The Comprehensive Drug Abuse Prevention and Control Act of 1970, which became effective May 1, 1971, makes parole under the general parole statute, 18 U.S.C. § 4202, available for almost all narcotics offenders. Respondent, who had been sentenced before May 1, 1971, and was ineligible for parole under 26 U.S.C. § 7237(d), which was repealed by the 1970 Act, sought habeas corpus in the District Court, claiming parole eligibility when one-third of his sentence had been served. The District Court denied relief on the ground that the prohibition on parole eligibility under 26 U.S.C. § 7237(d) had been preserved by § 1103(a) of the 1970 statute (which provides that "[p]rosecutions" for violations before May 1, 1971, shall not be affected by repeals of statutory provisions) and by the general saving clause, 1 U.S.C. § 109 (which provides that "[t]he repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute . . ."). The Court of Appeals reversed.
1. Section 1103(a) of the 1970 statute bars the Board of Parole from considering respondent for parole under 18 U.S.C. § 4202, since parole eligibility, as a practical matter, is determined at the time of sentencing, and sentencing is a part of the concept of "prosecution," saved by § 1103(a), Bradley v. United States, 410 U. S. 605. Pp. 417 U. S. 657-659.
2. The Board of Parole is also barred by the general saving clause from considering respondent for parole, since it is clear that Congress intended ineligibility for parole in § 7237(d) to be treated as part of the offender's "punishment," and therefore the prohibition against the offender's eligibility for parole under 18 U.S.C. § 4202 is a "penalty, forfeiture, or liability" under the saving clause. Pp. 417 U. S. 659-664.
BRENNAN, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, POWELL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which DOUGLAS and MARSHALL, JJ., joined, post, p. 417 U. S. 664.
A now-repealed statute, 26 U.S.C. § 7237(d), [Footnote 1] provided, inter alia, that certain narcotics offenders sentenced to mandatory minimum prison terms should be ineligible for parole under the general parole statute, 18 U.S.C.
§ 4202. [Footnote 2] Section 7237(d) was repealed, effective May 1, 1971, 84 Stat. 1292, by the Comprehensive Drug Abuse Prevention and Control Act of 1970, which makes parole under § 4202 available for almost all narcotics offenders. The question for decision in this case is whether the parole ineligibility provision of 26 U.S.C. § 7237(d) survives the repealer, so that a narcotics offender who has served more than one-third of a sentence imposed before May 1, 1971, remains ineligible for parole consideration under 18 U.S.C. § 4202.
had been preserved by § 1103(a) of the 1970 statute [Footnote 4] and by 1 U.S.C. § 109. [Footnote 5] 347 F.Supp. 99. The Court of Appeals for the Third Circuit reversed, holding that neither § 1103(a) of the 1970 statute nor 1 U.S.C. § 109 continued the prohibition on eligibility for parole consideration in 26 U.S.C. § 7237(d). 483 F.2d 656 (1973). [Footnote 6] We granted certiorari to resolve a conflict among the Courts of Appeals. [Footnote 7] 414 U.S. 1128 (1974). We agree with the District Court and reverse the judgment of the Court of Appeals.
Bradley v. United States, 410 U. S. 605, 410 U. S. 611 (1973), expressly reserved decision of the question now before us.
Bradley involved the conviction and sentencing after May 1, 1971, of offenders who committed narcotics offenses before that date. We held that sentencing is a part of the concept of "prosecution," and therefore that the provision of § 1103(a) of the 1970 Act that "[p]rosecutions for any violation of law occurring [before May 1, 1971] shall not be affected" by the repeal of 26 U.S.C. § 7237(d), barred the sentencing judge from suspending the sentences of, or granting probation to, the Bradley petitioners and also barred him from making them eligible for early parole, before they had served one-third of their sentences, under 18 U.S.C. § 4208(a). [Footnote 8] Although stating in a footnote that "[t]he decision to grant parole under [18 U.S.C.] § 4202 lies with the Board of Parole, not with the District Judge, and must be made long after sentence has been entered and the prosecution terminated," we concluded that "[w]hether § 1103(a) or the general saving statute, 1 U.S.C. § 109, limits that decision is a question we cannot consider in this case." 410 U.S. at 611 n. 6.
We hold that § 1103(a) bars the Board of Parole from considering respondent for parole under 18 U.S.C.
§ 4202. In concluding in Bradley that ineligibility for early parole under 18 U.S.C. § 4208(a) was part of the "prosecution," we reasoned that, since a District Judge's decision to make an offender eligible for early parole is made at the time of entering a judgment of conviction, the decision was part of the sentence and therefore also part of the "prosecution." 410 U.S. at 410 U. S. 611.
Similarly, a pragmatic view of sentencing requires the conclusion that parole eligibility under 18 U.S.C. § 4202 is also determined at the time of sentence. Since, under § 4202, an offender becomes eligible for parole after serving one-third of his sentence, see n 2, supra, parole eligibility is a function of the length of the sentence fixed by the district judge. Although, of course, the precise time at which the offender becomes eligible for parole is not part of the sentence, as it is in the case of § 4208(a), it is implicit in the terms of the sentence. And because it could not be seriously argued that sentencing decisions are made without regard to the period of time a defendant must spend in prison before becoming eligible for parole, or that such decisions would not be drastically affected by a substantial change in the proportion of the sentence required to be served before becoming eligible, parole eligibility can be properly viewed as being determined -- and deliberately so -- by the sentence of the district judge. Eligibility for parole under § 4202 is thus determined at the time of sentencing and, under the teaching of Bradley, is part of the "prosecution" saved by § 1103(a).
the obvious answer that the Court could not reasonably be thought to have decided in a footnote a question "on which" we said in the text, "we express no opinion," 410 U.S. at 410 U. S. 611, respondent's reliance upon the footnote both proves too little and too much. It proves too little, because the fact that the Board of Parole, not the sentencing judge, finally determines whether and when an offender should be released on parole does not undercut our conclusion that the district judge, at the time of sentencing, determines when the offender will become eligible for consideration for parole and the Board's action simply implements that determination. [Footnote 9] It proves too much, because, if -- as the respondent would have it -- the proper focus is upon the time at which release on parole is actually granted or denied, the parole decision, whether made under 18 U.S.C. § 4208(a) or 18 U.S.C. § 4202, is made long after the "prosecution" terminates; for under both provisions, the Board of Parole ultimately decides whether and when the offender is to be released. But, as previously mentioned, we held in Bradley that the district judge's decision to deny early parole under § 4208(a) was part of the sentence, and therefore part of the "prosecution."
"[t]he repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute."
"used by the great masters of crown law and the elementary writers as synonymous with the word 'punishment,' in connection with crimes of the highest grade."
Id. at 128 U. S. 402. Thus, the Court agreed with the construction of the clause by Mr. Justice Miller, as Circuit Justice, in United States v. Ulrici, 28 F.Cas. 328, 329 (No. 16,594) (CCED Mo. 1875), that those terms "were used by Congress to include all forms of punishment for crime." See 128 U.S. at 128 U. S. 402-403. In consequence, the saving clause has been held to bar application of ameliorative criminal sentencing laws repealing harsher ones in force at the time of the commission of an offense. See, e.g., Jones v. United States, 117 U.S. App.D.C. 169, 327 F.2d 867 (1963); United States v. Kirby, 176 F.2d 101 (CA2 1949); Lovely v. United States, 175 F.2d 312 (CA4 1949).
history of § 7237(d) reveals that Congress meant ineligibility for parole to be treated as part of the "punishment" for the narcotics offenses for which respondent was convicted. Section 7237(d) was enacted as part of the Narcotic Control Act of 1956. The statute embodied congressional acceptance of the approach that effective combat against the contagion of drug addiction required the imposition of severe penalties for certain narcotics offenses. Congress therefore enacted lengthy mandatory minimum sentences as a means of decreasing both drug addiction and trafficking. See, e.g., S.Rep. No.1997, 84th Cong., 2d Sess., 5 (1956); H.R.Rep. No. 2388, 84th Cong., 2d Sess., 10 (1956). But Congress believed that longer sentences would not achieve the desired results unless the offender remained imprisoned for his full term.
"In evaluating the effectiveness of the presently prescribed penalties, it must be recognized that special incentives in our penal system serve to decrease the actual time spent in a penal institution under a sentence imposed by a court. The violator is eligible for parole after serving one-third of his sentence. . . . Available data from the Bureau of Prisons, indicates that a narcotics violator actually serves an average of less than two-thirds of the sentence imposed by the court. This mitigation of sentence tends to defeat the purposes of [existing legislation]. . . ."
