been ordered by a court to turn the securities over to a receiver appointed in a suit to wind up the affairs of the corporation, such trustee has the right to intervene in the suit for the protection of its trust, although there has been as yet no default.

In Equity.

On June 2, 1899, Mrs. Feliciana R. Miles filed a bill in the United States circuit court for the Eastern district of Louisiana against the New South Building & Loan Association, a corporation created and organized under the laws of Louisiana, alleging insolvency of the corporation, and asking that a receiver be appointed, and the affairs of the corporation wound up. On June 3, 1899, a receiver was appointed as prayed. On June 6, 1899, Mrs. Miles filed an ancillary bill in the United States circuit court for the Northern district of Georgia. On the filing of this bill an order was rendered by said court taking ancillary jurisdiction of the cause, and recognizing and confirming the receiver already appointed. At the time the bill was filed, there were in the hands of the American Trust & Banking Company securities of the association to the amount of $447,466, which securities were held by the trust company under a trust agreement. The receiver demanded of the trust company the surrender of said securities, which was refused. On July 3, 1899, the receiver presented a petition to the circuit court of the United States for the Northern district of Georgia, which was heard by Judge Shelby, praying for an order directing the delivery to him of the property in question. For decision rendered in said case, see Miles v. Association (C. C.) 95 Fed. 919. On September 20, 1899, the American Trust & Banking Company, a Georgia corporation, having its home in the Northern district of Georgia, filed its intervention in the United States circuit court for the Northern district of Georgia, in which, after setting forth the status of the litigation prior to the date of the bringing of its intervention, it set up the following facts: That on December 14, 1891, the New South Building & Loan Association desired to issue bonds and secure the same by the deposit of cash or certain notes and other securities. To this end it created the Manhattan Trust Company of New York trustee, and entered into an agreement on the date named with said trust company, in which it was stipulated that the association should deposit with the trust company $100 in cash or $125 in securities for each $100 of bonds issued. In 1893 and 1894 supplemental agreements were entered into, which only related to the amount of bonds to be issued and the amount of securities to be deposited, and are not material here. On June 23, 1898, an agreement was entered into between the association and the American Trust & Banking Company, by which the latter company was substituted as trustee for the Manhattan Trust Company, and in which there were certain other stipulations, immaterial here. The trust agreement provides, as it now stands, in the hands of the American Trust & Banking Company, that upon default in the payment of interest the trustee shall proceed through itself or through the courts to realize on the securities in its hands for the benefit of the bondholders. The American Trust & Banking Company prays that it may be allowed to come into the litigation in the Northern district of Georgia, and that, in view of the insolvency of the association, and the fact that it is being wound up in the courts, the bonds may be declared due and be paid. It contains other prayers immaterial for present purposes. To this intervention demurrers were filed by the complainant and the receiver.

Denegre, Blair & Denegre, for complainant.

Denegre, Blair & Denegre and W. A. Wimbish, for receiver. Dorsey, Brewster & Howell and Gray, Brown & Randolph, for intervener American Trust & Banking Company.

NEWMAN, District Judge. In determining the demurrers filed by Mrs. Feliciana R. Miles, complainant in the original bill, and Armstrong, receiver, to the intervening petition of the American Trust & Banking Company, it is unnecessary at this time to pass upon

some of the interesting questions ably argued by counsel at the bar and in briefs subsequently filed. It is necessary, however, to decide: (1) Is the intervener a proper party to this litigation? (2) May it come into the litigation by intervening petition in the circuit court for this district? (3) Can it proceed at all before default in the payment of interest on the bonds secured by the trust agreement in which it is named as trustee?

As to the first question, it can scarcely be doubted that the intervening trust company is a proper party. It was named as trustee to hold certain notes and mortgages of the association which were placed in its hands to secure bonds and other obligations of the association. As the association is now in the hands of a receiver, and its business is being wound up for the benefit of persons at interest, the trust company is not only a proper, but probably a necessary, party to the cause.

