"cause the estates of bankrupts to be collected, reduced to money and distributed, and determine controversies in relation thereto, except as herein otherwise provided."

Section 23a (Comp. St. § 9607) provides:

"Jurisdiction of the United States and State Courts.-The United States Circuit Courts shall have jurisdiction of all controversies at law and in equity, as distinguished from proceedings in bankruptcy, between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees, in the same manner and to the same extent only as though bankruptcy proceedings had not been instituted and such controversies had been between the bankrupts and such adverse claimants."

In the answer of the trustee, he distinctly disclaims ownership in the bonds, and admits that they were deposited with the bankrupts. without the authority or assent of the owners for the use made of them, and admits that they were wrongfully used by the bankrupts in the hypothecation with the Chase National Bank.

The interest proclaimed by the trustee is the desire to see the proceeds of the bonds, after a sale, divided pro rata among those who are creditors and who had their bonds wrongfully converted by the bankrupt. The use made of the bonds constituted a felony under section 956 of the Penal Law (Consol. Laws, c. 40) of the state of New York. It is not incumbent upon the trustee in bankruptcy, in the faithful discharge of his duties, to try to keep, against the true owners, bonds which have been stolen, and which have been recovered and identified. Nor was it part of the duty of the trustee to take part in the equitable distribution of the stolen property or its proceeds upon its recovery. As soon as he discovered that the property which was given to his possession belonged to others, and was satisfied of that fact, he could no longer lawfully retain it, and should have delivered it to the true owner. The trustee always had at hand, when there were adverse claimants to the bonds, the right to turn them over to the registry of the District Court, or to the state court, where the replevin suit was instituted, and permit that court to determine the rights of the conflicting claimants. Section 820, Code of Civ. Proc. N. Y. This respondent has not entered the bankruptcy court, nor submitted to its jurisdiction, in an effort to determine the ownership of the bonds or the rights of the respective claimants. He has appeared specially and contested the jurisdiction of the District Court.

Since the bankrupt had no ownership interest in any of the bonds, which were hypothecated, and which were sold contrary to the rights of their true owners, no possible advantage could result to the creditors of the estate of the bankrupts, and the ratable distribution of the proceeds of the stolen property could not serve to increase the amount of the assets, or to reduce the total amount of the probable claims against the estate. The contest as to the interest in the stolen property, since it was no part of the estate of the bankrupts, is of no interest to the trustee. The Bankruptcy Act makes provision for the search or discovery of concealed assets by providing for the examination of the bankrupts and others; and, even assuming that an examination revealed this property in possession of the bankrupts at the

(263 F.)

time the petition was filed, the trustee could not retain possession of the stolen property, and would be obliged to return it, if possession were taken, to the lawful owner. It is inconceivable to believe that any greater right exists where the property is unlawfully held after wrongful conversion by a party other than the bankrupt.

But it is contended by the trustee that demands have been made upon him for these bonds by claimants who have lost their respective securities. By depositing the bonds or proceeds with the clerk of the court, and asking for an interpleader, the trustee would protect the estate against such demands. It is quite clear that the claim involved in the present action is not a proceeding in bankruptcy, or a controversy arising in connection with bankruptcy proceedings, as, indeed, it has no relation with bankruptcy proceedings, since the bonds were never lawfully transferred to any one by the bankrupts. Assets may be released by an assignee, if he takes them in good faith and finds later that they belong to third parties. Matter of Potter v. Durfee, 44 Hun, 197. A trustee in bankruptcy may do likewise. In re McIntyre (Ex parte Pippey) 181 Fed. 955, 104 C. C. A. 419; Dunlop v. Mercer, 156 Fed. 545, 86 C. C. A. 435.

The powers and jurisdiction of the bankruptcy court are derived from the Constitution and the acts of Congress passed in pursuance thereof, and even by consent the parties cannot invest a court with jurisdiction or power not authorized by law but conferred upon it by the Constitution. In re Hollins, 229 Fed. 349, 143 C. C. A. 469. Therefore it appears that the res in question never became subject to the jurisdiction of the District Court as property of the bankrupts. It is not claimed by the trustee as the property of the bankrupts, and there is no basis for asserting the right of the court to proceed as to it, when it is not the property of the bankrupt. Murphy v. John Hofman Co., 211 U. S. 562, 29 Sup. Ct. 154, 53 L. Ed. 327; White v. Schloerb, 178 U. S. 542, 20 Sup. Ct. 1007, 44 L. Ed. 1183.