Id. at 10-11. Accordingly, Congress expressly provided in § 7237(d) that parole under 18 U.S.C. § 4202 would be unavailable for narcotics offenders.
"It may be 'legislative grace' for Congress to provide for parole, but when it expressly removes all hope of parole upon conviction and sentence for certain offences, . . . this is in the nature of an additional penalty."
Durant v. United States, 410 F.2d 689, 691 (CA5 1969). Second, a repealer of parole eligibility previously available to imprisoned offenders would clearly present the serious question under the ex post facto clause of Art. I, § 9, cl. 3, of the Constitution, of whether it imposed a "greater or more severe punishment than was prescribed by law at the time of the . . . offense," Rooney v. North Dakota, 196 U. S. 319, 196 U. S. 325 (1905) (emphasis added). See Love v. Fitzharris, 460 F.2d 382 (CA9 1972); cf. Lindsey v. Washington, 301 U. S. 397 (1937); Holden v. Minnesota, 137 U. S. 483, 137 U. S. 491-492 (1890); Calder v. Bull, 3 Dall. 386, 3 U. S. 390 (1798); United States ex rel. Umbenhowar v. McDonnell, 11 F.Supp. 1014 (ND Ill.1934).
as a punitive measure, we hold that the no-parole provision of § 7237(d) is a "penalty, forfeiture, or liability" saved by § 109.
Respondent emphasizes that Congress completely changed its approach to regulation of narcotics offenses in the 1970 Act, jettisoning the retributive approach of the 1956 law in favor of emphasis in the 1970 Act upon rehabilitation of the narcotics offender. He argues that, in light of this basic change, little purpose is served by denying respondent eligibility for parole -- indeed, that such denial frustrates the current congressional goal of rehabilitating narcotics offenders.
Undeniably this argument has force, but it is addressed to the wrong governmental branch. Punishment for federal crimes is a matter for Congress, subject to judicial veto only when the legislative judgment oversteps constitutional bounds. See Gore v. United States, 357 U. S. 386, 357 U. S. 393 (1958); Bell v. United States, 349 U. S. 81, 349 U. S. 82 (1955). Section 1103(a) of the 1970 Act and 1 U.S.C. § 109 saved from repeal the bar of parole eligibility under § 7237(d), and, however severe the consequences for respondent, Congress trespassed no constitutional limits.
"(1) of any offense the penalty for which is provided in subsection (b) of this section, subsection (c), (h), or (i) of section 2 of the Narcotic Drugs Import and Export Act, as amended, or such Act of July 11, 1941, as amended, or"
"(2) of any offense the penalty for which is provided in subsection (a) of this section, if it is the offender's second or subsequent offense,"
"the imposition or execution of sentence shall not be suspended, probation shall not be granted, section 4202 of title 18 of the United States Code shall not apply, and the Act of July 15, 1932 (47 Stat. 696; D.C.Code 2201 and following), as amended, shall not apply."
"A Federal prisoner, other than a juvenile delinquent or a committed youth offender, wherever confined and serving a definite term or terms of over one hundred and eighty days, whose record shows that he has observed the rules of the institution in which he is confined, may be released on parole after serving one-third of such term or terms or after serving fifteen years of a life sentence or of a sentence of over forty-five years."
Respondent was convicted of violating 21 U.S.C. § 173 (1964 ed.) and 26 U.S.C. §§ 4701, 4703, 4704(a), and 4771(a) (1964 ed.). His sentences were imposed under 21 U.S.C. § 174 and 26 U.S.C. § 7237(a). Section 174 explicitly incorporated the provisions of 26 U.S.C. § 7237(d) which was directly applicable to the sentence imposed under § 7237(a).
"Prosecutions for any violation of law occurring prior to the effective date of [the Act] shall not be affected by the repeals or amendments made by [it] . . . or abated by reason thereof."
"The repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute, unless the repealing Act shall so expressly provide, and such statute shall be treated as still remaining in force for the purpose of sustaining any proper action or prosecution for the enforcement of such penalty, forfeiture, or liability."
The mandate was issued before the Circuit Justice signed a stay. The stay was treated, however, as staying all proceedings under the mandate. Respondent's motion to dismiss the writ of certiorari as moot is therefore denied.
The Courts of Appeals for the Second and Tenth Circuits have held that narcotics offenders are ineligible for parole. United States v. De Simone, 468 F.2d 1196 (CA2 1972) (but see United States v. Huguet, 481 F.2d 888 (CA2 1973)); Perea v. United States Board of Parole, 480 F.2d 608 (CA10 1973). In addition to the Court of Appeals for the Third Circuit, in this case, the Courts of Appeals for the Fourth, Fifth, Seventh, and District of Columbia Circuits have held that narcotics offenders are eligible for parole. See Alvarado v. McLaughlin, 486 F.2d 541 (CA4 1973); Amaya v. United States Board of Parole, 486 F.2d 940 (CA5 1973); United States v. McGarr, 461 F.2d 1 (CA7 1972); United States v. Marshall, 158 U.S.App.D.C. 283, 485 F.2d 1062 (1973).
"(a) Upon entering a judgment of conviction, the court having jurisdiction to impose sentence, when in its opinion the ends of justice and best interests of the public require that the defendant be sentenced to imprisonment for a term exceeding one year, may (1) designate in the sentence of imprisonment imposed a minimum term at the expiration of which the prisoner shall become eligible for parole, which term may be less than, but shall not be more than one-third of the maximum sentence imposed by the court, or (2) the court may fix the maximum sentence of imprisonment to be served in which event the court may specify that the prisoner may become eligible for parole at such time as the board of parole may determine."
The statement in Morrissey v. Brewer, 408 U. S. 471, 408 U. S. 480 (1972), that "[p]arole arises after the end of the criminal prosecution, including imposition of sentence" was addressed to the decision determining the time of release on parole, as distinguished from the decision determining eligibility.
Respondent argues that, since the 1970 Act contains its own saving clause, § 1103(a), that specific directive should be read to supersede the general clause § 109. But only if § 1103(a) can be said by fair implication or expressly to conflict with § 109 would there be reason to hold that § 1103(a) superseded § 109. See Great Northern R. Co. v. United States, 208 U. S. 452, 208 U. S. 465-466 (1908). We find no conflict.
The Court of Appeals, relying on statements in opinions of this Court that § 109 is intended to obviate "mere technical abatement[s]," see Hamm v. Rock Hill, 379 U. S. 306, 379 U. S. 314 (1964), held that, since respondent's conviction and sentence would remain intact even if he were released on parole, the purposes of 1 U.S.C. § 109 would not be served by applying it to save the no-parole provision of 26 U.S.C. § 7237(d). 483 F.2d 656, 663; see United States v. Stephens, 449 F.2d 103, 105-106 (CA9 1971). This analysis, it seems to us, begs the relevant question. The no-parole provision of 26 U.S.C. § 7237(d) was directly incorporated into the sentencing provisions of 21 U.S.C. § 174 and 26 U.S.C. § 7237(a), see n 3, supra, and if the repeal of 26 U.S.C. § 7237(d) can be viewed as mitigating respondent's punishment under those sections, his conviction and sentence would not be left intact by the repealer and his prosecution would "technically" abate under the common law rule. Thus, the appropriate inquiry is whether parole ineligibility is a "penalty, forfeiture, or liability" for his offense that survives the repealer.
"The liberty of a parolee enables him to do a wide range of things open to persons who have never been convicted of any crime. . . . Subject to the conditions of his parole, he can be gainfully employed, and is free to be with family and friends and to form the other enduring attachments of normal life. Though the State properly subjects him to many restrictions not applicable to other citizens, his condition is very different from that of confinement in a prison."
MR. JUSTICE BLACKMUN, with whom MR. JUSTICE Douglas and MR. JUSTICE MARSHALL join, dissenting.
The Court holds that the no-parole provision of the repealed statute, 26 U.S.C. § 7237(d) (1964 ed. and Supp. V), is saved by both the general saving clause, 1 U.S.C. § 109, and the specific saving clause, § 1103(a), of the 1970 Act. I believe that neither provision can be read to cover post-sentencing parole eligibility, and I therefore respectfully dissent.
Section 109. Parole eligibility, in my view, is not a "penalty" envisioned by, and within the meaning of, the general saving statute, 1 U.S.C. § 109. The purpose and thrust of § 109, the pertinent portion of which was enacted originally in 1871, c. 71, 16 Stat. 432, is to preclude the technical abatement of a prosecution for an offense that was committed before the criminal statute was repealed. Hamm v. Rock Hill, 379 U. S. 306, 379 U. S. 314 (1964). Quite appropriately, this recognizes that, apart from exceptional circumstances, [Footnote 2/1] one who violates the criminal law should not escape sanction if, subsequent to the commission of his criminal act, the law happens to be repealed.
