In re Sacchi. UNITED STATES CIRCUIT COURT-E. D. NEW YORK. On a petition to the circuit court for review of an order of the district court denying the application for removal of an assignee, Held, That inasmuch as the petitioner for review has become the sole creditor, an order should be made that the assignee convey the estate of the bankrupt to such assignee as the petitioner and the bankrupt may name, or if they do not agree the matter be referred to the register; the present assignee to receive all moneys collected by him until his just allowance for commissions and expenses is settled by the districtcourt. In re SACCHI. * WOODRUFF, C. J.-The present is an extraordinary appeal to the circuit court. The petitioner for the review of the decision of the district court seeks to remove the assignee in bankruptcy, on the ground of bad faith and mismanagement in his trust, and applies to this court to reverse the order denying his application in the face of the express decision and opinion of the register in bankruptcy, and of the district judge, upon the proofs herein, that the assignee would have been derelict in his duty, if he had not done substantially what he did. Had it been possible for the assignee to obtain these opinions in advance upon these same proofs, counsel would hardly have presumed to say that the assignee was guilty of official misconduct calling for his removal because he acted in accordance with those opinions; and yet the court is asked to condemn him as guilty of official misconduct for doing what both the register and district judge approve. As both of those officers had all the proofs before them which are before me, the claim on this appeal that those proofs show wilful misconduct comes very little short of an attack upon the integrity of the tribunals by whom the proofs were deemed to justify the assignee. Certainly I ought not to impute wilful misconduct and bad faith to the assignee because he drew from the circumstances before him the conclusions which the register and district judge approve. The question here is not whether in fact there was illegality in the mortgages, the foreclosure of which the assignee re VOL. VI.-32 * See 6 N. B. R. 398. In re Sacchi. sisted, but whether such resistance was fraudulent, malicious, or from unjust motive, and not in good faith for the benefit of the general creditors. However, I might conclude that upon the whole case the mortgages were valid, that the holders had a right to an early foreclosure, and that delay, while the rents, if any, passed into the hands of the assignee, operates prejudicially to the holders of the mortgages, this would come far short of holding that under circumstances which under the advice of counsel were deemed suspicious-circumstances which the register and district judge have declared suspicious, the assignee was guilty of misconduct calling for his removal because he acted on the suspicion, and sought to bring the inquiry into the proper court for investigation. But it is not true that had the mortagees seen fit to assert their rights in the mode which was most appropriate, any injustice would have been done to them, nor would unnecessary delay have been permitted to occur to their prejudice. The purpose and design of the bankrupt law is to bring the property of the bankrupt into the bankrupt court for administration; and that court is furnished with all needful power to liquidate and settle all liens thereon; and where there are adverse claims, which it is not appropriate or proper to litigate by summary enquiry and order, provision is made by giving jurisdiction to the district court, concurrently with the circuit court, for that purpose. It is true that state courts have jurisdiction to entertain bills for the foreclosure of mortgages upon the real estate of a bankrupt, and may no doubt properly exercise that jurisdiction, if no objection is made. Special circumstances may sometimes exist in which there is no reason for objection by the assignee, as, for example, when the mortgaged premises are confessedly of less value than the mortgage debt, (in re Iron Mountain Co., N. D. New York, Jan., 1872,) and where a foreclosure is pending and the proceedings are nearly completed at the time the proceedings 1 bankruptcy are commenced, it may sometimes be convenient and economical to suffer the validity of the mortgage In re Sacchi. and the amount due to be settled in the state court; but even then, whether to permit a sale by the decree of the state court, or not, will be in the discretion of the court of bankruptcy. In general mortgagees should not be permitted to pursue the estate of the bankrupt in the state court, but should come to the tribunal which under the federal laws is charged with its administration. No injustice can result from this. If there be doubt whether the mortgaged premises are adequate security for the payment of the debt and interest (when finally adjudged due upon a valid mortgage) the court will recognize the prior lien of the mortgage upon the land and the equitable right of the mortgagee to have the rents separated from the general estate of the bankrupt, by a receivership or otherwise, and not permit them to be applied to the payment of other debts or even to the expenses of the assignee or his fees; and on the obvious ground