his own cause of action, where such particulars do not relate to any pleaded defense. Nor will the defendant be compelled to disclose facts material only to his defense. Neither plaintiff nor defendant is entitled to discovery of an inquisitorial character as to the ground of action or defense of the other. The right of discovery as to matters material to the cause of action or defense of the interrogating party will not be defeated by the fact that such matters also involve the ground of the defense or action of the interrogated party. The disclosure of ultimate facts only can be required. To the extent that discovery may be granted as to material matters of fact, it must be limited to inquiry as to the material facts, and does not extend to a disclosure of evidence or of facts which merely tend to prove the material facts. The right does not extend to the discovery of the manner in which, or the evidence by which, the case of plaintiff or defendant is to be established. Discovery of the names of witnesses by whom the adversary proposes to prove his case will not be compelled. A party cannot be compelled to discover facts of which the other party had equal knowledge, or equal means of knowledge. An interrogatory filed under the rule should embrace a single question, and should be so framed that it may be clearly seen what the interrogated party is called upon to answer.

Applying these general rules, and giving effect to certain concessions made by the parties in their briefs and arguments, the objections to interrogatories 1, 2, 3, 4, 5, 6, 7, 8, and 8b are overruled. Objections to the other interrogatories are sustained.

2. Customs duties 130-Automobile, Into which smuggled liquor was being loaded, was being used for "transportation" or "removal" of liquor.

Automobile, into which liquor, which had been illegally imported was being loaded, in attempt to defraud the government of tax thereon under customs laws, was being used for the "transportation" or "removal" of the liquor, and was therefore subject to forfeiture.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Remove Removal; Transport-Transportation.]

Proceeding by the United States against one Durant touring car, in which the holder of a lien intervened. On application to set aside default judgment. Denied.

Loomis & Kirkland, of El Paso, Tex., for the motion.

H. R. Gamble, Sp. Asst. U. S. Atty., of El Paso, Tex., opposed.

ATWELL, District Judge. At the hearing of the motion the merits of the intervener's claim were presented. If the intervener could have no property in the automobile, nor any benefit from the setting aside of the default judgment, there would be no reason to set the same aside; hence the intervention, as well as the motion, were considered together.

The facts indicate that at 3 or 4 o'clock in the morning, on the banks of the Rio Grande, at or near El Paso, Tex., where that river marks the boundary between the United States and Mexico, several United States customs officials, having had intimation that a shipment of liquors from Mexico to the United States would cross the river at or near that point and be loaded into a Durant automobile for continued transportation, watched for and detected several men taking the liquors from the bank of the river in a wheelbarrow to the automobile in question, and there loading them into the car. When the United States officers ap

ING CAR.

them and ran; some of the firing came from across the Rio Grande, in the direction from

1. Internal revenue 46-Automobile being used in transportation of liquor with intent to defraud government of tax subject to forfeiture, without regard to ownership, liens, or claims.

Automobile, seized while being used in transportation of liquor in attempt to defraud government of tax thereon, is subject to forfeiture, without regard to ownership, or liens or claims of third persons in respect thereto, notwithstanding National Prohibition Act as supplemented by Act Nov. 23, 1921 (Comp. St. Ann. Supp. 1923, § 101384 et seq.).

officers found a large quantity of liquor, part of which was in the back of the automobile, and some of which was on the running board of the automobile, and the remainder of which was piled near the automobile and in the wheelbarrow. There were tracks, running from the car to the edge of the water, made by the wheelbarrow. cases in which the liquor was contained were branded "Sinaloa," and with the name of a firm in that state in Mexico which operates

The

a large sugar plantation, the principal byproduct of which is liquor. The cases themselves were Mexican manufacture.

