(dissenting). The questions involved in this ease are of importance, not only to the petitioner, but in their relation to the general scope and effect of our Bankruptcy Law (Comp. St. §§ 9585-9656). I cannot convince myself that the result is right.
Cheney’s trustee in bankruptcy contests the right of a creditor for more than $130,-000 to share in a bankrupt estate, which *788now, nearly seven years after adjudication, is in a position to pay a dividend of 75 to 90 per cent. The ease involves more than $100,000.
The questions presented should be considered in the light of certain general bankruptey principles. In ordinary bankruptcy, this case, not composition (Nassau Smelting & Refining Works v. Brightwood Foundry Co., 265 U. S. 269, 44 S. Ct. 506, 68 L. Ed. 1013), the bankrupt estate belongs, beneficially, to the creditors, not to the trustee, who is an administrator only. While it is the duty of the trustee to contest false and fictitious claims (Chatfield v. O’Dwyer, 101 F. 797, 42 C. C. A. 30), and of the bankrupt (section 7, subd. 7 [Comp. St. § 9591]), to disclose to his trustee the proving of any false claims against his estate, the act nowhere makes it the duty of the trustee to contest honest and lawful claims on merely technical grounds for the purpose of increasing the dividend of part of the creditors at the expense of other honest creditors. Statutes of limitations are ordinarily not meritorious defenses. I find nothing in the act, or in the adjudicated cases, making it the duty of the trustee to set up the statute of limitations against an honest creditor1 for the benefit of other creditors. The provision in section 57n, requiring claims to be proved within one year after adjudication, is grounded upon the theory that the trustee will within that year have the estate in condition to distribute. It is a provision purely for the benefit of the beneficial owners of the estate, so that they may get their money seasonably. Compare section 47 (2), being Comp. St. § 9631, which, in terms, requires the trustee to “close up the estate as expeditiously as is compatible with the best interests of the parties in interest.” Partial dividends are also provided for. Section 65b (Comp. St. § 9649). Plainly, the dominant features of the act are: Equality of treatment of honest creditors, and speed in liquidating and distributing the assets. The main burden of accomplishing the latter result rests upon the trustee.
In this case the trustee has been at least as slow in bringing the estate to the distribution point as the appellant has in making technically accurate proof of claim. A trustee who takes nearly seven years to get an estate ready to distribute has but poor standing, if any, to object to a creditor’s having a like period to make a formally accurate proof of a claim, duly scheduled and referred to by the District Court as “a just claim.” Formal proof of a scheduled and admittedly valid claim is a very perfunctory act, having little relation to business realities and rights. Cf. Haley v. Pope, 206 F. 266, 124 C. C. A. 330.
Meantime in this estate more than two-thirds of the claims of the long-delayed creditors have been purchased in behalf of the bankrupt’s mother, and her attorney has now purchased the bankrupt’s interest in his father’s estate for $243,000 in cash, and a waiver of dividends on these purchased claims of $675,000. The record does not disclose what other assets are available for distribution; nor the exact amount of claims proved. But it is clear enough that in this case the administration has produced neither speed nor equality of treatment, and that the present decision will greatly increase the inequality of treatment, already inferentially apparent from the purchase of claims in behalf of the bankrupt’s family. These facts have a bearing on the power of the trustee to maintain this contest. The purchaser of the bulk of the claims having, on the record before us, waived all right to a dividend, cannot, and, so far as now appears, the other creditors do not, object to the allowance of the appellant’s claim. Under such conditions I doubt the power of the trustee; but, if he has, technically, such power, he ought not to use it.
But there is much more to this ease. In section 57n is a provision that, if claims are liquidated by litigation, they may be proved within sixty days after the end of the litigation. I think there was, and still is, litigation involving such liquidation, which should now be brought to an end, so that the appellant may then, if he choses, within sixty days thereafter, file formal proof of claim.
The case as stated in the majority opinion does not, I think, sufficiently disclose the significance of the real proceedings.
