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low Greenwich Point, and nearly opposite Gloucester ferry. To make the landing, it was necessary for the tug to cross the river; but, as the navigable channel at this point is only between 1,500 and 1,600 feet in width, it is obvious that much caution was needed, especially with a tow so long and unwieldly. , No doubt the tug was a burdened vessel, and to that extent had the right of way, but even with this privilege it was still under obligation to exercise due care and not to obstruct the channel unnecessarily, or without proper regard for the rights of other craft. As the tug approached Gloucester, and while she was still to the south of the ferry slip, upon the eastern side, she blew three or four short blasts to notify the barges that the hawsers were about to be shortened, in order that the tow might be handled more readily, and the crossing be accomplished more safely. These blasts were intended only for the barges, and were so understood by the Algeria and by the other vessels that heard them. The custom for tows bound across the river from Gloucester to Point House wharf was to stop below the ferry slip on the eastern side, and to shorten hawsers before beginning the crossing. This was a reasonable and proper practice, and the Majestic should have observed it on this occasion. On the contrary, however, she disregarded her own signals to the barges, failed to stop on the eastern side of the channel, and began to cross without shortening any of the hawsers. When she had gone part of the way over, far enough probably to obstruct at least one-half of the channel, she stopped in midstream, and, in that situation, undertook to do the work of shortening the hawsers, that ought to have been done before she began the passage. While this process was going on, the collision with the Algeria took place, the steamship striking a severe blow upon the starboard side of the Jennings, not far from the stern, and the Bailey (which cast herself loose from the Jennings when the peril was seen to be imminent) drifting further upstream on the port side of the Algeria, and striking the barge Cardenas, which was lying at anchor to the eastward of the Algeria. The Majestic gave no signal of her intention to cross the stream, although the Algeria was in full view, and was seen by the tug about half a mile up the river. If the tug had stopped until the Algeria had passed, the collision could not have taken place, nor if she had kept on slowly, until it became certain that the steamship was not coming down, instead of turning directly across her path. Turning now to the Algeria, it is to be observed that she had come up the river earlier in the afternoon, and had overtaken and passed the tow on her way. She was then and afterwards in charge of a licensed pilot, and came to anchor off Kaighn's Point about 3 o'clock. For some reason, this anchorage ground was not regarded as safe or suitable, and about half past 3 she began to drop down the river in search of a better place. Her speed was very slow, not more than two miles over the ground, and she was still in charge of the pilot. The master and third officer were on the bridge, and a lookout was on duty . at the forecastle head, where the chief officer was also on watch. The Majestic, with her barges, was seen from three-quarters of a mile to a mile away, proceeding north along the eastern side of the channel. Her signals to the barges were heard on the Algeria, but, as already
stated, these were not intended for other vessels, and the Algeria did not suppose they were meant for her. When the Majestic turned to port without signal, and began to string out her tow across the river, the Algeria was half a mile away, and coming down very slowly against the flood tide. Seeing this threatening movement, the Algeria's wheel was put hard a-starboard, and her engines were stopped, or slowed down so as to secure a mere movement through the water. Thus she continued to approach the tow, although under control and at a slow rate of speed, evidently calculating that the tug could draw the tow clear before the courses would intersect. Whether this would have happened or not cannot now be known. Considering that the Jennings was struck very soon after she had turned across the stream, and that the Bailey apparently never turned at all, it may well be doubted whether the Algeria's calculation would have proved to be correct. At all events, it was utterly vitiated by the tug's stopping in midstream and undertaking to shorten hawsers in that dangerous position. When this maneuver was seen by the Algeria, her engines were ordered full speed astern, and