author: JOHNSON, Circuit Judge. BINGHAM, Circuit Judge

text:
    GALLAGHER et al. v. HANNIGAN. McISAAC v. SAME.
    (Circuit Court of Appeals, First Circuit.
    May 8, 1925.)
    Nos. 1761, 1762.
    I. Bankruptcy <®=»302(I)— Complaint in trustee’s action to recover assets fraudulently conveyed must allege substantia! case within jurisdiction of act.
    Complaint, in trustee’s action to recover assets of bankrupt fraudulently conveyed, must contain allegations of a substantial case within jurisdiction of Bankruptcy Act (Comp. St. §§ 9585-9656), in order to give jurisdiction to federal court.

      2. Bankruptcy <s=302( I) — Complaint, in trustee’s action to recover assets of bankrupt fraudulently conveyed, held not defective.
    Complaint, in action by trustee of bankrupt business trust to recover property fraudulently conveyed, which alleged payment of money to defendants by trustees named in trust agreement, held not defective for failure to aver payment by bankrupt, since it could only act through trustees.
    3. Bankruptcy <3=70 — Company organized as trust held properly adjudicated as an “unincorporated company,” rather than as partnership.
    Company, organized under trust agreement which provided for its control by board of directors and contained provision against personal liability of trustees, directors, or holders of certificates and units of stock, held properly adjudicated a bankrupt as an unincorporated company under Bankruptcy Act, § 4b (Comp. St. § 9588), rather than partnership, particularly in view of G. L. Mass. c. 182, recognizing such concerns as voluntary associations equivalent ' to “unincorporated companies” within Bankruptcy Act.
    4. Bankruptcy <8=467 — Appellate court held hot bound by findings of district court.
    On appeal in suits by trustee in bankruptcy to recover property of bankrupt fraudulently conveyed, Gircuit Court of Appeals is .not bound by findings of district court.
    5. Bankruptcy <8=178(2) — Payments made to attorneys from assets of bankrupt concern held recoverable as fraudulent conveyances of bankrupt’s assets.
    Where, within four months before bankruptcy, trustees of company organized under trust agreement for purpose of engaging in financial operations, out of its assets, paid attorneys substantial sums for services to be rendered in any criminal or other matters which might arise against them personally when attorneys knew source of such funds,' trustee in bankruptcy could recover such payments under Bankruptcy Act, §§ 67e and 70e (Comp. St. §§ 9651, 9654).
    Bingham, Gircuit Judge, dissenting.
    Appeal from the District Court of the United States for the District of Massachusetts; James Arnold Lowell, Judge.
    Two suits by John E. Hannigan, trustee in bankruptcy of the Old Colony Foreign Exchange Company, one against Robert Gallagher and another, and the other against Daniel V. Mclsaac. Judgment for plaintiff in each case, and defendants appeal.
    Affirmed.
    Lowell A. Mayberry, of Boston, Mass., for appellants.
    John E. Hannigan, of Boston, Mass. (Harold F. Hathaway, of Boston, Mass., on the brief), for appellee.
    Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
   JOHNSON, Circuit Judge.

These cases are appeals from a final decree of the District Court of the United States for the District of Massachusetts. The same questions are involved in both and they have been argued together. In each a bill in equity was filed by John E. Hannigan, as trustee in bankruptcy of the Old Colony Foreign Exchange Company, adjudged a bankrupt as an unincorporated company October 11, 1920, upon an involuntary petition filed August 16, 1920, in which he seeks to recover from the defendants money paid to them by the bankrupt, alleged to have been fraudulent transfers.

Raymond M. Meyers, Charles M. Bright-well, and Gunner R. A. Lindblad executed a written instrument on July 8, 1920, which provided in very broad terms for the carrying on of different lines of business, including the purchase of foreign merchandise and foreign exchange under the name of the Old Colony Foreign Exchange Company and that the title to all the property which it acquired should be in them as trustees or their successors.

The said Meyers, Brightwell, and Lind-blad were named therein as trustees, and it was declared that the association contemplated a capital stock of $1,000,000, represented by 10,000 units of the par value of $100 each; that annual and special meetings of the unit "holders were to be held; that the trustees’ sole duty and power should be to hold the title to the property of the association or trust; that a board of directors should be elected who should have and exercise exclusive management and control of the business of the association; that there should be no personal liability on the part of the trastees or on the part of the board of directors or on the part of the holders of the certificates and units in said trust; and that the property of the trust alone should be held liable for obligations' incurred by the board of directors or trustees.

This instrument was filed under the provisions of the General Laws of Massachusetts, chap. 182, § 2, in the office of the Commissioner of Corporations. No business of the kind described in it was ever done and no certificates for the ownership of any units in the property of the association were ever issued to any parties except to the three trustees. No directors were ever elected and no record of trustee meetings or any other meetings was ever.kept.

The association opened an office at 89 State street, Boston, Mass., and began to issue notes signed by the Old Colony Foreign Exchange Company, by R. M. Meyers, manager, in which it promised to pay to parties who might intrust their money to it the principal, with 50 per cent, interest, in 90 days. A little later it issued what was termed a “debenture,” which promised the same return to the holders and concluded with this statement:

“The trustees, under a declaration of trust filed in the office of the Commissioner of Corporations of Massachusetts, herein designated as the Old Colony Foreign Exchange Company, as such trustees and not individually, have caused this debenture to be signed in their behalf by their treasurer and secretary.
“Old Colony Foreign Exchange Company,
• “C. M. Brightwell, Treasurer.
“R. M. Meyers, Secretary.”

The issue of notes began July 28, 1920, and of debentures August 1, 1920, and was continued until August 13, 1920, when the business of the Old Colony Foreign Exchange Company was stopped by the commonwealth of Massachusetts.

It took in from the issue of notes and debentures $383,70450, from about 1,400 persons. An audit of its affairs disclosed that no investment was ever made by it and no purchases, outside of office furniture; that it had done no business except to borrow money upon its notes and debentures; that notes to the amount of $84,602.50 had been redeemed ; that it had paid in the way of commissions to agents $39,095.45, $5,655.75 to two other parties, and certain amounts to the attorneys who are named as defendants; that from all the records which could be found, the balance on hand should have been $223,-119.36, but that the sum of $164,559.98 was all that could be found, leaving a balance of $58,559.38 unaccounted for.

On August 12, 1920, investors, apparently alarmed by the disclosures in the daily papers in regard to the fraudulent practices of Charles Ponzi, which appear to have been similar if not substantially the same as those of the Old Colony Foreign Exchange Company, started a run on the latter, which was continued until about 2 o’clock in the afternoon of the next day, when Charles M. Brightwell and Raymond M. Meyers were arrested on warrants issued by the municipal court of the city of Boston. Lindblad was then out of the country.

The sum of $10,000 was paid to defendants Dennison and Gallagher as a retainer; $5,000 on the morning of August 13, 1920, and $5,000 about noon of that day. The District Court has found that these payments were made by Meyers from the money obtained by the Old Colony Foreign Exchange Company by the issue of notes and so-called debentures; that Mclsaac was retained as general counsel about August 2, 1920, and the sum of $4,500, from the same source, was paid to him; that defendant Wy-man received the sum of $2,500 for past legal services; and that this payment to him constituted an illegal preference under the Bankruptcy Act.

The defendants filed a motion to dismiss, which was denied by Judge Morris in a careful and elaborate statement, expressing views with most of which we find ourselves in accord.

The case was later tried upon its merits before Judge Lowell, who adopted Judge Morris’ views as to jurisdiction and on the main questions involved and then, on all the evidence, found as above noted.

The ease comes here on 75 assignments of error, some of which relate to the denial of the motion to dismiss because of lack of jurisdiction, and the remainder to the findings of Judge Lowell upon the merits and his refusal to give certain rulings and make certain findings which were requested. In support of the motion to dismiss, it was urged that the complaint was defective upon its face, because it did not allege that the bankrupt, the Old Colony Foreign Exchange Company, had made the payments which, it is alleged, were fraudulent; that as these Were plenary actions, the trustee could not maintain them in a federal court without the consent of the defendants, given in accordance with section 23b of the Bankruptcy Act (Comp. St. § 9607).

It is true that the complaint must contain an allegation of a substantial case within the jurisdiction of the Bankruptcy Act. See Flanders v. Coleman, 250 U. S. 223, at page 227, 39 S. Ct. 472, 473 (63 L. Ed. 948), where the court said, speaking of the •allegations of a bill:

“If there be enough of substance in them to require the court to hear and determine the cause, then jurisdiction should have been entertained.”

The bill of complaint, after alleging the faets hereinbefore stated, alleges that while the run upon the Old Colony Foreign Exchange Company was going on, Bright-well and Meyers paid to the defendants, Dennison and Gallagher, “the sum of $5,-000 from the money aforesaid of the Old Colony Foreign Exchange Company, and later on, on the same day, paid them another sum of $5,000 from the money of the Old Colony Foreign Exchange Company, making total payments of $10,000 to said Gallagher and Dennison for services to be rendered by said Dennison and Gallagher as counsel in any criminal or other matters .that might arise against them personally.”

It is apparent from the allegations of the bill that the only parties through whom the Old Colony Foreign Exchange Company could act — Lindblad being out of the country — were Brightwell and Meyers.

While in fact this association was a mere sham and pretense, intended to gain the confidence of the public in order to defraud it, yet, so far as it had any status and could perform any acts, it could only do so through them, and their acts were its acts. We think, therefore, that the District Court was right in denying the motion to dismiss, and holding that the District Court had jurisdiction.

