the cost price of the coal, and expenses of purchasing, and $200 per month during that period. Plaintiff in error, in making the latter agreement, expressly reserved his rights under the original contract, and the new agreement provided that if he should establish his right to the commission, the amount found to be due him should be credited with the expenses and the $200 per month paid him.

The rehearing asked for challenges the correctness of this court's decision, reversing the action of the lower court and granting a new trial as against the Director General, and it is as to the propriety of this ruling that we have to pass. This court at that time said that the decisive question for determination was "whether under all the circumstances the Director General by acting under the contract and receiving its benefits for five months, should be considered to have adopted it. If the Director General gave notice within a reasonable time of his election to reject the contract, the plaintiff cannot recover. If, on the other hand, the Director General received the benefits and made payments under the contract for a longer time than was reasonably necessary for an intelligent election, then he should be held to have adopted it," and this issue should have been submitted and passed upon.

The reference in the opinion to a jury was an inadvertence, as there was no question but that the case was regularly tried by the court without a jury, and the terms and conditions under which it was tried. The facts were comparatively simple, and in the main undisputed; and the case was submitted to the judge upon an agreed statement of facts, together with the testimony of two witnesses, taken pursuant to agreement, relating to matters not the subject of serious controversy.

[4] The rule controlling this court upon a writ of error to the judgment of the District Court in cases submitted without the intervention of a jury, and especially upon an agreement as to the facts, as here, is well settled under the decision of this court in the case of Dexter & Carpenter v. Davis, 281 F. 385, 25 A. L. R. 1173, to which, and the cases therein cited, special reference is made. To the same effect will be found Dunsmuir v. Scott (C. C. A. 9th Cir.) 217 F. 200, 133 C. C. A. 194. Under these authorities, the question of whether or not at the close of a trial there is substantial evidence to sustain a finding in favor of one of the parties to the action, is a question

of law which arises in the progress of a trial; and where the trial is before a jury, that question is reviewable on exceptions to the ruling, upon request for peremptory instructions for a verdict. Where the trial is before the court, it is reviewable upon a motion which presents that issue of law to the court for determination at or before the end of the trial.

In this case, motions were duly submitted by the plaintiff in error at the conclusion of all the testimony, and during the progress of the trial, to wit, that the court. would find and enter judgment in favor of the plaintiff against the defendants for the full sum sued for of $39,041.14, with interest until paid, and to render judgment accordingly, and that in any event the court would find and enter judgment in favor of the plaintiff in error for the sum of $13,853.40 as the lowest amount which the plaintiff was entitled to recover. court overruled both motions, and plaintiff duly excepted.

The.

[5] This court, in the previous opinion, as shown from the above excerpt therefrom, based the plaintiff's right to recover for any amount solely upon whether the Director General adopted the contract with the plaintiff in error, or within a reasonable time gave notice of his intention to reject the

same.

We think, upon further consideration, that the court should go further, and that as to the coal furnished by plaintiff in error between the dates of June 4, 1918, and January 1, 1919, and for which recovery is asked of $13,853.40, based upon a quantum meruit for services rendered, that the right of recovery should not be dependent upon the reasonableness or unreasonableness of the time within which the Director General elected to repudiate the contract, or gave notice of his intention so to do. The amount due upon the basis of quantum. meruit for that particular time, seems to be undisputed from the testimony, and therefore the court erred in refusing the second of plaintiff's motions.

