Agreement of March 25, 1921. "This arrangement, made between Edward Spiegel and David J. Finkelstein. Edward Spiegel, of E. Spiegel, hereby agrees to extend credit to David Finkelstein, of the Columbia Shoe Company, up to $25,000, twenty-five thousand dollars, for leather to be bought from E. Spiegel & Co. at a market price to be agreed upon. The leather is to be shipped in installments of $5,000, more or less, at one time. "David J. Finkelstein in turn agrees, for each installment of leather to be shipped to the Columbia Shoe Company, to forward shoes at an agreed market price if E. Spiegel & Co. see fit that they can sell them. If E. Spiegel & Co. do not take shoes in payment of the leather, then it is agreed that, after the leather is worked up and the shoes are sold, the Columbia Shoe Company can either turn over these accounts, to whom the shoes are sold, to E. Spiegel & Co., or after the money is collected by the Columbia Shoe Company they are to turn over this money to E. Spiegel & Co. E. S. D. J. F. C. S. Co." Letter of Attorney. "Know all men by these presents, that Columbia Shoe Company, by its duly authorized officers, doth hereby make, constitute, and appoint E. Spiegel & Co., of the city of New York, its true and lawful attorneys, for it and in its name to collect and receive all such accounts and moneys as may be due this corporation from its patrons in the city of New York, and when so collected to deposit the same in such bank, banks, or depositories as to our said attorneys may seem expedient, and to draw checks and drafts against said funds so to be deposited, and to do all lawful acts requisite for effecting the premises, and hereby ratify and confirm all that our said attorneys shall do therein by virtue of these presents. "In witness whereof, the said corporation has caused to be set hereto its corporate name by the hand of its president, and to be hereto affixed its corporate seal, duly attested by its secretary, this twenty-seventh day of April, A. D. 1921. Columbia Shoe Company, Certificate. "D. L. Finkelstein." “I, C. D. Rupp, secretary of the Columbia Shoe Company, * hereby certify that at a meeting of the board of directors of said corporation, duly held on the twenty-seventh day of April, A. D. 1921, the following resolution was unanimously adopted: 'Resolved, that the president and secretary of this corporation be and are hereby authorized, empowered, and directed to appoint E. Spiegel & Co., of the city of New York, attorneys in fact for this corporation to receive and collect all such moneys and accounts as may be due this corporation from patrons in the city of New York, to deposit said money in the name of and for the account of this corporation in such bank, banks, or depositaries as to said E. Spiegel & Co. may seem expedient, and in the name of this corporation to draw, sign, execute, and deliver checks or drafts against such deposits!" Myers & Goldsmith, of New York City (Mortimer C. Rhone, of Williamsport, Pa., of counsel), for petitioner. Allan D. Emil, of New York City, for respondent. Before ROGERS, HOUGH, and MAYER, Circuit Judges. MAYER, Circuit Judge (after stating the facts as above). We have set forth the three papers supra, so as that the questions involved may be fully understood. We pass by the contention that the agreement of Spiegel was with Finkelstein, and not with Columbia Shoe Company. We assume that it was with the latter. Spiegel, in his affidavit, did not state that the money he collected from Ajax and Smith was for shoes made out of the leather furnished under the agreement of March (289 F.) 25th; but we lay aside this and certain other questions raised in order to reach the fundamental points presented. It being admitted that, at the date of the filing of the petition in bankruptcy, Spiegel did not have possession of the money in controversy, we next inquire (1) whether he had title thereto; and (2) whether or not his claim is colorable. In the agreement of March 25, 1921, there is no language of the kind familiarly used in transferring accounts, such, for instance, as found in Hub Carpet Co., 282 Fed. 12. If Spiegel did not take shoes in payment of leather, then Columbia Shoe Company could either turn over accounts to Spiegel, or collect the money due it and turn over the money thus collected to Spiegel. Such an agreement did not presently assign the accounts to Spiegel, nor transfer the title to the accounts to Spiegel. It was nothing more at best than an agreement to turn over to Spiegel the accounts before collection or the proceeds after collection. No one could seriously urge that, by virtue of the agreement of March 28th, Spiegel could have maintained an action for conversion against Columbia Shoe Company in event of breach. The power of attorney of April 27th added nothing to title. If anything, it denied title. It merely permitted Spiegel to act as attorney in fact for Columbia Shoe Company, so as to enable Spiegel to make collections and to deposit in the corporation's name and to draw drafts, etc., in its name. This power of attorney was not in any sense a power coupled with an interest. Such a power, of course, presupposes a legal interest in the res over which the power is to be executed. 31 Cyc. 1043. In this case, the situation as to revocation of the power of attorney would, of course, have been different, if Spiegel had had title to the accounts. When the petition was filed, the property of the bankrupt was at once in custodia legis, and the power of attorney was revoked by operation of law. Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405; Lazarus v. Prentice, 234 U. S. 263, 34 Sup. Ct. 851, 58 L. Ed. 1305. Spiegel, therefore, had not power nor right to interfere with the bankruptcy court, by taking and withholding property, actually or constructively, in the possession of the bankruptcy court. In the case of In re Midtown Contracting Co., 243 Fed. 56, the adverse claimant had taken possession of the property prior to bankruptcy, and in all the cases, where summary proceedings have not been permitted, it will be found that the property prior to bankruptcy had been owned or possessed by the party adverse to the trustee prior to bankruptcy. For illustrations see Matter of Wood (C, C. A.) 278 Fed. 355; Matter of Eddy (D. C.) 279 Fed. 919; Charles H. Brown Paint Co. v. Bockhold (Ć. C. A.) 269 Fed. 139; Matter of Franklin Brewing Co. (C. C. A.) 263 Fed. 512; In re Joseph R. Marquette, Jr., 254 Fed. 419, 166 C. C. A. 51; In re Phoenix Planing Mill (D. C.) 250 Fed. 898. Where, however, the adverse claimant cannot show title and has not possession at the time of filing the petition in bankruptcy, his claim to hold money collected after the date of filing a petition in bankruptcy must be regarded as colorable. The mere fact that an argument can be made in favor of a claimant does not render a debated question of law a substantial question. When it appears, as in this case, that under no tenable theory can property in custodia legis be taken by an outsider, then the right to summary determination in the bankruptcy court is clear. The fundamental (but not the only) test is possession. Where, as here, the property in the eyes of the law was in possession of the bankruptcy court, procedure should be to move to reclaim in appropriate proceedings, and not to do acts which in effect amount to taking away property from the court's possession. The order is reversed, without costs, and the District Court is instructed to grant the application of the trustee. MERRIMACK NAT. BANK v. BAILEY et al. (Circuit Court of Appeals, First Circuit. June 4, 1923.) 1. Bankruptcy 164-Set-off by bank against insolvent's checking account held "transfer" within provision against preferences. Deposits in the checking account of an insolvent depositor are debts of the bank to the depositor, which give the bank an inchoate or conditional lien by way of set-off, and are "transfers," within the meaning of Bankruptcy Act, § 60a (Comp. St. § 9644), and when made when the depositor is insolvent, and when the bank has reasonable cause to believe that such deposits or loans or payments to the bank will effect a preference, they are voidable, if within the four months period. [Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Transfer.] 2. Bankruptcy 164-Set-off of debts against bank deposit held unlawful pref erence. Where the business of an insolvent was being liquidated by its creditors, its business being shut down, and the proceeds of liquidation were deposited in various banks, with an agreement and understanding as to pro rata distribution among the creditors generally, the action of a bank of deposit, which was also a creditor, in appropriating the deposit as a set-off to its claims against the insolvent, was void, under Bankruptcy Act, § 60a (Comp. St. § 9644), as an unlawful preference, and not within the rule that, where a deposit is made in good faith and in the usual course of business within four months before the petition in bankruptcy, the bank is allowed to credit the amount on notes of the bankrupt held by it. Appeal from the District Court of the United States for the District of Massachusetts; James M. Morton, Judge. In the matter of the bankruptcy of the Cooper-Liberty-Thompson Company. Proceeding by Hollis R. Bailey and others, trustees, against the Merrimack National Bank to have declared certain transactions preferences. Decree for the trustees (283 Fed. 514); and the Bank appeals. Affirmed. Philip N. Jones, of Boston, Mass. (Goldmann Edmunds and Hurlburt, Jones & Hall, all of Boston, Mass., on the brief), for appellant. Hollis R. Bailey, of Boston, Mass. (Edward R. Hale, of Haverhill, Mass., on the brief), for appellees. Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges. (289 F.) ANDERSON, Circuit Judge. In the District Court the appellant was held a preferred creditor for $3,273.83. The appellees are the trustees in bankruptcy of the Cooper-Liberty-Thompson Company, a shoe-manufacturing corporation, caught in the drop in prices and decline in business in the fall of 1920. The situation is detailed in a full and careful opinion by Judge Morton in 283 Fed. 514. The appeal, on analysis, presents nothing but a question of fact in a case in which the court below saw the witnesses, and in which, apart from the presumption thus arising, the record evidence abundantly sustains the finding of the District Judge. But the point involved is of some general importance and warrants brief discussion. The appellant was one of the bankrupt's depositor-creditor banks, and held its notes aggregating $30,000. In September, 1920, some of the banks refused to renew its notes; on October 21, a meeting of its larger creditors was held, attended by the appellant's president. A committee