COCHRAN, District Judge.
These causes are before me on exceptions filed by the Home Bond Company to the report of Referee Lindsey, as special master herein. The matter with which the report has to do is the relation of that company to certain accounts in favor of the bankrupts, some of which have been collected by the trustee herein, and some by the company. The latter claims to have been the owner of the accounts when collected under written contracts of purchase. This claim the trustee contests. Its position is that the company merely had a lien thereon for certain loans made by it to the bankrupts and legal interest thereon from the dates of the respective loans. The special master has upheld this position, and stated the accounts between the bankrupts and the company on this basis. It is of this action that the company complains by its exceptions.
The contract between the bankrupt, the New England Chair Company, and the company, is in words and figures as follows:
“This agreement, made this 6th day' of March, 1911, at Indianapolis, Indiana, by and between New England Chair Company, hereinafter called first party, and the Home Bond Company, hereinafter called second parly, wit-nesseth: That for one dollar ($1.00) and other good and valuable considerations, each to the other paid, receipt whereof is hereby acknowledged, the parties hereto have agreed and do hereby agree as follows:
“First. That said second party shall buy from said first party all acceptable accounts tendered to it by said first party and pay therefor the face value thereof less the following discounts: One per cent, on accounts that are paid within fifteen days. Two per cent, on accounts that are paid within thirty-days. Three per cent, on accounts that are paid within sixty days. Four [316]*316per cent, on accounts that are paid within ninety days. Five per cent. on. accounts that are paid within one hundred and twenty days. Six per cent, on accounts that are paid within one hundred and fifty days. Seven per cent, on accounts that are paid within one hundred and eighty days — subject, however, to the terms of this and any subsequent written agreement executed by the parties hereto.
“Second. That the said party shall pay: Seventy-eight per cent, on thirty day accounts. Seventy-seven per cent, on sixty day accounts. Seventy-six per cent, on ninety day accounts. Seventy-five per cent, on one hundred and twenty day accounts. Seventy-four per cent, on one hundred and fifty day accounts. Seventy-three per cent, on one hundred and eighty day accounts— upon delivery to and acceptance of such accounts duly assigned to the party of the second part, and the remainder, less discount and deductions taken by the debtor, shall be paid immediately after the collection of the account by the second party: Provided, however, no payment of the remainder shall be made while any of said accounts are in default.
“Third. The first party shall properly assign and deliver to said second party all accounts purchased, including the right of stoppage in transitu, either in the name of the party of the first part or in the name of the party of the second part (provided, however, the party of the second part shall not be charged with negligence in not making stoppage in transitu in any event unless thereunto requested by the party of the first part). If the merchandise named in the accounts should be refused or returned, for any cause, the title to such merchandise shall be and remain in said second party until such accounts are paid.
“Fourth. Said first party hereby guarantees the payment to the second party or its assigns of all accounts purchased hereunder according to the terms thereof. In the event of nonpayment at maturity to said second party of any accounts as purchased as aforesaid, or should the debtor become insolvent, said first party hereby covenants and agrees to repurchase said accounts within five days after receipt of written notice thereof and to pay therefor the same amount paid to the first party by said second party, plus the discount provided for in the first paragraph of this contract. Said second party is hereby given the right without notice to said first party to credit any moneys coming into its possession, belonging to said first party, on its accounts.
“Fifth. Immediately after the purchase of every account hereunder, said first party shall make upon its book an entry showing the absolute sale of said accounts to said second party, and said second party is hereby given the right and privilege of auditing the books, accounts, and records of said first party, relating to said accounts,’at any time that it may see fit to do so.
