5. Evidence 43(1)-Court does not judicially notice bankruptcy proceeding in suit against bankrupt.

Court does not judicially notice bankruptcy

This makes it unnecessary to discuss the other questions presented by the plea and the other propositions that have been urged in the briefs. For the reasons stated, I think the case should be dismissed for want of jurisdiction; and it is so ordered.

In re BARRETT & CO.
Claim of RHODES.

District Court, S. D. Georgia, Augusta Division.
June 21, 1928.

No. 1746.

1. Bankruptcy 4, 9(2)-Bankruptcy Act supersedes conflicting general legal principles and state statutes (Bankr. Act [11 USCA]). Bankruptcy Act (11 USCA), passed pursuant to the Constitution, is part of the supreme law of the land, superseding principles of general jurisprudence and state statutes in conflict therewith.

2. Bankruptcy 341-"Allowance of judgment" as claim in bankruptcy, whether rendered before or after filing of petition, means treatment thereof as conclusively fixing existence and amount of liability (Bankr. Act, § 63a (5); 11 USCA § 103(a), (5).

To allow judgment as claim in bankruptcy, whether absolutely owing when petition was filed under Bankruptcy Act, § 63a, 11 USCA § 103(a), or subsequently rendered before consideration of application for discharge, under subdivision (5) (11 USCA § 103(a), (5), means to treat it as conclusively fixing existence and amount of liability, which is of very nature of judgment.

3. Abatement and revival 43-Bankruptcy does not divest other courts than bankruptcy court of jurisdiction over bankrupt's person. The bankruptcy of a person does not of itself divest other courts than the bankruptcy court of their jurisdiction over his person. 4. Abatement and revival 43-Personal suit is not abated by defendant's bankruptcy, but court retains jurisdiction over bankrupt's person only.

A personal suit is not abated by defendant's bankruptcy, though it may be temporarily stayed pending bankruptcy proceedings, if based on provable debt, but court retains jurisdiction over bankrupt's person only; jurisdiction over

proceeding, in suit against bankrupt, but it must be pleaded and proved.

6. Bankruptcy 319-Fair distribution of estate among creditors through federal courts being prime object of Bankruptcy Act, distributees' claims must be ascertained by bankruptcy court, without regard to judgments of other courts (Bankr. Act [II USCA]).

Fair and equal distribution of bankrupt estate among creditors through federal courts being prime object of Bankruptcy Act 11 USCA), distributees' claims must be ascertained, as well as bankrupt's property collected, by bankruptcy court, without regard to judgments of other courts.

7. Bankruptcy 319-Only provable debts, reduced to judgment after filing of bankruptcy petition pursuant to statute, are binding on trustee not party to suit (Bankr. Act, §§ 11b, Ilc, 63a, 63b; II USCA §§ 29 (b), (c), 103(a), (5), (b).

Only provable debts, reduced to judgment after filing of petition in bankruptcy pursuant to provisions of Bankruptcy Act, are binding on trustee, not made party to suit nor directed to defend it, under section 63a (5), 11 USCA § 103(a), (5), in view of section 63b, 11 USCA § 103(b), and sections 11b, 11c, 11 USCA § 29 (b), (c).

8. Bankruptcy

319-Money judgment against bankrupt pending bankruptcy does not bind trustee, not party to suit nor directed to defend it (Bankr. Act, § 63a (5); 11 USCA § 103(a), (5).

Under Bankruptcy Act, § 63a (5), 11 USCA § 103(a), (5), a money judgment, rendered against bankrupt pending bankruptcy, does not bind trustee, not made party to suit nor directed by bankruptcy court to defend it.

9. Bankruptcy 319-Trustee, without notice of amendment of petition changing tort suit against bankrupt to suit on implied contract, held not bound by judgment against bankrupt (Bankr. Act, § 63a (5); 11 USCA § 103(a), (5).

Where petition in original suit against cor

poration, alleged to be in possession of cotton er's authority in payment of obligation due dedelivered by warehouseman without petitionfendant, alleged no conversion by latter, defendant's trustee in bankruptcy could safely ignore it, as judgment would not have been provable under Bankruptcy Act, § 63a (5), 11 USCA § without notice to him, alleging that defendant 103(a), (5), and was not bound by amendment, sold cotton and appropriated proceeds, with notice of petitioner's title and under implied contract to pay him value thereof.

