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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

In re MURRAY. Patent Appeal No. 2643. Court of Customs and Patent Appeals. March 31, 1931. Usina & Rauber, of New York City (Milans & Milans, of Washington, D. C., and Benjamin T. Rauber, of New York City, of counsel), for appellant. T. A. Hostetler, of Washington, D. C., for the Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. GARRETT, Associate Judge. The patent here sought is for alleged improvements in boiler structure. There are two claims at issue, Nos. 5 and 6, whieh read as follows: “5. A boiler wall structure of the character described comprising a multiplicity of rolled structural channel beams arranged flange to flange alongside one another and having separately formed U-shaped caps united to the edges of the channel flanges and nipples in the flanges of the channels adapted to establish communication between the chambers formed by said members. “6. A boiler wall structure of the character described comprising a multiplicity of rolled structural beams each having a rigid web and integral flanges substantially perpendicular thereto and separately formed caps united to the edges of the flanges and nipples establishing communication between the chambers formed by said members.” The claims were rejected by the Examiner, whose decision was affirmed by the Board of Appeals of the Patent Office. Appeal was then taken to this court. The references to prior art cited are: Mc-Clellon, 764,753, July 12, 1904; MeClellon, 963,627, July 5, 1910; Murray, 1,186,222, June 6,1916. In its decision the Board said: “Claims 5 and 6 are objectionable for the reason that they involve the limitation of an article claim by the method of making it. The article, as claimed, differs from the boiler fire wall disclosed in the patents to MeClellon only in the fact that the tubes are made by welding together at their edges two forms of rolled structural material, such as a channel bar and a semitubular section. When so welded together the tube is no different from one which is formed from a tube' having its sides flattened to produce abutting surfaces when brought together to form the fire wall. Such tubes are used in MeClellon No. 963,627 (See page 1, lines 83 to 85) and it is stated in No. 764,753 that the tubes 12 may be made of various shapes in cross-sectional contour though it is preferred that this be square exteriorly. (See page 3 lines 11 to. 14.) “If a claim were drawn to the method of making a tube by welding together the edges of two rolled structural elements it would be met by appellant’s patent No. 1,186,222, cit'ed by the Examiner.” It is observed that MeClellon, in patent No. 764,753, discloses a locomotive boiler with flat-sided water tubes composing the sides of the fire box. The specifications state that the tubes “may assume various shapes in cross-sectional contour, although I prefer the tubes that are square exteriorly.” A figure of the drawings shows tubes which are square both exteriorly and interiorly. McClellon’s patent, No. 963,627, is for a fire box for boilers which shows sections having curved sides joined by flattened sides. These are fitted together to form the walls. Nipples are shown which permit the water freely to circulate through the connected sections. The reference patent to Murray relates to a method of electrical welding. In view of the fact that the claims in the present case do not mention welding, this reference is not thought to have any particular pertinency here, but we are unable to see any error in the holding of the Board of Appeals which, in effect, is that appellant’s tubes, when finished by having the separately formed U-shaped caps united to the edges of the channel flanges, do not present any differences of a patentable nature from MeClellon’s tubes flattened to produce abutting surfaces. The decision of the Board is therefore affirmed. Affirmed.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

AMERICAN HIDE & LEATHER CO. v. UNITED STATES. No. J-555. Court of Claims. Nov. 3, 1930. William E. Hayes, of Washington, D. C. (Hayes & Hayes, of Washington, D. C., on the brief), for plaintiff. H. A. Cox, of Washington, D. C., Charles B. Rugg, Asst. Atty. Gen., and C. J. Mattson, of Washington, D. C. (Charles F. Kincheloe, of Washington, D. C., on the brief), for the United States. Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges. LITTLETON, Judge. Plaintiff brings this suit to recover $556,-754.72, alleged to represent an overpayment of income and • profits tax for the last six months of the calendar year 1919, being the first six months of the fiscal taxable year beginning July 1, 1919, and ending June 30, 1920. As shown by the facts, the commissioner held that the erroneous calendar-year returns were returns under the statute for the fiscal year ending within such calendar year and treated the-tax assessed and paid on such calendar-year returns as having been paid on a return for such fiseal year. As a result, the Commissioner of Internal Revenue held that there had been no overpayment for the period claimed by plaintiff. The result of the commissioner’s determination upon audit of the returns for 1918,1919, and 1920 was to show an overassessment of $538,202.77 for the six-month period ending June 30,1918. Of this amount the refund of $443,367.61 was barred by the statute of limitation and the balance of $94,835.16 was duly refunded by the commissioner with interest. Plaintiff contends that one-half of the tax paid under each of the erroneous calendar-year returns must be regarded as having been paid for each of the two fiseal years involved in such erroneous return. It therefore claims that six-twelfths of the tax paid under the erroneous calendar year 1918 return should be treated as having been paid for the fiscal period ending June 30,1918, and six-twelfths should be treated as a tax paid for the fiscal year ending June 30, 1919, and that the tax collected on the erroneous calendar year 1919 return should be similarly applied. Defendant contends that the tax paid under any such erroneous return must be treated as a tax paid for the correct taxable period •or year for which the return should have been filed and the tax paid, and that any ■overpayment should be refunded or credited against any tax due for another taxable period in the usual and ordinary manner expressly provided by statute in respect of overpayments. The question for decision, therefore, is whether a taxpayer having erroneously filed a return or returns and paid the tax thereunder for a period other than that required 'by law is entitled to have the tax so paid apportioned between the two taxable years involved upon the basis of the respective number of months concerned which fall within each of the correct taxable years. This question has been fully considered .and discussed by the court in P. L. Mann v. United States (Ct. Cl.) 44 F.(2d) 1005, this ■date decided. -For thfe reasons therein set forth, we are of opinion that plaintiff is not entitled to recover any amount as an overpayment of tax for the fiscal year ending •June 30, 1920. The petition must therefore be dismissed. It is so ordered. BOOTH, Chief Justice, and WILLIAMS •and GREEN, Judges, concur. WHALEY, Judge, did not hear this case :and took no part in the decision thereof. On Motion for New Trial. LITTLETON, Judge. Plaintiff’s petition was dismissed by opinion rendered November 3, 1930. Thereafter plaintiff filed a motion for a new trial and 'brief in support thereof. It is insisted, first, that “the court erred in treating the calendar year 1919 statement -of income as a statutory return for the fiscal year ended June 30, 1919,” and, secondly, that “the court erred in treating the tax paid •on income of the twelve months’ period ending December 31,1919, which period was not "the taxable period, as if it were a payment made for a taxable year ending in such ealen-dar year.” With respect to the first point the court ■held that when a taxpayer files a calendar-year return, when it should have filed a return ■for the fiscal year ending during such calendar year, such return, although on an erroneous basis, must be treated as a return under the statute, and it can only be treated as a return for a taxable period or year that has ended during the period covered by it. On the second point the court decided that a tax assessed and paid on a return for a calendar year, when the true accounting period of the plaintiff was a fiscal year ending within that calendar year, must be regarded ás having been assessed and paid for the fiscal taxable year ending within the year for which the return was filed, even although the taxpayer filed his return on the wrong basis. In oral argument upon the motion for a new trial and in the brief in support thereof, counsel for plaintiff contend that the calendar-year returns filed cannot be regarded as returns under the statute for any purpose, since in neither form nor substance did they purport to contain the income for a fiscal year which was the taxpayer’s annual accounting period and for which it was required by the statute to file returns. We cannot concur in this contention. Except for the fact that plaintiff did not file sufficient and timely claims for refund with respect to the tax paid on the calendar year 1918 return, there would be no basis whatever for the claimed overpayment for the fiscal year beginning July 1, 1919, and ending June 30, 1920, for the reason that had the commissioner not been prevented by the statute of limitation from refunding the entire overpayment determined for 1918, the plaintiff would have received the refund of all of the tax paid in excess of its correct tax liability for each of the fiscal years ended June 30, 1918, 1919, and 1920. The overpayment claimed by the plaintiff to have been made for the first six months of the fiscal year ended June 30, 1920, can only be supported by completely disregarding for all purposes the calendar-year returns filed and by treating each of them merely as a statement of income and deductions of the tax paid thereon as a tax for the first half and the second half of plaintiff’s fiscal taxable year. In other words, in order to bring the claimed overpayment within a period covered by a sufficient and timely claim for refund, one-half of the tax paid on each of the calendar-year returns must be treated as an advance payment for the first six months of the fiscal year ending on June 30. . We are of opinion, as pointed out in P. L. Mann v. United States (Ct. Cl.) 44 F.(2d) 1005, that the calendar-year returns must be treated as statutory returns for the fiscal year ending ■ within the calendar year for which such returns were filed. The Commissioner of Internal Revenue correctly so held and adjusted the income, deductions, and the tax paid accordingly. Returns are not fatally defective merely because they do not include all of-the income for the correct taxable period for which the returns should have been filed, or because they may include income which properly belongs in some other taxable period, or because the returns were made upon an erroneous basis. The treatment by the defendant of the calendar-year returns as statutory returns for the taxable fiscal years ending within the calendar years for which such return^ were improperly made for the purpose of assessment, collection, refunds, credits, and the statute of limitations was, in our opinion, a correct administration of the taxing act. The calendar-year returns purported to and did cover a period recognized by the statute as a taxable year. The taxable year covered by each calendar year return did not include the entire taxable year of the plaintiff, because its books were kept on a fiscal year basis. Each return was therefore made on an erroneous basis and included income and deductions of a portion of two of plaintiff’s correct taxable years. When the commissioner came to audit the calendar-year returns, he discovered that the plaintiff was on a fiscal year basis and it was necessary for him to adjust the income returned, the deductions taken, and the tax paid to conform to the plaintiff’s fiscal year. He did this by adjusting the income, deductions, and tax liability of the correct fiscal taxable year to the calendar-year returns covering the period in which the fiscal year ended. The commissioner would not have been justified in completely ignoring the calendar-year returns filed and in treating the taxpayer as if it had never filed a return for any of the taxable years 1918 to 1920, inclusive. This conclusion is not inconsistent with Lucas v. Pilliod Lumber Co., 281 U. S. 245, 50 S. Ct. 297, 74 L. Ed. 829, 67 A. L. R. 1350, where the taxpayer failed to sign and swear to a return. Nor is the ease of Florsheim Brothers Drygoods Co., Ltd., v. United States, 280 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542, authority for the contention of the plaintiff that calendar-year returns filed by a taxpayer keeping its books on the fiscal-year basis are without legal significance whatever and must be completely ignored. The Elorsheim Case involved the question whether a request for extension of time within which to file a return accompanied by an estimate of the total tax due for the year was a sufficient return to set in motion the statute of limitations. The holding of the court that such a document could not be considered a return under the statute cannot be extended to include a complete calendar-year return filed by a taxpayer employing the fiscal-year basis of accounting. ' We find no reason justifying a modification of the decision heretofore rendered. The motion for a new trial is therefore denied. BOOTH, Chief Justice, and WHALEY, WILLIAMS, and GREEN, Judges, concur.

f2d_48/html/0435-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

HART GLASS MFG. CO. v. UNITED STATES. No. H—528. Court of Claims. April 6, 1931. Frank C. Olive, of Indianapolis, Ind., for plaintiff. Ralph C. Williamson, of Washington, D. C., and Herman J. Galloway, Asst. Atty. Gen. (Charles P. Sisson, of Washington, D. C., on the brief), for the United States. Before BOOTH, Chief Justice, and WILLIAMS, LITTLETON, and GREEN, Judges. WILLIAMS, Judge. This is a suit to recover the sum of $11,-590.63, with interest thereon, which the plaintiff alleges is due it as an overpayment of its income and profit taxes for the year 1918. The plaintiff, the Hart Glass Manufacturing Company, and the T. F. Hart Paper Company, are each corporations doing business under and by virtue of the laws of the state of Indiana. The two companies filed separate income tax returns for the year 1918, and paid the taxes assessed against them on such returns by separate cheeks drawn on their respective banks. On December 27, 1921, the plaintiff and the paper company made application to have their tax liability for the years 1918 and 1921 computed on the basis of affiliated corporations. The Commissioner of Internal Revenue, on February 8, 1922, ruled they were affiliated corporations for the year 1918 within the purview of the Revenue Act of 1918. The T. F. Hart Paper Company was used as the principal company. An application was made to the Commissioner of Internal Revenue by the plaintiff and the T. F. Hart Paper Company, on November 7, 1923, that the taxes of the said companies be computed under sections 327— 328 of the Revenue Act of 1918 (49 Stat. 1993). The Commissioner of Internal Revenue on February 11, 1924, made an ’ additional assessment against the plaintiff in the amount of $45,901.03, and an additional assessment against the T. F. Hart Paper Company in the amount of $19,047.98. These additional assessments were made on the basis of the affiliation of the two companies, but not under the special, assessment provisions of sections 327-328 of the Revenue Act of 1918. Both the plaintiff and the paper company, in apt time, filed their claims for the abatement of the additional assessments made against them respectively. On November 6, 1926, the Commissioner of Internal Revenué made final adjustment of the assessment of taxes made against the plaintiff and the T. F. Hart Paper Company as affiliated corporations for the year 1918. The adjustment of assessments was made under the provisions of sections 327-328 of the Revenue Act of 1918, and, as outlined in bureau letter dated December 27, 1926, was as follows: Hart Glass Manufacturing Company.......$ 6,539 46 T. P. Hart Paper Company................. 36,202 13 The Commissioner’s letter of December 27, 1926, explaining the basis on which the final adjustment of the taxes of plaintiff and the T. F. Hart Paper Company for 1918 was made, shows an overassessment against each of the companies for the year, which overassessments to the extent not paid were abated by the Commissioner. It further shows an overpayment in the sum of $12,-930.94 by the plaintiff of its taxes, and a balance due from the T. F. Hart Paper Company on its taxes for the year in the amount of $17,300.17. The Commissioner applied $1,430.31 of the amount of the plaintiff’s overpayment of its taxes against an unpaid assessment ¿Í taxes against plaintiff for the year 1920, and the balance, $11,500.63, was credited by the Commissioner, without the consent of the plaintiff, against taxes due from the T. F. Hart Paper Company for the year 1918, which amount the plaintiff seeks to recover in this suit. The first question presented is whether the Commissioner could legally apply an overpayment of the plaintiff’s taxes for the year 1918 to the' payment of taxes due from the T. F. Hart Paper Company for the said year on the ground that they were affiliated companies. Section 240 of the Revenue Act of 1918 (40 Stat. 1081), provides: “In any case in which a tax is assessed upon the basis of a consolidated return, the total tax shall be computed in the first instance as a unit and shall then be assessed upon the respective affiliated corporations in such proportions as may be agreed upon among them, or, in the absence of any such agreement, then on the basis of .the net income properly assignable to each.” There was no agreement between the plaintiff and the T. F. Hart Paper Company as to the proportions in which the taxes due under the consolidated net income should be assessed against each of them, respectively, and there was no agreement between them which obligated-the plaintiff to pay or assume any of the tax liability of the T. F. Hart Paper Company for the year 1918. The Commissioner of Internal Revenue in his determination of the tax liability of the plaintiff and the paper company, as affiliated corporations for the year 1918, on both February 11, 1924, when the additional assessment against the two corporations was made, and on November 6, 1926, when final adjustment of such assessments was made, in which it was determined there was an over-assessment against each company, acted in strict compliance with the statute. In each instance he first computed the total tax liability of the two companies as a unit, and then apportioned the tax between them on the basis of the net income properly assignable to each. In the absence of an agreement between plaintiff and the T. F. Hart Paper Company that their taxes as affiliated corporations should be otherwise apportioned, the Commissioner was bound by the plain provisions of the statute to assess the tax against them in the proportion of their respective net incomes to the total net consolidated income as shown by the return. Swift & Co. v. United States, 69‘ Ct. Cl. 171. The Board of Tax Appeals has consistently held, and we think rightly so, that for the purpose of assessment and collection of taxes the separate identity of each corporation in an affiliated group is recognized. In American Creosoting Company v. Commissioner, 12 B. T. A. 247, the board said: “A corporation affiliated with another corporation under section 240 of the Revenue Act of 1918 does not lose its status as a Taxpayer’ and an assessment against such corporation in the absence of an agreement that the taxes due from other affiliated corporations may be collected from it will not authorize the collection from it of taxes due from such other corporations, and a notice to it of a deficiency in taxes due from other affiliated corporations joining with it in filing a consolidated return will not authorize the filing with the board of petitions for the redetermination of deficiencies by other affiliated corporations.” Nelson T. Hartson, Solicitor of Internal Revenue, in L. O. 1113 — C. B. III — 2—36, said in regard to section 240 of the Revenue Act of 1918: “This section, however, does not make of the affiliate group a single taxable entity so far as the payment of the tax is concerned; it provides that where the tax is assessed on the basis of a consolidated return, it shall be computed in the first instance as a unit, and shall then be assessed upon' the respective affiliated corporations in such proportions as may be agreed upon among them, or, in the absence of any such agreement, then on the basis of the net income properly assignable to each. The act does not provide that the affiliate group is a single ‘taxpayer’; on the contrary, since each member of the affiliated group is a taxpayer, subject to the tax imposed by the act, it is a ‘taxpayer’ within the meaning of the term as defined in section 1.” The statute authorizes an overpayment to be credited “against any income, war-profits, or excess-profits tax or installment thereof then due from the taxpayer.” (Italics ours.) This language does not authorize such overpayment to be credited against taxes due from any taxpayer other than the one making the overpayment. The taxpayer making the overpayment in this ease was the plaintiff. The commissioner applied such overpayment to the payment of taxes due from another taxpayer. His action in that respect was erroneous. The next question to be considered is the plaintiff’s right, in this suit, to recover the amount of the overpayment of its 1918 taxes which was wrongfully credited by the commissioner against taxes due from the T. F. Hart Paper Company. The defendant contends plaintiff’s right to maintain its suit is barred by the statute of limitations, because of its failure to file a sufficient claim for refund within the time required by law. Compliance with the statutory requirement with reference to the filing of claims for a refund of taxes is a condition precedent to the right of a taxpayer to maintain a suit for the recovery of such taxes. Feather River Lumber Co. v. United States, 66 Ct. Cl. 54; Hazel M. Davis v. United States, 67 Ct. Cl. 643; Swift & Co. v. United States, 68 Ct. Cl. 97; Kings County Savings Institution v. Blair, 116 U. S. 200, 6 S. Ct. 353, 29 L. Ed. 657; Rock Island Railroad Company v. United States, 254 U. S. 141, 41 S. Ct. 55, 65 L. Ed. 188. The Revenue Act of 1924, § 281 (26 USCA § 1065 note), provides: “(b) Except as provided in subdivisions (e) and (e) of this section, (1) no such credit or refund shall be allowed or made after four years from the time the tax was paid, unless before the expiration of such four years a claim. therefor is filed by the taxpayer. * * * “(e) If the taxpayer has, within five years from the time the return for the taxable year 1917 was due, filed a waiver of his right to have the taxes due for such taxable year determined and assessed within five years after the return was filed, or if he has, on or before June 15, 1924, filed such a waiver in respect of the taxes due for the taxable year 1918, then such credit or refund relating to the taxes for .the year in respect of which the waiver was filed shall be allowed or made if claim therefor is filed either on or before April 1, 1925, or within four years from the time the tax was paid. “(f) This section shall not (1) bar from allowance a claim for credit or refund filed prior to the enactment of this Act which but for such enactment would have been allowable. * *. *” The Revenue Act of 1926, § 284 (26 US CA § 1065) provides: “(g) If the taxpayer has, within five years from the time the return for the taxable year 1917 was due, filed a waiver of his right to have the taxes due for such taxable year determined and assessed within five years after the return was filed, or if he has, on or before June 15,1924, filed such a waiver in respect of the taxes due for the taxable year 1918, then such credit or refund relating to the taxes for the year in respect of which the waiver was filed shall be allowed or made if claim therefor is filed either on or before April 1, 1925, or within four years from the time the tax was paid. * * * . “(h) Except as provided in subdivision (d) this section shall not (1) bar from allowance a claim for credit or refund filed prior to the enactment of this Act which but for such enactment would have been allowable. * . * * » Section 1113. (a) Section 3226 of the Revised Statutes (26 USCA § 156), as amended, is re-enacted without change, as follows: “See. 3226. No suit or proceeding shall be maintained in any court for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully- collected until a claim for refund or credit has been duly filed with the Commissioner of Internal Revenue, according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. No such suit or proceeding shall be begun before the expiration of six months from the date of filing such claim unless the commissioner renders a decision thereon within that time, nor after the expiration of five years from the date of the payment of such tax, penalty, or sum, unless such suit or proceeding is begun within two years after the dis-allowance of the part of such claim to which such suit or proceeding relates. * * * ” The plaintiff filed three claims for a refund in respect to its 1918 taxes, as follows: (1) On March 15, 1920; a claim for the refund of $4,149.02, which claim was rejected by the Commissioner on February 11, 1924. (2) On March 11, 1924, a claim for refund in the amount of $10,000. The claim stated no ground for a refund other than that it was filed to protect the plaintiff’s rights against the running of the statute of limitations. It was rejected by the Commissioner on May 21, 1924. Neither of these rejected claims was, after its rejection, reopened or reconsidered by the Commissioner, nor were they amended, or sought to be amended, by the filing of any subsequent claim. This suit was begun December 22, 1927, more than five years after the payment of the taxes sought to be recovered, and also more than two years after the rejection of the said claims by the Commissioner, and is barred by the statute of limitations, in- so far as such claims are concerned. The plaintiff, however, does not rely upon the aforesaid rejected claims for refund as a basis of its suit, but relies upon (3) the joint claim for refund filed by it and the T. F: Hart Paper Company on December 17, 1926. This claim asks for a refund of $20,-000, and reads as follows: “This claim for refund is filed to protect the rights of the tax-payers under the statute of limitations and is based upon an application for special assessment under sections 327-328, revenue act of 1918, filed with the Commissioner of Internal Revenue in the taxpayers’ brief on May 1, 1924. The case is now pending in the special assessment section. Waivers on file for 1918 expire December 31, 1926. The amount shown on line 6 is estimated and subject to change upon final determination of the tax liability.” The plaintiff contends this claim is valid, and, by virtue of the waiver filed on October 28, 192b, extending the time in which assessment of the plaintiff’s 1918 taxes might be made until December 31,1926, was filed within the time prescribed by law. The waiver in question was filed subsequent to the time fixed in the Revenue Acts of 1924 and 1926 in which the filing of a waiver would operate to extend the time for filing claims for refund. Furthermore, the claim for refund relied upon was filed more than a year after the period had elapsed in which such claim was required to be filed. By virtue of section 278 (c) of the Revenue Acts of 1924 and 1926 (26 USCA § 1060), the waiver herein, although filed after the limitations had run against the assessment of taxes against the plaintiff for the year 1918, revived in the Commissioner authority to make an assessment within the period covered by the waiver. Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. -. Such waiver, however, filed after the date prescribed in section 281 (e) of the Revenue Act of 1924 and section 284 (g) of the Revenue Act of 1926, did not operate to extend the time in which claim for refund could be filed under the provisions of said sections. In Burnet v. Chicago Railway Equipment Co., 282 U. S. 295, 51 S. Ct. 137, 139; 75 L. Ed. -, the court said: “Attention is also called to section 281 (e) of the 1924 act, which extended the time for making claims for refund where a waiver of assessment had been filed prior to certain specified dates, and it is said that section 278 (e), as interpreted, would, when read with section 281 (e), result in a discrimination against those taxpayers who had signed a waiver after the statute had run. The argument is that such taxpayers would still be liable for the tax, but that no corresponding extension of the limitation on claims for refund would be given. The dates specified in section 281 (e), however, do not coincide with the periods of limitation on assessment and collection. The purpose of that section was merely to extend the time for filing claims for refund in particular cases of taxes for the years 1917-1919. There is no necessary relation between it and section 278 (c).” Neither waiver nor claim for refund was filed within the time required by law, and the plaintiff’s right to bring suit to recover the amount of the overpayment of its taxes for the year 1918 w;as barred by the statute of limitations when the petition herein was filed, December 23, 1927. The Commissioner had no legal authority to allow the refund, and no right to interest on the overpayment ever attached. Plaintiff’s petition is therefore dismissed. It is so ordered. BOOTH, Chief Justice, and LITTLE-TON and GREEN, Judges, concur. WHALEY, Judge, did not hear this case and took no part in its decision.,

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

WAUD et al. v. UNITED STATES. K-502. Court of Claims. April 6, 1931. H. Stanley Hinrichs, of Washington, D. C. (Frank S. Bright, of Washington, D. C., Raymond M. Ashcraft and Ashcraft & Ash-craft, all of Chicago, Ill., and Bright, Thompson, Hinrichs & Warren, of Washington, D. C., on the brief), for plaintiffs. J. W. Sheppard, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen. (Percia E. Miller, of Washington, D. C., on the brief), for the United States. Before BOOTH, Chief Justice, and GREEN, WHALEY, WILLIAMS, and LITTLETON, Judges. GREEN, Judge. Plaintiffs bring this suit as executors of the estate of George F. Griffin, deceased, to recover the sum of $5,242.28, with interest, paid as federal income tax for the period of May 4, 1920, to December 31, 1920. The facts have been stipulated, and the issue in the ease is whether certain sums paid to the executors as income from a trust created by the decedent’s father were taxable as income against decedent’s estate. The findings of fact show that the decedent, in his lifetime, under the will of his father and an agreement with other heirs, received one-half of the net income of the trust estate created under his father’s will, until his death, and thereafter Ms estate received this income until the expiration of a certain period. The Commissioner determined the value of the right to receive tMs income from the time of the death of the decedent, George F. Griffin, to the end of the period for which it was to be received, included this value as a part of the gross estate of the decedent, and assessed the estate tax accordingly. When the plaintiffs filed a federal income tax return, as executors, for the period of May 4,1920, to December 31,1920, they did not include this income from the trust as a part of the income of the estate, but the Commissioner, upon an audit of the return, did so include it, and assessed a deficiency by reason thereof. The plaintiffs paid this additional assessment with interest, and duly filed an application for refund on the ground that the income so received was not taxable as income to the estate of which they were executors. The application for refund having been rejected by the Commissioner, tMs suit was brought. The contention of the plaintiffs is, in brief, that the property which was so taxed by the Commissioner of Internal Revenue became, by virtue of the bequest of Ms father, and was, a part of the corpus of the estate of George F. Griffin, deceased; that it had been taxed as such under the estate tax provision; that, being a part of the corpus or principal of the estate, it was not income within the meaning of the Revenue Act of 1918; and that the aetion of the Commissioner resulted in double taxation, which Congress did not intend. We are unable to agree that the property taxed became a part of the corpus of the • estate by virtue of the bequest except in the sense that all receipts by an estate eventually become a part thereof. Nor do we think there was any double taxation. In this case, the estate tax and the income tax were levied upon two different things and under two different principles. The estate tax was levied as a transfer tax, and in this case is measured by the value of the right to receive certain property, while the income tax was levied and assessed upon the gain derived from other property. The federal estate tax is an indirect tax and not a direct fax upon property. It is merely a tax upon the privilege of transferring property. Whether the same transaction may give rise to the levy and assessment of another tax is not at all material, and does not at all affect the question of whether an income tax may be collected under the circumstances of the ease at bar. It is quite true that a gift or bequest of capital assets, even if payable in installments, or consisting of interest due at a future date, or other items of that nature, does not constitute income. The cases cited by counsel for plaintiffs are mostly of this nature, and are therefore not applicable herein. In the instant ease, the bequest was of the right to receive this income, and, when the income was paid, it still remained income. The precise question involved in this case was determined in Irwin v. Gavit, 268 U. S. 161, 45 S. Ct. 475, 69 L. Ed. 897, wherein it is held in effect that the beneficiary for life, or for a term of years, of the income of a trust estate created by will, is taxable on that income as sueh. Practically the same objections were raised therein to the taxation of the income from the trust as income to the estate as are made in the case now being considered, and these objections were held to be unfounded. The Board of Tax Appeals in the ease of Ernest P. Waud et al., Executors, 6 B. T. A. 871, has held that the income here involved was subject to income tax upon the authority of Irwin v. Gavit, supra; and also held in the case of Bull, Executor, v. Commissioner of Internal Revenue, 7 B. T. A. 993, that a tax in one form may be imposed on the present value of the right of expectancy and a tax in another form imposed upon the income when derived. In the ease of Widener v. Commissioner of Internal Revenue, 8 B. T. A. 651, the Board of Tax Appeals sustained the position taken by the government in the case now before the court. We concur in the reasoning of the Board of Tax Appeals in. the eases cited above. We have examined with care the other eases cited by plaintiffs in support of their position, but find that they are based on facts so much different from those of the ease at bar that, in our opinion, they have no bearing thereon. It follows that the petition of plaintiffs must be dismissed. It is so ordered.

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McCANN et al. v. UNITED STATES. No. K-64. Court of Claims. April 6, 1931. A. Donald MacKinnon, of New York City (Murray, Aldrich & Webb, of New York City, on the brief), for plaintiffs. George H. Foster, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States. Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges. WHALEY, Judge. This suit is brought by the administrators of the estate of John William Cooke, who inherited an undivided one-eighth interest in certain real estate in the city of New York under the will of William Washington Cole, who died March 19, 1915, to recover an assessment of additional income taxes based on the increased value of the property at the time of sale over the appraised value placed on it at the time of the death of Cole. The plaintiffs contend the value of the property in March, 1913, should be compared with the sale price received in 1929 which would show a loss sustained instead of a gain derived. But Cooke had no interest in the property in 1913. The only interest he acquired was under the will of Cole, and that interest vested immediately upon the death of Cole. The value of his interest was an undivided one-eighth of the total value of the property at that time. The appraisal of the property by the State authorities for inheritance-tax purposes placed a value of $800,999 on the property at the death of Cole. Cooke’s interest was one-eighth of that amount, or $100,000. Cooke died 18 days after the devise had vested. The plaintiffs are the ancillary administrators de bonis non of his estate and as his representatives are entitled to receive his interest. in the estate of Cole. No immediate distribution of this property was made by the executor of Cole. It was held by the executor until 1920, when it was sold for $978,001.58, or a net gain of $178,001.58 over the appraisal made at the death of Cole. The mortgages taken in part payment were not disposed of until 1923, and then distribution was made by the executor of Cole of the proceeds of sale. The estate of Cooke received one-eighth of the $978,001.58, or $122,259, an increase of $22,259 over the value of the property when acquired by Cooke upon the death of Cole. The Commissioner of Internal Revenue assessed a tax on this increase as income to the estate of Cooke. The taxable year is 1920 and the revenue act of 1918 is applicable. The corpus of the devise is exempt from taxation, but the income from such property is subject to tax. Section 213 (b) (3), 40 Stat. 1057,1065. The regulations specifically provide that where there is no appraised value for federal estate tax purposes “its value as appraised in the State court for the purpose of State inheritance taxes should be deemed to be its fair market value when acquired.” Article 1562, Reg. 45. Immediately upon the death of the owner, title to his real estate passes to his heirs or devisees. The value at the time of Cole’s death is the basis for the ascertainment of gain, or loss on the sale of real estate. That is the time of acquisition. Under the will of Cole, his executor had the power of sale of the real estate for distribution, but the title of Cooke vested at the time of death of Cole and its value as of that time is the basis on which the tax should be computed. Brewster v. Gage, 289 U. S. 327, 59 S. Ct. 115, 74 L. Ed. 457. The plaintiffs contend the Elmhirst Case, 38 F.(2d) 915, 69 Ct. Cl. 295, and the McKinney Case, 62 Ct. Cl. 189, decided by'this court sustain their position. But there is no merit in this contention. In the Elmhirst Case, supra, it was held that the cost to the testator of property purchased after March 1, 1913, was the basis of computing gain or loss when sold by his estate and the ownership by the testator during his lifetime and his estate afterwards was an entity. In the McKinney Case, supra, the property had been purchased prior to March 1, 1913, and sold by the executors. This court held that the cost to the testator was the, basis of computing the gain derived or the loss sustained from the sale. It was the difference between the original investment and the sale price and not the market value of the property on the date of the death of the testator. In this case the court treated the holdings of McKinney during his lifetime and his estate as an entity. These eases are entirely different from the ease under consideration. Neither Cooke nor his estate had any interest in the property before March 19,1915, and no purchase was made by Cooke. He acquired his interest under the will of Cole in 1915. The estate of Cole is in no way involved in the question before us and only the estate of Cooke is under consideration. There is a clear demarcation between the McKinney and Elmhirst Cases, supra, and the ease at bar. The Commissioner was correct in assessing the tax and the complaint should be dismissed. It is so ordered.

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MT. VERNON CAR MFG. CO. v. UNITED STATES. No. F—342. Court of Claims. April 6, 1931. Russell A. McNair, of Detroit, Mich. (Goodenough, Voorhies, Long & Ryan, of Detroit, Mich., on the brief), for plaintiff. Ralph C. Williamson, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States. PER CURIAM. Tbe plaintiff presented tbe identical question involved in this ease to tbe Board of Tax Appeals in contesting an alleged deficiency tax for tbe calendar year 1921. Tbe Board of Tax Appeals in a written opinion announced October 5, 1928 (13 B. T. A. 810), granted tbe plaintiff’s contentions and entered judgment accordingly. Thereafter tbe Commissioner of Internal Revenue acquiesced in the holdings of tbe Board of Tax Appeals. No reason has been advanced in this case why we should disturb the opinion of the Board of Tax Appeals, and judgment for tbe plaintiff is entered accordingly.

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W. M. DUTTON & SONS CO. v. UNITED STATES. No. H-397. Court of Claims. April 6, 1931. F. W. McReynolds, of Washington, D. C., for plaintiff. R. C. Williamson, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States. Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges. WILLIAMS, Judge. Plaintiff sues for recovery of excise taxes' assessed on sales of air pumps during the period from March 1, 1919, to February 28, 1926, under section 900 of the Revenue Act of February 24, 1919, 40 Stat. 1122 (and similar provisions of the acts of 1921 and 1924). Section 900 (3) of the Internal Revenue Acts of 1918 (40 Stat. 1122) and 1921 (42 Stat. 291), and section 600 (3) of the act of 1924 (26 USCA § 881 note), provide for excise taxes on “tires, inner tubes, parts, or accessories” of automobiles or motor cycles “sold to any person other than a manufacturer or producer” of automobiles or motor cycles. The question as to what constitutes “parts” and “accessories” in automobiles within the meaning of the Revenue Acts of 1918, 1921, and 1924 has been passed upon by this court in numerous cases. In Atwater Kent Manufacturing Co. v. United States, 62 Ct. Cl. 419, 425, the court said: “Where the articles, as those we are concerned with, are applicable for use in different kinds of machines or appliances and are just as ap-' plieable to the one use as to the other they are not distinctively parts of automobiles so as to be taxable under these statutes.” The rule announced in the Atwater Kent Mfg. Co. Case, supra, is followed in Cole Storage Battery Co. v. United States, 65 Ct. Cl. 164; Walker Manufacturing Co. v. United States, 65 Ct. Cl. 394; Fairmount Tool & Forging Co. v. United States, 42 F.(2d) 591, 70 Ct. Cl. 425, and other eases. In Universal Battery Co. v. United States, 281 U. S. 580, 583, 50 S. Ct. 422, 423, 74 L. E. 1051, the court said: “The administrative regulations issued under section 900 uniformly have construed the term 'part’ in that section as meaning any article designed or manufactured for the special purpose of being used as, or to replace, a component part of such vehicle, and which by reason of some characteristic is not such a commercial article as ordinarily would be sold for general use, but is primarily adapted for use as a component part of such vehicle. The regulations also have construed the term 'accessory’ as meaning any article designed to be used in connection with such vehicle to add to its utility or ornamentation and which is primarily adapted for such use, whether or not essential to the operation of the vehicle. “This construction of those terms has been adhered to in the Internal Revenue Bureau for about ten years, and it ought not to be disturbed now unless it be plainly wrong. We think it is not so, but is an admissible construction. Certainly it would be unreasonable to hold that articles equally adapted to a variety of uses and commonly put to such uses, one of which is use in motor vehicles, must be classified as parts or accessories for such vehicles. And it would be also unreasonable to hold that articles can be so classified only where they are adapted solely for use in motor vehicles and are exclusively so used. Magone v. Wiederer, 159 U. S. 555, 559, 16 S. Ct. 122, 40 L. Ed. 258. We think the view taken in the administrative regulations is reasonable and should be upheld. It is that articles primarily adapted for use in motor vehicles are to be regarded as parts or accessories of such vehicles, even though there has been some other use of the articles for which they are not so well adapted.” The air pumps involved were sold by the plaintiff to jobbers only, who in turn sold them to retailers through whom they were distributed to the ultimate consumer. While they could be and were used in connection with automobiles, they were not primarily adapted for that purpose, and in fact were used for a large variety of purposes such as inflating all kinds of pneumatic tires used on bicycles, motorcycles, airplanes, and sulkies; furnishing air pressure in gasoline and kerosene heating and cooking stoves, grates, and lighting systems; spraying equipment, chemical sprays for trees and paint-spraying machines; testing of fuses and switch boxes in electrical work: in gasoline torches for brazing; in draught-beverage containers; in outdoor athletic equipment, such as footballs, basket balls, air boats, air beds, air pillows, chest protectors, mask protectors, metal air tanks, and air containers for vulcanizing. Under the uniform decisions of this court, and the decision of the Supreme Court in Universal Battery Co. Case, supra, the articles in question being equally adapted to a variety of uses, and commonly put to such uses, one of which is use in motor vehicles, cannot be considered as primarily adapted for use in motor vehicles. The plaintiff is therefore entitled to recover the amount of taxes paid by it since October 11, 1922, for which claim for refund was made. Taxes paid prior to that date are barred by the statute of limitations. The plaintiff is awarded judgment in the sum of $38,658.25 with interest. It is so ordered.

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TAYLOR-LOCKWOOD CO. v. UNITED STATES. No. K-496. Court of Claims. April 6, 1931. For former opinion, see 45 F.(2d) 284. Theodore B. Benson, of Washington, D. C., for plaintiff. Lisle A. Smith, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States. Before BOOTH, Chief Justice, and LITTLETON, WHALEY, WILLIAMS, and GREEN, Judges. LITTLETON, Judge. Plaintiff moves for a new trial on the grounds, first, that its claim for refund filed February 19,1923, was sufficient in law, and, secondly, that the court erred in holding that the Revenue Act of October 3,1917 (40 Stat. 300) did not require the plaintiff to file a second return after its passage for the fiscal year ending June 30,1917. It is insisted that the act did require a second return and the rulings of the Commissioner fixed March 1, 1918, as the- date on which the second returns of taxpayers in the situation of the plaintiff were due. It is therefore contended that the refund claim was filed in time. The first ground of plaintiff’s motion for a new trial is without merit. The claim for refund which was filed related entirely to special assessment, and, as pointed out in the opinion of the court, the language thereof was not sufficient to constitute a claim for refund on any other ground. In this view of the matter, it is immaterial whether the Revenue Act of October 3, 1917, and the regulations required taxpayers in the situation of the plaintiff to file a second return on or before March 1,1918, for the fiscal year ending June 30, 1917, after the passage of the Revenue Act of October 3, 1917. This plaintiff did not file a second return, and the Commissioner did not require it to do so; neither did the Commissioner assert any penalty against the plaintiff. The ease of Updike et al. v. United States (C. C. A.) 8 F. (2d) 913, is not in point. That case related to a corporation which was dissolved prior to October 3, 1917, and article 61, Reg. 33, specifically provides that in such ease a second return under the act of October 3, 1917, should be made notwithstanding returns under prior acts had been made. The case of Beam v. Hamilton (C. C. A.) 289 F. 9, related to penalties for failure to file an exeess profits tax return for the calendar year 1917, and the decisions in McKnight, 3 B. T. A. 1060, and Monis, 9 B. T. A. 1273, are also not in point. Treasury Decision No. 2650, promulgated February 9, 1918, extending the time for filing returns under the act of October 3, 1917, does not apply to this case for the reason that that Treasury decision extended the time for filing returns to March 1, 1918, only with respect to returns due subsequent to October 16, 1917, and on or before March 1, 1918. The plaintiff’s return was due and was made August 30, 1917. I. T. 1951, C. B. III-1, page 362, related to a partnership and was based upon the authority of Treasury Decision No. 2650. The motion for a new trial is overruled.

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READING BROADCASTING CO. v. FEDERAL RADIO COMMISSION (Journal Co., Intervener). No. 5254. Court of Appeals of District of Columbia. Argued Feb. 4, 1931. Decided March 2, 1931. George O. Sutton, of Washington, D. C., for appellant. Thad H. Brown, Elmer W. Pratt, Elisha Hanson, and D. M. Patrick, all of Washington, D. C., for appellee. Before MARTIN, Chief Justice, and ROBB and VAN ORSDEL, Associate Justices. MARTIN, Chief Justice. Am appeal from a decision of the Federal Radio Commission refusing an application of appellant for an increase of power and a change of frequency for the operation of its broadcasting station WRAW located at Reading, Pa. It appears that station WRAW was first licensed as a broadcasting station in the year 1923. On June 15, 1927, it received a renewal license from the Federal Radio Commission permitting it to operate on a frequency of 1260 kilocycles with 100 watts power. This frequency was afterwards changed to 1310 kilocycles, the power remaining the same. The station was required to share time with station WGAL, located at Lancaster, Pa., operating upon the same frequency with 15 watts power. On January 25, 1930, the appellant filed an application with the Commission for a permit to install a new transmitter, and operate upon a frequency of 620 kilocycles with a power of 500 watts, and with unlimited time of operation. This application accordingly sought a change of frequency from 1310 kilocycles to 620 kilocycles, a change of power from 100 watts to 500 watts, and a right to operate without time restriction instead of dividing its time with another broadcasting station. Such a change if allowed would advance the station from a local to a regional station. A hearing was duly held upon the application, at which broadcasting station WTMJ of Milwaukee, Wisconsin, was allowed to intervene. The Commission thereupon held that the public interest, convenience, or necessity would not be served by granting the application. It was accordingly refused, and the present appeal was taken under section 16 of the Radio Act of 1927, 44 Stat. 1162, 1169 (47 USCA § 96). The Board found upon the evidence that station WRAW as now operating is doing a good local broadcasting service, although, owing to peculiar geographical conditions, its service area is somewhat restricted; but that its service in Reading and the neighborhood could be increased by approximately 600 per cent, by an improvement in the transmission of the present station, producing 100 per cent, modulation without changing its power or frequency. The Board found moreover that the service area of the station is well served by station WJZ located at New York City, and other high-powered radio stations. The Board also found that, if appellant’s station should be permitted to operate upon a frequency of 620 kilocycles, with power output of 500' watts, as proposed in the application, it would result in heterodyne interference with station WLBZ located at Bangor, Me., about 470 miles from Reading, operating upon a 620-kiloeyele channel with 500 watts power, and likewise with station WTMJ, located at Milwaukee, Wis., about 675 miles from Reading, operating upon a 620-kilocycle frequency, with power of 1 kilowatt at nighttime and 2% kilowatts in the' daytime, and would thereby reduce the service areas of those stations; also that it would interfere with the service of stations WEAN and WIP, located at the city of Philadelphia, about 50 miles distant from Reading, one operating upon a 620-kiloeyele channel, the other upon a 610-kiloeycle channel, by producing cross-talk on both of these channels. We have examined the evidence contained in the record, and we think it sufficiently sustains these findings. It consists in part of the testimony of competent engineers which is entitled to weight, and there is but little contradiction of it in the record. Under the rule expressed in Technical Radio Laboratory v. Federal Radio Commission, 59 App. D. C. 125, 36 F.(2d) 111, 66 A. L. R. 1355, 'the findings of the Board should in such ease be sustained. It is contended by appellant that the Second Zone, in which the state of Pennsylvania is situate, is under-quota in radio facilities as compared with the other zones established by section 2 of the Radio Act of 1927 (47 USCA § 82), supra, and section 9, second paragraph, as amended by section 5 of the Act of March 28, 1928, 45 Stat. 373 (47 USCA § 89), and that the state of Pennsylvania is similarly under-quota as compared with the other states of the Seeond Zone. Appellant insists that the Board should not continue such a situation by denying its application, in the interest of stations located in the over-quota states or zones. In answer to this contention, the Commission states that, if appellant’s application should be granted, “the interference which would result on- the‘620-kiloeyele and the 610-kiloeyele channels would be more detrimental to the listening public of Pennsylvania than the existing lack of this State’s full quota of regional assignments.” The Commission also states that it “took into account the service of the various stations operating on 620-kiloeycles and adjacent channels and determined that public interest, convenience, or necessity would not be served by permitting the operation of an additional station on 620 kilocycles at Reading, Pa., if such station would cause either heterodyne or crosstalk interference in the communities served by the former stations.” We concur in these views, for it would not be consistent with the legislative policy to equalize the comparative broadcasting facilities of the various states or zones by unnecessarily injuring stations already established which are rendering valuable service to their natural service areas. The paramount consideration after all is the public interest, convenience, and necessity, and we are convinced upon a review of the record that the Board’s conclusions are in line therewith. The decision is therefore affirmed, at the cost of appellant.

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HENRY v. BURNET, Commissioner of Internal Revenue. No. 4801. Court of Appeals of District of Columbia. Argued Feb. 5, 1931. Decided March 2, 1931. Motion for Rehearing Denied March 21, 1931. Camden R. McAtee, of Washington, D. C., for appellant. Mabel W. Willebrandt, Asst. Atty. Gen. and C. M. Charest, L. W. Scott, Sewall Key, Joe S. Franklin, and John G. Remey, all of Washington, D. C., for appellee. Before MARTIN, Chief Justice, and ROBB and VAN ORSDEL, Associate Justices. MARTIN, Chief Justice. This is an appeal from an order of the Board of Tax Appeals involving the individual income tax return of appellant for the year 1919. The controversy relates to two deductions claimed by appellant: (1) Because of appellant’s proportionate share of certain losses sustained in that year by a partnership in which appellant was a partner; and (2) because of the enforced payment by appellant of the proportionate share of such losses owing by his partner. The issue is governed by the Revenue Act of 1918, 40 Stat. 1057,1066,1070,1074, parts of which read as follows: “See. 214. (a) That in computing net income there. shall be allowed as deductions : * * * “(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business. * * * “(7) Debts ascertained to be worthless and charged off within the taxable year.” “See. 218. (a) That individuals carrying on business in partnership shall be liable for income tax only in their individual capacity. There shall be included in computing the net income of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year. * * * “(d) The net income of the partnership shall be computed in the same manner and on the same basis as provided in section 212. • '* * ” “See. 224. That every partnership shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowed by this title, and shall include in the return the names and addresses of the individuals who would be entitled to share in the net ineome if distributed and the amount of the distributive share of each individual. * * ■* ” It appears that the partnership in question was composed of appellant and one O. W. Muller, and conducted a stock brokerage business in the year 1919 in the city of New York. A branch of the firm located in Newark is not involved in this ease. The New York firm prospered during the first three months of 1919; but immediately after-wards it sustained severe reverses, and by November 14 of that year it was compelled to discontinue business. Appellant was the financial backer of the firm, and, when it suspended, he was obliged to meet, not only his own proportion of the firm’s obligations, but also those which should have been borne by the partner Muller. In March, 1920, an information return for 1919 was filed by the partnership, as required by section 224, supra: The appellant filed his individual tax return for 1919 at the same time, and claimed a deduction therein of $35,950.25 because of his proportionate share of a partnership loss of $63,038.20 sustained in carrying four certain margined accounts for its customer George C. Smith. This item similarly appeared in the information return of the partnership. Appellant claimed that the loss represented a debt ascertained to be worthless and charged off within the taxable year 1919, and accordingly responded to the deduction provided for by section 214(a) (7), supra. The Commissioner of Internal Revenue held that, in fact, the debt in question was not ascertained to be worthless nor charged off in the taxable year 1919, and accordingly disallowed the deduction. Appellant appealed that issue to the Board of Tax Appeals. While the .appeal was pending, appellant by motion amended his petition by adding a claim of $9,222, as Muller’s share of certain conceded bad debts lost by the firm, which should have been paid by him, but whieh appellant was compelled to pay for him. The Board of Tax Appeals decided against appellant upon his claim, including the amendment, and an appeal to this court was then taken. We agree with the finding and decision of .the Board. The record discloses that early in November, 1919, the Smith account showed a net aggregate debit balance greatly in excess of the value of the collateral securities held by the partnership therefor. These collaterals had been first deposited as security for three of the four accounts, but were considered by the parties and subsequently treated as security for all of them. On November 8 or 9, 1919, the firm notified Smith that he must put up additional margin or that his account would be closed out. Smith promised that he would try to protect the account, but he failed to do so, and was prohibited from, further trading after November 17, 1919. The debit balances of the accounts were ruled and brought down to January 1, 1920, and both interest and carrying charges were afterwards charged for that month. The collaterals securing the account, composed in part of Liberty bonds and in part of stocks, were closed out partly in February and partly in March, 1920, and on March 16 the final debit balances of the accounts were charged off, and the partnership was dissolved. The evidence concerning Smith’s financial condition during November and December, 1919, is not clear. .It was a period of panic in the stock markets, and such a situation would naturally be uncertain. We think that these facts fail to sustain appellant’s claim that the Smith debt was ascertained to be worthless and was charged off in 1919. Seiberling v. Commissioner (C. C. A.) 38 F.(2d) 810; Stranahan v. Commissioner (C. C. A.) 42 F.(2d) 720. It is contended by appellant that the action taken by the firm in November, 1919, forbidding further trading in the Smith account unless additional collateral was furnished, is proof that the debit balance then owing by Smith was ascertained to be worthless and was thereby charged off. The Board held otherwise, and we think correctly, for the firm’s action was manifestly intended as a temporary measure and not as a final settlement of the account. Moreover, the amount of the actual net indebtedness of Smith to the firm was not ascertained until the collateral was sold and the proceeds applied thereon. The firm did- not assume to own the collateral, crediting Smith with its market value, but sold it and credited the proceeds in the account. It is our opinion also that the evidence fails to sustain appellant’s claim for a deduction based upon his payment of Muller’s share of certain conceded debts of the firm, which appellant was compelled to pay for him. The Board found that a debtor-creditor relation arose between appellant and Muller because of this payment, but there seems to be no reason to hold that this relation existed prior to the dissolution of the partnership in March, 1920. Therefore the debt in question was not in existence as such in the year 1919. Moreover, the Board found the evidence insufficient to establish that the debt, even if it existed in 1919, was worthless at that time, and we do not disagree with this conclusion. The decision of the Board is affirmed.

