guage of the petition in this regard is that the plaintiff entered into the contract in question with the defendants "with a view of reselling the cross-ties mentioned therein for a profit, which resale thereof and anticipated or expected profits thereon, was reasonably within the knowledge and contemplation of the parties to said contract at the time of the execution of the same." It is well settled that, in order to satisfy the requirement of notice to the vendor that the vendee is buying for the purpose of reselling, it is only necessary to prove that such purpose of resale and the recovery of profits thereon was "within the contemplation of the parties to the contract at the time of its execution." Language no more specific than that just stated is found in any of the authorities cited by defendants. See Blue Grass Cordage Co. v. Luthy, 98 Ky. 583, 586, 33 S. W. 835, where it is stated that expected profits may be recovered where "it was fairly within the contemplation of both parties that the goods were purchased with a view to a resale for profits"; Bates Mach. Co. v. Norton Iron Works, 113 Ky. 372, 68 S. W. 423, where an instruction was approved that profits could be recovered if the defendants "knew at the time of purchase by plaintiffs that they purchased same with a view to a resale, and that the profits anticipated thereon were in the contemplation of both parties." See, also, to the same effect, MoffittWest Drug Co. v. Byrd, 92 Fed. 290, 34 C. C. A. 351; Central Trust Co. v. Clark, 92 Fed. 293, 34 C. C. A. 354; Denhard v. Hurst, 111 Ky. 546, 64 S. W. 393; Harrow Spring Co. v. Harrow Co., 90 Mich. 147, 51 N. W. 197, 30 Am. St. Rep. 421. The only criticism made upon the allegation of the petition in question as failing to sufficiently allege notice to the defendant of the intended resale is that it is manifestly "a conclusion of the pleader," and not a statement of fact. This proposition is apparently based upon the use of the word "reasonably." The allegation is not subject to the criticism referred to. The fact that the expected resale at a profit was not mentioned in the contract affects only the subject of evidence. In our opinion the petition definitely advised defendants of plaintiff's claim that the defendants knew, when the contract in question was made, that the plaintiff expected and intended to sell at a profit the ties contracted for, that such resale and expected profit were contemplated by the parties thereto at the time the contract was made, and that the loss of such profit was thus the natural and proximate result of defendants' breach.

In support of the objection that the petition does not show that the plaintiff's profit would have amounted to anything, after paying the expenses of transporting the ties from the place where defendants were to deliver them to plaintiff to the place where the latter was to deliver them under its contract of resale, the argument is presented that for all the petition shows plaintiff's contract of resale may have expired on the day after the making of the contract sued on; that there is no allegation that plaintiff failed to supply its customer with ties by reason of defendants' default; that the freight and expense of delivery might have eaten up the 10 cents per tie gross profit referred to; that for all that is shown by the petition plaintiff may have been able to buy sufficient ties to carry out its contract of resale at a price much less than ten cents per tie, in which case the loss would have

been only what was required to purchase such other ties. This argument is not persuasive. The petition plainly alleges that plaintiff could have sold "the minimum of 25,000 ties provided for in its said contract with the defendants in addition to all of the ties that your petitioner was able to and did buy up until in February, 1908," and that “had the said defendants complied with their said contract by the furnishing of the minimum of 25,000 ties provided for in said contract your petitioner would have derived a profit on the resale thereof to its said customer of $2,500." The infirmity in the argument in support of this criticism results from overlooking the fact that the burden of proof with respect to the question of mitigating damages by repurchase is on the defendants, rather than on the plaintiff, and in treating the petition not merely as a statement of plaintiff's cause of action, but as a statement of the proofs in support thereof. The petition is not in our opinion subject to the objection just considered.

The third and fourth grounds of demurrer raise the defense that it does not appear by the petition that plaintiff could not have bought in the market sufficient ties to meet its contract of resale, or that in purchasing the same it was compelled to pay more than the price it agreed to pay defendants. As to this defense, also, the burden of proof is on the defendants. It is strenuously urged, however, that railroad ties are "found anywhere and everywhere, in any quantity that is desired," and that the court must take judicial cognizance of plaintiff's alleged ability to repurchase in the market all the ties plaintiff might need to carry out its contract with its customer. It should be sufficient to say that the court cannot take judicial cognizance of the existence of such fact. Moreover, the petition to our minds sufficiently alleges the contrary. We see nothing in the objection that the damages claimed by the plaintiff are shown by the petition to be uncertain and speculative. The petition alleges a sufficient market already contracted for, and at a fixed price, alleged to be $2,500 in excess of the price under the contract in suit.

