10. Route Arbitrarily Located into the Park Inclosure. Judging from the map and a personal inspection of the locus in quo, it does not seem to the court that the route selected by the traction company, after leaving the Mt. Meigs Road, and entering the park. property by the lower end of the lake, and then running almost at right angles into the park property, is an arbitrary or improper location, or at all destructive of the purposes of the grant or the business of complainant. Such a route, in its initial stages, is far better for all concerned than crossing the lake further up by trestle, or entering upon the park property at the head of the lake. When, however, the location, after running some distance on the unfenced portion of the park, puts a 30-foot right of way into the inclosure of the park itself, where complainant has laid off the ground, improved it, and it is studded with buildings, taking a line which skirts close to these buildings, and between them and the lake, it is an arbitrary and unreasonable exercise of the reserved power, which a court of equity will restrain. The constant running of street cars by electricity in such a place, in the park, between the main grounds and the lake, and near the main ingress and egress to buildings and places of amusement, would seriously interfere with the management by the amusement company of its business, and would endanger, at least, old persons and young children in the crowds which roam about the park, in going to and from the lake. The reservation of the power to grant rights of way was never intended to give the lessors power to inflict such injury upon the lessee, or to enable the lessors or their assigns to disarrange and disorder the lessees' control of their own premises and business. The right of the amusement company to control its internal affairs, inside of the grounds, actually occupied and used by it for park purposes, is a valuable property right, which is not left to the control of the lessors, and a court of equity must protect it. The damage which would be inflicted upon the lessee by bringing such a state of things to pass, and the running of cars on the route selected inside of the fenced portion of the park, would certainly amount to far more than $2,000, exclusive of costs and interest, during the years of the life of the present lease. The objection on the ground that the amount involved is insufficient to give jurisdiction is therefore overruled.

Whatever may be the law in other cases, the court is of opinion, under the circumstances of this case-where the right of way was neither defined nor outlined, and might be located at any future time, upon the possession of one to whom the premises are leased for a particular business, which necessitates the erection of buildings and improvement of the grounds-that one who locates the right of way so as to disarrange the complainant's business, and avails himself of complainant's improvement for his own benefit, at least when another route is equally feasible and convenient, must pay fair compensation for the value of such taking and use during the term of the lease. The driveway from the Mt. Meigs Road to the park, so far as it has been utilized for defendant's roadbed, falls within this principle.

Injunction Allowed. A preliminary injunction will issue against any use by the defendant of the right of way within the inclosure, as set forth in the map made an exhibit to the amended bill, and within 50 feet of the point where the defendant entered the complainant's fence; but, in view of the circumstances under which the entry was made, the complainant must allow defendant, if it so desires, to remove the iron and structures within the enclosed park, and within 50 feet of the entrance thereof, the defendant, in turn, putting the premises in the same condition, after removing the track, as they were before it was built thereon.

In re BECKER BROS.

(District Court, M. D. Pennsylvania. July 31, 1905.)

No. 547.

BANKRUPTCY-RIGHT OF SET-OFF-DAMAGES For Tort.

Bankr. Act July 1, 1898, c. 541, § 68a, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3450], which provides for a set-off of mutual debts or mutual credits, does not authorize the setting off against the claim of a landlord for rent under a lease to the bankrupt of an unliquidated claim for damages in favor of the bankrupt, sounding in tort, and arising independently of the contract of lease.

In Bankruptcy. On exceptions to report of W. L. Hill, referee. Sur petition of bankrupts for allowance of set-off to landlord's claim for rent.

Charles L. Hawley, for exceptions.
W. S. Bevan, contra, for landlord.

ARCHBALD, District Judge. Attempt is made in this case to set off against a claim for rent, which has been duly proved, a counterclaim for damages against the landlord for negligently allowing water to come in upon the premises leased by the bankrupts, by which the bowling alleys which they had constructed there were injured. The referee has found in favor of the landlord on the merits, but he has also decided that the claim for damages is not, in any event, available as an offset, being unliquidated, and arising out of a tort; and, as the latter ruling effectually disposes of the case, and must unquestionably be sustained, it is not necessary to consider the other.

