27 F.(2d) 917 treatment by Dr. Bucknell, Dr. Jeliffe, and Dr. Giddings, and of the confinements at the Washington Hospital, St. Joseph's Infirmary, and at home, and of the recurrent severe headaches, were material misrepresentations. Whether the insurer, if fully informed, would have considered the mental aberration in 1914 as due to some toxemia, or would have connected it with the recurrent headaches, as indicating a constitutional weakness, cannot be told. testified touching this past history. Information of this testimony was conveyed to the insurance company. Its officers swear that it was their first knowledge of the misrepresentations touching the risk, and that they would not have accepted it had they known the facts. Demand to cancel the policy was made, with tender of the premiums and interest. This was more than six years after the misrepresentations occurred, yet the facts being within the peculiar knowledge of the Manleys, with nothing to suggest to the company either suspicion or other sources of knowledge, laches cannot be imputed to it. Cohron v. Woodland Hills Co., 164 Ga. 581. 139 S. E. 56. The rider made incontestable the liability only in respect to the time at which the diseases causing failure of health. began. It did not cut off inquiry into the validity of the contract on account of misrepresentations. Several of the doctors testify that this history would, in their opinion, render the risk uninsurable. Others think that the lapse of time, and the failure of the several insurance examiners to find anything wrong, would indicate the risk to be accept able. Nevertheless the company was entitled to the facts, to pass its own judgment upon the risk. I am of opinion that full disclosure about these matters was requisite, and falsity in the answers respecting them was fatal. The mania, in 1914, for business and personal reasons, was never made public. Mr. Manley never alluded to it in any of his many insurance applications. He may have concealed it purposely, or he may, as no doubt was the case while he had it, have been ignorant or unappreciative of the nature and extent of his trouble. But he should have disclosed its occurrence and named the physicians consulted. That its cause had not been ascertained, rendered dis- District Court, D. Massachusetts. August 3, closure the more important. Question 4 was not confined to diseases, but covered also "complaints and symptoms," and question 5 covered consultations for ailments, as well as for diseases. What has happened since may not be of importance, except to show what the ailments and complaints which Mr. Manley had, though they may not have been diagnosed at the time as diseases, were symptomatic of. Though Dr. Paulin's treatment in 1920 was temporarily successful, in February, 1922, Mr. Manley had a slight hemorrhage on the brain, with temporary partial paralysis. Dr. Bivings gives a picture of his resulting condition, with blood pressure 240, suffering with intense headaches, nervous and unable to sleep, speech impaired, and memory bad. Arterio-sclerosis was then well advanced. He again rallied and was able to work, but in 1926 was permanently and wholly disabled, both mentally and physically. [4] On August, 1926, he made claim for the first time under this policy, and his sanity was inquired into in court. The abovenamed physicians and Mrs. Manley there Under the agreement made in the application, and by the laws of Georgia, there is no liability under the policy and the same should be canceled. A decree may be taken accordingly. In re COCHRANE & HARPER SE- 1928. No. 39727. 1. Bankruptcy59-Debtor need not actively co-operate with attaching creditor to make his failure to obtain dissolution of attachment an "act of bankruptcy"; "preference" (Bankruptcy Act, as amended in 1926 [11 USCA § 21]). Under provision of the 1926 amendment to the Bankruptcy Act (11 USCA § 21), alleged bankrupt need not co-operate with attaching creditor in legal proceedings to make his failure to obtain dissolution of attachment an "act of bankruptcy," since such failure results in giving preference to the attaching creditor, though preference was not actively intended. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Act of Bankruptcy; Preference.] 2. Bankruptcy 3-Statute making debtor's failure to obtain dissolution of attachment an "act of bankruptcy" is not unconstitutional (Bankruptcy Act, as amended in 1926 [11 USCA § 21]). Provision of 1926 amendment to Bank ruptcy Act (11 USCA § 21), making debtor's failure to obtain dissolution of attachment "act of bankruptcy," held not unconstitutional. 