BOYLE v. GRAY et al.; SAME v. WEATHERBEE et al., 28 F.2d 7

BINGHAM, Circuit Judge. These two proceedings are bills in equity, under the provisions of

section 70e of the Bankruptcy Act of 1898 and amendments thereto (11 USCA § 110(e), brought by James L. Boyle, trustee in bankruptcy of Frank H. Gordon. The first is brought against Frank H. Gordon, Frank H. Gordon, Inc., and Herbert Gray; and the second against Frank H. Gordon, Frank H. Gordon, Inc., Artemus Weatherbee, and Patrick H. Gillin, the two latter being receivers of,Frank H. Gordon, Inc., in a receivership suit brought by Frank H.

Gordon, as stockholder and creditor, against the corporation in the Maine court, and also receivers or custodians under a bill in equity brought in the Maine court by Walter V. Wentworth against Frank H. Gordon, Frank H. Gordon, Inc., et al. In both proceedings the trustee seeks to recover certain real estate and personal property used in the construction and operation of certain fox ranches and a large number of foxes, or the proceeds thereof, all of which the trustee claims as the property of Frank H. Gordon, the bankrupt. In the District Court, both proceedings were dismissed, and the trustee appealed.

In 1922 Frank H. Gordon began the business of selling and ranching silver black foxes, and, in carrying on that business, entered into contráete for the sale and ranching of the foxes sold. Sales were made to a large number of persons during the year 1924, and to a limited extent during 1922 and 1923. By December 31, 1924, he had sold about 1,250 pairs at $2,000 per pair and taken in about $2,500,000.

In these sale contracts it was stipulated that Gordon “hereby sells and delivers to the party of the second part one pair of silver black foxes,” and further agrees to ranch said foxes “from the date hereof to the date of the birth of the first offspring of said foxes after the first breeding season, * * * and said pair of foxes and said offspring from the date of their birth to the 1st day of January next following * * * without further expense” to the purchaser, and for that purpose was to have “sole possession of said foxes * * * during said season.” In the contracts made down to August, 1924, Gordon guaranteed that a pair of foxes sold under a given contract would produce 100 per cent, of offspring for the first breeding season following the date of the contract, and, if less than two were produced by said pair of foxes, to supply young foxes to make up the 100 per cent, production.

All offspring produced in excess of 100 per cent, were to belong to Gordon. In the sale contracts made subsequent to August, 1924,'the guaranty was reduced to 50 per cent. By the fifth

article of the contract the purchaser gave to Gordon an option to purchase the two offspring when produced for $1,500, which option was to continue from the birth of said offspring to January 1st next following.

The sale contracts made after August, 1924, also included a provision that the foxes sold should be “segregated and designated by number at some appropriate time during the life of this contract consistent with necessary breeding and ranching arrangements, reserving also the right to substitute other similar foxes for those thus designated, should ranching or breeding necessities demand such substitution.” From and after August, 1924, if not earlier, pens on a designated ranch were numbered, and the pair of foxes in a particular pen so numbered were allotted to a given purchaser or purchasers of a pair of foxes under his or their contracts theretofore issued, and to a purchaser or purchasers of a pair of foxes under sales contracts thereafter issued.

This was done in this way: Each ranch where the foxes sold were being ranched contained pens numbered consecutively from 1 to 100. In Gordon’s office were kept sheets of paper, each sheet being devoted to and representing a particular ranch, which was divided into squares, representing pens, numbered from 1 to 100.

Each sales contract was numbered, and in each square on a sheet, representing a like numbered pen on a described ranch, was inserted the number or numbers of the sales contract or contracts relating to the pair of foxes segregated in that particular pen, and the proportion or fraction of the pair of foxes in that pen assigned or allotted to a particular contract or contracts, thus designating the owner or owners of the pair of foxes in that pen, and whether they had been sold to one or more persons.

In all sale contracts made after August, 1924, either by Gordon or his successor, Gordon, Inc., this method of segregating a pair of foxes and allotting them to a particular contract or contracts was followed. ■ There was also kept in the office of Gordon, and later on in. the office of Gordon, Inc., a card index system, in which every contract holder had a card assigned to Mm containing Ms name, against wMeh was set the date,‘the number, and the amount of Ms contract, the date payment was made on it and how paid, cash or otherwise, and the designation of the particular ranch and pen in wMch the foxes sold under that contract were.

