22 F.(2d) 6

view of a decision of the United States Board of Tax Appeals. Affirmed.

Edgar Watkins, of Atlanta, Ga. (Mac Asbill and Edgar Watkins, Jr., both of Atlanta, Ga., on the brief), for petitioner.

Mabel Walker Willebrandt, Asst. Atty. Gen., A. W. Gregg, General Counsel, Bureau of Internal Revenue, and W. Frank Gibbs, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.

Before WALKER, BRYAN, and FOSTER, Circuit Judges.

FOSTER, Circuit Judge. This is a petition for review of a decision of the United States Board of Tax Appeals.

Petitioner, Thomas J. Avery, an inhabitant of Georgia, in filing his income tax return for 1919, claimed as a deduction the sum of $36,567.28 for debts ascertained to be worthless and charged off during that taxable year. The Commissioner of Internal Revenue, respondent, allowed a deduction of only $1,841.26 and determined a deficiency of taxes amounting to $15,335.65. On appeal the board allowed an additional deduction of $392.96, determined that the other worthless accounts charged off in 1919 were not ascertained to be worthless during that year, found the deficiency in income tax to be $15,143.10, and entered an order accordingly.

The first question to be considered is our jurisdiction to reveiew a decision of the Board of Tax Appeals. The board was created by title 9 of the Revenue Act of 1924 (26 USCA §§ 1211-1222 [Comp. St. § 6371b]), and taxpayers were given the right to appeal to the board from decisions of the Commissioner of Internal Revenue determining a deficiency of taxes. After an adverse decision by the board, the taxpayer had no further remedy than to pay the taxes and sue to recover them, the same as from an adverse decision of the Commissioner, and by the statute creating it (section 900 [g], being 26 USCA § 1218 [Comp. St. § 6371%b]), the findings of the board were made prima facie evidence of the facts therein stated in any suit or proceeding by the taxpayer. The board was continued as an independent agency in the executive branch of the government by the Revenue Act of 1926, and by section 1003 of the said act (44 Stat. 110) the Circuit Courts of Appeals were given jurisdiction to review its decisions. Section 1003 reads as follows:

"Sec. 1003. (a) The Circuit Courts of Appeals and the Court of Appeals of the District of Columbia shall have exclusive juris

diction to review the decisions of the board (except as provided in section 239 of the Judicial Code, as amended); and the judgment of any such court shall be final, except that it shall be subject to review by the Supreme Court of the United States upon certiorari, in the manner provided in section 240 of the Judicial Code, as amended.

"(b) Upon such review, such courts shall have power to affirm or, if the decision of the board is not in accordance with law, to modify or to reverse the decision of the board, with or without remanding the case for a rehearing, as justice may require." [1] It was undoubtedly the intention of Congress to create an independent board of experts to decide impartially between the government and the taxpayer, with the right to a final determination of the questions presented in a regularly constituted court before It is consistent with payment of the tax. that intention to say that it was not contemplated that the Courts of Appeals should be burdened with reviewing the mass of evidence usually submitted before a board charged with the duty of considering technical details.

It will be noted that the Courts of Appeals have jurisdiction to reverse a decision of the board if it is not in accordance with law. It is clear from the wording of the statute that the jurisdiction given to this court is to review only errors of law in a decision of the board, and the inquiry is limited the same as it would be in reviewing the verdict of a jury on a writ of error, if the board has acted within its jurisdiction in considering the case presented.

It is contended by petitioner that the evidence before the Commissioner and the board was undisputed, and that, having exercised an honest belief in ascertaining and charging off the debts sought to be deducted in the year 1919, both the Commissioner and the board were concluded by his judgment. [2] The Revenue Act of 1918 (40 Stat. 1057), which applies to this case, permits a taxpayer, in computing net income, to deduct debts ascertained to be worthless and charged off within the taxable year. reasonable interpretation of the law is that, in order to secure a deduction of worthless debts, they must be charged off in the year they are ascertained to be worthless. A man is presumed to know what a reasonable person ought to know from facts brought to his attention. A taxpayer should not be permitted to close his eyes to the obvious, and to carry accounts on his books as good when in fact they are worthless, and then deduct them

The

22 F.(2d) 9

open court, and a default entered against each. A writ of scire facias was issued, returnable forthwith. Judgment was entered against the Columbia Casualty Company and paid. Nichols defended, but was held liable. Nichols' main contention, and the only one we find it necessary to consider, is that Parker's surrender by the Southern Surety Company ended all liability of both sureties under the original bailment. We think this contention is well grounded.

