IB BE

i'nOMAS.

33'1

In reTnoMAS.

(Di8trlct Court, D. South Carolina. June 21. 1888.)
1.

BANKRUPTCy-REFERENCE TO MASTER-REGISTER AS MASTER.

The iss'Ues arising on a petition to rletermine a question respecting asset. claimed to be part of a bankrupt estate, may be referred to a register as special master, to take the testimony, and report his conclusions of law and fact thereon. Depositions taken under order of a special master cannot be opened by him. though they are in his hands as clerk of the court. Under Rev. St.U. S. § providing that depositions must be sealed and remain under seal until opened in court. a deposition not sealed will be suppressed; otherwise if it bear the seal of an express company across which are, written the names of the commission.

2.

DEPOSITIONS-RIGHT TO OPEN.

8.

4.SAME-:-TIME QF TAKING.

"

WheTe it is stipulated that the parties shall close their testimony by a cert.ain time, depositions taken before, but not those taken after, such time, are '. admissible on a, subsequent hearing.

if'REFERENCE-POWER TO 'SET ASIDE.

, An of reference in a case within the jurisdiction of the judge making it, cannot be held void by another judge before whom the case comes on spe_ cial repC?!:t of the refere.e.

In, BankrupWY. Mitchell « for assignee. J. P.K. Brya,n,.for W. M. Thomas. SIMONTON, J. ,This cll-secomes up on a special report of E. M. Seabrook, Esq., one of the registers. of this court, as to certain questions arh,ing during the conduct of references in a cause in bankruptcy on the side referred to him by an order of this court dated 29th October, 1884. The petition was filed for the purpose of determining somel/uestion respecting certain assets claimed to be a part of the bankrupt estate. The answer being in, the cause came before the Hon. G. S. BRYAN, district judge, on 29th April, 1884, who made this order: "On hearing the motion foJ;' an order of reference herein, notice of which has been duly given, and on motion of Mitchell & Smith, for petitioner Absalom Blythe, it is ordered that the issues arising upon the petition herein, and the answer of W. M. Thomas, the defendant, thereto, be referred to Regiatel' Seabrook, witl1 instructions to take the testimony to be offered by the partjes, and report his cqnclusions of law and fact upon said issues." Mr. Seabrook was; not the register theretofore in charge of this case. This order having been made, no steps were taken under it until 23d August. 1886. On th!1t day it was agreed between counsel that Mr. Bryan, on behalf of W. M. Thomas, should close his testimony on 1st Octobert 1886, and that Mr. Mitchell on. behalfof the assignee, should his testimony by, 1st November, 1886. Oral testimony was taken on bQt1;l siqes. Testimony by depositions was, also taken. These depositions were on due notice. The persons taking. theIn. ,were attended bycQun. v.35F.no.5-22 .

S3S
sel of both parties, as well as by the witnesses. The packages containing the depositions were sent to the clerk of this court, according to law. Three of these depositions were taken before 1st November, 1886. One was taken during the present year. At a reference had recently, Mr. Mitchell proposed to open the and to read the testimony fore Mr. Sea,prook. Mr.. clerk of this The ositionswere in his hands as clerk. This was objected to on the grounds 'following: (1) Because the order in this case is to the register to take the testimony, and that this testimony in the depositions is not in compliance with the order, and cannot be received by the register. (2) Because these depositions can only be opened in court, (the district court of the United States,) to whose clerk they are directed under the statute; an.d they ,Cannot be openedby,!he register. (3) Because the depositions are not sealed up under the seal of the magistrates taking them, as appears on inspection, under which seals they must remain, under the statute,. until Qpened in court. {4)Because. the above depositions were not taken and'offered in evidence within the time limited, as appears by the record. Mr. Seabrook reports these objections, with his rulings thereon, anq. th 13ycome up now for adjudication. At the hearing, the counsel fOlthe, defendant took the further position that the order of reference was void in so far as it directed the register, Seabrook, to report his conclusions on the law and the facts, the register having no other function than that of oral examiner authorized to take the depositions of all such witnesses as should be' brought The questions thus raised are impbrtant in the practice of the court.. As we have seen this is ll: proceeding in equity. The petition and its answer are treated as a bill and answer in equity. Hearing it, the court, on the pleadings, referred toO Mr. Seabrook. This the judge did "by a; right inherent' in his offMe, 'not dependent upon any consent of the parties."8,:Greenl. Ev. § 330. 'The tight is rebognized in equity rule No. 74.' The ,reference was to Mr. Seabrook as register of this court, not, however; the register at thMtime in charge of the bankrupt's petition and estate. As register Cinly,"'"'-that is as a register possessing certain powers under the act of congress,-and in the exercise of such powers only, this'proceeding inequityco'uld not havebeeri referred to him. The grave litigation involved was not,within his jurisdiction as register. ,Manual of ,the 'United States Bankrnptcy Law, 1867, pp. 36, 37, 38. under tbesixteenth clause of the act, when an issue of factor of law arisea'beforea register, and is contested, he loses,jurisdiction of it, and the court alone can exercise it. Being thtls before the fat' decision ina" course of proceeding in equity, the judge could either examine and decide it himself, liPOn testimony taken Ore tenU8,or upon testimony taken under bis direction, ,or heconldrefer it;· In selecting his referee' !hrsdiseretion was not:limited, : He' could have named his clerk,or die 'clerk of the circuit CO\lrt, or some member of the Uhr, ,or anyone in whose opinion he had 'confidence. He chose torefe'r it to oUe of his registers, whose ability, exp.erience, and .freedom fr.om was well knownw the court, and peculiarly fitted hIm "to asslstthe Judge

IN BE THOMAS.

