WRIT of Certiorari to the United

47 L.R.A.(N.S.) 984, 33 Sup. Ct. Rep.ON W Circuit Court of Appeals for

ment which affirmed an order of the
District Court for the District of North
Dakota, requiring an assignee for cred-
itors to pay over to the trustee in bank-
ruptcy moneys claimed by him as fees
and disbursements under the assign-
ment. Reversed.
C. C. A.

431, Ann. Cas. 1915A, 39. But we agree with the state [46] court that the Eighth Circuit to review a judgthere is nothing in this statute which prevents enforcement of the revenue act in question. It is true that the provisions regulating the sale, dispensation, and disposition of the prohibited drugs are somewhat different in the two acts. The prohibitory measures of the Federal statute do not apply to the disposition and dispensation of drugs by physicians registered under the act in the regular course of professional practice, provided records are kept for official inspection. Under the state law physicians can only furnish prescriptions to addicts, and may not dispense the drugs to such persons at pleasure from stocks of their own.

There is certainly nothing in this state enactment, as construed by the supreme court of Minnesota, which interferes with the enforcement of the

Federal revenue law, and we agree with the state court that there is no conflict between the enactments such as will prevent the state from enforcing its own law upon the subject.

It follows that the judgment of the Supreme Court of Minnesota must be affirmed.

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See same case below, 261 Fed. 670.

The facts are stated in the opinion.

Mr. Fred B. Dodge argued the cause, and, with Messrs. Kay Todd, Walter Fosnes, and Charles W. Sterling, filed a brief for petitioner.

No brief was filed for the respondent.

Mr. Justice Day delivered the opinion of the court:

This is a writ of certiorari to review a decision of the circuit court of appeals for the eighth circuit, affirming an order of the district judge for the district of North Dakota in a bankruptcy proceeding. The pertinent facts are: On August 15, 1917, one Conrad C. Reiswig executed a trust deed for the benefit of his creditors to John P. Galbraith, assignee and the petitioner. herein. The assigned stock of merchandise was sold. Various proceedings and meetings of creditors were had, not necessary to recite. On December 22, 1917, upon the petition of creditors, Reiswig was duly adjudged a bankrupt, and Vallely, respondent herein, is his trustee in bankruptcy. Galbraith appeared in the bankruptcy proceedings and filed an account, claiming therein the right to retain a certain sum for fees and disbursements under the assignment; and paid over to the trustee in bankruptcy the other moneys which he had acquired. Thereupon the trustee in bankruptcy filed a petition with the referee in bankruptcy, asking, in a summary proceeding, for an order upon Galbraith to show cause why he should not pay over the sum of $1,474.10, retained as fees and expenses [48] as trustee under the assignment. The referee in bankruptcy made an order that Galbraith forthwith pay over that sum to the trustee in bankruptcy, or show cause why he should not do so. Galbraith appeared and set up that the order of the referee in the summary

Note. As to what amounts to an adverse holding by third persons of prop-proceeding was without authority, as he erty acquired from bankrupt-see note to Morning Telegraph Pub. Co. v. S. B. Hutchinson Co. 8 L.R.A. (N.S.) 1232.

was an adverse claimant to the moneys referred to in the order, and that the court had no jurisdiction in a summary

proceeding to hear and determine the questions involved. Without waiving objection, and subject to the right of Galbraith to assert his objection to the proceedings, testimony was taken concerning the money expended and retained by the assignee prior to the bankruptcy proceedings, for administering the estate. Among other things, it was stipulated that, as to the particular money expended by the assignee, he was an adverse claimant. The referee delivered an opinion passing upon the amount of the expenditures and compensation, but held that Galbraith was an adverse claimant within the rule declared by this court in Louisville Trust Co. v. Comingor, 184 U. S. 18, 46 L. ed. 413, 22 Sup. Ct. Rep. 293, and that, therefore, the bankruptcy court was without jurisdiction to proceed in a summary manner, and discharged the order. The decision of the referee was reversed by the district judge. 253 Fed. 390. The circuit court of appeals affirmed the order of the district court (— C. C. A. —, 261 Fed. 670), and the case is here upon writ of certiorari.