The intervener has a lien upon the automobile. It is a good-faith transaction, and so far as the intervener is concerned there is no fraud or connivance. Under the National Prohibition Law (Comp. St. Ann. Supp. 1923, § 101384 et seq.) the intervener's lien would be protected and respected. The government proceeds, however, in this case under the customs laws. Prior to the supplemental National Prohibition Act of November 23, 1921, and under the authority of United States v. Yuginovich, 256 U. S. 450, 41 S. Ct. 551, 65 L. Ed. 1043; and mentioned in Lewis v. U. S. (C. C. A.) 280 F. 5, it was thought that the National Prohibition Act repealed the customs laws in so far as the transportation of intoxicating liquor was concerned. Since that act, however, all of the courts, I believe, hold the view that both the customs regulations, which do not conflict with the National Prohibition Act, and that act itself, are alive and effective, and may be advantaged by government officials. United States v. Stafoff, 260 U. S. 477, 43 S. Ct. 197, 67 L. Ed. 358; United States v. One Cadillac (D. C.) 292 F. 773; United States v. One Essex Coupe (D. C.) 291 F. 479; United States v. Story (C. C. A.) 294 F. 519; Goldsmith v. United States, 254 U. S. 508, 41 S. Ct. 189, 65 L. Ed. 376; United States v. One Ford (D. C.) 1 F. (2d) 654.

[1] An automobile, therefore, therefore, seized while being used in the transportation of liquor with intent to defraud the United States of the tax thereon, is subject to forfeiture, without regard to its ownership, or liens or claims of third persons in respect thereto.

Second. The facts of the case are less satisfactory than the law, in so far as the government's side is concerned. Is an automobile into which liquors are being loaded, such liquors having been illegally imported into the United States, in fraud of the customs laws, engaged in "moving" or "transporting" such liquors? One court has held that contraband carried on the person of the driver of a car is no ground for forfeiture. United States v. One Ford (D. C.) 286 F. 204. An auto is not forfeitable, when one is arrested therein who is about to deliver a capsule of cocaine. U. S. v. One Kissel Touring Automobile (D. C.) 289 F. 121. To the same effect, with reference to liquor, U. S. v. One Buick (D. C.)

300 F. 584.

[2] I cannot share in a distinction so delicate. "Transportation" or "removal" consists in various acts. It is not altogether and alone movement. Certainly one is engaged in "transporting" or "removing" who is loading into the vehicle, and the vehicle which, though standing still at the time, receives the articles-into which the articles are actually loaded-is to that extent engaged in "transportation" or "removal." The evidence here, though largely circumstantial, leaves no reasonable ground for the finding of anything else than that the liquors in question were brought from the republic of Mexico into the United States illegally and in violation of the tariff laws and were in fact smuggled goods, and likewise were "transported" from the bank of the river to the automobile, and there loaded into the automobile for continued "transportation" and movement.

It appearing that the intervener has no right in the car seized under these circumstances and proceeded against under these statutes, the judgment by default will not be set aside.

TAYLOR v. AMERICAN NAT. BANK OF WICHITA FALLS, TEX., et al.

(District Court, N. D. Texas, Wichita Falls Division. December 3, 1924.)

No. 129.

1. Banks and banking 250(5) - Evidence held insufficient to prove fraud Inducing purchase of bank stock.

In action under Federal Reserve Act Dec. 23, 1913, § 23 (Comp. St. § 9689) and Rev. St. § 5220 (Comp. St. § 9806), to enforce shareholders' liability, by bank's officers and directors as bank's creditors, who had guaranteed bank's indebtedness to other bank, testimony held insufficient to prove fraud inducing purchase of stock.

2. Banks and banking 248(1)-Purchaser of stock subject to stockholders' liability, notwithstanding fraud Inducing purchase of stock.

Subscription of stock in national bank, obtained by false representations, is not void, but only voidable, and shareholder, who permits name to be shown on books of bank as shareholder, is subject to stockholders' liability under Federal Reserve Act Dec. 23, 1913, § 23 (Comp. St. § 9689) and Rev. St. § 5220 (Comp. St. § 9806.

3. Banks and banking 250 (3)-Stockholders in national bank, being sued for stockholders' liability, cannot bring cross-action.

In action against stockholders in national bank to enforce stockholders' liability under Federal Reserve Act Dec. 23, 1913, § 23 (Comp. St. § 9689) and Rev. St. § 5220 (Comp. St. § 9806), by a plaintiff who appears as trustee

Married woman, who held stock in national bank in her own right, under state law entitling her to so do, was liable for assessments in creditor's action, under Federal Reserve Act.