her anchor was dropped, but she had already come too close to permit these very proper efforts to succeed, for the collision with the Jennings followed almost at once, and the injury to the Bailey happened very soon afterward. In this state of facts, I think the tug and the steamship were both at fault. The tug should have stopped and shortened her hawsers before attempting to cross, should have signaled her intention before undertaking the passage, and should not have stopped in midchannel, and thus have increased a danger already apparent. The steamship may have been at fault in not keeping farther off to the westward, although I am not greatly disposed to insist upon this, but I think she was certainly to blame in holding on too long after she saw the unusual obstruction before her. She was going at slow speed against a flood tide, and her movements could have been easily controlled. If she had stopped altogether, even at the loss of 15 minutes, or had stopped and reversed, when she observed the dangerous character of the tug's maneuver, the collision would not have occurred, and I think she must be held liable for taking the chance that the tug would be able to pull the tow across before she herself got down to the barges. Certainly she did not leave herself much margin, for with all her efforts she was not able to clear the second tier of the tow, although she began the attempt when she was half a mile away. Moreover, it must not be forgotten that the tow had the right of way, and the Algeria was bound to pay proper respect to this privilege, even if she were somewhat inconvenienced thereby. Neither did she give any signal of her movements, and this too may have contributed to the accident, although it is quite sufficient to hold the steamship at fault for failing to stop when stopping would have surely prevented the injury. Some argument was made in support of the charge that the barges were also negligent in casting off their hawsers and in failing to anchor after they found themselves adrift, but I am not disposed to regard it seriously. Whatever the barges may have done was in the stress of peril, and should be judged leniently. I see no sufficient ground on
which they, or either of them, can be adjudged in fault. A decree may be entered against the tug and the steamship, with an
order of reference to a commissioner.
In re AMERICAN KNIT GOODS MFG. CO.
1. BANKRUPTCY—RECLAMATION OF PROPERTY BY SELLER—RESCISSION OF SALE CONTRACT. Circumstances under which a court of equity might permit a rescission of a contract of sale on the ground of mistake in the representations, where the parties could be restored to their original position, may not warrant such relief after the purchaser has become bankrupt, and especially where the Specific property purchased cannot be restored.
2. SAME-SALE INDUCED BY FRAUD. Evidence held not to sustain the claim of a seller of goods to a bankrupt that such sales were induced by fraud on the part of the bankrupt in knowingly making materially false statements of assets, such as would entitle the Seller to rescind.
In Bankruptcy. On exceptions to report of special master.
James, Schell & Elkus, for trustee.
CHATFIELD, District Judge. A special master in reclamation proceedings has reported that the goods sought to be reclaimed should be retained by the trustee, and the petitioning creditors left to prove their claim as general creditors for the balance due them, amounting to $15,280.21. To this report the attorneys for the trustee have excepted, upon one ground, but have also moved to have the report confirmed; and the petitioning creditors have excepted separately to various findings by the special master, and to his conclusion.
The principal ground of objection by the petitioning creditors is that a statement of assets made by the bankrupt a few months prior to its failure is claimed to have been an inducement for further deliveries of goods by these creditors, and that this statement was not only false in fact, but that the bankrupt's officers knew it to be such, and issued it with a fraudulent purpose, in order to conceal the true condition of the corporation. Much of the goods delivered upon the orders made subsequent to the giving of the statement referred to have been paid for, and the balance amounts to the sum above mentioned, viz., $15,280.21. Subsequent to the making of this statement two separate contracts were entered into, one upon April 11, and one upon May 3, 1905, and a former contract of November 19, 1904, was modified, and the special master has found that this modification was not a new giving of credit, but merely a reduction in amount of the original contract.