December 1, 1924, the corporation known as Frank H. Gordon, Inc., was organized under the laws of Maine for the purpose of taking over and conducting the fox business carried on by Frank H. Gordon, and on December 31,1924, Gordon entered into a contract with Gordon, Inc., whereby he transferred to it his fox business and all the property real and personal used by Mm in conducting said business, the consideration therefor being all the stock ($300,000) of the corporation and an agreement on its part to assume all the obligations and liabilities of Gordon arising out of Ms conduct of the business.

The property thus transferred included “all the silver black 'foxes remaining unsold and belonging to me” [Gordon], designating their location, being about 250 foxes ($84,600 was paid for them, at about $350 apiece, or $700 a pair); “all bteldings and structures upon leased or rented land,” specifying them; “all stock on hand, materials, machinery, pens, tools, lumber,” etc., belongmg to “Frank H.

Gordon and used by him in Ms business of silver black fox buying, selling, and rancMng,” particularly describing the property and designating tbe ranch or place where the same were situated; some 45 automobiles and 7 trucks, owned and used by Gordon in the fox business; personal property, consisting of a moving picture department; 35 lots of land, situated in Maine and elsewhere; all rights in “the contracts now in force between me and purchasers of foxes from me, having particular reference to my interest and right in and to the option for the purchase of offspring, mentioned and specified in said contract,” giving a

schedule of the sales contracts; and all accounts due and receivable contracted in the fox business, including general accounts, “accounts receivable from owners,” and notes payable. October 26, 1925, Gordon filed a bill in equity against Gordon, Inc., in the Supreme Court of Maine, asking for a receiver, wherein he alleged that he was a stockholder and creditor of the corporation and that it was solvent. He signed the bill and made oath that the. facts therein stated were true. On that day an answer was filed, admitting the allegations of the bill, and thereupon it was decreed that the bill be sustained, that P.

H. Gillin and Artemus Weatherbee be appointed temporary receivers of the property of the corporation, with power to carry on its business pending final decree, that a temporary injunction be issued, and that notice be given of a hearing November 17, 1925, for the appointment of permanent receivers. This bill was brought under the provisions of

section 23, c. 81, of the Revised Statutes of Maine. The receivers thereupon took possession of all the property of the corporation and of all the foxes in its possession as bailee under its sales contracts, or under sales contracts made by Gordon, for ranching foxes. November 2, 1925, Walter Y. Wentworth, on behalf of himself and all other contract holders numbering about 2,500, brought a bill in equity in the Supreme Court of Maine under

chapter 82, § 6, par. 7, Rev.

Stats, of Maine, against Gordon, Gordon, Inc., and Gillin and Weatherbee, as receivers of the corporation, setting out the sales contracts; that subsequent to their execution the foxes thus sold were set apart, segregated, and put in designated pens on the ranches, and that the sales contracts were numbered and entered upon the books of the defendants Gordon and Gordon, Inc., as the property of the contract holders; that none of the foxes in-the possession of the receivers were the property of Gordon, or of Gordon, Inc.., but were the property of the contract holders; that the foxes belonging to the contract holders had been negligently or willfully intermingled and confused by the defendants, so that it was impossible to identify those belonging to a given contract holder; and praying that the court determine and decree the respective rights of the parties to the foxes, order distribution of them to their owners, or make such other disposal as equity and good conscience required; and that P.

H.

Gillin and Artemus Weatherbee, receivers of Gordon, Inc., be appointed receivers of all the foxes on the ranches of Gordon, Inc., and hold and care for the same “in the interest of the owners thereof until further order of the court.” An answer to tMs bill having been filed by the defendants Gordon, Gordon, Inc., and others, admitting the facts alleged in the bill, and Gordon having testified in the state court to such facts, and that the title to the foxes sold under the contracts, either by Gordon or Gordon, Inc., were the property of the contract holders, the state court on November 9, 1925, after hearing, entered a decree, in which it found that the foxes sold under the contracts were allocated to the contract holders as alleged; that they remained in the possession of Gordon and Gordon, Inc., as bailee; that without the knowledge and consent of the plaintiffs these foxes, while in the possession of Gordon or Gordon, Inc., as bailee, were confused and their identity lost —and appointed Gillin and Weatherbee custodians of the foxes.