Dec. 23, 1913, § 23 (Comp. St. 9689) and Rev. St. § 5220 (Comp. St. § 9806).

7. Banks and banking 248(4) - One who was shown as shareholder on books of bank, and who voted stock, held liable in creditor's action to enforce stockholders' liability.

One in whose name stock stood on books of national bank, who participated in stock holders' meetings on several occasions, and voted stock, and who was shown on bank's books as stockholder, and who voted stock when indebtedness was contracted, held liable in creditor's action to enforce stockholders' liability, under Federal Reserve Act Dec. 23, 1913, § 23 (Comp. St. § 9689) and Rev. St. 8 5220 (Comp. St. § 9806), though a pledgee.

8. Banks and banking 248(1) — National bank's settlement with debtor, who was stockholder, did not preclude enforcement of stockholder's liability against other stock

holders.

Settlement of national bank's claim against former stockholder for substantial sum did not

preclude enforcement of stockholder's liability

against all the stockholders in creditor's action under Federal Reserve Act Dec. 23, 1913, § 23 (Comp. St. § 9689) and Rev. St. § 5220 (Comp. St. § 9806).

In Equity. Action by Mrs. Ella D. Taylor, individually and as executrix and devisee under the will of T. J. Taylor, deceased, against the American National Bank of Wichita Falls, Tex., and its shareholders. Decree for plaintiff.

Bullington, Boone & Humphrey, of Wichita Falls, Tex., for plaintiff.

C. Kyron Walsh, of Wichita Falls, Tex., for defendant Emert.

Kay, Aiken & Kenley, of Wichita Falls, Tex., for other defendants.

Smoot & Smoot, of Wichita Falls, Tex., for intervening creditor.

ATWELL, District Judge. This suit is brought under the provisions of section 23

(Comp. St. § 9689) and section 5220 of the United States Revised Statutes (Comp. St. § 9806), and is in the nature of a creditors' bill. Briefly, the bill alleges: That the American National Bank at Wichita Falls had a capital stock of $200,000. That early in the summer of 1921 it was necessary to pledge certain of its assets to the First Na

tional Bank of Wichita Falls for the realizing of sufficient cash to pay off its depositors. That before such an arrangement could be made the plaintiffs were compelled to become guarantors to the First National, which guaranty, among other things, provided that the paper that the First National was taking over for security for such advancements would be retaken by the guarantors, and cash turned over to the First National in its place, if the First National so demanded. Such contract of guaranty expressly reserved the liability of the shareholders of the American National. Shortly thereafter the American National voted to go into liquidation, it having arranged for its depositors' checks to be honored by the First National. That demand was made upon plaintiffs, guarantors, by the First National, that several hundred thousand dollars worth of the pledged paper should be taken up by plaintiffs and cash paid over in its stead, which was done. That losses much in excess of $200,000 resulted. They prayed for certain equitable relief in the way of a complete ascertainment of such losses, the value of securities, etc., and asked for judgment for a full assessment against each shareholder.

The defendants answered that the act of

the plaintiffs in making a guaranty to the First National Bank was voluntary and not arising in the due course of the business of the American National Bank; that the shareholders had made a prior payment upon an assessment levied by the Comptroller of the Currency; that the directors and active officers of the bank fraudulently induced certain shareholders to purchase stock, and for that reason such shareholders would not be liable upon their assessment in an action brought by such directors and active officers as creditors. Certain shareholders asserted cross-actions against certain officers and directors as individuals; two of the shareholders pleaded coverture; one shareholder pleaded that he was a pledgee. Likewise it was asserted that one R. M. Waggoner was at one time a director, and that the bank had settled with him. The defendants also sought to exact information concerning the condition of the liquidated bank, the value

of its assets, the amount of its liabilities, and a complete disclosure of its affairs.

A master was appointed, who worked out the details of the inside affairs of the bank, so far as its liabilities and assets and its expenditures were concerned. Upon hearing an exception was sustained to the crossactions. The parties stated in open court that they had agreed, after the completion of the master's report, that a sale of the existing assets of the bank should be made, and that the same was made, and that $50,000 in cash was realized. This eliminated any controversy over the amount of assets, or amount of liabilities, or correctness of expenditures, etc. This report and agreement show that the amount of liabilities was largely in excess of $200,000, after deducting the $50,000 received from the sale of the assets.

