"It is the long-accepted law that a foreign sovereign cannot be sued nor his property attached in the courts of a foreign friendly country without his consent." Nor can the defendant when sued by a foreign sovereign avail himself of any counterclaim or set-off except perhaps a set-off arising out of the same transaction. Under no circumstances can he obtain an affirmative judgment." Kingdom of Roumania v. Guaranty Trust Co., 250 Fed. 341, 343, 162 C. C. A. 411, 413 (Ann. Cas. 1918E, 524.) Does such sovereign, by the mere fact of going into the courts of a friendly foreign jurisdiction, so by waiver give its consent to being sued by way of counterclaim? I am constrained to hold that it does not. It is, of course, apparent that an insuperable difficulty, perhaps even an utter impossibility will inevitably be met in enforcing the payment of any judgment which might be obtained upon the counterclaim against the plaintiff herein. But this is not decisive, since the courts ordinarily will not stop to consider whether a judgment, if decreed, can or cannot be collected. Such a consideration is negligible upon the question of the right to maintain an action. Here, short of a serious disturbance of international peace, it may be conceded that a judgment against the republic of France in favor of the defendant upon its counterclaim could never be collected save with the consent of France, and while in a sense, upon this consideration, the point involved here is academic, it is yet of great pith and moment as a principle of international law. Keeping in mind the nature and effect of an action by way of counterclaim, I think the authorities, the analogous cases, and the reason of the thing all sustain the conclusion, which I reach, that such a proceeding is not permissible. While there is scarcely a dissenting view upon the point, that, as against a sovereign electing to sue an individual or a public or private corporation in its own courts, or in the courts of a friendly foreign jurisdiction such defendant may, as a defense to the demand of the sovereign, set off a part or the whole, of plaintiff's demand by pleading a demand which might otherwise form the subject-matter of a counterclaim, and that such a foreign sovereign is amenable, just as is any other plaintiff to mere matters of practice and procedure, yet no affirmative judgment can be sustained as upon a counterclaim against the sovereign, whereby the sovereign shall be compelled or adjudged to pay money or any other thing of value." French Republic v. Inland Nav. Co. (D. C.) 263 Fed. 410, 412. Our attention has been directed to The Gloria (D. C.), 286 Fed. 188. This was an admiralty case, and for that reason is perhaps inapplicable here; but, if it is an authority in favor of the power of a court to enter judgment against a foreign government, it is only necessary to say that it is in direct conflict with the decision of the Circuit Court of Appeals of the circuit in which the court was sitting, and finds little or no support in any well-considered case from any other jurisdiction. We need only add that the limitation thus imposed on the powers. of the court is as applicable to a court of bankruptcy as to any other. This conclusion disposes of the claim that the appellant was entitled to a judgment for costs. The case was brought here by both appeal and petition for revision, but inasmuch as the order is not one of those specially enumerated in section 25 of the Bankruptcy Act (Comp. St. $9609), the appeal is dismissed, and the order is affirmed. MICHAEL G. ALENICK V. CLARA SORENSON ET AL.* New Jersey Court of Chancery, March, 1924. No. 54469. FRAUDULENT TRANSFERS-FORM OF TRANSACTION-CONVEYANCE TO WIFE. In an action by a trustee in bankruptcy to have certain property in the name of the bankrupt's wife declared to be held in trust for the benefit of the bankrupt, evidence is examined and held sufficient to show that the property in question was paid for out of the funds belonging to the wife. (See Collier, 13th Ed., p. 1772; Am. B. R. Digest, § 564.) Bill in equity by a trustee in bankruptcy for a decree that the bankrupt's wife holds certain real estate in trust for her husband. Bill dismissed. Milton M. Unger, for complainant. James P. Mylod, for defendants. CHURCH, V. C.: This is a bill filed by the trustee in bankruptcy of one Soren Sorenson to have it decreed that the defendant, Clara Sorenson, his wife, holds certain lands situated in Caldwell, N. J., in trust for Soren Sorenson, and through him for the trustee in bankruptcy. The facts are that Sorenson purchased a lot in Montclair in March, 1912, upon which he erected a house with + 123 Atl. 877. his own funds. The title to the lot was taken in the name of his wife. The property was exchanged for another, which property was lost under foreclosure proceedings. In January, 1921, another property was purchased in his wife's name. This property continued in the name of his wife until May, 1923, when it was sold, and the proceeds, which amounted to $2,391.65, were deposited in the name of the husband in the Essex National Bank of Montclair. From this account the husband drew out moneys to pay creditors of his business until a balance of only $6.32 remained. On September 21, 1923, the property in question was acquired, the title being taken in the name of the wife. On June 23, 1923, two judgments against Sorenson were recovered as a result of an automobile accident. The allegation of the complaint is that this property was actually paid for with money