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JOURNAL CO. v. FEDERAL RADIO COMMISSION. Nos. 5095, 5163, 5268, 5269. Court of Appeals of District of Columbia. Argued Feb. 5, 1931. Decided March 2, 1931. Motion for Specific Directions in Mandate, etc., Denied March 21, 1931. Louis G. Caldwell and Elisha Hanson, both of Washington, D. C., for appellant in all the cases. Paul D. Spearman, Arthur W. Scharfeld, Thad H. Brown, and D. M. Patrick, all of Washington, D. C., for appellee in No. 5095. Thad H. Brown, A. W. Scharfeld, and D. M. Patrick, all of Washington, D. C., for appellee in No. 5163. Thad H. Brown, D. M. Patrick, Ben S. Fisher, and A. W. Scharfeld, all of Washington, D. C., for appellee in Nos. 5268 and 5269. Before MARTIN, Chief Justice, and ROBB and VAN ORSDEL, Associate Justices. ROBB, Associate Justice. Appeals from decisions of the Federal Radio Commission. Appellant, a Wisconsin corporation, is the publisher of the Milwaukee Journal, a leading newspaper in Wisconsin. It is the owner and operator of broadcasting station WTMJ at Milwaukee, which operates full time on a frequency of 620 kc., with authorized use of 1,000 watts power nighttime, and 2,500 watts daytime. This station and its predecessors in interest have been operating .since 1922, under licenses from the Secretary of Commerce and later under licenses from the Radio Commission. The station represents an investment of over $300,000. More than $160,000 has been expended for major station equipment alone. The total gross cost of operating the station is approximately $300,000 per annum, the greater portion of which being for program expenses. It has 48 full-time employees, including an operating staff of 10 skillful technicians, a musical director who devotes all his time to the station’s programs, an organist, and a permanent 16-piece orchestra. The pay roll for the year 1929 was $122,796.62. The evidence clearly establishes (indeed, there is no suggestion to the contrary) that appellant’s equipment is modern and satisfactory in every way and that its service has been of a very superior character. Prior to the decisions complained of, its normal and effective service area covered Wisconsin, most of Michigan, portions of Minnesota, Iowa, Illinois, and Indiana, and reached a population of approximately 3,500,000 persons. On November 11, 1928, when appellant was assigned its present frequency and power (620 kc., with 1,000 watts nighttime and 2,500 watts daytime power), the following stations were assigned the same frequency: Station WLBZ, Dover-Foxcroft, Me., with 250 watts nighttime and 500 watts daytime power; WDAE, Tampa, Fla., and WDBO, Orlando, Fla., dividing time, with 1,000 watts power; KFAD, Phoenix, Ariz., with 500 watts power; and KGW, Portland, Or., with 1,000 watts power. The use of this frequency by the other-stations named, owing to the limited power and the location of those stations, did not materially affect the efficiency or restrict the area of service of appellant’s station. In reliance upon the conditions thus created'and existing, appellant materially improved its equipment and increased its weekly outlay for programs. Early in April, 1929, appellant learned that station WLBZ (Me.) had applied for an increase of evening power from 250 to 500 watts. The commission’s chief engineer wrote appellant that he had opposed the increase because he “did not want the possibility of this station causing a heterodyne in the service area of WTMJ,” and inquired as to appellant’s views. On April 22, 1929; appellant replied that it was convinced that an increase of WLBZ’s power would cause serious heterodyne interference, and appellant therefore protested against the granting of the application on the ground that it would “unduly restrict the service area of WTMJ and damage the one good regional channel which the state of Wisconsin has.” Later appellant wrote the commissioner from the Fourth Zone protesting against the granting of any application for privileges on 620 kc. without hearing, and particularly asking to be heard with reference to the application of WLBZ. On August 24, 1929, appellant again wrote the commission regarding a hearing, and the commission replied that the application of WLBZ was to be scheduled for hearing “if the applicant requests a hearing.” On October 22, 1929, without notice or opportunity for hearing to appellant, the commission granted the application of WLBZ and authorized the use of 500 watts nighttime power “for remainder of license period provided no interference arises.” Appellant learned of this through the press, filed a formal protest, and requested that before the license should he renewed appellant be given an opportunity to be heard. On October 28, 1929, appellant ¡Sled with the commission a formal petition under oath asking that WLBZ’s application for renewal with increased power be either' denied or, if not denied, designated for hearing. In this petition appellant represented that the increase of power was causing interference in the area served by appellant’s station and constituted a radical reduction of its service area. The commission took no action on this petition. During the summer of 1929, appellant learned that the commission was considering a shift in the Florida broadcasting stations assigned to 620 ke., and by letter of July 29, 1929, to the commission, requested that “before any change is made in the Florida stations, WTMJ be given an opportunity to make the necessary investigation and to be heard.” On or about October 23, 1929, without giving appellant any notice or opportunity for hearing, a shift was made in the Florida stations, under which WDAE, at Tampa, was taken off 620 ke. and WFLA-WSUN, at Clearwater, Fla., was assigned to that channel, with an evening power of 1,000 watts and daytime power of 2,500 watts. On November 15, 1929, WFLA-WSUN commenced operation on 620 ke. Almost immediately, in thousands of letters and telephone calls from listeners throughout Wisconsin and surrounding states, complaint was made to appellant of the resulting interference. Thereupon, appellant sent skilled observers throughout the state, into Iowa and Northern Illinois. The evidence adduced by appellant overwhelmingly establishes that the simultaneous evening operation of station WFLA-WSUN has resulted in almost ruinous interference, and reduced appellant’s service area to a radius of approximately 20 miles from the transmitter. On November 11, 1929, appellant noted its appeal to this court in No. 5095. This appeal was from a decision of the commission rendered October 25, 1929, on appellant’s application for a renewal of its license. It is conceded that the commission renewed the license in its former terms, but it is contended that by an increase in power to another station already assigned to the channel, the commission had in effect refused appellant’s application for renewal. Section 16 of the Radio Act of 1927 (44 Stat. 1162, 1169, U. S. G. Supp. 3, tit. 47, § 96 [47 USCA § 96]) authorized appeals as follows: “Any applicant for a construction permit, for a station license, or for the renewal or modification of an existing station license whose application is refused by the licensing authority * * *; and any licensee whose license is revoked by the commission. * * *” Appellant was prejudiced, pot by a refusal to renew its application, but by the commission’s action with respect to other stations. Under the Act of 1927 no appeal was allowed in such circumstances. Recognizing this apparent defect in the statute, Congress in the Act of July 1, 1930 (46 Stat. 844 [47 USCA § 96], amending section 16 of the 1927 Act, provided for appeals by “any other person, firm, or corporation aggrieved or whose interests are adversely affected by any decision of the commission granting or refusing any such application or by any decision of the commission revoking, modifying, or suspending an existing station license.” It results that the appeal in No. 5095 must be dismissed. We have determined that radio transmission, being a form of interstate commerce, is subject to regulation. Technical Radio Lab. v. Fed. Radio Comm., 59 App. D. C. 125, 36 F.(2d) 111, 66 A. L. R. 1355; City of New York v. Fed. Radio Comm., 59 App. D. C. 129, 36 F.(2d) 115; Chicago Fed. of Labor v. Fed. Radio Comm., 59 App. D. C. 333, 41 F.(2d) 422; KFKB Broadcasting Ass’n, Inc., v. Fed. Radio Comm., 60 App. D. C. 79, 47 F.(2d) 670, decided this term. The purpose of this regulation obviously is to prevent chaos and to insure satisfactory service. The installation and maintenance of broadcasting stations involve a very considerable expense. Where a broadcasting station has been constructed and maintained in good faith, it is in the interests of the public and common justice to the owner of the station that its status should not be injuriously affected, except for compelling reasons. Chicago Fed. of Labor v. Fed. Radio Comm., 59 App. D. C. 333, 41 F.(2d) 422. Unless such a policy is maintained, the public will not receive the character of service which we are convinced the Radio Act was intended to insure. No station that has been operated in good faith should be subjected to a change of frequency or power or to a .reduction of its normal and established service area, except for compelling reasons. After the commission had increased the power of the Maine station and shifted the Florida stations, appellant, apparently being doubtful of its right of appeal in No. 5095, filed its application in No. 5163 seeking a modification of its existing license so as to permit the operation of its station with 5,000 watts power, full time, on the same frequency, 620 ke. This application was refused, the commission being of the view that to increase the power of appellant’s station from its then assignment of 1,000 watts to 5,000. watts would ruin reception of all the other stations on the frequency. As .already observed, appellant’s station had already suffered similar harm by the action of the commission with respect to such other stations on the same frequency; moreover, this action was taken without notice to appellant. Appeals in Nos. 5268 and 5269 were taken after the effective date of the amendment of July 1, 1930 (46 Stat. 844 [47 USCA § 96]), and involved the action of the commission in renewing the license of WFLA-WSUN, Clearwater, Fla., and the action of the commission in renewing the license of WLBZ, Bangor, Me. In each instance, as already noted, the action of the commission was taken without notice to appellant, and greatly to its prejudice. In our view, it clearly appears that appellant is entitled to some form of relief. The commission was in error as a matter of law in increasing the power of the Maine station and shifting the Florida stations without notice to appellant and an opportunity for appellant to be heard. Courier-Journal Co. v. Fed. Radio Comm., 60 App. D. C. 33, 46 F.(2d) 614, decided this term. The finding of the commission in No. 5163 that there are “four stations besides appellant’s assigned to the frequency of 620 kilocycles, whose geographical separation permits simultaneous operation without intolerable interference” is “manifestly against the evidence.” Ansley v. Fed. Radio Comm., 60 App. D. C. 19, 46 F.(2d) 600, 601, decided this term; KFKB Broadcasting Ass’n, Inc., v. Fed. Radio Comm., 60 App. D. C. 79, 47 F.(2d) 670, decided this term. Theory must give way to fact. Recognizing that the commission is better equipped than this court to work out an equitable solution of the problem, we are reluctant to direct the particular form of relief. In our view, the interests of justice will be subserved by a reversal of the decisions in Nos. 5163, 5268, and 5269, with directions to the commission to afford appellant, after notice and opportunity to be heard, such relief as will measurably re-establish appellant in the position occupied by it prior to the acts complained of. No. 5095 dismissed. Nos. 5163, 5268, 5269, reversed.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES v. DE ARMOND. No. 8972. Circuit Court of Appeals, Eighth Circuit. March 11, 1931. Bay less L. Guffy, Atty., U. S. Veterans’ Bureau, of Washington, D. C. (William L. Vandeventer, U. S. Atty., and Harry L. Thomas, Asst. U. S. Atty., both of Kansas City, Mo., William Wolff Smith, Gen. Counsel, United States Veterans’ Bureau, of Washington, D. C., Robert D. Durst, Atty. U. S. Veterans’ Bureau, of Springfield, Mo., and Vergil E. Willis, Regional Atty., U. S. Veterans’ Bureau, of Kansas City, Mo., on the brief), for the United States. Lawrence E. Goldman, of Kansas City, Mo. (Frank R. Daley and Goldman & Daley, all of Kansas City, Mo., on the brief), for appellee. Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge. REEVES, District Judge. This is an aetion on a policy of war risk insurance. Appellee, as the plaintiff in the trial court, recovered judgment, and the government has appealed. Gail W. Stubbs was a soldier of the World War, and there was granted to him insurance in the sum of $10,000. It was undisputed that all premiums were paid up to and including September, 1921. Suit was originally filed by the assured in March, 1928, but he died during that year, and his executor was substituted as plaintiff. It is alleged in an amended petition that the assured became totally and permanently disabled on June 1, 1920, from tuberculosis which affected his lungs, hips, and legs, and caused a disturbance of his entire nervous system. The original petition fixed the date of his incapacity as June 20, 19191. The appellant objected to the amendment which changed the date to June 1, 1920, on the twofold ground that it was a departure, and that it was unfairly made on the moment of beginning the trial. Motion was duly made to strike out such amendment. Being overruled, an application for a continuance was made on the ground that the appellant' did not have “a sufficient and reasonable time in which to prepare for trial.” The latter motion was also overruled. Answer to the amended petition was then filed, and the cause proceeded- to trial. The evidence tended to show that, when the assured was discharged from the army in June, 1919, he appeared to be “sort of tired out.” His face was flushed, he walked with a limp, he could not bend over, had to be helped on street cars, his left hip was affected, and his condition continued to grow worse.. In February, 1920-, he went to a hospital at St. Louis, where he remained confined to- his bed for four months. During that time he wore braces, which he continued to wear after leaving the hospital. He could not walk without assistance, and had to be bathed and dressed by his wife. Doctors who examined him said that he had tuberculosis of the lumbar spine. Some of the witnesses said that he was unable to work when examined in March, 1921. The prognosis as to his recovery was “not so very good.” In fact he was pronounced as “suffering from an incurable condition.” At the conclusion of the evidence both parties requested a directed verdict. There were no reservations; hence such requests had the effect to waive the jury and submit all questions of fact to the court. The court found the issues for the appellee. Appellant complains that the evidence did not support the findings of the court, that the court abused its discretion in denying the application for a continuance, and that the amendment to the petition above set out was a departure, and that by such amendment a new cause was stated and a new demand made concerning which there was no disagreement so as to confer jurisdiction upon the court. These will be noted and discussed in the course of the opinion. 1. When both parties requested a peremptory instruction, they, came within the rule approved in Williams v. Vreeland, 250 U. S. 295, loc. cit. 298, 39 S. Ct. 438, 439, 63 L. Ed. 989, 3 A. L. R. 1038, as follows: “ ‘Where both parties request a peremptory instruction, and do nothing more they thereby assume the facts to be undisputed and, in effect, submit to the trial judge the determination of the inferences proper to be drawn therefrom.’ And upon review a finding of fact by the trial court under such circumstances must stand if the record discloses substantial evidence to support it.” See, also, Clapper v. Gamble (C. C. A.) 28 F.(2d) 755. It will be observed that the evidence as above set out was substantial and sufficient to support the finding of fact made by the trial court. Malavski v. United States (C. C. A.) 43 F.(2d) 974; Vance v. United States (C. C. A.) 43 F.(2d) 975; Mulivrana v. United States (C. C. A.) 41 F.(2d) 734. 2. The matter of granting a continuance is within the sound discretion of the trial court. It is only subject to review if such discretion has not been soundly exercised. Appellant’s counsel was notified of the proposed amendment five days before trial. The only effect of the amendment was to change the date of the alleged accrual of incapacity of the .assured from Juné 20,1919, to June 1, 1920. In order to recover, it was necessary for the appellant to prove that the assured not only became totally disabled, but that such condition was reasonably certain to continue. In making preparation for the defense, the government would properly prepare to show by evidence that the assured was not totally disabled, but, if so, that same was not permanent. Instead of imposing a greater burden on the appellant, the amendment to the petition reduced the burden. There was a shorter period over which it was necessary to make survey and inquiry and obtain proof as to the true condition of the .assured. There was no abuse of discretion in denying the application for a continuance. 3. The last point urged by appellant is that the amendment was not only a departure, but that the new date fixed was not involved in any disagreement with the Director of the Veterans’ Bureau. Under date of July 27, 1927, counsel for the assured wrote the Director of the Veterans’ Bureau, in reference to the physical condition of the assured, in part, as follows: “He was discharged with S. C. D. .and from and after the date of discharge, he has been totally incapacitated. Because of his physical condition he is unquestionably permanently and totally unfit to carry on any substantial, gainful occupation.” Demand was made in that letter for the benefits of the policy “from the date of the inception of his disabilities to the present time.” Under date of March 14, 1928, the Director wrote the assured’s, and now appellee’s attorney, in part as follows: “Reference is made to previous correspondence in which you stated that the above named veteran has been permanently and totally disabled since his discharge from the service and requested payment of insurance benefits. “You .are informed that after, considering the ease the Director has decided that the evidence was not sufficient to warrant a permanent and total rating prior to September 12, 1922. In view of the fact that the veteran’s insurance lapsed for nonpayment of premiums due long prior to the effective date of the permanent and total rating, the insurance claimed cannot be paid.” The foregoing was tantamount to a denial of total and permanent disability at any time prior to September 12, 1922. This would amount to a disagreement as to' the total and permanent disability of the assured on June 1, 1920. The amendment was not a departure, and neither did the amended petition attempt to state a cause of action where there had been no disagreement with the Director of the Veterans’ Bureau so as to deny jurisdiction of the court. The case of Bernsten v. United States (C. C. A.) 41 F.(2d) 663, cited by appellant, does not support its contention. In that case the date when disability accrued was fixed in the demand upon the Director of the Veterans’ Bureau as of February 24, 1924, whereas the suit was based upon an alleged disability accruing at a much earlier date. In discussing the right of the soldier to maintain his action, the court employed language which supports the jurisdiction in the instant case: “If the appellant had presented a claim such as he now presents to the court for determination by the Bureau as to whether or not he was entitled to monthly payments under his War Risk Insurance by reason of total and permanent disability occurring during the life of the policy, the reply of the Bureau herein might appropriately be considered a rejection of that claim because it fixed a later date for the accrual of the total and permanent disability.” It should be noted that the claim in the case at bar, and as presented to the Veterans’ Bureau, is based entirely upon the allegation that permanent and total disability occurred while the soldier’s war risk insurance was still in force and effect. It was within the right of the appellee to amend his petition so as to have fixed a still later date as the policy continued in force until late in the year 1921. The judgment of the trial court was amply supported by the evidence. There was no abuse of discretion in permitting the amendment to the petition, and the evidence shows a disagreement between the appellee and the defendants so as to confer jurisdiction upon this court. The judgment of the trial eourt is affirmed.

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Caselaw Access Project

2024-08-24T03:29:51.129235

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BAXTER v. CONTINENTAL CASUALTY CO. No. 9001. Circuit Court of Appeals, Eighth Circuit. March 13, 1931. Douglas H. Jones, of St. Louis, Mo., for appellant. Arnot L. Sheppard, of St. Louis, Mo. (M. F. Watts and William R. Gentry, both of St. Louis, Mo., on the brief), for appellee. Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge. STONE, Circuit Judge. Appellee issued a policy insuring against liability arising from injury caused by automobiles. The assured named in the poliey was Southwest Motor Sales Company. In one portion of the poliey, Harry Shields is named as an executive officer of the above sales company. . The poliey provided that a person so injured might recover on the policy if an execution on a judgment for such injuries was returned unsatisfied and the insured was insolvent. Appellant brought suit for such an injury, in a state court of Missouri against the Southwest Motor Sales Corporation and Shields. Personal service was had on Shields and constructive service (as hereafter described) on the company. Neither defendant appearing, default judgment was entered for $10,000. Execution was returned unsatisfied. Thereafter, appellant filed this action on the above policy, alleging the above facts in more detail; that the policy covered both the company and Shields and the insolvency of both. Appellee answered, inter alia, that the poliey did not cover Shields and that the service on the sales company in the damage suit was void. The case was submitted to the court upon an agreed statement of facts. From a judgment for appellee, this appeal is brought. Two questions are presented here. The first is whether valid service was secured upon the corporation. The second is whether Harry Shields was covered by the poliey. If there was either valid service on the company or Shields was covered by this policy, the judgment should be reversed. I. Service. This contention involves two matters relating respectively to the validity of the attempted foreign personal service on the sales company and to the sufficiency of the publication service on that company to authorize a judgment in personam against it. The company was a Missouri corporation. No service could be obtained upon it in Missouri. The service was made personally upon its president who was then in Illinois. The service was in compliance with a Missouri statute (section 1192, R. S. Mo. 1919). The question here as to this personal service is the validity of that statute. The Supreme Court of the state has'squarely decided the statute invalid as applied to Missouri corporations. McMenamy Inv. & R. E. Co. v. Stillwell Catering Co., 267 Mo. 340, 184 S. W. 467. It may be added that the Missouri court has also determined that a general (personal) judgment cannot be entered upon foreign personal service since such is “constructive” service. Givens v. Harlow, 251 Mo. 231, 241,158 S. W. 355; Moss v. Fitch, 212 Mo. 484, 497, 111 S. W. 475, 126 Am. St. Rep. 568. The method of service hy publication is not challenged. The contention is that the decisions of the state have confined service by publication to judgments and decrees affecting a res within the State and do not permit judgments in personam to be entered thereon. This claim is sustained by Priest v. Capital, 236 Mo. 446, 457,139 S. W. 204; Moss v. Pitch, 212 Mo. 484, 497, 111 S. W. 475, 126 Am. St. Rep. 568, and numerous other cases in Missouri. Therefore, the trial court correctly ruled that the foreign personal service on the Sales Company was invalid and that the service by publication could not support the judgment in personam entered thereon. II. Coverage of Policy. The judgment in the damage ease was against both the company and Harry Shields (personally). There is no question but that Shields was properly served within the state of Missouri. If the policy covers the personal liability of Shields, then the liability of appellee may be made out through Shields, irrespective of the sales company. This depends'upon the meaning of the policy. Portions of the policy material to this matter are as follows: The appellee: “Hereby Agrees “To indemnify the herein named Assured against loss from the liability imposed by law upon the Assured for damages on account of bodily injuries, including death resulting therefrom, accidentally suffered or alleged to have been suffered within the policy period by any person or persons not employed by the Assured: “(1) while within the limits of the United States of America or the Dominion of Canada by reason of the ownership, maintenance or use (including loading or unloading), of any of the automobiles covered by this policy as described in the Schedule: “(2) while within or upon the premises described in the Schedule or upon the sidewalk or other ways immediately adjacent thereto by reason of the maintenance and operation of the business described in the Schedule. * * * “This insurance is subject to the following conditions and failure on the part of Assured to comply therewith shall forfeit the right to recovery hereunder. * * * “3. Premium. The premium for this policy other than for elevator and livery coverage shall be calculated at rates specified in the Schedule as applied to entire remuneration earned during the policy period by all employes of the Assured. Such entire remuneration shall include all wages, salaries, commissions, bonuses and other remunerations. The remuneration of each active executive officer and each proprietor, including Assured if an individual and members of the firm if a co-partnership, shall be included in the payroll at an agreed amount of $2,000 each per annum. The entire remuneration of each general manager and automobile salesman shall be included not to exceed, however, $2,000 for each per annum. The remuneration of all other employes shall be included at the actual amount earned. If this policy also covers livery operations the premium for that portion of the risk shall be calculated at the rates named in the Schedule and upon total gross livery earnings charged by the Assured, whether collected or not, for the renting of. automobiles covered hereby. The advance premium has been determined on the Assured’s estimate of entire remuneration and/or total gross livery earnings as stated in the Schedule. At the end of the policy period the actual amounts of such remuneration and/or livery earnings shall be determined by an audit of the Assured’s books and records. If such actual amounts when so determined exceed such estimates, the Assured shall immediately pay to the Company the corresponding additional premium. If they are less, the Company shall return the unearned premium when ascertained, but the Company shall retain not less than the minimum premium stated in the Schedule. The Company shall have the right to require of the Assured at any time within the policy period or one year thereafter, a sworn statement of the amount of such remuneration and/or livery earnings for the whole or any specified part of the policy period and the Assured shall furnish said statement within ten days after request. Any authorized representative of the Company shall have the right and opportunity to examine the books and records of the Assured pertaining thereto at any time during the policy period or within one year thereafter. The rendering of any estimate or statement or the making of any previous settlement shall not bar such examination nor the Company’s right to additional premium. The premium for elevator coverage shall be a specific charge applicable to each elevator covered, which premium shall be included in the advance premium payable at the beginning of the policy period. * * ' * “10. Schedule. The Assured by the acceptance of this policy warrants all statements of the following Schedule to be full, complete and true excepting those which purport to be estimates only. Statement 1. Name oí Assured Southwest Motor Sales Company. Address 3660-64 Gravois Avenue. Saint Louis, Missouri. The Assured is Corporation......................................................................... (State whether individual, co-partnership, corporation, estate or trustee.) Statement 2. The policy period shall be from April 21st, 1921, to< April 21st, 1922, commencing and ending at 12 o’clock noon, Standard Time, at place of issue. Statement 3. The location of the building containing the premises referred to in this policy is 3600-64 Gravois Ave. (Street and Number) Saint Louis....................................Missouri (City) (County) (State) Statement 4. The automobiles covered by this policy are and will be principally maintained and garaged in the city or town of Saint Louis, Missouri and Vicinity. Statement 5. The automobiles covered by this policy are and will he principally u&ed in the city or town of St. Louis, Missouri, and Vicinity. Statement 6. None of the automobiles covered by this policy are or will he rented to others or used to carry passengers or property for a consideration, actual or implied, except as follows: No Exceptions. Statement 7. The automobiles covered by this policy shall he all automobiles used by Assured in connection with the business operations of Assured as below described. Statement 8. The description of the business operations of Assured, estimated number of employes, estimated total remuneration and gross livery earnings, elevators covered, premium rates and advance premium are as follows: The above quotations from the policy are clear that the only assured named in the pol-' icy is the company; that the policy protects only the assured named therein; that such policy would not protect that assured from liability because of acts of an executive officer of assured unless that officer was named and his compensation included in the pi-emium base; that the only purpose of expressly naming Harry Shields (an executive officer) in this policy was to gain the above protection for the company (the assured) from liability it might incur through his acts; that there was no insurance protecting Shields from personal liability. Appellant claims the policy is, at least, ambiguous in this respect and, therefore, should be construed against the company. The rule invoked would apply if the policy were ambiguous, but it is not. Appellant introduced certain evidence to show that the parties themselves have placed a construction upon the policy which construction, he contends, is that the personal liability of Shields was to be covered thereby. Passing over the matters of whether and how far parties may thus vary the clear meaning of a written contract, the evidence introduced does not have the contended for effect. That evidence consisted of rules of organizations of insurers of which this company was a member. One set of rules (of the “National Workmen’s Compensation Bureau”) covered the period when this policy was issued. The other (of the “National Bureau of Casualty and Surety ■Underwriters”) was not until months later. As to both, it may be said that there is no pretense that insured or Shields had any •knowledge thereof at any time, hence they can be no basis for a claim of construction by the parties of the policy. The only bearing they might have would be as admissions of the insurer against interest. Obviously, the last set of rules could have no such force, as it was not in existence at the time the policy was issued and is intended to operate prospectively and hot retroactively. As to the first set of rules there is no force as an admission for two reasons. Hirst, there is no evidence that insurer ever was governed by or even followed it — these rules were merely “suggestions for the use of the members of the Association, in the transaction of their insurance business” (italics ours). Second, this rule set forth that, “The personal interest of any officer, partner, member of the firm or employee is not covered under a garage policy written on the payroll basis” (as this policy was) but “may be extended, however, under limitations as defined in the following endorsement, to cover the personal liability of such persons whose salary is included in the' payroll upon which the premium for the policy is based, for the additional charges provided in the Bate Section for ‘Additional Assureds — Employee and others’ ” and a form for such endorsement is set out which is as follows: “In consideration of the additional premium of $...... this policy is extended to cover the legal liability as defined therein of ......whose salary is included in the payroll upon which the premium for this policy is based, while any automobile is being operated by the said......(or by any person when accompanied by him, or while any automobile of the Assured garage is being operated with his consent), for the purposes described in the policy and for private and pleasure purposes.” This rule is much stronger evidence for the appellee than for the appellant. However, it has no place in the construction of a policy which is in itself clear. The judgment should be, and is, affirmed. It is stipulated that the Southwest Motor Sales Corporation and the Southwest Motor Sales Company is the same, company.

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Caselaw Access Project

2024-08-24T03:29:51.129235

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UNITED STATES v. VANCE et al. No. 8931. Circuit Court of Appeals, Eighth Circuit. March 11, 1931. Bayless L. Guffy, Atty., U. S. Veterans’ Bureau, of Washington, D. C. (William L. Vandeventer, U. S. Atty., and Harry L. Thomas, Asst. U. S. Atty., both of Kansas City, Mo., on the brief), for the United States. George F. Anderson, of Kansas City, Mo., for appellees. Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge. REEVES, District Judge. This is an action on a policy of war risk insurance. Appellees, as plaintiffs in the trial court, recovered, and the government has appealed. James D. Vance became a soldier in the World War in July, 1917. He was honorably discharged February 1, 1919. There was granted to him war risk insurance in the sum of $10,000 while engaged in said military service. His death occurred May 14, 1923, from tuberculosis. It was alleged by appellees in their petition that the insured paid no premiums subsequent to the month of May, 1919. They seek to avoid lapsation, however, by an averment that at the time the said Vance was discharged from the service he was suffering from a' compensable disability and was so rated by the Veterans’ Bureau, and that the compensation awarded to him on account of said disability was not paid to or received by him until April, 1921. In the meantime, it is asserted the said Vance became totally and permanently disabled, to wit, on or about July 1, 1920; that the uncollected compensation then due and unpaid was in excess of the premiums remaining unpaid on said insurance; and that therefore appellees were entitled to recover the amount of the said policy less such unpaid premiums. The government by amended answer challenged the jurisdiction of the court; denied the permanent and total disability of the veteran; alleged estoppel because of the collection of compensation without allowing deduction for premiums in default; and denied that Nina Vance Winn was a proper party. By stipulation a jury was waived, and the cause was tried to the court. The evidence on behalf of the appellees tended to show that the assured was not in good health when he was discharged from the Army on February 1,1919; that at that time he had lost weight; was suffering from a cough; looked pale and had little appetite; that he grew worse; continued to lose weight, and his cough persisted. He was not confined to his bed until late in the summer of 1920, although he was not able to follow continuously his profession as a veterinary surgeon. The physician who treated him from the time of his discharge from the Army, until late in the year 1920, diagnosed his affliction as tuberculosis. Early in the year 1920 a sputum test was made, which confirmed the diagnosis of his physician. He was unable to attend to any part of his professional work after September, 1920. There was evidence in support of the allegation that the soldier had been rated as suffering from a compensable disability from the date of his discharge, and that the compensation awarded was not received by him until April, 1921, and that this compensation was adequate to discharge his premium obligations. The government offered in evidence an application executed by the assured for a policy of insurance in the Prudential Life Insurance Company, dated June 16, 1919. Neither this application nor the statement made to the examining physician, nor the confidential report of the medical examiner, disclosed any of the ailments with which it is claimed the assured was afflicted. On the contrary, these documents showed a complete disclaimer of such affliction. The government also offered the application of the assured for compensation dated November 20, 1920. In that application the assured claimed disability “almost total.” Efe stated that his income as a veterinary surgeon from February 1, 1919; to November 1, 1920, had been $200 per month. He claimed that his disability began in April, 1918. Upon the evidence the trial judge found that the assured became totally disabled on July 1, 1920; applied provisions of section 305, World War Veterans’ Act (section 516, title 38, United States Code [38 USCA § 516] ) and held that the insurance in the full amount should not be treated as lapsed because of the uncollected compensation at the date total and permanent disability accrued to the assured; declined to apply estoppel because of the failure of assured to pay the defaulted premiums when his compensation Was collected, and entered judgment on the policy less unpaid premiums from May, 1919; to the 1st of July, 1920, with interest at 5 per cent. Provision was also made for the allowance of certain credits to- the government on account of previous payments admittedly made to the appellees. 1. The finding of the trial judge that the assured was totally and permanently disabled on the 1st day of July, 1920; was fully supported by the evidence. In fact it is not seriously contended by the government that such finding is error. Such finding could properly be made, even though there was-eonfiicting evidence and inconsistent statements of the assured. United States v. Meserve (C. C. A.) 44 F.(2d) 549. 2. The principal contention of the government is that the court had no right to apply the provisions of section 305, World War Veterans’ Act (section 516, title 38, United States Code [38 USCA § 516]) so as to make said insurance effective at the date it was found the assured became totally and permanently disabled. Pertinent portions of said section are as follows: “Where any person has, prior to June 7, 1924, allowed his insurance to lapse while suffering from a compensable disability for which compensation was not collected * * * becomes or has become permanently and totally disabled and at the time of such * * * permanent total disability was or is entitled to compensation remaining uncollected, then and in that event so much of his insurance as said uneolleeted compensation, computed in all eases at the rate provided by section 302 of the War Risk Insurance Act as amended December 24,1919; chapter 16, Forty-first Statutes, page 371, would purchase if applied as premiums when due, shall not be considered as lapsed.” While the matter of rating for a compensable disability is wholly within the proper and wisely exercised discretion of the Veterans’ Bureau, Armstrong et al. v. United States (C. C. A.) 16 F.(2d) 387, yet, when such rating has been made and compensation awarded, it becomes a question of fact for the court whether the award remained uneolleeted at the time total and permanent disability occurs. In the instant ease there was no controversy but that.the assured was rated by the Bureau as having a compensable disability at the time of his discharge from the military service) and that his compensation was not paid to him until April, 1921, and that the amount of such compensation was adequate to pay all premiums accruing on said insurance from the time the assured ceased to pay premiums until the court found upon the evidence that he became totally and permanently disabled. This was sufficient to invoke the provisions of said section 305, World War Veterans’ Act (section 516, title 38 U. S. Code) as above set out. By section 19 of the act, as amended (section 445, title 38, United States Code [38 USCA § 445]), jurisdiction is conferred upon the District Court to hear and determine all controversies between the policyholder and the government “in the event of disagreement as to claim under a contract of insurance.” By said section 305, World War Veterans’ Act (section 516, title 38, United States Code [38 USCA § 516]), the Congress has declared that the insurance' “shall not be considered as lapsed,” where there is uncollected compensation under conditions therein specified. Clearly there was a disagreement' as to the claim under the contract of insurance. This was sufficient to confer jurisdiction upon the court. In the exercise of such jurisdiction the court could not determine the question of compensable disability. The findings of the Bureau,.however, are admissible evidence on the particular essential fact as to whether the soldier had such a compensable disability as to continue his insurance in force because of the failure of the government to pay compensation before permanent and total disability accrued. Armstrong et al. v. United States, supra. Counsel for the government seek to apply the principle of Meadows v. United States, 281 U. S. 271, 50 S. Ct. 279, 74 L. Ed. 852. That case is not applicable for the reason that it was there sought to reinstate a lapsed policy. The court held that the right of reinstatement was statutory, and whether the assured was eligible under the statute was purely a question of fact to be determined by the Director of the Veterans’ Bureau, and when so determined his decision became final and conclusive. Section 305, World War Veterans’ Act (section 516, title 38, supra) became a part of the insurance contract. White v. United States, 270 U. S. 175, 46 S. Ct. 274, 70 L. Ed. 530. The court had jurisdiction of the cause, and this point must be ruled against the appellant. 3. Neither can the doctrine of estoppel be invoked. against appellees. Said section 305, World War Veterans’ Act (section 516, title 38, supra) does not contemplate that premiums in default shall be deducted from compensation awarded the assured because of a compensable disability. It is specifically provided in said statute that “the United States Veterans’ Bureau is authorized and directed to pay to said soldier, or his beneficiaries as the ease may be the amount of said insurance less the unpaid premiums and interest thereon at 5 per centum per annum compounded annually in installments as provided by law.” It was undoubtedly contemplated by the Congress that the full amount of compensation awarded to the soldier should be paid, but that delay in its payment would prevent his insurance being “considered as lapsed,” if total and permanent disability intervened, and in such ease the defaulted premiums should be collected from the insurance and not from his compensation. 4. The remaining question is whether Nina Vance Winn is a proper party. The evidence shows that she was made the beneficiary at the time the veteran applied for his insurance. In his application for compensation in November, 1920, the assured confirms this designation, although at that time he was married. By an amendment approved July 2, 1926 (section 16), the Congress limited the beneficiaries under insurance revived, under said section 305, World War Veterans’ Act (section 516, title 38, supra) to the widow, child, or children, or dependent mother or father of the assured. When the assured died on May 14, 1923, the rights of the parties attached under the law as it then stood. Subsequent amendments would not affect such rights. Moreover, the widow and the designated beneficiary have joined in this action, and their allegations as to their respective rights would be conclusive upon them. The judgment of the trial court is affirmed.

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UNITED STATES v. CROWELL. No. 8948. Circuit Court of Appeals, Eighth Circuit. March 11, 1931. Bayless L. Guffy, Atty. U. S. Veterans’ Bureau, of Washington, D. C. (Ross R. Mowry, U. S. Atty., of Newton, Iowa, Frank F. Wilson, Asst. U. S. Atty., of Mount Ayr, Iowa, and James T. Brady, Acting Gen. Counsel, U. S. Veterans’ Bureau, of Washington, D. C., on the brief), for the United States. George F. Anderson, of Kansas City, Mo., for appellee. Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge. REEVES, District Judge. This is an action on a policy of war risk insurance. The appellee, who was plaintiff in the trial court, recovered judgment on $8,000 of his war risk policy, originally granted in the sum of $10,000; and the government has appealed. Admittedly, the appellee was a soldier of the World War and was granted insurance in the sum of $10,000. He ceased to pay his premiums in April, 1919, and his policy unless revived became ineffective. He reinstated $2,000 of said insurance and is now carrying same as a valid contract with the government. This portion of his insurance is not involved in this controversy. He had a right to sue for the balance. Watson v. United States (C. C. A.) 45 F.(2d) 589. Appellee alleged in his petition that at the time of his discharge from the military service on March 24, 1919, he was suffering from a compensable disability, and that the award made therefor by the government was not collected until after he became totally and permanently disabled. It is averred that the amount of such compensation was in excess of his premium obligations on the residue of his insurance, and that perforce section 305 of the World War Veterans’ Act or section 516, title 38, United States Code (38 USCA § 516), said insurance should “not be considered as lapsed” while his compensation remained uncollected. He says that he became permanently and totally disabled on or about January 1,1920, whereas his compensation was not paid to or received by him until in May, 1922. The maladies, with which appellee complains that he was afflicted, were thyroid, cardiac, nervous and digestive disorders, neurasthenia, and general weakness. The defendant denied that plaintiff was entitled to recover, but admitted, that he had been granted the policy of insurance sued on. There was a denial also that appellee was totally and permanently disabled on the 1st of January, 1920. It was affirmatively asserted that at a subsequent date, to wit, January 16, 1920, appellee in his application for reinstatement of $2,000 of his wax risk insurance maintained his own capacity and ability, as otherwise such reinstatement could not have been effected. Moreover, the applicability of section 305 of the World Wax Veterans’ Act or section 516, title 38 United States Code (38 USCA § 516), was challenged. A jury was waived by stipulation of the parties, and the case was tried to the court. There was evidence tending to support the finding of the trial judge that the appellee was totally and permanently disabled on and after January 1, 1920. Appellee was examined by a physician on June 2,1920, and was found suffering with nervousness, a weak heart, and serious thyroid disorders. At that time the opinion was expressed by his physician that the appellee was not able to follow continuously any substantially gainful occupation and that his prognosis was not favorable. He was examined by another physician on January! 18, 1920, and at the time was found to be suffering from a “toxic condition due to thyroid trouble.” The opinion was then expressed by the physician that “he was not in a fit condition * * * to follow continuously any substantially gainful occupation.” Testimony of other physicians who examined and treated him at approximately the same time was to similar effect. The appellee, testifying in' his own behalf, said that, while in the military service in France during October, 1918, he was ill; was confined in the hospital and received a certificate of disability and a promise to be sent home. At the time of his discharge his physical condition “wasn’t very good. I didn’t feel like working * * * I was awarded compensation by the Bureau of War Risk Insurance at the rate of temporary total from the date of my discharge, from March 26, 1919, up to and including May 1st, and at the rate of 33%% from May 2, 1919.” Appellee was afflicted -with heart trouble and sinking spells which “would just leave me limp and weak” during the entire'period between his discharge from the Army and the trial of the case. Although there was conflicting and contradictory evidence, the above and foregoing was sufficient to support the finding of the trial court to the effect that he became totally and permanently disabled on January 1,1920. United States v. Meserve (C. C. A.) 44 F. (2d) 549; United States v. Rasar (C. C. A.) 45 F.(2d) 545. The serious contention made by the government is that the court had no jurisdiction of the subject-matter and was without power to apply the provisions of said section 305 World War Veterans’ Aet (section 516, title 38, United States Code [38 USCA § 516]). The case is governed in all respects by the opinion this day filed in case entitled United States of America, appellant, v. Laura P. Vance, Administratrix of the Estate of James D. Vance, deceased, and Nina Vance Winn, appellees, 48 F.(2d) 472. The same contention is made in both eases, and the same principles of law are made applicable by the similarity of facts. Under such circumstances, the principles of law applied in the Vance Case, supra, are applicable and controlling in this ease. The judgment of the trial eourt is affirmed.

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FIDELITY & DEPOSIT CO. OF MARYLAND v. CENTRAL BANK et al. No. 8979. Circuit Court of Appeals, Eighth Circuit. March 11, 1931. Rehearing Denied May 4, 1931. Horaee Chamberlin, of Little Rock, Ark., for appellant. George B. Rose, of Little Rock, Ark., D. H. Cantrell, J. F. Loughborough, A. W. Dobyns, A. F. House, and Wallace Townsend, all of Little Rock, Ark., on the brief), for appellees. Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge. REEVES, District Judge. The appellant, as plaintiff below, sought to enforce an equitable lien. Its bill was dismissed for want of equity, and it has appealed. Appellant became surety on two separate bonds of a contractor. Two contracts had been let which involved the improvement of the streets, curbs, and gutters within a prescribed district in the city of Little Rock, Ark. For the purpose of this improvement two municipal corporations had been formed under the laws of Arkansas, and were called improvement districts. They were managed by a board of commissioners. The contracts were similar and contained provision for the payment of 90 per cent, to the contractor during the course of the improvements upon estimates of the work done. The contracts also contained a provision that “the balance will be retained by the board until the final estimate is allowed.” Full or complete payments upon said contracts were to be made upon final inspection of the engineer. Such payments were to be made after the engineer had certified in writing “as to said completion and shall further certify as to the entire amount of each class of work performed and as to the value thereof.” There was a provision that upon receipt of such certificate notice should be given to “the contractor and his surety of the acceptance of the work and shall make final payment of same, all previous payments being deducted.” In the application for the bond, the contractor assigned to the appellant “as collateral, to secure the obligations herein,” certain properties, tangible and intangible, including “any and all percentages retained on account of said contract and any or all sums that may be due under said- contract at the time of said abandonment, forfeiture or breach, or that thereafter may become due.” It was stipulated in said assignment that it should “become effective as of the date of said contract bond, but only in the event of any such abandonment, forfeiture or breach of said contract or of a breach of any of said bonds, or of any of the agreements herein contained.” The contracts and the applications to the surety were all dated December 4, 1926. When accepted, the contractor immediately began the improvements. Payments were made from time to time upon the estimates furnished by the engineer for the districts as the work progressed. The appellee bank made loans to the contractor in January , and February, 1927. These loans were in the sum of $5,000 each, but only two are involved in this controversy. About the 1st of August, 1927, the work had been completed to the satisfaction of the improvement districts, and final estimates were certified by the engineer. Notice was thereupon given to the local agent of appellant. He approved final payment to the contractor. At approximately the same time advances were made to the contractor out of the balance of 10 per cent, retained by the official boards of the districts, but final payment was not made, as the contractor was not satisfied with the estimates. The contractor thereupon paid one of the $5,000 notes due the appellee bank. It may be inferred that such payment was made "in part at least out of moneys advanced to the contractor from the retained 10 per cent. The officers of the improvement districts thought further notice should be given to the appellant, and on September 30, 1927, caused a notice to be given to the gener al agent of the appellant. Upon the objections of the contractor, a new inspection was made. The engineer’s report and certificate covering his resurvey was made and delivered on October 12,1927. The final estimate as thus made was satisfactory to the contractor and the improvement districts. Even then they did not make final settlement with the contractor, although they had heard nothing from the appellant. On November 12, 1927, final settlement was made, and the balance of the retained percentages paid. Shortly thereafter the contractor paid a balance due on the second note of $5,000 involved in this controversy. The same inference may be drawn as to the source of funds used in such- payment. Appellant’s suretyship involved an obligation for material as well as labor in the improvements. Late in December, 1927, and early in January, 1928, demands were made upon appellant by two creditors of the contractor who had furnished material. These demands were in the sum of $6,005.87 and $498.96, respectively. Both were paid by the appellant late in December, 1927, and early in January, 1928. In this proceeding appellant claims that the appellees knew of its rights in respect of the retained percentages, and, notwithstanding such knowledge, paid out and appropriated same for other purposes. Appellant, by its bill, sought to have certain books, records, and accounts exhibited by the appellees. It also complains here that the trial court erred in overruling its application for the. production of such documents and accounts. Other facts, as they become pertinent, will be stated in the course of the opinion. 1. The court properly denied the application of the appellant for the production of documents. This being a proceeding in equity, appellant would be required to secure the production of documents under rule 58 of the Equity Rules (28 USCA § 723). That rule requires the annexation of interrogatories to the facts pleaded as a basis for the discovery. Pressed Steel Car Co. v. Union Pacific R. Co. (D. C.) 241 F. 964. The appellant did not observe this rule. Moreover, it was not made to appear that the appellee? were in a position to produce the documents requested. Also the production of such documents would have been apparently cumulative evidence. Galion Iron Works v. Ohio Corrugated Culvert Co. (C. C. A.) 244 F. 427. 2. That the appellant had an equitable lien upon the retained percentages in the hands of the improvement districts cannot be denied. Exchange State Bank v. Federal Surety Co. (C. C. A.) 28 F.(2d) 485. And, if said funds had been retained by said district, there is no question of the right of the appellant to have enforced the priority of its lien. However, its right to enforce such lien under its contract would only accrue,to it “in •the event of any such abandonment, forfei-' ture or breach of said contract or a breach of any said bonds, or any of the agreements herein contained.” It was the agreement that upon a final survey and estimate by the engineer of the. districts, final payment should then be made to the contractor. In order that the surety might have an opportunity to assert the happening of contingencies which would enable it to enforce its lien, notice to it was provided for. The districts endeavored to give such notice -when, the work was completed early in August, 1927. On the 30th of September, 1927, said districts again caused notice to be served. It was served this time upon appellant’s general agent. On October 12, after a resurvey by the engineer of the districts, the parties were satisfied. The contractor was then entitled to receive the retained percentages. This wás in accordance with the contracts. However, the districts did not make final settlement until November 12, 1927. In the meantime, there had been no response from appellant, although its general agent had written on October 1, 1927, “I am referring the entire matter to my Home Office today asking that they advise me by wire regarding the matter. Immediately upon receipt of their reply, I will advise you.” The question is whether under the circumstances the appellant would be entitled to have a judgment against the appellees for sums disbursed by it to satisfy claims of materialmen. The appellant lost its lien when it neglected to assert same at the time final estimates were made and certified to the districts. The contract upon which it became surety provided that final payment should be made when the improvements were completed and final estimates made. It was duly notified. Appellant’s local agent was first notified and assented to the payment. Its general agent, in reply to a notice given him on September 30, 1927, said: “I am not in a position to release the retained percentages in connection with the above numbered bonds. ■* * * “I am referring the entire matter to my Home Office today asking that they advise me by wire regarding the matter. Immediately upon receipt of their reply, I will advise you.” The districts received no further communications from the appellant or its agents. Under such circumstances, they were not called upon to hold the funds indefinitely. The rule is that “an equitable lien may be lost by negligent and unreasonable delay in proceeding to enforce it.” 37 C. J. 338; Atlantic Coast Line R. R. Co. v. Burnette, 239 U. S. 199, 36 S. Ct. 75, 60 L. Ed. 226; Landrum v. Union Bank of Missouri et al., 63 Mo. 48, loc. cit. 56; Rankin v. Scott, 12 Wheat. 177, 6 L. Ed. 592; Townsend v. Vanderwerker, 160 U. S. 171, 186, 16 S. Ct. 258, 40 L. Ed. 383. The eases cited by appellant are not applicable to the facts in this ease. They either were cases where the fund remained in the hands of one of the contracting parties or where such funds had been disbursed under circumstances which enabled the claimant to invoke the principles of a preference in bankruptcy. While» the foregoing disposes of thi3 appeal, yet there was evidence that appellant had obtained other security from the contractor. This fact, with the further circumstances of uncertainty as to the identity of the funds paid out, makes the enforcement of the lien doubtful at least, even if it had continued to exist. • The decree of the trial chancellor is affirmed.

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HERMAN v. UNITED STATES. No. 5988. Circuit Court of Appeals, Fifth Circuit. April 7, 1931. Rehearing Denied May 1, 1931. W. D. Girand, of Lubbock, Tex., and Cleo G. Clayton, of Amarillo, Tex., for appellant. Norman A. Dodge, U. S. Atty., and Morrow H. Boynton, Asst. U. S. Atty., both of Fort Worth, Tex. Before BRYAN and FOSTER, Circuit Judges, and HUTCHESON, District Judge. BRYAN, Circuit Judge. Appellant was convicted of violations of the National Prohibition Act (27 USCA) as charged in the third and fourth counts of the indictment. The third count charged him with unlawfully having in his possession 362 gallons of whisky for beverage purposes; the venue being laid in Lamb county, Tex., which it was alleged was in the Amarillo Division of the Northern District of Texas. The fourth count charged .appellant with maintaining a common nuisance. According to the evidence for the government, appellant’s son, on April 22, 1930, sold at one time to two purchasers two half-gallon jars of liquor which were taken out of the cellar of appellant’s home. One of the purchasers w.as a Texas State Ranger, who returned with a search warrant on April 25, and, upon a search of the cellar, found and seized the quantity of liquor described in the third count of the indictment. The whole 362 gallons were concealed behind a false wall, the secret door to which was electrically locked, and at the time of the seizure were acknowledged by appellant to he his property. The defense to the charge of unlawful possession was that the liquor had been put in appellant’s cellar during his absence from home and without his knowledge or consent. In support of this claim, the sheriff’s son was called as a witness, and testified that on April 24 appellant came to the home of the sheriff, who was absent at the time, and reported to his mother, the sheriff’s wife, that there was some whisky at his (.appellant’s) house. Appellant offered to prove by this witness that he said he objected to having •the whisky left on his premises, and wanted the sheriff to come and get.it, hut the court refused to let in that part of the proffered testimony. A variance is claimed because it is said the indictment charged appellant with the unlawful possession of liquor in the Amarillo division, whereas the possession proved was in the Lubbock division. The indictment also charged that the offense was committed in Lamb county, Tex., which we take judicial notice is in the Lubbock division. 28 USCA § 189a. The inadvertent, erroneous allegation that Lamb county is in the Amarillo division is not descriptive of the offense, and is therefore to he treated as surplusage. 2 Bishop’s Criminal Procedure, § 45. Appellant was permitted to prove that he reported to the sheriff’s wife the fact that there was liquor on his premises as indicating a consciousness of innocence. Wigmore on Evidence, §§ 174, 293. There was no error in refusing to allow him to go further and prove the self-serving declaration that he did not want the liquor on his premises, but desired the sheriff to come and get it. It is argued that the evidence was insufficient to support a conviction under the fourth count for maintaining a nuisance; but the sufficiency of the evidence under this count was not raised at the trial, and therefore is not properly presented for consideration here. We are of opinion, however, that there was evidence enough to prove the maintenance of a nuisance when it is considered that the two sales proved were made from a large supply of liquor which the jury were authorized to find appellant was keeping in his cellar for sale. Lewinsohn v. United States (C. C. A.) 278 F. 421; Denapolis v. United States (C. C. A.) 3 F.(2d) 722. It is also complained that the court failed to give a charge on the law of circumstantial evidence. The case did not depend entirely on evidence of this character, since there was direct evidence of the admission by appellant that the liquor found in the cellar belonged to him. It is not error to refuse to charge a jury upon the insufficiency of a part of the testimony. Blanton v. United States (C. C. A.) 213 F. 320, Ann. Cas. 1914D, 1238; 16 C. J. 1008. Besides, there was no request for a specific instruction on the law of circumstantial evidence; hence the court cannot he put in error for failing to give an instruction on that subject of its own motion. Gilmore v. United States (C. C. A.) 39 F.(2d) 897. Such charges as were requested upon the weight of the evidence were in substance given by the court in its general charge to the jury. The judgment is affirmed.