The gist of the defendants’ contentions, which are the basis of the other assignments of error, is, in substance, that the Old Colony Foreign Exchange Company was a partnership, and that it should not have been adjudicated a bankrupt as an unincorporated company, and therefore that the plaintiff has no title to its assets; that the money derived from the buyers of notes and its debentures was that of Brightwell, Meyers, and Lindblad as partners, which they were free to use as they chose, including its use in employing the defendants to defend them from alleged crime; that, as the plaintiff never got title to the assets of the Old Colony Foreign Exchange Company, he cannot maintain an action in either ease.

We concur with the two learned District Judges in rejecting this proposition and its results, and hold that the bankrupt was an “unincorporated company,” within the meaning of section 4b of the Bankruptcy Act (Comp. St. § 9588); and that the plaintiff, as trustee, has title to all the property' of the Old Colony Foreign Exchange Company, including that which was fraudulently transferred by it.

In the following eases in the federal courts an association similar to the Old Colony Foreign Exchange Company has been held to be an unincorporated company and subject to adjudication as a bankrupt: In re Seaboard Fire Underwriters (D. C.) 137 F. 987; In re Hercules Atkin Company (D. C.) 133 F. 813; In re Associated Trust (D. C.) 222 F. 1012; In re Parker et al. (D. C.) 275 F. 868; In re Order of Sparta, 242 F. 235, 155 C. C. A. 75; In re Tidewater Coal Exchange (C. C. A.) 280 F. 638.

Undoubtedly, such associations, when fully organized as the declaration of trust in this case contemplated, are held by the Massachusetts courts to be, for certain narrowly limited purposes, partnerships. But it does not at all follow that under federal law they cannot be properly adjudicated bankrupt as unincorporated companies. We think the following statement from the opinion of the court in Re Associated Trust, supra, applies with greater force to the Old Colony Foreign Exchange Company than to the association with which the court was there dealing.

“It is impossible to eoneeive an organization to which the name 'unincorporated company’ could be more appropriately applied than to a concern organized as the declaration of trust in this case contemplated.”

The Massachusetts statutes themselves recognize such concerns as voluntary associations, a term which, for present purposes at least, is equivalent to “unincorporated companies.” G. L. chap. 182; Malley v. Howard (C. C. A.) 281 F. 363, 371.

Section 6 of this chapter is as follows:

“Sec. 6. An association may be sued in an action at law for debts and other obligations or liabilities contracted .or incurred by the trustees, or by the duly authorized agents of such trustees, or by any duly authorized officer of the association, in the performance of their respective duties under such written instruments or declarations of trust, and for any damages to persons or property resulting from .the negligence of such trustees, agents or officers acting in the performance of their respective duties, and its property shall be subject to attachment and execution in like manner as if it were a corporation, and service of process upon one of the trustees shall be sufficient.”

The Old Colony Foreign Exchange Company and most of these associations limit their contractual liabilities to the res of the trust estate, thus seeking and generally attaining, nearly if not quite all, the limited liability of a corporation. Hussey v. Arnold, 185 Mass. 202, 70 N. E. 87; McCarthy v. Parker, 243 Mass. 465, 138 N. E. 8. Plainly, the “property” referred to in G. L. Mass. chap. 182, § 6, is the property of the association — derived from its stockholders, its creditors, or in the usual course of its business. It does not mean the property of its shareholders as partners.

The trust estate, so fax as its assets are concerned under Massachusetts law, is treated as an. entity, as is a corporation.' The fact, if it be a fact, that such associations may be partnerships as to creditors not charged with notice that the officers thereof are required to limit their contractual undertakings as to the res of the trust estate, is no reason for holding that bankruptcy may not be invoked in order to provide equality of treatment of all creditors of this separate entity. Compare Horgan v. Morgan, 233 Mass. 381, 124 N. E. 32; Frost v. Thompson, 219 Mass. 360, 366, 370, 106 N. E. 1009; Neville v. Gifford, 242 Mass. 124, 128, 136 N. E. 160.

Moreover, a partnership itself is, in bankruptcy, treated, for certain purposes, as a separate entity. In Francis v. McNeal, 228 U. S. 695, 700, 33 S. Ct. 701, 702 (57 L. Ed. 1029, L. R. A. 1915E, 706), Mr. Justice Holmes, referring to the partnership provisions in the Bankruptcy Act, says:

“No doubt these clauses taken together recognize the firm as an entity for certain purposes, the most important of which, after all, is the old rule as to the prior claim of partnership debts on partnership assets and that of individual debts upon the individual estate.”

This doctrine is quoted and applied in Re Samuels et al., 215 F. 845, 132 C. C. A. 187.

The reason, then, why a partnership cannot be adjudicated, bankrupt unless all of its partners are insolvent, grows, not out of the words of the Bankruptcy Statute, put out of the general principles of law. There •cannot be equality of treatment unless the court extends its jurisdiction to the assets which must be marshaled for the purpose of distribution. But these reasons do not at all apply to voluntary associations or unincorporated companies; for in these cases the shareholders, even" if partners inter sese (Flint v. Codman, 247 Mass. 463, 471, 142 N. E. 256), or as to the rare creditor not charged with knowledge of the limited powers of their officers (Neville v. Gifford, supra), are not liable to. the ordinary creditors of the association. As to most, generally as to all creditors, the res or trust estate stands exactly like the assets of a corporation. It is the sole resort of creditors. The shareholders and officers of these associations stand outside the scope of the bankruptcy liquidation, just as do the officers and stockholders of an ordinary corporation. Their individual assets are not liable for the association’s debts. The Bankruptcy Court has, therefore, no occasion to extend its jurisdiction over these shareholders.

This is, in effect, but an elaboration of what Judge Morton held in Re Associated Trust, supra, where he said as to the words “unincorporated company,” that “company” “would seem to imply an association of individuals, not partners, carrying on business under a distinct name, and having common rights .inter se, but having no individual ownership in the joint property, no individual control over the business in'whieh their joint capital is embarked, and no direct individual liability for the company’s debts.”

The words “no direct individual liability for the company’s debts” furnish the main reason for the conclusion that such associations, although for some purposes partnerships, under the Massachusetts holdings, are not to be dealt with as partnerships under the Bankruptcy Act, where an equal distribution of their assets among their creditors is the controlling purpose.

The Old Colony Foreign Exchange Company had not become, like the voluntary associations dealt with by the Supreme Court of Massachusetts in the cases cited upon the defendants’ brief, a completely organized trust with a large number of certificate or unit holders who managed and controlled the property and business through trustees who were their agents. The objects of the trust were never undertaken. Neither foreign merchandise nor foreign exchange was ever purchased.

It is evident that the company had no resources with which to meet the obligations which it was incurring, and that it could only depend upon doing so by obtaining further victims of its swindling scheme.

The District Court has found that the defendants, Gallagher and Dennison, knew that the money which was paid them was not that of Brightwell and Meyers, but of the Old Colony Foreign Exchange Company; that it would be an insult to their intelligence to suppose that they thought that the money was to be used for any purpose connected with the business of the Old Colony Foreign Exchange Company.

The District Court bases its decree upon the misappropriation of the property of the Old Colony Foreign Exchange Company.' While there is ample evidence to sustain its finding that the defendants knew that the money paid to them was not that of Bright-well and Meyers, it is also sufficient to authorize us to find that they knew that it was money of the Old Colony Foreign Exchange Company, and that they knew how this money had been obtained.

Upon this appeal, we are not bound by tbe findings of tbe District Court, but can reach such conclusions as we feel are warranted by the evidence.

It is evident that the money paid to the defendants was not paid to them for any purpose for which it was intrusted to the Old Colony Foreign Exchange Company by the holders of its notes and debentures, but was diverted to a purpose entirely foreign to the purposes for which it had declared itself to be organized and for which these so-called investors had turned over their money to it; and that this was within the knowledge of ail these defendants. It was a misappropriation, therefore, by the Old Colony Foreign Exchange Company and a diversion of the money received from its gullible victims to a purpose entirely foreign to those for which it had persuaded them to intrust it with their money; and any creditor of the bankrupt could recover money which was so fraudulently transferred and diverted from the purpose of the trust with the knowledge of those who received it. Therefore, the trustee in bankruptcy may, under section 70e of the Bankruptcy Act (Comp. St. § 9654), maintain- an action for its recovery. See Flanders v. Coleman, 250 U. S. 223, 39 S. Ct. 472, 63 L. Ed. 948. We think also that he could maintain an action under section 67e of the Bankruptcy Act (Comp. St. § 9651), as these fraudulent transfers were made within four months of the filing of the petition in bankruptcy, and their obviously necessary effect was to “hinder, delay or defraud creditors.”

In Dean v. Davis, 242 U. S. 438, 37 S. Ct. 130, 61 L. Ed. 419, the court said:

“A transfer, the intent (or obviously necessary effect) of which is to deprive creditors of the benefits sought to be secured by the Bankruptcy Act 'hinders, delays or defrauds creditors’ within the meaning of section 67e.”

Park v. Cameron, 237 U. S. 616, 35 S. Ct. 719, 59 L. Ed. 1147, is relied upon by the defendants in support of their contention that, as the payments made by Brightwell and Meyers were not the acts of the bankrupt, but their individual acts, this did not constitute transfers by the bankrupt. In that case, however, the declaration alleged that the corporation did not authorize the payments that had been made by the defendants, or ratify them, and that the defendants knew this; and the court held that there was no allegation that the corporation had made any transfers, but only that certain of its officers by false pretenses had withdrawn and misappropriated its funds.