It results from the views we have stated that in our opinion the learned judge who heard the case erred in granting the motion to strike out and in sustaining the demurrer to the petition. The case has been argued throughout upon defendants' behalf upon the theory that the petition does not claim general damages, viz., the difference between the contract price and the market value. The petition alleges that:

"The 25,000 ties agreed to be sold and delivered to it by said defendants were reasonably worth in the market 10 cents more per tie than the amount named in said contract during all the period covered by said contract."

This fails of stating the correct measure of general damages only in that it omits the statement of market value as at the place of delivery provided by the contract. If plaintiff desires to claim general damages, such amendment of the petition as will permit such recovery should be had.

The order granting the motion to strike out and sustaining the demurrer will be reversed.

(176 Fed. 253.)

In re RUSSELL.

(Circuit Court of Appeals, Second Circuit. February 8, 1910.)

No. 141.

1. RELEASE (§ 25*)-CONSTRUCTION-INTENTION OF PARTIES. Releases are to be construed according to the intent of the parties, as it may be gathered, if it can be gathered, from the instrument itself. [Ed. Note. For other cases, see Release, Cent. Dig. § 48; Dec. Dig. § 25.*]

2. BANKRUPTCY (§ 407*)-GROUNDS FOR REFUSAL OF DISCHARGE-FALSE STATEMENTS-RELEASE.

An agreement by a creditor based on a valuable consideration, which recites that one of its purposes is to cancel and surrender certain written statements made by a debtor on which he obtained credit, the truthfulness of which was in controversy between the parties and by which the creditor expressly cancels and "agrees to surrender up the same, and concedes that any inaccuracies therein * were inadvertent and with

out wrongful intent," debars the creditor from using such statements as a ground of objection to the debtor's discharge in bankruptcy. [Ed. Note. For other cases, see Bankruptcy, Dec. Dig. § 407.*] 3. BANKRUPTCY (§ 407*)-GROUNDS FOR REFUSAL OF DISCHARGE-FALSE STATE

MENTS.

A financial statement delivered to a commercial agency for general circulation among its inquiring subscribers is not within Bankr. Act July 1, 1898, c. 541, § 14b, 30 Stat. 550 (U. S. Comp. St. 1901, p. 3427), as amended by Act Feb. 5, 1903, c. 487, § 4, 32 Stat. 797 (U. S. Comp. St. Supp. 1909, p. 1310), which makes it a ground for refusing a discharge that the bankrupt has "obtained property on credit from any person upon a materially false statement in writing made to such person for the purpose of obtaining such property on credit."

[Ed. Note.--For other cases, see Bankruptcy, Dec. Dig. § 407.*]

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

In the matter of Walter Russell, bankrupt. On appeal by the Commercial Trust Company of New York from an order granting a discharge. Affirmed.

The following is the opinion of the trial court:

I think that the contract of March 2, 1906, between Mr. Russell, Mrs. Russell, and the Commercial Trust Company bars the Trust Company from taking legal proceedings of any kind to the disadvantage of the bankrupt based on the financial statements made to the Trust Company and the Bradstreet Company. There was ample consideration in Mrs. Russell's indorsement for $17,500 and her transfer of her collateral. The Trust Company, by that contract, agreed to cancel and surrender the said statements, conceded the inadvertency of any misstatements therein, and waived and released any claim in that regard. The effect of that agreement, in my opinion, was to leave the parties to it subsequently in the same condition in which they would have been if no such financial statements had ever been made. This conclusion makes it unnecessary to consider the question elaborately argued by the bankrupt's counsel whether the statements were in fact untrue.

My conclusion is that the referee's report should not be confirmed, and that a discharge should be granted to the bankrupt.

Campbell & Moore (William J. Wallace, of counsel), for appellant. Charles A. Boston, for appellee.

Before LACOMBE and WARD, Circuit Judges, and HAND, District Judge.