Thereafter all known contract holders, except 108, voluntarily became parties to the bill, and the balance of the known contract holders, having been made parties defendant, were duly served with process, and after notice and hearing, the bill was taken pro eonfesso as to them. February 13, 1926, Gillin and Weather-bee were appointed temporary receivers in the Wentworth Case, and on April 6, 1926, permanent receivers.

August 26, 1926, -the receivers in the Wentworth suit sold all the foxes to Herbert Gray for $300,000; and the receivers in the suit of Gordon against Gordon, Inc., sold all the real estate, ranches, and equipment of Gordon, Inc., situated at Lincoln, Maine, to said Gray for $50,000, which sales were confirmed by decrees of the Maine court. November 19, 1925, an involuntary petition in bankruptcy was filed against Frank H. Gordon, individually, upon which he was adjudged a bankrupt September 21, 1926. October 15, 1926, James L. Boyle was appointed trustee.

It appears that tbe bankruptcy petition was not filed until more than four months after the foxes were sold to the various contract holders and had been taken possession of in their behalf by the Maine court through its custodians in the Wentworth suit, and until more than four months after the real estate and personal property were sold to Gordon, Inc., and had been taken possession of by the Maine court through its receivers in the suit against Gordon, Inc., although the state court proceedings and- the possession taken under them were had within four months of the filing of the petition in bankruptcy. -October 26, 1926, James L.

Boyle, trustee in bankruptcy of Gordon, the individual, filed petitions in the two equity suits in the Maine court, asking to be allowed to bring suit in the United States District Court against Gillin and Weatherbee, as receivers of Gordon, Inc., and against them as receivers or custodians of the foxes in the Went-worth suit. November 5, 1926, the prayers of these petitions were denied. Boyle appealed to the law court of the state, which affirmed the decrees below.

October 26,1926, the trustee in bankruptcy also presented petitions to the Maine court in the two suits there pending, setting out his appointment as trustee in bankruptcy of Gordon, the individual, and alleging that all the assets coming into the hands of the receivers or custodians of the court in either suit were claimed by the trustee as the property of Gordon, the bankrupt, and that all property of every kind received by them as receivers or custodians in either suit belonged to him as trustee of the estate of said Gordon, and requested that an order be entered requiring the receivers or custodians to turn over all assets by them received to him.

The prayers of these petitions were also denied, and appeals were taken to the law court. In the law court, these appeals were dismissed for want of prosecution, and the decrees below affirmed. January 18, 1927, the trustee in bankruptcy filed in the United States District Court for Maine, sitting as a bankruptcy court, the two bills in equity brought under

section 70e of the Bankruptcy Act and above described, praying, in the suit in which Herbert Gray is made a party defendant, that he be ordered to account for all property purchased by him from the receivers of Gordon, Inc., and from the receivers under the Wentworth bill, and praying in the other suit, in which Gillin and Weatherbee were made parties defendants, that Gillin and Weatherbee, both as receivers of Gordon, Inc., and as receivers or custodians under the Wentworth bill, be ordered to turn over to the trustee all assets and money received or held by them in either capacity.

