STONE, Circuit Judge.
Appellant filed two amended general claims (Nos. 184 and 185) in the bankruptcy proceeding of the Calhoun Beach Club Holding Company. After full hearing, the referee denied both entirely. On review, the trial court affirmed the referee except as to one item in claim No. 184, being for $8,000.00 based on eight $1,000.00 bonds issued by bankrupt and pledged by Mr. Goldie as collateral to a note purchased by C. R. Shefveland. From this order of affirmance, Mr. Goldie appeals. Three corporations will be, for brevity, referred to as follows: The Calhoun Beach Club Holding Company as the bankrupt, the Calhoun Beach Holding Company as the Holding Company, and the Calhoun Beach Club as the Club.
Claim No. 184 is for claimed advancements to the bankrupt and is evidenced by 183 checks, from October 19, 1926, to July 17, 1933. These checks are in various sums and amount to $20,378.48 plus interest thereon. Claim No. 185 was for claimed advancements to the bankrupt represented by 32 notes, dated from November 20, 1926, to November 15, 1928, in a total of $20,212.84 plus interest thereon.
The report of the referee states: “In view of the fact that the books of the bankrupt are reasonably complete for the period up to December 31, 1928, and there are no books thereafter, the court for convenience will consider these claims in two periods:
A. The period from October 9, 1926 to December 31, 1928.
B. The period after January 1, 1929.
A. The first period includes all of the 32 items of claim No. 185, aggregating $20,-212.84, and the first 37 items of claim No. 184, aggregating $15,140.49, as they are listed on- tabulations introduced in evidence as Goldie Claim 185 Exh. 1, and Goldie Qaim 184, Exh. A., or a total of $35,353.-33. All of the items of claim No. 185 are reflected on the journal and ledger of the bankrupt; of the 37 items of claim No. 184, all except items 1, 2, 4 to 9, 17 to 19, 28, 31 and 36, are credited to Goldie on the ledger.
B. The second period includes items 38 to 183 of claim No. 184, aggregating $4859.-51. None of these items are reflected on the books of the bankrupt produced.”
As to Period A, the referee concluded, from showing of the account books of the bankrupt, that Mr. Goldie was entitled to a credit, as “shown on the ledger account,” for net amount of advances to December 31, 1928, of $25,637.84; and must be charged with a debit, “shown on the ledger account,” of $25,525.08—leaving a net credit due him of $156.76. This disposed of all the items on claim No. 185 and of items 1 to 37 on claim No. 184. This left items 38 to 183 of claim 184, which fell in the above period B.1
[698]*698As to Period B, there were the above 146 items (38 to 183) which amounted to $4859.51. The referee found that the claimant “has failed to establish by any satisfactory evidence that said payments were made at the request of the bankrupt, or for its use or benefit, and has failed to produce any account books reflecting such payments and has failed to disclose any payments which he may have received from the bankrupt during that period or any charges against him during that period.
Goldie, being the president and managing officer of the bankrupt, occupied a fiduciary relation to it, and any claim presented by him against the bankrupt estate must be subjected to close and rigid scrutiny, and to be allowed, must be satisfactorily established by the proof. Such serious doubt exists as to the propriety of any of said items that the court feels constrained to disallow them.”
In addition to the above claims for advancements, there was an item of $300.00 for “services”, at $20.00 per day for 15 days between July 18, 1932, and October 12, 1932. As to such, the referee found that no evidence was offered to support this item; and, “in addition”, that payment of salaries to any officer or director, except from “net profits arising from the operations of said Club property under said operating agreement” was a condition for issuance of a license (by the Securities Commission of Minnesota) to sell stock of the bankrupt and a written waiver to that effect and for that purpose was executed by claimant and there had never been any such “net profits.”
The net result of the above findings of the referee is that there was due claimant $156.76 on claim 184 and nothing on claim 185. These findings were based upon what we may designate as the mathematical phase of the problem, that is, what the referee deemed the evidence to show as to the existence of advancements by and as to opposing debit items against the claimant—in short, whether the bankrupt was in fact indebted to claimant, and, if so, in what amount. However, the findings of the referee did not stop with these mathematics.
He considered other issues and found: that all advancements in these claims should be treated as capital contributions to the bankrupt and not as loans to be repaid; that any amount due on these claims should be subordinated to the claims (27 claims for $29,500.00) of holders of bonds which were personally guaranteed by Mr. Goldie; that this claimant joined with others in false and fraudulent transactions “with an intent to enforce groundless claims and thereby deceive and defraud stockholders and creditors of the above estate” to their damage and, therefore “is now estopped from asserting any claim against the above estate, and from attempting to share with the good faith creditors of the above estate in the distribution thereof.”; that an assignment of the subject matter of these claims to L. M. Shapiro (or to a partnership made up of him and his brother Sam Shapiro) was ineffective because the debt for which the assignment was made had been paid; and, that an item in claim 184 for $8,000.00, represented by bonds of the bankrupt pledged as collateral to a note owned by C. R. Shefveland, was not allowable.2
In his certificate, the referee stated the questions presented for review were:
“(1) Whether said unsecured claims, if allowed in any amount, should be postponed and subordinated to the rights of [699]*699creditors holding ‘A’ Bonds of the bankrupt guaranteed by Goldie.
“(2) Whether Goldie was guilty of actual bad faith and breach of duty whereby the good faith creditors of the above estate were deceived, whereby he is now es-topped from asserting any claims against the above estate.
“(3) Whether the bankrupt was in fact indebted to Goldie, and if so in what amount.
“ (4) Whether the advances made by Goldie for the bankrupt should be treated as capital contributions to the bankrupt or as loans.
“(5) Whether Goldie performed any services for the bankrupt in 1932 for which he is entitled to compensation.
“(6) Whether C. R. Shefveland, as subrogee of Goldie, is entitled to the allowance of a claim upon $8,000 of ‘B’ bonds of the bankrupt included in Goldie’s claim No. 184.
“(7) Whether in the event Goldie has a claim, L. M. Shapiro, or Hennepin Transfer Company or Hennepin Transportation Company, Inc., is the assignee thereof.”