of creditors was appointed, which, about November 1, took charge of the company's business, reducing it to a liquidating basis. A circular letter proposing a six months' extension, by the creditors for more than $1,000, was issued. This letter set forth, inter alia, a plan of gradual liquidation: "Every creditor, bank or merchandise, to receive the same percentage whenever a payment on account is made." On November 17, the appellant agreed to this extension, but with the condition that its agreement should be void after December 15. Meantime the company's bookkeeper continued to make deposits with the various creditor banks, including the appellant, and a few checks were drawn to pay bills incident to the liquidating program. In October there were nine deposits with the appellant, aggregating about $33,370, and withdrawals amounting to about $34,516; in November there were two deposits, aggregating $495.11, and withdrawals amounting to $560; in December there were two deposits, aggregating $3,273, and withdrawals amounting to $1,160. On January 1, 1921, the balance was $5,159.01, which, on January 3, was set off by the defendant upon notes of the bankrupt which it held. It is this application that the trustees now seek to set aside as a preference. About January 1, the creditors' committee abandoned their undertakings and the company's officers resumed their official functions. On an involuntary petition, filed January 19, 1921, the corporation was adjudicated a bankrupt on February 1, 1921. This outline shows plainly enough that the company was insolvent, and that the appellant had abundant reason to believe that its appropriation, by way of set-off, of any deposits made with it during the liquidation period, would effect a preference. The court below was fully warranted in finding that the appellant's action, "whether legal or not, was certainly lacking in good faith." The District Judge resolved all reasonable doubts in the defendant's favor in holding that the situation had not been sufficiently developed on November 3 and 4, when $495.11 was deposited, as to make it then obvious that the company would have to be liquidated; but he held that the deposits of December 7 and 10, amounting to the abovenamed sum of $3,273.73, were preferences. [1] On analysis, the appellant's claim falls little short of contending that a creditor-depositor bank cannot become a preferred creditor, because it may honor checks on the deposits, which are, of course, debts of the bank to the depositor. We cannot accept this proposition. Such deposits or payments to the bank give the bank an inchoate or conditional lien by way of set-off. They are "transfers" within the meaning of section 60a of the Bankruptcy Act (Comp. St. § 9644). If, as in this case, they are made when the depositor is insolvent, and when the bank has reasonable cause to believe that such deposits, or loans, or payments, to the bank, will effect a preference, they are, if within the four months period, voidable. The fact that such bank creditors may honor checks on such deposits does not control. this case, checks to cover these deposits were not drawn and paid. The appellant knew it was getting more than its share of an insolvent estate by undertaking to avail itself of set-off. In Bank creditors are subject to exactly the same rule of law as to preferences and set-off as are merchandise and other creditors. The different relations arising out of the fact that a bank creditor is also commonly a depositor debtor may require a somewhat different assessment and application of the evidential facts. But in all such cases of preference by set-off the fundamental question is one of fact: Was a transfer made by an insolvent under such circumstances as "to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class?" and did the creditor "then have reasonable cause to believe that transfer would effect a preference"? * such The cases relied upon by the plaintiff are not in point. Studley v. Bank, 229 U. S. 523, 33 Sup. Ct. 806, 57 L. Ed. 1313; Bank v. Massey, 192 U. S. 138, 24 Sup. Ct. 199, 48 L. Ed. 380; Continental Trust Co. v. Chicago Title Co., 229 U. S. 435, 33 Sup. Ct. 829, 57 L. Ed. 1268. We recognize, of course, the soundness of the rule stated in such cases as American Bank & Trust Co. v. Coppard, 227 Fed. 597, 142 C. C. A. 229, that: "When an insolvent customer makes a deposit with his bank, in good faith and in the usual course of business, at any time within four months before the petition in bankruptcy is filed against him the bank is allowed to credit the amount on notes of the bankrupt held by it." (Italics ours.) [2] But in this case the deposits were not made "in the usual course of business." There was no "usual course of business" after November 1. The insolvent's business was then shut down; it was being liquidated by its creditors; naturally enough, the proceeds of liquidation were deposited in various creditor banks. The understanding that no preferences should be given was, in effect, nothing but a recognition of the requirements of the law. The situation here disclosed illustrates the fallacy and unfairness of the appellant's contention. If the creditors' committee had succeeded within the four months in turning substantially all the insolvent's assets into cash and depositing it with the creditor banks (subject only to trifling withdrawals by check for |