In this case, however, we are faced with a decidedly different situation. Respondent Marrero in no way is seeking to avoid punishment for his criminal act, and he is still fully subject to the service of his sentence. What Marrero seeks is merely the opportunity to be considered for parole. Eligibility for parole will not free him from his imposed sentence. The decision whether he should be accorded parole lies within the discretion of the Board of Parole. If for any reason the Board feels that parole would not be appropriate for the respondent, it can be denied, and Marrero will remain incarcerated for the term to which he is subject. Moreover, even if parole is deemed appropriate and is granted, respondent still would be subject to the conditions the parole authorities choose to place on his conditional freedom.
"is not a release of the prisoner from all disciplinary restraint, but is rather merely 'an extension of the prison walls;' and the prisoner, while on parole, remains 'in the legal custody and under the control of' the Parole Board,"
United States v. Marshall, 158 U.S.App.D.C. 283, 286, 485 F.2d 1062, 1065 (1973). The "sentence" to be served by respondent is still 10 years, whether or not he is granted parole. Cf. Anderson v. Corall, 263 U. S. 193 (1923). In short, it is by no means clear to me that respondent Marrero is seeking to be relieved of the obligations of the "sentence" imposed upon him.
By expanding the term "penalty" to include parole ineligibility, rather than restricting it to the sentence imposed, the Court, in my view, misconceives the nature of parole ineligibility and extends § 109 well beyond its prior limits. To say that Congress intended parole ineligibility to be a "penalty" under the repealed statute is merely to state the conclusion. The appropriate question is whether Congress intended parole ineligibility to be the type of "penalty" preserved by the general saving statute. Until today, § 109 has not been read so broadly, and I believe this extension goes beyond the intended narrow anti-abatement reach of § 109. To repeat: § 109 "was meant to obviate mere technical abatement." Hamm v. Rock Hill, 379 U.S. at 379 U. S. 314.
This unprecedented extension of § 109 might be justified, and perhaps made acceptable, if it were possible in any way to conclude that the Court's reading serves to effectuate congressional intent or to promote some valid policy. But the result reached clearly does a disservice in both respects.
Stat. 1294, and it precludes abatement only of "prosecutions." Although we pretermitted this precise question in Bradley v. United States, 410 U. S. 605, 410 U. S. 611 n. 6 (1973), the Court clearly distinguished post-sentence parole eligibility from the specific terms of the sentence already handed down. I believe this distinction is crucial, and that it requires a different result in the instant situation.
In determining whether § 1103(a) bars parole eligibility for pre-Act offenders, the Court should ascertain what Congress intended. While there is no precise legislative history on this question, I think the wording of § 1103(a) and the overall purposes of the 1970 Act preclude the result reached by the Court. Section 1103(a) applies only to "prosecutions." We reached the outer limit of this term in Bradley. Certainly the legislative and judicial history of the even broader language of the general saving provision, § 109, hardly supports the extravagant interpretation of § 1103(a) reached today. In light of the clear history and law under § 109, had Congress wanted to save more than the prosecution itself, it could well have done so in specific terms. Instead, it chose the narrowest possible saving clause. Particularly in light of the fact that the text of the 1970 Act specifically rejects the concept of paroleless sentencing, it is illogical and unwarranted to assume that Congress intended the term "prosecutions" to be read so broadly.
(1971), I see no other choice than to resolve any doubts in favor of eligibility.
The Court would justify its broad reading of the word "prosecution" by stating that "a pragmatic view of sentencing requires [this] conclusion." Ante at 417 U. S. 658. Needless to say, no authority, legal or otherwise, is cited for this proposition other than the majority's own intuition, and I venture to say that none could be cited. Parole eligibility is determined by a parole board at its discretion, and the existence of parole eligibility is either guaranteed by statute or, as in the case of the repealed Act, is denied by statute. One thing is clear: the sentencing judge has no explicit control over the determination. Congress has never instructed district courts to assess sentences according to parole eligibility dates and if, in fact, some judges do this, it hardly justifies this Court's flat conclusion that parole eligibility is "implicit in the terms of the sentence" and is "thus determined at the time of sentencing." Ibid.
position here is incorrect, in terms both of the laws and of policy, I would affirm the judgment of the Court of Appeals.
See, e.g., Hamm v. Rock Hill, 379 U. S. 306 (1964).
The issue certified and decided in United States v. Reisinger, 128 U. S. 398 (1888), was only whether a prosecution under a repealed criminal statute survived the repeal. "Penalty" appears to have been used there interchangeably with the concept of criminal liability. See also United States v. Smith, 433 F.2d 341 (CA4 1970), cert. denied, 401 U.S. 942 (1971); United States v. Brown, 429 F.2d 566 (CA5 1970); Faubion v. United States, 424 F.2d 437 (CA10 1970).
In Kirby and Lovely, the Courts of Appeals construed the general saving clause in connection with repealing statutes' saving clauses that provided for the nonabatement of any "rights and liabilities" under the repealed acts. It is interesting to note that all the cases cited by the Court, ante at 417 U. S. 661, and petitioner, Brief for Petitioner 16-17, for the proposition that sentence as well as prosecution survives under the general saving clause, were decided in circuits that subsequently rejected the extension sought by petitioner in the present case.
Petitioner concedes that granting parole eligibility presents no institutional problems.
"Neither the Bureau of Prisons nor the Board of Parole believes that it would impede the proper performance of their functions if they were required to consider narcotics offenders convicted under the prior statute eligible for parole under 18 U.S.C. 4202. Such a requirement would not demand the granting of parole to any individual prisoner unless the Board determines that his supervised release from confinement is in the interests of both the prisoner and society."
As the Court notes, ante at 417 U. S. 659 n. 9, in Morrisey v. Brewer, 408 U. S. 471, 408 U. S. 480 (1972), we stated that "[p]arole arises after the end of the criminal prosecution, including imposition of the sentence." The fact that the decision might have dealt with release, rather than the determination of eligibility does not eliminate the conceptual proposition that parole eligibility is an event separate from sentencing, and I feel that the majority's attempted distinction is not persuasive.
Perea v. United States Board of Parole, 480 F.2d 608 (CA10 1973).
United States ex rel. Marrero v. Warden, 483 F.2d 656 (CA3 1973) (the instant case); Alvarado v. McLaughlin, 486 F.2d 541 (CA4 1973), pet. for cert. pending sub nom. McLaughlin v. Prieto; Amaya v. United States Board of Parole, 486 F.2d 940 (CA5 1973), pet. for cert. pending; United States v. Marshall, 158 U.S.App.D.C. 283, 286, 485 F.2d 1062, 1065 (1973). See United States v. Huguet, 481 F.2d 888 (CA2 1973) (question pretermitted). See also United States v. McGarr, 461 F.2d 1, 4 (CA7 1972); United States v. Stephens, 449 F.2d 103 (CA9 1971). The Second Circuit's earlier decision in United States v. De Simone, 468 F.2d 1196 (1972), cert. denied, 410 U.S. 989 (1973), cited by the Court, ante at 417 U. S. 656 n. 7, was referred to in Huguet, supra, and "cannot be regarded as controlling." 481 F.2d at 891.


text:
Charles A. Goetz became a voluntary bankrupt on October 12, 1900. George B. Keppel, the trustee, sued the Tiffin Savings Bank in an Ohio court to cancel two realestate mortgages executed by Goetz, one to secure a note for $4,000 and the other a note for $2,000. The mortgage to secure the $4,000 note was made more than four months before the adjudication in bankruptcy. The mortgage securing the $2,000 note was executed a few days before the bankruptcy, the mortgagor being at the time insolvent and intending to prefer the bank. The bank defended the suit, averring its good faith and asserting the validity of both the securities. In a cross petition the enforcement of both mortgages was prayed. The court held [197 U.S. 356, 357] the mortgage securing the $4,000 note to be valid, and the mortgage securing the $2,000 note to be void. The trustee appealed to a circuit court, where a trial de novo was had. At such trial the attorney for the bank stated to the court that the bank waived any claim to a preference as to the $2,000 note, but that he could not assent to a judgment to that effect. A judgment was entered sustaining the security for the $4,000 note and avoiding that for the $2,000 note.
The bank subsequently sought to prove that it was a creditor of the estate upon the note for $2,000, and upon two other unsecured notes, aggregating $835. The referee refused to allow the proof, upon the ground that, as the bank had compelled the trustee to sue to cancel the security, and a judgment nullifying it had been obtained, the bank had lost the right to prove any claim against the estate. The district judge, upon review, reversed this ruling. The circuit court of appeals to which the issue was taken, after stating the case as above recited, certified questions for our determination.
