(dissenting).
My construction of this record is so radically different from that presented in the majority opinion that I am constrained to a pretty full restatement of the facts and issues as I see them. The main question in these eases is whether the bankruptcy court or the state court of Maine has jurisdiction to liquidate the insolvent fox business of the bankrupt Frank H. Gordon.
Gordon was a dentist in Bangor. In 1922, he began the business of raising silver black foxes and the issuance of contracts executed in duplicate and running as follows:
“Article I. Said party of the first part (Gordon), in consideration of two thousand dollars ($2,000) to him paid by the party of the second part, the receipt whereof is hereby acknowledged, hereby sells and delivers to the party of the second part one pair of silver black foxes, warranted to be free of incumbrances and to be in Rood, healthy condition.
“Article II. Said party of the first part hereby agrees properly to ranch said foxes according to his regular system of ranching from the date hereof to the date of the birth of the first offspring of said foxes after the first breeding season following the date hereof, and said pair of foxes and said offspring from the date of their birth to the 1st day of January next, following: Provided, however, that this provision shall apply to said offspring only to the date of purchase thereof, if the right to so purchase provided for in article Y shall be exercised by the party of the first part as therein provided, without further expense to the said party of the second part and for said purposes is to have sole possession of said foxes undisturbed by said party of the second part during said season. '
“Article III. Said party of the first part hereby guarantees 100 per cent, production of offspring; that is, two offspring for the first breeding season next following the date hereof, and if less than two offspring are produced by said pair of foxes during said season said party of the first part shall supply young foxes of like kind and quality to make up said 100 per cent, production.
“All offspring produced by said pair of foxes during said season in excess of said *17100 per cent, shall belong to said party of the first part.
“Article IT. In consideration whereof the said party of the second part has paid to the said party of the first part the sum of two thousand dollars ($2,000). Said party of the second part hereby agrees not to remove said pair of foxes, nor said two offspring from the possession of the said party of the first part, or in any way interfere with his said possession and ranching thereof for the time provided in this agreement.
“Article T. Said party of the second part hereby agrees that the said party of the first part shall have the right and privilege to buy from him, and he hereby agrees to sell free of all incumbrances to the said party of the first part, said two offspring hereinbefore described as soon as they shall be produced or supplied under the said guaranty, and to execute and deliver to him, said party of the first part, all conveyances necessary to carry o.ut this provision, upon tender to him of the sum of fifteen hundred dollars ($1,500) by said party of the first part, and this option to purchase shall continue and be in force from the birth of said offspring up to January 1st next following.”
Many of the contracts issued were for but fractions of pairs — even for one-twentieth of a pair, calling for but $100. The scheme as actually intended and operated did not, as Gordon’s uneontradieted testimony plainly, shows, contemplate “delivering any. of the foxes.” “The thing which seemed to worry my customers” most was the possibility that they might have to take delivery, which they “did not want.” He continues:
“We didn’t claim we were going to locate any fox, or mark or specifically identify the foxes in any way. It was not my intention to ever' mark them, because it wasn’t so good protection for my client. If they owned a specific pair of foxes, or expected to continue to own that specific pair of foxes, they must insure them. In case of death, I would have no authority to give them another pair of foxes. I had no obligation to give them any. But with my contract — my intention of simply keeping foxes enough to cover my contracts at all times, I considered a safer proposition would be for any investor to own, in reality, an undivided interest in the whole fox industry.”
He also testifies that some of the pairs did not mate, but quarreled and had to be changed into other pens; that death — at times, epidemics — greatly reduced his stock; that he gave the perpetual guaranty of 100 per cent, “made out from year to year,” referring to what was called the “renewal ranching agreements,” said to have been made with the customer after his contract had run a year; no copy of such renewal agreement is in the record.
The real motive force back of the scheme is found in article T; the provision giving Gordon an option to buy the actual or supplied 100 per cent, reproduction for $1,500 a pair.. He testifies: “As soon as we paid one or two customers the $1,500 which was the option price on the litter, they began to advertise the fox business, and * * * we met with very little sales resistance to selling all we could get to sell. * * * ”
But he shortly discovered that under his management reproduction was only about 50 per cent.;' consequently, in order to have foxes enough to cover the outstanding contracts and “have some stock in trade to sell at all times,” he bought, at an average price of about $700 a pair, “in 1924, more than 1,000 pairs of foxes to take care of my sales and make up whatever shortage of reproduction there was.”
His scheme, therefore, was to sell contracts at $2,000 a pair with a guaranty of 100 per cent, production, and to make up the deficit of about 50 per cent, by purchases at about $700 a pair, creating a market for more contracts of sale at $2,000 a pair by exercising the option to keep (“buy”) at $1,500 a pair the actual or substituted reproduction. The earlier buyers of “an undivided interest in [Gordon’s] fox industry” got a 75 per cent, return on their investment, and consequently became enthusiastic advertisers of it; it was essentially Ponzi’s scheme of paying the earlier comers huge profits from moneys furnished by the later comers. Cunningham v. Brown, 265 U. S. 1, 44 S. Ct. 424, 68 L. Ed. 873.