339

in. the performance of his duty." The reference, therefore, was not to the register as register, but to Mr. Sellbrook, filling pro hac the place of a master. It decided no question in dispute. It compromised or prejudiced no right. It was simply for the information of the court, for the assistance .of the t;Jourt in formulating and presenting the evidence in the cause, and the points oflaw arising therefrom. The. conclusions of the master do not bind the court on any question of law or of fact. The reference was but" an ordinary step in the cause." Adams, Eq. 379. This being so, 'no part of this order is void. Mr. Adams, in his work ou Equity, speaking on this subject, says: "When the master has disposed of all objections, and has come to a conclusion pn the matters referred, he settles and sign!! bis report. and such report is then filed. The ordinary mode of framing a report is to refer separately to each of the directions in the decree, and then, with respect to each direction, first to mention on what evidence the master has proceeded. and then to state the conclusion to which he has arrived. In stating his conclusion he should so far detail the'factswhich warrant it as to enable the court to judge of its correctness. It is frequently though not al ways necessary that he should also state the reasons which have induced his decision. But he mnst not omit the conclusion itself, or state evidence or circumstances. which are presumptive evidence, WithOut finding whether they amount to satisfactory proof." Nor is this practice varied by the rules in equity. Rule . 83 provides for filing exceptions to a master's report. Exceptions to what? If the master bebut an oral examiner, as in rule 67, all that he must do is to report all testimony offered before him, and all the exceptions thereto at the time of taking it, without any ruling of his own. To give place to exceptions t<;> a report there must be findings in the report. So, also, if the report be not excepted to within 30 days, it will be confirmed. What will be confirmed? What can be confirmed but its conclusions? But it may be said that these are only conclusions of fact; that the master can find lloconc1usions of law. The authority quoted makes no such distinction, nor can any reason be assigned for it. The purpose of tbe referenGe:is,not to decide the cause, nor does it go to another tribunal. It puts it for a timo in tbe bands of the master, "a branch of the court," bound implicitly to obey its instructions. Adams, Eq. 672.' Even if my conclusion did not coincide with tbat of tbe learned magistrate who made the order, I could not hold void this order made by him in a case within his jurisdiction. His orders are the law of this court, and tbey can only be set aside by a. court. authorized to reverse its decrees. But he is sustained by the uniform practice of the courts of equity in South Carolina as they existed before 1868, courts which followed implicitly the practice of Westminster Hall. Mr. Seabrook will carry out the ex. isting order· of. the court when he frames his report thereon. We come now to the exceptions reported by the special master. The first objection is not well taken. As we have seen, Mr. Seabrook is acting as a special master. Under equity rule 77 he Can not only examine viva voce the witnesses produced. before him, but he can order "the examination of other witnesses to be taken uudera commission, * * * or deposition inJhecase, undedheact The secondobjeo-

340

FEDERAL REPORTER.

tion is that Mr. Seabrook cannot open the deI.ositions. This cannot be done except by the court. This is well taken. The court is always open for purposes like this. Application can be made. heard, and acted upon at any time by the court. The third objection is as to the packages in which the depositions came. Two of them are in gummed envelopes. and are not under the seal of the magistrate taking them. Every formality must be complied with in the taking and transmitting these depositions. One requirement is that when transmitted to the court "it must be sealed up, * * * and remain under his seal until opened in court." Section 865, Rev. St. Two are not so sealed.. They must be suppressed. One is sealed with the impress of the seal of the Adams Express Company, and across it is written the name of the commissioner. A person may adopt any seal as his own, or anything in place pf a seal. A· wafer, scroll, sometimes even a flourish, have been so adopted and recognized. This deposition cannot be ,suppressed, for the reason stated. The fourth objection is that the depositions· were not introduced in evidence within the time limited. Three of the depositions were taken and returned before November, 1886. They were taken after notice, in the presence of the attorneys. Those so taken were by Mr. Mitchell, and after the time within which Mr. Bryan could introduce testimony had expired. The stipulation was that the parties should close,that is, should not put in any 0ther evidence after the time limited. That the testimony was heard after that day does not violate the stipulation. It was within the time. No deposition taken after that time can be admitted. One deposition was taken during this present year, and is excluded. The course pursued by Mr. Seabrook in thus bringing before the court, pending a reference, questions which impede its progress, is approved. The court will always be open for the discussion and tlecision of these questions "by the way." The practice met the sanction of Judge STORY in GaBS v. Stinson, 2 Sum. 606, and commends itself. The case is recommitted to Mr. Seabrook for action under the order of reference.. The case has consumed much time. Let the report be filed at as early a day as is practicable.

CITIZENS' NAT. BANK V.

Down.

(Oire'Uit Court. E. D. North Carolina. June 21. 1888.)

i.

BANKS AND BANKING-NATIONAL BANKS-INSOLVENCy-PRIORITY OF CLAms.

2.

A creditor of an insolvent national bank. whose demand grows out ofa fraudulent transaction perpetrated by the officers of the bank in contemplation of the immediate wrecking of their corporation, does not thereby bl/come entitled to a preference over the general crediio.rs of the bank.
SAME.

On tbe 22d and 28d of March plaintiff, a bank in Raleigh, N.'C·· received in the ordinary course of business checks drawn on the State Natio,n!ll Bank of that city. which. after deduction had been made 9f i,ts checks received by the latter bank, amounted to $17,000. It paid the same by its checks on a bank

.