In the case relied upon by the petitioner (Well-Made Gas Mantle Co., 233 Fed. 250, 147 C. C. A. 256), the bankrupt's trustee asserted that he claimed title in good faith to the property, and there was some basis for this claim. In Michel & Lazarus v. Prentice, 234 U. S. 264, 34 Sup. Ct. 851, 5 L. Ed. 1305, the property was said to "belong to the bankrupt estate," and the order was sought to secure "the restoration of the bankrupt's estate which was in the custody of people having no right to it." In Acme Harvester Co. v. Beekman Lumber Co., 222 U. S. 300, 32 Sup. Ct. 96, 56 L. Ed. 208, there was a finding by the court that there was no dispute "upon this record that the money attached was owing to the bankrupt and unquestionably its property." It will be seen that in each of these cases there was a claim of right to the property, and they are therefore distinguishable from the facts involved in the case here considered.

We conclude that the court below properly denied the application for a stay, and the order is therefore affirmed.

SAMARA et al. v. UNITED STATES.

(Circuit Court of Appeals, Second Circuit. January 14, 1920.)

No. 4.

1. CRIMINAL LAW 422 (6)-ADMISSION BY ONE CONSPIRATOR ADMISSIBLE

AGAINST OTHERS.

In a prosecution for conspiring to conceal a bankrupt's assets, an admission by one of the conspirators during the course of the conspiracy is admissible against the other conspirators, although not made in their presence.

2. CRIMINAL LAW 424(3) EVIDENCE REGARDING HISTORY OF TRANSACTION DOES NOT VIOLATE RULE AGAINST CONSPIRATORS' STATEMENTS MADE AFTER CONSPIRACY IS ENDED.

In a prosecution, for conspiring to conceal a bankrupt's assets, evidence that the bankrupt's attorney took him before the District Judge and later to the district attorney, to whom he confessed was not rendered inadmissible against his co-conspirators by the rule that a conspirator's statement in the absence of his co-conspirators after the conspiracy is ended is inadmissible, being merely a history of the transaction.

3. CONSPIRACY 41-PERSON JOINING CONSPIRACY AFTER ITS INCEPTION IS LIABLE.

A person entering a conspiracy after its inception, but prior to its consummation, is deemed a party to all acts done by his co-conspirators, either before or after his entering the plan.

4. CONSPIRACY 47-EVIDENCE SUSTAINING CONVICTION.

In a prosecution for conspiring to conceal a bankrupt's assets, evidence that accused assisted the bankrupt in making out fictitious bills of sale and carrying away goods held to sustain a conviction, although accused was not present at the inception of the conspiracy.

In Error to the District Court of the United States for the Southern District of New York.

Criminal prosecution by the United States against Saleen Samara, Amen Samara, and Saleen Baloutin. Judgment of conviction, and the defendants bring error. Affirmed.

Osborne, Lamb & Wilcox, of New York City (James W. Osborne, Gilbert D. Lamb, and George W. Wickersham, all of New York City, of counsel), for plaintiffs in error.

Francis G. Caffey, U. S. Atty., and E. Paul Yaselli, Asst. U. S. Atty., both of New York City.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS, Circuit Judge. The defendants have been convicted under an indictment which charged them with the commission of two independent crimes. The first count charged them with a conspiracy to commit the crime. The second count charged them with the actual commission of the substantive crime which they are charged with having conspired to commit. So far as the first count is concerned, the conspiracy alleged is one to commit an offense against the United States in violation of section 37 of the Criminal Code, which reads as follows: "If two or more persons conspire either to commit any offense against the United States, or to defraud the United States in any manner or for any pur

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(263 F.)

pose, and one or more of such parties do any act to effect the object of the conspiracy, each of the parties to such conspiracy shall be fined not more than ten thousand dollars, or imprisoned not more than two years, or both." U. S. Comp. Statutes, § 10201; Barnes' Fed. Code (1919) p. 2344, § 9715.

The crime charged in the second count was that of a concealment of assets from a trustee in bankruptcy, in violation of the Bankruptcy Act, § 29b, subd. 1, which declares that:

"A person shall be punished, by imprisonment for a period not to exceed two years, upon conviction of the offense of having knowingly and fraudulently (1) concealed while a bankrupt, or after his discharge, from his trustee any of the property belonging to his estate in bankruptcy." U. S. Comp. St. § 9613; Barnes' Fed. Code (1919) p. 2165, § 9113.

