and expense involved in the service, and of all the attending circum-
stances, our conclusion is that the amount that should be awarded is
$10,000, instead of $40,000, the amount awarded by the decree appealed
from. That decree will be here modified, as just indicated, and, as so
modified, it is affirmed, with costs against the appellees.
Modified and affirmed..



November 13, 1918.)

(Circuit Court of Appeals, Second Circuit.

Nos. 42, 43.


A tug, with tow, passing down the Hudson on a bright day, held solely in fault for collision with a crossing ferryboat, which was the privileged vessel, where, although mistaking a signal of the ferryboat, she knew of the mistake in time to have resumed her proper course.




The privileged of two crossing vessels, although knowing that the other has taken an erroneous course, which might result in collision, on giving her warning, and if there is time for her to change her course, has a right to assume that she will do so, and is not in fault for not immediately stopping and reversing.

Appeals from the District Court of the United States for the Southern District of New York.

Suits in admiralty for collision by the Cornell Steamship Company against the ferryboat Musconetcong, the Delaware, Lackawanna & Western Railroad Company, claimant, and by the named Railroad Company against the steam tug Hercules, Cornell Steamboat Company claimant, with cross-libels. From the decree, each libelant appeals. Reversed.

Kirlin, Woolsey & Hickox, of New York City (L. De Grove Pot-
ter, of New York City, of counsel), for Cornell Steamboat Co.
Ellis W. Leavenworth, of New York City, for the Musconetcong.
Before WARD, ROGERS, and MANTON, Circuit Judges.

MANTON, Circuit Judge. On June 20, 1916, at 6:20 a. m., a clear day, with an ebb tide, the ferryboat Musconetcong, of the Delaware, Lackawanna & Western Railroad Company, left her slip at Fourteenth street, Hoboken, N. J., on its voyage to Twenty-Third street, New York City. This is about directly opposite the Hoboken slip. The master saw the Cornell Steamboat Company's tug Hercules with a scow in tow on a hawser coming down the river east of the middle, between Thirtieth and Thirty-Third streets. There was no reason to expect that the Hercules would in any way interfere with the navigation of the Musconetcong, which was the privileged vessel. When

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near the middle of the river, the Musconetcong blew two whistles, intended for the ferryboat Paunpeck, which, in regular trips, runs opposite, and was bound for Hoboken. These whistles were intended for the Paunpeck only. However, the Hercules answered with a signal of two whistles. The Musconetcong immediately blew the alarm, followed by one whistle, which indicated that she did not intend her signal for the Hercules, and that she did not intend to give way to her. A collision resulted by the Hercules striking the port side of the Musconetcong about 50 feet from the bow.

The District Judge, after the trial, found the Hercules solely at fault for violation of the starboard hand rule, and exonerated the Musconetcong. On a rehearing, he later held the Musconetcong was also at fault for failing to reverse or slacken her speed at once after blowing her alarm signal, and decreed that the damages be divided.

[1] The Hercules was clearly at fault. The vessels were on crossing courses, and it was her obligation to keep out of the way of the Musconetcong. Why the Hercules should assume that the two whistles blown for the Paunpeck were intended for her is not made apparent by the testimony of the Hercules. There were no reasons why there should be navigation contrary to the rule; but, even if a mistake were made by the Hercules, she was immediately notified that there would be no agreement to navigate contrary to the rule, and even after that there was ample time for her to have avoided a collision. The Hercules at the time was headed straight down the river, coming along slowly. The Paunpeck was compelled to stop and wait for a New York Central tug, which was going down west and ahead of the Hercules, and but for this she would have crossed ahead of the Hercules, and the Musconetcong could have passed between the New York Central tug and the Hercules safely, for she was going full speed, whereas the Paunpeck had not, at that time, developed much speed. The Musconetcong had almost reached the middle of the river when the two whistles were blown, and after the collision the Paunpeck passed the Musconetcong starboard to starboard. It is apparent that the two whistles were not intended for the Hercules. The burden was upon the Hercules to establish an agreement to navigate contrary to rule. The Scranton, 221 Fed. 609, 137 C. C. A. 333. This she has not done. Indeed, after the notification of the Musconetcong by signal that there would be no change in the rule of navigation, there was still time for the Hercules to have ported or reversed, and thus to have avoided the collision. At this time she was going about 5 or 6 miles, and her proximity to the Musconetcong warrants such a conclusion.

