text:
    SEABOARD SMALL LOAN CORPORATION et al. v. OTTINGER.
    No. 3129.
    Circuit Court of Appeals, Fourth Circuit.
    June 17, 1931.

      W. Warren Dickerson, of Roanoke, Va., for appellants.
    A. S. Hester, of Lynchburg, Va., for appellee.
    Before PARKER and SOPER, Circuit Judges, and COCHRAN, District Judge.
   PARKER, Circuit Judge.

On December 24, 1929, one D. P. Ottinger, an employee of the Norfolk & Western Railway Company, borrowed of the Seaboard Small Loan Corporation of Lynchburg, Va., the sum of $50, giving as security for the loan a deed of trust on certain personal property and executing an assignment .of 10 per cent, of his monthly wages for a period of forty months. This assignment provided that copy should not be served upon the railway company so long as there should be no default in the monthly payments provided for. Pour payments on the debt left a balance due on May 30, 1930, of $30.” On June 19th Ottinger filed a voluntary .petition in bankruptcy, and was duly adjudged a bankrupt; the debt due to the loan corporation béing properly scheduled among his liabilities. He filed petition for discharge on September 15, 1930; and discharge was granted on November 4th.

After filing petition in bankruptcy, Ot-tinger made no further payments on the debt due the loan corporation; and it thereupon proceeded, on July 28, 1930, to file with the railway company copy of the assignment of wages and to demand that 10 per cent, of the monthly wages of Ottinger be retained and paid to it thereundey. This suit was then instituted by Ottinger to enjoin the loan corporation and its treasurer from interfering with the wages due him by the railway company and to require them to withdraw the assignment order filed with the company. Defendants answered, challenging the jurisdiction of the court and asserting a lien on the wages of Ottinger under the assignment order, notwithstanding the adjudication of bankruptcy or any discharge that might be granted. Discharge was granted Ottinger while the matter of the injunction was pending. Thereafter, on November 15th, the District Judge granted the injunction prayed, and the defendants appealed. The appeal presents two questions for our consideration: (1) Whether after the adjudication and,, discharge in bankruptcy there was any lien by reason of the assignment order on the wages earned by the bankrupt; and (2) if not, whether the court below had jurisdiction to enjoin the loan company and its treasurer from attempting, by the assertion of the lien, to collect a debt discharged by the bankruptcy.

On' the first question, it is clear that there was no lien by reason of the assignment order on wages earned by the bankrupt subsequent to the adjudication of bankruptcy. The rule is that an assignment of wages to be earned in the future is not good at law because ineffective to pass legal title, but will be enforced in equity. It is enforced in equity, not as a conveyance in prsesenti of what manifestly does not exist, but because it is regarded in equity as a contract to take effect and attach to the wages assigned as soon as they come in esse. Until the wages are earned, it is regarded as an agreement to convey ; after that time as a conveyance. Emerson v. European & N. A. R. Co., 67 Me. 387, 391, 24 Am. Rep. 39, 41; Rodijkeit v. Andrews, 74 Ohio St. 104, 77 N. E. 747, 6 Ann. Cas. 761, 5 L. R. A. (N. S.) 564 and note. The assignment in this case did not, therefore, create a lien upon the wages of the bankrupt at the time it was executed, but such lien was to arise at the timé the wages should be earned. Until then the assignment was no more than a contract of the bankrupt, the obligation of which was discharged by the bankruptcy in the same way that his other personal obligations were discharged.

It is true that the rights of lienors under existing liens, not forbidden by the Bankruptcy Act are preserved by that act; but the trouble here is that there was no lien on the wages in question existing at the time of the filing of the petition in bankruptcy. The loan company held nothing but a debt against the bankrupt and a contract providing for the creation of a lien in the future when wages should be earned. Before this contract could give rise to a lien, its obligation was discharged by the bankruptcy; and the debt, without which no lien could exist, was discharged also. A few cases have held that under such' circumstances the assignment will be enforced notwithstanding the bankruptcy of the assignor. Mallin v. Wenham, 209 Ill. 252, 70 N. E. 564, 65 L. R. A. 602, 101 Am. St. Rep. 233; Citizens’ Loan Ass’n v. Boston & Maine Railroad, 196 Mass. 528, 82 N. E. 696, 14 L. R. A. (N. S.) 1025, 124 Am. St. Rep. 584, 13 Ann. Cas. 365. But, with due respect to the courts so holding, we do not think the decisions are sound. .The weight of reason and authority is to the contrary. In re West (D. C.) 128 F. 205, 206; In re Karns (D. C.) 148 F. 143; In re Home Discount Co. (D. C.) 147 F. 538, 547; In re Ludeke (D. C.) 171 F. 292; Progressive B. & L. Ass’n v. Hall (C. C. A. 4th) 220 F. 45; Levi v. Loevenhart & Co., 138 Ky. 133, 127 S. W. 748, 749, 30 L. R. A. (N. S.) 375, 137 Am. St. Rep. 377; Leitch v. Northern Pac. R. Co., 95 Minn. 35, 103 N. W. 704, 5 Ann. Cas. 63; 7 C. J. 411; note 14 L. R. A. (N. S.) 1025 et seq.

The leading case upon the subject is In re West, supra, decided in 1904 by Judge ^Bellinger of the district of Oregon. He thus clearly and concisely states the principles applicable: “The theory of a lien upon the earnings of future labor is not that it attaches to such earnings from the moment of contract of pledge or assignment, but from the moment of their existence. It is needless to say that there can be no lien upon what does not exist. A pledge or assignment of future wages under an existing employment is said to create an equitable interest in such wages. Stott v. Franey, 20 Or. 410, 26 P. 271, 23 Am. St. Rep. 132. This is true of wages earned upon a general employment, as well as those earned upon a definite contract. In this ease the railroad company was under no obligation to employ the bankrupt, nor he to work for the company. If future earnings m such a case can be said to have a potential existence, they are the subject of an agreement for a lien; but the lien, or the so-called equitable interest, does not attaeh until the wages come into existence, and until the lien does attach there is no lien. The discharge in bankruptcy operated to discharge these obligations as of the date of the adjudication, so that the obligations were discharged before the wages intended as security were in existence. The law does not continue an obligation in order that there may be a lien, but only does so because there is one. The effect-of the discharge upon the prospective liens was the same as though the debts had been paid before the assigned wages were earned. The wages earned after the adjudication became the property of the bankrupt clear of the claims of all creditors. Collier on Bankruptcy, 509. These debts cannot escape the operation of the bankruptcy law by an agreement for a lien upon what the debtor expected to earn, but did not earn until after the adjudication of bankruptcy.”

