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as agreed, and on December 31, 1904, the Scannell was launched and turned over to him; and he had her enrolled in the customhouse at Stonington, as required by law, January 3, 1905, and she was taken to Cottrell's dock, where she was attached later by one of Mr. MacDonald's creditors. MacDonald did not schedule her in his bankrupt schedules, but Chapman, trustee, February 28, 1905, took possession of her, and still holds the possession of her. She is nearly completed, and will be worth about $41,000. The petitioner wants possession, and $2,000 demurrage $75 per day. The trustee has put a keeper on board, had her appraised as the assets of MacDonald, and is using up her value in keeperage, etc.

(3) George W. Frost, of Central Falls, R. I., made a contract with MacDonald to build a four-masted schooner, April 30, 1904, for $38,400, to be completed January 1, 1905, and to be paid for in stages; title to vest with each payment. He has paid $19,960. She was not scheduled by the bankrupt, but has been inventoried and appraised by the trustee, who holds possession, and is worth from $8,000 to $9,000 in the present, incomplete state, as appraised. Frost prays for possession and damages and costs.

(4) Mark L. Gilbert, of Mystic, claims that on May 23, 1904, he made an agreement with MacDonald whereby MacDonald was to build and launch the hull of a four-masted schooner on the 1st day of March, 1905, for $23,250, to be paid for in stated sums at various stages of construction, with title to the amount paid for to vest in said Gilbert upon each payment, and that he has paid $3,250 upon said construction, and is entitled to the keel and frames that have been set up and prepared. The trustee has taken possession of the same, and has destroyed the construction in part by using 13 of the frames in the Boggs, another schooner in course of building in the same yard. Appraised value of the keel, etc., $310.10. He prays for possession of so much as is left, and for damages for the destruction of the 13 frames misapplied. As to the Jones schooner, MacDonald's contract only extended to completing the schooner to an extent sufficient to launch; Jones himself to do the rest, amounting to several thousands of dollars-$11,000 or $12,000. That she was so far completed as to be fit to be launched at the time she was launched and delivered is affirmed on one side, and denied on the other. Jones had anticipated getting her launched and away from the shipyard before winter set in-as early as midsummer-and had then obtained permission to take her into Cottrell's dock, where she now lies. She was liable to be frozen in if she remained at the shipyard till winter, and in fact it appears in the evidence that she had to be cut out to some extent when she was launched and taken away, and it was necessary she should be where she could be got out readily, so that Jones could do his completing work, which would require a month or so after MacDonald had completed his part. The title delivery was December 28th, by builder's certificate, etc.; the physical, December 31st, when MacDonald tied her to Cottrell's dock at Jones' request. It is true, there were many ceiling bolts to be driven upon her, also many keelson bolts, and many other minor matters, but the weight of evidence was that she was "fit to launch," which seems to be amply supported by the fact that she has been afloat three months and more without pumping at this time. There is evidence in the case that Frank MacDonald, one of MacDonald's sons, and bookkeeper for him, about the time of the launch, interviewed Mr. Crandall, the draw tender on the railroad bridge, to ascertain whether or not it would be opened in the nighttime, on application, for the passage of towboat and tow, and, after ascertaining that it would, went on the same night to intercept Jones, at New London, and Tooker, an agent of Miller & Houghton, ship agents, of New York, who were acting as agents for the schooner's owners-said Jones and Tooker being then on their way to New Haven to consult their proctor as to future proceedings-and then and there informed them of the fact. Whatever plot or design on the part of Jones, Tooker, or Frank MacDonald this information was obtained to assist or develop, it evidently did not develop, for the next day the boat, in obedience of a telegraph or telephone from Jones, at New York or New Haven, was launched by MacDonald, and taken across the river, some five minutes' walk, to Cottrell's wharf, and tied up, as had been arranged for by Jones the summer before. If any scheme had been at any time exploited or devised by

138 FEDERAL REPORTER.

Tooker or any one to run off the schooner by stealth out of the reach of MacDonald's creditors, in contemplation of bankruptcy, it was summarily dropped and utterly abandoned. She was attached January 7, 1905, on the suit of Standard Machine Co. v. MacDonald; but subsequently the trustee in bankruptcy took possession of her, and had her appraised at $23,500, and she is still in his possession. She is not worth as much as has been paid for her, and the trustee has no interest in her for labor or materials, and she should be returned to Mr. Jones at once, lest further loss occur to her owners through the law's delays.

As to the Frost petition, I have heretofore stated the proofs and my opinion. I find that the boat, in her present stage-keel and frame, etc.-should be delivered to Frost, and such time for completion should be given or leased to her owners, consistent with their rights and the rights of creditors under the bankrupt law, considering that the bankrupt is as entirely bankrupt as to his contracts and engagements as he is as to his debts, and that neither he nor his trustee can be compelled to fulfill his engagements of either sort.

