CLIFFORD, Circuit Justice.
Undoubtedly the evidence shows that a large amount of negotiable paper was outstanding against Edward Seagrave, at the period mentioned in the bill of complaint, and that he was indebted in a considerable amount to the complainants, for which they also held his negotiable paper. Assuming those facts as proved, the complainants insist that the evidence shows, that the debtor made a fraudulent arrangement with the principal respondents, in pursuance of which, they purchased a large amount of his paper so outstanding, at a discount of seventy-five or eighty per cent, and received from him a conveyance of his property, in exchange for the paper, and also a mortgage of certain real estate, as a further security for the same, estimating the paper, so purchased, at its full nominal value in the exchange. According to their theory, the intent and design of the debtor were to hinder, delay, and defeat his creditors, and that the respondents well knew that such was the intent and design of the debtor, and that they received the conveyance and mortgage with that knowledge, and have retained in their hands the amount of the difference between the value of the paper and the price paid for its purchase, for the use and benefit of the debtor. They do not controvert the fact that the debtor was justly and legally liable on the paper, but they contend, that the amount of the difference between the price paid for the paper and the nominal valúe is fraudulently held by the respondents, and that the mortgage to them, and the assignment to the other respondent, are without consideration and fraudulent, because, as they insist, they were executed, the one to secure that amount, and the other to facilitate the accomplishment of that purpose. Fraud, therefore, is the essence of the charge, and it is upon that ground that the complainants ask the interposition of the court, to cancel and discharge the mort gage, and the assignment of the real estate. Briefly stated, the transactions out of which the controversy has arisen were in substance and effect as follows, as appears from the pleadings and evidence: Large pur chases of wool were made by Edward Sea-grave, in connection with other parties, in 1853, for the purpose of speculation. Money was raised for that purpose,, to a large amount, on bills of exchange and promissory notes drawn and made by the first-named party. They were unsuccessful in the speculation, and about the 4th of February, 1854, the drawer and maker of the bills and notes stopped payment on this class of paper. Payment of the paper being refused, it was protested, and a considerable amount of it subsequently went into the possession of the principal complainants. Suit was commenced by them on the paper, and a judgment recovered for the amount with costs of suit. An execution duly ísf ued, and was levied-on the real estate in controversy. Founded upon these preliminary facts, the complainants insist that their title to the real estate ought to be complete. But the respondents have a prior title, and unless-the same is shown to have been fraudulently and wrongfully obtained, they must prevail in the suit. The complainants charge fraud, and in order to ascertain whether they have proved their charge, it becomes necessary to look with some care at the circumstances under which the respondents ac quired their title.
Finding the aforesaid paper in the market, the respondents purchased a large amount of it at a discount of seventy-five or eighty per cent. All of the purchases were made openly, and on the 17th of November, 1854, the debtor executed to the purchasers the mortgage to secure the payment, allowing -the full amount of the bills and notes. He had stopped payment on this paper on the 4th of February, 1854; and eleven months afterwards, on the 4th of January, 1855, he assigned his property for the benefit of his creditors, giving preference to the two first-named respondents. It [1157]*1157was under these circumstances that the two principal respondents became possessed of the real estate on which complainants levied their execution; arid the complainants charge that the conveyance was fraudulent, because designed to hinder, delay, and defeat creditors, and that the respondents now hold the estate upon a secret trust, for the use and benefit of the debtor, and that the assignee was cognizant of the fraud, and participated in its perpetration. No direct evidence to prove the alleged fraud is introduced by the complainants, and it should be borne in mind that they have not made the debtor a party to the bill of complaint. Direct proof of the alleged fraud being unattainable, the complainants set forth the circumstances on which they rely to establish the charge. Taking the case as stated in the bill of complaint, the circumstances alleged by the complainants to prove the conveyance fraudulent may be classified into four distinct charges. First, they charge that the two principal respondents combined and confederated with Edward Seagrave to defraud his creditors, and to that end' entered into a corrupt bargain, understanding, and agreement that the former should purchase some $40,000 or $50,000 of his outstanding paper, at a large discount, and that he, the debtor, should pay and secure the paper so purchased, at its full value, and that the purchasers should hold the property transferred to them for that purpose, over and above the amount paid for the paper, for the use and