In September, 1918, about eight months after the adjudication, the trustee filed an omnibus petition for leave “to sell at public or private sale all of the assets, property, and estate of the said bankrupt,” reciting that these assets were not such as were ordinarily sold on the stock exchange or at public auction. In argument, it is agreed that most, if not all, of the assets, including the bankrupt’s interest in his father’s estate, were subject to liens, or alleged liens, and were also of a speculative or uncertain character. The petition was obviously intended, and was construed by the parties as intended, to procure a sale of a mass of liened assets, free from liens. Thereupon the ap‘ pellant’s predecessor, the American Ammonia Company, appeared, generally, by *789counsel, and objected to the sale of the Ammonia stock, except subject to its asserted lien for “upwards of $130,000.” If it might have questioned the jurisdiction invoked by the trustee, and compelled the trustee to resort to a plenary suit, it did not. Taubel v. Fox, 264 U. S. 426, 44 S. Ct. 396, 68 L. Ed. 770, and cases cited; In re Schweitzer (D. C.) 217 F. 495. It submitted unconditionally then, and submits now, to the jurisdiction of the bankruptcy court to determine all its rights, as creditor and to security. On such submission the trustee had at least constructive possession of the Ammonia stock. Indeed, it does not appear (unless inferentially) that he had not physical possession thereof. I do not understand that the referee’s full jurisdiction over the Ammonia Company’s debt and security is questioned. Certainly no one but the lienholder could question it, and it did not and does not. In re Kinsey Co., 184 F. 694, 106 C. C. A. 648. The objection to a sale, at that time, except subject to the objector’s alleged lien, was in legal effect an appeal to the discretion of the court which, in its very nature, involved a submission to the jurisdiction. Experienced counsel rarely object to the summary jurisdiction ; for it is quicker and cheaper than a plenary suit, and adequately safeguarded by right of appeal.
Shortly after the creditor’s appearance, it Was stipulated by the trustee and the Ammonia Company that there should be no sale of the Ammonia stock or of the bankrupt’s interest in his father’s estate without further proceedings, on due notice. Before any order was made another creditor, J. R. Williston & Co., appeared as objector; so that the stock and bonds of the Gila Copper Sulphide Company were also excepted from the order of sale, which was, as to the balance of the assets—whether incumbered or unincumbered the record does not show—then allowed.
This petition for sale free from lien was, under the circumstances recited in the petition, a proper proceeding. 6 Remington, (3d Ed.) § 2683; New England Piano Co., 122 F. 937, 59 C. C. A. 461; In re National Boat & Engine Co. (D. C.) 216 F. 208, 211 (an instructive opinion by Judge Hale of the Maine District); In re North Star Co. (D. C.) 252 F. 301, and cases cited (an illuminating opinion by Judge, now Mr. Justice, Sanford, citing many cases). It might have been allowed even if the alleged lien-holder had objected. 6 Remington, §§ 2575 —2578; In re Shoe & Leather Reporter, 129 F. 588, 64 C. C. A. 156; 6 Remington, §§ 2581, 2589, 2591.
Such sales, free from lien, are ordered, not merely as matter of power, but-as matter of sound discretion—and even against objection by an alleged lienholder—if and when there is reasonable doubt as to the value of the security, or any question as to the validity or the extent of the alleged lien. 6 Remington, § 2583, and cases cited; In re Littlefield, 155 F. 838, 84 C. C. A. 72.
It is then clear, on principle and on authority, that these proceedings were litigation within the meaning of section 57n, involving all possible questions as to the Ammonia Company’s claim and the validity and extent of the security therefor. This seems to me too clear to require illustrative argument. But I observe that, without further pleadings, the trustee might have denied that the alleged debt of $136,000 ever existed ; he might have claimed payment in full or in part; he might have contended that, if existent, it was never secured by any lien on the stock; or that, if once so secured, the lien had been in whole or in part discharged. Other conceivable questions might have been raised. So that, if á sale had been ordered, free from lien for, say, $100,000, all such contentions—both as to the appellant’s debt and the value and application of security therefor—would have had to be. determined in making an order for the disposition of the proceeds of the sale. When so disposed of, the debt would either have been fully paid out of the proceeds of the sold security or any unpaid balance would have been provable against the general assets. Section 57h; Powell v. Leavitt, 150 F. 89, 80 C. C. A. 43. “The phrase ‘liquidated by litigation’ is general”; as Judge Lowell said in 150 F. 91, 80 C. C. A. 45. It covers, I think, cases of preference (section 57g), of security (section 57h), or of unliquidated damages (section 63b). Cf. 2 Remington, §§ 849, 862, 863, 879, 880.