In the ease of In re Home Discount Co., supra, Judge Jones of the. Northern district of Alabama made exhaustive investigation of the subject, with special reference to the purpose and intent of the bankruptcy law with relation thereto, and we agree with his statement of the law. Said he:

“The effect of the assignment, without regard to its infirmities under the local statute, is avoided by the provisions of the bankruptcy law as to wages earned after the filing of the petition. The power or ability of the debtor to earn wages in the future under a subsisting contract, standing apart from anything which it has brought into existence as property, is the mere right of the debtor to create property in the future. One dominant purpose of the bankruptcy statute is to prevent creditors from seizing, directly or indirectly, upon this right of the bankrupt, after his adjudication, by applying its subsequent fruits to anterior obligations. * * * The debtor’s right to earn wages in the future and to dispose of the fruits of his labor is not 'property’ in any sense in which the bankruptcy statute uses thef term, but constitute rather rights and privileges which go to make up a man’s liberty and freedom. The plain purpose of the statute is that the title and right to all things and rights which do not fall within the vesting words of section 70 of the bankruptcy statute (30 Stat. 565 [U. S. Comp. St. 1901, p. 3451, 11 USCA § 110]) shall remain in the bankrupt, and that as to the rights or things thus saved to him he shall be released from all liability to answer for prior debts and contracts, with certain exceptions not here material. The right of th.e debtor to work and contract for future service is not mentioned, directly or inf erentially, in the rights or things required to be sold, appraised, or scheduled, or which pass to the trustee for the benefit of creditors. The studied enumeration of the particular rights and things which the bankrupt is required to surrender takes all other rights and things not named without the definition, thus fixed, of the 'property’ which the statute intends to take from the bankrupt or to pass to his creditors. Whatever he is not required to surrender is his absolutely, freed from the enforcement of the obligation of his prior contracts, unless at the time of the filing of the petition it has taken the form of property. upon which a lien has fastened. In that event only does he take it subject to the performance of prior contracts concerning it. * * *
“The wages not being in existence at the time of the adjudication, and the right to earn them not then being subject to a lien, there was no property or thing in existence, at that time, upon which a lien could attach, or be preserved. The most the .assignee had, at the time of the adjudication, was an exec-utory contract to turn the wages over to him when they did come into existence in the future. East Lewisburg v. Marsh, 91 Pa. 96; Christian & Craft Grocery Co. v. Michael & Lyons, 121 Ala. 87, 25 So. 571, 77 Am. St. Rep. 30. This equity cannot be made to ripen into a lien upon.the wages until they come into existence after the adjudication, and then only by enforcing against the bankrupt the obligations of a contract for whose enforcement the law denies all remedy, and from which the discharge releases the bankrupt of all liability. The upholding and enforcement of the claim of the creditor, under such circumstances, is not the preservation of a valid lien, which the bankruptcy statute saves, but the creation outright of a lien in violation of the provisions of that statute.”

In the case of Levi v. Loevenhart & Co., supra, the Court of Appeals of Kentucky well said, with respect to an assignment order similar to that with which we are dealing here: “The order was valid only so long as the indebtedness to plaintiff remained unsatisfied. It is of no higher or greater dignity than the debt. It is merely an agreement that there shall be appropriated out of the debt- or’s wages a stipulated sum, to be credited on his debt until it is satisfied; i. e., paid or discharged. By his discharge in bankruptcy Metzler settled every debt that he owed— was entirely, completely, and finally relieved from any and all liability on account thereof; and as plaintiff’s claim was set up and described in the proceeding in the bankruptcy court as a debt owing by Metzler, it was likewise canceled, satisfied, and settled, and, being settled, the conditions of the order were fully satisfied, and appellee relieved from all liability thereunder.”

Coming to the question of jurisdiction, we entertain no doubt as to the power of the court below to grant the relief prayed. The Bankruptcy Act § 17 expressly provides that, with certain specified exceptions, a discharge in bankruptcy shall release a bankrupt from all of his provable debts. 11 USCA § 35. And as said by the Supreme Court in Chicago, B. & Q. R. R. v. Hall, 229 U. S. 511, 515, 33 S. Ct. 885, 886, 57 L. Ed. 1306, it was “intended not only to secure equality among creditors, but for the benefit of the debtor in discharging him from his liabilities and enabling him to start afresh with the property set apart to him as exempt.” “The determination of the status of the honest and unfortunate debtor l)y his liberation from encumbrance on future exertion is matter of public concern,” said Chief Justice Puller in Hanover Nat. Bank v. Moyses, 186 U. S. 181, 192, 22 S. Ct. 857, 862, 46 L. Ed. 1113.

In view of this purpose of the act and of the express provision that the bankrupt shall be released from all provable debts, it would be indeed a strange situation if the court vested with jurisdiction to enforce the act were without power to stay the hand of a creditor whose debt has been discharged by bankruptcy, but who nevertheless persists in harassing the bankrupt with efforts to collect it. It will not do to say that the bankrupt has an adequate remedy at law by pleading the discharge in ease of suit, or by suing an employer if the latter withholds wages under an order such as that here. Such remedy is not adequate, because its assertion involves trouble, embarrassment, expense, and possible loss of employment. A laboring man who had availed himself of the benefits of the act would in many eases prefer to pay a debt discharged by bankruptcy rather than hazard his employment by bringing suit for wages withheld under notice like that with which we are dealing. And an employer in many eases would prefer to discharge an employee against whom a claim had been filed rather than engage in litigation with the claimant. The demand under an assignment order, in an effort to collect a debt discharged by bankruptcy, is nothing less than an attempt to circumvent the order discharging same and to deprive the bankrupt of the benefit of that order. It was to meet situations such as this that the bankruptcy court was vested with the general power under section 2, subsection 15 of the Bankruptcy Act (11 USCA § 11(15) to “make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of this title.” As said by Judge Van Valkenburgh in the Swofford Bros. Dry Goods Co. Case (D. C.) 180 F. 549, 553: “* * * This section may be availed of to compel anything which ought to be done for, or to prevent' anything which ought not to be done against the enforcement of the law; provided the court of bankruptcy otherwise has jurisdiction of the person or the suhjeet-matter. For such purposes the court has the plenary powers of a court of equity and can exercise the powers of such a court for the ascertainment and enforcement of the rights and equities of the various parties interested in the estate of the bankrupt company.”

In the case of the Home Discount Company, supra, it was held directly that the court had the power exercised by the court below, and the discount company was fined for contempt of court because it failed to withdraw a notice of assignment filed with the employer of bankrupt. What was said by Judge Jones in that connection is pertinent here. Said he: “The filing of the assignment of the wages with the bankrupt’s employer the day after the adjudication was an effort to embarrass the administration of the estate, and to force the bankrupt by the sore pressure caused ,by withholding the wages to pay an illegal demand, from which a discharge would, free him. It was nothing more than an effort to starve him into abandonment of his right under the law, in defiance of the orders made to enforce those rights. If a court of bankruptcy has no power to prevent creditors from making such use of assignments of wages, it had as well shut its doors, and abandon all effort to vindicate the rights which the statutes commit to its protection. The law does not make such weaklings of courts of bankruptcy. They have ample power to protect the bankrupt in the enjoyment of all his rights, and to frustrate the efforts of those who seek to defeat the practical enjoyment of them.”

In Progressive B. & L. Ass’n v. Hall, supra, this court held that the court of bankruptcy was without jurisdiction to enjoin action by a creditor residing in another district, but said that the bankrupt might obtain relief by an ancillary suit instituted in the district'of the creditor’s residence.