But the large purchases requisite to meet the guaranty, and the payment of $500,000 to $600,000 under the option provision, plus heavy expenses in ranching, feeding, and for overhead, shortly made Gordon insolvent; like most promoters of foolish and fraudulent schemes, he wasted much of his gettings —$90,000 on one newspaper for propaganda purposes, and in exorbitant commissions; in the later stages 50 per cent, to 60 per cent, to overcome “sales resistance.”
In August, 1924, the state authorities investigated the enterprise and made a report. Then, under the advice of counsel, the form of the contract was changed, by striking out “and delivers,” in the first article, in order to make the contract conform to the real intent of both parties and to the prae*18tice actually adopted, and by inserting1 a provision that the foxes 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 substitutes”; but this was never done. The time limit for the option in article Y was also changed from one year from the date of the contract to read “from the birth of said offspring up to January 1st next following.” A new article VI was added, here immaterial.
Late in 1924 Gordon, under the advice of counsel, formed the Maine corporation of Frank H. Gordon, Inc., and transferred his business and assets to it as of December 31, 1924. The directors were Gordon, his family, and nominees. He dominated and carried on the business, as he testified, precisely as before the incorporation, insisting that the directors “were to be distinctly dummy directors.” All the stock ($300,000) was issued to Gordon. In form, the corporation took over his liabilities, and, assuming the validity of such assumption, was from the outset hopelessly insolvent, as was Gordon when he made the transfer. About $250,000 was taken in from new fox contracts after January 1, 1925. But shortly “sales resistance” became too strong to be overcome. In that winter (1924^25) an epidemic carried off many foxes. By October, 1925, Gordon’s resources were so exhausted that the foxes were starving and eating each other; consequently he, as plaintiff, against Gordon, Inc., applied to the Supreme Court of Maine for a receiver. In his bill, he asserts failure of his effort to bring about a common plan among the holders of said contracts (he does not describe them as owners of foxes) for some equitable basis for reorganization, and the imperative necessity for immediate arrangements to provide food for the foxes. The answer, filed, of course, by procurement of Gordon’s counsel, admitted everything alleged. The court appointed, October 26, 1925, the defendants Weatherbee and Gillin temporary receivers; they forthwith took possession of the ranches in Maine and efficiently fed and eared for the foxes. November 17, 1925, was, by the same decree, fixed as the date for hearing the question of making the receivership permanent, notice to be given by publication. On November 17, on bill and answer (no evidence), the receivership and injunction were made permanent; the receivers were ordered to collect all assets of Gordon, Inc., to sell them at public or private sale, subject to the court’s approval; claims against the corporation were to be filed with the clerk of court not later than March 23, 1926, notice to be given by publication.
Meantime, on November 2, 1925, one Wentworth, on behalf of himself and all other contract holders, brought a bill against Gordon, Gordon, Inc., and (by permission of the court) the receivers, alleging that title to all of the foxes then in the possession of the receivers was in the various contract holders, and not in any of the defendants; that the foxes had become intermingled and confused, so that the receivers could not identify those belonging to specific contract holders; and praying that the court would determine the rights and equities of all persons in respect to said foxes, and order distribution or other appropriate disposal thereof, meantime authorizing borrowing on receiver’s certificates in order to provide food and care for the foxes. On answer admitting the allegations of the bill, the court took jurisdiction; and, on November 9, 1925, appointed Weatherbee and Gillin custodians to manage and care for the foxes in behalf of all persons in interest. This suit is limited to the foxes; it does not suggest court action as to other property.
On February 13, 1926, the Wentworth bill was taken pro confesso against holders of contracts described as nonappearing part owners; the custodians were appointed temporary receivers, and it was ordered that on April 5, 1926, “any person having probable interest in the property concerned may show any reason which may be made to appear to the court why there shall not be permanent receivership” — notice to nonresidents of Maine to be given as ordered on a motion (not before us) that nonresidents be made parties. Apparently this refers only to nonresident holders of fox contracts; there is nothing to show notice to general creditors, whose claims were very considerable.
On April 6, 1926, in the same suit, Gillin and Weatherbee were made permanent receivers, and ordered to take steps for a speedy close of the receivership. On July 22, 1926, on a petition of the receivers (not in the record), it was decreed that the foxes should be offered for sale at public auction on August 17 from the courthouse steps in Bangor, bids to be subject to confirmation by the court. For some reason not shown, this plan of a public auction sale was abandoned. On August 26, 1926, in the Went-*19worth suit, the defendant Herbert Gray submitted to the court an offer of $300,000 for all the foxes, and, in the Gordon suit, of $50,000 for the real estate- and personal property at Lincoln, Me., clear and free from incumbrances. Gray agreed in his offer that, after reserving 2 ranches out of 15 at Lincoln, to be selected by him, with all the foxes therein and the equipment thereon, he would “distribute the remaining foxes in that proportion to which they are entitled to all contract holders who within 30 days of the confirmation of the sale notify him of such election and pay him their just and equitable proportion of the purchase price of the foxes, plus any expenses, receivers’ or otherwise, which he may have paid or incurred.” These items amounted to about $67 a fox. He further agreed to “sell and convey at their fair proportionate value, based upon the entire purchase price, to any or all groups of contract holders entitled under the above offer to receive 300 or more foxes, such ranch or ranches and equipment as are needed 'to care for said foxes, provided, however, that the bidder may first retain sufficient ranches to properly accommodate all foxes that may not be taken by the contract holders under the above offer.” Just what a “ranch” covered I do not understand. Parenthetically, what has become of ranches and foxes not at Lincoln, Me., eannot from this record be ascertained. Gordon testified that he had a ranch at Milbridge, Me., and another in Marlboro, Mass.