The conclusion seems to me to be irresistible that there was litigation under section 57h, and within the meaning of section 57n.
But the majority hold that, even if there was such litigation) the referee’s order in 1920 “finally disposed of the petition”; so that, if the trustee “should desire 'to obtain leave to sell the assets specifically excepted in the order, it would be necessary for him to file another petition.” With this view I cannot agree. The petition must be read with the stipulation and the rest of the proceedings. The stipulation provided, in terms:
“Such further notice to be given by the trustee to creditors as the referee in bank*790ruptcy may direct, before the entry of any order with reference to the sale of the said ammonia stock, or interest in the estate of Benjamin P. Cheney, Sr.”
This amounts to an agreement to suspend, to the extent indicated, proceedings under the blanket petition. It contemplates further proceedings under this petition—not a new petition. The order made was consistent with the stipulation; it was therefore an interlocutory, not a final, order. It follows that the petition remains undisposed of. The jurisdiction sought by the trustee, assented to by the Ammonia Company, and asserted by the referee over the sale of this stock, free and clear, still subsists, and cannot now be questioned, either by the trustee or by the creditor. And the Ammonia Company had, as I think, a right to regard the status created as the result of the stipulation and interlocutory order as eontinuingly satisfactory to the trustee, unless and until the trustee should, on due notice, call up the petition for further action. Of course the Ammonia Company had a like right.
The probable reason why the petition was never pressed for further hearing was because, while litigation was being carried on as to the bankrupt’s interest in his father’s estate (Woodard v. Snow, 233 Mass. 267, 124 N. E. 35, 5 A. L. R. 1381; Forbes v. Snow, 239 Mass. 138, 131 N. E. 299, 16 A. L. R. 546; Forbes v. Snow, 245 Mass. 85, 140 N. E. 418), the Ammonia stock became worthless. But the present questions of law are precisely the same as though, pending this suspension, the Ammonia stock had become worth $500,000, and the chief asset of the estate. If the Ammonia stock, rather than the Cheney estate, had developed large value, the contentions now made would never have been heard of.
I conclude that the litigation, within the meaning of section 57n, is still pending.
The questions so far discussed were not raised and discussed before Judge Morton or dealt with in his opinion. He disallowed the petition as matter of discretion and not as matter of law. Agreeing with him that he had power to allow it, with deference I venture to disagree on the question of discretion. He says, and I agree: “It is settled by authoritative decisions that courts of bankruptcy should exercise great liberality in allowing amendment of insufficient or defective proofs of claim. In re Basha, 200 F. 951, 119 C. C. A. 335; Hutchinson v. Otis, 190 U. S. 552, 23 S. Ct. 778, 47 L. Ed. 1179; Id. (C. C. A. 1st), 115 F. 937, 53 C. C. A. 419; In re Kessler, 184 F. 51, 107 C. C. A. 13, 25 Am. Bankr. Rep. 512 (C. C. A. 2d); In re Salvator Brewing Co., 193 F. 989, 113 C. C. A. 626, 28 Am. Bankr. Rep. 56. It is also settled that the mere scheduling of a claim is not sufficient proof of it.”
But his conclusion is thus stated:
“It is not to be lost sight of that the Ammonia Company had a just claim, for a large amount, which will be lost if the proof is not permitted; but it must also be remembered that the present situation is its own fault, I doubt whether, as a matter of law, what was done- on its behalf is susceptible of amendment into a proof of claim; and I am clear that the equities in favor of the claimant are by no means strong enough to warrant such an extreme exercise of discretion in its favor as it invokes. It is upon this latter ground that I rest my decision, affirming in so doing the judgment and order of the referee.” (Italics mine.)