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LAUDERDALE v. UNITED STATES. No. 5926. Circuit Court of Appeals, Fifth Circuit. April 9, 1931. J. L. Roberson and Sam C. Cook, Jr., both of Clarksdale, Miss. (Roberson & Cook, of Clarksdale, Miss., on the brief), for appellant. Lester G. Pant, U. S. Atty., of Holly Springs, Miss. Before BRYAN, POSTER, and WALKER, Circuit Judges. WALKER, Circuit Judge. The appellant was convicted under an indictment containing nine counts. The first, third,, fifth, and eighth counts each charged that appellant on a stated date, at the town of Ruleville, in Sunflower county, Miss., did knowingly and unlawfully possess intoxicating liquor, to wit, whisky, for beverage purposes; the dates stated in the several counts being different, and the dates stated in each of the nine counts being later than the date of the enactment of the Jones Act, 45 Stat. 1446 (27 USCA §§ 91, 92). The second, fourth, and sixth counts each charged that appellant, on a stated date, at the town of Ruleville, in Sunflower county, Miss., did knowingly, willfully, unlawfully, and feloniously sell intoxicating liquor, to wit, whisky, for beverage purposes; the dates stated in the several counts being different. The seventh count charged that appellant on a stated date, at said town of Ruleville, did knowingly, willfully, unlawfully, and feloniously transport intoxicating liquor, to wit, whisky, for beverage purposes. The ninth count charged that appellant on a stated date, at said town of Ruleville, did knowingly, willfully, and unlawfully maintain a common and public nuisance on described premises located in said town of Ruleville, in that he then and there knowingly, willfully, and unlawfully did maintain said premises as a place where intoxicating liquors, to wit, whisky, for beverage purposes, was unlawfully kept for sale and sold. The appellant demurred to the indictment and to each of its counts. As to all the counts the demurrer raised the question of the sufficiency of the allegations as to the place of the commission of the offense attempted to be charged. The counts charging possession were challenged on the grounds that they failed to allege that the whisky mentioned was fit for use for beverage purposes, or that the possession of it was with the intention of using it in violation of the National Prohibition Act. The counts charging sales were challenged on the ground that they failed to allege to whom the sale was made. The transportation count was attacked- because it did not allege how the transportation was effected, and that it failed to state the place from, or the place to which, the whisky was transported. The demurrer was overruled. On a verdict finding the appellant guilty as charged, the court adjudged that he pay a fine of $250 and that he be imprisoned in jail for a period of twenty-four months. Assignments of error were based on the overruling of the demurrer to the indictment, on rulings on evidence, and on the court’s refusal to direct a verdict of not guilty. None of the counts was subject to demurrer because of the insufficiency of its allegations as to the place of the commission of the charged offense. The particular location in the town of Ruleville of the alleged unlawful conduct was not of the substance of the offense charged. If additional information in that regard had been deemed by the appellant to be necessary to enable him to make preparation to meet the charges made, it could have been called for by an application for a bill of particulars. Adamson v. United States (C. C. A.) 296 F. 110; Leonard v. United States (C. C. A.) 18 F. (2d) 208; United States v. Luther (D. C.) 260 P. 579; Day v. United States (C. C. A.) 28 F.(2d) 586. The counts charging unlawful possession of whisky, an intoxicating liquor, were not defective by reason of the suggested omission of allegations, which were not required to show the commission of the crimes attempted to be charged. Hodgson v. Vermont, 168 U. S. 262, 18 S. Ct. 80, 42 L. Ed. 461; Middlebrooks v. United States (C. C. A.) 23 F.(2d) 244. For like reason the suggested omission from the counts charging unlawful sales of whisky, and from the count charging unlawful transportation of whisky of descriptive allegations of the details of such sales and transportation, did not constitute defects in those counts making them subject to demurrer. Husty v. United States, 51 S. Ct. 240, 75 L. Ed.-, Feb. 24, 1931; Karger v. United States (C. C. A.) 46 F.(2d) 302. The court overruled an objection to the jury being permitted to smell the contents of a bottle of whisky which had been identified by a witness as one sold by the appellant. The effect of overruling that objection being to permit the jurors merely to examine or scrutinize a thing produced before them as part of the evidence in the case on trial, that ruling was not erroneous. Driskill v. United States (C. C. A.) 24 F.(2d) 525. It is not necessary to pass on the contention that a verdict of not guilty under the nuisance count should have been directed, because of the insufficiency of evidence to support its allegations, as the punishment im-, posed was warranted by the conviction under other counts, the material allegations of which were supported by evidence. The record showing no reversible error, the judgment is affirmed.

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BOYETT v. UNITED STATES. No. 6098. Circuit Court of Appeals, Fifth Circuit. April 8, 1931. Wm. C. Pierce and W. K. Zewadski, Jr., both of Tampa, Fla., for appellant. W. P. Hughes, U. S. Atty., and William A. Paisley, Asst. U. S. Atty., both of Jacksonville, Fla. Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges. FOSTER, Circuit Judge. Appellant was convicted of unlawful manufacture of intoxicating liquor and possessing liquor and apparatus designed for manufacture of same, and was sentenced to serve two years in the penitentiary. No other person was indicted with him. Not a single exception w.as reserved at the trial, but we are asked to notice plain error appearing on the record. Of course, we may do so, in a proper case, under the provisions of our rule 11 and under the provisions of 28 USCA § 391. It is but fair to say that appellant was not represented in the District Court by the same counsel who appeared on this appeal. As to the occurrences that we are asked to notice as plain error, we quote literally from the bill of exceptions as follows: “The jury retired to the jury room and after apparently an hour came hack into the Court and through their Foreman, asked additional instructions from the Court as to whether the defendant would be guilty of the charges in the indictment if he (the defendant) knew that the still described by the government witnesses w.as on the defendant’s property, and he (the defendant) made no effort to stop it. “Whereupon, the Court further charged the jury: “ ‘If the defendant knew that the still was in this house, on his property, as stated by the Government witnesses, and in operation there, and took no steps to stop it, he would he equally guilty with the person, or persons, so operating the distillery, under the charge the Court has previously given you in regard to principal and accessory.’ “Whereupon the jury retired for some time and returned into Court and reported that they were unable to agree upon a verdict. Whereupon, the Foreman stated: “ ‘Your Honor, it may be that if we had further instructions, we might be able to reach a verdict.’ “Whereupon, the Court replied: “ ‘I am afraid there are some of you who do not want instructions, and are not willing to follow the instructions given by the Court. “ ‘It does not seem to the Court that there should be any great difficulty in arriving at a verdict in this case. “ ‘Mr. Marshal (addressing the Marshal of the Court): You can prepare supper for this jury and a place for them (to be made confortable) for the night, and after supper you may permit them to consider their verdict until bedtime, and then permit them to retire until morning, and after they have had breakfast, return them to their jury room for further consideration of their verdiet. Be sure and see that they are made comfortable.’ “Whereupon, the jury again retired and in about five minutes thereafter returned to the Court and announced that they had agreed upon a verdict. * * * ” The government depended for conviction entirely upon circumstantial evidence. A still in full operation was found on appellant’s farm in Pasco county, Fla., together with a quantity of mash and liquor, in a building situated about 60 yards from his residence, but inclosed by a barbed-wire fence, which ran across a path leading to appellant’s door. Appellant took the stand and testified he had rented the building where the still was discovered to a man named J. Q. Smith and that he had nothing to do with the still and did not know it was there. He was corroborated as to having rented the building by two witnesses, and three other witnesses testified to having seen Smith in and about the building. There was no one in charge of the still when it was discovered and no arrests were made at that time. It may be conceded that when a still is in operation upon the premises of a person and facts are disclosed to the jury clearly indicating his knowledge and consent, a presumption of guilt as .an accessory may arise, in the absence of other evidence sufficient to exonerate him or to create a reasonable doubt. However, mere knowledge that an offense is being committed is not equivalent to participation with criminal intent. Consent is a necessary element and must also be shown. While this may be inferred from all the circumstances disclosed, it is always a question for the jury. In this case a close question of fact was presented, and it is evident that there was considerable doubt in ,the minds of some of the jurors as to appellant’s guilt. He was entitled to the benefit of any reasonable doubt existing, not only in the minds of all the jurors, but also in the mind of any individual juror. A federal judge is vested with considerable discretion in commenting on the facts before the jury and in reviewing the evidence, provided he does so fairly and presents both sides of the ease, and also makes it clear to the jury that they are the sole ultimate judges of the facts, of the credibility of the witnesses, and of the weight and sufficiency of the evidence. However, when it is apparent that doubt exists in the minds of the jury, after having received the charge of the court and retired to deliberate, in delivering .additional charges the judge should exercise caution and refrain from indicating to the jury his own opinion as to the guilt or innocence of the defendant. It is also his duty to refrain from any intimidation or coercion of the jury. Kesley v. U. S. (C. C. A., 5th Circuit) 47 F.(2d) 453, decided March 5, 1931; Garst v. U. S. (C. C. A.) 180 F. 339; Oppenheim v. U. S. (C. C. A.) 241 F. 625; Lewis v. U. S. (C. C. A.) 8 F. (2d) 849. The charge of the court above quoted took aw,ay from the jury any question as to appellant’s consent to the .operation of the still and made it imperative that a verdict of guilty should be returned if the jury believed he had knowledge of the still and took no steps to prevent it. Consent is not necessarily to be implied from the fact that one having knowledge that an. offense is being committed does not report it to the proper authorities or take other steps to prevent it. There are many reasons that might be stated, sufficient no doubt to the mind of a person so situated, that would prevent his taking action although he objected instead of consented. The question of knowledge .and consent was for the jury. Furthermore, when the jury came into court the second time the judge made it very clear to them that he believed some of them were derelict in their duty and that he intended to punish them by keeping them sequestered indefinitely until they had reached a verdict. This tended to intimidate and coerce them. The charges and remarks of the court, above quoted, had a tendency to deprive appellant of a fair trial and present plain error on the record, requiring a reversal, which we feel compelled to notice. Reversed and remanded.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

MARSHALL FIELD & CO. et al. v. PEARSON. CITIZENS’ NAT. BANK OF LUBBOCK v. SAME. No. 5861. Circuit Court of Appeals, Fifth Circuit. April 8, 1931. Rehearing Denied May 1, 1931. Allen Wight, of Dallas, Tex., and Robt. A. Sowder and E. L. Klett, both of Lubbock, Tex., for appellants. Richard L. Douglas, of Lubbock, Tex., and L. S. Kinder, of Plainview, Tex., for appellee. Before BRYAN and FOSTER, Circuit Judges, and HUTCHESON, District Judge. HUTCHESON, District Judge. Bob Barrier, Paul Barrier, Mike Barrier, and Clifton Barrier, constituting the partnership of Barrier Bros., and each individual composing the partnership, were upon their voluntary petition adjudicated bankrupt in May, 1929. The appellant Marshall Field & Co., five other mercantile creditors, and the Citizens’ National Bank, the latter prosecuting a separate appeal, filed proofs of claim against the partnership; the mercantile creditors claiming upon guaranties given by Barrier Bros, the partnership, and certain deeds of trust and chattel mortgages given by the partnership to secure the same; the Bank claiming upon three notes of'Barrier Bros., Inc., two of them indorsed by the partnership, and all of the notes, as they claimed, secured by ■deed of trust. These claims, contested by the trustee, were disallowed by the referee as either secured or unsecured claims against the partnership. The District Judge approved the action of the referee in disallowing all the claims as secured, and his action in disallowing them as unsecured, except that he allowed the claim of the Citizens’ National Bank on the two notes indorsed by the partnership, ,and the claims of Marshall Field & Co., Perkins Dry Goods Company, and Keith Bros. & Co. on a small portion of their claimed indebtedness as unsecured. From the action of the District Judge this appeal is prosecuted. By a frictional approach to the consideration of this case begun before the referee through and as the result of an effort to disqualify him because of his statutory commissions, and maintained throughout, which has generated more heat than light, the issues in it have assumed aspects of difficulty which a less intense approach to it discloses are more apparent than real. Simply stated, this ease is one in which four brothers, who had for many years been partners in a mercantile business, desiring to expand that business, formed a corporation, and turned over to it their mercantile business. The partnership, which had acquired real estate and other assets in the name of one of the partners, not dissolving, but continuing thereafter to exist as such, retired from the active conduct of the business, but continued to give its credit and the activities of its members to building up the’ corporation’s business. Some of the appellants, mercantile creditors, had in 1928, almost immediately after the corporation had taken over the partnership business, secured from the partners instruments guaranteeing or agreeing to guarantee the corporation’s debts, while on November 3, 1928, Bob Barrier, as president of Barrier Bros., Inc., wrote Marshall Field & Co., in reply to its complaint that the business had been incorporated without its knowledge, that what they had in effect done was to segregate their merchandising operations from their other businesses, concluding, “Legally you have not released one single piece of real estate, notes or any part of our merchandising operations, and the same assets which we (referring to the partnership) listed on January 1st are still intact.” Perceiving on too large a scale the opportunities which lay before them, the partnership enlarged its periphery of distribution at the expense of its center of gravity, credit, to such an extent that though remaining solvent, credit difficulties began to confront them, and in the early part of 1929 extended negotiations were begun and carried on by the Barriers, through Bob Barrier, the president and guiding spirit of the corporation and partnership, looking to a reorganization of the business, but on a sounder and more reliable basis of capitalization. In the course of and to carry out their agreements made while these' negotiations were going on, Barrier Bros., on the 11th of April, executed to George R. Bean, trustee, for the use ,and benefit of the appellánts, merchandise creditors, two chattel mortgages and one real estate mortgage, and on the 25th of April executed a real estate mortgage on additional property. The real estate mortgages, as they appeared in the proofs of claims showed as grantee, in addition to the six merchandise creditors, appellants, the name of the Citizens’ National Bank. The testimony showed as to the mortgage of April 11 that the bank’s name was inserted as grantee while the instrument was in the clerk’s office after its filing for but before its recordation. This insertion was made with the express consent of Paul, in whose name the land stood, and of Bob Barrier, the managing partner who had general authority to sign Clifton’s name. Clifton testified that he knew when he signed the schedules that the bank was included in the deed of trust. The other partner, Mike Barrier, testified that he had not been told and did not know that the bank’s-name had been added to the deed of trust. The referee finding that 'the guaranties were the guaranties of the individuals composing the partnership and not of the partnership, allowed the claim primarily against the individual estates and only secondarily against the partnership estate. He also found that, if intended to be executed by the partners, they were invalid for want of consideration moving to the partnership. He also disallowed the securities on the ground that they were invalid as voluntary conveyances under the Texas statutes and also they were invalid as unlawful preferences under section 60b of the Bankruptcy Act (11 USCA § 96(b). These conclusions were in substance sustained by the District Judge, and the action of the referee, except as above noted, was confirmed. In this we think the court erred. On the first point as to the intention of the guarantors, it is perfectly clear that they intended to place the partnership credit and the partnership assets back of the corporation’s debts. The corporation derived from them; it was their creature, and, as to the merchandise business, their alter ego. They had assured Marshall Field & Co. in the letter above referred to, and the other creditors in the instruments they gave them, that every asset of the partnership was back of the corporation, and as to this Bob Barrier testified: “I felt like on November 3rd that Mr. Williams still had his claim intact against the partnership assets, and that was what we intended for him to have, but Mr. Williams was not satisfied with the letter. He knew that we kept this property in the names of the individuals but operated as a partnership. We wanted to satisfy Marshall Field & Co. as best we could and we prepared the statement of the partnership assets and signed the guaranty. In executing the guaranty we did it so that Marshall Field & Co. could have the benefit of the partnership and be protected by the partnership property, that was the purpose of it. We knew that that was Mr. Williams’ idea at that time.” It is perfectly plain that in executing all of these instruments the partners intended to pledge the credit and assets of the partnership to insure the carrying on of its business now being transacted in the name of the corporation, whose entire stock the partnership owned, as fully and to the same extent as though the partnership were still conducting the business, and that what they did was effective to carry out this intention. . As to the securities, we think it equally plain that there is no basis for the finding of the referee either that these mortgages were void as voluntary conveyances, or that they constituted preferences. They were given as part of the plan then on foot for the handling and conduct of the business, supported by the valuable consideration of the promise to help by the extension of the debts then due, and the providing of further credit, and, while there is ample evidence that the corporation was in an embarrassed condition for want of funds, the evidence wholly fails to sustain the conclusion that the corporation and the partnership were insolvent within the meaning of the law, or, if they were, that the creditors securing th.e mortgages received them under such circumstances as that it eould.be found that they had reasonable cause to believe that a preference would be effected. Grant v. First National Bank, 97 U. S. 80, 24 L. Ed. 971; In re Gaylord (D. C.) 225 F. 234. The notes on which the bank claimed were notes of the corporation, two of them guaranteed by the partners, one not, and the bank stands in the same case as to the right to the securities claimed as the other creditors, except for the point made against it by the trustee, that it was not an original grantee in the mortgages, but its name was inserted therein after the instruments had been executed and delivered to the grantees. [3,4] The proof does establish that as to the mortgage of April 11th the bank’s name was inserted as grantee after execution and delivery and filing for record, and, while as to that of April 25th the proof is wanting in certainty, there is sufficient evidence to sustain the finding that this instrument was' also executed and delivered, though not filed for record, before the bank’s name was inserted in it. In order then for the bank to avail itself of the securities, it must have sustained the burden thus cast upon it of proving that, though inserted after execution and delivery, it was done with the consent of the partners in such manner as to make it their act and deed. This we think the bank has done. There is no question here of fraudulent spoliation as in Bowser v. Cole, 74 Tex. 222, 11 S. W. 1131; rather this is a case like that of Otto v. Halff, 89 Tex. 384, 34 S. W. 910, 59 Am. St. Rep. 56, where the insertion was innocently made by the bank with the knowledge and consent of the partner in whose name the’ land stood, the managing partner and moving spirit of both corporation and partnership, and, if not in service, it was certainly not in disservice of the partnership, as it merely had the effect of including in the instrument another creditor who had advanced money to the corporation on the faith and confidence in its managing owners, the partners themselves. That an instrument, though changed after filing and before recordation, will stand as recorded when the change is made with the consent of the grantor is settled law in Texas. Henke v. Stacy, 25 Tex. Civ. App. 272, 61 S. W. 509. Nor is there any question but that, though one partner has no implied general power to sell or mortgage real estate of a firm, a conveyance so made will be good against the interest of the partners making it and against the interest of the other partners, upon, proof from which, either authorization or ratification may be inferred. Allen v. Meyer (Tex. Civ. App.) 65 S. W. 645; Williams v. Meyer (Tex. Civ. App.) 64 S. W. 66, 69. The record in this case shows affirmatively that Bob Barrier, the managing partner, Paul Barrier, in whose name the greater part of the land stood, and Clifton Barrier, all agreed to the insertion of the bank’s name in the instruments. While there is no direct evidence that Mike Barrier either authorized or ratified the act of the other partners in including the bank in the instruments, in -view of the nature of the partnership, its relation to the corporation, the fact that its properties stood in the name of the individual partners who did assent to the inclusion of the bank, the negotiations that had been going on for some time, to which the bank was a party, which negotiations were conducted by Paul and Bob Barrier, the fact that the inclusion was in line with the general purpose of the instruments, to protect creditors who had made advances to the corporation upon the faith of the credit of the partnership, and to secure an extension of time on that indebtedness and further credit, the evidence is sufficient to support the finding that the insertion of the bank’s name was the act and deed of the partners which their trustee cannot disaffirm, and that the claim of the bank, as well as the other appellant creditors, should be approved as a secured claim against the partnership estate. The judgment of the court below is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

MERIT OIL EQUIPMENT CO. v. FRY EQUIPMENT CORPORATION et al. No. 5419. Circuit Court of Appeals, Sixth Circuit. April 10, 1931. Lynn A. Williams, of Chicago, Ill. (Thomas H. Sheridan and Williams, Bradbury, McCaleb & Hinkle, all of Chicago, Ill., on the brief), for appellant. C. L. Byron and H. M. Huxley, both of Chicago, Ill., for appellees. Before DENISON, MOORMAN, and HICKENLOOPER, Circuit Judges. HICKENLOOPER, Circuit Judge. The defendant below appeals from a decree finding valid and infringed claims 7, 8, 9, 13, 14, 15, 16, and 19 of patent No. 1,635,115, for an apparatus for cleaning containers and the like, issued July 5,1927, upon application of Leo Deutseh and another. With the development of a need for a service station unit for cleaning transmission, crank, and differential-gear casings upon automobiles, by flushing with kerosene or other grease solvent, a number of applications were filed for patents upon devices of this general nature. Few of them were of practical utility. Deutseh conceived the idea that such a device, to be serviceable, must be compact and light, to facilitate -handling, and that provision must b'e made for a continuous circulation of the cleaning fluid, that is, that there must be both a flushing and a suction conduit, drawing the cleansing fluid from a portable tank and returning it to the same container after it had passed through the casing to be cleaned. Thus the same fluid could be used over and over again, provided proper means were installed for straining it upon its return to the main source of supply. It was this concept which underlay his advance step in the art. Deutseh accomplished his purpose by an exceedingly ingenious combination of mechanical elements. To avoid a duplication of pumps he utilized the ejector principle, carrying part of his main stream through a flushing hose to the gear casing to be cleaned, and using another part to produce suction in the other conduit. The problem of continuous circulation of the cleaning fluid from supply reservoir, to the easing, and back to the reservoir, was solved. By this device he also prevented particles of hard substance passing through the pump and injuring its parts, and by placing a valve-controlled nozzle at the end of the flushing hose the supply of cleaning fluid to the casing could be shut off without stopping the pump or the suction; and so his device was capable of entirely withdrawing the cleaning fluid from the easing after the operation was completed. The single pump was carried by the head of a barrel-like tank, from the bottom of which upper head was depended a basket-type strainer into which the suction hose discharged. To keep the strainer clean Deutseh provided that the stream from the suction conduit should play against the vertical side of the strainer, thus continually washing it off and causing the solid matter “to be deposited at a point away from said strainer.” Claims 7, 8, 9, 13, 14, 15, and 16 are all built around this above-mentioned method of keeping the strainer clean by discharging the returning liquid against its side. In none of them, excepting possibly claim 14, is the true nature of the advance step disclosed or emphasized — the compactness of the unit, the single pump, and the cycle of the cleaning fluid. True, several of these claims call for most of the separate elements of the combination, such as the tank, the pump, the suction conduit, the strainer, and, in claim 14, broadly, “means whereby cleaning liquid may be supplied from said tank to the casing to be cleaned,” but each contains the element, in a variety of modes of expression, that the strainer shall be “so arranged that the material from said (suction) conduit will be discharged against the strainer for keeping the latter clean and the solid matter will be deposited at a point away from the strainer.” Claim 7. Whether these elaims are to be considered as descriptive of a new machine, in its entirety or as an article of commerce, or as calling for a combination of mechanical elements co-operating to produce a result never before attained in a single machine, the call for an arrangement or organization of the discharge end of the suction hose and the strainer, whereby the returning fluid is used to keep the strainer clean, forms a descriptive feature of the machine, or an essential. element of the combination, without which another’s device would not infringe. We do not find this element in the alleged-infringing device of the defendant. In the defendant’s device the suction hose discharges below the normal operating level of the cleaning fluid. The basket strainer is enlarged and cylindrical in shape, so that its flat base extends further toward the bottom of the tank. Gravity is relied upon to deposit the hard matter at the base of the cylinder or basket, but this obviously requires that the stream of returning fluid discharged from the suction conduit shall not continually stir up such hard particles. Accordingly, the defendant provided a simple baffle-plate below the discharge orifice to deflect or break the force of the stream. The function of this baffle-plate, however, is not to wash off the strainer nor to assist in depositing solid matter at a point away from the strainer. It does not so operate. Its function is solely to avoid agitation of that which has already settled by gravitation. We are of the opinion that in so far as the means disclosed for keeping the strainer clean is of the essence of the inventive step, even though of but one element of the machine or combination, the patentee may not claim any, all, and every means for accomplishing the desired result. See Davis Sewing Machine Co. v. New Departure Mfg. Co., 217 F. 775, 782, et seq. (C. C. A. 6); Heidbrink v. McKesson, 290 F. 665, 668 (C. C. A. 6); and compare Holland Furniture Co. v. Perkins Glue Co., 277 U. S. 245, 256, 48 S. Ct. 474, 72 L. Ed. 868. Construed in the only way by which it is possible to sustain them, that is, as calling for the particular means disclosed by the patentee, they are not infringed by defendant’s baffle-plate organization which is in no sense an equivalent. Claims 7, 8, 9, 13, 14, 15, and 16 must therefore be held not infringed, and the decree below must be reversed to this extent. This brings us to a consideration of claim 19, printed in the margin. This claim is accurately descriptive of the patentee’s device and unambiguous. Construed in the light of .the specification it clearly calls for (1) a pnmp, that is, a single pump for operating both flushing and suction conduits, and thus possibly by necessary implication requiring use of the ejector principle; (2) a suction, line; (3) a pressure (or flushing) line; (4) means for selective use of either suction or pressure line — -the valve-controlled nozzle or any valve in the pressure line beyond the ejector; and (5) the strainer; all so organized as to permit the “circulation” and reuse of the cleaning fluid. It is not contended that this claim does not read directly upon the defendant’s device, or that the various elements do not constitute a true combination, as distinguished from an aggregation. The sole defenses as to it are anticipation and want of invention in view of the prior art. We find nothing precisely anticipatory in the patent references. Anderson, in his . patent No. 1,549,952, August 18, 1925, used two tanks, forcing the liquid from one by compressed air and drawing it into the other by suction. At the end of the operation the cycle of compressed air was reversed and the cleaning fluid was redelivered through a strainer into the original tank from which it had been withdrawn. This .device lacked many of the points of utility .disclosed by Deutseh, the most notable being a complete lack of continuous circulation of .the cleaning fluid during any length of operation. This circulation of the cleaning fluid is also clearly absent in, the device of Maker, patent No. 1,506,652, August 26, 1924, notwithstanding that the gear casing being once filled, that- small portion of the supply could be circulated from the casing, through the •pump, and, -back to the easing, by the turning óf a valve to- jshange the intake from the supply tank ito an outside hose or conduit. Osborne, patent No. 1,633,283, June 21, 1927, has the single portable tank but a reversible pump by which the cleaning fluid is first forced under pressure into the gear casing, thence drains into a separate catch-basin or receptacle and is subsequently,, by reversing the pump, sucked back into the supply tank. In none of these do we find an even close approximation of the concept of Deutseh. Menge, patent- No. 1,552,998, September 8,1925, had two pumps, one for pressure and one for suction. The marked disadvantage of this is that particles of grit and hard, solid matter are continually passing through the suction pump to the possible damage of its parts. The device also lacks the compactness, simplicity of design and operation, and the general utility of Deutseh. We have no hesitancy in holding that the reduction in the number of working parts of the device of the patent in suit, and the compactness achieved by this and by the use of the ejector principle to produce suction, were features of advance over Menge and entitled to recognition as such, although Menge is perhaps the closest reference in the prior art. In the related arts, the closest reference is that to Cartwright, patent No. 1,331,239, for a portable pumping apparatus. This device has many of the mechanical features employed by Deutseh but is to be regarded primarily and essentially as a pumping device. The function of cleaning comparatively small gear casings by continuous circulation through them of a cleaning fluid was not, we think, even contemplated, notwithstanding the pressure chamber between the pump and the injector used to produce suction is equipped with a “distributing union” to which a number of hoses may be coupled “so that they may be utilized as desired.” Cartwright could readily be reorganized to anticipate Deutseh, but in this reorganization and in the application of the device to a use for which -it was not originally intended and which was practically impossible without reorganization, we would find the exercise of invention. Without sueh reorganization Cartwright would not anticipate. Compare Gordon Form Lathe Co. v. Walcott Mach. Co., 32 F.(2d) 55, 58 (C. C. A. 6), and eases there cited. Nor do we think that it required only mechanical skill to combine the various elements (admittedly all old) by which Deutseh accomplished his end. Others were groping in the same direction, but it remained for him to definitely solve the problem.- This is an indication of the exercise of more than mechanical skill. It is contended that the device of the patent lacked utility, in that its first commercial embodiments were inefficient, but whether the defect was due to the type of pump used, as one witness testifies, or to some other detail, it is not inherent in the invention itself. It would indeed be strange if no change of detail were to result from commercial production, or if improvement in efficiency of organization or manufacture, without departure from the original concept of the inventor, were to destroy the patent. Structures later built well within the calls of claim 19 had a good measure of commercial success. The defendant has accorded the patent the tribute of imitation, its device differing from the patented device only as to details not covered by claim 19, and we think that it cannot be said either that invention was wanting or that the device lacked sueh utility as was necessary for a finding of patent validity. The decree of the District Court finding claim 19 valid and infringed is affirmed. Neither side will be awarded costs in this court. 19. A motor vehicle service station unit for cleaning gear casings and the like comprising a pump, a suction line and a pressure line connected to saidl pump for circulating a cleaning fluid through the casing to be cleaned, means for selectively using either the suction line or pressure line, and means for separating any solid matter removed from said casing with said cleaning fluid.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

GARDNER v. GRAND BEACH CO. et al. No. 5737. Circuit Court of Appeals, Sixth Circuit. April 10, 1931. E. W. Froehlieh, of Chicago, Ill., for Gardner. M. M. Uhl, of Grand Rapids, Mich., for Grand Rapids Trust Co. Charles S. Abbott, of Detroit, Mich., for Grand Beach Co. and others. Travis, Merrick & Johnson, of Grand Rapids, Mich., and A. S. & E. W. Froehlich and Edmund W. Froehlich, all of Chicago, Ill., for appellant. Sempliner Dewey, Stanton & Bushnell, Edward R. Stanton, and Charles S. Abbott, all of Detroit, Mich., for appellees. Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges. HICKS, Circuit Judge. The original bill sought to foreclose a mortgage securing a bond issue of the Grand Beaeh Company. Various phases of the ease have heretofore been before this court [See 29. F.(2d) 481; Id. 34 F.(2d) 836.] The defendants now appeal from a decree of foreclosure and sale and also from an order directing the receiver to pay certain taxes, interest, and insurance and allowing it to borrow money with which to defray certain administration expenses. Plaintiff appeals from so much of the foreclosure decree as compels it to forfeit all interest upon its bonds upon the ground of usury. After said appeals were perfected, but before the record was filed here, plaintiff and .defendants stipulated for a settlement. of the litigation, which stipulation, with an amendment thereto, the District Court, upon the ground that it was then without jurisdiction of the case and for other reasons, declined to recognize. Therefore defendants petitioned this court to compel the District Judge by mandamus proceedings to confirm and enforce said stipulation by appropriate orders and decrees, which petition was denied. Upon the hearing of the appeals here, plaintiff and defendants presented the stipulation as amended, and asked the court to dispose of the case in the light thereof. As a procedural matter plaintiff has filed here what he is pleased to call a “Plea of Release of Errors” based upon the stipulation. We have jurisdiction in the premises. Dakota County v. Glidden, 113 U. S. 222, 225, 5 S. Ct. 428, 28 L. Ed. 981; Talbot v. Mason, 125 P. 101,104 (C. C. A. 6). [2-4] The stipulation provides that the foreclosure decree shall be modified and amended so as to fix the sum of $350,000 as the total debt to plaintiff instead of the sum of $257,440, as determined by the decree; that neither the plaintiff nor its representatives or successors shall cause a sale of the mortgaged premises during the period of five years from January 9,1930; that existing injunctions be dissolved; that the receiver shall file its final report, pass its accounts, and deliver to defendants all of their documents, books, vouchers, and records now in the possession of the receiver; that the defendants be forthwith restored to possession of all the properties involved and that the receivership be wound up and the receiver discharged. In addition to these principal features, the stipulation sets forth a comprehensive scheme for the determination of all matters in litigation. We find it unnecessary to consider the plan generally except to say that we think it constitutes a valid compromise as between the parties thereto. The law favors the settlement of controversies out of court, and equity will follow the law where it may do so without the violation of any fundamental equitable principle. The receiver alone resists the confirmation of this settlement. This is not a creditors’ suit, and no other party, except possibly the American Radiator Company and Scott Dyer, whose claims were adjudicated in the foreclosure decree, is in an attitude to complain. The receiver insists that its interests have not been sufficiently protected; that no proper arrangement has been made to satisfy the receiver’s certificates, its fees, expenses and other obligations. This matter affects not only the receiver but the court as well, for, having appointed the receiver and authorized it to take possession of ánd manage the property, to employ counsel, to issue receiver’s certificates and borrow money, the court has of course pledged its faith that all of the authorized obligations of the receivership shall be paid or at least secured by proper liens upon the property in its custody. We think these interests have been sufficiently safeguarded. The stipulation specifically provides that upon the determination of its final accounts the court may allow the receiver its proper lien for any sums found to be due it on such terms as the court may direct. The receiver’s certificates are all owned by it, and, as we understand the record, other moneys expended -in the interest of the receivership were advanced by it. No attempt is made to postpone the enforcement of said lien. The application to defer the sale of the property for five years is binding upon the plaintiff and its representatives only, and has reference to a foreclosure sale. It has no reference to court action for the enforcement of the receiver’s lien. This mutual understanding of plaintiff and defendants is reflected by certain provisions of a proposed decree intended, if adopted by the court, to confirm the stipulation, which decree, as stated in defendants’ brief, was drafted and approved by opposing counsel, and in which it is provided that the five-year period shall “in no wise limit or impair the power of the court to order a sale at any time for non-payment of obligations due to the receiver or others who have established or may hereafter establish valid liens against the premises superior to those of the plaintiff; provided, however, that the plaintiff and said defendants shall have a right to be heard upon any proposed action of the court to be taken with reference thereto.” In this connection we think that the American Radiator Company and Scott Dyer must be considered as falling within the class of “others who have established * * * valid liens against the premises superior to those of the plaintiff.” These quasi parties are not parties to the stipulation, but in the District Court their claims were referred to a master. The master allowed them as secured lien claims, his report was unexeepted to, and was confirmed and approved by the court in the foreclosure decree. No assignment of errors challenges their correctness here. It does not appear that any citation issued to these parties. It is apparent to us that the properties involved "are more than sufficient in value to satisfy these claims and any possible lien claims of the receiver. The objection that the stipulation, if approved by the court, would set aside certain orders approving the reports of, and making allowances to, the receiver is without merit. It is true that the stipulation discharges the plaintiff from all liability to defendants on account of the appointment of the re-‘ eeiver or on account of any improper management of the receivership, and reserves the right to defendants to contest the accounts of the receiver and to question its management of the properties, but this can in no sense be construed as an agreement between the parties to abdicate or nullify any of the allowances heretofore made to the receiver. These are matters resting in the discretion of the court alone, pending the final settlement and discharge of the receiver. The receiver complains that upon the confirmation of the stipulation it would be required by its terms forthwith to deliver to defendants all their books and records now in its possession. We do not regard this criticism as particularly weighty. It is more than probable that the defendants would necessarily require the possession of these books, documents, and records in the management of their affairs. Their retention by the receiver could only be for evidential uses in stating its final accounts. Their production whenever and wherever needed is a matter clearly under the control of the court. In addition, the proposed' order of confirmation heretofore referred to contains a specific provision which, if approved by the court, will fully protect the receiver in this particular, and which provision the court would be warranted in adopting as a part of any confirmatory order.. Nor are we impressed with the argument that the possession of the receiver should continue in order that the court may maintain its jurisdiction over the property. We think that the doctrine of notice by lis pend-ens is sufficient for that purpose. Further, if during the progress of the cause the court should deem it necessary to repossess the properties by reason of the default of either party to the contract, it has ample authority to do so, not only in virtue of its inherent equitable jurisdiction, but by implied, if not express, provisions of the stipulation itself. . ■ Without further detailed discussion, we conclude that the various objections urged by the receiver should not impel a court of equity to disregard the stipulation of the parties and to proceed, notwithstanding, to review the decrees appealed from. The parties have agreed upon the exact amount of the mortgage debt, the postponement-of the foreclosure sale, the immediate discharge of the receiver, and the restoration of possession to the defendants, together with a full and complete plan of settlement. It is apparent that the receivership has not been a financial success, and that the relationship between defendants and the receiver has not been harmonious. The attitude of the defendants toward the receiver has been one of open hostility. We are not here concerned with fixing the responsibility for such a situation. Suffice it to say that, if under such circumstances the plaintiff whose interests are at stake and at whose instance the receiver was appointed feels that it should now be discharged and the defendants restored to possession, its attitude is entitled to serious consideration. But we are not especially concerned with the reasons leading to the compromise. The parties were competent to contract, and we regard it as not only our right, but our duty as well, to respect their voluntary settlement (Gulf, C. & S. F. R. Co. v. Dennis, 224 U. S. 504, 507, 32 S. Ct. 542, 56 L. Ed. 860); it appearing to us that the rights and interests of the receiver are sufficiently safeguarded. The court will at least relieve itself of all responsibility for further receivership losses. The result reached here is that the case will be remanded to the District Court, with directions to confirm and enforce by appropriate orders and decrees the stipulation of the parties in accordance with the terms thereof as construed and interpreted by this opinion, and to modify the decree of foreclosure and sale in accordance therewith. As an aid to it, the court may or may not find various provisions of the proposed decree approved by the parties to be helpful.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

DAVIS v. McNAIR. No. 5938. Circuit Court of Appeals, Fifth Circuit. April 14, 1931. George C. Bedell, of Jacksonville, Fla.r and David R. Dunham, of St. Augustine, Fla., for appellant. Frank D. Upchurch, of St. Augustine,. Fla., for appellee. Before FOSTER, HUTCHESON, and WALKER, Circuit Judges. Rehearing denied May 23, 1931. WALKER, Circuit Judge. This is an appeal from a decree sustaining a motion to dismiss a bill in equity the-allegations'of which showed as follows: On July .8, 1929, the appellant, who is herein, called plaintiff, had to his credit the sum of' $35,062.74 on deposit in the savings department of the First National Bank of St. Augustine, Fla., which is herein referred to as the bank. On that day plaintiff went to the-place of business of the bank and made-known his desire to purchase Liberty bonds to the amount of $35,000, par value, in the denomination of $5,000 each, with money he-so had in deposit, and plaintiff then ordered said bonds and offered to draw out his money to the amount then to his credit, and tendered'. his passbook. He was informed at that time-by the bank’s representative that it was not necessary for him to draw out his money,, that the bank would purchase the bonds for-him and charge the price of same to his account. Plaintiff then asked when he could get the bonds, and was told that it would take eight or ten days before the bonds could be-delivered, and that he would be notified when-the bonds arrived. For reasons unknown to plaintiff the bonds were not ordered immediately as he had requested, and were not ordered until the 18th day of July, 1929, on which day the cashier of the bank ordered said bonds by letter, on the office copy of which, retained by the bank, a notation was-made showing that the order and purchase were for plaintiff. Said bonds were ordered in the amount and denomination above stated through the Chase National Bank of the-city of New York, which made due acknowledgment to the bank of the order to purchase said bonds, which said acknowledgment was received by the bank on or about July 22, 1929. On July 23, 1929, an officer of the bank called an officer of the bond department of the Chase National Bank on long-distance telephone, and was advised that $35,000, par value, of Liberty bonds had been purchased and charged to the account of the bank. The bank by vote of its directors closed its doors for business on July 24, 1929; on or about July 25, 1929, the Comptroller of the Currency appointed T. J. Cottingham receiver of the bank, for the reason that said bank w.as insolvent and unable to pay its just and legal debts. Subsequently the Comptroller of the Currency, under and by virtue of the authority in him vested, appointed R. L. Van Zandt receiver of the hank to succeed T. J. Cottingham, and said R. L. Van Zandt was receiver of the bank at the time the bill of complaint was filed. After the bill was filed, as alleged by plaintiff by way of supplement thereto, the appellee, M. C. McNair, by authority of the Comptroller'of the Currency, succeeded R. L. Van Zandt as receiver of the bank. He is herein referred to as the defendant. Plaintiff made demand on T. J. Cottingham, .as receiver of the bank, for delivery to plaintiff of said Liberty bonds purchased by the bank for him, and the demand was refused. Plaintiff has since made formal demand in writing on the receiver of the bank for delivery to him of said Liberty bonds, and such demand has been refused, and said Liberty bonds have never been turned over and delivered to plaintiff or any one for him. At the time plaintiff ordered the purchase of said Liberty bonds by the bank, he offered to have entered upon his passbook the charge of the money necessary to pay for said bonds, and thereafter plaintiff would not have been permitted by the bank to withdraw his money from the savings department of the bank had he desired to do so. The president of the bank stated to several persons that plaintiff had drawn out his money and purchased Liberty bonds. Plaintiff did not learn and did not know until after the bank had closed its doors for business, as above stated, that his account in the savings department of the bank had not been charged with the purchase of said bonds, if in fact his said account has not been so charged. Said bonds, purchased as above stated, are being held by the Chase National Bank as security for indebtedness of the bank to the said the Chase National Bank, but plaintiff is without information as to the amount of said indebtedness or as to how much, if any, of said indebtedness is on account of the purchase price of said bonds, or whether said Chase National Bank has a lawful lien upon said bonds. “The plaintiff is now informed that the actual purchase price of said liberty Bonds including earned interest was less than a hundred dollars more than the amount which the plaintiff had on deposit at the time he ordered said Liberty Bonds; that the plaintiff was never advised or informed until after said The First National Bank of St. Augustine closed its doors that the purchase price of said Liberty Bonds was more than the amount of his deposit, and is now without information as to the precise amount of the purchase price of said bonds and the costs and charges attendant upon said purchase, but the plaintiff has always been ready, able and willing to pay over and above the amount he had on deposit in said The First National Bank of St. Augustine whatever might be reasonably due said Bank on account of the purchase price of said bonds and its proper charges in that behalf; and the plaintiff is now ready, able and willing to do equity and so offers.” The bill, to which the defendant, as receiver of the Bank, by substitution became the sole party defendant, contained prayers that the court decree the right of appellee as such receiver in said bonds to be subject-to a trust in favor of plaintiff, and that in the liquidation of the indebtedness for which said Chase National Bank may have a lawful lien upon said bonds, if any, the right and equity of the plaintiff be preserved, and appellee decreed to discharge said indebtedness from funds in his hands or that may come into his hands, other than said bonds; that plaintiff be decreed to have a lien upon said bonds or their proceeds to the extent of said sum of $35,062.74, the same to be enforced by sale of said bond and/or application of their proceeds to the payment of said sum, and that, if the amount' realized and available be insufficient to pay said sum, then that for the unpaid balance plaintiff be decreed to recover same from the assets of the bank in liquidation; and for such further or other relief in the premises as the nature of the circumstances óf this cause may require and to the court shall seem meet. By what occurred, as indicated by the above-recited allegations of the bill, when plaintiff arranged with the hank for the purchase of the stated amount of Liberty bonds, the previously existing relation of creditor and debtor between plaintiff and the Bank was terminated, with a result that from that time the balance to the credit of the plaintiff ceased to be subject to be checked on by him in favor of another or others than the bank, and the bank in a 'fiduciary capacity held the amount of that balance to he used only in paying for' the bonds it agreed to buy for the plaintiff. The bank’s agreement to buy the bonds for the plaintiff having been complied with by it, .and its right and duty to use the amount of that balance in paying for the bonds having accrued while it was a going concern, when its resources were subject to its disposition, in equity the Bank is to be treated as, prior to its suspension of business, having received the amount of that balance as a payment on the purchase price of the bonds ordered and bought, in other words, as having acted in accordance with the agreement by holding that amount to be appropriated to the payment of what was owing for the bonds purchased. An effect of the Chase National Bank complying with the order to buy the bonds, and notifying the bank of the purchase and that the price was charged to the latter, was that the title to the bonds was vested in the bank; and the bank, prior to its suspension of business, having purchased the bonds for the plaintiff, and having received the amount of the deposit to be paid for or on the bonds purchased, its title thereto in equity was transferred to, or acquired by, the plaintiff, and, at and prior to the time of the bank’s suspension of business, it, by its agent, the Chase National Bank, had possession of the bonds, which were held for the plaintiff, subject to a lien thereon in favor of the Chase National Bank for whatever balance was owing to it by the bank, and to .a lien thereon in favor of the bank for so much of the amount of the cost of the bonds as was in excess of the amount received by the bank for use in paying for them. Le Marchant v. Moore, 150 N. Y. 209, 44 N. E. 770; Richardson v. Shaw, 209 U. S. 365, 28 S. Ct. 512, 52 L. Ed. 835, 14 Ann. Cas. 981; Chase v. Petroleum Bank, 66 Pa. 169. The arrangement between the plaintiff and the bank with reference to buying the Liberty bonds would not have been substantially "different in effect if the plaintiff had checked out the amount on deposit to his credit and had then delivered that amount in cash to the bank upon the latter then agreeing to use that sum in buying the Liberty bonds desired by plaintiff. By what was done the relations of the parties with respect to the funds were so changed that thereafter the deposit was in the nature of .a special one, having the trust feature of a special deposit. The bank was in the position of admitting that it held the amount so intrusted to it for use in paying for the Liberty bonds it agreed to buy for the plaintiff. By that transaction the plaintiff became entitled to have that amount applied in paying for Liberty bonds bought pursuant to the agreement, and, upon the bank failing to segregate that amount and use it in paying for the bonds after it became its duty to do so, the plaintiff became entitled to enforce its right to have this amount applied in accordance with the agreement, though it was intermingled with the bank’s general funds. The bank’s funds went into the possession of its receiver, the defendant, subject to the preferential claim against those funds which existed in favor of the plaintiff when the bank suspended operations. It was suggested in argument in behalf of the defendant that the plaintiff did not have a preferential claim against the funds of the bank- which came to the possession of its receiver, the defendant, because those funds were not increased as a result of the arrangement for buying Liberty bonds. By that transaction the bank ceased to be the plaintiff’s debtor for the amount which previously had been on deposit subject to check, and in effect accepted from the plaintiff the same amount in cash, to be held by it, not as its own property, but as an agent, charged with the duty or trust to use it in paying for the bonds to be purchased, and of keeping the amount so received separate from its general assets. An effect of the bank’s failure to keep the sum of money so received by it segregated from its own assets and permitting it to be commingled with its general funds was that that 'sum was added to funds then owned by the bank, and the plaintiff became entitled to have the amount of his money delivered to the bank as agent withdrawn from' the bank’s general funds with which it was commingled, dnd used in the way the bank was obligated to. use it. The assets of the bank having passed into the hands of the receiver, the defendant, increased by the •amount of plaintiff’s money wrongfully commingled therewith, those assets are held by the defendant subject to a preferential claim in favor of the plaintiff for the amount of his money which was so wrongfully commingled with funds owned by the bank. Goodyear Tire & Rubber Co. v. Hanover State Bank, 109 Kan. 772, 204 P. 992, 21 A. L. R. 677; Northwest Lumber Co. v. Scandinavian American Bank of Seattle, 130 Wash. 33, 225 P. 825, 39 A. L. R. 922; Bryan v. Coconut Grove Bank & Trust Co. (Fla.) 132 So. 481; Central National Bank v. Connecticut Mut. L. Ins. Co., 104 U. S. 54, 26 L. Ed. 693. The allegations of the bill show that, as between the plaintiff and the defendant, the former in equity has title to the Liberty bonds mentioned, subject to Hens thereon above referred to, and- that plaintiff has a preferential claim, having priority over the claims of the bank’s general creditors, against the assets of the bank held by the defendant as receiver for the amount of plaintiff’s money received by the bank as above stated, and is entitled to recover that sum of money or to have it taken from the assets of the bank held by the defendant and applied in the way the bank was obligated to apply it. The plaintiff is entitled to have the aid of a court of equity for the establishment and enforcement of those rights. It foUows that the above-mentioned ruling was erroneous. As the Chase National Bank has not been made a party to this suit, whatever claims to or against the Liberty bonds mentioned it may have or assert are not now subject to be passed on. The remedy which properly may be awarded in favor of the plaintiff may be affected by the reduction of the funds of the bank between the time when it in effect acknowledged its receipt from the plaintiff of the amount previously owing to him and the time when the bank’s funds, including the sums held by it for the plaintiff and commingled with those funds, passed into the custody of the defendant, and by the existence of preferential claims against those funds in favor of another or others than the plaintiff. In re Bolognesi & Co. (C. C. A.) 254 F. 770, 773 Empire State Surety Co. v. Carroll County (C. C. A.) 194 F. 593. The bill contains no allegations as to the just mentioned matters. Such allegations are not requisite to the sufficiency of the bill to show that plaintiff was entitled to relief sought. Though the funds which the bank owned at the time it commingled therewith the sum it is chargeable with having received from the plaintiff for a specific purpose were wholly dissipated before the appointment of a receiver, the plaintiff was entitled to an adjudication on the question of the title or ownership of the Liberty bonds as between him and the defendant. If the bank’s funds were reduced below the amount so received from plaintiff between the time when the bank became chargeable with the receipt of the plaintiff’s money to be used in buying the bonds and the date of the passing of the bank’s assets into the hands of the receiver, or if another or others have preferential claims against those assets, the facts in regard to those matters perhaps may be set up by way of defense. Moreland v. Brown (C. C. A.) 86 F. 257. Because of the above-mentioned error, the decree .appealed from is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion. Reversed.

