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In extenuation of the delay in bringing this suit, it is alleged that neither the complainants nor their predecessors in interest had any knowledge or information that a patent to said mining claim had issued to said John M. McChrystal until about the middle of the year 1901; that said John H. McChrystal delayed the filing of the complaint by saying to the complainants that he would carry out his agreement in the event it was shown by investigation that no conveyance had been made as agreed. The bill alleged the value of the premises to be $20,000. It also alleged that on the 24th day of September, 1898, the defendant the Eagle & Blue Bell Mining Company, a corporation, obtained a conveyance of the interests of said McChrystals in said South Extension Beecher mining claim, including the property described hereinbefore, and that when it made said purchase it had full knowledge and notice of all the right, title, and interest of the complainants in said property.

The prayer of the bill is that the defendants be decreed to execute a conveyance of the premises, in accordance with said agreement, to the complainants; that in the event the defendants transferred the title to the premises to innocent purchasers for value they be decreed to pay unto the complainants the value thereof, to wit, $20,000.

The circuit court sustained a demurrer to this amended bill. The complainants declining to plead further, the court entered decree dismissing the bill. To reverse this action the complainants below prosecute this appeal.

Harrison O. Shepard, for appellants.

John A. Street and W. H. Bramel, for appellees.

Before SANBORN and VAN DEVANTER, Circuit Judges, and PHILIPS, District Judge.

PHILIPS, District Judge, after stating the facts as above, delivered the opinion of the court.

The chief insistence of counsel for appellants is that the facts alleged show a trust relation between the said Kelly and others and the McChrystals, which the latter failed and refused to observe; that it was a continuing trust, which, under the facts recited, was neither barred by the statute of limitation nor obstructed in its enforcement by the laches of the complainants.

We are unable to discover any trust agreement in the ultimate shape the contractual relation between the parties assumed. When the claim of Kelly and others, adversing the application of the McChrystals for a patent, was withdrawn and the suit arising thereon was dismissed, the parties in legal effect conceded that the mining area in contest was the property of said McChrystals. Thereupon the new agreement or contract between them supervened, which alone formed the basis of any right of action in Kelly and others or their successors. That contract created no trust obligation upon the McChrystals to obtain title for the benefit of the complainants so as to impose upon them the duty of seeking out the said Kelly and others and making tender of conveyance. The agreement was that after the McChrystals should procure a patent to said claim they would, "upon demand therefor and the payment of $101.25, convey to said Timothy Kelly et al. by deed" the property, etc. Clearly this did not vest in Kelly and others any equitable title or interest in the property, for the obvious reason that at the time they had not paid any part of the purchase price or expenses of the acquisition of the patent. Ducie v. Ford, 138 U. S. 587, 591, 11 Sup. Ct. 417, 34 L. Ed. 1091. The contract constituted the mere relation of a prospective vendor and vendee under an optional

contract. Dunphy v. Ryan, 116 U. S. 491, 496, 6 Sup. Ct. 486, 29 L. Ed. 703.

The legal effect of the final agreement was the creation of a mere optional contract, whereby, upon the procurement of a patent to said claim, the McChrystals were, upon demand therefor and the payment of $101.25, to convey to the said Kelly and others the designated property. No obligation on the part of the McChrystals was imposed to do anything about making the conveyance until the patent should be procured and a demand made upon and a payment to them of the sum of $101.25. The McChrystals could take no initiative or aggressive action against Kelly and others. It was left entirely optional with the latter as to whether or not they would move in the matter; and they could make no demand for a conveyance except upon the tender of $101.25.

In the absence of any specification as to when the demand and tender should be made, the law implies that this should be made within a reasonable time; such reasonable time being a question for the determination of the court under the special facts of the particular case. A cause of action arises as soon as the party has a right to apply to the proper tribunal for redress. Tapley v. McPike, 50 Mo. 589. In this case the right to make the demand and tender arose in favor of Kelly and others when the McChrystals obtained a patent, which was May 23, 1893. They could not escape the running of the statute of limitations if they delayed making their demand an unreasonable length of time. Williams v. Bergin, 116 Cal. 56, 47 Pac. 877; Meherin v. S. F. Produce Exchange Company, 117 Cal. 215, 48 Pac. 1074; Hintrager v. Hennessy, 46 Iowa, 600; Ball v. Keokuk & N. W. R. Co., 62 Iowa, 751, 16 N. W. 592.