No such distinction can be made between Brightwell and Meyers and the Old Colony Foreign Exchange Company as could be made-between the officers and the corporation in Park v. Cameron, supra; nor are there any allegations in the bills in these eases that the Old Colony Foreign Exchange .Company had never authorized or ratified these payments, and the evidence diselosés that they were made by the only parties who constituted the Old Colony Foreign Exchange Company or through whom it could act.'

The decree of the District Court is affirmed in each case, with costs to the appellee in this court.

BINGHAM, Circuit Judge

(dissenting). These are proceedings brought by the trustee in bankruptcy of the Old Colony Foreign Exchange Company (which has been adjudicated a bankrupt as an unincorporated company) to recover eertain funds alleged, proved, and found by the District Court to have been the funds of the Old Colony Foreign Exchange Company which Brightwell and Meyers misappropriated and paid to the defendants for legal services to be rendered Brightwell and Meyers individually in the trial of certain indictments.

In paragraph 7 of the bill of complaint it is alleged that the Old Colony Foreign Exchange Company received $383,704.50 for notes which it had sold and issued, and that “this money was the property of the Old Colony Foreign Exchange Company as between itself and said Brightwell and Meyers.” In .paragraph 8 of the complaint it is alleged that “on August 12, while said run was in process, the said Brightwell and Meyers paid to the defendants Dennison and Gallagher the sum of $5,000 from the money aforesaid of the Old Colony Foreign Exchange Company, and later on, on the same day, paid them another sum of $5,000 from the money of the Old Colony Foreign Exchange Company, making total payments of $10,000 to said Gallagher and Dennison for services to be rendered by said Dennison and Gallagher as counsel in any criminal or other matters that might arise against them personally.” In paragraph 10 there is a like allegation with reference to payments by Brightwell and Meyers from the money of the Old Colony Foreign Exchange Company to Mclsaac, namely, that it was paid to him by Brightwell and Meyers as a retainer in any criminal proceedings that might be instituted against them as individuals.

In the course of the trial the court stated the issue to be tried as follows:

“The question is, Had Brightwell and Meyers, or whatever their names were, any right to use the money of the Foreign-Exchange to further their own interest in defending themselves ? They might have been angels of purity, and so found by the court, but that wouldn’t alter the question of whether they had any right to use those funds, or any of them.”

Again, the District Court said:

“It is rather my idea — I don’t say I have decided it — that these people had no right to use this money for their own personal uses even, though those uses might be most exemplary. In other words, if they wanted to found a foundling hospital they couldn’t do it. It wasn’t their money.”

There was evidence that Brightwell and Meyers took the money from the Old Colony Foreign Exchange Company and paid it to Dennison, Gallagher, and Mclsaac to compensate them for services to be rendered in defending them individually in certain criminal prosecutions and not for services to be rendered the company, and that the defendants knew or had reason to believe that the money which they received had been taken by Brightwell and Meyers from the funds of the Old Colony Foreign Exchange Company. The District Court found that the defendants Dennison, Gallagher, and Mclsaac, “knew that the money was not that of Brightwell and Meyers, but came from the Old Colony Foreign Exchange Company,” and in the course of its opinion said: “It was contended that the defendants could keep the money as a fee given by a bankrupt for professional advice in the case of bankruptcy. I find that the money was not given for this purpose.” He also found:

“The law of the case is simple. As to the defendants Dennison, Gallagher, and Me-Isaae, money of the company was given them for purposes unconnected with the business of the company, and was a fraudulent transfer, which may be recovered by the trustee in bankruptcy.”

The defendants contend that, on the allegations of the bill and the findings of the District Court, the District Court as a federal court, or a court of bankruptcy, was without jurisdiction. There was no diversity of citizenship on which its jurisdiction as a federal court could be based and the defendants never consented to be sued in the District Court.

Section 23b of the Bankruptcy Act (Comp. St. § 9607) provides:

“23b. Suits by the trustee shall only be brought or prosecuted in the courts where 'the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits for the recovery of property under section sixty, subdivision b; section sixty-seven, subdivision e; and section 70, subdivision e.”

Section 60, subdivision b (section 9644), relates to preferences and can have nothing to do with this case as the defendants were not creditors of the bankrupt association. Section 67, subdivision e (section 9651), reads:

“67e. That all conveyances, transfers, assignments, or incumbrances of his property, or any part thereof, made or given by a person adjudged a bankrupt under the provisions of this act subsequent to the passage of this act and within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay, or defraud his creditors, or any of them, shall be null and void as against the creditors of such debtor, except as to purchasers in good faith and for a present fair consideration; and all property of the debtor conveyed, transferred, assigned, or incumbered as aforesaid shall, if he be adjudged a bankrupt, and the same is not exempt from execution and liability for debts by the law of his domicile, be and remain a part of the assets and estate of the bankrupt and shall pass to his said trustee, whose duty it shall be £o recover and reclaim the same by legal proceedings or otherwise for the benefit of the creditors. And all conveyances, transfers, or in-cumbrances of his property made by a debt- or at any time within four months prior to the filing of the petition against him, and while insolvent, which are held null and void as against the creditors of such debtor by the laws of the state, territory, or district in which such property is situate, shall be deemed null and void under this act against the creditors of such debtor if he be adjudged a bankrupt, and such property shall pass to the assignee and be by him reclaimed and recovered for the benefit of the creditors of the bankrupt. For the purpose of such recovery any court of bankruptcy as hereinbe-fore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.”

And section 70, subdivision e (section 9654), reads:

“70e. The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value,-from the person to whom it was transferred, unless he was a bona .fide holder for value prior to the date of the adjudication. .Such property may be recovered or. its value collected from whoever may have received it, except a bona fide holder for value. For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.”

To give the District Court, as a court of bankruptcy, jurisdiction under section 67e or 70e it is necessary that the transfers complained of in these eases should have been made by the bankrupt, the Old Colony Foreign Exchange Company, to the defendants. But the allegations, proofs, and findings in these cases are to the effect that the transfers were not made by the bankrupt but were made by Brightwell and Meyers from the funds of the Old Colony Foreign Exchange Company, which Brightwell and Meyers misappropriated and devoted to their own private uses. In the opinion of the court, my associates, in order to bring the ease within the provisions of 67e and 70e, have ignored the findings of the District Judge based on the allegations of the bill and the evidence in the case, and have held that Brightwell and Meyers, in misappropriating the funds of the Old Colony Foreign Exchange Company and applying them for their own benefit, were acting as agents of the Old Colony'Foreign Exchange Company and for its benefit." But it is evident and does not call for much discussion that where officers of a corporation or association misappropriate its funds and apply them to their own uses, they can-riot reasonably be found in so doing to be acting as agents of the corporation or association whose funds they have misappropriated. Then again, Brightwell and Meyers having misappropriated the funds of the Old Colony Foreign Exchange Company and devoted them to their own uses, it cannOt be found that the Old Colony Foreign Exchange Company transferred those funds in fraud of its creditors. As no transfer was made by the Old Colony Foreign Exchange Company or any one authorized by it to make a transfer, it is plain that these proceedings should have been dismissed in the District Court for want of jurisdiction, the same as was done in Park v, Cameron, 237 U. S. 616, 35 S. Ct. 719, 59 L. Ed. 1147.

Although the District Court as a federal court or as a court of bankruptcy was without jurisdiction'in'these cases, it does not follow that on the facts here found the plaintiff has not a right of action. On the contrary, I- am of the opinion that he has a right of action, but must enforce it in a state court that has jurisdiction of the subject-matter and of the parties. The finding of the District Court that Brightwell and Meyers misappropriated the funds of the Old Colony Foreign Exchange Company, and that the defendants received them knowing that they were the funds of the Old Colony Foreign Exchange Company, and that Brightwell and Meyers had no right to use them for their own benefit, establishes a common-law right, which may be enforced in the proper forum.


source: Caselaw Access Project

author: WADDILL, Circuit Judge. WOODS, Circuit Judge

license: Public Domain

text:
    THE SAGAPORACK. NORFOLK DREDGING CO. v. UNITED STATES.
    (Circuit Court of Appeals, Fourth Circuit.
    April 14, 1925.)
    No. 2311.
    Collision @=»95(7) — Steamship and tugs with tow of unusual length held equally at fault, and both liable for damages from collision.
    Steamship on eastern side of channel, inaugurating port to port signal on sighting tugs with tow of unusual length approaching more than mile ahead on eastern side of channel, and failing-to take into consideration time necessary for tugs and tow -to cross channel, held equally at fault and liable for half of damage from resulting collision.
    Woods, Circuit Judge, dissenting.
    Appeal from the District Court of the United States for the Eastern District of Virginia, at Norfolk; D. Lawrence Groner, Judge.
    Libel by the Norfolk Dredging Company against the United States, owner of the steamship Sagaporack. From a decree for the United States, libelant appeals.
    Decree modified.
    H. H. Little, of Norfolk, Va. (Hughes, Little & Seawell, of Norfolk, Va., on the brief), for appellant.
    H. H. Bumble, Sp. Asst. U. S. Atty., of Norfolk, Va. (Paul W. Kear, U. S. Atty., and Charles A. McDonald, Dist. Atty. U. S. Shipping Board, both of Norfolk, Va., on the brief), for the United States.
    Before WOODS and WADDILL, Circuit Judges, and MeDOWELL, District Judge.
   WADDILL, Circuit Judge.

