when principal and interest are paid, compensation is complete. In England, until a different rule was provided by statute, it was settled that equitable relief ordinarily would not be granted in case of waste (Peachy v. Somerset, 1 Stra. 447), for breach of a covenant to make repairs (Hill v. Barclay, 16 Ves. 402, and 18 Ves. 56), or in case of the breach of a covenant to insure (Reynolds v. Pitt, 19 Ves. 134). The ground of the denial of relief in these cases was the impossibility, on the part of the tenant, of showing that compensation could be made. In Fonblanque's Equity, first published in 1737, it is said: "Where it [the covenant] is for the doing of a collateral act, they cannot know of what value it is to the party." 1 Fonbl. Eq. b. 1, c. 6, § 4. In 1 Ch. Prac. 32, Maddock says: "Equity will only relieve, where the thing may be done afterwards, or a compensation can be made for it; but unless a full compensation can be given, so as to put the party precisely in the same situation, a court of equity will not interfere, for such a jurisdiction would be arbitrary.”’ In Kann v. King, 204 U. S. 43, 27 Sup. Ct. 213, 51 L. Ed. 360, it was held that, whatever power a court of equity may have to relieve a tenant for forfeiture of a covenant to pay taxes, it cannot require the owner to risk the loss of his property by compelling him to test the validity of an irredeemable tax title based on taxes the tenant neglected to pay; in other words, the court withheld relief because of a forfeiture through the failure of the tenant to pay taxes. After adverting to the rule established in Sheets v. Selden, 7 Wall. 416, 19 L. Ed. 166, that relief would be granted from a forfeiture for the nonpayment of rent, the court said: * "When the foundation upon which the doctrine is based is borne in mind, it becomes apparent that it affords no ground for the contention that it is applicable to a case where the failure to perform a covenant to pay taxes has led to a tax sale, ripening into a prima facie irredeemable title held adversely to the lessor. To extend the principle to such a degree would be destructive of rights of property, since it would subject every one who made a lease of his property, containing a covenant by the lessee to pay taxes, to the hazard of the loss of his title, if only the tenant chose to violate the covenant, and thus give rise to the coming into existence of a tax title, prima facie valid and irredeemable in character." In Dunklee v. Adams, 20 Vt. 415, 50 Am. Dec. 44, the court, after a careful review of the authorities, declined to relieve from a forfeiture growing out of the breach of covenants for the performance of certain personal services and for the delivery from time to time of certain specific articles, saying: "In such a case the time for the performance of the service is of the very essence of the contract; it certainly can never be done afterwards. It is impossible to put the party in the precise situation he would have been in, if the condition had been performed."' It is apparent from the rent named in this lease that the property involved is of very considerable value; hence it was of particular importance to the plaintiff landlord to have a successful and solvent tenant. To that end, presumably, these covenants were inserted in the lease. The defendant, by signing the lease, accepted its covenants and is bound by them. What would be the measure of compensation should the court attempt to write a new contract for the parties? It could not alter the unfortunate circumstance that a petition in bankruptcy has been filed against the defendant, a receiver appointed, and a composition effected. In other words, it could not give the plaintiff landlord the kind of a tenant for which he covenanted in the lease. Presumably the plaintiff considered these covenants of peculiar or special value to him. His right to incorporate them in the lease is not and could not be denied, and there is no standard by which the court can measure the compensation to him for their breach. We therefore are constrained to rule that this is not a case where relief may be awarded from a forfeiture. It results that the judgment must be reversed, with costs, and cause remanded for a new trial. Reversed. IN THE MATTER OF HENRY SCHAPIRO, BANKRUPT.* U. 8. District Court, District of Maryland, January, 1923. LIENS PARTICULAR LIENS-DISTRESS DISTRESS WARRANT LEVIED AFTER FILING OF PETITION. Since the issuing of a distraint warrant is the act of the landlord under the laws of Maryland, it does not affect anything until it is actually levied, and as soon as the petition in bankruptcy is filed, the right to distrain is ended, and a levy made thereafter is ineffectual. (See Collier, 13th Ed., p. 1540; Am. B. R. Digest, § 466.) Order denying lien by levy of distraint warrant. George O. Blome, for petitioner. Baldwin & Sappington, for trustee. ROSE, Circuit Judge: The question presented is whether a distraint, the warrant for which was issued before the filing of the petition in bankruptcy, but which was not levied until afterwards, constitutes any lien upon the property. The question is really answered by In re Chaudron & Peyton (D. C., Md.), 24 Am. B. R. 811, 180 Fed. 841. The distraint, being the act of the landlord, does not affect anything until it is actually levied, and so soon as the petition is filed, the right to distrain is ended. IN THE MATTER OF SPECIALTY CANDY COMPANY, BANKRUPT.