The certificate states the evidence as to each of these seriatim.
We take up now the particular matters urged here by appellant. Logically, we consider first those points which, if determined against appellant, would completely or largely dispose of the claims in their entirety. There are three points of this character: (1) this point concerns the finding that claimant was guilty of actual bad faith and breach of duty whereby good faith creditors were deceived and because of which he is estopped from asserting any claims against the estate—if this be determined adversely to claimant, both claims fail entirely; (2) this point concerns the finding that the advancements should be treated as capital contributions and not as loans—if this be determined adversely to appellant, all items therefor in the claims fail but the claim item for services is not concluded thereby; (3) this point is concerned with the claim item for services.
(1) The Fraud Point.
This point hinges on the existence or not of bad faith or breach of duty by claimant to the prejudice of creditors and stockholders of the bankrupt. By such bad faith or breach of duty is meant such conduct as would make it inequitable for claimant to have his claims allowed or, if allowed, to have them share, in distribution of the estate, on equality with other unsecured creditor claims. Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281. Determination here required consideration of certain legal principles and then the application of those principles to the fact situation.
The legal principles are stated by Mr. Justice Douglas in Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281. Those principles are: that disallowance or subordination of a claim is determined “in light of equitable considerations” (308 U.S. page 305, 60 S.Ct. page 244); that this applies to claims by an officer, director or stockholder of a bankrupt corporation (308 U.S. pages 306, 307, 60 S.Ct. 238, 84 L.Ed. 281) ; that, because such officer or director is a fiduciary, their dealings with the bankrupt “are subjected to rigorous scrutiny” and the burden is on them “not only to prove the good faith of the transaction but also to show its inherent fairness from the viewpoint of the corporation and those interested therein”—the test being “whether or not under all the circumstances the transaction carries the earmarks of an arm’s length bargain” (308 U.S. page 306, 60 S.Ct. page 245); that it is the duty of the bankruptcy court “to sift the circumstances surrounding any claim to see that injustice or unfairness is not done in administration of the bankrupt estate” and this duty “is especially clear when the claim seeking allowance accrues to the benefit of an officer, director, or stockholder” (308 U.S. page 308, 60 S.Ct. page 246); that “a sufficient consideration may be simply the violation of rules of fair play and good conscience by the claimant; a breach of the fiduciary standards of conduct which he owes the corporation, its stockholders and creditors.” (308 U.S. pages 310, 311, 60 S.Ct. page 247).3 Therefore, the ques[700]*700tion here is whether this claimant has so violated the “rules of fair play and good conscience” that his claims either should be disallowed or should be subordinated to the unsecured creditor claims.
The fact situation found by the referee to justify disallowance of these claims on this basis is, as stated by the referee, set forth in the footnote 4.4
To the statements in the footnote may be added the undisputed facts that, prior to the applications to the Securities Commis^ sion, a number of memberships in the Club had been procured. Also, that sale of stock [701]*701was limited, in the order of the Commission, to Club members.
The findings of the referee on this quoted fact situation is thus stated by the referee:
“Each and all of the aforesaid instruments and transactions whereby the Holding Company purported to create, preserve and enforce [tile], lien and claims against the bankrupt and its property and estate were false and fraudulent, and were falsely and fraudulently caused to he done and executed by Goldie and his associates, with an [702]*702intent to enforce groundless claims and thereby deceive and defraud stockholders and creditors of the above estate, and constituted a deliberate deception and fraudulent scheme by Goldie, and Goldie was guilty of actual moral turpitude and breach of duty by which the good faith creditors of the above estate were deceived and defrauded to their damage, whereby Goldie is now estopped from asserting any claim against the above estate, and from attempting to share with the good faith creditors of the above estate in the distribution thereof.
[703]*703“The entire enterprise of the bankrupt was founded upon the financing of this project through the registration of its stock, the placing of said mortgages, and the issuance of its bonds, and many, if not all, of the creditors whose claims have been filed and allowed in the above proceeding extended credit to the bankrupt upon the faith of the scheme of financing set up, which necessarily included the ownership of the property in fee by the bankrupt; and said creditors relied upon the representation that the bankrupt had paid the entire purchase price of said property, excepting the bond issue, and was the owner in fee thereof, free and clear of encumbrances, excepting [704]*704the trust deed securing its bonds, and said enterprise would not have gone forward nor would said creditors have extended credit to the bankrupt or purchased its bonds except for such representations; and the attempt by Goldie hereinbefore found constitutes a deliberate attempt to hinder, delay and defraud the creditors of the bankrupt.”
From these facts and the findings thereon, it thus appears that the main bases of the findings are the instruments by which the Holding Company (dominated by claimant) replaced the conveyance of title to the bankrupt by a sales contract; claimant’s endeavors to secure amendment of the claims of his associates (Mendelson and [705]*705Sutterman) ; and the suit of the Holding Company to cover large amounts ($49,-500.00) created as a part of the sales contract of the land to bankrupt.
The original arrangement as to the land seems to have been that there was a contract between the Holding Company and the bankrupt whereby the former was to convey the land to the bankrupt on payment of $75,000. At the same time, there was another contract between bankrupt and the Club whereby the former was to convey to the Club for the same sum, payable one dollar in cash and the balance when the Club dues collections should reach $300,-000.00. There were subsequent alterations (not here material) in these contracts. The important consideration is that, at the time the application was made to the Commission, the Holding Company had not relinquished title but was under contract to convey. It is evident, from the order of the Commission, that it understood the title was not in the bankrupt when it considered the application and made a “conditional order” on July 31, 1928.5 In that order was the requirement:
“That the fee owner of the following described property located in the city of Minneapolis, Hennepin County, Minnesota: [property description omitted here] enter into an agreement with applicant to deed said property to applicant free and clear of all encumbrances for the following consideration:
[706]*706“The sum of $40,000 cash payable as follows: $8,500 thereof which has heretofore been paid, $16,500 payable September 1, 1928, $15,000 payable October 1, 1928, and $35,000 par value of Class A Common stock. And that certified copy of such contract be filed with this department together with the opinion of an attorney showing good and satisfactory title in said fee owner subject to said contract for deed.”