benefit of the grantor; and the charge is, that the corrupt and fraudulent agreement was- substantially carried into effect. By the well-settled rules of law, the burden of proof is upon the complainants to make out their charge. Fraud may be inferred from circumstances, but it cannot be presumed without proof, and he who makes the charge has the burden of establishing it. It is insisted by the complainants, that, under the circumstances of this ease, the burden of proving the fairness of the transaction is upon the respondents; but the proposition is wholly untenable, and cannot receive the least countenance. Appeal is made by the bill of complaint to the consciences of the respondents on this point, and they most explicitly and unequivocally deny the charge in all its details. Where fraud is imputed, and the answer is responsive, and the denial positive, the universal rule is, that a decree cannot be pronounced on the testimony of a single witness unaccompa-panied by corroborating circumstances. Hughes v. Blake, 6 Wheat. [19 U. S.] 468. Marshall, C. J., in Clarke’s Ex’rs v. Van Riemsdyk, 9 Cranch [13 U. S.l 160, states the rule as follows: That “either two witnesses, or one witness with probable circumstances, will be required to outweigh an answer asserting a fact responsive to a bill”; and he gives as a reason for the rule, that the plaintiff calls upon the defendant to answer an allegation, and thereby admits the answer to be evidence; and if it is testimony, says the chief justice, it is equal to the testimony of any other witness; and as the plaintiff cannot prevail if the balance of proof be not in his favor, he must have circumstances in addition to his single witness to turn the balance. But it must not be understood from what has been said, that direct evidence is necessary, in a case like the present, to support a bill of complaint, because such is not the rule of law. Satisfactory proof may be made by circumstances alone, or partly by circumstances and partly by direct testimony, or entirely by the latter.
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CLIFFORD, Circuit Justice.
Undoubtedly the evidence shows that a large amount of negotiable paper was outstanding against Edward Seagrave, at the period mentioned in the bill of complaint, and that he was indebted in a considerable amount to the complainants, for which they also held his negotiable paper. Assuming those facts as proved, the complainants insist that the evidence shows, that the debtor made a fraudulent arrangement with the principal respondents, in pursuance of which, they purchased a large amount of his paper so outstanding, at a discount of seventy-five or eighty per cent, and received from him a conveyance of his property, in exchange for the paper, and also a mortgage of certain real estate, as a further security for the same, estimating the paper, so purchased, at its full nominal value in the exchange. According to their theory, the intent and design of the debtor were to hinder, delay, and defeat his creditors, and that the respondents well knew that such was the intent and design of the debtor, and that they received the conveyance and mortgage with that knowledge, and have retained in their hands the amount of the difference between the value of the paper and the price paid for its purchase, for the use and benefit of the debtor. They do not controvert the fact that the debtor was justly and legally liable on the paper, but they contend, that the amount of the difference between the price paid for the paper and the nominal valúe is fraudulently held by the respondents, and that the mortgage to them, and the assignment to the other respondent, are without consideration and fraudulent, because, as they insist, they were executed, the one to secure that amount, and the other to facilitate the accomplishment of that purpose. Fraud, therefore, is the essence of the charge, and it is upon that ground that the complainants ask the interposition of the court, to cancel and discharge the mort gage, and the assignment of the real estate. Briefly stated, the transactions out of which the controversy has arisen were in substance and effect as follows, as appears from the pleadings and evidence: Large pur chases of wool were made by Edward Sea-grave, in connection with other parties, in 1853, for the purpose of speculation. Money was raised for that purpose,, to a large amount, on bills of exchange and promissory notes drawn and made by the first-named party. They were unsuccessful in the speculation, and about the 4th of February, 1854, the drawer and maker of the bills and notes stopped payment on this class of paper. Payment of the paper being refused, it was protested, and a considerable amount of it subsequently went into the possession of the principal complainants. Suit was commenced by them on the paper, and a judgment recovered for the amount with costs of suit. An execution duly ísf ued, and was levied-on the real estate in controversy. Founded upon these preliminary facts, the complainants insist that their title to the real estate ought to be complete. But the respondents have a prior title, and unless-the same is shown to have been fraudulently and wrongfully obtained, they must prevail in the suit. The complainants charge fraud, and in order to ascertain whether they have proved their charge, it becomes necessary to look with some care at the circumstances under which the respondents ac quired their title.
