twice a week to get it. Moore told him they could pay nothing, and that the only thing he could do was to sell them his property. Boyle was to see W. S. Goff, which he did, and later Moore himself saw him and he agreed to look at it. Moore told him that this was their only available resource, and that he would sell if he could have an option to redeem it. Goff came and examined the property and said he would try and get a buyer; the price named being $3,100. Goff spoke to his mother and she agreed to take it. Thereupon, at his suggestion, he and Moore met at Mr. Fell's office, and the deed was made out to Mrs. Goff, six months being given to Moore to redeem it, and 6 per cent. on the price being fixed as the rental. Goff says that Moore wanted to sell in order to get money to buy material; but considering that the Goff Lumber Company, by the arrangement, was to get all over and above the incumbrances, there clearly could have been no such purpose in it. The same day they also secured $900 in cash, which was coming to Moore & Son on the E. J. Moore building. This money was earned, but was not yet payable, and was refused to Moore, but was paid to Goff to apply on the job. Including it, the account of the Goff Lumber Company was paid up to within about $500.

The failure of the Society Circus was undoubtedly the cause of Moore & Son's bankruptcy. This concern was sold out by the sheriff July 31st, but Moore & Son seem still to have had hopes of realizing something out of it through the interpleader proceedings which were pending, which were not disposed of until along in the fall, after which there was little question as to what would be the outcome. The money so tied up and eventually lost, as well as that which was dependent on the finishing up of their building operations, deprived them of ready cash with which to obtain new material as well as pay their men promptly and demand corresponding service, thus hampering them seriously with their various contracts. Upon inquiry by Mr. Fell, at the time of the conveyance to Mrs. Goff, Moore went over his affairs to a certain extent, stating that he had $11,000 or $12,000 outstanding, which he expected to get in, in a little while, and, if he did that, he would be in easy circumstances, the Goff Lumber Company being the only ones who were pressing him. On the strength of this expectation, he also undertook to take care of the two judgments, amounting to $630, which were liens on his property. The architects,. as he claimed, were holding him up on some of his jobs, and refusing to honor his orders, or give him certificates for what was due him, but upon going to certain of them, while the parties were still together, Mr. Fell was informed that this was not so, and that certificates were not given because the times for payment had not come. The amount said by Mr. Moore to be due included that which was owing by the Society Circus, which was nearly one-half of it, which inquiry would have disclosed, but nothing was, in fact, said of it. To get the rest of this money also, Moore & Son would have had to pay out for material from $4,000 to $5,000 which they did not have and could not command, and which would have increased their indebtedness to about $15,000. Under the most favorable circumstances, up164 F.-9

on the completion of the several buildings under way, and getting all that was due them from the Society Circus, they would only have been $2,000 or $3,000 ahead, and without that they would be just about that much behindhand. This was not brought out, however, at the time of the transfer, nothing being asked that would do so; Mr. Goff and Mr. Fell, except so far as inquiry was made of one firm of architects, contenting themselves with the general declaration by Moore as to the amount that was coming to him and the effect that it would have on his affairs. But the best that could be made out of it, the outlook for the firm as so presented was anything but a promising one. As said in the other case, they were evidently in deep water, and, while still a going concern, it was clearly a question how long they would be. The Goffs knew of the failure of the Society Circus, and at least in a general way the fact that Moore & Son were involved in it. They had refused to furnish material for it, as a losing venture, and immediately after it went under their collector came twice a week for his money. As W. F. Goff told the trustee afterwards, it was this that brought about the bankruptcy. By express notice also from Moore, in taking his residence, the Goff Lumber Company were getting his last available asset. A few days before they had secured a deed from D. B. Moore, the son, for his house, and now they were taking over that of his father, in view of which, and the signs of financial distress which were otherwise manifest, they assumed whatever risk there was in doing so. In re Hines (D. C.) 16 Am. Bankr. Rep. 495, 144 Fed. 543; Wright v. William Skinner Mfg. Co. (C. C. A.) 162 Fed. 315. Indeed, the very course taken throughout the whole transaction discloses the doubt which they had with regard to it, Mrs. Goff being put forward as the purchaser at first, and the title being shifted over to Mr. Morgan so as to have it if possible at a still further remove, when a contest with creditors over it was imminent. Mrs. Goff professes to have bought for investment, but she was very quick to dispose of the property when her son thought it advisable to do so. The only possible saving thing which the defendants have to rely on is that Moore said there was considerable money coming to him within a few days, and that, if he got it, he would be in easy circumstances. But the "if" was a large one, and the inquiry .made by Mr. Fell of the architects showed that the statement could not be relied upon, dispelling the assurance which otherwise might be made out of it.

