In Wilson & Co. (D. C., N. Y.), 42 Am. B. R. 350, 252 Fed. 631, a marginal trader pledged with Wilson, a broker, a quantity of stocks. Wilson repledged all of them, and converted a portion, but not enough to liquidate the claimant's indebtedness to him, if the value of the other securities which had been. hypothecated, but not converted, was left out. That case differs, in that here it is stipulated that the conversion of the securities of the petitioners was great enough to extinguish the debit balance due from each of them. The views of the court are summarized in this way:

"First. As between securities hypothecated with authority and those hypothecated without authority, obviously the latter have the superior equity; second, where securities are hypothecated without authority, or, though hypothecated with authority are in part subsequently converted, the securities remaining stand on equal equities provided that, as the result of the conversion of securities originally rightfully hypothecated, the restatement. of the whole account shows a credit balance in favor of the customer; third, where securities have been rightfully hypothecated, and there has not been any conversion of any of such securities, then the equity of a customer owning such securities is inferior to that of customers owning securities as described in paragraphs first and second."

The following cases were cited: In re Hollins (C. C. A., 2dCir.), 36 Am. B. R. 698, 232 Fed. 124, 146 C. C. A. 316; In re Stringer (D. C., N. Y.), 37 Am. B. R. 44, 230 Fed. 177; In re Stringer (D. C.), 233 Fed. 799; In re Toole (C. C. A., 2d Cir.), 46 Am. B. R. 651, 274 Fed. 337, 24 A. L. R. 470; Harmon v. Sprague, 163 Fed. 486, 90 C. C. A. 32.

Identification of the petitioners' securities in the Hutton pledge has been sufficient, and a majority of the other securities pledged by the Whitehouse Company being the property of marginal traders who authorized the Whitehouse Company to deal in their property as outlined, the present petitioners, with relation to the fund, are in a position where they may assert equities.

Respondents contend that no advantage should accrue by reason of the petitioners' vigilance. The order to show cause is not to be construed as a bar to a creditor of his right to file a proof of claim as a general creditor against the estate. within one year after the order adjudicating the above-named bankrupts.

(section 57 subd. [n], Bankruptcy Act [Comp. St. § 9641], providing for proof of claims), but it is within the power of the court to require persons claiming stocks and bonds in possession of the receiver, or which might come into the possession of the trustee, to give notice of their claims within a time specified, or be barred of a right to recover them from the receiver or the trustee. Penn. Steel Co. v. New York Ry., 198 Fed. 721, 117 C. C. A. 503. As held by the court in Matter of Lathrop Haskins & Co. (C. C. A., 2d Cir.), 34 Am. B. R. 739, 223 Fed 912, 139 C. C. A. 392, the court could not determine in a summary proceeding, rights to securities not in its possession, but it could fix a limit of the time within which persons claiming an interest in the stock should give notice of their claims. In re Ennis, 198 Fed. 381, 117 C. C. A. 257; In re Gay & Sturgis (D. C., Mass.), 35 Am. B. R. 417, 224 Fed. 127.

Respondents argue that petitioners should bear the burden equally with other persons whose securities were included in the Hutton pledge, and that there must be equal contribution among all such persons, and that, if the owners of the other securities failed to appear, their interests in the funds should pass to the trustee, and cite Duel v. Hollins (U. S. Sup. Ct.), 37 Am. B. R. 1, 241 U. S. 523, 36 Sup. Ct. 615, 60 L. Ed. 1143. That case is authority on identification of securities in the pledge, but is not decisive of equities of those who have traced their securities in the pledge. The stock there found was insufficient to cover the claims of certain customers. The court held that each claimant could recover the value of such a number of shares as the amount he was entitled to bore to the amount the long customers were entitled to. It seems to us that there is a distinction to be observed, where, as here petitioners, with the exception of Wittmer, are persons whose securities were wrongfully pledged with the Hutton Company, or were converted as already, explained. Again, we have here a surplus of more than sufficient to satisfy all such claims. Claims of contribution are therefore unnecessary.

In re Toole, supra, is not directly in point, for there Foster, a marginal trader, discovered, upon the failure of the broker, that certain of his securities had been pledged. The pledgee

did not sell all the collateral that he held, but, after paying the amount of his lien, delivered to the trustee a surplus fund, together with certain securities, including the stock of the marginal trader, Foster, who then brought suit to recover. It was held that Foster's claim should be consolidated with others, as the mere chance that his property had survived ought not to put him in a better position than those whose property had been pledged with his under like circumstances, but had been sold, and also decided that, if it should appear that there were others with the same equities, yet the fund was insufficient to pay all claims, joint contribution should be had. The court in its discussion said that, if the stock of A. is lawfully pledged and that of B. and C. unlawfully pledged, there is no obligation on the part of B. and C. to contribute, for there is no common burden between A. on the one side and B. and C. on the other. The principal that joint contribution may be enforced applies only in cases where the situations of the parties are equal, as "equality among persons whose situations are not equal is not equitable."

