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him for his bonds and stock the same price that they were to receive from the Illinois Company for their own bonds and stock. That they also offered to pay him the difference between the price at which he procured the bonds and stock of third parties to be delivered to them and the price which they were to receive for their own bonds and stock from the Illinois Company—the names of various owners and the amount of their holdings being particularly mentioned. That relying upon these false and fraudulent statements and representations the defendant entered into an agreement with the firm, a memorandum of which was reduced to writing and signed by complainant and said firm.

This agreement states in detail the bonds and stock which are to be sold and delivered and the prices to be paid therefor and, with the exception of a few unimportant formalities, concludes as follows:

"The $24,000 is all that is to be paid Martin under this agreement, except such profit as Mr. Martin may make on the bonds and stock below 25 cts. for the bonds and 10 cts. for the stock.

“The bonds and stock are to be paid for, to parties bringing them in, from time to time at such prices under 25 cts. and 10 cts. as Martin may designate; and if paid for at less than 25 cts. and 10 cts. the difference is to be paid to him as they are delivered by the parties. It is agreed that not more than 25 cts, shall be paid for the bonds and 10 cts, for the stock, to any parties during the pendency of this agreement, except with the permission of Martin.”

The bill alleges further : That, for a valuable consideration, the defendant and his firm warranted that the Illinois Company had agreed to pay the firm for the bonds and stock owned by them $250 for each bond and $10 for each share of stock; that relying upon the said representations and warranty the complainant delivered under the contract 1,095 bonds and 4,300 shares of stock and was paid therefor at the contract rate. That the said firm received from the Illinois Company more than they paid complainant for said bonds and stock and profited greatly by reason of their false and fraudulent statements, to an extent unknown to complainant. That complainant first discovered the fraud and the larger amounts received from the Illinois Company in January, 1903.

The complainant offers to return to the firm of R. T. Wilson & Co. whatever bonds and stock may be necessary to put the firm in the position they occupied prior to June 26, 1892. The bill invokes equitable relief because the extent to which the said firm have secretly profited by said transaction is unknown to complainant.

Alternative relief is demanded as follows: First, that a master be appointed to take an account; or, if mistaken in this relief, then, second, that the written contract be reformed so as to agree with the oral contract; or, if mistaken as to the right of the complainant to an accounting or to a reformation of the written contract, then, third, that the contract be rescinded and the defendant be directed to return all of the bonds and shares of stock transferred thereunder. Lastly, the complainant prays, if he be mistaken in all the foregoing prayers, that he may have such other or further relief as to the court may seem just and equitable. The defendant demurs on the ground that the bill shows on its face that the subject-matter of the suit is not within the jurisdiction of a court of equity because the complainant has a plain and adequate remedy at law and is not entitled to the relief prayed for, Confining the allegations of the bill to the facts pleaded and reducing these facts to their last analysis we are convinced that the only cause of action stated is for the recovery of damages based on fraud. That the complainant has a complete and adequate remedy at law we have no doubt and we see no reason for the interposition of a court of equity. There can be no dispute as to what the actual agreement between the parties was because it was reduced to writing, and the reciprocal obligations of the parties are stated in concise and unambiguous language.

In substance R. T. Wilson & Co. agreed to pay the complainant 25 cents on a dollar for the bonds and 10 cents on a dollar for the stock, for all bonds and stock which he brought in, or caused to be brought in, to the firm. The amount due under this contract was fully paid. The accusation against the defendant is that the complainant was induced to enter into the contract by the false and fraudulent statements of the defendant that his firm was to be paid 25 cents and 10 cents, respectively, on the bonds and stock by the Illinois Company and that he would pay complainant the exact sum he received from the Illinois Company. Is it not manifest, if the complainant succeeds in proving the false representations and the averment that more than the contract price was paid by the Illinois Company to the firm of R. T. Wilson & Co., that when he has been paid the difference between what he did receive and what he should have received he will no longer have a cause of complaint against the defendant? It is argued that the amount received from the Illinois Company is unknown and that it is necessary to invoke the powers of a court of equity to compel a discovery in this regard. Assuming for the moment that the difficulty of obtaining testimony affords a reason for turning a complaint in an action at law into a bill in equity, we are unable to see, in the present situation, why there should be any greater difficulty in the one case than in the other. The defendant knows how much he received from the Illinois Company and that company knows how much it paid for the bonds and stock. The books of the company and of the firm undoubtedly contain entries of the transactions. The process of the court will compel the attendance of witnesses and the production of books as effectually in a common-law action as in a suit in equity.

