Before MARIS, O'CONNELL and KALODNER, Circuit Judges.
This is an appeal by the objecting creditor from the affirmance by the District Court of the Order of the Referee in Bankruptcy granting the discharge of the bankrupt.
In 1922 the bankrupt executed notes totalling $8,000 to his uncle, Philip Remstine (whose executor is the objecting creditor). Some time in 1945 suit was started on these notes. The bankrupt moved to strike the complaint pleading the statute of limitations and lack of consideration for the execution of his notes. His motion was denied.He did not answer on the merits and on September 25, 1945, judgment was entered against him in the New Jersey Supreme Court in the amount of $14,151.95 damages and $64.10 costs. The bankrupt filed a voluntary petition in bankruptcy, in the United States District Court for the District of New Jersey on January 16, 1946, and listed in his schedule the debt to his uncle as the only liability.
The record discloses that prior both to the entry of the aforesaid judgment and the filing of the bankruptcy petition, the bankrupt on July 3, 1945, executed a deed of conveyance to his home, 74 Courter Avenue, Maplewood, New Jersey, to himself and his wife, as tenants by entireties. Title to the home had been in the bankrupt alone since 1922 and had been purchased for $12,000.At the time of the transformation to tenants by the entireties the home was mortgaged by two encumbrances. According to the testimony of the bankrupt and his wife, both mortgages were in arrears and payment was demanded by the mortgagees and it became necessary to refinance the home in order to pay off the mortgages. For this purpose, they testified, a Federal Housing Administration mortgage was secured in the amount of $7,500 which was executed by both the bankrupt and his wife; the proceeds thereof, together with additional funds alleged to have been supplied by the wife, were used to pay off the existing encumbrances and the property was put in the name of the husband and wife. At the hearing before the referee the wife testified that in September, 1944, she withdraw $300 from her own bank account (the bank book was produced) which was paid on account of one of the mortgages and at the time of the conveyance to herself and her husband she converted some war bonds totalling about $150 and some bonus bonds totaling about $600; the proceeds of which were employed in the satisfaction of the existing mortgages. The wife testified that she had no private income and that the bank account and the monies for the war bonds were accumulated by her from gifts from her mother and monies she had saved from household allowances received from her husband. As to the bonus bonds, she testified that these had been given to her by her husband in 1934 or 1935. The bonus bonds apparently were in the name of the husband up to the time of their conversion, because the wife testified that the husband went with her to sign when they were redeemed.
Objections were filed by the judgment creditor on the ground that the bankrupt had made a transfer of his property "intending to hinder, delay and defraud his creditors". The Referee originally sustained the objections to the discharge and the District Court sent the matter back to the Referee for the purpose of taking additional testimony. At the second hearing the wife testified substantially as has been above indicated and the Referee, on January 24, 1947, entered an order vacating the denial of the discharge and made an order granting the discharge.
In the Memorandum of Referee on Re-Reference, the Referee found as a fact that: "* * * the deed conveying the property known as No. 74 Courter Avenue, Maplewood, New Jersey to the bankrupt and his wife as tenants by the entirety was executed on the insistance of the wife who had used some $750,00 of her money in making payments on mortgages covering the property. While she had received this money from her husband from time to time, she had saved it and it was her money when the payments were made * * *"
The Refree also found that the $750.00*fn1 payment by the wife "represented a substantial part of the equity in the property." The Referee further found: "* * * that it was reasonable for the bankrupt to put the property in the names of his wife and himself and that the fact that he did so is not sufficient to show an actual intent to hinder, delay and defraud his creditors * * *"
Finally, the Referee found that "the proofs do not show an actual fraudulent intent" such as to bar the bankrupt's discharge.
The District Court in disposing of a petition for review of the Referee's Order, held, after considering the record and the arguments of counsel: "It appeared that the Order of January 24, 1947, was proper in all respects" and thereupon affirmed the Order.
The simple question presented is whether the Referee's findings of fact were so "clearly erroneous" and the District Court's affirmance was such "a plain mistake which would result in the defeat of justice" as to warrant reversal by this Court.
General Order 47, 11 U.S.C.A. following section 53, provides that "the judge shall accept (the referee's) findings of fact unless clearly erroneous". Under former General Order XLVII it was provided that "the reports of referees in all * * * proceedings under the Act shall be deemed presumptively correct, but shall be subject to review by the court, and the court may adopt the same, or may modify or reject the same in whole or in part when the court in the exercise of its judgment is fully satisfied that error has been committed."
There seems to be but little difference between the former and the present General Order. The present General Order is perhaps as shade stronger in giving effect to the Referee's findings by reason of the use of the term "clearly erroneous".The same term is used in Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c,*fn2 relating to findings of fact by the Court without a jury, and has been commented upon in United States v. Aluminum Co. of America, 2 Cir., 1945, 148 F.2d 416 at page 433 as follows: "* * * It is idle to try to define the meaning of the phrase, 'clearly erroneous'; all that can be profitably said is that an appellate court, though it will hesitate less to reverse the finding of a judge than that of an administrative tribunal or of a jury, will nevertheless reverse it most reluctantly and only when well persuaded. This is true to a considerable degree even when the judge has not seen the witnesses. His duty is to sift the evidence, to put it into logical sequence and to make the proper inferences from it * * *."
In the case at bar the Referee has seen and heard the witnesses and has determined their credibility and his findings have been affirmed by the District Court. We are not ...