that he is only entitled to the interest which the bankrupt has in the premises. Nor will any delay be permitted without just reference to the interest of all who are concerned, the mortgagees as well as other creditors. Nor do I think it doubtful that where no just cause for questioning the validity of the mortgage exists the court in bankruptcy would entertain the summary petition of a mortgagee for the sale of the mortgaged premises, and direct the assignee to make the sale, either free of all liens or subject to the mortgage, as might be deemed judicious. Nor if the assignee disputed the validity of the mortgage is it doubtful that under the jurisdiction declared in the second section of the bankrupt law the mortgagee may proceed by bill in either the district or circuit court. It is therefore an error to insist that the mortgagee, if not permitted to proceed in the state court, is remediless, or that he must await the pleasure of the assignee and suffer him to collect the rents and income of the mortgaged premises, leaving the interest unpaid. I can see, I think, that it is either misapprehension on this subject or a disregard of these In re Sacchi. views that led the mortgagees in this case into the state court after the bankruptcy and after the appointment of an assignee, and that the resistance to any withdrawal of the administration from the bankruptcy court, the proper tribunal, has resulted in bitter personal feeling, in great and unnecessary delay, and in large expenses and possible loss, which might have been easily avoided. It further appears that pending the controversy the petitioner for the review has become the sole creditor of the bankrupt, (other than two prior mortgages of the premises in question,) and that no other property of the bankrupt has come to the assignee, except the mortgaged premises. The bankrupt united in the petition for the substitution of an assignee, to be named by the petitioner as such sole creditor. The assignee, by his counsel, on the argument of this review declared his entire assent to such change. There is therefore no reason why the prayer of the petitioner to that extent should not be granted, the present assignee being allowed, out of any moneys collected, his just and reasonable disbursements, and his commission on the moneys received and paid, or to be paid. But it would not be just or reasonable to allow him, as was suggested on the argument, commissions based upon the speculative idea that, possibly if continued in office and permitted for the mere purpose of earning commissions to litigate the validity of the mortgages against the will of all who are interested in that question, he might establish their invalidity. The bankrupt law was not enacted for the purpose of enabling assignees to earn fees by unnecessary litigation, when no interest of the parties to be affected thereby requires it, and where, on the contrary, every beneficial interest involved therein forbids it. Had it, therefore, appeared that, upon the conceded fact that there are no general creditors but the petitioner, and therefore no interest is to be served by further contest respecting the mortgages, (the bankrupt himself uniting in the petition,) the district court had refused to substitute such In re Butler. made, and other assignee, there might have been reason for asking this court to review the decision. But it appears by the decision of the district judge that the petitioner declined to take such substitution unless it proceeded upon other grounds, and this also was conceded on the argument in this court. This, however, does not appear by the order which was which is under review; it ought, I think, to have been made a part of the order, lest it should stand on the record an adjudication that the petitioner was not entitled upon conceded facts to have any part of the relief sought. The mere fact that the petitioner under the advice of his counsel thought himself entitled to a removal of the assignee, on the other ground probably ought not to deprive him of the opportunity to bring the matter to a close without further litigation. Let an order be made that the assignee convey the estate of the bankrupt to such assignee as the petitioner and the bankrupt may name, or, if they do not agree, that it be referred to register Winslow, to receive the nomination of the petitioner, and if he approve such nomination, then that the assignee convey to the assignee so approved, but reserving to the present assignee all moneys collected by him until his just allowance for his expenses and for his commissions thereon shall be settled in such manner as the district court may direct. UNITED STATES CIRCUIT COURT-W. D. PENNSYLVANIA. Unless there is a seizure for rent as provided for in the Pennsylvania statute, the bankrupt act of eighteen hundred and sixty-seven gives the landlord no lien or preference over the bankrupt's other creditors. Where premises are occupied by the assignee or trustee after adjudication, rent should be paid for the time they are so occupied as part of the administration of the estate. In re H. L. BUTLER. Opinion by SAMUEL HARPER, register. Henry Bockstoce, the claimant, leased to the bankrupt the buildings and premises, No. 127 Liberty street, in the city of Pittsburgh, for a term of five years, from October |