The fact that the bill deals in large figures and states a seemingly complicated transaction tends to obscure the real issue between the parties. Let us test it by a simple illustration, for the principle is the same whether one bond or a thousand bonds are involved. A. agrees to pay $250 to B. for a bond the face value of which is $1,000. A. fraudulently represents that he has an agreement with C. by which C. is to pay $250 for such bonds; that no one else can afford to pay more than $210 and that if B. will sell he will be given the full benefit of the agreement with C. and receive whatever sum C. pays to A. Relying on this representation B. accepts the offer and the sale is consummated. Subsequently he learns that C. paid A. $300 for the bond. Is it not too plain for debate that, on these facts, B.'s remedy is an action at law to recover damages, the measure of which should not exceed the sum of $50? A court of equity has no jurisdiction of such a controversy.

The decree is affirmed.

TOWNSEND, Circuit Judge, heard the argument, participated in the consultations and voted to affirm.

(155 Fed. 100.)

In re FIRST NAT. BANK OF LOUISVILLE, KY. FIRST NAT. BANK OF LOUISVILLE, KY., V. HOLT. (Circuit Court of Appeals, Sixth Circuit. June 17, 1907.)

Nos. 1,634, 1,655. 1. BANKRUPTCY-MỌDE OF REVIEW-ORDERS MADE IN BANKRUPTCY PROCEED

INGS.

An order made by a court of bankruptcy affirming an order of a referee settiug aside an allowance of a secured claim, and requiring the creditor to pay to the trustee the amount of an unlawful preference, is one made in the bankruptcy proceedings proper, and is reviewable on petition for review, under Bankr. Act July 1, 1898, c. 541, $ 24b, 30 Stat. 553 (U. S. Comp. St. 1901, p. 3432].

[Ed. Note.For cases in point, see Cent. Dig. vol. 6, Bankruptcy, § 915.

Appeal and review in bankruptcy cases, see note to In re Eggert, 43

C. C. A. 9.] 2. SAME-VOIDABLE PREFERENCES—INTENT TO GIVE PREFERENCE.

To render a preferential payment received by a creditor from his debtor within four months prior to the latter's bankruptcy voidable under Bankr. Act July 1, 1898, c. 541, § 60b, 30 Stat. 562 [U. S. Comp. St. 1901, p. 3445), as amended by Act Feb. 5, 1903, c. 487, § 13, 32 Stat. 799 [U. S. Comp. St. Supp. 1905, p. 689), the bankrupt must not only have been insolvent when the payment was made, but must have intended it as a preference, and, if in fact made in the ordinary course of business, without thought of injuring other creditors and in the belief in his ability to pay them all, the creditor receiving it cannot be charged with reasonable cause to believe

that a preference was intended. 3. SAME.

The making of a present loan is a sufficient consideration for a transfer of collateral to secure not only such loan, but also a prior indebtedness, and, where such a transfer was made in good faith when the debtor was solvent, the right of the creditor to the securities attached at that time and collections subsequently made by it thereon and applied on the prior debt after the debtor became insolvent and within four months prior

to its bankruptcy do not constitute voidable preferences. Appeal from the District Court of the United States for the Western District of Kentucky.

Lawrence S. Leopold, for First Nat. Bank.
Herman H. Nettelroth, for trustee.
Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

SEVERENS, Circuit Judge. This case comes here by two methods for review--one by petition for review of an order made in the bankruptcy proceedings in Re R. M. Martin Company, and the other by an appeal from the same order in the respect that it is a decree in an

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independent controversy arising in the course of a bankruptcy proceeding. The order complained of is one made by the referee and approved by the district judge setting aside an allowance of a secured claim of the First National Bank of Louisville, and requiring it to pay to the trustee $1,000 which, it was held, the bank had received from the bankrupt through an uniawful preference. The order was therefore one made in the bankruptcy proceedings proper, and not in an independent controversy arising in such proceedings, and is reviewable here upon the petition for review under section 24b of the Act of July 1, 1898 (30 Stat. 553, c. 541 [U. S. Comp. St. 1901, p. 3432]). Accordingly the appeal is dismissed.

