so far on his starboard that he did not consider any further atten tion to her was required, and he proceeded on his course and had passed the Fleming, several hundred feet away, when a dark object suddenly loomed up a little on his port bow, which he recognized as a dumping scow and endeavored to avoid by reversing and starboarding his helm but without success, and his starboard barge was brought in sharp contact with No. 24, so injuring the barge, that she sank to her deck. He had seen from the beginning, a white light on his port hand, which he supposed was an anchored vessel, but which turned out to be on No. 10, which was drifting up the channel, further to the eastward than No. 24.

There can be no question that the Fleming was grossly in fault for permitting her barges to drift such a distance away and to block the channel without the lights on them, required by law, to indicate their positions. This method of towing on long hawsers in the crowded waters of New York Bay can only be justified, if at all, by the exercise of the utmost exactness on the part of the tug in performing her duty to keep her boats in line, so that passing vessels can navigate safely with regard to them, and by the exercise of the utmost vigilance to see that the tow's lights are at all times exhibited, as the rule requires. No. 24 was also in fault for the failure to exhibit lights. In view of the culpable negligence of the Fleming, I am not disposed to hold No. 22 in fault for her failure to have a lookout stationed forward. Her master was performing the duties of one from the pilot house and was not otherwise engaged, the wheel being handled by one of the deck hands. It appears that the master was reasonably vigilant and it is doubtful if a lookout stationed elsewhere could have discovered No. 24 in time for No. 22 to have avoided her. Nor do I consider that No. 22 should be held because of the Fleming's exhibition of towing lights. They did not call upon No. 22 to avoid a tow, without lights, in a place it should not have been. The libel is dismissed as to No. 22, without costs. The petition is sustained as to the Fleming and No. 24, with costs, and dismissed as to No. 10, without costs. An order of reference to ascertain the damages will be entered.

In re CHASE et al.

In re B. H. GLADDING CO.

(Circuit Court of Appeals, First Circuit. June 18, 1903.)

No. 470.

1. ASSIGNMENTS-PRECEDING BANKRUPTCY-CLAIMS OF ASSIGNEES-PAYMENTEQUITABLE LIEN.

Where an insolvent made an assignment for the benefit of his creditors, and prior to the filing of a bankruptcy petition the assignee collected dues, continued insurance on the property, arranged for guarding the same, collected outstanding goods, conducted much correspondence, took an exhaustive inventory, and incurred a liability for rent, such assignee acquired a lien on the assets for his necessary disbursements, and the reasonable value of such services as benefited the bankrupt's estate, unaffected by Bankr. Act, § 64b (Act July 1, 1898, c. 541, 30 Stat. 563 [U. S. Comp. St. 1901, p. 3447]), prescribing the debts of a bankrupt entitled to priority on distribution of his estate, subject to the limitations of Randolph v. Scruggs, 23 Sup. Ct. 710, 190 U. S. 533, 47 L. Ed.

2. SAME-SURRENDER OF ASSETS-WAIVER OF LIEN.

That such assignees paid to the trustee in bankruptcy the gross amount received by them, and surrendered all other assets in their hands, did not deprive them of the right to apply to the court for the payment of the amount of such lien.

8. BANKRUPTCY-EQUITIES OF TRUSTEE.

The rule applied that trustees in bankruptcy have no equities greater than those of the bankrupt, and sometimes will be ordered to do full justice, even in some cases where the circumstances give rise to no legal right, and, perhaps, not even to a right which could be enforced in a court of equity as against an ordinary litigant.

SAME ASSIGNMENTS.

An assignment for the benefit of creditors, fairly made and intended to facilitate the equal distribution of the insolvent's property among his creditors, without any attempt to defraud or embarrass persons to whom he was indebted, is not so contrary to the policy of the bankrupt act as to preclude the assignee from recovering for disbursements and services made for the benefit of the estate prior to the filing of the bankrupt's petition.

Petition for Revision of Proceedings of the District Court of the United States for the District of Rhode Island, in Bankruptcy.

See 120 Fed. 709.

Seeber Edwards (James C. Collins, Jr., and Edwards & Angell, on the brief), for petitioners.

Herbert A. Rice (Walter B. Vincent and James Harris, on the brief), for respondent trustee.

Before COLT and PUTNAM, Circuit Judges, and ALDRICH, District Judge.

