In the matter of Nathan Devorkin, bankrupt. From an order sustaining the objection of the Security Bank & Trust Company of Memphis, Tenn., to the bankrupt's application for discharge, the bankrupt appeals. Reversed and remanded. Leo Goodman, of Memphis, Tenn., for appellant. Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges. DENISON, Circuit Judge. Devorkin was adjudicated a voluntary bankrupt, and directly thereafter filed his petition for a discharge. The Security Bank & Trust Company was a creditor, and supported opposition to the discharge by the specifications (1) that the bankrupt, with attempt to conceal his financial condition, had failed to keep the necessary books of account or records; and (2) that the bankrupt had transferred his interest in certain real estate with intent to hinder, delay, and defraud his creditors. The matter was sent to a referee, who heard proofs and found as facts that, while the bankrupt had wholly failed to keep books, this had not been done with intent to conceal his financial condition, and that the transfer of the real estate was a bona fide transaction, without intent to hinder, delay, or defraud. The creditor treated the referee's report as that of a special master in equity, and challenged the result through exceptions. Upon the review thus invoked, the District Judge did not pass upon the first specification, but held that the real estate transfer had the inevitable effect to hinder, delay, and defraud, and that, therefore, the second specification should be sustained, and the application for discharge be denied. The bankrupt appeals. [1] 1. We see no cause to disturb the finding of the referee that the failure to keep books was not with that intent which is made the basis for preventing a discharge. It appears that for three years, and since Devorkin had been the sole proprietor of the business, he had kept no books. The dealings were small and practically for cash; the debts proved were-largely those left over from an old connection. Doubtless there are cases where the failure to keep any systematic books or records would, of itself, require the conclusion that it was done with the intent to conceal, but such conclusion is by no means inevitable. The inference is one of fact to be drawn from the Sheinberg v. Hoffman (C. С. А. 3) 236 Sherwood Co. v. Wix (C. C. A. 4) 240 Cases like Paper v. Stern (C. C. A. 8) proofs in a particular case. Fed. 343, 149 С. С. А. 475; Fed. 692, 153 С. С. А. 490. 198 Fed. 642, 117 С. С. А. 346, and In re Hanna (C. C. A. 2) 168 Fed. 238, 93 C. C. A. 452, are not inconsistent with this rule. [2] 2. Devorkin owned a half interest in a piece of business real estate, the whole of which had cost $10,000 or $12,000. His interest was incumbered by one-half of an old mortgage for $5,000 covering the entire title, by $1,000 unpaid lien for the purchase price of his half interest, and by a mortgage or deed of trust for $3,000 upon his half interest, given by him more than a year before to secure a cash loan for money needed on account of old liabilities in which Devorkın was involved. This last loan had been secured for him through the favorable representations of Mr. Goodman, his attorney, and Mr. Goodman felt a measure of moral responsibility upon the loan. Shortly before bankruptcy, and with knowledge on Goodman's part that it was imminent, Devorkin made a deed to Goodman of his half interest, and it is this conveyance which is the basis of the second specification. The testimony is undisputed that this deed was made at Goodman's advice and request, and because the first mortgage was about coming due and some refunding and extensions would be necessary, or else it would be foreclosed, and it was apprehended that not enough would be realized to pay the $3,000 mortgage, and there would be a loss thereon for which Goodman would feel responsible. He also thought that, if Devorkin's title passed to a trustee in bankruptcy, any refunding or extension contracts would be impossible, and thus foreclosure and loss could not be avoided, while, if the title was put in his name, he could arrange the necessary extensions. He therefore agreed that in exchange for the deed, which would enable him thus to protect the existing junior mortgage, he would advance, personally, whatever funds were necessary to meet payments that must be made on the incumbrances, and would give Devorkin two years within which to redeem the property by paying whatever might thus accumulate against it. It is entirely plain that this transaction, when thus fully stated, did not inherently involve any hindering, delaying, or dafrauding of creditors. It was, at most, a conveyance of Devorkin's equity of redemption by way of further security for existing debts; and the mere giving of a preference is no reason for denying a discharge. The trouble is that this trust was not expressed on the face of the deed, which (as we understand the record) appeared to be absolute and unconditional; and this situation suggests, if it does not reveal, a conveyance with a secret trust reserved for the grantor's benefit-a