* * *

Section 2 of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3421], provides that courts of bankruptcy are invested with jurisdiction to * * * (3) appoint receivers or marshals upon the application of parties in interest to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified. * * It is the filing of the petition, therefore, and not the adjudication, that authorizes this action by the court of bankruptcy. Such filing is the commencement of the proceedings, and in effect is an attachment or sequestration from that time of all the property of the bankrupt not exempt to him for the benefit of his creditors. Bank v. Sherman, 101 U. S. 403, 25 L. Ed. 866; Mueller v. Nugent, 184 U. S. 14, 22 Sup. Ct. 269, 46 L. Ed. 405. The court from that time may draw to its actual custody the property of the bankrupt within its territorial jurisdiction. If an adjudication follows, such property will be distributed by the court. If it does not, it will be restored to the bankrupt, or the person from whose custody it was taken. In most of these cases the distinction is observed between proceedings in bankruptcy, as such, and controversies at law or in equity under section 23, Act July 1, 1898, c. 541, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3431]. But in Bryan v. Bernheimer the Supreme Court is careful to state that the powers of the bankruptcy court under section 2, cl. 3, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3121], are not limited by section 23, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3431], and that what is said in Bardes v. Bank that might be so construed was inadvertently said upon a question not arising in that case. This question is carefully considered by the Court of Appeals in Re Rochford, above, and the distinction between proceedings in bankruptcy, as such, and a controversy at law or in equity, within the meaning of section 23, is clearly pointed out, and the rules deducible from the decisions of the Supreme Court in Bryan v. Bernheimer and Bardes v. Bank are summarized by Sanborn, Circuit Judge, as follows:

"(1) The District Court, sitting in bankruptcy, has no jurisdiction over a controversy between trustees in bankruptcy and an adverse claimant over the title or possession of property in the custody of the latter in the absence of his consent. But such an issue is a controversy at law or in equity, as distinguished from a proceeding in bankruptcy, within the meaning of section 23 of the bankrupt act of July 1, 1898, c. 541, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3431].

"(2) The District Court, sitting in bankruptcy, has jurisdiction of such a controversy in cases in which it finds it absolutely necessary for the preservation of the estate to take possession of the property from the adverse claimant by means of its receiver or the marshal, under clause 3 of section 2, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3421]; and such a seizure, and the subsequent determination of the issue thus raised between the trustee and the adverse claimant, is a proceeding in bankruptcy, as distinguished from a controversy at law or in equity, within the true construction of section 23.

"(3) The District Court, sitting in bankruptcy, has jurisdiction to determine, after reasonable notice to the claimants to present their claims to it, the claims of all parties to property, and to the proceeds of property, which its officers have lawfully reduced to their actual possession in the course of the administration of the estate of the bankrupt; and controversies between trustees in bankruptcy and adverse claimants to property which has in this way reached the custody of the District Court are not controversies at law or in equity, as

distinguished from proceedings in bankruptcy, within the proper interpretation of section 23."

This was prior to the amendment of February 5, 1903, c. 487, 32 Stat. 797 [U. S. Comp. St. Supp. 1903, p. 409]. That amendment in no way restricts the power of the court under section 2 (3), but does enlarge the jurisdictions in which suits or actions by the trustee against third parties may be brought.

The conclusion, therefore, is that the bankruptcy court had jurisdiction to summarily take possession of this stock of merchandise from the Hawkeye Land Company, under clause 3 of section 2 of the bankruptcy act, in case it was necessary to do so to preserve it to the estate of the bankrupt; that the allegations of the ancillary petition, in effect, are that such property in fact belonged to Edward J. Moody, and are sufficient upon which to base a finding that it was necessary for the court to take possession of it in order to preserve it to his estate in bankruptcy in case he was such owner, and should be adjudged bankrupt; that the order appointing the receiver, and directing him to take possession of such property, is, in effect, a finding that it was necessary to do so. The result is that by that finding and order, and the action of the receiver thereunder, the court of bankruptcy has reduced this property to its actual custody. This, however, does not determine the actual ownership of the same.

