service rendered under the same, or by reason of the cancellation thereof; and after a long and bitter controversy between them, growing out of these conditions, upon the court's ascertainment of the sum actually due to the plaintiff at the time of the breach of the contract by the defendant, for work and labor performed under the contract, such amount became a debt due unconditionally, and payable in money; and the defendant should not for a moment be allowed at the end of such a contest, then to avail itself of the benefit of discharging its liability by tendering its own securities, which might prove valueless, and probably were greatly depreciated. Upon its electing to cancel the contract, making it impossible for the plaintiff to execute same, and its refusal to pay the plaintiff for the work it had actually performed, thereby forcing it to resort to the courts to secure relief under its contract, the defendant company then and there ceased to occupy the favored position of having the right to tender its obligations under the provisions of the contract between them, as distinguished from paying the amount finally ascertained to be due by it, as any other litigant would have to do. Marlor v. Texas & P. R. Co. (C. C.) 21 Fed. 385; McNitt v. Clark, 7 Johns. (N. Y.) 465; Gilbert v. Danforth, 6 N. Y. 585; Stephens v. Howe, 2 Jones & S. (N. Y.) 133; Stewart v. Donelly, 4 Yerg. (Tenn.) 177; Choice v. Moseley, 1 Bailey (S. C.) 136, 19 Am. Dec. 661; Butcher v. Carlile, 12 Grat. (Va.) 520; Church v. Feterow, 2 Pen. & W. (Pa.) 301; Trowbridge v. Holcomb, 4 Ohio. St. 38; Perry v. Smith, 22 Vt. 301; Mettler v. Moore, 1 Blackf. (Ind.) 842. As to whether the complainant had a lien for the amount thus found to be due it, and the order of priority of such lien, the defendant company having broken the contract, and being itself in the hands of a receiver, should at least be estopped from gainsaying it; and so far as this litigation is concerned, no other lienor has appeared to interpose such objection. Fourth. It is finally insisted that the plaintiff is not entitled to the first lien upon the property of the defendant company; and that in no event should the lower court in this proceeding have decreed in its favor, and for the sale of the property, because of the pendency of the suit in the federal court in Pennsylvania, in which the affairs of the defendant company were being wound up, and its estate administered. So far as the first lien is concerned, while the opinion of the court does say that the right to the first lien existed in behalf of the plaintiff, the decree does not specifically so adjudicate; but merely that there exists a lien, and directs sale of the property. We think that so far as this record shows, this plaintiff was entitled to a first lien upon the property sought to be subjected to its lien; but that the court below was right in decreeing in favor of the plaintiff, and for a sale of the property to pay the indebtedness adjudged to be due, there can be to our minds no serious question. What might have been the duty of the court respecting the ascertainment of liens, or the consideration to be shown to the pendency of the suit in the federal court in Pennsylvania, is a matter that we do not feel called to pass upon; since the question of the existence of other liens, and the determination of rights arising under them between the holders of the same, and the plaintiff, was 145 F.-30 not asked at the hands of the court below. Nor was the pendency of the receivership suit in the federal court in Pennsylvania, set up until after the decree of sale herein in favor of the plaintiff; and it is too late to raise these questions for the first time upon appeal. To give consideration to them, would enable the defendant to withhold such defense until after the decision upon the merits of the case; and then avoid the effect of an adverse determination, by raising matters in no way in issue before the trial court. We think that the plaintiff was clearly entitled to the relief afforded it in the collection of its debt, by the decree of the court below, and that there was no error therein, as against which relief can be obtained in this court. The decree of the lower court will be affirmed, with costs. MORGAN et al. v. FIRST NAT. BANK OF MANNINGTON et al. (Circuit Court of Appeals, Fourth Circuit. May 1, 1906.) 1. BANKRUPTCY-REVIEW-MODE-APPEAL-PETITION TO REVISE. 2. SAME PREFERENCE-TRUST DEEDS-VALIDITY. Where a trust deed was executed by a bankrupt to secure an antecedent debt without any actual fraud within four months prior to the institution of bankruptcy proceedings, and was intended to create a preference, and was accepted for that purpose at a time when the bankrupt was insolvent, and it resulted in giving a preference, it was avoided by the bankrupt's adjudication as a bankrupt, as provided by Bankr. Act July 1, 1898, c. 541, §§ 60a, b, 67e, 30 Stat. 562, 564 [U. S. Comp. St. 1901, pp. 3445, 3449]. A trust deed securing an antecedent debt without a new consideration, executed by a corporation while insolvent for the purpose of prefering one creditor over another, which was accepted for that purpose, and operated as a preference, was void provided it was assailed within four months of the recordation thereof, as provided by Code W. Va. 1899, c. 74, § 2, and was therefore also void as against the grantor's creditors in bankruptcy, as provided by Bankr. Act July 1, 1898, c. 541, § 67e, 30 Ștat. 564 [U. S. Comp. St. 1901, p. 3449]. 4. SAME-CONTRACT-RELATION. Where a contract providing for the execution of a trust deed to secure bonds of a corporation given for advances was not recorded, a trust deed executed pursuant to such contract within four months prior to the institution of bankruptcy proceedings could not take effect by relation as of the date of the contract, in order to sustain the same as against unsecured creditors of the bankrupt. 