Pullan vs. C. & C. Air-Line R. R. Co.

ployed in making the earnings, and he has apportioned the value according to the length of the road; and, upon the capital thus ascertained he has calculated it at eight per cent. as a reasonable rent. Now I think the circumstances of the case do not warrant that. It seems to me that that is too low a per cent. for the use of the rolling stock of the defendants. This was an important element in the earnings of the road, and it seems to me that the master has hardly had a just appreciation of the part this rolling stock bore in obtaining these earnings. Eight per cent. on that kind of property, considering how subject it is to loss and deterioration in many ways, seems hardly enough, and I think that the facts scarcely warranted the master in finding so low a per centage; and that exception will be sustained by the court.

Some criticism has been made upon the manner in which the master obtained the results upon his pro rata rule. It is insisted on the part of the defense that he has made his denominators too low in every instance. For example, the master took the length of the road from Richmond to Logansport, one hundred and eight miles, to obtain a pro rata estimate for twenty-seven miles, then he took the length of the road from Richmond to Valparaiso, 170 miles, to make a pro rata estimate, and then for Chicago 216 miles, and then for the whole length of the road, about 580 miles. I am rather inclined to think there is something in this criticism on the part of the defense; and therefore in referring back the case to the master, I shall ask him to reconsider his pro ruta estimate upon these points and see whether he has been precisely correct. I am not certain as to this, and therefore I shall not make an absolute ruling upon that point.

There is only one remaining question which, although it is not absolutely necessary now to discuss or decide, still as it was presented in the argument, and may have some influence upon the action of the partics, I may as well state what is the opinion of the court. That is as to the effect of any finding of the court against the defendant for the indebtedness which

Pullan vs. C. & C. Air-Line R. R. Co.

is due for the income upon its property, I mean the Cincinnati and Chicago Air-Line Railroad Company. It is claimed that although the mortgage may not cover any other property than that between Richmond and Newcastle, as it included the income and after-acquired property of the road, and the defendant was in possession, subject to the equities protected by the mortgage, that its property is bound equitably for any decree that may be rendered against it. And I do not know why this principle, to some extent at least, may not be a sound one. They, as the operators of the road from Richmond to Logansport, received the income on this particular part; as receivers of the income of this part they may be bound to respond for that to the mortgagees under the mortgage of 1852.

As the court has already said, they held it in trust for whomsoever are entitled to it, and having so received and held it, there may be, perhaps, an equitable lien upon their property to respond for the amount. But I do not decide this point, and it may remain open for future consideration.

I may say, in conclusion, that the master appears to have devoted himself with great industry and fidelity to the investigation of the several points submitted to him by the court, and the manner in which he has discharged his duty, con. idering the many difficulties and embarrassments attending its performance, is very creditable to him. And the court, in the examination of the various questions referred to in this opinion, has derived great assistance from the arguments of the counsel on both sides.

For other opinions in this case, see Bill vs. The New Albany &c., Railway Co., Vol. 2 of this Series, 390; James Pullan vs. the Cincinnati & Chicago Air-Line R. R. Co. ct al., 4 do., 35.

That a court may on, or previous to, the final judgment revise any of its preliminary orders, consult Breedlove vs. Nicolet, 7 Peters, 413; Simson vs. Hart, 14 Johnson, 63; Akerly vs. Vilas, Vol. 2 of this Series, 110.—[Re porter.

Ex parte Perkins.

Ex parte PERKINS.

CIRCUIT COURT.-NORTHERN DISTRICT OF ILLINOIS.- MAY,1873.

IN BANKRUPTCY.

ASSIGNEE-REMOVAL.

1. DISCLOSURE TO CREDITORS.-It is the duty of an assignee to disclose to the creditors, upon inquiry, and where it appears they are ignorant thereof, the main facts known to him relating to the condition and assets of the bankrupt estate.

2. DEBTORS PURCHASING CLAIMS TO SET-OFF.-Where he knows there is a large sum of money on deposit in a bank, belonging to the estate, against which the bank claimed and were purchasing set-offs, it is his imperative duty to state these facts to creditors inquiring concerning the value of their claims.