These bids were accepted and the sales confirmed. On October 4, 1926, the receivers reported that Gordon and Gordon, Inc., had sold and issued 4,270 contracts, of which 353 were canceled; that upon the date of their appointment there were outstanding 3,917 contracts, belonging to 2,600 owners; that the contracts then outstanding represented $2,841,315, and “in round numbers 2,841 foxes.” What the additional $315 “represented” does not appear. By later decrees it was determined that various named assignees or purchasers of contracts were entitled to the rights of long lists of original owners of contracts, whose names and the numbers of their contracts were attached to such decrees. On January 13, 1927, a 6 per cent, dividend in cash was ordered on the face of approved fox contracts and paid to the amount of $136,557; checks for $21,546 more were held up because of these suits.
But on November 19, 1925, creditors had filed a petition in bankruptcy against Gordon, which the District Court dismissed on the ground that the claims relied upon were not liquidated. On appeal that ruling was reversed by this court. 12 F.(2d) 778.- Adjudication followed, and the appointment of the trustee Boyle on October 15, 1926. Boyle, as trustee, promptly filed in both suits in the Maine court papers by which he “begs to inform this court” of the bankruptcy proceedings against Gordon, and Boyle’s claim that “all assets coming into the hands of the receivers” belong to him as such trustee; that he therefore “requests or suggests that an order be entered,” commanding the receivers to turn over all assets received -by them. That court seems to have treated these papers as petitions; for it denied them by decrees November 5, 1926. Boyle also moved for leave to bring in the federal court a suit against the state court receivers; these motions were denied. Boyle filed, but did not prosecute, appeals;, they were dismissed pro forma, for want of prosecution, December 21, 1926. No evidence was offered by Boyle in the Maine court; I find no order admitting him as a party in either suit.
On January 18, 1927, Boyle brought in the District Court for Maine these two suits (dismissed below), one against Gray, Gordon, and Gordon, Inc., and the other against Weatherbee and Gillin, receivers. Boyle;s contentions are thus summarized by his counsel:
“(a) Title to the foxes never passed to the contract holders.
“(b) The transfer by Gordon to the corporation, was void as contrary to the Maine bulk gales statute.
“(e) The conveyance by Gordon to the corporation was, as to the trustee, a fraudulent conveyance as a matter of law.
“(d) The corporation was the alter ego and mere instrumentality of Gordon, and did not have a separate distinct existence.
“(e) By operation of the law the trustee was vested with all property of the bankrupt, whether transferred to the corporation or not.
“(f) Bankruptcy having intervened within four months from the date of the filing of the petition in the state court, exclusive jurisdiction was in the bankruptcy court,, and such jurisdiction it eannot relinquish.
“(g) The defendants must account to the plaintiff for assets of the bankrupt coming into their hands.”
The main contentions of all the defendants, raised by pleas and answers, are:
(1) The denial of Boyle’s motions in the-Maine court, followed by his failure to prosecute his appeals, were a final submission by him to the jurisdiction of that court.
*20(2) Possession of the res by the state court before the filing of the bankruptcy petition vested in that court exclusive jurisdiction to determine all rights therein.
I think it dear that Boyle’s well-mannered suggestions to the Maine court were not an election to submit his rights and duties to that court, assuming that a trustee has, without authority from the bankruptcy court, the power to make such election. He did not ask to be made a party; he sought no process against any one; he framed no issue; he offered no evidence. His appeals to the law court were but an unnecessary extension of his suggestions for comity to the court of last resort, so as to give the Maine courts a considered opportunity to deal with that delicate question. Compare Harkin v. Brundage, 48 S. Ct. 269, 72 L. Ed. 457; Empire Trust Co. v. Brooks (C. C. A.) 232 F. 641. The federal court had, on such cases as are here pleaded, jurisdiction to collect the bankrupt’s estate without obtaining any permission from the Maine court to sue its receivers. Miller v. Potts (C. C. A.) 26 F. (2d) 851. Creditors.of a bankrupt estate are, in the language of the late Judge San-born, from the date of the filing of the petition eestuis que trust of the recoverable estate. Commissioners v. Hurley (C. C. A.) 169 F. 92, 94, 95. Their trustee cannot fritter away their rights (frequently to avoid preferences) by filing mere suggestions and requests in a state court, without issue tendered or evidence offered. Fidelity Co. v. Bray, 225 U. S. 215, 218, 32 S. Ct. 620, 56 L. Ed. 1055; In re Diamond’s Estate (C. C. A.) 259 F. 70, 75; Martin v. Globe Bank (C. C. A.) 193 F. 841; Missouri v. Angle (C. C. A.) 236 F. 644, 652; In re Sage (D. C.) 224 F. 525; Bank v. Butler (C. C. A.) 282 F. 866; Hume v. Myers (C. C. A.) 242 F. 827, 830, 831; Union El. Co. v. Hubbard (C. C. A.) 242 F. 248; In re Hecox (C. C. A.) 164 F. 823; In re Grafton Co. (D. C.) 253 F. 668, 673, et seq.; Bank v. Murchison (C. C. A.) 213 F. 147, 150; 5 Rem. (3d Ed.) §’§ 2084, 2116. The cases stand as they were before Boyle (in comity only) filed his suggestions in the state court.