As to Gilbert's claim, his contract was for a four-masted schooner, made May 23, 1904, with payments stated in the contract at different stages; title to the vessel to be in him as fast as payments were made. He paid $100 at the time the contract was signed, and again $3,150 at the time MacDonald informed him that the keel was laid and the frames were in the yard. If there had been any frames molded and designated for this schooner, they cannot be found in the yard now; and there is evidence showing most of the molded frames, which lay about the yard in undistinguished piles, have gone into a certain schooner, called the "Boggs," which is in the stocks or frames in the yard, awaiting completion. The keel has been appraised at $310.10, and its whereabouts is known and designated, and should be delivered to Gilbert, and all such rights and conveyances for completing her be leased to Gilbert as is possible under the bankrupt law; and by so doing he may decrease the obligations of the estate to the guarantors of MacDonald upon the contract, who have probably a provable claim against him for so much as they shall lose by his nonfulfillment of the contract, at least to the extent of the payments he has received thereon, over and above the value of the work done as appraised.

I find that the court has full power to supervise and revise the proceeding of the referee and trustee in all such matters, when brought to its attention, in the most summary and informal manner, as in this case, certainly if they appear and are heard thereon.

Samuel Park and James D. Dewell, Jr., for petitioners.

H. A. Hull and H. W. Rathbun, for trustee.

PLATT, District Judge. Upon adjudication, the trustee took title to all property which was then vested in the bankrupt, subject to all valid claims, liens, and equities. The title to the property which the petitioners ask to reclaim was, as appears by the evidence and the report of the special master, vested in them, and not in the bankrupt. Such vesting was based upon contract, and full value for the interests vested had been paid.

The case of the Scannell is a clear one, because physical delivery of possession had been added to the actual title. As to the other contracts, it would be a queer proceeding for a court, which in such matters as this is understood to invoke and apply the pure principles of equity, to deprive the petitioners of the benefit of deliberate contracts, made with an open eye and for good reason, and in the same breath turn over to the general mass of creditors uncompleted parts of certain things, which the trustee is unable and unwilling to so treat as to give them hereafter a substantial value. The Poconoket Case (D. C.) 67 Fed. 265, is not exactly in point, it

is true, but that Judge Butler was not much impressed with the possibility of change which the facts of this case present is also quite evident.

It is not apparent that the fact that creditors herein attempted to assert claimed rights adds anything to the force of the reasoning presented by counsel for the trustee and those particular creditors. The report of the special master is confirmed, and let the properties in question be delivered to the petitioners in accordance therewith, but without costs or disbursements or demurrage in the case of the Scannell, the said properties having come to the possession of the trustee by process of law, and not by effective action on his part.

HILLIARD v. LYMAN et al.

(Circuit Court, D. Vermont. May 24, 1905.)

CORPORATIONS-PERSONAL LIABILITY OF DIRECTORS FOR EXCESSIVE INDEBTEDNESS-VERMONT STATUTE.

Under V. S. 3724, relating to corporations, which provides that "no debts shall be contracted by the corporation exceeding in amount twothirds of the capital stock actually paid in, and a director assenting to the creation of an indebtedness exceeding such amount shall be personally liable for the excess," the avails of the liability of directors who assent to the creation of indebtedness in violation of such provision are not assets of the corporation, to be collected and marshaled between creditors, but the directors assenting are personally liable jointly and severally directly to a creditor whose debt was beyond the limit, who may enforce such liability by an action at law against one or more of them.

At Law. On demurrer to declaration.

Edward H. Deavitt, for plaintiff.

E. Henry Powell, Max L. Powell, and Wilder H. Burnap, for defendants.

WHEELER, District Judge. The statute under which the defendants were directors provides (V. S. 3724):

"No debts shall be contracted by the corporation exceeding in amount twothirds of the capital stock actually paid in; and a director assenting to the creation of an indebtedness exceeding such amount shall be personally liable for the excess."

