(after stating the facts as above). It is insisted by the trustee and objecting creditors that (1) the banks have no provable claims against the bankrupt, because (a) the bankrupt was not on November 18, 1904, indebted to Ehrehart, and (b) Ehrehart. had no authority to pledge the bonds as collateral for his personal in*849debtedness; (2) that, if the banks have provable claims, they are not entitled to priority over the unsecured creditors, because (a) the mortgage securing the bonds constitutes a voidable preference, and (b) the mortgage was fraudulently withheld from record, and, therefore, is void as security; (3) that by their negligence and laches the banks have estopped themselves from asserting their claims, or, if allowed to assert them, they should be postponed in payment to the debts of all other creditors.
[1-4] Carefully considered, I am not inclined to think that much difficulty arises in determining the first objection in its first aspect. Its determination involves purely a question of fact. The referee’s judgment on such questions must always be given favorable consideration, and in cases of doubt be solved in favor of his finding. By the very complete and able opinion filed by him it is clearly shown that the evidence upon which he bases his findings was very carefully considered by him. A review of this evidence convinces me that the bankrupt was indebted to Ehrehart on November 14, 1904, for sums of money which he had advanced to it. It cannot be successfully contended that Ehrehart had sold to it property at an overvaluation, and should be held to be indebted for the difference between this overvaluation and its true value, to offset this indebtedness for advances made, because it has been held by the Supreme Court of Appeals of this state that the fact that property, received by a corporation in full payment of stock issued, is taken at an overvaluation, will not make the holder of such stock liable as for unpaid subscription until the transaction has first been impeached for fraud upon the corporation. Bank v. Coal & Coke Co., 51 W. Va. 60, 41 S. E. 390. Such impeachment for fraud must be instituted and prosecuted by the corporation itself, or at least by some of its stockholders dr creditors existing at the time the sale was made. Stockholders existing at the time, who assented to and confirmed the contract of purchase (as all did in this case), are estopped afterwards from impeaching it. Subsequent creditors, who have extended credit to the corporation upon the strength of the property so acquired, will certainly not. be permitted to impeach the purchase under any ordinary conditions. These principles are clearly determined in Old Dominion Co. v. Dewisohn, 210 U. S. 206, 28 Sup. Ct. 634, 52 L. Ed. 1025, and cases therein cited. In the case here Ehrehart himself owned the property. and in turning over the property became the substantial owner of all of the stock of the corporation and its sole creditor. These bank debts were not incurred for money which Ehrehart secured in payment for the property, but for additional sums borrowed by him from the banks and advanced by him to the corporation for purposes of improving and operating the property — all to the end of increasing its value in the interest of subsequent creditors. I am wholly unable, from the evidence, to conceive any extraordinary conditions justifying subsequent creditors in regarding themselves defrauded in the premises.
[5] Touching the second aspect of this first objection, as to Ehre*850hart’s authority to pledge the bonds to these banks, it would be entirely sufficient to say that the undisputed testimony of Gibson and Ehrehart is that such authority was directly given by vote of the directors ; but, even if this were not ,so, the circumstantial evidence, it seems to me, is entirely sufficient to indicate such authority. It is reasonable to presume that these bonds were authorized by the company to issue in order to settle its outstanding debts; that Ehrehardt, the treasurer of the company, would be the one selected to negotiate settlement of these debts with these bonds; that, being substantially the sole creditor of the company at the time, his taking over of the bonds in payment of his debt would be both satisfactory and ratified by the company; and -the fact that no complaint was at the time or since made by the company, or any of its officers or directors, is strong presumptive evidence, in absence of anything to the contrary, that his negotiation was satisfactory and acquiesced in.
[6] The more serious question in the case arises under the third objection stated, which includes substantially both aspects of the second, and may be stated as a single proposition in these words: Have these banks, by either fraudulently concealing their deed of trust, or by reason of negligently withholding it from record, lost the right to prove their debts at all, or, if not, to assert their claim of priority over unsecured creditors? In other words, have they estopped themselves from asserting either debts or priorities, or both ? What debts are entitled to priority under the bankrupt law? Section 64b says, among other things:
“Debts owing to any person who by the laws of the states or the United States is entitled to priority.”
Section 3Í03 of the Code of West Virginia, 1906, provides that among other contracts a deed of trust—
“shall be void as to creditors * * * until and except from the time that it is duly admitted to record.”
' What kind of creditors are referred to? The Supreme Court of Appeals, in Gilbert v. Peppers, 65 W. Va. 355, at page 364, 64 S. E. 361, at page 365 (36 L. R. A. [N. S.] 1181), referring to this section of the Code says:
“It does not contemplate general creditors. As to them, it is valid, whether recorded or not. A mere personal debt bears no relation to the property of the debtor, since it does not constitute a lien thereon. Before a creditor can claim any legal right in respect to the property of his debtor, or any interest therein, in law or equity, he must, by some means acquire a lien thereon, as by attachment or reduction of his debt to judgment.” — citing Moore v. Tearney, 62 W. Va. 72, 57 S. E. 263; McCandlish v. Keen, 54 Va. 615; Dulaney v. Willis, 95 Va. 608, 29 S. E. 324, 64 Am. St. Rep. 815.