[2] The Musconetcong cannot be held at fault for failing to reverse or slacken her speed at once after the exchange of signals. If the Hercules had obeyed the signals and the rule, the collision would have been avoided; and the Musconetcong, a privileged vessel, was entitled to assume that, although it was proposed to her to give way by the exchange of the two-whistle signals, rejection thereof by her would result in navigation in conformity to the rule. The District Judge found that the Musconetcong ran about a minute and 400 or 500 feet before she started to reverse. She was justified in letting some

time elapse, in order to ascertain whether the Hercules would continue on or would port her helm, and during this lapse of time she conformed to the law in keeping her speed and course even, though the subsequent events proved that stopping and backing would have been better. The Chicago, 125 Fed. 712, 60 C. C. A. 480; The Cygnus, 142 Fed. 85.

As pointed out in The Chicago, 125 Fed. 712, 60 C. C. A. 480, the privileged vessel should not be too quick in assuming that the burdened vessel is not going to yield to it, although its behavior may be erratic. Here, apparently, the Hercules did not change her course or speed until it was too late to avoid the collision. We think the Musconetcong was not at fault, and that the District Judge was correct in his first decision holding the Hercules solely at fault.

The decree will be reversed, and the cause remanded, with instructions to dismiss the libel against the Musconetcong, and to enter a decree against the Hercules for full damages.

KNAUTH et al. v. KNIGHT et al.

(Circuit Court of Appeals, Fifth Circuit. January 8, 1919.)

No. 3303.


140(2)—EQUITABLE LIEN-TRUST ARISING FROM FRAUD. Where bankrupts each day overdrew their bank account, which was secured by collateral, and each night made deposits to cover, the fact that money fraudulently obtained from complainants was from time to time included in such deposits held not to impress the surplus fund arising from the sale of the bank collateral after bankruptcy with a trust in favor of complainants.



The fact that money fraudulently obtained from complainants by bankrupts was used in paying overdrafts at a bank did not give complainants by subrogation a lien on collaterals held by the bank as security.

Appeal from the District Court of the United States for the Northern District of Alabama; William I. Grubb, Judge.

Suit in equity by Wilhelm Knauth and others against John W. Knight and others. Decree for defendants, and complainants appeal. Affirmed.

See, also, 219 Fed. 721, 135 C. C. A. 419.

Geo. T. Hogg, of New York City, and E. H. Cabaniss, of Birmingham, Ala., for appellants.

Augustus Benners and Forney Johnston, both of Birmingham, Ala., for appellees.

Before BATTS, Circuit Judge, and FOSTER, District Judge.

FOSTER, District Judge. In this case appellants filed their bill to rescind a fraud practiced on them by the bankrupts, Knight, Yancy For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

& Co., and seeking to impress certain assets of the bankrupt estate with a trust in their favor for the amount of $98,005.58. The District Court dismissed the bill on final hearing, and from that judgment this appeal is prosecuted.