The requirement of this order was not a deed to the bankrupt but a contract to convey on the terms set forth and a showing that the contracting conveyor had fee title clear except for such contract.
By two sales contracts dated August 6, 1928 (acknowledged later in August), the Holding Company obligated itself to convey the land to the Club on the terms set out in the conditional order of the Commission; and the Club to convey to the bankrupt on the same terms. It does not appear that these contracts were recorded but it seems they were presented to the Commission.
On October 11, 1928, the Holding Company conveyed the land to the bankrupt by warranty deed, stating that “the same are free from all encumbrances.” On November 2, 1928, the bankrupt (by its secretary) wrote the Commission6 wherein it stated:
“With reference to the [proff] of satisfactory title, I enclose herewith a carbon copy of a letter from the Chicago Title & Trust Company to H. O. Stone & Company, the bankers who are furnishing the money on the first mortgage bond issue, showing that the title is clear in Calhoun Beach Club Holding Company, Inc., [the bankrupt] subject only to the Trust Deed issued to Chicago Title and Trust Company covering both the first and second mortgage loans aggregating $1,075,000.00, and the Chicago Title and Trust Company has, or will, issue to the Chicago Title & Trust Company its insurance policy guaranteeing this Trust Deed to be a first mortgage upon the prerm ises.”
The Commission made its definite order allowing registration on November 5, 1928. Four days later (November 9, 1928), the bankrupt reconveyed the land to the Holding Company by warranty deed for free title subject only “to incumbrances now on said premises aggregating One Million Seventy-five Thousand Dollars ($1,075,-000.00)”—which was the deed of trust securing the bond issue. This deed was not recorded until January 4, 1929. By a sales contract (dated November 9, 1928, but not acknowledged until January 18, 1929, and, apparently, not recorded) the Holding Company agreed to reconvey this land to the bankrupt upon full payment to it of a “purchase price” of $1,135,000.00 in the manner and at the times following:
“Ten Thousand Five Hundred Dollars ($10,500) by executing and delivering to party of the first part, its promissory note in said amount, the receipt of which note is hereby acknowledged; One Million Seventy-five Thousand Dollars ($1,075,000) by assuming and hereby covenanting to pay in accordance with their terms, the principal and interest upon the now existing encumbrances against said premises aggregating said principal amount;
“And the balance of Forty-nine Thousand Five Hundred Dollars ($49,500), in installments following to-wit: Five Thousand Dollars ($5000) each on or before the 15th days respectively of February, March, April, and May, 1929, Seven Thousand Five Hundred Dollars ($7,500) each on or before the 15th days respectively of June, July, and August, 1929, and Seven Thousand Dollars ($7,000) on or before the 15th day of September, 1929.
“The party of the second part shall pay interest at the rate of six per cent per annum from and after this date on said deferred installments of Forty-nine Thous- and Five Hundred Dollars ($49,500). Said interest shall be computed on said installment due dates on the balances of principal in each case remaining unpaid, and shall be paid together with and in addition to said installments of principal.”
Thereafter claimant contended these instruments created a lien prior to the bonds issued under the deed of trust.
Either in August, 1929 (as stated by the referee), or_early in September, 1929 (as shown by comparison of statements in notices to unsecured creditors signed by Brill and Maslon on August 30 and September 17, 1929), notice of cancellation, because of default in payments, of this last above sales contract was given.
[707]*707The bankrupt’s schedules (verified by claimant on February 3, 1933) listed Main-East Prairie Road Gardens Syndicate as the assignee of the vendor’s (Holding Company) interest in the above sales contract and, thereby, an unsecured creditor for $49,500.00 with interest from November 9, 1928. The Syndicate seems to have been a partnership composed of Sutterman and Mendelson, who were claimant’s associates in the Holding Company.
On April 28, 1933, Sutterman and Mendelson (as individuals) filed separate claims (Nos. 103 and 148). Each of these claims was for the same two debts—one of which was for $10,500.00, being the note given by the bankrupt under the above sales contract of November 9, 1928. This claimant participated actively therein.
On November 22, 1935, Sutterman and Mendelson, in the name of the above Syndicate, filed a petition (based on allegations of lost claim papers sent to Mr. Goldie for attention) to amend their claims (Nos. 103 and 148) by adding the indebtedness $49,500.00 representing the unpaid balance (above the note for $10,500.00) on the sales contract. This was opposed by the trustee ; and, upon failure of Sutterman or Mendel-son to appear (after notice), this petition was denied by the referee on October 4, 1938. There was no petition to review this order.
On October 22, 1938, there was a special meeting of the board of directors of the Holding- Company. The “officers” reported that the trustee in bankruptcy “had apparently succeeded in disallowing the claim of approximately fifty thousand dollars ($50,000) due this corporation under the terms of a Contract for Deed, and which claim had been assigned to the Main-East Prairie Road Gardens Syndicate for moneys due them from this corporation.” A resulting resolution authorized the board of directors, through its officers, to “proceed with whatever legal action may be necessary to aggressively enforce and collect the moneys due this corporation under this Contract for Deed. They are authorized to commence whatever lawsuit may be necessary against the Trustee and/or his attorneys, the Surety Company who issued the Lien Bond, from whom recovery was made for liens placed against the property of this corporation. They are further authorized to commence suit against any person, persons, partnerships or corporations to recover the moneys due this corporation under this Contract for Deed, or who have caused financial loss or damage to this corporation by any illegal acts or deeds.”