Messrs. John C. Royer, Henry Weller, and Bunn & Royer for Keppel.
[197 U.S. 356, 358] Messrs. George E. Seney, John L. Lott, and Milton Sayler for the bank.
'First. Can a creditor of a bankrupt, who has received a merely voidable preference, and who has in good faith retained such preference until deprived thereof by the judgment of a court upon a suit of the trustee, thereafter prove the debt so voidably preferred?
'Second. Upon the issue as to the allowance of the bank's claims, was it competent, in explanation of the judgment of the Ohio circuit court in favor of the trustee and against the bank in respect to its $2,000 mortgage, to show the disclaimer made in open court by the attorney representing the bank, of any claim of preference, and the grounds upon which the bank declined to consent to a judgment in favor of the trustee?
Before we develop the legal principles essential to the solu- [197 U.S. 356, 360] tion of the first question, it is to be observed that the facts stated in the certificate and implied by the question show that the bank acted in good faith when it accepted the mortgage and when it subsequently insisted that the trustee should prove the existence of the facts which, it was charged, vitiated the security. It results that the voidable nature of the transaction alone arose from 67e of the the act of 1898, invalidating 'conveyances, transfers, or encumbrances of his property made by a debtor at any time within four months prior to the filing of the petition against him, and while insolvent, which are held null and void as against the creditors of such debtor by the laws of the state, territory, or district in which such property is situate' [30 Stat. at L. 565, chap. 541, U. S. Comp. Stat. 1901, p. 3449], and giving the assignee a right to reclaim and recover the property for the creditors of the bankrupt estate.
Re Greth, 112 Fed. 978; Re Keller, 109 Fed. 126, 127; Re Owings, 109 Fed. 624. [197 U.S. 356, 361] to prove his claim, after the surrender of a preference by the compulsion of a decree or judgment, such decisions rest not upon an analysis of the text of the act of 1898 alone considered, but upon what were deemed to have been analogous provisions of the act of 1867 and decisions thereunder. We omit, therefore, further reference to these decisions, as we shall hereafter come to consider the text of the present act by the light thrown upon it by the act of 1867 and the judicial interpretation which was given to that act.
The text is, that preferred creditors shall not prove their claims unless they surrender their preferences. Let us first consider the meaning of this provision, guided by the cardinal rule which requires that it should, if possible, be given a meaning in accord with the general purpose which the statute was intended to accomplish.
We think it clear that the fundamental purpose of the provision in question was to secure an equality of distribution of the assets of a bankrupt estate. This must be the case, since, if a creditor having a preference retained the preference, and at the same time proved his debt and participated in the distribution of the estate, an advantage would be secured not contemplated by the law. Equality of distribution being the purpose intended to be effected by the provision, to interpret it as forbidding a creditor from proving his claim after a surrender of his preference, because such surrender was not voluntary, would frustrate the object of the provision, since it would give the bankrupt estate the benefit of the surrender or cancelation of the preference, and yet deprive the creditor of any right to participate, thus creating an inequality. But it is said, although this be true, as the statute is plain, its terms cannot be disregarded by allowing that to be done which it expressly forbids. This rests upon the assumption that the word 'surrender' necessarily implies only voluntary action, and hence excludes the right to prove where the surrender is the result of a recovery compelled by judgment or decree. [197 U.S. 356, 362] The word 'surrender,' however, does not exclude compelled action, but, to the contrary, generally implies such action. That this is the primary and commonly accepted meaning of the word is shown by the dictionaries. Thus, the Standard Dictionary defines its meaning as follows: '1. To yield possession of to another upon compulsion or demand, or under pressure of a superior force; give up, especially to an enemy in warfare; as, to surrender an army or a fort.' And in Webster's International Dictionary the word is primarily defined in the same way. The word, of course, also sometimes denotes voluntary action. In the statute, however, it is unqualified, and generic, and hence embraces both meanings. The construction which would exclude the primary meaning, so as to cause the word only to embrace voluntary action, would read into the statute a qualification, and this in order to cause the provision to be in conflict with the purpose which it was intended to accomplish,-equality among creditors. But the construction would do more. It would exclude the natural meaning of the word used in the statute, in order to create a penalty, although nowhere expressly or even by clear implication found in the statute. This would disregard the elementary rule that a penalty is not to be readily implied, and, on the contrary, that a person or corporation is not to be subjected to a penalty unless the words of the statute plainly impose it. Tiffany v. National Bank, 18 Wall. 409, 410, 21 L. ed. 862, 863. If it had been contemplated that the word 'surrender' should entail upon every creditor the loss of power to prove his claims if he submitted his right to retain an asserted preference to the courts for decision, such purpose could have found ready expression by qualifying the word 'surrender' so as to plainly convey such meaning. Indeed, the construction which would read in the qualification would not only create a penalty alone by judicial action, but would necessitate judicial legislation in order to define what character and degree of compulsion was essential to prevent the surrender in fact from being a surrender within the meaning of the section. [197 U.S. 356, 363] It is argued, however, that courts of bankruptcy are guided by equitable considerations, and should not permit a creditor who has retained a fraudulent preference until compelled by a court to surrender it, to prove his debt, and thus suffer no other loss than the costs of litigation. The fallacy lies in assuming that courts have power to inflict penalties, although the law has not imposed them. Moreover, if the statute be interpreted as it is insisted it should be, there would be no distinction between honest and fraudulent creditors, and therefore every creditor who in good faith had acquired an advantage which the law did not permit him to retain would be subjected to the forfeiture simply because he had presumed to submit his legal rights to a court for determination. And this accentuates the error in the construction, since the elementary principle is that courts are created to pass upon the rights of parties, and that it is the privilege of the citizen to submit his claims to the judicial tribunals,-especially in the absence of malice and when acting with probable cause,-without subjecting himself to penalties of an extraordinary character. The violation of this rule, which would arise from the construction, is well illustrated by this case. Here, as we have seen, it is found that the bank acted in good faith, without knowledge of the insolvency of its debtor and of wrongful intent on his part, and yet it is asserted that the right to prove its 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.
We are of opinion that, originally considered, the surrender clause of the statute was intended simply to prevent a creditor from creating inequality in the distribution of the assets of the estate by retaining a preference, and at the same time collecting dividends from the estate by the proof of his claim against it, and consequently 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 [197 U.S. 356, 364] on an equal footing with other creditors and prove his claims.
Is the contention well founded that this meaning which we deduce from the text of the surrender clause of the present act is so in conflict with the rule generally applied in bankruptcy acts, and is, especially, so contrary to the act of 1867 and the construction given to it, that such meaning cannot be considered to have been contemplated by Congress in adopting the present act, and hence a contrary interpretation should be applied?
Thus the English rule substantially conformed to the construction we have given to the bankruptcy act before us.
Neither our bankrupt act of 1800 (2 Stat. at L. 19, chap. 19) nor that of 1841 (5 Stat. at L. 440, chap. 9) contained a surrender clause, or any provision generally denying the right of a creditor of a bankrupt to prove his debt in the event that he had received a preference. But, under those acts, bankruptcy courts must necessarily have exercised the power of protecting the estate by preventing a creditor having an otherwise provable debt, who retained that which belonged to the estate, from at the same time taking dividends from it.
Passing the present consideration of the judicial construction given to the act of 1867, and treating, as we believe should be done, the restriction as to the proof of debts expressed in 39 as applicable to voluntary as well as involuntary bankruptcy, we think, as a matter of original interpretation, the surrender clause of the act of 1867 not only fortifies, but ab- [197 U.S. 356, 367] solutely sustains, the construction which we have given to the surrender clause of the act of 1898. Whilst the surrender clause of the act of 1867 changed the method of procedure prevailing under the English rule, and presumptively also obtaining under the acts of 1800 and 1841, by which a creditor holding a preference might prove his claim, but was allowed to obtain no advantage from so doing until he had surrendered his preference, it cannot, we think, in reason be considered that this mere alteration in the practice to be followed was intended in and of itself to impose a penalty upon a creditor who did not voluntarily surrender his preference. And this we think is demonstrated when it is seen that, after making the change as to the procedure in the proof of debts by preferred creditors, there was subsequently embodied in 39 an express prohibition, in the nature of a penalty, forbidding the proof of debt by a creditor who came within the purview of the section. Either that provision solely related to proof of debts embraced in the previous surrender clause or it did not. If it did, then the expression of the penalty in 39 indicates that it was not deemed that the surrender clause contained provision for the penalty, otherwise 39 would in that regard be wholly superfluous. If, on the other hand, it be considered that 39 embraced other debts or claims against the estate than those to which the surrender clause related, then the expression of the penalty in 39, under the rule of expressio unius, could not by implication be read into the previous surrender clause. That is to say, if 23 and 39 of the act of 1867 be considered as not in pari materia, then it follows that the former,-the surrender clause,- standing alone, did not impose the penalty or forfeiture provided for in the latter. If they were in pari materia, then the penalty, whilst applicable and controlling as to both, because of its expression in the later section, cannot be said to have existed alone in and by virtue of an earlier section, wherein no penalty was expressed.