belonging to Soren Sorenson, and that title was taken in his wife's name to defraud the creditors who had secured the judgments above mentioned. Her story is that, when the second piece of property in Montclair, known as the Willow street property, was sold, the check for the net proceeds of the sale was made out to the order of Clara Sorenson, amounting to $2,391. It was delivered to her, and she indorsed it and deposited the check in her husband's bank account, she having no account of her own; that when she found he was paying this out in his own business she protested, as did their daughter, and demanded that he repay her this amount. On July 11, 1923, the husband paid the wife $500 which he had received from the proceeds of his business, and on June 20th he paid her the further sum of $1,200 and subsequently $350. These payments, with the possible exception of the $350, were all paid the wife before June 26th, when the judgments were recovered. The question then arises as to whether this property was actually paid for with money belonging to the husband or with money belonging to the wife. In June, 1921, when Sorenson bought the Willow street house, there was no question as to his solvency, and the title was taken in his wife's name, and, even though he did pay for it from his own funds, it seems to me that that made it hers absolutely. When it was sold, and the proceeds, amounting to $2,391, were deposited in the name of the husband, the question arises as a matter of fact whether this was a gift from the wife to the husband, or whether her story is true that it was deposited in her husband's account merely for the sake of convenience. I believe that this latter situation is true, and it is confirmed in my opinion by the fact that in June, 1923, before the judgments were recovered against him, he turned over to his wife practically the same amount of money which she claimed as hers. Moreover, the cases, as I understand them, hold that a person in failing circumstances may prefer a creditor unless the creditor unites with the one making the conveyance to defraud. Reed v. Tilton, 90 N. J. Eq. 42, 43, 105 Atl. 597. I was impressed by the straightforward stories told by the husband, the wife, and the daughter on the witness stand. The wife for over 14 years has been a working woman, and has also conducted, with the assistance of her daughter, a boarding house, and receives some revenue from that, so there is nothing improbable in her story that this money actually represented her earnings. Her husband seems to have acquiesced in this theory, and voluntarily returned the money to her before the judgments. against him were obtained. I do not think he made these payments in order to defraud his creditors, and it should be borne in mind that before the cases were tried it was impossible to know whether or not there would be any creditors. I shall therefore advise a decree dismissing the bill. HUGH A. CREGG, AS TRUSTEE IN BANKRUPTCY OF DANIEL F. MCCARTHY, JR. v. MERCHANTS' TRUST COMPANY.* Massachusetts Supreme Judicial Court, April, 1924. PREFERENCE-MANNER OF CREATING PREFERENCES-' The payment of a note at a bank by a check on deposits in the bank, constitutes a "transfer of property" within the meaning of section 60a of the Bankruptcy Act. (See Collier, 13th Ed., p. 1273; Am. B. R. Digest, § 523.) 143 N. E. 339. SAME-MANNER OF CREATING PREFERENCE-PAYMENT BY OR ON NOTES OB CHECKS EVIDENCE SUFFICIENT TO SHOW REASONABLE CAUSE TO BELIEVE PAYMENT OF NOTE WOULD EFFECT PREFERENCE. In an action by a trustee in bankruptcy to recover an alleged preference in the payment of a note to a bank, the evidence is sufficient to show that the bank had reasonable cause to believe that the application of deposits in the bank to the payment of the note would effect a preference where it appears that deposits were made after a transfer of the bankrupt's account to a separate account as agent, and that the bankrupt's stock had been destroyed by fire and he had ceased to do business. (See Collier, 13th Ed., p. 1273; Am. B. R. Digest, § 529.) SAME MANNER OF CREATING PREFERENCE-PAYMENT BY OR ON NOTES OR CHECKS-PAYMENT OF ENDORSED NOTE CONSTITUTES PREFERENCE. Payment by a bankrupt, while insolvent, within four months prior to the filing of the petition in bankruptcy against him upon his endorsed notes, which the endorsers would have paid if he had not, constitutes a preference. (See Collier, 13th Ed., p. 1273; Am. B. R. Digest, § 529.) Action by trustce in bankruptcy to recover moneys paid as preference. Verdict for plaintiff and defendant brings exceptions. Exceptions overruled. W. C. & E. J. Ford, for plaintiff. Rowell & Clay, J. S. Eastham, J. P. Kane, and D. J. Murphy, for defendant. PIERCE, J.: This is an action of contract, brought by the plaintiff as trustee in bankruptcy of the estate of Daniel F. McCarthy, Jr., to recover the sum of $3,000 which the trustee alleges was paid as a preference to the defendant by the said McCarthy while he was insolvent, in violation of the Bankruptcy Act. It is not in dispute that McCarthy was adjudged an involuntary bankrupt on May 8, 1916; that the plaintiff was duly elected and now is trustee of said bankrupt; that the petition filed on April 18, 1916, showed his liabilities to be $7,666.90 and his assets $650. It is also not in dispute that the evidence warranted a finding that the defendant bank on a demand note, indorsed by Maurice J. Curran and William H. Donovan on the sole responsibility of the indorsers, loaned the said McCarthy |