Finding the aforesaid paper in the market, the respondents purchased a large amount of it at a discount of seventy-five or eighty per cent. All of the purchases were made openly, and on the 17th of November, 1854, the debtor executed to the purchasers the mortgage to secure the payment, allowing -the full amount of the bills and notes. He had stopped payment on this paper on the 4th of February, 1854; and eleven months afterwards, on the 4th of January, 1855, he assigned his property for the benefit of his creditors, giving preference to the two first-named respondents. It [1157]*1157was under these circumstances that the two principal respondents became possessed of the real estate on which complainants levied their execution; arid the complainants charge that the conveyance was fraudulent, because designed to hinder, delay, and defeat creditors, and that the respondents now hold the estate upon a secret trust, for the use and benefit of the debtor, and that the assignee was cognizant of the fraud, and participated in its perpetration. No direct evidence to prove the alleged fraud is introduced by the complainants, and it should be borne in mind that they have not made the debtor a party to the bill of complaint. Direct proof of the alleged fraud being unattainable, the complainants set forth the circumstances on which they rely to establish the charge. Taking the case as stated in the bill of complaint, the circumstances alleged by the complainants to prove the conveyance fraudulent may be classified into four distinct charges. First, they charge that the two principal respondents combined and confederated with Edward Seagrave to defraud his creditors, and to that end' entered into a corrupt bargain, understanding, and agreement that the former should purchase some $40,000 or $50,000 of his outstanding paper, at a large discount, and that he, the debtor, should pay and secure the paper so purchased, at its full value, and that the purchasers should hold the property transferred to them for that purpose, over and above the amount paid for the paper, for the use and benefit of the grantor; and the charge is, that the corrupt and fraudulent agreement was- substantially carried into effect. By the well-settled rules of law, the burden of proof is upon the complainants to make out their charge. Fraud may be inferred from circumstances, but it cannot be presumed without proof, and he who makes the charge has the burden of establishing it. It is insisted by the complainants, that, under the circumstances of this ease, the burden of proving the fairness of the transaction is upon the respondents; but the proposition is wholly untenable, and cannot receive the least countenance. Appeal is made by the bill of complaint to the consciences of the respondents on this point, and they most explicitly and unequivocally deny the charge in all its details. Where fraud is imputed, and the answer is responsive, and the denial positive, the universal rule is, that a decree cannot be pronounced on the testimony of a single witness unaccompa-panied by corroborating circumstances. Hughes v. Blake, 6 Wheat. [19 U. S.] 468. Marshall, C. J., in Clarke’s Ex’rs v. Van Riemsdyk, 9 Cranch [13 U. S.l 160, states the rule as follows: That “either two witnesses, or one witness with probable circumstances, will be required to outweigh an answer asserting a fact responsive to a bill”; and he gives as a reason for the rule, that the plaintiff calls upon the defendant to answer an allegation, and thereby admits the answer to be evidence; and if it is testimony, says the chief justice, it is equal to the testimony of any other witness; and as the plaintiff cannot prevail if the balance of proof be not in his favor, he must have circumstances in addition to his single witness to turn the balance. But it must not be understood from what has been said, that direct evidence is necessary, in a case like the present, to support a bill of complaint, because such is not the rule of law. Satisfactory proof may be made by circumstances alone, or partly by circumstances and partly by direct testimony, or entirely by the latter. Whatever may be the nature of the evidence, however, the measure of proof required is the same, that is, it must be equal to two witnesses, or one witness with corroborating circumstances sufficient “to turn the balance.” Recurring to the pleadings, it is clear that the answer of the respondents falls within this rule, and must be overcome by circumstances more than equal to the positive testimony of a single witness.