The decisions of the lower Federal courts interpreting the [197 U.S. 356, 368] sections in question, as they stood prior to the amendment of 39 by the act of 1874, hereafter to be referred to, were numerous, and we shall not attempt to review them in detail. They will be found collected in a note contained in the eleventh edition of Bump on Bankruptcy, pp. 550 et seq. Disregarding the discord of opinion shown by those decisions concerning what constituted an involuntary surrender,-that is, whether it was involuntary if made at any time after suit brought by the assignee, or was only so after recovery by the force of a judgment or decree,-and putting out of view also the differences of opinion which were engendered by the fact that the forfeiture imposed by 39 was found in that portion of the act of 1867 which related to involuntary bankruptcy, we think the decisions under the act of 1867, prior to the amendment of 1874, may be classified under four headings.
First. The cases which held that the prohibition of 39 against the proof of debt operated as a bar to such proof, even although there was a voluntary surrender, where the preference had the characteristics pointed out in 39. These cases were, however, contrary to the great weight of authority under the act, and the construction which they enforced may be put out of view.
Second. Those cases which, whilst treating the surrender clause as giving a creditor an alternative which he might exercise without risk of penalty or forfeiture, yet held that by the operation of 39 upon the surrender clause the creditor lost the option to prove his claim, when the surrender was compelled by a judgment or decree at the suit of the assignee. The cases enforcing this interpretation constituted the weight of authority, and such construction may, therefore, be said to have been that generally accepted, and, in our judgment, was the correct one.
Thus clearly pointing out that by the surrender clause alone the creditor would not be debarred from proving his claim, if in fact there had been a surrender, whether voluntary or not, but that, as a result solely of the prohibition of 39, the creditor would be barred after recovery by the assignee.
Third. Cases which treated the surrender clause as in and of itself forbidding a surrender after recovery, because the recovery authorized by 35 was the antithesis of the surrender and precluded a surrender after recovery. This class of cases in effect treated the prohibition expressed in 39 as unnecessary, quoad the subject-matters to which 23 and 35 were addressed. The cases, however, were few in number, and are illustrated by the case of Re Tonkin, 4 Nat. Bankr. Reg. 52, Fed. Cas. No. 14,094.
As an alternative, however, to this view, and treating the sections referred to as in pari materia, it was reiterated that 23 was limited and controlled by the penalty provided in 39.
Plainly, this amendment not only abolished the penalty provided in 39 as originally enacted, since it allowed a creditor to prove his claim for the whole amount thereof after recovery against him if he had not been guilty of actual fraud, and, even in case of actual fraud, after recovery, permitted him to prove for a moiety. The amendment clearly also was repugnant to that construction of the act of 1867 given in some of the cases to which we have referred under the third classification, wherein in the reasoning employed it was assumed that a forfeiture or penalty might to implied alone from the terms of the surrender clause, irrespective of the operation of 39. This results from the very words of the amendment, which says, 'and this limitation on the proof of debts shall apply,' etc., showing that the restriction on the right to prove after a compulsory yielding up of a preference was deemed by Congress to result not from the surrender clause, but from the limitation expressly declared by 39 as amended, which operated a qualification of the broad terms of the surrender clause. It manifestly also arises from the fact that, whilst Congress plainly intended by the amendment to make a change in the rigor of the rule previously obtaining, the phraseology of the surrender clause as originally found in the act was not altered.
After the adoption of the amendment of 1874 it is true that in one or two instances it was held that the amendment, instead of mitigating the severity of 39 as it stood before the amendment, had increased it by adding an additional limitation, viz., prohibiting a preferred creditor who had been guilty of actual fraud from proving for more than one half of his claim, even where he had volutarily surrendered his [197 U.S. 356, 372] preference. But these were isolated cases, since practically the otherwise universl construction was that the amendment was remedial and intended by Congress to mitigate, even in cases of actual fraud, the severity of the prohibition of 39 as originally enacted.
And such construction was also expounded in the following cases: Re Currier (1875) 2 Low. Dec. 436, Fed. Cas. No. 3,492; Burr v. Hopkins (1875) 6 Biss. 345, Fed. Cas. No. 2,192, per Drummond, J.; Re Black (1878) 17 Nat. Bankr. Reg. 399, Fed. Cas. No. 1,459, per Lowell, J.; Re Newcomer (1878) 18 Nat. Bankr. Reg. 85, Fed. Cas. No. 10,148, per Blodgett, J.; Re Kaufman ( 1879) 19 Nat. Bankr. Reg. 283, Fed. Cas. No. 7,627, per Nixon, D. J.; Re Cadwell (1883) 17 Fed. 693, per Coxe, J.
The meaning of the amendment of 1874 was considered by the court of appeals of New York in the case of Jefferson County Nat. Bank v. Streeter, 106 N. Y. 186, 12 N. E. 706. The New York court expressly adopted the construction given in the cases to which reference has just been made, and its action in so doing was affirmed by this court in Streeter v. Jefferson County Nat. Bank, 147 U.S. 40 , 37 L. ed. 70, 13 Sup. Ct. Rep. 236.
It follows that the construction which we at the outset gave to the text of the act of 1898, instead of being weakened, is absolutely sustained by a consideration of the act of 1867, both before and after the amendment of 1874, and the decisions construing the same, since in the present act, as we have said, there is nowhere found any provision imposing even the modified penalty which was expressed in the amendment of 1874. The contention that, because the act of 1898 contains a surrender clause, therefore it must be assumed that [197 U.S. 356, 373] Congress intended to inflict the penalty originally imposed by 39 of the act of 1867, must rest upon the erroneous assumption that that penalty was the result of the surrender clause alone. But this, as we have seen, is a misconception, since from the great weight of judicial authority under the act of 1867, as well as by the express enactment of Congress in the amendment of 1874 and the decisions which construed that amendment, it necessarily results that the penalty enforced under the act of 1867 arose not from the surrender clause standing alone, but solely from the operation upon that clause of the express prohibition contained in 39 of that act. When, therefore, Congress in adopting the present act omitted to reenact the provision of the act of 1867, from which alone the penalty or forfeiture arose, it cannot in reason be said that the omission to impose the penalty gives rise to the implication that it was the intention of Congress to re-enact it. In other words, it cannot be declared that a penalty is to be enforced because the statute does not impose it.
And, irrespective of this irresistible implication, a general consideration of the present act persuasively points out the purpose contemplated by Congress in refraining from re-enacting the penalty contained in 39 of the act of 1867. Undoubtedly the preference clauses of the present act, differing in that respect from the act of 1867, as is well illustrated by the facts of this case, include preferences where the creditor receiving the same acted without knowledge of any wrongful intent on the part of the debtor, and in the utmost good faith. Pirie v. Chicago Title & T. Co. 182 U.S. 454 , 45 L. ed. 1179, 21 Sup. Ct. Rep. 906. Having thus broadened the preference clauses so as to make them include acts never before declared by Congress to be illegal, it may well be presumed that Congress, when it enacted the surrender clause in the present act, could not have contemplated that that clause should be construed as inflicting a penalty upon creditors coming within the scope of the enlarged preference clauses of the act of 1898, thereby entailing an unjust and unprecedented result. [197 U.S. 356, 374] Our conclusion, therefore, is that the first question propounded must to answered in the affirmative, and that the two other questions require no response.
And it is ordered accordingly.
I am unable to agree with the construction given to the sections of the bankruptcy act under consideration, and, because of the importance of the questions involved, have deemed proper a statement of the conclusions reached.
Notwithstanding the first question propounded by the court of appeals presupposes that the $2,000 mortgage was a preference within the meaning of the bankrupt act, it is argued on behalf of the creditors that, although the mortgage made a few days prior to the bankruptcy proceedings and when the bankrupt was insolvent, was void under 6343 of the Revised Statutes of Ohio, as amended April 26, 1898 (93 Ohio Laws, p. 290), read in connection with 67, paragraph e, of the bankruptcy act, it did not constitute a preference which must be surrendered preliminary to proof of the creditor's claim because there was no actual transfer of any property to the creditor, and the only thing obtained was a void mortgage.
'a. A person shall be deemed to have given a preference if, being insolvent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.