The main allegations in these bills were that on or about January 1, 1925, and for some time prior thereto Gordon, the individual, was insolvent in both the common-law and the bankruptcy sense; that with the intent of hindering and delaying and defrauding his creditors he transferred on or about that date all of his property to Gordon, Inc., of the value of upwards of $1,000,000; that Gordon, Inc., was not a purchaser in good faith and for a present fair consideration, and that its title thereto was merely color-able; that the transfer was fraudulent and void as against the creditors of Gordon and the complainant; that Gordon, Inc., was the alter ego of the defendant Gordon, and a mere shield; that Gillin and Weatherbee were appointed receivers in the state court in the action brought against Gordon, Inc., and were receivers or custodians of the state court in the proceeding brought by Went-worth; that as such receivers and custodians they took possession of all the assets of Gordon, the individual, whether standing in his name or in the name of Gordon, Inc., including real estate, personal property, and foxes, numbering 3,000; that Gillin and Weatherbee, as receivers and custodians, as aforesaid, subsequent to the date of the filing of the petition in bankruptcy against Gordon and with knowledge thereof .purported to sell all of said assets to the defendant Gray, and that Gray had notice of the pending bankruptcy proceeding; that Gillin, Weatherbee, and Gray all had notice that it was claimed that said property was owned by Gordon, and that the transfer to Gordon, Inc., was colorable and fraudulent; that the Maine court was without jurisdiction to order the sale subsequent to the filing of the petition in bankruptcy; that the sale to Gray was null and void, as being made subsequent to the petition in bankruptcy, when the property was in custodia legis and exclusively in the control of the bankruptcy court; that Gray had notice that the title to the property which he had purported to purchase was in Gordon and that the transfer to Gordon, Inc., was in fraud of creditors; that the proceedings in the state court against Gordon, Inc., and under the Wentworth bill, were commenced within four months of the filing of the petition in bankruptcy, and were nulli-fled by- the adjudication in bankruptcy; that the United States District Court had exclusive jurisdiction over the property in question, and an exclusive right to try the title thereto; and that the complainant, after qualifying as trustee, made a demand upon Gray for the property in question.

The defendants in both suits, reserving all rights to object to the jurisdiction of the District Court to hear either cause, and without consenting thereto, filed answers, in which they set up three distinct pleas.

In the first plea, after setting out the proceedings in the state court and what had been done thereunder, it was averred that the receivers at the time of their appointments and ever since continuously claimed title to all of the property adversely to Gordon, the individual; that Gray having obtained title by valid decrees in the Maine court to all the property purchased by him., held the same adversely to Gordon; that the Maine court was and is a court of competent jurisdiction to try all questions raised by the bill, and that the United States District Court did not have exclusive jurisdiction to determine any of the questions; that the Maine court having first acquired jurisdiction by taking possession of the property, the federal District Court could not interfere with that possession or collaterally attack the validity of its decrees, but that said trustee must institute any suit to establish title to the property in question in the state court.

In the- other two pleas they set up the facts heretofore related with regard to the appearance of Boyle, the trustee in bankruptcy, in the two state court proceedings; his petitions alleging ownership of the property in the hands of the receivers or of the custodians; his requests for leave to sue the receivers in the federal court; the decrees of the Maine court entered on his petitions, and that by reason thereof the question of title raised by the plaintiff’s bills had become “res ad judicata.” The answers, after admitting the formal allegations of the bills, denied the allegations as to jurisdiction, and all the allegations of the bills bearing upon the merits of each case.

When the cases came on for trial in the District Court, the defendants renewed their objections to the court’s jurisdiction.

At the time of the sale of the fox business, and the property used in connection therewith, on December 31, 1924, by Gordon to Gordon, Inc., an audit of the books kept by Gordon in his business showed that Gordon had to his credit in the bank $22,656.76, that his total assets were $777,148.49, and his liabilities $145,055.51; that these were his actual not contingent liabilities; and it appeared in testimony that ‘Gordon, just prior to the transfer to the corporation, was able to pay and was paying his obligations as they became due in the regular course of business.

The evidence also showed that, after Gordon, Inc., purchased the fox business and property on December 31, 1924, it took possession of all the property and business, and that the deeds of the real estate' were recorded January 15, 1925; that thereafter the corporation conducted the fox business, sold some 250 or 260 foxes for $250,000 or $260,000, made renewal ranching agreements with prior contract holders of foxes, bought real estate, and gave mortgages on its real estate for substantial sums; that in January, 1925, the first month after its organization, it paid current expenses of the corporation amounting to $36,754.07, and paid $67,739.-48 to satisfy obligations of Gordon, the individual, previously contracted by him in .the conduct of the fox business; that in February, 1925, it paid out for current expenses of the corporation $40,000 and $36,000 on the obligations of Gordon, the individual, which he had previously incurred in that business; that in March, 1925, it paid current expenses of the corporation amounting to $40,000 and $30,000 of the obligations of Gordon, the individual, previously incurred by him in the fox business; that in April, 1925, it expended $32,948.22 in carrying on the business, and in May, 1925, $22,368.77 for like purpose; that the assumed obligations of Gordon, the. individual, were entered in the books of the corporation as its obligar tions of January 1, 1925, and were paid promptly so long as it had money to do so; and that on October 24, 1925, the outstanding obligations (apart from a note on which there was a balance owing of $50,000 or $60,-000) were about $29,000, practically all of which were debts created by the corporation.