Some question is raised as to whether the complainant should not have proceeded by motion or petition in the original bankruptcy cause instead of by instituting an ancillary suit in equity. As defendant has its principal office in the district of the bankruptcy, it would seem that complainant might have pursued either course. There can be no question, however, that the filing of the ancillary suit was proper. See In re Swofford Bros. Dry Goods Co., supra, (D. C.) 180 F. 549, 554.

There was no error, and the decree of the court below will be affirmed.

Affirmed.


source: Caselaw Access Project

author: PARKER, Circuit Judge.

license: Public Domain

text:
    GRAND LODGE OF IMPROVED, BENEVOLENT AND PROTECTIVE ORDER OF ELKS OF THE WORLD v. GRAND LODGE, IMPROVED, BENEVOLENT AND PROTECTIVE ORDER OF ELKS OF THE WORLD, Inc., et al.
    No. 3105.
    Circuit Court of Appeals, Fourth Circuit.
    June 19, 1931.

      T. G. Nutter, of Charleston, W. Va., and Perry W. Howard, of Washington, D. C. (George E. C. Hayes, of Washington, D. C., and W. C. Hueston, on the brief), for appellant.
    James T. Carter, of Baltimore, Md. (J. R. Pollard, of Richmond, Va., and W. W. Foreman, on the brief), for appellees.
    Before PARKER, Circuit Judge, and WEBB and GLENN, District Judges.
   PARKER, Circuit Judge.

This suit was instituted in the court below by the Grand Lodge of Improved Benevolent and Protective Order of Elks of the World, a New Jersey corporation, against the Grand Lodge, Improved, Benevolent and Protective Order of Elks of the World, a corporation of Virginia, and James T. Carter, Leon A. Reid, Joseph R. Pollard, and John B. Neblett, citizens of that state. The purpose of the suit was to enjoin defendants from using the corporate name of complainant. Defendants denied that the New Jersey corporation was the real party in interest, and averred that the Grand Lodge of Improved, Benevolent and Protective Order of Elks of the World, whether incorporated in New Jersey or not, had no such property in that name as was entitled to protection from use by defendants. From a decree denying the injunction prayed, dissolving a temporary restraining order and dismissing the bill, complainant has appealed.

From the pleadings and proof it appears that complainant is a colored fraternal order with lodges in various parts of the United States and a membership of some 200,000 persons. It is governed by a Grand Lodge, composed of representatives elected by the various local lodges, which are bound together not only by their connection with the Grand Lodge, but also by connection with state associations, sometimes called state grand lodges, composed of the local lodges of the various states. The state associations, however, have none of the powers of government of the order, all of which are vested in the Grand Lodge. In the extension of membership, the name of the order is of great value to it, as under that name it has acquired a reputation for fraternal and charitable work which appeals to those from whom its membership is recruited.

Complainant is incorporated under the laws of New Jersey. The order has obtained charters under the laws of Ohio, New York, and the District of Columbia also. State associations of lodges, including those in Virginia, have obtained charters under the laws of various other states; but, so far as we can gather from the record, only the charters granted by New Jersey, New York, Ohio, and the District of Columbia were intended to give corporate existence to the national order. It is undoubtedly the national' order which is the complainant here; and it is suing as a New Jersey corporation under the charter granted it by that state.

The individual defendants are citizens of Virginia, and the corporate defendant is a corporation organized under the laws of that state in the year 1929. It appears that at the 1929 meeting of the Grand Lodge of complainant, certain representatives from Virginia became aggrieved at action taken by the Grand Lodge and attempted to secede from the order and set up, under what is practically the same name, an independent order to offer “a harbor of refuge” to the members of the original order who were opposed to its administration. The questions presented by the appeal áre (1) whether the complainant suing as a New Jersey corporation has any standing as such in this court; and (2) whether complainant has such rights in the name of the order as are entitled to protection by a court of equity against the efforts of seceding members to operate thereunder. We think that both of these questions must be answered in the affirmative.

As heretofore stated, there is no question but that the Grand Lodge representing the national order is the real party in interest in the suit. We think it equally clear that the New Jersey corporation, in whose name suit is brought, is an incorporation of the Grand Lodge representing the national order. A number of witnesses so testify, and it is significant that the certificate of incorporation is signed by as many citizens of New York as of New Jersey and contains theprovision that the corporation shall have power to conduct and supervise subordinate lodges “throughout the United States and Canada, which lodges shall have the same powers as are herein conferred, but shall be subject to and under the control of the Grand Lodge.”

The fact that the order is incorporated also in Ohio, New York, and the District of Columbia does not impair its rights under its New Jersey charter; nor does such fact limit the right of the New Jersey corporation to sue in the courts, except- that, in the other states in which the Grand Lodge is incorporated, the New Jersey corporation would not be heard to invoke the jurisdiction of the federal courts on the ground of diversity of citizenship. St. Joseph & Grand Island Railroad v. Steele, 167 U. S. 659, 17 S. Ct. 925, 42 L. Ed. 315; Patch v. Wabash R. Co., 207 U. S. 277, 28 S. Ct. 80, 52 L. Ed. 204, 12 Ann. Cas. 518. The effect of incorporation in other states is merely to give the order corporate existence in those states. That the same persons may incorporate under the same name in two or more states is too well settled to admit of discussion. The corporations thus formed have legal existence, of course, only within the jurisdiction of the states which have brought them into being; but a charter obtained from one state is not forfeited by reason of the fact that a charter is obtained from another, nor is the right to resort to the federal courts, with the exception above noted, in any wise impaired. 14A C. J. 1228 et seq.; 1 Fletcher Cyc. Corporations 837; Nashua, etc., R. Co. v. Boston, etc., R. Corp., 136 U. S. 356, 375, 10 S. Ct. 1004, 1008, 34 L. Ed. 363. Familiar illustration of these principles is the practice of interstate railroads to incorporate under the laws of a number of states. 14A C. J. 1227; Patch v. Wabash R. Co., supra; Nashua, etc., R. Co. v. Boston, etc., R. Corp., supra; Memphis & Charleston R. R. Co. v. Alabama, 107 U. S. 581, 2 S. Ct. 432, 27 L. Ed. 518; Muller v. Dows, 94 U. S. 444, 24 L. Ed. 207; Chicago & N. W. Railway Co. v. Whitton, 13 Wall. 270, 20 L. Ed. 571; Baltimore, etc., R. Co. v. Harris, 12 Wall. 65, 20 L. Ed. 354; Lake Shore & M. S. Ry. Co. v. Eder (C. C. A. 6th) 174 F. 944; Boston & M. R. Co. v. Hurd (C. C. A. 1st) 108 F. 116, 56 L. R. A. 193; Farnum v. Blackstone Canal Corp., 1 Sumn. 46, 8 Fed. Cas. 1059, No. 4,675. As said by Mr. Justice Field in the NasLua Railroad Case: “There are many decisions, both of the federal and state courts, which establish the rule that, however closely two corporations of different states may unite their interests, and though even the stockholders of the one may become the stockholders of the other, and their business be conducted by the same directors, the separate identity of each as a corporation of the state by which it was created, and as a citizen of that state, is not thereby lost.”

