deoree subrogating the Plant mortgage to the residue of the fund after payment of the judgment in favor of Gunn. But as this ruling gives the judgment a lien for principal and interest from the date of the original verdict and judgment. (the judgment bearing interest as a secured debt.) and as this will absorb the whole fund. this decree is refused j espeoially as it does not appear that the mortgage would have any priority of lien exoept on the proceeds of the sale of the mortgaged property. 4. The doctrine of election of two funds does not apply exoept where both are equally aocessible to the creditor. The oreditor having the senior lien cannot be forced by one having a junior lien to resort to a fund which is only partially colleoted. and the balance of which is merely in the form of· promissory notes of purohasers of land, the notes being due on long time. Upon these grounds the decree of the court is that the oomplainants' bill be dismissed at their cost. ERSKINE, J., conourred.
THE SAME V. DUB. THE SAME V. KAHN.
(Oircuit (Jourt. 8. D. Georgia, W. D. May 12, 1881.)
Sales amounting to $1,100, $1,900, and $2,200, made in one week to three persons by a retail dealer who owed $11,000, and whose stock consisted of merchandise worth $8,000, and whose sales, in the usual course of his business, amounted to $1,100 per month, are prima facie fraudulent, under sections 5129, 5130; of the Revised Statutes.
Where the vendees were familiar with the nature of the bankrupt's business, and where such purchases were not in the ordinary course of the business of the vendees, as well as in that of the vendor, the assignee in bankruptcy of the latter may recover from them the value
of the. goods, unless they can show that at the time of the transactions they made inquiry and satisfied themselves that the vendor ing for a legal purpose.
In such a case, the mere statements of the vendees that they did not know that the vendor intended any fraud on the bankrupt act amount to nothing. The law declares that they did know; that the fact of the vendor' making the sales out'of the usual course 01 hiB bUBine!18 conveyed knOWledge to them in'imajacie of an illegal purpose; and it is for them to show that by Inquiry and investigation they became reasonably satisfied that the sales were properly and legally made.
Mr. Justice WILLIAM B. WOODS delivered the following decision :. These three cases were, heard' together, 'thefaots being substantially the same 'in eaoh. They are bills in equity filed by Robert A. Nisbet, assignee' of A. Dans, a bankrupt, to reoover from the defendants the value of certain goods alleged to have been trltnsferred to thew: by Dans when insolvent, and with intention to defeat the operation of the bankrupt aot, and not in the usual course of his business. The oase against Thomas Quinn Will be taken up first. The faots are these: Dans begaub11sines8 in Maroh, 1877, at ,Hnff's corner, in the oityof Macon, Georgia. His business was tbat of a retail dealer in cigars, tobacco, pipes, etc. His capital at that time does not 'appear in the evidence. His ordinary monthly sales from the beginning of his business up to December following, the time of his adjudication in bankruptcy, were $1,000 per month. In November he had $8,000 worth of stock in his store. The debts proved against him in bankruptcy show that he was indebted to parties from whom he purchased hif;3stock something over $7,500. During the month of Noyember, and during one week of that month, from the 22d to the 29th, Dans made sales of his stock to an amount of a little over $5,000 to three persons. To Quinn he sold goods worth $1,100, to Kahn over $1,900, to Dub $2,200. During the
.Reported for the FEDERAL REpORTER, from the opinion and summary of facts pronounced orally by Judge Woods, by W. B. Hill, Esq., of the ""acon bar.