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2024-08-24T03:29:51.129235

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CORNEC et al. v. BALTIMORE & O. R. CO. et al. The RICHELIEU. No. 3003. Circuit Court of Appeals, Fourth Circuit. April 13, 1931. George Forbes and John H. Skeen, both of Baltimore, Md., and John C. Prizer, of New York City (Henry L. Wortehe, of Baltimore, Md., Barry, Wainwright, Thacher & Symmers, of New York City, Louis J. Sagner, L. Wethered Barroll, Jacob E. Cohen, Gliek & Schlossberg, Harry H. Goldberg, Harry O. Levin, Briscoe & Jones, Herbert R. O’Conor, William H. Lawrence, .and George T. Mister, all of Baltimore, Md., on the brief), for appellants. George W. P. Whip, of Baltimore, Md. (Duncan K. Brent, of Baltimore, Md., on the brief), for appellee Baltimore & O. R. Co. Emory H. Niles, of Baltimore, Md., and William P. Hurley, of Newark, N. J., for appellee Lewis Mfg. Co. Before PARKER and NORTHCOTT, Circuit Judges, and GRONER, District Judge. PARKER, Circuit Judge. This is an appeal from a decree in admiralty dismissing libels filed against the Baltimore & Ohio Railroad Company for the recovery of damages sustained as the result of a pitch dust explosion alleged to have been due to its negligence. The libels were filed against the railroad company, which was engaged at the time of the explosion in loading a cargo of pitch into the French barque Richelieu. They were filed by the master in behalf of the owners of the vessel and the owners of the cargo, by certain members of the crew, certain stevedores employed by the railroad and by the personal representatives of certain stevedores who were killed in the explosion. It was alleged that the railroad company was guilty of negligence in creating a cloud of explosive dust while loading the cargo of pitch and in using open kerosene lights and machinery which emitted sparks and flashes of electricity in the dust thus created. The railroad company filed a cross-libel against the owners of the vessel, asking recovery for the damage done to its pier as .a' result of the explosion; and, under Admiralty Rule 56 (28 USCA § 723), it impleaded the Lewis Company, the manufacturers of the pitch, alleging that the pitch was of dangerous character, and that the manufacturers had negligently failed to give warning with regard thereto. The District Judge dismissed all of the libels and the cross-libel. He found that the explosion was caused by the use of open lights in the cloud of pitch dust, but that the railroad company was not guilty of negligence, because the explosive character of the dust was not known and the company was not chargeable with knowledge thereof. For like reason, he dismissed the cross-libel against the owners of the vessel and discharged the manufacturers who had been impleaded under the admiralty rule. Although the record is voluminous and the briefs unreasonably long, the facts of the case are comparatively simple. The railroad company had transported the pitch over its railroad system from Fairmont, W. Va., and Chicago, Ill., to its terminals in Baltimore, and was engaged in loading it on the Richelieu when the explosion occurred. For this purpose it was using the loading devices which it had constructed for the loading of coal on vessels, consisting of a tower, a shuttle belt, a telescopic chute, and, at the bottom of the chute, electrically operated, trimmers which changed the direction of the ' falling coal and .threw it against the sides of the vessel. These loading devices had a tendency to break the pitch up, and, when they were in operation, resulted in creating a dense cloud of pitch dust. When coal was being loaded, a sprinkler system was used to keep down the dust; but, when the railroad company was loading pitch for another company some time prior to the explosion, objection was made to the use of the sprinkler system on the ground that water injured the pitch, and thereafter, when loading pitch, nothing was done to allay the dust. The loading apparatus had been in use for several years, and the electrical machinery used in connection therewith had become considerably worn, with the result that at a number of places it emitted sparks and flashes of electricity. Without going into a minute description of its condition, it is sufficient to say that the testimony establishes beyond peradventure that it was not fit for use in an explosive atmosphere. The loading of the vessel was well -advanced towards completion when the explosion occurred. All the work which could be done in the hold with the use of the mechanical trimmers had been completed, and they were being operated in the ’tween decks. Stevedores- had been sent into the hold to complete the trimming there, and a number were working in the ’tween decks. These stevedores were given open kerosene lamps to furnish light while they were at work. The forward hatch had been closed, and a temporary bulkhead had been erected forward of No. 2 hatch, which confined the cloud of dust created by the operation of the trimmers. This dust cloud took fire, and the explosion resulted. The learned judge below has found that the explosion was caused by the open lamps, and it is clear that it originated either from these or from the mechanical trimmer which was operating in the ’tween decks at No. 2 hatch. We think that the evidence shows that it originated from the trimmer. Eyewitnesses, whom the judge found to be truthful, so testified; and the only substantial evidence to the contrary is the opinion of one of the experts. Direct evidence of an occurrence is, of course, entitled to greater weight than opinion evidence [Lancashire Shipping Co. v. Morse Dry Dock & Repair Co. (D. C.) 43 F.(2d) 750]; and we should hesitate to base a finding upon the opinion evidence here, which is opposed to the overwhelming weight of the testimony of eyewitnesses. It is not necessary to go into this matter, however, as the dust unquestionably exploded because of contact with ,a source of ignition for which the railroad company was responsible. The bringing of such source of ignition into contact with the dust was dangerous. The only question on this branch of the case is whether the company, in the exercise of ordinary and reasonable care, should have known that it was dangerous; i. e., that the dust was explosive. We think that this question must be answered in the affirmative. Pitch is a carbonaceous substance more than 99 per cent, combustible and more than 50 per cent, volatile. Pitch dust is nothing but pitch in a fine state of subdivision. It is a matter of general and common knowledge that whatever will burn will burn more rapidly in fine subdivision, .and that, granted a proper admixture of air, the finer the subdivision the more rapid the rate of combustion. A dust explosion is simply the exceedingly rapid and almost instantaneous combustion of myriads of small particles of solid matter held in suspension by the air. Not all dust clouds, of course, even of combustible material, are explosive, for to render them explosive there must be the proper admixture of air to supply the necessary oxygen; but it has long been known that, if the proper mixture with the air is obtained, any dust of combustible matter will explode, and that every precaution should be taken to prevent any source of ignition from coming in contact with it. Thus it was .known that not only pitch dust and coal dust were explosive, but also that explosions were to be apprehended from the dust of grain, starch, cocoa, tea, rice, soya beans, malt, oat husk, cork, and other like substances. As said by the railroad company in its brief filed with this court in the case of Moore v. B. & O. Co., 37 F.(2d) 884, “the fact that carbonaceous or combustible matter in fine subdivision as dust floating in the air may form a highly dangerous or explosive mixture and has been the cause of numerous disastrous explosions has long been known.” It may be true that the theory of the witness Patrick as to the mechanics of a pitch dust explosion was something new, although we are not satisfied either with the novelty or with the correctness of that theory; but certain it is that, whether the correct theory was held or not, the explosibility of pitch dust had long been known, and that is the fact of importance here. In the British Blue Book of 1914 it was stated: “Pitch dust was found to be more highly inflammable material than coal dust of the same degree of fineness and almost as dangerous as sugar.” Practically the same statement is contained in Bulletin No. 167 of the United States Bureau of Mines published in 1922. A work on “Blacks and Pitches,” published by H. M. Langton in 1925, stated that fatal explosions due to coal tar pitch had been recorded, and that “pitch dust is more highly inflammáble than coal dust of the same degree of fineness.” The United States Bureau of Mines, in a report in 1919 to the Aluminum Company of America, stated: “The inflammability tests conducted with the pitch dust indicate it is considerably more inflammable than standard Pittsburgh coal dust of about 200-mesh. Clouds of the material could be easily ignited with a bunsen burner flame, electric are, candle flame, etc. This dust must therefore be considered as dangerously inflammable when mixed with air.” There is abundant evidence not only of pre-existing theoretical knowledge of the ex-plosibility of pitch dust, but also of so mány disastrous explosions due to it that .any person engaged in handling pitch should have known of them. In 1871 there was an explosion of grahamite dust while .a vessel was being unloaded in New York harbor; the explosion being caused by a workman’s striking a match to light his pipe. ■ Grahamite is natural pitch or asphalt. Other dust explosions had occurred from time to time in the asphalt mines of Utah and Oklahoma. A pitch dust explosion occurred at the Glasgow docks in the year 1914 while a vessel was being loaded with pitch and is reported in the British Blue Book of that year. The Blue Book for 1923 reports .another such explosion. In 1924 there was a disastrous explosion of pitch dust at the plant of the Aluminum Company of America at Massena, N. Y., an account of which was carried by various newspapers. It w.as also the subject of a special article in the Bulletin of the Department of Labor of the state of New York, which contained the following statement: “Laboratory tests and the above experience leave no doubts as to the explosibility of pitch dust, and unusual precautions should be exercised by all who handle it to minimize the damage resulting therefrom.” In the light of the occurrences and the articles to which we have referred, the contention that' the explosibility of pitch dust was not known prior to the explosion on the. Richelieu cannot be sustained. Not only was there information available as to explosions whieh had occurred, with opinions by experts and officials of government departments that pitch dust was explosive, but it also seems to us that, in the absence of such information, the railroad company, with its vast experience as a carrier of commodities, should have known that this cloud of carbonaceous dust was explosive, and that it was dangerous to bring a source of ignition in contact with it. The man on the street may not know the dangerous character of carbonaceous dust, but this carrier knew, or should- have known it; and the records of this court show that shortly before the explosion it had built a great grain elevator at Baltimore, and, in constructing same, had used the utmost care to guard against the danger of dust explosions. It certainly seems that one who knows that grain dust will explode ought have no difficulty in concluding that pitch dust also is explosive. In this connection, it is shown by the record that, in a booklet by Price and Brown on “Dust Explosions,” published by the National Fire Protection Association, a work which collated the knowledge of government officials on the subject, and with whieh the proper officials of the the railroad should have been and probably were familiar, the following standards of care were laid down for dealing with dust: “Unless all the conditions whieh might possibly affect the inflammability of a dust are known it is difficult to state offhand what dusts are explosive, or whether a certain dust will explode or is dangerous. One broad principle whieh may be used as a guide in determining what dusts are explosive, or dangerous is that any dust from highly carbonaceous material or from any material that will burn may explode under proper conditions and is therefore dangerous from the explosion standpoint: The fact that coal dust is explosive has been brought out very forcibly by the large losses of life often accompanying a mine explosion. * * * That carbonaceous dusts are explosive is accepted as a theory by many men prominently identified with various industries, but they seem to feel that their particular plants are immune. It is not so long ago that some of the flour millers would say that they never heard of .a dust explosion in a flour mill, while elevator men would say that they knew of the danger in flour mills, but most of them thought that elevator dusts contained too much field dirt to be explosive. However, since all carbonaceous dusts may explode, every possible precaution should be taken, not only in flour mills and elevators, but in every industry producing carbonaceous dusts, and, in fact, in other industries as well, for explosions of aluminum dusts have occurred, and there is one report of an explosion of iron dust.” With the general and common knowledge existent as to the explosive character of carbonaceous dusts in general, and with the information which the railroad might have obtained, and which it should have obtained when it held itself out as qualified to handle pitch, as to the explosibility of pitch dust in particular, there can be no question that it was guilty of negligence in operating sparking electrical machinery and in sending open lights into a cloud of such dust. This conduct was directly in violation of the standards of eare in dealing with dust prescribed by regulations which had been in force in England and several states of this Union for a number of years, and, irrespective of regulations, was violative of ■ the standards of caution whieh would suggest themselves to a mind of reasonable prudence having such knowledge of the danger of dust explosions as the officials of the railroad must be presumed to have had. The mere fact that they had loaded coal with the same machinery and with similar open lights without explosion, and that they had been asspred that pitch would load like coal, offers no excuse for the negligence. In loading coal, the dust was kept down with the sprinkler, system which was not used in loading pitch; and it is a matter of common knowledge that the danger of explosion in a dust cloud is dependent upon its acquiring the proper density. And the fact that no explosion resulted in the loading of coal is not conclusive that the methods employed were such as in the exercise of due eare should have been used even there. Negligent methods of operation do not always or even generally result in disaster. The inquiry is, not whether a method of operation has been used without disastrous results, but whether it is of such a character that danger of injury is reasonably to be apprehended from its use. Where the element of danger is present, successful operation is to be deemed “fortunate rather than prudent.” And we think that knowledge of the fact that it was dangerous to use the sparking machinery and the open lights around the pitch dust was directly brought home to the officials of the railroad in charge of the loading. Just four days before the explosion, while pitch was being loaded on another vessel, pitch dust on the collector rings of one of the trimmers was ignited by electricity, and directions were given that the collector rings be thoroughly blown out, the statement being made in the written directions that “they get full of that pitch and flash between them.” And on this vessel, about four hours before the explosion, there was an igniting of dust around the collector rings and a flash of yellow smoke. While these incidents did not result in an explosion, they should have put the officials in charge of the loading on notice of danger. And the fore-, man, Rice, seems to have had an idea that danger was present, for, when he sent the stevedores in with the open lights, he cautioned them to be careful, as the “stuff,” meaning the pitch, was dangerous. The railroad company, then, undertook the loading of the pitch on the vessel, having held itself out. through .its published tariffs as qualified to perform this service. It had absolute control of the cargo and of all the details of., loading. The explosion occurred because it did the loading in such" a way as to create .a cloud of dust, and then brought into that dust cloud open lights and sparking electrical machinery. This was negligence because it knew, or in the exercise of ordinary care should have known; that' a cloud of carbonaceous dust was likely to explode if an adequate igniting agency were brought .in contact with it. The principles of law applicable are elementary, and no citation of authority is necessary. See, however, International M. M. S. S. Co. v. Fletcher (C. C. A. 2d) 296 F. 855; Grayson v. Ellerman Lines (1920) A. C. 466; The Willem Van Driel (C. C. A. 4th) 252 F. 35; Id. (D. C.) 242 F. 285; State of Maryland to Use of Goralski v. General Stevedoring Co. (D. C.) 213 F. 51, 52, Id. (C. C. A.) 219 F. 827; Quaker Oats Co. v. Grice (C. C. A. 2d) 195 F. 441; Barney v. Quaker Oats Co., 85 Vt. 372, 82 A. 113. It is argued'that there can be no recovery in behalf of the vessel, her crew and cargo, because the master observed the manner in which the loading was being done, and knew of the creation of the cloud of dust and the use of the trimmers .and the open lights. The answer to.this, as pointed out by the court below, is that the loading was in charge of tha railroad company, as an independent contractor, and the master had no duty or right of supervision ,as to instrumentalities adopted and methods used. Atlantic Transport Co. v. State of Maryland (C. C. A. 4th) 259 F. 23; The Satilla (C. C. A. 2d) 235 F. 58; Jeffries v. De Hart (C. C. A. 3d) 102 F. 765; Grayson v. Ellerman Lines (1920) A. C. 466. The duty rests upon the master, of course, to see that cargo is properly stowed so that the vessel will be seaworthy. The instrumentalities used for loading and the methods of work, however, are matters within the control of the contracting stevedore. In the absence of some showing that the master directed the use of negligent methods, expressly approved them, or consented to their use, we know of no principle upon which the stevedore can be absolved from liability to the vessel- for negligence in using them. The stevedoring company owes to the vessel and her owners the duty of using due care in the loading; but the vessel and her owners owe no such duty to the stevedoring company. See opinion of Lord Birkenhead in Grayson v. Ellerman Lines, supra. Negligence can be predicated only of failure in performance of duty, and the negligence is his to whom the duty appertains. The mere fact that an injured party may have had knowledge that negligent methods were being used does not, in the absence of contributory negligence, absolve the one guilty of such negligence from liability therefor. As to the injured stevedores, it is contended that they assumed the risk of their injury, and for that reason.cannot recover; but this contention manifestly cannot be sustained. There is nothing to show that these illiterate laboring men knew or appreciated the danger of the situation when they were negligently sent into a place which the master, because of superior opportunities of knowledge, should have known to be dangerous. “Assumption of risk does not eover those unseen or obscure dangers which cannot reasonably be discerned by an employee and which the employer properly may be held to know about.” 18 R. C. L. 686; Crimmins v. Booth, 202 Mass. 17, 88 N. E. 449, 132 Am. St. Rep. 468; Promer v. Milwaukee, etc., R. Co., 90 Wis. 215, 63 N. W. 90, 48 Am. St. Rep. 905; Galveston, etc., R. Co. v. Garrett, 73 Tex. 262, 13 S. W. 62, 15 Am. St. Rep. 781. And the employee does not assume risks due to the negligence of his employer unless they are obvious or fully known and appreciated by him. Waldron v. Director General (C. C. A. 4th) 266 F. 196; Brie R. Co. v. Collins (C. C. A. 2d) 259 F. 172; Choctaw, etc., R. Co. v. McDade, 191 U. S. 64, 68, 24 S. Ct. 24, 48 L. Ed. 96; Texas & Pac. R. Co. v. Archibald, 170 U. S. 665, 673, 18 S. Ct. 777, 42 L. Ed. 1188. As to the Lewis Company, the manufacturers of the pitch, we think that the court below properly dismissed it from the case. While there is some evidence that the pitch which it manufactured had a higher volatile content than certain other pitch handled by the railroad, there is no evidence that this rendered it or the dust created in handling it any more dangerous than any other pitch or pitch dust would have been. Pitch is not a dangerous substance, and there was no dangerous or vicious quality connected with this particular pitch which it was incumbent upon any one to communicate. Pitch dust, as we have seen, is dangerous just as is any other carbonaceous dust; but there is no more duty upon a manufacturer or shipper of pitch to communicate this fact than there would be upon a shipper of grain to communicate the fact that grain dust is explosive. The dust is not a vice of either pitch or grain. It is stirred up by the manner in which the pitch or grain is handled; and a shipper or manufacturer has the right to assume that a carrier or stevedoring company is familiar with the danger inherent in clouds of carbonaceous dusts and will protect against them accordingly. The decree- below will be affirmed in so far as it dismissed the Lewis Company from the case and in so far ’as it dismissed the cross-libel, but will be reversed in so far as it dismissed the libels filed against the railroad company; and the cause will be remanded for further proceedings in accordance with this opinion. Reversed in part, and remanded. Note. — Judge GRONER, who sat in the hearing of the ease, concurred in the conclusion expressed in the foregoing opinion, but, because of his .appointment to the Court of Appeals of the District of Columbia, and consequent removal from the Fourth Circuit, did not participate in the preparation of the opinion or in the decision.

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2024-08-24T03:29:51.129683

KANSAS CITY SOUTHERN RY. CO. et al. v. SILICA PRODUCTS CO. No. 8954. Circuit Court of Appeals, Eighth Circuit. March 13, 1931. Rehearing Denied May 4, 1931. Arthur C. Brown, of Kansas City, Mo., for appellants. Thomas E. Scofield, of Kansas City, Mo. (Henry N. Ess, I. N. Watson, John B. Gage, Powell C. Groner, and Paul V. Barnett, all of Kansas City, Mo., on the brief), for appellee. Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge. BOOTH, Circuit Judge, delivered the opinion of the Court. This is a patent suit in conventional form involving reissue patent No. 17,207, granted to Orlando A. Collings, February 5,1929, for “waterproof plastic.” The original patent, No. 1,650,864, was granted November 29, 1927; application filed April 3, 1922. Ownership is in appellee, Silica Products Company, plaintiff below. In the specifications of the original patent, as well as in the reissue, the invention is thus described: “This invention relates to waterproof plasties; and it comprises a method of waterproofing concrete, stucco, plaster of Paris, etc., wherein the materials employed for making such a plastic are admixed, at the time of gaging or prior thereto, with an insoluble dry mineral matter of the nature, of a gelatinizable ‘reversible colloid’, such as dry bentonite; and it further comprises as a new and waterproof material, a set calcareous plastic material, containing disseminated particles of .a relatively dry mineral material having the properties of a gelatinizable reversible colloid, such as bentonite; all as more fully hereinafter sot forth and as claimed.” The specifications further describe the purpose, process, and product as set out in the margin. Numerous defenses to the suit were set up, including (1) invalidity of the patent because the alleged invention was for an inoperable process and an impossible product; (2) invalidity for lack of invention in view cyf the prior art; (3) invalidity because the reissue patent was for a different invention than the original; (4) invalidity for lack of diligence in filing application for the reissue; (5) intervening rights of the defendant between the granting of the original patent and the reissue; (6) noninfringement. It is contended by defendants that the defense of invalidity on account of indefiniteness was also set up. We shall touch upon this later. The trial court, by its decree, adjudged claims 1, 2, 7, 8, 9, 10, 11, 12, 13, 14, and 15 of the reissue- patent valid and infringed; and ordered an injunction and an accounting. ■ The present appeal followed. Claims 1 to 10, inclusive, are identical in the original and in the reissue. Claim 2 may be taken as typical of the process; claim 7 as covering the ' intermediate stage plastic composition; claim 10 as covering a final stage product. Claim 12 of the reissue may be taken as typical of the first or dry stage of the mixture. They read as follows: “2. The process of preparing a calcareous plastic capable of becoming impervious to water on access of moisture which comprises mixing dry bentonite with water and a cement of the Portland cement type, the amount of water used being merely that which will be taken up by the cement. * * * “7. A plastic composition which will set to form a waterproof concrete comprising Portland cement and approximately five per cent, of bentonite. * * * “10. Set calcareous cement containing bentonite in such condition as to swell upon access of moisture thereto, thereby rendering said cement impervious to water. * * * “12. A composition consisting of hydraulic cement and bentonite adapted to form a plastic upon the addition of water.” It is thus seen that the claims cover not only the process but the product in three stages: dry, plastic and set. Operability. On the question of operable invention, much evidence was introduced, and it was of a contradictory character. Tests had been made on behalf of both parties, and the results of those tests were introduced in evidence. The results appeared to be contradictory. Some of the seeming contradiction arises from the fact that in the defendants’ tests, an amount of bentonite was used differing from the amount used in the plaintiff’s tests. This diversity arose from a difference in construction of the patent by those directing the tests for defendants and those directing them for plaintiff. In the specifications of the patent is found this language: “I use in concrete of normal composition, in addition to the usual materials, a small proportion of a dry mineral matter [bentonite]. * * *” (Italics ours.) Also in the specifications occurs this statement: “Concrete made with 2 to 5 per cent, bentonite is capable of withstanding considerable hydrostatic heads of water. Higher proportions may be used.” The exact amount, however, is not stated in the specifications. None of the claims specifies the amount except claims 7, 8, and 9. Claim 9 reads as follows: “A waterproof Portland cement concrete of at least normal strength characterized by the admixture of approximately five per cent, of bentonite with the cement before it has set.” The words “approximately five per cent, of bentonite” also occur in claims 7 and 8. Plaintiff contends that the language means that the amount of bentonite is to equal 5 per cent, of the amount of cement used. Defendants contend that the language means 5 per cent, of the whole concrete mix. We think the language in the three claims mentioned is ambiguous in reference to the amount of bentonite to be used. The trial court held that the percentage of bentonite was to be “understood as calculated upon the amount of cement used and not on the amount of concrete.” If this construction is adopted, the invention under the evidence is clearly operable. Furthermore, as we shall hereafter see, defendants have quite closely followed the process of plaintiff’s reissue patent and have produced a correspondingly like product. An infringer is estopped from denying utility and operability. Dunkley Co. v. Cent. Calif. Canneries (C. C. A.) 7 F.(2d) 972, 976; Boyce v. Stewart-Warner Corp. (C. C. A.) 220 F. 118, 126. We think the view of the trial court as to the amount of bentonite to be used is correct; and we reach that conclusion the more readily because of the rule that where the language used in claims is ambiguous, that construction should be adopted which will render the patent valid rather than one which will render it invalid. The Prior Art. Reliance is placed upon Kraus, 1,509,406, September 23, 1924; Kraus, 1,629,714, May 24,1927; Brookby, 1,627,952, May 10, 1927; Kraus, 1,509,478, September 23, 1924; Gos-sett, 1,487,057, March 18, 1924. The first three were cited in the Patent Office. In considering these prior art patents, it should be borne in mind that the prime object sought in the Collings patent, original and reissue, is the waterproofing of concrete, stucco, etc. The plasticity or plastic condition referred to in the specifications .and in some of the claims is merely an incident to one stage of the mixture. Kraus, 1,509,406, is concerned with the ceramic art and shows a method of increasing the plasticity of clay by mixing in bentonite - as a plasticizing agent. Kraus, 1,629,714, is merely .a divisional of 1,509,406. In neither of these patents is there any mention of concrete or Portland cement and no mention of bentonite for purposes of waterproofing. .The cement rock used by Kraus is not the equivalent of Portland cement. Brookby, 1,627,952, has for its object the production of a plastic cementitious material for use as a mortar. It makes use of Portland cement and incorporates “a small percentage of finely divided hydrated lime and a small percentage of finely divided, highly plastie. clay, such as plastic kaolin, china clay,” ete. No mention is made of bentonite and no suggestion is made that the hydrated lime may be omitted. ' Moreover, Brookby is not properly an anticipating reference, inasmuch as the Brookby application was filed later than the Collings application. Gossett, 1,487,057, is for a binding or bonding material which shall bind together various substances, vegetable or mineral, into a mass having the appearance of rock or stone. The binding material is made up of two solutions, in one of which bentonite is used along with iron rust and sulphate of copper. There is no mention of concrete or Portland cement and the bentonite is not mentioned as being used for a waterproofing agent. Kraus, 1,509,478, relates particularly to refractory cements or mortars; bentonite is used as a bonding material and as a plasticizing agent. No mention is made of Portland cement or concrete and no use is made or suggested of bentonite for waterproofing purposes. Departure. But it is contended by defendants that there is, in the reissue patent, a departure from the original patent which renders the reissue invalid; and if there is no departure, yet the claims 11 to 15 are invalid in view of the prior art. The reissue contains a number of minor changes in the specifications, and adds new claims (11 to 15), retaining the ten of the original patent. The changes made in the specifications are clarifying and explanatory. They apply as well to the old claims as to the new. There is no change in the fundamental invention claimed in the original application, viz., a waterproof concrete as a final product and a process for producing the same. The changes in the specifications and the new claims merely make more definite what was apparent from an analysis of the old specifications, viz., that in carrying out the process, three distinct products would or could be produced; one at each of three successive stages of the process. The first-stage product would be the dry mixture of the finely ground clinker and the bentonite with or without a filler or an aggregate. The second-stage product would be the plastic composition. The third or final-stage product would be the waterproof set concrete. The second-stage produet was covered by claim 7 in the original patent. The third or final-stage product was covered by several claims in the original patent; but the first-stage product was not covered by any of the claims of the original patent. It was to remedy this omission that the application of the reissue was made. The new claims 11 to 15 of the reissue cover the first-stage product. These claims are limited by the specifications and cover only a mixture which will be or may be produced in carrying out the process whose final result is a waterproof concrete. The new claims of the reissue are merely subeombination claims. As thus limited, each of the new claims finds a basis in the specifications as originally drawn. We hold that the reissue was not a departure and was not invalid within the authorities on the subject. Parker & Whipple Co. v. Yale Clock Co., 123 U. S. 87, 8 S. Ct. 38, 31 L. Ed. 100; Topliff v. Topliff, 145 U. S. 156, 12 S. Ct. 825, 36 L. Ed. 658; Universal, etc., Co. v. M. B. Schenek Co. (C. C.) 165 F. 344; Van Kannel, etc., Co. v. Winton, etc., Co. (C. C. A.) 276 F. 234. In the Topliff Case, the Supreme Court said (page 170 of 145 U. S., 12 S. Ct. 825, 831): “From this summary of the authorities it may be regarded .as the settled rule of this court that the power to reissue may be exercised when the patent is inoperative' by reason of the fact that the specification as originally drawn was defective or insufficient, or the claims were, narrower than the actual invention of the patentee, provided the error has arisen from inadvertence or mistake, and the patentee is guilty of no fraud or deception; but that such reissues are subject to-the following qualifications: “First. That it shall be for the same invention as the original patent, as such invention appears from the specification and claims of such original. * * * “Third. That this court will not review the decision of the commissioner upon the question of inadvertence, accident, or mistake, unless the matter is manifest from the record. * * * ” Diligence. Defendants further contend that the patentee failed to exercise due diligence in filing his application for reissue, and that therefore the reissue is invalid. We think this contention cannot be sustained. The application for reissue was filed eleven months after the issuance of the original patent. We fail to find from the evidence that either defendant suffered any prejudice by reason of the delay of eleven months. In the absence of such proof, the two-year rule is generally applied to reissue eases. In Chapman v. Wintroath, 252 U. S. 126, page 137, 40 S. Ct. 234, 236, 64 L. Ed. 491, the court said: “In reissue cases, where there was no statutory time prescribed for the making of an application for the correction of a patent, and although unusual diligence is required in such cases, this court adopted the two-year rule as reasonable by analogy to the law of public use before an application- for a patent. Mahn v. Harwood, 112 U. S. 354, 363, 5 S. Ct. 174, 6 S. Ct. 451, 28 L. Ed. 665; Wollensak v. Reiher, 115 U. S. 96, 101, 5 S. Ct. 1137, 29 L. Ed. 350.” See also Webster, etc., Co. v. Splitdorf, etc., Co., 264 U. S. 463, 44 S. Ct. 342, 68 L. Ed. 792; Topliff v. Topliff, supra. Indefiniteness. It is further contended in this court by defendants that the reissue patent is void for indefiniteness.' We think this defense is not open to defendants, first, because the defense is one which must be pleaded, and there is no sufficient allegation in the answer under which the defense could be made; and, secondly, the special allegation relied upon, in the answer, not being sufficient, no notice in connection with the general issue was given by defendants as required by 35 USCA § 69. Furthermore, the contention that the reissue patent was invalid for indefiniteness was not made at the trial and was not passed upon by the trial court. Speaking of this matter, that court said: “I have not considered whether the patent may- not be invalid for indefiniteness under the rule declared by the Supreme Court in Wood v. Underhill, 5 How. 1, 4,12 L. Ed. 23; Tyler v. Boston, 7 Wall. 327, 330, 19 L. Ed. 93; and the Incandescent Lamp Patent, 159 U. S. 465, 474, 16 S. Ct. 75, 40 L. Ed. 221, since that issue is not raised by the pleadings nor was that contention made at the trial.” Intervening Rights. Defendants contend that between the date of the issue- of the original patent and the date of the application for the reissue, they acquired certain intervening rights, so that the reissue patent cannot, now be enforced against them. These intervening rights are not very clearly- defined, but as we gather from the brief of counsel, they relate to the employment of bentonite m concrete to increase the plasticity or workability thereof. In view of what we have already said, we think there is no substantial merit in this contention of defendants. Walker on Patents (6th Ed.) § 299, states the law on intervening rights as follows (page 373): “An intervening right is acquired by any person who manufactures and/or sells an article, or uses a process, between the grant of the original patent and the filing of the application for reissue, and not covered by the claims of the original patent, said party having relied on the omission of the original patent to claim the invention now embraced in the enlarged or broadened claims of the reissue; and that by reason thereof he is immune from liability and enjoys an irrevocable and permanent license to continue to manufacture and/or sell and/or use the invention without restriction.” On the 7th of February, 1927, Charles P. Derleth became licensee of Collings under the application which ripened into patent No. 1,650,864. The licensee admitted the validity of the patent to be obtained,, and any reissue thereof. Mr. Derleth, proceeding under the license, sold bentonite under the trade name of “Colloy.” Mr. Derleth was fully acquainted with the .allowance of the patent and on December 5, 1927, wrote as- follows: “Mr. W. A. Collings, “1300 South Los Angeles St., “Los Angeles, California. “Dear Sir: “My congratulations to you in your success in having allowed the patent covering the use of Bentonite in concrete and Portland cement compositions. “We acknowledged Mr. Schofield’s advice of allowance as per the attacked copy and sincerely hope that the broad claims as originally requested have been allowed and it now is advisable to make fullest use of this patent. “If there is any way that we can co-operate in your activity in the West, please do not hesitate to advise.” Some time in 1928, the license was canceled by Mr. Derleth. On February 11,1928, defendant Colloy Products Company was incorporated, Mr. Derleth being a large stockholder, and it continued thereafter' tó sell its product “Colloy,” as stated' by its'counsel, “in reliance upon the limitations'of the plaintiff’s original patent.” In- -other words, Mr. Derleth and his company, the Colloy Products Company, in the esereise of their judgment, concluded that the process and the product of plaintiff’s patent lacked operability. But we have now held that the reissue patent, the first ten claims of which are identical with the ten claims of the original patent, is operable and valid. So far, therefore, as these ten claims are concerned, there can be no intervening rights' of defendants. The Colloy Products Company simply speculated on the validity of the original patent. And as to the claims added in the reissue, there could be no substantial intervening rights of 'defendants. The new claims cover the first stage product or mixture formed in carrying out the process. This was not covered by the original patent. Assuming, but without deciding, that defendants, by reason of this omission, had the right to make this first-stage product or mixture, they have not stopped there but have carried out the full process and produced the final, finished product. They are therefore infringers. We are unable to see how any substantial intervening rights of defendants are prejudiced by the enforcement of the new claims of the reissue patent. Infringement. There remains the question of infringement. The use by defendant railway company in making concrete with “Colloy” as a constituent is admitted, and the sale of “Colloy” by defendant Products Company to the railway company is also admitted. It is also admitted or proven that “Colloy” is made up of 40 per cent, of bentonite and 60 per cent, of silica. The process of admixture with the'Portland cement is substantially the same as in plaintiff’s patent. But defendants claim that the quantity of bentonite used by them is different from the quantity contemplated by the teaching of the patent; that the manner of use was different; and that the effect produced was different. As to the amount used, Dr. Roy cross-testified as follows : “I would say that the percentage of Colloy to the cement was not over four per cent. It may have been somewhat under four per cent. .Well, it might have been as low as two per cent, and possibly three per cent.; I would say as low as three per cent., possibly. I would estimate that it was somewhere between two and four per cent.” This would make the amount of bentonite used .8 per cent, to 1.6 per cent, of the Portland cement. It is to be noted that except in the claims 7, 8, and 9, the reissue patent puts no limitation on the amount of bentonite except that the specifications use the expression “a small proportion.” The reissue patent also contains this statement in the specifications: “The amount of bentonite added is that which is necessary for retaining the plastie properties and giving waterproof qualities, and will vary within wide limits, depending upon the extent of the plastic and waterproof properties desired and the qualities of bentonite used.” We think the amount used by defendants would come within the claims 1, 2.10, 11, 12, 13,14, apd 15, but not within 7, 8, and 9. As to the manner of the use of the bentonite, it is the contention of defendants that plaintiff’s patent requires that the bentonite shall remain in a dry state throughout the process, and also in the finished product, whereas defendants’ use of bentonite includes the wetting of it during the process. As to this contention, it is sufficient to say that defendants’ statement of what plaintiff’s patent requires is not in accord with our understanding of the teaching of the patent. As to defendants’ contention that the result of their use of bentonite is to produce a water-tightening and not a waterproofing in the finished product, and, in support of this contention, that they use a different agent for waterproofing, all that need be said is that defendants have followed the process of the patent with substantial closeness. If in some slight particular there has been a variance and the result has been a product inferior in waterproofing to the product of the patent, this will not avoid infringement. “One does not escape infringement by practicing invention imperfectly.” Gibbs v. Triumph Trap Co. (C. C. A.) 26 F.(2d) 312; Hobbs v. Beach, 180 U. S. 383, 401, 21 S. Ct. 409, 45 L. Ed. 586; Syracuse, etc., Co. v. Leroy, etc., Co. (D. C.) 233 F. 682; General Elec. Co. v. Alexander (C. C. A.) 280 F. 852, 855; McDonough v. Johnson-Wentworth Co., 30 F.(2d) 375, 384 (C. C. A. 8). Even if defendants used the bentonite, as is claimed, for plasticity and water-tightening, and not for waterproofing, this would not avoid infringement. The purpose and intent of defendants is immaterial. Kawneer Mfg. Co. v. Toledo, etc., Co. (D. C.) 232 F. 362; Thompson v. N. T. Bushnell Co. (C. C. A.) 96 F. 238; Parker v. Huhne, 18 Fed. Cas. No. 10,740. Our conclusion is that the decree should be modified so as not to hold claims 7, 8, and 9 infringed, and, as so modified, it is affirmed. “As water and cement after setting do not have quite their original joint volume and as a limit is placed to the contraction of the concrete as a whole by the rigidity of the coarser aggregate,' it follows that such a concrete must be, of necessity, more or less minutely pervious. * * * Sometimes this pervious character is unimportant, as in cases where the concrete is not used in wet or moist situations. But sometimes the pervious character is a serious objection, as in concrete exposed to water under hydrostatic head, in stucco coatings, etc. “It is the purpose of the present invention to obviate this penetrability by water. To this end, I use in concrete of normal composition, in addition to the usual materials, a small proportion of a dry mineral matter having the properties of a reversible swelling or gelatinizable colloid; that is, capable of swelling with water and of being dried without forfeiting its swelling power on again wetting. * * ♦ I regard some varieties of a mineral known as bentonite as the most available for the present purposes. * * * Although sometimes regarded as being, generically, a ‘clay’ bentonite is not really a clay in the ordinary sense. Unlike clays, a moderate degree of roasting does not impair materially its property of taking up water to form a plastic mass. Like the clays, however, the presence of free lime tends to hinder its assuming a dispersoid state or condition; and, for this reason and because its hydration requires time, it can be admixed with the wet concrete batch without much moistening or swelling. The water of the wet mix goes preferentially to the .cement constituents during the time occupied in setting and the bentonite remains relatively dry; in a condition in which it is able to take up water. After the concrete is set these minerals are hydrated and the bulk of the free lime has disappeared so that free swelling of the bentonite by water is no longer inhibited. * * * “The bentonite is advantageously used in a rather coarse condition although for some purposes, it may be used in a somewhat fiper condition. It may be admixed with cement in the clinker grinding mills or added to the mix just prior to making the concrete. In the concrete, it does not swell to any material extent during mixing and setting, for reasons stated ante, nor is it much affected by the cement; it remains in the wet material in its original unhydrated state during the setting. On subsequent exposure of the said concrete to water, tho moisture entering through any pore encounters the bentonite and swells it, effectually plugging the pore. Concrete made with 2 to 5 per cent bentonite is capable.of withstanding considerable hydrostatic-heads of water. Higher proportions may be used.”

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TIGER et al. v. TWIN STATE OIL CO. et al. No. 312. Circuit Court of Appeals, Tenth Circuit. March 16, 1931. Charles B. Rogers, of Tulsa, Okl. (E. C. McMichael, of Sapulpa, Okl., on the brief), for appellants. John M. Goldesberry, U. S. Atty., of Tulsa, Okl., for appellee the United States. William J. Gregg, of Tulsa, Okl. (G. Earl Shaffer and R. E. Berger, both of Tulsa, Okl., on the brief), for other appellees. Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges. McDERMOTT, Circuit Judge. The appellants, plaintiffs below, are the children of a full-blood Creek Indian whose English name was John Tiger. Plaintiffs demand possession of certain land allotted by the Dawes Commission to one Do-saw-cher, a full-blood Creek, and for an accounting for rents and profits. The defendants in possession deny plaintiffs’ claim; they assert that Do-saw-cher was the Indian name of John Tiger; that John Tiger had been allotted other land, enjoyed the use thereof for years, and sold it and enjoyed the proceeds. That shortly after the allotment to Do-saweher was made the government discovered that it was a duplicate allotment, the same Indian having theretofore received his allotment under his English name; that upon discovery of the error, the United States canceled the duplicate allotment, and -reallotted the land to Leslie King and Alice Colbert, other Creeks entitled to allotments, through whom defendants claim. The United States appeared in the case for itself and on behalf of the Secretary of the Interior and Leslie'King and Alice Colbert, and set up in detail the facts concerning the duplication of allotments, and affirmatively prayed for a decree canceling the allotment to Do-sawcher on account of the gross mistake of fact and law in'the making thereof, and that the title of Leslie King and Alice Colbert be quieted in them and their assigns. Upon the issues so joined the case was tried. While there is room for conjecture in the tribal records, the evidence leaves no doubt as to the facts. OiL September 9, 1899, Mrs. Emma Lynch, a white woman, was appointed guardian for one “Euehee Indian boy whose name is John Tiger, a minor, under the age of 14 years.” ■ The name this boy was known under, in the Euehee Tribe, was Do-saw-eher. Mrs. Lynch then made application for an allotment for John Tiger, her ward. On September 3, 1902, allotment deeds for the land selected by Mrs. Lynch were executed to John Tiger, which were approved by the Secretary of the Interior on December 22, 1902, and filed for record on December 30, 1902. This is not the land involved in this aetion. Later Joseph Bruner was appointed his guardian, and as such executed a departmental oil and gas lease for him on the land so deeded to him. Siller Kemohah married John Tiger on September 5, 1913; he was known to her as John Tiger Lynch, getting the “Lynch” from his guardian. The marriage license names him as John Tiger. His wife testified that her husband was known in the Euehee Tribe as Do-saw-cher. She and John Tiger are the parents of the plaintiffs. He enlisted in the United States Army as John Tiger, and during his service his wife made several applications for the payment to her of royalties from the land deeded to her husband, and in such applications described herself as “Siller Tiger, the wife of J ohn Tiger.” The royalties were paid to her. In 1919 John Tiger applied for a removal of his restrictions, which was granted. In the same year he sold the land to W. R. McKee, the deed being executed by John and Siller Tiger. In 1920 Siller Tiger procured a divorce from her husband John Tiger, and later married Kemohah. John Tiger died in 1924. From this brief recital it incontrovertibly appears that the father of plaintiffs, using his English name of John Tiger, accepted an allotment made to him, enjoyed the use of it for years, sold it and, used the proceeds. The object of this aetion is to procure anothr er allotment under his Indian name of Do-saw-cher. Plaintiffs’ claim is that the “John Tiger” appearing on the records of the Dawes Commission was intended to identify another Indian called “Johnny” or “John Peter,” and that John Tiger accepted, used and sold an allotment intended for John Peter, and has never had his own allotment. The trial court found against this'claim on the facts, and we agree. But it is immaterial; for it cannot be disputed that this land was intentionally allotted and deeded to the father of plaintiffs, and the name used by him is but incidental. We turn now to the history of the land involved in this action. . On the rolls of the Dawes Commission appeared the name “Do-saw-eher.” No one applied for an allotment under this enrollment, and accordingly the Dawes Commission arbitrarily allotted to “Do-saw-eher” the land in litigation, and in 1993 patents to him were executed, approved and recorded. They were sent to the Principal Chief of the Creek Nation for delivery, but no one called for them. In 1904 the Dawes Commission discovered that John Tiger, who already had his allotment, was the same .individual as Do-saw-eher, and that the Do-saw-cher allotment was therefore a duplicate. The Commission procured affidavits supporting the fact of duplication and transmitted them to the Secretary of the Interior with its recommendation that Do-saw-cher’s name be stricken from the rolls and the deeds issued in his name be canceled. The Secretary directed that this be done, and accordingly the name Do-saw-eher was stricken from the rolls; the Principal Chief of the Tribe canceled his signature to the deeds, and they were returned to the Secretary of the Interior. The land was later allotted to Leslie King and Alice Colbert, under whom defendants claim. Leslie King and Alice Colbert, and their assigns, have been in possession since 1907 or 1908. The trial court denied a motion to dismiss the answer and cross-petition of the United States, and the answers 1 of the defendants; and upon final hearing dismissed the plaintiffs’ bill and entered a decree upon the cross-petition of the United States, striking the name of Do-saw-cher from the rolls, canceling the deeds issued in his name, and quieting the titles of the defendants. The plaintiffs appeal. There can be no question of the correctness of that part of the decree which dismissed plaintiffs’ bill. There is not the slightest doubt that the father of plaintiffs was granted his full allotment, accepted it, enjoyed it and sold it. That neither he nor his children are entitled to two allotments is conceded. The assertion of a claim to a second allotment is a fraud on every other member of the Tribe. That courts of equity can never he used as an aid in the perpetration of a fraud has been so long settled that the rule has become axiomatic. The plaintiffs’ father has had his full share of the tribal property. That he used the name of John Tiger for that purpose is but incidental, for allotments are made to individuals and not to names. The father of plaintiffs cannot use his English name of Tiger to get one full allotment and his Indian name of Do-saw-cher to get another. There is another all-sufficient reason why plaintiffs cannot prevail. Section 23 of the Creek Agreement (31 Stat. 861, 867) provides : “Any allottee accepting such deed shall be deemed to assent to the allotment and conveyance of all the lands of the tribe, as provided herein, and as a relinquishment of all his right, title, and interest in and to the same, except in the proceeds of lands reserved from allotment. “The acceptance of deeds of minors and incompetents, by persons authorized to select their allotments for them, shall be deemed sufficient to bind such minors and incompetents to allotment and conveyance of all other lands of the tribe, as provided herein.” By accepting the allotment selected by Mrs. Lynch, the plaintiffs’ father expressly relinquished all his right, title, and interest to the land here in controversy. Plaintiffs argue that John Tiger and Do-saw-cher are two individuals; the evidence to the contrary is overwhelming; but if they are, there is no dispute that plaintiffs’ father is the individual who accepted the allotment he later sold to McKee; .if Do-sawcher is another individual, he is a phantom that is no kin to plaintiffs, and they have no concern with his allotment or this lawsuit. Plaintiffs claim that John Tiger on-.the rolls is in fact John Peter in the flesh; that John Tiger in the flesh is Do-saw-cher on the rolls; that plaintiffs’ father accepted John Peter’s allotment by mistake, lived on it for years and sold it by mistake. But the claim is not. borne out by the record, and is contradicted by the fact that even now the plaintiffs in this action are suing in the state courts to recover the land sold to McKee, land which in this court they assert to belong to the heirs of John Peter. But this is enough. Turn as we will, we come back to the undisputed fact that plaintiffs’ father was the boy for whom Emma Lynch selected the land deeded to John Tiger; that the Commission intended that boy to have that particular land; he then became the “John Tiger” on the rolls, as he remained John Tiger throughout his life. The father of plaintiffs has had his allotment; his children are not entitled to another. This leaves for disposition the correctness of that part of the decree granting the affirmative relief prayed for by the United States against the plaintiffs, the heirs of the individual whose name was carried on the rolls as “John Tiger” and as “Do-saw-cher.” The plaintiffs challenge the right of the United States to pray for the relief granted, on the ground that the United States has no interest in the controversy. The point is not well. taken. The United States was a party to the agreement with the Creek Nation which provided for an equitable distribution of the tribal lands among the members of the Tribe, and officers of the United States were charged with the administra^ tion of that agreement; the proper administration of that agreement is a part of a “great governmental project, having for its object the social and industrial advancement of the Indians.” United States v. Allen (C. C. A. 8) 179 F. 13. Every member of the Tribe has an interest in preventing one member from getting more than his share of the tribal lands; the United States is charged with a responsibility to all the members of the Tribe, and has a right to come into its own courts in their interest. No pecuniary interest is necessary. Heckman v. United States, 224 U. S. 413, 32 S. Ct. 424, 56 L. Ed. 820; United States v. New Orleans Pac. Ry. Co., 248 U. S. 507, 39 S. Ct. 175, 63 L. Ed. 388, and cases therein cited. It is argued that the defendants may not interpose an equitable defense in an action at law. Equitable defenses may now be interposed in actions at law. Judicial Code § 274b (28 USCA § 398). Coming now to the merits. The defendants rely in part upon the action of the Secretary of the Interior in removing the name of Do-saw-cher from the rolls, and the cancellation of the deeds by the Principal Chief and their surrender. The plaintiffs urge that such acts were ineffectual. Whether, under the circumstances of this ease and under the Creek Agreement, the Secretary lost jurisdiction prior to some act of the allottee indicating an acceptance of the allotment, is much mooted in the briefs, but need not be decided. For even if he had not lost jurisdiction, he may not act arbitrarily. Cornelius v. Kessel, 128 U. S. 456, 9 S. Ct. 122, 32 L. Ed. 482. The Secretary must give notice and an opportunity to he heard to those whose rights will be affected by the correction of the rolls or the cancellation of instruments. This he did not do. Brown v. Hitchcock, 173 U. S. 473, 19 S. Ct. 485, 43 L. Ed. 772; Garfield v. U. S. ex rel. Goldsby, 211 U. S. 249, 29 S. Ct. 62, 53 L. Ed. 168. The point is, however, not now material. The heirs of Do-saw-eher are now in a court of competent jurisdiction. They have now had ample notice of the prayer of the government to cancel the deeds and eliminate the name from the rolls; they have had their opportunity to be heard. The simple question remains, Is there power in the court to strike Do-saw-cher’s name from the roll and cancel the deeds to him ? We have no doubt of the existence of the power, and it. is one that has been exercised. Porter v. United States (C. C. A. 8) 260 F. 1. It would be a strange anomaly indeed if no power existed anywhere to correct such a manifest error as is disclosed by this record. John Tiger' cannot be awarded two allotments without a breach of the agreement between the Creek Nation and the United States. If he cannot have two allotments — and he cannot — and there is no power to cancel the deeds to him and reallot the lands, then the land must remain as tribal land, another result not contemplated by the agreement. It is argued that the act of the Dawes Commission in enrolling Do-saw-eher was the determination of a quasi-judicial body that he was entitled to an allotment. This is true. A determination of the Dawes Commission, when acting within its jurisdiction, is subject only “to such attacks as eould successfully be made upon judgments of this ■character for fraud or mistake,” and such attacks must be supported by “full and convincing proof.” United States v. Wildcat, 244 U. S. 111, 37 S. Ct. 561, 564, 61 L. Ed. 1024; United States v. Atkins, 260 U. S. 220, 43 S. Ct. 78, 67 L. Ed. 224. Reliance is also placed upon United States v. Lena (C. C. A. 3) 261 F. 144, wherein it was held in substance that if a claim was made before the Dawes Commission that a duplication existed, and the Commission considered the matter and determined that no duplication in fact existed, that the determination of the Com- . mission cannot be impeached. In the ease at bar the Commission did not determine that no duplication existed; on the contrary, when its attention was called to the matter, it found .that a duplication did exist, and the record leaves no doubt of the correctness of that finding. This court is not only bound by the decisions in the Wildcat and Atkins Cases, but is in thorough accord with the principles there announced. If there is to be any stability to Indian titles, the determination of the Dawes Commission as to matters confided to its jurisdiction cannot be collaterally re-examined on the ground that the Commission made a mistake in its determination. But that is not this case. The Commission in this case determined that the father of the plaintiffs was a member of the Tribe and entitled to an allotment. The mistake was in making two records of the one determination. Within the strict confines of the Wildcat and Atkins Cases, there is ample power in the court to correct this manifest error. In the first place, the action of the Dawes Commission in making a second allotment to the same Indian is in violation of the agreement it was administering, is beyond its power, and is void. Courts of equity have power to set aside actions of administrative boards or of inferior courts which are in excess of their jurisdiction. United States v. Walker, 109 U. S. 258, 3 S. Ct. 277, 27 L. Ed. 927. Again, the Supreme Court of the United States in the Wildcat and Atkins Cases expressly held that determinations of the Dawes Commission were subject to attack for extrinsic fraud or mistake. It conclusively appears that John Tiger and Do-saw-cher were but two names for one individual. A determination that Do-saw-cher should remain on the rolls and be allotted land after he, under the name of Tiger, had already received his allotment, eould only be brought about by fraud or gross mistake. If the Commission intended to give two allotments to one Creek, it was fraud. But of course it did not so intend. It is entirely clear that its actions were the result of a mistake; not an intrinsic mistake in the decision of disputed facts or law in a matter presented to and determined by it, as in the Wildcat and Atkins Cases, but a mere clerical oversight in carrying one Indian on the rolls under two names. In the Atkins Case an actual controversy was presented and determined as to the existence of Tommy Atkins; a mistake in that determination is intrinsic, and does not void the determination. But no controversy was presented or determined here as to the existence of Do-saw-eher. He did exist. He was entitled to enrollment and allotment. But he was already enrolled, and already had his allotment under another name. The duplicate erirollment and allotment was not an intrinsic mistake in a determination, but an extrinsic mistake in making two records of one determination. Horton v. Stegmyer (C. C. A. 8) 175 F. 756, 20 Ann. Cas. 1134; Luikart v. Farmers’ Lumber Co. (C. C. A. 10) 38 F.(2d) 588. If such a mistake can not he corrected, then no power would exist to correct the error of a scrivener for the Commission who described a section, instead of a quarter-section, in an allotment deed. We cannot conclude that the government is so helpless. We therefore hold that the trial court properly corrected this manifest error, and entered a decree accordingly. Affirmed.

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2024-08-24T03:29:51.129235

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MASSACHUSETTS BONDING & INS. CO. v. CLYMER MFG. CO. et al. No. 359. Circuit Court of Appeals, Tenth Circuit. March 17, 1931. Carle Whitehead, of Denver, Colo. (Wm. E. Hutton, Julian P. Nordlund, and Albert L. Yogi, all of Denver, Colo., on the brief), for appellant. Kenaz Huffman, of Denver, Colo. (Frank E. Gove, of Denver, Colo., and Ira J. Wilson, of Chicago, Ill., on the brief), for appellees. Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges. PHILLIPS, Circuit Judge. Appellees brought suit against the Shot-Lite Corporation of America for infringement of a patent. On January 20, 1928, an interlocutory decree was entered therein adjudging the patent valid and the Shot-Lite Corporation guilty of infringement. On April 2, 1928, the Shot-Lite Corporation appealed from this decree. On April 28, 1928, it gave an appeal bond, with appellant as surety, in the sum of $750.00, conditioned as follows: “Now, the condition of the above obligation is sneh, that if the said The Shot-Lite Corporation of America shall prosecute said appeal to effect, and answer all damages and costs, if it fail to make good its plea, then the above obligation to be void, else to remain in full force and virtue.” Thereafter, the Shot-Lite Corporation dismissed sueh appeal and paid all the appellate court costs. On April 30, 1930, appellees filed a motion in the patent infringement suit for judgment for the full amount of the bond, alleging that the costs taxed in the lower court were in excess of sueh amount and were unpaid. The district court gave judgment for the full amount of the bond. This is an appeal therefrom. Section 869, title 28, USCA, provides: “Every justice or judge signing a citation on any writ of error, shall, except in cases brought up by the United States or .by direction of any department of the Government, take good and sufficient security that the plaintiff in error or the appellant shall prosecute his writ or appeal to effeet, and, if he fail to make his plea good, shall answer all damages and costs, where the writ is a supersedeas and stays execution, or all costs only where it is not a supersedeas as aforesaid.” It will be noted that the condition of the bond complies with the statutory requirement for a supersedeas bond, rather than a cost bond. Section 227a, title 28, USCA (44 Stat. 1261), reads as follows: “When in any suit in equity for the infringement of letters patent for inventions, a decree is rendered which is final except for the ordering of an accounting, an appeal may be taken from sueh deeree to the circuit court of appeals: Provided, That such appeal be taken within thirty days from the entry of sueh deeree or from February 28, 1927; and the proceedings upon the accounting in the court below shall not be stayed unless so ordered by that court during the pendency of sueh appeal.” Upon appeal to the Circuit Court of Appeals from an interlocutory deeree granting or continuing an injunction, the appellant is not entitled to a supersedeas as a matter of right, and it is within the discretion of the Circuit Court to grant or refuse it. In re Haberman Mfg. Co., 147 U. S. 525, 13 S. Ct. 527, 37 L. Ed. 266; Virginian Ry. Co. v. United States, 272 U. S. 658, 672, 47 S. Ct. 222, 71 L. Ed. 463; Lalance & Grosjean Mfg. Co. v. Habermann Mfg. Co. (C. C.) 54 F. 375; Timolat v. Philadelphia Pneumatic Tool Co. (C. C.) 130 F. 903. Furthermore, the bond was given more than sixty days after the interlocutory deeree was entered and it could not have operated as a supersedeas without an order of the court to that effeet. No such' order was made. Section 874, title 28, USCA. In their brief, counsel for appellees say that “it may be admitted that the bond is not a supersedeas bond but a plain cost bond on appeal.” We will, therefore, consider it as a cost bond and not as a supersedeas bond. In Fidelity & Deposit Co. v. Expanded Metal Co. (C. C. A. 3) 183 F. 568, the court held that the phrase “all costs” in a cost bond on appeal included both trial and appellate court costs. Sueh conclusion is predicated upon the proposition that, since the phrase “all costs” in the condition provided for a supersedeas bond includes both trial and appellate court costs, the same words in the condition provided for a cost bond should be given the same meaning. This decision has been followed in Oehring v. Fox Typewriter Co. (C. C. A. 2) 266 F. 682, 12 A. L. R. 718; American Surety Co. v. United States (C. C. A. 5) 239 F. 680; Pacific Coast Casualty Co. v. Harvey (C. C. A. 9) 250 F. 952. This, however, is contrary to the practice-in this circuit. The amount, of the cost bond is seldom fixed high enough to cover the costs in both the trial and the appellate courts. This is well illustrated by the instant case, where the amount of the bond was $750.00 and the trial court costs were $2,-493.61. A judgment or decree in the trial court includes the costs in that eourt. Such costs are merged in the judgment. They are collectible under the word “damages” in the supersedeas bond, which covers the entire money judgment, of which the costs are a part. Cranor v. School Dist., 81 Mo. App. 152, 154; Id., 151 Mo. 119, 52 S. W. 232; Schroeder v. Boyce, 127 Mich. 33, 86 N. W. 387, 388. Therefore, in order to construe a supersedeas bond as covering the costs in both the trial and the appellate courts, it is not necessary to construe the phrase “all costs” as covering trial court costs because, as stated, such costs are covered by the word “damages.” It is our conclusion that the phrase “all costs,” in both supersedeas and cost bonds, includes only the costs in the appellate court. To hold otherwise would require the appellant, who elects to give a cost bond and not to supersede the judgment or decree, to give security for the trial court costs the same as in a supersedeas bond, and to remain subject to execution pending appeal for the enT foreement of such judgment as to costs. We do not think Congress intended to so penalize the right of appeal. It is our conclusion that the bond in the instant case covered only the costs in the appellate court. The cause is reversed and remanded with instructions to enter judgment for appellant.

