tion of annexation was held not to abrogate a system of trials by information and convictions by a non-unanimous jury, as applied to cases prior to the Organic Act of April 30, 1900.

But we do not think it necessary to go further than section 81 itself to find authority for a recognition of the laws previously existing in Hawaii concerning the constitution of its courts and their method of procedure. Whether a petition to a Circuit Court acting as a court of probate shall be addressed to and passed upon by the judge while sitting in court at chambers is, after all, much more a matter of form than of substance. Commonwealth v. McLaughlin, 122 Massachusetts, 449. The petition for the removal of the guardian in this case is entitled "In the Circuit Court of the First Judicial Circuit, Territory of Hawaii. In Probate. At Chambers." It appears to have been heard by the Circuit Judge without a jury, his decision being entitled "Before a Judge of the Circuit Court, of the First Circuit, Territory of Hawaii." It must doubtless be treated as a proceeding at chambers, but for reasons already given we think the power to act at chambers was saved by section 81 continuing in force the previous laws of Hawaii concerning the courts and their procedure. It would be too narrow a construction to hold that this did not include the procedure before judges of those courts sitting at chambers.

The decree dismissing the writ is

Affirmed.

Statement of the Case.

197 U.S.

KEPPEL v. TIFFIN SAVINGS BANK.

CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE SIXTH CIRCUIT.

No. 116. Argued January 6, 1903.-Decided April 3, 1905.

The word "surrender," as generally defined, may denote either compelled or voluntary action. In § 57g of the Bankruptcy Act of 1898, providing that the claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences, it is unqualified and generic and hence embraces both meanings.

A penalty is not to be readily implied and a person subjected thereto unless the words of the statute plainly impose it, and courts will not construe the provision so as to cause the word "surrender," as used in § 57g of the Bankruptcy Act, to embrace only voluntary action and thus read into the statute a qualification conflicting with equality of creditors and also creating a penalty not expressly or by implication found in the statute. Such a construction would create a penalty by judicial action alone and would also necessitate judicial legislation in order to define the character and degree of compulsion essential to prevent the surrender in fact from being a surrender within the meaning of the section. The 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, can thereafter prove the debt so voidably preferred.

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 real estate mortgages executed by Goetz, one to secure a note for four and the other a note for two thousand dollars. The mortgage to secure the four thousand-dollar note was made more than four months before the adjudication in bankruptcy. The mortgage securing the two thousand-dollar 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.

Argument for Keppel, Trustee.

the mortgage securing the four thousand-dollar note to be valid and the mortgage securing the two thousand-dollar 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 two thousand-dollar note, but that he could not assent to a judgment to that effect. A judgment was entered sustaining the security for the four thousand-dollar note and avoiding that for the two thousand-dollar note.

The bank subsequently sought to prove that it was a creditor of the estate upon the note for two thousand dollars, 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.

Mr. John C. Royer, with whom Mr. Henry J. Weller was on the brief for Keppel, trustee:

For definition of "surrender" see Century Dictionary and Bouvier's Dictionary. Congress intended a voluntary surrender. See act of 1867, § 23, 14 Stat. 517; Amendment of 1874, 18 Stat. 178. See cases in which the surrender clause of the act of 1867, prior to its amendment, was construed. Re Lee, No. 8179 Fed. Cases; S. C., 14 N. B. R. 89; Re Richter, No. 11,803 Fed. Cases; S. C., 1 Dill. 544; Re Leland, No. 8230 Fed. Cases; S. C., 7 Ben. 156; Re Stephens, No. 13,365 Fed. Cases; S. C., 3 Biss. 137; Re Drummond, 4049 Fed. Cases; S. C., 4 Biss. 149; Re Graves, 9 Fed. Rep. 816.

While some of the judges allowed a surrender pending litigation, no creditor has been allowed to surrender his preference after judgment against him. See cases under the present act. Re Owings, 109 Fed. Rep. 624; Re Keller, 109 Fed. Rep. 162; Re Greth, 112 Fed. Rep. 978, follow the decisions under the

Argument for Tiffin Savings Bank.

197 U. S.

former law. Re Richard, distinguished, the facts being different. The rule may be harsh but these cases show that Congress intended the rule to be harsh.

Mr. George E. Seney, Mr. Milton Sayler and Mr. John L. Lott for the Tiffin Savings Bank:

The mortgage having been given by Goetz while insolvent, and within four months of the filing of his petition in bankruptcy, by operation of law alone became absolutely void, and the bank had no preference whatever. Under the law of Ohio the title and possession both remain in the mortgagor until condition broken. Ely v. McGuire, 2 Ohio St. 372; Bradfield v. Hale, 67 Ohio St. 316, 323; Harkrader v. Leiby, 4 Ohio St. 602, 612; Sun Fire Office v. Clark, 53 Ohio St. 414, 424; Kernohan v. Mauss, 53 Ohio St. 118, 133.

As to Federal decisions, there is a contrariety of opinion as to what constitutes a preference and as to when it shall be surrendered in order to entitle the person holding it to prove his claims. Most of the cases cited by opposing counsel arose under the act of 1867, and were cases in which there had been an actual payment of money, or the actual receipt or possession of property, or where the person had been a party to an actual fraud, and cannot he held controlling here. For cases bearing on the preference clause under the present law see notes in 1 Fed. Stat. Ann., pp. 664, 665, and see Pirie v. Trust Co., 182 U. S. 438, as to whether a payment of money was a transfer of property within the meaning of the law. There was an actual payment and delivery-a completed transaction-a passing of property. Bank v. Massey, 192 U. S. 138.

The referee held that the bank had not made a voluntary surrender of its so-called preference, and therefore was not entitled to prove its claim. By so holding the referee read into the act something that is not there. The language of the act is surrender, not voluntary surrender. If a referee may inject into the act the word voluntary, it would be but a step further to require that a willing, a cheerful or even a joyful

surrender be made. Webster defines surrender as the giving or delivering possession of anything upon compulsion or demand, and the same definition is to be found in the Standard and Century dictionaries. If the ruling of the referee be correct, then a creditor who, in good faith, has accepted a payment or security, without knowledge of the insolvency of his debtor, must blindly surrender that which he has received, without an opportunity for a determination of the question of insolvency at the time of the receiving of the payment or security, or of the question whether that which he has received constitutes a preference. The creditor is not required to submit to the ruling of the referee, but is entitled to the decision of the court upon the point. Section 57f.

MR. JUSTICE WHITE, after making the foregoing statement, delivered the opinion of the court.

The following are the questions asked by the Court of Appeals:

"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?

"Third. If the failure to 'voluntarily' surrender the mortgage given to secure the $2,000 note operates to prevent the allowance of that note, does the penalty extend to and require the disallowance of both the other claims?"

Before we develop the legal principles essential to the solu