In Bankruptcy. In the matter of the bankruptcy of Barrett & Co., a corporation. From a judgment of the referee, sustaining

Paul T. Chance, of Augusta, Ga., for

SIBLEY, District Judge. On June 26, 1923, Rhodes filed, in a state court, a petition at law against Barrett & Co., a corporation, alleging that it was in possession of 68 bales of cotton belonging to petitioner, particularly described by marks and weights, of the value of $10,196.83, which had been stored by petitioner with Pilcher & Dillon, warehousemen, and which Pilcher & Dillon had delivered, without petitioner's authority, to Barrett & Co., in payment of obligations due Barrett & Co by Pilcher & Dillon. The prayer was "for the judgment of the court" and for process. On July 30, 1923, Barrett & Co. was adjudged a bankrupt. At the appearance term of the suit, in August, 1923, Barrett & Co. answered, denying liability, and, setting up the pending bankruptcy, prayed a stay of the suit. On September 13, 1923, Rhodes filed a proof of his claim in bankruptcy for $10,196.83, attaching a copy of said petition. No stay of the suit was ordered by the state or bankruptcy court, but no action was taken in it until September 20, 1926, when Rhodes had his case set down for trial, notifying the original counsel for Barrett & Co. and the counsel for the trustee in bankruptcy. These counsel appeared in court, but declined to participate in the trial -counsel for Barrett & Co. claiming to be no longer employed, and counsel for the trustee claiming that the trustee, not being a party, was not interested in the trial and would not be bound by its result; that Rhodes had filed his claim in the bankruptcy court, and that court alone had jurisdiction to pass on its validity.

These counsel having left the court, Rhodes amended his petition by alleging that Barrett & Co., at the time of receiving the cotton, had sold it on the market and appropriated the proceeds, with notice of his title and under an implied contract to pay him the value of the cotton. A verdict was had for the plaintiff, no one contesting it, and a judgment was taken against Barrett & Co. for $10,196.83 and costs. Rhodes then amended his claim in the bankruptcy case by setting up this judgment. The trustee there upon moved the referee to disallow the claim on grounds going to its merits. On a hearing the referee held that section 63a (5) of the

touching the allowance of judgments obtained pending bankruptcy was applicable, and precluded any inquiry into the merits, and he sustained the judgment as a valid claim. The question is as to the conclusiveness in the bankruptcy court of a money judgment against the bankrupt, rendered pending the bankruptcy, after notice to the trustee, but without his participation, when he is not made a party by the trial court, nor directed to defend by the bankruptcy court. [1, 2] The jurisdiction in bankruptcy is derived from the Constitution of the United States, and is paramount. The Bankruptcy Act (11 USCA), passed in pursuance of the Constitution, is part of the supreme law of the land, superseding principles of general jurisprudence and state statutes, if in conflict with them. The ascertainment of the meaning of the act is therefore all-important. Section 63a deals with provable claims, naming as among such "debts which are (1) a fixed liability as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, and (5) founded upon provable debts reduced to judgments after the filing of the petition and before the consideration of the bankrupt's application for a discharge." In both instances, to allow the judgment as a claim fairly means to treat it as conclusively fixing the existence and the amount of the liability; this being of the very nature of a judgment. As to the judgments first mentioned, those rendered prior to bankruptcy, they are of necessity against the bankrupt alone; but the trustee, being a privy since the judgment, and taking the estate subject to the liabilities against it as they existed at the time of the filing of the petition, is naturally and properly bound by it, unless attackable for collusion. Merely personal judgments against the bankrupt, rendered after the adjudication and after the rights and liabilities of the bankrupt estate have become fixed, the trustee being no party to them, should reasonably not bind the trustee nor the estate.

