never do so unless that which the state attempts to do is a palpable violation of the constitutional rights of the owners of property." The way we view it, to permit the valuation of complainant's intangible property as made to stand would be a palpable violation of its rights. It is an attempt to make it pay on a 100 per cent. valuation when the bulk of the taxpayers pay on not exceeding an 80 per cent. valuation. This of itself is sufficient to require that this court should intervene. Particularly is this so when it is considered that there is a possibility, at least, that the valuation of its intangible property may include the skill and efficiency with which its affairs are managed, and the personalty of individuals not subject to equalization largely escapes taxation at all.

We conclude, therefore, that complainant is entitled to the relief it seeks.

RYTTENBERG v. SCHEFER et al.

(District Court, S. D. New York. May 23, 1904.)

1. USURY-COMMISSIONS FOr Use of Credit.

A commission charged by one commission house to another for the use of its credit under an arrangement by which it guarantied all consignments sent to the second house did not constitute usury.

2. BANKRUPTCY-PREFERENCE.

A bankrupt cannot be held to have given a preference, recoverable by his trustee, because of sums collected by a creditor after the bankruptcy from third persons under a contract which had been in force between the bankrupt and the creditor for a number of years.

3. CONTRACT-VALIDITY.

A contract by which a bankrupt commission firm, some years before its bankruptcy, agreed to do all its business through another firm, obtaining the benefit of the latter's credit, held not invalid, as a scheme to hinder, delay, or defraud its creditors.

4. BANKRUPTCY—JURISDICTIOn of Courts—SUIT BY TRUSTEE.

A court of bankruptcy has jurisdiction by consent of a suit by a trus tee to recover a fund for the estate, under Bankr. Act July 1, 1898, c. 541, § 23, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3431], where the defendant appears generally and answers to the merits.

5. FACTORS-LIEN-EFFECT OF CONTRACT BETWEEN COMMISSION HOUSES.

A commission firm some years before its bankruptcy entered into a contract by which it agreed to do all its business through defendants, composing a second firm, to whom all goods should be consigned, and in whose name all sales and collections were to be made. Defendants were to make advances on consignments, and be responsible therefor. A lease for premises occupied by the bankrupt was assigned to defendants, but the rent therefor was to be paid by the bankrupt, which was to continue to occupy them and carry on the business therein at its own expense. At the time of the bankruptcy there were goods on the premises or in warehouse in the bankrupt's name, some of which had been consigned in defendants' name, and some purchased by the bankrupt, but on all of which defendants had made advances. There were also accounts due for goods sold, made payable to defendants by directions on the invoices sent to purchasers. Held, that the consigned goods were in the possession of defendants, who had a lien thereon, as well as on the accounts due for such goods sold, for their advances and charges, but that goods bought by the bankrupt must be considered as having been in its own possession--the 1. See Usury, vol. 47, Cent. Dig. § 72.

premises being its own, as between it and defendants-and that defendants, lacking possession, had no lien either upon such goods, or accounts due for those sold, although, as in case of the other accounts, there was a direction on the invoices that they should be paid to defendants, and the bankrupt rendered a periodical statement to defendants, in which all goods were treated as having been consigned to defendants, and all accounts as being their property.

6. EQUITABLE LIEN-INVALIDITY OF LEGAL LIEN.

Where parties attempted by an agreement to give one a factor's lien on property of the other, but such agreement did not create a lien, because possession of the property remained in the debtor, an equitable lien will not arise, although the agreement was made in good faith.

In Equity.

Morris J. Hirsch (Benjamin N. Cardozo and Herbert H. Maass, of counsel), for complainant.

Carter, Hughes, Rounds & Schurman (Charles E. Hughes and Richard E. Dwight, of counsel), for defendants.

HOLT, District Judge. This is a suit in equity brought by the trustee of the firm of Radon & Co., bankrupts, against the members of the firm of Schefer, Schramm & Vogel, to determine the ownership of a fund. Radon & Co. were engaged in the business of commission merchants and dealers in woolen goods, in the city of New York. On December 7, 1897, they made a written agreement with the firm of Schefer, Schramm & Vogel, who were commission merchants in New York, which agreement provided as follows:

"1. Radon & Co. agree to transact all their business through Schefer, Schramm & Vogel. The lease of the premises at 530 Broadway, now occupied by Radon & Co. shall be assigned to Schefer, Schramm & Vogel. All goods at present consigned or owned by Radon & Co. shall be consigned by their respective owners to Schefer, Schramm & Vogel as factors for sale upon commission.

"2. Schefer, Schramm & Vogel agree, on the request of Radon & Co., to advance to the respective consignors two-thirds of the net market value of the goods respectively consigned. Account sales shall be furnished to said consignors monthly and Schefer, Schramm & Vogel agree to discount such sales for the respective consignors.

"Schefer, Schramm & Vogel shall be entitled to a commission of two and one-half per cent, on the net amounts of sales, and interest in the accounts current with said consignors shall be charged and credited at the rate of six per cent. per annum.