The secured claim of the bank was for the sum of $16,200, which, of course, did not include the $1,000 in question. The facts as found by the referee and reported to the district judge for review are substantially as follows: In July, 1904, the bankrupt had become indebted to the bank to the amount of $10,000. It was not secured; and, being in want of more funds to continue its business, the bankrupt entered into an agreement with the bank to which one Johnson, the secretary of the bankrupt, was a third party, and which agreement, after reciting the desire of the bankrupt to procure a loan for use in its business upon the security of its book accounts with its customers and the undertaking of the bank to make such loan, witnessed that:

“Said second party shall execute and deliver to the order of said bank its note of even date herewith, for the amount of such loan and advance, and interest thereon, payable after date thereof, and as security for the payment of said note, said second party hereby sells, assigns and transfers to said bank and its assigns, the following accounts now outstanding upon said second party's books, and all moneys due and to become due thereon.”

Here follows a list of accounts, giving names and addresses of debtors and the amounts and dates when due, and a receipt and agreement by Johnson as follows:

"Received of the First National Bank, Louisville, Ky., for collection, sundry, accounts receivable assigned to it by the R. M. Martin Company, Louisville, Ky., as per foregoing list.

"All collections of said accounts to be turned over to said bank as they are received by me.

“Charles L. A. Johnson." Then the agreement proceeds to stipulate that:

"Said third party agrees, upon request of said bank, to collect the amount of said accounts, or any of them, as the agent of said bank, without any charge against said bank for such collections, and all payments on such accounts shall be entered in said book, and said third party shall immediately pay over and deliver to said bank or its assignees, the amounts of such collections, to be applied to the extinguishment of said note, and all checks, drafts and moneys so collected by said third party shall be and remain the property of said bank until a sufficient amount has been collected, and paid over to ay the total amount of said note and interest, and any other indebtedness of said second party to said bank and after said note and all other indebtedness of said second party to said bank shall have been fully paid and extinguished, the remainder of said accounts, if any, shall revert to, and become the property of said second party.

“In case of the insolvency or bankruptcy of said second party before the payment of said note and interest, or, in the event of any breach of any of the provisions of this contract by either said second party or said third party,

84 C.C.A.-2

the agency, of said third party for the collection of such accounts shall at once cease and determine, without notice, and said bank shall then proceed to collect the remainder of such accounts so far as possible, and apply the proceeds thereof to the payment of said note and interest, to the payment of any other indebtedness of said second party to said bank, and after de ducting the expense of collecting said accounts, shall hold the surplus, if any, subject to the order of said second party or its assigns.

"In witness whereof, the parties hereto have executed this agreement the day and year first above written.

"R. M. Martin Co.,
“By R. M. Martin, President,

"C. L. A. Johnson, Treasurer." And from time to time thereafter, whenever the bankrupt required more funds, similar loans were made by the bank and upon like security and a like agreement with regard to the accounts of the bankrupt and the application of their proceeds. The particular advances by the bank were paid out of these proceeds and $4,000 of the old debt of $10,000 were also paid. Johnson kept an account in his own name with the bank of his deposits made from collections, but without any distinction of the particular accounts from which the deposits came. From time to time these deposits were turned over to the bank by check, the method being, as we understand, first by Johnson's check to the bankrupt and then by the check of the bankrupt to the bank.

During the four months preceding the filing of the petition in bankruptcy loans were made by the bank in this way to the amount of $16,200. One of these loans was of $2,000 made December 16, 1905. On the 13th of that month Johnson checked out of his account $1,000 to the bankrupt, and the bankrupt gave its check to the bank for that amount. The referee states the circumstances as follows:

“It was assumed by the bank that the remainder of the pledged accounts which were still uncollected would suffice to discharge the entire contemporaneously secured indebtedness, and it was then agreed that said Johnson, agent, should pay out of his deposit account the sum of $1,000 to the R. M. Martin Company, and that the R. M. Martin Company should thereupon pay $1,000 to said bank upon said old indebtedness aforesaid. The evidence shows that a check was drawn by Johnson, agent, for $1,000 payable to said bankrupt company. Said check was deposited by said company in its account with said bank, and thereupon said company drew its check against its account in said bank for $1,000 and thereby paid said sum to said bank, which gave credit upon said old debt therefor.”

The referee further states that the evidence shows "that on and after December 1, 1905, the R. M. Martin Company was insolvent," and “that the officers of said bank had reasonable cause to believe that said company was then insolvent.” From the facts that the evidence did not show whether the $1,000 paid by Johnson on December 13, 1905, was collected from accounts pledged after December 1, 1905, or whether it was realized from accounts pledged before that date, and that Johnson had so commingled his collections that separation of the proceeds was rendered impossible, the referee concluded that the presumption should be that the payment was made from the proceeds of the newly assigned accounts, upon the principle applied to the willful commingling of goods. We find nothing in the case as stated by the referee which would justify the application of such a rule. There is no reason for supposing that the commingling of the col

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