On December 24, 1938, the Holding Company (dominated by claimant) filed an action in the State court against the trustee. This petition recited the above sales contract and that there was an unpaid balance thereon of $49,500.00; that the contract had been assigned to the above Syndicate and by it re-assigned to the Holding Company; that the Holding Company was the owner of the land but that both it and the bankrupt had lost title by reason of the foreclosure of mechanics’ liens against the property; that there was a contractor’s bond “to indemnify and save harmless the owners of the land * * * against loss by reason of lien filed thereon”, which bond was “for the benefit of this plaintiff as owner of the fee title to said property and [to] save this plaintiff from loss of its title by reason of lien foreclosures”; that the receiver in bankruptcy had recovered $30,-543.74 on said bond, which money was held by the trustee; and that “in equity and good conscience” this belonged to plaintiff; wherefore, judgment was prayed for said sum. Early in January, 1939, the trustee filed a petition to restrain this action. A decree resulted granting such restraint. Included in the decree was a finding that the contract of deed (above sales contract) was “fictitious” and, in the decretal portion, it is decreed “That the claim of Calhoun Beach Holding Company asserted against petitioner in the aforesaid action against him, is false, sham, fraudulent, and without color or right, and constitutes a false cloud on the title of petitioner to the assets of the above estate.”
The foregoing history and transactions outline as follows. The claimant was the dominating force in the Holding Company which originally owned the land. He was the majority stockholder and dominant in the bankrupt. He was the moving force in the entire promotion plan involving the three corporations. He was the active personality in the movements to finance the plan, including Club memberships and arrangements to secure bond issues and to sell stock in the bankrupt. The deed from the bankrupt (of November 9, 1928) and the unrecorded sales contract of that date were deliberate steps to evade required conditions imposed by the Commission as prerequisites to registration of the stock of bankrupt for sale. The requirement of the Commission was for a sales contract show[708]*708ing only $31,500.00 unpaid and to be payable $16,500.00 on September 1, 1928, and $15,-000.00 on October 1, 1928. The contract of November 9, 1928, called for $60,000.00 of which $10,500.00 was represented by a note and $49,500.00 by eight monthly instalment payments beginning February 15, 1929. From the filing of the bankrupt’s schedules in February, 1933, to the denial of amendment of the Sutterman and Mendelson claim on October 4, 1938, this claimant was active in attempts to prove this $60,000.00 as unsecured claims against the estate. When such attempts were unsuccessful, the Holding Company (in which he was the dominant personality) endeavored, early in 1939, to deprive the estate of practically all its assets through an action resting upon this same sales contract. This action was to recover from the trustee the proceeds of the contractor’s bond suit. The recovery in the bond suit by the trustee was in August, 1935. This claimant was thoroughly familiar with that proceeding and its results. Not until December, 1938, and then only after it became clear that the payments under the sales contract were disallowed in the bankruptcy proceeding, was this suit for the assets of the estate begun. These efforts in the bankruptcy proceeding, if successful, could have had only an adverse effect upon all other allowed unsecured claims because the amount of unsecured claims would have been increased by more than $50,000.00 since those claims ($49,500.00) bore interest. Had the suit for assets been successful, the Holding Company would have gotten all the assets and there would have been nothing left for the other unsecured or bond creditors. Whether or not the entire $60,000.00 was fictitious, as found by the trial court in the above restraining suit, so much of it as exceeded $31,500.00 seems clearly to be fictitious.
This outline reveals consistent and persistent efforts by the claimant to reduce the dividends to other unsecured creditors and, having failed therein, to absorb the assets of the estate—both to his advantage—and such efforts based upon claims which, to say the least, were questionable. It is not difficult to understand the anxiety of this claimant when faced with failure of his development plans and resultant loss to himself. Nor is it blameworthy that he should take all proper steps to protect himself from loss. However, the duty of a bankrupt (and where the bankrupt is a corporation, of its officers) is to aid the honest administration of the estate in all its aspects. It is highly improper for such officer to attempt to reduce or to deny the estate to honest creditors. We think this conduct is in “violation of rules of fair play and good conscience by the claimant; a breach of the fiduciary standards of conduct which he owes the corporation, its stockholders and creditors.” Pepper v. Litton, 308 U.S. 295, 310, 60 S.Ct. 238, 247, 84 L.Ed. 281. Because of this, these claims should not participate with these other unsecured creditors. Since the harmful conduct here is more particularly directed at the creditors we might be disposed to postpone rather than disallow these claims upon this ground. However, there is no chance of the other unsecured creditors receiving more than a small percentage of their claims so that postponement instead of disallowance would be of no benefit to claimant; and the referee and the trial court have disallowed the claims for this reason. Therefore, we think this action should be affirmed.7
[709]*709(2) The Capital Contribution Point.
The view hereafter stated as to this point is that of the writer, the majority view being expressed in the concurring opinion by Judge JOHNSEN.
The finding of the referee (approved by the trial court) upon this point is as follows :
“In view of the relation of Goldie to the bankrupt, and more particularly the facts that he was its majority stockholder and managing officer, and entirely controlled its affairs, that it had no capital except the money obtained from the sale of memberships and the money furnished by him for the purpose of procuring such memberships, that all of the advances included in Goldie’s claims were made solely for the purpose, of getting the enterprise of the bankrupt under way and for the further purpose of enabling the Holding Company, with which Goldie was affiliated, to dispose of its real estate to its advantage, together with the further fact that the initial 20% commission credited to Goldie in the amount of $36,820.00 was also entered on the capital account of the bankrupt as a debit to capital stock, and was represented to the Securities Commission to be a deferred asset of the bankrupt (See Trustee’s Exh. O, Report to Securities Commission, filed June 25, 1929), and was so shown in said audit report of December 31, 1928 (see Trustee’s Exh. H), the court has concluded that, disregarding mere matters of form and ascertaining the ultimate relation of the parties, all of these advances, including those now evidenced by notes signed by the bankrupt, must be deemed to be capital contributions to the bankrupt and not loans which the bankrupt promised to pay; that it would be unconscionable to permit the assets of the bankrupt to be diminished by the allowance of Goldie’s claims; and that on that ground, Goldie cannot prove claims in competition with outside creditors of the bankrupt.”
