author: MANTON, Circuit Judge.

text:
    In re CARL DERNBURG & SON, Inc. Petition of DERNBURG.
    (Circuit Court of Appeals, Second Circuit.
    December 2, 1924.)
    No. 98.
    1. Bankruptcy <§=>341 — Referee has full authority to inquire into defenses of claims based on preference or transfers.
    Under Bankruptcy Act, § 57g (Comp. St. § 9641), the referee in bankruptcy has full authority to inquire into defenses of claims whieh are based upon preference or transfers.
    2. Bankruptcy <§s=224-^-“Referee in bankruptcy” officer of court with no power not conferred by order of reference.
    “Referee in bankruptcy” is not a separate court nor endowed with any independent judicial authority, but is merely an officer of the court of bankruptcy with no power not conferred by the order of reference.
    [Ed. Note. — For other definitions, see Words and Phrases, Referee in Bankruptcy.]
    3. Bankruptcy <§=>228 — Judicial functions of referee reviewable by bankruptcy court.
    The judicial functions of referee in bankruptcy are always subject to review of bankruptcy court.
    4. Bankruptcy <§=>224 — Referee has no jurisdiction over plenary suit against third party when property is not in custody of court.
    Referee in bankruptcy has no jurisdiction over a plenary suit in equity brought by trustee in bankruptcy against a third party un-vder Bankruptcy Act, § 70e (Comp. St. § 9654), when property is not in the custody or control of the bankruptcy court.
    5. Bankruptcy <®=>34I — Claimant, by presenting proof of debt, consents to jurisdiction of court to decide any defenses that may be lawfully interposed.
    Under Bankruptcy Act, § 57g (Comp. St. § 9641), claimant by presenting her proof of debt submitted her claim to the jurisdiction 'of the bankruptcy court, and must be deemed to have consented to the jurisdiction of the court to decide any defenses that may be lawfully interposed.
    6. Bankruptcy <@=>341 — Referee had jurisdiction. to determine question of preference on trustee’s objections, to proof of debt.
    Under Bankruptcy Act, § 57g (Comp. St. ■§ 9641) prohibiting allowance of claims unless creditor shall surrender voidable preferences, conveyances, transfers, assigns, ’ or in-cumbrances, referee had jurisdiction to determine whether claimant who made proof of debt had received preferential payment on trustee’s objections and motion to expunge proof.
    Petition to Revise Order of the District •Court of the United States for the Southern District of New York.
    In the matter of Carl Dernburg & Son, Inc., bankrupt. On petition of Emma Dernburg to revise order of District Court denying motion to strike out objections to defense interposed by trustee.
    Affirmed.
    Robert L. Turk, of New York City, for petitioner.
    Rosenthal & Heermanee, of New York City (S. Michael Ress, of New York City, of counsel), for respondent.
    Before ROGERS, HOUGH, and MANTON, Circuit Judges.
   MANTON, Circuit Judge.

Carl Dem-burg & Son, Inc., was adjudicated a bankrupt prior to May 22, 1922, and a trustee was appointed August 2, 1922. Emma Dernburg on May 22, 1922, filed a claim against the bankrupt’s estate for $15,000. On March 28, 1921, she executed a guaranty of liability to the Manufacturers’ Trust Company whereby she guaranteed the payment of “liability or liabilities on negotiable instruments due or not due now existing or hereinafter to be incurred to Carl Dernburg & Son, Inc., to a total of $15,000.” On September 12, 1921, the bankrupt made a promissory note for $15,000 which was indorsed by Carl Dernburg. This note was not paid by the bankrupt and the petitioner in due time paid it. After the filing of the claim by the petitioner, the trustee filed objections to the proof of the debt, claiming and alleging that the petitioner received from the bankrupt and failed to surrender certain voidable preferences within the provisions of the Bankruptcy Law consisting of cash, notes, and accounts receivable aggregating the sum of $3,777.60. The trustee gave notice of motion b.efore the referee to expunge this proof of debt and disallow or reduce the same. The petitioner objected to the proceeding before the referee, contending that he had no jurisdiction to determine this question of preference brought up in a summary proceeding or to determine the issues as to preferences and that they could only be adjudicated in a plenary suit. The referee held otherwise, overruling this objection, and decided that he had jurisdiction to try this defense under section 57, subdivision g, of the Bankruptcy Act (Comp. St. § 9641). A certificate thereafter was issued to the District Court to bring the matter up for review, and that court approved the conclusion of the referee. From an order entered thereon this petition is taken.

Section 57g of the Bankruptcy Act reads: “The claims of creditors who have received preferences, voidable under section sixty, subdivision b, or to whom conveyances, transfers, assignments, or incumbrances, void or voidable under section sixty-seven, subdivision e, have been made or given, shall not be allowed unless such creditors shall surrender such preferences, conveyances, transfers, assignments, or incumbrances.”

There is no ambiguity in the language of this subdivision. The referee in bankruptcy has full authority to inquire into defenses of claims which are based upon preferences or transfers. We have held that the court has power to require the attachment lien to, be released before an adjudication is entered, and that a creditor might prove his claim providing he surrenders his liens. In the Matter of Automatic Typewriter Company (C. C. A.) 271 F. 2; In re Stevens v. Nave-McCord, 150 F. 71. The referee in bankruptcy is not a separate court, nor endowed with any independent judicial authority. He is merely an officer of the court of bankruptcy, having no power except as conferred by the order of reference. His judicial functions are always subject to the review of the bankruptcy court. He has no jurisdiction over a plenary suit in equity brought by the trustee in bankruptcy against a third party under section 70e (Comp. St. § 9654) when the property is not in the custody or control of the court of bankruptcy. Weidhorn v. Levy, 253 U. S. 268, 40 S. Ct. 534, 64 L. Ed. 898; Galbraith v. Vallely, 256 U. S. 46, 41 S. Ct. 415, 65 L. Ed. 823. Still where the claimant has submitted her claim to the jurisdiction of the bankruptcy court, as here, by presenting her proof of debt for $15,000, she must be deemed to have consented to the jurisdiction of the court to decide any defenses that may be lawfully interposed. The Court of Appeals of the Ninth Circuit has considered this and announced that the claims of creditors who have received preferences should not be allowed unless the creditors surrender their preferences holding that there was no ambiguity. In re Fixen & Co., 102 F. 295, 42 C. C. A. 354, 50 L. R. A. 605. There it was said: “When a creditor presents a bona fide claim against the bankrupt estate, the question to be determined is: Has the creditor received a ‘preference’ in his dealings with the bankrupt?”

The claim of necessity must he open to such defenses or offsets as the particular facts involved permit. The mere filing of the claim is not an allowance of it. It is essential that there be an examination of the claim. An examination contemplates any and all defenses to it. The statute specifically creates a defense, making a claim void or voidable where it appears that a transfer was made which granted the preference. It permits the creditor to press his claim if he is willing to surrender his preference. If he insists that there were no preferences, he may be heard in the forum of his selection where he files his proof of debt. Every person submitting himself to the bankruptcy court in the progress of the ease for the purpose of having his rights in the estate determined makes himself a party to the suit and bound in the legitimate course of the proceeding. As was said in Wiswall et al. v. Campbell, 93 U. S. 347, 23 L. Ed. 923: “A creditor who offers proof of his claim, and demands its allowance, subjects himself to the dominion of the court, and must abide the consequences.”

We see no difference between this principle in the ease of a creditor filing his mitten claim and submitting the proof to substantiate the claim. The trustee having interposed the defense, if the petitioner persists in her demand of payment of $15,000, she must answer the charge that she has received preferences in the proceeding before the referee.

Order affirmed.


source: Caselaw Access Project

author: MANTON, Circuit Judge. LEARNED HAND, District Judge HOUGH, Circuit Judge

license: Public Domain

text:
    MANHATTAN RUBBER MFG. CO. v. LUCEY MFG. CO.
    (Circuit Court of Appeals, Second Circuit
    January 5, 1925.)
    No. 252.
    1. Corporations <§=>556 — Equity may appoint receiver for corporation in proceeding by creditor who has no judgment, where corporation does not object.
    Where defendant corporation made no defense to creditors’ bill nor to application for receivers, court of equity could appoint receiver and through such receiver take possession of and preserve the corporation’s property, though bill was filed by only one creditor and though such creditor has no judgment.
    2. Corporations <§=>555 — Court of equity which has appointed receiver cannot order directors to file voluntary bankruptcy petition or. admit inability to pay debts'and willingness to be adjudicated bankrupt.
    Court of equity which has appointed receiver for corporation has no right to order the directors of the corporation to file a voluntary petition in bankruptcy or to admit in writing the corporation’s inability to pay its debts and its willingness to be adjudicated a bankrupt.
    Hough, Circuit Judge, dissenting.
    Appeal from the District Court of the United States for the Southern District of New York.
    Bill by the Manhattan Rubber Manufacturing Company against the Lueey Manufacturing Corporation, in which receivers were appointed for defendant. Erom an order commanding directors of defendant to file a voluntary petition in bankruptcy, or to admit in writing the corporation’s inability to pay its debts and its willingness to be adjudicated a bankrupt, defendant appeals.
    Reversed.
    J. J. Lynch, of Chattanooga, Tenn., and E. Bright Wilson, of New York City, for appellant.
    Rosenberg & Ball, of New York City (Wilbur L. Ball and Godfrey Goldmark, both of New York City, of counsel), for ap-pellees, receivers.
    Before HOUGH and MANTON, Circuit Judges, and LEARNED HAND, District Judge.
   MANTON, Circuit Judge.