These figures, however, do not include conditional liabilities (those arising out of the guaranty contained in the contracts), created either by Gordon or Gordon, Ine., under the sales contracts for foxes. In other words, by October 24, 1925, when the receivership was applied for in the state court, the obligations of Gordon, the individual, created by him in connection with the fox business, had practically all been paid by Gordon, Inc., except a note of his given for foxes, on which there was owing a balance of between $50,000 and $60,000.

A study of the case discloses that according to the plaintiff’s bills he claims title, not only to the real estate and personal property included in the sale hy Gordon to Gordon, Inc., on December 31, 1924, but to all the foxes sold by Gordon under sale contracts prior to December 31, 1924, and which Gordon did not claim title to or purport to transfer to Gordon, Irio., under the sale of December 31,1924, and to all the foxes (250 or so) which he did transfer December 31, 1924, to Gordon, Inc., and which it thereafter sold to contract holders; and that he seeks to support his claim of title on two theories:

(1) That Gordon, Inc., was a mere alias or agency under which Gordon, the individual, transacted business, or that it was a mere sham, organized in fraud of creditors, and should not be regarded as an independent entity, and in either, case the property in its possession at the time the proceedings in the state court were brought was the property of Gordon, the individual; and (2) if Gordon, Inc., was not a mere alias or sham, but an independent entity, to which Gordon by his contract of December 31, 1924, transferred title to the property, that the transfer was without consideration and voidable as against creditors of Gordon and the plaintiff, the trustee in bankruptcy, on the ground that it was made when he was insolvent, with the purpose and intention of hindering, delaying, or defrauding his creditors; that on either theory the property transferred to Gordon, Die., was the property of Gordon, the bankrupt; that its possession and that of the state court receivers was of right his; that the bankruptcy court, upon the filing of the bankruptcy petition, acquired constructive possession of the property and exclusive jurisdiction to determine the title and rights of all parties thereto or therein; and that this was true at least as respects the real and personal property in the possession of the receivers under the Gordon proceeding against Gordon, Inc., because the application by Gordon, if insolvent, to the Maine court for a receiver of the property, if it was his property, occurred within four months before the filing of the petition in bankruptcy, and was

an act of bankruptcy, which by construction operated to nullify any lien against that property created by the receivership proceeding. There are no allegations in either bill wherein it is asserted that the sale by Gordon to Gordon, Inc., was invalid under the Maine Sales in Bulk Act, nor are any facts alleged therein upon which to predicate the application of that act, although it was claimed at the trial that the act was applicable to that sale.

In the District Court it was found that Gordon, Inc., was not the alter ego or agent of Gordon, the individual, nor a mere sham, but was an independent entity, created without fraud, and following the sale and purchase of December 31, 1924, was generally recognized as such; that it conducted a substantial business, kept independent accounts, sold a large number, of foxes, bought supplies, paid current bills incurred by it of a large amount, paid practically all the bills incurred by Gordon, while conducting the fox business, including his notes, with the exception of a balance due on one, bought real estate, made renewal ranching agreements with old contract holders, and gave several mortgages on its real estate, all as heretofore set out.

We think the finding that the corporation was an independent entity, created without fraud, was warranted by the evidence, and approve it. It, and the evidence on which it is based, undoubtedly show that, so far as the question of independent entity is concerned, the character of the adverse claim of title by the defendants to the property in their possession at the time of the filing of the bankruptcy petition, their adverse claim was not merely colorable, but substantial.