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2024-08-24T03:29:51.129235

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LEWIS et al. v. REYNOLDS. No. 369. Circuit Court of Appeals, Tenth Circuit. March 17, 1931. Rehearing Denied April 20, 1931. N. E. Corthell, of Laramie, Wyo. (A. W. McCollough and M. E. Corthell, both of Laramie, Wyo., on the brief), for appellants. John R. Wheeler, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (C. M. Charest, Gen. Counsel, and P. E. Miller, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., and A. D. Walton, U. S. Atty., of Cheyenne, Wyo., on the brief), for appellee. Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges. PHILLIPS, Circuit Judge. This is an action at law brought by Edgar Percy'Lewis and Richard F. Cooper, as trustees under the will of Arthur Francis Thomas Cooper, deceased, to recover $7,297.16 alleged to have been wrongfully collected as federal income tax assessed against the estate of Cooper for 1920. On February 18, 1921, the administrator of such estate filed an income tax return for the period from January 1 to December 12, 1920 — a final settlement of the estate having been made on the latter date. In such return, deductions were claimed on account of the following expenditures made by the administrator: Attorney’s fees, $20,750; state inheritance tax, $16,870; publishing notices, $67.52; probate court fees, $26.00; and premium on administrator’s bond, $105.55. A personal exemption of one thousand dollars was claimed and the normal tax on the first four thousand dollars was computed at four per cent. On November 24, 1925, the Commissioner determined the tax upon such return. He disallowed all of such deductions except the item of attorney’s fees. He determined that Cooper, deceased, was a non-resident alien of Great Britain and Ireland at the time of his death and, therefore, disallowed the exemption of one thousand dollars and computed the tax on the first four thousand dollars at eight per cent. He assessed a deficiency tax of $7,297.16. On March 21,1926, the trustees paid such deficiency assessment under protest. On July 27,1926, the trustees filed a claim for refund of $7,297.16, based on the disallowance of such deductions and exemption and the computation of the normal tax at eight per cent, instead of four per cent. A letter from the Commissioner to the trustees, dated May 18, 1929, stated that the payment of $20,750 for attorney’s fees was not allowable as a deduction from income, and set forth a corrected computation of the tax. In such computation, the Commissioner allowed the amount paid as inheritance tax as a deduction, allowed the personal exemption of one thousand dollars and computed the normal tax at four per cent. Such computation showed a total tax liability of $21,-946.96, and the tax theretofore assessed and paid as $20,379.77. Such letter further stated: “Since the correct computation results in an' additional tax as indicated above which is barred from assessment by the statute of limitations your claim will be rejected on the next schedule to be approved by the commissioner.” The trial court held that the claim for refund was properly denied and entered a judgment accordingly. The trustees have appealed. ■ • • Counsel for the trustees contend that the Commissioner -yvas without authority to redetermine and reassess the tax after the statute of limitations had run' against the assessment, and that he was restricted in his consideration of the claim for refund, at the time of his decision, to a determination of whether the trustees were entitled to deductions of the specific items set up in the claim for refund. Counsel for the collector contend that the Commissioner had the power, upon consideration of the claim for refund, to reconsider the entire assessment and to determine whether or not the trustees had overpaid the tax. Section 284 (a) of the Revenue Act of 1926 (44 Stat. 66), section 1065 (a), title 26, USCA, in part provides: “(a) Where there has been an overpayment of any income, war-profits, or excess-profits tax imposed by this Act (Feb. 26, 1926), the Act entitled 'An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,’ approved August 5, 1909, the Act entitled 'An Act to reduce. tariff duties and to provide revenue for the Government, and for other purposes,’ approved October 3, 1913, the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, the Revenue Act of 1921, or the' Revenue Act of 1924, or any such Act as amended, the amount of such overpayment shall, except as provided in subdivision (d), be credited against any income, war-profits, or excess-profits tax or installment thereof then due from- the taxpayer, and any balance of such excess shall be refunded immediately to the taxpayer.” Section 322 (a) and (b) (1) of the Revenue Act of 1928 (45 Stat. 861), section 2322 (a) and (b) (1) title 26, USCA, in part provides: “(a) Authorization. Where there has been an overpayment of any tax imposed by this title, the amount of such overpayment shall be credited against any income, war-profits, or excess-profits tax or installment thereof then due from the taxpayer, and any balance shall be refunded immediately to the taxpayer. “(b) Limitation on Allowance. — (1) Period of limitation. No such credit or refund shall be allowed or made after two years from the time the tax was paid, unless before the expiration of such period a claim therefor is filed by the taxpayer.” The above quoted provisions clearly limit refunds to overpayments. It follows that the ultimate question presented for decision, upon a claim for refund, is whether the taxpayer has overpaid his tax. This involves a re-determination of the entire tax liability. While no new assessment can be made, after the bar of the statute has fallen, the taxpayer, nevertheless, is not entitled to a refund unless he has overpaid his tax. The action to recover on a claim for refund is in the nature of an action for money had and received, and it is incumbent upon the claimant to show tha,t the United States has money which belongs to him. Champ Spring Co. v. United States (C. C. A. 8) 47 F.(2d) 1. Since, in the instant ease, the trustees had not overpaid the tax, the claim for refund was properly denied. Judgment affirmed.

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HOGAN et al. v. UNITED STATES. No. 5991. Circuit Court of Appeals, Fifth Circuit. April 3, 1931. Edwin H. Grace and Edwin C. Hollins, both of New Orleans, La., for appellants. Philip H. Mecom, U. S. Atty., and Elmer A. Mottet, Asst. U. S. Atty., both of Shreveport, La., and A. W. Henderson, Sp. Asst. to Atty. Gen., for the United States. Before FOSTER, Circuit Judge, and HUTCHESON and SIBLEY, District Judges. HUTCHESON, District Judge. On an indictment charging in the first count conspiracy to handle intoxicating liquors in violation of both the National Prohibition and the tariff laws, in the second count unlawful importation of intoxicating liquors, in the third count unlawful concealment thereof after importation, and in the fourth count unlawful transportation, ten defendants, appellants here, were convicted. Four were convicted on all four counts; four on counts 2, 3, and 4, while two, Bryan and Smith, were convicted on the conspiracy count alone. Appellants complain of the action of the court below in overruling their motion to quash and their demurrers to the four counts of the indictment, while error is assigned to the ruling in all the counts, the brief argues only the error as to the conspiracy count submitting the point as to the other three counts without argument. There is no merit in the attack on the conspiracy count. It is competent to charge,, and the indictment does charge, simply and clearly a single conspiracy to violate both the tariff and the prohibition acts, and proof as to either will support conviction. McDonnell v. U. S. (C. C. A.) 19 F.(2d) 801. Not only in the general charging part of the indictment, but in the statement of the overt acts, the conspiracy is fully and sufficiently alleged. Miller v. U. S. (C. C. A.) 300 F. 529; Hartson v. U. S. (C. C. A.) 14 F.(2d) 561; Tomplain v. U. S. (C. C. A.) 42 F.(2d) 203; Perry v. U. S. (G. C. A.) 39 F.(2d) 52; Wong Tai v. U. S., 273 U. S. 77, 47 S. Ct. 300, 71 L. Ed. 545. Nor was there error in the court’s action on the other counts except the third. The third count failing to charge that the liquor in question had theretofore been unlawfully imported, and being therefore defective, the demurrer to this count should have been sustained. Hartson v. U. S. (C. C. A.) 14 F.(2d) 561. This error is harmless, however, because the sentences imposed upon the defendants were less than might have been imposed upon the valid counts of the indictment. The contention which the appellants mainly labor is that there was error in the admission of the evidence of the chief Government witness himself a eoeonspirator, as to conversations and transactions had in January and February, 1929, at Abbeville, La., with one of the defendants, Hogan, whom the evidence shows to have been one of the moving spirits in the conspiracy, as to shipments of liquor from Abbeville, appellants claiming that this was in effect an admission in proof of other crimes than those charged, and that it was therefore highly prejudicial to them. The point is wholly without merit. While it is true that the indictment does charge in the conclusion of the stating part that “thereafter intoxicating liquors were to be transported to Gueydan, Louisiana, from which point they were again to be transported to various places,” the indictment is not and cannot be thereby limited to the particular Gueydan transaction referred to in the statement of overt acts; and in the substantive counts of the indictment. For not only is . the date of the beginning alleged as on or about April 1, 1929, of course immaterial as to fixing the starting time of the conspiracy, but the indictment expressly alleges that the conspiracy was begun and continued at Abbeville and Gueydan in the parish of Vermillion, at Lake Arthur, in the parish of Jefferson Davis, and in the parish of Cameron, state of Louisiana. More than that, it continues alleging generally that the parties named in it conspired “to commit 'certain offenses against the United States; that is the offenses of unlawfully transporting into and unlawfully possessing within the United States intoxicating liquors,” and further, that “such scheme and conspiracy was to be carried out in substantially the following manner; that said defendants were to bring said intoxicating liquors into the United States at various places along the Southern coast of the State of Louisiana.” In the light of the specific allegations in the indictment as to Abbeville, all of the elaborate structure of complaint which appellants have raised against the admitted evidence falls. Besides, had the indictment omitted the specific reference to Abbeville, the proof as showing the inception of, and' characterizing the relation to each other of the parties would be admissible against the objection urged, for if evidence is relevant to and admissible in proof of the offense in question, it is not rendered inadmissible because it might have a tendency to prove the commission of other offenses. Nielson v. U. S. (C. C. A.) 24 F.(2d) 802, 803; Haffa v. U. S. (C. C. A.) 36 F.(2d) 1. Appellants also urge that the evidence is insufficient to support the conviction. While it is true that the evidence on the part of the United States consists largely of the.testimony of accomplices and eoeonspirators, not one syllable of evidence was offered by defendants in rebuttal, and the testimony, if believed, was ample to establish the guilt of each of the defendants. The court, in a full, comprehensive, and fair general charge submitted the ease to the jury on the theories as well of the defendants as of the government, and no error either in the matter of the charges given or of those refused is shown. Appellants make an additional point upon the introduction over their objection, of evidence in support of one of the overt acts charged in the conspiracy count, the attempted bribery of an officer to permit the handling of liquors through his parish. The admission of this evidence was not error. It was offered, not as proof of an independent offense, but as part of the arrangements undertaken for the effective carrying out of the conspiracy. It was germane to it, and while it may have suggested the commission of another offense, it was not offered for that purpose, nor is it objectionable as such because of that tendency. “The mere fact, if it be a fact, that such admitted testimony showed a minor conspiracy to commit an unlawful act other than those charged in the indictment, would not render such evidence incompetent, provided it tended to prove a necessary ingredient of the major conspiracy.” Haifa v. U. S. (C. C. A.) 36 F.(2d) 1, 3; Nielson v. U. S. (C. C. A.) 24 F.(2d) 802, 803. Any relevant act tending to prove the general character and object of the conspiracy is admissible, even though it tends to prove the commission of a separate offense. Woodman v. U. S. (C. C. A.) 30 F.(2d) 482, 483; Martin v. U. S. (C. C. A.) 17 F.(2d) 973. The ease of Cucchia v. U. S. (C. C. A.) 17 F.(2d) 86, cited by appellants, is not in principle opposed. That was a fact case, in which the court, after announcing the principle as above stated, held that the proof offered was not germane to the conspiracy charged, but related wholly to an independent offense. Finding the record without reversible error, the judgment of the court below is affirmed.

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WABASH R. CO. v. LEWIS et ux. No. 8870. Circuit Court of Appeals, Eighth Circuit. March 11, 1931. Paid M. Peterson, of Columbia, Mo. (Homer Hall, of St. Louis, Mo., and Boyle G. Clark and Nick T. Cave, both of Columbia, Mo., on the brief), for appellant. Don C. Carter, of Sturgeon, Mo., for appellees. Before STONE and GARDNER, Circuit Judges, and WYMAN, District Judge. WYMAN, District Judge. This is an appeal from a judgment rendered by the United States District Court for the Central Division of the Western District of Missouri, in an action brought by the appellees, as plaintiffs below, against appellant, defendant below, for the recovery of $7,500 in damages alleged to have resulted to the residence property of the plaintiffs, situated at Columbia, Mo., by reason of the failure on the part of the defendant railroad company to construct and maintain necessary and proper ditches and openings along and through a certain embankment constructed and used by said railroad company for and as a roadbed for certain of its spur tracks. The petition of the plaintiffs alleges, among other things, ownership in the plaintiffs of the property alleged to have been damaged; construction of the embankment or roadbed by the defendant; its failure and negleet to construct, maintain, and keep open suitable and necessary ditches and drains along said roadbed, and sufficient and necessary openings through and across said roadbed or embankment; and that by reason of said failure and negleet, on the 19th and 28th days of June in the year 1928, and on the 30th day of April and the 1st day of May, in the year 1929, waters, including surface waters, were gathered on the north and west side of said embankment, and were held and forced back, across, on, and over the property of the plaintiffs by reason of which the plaintiffs were damaged in the sum of $7,500. The defendant, by way of answer, interposed a general denial. The ease was tried to a jury, and at the conclusion of all of the evidence the defendant moved the court for a directed verdict in its favor, which motion was denied. The jury found for the plaintiffs and assessed their damages at the sum of $1,658.37. Judgment was thereafter entered accordingly, from which judgment the defendant railroad company has appealed to this court. There is substantial evidence which tends to prove the following facts: William Lewis and Fanny Lewis are husband and wife, and for some ten or twelve years prior to the commencement of the action they owned and resided upon the property described in the petition, which consists of a certain lot or parcel of ground with a .two-story and basement frame dwelling house situated thereon, in the city of Columbia, Mo. Said residence property fronts west on a street known as Christian College avenue, which runs north and south in the city of Columbia. The main line tracks of the appellant railroad company run in a northerly and southerly direction, some distance east of the- Lewis property; and a street, known as Rogers street, runs in an easterly and westerly direction at some distance north of the Lewis property. The natural slope of the area between Christian College avenue and the main line railroad tracks and south of Rogers street is generally to the south. Some two or three years pri- or to the commencement of the action the appellant constructed a grade or embankment from a point on the west side of its main line tracks, at or near their intersection of Rogers street, and extending upon a curve east and south of the Lewis property in a southerly and southwesterly direction to a point on the east line of Christian College avenue, some distance south of the west line of the Lewis property. This grade or embankment was constructed and used as a roadbed for certain spur tracks or team’ tracks which branch off from the main line tracks, and in order to overcome the natural slope of the ground and maintain.the grade of the spur tracks at the -approximate level of the main line tracks, the height of the embankment increased from a height of about two feet at the point of its junction with the main line roadbed, to a height of some ten or twelve feet at its west end, directly south of the west line of the Lewis property. An inclined driveway was also constructed by means of an earth fill or grade some thirty or forty feet in width, which started at the approximate grade of the Lewis property and at a point near its south line, and extended south along the east line of Christian College avenue, increasing in height until it reached the level of, and connected at a right angle with, the roadbed or embankment at its west end. Prior to the construction of this embankment, surface waters falling or flowing upon the area lying between Christian College avenue and the main line railroad tracks and south of Rogers street, flowed freely and naturally to the south and found their way into ■ a well defined natural water course known as Flat Branch, which was a stream some eight or ten feet in width, and six or seven feet in depth. No part of the area above referred to had ever been flooded or inundated as a result of inadequate drainage prior to the construction of said embankment within the memory of the witnesses. With the evident purpose of affording an outlet to the- south into Flat Branch, for surface waters finding their way onto the area above described, a drain tile, eighteen or twenty inches in diameter, was laid across the bottom of the embankment when the same was constructed at a point approximately south of the Lewis residence. On the 19th and 28th days of June, 1928, and on the 30th day of April and the 1st day of May, 1929, the natural flow of surface waters falling or flowing onto the area lying north and west of the embankment above referred to was obstructed by said embankment, as a result of which said waters were impounded upon and overflowed a large part of said area, including the property of the appellees, which was inundated to a depth of from eight inches to a foot. When the water subsided, a large accumulation of mud, filth, and debris was left in the basement of the dwelling house and upon the lawn. As a result of these overflows, the foundation walls of said dwelling house settled and cracked; the basement floor was cracked and broken; windows and doors sagged and bound; the fireplace settled and was tom away from the wall and casing; and the dwelling house was damaged in other respects. Immediately after the 19th of June, 1928, the tile opening through said embankment was found to be filled with mud and debris. Appellant contends that the court erred in denying its motion for directed verdict for the reason that there was no evidence that the overflow was caused by the failure to construct lateral ditches along or suitable openings through its roadbed, as required by section 9953, of the 1919 Revised Statutes of Missouri. This action was evidently brought under the section of the Missouri Statutes above referred to, which reads as follows: “See. 9953. Ditches and drains — right of way to be kept clean. — It shall be the duty of every corporation, company or person owning or operating any railroad or branch thereof in this state, and of any corporation, company or person constructing any railroad in this state, within three months after the completion of the same through any county in this state, to cause to be constructed and maintained suitable openings across and through the right of way and roadbed of such railroad, and suitable ditches and drains along each side of the roadbed of such railroad, to connect with ditches, drains or watercourses, so as to afford sufficient outlet to drain and carry off the water, including surface water, along such railroad whenever the draining of such water has been obstructed or rendered necessary by the construction of such railroad.” While there may be nothing in the record which tends to prove that the overflows resulted from any structural or mechanical defects in the ditches along, or the opening through, the roadbed, there is evidence from which the conclusion might reasonably be drawn that the opening through the embankment was insufficient in size to afford proper drainage of the area affected. There is also ample evidence to support a finding that the opening through the roadbed, regardless of its size, was not properly maintained. The statute under which the action was brought is regulatory in its nature, and it imposes upon the railroad company not only the duty of constructing suitable ditches along, and openings through, its roadbed, but also a continuing duty to maintain the ditches and openings after the same have been constructed. Manifestly, this statute, by its terms, makes it incumbent upon the appellant to keep the ditches along, and the openings through, its roadbed in repair and good working order so as to permit the free and unobstructed flow of surface waters through them, and thus afford proper and adequate drainage of the area lying north and west of the roadbed. Appellant also contends that the evidence shows that the alleged damage to appellees’ property resulted from floods or overflows caused by excessive and unprecedented rainfall, and our .attention is directed to the fact that appellant requested the court to instruct the jury that they could not allow appellees anything for damages caused by a r.ain or overflow on the 28th day of June, 1928, and that a similar instruction was requested as to the rain or overflow occurring on the 1st day of May, 1929, and the court’s refusal to give these requested instructions is now assigned as error. It is argued that the only evidence having reference, to the 28th day of June, 1928, and the 1st day of May, 1929, is the record of the Weather Bureau, which shows that the rain occurring on the' 28th day of June, 1928, was unusual and unprecedented, and that appellant would not be liable for damages resulting from conditions which could not have been reasonably foreseen. It is also argued that there was no evidence that appellees sustained any damage as a result of rain or overflow occurring upon either of said last-mentioned dates.' It is true that there is evidence in the record which tends to prove that the quantity of rain precipitated on both June 19 and June 28, 1928, w.as «extraordinarily excessive and unprecedented in that locality, but it is equally true, notwithstanding the confused condition of the testimony, that there is substantial evidence in the record to the effect that while a heavy rain fell on eaeh of these dates, neither of the rainstorms was extraordinarily excessive or unprecedented. Each of several witnesses testified to their knowledge of previous rainstorms visited upon the vicinity which were of equal or greater volume and severity. The appellees’ 'witnesses, in the first instance, all testified as to rains and flood damage occurring on the 26th day of June, 1928, and the 29th day of April, 1929. After the records from the -office of the Weather Bureau were received in evidence, it appeared that there was no rain on either of the last-mentioned dates, but it also appeared that heavy rain fell on the 28th day of June, 1928, and that nearly an inch of rain fell on May 1, 1929. These witnesses were then recalled, and when their attention was called to the apparent discrepancy between their testimony and the records of the United States Weather Bureau, each of them testified that they might have been mistaken as to these dates. It is true that the witnesses, when recalled, did not specifically say that they had, in fact, been mistaken as to the dates and change their testimony in this regard', as perhaps they should have done; but in view of all of the facts and circumstances it was undoubtedly manifest to the court, the jury, and all concerned that the witnesses, when originally testifying, had, in fact, been mistaken as to these particular dates. There is nothing in the record, however, to indicate that their testimony was otherwise erroneous. The events detailed in their testimony occurred; the conditions related by them obtained; and as a result, appellees’ property was damaged. The important question in the ease was whether or not this damage was the result of the negligent act or omission on the part of the appellant, and the exact dates were of minor importance and material only to the end that appellant might be sufficiently advised as to the time of the alleged damage to enable it to intelligently answer the petition and prepare its defense. The credibility of witnesses, the interpretation of testimony, and the weight which shall be given to it, are matters to be considered and determined by the jury, and in view of the faets and circumstances disclosed by the record in this case, we feel that it was clearly proper to submit all of these questions to the jury, leaving it for them to say whether or not, under all of the faets, the evidence and circumstances in the case, the appellant was liable. We find no error in the aetion of the trial court in these regards. Appellees] petition as originally drawn alleged the specific dates of the several inundations which resulted in the damage complained' of to - be the 19th and 26th days of June, 1928, and the 29th and 30th days of April, 1929. Witnesses for appellees, in their direct testimony, fixed these dates as the dates when the water overflowed appellee^! property. -After the records of the United States Weather Bureau office were offered and received in evidence, appellees’ witnesses were recalled, and each testified that he or she might have been mistaken as to the exact dates. Counsel for appellees, over appellant’s objection, was then permitted to amend the petition by changing the dates of the alleged inundations from the 19th and 26th days of June, 1928, to the 19th and 28th days of June, 1928, and from the 29th and 30th -days of April, 1929, to the 30th day of April and the 1st day of May, 1929. It is urged by appellant that the trial court erred in permitting this amendment. In support of this contention appellant argues that there was no evidence which could justify the amendment because the appellees’ witnesses did not fix the dates in the amended complaint as the dates of the particular inundations, but when they were recalled they merely stated that they might have been mistaken. While, as suggested above, the record in this regard is far from satisfactory] it is manifest that no prejudice resulted because of the amendment. There is no evidence that the appellant was taken by surprise,- or in .any way misled. The application to amend went to the wise discretion of the trial court, and in the absence of a showing of abuse of discretion, the court’s aetion will not be disturbed upon review. There was no error in permitting the amendment. Upon the trial of the case the appellees called two contractors who were sworn and testified as expert witnesses. Appellant objected to certain hypothetical questions propounded to these witnesses, and the court’s action in overruling -these objections is now assigned as error. It appears by the record that the particular objections relied upon as a basis for the claim of error were very general in their terms. In fairness to the trial court and all parties concerned objections to hypothetical questions should specifically state the particular matters included in or omitted from the question which renders it objectionable, and had the objections in question been sufficiently definite in this regard, the defects in the questions might have been easily remedied at the time. But aside from this, the record discloses that the witnesses to whom these questions were propounded were cross-examined at length-by counsel for appellant, and the identical matters, the omission of which from the questions .appellant now contends rendered them objectionable, were supplied by such cross-examination. It follows that if there was error in overruling these objections, it was cured by the cross-examination and was in no way prejudicial to appellant. Travelers’ Ins. Co. v. Schenkel (C. C. A.) 35 F.(2d) 611. In the course of the court’s charge to the jury the following language was used: “The Court is going to say to you in discussing the evidence in this case, that the defendant contends that if the property was flooded at the times mentioned in the petition that it was due to an excessive, unprecedented rainfall. Gentlemen, I may say to you that nobody is responsible for an unprecedented or excessive rainfall unless it should appear that the negligence of the railroad company concurred, that is concurred, — I mean happened at the same time, the excessive rainfall and the negligence of the defendant in the ease all combined at the same time to cause the plain tiff injury, then plaintiff is entitled to recover.” Appellant excepted to this portion of .the court’s instructions and now assigns it as error, and in support of its claim contends that there was no evidence of concurrent negligence in the record. Clearly, appellant is in error in this contention. It has already been observed that there was evidence from which the jury might have found the defendant negligent in its failure to construct adequate openings through its grade, as well .as in maintaining such opening after its construction. In view of the verdict it is manifest that the jury found such negligence. If the jury, under the evidence, believed that the rainfall was excessive, and, as defined by the court in its instructions, constituted an act of God, and that,'notwithstanding this fact, plaintiff’s property would not have been damaged but for the fact that the flow of the flood waters was retarded by reason of appellant’s negligence, then, manifestly, the negligence concurred in causing the damage. The rule is well settled that where rains are so unprecedented and the resulting floods so extraordinary that they are, in legal contemplation, an act of God, one obstructing the water flow will not be held liable, provided, however, that the so-called act of God is not only the proximate, but the sole cause of the damage. In other words, where an unprecedented flood is the cause of the damage, but the prior, coincident, or subsequent negligence of one obstructing the flow of flood waters so mingles with it as to be an efficient and co-operating cause, the obstructor will be held responsible because of his concurrent negligence. The instruction complained of was a proper statement of the law and was fully warranted by the testimony in the ease. Tranbarger v. Railroad, 250 Mo. 46, 156 S. W. 694; Chicago, etc., Ry. Co. v. McKone, 36 Okl. 41, 127 P. 488, 42 L.R. A. (N. S.) 709; Williams v. Columbus Producing Co., 80 W. Ya. 683, 93 S. E. 809, L. R. A. 1918B, 179. It follows that the judgment appealed from should be, and is, affirmed.

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AMERICAN AUTOMOBILE INS. CO. v. CASTLE, ROPER & MATHEWS et al. No. 8880. Circuit Court of Appeals, Eighth Circuit. March 11, 1931. Rehearing Denied April 17, 1931. Ralph P. Wilson, of Lincoln, Neb., and John S. Marsalek, of St. Louis, Mo. (Allen, Moser & Marsalek, of St. Louis, Mo., and Burkett, Wilson, Brown, Wilson & Van Kirk, of Lincoln, Neb., on the brief), for appellant. C. Petrus Peterson, of Lincoln, Neb. (Peterson & Devoe, of Lincoln, Neb., on the brief), for appellees. Before KENTON and BOOTH, Circuit Judges, and REEVES, District Judge. REEVES, District Judge. Appellant was the plaintiff and appellees the defendants in the trial court, and these designations will be used in the course of this opinion. Plaintiff was engaged in' the automobile liability insurance business, and on August 23, 1927, issued its policy or contract of insurance to the corporate defendant, whereby it insured said defendant for the term of one year against liability arising from the use of its automobiles. On the 16th of September, 1927, an accident occurred which .formed the basis of a claim against the defendants. The automobile involved had been hired by, and was being used on behalf of, the corporate defendant. On September 28th following, plaintiff caused to be attached to its said policy an indorsement which specifically covered hired automobiles “during the term thereof.” After this waa done, the plaintiff was notified of the accident and of the claim being made against the defendants. Thereupon, plaintiff canceled its policy and then filed its bill in equity to reform its terms while it was in force by striking from the hired ear indorsement the words “during the term thereof” and inserting therein the words “from the date of this endorsement.” The object of such reformation was to relieve the company of apparent liability on account of hired ears used prior to the indorsement, which, it is averred, was in accordance with the actual agreement of the parties. Plaintiff alleged that- the language of the said indorsement was the result of a mutual mistake. The defendants by answer, cross-bill, and counterclaim denied the limitations stated by plaintiff as to the coverage of the original policy, and averred that the original contract, consonant with the agreement of the parties, should have included hired automobiles. The defendants, therefore, sought to reform the policy to make it comply with their view of the original understanding of the parties. Moreover, the corporate defendant, having discharged the liability accruing against it because of the accident above mentioned, prayed recovery of the loss sustained; with interest, costs, and attorneys fees, upon the policy so reformed. The chancellor below, upon the evidence, dismissed plaintiff's bill, reformed the policy in accordance with the cross-bill of the defendants, and allowed a money recovery in its decree for the loss sustained up to the limits of the policy. Plaintiff has appealed, claiming error in the dismissal of its bill, the reformation of the policy as prayed by the defendants, and the allowance of recovery for losses under the contract as reformed. These questions will be discussed, and statement of additional pertinent facts will be made in the course of the opinion. 1. The policy with its indorsements was obtained through the intermediation of O. G. Pierce Company of Lincoln, Neb. This was the business name of Mrs. Olga G. Pierce. She was engaged in the brokerage insurance business, and negotiated with the defendants relative to liability insurance. She solicited the insurance and obtained the policy through another brokerage office at Omaha, Neb., and thence through the regularly- licensed agents of the plaintiff, also of Omaha.' Nebraska statutes, section 7757, Compiled Statutes of 1922, in force at the time, provided in. relation to brokers as follows: “Every * * * broker who shall solicit an application for insurance of any kind shall, in any controversy between the insured * * * and the company issuing any policy upon such application, be regarded as representing the company and not the insured.” ■ Section 7772 is supplemental, and fixes the status of all persons as agents for the insurer where such persons cause insurance contracts to be executed or receipt for the premiums on such insurance. Such statutes are recognized and enforced. 32 C. J. 1057; McMaster v. New York Life Insurance Co., 183 U. S. 25, 22 S. Ct. 10, 46 L. Ed. 64; Continental Life Insurance Co. v. Chamberlain, 132 U. S. 304, 10 S. Ct. 87, 33 L. Ed. 341. It is obvious, therefore, that the O. G. Pierce Company was for all the purposes of this action the agent of the plaintiff. Stipcich v. Metropolitan Life Insurance Co., 277 U. S. 311, 48 S. Ct. 512, 72 L. Ed. 895. Her status was necessarily that of a soliciting agent. In Robinson v. Union Automobile Insurance Co., 112 Neb. 32, 198 N. W. 166, the Supreme Court of Nebraska defined the powers of a soliciting agent. This was done in construing said sections 7757 and 7772, supra. It was there held in, effect that the agent would have the right to agree with the insured in reference to the coverage of the policy, and that, if the policy when issued did not conform to the agreement of the parties, it became the subject of reformation. Although the testimony of Mrs. Pierce, who testified for plaintiff, was vague and unsatisfactory, yet it tended to support the cross-bill of defendants to the effeet that hired automobiles should have been included in the coverage of the original policy. The testimony of Charles H. Roper, who acted for the corporate defendant in such negotiations, was clear, positive, and satisfactory that the coverage of the original contract should have included hired automobiles. The plaintiff relies on circumstances to support its claim that the hired ear indorsement was not to become effective as of the date of the original policy. These circumstances were gathered from the conferences of Mrs. Pierce with employees of the corporate defendant, wherein it was specifically mentioned that hired ears were not used by the corporate defendant, and the fact that in all the correspondence between O. G. Pierce Company and the Omaha-broker no reference was made to hired ears. Such correspondence specifically referred only to automobiles owned by the corporate defendant. Moreover, when the accident occurred, O. G. Pierce Company was notified by defendants. Mrs. Pierce thereupon obtained the hired ear indorsement, but neglected to advise her principal of the fact of the accident and probable claim. She delayed doing this till after the indorsement had been obtained and attached to the policy. There was no evidence, however, that the corporate defendant or its agent knew anything about the correspondence of O. G. Pierce Company with her principal or of her failure to notify plaintiff of the accident or that there was collusion or bad faith on its part. It was natural and proper for the agent of the corporate defendant to acquaint plaintiff’s soliciting agent with the facts of the accident and to' interpose a complaint on the limitation, if any, as to coverage of the original contract as evidenced by the policy. The defendant, Charles H. Roper, acting for his eodefendant, testified that he made such complaint to Mrs. Pierce after the accident, and that she at the time acquiesced in his suggestion that the policy was incomplete, in view of their negotiations, and voluntarily undertook to have it corrected. This she apparently did and delivered an amended or indorsed policy to the insured. Upon the foregoing, the trial court was justified in dismissing plaintiff’s bill. Moreover, there was clear, convincing, and satisfactory testimony in support of the reformation of the policy in accordance with the prayer of the defendants. Philippine Sugar Estates Development Co. v. Government of Philippine Islands, 247 U. S. 385, 38 S. Ct. 513, 62 L. Ed. 1177; Mathis v. Hemingway (C. C. A.) 24 F.(2d) 951. 2. Plaintiff’s statement that the defendants would not have the right to recover on the policy as reformed for want of notice is untenable. The plaintiff waived notice and proofs of loss by denying liability on other grounds. Royal Insurance Co. v. Martin, 192 U. S. 149, 24 S. Ct. 247, 48 L. Ed. 385; Feis v. United States Insurance Co., 112 Neb. 777, 201 N. W. 558, 39 A. L. R. 1008. Moreover, there was no provision for forfeiture upon failure to give notice. 3. Though the parties stipulated for the waiver of a jury on the law question arising in the ease, yet, under equity rule No. 23 (28 USCA § 723), it was entirely permissible for the trial court to determine said matter “according to the principles applicable, without sending the ease or question to the law side of the court.” The decree of the chancellor below is correct, and it is affirmed.

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COMMISSIONER OF INTERNAL REVENUE v. MOORE, and three other cases. Nos. 202, 203, 205, 206. Circuit Court of Appeals, Tenth Circuit. March 14, 1931. Allin H. Pierce, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (G. A. Youngquist, Asst. Atty. Gen., Sewall Key and Mr. John H. McEvers, Sp. Assts. to Atty. Gen., and C. M. Charest Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for petitioner. Hubert L. Bolen and D. B. Welty, both of Oklahoma City, Okl., for respondents. Before PHILLIPS and McDERMOTT, Circuit Judges, and KENNEDY, District Judge. MeDERMOTT, Circuit Judge. The sole question involved on these appeals is whether the profit derived from the sale of certain oil stock should be charged into the income of the taxpayers for the year 1918, when the contract of sale was made, or whether it should be charged into the yeará in which the payments on the purchase price were actually received. The Board of Tax Appeals held that the entire profit was taxable in the year 1918, and, since the statute of limitations had run on the assessment of taxes for that year, that there was no taxable liability. The Commissioner appeals. The facts are not in dispute. In the year 1918 the taxpayers owned 200 shares of the capital stock of the Garfield Oil Company, that being one-half of its issued capital; the other half was owned by the Exchange Oil Company, a subsidiary of the Sinclair Oil & Gas Company. In 1918 the' taxpayers undertook to negotiate a sale of their stock to the Exchange Oil Company. After some dickering, the parties agreed upon a sale price of $3,000,000, of which $500,000 was to be paid in cash, the balance to be paid by assigning 20 per cent, of the oil runs to the sellers until they had received $2,500,000, with the guaranty that such runs would equal at least $500,000 a year. Because of the greater financial responsibility of the parent Sinclair Company, it was agreed that that company should guarantee the deferred payments. The terms being agreed upon, it was left to the attorneys for the Sinclair Company to draw the papers. Such attorneys devised the plan of two contracts, one of them being an outright contract of purchase between the taxpayers and the Exchange Oil Company, by which the Exchange Company purchased the stock for $500,000 in cash and the delivery of oil and gas income certificates entitling the taxpayers or their assigns to 20 per cent, of the gross income of the Exchange Company, as and when received. The second contract was between the taxpayers and the Sinclair Company, by which the taxpayers purported to grant to the Sinclair Oil & Gas Company an option to purchase such certificates for the sum of $2,500,000. By that agreement the certificates, indorsed in blank, were delivered to a trustee named in the instrument. The taxpayers were to receive the income from the oil and gas certificates until such receipts equaled $2,500,000, when the Sinclair Company became the owner of such certificates. The Sinclair Company agreed that if in any one year the income from such certificates did not amount to the sum of $500,000, it would advance to the taxpayers the difference, without interest, and bound itself to purchase such certificates, five years from the date of the agreement, for a total consideration of $2,500,000. It is obvious that this is a firm contract of purchase, and not an option. Reading these instruments together, as they must be, it is entirely clear that the taxpayers sold their stock for $3,000,000, $500,-000 in cash and $2,500,000 in deferred payments, the Sinclair Company binding itself to the extent of $500,000 a year for five years. The taxpayers could receive no more than $3,000,000 for their property in any event, and the Sinclair Company was firmly bound to pay that amount in any event. This is not only the clear purport of the writings when read together, but is also the undei'standing of the taxpayers. One of them testified that $3,000,000 “was the fixed price. There was no question about that. * * There was not any other view entertained by us but what we were receiving $3,000,000 as the purchase price for that property. * * * That was determined before we completed the sale.” The understanding of the taxpayers is further evidenced by the fact that, notwithstanding that their income tax returns were on a cash basis, they did not account for the entire profit on the sale in their 1918 returns, but accounted only for the $500,000 received that year, and in each of the five succeeding years accounted, for so much of the profit as was represented by the amounts received by them during the year in question. Disagreement arose between the taxpayers and the Commissioner as to certain questions of depletion and other matters not here pertinent. During these negotiations with the Commissioner, the taxpayers maintained their original position that profits on the sale should be distributed over the five years. The negotiations with the Commissioner were so prolonged that the statute'of limitations ran upon any additional assessment for the year 1918. The taxpayers then contended that the sale was complete in 1918; that, in fact, no part of the purchase price of the stock sold was received in the years 1919 to 1923, inclusive, despite their returns to the contrary: that the transaction with the Exchange Oil Company was separate and distinct from the transaction with the Sinclair Company; that what they had in fact done was to exchange their stock in the Garfield Oil Company for $500,000 in cash and oil and gas income certificates which had a ready market value; that, under section 202 (b) of the Revenue Act of 1918 (40 Stat. 1060), the sale should be treated as an exchange of property; the contemporaneous transaction with the Sinclair- Company should be disregarded; and no part of the sale price should be charged to them for the years 1919 to 1923, inclusive. The statute having run on the 1918 assessment, the result of their contention, if sound, is that foui’-fifths of the profit from this sale escapes any taxation. The Board of Tax Appeals sustained the contention of the taxpayers, and held that the transaction with the Exchange Oil Company was “complete in itself. * * * There were two transactions, each separate and distinct from the other and each giving rise to income.” With this holding we cannot agree. The first contract, considered separately, does not express the agreement of the parties. If the Board of Tax Appeals is correct, the sale price of the stock was an unascertained and unaseertainable amount, with $500,000 as a minimum, and that sum plus 20 per cent, of all the oil recovered under the leases as a maximum. But all the evidence is that the sale was bottomed on a fixed price of $3,000,000, of whieh $500,000 was to be paid in cash and the balance in deferred payments. This was the original agreement which the attorneys for the Sinclair Company were instructed to, and whieh they did, reduce to writing. That two contracts were drawn (o effectuate that purpose cannot change the substance of the transaction. See O’Meara v. Commissioner, 34 F.(2d) 390, where this court construed two writings as reflecting but one transaction. Taxation is a practical matter, and the courts uniformly penetrate the form to get at the substance. Tyler v. United States, 281 U. S. 497, 50 S. Ct. 356, 74 L. Ed. 991, 69 A. L. R. 758; Chicago, M. & St. P. Ry. v. Mpls. Civic Ass’n, 247 U. S. 490, 38 S. Ct. 553, 62 L. Ed. 1229; Schoenheit v. Lucas (C. C. A. 4) 44 P.(2d) 476; Tsivoglou v. United States (C. C. A. 1) 31 F.(2d) 706; Phillips v. Gnichtel (C. C. A. 3) 27 F. (2d) 662. That leaves for determination the legal question of whether the entire profit on the sale should be charged to the year 1918, or whether it should be distributed through the years in whieh the purchase price was paid. The property involved is personal property; the sale was not one made by one regularly engaged in the sale of personal property on the installment basis, but was a casual sale; the buyer was responsible financially. Section 213 (a) of the Revenue Act of 1918 (40 Stat. 1065), defines gross income as including profits arising from sales of personal property, and provides: “The amount of all such items shall be included in the gjoss income for the taxable year in whieh received by the taxpayer, unless, under methods of accounting permitted under subdivision (b) of section 212, any such amounts are to be properly accounted for as of a different period.” Article 42, Treasury Department Regulations 45, promulgated under this act, provides : “The rule prescribed is that in the sale or contract for sale of personal property on the installment plan, whether or not title remains in the vendor until the property is fully paid for, the income to be returned by the vendor will be that proportion of each installment payment which the gross profit to be realized when the property is paid for bears to the gross contract price. * * * If the vendor chooses as a matter of consistent practice to treat the obligations of purchasers as the equivalent of cash, such a course is permissible.” The taxpayers were on a cash basis of accounting, and, in line with the statute above quoted, they did return the profits from this sale “in the gross income for the taxable year in which received by the taxpayer,” proportioning the profit in accordance with the quoted regulation. Conceding, for the argument, that the statute and regulation afforded the taxpayers the election of treating the obligations of the purchaser as the equivalent of cash, the taxpayers otherwise elected; they may not now change that election, particularly since the result would be to throw all of the profit into a year where collection is barred by limitations. Lucas v. St. Louis National Baseball Club (C. C. A. 8) 42 F.(2d) 984; Rose v. Grant (C. C. A. 5) 39 F.(2d) 340; Alameda Investment Co. v. McLaughlin (C. C. A. 9) 33 F.(2d) 120; Holmes on Federal Income Tax (6th Ed.) 1278. Another point is worthy of notice. Section 212 (d) of the Revenue Act of 1926 (26 USCA § 953 (d), is made retroactive by section 1208 of the same act (26 USCA § 953a). That section, and the regulation promulgated thereunder (Reg. 69, art. 42), permits the distribution of profits on a sale on deferred payments in the ease of “casual sale * * * for a price exceeding $1,000 * * * if the initial payments do not exec. 3 one-fourth of the purchase price.” The section defines “initial payments” as cash or property other than; evidences of indebtedness of the purchaser. The case at bar falls within the four comers of this , retroactive statute. The taxpayers argue that the transaction is governed hy section 202 (a) of the Revenue Act of 1918, which provides that, where property is exchanged for other property, the property received in exchange shall “for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any.” It is argued that they received in exchange for their stoek certain oil and gas income certificates, which, coupled with the agreement of the Sinclair Company to purchase, had a ready market value. But we do not regard the transaction as an exchange of their stock for the income certificates, but rather as a sale on deferred payments. The taxpayers never had any dominion over such certificates —they did not “receive them” — for by the very transaction of their issuance they passed to the Sinclair Company hy a contract of sale. Reliance is had upon Fesler v. Commissioner (C. C. A. 7) 38 F.(2d) 155, and similar cases, which hold that, where property is exchanged for negotiable bonds or other property which may he readily liquidated, the profit is realized and taxable, under section 202 (a). The facts do not bring this ease within the doctrines there announced, for this is not an exchange of property, but a sale on deferred payments. On the other hand, it was held hy the Second Circuit in Bedell v. Commissioner, 30 F.(2d) 622, 624: “But if land or a vehattel is sold, and title passes merely upon a promise to pay money at some future date, to speak, of the promise as property exchanged for the title appears to us a strained use of language, when calculating profits under the income tax. Section 202 (b) of the Act of 1918 provided for an exchange of property and made the profit depend upon ‘the amount of its [the property received] fair market value, if any’ — a phrase which was amended in the law of 1921 (42 Stat. 227) to ‘readily realizable market value.’ There is a difference between the two, but it is absurd to speak of a promise to pay a 'sum in the future as having a ‘market value,’ fair or unfair. Such rights are sold, if at all, only by seeking out a purchaser and higgling with him on the basis of the particular transaction. Even if we could treat the case as an exchange of property, the profit would be realized only when the promise was performed.” See, also, Foulke on Taxation, c. 18, “Installment Sales,” and cases there cited; Davis v. United States (C. C.) 46 F.(2d) 377; O’Meara v. Commissioner (C. C. A. 10) 34 F.(2d) 390. In Eisner v. Macomber, 252 U. S. 189, 40 S. Ct. 189, 64 L. Ed. 521, 9 A. L. R. 1570, the government urged that the recipient of a stoek dividend had received taxable income, because the stockholder may sell the shares acquired by the stoek dividend. The Supreme Court said that he might if he could find a buyer, but if and when he did sell, the profit realized was taxable income. The Supreme Court then said, at page 213 of 252 U. S., 40 S. Ct. 189, 195: “Tet, without selling, the shareholder, unless possessed of other resources, has not the wherewithal to pay an income tax upon the dividend stoek. Nothing could more clearly show that to tax a stoek dividend is to tax a capital increase, and not income, than this demonstration that in the nature of things it requires conversion of capital in order to pay the tax.” It is so in this case. In 1918 the taxpayers had not realized all the profit from this sale. The profit was realized as they received 'the deferred payments. Aside from the $500,000, they received nothing in 1918 but a share in oil produced in later years and an agreement of the Sinclair Company. While the Sinclair Company was then, and now is, a solvent corporation, the fact still remains that the taxpayers did not realize the profit from the sale in 1918, hut realized the profit during the ensuing years; and it is the general contemplation of the statutes that a tax shall he levied on profits which are realized and not deferred. If the contention of the taxpayers is sound, one who sells his farm to a responsible buyer on payments deferred over twenty years must account for the entire profit during the year of the sale. He has not actually received that profit; he has received no income out of which to pay the tax; the statute and the regulations give him the right to spread the tax; to deny him the right would, in our opinion, result in a hardship to taxpayers generally. The causes are therefore reversed and remanded for further proceedings in accordance with this opinion.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