1. The testimony shows that in the fall of 1920 a national bank examiner discovered that the American National was insolvent, and its capital stock impaired. He went to a Mr. Kell, who resided in Wichita Falls, and who was a member of the Federal Reserve Board, and acquainted him with the situation (Mr. Kell having no knowledge of the condition of the bank, and having no connection therewith whatsoever), and solicited him to avert such a financial catastrophe as would follow the closing of the bank, which had at that time deposits greatly in excess of $1,000,000. The examiner advised Mr. Kell that it would be necessary to take certain paper out of the bank, and to resubscribe for the entire capital stock of $200,000. Mr. Kell was a substantial and a philanthropic citizen, interested in the good name of Wichita Falls, and he called into conference a score or more of other citizens, and they arranged to, and did in fact, raise $200,000 in cash and put it in the bank. This $200,000 was to be used for taking the stock of any old stockholder who did not see fit, or who was not able, to pay the assessment of 100 cents. There were many who came within this category, and as a result Mr. Kell took about $20,000 of the stock, and several other gentlemen thus became stockholders. They made no personal examination of the paper, but relied upon the information furnished by the examiner, and by a committee of expert bankers chosen from the other banks in the city, who took from the bank and charged off such paper as they thought worthless, so that when they had finished they represented that the bank was solvent, with unimpaired capital. The old active officers of the institution 2 F. (2d)-31

were displaced, and new officers took charge some of whom drew no salary. The bank continued in business from then until the summer of 1921, when it arranged with the First National to take over the payment of its depositors, as stated in the first part of this opinion. In the meantime, and during the time from the fall of 1920 to about April 10, 1921, some of the defendants had purchased stock, believing that the bank was all right, and that its new officers would make a creditable and dividend-paying institution out of it.

Considerable testimony was introduced tending to show that Wichita Falls was in the oil belt of Texas, and that its banking institutions dealt with refineries and men and concerns interested in the oil industry, and that a large part of its paper had been executed by such customers; that some time in the early winter of 1921 oil prices and properties became greatly depressed; that oil decreased from $3 or $4 per barrel to $1 per barrel; that leases which were thought to be valuable prior to that time became almost worthless, and that the general liquidation through which the country at large went also affected the bank; that the bank, which was solvent in the fall of 1920, became extended and in financial peril by June or July of 1921.

There was testimony, both pro and con, as to the worth of large amounts of paper which was found to be in the bank. There was some testimony that Officer Taylor, now deceased, the consort of the plaintiff Taylor, phoned a personal friend that the bank was all right and that that friend bought $2,000 of the stock. There was also testimony of two or three other stockholders that representations had been made to them concerning the solvency of the bank. Such officers, or directors, whom it was claimed had made such representations, are some of the plaintiffs.

The

[1] 2. Such testimony was not sufficiently impressive to fix any actual fraud. facts and testimony preclude any finding of constructive fraud. The shareholders who assert either actual or constructive fraud acquired their stock after the assessment was made by the Comptroller, and they participated in the stockholders' meetings on January 11, 1921; also in another stockholders' meeting in April, 1921, when it was voted to increase the capital stock from $200,000 to $700,000; also in a meeting on or about October 1, 1921, when liquidation was voted, and when there was the approval of the resolution of the board of direc

tors in the assignment of the assets to the First National out of which guaranty arose. Each of them, if I am not mistaken, were depositors in the institution and were able to withdraw such deposits by reason of the arrangements with the First National.

[2] Even if a subscription of stock be obtained by false representations which go to the financial condition of the bank, that would not make the contract void, but only voidable, and the shareholder becomes liable to such creditors as become such while he permits his name to be shown on the books of the institution as a shareholder. The liability of the nation's banks and bankers would rest upon a false foundation, if the stockholder were allowed to assert, upon being called to account by a creditor of his institution, that he himself became a stockholder by reason of fraud that was practiced upon him by some one associated with the institution. The following authorities throw varying shades of light upon the perils that a stockholder assumes, and conclusively show that there is very little immunity or defense: Lantry v. Wallace, 182 U. S. 549, 21 S. Ct. 878, 45 L. Ed. 1218; Ryan v. Mt. Vernon National Bank, 224 F. 429, 140 C. C. A. 123; Scott v. Latimer, 89 F. 843, 33 C. C. A. 1; Scott v. Deweese, 181 U. S. 202, 21 S. Ct. 585, 45 L. Ed. 822.

