money in question was used by Rosenthal as follows: $300 was paid to his attorney for services not appearing in the evidence, $250 to G. Rosenthal & Sons for a protested check, $150 to S. I. Richman & Co. for another protested check, $150 for pay roll, and $150 to the bankrupt personally. On October 15, 1902, 19 days after this transaction, the bankrupt filed her petition, and was adjudicated bankrupt, the attorney in the proceeding being the same attorney to whom the sum of $300 was paid as aforesaid. The sched ules show that her liabilities amounted to $26,931, and nominal assets $6,673. Liabilities to the extent of $10,906 were secured, leaving unsecured liabilities of $16,025 and nominal assets of $6,673. In the nominal assets was a stock of goods valued at $4,000 which were actually sold by the receiver for $1,050. It is apparent that on that date the bankrupt was hopelessly insolvent. Upon the foregoing state of facts the trustee petitioned this court for relief by injunction against the collection of the assigned accounts by the Jefferson Bank, and for the usual order of reference to determine the validity of the bank's claim, the attorney for the bank agreeing to refer the matter for the purpose of taking testimony, and an order was made on March 12, 1903, referring the matter to the referee in bankruptcy as special commissioner. I have treated the present proceeding as in the nature of an action by the trustee to set aside the assignments in question under the provisions of section. 60 (Act July 1, 1898, c. 541, 30 Stat. 562 [U. S. Comp. St. 1901, p. 3445]), as an unlawful preference received by the Jefferson Bank, with reasonable cause to believe that it was so intended. Such being the case, it is necessary for the trustee to establish: First, the insolvency of the debtor; second, the obtaining by one creditor of a greater percentage of his debt than any other creditor in the same class; third, the giving of a preference within four months; fourth, reasonable cause on the part of the creditor to believe that a preference was intended. In re Eggert, 4 Am. Bankr. R. 449, 102 Fed. 735, 43 C. C. A. 1; Mathews v. Hardt, 9 Am. Bankr. R. 373, 80 N. Y. Supp. 462. First. As to the insolvency of the debtor': I am satisfied from the evidence in this case that Fanny Mandel was insolvent on September 26, 1902, and for a considerable period prior thereto. The transaction in question occurred less than three weeks prior to the bankruptcy, and the schedules verified by her are competent evidence, not only of her insolvent condition at that time, but also on the question of insolvency within a reasonable time prior thereto. Bank of New York v. Southern National Bank, 170 N. Y. 1, 62 N. E. 677; Baily v. Hornthal, 154 N. Y. 648, 49 N. E. 56, 61 Am. St. Rep. 645. The testimony of Kress, the bookkeeper, is also cogent evidence to the same effect. The bankrupt was being pressed for money, two checks had gone to protest, and the creditors were threatening suit. The deficiency of nearly $10,000 between the unsecured liabilities and the nominal assets has not been explained, and leaves no room for doubt that on September 26, 1902, the bankrupt was entirely insolvent, and I so find and report. Second. That the Jefferson Bank, by retaining the surplus accounts, has obtained a greater percentage of its debt than any other creditor in the same class is also apparent. The vice president of the bank testified that the bank, acting upon the agreement of February 6, 1902, applied $600 from the surplus of equity account to the payment of the note of that amount then maturing, and proposed to apply any further equity payments on the remaining indebted ness. Third. Under the ruling in the case of Mathews v. Hardt, 9 Am. Bankr. R. 373, 79 App. Div. 570, 80 N. Y. Supp. 462, which was decided by the Appellate Division of the Supreme Court, this department, in January, 1903, it was held. construing section 60 of the bankruptcy act, that an agreement by which a firm was to make an advance to a corporation, and should have a lien for the same upon the property of the corporation, is to be treated as of the date when possession was taken, and not when the agreement for the lien was given. The question to be determined in such cases is therefore: "Did the delivery of the possession to the defendants and their taking possession within four months of the bankruptcy constitute a preference within the meaning of the bankruptcy act?" As is well stated in the opinion in this case, "the trend of the decisions in the United States Supreme Court under the recent bankruptcy act upon the subject of the date of transfers is in support of the view that, 127 F.-55 with respect to an instrument of transfer, it is the time when such instrument is recorded or when possession is taken or notice is otherwise brought home to the creditors of the bankrupt that is controlling." In Crooks v. Bank. 3 Am. Bankr. R. 242, 61 N. Y. Supp. 604, decided by the Appellate Division, the court says: "It is the result or effect of the act done which is declared against, not the manner or method by which it is done. No matter how circuitous the method may be, if the effect of a transfer of property, made within four months before the filing of a petition in bankruptcy, is to enable any of the bankrupt's creditors to obtain a greater percentage of his debt than others in the same class, then such transfer is voidable, if the person receiving it or to be benefited thereby had reasonable cause to believe that it was intended thereby to give a preference." Under these authorities, I am constrained to report that the agreement of February 6, 1902, did not give the Jefferson Bank any power to retain the surplus of the accounts assigned to them, and apply them on the general indebtedness of the bankrupt, as against the claims of the other creditors in this proceeding. The nature of the transaction must be determined as of September 26, 1902, when the assignment was actually made and possession taken thereunder. This being within four months of the bankruptcy, and the bankrupt at the time insolvent, constitutes, in my opinion, a preference, within