It is contended, however, that the trust company cannot come into the circuit court for this district, even if it is a proper party to the case. The claim is that, if it becomes a party at all, it should be in the cause in the court of primary jurisdiction in the Eastern district of Louisiana. So far as the demurrer on this ground by the receiver is concerned, it may be answered that he has brought the trust company into the litigation in this district by his motion filed in this court for the purpose of having the assets of the association in the hands of the trust company turned over to him as receiver. He filed his petition in the court in this district. It was an swered here by the trust company, and heard and decided by Circuit Judge Shelby on the pleadings in this district. The status of the trust company in the litigation, so far as it has been determined, is to be gathered from proceedings in this district. Judge Shelby, in the motion referred to (95 Fed. 919), while directing that the assets held by the trust company should be turned over to the receiver to be collected, ordered that the money realized from the same should be deposited by the receiver with the trust company. He seems to have reserved any rights of the trust company for further determination, and simply decided the question of possession for the purpose of reducing the securities to money. In concluding his opinion on the motion to turn over the assets to the receiver, Judge Shelby says: "Whether or not the trust company is a necessary party defendant to the bill is a question not necessary to be now decided. If it is, and is not made a party, it would be permitted to intervene in the cause by petition if it became necessary to do so to protect or assert any interest involved in the suit." While learned counsel endeavor to give this expression a different construction, I think it is fair to infer that, as he was discussing the case in this district, the judge had reference to the right of the trust company to intervene in the suit in this district. Especially is this true as the judge directed, as has been stated, that the money be deposited by the receiver with the trust company in this district. But, independently of the decision of Judge Shelby, and of anything to be gathered from that proceeding, or his order and opinion, an ancillary bill is pending, in the circuit court for this district, and this is the home

of the trust company. The securities of the association deposited with the trust company are still probably in contemplation of law, in this district, the naked possession being in the receiver for collection; and it would seem to be eminently proper that any peculiar rights the trust company may have should be enforced, and any duty that may be upon it discharged, by applying to the circuit court for this district. There is no reason whatever why there should be any conflict between the court for the Eastern district of Louisiana and the court for this district. The circuit court in Louisiana is the court of primary jurisdiction, and has the general control of this case, and any orders that may be entered or any decree made in this district must be in accordance with the recognized equity practice in federal courts concerning courts of ancillary jurisdiction.

As to the right of the trustee to come into court before there is default in the payment of interest on the bonds secured by the trust agreement, it is only necessary to say that the affairs of the association are being liquidated and wound up by a receiver, and its inability to carry out the purposes for which it was organized is conceded. It is certainly the right, if not the positive duty, of the trustee, to come into the litigation, and set up the trust agreement, and the rights of the beneficiaries under the same. What relief will be granted it is a question which must be determined as the case proceeds. Much, necessarily, may depend upon the action of the circuit court in Louisiana having general control of the litigation, when its orders and decrees are brought to the attention of this court. There is no question about the correctness of the argument that there should be harmonious and concentrated management of the affairs of the association, the collection of its assets and the disposition of the same, and nothing whatever will be done in this court to retard or prevent it. An order will be entered overruling the demurrer, and the case made by the intervening petitioner will be retained in this court for such further action as may be necessary and proper.

The bill in this case was first presented to Circuit Judge PARDEE, who made the order appointing the receiver, and who authorized and directed the filing of the ancillary bill in this district. He has been present in this district while I have had the case under consideration, and I have conferred with him about it, and have also shown him this opinion. He authorizes me to state that he concurs both in the conclusion reached, and in the reasons I have briefly given for the same.

AMERICAN BUILDING & LOAN ASS'N v. CARTER et ux.
(Circuit Court of Appeals, Fifth Circuit. January 9, 1900.)

No. 766.

MORTGAGES-COLLUSIVE SALE UNDER MORTGAGE AFTER PAYMENT OF Debt. Evidence considered, and held to establish that the taking up of a note by the maker was a payment, and not a purchase on behalf of his mother, whose check was used in making the final payment, and that a subsequent sale of property under a trust deed securing such note was fraudulent and

voidable as against a subsequent mortgagee which took its mortgage under an agreement that the lien of the note should be extinguished out of the proceeds of its mortgage.

Appeal from the Circuit Court of the United States for the Northern District of Texas.

U. F. Short, for appellant.

Alexander, Clark & Hall, for appellee.

Before PARDEE and SHELBY, Circuit Judges.

