The trustee in bankruptcy of McDonnell Seed Company, a Washington corporation, appeals from a decision of the district court reversing an order of the referee in bankruptcy which disallowed certain creditors’ claims. We conclude that the order of the district court must be affirmed.

McDonnell Seed Company, a corporation wholly owned by one Leo McDonnell, was desirous of acquiring the stock of another seed company, Washburn Wilson Seed Company, an Idaho corporation. Following some examination of the books and assets of Washburn Wilson, a form of contract was drawn under which an individual stockholder was to agree to sell his stock to McDonnell Seed Company for a cash price, payable 29% down and the balance in three equal annual payments. The stockholder’s stock certificates, endorsed in blank, were to be delivered to a bank as escrow agent, to be delivered in turn to the McDonnell Seed Company upon full payment of the purchase price. The contract contained the following provisions pertinent to this matter:

The contract was executed by appellees, who were stockholders, in October, 1959, and the escrow was duly opened and their certificates deposited. The McDonnell Company was adjudicated a bankrupt on October 13, 1960, pursuant to a voluntary petition in bankruptcy; Washburn Wilson was adjudicated an involuntary bankrupt on October 24, 1960. Appellees’ claim is for the balance of the purchase price. Since the trustee does not argue to the contrary, we assume that a contract providing for this remedy (as paragraph 3 does) is enforceable under Idaho law.

Relying on the language appearing in paragraph 2, the referee held that the contract was automatically terminated by the bankruptcies, and that consequently the stockholders of Washburn Wilson had no claim against the McDonnell Company. Upon review, the district court held that the provisions relied upon by the referee were void as against public policy. It did so on the ground that if the clause were so enforceable, the McDonnell Company could pirate the assets of Washburn Wilson, thereby rendering that company bankrupt, and the security (the stock held in escrow) worthless and, at the same time and by the same means, defeat the stockholders’ right to be paid. We need not and do not hold that the provisions of paragraph 2 are void for all purposes, but we agree that they cannot be applied in favor of the McDonnell Company or of the trustee as its successor in this case.

The creditors offered testimony showing that immediately after the execution of the contract, and pursuant to its terms, the officers and directors of the McDonnell Company were elected officers and directors of Washburn Wilson. They also showed that during the ensuing year these persons systematically looted the assets of Washburn Wilson. The evidence shows that, at the time the contract was made, Washburn Wilson’s current assets were about two-and-one-half times its current liabilities, and that, at the time of its bankruptcy, it was hopelessly insolvent. This was brought about largely by pledging seed purchased by Washburn Wilson to secure the debts of the McDonnell Company and by obtaining bank advances on drafts and trade acceptances which were thereafter dishonored by the drawees to the tune of some $350,000.

Most of this evidence was excluded by the referee by reason of his construction of the language of paragraph 2. However, acting under rule 43(c) of the Federal Rules of Civil Procedure, he permitted the appellees to place upon the witness stand persons, including disinterested witnesses, whose testimony fully supports the foregoing general statements of fact. The trustee’s counsel did not elect to cross-examine them, nor did he offer any contrary testimony, apparently preferring to stand upon his construction of the agreements. Our read *327 ing of the testimony indicates that it would not in any event be possible for him to contradict the showing that was made.

It is claimed that the district court had no right to consider this testimony. We disagree. The very purpose of placing it in the record was to enable the creditors, in the event of an adverse ruling as to the construction of the agreement, to present to the district court a full record of the facts upon which they relied. The district court, having concluded that the evidence was admissible, could have remanded the matter to the referee for the taking of further evidence in the light of the court’s construction of the agreement. However, when it appeared to the court from the testimony that the facts were such as to warrant a holding that paragraph 2 could not be relied upon as a defense, it was not compelled to require the referee to go through the futility of a further hearing. It could instead accept the testimony and decide the issue in the light of the facts that that testimony revealed. (See General Order 47, following 11 U.S.C.A. § 53 ; Carter v. Kubler, 1943, 320 U.S. 243 , 64 S.Ct. 1 , 88 L.Ed. 26 ).

The three paragraphs are inconsistent on their face. Presumably, they were inserted by the draftman at the request of one or the other of the parties, and he made no effort to reconcile them. The record does not show who wanted what; the scrivener does not recall. We must reconcile them if we can. We hold that paragraph 2 cannot defeat appellees’ rights when, as here, the bankruptcies arise from culpable misconduct on the part of the officers and directors of the McDonnell Company. The testimony shows that to sustain the application of the contract which the referee adopted would permit the bankrupt to profit by its own wrong by wrecking the purchased corporation and diverting to its own use much of those assets, these being what gave the stock value and, having done so, to say to the selling stockholders: “Your company is now bankrupt, as are we, and you have agreed that under these conditions we need not pay you.” We need not and do not decide what the effect of the language in controversy would be if bankruptcy had been brought about by economic conditions or by mere business bad judgment. All that we hold is that under the circumstances revealed by this record, the trustee, as successor to the bankrupt, cannot take advantage of this provision of the agreement.

We think it clear that for the purposes of this case the trustee stands in the shoes of the bankrupt. (See Schultz v. England, 9 Cir., 1939, 106 F.2d 764 ) The question here is as to the validity of a defense asserted on behalf of the bankrupt, to a claim upon a contract made by it. The court, sitting in bankruptcy, applies equitable principles. (Pepper v. Litton, 1939, 308 U.S. 295, 303-304 , 60 S.Ct. 238 , 84 L.Ed. 281 ) As applied by the referee in this case, the provision of the contract upon which the trustee relies would operate as a condition, and would have the effect of terminating the obligation of McDonnell Company and the rights of the appelleecreditors. It has long been good contract law that if the happening of such a condition is caused by the conduct of the promisor it will not terminate the duty of the promisor. (Restatement, Contracts § 302 (1932) and cf § 307) This is but an application of the established principle that equity will not permit one to rely on his own wrongful act. (Deitrick v. Greaney, 1940, 309 U.S. 190, 196 , 60 S.Ct. 480 , 84 L.Ed. 694 ) (Also see 3A Corbin, Contracts § 748 (1960); 5 Williston, Contracts § 677 (3d ed. 1961)) We think that the principle is peculiarly appropriate here where the purchasing corporation caused its own officers and directors to become the officers and directors of Washburn Wilson and thereby assumed, in relation to the selling stockholders, the present creditor-appellees, a fiduciary relationship. (See Idaho Code Ann. § 30-142 (1948); Hanny v. Sunnyside Ditch Co., 1960, 82 Idaho 271 , 353 P.2d 406 )

*328 No contention was made, here or below, that the provisions of paragraph 1, quoted above, can defeat the claim. In any event, while those provisions, if read literally, are clearly inconsistent with paragraph 3, we think that they must be read with paragraph 3. When so read, we think that the second sentence of paragraph 1 must be considered to be solely for the benefit of appellees, that it may be waived by thena, and that it has been waived by their assertion of rights under paragraph 3.

The fact, if it be a fact, that these creditors may have a cause of action, either in their own right or in the right of their corporation, against the individual officers and directors who destroyed it, is not a bar to the allowance of their claim in this bankruptcy. (See Collier, Bankruptcy § 63.03(2) (14th ed. 1961))

Affirmed.