If the case were to go by the state law, it is clear that no such set-off or counterclaim would be maintainable. It does not arise out of any duty imposed on the landlord by that relation, or the covenants of the lease, but is admittedly based on the larger obligation outside of that, by which, as it is said, he was bound to do or suffer no act by which the tenants should be injured or interfered with in the enjoyment of the premises demised. But it was expressly held in Groetzinger v. Latimer, 146 Pa. 628, 23 Atl.. 393, following a number of preceding cases, that matters sounding in tort, and arising out of a different transaction, cannot be used as

a set-off against an unrelated claim. In that case, to make the analogy complete, the plaintiffs sued for rent; and the defendants put in a counterclaim for damages sustained by reason of the unlawful seizure of their property on landlord's warrant, and the consequent interference with and injury to their business. But it was held that this, in effect, was a tort, which would form the subject of an action ex delicto, and could not, therefore, be brought in as a set-off.

The case is to be disposed of, however, by a reference to the bankruptcy act, and the question is as to what is there provided. By section 68 (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3450]) it is declared:

"(a) In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid."

Also that:

"(b) A set-off or counter claim shall not be allowed in favor of any debtor of the bankrupt which is not provable against the estate."

The bankruptcy act of 1867 had a substantially similar provision, which was itself taken from the earlier English acts, under which it was decided that by "mutual credits" are meant such as must, in their nature, terminate in debts, or a debt be in the contemplation of the parties. Ross v. Hart, 8 Taunt. 499, 2 Smith's Lead. Cases, 309; Naoroji v. Bank of India, L. R. 3 C. P. 444; Libby v. Hopkins, 104 U. S. 303, 26 L. Ed. 769. It was accordingly held in the latter case that, in a suit by an assignee in bankruptcy to recover money sent to the defendants by the bankrupt in trust to be applied to a specific purpose, a debt due by the bankrupt to the defendants could not be set off. It is true that in Booth v. Hutchinson, L. R. 15 Eq. 30, a tenant, from whom rent was due to the bankrupt estate, was held entitled to set off damages arising out of a breach of the lease. And in Peat v. Jones, 8 Q. B. Div. 147, and Jacob v. Kipping, 9 Q. B. Div. 113, in an action to recover the unpaid balance due on goods contracted to be sold and delivered by the bankrupt, damages accruing in the one case from the nondelivery of a part of the goods, and in the other from fraudulent representations made in the course of the sale, were allowed to come in. But these cases arose under the more recent English acts, in which the words "mutual dealings"-a much more comprehensive term than "mutual credits"-appeared; and in Peat v. Jones, as well as in Jacob v. Kipping, it is pointed out that the damages sought to be set off grew directly out of a breach of the obligation involved in the contract of sale. That there was no intention of departing from the earlier construction by anything which is so decided is shown by Palmer v. Day (1895) 2 Q. B. 618, where it was said by Russell, C. J.:

"The section [of the English bankruptcy act relating to the subject of setoff], in its present shape, has been held applicable to all demands provable in

1 Although in Makehan v. Crow, 15 Com. Bench (N. S.) 47, a similar ruling was made under the prior law.

bankruptcy, and so to include claims as well in respect of debts as of damages, liquidated or unliquidated, provided they arise out of contract. But whilst the right of set-off has been thus widely extended, it is still subject to the limitation that the 'dealings' must be such that, in the result, the account contemplated in the section can be taken in the way described. In other words, the dealings must be such as will end on each side in a money claim."

Consistently with this it was also held in Eberle Hotel v. Jonas, 12 Q. B. Div. 459, that where, in winding-up proceedings, where the bankruptcy rule prevails, the liquidator of the company which is being wound up is entitled to a return of goods in specie, and has brought an action of detinue therefor, the defendants will not be allowed to assert a counterclaim for goods supplied, on the ground of mutual dealings.

