(177 Fed. 182.) HOLMES v. DOWIE et al. IRVINE et al. v. THOMAS. (Circuit Court of Appeals, Seventh Circuit. January 4, 1910.) No. 1,616. 1. COURTS (§ 508*)-PROCEEDINGS IN STATE COURT-FEDEral Court-JuRISDIC. Rev. St. § 720 (U. S. Comp. St. 1901, p. 581), providing that an injunc tion shall not be granted by any federal court to stay proceedings in a state court except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy, does not apply to a suit in a state court by which it is attempted to fasten an easement on the fee of lands taken into the possession of a federal Circuit Court for the administration of an estate through a receiver, since the federal court's possession drew to it power to hear and decide all controversies relating to rights and interests in the property. [Ed. Note. For other cases, see Courts, Dec. Dig. § 508.* Federal courts enjoining proceedings in state courts, see notes to 16 C. C. A. 90; 27 C. C. A. 575; 63 C. C. A. 437.] 2. RECEIVERS (§ 110*)-ADMINISTRATION OF ESTATE-SCOPE-QUESTIONS DE TERMINED. Where insolvent was the owner of a large tract of land subject to many leases containing restrictions as to the use of the property when a receiver was appointed, who asserted dominion over the incorporeal rights of the insolvent, his right to relieve the lessees severally from the restrictive conditions was a valuable asset in the hands of the receiver, and hence, the extent to which the recited restrictive conditions was affected by other paragraphs of the leases, by the character of the plat or by the oral or written representations of the insolvent, were questions affecting the value of the receiver's reversionary interest, to be presented to and adjudicated by the court of administration. [Ed. Note. For other cases, see Receivers, Dec. Dig. § 110.*] Appeal from the Circuit Court of the United States for the Eastern Division of the Northern District of Illinois. Action by William B. Holmes against John Alexander Dowie and others, consolidated with a bill by Gus D. Thomas, as receiver of the estate of Dowie, against Charles D. Irvine and others. From at decree in favor of the receiver, Irvine and others appeal. Affirmed. In July, 1906, in a suit by Holmes against Dowie and others, appellee's predecessor was appointed receiver and directed to take immediate possession of all property, real, personal, and mixed, situated in Lake county, Ill., then in the name of or claimed to have been owned by Dowie. Of the tangible property appellee's predecessor and appellee took and held actual possession; over the intangible they exercised dominion so far as that was possible. About 1901 Dowie purchased 6,500 acres of land in Lake county, Ill., and thereon established what was and is known as Zion City. When the receiver was appointed, a considerable portion of the Zion City site (in lots and blocks) remained in fee simple absolute in Dowie; the balance he had transferred by uniform residential or uniform business property leases to various persons who went into possession thereunder. All leases were to run till January first, A. D. 3000. In the leases of residential property one of the covenants of the lessees was that the premises "shall not, nor shall any portion thereof, or any building, or structure of any kind, now or hereafter located on said premises, ever be used (without the written consent of the lessor is first obtained) as or for other than residential uses and purposes." In March, 1909, appellants, lessees of residential property, filed their bill in the Lake county circuit court against the lessees of three other lots in the residential district to restrain them from using the lots for other than residential purposes. The receiver was not a party to this Lake county suit. None of the parties to the Lake county suit had been made parties to the suit of Holmes against Dowie in the United States Circuit Court. The Lake county bill, after setting forth the above recited facts relating to the Zion City site and the leases of lots, further averred in effect that in the plat certain portions were set aside and forever reserved exclusively for residential purposes; that Dowie, before any leases were made, represented to the world in public speeches and prints that the title to the site would be held and protected so that the conditions as to residence and business lots would be preserved forever; that appellants (and more than 300 others similarly situated in whose behalf also the bill was alleged to have been brought) relied upon said representations in taking leases; that the defendants were threatening and were about to violate the conditions of their leases; that others, in pursuance of a conspiracy with the defendants, would from time to time seek to do likewise; and that appellants and all others similarly situated had acquired, by virtue of the premises, easements over and appurtenant to all the lands within the Zion City site. The prayer was, not only that the named defendants be enjoined, but that the easements of appellants (and of all others simi-' larly situated who should come into the case) be adjudicated and established in and to all the lands in Zion City. A few days after the aforesaid bill was filed in the Lake County circuit court appellee as receiver presented to the court below his petition in which, after setting forth the situation as hereinabove outlined, he alleged that the lands within the Zion City site had been scheduled in his inventory of the assets of the Dowie estate; that in some he owned as receiver the fee simple, and in the balance the reversionary interest; that, under orders of the court, he was engaged in converting these assets into money; and