Receivers in equity were appointed for the appellant on August 17, 1923, on a creditors’ bill filed in the District Court. The bill of complaint alleged that the appellant was indebted to the complainant in upwards of $3,000 and that it owed other sums to creditors in excess o£ $2,015,000. It alleged that it had assets more than sufficient' to meet its obligations and was solvent but temporarily financially embarrassed. Further, it alleged that in order to preserve its property for equitable distribution among those entitled thereto, it believed the District Court should intervene and appoint,a receiver to take charge of all the assets of the defendant, which receiver should conduct, maintain, and administer the same under the power to be conferred upon him in the proposed decree which was submitted upon the filing of the complaint. In the prayer for relief, an injunction was asked, restraining creditors from proceeding to collect the obligations owed by the appellant. An answer was filed admitting the allegations of the hill, and the decree was entered on consent appointing the receivers. The corporation had property in California, hut no receivers were applied for or appointed in either an ancillary or original bill in that jurisdiction.

On October 6, 1924, the receivers appointed filed a petition asking for an order that the corporation should voluntarily take action necessary to cause it to be adjudicated a bankrupt. The petition alleged that the corporation was insolvent; that the receivers had asked the defendant, its officers and directors, to voluntarily file a petition in bankruptcy or consent to the adjudication of the corporation as a bankrupt, and this request had been refused. It set forth that a meeting of the directors was called for and that the directors had consistently refused to cause the defendant to take such action. It alleges that one J. F. Lueey owns the majority of the stock of the corporation, and that he selected the majority of the directors and controls them; that he has refused to permit the directors to file a petition in bankruptcy for the reason that he would be personally liable for indebtedness owing in California, since such liability is imposed upon stockholders under the law of that state. It sets forth that a creditor in California has attached the property of the corporation in that jurisdiction for a large indebtedness, and the property so attached is valued at $550,00'0, with a realizable value of from $200,000 to $300,000.

Upon hearing, this application, the Distinct Court entered an order which commanded that the corporation should admit in writing its inability to pay its debts and its willingness to be adjudicated a bankrupt on the ground that it is insolvent. And it was further ordered “that each and every officer and director of the defendant authorized to act by such resolution, shall without delay, act in aeeordancé therewith.” The theory of such proceedings was to avoid the creditors in California securing the advantage they had by their writ of attachment and to cause the property in that state to come under the jurisdiction of the bankruptcy court for administration. Indeed, all the property of the corporation would at once be transferred to the bankruptcy court.

To this creditors’ bill the corporation made no defense, nor to the application for receivers, through its duly constituted authority to give' consent by admissions of the allegajtions of the complaint. Therefore, the administration of the assets' of this corporation is within the function of this court of equity and the parties are before the court. It has the power to proceed with such administration. Under the creditors’ bill, courts of equity have lent their assistance to common-law courts to enable judgment creditors to reach, through receivers, property beyond the reach of execution. The scope of these suits has extended into equitable levies in favor of all judgment creditors entitled to seize the defendant’s property. No distinction is drawn between corporations and individuals. Now the practice has been established of permitting creditors having judgments to apply to courts of equity to take possession of the assets and undertake, through receivers, their general administration. And now the judgment creditor is not essential unless the corporation objects. A creditor may file a bill, and if the corporation does not object, but consents, the court of equity may appoint the receiver, and through such officers the court will have the same general administration. Penn. Steel Co. v. N. Y. City Railway Co., 198 F. 721, 117 C. C. A. 503; Graselli Chemical Co. v. Ætna Explosives Co., 252 F. 456, 164 C. C. A. 380. The pippose of this creditors’ bill, like all such bills, whether brought by one creditor or for the benefit of all the creditors, has for its primary purpose securing equality of distribution of assets. The chief purpose of such a bill is to gather in and preserve its assets. As to the extent and method of administration, we have said in the ¿Etna Case, supra:

“The court possesses jurisdiction over the, corporation, as well as over the property of the corporation, and it has complete power to deal with either, and it is essential that it should have, for-it could not control the property without the power to control the corporation. The appointment of the receiver supersedes the power of the directors to carry on the business of the corporation, and the receivers take possession of the corporation, its books, its records, and assets. Indeed, it is often the custom for courts of equity, in an order appointing the receiver, to expressly restrain the corporation and its officers from exercising any of the privileges or franchises of the corporation until the further order of the court. The court’s power to take from the directors their right to direct can also, while in control, restrain action by the stockholders, when it deems it for the best interests of all concerned to do so.”

It is argued by'the appellee that our decision in the ¿Etna Case is authority for the order appealed from. That was a receivership in equity on a creditor’s bill. The amended certificate of incorporation of the defendant provided that the preferred stock had no voting rights except in the event that there should'be a default in the payment of dividends on the preferred stock for a period of eight months. Then it was provided that each share of the preferred stock should have nine votes. During the pendency of the equity receivership, eight months elapsed without the payment of dividends upon the preferred stock. The annual meeting of the stockholders was appointed to be held on March 19, 1918, and it appears that there was to be a contest for the control of the board of directors to be elected at that meeting. A plan of reorganization was under consideration. The stockholders were enjoined from holding a meeting because the court found that it would be inequitable to permit the preferred stock, under the circumstances, to exert the voting rights with the prospect of interference with the plan of reorganization. In supporting the order there entered, we considered the extent to which a court might interfere with the internal affairs of the corporation in aid of the proper fulfillment of the purposes of the suit. All that was done in that case was to preserve the res, keep it within the jurisdiction of the court, and assist a plan of reorganization. It enjoined prospective interference with such purposes.

Here the court commands the directors to, in effect, end the success of this suit, and, indeed, makes it valueless. It purposes to turn over to the bankruptcy court all the assets. It defeats the plea to protect against creditors temporarily and to enable the corporation to restore itself to the position to meet its obligations due to creditors.

In Gay v. Hudson River Electric Power Co., 184 F. 689, 106 C. C. A. 643, the corporation was in equity receivership. A mortgagee under a mortgage existing prior to the receivership, was restrained, by the order appointing the receivers, from foreclosing its mortgage. Am application to vacate the injunction as to it was denied, and on appeal this court reversed the order holding that the mortgagor might proceed with the foreclosure, and we said:

“But, although a court of equity will be astute to protect all equitable interests, there is a limit beyond which it may not go. In the case of successive mortgages upon a single piece of real estate, it may often be a great hardship to the holder of a junior mortgage to have the property sold under foreclosure of the first mortgage at a time when general financial distress will preclude any hope of enough being realized to pay more than the amount secured under the first mortgage, while, if all action could be suspended for two or three years, the property would sell for a price sufficient to pay both mortgages in full. But there is no power in a court of equity to abrogate the right of foreclosure and sale for which the first creditor stipulated, which is incorporated in the contract and on the strength of which he lent his money. ® It may be a 'grievous wrong’ to them to permit such sales; but, if it is the clear right of the mortgagee to have such a sale go on, the court may not deny him his right, however great may be the hardship to others.”

In Odell v. H. Batterman Co., 223 F. 292, 138 C. C. A. 534, the defendant was in equity receivership, and the landlord of the premises of which the defendant had a lease applied to the court for permission to commence an ejectment action in the state court. It was held to be an abuse of discretion to refuse to permit the landlord to adjudicate his claim, even though it resulted in dispossessing the corporation.

In Oliver v. Parlin Co., 105 F. 272, 45 C. C. A. 200, in a suit in equity to recover possession of real property and to cancel a deed of trust executed by prior owners thereof for fraud in which the grantors and grantees of such deeds were made defendants, the court of equity, where the defendant was in equity receivership, refused to restrain the foreclosure proceedings in the state court.

These cases illustrate the limitations'that are imposed upon the equity court in the administration of the corporation’s affairs. It is the bankruptcy court that must determine whether the defendant should be adjudicated a bankrupt under the Bankruptcy Act (Comp. St. §§ 9585-9656). The appellant has a right to a trial by jury on the issues of insolvency and the commission of the act of bankruptcy on such application for adjudication. This right must not be denied. C. Elliot v. Toeppner, 187 U. S. 327, 23 S. Ct. 133, 47 L. Ed. 200. Here the bill and answer agreed that tile assets are sufficient to pay all its indebtedness. No solvent corporation can be adjudged a bankrupt without its consent. It must be a voluntary act of the board of directors, or a creditor may show the commission of an act of bankruptcy. The present effort is to compel its officers, without their consent and, indeed, over the protest of some of the board of directors, and without an application of a creditor, to allege or admit insolvency so that the bankruptcy court may take possession and jurisdiction of the res collected and maintained by this court of equity. The hope is to defeat the attachment of property of the corporation in California. This effort resulting in this order is wholly beyond the court’s power to command. The directors have the privilege of placing the corporation in bankruptcy if they so desire — if .the business necessities require it. The failure to go into bankruptcy is not a legal wrong.

In Wilson v. City Bank, 84 U. S. (17 Wall.) 473, 21 L. Ed. 723, the Supreme Court said:

“As before remarked, the voluntary clause is wholly voluntary. [Bankruptcy Act.] No intimation is given that the bankrupt must file a petition under any circumstances. While his right to do so is without any other limit than his own sworn averment that he is unable to pay all his debts, there is not a word from which we can infer any legal obligation on him to do so. Such an obligation would take from the right the character of a privilege, and confer on it that of a burdensome and, often, ruinous duty.
“It is, in its essence, involuntary bankruptcy. But the initiation in this kind of bankruptcy is, by the statute, given to the creditor, and is not imposed on the debtor. And it is only given to the creditor in a limited class of cases.”

