prompted to record the same because it came to their knowledge that said Marsh Bros. were in embarrassed circumstances.

"The estate of the said bankrupts that went into the possession of the trustee consisted of miscellaneous items of personal property and numerous equities in real estate in said Bridgeport. Said trustee derived from sales of equities of redemption the sum of $303, and the interest of said bankrupts in the equities still undisposed is of inconsiderable, if any, value. Said trustee had derived from all of the personal estate of the said bankrupts the sum of $5,447.16. The claims against said estate as proved amount to $32,830.92, of which $2,583.09 are for wages due employés of the bankrupts, and of which last-mentioned sum about $2,583.09 are preferred claims.

"No evidence was offered to show that the estate in the hands of said trustee had been enhanced in value by said sums previously realized by said Marsh Bros., or C. B. Marsh, from the releases of said mortgages or sales of said properties in respect to which said wrongful appropriations are claimed to arise, nor what disposition was made of said sums realized from said mortgages or sales, and no connection was traced or shown between said sums so realized and the ownership of the property that passed into the possession of said trustee.

"I find that the petitioners had knowledge that said Marsh Bros. were withdrawing and releasing mortgages held by them as collateral security as aforesaid, and that said assignments were not recorded to facilitate this mode of doing business, and that the wrong committed by Marsh Bros. consisted only in the releases in question having been made without substituting other mortgages in their place, as it was understood by the parties from their uniform course of dealing would be done.

"The petitioners claimed that the burden of proof lay upon the trustee in bankruptcy to show that the bankrupt estate in his hands was not en hanced by the sums of money which came into the possession of Marsh Bros., as the proceeds of the sale of these properties, and claimed to have proven that the estate in the hands of the trustee was increased by that amount.

"The court overruled the claim of petitioners, but held and ruled that the burden of proof was upon the petitioners to trace the proceeds into the estate coming into the hands of the trustee, and that this they had failed to do; and the said question is certified to the judge for his opinion thereon."

In stating my opinion upon the point of law at issue it would be an unnecessary task to attempt any improvement upon the comprehensive, closely reasoned and logical analysis contained in the memorandum filed by the referee December 18, 1901. The matter has been argued before me exhaustively and ably by counsel. I have given thorough attention to all the points which they have presented, have examined the cases to which they refer me, and have noticed the care with which the referee has discussed them. I fully agree with him, and offer herewith his memorandum as containing a very complete statement of the opinion at which I have arrived from my own investigation, and many of the reasons which have led me to my conclusions. The exceptions to the report of the referee as to matters contained in paragraphs 5 and 23 are overruled.

My reason for this ruling is twofold: (1) In the decision of questions of controverted fact I must depend upon the conclusions arrived at by the referee. He has every opportunity for arriving at the truth. (2) In this particular case I have been at great pains to examine the testimony which was taken down at the time of hearing and has been forwarded to me, and I am bound to say that I concur most heartily with the referee in his conclusions.

The decision of the referee is sustained.

LA ESCOESSO.

(District Court, D. New Jersey. May 26, 1902.)

1. TUG AND Tow-SINKING OF TUG BY CAPSIZING OF TOW-IMPROPER BALLASTING.

A bark in ballast, while being towed by two tugs, capsized, sinking one of the tugs. The weather was no worse than should have been an ticipated at the season. Held, on evidence showing the tugs to have been without fault, and that the accident was due to the failure of the bark to provide herself with sufficient and proper ballast, that she was liable for the injury to the tug.

In Admiralty. Suit against tow to recover for injury to tug.
Linsly Rowe, for libelant.

Wing, Putnam & Burlingham, for claimant.