[1] While sureties on a bail bond have certain rights over the principal which do not accrue under an ordinary suretyship, the familiar rule of strict construction applies. Reese v. United States, 9 Wall. 13, 21, 19 L. Ed. 541. The doctrine is stated by the Supreme Court in Smith v. United States, 2 Wall. 219, 235, 17 L. Ed. 788, as follows:

only by his own act, and he did nothing; he knew nothing of the October bailment. We agree with the Supreme Court of California in People v. McReynolds, 102 Cal. 308, 36 P. 590, that the fact that the accused was in the custody of the sheriff on the order of the court for only a short time was immaterial; that "it makes no difference whether the time was ten minutes or ten months."

To the same effect is Commonwealth v. Coleman, 2 Metc. (Ky.) 382, where the court points out that, when the principal had been surrendered, the sureties no longer had any control over him, and neither of them could be held responsible for his appearance for any purpose whatsoever. This obviously sound doctrine is supported by the overwhelming weight of authority. State v. Doyal, 12 La. Ann. 653; State v. Trahan, 31 La. Ann. 715; 6 C. J. 941. We find no authority to the contrary which calls for citation and discussion.

The judgment of the District Court is reversed, and the case is remanded to that court for further proceedings not inconsistent with this opinion.

"When the contract of a guarantor or surety is duly ascertained and understood by a fair and liberal construction of the instrument, the principle, says Chancellor Kent, is well settled, that the case must be brought strictly within the guaranty, and the liability of the surety cannot be extended by implication. 3 Commentaries (10th Ed.) 183; Birkhead v. Brown, 5 Hill, 635. Liability of a surety, say the court in McClusky v. Cromwell [11 N. Y.] 1 Kernan, 598, is always strictissimi juris, and cannot be extended VAN by construction; and this court, in the case of Leggett et al. v. Humphrey, 21 How. 76 [16 L. Ed. 50], adopted the same rule, and explicitly decided that a surety can never be bound beyond the scope of his engagement. United States v. Boyd et al., 15 Pet. 208 [10 L. Ed. 706]; Kellogg v. Stockton, 29 Pa. 460."

[2] When Parker was bailed in April, the two sureties were-while not technically cosureties associate sureties, giving in open court, together, security to the required amount of $5,000 for Parker's appearance. When the Southern Surety Company surrendered Parker, six months later, that bailment was ended. The transaction of October 20th was a new bailment, to which Nichols was not a party, either de novo or under his contract of April 9th. The learned District Judge failed to carry to its logical and legal conclusion his expressed view that, if Parker "while in custody had made his escape, unquestionably Nichols would have been discharged." This amounts to holding that Nichols was not bail surety while Parker was in the custody of the government. But, once ended by acts of the Southern Surety Company and of the government, Nichols' responsibility could be re-created

In re A. C. WAGY & CO., Inc. NORDEN v. A. C. WAGY & CO., Inc., et al. (two cases).

Circuit Court of Appeals, Ninth Circuit.
October 31, 1927.

Nos. 5250, 5251.

1. Bankruptcy 39-Court can receive and consider voluntary petition, though involuntary petition be pending.

Pendency of involuntary petition in bankruptcy does not deprive court of jurisdiction to receive and consider voluntary petition. 2. Bankruptcy 51-Jurisdiction to protect creditors under earlier pending involuntary petition held not precluded by adjudication under voluntary petition.

That adjudication of bankruptcy is under voluntary petition does not preclude jurisdiction to protect creditors under the earlier pending involuntary petition.

3. Bankruptcy 51-Adjudication should be under voluntary petition, unless there arises question of preservation of rights under earlier involuntary petition.

Unless some question of preservation of rights under earlier involuntary petition arises, there should be an adjudication under subsequent voluntary proceeding.

4. Bankruptcy 51-Denial of order to show cause on petition to set aside adjudication held proper, application being for order directed only to the receivers.