The District Court also found (1) that the sale of December 31, 1924, from Gordon to Gordon, Inc., was not made without consideration, as alleged in the plaintiff’s bill; that as consideration for the transfer Gordon, Inc., paid to Gordon its capital stock of $300,000, assumed all of his obligations, actual and contingent, incurred in the fox business, listed all of Ms actual indebtedness on its books as its own, and paid all of the same in the regular course of business, except a disputed bill or so, and the balance of a note, as above stated; (2) that the transfer was not made with the purpose and intent of hindering, delaying, or defrauding Gordon’s creditors; that the transfer of the land was recorded in the public records on or about January 15, 1925, some 11 months before the petition in bankruptcy was filed; that no creditor ever attacked the conveyance, and while the transfer might have tended to hinder and delay Gordon’s creditors, in the sense that they were not direct creditors of Gordon, Inc., the “creditors of Gordon were taken care of in the fullest way by the corporation,” wMeh assumed his obligations and paid all Ms bills, except one or two that were in dispute.

It is true that a transfer for a valuable consideration, if made with the purpose and intent to hinder, delay, or defraud creditors, may be avoided at tbeir instance, if the transferee is aware of the intended fraud; but in such case the fraudulent intent must be proved. Wilson v. Spear, 68 Vt. 145, 34 A. 429, and cases there cited. And that a voluntary conveyance, one without valuable consideration, if made with the purpose and intent to defraud creditors, may be avoided at their instance, without regard to knowledge by the transferee of the intended fraud. Laughton v. Harden, 68 Me. 208; Wilson v. Spear, supra.

That, when the transfer is made with the intent of defrauding creditors, the consideration paid or the condition of the transferror’s estate are immaterial. Wadsworth v. Williams, 100 Mass. 126, 130; Wilson v. Spear, supra. And it is also held that a transfer, with or without valuable consideration, may be avoided by creditors, if on the facts found or conceded the transfer must necessarily result in hindering, delaying, and defrauding creditors. For on such a state of facts no other inference is warranted than an intent to defraud.

The only difference, when' the evidence is conflicting, is that the trier of fact must draw the inference of intent. But in either ease the fraud found is actual, not constructive. Gardiner Sav. Inst. v. Emerson, 91 Me. 535, 40 A. 551, 552; French v. Holmes, 67 Me. 186; Weeks v. Hill, 88 Me. 111, 33 A. 778; Matthews v. Thompson, 186 Mass. 14, 71 N. E. 93, 66 L. R. A. 421, 104 Am. St. Rep. 550.

But here the transferee paid as consideration its capital stock of $300,000, assumed all of the transferror’s (Gordon’s) .indebtedness, listed it on its books as its indebtedness, and “in the fullest way” took care of and paid the bills outstanding against the transferror. Under these circumstances it can hardly be said that no other conclusion can be drawn than that the consideration given was not a valuable consideration, nor that the transfer must necessarily result in hindering, delaying or defrauding the creditors of Gordon.

But we are not called upon to go to this extent in determining the preliminary question of the bankruptcy court’s jurisdiction, for the situation presented by the evidence is such that the adverse claim of Gordon, Ine., and of its receivers to the property (real estate and personal property other than foxes) in their possession cannot be said to be merely colorable, rather than substantial. None of the findings of the District Court is to be disregarded unless dearly wrong.

Its finding, that the controversy presented by the adverse claim of Gordon, Ine., and its receivers is substantial, was right; for “an actual claim may be adverse and substantial even though in fact 'fraudulent and voidable,’ ” if the claimant’s, contention discloses “ 'a contested matter of right, involving some fair doubt and reasonable room for controversy,’ * * * in matters either of fact or law.” Harrison v. Chamberlin, 271 U. S. 191, 194, 195, 46 S. Ct. 467, 469 (70 L. Ed. 897).

And unless “the preliminary inquiry [of the court to determine its jurisdiction] shows that * * * [the adverse claim] is so unsubstantial and obviously insufficient, either in fact or law, as to be plainly without color of merit, and a mere pretense,” it is not “to be held merely colorable.” Harrison v. Chamberlin, supra, 271 U. S. 195, 46 S. Ct. 469, 70 L. Ed. 897. In other words, an adverse claim is 'substantial and not merely colorable, if a question of law or fact is thereby presented raising a fair .doubt as to its validity or invalidity, even though it may be in truth and in fact fraudulent and voidable.