We think the referee was right in holding that the case was governed by Louisville Trust Co. V. Comingor, supra. In that case a general assignment for the benefit of creditors was made within four months of the bankruptcy proceeding; the assignment was therefore an act of bankruptcy. A receiver was appointed in the bankruptcy court. The assignee turned over the proceeds of sale of the property, retaining his fees as assignee and his dis bursements to counsel. A summary proceeding was begun in the district court, ordering the assignee to show cause [49] why he should not pay to the receiver the amounts retained. This order was made against the objection of the assignee that the court had no authority to proceed in that manner. This court held that the assignee was an adverse claimant as to these amounts, and that the district court was without jurisdiction to determine the controversy in a summary proceeding. This case has been repeatedly cited as determinative of the law and practice in similar cases. The circuit court of appeals made no 1 See full consideration of the subject by the circuit court of appeals of the eighth circuit, Judges Sanborn, Van Devanter, and Reed, in Re Rathman, 106 C. C. A. 253, 183 Fed. 913; Collier, Bankr. 11th ed. 525, 528. and cases cited in notes; Black, Bankr. 974; 2 Remington, Bankr. 2d ed. § 1612; 1 Loveland, Bankr. 2d ed. 129.

reference to the Comingor Case, and held the case was ruled by Randolph v. Scruggs, 190 U. S. 533, 47 L. ed. 1165, 23 Sup. Ct. Rep. 740; but that case did not present the question here involved. In that case there had been an assignment prior to the bankruptcy proceedings, and the question presented was whether a claim for professional services, rendered in the course of a general assignment, before the bankruptcy, was entitled to be paid as a preferential claim out of the estate in the hands of the trustee in bankruptcy when the adjudication of bankruptcy had been made within four months after the making of the assignment, and the assignment set aside as in contravention of the bankruptcy law. It was held that the claim for compensation could be allowed so far as the services were shown to be beneficial to the estate.

In, Babbit v. Dutcher, 216 U. S. 102, 54 L. ed. 402, 30 Sup. Ct. Rep. 372, 17 Ann. Cas. 969, also cited in the opinion of the circuit court of appeals, it was held that books and records of a corporation, upon adjudication in bankruptcy, passed to the trustee, and belonged in the custody of the bankruptcy court, there being no adverse claim to them. Upon that state of facts it was [50] held that, on a rule to show cause, the court could properly make an order compelling the delivery of the books to the trustee. In the opinion in that case, Louisville Trust Co. v. Comingor, supra, and other cases, are cited for the purpose of showing that a different rule would prevail when an adverse claimant set up a right to be heard in other than a summary proceeding.

It may be, as suggested by the circuit court of appeals, that a summary proceeding at the instance of the trustee would afford a more speedy and economical administration of the estate in bankruptcy. But the right to recover in such instances only in suits of the ordinary character, with the rights and remedies incident thereto, has been consistently maintained by this court. The principle of the Comingor Case has never been departed from in this court. It establishes the right of an assignee for the benefit of creditors, to the extent that he asserts rights to expenses incurred and compensation earned under an assignment in good faith, before the bankruptcy proceedings, to have the merits of his claim determined in a judicial proceeding suitable to that purpose, and not by summary proceedings where punishment for contempt is the

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means of enforcing the order. We see no occasion to depart from this practice. There was no waiver by the assignee of his rights in this respect. He made no attempt to retain the body of the estate as against the trustee in bankruptcy. As to his disbursements and compensation while acting as assignee, he asserted an adverse claim. Under the settled rule of this court he could not be proceeded against summarily for such disbursements and compensation over his protest, duly made, against that method of procedure.

In our view the courts below erred in deciding otherwise, and the order of the Circuit Court of Appeals is, accordingly, reversed.

[51] UNITED STATES, Appt.,




(See S. C. Reporter's ed. 51-70.)

Public lands railroad land grants indemnity selections withdrawal.