I think the scheduling of the claim, supplemented by the proceedings before the referee, was enough so that there was power to allow amendment.
In the objection to the sale filed by counsel for the Ammonia Company is the statement that the Ammonia Company “has a lien on said shares to the amount of upwards of $130,000.” The words “to secure a debt due from the bankrupt” do not explicitly appear. But the schedule, which was a part of the record before the referee and the trustee, showed that the alleged lien was for a debt due from the bankrupt, not from a third party. All the parties must have understood, and did understand, that this was an assertion in writing of a debt of upwards of $130,000 due from the bankrupt—not from another debtor. This was enough to lay a basis for an amendment. See In re Patterson Shipbuilding Co. (C. C. A.) 293 F. 190, 192; In re Fairlamb (D. C.) 199 F. 278; In re Drexel Hill Motor Co. (D. C.) 270 F. 673; J. B. Orcutt Co. v. Green, 204 U. S. 96, 27 S. Ct. 195, 51 L. Ed. 390; 2 Remington, Bankruptcy, §§ 747, 751; In re Louis J. Bergdoll Motor Co. (D. C.) 230 F. 248.
It also seems to me clear that the equities are in favor of the claimant.
The Ammonia Company did nothing to injure other creditors or to impair its right to equality of treatment in the general assets after applying the value of its security. True, it objected, in 1918, to a sale of the Ammonia stock. But the record indicates that the trustee, on consideration, adopted the Ammonia Company’s view that a sale at that time was not in the interest of the es~ *791tate. For aught that appears, that stock then had large prospective, although little immediate, market value. If the trustee had insisted on a sale and the referee had so ordered, doubtless the secured creditor might have bid it in, thus acquiring for his own sole benefit any possible increment of value. 6 Remington, § 2614.
At any rate, as there was to be litigation to determine the value of the bankrupt’s interest in his father’s estate, the record indicates that all parties were satisfied to preserve the status quo as to the Ammonia stock and the Gila Sulphide stock. Under such circumstances, no creditor, secured or unsecured, has any equities against any other creditor. It was in the common interest, as then considered, to suspend sale of these three items of assets, pending further development as to tlieir value. The facts that the Sulphide stock is of unknown value, that the Cheney estate has proved to be of large value, and the Ammonia stock worthless, make no difference whatever either in the questions of law or in the equities which may guide on questions of discretion. The fundamental principle of equality of treatment of honest creditors is the rule that should control in this ease.
While the purchase by the bankrupt’s mother of two-thirds of his proved and allowed debts, and also the chief asset of his estate, is not, in form, a composition with his creditors, yet, in business results, both to the bankrupt and to the proving creditors, and in equities arising to the scheduled but (so far) nonproving creditors, the situation is closely analogous to that created by an outright offer of composition; the bankrupt’s estate goes back to his family through a trade with his creditors. Nassau Smelting & Refining-Works v. Brightwood Foundry Co., 265 U. S. 269, 44 S. Ct. 506, 68 L. Ed. 1013. A trade has superseded normal bankruptcy as to two-thirds of the creditors. Cumberland Glass Co. v. Dewitt, 237 U. S. 447, 454, 35 S. Ct. 636, 59 L. Ed. 1042.
This quasi composition undertaking has obviously been, facilitated by the delay of nearly seven years in bringing the estate to the distribution point. Such delay wearies and discourages creditors to the point of being easy sellers of their claims. Justice thus delayed is justice denied. Under such circumstances courts should not be astute to prevent scheduled and admittedly honest creditors from proving and participating in the bankrupt estate. Speculation with property and rights in custodia legis is not to be encouraged. This is a case in which the one-year statute of limitations has no just application; one in which it should not be applied if there is any legal way of avoiding the application.
I find at least two legal ways of avoiding this unjust result.