seizure, existent before the National Prohibition Act was ever dreamed of, as modified, if modified at all, by the Espionage Act. [2] The language of section 25 reads:

"No search warrant shall issue to search any private dwelling occupied as such unless it is being used for the unlawful sale of intoxicating liquor, or unless it is in part used for some business purpose such as a store, shop, saloon, restaurant, hotel, or boarding house."

It is argued that the words "store, shop, saloon, restaurant, hotel, or boarding house" are words having well-defined meanings and describe well-defined places, and that on the theory of "expressio unius est exclusio alterius," a still set up in a dwelling house does not put the dwelling house in a class "in part used for some business purpose."

It seems to me that the very statement of the proposition shows its fallacy. Certainly the distillation of intoxicants from mash has become a very lucrative business to those who are so fortunate as to escape detection. It is a business entirely disconnected and disassociated with the ordinary environments of a home. Distilleries in private dwellings are innovations, the product of nation-wide prohibition, far from essential to the tranquillity of the home. It is my opinion that the words of the statute, "store, shop, saloon, restaurant," etc., are illustrative and not exclusive.

While the words may not be interpreted to mean a distillery, the process of distilling is a "business," to which individuals have devoted a portion of their homes to an extent that it cannot be said they are exclusive ly used as private dwellings.

provisions of the revenue laws, or to put violations of them beyond the pale of the law, is, as said in one case, "to charge it with an intent to encourage the infant industry of family distilleries and to sanction the most pernicious evil of the day."

The object of the National Prohibition Act is declared in title 2, § 3 (Comp. St. § 10138/2aa), to be enacted "to the end that the use of intoxicating liquor as a beverage may be prevented."

It would be strange indeed to impute to Congress an intent to insert in the same act a clause calculated to foster and encourage the very evil which it was trying to exterminate. Yet such is the effect of section 25 as it has been construed in some of the cases to which my attention has been called.

To hold that a still set up in one's kitchen or his bedroom, turning out its product in commercial quantities, is immune from seizure so long as no sale is made from the house, is straining section 25 beyond the breaking point, and I cannot bring my mind to a status which will permit me to so hold.

But I am asked to go further, and hold that a basement or cellar exclusively used as a brewery is immune from search because the family of the owner lives in a tenement in the same block.

In the case at bar we are dealing with something more than a family distillery. Two stills, of 50-gallon capacity, were found in operation, capable of an output of many gallons of moonshine per day.

If the application for a search warrant had recited a violation of R. S. § 3266, instead of a violation of the National Prohibition Act, I would have no hesitancy whatever

"No person shall use any still, boiler, or other vessel, for the purpose of distilling, in any dwelling house, or in any shed, yard, or inclosure connected with any dwelling house, or on board of any vessel or boat."

R. S. § 3282, as amended by section 5, Act of March 1, 1879 (Comp. St. § 6022), provides that:

"No mash, wort, or wash, fit for distillation or for the production of spirits or alcohol, shall be made or fermented in any building or on any premises other than a distillery duly authorized according to law."

These sections of the Revised Statutes existed long before the National Prohibition Act was passed, and, if violated, the only immunity from search and seizure was the Fourth Amendment. To impute to Congress an intent to change or modify the foregoing

ing what appears to be the fact, that the search warrant was issued because the application therefor recites a violation of the National Prohibition Act, and that therefore section 25 is applicable, I think, even then, the motions should be denied, because the warrant was to search a cellar, no part of which was devoted to family use.

It is not uncommon to find many different lines of business carried on in the basement of city blocks, the upper stories of which are occupied by tenants. No greater reason appears why a store, saloon, or restaurant, located in the basement of a tenement house, should be the subject of a search, than a basement or cellar devoted to a distillery.

For the reason that I believe section 25 of the National Prohibition Act was never intended to prohibit the search of a dwelling

house wherein the distillation of intoxicants is being carried on, and for the further reason that the search was made of a cellar exclusively devoted to a distillery, the defendants' motions were denied.

The following is a list of cases bearing on one side and the other of the questions presented: In re Mobile (D. C.) 278 F. 949; Hurley v. United States (C. C. A.) 300 F. 75; United States v. Goodwin (D. C.) 1 F.(2d) 36; United States v. Apple (D. C.) 1 F. (2d) 493; United States v. Mitchell (D. C.) 12 F. (2d) 88; United States v. Kelih (D. C.) 272 F. 484; Jozwich v. United States (C. C. A.) 288 F. 831; Temperani v. United States (C. C. A.) 299 F. 365; Staker v. United States (C. C. A.) 5 F.(2d) 312; Monaghan v. United States (C. C. A.) 5 F. (2d) 424.

In re DAILEY et al.

John M. Enright, of Jersey City, N. J., for U. S. Fidelity & Guaranty Co.

George G. Tennant and Albert C. Wall, both of Jersey City, N. J., for trustee. Mark Ash, of New York City, for creditors.

Edward Maxson, of Summit, N. J., for City of New York.

BODINE, District Judge. On April 1, 1918, John D. Dailey and De Witt C. Ivins, individually and copartners trading under the name of Dailey & Ivins, were adjudged bankrupts. The bankrupts were garbage men in the City of New York, and were obligated to that city for the performance of these duties upon a bond in the sum of $200,000. The United States Fidelity & Guaranty Company and the American Surety Company were guarantors. Messrs. Dailey and Ivins did not perform their contract with the city, and a claim in its behalf in the sum of $730,962.25 was finally allowed.

On May 1, 1924, the surety companies paid the city $180,000 in settlement of liability upon their bonds, each contributing

1926.

1. Bankruptcy 316(3)-Indemnity Contract of partnership and its Individual members to indemnify surety on bond against llability gives rights beyond one to indemnify only against loss, including right to prove claim in bankruptcy (Bankruptcy Act, § 571 [Comp. St. § 9641]).

A contract of indemnity, executed by a partnership and its individual members to the surety on its bond for performance of a contract, in which they agreed to perform all the conditions of the bond, to protect the surety against liability thereon, and to place it in

funds before it should be required to make pay

ment thereunder, held to give the surety rights beyond those implied in law including the right to prove against the estates in bankruptcy of the partnership and individual partners the damages it sustained from breach of the contract to indemnify against liability, and not merely the right of subrogation, under Bankruptcy Act, 8571 (Comp. St. § 9641), to the rights of the creditor to whom the bond was given and paid against the partnership estate.

2. Bankruptcy 316(3)-Surety on bond of bankrupt liquidating claim may prove it against estate.

Surety on bond of bankrupt which liquidated its claim by payment pending the proceedings may prove it against the estate.

In Bankruptcy. In the matter of John D. Dailey and De Witt C. Ivins, individually and as partners trading as Dailey & Ivins, bankrupts. On review of order of referee. Modified.

the surety companies amended the claims which they had previously filed (the claims being for breach of contract, damages unliquidated), setting forth the settlement with the city and seeking an allowance of, a joint claim for $180,000, or several claims for $90,000 each, against the partnership estate, and further setting forth that the American Surety Company was entitled to an allowance of $90,000 against the individual estate of the partners.

The referee disallowed the claim against the partnership estate, but allowed the claim of the American Surety Company for $90,000 against the individual estates of the partners. The matter comes before this court on review.

[1] The contract of the American Surety Company upon which the claim is predicated, so far as pertinent, is as follows:

"III. That the indemnitor will perform all the conditions of said bond, and any and all renewals and extensions thereof, and will at all times indemnify and save the surety harmless from and against every claim, demand, liability, cost, charge, counsel fee (including fees of special counsel whenever by the surety deemed necessary), expense, suit, order, judgment, and adjudication whatsoever, and will place the surety in funds to meet the same before it shall be required to make payment, and, in case the indemnitor requests the surety to join in the prosecution

or defense of any legal proceeding, the indemnitor will, on demand of the surety, place it in funds sufficient to defray all expenses and all judgments that may be rendered therein. The indemnitor will not ask or require the surety to remove or join in any application for the removal of any proceeding from a state court to a federal court in any state where such action would in any way effect the surety's right to transact busi

ness.

"IV. That the suretyship is for the special benefit of the indemnitor, its property, income, and earnings now owned or hereafter acquired, to which the surety looks for its indemnity, and the indemnitor represents that it is specifically and beneficially interested therein.

"V. That the surety shall have every right and remedy which a personal surety without compensation would have, including the right to secure its discharge from its suretyship, and should it make payment, hereunder shall have every right and remedy of the indemnitor for the recovery of the

same.

"VI. That this agreement shall cover, not only the suretyship above recited, but all alterations, renewals, extensions, or modifications thereof which may be requested or assented to by the principal named in such obligation. That the surety shall be at liberty to pay or compromise any claim or charge of the character enumerated in section III hereof, and the voucher or other evidence of the payment thereof shall be prima facie evidence of the fact and of the indemnitor's liability therefor to the surety."

It is to be noted that this contract is executed by John D. Dailey and De Witt C. Ivins, individually and as members of the firm of Dailey & Ivins. It is also to be noted that the principals expressly agreed that they would perform all the conditions of the contract, and also agreed to place the surety company in the funds which it might require before the surety company should be required to make payment. In this particular, the contract gives the surety rights beyond those implied in law. Such a contract is legal, and may be the basis of a recovery. Professor

Williston says in his book on Contracts, at page 2311, as follows:

"At law, recovery on a contract of indemnity before payment of the liability is dependent on the construction of the contract. If the terms are broad enough to amount to an indemnity against liability, and not merely an indemnity against payment in discharge of liability, recovery will be allowed as soon as the party to be indemnified has incurred liability. But courts of equity, even in the absence of words expressly guaranteeing freedom from liability, as distinguished from freedom from loss, specifically enforce the obligation and compel the promisor to meet his obligation to indemnify before payment of it by the promisee."

The learned referee took the view that the indemnity agreement of the American Surety Company did not create any larger rights than those of subrogation, so far forth as the estate of the bankrupt partnership was concerned, and disallowed the claim, taking the view that the only rights of the surety were by subrogation under section 57i of the Bankruptcy Act (Comp. St. § 9641), and in support of his position relies upon the case of Williams v. Fidelity Insurance & Guaranty Co., 236 U. S. 549, 35 S. Ct. 289, 59 L. Ed. 713. Since the contract of the parties gave the American Surety Company larger rights than those of subrogation and indemnity, it would seem that, so far as the surety company's contract was breached (and there is no dispute about that), it is entitled under that contract to damages which it has proved in the sum of $90,000, and may prove the same against all estates.

[2] As to the United States Fidelity & Guaranty Company, it was also a creditor under its contract of the bankrupt partnership with a provable debt in bankruptcy, which has now been liquidated, and its claim, as such, should have been allowed. Maryland Casualty Co. v. Jones, 140 Md. 395, 117 A. 765, 48 Am. Bankr. R. 624. See, also, United States Fidelity & Guaranty Co. v. Carnegie Trust Co., 177 App. Div. at page 176, 164 N. Y. S. 92; Id., 221 N. Y. 646, 117 N. E. 1086.

Let an order be entered accordingly.

HENDERSON v. PLYMOUTH OIL CO.

(FARQUHAR, Intervener).

Circuit Court of Appeals, Third Circuit. March 7, 1927.

Rehearing Denied May 31, 1927.

No. 3530.

1. Courts 314-Federal court has jurisdiction of suit to compel stock transfer by foreign corporation, though real controversy is between stockholders, citizens of same state. Federal court held to have jurisdiction of suit by resident of Pennsylvania against foreign corporation to compel transfer on its books of certain certificates of stock, though real issue in dispute was between plaintiff and intervener, who was resident of the same state, since the nonresident corporation, while a mere stockholder, was necessary party to release stock.

2. Corporations 125-Person holding certificates of stock under assignment acknowledging value received with power of attorney has legal title.

Person having possession of certificate of stock under assignment acknowledging value received, with irrevocable power of attorney, has legal title thereto, placing burden on original owner to defeat such legal title.

3. Corporations 30 (2)-Promoter's transfer of stock to purchasers in partial reparation for fraud in misrepresenting outstanding stock held supported by sufficient moral consideration.

Transfer of stock by promoter to purchasers in partial reparation of fraud in misrepresenting amount of outstanding stock at time of sale, and in an endeavor to recompense purchasers, held supported by sufficient moral consideration.

4. Corporations 80(11)-Evidence held to show fraudulent misrepresentations by promoter to purchasers as to outstanding stock of corporation.

Evidence held to establish that promoter, at time of making sale of stock, fraudulently misrepresented to purchasers the amount of out

standing stock of the corporation.

5. Corporations 30 (2)-Promoter's assignment of stock to purchasers in partial reparation for fraud in misrepresenting outstanding stock held not, procured by duress.

Promoter, having assigned certain shares of stock to purchasers in partial reparation for fraud in misrepresenting amount of outstanding

stock, held to have failed to establish that assignment thereof was procured by duress, or to have shown any proof for compelling the holders of such certificates to return them. Woolley, Circuit Judge, dissenting.

Appeal from the District Court of the United States for the Western District of Pennsylvania; W. H. Seward Thomson, Judge.

Suit by William M. Henderson against the Plymouth Oil Company, wherein Jerome 19 F. (2d)-7

Q. Farquhar intervenes. From a decree for intervener (13 F.[2d] 932), plaintiff appeals. Decree vacated, and cause remanded, with directions.

Thorp, Bostwick, Stewart & Reed, of Pittsburgh, Pa., and Owen J. Roberts, of Philadelphia, Pa., for appellant.

George E. Alter, of Pittsburgh, Pa., for appellee Plymouth Oil Co.

Weller, Wicks & Wallace, of Pittsburgh, Pa. (H. D. Rummel, of Charleston, W. Va., and John W. Davis and James M. Nicely, both of New York City, of counsel), for appellee Farquhar.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

BUFFINGTON, Circuit Judge. On October 20, 1924, the Plymouth Oil Company, a corporation, issued to J. G. Farquhar its 19 certificates of stock, Nos. 427-446, aggregating 50,000 shares of its common stock. Such certificates provided they were "transferable

pany

on the books of the comby attorney upon surrender of this certificate properly indorsed." Farquhar on June 26, 1925, using the transfers printed on the back of such 19 certificates, transferred such stock in blank by his 19 signatures, each duly witnessed, in form following: "For value received do hereby sell, assign, and transfer unto shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint

attorney to transfer the said stock on the books of the within named company, with full power of substitution in the premises. Dated June 26, 1925. J. G. Farquhar. In presence of W. G. Wilson." On the succeeding day, June 26, 1925, the subscribing witness, Wilson, united with W. M. Henderson, A. R. Budd, and F. B. Lockhart in a declaration of trust as follows:

"Whereas, the persons listed on the attached sheet are the holders of and have purchased the number of shares of stock set opposite their names in the Plymouth Oil Company upon the representation made by J. G. Farquhar et al. that the total outstanding capital stock of the company was 350,000 shares; and whereas, it is now contended that the total outstanding capital stock of the company is 1,050,000 shares; this memo witnesseth, that said J. G. Farquhar has this day turned over to Walter J. Wilson the following certificates of common stock of said company: [Reciting certificates above specified.]

"The said stock is now turned over to W. M. Henderson, and he hereby receipts for the same, to be held by him for the benefit proportionately of such of the stockholders mentioned on the attached list as shall elect to acquiesce in the action of the undersigned in demanding and receiving this stock, it being the intention of said J. G. Farquhar to add to this stock enough shares that the holdings of the persons on the attached lists shall be brought to a place where they will bear the same ratio to an outstanding issue of 1,050,000 shares as they would have borne, had the capitalization been as represented by said J. G. Farquhar, namely, 350,000 shares.

"Whereas, W. M. Henderson, F. B. Lockhart, Walter J. Wilson, and A. R. Budd have voluntarily constituted themselves a committee to obtain restitution for said misrepresentation, without any liability on their parts, and without binding or assuming to bind any of the other persons on the attached list, unless they shall elect to ratify this action.

"In witness whereof, we have hereunto set our hands and seals this 26th day of June, 1925."

On December 9, 1925, Henderson, who was a citizen of Pennsylvania, filed in the court below a bill in equity against the Plymouth Oil Company, a corporate citizen of Delaware, whose office and officers for the transfer of stock were in Pittsburgh, Pa., which, so far as here pertinent, set forth that Farquhar had, on or before June 26, 1925, for value, transferred and assigned said stock to Henderson; that from that time until December 9, 1925, the transfer of all stock by the said company had been enjoined in a suit against the company in Delaware; that such injunction was dissolved on December 9, 1925; that on request the company had declined to transfer; that the amount in controversy exceeded $3,000, and prayed it be ordered to transfer the 50,000 shares aforesaid and pay the dividends thereon accrued. To this bill Plymouth made answer, stating, so far as is here pertinent, that the stock and dividends were claimed by Farquhar, who had notified it not to transfer the same or pay the dividends thereon; that it was a mere stakeholder, and "stands ready to register said stock in the name of the person or persons lawfully entitled thereto"; and prayed that Farquhar be decreed to interplead.

Thereafter Farquhar prayed and was allowed to intervene, and answered, and denied "that he transferred said stock to said

Henderson for value, and avers that Henderson procured possession of the certificates above referred to by duress and fraud," and prayed that Henderson be decreed to deliver the 19 certificates to him. On these issues the parties went to a trial, in which the court held with Farquhar, and entered a decree ordering Henderson to deliver to Farquhar the 19 certificates; that the Plymouth Oil Company pay Farquhar the dividends it was withholding on the stock; that Henderson's bill be dismissed; and that he pay Farquhar and the oil company their costs. From such decree this appeal was taken.

After argument and due consideration had, this court is of opinion the court below was in error in dismissing Henderson's bill, in not awarding him the relief prayed for, in not dismissing Farquhar's bill, and in not imposing the costs of Henderson and the Plymouth Oil Company upon Farquhar. Our reasons for so holding we now state. [1] In marshaling the pleadings and parties, it will appear that the real issue in dispute was between Henderson and his cestui que trustents and Farquhar, all of whom were citizens of Pennsylvania, and, were this all, the court below would have been without jurisdiction. But the oil company, which was a citizen of Delaware, while a mere stakeholder, was a necessary party to the relief which both Henderson and Farquhar sought. If Henderson prevailed, the oil company by decree would have to transfer on its books the 19 certificates and pay the withheld dividends, and if Farquhar succeeded the oil company would be decreed, as was indeed done, to pay Farquhar the withheld dividends. Such being the case, we are of opinion the court below had jurisdiction.

[2] Turning, now, to the status of the parties under the pleadings and proofs, we have this situation. The 19 certificates are in Henderson's possession and over Farquhar's admitted signature he has assigned them, "for value received," and given an irrevocable power of attorney to transfer them on the books of the company. The acts of the parties, possession by Henderson, acknowledgment of value received, and irrevocable powers of attorney by Farquhar, vest the legal title in Henderson, and the burden rests on Farquhar to defeat such legal title. This he seeks to do on two grounds: First, that the transfer was made without consideration; and, second, that, even if made on due consideration, it was made by him under duress and threat of imprisonment.

These two grounds were by the court be