“Sixth. Where as, it is for the mutual benefit of the parties hereto that the collection of said accounts shall in the first instance be remitted to the parties of the first part and in its name, the party of the first part shall at all times appoint some person or persons, mutually acceptable to both of the parties hereto, their attorney in fact to receive all such remittances in whatever form they may be made, and to transfer, assign, and transmit all such proceeds to said party of the second part. And said party of the first part shall, immediately upon receipt of such, remittances, in whatever form the same shall be made, deliver the same to such attorney for transmittal to the party of the second part; and said attorney shall at all times have access to all mail received by said party of the first part, and all books and records of the party of the first part, to discover what payments and remittances are made upon such accounts. And in consideration of the execution of this agreement by the party of the second part, said party of the first part undertakes to guarantee the faithful conduct of said attorney in fact in the receipt, assignment, and transmittal of all such payments or remittances. And upon the like consideration said party of the first part shall pay unto said attorney in fact compensation for all such services so rendered in that behalf; and we will furnish and provide for said attorney in fact all necessary clerical or stenographic assistance for making- reports and remittances. [317]*317Said attorney in fact shall also have the right and power, and it shall he his duty to endorse the name of the party of the first part on any freight or express bill or bill of lading relating to said accounts, and ratifying and confirming all its said attorney may do in the premises. And said attorney in fact as to all such matters shall receive such moneys or other remittances solely for the party of the second part and shall at all times be subject to its exclusive orders with relation thereto; and it is now mutually agreed between the parties hereto that E. Manning shall be and continue such attorney in fact to perform such duties, until by mutual agreement of the parties hereto another person shall be appointed in his stead.
“Seventh. That said second party in mating purchase of accounts hereunder relies upon the guaranties and covenants of said first party herein contained and upon the written representations made to it by said first party as to the financial responsibility of said first party; that said written representations heretofore made and that may hereafter be made are for the purpose of establishing the credit of said first party so that sale of accounts may be made hereunder.
“Eighth.
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COCHRAN, District Judge.
These causes are before me on exceptions filed by the Home Bond Company to the report of Referee Lindsey, as special master herein. The matter with which the report has to do is the relation of that company to certain accounts in favor of the bankrupts, some of which have been collected by the trustee herein, and some by the company. The latter claims to have been the owner of the accounts when collected under written contracts of purchase. This claim the trustee contests. Its position is that the company merely had a lien thereon for certain loans made by it to the bankrupts and legal interest thereon from the dates of the respective loans. The special master has upheld this position, and stated the accounts between the bankrupts and the company on this basis. It is of this action that the company complains by its exceptions.
The contract between the bankrupt, the New England Chair Company, and the company, is in words and figures as follows:
“This agreement, made this 6th day' of March, 1911, at Indianapolis, Indiana, by and between New England Chair Company, hereinafter called first party, and the Home Bond Company, hereinafter called second parly, wit-nesseth: That for one dollar ($1.00) and other good and valuable considerations, each to the other paid, receipt whereof is hereby acknowledged, the parties hereto have agreed and do hereby agree as follows:
“First. That said second party shall buy from said first party all acceptable accounts tendered to it by said first party and pay therefor the face value thereof less the following discounts: One per cent, on accounts that are paid within fifteen days. Two per cent, on accounts that are paid within thirty-days. Three per cent, on accounts that are paid within sixty days. Four [316]*316per cent, on accounts that are paid within ninety days. Five per cent. on. accounts that are paid within one hundred and twenty days. Six per cent, on accounts that are paid within one hundred and fifty days. Seven per cent, on accounts that are paid within one hundred and eighty days — subject, however, to the terms of this and any subsequent written agreement executed by the parties hereto.
“Second. That the said party shall pay: Seventy-eight per cent, on thirty day accounts. Seventy-seven per cent, on sixty day accounts. Seventy-six per cent, on ninety day accounts. Seventy-five per cent, on one hundred and twenty day accounts. Seventy-four per cent, on one hundred and fifty day accounts. Seventy-three per cent, on one hundred and eighty day accounts— upon delivery to and acceptance of such accounts duly assigned to the party of the second part, and the remainder, less discount and deductions taken by the debtor, shall be paid immediately after the collection of the account by the second party: Provided, however, no payment of the remainder shall be made while any of said accounts are in default.