In the ease of Famum v. Blackstone Canal Corp., supra, Mr. Justice .Story 'said: “Although, in virtue of these several acts, the corporations [one of Rhode Island and one of Massachusetts], acquired a unity of interests, it by no means follows, that they ceased to exist as distinct and different corporations. Their powers, their rights, their privileges, their duties, remained distinct and several, as before, according to their respective acts of incorporation. Neither could exercise the rights, powers, or privileges conferred on the other. There was no corporate identity. Neither was merged in the other. If it were otherwise, which became merged? The acts of incorporation create no merger, and neither is pointed out as survivor or successor. We must treat the case, then, as one of distinct corporations, acting within the sphere of their respective charters for purposes of common interest, and not as a case where all the powers of both were concentrated in one. The union was of-interests and stocks, and not a surrender of personal identity or corporate existence by either corporation.”

Coming to the merits, it is well established that a benevolent, fraternal, or social organization will be protected in the use of its name by injunction restraining another organization from using the same or another name so similar as to be misleading. Nims on Unfair Competition and Trademarks (3d Ed.) § 86; Thompson on Corporations (3d Ed.) § 77; Benevolent & Protective Order of Elks v. Improved Benevolent & Protective Order of Elks of the World, 205 N. Y. 459, 98 N. E. 756, Ann. Cas. 1913E, 639, L. R. A. 1915B, 1074 and note; Grand Lodge, K. P. v. Grand Lodge, K. P., 174 Ala. 395, 56 So. 963; Society of War of 1812 v. Society of War of 1812, 46 App. Div. 568, 62 N. Y. S. 355; National Circle, Daughters of Isabella, v. National Order of Daughters of Isabella (C. C. A. 2d) 270 F. 723; Daughters of Isabella No. 1 v. National Order, Daughters of Isabella, 83 Conn. 679, 78 A 333, Ann. Cas. 1912A, 822; International Committee of Young Women’s Christian Associations v. Young Women’s Christian Association, 194 Ill. 194, 62 N. E. 551, 552, 56 L. R. A. 888; Benevolent & Protective Order of Elks v. Improved Benevolent & Protective Order of Elks, 122 Tenn. 141, 118 S. W. 389; Creswill v. Grand Lodge Knights of Pythias, 133 Ga. 837, 67 S. E. 188, 134 Am. St. Rep. 231, 18 Ann. Cas. 453, reversed on other grounds 225 U. S. 246, 32 S. Ct. 322, 56 L. Ed. 1074. The reasons underlying the rule are thus stated in Nims on Unfair Competition and Trademarks (3d Ed.) § 86: “The fact that a corporation is an eleemosynary or charitable one and has no goods to sell, and does not make money, does not take it out of the protection of the law of unfair competition. Distinct identity is just as important to such a company, oftentimes, as it is to a commercial company. Its financial credit — its ability to raise funds, its general reputation, the credit of those managing it and supporting it, are all at stake if its name is filched away by some other organization, and the two become confused in the minds of the public.”

And the rule is thus stated in Thompson on Corporations (3d Ed.) § 77: “TJse of Name Protected by Injunction. — The rule is that a corporation is protected in the selection and adoption of its name in the same manner and to the same extent as a corporation, unincorporated society, or individual who has acquired a prior right to a name used as a trade-name or trade-mark. Any subsequent appropriation and use of the name, or a similar name, of an existing corporation by another corporation; where it does substantial damage or where it is calculated to mislead the public, will be restrained. This is the rule though the corporation is not formed for pecuniary profit, but for purely fraternal, benevolent, or religious purposes. The rule has also been stated thus: ‘The principles upon which these cases rest are, that although a corporation may be legally created, it can no more use its corporate name in violation of the rights of others than the individual can use his name, legally acquired, so as to mislead the public and to injure another. The principle adopted is similar to that of a trade-name or trademark, and is applied accordingly. Consequently a court of equity has jurisdiction in such a case without the intervention of the state.’ ”

The ease of International Committee of Young Women’s Christian Associations v. Young Women’s Christian Association of Chicago, supra, is very similar to the case here, and the same principles are applicable. In that ease the appellants had withdrawn from the Young Women’s Christian Association because of the failure of the association at one of its conferences to adopt a certain “evangelical test,” and, under the name of International Committee of Young Women’s Christian Associations, had engaged in the general work in which the original associsution was engaged. In holding that the use of the name should be enjoined, the Supreme Court of Illinois said: “It is apparent the motive for the creation of the International Committee was brought about by the failure of the International Conference to adopt the resolution requiring the ‘Evangelical test.’ That those persons who favored the adoption of such a resolution had a right to withdraw from the International Conference when convinced that their views were not agreeable to the majority of the conference, and to call a convention of those who were favorable to their views, and to select a committee or board of managers to have general supervision over the work of the associations comprising that convention, is not denied, and must be conceded by all. The question here, however, to be decided is, Had such persons, upon their withdrawal and reorganization, a right to adopt as a name for its managing board ‘International Committee of the Young Women’s Christian( Associations,’ — a name which contains substantially the entire corporate name of appellee, a previously incorporated association, preceded by the words ‘International Committee of,’ which clearly indicate to the ordinary mind that appellant is a committee of appellee and the conference with which appellee is affiliated, and with which appellant has no connection, and to use that name in the conduct of its affairs? We think not. The object, work, sources of support, and field of labor of each being substantially the same, and the name of appellee having been adopted and in use by it many years prior to the incorporation of the appellant, the appellant had no right to adopt as its corporate name one so similar to that of ap-pellee, or to incorporate in its náme words which would indicate to the public that it was the representative of appellee and the conference with which appellee is affiliated. In addition to the similarity of name, and the representation contained in appellant’s name that appellant is the representative of appel-lee and the conference with which it is affiliated, from an examination of the entire record it clearly appears that such name was adopted by the appellant advisedly and for the purpose of leading the general publie, and the persons with whom it was likely to be associated, and from whom it hoped and expected to obtain support by way of donations, to believe that it stood as the committee and representative of the associations known as ‘The Young Women’s Christian Association,’ then organized in the field where it expected to operate. Appellant may have felt justified in so doing by reason of the failure of the International Conference to adopt the ‘Evangelical test,’ yet such conduct, in law, amounts to a fraud upon the publie and ap-pellee.”

In the ease at bar, complainant for more than a quarter of a century had enjoyed the use of its name and had built up thereunder a large fraternal order among the colored people of the United States. Its fraternal, charitable, and educational activities had commended it to the publie, and had given membership therein a value to the people from whom it recruited its membership. It was entitled to enjoy the fruits of the organization which it had built up, unhampered by the efforts of others to appropriate to themselves its corporate name with the advantages thereto attaching. If the Virginia members were dissatisfied, they, of course, had a right to withdraw and organize a new order; but they had no right, if they did so, to adopt the name of the original order or to hold themselves out as a branch of that order. To do so constitutes a fraud upon the original order and upon the publie, and, if allowed, would result in enabling the rival organization to appropriate to itself the advantages which the original order had built up' through years of effort. A more glaring example of unfair competition eould not well be imagined.