This case proceeded upon the theory of a conspiracy between the bankrupts Saleen Antoon and Tonfic Khoury as co-conspirators and aiders and abetters of the bankrupts to conceal assets from the trustee in bankruptcy. Saleen Antoon and Tonfic Khoury, prior to the early part of 1914, were conducting a partnership and engaged in the business of buying and selling oriental merchandise, consisting of silks, linens, kimonos, and embroideries, under the trade-name of S. Antoon & Co., with a place of business in Philadelphia, Pa. In May, 1915, the firm removed to New York City. Among its creditors, and the largest creditor of all, was the firm of Samara Bros., which was composed of Saleen Samara and Amen Samara. The firm of Samara Bros. was established in New York City, and it conducted a wholesale business in oriental merchandise. Another creditor was Saleen Baloutin, also engaged in the same business, and with the two Samaras, defendants herein.

The testimony is that in May, 1915, Antoon and Khoury had a conference with the Samaras, at which the Samaras told the bankrupts that they could not pay their debts, and advised them that they ought to buy as much merchandise in the market as they could, immediately sell it at whatever price available, square accounts with them, put the rest of the money in their pockets, and then declare themselves insolvent; that they later could conveniently start in business again, since the whole matter would be viewed as nothing out of the ordinary, as everybody usually fails and never has any trouble; and that, if they should accidentally get into trouble, they (the Samaras) would unhesitatingly help them out. Antoon and Khoury did not at that conference agree to the Samara proposition and left, saying they would think it over and let them know what they were willing to do the next day. On the following day Antoon and Khoury called at Samara Bros.' place of business. and a conversation took place which in substance was as follows:

The Samaras said that they (Antoon and Khoury) were foolish if they did not do what they had told them to do the day previous; that they should do it, and need not be afraid. Antoon, as a result of their persuasion, assured them that they would do it. The Samaras, upon this assurance, instructed them that they should go ahead and buy as much goods as they could giving them names of dealers from whom they should buy on credit, all of whom were recognized as strong competitors of the Samaras. In addition it was further suggested and decided to

have Tonfic Khoury go on the road and sell the merchandise, while Antoon would do the buying; that upon receipt of the merchandise they should send them (the Samaras) enough in quantity to pay their debt without entering it on the books-merely make a memorandum of whatever was sent to the Samaras. Saleen Antoon proceeded to buy from the parties named by the Samaras and others on a credit basis, and within the period of five or six days bought some $12,000 to $13,000 worth of merchandise on credit.

Saleen Samara and Amen Samara had working for them a brother, Elias Samara, one of defendants. As a means of confidential convenience, Antoon sent a great deal of the merchandise that he had bought to Samara Bros.' place of business, by Elias Samara, in bundles, and on one occasion a large case filled with merchandise through Samara Bros.' truckman. The Samara Bros. told Antoon that it was necessary to have a bookkeeper fix the books; otherwise, he would go to jail, and thereupon recommended to him one Nicholas G. Mamary, who was immediately employed by S. Antoon. As the payments on the merchandise that was bought began to become due after the expiration of 30 days, Amen Samara called at the place of business of S. Antoon and asked to see his books, and remarked to Antoon that the books would have to show where the merchandise had been sent, in which case it became urgently important that he should make entries of sales of a fictitious nature. He further told him to call at his house the next day or the day after in the evening, and bring with him the sales book, in order that he might be properly shown how to make and enter the fictitious sales. As instructed Antoon took the sales book and went to the residence of Amen Samara, and upon arrival found present there Amen, Saleen, and Elias Samara, and Saleen Baloutin, the defendants. It appears that a number of fictitious bills were then made out, amounting to $4,373.24, more or less. After the fictitious sales had been made out, and the whole matter gone over thoroughly, Saleen and Elias Samara and Saleen Baloutin agreed to call at Antoon's place of business early next morning and be prepared to take all of the merchandise away, except a few things which they thought it would be advisable to leave, so that the other creditors would see that something was left. This was done as had been agreed. A few days later a petition in bankruptcy was filed. against Antoon and Khoury.

Antoon before June 15, 1915, not having disposed of all of his merchandise before June 15, 1915, was instructed by Samara Bros. to ship whatever merchandise he had not disposed of to any town he knew of and leave it there. Antoon acted accordingly and sent Khoury away with three trunks filled with merchandise. All of the merchandise contained in one of the trunks was sold by Khoury while traveling, and the merchandise in the other two trunks was stored by him at Oil City, Pa. On September 1, 1915, Antoon, in talking to Samara Bros. about what should be done with the merchandise contained in the two trunks stored at Oil City, was told to go there and sell as much of it as he could, and that whatever merchandise he could not sell he was to ship to them, and they would sell it for him and give him the proceeds. On September 19, 1915, Antoon went to Oil City, emptied the two trunks that