If it be assumed, although neither of the plaintiff’s bills contained allegations setting up the Maine Sales in Bulk Statute (Rev. St. c. 114, §§ 6, 7) that the question sought to be raised under it is properly here (•which we doubt), we do not think that the District Court erred in ruling and finding that the applicability of the statute and its effect upon the transfer by Gordon to Gordon, Ine., presented a reasonable dispute.

This is manifestly so as respects the real estate and personal property in the possession of the receivers of Gordon, Inc., and also true as respects the 250 or so of foxes transferred by Gordon to Gordon, Ine., under the contract of sale of December 13, 1924, for as to them the evidence shows that in the early months of 1925, and more than four months prior to the filing of the petition in bankruptcy, Gordon, Ine., sold these foxes to contract holders, who purchased in good faith and for value, and that these foxes were taken possession of by the receivers or custodians in the Wentworth Case, asserting a claim of title in behalf of the contract holders, before the bankruptcy petition was filed.

In this situation it cannot be said that the adverse claim of the receivers or custodians in behalf of the contract holders to these foxes was merely eolorable, and not substantial, even though the Maine sales in bulk statute might otherwise have been held applicable to such foxes, had Gordon, Inc., not sold "them to bona fide purchasers.

As to the foxes sold to contract holders by Gordon prior to the transfer of his fox business to Gordon, Ine., on December 31, 1924, as well as to the foxes sold by Gordon, Ine., to contract holders after the transfer, all of which had been taken possession of by the receivers or custodians under Wentworth bill, the District Court evidently found that their claim of title, in behalf of the contract holders, was substantial, and not merely col-orable, for he ruled that as to them “the jurisdiction of the state court is too obvious to require discussion.” We -agree with this conclusion.

The defendants’ evidence tended to show that all the foxes taken into the possession of the receivers, whether sold by Gordon or by Gordon, Inc., had been sold to contract holders for $2,000 a pair, who purchased in good faith; that each pair of foxes had been segregated and set apart to a contract holder, or set of contract holders, owning the whole of or shares in that particular pair of foxes; that originally they had been left in the possession of Gordon, and later were taken over by Gordon, Ine., for ranching purposes, and were held by Gordon before the transfer of December 31, 1924, as bailee, and by Gordon, Inc., after the transfer, also as bailee.

If the foxes of the various contract holders subsequently became intermingled, so that the particular pair sold to a given contract holder or set of contract holders could not be identified, through the negligence or willful conduct of either bailee, the bailee did not thereby acquire title to the foxes. The contract holders would be the owners of the foxes as tenants in common.

It has been suggested that title to a fraction of a fox could not be transferred, and, as a considerable number of foxes had been sold where two or more persons owned fractions of a pair, that in such cases the title to the pair did not pass from Gordon or Gordon, Inc., as the case might be, to such contract holders. This contention is without merit, for, under

section 6 of the Uniform Sales Act in force in Maine, a sale of an undivided share of a chattel may be had and the buyer becomes an owner in common with the owner or owners of the remaining share or shares. And such apparently is the .common law. In Littleton on Tenures (1480) it is said: “See. 319. Also, as there be tenants in common lands and tenants, etc.,' as aforesaid, in the same manner there be possessions and properties of chattels reals and personals.” “See. 321. In the same manner it is of chattels personals.

As if two have jointly by gift or buying, a horse or an ox, etc., and the one grant that to which him belongs (of the same horse or ox) to another, the grantee, and the other which did not grant, shall have and possess such chattels personals in common, etc.” See, also, Williston on Sales, § 146.

We think it is clear from the terms of the sales contracts and the acts of the parties that it was intended title to the foxes should pass to the contract holders according to their interests in a given pair of foxes, and that it did so pass, and that the District Court was right when it found and ruled that the claim of the receivers or custodians in behalf of the contract holders was substantial and not merely colorable. There is no allegation, claim, or proof that the title of the contract holders to the foxes, if they acquired title, was not in good faith and for a valuable consideration.