In 1, 25, of the act of 1898, a 'transfer' is defined to include the sale and every other and different mode of disposing of or parting with the property or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift, or security.
This definition of a transfer covers a mortgage given for the [197 U.S. 356, 376] security of a debt in express terms, and 60 provides that preferences shall include transfers, the effect of the enforcement of which would be to enable any one of the bankrupt's creditors to obtain a greater percentage of his debt than other creditors of the same class.
It is true that if the mortgage is void it can have no effect to diminish the estate of the bankrupt, but upon its face the mortgage is good as against the bankrupt and the creditors of the estate.
It is said that, the mortgage being void, the creditor had nothing to surrender, but this assumes the invalidity of the security. Until set aside or voluntarily surrendered it is a good encumbrance upon the property, whether regarded as a conditional conveyance or as a mere security for the debt. It could be set aside by the trustee upon proof of insolvency of the bankrupt and other conditions named in the act at the time of giving it; otherwise it would stand as a valid security, unless the creditor should elect to surrender it and make proof of his claim as a general creditor.
The answer to the first question requires a consideration of 57g of the act of 1898, which, as it stood prior to the amendment of February 5, 1903 (32 Stat. at L. 797, chap. 487),1 read: 'The claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences.' May a creditor who has received a preference, voidable by the act, contest the validity thereof, and, if it is declared invalid, still prove his debt upon surrender of his preference as though no contest had been had?
It was held by this court in Pirie v. Chicago Title %& t. c/o. 182 U.S. 438 , 45 L. ed. 1171, 21 Sup. Ct. Rep. 876, that a creditor who had received a [197 U.S. 356, 377] preference, although he did not have reason to believe that one was intended, could only keep the property transferred upon condition of refraining from proof of the balance of his debt.
It was pointed out in that case, in the opinion of the court Mr. Justice McKenna, that 60 in its various provisions permitted a creditor who had innocently received a preference to hold it if he chose, and it could only be recovered by the trustee in the event that he had reasonable cause to believe that a preference was intended, in which case the trustee might recover the property or its value. But the innocent creditor might keep the property transferred to him, although a preference within the definition of the act, upon terms of nonparticipation in the bankrupt estate in the general distribution to the creditors.
Section 23 of the bankruptcy act of 1867 provided: 'Any person who, after the approval of this act, shall have accepted any preference, having reasonable cause to believe that the same was made or given by the debtor contrary to any provision of this act, shall not prove the debt or claim on account of which the preference was made or given, nor shall he receive any dividend therefrom until he shall first have surrendered to the assignee all property, money, benefit, or advantage received by him under such preference.' Section 57g of the present act, prior to the amendment of February 5, 1903, required broadly that claims of creditors who have received preferences shall be surrendered, and that the same shall not be allowed unless this is done.
Under the former act the surrender was required of creditors who had accepted preferences, having reasonable cause to believe the same contrary to the provisions of the act, and such creditor could not receive any dividend until he had first surrendered the preference. In passing the act of 1898, Congress doubtless had before it prior legislation on the subject, and particularly the act of 1867, the most recent enactment on the subject.
Section 57g provides that all preferences, whether innocent [197 U.S. 356, 378] or otherwise, shall be surrendered before the creditor can prove his claim, and the right of proof is not postponed until the surrender, but claims are not to be allowed unless creditors shall surrender their preferences. The element of time is indicated in the word 'until,' which means to the time of, or up to, while the use of 'unless' more emphatically denies the right of proving the claim, save or except upon terms of relinquishing the preference.
In view of the purpose of the bankruptcy act to make an equal distribution of the bankrupt's estate among creditors of the same class and to avoid preferences made within four months, I think, having in view the first question put by the circuit court of appeals, that the sections of the law in question must be construed to put a creditor or who has received a merely voidable preference, which could be recovered from him by the trustee, to his election between striving to retain that which he has received, and voluntarily surrendering his preference, and filing his claim that he may participate with other unsecured creditors in the general distribution of the estate.
The law looks to a prompt, equal, and inexpensive distribution of the estate among those entitled thereto, and I do not think it was intended to permit a creditor to take the chances of litigation with the trustee, and, when defeated, still have the right to 'surrender' his preference and participate in the distribution of the general estate. I think the surrender contemplated by the law is not the capitulation which comes after unsuccessful resistance, but is intended to require the creditor, who must be ppresumed to know the law, to make a prompt election and to stand or fall upon the choice made. In other words it was not intended to permit a creditor who hoids security liable to defeat under the law to keep it if he can maintain it by successful contest, and, if not, to have the same right and privilege as to proof of his debt that he would have if he promptly availed himself of the privilege of surrender, which the law gives to one who would place himself upon a general equality with other creditors of the estate. [197 U.S. 356, 379] These conclusions are sustained by a consideration of the terms of the law under discussion, as well as the adjudicated cases which have arisen under it. The act of 1898 made important changes when compared with the bankrupt law of 1867. As we have already seen, 23 of the latter act limited the requirement as to the surrender of preferences to those made or given contrary to the provisions of the act. Section 35 of the same law gave the right to the assignee in bankruptcy to set aside illegal preferences, and 39, after enumerating certain transactions which should amount to acts of bankruptcy, including fraudulent conveyances as therein described, provided that whenever the beneficiary had reasonable cause to believe that a fraud upon the act was intended, or the debtor was insolvent, the assignee might recover the property, and the creditor should not be allowed to prove his debt in bankruptcy. In 1874 (18 Stat. at L. 178, chap. 390), 39 of the act was amended, and, instead of prohibiting a creditor who had received a conveyance in fraud of the act from proving his debt, it was provided that such creditor should not, in case of actual fraud on his part, be allowed to prove for more than a moiety of his debt, and this limitation should apply to cases of voluntary as well ws involuntary bankruptcy.
It will not, in my view, aid in the determination of the proper construction of the act of 1898 to review the numberous and conflicting decisions made under the act of 1867 as to the effect of these various provisions upon the right of the creditor to prove his claim. The great weight of authority is that one who had a voidable preference under the act could not be permitted to prove his claim after a judgment had been rendered against him in a contest with the trustee.
Presumably with the provisions of the act of 1867 before it, providing that in certain cases of fraudulent conveyance the creditor could not prove his claim in bankruptcy, first as to the whole, and later as to a half of the debt, and the limitations of the requirement to surrender preferences to those made in violation of the act, Congress laid aside these requirements, [197 U.S. 356, 380] and broadly provided in 57g of the act of 1898 that all preferences must be surrendered as a condition of proof of claims against the estate. The innocent holder of a preference could not be deprived of his right of election between proof of his debt and the surrender of his preference. He who had a voidable preference might surrender it and prove his debt. If he did not 'surrender,' the trustee could recover the preference, and the privilege of proof which was conditioned upon surrender no longer existed.
Prior to the amendment of 1903 this court in the case of Pirie v. Chicago Title & T. Co. already referred to, decided that the requirement extended to all menner of preferences, whether innocently received or otherwise, and this was the law until the amendment of 1903.
Therefore the sole question here is: What is meant by the term 'surrender' as used in the act of 1898?
'The statute is that they shall not prove up the debt or claim on account of which the preference was given. It was this precisely which, by the motion under consideration, they sought to have done, and which the court refused to allow.
'It is urged by the claimants that this refusal was erroneous because they had, before the time when they made their motion, surrendered to the assignee all property received by them, under the preference. This devolves upon us the duty of interpreting the meaning of the word ' surrender,' as it is here used. And it is our opinion that a creditor who receives [197 U.S. 356, 381] goods by way of fraudulent preference, and refuses the demand therefor which the assignee is authorized to make ( 15), denies his liability, allows suit to be commenced by the assignee, defends it, goes to trial, is defeated and judgment passes against him, which he satisfies on execution, cannot be said, within the meaning of the statute to have surrendered to the assignee the property received by him under such preference.
To the same effect is Re Owings, 109 Fed. 623, and in Re Greth, 112 Fed. 978, 7 Am. Bankr. Rep. 598, the cases are reviewed and the same conclusion reached.
The only case decided under the act of 1898, which has come to my attention sustaining a contrary view, is Re Richard, 94 Fed. 633, 2 Am. Bankr. Rep. 506, in which it was decided that, notwithstanding the preference was set aside after a fruitless fight with the trustee, the creditor might prove his claim.
'To sustain the contention that the bank did not surrender its preference, it is urged that the bank did not at once, on demand of the assignee, turn over the goods levied on, but litigated the matter with the assignee in both the district and the circuit courts, and that the proceeds of the executions were not relinquished until final judgment was entered against the bank.