Defendants rely upon the ease of Supreme Lodge, Knights of Pythias v. Improved Order, Knights of Pythias, 113 Mich. 133, 71 N. W. 470, 471, 38 L. R. A. 658. In that ease, however, as the court pointed out, there was a difference in the names used which the court thought would avoid imposition upon the publie or interference with the rights of plaintiff order. That is not the case here, where the names are practically identical. While the soundness of the decision in that case is questionable, the court in its opinion laid down principles which we regard as sound and which condemn the use by defendants of- the n'ame which they have adopted. The court said: “The correct principle is stated in complainant’s brief (page 71) as a quotation from the opinion of Judge Poster, of the superior court of Vanderburgh county, Indiana, rendered in the suit of St. George Lodge, K. of P. v. Rosenthal: ‘Where a corporation has appropriated and used a name for such length of time as to become identified by the name, and had established a character and reputation under it, it is a fraud upon the corporation and the publie if this name be assumed by others under such circumstances as would lead the publie to believe that they constitute the original corporation, and, where injury will result to the corporation on account thereof courts of equity will, at the suit of the injured parties, by injunction restrain the further perpetration of the wrong. It is the special injury to the party aggrieved and the imposition upon the public that constitute the wrong which the courts will redress. It is not necessary that the wrong should be intentionally committed. It is enough that the name should be used under such circumstances as would lead the publie to believe that the latter organization was the former, and thereby cause injury to the former corporation.’ ”

It is argued that complainant has abandoned the right to be protected in the use of its name by allowing the use of same by various organizations of colored Elks in different parts of the country. We do not think, however, that this position can be sustained upon the record. It is true that charters were obtained from various states by the Elks resident therein and that these charters were obtained with the approval of the Grand Lodge; but it appears that these were but the incorporation of the lodges within the respective states which at all times remained subordinate to the Grand Lodge. There was a schism in the order about 1900, but this was healed a few years later, and since then all colored Elks of the United States, the evidence shows, have recognized the jurisdiction of the Grand Lodge and have exercised their rights as such under its dispensation.

Finally it is said that complainant is not entitle^ to the protection of its name because it has itself appropriated the name of the white Benevolent and Protective Order of Elks. Benevolent & Protective Order of Elks v. Improved Benevolent & Protective Order of Elks of the World, 205 N. Y. 459, 98 N. E. 756, L. R. A. 1915B, 1074, Ann. Cas. 1913E, 639; Id., 122 Tenn. 141, 118 S. W. 389. In this connection it should be said that complainant claims not to have been a party to the Tennessee case, and that the injunction granted in the New York case has been dissolved by consent. But, without passing upon the rights of the white order, which are not before us, we do not think that the rights of the complainant are to be ignored because it has adopted a name very similar to that of the white order. Neither complainant nor defendants are seeking membership among white people, and the similarity of their names to that of the white order has no bearing upon the injury and wrong which the use of the name by defendant will inflict upon complainant. The white order recruits its membership from white persons only, and does not enter into competition with either complainant or defendants. Defendants, however, are in direct competition with complainant, and the use of its name gives defendants an unfair and unconscionable advantage. As said in Re Polish Nat. Catholic Church, 31 Pa. Super. Ct. 87, the confusion likely to follow from the use of similar names is the reason for denying the right to such use, rather than the existence of any vested right in the organization objecting to the use of the ñame. And in considering the probability of confusion liable to result from the use of similar names, the court will take into consideration the persons with whom the organizations deal which use the names in question. Legal Aid Soc. v. Co-operative Legal Aid Society, 41 Misc. Rep. 127, 83 N. Y. S. 926. The rule is thus stated in Nims on Unfair Competition (3d Ed.) 962:

“To establish a cause of action for unfair competition it is not necessary to prove an exclusive right in plaintiff, i. e., that no one else ever has used the mark in the past or that no one else is using it now.
“The issue is not one of title or exclusive right but of representation, viz., what does the mark as used by plaintiff represent or mean to the public, and what in contrast, does the mark used by the defendant represent.”

In Clark Thread Co. v. Armitage (C. C. A. 2d) 74 F. 936, 943, Judge Shipman said, in sustaining an injunction issued to restrain the use of certain names and labels on the ground of unfair competition: “It does not follow, however, because the complainant is not exclusively entitled to use the words ‘Clark’s Spool Cotton,’ that therefore it cannot rightfully enjoin a person who is fraudulently making use of its label. The litigation in regard to the Rogers trade-mark * * * showed that three distinct corporations were entitled to use the name ‘Rogers’ upon their goods, but it was never supposed by a court that either injured owner had not a right to suppress the use of the trade-name by a fraudulent competitor, or that it was an adequate defense that there were other owners whose use was not fraudulent.”

And see, also, Red Polled Cattle Club of America v. Red Polled Cattle Club of America, 108 Iowa, 105, 78 N. W. 803; BritishAmerican Tobacco Co., Ltd., v. British-American Tobacco Co. (C. C. A. 2d) 211 F. 933, Ann. Cas. 1915B, 363; Philadelphia Trust, S. D. & I. Co. v. Philadelphia Trust Co. (C. C.) 123 F. 534; Hendriks v. Montagu, L. R. 17 Ch. Div. 638; Lee v. Haley, L. R. 5 Ch. App. Cas. 154. In the case last cited, Lord Justice Giffard thus stated the rule which we think applicable here: “I quite agree that they have no property in the name, but the principle upon which the cases on this subject proceed is, not that there is property in the word, but that it is a fraud on a person who has established a trade, and carries it on under a given name, that some other person shall assume the same name, or the same name with a slight alteration, in such a way as to induce persons to deal with him in the belief that they are dealing with the person who has given a reputation to the name.”

The case before us comes to this: Complainant, under a name very similar to that of a white fraternal order, has built up a fraternal order among colored people, which has acquired a large membership and a splendid reputation among the people from whom it solicits members. The individual defendants have withdrawn from the order and by the use -of its name seek to secure for the new order which they have incorporated the benefit of its reputation and standing. This we think is a fraud upon the original order and upon the public, which a court of equity should enjoin. The decree of the court below denying the injunction and dismissing the bill will accordingly be reversed, and the ease will be remanded for further proceedings not inconsistent herewith.

Reversed.


author: SOPER, Circuit Judge.

text:
    HARRIS v. PENNSYLVANIA RAILROAD CO.
    No. 3158.
    Circuit Court of Appeals, Fourth Circuit.
    June 17, 1931.
    D. Arthur Kelsey, of Norfolk, Va. (Kelsey & Jett, of Norfolk, Va., on the brief), for appellant.
    T. H. Willcox, Jr., of Norfolk, Va. (Willcox, Cooke & Willcox, of Norfolk, Va., on the brief), for appellee.
    Before PARKER and SOPER, Circuit Judges, and ERNEST F. COCHRAN, District Judge.
   SOPER, Circuit Judge.

An action at law was brought in the District Court by Minnie C. Harris, administratrix of the estate of Ernest L. Harris, against the Pennsylvania Railroad Company, to recover damages for his death on September 29, 1929, while in the defendant’s employ as a deck hand on a ear float of the defendant then engaged in transporting certain railroad ears from Cape Charles to Little Creek, Va. The action was instituted under the provisions of section 33 of the Merchant Marine Act of 1920 (46 USCA § 688), wherein it is provided that in ease of the death of a seaman, as the result of an injury in the course of his employment, his personal representatives may maintain an action for damages, and, in such action, all statutes of the United States conferring or regulating the right of action for death in case of railway employees shall be applicable. The Federal Employers’ Liability Act (section 1 [45 USCA § 51]), is such a statute, and provides that every common carrier by railroad shall be liable in damages in ease of death of the employee resulting in whole or in part from negligence of any of the officers, agents, or employees of the carrier. The gist of the action is that the death of Harris was the direct result of negligence on the part of the officers and agents of the defendant, engaged as fellow members of the crew with him at the time of his death.