transaction as to which the law implies a fraudulent intent. [3-5] This leads us to the question which counsel have chiefly argued-whether the equity thus conveyed was worth anything. In deciding whether a conveyance had the effect to hinder, delay, and defraud creditors, it is of no controlling importance that the trustee has not been able to avoid it, or even that he has not tried to avoid it, and, doubtless, in the absence of any proof, there would be some presumption that property conveyed by the bankrupt had value; but it is none the less certain that a deed cannot be intended to or have the effect to hinder, delay, or defraud creditors, unless it is a conveyance of something rather than of nothing, and we cannot regard the transfer of an absolutely worthless equity of redemption as a sufficient ground for refusing a discharge. If such conveyance releases a right of possession pending foreclosure, which would be of substantial value to the trustee, that would make a question on which this record is silent; but the mere fact that the trustee might get something for a release paid to him as a bonus, and not because he was entitled to it, but to avoid trouble-this mere fact we cannot think enough to give condemnatory character to the transaction. We cannot escape the conclusion that the circumstances of this case-the cost of the property, the admitted incumbrances, the apparent fear of all parties that the property would not pay the incumbrances, and the character of the contract accompanying the transfer-were sufficient to put upon the trustee the burden of showing that the creditors whom he represented might have been substantially damnified. This burden was not met; but we are not inclined, for that reason alone, now to direct that the discharge be granted. The objecting creditor rested on a misapprehension. If the objecting creditor desires, there should be a further hearing on this issue; we decide now only that the making of the deed, under the circumstances shown, does not of itself necessarily bar the discharge. Lacking an application for such further hearing, made within 30 days after mandate, the discharge should be granted. The order must be reversed, and the case remanded for further proceedings in accordance with this opinion. (243 Fed. 174) THE TRANSFER NO. 15. THE LANSING. (Circuit Court of Appeals, Second Circuit. May 8, 1917.) Nos. 241, 242. 1. COLLISION 95(2) - STEAMSHIP AND MEETING TOW-INSUFFICIENT LOOK OUT. A collision in the daytime on East River between a steamship, which was passing up on the deep water range, and one of two car floats alongside a meeting tug, held, on conflicting evidence, due solely to the fault of the tug in misunderstanding the steamer's passing signal of two whistles. which was justified by the positions of the vessels, probably because of not having a lookout in the bow, and so crossing the signal and turning to starboard across the course of the steamship, which at once stopped and reversed, but too late to avoid collision. [Ed. Note. For other cases, see Collision, Cent. Dig. §§ 200-202.] 2. COLLISION 199-PRECAUTIONS IN HARBOR-LOOKOUT. It is incumbent on a vessel navigating New York Harbor and vicinity, even in the daytime, to maintain a vigilant lookout. [Ed. Note.-For other cases, see Collision, Cent. Dig. §§ 211, 212.] Appeal from the District Court of the United States for the Southern District of New York. Suit in admiralty for collision by the Lansing Steamship Company, Incorporated, owner of the steamship Lansing, against the steam tug Transfer No. 15 and car float N. Y., N. H. & H. R. R. No. 41, the New York, New Haven & Hartford Railroad Company, claimant, with crosslibel against the Lansing, in which the Seaconnet Coal Company intervened. Decree against the Lansing, and the other parties appeal. Reversed. Appeal in admiralty from decree dismissing the libel of the steamship Lansing against the steam tug Transfer No. 15, and sustaining For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes the libel of the steam tug against the steamship. The cargo of the Lansing belonged to the Seaconnet Coal Company, which intervened pro interesse suo in the action against the Transfer No. 15. The intervener also appealed. James T. Kilbreth and Irving Miller, both of New York City, for the Transfer No. 15. Robinson Leech, of New York City, for the Lansing. Blodgett, Jones, Burnham & Bingham, of Boston, Mass. (Edward E. Blodgett, of Boston, Mass., of counsel), for intervener. Before WARD, ROGERS, and HOUGH, Circuit Judges. HOUGH, Circuit Judge. [1] The collision out of which these litigations arose occurred off the ferries at the foot of Whitehall street, Manhattan, on a fair afternoon (April 19, 1916), when the wind was light, the weather clear, and the East River tide still running ebb, although the tide had begun to rise. The Lansing is a steamer 250 feet long, originally built for traffic on the Great Lakes, and of very slow speed. The Transfer No. 15 is an able tug 125 feet long, and had in tow a loaded carfloat on each side, each float being 327 feet long. The Lansing was bound up