This is a summary proceeding, commenced by a petition by the trustee in bankruptcy of A. Karp, praying that Charles Porter, who had been common-law assignee of Karp, “be directed to turn over forthwith to said trustee all the property, or the value thereof, which came into the possession of said Porter by virtue of said assignment.” The matter was heard by Mr. Referee Warner, who made an order that Porter pay over forthwith to the trustee the sum of $467.50. The case is here on the certificate of the referee on a petition for review. The evidence is not reported. The findings of fact by the referee must therefore stand, unless they appear from his certificate to be erroneous. At the beginning of the proceedings Porter objected that this court had no jurisdiction of the matter on summary proceedings, and has never waived or abandoned that objection.
[ 1 ] The bankrupt carried on a banking business. Pie made a common-law assignment to Porter on January 6, 1913, under which Porter took possession the next day. On January 11th the involuntary petition in bankruptcy was filed, upon which adjudication has been made. Porter carried on the business under the assignment to him till January 17th. when he closed it out by selling all the assets. He “acted in good faith and under advice of counsel.” He paid over to the trustee $218.50, which he contends is all that was due.
It is not clear on what basis the account was stated by the assignee before the referee. Apparently the debit side of it was made up of an itemized schedule of the property received, with no values given, and the sums collected by him from the operation of the business; and the credit side was made up of sums paid for running the business, of various disbursements to himself, his counsel, and other persons in connection with the sale of the assets and the liquidation of the business, of accounts receivable resulting from his operation of the business, of claims on certain scheduled property said to belong to Karp,
Upon these facts, I am of opinion that the bankruptcy court had power to settle Porter’s account with the trustee in summary proceedings. To hold that a common-law assignee, who, with notice of pending bankruptcy proceedings against his assignor, goes ahead and operates, and finally liquidates, the bankrupt’s business and property, can only be made to account to the trustee by plenary proceedings, perhaps in a state court, would introduce such delay, expense, and lack of uniformity in the settlement of bankrupt .estates that such a ruling ought not to be made, unless required by decisions binding on this court. According to what seems to be established law, a common-law assignee is to be regarded as an adverse claimant (and therefore not amenable to summary process) only as to payments or dispositions of property made by him in good faith, before the institution of the bankruptcy proceedings, and as to liens in his favor which accrued prior to that time. Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814, 5 Am. Bankr. Rep. 623; Louisville Trust Co. v. Comingor, 184 U. S. 18, 22 Sup. Ct. 293, 46 L. Ed. 413, 7 Am. Bankr. Rep. 421; Randolph v. Scruggs, 190 U. S. 533, 23 Sup. Ct. 710, 47 L. Ed. 1165, 10 Am. Bankr. Rep. 1; Re Chase, 124 Fed. 753, 59 C. C. A. 629 (C. C. A. 1st Circuit); Re Thompson, 128 Fed. 575, 63 C. C. A. 217, 11 Am. Bankr. Rep. 719 (C. C. A. 2d Circuit); Remington on Bankruptcy (2d Ed.) §§ 1611, 1612. It does not appear that any of tire matters here in controversy are of those sorts.
The items of the account in dispute are as follows:
(1) Alleged overpayment to attorney for assignee.$105.00
(2) Goods received by assignee and unaccounted for by him. 293.50
(3) Amount reserved by assignee for Silbert claim. 69.00
$467.50
[2] As to the first of these items: The assignee paid his attorney $205. The referee has found that this was $105 more than a proper charge for the services rendered, and has charged the assignee with the overpayment. There are no facts before me as to the nature and extent of the legal services, or the occasion for them. The referee’s findings cannot, therefore, be revised, and must be confirmed.
As to items 2 and 3: In operating the business the assignee paid out $629.53; he took in from sales made by him (and perhaps also from accounts receivable of the bankrupt) $635.83; and he has uncollected book accounts' for goods sold by him on credit amounting to $109.73. The learned referee, in stating the account, apparently disregarded altogether Porter’s operation of the business, found that he had not accounted for $293.50 worth of goods that he took over, and thereupon charged him with that difference. The uncollected book accounts are
The assignee’s explanation was; as I understand the facts stated on the second page of the certificate, that this $293.50 represented, as to $116.03, cash and book accounts resulting from his operation of the business, and as to the balance, $177.47, an operating loss during the eleven days; in other words, that he obtained the gross cash and credit intake of the business above stated by the expenditures which have been scheduled and allowed, plus $293.50 worth of flour received by him from Karp, which was used up in carrying on the business.
[8] The filing of the petition was notice that the petitioning creditors objected to the common-law assignment and opposed liquidation of the bankrupt’s affairs under it. The Bankruptcy Act gave them the right to have the assignment superseded and set aside. Re Slomka, 122 Fed. 630, 58 C. C. A. 322 (C. C. A. 2d Circuit). Under such circumstances, I think that the assignee must be held to have acted at his peril in carrying on the bankrupt’s business, and eventually selling it out and winding it up (see Bryan v. Bernheimer, ubi supra), and in doing anything beyond what was necessary to preserve the property which was in his hands when the petition was filed (Re Hays, 181 Fed. 674, 104 C. C. A. 656, 24 Am. Bankr. Rep. 691 [C. C. A. 6th Circuit]). More than that can be safely done after the bankruptcy proceedings are instituted only by a receiver acting under the authority of the bankruptcy court.
[4] As the cases above cited show, however, common-law assignments are by no means outlawed by the Bankruptcy Act. They are generally made with the object of holding a debtor’s business together pending an effort to settle his affairs without bankruptcy; they usually authorize and contemplate a continuance of the business while the effort is being made. Where the creditors allow the assignee to continue in possession of the property and to operate the business, he is not necessarily to be charged with a resulting loss, whether occurring before or after the filing of the petition in bankruptcy. As the assignment under which he acts is voidable, the burden is certainly upon him to satisfy the court that he acted, after the institution of the bankruptcy proceedings, not only in good faith, but with sound business judgment under the circumstances; in other words, that the court, if seasonably applied to, would have authorized him to do what he did. Bryan v. Bernheimer, ubi supra. It may well be ‘that the assignee has greater freedom of action and is held to a less strict accountability as to his conduct before the bankruptcy petition is filed, both because until that is done he cannot be sure the assignment will be set aside and is forced to act on his own responsibility, and also because the filing of the petition gives certain inchoate rights over the respondent’s property, which become fixed by the adjudication. Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405.
If the assignee desires to raise this point, however, it devolves upon
Upon the record before me, no error appears to have been made by the learned referee, and his order must be affirmed.