“Third. The first party shall properly assign and deliver to said second party all accounts purchased, including the right of stoppage in transitu, either in the name of the party of the first part or in the name of the party of the second part (provided, however, the party of the second part shall not be charged with negligence in not making stoppage in transitu in any event unless thereunto requested by the party of the first part). If the merchandise named in the accounts should be refused or returned, for any cause, the title to such merchandise shall be and remain in said second party until such accounts are paid.
“Fourth. Said first party hereby guarantees the payment to the second party or its assigns of all accounts purchased hereunder according to the terms thereof. In the event of nonpayment at maturity to said second party of any accounts as purchased as aforesaid, or should the debtor become insolvent, said first party hereby covenants and agrees to repurchase said accounts within five days after receipt of written notice thereof and to pay therefor the same amount paid to the first party by said second party, plus the discount provided for in the first paragraph of this contract. Said second party is hereby given the right without notice to said first party to credit any moneys coming into its possession, belonging to said first party, on its accounts.
“Fifth. Immediately after the purchase of every account hereunder, said first party shall make upon its book an entry showing the absolute sale of said accounts to said second party, and said second party is hereby given the right and privilege of auditing the books, accounts, and records of said first party, relating to said accounts,’at any time that it may see fit to do so.
“Sixth. Where as, it is for the mutual benefit of the parties hereto that the collection of said accounts shall in the first instance be remitted to the parties of the first part and in its name, the party of the first part shall at all times appoint some person or persons, mutually acceptable to both of the parties hereto, their attorney in fact to receive all such remittances in whatever form they may be made, and to transfer, assign, and transmit all such proceeds to said party of the second part. And said party of the first part shall, immediately upon receipt of such, remittances, in whatever form the same shall be made, deliver the same to such attorney for transmittal to the party of the second part; and said attorney shall at all times have access to all mail received by said party of the first part, and all books and records of the party of the first part, to discover what payments and remittances are made upon such accounts. And in consideration of the execution of this agreement by the party of the second part, said party of the first part undertakes to guarantee the faithful conduct of said attorney in fact in the receipt, assignment, and transmittal of all such payments or remittances. And upon the like consideration said party of the first part shall pay unto said attorney in fact compensation for all such services so rendered in that behalf; and we will furnish and provide for said attorney in fact all necessary clerical or stenographic assistance for making- reports and remittances. [317]*317Said attorney in fact shall also have the right and power, and it shall he his duty to endorse the name of the party of the first part on any freight or express bill or bill of lading relating to said accounts, and ratifying and confirming all its said attorney may do in the premises. And said attorney in fact as to all such matters shall receive such moneys or other remittances solely for the party of the second part and shall at all times be subject to its exclusive orders with relation thereto; and it is now mutually agreed between the parties hereto that E. Manning shall be and continue such attorney in fact to perform such duties, until by mutual agreement of the parties hereto another person shall be appointed in his stead.
“Seventh. That said second party in mating purchase of accounts hereunder relies upon the guaranties and covenants of said first party herein contained and upon the written representations made to it by said first party as to the financial responsibility of said first party; that said written representations heretofore made and that may hereafter be made are for the purpose of establishing the credit of said first party so that sale of accounts may be made hereunder.
“Eighth. That said first party shall execute and deliver to said second party or its assigns any document necessary or proper to carry into effect this contract, and should second party employ counsel or cause legal action to be instituted to enforce payment of any of said contracts, or any part thereof, either in its own name or the name of the party of the first part, then and in either case said first parly shall immediately pay to said second party or its assigns, all court costs, expenses, and attorney’s and stenographer's fees which may be by it expended in such proceedings.
“In witness whereof, the said first party has hereunto set its hand and seal, and said second party has caused these presents to be executed by its president and secretary, and its corporate seal to be hereto attached.
“The New England Chair Company [Seal.]
“By A. D. Martin, President.
“Attest: Chas. Irion, Secretary.
“Home Bond Company,
“By P. ,T. Ilauss, Vice President.
“Attest: P. H. Rupert, Secretary.
