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credit of the account, in the course of their management of the business of the assignor. The assignor was duly adjudicated a bankrupt and, thereafter, the trustee in bankruptcy petitioned the Bankruptcy Court for an order directing the respondents, as assignees, to account for and pay over all moneys received by them from the date of the assignment to the date of the appointment of the receiver. Proceedings on the petition resulted in the order of the District Court directing respondents to pay over to the trustee an amount which would have stood to the credit of the assignees in their deposit account with the bank had the account not been closed in the following


On September 30, 1920, ten days before the filing of the petition, the deposit account of the assignees with the bank was debited with the sum of $4,516.43, which amount was credited on the note of the bankrupt held by the bank, and on October 13, 1920, subsequent to the filing of the petition, and on various dates thereafter to and including October 25, 1920, further debits were made in the account which were credited on the note. These credits, including the first mentioned, amounted to the sum of $12,883.81, which was the amount directed to be paid over by respondents by order of the District Court. These debits and credits were made by direction of the respondent, Henderson, who throughout the period in question acted as one of the assignees and was also president of the bank. Although there was no explicit finding on the subject, the debits appear to have been made with the tacit assent of Scannell, the other assignee, who in any event appears to have left the management of the fir.ancial operations of the assignees to Henderson and made no objection or protest with respect to this use of the account standing to his credit as an assignee. We think that the finding of the Circuit Court of Ap

Opinion of the Court.

268 U.S.

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peals that this application of the bank deposit on the note of the bankrupt constituted a “partial payment of the note as fully as if the assignees had given their check or withdrawn the money from the bank and paid it over the counter" is correct, and that both the assignees must be held legally responsible for this result. Where one of two co-trustees assents to a breach of trust by the other without objection, he is legally chargeable with liability for the breach. Bermingham v. Wilcox, 120 Cal. 467, 472; Adair v. Brimmer, 74 N. Y. 539; Matter of Niles, 113 N. Y. 547; Hill v. Hill, 79 N. J. Eq. 521.

The referee found that respondent Henderson was at all times from September 24, 1920, until the appointment of the receiver in bankruptcy, in control of the assignees' deposit account; and that he was the only officer of the bank who at any time exercised any control over the account, and that as president of the bank he at all times until the filing of the referee's report, had personal control of the funds deposited in the account; that the original ledger sheet of the bank showing the account standing in the names of the respondents as assignees, was destroyed by officials of the bank some time after the filing of the petition in bankruptcy and then an attempt was made to restore this account to the name of the bankrupt by rewriting the ledger sheets. He also found that on and after September 24, 1920, both the respondents and the Fort Sutter National Bank, which with respondents had on that date executed the creditors' agreement under which the assignment to respondents for the benefit of creditors was made, had actual knowledge of the insolvent condition of the bankrupt.

On the petition to revise, the Circuit Court of Appeals held that, when the money on deposit with the bank was applied on the note of the bankrupt, “ the money passed into the possession and under the control of the bank and out of the possession and beyond the control of the re


Opinion of the Court.

spondents .; that the funds in the bank are not the funds of the president nor are they subject to his order and control, and an order directing him to pay over the money is not an order against the bank and is not binding upon the bank.” The court accordingly held that the bank, which was not a party to this proceeding, held the funds received by it in its own right adversely to any claim of the assignees or the trustee in bankruptcy and could not be reached by a summary proceeding and it reversed the judgment and order of the District Court.

It is well settled that property or money held adversely to the bankrupt can only be recovered in a plenary suit and not by a summary proceeding in a Bankruptcy Court. Louisville Trust Co. v. Comingor, 184 U. S. 18; First National Bank of Chicago v. Chicago Title & Trust Co., 198 U.S. 280; Gailbraith v. Vallely, 256 U. S. 46. But property held or acquired by others for account of the bankrupt is subject to a summary order of the court, which may direct an accounting and a payment over to the trustee or receiver appointed by the Bankruptcy Court. White v. Schloerb, 178 U. S. 542; Mueller v. Nugent, 184 U. S. 1; Babbitt v. Dutcher, 216 U. S. 102; Chicago Board of Trade v. Johnson, 264 U. S. 1. Such is the rule with respect to assignees for the benefit of creditors within four months of filing of the petition. In re Stewart, 179 Fed. 222; In re Rathman, 183 Fed. 913; In re Neuburger, Inc., 240 Fed. 947; In re Diamond's Estate, 259 Fed. 70, 74, and see Bryan v. Bernheimer, 181 U. S. 188. See Louisville Trust Co. v. Comingor and Gailbraith v. Vallely, supra, where, however, the jurisdiction was defeated by the adverse claim of the assignee arising before the filing of the petition; and see Randolph v. Scruggs, 190 U. S. 533, as to the nature of the title of the assignee for the benefit of creditors when bankruptcy ensues. See also Taubel, etc. Co. v. Fox, 264 U. S. 426, 433 and note. Courts of Bankruptcy do not permit themselves to be