Although such transactions will be carefully scrutinized, it is true (as appellant urges) that a stockholder (or officer or director) may become a creditor of the corporation—either through loans or advancements of the character of loans— where there is no fraud or overreaching. Richardson v. Green, 133 U.S. 30, 43, 10 S.Ct. 280, 33 L.Ed. 516; Marine and River Phosphate Min. & Manufacturing Co. v. Bradley, 105 U.S. 175, 182, 26 L.Ed. 1034; Twin-Lick Oil Co. v. Marbury, 91 U.S. 587, 588-590, 23 L.Ed. 328; Jackman v. Newbold, 28 F.2d 107, 111, 62 A.L.R. 729, this Court; Stuart v. Larson, 298 F. 223, 225, 38 A.L.R. 79, this Court. And collection of such an honest indebtedness may be allowed in receivership or bankruptcy proceedings. Wheeler v. Smith, 9 Cir., 30 F.2d 59, 60, and see Stuart v. Larson, 298 F. 223, 38 A.L.R. 79, this Court.
But the issue now being considered does, not “turn on the existence or non-existence of the debt” but rather involves “simply the question of order of payment” (Pepper v. Litton, 308 U.S. 295, 310, 60 S.Ct. 238, 247, 84 L.Ed. 281) “and so-called loans or advances by the dominant or controlling stockholder will be subordinated to claims of other creditors and thus treated in effect as capital contributions by the stockholder” (308 U.S. pages 309, 310, 60 S.Ct. page 246) in certain situations. Some of such situations are adverted to in Pepper v. Litton, supra, 308 U.S. pages 309-311, 60 S.Ct. 238, 84 L.Ed. 281. But whatever be the situation, obviously it is to be tested by “rules of fair plajr and good conscience.” Pepper v. Litton, supra, 308 U.S. 310, 60 S.Ct. 247, 84 L.Ed. 281. The question is then whether such rules, on the fact situation here, justify or require treatment of these loans and advances as capital contributions.
The fact situation here is as follows. Claimant was the majority stockholder in, a director and officer and the dominating personality in the bankrupt. He was the dominant figure in the Holding Company which owned the land. He was the real force behind the promotion plan to improve the land by this building. The financing plan contemplated three methods of raising money to buy the land and to erect and furnish the building. The initial method was by Club membership fees which were to be turned over to the bankrupt when they reached a stated total. The other two methods were by sales of stock of the bankrupt and by issues of bonds by it. The advancements and loans in these claims were (so far as we can judge from the incomplete evidence and with small exceptions) made to forward the enterprise by supplying money needed by the bankrupt, in connection with the project of building or of financing and not available to it from any of the three above sources.8 With [710]*710the exception of the items (disallowed by the referee), there seems to be no dispute that they were used for such purposes. The advancements and loans seem to have been actually made; to have been made without overreaching so far as they were concerned; and to have been beneficial to the bankrupt.
In the making of such advances and loans as found actually to have been made, we find no such violation of “rules of fair play and good conscience” toward the creditors which would warrant these advances and loans being held to be capital contributions and, as such, to be subordinated to the claims of unsecured creditors. We think the referee and trial court were in error in so holding.
(3) Claim for Services.
This is an item (in claim 184) of $300.00 for services alleged to have been rendered to the bankrupt between July 18 and October 12, 1932—the charge is $20.00 per day for fifteen days. The finding of the referee (approved by the trial court) was disallowance of this item on two grounds: (1) no supporting evidence, and (2) allowance would be in violation of a condition in the conditional registration order of the Securities Commission (July 31, 1928) “that no salaries be paid to any of the officers and directors of applicant for services rendered, save and except out of net profits arising from the operations of said Club property under said operating agreement,” and the resultant waiver of salary filed with the Commission by claimant.
We need examine only the first ground. Counsel have not pointed out and we have been unable to find (after diligent search) any evidence supporting this item. Therefore, the disallowance thereof must be approved.
(4) The Hendrickson Audit.
For convenience in consideration, the referee considered these claims in two time periods. The reasons for this method of consideration are stated by the referee to be that for the first period (October 9, 1926, to December 31, 1928) “the books of the bankrupt are reasonably complete.” For the second period (after January 1, 1929), the referee stated there were no such books. The items falling within the first period included the first 37 items of claim No. 184 (aggregating $15,140.49) and all items of claim No. 185 (aggregating $20,-212.84)—a total of $35,353.33. The second period covered 146 items (Nos. 38 to 183) aggregating $4,859.51.
As to the first period, the referee made extended findings resulting in an allowance of $156.76 on both claims'—this being the net credit found in the balance of debit and credit in the transactions between bankrupt and claimant. These findings are set forth in footnote 9.9 The evidence as [711]*711to both periods (introduced at the hearing) consisted of various documentary matters and oral testimony by Mr. Goldie, Mr. Amos Deinard, Mr. Ernest Malmberg and [712]*712apparently some others. The only oral testimony appearing in this record is a portion of that by Mr. Malmberg. The other oral testimony, as summed up in the cer[714]*714tificate of the referee, is as set forth in footnote lO.10
From the findings (footnote 9) and the recital of evidence (footnote 10), the [715]*715force and place of the audit made by Hendrickson clearly appears. Appellant contends here that the referee improperly allowed the debit item for $25,525.08 (in the audit) against claimant.11 The reason urged why this debit item should have been rejected is that it was a bookkeeping error (a) in that Hendrickson’s figures were based upon a commission to claimant of only 20% of the fees of membership in the Club secured by claimant, whereas, the original contracts for such service (successively allowing a commission of 15% and later 20%) were altered (November 1, 1927) to allow 30%; and (b) in that Hendrickson failed to take into account a resolution of the Chib (February 7, 1927) whereby the Club was to absorb overrunning expense.
(a) As to the 30%. The first mention of this point which we have been able to find is in the brief filed here by appellant. So far as the record here reveals, is was not raised nor considered nor determined by the referee or the trial court. We have found no evidence bearing upon it except the resolution by the Board of Governors of the Club (in the minutes of the Club) which is as follows: “It was further moved by Mr. Ekstrum and seconded by Mr. Magney that the Calhoun Beach Club Holding Company be allowed a fee of 30% of the membership fee of the regular membership.”