The plaintiff’s powers and duties accrued as of November 19, 1925, on the filing of the bankruptcy petition; it was a “caveat to all the world.” Mueller v. Nugent, 184 U. S. 1, 14, 22 S. Ct. 269, 46 L. Ed. 405; May v. Henderson, 268 U. S. 111, 117, 45 S. Ct. 456, 69 L. Ed. 870, and cases cited. Gordon’s transfer, as of December 31, 1924, while insolvent, to his corporation, was plainly in fraud of his creditors, even if there was no set purpose to deprive them of ultimate payment; enough that it would hinder and delay them. Empire, etc., Co. v. Practical, etc., Co. (C. C. A.) 20 F.(2d) 297, 298; Lovett v. Faircloth (C. C. A.) 10 F.(2d) 301, 304; Bank v. Trebein, 59 Ohio St. 316, 52 N. E. 834, and cases cited; Liller Building Co. v. Reynolds (C. C. A.) 247 F. 90; Graham Mfg. Co. v. Davy-Pocahontas Co. (C. C. A.) 238 F. 488; Glenn, Rights of Creditors, § 105, and cases cited. The parties must be held to have intended the natural and inevitable consequences of their acts; Matthews v. Thompson, 186 Mass. 14, 71 N. E. 93, 66 L. R. A. 421, 104 Am. St. Rep. 550, and cases cited; Bress v. Gersinovitch, 231 Mass. 565, 121 N. E. 525.
For present purposes, the corporation was but an instrumentality of Gordon’s. Into the corporation went no new capital. As above noted, it became insolvent by the terms of the transfer. Prior to the incorporation he had obtained on this scheme approximately $2,500,000 from dupes, of which perhaps $500,000 had been paid to the earlier comers as dividends of 75 per cent. — paid in order to obtain more dupes and in no part from profits. The same scheme of fraud and folly, carried on by the same man, in the same way, with the same aggregation of assets and liabilities, went on after January 1, 1925, with new dupes putting in perhaps $250,000, .about one-eleventh of the gross thus received. Compare In re Kornit Co. (D. C.) 192 F. 394, 396. It is plain that the right to equality of treatment of the first group of victims who had put in $2,500,000 before January, 1925, can be secured only through bankruptcy; equally plain that the right of the new group to like equality (all they are entitled to) can be secured by treating the corporation as. a mere instrumentality of Gordon. The fiction of separate corporate entity cannot be allowed to destroy or impair the rights of either group.
The reasons given for the incorporation, and adverted to in the opinion of the court below, are not persuasive. The first is that it was to reduce income taxes. But, as Gordon’s own testimony and the indisputable facts show that from the outset he had no real income, and so reported to the government, zero could not be reduced by incorporating his insolvency creating enterprise. The other reason, that various so-called customers wanted permanency for the scheme, is equally unconvincing. Permanency in a fox-breeding scheme, in which a leading factor was a guaranty of double the actual reproduction, is obviously absurd. As operat*21ed, the scheme was (as stated above) to pay the earlier comers large sums furnished by the later comers. Permanency was as impossible as perpetual motion. I regard it as almost too plain for argument that the incorporation was nothing but a device of counsel to avoid the (obviously inevitable) liquidation in the bankruptcy court. In April, 1924, the Supreme Court of the United States in the Ponzi Case (Cunningham v. Brown, supra, overruling this court in 284 F. 936) had held the preference provisions of the Bankruptcy Act (11 USCA) applicable, in order to work out approximate equality among the victims of such schemes. This result probably inspired counsel in the summer of 1924 to seek means to avoid a like result in liquidating this comparable scheme. The case is quite unlike that of the Chevaux Kid Case. Prince v. McLaughlin (C. C. A.) 16 F.(2d) 886. It is much more like such cases as Exploration Mercantile Co. v. Pacific Co. (C. C. A.) 177 F. 825; Stockton v. Central R. R., 50 N. J. Eq. 52, 24 A. 964, 17 L. R. A. 97; Higgins v. Cal. Pet. Co., 147 Cal. 363-369, 81 P. 1070; In re Holbrook Shoe & Leather Co. (D. C.) 165 F. 973; In re Berkowitz (D. C.) 173 F. 1012; Donovan v. Purtell, 216 Ill. 629, 75 N. E. 334, 1 L. R. A. (N. S.) 176; Booth v. Bunce, 33 N. Y. 139, 88 Am. Dec. 372; Chicago M. Co. v. Minneapolis Co., 247 U. S. 490, 38 S. Ct. 553, 62 L. Ed. 1229; In re Muncie Pulp Co. (C. C. A.) 139 F. 546; In re Rieger Kapner & Altmark (D. C.) 157 F. 609; In re Kornit Mfg. Co. (D. C.) 192 F. 392; Clere Clothing Co. v. Union Trust Co. (C. C. A.) 224 F. 363; Hunter v. Baker Co. (D. C.) 225 F. 1006-1015; In re Looshen Piano Case Co. (D. C.) 261 F. 93; Kiendl v. Taunton (D. C.) 206 F. 509; Baker Motor Vehicle Co. v. Hunter (C. C. A.) 238 F. 894; Empire Lighting Co. v. Practical Co. (C. C. A.) 20 F.(2d) 295; Montgomery Web Co. v. Dienelt, 133 Pa. 585, 19 A. 428, 19 Am. St Rep. 663; In re Slobinsky, [1913] 2 K. B. 517; 11 USCA p. 579, note 842; Wormser, Disregard of Corp. Fiction, pp. 47-85, and cases reviewed.