In reaching our conclusion as to the right to recover on a quantum meruit for coal furnished during the period from June 4, 1918, to January 1, 1919, we are convinced that, under the circumstances under which the Director General received the coal from plaintiff in error, an implied contract arose on his part to pay what the service was justly worth, and we are not unmindful that the Director General did say he would repudiate the contract and not be bound thereby; but

when he continued to receive coal, knowing that the plaintiff in error was furnishing the same, with the declaration on his part that he did so reserving his right to demand compensation under the contract, he thereby incurred the liability insisted upon by plaintiff in error. To avoid this natural consequence, it was a simple matter to decline to receive the coal; and by accepting and using it, he obligated himself to make just compensation to the plaintiff in error for his services in connection therewith. Dermott v. Jones, 2 Wall. 1, 8, 9, 17 L. Ed. 762; Clark v. United States, 95 U. S、 539, 24 L. Ed. 518; The Sappho (C. C. A. 4th Cir.) 94 F. 545, 550, 36 C. C. A. 395; Kaufman v. Raeder (C. C. A. 8th Cir.) 108 F. 171, 177, 178, 47 C. C. A. 278, 54 L. R. A. 247; Carpenter v. Smithey, 118 Va. 533, 88 S. E. 321; City of Norfolk v. Norfolk County, 120 Va. 356, 361, 91 S. E. 820; Williston on Contracts, vol. 2, § 843, and cases cited; 1 Chitty on Pleadings, 333; 2 R. C. L. § 5, pp. 745, 746.

The irresistible inference, from the Director General's conduct in acepting and using the coal, is that it was to his interest to do so, and the testimony not only strongly tends to sustain this view, but that the Director General was otherwise without coal. Certainly it would be inequitable and unfair to allow plaintiff in error to render his service during the period in question for nothing. This would be the effect of allowing the Director General to accept and use the coal without paying what plaintiff's services were reasonably worth.

Our conclusion of this application for rehearing is that the judgment of the lower court should be reversed as to the Director General of Railroads, and a new trial awarded, for the reasons stated in this and the previous opinion filed herein. Reversed.

WOODS, Circuit Judge (dissenting). I dissent, for the reason that in my conception the majority opinion attributes to the Director General an implied contract which he expressly refused to make. The importance of the case seems to justify a full statement of the facts and the law involved. On July 1, 1917, the plaintiff, Martin, contracted with the Richmond, Fredericksburg & Potomac Railroad Company to supply for three years all its fuel coal, buying it at his own expense and on his own credit, and delivering it to the railroad at cost and a commission of 5 per cent. furnished coal under the contract to the entire satisfaction and advantage of the

He

railroad company until December 28, 1917, when under the act of Congress the railroad was taken over by the President through the Director General. Thereafter, until June 4, 1918, Martin continued to deliver all fuel coal for the railroad company under orders of the Director General. Deliveries and payments were made under the terms of the contract. On June 4, 1918, John Barton Payne, counsel for the Director General, wrote to plaintiff concerning the contract:

"I am directed by the Director General to advise you that the United States, being now in possession, operation and control of the Richmond, Fredericksburg & Potomac Railroad Company, declines to recognize the validity of said contract as binding on the United States, and will therefore decline to receive any coal pursuant to said contract from this date, unless you desire to deliver the coal at the regular price without payment of the 5 per cent. to you provided for therein. You may regard this as definite notification that the contract, so far as the United States is concerned, is not binding."

On June 5, 1918, White, president of the Richmond, Fredericksburg & Potomac Railroad Company, telegraphed plaintiff:

"Have just received orders from Judge John Barton Payne, general counsel for the Director General of Railroads, that the contract made between you and these companies for fuel purchased will not be recognized by the United States, the government having taken over these railroads together with their outstanding contracts, that unless you will deliver coal at the regular price without payment of five per cent. commission we shall make other arrangements to secure coal. Please wire quick if you are willing to agree to this proposition transmitted by Judge Payne."

By telegram dated June 5th plaintiff answered:

"Wire received. Am surprised at request of Judge Payne as my contract was made in good faith before any fuel administration orders and before government took over railroads. Have gone to great expense to enable me to perform this contract and should certainly have an opportunity to present my side of the matter before such summary action is taken. In the meantime however will continue to purchase coal for you as suggested in your telegram without prejudice to my rights under contract."