Petitioners have indentified their properties in the pledge. No persons except those now before the court have claimed any interest in the fund here involved, in that they did not appear in response to the show cause order. Petitioners, therefore, are not bound to deliver to the trustee, and thus put themselves in the attitude of contributing jointly in bearing the burden of the pledge with those whose equities are inferior to theirs. It follows that the trustee cannot claim more than could the other customers whose equities are inferior.

The order appealed from is reversed, and the proceeding is remanded, with directions to proceed in accordance with the views herein expressed; the claim of Wittmer against the fund to be classified as inferior and subject to the claims of the other petitioners.

Reversed and remanded.

IN MATTER OF MORRIS BROTHERS, INC., BANKRUPT.*

ALBERT C. SMITH V. EARL C. BRONAUGH.

U. S. Circuit Court of Appeals, Ninth Circuit, October, 1923.

No. 4043.

(Aff'g 49' Am. B. R. 93.)

TITLE TO PROPERTY-WHAT PROPERTY PASSES TO TRUSTEE-PROPERTY IN WHICH OTHERS HAVE INTEREST-PROPERTY HELD BY BANKRUPT AS TRUSTEE TRUST FUNDS COMMINGLED WITH OTHER PROPERTIES.

A person who has been induced by fraud to purchase stock in a corporation, does not sufficiently trace the money paid where it is shown that the money went into the general fund of the corporation and was used in its general operations.

(See Collier, 13th Ed., p. 1682; Am. B. R. Digest, § 393.) SAME-WHAT PROPERTY PASSES TO TRUSTEE-PROPERTY IN WHICH OTHERS HAVE INTEREST-PROPERTY HELD BY BANKRUPT AS TRUSTEE-RIGHTS OF STOCKHOLDER SUBORDINATE TO RIGHTS OF CREDITORS.

A stockholder of a bankrupt corporation, who was induced to purchase stock by means of fraud, has no right in the assets of the corporation as against creditors who became such while he was a stockholder, although he is able to trace his payment for stock into the assets in the hands of the trustee.

(See Collier, 13th Ed., p. 1682; Am. B. R. Digest, § 393.) PRIORITY OF DEBTS AND CLAIMS-DEBTS ENTITLED TO PRIORITY BY STATE OR FEDERAL LAWS-IN GENERAL-IN OREGON, CREDITORS OF CORPORATION ENTITLED TO PRIORITY OVER STOCKHOLDERS WHO ARE INDUCED BY FRAUD TO PURCHASE STOCK.

Under the law of Oregon, which provides that creditors of insolvent corporations are entitled to be paid before stockholders whose status is due to corporate fraud, can by rescission change to the status of creditors. and receive payment out of corporate property, the creditors of a bankrupt corporation are entitled to priority of payment, by virtue of section 64b (5) of the Bankruptcy Act, over a stockholder who was induced to become such by fraud.

(See Collier, 13th Ed., p. 1483; Am. B. R. Digest, § 875.)

Appeal from order of the District Court of the United States. for the District of Washington, denying preference to appellant's claim. Affirmed.

293 Fed. 294.

Before HUNT and RUDKIN, Circuit Judges, and BOURQUIN, District Judge.

I. N. Smith, L. A. McNary, John W. Reynolds, and Flegel, Reynolds, Flegel & Smith, for appellant.

J. P. Winter, for appellee.

BOURQUIN, District Judge:

This appeal is from qualifications attached to allowance of appellant's claim against the estate in bankruptcy. In review of the referee's disallowance of the claim the District Court determined in substance and effect that by reason of fraud imputable to the corporation bankrupt, and that induced appellant's purchase of some of its preferred capital stock, he is entitled to rescind and to assert a claim against the estate; that the consideration he paid is not traceable into certain bonds in the estate, nor into the general mass thereof, and neither bonds nor estate is chargable with trust or lien in his behalf; that, dur ing the 17 months between purchase and adjudication of corporate bankruptcy, claims accrued against the corporation, that are now asserted against the estate, in excess of the assets in the estate, and in excess of $1,500,000; and that these claims are superior in equity to his, and are entitled to be paid prior to his.

The appeal questions only the finding of nontraceability of the consideration paid for the stock, and the law applied. The evidence is without conflict and discloses that Morris Bros., Inc., contemplating reorganization with power to issue preferred stock, in July, 1919, sold to appellant an interim certificate in amount $2,000. In payment to the corporation he delivered Canadian bonds in value $2,000, to be collected and applied. To effect reorganization, in September, 1919, the stockholders of Morris Bros., Inc., organized a new corporation of the same name, this bankrupt, and to it transferred all the property of the old corporation. In consideration the new corporation assumed the liabilities of the old, and to the latter's stockholders issued all the new stock.

Accordingly a Mrs. Etheridge received all the preferred