Harris was 31 years of age, and, until three days before the accident, had been employed in a clerical capacity. On September 26, 1929, he was engaged by the defendant as a deck hand; and on the night of September 29, 1929, was drowned while engaged in the performance of his duties on a car float which was in tow of one of the defendant’s tugs. The float was 348 feet in length by 47.9 feet beam. She carried a crew of seven, of whom James A. White, the mate, W. A. Sparrow, the fireman, and Harris, the deceased, were on duty. The mate was in command of the vessel, and, at the time of the accident, was standing in the pilot house of the float which was located on an elevated bridge or structure above the main deck about the center of the vessel. From his station in the pilot house, he had a view of the main deck of the vessel, fore and aft. -He was able within a few seconds to step from the pilot house to the side of the vessel, a distance of some 25 feet.

The flotilla had left Cape Charles in tow of the tug at 5:45 p. m., and had arrived at the entrance to Little Creek about 8:45 p. m. When it reached this point, a signal was received from the tug to cast off from the bow of the barge the steel hawser by which she was being towed. This maneuver was necessary in order that the tug might come along side the starboard side of the car float and be made fast to her, and proceed thence to the landing. It was the duty of Harris to cast off the hawser from the bow of the float. He had been joined by the fireman, Sparrow, who had come on deck in order to show Harris how to malee fast the lines from the tug when she came along side, and also for the purpose of receiving the stem line from the tug and attaching it to the float. After the tow line had been cast off, Harris and Sparrow walked aft on the vessel from her bow to a cleat on her starboard side, situate about one-half the distance between the bow and the bridge. Sparrow instructed Harris to fasten the bow line of the tug to this cleat when the tug should come along side .of it, and then went aft on the starboard side of the ear float to receive the stem line from the tug. When he arrived at a point about amidships, he heard a cry, and looking back saw Harris going into the water feet first with the lantern which he had been carrying still in his hand. Sparrow called out to the tugboat “man overboard” so as to stop her from coming back upon Harris. Harris came up from beneath the water at a point about 25 feet aft of Sparrow, as the latter stood amidships. The barge at the time was going ahead about 3 or 3% miles per hour. Harris called out two or three times “throw me a line.” Sparrow testified that he went aft on the barge as quickly as he could and when he arrived at the stem, he picked up a 6-inch hawser and threw it toward the man in the water. At that time Harris was seen about 50 feet astern of the float. The hawser was so heavy that the fireman could not throw it more than 10 feet. Nearby there lay upon the deck a heaving line, estimated to be probably about 6 fathoms or 48 feet in length which could have been thrown much more easily, but the fireman failed to use it. Harris was an expert swimmer, and, after he reappeared on the surface of the water, he seemed to be swimming or treading water.

No other effort was made to throw a line or other device to Harris while he was in the water. When Sparrow called out “man overboard,” the mate stepped out of the pilot house and walked across to the starboard side of the boat, and, looking over the side, saw some bubbles which might have indicated that some one had fallen in. He testified that he had some conversation with Sparrow as to the whereabouts of the man overboard, but this testimony is not substantiated by Sparrow. There was a life buoy kept near the pilot house which White could have secured and thrown into the water in 3 or 4 seconds, but he made no attempt to do so, and, not seeing Harris in the water, he walked back into the pilot house after a couple of minutes without further ado. His explanation is that it was necessary for him to be in the pilot house as the flotilla was approaching certain bridges 400 or 500 yards away. It seems clear, however, that irrespective of this duty, it would have been easy for him to have thrown a buoy or life ring upon the water during the period while he was at the starboard side of the ship.

In the meantime, the tug backed toward the spot where Harris had fallen overboard, and certain members of the crew called out and were ready to throw a life line or life belt to him, but, not seeing him, nothing was done. After staying at the point of the accident some ten minutes, the tug proceeded with the ear float to the dock. Several days later Harris’ body was found on a neighboring shore about 50 yards from where he was last seen in the water.

At the close of the plaintiff’s case in the trial below, the defendant made a motion for a directed verdict in its behalf, which was granted by the district judge. He held, in effect, that it was the duty of the defendant railroad company to exercise reasonable diligence to save the deceased after it was ascertained that he was in danger of his life; but that even if it could be said that there was a lack of such diligence on the part of the mate and the fireman to do all that was reasonably possible to save the drowning man by throwing lines or buoys into the-water, nevertheless there was no evidence from which the jury could reasonably conclude that more diligent action on their part would have saved their comrade’s life. The judge thought that even if additional steps had been taken, it was still merely a matter of speculation as to whether the deceased would have been able to have availed himself of them so as to be saved. See New York Cent. R. Co. v. Grimstad (C. C. A.) 264 F. 234, where a similar decision was made.

Two main questions are presented by the argument of counsel: (1) Whether when the seaman fell overboard by reason of his own misf ortiine or carelessness, and without negligence on the part of any other member of the crew, the defendant owed him a duty to rescue him from his peril; and (2) if this duty be found to exist, whether there was negligence on the part of the erew in failing to perform it. The defendant contends that if a seaman falls overboard from his ship through his own neglect or misfortune, and without negligence on the part of the vessel contributing, no legal obligation exists on the part of any one on board to attempt to rescue him from his peril; from a legal standpoint, he may he left to die with impunity. No direct authority is cited for this position, hut it is suggested that the relationship of a seaman to the owners of his ship is governed by the well-known rules of the law of master and servant, and cases are cited which hold that an employer, free from negligence, is not required to furnish medical care and attention to an employee who becomes ill or is injured in the course of his work. See Union Pacific Ry. Co. v. Cappier, 66 Kan. 649, 72 P. 281, 69 L. R. A. 513 note; Allen v. Hixson, 111 Ga. 460, 36 S. E. 810; Virginia Iron, Coal & Coke Co. v. Odle’s Adm’r, 128 Va. 280, 105 S. E. 107. The authorities, however, even as to nonmaritime occupations, are not uniform, and some hold that in hazardous employments, there is a tacit understanding existing between the parties that if an employee is so injured in the course of his employment that he cannot care for himself, the employer, in the emergency, will furnish him with the necessary treatment. Hunicke v. Meramec Quarry Co., 262 Mo. 560, 172 S. W. 43, L. R. A. 1915C, 789, Ann. Cas. 1915D, 493; Raasch v. Elite Laundry Co., 98 Minn. 357, 108 N. W. 477, 7 L. R. A. (N. S.) 940.

