In Error to the District Court of the United States for the District of Nevada.

' Petition in involuntary bankruptcy on the part of certain creditors of the Exploration Mercantile Company, a corporation organized under the laws of and doing business in the state of Nevada, to have said . corporation adjudged a bankrupt on the grounds that more than four months prior to the filing of the petition in bankruptcy the corporation had been insolvent, and during that time had committed an act of bankruptcy in applying to the district court of the state of Nevada for a receiver of its property. From an adjudication as a bankrupt, it brings error.

The opinion of Farrington, District Judge, in the court below, is as follows:

A jury having found that the Exploration Mercantile Company committed an act of bankruptcy by applying for a receiver while it was insolvent, a motion is now made in arrest of adjudication because of the alleged insufficiency of the creditors’ petition. It is averred in the amended petition that “at ■the date of filing the original petition herein, to wit, September 12, 1908, for more than four months continuously next prior thereto and ever since said time, the aggregate of said Exploration Mercantile Company’s property, at a fair valuation, amounted to less than the sum of $00,000, and that at all the said times its debts were in excess of $74,000.” This is a sufficient allegation that the Exploration Mercantile Company was insolvent August G, 1908, when an application was made to the state court for appointment of a receiver for the property of the company. It is next alleged that the entire capital stock of the company consists of 50,000 shares of the par value of $1 each, of which W. C. Stone owns 48,000 shares, F. G. Hobbs, 1,000 shares, and C. E. Wylie, 1,000 shares; that these three persons not only owned all the capital stock, but they constitute thex entire board of directors of said corporation, Stone being its president, Wylie its. vice president, and Hobbs its secretary and ■treasurer: that these three persons conspired and agreed to evade the provisions of the bankrupt act (Act July 1. 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 341SJ) and to prevent creditors from obtaining a knowledge of the company’s affairs, and from participating in the choice of a trustee; to hinder, delay, and defraud the creditors of the company, and to force them to accept less than the full amount of their claims; "that in pursuance of said conspiracy and agreement said directors and officers, acting for and on behalf, and as the act and deed, of said corporation, which was then and there insolvent as aforesaid, on the 6th day of August, A. D. 1908, caused to be filed in the district court of the First judicial district of the state of Nevada, in and for the county of Esmeralda, an application xiraying for the appointment of a receiver with a view to the dissolution of said corporation.” The petition so caused to he filed was presented by the said W. C. Stone. It was averred therein that the assets of the company amounted to $95,000, while its liabilities were but $05,000; that owing to depressed conditions in business and the difficulty of making collections, the assets of the company were in danger of being wasted through attachment or litigation; that the plaintiff Stone is the holder of more than one-tenth of the capital stock of the corporation, and “that said corporation should be dissolved, and that a receiver should be appointed to take, charge of the business and affairs of said corporation, that its property may he preserved, its creditors paid, and its assets cared for.” The prayer, in substance, was that a receiver he appointed to manage the affairs of the company with a view to its dissolution. The creditors’ petition also alleges that on the same day. August 6, 1908, the above-mentioned petition was filed, summons was issued, on which said Wylie in pursuance of said conspiracy, and as the act of said corporation, indorsed an admission of service; that on ihe same day the said directors and officers, as the act of said corporation,, caused to he filed in said court and cause an appearance and application for the appointment of a receiver of the properly of said company. Said appearance reads in part as follows: “W. O. Stone, Plaintiff, vs. Exploration Mercantile Company, a corporation, Defendant. Now comes O. E. Wylie, manager and one of 1he directors of the above-named defendant, and enters the appearance of the said defendant in (he above-entitled canse, and asks the above-entitled court to appoint as receiver of said defendant, G. E. Wylie, the undersigned, one of the directors of said corporation. G. E. Wylie, Manager and Director of the Exploration Mercantile Company.”

It is further alleged in the creditors’ petition that on the same day “the directors and officers of said Exploration Mercantile Company, a corporal ion, acting for and on behalf, and as the act and. deed, of said corporation, which was then and there insolvent- as aforesaid, moved the said state court upon the said pleadings as above set forth, for an order, and said state court, on said day made its order, appointing said C. E. Wylie receiver,” etc. On the following day said Wylie entered upon the duties of his office as such receivin'; (hat on September 8, 1908, and at other times, said Stone in pursuance of said conspiracy, and as the act of said corporation, sought to settle claims against it for 00 cents on the dollar; that ever since August 6, 1.908, said directors and officers have refused and still refuse petitioners access io the hooks of the company, and at all times have refused to permit petitioners’ representatives to take or assist in taking an inventory of the property of the Corporation. Near the end of the creditors’ petition is this statement: “Ever since said 6th day of August, A. D. 1908, said Exploration Mercantile Company, a corporation, and each and all of said directors and officers have acquiesced in, upheld, ratified and confirmed the said proceedings and application for, and appointment of, said receiver as aforesaid; and said Frank G. Hobbs has ratified and confirmed the same and has since been continuously in the employ of said receiver.” The petition concludes with a prayer that the Exploration Mercantile Company be adjudged bankrupt.

This petition having been filed, within due time thereafter the alleged bankrupt filed its answer, demanding a trial by jury. By consent of both parties the following issues in the form here set out were submitted to the jury: “Whether on the Oth day of August, 1908, the date of the appointment of C. E. Wylie as receiver of the Exploration Mercantile Company by the district court of the First judicial district: of the state of Nevada in the case of W. C. Stone v. Exploration Mercantile Company, the aggregate of the property of the said Exploration Mercantile Company was, at a fair valuation, sufficient in amount to pay its debts. Whether on the 12th day of September, 1908,• the date of the filing of the petition in bankruptcy in these proceedings, the aggregate of the property of said Exploration Mercantile Company was. at a fair valuation, sufficient in amount to pay its debts. Whether on the 0th day of August, A. D. 1908. 1he Exploration Mercantile Company, being insolvent, np: plied for a receiver for its property.” The jury, after having heard the evidence and listened to the instructions of the court, returned a negative answer to the first and second interrogatories, and an affirmative answer to the third.

Among the grounds urged in arrest of judgment and of the order of adjudica lion. there is no intimation that the verdict is not sustained by the evidence, The several grounds may be resolved.into one comprehensive objection: The creditors’ petition failed to show that defendant was guilty of an act of bankruptcy in this, that it fails to show that defendant applied for a receiver for its property. It is contended that the petition not only fails to show that the corporation applied for a receiver, but under the Nevada stainte it was and is impossible for any Nevada corporation to make such an application.

Section 7 of the General Incorporation T.aw of Nevada (St. .190.'!, p. 121) pro: vides that every corporation created under the provisions of this act shall have power “to wind up and dissolve itself, or to be wound up and dissolved in the manner hereinafter mentioned.” The power granted is the power “to wind up and dissolve itself or to be wound up and dissolved in the manner hereinafter mentioned.” It is the winding up and dissolution of the corporation which is provided for. There is no attempt to circumscribe or limit the power to ask the appointment of a receiver. Receivers are frequently asked and appointed for corporations when there is no thought of dissolution.

Section' 89 of the act provides a method of dissolution by voluntary action of the stockholders, officers and creditors.

Section 94, under which the proceedings in this case were had, provides for winding up a corporation by the court, and reads as follows:

‘‘¡Receiverships and Dissolution by the Court.

“Sec. 94. Whenever a corporation has in ten successive years failed to pay dividends amounting in all to five per cent, of its entire outstanding capital, or has willfully violated its charter, or its trustees or directors have been guilty of fraud or collusion or gross mismanagement in the conduct or control of its affairs, or its assets are in danger of waste through attachment, litigation, or otherwise, or said corporation has abandoned its business and has not proceeded diligently to wind up its affairs, or to distribute its assets in a reasonable time, or has become insolvent and is not about to resume its business with safety to the public, any holder or holders of one-tenth of the capital stock may apply to the district court, held in the district where the corporation has its principal place of business, for an order dissolving the corporation and appointing a receiver to wind up its affairs, and may by injunction restrain the corporation from exercising any of its powers or doing any business whatsoever, except by and through a receiver appointed by the court. Such court may, if good cause exist therefor, appoint one or more receivers for such purpose, but in all cases directors or trustees who have been guilty of no negligence nor active breach of duty shall have the right td be preferred in making such appointment, and such court may at any time for sufficient cause make a decree dissolving said corporation and terminating its existence.”

Subsequent sections provide for notice to creditors, in'esentation of claims to the receiver within a limited time, the barring of claims not so presented, the sale of property, and the distribution of assets. Although the act does not provide for the discharge of the debtor, and is not so entitled, it is essentially an insolvency act. The winding up of the corporation discharges its debts. “An insolvent law is a law for the relief of creditors by an equal distribution among them of the assets of the debtor, but does not necessarily involve the discharge of the debtor.” Harbaugh, Assignee, v. Costello, 184 Ill. 110, 56 N. E. 363, 75 Am. St. Rep. 147; In re Merchants’ Ins. Co., 17 Fed. Cas. No. 9,441; Moody v. Development Co., 102 Me. 865, 66 Atl. 967; In re Salmon & Salmon (D. C.) 143 Fed. 395. “In so far as the person and the subject-matter falls within the jurisdiction of the bankrupt act and is within the jurisdiction of the bankrupt court, the state insolvency law is superseded and cannot be invoked.” Littlefield v. Gay, 96 Me. 423, 52 Atl. 925; Westcott & Co. v. Berry, 69 N. H. 505, 45 Atl. 352; In re Curtis (D. C.) 91 Fed. 737. In the absence of statutory authority courts of equity have no power to wind up the affairs of a corporation. Beach on Receivers, § 80. But when from any cause the property of a corporation is in imminent danger of waste or destruction and a receivership is necessary and there is no other adequate relief, a court of equity has inherent power to appoint a receiver to take charge of the corporate assets and .affairs; but this power is to preserve and not to dissolve a corporation, and as soon as the necessity for such supervision ceases, the court must lift its hands and retire. Beach on Receivers, § 421, The doctrine that a receiver cannot be appointed for corporate property on application of the corporation itself ax>plies quite as strongly to persons as to corjoorations. 17 Ency. PI. & Pr. p. 687.

If the rulé not only forbids the appointment, but also renders it impossible for a debtor to apply for the appointment of a receiver over his own properts^, why did Congress declare it an act of bankruptcy for a person being insolvent to apply for a receiver? It is unreasonable to suppose that Congress would prescribe an act which no one can commit. There is a difference between asking and receiving; between the application for and the granting of a receivership. A corporation through its officers may apply for relief'which a court may properly and justly refuse, or which it has no power to grant. When a person who is actually insolvent applies for a receiver for his property, the act of bankruptcy is committed, and this is so irrespective of any action which may be had in the court to which' the application is made. The application is in itself an admission that the debtor’s affairs require supervision.

The fact that certain powers are conferred by statute upon corporations does not mean that a corporation is unable to perform any act beyond the scope of such enumerated powers. The statute restricts the authority of the corporation, and fixes the limits beyond which its acts are unlawful and in excess of the powers conferred. If it were otherwise a corporation could not be guilty of an ultra vires act, a tort, or a misdemeanor. Corporations commit wrongful, unlawful and even criminal acts, and they are held responsible therefor even though the act is not the formal act of the corporation. United States v. MacAndrews & Forbes Co. (C. C.) 149 Fed. 823, 835; Clark on Corp. § 63. “There may be actual corporate conduct,” says the court in People v. North River Sugar-Refining Co., 121 N. Y. 582, 619, 24 N. E. 838 (9 L. R. A. 33, 18 Am. St. Rep. 843) “which is not formal corporate action; and where that conduct is directed or produced by the whole body, both of officers and stockholders, by every living instrumentality which can possess- and wield the corporate franchise, that conduct is of a corporate character, and, if illegal and injurious, may deserve and receive the penalty of dissolution.”

A corporation is an association of natural persons united as one body, and endowed by law with the capacity to act in many respects as an individual, as a separate and distinct entity, but a corporation can only act or think or purpose through its officers, directors or stockholders. It is inconceivable that a corporation should form or carry into effect any design which is contrary to the wishes of its directors, officers, and stockholders; it exists t-o carry out their purposes and their plans. The conception that a corporation is a legal entity existing separate, -apart and distinct from the natural persons who' compose it is a fiction which has been introduced for .convenience in making contracts, acquiring property, suing and being sued, and to secure limited liability on the part -of stockholders. “It is a certain rule,” says Lord Mansfield, O. ,T., “that a fiction of law shall never be contradicted so as to defeat the end for which it was invented, but for every other purpose it may be contradicted.” Johnson v. Smith, 2 Burr. 962; Wood v. Ferguson, 7 Ohio St. 288; Clark on Corp. p. 9. The fiction of a corporate entity was never invented to promote injustice or defraud, and when it is used for such a purpose it should be disregarded, and the actual fact should be ascertained. In re Rieger, Kapner & Altman (D. C.) 157 Fed. 609. 613; Bank v. Trebein, 59 Ohio St. 316, 52 N. E. 834; State v. Standard Oil Co., 49 Ohio St. 137, 30 N. E. 279, 15 L. R. A. 145, 153, 34 Am. St. Rep. 541; People v. N. R. S. R. Co., 121 N. Y. 582, 613, 24 N. E. 834, 9 L. R. A. 33, 18 Am. St. Rep. 843; United States v. Milwaukee, etc., Co. (C. C.) 142 Fed. 247, 252; Holbrook, Cabot & Rollins Corp. v. Perkins, 147 Fed. 166, 169. 77 C. C. A. 462; Cawthra v. Stewart, 59 Misc. Rep. 38, 109 N. Y, Supp. 770; U. S. & Mexican Trust Co. v. Delaware, etc., Co. (Tex. Civ. App.) 112 S. W. 447, 460; Southern E. S. Co. v. State, 91 Miss. 195. 44 South. 785, 790, 124 Am. St. Rep. 638 ; 7 Am. & Eng. Ency. L. 633, 634; 1 Cook on Corp. (5th Ed.) p. 27. “For certain purposes the law will recognize the corporation as an entity distinct from the individual stockholders; but that fiction is only resorted to for the purpose of working out the lawful objects of the corporation. It is never resorted to when it would work an injury to any one, or allow the corporation to perpetrate a fraud upon anybody.” Sportsman Shot Co. v. American S. & L. Co., 30 Wkly. Law Bul. 87.

In United States v. Milwaukee Refrigerator Transit Co. et al. (C. C.) 142 Fed. 247, 255, it was charged that the transit company was a dummy corporation organized, owned and operated by the stockholders of the brewing company as a device to cover the receipt of rebates on interstate shipments of beer. After an exhaustive examination of the authorities, the court stated the principle thus: “If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal entity as. a general rule, and until sufficient reason to the contrary appears; but, when the motion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.”

In Re Rieger et al. (D. C.) 157 Fed. 609, a proceeding in bankruptcy, the. bankrupts were copartners; in the course of their business they had bought 99 per cent, of the outstanding stock of a corporation, the remaining shares, being held by relatives of one of the copartners. Receivers having been-appointed for the partnership assets, an application was made to extend the receivership to the property of the corporation. It was charged that the bankrupts having abandoned the partnership business, were still in control of the business and property of tbo corporation, and if permitted to remain in control they would remove and dispose of it. The court held that all the property of the corporation belonged to the copartners, and entirely ignored the fact that the property belonged to a corporation. The court said: “The fiction of legal corporate entity cannot be so applied by the partners as to work a fraud on a part of their creditors, or hinder and delay them in the collection of their claims, and thus defeat the provisions of the bankruptcy act. The doctrine of corporate entity is not so'sac-red that a court of equity, looking through forms to the substance of things, may not in a proper case ignore it to preserve the rights of innocent parties or to circumvent fraud.”

In Bank v. Trebein Co., 59 Ohio St. 316, 326, 52 N. E. 834, a failing debtor-formed a corporation composed of himself and certain members of his family, to which he transferred all his property in exchange for stock of which he received substantially all. He immediately placed all his stock, except one share, with certain of his creditors as security for their claims, and then as president and- general manager of the corporation, retained the control and management of the property and business which he had before the corporation was formed. The court declared the corporation, in substance, another Trebein. saying: “The fiction by which an ideal legal entity is attributed to a duly

formed incorporated company, existing separate and apart from the individuals composing it is of such general utility and application, as frequently to induce the belief that it must be universal, and he, in all c-ases adhered to, although the greatest frauds may thereby be perpetrated under the fiction as a-shield. But modern eases, sustained by the best text-writers, confine the fiction to the purposes for which it was adopted — convenience in the transaction of business and in suing and being sued in its corporate name, and the continuance of its rights and liabilities, unaffected by changes in its corporate members-; -and have repudiated it in all eases where it has been insisted on as a protection to fraud or any other illegal transaction.”

In Cawthra v. Stewart, 59 Misc. Rep. 38, .109 N. X. Supp. 770, Stewart owned 98 shares of the capital stock of a corporation known as E. O. Stewart & Co., ■and controlled the other two shares. Cawthra, induced by false representations made by Stewart, who was then a director of the company and its president, invested $3,000 in the corporate business and received half the stock. Suit was brought against Stewart and the company to rescind the stock contract and recover the amount paid. The corporation demurred that it was a distinct, definite entity, and not liable for any acts of Stewart which it had not authorized. The court said: “Strictly speaking, such terms as ‘authority’ and ‘ratification’ and others which imply separate personalties are inappropriate. We do not have a case of agency, but of -identity. It cannot properly be said that the corporation could clothe Stewart with authority any more than that Stewart could clothe himself with authority. He was the corporation, and it was only another form of him. Whatever he did with respect to the matters lie was handling under the guise of a corporation was the act of The corporation.”

In the case of State v. Standard Oil Co., 49 Ohio St. 137, 30 N. E. 279. 15 L. R. A. 145, 34 Am. St. Rep. 541, it -appears that the stockholders in various corporations and a number of copartnerships interested in the oil business agreed to transfer their interests in their several properties, and all their corporate stock, to certain trustees; they were to receive in lieu thereof trust certificates equal in par value to the stock which they surrendered. There was no act on the part of the corporation, no formal act, it was simply the act of the stockholders of these various corporations, and of course that meant all the officers and the directors. It was held that this action of the stockholders was, under the circumstances, to be regarded as the act of the corporation. The following extract is from the opinion: “Applying, then, the principle that a corporation is simply an association of natural persons, united in one body under a -special denomination, and vested by the policy of the law with the capacity of acting in several respects as an individual, and disregarding the mere Action of a separate legal entity, since to regard it in an inquiry like the one before us would he subversive of the purpose for which it was invented, is there, upon an analysis of the agreement, room for doubt Unit the act of all thé stockholders. officers -and directors of the company in signing it should he imputed to them as an act done in their capacity as a corporation? We think not, since thereby all the property and business of the company is, and was intended to be. virtually transferred to the Standard Oil Trust, and is controlled through its trustees, as effectually as if a formal transfer had been made by the directors of the com]muy. On a question of this kind, the fact must constantly be kept in view that the metaphysical entity has no thought or will of its own ; that every act ascribed to it emanates from and is the act of the individuals personated by it; and that it can no more do an act. or refrain from doing it, contrary to the will of these natural persons, than a house could be said to act independently of the will of its owner; and, where an act is ascribed to it. it must bo understood to be the act of the persons associated as a corporation, and, whether done in their capacity as corporators or as individuáis must: be determined by the nature and tendency of the act. It therefore follows, as we think, from the discussion we have given the subject, that whore all, or a majority, of the stockholders comprising a corporation do an act, which is designed to affect the property and business of the company, and which, through the control their numbers give them over the selection and conduct of the corporate agencies, does affect: the property and business of the company, in the same manner as if it had been a formal resolution of its board of directors, and the act. so done is ultra vires of the corporation and against public policy, and was done by them in their individual capacity for the purpose of concealing tlieir real purpose and object, the act should be regarded as the act of the corporation: and. to prevent the abuse -of corporate power, may he challenged as such by the state in a proceeding in quo warranto.”

While the motion now under consideration rests upon the alleged insufficiency of the creditors’ pciition, It may not. he amiss to consider how completely certain allegations of the petition are supported and illustrated by 1he evidence. The creditors were refused access to tlio books. Even after' proceedings in the state court were commenced the hooks were withheld and the creditors informed if they wished to see the accounts they must procure an order from that court. Mr. Ruhl was directed by the state court: to expert the books, but even he, armed with this authority, was not permitted, to examine all of them: the accounts of Mr. Stone were withheld, and bnt a semblance of full exhibition was had. An ordei; to produce books and jiapers was required in this court in addition to the subpom-a duces tecum. A number of leaves were tom from the journal by Mr. Stone, and either lost or destroyed. Mr. Stone gives as an excuse for such mutilation of the journal that the agent of Bradstreet insisted on seeing the hooks. In the merchandise account only those purchases of merchandise were recorded for which cash payments had been made. Credit: purchases of merchandise were not shown by that account, and could be ascertained only by examination of the various statements which accompanied each purchase. Obviously books kept in such a manner do not show liabilities; they conceal the real conditions.

An auto account, an account with Mr. Pryor, and a. very active slock and commission account show frequent and considerable investments of Exploration Mercantile Company money. These, the bookkeeper, Mr. Hobbs, stated were really accounts of j\Ir. Stone. The transfers into Mr. Stone’s personal account were shown, if at all. on the destroyed journal leaves. The detached ledger leaves showing Mr. Stone’s personal account were withheld from examination until an order for production of books and papers was made in this court during the progress of the trial. An entry made December 111, 1907, credits Mr. Stone with wages. $36,000, and rent $12,000; total $48.000. In reference to these matters Mr. Hobbs testifies ds follows:

“(By Mr. Garney.) Q. I will ask you to examine petitioners’ Exhibit No. 9, being the journal, on page 31, under the head of ‘Profit and Boss,’ and ‘Bent.’ What was the amount of rent for that store building during the year 1906? A. $3,600. Q. That is at the rate of $300 per month? A. Yes, sir. Q. That entry was made by yourself? A. It was. Q. As the treasurer of the corporation? A. Yes, sir. Q. I will ask you to examine this sheet known as ‘Account Walter C. Stone,’ on December 31, 1907 (hands to witness), for $12,000; when was that $12,000 placed thereon, the figures? A. When was it placed there? Q. Yes. A. On December 31,1907. Q. 1907? A. Yes. Q. I will ask you to examine an item known as ‘Sundries’ on December 31, 1907, iboing an amount of $55,-801.50. A. Yes, sir. Q. What does that include? A. I could not tell unless I had the journal page for that, journal 50, or I could get it from the ledger with time, it will take a little time to figure these things. Q. This is the journal, is it not? (Hands book to witness.) A. Yes, sir; that page is missing. Q. That has reference to, the page that is missing, has it? A. Yes, sir. Q. And those pages that are missing included these items of account? A. The journal entries. Q. Have you any idea what that fifty-five thousand odd dollars is for? A. I have an idea, but I could not give it to you unless I could look over the ledger records, I could get it from that. Q. I will dsk you to look at the item of December 31st, ‘Wages to date, $36,000.’ A. Yes, sir.' Q. When was that entry made?. A. December 31, 1907. Q. $36,000? A. Yes, sir. Q. I wish you would examine that paper and see if that was not $12,000? A. It has been changed, or the journal record was changed at that particular time, at that same time. Q. It had been changed at that time? A. Yes, it was changed at that time. Q. There has been considerable diligence on your part, on Mr. Stone’s part, and on Mr. Wylie’s part since the filing of this petition in bankruptcy to show by the books that this institution was solvent on the 6th day of August, 1908, has there not? A. Yes, sir. Q. I will ask you to look at the footings of $87,439.89, and ask you whether or not those footings have not been changed? A. The book records were changed at that particular time. Q. They were changed from $12,000 to $36,000? A. I don’t know what the changes were; I would not state what the change was, but I remember of making that change myself; I made it. The Court: When did you say that change was made? A. At the time of entry. Q. (Mr. Carney.) When wa¡3 the entry made? A. December 31, 1907. Q. Do you know what wages Mr. Stone received? A. The wages, no, unless I could figure it up. Q. What was his salary as the president of the corporation? A. I could not tell unless I figured it up from the ledger. Q. You have no recollection as to what Mr. Stone drew as an officer of that corporation for a salary? A. It went in as a lump sum, I believe, at that particular time. Q. As a matter of fact, Mr. Stone never received more than $300 per month, did he, during 1906, as wages? A. I don’t remember, I could not tell. Q. Did you ever have any meeting as to what wages Mr. Stone should receive as an officer of this corporation? A. Yes, sir. Q. ÁVhen was that meeting? A. At the time this entry was made, I think, some time around there! Q. Are there any records of it in the minute book of the Exploration Mercantile Company? .A. I think so. Q. Will you kindly produce them. A. I am not absolutely certain, I think there was. Q. I hand you the minute book of the corporation (hands to witness), do you find any memorandum there? A. It says, ‘Meeting of the board of directors of the Exploration Mercantile Company. This meeting of the board of directors held on the 2d day of January, 1908, in the office of the company, present W. C. Stone, Frank G. Hobbs, C. E. Wylie. At this meeting the board examined the books of the corporation kept by its secretary, Frank G. Hobbs, and the balances struck by him, and on motion it was resolved that the said accounts are correct, and the balances are true, -and that the same be and are hereby adopted and affirmed.’ Q. Those are minutes placed there by typewriting? A. Yes, sir; these are typewritten minutes. Q. Where were they xu-epared? A. I don’t know.”

The reasons why Messrs. Stone, Wylie, and Hobbs objected to an examination of the books are obvious. There is some testimony to the effect- that Mr. Hobbs .and Mr. Wylie objected to the petition presented by Mr. Stone in the state court, but in the light of their cpnduet I am satisfied their objections were not serious. The refusal to permit examination of the books, and the adoption and use of a method of bookkeeping which tended to conceal Hie., real condition of the business, were calculated to hinder and delay creditors. In this Messrs. Stone, Wylie, and Hobbs participated. The conduct of each of them indicates that he knew there was something to be concealed from the creditors, and also that he knew the concern was insolvent. They seem to have agreed upon Mr. Stone's salary after the services had been rendered. The term of service could not have exceeded two years, for which they fixed a salary of $18.000 per year. During a portion of these two years Mr. Stone was traveling in Europe and China. Is it reasonable to suppose that a concern having a total capital stock of $00,000, paying its president a salary of $18.000 per year and a rent of $12,000 per year, can be operated at a profit? The evidence is very conclusive that each of the three men knew the business was running behind, and wished to conceal that fact. When the creditors were «bout to commence attachment suits, Mr. Stone, who had received the $48,000 credit, who had mutilated the journal, who had withheld his own account from examination, who was then the aental owner of fit! per cent, of the stock of the concern, filed in the state, court; a petition asking that court to wind up the corporation, and place its property in the hands of a receiver because litigation was threatened and the assets were likely to be wasled. Mr. Wylie, general manager of the corporation, immediately appeared in court and filed an admission of service Cor the corporation, and a request that he himself be appointed receiver. This proceeding in the state court, was certainly in harmony with the previous and subsequent, conduct of the three men; it was but a part of a scheme to hinder and delay and therefore to defraud the creditors of the Exploration Mercantile 'Company, and the scheme was participated in, and consistently pushed and carried out by all the officers of the corporation, by its president, secretary and treasurer, general manager, and directors, and by all its stockholders.

It is alleged, and the testimony shows, that all the directors, officers, and stockholders of the Exploration Mercantile Company, as the act and deed of the corporation, caused the Stone petition to be filed and a receiver to be asked for, and later that they, in behalf of said corporation, as its act and deed, moved the court for an order appointing Wylie receiver. It is also averred that the corporation ratified the act. It is also alleged, and amply proven by the tesiimony, that tins was all done to hinder, delay, and defraud its creditors ; and it is clear from the testimony that these, persons. Stone, Wylie, and Ilobbs. knew the corporation was insolvent at the time the receiver was applied for. t’ndor the shelter of a receivership, which tied the hands of the creditors, they proposed themselves to control its business and conceal its actual condition. Inasmuch as all the stockholders, all the officers and all the directors of this corporation, without exception, are using the distinction between themselves and the corporate entity for the purpose of hindering, delaying and defrauding creditors, that distinction should be disregarded, and the act of applying for a receiver should be imputed to the corporation itself.

The motion in arrest of judgment is denied, and the usual adjudication of bankruptcy will be entered..