mechanic's lien on property, not that of the bankrupt, for materials sold to the bankrupt and which he used in construction work in which he was engaged, held without application under the facts of the case. (See Collier, 13th Ed., p. 1284; Am. B. R. Digest, § 506.) Action by trustee in bankruptcy to avoid chattel mortgage and bill of sale as preference. Judgment for defendant and plaintiff appeals. Reversed. Kerr & Richardson, and Webber, George & Owen, for appellant. David R. Thomas and Selover, Schultz, Mansfield & Bryan, for respondent. DIBELL, J.: Action by William A. Marin, as trustee in bankruptcy of Newton Zeek, to avoid as preferential a chattel mortgage and bill of sale given by the bankrupt to the defendant. There was a trial to the court and judgment for the defendant. The plaintiff appeals. 1. Under section 60a of the Bankruptcy Act, a transfer by the debtor while insolvent within four months of bankruptcy, if the effect is "to enable any one of his creditors to obtain a greater percentage of his debt than any other such creditors of the same class," is preferential; and by section 60b the trustee may recover the preference or its value if the creditor or his agent acting for him "shall then have reasonable cause to believe that the enforcement of such transfer would effect a preference." * * * U. S. Comp. St. § 9644. Zeek had a small plumbing and heating business at West Concord in Dodge county. He owed the defendant something over $900. On April 6, 1921, the defendant's credit man called upon him but was unable to get a payment. On July 6, 1921, he was again unsuccessful. At that time a chattel mortgage was taken upon all of his stock to secure three notes of $300 each, due on July 27, 1921, August 27, 1921, and September 15, 1921. A check was given for the note first due, and it went to protest. The credit man went to West Concord on August 6, 1921, took a bill of sale of the property covered by the mortgage, and went into possession. Zeek filed a petition in bankruptcy on August 19, 1921, and the adjudication was on September 6, 1921. Our most recent case involving the question of what constitutes reasonable cause to believe that a payment will operate as a preference is Hanson v. Shank (Minn. Sup. Ct.), 4 Am. B. R. (N. S.) 317, 198 N. W. 804. There Judge Taylor said: "Showing that the creditor had knowledge of facts sufficient to put an ordinarily prudent man upon inquiry as to his debtor's solvency is sufficient to charge him with knowledge of the facts which such inquiry would naturally have disclosed if pursued with reasonable diligence. Galbraith v. Whitaker, (Minn. Sup. Ct.), 32 Am. B. R. 113, 119 Minn. 447, 138 N. W. 772, 43 L. R. A. (N. S) 427; and the numerous cases cited in the note found in 16 Ann. Cas. 816." In this connection see 2 Collier on Bankruptcy, 13th Ed., 1294-1315; 4 Remington on Bankruptcy, §§ 1819-1825; 3 R. C. L. 278, § 105. The account owing the defendant was past due on April 6, 1921. Some of it had run a long while. The defendant had been unable to collect. The credit man had the bill of sale written by an attorney in West Concord. The attorney says that he told the credit man that he had a judgment for $500 against Zeek, and a number of other claims, aggregating with the judg ment some $1,200, and that execution had been issued upon the judgment. He says that he told him that the bill of sale would be worthless unless he complied with the Bulk Sales Law. The credit man says that the attorney "told me he had those claims but he did not enumerate them." He could not remember what was said about the Bulk Sales Law, but was of the impression that the attorney "had advised that he did not think that would interfere." The validity of the bill of sale was apparently in question. There were three judgments against Zeek, aggregating more than $1,000, docketed in the county. Their dates were February 5, 1921, February 21, 1921, and June 4, 1921. The credit man knew that he was dealing with a man whose business was small, that much of the account was old, that it had been. hard to collect from him, that he could not pay, and that the mortgage covered the stock of merchandise without which he could not conduct his business. It was that out of which he must make his money with which to pay creditors. The giving of a chattel mortgage covering the whole stock in trade of the debtor is out of the usual course of business, is of itself evidence that he is in hard straits, suggests insolvency, and it is persuasive proof that the creditor taking the mortgage believes that he is gaining an advantage over the other creditors. In re Sutherland Co. (D. C., Mass.), 40 Am. B. R. 305, 245 Fed. 663; Gering v. Leyda (C. C. A., 8th Cir.), 26 Am. B. R. 137, 186 Fed. 110, 108 C. C. A, 222; McElvain v. Hardesty (C. C. A., 8th Cir.), 22 Am. B. R. 320, 169 Fed. 31, 94 C. C. A. 399; Allen v. McMannes (D. C., Wis:), 19 Am. B. R. 276, 156 Fed. 615; Dokken v. Page (C. C. A., 8th Cir.), 17 Am. B. R. 228, 147 Fed. 438, 77 C. C. A. 674; Pierre, etc., v. Winkler (S. Dak. Sup. Ct.), 40 Am. B. R. 622, 39 S. D. 454, 165 N. W. 2; Walbrun v. Babbitt, 16 Wall. 577, 21 L. Ed. 189. As a matter of law the defendant had reasonable cause to believe that the mortgage and bill of sale would operate as a preference. The facts in his possession were such as to incite inquiry which would have resulted in exact knowledge. In so holding we do not overlook the statement of his property and debts which the bankrupt gave the defendant on April 6, 1921. 