The only excuse pleaded in the bill for the long delay in bringing this suit is that neither the complainants nor their predecessors in interest had any knowledge or information that said patent had issued until about the middle of the year 1901. This is but an admission of the appellants' indifference and inattention to their interests and duty. The records of the Land Office Department are an open book, accessible to every one concerned. There was a local land office in Utah where the records would show the issue of all patents for lands situate in that district. The very situation of the matter respecting the patent was such as to render it highly probable, the adversed contest being abandoned, that the patent would issue at an early date. Johnston v. Standard Mining Company, 148 U. S. 360, 13 Sup. Ct. 585, 37 L. Ed. 480. An inquiry by letter or otherwise would have enabled the appellants or their predecessors to have early obtained the necessary information respecting the issue of the patent. They rested, however, in indifference, contenting themselves with the mere "saying" of John H. McChrystal that he would carry out his agreement. His promise to convey, made in 1892, was a continuing promise for a reasonable time, which received no additional virtue by its oral repetition. It furnished no obstruction to affirmative action on the part of the appellants, and no excuse in law for their nonaction.

The bill discloses the fact that in 1898 the Eagle & Blue Bell Mining Company, one of the defendants below, became the purchaser of this

property, knowledge of which fact by appellants at the time of the transfer is not negatived by the bill. They stood idly by for nearly ten years after their cause of action arose, and for four years after the Eagle & Blue Bell Mining Company became the purchaser, before making tender to the McChrystals, and five years before demand by suit on said company. The value of the property is alleged in the bill to be $20,000, warranting the inference that by the development of this property under the management and expenditure of this company it had become valuable, on discovery of which these appellants come forward with the offer of the petty sum of $101.25 and demand a conveyance to them of the property.

Under the statute of Utah (Rev. St. 1898, § 2875) actions on written instruments, upon contracts, obligations, or liability founded upon written instruments are barred by limitation after the lapse of six years. And, as applied to property like mines in Utah the value of which is very fluctuating, courts of equity exact of claimants asserting rights therein, based upon contracts parol in character, a degree of vigilance and early, energetic action in enforcing such claims wholly wanting in this case. See Twin-Lick Oil Company v. Marbury, 91 U. S. 587, 23 L. Ed. 328; Galliher v. Cadwell, 145 U. S. 368, 12 Sup. Ct. 873, 36 L. Ed. 738; Johnston v. Standard Mining Company, 148 U. S. 360, 13 Sup. Ct. 585, 37 L. Ed. 480; Curtis v. Lakin, 94 Fed. 251, 255, 36 C. C. A. 222.

There was no error in the action of the Circuit Court in dismissing the bill of complaint, and its decree is affirmed.

POWELL v. LEAVITT.

In re NOEL.

(Circuit Court of Appeals, First Circuit. January 24, 1907.)

No. 652.

1. BANKRUPTCY-CLAIM-LIQUIDATION-LITIGATION-STATUTES-CONSTRUCTION. Bankr. Act July 1, 1898, c. 541, § 57n, 30 Stat. 561 [U. S. Comp. St. 1901, p. 3444], provides that claims shall not be proved against a bankrupt's estate subsequent to one year after the adjudication; or, if they are liquidated by litigation and final judgment therein is rendered within 30 days before or after the expiration of such time, then within 60 days after the rendition of such judgment. Held, that such section should be construed to mean that, if a final judgment be entered within 30 days before the expiration of the time specified or at any time thereafter, the claim might be proved within 60 days after the rendition of the judgment. 2. SAME "LIQUIDATION BY LITIGATION."

Where a claim secured by a mortgage on a bankrupt's stock in trade was attacked by the trustee as a preference, whereupon the creditor sued in a state court to establish the validity of the mortgage, in which action the mortgage was held to be invalid as a preference, the creditor's claim was thereby "liquidated by litigation," and provable as an unsecured claim within 60 days after the rendition of the judgment in the state court, as provided by Bankr. Act July 1, 1898, c. 541, § 57n, 30 Stat. 561 [U. S. Comp. St. 1901, p. 3444].

Appeal from the District Court of the United States for the District of New Hampshire.

For opinion below, see 144 Fed. 139.

Max L. Powell (Powell & Powell, on the brief), for appellant.
Thomas F. Johnson, for appellee.

Before COLT, PUTNAM, and LOWELL, Circuit Judges.