The libel in this ease was filed under the Suits in Admiralty Act March 9, 1920, 41 Stat. L. 525 (Comp. St. Ann. Supp. 1923, §§ 1251(4-1251(40, to recover damages sustained in a collision between the steamship Sagaporaek, a government-owned ship, and a tow of the libelant.

The collision the subject of this litigation occurred on the night of Tuesday,' October 30, 1923, about 10:30 o’clock, in the waters of the Elizabeth river, Norfolk Harbor, Va., in the immediate vicinity of the mouth of the cut channel leading from the main channel of the river to the Standard Oil Company property, and about half a mile below Boush Bluff. The facts are substantially as follows:

The libelant, Norfolk Drédging Company, a corporation organized under the laws of the state of Virginia/with its principal place of business in Norfolk, was engaged in the removal of mud from one of the channels of the Elizabeth river near the scene of the collision, and transporting it to the place of deposit in Chesapeake Bay below Willough-by Beach. At the time, it had two tugs and four scows running tandem, which were- returning empty from the United States dumping ground aforesaid, having crossed inside Et. Wool and across the flats to the main channel of the Elizabeth river. The flotilla was 1,230 feet long, and in ascending the river came into collision at the point named with the Sagaporaek, a large ocean-going vessel of 5,113 tons burden, 590 feet long, 54.5 feet beam, 27.6 feet deep. The ship was en route from the Government Engineer Pier above Lambert’s Point, partly laden, outward bound for Philadelphia, and struck the forward mud-scow of the flotilla, causing serious damage to it, and injuring the second and third scows.

There was a sharp conflict in the testimony as to just how the collision came about, and by whose fault the same was caused, and where it occurred, the libelant’s contention being that it was on the western side of the channel, opposite the Standard Oil Company’s cut, instead of at the mouth of the cut on the eastern side. Much testimony was introduced, and the District Court was inclined at first to adopt libelant’s view. Upon a rehearing and the introduction of additional testimony,- the court reached the conclusion that it occurred on the eastern side of the channel, and decided in favor of the respondent and dismissed the libel. Erom that decision this appeal was taken.

We have given much thought to this case, and are entirely in accord with the findings of the District Judge, that the collision took place on the eastern side of the channel, as claimed by respondent. Indeed, the evidence seems to preclude serious controversy on this subject. But we are not in accord with the District Judge as to what should be the result of this finding.

Libelant’s contention is that on coming into the Elizabeth river on its eastern side, and when about opposite Pine Beach, the tow crossed to the westward on a diagonal course, and then proceeded up the channel close to its western edge; that the lights of the Sagaporaek above Boush Bluff were observed, and upon the ship’s rounding the curve at. that point, showed both her red and green lights, and later shut out her green and showed her red light. Shortly after making the turn, a short blast of the whistle was sounded by her, which was answered with one blast by the leading tug. The vessels continued to approach each other until the Sagaporaek passed the forward tug at an estimated distance of 150 feet away, when the steamship gave three blasts of her whistle, and instead of continuing down the channel, swung immediately to port, and ran into the front end of the leading scow.

The circumstances of the collision as given by the respondent are directly to the contrary, and substantially as follows: That the steamship, upon coming down the channel, was fully equipped and manned, and in charge of a Virginia pilot and before reaching Boush Bluff saw the tugs and tow, and upon straightening down the channel at Boush Bluff, observed the flotilla dead ahead about a mile distant, coming up the channel. The Sagaporaek thereupon blew one blast of her whistle to indicate her desire to pass port to port. The leading tug imme-dia.tely answered with one blast of its whistle assenting thereto, but did not for some time thereafter change its course to starboard. Upon observing this, the navigators of the steamship Sagaporaek put her engines slow, and almost immediately afterwards stopped them. Owing to the delay of the tug in changing its course so as to conform to the passing signals, and to the unmanageable character of the tow, together with the effect of the tide on it, the scows continued to make up the channel on the east side thereof, and directly in- the path of the steamship, which was being navigated on the extreme eastern side of the channel; that in this condition the Sagaporaek put her engines 'full speed astern, indicating that fact by three blasts of her whistle, and let her port anchor go, when the scows came down upon the ship without any slackening of speed.

Concurring, as we do, in the conclusion of the District Judge as to the location of the scene of the collision, it follows that_ the li-belant was at fault in bringing about the same because of its failure to keep to its side of the fairway, and in not proceeding thereto more promptly, after improvidently accepting the port, to port passing signal. But it does not impress us that the lib-elant should be held entirely at fault and responsible for bringing about the collision, and the respondent escape all liability therefor in the circumstances in which the same occurred here. The tow was of unusual length and character; consisting of two large tugs and four large mud-scows, proceeding directly up the channel on a straight course, on a clear night and with favorable weather conditions. The tugs carried the regulation side lights, bow lights, and three loft lights each, and the scows the regulation lights, a white light on the head end of the head scow, a white light on the tail end of the head scow, and a white light on the tail of every other scow, all brightly burning. The tugs and tow were observed just before the steamship reached Boush Bluff, and after rounding the bluff they were sighted on the eastern side of the channel dead ahead, showing both side lights; and the vessels so navigated for an appreciable time without the tugs going to starboard pursuant to the port to port passage signal, and until it was too late.to avoid collision with the scows. In these circumstances, the steamship slowed down somewhat, and finally stopped, at which time the tugs were still - dead ahead when the tugs suddenly veered to the westward side of the channel, leaving the scows right under the bow of the ship about a ship’s length away, and her engines were then put full speed astern. The collision was then, however, inevitable.

The ship, inaugurating the port to port signal in meeting a tow of the size and character in question, when the vessels were only about a mile apart, meeting each other head on or nearly so, and with the ship navigating as near to the eastern side of the channel as it prudently could do, so that it could not navigate further to starboard in aid of the passage, was of doubtful propriety, and should not have been resorted to in the absence of some unusual condition making the same necessary; and when in the execution of this maneuver it became manifest that the tug was not conforming to the agreed passage, it was almost reckless negligence for the ship to have continued to navigate with a tow of the length and character in question, coming head on with its running lights not changed until the vessels were virtually within 400 feet, or a ship’s length one of the other. The tug and tow were incumbered vessels, and the steamship the free vessel, and the duty imposed upon the latter was to avoid collision or the risk of collision with the former; and while ordinarily the port to port passage is thé preferable and generally the usual one for vessels meeting each other, still where there are circumstances, such as in this case, which would make the starboard passage the proper and safer one, it, of course, should be adopted. According to the respondent’s entire testimony, the eastern side of the channel, along which it was of right navigating, was observed to be obstructed by a tow of unusual length and character; and there was no reason, considering the distance the vessels were apart and .the relation .each bore to the other, to hazard the risks of the port to port passage, but on the contrary, under her starboard helm, the steamship should have passed down the ship-channel of 600 feet width, leaving the incumbered tug and tow to the steamer’s right. Moreover, under the testimony in this ease, and taking into consideration the length of this tow and its character, there was no excuse from the start in the ship inaugurating the port to port passage, as the evidence shows that it would take this tow, proceeding at the usual angle of navigation, nearly half an hour to cross from one side of the channel to the other. The vessels, when the port to port signal was given, were only about a mile apart, each proceeding at about five and a half miles an hour, or approximately a mile in five minutes. For the stéamship to have failed to take into account the tailing of the scows, in the effort to cross the channel, was equivalent to running headlong on into a cul-de-sac, from which escape was well-nigh impossible.

Our conclusion is that the collision was the'result of fault of both the tugs and the ship, and hence the damages resulting therefrom should be divided.

The decree of the district court will be so modified.

WOODS, Circuit Judge

(dissenting). The tugs with their tow were on the wrong side of the channel. The one-blast signal of the steamship Sagaporack was an inquiry addressed to the tugs if they were willing to make the usual port to port passing and if they could safely do so. Their answer of one blast was an assurance to the steamship that they could and would direct their course to starboard so • as to make the port to port passing safely. The steamship had a right to rely on this assurance until it became' manifest to her navigator that the tugs had given a wrong signal and that they could not or would not so navigate as to make the proposed passing safe. I think when this danger became evident the navigator of the steamship did everything possible to prevent the collision in an emergency brought about solely by the fault of the master of the tugs.’

For these reasons it seems to me the District Court was right in holding the tugs alone responsible for the collision.


author: ROSE, Circuit Judge.

text:
    SOUTHERN SURETY CO. v. MAXWELL.
    (Circuit Court of Appeals, Fourth Circuit.
    April 14, 1925.)
    No. 2322.
    1. Courts ©=>309, 317 — Suit by bankruptcy trustee for possession of steam shovels used by bankrupts’ surety held within jurisdiction of federal court for diversity of citizenship.
    Where Iowa and Maryland corporations, as sureties for bankrupt road contractors, under chattel mortgages on bankrupt’s equipment, and West Virginia corporation, which advanced money to bankrupts on bill of sale to road 'equipment, severally claimed preferred rights to steam shovels purchased conditionally by bankrupts from Pennsylvania corporation, and Maryland and West Virginia corporations submitted themselves to jurisdiction of bankruptcy court, but Iowa corporation’s objection to court’s jurisdiction was sustained, held, that only controversy, in bankruptcy trustee’s suit in equity for possession of steam shovels used by Iowa corporation in completing its portion of work, was between trustee and Iowa corporation, and federal court had jurisdiction for diversity of citizenship, under Judicial Code, § 57 (Comp. St. § 1039).
    2. Bankruptcy ©=>301 — Appointment of receiver for bankrupt road contractors’ equipment being used by bankrupts’ surety in completing work held not abuse of discretion.
    Where road contractors’ bankruptcy trustee filed bill in equity against bankrupt’s surety and presented evidence that equipment being used by surety in completing work was being largely destroyed by surety’s improper use thereof, court did not abuse its discretion in appointing receiver for such equipment.
    Appeal from the District • Court of the United States for the Northern District of West Virginia, at Elkins; William E. Baker and George W. MeClintie, Judges.
    Suit by Claude W. Maxwell, trustee in bankruptcy of the estate of W. J. & J. T. Gephart, bankrupts, against, the Southern Surety Company. Decree for plaintiff, and defendant appeals.
    Affirmed.
    Frank E. Parrack, of Kingwood, W. Va., for appellant.
    C. O. Strieby and D. H. Hill Arnold, both of Elkins, W. Va., for appellee.
    Before WOODS, WADDILL and ROSE, Circuit Judges.
   ROSE, Circuit Judge.