We are referred to no decisions involving' the bald question presented in the ease at bar, although eases are cited in which the negligent failure of a ship’s erew to save a drowning seaman has been treated as a material circumstance in determining the obligation of the vessel. See Salla v. Hellman (D. C.) 7 F.(2d) 953; Newport News S. B. & D. D. Co. v. Watson (C. C. A.) 19 F.(2d) 832, 833. But we have no doubt that a legal obligation rests upon a ship to use due diligence to save one of the erew, who, by his own neglect, falls into the sea; and that the owners are liable if, by failure to perform this duty, his life is lost. The reason is apparent when we consider the peculiar relationship of the seaman to his ship, which, irrespective of statute, has been recognized from the earliest period. The general rules of master and servant apply, but they are modified by the nature of the business. The contract of employment involves not merely a surrender of the personal liberty of the seaman to a greater extent than is customary, Robertson v. Baldwin, 165 U. S. 275, 17 S. Ct. 326, 41 L. Ed. 715, but it imposes upon the employer an exceptional obligation to care for the well-being of the erew.

There is no other peaceful pursuit in which the dominion of the superior is so absolute and the dependence of the subordinate so complete, as in that of a sailor upon a vessel at sea. He binds himself by the contract of employment to serve the ship during the voyage, and desertion may be made an offense punishable by imprisonment. He owes obedience while on shipboard to his superior officers, and is bound to execute their lawful commands even at the risk of danger to his person or his life; and their right to enforce obedience by proper discipline and punishment has been recognized. If he is taken sick or is injured on hoard the ship, or is cast into the sea by the violence of the elements or by misfortune or negligent conduct, he is completely dependent for care and safety upon such succor as may be given by the members of the erew. By reason of these conditions,» the maritime law extends to mariners a protection greater than is afforded by the general rules of common law to those employed in service upon the land. From time immemorial, seamen have been called the “wards of admiralty”; and in this country as elsewhere the Legislature has enacted an elaborate system of legislation for their protection. Regardless of legislation, it is uniformly recognized that it is the duty of a vessel to care for a seaman who is taken sick or receives an injury on a voyage in the service of the ship, to the extent of providing medical care and attendance, and, if possible, a .cure at the expense of the ship. And it is even required, where a serious accident occurs, that the master shall exercise a reasonable judgment as to putting into the nearest available port, in order that proper treatment may be secured. The Osceola, 189 U. S. 175, 23 S. Ct. 483, 47 L. Ed. 760; The Iroquois, 194 U. S. 240, 24 S. Ct. 640, 48 L. Ed. 955; The Kenilworth (C. C. A.) 144 F. 376, 4 L. R. A. (N. S.) 49, 7 Ann. Cas. 202. Equally clear is the obligation upon the part of the ship to save the life of a sailor who falls overboard through a misadventure, not uncommon in his dangerous calling. It is absurd to admit the duty to extend aid in the lesser emergency, and to deny it in the greater. In both cases, it is implied in the contract that the ship shall use every reasonable means to save the life of a human being who has no other source of help. The universal custom of the sea demands as much wherever human life is in danger. The seaman’s contract of employment requires it as a matter of right.

We think also that the evidence was sufficient to justify the submission to the jury of the issue of negligence. The jury might well have concluded that a greater degree of diligence should have been exercised by the mate in charge of the vessel and by the fireman on the deck at the time. The deceased was an expert swimmer, and, when he came to the surface of the water, he was swimming or treading water. He called out several times for the men on the barge to throw him a line. At this moment or shortly thereafter, the mate arrived at the side of the ship in close proximity to a life ring, but made no effort to throw it into the water because he could not see the man overboard. The mate knew that the man had just gone overboard, and it should have been obvious to him that the very occasion existed for which life rings are made and used. The fireman also, although making an effort in his excitement to throw overboard a 6 inch hawser which one man could not' readily handle, failed to make any effort to use the heaving line nearby which he could easily have managed. It is true that the heaving line was only about 50 feet long and when the hawser was thrown, Harris was already 50 feet from the stem of the vessel which was then slowly going ahead. But it is not easy to understand, notwithstanding the testimony of Sparrow to the contrary, why he could not have reached the stem of the vessel before it passed the man in the water. The vessel was only moving at the pace of an ordinary pedestrian, and an able-bodied seaman should have had no difficulty in reaching the stem before the vessel passed the man struggling in the water. The jury was not obliged to accept his opinion that he went aft as soon or as fast as he could.

These obvious facts lead us to conclude that there was evidence of neglect on the part of the crew, and further that it was for the jury to decide whether the man could have been saved if due diligence had been used. The deceased, even when last seen, was within 200 feet of the point at which a life ring, if promptly thrown, would have rested on the surface of the water. He was evidently making every possible effort to save himself. Whether in any event he would have succeeded is not a certainty, but in our view there was enough testimony tending to show a reasonable probability of rescue, had a life ring or heaving line been used, to justify the submission of the question to the jury,

Reversed,


author: EVANS, Circuit Judge.

text:
    In re WAKEY. CURTIS v. AMSLER.
    No. 4473.
    Circuit Court of Appeals, Seventh Circuit.
    June 29, 1931.

      W. I. Hibbs, Harold A. Butters, and A. E. Butters, all of Ottawa, Ill., for appellant.
    Arthur H. Shay, of Streator, Ill., for appellee.
    Before EVANS and SPARKS, Circuit Judges, and WILKERSON, District Judge.
   EVANS, Circuit Judge.

This appeal involves a single question, the right of a mortgagee to receive the rents and profits collected by a trustee of the bankrupt estate of the mortgagor from the operation of a farm covered by the mortgage. The mortgage lien covered the “rents, issues and profits thereof,” etc.

Mortgagor was duly adjudged a bankrupt when there was no default in the mortgage, either in interest or principal. The trustee in bankruptcy collected the rent for two years. Appellant, the mortgagee, then petitioned the court for an order directing the trustee to apply the rents and profits to the payment.of the interest due upon the mortgage. The referee denied the petition, and his order was confirmed by the District Court. This appeal was taken from the court’s order.

It is not questioned but that the rents and profits of land, as well as the land, may be the subject of a valid mortgage lien. ' Greenebaum Sons Bank & Trust Co. v. Kings-bury, 248 111. App. 321; Ortengren v. Rice, 104 111. App. 428; McLester v. Rose, 104 111. App. 433; First Nat. Bank of Joliet v. Illinois Steel Co., 174 111. 140, 51 N. E. 200; Bagley v. Illinois Trust & Savings Bank, 199 111. 76, 64 N. E. 1085. It seems equally clear in Illinois that the lien upon the rents and profits is not ordinarily enforceable until the mortgagee begins foreclosure proceedings, and a receiver, or other officer appointed by the court, tabes possession of the property described in the mortgage. Dillon v. Dyer, 258 111. App. 144; St. Louis Union Trust Co. v. Wabash, Chester & Western Ry. Co., 258 111. App. 9; Taylor v. Osman, 239 111. App. 569; Anderson v. Frederiekson, 252 111. App. 281; Rohrer v. Deatherage, 336 111. 450, 168 N. E. 266. After the appointment of such receiver in the niortgagee’s suit, the mortgagee’s right to the rents thereafter collected is clear. Rohrer v. Deather-age, 336 111. 450, 168 N. E. 266; Dillon v. Dyer, 258 111. App. 144; St. Louis Union Trust Co. v. Wabash, Chester & Western Ry. Co., 258 111. App. 9.

