tion in a conveyance fraudulent in fact, is necessary to convey or forfeit the homestead right. In both Ruohs v. Hooke and Rosenbaum v. Davis, cited above, the husband was grantor and the wife grantee; yet the wife's application for homestead was not denied, though she was a party to the conveyance which had been set aside as constructively fraudulent. The estoppel in those cases was no stronger against the husband than the wife. What the one gave, without moral fraud, the other had accepted. The test is, was the conveyance in which husband and wife participated, either as joint grantors or as grantor and grantee, free from actual, wicked fraud? If so, the homestead right may be asserted in property thus conveyed as against the claims of creditors affected thereby. If, on the other hand, the transaction is tainted with purposed fraud, the right of homestead is lost when both husband and wife participate. This forfeiture of the homestead right in cases of actual fraud is said in Gibbs v. Patten, 2 Lea, 180-183, to be a rule founded on ethics, "in that it visits fraud with severe penalties."

This brings us to the question as to the actual character of the conveyance made by the petitioner and his wife of the property in which the petitioner now asserts a right of homestead. That this review of the order of the district judge extends only to questions of law must be conceded. If the facts have been settled by the district judge, we cannot go behind his finding of fact. There was a finding of fact and law by the referee, but the order of the referee was not reviewed upon this finding of facts nor upon the referee's summary of the evidence. The referee certified the entire evidence as an agreed statement of facts, and the district judge reviewed the referee's order upon the entire evidence heard by the referee. In this state of the record the finding of facts or opinion of the referee upon the facts is of no evidential value. The hearing by the district judge was an original hearing upon all of the evidence. But it has been argued that the learned district judge found that the deed to Taylor was fraudulent, and that this finding is conclusive. But the learned district judge did not find that the transaction was fraudulent in fact. Having well in mind the distinction between constructive and actual fraud, he stopped with a finding that the conveyance was "fraudulent in law." Referring to his opinion, which constitutes the only finding made by him, he said upon this subject that, "upon the evidence disclosed by the record, there can be no doubt that the conveyance made by the bankrupt of the land in which the homestead is now claimed was fraudulent; certainly so in law, whatever might be considered true as a matter of fact." In the absence of a specific finding of the fact of actual as distinguished from constructive fraud, we can only conclude that the order of the referee was confirmed upon the ground that the conveyance was constructively fraudulent, and that under the Tennessee decisions the bankrupt forfeited his right of homestead by a conveyance constructively fraudulent if the wife joined therein. That the learned judge did not mean to be understood as finding fraud in fact is very obvious from the agreed statement of facts, which constituted the whole of the evidence. The only evidence consisted in that given by

the bankrupt himself when examined at a creditors' meeting. The sum of it is this: Acting under bad legal advice, he assumed that this entire tract of land, being only of the value of $1,000, was exempt, and could be conveyed at his pleasure, without wrong to his existing creditors. He wished to convey it to his wife, but, being advised that he could not do so directly, he conveyed to Taylor, who was closely related to his wife, with the purpose and in trust that Taylor would convey it to his wife. Two months afterwards he applied to be declared a bankrupt, and omitted this property from his schedule. Later on, and before he had been examined, or any step taken to reach this property, he was advised that the creditors had a right to the remainder interest in his homestead. Thereupon he procured Taylor to reconvey to him, applied for and obtained leave to amend his schedule by adding this property as an asset in which he claimed a homestead. That the conveyance of the remainder estate was voluntary and void as to creditors because he was at the time indebted to insolvency, is plain. But that his purpose was to cheat, defraud, or hinder his creditors is not the inference which the district judge drew from this evidence. So far as the conveyance was in contravention of the rights of his creditors, he has rectified matters by procuring a reconveyance. This he did in advance of any action by creditors or in their behalf. But, assuming that he has thereby accomplished what an action by the trustee would have accomplished, and that his rights are not other or greater than if the trustee had set the deed aside, we nevertheless reach the conclusion that the transaction was free from moral fraud, and was only constructively fraudulent. The case is, therefore, governed by the milder and more just rule announced in Ruohs v. Hooke and Rosenbaum v. Davis, cited above. The order denying homestead was erroneous. It will be set aside, and the property sold, subject to the homestead rights of the petitioner as herein indicated. The trustee will pay the costs of this proceeding out of the bankrupt's estate.