3. Bankruptcy 72(1)-Corporation taking over securities of dissolved partnership in financial difficulties for liquidation held subject to bankruptcy; "business corporation" (Bankruptcy Act, II USCA § 22). Where partnership in financial difficulties dissolved and transferred its securities to corporation organized by it, under agreement with its principal creditors which provided that partners were to give corporation a percentage of the earnings from any business in which they might engage, and that corporation would liquidate the assets and guarantee all debts of creditors in consideration of their refraining from suing old firm, held, under Bankruptcy Act (11 USCA § 22), that corporation was subject to bankruptcy as a "business corporation," as against contention that it was merely assignee for benefit of creditors. [Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Business Corporation.] 4. Bankruptcy 76(3)-Objection that petitioning creditors were estopped to bring petition held overcome by joining other creditors, to whom objection was not applicable. Objection that creditors petitioning for involuntary adjudication in bankruptcy were estopped to bring such petition was cured by the joining of other creditors to whom such objection was not applicable. In Bankruptcy. In the matter of the Cochrane & Harper Securities Company of Boston, alleged bankrupt. On report of referee, advising involuntary adjudication, opposed by the United States Trust Company, objecting creditor. Adjudication ordered. Harvey H. Bundy, Henry Parkman, Jr., and Putnam, Bell, Dutch & Santry, all of Boston, Mass., for petitioners. Sherman L. Whipple and Martin Witte, both of Boston, Mass., for United States Trust Co., of Johnstown, Pa. LOWELL, District Judge. An involuntary petition in bankruptcy was filed against the Cochrane & Harper Securities Company, a corporation, on December 23, 1927. The corporation did not contest its adjudication, but an objecting creditor, the United States Trust Company of Johnstown, Pa., insisted that the corporation was not amenable to bankruptcy. The case was referred to Mr. Referee Lincoln, who reported, advising that an adjudication follow; the present proceeding is a hearing on this report. The firm of Cochrane, Harper & Co. were dealing in securities, largely of the New England Oil Corporation. In February, 1923, their affairs became embarrassed, and an agreement was entered into between the principal creditors and the firm. Pursuant to this agreement the Cochrane & Harper Securities Company was incorporated under the laws of Massachusetts. The arrangement was that the firm of Cochrane, Harper & Co. should be dissolved, and turn over to the corporation all of its securities, which it did. The members of the firm were to give to the corporation from time to time a certain percentage of any earnings from any business in which they might engage. The company was to liquidate the assets. It was thought at the time that by this manner of procedure the result to creditors would be much more favorable than if proceedings in bankruptcy were taken. The agreement provided that Cochrane, Harper & Co. should be relieved from the liability on their debts, and also provided that the creditors who agreed to the arrangement should not sue the old firm. The company guaranteed all the debts of the creditors; there was a provision that no suit on this guaranty should be instituted before March 1, 1924. Among the creditors who agreed to this arrangement was the Farmers' Guarantee & Mortgage Company of Johnstown, Pa., to whose rights the present objecting creditor has succeeded. The corporation was formed and proceeded to function, but its affairs did not turn out favorably, and $74,000 was all that could be realized from the assets which were turned over to it. On September 7, 1927, the United States Trust Company, the present objecting creditor, brought suit against the company, and attached by means of trustee process this sum of $74,000 in one of the Boston banks. This case raises several questions, which deserve careful consideration, not so much for any difficulty in their solution, as for their able and ingenious presentation by learned counsel. The circumstances are such as to show in an interesting way the evolution of the present Bankruptcy Act, from its passage in 1898 down through its latest amendments in 1926 (11 USCA). The decision which I am about to give would have been entirely different in 1909, and partly different in 1911; the law having been progressively changed, first in 1910 and again in 1926. Before 1910, the corporation would not have been amenable to the act; before 1926, there would have been no act of bankruptcy. [1] It is insisted by the objecting creditor that no act of bankruptcy was committed under the clause of the Bankruptcy Act contained in the amendment of 1926 relating to suffering or permitting an attachment, because the bankrupt did not co-operate with the attaching creditor in the legal proceedings. No authority to this effect has been cited, but the argument is that it would be unfair, and indeed unconstitutional, to pro 27 F.