It would seem clear, therefore, that under the laws of West Virginia these banks would have a lien as against these unsecured creditors, represented by the bankrupt trustee, even if the deed of trust had never been recorded, and that the only risk they ran, by not recording it, was that some other creditors might have secured priority over them by obtaining judgment or other liens in the intervening time. This is based upon the mere neglect to record, and does not *851refer to deeds of trust executed fraudulently, or to secure, unlawfully, perference from an insolvent debtor, knowing him to be insolvent, and to have fraudulent purpose in view. Even in such cases, ordinarily federal courts, approving Chancellor Kent’s saying in Wiggins v. Armstrong, 2 Johns. Ch. (N. Y.) 144, that “unless he [the creditor] has a certain claim upon the property of the debtor he has no concern with his frauds,” will not allow a simple contract creditor to assail such conveyances for fraud. Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358; Cates v. Allen, 149 U. S. 451, 13 Sup. Ct. 883, 977, 37 L. Ed. 804.
[7] But exception is made in case of a trustee in bankruptcy, who is held, as to such conveyances and preferences, to have “all the right of a judgment creditor, as well as the power specifically conferred by the bankrupt act.” Dudley v. Easton, 104 U. S. 99, 26 L. Ed. 668. He is not, however, to be held a purchaser for value. Hewit v. Berlin Machine Works, 194 U. S. 296, 24 Sup. Ct. 690, 48 L. Ed. 986. Under these conditions, it seems to me that the very recent case of Holt, Trustee, v. Crucible Steel Co., 224 U. S. 262, 32 Sup. Ct. 414, 56 L. Ed. 756, is conclusive. The case involved the exact question that we have here, to wit, the validity, under the recording law of a state, of - an unrecorded mortgage as against creditors who became such after it was given, and without knowledge of it, where none of them had secured a lien upon the property. The question arose, as here, in a bankruptcy proceeding. • The Supreme Court there affirmed the Circuit Court of Appeals of the Sixth Circuit, holding that the effect to be given to an unrecorded chattel mortgage under sections 67a and 67b must be determined by the recording law of the state, and that under that law the question turns on who are included in the term “creditors,” and that where such term has been held by the state courts not to include creditors who have no liens against the property, as has been held in this state (Gilbert v. Peppers, supra), such unrecorded mortgage gives preference to those secured thereby as against such unsecured creditors. In view of this recent and authoritative ruling, I deem it unnecessary to consider, to any extent, the effect of sections 60a and 60b (Act -July 1, 1898, c. 541, 30 Stat. 562 [U. S. Comp. St. 1901, p. 3445]) and the changes made therein by the amendments of 1903 (Act Feb. 5, 1903, c. 487, § '13, 32 Stat. 799 [U. S. Comp. St. Supp. 1909, p. 1314]) and 1910 (Act June 25, 1910, c. 412, § 11, 36 Stat. 842 [U. S. Comp. St. Supp. Í911, p. 1506]). It is sufficient to say that I think Judge Cochran, in Debus v. Yates (D. C.). 193 Fed. 427, has very learnedly and clearly considered the question, and that I am in full accord with his views.
[8] Finally, the matter narrows to the contention made that the conduct of these banks has been so tainted with laches and negligence as to practically make their claim of priority fraudulent and void, or has at least estopped them from asserting it. This involves a question of fact largely as regards their conduct. There is no doubt as to their loaning to Ehrehart the money, and claimed that they took these bonds as collateral to secure such loans, that they received them from the treasurer of the company, and that they understood the money *852had been borrowed by Ehrehart for the company’s use and benefit. Sifted to the bottom, the charge of fraud and estoppel can be based, so far as the banks are concerned, upon only two delinquencies: (a) Failure to see to it that the deed of trust was promptly recorded; and (b) failure to secure prompt payment of the interest coupons attached to the bonds. The Supreme Court, in the Holt, Trustee, Case, has said that the first is not sufficient, and I am clearly convinced the second is not, to.deprive them of their lien.
I can see no conflict with these conclusions in the ruling of Moore v. Tearney, 62 W. Va. 72, 57 S. E. 263, relied on by counsel. On the contrary, it is there expressly held, as in Gilbert v. Peppers, that, as against unrecorded conveyances, only lien creditors are protected, while, touching the question of fraudulent conduct, the facts were vitally distinct and different. There Tearney, a father-in-law, took two absolute deeds of conveyance from his son-in-law, by which all creditors, lien or otherwise, were designed to be excluded, kept them in his possession unrecorded, until his death six years after, in the meantime allowing the son-in-law to remain in possession, claim the lands as his own,’ have them assessed in his own name, and to insure in his own name the buildings thereon.
Nor do I overlook the bitter outcry against the injustice done the creditors, arising, in the case of two of them, from the fact that their attorney searched the records, ascertained the recorded liens, and was told by the secretary of the corporation that there were no others. If that statement had been made to him by either Ehrehart, Winebrenner, the trustee, or the banks, the question would be entirely different. Just grounds for estoppel would have arisen, because it was Ehrehart’s debt that was secured collaterally by the bonds, the bank held the bonds, and Winebrenner was its treasurer, trustee, and representative. But Moore had no interest, and therefore no power to estop those who had. It would be a very dangerous doctrine to establish that an individual or corporation, by its representative, could, after creating a debt of this kind, estop its recovery by denying that it existed. A calm and dispassionate view, does not carry strong conviction of the great wrong done simple contract creditors, so- earnestly felt to exist in the minds of counsel; for it is to be borne in mind that their extending. credit was a voluntary act on their part, that they could have demanded a lien upon the property before, doing so, which would have been entirely good as against the banks’ unrecorded one, and the risk they ran by' not doing so was of.their own creation.
I can see no error in the ruling of the referee in this matter, and it must be affirmed.