The Director General several times reiterated his repudiation of the contract of Martin with the railroad company. After June

4, 1918, in accordance with his agreement with Martin, the Director General continued to receive coal from Martin and paid therefor only the cost price and expenses, without the 5 per cent. commission or other compensation, until January 1, 1919. On that day Martin agreed with the Director General to deliver to the railroad its fuel coal supply until the end of the federal control, receiving therefor the cost price of the coal and expenses of purchasing and $200 a month compensation. In making this agreement, however, Martin again expressly reserved his rights under the original contract. The agreement with the Director General provided that, if Martin should establish his right to the 5 per cent. commission according to the contract, the amount found to be due him thereunder should be credited with the expenses and the $200 per month paid him under the new arrangement. When the government released control on March 1, 1920, the railroad company immediately resumed with Martin the relations established by the contract of July 1, 1917, and paid him commissions accordingly for four months, the remainder of the contract period.

The claim of the plaintiff is for 5 per cent. commission for services rendered in purchasing coal from June 5, 1918, when the Director General gave notice of his refusal to adopt the contract of July 1, 1917, to March 1, 1920, when the railroad was returned to its owner, less the sums paid him for expenses and as compensation. Evident ly, the railroad company is not liable for services rendered by Martin after the government frustrated the contract by taking over the property. Missouri Pacific Railroad Co. v. Ault, 256 U. S. 554, 41 S. Ct. 593, 65 L. Ed. 1087. It is equally clear that the Director General, taking possession under the federal statute, was not bound to carry out the contract of the railroad company with Martin, and that no action for its breach would lie against him, unless by his action he adopted it. Omnia Commercial Co., Inc., v. United States, 261 U. S. 502, 43 S. Ct. 437, 67 L. Ed. 773. He had, however, the option of adopting the contract with Martin under the provisions of subdivision (h) of section 4 of the contract between himself and the railroad company.

The letters and telegrams show beyond all doubt (1) explicit refusal of the Director General to continue the contract with Mar

tin; (2) refusal of the Director General to accept the coal in the future unless Martin would agree to deliver it at the regular price without commission; (3) notice to Martin from the Director General that, in case of Martin's refusal to deliver the coal at the regular price, the Director General would get the coal from another source; (4) Martin's agreement to continue to deliver the coal on the terms named by the Director General-that is, without compensation above the regular price; (5) the reservation by Martin, acceded to by the Director General, that if it should turn out that the contract with the railroad company to pay 5 per cent. commission was binding on the Director General, then, and not otherwise, Martin should receive 5 per cent. commission above the regular price.

It turned out that the Director General was not bound by the contract with the railroad company. Therefore the condition upon which the parties agreed that Martin should receive compensation above the regular price failed, and he has no right of action against the Director General for compensation. By the majority opinion Martin is relieved of the condition and risk which he took by his express agreement with the Director General. His explicit contract to assume the risk and accept the condition, as it seems to me, is set aside and annulled, and an implied contract to pay the value of his service is attributed to the Director General. I cannot agree that the judicial power extends to substitution of an implied contract to pay for services the opposite of the contract actually made, fully understood and acted upon by both parties.

The authorities cited in the majority opinion do not seem to me to support its conclusion. There was one issue of fact in the case. Did the Director General so unreasonably delay repudiation of the contract that he should be held to have adopted it? This issue was decided by the District Judge against the plaintiff on facts sufficient to support an answer either way. Hence the decision of the District Judge on this point was final.

I regret the additional labor imposed on the other members of the court and the counsel in the cause, due to my failure in writing the former opinion to observe that the case was tried by the District Judge without a jury.

I think the judgment should be affirmed.

KYNERD v. McCARTHY et al. (Circuit Court of Appeals, Fifth Circuit. December 10, 1924.)

No. 4323.

1. Receivers 206-Court has jurisdiction to appoint receivers for a foreign corporation

at instance of lien creditor.