that the filing and pendency of appellants' Lake county bill constituted a cloud upon his title. Appellants' answer admitted the facts stated in the petition, but denied the legal conclusion. Thereupon the court entered the decree from which this appeal is taken, enjoining the maintenance of the Lake county suit. George W. Field and Leslie A. Needham, for appellants. Before GROSSCUP, BAKER, and SEAMAN, Circuit Judges. BAKER, Circuit Judge (after stating the facts as above). We deem it too obvious to require elaboration that section 720, Rev. St. (U. S. Comp. St. 1901, p. 581), has no application to the Lake county suit as an attempt to fasten an easement upon the fee of the lands that the United States court had taken into its possession for the purposes of administration. That possession drew with it the power (and the exclusive power, without the consent of the administering court) to hear and decide all controversies relating to rights and interests. in such property. Farmers' Loan & Trust Co. v. Lake St. Elevated Rld. Co., 177 U. S. 51, 20 Sup. Ct. 564, 44 L. Ed. 664; Porter v. Sabin, 149 U. S. 473, 13 Sup. Ct. 1008, 37 L. Ed. 815; Swope v. Villard (C. C.) 61 Fed. 417; Louisville Trust Co. v. Cincinnati, 76 Fed. 296, 22 C. C. A. 334; J. I. Case Plow Works v. Finks, 81 Fed. 529, 26 C. C. A. 46; American Loan & Trust Co. v. Central Vermont Rld. Co. (C. C.) 84 Fed. 917; Buckhannon & N. Rld. Co. v. Davis, 135 Fed. 707, 68 C. C. A. 345. This really would be enough to justify an affirmance of the decree, for the Lake county bill very clearly is aimed at affecting the title to Zion City lands that had never been leased, and the question is the right of appellants to maintain that bill, not some lesser bill. But if appellants were thought to be right in assuming that the larger aspects could properly be ignored and the bill considered merely as one in personam, on behalf of appellants only, against the lessees. of three lots to compel them to respect negative easements, we should regard the decree well rendered. The lessees were in physical possession; but appellee was asserting dominion over the incorporeal rights of the lessor in the leases. If the lessor, as against all the lessees, had the right by his written consent to relieve lessees severally from restrictive conditions, that would be a valuable property right, a valuable asset in the hands of appellee. To what extent the recited condition in the uniform leases is colored by other paragraphs, or by the character of the plat, or by the oral or written representations of Dowie, are questions that would affect the extent and value of appellee's reversionary interests; and therefore are questions that, on reason and authority, as we believe, should be presented to the court of administration. The decree is affirmed. (177 Fed. 184.) In re JOHN OSBORN'S SONS & CO., Inc. No. 159. BANKRUPTCY (§ 324*)-CLAIMS-ALLOWANCE "JUDGMENT"-PAYMENT OF IN TEREST. Though the rule that a creditor who has not stipulated for interest and accepts payment of the indebtedness in full cannot subsequently recover interest thereon is applicable to the payment of claims by a trustee in bankruptcy, allowed claims proved in bankruptcy proceedings as required by Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 560 [U. S. Comp. St. 1901, p. 3443]) § 57, and General Order 21 (89 Fed. ix, 32 C. C. A. xxii), are entitled to be treated as judgments, and, as such, to interest before and after allowance. [Ed. Note. For other cases, see Bankruptcy, Cent. Dig. § 511; Dec. Dig. § 324.* For other definitions, see Words and Phrases, vol. 4, pp. 3827-3842; vol. 8, pp. 7695, 7696.] Petition to Review Order of the District Court of the United States for the Southern District of New York. In the matter of the bankruptcy of John Osborn's Sons & Company, Incorporated. On petition of Howard J. M. Cardeza and others as trustees in liquidation to revise an order of the District Court refusing to require the trustee in bankruptcy to pay over to the trustees in liquidation a balance of the funds in his hands. Affirmed. W. G. Cook, for petitioners. Maxwell C. Katz, for respondents. Before LACOMBE, COXE, and WARD, Circuit Judges. WARD, Circuit Judge. This is a petition to revise an order of the District Court refusing to require the trustee in bankruptcy to pay over to the trustees in liquidation of a bankrupt corporation a balance of funds in his hands. The petition in the District Court alleged that none of the debts of the bankrupt corporation was based upon any contract providing for the payment of interest, but that they were all ordinary debts arising out of the purchase of goods, that the principal of all the indebtedness had been paid in full, and that the ground of the trustee's refusal to pay over the balance was that he intended to collect enough out of the bankrupt estate to pay interest on the said indebtedness. These allegations are uncontradicted. There can be no doubt as matter of law that, if a creditor who has not stipulated for interest accepts payment of the indebtedness in full, he cannot subsequently recover interest thereon. The reason is that interest, in the absence of an express agreement to pay it, is a mere incident of the debt, and is to be recovered as damages for its detention. Stewart v. Barnes, 153 U. S. 456, 14 Sup. Ct. 849, 33 L. Ed. 781. It makes no difference that the payment is accepted under protest (Cutter v. The Mayor, 92 N. Y. 166); nor that the payment is made while a suit for both principal and interest is pending (Canfield v. School District, 19 Conn. 529; Davis v. Harrington, 160 Mass. 278, 35 N. E. 771). The district judge, admitting this to be