See, also, Summers v. Abbott, 122 F. 38, 58 C. C. A. 352; Richmond Steel Co. v. Allen, 148 F. 657, 78 C. C. A. 389; In re New Amsterdam Motor Co. (D. C.) 180 F. 943.

The debtor is under no obligation to proceed voluntarily into bankruptcy. He cannot be forced to bring such a proceeding. Even in an involuntary proceeding, his failure to appear does not convert the proceeding into a voluntary one. Creditors have the right, if cause be shown under the Bankruptcy Act, to file a petition. No great.er rights are accorded receivers. A court of equity cannot add to the bankruptcy statute any more than it can take from the mortgagee his right to foreclose his lien or the owner his right to possession if entitled thereto before the receivers took possession of the res. This leaves the right of creditors to proceed under the Bankruptcy Act unimpaired if good cause be shown. 'We think the command of the order below reaches out into limits that a court of equity may not go in administering the property of the corporation in possession of its receiver. The case is not in conflict with the authority of the ¿Etna Case upon which the appellee relies. There is a clear distinction.

Order reversed.

LEARNED HAND, District Judge

(concurring) . The' right of the District Court to entertain such a bill as that at bar depends upon the jurisdiction of a court of equity over a.judgment creditor’s bill; it is that and nothing more. Pusey & Jones v. Hanssen, 261 U. S. 491, 43 S. Ct. 454, 67 L. Ed. 763. True, it is not necessary that the debt shall be in judgment and that execution shall be returned nulla bona, if the defendant consent (Re Metropolitan Street Railway Receivership, 208 U. S. 90, 28 S. Ct. 219, 52 L. Ed. 403), but that in no sense changes the equity of the bill, any more than the fact that it is brought on behalf of all creditors instead of on behalf of one. In such a suit the court takes possession of the property, and sells and distributes it; but in so doing it acts strictly in rem and does not go beyond the reach.of its process. This remains true although the court acting in personam may compel the debtor to convey assets which it cannot seize (Ager v. Murray, 105 U. S. 126, 26 L. Ed. 942), or which may be without the jurisdiction (Bailey v. Ryder, 10 N. Y. 363, 370), just as it may in a foreclosure (Muller v. Dows, 94 U. S. 444, 24 L. Ed. 207). Yet the scope of the bill still remains a distribution of the assets which can be brought within its jurisdiction, in payment of the defendant’s debts.

In the suit at bar the order under appeal requires the defendant to commit an act of bankruptcy and to consent to file a voluntary petition, either of which will defeat the very purpose of the bill by compelling a surrender by the receivers to the bankruptcy court which supersedes .all other insolvency proceedings. I cannot conceive how that can be thought to be within the purposes of the suit to 'which the' defendant consented, and I submit that it is entitled to insist upon limiting th^t consent to what the bill proposed.

As I undersand it, the receivers support their position chiefly by an appeal to Graselli Chemical Co. v. Ætna Explosives Co., 252 F. 456 (C. C. A. 2) 164 C. C. A. 380. There it is true that by a divided court we held in a suit like this the preferred shareholders of a company in receivership might be enjoined from exercising rights given them under the charter. If the principles there enunciated were again to arise, for myself, .1 should feel it necessary to give the closest scrutiny to their validity and to consider in the gravest possible way whether the authority of the case must not be confined to the very facts then before the court. Por that reason I am quite unwilling now by silence to give any apparent assent to its broader implications. However, I entirely agree with my brother MANTON in thinking' that even if Graselli Chemical Co. v. ¿Etna Explosives Co., supra, should in the end become broadly accepted, the case at bar is certainly beyond its ruling. At least the court did not there in effect terminate the suit itself; its action, proper or not, was confessedly ancillary, and was supported only on the theory that it made possible the distribution of the assets in the suit itself.

The receivers’ argument goes even further. We are asked to hold that such a suit submits the corporation generally to a visitator-ial control, by virtue of which we can compel the' debtor to do whatever may in our judgment be to the advantage of its creditors. Any such notion ignores altogether the origin and history of such suits. They are as much limited by law as any others, and there is in my judgment no warrant either in principle or policy for asserting that, once a receiver is appointed, the court takes on the part of a benevolent despot. If we needed authority for so plain a proposition, it seems to me that there is the clearest intimation of it in Pusey' & Jones v. Hanssen, supra.

HOUGH, Circuit Judge

(dissenting). Something might be said concerning the order complained of as an act of discretion; that is, whether it was advisable to make such an order. But I am not concerned with that, because what is here attacked is the jurisdiction of the court to make the order, for this court is declaring that the order in question was beyond the power of the District Court, and on this point I cannot agree.

The case-at bar presents a typical “umbrella receivership”; by which is meant that a court of equity has extended its protection to a defendant which admitted that it was unable to discharge its obligations as they matured, but agreed that if well managed and granted a moratorium it had enough property to pay what it owed — and indeed do better than that. When such an application is made, the proper question (not I think always asked) is whether the “hardship and impossibility of other relief justify the appointment.”

I am sure that few suits of this kind were ever begun against corporations other than carriers where the suggestion of ultimate solvency or better was not somewhat hazardous. At all events, corporations whose solvency was thus( averred in limine have so often turned out grossly insolvent that creditors’ bills of this nature have by a process of evolution become an elaborate scheme of insolvent administration or corporate reorganization according to the turn of events-after receivers appointed.

Indeed, such bills have come to afford a species of locus poenitentiee for the study of possibilities by creditors, shareholders, directors, receivers, and various self-appointed committees sitting under the chancellor’s “umbrella” and watching the weather outside.

I think it true that the origin of such bills was the willingness of equity to lend its aid by way of equitable levy to an effort equally to distribute assets whether sufficient or insufficient for solvency among those legally entitled thereto. Thus the primitive view of a bill like this one led to regarding it as no more than the reduction to the court’s possession of a certain amount of property and to confining the activities of chancery to the preservation, distribution, or restoration of that property to or among the persons entitled to the same.

But no one was ever able to know beforehand the ramifications of such a matter, or to foresee the demands that would be made upon the discretion, the boldness, or the inventive ability of the court whose aid creditors, shareholders, and directors united in. seeking. And this has been shown increasingly true in a federal Union like ours,, where each of the 48 constituent sovereigns-often seems primarily engaged in playing-for its own hand, and does this in a business world rendered more complex by the’ structure of our country and increasingly impatient with the hampering limitation of state lines and state laws. Such conditions., political and commercial, are increasingly presenting new and vexatious questions loudly calling for what one of our ablest judges Aas called “the plastic remedies of equity.”

Such a situation was acutely presented to this court in Graselli, etc., Co. v. Ætna, etc., Co., 252 F. 456, 164 C. C. A. 380. That well-known decision was necessarily one of two things — there was no tertium quid. It was either a rather bald legal mistake, or it was an advance, ingenious and even daring, in equity jurisdiction — and I use the word ‘“jurisdiction” in its primary sense as meaning power. It was made after exhaustive argument by counsel of learning, and the result was of primary importance if equitable' proceedings for reorganizations or in insolvency are to continue and to grow, as all living things must grow. Therefore as I regard that decision as a marked advance in jurisprudence, and not as a mistake, I think that its implications should be now lived up to — as they should have been recognized when the decision was formulated.

The central thought of that judgment is that the modem creditors’ bill is much more than an equitable levy upon such property as might pass into the hands of the receivers appointed under the bill; and it was an advance because the defendant was held personally or individually subject to the jurisdiction, that is, to the power of the chancellor, and so far subject thereto that the corporation or its officers might ‘be restrained from exercising their privileges or franchises, and even the stockholders might be restrained from acting as stockholders are lawfully entitled to do whenever their intended action was in the opinion of the court not for the best interests of all concerned. There is plainly no difference in legal theory between injunctions forbidding an act and in-. junctions commanding an act, and either may be used to further the common interest of all parties in the res, i. e., the property of the defendant.

In practical administration under creditors’ bills like this, the ¿Etna decision had been for some time foreshadowed. Thus officers and directors of a defendant corporation have been ordered to execute deeds of corporate realty in order that all concerned might benefit by the price obtained therefor; and' similarly such officers have been compelled by order to convey the title of corporate realty to the receivers of the court in order to facilitate dealing with the same and inter alia preventing attachments being laid on lands situate in states to which the corporate defendant Was foreign.

To prevent corporate officials and shareholders from improperly dealing with corporate property and to compel them #properly to deal with it in ways that receivers for well-known reasons cannot do, is but one method of administering the res in the court’s possession. Any corporate act which injures that res is an interference therewith, and that this was the sense, or one sense, of the ¿Etna decision has ‘been stated by this court in Habirshaw, etc., Co. v. Habirshaw (C. C. A.) 296 F. 875, at 880.

And in Re O’Gara Coal Co., 260 F. 742, at 744, 171 C. C. A. 480, the iEtna decision has been cited as not interfering in any way with.the corporate existence.of the defendant or as denying the right of the stockholders to act “in eases where the court fails or refuses to exercise its supervisory power.”

The ease last cited was in bankruptcy, and it emphasizes the truth that in bankruptcy no more than in equity is the corporate existence interfered with or the legal relations of directors and shareholders impaired. This is elementary, but the novelty of the ¿Etna Case is that it recognized and approved the supervisory power of the equity court as something that could coerce corporate action for the benefit of all concerned. But it is now asserted to be beyond the power of the equity court to compel the defendant herein to go into bankruptcy.