The appellant, the Southern Surety Company, is a corporation off the state of Iowa. For brevity, it will be styled the Iowa company. It appeals under section 129 of the Judicial Code (Comp. St. § 1121) from an order of the court below a/ppointing a receiver-for two steam shovels theretofore in its possession. In the first place, it denies that there was such diversity of citizenship as sufficed to give the court below jurisdiction in the proceedings.

The appellee, Claude W. Maxwell, a citizen of West Virginia, is trustee in bankruptcy of W. J. and J. T. Gephart, copartners and bankrupts. He says that both the bankrupts are citizens of Pennsylvania. The Iowa company in its answer alleges that one of them is a citizen of West Virginia and the other of Maryland. If the appellant and the appellee were the only parties to the litigation, there would be no question that the Iowa company, the defendant below, would be treated, for the purpose of this ease, as a citizen of a different state than either of the bankrupts whether they were citizens of West Virginia, of Maryland, or of Pennsylvania. As the bill asserts a title to specific chattels, admittedly within the Northern district of West Virginia, section 57 of the Judicial Code (Comp. St. § 1039) gave venue to the court below, irrespective of the place of residence of the parties, provided, of course, no one of them on one side was a citizen of the state of anybody on the other.

The Iowa company says that if so much be admitted, the jurisdiction is defeated because the appellee’s bill was brought against not only the Iowa company, but the Erie Steam Shovel Company, a corporation of Pennsylvania, the Maryland Casualty Company, a corporation of Maryland, and the Davis Trust Company, a corporation' of West Virginia, hereinafter respectively called the Pennsylvania company, the Maryland company and the West Virginia company. It points out that if the bankrupts were eit-izens of Pennsylvania as the trustee alleges, they are both of the same citizenship as the Pennsylvania company; that if, as it says, one of them is a citizen of "West Virginia and another of Maryland, the former is of the same state as the West Virginia company and the latter of the same state as the Maryland company. The appellee replies that all this is true, but that, as his bill discloses, there is in these proceedings no controversy between himself as trustee of the bankrupts and the Pennsylvania, the Maryland, and the West Virginia companies, or any one or more of them, and that as against the Iowa defendant, he and the three defendants are here asserting a common interest. .It asks that in consequence the parties should he so aligned, and, if that he done, the Iowa company Will he the sole defendant and the plaintiffs will he citizens of Maryland, West Virginia, and Pennsylvania.

The property for which the receiver was appointed consisted of two steam shovels. They had been obtained by the bankrupts from the Pennsylvania company, under a conditional contract of sale in which the vendor reserved title to itself until full payment had been made, and it is suggested that a balance may still be due the seller. The bankrupts were contractors engaged in various counties of West Virginia in the construction of state roads under several separate contracts with the state road commission of that state. The Maryland company was surety on the bonds given by the bankrupts for the performance of some of these contracts, and the Iowa company on others subsequently entered into. Before either the Maryland or the Iowa company .executed the bonds in question, the bankrupts incorporated, in the application for them, provisions' giving a chattel mortgage to the surety on all equipment to be brought upon the job to secure it against any loss it might sustain upon that particular project and also upon all other indebtedness which might be owing to it. The application further conferred upon the surety the right to use the property of the bankrupts on the work in completing the contract. All the contracts themselves were upon the state standard form, which in substance provided that, upon the contractor’s default, the commission might take the prosecution of the work out of his hands and appropriate or use any or all materials and equipment on the ground and might enter into an agreement with others for the completion of the contract.

The bankrupts began work first, under the contracts upon which the Maryland company was surety. Some of them.were completed. Some of them never were and were annulled by the state roads commission under the provision above referred to. The steam shovels in question had been used, so at least is its claim, upon the uncompleted contracts for which the Maryland company was the surety and were then moved over into another county. and put upon the work for which the Iowa company had gone on the bankrupt’s bonds, and they were there at the time of the filing of the bill in this ease.

The West Virginia company had advanced money to the bankrupts and took a bill of sale therefor upon the property of the bankrupts including the shovels in question. The state roads, commission annulled all the contracts. The Iowa company elected to complete the work on those for which it was surety and was and is using the shovels in so doing. The Maryland, the West Virginia, and the Iowa companies, as among themselves, severally claim preferred rights in these. shovels.

Shortly after the adjudication in bankruptcy and the appointment of the appellee as trustee, he caused all the property of the bankrupts including the shovels to be appraised. He then filed a petition with the. referee against all the corporations claiming liens thereon to bring them in and to settle their conflicting claims. The Maryland and the West Virginia companies appeared’ and submitted themselves to the jurisdiction of the court of bankruptcy. No process appears to have been served upon the Pennsylvania company, nor did it enter an appearance. The Iowa company did appear, but only to object to the jurisdiction of the court. Its objection was necessarily sustained.

Then, the trustee filed the hill in equity in the instant case. In it he set up the facts already stated. He claimed that he was entitled to the possession of the shovels and other property, and he also alleged that their value was being largely destroyed by the careless and improper use to which the Iowa company was putting them. After the submission of affidavits and evidence, the court overruled the motion to dismiss the bill, and held that the property might remain- in the possession of the Iowa company, if within 10 days from the date of the order it gave bond in the sum of $15,000 to make good any loss which the trustee in bankruptcy might suffer in consequence of the Iowa company retaining possession of the property and using it, if it should ultimately be determined that the rights of the trustee and of the creditors of the bankrupts were superior to those of the Iowa company. The latter did not avail itself of this permission to give bond, and thereupon, after hearing further evidence tending to show that the value of the shovels was being destroyed by the manner it was using or abusing them, the court passed the order here appealed from. We think the appellee is right, in that the only controversy in this particular proceeding is between the trustee in bankruptcy and the Iowa company. If it shall be determined that the trustee or any of the nominal defendants in the ease other than the Iowa company have rights to the shovels superior to those of the latter, the adjustment of those rights as among themselves will take place in the bankruptcy proceeding and not in the equity cause. Realigning the parties in the manner in which they should be realigned, or treating the defendants other than the Iowa company as merely nominal parties, the result in either event would be that the court below had jurisdiction.

Without intimating any opinion whatever as to the ultimate rights of the parties, we are satisfied that, contrary to the contention of the appellant, there was no abuse of discretion on the part of the learned court below in appointing a receiver in view of the evidence submitted to it. A clear ease for equity jurisdiction was set up. There is no real claim that the Iowa company owned the shovels. It had, according to its contention, the right to their possession and use; but if, while rightfully holding that possession as bailee, pledgee, mortgagee, or by whatever other name its rights to the shovels are properly designated, it misused them, the right of a court of equity, for the protection of others having interests in them, to prevent such abuse, is too clear to be gainsaid.

Affirmed.


author: WADDILL, Circuit Judge.

text:
    KEETON v. JEFFERSON STANDARD LIFE INS. CO. SAME v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.
    (Circuit Court of Appeals, Fourth Circuit.
    April 14, 1925.)
    Nos. 2328, 2329.
    I. Appeal and error <©=I0I0(I) — District judge’s findings binding on appellate court unless based on unsound reasoning or unsupported by evidence.
    Findings of district judge as to falsity and materiality of representations made by applicant for insurance are binding on Court of Appeals unless based on unsound reasoning or unsupported by evidence.
    2. Insurance <@=291 (I) — Representations as to prior state of health held material and to warrant cancellation of policies.
    Representations as to prior state of health held material, and when knowingly false, and the insurance companies were misled thereby, to warrant cancellation of policies.
    3. Insurance <@=378(3) — Knowledge of insurer’s agent not imputed to insurer.
    Under Code Va. 1919, § 4220, insurance solicitor is not such a representative of company that knowledge imparted to him as to applicant’s prior health would be imputed to company.
    4j. Insurance <©=379(5) — Policy obtained by fraud not sustained because of agent’s information or writing of answers by him.
    Policy obtained by fraudulent representations as to prior health could not be sustained because answers appearing on application were in fact written by defendant’s agent rather than assured, or because of information possessed by him.
    5. Appeal and error <©=1050(2) — Error, if any, in admitting testimony of insurer’s medical director, held immaterial.
    Where representations were knowingly false and were material, error, if any, in admitting testimony of insurer’s medical director that company would not have issued policy had true facts been known, was immaterial in action to cancel policy.
    Appeals from the District Court of the United States for the Eastern District of Virginia, at Richmond; D. Lawrence Groner, Judge.
    Two suits, one by the Jefferson Standard Life Insurance Company against Jessie P. Keeton, in her own right; and the other by the Equitable Life Assurance Society of the United States against Jessie P. Keeton, as executrix of Joseph S. Keeton, deceased. Erom decrees for plaintiff in each suit, defendant appeals.
    Decrees affirmed.
    Prank T. Sutton, Jr., and M. J. Fulton, both of Richmond, Va. (John J. Wicker, Jr., and Fulton & Wicker, both of Richmond, Va., on the brief), for appellant.
    Stuart G. Christian and Wyndham R. Meredith, both of Richmond, Va. (Brooks, Hines & Smith, of Greensboro, N. C., and Alexander & Green, of New York City, on the brief), for appellees.
    Before WOODS, WADDILL, and ROSE, Circuit Judges.
   WADDILL, Circuit Judge.