The whole record makes it dear that the incorporation was but a device to prevent the victims from obtaining their rights under the Bankruptcy Law. It ought not to be allowed to prevail.
In this connection significance attaches to the subsequent conduct of the receivers. The bankruptcy petition was filed, as above noted, on November 19, 1925. The receivers employed counsel on behalf of Gordon to contest it before the District Court, on January 22, 1926. That court, on March 3, 1926, dismissed the proceedings, on the ground that “the petition and the offers of proof did not make out provable claims in bankruptcy.” On appeal, the ease was argued in this court on April 13, 1926, also by counsel employed by the receivers. At that time practically no steps had been taken in the two state court eases — except highly appropriate steps to conserve the foxes, as to which the receivers seem to have been faithful and successful. Pending decision by this court on bankruptcy, the receivers on June 1, 1926, filed in the state court petitions for leave to sell the property. On June 12, 1926, this court’s opinion was filed, holding that the bankruptcy petition must be heard on its merits. But the receivers pressed for a sale; and an interlocutory decree for a sale was procured by them on July 22, 1926, and the sale (or distribution) actually ordered in August, 1926, after mandate from this court on August 12, 1926. There was obviously set purpose by the receivers and all the counsel involved to put the property beyond the reach of the equality creating requirements —and other undesired limitations — of the Bankruptcy Act.
Comity plainly required that the status quo should be preserved, pending determination of the respective powers and duties of the state and federal courts. Cf. Hooks v. Aldridge (C. C. A.) 145 F. 865, 869.
I come now to consider the effect of the two receivership proceedings: Gordon’s, under which, on October 26, 1925, he procured receivers of the foxes and all other property; and the Wentworth suit, of November 2, 1925, under which the same receivers were made custodians (and later receivers) of the foxes, on the theory that they (and all of them) were the property of contract holders, and belonged neither to Gordon nor to Gordon, Inc.
The Gordon suit is by the receivers correctly pleaded as brought “for the purpose of protecting and conserving the estate. * * * ” But, even- if we assume that it may (either with or without amendment) be regarded as a creditors’ bill, involving ultimate liquidation, it is plain that it was superseded by bankruptcy within four months. Mere possession by a state court through a receivership does not exclude effective and possessive bankruptcy jurisdiction. Receiv-erships of insolvents (and both Gordon and Gordon, Inc., were insolvents) are now grounds for bankruptcy jurisdiction. It would be absurd to hold that Congress, under its paramount constitutional power *22(Taubel v. Fox, 264 U. S. 426, 430, 44 S. Ct. 396, 68 L. Ed. 770), has left specific grounds for invoking bankruptcy so to operate as to leave the bankruptcy courts without power to administer in bankruptcy (Randolph v. Scruggs, 190 U. S. 533, 539, 23 S. Ct. 710, 47 L. Ed. 1165; Stellwagen v. Clum, 245 U. S. 605, 613, 38 S. Ct. 215, 62 L. Ed. 507; 5 Rem. §§ 2071, 2072, 2073; In re Conservative Co., etc. [C. C. A.] 24 F.[2d] 38; Scott v. Goodman [D. C.] 25 F.[2d] 175, 178. On this record, we need not consider any possible application of the rule laid down in Galbraith v. Vallely, 256 U. S. 46, 50, 41 S. Ct. 415, 65 L. Ed. 823.
Of course, Gray, who was conversant with the proceedings throughout, bought at his peril; he is not a bona fide purchaser without notice. Bank v. Sherman, 101 U. S. 403, 406, 25 L. Ed. 866; Bank v. Butler (C. C. A.) 282 F. 866; Diamond’s Estate (C. C. A.) 259 F. 70, and cases cited; Eppley v. Baylor (C. C. A.) 293 F. 305, 310.
The conclusion that Gordon’s attempted transfer of his business to Gordon, Inc., was voidable as in fraud of' creditors, makes it unnecessary to discuss whether it was not also void under the Maine statute as to sales in bulk. R. L. Me. c. 114, § 6. It certainly is not clear that that statute is not applicable to a substantial part of the property, in form transferred by Gordon to Gordon, Inc.
The trustee seems to me clearly entitled to recover the property, or the value thereof, disposed of under the Gordon suit.