There was no error in denying order to show cause on petitions to set aside adjudication in *Rehearing denied December 5, 1927.

bankruptcy, the application being for an order directed only to the receivers, who in such proceeding were not the representatives, either of the creditors or bankrupt, parties whose presence was essential to determination of question presented by petition.

5. Bankruptcy51-Petition to vacate adjudication in voluntary proceeding may not be maintained by creditor.

A creditor has no right to maintain petition to vacate adjudication of bankruptcy made in voluntary proceeding.

Appeals from the District Court of the United States for the Southern Division of the Southern District of California; William P. James, Judge.

In the matter of A. C. Wagy & Co., Inc., bankrupt. Robert Van Norden filed petitions to set aside adjudication of bankrupt in both the voluntary and the involuntary proceeding. From denial of orders to show cause, he appeals. Affirmed.

See, also, 20 F. (2d) 638.

In the court below A. C. Wagy & Co., Inc., a corporation, was adjudged bankrupt, in both a voluntary and an involuntary proceeding. The petition in the involuntary proceeding was filed on June 1, 1927, and on that date receivers were appointed, and on June 22 adjudication of bankruptcy was entered. The voluntary petition was filed on June 16, 1927, and on the same day the corporation was adjudged a bankrupt and the receivership was extended to said proceeding.

The appellant herein filed in the court below in each proceeding a petition to set aside the adjudication of bankruptcy and the appointment of receivers. In each case he alleged that in May, 1927, he had filed in the District Court of the United States for the Northern District of California a complaint against said corporation, praying, among other things, for the appointment of a receiver for its property; that in pursuance thereof that court on May 25, 1927, appointed receivers who duly qualified and went into possession of the assets of said corporation within that district, and that the said receivers had thereafter filed in the court below a bill praying for their appointment as ancillary receivers to take possession of said corporation's assets within the latter district; but that said petition was denied and others were appointed such ancillary receivers, and as such had qualified and entered into possession of the assets of the corporation within that district, the same persons having subsequently been appointed as receivers in the two proceedings in bankruptcy.

tion of bankruptcy and the appointment of receivers in the involuntary proceeding, the appellant's petition alleged that the court was without jurisdiction, for want of service of the subpoena upon the proper officer of said corporation, and as to the voluntary proceeding the petition alleged that the resolution of directors authorizing the same was null and void, for the reason that they had not been elected or qualified as such officers.

From the denial of orders to show cause upon said petitions the appellant appeals. Arnold C. Lackenbach, of San Francisco, Cal., for appellant.

W. T. Craig and Shaw & McDaniel, all of Los Angeles, Cal., for appellees Carnahan

and Scott.

B. W. Kemper, of Los Angeles, Cal., for bankrupt.

Shaw & McDaniel, of Los Angeles, Cal., for petitioning and intervening creditors.

Kyle Z. Grainger and Clare Woolwine, both of Los Angeles, Cal., for certain intervening creditors.

Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.

GILBERT, Circuit Judge (after stating the facts as above). the facts as above). [1-4] The pendency of the involuntary petition did not deprive the court below of jurisdiction to receive and consider the voluntary petition, and the fact that adjudication was made under the latter did not preclude jurisdiction to protect the creditors under the former. International Silver Co. v. New York Jewelry Co. (C. C. A.) 233 F. 945. It is held that, unless some question of the preservation of the rights under the earlier involuntary petition arises, there should be an adjudication under the subsequent voluntary petition, In re Lachenmaier (C. C. A.) 203 F. 32; In re Anderson Motor Co. (D. C.) 18 F. (2d) 1001; and that as a general rule the adjudication should be made in the voluntary case "since it is quicker, less expensive, and less likely to lead to delay and unnecessary litigation." In re New Chattonooga Hardware Co. (D. C.) 190 F. 241. It results that, if the appellant failed to present to the court below ground for vacating the adjudication in the voluntary proceeding, he was entitled to no relief in that court on either of his petitions.

It remains, therefore, to inquire whether the appellant was erroneously denied the order to show cause why the adjudication on the voluntary petition should not be set aside and vacated and the receivers discharged. As ground for setting aside the adjudica- We think it clear that there was no error.

22 F.(2d) 11

FIRST NAT. BANK OF GAINESVILLE, GA., instructed to make payment upon delivery of