PUTNAM, Circuit Judge. This is a petition under section 24b of the act establishing a uniform system of bankruptcy, approved July 1, 1898, c. 541, 30 Stat. 553 [Ú. S. Comp. St. 1901, p. 3432], asking for a revision of the decree of the District Court for the Dis

4. Effect of national bankruptcy act on state insolvency laws and on assignments for benefit of creditors, see note to Carling v. Seymour Lumber Co., 51 C. C. A. 11.

124 F.-48

trict of Rhode Island in the matter of B. H. Gladding Company, bankrupt. The bankrupt is a corporation domiciled in Rhode Island, and on the 10th day of September, 1902, it made a general commonlaw assignment to the petitioners for the benefit of its creditors, directing an equal distribution among them. No criticism is made of the terms of the assignment, nor any suggestion that it was not framed in all respects for the advantage of all the creditors. The assignor was carrying on a retail dry goods store in Providence, and it had a lease of the premises occupied by it therefor. The petitioners entered into possession of the stock, and held the same until the assignor was subsequently adjudged bankrupt. Meanwhile they continued the business on the leasehold premises. They thus became subject to a claim on the part of the owner of the fee of the leased premises for a certain proportion of the accruing rent thereof. The question of liability for rent is not in form to be completely disposed of by us, and it will remain to be adjusted by the District Court, subject to the rules which we announce herein. The case further shows the following:

"While in possession of the store the assignee collected certain bills due to the company, amounting to $9,190. They continued the insurance upon the property, arranged for the watching and guarding of the stock in the store, and of the books and papers of the company, got in certain goods of the company which were outstanding, disposed of certain claims against the company, finished up and delivered certain goods made to order, cared for the horses and wagons of the company, conducted much correspondence, and took an exhaustive inventory of the property of said company."

The petitioners turned over to the trustee in bankruptcy all the assets, and submitted to the District Court their claims for compensation for their disbursements and for an allowance for their services, and for protection against the demand made by the owner of the leased premises. The referee rejected all, and the District Court, without any opinion and in a formal manner, entered a decree affirm ing his decision. The question involved seems to have been under discussion since the enactment of the bankruptcy act of March 2, 1867, 15 Stat. 227, c. 258. Bump's Bankruptcy (10th Ed.) 848.

It cannot be questioned on this record that the disbursements and services of the assignees were desirable for the preservation of the assets, and for maintaining them so as to yield the largest net return, and so, at least in part, inured to the benefit of the creditors in the bankruptcy. Of course, compensation could not be based on a percentage of the assets, or on any consideration except that of a moderately reasonable allowance for the attention given the property, according to the portion of time which the assignees used therefor, ail to be adjusted in such way as not to throw on the estate a doubie burden of any serious consequence. It can hardly be necessary to argue that such reimbursement and compensation would be in accordance with general equity.

The trustee, however, seems to understand that the case is governed by section 64b of the statute (Bankr. Act July 1, 1898, c. 541, 30 Stat. 563 [U. S. Comp. St. 1901, p. 3447]), which is as follows:

"The debts to have priority, except as herein provided, and to be paid in full out of bankrupt estates, and the order of payment shall be (1) the actual

and necessary cost of preserving the estate subsequent to filing the petition; (2) the filing fees paid by creditors in involuntary cases; (3) the cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney's fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning creditors in involuntary cases, to the bankrupt in involuntary cases while performing the duties herein prescribed, and to the bankrupt in voluntary cases, as the court may allow; (4) wages due to workmen, clerks or servants which have been earned within three months before the date of the commencement of proceedings, not to exceed three hundred dollars to each claimant; and (5) debts owing to any person who by the laws of the states or the United States is entitled to priority."

Some of the propositions of the petitioners give color to this understanding of the trustee, but it is without any proper basis. The provision of statute quoted has no relation to this subject-matter. It applies only to sums over which the court in bankruptcy has jurisdiction as such court. In the present case, the claims of petitioners constituted a lien on the assets in their hands adverse to the trustee, and the portion of the statute cited appertains to nothing of that nature. If there had been any doubt on the point, it was removed by Louisville Trust Company v. Comingor, 184 U. S. 18, 22 Sup. Ct. 293, 46 L. Ed. 413. The claims of the petitioners depend altogether on general principles of law, by virtue of which they might have retained assets in their hands until their lien was satisfied.