However this may be, it appears from the testimony that the bankrupt corporation was in default, and that the creditors did not enforce this default, but allowed the modification of the contract, relying upon the statement of condition dated March 17, 1905. It is necessary therefore, to consider (1) whether this statement was false and fraudulent to a material extent; (2) whether the bankrupt, through its officers, knew that it was so false and misleading, and purposely intended to deceive by the use of the statement; and (3) whether the claimant creditors relied upon this statement for facts so material that the transaction would be set aside by a court of equity (if these statements were not in fact true) as having been entered into upon a mistake of fact, and causing the unjust enrichment of the party responsible for the mistake. As to the first and second points, the special master has reported at length as to the truth and accuracy of the statement. He has found that the statement issued was not materially false, and that the bankrupt corporation and its officers did not intend to issue a false statement, or to deceive. The special master has also reported that the creditors relied in part upon this statement and in part upon personal examinations for their action subsequent to the date of the statement of March 17, 1905, and the evidence seems to bear out the special master's report. Some of the items included as quick assets are capable of argument as to whether they are assets or liabilities; but there is no sufficient proof that the officers of the corporation purposely and fraudulently inserted these amounts with the intention of making a false statement, and it does not seem that these items are of such a character that they can be called mistakes of fact, or misrepresentations of fact, especially if made without intentional fault upon the part of the person making the representations. The creditors have claimed a right to rescind upon two theories: (1) That there was actual fraud; and (2) that, in the absence of actual fraud, equity would grant a rescission, if the representations were false in fact and the person making them mistakenly supposed them to be true. It is unnecessary to go into the law of the latter proposition. The circumstances under which equity will allow the rescission of a contract, and attempt to restore the parties to their original position, when such can equitably be done, do not seem to be applicable to the present case, when other creditors’ rights have intervened, and the debtor has been thrown into bankruptcy. It is believed that no court of equity would, under the present circumstances, allow the rescission. At any rate, no such rescission would be allowed, except with relation to some specific object or subject-matter of a contract, which could be returned to the party from whom it was obtained, and the parties thus be restored to their original position. In the present case this is not possible, and the petitioners have not prayed for the return of specific objects alone, but, on the contrary, have asked that they be given the balance in their favor upon an accounting; and, even if the return of the yarns in the possession of the trustee were what was asked, it does not seem to this court that the statement of March 17, 1905, contains such mistakes of fact as to show that the creditors did not assume the risk of the contract made, or were deceived as to imaterial facts into making that contract.
The special master's findings as to the accuracy of the financial statement in its material features, and the freedom of the officers of the bankrupt from fraudulent and intentional deceit, seem to be supported by evidence, and the burden of showing them incorrect to such a degree as to justify setting aside the report has not been sustained.
It is unnecessary to consider the exception on behalf of the trustee to the special master's report, as the report is in his favor.
The exceptions of the creditors should be overruled, and the report confirmed.
Ex parte BICK.
(Circuit Court, S. D. New York. June 29, 1907.)
1. BANKRUPTCY-CONTEMPT-ACTS CONSTITUTING MISBEHAVIOR-GIVING FALSE
The giving of false, vague, and evasive testimony by an alleged bankrupt on his examination before a special commissioner, with the intention of misleading the court and concealing assets of his estate, is a misbehavior, and constitutes a contempt, which the District Court has power to punish under Rev. St. § 725 [U. S. Comp. St. 1901, p. 583], on a sum
mary hearing without a jury. 2. HABEAS CORPUS-JURISDICTION AND RELIEF-CIRCUIT AND DISTRICT COURTS.
A Circuit Court of the United States has no appellate jurisdiction over a District Court, and cannot review its proceedings for any error or irregularity on petition for a writ of habeas corpus, where the District Court had jurisdiction.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 13, Courts, § 1118. Jurisdiction of federal courts, see note to In re Huse, 25 C. C. A. 4.)
WARD, Circuit Judge. This is a proceeding to discharge the petitioner by means of a writ of habeas corpus from a commitment for contempt of court. After a petition of involuntary bankruptcy had been filed against Philip and Joseph E. Bick, copartners, the petitioner, Joseph E. Bick, was required by an order of the United States District Court for the Southern District of New York to appear before a special commissioner for examination. After having testified several times before the special commissioner he was adjudicated a bankrupt, and subsequently, on the petition of William Henkel, Jr., receiver, the District Court made an order requiring the petitioner to show cause why he should not be adjudged guilty of contempt for false testimony, and for vague, contradictory, contemptuous and evasive answers given in order to conceal assets of his estate. The petitioner filed an answer denying the contempt, and appeared on the return day personally and by counsel. The return of the United States marshal shows that the district judge permitted the petitioner to testify before him in open court with reference to the acts and conduct charged against him. At the conclusion of the hearing the court adjudged the peti