These bills in equity were respectively filed by the appel-lee, the Jefferson Standard Life Insurance Company, hereinafter called the Jefferson Company, in the first-named cause, and by appellee, Equitable Life Assurance Society of the United States, hereinafter called the Equitable Society, in the last-named cause, to set aside, cancel, vacate, and annul four certain life policies issued by appellees, for $5,000 each, two being issued by each company, on the life of Joseph S. Keeton.

The causes were heard together by consent, as the assured was the same in all the contracts, and the policies were issued about the same time; that is to say, by the Jefferson Company on the 29th of April, and by the Equitable Society on the 22d of May, 1921. The first-named policies were delivered June 21, 1921, and the last on the 27th of June, 1921. The assured, Joseph S. Kee-ton, died on the 26th of August, 1921.

Shortly after his death, the bills in these causes were filed, appellees averring that after the death of the assured they learned of certain false statements and representations made in the applications for the policies, which invalidated the same. Each company tendered the return of the premiums paid, and in the case of the Equitable Society, one of the policies payable to a beneficiary other than the assured’s wife, Jessie P. Keeton, was surrendered upon- return of the premium, and is not involved in these suits, leaving the contest only on a single policy for $5,000 in the Equitable Society, and two for $5,000 each in the Jefferson Company.

In his application for a policy in the Jefferson Company, the assured answered the following questions bearing on his health, and made certain stipulations, as follows:

“(a) Have you been disabled or received' medical attention within the past five years ? No.”
“(c) Have you ever suffered from any ailment or disease of the heart, lung, etc.? No.”
“E. Have you ever had rheumatism, gout, etc.? No.”
“H. Have you consulted a physician for any ailment or disease not included in your above answers? No.”
“(d) What physician or physicians, if any, not named in the above, have you consulted or been treated by within the last five years, and for what illness or ailment (if none so state) ? None.”
“I hereby agree for myself, and for any person who may have or claim any interest in any contract which may be issued on this application, that:
“First, every statement and representation hereinabove contained is material and' true.”
Which was signed by J. S. Keeton.
“This policy and the application therefor-(parts 1 and 2), copies of which are attached hereto, constitute the entire contract, and no statement shall avoid any payment under this policy, or be used in defense of any claim hereunder unless it is contained in one of these instruments.”
“No agent or other person except the-president, a vice president, the secretary or an assistant secretary of the company has-, power on behalf of the company to make, modify or discharge, this, or any contract of insurance, to extend the time for paying a premium, to waive any lapse or forfeiture of any of the company’s rights or requirements, or to bind the company by making any promise respecting any benefits hereunder, or by accepting any representation or information not contained in the written application for this policy.”

In his applications for policies in the Equitable, the assured answered the following questions bearing on his health, and made certain representations -as follows:

“6. State every physician or practitioner whom you have consulted or who have treated you during the past five years. None.”
“C. Have you ever been treated for any disease or disturbance of the heart or blood vessels? No.”
“8. Have you ever had gout, rheumatism, tuberculosis, or syphilis? No.”
“F. Have you ever had any other illness- or injury not mentioned above? No.”

The application to the Equitable contained the following stipulation:

“All of the foregoing answers and all those made to the society’s medical examiner which are contained in part 2 hereof are-true and are offered to the society as an inducement to issue the policy for which application is hereby made.”

At the end of the application is the following :

“I agree that the foregoing answers shall’, be part of my application which shall consist of parts one and two taken together, and that the foregoing answers shall also become-part of any policy contract which may be issued on the strength thereof.
“Dated at Richmond, Virginia, on the 21st-day of May, 1921.
“[Signed] J. S. Keeton.
“Witness: P. W. Howie, M. D.”

Keeton’s policy with the Equitable Society-also contained the following:

“The Contract. This policy and the application therefor, a copy of which is indorsed hereon, or attached hereto, constitute the entire contract between the parties. , All statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties, etc.” ■

Complainant in each of the causes charged that the assured procured the issuance of policies by making false statements, and concealing facts respecting material matters bearing upon his health, and medical treatment previously received by him, particularly that he had not theretofore been treated for rheumatism and heart trouble, and had never had or suffered from either of said ailments, and had had no occasion for five years preceding the dates of applications for the policies to have medical attention from any physician; all of which answers the bills charged were knowingly false and fraudulent, and affected matters of vital importance looking to the issuance of policies, and but for the making of which the policies would not have been issued.

Appellant, defendant in the District Court, answered denying generally all accusations of fraud in connection with the procuring of the insurance, and insisted that the deceased was insurable, and had not theretofore within five years preceding the dates of the policies, suffered from rheumatism or other disease that would have affected his insurability; nor had he been practiced upon within the period specified for any such ailments by a physician or physicians; and that the malady from which he died was one of short duration, the first symptoms of which appeared in the month of June, 1921.

Appellant further insisted that appellees were fully advised of the ailments with which the assured was afflicted, and that its agents and representatives knew thereof, and in the light of such knowledge made full investigation as to the health of the assured; and further averred that the answers to questions propounded to the assured were not in fact his answers, but those of insurers’ representatives, who took down the same.

Issues were joined upon the pleadings, and the two causes heard together and submitted to the district judge. The testimony was all taken in open court under the new equity rules, and the District Court passed its decrees on the 17th of April, 1924, holding that said policies should be declared null and void and canceled, because procured by the .assured’s making false statements respecting material matters leading to their issue, which the testimony clearly established. From the decrees thus entered, these appeals were taken.

The merits of the cases, on appeal, turn so largely in our judgment upon what is the correct determination of the facts properly controlling, that we are relieved from much of the difficulty that might otherwise arise in passing upon the questions involved, by reason of the findings of fact of the learned district judge, who saw and heard the witnesses testify, and was thereby better enabled to give to their testimony the weight that properly belonged to the same. The following are excerpts from the opinion and finding of the district judge:

“The points of law, as I see them, are not really in serious doubt. I think the proper determination of the case depends upon a fair application of well-recognized principles of law to the facts. * * K
“The case, I think, presents only two questions: The question of whether or not the statements which are the basis of the suit, which were made in the answers in the examination of the applicant for the insurance, were untrue and, to that extent, false statements; and if they were, whether they were material and affected the making of the contract and the meeting of the minds of the parties. * * *
“It goes without saying that the very basis of the contract is the' condition of the man’s health. No insurance company could last, no insurance company could exist, unless there was a careful medical examination of the applicants for insurance. The rules which experience has taught are observed in the writing of the insurance, in the making of the contract. The undisputed evidence in this case is that the insured when he was examined by both doctors and asked the question whether or not he had consulted * * * a physician in the past five years, answered no. And when he was asked the other question whether or not he had suffered * * * certain designated diseases, including heart disease, syphilis, and rheumatism, he again replied no. The fact develops, by equally undisputed evidence, that he had consulted physicians, and not 'one physician, but, as stated time and time again in the argument, six physicians within a period of two years, prior to the time the application was made.”

The district judge reviewed the testimony of the physicians at considerable length, bearing upon the character and extent of the assured’s illness and treatment therefor, which showed, among other things, that for a period of six weeks in the summer of 1919, he was dangerously ill, under the constant treatment of a physician for rheumatism, his temperature running from 103 to 104, and that from a -year to- a year and a half prior to making the applications for insurance, other doctors were invariably called in, in the absence of his regular physician, with a view of affording temporary relief; and considering the character of the symptoms, and whether the assured was suffering from rheumatic symptoms or not, the judge concluded :

“Whether they were real symptoms, or whether they were superficial symptoms, subjective or objective, I don’t think it is-material one way or the other, but from June in 1919 until possibly January in 1920, or within a year and two or three months of the time of this application, this insured had been constantly, or almost constantly, under the care of physicians, and, when he came to be examined by the examiner of the insurance company he concealed these facts entirely from both of those examiners, when he answered that question: ‘Have you consulted or been advised by a physician within five years? No.’ Now, of course, the purpose and the only purpose subserved by the question and the answer was to furnish the insurance company with the information by which, through interrogation of the doctors who had been consulted by the applicant, they might determine the extent and character, duration and insurability or curability or what not of the man’s illness. And, in this case, if there had been no more than that, that is to say the matter had rested at that point, it follows, it seems to me irresistibly that the company would have been deprived by reason of an incorrect and therefore an untrue statement of facts that could not have escaped the memory of the applicant, thereby deprived, I say, of a very material part of the information necessary to enable them to determine whether or not they shall make the contract with him.”