It is not to be denied that, as a matter of business, a creditor has the right to take all that he can get, and collect up as closely as he is able. No one, indeed, could get along without that. But that is not to say that, if the debtor at the time is manifestly in failing circumstances and does not hold out against bankrupety for the requisite period, the creditor may not be compelled to surrender the preference which he has secured and come in pro rata with others not so favored. In the present instance, after all has been said, the case therefore comes down to this. A contractor, with half a dozen building operations on hand, and claiming to have a good many thousand dollars due him,

but of which he cannot get a penny, his orders for money being turned down, and certificates from the supervising architects being refused him, as a last expedient, to satisfy an importunate creditor, deeds over his residence to secure a quieting credit. This so clearly shows on its face that he is not only in straits, but in extremities, as to warn the creditor so preferred that whatever is secured is secured conditionally, and that, if bankruptcy intervenes within four months, the advantage cannot be retained.

Let a decree be drawn sustaining the bill, declaring that the transaction complained of was a voidable preference, and directing a reconveyance of the property to the trustee, with costs.

In re FRIEDMAN.

(District Court, E. D. Wisconsin. September 11, 1908.)

1. BANKRUPTCY-FRAUD OF Bankrupt-CONCEALMENT OF INSOLVENCY.

Evidence that a bankrupt merchant, when in fact insolvent, purposely falsified an inventory of his stock, largely increasing the same, and used it as a basis of statements made to commercial agencies and others, that he destroyed books, which made it impossible to ascertain his transactions, and that, having previously established a fictitious credit by borrowing money from relatives with which to discount his bills, he purchased within six months before his bankruptcy a quantity of goods largely in excess of his purchases for the entire preceding year, which goods he did not pay for, and only part of which were accounted for, justify a finding that he deliberately and fraudulently concealed his insolvency for the purpose of obtaining goods on credit which he did not intend to pay for. 2. SAME-CONTEST OF CLAIMS EVIDENCE.

On a contest of claims filed by certain relatives against the estate of a bankrupt, where it was clearly shown that the bankrupt fraudulently concealed his insolvency for the purpose of securing a large stock of goods on credit without intending to pay for the same, and that the claimants had been closely associated with him in business transactions, evidence was admissible to show that they had previously been associated together in similar fraudulent transactions.

3. EVIDENCE-WEIGHT-DIRECT AND CIRCUMSTANTIAL EVIDENCE.

If the positive evidence of an alleged fact is inherently improbable, the court is not bound to accept it as establishing such fact, but may reach a conclusion based upon circumstantial evidence which appears more convincing.

4. CONSPIRACY-EVIDENCE TO ESTABLISH-"ACTIONABLE COMBINATION."

A mere tacit understanding between conspirators to work to a common purpose is sufficient to constitute a guilty actionable combination. [Ed. Note. For cases in point, see Cent. Dig. vol. 10, Conspiracy, 1-5.]

5. BANKRUPTCY ITORS.

- PROVABLE CLAIMS CONSPIRACY TO DEFRAUD OTHER CRED

When a creditor of a bankrupt participates in a scheme to defraud other creditors, and in furtherance thereof advances money or incurs expense, the entire transaction is contaminated by the fraud, and the court

will not assist the conspirators by allowing claims for such advances against the estate.

6. SAME.

Where a creditor of a bankrupt makes a claim the larger part of which is fraudulent, he is not entitled to the allowance of any part thereof. 7. SAME.

The brother and brother-in-law of a bankrupt each filed a large claim against his estate for money lent. The bankrupt was conducting a mercantile business, which had been purchased jointly by the three; the bankrupt's interest being paid for with borrowed money. Afterwards the claimants ostensibly sold their respective interests to the bankrupt, taking his notes, which were, however, ignored thereafter until his bankruptcy. Claimants thereafter made many loans to the bankrupt to enable him to discount his bills, in many cases themselves borrowing the money. By means of such discounts the bankrupt built up a fictitious credit, and on his bankruptcy was indebted in the sum of $56,000, and the claimants indirectly purchased his stock for $23,000 and placed the bankrupt in charge as manager. Held, that such evidence was sufficient to establish a conspiracy between the three to enable the bankrupt to defraud his creditors, if not in fact a joint ownership of the business, which required a disallowance of the claims.

In Bankruptcy. On review of order of referee allowing certain claims.

This is a proceeding to review the order of the referee, who has allowed certain claims of the bankrupt, as follows: Sam. J. Weinberg, $512.37; Tillie Friedman, $7,782.09; Hattie Saxe, $430; Louis Friedman, $4,941.42; E. M. Rieselbach, $11,550.91. The dramatis personæ are as follows: Adolph Friedman, a dealer in clothing, the bankrupt; Louis and Sol. Friedman, brothers of Adolph; Tillie Friedman, the wife of Adolph; E. M. Rieselbach, a brother-inlaw; Philip Saxe, a merchant of considerable means. Adolph Friedman, Louis Friedman, and E. M. Rieselbach each married a sister of Leo and Philip Saxe. Hattie Saxe is a sister of Philip and Leo Saxe, and was from time to time employed as bookkeeper by the bankrupt. Morris, Jacob, Louis, and Henry Friedman, connected with the Friedman Mercantile Company of St. Louis, are cousins of the bankrupt.