LOWELL, Circuit Judge. On April 8 and on May 24, 1904, Noel, being then insolvent, mortgaged his stock in trade to Powell as security for his promissory notes. On June 21, 1904, Noel was adjudged a bankrupt, and in due time thereafter Leavitt was appointed his trustee. On August 18, 1904, Powell consented in writing to a sale of the mortgaged property by the trustee; "it being understood that the funds received by him for the same shall be deposited by him under the orders of the said court of bankruptcy to await the final adjudication of the rights of the various parties interested therein." Thereafter, Powell brought an action in the state court against the trustee to establish the validity of the mortgage. In October, 1905, the court found that the mortgage was a preference invalid under the bankrupt act, and rendered a verdict for the defendant. On November 10, 1905, Powell offered his proof of debt in due form to the referee. The trustee objected to the proof, and the referee rejected it, relying upon section 57n of the bankrupt act. Act July 1, 1898, c. 541, 30 Stat. 561 [U. S. Comp. St. 1901, p. 3444]. Upon a question certified by the referee to the District Court, the learned judge, for the reason above mentioned, affirmed the decision of the referee rejecting the proof. From the decision of the District Court the petitioner has appealed to this court. Section 57n of the bankrupt act, so far as it is material to this case, reads as follows:

"Claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication; or if they are liquidated by litigation and the final judgment therein is rendered within thirty days before or after the expiration of such time, then within sixty days after the rendition of such judgment."

It has been suggested that, in order to bring a claim within the exception, final judgment in the litigation must be rendered within 30 days of the expiration of the year, either before or after. In re Keyes, 152 Fed., decided in the District Court for the District of Massachusetts, November 8, 1906. If we depended altogether upon the grammatical construction of the sentence, and disregarded altogether the nature of the injustice against which the exception was intended to guard, this construction might not be unreasonable. But to limit to 30 or to 60 days the time during which litigation will suspend the operation of the statute of limitations, and to exclude from proof claims liquidated by litigation 14 or 15 months after adjudication, is to establish a serious distinction with only a fantastic difference. That a creditor whose claim was in litigation might, by an unqualified statute of limitations, be deprived of his just share of the bankrupt's estate, was the "mischief felt," the "occasion and necessity" of the exception. To save the rights of such a creditor was "the object and the remedy in view," and the intention of the Legislature is to be ascertained accordingly. 1 Kent, Com. 462; 1 Plow. 205; Potter's Dwarris, 194. We therefore interpret the exception as if it read:

"If the final judgment therein is rendered within thirty days before the expiration of such time, or at any time thereafter."

We have to determine if the proceeding here had in the state court was a liquidation by litigation of the creditor's claim within the meaning of the bankrupt act.

This is the creditor's contention. The trustee, on the other hand, contends that the exception in clause "n" refers only to a suit brought under section 63b (30 Stat. 563, c. 541 [U. S. Comp. St. 1901, p. 3447]) to fix the face value of a claim due from the bankrupt's estate, which otherwise by reason of its indefinite amount would not be provable. Upon a consideration of the clause already quoted, as its meaning is illustrated by the whole bankrupt act, we agree with the contention of the creditor. In Keppel v. Tiffin Savings Bank, 197 U. S. 356, 25 Sup. Ct. 443, 49 L. Ed. 790, the Supreme Court decided that the enforced surrender of a preference by a creditor did not necessarily deprive him of his right to prove thereafter. In that case formal proof was offered within a year of the adjudication; but the court expressly repudiated that construction of the law which would hold that the creditor's "right to prove (his) lawful claims against the bankrupt estate was forfeited simply because of the election to put the trustee to proof in a court of the existence of the facts made essential by the law to an invalidation of the preference." On the contrary, it held that "whenever the preference has been abandoned or yielded up, and thereby the danger of inequality has been prevented, such creditor is entitled to stand on an equal footing with other creditors and prove his claims." Pages 363, 364 of 197 U. S., pages 445, 446 of 25 Sup. Ct. (49 L. Ed. 790). The phrase "liquidated by litigation" is general, and the object of the exception which is made to the statutory limit of time is plainly to allow the proof of a claim after the expiration of a year by a creditor who during that time was engaged in litigation with the bankrupt's estate concerning its liability to him. In a sense the debt evidenced by the promissory notes held by Powell had already been liquidated. Apart from bankruptcy proceedings, Powell could have sued Noel at law for their face value. It may be that, pending the litigation, he could have proved his claim in bankruptcy as a secured claim, leaving his proof to be amended, in case his mortgage was avoided. Hutchinson v. Otis, 115 Fed. 937, 941, 53 C. C. A. 419; on appeal, 190 U. S. 552, 23 Sup. Ct. 778, 47 L. Ed. 1179. But to prove during litigation a claim which cannot be allowed unless the creditor fails in the litigation is but an empty formality. If the security is as large as the debt, it is a formality which can hardly be accomplished under the rules and with the forms which have been provided. Notice of the claim is given in effect by the litigation, and, if the preferred creditor is not to be deprived of his proof altogether, there seems no good reason why he should not offer it immediately after the litigation is ended. The substantial amount of Powell's claim, the amount for which he could seek allowance and upon which he could demand a dividend, here remained uncertain until the validity of the mortgage had been settled. To hold that Powell's claim was "liquidated by litigation" in the proceeding which, for some purposes, determined the amount for which it should be allowed, is not, we think, a forced con

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