the meaning of section 60, subd. "b," so far as the attempted disposition of the surplus of the accounts is concerned. I am satisfied that the bank made the advance of $1,000 at the time of the transfer, and as to that extent the assignment is valid. There is also no question in my mind as to the validity of any of the assignments other than that of September 26, 1902, as all of such were made in the regular course of business and for a present consideration. But the surplus under these assignments, as well as those involved in the transaction of September 26, 1902, is the sole question concerning which any serious controversy may arise. Fourth. This brings us to the last element necessary to render the transaction voidable, to wit, did the Jefferson Bank have reasonable cause to believe that a preference was intended? It is strenuously urged that the circumstances attending the last advance were of so unusual a nature as to raise the natural presumption that the bank knew, or should have known, that a preference was intended. Mr. Radt, the vice president of the bank, who conducted the transaction on behalf of the Jefferson Bank, denied positively any information as to the failing condition of the business of the bankrupt, and testified that he made no inquiries as to the business or the purpose for which the money was intended. He had previously, made advances on such assignments, and relied on his acquaintance and knowledge of Rosenthal. In answer to a question as to whether it was his custom to advance money on accounts without inquiring as to the financial condition of the depositor, he stated: "It is only the custom when the people commence to cash accounts; afterwards we take them right along as we go along." Mr. Radt does not explain very clearly why he did not advance the usual 70 per cent. on the accounts then presented to him, which, as stated, aggregated $2,657.43; but Mr. Rosenthal testifies that the reason was that the accounts in question were not rated, and therefore not as valuable as the previous ones. In this he is contradicted, to a certain extent, by Mr. Kress, who stated that the accounts were good and collectible; and he further stated that Rosenthal stated or implied that there had been more claims handed down than the amount he should have received to secure the bank for money loaned. I am inclined to believe Kress' testimony rather than that of Rosenthal, Mr. Radt testified that he had known Rosenthal for years, and Rosenthal testifies that he never knew Radt before he went to the bank. It is quite likely that Radt made no inquiries, being satisfied to keep the accounts and apply the balance as collected under the agreement of February 6, 1902. If he had inquired, he certainly would have discovered the condition of the business. The fact that two checks had gone to protest must have been known to him, or might have been easily ascertained. The disposition of the money might also have enlightened him as to the condition of the business. He would have learned that cash was being paid to take up protested checks, and to pay a lawyer, presumably for advice in regard to bankruptcy proceedings, and that the bankrupt was applying the rest to her own personal use. There is no question that at the time the loan of $1,000 was obtained the bankrupt was meditating these proceedings, and, in view of the close relations between the bank and Rosenthal, I cannot resist the presumption that the assignment of so large a number of accounts was part of a plan tacitly understood between them, by which the bank was to get the benefit of the surplus. The action of the bank in applying the surplus to the first note confirms this view. I think that the surrounding circumstances were such as would have led an ordinarily prudent business man to believe that a preference was intended, and I so find and report. The total face value of the accounts assigned after the date of the previous statement appears by the testimony at pages 121 and 124 to be... $5,937 30 Of this there has been assigned on September 26, 1902, 37 accounts, of the aggregate face value of... ..... 2,657 43 Leaving accounts assigned to the bank prior thereto of the face value of $3,279 87 unaffected by this decision. .... By the stipulation filed herein October 15, 1903, it appears that the receiver and trustee have collected thirty assigned accounts, aggregating $2,981 38 Of which there belongs to the trustee in bankruptcy under this decision .... $592 70 But it also appears by the same stipulation that the bank has collected from the assigned accounts of September 26, 1902, and improperly retained... over and above the loan of $1,000, interest and commissions, and that assigned accounts of the face value of $631.76 remain uncollected. I therefore find and report that, upon the assignment by the Jefferson Bank of the following accounts remaining uncollected, viz.: -The trustee in bankruptcy should pay to the Jefferson Bank out of the balance in his hands the sum of.... $2,172 93 -The same being the proceeds of all amounts collected by said trustee and assigned to the Jefferson Bank, less the proceeds of accounts assigned on September 26, 1902, collected over and above the sum of $1,000, above set forth. I further report that the commissioner's fees in this reference, amounting to $75, and the stenographer's fees, amounting to $38.05, should be paid as may be directed by the order of the district judge. All of which is respectfully submitted. Lesser Bros. (William Lesser, of counsel), for trustee. Strasbourger, Weil, Eschwege & Schallek (Emanuel Eschwege, of counsel), for claimant. HOLT, District Judge. Referee's report confirmed. PETERSON v. EIGHT HUNDRED AND SIXTY-NINE CEDAR LOGS. (District Court, S. D. Alabama. January 18, 1904.) 