The temporary Executive withdrawal before survey, for possible addition to an existing forest reserve, of lands within the indemnity limits of the land grant to the Northern Pacific Railroad Company, made by the Act of July 2, 1864, as modified and supplemented by the Joint Resolution of May 31, 1870, could not cut off the railroad company's right, earned by the construction of the road, to select such lands as indemnity, where the losses in the place ceeded the available lands in the indemnity limits, and the company's purpose to claim the latter was asserted at the earliest op. portunity.

limits at the time of such withdrawal ex

[For other cases, see Public Lands, I. c, 2, f, in Digest Sup. Ct. 1908.]

[No. 325.]

Assistant Attorney General Nebeker argued the cause, and, with Special Assistant to the Attorney General Underwood, filed a brief for appellant:

No rights to lands within the indemnity limits attach until an application to select is filed.

Ryan v. Central P. R. Co. 99 U. S. 382, 25 L. ed. 305; St. Paul & S. C. R. Co. v. Winona & St. P. R. Co. 112 U. S. 720, 28 L. ed. 872, 5 Sup. Ct. Rep. 334; Oregon & C. R. Co. v. United States, 189 U. S. 103, 112, 113, 47 L. ed. 726, 730, 731, 23 Sup. Ct. Rep. 615; Osborn v. Froyseth, 216 U. S. 571, 577, 578, 54 L. ed. 619, 623, 624, 30 Sup. Ct. Rep. 420; United States v. Southern P. R. Co. 233 U. S. 565, 56 L. ed. 553, 32 Sup. Ct. Rep. 326.

As the lands involved were, at the date of filing of the selection list, already withdrawn for forestry purposes, they were not subject to selection.

United States v. Midwest Oil Co. 236 U. S. 459, 59 L. ed. 673, 35 Sup. Ct. Rep. 309; Chicago, M. & St. P. R. Co. v. United States, 244 U. S. 351, 356, 61 L. ed. 1184, 1193, 37 Sup. Ct. Rep. 625.

There is no obligation upon the part of the United States to preserve lands within indemnity limits for the benefit of the company.

Hewitt v. Schultz, 180 U. S. 139, 45 L. ed. 463, 21 Sup. Ct. Rep. 309; Northern P. R. Co. v. Miller, 7 Land Dec. 120; Northern P. R. Co. v. Davis, 19 Land Dec. 90; Wisconsin C. R. Co. v. Price County, 133 U. S. 496, 512, 33 L. ed. 687, 695, 10 Sup. Ct. Rep. 341; Southern P. R. Co. v. Bell, 183 U. S. 675, 689, 46 L. ed. 383, 390, 22 Sup. Ct. Rep. 232; Humbird v. Avery, 195 U. S. 480, 508, 49 L. ed. 286, 298, 25 Sup. Ct. Rep. 123.

The failure of the government to have the lands sooner surveyed is not material. Oregon & C. R. Co. v. United States,

Argued October 7, 1920. Decided April 11, 189 U. S. 116, 118, 47 L. ed. 732, 733,

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See same case below, C. C. A. 264 Fed. 898.

The facts are stated in the opinion.

Note. As to land grant to railroads -see note to Kansas P. R. Co. v. Atchison, T. & S. F. R. Co. 28 L. ed. U. S. 794.

23 Sup. Ct. Rep. 620; United States v. Missouri, K. & T. R. Co. 141 U. S. 358, 35 L. ed. 766, 12 Sup. Ct. Rep. 13.

Mr. Charles Donnelly argued the cause, and, with Mr. Charles W. Bunn, filed a brief for appellee:

The Act of 1864 and the Resolution of 1870 constituted a contract between the government and the railroad company.

Burke v. Southern P. R. Co. 234 U. S. 669, 679, 58 L. ed. 1527, 1544, 34 Sup. Ct. Rep. 907.

It was the intention of Congress that the grantee should get the full quantity of lands granted; at least, so far as it

was possible to get it within the limits of the grant.

Wisconsin C. R. Co. v. Forsythe, 159 U. S. 46, 60, 40 L. ed. 71, 75, 15 Sup. Ct. Rep. 1020; Hewitt v. Schultz, 180 U. S. 139, 157, 45 L. ed. 463, 472, 21 Sup. Ct. Rep. 309; Southern P. R. Co. v. Bell, 183 Ü. S. 675, 689, 46 L. ed. 383, 390, 22 Sup. Ct. Rep. 232; Oregon & C. R. Co. v. United States, 189 U. S. 103, 115, 47 L. ed. 726, 732, 23 Sup. Ct. Rep. 615; Humbird v. Avery, 195 U. S. 480, 508, 49 L. ed. 286, 298, 25 Sup. Ct. Rep. 123.