The closest and most important question in the case is: Did the Maine court, under the Wentworth suit, have jurisdiction, as against bankruptcy, to dispose of 4,600 foxes, worth, on this record, about $250 each— over $1,100,000? We must not fall into error by conceiving this question too broadly and inclusively; it is not a question whether jurisdiction was legally and wisely taken (under both suits) to conserve wasting property; nor whether in the Wentworth suit jurisdiction was properly assumed for examination of the claim of ownership in common; just as the jurisdictional basis may be examined in summary proceedings by the bankruptcy court. May v. Henderson, 268 U. S. 111, 116, 45 S. Ct. 456, 69 L. Ed. 870, and cases cited. The question is whether, on the undisputed facts, jurisdiction was legally retained and exercised by the sale and distribution (both) of all of the foxes as the property of the contract holders, and therefore no part of the estate of the bankrupt Gordon. To take, to conserve, to hold, pending determination of the truth of alleged jurisdictional facts, are quite distinct from general administration, liquidation, and distribution,, in quasi insolvency or bankruptcy. Under assignments for the benefit of creditors, the-assignees legally and properly take, hold, and conserve the estate, but always subject to being superseded by bankruptcy. Randolph v. Scruggs, supra. Such assignees may not hastily liquidate and distribute, in order to escape “their legal duty to turn the property or its proceeds over to the trustee in bankruptcy.” May v. Henderson, 268 U. S. 111, 116, 45 S. Ct. 456, 459 (69 L. Ed. 870). The duty of conservation receivers is the same.
We must not overlook that the general tendency of the amendments of the Bankruptcy Act during 30 years is toward extending the scope of the plenary or exclusive jurisdiction of the bankruptcy court, as an essential means of a nearer approach to achieving the ideals of the act — speed and equality. The amendments making receiverships of insolvents grounds of bankruptcy are remedial, obviously enacted to meet a demonstrated defect in the act, and are entitled to very liberal construction. Compare Taubel v. Fox, 264 U. S. 426, 44 S. Ct. 396, 68 L. Ed. 770, and notes; May v. Henderson, 268 U. S. 111, 45 S. Ct. 456, 69 L. Ed. 870; Bank of Dillon v. Murchison (C. C. A.) 213 F. 147, 150.
The adverse claim requisite to exclude possession and administration by the bankruptcy court must be real and substantial, in law or in fact. Harrison v. Chamberlin, 271 U. S. 191, 46 S. Ct. 467, 70 L. Ed. 897. This is important, for the initial situation, as disclosed by the Wentworth bill and answer, is quite different from that later disclosed by the undisputed and indisputable facts. In Wentworth’s bill, filed November 2, 1925, he alleges that Gordon sold him between March 26, 1922, and August 14, 1924, five pairs of' silver black foxes, for which he paid $10,-000; that, at or subsequent to the execution of said contracts, Gordon set apart, segregated, and put in pens on one of his ranches-the foxes sold under these contracts, and designated and entered them upon his books as Wentworth’s property; that later Gordon,, or Gordon, Inc., negligently or willfully intermingled and confused Wentworth’s foxes with foxes belonging to other like owners, so that neither plaintiff (nor the receivers then-in charge) could identify the foxes of Went-worth or of the other owners. The case thus presented, on bill and answer, to the state-court, was of sales of full pairs, seasonably identified by the seller as the buyer’s, and thereafter intermingled by the seller with-. *23those of other buyers. The pleadings made a plain ease of jurisdiction under R. S. Me. c. 82, § 6, or under general equity powers. 'When that court took jurisdiction and entered its interlocutory decree of November 9, 1925, appointing the receivers custodians of the foxes, there was nothing to show the issuance of contracts for fractions of pairs, or otherwise to control the allegation and admission that pairs of foxes had been segregated and identified as the property of Wentworth and other persons in like position, in whose behalf also the bill was brought —-thus apparently creating a tenancy (or ownership) in common. Williston on Sales, c. 6, and particularly section 150 et seq., and eases cited.
Ten days later, when the bankruptcy petition was filed, the only parties before that court were a single investor, Wentworth, Gordon, his instrumentality, Gordon, Inc., and the court’s receivers, holding for Gordon or Gordon, Inc., or for the contract holders as owners in common. It is important to note that nothing had then been done except to feed and save starving foxes and issue an order of notice to other contract holders. No lien or right, good against bankruptcy, could thereafter be created against Gordon’s estate in bankruptcy, whatever it should prove to be; for that estate was then in custodia legis. Acme Co. v. Beekman, 222 U. S. 300, 32 S. Ct. 96, 56 L. Ed. 208. The bankruptcy petition assailed Gordon’s scheme as a fraud ab initio, and thus gave the receivers actual as well as constructive notice that everything remaining of Gordon’s gettings might in bankruptcy be held distributable to his victims on the basis of their net investments in his scheme — a result presumably not desired by Wentworth, one of the earlier investors.