1. SHIPPING-CONSTRUCTION OF CHARTER PARTY-MEASUREMENT OF ROUND LOGS. A schooner contracted for a lump sum of $720, as freight to carry from a Cuban port to Mobile "round cedar logs, to consist of 60,000 feet." It appeared that there were two methods of measuring round logs, one of which was to square them, and so compute their contents, and the other to compute their entire contents as round logs. By the testimony of persons engaged in the shipping and timber business in Cuba, where the charter was made, it was shown without material contradiction that it was the custom in shipping from there to take the invoice measurements in which the logs were reduced to square measure as the basis for computing freight, and to add $2 per thousand feet to the freight to United States ports where the logs were round. It was also shown that the highest rate of freight paid to such ports for squared logs at the time of the contract was $10 per thousand feet. Held, that in the absence of any designation of the method of measurement in the contract it must be presumed to have been made with reference to such custom, especially in view of the stipulated rate of $12 per thousand feet. In Admiralty. Suit to recover balance of freight. TOULMIN, District Judge. The freight due the shipowner for carrying and delivering goods is sometimes payable according to the weight or measurement of the cargo, and sometimes payable in a lump sum. 7 Am. & Eng. Encyc. of Law (2d Ed.) 251. By the contract in this case the freight was payable in a lump sum, and the cargo to be carried from Santa Cruz, Cuba, to Mobile, Ala., was "round cedar logs, to consist of 60,000 feet." The freight was payable in a lump sum of $720, not for a part cargo of round cedar logs, but for 60,000 feet of such logs. The libelant was paid the $720, on delivery in Mobile of a part of the cargo of logs; but he refused to deliver the balance of the logs without a further payment of freight thereon, claiming that the cargo of logs largely exceeded 60,000 feet in measurement. It was undisputed on the evidence that the measurement of the logs, by the method of squaring them to ascertain their contents, was 60,454 superficial feet, and that the measurement of the entire contents of the logs as round logs was considerably more-how much more does not appear from the evidence. However, it was conceded that there are at least two methods of measuring round logs and ascertaining their contents in feet, which are essentially different. One or the other, and not both, must have been in the mind of the parties at the time the contract for the shipment and transportation of the logs in question was entered into. The contract, by its terms, is silent as to the method of measurement. Extrinsic evidence must, of necessity, be resorted to in order to find out whether it was 60,000 feet according to the one or the other method; and "what extrinsic evidence is better to ascertain this than that of usage?" Parties who contract on a subject-matter concerning which known usages prevail by implication incorporate them into their agreement, if nothing is said to the contrary. Barnard v. Kellogg, 10 Wall. 383, 19 L. Ed. 987; Robinson v. U. S., 13 Wall. 363, 20 L. Ed. 653; Seagar v. N. Y., etc., Mail S. S. Co. (D. C.) 55 Fed. 324. In determining upon what measurement freight is to be calculated, the usage in the particular trade to which the contract relates may be considered if the stipulation in the contract is ambiguous. 7 Am. & Eng. Encyc. of Law (2d Ed.) 189. The libelant testified that there was no custom in the trade between Cuba and Mobile or elsewhere to calculate the contents of round timber upon the basis of the measurement of the timber after it is squared. He, however, stated that he had but once before the trip in question transported round logs from Santa Cruz to an American port, viz., to New York, and that the freight charged upon that cargo was estimated according to superficial feet; that the charter party in that instance was for square logs, but he took some round logs as a part of the cargo, and at the same freight, as I understood his testimony, which was $9 per 1,000 superficial feet. He also stated that the prevailing rate of freight on square cedar logs to American ports from Cuba was from $8 to $10 per 1,000 superficial feet; that $8 was the lowest to Mobile; that $9 to $10 was the rate to New York. He gave no rate on round cedar logs. He further testified that before all the logs involved here were delivered to him he thought he had about his complement of logs, and he so told the shippers. But it does not appear that he had the logs measured at that time, or that he made any inquiry as to the method by which they were measured. He did not refuse to receive and transport the balance of them, but did in fact receive and put aboard his vessel all the logs delivered to him, being 869 in number. The libelant further testified that he said to the shippers that he would measure the logs when delivered, and if there were more than 60,000 feet they would have to pay for it. When the bills of lading were presented for signature libelant objected to signing them, as he says, on account of the number of feet, but did sign them with the indorsement thereon, "Measurement unknown." It does not appear that at that time he raised any question as to the basis or method of measurement, or that he said anything about the difference between the measurement of round and square logs. The bill of lading was for 369 logs of round cedar, measuring 60,454 superficial feet. Witness Benemelis, a witness for claimant, testified that he was for many years engaged in the lumber and timber business in Cuba, and that he knew the customary mode of measuring round logs so as to put them into feet, which method he described; that in buying, selling, or shipping round timber the custom was to reduce round logs to square measure, and thus ascertain their contents in superficial feet, according to the rule or mode described; that sometimes in shipping it might be agreed between the shipper and the vessel that the cargo was to be taken by weight, and the freight based thereon, sometimes for a lump sum, and sometimes by measurement-so much per 1,000 feet-but when by measurement it would be by reducing the round logs to square measure; that this was the universal custom, if the freight was based on measurement. Witness Prats, a witness for claimant, had been a ship broker for 30 years, doing business in Havana. He testified that the custom there |