this letter, it agreed to lend the bankrupt $80,000, $60,000 of which was at once placed to its credit. The first check drawn by the bankrupt on Greenbaum was for $7,300 to pay the balance of the note which had been discounted by the bank for Shirer personally. With reference to this check Ferguson says that when he found that Shirer had returned from Chicago, he, Ferguson, stopped at Shirer's office and asked the clerk to prepare a check which was done and Shirer, as president, and Ferguson as treasurer, signed it. Ferguson was asked whether he regarded this note for $7,300 for which the check was given as a liability of the bankrupt. His only reply was "we understood they were going to pay it." It does not appear that either the bank or Furguson made any inquiry as to why the bankrupt undertook to answer for what was Shirer's obligation. As the record stands, the bankrupt's money was applied by the bank to the payment of a debt due by Shirer to it and there is no evidence that anybody connected with the bankrupt other than Shirer himself and Ferguson, knew of or consented to this application of its funds.

We think that the trustee rightly insists that the bank must credit this $7,300 upon its claim against the bankrupt. In so holding we have not lost sight of the fact that in its brief the bank says that if Ferguson to promote some private end of his own conspired with Shirer to do an improper thing, the knowledge he acquired as such co-conspirer could not be imputed to the bank. Sound as the proposition of law is, it has no relevancy to the facts disclosed by this record. There is nothing here shown to raise even a suspicion that Ferguson in what he did in connection with this check was seeking anything personal to himself. It is clear that in getting it he was acting for the bank and what he knew concerning it the bank must be held to have known. That is to say when the bank received this $7,300 from the bankrupt, it knew that the check was in payment of the note which Shirer personally owed to it. It had no reason to believe that any officer of the bankrupt except Shirer himself and Ferguson who in this matter was acting for the bank, as he himself in fact testified, knew that its money was being used to pay its president's personal debts. If in point of fact the proceeds of this note had gone to the bankrupt or if it had

authorized the payment the fact could have been shown but it was not. As the record stands, the bank must account to the trustee for the $7,300, that is to say, it must treat that sum as a credit on its claim against the bankrupt.

Another of the trustee's exceptions goes to the entire claim of the bank. It alleges that the bank for the purpose of getting undeserved credit for the bankrupt knowingly made false statements as to the latter's financial condition and that those to whom they were made acted upon them and suffered thereby. The trustee argues that in consequence the bank is not entitled to receive anything from the bankrupt estate until after its other creditors have been paid in full. To sustain this exception the trustee relies upon the telegram and the letter sent by the bank to Greenbaum and, as we understand the record, upon them alone. If they made the bank liable to anyone as to which we intimate no opinion whatever, it was to Greenbaum. If anyone was deceived by them, it was Greenbaum and it alone suffered from them. The money the bankrupt obtained from it went to swell the bankrupt's resources and to a greater or less extent benefited the bankrupt's other creditors. As representing them, the trustee has not been hurt. Doubtless a case can be conceived in which a creditor of a debtor in failing circumstances may for its own purposes seek by knowingly false statements to obtain credit for the debtor from any or from all who may deal with the latter. Under such conditions it may be that the trustee as representing the creditors generally has the right to insist that in the distribution of the bankrupt's estate, the improper action of the one creditor shall estop it from competing with its victims, but such rule of law, if it exists, has no application to the instant case. The learned court below was right in overruling this exception.

From what has been said it follows that the exceptions of the trustee to $12,284.52 of the bankrupt's claim, that is to say to the two sums of $4,984.52 and $7,300 respectively, should have been sustained and that there was no error in overruling his other exceptions. In short the claim of the bank should have been allowed for $30,253.43 and not for $42,537.95. Modified.

IN THE MATTER OF EDGAR S. MEYER AND ELMER JUDD, INDIVIDUALLY AND AS CO-PARTNERS, TRADING UNDER THE FIRM NAME OF MEYER AND JUDD," BANKRupts.

U. S. District Court, Western District of Tennessee, Western Division, April, 1924.

No. 5157.

LIENS-IN GENERAL-VALIDITY DETERMINED BY STATE LAW.

The validity of a contract made between a manufacturer of automobiles and a retail dealer, which attempts to retain title to the automobiles until the payment of notes given therefor, is to be determined by the law of the state wherein the dealer resides and the cars are intended to be delivered.

(See Collier, 13th Ed., p. 1509; Am. B. R. Digest, § 428.)

SAME-PARTICULAR LIENS-CONDITIONAL SALE TO RETAIL DEALER VOID IN TENNESSEE.

A conditional sale of automobiles by a manufacturer to a retail distributor is invalid in Tennessee as against the dealer's receiver in bank. ruptcy.

(See Collier, 13th Ed., pp. 1526, 1703; Am. B. R. Digest, § 444.) TITLE TO PROPERTY-RECLAMATION PROCEEDINGS IN GENERAL-RECLAMATION PROCEEDINGS NOT MAINTAINABLE BY FOREIGN CORPORATION WHICH HAS FAILED TO COMPLY WITH STATE LAWS.

An Indiana corporation is precluded from filing a petition of reclamation in the Federal Court in Tennessee if it has failed to comply with the statutory requirements necessary before doing business in the latter state. (See Collier, 13th Ed., p. 1733; Am. B. R. Digest, § 414.)

PRESERVATION OF ASSETS AND APPOINTEMENT OF RECEIVER-RECEIVER-ACTIONS AGAINST RECEIVER-ANCILLARY RECEIVER MAY CONTEST QUESTIONS OF TITLE.