"3. Radon & Co. agree to take charge of all said cor 'gned goods for Schefer, Schramm & Vogel and of the sale of said goods, and shall defray all the expenses incident to such sale or to the business conducted at 530 Broadway, including the rent of said premises and the premiums for insurance on the said consigned goods, and shall reimburse Schefer, Schramm & Vogel for all payments made by them for any such expenses. But all sales shall be under the supervision of Schefer, Schramm & Vogel and shall be made in their name and on their behalf, and all goods sold shall be charged on bill heads reading 'Bought of Schefer, Schramm & Vogel.' The terms of sale shall in no case exceed four months from date of bills. Radon & Co. shall furnish to Schefer, Schramm & Vogel monthly accounts of sales made for the respective consignors. "4. Schefer, Schramm & Vogel do not assume the risk of overadvances and Radon & Co. shall be liable to Schefer, Schramm & Vogel for any loss which may accrue by any such overadvances. An account shall be kept between Schefer, Schramm & Vogel and Radon & Co. which shall be called 'Radon & Co. Guarantee Account.' In this account Radon & Co. shall be charged with

the net amounts of the account sales furnished by them to Schefer, Schramm & Vogel as aforesaid and also with the rent of said premises and premiums for insurance on said consigned goods and with any moneys paid by Schefer, Schramm & Vogel to Radon & Co., or on their behalf, to defray the expenses of the business conducted at 530 Broadway, or for any other purpose in connection therewith, and also with the commissions of Schefer, Schramm & Vogel payable as aforesaid. Radon & Co. shall be credited in said account with all payments upon the sales therein charged as aforesaid and they shall also be credited in said account with all commissions charged to consignors in their respective accounts current with Schefer, Schramm & Vogel.

"Radon & Co. shall at all times pay to Schefer, Schramm & Vogel, for credit to said guarantee account, a sufficient amount of money so that the debit of said account shall at no time exceed seventy-five per cent. of the solvent accounts then outstanding and representing the sales made as aforesaid in the department under the charge of Radon & Co.

"Interest shall be charged and credited in said guarantee account at the rate of six per cent. per annum.

"5. Radon & Co. shall be responsible for the stock of consigned goods of which they shall take charge as aforesaid, and for the management of the sales thereof, and they agree to furnish to Schefer, Schramm & Vogel letters from said consignors in which they shall respectively agree that Radon & Co. shall have the management of their sales and that Radon & Co. alone shall be responsible to them for such management, and that the responsibility of Schefer, Schramm & Vogel to said consignors shall be strictly limited to the financial part of the business entrusted to them as factors as aforesaid.

"6. This agreement shall continue in force for one year from January 1st, 1898, and after said date it shall continue subject to termination by either party upon six months' notice in writing."

Radon & Co. continued to transact business at 530 Broadway for about a year and a half after the making of this agreement, and then removed to 32 Greene street, and continued business there until April 14, 1903. On that day they filed a voluntary petition in bankruptcy, and a receiver was appointed, who on April 15th qualified and took possession of the merchandise at 32 Greene street, and in a warehouse at 41 Thirteenth avenue. Schefer, Schramm & Vogel claimed to have a lien upon such merchandise and the outstanding accounts under the above agreement; and thereafter, under an order of this court, entered upon the consent of all the parties, the merchandise was sold, and the proceeds thereof, together with the proceeds of the outstanding accounts collected by the defendants, were deposited in a trust company, subject to the order of this court. Subsequently, by like consent and order, the money so deposited was delivered to the defendants; they giving a bond to pay to the plaintiff any amount which might be ultimately found to belong to the bankrupt estate.

In pursuance of the above agreement, the lease of the premises occupied by the bankrupts at 530 Broadway, and later of those at 32 Greene street, was assigned by Radon & Co. to Schefer, Schramm & Vogel. Schefer, Schramm & Vogel thereafter paid the rent to the landlord, and charged it to Radon & Co. in their account. Each of these premises consisted of an upper floor. On the street entrance were placed signs of "Radon & Co." On the entrance door of the floor rented were placed two signs-one "Radon & Co.," and below that "Schefer, Schramm & Vogel, Annex." The merchandise shipped by manufacturers was invoiced to Schefer, Schramm & Vogel, and on its arrival at New York was delivered and kept at Radon & Co.'s place of business. Goods were also purchased by Radon & Co., and

delivered and kept at their place of business. The consignment business gradually diminished, and the purchases by Radon & Co. gradually increased, so that for several years before the failure, and at the time of the failure, most of the goods on hand were goods purchased by Radon & Co. The bills for mechandise sold, whether consigned or purchased, had printed on them at the top "Radon & Co., Woolen Commission Merchants, 32 Greene Street," at one side, and "Bought of Schefer, Schramm & Vogel, 476 & 478 Broome Street," on the other side. Later an additional notice was stamped in red ink on the bills for goods sold, as follows:

"When making remittances to Messrs. Schefer, Schramm & Vogel, please mention 'For Department Radon & Co.' All other communications kindly address direct to Radon & Co., 32 Greene Street, New York."