These findings bind us in the action we should take, unless we are convinced, either that the judge’s reasoning was not sound as to the law, or that the facts as found by him are clearly not supported by the testimony. As to many of the facts of importance, and as found by the district judge, there seems to be no real dispute, while as to others there is sharp conflict in the evidence, which, however, was solved in favor of appellees by a judge who had opportunity to determine the truthfulness of the statements of. the several witnesses, heard them testify, and observed their demeanor, intelligence, . and candor . while upon the stand. We should be slow to depart from the well-recognized rule of following the findings of the trial court in the circumstances, and which is supported by the almost unanimous decisions of the federal courts. Adamson v. Gilliland, 242 U. S. 350, 37 S. Ct. 169, 61 L. Ed. 356; Mason v. United States, 260 U. S. 546, 556, 43 S. Ct. 200, 67 L. Ed. 396; Espenschied v. Baum, 115 F. 793, 53 C. C. A. 368; American, etc., v. Moorehead, 226 F. 202, 141 C. C. A. 129; Westerman v. Dispatch, etc., Co., 233 F. 609, 147 C. C. A. 417; United States Grass Creek O. & G. Co., 236 F. 481, 484, 149 C. C. A. 533; Stratton v. Buller (C. C. A.) 268 F. 825; McGovern v. McClintic-Marshall Co. (C. C. A.) 269 F. 916.

So far from not adhering to the usual rule in this case, it seems to us that the District Court was elearly right in what it did, and there was no other conclusion that could fairly have been reached, having regard to the testimony in the ease and the law properly applicable thereto.

These were applications for the issuance of policies of insurance on the life of James S. Keeton. The policies contained a one-year noncontestable clause. Of course, before issuance of such policies, the condition of the health of the applicant was of prime importance, and where the policies became incontestable after a year, it was doubly so. Every consideration of right and justice would indicate that in such circumstances the utmost care should be observed in entering into a contract of insurance, and that only persons supposed to be in good health would be acceptable as risks. The applicant’s history in respect to his health and medical treatment were most material, as bearing upon whether the insurance risk would be assumed; and at least the applicant should make full and frank explanation and answers to all inquiries throwing light upon his present and past state of health. Nothing could well be more important than the fact of previous sickness and past medical treatment, as to which the applicant was best able to furnish correct information; and anything that tended to mislead, or indicated a purpose to conceal the real truth, would serve to invalidate a policy if procured by such misleading and fraudulent conduct. In this ease, the answers to the questions were of a character that the applicant could not have been mistaken about. They related directly to the state of his health regarding serious illness, and whether he had been treated at all by any physi-eians during the period of five years previous to these inquiries, and he made positive and emphatic replies denying the existence of any sickness, or that he had received any medical treatment; all of which answers, being material and of vital importance to the transactions thus consummated, were entirely false, and deceived and misled the insurance companies into making the contracts of insurance now sought to be annulled. Authorities to sustain these views might be cited almost without number, but only a few will be given. Mutual Life Ins. Co. v. Hilton-Green, 241 U&. S. 613, 622, 36 S. Ct. 676, 60 L. Ed. 1202; Hubbard v. Mutual Reserve Fund L. Ass’n, 100 F. 719, 726, 727, 40 C. C. A. 665; Talley v. Metrop. L. Ins. Co., 111 Va. 778, 69 S. E. 936; Mutual L. Ins. Co. v. Mullan, 107 Md. 457, 69 A. 385; Bryant v. Metropolitan L. Ins. Co., 147 N. C. 181, 60 S. E. 983; Schas v. Equitable L. Assur. Soc., 166 N. C. 55, 81 S. E. 1014; Caruthers v. Kansas Mut. L. Ins. Co. (C. C.) 108 F. 487, 491; Rigby v. Metropolitan L. Ins. Co., 240 Pa. 332, 87 A. 428; 4 Joyce on Insurance (2d Ed.) p. 3528; 25 Cyc. 816.

We have given much consideration to appellant’s position that the answers, made by the assured to the several questions relied on to annul the policies, were written by representatives of the company, and not the assured, and that the latter should not be bound thereby; that the companies had knowledge as to the health of the assured, information in that respect given to their agents being imputed to them.

We have examined carefully the Virginia statutes, Code, § 4220, relied on in support of the proper interpretation to be placed upon contracts of insurance, as we have the many authorities, state and federal, cited by appellant. In the view we take, the authorities, do not call for a conclusion different from the one we have arrived at, under the particular faets and circumstances of this ease. There is nothing in the testimony to warrant the suggestion that answers, made by the assured to' questions propounded to him by the medical examiners, were written other than as actually made by the applicant; and it is quite clear that within the provisions of the policy, the insurance solicitor or canvasser securing the same was without authority to issue policies or to make valid contracts for and binding on the company, and was not such a representative of the company as that knowledge imparted to him would be imputed to the company.

These positions respecting answers to questions made by the agent of the company, instead of the assured, and the imputation of knowledge on the part of the company because of information to its representative, are each predicated upon the transaction having been entered into in good faith, and that the same is otherwise free from the taint of fraud and imposition on the part of the assured; and when it once appears that such fraudulent conditions exist respecting material matters entering into the making of the contract, they become immaterial, and a contract so secured must fall. Mutual L. Ins. Co. v. Hilton-Green, 241 U. S. 613, 622, 36 S. Ct. 676, 60 L. Ed. 1202, supra; New York Life Ins. Co. v. Fletcher, 117 U. S. 519, 529, 533, 534, 6 S. Ct. 837, 29 L. Ed. 934; United States L. Ins. Co. v. Smith, 92 F. 503, 34 C. C. A. 506; Caruthers v. Kansas Mutual L. Ins. Co. (C. C.) 108 F. 487, 492, 494, supra; North American F. Ins. Co. v. Throop, 22 Mich. 146, 168, 7 Am. Rep. 638; Gallant v. Metropolitan Life Ins. Co., 167 Mass. 77, 44 N. E. 1073; Roe v. National Life Ins. Co., 137 Iowa, 696, 115 N. W. 500, 17 L. R. A. (N. S.) 1144; Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212, 5 L. R. A. 638, 12 Am. St. Rep. 801; Lorie v. Connecticut Mutual L. Ins. Co., 15 Fed. Cas. 891.

We are forced to the conclusion that the assured, in making the answers he did, in respect to his health and medical treatment he had received, fraudulently made false representations in regard to material matters, and concealed and withheld the real faets, which, if known, would have resulted in the applications being refused and the contracts of insurance not entered into.

Appellant insists in the seventh assignment of error that the court erred in allowing the witness Dr. Alfred Billings, assistant medical director for the Equitable Society, to testify as to whether the company would have issued the policy had the true faets in respect to the transaction been known. The ruling of the court complained of does not seem to us material, in the light of the conclusion we have reached.

The decrees of the District Court entered separately in the two eases will be affirmed, with costs.

Affirmed,


author: WOOLLEY, Circuit Judge.

text:
    SMITH v. HILL et al.
    (Circuit Court of Appeals, Third Circuit.
    April 15, 1925.)
    No. 3341.
    1. Receivers <@=>137 — Refusal to confirm sale, without evidence that bid was grossly inadequate, would be abuse of “judicial discretion.”
    Refusal to confirm receivers’ sale to only bidder, wholly without evidence that bid was grossly inadequate, would constitute abuse of discretion, since “judicial discretion” is not the indulgence of a judicial whim, but the exercise of judicial judgment, based on facts and guided by law.
    [Ed. Note. — For other definitions, see Words - and Phrases, First and Second Series, Judicial Discretion.]
    2. Receivers <@=>137 — Refusal to confirm bid at receivers’ sale,-because grossly inadequate, held not abuse of discretion.
    Refusal to confirm bid of $160,000 for real estate appraised at $9,000, 99-year lease appraised at more than $533,000, machinery, fixtures, and equipment appraised at more than $313,000, 65,000 shares of capital stock, and bonds • of face value of $240,000, secured by mortgage, not appraised, because grossly inadequate, helé not abuse of discretion, notwithstanding announcements, made before sale, tending to chill bidding, and failure of appraisement to allow for depreciation in values of property.
    3. Receivers <@=>137 — Appraisement is net conclusive, but may be considered by court in determining adequacy of bid.
    _ Appraisement of property being sold at receivers’ sale, though not conclusive, may be considered by court in determining adequacy of bid before confirmation of sale.
    Appeal from the District Court of the United States for the Eastern District of Pennsylvania; Oliver B. Dickinson, Judge.
    Proceeding by John P. Hill and another, as receivers of the Hydro United Tire Company, for sale of assets of such company. Prom an order refusing to confirm a bid of F. Haskell Smith, he- appeals.
    Affirmed.
    Isaae A. Pennypacker, of Philadelphia, Pa., for appellant.
    Henry W. Braude, of Philadelphia, Pa., for appellees.
    Before BUFFINGTON and WOOLLEY, Circuit Judges, and MORRIS, District Judge.
   WOOLLEY, Circuit Judge.

The appellant made the only bid at a receivers’ sale, which, later, the District Court refused to confirm. Asserting his inchoate right of a bidder at a judicial sale, the appellant took this appeal (Investment Registry, Ltd., v. Chicago & M. E. R. Co., 212 F. 594, 129 C. C. A. 130; Metzler v. Wyoming National Bank [C. C. A.] 278 F. 620; Stokes v. Williams, 226 F. 148, 141 C. C. A. 146; 3 C. J. 652, 653), and charges that the learned trial judge, in refusing confirmation, abused his discretion in that he acted on an entire absence of evidence that the bid was grossly inadequate. If this be true, he erred, for judicial discretion is not the indulgence of a judicial whim, but is the exercise of judicial judgment based on facts and guided by law.