KIRKPATRICK, District Judge. The Escoesso, while being towed by the libelant's tugs from the Erie Basin towards the Arthur Kills, capsized in a squall of wind. In so doing she caused the tug which was fastened to her port side to sink, and it is for this damage that the libel is filed. The Escoesso filed a libel in the Southern district of New York for the damages which she sustained by the overturning, alleging negligence on the part of the tug. The matter was heard by Judge Brown, and he, after due consideration of the evidence, decided that the tug was faultless. The W. J. McCaldin (D. C.) 35 Fed. 330. In this finding I concur. A consideration of the evidence shows that the bark was in ballast, and, in order to render her more steady, the master ordered logs, supposed to be equivalent to 150 tons of interior ballast, placed alongside the ship to serve instead. At the commencement of the trip the wind was not very strong, but increased as they progressed, and when near the kills the bark was struck by a sudden squall and capsized. This was due, no doubt, to the insufficiency of the ballast with which the bark had supplied herself. The squall does not appear from the evidence to have been such a one as, considering the season of the year, and the character of the weather at starting, might not have been expected, and certainly not such a one as, under the circumstances, it was not the duty of the bark to have guarded against. It was the duty of the bark to provide itself with sufficient ballast for the voyage, and with that sufficiency the tugs had nothing whatever to do. They had a right to presume that the bark was seaworthy, and, if there had been any real apprehension by the master of the bark of the sufficiency of the ballast, he ought, as Judge Brown says, "to have called the subject specifically to the attention of the tug captain, which he did not do." The tugs have been adjudged, in a suit between these parties, to have been without fault, and the claimant is estopped from setting up that defense in this suit. Regarding the tugs as blameless, the injuries sustained by the tugs must be attributed to the negligence of the bark in not providing sufficient ballast. In consequence of this fault, she must be held answerable.

Decree should be for libelant.

In re TONTINE SURETY CO. OF NEW JERSEY.

(District Court, D. New Jersey. May 26, 1902.)

1. BANKRUPTCY-CORPORATIONS-TRADING OR MERCANTILE PURSUITS.

A corporation is not subject to proceedings in involuntary bankruptcy, under Bankr. Act 1898, § 4b, as one engaged principally in trading or mercantile pursuits, because authorized to engage in such pursuits by its charter, when it has never in fact been so engaged.

2. SAME.

To be a trader or to engage in a mercantile pursuit, within the meaning of Bankr. Act 1898, § 4b, a corporation must both buy and sell; and a company authorized by its charter to deal in diamonds, and which entered into contracts by which it agreed to deliver a diamond to the holder, at his option, on his payment of a certain sum in installments, but which never qualified itself to perform on its part, and never purchased, owned, or delivered a diamond, is not engaged in trading or mercantile pursuits, so as to be subject to proceedings in involuntary bankruptcy.

In Bankruptcy. On petition in involuntary bankruptcy.

Hunt, Hill & Betts, for petitioners.
Raymond Dawson, for respondent.

KIRKPATRICK, District Judge. A petition has been filed in this court, by a sufficient number of persons, praying that the Tontine Surety Company of New Jersey be adjudged a bankrupt; alleging that within four months prior thereto the corporation had committed an act of bankruptcy by making a general assignment for the benefit of its creditors, under the insolvent laws of the state of New Jersey. Certain creditors have answered the petition, objecting to such adjudication upon the ground, among others, that the said company is not engaged principally in trading and mercantile pursuits, as required by section 4, subd. "b," Act 1898.

For the purpose of avoiding the necessity of a trial upon the issues of fact presented by the pleadings, the parties, by their respective attorneys, have consented and agreed on a statement of facts, the truth of which each admits, to wit: First, that the Tontine Surety Company of New Jersey was formed under the general corporation act of New Jersey, with powers contained in its certificate of incorporation, and that said company on July 19, 1901, made a general assignment for the benefit of its creditors, which assignment was recorded in the office of the register of Hudson county, N. J., on the 27th day of July, 1901; second, that the business of the said Tontine Surety Company was transacted under and pursuant to contracts issued by it, a copy of which contract is annexed to the said stipulation, which is admitted in its entirety on the question at issue,-as to whether or not such company is such a corporation as may be adjudged a bankrupt. It is also admitted that the said company never did, in fact, buy, own, or deliver diamonds or merchandise of any kind whatever. An inspection of the prospectus of the company, annexed to and made part of the stipulation, shows that the company