The payment of these bills was generally made to Schefer, Schramm & Vogel directly by the customers. Occasionally Radon & Co. received the payments, in which case they at once turned them over to the defendants. Detailed statements of all goods received from consignors, and of those purchased by the bankrupts, and also statements of all outstanding accounts for sales of goods, either owned by Radon & Co., or consigned to the defendants, were sent to Schefer, Schramm & Vogel by Radon & Co., at first monthly and afterwards quarterly. These statements were at first headed, "Messrs. Schefer, Schramm & Vogel, Stock of Goods consigned by Radon & Co." The headings were afterwards shortened to "Messrs. Schefer, Schramm & Vogel, Radon & Co. Acct.," or similar forms. On the basis of these statements, Schefer, Schramm & Vogel made their advances to Radon & Co. of 6623 per cent. on the goods purchased, and of 75 per cent. of the outstanding accounts. The 6623 per cent. of the value of the goods consigned by manufacturers was remitted directly to the consignors by Schefer, Schramm & Vogel. When these goods were sold, Schefer, Schramm & Vogel guarantied the sale, and placed the amount of the sale to the credit of the consignor, deducting 7 per cent. commission for their services and guaranty. The net amount so credited to the consignor was charged against Radon & Co., and they were credited with all collections for goods sold. Radon & Co. were also charged with a commission of 21⁄2 per cent. on all sales made of goods either purchased by them or consigned by manufacturers, with the advances made to them on account of stock and outstanding accounts, with interest on the advances at 6 per cent., with the rent of the premises occupied by them, and with any other expenses paid by the defendants in connection with the business of Radon & Co.

At different times part of the stock on hand was deposited in a warehouse at 41 Thirteenth avenue, for convenience, and the warehouse receipts taken in the name of Radon & Co., with the defendants' knowledge and consent. All the stock, whether at 530 Broadway or 32 Greene street, or in the warehouse, was insured by Radon & Co., "Loss, if any, payable to Schefer, Schramm & Vogel"; the insurance premiums being paid by Radon & Co.

The amounts realized since the bankruptcy from the sale of the goods at 32 Greene street was $11,288.47; and of the goods at the

warehouse, $4,880.26. The amount collected on the outstanding accounts was $20,804.62, making a total of $36,973.35. Radon & Co. owe the defendants $48,699.27, and owe the unsecured creditors about the same amount. The question in this case, therefore, is whether all of the assets shall be paid to Schefer, Schramm & Vogel, or shall be distributed ratably among all the creditors.

Several grounds of recovery are alleged in the complaint, some of which, in my opinion, are clearly untenable.

It is urged that the agreement was usurious; the claim being that the 22 per cent. paid to the defendants as commissions was in fact usury. Aside from the well-settled general rule that a court of equity will not set aside a usurious contract, except on the condition of paying the amount actually due, less the usury (Rogers v. Rathbun, 1 Johns. Ch. 367), and the fact that this rule still applies in New York in the case of a trustee in bankruptcy, notwithstanding the statute abrogating it as to the original borrower (Wheelock v. Lee, 64 N. Y. 242), in my opinion on the merits there was no usury. Schefer, Schramm & Vogel guarantied the consignments, and permitted Radon & Co. to have the benefit of the name and credit of their house under the arrangement made. The contract was a genuine business arrangement, of mutual advantage to both parties, and not a mere cloak to cover usury.

The complainant also claims to recover all moneys collected under the contract by the defendants within four months before the bankruptcy, and since, on the ground that such moneys constituted a preference under the bankrupt act. As to all amounts collected during the four months before the bankruptcy, the evidence, in my opinion, does not establish that the defendants knew or had reasonable cause to believe that it was intended thereby to give a preference. As to moneys collected after the bankruptcy, and the appointment and qualification of the receiver, there could be no preference. A preference, in its legal as well as in its ordinary sense, implies a party who prefers; but a bankrupt, after the appointment of a receiver, cannot, by doing or omitting anything, prefer anybody. He has no longer any title to any property with which he can prefer any creditor, and in fact Radon & Co. did not then do anything to enable the defendants to collect the money. The complaint alleges that the agreement was void because executed pursuant to a fraudulent scheme and conspiracy to hinder, delay, and defraud creditors. I think there is nothing in the evidence to suggest any fraud, either in fact or in law. The arrangement was a mutually advantageous business arrangement between the parties. It not only was not executed furtively or secretly, but every effort was made to give the arrangement notoriety. It was a perfectly fair and valid transaction, as between the parties, so long as each of them continued It is the change in their status caused by the bankruptcy of Radon & Co. that gives rise to the serious questions in this case. In my opinion, the claim that the agreement was void as a scheme to hinder, delay, and defraud creditors is entirely untenable.

It may be suggested that, if the plaintiff cannot recover on the ground of a preference or a fraudulent transfer, this court has no jurisdiction. But consent confers jurisdiction in suits by a trustee relating to the bankrupt estate. Bankr. Act July 1, 1898, c. 541, § 23,