In a strict sense, the order requires nothing of the kind; it only directed the defendant to tell the truth as to its financial condition, and to add thereunto the statement that it was willing to be adjudged a bankrupt. A majority in value of the shareholders were not willing so to have the corpora-tion adjudicated, and their unwillingness on this record was due to another willingness, viz.: They preferred to have a few creditors absorb all the California assets of the estate rather than to expose themselves to possible personal liability under the corporation laws of the same state. The motive or reason was most unworthy, it was plainly not for the benefit of all concerned, and a plainer case for the exercise of supervisory power could hardly be presented — if the situation was worth saving at all — but this last hypothesis eannot be considered on the question of power, for it goes only to the matter of discretion. But it is further argued that there is some difference between forbidding shareholders to vote and telling directors to go into bankruptcy, because no one can be compelled to seek the bankruptcy court; every debtor has his right of choice until involuntary proceedings have been perfected against iim. Ancl it is said that to coerce or forbid this right of choice is the deprivation of a lawful right.

No more lawful right could be imagined than the right of the ¿Etna stockholders to vote; it was an inherent part of the charter of the corporation, and if the chancery court could deprive them of that right it was a far more drastic exercise of power than to compel a body of directors to tell the truth about their corporate condition.

Further, bankruptcy is not legal suicide, and there is much to be said in favor of a properly conducted bankruptcy as a scheme of reorganization, and only in bankruptcy can the still surviving and unimpaired corporation obtain a discharge from its debts. Viewed as an alleged violation of legal right the order here complained of seems to me far less drastic than that in the ¿Etna Case.

But it is further argued (if I understand it) that there is something radically wrong in issuing an order in equity the effect of which will probably be to terminate or render idle the very suit in which the order is entered. Suits are not virtuous in themselves; the object of any suit of this kind is to secure equitable equality for all and if that result can be reached by inviting or by ordering the suitors to seek another jurisdiction, it seems to me a rather archaic view to make a sort of fetish out of the suit first brought. There is nothing sacred about this equity suit. If it can attain its object of equitable equality by any other method than a final judgment, it is for the good of all concerned that it should be done.

It follows that I must dissent, because I feel very strongly that the court is refusing to follow the ¿Etna Case, while not in terms overruling it.


author: LEARNED HAND, District Judge.

text:
    BECHER et al. v. UNITED STATES.
    (Circuit Court of Appeals, Second Circuit.
    December 8, 1924.)
    No. 29.
    1. Conspiracy <@=>47 — Evidence held to prove certain defendants parties to conspiracy to defraud government of customs duties and internal revenue taxes.
    In prosecution for conspiracy to defraud the United States of customs duties and internal revenue taxes by fraudulent withdrawal of liquor from bonded warehouse, in violation of Rev. St. § 2987 (Comp. St. § 5680), evidence held to prove certain of defendants parties to conspiracy1.
    2. Conspiracy <@=>47 — Evidence held to sustain conviction of certain defendants for conspiracy to violate the National Prohibition Act.
    Evidence held to sustain conviction of certain defendants of conspiracy to violate the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 1013814 et seq.) by possessing, importing, and selling intoxicating liquors, fraudulently withdrawn from bonded warehouse.
    3. Customs duties <@=>125 — Statute making it a crime to defraud government of customs duties by fraudulent withdrawal of liquor from bonded warehouse held not repealed by National Prohibition Act.
    ■ Rev. St. § 2987 (Comp. St. § 5680), making it a crime to defraud United States of customs duties by fraudulent withdrawal of liquor from bonded warehouse, held not repealed by National Prohibition Act (Comp. St. Ann. Supp. 1923, § 1013814 et seq.), in so far as it involved transportation which occurred before enactment of Supplementary Prohibition Act of November, 1921.
    4. Conspiracy <@=>43(10) — Indictment charging conspiracy to defraud government by fraudulent withdrawal of liquor from bonded warehouse by forged permits held sufficient.
    In prosecution for conspiracy to defraud United States of customs duties and internal revenue taxes by fraudulent withdrawal of liquor from bonded warehouse, in violation of Rev. St. § 2987 (Comp. St. § 5680), indictment, describing forged permits by means of which liquor was withdrawn as similar to customs permit with specified number, held sufficient.
    5. Indictment and information <@=>106 — Forged instrument need not be set out unless prosecution is for forgery, counterfeiting, or misuse of mails.
    Indictment need not set out forged document in full, except .in prosecutions for forgery, counterfeiting, or misuse of mails.
    6. Criminal law <@=>1044 — Question of failure of indictment to describe forged1 permits with sufficient accuracy not raised by motion to dismiss.
    In prosecution for conspiracy to defraud government of customs duties and-internal revenue taxes by fraudulent withdrawal of liquor from bonded warehouse by means of forged permits, motion to dismiss held insufficient to raise question as to sufficiency of indictment for failure to describe the forged permits with sufficient accuracy.
    7. Conspiracy <@=>23 — Gravamen is formation of agreement.
    Gravamen of criminal conspiracy is formation of agreement.
    8. Conspiracy <@=^27 — Commission of overt act essential to prosecution.
    There can be no prosecution for conspiracy to commit crime until some overt act has been committed.

      9. Conspiracy <§=>27 — Conspiracy to defraud government of customs duties and internal revenue taxes, by fraudulent withdrawal of liquor from bonded warehouse, complete when agreement has been made and step taken in its execution.
    Crime of conspiracy to defraud government of eustcyns duties and internal revenue taxes by fraudulent withdrawal of liquor from bonded warehouse, in violation of Rev. St. .§ 2987 (Comp. St. § 5680), was complete as soon as agreement was made and any step in its execution had taken place, and it is not necessary that liquor should be deposited in bonded warehouse or even imported.
    10. Criminal law <§=>787(I) — Instruction that no inference of guilt could be drawn from defendants’ failure to testify without request therefor not error.
    Instruction that no-inference of guilt could be drawn from defendants’ failure to testify in absence of request therefor by defendants was not error, though in absence of such request it is better if court makes no reference thereto.
    11. Witnesses <§=>196 — Communication from agent to principal’s attorney at time when principal was acting in hostility to agent held not privileged.
    Agent’s communication to principal’s attorney; on attorney’s examination of agent to ascertain whether agent had converted principal’s money at a time when ag'ent was no longer active as principal’s agent, held not privileged, since at such time principal was acting in hostility to agent.
    12. Conspiracy <§=>43(10) — Counts held sufficient as against contention that conspiracy is nowhere set up as whole.
    Counts charging conspiracy to defraud the United States of customs duties and internal revenue taxes, by fraudulent withdrawal of' liquor from bonded warehouse, and to violate the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 1013814 et-seq.), alleging in general the legal effect of conspiracy, and stating as introduction to details of agreement that “it was a part of said conspiracy” that conspirators should do acts enumerated, held sufficient as against contention that conspiracy is nowhere set up as a whole..
    13. Conspiracy <§=>41 — Defendant may be convicted of conspiracy to commit crime without being guilty of substantive crime itself.
    Defendant may be convicted as a party to conspiracy to defraud United States of customs duties and internal revenue taxes by fraudulent withdrawal of liquor from bonded warehouse, in violation of Rev. St. § 2987 (Comp.-St. § 5680), without being guilty of substantive crime.
    14. Customs duties <§=>134 — Evidence held insufficient to sustain conviction for fraudulent withdrawal of liquors from bonded warehouse without payment of customs duties and internal revenue taxes.
    Evidence held insufficient to sustain conviction of defendant for fraudulent withdrawal of liquor from bonded warehouse without payment of customs duties and internal revenue-taxes, in violation of Rev. St. § 2987 (Comp. St. § 5680).
    15. Criminal law <§=>560 — Jury must acquit if facts are compatible with either guilt or innocence.
    If state of facts is compatible with either-guilt or innocence, jury must acquit.
    16. Criminal law <§=>782(9) — Refusal to charge jury to acquit defendant if evidence could not be reconciled with hypothesis other than innocence held not error.
    Refusal to charge that jury must acquit unless they could not reconcile evidence with-any hypothesis except innocence held not error.
    17. Criminal law <§=>782(9) — Rule as to sufficiency of charge as to p'roof essential to conviction, stated.
    Charge as to proof essential to conviction-is sufficient, if jury is told that prosecution-must establish all facts to required degree of satisfaction of jury; no particular form being, necessary.

      S

    18. Criminal law <§=>69S(I) — Hearsay and secondary evidence held sufficient to prove fact, in absence of objection.
    In prosecution for conspiracy to defraud government of customs duties and internal revenue taxes by fraudulent withdrawal of liquor from bonded warehouse, in violation of Rev. St. § 2987 (Comp. St. § 5680), bill of lading and copies of inspectors’ slips held sufficient to-prove identity of cases of whisky imported and those which were stored in warehouse, as-against contention that bills of lading were-hearsay evidence and copies of inspectors’ slips were not the best evidence, in absence of objection to such evidence on such grounds.
    19. Criminal law <§=>696(4)j — General motion to-strike document held not objection to admissibility of evidence as to genuineness of signature.
    General and unspecified motion to strike out document at dose of case held not objection to admissibility of evidence as to genuineness-of signature.
    20. Criminal law <§=>! 169(2) — Admission of bank’s signature card to prove disputed signature held harmless in view of other evidence as to guilt.
    In prosecution for conspiracy to defraud by fraudulent withdrawal of liquor from bonded, warehouse without payment of customs duties - and internal revenue taxes, in violation of Rev. St. § 2987 (Gomp. St. § 5680), erroneous admission of bank’s signature card held harmless as to defendant shown guilty by 1,200 page-record.
    In Error to the District Court of the United States for the Southern District of New York.
    Morris E. Beeher, Murray E. Birnbaumr and Millard Eriedberg were convicted of conspiracy to defraud the United States of. customs duties and internal revenue taxes by fraudulent withdrawal of eases of liquor from bonded warehouse, and of the substantive crime, and they bring error.
    Affirmed as to first and third named defendants, and affirmed in part and reversed in part as to second named.
    Gilbert & Black, of New York City (Charles H. Tuttle, of New York City, of counsel), for plaintiff in error Beeher.
    George Z. Medalie and Emanuel Harris, both of New York City, for plaintiff in error Friedberg.
    Vine H. Smith, of New York City, for plaintiff in error Birnbaum.
    John Holley Clark, Jr., of New York City, for the United States.
    Before HOUGH and MANTON, Circuit Judges, and LEARNED HAND, District Judge.
   LEARNED HAND, District Judge.