These cases consider the question from the reverse standpoint from which it comes up here; that is to say, the right of set-off is not claimed in behalf of the estate, but against it. But that is not material. The principle is the same, and, by it, it is clear that, from whatever side considered, it cannot be regarded as extending to a claim for damages, sounding in tort, and growing out of an entirely different and independent transaction. The right of action, no doubt, vested in the trustee, in the present instance, to recover the damages alleged to have been done to the bankrupts' property. Section 70a (6), 30 Stat. 566 [U. S. Comp. St. 1901, p. 3451]. And the composition offered by the bankrupts having been accepted and confirmed, this right has now reverted to them again. Section 70b. So that no difficulty arises upon that score. The bankrupts would therefore, unquestionably be entitled to have the claim for rent reduced in the way they ask, in relief of the composition which they are to pay, if only the counterclaim which they set up could be entertained. But for the reasons stated, it cannot be, and the action of the referee in rejecting it must therefore be sustained. The suggestion that, unless the set-off is allowed, the bankrupts will be, without remedy, even if it afforded the basis for an argument, is met by the consideration, which has just been alluded to, that by the express provision of the act the bankrupts are reinvested by the composition with all their pre-existing rights, which they can enforce by action, the same as though bankruptcy had not intervened. Stone v. Jenkins, 176 Mass. 544, 57 N. E. 1002, 79 Am. St. Rep. 343; 4 Am. Bankr. Rep. 568.

The exceptions are overruled, and the action of the referee in refusing to reduce the rent by the set-off claimed is confirmed, without prejudice, however, to the merits of the claim, which are not passed upon.

HAY et al. v. CUDABACK.

(Circuit Court of Appeals, Third Circuit. June 9, 1905.)

No. 11.

CONTRACTS-CONSTRUCTION-ENFORCEMENT BY ASSIGNEE.

Defendants purchased certain lots, taking title to a trustee, who executed mortgages to secure deferred payments of purchase money. Defendants then entered into a contract with the trustee, by which they agreed to furnish him with all money necessary to pay taxes and the interest and principal of the mortgages as the same became due, and to indemnify and hold him harmless from all costs, charges, and expenses by reason of his executing such bonds and mortgages. Defendants having failed to furnish the money to pay the same, the mortgages were foreclosed by plaintiff, who recovered a deficiency judgment against the trustee, and thereupon the trustee assigned all his rights under the contract to plaintiff, who entered satisfaction of such judgments. Held, that the contract was not merely one of indemnity, but also one binding defendants to pay the mortgage debts, which could be enforced by plaintiff as assignee, the satisfaction of the deficiency judgments without payment being a matter of which defendants could not complain.

In Error to the Circuit Court of the United States for the Eastern District of Pennsylvania.

For opinion below, see 134 Fed. 120.

Edward J. Fox, for plaintiffs in error.

John A. McCarthy, for defendant in error.

Before ACHESON, DALLAS, and GRAY, Circuit Judges.

ACHESON, Circuit Judge. Hay and Fisler, the plaintiffs in error (the defendants below), purchased certain lots of ground in the city of Niagara Falls, in the state of New York, but took the title in the name of I. J. Forbes King. Hay and Fisler paid down. the only part of the purchase price, and the balance was secured by purchase money bonds and mortgages given by King. King was to hold the lots in trust for Hay and Fisler, and convey the same as they might direct. A written agreement dated August 13, 1894, between King, as party of the first part, and Hay and Fisler, as parties of the second part, after reciting the above-stated facts, provides as follows:

"Now, therefore, this agreement witnesseth that the parties of the second part, in consideration of the premises and the agreements hereinafter con'tained on the part of the party of the first part, agree to furnish all sums of money necessary from time to time to pay the taxes on said lots and the interest and principal on said bonds and mortgages, as the same become due and payable, and to indemnify and save harmless said party of the first part from all costs, charges, and expenses by reason of his executing said bonds and mortgages or any of them."

Hay and Fisler did not furnish King sufficient money to pay the said bonds and mortgages, and consequently two of the mortgages were foreclosed by the holder, William Cudaback (the defendant in error), and deficiency judgments were obtained against King, one for $1,492.62 and the other for $277.62, on July 26, 1901. On the day these judgments were entered against King he assigned all his rights, claims, and demands against Hay and Fisler under the

139 F.-24