This definition is given in support of the contention that a surrender may sometimes be made involuntarily. This is doubtless true, and obviously the term may have different meanings when used in different connections. It may be that an army may surrender a fort after a most vigorous contest, while there is still the choice between further resistance and [197 U.S. 356, 384] yielding the fortress to an enemy; but the most liberal meaning of the term could hardly describe as a surrender the occupation which a victorious army has gained of a fort after it has ejected the enemy from its walls and is securely intrenched therein without leave of those who have been forcibly driven out.
The bankrupt law contemplates that a secured creditor who holds a secuity voidable under the law, and which he should put into the common fund as a condition of the right to participate with other unsecured creditors in the division of the estate, must make his choice while he has yet something to give for the privilege of being taken from the class of those who have a security which may be taken from them, and placed in a class, always favored in the bankrupt law, who shall share in the equal distribution of the bankrupt's estate, freed from fraudulent conveyances and voidable preferences.
The complete answer to the argument that one who has received a preference which he must give up before proof as a general creditor has the right to try out with the trustee the question of the validity of the preference, and then surrender, is that when the judgment of the law has taken the preference from him he has nothing left to surrender, and if then so disposed the creditor cannot surrender a thing which has been wrested from him by the strong hand of the law.
I think the construction here given comports with the purposes and carries into effect the design of the act as expressed [197 U.S. 356, 385] by its terms. It is true that in the present case, after resisting the attack upon the $2,000 mortgage in the court of common pleas, and when the judgment had gone against the bank, it did not appeal, and its counsel in the circuit court disclaimed intention to insist upon the preference of the $2,000 mortgage, but even then refused consent to a decree against the mortgage; and in our opinion the time of election was before judgment in the court of original jurisdiction wherein the mortgage was contested and defeated. It is unnecessary to consider whether an election to surrender the preference can be made after issue joined and before judgment. In this case a trial was had upon the merits. The judgment rendered was vacated by the appeal, and in the appellate court, notwithstanding the qualified disclaimer of counsel for the bank, a final judgment was rendered against the mortgage.
These considerations lead to the conclusion that the first and second questions should be answered in the negative.
The importance of the ruling just made is shown in its application, not only to the act of 1898 as it originally stood, but to the act as it now stands since the amendment of February 5, 1903, which only requires a surrender of preferences when the same are in violation of subdivision b of 60, or void or voidable under 67, subdivision e. The reasoning of the majority of the court permits the holder of a preference, no matter how fraudulent, to contest with the trustee when his preference is attacked, and, when convicted of fraud and an intention to defeat the purposes of the law, to 'surrender' that which the law has declared he cannot hold, and prove his debt as a general creditor. To permit this seems to me to defeat the purpose of the act, and to encourage the very thing the surrender clause was intended to promote,-a prompt and inexpensive distribution of the estate. The fraudulent transferee, although he has lost his suit, has taken no risk, and may still prove his claim on an equality with unpreferred creditors over whom he has sought an illegal advantage. I cannot agree [197 U.S. 356, 386] with this construction, and therefore dissent from the judgment and reasoning of the majority of the court.
I am permitted to state that Mr. Justice Harlan, Mr. Justice Brewer, and Mr. Justice Brown concur in this dissent.
[ Footnote 1 ] U. S. Comp. St. Supp. 1903, p. 415.

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text: 168 WATER RIGHTS SYSTEMS PERTAINING TO WATERCOURSES privileges-mining and diverting water-were equally conferred and stood on an equal footing.36 On the public domain, therefore, the right to the use of running water existed without private ownership of the soil, on the basis either of prior location on the land or of prior appropriation and use of the water,37 conflicts between land claimants and water claimants being decided by the fact of priority in time of either land location or water diversion.38 Relative rights of appropriators.-The first appropriator of water for mining or other beneficial purposes was recognized in the local communities as having, to the extent of actual use, the better right. And priority of appropriation-a fundamental feature of the appropriation doctrine-was repeatedly recognized in specific terms by the courts in the early California water cases.39 The priority principle was applied in the first California cases as between appropriators of water for mining purposes,40 and was soon extended to other purposes as well. This extension required the authority of the courts, for in the mining areas it was argued that a prior appropriation could be made solely for the purpose of mining and there was as yet no Federal or State legislation on the subject. Thus, in one controversy, the right to use the water of a stream was claimed by a prior appropriator for operating a sawmill and by a subsequent appropriator for working mines.41 The upstream mining diversions from a water supply insufficient for both claimants prevented operation of the mill for 5 months of the year. The California Supreme Court resolved the vital issue by affirming the judgment of the trial court in issuing an injunction against the miners. The ground for this decision was that under the State policy the prior appropriation of either land or water on the public domain entitled the holder to protection in its quiet enjoyment. In a later California case, the plaintiff, a prior appropriator of water, had constructed a reservoir for impounding the waters of a ravine for the purpose of irrigating a garden and fruit trees on the public domain.42 Defendants entered the enclosed premises, proceeded to dig and sluice the same for mining purposes, and threatened to divert the water from plaintiff's reservoir. The supreme court decided that regardless of the rights of defendants to enter public lands for mining purposes,43 the threatened diversion of water from the 36Irwin v. Phillips, 5 Cal. 140, 147 (1855). 37Hill v. Newman, 5 Cal. 445, 446 (1855). 38Irwin v.Phillips, 5 Cal. 140, 147 (1855); Crandall v. Woods, 8 Cal. 136,144 (1857). 39 See Stiles v. Laird, 5 Cal. 120, 122 (1855);Hill v. Newman, 5 Cal. 445, 446 (1855); Hill v. King, 8 Cal. 336, 337, 338 (1857). See also Jennison v. Kirk, 98 U. S. 453, 458 (1879). 40Eddy v. Simpson, 3 Cal. 249, 252 (1853). 41 Tartar v. Spring Creek Water & Min. Co., 5 Cal. 395, 397-399 (1855). "Rupley v. Welch, 23 Cal. 452, 455-457 (1863). 43 An exception from the right of the prior appropriator of water to be protected against all the world but the true owner was expressed in early California State legislation requiring the agriculturist to yield to the miner under certain circumstances: Cal. Stat. ch. 82 (1852); Stat. ch. 119 (1855).

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We present some results of investigation and engineering of cryogenic electron-optical, mass-spectrometric, and super-conducting devices for space research, ground-based infrared devices for stadying space objects, on-board cryostat systems, cryogenic vacuum imitators of the outer space, materials and technologies for investigations in the outer space.
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36. Mihal'chenko R. S., Arhipov V. T., Vakulenko V. D. et al. Research work microcryogenic throttle system in conjunction with the cold accumulator. In Thermal processes in cryogenic systems, 100—106 (Nauk, dumka, Kiev, 1986) [in Russian].
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39. Gamulya G. D., Ostrovckaya Ye. L., et al. Friction behaviour and wear resistance of diamond-like carbon films under cryogenic temperatures. Diamond and Related Materials, 3, 1381 — 1384 (1994).
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42. Ilichev V. Ya., Skibina L. V., Chernik M. M. The influence of martensitic trasformation on strength and plasticity of Fe-Cr-Ni alloy single crystals. Austenitic Steels at Low Temperatures, Ed. by R. P. Reed, 69—82 (Plenum Press, New York, 1983).
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46. Mikhalchenko R. S., Arkhipov V. T., Ostrovskii I. N., et al. A study of solidification of liguid cryogens in cryostats. Low Temperature Physics, 16 (4) 476—480 (1990).
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When the Supreme Court issued its ruling in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 194 L. Ed. 2d 635 (2016), earlier this year, it was received by compliance professionals with mixed reactions. Many were thrilled with the Supreme Court’s ruling which seemingly provided a defense to purely statutory-damages-based consumer lawsuits. Others were cautious not to read too much into the Supreme Court’s decision. Based on recent rulings out of courts in the Eleventh Circuit, it appears the skeptics may have been right.
The Supreme Court’s remand gave hope to those who seek to defend against consumer litigation premised on statutory violations. For example, both the Telephone Consumer Protection Act (TCPA) and Fair Debt Collection Practices Act (FDCPA) provide for statutory remedies irrespective of actual damages. If Spokeo remanded an FCRA statutory claim, could analogous arguments gain traction under the TCPA and FDCPA and protect businesses from technical violation cases?
Unfortunately, in at least the Eleventh Circuit, this hope is nothing more than a pipe dream. With respect to the FDCPA, earlier this month, in an unpublished opinion, the Eleventh Circuit distinguished Spokeo in the context of an FDCPA improper disclosure case and permitted a statutory damages claim to proceed despite the lack of any economic or physical damages. See Church v. Accretive Health, Inc., 2016 U.S. App. LEXIS 12414 (11th Cir. July 6, 2016). Specifically, the Eleventh Circuit noted that the Supreme Court left open the possibility that a violation of a procedural right could be an injury-in-fact in certain circumstances. Id. at *6. The Court in Church found that Congress created a right to receive the required FDCPA disclosures and a new injury when a debtor does not receive such disclosures. Id. at *10. Not receiving the mandatory disclosures was deemed to be a “real” and “concrete” injury which sufficiently satisfied the injury-in-fact requirement. Id. at *11.