The declaration alleges the creation of an indebtedness of the corporation amounting to $2,800 to the plaintiff, in excess of twothirds of the capital stock actually paid in, assented to by the defendants as directors, whereby they became liable therefor by force of the statute, and in consideration thereof undertook and faithfully promised to pay the same. The principal grounds of demurrer urged are that all the creditors in excess are not joined as plaintiffs, and that the remedy, if any, cannot be enforced at law, but only in equity. This statute is to be taken at its face value. There is no other provision regarding its enforcement, or relating to it. Decisions upon other statutes with limitations upon the amount of liability, or providing for its enforcement, are not applicable to these

questions. This liability seems to be original, raised by the statute upon the assent of a director. Windham Provident Institution v. Sprague, 43 Vt. 502. The liability for a debt must be a liability to the creditor, and the avails of the liability would not be assets of the corporation. There is no limit to liability upwards, but it extends as far as the assent goes, and no creditor would have any right to or interest in any recovery by another, as there would or might be if there was a limit to the amount that could be recovered by all. Each creditor must recover only upon the assent of each director to the indebtedness to him in excess, and what is so recovered belongs to that creditor only, and there can be no marshaling between these more than between any creditors of a common debtor. It is the assent of each director that is material to the liability for excess, and they are not holden as a board or body, but each only according to his individual assent; but several assenting to the same debt would seem to be liable jointly on account of that identity.

Demurrer overruled.

CLYMER V. SUPREME COUNCIL, A. L. H., et al.

(Circuit Court, E. D. Pennsylvania. May 31, 1905.)

No. 7.

MUTUAL BENEFIT INSURANCE RESCISSION OF CONTRACT-LACHES.

Where a member of a mutual benefit association was entitled to rescind his contract and recover the assessments paid because of the illegal attempt of the society to reduce the amount payable thereon, but, while protesting, paid the assessments made against him on the new basis for three years before electing to rescind, during which time the society lost a large number of members by death and withdrawal, who would have been assessable to pay his claim, and also took in new members in ignorance of such claim, the delay constituted such laches as to estop him from recovering back the assessments paid.

At Law. On motion by defendant for judgment notwithstanding the verdict.

B. Elwert, for plaintiff.

Kendrick & Atkin, for defendants.

J. B. MCPHERSON, District Judge. There were no facts in dispute at the trial, and a verdict was accordingly directed in favor of the plaintiff, the court reserving the question whether any evidence had been offered that should carry the case to the jury. It was shown that the plaintiff held a certificate for $5,000 in the American Legion of Honor, which the supreme council of the order had attempted to reduce to $2,000 by an amended by-law, which was passed in August, 1900, and put into effect in October of that year. The plaintiff was duly notified of the amendment, and when the first assessment under it, which reduced the charge upon his certificate from $11.40 to $4.56, was presented for payment, he pro

tested to the collector against the action of the supreme council, but finally paid the smaller amount; and thereafter, without further protest, paid assessments of $4.56 until September, 1903, when he ceased payment and brought this suit, declaring in his statement of claim that "plaintiff now elects to rescind said contract, considers it terminated, and declines to pay any further assessment." His testimony upon this point is as follows:

"Q. You knew that they passed such a by-law reducing the face value of the policy?

"A. Yes, I had known that.

"Q. When the collector came around to collect, what did you do, right after this by-law went into effect?

"A. I protested, saying while they had every right to make as large assessment as was necessary to pay for the decree [deaths?], they had no right to reduce my certificate.

"Q. Then you continued to pay as the assessments were levied?

"A. Exactly.

"Q. During that time, between August, 1900, and the time you brought suit, did this organization issue to you any policy with the reduced amount? "A. That is the only policy.

"Q. Did they in any way stamp your policy showing it was reduced? "A. Not in any way, outside of the notice they sent around that they intended to do so."

On his direct examination he testified that the notices of assessment after October, 1900, did not indicate on what amount he was being assessed, and that he received no other word from the order that he was being assessed on a $2,000 policy "but the two circulars"—meaning the circular of August or September, 1900, notifying him of the amendment, and a circular of August 29, 1903; the latter being of no importance in this trial. But it appeared afterwards that he had probably misunderstood the questions of his own counsel, for he testified on cross-examination as follows:

"Q. You testified in chief that you had been advised of the by-laws passed in 1900, reducing the amount payable under your policy. Is that so? "A. Yes, that is right.

"Q. With that knowledge, did you subsequently pay the amounts, between 1900 and 1903?

"A. Whatever was called, yes.

"Q. Did you protest in any other manner than in the manner which you have described to the reduction in your policy?

"A. No.

"Q. What words did you use to the collector at the time you made this pro test?

"A. That they had a perfect right to levy whatever assessments were required to pay for the death benefits, and they had no business to reduce my certificate, or the amount of my certificate.

"Q. Between 1900 and 1903, were your assessments lower than they had been under the $5,000 plan?

"A. Yes.

"Q. They were lower? "A. Yes."

Upon these facts, the case is not distinguishable from Supreme Council, etc., v. Lippincott (C. C. A.) 134 Fed. 824, decided by the Court of Appeals for this circuit, and upon the authority of that decision, therefore, the defendant is entitled to judgment upon the reserved point.

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