(2d) 917 vide that a mere undissolved attachment is very similar, though not in phraseology, should be an act of bankruptcy. There seems to one clause of the insolvent law of Massato be no question, however, under the rule chusetts which was passed in 1838 (St. 1838, laid down in Wilson Bros. v. Nelson, 183 c. 163), and has often been construed withU. S. 191, 22 S. Ct. 74, 46 L. Ed. 147, that out a hint of its illegality. Bates v. Chapin, the bankrupt need not actively co-operate to 8 Cush. (Mass.) 99; Taunton National Bank render it an act of bankruptcy. That case v. Stetson, 145 Mass. 366, 14 N. E. 349; related to another section of the statute, but Binney v. Globe National Bank, 150 Mass. the words of the clause now in issue are sim- 574, 23 N. E. 380, 6 L. R. A. 379; Marble v. ilar, and the principle is the same. See In Jamesfield Mfg. Co., 163 Mass. 171, 39 N. E. re Maryanov (D. C.) 20 F. (2d) 939. 998. The error in the argument of the objecting creditor arises from the lingering idea, hard to get rid of on account of the ordinary meaning of the word, that a preference always connotes an intent or desire to give an advantage to one creditor over another. This has not been the law under the present Bankruptcy Act. Collier (13th Ed.) p. 1245. But old ideas die hard. It is true that the new act of bankruptcy was passed to prevent a creditor getting an advantage by a preference (which would be voidable, if the petition were filed in time) ripening into a right of property, unassailable by a trustee in bankruptcy if the debtor is adjudicated on a petition filed too late to upset it. See In re Maryanov, ubi supra. This situation was brought about by the decision of the United States Supreme Court in Citizens' Banking Co. v. Ravenna Nat. Bank, 234 U. S. 360, 34 S. Ct. 806, 58 L. Ed. 1352. But there is no requirement that a preference be intended, nor even that one be effected, though that is the result. As to the hardship of providing that an undissolved attachment should be an act of bankruptcy, it is no harsher than the provisions of many insolvency laws. See Lowell, Bankruptcy, § 40. [2] The contention that the new act of bankruptcy is unconstitutional is met by the fact that it is a kind of provision not uncommon in bankruptcy acts that the existence of certain facts showing an insolvent condition should be taken as conclusive evidence of bankruptcy, and therefore be made an act of bankruptcy. Lowell, Bankruptcy, loc. cit. The argument as to unconstitutionality is unsound. The fourth act of bankruptcy [3] It is argued that the company is not subject to bankruptcy, because it is really merely an assignee for the benefit of creditors, though in form a business corporation. This argument is unsound. Missouri-American Electric Co. v. Hamilton-Brown Shoe Co. (C. C. A.) 165 F. 283. The only way in which the company resembles an assignee for creditors is that the final result of its operation will be the distribution of the fund among the creditors. It has many points of difference. In the first place, the debts of the creditors are guaranteed; in the second place, the individual partners were to contribute from time to time from their earnings in other lines of business; in the third place, it was contemplated that there would have to be business operations of some amount in order to liquidate the assets; in the fourth place, the surplus, if there had been any, would not have gone to the debtor; and finally, there was no relation of trust, as there is in an assignment for benefit of creditors. There is no doubt, in my opinion, that the company is subject to the Bankruptcy Act as a business corporation. The cases cited by the objecting creditor antedate the amendment of 1910. The provision as to the bankruptcy of corporations was entirely changed in 1910, so that decisions of courts before that time are no longer of authority. [4] It is also objected that the petitioning creditors were estopped to bring a petition. As pointed out in the learned report of the master, the objection, if it were a valid one, has been cured by the joining of other creditors to whom it is not applicable. Adjudication ordered. 1 THE DANIEL KERN. District Court, W. D. Washington, N. D. August 3, 1928. No. 3824. 