2. The court finds that the mortgage was given "in lieu of other security claimed by defendant." The law is that a mere exchange of securities, fairly made, is not a preference. Cook v. Tullis, 18 Wall. 332, 21 L. Ed. 933; Sawyer v. Turpin, 91 U. S. 114, 23 L. Ed. 235; Stewart v. Platt, 101 U. S. 731, 25 L. Ed. 816; 2 Collier on Bankruptcy, 13th Ed., 1283; 4 Remington on Bankruptcy, 88 1658, 1703. The giving of a mortgage by an insolvent in lieu of an inchoate or vested mechanic's lien may be sustained as against a claim of preference. In re Lynn Camp Coal Co. (C. C., Ky.), 22 Am. B. R. 60, 168 Fed. 998; Lloyd v. Sichler (Wash. Sup. Ct.), 38 Am. B. R. 735, 94 Wash. 611, 162 Pac. 979. The claim of the defendant, upon which it seeks the protection. of the doctrine stated, is that it gold Zeek material which was used in construction work which he was doing and upon which it had a right of lien when it took the mortgage. The evidence, as we read it, fails to show that the defendant had a lien. Again, if the defendant had a lienable claim for merchandise sold Zeek it was not against his property. The rule as to the fair exchange of securities has no application. It is a further claim of the plaintiff that the chattel mortgage and bill of sale are void under section 67 of the Bankruptcy Act. U. S. Comp. St. § 9651. Zeek remained in possession. The claim is that such a mortgage is fraudulent as to creditors. Dunnell Minn. Dig. § 3885 et seq. and cases cited. And the claim is that under the Bulk Sales Law (G. S. 1913, § 7018) the bill of sale is presumptively fraudulent as to creditors. Holding the mortgage and bill of sale preferential, we do not consider whether they could be sustained under section 67. We do not discuss the defendant's claim that the complaint, concededly not a model of good pleading, is sufficient, nor its objections to the reception of evidence. The evidence was received, and the defendant is not the appellant. We do not discuss the insolvency of the bankrupt. The evidence establishes it. Judgment reversed. BERRY CLOTHING COMPANY, INC., v. HYMAN SCHOPNICK. * WHAT DEBTS AND CLAIMS are Provable-DEBTS ON OPEN ACCOUNT OF CON. TRACT-IN GENERAL-CLAIM FOR GOODS SOLD AND DELIVERED IS PROVABLE. A claim against a bankrupt estate on an account annexed for goods sold is provable under section 63a-(4) of the Bankruptcy Act and therefore dischargeable. (See Collier, 13th Ed., p. 1404; Am. B. R. Digest, § 829.) RIGHTS, DUTIEs and LiabilitIES OF BANKRUPT SUITS BY AND AGAINST BANKRUPT STAY OF PENDING SUITS-DISCRETION OF COURT-DISCRETIONARY WITH COURT TO STAY SUIT AFTER ADJUDICATION. Section 11a of the Bankruptcy Act does not require a peremptory stay of a pending action after adjudication in bankruptcy although the court may grant a stay to such extent as justice may require. (See Collier, 13th Ed., p. 397; Am. B. R. Digest, § 920.) Action of contract against surety on bond to dissolve attachment. Decision for plaintiff and defendant brings exceptions. Exceptions overruled. 144 N. E. 392. This is an action of contract to recover from a surety on a bond given to dissolve an attachment, made in an action by the plaintiff against three defendants who were principals on the bond, the amount of the judgment recovered in the original action. The relevant facts are that the plaintiff brought the original action against three defendants doing business as copartners on a writ bearing date December 27, 1920, and returnable into court Janu ary 29, 1921. There was delivered to the plaintiff on December 29, 1920, a bond to dissolve the attachment (on which the present action is brought) made in the original action signed by the three defendants therein as principals and by the defendant in the present action and two others as sureties. The original action was on an account annexed for goods sold. On April 14, 1921, a petition in bankruptcy was filed against the defendant copartners and they were adjudicated bankrupts on April 28, 1921. The bankrupts duly filed their schedules and included the plaintiff among their creditors. The plaintiff filed its proof of claim in bankruptcy "without prejudice to its rights" in the original action. That original action was placed upon the special list for trial in January, 1922, whereupon the defendants filed a suggestion of the bankruptcy of said defendants" and a certified copy of the adjudication. On January 18, 1922, the defendants in the original action were defaulted and judgment was rendered against them in favor of the plaintiff on its declaration on January 30, 1922. Thereafter, by agreement of parties, a stay of execution was granted until further order of the court. Discharges in bankruptcy were granted to two of the copartner defendants on May 23, 1922, and to the third on May 31, 1922. The condition of the bond to dissolve the attachment, on which the present action is brought, was that, if the principals "shall pay to the plaintiff in said action the amount, if any, that it may recover therein within thirty days after the final judgment in said action; and also shall pay to the plaintiff in said action within thirty days after the entry of any special judgment in said action, |