Where an issue (except of jurisdiction) has not been raised or considered below but is presented here for the first time, this Court will not examine it (Helvering v. Tex-Penn Oil Co., 300 U.S. 481, 498, 57 S.Ct. 569, 81 L.Ed. 755; New York Life Ins. Co. v. Calhoun, 114 F.2d 526, 543, this Court, certiorari denied 311 U.S. 701, 61 S.Ct. 141, 85 L.Ed. 455; Falstaff Brewing Corp. v. Iowa Fruit & Produce Co., 112 F.2d 101, 106, this Court. This is emphasized where the matter is one of fact and the record brought here fails to reveal sufficient for a determination of the issue by this Court.
(b) The Resolution of the Club. By contract of December 11, 1926, the Club employed the bankrupt to conduct a campaign for members for the Club. Thereby the Club agreed to pay and the bankrupt to accept “in full compensation for services and expenses of said second party [the bankrupt] in connection with said campaign the sum of 15% of the membership fees”; the bankrupt was “authorized to [716]*716withhold” the commission; and the bankrupt might employ others to carry on the campaign for it “at its own expense” (italics added.) On the same day, the bankrupt and claimant contracted for employment of claimant by the bankrupt to conduct the membership campaign upon the same terms as in the above contract between bankrupt and the Club. February 7, 1927, a resolution of the Board of Governors of the Club was adopted “that the club holding company [the bankrupt] be allowed 20% of all membership fees.” In pursuance of this resolution and on February 15, 1927, the contract between bankrupt and the Club was modified only to increase the commission to 20%. The same day a like change was made in the contract between bankrupt and claimant. On November 1,-1927, the hereinbefore quoted resolution was adopted by the Board of Governors of the Club increasing the commission to 30%. Although a change had been made in the first contracts in order to cover the increase to 20% authorized by the above resolution of February 7, 1927, this record is silent as to any changes in the contracts following the November 1, 1927, resolution. Therefore, the situation at all times was that the bankrupt was to receive from the Club the percentage commission and was obligated to pay all expenses of the campaign. The contracts between bankrupt and claimant were identical in this respect.
At the request of bankrupt, C. V. Hendrickson made an examination “of books and accounts” of the bankrupt as of December 31, 1928. The result of this examination was embodied in an audit report dated January 21, 1929. A copy of this report was furnished both to bankrupt and to claimant. That report contained the above item of $25,525.08 as an account receivable against claimant representing “the excess of expenses necessary over 20% commission allowed for membership campaign by Mr. Harry S. Goldie.”
Appellant contends that by a resolution of the Club, “in its minutes of February 7, 1927,” the Club “was to absorb overrunning expense” of the campaign, which would eliminate this debit item against claimant in the Hendrickson audit. This entire resolution is: “In case it is found when the trust fund [made up of cash and notes received for membership fees] has been completed that there is a deficit as a result of the membership campaign that deficit may be made up from the membership fees collected from members coming in after the trust agreement has been completed.”
On its face, this resolution is not clear. The testimony of Ernest Malmberg12 , who introduced the resolution, is that money had been charged to campaign expenses for entertainments which the Club members thought they should stand because beyond the campaign; and that it was the intention “that whatever the campaign expenses were over and above the agreed commission, was never to be paid by Goldie, because the money had been used for a number of things which we felt was outside of the campaign, outside of the membership campaign, and that the Club should pay for it.” This testimony would justify the construction of the resolution to mean that it was intended for the benefit of Mr. Goldie and applied to any excess of campaign expenses' over commissions. However, it is strange that this matter, so important to claimant, was not covered in the above contracts made eight days later (February 15, 1927), which changed the commission rate to 20%—a matter authorized by the Club by another resolution adopted at this same meeting of February 7, 1927. There are also the situations (1) that the books of the bankrupt continued to reflect these expenses as a debit against claimant, who was the managing personality of that company; and that such expenses appeared as receivables on the statement, filed in July, 1928, with the Securities Commission in connection with its application for registration of its stock, which application was executed by Mr. Malmberg as secretary of the bankrupt.
Giving claimant the fullest benefit of this resolution, it is not open to question that the resolution of the Club cannot, without more, have the slightest effect upon the contract relations between the bankrupt and claimant. Under such contracts and all of them the claimant was liable to the bankrupt for these expenses. Therefore, it was no error in bookkeeping to show such liability upon the books of the bankrupt.
As further proof that this debit entry was a mistake in bookkeeping, appellant relies upon a resolution claimed to have [717]*717been adopted at a directors’ meeting of the bankrupt in April, 1929. The minute book of the bankrupt, as shown by the evidence and found by the referee, was last in possession of claimant. It has never been in the custody of the trustee or his counsel and has npt been delivered to him although production has been “specifically” demanded by him. It was not produced at the hearing. The sole evidence of existence of such a resolution is the oral testimony of Mr. Malmberg that a resolution was adopted at a meeting in April, 1929, when he was present. He does not attempt to remember the wording of the resolution but only that its tenor was to relieve claimant from liability for this debit item. It is unusual that such a resolution as to a matter of such importance to claimant and when he was the majority stockholder and dominating personality of bankrupt was not urged for more than two years after adoption of the resolution by the Board of Governors of the Club on February 7, 1927.
However this may be, adoption of the resolution was not the legal act of the bankrupt. In April, 1929, the board of directors of the bankrupt consisted of four members. The then directors were claimant, Mr. Foote, Mr. Springer and Mr. Malmberg. Malmberg testified that Springer was not present. Whether he had been notified of the meeting does not appear.13 Malmberg testified positively that he had voted against the resolution. This left Mr. Foote and claimant voting for it. It took the vote of claimant to adopt it. He was directly interested adversely to the bankrupt, its stockholders and creditors. The bankrupt was then in bad financial condition. “Where the claim asserted is void or voidable because the vote of the interested director * * * helped bring it into being” it may be disallowed (Pepper v. Litton, 308 U.S. 295, 309, 60 S.Ct. 238, 246, 84 L.Ed. 281) ; and contracts of directors made with themselves “for their own benefit” will not be given effect by courts. McGourkey v. Toledo & Ohio Central Ry. Co., 146 U.S. 536, 552, 13 S.Ct. 170, 36 L.Ed. 1079; Richardson v. Green, 133 U.S. 30, 43, 10 S.Ct. 280, 33 L.Ed. 516; Wardell v. Railroad Co., 103 U.S. 651, 658, 26 L.Ed. 509. Even where a contract so obtained is merely voidable, it is so as to creditors and a trustee in bankruptcy succeeds to such rights of avoidance in the creditors. Pepper v. Litton, 308 U.S. 295, 307, 60 S.Ct. 238, 84 L.Ed. 281. This trustee is here challenging this release from liability for this debit item.