On the return of an order of notice in Eebruary, 1926 (if not before), the facts appeared to be entirely inconsistent with the allegations and admission in the Wentworth ^headings. It then and subsequently appeared that a large proportion of the contracts were for but fractions of pairs; the investments ran from $100 up. A fraction of a pair of foxes cannot be “set apart and segregated,” so as to pass title. An intent to pass title to a fraction of a pair is refuted by the evidence and the course of business. No contract holder testifies to the identification of a pair as his, or to intent to take title to a pair or to a fraction of a pair. This is highly significant. The undisputed and indisputable facts are that never, until near the close of 1924, after the bulk of the business had been done, was there even an attempt to identify contracts with pens, in which there might or might not be breeding pairs of foxes. But giving the same numbers to pens and contracts did not identify foxes; for, as Gordon, without contradiction, testified: “The pens simply had a number on them, and the foxes might be moved any time of the day or night, and no record sent to the office.” And in addition to quarrels, divorces, and rematings, there were deaths, even epidemics, births, and large purchases, to make up the deficit under the 100 per cent, guaranty, as well as under his option. When Gordon (in form) transferred the business, ete., as of December 31, 1924, to the corporation, his books showed that he had foxes costing $84,600, in excess of the number then due contract holders under the 100 per cent, guaranty. At one time he had on the ranches foxes subject to (what he calls) a mortgage to the seller to secure part of the purchase money; of course, clear title to these could not pass under, contracts. There were different grades of foxes. In Gray’s bid, he stipulated that only one of the two ranches he was to reserve for himself should be of “first grade.” Poxes are not fungible, at any rate when of different grades and paired for breeding purposes. The contracts themselves provided that his ranching and possession should not be interfered with. On Gordon’s uncontradieted testimony, supra, it was the intent neither of himself nor any of his customers that title should pass. This alone would seem enough. 1 Williston, Sales, §§ 150, 258, 259. He, and not they or any of them, carried insurance and paid the local taxes on the foxes; no contract holder carried the risk of loss by death of any fox; no dead fox was ever charged to any contract holder. The theory of a real ownership, by the investors, of identified breeding pairs, required identification of the reproduction also; and, if less than 100 per cent., an identification of the pups of like kind and quality supplied by Gordon under his guaranty; and then, if he took up his option, an identification of the pups to which the option applied. None of these things were. done. On the contrary (to recapitulate), Gordon had a shifting aggregation, of different grades of foxes, in thousands of pens, on various ranches, in two or three towns — mating, divorcing, breeding, dying, supplemented from time to time by purchases from without. He sold thousands of these contracts, and under his option paid the earlier contract holders 75 per cent, dividends out of the proceeds of the later sales of contracts. It seems to me impossible to *24hold that title to any pair, or fraction of a pair, , ever passed from Gordon to any contract holder. These investors had contracts, and nothing but contracts. Until the court took possession through its receivers and enjoined suits, clearly any creditor of Gordon might have attached and levied execution on any or all of the foxes; no contract holder could have successfully maintained replevin or conversion for any foxes thus seized for Gordon’s debts. The plaintiff trustee is in the shoes of such a creditor. Bankruptcy Act, §§' 70a(5) and 70e (31 USGA § 110 (a)(5), (e).
I observe that learned counsel for the defendants in their hriefs do not seriously urge the impossible proposition that title to this aggregation of foxes passed to the contract holders. On the contrary, they ground their defense on the two propositions that Boyle has finally elected the state court as his forum, and that the transfer to Gordon, Inc., created such an adverse interest as to exclude superseding bankruptcy jurisdiction, both of which propositions I think clearly untenable.
Adequately analyzed, the reasoning and decision of the Supreme Court in May v. Henderson, supra, rule this case. The court there reversed the Circuit Court of Appeals for the Ninth Circuit (289 F. 192), and held that the attempt of an assignee for the benefit of creditors to prefer the bank of which he was president, by permitting, before the petition was filed, a deposit to be applied to a note, could be dealt with on summary proceedings against the two assignees. The Supreme Court there held that the decision of the Circuit Court of Appeals that there was “nothing in the record to impeach the claim of the respondents that the bank claims the money by title adverse to them, and that the money is not now in their possession or under their control,” was wrong, because merely colorable. Mr, Justice Stone, for a unanimous court, says, inter alia (268 U. S. 115, 116, 45 S. Ct. 458):
“Courts of bankruptcy do not permit themselves to be ousted of jurisdiction by the mere assertion of an adverse claim. The court has jurisdiction to inquire into the claim for the purpose of ascertaining whether the summary remedy is an appropriate one within the principles of decision here stated. * * * It may disregard the assertion that the claim is adverse if on the undisputed facts it appears to be merely col-orable.”
The adverse claim' there held merely col-orable was far more plausible in both law and fact than the claim here that title to these 4.600 foxes (old and young) had vested in 2.600 holders of these contraéis, running from $100 to several thousands, and issued' from 1922 to about July, 1925.. Of the 4,-600 foxes, about 1,800 were bom in the spring of 1926, while the receivers were in possession. How, when, and to what contract holders did Title to these 1,800 pass? Am adverse claim so absurdly based as is this of ownership in the investors is not real and substantial. It is only dimly colorable, from the untrue allegations in the Went-worth bill, and because a respected court did not, sua sponte, end a jurisdiction invoked by what seemed to be the agreement of the great majority of the parties in interest. I am constrained to think that state jurisdiction so grounded cannot oust bankruptcy jurisdiction; that the possession of the foxes by the receivers under the Wentworth bill was for present purposes no more effective than the possession of the ranches, etc., under the Gordon suit; that both were superseded by bankruptcy within four months. 5 Rem. § 2067. Miller v. Potts (C. C. A.) 26 F.(2d) 851, and In re Diamond’s Estate (C. C. A.) 259 F. 70, support my conclusions.
It follows that the insolvent estate accruing out of this scheme of fraud and folly was Gordon’s bankruptcy estate, and should be so readministered as substantially to meet the requirements of the Bankruptcy Law, as was Ponzi’s like estate. Cunningham v. Brown, 265 U. S. 1, 44 S. Ct. 424, 68 L. Ed. 873.
I do not discuss many questions which would inevitably arise in such readministration of the estate. We do not even know on what basis the bankruptcy court, after mandate from this court, proceeded in adjudicating Gordon bankrupt. But the petition before this court in 12 F.(2d) 778, alleges that Gordon obtained $4,100 from the petitioners fraudulently, .and also that he made transfers in fraud of creditors and by way of preference. Clearly, the argument of fraud ab ini-tio would be open to many, perhaps to all, of the investors. Gordon’s transaction with the Waldo Trust Company is, by fair implication, an admission by him that the contracts were open to rescission for fraud. Contracts had been purchased by people whose notes for the money paid Gordon were discounted in this Trust Company, and who “afterwards found that the contracts were not worth what they thought they were.” In order to protect the treasurer from liability or blame for discounting these notes, Gordon assumed the liability of the promisors to the' bank and ordered their fox contracts can-*25eeled. Contracts financed by money from a bank are no more voidable for fraud than contracts financed by money of the dupes themselves. This is one of a substantial number of transactions, inadequately shown in this record, calling for critical examination in the bankruptcy court.
Again, the method of distribution adopted by the Maine court is plainly inconsistent with the rules applicable in bankruptcy. As I understand the proceedings (from the ill-arranged and inadequate copies of records in that court here presented), they went on the theory that all of the contracts outstanding were valid for their original face, without regard to the fact that the earlier investors must have received one or even two 75 per cent, dividends. For illustration: Wentworth had invested $10,000 as early as August, 1924. Inferentially, he must have received two dividends amounting to 150 per cent, on his $4,000 invested in 1922, or $6,-000, and one dividend of 75 per cent, on $6,-000 invested in 1924, $4,500, or $500 more than his aggregate investment. Yet he seems to have been treated precisely like the later comers, who had received nothing. If the Gordon scheme was a fraud ab initio, Went-worth was a preferred creditor, not a wronged owner of five pairs of foxes.
Again, Gray offered $300,000 for all the foxes, 4,600, on condition that he allow the contract owners, who were reported to be entitled to 2,841 foxes, to have 2,841, paying therefor in cash at the same rate, about $67 a fox. This apparently resulted in giving him about 1,800 foxes, worth on this record about $450,000, for less than one-third of that sum, and the ranches and other property went in large, but unaseertainable, part to Gray, with a right of participation in the distributee contract owners who came into this scheme of liquidation, leaving general creditors, with claims filed and apparently valid of over $70,000, no chance for any substantial dividend. Yet it was not even claimed that the contract holders had any title or other superior right in the ranches, etc., held under the Gordon suit.
Again, if the contracts were, as the Maine court seemed to hold, valid, they covered 100 per cent, annual reproduction, and not merely the original pairs or fractions of pairs. Most of them were issued in 1923 and 1924; on these there were at least two breeding seasons before the distribution or sale in the fall of 1926. If, under their contracts, they were originally entitled to 2,841 foxes, under the reproduction guaranty, they must have been entitled to this guaranteed progeny (5,682), except .as such right was cut down by Gordon’s exercise of his option for perhaps 400 pairs. On this record I can see no foundation for distributing the foxes without regard either to the guaranty of 100 per cent, annual reproduction or to Gordon’s payments under his option.
There is no indication that this mixed sale and distribution of the foxes and all other property was ordered after notice, of this plan to the parties in interest and opportunity to object to Gray’s extraordinary proposition; it seems to have been ordered in chambers, after the state court rejected bids submitted at the auction advertised.
In bankruptcy, the creditors would have the right to claim both a substantially different estate to distribute and a radically different theory of distribution.
The doctrine that prior possession of a. res by a court of competent jurisdiction excludes jurisdiction by all other courts is not applicable. Plainly the state court of Maine is not a court of “competent jurisdiction” in bankruptcy. It has no jurisdiction to deal with preferences, almost certainly an important element in bankruptcy administration and liquidation of this estate, as it was in the Ponzi estate, in which, after decision by the Supreme Court of the United States, hundreds of preference suits were brought and sustained.
To apply broadly and literally the doctrine that prior possession, through its receivers, by a court of competent jurisdiction, excludes bankruptcy, would nullify the amendments of the act which expressly make receiverships of insolvents grounds of bankruptcy. Since those amendments, such receiverships have, as stated above, no more validity as against bankruptcy than assignments for the benefit of creditors. Miller v. Potts, supra; In re Diamond’s Estate, supra; Rem. § 2070.
Doubtless (as the majority opinion holds), if the gist of the cases were suits to avoid transfers in fraud of creditors, the state court has concurrent jurisdiction with the federal court under section 70e of the act. Murphy v. John Hofman, 211 U. S. 562, 568, 29 S. Ct. 154, 53 L. Ed. 327; 5 Rem. Bankruptcy (3d Ed.) § 2042. But, rightly analyzed, the gist of these eases is not jurisdiction to recover for the bankruptcy estate property conveyed in fraud thereof. The gist is whether the state court has exclusive jurisdiction to administer and liquidate, without regard to bankruptcy, both receivership estates, viz. the ranches, etc., held under the Gordon receivership and all *26of the 4,600 foxes held under the Wentworth receivership. State court concurrent jurisdiction under section 70e is in aid of appropriately invoked bankruptcy jurisdiction. The attempt here is to pervert it into a nullification of the right of creditors to hake administration and liquidation in bankruptcy of any part of Gordon’s gettings from his dupes. ■