1. What persons are subject to bankruptcy law, see note to Mattoon Nat. Bank v. First Nat. Bank, 42 O. C. A. 4.

116 F.-26

tendered itself as being willing to write a mercantile contract which would entitle the holder thereof to buy a diamond for $100, to be paid for in 80 weekly installments, of $1.25 each, subject to certain conditions set forth in the contract, and stipulate that after the payment of said 80 installments the buyer shall have the option either to take the diamond, or to receive $120 in cash. But as appears in the stipulation, the company itself never took any steps to qualify itself to fulfill its part of the contract, and never purchased, owned, or delivered a diamond of any kind; nor did it have an existence for a sufficient length of time to entitle any one to receive the cash value, according to the contract, for the money paid into its treasury. In the case of In re New York & W. Water Co. (D. C.) 98 Fed. 711, Judge Brown was called upon to interpret the section of the statute which is now before this court; and he there held that, notwithstanding the fact that by its charter the corporation sought to be adjudged a bankrupt had the authority to engage in a business which would bring it within the terms of the statute, yet, unless it had in fact so engaged in business, the court was without jurisdiction. In discussing the question as to what corporations were within the purview of the law, Judge Brown cites many definitions laid down by the leading lexicographers, and concludes that by the weight of authority the proper description of the business of a trader includes both buying and selling either goods or merchandise which are ordinarily the subject of traffic, and that by "mercantile pursuits" is meant the buying and selling of goods or merchandise, or "dealing in the purchase and sale of commodities," and that, too, not occasionally or incidentally, but habitually, as a business. It is apparent that it was the intention of congress to exempt from the provisions of the bankrupt act all corporations save those whose principal business was that included within the exemption; in other words, all corporations whose principal business was not that of the ordinary trader, or natural persons engaged in mercantile pursuits. I am of the opinion that this company is not within the provisions of the bankrupt act; for, whatever may be its powers under its charter, it is admitted by the stipulation that it never did, in fact, buy, own, or deliver merchandise of any kind. As has been said before, to be a trader or to be engaged in a mercantile pursuit, one must both buy and sell.

For this reason, then, the petition should be dismissed.

In re ROSENBERG (two cases).

(District Court, E. D. Pennsylvania. June 10, 1902.)

Nos. 358, 697.

1. BANKRUPTCY-Hearing BEFORE REFEREE.

Where a proceeding before a referee instituted by a trustee in bankruptcy against a third person to determine the ownership of property was dismissed by the court for want of jurisdiction, the entire proceedings necessarily became null, including the findings of the referee and the taking of evidence by him; and he could not thereafter, in a new proceeding, base a determination of the same issues on the findings

made in the prior proceeding, or consider the evidence taken therein, unless by stipulation of the parties.

2. SAME-JURISDICTION OF COURT OF BANKRUPTCY-CONTROVERSY BETWEEN TRUSTEES.

A court of bankruptcy has jurisdiction to determine a controversy as to the ownership of property between the trustees of two different estates, both of which are being administered by such court.

In Bankruptcy. On certificate from referee.

Geo. B. Johnson and Arthur B. Huey, for trustee of Emanuel Rosenberg.

John Weaver and Greenwald & Mayer, for trustee and creditors of Philip Rosenberg.

J. B. MCPHERSON, District Judge. I regret very much that this protracted litigation cannot now be ended, but it is so clear to my mind that the central question in dispute has not yet been decided that I have no option except to send the case back to the referee. A brief statement of the facts will, I think, make the situation plain: In November, 1899, Emanuel Rosenberg was adjudicated a bankrupt. In the following February a controversy arose concerning some personal property, the ownership of which was claimed by Philip Rosenberg, the bankrupt's brother, and by Emanuel Rosenberg's trustee. Owing to the business relations that had existed between the brothers, it was difficult to decide whether the possession of the property had been in Emanuel as an individual, or as the mere agent of Philip. The controversy was sent to the referee for a hearing, Philip expressly consenting to this order. The report of the referee finding the property to have been Emanuel's was set aside by the court in September, 1900, in the following opinion:

"I have considered the evidence taken by the referee in this controversy, but as the case must be decided on the question of jurisdiction, and as the litigation is to be transferred to another tribunal, it would not be proper to express my opinion on the facts.

"Since the decision last May by the supreme court of the United States in Bardes v. Bank, 178 U. S. 524, 20 Sup. Ct. 1001, 44 L. Ed. 1175, it is clear that the district court can only acquire jurisdiction of a proceeding such as this by consent of the proper defendants. Such consent was not given by some of the necessary defendants, although the counsel for Philip Rosenberg did agree at bar that the referee might determine the question of title to the goods sold at the sheriff's sale; and therefore the proceedings before the referee must be set aside, and the petition of the trustee must be dismissed. It is accordingly so ordered."

Shortly afterwards Philip, also, was adjudicated a bankrupt, and a trustee was duly appointed. In November, 1900, the two trustees joined in a petition to the referee asking for an order to sell the property at private sale, and for leave to deposit the proceeds in bank to the joint credit of the trustees, "subject to such claims against the proceeds of sale as might otherwise have been made against said goods." The sale was made, and the balance of the purchase money, after deducting certain expenses, has been duly deposited in bank. Thereupon Emanuel's trustee petitioned the referee to distribute the proceeds as if the property had belonged to Emanuel, and in spite of the denial of such ownership by the trustee