on practically all the assets of the company to secure himself as executor the said $3,000 already advanced to the Luck Construction Company by himself and already paid out on the Virginia Blue Ridge job. That no meeting of the stockholders or directors of said company was called, or ever undertaken to be held. That no notice or knowledge to G. T. Fogel, the owner of $10,000 of the stock of the company, also a director, was given. That E. E. Francey, the remaining stockholder and director, was about this time written to by Sale, or Luck, asking his consent to give a mortgage to secure some money to be borrowed from the Luck estate, which was to be used in carrying on a new job just taken by the company in Alleghany county, Md., ‘and that in order to start that work up then I agreed they should execute the deed of trust.' That Francey knew nothing about the Luck estate having advanced money in the summer of 1916, and that this money had already been expended in the Virginia Blue Ridge job. That he never authorized the giving of a mortgage or deed of trust to secure such money, and Francey testified that, if he had known the facts he would not have consented. That at this very time Francey himself was a creditor for money advanced and loaned to the Luck Construction Company, in the sum of about $20,000. That $2,000 which was turned over by check of H. M. Luck on or about the date of the alleged deed of trust and mortgage was really the money of the company itself, representing the proceeds of the company's rail at Westport, and was not the money of H. M. Luck, executor.

"That H. M. Luck had actual knowledge of all the above facts.

"No ratification of these attempted liens is shown by the evidence to have been made by Francey or Fogel. The moneys advanced by H. M. Luck, executor, to the Luck Construction Company, on August 30, 1916, and subsequent dates (set out in detail, supra), and totaling $1.479.67, are not claimed, either as set out in the original and amended proofs of debt, and exhibits filed therewith, or in the evidence and statement of counsel for H. M. Luck, executor, to be included in the alleged security of the deed of trust and chattel mortgage, here in controversy. The deed of trust and mortgage are only claimed as security for the payment made to and expended by the Luck Construction Company in June and July, 1916, 'which money was loaned some months before the security was given.'"

In determining as to the correctness of the rulings of the court below, it should be borne in mind that all questions of fact were found by the referee and in turn affirmed by the court below.

The referee in making his report filed an opinion which we think clearly and accurately states the law. We quote the opinion in full: "Ordinarily a corporation cannot legally act in matters of this kind, except through its board of directors in meeting assembled in a board meeting where the matter may be acted upon as a board sitting as such. This is the general rule. That the board of directors of the bankrupt corporation held no meeting authorizing the execution of the deed of trust in question is clearly established by the evidence. 10 Cyc. pp. 774, 775; 3 Cook on Corporations (6th Ed.) § 1713a; 2 Thompson on Corporations (2d Ed.) §§ 1071–1073.

"While this is the general rule, it will be observed that the great majority of cases cited by the authorities in support of this rule were cases arising out of suits instituted by stockholders, and not creditors. On the other hand, there is good authority for the proposition that where innocent parties, for a present fair consideration, deal with officers of a corporation who have been held out as having authority to do certain acts, who have apparent or ostensible authority to act for the corporation in certain matters, the innocent party, having acted in good faith and having changed his position by virtue thereof, will be protected, even though it turns out that the officer with whom he was dealing in reality had no authority to bind the corporation, or that the transaction has been otherwise irregular. In seeking this protection, however, the party must bring himself clearly within the rule, and show that he did not have actual knowledge of the true condition and acted in the utmost good faith. 10 Cyc. p. 912; Thompson on Corporations, § 2560.

"But here we have no such condition. This is neither a suit by a stockholder, nor did the petitioner herein part with his property for a present fair consideration, nor can he claim that he was innocent of the true state of affairs. On the contrary, the beneficiary under the deed of trust in question had full and actual knowledge of the company's condition, knew that no corporate action had been taken, knew that he was not applying the proceeds derived from the deed of trust in the manner agreed upon by Francey, the largest stockholder, vice president of the company, and one of its three directors. He had actual knowledge that Fogel, who was the owner of $10,000 of the stock of the corporation, and also a director, did not even know of the proposed deed of trust. Luck, executor, was dealing with himself as president of the Luck Construction Company, and merely directed Sale, at most a de facto officer, to sign the deed as secretary and place thereon the seal of the corporation. In reality Luck was the only officer and stockholder of the corporation who knew what was taking place. The evidence shows that Sale was not a stockholder, and held the office of assistant secretary of the corporation by virtue of a power of attorney in which Fogel, the real secretary of the company, undertook to delegate the duties of his office to Sale. Luck, executor, therefore, cannot be heard to say that he did not have actual knowledge of all these facts. What he did was not the act of the corporation, and the attempted conveyance of the property described in the deed of trust and chattel mortgage of August 29, 1916, must be held to be absolutely void.