Because Church is an unpublished opinion, it is not binding precedent. See 11th Cir. R. 36-2. Despite its status as an unpublished opinion, at least one Court has already cited and relied upon Church. In Dickens v. Gc Servs., the plaintiff claimed that the defendant omitted material language required by the FDCPA. 2016 U.S. Dist. LEXIS 94621 (M.D. Fl. July 20, 2016). The defendant moved to dismiss for lack subject matter jurisdiction arguing, amongst other things, that Spokeo confirms that the plaintiff did not suffer an “injury-in-fact.” The Middle District of Florida denied the motion to dismiss, stating that the defendant grossly misread Spokeo. Id. at *3. More importantly, the Court cited to Church and stated that the “Court is convinced that the Eleventh Circuit's Church opinion is a more nuanced application of Spokeo and the principles underlying it” and that “[i]n the face of that persuasive authority, the Court will not read Spokeo as denying Dickens standing here.” Id. at *5. Given that the courts in Church and Dickens each characterized a violation of the FDCPA as a cognizable and concrete injury, it does not appear that businesses will be able to rely on Spokeo in order to defend against technical FDCPA violations which are devoid of any actual damages.
The TCPA outlook on this front appears equally grim. “[T]he Eleventh Circuit has held that Congress intended to create a concrete injury where the statute was violated, meaning so long as the plaintiff has been affected personally by the conduct that violates the statute, standing exists.” Rogers v. Capital One Bank (USA), N.A., 2016 U.S. Dist. LEXIS 73605, *4 (N.D. Ga. June 3, 2016)(citing Palm Beach Golf Ctr.-Boca, Inc. v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245, 1252 (11th Cir. 2015)). Because Palm Beach Golf was issued prior to Spokeo, one could argue that it is overruled to the extent it is inconsistent with Spokeo. However, even though Church was an FDCPA case, the fact that the Eleventh Circuit limited Spokeo to its narrow facts and found a concrete injury-in-fact on a purely statutory-based claim seemingly signals that the Eleventh Circuit would consider Palm Beach Golf to be good law. Based on these recent cases, it is reasonable to conclude that the Eleventh Circuit would hold that the TCPA created a concrete injury and, as a result, regardless of any actual damages, a plaintiff would have Article III standing.
Recently, a court outside the Eleventh Circuit held that the plaintiff’s TCPA claim alleged nothing more than a bare violation of the TCPA without any concrete harm and thus required dismissal. See Sartin v. EKF Diagnostics, Inc., 2016 U.S. Dist. LEXIS 86777 (E.D. La. July 5, 2016). While such a ruling is positive news for businesses defending consumer claims, it is not binding on the Eleventh Circuit. In fact, in all likelihood as noted above, the Eleventh Circuit would reject Sartin and adhere to Palm Beach Golf.
Therefore, it seems the best hope for businesses in the Eleventh Circuit would be a circuit split that requires the Supreme Court to answer the question whether a statutory violation without any actual damages is sufficient to confer standing or whether Spokeo is limited to its facts. For now, courts in the Eleventh Circuit appear to lean towards the latter.

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56. 21 C.F.R § 1271.47 (2012).
57. 21 C.F.R § 1271.50 (2012).
58. Id. This includes “[r]ecords or other information received from any source pertaining to risk factors for relevant communicable disease (e.g. social behavior, clinical signs and symptoms of relevant communicable disease, and treatments related to medical conditions suggestive of risk for relevant communicable disease).” For repeat donors, a bank may perform an abbreviated screening if it has been six months or less since he completed a full screening. An abbreviated screening requires only review and documentation of “any changes in the donor’s medical history since the previous donation that would make the donor ineligible, including relevant social behavior.” 21 C.F.R § 1271.75(e) (2012).
59. See 21 C.F.R. § 1271.75(a)( 1) (stating “if you are the establishment that performs donor screening, you must screen a donor of cells or tissue by reviewing the donor’s relevant medical records for . . . [r]isk factors for, and clinical evidence of, relevant communicable disease agents and diseasesFalse” (emphasis added)); see 21 C.F.R. § 1271.3(s) (“Relevant medical records means a collection of documents that includes a current donor medical history interviewFalse” (emphasis added)).
60. 21 C.F.R. § 1271.75; Guidance for Industry: Eligible Determination for Doctors of Human Cells, Tissues, and Cellular and Tissue-Based Products, U.S. FOOD & DRUG ADMIN. (Apr. 19, 2012), http://www.fda.gov/BiologicsBloodVaccines/GuidanceCompliance RegulatoryInformation/Guidances/Tissue/ ucm073964.htm#DONORSCREENING1271.75.
61. 21 C.F.R. § 1271.3(n) (“Donor medical history interview means a documented dialog about the donor’s medical history and relevant social behavior, including activities, behaviors, and descriptions considered to increase the donor’s relevant communicable disease risk.”).
62. See 21 C.F.R. § 1271.3 (How does FDA define important terms in this part?); 21 C.F.R. § 1271.75 (How do I screen a donor?).


The 9th Circuit Court of Appeals, which covers California, delivered a great opinion for disabled workers wrongfully denied long term disability benefits from their insurer.
This case involves Boeing, and Aetna Life Insurance Company. A few years ago, all of the LTD insurers reserved “discretionary” authority for themselves. Discretion in LTD policies, in my opinion, amounts to highway robbery. The insurance company sells you a long term disability policy, supposedly to protect you should you become disabled and can no longer work.
So they sell you this policy, but in the language they reserve for themselves “discretion.” Meaning, they get to decide whether you are disabled or not. And courts respected this discretion. The insurance company would only lose if they abused this discretion.
I won’t get into how an insurer can abuse their discretion, as it’s a lengthy, unclear and complex topic. Just know, that in California, discretion for LTD policies is effectively dead. California passed a law in 2012, stating any discretion clause in a policy, contract, certificate, or agreement offered, issued, delivered, or renewed after that date, will be void.
The insurer argued this new law didn’t apply to their policy, because the language in the agreement existed before 2012, and was not renewed or modified since. The Court disagreed, and stated under California law, a policy is “renewed” if it continues to be in force beyond it’s anniversary date. In essence, all policies renew every year in its existence.
As we have quoted above, § 10110.6 voids any “provision that reserves discretionary authority to the insurer, or an agent of the insurer.” Cal. Ins. Code § 10110.6(a). The statute applies to any “policy, contract, certificate, or agreement offered, issued, delivered, or renewed.” Id. “‘[R]enewed’ means continued in force on or after the policy’s anniversary date.” Id. § 10110.6(b). Thus, for § 10110.6 to void the discretionary clauses in question, “a policy, contract, certificate, or agreement” must have been “offered, issued, delivered, or renewed” after the statute’s effective date of January 1, 2012. See Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 927 (9th Cir. 2012) (“The law in effect at the time of renewal of a policy governs the policy . . . .”).
provision is void and unenforceable.
Cal. Ins. Code § 10110.6(a). A document (not just a policy, but also the contract, certificate, or agreement) is “renewed” if it “continue[s] in force on or after the policy’s anniversary date.” Id. § 10110.6(b). Boeing’s Policy here “renewed” when it continued in force beyond its anniversary date of January 1, 2012 and, accordingly, the Master Plan similarly “renewed” when it continued in force beyond the Policy’s anniversary date.
Boeing argues that § 10110.6(b) must refer only to insurance policies and not other plan documents. Thus, claims Boeing, the discretionary clause in the Master Plan survives and applies to Orzechowski’s claim. This is a variation on the prior argument that ERISA’s saving clause applies only to insurance companies, and not to insurance provided or funded by other companies. The argument fares no better the second time. By its terms, § 10110.6 covers not only “policies” that provide or fund disability insurance coverage but also “contracts, certificates, or agreements” that “fund” disability insurance coverage. “An ERISA plan is a contract,” Harlick v. Blue Shield of Ca., 686 F.3d 699, 708 (9th Cir. 2012), and thus the Master Plan falls under § 10110.6.
This is a great decision for disabled workers living in California. Discretion is unfair, morally and ethically wrong. And California did the right thing protecting its residents.
While I did not handle this case, and this is just a summary of a disability case, if Unum or any other company denied or terminated your benefits, call us right now, or complete the contact form on my website.