Since this matter was submitted, Edward J. Moody has been adjudged a bankrupt, and the matter has been referred generally to the referee for Fayette county, and a trustee has been, or in due time will be, appointed. The right of the land company to the property or its proceeds depends upon whether or not it is a bona fide purchaser of it from the bankrupt prior to the filing of the petition in bankruptcy. The petitioning creditors contend that it is not. This is a question which the parties have the right to contest. It can only be done, however, in a proceeding where the evidence upon both sides can be taken in the usual way. In Bardes v. Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175, above, it is said that proceedings in bankruptcy for the distribution of property in the custody of the bankruptcy court are in the nature of proceedings in equity. They are therefore a branch of equity jurisdiction. It is a familiar principle of equity jurisprudence that property in the custody of a court of equity is always held by it in trust for those to whom it rightly belongs; and the jurisdiction to inquire into and determine to whom it so belongs, and to that end to require all claimants thereto to present their claims within a stated time, or be barred of any interest in or right to the property, is inherent in every court of equity. In re Rochford (C. C. A.) 124 Fed. 187, above. And this though the property may have been wrongfully seized, and so brought into the custody of the court. Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27, 28 L. Ed. 145. See, also, Freeman v. Howe, 24 How. 450, 16 L. Ed. 749, and Buck v. Colbath, 3 Wall. 334, 18 L. Ed. 257. Bryan v. Bernheimer and In re Rochford, above, establish the rule by which the right to this stock of merchandise or its proceeds so in the custody of the court may be fully determined; and that is to require the land company to propound its claims to such property to the bankruptcy court within a stated time. The motion of the Hawk

131 F.-34

eye Land Company for the release of the property will therefore be overruled, and it will be required to propound its claim to this property before the referee by September 1, 1904. The referee will so notify it at least 10 days before such date,, and, if it fails to do so within such time, it will be barred of all right to or interest in said property. If it shall so propound its claim, the referee will then fix the time within which the trustee, as soon as appointed, shall plead thereto, and will make all requisite and necessary orders for speeding the matter to a final hearing, and determine the questions so presented. Upon the appointment of the trustee, the receiver will turn over to him all property seized under the order of his appointment, or the proceeds of such as he may have sold, and render to the referee a full and true account of all thereof. The referee will fix the amount of the receiver's compensation. The trustee, however, will not be entitled to the property or the proceeds thereof paid by the Hawkeye Land Company as consideration for the stock of merchandise, and such merchandise also. He must either affirm or disaffirm as a whole the transaction between the Hawkeye Land Company and Edward J. Moody, and, if it be finally adjudged that the trustee is entitled to the stock of merchandise, the consideration paid by the Hawkeye Land Company therefor, if received or recovered by him, must be returned to it. It is not necessary that an injunction should issue against the land company, as the stock of merchandise is now in the actual custody of the bankruptcy court, through its receiver; and any interference with it, or any attempt to do so, while in his possession or that of the trustee, would be an interference with and obstruction of the exercise of the jurisdiction of that court, and there is no reason to apprehend that this will be done.

Mrs. Myrtle Moody has not appeared in response to the notice to show cause why an injunction should not be granted against her. An injunction will therefore be issued against her as prayed, upon the petitioning creditors filing a bond in the sum of $1,000, with sureties to be approved by the clerk of this court.

It is ordered accordingly.

BOBBS-MERRILL CO. v. SNELLENBURG et al.

(Circuit Court, E. D. Pennsylvania. August 1, 1904.)

No. 29.

1. COPYRIGHTS-RETAIL PRICE-CONTROL-NOTICE.

Where publishers of a copyrighted book printed on the page immediately following the title page of each copy, underneath the notice of copyright, a notice that the price of the book at retail was $1 net, and that no dealer was licensed to sell it at a less price, and that such a sale would be treated as an infringement of the copyright, such notice did not entitle the publishers to control the retail price of the book, so as to render a sale of the book at a reduced price an infringement of their copyright.

In Equity.

Samuel Dickson, for complainant.

Ira J. Williams and Alexander Simpson, Jr., for respondents.

HOLLAND, District Judge. The Bobbs-Merrill Company is the publisher of a book or novel known as "The Castaway," which was written by Hallie Erminie Rives, from whom it was purchased, together with a copyright for the same. The defendants purchased a large quantity of these books from a third party, without any notice of the fact that the plaintiffs were attempting to limit the retail price thereof, at the time they purchased them, other than the notice contained in the book upon the page immediately following the title page. There was no contract or agreement made by the defendants with the plaintiffs or any other parties as to the sale of the copies owned by defendants. That upon the page immediately following the title page of each copy of this book appear the following words:

Copyright 1904

The Bobbs Merrill Company

May

The price of this book at retail is One Dollar net. No
dealer is licensed to sell it at a less price, and a sale
at a less price will be treated as an infringement of the
copyright.
The Bobbs-Merrill Company.