[3-5] Since Peck v. Jenness, 7 How. 612, 12 L. Ed. 841, and Eyster v. Gaff, 91 U. S. 521, 23 L. Ed. 403, it has been recognized that the bankruptcy of a person does not, of itself, divest other courts than the bankruptcy court of their jurisdiction. Pending suits to enforce specific liens or to deal with specific property (other than insolvency proceedings) are generally not to be interfered with by the bankruptcy court, unless to have

the trustee intervene. A personal suit against the bankrupt is not abated, though it may, if on a provable debt, be temporarily stayed pending bankruptcy. The court does not judicially notice the bankruptcy proceeding, but it must be pleaded and proved. Boynton v. Ball, 121 U. S. 457, 7 S. Ct. 981, 30 L. Ed. 985. If at last a discharge in bankruptcy be granted, but the bankrupt neglects to plead and prove it, a judgment against him for the debt rendered afterwards is valid and binding on him. Dimock v. Revere Copper Co., 117 U. S. 559, 6 S. Ct. 855, 29 L. Ed. 994. But in such personal suits the jurisdiction which the trial court retains after bankruptcy is only what it had before-a jurisdiction over the person of the bankrupt. The jurisdiction over his property and its burdens has passed to the bankruptcy court. Nothing that the bankrupt thereafter does or suffers to be done can affect them. Not the bankrupt, but the trustee, is thenceforth the representative in law of the bankrupt's former business in so far as it may affect the distribution of the estate.

[6] To make a fair and equal distribution of the estate to creditors through the federal courts is a prime object of the Bankruptcy Act. To accomplish it, it is just as important that the claims of the distributees be ascertained by the bankruptcy tribunal as that the bankrupt's property should be collected by it. That the distribution should be controlled by the judgments of other courts in any jurisdiction where the bankrupt can be served, the creditor perhaps selecting a favorable forum, and the bankrupt perhaps playing favorites in defending, would be most unfortunate. Even if notice and opportunity to defend be given the trustee, much embarrassment would, and much injustice might, en

sue.

[7] The provable debts reduced to judgment after the filing of the petition, mentioned in section 63a (5), do not include all such judgments rendered against the bankrupt. Literally applied, as the referee applied them, the words would include judgments by default and judgments without notice to the trustee, for there is nothing in the act to differentiate them. But I am persuaded that only provable debts reduced to judgment after the filing of the petition pursuant to the provisions of the act are meant. One such provision for reduction to judgment occurs in section 63b (11 USCA § 103(b), immediately following: "Unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct." Liquidation by the trial of 27 F. (2d)-11

a suit, if so directed, would result in a provable judgment. Liquidation by a trial against the wish of the bankruptcy court, and without the participation of its trustee, would not.

Again, in section 11, dealing with suits pending at the time of the bankruptcy, it is provided: "(b) The court may order the trustee to enter his appearance and defend any pending suit against the bankrupt. (c) A trustee may, with the approval of the court, be permitted to prosecute as trustee any suit commenced by the bankrupt prior to the adjudication, with like force and effect as though commenced by him."

11 USCA § 29 (b), (c). If the trustee thus defends, he, of course, is bound by the judgment; but the act studiously subjects his entrance into litigation in other courts to the direction of the bankruptcy court.

The authorities on the question are not clear or consistent. Norton v. Switzer, 93 U. S. 355, 23 L. Ed. 903, was decided under the Bankruptcy Act of 1867 (14 Stat. 517). The assignee there was formally made a party and served as such, and the judgment thereafter rendered, he not defending, was held to bind him in fixing the existence and amount of the debt. No allusion is made to the provision in that act (R. S. § 5106) that a suit may proceed to judgment to fix the amount due "by leave of the court in bankruptcy." See Hill v. Harding, 107 U. S. 631, 2 S. Ct. 404, 27 L. Ed. 493, where the section is interpreted. Under the present act (In re Buchan's Soap Corporation [D. C.] 169 F. 1017), the trustee was held bound by the result of a default judgment against the bankrupt, although the claim had been filed for allowance in the bankruptcy court. It does not appear from the report whether the trustee was made a party or only notified of the trial. The same court in Re Hoey, Tilden & Co., 292 F. 269, held to the contrary, refusing to let its officer defend a suit on the ground that he would not be bound by the result. In re McBryde (D. C.) 99 F. 686, upheld a suit at law pending bankruptcy as effectual to stop the running of limitation, but made no ruling on the conclusiveness of the judgment. In re Brady Foundry Co. (C. C. A.) 3 F. (2d) 437, holds the trustee not bound by a default judgment against the bankrupt, he having notice of the suit and attempting to open the judgment afterwards, but not otherwise being a party. [8] Upon the broad ground that under a proper construction of the Bankruptcy Act, a money judgment against the bankrupt, rendered pending bankruptcy, does not bind a