Also, the presence of the claimant, if necessary to make a quorum of the board, cannot be so counted as to matters wherein his interest is adverse to the corporation. 13 Am.Jur., p. 919 and cases in notes 10-13.14 This record does not [718]*718show what number of directors were required to constitute a quorum, however, it usually requires a majority of the directors. If this be true here, there was no legal quorum in acting on this resolution.
The contention here is solely that the debit item is a “bookkeeping error”. This position is finally stated in the brief -as follows:
“From the foregoing it appears that the Hendrickson debit was bookkeeping error; that no factual indebtedness on the part of Goldie to the bankrupt ever existed; that there was no discharge or attempt at discharge of any factual indebtedness but simply a rectification of a bookkeeping error.”
We must conclude that this debit item was not improperly included in the consideration by the referee and trial court.
(5) Claim Items after January 1, 1929.
As above stated, the referee divided the claim items, for convenience in consideration, into two time periods—the first ending December 31, 1928, and the second beginning January 1, 1929. This point has to do with disallowance of the items falling in the second period. All of the items in the second period are items (Nos. 38-183) of claim 184. As to these items, the referee found:
“The supporting checks for these items are likewise included in Goldie Claim 185, Exh. B. These checks were likewise issued by Goldie, the Holding Company and the Continental Finance & Mortgage Company, to the order of the bankrupt and many other persons.
“Of the items so listed, Items 172 to 183 inclusive represent payments made after the filing of the involuntary petition herein; and of these, Items 179 to 183 inclusive, aggregating $110.00, represent payments by Goldie on a note of the bankrupt, endorsed by him as guarantor to the Midland National Bank & Trust Company of Minneapolis; no claim was ever filed upon said note in this proceeding, either by the holder of the note or by Goldie in the name of the holder.
“None of the items for this period (January first, 1929 on) appear on any books of the bankrupt produced. Goldie has failed to establish by any satisfactory evidence that said payments were made at the request of the bankrupt, or for its use or benefit, and has failed to produce any account books reflecting such payments and has failed to disclose any payments which he may have received from the bankrupt during that period or any charges, against him during that period.
“Goldie, being the president and managing officer of the bankrupt, occupied a-fiduciary relation to it, and any claim presented by him against the bankrupt estate must be subjected to close and rigid scrutiny, and to be allowed, must be satisfactorily established by the proof. Such serious doubt exists as to the propriety of any of said items that the court feels constrained to disallow them. Among other things it appears that during said period Goldie came into possession of $8000 of the ‘B’ bonds of the bankrupt, which he included in Claim No. 184, but has failed to disclose that he gave any consideration for said bonds. It also appears that during this period Goldie was conducting his own business and the business of the Holding Company and Club at the same office which he maintained for the bankrupt, and with, the same overhead as represented in many of these charges.”
The contentions of appellant and the entire supporting argument are as follows :
“The books and records of the bankrupt comprise a journal and a ledger, for 1926-to the end of 1928, inclusive. Anyone can see, upon inspection of these, that they are more or less fragmentary and preliminary in form and nature, being just informal repositories of entries made by various persons from time to time—in essence memorandum write-ups not following a strict day-by-day chronology. Mr. Goldie has furnished the best evidence of payment.—-the original cancelled checks to establish his pay-outs and the debits and charges against the bankrupt for the moneys necessarily advanced in its interest and behalf. A mere comparative inspection of the checks and of the tabulation of his claims, for the two periods under which the referee considered them, «dis[719]*719closes that the pay-outs for the second period were of the same nature and to the same end and purpose as those of the first, and were made at the request and for the benefit of the bankrupt.”
The first argument seems to be an attack upon the form and completeness of the journal and ledger, introduced in evidence, covering the items in the first period. Just what this has to do with the items in this, the second, period is not explained. If, from this, an unexpressed inference is intended that the account books of the bankrupt covering the second period were of similar character and, therefore, would be of little use, the answer is that the best way to have shown that would have been for the claimant to produce such books and let them speak for themselves.
The remaining argument is that the checks are the best evidence of the actual expenditures to or for the bankrupt and that a “mere comparative inspection of the checks and of the tabulations of his claims, for the two periods” discloses that those for the second period “were of the same nature and to the same end and purpose as those of the first, and were made at the request and for the benefit of the bankrupt.”
We assume that the tabulations correctly show the amount, check number, check date, maker and payee of the checks representing the items of claim 184. Of the 146 items—all being checks—in this second period (aggregating $4,859.51), the tabulation for claimant shows only three (aggregating $1,070.00) where the bankrupt was payee—none is shown where bankrupt was endorsee although this is shown in the preceding part of this tabulation which related to the first period. The other 143 checks were to various persons or corporations. The earlier portion of this tabulation (relating to items in the first period) shows 37 checks of which 18 are to bankrupt (as payee or endorsee) and 19 to others (in 9 of these claimant is payee). With •no other supporting evidence, we are asked to determine that these. 146 items (Nos. 38—183) represent expenditures to or for the bankrupt simply from a comparison of the items in the first period with those in this period—-both as shown on this tabulation. No such result can be allowed except as to the three items (aggregating $1,-■070.00) where bankrupt is the payee. We will assume that those three items in the above aggregate were received and used by the bankrupt and were beneficial to it. The other 143 items may represent, in part or wholly, expenditures for the benefit and beneficial to the bankrupt. Wé have no way of knowing, from this record, whether they or any of them were or were not.