The defendants have been selling this book at 98 cents per copy, and this bill is for a preliminary injunction to restrain them from selling any copies of the novel at retail at a less price than $1 net, and for an accounting for the profits accruing to the plaintiffs by reason of these unlawful sales.

It is contended on the part of the plaintiffs that a sale by the defendants of a copy of this novel at a less price than $1, under the circumstances, is an infringement of their copyright, and that they are entitled to a restraining order, and an accounting for such violation. After a very careful consideration of this question and the cases reported wherein the law applicable thereto has been considered, we fail to find any decision covering all the features of this case. The closest case to the one at bar is Harrison v. Maynard, Merrill & Co., 61 Fed. 689, 10 C. C. A. 17, which was decided in 1894 by the Circuit Court of Appeals for the Southern District of New York by Circuit Judge Shipman; and, while that case may not be controlling in this district, yet the deliberate judgment of a Circuit Court of another district should be regarded as decisive of the question involved until otherwise determined by the Supreme Court. In that case Maynard & Co., the owners of a copyright of a book, had sent a number of unbound volumes to one Alexander, a bookbinder in the city of New York, for the purpose of having them bound for sale. While in the latter's store, a destructive fire occurred in the bindery, as a result of which these unbound volumes were partially damaged. They were sold to one Fitzgerald, who after

ward sold them to be utilized as paper stock only, and not to be placed on the market as anything else. Harrison, a dealer in secondhand books, obtained possession of some of these unbound damaged volumes, bound them, and placed them upon the market for sale, without any knowledge of the agreement made by his vendor not to sell the same as newly bound books. A bill was filed against Harrison to restrain him from disposing of the same in violation of Maynard's right under the copyright statutes of the United States. It was contended there that the owner of a copyright was entitled to an order to restrain the sale of a copyrighted book, the title to which he had transferred, but which was being sold in violation of an agreement entered into between himself and his vendee; but it was held that the owner of a copyright, who has transferred the title to copyrighted books under an agreement restricting their use, cannot restrain, by virtue of the copyright statutes, sales of said books in violation of the agreement. He was confined to his remedy for the breach of contract.

In an elaborate opinion by Judge Hammond in the case of Publishing Company v. Smythe (C. C.) 27 Fed. 914, it was decided that, so long as the owner of a copyright retains the title to the copies of the book which he has the exclusive right to vend by virtue of the copyright, he can impose restrictions upon the manner in which and upon the person to whom the copies can be sold. Having the exclusive right to vend, he has the right to appoint to whom the book shall be sold. If his agents, to whom he has intrusted the possession of his books, violate his instructions, and fraudulently sell to a person with knowledge or notice. of the fraud, or to one who, under all the circumstances, should have made inquiry as to his vendor's rights to sell, such fraud will be an infringement of the copyright, with which the original owner has never parted, and can be restrained by virtue of the statutes of the United States. This right to enjoy the benefits of the copyright statutes results from the fact that the owner has never parted with the title to the book or the copyright, although he parted with the possession of the book. But the right to restrain the sale of a particular copy of the book by virtue of the copyright statute has gone when the owner of the copyright and of that particular copy has parted with all his title to it, and has conferred an absolute title to the copy upon the purchaser, although with an agreement for a restricted use. The exclusive right to vend the particular copy no longer remains in the owner of the copyright by the copyright statutes. Harrison v. Maynard & Co., supra.

It will be noted, however, that in the case of Harrison v. Maynard, supra, there was no notice printed in each copy of the book, such as is found on the page immediately following the title page to the book in this suit. Though the result of all the decisions in cases of this kind is to the effect that, when the owner of a copyright transfers title to a copyrighted book, although under an agreement restricting its use, or price at which it can be sold at retail, and the book is sold in violation of this agreement, his only remedy is for breach of contract and cannot be restrained by virtue of the copyright statutes, yet the question in this case arises as to whether this notice inserted by the plaintiffs in this case in the book in question amounts to the retention by them of such an