The three plaintiffs in error, in company with nineteen others, were indicted on June 29, 1923, upon nine counts, of which three alone remained at the trial, Nos. 1, 8, and 9. The first was for conspiracy to defraud the United States of customs duties and internal revenue taxes by the fraudulent withdrawal of 4,900 cases of whisky and 295 cases of champagne. The eighth was for a conspiracy to violate the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 10138^4 et seq.) by possessing, transporting, and selling these intoxicating liquors. The ninth was for the substantive crime of which the first laid a conspiracy. The jury found guilty seven others besides the three plaintiffs in error, and all were sentenced to imprisonment. The chief conspirators were Emanuel H. Kessler and Morris E. Sweetwood, to whom the three plaintiffs in error acted as assistants or accomplices and who did not appeal. None of the defendants took the stand on his own behalf.

The outline of the conspiracy alleged, and as we think proved, was that Kessler and Sweetwood, acting in concert through the firm of Hartman, Goldsmith & Co., imported the whisky in question, had it placed in a bonded warehouse, afterwards withdrew it fraudulently without the payment of duties, and disposed of it unlawfully within the United States. Hartman, Goldsmith & Co. was an importing corporation composed of the defendants Aron and Friedberg, who were the New York agents for the Scotch manufacturers, and who under their own name made the importation in question in the autumn of 1921. When the whisky arrived in New York, it was stored in a bonded warehouse in the name of Hartman, Goldsmith & Co., who executed a bond for the payment of the duties and remained liable for the same.

By the procurement of Kessler and Sweet-wood, the whisky was withdrawn towards the end of May, 1922, by means of forged permits, and it thereupon disappeared; just where no one knows. In March, 1922, Bim-baum procured an interest in a corporation kno.wn as the Standard Carpet, Company, which did an apparently legitimate business, in the basement of whose building he later built a secret cellar in which some of the eases of whisky were found; the names of the importers being partially obliterated. Bimbaum was proved to have sold liquor from this cellar, though not of the importations here in question.

For the sake of simplicity we shall take up the eases of the defendants separately, since different considerations apply to each.

1. Becher’s Case.

The "theory of the prosecution was that Beeher, with knowledge of the purposes of Kessler and Sweetwood, procured for Aron and Friedberg indemnity bonds of the United States Fidelity & Deposit Company of Maryland, to secure them against their liability for duties after the proposed fraudulent withdrawal from the warehouse.' It became necessary, therefore, to show that he had knowledge of Kessler’s purposes. To establish this, the prosecution proved the following facts: Beeher first made application to another surety company before the whisky was withdrawn for a bond covering 1,000 cases in which one Frank J. Sullivan appeared as principal, the condition of which was to indemnify and save harmless Aron and Friedberg from any liability under their bond to the United States. The surety company demanded $15,000 indemnity upon this bond and upon Becher’s failure to deposit the same asked for its return on June 3, at which time the whisky had already been withdrawn. Thereupon about the 20th of June Beeher obtained four bonds from the United States Fidelity & Deposit Company of similar import upon four applications signed by Frank J. Sullivan. These bonds were dated from the 22d to the 25th of May and were signed by Sullivan. Under his arrangement with the company’s agent, MeFee, Beeher was not required to make any indemnity deposit for these bonds. In them Sullivan figured as the purchaser of the whisky which was to be withdrawn in his name, and he appeared upon the books of Aron and Friedberg as the buyer from them.

It was necessary for the" prosecution to prove that Sullivan was either a wholly fictitious person or a dummy for Kessler and Sweetwood, and that Beeher knew it. This was proved by a variety of circumstances. On August 7th after the transactions came under suspicion, one Wilson, representing the surety company, had a talk with Beeher in which the latter said that Sullivan had shown him evidence that he had paid Aron and Friedberg $80,000; that he had investigated Sullivan’s references and had found, among other things, that he had a deposit of $40,000 in the Pacifie Bank. Aron and Friedberg’s books showed a credit to Sullivan on March 25th of over $86,000 as a buyer, as we have said, and a debit on the same day against the name of Aron of exactly the same amount, with a clerical error of 5 cents. Aron’s name upon the books had been written over an erasure, which the jury might reasonably have found originally contained the name of Kessler or Sweet* wood. The books showed that Kessler and Sweetwood had lent the money to Aron and Friedberg upon the original importation. The debit to them, sub nomine Aron, to balance Sullivan’s apparent credit, was made up of the repayment of this original loan, with interest, of another apparent loan of $10,000 with interest, and of $3,000 in addition. From this it was permissible, and in our judgment necessary, to conclude that Kessler had not been a lender at all, but that he had imported the whisky and had withdrawn it; the whole paraphernalia of entries being a fetch to disguise his connection. This was completely proved by the fact that Kessler, sub nomine Wood, paid Aron and Friedberg $16,200 in June, 1922, which, had the transaction been a loan, would have left him not quite whole as to his principal, to say nothing of any interest. The complicity of Aron and Friedberg with Kessler in the main outline of the conspiracy was undoubted.

This, however, did not prove that Beeher was privy to the scheme. There might have been a Sullivan, Kessler’s dummy, who, impersonating a buyer, imposed upon Beeher. It was necessary for the prosecution to contradict this possibility, and this they did out of Beeher’s own mouth. As we have said, he told Wilson that he had verified Sullivan’s bank account in the Pacific Bank, and it was proved that he had no such account. Again he told MeFee in October that Sullivan was a fictitious person. It is¡ -argued that this was consistent with his subsequent discovery of that fact. Taken alone this might be so, but not in the face of his statements to Wilson that he had met him and run down his references. Nor is it consistent with the interpretation that by “fictitious” he only meant that Sullivan had turned out to be another person than he supposed. The statement about the deposit answers that. Finally, it was proved that Kessler gave him $40,-000 to put up as indemnity with MeFee, which MeFee says he did not receive. If so, he could not have supposed that Sullivan was a genuine buyer; at least, Beeher knew that he was acting for Kessler in the transaction.

We think that such a web of deceit and disguise was ample justification .for a jury in concluding that Beeher knew the general nature of Kessler’s enterprise, at least that it involved the surreptitious and unlawful withdrawing of the whisky. They could scarcely have avoided the conclusion that he was guilty under the eighth count of ' a conspiracy for violating the National Prohibition Act.

It is, however, argued that though Beeher may have been implicated in Kessler’s scheme to sell the whisky unlawfully, there is not enough proof to hold him for defrauding the revenues. This argument too much ignores Beeher’s direct connection with that very part of the scheme. Aron and Fried-bergimust be secured if the withdrawals were to be fraudulent, because the liability would then be wholly theirs. Beeher had undertaken to secure them before any of the whisky had been withdrawn, and his subsequent efforts were certainly in pursuance of an original agreement. The bonds were not in the least necessary if the withdrawals were to be regular. As we have shown, everybody was dealing with, every one else on close terms. There was no Sullivan, or he was a mere dummy, and if there had been no fraud in prospect it seems incredible to us that Aron and Friedberg should not have seen to it that Kessler before withdrawing the whisky had paid the duties and had thus relieved them.

Beeher knew all this and knew the false Sullivan who was to appear as buyer and to sign the bonds. He knew that Kessler was doing it all and meant to keep his' connection with it secret. He further knew that Aron and Friedberg did not choose to protect themselves by insisting upon payment of the duties, but meant to take bonds of Sullivan. It seems to us barely credible that with full knowledge of this whole front of fraud and disguise, Becher should have been ignorant of Kessler’s actual plans.

Moreover, we find corroboration for this version in Becher’s dealings with McFee, who supposing the transactions to be honest regarded the liability of his company as merely nominal. But Kessler did not think so, since he gave Becher $40,000 to secure the company. Why did he take it? Surely because he knew that the risk would seem actual to Kessler, who knew what they all contemplated, though it seemed insubstantial to McFee who did not. It is conceivable that Beecher should have in this merely turned a gratuitous knavish trick on Kessler, but the circumstance fits rather too neatly into the theory of the prosecution.

To sum up, we can scarcely believe that among such confederates it would be likely that in a matter so closely concerned with the very duty detailed to Becher he would or could have been kept in the dark as to their purposes. At least, there seems to us enough to justify a jury in so concluding. Whether we should have had any reasonable doubts ourselves is not to the point.

The ninth count was proved if the first was. As we have said, Becher began his efforts to get the bonds before the whisky was withdrawn. If there was an antecedent agreement by which this was to be his.share of the common purpose, and if his procuring .of the bonds was a condition to Aron and Friedberg’s consent to the withdrawal, all were accomplices and therefore principals in the substantive crime.