5. COURTS-FEDERAL COURTS-RULES OF DECISION. In determining the validity of a mechanic's lien in a bankruptcy proceeding, the federal courts will be governed by the state laws. Appeal from, and Petition for Revision of Proceedings in, the District Court of the United States for the Northern District of West Virginia, at Clarksburg. On the 16th day of May, 1903, five gentlemen of the town of Cameron, W. Va., consisting of A. E. Fox and others, as parties of the first part, entered into an agreement with the Mannington Realty Co., party of the second part, and the First National Bank of Mannington, W. Va., and others, parties of the third part, to construct, build, and equip a pottery plant. Said Fox and others were to construct the plant, the said Mannington Realty Company to donate and convey on or before the 26th day of May, 1903, three acres of land to said Fox and others, promoters, and the First National Bank of Mannington and others, parties of the third part, were to furnish the money. The contract provided that the deed for the three acres of land should be made to A. E. Fox and others, the parties of the first part, and upon the charter and organization of the pottery company said Fox and others were to convey said land to the pottery company. The said Fox and others, parties of the first part, were to execute to the said parties of the third part their interest-bearing gold bonds, to become due on the 1st day of January, 1904, and to be dated and delivered to the parties of the third part as money was needed in the construction and equipment of the plant; and the agreement further provided that the said bonds so executed should be taken up and canceled, and the stock or gold bonds of the pottery company, or both such stock and bonds, to be secured by deed of trust upon the whole property, should be substituted, and the said parties of the first part released from all responsibility for their said notes. Most of the provisions of said agreement were carried out. The deed to Fox and others, however, was not made, and said Fox and others waived this requirement; and, some months after the same was to have been executed, directed that the Mannington Realty Company make the conveyance direct to the Augusta Pottery Company, which was done on the 29th day of December, 1903, and recorded on the 15th day of January, 1904. The plant was built and equipped during the summer and fall of 1903 in the name of the Augusta Pottery Company; the company having been incorporated in that name by the said Fox and others shortly after the contract was entered into of the 16th day of May, 1903, and pursuant to said agreement. The deed to the land was not made and recorded until the dates above mentioned, and the said contract was kept in the possession of the parties in interest, was not known of, and never put to record until it was incorporated in the deed from the Mannington Realty Company of the 29th day of December, 1903, and admitted to record on the 15th day of January, 1904, eight days after the deed of trust had been executed and recorded by the said Augusta Pottery Company, as contemplated in the said agreement, mortgaging its property to cover its bonded indebtedness. The mortgage bore the date of the 1st of January, 1904, and was recorded on the 7th day of the same month, was executed pursuant to a resolution passed at a meeting of the board of directors and of the stockholders of said Augusta Pottery Company held on the 16th day of November, 1903, and secured a bond issue of $45,000. During the construction of the plant, the parties of the third part to said agreement, being the appellees in this appeal, from time to time advanced money, according to the terms of the contract of the 16th day of May, 1903, to the said A. E. Fox and others, and accepted the notes of said Fox and others for the amount of their advances, as aforesaid, and as was contemplated by said agreement; and after the execution of the mortgage aforesaid, all of said notes of said Fox and others were duly taken up by said Augusta Pottery Company, and the bonds of said company so secured regularly substituted in their place, and the said pottery company assumed the interest-bearing gold bonds of said Fox and others to the banks and others, the parties of the third part to the said contract furnishing the money, all of which was done long after the money was furnished under said contract, and used in the construction and equipment of the said plant, and within four months of the time of the inauguration of the involuntary bankruptcy proceedings herein on the 23d day of April, 1904. The said plant was duly constructed and equipped in the name of the Augusta Pottery Company, and the said company contracted debts at various times, for some of which the creditors were entitled to mechanics' liens under the laws of the state of West Virginia, and upon the recordation of the mortgage aforesaid and the title deeds to the property, and within the time provided by the statutes of West Virginia, filed their mechanics' liens, claiming a lien upon the property of the said pottery company prior to said bonded indebtedness. These debts amounted in the aggregate to some $12.000, of which $6,025.22 was covered by mechanics' liens. The unsecured creditors having filed their involuntary petition in bankruptcy against. the pottery company, the same was regularly adjudged bankrupt, and pending such proceedings the said real estate and plant was sold, from which was realized the sum of $38,000. The case was duly referred to the referee, who decided that out of the $38,000 should first be paid the costs of sale, certain unpaid taxes, and costs of the bankruptcy proceedings; second, two labor