TODD et al. v. UNITED STATES. NO. 5958. Circuit Court of Appeals, Fifth Circuit. April 4, 1931. Rehearing Denied May 5, 1931. Morris M. Givens and C. J. Hardee, both of Tampa, Fla., for appellants. W. P. Hughes, U. S. Dist. Atty., of Jacksonville, Fla. Before FOSTER, Circuit Judge, and HUTCHESON and SIBLEY, District Judges. HUTCHESON, District Judge. In this case, upon the trial of an indictment joining three counts, one against Chevis, one against Todd, and one against Todd and Day jointly, Chevis was acquitted, and Todd and Day found guilty as charged. The first count charged in substance that on the 8th day of October, 1929, at Tampa, Hillsborough county, Fla., one T. M. Chevis had in his unlawful possession one pint of whisky; the second that Pirl Todd did, on the same day and in the same place, have in his possession intoxicating liquors, to wit, 59 bottles of home-brew beer, containing one-half of 1 per cent, and more of alcohol by volume fit and intended for use for beverage purposes, while the third count charged that, on the same day and in the same city and county, Pirl Todd and Leo Day did “unlawfully, willfully and knowingly maintain a common nuisance, that is to say, a certain one story frame building, located at 713 Morgan Street, city, county and district aforesaid, where intoxicating liquors containing % of 1% of alcohol by volume were then and there unlawfully kept for sale and sold for beverage purposes.” The United States established by the uncontroverted testimony of its witnesses, the defendants offering no proof, that there were two small buildings, with a space six or eight feet between, one numbered 713 Morgan street, known as Leo Day’s place, the other known as the tire shop; that the rear of the tire shop and of 713 Morgan street were connected by a shed; that Day owned and maintained 713 Morgan street ostensibly as a taxi stand; but that it had long had the reputation of being a place where into^icating liquors were commonly sold; that the place had been under more or less constant observation; that many persons had been seen, especially at night, going into Day’s place; ears had been seen to drive up and drive away, while one MeMurray had been arrested in connection with some liquor in a garbage can in a vacant lot back of the place; that Day had on that occasion advised the officers that MeMurray was working for him at 713 Morgan street; that he (Day) was in the bootlegging business, and everybody knew it; that MeMurray was his man; and that he would plead him guilty. There was no direct proof as to whether Day owned, or did not own, the “tire shop” building, but the proof was ample to sustain the conclusion that he had control at least of the back part of it, where the liquor was found. One of the government’s witnesses testified: “I never at any time found liquor, wine, beer, or any intoxicating liquor, in the place at 713 Morgan Street; the^ do not keep liquor in that place. It is in a frame building to the south of it. I found the liquor or the beer in the rear of the tire place to the south of it where the little locked room was. There is a little walkway between the two buildings wide enough for a man to walk through. It is a separate building, but there is a shed that goes back that connects both of them.” There was testimony that Day and Todd had been frequently seen hanging around this place. The testimony as to the occurrences on October 8th, when the arrests out of which this indictment grew were made,, is to the effect that prohibition officers, having seen Chevis stop in front of "Day’s place, 713 Morgan street, and Todd, the waiter, come out of there, talk to Chevis, go back into the building, go around behind and to a little shed room in another building about eight feet back of 713 Morgan street, and come out with a bottle partly wrapped which he gave to Chevis, had accosted Chevis and seized the bottle, which proved to be whisky; that immediately thereafter, seeing Todd, the waiter, who, after delivering the bottle to Chevis, .had gone back to the little room at the rear, come out of there and go into 713 Morgan street with a bottle in his hand, he had followed him in in time to see him throw the bottle out of the window, and to see the broken bottle and contents on the ground. This bottl'e also had' contained whisky. Having arrested Chevis and Todd, he then went back to the little building whence he had seen Todd twice emerge, and entering, seized 59 bottles of intoxicating beer. Day and Todd have appealed, urging reversible error in overruling their joint and several motions for bill of particulars and to quash, their demurrers to the indictment for misjoinder and indefiniteness, and their objections to the introduction in evidence of the liquors seized, because seized without probable cause as to them. From the statement of the evidence above, it is clear that, though ordinarily it is not good practice to join in an indictment counts charging distinct offenses against separate defendants, U. S. v. McConnell (D. C.) 285 F. 164, the action of the court in this case cannot be assigned as prejudicial error, not only because a motion to quash is ordinarily addressed to the discretion of the court and is not the subject of review by an appellate court, Gay v. U. S. (C. C. A.) 12 F.(2d) 433, and because, if there was misjoinder, the objection was not well taken by demurrer, but ¿must be by motion to compel an election, Optner v. U. S. (C. C. A.) 13 F. (2d) 11; Etheredge v. U. S. (C. C. A.) 186 F. 434, but also because, though the indictment does contain separate counts as to separate defendants, the matters charged in reality constitute but one series of transactions, and the facts relied upon for the conviction of Chevis in the first, and Todd in the second, count, are the same facts relied upon for the conviction in the third count of Todd and Day, Davis v. U. S. (C. C. A.) 12 F.(2d) 253. It is also apparent that the .court did not err in overruling the demurrers and motions to quash for want of definiteness and certainty, Maceo v. U. S. (5th C. C. A.) 46 F.(2d) 788; Husty v. U. S., 282 U. S. 694, 51 S. Ct. 240, 75 L. Ed.-, Feb. 24, 1931; and that its action in refusing the motion presented on the day before the trial for bill of particulars was an exercise of its discretion, which presents no reviewable error, Wong Tai v. U. S., 273 U. S. 77, 47 S. Ct. 300, 71 L. Ed. 545. It is also .apparent that there was no error in the action of the court in admitting in evidence the bottle of whisky seized from Chevis,- that broken in Day’s place, and the 59 bottles of - home-brew beer found in the little tire shop. As to the first bottle, it, when seized, was not in the possession of appellants, but of Chevis, and neither of them can complain of the invasion of Chevis’ constitutional rights, while as to the bottle broken in Day’s place, and the beer seized in the adjoining tire shop, the officer had right to seize them as incident to the lawful arrest of Todd, whom he had actually apprehended in an overt yiolation of the law. In addition to these assignments, appellants present and urge most vigorously three others — that the court erred in refusing their motion to direct a verdict, because, as a matter of law, the proof at best for the government showed merely the taking of orders for whisky at 713 Morgan street, but that none was kept for sale or sold there; or, if there was an issue as to that point, that the court erred in the submission of the issue to the jury, both in refusing to give the charge which appellants requested and in charging as the court did. Appellants cite Heitman v. U. S. (C. C. A.) 5 F.(2d) 887; Hattner v. U. S. (C. C. A.) 293 F. 381, to the effect that the government, having in the indictment specifically described the place where the alleged nuisance was maintained, must prove the place as laid; and Miller v. U. S. (C. C. A.) 300 F. 529, to the effect that, where the evidence at most establishes that a place which is used by one ostensibly for the carrying on of a legitimate business is also used by him as an office from which directions are given as to carrying on a liquor business elsewhere, or in which he sometimes received payments for liquor, the liquor being kept at some other place, and sold to purchasers without ever being on the premises, proof of nuisance is not made out. We agree with appellants that, having laid the nuisance at 713 Morgan street, the government was required to prove it substantially as laid. We do not agree that it has failed to do so. On the evidence, we think the proof amply supports the conclusion that a nuisance was being committed at 713 Morgan street as laid in the indictment. The evidence, direct and circumstantial, shows not only that the office of 713 Morgan street was used for the purpose of receiving orders and taking payment for intoxicating liquors sold there, but also that the liquors stored in the premises adjoining at the rear were in effect sold and kept for sale .at the number charged. Cached immediately at the rear, adjacent to and within eight or ten feet of it, in a little shed room shown to have been in the possession- and control of the appellants, in connection with 713 Morgan street, it was in effect delivered from the place where it was ordered. In addition, the proof amply supports the finding that at least some of the liquors stored in the little shed room for sale were carried into 713 Morgan street and through it for the purpose of delivery, and that all of the contact of the public with the liquors and their traffic and transactions in them were in effect carried on in and in front of that number. There is abundant proof that the little shed room in the back of and adjoining 713 Morgan street was in the possession of, and used by, the appellants in their liquor enterprise as part and parcel of it, and, in the absence of controverting proof, it must be held that this in effect was so, and that the evidence amply supports the conviction on the nuisance count of the indictment. It remain's only to inquire whether there was error prejudicial to the appellants in the way in which this count was submitted to the jury. It is claimed that there was error in refusing the charge requested, to the effect that, if the jury found that no liquor was actually kept for sale or sold at 713 Morgan street, they should find the defendants not guilty, even though they believed that orders for liquors were taken there, and it is also claimed that there was error in the affirmative charge of the court that, “if the jury found that orders were taken there and money paid at 713 Morgan Street for the delivery of intoxicating liquors from other premises, it was immaterial that any intoxicating liquors were actually kept there, for under such circumstances intoxicating liquors would be constructively kept there.” Considering these charges, that refused and that given, as we must, not as abstractions, but as applied to the faets in this case, we think it plain that no error was committed. The law looks to the substance, not to the form; that is satisfied here. The statute denounces as well the sale as the keeping for sale. Assuming, therefore, without deciding, that, if the facts here were like those in the Miller Case, orders for liquor being taken at one place, and deliveries being made from a place not immediately contiguous, but entirely different in location, proof of nuisance would not be made out, and that it would have been error for the court, under such facts, to fail to so charge, such a ease is not presented here. Here all of the liquors were cached in an immediately adjoining and connected unnumbered building entirely under the control of the 'defendants, and all of the transactions were made in front of or in the numbered,office, where the deliveries, though beginning at the adjoining shed, were completed. Under these circumstances, the numbered office would in effect be the place where liquors were kept for sale and sold, even though no liquors were actually stored in the place, or no manual deliveries took place inside of it. The court charged the jury generally that, if orders were taken and money paid in the premises for the delivery of intoxicating liquors from other premises the nuisance charge would be made out. The charge must be construed in the light of the evidence in the case. So construed, it in effect tells the jury that, if 713 Morgan street was a place where purchases and sales of liquors were negotiated, moneys paid therefor, and deliveries effected from a store of liquors maintained in the shed adjoining it in the rear, the place would be a common nuisance, although no liquors were actually kept in storage there. This charge fully satisfied the law. There being no reversible error, the judgment is affirmed.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

SCHMITT v. LAMB. No. 6072. Circuit Court of Appeals, Fifth Circuit. April 9, 1931. Gerald FitzGerald, of Clarksdale, Miss., Marcellus Green and Garner W. Green, both of Jackson, Miss., and J. L. Roberson and Sam C. Cook, Jr., both of Clarksdale, Miss. (Maynard, FitzGerald & Venable, of Clarksdale, Miss., on the brief), for appellant. W. Calvin Wells, of Jackson, Miss., and Arvid B. Tanner, of Chicago, Ill. (Wells, Jones, Wells & Lipscomb, of Jackson, Miss., on the brief), for appellee. Before FOSTER, Circuit Judge, and GRUBB and DAWKINS, District Judges. DAWKINS, District Judge. In this case the plaintiff alleged that he had been appointed receiver of certain property and funds found by final decree of the court below in suit in equity No. 129; to be impressed with a trust and lien in favor of creditors of W. P. Holland, husband of the defendant therein, Florence T. Holland; that the said original proceeding had been one in which the plaintiff, for himself and for the use and benefit of other creditors of the said W. P. Holland, had sought that relief against the wife as to the property and funds conveyed to her with the “actual and constructive intent of defrauding creditors of the husband”; that upon the filing of said original bill, all persons, including the defendant in the present proceeding, William E. Lamb, who was the attorney of said Florence T. Holland, became “charged with constructive knowledge of the rights of the plaintiff in said cause”; and that the defendant, Lamb, as well as other persons, “there- • after taking or receiving any part or portion of the said estate of the said Florence T. Holland took the same impressed with the trust aforesaid, and with knowledge of the rights of the parties aforesaid, and with the duty and obligation upon their part to return the same upon the due orders and judgment of this court and any other court of competent jurisdiction”; that the defendant Lamb, although a resident and citizen of Chicago, Ill., “was employed by the said Florence T. Holland to defend said suit aforesaid” (cause No. 129 in equity); that the said Lamb “accepted said employment and obtained, prior to the receipt of any moneys as herein set forth out of said estate, full and actual knowledge of the facts stated in said Bill of Complaint, and of the actual facts relative to the transactions mentioned and described therein”; that, notwithstanding said knowledge, he “caused the said Florence T. Holland, between the dates of August 8, 1928, and April 12, 1930, to pay him large sums of money in cash out of said estate, which said sums of money plaintiff alleges aggregated a total amount, of which plaintiff has knowledge of Seventy thousand, three hundred and eighty and 36/100 ($70,386.36) Dollars,” as shown by itemized statement attached, marked Exhibit A and made a part of the petition; that the said sums were paid by the said Florence T. Holland to the said defendant, under guise of the payment to the said William E. Lamb of fees as an attorney for the defense of said suit No. 129, but plaintiff states that the said Florence T. Holland was without right at law or in equity to pay the said sums out of said funds, constituting a trust as aforesaid, and said defendant was without lawful right to accept the same, and that in accepting the same he, the said defendánt, took the same impressed with- said trust. Plaintiff pra-yed for service and for the stating of an account between him and the defendant of the sums paid “by said Florence T. Holland, and that it be determined and adjudicated that the funds so received by the said defendant are trust funds as aforesaid, and that it be further decreed that the said sums of money so found be returned to the plaintiff, to be dealt with by him in accordance with the orders and decrees of this court in said ease No. 129.” Exhibit A attached to the petition showed payments made to defendant beginning August 8, 1928, in the sum of $10,001) and continuing to April 12, 1930; totaling the sum alleged, to wit, $70,386.36. The petition in this ease, in paragraph 3, also makes “reference to the said case (No. 129) * * * and special reference being made to the terms of said decree, whereby plaintiff was' appointed and empowered by the terms of said decree and by law to sue for and collect and receive the entire estate of Florence T. Holland, one of the defendants in said' cause Ho. 129.” The citation of subpoena was in the usual form in equity, dated April 39, -1939, and on the same day was personally served upon defendant within the jurisdiction of the court below by the marshal thereof. Defendant Lamb appeared and moved to quash the service “on the ground that he was then and there privileged and immune from service of any process issuing from this court in this ease,” for the reasons: (1) He was a citizen and resident of the state of Illinois; (2) that he was within the jurisdiction of the court below under compulsory process issued on a rule for contempt in'the said suit Ho. 129; (3) that he was further present in said jurisdiction as attorney for W. P. Holland, in certain suits brought against him in said court, and as “attorney of record for Florence T. Holland in cause Ho. 129 in equity, aforesaid * * * ”; (4) that he appeared in court on said 39th day of April, 1930, when the present suit was served “in answer to said citation (for contempt) following the entry of final decree in said cause Ho. 129; that after his appearance in response to said citation said judge entered an order continuing the hearing on said citation until June 9, 1939”; and that thereafter, while waiting to catch a train for the purpose of returning to his home in Illinois, the process in this ease was served upon him at Clarksdale, in said district) (5) that at the time of the attempted service, he had no other business that “caused or required him to be in said Horthern District of Mississippi, nor was he there in pursuit of pleasure or for any other cause or reason whatever than as hereinabove set forth”; and (6) “except for the matters hereinabove set forth, said William E. Lamb would not have been in the Horthern District of Mississippi at the time of the attempted service of process upon him.” The court below quashed the service and dismissed the bill. It could, of course, take cognizance of the proceedings in suit. No. 129 in equity, as to which the bill in the present case was ancillary. The original bill with the exhibits attached thereto, and interrogatories addressed to the several defendants therein, filed June 23, 1928, were offered in evidence and have been brought up with the record in the case. It was alleged therein that a receiver ■should be appointed to take charge of the estate, both real and personal, of the defendant Florence T. Holland, and on the 6th day of January, 1929', an amended bill was filed wherein it was further asked that a receiver be appointed “to take charge and conserve the corpus of the said estate of the said Florence T. Holland, * * * ” and attached thereto were additional interrogatories propounded to other persons. The original bill in suit Ho. 129 was against the said Florence T. Holland and a large number of banks and other persons to have property rights, and credits, alleged to amount to several hundred thousands of dollars, decreed to belong to William P. Holland and to have them impressed with a trust and lien in favor of the creditors whose interests were represented by the plaintiff. As previously stated, both in the original and amended petitions, plaintiff alleged facts and circumstances warranting appointment and in the latter prayed for the appointment of a receiver and for an accounting. On April 39, 1939, the lower court rendered a judgment, “the parties plaintiff and intervenor expressly agreeing thereto in open court and likewise the said Florence T. Holland are( ?) agreeing to the matters and things in this decree contained, the Planters Manufacturing Company not to be prejudiced hereby or William E. Lamb, or Butler, Lamb, Foster & Pope, not to be prejudiced hereby.” This decree found that William P. Holland was indebted to some fourteen banks by virtue of judgments rendered in the court below and in a state court of Mississippi, aggregating $7,612,739.84; it also stated that “the said indebtedness so evidenced by said judgments and so hereby decreed, is hereby declared to be fixed as a lien from the date of the filing of the original bill in this ease, upon the entire estate of the defendant, Florence T. Holland, consisting of property, real, personal and mixed, and of every kind wheresoever situated and especially upon the property as hereinafter described, and the said estate of the said Florence T. Holland is hereby declared to be and to have been from May 1, 1920, a trust fund held in trust by the said Florence T. Holland for the benefit of the plaintiff and intervenors in this ease, hereby decreed to be and to have been creditors of the said W. P. Holland.” The said decree further appointed a receiver “of the entire estate of Florence T. Holland, and she, the said Florence T. Holland, and all other persons whomsoever are hereby directed and commanded to deliver to him, as such receiver, forthwith, all of the property of every kind and character by her, they, or any of them held which said property, when-so delivered to said receiver shall be subject to the further orders of this court.” The said Florence T. Holland was further ordered to deliver a large quantity of stocks, notes, cash in banks, personal and real property, by specific description to the receiver. It was further provided in said decree as follows : “Said Receiver is hereby invested with full power and authority to institute and/or prosecute in any Ceurt of proper jurisdiction at law or in equity any suit or proceeding against any and all persons whomsoever seeking to recover possession and/or control and/or damag-es in connection with the rights hereby vested in him.” From what has been set forth herein-above, it is evident that, from the inception of the suit No. 129 in equity, it was intended that the lower court should take charge of said property and the subsequent decree of the court actually impressed upon all of it in the hands of Florence T. Holland, or under her control, a trust and lien in favor of the creditors of her husband, as having been conveyed in fraud of their rights. All of the parties to that litigation, particularly the defendant Florence T. Holland and her attorneys, knew that if the allegations of the bill were sustained and the relief sought was granted, the court would be compelled to draw to itself for administration and disposition all of the property and funds so claimed. That bill was filed on June 23, 1928, and the petition in the present case alleges that the payments were made to Lamb long after citation in said cause No. 129 and for services in defending said Mrs. Holland therein, beginning August 8, 1928, and continuing to April 12, 1930, some eighteen days before the final decree in said suit was entered and the citation in this case served on April 30th. In such circumstances, could the defendant, Florence T. Holland, or her agent, make any disposition which would defeat the jurisdiction of the court over the property upon which the trust and lien were sought to be created? There might be some question as to the effect of such a transfer, if the money had passed into the hands of an innocent third person without knowledge of the pendency of the bill; but it seems reasonably clear to us that neither she nor her agent or attorney, having knowledge of the suit and its purposes, could ignore it and dispose of the property to be affected in a manner to defeat that jurisdiction. Lang v. Choctaw Oklahoma, etc., R. Co. (C. C. A.) 160 F. 355. If she (Mrs. Holland) could remove a part, then she might do so as to the whole property, with the result that the court’s decree, when rendered, would be futile, or the plaintiff he compelled to pursue the property into whatever jurisdiction she might see" fit to carry it. Such is the possible consequence' of a holding of that nature, and we think demonstrates the soundness of the doctrine of constructive possession, flowing from a proceeding in equity of the character of suit No. 129. If the defendant could not do this herself, we can see no more reason for holding that it could be done indirectly through her attorney, whether under the claim of paying attorney’s fees, or otherwise. “Where a bill in equity brings under the direct control of the court all the property and estate of the defendants, or of certain named defendants, or certain designated property of all or of either of the defendants, to be administered for the benefit of all entitled to share in the fruits of the litigation, and the possession and control of the property are necessary to the exercise of the jurisdiction of the court, the filing of the bill and service of process is an equitable levy on the property, and pending the proceedings such property may properly be held to be in gremio legis. The actual seizure of the property is not necessary to produce this effect, where the possession of the property is necessary to the granting of the relief sought. In such cases the commencement of the suit is sufficient to give the court whose jurisdiction is invoked the exclusive right to control the property.” Illinois Steel Co. v. Putnam (C. C. A. 5th Cir.) 68 F. 515, 517. See also Adams v. Mercantile Trust Co. (C. C. A. 5th Cir.) 66 F. 617, 626 and cases cited; C. J., Vol. 34, p. 200. In view of this principle of the law, we do not think the court could be deprived of its power over a portion of the property or funds by the attorney for the defendant coming- into its jurisdiction and taking it away, even in satisfaction of his fees; neither do we think that process to prevent such a course or to compel restoration can he defeated by pleading the immunity usually accorded practitioners when actually e'ngaged in their professional duties before such court. This immunity is more for the protection of the court itself and to prevent interference with its proceedings, than for the benefit of the attorney. Stewart v. Ramsay, 242 U. S. 128, 37 S. Ct. 44, 61 L. Ed. 192. To allow it to defeat proper process for the control of such property would be to destroy the very basis of the rule itself, i. e., the orderly functioning of the court. Our conclusion is that the service in this case was erroneously quashed. Reversed.

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CRAMER et al. v. LAMB. No. 6004. Circuit Court of Appeals, Fifth Circuit. April 9, 1931. Gerald Fitzgerald, of Clarksdale, Miss., Marcellus Green and Garner W. Green, both of Jackson, Miss., and J. L. Roberson and Sam C. Cook, Jr., both of Clarksdale, Miss. (Maynard, FitzGerald & Venable, of Clarksdale) Miss., on the brief), for appellants. W. Calvin Wells, of Jackson, Miss., and Arvid B. Tanner, of Chicago, Ill. (Wells, Jones, Wells & Lipscomb, of Jackson, Miss., on the brief), for appellee. Before FOSTER, Circuit Judge, and GRUBB'and DAWKINS, District Judges. DAWKINS, District Judge. This cause involved a rule for contempt against William E. Lamb, because of the alleged taking from the jurisdiction of the court of certain funds and for which the ancillary bill was filed in the ease of Schmitt, Receiver, v. Lamb (No. 6072) 48 F.(2d) 533, this day decided. Citation upon the rule was also quashed on the same ground as in that case, that is, because defendant, a resident of the state of Illinois, was present in the jurisdiction of the court as an attorney at law and therefore immune from such process. Appellants have moved to dismiss the appeal upon the grounds: (1) That this court “is without jurisdiction to review the judgment of the court below because the proceeding * * * was a contempt proceeding and because” it was not maintainable upon the facts alleged; and (2) the decree appealed from was not final. The petition for the rule alleged that the defendant in suit No. 129 in equity, Mrs. Florence T. Holland, and her husband, W. P. Holland, had conspired with the defendant Lamb and his firm and had “set over and assigned” to him and them $90,000 of the trust fund estate involved in that cause, with full knowledge of its purpose to subject the same to the alleged trust and lien of the creditors of W. P. Holland, all in contemptuous disregard of the authority and jurisdiction of the court below. Among other things, the prayer was that the defendant and others therein named be cited to appear before the court “upon a day to be named by the court, there to show cause why they should not be held in contempt of this court.” The rule was filed on April 21, 1930, and on the same day the court signed an order to show cause on the following day at 9 o’clock a. m., why the defendant therein should not be punished as for contempt. The matter was continued to a later date, and on July 22, 1930, Lamb filed his motion to quash the service. Several grounds, other than his immunity as attorney, were set up, but the court below quashed the service for that reason alone and decreed “that the said motion of the said William E. Lamb to quash the process and dismiss the petition for the citation of W. E. Lamb for contempt, and for an order to turn over money paid him by -the defendant, be and the same is hereby sustained and the rule to show cause is hereby discharged, and the said petition is hereby dismissed, without prejudice to the rights of the plaintiff, the receiver or any interested party, to proceed civilly in the matter as they or any of them may be advised. * * * ” For the reasons stated in cause No. 6072, this day decided, we think the funds were in the constructive possession of the court, to the knowledge of Lamb and his clients, and that plaintiffs were at liberty to proceed either by bill in equity, as was done there, or by rule for contempt, or by both means, to compel their restoration to the custody of the court’s officers. We are of the opinion, therefore, that the rule did state a ground for relief and the service under the circumstances was properly made. The decree below dismissed the rule by quashing the service and hence was undoubtedly final, notwithstanding the reservation of the right “to proceed civilly.” Reversed.

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UNITED STATES v. BISCHOF. No. 188. Circuit Court of Appeals, Second Circuit. April 13, 1931. George Z. Medalie, U. S. Atty., of New York City (Frank W. Ford, Asst. U. S. Atty., of New York City, of counsel), for the United States. William E. Riseley, of New York City, for appellee. Before MANTON, L. HAND, and CHASE, Circuit Judges. MANTON, Circuit Judge. Appellant filed this bill in equity under section 15 of the Naturalization Laws (34 Stat. 601, 8 U. S. C. § 405 [8 USCA § 405]) for the cancellation of appellee’s certificate of naturalization. Appellee’s application for citizenship was filed in the Supreme Court, Sullivan county, N. Y., May 15, 1925, and he was admitted to citizenship June 23, 1928. At the time of the hearing on his application, the Department of Labor was represented. It was made to appear that on January 30, 1925, the appellee was sued for absolute divorce on the ground of adultery, in the New York Supreme Court, and there was a finding that he had committed the offense charged. There was no defense entered to the divorce action. The government objected 'to his admission, not on the ground that the Immigration Law had not been followed, but because the applicant had not proven he was of good moral character and of good behavior within the five years previous to his application. The objection was not sustained. Thereafter this bill was filed. It is conceded “that all the facts which are now presented to the Court were presented to the Supreme Court at the time'of the granting of the certificate of naturalization.” The court below dismissed the bill for want of equity. 35 F.(2d) 186. The Naturalization Act of June 29,1906 (34 Stat. 596) provides : “Sec. 4. That an alien may be admitted to become a citizen of the United States in the following manner and not otherwise: • * * “Fourth. It shall be made to appear to the "satisfaction of the court admitting any alien to citizenship that immediately preceding the date of his application he has resided continuously within the United States five years at least, and within the State or Territory where such court is at the time held one year at least, and that during that time he has behaved as a man of good moral character. * * *” 34 Stat. 598, U. S. C. title 8, § 382 (8 USCA § 382). ' “See. 11. That the United States shall have the right to appear before any court or courts exercising jurisdiction in naturalization proceedings for the purpose of cross-examining the petitioner and" the witnesses produced in support of his petition concerning any matter touching or in any way affecting' his right to admission to citizenship, and shall have the right to call witnesses, produce evidence, and be heard in opposition to the granting of any petition in naturalization proceedings.” (34 Stat. 599, U. S. C. title 8, § 399 (8 USCA § 399). “Sec. 15. That it shall be the duty of the United States district attorneys for the respective districts, or the Commissioner or Deputy Commissioner of Naturalization, upon affidavit showing good cause therefor, to institute proceedings in any court having jurisdiction to naturalize aliens in the judicial district in which the naturalized citizen may reside at the time of bringing the suit, for the purpose of setting aside and canceling •the certificate of citizenship on the ground of fraud or on the ground that such certificate of citizenship was illegally procured. * * •” 8 USCA § 405. The behavior of a man of good moral character is as necessary a qualification to '.naturalization as other requirements of the statute. United States v. Ness, 245 U. S. 319, 38 S. Ct. 118, 62 L. Ed. 321. There are several unreported District Court eases cited to us supporting the government’s position that adultery proved justified cancellation under section 15 because such an applicant had not met the statutory requirement of good behavior. But the difficulty here is that the state court, which granted the application for citizenship to the appellee, knew that a divorce had been granted and that it was based upon the charge of adulterous conduct. The only issue raised in the state Supreme Court was whether section 4, subdivision fourth, of the June 29, 1906, act (8 U. S. C. § 382 [8 USCA § 382]), referring to good behavior of the appellee, had been complied with. That .issue was decided in appellee’s favor, but, where essential prerequisites to a valid order of naturalization are lacking, as, a certificate of arrival (United States v. Ness, supra), cancellation will be granted under section 15. Such a certificate of citizenship is illegally granted. In the Ness Case, the court said (245 U. S. 325, 38 S. Ct. 118, 121, 62 L. Ed. 321): “The remedy afforded by Section 15 for setting aside certificates of naturalization is broader than that afforded in equity, independently of statute, to set aside judgments, * * * but it is narrower in scope than the protection offered under Section 11. Opposition to the granting of a petition for naturalization may prevail, because of objections to the competency or weight of evidence or the credibility of witnesses, or mere irregularities in procedure. A decision on such minor questions, at least of a state court of naturalizatibn, is, though clearly erroneous, conclusive even as against the United States if it entered an appearance under Section 11.” So where the questions of fact are determined by the court admitting to citizenship, such findings of fact are regarded as conclusive. United States v. Srednik, 19 F. (2d) 71 (C. C. A. 3) ; United States v. Richmond, 17 F.(2d) 28 (C. C. A. 3). The remedy of the government, if it feels aggrieved by the decision on such findings of fact, is by appeal. We pointed out the distinction between a jurisdictional prerequisite to naturalization and mere fact finding in United States v. Gokhale, 26 F.(2d) 360 (C. C. A. 2). There we held the law providing that the applicant must be a free white person must be complied with, and that a Hindu was not, and therefore could not be admitted. Section 15 grants leave to cancel a previous naturalization for fraud or illegal procurement in its inception. The causes for which a suit will lie áre such as permit a court to cancel its own judgment, and Section 15 gives to one court such power over the decree of another. United States v. Richmond, 17 F. (2d) 28 (C. C. A. 3); United States v. Luria, 184 F. 643 (D. C. S. D. N. Y.). The question of fact determined by the state Supreme Court in favor of the applicant formed no basis for the claim of fraudulent or illegal means used in obtaining the certificate. The government having appeared and contested the one issue before the court, it is concluded by that decision on. the question of fact thus presented. Decree affirmed.

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In re GOTHAM CAN CO. MERCHANTS’ TRANSFER & STORAGE CO. v. RAFFERTY. No. 347. Circuit Court of Appeals, Second Circuit. April 6, 1931. Oppenheimer, Haiblum & Kupfer, of New York City (Eli S. Silberfeld, of New York City, of counsel), for petitioner-appellant. Merchants’ Transfer & Storage Company. Joffe & Joffe, of New York City (Louis Jofiie, of New York City, of counsel), for respondent-appellee trustee in bankruptcy. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. AUGUSTUS N. HAND, Circuit Judge. Merchants’ Transfer & Storage Company, hereafter called finance company, advanced money to Gotham Can Company, the bankrupt,. prior to its adjudication, upon the security of accounts receivable assigned by the latter. The contract of the parties provided that the finance company should advance in cash 77 per cent, of the face value of the accounts and the remaining 23 per cent, upon collection of the accounts subject to the following charges: (a) A charge of $5 per thousand on the first $100,000 of accounts assigned during any one year. (b) A “service charge” of one-thirtieth of 1 per cent, per day upon the outstanding balance of uncollected accounts. (e) Attorneys’ fees and other expenses incurred by the finance company in the collection of accounts not paid in full at ma/tuiity. The bankrupt agreed to collect the accounts and to remit the proceeds in specie to the finance company. On October 3,1929, when the. adjudication in bankruptcy occurred, the finance company held accounts having a face value of $10,674.97 as security for actual cash advances of $8,231.25. After the bankruptcy, the finance company made collections of these assigned accounts to the amount of $8,156.21, and the trustee to the amount of $529.52. On February 28, 1930, the finance company filed a proof of debt against the bankrupt estate, and in March, 1930, it filed a petition praying that the trustee pay over the above collections of $529.52 in his hands, together with any further collection which he had received. As a basis for its petition, the finance company claimed that there was due it the following sums: Amount advanced by it in excess of collections which it had received from assigned accounts $ 75.04 Service charges accrued after adjudication at the rate of one-thirtieth of 1 per cent, per day on outstanding accounts 384.87 Disbursements after adjudication incurred in collecting accounts ~ 29.95 Attorneys’ fees 300.00 $789.86 According to the contention of the finance company, there was therefore a balance of $260.34 due it in excess of the $529.52 representing accounts which the trustee had collected. The trustee filed a cross-petition asking that the proof of claim of the finance company be expunged, that the service charges for $384.87 and the miscellaneous charges for $29.95 be disallowed, and that an allowance of reasonable attorneys’ fees be made by the court. The District Court directed the finance company to turn over the uncollected accounts receivable, then amounting to $1,854.57, to the trustee upon payment by him of $75.04, which was the difference between $8,231.25, the amount due at the date of adjudication, and the $8,156.21, which it had collected from the accounts. The court also ordered the referee in bankruptcy to fix the reasonable value of the fees of the attorneys for the finance company and expunged the latter’s claim. The court rejected the item of $384.87 for service' charges on the ground that it in fact represented interest and that under the rule of Sexton v. Dreyfus, 219 U. S. 339, 31 S. Ct. 256, 55 L. Ed. 244, interest should not be allowed after the filing of the petition in .bankruptcy. The arrangement between the parties was in form a sale of accounts receivable with an agreement on the part of the finance company to advance 77 per cent, of the face value of the accounts at once, and to advance the remaining 23 per cent, as soon as it might be received from the payment of the accounts, after deducting therefrom the charge of $5 per thousand on the first $100,-000 of accounts, the charge of one-thirtieth of 1 per cent, on all unpaid accounts, and, in the event of bankruptcy or other default, expenses incurred in making collections. The finance company might be regarded as entitled to hold the accounts until they were all collected, even though its cash advances and expenses up to any particular date were satisfied. If so, the one-thirtieth of 1 per cent, daily charge could continue to roll up so long as any accounts remained unpaid. And this would be true whether the transactions were regarded as sales or loans. We think they were not sales, and to regard them as loans, which Gotham Can Company could not pay off until all the accounts were collected seems an unreal interpretation of the arrangement. Such a construction would imply that the Gotham Can Company borrowed on time and had no right to pay off its obligations until the accounts were all collected. No such obligation fairly appears from agreement of the parties. The transactions were had under a contract whereby the Gotham Can Company warranted that every account assigned would be paid in full at maturity, and that, if it was not paid, the Gotham Can Company would make it good. Moreover, high rates were to be paid for its advances and these, together with its compensation and such expenses as might be involved in making collections, were to be paid out of the accounts. In decisions construing usury statutes, contracts of this kind have uniformly been held to be collateral loans. We see no reason to give them any other interpretation here. Home Bond Co. v. McChesney, 239 U. S. 568, 36 S. Ct. 170, 60 L. Ed. 444; In re Grand Union Co. (C. C. A.) 219 F. 353; National Trust & Credit Co. v. Orcutt (C. C. A.) 259 F. 830; Commercial Security Co. v. Holcombe (C. C. A.) 262 F. 657; Le Sueur v. Manufacturers’ Finance Co. (C. C. A.) 285 F. 490. The obligation of the Gotham Can Company to repay all advances in full and to pay certain percentages for the use of the- money, shows that the transactions were essentially collateral loans, and not sales, and that the relations of the parties are governed by the decisions we have cited. The loans have been repaid, except for the small balance of $75.04, and all other claims, have been liquidated except the so-called service charges, disbursements, and attorneys’ fees secured by the contract, so that the accounts ought to be returned to the trustee in bankruptcy whenever these latter items, or such of them as are proper charges against the collateral, are repaid. As no proof of debt can include interest or other charges accruing subsequent to the filing of the petition in bankruptcy, the claim of the finance company was properly expunged. Sexton v. Dreyfus, 219 U. S. 339, 31 S. Ct. 256, 55 L. Ed. 244; Board of Com’rs of Shawnee County, Kan., v. Hurley (C. C. A.) 169 P. 92, page 96; Bankruptcy Act, § 63a. (1), 11 USCA § 103 (a) (1). No one disputes that the balance of $75.04 should be repaid by the trustee out of the $529.52, which he has collected. The same thing, in our opinion, is true of the $29.95 representing petty disbursements incurred by the finance company in collecting the accounts. The attorneys’ fees are in the same category (Boise v. Talcott [C. C. A.] 264 F. 61; In re Rosenblatt [D. C.] 299 P. 771; Security Mortgage Co. v. Powers, 278. U. S. 149, 49 S. Ct. 84, 73 L. Ed. 236), but they must be fixed by the court and not by the mere ipse dixit of the lender. When the finance company came into the bankruptcy court asking for payment of the proceeds of the accounts, it submitted itself to the jurisdiction, as indeed it seems to have conceded. The only question remaining is whether it is entitled to payment of the $384.87 service charges out of the proceeds of the accounts in the hands of the trustee. This claim the court below disallowed upon the authority of Sexton v. Dreyfus, supra, but that decision has no bearing on the question in dispute here. It had nothing to do with the right of a creditor holding securities to have interest as well as principal paid out of the collateral, but related only to the amount for which a secured claim might be proved in bankruptcy. In that ease the secured creditor had sold his collateral and sought to apply the proceeds first to the payment of interest accrued since the filing of the petition. Such a mode of marshaling, when the security was insufficient to pay the entire indebtedness, would increase the creditor’s claim against the estate by the amount of interest accruing since the filing of the petition, though such interest could not in the ordinary case be included in his proof of debt. Bankruptcy .Act, § 63a (1). The Supreme Court, following the English decisions, accordingly held that a creditor in such circumstances must first apply his security to the liquidation of the debt, with interest to the date of the petition. It was never suggested that he could not pay interest accruing up to the very date of payment out of the proceeds of the collateral if he might thus satisfy his entire claim. That he may do this has frequently been held, and any other result would be contrary to section 67d of the Bankruptcy Act (11 USCA § 107 (d), which provides that valid liens given for a present consideration shall not be affected by the act. Coder v. Arts (C. C. A.) 152 P. 943, 15 L. R. A. (N. S.) 372; San Antonio Loan & Trust Co. v. Booth (C. C. A.) 2 P. (2d) 590; People’s Homestead Ass’n v. Bartlette (C. C. A.) 33 F.(2d) 561. Accordingly the item of $384.87 should be paid by the trustee out of the proceeds of the accounts in its hands. The order of the District Court should be modified by directing the trustee to pay to the finance company from the proceeds of the accounts in his hands the foregoing items of $75.04, $384.87, and $29.95, and by 'directing the finance company to reassign to him any accounts remaining uncollected, as well as any proceeds from the accounts which may remain in its hands after the attorneys’ fees incurred by it have been fixed by the District Court, or by agreement with the trustee, and paid.

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THE EAST HAMPTON. ELECTRIC BOAT CO. v. EAST HAMPTON SHIPPING CO., Inc., et al. No. 307. Circuit Court of Appeals, Second Circuit. April 6, 1931. George E. Hall, of New York City, for appellant. Duncan & Mount, of New York City (Frank A. Bull, of New York City, of counsel), for appellee. Before L. HAND, SWAN and AUGUSTUS N. HAND, Circuit Judges. L. HAND, Circuit Judge. On July 18,1930, the libellant had a claim against the East Hampton Shipping Company, In'e., a New York corporation, for repairs done upon its ship, the “East Hampton,” then at the wharf of the Thames Tow Boat Company in New London Harbor, where she had lain for about eleven months. The account being a year in arrears, the libellant on that day filed its libel in rem against her, and a stipulation for costs. The District Court at the same time issued a monition returnable, August fourth, under which the marshal arrested the ship, posted a notice upon her, and in the court house at New Haven, and published it in a New London paper. On August second the Thames Tow Boat Company filed an intervening libel in rem for other repairs and wharfage, and on the return day, no claimant having appeared, the District Court by interlocutory decree directed that default should be entered and that the ship should be sold, and .awarded the libellants the amount which should be found due upon a reference. A venditioni exponas issued on the sixth, which was executed on the twenty-fifth, the ship being struck off to Hayes, the appellant, for two thousand dollars. Of all this the East Hampton Shipping Company had no notice, though the decree of sale recited the contrary. Having learned of the sale after it took place but before confirmation, it intervened in the suit on September ninth, and' on the thirteenth procured a rule nisi “to vacate the sale,” returnable on the twenty-second. Its petition alleged that it had had no notice of any of the proceedings, that the ship was worth $25,000, that there were liens of $3,500 upon it, that the rules of the court in the admiralty had been disregarded, and that it would pay into court any amount neeessary to cover the claims of both libellants. Hayes, the purchaser, appeared in opposition on the return day, and submitted voluminous affidavits in answer. The matter chiefly litigated was the ship’s value, the appraisals varying between $2,000, the amount of the bid, and $50,000, the highest figure of the claimant’s affiants. The judge did not find what was the value of the ship,, and set aside the sale, not for “the gross inadequacy” of the bid, but because of the failure to give notice to the claimant. The decree provided that the claimant should pay the amount due the libellants with costs, repay Hayes his bid together'with the amount thereafter disbursed by him, and post a bond guaranteeing to bid $4,000 upon a new sale which was ordered. This decree was amended on October eighth in certain particulars, irrelevant except that among the recitals was incorporated the statement, made with the claimant’s consent, that it “waived so much of the prayers of said petition as relate to the reopening of the default decree * * * and informed the court that” it “only claimed so much of the prayers of said petition as related to the setting aside of the sale.” The appeal is from the decree of September thirtieth. We held in The St. Paul, 262 F. 1021, following Butterfield v. Usher, 91 U. S. 246, 23 L. Ed. 318, that a decree, vacating a sale under a decree in the admiralty and directing a new sale, was not appealable before final decree in the suit át large. That decision would apply here, and deprive us of jurisdiction, except for an allegation in the petition for the amendment of the decree of September thirtieth, that both libellants had been paid. Since this put an end to the suit, the decree vacating the sale and directing the purchaser to deliver the ship has become final. In Butterfield v. Usher this was said to have been held in Blossom v. R. R. Co., 1 Wall. 655, 17 L. Ed. 673; and in any event it is plainly the ease. The only purpose of the suit was to collect the libellants’ claims; these being paid, there was nothing to justify another sale, for the claimant is under no duty to give the purchaser, Hayes, a second chance to buy its ship at public auction, because the first sale has fallen through. All that can remain to be done is to ascertain whether the first sale shall stand, and whether it does or not, the ease ends. Hence, though to do so we must look behind the form of the decree, in fact we can assume jurisdiction over the appeal. We may therefore proceed to the merits. Rule five of the Admiralty Rules of the District of Connecticut provides that, “except by consent of the parties or by order of the Court,” there shall be no sale of the res by interlocutory decree “before the sum chargeable thereon is fixed by the Court.” (“By order of the Court” means something more than the decree itself, though separate orders are of course not necessary. The rule contemplates some special occasion and here there was none. The ship had already lain at her berth for nearly a year; it was summer; the wharfage was not high. There was not the slightest reason to sell her before final decree, when the claimant would have beefi entitled' under local admiralty rule twenty-eight to actual notice, if that were feasible. This would have given it the opportunity to protect its property, which perhaps the court supposed it had already had in fact, because of the false recital of actual notice. Admiralty Rule 12 of the Supreme Court (28 US CA § 723) provides for the sale of a ship when the owner “unreasonably neglects” to give a stipulation, “upon due cause shown”; it presupposes that there shall not otherwise be any sale, except as Rule 11 (28 USCA § 723) may require, that is, if the keep be unreasonably high. It was therefore contrary to law to sell the ship when she was sold, and a wrong to the claimant, which this very contest shows to have had substance. As between the libellants and itself there can be no question of its right to reopen, and the only question is how far the court should recognize the owner’s interest against the bidder’s in his bid. Though his position changes upon confirmation, until then a bidder is not a purchaser, but merely an offerer to the court, which accepts his bid only by the confirming order. Camden v. Mayhew, 129 U. S. 73, 82, 9 S. Ct. 246, 32 L. Ed. 608; State of Tennessee v. Quintard, 80 F. 829, 835 (C. C. A. 6). It is quite true that a court will not refuse to confirm a bid merely, because higher bids are in sight, but this we conceive is not because the unconfirmed bidder has any vested right in the property. It is rather because such a practice, if made general, would tend to keep bidders away and chill the auction. Since, therefore, bids must be confirmed as well in the admiralty as in equity (The New Hampshire, Fed. Cas. No. 10160; The Sue [D. C.] 137 F. 133), we are to consider here, not so much the bidder’s interest, as whether it would be undesirable to allow such circumstances as these to interfere with the finality of judicial sales. We agree that it would be difficult on these affidavits positively to conclude that the bid was so low as to “shock the conscience of' the court,” which would alone be enough. Graffam v. Burgess, 117 U. S. 180, 191, 192, 6 S. Ct. 686, 29 L. Ed. 839; Pewabic Mining Co. v. Mason, 145 U. S. 349, 367, 12 S. Ct. 887, 36 L. Ed. 732; Magann v. Segal, 92 F. 252, 259 (C. C. A. 6). Any appraisal, in the face of so much unwinnowed testimony, would be little more than a guess. We might perhaps say with some confidence that the ship was worth twice or three times the bid, but that would hardly serve. The inadequacy of the bid is not however the only reason which courts accept; in Magann v. Segal, supra, the negligence of other bidders to come prepared with the necessary cheques was thought enough. Inevitably some doubt is thrown upon all sales by accepting any excuse whatever, and the situation is the familiar one of balancing conflicting interests; but it seems to us enough that the owner has had no notice. Ordinarily, the prescribed procedure will not be ignored, so that such occasions will not often arise; when they do, the bidding has taken place without the bidder most interested to protect the property; it is in general regarded as of prime importance that a man should not lose his property without a hearing. Against these considerations the added uncertainty cast upon judicial sales does not appear to us a sufficient counterweight". Certainly such a situation justified the exercise of the judge’s discretion to refuse confirmation. The recital incorporated in the decree by the amendment is riot material. Its purpose was clearly to allow the decree to stand, but not to forego any objection to the sale. The failure to give notice might indeed have even justified vacating the decree, had the claimant chosen to assert it; but it went further than that. It also vitiated the sale by keeping the claimant away, a grievance which the stipulation did not affect, but specifically reserved. The decree is modified and the cause remanded with instructions to require the claimant as a condition upon retaking the ship to pay the marshal’s costs up to September 30, 1930; to restore to Hayes the amount of his bid and his outlay upon the ship, to be ascertained, together with interest upon both up to September 30, 1930; to allow the claimant thereupon to retake the ship; and to dismiss the libel. The costs of this appeal will rest upon the appellant.

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UNITED STATES v. 10 BOTTLES OF SCOTCH WHISKY et al. SAME v. ONE ONE-QUART BOTTLE OF GLYCERINE et al. Nos. 337, 338. Circuit Court of Appeals, Second Circuit. April 6, 1931. Perkins & Bntler, of New York City, for appellant National Cash Register Co. Harry Edwards, of New York City, for appellant Domestic Electric Co. Leo De Nave, of New York City, of counsel, for appellants. Howard W. Ameli, U. S. Atty., of Brooklyn, N. Y. (J. Bertram Wegman, Herbert H. Kellogg, and Emanuel Bublick, all of Brooklyn, N. Y., of counsel), for the United States. Before MANTON L. HAND, and CHASE, Circuit Judges. L. HAND, Circuit Judge. In the first ease the United States filed a libel of information to forfeit chattels, seized at 1286 Bedford Avenue, Brooklyn, among which was an “ice cube Frigidaire.” At that place one, Collins, “possessed” and had “custody and control” of “distilled spirits, subject to the tax imposed thereon by section 900 of the Revenue Act of 1926 [26 USCA § 245], and beer containing more than one half of one per centum of alcohol.” These Collins possessed for the purpose of selling in fraud of the Internal Revenue Laws “and with design to avoid the payment of said taxes.” ' The chattels were found and seized “within the place and building where the spirits and beer were seized.” The second libel alleged the seizure of another lot of chattels, among which was a cash register, at 140 Livingston Street, Brooklyn, where one, Powell, possessed certain liquor and beer with intent to defraud the revenue, and glycerine and alcohol to make gin for the same purpose. The chattels seized were “within the same place” as the liquor, beer and raw materials. The owner' of the Frigidaire in the first suit, and the cash register in the second, appeared, made claim, and excepted to the libels for insufficiency in law. The District Judge overruled the exceptions, and decreed a forfeiture, the claimants not wishing to plead over. In Re Hurley (D. C.) 37 F.(2d) 397, 398, Judge Adler concluded that the clause in Rev. St. § 3453 (26 USCA § 1185) “all tools, implements, instruments, and personal property whatsoever,” must be confined to chattels used in the manufacture of raw materials into taxable articles with intent to defraud the revenue, and the Ninth Circuit adopted that view in Ryan v. U. S., 44, F.(2d) 951. This would dispose of the Collins suit, though not that of Powell. Judge Lowell held, in U. S. v. 33 Barrels of Spirits, Fed. Cas. No. 16,470, that the articles seized must be used in aid of the unlawful purpose, but, as the ease before him concerned manufacture, he had no occasion to say, and did not, whether the section applied when no manufacture took place. Judge Choate, in U. S. v. 16 Barrels of Distilled Spirits, Fed. Cas. No. 16,300, had before him a case involving the possession of finished spirits, possessed with intent to defraud the revenue, and he held that all personal property on the premises was confiscable, regardless of its connection with the unlawful purpose. He ameliorated the severity of the result by construing “place .or building” as including only those parts of the premises occupied by the possessor of the liquor. In U. S. v. One Ice Box (D. C.) 37 F.(2d) 120, Judge Woodward held confiscable the paraphernalia of a purveyor of liquors, who was not engaged in manufacture, the articles seized being, however, all in his possession in that part of the premises occupied by him. The same section was under discussion in U. S. v. Quantity of Tobacco, Fed. Cas. No. 16,106, and U. S. v. Distillery at Spring Valley, Fed. Cas. No. 14,963, but the point here at bar was not decided. It appears to us that to construe the clause in question as limited to cases of manufacture. disregards the words, “such articles,” in the clause, “in the place or building, or within any yard or inelosure where such articles or raw materials are found.” 26 USCA § 1185. Except for the earlier form of this provision in the Act of 1864 (13 Stat. 240, § 48), there seems to be no room for doubt. The section begins by condemning all “articles” on which taxes are imposed. It extends this by the next sentence to “raw materials” intended for the manufacture of “articles of a kind subject to tax,” and concludes by including the tools, etc., in the place “where such articles or raw materials” may be. The apparent purpose was to cover the associates of manufactured articles as well as of raw materials ; nor is there any antecedent reason to impute any difference. The Act of 1864 (13 Stat. 240, § 48) scarcely justifies the opposite view. Indeed, the clause was mere jargon, as originally enacted. It read as follows: “All tools * * * in the place or building * * * where such articles on which duties are imposed, as aforesaid, and intended to be used by them in the fraudulent manufacture of such raw materials, shall be found.” “Intended to bo used by them in the fraudulent manufacture of such raw materials,” does indeed more naturally refer to “tools, implements” and “instruments,” but the position of the clause does not permit of such attribution. Nor does it better the sense to assume a transposition of the clause, so as immediately to follow “property whatsoever.” The best escape, though it does much violence to the language, is to read the phrase as meaning, “and raw materials intended to be used by them in the fraudulent manufacture of such articles,” and this is the substance of the amendment of 1866 (14 Stat. Ill), when the section took its present form. Apparently the words were at once recognized as meaningless, and we think that the seeond version is alone to be taken as expressing the authoritative intent of Congress. Hence we hold that property is confiscable, when found in the same place or building as manufactured articles subject to tax. It does not follow that the libels are good. The association of the chattels seized with the illicit liquor is alleged only by inference. In Collins’s case the libel alleged that “the premises 1286 Bedford Avenue” wer¿ within the Eastern District of New York, that Collins possessed the liquor “at the said premises,” and that the chattels seized were “in or within the same place and building” as the liquors. In Powell’s Case the allegations are in substance the same, except that the chattels are alleged to be “in or within the same place” as the liquors and raw materials. We adhere to the view of Judge Choate that the chattels must be in a part of the building occupied by the possessor of the illicit liquor, and we may add, in a part associated in use with that where the liquors are possessed. The opposite view would result in fantastic injustice which was certainly outside the purpose of the law. U. S. v. Stowell, 133 U. S. 1, 10 S. Ct. 244, 33 L. Ed. 555, concerned only a brewery, and it was necessary to decide no more than that the brewery was part of the same premises as the illicit distillery which had been set up within it. Upon exception we may perhaps read the libels as alleging that Collins or Powell occupied that part of the building where the illicit liquors were found, but it seems to us an undue extension to read the words “same place” as intended to mean that the other chattels were there as well. “Place” seems to have been used in the libels as the equivalent of the building at the street number mentioned, and it is consistent with the allegations that the chattels were anywhere in those buildings and that Collins or Powell were not in occupation of the part where they were. Hence, to succeed the libels must be amended to declare that the place where the chattels were seized was also in occupation of the possessor of the liquors, and was not divorced in use from that where the liquor or raw materials themselves were possessed. This will not necessarily be enough. We do not now decide whether in addition it must appear that the chattels were in custody of the possessor, and if so, that they were being used as ancillary to the unlawful purpose. No doubt when the libels are amended the pleader will declare himself fully as to both these matters; we reserve judgment, since the questions may not arise. Decrees reversed and causes remanded with leave to the libellant to plead over.