[1] While the record is voluminous, the salient facts may be briefly stated. For a number of years Knight, Yancy & Co., were cotton buyers and exporters in Decatur, Ala., and in 1910 were adjudicated bankrupts. In the course of their business they executed many fictitious bills of lading and other documents, and annexed them as security to drafts which they discounted or sold. When adjudicated bankrupts, they owed nearly $5,000,000 on these fraudulent transactions, including the claim of appellants. The bankrupts did business with the First National Bank of Decatur in the following manner: In the course of the day they would overdraw their account, and at the close of business that day would make deposits to cover the overdraft. The overdrafts were secured by the pledge of certain certificates of stock and warehouse receipts for cotton. Their overdraft sometimes ran up to over $200,000. From time to time, as the drafts were disposed of to appellants, the money obtained from them found its way into the First National Bank, and there mingled with the general funds of the bankrupts, of which it was a small part, and helped to liquidate the daily overdraft.

Appellants elected to rescind the fraudulent transactions by which their money was obtained, and have not participated in the bankruptcy proceedings. After bankruptcy, the bank liquidated the security it held and turned over to the trustee a surplus of about $155,000.

It is the theory of appellants that the money obtained from them went to reduce the indebtedness of the bank secured by the collaterals pledged, and therefore the bankrupt estate was to that extent enriched and a trust created in their favor on the said property. The District Court found against this contention, holding that while appellants' money went to pay an overdraft which was secured by a lien on the property pledged, and reduced the secured indebtedness of the bankrupts to the bank, it also had the effect of enabling the bankrupts to increase their indebtedness of like character and amount on the succeeding business day; therefore the estate was not enriched for the benefit of the general creditors. This holding was correct. It is evident the money went to pay pre-existing debts, and did not increase the free assets at all. Wuerpel v. Com. Bank, 238 Fed. 269, 151 C. C. A. 285.

[2] It is also contended by appellants that, as the money obtained from them went to reduce the lien of the bank on the collaterals held by it, they are subrogated to the rights of the bank. The District Court decided this contention against appellants, and held that, when indebtedness to the bank was paid by depositing the proceeds of the drafts, the lien was satisfied and ceased to exist, so that when bankruptcy intervened the bank had no lien. Error is assigned to this.

Appellants' theory of subrogation is too far-fetched and attenuated to be tenable. In the case of Etna Life Insurance Co. v. Middleort, 124 U. S. 534, 8 Sup. Ct. 625, 31 L. Ed. 537, the Supreme Court

reviews the authorities, clearly states the principles of subrogation, and quotes with approval the following rule:

"It is only in cases where the person advancing money to pay the debt of a third party stands in the situation of a surety, or is compelled to pay it to protect his own rights, that a court of equity substitutes him in the place of the creditor, as a matter of course, without any agreement to that effect."

It is clear that appellants are not subrogated to the rights of the bank. The funds obtained from appellants by the bankrupts did not come into the possession of the trustee at all, nor did any property into which these funds entered, and there was no actual enrichment of the estate for the benefit of the ordinary creditors.

We do not find the cases cited by appellants persuasive. In each of them the money or property obtained by fraud was traced and identified, and no subsequent lien was created on the fund or property into which it entered.

The judgment of the lower court is affirmed.


(Circuit Court of Appeals, Ninth Circuit. February 3, 1919.)

No. 3189.




Where the bill of lading required the carrier to transport the goods with reasonable dispatch, it was not error, in an action for delay, to admit testimony of the shipper that he was told by defendant's clerk, through whom the shipment was made, when it would reach its destination.



Only rulings to which exceptions were duly taken can be reviewed by the appellate court.


The rule that, when part of a writing is given in evidence by one party, the whole on the same subject may be introduced by the other, is subject to the limitation that no more of the remainder than concerns the same subject and is explanatory of the portion admitted is receivable.

In Error to the District Court of the United States for the Second Division of the Northern District of California; Jeremiah Neterer, Judge.

Action at law by Hilmar Stephany against the Southern Pacific Company. Judgment for plaintiff, and defendant brings error. Affirmed.

A. A. Moore and Stanley Moore, both of San Francisco, Cal., for plaintiff in error.

Jay Monroe Latimer, of San Francisco, Cal. (J. E. Pemberton, of San Francisco, Cal., of counsel), for defendant in error.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

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