The claim that Revised Statutes, § 2987 (Comp. St. § 5680), was repealed by the National Prohibition Act, might have been good, had the events here in question occurred before the Supplementary Prohibition Act of November, 1921; but they did not. U. S. v. Stafoff, 260 U. S. 477, 43 S. Ct. 197, 67 L. Ed. 358, rules upon this point.

The point is bad that the permit should have been set out in full in the ninth count. The forged permits on which the whisky was withdrawn could not be found, but the count described them with sufficient accuracy by saying they were similar to Customs Permit 7507. Had this been deemed an insufficient description, it could have been supplied by bill of particulars. However, the whole point is bad in law in any event, for the indictment was not for forgery, and it is only in cases such as forgery, counterfeiting, or the misuse of the mails that it is necessary to set forth the document in full. U. S. v. Heinze (C. C.) 161 F. 426. Finally, upon the motion to dismiss the point was not raised by any of the defendants and the bare motion to dismiss was not sufficient.

The criticism of counts 1 and 8 qua pleading is not good. Under a charge of conspiracy the gravamen of the crime is the formation of the agreement. It is true that there can be no prosecution until some overt act has been committed, but it was not necessary that the whisky should be deposited in the warehouse or even should be imported. The crime was complete as soon as the agreement was made and any step in its execution had taken place.

In his charge the learned trial judge without request from the defendants mentioned the fact that they had not taken the stand. With some elaboration he instructed the jury that no inference of guilt could be drawn from this. Becher now urges that any allusion to the fact was reversible error. It is no doubt better if a defendant requests no charge upon the subject, for the trial judge to say nothing about it; but to say that when he does, it is error, carries the doetrine of self-incrimination to an absurdity.

Halle was an attorney for Kessler and Sweetwood. After the latter had discovered that Becher had not deposited with the surety company the $40,000 given to him as indemnity, they had an interview with him at which Halle was the spokesman. He questioned Becher as to what had become of the money, to which Becher falsely answered that he had delivered it to the surety company as indemnity. Bechet objected to the evidence as incompetent upon the theory that he was Kessler’s agent and that the communication to Halle, concededly Kessler’s attorney, was privileged. The objection is clearly bad. Had Becher been still active as Kessler’s agent, and had the communication been for the purpose of furthering Kessler’s projects, it might perhaps have been privileged. We may so assume without expressing that opinion. But the interview was not of that character. Kessler was acting then in hostility to Becher, suspecting that he had converted his moneys, and questioning him with a view to their possible recovery. Such a communication is in no sense privileged, but is between the client on the one hand and a third person on the other, as an opposed party.

We see no error in Becher’s trial, and as to him the judgment is affirmed.

2. Friedberg’s Case.

After what we have already said, it seems to us scarcely necessary to say much about the only point which Friedberg raises, the sufficiency of the proof as to him. He knew of the false Sullivan and that he was merely a disguise for Kessler. He knew that Kessler had imported the whisky, stored the whisky, would withdraw the whisky, and must sell the whisky. He could have no illusions about his purposes. As to his complicity in the fraudulent withdrawal, as in Becker's ease, the proof is not quite so strong. Tet it was he who insisted on the bonds, though he had it in his power to require Kessler to pay the duties before he withdrew the liquors. It was he who by his letters of July 17, 1922, began to lay a foundation for recovery from the surety compa^ ny on what he knew to be a fraudulent claim, a claim in the name of Sullivan who had disappeared because he never existed. It appears to us merely a waste of words,1 in the face of all this, to argue in detail that a jury had no basis on which to involve him in that feature of the scheme in which he was so vitally concerned and which he took such care to make safe.

As to Friedberg the judgment is affirmed.

3. Bimbaum’s Case.

The first, point in Bimbaum’s ease is that counts 1 and 8 charge no crimes. Each is cast in the same form; it alleges in general the legal effect of the conspiracy, and then, as introduction to the details of the agreement, that it was a part of said conspiracy” that the conspirators should do so and so. The challenge is that nowhere is the conspiracy set up as a whole. This is a misconception of a form in use for many years in this circuit. The phrase is to be interpreted, not as a meaning that the conspiracy was in part as alleged, but that the acts alleged were within the joint scheme, that they were a parcel of it. When finally enumerated, these acts are to be taken as an exhaustive summation of the whole criminal agreement, and the count lays a good charge.

The next point is the invalidity of the search warrant on which the premises of the Standard Carpet Company were searched. We find it unnecessary to discuss the details of these affidavits more than to say that we find it difficult to see how any warrant could stand on reasonable inferences if this is to fail.

The most important point, and one in which in part we agree with the defendant, is of the sufficiency of the proof connecting him with the conspiracy. It was indeed abundantly proved, and but faintly if at all disputed, that the jury might well have found Bimbaum guilty of selling liquors unlawfully, but that he argues is quite another charge. Of course, we agree, but the circumstances as a whole leave no doubt that he was implicated at least in Kessler’s general enterprise, and was not as he argues merely a buyer from him. We concede at once that merely as buyer he was not a party to the scheme in any criminal sense, that on the contrary the prosecution was bound to involve him in the plan as a whole in some other sense; but the proof was ample. While none of his sales were traced back to any of the liquor here in question, some eases with the marks partly obliterated were discovered in his cellar, secreted with an elaboration which was proof positive that he had established a cache for illegal liquors which was to be continuously used as such. We need hardly go into the details or the means of disclosure; they deeply involved him in the illegal trade.

Still all this was indeed equally consistent with his being a large buyer and did not show his complicity with Kessler. The other proof did. His entry into the Standard Carpet Company was an obvious cover for his purposes, since he there made his cache and thence he sold his contraband liquor. There he was at times visited by Kessler, Sweet-wood, and Fox. The fact which to our mind ends any doubt is the payment of $40,-000 made by Kessler sub nomine Wood to Bimbaum on March 7th. That was shortly after the conclusion of his bargain with Rosenthal by which he got a half interest in the carpet company. He had paid Rosenthal $32,000 and later in July eventually forced him out altogether by a final payment of $10,000. The sufficiency of the proof of this payment is challenged, but the point is trivial. The absence of the cashier’s cheek rendered competent the stub which was presumably made out at the same time, and there was ample proof that it recorded a payment from Wood to Bimbaum.

This was wholly inconsistent with the supposition now put forward that Bimbaum was merely a buyer of Kessler’s liquors. If so, the payments would have been from him not to him. It is difficult to see how any other reasonable conclusion could be reached than that he was acting for Kessler when in the early part of the year he got his first share in the carpet company. His connection with Fox in the year 1921 gave some corroboration to such an inference.

However, it was one thing to prove that Bimbaum was privy to Kessler’s scheme to dispense whisky unlawfully, and another that he knew anything of that detail which involved defrauding the United States of its revenues. The chances are indeed pretty strong that he did, but we have been unable to find in the record any evidence on the matter. It seems to us quite possible that although he is shown in February to have been devising means by which Kessler should secrete the whisky, he was not informed of how Kessler was to get it out of bond, or indeed whether it was to come in regularly or by illicit importation. We all agree that the conviction must therefore be reversed upon the ninth count, but my brothers think that that upon the first should be affirmed. They invoke the principle that when once a man is shown to have engaged in a conspiracy to commit some illegal act he becomes criminally liable for everything which his accomplices may do in its execution. Bimbaum being shown in February to be in the plot to sell the whisky became therefore privy to the fraud upon the United States which Kessler and Friedberg and Beeher later perpetrated in its execution. Speaking for myself alone, I cannot concur in this ■ conclusion. When the books say that a conspirator is responsible for all that is done by his fellows without his knowledge, I understand no more than that their conduct will be competent proof against him; as for example, if it be pleaded as an overt act, or introduced in evidence as showing the s'eope of the scheme. To say that every one once shown to be engaged in a criminal agreement thereby becomes involved as a party in all independent criminal agreements, even though they be ancillary to the first, seems to me to contradict the primary test of criminal responsibility that a man must be aware of the acts with which he is charged. The result in the ease at bar makes no difference in the term of Bimbaum’s imprisonment, since the same sentence was imposed on all counts to ran concurrently, but it does affect the fine of $10,000.

Bimbaum’s attorney asked the court to charge that the jury must acquit unless they could not reconcile the evidence with any hypothesis except innocence. This Judge Winslow declined, relying on his colloquial instructions which so far as we can see included the request asked. We should not indeed stop to notice the matter at all, except that the point seems to us to rest on a misconception of what it is ever necessary for a trial judge to say. It is of course true that if a state of facts is compatible with either guilt or innocence the jury must acquit; the guilt is not shown at all, to say nothing of reasonable doubts. But that is necessarily involved in charging them that they must positively find all the facts which make up the crime. It is perhaps a convenient thing, arguendo, for a judge to illustrate his meaning by such examples, but it is not in the least degree necessary. Nothing is more conducive to the absurd formalism, which even yet at times invades a criminal trial, than to suppose that there is a ritual which must be repeated if the charm is to work. We wish once more, since it appears to be necessary, to repudiate altogether any such putative requirement. It is enough if it appears that the jury has been told that the prosecution must establish all the facts to the required degree of satisfaction of the jury, and there is no fixed way in which this need be communicated, so long as that idea is evident. Had the learned judge not only refused the request, but said nothing of the kind in his charge, he would have been altogether justified, so long as the substance of what he said showed that the prosecution must prove its case.

