James v. Gray

• Decision Date: 06 July 1904
• Docket Number: 494.
• Citation: 131 F. 401
• Parties: JAMES v. GRAY. In re JAMES et al. Ex parte JAMES.
• Court: U.S. Court of Appeals — First Circuit

131 F. 401

JAMES v. GRAY. In re JAMES et al. Ex parte JAMES.

No. 494.

United States Court of Appeals, First Circuit.

July 6, 1904

Joseph H. Beale (Beale, Hutchings & Beale, on the brief), for appellant.

Lee M Friedman (Morse & Friedman, on the brief), for appellee.

Before COLT and PUTNAM, Circuit Judges, and ALDRICH, District Judge.

PUTNAM Circuit Judge.

This is a case of a bankrupt partnership. Proof of a claim of $20,469.46 for money loaned the partnership was offered by the wife of one of the bankrupt partners, and rejected by the District Court on the strength of In re Talbot, 110 F. 924. In re Talbot rested on Woodward v. Spurr 141 Mass. 283, 6 N.E. 521, and Bank v. Tyndale, 176 Mass. 547, 57 N.E. 1022, 51 L.R.A. 447. The District Court also made reference to Clark v. Patterson, 158 Mass 388, 33 N.E. 589, 35 Am.St.Rep. 498.

All the transactions were in Massachusetts, and all the parties are residents of that state. The common and statutory laws of Massachusetts relating to this loan are, as we will see, in harmony with the commonlaw text writers and authorities, so that, so far as they are concerned, the claim could not be allowed in either the federal or state courts, because, on the ground of the unity of the persons of the husband and wife, no contract could ever exist. Therefore, if we had no separate estate as known to the chancery courts, and no statutory separate estate, the decision of the District Court would necessarily be affirmed.

The case involves the statutes which were re-enacted in Rev. Laws Mass. 1902, c. 153, Secs. 1, 2 as follows:

'Section 1. The real and personal property of a woman shall upon her marriage remain her separate property, and a married woman may receive, receipt for, hold, manage and dispose of property, real and personal, in the same manner as if she were sole. But no conveyance by a married woman of real property shall, except as provided in section 36, extinguish or impair her husband's tenancy by the curtesy by statute or his rights to curtesy which existed at the time this chapter takes effect in such property unless he joins in the conveyance or otherwise releases his said rights.

'Sec. 2. A married woman may make contracts, oral and written, sealed and unsealed, in the same manner as if she were sole, except that she shall not be authorized hereby to make contracts with her husband.' It will be observed that, unlike the statutes of many states, this legislation does not enlarge the common law so far as contracts between husband and wife are concerned. If any relief is found, it must be on equitable principles, treating the property vested in the wife under the statute as a separate estate in equity, or analogous thereto. The existing statutes in bankruptcy make no special provision in reference to claims of this character; but that full equitable principles are accepted by the courts in bankruptcy was determined by us in Batchelder & Lincoln Co. v. Whitmore, 122 F. 355, 58 C.C.A. 517, and in Franklin Chase et al., Petitioners, 124 F. 753, 59 C.C.A. 629. There can be no question that equitable claims, as, for instance, claims arising out of a breach of trust in the technical sense of the word 'trust,' are provable under Act July 1, 1898, c. 541, Sec. 63, 30 Stat. 562, 563 (U.S.Comp.St. 1901, p. 3447). They are to be regarded either as 'unliquidated claims' or as claims founded 'upon a contract, express or implied,' because every trust involves such a contract. There never has been any question on this score in the United States, and in England the rule is the same. Williams' Bankruptcy Practice (7th Ed. 1898) at page 120, says:

'A breach of trust, although it would afford a good ground for an action of tort for unliquidated damages, is always, even without express enactment, held to create a debt in equity.'

The learned author makes this observation as part of his description of debts provable in bankruptcy. At pages 36 and 37 the learned author, speaking of the words describing provable debts in the act of 1869, 'due at law and in equity,' says:

'These words do not appear in the present act, but it would not seem that the law has been changed by the omission of them.'