[3] A cross-action by stockholders, over against plaintiffs, who appear as trustees for creditors, is not permitted. Geneva Furniture Co. v. Karpen, 238 U. S. 254, 35 S. Ct. 788, 59 L. Ed. 1295; U. S. Bolt Co., v. Kroncke Hardware Co., 234 F. 868, 148 C. C. A. 466; Foster's Federal Practice, vol. 2, p. 1134; rule 30, Equity Practice. [4] 3. The assertion that the plaintiffs may not recover, because they were not legally bounden to make any guaranty to the First National Bank, and that therefore it was a voluntary burden, for which they may not charge defendants, I think, is ruled by the cases of Hightower v. American National Bank, 263 U. S. 351, 44 S. Ct. 123, 68 L. Ed. 334, and Wyman v. Wallace, 201 U. S. 230, 26 S. Ct. 495, 50 L. Ed. 738, against the defendants. In the first-mentioned case the Supreme Court said:

"The remaining contention is that the debt sought to be enforced was created during the process of liquidation, and therefore is not one for which the shareholders are liable. The premise is faulty. The debt arose from the contract, and represents moneys advanced in excess of what was realized from the assets. There

was power to make the contract. The pur

pose was not to obtain money to engage in new business, but simply to change from many creditors to one. Nor was the contract made in derogation of the rights of the shareholders. One of its purposes was to subserve their interests, and this was recognized when they ratified and confirmed it."

See, also, Poppleton v. Wallace, 201 U. S. 245, 26 S. Ct. 498, 50 L. Ed. 743; King v. Pomeroy, 121 F. 287, 58 C. C. A. 209. That a guarantor has the same rights as the institution was held in People's Bank v. National Bank, 101 U. S. 181, 25 L. Ed. 907; First National Bank v. Armstrong (Tex. Civ. App.) 168 S. W. 873.

[5] 4. That the Comptroller had previously levied an assessment does not absolve the shareholders from a suit at the instance of the creditors has been determined in Delano v. Butler, 118 U. S. 634, 7 S. Ct. 39, 30 L. Ed. 260; Commercial National Bank v. Weinhard, 192 U. S. 244, 24 S. Ct. 253, 48 L. Ed. 425; Studebaker v. Perry, 184 U. S. 258, 22 S. Ct. 463, 46 L. Ed. 528.

[6] 5. Coverture was pleaded by Mrs. Carrigan, and by Mrs. Fine. In each instance the husband purchased the stock and gave it to the wife. It was carried in the name of the wife upon the books of the institution. This creates a liability against her by force of the federal law, regardless of her freedom from it under common law. If a married woman is, by the laws of the state in which she resides, capable of holding stock in a national bank in her own right, she is liable for assessments rendered thereon. In the case of Keyser v. Hitz, 133 U. S. 138, 10 S. Ct. 290, 33 L. Ed. 531, it was said: "The law annexes her liability of its own force and no capacity to act on her part is required." See, also, Christopher v. Norvell, 201 U. S. 216, 26 S. Ct. 502, 50 L. Ed. 732, 5 Ann. Cas. 740.

[7] 6. Defendant Fine also defends on the ground that he was the pledgee of 30 shares. The facts show that the stock was in his name on the books, and that he participated in stockholders' meetings upon several occasions and voted the stock. Finally the stock was in his name at the time he voted for the liquidation and the making of the contracts which are the basis of this suit. This makes him liable in an action of this sort. Ohio Valley National Bank v. Hulitt, 204 U. S. 161, 27 S. Ct. 179, 51 L. Ed. 423; Rankin v. Fidelity Insurance & Trust Co., 189 U. S. 241, 23 S. Ct. 553, 47 L. Ed. 792.

[8] 7. The settlement of the liability of R. M. Waggoner for the substantial sum of