On the contrary, the evidence shows that they paid a valuable consideration and acted in good faith. The adverse claim of title to the foxes asserted by the receivers or custodians in behalf of the contract holders, and the adverse claim of title to the real estate and other personal property asserted by the receivers of Gordon, Inc., each being substantial, and not merely colorable, and the title under which these claims arose having been created more than four months before the petition in bankruptcy was filed, and therefore not nullified by it (Metcalf v. Baker, 187 U. S. 165, 174, 23 S. Ct. 67, 47 L.

Ed. 122; In re Rohrer [C. C. A.] 177. F. 381, 383; Pickens v. Roy, 187 U. S. 177, 180, 23 S. Ct. 78, 47 L. Ed. 128), and actual possession being in the state court through its receivers and custodians at the time and since the petition was filed, the District Court as a court of bankruptcy did not have exclusive jurisdiction to determine the conflicting claims to the property, and the question is: In what court must the plaintiff, the trustee in bankruptcy, bring his plenary suits in order to test the merits of his claim?

It is well established that the- federal District Court, as a bankruptcy court, has exclusive jurisdiction to try the merits of such questions in a

summary or plenary proceeding, if it has actual or constructive possession of the property in question. Taubel, etc., Co. v. Fox, 264 U. S. 426, 433, 434, 44 S. Ct. 396, 68 L. Ed. 770; Orinoco Iron Co. v. Metzel (C. C. A.) 230 F. 40, 45. But where, at the time the petition in bankruptcy was filed, it did not have actual or constructive possession of the property, and has not since then had it, and the property is in the possession of an adverse claimant under a substantial claim, that court does not have exclusive jurisdiction to try the merits of the claims to the property. Taubel, etc., Co. v. Fox, supra.

It would, however, have concurrent jurisdiction to entertain a plenary suit embodying a controversy over property in the possession of a third party having the right of possession, where the nature of the controversy was such as is contemplated by the provisions of

section 70e of the Bankruptcy Act, but would not have even concurrent jurisdiction, if at the time of the filing of the bankruptcy petition the property was in the possession of some other court of competent jurisdiction, or its officers, having the right of possession. Taubel, etc., Co. v. Fox, supra. When a trustee in bankruptcy is required to bring a plenary suit, under

section 70e or otherwise, to test a claimed right or title to property, resort must be had to the court having actual custody and right to the possession of the res. Lion Bonding Co. v. Karatz, 262 U. S. 77, 88, 89, 90, 43 S. Ct. 480, 67 L. Ed. 871; Murphy v. Hofman Co., 211 U. S. 562, 569, 29 S. Ct. 154, 53 L. Ed. 327; Mueller v. Nugent, 184 U. S. 1, 15, 22 S. Ct. 269, 46 L. Ed. 405. For such court has exclusive jurisdiction to determine all rights 'thereto or therein. And its determination of those rights cannot be questioned collaterally in the federal courts. Lion Bonding Co. v.

Karatz, supra, at page 90, 29 S. Ct. 154, 53 L. Ed. 327; Kline v. Burke Const. Co., 260 U. S. 226, 229, 235, 43 S. Ct. 79, 67 L. Ed. 226, 24 A. L. R. 1077. As the trustee in bankruptcy did not at the time of bringing its plenary suits in equity have “the right of possession” to the property, and the Maine court, a court of competent jurisdiction, “at that date, and also at the time of the filing of the petition in-bankruptcy, was entitled to possession and had possession,” the District Court, as a court of bankruptcy, was without jurisdiction, exclusive or concurrent. First National Bank v.

Title & Trust Co., 198 U. S. 280, 281, 25 S. Ct. 693, 49 L. Ed. 1051 (a

summary proceeding); Whitney v. Wenman, 198 U. S. 539, 552, 25 S. Ct. 778, 49 L. Ed. 1157 (a plenary suit). And this is as true since the amendments" to the Bankruptcy Act of 1903, 1906, and 1910, as previously when the two above-cited cases were decided, for those amendments did not extend - the concurrent jurisdiction of the bankruptcy court to controversies where the possession and right of possession were in another court of competent jurisdiction at the time the bankruptcy petition was filed and when the plenary suit is brought.

Under the facts here found the District Court did not have jurisdiction, exclusive or concurrent, to entertain these suits, and they were properly dismissed for that reason. In each case the decree of the District Court is affirmed, with costs to the appellees.