In this case the mortgagee made no application for permission to foreclose his mortgage, and not until after two years’ rent-had been collected by the trustee did he ask to have the same applied upon his mortgage. This failure on his part to assert his lien would have been fatal to his application here but for the intervention of the bankruptcy proceedings. Doubtless the bankruptcy proceedings and the appointment of the trustee dispensed with the requirement that the mortgagee should start foreclosure proceedings and secure the appointment of a receiver. For the mortgagee could not foreclose without the consent of the court, which had appointed a trustee to take possession of the property and collect the rents and profits. Isaacs, Trustee, v. Hobbs Tie & Timber Company, 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645, decided February 24, 1931.

But, while the institution of foreclosure proceedings was not necessary, the question arises: Was the mortgagee not required to make a demand on the trustee for the rents, and, if the demand be refused, to apply to the court for an order directing the trustee to apply the rents and profits upon the mortgage? Until such demand, or application was made, should the rents and profits not pass to the trustee for the benefit of the general creditors?

Respecting the answer to this query, the authorities are seemingly not in accord. Collier on Bankruptcy, vol. 2, p. 1675, discusses the question and recognizes the divergence of opinion: “But, on the question as to whether rents collected from mortgaged premises of a bankrupt between adjudication of bankruptcy and sale under foreclosure proceedings belong to the mortgagee under a claim of deficiency or to the general creditors, there is a divergence of opinion. * * * The eases hold, in effect, that until the mortgagee has reduced the mortgaged premises to his possession, or has attached or sequestered the rents, the possession of the trustee is that of the mortgagor, and rents from the mortgaged premises, which, but for the bankruptcy would belong to the mortgagor, after bankruptcy belong to the trustee by virtue of his title and possession, and are therefore applicable to debts due the general creditors. There is an opposite line of authorities which takes the view that for many purposes the relative rights of creditors are to be regarded as fixed when bankruptcy takes place; that after insolvency has taken the mortgaged property out of the mortgagor’s hands, its income or product belongs to the lien creditor, who has thus become the virtual owner; and that such ineome or product issuing from mortgaged property should not be diverted from the mortgage creditor who has a lien to general creditors who have no lien. This view is not based upon the notion that the mortgage confers a lien upon rents, for, of course, it does not; but it is based upon what is conceived to be an equitable adjustment of rights, of which some are obviously superior to others.”

An examination of the authorities cited leads us to the conclusion that the weight, as well as the trend, of authorities, favors the position that appellant’s lien was effective from the date of the trustee’s appointment.

In the recent case of Mortgage Loan Co. v. Livingston (C. C. A.) 45 F.(2d) 28, 32, the court said:

“It is argued, and the lower court was of the view, that they were not entitled to these funds because they had never acquired actual possession of the property, either directly or through a receiver, and that they had not made demand therefor. In the absence of a receivership, or other process by which the mortgaged property is in the control of the court, a mortgagee of real property would not be entitled to the rents and profits of the mortgaged premises until he had taken actual possession, or until possession were taken in his behalf by a receiver, or until he had demanded such possession. * * *
“To hold that the mortgagees had a legal right to these rents and issues under the provisions of their mortgage, but that they should be precluded from recovering same because they had not technically pursued a legal remedy is to overlook the fact that the property was in the control of a court of equity, and that equitable remedies commensurate with the legal rights of the parties should be available. To take from the mortgagees the property to which confessedly they are entitled under the pledge provision of their mortgage, and transfer it to the unsecured creditors of the bankrupt, appeals to us as harsh, inequitable, and unwarranted.”

The court also said, page 33 of 45 F.(2d): “So here, the receiver, while not appointed in a separate suit instituted by the mortgagees, was functioning on behalf of all creditors with due regard to priorities of claims and liens on the property of the bankrupt. The mortgagees could not have assumed, under the facts as disclosed by this record, that the receiver was holding possession of these properties and collecting the rents and issues arising therefrom for any other purpose than to preserve them for the party entitled to them.”

The facts in that ease are not in all respects similar to the facts disclosed in the instant suit, but the principle involved is the same. The decisions of the Courts of Appeals of the Third Circuit and of the First Circuit are to the same effeet. Bindseil v. Liberty Trust Co., 248 F. 112; In re Industrial Cold Storage & Ice Co., 163 F. 390; In re Torchia, 188 F. 207. See, also, Atlantic Trust Co. v. Dana (C. C. A.) 128 F. 209.

The Court of Appeals of the Second Circuit has held to the contrary. In re Brose, 254 F. 664.

Our conclusion is that the trustee in bankruptcy represented all of the creditors, the secured, the preferred, and the unsecured; that under Isaacs, Trustee, v. Hobbs Tie & Timber Co., supra, appellant could take no steps to perfect a lien upon the rents save in the court of bankruptcy; that he correctly assumed that his rights would be protected by the court of bankruptcy when it came to distribute the funds in the trustee’s possession, derived either from the sale of the farm or from; the rentals of the farm.

Iñ reaching this conclusion we have not overlooked the contention based upon the proposition that the provision of the mortgage covering rents and profits conveyed a right to a lien rather than an unqualified lien. A condition precedent to the ereation of such lien was necessary, viz., the appointment of a receiver to collect the rents and profits. Inasmuch as this receiver would ordinarily not be appointed, except upon a showing that the property was insufficient to pay the mortgage debt and inasmuch as the income belonged to the mortgagor, or in case of his bankruptcy, to the trustee, until such receiver was appointed, it has been argued that such income belonged to the trustee in the- absence of a showing that the property was insufficient to satisfy the mortgage debt. The weakness of this argument lies in the fact that the trustee, as the successor of the mortgagor, collected the rents and profits and held them for the benefit of the unsecured creditors, the secured creditors, and the preferred creditors. He occupied a position akin to that of a receiver appointed at the instance of a judgment creditor in a suit where the first mortgagee is made a party, and the order appointing the receiver fails to designate the parties for whom the receiver should collect the rents and profits. Under such circumstances, the moneys collected by the receiver are payable to the lienors in the order of their priority.

It would seem that a trustee in bankruptcy represents the mortgagees fully as much as a receiver appointed in a suit brought by a judgment creditor. The rights of judgment creditor and prior mortgagee in and to such rents and profits collected Dy the receiver were fully considered in Cross v. Will County National Bank, 177 Ill. 33, 52 N. E. 322. The court there reached the conclusion that the receiver was not appointed solely for the judgment creditor, and inasmuch as the receiver was not, by the order of appointment, directed to apply the rents and profits to satisfy the judgment of the judgment creditor, they were applicable to the liens on the property in the order of their priority. As the lien of the mortgage was prior to that of the judgment, the mortgagee was entitled to be first paid out of the rents.

Assuming as we do that the trustee in bankruptcy occupies the same position as a receiver appointed in a suit in equity, where no directions appear as to the disposition of the rents and profits, there seems no escape from the conclusion that payments out of such funds should be made to the lienholders in the order of their priority. '

We express no opinion as to the right of the trustee to retain from said rentals a sum sufficient to pay the expense of administering the bankrupt’s estate because of the absence of facts showing the existence of other funds sufficient to take care of such expense.

The decree of the District Court is reversed, with directions to enter an order in accordance with the views above expressed.