“Por and in consideration of the execution of the foregoing agreement by the Home Bond Company, the undersigned hereby guarantees to said Home Bond Company the full prompt and faithful payment and discharge by New England Chair Company of all and singular the agreements and provisions therein contained to be by said New England Chair Company kept, observed, and performed, and hereby waives notice of acceptance of this guarantee by the Home Bond Company.
“In witness whereof, we and each of us have hereunto set our hands and’ seals this 6th day of March, 1911. A. D. Marlin. [Seal.]
“Graham Vreeland. [Seal.]
“Chas. Irion. [Seal.]
“Witness: Chas. Irion.”
The, contract between the other bankrupt and the company is of sim - ilar character and dated November 9, 1911. I approve of the conclusion reached by the special master and the reasoning on which it is based. The considerations which support this conclusion are that the bankrupts were to and did collect the accounts and bear all expense in connection with their collection,- what is claimed to have been the purchase price for the accounts, to wit, the difference between the face of the accounts and the discount, was not known until payment of the account and receipt thereof by the company, and then depended on the time that had elapsed since the date of the advance of the 75 per cent.; what is claimed to have been deferred payment of the purchase price was simply a return to the bankrupt of the excess of the collection over [318]*318and above the advance and discount; and the provision that, in the event of nonpayment of any of the accounts at maturity or the debtor becoming insolvent, the bankrupt should repurchase the accounts and pay therefor the advance made thereon plus the discount.
The argument on behalf of the Bond Company assumes that the conclusion of the special master is based on the consideration that the bankrupt guaranteed the payment of the accounts, and is directed largely to combating the idea that this consideration rendered the transaction a loan and not a purchase. Numerous cases are cited where purchases of notes and accounts, accompanied by a guaranty of payment, have been held-to be purchases, and not loans at usurious rates of interest. But I do not understand that the special master’s conclusion is based on this consideration; nor is it needed to uphold it. Possibly, however, the fact that the contracts were accompanied by a personal guaranty that the' bankrupts would make full, prompt, and faithful payment and discharge of all the agreements and provisions therein contained to be kept, observed, and performed by it is not without some significance in upholding that conclusion.
The decision of the Circuit Court of Appeals of the Second Circuit in the case of In re Canfield, 193 Fed. 934, 113 C. C. A. 562, and of the Supreme Court of the United States in the same case under the style of Houghton, Receiver, v. Burden, 228 U. S. 161, 33 Sup. Ct. 491, 57 L. Ed. -, rendered April 7, 1913, is relied on by the company as conclusive on the question herein involved. But I fail to see its relevancy to this case. In that case there was no such question in issue as that in issue here. Burden did not claim to have purchased the accounts there involved. He simply claimed a lien thereon to secure a loan, and the sole question was whether the contract between him and the bankrupt wrs usurious, and therefore, under the law of New York, void. The ground upon which it was claimed to be usurious was the provision that, in addition to receiving 6 per cent, on his money, Burden was to receive a certain compensation for certain services to be rendered by him for the bankrupt. The question as to whether this provision rendered the contract usurious hung on whether it was a sham and device to cover usury, or really intended to provide compensation for the services called for in the contract.
Here, if the contracts are treated as evidencing loans, there can be no question that the discount provided for is usurious. It is for greatly more than the legal rate of interest. The discount provided for is not for services to be rendered by the company to the bankrupts. It was to render them no services. All that it did, or had a right to do, was on its own account. Hence the only way of saving the contracts here is to make good the contention that they evidence purchases, and not loans. That the company has failed to do. Rather, it has been shown that it is not good.
In so far as the contracts in question here use words fit for a contract of purchase, they are mere shams and devices to cover loans of money at usurious rates of interest. That the company was not averse to the use of shams is otherwise apparent from the use by it of the word “service,” in its dealings with the bankrupts under the contracts, [319]*319to characterize the discounts. In any view of the contracts, those discounts were not charges for services rendered the bankrupts. Loans are never regarded as services.
The report of the special master is approved and confirmed.