The fact that, under the circumstances, the petitioners paid the trustee the gross amount received by them, and delivered them the other assets, does not, as is clearly settled, deprive them of the right to apply to the court for payment of the sums for which they once had a lien. It is settled that a trustee in bankruptcy has no equities greater than those of the bankrupt, and that he will be ordered to do full justice, even in some cases where the circumstances would give rise to no legal right, and, perhaps, not even to a right which could be enforced in at court of equity as against an ordinary litigant. Williams' Law of Bankruptcy (7th Ed.) 191. Indeed, bankruptcy proceeds on equitable principles so broad that it will order a repayment when such principles require it, notwithstanding the court or the trustee may have received the fund without such compulsion or protest as is ordinarily required for recovery in the courts either of common law or chancery. Hutchinson v. Le Roy, 113 Fed. 202, 205, 51 C. C. A. 159; Hutchinson v. Otis, 115 Fed. 937, 940, 53 C. C. A. 419; Batchelder & Lincoln Company v. Whittemore (C. C. A.; decided April 23, 1903) 122 Fed. 355. Indeed, so sweeping is this rule that in Hutchinson v. Otis, 115 Fed., at page 940, 53 C. C. A. 422, we said that parties having an interest might not be held by a court of bankruptcy even to a mistake merely of law. Its breadth is also shown in Lowell on Bankruptcy, 310, where it is said that it has been established ever since 1742, beginning with Scott v. Surman, Willes, 400, and that it is so sweeping that, in actions at law brought by assignees in bankruptcy, defendants may prevail on merely equitable defenses. How it happened that jurisdiction in bankruptcy became of an equitable nature is explained historically in an interesting way in Robson's Bankruptcy (2d Ed.) at page 2.

But there seems to be an impression that the statutes in bankruptcy have denounced assignments at common law for the benefit of creditors to such an extent as to mark them as so far against the policy of the law that all parties thereto are particeps criminis, and that none can establish thereunder any rights pro or con. There are several answers thereto. First of all, even if assignments were strictly void as such, the assignees, until the intervention of proceedings in bankruptcy, would stand as the agents of the assignors, coupled with possession; and so, having acted innocently in their behalf, they would become entitled as such agents to receive their disbursements and a reasonable compensation, and to hold a lien therefor on the property in their hands. This was well stated by Mr. Justice Brown, then a district judge, in Hunker v. Bing (D. C.) 9 Fed. 277, 281, where, under a previous statute in bankruptcy, he said that the respondent in that case, who was an assignee under a common-law assignment, might be regarded as a "factor or agent" of the assignor; so that he might be held "as having done what he did under an implied request to that effect, and to have acquired thereby an equitable lien upon the property in his possession for his necessary services and disbursements therein, which should be respected in bankruptcy so far as they have been necessary and beneficial to the general creditors, or such as the assignee in bankruptcy would otherwise have incurred." Mr. Justice Gray, in Bryan v. Bernheimer, 181 U. S. 188, 192, 193, 21 Sup. Ct. 557, 45 L. Ed. 814, noticed the same fact when he said that an assignee under a general assignment is not one for value, but simply "an agent" for the distribution of the proceeds of the debtor's property among his creditors.

Indeed, this proposition of agency is well illustrated by the fact that, ordinarily, common-law assignments contain a clause expressly making the assignee the agent of the assignor; but this clause, of course, is not necessary, because, if the assignment becomes ineffectual as an assignment and as creating a technical trust, the agency is implied by law. On the other hand, it is not to be inferred that the assignor and the assignee are at liberty to create the terms of this agency at their own option. From the time the assignor declares his insolvency by making an assignment, his property must be held equitably for the benefit of his creditors, and he can do nothing which will embarrass or prejudice them in realizing therefrom, whether the result is that they are administered under the common-law assignment or ultimately go into the hands of a trustee in bankruptcy. Therefore, in no event can he impress on them a lien for any amount of compensation arbitrarily agreed on. Anything in this direction. beyond what would be reasonable and equitable would be contrary to the policy of the law, and would be declared invalid by the court. having jurisdiction of the trust if the assignment is worked out at common law, or by the court in bankruptcy if the property finally comes under its control.

These principles fully justify a reasonable claim on the part of the petitioners. No authority cited to the contrary, either under the present statutes of bankruptcy or any previous act, is of sufficient weight or force of reasoning to preponderate against this conclusion.