1. Negligence 121(1), 134(1)-Negligence is never presumed, but must be established by fair preponderance of evidence. Negligence is never presumed, but must be established by a fair preponderance of the evidence. 2. Salvage 22-Loss of barge in tow raises no presumption of negligence of tug rendering salvage service. Loss of barge while in tow raises no presumption of negligence on part of tug rendering salvage service. 3. Salvage ~7-"Salvage service" is voluntary service to vessel in distress, entitling salvor to proportion of value of property saved, as well as compensation for services, while "towage" is service merely expediting voyage, and paid for by agreement or on quantum meruit. "Salvage service" is a voluntary service, rendered to a vessel needing assistance in distress, present or reasonably apprehended, and compensated, not only for services rendered, but by gratuity predicated on proportion of value of property saved, as encouragement to others for like service, while "towage" is service for mere purpose of expediting voyage, without reference to danger or distress, and is paid for by agreement, or on basis of quantum meruit pro opere et labore. [Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Salvage Service; Towage.] 4. Salvage 22-Good faith salvors must use judgment and skill of ordinarily prudent and capable man in preserving his own property. Salvors in good faith are held to reasonable judgment and skill, such as a man of ordinary skill and capacity would use in the preservation of his own property. In Admiralty. Libel by the Coastwise Steamship & Barge Company against the steamship Daniel Kern, her engines, tackle, etc., claimed by the Columbia Barge Company. Libel dismissed. towage service, and denies that the loss was occasioned through any act of omission or commission on the part of the officers of the respondent ship. The commissioner began taking testimony on the 18th of January, 1918, on behalf of the libelant, and the testimony of the officers in charge of the respondent was taken at that time. The testimony was not concluded in the case until 1927, and the commissioner's findings and conclusions were filed in this court on the 23d of May, 1928. Exceptions to the commissioner's report were filed June 18, 1928, and thereafter argument was heard by the court on the exceptions, and the final brief submitted upon the exceptions July 18, 1928. The issue involved is clearly a question of fact. This was determined against the libelant by the commissioner, who had before him all of the witnesses and observed their demeanor and manner of testifying. The testimony of the claimant as to the ultimate fact was given when all of the circumstances were fresh in the minds of the witnesses, and before any testimony had been given on behalf of the libelant. The libelant did not produce its witnesses until some time after the event, and necessarily the circumstances and knowledge with relation to the conduct and acts of the parties must have been considerably dimmed. [1, 2] Without going into a detailed discussion and analysis of the evidence, I am satisfied, after reading the testimony and considering all of the circumstances detailed, that the burden placed upon the libelant has not been sustained. The findings of the commissioner are therefore approved. Negligence is never presumed, but must be established by a fair preponderance of the evidence. Loss of the barge raises no presumption of negligence on the part of the tug. The Steamer Webb, 81 U. S. (14 Wall.) 406, 20 L. Ed. 774. Disinterested witnesses, who were present and knew of many of the cir called, nor their absence accounted for. It Trefethen & Findley, of Seattle, Wash., cumstances bearing upon the issue, were not for libelant. Winter S. Martin, of Seattle, Wash., for is obvious that these should have been called respondent. NETERER, District Judge. The libelant seeks to recover the value of a barge known as St. David, alleged to have been lost while in tow of the respondent vessel, while proceeding from Yakutat harbor on the evening of October 30, 1917, through the carelessness and negligence of the master of the respondent running the barge upon a reef. Claimant denies negligence, denies by the libelant, if they confirmed its contention, and, the absence being unaccounted for, if any thought is given thereto, it must be that the statements of these persons would be out of harmony with the testimony of the libelant's witnesses. [3, 4] The service rendered by the respondent Daniel Kern was clearly a salvage service. The testimony cannot bring the status of the parties in any other relation. Salvage service is distinguished from a towage serv 27 F.