"Here we find Luck as president of the corporation dealing with himself as executor of the N. C. Luck estate. The evidence shows that Luck is one of the legatees under the will of N. C. Luck, and therefore interested in the transaction in three different capacities: First, as president; second, as executor; and, third, individually. The decisions and authorities holding that transactions of this kind are invalid are too clear to admit of argument. 10 Cyc. p. 918; Thompson on Corporations, § 1411.

"It is contended by the petitioner that the trustee in bankruptcy cannot properly attack the validity of the deed of trust under consideration. It is argued that the trustee stands in the shoes of the bankrupt corporation, and that if the corporation could not raise any question concerning the validity of the deed of trust (under the doctrines of estoppel) then the trustee could not. While this may have 'been true prior to the amendment of the Bankruptcy Act, it is not now a correct statement of the law. Section 47 of the Bankruptcy Act of July 1, 1898 (30 Stat. 577, c. 541) as amended by Act June 25, 1910, 36 Stat. 840 (Comp. St. § 9631), provides in part as follows: (2) And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon, and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judg ment creditor holding an execution duly returned unsatisfied.'"

*

*

In view of the foregoing, which meets with our hearty approval, we do not deem it necessary to enter into an extended discussion of the matters involved in this controversy, inasmuch as what we might say would of a necessity be simply a repetition of what the referee has already so well said, further than to cite the case of Loan & Trust Co. v. Graham, 14 Am. Bankr. Rep. 313, 135 Fed. 717, 68 C. C. A. 355. This court, in discussing this phase of the question, said:

"The question of whether or not the lien claimed by the trust company constituted a valid preference under the bankruptcy law was one dependent upon the correct determination of the facts in relation to the particular transaction; and that fact both the referee and the lower court having determined adversely to the trust company, this court, treating this as a petition for review, could not disturb, and, treating it as an appeal, should only do so where those tribunals appear plainly to have been wrong in the conclusions reached by them. Under the facts of this case it may be said that there was 255 F.-41

room for difference of opinion as to just what was the true transaction between the parties; but certainly no such doubt as would justify this court in departing from the well-established rule of accepting the decision of the lower courts, particularly where they both coincide as to what are the facts."

In view of what we have said, it necessarily follows that the decree of the lower court should be affirmed.

Affirmed.

THE PINNA.

(Circuit Court of Appeals, Fifth Circuit. January 31, 1919.)

No. 3306.

1. SEAMEN 24 DEMAND FOR HALF PAY AT INTERMEDIATE PORT-SUFFICIENCY OF COMPLIANCE.

Where, on demand by seamen on arrival at American port for payment of half their earned wages, the master stated that he did not have money and banks had closed, but offered them store orders, which they accepted and used in part, they could not thereafter dispute validity of payment pro tanto, nor put master in default, so as to entitle them to full payment and discharge without a further demand.

2. SEAMEN C24 DEMAND FOR HALF WAGES AT INTERMEDIATE PORT-TIME FOR COMPLIANCE.

The master of a vessel is entitled to reasonable time to prepare himself to comply with a demand by seamen for half of their wages under Seamen's Act, § 4 (Comp. St. § 8322).

3. SEAMEN 21-WAGES-FORFEITURE BY DESERTION.

Seamen, who demanded instant compliance with their demand for half their earned wages in an American port, and when the master obtained the money shortly afterward, while they were still on the vessel or wharf, refused to accept it and left the vessel, forfeited their wages as deserters.

Appeal from the District Court of the United States for the Eastern District of Louisiana; Rufus E. Foster, Judge.

Suit in admiralty by H. Olsen and others against the steamship Pinna; Lane & McAndrew, Limited, claimant. Decree for claim

ant, and libelants appeal. Affirmed.

For opinion below, see 252 Fed. 203.

W. J. Waguespack and Herbert W. Waguespack, both of New Orleans, La., for appellants.

W. W. Young, of New Orleans, La. (Terriberry, Rice & Young, of New Orleans, La., on the brief), for appellee.

Before WALKER and BATTS, Circuit Judges, and GRUBB, District Judge

GRUBB, District Judge. This is an appeal from a decree in admiralty, dismissing a libel, filed by 14 seamen, as to 12 who are appellants in this court. A decree in favor of the other 2 libelants is not appealed from. The question presented by the appeal is whether the appellants properly demanded, and were entitled to the payment of, half wages earned, when their ship reached Port Arthur, Tex.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

