In re Noethen

LACOMBE, Circuit Judge (after stating the facts as above). It seems hardly necessary to add anything to the opinion of the District Judge. A mortgage such as this, covering supplies which are constantly shifting, some being used up in the business and other similar supplies being bought to take their place, will be sustained, if. it is apparent that all money received by' the mortgagor from the sale of old stock is used either to buy new stock, which is taken into the premises and brought under the mortgage, or else is applied in reduction of the mortgage debt. From the record, a majority of the court are not satisfied that this was the case. The wines, liquor, and merchandise, both old and new, were at all times used by the bankrupt as such stock in trade ordinarily is, and were bought and sold and dealt in from day to day in the usual course of trade; all the proceeds being retained by the bankrupt, and no part being turned over to the mortgagee. There is nothing to indicate that the mortgagee did not know the bankrupt was selling the stock of wines, cigars, and restaurant supplies. The business was a going restaurant, where such sales are made from day to day. Knowing what the business was, the mortgagee must have known they were selling stock which his mortgage covered. He knew that they made no payment or return or reports to him of such sales. The inference seems irresistible that there was no agreement that the proceeds of sales should be applied on the mortgage. If there were such an agreement, he would certainly have inquired why, during six months, no return was made to him of any sales. A majority of the court concur in affirming the order.