A federal court had jurisdiction to appoint receivers for a foreign corporation having property in the district, at suit of a creditor entitled to a lien under the state statute, where diversity of citizenship existed, though appointment was asked as ancillary to appointment in another district, the court of which had no jurisdiction. 2. Receivers

19-Grounds for appointment of receivers for foreign corporation.

That a foreign corporation doing business and having property in the district is unable to pay a judgment against it, and is in danger of having its property sacrificed and its business discontinued by reason of garnishments issued under such judgment, constitutes ground for appointment of receivers at suit of its other

creditors.

Appeal from the District Court of the United States for the Northern District of Texas; James Clifton Wilson, Judge.

Suit in equity by J. T. McCarthy, Jr., and others, against the U. S. Tex Oil Corporation and others. From an order appointing receivers, W. D. Kynerd appeals. Affirmed.

Joseph Manson McCormick, of Dallas, Tex. (Francis Marion Etheridge, Henri Louie Bromberg, and Paul Carrington, all of Dallas, Tex., on the brief), for appellant. J. H. Barwise, G. W. Wharton, and H. S. Garrett, all of Fort Worth, Tex., and Alex S. Coke, of Dallas, Tex. (Robert Lee Stennis and Sam Deb Stennis, Jr., both of Dallas, Tex., on the brief), for appellees.

Before WALKER and BRYAN, Circuit Judges, and DAWKINS, District Judge.

BRYAN, Circuit Judge. This is an appeal from orders of the District Court for the Northern District of Texas appointing receivers of the U. S. Tex Oil Corporation, and enjoining its creditors from interfering with the possession by the receivers of the corporation's properties, or with the management and administration of its affairs.

On February 27, 1924, Kynerd, the appellant, obtained in a Texas state court a judgment for $292,556.95 against the U. S. Tex Oil Corporation, a corporation under

the laws of New Hampshire. On March 4, J. T. McCarthy, Jr., a citizen of Texas, filed his bill of complaint against the oil corporation in the United States District Court for the Northern District of Texas. The bill contains averments to the following effect: The corporation has assets amounting to $350,000 and is indebted in an equal amount, not including Kynerd's claim. It is indebted to McCarthy in the sum of $4,269.32 for work, labor and services. Kynerd was threatening to levy upon and seize the assets of the corporation in satisfaction in whole or in part of his judgment, which is excessive, and has applied for writs of garnishment, and unless enjoined would cause a sacrifice of the assets of the corporation, and prevent it from continuing its business operations. The bill then avers the prior appointment of a receiver by the United States District Court of New Hampshire, and prays for the appointment of ancillary receivers in Texas, and for an injunction in order to protect from waste the property of the corporation situated in Texas. The proceedings in the New Hampshire court are attached to and made a part of McCarthy's bill, but it does not affirmatively appear that the New Hampshire court acquired jurisdiction, since the requisite diversity of citizenship is not averred, and the complainants are not shown to be other than simple contract creditors.

An answer, verified by its secretary and to which its seal was attached, was filed on behalf of the U. S. Tex Oil Corporation admitting that the averments of the bill were true, and consenting to the relief prayed for by McCarthy. The District Court of Texas immediately appointed receivers as prayed, and on March 19 Kynerd moved to vacate the order appointing the receivers and to dissolve the injunction. As reasons for granting the motion, Kynerd alleged, among other things, that after he recovered his judgment he caused a large number of writs of garnishment to be issued, and thereby had impounded a large amount of money of the oil corporation, and had his judgment recorded in several counties in Texas in which the corporation had property. On March 22 the District Court modified the injunetion, so as to permit the appellant to institute or continue proceedings to establish claims and liens upon the property of the corporation, and to pursue any other action not involving interference with the possession of the receivers.