The general rule as to indemnity lands is that, until they are selected by the grantee, the government has complete control over them; but this rule rests upon an assumption that where one indemnity section is disposed of, another is available. The rule does not obtain where this assumption is shown to be unwarranted.

St. Paul & P. R. Co. v. Northern P. R. Co. 139 U. S. 1, 35 L. ed. 77, 11 Sup. Ct. Rep. 389; United States v. Southern P. R. Co. 146 U. S. 615, 616, 36 L. ed. 1104, 1105, 13 Sup. Ct. Rep. 163; Southern P. R. Co. v. Bell, 183 U. S. 675, 682, 46 L. ed. 383, 387, 22 Sup. Ct. Rep. 232; Southern P. R. Co. v. Groeck, 31 C. C. A. 334, 59 U. S. App. 366, 87 Fed. 973; Hewitt v. Schultz, 180 U. S. 139, 157, 45 L. ed. 463, 472, 21 Sup. Ct. Rep. 309; Oregon & C. R. Co. v. United States, 189 U. S. 103, 47 L. ed. 726, 23 Sup. Ct. Rep. 615; Weyerhaeuser v. Hoyt, 219 U. S. 380, 387, 55 L. ed. 258, 261, 31 Sup. Ct. Rep. 300; Daniels v. Wagner, 125 C. C. A. 93, 205 Fed. 237. Either the lands in question, in view of the admitted facts in this case, were not public lands within the meaning of the Act of March 3, 1891, and therefore the withdrawal order was unauthorized and inoperative, or they are public lands, and then the act authorizing their withdrawal was a direct invasion of the constitutional rights which the railway company had in them; and such legislation cannot stand.

Sinking Fund Cases, 99 U. S. 700, 718, 25 L. ed. 496, 501.

appeals (C. C. A., 264 Fed. 898), and the United States brought the case here.

The lands in question are within the indemnity limits of the land grant made to the Northern Pacific Railroad Company by the Act of July 2, 1864, chap. 217, 13 Stat. at L. 365, as modified and supplemented by the joint resolution of May 31, 1870, 16 Stat. at L. 378, and were selected and patented as indemnity for lands lost within the place limits. The rights and obligations of the original railroad company arising out of the grant have long since passed to the present railway company, and there is no need here for distinguishing one company from the other.

The grant was made for the declared purpose of "aiding in the construction" of a proposed line of railroad from Lake Superior to Puget sound and Portland, Oregon, [59] and "to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores" over such line. It was expressed in present terms,-"there be, and hereby is granted," and was of "every alternate section of public land, not mineral, designated by odd numbers" within prescribed place limits on each side of the line, excepting such sections or parts of sections as should be found to have been otherwise disposed of, appropriated, or claimed, or occupied by homestead settlers, or pre-empted, prior to the definite location of the line. Nelson v. Northern P. R. Co. 188 U. S. 108, 47 L. ed. 406, 23 Sup. Ct. Rep. 302. As indemnity for any lands so excepted, as also for any excluded as mineral. other lands were to be "selected by said company," under the direction of the Secretary of the Interior, from unoccupied, unappropriated, nonmineral lands in odd-numbered sections within prescribed indemnity limits. The line of the road was to be definitely located by filing a map or maps thereof in the General Land Office; and the road, when constructed, was to be "subject to the use of the United States, for postal, military, naval, and all government service, and also subject to such regula

Mr. Justice Van Devanter delivered tions as Congress may impose restrictthe opinion of the court:

This is a suit by the United States to cancel a patent issued to the railway company for 5,681.76 acres of land in Montana, the asserted ground for such relief being that the land officers issued the patent through inadvertence and mistake. The company prevailed in the district court and in the circuit court of

ing the charges for such government transportation." As each consecutive 25 miles of road was constructed and made ready for the service contemplated, the same was to be examined by commissioners selected by the President, and, if they reported that the same was completed in all respects as required, patents were to be issued to

the company for the lands opposite to and coterminous with the completed section. The President was to cause the lands along "the entire line" to be surveyed for 40 miles in width on both sides "after the general route shall be fixed, and as fast as shall be required by the construction of said road;" the granted sections within the place limits were to be withheld from sale, entry, and pre-emption, except as against preemption and [60] homestead occupants whose settlement preceded the definite location of the line; all lands within the indemnity limits were to be and remain subject to the operation of the Pre-emption and Homestead Laws, save as the oddnumbered sections should be taken out of the operation of those laws by indemnity selections made to supply losses within the place limits (Hewitt v. Shultz, 180 U. S. 139, 147-149, 155, 156, 45 L. ed. 463. 468, 469, 21 Sup. Ct. Rep. 309; Weyerhaeuser v. Hoyt, 219 U. S. 380, 387, 388, 55 L. ed. 258, 261, 262, 31 Sup. Ct. Rep. 300); and the price of the even-numbered sections retained by the United States in the place limits was to be increased to double the usual minimum. If the company accepted the terms on which the grant was made, it was required to signify its acceptance in writing under its corporate seal within two years.

acres. To supply these losses it was necessary to resort to the indemnity limits, as was contemplated and provided in the granting act and resolution. In the asserted exercise [61] of this right the company selected the lands in question. The particular losses on account of which the selection was made were such as to support it, the selection was made in conformity with the directions given by the Secretary of the Interior, and the lands selected were subject to selection unless rendered otherwise by a temporary Executive withdrawal made about a year before. The local land officers accepted and approved the selection list, and, in transmitting it to the General Land Office, called attention to the withdrawal. But when the Commissioner and the Secretary approved the selection and caused the patent to issue, they overlooked the withdrawal, and so did not consider or pass on its bearing on the company's right to select the lands. Five years later the matter was called to their attention and they caused this suit to be brought.

The lands in question were not surveyed in the field until near 1905, and the plat of survey was not filed in the local land office until April 5, 1905. This indemnity selection was made later in the same day. On several occasions The company duly accepted the terms prior to 1904 the company had endeavof the grant, filed appropriate maps of ored to select lands in the indemnity the general route, afterwards definitely limits while they were as yet unsurveyed, located the line in the mode prescribed, or before the plat of the survey was and constructed and completed the road filed in the local land office; but the from Ashland, Wisconsin, on Lake Su- Secretary of the Interior had refused perior, to Tacoma, Washington, on Pu- to consider such selections, and had diget sound, and thence to Portland, Ore-rected that none be received until after gon, its full length being more than 2, 000 miles. The definite location was completed in 1884 and the construction in 1887. The road as completed was examined and favorably reported by the commissioners and accepted by the President. Reports of Commissioner of Railroads for 1885, p. 22; 1886, p. 36; 1887, p. 24; 1888, p. 24; Doherty v. Northern P. R. Co. 177 U. S. 421, 44 L. ed. 830, 20 Sup. Ct. Rep. 677; United States v. Northern P. R. Co. 37 C. C. A. 290, 95 Fed. 864, s. c. 177 U. S. 435, 44 L. ed. 836, 20 Sup. Ct. Rep. 706; United States v. Northern P. R. Co. 193 U. S. 1, 48 L. ed. 593, 24 Sup. Ct. Rep. 330.

The losses to the grant in the place limits through other disposals, homestead settlements, and the like, prior to the definite location of the line, and through the exclusion of lands found to be mineral, amounted to several million

the land was surveyed and the plat filed. Thus this selection was made as soon as was admissible under the Secretary's directions. The temporary Executive withdrawal of the lands was made January 29, 1904, before they were surveyed, and was intended to prevent the acquisition of any claim to them pending an inquiry into the desirability of adding them, along with other lands, to an existing forest reserve. On March 7, 1906, they were added to the reserve by an Executive proclamation.

In its defense to the suit the company takes the position [62] that the temporary withdrawal did not affect its right to select the lands, and therefore that the United States was not prejudiced by the fact that the Commissioner and the Secretary overlooked the withdrawal when the selection was approved and the patent issued. In support of

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