In Ex parte Wells, 2 M.,D.& De G. 504, the value of a legacy of stock, bequeathed to the wife's separate use, but transferred to the name of her husband, who sold it out and became bankrupt, was held provable. In Ex parte Greer, 2 D.& Ch. 113, it was decided that the income of an estate settled in trust for the wife must be used by the husband with her consent without creating a debt, yet the whole theory of the case was that, if the principal had been so used, it would create a debt, provable in bankruptcy. These decisions are in all respects analogous, as they arise with reference to a claim of a married woman against her husband in connection with her separate estate.

It must be conceded that the decisions of the Supreme Judicial Court of Massachusetts, which have been referred to by the learned judge of the District Court, would, if they controlled this court, compel us to sustain his decree. Clark v. Patterson, 158 Mass. 388, 33 N.E. 589, 35 Am.St.Rep. 498, was a bill in equity, brought by a wife against a partnership of which her husband was a member, for relief with reference to a loan made to the partnership from her separate estate. The court held that relief could not be granted even in equity, stating, at page 391, 158 Mass., page 591, 33 N.E., 35 Am.St.Rep. 498, that the note was void as between the original parties, having been given to a wife by a partnership of which her husband was a member, and, with a citation of prior decisions of the same court, adds that equity does not relieve in such a case. The reason for this decision appears in Woodward v. Spurr, 141 Mass. 283, 286, 6 N.E. 521, where it was held that, with reference to the rights of a wife having a separate estate against her husband with regard to that estate, relief, even in equity, will not be granted on an alleged debt strictly contractual, nor unless there are some elements of spoilation on the part of the husband, or elements raising a trust on his part, either express, implied, or resulting, or something analogous thereto.

We should also refer to the expressions of the then Chief Justice Gray, earlier than any decisions already referred to, found in Atlantic National Bank v. Tavener, 130 Mass. 407. This was in 1881, subsequent to the enactment of any statute the substance of which is found in the sections which we have cited from chapter 153 of the Revised Laws, which could possibly affect the case now before us. We shall have occasion to turn again to this case; but for the present, we notice only the fact, stated at page 409, that, while it had not then been determined in Massachusetts whether a loan by a wife to her husband from her separate property creates an equity in her favor, 'it has generally, if not unanimously, been decided in the affirmative by other courts. ' That such is the general rule which the federal courts will apply in equity, notwithstanding any local decisions, cannot be questioned. It is so stated by all the text writers to whom we look for the general rules of the equity law. The latest English work, and a very satisfactory one, Eversley's Law of the Domestic Relations (2d Ed. 1896), giving the law as it was before the modern legislation in England, says at page 291:

'But in equity a married woman was permitted to contract with her husband in respect to her separate estate, and sue him with regard to it.'

Again, at page 297, the author says:

'A husband formerly at common law could not make a valid loan to this wife, both because it was in the nature of a contract, and whatever property might have passed by delivery reverted to him in virtue of his marital right. But in equity the husband was enabled to sue his wife in respect to her separate estate. The husband can make a valid loan to his wife of property, whether specific chattels or other things. * * * In equity the capacity of a wife who had a separate estate to make a valid loan to her husband was clearly recognized, and she might have sued her husband, or proved against his estate after death, like any other creditor.'

The same rule, so far as concerns loans by the wife to her husband from her separate estate, was authoritatively held by Lord Westbury in Woodward v. Woodward, 3 De G.,J.& S. 671, 674. We will observe that any suggestion that there can be no transactions between husband and wife enforceable in equity, except through the medium of a trustee or some other third person, finds no support in the authorities, and was positively ignored in Woodward v. Woodward, where the loan was a direct one.

The same rules were stated in Wallingsford v. Allen, 10 Pet. 583, 593, 9 L.Ed. 542. The opinion rendered by Mr. Justice Wayne says:

'Agreements between husband and wife, during coverture, for the transfer from him of property directly to the latter, are undoubtedly void at law. Equity examines with great caution, before it will confirm them. But it does sustain them, when a clear and satisfactory case is made out that the property is to be applied to the separate use of the wife. * * * In more v. Freeman, Bunb. 205, it was determined that articles of agreement between husband and wife are binding in equity without the intervention of a trustee.'

More v Freeman was decided in 1726. It was affirmed by the House of Lords, as appears at page 207, and has apparently been ever since regarded as authoritative. These expressions in Wallingsford v. Allen, in connection with the other decisions of the Supreme Court to which we will hereafter refer, like the English authorities which we have cited, require that we...