[1, 2] Jurisdiction of the Texas District Court, from which this appeal comes, is not dependent upon jurisdiction of the District

Court of New Hampshire. In this suit there is diversity of citizenship, and the complainant has a lien under article 5639a of Vernon's Ann. Civ. St. Supp. 1918 of Texas. The U. S. Tex Oil Corporation is shown not to have assets enough to protect itself against appellant's judgment, and to be in immediate danger of having its property sacrificed and its business discontinued by reason of the issuance of writs of garnishments at appellant's instance. It therefore appears to be insolvent. Cunningham v. Norton, 125 U. S. 77, 8 S. Ct. 804, 31 L. Ed. 624. Under these circumstances the appointment of a receiver to preserve the property was authorized. 23 R. C. L. 18, 24. It is wholly immaterial that the receivers appointed in Texas were designated as ancillary receivers. The property they were authorized to take possession of and to administer is within the jurisdiction of the trial court.

[3] Some contention is made that there was a lack of proper authority from the oil corporation to answer and admit the averments of McCarthy's bill; but, in the absence of evidence to the contrary, the authority of counsel who appeared for it will be presumed. Alexandria Canal Corporation v. Swann, 5 How. 83, 12 L. Ed. 60. The orders appealed from are affirmed.

aft

210762
£(ad) 91,
I'd 14 F (28) 469.

In re H. MAGEN CO., Inc.

(District Court, E. D. New York. June, 1924.)

Bankruptcy 225-Procedure; proceedings before referee before and after appointment of trustee.

Prior to the election and qualification of a trustee, applications in turn-over or reclamation proceedings should be presented in the first instance to the court, which may refer the matter, if it deems best; but, after the election and qualification of a trustee, such applications

should be made in the first instance to the referee, whose decisions may be reviewed by the court in proper proceedings.

In Bankruptcy. In the matter of the H. Magen Company, Inc., bankrupt. On motion to review order of referee. Motion granted.

Shaine & Weinrib, of New York City, for trustee.

Max J. Finkelstein, of New York City, for Herbert Magen.

INCH, District Judge. This is a motion made by the attorneys for a trustee to review an order of a referee. It presents a question of practice in this district. Be3 F. (2d)-3

cause of this fact this opinion is rendered after consultation with the other judges of this district, so that the practice in this district may be clear and uniform. The motion is really made at the instance of the learned referee, whose order is to be reviewed for the purpose of settling the practice. The question arises as follows:

A duly elected and qualified trustee presented a petition to the referee. The petition asked for an order directing a certain third party to turn over certain property or its value. On the return day of the motion the party appeared and objected to the application being made in the first instance before the referee upon the ground that the application should have been made to the court. The referee thereupon denied the motion of the trustee on the ground that the practice in this district was in conformity with the objection above mentioned, and in a careful and fair opinion stated his reasons, intimating very properly that any departure from the practice should be made by the court, and not by a referee. In order to allow a review of his decision, the denial of the motion by him was with leave to review the same before this court. This has now been done by the attorneys for the trustee, no one appearing in opposition.

After careful consideration it seems that the motion should be granted. The trustee should therefore again present his application to the referee, for the purpose of allowing said referee in the first instance to pass upon the merits thereof, subject, of tions and proper steps being taken, to recourse, to the right of this court, on objecview.

Prior to the election of a trustee this court is peculiarly charged with the duty of caring for the estate of a bankrupt, regardless of the fact that an adjudication has taken place and a referee appointed, where the creditors of said bankrupt have not duly assumed at a meeting thereof that control contemplated by and in accordance with the plan of the Bankruptcy Law, by the election and qualification of a trustee. After adjudication, and prior to the appearance of a trustee, the title to the property is in the court. A receiver is but the representative of the court. Oftentimes, and possibly not often enough, a receiver is a mere custodian for the court.

When, however, a trustee has been duly elected, by a vote or otherwise, at a regular meeting of the creditors, and such trustee has duly qualified, the title to the bankrupt's property, wherever located, is vested in such trustee, and from then on the plain policy