3. EXCUSES WHAT INSUFFICIENT.-It is not a sufficient excuse that he could not give definite estimates as to what the estate would pay, or that he says he did not intend to mislead any one. He is presumed to intend the necessary consequences of his own acts, and the concealment of the exist ence of this large deposit must mislead creditors and affect their action. Nor is it a sufficient answer or excuse that the books of the bankrupt could be examined by the creditors.

4. REPORTS.-The assignee should also make, in season, the reports prescribed by the rules in bankruptcy.

5. REMOVAL WHEN ORDERED.-Where an assignee has failed in properly informing creditors in regard to their rights and the value of the assests, and the information has been suppressed in the interest of one class of creditors, it is the duty of the court to remove him.

6. PRACTICE.-On a revisory petition to the circuit court, the proper practice is to direct the district court to remove the assignee and to ap point some other competent person in his place.

This was a petition by John A. King and Newton S. Taylor, creditors of the State Insurance Company, bankrupt, filed under the second section of the bankrupt act, to review an

Ex parte Perkins.

order of the district court refusing to remove Norman C. Perkins, assignee of the State Insurance Company of Chicago, bankrupt.

This corporation, organized under the general law of the state of Illinois, and doing business in the city of Chicago up to the 9th day of October, 1871, sustained such losses on that day that it became insolvent and suspended business.

On the 2d of November the attorney-general of the state commenced proceedings in the circuit court of Cook county to wind up the corporation under the statute of the state, in which proceedings Horace A. Hurlburt, the president of the company, was appointed receiver, George C. Smith, president of the bank and treasurer of the insurance company, and his brother, Charles M. Smith, vice-president of the bank and vice-president of the insurance company, signing his bond.

On the 8th of December following, a petition in bankruptcy was filed against the company in the district court of the United States for this district, under which the company was, on the 12th of January, 1872, adjudicated a bankrupt by default. No schedule or inventory was filed until the 17th of February, 1873.

At the time of the fire, October 9, 1871, the company had in the hands of George C. Smith, its treasurer, on deposit in the National Loan and Trust Company, a bank of which he was president, the sum of sixty thousand dollars in cash, good mortgages to the amount of about one hundred thousand dollars and also United States Government bonds of the value of two hundred thousand dollars. These bonds were, at that time, in New York city but soon afterwards were, by Smith's order, converted into cash and the proceeds deposited in this bank.

The losses of the company by the fire were between $600,000 and $700,000. The books of the company were in the hands of the treasurer, and were not exhibited to any outside persons, and the reports ordinarily given of the liabilities and assets of the company by its officers and those winding

Ex parte Perkins.

up its affairs, were that the losses were about ten times its assets. Immediately after the fire the bank commenced buying up the proofs of loss as filed against the company, at the rate of ten per cent. on their face, for the purpose of off-setting them against the funds on hand. By the 1st of December they had purchased claims to the amount of two hundred and sixty thousand dollars, upon which they issued certificates of indebtedness in the name of the company, to J. Bradner Smith, a brother of George C. Smith and Charles M. Smith, which certificates were taken to the National Loan and Trust Company Bank and charged up at their face against the deposit of the company

The policies and proofs

of loss upon which these certificates were issued were left in the office of the company as taken up, and canceled. The balance still in the bank to the credit of the company was further diminished by deductions for salaries paid, and retaining fees of counsel, and loans to the amount of about twenty thousand dollars, and a further charge was made of forty-two housand dollars for stock of the insurance company which the bank had bought before the fire.

In the schedules all the policy-holders were returned as creditors of the company, but not J. Bradner Smith, to whom the certificates of indebtedness had been issued, nor the National Loan and Trust Company which had purchased them. The cash on hand was stated at $17,779.33, being the amount of the deposit in the bank after deducting all charges made against it. The other assets were returned as bills, notes and other securities to the amount of about one hundred and twenty-five thousand dollars.

At the election on the 12th of April, Norman C. Perkins, who had previously been the attorney for both the bank and insurance company, was elected assignee by an almost unanimous vote, Shufeldt & Ball, the brokers through whom the bank had purchased the claims against the company, casting all their votes for him; and on the 15th of the same month he was confirmed by the district court, and gave bond in