for which the Towing Company may be legally liable, shall exceed $100 per day, and also that such limited liability may be increased by payment of an increased rate. The validity of this provision has been sustained by the Circuit Court of Appeals for the Sixth Circuit in Hand & Johnson Tug Line v. Canada S. S. Lines, 281 F: 779. See, also, Reid v. American Express Co., 241 U. S. 554, 36 S. Ct. 712, 60 L. Ed. 1156. [1] In view of these decisions, I must hold that the provision constituted a reasonable limitation of liability for demurrage for delay in the navigation of the North Sea, and, since the owner was aware of the tariff and its conditions and became a party thereto, the restriction was valid against it.

[2,3] The commissioner correctly ruled that the expense of crew during the delay in repairing the vessel was not a separate item of damage, but was included in the loss of use. He considered the expense for crew and the loss of use of the vessel together, the former merging into the latter, and calculated the damage by taking the gross market value during the time the North Sea was delayed while undergoing repairs. Allowance was made for expenses paid or incurred, deducting any amount saved because of the vessel's idleness. This rule was, I think, properly applied. Tweedie Trading Co. v. Strong & Trowbridge Co. (C. C. A.) 195 F. 929. In Christie & Lowe v. Fane S. S. Co. (C. C. A.) 159 F. 648, it was ruled that an allowance in a collision case for loss of charter money pending repairs and for expenses of crew for wages during the delay was double charge, since such expenses of operation are elements constituting the amount of damage sustained from the loss of the use of the ship. The item of $1,067.80 for wages of crew, therefore, was properly disallowed as a separate basis of recovery.

[4] The next question is whether the commissioner correctly applied the limitation of liability terms to the claim for delay, excluding the claim of recovery. Proctor for libelant urges that the tariff, properly construed, is a limitation upon recovery, and not upon the claim for detention or delay, and invokes the rule usually applied in admiralty, where both vessels are at fault for collision, of applying the limitation rule after the damages have been divided, "or until the balance has been struck." The North Star, 106 U. S. 17, 1 S. Ct. 41, 27 L. Ed. 91. This contention implies that, since the damages for 104 days' delay was approximately $6,192.80, the limitation of the tariff, when applied thereto, would entitle libelant

to a flat recovery of $1,025, without division under the interlocutory decree.

But since the contract of towage in the instant case gave to libelant the right to increase the limitation to any amount above the $100 per day by paying a higher rate for the towage service rendered, I am persuaded that the commissioner properly rejected this view, and that the rule of The North Star does not apply. In that case the limitation of liability was based upon the longexisting maritime rule of division of damages for a joint fault, while the legal relations established by the tariff and the specific limitation to any claim for delay demands a different apportionment, and one in accord with the "valuation rule" applied in the Reid Case, supra, and in Union Pac. R. Co. v. Burke, 255 U. S. 317, 41 S. Ct. 283, 65 L. Ed. 656. As well said by the commissioner:

"To apply the limitation to the recovery instead of to the claim would, in case of a division of damages, be to allow a claim for $200 per day, and then to divide the damages upon that basis and this is prohibited by the plain language of the provision."

The exceptions are overruled, and respondent must pay one-half of the total damages for repairs, loss of use, and interest, or $3,398.49.

ANDERSON v. SHIPOWNERS' ASS'N OF THE PACIFIC COAST et al. District Court, N. D. California, S. D. June 21,

1928.

1 No. 1486.

Monopolies 24 (2)-Evidence held not to establish combination in restraint of trade between shipowners' associations by maintenance of bureau for employment of seamen,

Evidence held not to establish combination in restraint of trade between associations ownstate and foreign commerce on the Pacific Coast, ing, operating, or controlling vessels in interby maintenance of employment bureau for employment of all seamen on the Pacific Coast; it not having been proven that associations and

their members have bound themselves to employ

seamen exclusively through such employment bureau.

In Equity. Suit by Cornelius Anderson, on behalf of himself and all other seamen employed in interstate and foreign commerce by sea on vessels flying the flag of and engaged in the merchant service of the United States, and sailing to and from ports on the Pacific Coast of the United States, against the Shipowners' Association of the Pacific Coast and others. Judgment for defendants