PARDEE, Circuit Judge. The transactions out of which the suit arose were as follows: On the 22d day of June, 1889, James B. Simpson made a conveyance of the property involved in this litigation, and located in Dallas, Tex., to J. J. Carter, in consideration of the sum of $3,000,-one-half cash, and a note for $1,500, payable 12 months after date, with interest at the rate of 10 per cent. per annum, a lien being retained in the deed of conveyance to secure the payment of this note. A deed of trust was also executed at the time to secure the payment of this note, but this deed of trust was not recorded until January 6, 1892. The American Building & Loan Association, on the 2d day of October, 1889, made a loan of $5,000 to J. J. Carter and wife, Josephine M. Carter, for which they executed their bond in writing and a deed of trust to secure the payment of the same upon the property so purchased by the said J. J. Carter from James B. Simpson. At the time of this transaction the loan association had no actual notice of the existence of the deed of trust executed by J. J. Carter to secure the payment of the $1,500, and it was expressly understood between J. J. Carter and Josephine M. Carter and the association that the $1,500 vendor's lien note should be paid off and canceled out of the proceeds of said $5,000 loan. The by-laws of the company and the laws of the state of Minnesota forbade its lending money except upon first liens and mortgages. On December 9, 1891, default having been made in the payment of the bond, the American Building & Loan Association instituted a suit in equity (No. 200, equity docket of the circuit court) to foreclose its deed of trust upon the property, and made J. W. Young a party defendant to the bill, it being supposed that James B. Simpson had transferred the note for $1,500 executed by J. J. Carter to the said J. W. Young, and that the latter then held the same. At the time of the institution of this suit the complainant therein did not know that Mrs. N. J. Carter had any interest in said $1,500 note. It appears that, after the maturity of the $1,500 lien note, J. W. Young, at the instance of J. J. Carter, bought from James B. Simpson, the then holder, the said note, and the same was indorsed "Without recourse" by said James B. Simpson. J. W. Young acquired the note in apparent good faith, and held the same until the 5th of November, 1891. During the time Young held the note, various payments were made thereon by J. J. Carter and his agents, and to such an extent that on the 5th of November, 1891, the amount due thereon had been reduced to the sum of $900. J. J. Carter testi. fies that these several payments made upon the note were with moneys furnished by his mother, Mrs. Nancy J. Carter, but, taking

his evidence in this regard, in connection with his whole evidence and conduct in the case, we are not inclined to the opinion that Carter's evidence, although uncontradicted by any other witness, imports absolute verity. On the 5th of November, the note was taken up by J. J. Carter, who paid the balance thereon-$900-in a check drawn by his mother on the National Exchange Bank of Dallas, Tex., where the mother had opened an account on the 19th of October, 1891. The following indorsement appears upon the note (there is no evidence showing or tending to show when it was made), to wit: "Pay to order of Mrs. N. J. Carter. J. W. Young. Mrs. J. W. Young, per J. P. A. Heintz."

It further appears from the evidence that on the 6th day of Janu ary-long prior to filing the answer of J. J. Carter and Josephine M. Carter in the original suit-the trustee in the deed given by J. J. Carter to secure the $1,500 lien note, which deed was not recorded until January 6, 1892, sold, after notice and advertisement, the property in controversy to Mrs. Nancy J. Carter for the apparent consideration of $1,000. The deed executed in pursuance of this sale was not filed for record until May 3, 1893. The evidence further shows that prior to the 6th of January, 1892, and thereafter until her death, in 1894, the said Mrs. Nancy J. Carter resided with her son, J. J. Carter, and that thereafter until the present time all the rents and revenues collected on the said property have been received by Mrs. Nancy J. Carter and her devisee, Mrs. Josephine M. Carter, the wife of J. J. Carter. It appears also from the record, on the 28th day of February, 1885, Mrs. Nancy J. Carter made a last will, devising all her property among her two sons, two daughters, and a granddaughter, share and share alike, with the exception of a special legacy in favor of his granddaughter; that on the 22d day of June, 1892,-very shortly after J. J. Carter and his wife, Josephine M. Carter, filed their answer in the original suit of foreclosure,-Mrs. Nancy J. Carter added a codicil to her will, giving and specially devising to Mrs. Josephine M. Carter, the wife of her son, J. J. Carter, the premises apparently acquired by her under trustee's deed aforesaid. The defendants J. J. Carter and Josephine M. Carter filed an answer to said bill on June 9, 1892, and on the same day J. W. Young filed his disclaimer of all interest in or right to the properties. The case was referred to a master, tried, and a final decree rendered July 16, 1895. This decree gave judgment for the complainant therein and against J. J. Carter for the amount of its said loan, with interest, together with a foreclosure upon the lands involved in this controversy, against the defendants J. J. Carter and Josephine M. Carter, and ordered a sale of the property. Although various attempts were made, no final sale of the property was made under the decree of July 16, 1895, and on October 8, 1896, the American Building & Loan Association, complainant, filed the present bill, charging the facts, among others, of the sale by James B. Simpson to J. J. Carter on October 19, 1889; the execution of the vendor's lien note for $1,500 by the said J. J. Carter to the said James B. Simpson; the execution of the deed of trust at the same time; that it was not recorded until January 6, 1892; the loan of $5,000 made by the complainant herein on October