(106 Fed. 880.)

MCCLAIN, Collector, v. FLESHMAN.

(Circuit Court of Appeals, Third Circuit. February 21, 1901.)

No. 21.

1. INTERNAL REVENUE-STAMP TAXES-AGREEMENTS TO SELL STOCKS.

A stockbroker by his course of business entered into agreements with his customers to buy or sell stocks at a fixed price for future delivery. Each of such agreements was evidenced by a written memorandum properly stamped in accordance with Schedule A of the war revenue act of 1898, which enumerates, as subject to stamp taxes imposed by the act, "all sales or agreements to sell or memoranda of sales or deliveries or transfers" of stock. The transactions were purely speculative, conducted on margins, and no actual delivery of stocks was contemplated by the parties, but settlement was made by the payment of differences and the surrender of the written memoranda. Held, that such settlements did not involve agreements for a resale of the stocks, requiring new memoranda to be made and stamped under such provision; the courts

having no authority to infer such agreements, contrary to the fact, for the purpose of extending the provisions of the statute to transactions not within its terms.

2. SAME-MODE OF COLLECTION.

Where a person fails to make and deliver bills or memoranda of agreements made by him to sell stocks and affix stamps thereto as required by section 25 of the war revenue act of 1898, a collector has no authority to demand and collect from him the value of the stamps which would have been required had he complied with the law,-the only remedy provided for a violation being by prosecution and fine or imprisonment; and a payment so enforced by a collector under threat of suit is illegally exacted, and may be recovered back.

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

For opinion below, see 105 Fed. 610.

Wm. M. Stewart, Jr., for plaintiff in error.

F. B. Bracken, for defendant in error.

Before DALLAS and GRAY, Circuit Judges, and BRADFORD, District Judge.

GRAY, Circuit Judge. This is an appeal from the judgment of the circuit court of the United States for the Eastern district of Pennsylvania entered in favor of J. B. Fleshman & Co. upon a demurrer to a statement of claim filed by him. The suit was brought to recover from the collector of internal revenue the sum of $4,544.90 exacted by said collector from the plaintiff. As disclosed by the statement of claim, the appellee, Fleshman, being a stockbroker, entered into various agreements with customers, whereby in some instances he agreed to sell, and in others to buy, shares of stock. Each agreement was evidenced by a written memorandum, to which, at the time it was issued, tax stamps were affixed, in accordance with the provisions of the war revenue act of 1898, imposing a stamp tax on sales or agreements to sell shares of stock. The stock embraced in these agreements was not at any time in the possession of either of the parties thereto. No delivery of stock was made in accordance with the terms of the agreements, and none was contemplated by the parties when they were entered into; the transactions being purely speculative, and the intention being to settle by the payment of differences. Settlement in each case was in fact made in this manner,-Fleshman paying to the other party to the agreement the difference between the agreed price and the market price at the time of settlement, the party receiving payment then surrendering to Fleshman the original memorandum issued in connection with the transaction; but no new paper or instrument of any kind was issued by either of the parties. The commissioner of internal revenue held that these settlements necessarily involved agreements to resell the stock, in connection with which new memoranda, bearing tax stamps, should have been issued, as provided by the act of June 13, 1898, Schedule A, and, this not having been done, Fleshman was liable to a tax equal to the value of the tax stamps which should have been attached to such memoranda if they had been issued.

The original memoranda evidencing the agreements of purchase or sale had, as already stated, proper stamps attached thereto; and the first question raised by the demurrer was whether the subsequent settlements which in due course of such business were made between the appellee and his customers, by which "differences" were paid and received according to the authorized quotation of the New York stock market, should have been evidenced by memoranda to which stamps appropriate to contracts of sale or purchase of shares of stock should have been attached.

Section 6 of the internal revenue act, above referred to, provides as follows:

"See. 6. That on and after the first day of July, 1898, there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and other documents, instruments, matters, and things mentioned and described in Schedule A of this act, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, shall be written or printed by any person or persons, or party who shall make, sign, or issue the same, or for whose use or benefit the same shall be made, signed, or issued, the several taxes or sums of money set down in figures against the same, respectively, or otherwise specified or set forth in the said schedule."