Evidence is introduced by the complainants, to show that Edward Seagrave advised some of the holders of his paper to sell the same to the respondents, on the terms mentioned in the bill of complaint. Testimony to that effect was given by Elijah B. Newell, who says, among other things, that the debtor sent for him and advised him to sell to those parties, telling him that the terms were the best he would' probably ever obtain. Spencer Mowry also testifies, that the same person first gave-him information that those parties would purchase the paper, and that he urged the witness to sell to them, and that he did so, and they expressed the desire to purchase more of the paper. This witness also states, that he derived the impression, that the debtor had money left with his friends to buy the paper at twenty-five per cent, and intimates, that he accepted the same because he did not see any way to prevent the transaction. Five pieces of the paper were also sold to them by George Cooke on. the same terms, but he does not testify to any conversations which can have any material bearing on the case. Many other facts and circumstances are introduced by the complainants, as having some tendency to authorize the inference, that the paper was purchased in pursuance of the alleged corrupt bargain, understanding, and agreement They rely on the fact that the respondents purchased about the amount of paper specified in the bill of complaint: that the debtor subsequently conveyed the property and executed the mortgage as alleged; and that he paid and secured the full value of the paper. Considerations, however, of very great importance, connected with this inquiry, are entirely over[1158]*1158looked by the complainants. Apparently they seem to forget that the paper purchased was the bona fide paper of the debt- or, and that the purchase of it, in open market, without any combination or confederacy to defraud, and without any corrupt bargain, understanding, and agreement with the debtor to do any acts to hinder, delay, or defeat his creditors, whether purchased at a discount or not, was a lawful transaction, and consequently that proof of those facts, without more, furnished no ground whatever, of relief, in this case. They also seem to be equally unmindful of the fact that the allegations of combination, confederacy, and fraud were unequivocally denied in the answer. Those denials are very properly invoked by the respondents as evidence to refute the allegations which constitute the foundation of the prayer for relief. Reliance is not placed upon those denials alone by the respondents, but they also rely upon the testimony of the debtor himself, who most unequivocally negatives the whole foundation of the allegations in the bill of complaint. Under these circumstances, it is impossible to say that the transaction was fraudulent, or that the complainants are entitled to relief. Second, adopting the classification already suggested, the next charge is that the assignment was executed as a part of the alleged fraudulent scheme, and as a cover to the arrangement previously carried into effect, in pursuance of the corrupt bargain, understanding, and agreement made between the assignor and the principal respondents. Like the first charge, this one also is met by the unqualified denial of the answer. All three of the respondents deny the charge in all its details, and the testimony of the debtor is equally explicit to the same effect. Attention was also called at the argument to the fact that the two principal respondents were preferred in the instrument, and it must- be admitted that such a clause, in some jurisdictions, would render the assignment void, but the effect of it as a general rule must depend upon the local law. State laws may authorize such a preference, or they may forbid it; and in all cases where the proceeding is under the state law, the regulations of the state must furnish the rule of decision. Assignments with preferences in favor of certain creditors are held to be valid in this state, as appears by several decisions of the state court; and this court will follow that rule, until it is repealed by competent authority. Dockray v. Dockray, 2 R. I. 547; Beckwith v. Brown, Id. 311; Sadlier v. Fallon, 4 R. I. 490. Third, complainants charge, that the as-signee was cognizant of the corrupt scheme and combination set forth in the first charge, and that he well knew the fraudulent purpose for which the mortgage and assignment were executed. But the charge is very pointedly denied in the answer, and the complainants offer no satisfactory proof in support of it; and under those circumstances they can hardly expect a finding in their favor. Finally, thé complainants charge, that the debtor, upon the execution of the mortgage deed and the assignment, continued to treat the property conveyed as his own, and that he was allowed to do so by the respondents. But they fail to prove the charge, and it is very explicitly denied in the answer.
TOn appeal to the supreme court the decree of this court was affirmed. 1 Wall. (68 U. S.) 684.]
In viewW the whole evidence, I am of the opinion that the complainants have failed to prove any one of the charges against the respondents, and the bill of complaint is accordingly dismissed with costs.