The facts of this case are highly involved. Therefore in looking for evidence on which the order was based we shall confine ourselves to the record and state only enough to show the ground for the court’s action.

The plant in question is in Pottstown, Pa. It was built, equipped and owned by the National Rubber Realty Company. That company placed a first mortgage on the property for $250,000 to secure bonds for a like amount. In 1920 it leased the property to the Hydro United Tire Company for 99 years, subject to the mortgage. Later, the Hydro United Tire Company acquired $240,000 of the $250,000 bond issue of the National Rubber Realty Company, and also •acquired 65,039 shares of the stock of the National Rubber Products Corporation. The latter corporation owns the majority of the stock of the National Rubber Company, which in turn owns all of the stock of the National Rubber Realty Company. The Hydro United Tire Company went into the hands’ of receivers and, in due course, a portion of its property was appraised. Pursuant to an order of the court the receivers advertised and offered certain of the property for sale, subject to confirmation by the court, as follows: ■

A parcel of real estate, in fee, appraised at $9,000; the 99-year lease held by the Hydro United Tire Company upon the premises of the National Rubber Realty Company, appraised at $533,214.57; machinery, furniture, fixtures and equipment appraised at $313,957.52; 65,039 shares of the capital stock of the National Rubber Products Corporation, pot appraised; and $240,000 of bonds secured by the mortgage on the plant-of the National Rubber Realty Company, not appraised. These bonds were pledged with the National Bank of Pottstown as security for a debt of the Hydro United Tire Company (or of its receivers) amounting to $127,948.52 and interest, payable out of the proceeds of the sale before the bonds could be obtained and delivered to the purchaser. For these properties, thus appraised and not appraised, the appellant made a bid of $160,-000 which the receivers accepted at the sale but resisted when the sale came on for confirmation. All this was before the court. But there was more than this. At the sale attorneys for various interests appeared and made announcements as follows: One, speaking for the Hydro United Tire Company, stated that that company was about to appeal to the Supreme Court of the United States from an order of the District Court denying its motion to dismiss the bill appointing receivers, and that, if successful, purchasers at the sale would take nothing'; another, speaking for the Union Bond & Mortgage Company, gave notice that the 65,-039 shares of the stock of the National RuB-' ber Products Corporation would not vest in the purchaser the control of the National Rubber Realty Company as set forth in the catalogue giving the terms of the sale; and still another, representing the National Rubber Realty Company, called attention to a provision in its lease with the Hydro United Tire Company requiring its consent to an assignment of the lease and announced that it would not consent to an assignment to the purchaser. The Security Trust Company of Pottstown, the trustee of the mortgage for the $250,000 bond issue of the National Rubber Realty Company, notified prospective bidders that the mortgage covered the plant and its equipment and that the purchaser of the plant or of its equipment would take only a leasehold interest in the same, subject to the mortgage, and would not be permitted to remove any part of it from the premises.

All of this is in the record, and all of it is evidence which the learned trial judge could properly use in forming his judgment and exercising his discretion. First, it is clear that the various announcements made before the sale inevitably tended to chill the bidding. Next, the appraisement, though not conclusive, is evidence which the learned trial judge could validly use in determining the adequacy of the bid. The appraisement, however, is attacked on the ground that it is excessive in that, admittedly, the valuations were made upon the basis of prevailing prices for reconstruction as of its date (November 1, 1922) without allowing for depreciation. Still, it has value as evidence in view of the fact that the property was comparatively new. The lease and fixtures offered and bid for were appraised at a total of $856,172.09; the $240,-000 first mortgage bonds and the 65,039 shares of stock were not appraised. The appellant’s bid of $160,000 covered all. Moreover, from this bid of $160,000 the sum of $127,984.52 would have to be deducted and paid the National Bank of Pottstown to meet its loan and release the $240,000 of bonds for delivery to the purchaser, leaving only the sum of $32,000 as the actual return to the receivers — and to the creditors— from the sale of the first mortgage bonds, the lease and the physical properties of the corporation. If the appraisement were, say, twice the value of the property, yet the great disparity between a reduced appraisement and the purchase price is such as to make it impossible for us to say (notwithstanding the purchaser might have been buying litigation) that the learned trial judge abused his discretion in refusing to confirm the sale.

The order is affirmed.


author: EVAN A. EVANS, Circuit Judge.

text:
    DE NOVA et al. v. LEVY, U. S. Marshal, et al.
    (Circuit Court of Appeals, Seventh Circuit.
    February 28, 1925.)
    Nos. 3434, 3435.
    Criminal law <@=>242(6) — Federal commissioner in removal proceedings merely ascertains whether there is reasonable cause to believe prisoner guilty.
    Duty of federal commissioner in removal proceedings under Rev. St. § 1014 (Comp. St. § 1674), was merely to ascertain whether there was reasonable cause to believe prisoner was guilty, and legal question of sufficiency and construction of indictment could only be determined by court where indictment was pending.
    Appeal from the District Court of the United States for the Eastern Division of the Northern District of Illinois.
    Separate applications for habeas corpus by Charles De Nova and James De Nova against Robert R. Levy, United States Marshal, and another. From the judgment and order dismissing writs, relators appeal.
    Affirmed.
    Charles A. Williams and Harry L. Brin, both of Chicago, Ill., for appellants.
    Edwin A. Olson, U. S. Atty., of Chicago, Ill., for appellees.
    Before EVANS, PAGE, and ANDERSON, Circuit Judges.
   EVAN A. EVANS, Circuit Judge.

Both appeals were heard together and involved the same questions. They will be disposed of in one opinion. Each party feels aggrieved at an order discharging a writ of habeas corpus issued to review the action of the United States commissioner in holding them “for trial on an indictment returned by a grand jury in the Northern District of Ohip, Western Division.”

Appellants, and numerous other defendants, were indicted under section 197 of the United States Penal Code (Comp. St. § 10367), charged with having knowingly and feloniously robbed certain post office employees of a registered mail pouch; the appellants herein being specifically charged with being accessories after the fact to the commission of the offense in that they, and “each for themselves, wilfully, knowingly, maliciously and feloniously assisted said ‘the robbers’ in concealing themselves from the officers of the law and in making available for the use of said ‘the robbers’ and of each and several of the above named defendants, the property stolen as the result of the robbery described in this indictment.”

Appellants were residents of the state of Illinois where they were apprehended, and removal proceedings, under section 1014 of the Revised Statutes (Comp. St. § 1674) were instituted to take them to the Northern District of Ohio, Western Division, where the cause is pending.

Upon the hearing under section 1014, proof was adduced from which the commissioner found that,

“There appears probable cause to believe the said Charles De Nova guilty of said offense,” and he ordered,
“Said Charles De Nova to enier into recognizance, with sufficient surety, in the srpn of ten thousand dollars, for his appearance for trial of the said charge, at the next term of the District Court of the United States for the Western. Division of the Northern District of Ohio, or in default thereof to be committed to jail.”

The same proceedings were had and the same findings were made in respect to James De Nova.

Thereafter, petitions for writs of habeas corpus were filed and upon their hearing it was stipulated that the facts in the petition set forth, “but not the conclusions of law or fact” were true. Both writs of habeas corpus were discharged.

The sole contention of each appellant is that he was not and could not have been an accessory after the fact as charged in the indictment. This position is based on the fact that he was never in the state of Ohio. He, therefore, could not, so he urges, have violated section 197 of the Criminal Code (robbing the mail) in the state of Ohio, by merely becoming an accessory after the fact in Chicago some months later. In other words, it is appellants’ position that sections 333 and 334 (sections 10507, 10508) define separaté crimes, and the venue in appellants’ ease is different from the venue of the crime charged in the indictment.

Considerable misunderstanding respecting the issues triable under these removal proceedings (section 1014) apparently exists among the profession. Likewise, it seems that to contest the relief sought in such proceeding, is a most common and, alas, too frequently, a successful means of securing delay. The decision in Morse v. United States, announced February 2, 1925, 45 S. Ct. 209, 69 L. Ed. -, subsequent to the oral argument, disposes of both of these appeals.

The court there says:

“The indictment was before the commissioner simply as evidence for the purpose of establishing or tending to establish the commission of an offense; and the commissioner had authority to pass upon its effect in that aspect only. The court reviewing the action of the commissioner under section 1014 upon habeas corpus was governed by the same rules and its decision was subject to the same limitation.” * * *
“In other words, the commissioner, or the court in review on habeas corpus, for lack of power cannot conclusively adjudge the indictment, qua indictment, to be either good or bad or pass finally upon the- guilt or innocence of the accused. * * * Upon the ease here presented, the trial court alone had plenary jurisdiction over the cause and consequently alone had plenary power to pass upon the sufficiency of the indictment as the pleading which initiated and was the foundation of the prosecution.”

In other words, appellants’ contention that they were guilty, if at all, of a separate offense, when charged in the indictment with being accessory after the fact, was a matter solely for' the determination of the judge in the Northern district of Ohio, before whom the criminal cause was pending.

The commissioner properly concluded that he was bound to respect the sufficiency of the indictment as returned by the grand jury, and was merely charged with the duty of ascertaining whether there was reasonable cause to believe the prisoner guilty.

The legal question (the construction of the indictment in the light of sections 332, 333 and 334 of the Criminal Code [Comp. St. §§ 10506, 10507, 10508]) is one which can only be determined by the court where the indictment is pending.

The judgment and the order is affirmed.