There are a number of exceptions to the admission of evidence, of which we need notice only the more important. The first is that it was error to admit the proof of identity between the cases of whisky imported and those which were stored in the warehouse. This was done as follows: The bills of lading on which they were imported were put in evidence. It is alleged that this was hearsay evidence of the fact that the cases bore the same numbers. No such objection was taken at the time, assuming that it would have been good. Next the correspondence of these numbers with those of the cases stored in the warehouse was shown by certain transfer slips made by Sobel, the United States storekeeper, as a record of the cases stored. These numbers he did not get from inspection of the eases, but from slips made by inspectors who had seen the cases and recorded the numbers. The inspectors’ slips would have been good primary evidence, being official documents recording the personal observation of the official. Sobel’s copies were good secondary proof, and no objection was made that the inspectors’ slips were not themselves produced.

The other point we think it necessary to discuss is that disputed signatures were proved by comparison with documents bearing genuine signatures which were not independently relevant, contrary to the rule in Hickory v. U. S., 151 U. S. 303, 14 S. Ct. 334, 38 L. Ed. 170, and Williams v. Conger, 125 U. S. 397, 8 S. Ct. 933, 31 L. Ed. 778. It is quite, true that Sweetwood’s signature to a bond signed by him for his appearance in answer to a criminal charge was offered for this purpose, but no objection was made at the time either to its admission or to the purpose for which it was to be used. A general and unspecified motion to strike out the document made at the close of the case, not raising any such objection, will not serve. Exhibit 11 was Kessler’s card in the Manufacturer’s Trust Company. It was not proved as his when admitted, but the correctness of the copy of his account in the bank was admitted. Conceding that Kessler had such an account, the authenticity of the signature was proved prima facie. It was relevant, moreover, since some of, the items of the account were relevant. Exhibit 47 was Kessler’s signature card in the Chat-ham & Phoenix Bank. It was proved but was probably irrelevant. The signature cards of Grimes and Jordon in the Ham-man Bank were neither relevant nor authenticated. We decline to make such errors the basis of a reversal in the face of a record of over 1,200 pages. The identity of “Wood” with Kessler and • Sweetwood was proved by many other circumstances and could not reasonably be doubted. It depended in no sense on Kessler’s signature cards. The identity of Grimes or Jordon with Sullivan may or may not have been argued at the trial; we have no means of knowing it. In any event, this is a point raised only by Bimbaum, and we have found that the evidence was not enough to connect him with the fraudulent withdrawal of the whisky, with which Grimes, Jordon, and the putative Sullivan were concerned.

The judgment is affirmed on all counts as to Becher and Eriedberg. It is affirmed as to Bimbaum except as to the ninth count, as to which it is reversed.


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    In re HURST & HURST, Inc. Petition of CREDIT GUIDE PUB. CO.
    (Circuit Court of Appeals, Second Circuit.
    January 5, 1925.)
    No. 120.
    I. Bankruptcy ©=212 — Where consent order, not appealed from, reserved lien on property to receiver, petitioner held not entitled! to claim that receiver parted with lien by delivery of parts of property.
    Where there was no appeal from consent order referring to special master application to require petitioner to return property improperly taken from bankrupt’s possession, and such order expressly provided that receiver or trustee should have a lien on property as security for amount due, petitioner will not be heard to object that receiver parted with his lien by delivery of certain parts of the property.
    2. Bankruptcy ©=212 — Order requiring return of property held to sufficiently identify same.
    Order requiring petitioner to return certain property improperly taken from bankrupt’s possession helé to sufficiently identify property.
    3. Bankruptcy ©=446 — Suggestion on petition to revise that petitioner might' be held for contempt not considered, but compliance with order presumed.
    On petition to revise order requiring return of property improperly taken from bankrupt’s possession, or in the alternative to pay amount found due, petitioner’s suggestion that it might be held for contempt for failing to obey the order will not be considered, but it will be assumed that petitioner will comply with the order.
    4. Bankruptcy ©=446 — Sufficiency of evidence not reviewed on petition to revise.
    On petition to revise, the sufficiency of the evidence will not be reviewed, where findings of fact are supported by some, evidence.
    5. Bankruptcy ©=212 — 'Trustee held to have shown sufficient compliance with.court’s order as to procuring assignments from judgment creditor.
    Where court, in making order requiring petitioner to return property improperly taken from bankrupt’s possession or to pay amount found due, provided for trustee securing assignments of judgments from certain judgment creditors, and on petition to revise it was shown that all but one of such assignments had been procured, and that trustee was in position to obtain assignment of such judgment, •if petitioner intended to pay, helé, there was sufficient showing of trustee’s compliance with order.
    Petition to Revise Order of the District Court of the United States for the Southern District qf New York.
    In the matter of Hurst & Hurst, Inc., bankrupt. Application to require the Credit Guide Publishing Company to return property of the bankrupt to the trustee was submitted to a special master by stipulation, and to review an order of the District Court approving the report, and directing the petitioner to return the property or pay balance found due, the Publishing Company petitions to revise.
    Order affirmed.
    Samuel Rose, of New York City, for appellant.

      Yankauer & Davidson, of New York City (Harvey T. Mann, of New York City, of counsel), for respondent.
    Before ROGERS, HOUGH, and MANTON, Circuit Judges.
   MANTON, Circuit Judge.

After the adjudication in bankruptcy and the appointment of a receiver of this bankrupt, it was found that the Credit Guide Publishing Company had obtained certain galley pages of type upon which the bankrupt asserted an artisan’s lien. An application was made for the return of the property alleged to have been improperly taken from the bankrupt’s possession, and this issue, upon stipulation, was submitted to a special master to determine the debits and credits of the parties. The master found that there existed a balance due to the bankrupt of $6,100. The master’s findings were approved by the District Court, and an order was entered accordingly, directing the payment, but the order of the court provided that the trustee in bankruptcy secure assignments of judgments from certain judgment creditors who had reduced their claims against the petitioner to judgment. This was done to avoid the possibility of double recovery from the petitioner. The order referring the matter to the special master stands uneontroverted.

We are at first urged to consider the claim of the petitioner that the receiver parted with his lien by delivery of parts of the galleys to the petitioner; it being contended that this was done pursuant to the contract of August 29, 1921. This claim is answered by the fact that, by the terms of the order of reference dated January 5, 1922, which was entered upon consent, it was provided that, in the event that the petitioner fails to pay the amount which may be found due and owing to the bankrupt, it shall turn back to the receiver or trustee the page galley proofs, and further that “the receiver or trustee shall have a lien upon the same as security for the amount found due.” Since there was never an appeal from the order entered upon that stipulation, it must be regarded as settled, and there was a lien for any balance that might be found due. The result is that the petitioner must pay or return the galley pages of type for the purpose of satisfying the lien thus secured by the order.

It is next argued that there is no sufficient identification °of the property in the order of May 28, 1924. The order of January 25, 1922, described the property as “the page galleys of type heretofore turned over by the receiver herein to the Credit Guide Publishing Company, Inc.” The later Order of May 28 follows this language substantially, and further identifies the galleys as such property “that was ordered to keep intact and accessible at all times.” It does not appear that there was ever any question of identity of the material upon which the bankrupt claimed a lien, and it appears to be well recognized and subject to identification by both litigants.

It is urged that, because of the form the order takes directing payment or delivery of the property, the petitioner might be held for contempt for failing to obey the order of the court appealed from. We will not consider such a suggestion at this time. We will assume that the petitioner will fulfill the directions of the order which we are about to affirm. Nor can we examine the sufficiency of the evidence to support the findings of fact on this petition to revise. It should be unnecessary now to cite authority for this proposition. Since there is some evidence to support the findings, we are precluded by the conclusion of the master later affirmed by the District Court.

It appears by the affidavits submitted that assignments had been made, as suggested by the District Court, of the judgments entered against the petitioner for the claims of three creditors. An affidavit was submitted, which is not controverted, to the effect that two of these judgments were assigned to the trustee, and the third, the judgment of the Enmore Linotype Service, Inc., was based upon a cause of action for work, labor, and services, and was not in any way based upon an assignment from the bankrupt. The affidavit sets forth that, if the petitioner intends to pay the amount due and owing, the trustee is in a position to obtain an assignment of the judgment of the Enmore Linotype Service, Inc. We think that this is sufficient compliance with the suggestion of the District Court.

Decree affirmed.