claims, aggregating $66.01; and, third, the mechanics' liens aforesaid; and that the amount remaining, of $29,297.73. should be distributed pro rata between the unsecured creditors and the bonded indebtedness of $45,000, on the basis of 61.68 per cent.; the referee's conclusion being that said mortgage was avoided by reason of the bankruptcy proceedings, it having been executed to secure payment of an antecedent debt. From this decision of the referee an appeal was taken by the holders of the mortgage bonds, the appellees herein, to the United States District Court, and that court reversed the action of the referee in as far as he, held that the mortgage given by the bankrupt company was avoided by the bankruptcy proceedings, and that the mechanics' lien took precedence over such mortgage indebtedness, and placed the unsecured creditors upon a footing with the mortgage bondholders. From this decision the supply lien creditors, the bankrupt's trustee, and certain of the unsecured creditors appealed to this court. After the appeal was taken, a motion was regularly made to dismiss the same, because an appeal was not the proper method of presenting the questions involved in this court, and thereupon the appellants regularly filed their petition for review, and presented the same record, which is case No. 642, the number of the case on appeal being 616. Scott C. Lowe, for appellants. C. A. Snodgrass, for appellees. Before PRITCHARD, Circuit Judge, and WADDILL and KELLER, District Judges. WADDILL, District Judge, after stating the facts as above, delivered the opinion of the court. We are first called upon to determine whether this court can afford the relief sought, either by appeal or on motion for review under the bankruptcy act; and, if so, which is the appropriate proceeding. Just when one or other of the remedies referred to is applicable may be said to be not free from doubt under the existing bankruptcy act, and as to which there has been much diversity of view by the different courts. But, so far as the questions arising in this case are concerned, it does not seem to the court that there is room for serious controversy as to which is the proper remedy to be adopted, and we shall not therefore enter into any general discussion thereof, or attempt to harmonize the apparently conflicting views of the courts on the subject. The question here is one arising in bankruptcy proceedings; that is, in the administration of the estate in bankruptcy, as distinguished from a controversy at law or in equity arising in the course of bankruptcy proceedings, such as is clearly contemplated by sections 23 and 24 of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 552, 553 [U. S. Comp. St. 1901, p. 3431]. Denver Nat. Bank v. Klug, 186 U. S. 202, 205, 22 Sup. Ct. 899, 46 L. Ed. 1127; In re Friend, 134 Fed. 778, 67 C. C. A. 500. The debt is not disputed, and the point sought to be reviewed is one of law, arising upon the determination of the validity of a trust deed executed by the bankrupt company within four months of the institution of the bankruptcy proceedings, and hence belongs clearly to the class of cases made subject to review by this court under its general power to "superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy." Bankr. Act July 1, 1898, c. 541, 30 Stat. 553, § 24b [U. S. Comp. St. 1901, p. 3432]. This view has been taken by the Circuit Courts of Appeals of several of the circuits, notably, in the First, Sixth, and Seventh. In re Rouse, Hazard & Co., 91 Fed. 96, 33 C. C. A. 356; In re Richards, 96 Fed. 935, 37 C. C. A. 634; Courier Journal Co. v. Schaefer-Meyer Brewing Co., 101 Fed. 699, 41 C. C. A. 614; In re Worcester County, 102 Fed. 808, 42 C. C. A. 637; Note to In re Eggert, 102 Fed. 735, 43 C. C. A. 13, 14, 16, 17; In re Mueller, 135 Fed. 711, 68 C. C. A. 349. The latter is a decision of the Circuit Court of Appeals for the Sixth Circuit, and to the opinion of President Lurton of that court reference is especially made, as containing an able and interesting discussion of the general subjects of appeals and review in bankruptcy cases from the District Courts of the United States. Second. Coming to the merits of the case, we are called upon to pass upon the effect of bankruptcy proceedings on the trust deed on its plant and other property, given by the bankrupt within four months of the institution of the bankruptcy proceedings, and whether the bonded indebtedness secured under such deed of trust takes precedence over certain mechanics' liens duly perfected and recorded in the proper courts of West Virginia against the bankrupt company for debts incurred during the construction of its plant, as well as the effect of the same upon the unsecured creditors of the company. The following extracts from the provisions of the present bankruptcy act as amended have special reference to the case. "Sec. 60a. Preferred creditors. A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, or after filing the petition, and before the adjudication, made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. * Act July 1, 1898, c. 541, 30 Stat. 562 [U. S. Comp. St. 1901, p. 3445]. “Sec. 60b. If a bankrupt shall have given a preference within four months before the filing of a petition, or after the filing of the petition and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person." "Sec. 67e. That all conveyances, transfers, assignments, or incumbrances of his property, or any part thereof, made or given by a person adjudged a bankrupt under the provisions of this act subsequent to the passage of this act, and within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay, or defraud his creditors, or any of them, shall be null and void as against the creditors of such debtor, except as to purchasers in good faith and for a present fair con |