The trustee filed objections to these claims, in substance as follows: First, generally, that such amounts are not due and owing from the estate; second, that each of these creditors has, within the four-months period, received a payment from the bankrupt which amounted to a preference, and therefore ought not to participate without first paying back the several amounts so received; third, "that at the time the indebtedness claimed to exist by said claimants was alleged to have been incurred the said claimants and the bankrupts were, and for a long time prior thereto had been, unlawfully confederated together, with the false and fraudulent purpose of defrauding the creditors of said bankrupt, and the moneys so alleged to have been advanced and loaned by said claimants to the said bankrupt were then and there so advanced and loaned in pursuance to said unlawful confederation, and for the sole purpose of aiding and abetting the said bankrupt in the fraudulent design to defraud his creditors by creating for said bankrupt a false and fictitious credit, standing, or rating, by means of which the said bankrupt would be enabled to secure a large stock of merchandise upon credit without intending to pay therefor."

The evidence shows that in 1890 Adolph and Louis Friedman and E. M. Rieselbach were each carrying on a clothing business in Kentucky. At one time Louis and Adolph were partners at Philpot, Ky. Louis sold his interest in the store to Rieselbach. In 1889 Adolph purchased Rieselbach's interest for $12,000, and paid $2,100 on account. Rieselbach went to St. Louis. Adolph came to Milwaukee in 1902, leaving his store at Yelvington, Ky., to be run by

an employé. Louis bought the Westphal stock at Milwaukee for $9,000. Louis claims to have advanced $6,000 of this and Adolph $3,000, which sum was furnished him by his wife. Louis also claims that after remaining in partnership with Adolph for about three weeks he sold his interest to Adolph. About this time Rieselbach advanced $3,000 to Louis and took his note for that amount, which note seems to have been ignored by both parties. Louis took Adolph's note for $2,775, ostensibly for the balance of his purchase of Louis' interest in the Westphal stock. The trustee claims that Louis, Adolph, and Rieselbach were jointly interested in the venture, and the notes given by Louis and Adolph were intended to conceal the participation of Louis and Rieselbach, and to give Adolph the status of sole trader. Adolph then owed Rieselbach $3,000 on the purchase price of the Yelvington stock. He also claims to have owed his wife the further sum of $2,300, advanced long before that time, and $3,950 for a later advance by her. So that Adolph appears to have been insolvent at the time of the Westphal purchase. In 1902 the entire stock at Yelvington was destroyed by fire, and netted by way of insurance $8,000, with which sum Adolph paid up Rieselbach his debt of $3,000 and also paid other debts. In 1903 Louis set up in business on his own account in Milwaukee. In August, 1905, Adolph moved to the store on Twelfth and Walnut streets.

On August 15, 1905, Adolph took an inventory (which was the last inventory he ever took), which showed stock on hand, $16,888.65. This inventory was doctored and padded by the bookkeeper, so that the stock on hand was raised $11,298.60, so that the bogus inventory showed, August 20th, stock on hand, $28,187.25. There has been introduced in evidence an itemized statement, showing in detail how this fraud was practiced, nearly every item in the inventory being arbitrarily raised; and this fraudulent inventory became the basis of financial statements made by Adolph to banks and commercial agencies. August 21, 1905, the bankrupt made a statement to the First National Bank, in which he listed his merchandise on hand at $17,000. His liabilities he scheduled: Bills payable for merchandise, $300; open accounts. none; loans or deposits, none. By this statement the bankrupt's net worth was $18,000. On the 25th of October, 1905, the bankrupt made another statement to the First National Bank of Milwaukee, wherein he listed his merchandise on hand as $26,240.50, and liabilities: Merchandise accounts, $8,26573; loans or deposits, none; other indebtedness, none-total liabilities, $8,265.73, making his net worth $19,164.77. On the 10th of January, 1907, the bankrupt gave a statement to the First National Bank of Milwaukee for the purpose of procuring credit from time to time, in which he stated that his merchandise on hand was worth $47,465; bills payable for merchandise, $3,700; due First National Bank, $3,500; other bills payable, $4,000; open accounts not due, $4,900; due relatives and employés, nothing. This statement remained unchanged until his failure, at which time he owed the First National Bank $2,000. Other similar statements were given out to the Dun and Bradstreet agencies.

It further appears that about July, 1907, the cash book, which would have disclosed the dealings with relatives, was destroyed, and the bookkeeper made up what she called a copy of the missing book; but it was not a copy. It was apparently made up for the purpose of confusing the true situation. Later an itemized expense book disappeared, which had been kept in the store, and which would have thrown light on the situation. To show the utter worthlessness of the cash book: The expert accountant when on the stand tabulated the monthly balances of cash for 2 years, as shown by the bank account, the account kept on the stubs of check book, and the cash book. For 12 months the cash book balance, which should show total cash in bank and in store, showed a much smaller amount than was shown in the bank account alone. The account in the check book only agreed with the bank balance in a few instances, and generally they were wide apart.

Louis Friedman and E. M. Rieselbach loaned the bankrupt large sums of money to enable him to discount his bills. The volume and frequency of such loans may be shown by the following statement: