(273 F.) only that, but he actually participated in so assembling the bonds, with representation to the parties consenting to the exchange that they should be retired and canceled. The Clear Lake bonds have been practically all accounted for. Miller secured of them 247; Hartman 34; Morgan has 3, which Hartman gave to Keep to be delivered to Miller, under the understanding with Miller that, when all the bonds were gathered in, they should be canceled; and 12 others are out, supposedly in the hands of one Mills, who is making no claim here for them. This leaves 4 unaccounted for. At any rate, all should be canceled in pursuance of the continued understanding with Keep to that effect. Beyond this, Keep should be estopped to claim otherwise by his express act in undertaking to secure, as he did, the issuance by the Eastern Company of a series of $200,000 first mortgage bonds. These bonds were issued, as he agreed they should be, and he ought not now to be heard or permitted to say or do anything that would subordinate them to any prior incumbrance. Another question has been brought into the case by reason of the Wapinitia Irrigation Company's having been made a party defendant, with a view to subordinating its property and rights, whatever they are, to the lien of plaintiff's trust deed. The Wapinitia Company has interposed a counterclaim against Keep, charging him with being the instigator and real party in interest in instituting and maintaining the principal suit to foreclose, and with annoying the water users claiming rights and privileges from the Wapinitia Company, and threatening to disturb them in their enjoyment of such rights and privileges. This entails an inquiry touching the organization of the Wapinitia Company, and, incidentally, whether Keep ought to be heard to claim any interest therein. The Eastern Company acquired, not only the holdings of the Clear Lake Company, but additional holdings from Keep, and all these have been embraced in the trust deed to Bayer to secure the payment of the $200,000 bond issue, which bonds, as we have seen, became the property of Keep. The Wapinitia Company acquired its property and holdings from the Eastern Company. Keep claims that they were so acquired through a fraud upon him committed by Miller by maladministration of his office as trustee for Keep under the trust arrangement of March 26, 1913. The Eastern Company, in pursuance of a proposition made by W. B. Keen and others to purchase a portion of its properties, rights, and privileges for promoting a separate irrigation project, sold and conveyed to the Wapinitia Company such of its property as was desired. În arranging and perfecting the sale, Miller testifies, in effect, that with an open mind he disclosed to Keep everything that was going on, and consulted and collaborated with him freely at all times touching the Wapinitia project, and that whatever was done looking to the consummation thereof was done with his explicit and unrestrained consent and approval. Keep flatly controverts Miller's statements in almost every material particular, and disclaims any knowledge of the Eastern Company's negotiations with Keen for the sale of the property to the Wapinitia Company, or of the sale being made, until some time after it had been consummated. Happily, the documentary evidence contained in the record renders a satisfactory solution of this dispute, without an attempt to reconcile their conflicting statements. On July 20, 1914, Keep wrote the Secretary of the Interior a letter whereby he specifically recognized that certain rights and privileges therein noted were to be transferred to W. B. Keen, or his order. He further released to the government all such rights, and directed and authorized it to make the necessary transfer to Keen. Keep seems to dispute his signature to the letter, but I am persuaded that it is genuine. On September 30, 1914, J. C. Bayer, trustee, gave a partial release of the Eastern Company's $200,000 mortgage, releasing the lands, rights, and privileges conveyed to the Wapinitia Company from the lien of the trust deed. Before he would consent to execute the release, he exacted of the bondholders of the Eastern Company's issue a request or direction on their part that he do so. In compliance therewith, Keep and the other holders made such request and direction in writing. The one made by Keep bears date September 1, 1914, whereby he represents that he is the owner of 40 of such bonds, and further represents that he understands that a sale has been made to W. B. Keen of a portion of the water rights and privileges theretofore secured from the government and from the state of Oregon, and that in order to make a conveyance to Keen it is necessary to release the property purchased by him from the lien of the trust deed or mortgage held by Bayer. The property to be released is specifically described. The request proceeds: "Now, therefore, in consideration of one dollar and other good and valuable consideration to me in hand paid, the receipt of which is hereby acknowledged, I hereby consent, authorize, and direct you to release said property conveyed, or to be conveyed, to the said W. B. Keen by the said company from the lien of the trust deed or mortgage, so far as the bonds owned by me are concerned. [Signed] Joseph R. Keep." Other like requests were made by members of his family, of which he was apprised. These documents show beyond question that Keep, not only gave his free assent to the sale being made to Keen, and likewise to the Wapinitia Company, but actually and actively participated in it; and it is now too late, after the Wapinitia Company has become possessed of its rights and privileges, and expended large sums of money to that end, in reliance upon his acts, for Keep to attempt to oust it, or to disturb it or the water users in the enjoyment of their possession. A decree will be entered dismissing the plaintiff's complaint, and enjoining Keep from disturbing the Wapinitia Company and the water users in the full enjoyment of their property, rights, and privileges. (273 F.) UNITED STATES v. SYLVESTER. (District Court, D. Connecticut. March 8, 1921.) No. 1321. 1. Intoxicating liquors 244-Congress intended to confiscate interest of wrongdoer in transporting vehicle and to protect all innocent persons. The intent of Congress in enacting National Prohibition Act, tit. 2, § 26, providing for the forfeiture of an automobile in which liquor is illegally transported, unless good cause to the contrary is shown by the owner, and for the sale of such automobile and the payment of bona fide liens thereon, was to penalize only the wrongdoer, and to protect the interests of innocent persons in the vehicle unlawfully used. 2. Intoxicating liquors 255-Conditional seller, proving bona fide lien on transporting vehicle and ignorance of unlawful use, receives payment of lien. A conditional seller of an automobile truck used by the buyer for the unlawful transportation of liquor, who proves that he has a bona fide lien for a balance due on the purchase price and that he had no knowledge of the unlawful use of the automobile, is entitled to the payment of his lien out of the proceeds of the sale of the automobile. 3. Intoxicating liquors 252-Forfeiture of transporting vehicle not absolute, as under revenue laws. The forfeiture of a vehicle used for the unlawful transportation of intoxicating liquor under National Prohibition Act, tit. 2, § 26, is not absolute, as was the forfeiture of conveyances used in the removal of liquor on which the revenue tax was not paid, under Rev. St. § 3450 (Comp. St. § 6352). 4. Intoxicating liquors 255-Innocent owner of vehicle, who loaned it to unlawful user, can secure return. An owner of an automobile, who loaned it to another without knowledge that it was to be used for the unlawful transportation of liquor, and without information which should have aroused his suspicions, is entitled to a return of the vehicle to him after its seizure while being used in such unlawful transportation. 5. Intoxicating liquors 255-Lienor of transporting vehicle cannot secure its return. Under National Prohibition Act. tit. 2, § 26, one who has a lien on an automobile seized while being used for the transportation of intoxicating liquor is not entitled to have the vehicle returned to him, and thereby be enabled to profit by the transaction, but is limited to a repayment of the amount of his lien from the proceeds of the sale of the vehicle. 6. Intoxicating liquors 255-Sale of forfeited vehicle should be abandoned, when highest bid does not equal bona fide liens. Where only a small amount of the purchase price of a vehicle had been paid, so that the lien of the seller, who was ignorant of the unlawful use of the automobile, is substantially equal to the value of the vehicle, and the highest bid at the marshal's sale does not equal the amount of the lien, the marshal should abandon the sale and report the facts to the court. Proceeding by the United States against Anthony Sylvester for the forfeiture of a truck used in the illegal transportation of liquor. The Commercial Investment Trust filed a petition, reclaiming the truck as an assignee of the conditional seller thereof. Order entered for sale of the truck. For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes George H. Cohen, Sp. Asst. U. S. Atty., of Hartford, Conn. William A. Wright, of New Haven, Conn., for reclaiming petitioner. THOMAS, District Judge. On July 26, 1920, the defendant and his brother bought a motor truck from the Diamond T Motor Truck Company, of New York City, on a conditional bill of sale for an agreed price of $3,300, and paid $1,100 the day the truck was delivered. On July 27, 1920, the Commercial Investment Trust, the petitioner in these proceedings, purchased for value, without notice, and before maturity, from the conditional vendor, the note and the conditional sale contract to secure the note. Subsequently two installment notes, of $183.33 each, were paid, so that there is now due on said contract the sum of $1,833.34. Both the conditional sale contract and the assignment of it were properly executed, acknowledged, and recorded. The defendant was subsequently arrested and duly convicted of transporting intoxicating liquor in violation of the National Prohibition Act (41 Stat. 305), and paid his fine. Thereupon the government filed a petition asking that the motor truck used for the transportation of the intoxicating liquors, which is the same truck mentioned in the conditional bill of sale, and which was seized and is now in the possession of the enforcement officers, be ordered sold at public auction in accordance with the provisions of section 26 of title 2 of the National Prohibition Act. In due season, and in accordance with the provisions of the act, the Commercial Investment Trust intervened, by filing a reclaimer petition, asking for an order directing the delivery of the truck to the petitioner, on the ground that the title to the truck remained and was at all times vested in the petitioner under the terms of the conditional bill of sale by which the truck was sold, and that the illegal transportation of the intoxicating liquor by the defendant was without the knowledge or consent of the conditional vendor or his assignee. The answer of the government admits (1) the proper execution of the conditional bill of sale and its proper assignment to the petitioner; (2) that the illegal transportation of liquor by the defendant was without the knowledge or permission of either the original vendor or the petitioner. But, even in view of the conceded facts, the government. contends that the petition must be denied, and the truck sold in accordance with the provisions of section 26 of the act. So that the question here presented is this: Is a motor vehicle, bought on a conditional bill of sale and seized in the illegal transportation of intoxicating liquor in violation of the National Prohibition Act, subject to forfeiture and sale, where the same has been used for such illegal transportation by the vendee without the knowledge or permission of the vendor or his assignee? [1] The answer to the question lies in the interpretation and construction to be given section 26, title 2, of the act, which, so far as it is here pertinent, provides: "Whenever intoxicating liquors transported seized by an officer he shall take possession of the * and shall arrest any person in charge thereof. illegally shall be automobile, The court (273 F.) upon conviction of the person so arrested shall order the liquor destroyed, and unless good cause to the contrary is shown by the owner, shall order a sale by public auction of the property seized, and the officer making the sale, after deducting the expenses of keeping the property, the fee for the seizure, and the cost of the sale, shall pay all liens, according to their priorities, which are established, by intervention or otherwise, at said hearing or in other proceedings brought for said purpose, as being bona fide and as having been created without the lienor having any notice that the carrying vehicle was being used or was to be used for illegal transportation of liquor,” -and shall pay the balance of the proceeds into the treasury of the United States as miscellaneous receipts. Thus it is apparent that this section makes it unlawful for any one to transport intoxicating liquor in and by means of any vehicle, and in addition declares that the vehicle thus used shall be forfeited. But it is apparent that the Congress intended to penalize only the wrongdoer. This is accomplished in two ways-first, by imposing a penalty for the offense of transporting intoxicating liquor; and, second, by confiscating his interest in the vehicle. The question, therefore, is to determine how to bring into practical operation the provisions of section 26, to the end that the wrongdoer may be properly punished, while the innocent parties may be protected against loss, as far as possible. When a defendant is arrested for transporting intoxicating liquor, and the vehicle is seized, what is to be done with it depends upon what interest the defendant has in it. If he had no interest-that is, if he had stolen it, or had borrowed it from its real owner, who neither knew nor could be presumed to have knowledge of the illegal purpose for which it was to be used-manifestly the wrongdoer had no interest to forfeit, and it logically follows, under the provisions of the act, that the vehicle should be returned to its rightful owner, by order of court. If, on the other hand, the wrongdoer had an interest in the vehicle, his interest should be confiscated and the vehicle ordered sold. What, then, is to become of the interest of the conditional vendor or the interest of the mortgagee? Are such persons to lose their interest in the vehicle or the value of their property right? The answer is a negative one, and is found in the provisions of section 26, which guard against such loss, as far as possible. [2] From its phraseology it is apparent that just such cases were in mind when the law was framed, and that the Congress realized that vehicles would be used for the illegal transportation of intoxicating liquor by persons who would purchase the same on conditional bills of sale, and that such vehicles would be used for such unlawful purpose without the knowledge or consent of the conditional vendor or his assignee. In order, therefore, to protect a person retaining title under a valid conditional bill of sale, or one who holds a valid chattel mortgage, such person must satisfy the court that he holds a bona fide lien and lacked the knowledge or information of the illegal purpose for which the vehicle was used or was to be used. Having done this, he is entitled to receive from the proceeds of the sale the amount of the lien, established by intervention or otherwise, after the costs as provided by law, are paid. Section 26 of the act seems so clear that there can |