LACOMBE, Circuit Judge. On April 14, 1908, Russell filed his petition and was adjudged a bankrupt. On June 8, 1908, he applied for his discharge. The creditors were duly cited to appear; the Commercial Trust Company, a creditor in the sum of $10,000, duly appeared and opposed the discharge, filing written specifications of objection. These specifications set out two statements in writing by the bankrupt, which the objecting creditor claimed were materially false and were made to the Trust Company for the purpose of obtaining property from it on credit, such property being obtained from the creditor upon said statements. The bankrupt vigorously denies the falsity of such statements, which are dated respectively January 26, 1907, and April 26, 1907. The case was sent to a referee as special master for examination and report. Testimony was taken, and he reported (February 24, 1909) that both statements were false, that the bankrupt obtained property from the creditor on the strength of each of them, and recommended that discharge be denied. The District Judge overruled the report and granted discharge, basing his decision on a certain agreement between the bankrupt and the creditor (dated March 2, 1908) which will be hereinafter referred to. The order granting discharge is now here on appeal. The opinion of the District Judge will be found above. The facts detailed in the record are as follows:

Russell is an artist who engaged in various business ventures connected with real estate and the erection of buildings thereon. In May, 1905, he made a statement to a reporter of Bradstreet's Commercial Agency giving an estimate of his financial condition. This statement is not specified and was not considered by the special master. On January 12, 1907, Russell wrote a letter to the Trust Company in respect to opening accounts for two corporations, and upon receiving a reply called (January 14th) and made himself known, had a conversation with its president, and referred the latter to four individuals as to his honesty, integrity, and general standing. The company wrote to these individuals the same day and received favorable replies. It also applied to the Bradstreet Company for a report, and on the same day January 14th-received a copy of the statement of May, 1905. Thereupon on January 29, 1907, the Trust Company loaned Russell $20,000 on his demand note with collateral. On January 26, 1907, Russell made a statement in writing to the Bradstreet Company giving an estimate of his financial condition on a printed form furnished by the company signed by him. This is one of the statements enumerated in the specifications. Whether or not it is false has been hotly contested, but we do not find it necessary to decide that question. The Bradstreet Company kept this statement on its own files, but on February 2, 1907, it sent to the Trust Company a copy of its contents, adding that, while "well regarded personally and believed to possess

considerable means, no definite estimate of same is obtained." On February 13, 1907, the Trust Company made a further loan to Russell on his demand note for $5,000. Subsequently on April 15, 1907, the Trust Company called on Russell for a statement as to his financial condition; he sent them such written statement signed by himself on April 26th. This is the other statement set out in the specifications of objections, and it will not be necessary to decide whether or not the special master erred in finding that it was false. On May 4, 1907, the Trust Company loaned to the Dayton Construction Company (in which Russell was interested) on its note due August 5th, with collateral, $12,500. The president of the Trust Company asserts that Russell indorsed this note, the latter asserts that he did not; the question might readily have been determined by producing the note. This was not done, and upon examining all the evidence bearing on this branch of the case we are inclined to the opinion that his indorsement was not on it. Inasmuch, however, as a note of one Dorrance ($15,000), to the Dayton Company which was indorsed by Russell was substituted for the Dayton Company note when it came due, the question becomes unimportant; Russell was of course liable on this Dorrance note whether the proceeds of the prior note went to the Dayton Company or to himself.

Some months later, the panic of 1907 having intervened and in January or February, 1908, differences having arisen, the matter of the truthfulness or falsity of these two statements was taken up in an interview or interviews between counsel for the Trust Company and Russell. Counsel insisted that there were several false representations in the written statements, that they could have Russell arrested and put in jail in a civil action on a charge of fraud, that his reputation would suffer, that Russell was up against a very grave proposition. Counsel asked if Russell's wife had property, and if she would not give up some of it to help him out of this fix. These interviews resulted in the agreement, above referred to between Helen A. Russell, the wife, of the first part, Walter Russell of the second part and the Trust Company of the third part, which was executed March 2, 1908. It recites that "the party of the second part has heretofore borrowed certain moneys from the party of the third part aggregating $40,000 and has delivered written statements to the party of the third part as to his assets and liabilities, and has transferred to the party of the first part certain properties included in said statements." The indebtedness stated is the $25,000 loaned to Russell and the $15,000 due on the Dorrance note indorsed by him, which was substituted for the original Dayton Company note for $12,500. It further recites that "the party of the first part (the wife) desires to secure the withdrawal and cancellation of any such filed statements and to avoid any contention regarding the validity of any such transfer of property to her, and to obtain from the party of the third part forbearance of its claim against the party of the second part and to that end has agreed to assume responsibility for a portion of said indebtedness, to wit, the sum of $17,500, and to secure the payment thereof by the assignment as collateral security" of certain property and securities specifically enumerated.