gistfile1.rb

class DocumentsController < ApplicationController
  before_action :set_document, only: [:show, :edit, :update, :destroy]
  before_filter :load_folder

  # GET /documents
  # GET /documents.json
  def index
    @documents = documents.all
  end
  
  private
  def load_folder
    @folder = Folder.find(params[:folder_id])
  end

  def documents
    @folder ? @folder.documents : Document
  end

  # Use callbacks to share common setup or constraints between actions.
  def set_document
    @document = Document.find(params[:id])
  end

  # Never trust parameters from the scary internet, only allow the white list through.
  def document_params
    params.require(:document).permit(:name, :text, :url, :user_id, :folder_id, :label_id)
  end
end

Looks fine except that folder isn't defined as far as I can tell.
assuming. There's a @folder.

@folder ? @folder.documents : Document.all

That's probably better.