the general rule, held that it did not apply to bankruptcy proceedings because they constitute a mere division of the fund belonging to the creditors, dividends from which are not to be regarded as payments on account of the bankrupt's indebtedness. In other words, that it is a distribution among equitable co-owners of their own property. We cannot accede to this view. The creditors are not owners of the bankrupt's assets; on the contrary, the trustee owns them in trust to pay the bankrupt's debts and any surplus to the bankrupts. Payment by the trustee, unless differentiated for some other reason, is as much subject to the rule that after a debt unaccompanied by a contract for interest is paid in full no interest can be recovered as if the payment were made by the bankrupt. The trustee, however, contends that upon authority the rule does not apply to payments by executors, administrators, or receivers or trustees in bankruptcy. He cites a number of cases to prove this which do not appear to us to be controlling. In Williams v. President, etc., of American Bank, 4 Metc. (Mass.) 317, the question whether the creditors of a decedent's estate were entitled to interest in addition to principal arose before the principal had been paid. Chief Justice Shaw decided merely between the equities of the creditors and the next of kin without the question under consideration being raised at all. The subsequent case of Brown v. Lamb, 6 Metc. (Mass.) 203, under the insolvent laws of Massachusetts, did involve the question, but it was not considered, and the decision was rested entirely upon Williams v. President, etc., of American Bank. Judge Bond's decision in Re Bank of North Carolina, 12 N. B. R. 130, Fed. Cas. No. 895, is founded on these two cases. In the Matter of Murray, 6 Paige (N. Y.) 204, a proceeding under the insolvent laws of New York in which the indebtedness had not been paid in full, Chancellor Walworth held that the balance with interest was payable out of funds subsequently collected. In People v. Trust Co., 187 N. Y. 293, 79 N. E. 1004, it was held that interest should be paid out of the estate of an insolvent trust company to depositors and holders of certified checks who had no contract for interest and whose claims had been paid in full. The court said it felt committed to this doctrine because of certain obiter observations in the earlier case of People v. American Loan & Trust Co., 172 N. Y. 371, 65 N. E. 200. In that case, however, all that was decided was that interest ceases from the appointment of a receiver of an insolvent trust company. This is the usual rule in all cases of insolvency, because, the assets almost invariably not being sufficient to pay the debts, calculations of interest are waste of time. The court added what is also everywhere the rule, that, if the assets are sufficient, interest must be paid. Of course, it meant interest that is due, whether by contract or as damages. Judge Haight further relied upon Sickels v. Herold, 149 N. Y. 332, 43 N. E. 852, holding that interest as damages was due after demand; Richmond v. Irons, 121 U. S. 27, 64, 7 Sup. Ct. 788, 30 L. Ed. 864, holding that stockholders of an insolvent national bank subject to assessment were liable for interest if the bank was; Wheeler v. Millar, 90 N. Y. 353, 363, holding that stockholders whose stock had not been fully paid are liable to pay interest; Mahoney v. Bernhard, 45 App. Div. 499, 63 N. Y. Supp. 642, affirmed 169 N. Y. 589, 62 N. E. 1097, in which the question as to interest was raised before the indebtedness was paid in full. None of these authorities seems to us to justify Judge Haight's conclusion. But he did cite another authority (National Bank of Commonwealth v. Mechanics' National Bank, 94 U. S. 437, 438, 24 L. Ed. 176), which deserves separate consideration because it proceeds upon an entirely different theory. In it depositors in an insolvent national bank in the hands of the Comptroller of the Currency whose claims had been paid in full were held entitled to interest on the ground that when their claims were proved to the satisfaction of the Comptroller they were to be treated as judgments. Mr. Justice Swayne said: "The fiftieth section of the national banking act (13 Stat. 113) requires the Comptroller of the Currency to apply the moneys paid over to him by the receiver on all such claims as may have been proved to his satisfaction, or adjudicated in a court of competent jurisdiction.' The act is silent as to interest upon the claims before or after proof or judgment. Can it be doubted that a judgment, if taken, would include interest down to the time of its rendition? Section 996, p. 182, Rev. St., declares that all judgments in the courts of the United States shall bear the same rate of interest as judgments in the courts of the states, respectively, where they are rendered. Interest is allowed by the law of New York upon judgments from the time they are perfected. 3 Rev. Code N. Y. (Ed. 1859) p. 637. If these claims had been put in judgment, whether in a court of the United States or in a state court of that state, the result as to interest upon the judgment would have been the same. It was unnecessary to reduce them to judgment, because they were proved to the satisfaction of the Comptroller. After they were so proved, they were of the same efficacy as judgments, and occupied the same legal ground. Hence they are within the equity, if not the letter of these statutes, and bear interest as judgments would have done. Sedgw. on Constr. 311, 315." We think that allowed claims in bankruptcy are as much entitled to be treated as judgments. Section 57 of the bankruptcy act (Act July |