same month, he sales ,to other parties in the ordinrtry retail trade to $1,500', At the time of these transactions with Quinn, Kahn, and Dub,'and before any' of' the creditors had begun proceedings by attachment in the state courts against him, Dans employed W. Desson,' an of MacQn, t,Q write to his credit· ors that on. account of· losses in business he could not meet bis obligations, and to submit a proposition of compromise. Iil addition to the proven debts, he owed debts for borro:wed money; for, according to his testimony, he paid $3,300 to such. debts with the proceeds 'sales to Quinn, Kahn,lUld Dub. So it appears that his total indebtedness was about. $11,000, and 4is property cpnaisted wholly of. his stock, worth $8,000, and some. accounts which 4e testifies were small in amount and value. Hence, it is perfectll' clear that Dans waa at that time insolvent.. His own .confession .is in the record that he had employed an,attorney to write to his oreditors and inform them that he waS unable, to pay hilil debts. Dans hali been andw&s a retail dealer in the articles composing his stock. He now suddenly becomes a wholesale dealer. At no time prior to these tr,ansactions had his sales averaged more than $1,100 Per month; at no time had any single sale amounted to more than $100; but his sales in the usual course of his business were small retail sales. The law declares what the fact that a sale is made out of the ordinary course business of the debtor shall be consid. ered I:I.S proving: it is prima facie evidence of fraud. This bankrupt, after receiving $1,568 from what he testifies were ordinary retail sales. in the month of November, paid for borrowed money, as he alleges, to relatives and other friends, $3,300. ..This clearly establishes the fact that he was at· tempting to prevent his property from going into the hands of his assignee for distribution under the bankrupt act, for that was the result of his acts" and he is presumed to have intended that result. .He wholly fails to account for $3,400 of the m9ney which came into his hands.' When he is allked what disposition he had' made of his ,assets, he can only account for one·half. This stock, which had not been paid
for, belonged in equity to the sellers, and the proceeds it ought in justioe t9 be paid to them. The evidence shows that Dans made these sales lor two purposes: (1) To pay creditors whom he favored, (there being no proof that they were not creditors;) and (2) to defeat the provisions of the bankrupt act, and to prevent his property from coming to his assignee in bankruptcy. The only real question in the. case is, did Quinn know that these sales were made for such illegal purposes? The very fact that. these sales were made out of the ordinary course of business of the seller was prima facie evidence of fraud. On this point the testimony of the defendant is in the record. Quinn paid $1,100 for this purchase. He had been in the habit of buying goods from Dans, and prior to November, 1877, his purchases ranged from $4: to $24 per month.. Being in the habit of buying goods from Dans, he knew the nature of Dans' business. He himself was doing business, partly in the same line, in the same town. To say that he did not know the nature of Dans' business would be to shut our eyes to the plain facts in evidence. Quinn's entire stock was worth about $1,000. His entire sales from groceries and all his merchandise amounted, according to his testimony, to about $600 per month. Yet he buys goods from Dans at one purchase worth $1,100. The law declares what this establishes. Quinn says that he did not know that Dans was acting in contemplation of insolvency, or with any design to hinder or impede the operation of the bankrupt act; but the law says that he did know; that when he bought of a small retail dealer a large amount. of goods at wholesale, that fact conveyed knowledge to him of the illegal purposes set forth in the bankrupt act, (Rev. St. § 5130.) If he could show that he inquired 9f Dans what was the object of the sale, and Dans had told him that it was to raise money to pay these debts, it might relieve him. But he shut his eyes, hoping to make a profit and a speculation out of the purchase. Quinn. may not have been interested in defrauding Dans' creditors, but he was aiding Dans in so doing, and he must take the consequences.
In the case against Dub there is no doubt tha.t he knew the nature of Dans' business. He was an old friend and an intimate acquaintance of the bankrupt.. He bought goods of the'value of $2,200, when by his own testimony $600 to $JOO would fully stock the IiImall establishment connected with his hotel where he was selling these goods. In the case against Kahn the evidence also is that he was an old friend and knew the nature of Dans' business. In 1867 he gave in his entire stock for taltes at $1,000, yet his purchase from Dub at one transaction amounted to $1,926. His denial that he knew that Dans'was acting with intent to work a fraud on the bankrupt law amounts to nothing. He should have shown that he made inquiry, and that he became satisfied that Dans' purpose was not the purpose which the law declared it, prima facie, to be. The decree must, therefore, be against the defendants for the full amount of the value of the goods bought by them. D. J., concurring.
lliNOVER FIRE INs. 00.
KEOGH and others.
(Circuit Court, S. D. New York. May 28,1881.)
Where A., B. and C. on 'the one side, and D. on' the other, are necessary parties to the claim. of D. on the fund in controversy, the case is not removable if A. and D. are citizens of the same state, although the other two parties are citizens of another state.
BLATCHFORD, O. J. The petition for removal alleges that there is no controversy between Estes and Keogh, and that the controversies to which Keogh is a party in the suit, or in which he is interested, are all between Keogh and citizens of New York, namely, Williams, Black & 00., and the Blossoms. But, the pleadings having all been put in before the petition for removal was filed, the controversies, and the questions as to who are the real parties to them, must be judged of by those pleadings. They show that Williams,