Where an ancillary receiver has been appointed and property of the bankrupt delivered to him whereupon a claimant files a petition for reclamation of the property in the court of ancillary jurisdictions the receiver is a proper party to contest the question of title.

(See Collier, 13th Ed., p. 79; Am. B. R. Digest, § 303.)

PREFERENCES-MANNER OF CREATING PREFERENCE-PAYMENT-IN GENERALPAYMENT TO ATTORNEY HELD NOT PREFERENCE.

Evidence considered and held not to show a preference by payment to attorney for services and expenses in attempting to assist the bankrupt out of an involved and precarious financial condition before bankruptcy (See Collier, 13th Ed., p. 1336; Am. B. R. Digest, § 527.)

Petition to review determination of referee as to validity of liens. Petition dismissed.

PROCEEDINGS BEFORE REFEREE.

Statement of facts:

This matter is now before the court on a petition for reclamation filed by the Stutz Motor Car Company of America, Inc., seeking to reclaim from the receiver two Stutz 4-H four passenger automobiles, and upon an intervening petition filed by M. E. Lesser claiming to be the owner of five hundred ($500) dollars of the funds now in the hands of the receiver in this cause. Inasmuch as the automobile and the funds in controversy have been the subject of a somewhat extended litigation, it will be necessary to state the history of these proceedings in order to intelligently state and discuss the issues now presented for determination.

On June 13, 1921, the Stutz Motor Car Company of America, Inc., filed a bill in the Chancery Court of Shelby county, Tennessee, against E. S. Meyer, said to be a non-resident of Tennessee, and a resident of Chicago, Illinois, Southern Motor Car Company, a Tennessee corporation, with its situs at Memphis, and Union Motor Car Company, another Tennessee corporation, also domiciled at Memphis. In this bill the Stutz Motor Car Company of America, Inc., alleged the following facts:

That defendant E. S. Meyer secured from the complainant a franchise right to represent the complainant in Memphis, Tennessee, by selling the automobile products of the complainant; that Meyer bought from the complainant two Model H, four passenger, 1920, Stutz automobiles, for which he executed his several promissory notes, and complainant retained title to said automobiles by virtue of a contract of sale made and executed in the eity of Indianapolis, Indiana, the home office of complainant, which contract was exhibited with the bill, and this contract was executed on or about the 23d of April, 1921.

The defendant, E. S. Meyer, with whom said contract was made, failed to meet the first note given in pursuance of said contract of sale of the auto, mobiles mentioned in the bill, and that on May 23, 1921, default was entered on said note by complainant; that pursuant to the terms of said contract, the title to said automobiles was to vest in complainant and that the ma chines were to be reshipped to complainant at Indianapolis, Indiana, but that defendant in this connection, upon said default, refused and failed to comply with the terms of his contract.

That defendant Meyer, while in the city of Memphis in the automobile business, contracted obligations with defendants, Southern Motor Car Company and Union Motor Car Company; that the nature of the obligations claimed by the last mentioned corporations were to complainant unknown, but that the Union Motor Car Company had taken one of the model H, 1920, four-passenger Stutz automobiles and appropriated the same to its own use, and holds the same without right or authority; that the Union Motor

Car Company had also, without right, title or process of law taken a model H, four-passenger automobile from the place of business of Edgar S. Meyer on an alleged obligation of said Meyer to said company, notwithstanding title to said automobile was in the complainant.

It is also alleged that the defendant corporations are endeavoring with all speed to dispose of these automobiles and that unless prevented by order of the court they will dispose of the same to the great injury, loss and damage of the complainant. The prayer of the bill is that an attachment issue and be levied upon the two automobiles described; that in the event the property can not be located, an injunction issue restraining the defendant corporations from disposing of the property until further orders of the court and that complainant have a decree for the possession of the automobiles described and vesting the title to same in complainant. Judgment is also prayed against defendant E. S. Meyer for the amount due complainant on the unpaid notes.

So far as this record shows no answer was made to this bill. A week later, and on June 20, 1921, the Stutz Motor Car Company of America, Inc., filed another bill in the Chancery Court of Shelby county, Tennessee, against W. D. Mathis, E. S. Meyer, doing business as the Memphis Stutz Company, and E. E. Meyer individually. The substance of the allegations of this bill are as follows:

That defendant E. S. Meyer had theretofore engaged in business in the city of Memphis in the sale of Stutz automobiles under the trade name of the Memphis Stutz Company, with defendant W. D. Mathis as one of his employees; that Meyer failed in business on or about May 23, 1921, at which time there were in his possession two Stutz 4-H, four-passenger motor cars, the title to which had been retained by complainant; that Meyer had breached his contract with complainant, in that he had failed to pay certain notes given in pursuance thereof; that complainant, in the exercise of its rights under the contract, had taken possession of said automobiles and had ordered the same to be delivered to the railroad platform of the Illinois Central Railroad Company in Memphis; that the automobiles were taken to the railroad station for shipment under the supervision of one L. M. Dreves, who was at that time acting under direct authority from complainant, but that before the cars could be actually transported, and while they were at the railroad station, defendant Mathis went to the railroad station and removed the cars without the knowledge of the complainant or its agents, and drove them to the Court Avenue Garage, where they were secreted for a time, then drove them to the temporary quarters and former place of business of defendant Meyer, and then had them taken to the place of business of the Union Motor Car Company, where they remained until knowledge of their whereabouts was gained by complainant; that an attachment proceeding had been instituted against the Union Motor Car Company, the Southern Motor Car Company, and E. S. Meyer, whereupon the Union Motor Car Company ordered the cars removed from its place of business.

That after defendant Mathis had so wrongfully taken possession of the