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    THE HELEN. THE WHITE ASH. THE W. S. HOLBROOK et al.
    (Circuit Court of Appeals, Second Circuit.
    December 2, 1924.)
    No. 108.
    1. Collision @=»96 — Tugs which had not undertaken work of moving colliding vessel held not liable.
    Where vessel backing out of slip under her own power collided with vessel on other side of slip, tugs engaged to move her, but which at time of collision were waiting at mouth of slip, and had not undertaken work of moving vessel, were not liable.
    2. Collision <©=>! !5 — Colliding vessel, and) not tow company, responsible for fault of captain of tugs in charge of colliding-vessel.
    Where captain of tugs sent to move vessel from one slip to another, and who received pilot’s fee, was on her bridge in command as she backed from slip under her own steam without line to dock, and collided with vessel on other side of slip, colliding vessel, and not towing company, held responsible for his fault in navigation.
    3. Shipping <®=v28 — Maritime lien impressed on vessel goes with it into whosesoever hands it may come.
    Collision impresses maritime lien on wrongdoing vessel, which goes with it into whoseso-ever hands it may- come.
    4. Shipping <§==>87 — Maritime Hen impressed on . vessel causing damage is inchoate at moment of wrong, and must he perfected by subsequent proceedings.
    Maritime lien impressed on vessel causing damage is inchoate at moment of wrong, and must be-perfected by subsequent proceedings.
    Appeal from the District Court of the United States for the Eastern District of New York.
    Libel by J. P. Clark against the steamship Helen, her engines, etc., claimed by the Bull Insular Steamship Company, and the steam tug White Ash, her engines, etc., cláimed by the Ovens’ Towboats, Incorporated, wherein the steam tugs W. S. Holbrook and others were impleaded. Erom a decree granting partial relief (288 E. 935), libelant appeals.
    Reversed in part, and affirmed in part.
    Park & Mattison, of New York City (Samuel Park and Anthony V. Lynch, Jr., both of New York City, of counsel), for appellant.
    Duncan & Mount, of New York City (Dudley C. Smith, of New York City, of counsel), for appellee Bull Insular S. S. Co.
    Foley & Martin, of New York City (Wm. J. Martin and Geo. V. A. MeCloskey, both of New York City, of counsel), for appellee Ovens’ Towboats, Inc.
    Before HOUGH and MANTON, Circuit Judges, and LEARNED HAND,, District Judge.
   MANTON, Circuit Judge.

The libelant was the owner of the coal boat J. P. Clark, which on March 22d was lying securely moored outside the coal boat Burns Bros. No. 20 on the north side of the pier at the foot of Adams street, Brooklyn. The steamship Helen, owned by the Bull Insular Steamship Company, was moored across the slip on the south side of the dock at the foot of Pearl street, Brooklyn, on the morning of that day. Between 12 and 1 o’clock p. m. on that date with the ebb tide running full strength, the Helen started backing out from her berth under her own steam. The influence of the tide and the failure of the Helen to hold a line on the dock caused her to swing across the slip and strike the Clark, doing considerable damage to her and to the Burns Bros. No. 20. The Holbrook Towing Line, Inc., was engaged by the owners of the Helen to shift the Helen from the Arbuckle Slip to South Fourth street, Brooklyn, and had in waiting for assistance four tugs with a captain in charge. The Holbrook Company’s captain in charge was first sent to perform this work with two tugs, but was later assigned two additional tugs. The captain went aboard the bridge qf the Helen and the steamer backed out of the slip under her own steam, with the two tugs waiting at the mouth of the slip under her starboard quarter to hold her up against the ebb tide. No line was hqld on the dock; all of the lines were let go. The captain testified that he received a pilot’s fee of $5. At the time, the master of the Helen, the first officer, and the wheelsman were on the bridge of the Helen hut the navigation was directed and in charge of the Holbrook’s captain. The. District Court dismissed the libel, holding in substance that the Holbrook’s captain was not the agent of the owners of the Helen, but simply an employee of the Holbrook Towing Line which was an independent contractor and therefore declined to hold the tugs or vessel responsible in rem.

The record disclosed that the tugs did not at any time come in contact or undertake the work of moving the vessel, and therefore there is no maritime lien impressed against the tugs which came to assist in this maneuver. That part of'the decree which dismisses the libel as against the tugs is sustained. But the decree entered against the Holbrook Towing Line should be reversed and a decree entered against the Helen. The Helen came in collision with the libelant’s coal boat. It is quite clear that none of the tugs had as yet begun to exert any force on the Helen at the time of the collision, but were waiting in a position under the quarter of the ship while she was backing out under her own steam. It was while the Helen was thus navigated that the collision occurred. The defense that the master of one of the tugs was on the bridge in command is insufficient because he was acting as a pilot hired voluntarily by the owners of the Helen, and as to third parties the Helen is responsible for damages caused by fault in her navigation. The collision impressed upon the wrongdoing vessel a maritime lien. That lien, so impressed, goes with the vessel into whosesoever hands it may come. It is inchoate at the moment of the wrong, and must be perfected by subsequent proceedings. The China, 7 Wall. 53, 19 L. Ed. 67. This early decision has been followed as a guide since its pronouncement as illustrated in The Eugene F. Moran, 212 U. S. 466, 29 S. Ct. 339, 53 L. Ed. 600, where the Supreme Court said:

“The New York Central Railroad gets all its damages in any view, unless Sturgis v. Boyer, 24 How. 110, should be overruled. In that ease it was held that a tug having control of a vessel in tow was solely responsible to a lighter upset by the vessel through the fault of the tug alone. * * w
“We see no reason why the decision should not stand. No doubt the fiction that a vessel may be a wrongdoer and may be held, although the owners are not personally responsible on principles of agency or otherwise, is carried further here than in England. The China, 7 Wall. 53; The Barnstable, 181 U. S. 464, 467, 468; Homer Ramsdell Transportation Co. v. La Compagnie Generate Transatlantique, 182 U. S. 406, 413, 414. See the Blackheath, 195 U. S. 361, 366. Possibly the survival of the fiction has been helped by the convenient security that it furnishes, just as no doubt the responsibility of a master for a servant’s torts, that he has done «his best to prevent, has been helped by the feeling that it was desirable to have some one who was able to pay. See Williamson v. Price, 4 Martin, N. S. 399, 401; Williams v. Jones, 3 H. & C. 256, 263. But after all a fiction is not a satisfactory ground for taking one man’s property to satisfy another man’s wrong, and it should not be extended. There is a practical line and a difference in degree between the ease where the harm is done by the mismanagement of the offending vessel and that where it is done by the mismanagement of another vessel to which the immediate but innocent instrument of harm is attached” (eases cited).

The vessel, in whosesoever hands she lawfully is, is herself considered as the wrongdoer, and is liable for the tort and subject to a maritime lien for the damages. Ralli v. Troop, 157 U. S. 402, 15 S. Ct. 657, 39 L. Ed. 742. In Homer Ramsdell Co. v. La Compagnie Gen. Trans., 182 U. S. 406, 21 S. Ct. 831, 45 L. Ed. 1155, the court said:

“The master of a ship, and the owner also, is liable for any injury done by the negligence of the crew employed in the ship. The same doctrine will apply to the ease of a pilot, employed 'by the master or owner, by whose negligence any injury happens to a third person or his property; as, for example, by a collision with another ship, occasioned by his negligence. And it will make no difference in the case, that the pilot, if any is employed, is required to be a licensed pilot; provided the master is at liberty to take a pilot, or not, at his pleasure; for, in such a ease, the master acts voluntarily, although he is necessarily required to select from a particular class.”

This court, in The Maren Lee, 278 F. 918, held that a pilot in charge of a vessel whose negligent orders resulted in a collision was not a compulsory pilot, but one voluntarily accepted as the result of contract, and that the vessel was liable in rem. There the master of a tug was stationed on the deck of a schooner in tow, directing her course in an endeavor to make her follow another tug which was towing ahead. A tug which was made fast to the starboard quarter of a schooner was at fault for going stern when the schooner tpok a sheer to starboard which resulted in a collision. The tug was held liable in rem for the resulting damages through her master, who gave the wrong order and was acting as pilot for the schooner. There we said:

“He was not a compulsory pilot, but one voluntarily accepted as the result of contract. Wherefore, if he gave a wrong order, which caused or contributed to collision, the Cressy is liable as the offending res (Homer Ramsdell, etc., Co. v. La Compagnie Generale, 182 U. S. 406, 21 Sup. Ct. 831, 45 L. Ed. 1155, and eases cited); whereas, if he gave a proper order (which we do not believe he did), and that order was misunderstood by the ship’s officers and/or the man at the wheel, the schooner is also liable, though for another reason.”

In The Edward G. Murray, 278 P. 895, we' held that the ship was responsible for the acts and omissions of the voluntary pilot guiding the ship for the injury done to person or property of third parties.

The eases relied on by the appellee are distinguishable. In Sturgis v. Boyer, 24 How. 110, 16 L. Ed. 591, the collision took place between a ship without motor power towed by a steam tug and a lighter propelled by oars. Thus the propelling power was furnished by the tug and it was held that unless the owner and person in charge of the vessel in some way sustain toward each other the relation of principal and agent, the injured party could not have his remedy against the colliding vessel.

In The Eugene Moran Case, 212 U. S. 466, 29 S. Ct. 339, 53 L. Ed. 600, the tug was moving the scows without motive power. They had no control of their own movements and the tug was held responsible for faulty navigation. In The John D. Rockefeller (C. C. A.) 272 F. 67, the steamer was in tow of two powerful tugs which entirely controlled her movements. The use of her own power was occasional, but did in no way contribute to the collision and she was held free from fault. In Wilmington Railway Bridge Co. v. Franco-Ottman Shipping Co., 259 F. 166, 170 C. C. A. 234, the ship employed a tug to tow her through a bridge, and while the tug master was on the steamer directing the navigation, struck and damaged the bridge. • It was shown that the ship- which brought about the collision was not at fault and the suit was dismissed against her owner. That suit was in personam. As pointed out in The Eugene P. Moran, supra, there is a practical line and a difference in degree between the ease where the harm is done by the mismanagement of the offending vessel, and that where it is done by the mismanagement of another vessel to which the immediate but innocent instrument of harm is attached. Thus it has been consistently held that the vessel that comes into collision is considered the wrongdoer if there be fault in her navigation, and she is subject to maritime lien for damages irrespective of the question of agency and the liability does not depend upon the question of agency.

The decree dismissing the libe‘1 against the tug White Ash will be affirmed. A decree will be granted against the steamship Helen with costs. The District Court will enter a decree conforming with this opinion.

Reversed in part. Affirmed in part.