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Opinion of the Court.

268 U.S.

ousted of jurisdiction by the mere assertion of an adverse claim. The court has jurisdiction to inquire into the claim for the purpose of ascertaining whether the summary remedy is an appropriate one within the principles of decision here stated. Mueller v. Nugent, supra; Schweer v. Brown, 130 Fed. 328, 195, U. S. 171; Hebert v. Crawford, 228 U. S. 204; In re Ellis Bros. Printing Co., 156 Fed. 430. It may disregard the assertion that the claim is adverse if on the undisputed facts it appears to be merely colorable. In re Weinger, Bergman & Co., 126 Fed. 875; In re Rudnick & Co., 158 Fed. 223; In re Ransford, 194 Fed. 658; Michaelis v. Lindeman, 196 Fed. 718.

The petition upon which this proceeding was intitiated was in the usual form and prayed that the respondents be required to account for all moneys and properties coming into their hands as assignees or trustees under the assignment for the benefit of creditors. Such was their duty. Having assumed to take possession of the property of the bankrupt for its account, it was their legal duty to turn the property or its proceeds over to the trustee in bankruptcy or to account for their inability to do so by showing either a disposition of it in performance of a legal duty assumed toward the bankrupt or the bankrupt’s trustee or by clothing themselves with the protection of a claim adverse to the bankrupt which was not merely colorable. As found by the Court, respondents came into the possession of moneys of the bankrupt which were by them placed on deposit to their credit as trustees or assignees for the benefit of creditors. The result of this transaction was that neither the bank nor the assignees held any specific money for account of the bankrupt and its creditors. They were creditors of the bank and the bank was their debtor. Marine Bank v. Fulton Bank, 2 Wall. 252; Phoenix Bank v. Risley, 111 U. S. 125. We are not therefore dealing with money in the possession


Opinion of the Court.


of the assignees or the bank in any literal sense, but the credit as a mere chose in action was held by the assignees for account of the bankrupt and they were bound to account for its proper disposition as for any other property coming into their hands.

The several amounts debited to the account, with the assent or connivance of the assignee subsequent to the filing of the petition, fall clearly within the rule that, as to property in the hands of the bankrupt or held by others for his account, “ The filing of the petition is a caveat to all the world and in fact an attachment and an injunction.” Mueller v. Nugent, supra; Lazarus v. Prentice, 234 U. S. 263; Knapp & Spencer Co. v. Drew, 160 Fed.

In re Denson, 195 Fed. 854; In re Leigh, 208 Fed. 486; Gunther v. Home Ins. Co. et al., 276 Fed. 575; Matter of R. & W. Skirt Co. et al., 222 Fed. 256; Reed v. Barnett Nat. Bank, 250 Fed. 983; and see Acme Harvester Co. v. Beekman Lum. Co., 222 U.S. 300. See Babbitt v. Dutcher, 216 U. S. 102. In consequence, any person acquiring an interest in property of the bankrupt or his assignees for the benefit of creditors, adverse to the creditors, after the filing of a petition with notice of it, may be directed to surrender the property thus acquired by summary order of the Bankruptcy Court. In re Denson, supra; In re Rudnick, supra; and see White v. Schloerb, supra.

The rule is the same when a creditor secures payment of his debt from the bankrupt's estate after the filing of the petition. A summary order may be made directing repayment of the money to the trustee in bankruptcy. Knapp & Spencer Co. v. Drew; In re Leigh; Matter of R. & W. Skirt Co., supra; In re Columbia Shoe Co., 289 Fed. 465. A like rule has been applied where a bank secures payment of its debt by setting up its lien or right of counterclaim against a deposit account of the bankrupt or the bankrupt's assignee, created subsequent to the filing

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