The libelants were shipped in London for a voyage to certain ports in the Gulf of Mexico, and back to a final port of destination in the United Kingdom, not to exceed one year. They signed shipping articles on November 26, 1916, and then received certain advances, and made certain allotments of their pay. The ship arrived at Port Arthur on January 9, 1917, and loaded some oil. There is a dispute as to the time of her arrival; the libelants testifying that she arrived in the morning, and the master and chief engineer that she docked at 3 p. m. After the ship docked, and on the same day, the crew demanded a payment of wages, in varying amounts from $5 to $15, as indicated on a list presented to the captain. The master told them that he had no money on the ship, and that it was impossible to then get it on shore, because the banks had closed, and offered the men orders for merchandise on the Gulf Refining Company's store at Port Arthur. The men demurred, but accepted the orders, were granted shore leave, and traded part of the amount of their orders in merchandise at the store. The succeeding morning they made another demand for half wages then earned, in cash, without deduction for advances and allotments made in London. The master replied to their demand that he had not enough money in the ship to pay their half wages, offering them $5 each, in addition to the amounts taken up by them in merchandise. The master and chief engineer also testified that the master also told the appellants that he would get more money for them from the bank as soon as he could, and return to the ship with it. The appellants declined to await his return, and left the ship for the purpose of libeling it, claiming that the captain's failure to pay them half wages earned entitled them to collect their full wages due and to their discharge from the ship. The captain, upon his return from Port Arthur with additional money, testified that he found some of them on the ship or on the dock, after a visit to the ship to get their effects, and offered then to pay them according to their demand, but that they declined to receive anything from him, upon the ground that it was too late. The ship sailed from Port Arthur without the appellants, and the captain entered them on the log as deserters from the ship. Upon the ship's arrival in New Orleans, the libel against it was filed.

The rightfulness of the appellants' position in leaving the ship depends (1) upon their right under section 4 of the Seamen's Act of 1915 (Act March 4, 1915, c. 153, 38 Stat. 1165 [Comp. St. § 8322]) to receive half wages earned from the time the voyage commenced till its arrival at Port Arthur, without deductions, and in money; and (2) upon whether they properly demanded half then earned wages from the master. The first question depends upon whether the ship should be credited with advances and allotments made in London, and upon whether payments in orders payable in merchandise are properly to be taken into account.

[1] We think an answer to the first question is unnecessary to a decision of the case. Whether there was an amount due the appellants or not, the master could be put in default, so as to entitle them to full wages and a discharge, only for failure to comply with a proper and

legal demand. Conceding that the first demand on the day of the ship's arrival at Port Arthur could only have been complied with by a money payment, if the appellants had stood on their right to nothing but a money payment, yet the fact is that they all both accepted and partly used the store orders. They could not use the orders and still dispute the validity of the payment. The acceptance of the orders and the use of them for less than the amount of half of their earned wages would not prevent their making a second demand for the unpaid portion of the then half of their earned wages. They made a demand on the morning of the second day. It may be conceded that it was a demand for the amount of wages they were entitled to demand under section 4 of the Seamen's Act. The captain, in response to the demand, according to appellee's testimony, which the District Judge found to be true, did not refuse to comply with the demand, but offered appellants each $5 immediately, and asked for time to get more money from the Port Arthur bank with which to supply any deficiency. There is a conflict in the evidence as to what happened between the master and the appellants on the occasion of the second demand, but the District Judge found the facts to be as stated, and an examination of the record supports the correctness of his conclusion. The appellee's evidence is also to the effect that the master thereafter procured the money and offered it to those of appellants who were at the ship or on the dock upon his return, and that they declined to receive it. No reference to this offer and refusal is found in appellants' testimony.

[2] A demand, to be legal, must afford the person on whom the demand is made a reasonable time to accede to it. If, upon the second demand, the master had pleaded inability to immediately comply, not coupled with a request for time to put himself in shape to comply, it might be construed to be a refusal to comply, which would entitle the appellants to full wages and a discharge. Upon the ship's arrival in port, the master was entitled to a reasonable time to prepare himself to comply with any demands made upon him for wages. The acceptance of the orders tendered by the master in response to the first demand authorized the master to assume that the men would not insist on further payment, at least until he was notified to the contrary by the second demand. He was not, therefore, in default for not having anticipated and prepared for the second demand. He was entitled to a reasonable time, after the making of the second demand, to get the money to comply with it. This was certainly true, if he requested the extension of such indulgence to him and expressed a purpose to put himself in shape to comply shortly with the demand, if granted, and this is what the record discloses in this case. The purpose of section 4 of the Seamen's Act was to furnish a remedy by which sailors could procure a proportion of their earned wages at each port, and not to provide a method by which the shipping articles could be terminated at the will of the seaman, because of a failure on the master's part to instantly comply with a demand by the seaman, which was made with the purpose of procuring the right to demand a discharge from the shipping articles, rather than the payment of half of the earned wages under them.