and circumstances surrounding Schweyer's activity and his status and that of the corporation itself.
Schweyer was a close friend of Connor. When he desired to form another corporation known as the General Crayon Company at about the time of this mortgage transaction in 1941, Connor acted as one of the incorporators for him. Schweyer consulted counsel and knew that as a director of the Jersey Materials Company he held a position of a fiduciary nature and that he could not with propriety close the bargain with the Greens for the mortgage at a greatly reduced amount for his personal advantage. Connor was fully conversant with the affairs of the Jersey Materials Company, knew of its insolvent condition and knew also of the disintegrating relationship existing between Schweyer and Krohn. Schweyer told Krohn nothing concerning the opportunity to purchase the mortgage security at about one-third of its face value with interest. He advanced his own money to Connor with which to make the purchase. There is the testimony of Schweyer and Connor that Schweyer had no interest in the mortgage but this would be their likely statements if the purchase was being made by Connor for Schweyer or at least for him to have an interest in the transaction. Schweyer's action is so inconsistent with the ordinary conduct of a businessman under circumstances such as those present that it challenges credulity. Schweyer himself is a creditor of the bankrupt although Krohn is a much larger creditor. His beneficent friendship in introducing Connor to the transaction whereby he would stand to make such a substantial profit as against the corporation's creditors cannot be accepted as his motive in the light of the fact that it was his money that made possible Connor's purchase. When he required someone to accept stock for the purpose of forming a corporation, Connor was the available dummy. In the instance of the acquisition of the Green mortgage it seems certain that Connor again was acting for or with him.
I realize that fraud and collusion must not be presumed nor should it be deduced on the basis of mere suspicion. The burden of proving it rests upon the party pleading it and that proof should be clear and convincing. In this case we have as direct evidence the testimony of Schweyer and Connor that the transaction was a bona fide purchase of the mortgage to enure entirely to the benefit of Connor. On the other hand, we have a chain of circumstances showing conclusively that Schweyer felt aggrieved at the activity of his colleague in the corporate enterprise, Krohn, and anticipated the dissolution of the corporation. He knew that the mortgage could be bought at a bargain and failed to communicate it to the corporation. Instead, he chose to communicate this information to his friend, Connor, and to make available out of his own funds every penny necessary to carry out the transaction. These, and the other circumstances which have been mentioned heretofore, point to a course of action inconsistent with the direct statements of Schweyer and Connor but entirely consistent with a course of conduct of a corporate officer who desired to benefit by controlling his corporation's secured evidence of indebtedness. The old adage that actions speak louder than words seems to have peculiar applicability here.
I am persuaded that Connor purchased the mortgage from the Greens with the intent that Schweyer should benefit thereby and that under such circumstances Connor should recover from the bankrupt estate no more than the sum of money paid by him for the mortgage, together with interest from the date he paid it.
In arriving at my conclusion I have not overlooked the provisions of No. 47 of the General Orders in Bankruptcy.
Ordinarily, if the referee's finding is based upon conflicting evidence involving questions of credibility and the referee has actually heard the witnesses, great weight must be attached to his conclusions and they should not be disturbed unless there is a most cogent evidence of mistake and miscarriage of justice. In this case, however, the referee's conclusions are ultimate findings based upon substantially undisputed facts which need not be accorded so conclusive an effect. The assertions of Schweyer and Connor as to the sole interest of Connor in the purchase are undisputed and the circumstances surrounding the purchase are likewise undisputed. I am constrained to infer from this conflict a conclusion which differs from the inference drawn by the referee and this is not beyond the power of the reviewing court.
"The judge is not bound by the findings of the referee when no serious contradictions are in the evidence. On uncontradicted evidence, the judge or an appellate court is in as good a position as the referee to make findings of fact." Remington on Bankruptcy, Vol. 8, 5th Ed., § 3718, p. 33; Walter v. Atha, 3 Cir., 262 F. 75.
Accordingly, the order of the referee will be affirmed but upon the reasons set forth herein.