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NORTH GERMAN LLOYD v. ELTING, Collector of Customs. No. 326. Circuit Court of Appeals, Second Circuit. April 6, 1931. George Z. Medalie, U. S. Atty., of New York City (George B. Schoonmaker, Asst. U. S. Atty., of New York City, of counsel), for appellant. John M. Lyons, of New York City (Roger O’Donnell, of Washington, D. C., of counsel), for appellee. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. SWAN, Circuit Judge. At various dates between December 22, 1924, and June 10, 1925, the plaintiff steamship company brought to the port of New York six aliens, each of whom was excluded by the immigration officials because of some physical defect which might affect his ability to earn a living. Aliens who are found to possess such defects and are so certified by the examining surgeon are excluded from admission to the United States by section 3 of the Immigration Act of 1917 (8 USCA § 136). Section 21, however, permits the Secretary of Labor to admit them in his discretion upon the giving of a suitable bond (8 USCA § 158); but it is not alleged that any of the six aliens in question was so admitted. With respect to each of them a fine was imposed upon the plaintiff under section 9 as amended (8 USCA § 145), which plaintiff paid under protest to the defendant collector of the port of New York. This suit was brought to recover the sums so paid, aggregating some $2,100. The complaint contains six counts, each of which sets up a distinct cause of action based upon one of the several fines. Each count alleged transportation by plaintiff from Germany to the United States of an alien who exhibited a proper German passport *and a quota immigration visa issued by an' American consul; the exclusion and order to deport the alien because of a physical defect certified by the examining surgeon to be such as might affect his earning ability; the imposition of a fine upon plaintiff despite its submission of evidence to the Secretary of Labor in opposition to the proposed fine; plaintiff’s payment of the fine under protest, and defendant’s covering of part of the fine into the Treasury of the United States and delivery of the rest (the passage money) to the alien. These allegations the defendant’s answer admits. Eac-h count further alleged that the act of the Secretary of Labor in imposing the fine was without lawful authority and arbitrary; that in transporting the alien plaintiff acted on the visa of the American consul and the fact that the alien was a proper subject for admission under section 21 of the Immigration Act of 1917; that the alleged inadmissibility of the alien could not have been ascertained by the exercise of reasonable diligence by plaintiff prior to the alien’s departure from the port of embarkation; and that demand for payment had been made by plaintiff and refused by defendant. These allegations the answer denied. Upon these pleadings, judgment was entered for the plaintiff, and a certificate of probable cause was granted pursuant to section 989 of the Revised Statutes (28 USCA §»842). By the terms of section 9 of the Immigration Act of 1917 as amended (8 USCA.§ 145), under which the Secretary of Labor assumed to act in imposing the fines upon plaintiff, no fine can be assessed unless “it shall appear to the satisfaction of the Secretary of Labor” that the physical defect of the alien “might have been detected by means of a competent medical examination” at the time of his foreign embarkation. This fact would seem to be put in issue by the plaintiff’s allegation that the inadmissibility of the alien was not then ascertainable by the exercise of reasonable diligence, and the defendant’s denial thereof. Hence a judgment on the pleadings can be sustained only if the issue raised can be said to be immaterial. Plaintiff so argues, and this view was accepted by the court below. It is contended that since section 21 (8 USCA § 158) gives the Secretary of Labor discretion to admit upon bond aliens liable to be excluded because of physical defects which may impair their earning ability, such aliens must be privileged to come to the United States to invoke exercise by the Secretary of his discretion to- admit them,, and hence section 9 cannot reasonably be construed to impose a fine upon the transportation company which brings them here for that purpose. However persuasive this argument might appear if addressed to Congress, it cannot justify a court in overriding express statutory provisions to the contrary. Section 9 (8 USCA § 145) declares that “it shall also he unlawful for any person to bring to any port of the United States” physically defective aliens, and it expressly imposes a fine for so doing, if the Secretary of Labor be satisfied that the defect existed at the time of foreign embarkation and might then have been detected by a competent medical examination. The validity of similar provi-sio-ns in the Act of March 3, 1903 (32 Stat. 1215) was adjudged in Oceanic Steam Navigation Co. v. Stranahan, 214 U. S. 320, 20 S. Ct. 671, 53 L. Ed. 1013. By this language Congress expressly prohibited the bringing in of defective aliens. Of section 9 (8 USCA § 145) no less than of section 19 (8 USCA § 155) it may be said that it “is not aimed at the aliens of the excluded class, but at the owners of vessels unlawfully bringing them into this country.” United States v. Nord Deutscher Lloyd, 223 U. S. 512, 517, 32 S. Ct. 244, 245, 56 L. Ed. 531. Section 21 (8 USCA § 158) on the other hand, deals with aliens liable to be excluded because likely to become a public charge or because of physical disability (excepting certain named diseases), and says nothing concerning the owners of vessels who bring such aliens to this country. To hold that the latter section in effect repealed the former would ran counter to accepted canons of statutory construction. There is no necessary conflict between them. Moreover, the last sentence of section 9 (as amended by 43 Stat. 167 [8 USCA § 145]) forbids the construction contended- for. That sentence reads: “Provided further, That nothing contained in this section shall be construed to subject transportation companies to a fine for bringing to ports of the United States aliens who are by any of the provisos or exceptions to section 3 of this Act exempted from the excluding provisions of said section.” Some of the provisos in section 3 give the Secretary of Labor discretion to admit, and this was the basis of the decision in Dollar Steamship Line v. Hyde, 23 F.(2d) 910 (C. C. A. 9). Under the familiar maxim, “expressio unius est exclusio alterius,” this express reference to the provisos and exceptions to section 3 (8 USCA § 136) exhausted the exemptions from fine which Congress expressed the desire to grant to companies who should bring in aliens excluded by the terms of section 3. We may not add to this list by implication because section 21 also gives the Secretary discretion to mitigate harsh eases in favor of another class of aliens liable to be excluded. Section 21 had been on the statute books since 1907 (34 Stat. 907), and we ean not assume that the failure to refer to it in the last sentence of section 9, when that section was re-enacted in 1924, was mere inadvertence. If the Secretary had exercised his discretion in favor of admitting the aliens, it may be that the vessel owner who brought them would incur no penalty. See Norddeutseher Lloyd v. United States, 213 F. 10, 14 (C. C. A. 2); Lloyd Sabaudo Societa, etc., v. Elting, 45 F.(2d) 405, 409 (D. C. S. D. N. Y.). That question is not now presented, for there is no allegation in complaint or answer that any of the aliens in question was admitted by the Secretary. Whatever the rale may be in that situation, it seems clear that the bringing of a defective alien who is not admitted by the Secretary falls squarely within the prohibition and the penalty of section 9. Nor is this conclusion inconsistent with our decision in Compagnie Erancaise de Navigation a Vapeur v. Elting (C. C. A.) 19 F. (2d) 773. There admission of the alien was not dependent upon the Secretary’s exercise of discretion. If the alien was, as he claimed to be, returning to a United States domicile, he was not in an excluded class, but was absolutely entitled to enter. Under the statute and the rules he was permitted to offer evidence in support of his claim, and this he could do only at a United States port. Under such circumstances, we held that a steamship company was not subject to fine for bringing him to this country though his claim was rejected. That doctrine cannot be extended to cover the case at bar for reasons already stated. The other eases cited by plaintiff, Clyde Steamship Co. v. United States, 33 F.(2d) 343 (D. C. S. D. N. Y.), and United States v. Compagnie Generale Transatlantique, 26 F.(2d) 195 (C. C. A. 2), are also clearly distinguishable. Lloyd Sabaudo Societa, etc., v. Elting, 45 F.(2d) 405 (D. C. S. D. N. Y.), is in accord with •our conclusion. The plaintiff argues also that the alien’s possession of a proper passport with a quota immigration visa issued by an American consul precludes the imposition of a fine for the transportation of such alien. This is equivalent to contending that the Immigration Act of 1924 (43 Stat. 153 [8 USCA § 201 et seq.]) has abolished the requirement that a carrier determine at its peril by a competent medical examination at the port of foreign embarkation whether the alien is afflicted with a physical defect which excludes him from admission. The statute will not permit of such a construction. Section 25 (8 USCA § 223) expressly declares that the 1924 act is in addition to and not in substitution for the provision of the earlier immigration laws; and section 2(g), 8 USCA § 202(g), provides that the issuance of an immigration visa shall avail the alien nothing if he is found to be inadmissible upon arrival. While the statute is silent upon the subject of a medical examination prior to the issuance of a visa, the official instructions to consuls direct them to require immigrants to present medical certificates showing that they are not within any of the classes excluded by section 3 of the Act of 1917 (8 USCA § 136). This requirement was doubtless within the authority of section 2(f), 8 USCA § 202(f), but certainly there is nothing in the statute to support the conclusion that such medical certificates were to relieve the steamship companies of the obligation to make their own examination. On the' contrary, section 9 (8 USCA § 145), which imposes the fine if the defect might have been detected by the steamship company by means 'of a competent medical examination, was reenacted. The purpose of the 1924 act was more rigidly to restrict immigration, and a double examination would not be an unreasonable execution of that purpose. It may be that, if the medical examination conducted under the direction of the consul did not disclose the physical defect which resulted in the alien’s exclusion, the Secretary of Labor would act unreasonably in determining that the defect existed and might have been discovered by the steamship company at the foreign port. That would turn upon whether the consul’s “medical examination” was a “competent” one, depending altogether on the circumstances of its making. We cannot hold as a matter of law that it was such, thus making the imposition of a fine arbitrary and unlawful. The pleadings raised- an issue as to whether the defect could have been discovered at the foreign port. That issue is material to the cause of action alleged. Consequently the judgment on the pleadings cannot be sustained. Judgment reversed, and cause remanded.

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MOUNT v. COMMISSIONER OF INTERNAL REVENUE. No. 132. Circuit Court of Appeals, Second Circuit. April 6, 1931. Clarence J. Hand and Larkin, Rathbone & Perry, all of New York City (John W. Drye, Jr., Hersey Egginton, and John M. Perry, all of New York City, of counsel), for petitioner. G. A. Youngquist, Asst. Atty. Gen., and Sewall Key and John H. McEvers, Sp. Asst. to Atty. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and R. N. McMillan, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. SWAN, Circuit Judge. The petitioner and his brother owned undivided half interests in real estate and personalty which they had acquired by inheritance from the estate of Susan Mount in 1917. In January, 1920, they caused to be organized a New York corporation, under the name of Clem Realty Company, with a capital stock of $1200, represented by twelve shares of stock. Forthwith they conveyed to it said real estate and possibly certain shares of bank stock, though there is much confusion in the record as to the stock. The Commissioner of Internal Revenue ruled that petitioner and his brother transferred the property to the corporation in exchange for its stock, resulting in a taxable gain under section 202 (b) of the Revenue Act of 1918 (40 Stat. 1060): “(b) When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any. * * *” The Board of Tax Appeals confirmed the deficiency found. by the Commissioner, and the correctness of this ruling is presented by this appeal. It is contended by petitioner that the twelve shares of stock were paid for in cash and the conveyance of the property was a gift to the corporation. But the corporate minutes, upon which he relies, do not bear out this contention. The resolution of acceptance provides that “the corporation shall take the properties at the values at which said properties were appraised in inheritance tax proceedings in the Estate of Susan Mount,” and further that, if upon appraisal of the various parcels of real estate there shall be an excess of value above that fixed by" the inheritance tax proceedings, such excess “shall be construed as a gift to the corporation.” There was no sense in speaking of the excess of value as a .gift unless the rest of the value was a consideration for some'-thing the corporation gave in return. It gave in return its shares. . It is true that it also agreed to indemnify the brothers against liabilities incurred or to be incurred in connection with another corporation known as Bronx Exposition, but such promise was backed by nothing except the assets obtained in exchange for its shares. The corporate minutes merely disclose a transparent at-' tempt to conceal the real nature of the trans-: action, which was to convert the individual ownership of the brothers’ property into ownership through a corporation whose shares should be equally divided between them.' Confirmation, were it needed, is found in the1 petitioner’s admission in the note attached' to his, income tax return, stating that the realty was conveyed in exchange for the “entire capital stock of the company.” The-Board was right in holding the transaction an exchange and not a gift. The conveyance was made subject to existing mortgages, liens, and taxes. To provide a working capital, the Messrs. Mount agreed to supply $100,000, or such amount, up to that sum “as shall be realized from the sale of stocks received by them by inheritanee from Susan Mount upon liquidation of outstanding collateral loans, the corporation to have the right to take any or all of said securities up from time to time at the values at whieh they were appraised in inheritance tax proceedings,” and any excess over such; value to be received by the corporation as a gift. The brothers owned 538 shares of bank , stock acquired by inheritance. It may be inferred that this stock was taken over by the corporation at some time during the year 1920, though the record concerning it is most confused. It is impossible to tell when it was taken over, or what sum, if any, the corporation paid to release it from “outstanding collateral loans.” The Commissioner’s deficiency notice shows that he took 438 shares to have been transferred as of January 1, 1920, and apparently he valued it as of that date. The difficulties in sustaining a valuation as of that date are obvious, but we do not stop to consider this feature of the case, because even on the assumption that the bank stock may be treated exactly like the real estate, that is, that both were exchanged for the shares of the newly formed corporation, we think no taxable gain resulted. Under the Revenue Act of 1921, § 202 (c) (3), 42 Stat. 230, such an exchange as this is explicitly excepted from taxation, and all subsequent acts express the same congressional intent; but the present ease must .be adjudged under the language of the 1918 act, already quoted. The exchange was taxable only if the shares had a “fair market value.” This is the clear implication of the statute and is the construction adopted by the Regulations. Regulations 45, § 1563. The Board made no finding that the shares had a market value; on the contrary, it said that no evidence was offered as to saleability or market value. As so frequently happens in tax cases,- the Commissioner relies upon the presumptive correctness of his determination. Wickwire v. Reinecke, 275 U. S. 101,105, 48 S. Ct. 43, 72 L. Ed. 184; Austin Co. v. Commissioner, 35 F.(2d) 910, 912 (C. C. A. 6). So the question comes down to how far we are to press the taxpayer’s burden of proof. Here were six shares of stock out of a total of twelve held equally by two brothers, issued for a mixed lot of property composed of twenty-nine parcels of real estate incumbered by mortgages, liens, and taxes, and the equity in securities which had been pledged for collateral loans, the corporation itself also incumbered by an obligation to protect the brothers against indefinite obligations to creditors of Bronx Exposition. Such shares may have intrinsic value, but certainly the only reasonable inference is that they have no “fair market value.” See O’Meara v. Commissioner, 34 F.(2d) 390, 395 (C. C. A. 10); Holmes Fed. Income Tax (6th Ed.) § 332. As is said in section 1583 of Regulations 45: “ * • • 'Market valué’ is the price at which a seller willing to sell at a fair price and a buyer willing to buy at a fair price, both having reasonable knowledge of the facts, will trade. Property received in exchange for other property has no 'fair market value’ for the purpose of determining gain or loss resulting from such exchange when, owing to the condition of the market, there can be no reasonable expectation that the owner of the property, though wishing to sell and any person wishing to buy will agree upon a price at which to trade unless one or the other is under some peculiar compulsion.” There must be a limit beyond which the presumptive correctness of the Commissioner’s determination may not be stretched in order to defeat a taxpayer. On the facts appearing in this record, the burden which the taxpayer carried of establishing that there was no fair market value for his shares was sustained. The number of shares, their equal division, and the character of the property for which they were issued, required an inference that there was no market for them, in the absence of evidence of saleability or market value. This conclusion is in accord with the uniform holding of the courts, so far as we are advised, under similar circumstances. O’Meara v. Commissioner, supra; Tsivoglou v. United States, 27 F.(2d) 564 (D. C. Mass.), affirmed 31 F.(2d) 706 (C. C. A. 1); Bourn v. McLaughlin, 19 F.(2d) 148 (D. C. N. D. Cal.); Heafey v. Allen, 34 F. (2d) 941 (D. C. Neb.). Cf. Schoenheit v. Lucas, 44 F.(2d) 476 (C. C. A. 4). Our own recent decision in Insurance & Title Guarantee Co. v. Commissioner, 36 F.(2d) 842, is not inconsistent with this result, for there the Board had made a finding of market value based on actual sales of the new shares. The order of the Board of Tax Appeals is reversed.

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SHEARER v. COMMISSIONER OF INTERNAL REVENUE. No. 77. Circuit Court of Appeals, Second Circuit. April 6, 1931. Harry J. Campaign and George L. Shearer, both of New York City, for appellant. G. A. Youngquist, Asst. Atty. Gen., and Sewall Key and Norman D. Keller, Sp: Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and J. K. Polk, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. L. HAND, Circuit Judge. The taxpayer was one of a firm of attorneys in New York which kept its books upon a fiscal year other than the calendar year. His distributive share from the firm for the firm year ending in 1922 was large, and he included it in his return for that year as required by section 218 (a) of the Revenue Aet of 1921 (42 Stat. 245). In calculating his tax he split the share into two parts; that is to say, he calculated one tax upon the proportion allocable to 1921 as though it were alone, and another upon the remainder allocable to 1922, on t]ie same assumption. The Commissioner computed the tax upon the part allocated to 1922 at the rates for that year, including a surtax as though that part were alone included. To this he added a second tax calculated upon the part allocated to 1921 at the rates for that year, including a surtax as though that part were an addition to the part allocated to 1922. The surtax was therefore made up by putting the 1922 part in the lower “brackets” and the 1921 in the higher, and applying the rates accordingly. The Board affirmed the Commissioner and the taxpayer appealed. During 1922 the taxpayer bought a motorcar, for which the dealer charged him by entering the excise tax under section 900 of the Aet of 1921 (42 Stat. 291), as an item separate from the purchase price, as provided in Article three of Regulations 47; the dealer in this way avoiding a tax upon any part of the separate item. This tax the taxpayer claimed the right to deduct from his income under section 214 (a), (3), 42 Stat. 239, and the Commissioner disallowed it. The appeal is also from the decision of the Board affirming this rule. As to the first point, the difficulty arises from the omission from the Act of 1921 of section 206 of the Aet of 1918 (40 Stat. 1062), a confessed inadvertence corrected in the Act of 1924. That section had provided, and section 207 of the Act of 1924 (26 USCA § 938) later did provide, that when a partner’s distributive share from his firm fell in separate years, the surtax should be computed as the Commissioner proceeded in the ease at bar. By Article 335 of Regulations 62 he continued this method for the year 1922, and relies upon his power to do so here. Section 205 (c), which remained in all three acts (40 Stat. 1061, 42 Stat. 232, 26 USCA § 938 (b), provided that the rates for each year should “apply” to that part of the partner’s share allocable to that year, and that the share should be allocated proportionately to the fraction of each calendar year included in the firm year. We have first to consider what is the result of the Act of 1921, disregarding the repeal of section 206, and then how far that repeal changes the result. In express terms section 218 (a) required the whole share to be included in the return for the later year; thus precluding the addition of the earlier part to the other income of the earlier year. The taxpayer’s method not only treats the earlier part as though it had accrued in the earlier year, but as though it were the only income of that year, since he does not, and of course could not, include it in his 1921 return. This is in effect to tax it as the whole income of another person received or accrued in 1921, though returned in 1922. It seems to us apparent that this result could not have been intended; section 218 (a) by requiring the whole share to be returned in one year, must have meant that the surtax should be computed upon it as though it were received in a single year. Section 205 (e) does not meet this inference; it does indeed distribute the rates of 1921 and 1922 among the allocated parts, but it does not suggest that the share shall lose its character as an entirety. The rates for each year may equally “apply” to the part allocated to that year, though the second part, whichever be chosen as second, be taken as part of a whole, that is, though it be placed in the higher “brackets.” Thus, regarding alone the relevant sections of the Act of 1921, the taxpayer’s pretension to treat the part allocated to 1921 as though it were a separate income for that year seems without warrant. Nor do we think that the repeal of section 206 justifies an opposite inference. That section was designed to establish a special order in which the rates should be applied; the earlier rates to the later parts, the later to the earlier. The repeal can at most be understood as no more than to abrogate that method, which was indeed contrary to what would naturally have been selected. So far indeed we hold that it went, whether or no it was inadvertent. While at times the subsequent action of Congress has been held to throw light upon what had gone before, we know of no case where a repeal has been held to be brutum fulmen, because the repealed provision was later reinstated. We are thus brought to the question whether the Commissioner had power to preserve the old method, despite the repeal. On the whole it seems to us that he had not. Had section 206 not been repealed, it would perhaps have been possible to say that the order in which the parts should be taken was within the compass of the Commissioner’s legislative powers, though even that is doubtful. Section 205 (c) in applying the rates of each year to the part allocable to that year, if taken by itself, can scarcely be supposed to have meant to invert the actual sequence in the accumulation of the income. True, the allocation is arbitrary, since it will seldom be that an income accrues proportionately with the lapse of timé. Nevertheless, the effort was to avoid perplexing inquiries by establishing a rule which in the long run would conform with the facts; not to disregard the fact that an income is accretive, and that the first part, whether or not it be arbitrarily computed, must accrue in the earlier period. But whatever may be thought of the propriety of that interpretation, when the Commissioner has otherwise provided, it appears to us conclusive when coupled with the repeal itself. Section 206 having prescribed the inverted method, its repeal, unless we permit ourselves to disregard it because it was not deliberate, can only be understood as relieving the computation from this prescription, and to require the part allocated to the earlier year to be treated as the first part to accrue. It appears to us therefore that between 1918 and 1924, the law required the part allocable to the earlier year to be placed in the “lower brackets,” and that allocable to the later year to be placed in the higher. While this makes only a trifling difference to the taxpayer at bar, we think him entitled to so much relief. As to the second point, the motor tax is imposed upon the dealer, not the purchaser. Section 900' (42 Stat. 291) levies an excise upon “the following articles sold * * * by the manufacturer,” and if it had been theoretically open to argument whether the dealer or the buyer was the subject of the tax, the question was set at rest by Lash’s Products Co. v. U. S., 278 U. S. 175, 49 S. Ct. 100, 73 L. Ed. 251. In that case a similar tax under section 628 of the Act of 1918 (40 Stat. 1116) was held to be imposed upon the dealer, and to be part of the purchase price upon whieh the percentage should be computed, though this results in taxing the tax itself when it has been “passed on” to the customer. Indeed, except that the regulation of the Commissioner to that effect had been confirmed by subsequent statute, it was intimated that no difference would arise, when the dealer separately “bills” the customer for the tax. We follow the language of the opinion in holding that, however set up in the sale, the tax is a part of the purchase price and that the dealer, and he alone, pays it. It is true that, so looked at, the sum when collected by the dealer is treated as part of his gross taxable income from which he makes the deduction, though this income by hypothesis comes to him only because he must pay it out to the government as a tax. If the final incidence of the burden be traced, no doubt the only income, properly speaking, which has borne the tax is the customer’s, for it is a fiction to treat as income a sum received by the dealer, which, except for the tax, would never have come to him at all. In substance, therefore, we must agree that the only person who has suffered any diminution of what would otherwise have been an income, is the customer, and that a nicer accommodation of the tax to economic burdens would have distinguished between cases in which the tax could be shown to have been added, and those where the dealer had to bear it. But the final incidence of taxation is not a measure of the person on whom the tax is levied, and it seems to us that the form of the statute must control. The- fact that the Act of 1928 (26 USCA § 2001 et seq.) excluded those dealers who had succeeded in throwing the loss upon their customers, indicates no more than that Congress did not wish to make them a gratuity; it does not determine the original character of the tax. Deeree modified in accordance with the foregoing.

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2024-08-24T03:29:51.129235

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BRIEF ENGLISH SYSTEMS, Inc., v. OWEN et al. No. 317. Circuit Court of Appeals, Second Circuit. April 6, 1931. Arthur A. Beaudry, of New York City, for appellant. Clarence M. Crews, of New York City (Edgar M. Kitchin, of Washington, D. C., and White & Case and William St. John Tozer, all of New York City, of counsel), for appellee. Before MANTON, L. HAND, and CHASE, Circuit Judges. CHASE, Circuit Judge (after stating the facts as above). In so far as the plaintiff claims to have the exclusive right to the use of a published system of shorthand, this suit must fail. There is no literary merit in a mere system of condensing written words into less than the number of letters usually used to spell them out. Copyrightable material is found, if at all, in the explanation of how to do it. Guthrie v. Curlett et al. (C. C. A.) 36 F.(2d) 694, 696. Without suggesting that anything in its shorthand system this plaintiff would retain by copyright for itself alone might have been the subject of a valid patent, it may be said that the way to obtain the exclusive property right to an art, as distinguished from a description of the art, is by letters patent and not by copyright. For present purposes it is enough to recognize that the plaintiff’s shorthand system, as such, is open to use by whoever, will take the trouble to learn and use it. Baker v. Selden, 101 U. S. 99, 25 L. Ed. 841; Griggs v. Perrin (C. C.) 49 F. 15. From this it follows that the claimed infringement by Owen’s book should be determined exactly as though he had been writing about the Dearborn shorthand system instead of one he claimed to have originated himself. When the copyrighted works and the claimed infringement are examined for piracy of composition, no substantial appropriation of manner, method, style, or literary thought can be perceived. Once concede that the defendant Owen could lawfully write, or write about, any system of shorthand his ability permitted and his book has nothing of consequence in common with what is covered by the plaintiff’s copyrights. The manner of treatment is substantially dissimilar and original. Without proof of the kind of appropriation mentioned above, the plaintiff has no cause of action. Baker v. Selden, supra; Griggs v. Perrin, supra; Chautauqua School of Nursing v. National School of Nursing (C. C. A.) 238 F. 151; Dymow v. Bolton (C. C. A.) 11 F.(2d) 690; Nutt v. National Institute (C. C. A.) 31 F.(2d) 236, 239; Holmes v. Hurst, 174 U. S. 82, 19 S. Ct. 606, 43 L. Ed. 904; Edwards & Deutsch Co. v. Boorman et al. (C. C. A.) 15 F.(2d) 35: Decree reversed.

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THE WHITE CITY. No. 319. Circuit Court of Appeals, Second Circuit. April 6, 1931. Florence J. Sullivan, of New York City, for appellant. James E. Freehill and Neil P. Cullom, both of New York City, for appellee. Before MANTON L. HAND, and CHASE, Circuit Judges. L. HAND, Circuit Judge. The libellant is the assignee of one Frost, who is the owner of a motor yacht, “The Drifter,” built for him by'the Consolidated Shipbuilding Company, which had promised to deliver her at Port Newark, New Jersey. The builder’s yard was at Morris Heights, New York, and the yacht had to be towed down the Harlem and East Rivers through the Bay, the Kills, and into Newark Bay. For this purpose it made a contract with one Simpson to tow her and her cradle alongside & steamer at Port Newark. Simpson, finding it impossible to tow with his own vessel, substituted the claimants’ vessel here in suit, the “White City,” which undertook the work. She took the yacht and cradle upon a hawser and started out, there being no one on the tow ■except a servant of the builder, whose duties were no different from those of the ordinary bargee, and whom we shall consider to have been such. Due to delays in starting and en route, the “White City” did not reach Port Newark in time te deliver the yacht that day, and tied up for the night at a place called Fisher’s Dock in Bayonne. The bargee, not wishing to stay aboard, announced that he would leave, to which the master of the “White City” did not object] and he left. The next morning the steamer again got under way and delivered the yacht and cradle to the proper consignee before breakfast. The libellant proved that the yacht had been delivered in good condition to the “White City,” and, upon evidence which satisfied the judge, that when delivered at Port Newark a hole had been stove in her side near the water line, for the cost of repairing which he sued. We see no reason to question the conclusion that the hole was made during the trip, and we dispose of the case upon that assumption. The claimants did not prove when or how the accident happened, or what care they took while towing, or indeed anything except the course they took, that they put fenders about the yacht while she lay at Fisher’s Dock, and that in the morning she was in the same condition as when they took her. They suggested that a piece of driftwood, of which there was much in the Bay at that season, might have stove in the yacht’s side, but this was merely an assumption. If a presumption of negligence arose from the mere fact of the delivery of the yacht in damaged condition, it had not been met. It extended to explaining how the injury occurred, or else that, however it did, it was not caused by their neglect. The testimony was too scanty to meet this test. The judge held that such a presumption existed from the contract, and that as it had not been rebutted, the libellant should recover. The claimants appealed. There is no doubt that a towage contract, simplieiter, does not put the tow in bail to the tug (The Webb, 14 Wall. 406, 20 L. Ed. 774; Eastern Transportation Line v. Hope, 95 U. S. 297, 24 L. Ed. 477), but when the tow has no one in charge it has repeatedly been said, though generally obiter, that a bailment results [The D. Newcomb (D. C.) 16 F. 274; Bust v. Cornell Steam-Boat Co. (C. C.) 24 F. 188; The Seven Sons (D. C.) 29 F. 543; McWilliams Bros. v. Director General, 271 F. 931 (C. C. A. 2); The James McCue (D. C.) 37 F.(2d) 934; Delaware Dredging Co. v. Graham (D. C.) 43 F.(2d) 852]. Nor does the presence of a bargee change the relation. The Merrimac, Fed. Cas. No. 9478; The Princeton, Fed. Cas. No. 11433a, affirmed Fed. Cas. No. 11434; The Genessee, 138 F. 549 (C. C. A. 2); Doherty v. Pa. R. R. Co., 269 F, 959 (C. C. A. 2). In the ease 'of charters which are demises, we have often held that redelivery in damaged condition raises a presumption of negligence which the demises must explain. Terry & Tench Co. v. Merritt & Chapman (C. C. A.) 168 F. 533; White v. Upper Hudson Stone Co. (C. C. A.) 248 F. 893; Schoonmaker, Conners Co. v. Lambert Transp. Co. (C. C. A.) 268 F. 102; Bushey v. Hedger (C. C. A.) 40 F.(2d) 417; Cummings v. Pa. R. R. Co. (C. C. A.) 45 F.(2d) 152. Swenson v. Snare & Triest Co., 160 F. 459 (C. C. A. 2), though at times cited for the same doctrine, is scarcely an authority, because the nature of the injury was such as to justify an inference, independent of presumption. We are committed in such cases to the doctrine which the District Judge applied to the towage of a barge manned only by a bargee. In principle we cannot distinguish between that and the situation at bar; and if free to choose we should follow the decision below. The reason for imposing a presumption appears to be here quite as strong as in demises; that is, the greater opportunity of the bailee to explain the injury, due to the immediacy of his access to the barge and the bailor’s absence. Though a distinction might have been drawn when a bargee is present, none ever has been, and the only ground we can imagine is that in a demise the period of custody is usually longer, not a satisfactory difference. Our own decisions seem to us, however, to have too strongly established an exception to justify a departure now. Whether this has arisen from confusing an ordinary tow-age contract, where the owner of the tow remains in possession, with a contract like this where the tow is unmanned or manned only by a bargee, we cannot tell. Probably the doctrine generally applicable was carried over to this situation without observing the difference; so far as it appears, the anomaly has not hitherto been observed. The first case in this court that we have found is The Genessee, 138 F. 549, 550, where the tug was held because of “an accident such as in the ordinary course of things does not happen when a bailee uses due care”; but this is inconclusive as to the absence of a presumption arising from injury alone. The decision depended upon an inference from the evidence, as was also true in The Wyomissing, 228 F. 186; Kiernan v. Lake Champlain Transp. Co., 273 F. 499; The Primrose, 42 F.(2d) 827; and The Fred’k Lenning, 45 F. (2d) 691, all decided by this court. In The Winnie, 149 F. 725, we spoke of the burden of proof alone, which is indisputably upon the bailor, and which has nothing to do with a presumption, though the two are often confused. The tug had made proof, and there was no need for discussing presumption; nor did we do so. The next case was The R. B. Little (C. C. A.) 215 F. 87, where it was doubtful whether the injury had happened during the towing. There was no proof as to what caused it, but wé dismissed the libel, using language equivalent to saying that there is no presumption. If proof of any kind does away with, “rebuts,” the presumption, this case is not an authority. That however is not the limit of its office, if it exists at all. While it ceases to play any part in the result as soon as the claimant has discharged his duty of “going forward,” yet if he cannot explain the injury, he must at least put in some proof to negative the existence of negligence in its occurrence. Once he has done that, the libellant must satisfy the judge of the fault. So understood, the R. B. Little, supra, seems to be a holding against such a presumption; the tug had not satisfied it, if it existed. In The Clarence L. Blakeslee (C. C. A.) 243 F. 365, 366, the facts were all in evidence and showed just how the.barge had been damaged. Strictly therefore it was necessary to hold no more than that the libellant had failed to carry the burden. Nevertheless, we went further and said that negligence is “not presumed merely because the injury is not otherwise accounted for,” though The Winnie, which we cited, was scarcely an authority for that statement. In Aldrich v. Pa. R. R. Co. (C. C. A.) 255 F. 330, the barge had been stove in during the night, and nobody could explain how it had happened. Had she been on charter the bailee would have been-liable; his immunity could rest only upon the absence of any presumption in a towage contract. In The Greenwich (C. C. A.) 270 F. 42, the whole situation was brought out, and our comment that the injury raised no presumption was obiter; nevertheless, it shows the doctrine which we supposed applicable. The same is true of The W. H. Baldwin (C. C. A.) 271 F. 411. The libel in Hildebrandt v. Flower Lighterage Co. (D. C.) 277 F. 436, affirmed without opinion in (C. C. A.) 277 F. 438, was against, both tug and charterer, and the case was disposed of on a different theory as to each. Against the charterer a presumption was assumed, but not so against the tug,'whose negligence the libellant was called upon to prove. In Brigham v. Cornell Steamboat Co., 18 F. (2d) 92, we concluded that the breaking adrift, was due to the fault of the bargees, but we-said that the tow must prove negligence, by which we meant that it must so prove it in the first instance. We read The Ellen McGovern (D. C.) 27 F. 868, as imposing liability because of an inference of fact, though it is true that Brown, J., spoke of the burden of proof thereby thrust upon the tug, a not altogether clear statement. The Seven Sons (D. C.) 29 F. 543, is a holding to the contrary, but not in this circuit. The Sea Lion (D. C.) 12 F.(2d) 124, Southgate v. Eastern Transp. Co., 21 F.(2d) 47 (C. C. A. 4), and The Ashwaubemie, 3 F.(2d) 782 (C. C. A. 4), contain at least dicta in accord with our view. We understand Delaware Dredging Co. v. Graham (D. C.) 43 F.(2d) 852, to hold that there is a presumption which does not extend, however, to explaining the cause of the injury. To neither of these propositions can we assent; first, we think that there is no presumption; second, if there were, that the bailee must explain the cause of the injury, or, if he cannot, that it was not due to his neglect. While we cannot find that there has been an authoritative ruling to the. contrary elsewhere, we should be bound by our- own decisions in any event. We think that they have settled the doctrine that in towage cases it makes no difference that the tow is in the possession or custody of the tug, and if so, the libellant did not make out a case. Decree reversed; libel dismissed.

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In re PENNSYLVANIA R. CO. No. 131. Circuit Court of Appeals, Second Circuit. April 6, 1931. Chauneey I. Clark, of New York City, for appellant. George V. A. McCloskey and Willmm F. Purdy, both of New York City, for appellees Cleary Bros., Inc., and others. William F. Purdy and John E. Purdy, both of New York City, for appellee Hughes. Warner Pyne, of New York City, for appellees City of Long Beach and others. Macklin, Brown, Lenahan & Speer, of New York City (George V. A. McCloskey, of New York City, of counsel), for claimants. Single & Single, of New York City, for claimant Armstrong Transportation Co. Leo J. Curren, of New York City, for claimant James McWilliams Blue Line, Inc. Park, Mattison & Lynch, of New York City, for claimants Mark W. Maclay and Charles E. McWilliams. Foley & Martin, of New York City, for claimant Red Star Towing & Transportation Co. John R. McMullen, of New York City,, for claimant Cleary Bros., Inc. Otto & Lyon, of New York City, for claimant Harold L. Valentine, Inc. Before L. HAND, CHASE, and MACK,. Circuit Judges. L. HAND, Circuit Judge. The Pennsylvania Railroad Company jnaintains a terminal for the transportation, of coal to the City of New York at SouthAmboy, New Jersey, at tbe mouth of the Raritan River opposite the southern end of Staten Island. The tracks end in coal chutes upon the piers, whence the coal falls into barges which are brought beneath to be filled. Thereupon they are towed away, made up into flotillas and hauled through the Kills to the Upper Bay, and so to the city. While awaiting their turn at the chutes, they are moored in large numbers at a mooring rack some twelve hundred feet long, not far from the piers. The road does not try to keep the barges in any order at the rack; they are laid helter-skelter as they chance to arrive, or as it may he convenient to dispose them. Nor does it keep any plan of their arrangement in the coal office upon the pier; the employees, although they have a record of such boats as have been left, do not know where amongst the lot any particular one may have been put. When a parcel of coal consigned to a given dealer is ready to be dumped, the barge which he has sent to lift it, must therefore be drilled out of the mass of barges moored indiscriminately at the rack and brought to the chutes. This may involve no more than taking her from the outside tier, or it may require the casting off of twenty or thirty outside barges, until she can be reached. This is the work of one or more tugs kept for that purpose in the vicinity; on the day in question, a Sunday in October, the “Brinton” was the only tug so employed. The practice is to tell the tug to fetch the consignee’s barge, when the .time comes to unload the ears which hold his coal; the tug goes to the rack, breaks out the barge and brings it to the chute. On the afternoon in question there was a northwesterly gale, blowing off-shore, which swept the length of the rack, along which over fifty barges were moored, six or seven tiers deep. The “Brinton,” which had already drilled out several barges for the chutes without mishap, got orders from the coal department to break out a barge, called the “Blue Coat,” several tiers inside, whose owner’s coal was then ready to be loaded. She went to the clustered barges, east off the side lines of those outside, and was in train of laying a line to the “Blue Coat,” when the hawsers parted of some twenty-two or twenty-three, so pushed away to give her access. She tried unsuccessfully to manage the flotilla thus afloat, but it at once passed out of her control, and drifted easterly in the Lower Bay at the mercy of wind and sea. The boats held together for a while, but eventually broke apart, some going aground at Great Beds Light for a while, and later drifting out into the wider reaches of the Bay; the rest separating in various directions. It is unnecessary, and indeed impossible, to follow the fate of each barge. Some were recovered while ¿float; a few let go their anchors, though only one held, and then only because it fouled a cable. The greater part drifted clear across the Bay past Coney Island, and by Monday morning were off the westerly end of Long Beach. Even there they did not stop, but went ashore, or drifted near land, at Short Beach, Jones Beach, and even as far as Eire Island. Many were a total loss, for which their owners are claiming here. One eventually went to pieces against the Boardwalk at Long Beach in a southerly storm on Wednesday, doing great damage to that structure. The City of Long Beach and Long Beach-on-the-Ocean, Inc., are claimants for that damage. The “Brinton” stood by on Sunday night, but on Monday morning, believing that she could do no more, cut her hawser, took the crews off the barges and put back, being out of fuel and food. The road’s marine officials at Jersey City had meanwhile learned of the disaster, and on Sunday evening sent to the rescue two tugs, the “Number 32” and the “Overbrook,” more powerful than the “Brinton.” The “Overbrook” took the. ground in her efforts, and perhaps the “Number 32” as well, though that is in dispute. They plied about in the darkness, picking up what they could, but not very effectively, since the conditions forbade much service. On Monday morning at about nine the road chartered the wrecking tug, “Resolute,” and visited the shore where those barges still lay which had not been recovered. They were scattered along the beaches among the breakers, and it appeared to those on board impossible to reach them. Meanwhile a Coast Guard vessel had got hold of one, and a fishing vessel had picked up another. These the “Resolute” took in tow and brought back safely, at about four o’clock on Tuesday morning. By Monday morning the storm had somewhat subsided, and it was relatively calm all of Tuesday and on Wednesday morning until shortly before noon, when the wind, which had meantime hauled to the south, again rose to thirty-four miles and blew on shore. Although the evidence does not certainly prove so, it was probably at this time that a single barge, the Hill, did substantially all the damage to the walk. On Tuesday, and probably also on Monday, though it is not necessary so to find, officials of the City of Long Beach advised the road that two barges then near shore were likely to damage the walk, and the road’s officials tried again to charter the “Resolute,” but without success, she being then engaged elsewhere. Finding that the wreckers had no other craft available, they did nothing more. Small craft, fishing boats and launches, busied themselves on Monday and Tuesday with the rescue, in several eases successfully; but the road made no effort to. secure the services of these vessels. On Sunday night, the tug, Hughes, set out from South Amboy and brought back five barges; for this she asks and has secured a salvage award. Several of the barge owners sued the road and as more suits were in prospect, it commenced this limitation proceeding, surrendering the “Brinton,” which it now concedes to be guilty, and asking exoneration in person-am under the statute. .The claimants appeared in number and contested the limitation, alleging that the road was in privity with the tug’s fault. The facts as to this were as follows: One, Crane, was the “terminal shipping agent” of the road at South Amboy, and was in general charge of discharging coal ears and loading barges. He had had no marine experience, and knew nothing of the handling of barges and tugs, except so far as his position might acquaint him as the work went on. He told the tug masters when he was ready for a barge, specifying that which he would next want. Both he and the master of the “Brinton” swore that his orders left it to the discretion of the tug master, how to drill out a barge, and whether the weather conditions at the time justified compliance. Crane did not know— nobody in the coal department or probably anywhere else knew — where in the cluster any given barge was; it was left to the tug master to decide whether it was safe to carry out the order. Those in charge of the marine service of the road were at Jersey City, some miles away; at the scene of the misadventure there was nobody in charge but Crane. The District Judge held the “Brinton” at fault for trying to take out the “Blue Coat.” He charged the road with all the resulting damage to the barges and the Boardwalk, and refused to allow limitation; holding that Crane was a superintendent in privity with the road, whose order to the “Brinton” to fetch the “Blue Coat” was peremptory, and was made with knowledge of the dangers involved. Thus it became unnecessary to consider whether there was any succeeding duty, after the marine superintendent at Jersey City learned of the disaster, to exercise any care to save the barges, or protect the walk. The road appealed; so did the tug, Hughes,' for insufficiency of her salvage awards. We are entirely satisfied, so far as concerns the fault of the “Brinton,” that the limitation should have been allowed, and if the ease ended there, it would in our judgment present little difficulty. Crane was not placed in charge of the drilling of the barges, and could not be supposed to know anything about marine matters. We need not dwell upon the evidence in detail; it is perfectly apparent that he was wholly unfitted for any such duties, and it would be altogether unreasonable to suppose that he should intervene or direct the conduct of the tugs. He was a landsman whose undisputed testimony that he was intended to act only as such, is corroborated beyond dispute by the organization of the business at the terminal. We cannot conceive that his order to drill out a barge should have been understood by the tug master as- peremptory, or to supersede his own judgment. The “Brinton” was fit for. the work, had already conducted it successfully, and the only fault was that of her master, who should not have undertaken to penetrate so far among the barges without help. This fault being conceded, the tug is forfeit, but the road was entitled to limitation for any consequences “proximate” upon the original act. All the resulting damage seems to us such; it was not unlikely that such a number of barges, breaking loose in a gale, might spread upon the waters and drift at random. They might go ashore anywhere, and were likely to damage whatever they struck, the Boardwalk, or any other structure near the water. But, unless the subsequent notice to the marine superintendent, imposed an independent and affirmative duty upon the road, it is impossible to see any defence to the petition. As to the barges themselves there was, however, such a duty. The road was a bailee. McWilliams Bros. v. Director General, 271 F. 931 (C. C. A. 2); Doherty v. Pa. R. Co., 269 F. 959 (C. C. A. 2); The Wyomissing, 45 F.(2d) 160 (C. C. A. 2); Stevens v. The White City, 48 F.(2d) 557 (C. C. A. 2). The relation is analogous to that of a tug which temporarily moors a barge on route, or at the end of the voyage. Bouchard Transp. Co. v. Pa. R. Co., 6 F.(2d) 362 (C. C. A. 2); McWilliams v. Davis, 285 F. 312 (C. C. A. 2); The Howard, 252 F. 85, (C. C. A. 2). Though it does not appear that the road towed all the barges from New'York to South Amboy, that in our judgment made no difference. The rack was the place fixed by the road for the delivery of barges to be loaded and then put into its tows. Nobody could expect an owner’s tug to stand by until at the road’s convenience it should take a barge out to be laden. Nor is it reasonable to suppose that nobody should meanwhile be responsible for its care, being itself helpless. We hold that the road received the boats as bailee and became responsible for a bailee’s care until they were delivered. If so, that duty remained as long as the bailment; it was not discharged as soon as the barges broke adrift. Hence when the marine superintendent at Jersey City learned of the plight of the flotilla on the afternoon of Sunday — he being a person in “privity” with the road under the limitation statute — any subsequent neglect must be charged to the road without limitation, and the question becomes one of fact; whether the road did all that a bailee should. We see no reason to complain of its action on Sunday night. The “Brinton” stood by; the “Number 32” and the “Overbrook” were sent to the rescue. So far as we can see, they did all that they could. The next morning the “Resolute” was chartered and went to the beaches; but Newman, the only witness called, swore that it was impossible to reach the barges, which were too far inshore. The “Resolute” stood by until Monday afternoon and then gave up, thinking that it could do no more. It is exceedingly improbable, having come for that purpose, and being by profession a wrecker, that she would have made no effort, if help was possible. On Tuesday the road, warned by the City of Long Beach, again asked for the “Resolute,” or some other craft of the wrecking company, but was unable to get any; there is no reason to impugn its good faith. It appears to us that so far as large craft is concerned, nothing more was to be expected. To be sure, the road might have sent its own tugs again, and its efforts on Tuesday indicate that it then thought that more might be done, but it is entirely speculative to suppose that had another vessel once more gone to the beaches, she would have been of any more service than the “Resolute” on Monday. The claimants have the burden of showing fault, and loss arising from it (The 84-H, 296 N. 427, 432 [C. C. A. 2]); so far as this sort of effort would have helped, it seems to us that they have failed. There remains the question whether the road should.have used other means. It appears that when Newman was at the beaches in the “Resolute” on Monday, he saw some launches or fishing boats engaged in recovering some of the barges. In this they were partly successful, but, except as to the Hill, there is no evidence that any of those not rescued were in a position where they could be. It would in any ease be necessary for a given owner to show that reasonable efforts would have salved his barge; it would not be enough to show that some unidentified barges might have been saved; perhaps they were. We cannot say, the burden being as it is, that any owner lost his property because of the road’s inaction. This does not however apply to the Hill. One, Kuehnle, was a civil engineer, attached to the City of Long Beach, who swore that on Monday he went to the beach and saw near the shore the Hill and another boat, one of which had already done some damage to the Boardwalk. He telephoned to the offices of the road at Jersey City, and to Hill, who said that he had no further interest in the barge, which he abandoned to his underwriters. It does not very definitely appear who got the message at Jersey City, but on Tuesday morning at any rate, Newman got a second message, and this was the occasion for his trying to reeharter the “Resolute.” He did nothing further; nor did any one else until after the damage had been done. However, Kuehnle went down a second-time on Tuesday afternoon, and saw the two barges still afloat in about the same place. While he was there, a launch came in, picked up one of the two and carried it off without mishap. Though the road cannot therefore limit its liability as to the Hill, it does not follow that the same is true as to the City and the Long Beach Company. It had no contractual relation with these, and was liable, if at all, only as a tort-feasor. So much damage as was done to the Boardwalk on Monday should be limited in any event; the road had had no adequate chance to act by small boats. But this was trifling and the real question is as to the rest. What we have to decide is whether the road’s knowledge acquired after the “Brinton’s” fault occurred, charged it with so much of the damage' as ensued thereafter, and as it could have prevented by reasonable efforts. We may assume that in general the extent of a man’s liability is to be measured by what he knew when he acted, except for the possibilities suggested in sections 195 and 196 of the Restatement of Torts (Tentative Draft No. 4); that is to say, save in unusual circumstances he does not become liable for injuries which he may later find his act will cause, if at the outset these were too unforeseeable to charge him. That is not this ease. As we have said, the damage to the Boardwalk was fairly to be apprehended once the boats were set adrift; the road was charged with them, but the statute gave it a partial immunity. Should that immunity continue after knowledge is brought home? In form, at least, the section does not so read; it limits the “liability * * k for any * * * loss, damage, or forfeiture, done, occasioned, or incurred without the privity, or knowledge of such owner” (section 188, title 46, U. S. Code [46 USCA § 183]). “Done” must refer to “loss” or “damage,” though “occasioned or incurred” is as apposite to “liability.” Congress appears to have- had in mind the incidence of the fault, rather than its origin. Such an interpretation does indeed imply that a person, who has set in motion a train of events likely to end in injury, remains under a duty to check them while he can; but this we think accords with good sense and ordinary notions of justice. It is true that the decisions do not cover the point, for the occasion to distinguish does not ordinarily arise. If his original liability ipso facto extends to all that is to be foreseen at the start, it would add nothing to put the tort-feasor under a continuing duty to check the culmination of his wrong. That can only become important when, as here, his liability changes meanwhile. Yet it is the injury that constitutes the wrong (Baltimore S. S. Co. v. Phillips, 274 U. S. 316, 47 S. Ct. 600, 71 L. Ed. 1069), and while the extent of liability is measured as of the time of. the initial lapse, if the evil is still preventable, it would be a perverse doctrine to charge the actor with no duty to intervene while he can. Faced with the choice, as res integra, we do not hesitate to impute such a duty. Therefore, we hold that as to the damage done on Wednesday the road cannot limit its liability. That liability is justiciable in this proceeding, though the tort was not maritime, and the limitation be denied. Hartford Acc. & I. Co. v. So. Pac. Co., 273 U. S. 207, 217, 218, 220, 47 S. Ct. 357, 71 L. Ed. 612; Richardson v. Harmon, 222 U. S. 96, 32. S. Ct. 27, 56 L. Ed. 110. There remains therefore only the question as to whether the Hill, the City and the company by their inaction after notice,. disqualified themselves, and to what extent.. Hill we cannot charge. The only evidence- is that when on Monday afternoon Kuehnle called him up, he said that he had no further interest in the barge, and relied upon his underwriters. This is not enough, regardless of whatever be the duty to protect one’s property put in jeopardy by another; for such a duty cannot arise until it is apparent that the tort-feasor is not himself going to do what the law demands. The evidence does not show what Kuehnle told Hill, or that he had reason at that time to assume that the road would not do all it could to rescue the barge. Not till then was he required' to act. This is a defence and the road must prove it; we find the record too equivocal to support the conclusion. The fact is otherwise as to the City .and the Long Beach Company. They were well advised of the danger to the Boardwalk on Monday, and telephoned the road on that day. The road took no action, and they called up again on Tuesday morning. Again, nothing was done. They waited during the whole of that day and on Wednesday morning, until the southerly storm rose about noon. During all this time they had as much opportunity to get a launch as the road; and they must have understood that if they did not act, no one would. Therefore, if they were under any duty to protect their property, and if their failure affected their rights, the facts put them in default. It may seem a harsh rule that a man shall not recover for an admitted wrong, if he does not put himself to expense and trouble to fend against the threatened damage; yet when the inconvenience is trivial, this is the basis of those numberless eases which 'bar recovery when the sufferer has failed to protect himself after notice of danger. In the end the line must be found in the extent of the burden so imposed. If it be a question merely of turning one way or the other, he may not obstinately persist, and charge another for his injury. Grave dangers require easy precautions, even by those wronged. We have often applied that doctrine to tug and tow. The M. E. Luckenbach (D. C.) 200 F. 630, affirmed (C. C. A.) 214 F. 571; The Britannia (C. C. A.) 252 F. 583; The Coleraine (D. C.) 179 F. 977, affirmed (C. C. A.) 185 F. 1006; American, etc., Co. v. N. Y. (C. C. A.) 33 F.(2d) 97. These decisions all concerned slight efforts which nobody disputes that it is the duty of the. injured person" to make. The question here is whether the City and the company were called upon to hire a launch and tow away the barge. There are a number of cases in which as much was required; they concern such things as fires, changes in the adjacent land, fences and stream pollution. Stuekemann v. Pittsburgh, 255 Pa. 307, 99 A. 906; Van Pelt v. Davenport, 42 Iowa, 308, 20 Am. Rep. 622; Shinn v. Smith, 80 Ark. 321, 97 S. W. 52; City of Lexington v. Chenault, 151 Ky. 774, 152 S. W. 939, 44 L. R. A. (N. S.) 301; Adams v. Clover Hill Farms, 86 Or. 140, 167 P. 1015; Wisconsin, etc., Co. v. Scott, 167 Ark. 84, 267 S. W. 780; Pribonic v. Fulton, 178 Wis. 393, 190 N. W. 190, 27 A. L. R. 281; Brown v. Brooks, 85 Wis. 290, 55 N. W. 395, 21 L. R. A. 255; Simpson v. Keokuk, 34 Iowa, 568; Illinois Central R. Co. v. McKay, 69 Miss. 139, 12 So. 447; Walrath v. Redfield, 11 Barb. (N. Y.) 368. At times a difference has been thought to exist if the tort was a trespass or a nuisance (Athens Mfg. Co. v. Rucker, 80 Ga. 291, 4 S. E. 885; Grant v. St. Louis, I. M. & S. R. Co., 149 Mo. App. 306, 130 S. W. 80); but if the exception be sound, it does not apply here. Heaney v. Heeney, 2 Denio (N. Y.) 625, holds the contrary in a case similar to that at bar, but the deci sion was explained in Walrath v. Redfield, supra, on the ground that the tort had been deliberate, though'the court had given no such reason. City of Richmond v. Cheatwood, 130 Va. 76, 107 S. E. 830, is also to the contrary, though again it is not perfectly clear that it might not have rested upon the fact that the plaintiff thought, or might have thought, that the defendant would remedy the wrong before it caused the second damage which was at issue. The ease at bar,seems to us to- fall within the principle of the bulk of these decisions, and the failure of the claimants to remove the barge on Tuesday and Wednesday to associate them equally with the road in resulting damage; they contributed to the injury. A more perplexing question arises as to the effect of this neglect. The injury was on land over which the admiralty had no jurisdiction. Yet the District Court got jurisdiction because of the limitation proceeding. And so, had the suit been an action at law, the plaintiff’s contributory negligence would have been a complete defence; in the admiralty it results only in a division of damages. We, have to decide which rule applies here. It is well settled that where the wrong occurs in one jurisdiction, and action is brought in another, the rule of contributory negligence of the first governs. Illinois Central R. Co. v. Ihlenberg (C. C. A. 6) 75 F. 873, 34 L. R. A. 393; Long v. Atlantic, etc., R. Co., 238 F. 919 (C. C. A. 4); Caine v. St. Louis, etc., R. Co., 209 Ala. 181, 95 So. 876, 32 A. L. R. 793; Louisville & N. R. Co. v. Whitlow’s Adm’r, 43 S. W. 711, 19 Ky. Law Rep. 1931, 41 L. R. A. 614; East Tennessee, etc., R. Co. v. Lewis, 89 Tenn. 235, 14 S. W. 603; Fitzpatrick v. International Ry. Co., 252 N. Y. 137, 169 N. E. 112, 68 A. L. R. 801. The law of the place where the tort occurs also controls the extent of the recovery. Slater v. Mexican National R. Co., 194 U. S. 120, 24 S. Ct. 581, 48 L. Ed. 900; Northern Pac. R. Co. v. Babcock, 154 U. S. 190, 14 S. Ct. 978, 38 L. Ed. 958; The Eagle Point, 142 F. 453 (C. C. A. 3). The same is true of more truly procedural issues (Central Vermont R. Co. v. White, 238 U. S. 507, 35 S. Ct. 865, 59 L. Ed. 1433, Ann. Cas. 1916B, 252), at least when a statute is concerned. Galef v. U. S. (D. C.) 25 F. (2d) 134, is not to the contrary; it turned upon the fact that both parties were Americans, though whether that be a good distinction we need not decide. The same rule applies to suits in the admiralty under death statutes of a state, drawn after Lord Campbell’s Act. The City of Norwalk (D. C.) 55 F. 98, affirmed (C. C. A.) 61 F. 364; Robinson v. Detroit, etc., Co., 73 F. 883 (C. C. A. 6); Quinette v. Bisso (C. C. A. 5) 136 F. 825, 5 L. R. A. (N. S.) 303; O’Brien v. Luckenbach S. S. Co., 293 F. 170 (C. C. A. 2); Truelson v. Whitney, etc., Co., 10 F.(2d) 412 (C. C. A. 5). The statute is considered as imposing the limitation as a condition upon the right. However, it was held in Belden v. Chase, 150 U. S. 674, 14 S. Ct. 264, 37 L. Ed. 1218, that when action is brought at law in a State court for a collision upon navigable waters the plaintiff loses, if himself negligent. This has been often followed. Johnson v. U. S. Shipping Board Emergency Fleet Corp., 24 F.(2d) 963 (C. C. A. 2); Puget Sound Nav. Co. v. Nelson, 41 F.(2d) 356 (C. C. A. 9); Maleeny v. Standard Shipbuilding Corp., 237 N. Y. 250, 142 N. E. 602; Kalleck v. Deering, 161 Mass. 469, 37 N. E. 450, 42 Am. St. Rep. 421; Smith v. Norfolk & S. R. Co., 145 N. C. 98, 58 S. E. 799,122 Am. St. Rep. 423. Dicta of our own in Roebling’s Sons v. Erickson (C. C. A.) 261 F. 986, Storgard v. France & Canada S. S. Corp. (C. C. A.) 263 F. 545, and Port of New York Stevedoring Corp. v. Castagna, 280 F. 618 (C. C. A. 2) we overruled in Johnson v. U. S. Shipping Board Emergency Fleet Corp., supra. Conversely, it is well-settled that when the libellant sues in the admiralty upon a tort arising within the territorial waters of a State, his contributory negligence does not defeat him altogether; he need only divide his damages. Atlee v. Packet Ce., 21 Wall. 389, 22 L. Ed. 619 ; The Max Morris, 137 U. S. 1, 11 S. Ct. 29, 34 L. Ed. 586. We can see no escape therefore from concluding that as between a common-law court and a court of admiralty the question is treated as one of procedure, though in general the law is otherwise. It must be the same in the ease of a tort over which the admiralty gets jurisdiction only by virtue of the limitation statute. Until Southern Pac. Co. v. Jensen, 244 U. S. 205, 37 S. Ct. 524, 61 L. Ed. 1086, L. R. A. 1918C, 451, Ann. Cas. 1917E, 900, it was usually understood that liabilities arising from acts taking place in territorial waters depended upon the law of the State. That case, together with Chelentis v. Luckenbach S. S. Co., 247 U. S. 372, 38 S. Ct. 501, 62 L. Ed. 1171, and the cases which have since followed, have, however, established it that the maritime law alone creates them. Several of the' decisions we have cited were after this change had come about, but they did not make a distinction. Nor indeed would it be material in any event. It was not suggested in The Max Morris that the liability there in suit was subject to divided damages because it was maritime, or that action would not be barred at law. Rather it was implied that the rule of the forum controlled. So too in Belden v. Chase it was assumed that the doctrine varied with the court. Nor can we see anything in Chelentis v. Luckenbach S. S. Co., looking otherwise. The cause of suit for cure and maintenance which' the court was discussing is quite separate from that for indemnity; it does not depend at all upon the ship’s fault, nor on the seaman’s freedom from negligence. It is not a limitation upon a common-law, or maritime, liability, peculiar to a court of admiralty. So far as we can find there is nothing in the books beyond our own overruled dicta which throws doubt upon Belden v. Chase. And so we hold, though we acknowledge the anomaly, that in a ease such as this the damages must be divided. Judge Soper reached the same result by a very different reasoning in U. S. v. Norfolk-Berkley Bridge Corp. (D. C.) 29 F.(2d) 115, 128-132, the only decision in point that we have found. The wréek statute (33 USCA § 409) has no application and does not exonerate the road. We have indeed said [Red Star, etc., Co. v. Woodburn (C. C. A.) 18 F.(2d) 77], that it absolves the tug of injuries for which she might otherwise be liable; but certainly this does not occur until the opportunity for marking the wreck exists. Here the Hill was presumably half afloat, half aground, continuously pounding the walk till she went to pieces. It was impossible to treat her as a wreck and mark her; it would have served no purpose to do"so. The statute is not directed to such a situation, and it would pervert its meaning so to read it. On the other hand, we cannot see that the doctrine of Pendleton v. Benner Line, 246 U. S. 353, 38 S. Ct. 330, 62 L. Ed. 770, and Luckenbach v. W. J. McCahan Sugar Refining Co., 248 U. S. 139, 39 S. Ct. 53, 63 L. Ed. 170,1 A. L. R. 1522, has anything to do with the case. Those decisions involved warranties of seaworthiness, and a warranty is an undertaking to pay the promisee if certain facts turn out to be otherwise than as the warrantor states. The warrantor is liable upon that promise without limitation, because his default — failure to pay — is personal. The Number 34, 25 F.(2d) 602, 607 (C. C. A. 2). A bailee on the- other hand promises to use all reasonable efforts to return the vessel, but it is his agent who defaults, not he, if she be not properly guarded. The lee King, 261 F. 897 (C. C. A. 2); The Soerstad (D. C.) 257 F. 130. Were he to promise at all hazards to return her, he might well bé outside the protection of the statute. We think that the salvage awards to the Hughes were too small. We raise the total of $450 to $1,350 to be divided in the same proportion and charged against the barges in rem. The Hughes was not at the time employed by, or working for, the petitioner. The decree is reversed, and the cause remanded with directions to allow limitation as to all the barges except the Hill; to give full damages in personam for it and half damages for the damage done to the Boardwalk after Monday; and to award a lien of salvage in favor of the Hughes. The questions which may arise as to the marshalling of the proceeds of the “Brinton” among all the claimants have not been argued and we reserve them. In any case, they more properly arise upon final decree.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