the East River; the Transfer, with her floats, was coming down, intending to round the Battery and proceed to the New Jersey shore. There was no unusual amount of traffic in the neighborhood, and the evidence contains no suggestion that any vessel not proceeded against interfered with navigation. The collision was a violent one between the bow of the Lansing and the port side of the Transfer's port carfloat, about 50 feet abaft her forward end. That such a collision could happen in broad daylight is of itself almost evidence of negligence. The Tugboat No. 6, 170 Fed. 306, 95 С. С. А. 502. On consideration of the pleadings and the testimony of those in charge of the navigation of the colliding vessels, we find it impossible to harmonize their statements or to arrive at any story of collision not somewhere denied in vital details. There are some points, however, so conclusively proven as to dominate, and from these controlling facts we deduce a result favorable to the Lansing. That steamer entered the channel between the Battery and Governor's Island upon the "deep water range." Such is the testimony of her master, while the captain of the Transfer admitted that when he first noticed the steamship (he being above Pier 7, East River) she was on that range. The Transfer and her tow, by the statement of her own master, "came down the East River to go under the Brooklyn Bridge, and proceeded down about in the middle of the river, favoring the New York shore." The tug master's intention was "to follow the middle of the river as near as possible, and as we proceed down we keep drawing in to the New York shore." The Lansing against the tide was making not over 3 miles an hour by the land, while the Transfer on her own testimony was similarly going at the rate of at least 9 miles an hour. The place of collision was off the ferries nearest to Pier 4 East River, and about 1,000 feet off the pier ends. This is the evidence of the master of a tug which was lying off the ferries, who had a full view of the collision, and was introduced as a witness on behalf of the Transfer. The distance from the pier end given by him puts the place of collision on the "deep water range." The heading of the Transfer and her floats at the moment of impact is plainly testified to by her master, who, when asked how his boat was heading at the time they came together, replied: "I should think that my boat was heading directly toward Staten Island ferry rack." * the With the place of collision thus fixed, and the bearing of tug and tow also fixed within narrow limits, we next inquire as to the angle of collision. On this point there is practical unanimity among the witnesses-it was a right-angled blow-a statement amply confirmed in our opinion by the nature of the wounds. But if the blow was right-angled, the point of contact substantially on the deep water range, and the tug and carfloats heading for the ferry racks nearest Pier 4, the conclusion is mathematical that the Lansing at collision was on the range, and had never substantially altered her course from the moment she was first seen by the Transfer. Such is her evidence, which in our judgment is confirmed by the foregoing. The hopeless conflict of evidence herein relates to the signals given and the relative bearings of the two vessels at the time of giving them. There is a fair preponderance of evidence that the Lansing blew first, giving a signal of two whistles. That the first signal was given by the Lansing is admitted in the Transfer's pleadings, but it is said to have been a signal of one blast. It is proved as a two-whistle signal, and we perceive no reason why it should not have been heard and understood by the Transfer, which undoubtedly replied with one whistle. The vital point is whether, when the Lansing blew two whistles, she had the Transfer on her port or starboard bow. The testimony on this is utterly irreconcilable; but when it is observed that the vessels when not over half a mile apart were approaching each other at the rate of at least 1,100 feet a minute, that the collision occurred on the deep water range, with the port side of the Transfer's floats in the act of crossing the Lansing's bow, and the floats and tug heading for the upper ferry slips, we think it demonstrated that in order to produce collision the tug and tow must have come (under a port helm) from the Lansing's starboard side. It is not thought that the Transfer was as far over to Brooklyn (or starboard), when the Lansing blew two whistles, as the captain of the steamer asserts; but she was enough to starboard of the Lansing's course to render a two-whistle signal (under the meeting rule) proper. This is in accord with the Lansing's evidence, and is very nearly admitted by the master of the Transfer when he assented to counsel's proposition that, if he had understood the Lansing's first signal as of two whistles, he could "have answered with two and safely gone down on her starboard side." Thus we find that this disaster occurred through a misunderstanding of whistles, for which no excuse is proffered; as a result thereof |