* U. 8. Circuit Court of Appeals, Seventh Circuit, December, 1923. No. 3303. PREFERENCES-CONSTITUENT ELEMENTS OF VOIDABLE PREFERENCE-NECESSITY FOR DIMINISHING ESTATE--PRESENT AND FUTURE Consideration-Chattel MORTGAGE GIVEN TO SECURE PRESENT LOAN AND FUTURE CREDIT. A chattel mortgage given within the four month period to secure 8 present loan and a future credit is not a preference and is enforceable 286 Fed. 620. 295 Fed. 508. up to the amount of the loan plus the amount of the goods purchased by the bankrupt on credit. (See Collier, 13th Ed., p. 1278; Am. B. R. Digest, § 504.) Appeal from judgment of the District Court of the United States for the Eastern Division of the Northern District of Illinois denying a claim to a chattel mortgage lien. Reversed. Before BAKER, EVANS, and PAGE, Circuit Judges. Frank Michels, for appellant. Garfield Charles, for appellee. PAGE, Circuit Judge: In May or June, 1922, the predecessor of bankrupt, a copartnership, candy makers in Chicago, owed appellant $3,000 or $4,000 for chocolate coatings. Time for payment was extended and notes were taken. Appellant's salesmen then took up negotiations for a loan from appellant to bankrupt. Bankrupt was incorporated in June, took over the partnership business, and assumed its liabilities. The loan was consummated on September 18th for $10,000, and was secured by a chattel mortgage on bankrupt's machinery and equipment. In the meantime, bankrupt had been making payments on its merchandise notes to appellant, and had received $2,000 additional credit. Of the loan, appellant paid in cash $2,000, and that was used, together with $500 furnished by bankrupt, to pay a $2,500 balance of an old chattel mortgage on bankrupt's property. For $8,000 of the loan appellant gave bankrupt credit, to be used, as provided in a written agreement then made between the parties, to purchase chocolate for use in its business." As against that credit, bankrupt, before bankruptcy proceedings were commenced against it on November 24th, had received $5,800 in merchandise. In the bankruptcy proceedings, appellant, by petition, set up its mortgage rights, and asked that it be given the mortgaged property. By stipulation the property was sold, and brought $9,368.80. The proceeds were to be held awaiting the determina tion of appellant's rights, which were contested by the trustee in bankruptcy on the ground that the mortgage was given, within four months of bankruptcy, to secure an old indebtedness, and that bankrupt was then known by appellant to be insolvent. There is nothing in the record to show that the property statement made by bankrupt's predecessor to appellant on May 1, 1922, and which showed clearly that the business was then solvent, was untrue, or that appellant had any reason to believe it was untrue. The only thing to which the court's attention was directed that occurred thereafter was the protest of a note for $450 on September 11th, but it was paid two days later. The mortgage was not given to secure past-due indebtedness, and there is nothing in the record to show that bankrupt was insolvent when the mortgage was given or that appellant had any reason to suspect that it was then insolvent. The referee found that appellant, as part of the loan, gave bankrupt $2,000 towards paying off the old chattel mortgage, and that, against the credit of $8,000, bankrupt had, before bankruptcy, received $5,800 in chocolate coatings, and also, after negotiations for the loan were started, but before the mortgage was given, had granted additional credit to bankrupt of $2,000. Based on the referee's finding, he reported that appellant was entitled, under its mortgage, to be paid the $2,000 credit given after negotiations for the loan started, but before it was consummated, and that there should also be paid from the mortgage sale proceeds $5,800 for chocolate coatings delivered, as against the $8,000 credit and $2,000 cash given to pay the old mortgage. The District Court reversed the findings of the referee, and this proceeding is to test the correctness of that reversal. The mortgage was not given to secure any past-due indebtedness, and the credit advanced after negotiations commenced, but before September 18th, was not secured by the mortgage. The $2,000 cash and the $5,800 worth of chocolate coatings received by bankrupt against the $8,000 credit represented a then present fair cash consideration for the mortgage to the extent of $7,800, and interest from September 18, 1922, and should be paid to appellant from the proceeds of the mortgage sale. The order of the District Court is reversed, with direction to proceed in harmony with this opinion. |