But supposing that they were both expended for and beneficial to the bankrupt, that does not compel or invite the conclusion that they are allowable items against this estate. As to the first period, the referee found and the trial court approved a finding that claimed items aggregating $35,353.33 should be reduced to $156.76 because of what the account books of the bankrupt showed to be the balance in the accounts of the claimant and bankrupt. Also, one item of $1,500.00 was found to have been repaid claimant and he admits here that error. There were account books kept by the bankrupt after December 31, 1928. They were last in the possession of the claimant; have been demanded by the trustee; and not produced. Claimant was the dominating personality and majority stockholder in the bankrupt. The books of the bankrupt should have shown the transactions between it and claimant during this second period—as they did during the first period. They should have shown any credits to claimant and any debits against him so that a balance could have been struck as to this account. They would have been very strong evidence of the items in and the state of the account. Where relevant evidence is within the control of a party to whose interest it would naturally be to produce it and he fails so to do, without satisfactory explanation,” and produces no evidence or weaker evidence, an inference is justifiable that it would be unfavorable to him. Interstate Circuit, Inc., v. United States, 306 U.S. 208, 226, 59 S.Ct. 467, 83 L.Ed. 610; Local 167, International Brotherhood of Teamsters, etc., v. United States, 291 U.S. 293, 298, 54 S.Ct. 396, 78 L.Ed. 804; Mammoth Oil Co. v. United States, 275 U.S. 13, 52, 48 S.Ct. 1, 72 L.Ed. 137; United States ex rel. Bilokumsky v. Tod, 263 U.S. 149, 153, 154, 44 S.Ct. 54, 68 L.Ed. 221. This rule has been applied, by this Court, to records in possession of a party. Missouri, K. & T. Ry. Co. v. Elliott, 8 Cir., 102 F. 96, 102, affirmed 184 U.S. 695, 22 S.Ct. 937, 46 L.Ed. 763. The referee was justified in disallowing these [720]*720items in the second period because of the unfavorable inference naturally drawn from failure to produce the account books of the bankrupt.
(6) Hennepin Transfer Company Assignment.
On June 19, 1936, Hennepin Transfer Company filed with the trustee an assignment reading as follows:
“January 3, 1935.
“Hennepin Transfer Company,
“Third Avenue North and First Street,
“Minneapolis, Minn.
“Dear Sirs:
“For value received, I hereby transfer and assign all of my'right title and interest in any and all claims filed by me to this date in the bankruptcy of the Calhoun Beach Club Holding Company now recorded in the Federal Bankruptcy Court, with Alexander McCune, Referee in Bankruptcy, to you, the Hennepin Transfer Company or your [assignes]. This assignment not to exceed the sum of Three Thousand Dollars.
“Harry S. Goldie.”
This was transmitted in a letter (June 18, 1936) stating the assignment was filed to protect the interests of the assignee as “we understand a dividend will soon be available to creditors.” The referee found as follows:
“It appears from said books [of assignee] that as of December 31, 1938, Goldie was indebted to Shapiro or said firm in the sum of $13,618.72, and that thereafter during the year 1939 and up to the time of said hearing, said Goldie received additional advances in the amount of about $300. However, as of January 3, 1935, the date of said assignment, Goldie was indebted to Shapiro and said firm only in the amount of $2827.67, made up of an item of $1332.15 shown on Trustee’s Exhibit KK and an item of $1495.52 shown on Trustee’s Exhibit JJ; since that date Goldie has paid generally on his account a sum in excess thereof, to-wit: $2973.53. All of the rest of the account accrued after January 3, 1935. There being no contrary application made or directed either by Goldie or by the creditor and the account constituting a running account, the court has concluded that said payments should be applied against the first debits to extinguish them according to priority of time; therefore, Goldie’s account as of the date of said assignment has been fully paid.”
An assignee stands in the shoes of the assignor and subject to all equities against the assignor. Fidelity Mutual Life Ins. Co. v. Clark, 203 U.S. 64, 74, 27 S.Ct. 19, 51 L.Ed. 91; 4 Am.Jur., p. 304, § 95 and numerous cases in notes 17 and 18. Unless these claims (or at least enough of them to satisfy the assignment) can be allowed to claimant, the assignee would fare likewise. Since we hold the claims cannot be allowed, there is no point in examining this matter. Besides, the assignee has not appealed.
(7) Subordination to Bond Claimants.
The referee found that “if the unsecured claims of Goldie should be allowed in any amount, then the claimants upon said guaranteed bonds are entitled equitably to have Goldie’s claims postponed and subordinated to their rights; that it would work a fraud upon said guaranteed bondholders to permit Goldie to assert any claims in equality or in competition with them, and that therefore Goldie is estopped from sharing equally or competing with them as claimants in the distribution of the above estate.”
Appellant contends that “the question of subordination and adjustment of equities should be determined, not in the order of allowance or disallowance of appellant’s claims but rather in the order of distribution of assets.”
It is true that equities between unsecured creditors, which may result in precedence of payments in dividends, may be determined in connection with orders of dividend payment. See In re Abell, 198 F. 484, this Court, and Keith v. Kilmer, 1 Cir., 272 F. 643. However, this does not mean that such equities or priorities cannot be determined in connection with allowance of claims of unsecured creditors. Such has often been done. Some of the cases are Carter v. Bogden, 13 F.2d 90, this Court; In re Morris Bros., 9 Cir., 293 F. 294, 297; In re Ewald & Brainard, D.C. Iowa, 135 F. 168, 171. This has been done where the precedence was based, as here, on contract obligations of the Claimant affecting the equities as to other unsecured creditors. In re Bruns Co., 7 Cir., 256 F. [721]*721340; Searle v. Mechanics’ Loan & Trust Co., 9 Cir., 249 F. 942. It is difficult to see Thy it makes any difference whether the precedence is determined in connection with allowance of a claim or in connection with payment of dividends from the estate. The essential thing is that if precedence of payment is not involved in allowance of a claim, it is not foreclosed but may be raised in connection with payment of dividends.
We do not understand that appellant challenges here the finding of the referee on the merits. Since he was guarantor on the bonds and since the property securing the bonds has been lost as such through foreclosure sale in the mechanics’ lien suit, it is obvious that the postponement of claimant to such bondholders was properly determined by the referee.
The result of all the foregoing is that the order of the trial court must be and is affirmed.15