(2d) 921 of profits because of collision does not require decision of doubtful questions in favor of libelant, who has burden of proof. Difficulty in proving damages for loss of profits as result of collision does not require court to view matter leniently and decide doubtful questions in libelant's favor, but burden of proof is on libelant in such cases, as in all other tort cases. 3. Collision 125-Damages, as for loss of profits, because of collision, cannot be recovered, unless established with reasonable certainty. ice, in that a salvage service is a voluntary 2. Collision 123-Difficulty in proving loss service, rendered to a vessel needing assistance in distress, present or reasonably apprehended (McConnochie v. Kerr [D. C.] 9 F. 50; The S. C. Schenk [C. C. A.] 158 F. 54; The Kennebec [C. C. A.] 231 F. 423; The Mercer [C. C. A.] 297 F. 981), and is compensated, not only for the services rendered, but also a gratuity for centuries predicated upon proportions of the value of the property saved, as encouragement to others for like service and effort for the benefit of commerce. Towage is a service for the mere purpose of expediting her voyage without reference to danger or distress (the Lowther Castle [D. C.] 195 F. 604), and is paid for by agreement or on the basis quantum meruit pro opere et labore (The Egypt [D. C.] 17 F. 359). Salvors in good faith are held to reasonable judgment and skill (The Laura, 81 U. S. [14 Wall.] 336, 20 L. Ed. 813; The Infanta Maria Teresa, 188 U. S. 283, 23 S. Ct. 412, 47 L. Ed. 477), such as a man of ordinary prudence and capacity would use in the preservation of his own property (The Shawmut [D. C.] 155 F. 476; The Henry Steers, Jr. [D. C.] 110 F. 578). Judge Lurton, later Justice Lurton, of the Supreme Court in The Schenk, supra, said: " There is no responsibility if the service was rendered in good faith, without clear evidence of culpable negligence or willful misconduct." There is no such evidence in the record. From all of the testimony it is apparent that the officers of the claimant were acting in good faith, exercising reasonable judgment and skill, and there is no testimony of any culpability or willfulness in any fashion. Order of dismissal will be entered on notice. THE PRISCILLA. District Court, D. Massachusetts. August 2, 1. Collision136-Libelant, delivering all oll Libelant, delivering all oil it had contracted or had chance to deliver during entire time that barge injured in collision was in operation and being repaired, could recover only additional expenses and loss of profits it would have earned, but for injury. 27 F.(2d)-581⁄2 Damages, as for loss of profits, resulting from collision between vessels, cannot be recovered, unless they are established with reasonable certainty. 4. Collision 128-Criterion for recovery of profits lost because of collision is not what might have been earned, but what would have been earned. The criterion for recovery of profits lost as result of collision between vessels is not what profits might have been earned, but what would have been earned. 5. Collision 125-To recover profits lost, circumstances must be shown with sufficient particularity to prove that injured barge could have been spared from libelant's fleet, and would probably have found employment. To recover profits lost because of injury to barge in collision, attendant circumstances must be shown with sufficient particularity to prove that libelant's accustomed use of barge was such that it could have been spared from its fleet and would probably have found employment. 6. Collision 123-Burden is on libelant to prove expense caused by injury to barge in collision by direct evidence, without conjecture. Libelant may recover for any expense to which it was put by reason of injury to its barge in collision, but the burden rests on it to prove such expense by direct evidence, without conjecture. 7. Collision 129-Libelant cannot recover expense of substituting idle vessel for vessel Injured in collision. Libelant cannot recover expense of substituting an idle vessel, not kept for use in emergencies, but merely part of owner's regular fleet, for which there is not sufficient employment to keep her busy, for a vessel injured in collision. 8. Collision 129-Libelant held entitled to extra expense of towing barge substituted for injured barge to place of collision and back. Libelant held entitled to recover extra expense of towing barge, substituted for barge injured in collision, to place of collision and back, where evidence showed that barge could not have been hired at such place, except at very great expense, if at all |