Schedule A, therein referred to, is headed, "Stamp Taxes," and the provision with which we are concerned is as follows:

"On all sales, or agreements to sell, or memoranda of sales or deliveries or transfers of shares or certificates of stock in any association, company, or corporation, whether made upon or shown by the books of the association, company, or corporation or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock, or to secure the future payment of money, or for the future transfer of any stock, on each hundred dollars of face value or fraction thereof, two cents."

A brief analysis of the transactions in question will, we think, clearly determine the applicability thereto of these provisions of the law. The original contract was a contract in which the appellees agreed either to sell to or buy from their customers a certain number of shares of stock, and provided that these shares should be receivable or deliverable within a certain number of days. The purely speculative character of the transaction is attested by the fact that no delivery or transfer of shares was contemplated, and that in each case a payment on account was made by the customer, whether it be a transaction of sale or of purchase on his part. This payment is re ceipted for in the memorandum in every case, and is known in stockbrokers' parlance as a "margin." But for the purposes of this case we are treating the transactions evidenced by the memoranda as valid agreements of sale or purchase. As such, they have had affixed to them the stamps called for in Schedule A. When, however, these transactions came to be closed or "rounded up," no stocks were demanded or delivered on either side, or expected to be, but a payment was made or received by one side or the other according as the quotations of the New York stock market showed that within a given time the stocks had risen or fallen. This payment represented the difference between the prices mentioned in the memoranda of agree

46 C.C.A.-2

ment at which the stocks were bought or sold, and that at which they were at the time given quoted in the said stock list. No sale or agreement to sell or memoranda of sale or delivery or transfer of shares or certificates of stock were necessary or required or appropriate in or to such a settlement. It was, as contended for by the appellees, either the closing of a purely wagering transaction, or the adjustment and payment of damages resulting to one of the parties by reason of the breach of contract on the part of the other in failing to deliver the stock when demanded, or receive it when tendered, as provided by the agreement. When this settlement, by the payment or receipt of an amount of money representing the difference alluded to, was made, the transaction was closed, and the memoranda of sale or purchase were surrendered. No new transaction of purchase or sale being required, there is no memorandum or other document representing such supposititious sale or purchase requisite, and no legal obligation to make such rested upon the parties, or either of them. The parties chose to stop short of the point where such a document, requiring to be so stamped, would be necessary. Their right to so stop cannot be gainsaid under any correct construction of the law in question. No paper or instrument properly evidencing the settlement of the stock transactions as described above and set forth in the statement of claim, even if drawn up, would be included in the designation or description of taxable instruments in Schedule A of the revenue act. We are of opinion, therefore, that the imposition of tax by reason of these transactions was, for the reasons stated, wholly unwarranted. That the dealings in question are gambling transactions cannot affect our view of the law. If congress desires to pursue them with exactions in the way of tax, it may rightfully do so; but, however desirable such penalty or taxation may appear to be, it should not be inflicted or imposed by a strained judicial construction.

The court below based its opinion overruling the demurrer upon another ground, equally controlling and decisive of the case in hand. The reasoning of the court on this point is so full and clear that we prefer to quote and adopt it as our own, rather than attempt to paraphrase it. It is as follows:

"Assuming the government's position to be correct, that each of the plaintiff's transactions, to be complete, should have embraced a written contract to resell, duly executed, stamped, and delivered,-and assuming further that the war revenue act was violated because such contracts were not executed and stamped, the question still remains, did such violation authorize the collector to demand from the plaintiff a sum of money in cash? As it seems to me, this question must be answered in the negative. The taxes under consideration are stamp taxes upon certain agreements, and taxes of this kind are not sums of money assessed annually, or for any other period, against either the citizen or his property. The remedies ordinarily used for the collection of such sums are not available to enforce the use of stamps under the war revenue act, because these remedies are not given by the statute, and are not implied from the nature of the citizen's obligation. Stamp taxes upon agreements are charges by way of excise, and the government collects the charge by selling the necessary stamps and requiring them to be affixed to the material evidence of the contract. If this requirement is disobeyed, the statutory punishment is fine or imprisonment, coupled with the suspension of the evidential value of the written instrument; but nowhere in the act is there to be found any provision empowering a collector to distrain