OLTARSH v. BRATTER et al. No. 314. Circuit Court of Appeals, Second Circuit. April 6, 1931. Hartman, Sheridan, Tekulsky & Pecora, of New York City (Charles A. Winter, of New York City, of counsel), for appellants. Joseph Sterling, of New York City, for appellee. Before MANTON, L. HAND, and CHASE, Circuit Judges. L. HAND, Circuit Judge. The plaintiff sued the defendants for the breach of a contract by which he was to receive twenty-five thousand dollars and certain shares of stock, in consideration of his procuring for them a plot of land, securing a loan upon it of $900,000, and preparing plans for. and supervising the erection of, a building which should contain a moving picture theatre. The plaintiff’s evidence permitted the jury to find that he had secured the plot and perhaps the loan as well, and was by way of proceeding with the project when the defendants told him that they could not complete and repudiated the contract. Thereupon, according to his story, they suggested to him that he try to procure a lease of the land, the owners to erect the building, and the defendants to be lessees at a specified rental. This proposal the defendants' agreed should not terminate the existing obligations; and in any event, in case they bought the land, or leased it, the plaintiff should have his pay quite as though they had gone on with the original agreement. Coneededly, the plaintiff failed to get the lease from the owners for the defendants, who thereafter bought the land themselves and put up the building without the plaintiff’s help. The breach assigned was this elimination of the plaintiff from the transaction. The defendants’ evidence was that the plaintiff had never obtained the loan, and that he announced his inability to proceed at the interview when the question of a lease arose. They said that at that time he entered into a contract with them, to buy the property himself, put up the building at:'his own cost and lease it to them, he to have the rent and a quarter interest in the lessee 'corporation. In confirmation of this ‘ they relied upon a written contract by which they, acting in the name of a corporation which they controlled, promised to accept a lease from the plaintiff of such a theatre to be put up according to his plans and specifications, at a rental of $45,000. This was on March fifth, the same day on which the plaintiff said that he had agreed tentatively to try to get a lease for them from the owners. In a letter written on March eighth to the defendants’ representative, the plaintiff wrote as follows: “I do not know whether you were told by Bratter and Poliak, but the other day when I was there I finally agreed with them to give them a lease on the property and they agreed to enter into such a lease for a specific amount. I do not know how well you know them, but I am afraid after I have the land purchased and have my deal closed, I may run into a snag and find myself with the land and the theatre and they not properly tied np in the financial way.” The District Judge left it to the jury to say whether the parties had abandoned the original agreement and substituted the agreement by which the plaintiff was to give the defendants a lease. If so, there could be no recovery; if not, the jury might find that the original contract continued, and the defendants were liable. The jury found for the plaintiff and the defendants appealed. We need only consider the exception to the sufficiency of the proof at the close of all the evidence. The ease failed, if it then appeared that the original contract had been abandoned, and that in its place there remained only the agreement that the plaintiff should procure the land, build the theatre and give the defendants a lease. The plaintiff had not pleaded such a cause of action and made no effort to prove that he could have procured the land from the owners, or built the theatre. Even though the defendants deprived him of his opportunity to do so by. stepping behind him before his túne was up, that did not dispense with some proof that he would himself have been able to perform, New York Trust Co. v. Island Oil & Transp. Corp., 34 F.(2d) 653 (C. C. A. 2). He could therefore recover only on the theory that the original contract continued, and indeed it was on this that he relied. It was conceivable that the second agreement should have been tentative, a substitute only in ease the plaintiff could buy the land and finance the project; and in the event of the plaintiff’s failure to do so, that the defendants were to remain liable upon the original contract. But neither the offer of March fifth, nor the plaintiff’s letter of March eighth, suggested anything of the sort. We infer little or nothing from the offer, which might indeed contain no reference to the situation in ease the agreement broke down; but it seems to us most unlikely that the plaintiff should have used the language he did in the letter of March eighth, if the agreement was conditional upon his success. When he wrote, “I finally agreed with them to give them a lease on the property, and they agreed to enter into such a lease,” it was scarcely the language of one who has done no more than agree to try to extricate the other party from a contract which has become onerous. Clearly the two' contracts, if “finally agreed” upon, could not exist side by side; the owners could not at once sell the property to the defendants, and the plaintiff buy it and give them a lease. The plaintiff might still be entitled to more than the prescribed rental, indeed, to his original compensation; but his performance was not the same, and he could earn his pay only in ease he performed. But though the letter of March eighth be not alone a sufficient contradiction of the possibility that the actual agreement of March fifth was conditional on the plaintiff’s success in getting the land himself and putting up the building, he said nothing of such a condition. He did not assert that he had tenta^ tively agreed to buy the property, put up the building, and lease it to the defendants, meanwhile reserving his rights in the case of his failure. According to his version, he was only to act as an intermediary between the defendants and the owners in getting them to put up the building and give the lease. That was quite a different transaction. That version the documents conclusively contradicted; we may say positively that no such arrangement was ever made between the parties, and no jury which understood their import could have so concluded. With this testimony eliminated, there remained only the defendants’ own testimony and the documents themselves, and there was nothing to show that the second contract was conditional upon the plaintiff’s success in getting the land and putting up the building. The jury was certainly not entitled to read the plaintiff’s testimony as referring to the agreement actually made, even if the letter of March eighth was not a sufficient contradiction, were it so read. The defendants should have had a directed verdict. Judgment reversed; new trial ordered.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

ARMENTA v. UNITED STATES. No. 6237. Circuit Court of Appeals, Ninth Circuit. March 30, 1931. Wm. J. Fellows and John W. Bay, both of Phoenix, Ariz., for appellant. John C. Gung’l, U. S. Atty., of Tucson, Ariz., J. S. Wheeler, Asst. U. S. Atty., of Phoenix, Ariz., and B. G. Thompson and Norman S. Hull, Asst. U. S. Attys., both of Tucson. Before BUDKIN, WILBUR, and SAWTELLE, Circuit Judges. Rehearing denied May 11, 1931. SAWTELLE, Circuit Judge. Appellant, hereinafter called the defendant, was convicted upon counts 3, 4, and 5 of an indictment, in which counts he was charged with the unlawful possession and sale of intoxicating liquor and maintaining a common nuisance. Pursuant to the verdict of the jury the court announced sentence: “That the said defendant be imprisoned in the United States Penitentiary at McNeil Island, in the State of Washington, for the period of three (3) years on count four, said term of imprisonment to date from his delivery to the warden of said penitentiary; that said defendant be fined in the sum of three thousand dollars ($3,000.00) on count four; that he be fined the sum of five hundred dollars ($500.-00) on count three, and that he be fined the sum of one thousand dollars ($1,000.00) on count five; that in default'of payment thereof he stand committed to said penitentiary» until said fines are paid or he is otherwise discharged by law, said commitment in default of payment of said fines to. run concurrently with each other and to date from the expiration of the term of imprisonment imposed under said count four.” On the following day, April 11, 1930, as shown by the minutes of the trial court, the defendant being present with his counsel, this judgment was vacated and the following judgment entered: “That said defendant be imprisoned in the United States Penitentiary at McNeil Island, in the State'of Washington, for the period of three (3) years on count three; said term of imprisonment to date from his delivery to the warden of said penitentiary; that said defendant be fined the sum of three thousand dollars ($3,000.00) on count three; that he be fined the sum of five hundred dollars ($500.00) on count four; that he be fined the sum of one thousand dollars ($1,000.00) on count five; that in default of payment thereof he' stands committed to ' said penitentiary until said fines are paid or he is otherwise discharged by law, said commitment in default of payment of said fines to run concurrently with each other andi to date from the expiration of the term of imprisonment imposed under said count three.” The record contains a “proposed bill of exceptions” which evidently was not presented to the judge of the trial court for his approval, as required by law and by the rules of court. In any event, it is not signed and properly authenticated, and therefore cannot be considered by this court. Counsel for the defendant relies upon and argues four assignments of error: “I. That the court erred in denying or ignoring the defendant’s motion to suppress evidence obtained during a search and seizure by said federal prohibition agents, which evidence was used at the trial of said defendant. “II. That the court erred in demanding of the defendant that he produce a certain affidavit, the contents of which were highly prejudicial to the defendant. “III. That the argument of counsel for the Government and the comment of the court during the course of the trial were highly prejudicial to the defendant. . “IV. That the court erred in denying the motion in arrest of judgment macle by the defendants.” Assignment I relates to the ruling of the court on the defendant’s motion to suppress certain evidence obtained during the search of defendant’s residence by federal prohibition officers. In the absence of the bill of exceptions this ruling is not open for review. In the case of Doran v. United States, 31 F. (2d) 754, 755, Judge Dietrich, speaking for this court' said: “A motion seasonably made for the suppression of part of the evidence, on .the ground that it was obtained through an unlawful search, was heard upon affidavits and oral testimony prior to the trial, and denied. ' The testimony so adduced is not brought here by bill of exceptions or otherwise, and the order is therefore not open for review.” See, also, Beach v. United States, 35 F.(2d) 837 (C. C. A. 9th); Lockhart v. United States, 35 F.(2d) 905 (C. C. A. 9th); Sapp v. United States (C. C. A.) 35 F.(2d) 580. Assignments II and III relate to alleged errors of the court, and counsel for the government during the course of the trial. For the reasons just stated these assignments are likewise not open for review. Assignment IV relates to the ruling of the court on defendant’s motion in arrest of judgment, and is the only one properly before us for review. .As above stated, upon the return of the verdict the court sentenced the defendant to imprisonment in the United States Penitentiary at McNeil Island in the state of Washington for a- period of three years and imposed a fine of $3,000 on count 4 of the indictment. This sentence was urn-authorized both as to the term and place of imprisonment. Count 4 of the indictment charges the defendant merely with a misdemeanor, namely, the unlawful possession of intoxicating liquor, and the court in imposing the Sentence undoubtedly was laboring under the impression that count 4 was the count charging the sale of intoxicating liquor. On-the following day and during the same term of court the court, over the defendant’s objection, vacated the judgment and sentence and imposed the same judgment and sentence under count 3, the sales count, and at the same time imposed a fine of $500 under count 4, the possession count. Counsel for the defendant contends that “the above sentences were legal tho the one was excessive, to-wit: the sentence on the fourth (4th) count, but it has been held that where a sentence is excessive it does not render the judgment void except, as to the excess,” and he argues that, as to the excess, defendant’s sentence should be modified by this court. We agree with counsel that all of the sentences were legal, except the sentences under count 4. It is true that this sentence is merely excessive in so far as the amount of the fine is concerned, but it is void in other respects. It must be remembered that the fourth count charged the defendant with the commission of a misdemeanor, and that upon conviction thereof the court sentenced him to pay a fine and to be imprisoned in the penitentiary for the term of three years. A misdemeanor is an offense which may be punished by imprisonment for a term not exceeding one year. 35 Stat. 1152, 18 USCA § 541. There is, consequently, no escape from the conclusion that the judgment of the court sentencing the defendant to imprisonment in the penitentiary was in violation of 'the statutes of the United States. “The court below was without jurisdiction to pass any such sentences, and the orders directing the sentences of imprisonment to> be executed in a penitentiary are void. This is not a case of mere error, but one in which the court below transcended its powers. Ex parte Lange, 18 Wall. 163, 176 [21 L. Ed. 872]; Ex parte Parks, 93 U. S. 18, 23 [23 L. Ed. 787]; Ex parte Virginia, 100 U. S. 339, 343 [25 L. Ed. 676]; Ex parte Rowland, 104 U. S. 604, 612 [26 L. Ed. 861]; In re Coy, 127 U. S. 731, 738, 8 S. Ct. 1263 [32 L. Ed. 274]; Hans Nielsen, Petitioner, 131 U. S. 176,182, 9 S. Ct. 672 [33 L. Ed. 118].” In re Mills, 135 U. S. 263, 270, 10 S. Ct. 762, 764, 34 L. Ed. 107. The Supreme Court in speaking of the penitentiary sentence said: “That is a sentence which can only be imposed- where it is specifically prescribed, or where the imprisonment ordered is for a period longer than one year, or at hard labor.” In re Bonner, 151 U. S. 242, 254,14 S. Ct. 323, 324, 38 L. Ed. 149. The National Prohibition Act (c. 85, Title 2, § 29, 41 Stat. 316, 27 USCA § 46) prescribes the punishment for the first offense of the crime of possessing intoxicating liquor a fine not exceeding $500. “It follows that the court had no jurisdiction to order an imprisonment, when the place is not specified in the law, to be executed in a, penitentiary, when the imprisonment is not ordered for a period longer than one year, or at hard labor. The statute is equivalent to a direct denial of any authority on the part of the court to direct that imprisonment be executed in a penitentiary in any cases, ■other than those specified.” In re Bonner, supra. In the same ease the court quotes from In re Mills, 135 U. S. 263, 10 S. Ct. 762, 34 L. Ed. 107, as follows: “ ‘A sentence simply of' “imprisonment,” ’ said the court, ‘in the case of a person convicted of an offense against the United States, where the statute prescribing the punishment does not require that the accused shall be confined in a penitentiary, cannot be executed by confinement * * * “for a period longer than one year.” ’ ” It will thus be seen that the trial court in the instant case was without jurisdiction to sentence defendant to imprisonment in the penitentiary under the fourth count of the indictment. See, also, Ex Parte Lange, 18 Wall. 163, 21 L. Ed. 872. The court being without jurisdiction to impose a penitentiary sentence in the first instance, it was within its power and jurisdiction during the same term to vacate the sentence and impose a valid one, especially in view of the fact that the judgment specifies that the defendant’s term of imprisonment dates from his delivery to the warden of the penitentiary, and that no part of the sentence had been executed. The Supreme Court in the ease of Goddard v. Ordway, 101 U. S. 745, 752, 25 L. Ed. 1040, said: “In Ex parte Lange (18 Wall. 163, [21 L. Ed. 872]), we said that ‘the general power of the court over its own judgments, orders, and decrees, in both civil and criminal cases, during the existence of the term at which they are first made, is undeniable.’ Bassett v. United States, 9 Wall. 38 [ 19 L. Ed. 548]; Doss v. Tyack, 14 How. 297 [14 L. Ed. 428]. As part of the ‘roll of that term,’ they are deemed to be ‘in the breast of the court during the‘whole term.’ Bac. Abr., tit. Amendment and Jeofail, A.” “As a general practice, the sentence, when imposed by a court of record, is within the power of the court during the session in which it is entered, and may be amended at any time during such session, provided a punishment already partly suffered be not increased.” Wharton, Criminal Pleading and Practice (9th Ed.) § 913. “A sentence * * * ¿loes not commence until the person sentenced is taken to the prison.” Dimmick v. Tompkins, 194 U. S. 540, 24 S. Ct. 780, 48 L. Ed. 1110. In the instant ease, at the time the defendant was resentenced he had not begun the service of his original sentence, and therefore no question of jeopardy or double punishment is here involved. The judgment of the lower court is affirmed.

f2d_48/html/0571-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

ANONYMOUS, an Attorney, v. TRENKMAN et al. No. 255. Circuit Court of Appeals, Second Circuit. April 6, 1931. I. T. Matto, of New York City, for appellant. H. Snowden Marshall, of New York City, for appellees. Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges. MANTON, Circuit Judge. Appellant is an attorney at law, and sued for damages, alleging he was libeled by reason of allegations contained in a complaint filed to set aside an order of settlement and discontinuance, of- an aetion, wherein he was named as defendant, which discontinuance was entered December 24, 1924, in a cause involving the appellee Beatrice P. Trenkman, appellee Henry M. T. Beekman appearing as attorney. The basis of the suit-to set aside the discontinuance was duress-The suit, which was compromised and discontinued, was a litigation over the disposition of the estate of William E. Smith. It. was claimed that Smith was induced by fraud and force to marry one Clair Smith; that he was in an impaired mental condition; that he- executed a last will and testament which, was obtained by fraud and undue influence;, that deeds, conveyances, and assignments were made which were also fraudulent and the-suit sought to enjoin the defendants therein named from transferring, conveying, or otherwise disposing of the property. Appellant is named as a party defendant in that action. The case was compromised by payment of a substantial sum of money, and the aetiondiscontinued as stated. The twentieth paragraph of the complaint, served in the action-to- set aside the settlement and discontinuance, contained the following: “That since said settlement, the-plaintiff has obtained evidence which leads her to believe, and she alleges on information and belief, that the death of said William E. Smith was brought about by the defendants, pursuant to their fraudulent plan and conspiracy hereinabove set forth.” The present complaint was dismissed on-motion. For the purpose of testing the sufficiency of this complaint, the appellees are deemed to have conceded the truth of the allegations thereof which, of course, allege the falsity of the statements contained in the twentieth paragraph charging the appellant, in substance, with causing the death of William E. Smith. That the allegations are libelous and actionable, unless privileged, admits of little doubt, for they in effect charge the defendant with crime. Morrison v. Smith, 177 N. Y. 366, 69 N. E. 725; Krug v. Pitass, 162 N. Y. 154, 56. N. E. 526, 76 Am. St. Rep. 317; O’Connell v. Press Publishing Co., 214 N. Y. 352, 108 N. E. 556. The cause of death of William E. Smith and.how it.was brought about as alleged in the complaint, was not material or relevant to the question of the right to vacate the discontinuance and settlement. This aetion to vacate the discontinuance was instituted four years after the order of discontinuance was entered upon stipulation of the parties. The plaintiff in the action to vacate the discontinuance also prayed for the vacating of the probate of the will of William E. Smith. Only the Surrogate’s Court of New York County had jurisdiction as to this. Pyle v. Pyle, 137 App. Div. 568, 122 N. Y. S. 256, affirmed 199 N. Y. 538, 92 N. E. 1099; Bowden v. Owen, 103 Misc. Rep. 56, 61, 171 N. Y. S. 778, affirmed 227 N. Y. 612, 125 N. E. 913. The New York courts have applied two tests of relevancy depending upon the facts of the particular ease. Where a libel occurs in a preliminary pleading and is directed at one not a party to the cause, the privilege will be granted only if the allegation is one of the ultimate facts on which the pleader relies. Moore v. M. N. Bank, 123 N. Y. 420, 25 N. E. 1048, 11 L. R. A. 753. In that ease, a former teller sued the bank for libel. The libel was contained in a statement of claim and bill of particulars, presented by the bank in an action against sureties on a cashier’s bond, and containing a list of items stolen by the cashier, including certain amounts said to have been drawn out “by collusion with the teller.” The court held that the libel was not privileged because irrelevant and had nothing to do with the surety’s liability to the bank; apparently it served no purpose to inform them of the teller’s collusion with the cashier, and hence until the bank adduced proof of its relevancy it was not privileged. In Lesser v. International Trust Co., 175 App. Div. 12, 161 N. Y. S. 624, a petition in bankruptcy referred to one lesser as the recipient of certain assets and characterized him as a “fugitive from justice.” This was held not to be privileged. In Battu v. Smoot, 211 App. Div. 101, 206 N. Y. S. 780, a libel suit was brought by an officer and director of a corporation against a former employee. The employee had been hired under a contract by whose terms he had agreed to assign certain patents and not to compete in like business, and, as compensation, he received stock in the company. The company sued for breach of this contract, and in his answer he set up the fact that the officers and directors had conspired to control the company and monopolize the profits to his exclusion; that they did this by paying excessive salaries and in some eases through dummy employees. This was held not to be privileged, since no relief was asked against the officers and directors and since his grievance as a stockholder had nothing to do with the breach of contract issues. These eases were followed in the federal court in Union Mutual Life Ins. Co. v. Thomas, 83 F. 803 (C. C. A. 9). The life insurance company denied the death of the insured and also set up in its answer that the plaintiff and the attorney had no cause to believe him dead and had conspired to defraud the company. It was held that this statement was not privileged as against the attorney. The court said that the allegation of plot added nothing to the allegation that the insured was alive, and so was irrelevant. In Union Mutual Life Ins. Co. v. Thomas, 83 F. 803, 804 (C. C. A. 9), it is said: “It is perhaps not necessary'that it be in all eases material to the issues presented by the pleadings, but it must be legitimately related thereto, or so pertinent to the subject of the controversy that it may, in the course of the trial, become the subject of inquiry.” King v. McKissick, 126 F. 215 (C. C. Dist. Nevada), involved a petition to perpetuate testimony which alleged that the adverse claim was being made because of the false, fraudulent, and malicious representations of one E. D. King to the claimants. This was held not privileged, as it was of no consequence why the claim was put forth. See, also, Potter v. Troy, 175 F. 128 (C. C. S. D. N. Y.). The rule was stated in Harlow v. Carroll, 6 App. D. C. 128, 139; that the “matter, to which the privilege does not extend, must be so palpably wanting in relation to the subject-matter of controversy as that no reasonable man can doubt its irrelevancy and impropriety.” Here the issue presented by the pleadings in the suit to set aside the compromise and discontinuance was the claim to rescind because the compromise was procured by fraud. The murder of Smith was not relevant to that issue. It is true that in the bill the vacation of probate is also asked for, but that was a matter for the Surrogate’s Court; the state Supreme Court not having jurisdiction. Moreover, such a cause of action would not be against this appellant, but against the legatee. The rule is stated in Andrews v. Gardiner, 224 N. Y. 440, 445, 121 N. E. 341, 2 A. L. R. 1371, that counsel are privileged with respect to any statements, oral or written, made in judicial proceedings and pertinent thereto, and that in England the im-° munity is broader. There the privilege exists whether the statements are relevant or not, but the American rule is that the privilege is lost if the libel is irrelevant. Youmans v. Smith, 153 N. Y. 214, 47 N. E. 265; Moore v. Manufacturers’ Nat. Bank, supra; McLaughlin v. Cowley, 127 Mass. 316; Barnett v. Loud, 226 Mass. 447, 115 N. E. 767; Kemper v. Fort, 219 Pa. 85, 67 A. 991, 13 L. R. A. (N. S.) 820, 123 Am. St. Rep. 623, 12 Ann. Cas. 1022. Under the law of New York and the federal law, if the lihelous matter is malicious and irrelevant, it ceases to be privileged. White v. Nicholls, 3 How. 266, 11 L. Ed. 591; Potter v. Troy (C. C.) 175 F. 128. The pleadings should contain but the plain and concise statements of the material facts and not the evidence by which they are to be proved. Civil Practice Act, § 241. If a pleader goes beyond the requirements of the statute and alleges an irrelevant matter which is libelous, he loses his privilege. The appellees are charged with willfully — the one swearing to, and the other as attorney drafting — libelous allegations which are irrelevant to the issue in that suit, for they did not touch the issues which the parties had made by their pleadings. They are alleged in the present bill of complaint to be false, untrue, and willfully made. If this be established, the libel is actionable. Order and judgment reversed.

f2d_48/html/0574-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

QUEENSBORO NAT. BANK OF CITY OF NEW YORK v. KELLY. No. 258. Circuit Court of Appeals, Second Circuit. April 6, 1931. See, also, 15 F.(2d) 395. Samuel Perlo, of New York City, for appellant. Ignatius A. Seannell, of New York City, for appellee. Before L. HAND, CHASE, and MACK, Circuit Judges. MACK, Circuit Judge. In an action against the maker by the payee of a promissory note for $14,432.63, defendant answered that the consideration therefor was an assignment by plaintiff to him of certain bills of exchange aggregating $16,164.15; that the note was to be effective on condition that the bills were delivered to defendant, but that no delivery had been made; that, on the contrary, when at matur-ity defendant had tendered the amount of the note with interest, plaintiff had informed him that it was unable to deliver the drafts; that all or a greater number of the drafts had been paid prior to the assignment to defendant. Of even date with the note, but whether before or after its execution is in controversy, a writing was signed by both parties (copied in the margin). It was stipulated at the trial that prior to the execution of the note some of the drafts had been paid by the drawees thereof to a Porto Rican bank, plaintiff’s correspondent; that the moneys received had been remitted by it, $9,189.21 thereof to the drawer, Soamer Distributing Company, which deposited the cheeks with plaintiff, in its general account, and the balance, $1,067.51, directly to plaintiff. The drafts had. been issued in sets of two. This, however, is about all that on this record can be stated in respect to them. In other words, it is not clearly apparent (a) who the payee was, whether the drawer or plaintiff or the Porto Rican Bank; (b) whether they were delivered by the drawer to the plaintiff, and, if so, for what purpose; or (c) whether they were sent either by drawer or plaintiff to the Porto Rican bank, and, if so, whether the whole .or only part of either the firsts or the seconds of exchange or both were so sent; (d) whether sneh drafts as were in plaintiff’s possession at the time of the assignment were firsts or seconds or both, and whether they were originally payable to plaintiff or had theretofore been indorsed to it by the drawer or the Porto Rican bank as payee, or had been delivered to it without indorsement; and, if indorsed, what the nature of the indorsement was. We deem it essential to point out this lack of clarity in the testimony in order that on another trial it may be corrected and the entire situation presented. Inasmuch as at the conclusion of the trial both parties moved for a directed verdict and submitted the cause to the court on a stipulation that neither would ask to go to the jury but that the court might direct a verdict, all doubts in respect to the testimony must for the purposes of the present appeal be resolved against the appellant. Some time after the submission, the trial judge rendered an opinion stating that a verdict would be directed in favor of the defendant, but he made no special findings of fact. The judgment from which the appeal was • taken, after reciting the stipulation and the granting of defendant’s motion for a directed verdict, dismisses the complaint and awards costs to defendant. No exceptions were taken other than to the exclusion of evidence. In this situation, on this appeal, only errors of law in that respect may be considered. Beuttell v. Magone, 157 U. S. 154, 15 S. Ct. 566, 39 L. Ed. 654; Sena v. Am. Turquoise Co., 220 U. S. 497, 31 S. Ct. 488, 55 L. Ed. 559. The question thus presented for review is whether or not the court erred in refusing to admit parol evidence that defendant knew the drafts to be worthless pieces of paper at the time of the execution of the assignment and that the actual or main consideration for the note was an agreement between defendant, for a long time president, and thereafter chairman of plaintiff’s board of directors, and his codirectors, to make good, in proportion to their stock holdings,- certain of the bank loans, pursuant to the National Bank Examiner’s direction that they be replaced because deemed by him unsafe. The relevancy of the rejected testimony is its tendency to negative the implication of any warranty by plaintiff as transferor of the drafts. Although the drafts were drawn on Porto Ricans, as their assignment by plaintiff to defendant under the written document and their delivery either actual or constructive under the terms of that document or by the delivery of a paper listing them were completed in New York, the law of that state controls ; if statutory, this court accepts the state court’s interpretation, but, if not statutory, the federal court is not bound by the state court’s decisions on the common law or the law merchant as applied to such a Commercial transaction.- We .are dealing with negotiable instruments; as heretofore stated; on the record before us, it is uncertain whether at the time of the transfer the drafts were order or bearer paper. This can be cleared up on the new trial. If it shall then appear that in plaintiff’s hands they were bearer paper, the transfer is clearly within the provisions of the New York Negotiable Instruments Law (Consol. Laws, c. 38); they were “negotiated” within section 60 of that act. The implied warranties, if any, arising out of the transaction, will be those specified in section 115. If, however, it shall appear that they were then order paper, inasmuch as they were not indorsed by plaintiff, they were not in the strict sense of the term negotiated. The question then arises whether in these circumstances the Negotiable Instruments Law covers the transaction so that section 115 determines the implied warranties, or whether the transfer is to be dealt with as an assignment at common law. The importance of the matter is due to the conflict between Meyer v. Richards, 163 U. S. 385,16 S. Ct. 1148, 41 L. Ed. 199, holding that the transferor warrants the instrument to be valid, and Littauer v. Goldman, 72 N. Y. 506, 28 Am. Rep. 171, holding that the transferor warrants only that he has no knowledge of any invalidity. Section 79 of the New York Negotiable Instruments Law expressly governs the ease of delivery, without indorsement, of order paper. Whatever the situation at common law, such a transfer vests the title of the transferor in the transferee, and the latter “acquires, in addition, the right to have the indorsement of the transferrer.” This section further provides “but for the purpose of determining whether the transíerree is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.” While, therefore, for the one specified purpose, actual indorsement is essential to complete the “negotiation,” the apparent legislative intent was to make the negotiation effective for other purposes as soon as the right to have the indorsement placed thereon was acquired. Section 115 uses a similar word, “negotiating.” Narrowly interpreted, the applicability of this section might thereby be limited to order paper on which the qualified indorsement had actually been made. In our judgment, however, the legislative intent, evidenced by the provision of section 79, will be effectuated only by a more liberal interpretation, so as to cover the transfer of order paper before as well as after actual indorsement. As between the immediate parties to the transaction and in respect to the warranties, if any, that the transferor gives to his immediate transferee, no question of holder in due course is involved. Whether the assignment be before or after maturity, for value or as a gift, title to the paper and the right to demand the indorsement vest in the transferee at once. It follows, therefore, that, whether the drafts be bearer or unindorsed order paper, plaintiff at the best warranted under section 115 only against its own knowledge and not against the fact of invalidity. As the warranties, if any, are not expressed in the assignment document or in any writing, either on the drafts or outside of them, whether they were bearer or unindorsed order paper, the warranties are only such as the law implies; in these circumstances, there is no varying of a written instrument by parol evidence in the admission of testimony tending to negative the implication of any warranty. Smith v. Barner, 95 Or. 486,188 P. 216. In that ease, in some respects similar to the instant one, the court was unanimous on this point; the only difference between the majority and minority was whether parol evidence of the actual transaction and intention would be admissible if (what was not clear on the record before the court) it should appear on the new trial that the order paper had in fact been indorsed “without recourse” and not merely •assigned and delivered. The minority in that case, as in Moody v. Morris-Roberts Co., 38 Idaho, 414, 226 P. 278, contended in well-reasoned opinions (approved by Chafee, Brannan’s Neg. Instr. Law [4th Ed.] p. 609; see Llewellyn, 29 Yale Law Journal 102, at 104, note 11) that the words “without recourse” on the instrument itself do not expressly embody in writing the warranties implied under the provisions of statutes identical with section 115 of the New York act, and that therefore the admission of such evidenee would not contravene the parol evidence rule. No such question, however, will arise here, for clearly, even if the drafts were order paper, they had not been indorsed at the time of their assignment. The fact that the implied warranties of section 115 of the Negotiable Instruments Law are stated in absolute terms does not, in our judgment, preclude parol evidence of the transferee’s knowledge of invalidity. Both under the law of sales of chattels (1 Willis-ton. Sales §§ 219, 234) and under the law merchant before the N. I. A. (Baldwin v. Van Deusen, 37 N. Y. 487; Bell v. Dagg, 60 N. Y. 528; Coffman v. Allin et ux. Litt. Sel. Cas. [16 Ky.] 200; Beal v. Roberts, 113 Mass. 525; Porter v. Bright, 82 Pa. 441; Carroll v. Nodine, 41 Or. 412, 69 P. 51, 93 Am. St. Rep. 743), the purchaser’s knowledge of defects, proven normally by parol evidence, negatives the implication of the usual warranties as to such defects. See Britton, “Liability of Transferor by Delivery and a Qualified Indorser,” 40 Yale Law Jour. 215, 254, and 255, and cases cited. The tendered evidence of defendant’s knowledge of the “worthlessness,” that is, the invalidity, of the drafts by reason of their payment in whole or in part or the earlier negotiation of one of the sets and/or payment thereof, was therefore admissible to negative the statutory implication of a warranty by plaintiff; its exclusion was reversible error. Proof of all the circumstances surrounding the transaction was likewise admissible to establish that these drafts were intended by both parties to be taken at defendant’s risk without any 'warranty, irrespective of defendant’s knowledge or lack of knowledge of specific defects. For this purpose, the offered proof of the parol agreement as an additional or even' main consideration for the note should have been received; its exclusion, too, was enrol’. Such evidence, if believed, tended to show that both parties re^ garded the drafts as worthless, and therefore intended no warranty to he implied. Clearly the assignment document did not in form or in fact express the entire understanding of the parties, as defendant himself asserts by pleading and offering evidence to show actual delivery of the drafts to he an express condition to payment of the note, although the document does not so provide. Moreover, its primary purpose was not to express a complete agreement between the parties. ' It is rather a grant, an assignment of the drafts, with a reservation of the right to apply collections thereon on defendant’s notes; incidental thereto is plaintiff’s unilateral promise to give the Soamer Company time on its unsecured indebtedness. Defendant’s signature is attached thereto, but it contains no promise by him to execute a note; the note is merely recited as the consideration for plaintiff’s assignment of the drafts and the extension of time. If on the new trial the jury should ■disbelieve the rejected testimony, then, as heretofore stated, plaintiff’s warranty is that prescribed in section 115 of the New York Negotiable Instruments Law, not that the paper was “valid and subsisting,” but only that plaintiff as transferor “has no knowledge of any fact which would impair the validity of the instrument or render it valueless.” This limitation of the warranty is also adopted in other uniform Acts. It will therefore not suffice for defendant to prove that the drafts or their negotiated counterparts, had. jn fact been paid; in order to establish 'this breach of warranty that gives him a set-off against his liability on the note, he must prove plaintiff’s knowledge of such payment. The third defense of payment of the draft is not a defense of failure of consideration for the note; there was no failure. The document passed title to the drafts and gave defendant the promise of time on the Soamer Company liability. But he may establish a set-off based on breach of 'warranty. It is to be noted that the third defense as pleaded fails to allege plaintiff’s knowledge of the payments. This defect may, however, in the discretion of the trial court, be obviated by amendment. In any event, proof of knowledge that one or more drafts had been paid gives a set-off only to that extent; all liability on the note is not thereby ended. See Ryan v. Security Savings Bank, 50 App. D. C. 292, 271 F. 366; New York Negotiable Instruments Law, § 54. In respect to the second defense of tender of payment by defendant and plaintiff’s refusal to deliver the drafts, it is to be noted that the written tender made at maturity was not the tender as pleaded by him, conditioned only on delivery of the unpaid drafts in the sum of $16,164.15. There was added the further requirement, which was neither pleaded nor proved, that plaintiff also furnish proof “that neither the firsts nor seconds of exchange of said draft had been paid by the drawee.” There was, however, no contraetual or other obligation on plaintiff to furnish this proof as a condition to payment of the note. For the errors in rejecting the offered testimony, the judgment must be reversed, and the cause remanded for a new trial. In consideration of the execution and delivery by William F. Kelly of a note for a term, of ten (10) months in the sum of Fourteen Thousand Four Hundred Thirty-Two Dollars and Sixty-three Cents ($14,432.63) dated this day, the Queensboro National Bank of the City of New York hereby assigns and sells to William F. Kelly drafts of the Soamer Distributing Company, Long Island City, N. Y., aggregating the sum of Sixteen Thousand One Hundred Sixty-Four Dollars Fifteen Cents ($16,164.15) with the privilege to the said William F. Kelly, to take legal action in such cases as he may be advised in the name of the Queensboro National Bank of the City of New York at his own expense and without recourse to the Bank. The said note to bear interest. It being understood, however, that in case the said William F. Kelly collects any monies on account of any draft or drafts hereby assigned, that that money shall be turned over to the Bank by the said William F. Kelly and such money turned over shall be in reduction of the said note and that the said William F. Kelly hereby assigns all such monies that may be collected on account of any draft or drafts hereby assigned. The Queensboro National Bank of the City of New York hereby agrees not to press the Soamer Distributing Company for more than One Hundred ($100) Dollars per month of the $3300 (Thirty-three Hundred Dollars) the said Soamer Distributing Company owes to the Bank that is not secured and is not contained in the said $16,164.15 heretofore assigned. In witness whereof the Queensboro National Bank of the City of New York has hereby caused its seal to be-affixed and these presents to be signed by its President, and William F. Kelly has hereto set his hand and seal this fourteenth day of July, 1925. Queensboro National Bank of the City of New York. By John La Duke, President. Wm. F. Kelly. [Seal.] In the presence of $ Samuel Perlo. Cf. Liberty Trust Co. v. Tilton, 217 Mass. 462, 465, 105 N. E. 605, L. R. A. 1915B, 144, broadly defining “negotiated” to constitute a payee a bolder in due course. Sales of Goods Act, New York Personal Property Law (Consol. Laws, c. 41), § 117(c); Stock Certificates Act, Id. § 172(c); Warehouse Receipts Act, New York General Business Law (Consol. Laws, c. 20), § 128(c).

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In re THURSTON. No. 279. Circuit Court of Appeals, Second Circuit. April 6, 1931. Single & Hill, of New York City (Forrest E. Single, of New York City, of counsel), for appellant. William F. Purdy, of New York City (John E. Purdy, of New York City, of counsel), for appellee. Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges. MANTON, Circuit Judge. Appellant’s barge sank in the New York State Barge Canal. A marine insurance policy covering the barge provided that in the case of loss a survey should be made by surveyors, one appointed by each party, and, if they failed to agree, an umpire might be appointed pursuant to the United States'Arbitration Act, § 5 (9 USCA § 5). An umpire was appointed by the court. After a consideration, he'made specifications of the work required to repair the damage and stated how it should be done. The appellant moved to direct him to amend his report, and the appellee moved for a confirmation of the report as made. The order appealed from confirmed the report, but struck out therefrom the following paragraph: “It is the opinion of the undersigned that the reasonable cost of foregoing recommended repairs will not exceed the sum of $5,889.-40, which is the actual financial loss which the assured has suffered by reason of damage sustained in the disaster for which the surveys were made.” The appellant complains of the order confirming the report as modified. The clause of the policy providing for the appointment of the umpire reads: “If the surveyor appointed by these Insurers cannot agree with the surveyor appointed by the Assured upon an umpire, either party hereto may apply to the United States District Court for the District in which the home port of the vessel insured hereunder is located, for the appointment of an umpire pursuant to the United States Arbitration Act. The surveyors, or the umpire, if it shall become necessary to name one, shall make specifications in writing, clearly, stating both the amount of work and the manner in which it shall be done to make said vessel good in respect of any damage caused by the disaster. * s . * Such specifications shall be binding both upon the assured and these Insurers as to the extent of damage and the manner in which the work shall be done, subject, nevertheless, to the policy terms and conditions and the question of whether or not the disaster and resulting loss or damage are covered by this policy.” In this manner, the parties to the policy of insurance in dispute, as to naming the umpire, agree to take advantage of section 5 of the United States Arbitration Act (section 5, title 9,'U. S. Code [9 USCA § 5]) by petitioning the District Court to appoint one. His duty was to determine the amount of the work and the manner in which it should be done and his determination, to be binding on both parties. By the stipulation of the parties, he was to make no award fixing the amount of damages. His report was solely for the purpose of determining how the repairs should be carried out, and had nothing to do with the amount of the ultimate liability. The specifications were to be binding as to both the assured and the insurer, “subject, nevertheless, to the policy terms and conditions and the question of whether or not the disaster and resulting loss or damage are covered by this policy.” Other provisions of the United States Arbitration Act were not made applicable by the parties. They did not stipulate for arbitration under this act. But the court confirmed by order a report which recited the appointment of the umpire, the fact that a survey was made of the barge and the repair specifications noted, and recommended the various repairs to be made. No judgment could be entered on this report., Under the United States Arbitration Act § 8 (9 USCA § 8), provision is made for the entry of a decree upon the award “if the basis of jurisdiction be a cause of action otherwise justiciable in admiralty,” and “the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings.” By section 9 of the act (9 USCA § 9) the decree might be entered if the parties had stipulated in their policy for arbitration and that judgment of the court should be entered upon the award made pursuant to the arbitration. But here the parties did not bring their dispute within either section 8 or section 9 of the act. On the contrary, as above pointed out, they stipulated that the report of the umpire would be conclusive upon them. The other sections of the United States Arbitration Act are inapplicable here. Since the policy does not substitute arbitration for a suit under it, but provides for a board to determine the facts as found here, which shall be conclusive upon the parties (American Steel Co. v. German-American Fire Ins. Co. [C. C. A.] 187 F. 730; Toledo S. S. Co. v. Zenith Transp. Co., 184 F. 391 [C. C. A. 6]; Wurster v. Armfield, 175 N. Y. 256, 67 N. E. 584; Matter of Fletcher, 237 N. Y. 440, 143 N. E. 248), there was no jurisdiction in the court below to confirm this report. The order will therefore be reversed, with directions to dismiss the petition for confirmation of the report. In re Woerner, 31 F. (2d) 283 (C. C. A. 2). Order reversed.

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STANDARD OIL CO. OF NEW JERSEY v. NEVILLE. No. 3116. Circuit Court of Appeals, Fourth Circuit. April 13, 1931. Thomas B. Jackson and Brown, Jackson & Knight, all of Charleston, W. Va., for appellant. M. M. Neely, of Fairmont, W. Va. (H. H. Rose, of Fairmont, W. Va., on the brief), for appellee. Before PARKER and NORTHCOTT, Circuit Judges, and WEBB, District Judge. NORTHCOTT, Circuit Judge. This is an action of trespass on the ease, instituted in the circuit court of Marion county, W. Va., by Neville, administrator, plaintiff, against appellant, Standard Oil Company of New Jersey, defendant, for the alleged •wrongful death, of plaintiff’s decedent, Blair Idleman Neville, and removed by defendant to the United States District Court for the Northern District of West Virginia. Defendant pleaded the general issue to plaintiff’s amended declaration, charging defendant, through one of its agents, with negligence in causing the death of decedent in an automobile accident. Trial was had in October, 1929, resulting in a hung jury. A second trial was had in July, 1930, resulting in a verdict and judgment for plaintiff in the sum of $8,600, from which judgment this appeal is prosecuted. The plaintiff’s decedent was killed in an automobile accident. When killed, he was driving his car with his brother, and his car was being followed closely by a ear driven by an agent of the Standard Oil Company. The car driven by decedent was unexpectedly stopped by colliding with an approaching car, when the ear driven by appellant’s agent struck the decedent, who had been thrown out of his ear, and killed him. Two main questions are presented by appellant’s attorneys as to error committed in the trial. The first of these is the question of the admission of a statement of appellant’s agent made about forty-five minutes after the accident, when the agent had driven about ten or thirteen miles from the place where the accident happened; the statement being made to a man at a garage where the appellant’s agent had gone to have his ear examined. The statement made by the agent was to the effect that he had had a funny experience coming up the road a little while ago. There was an automobile wreck, and a man was killed, and that he thought he may have done it; that he was followup the other car, and said, “I shut my eyes and went through, I don’t know how I got through.” The trial judge admitted this statement on the ground that it was a part of res geste. The question as to whether a statement is a part of the res geste depends on the circumstances of each ease, and there is no fixed rule by which the question can be decided. An examination of the authorities leads us to the conclusion that the statement made in the present case was too long after the happening and too much in the nature of a narrative of a past event to constitute a part of the res geste. 10 R. C. L. “Evidence,” §§ 161, 162, 169,173,174 ; 22 C. J. “Evidence,” pp. 451-469, §§ 543-557; Vicksburg & Meridian R. R. Co. v. O’Brien, 119 U. S. 99, 7 S. Ct. 118, 30 L. Ed. 299; Ambrose v. Young, 100 W. Va. 452,130 S. E. 810. It is well settled that an agent may not, outside of his duties, make admissions against the interests of his principal that will bind the principal. Calzavaro v. Planet S. S. Corp. (C. C. A.) 31 F.(2d) 885. It is also true, however, that, where a statement of this kind is improperly admitted, the error is rendered harmless when the facts contained in the statement are unquestionably proven by other evidence, and in this instance the agent himself went upon the stand and testified that, when the accident happened, he shut his eyes and went through, and also testified that he had stated to decedent’s father that he had found blood and hair upon his ear. In addition to this, it was thoroughly proven by other witnesses that it was the ear of the Standard Oil'Company’s agent that hit the man that was killed. In view of all this, we fail to see how the statement made by the agent-and admitted by the court below could have in any way prejudiced the ease of the appellant in the minds- of the jury. It is clearly established that error in receiving proof of a declaration is harmless, where the faet sought to be proved is established beyond doubt by other evidence. - 38 Cyc. 1419, et seq.; Gosh v. Lehigh & Wilkes-Barre Coal Company, 68 Pa. Super. Ct. 63; Lozier Automobile Exchange v. Interstate Casualty Company, 197 Iowa, 935, 195 N. W. 885; C. & O. Ry. Co. v. Ware, 122 Va. 246, 95 Si E. 183; Howell v. Wysor, 74 W. Va. 589, 82 S. E. 503, Ann. Cas. 1916C, 519; Chesapeake Stone Co. v. Holbrook, 168 Ky. 128, 181 S. W. 953, L. R. A. 1916D, 311; Smith v. St. Louis & S. F. R. Co., 96 Ark. 647, 132 S. W. 926; Van Eman v. Fidelity & Casualty Co., 201 Pa. 537,51 A. 177; Pensacola, etc., R. R. Co. v. Anderson, 26 Fla. 425, 8 So. 127. The second question raised is as to the refusal of two instructions requested on. behalf of appellant in the trial below. An examination of these instructions leads us to the conclusion that they were properly refused, but, if they were not properly refused, the oral charge of the trial judge substantially covered the points raised in the instructions as far as they correctly stated the law. The charge of the trial judge was at 'least very fair to the appellant, and, if anything, went too far in his favor. Under these circumstances, it has been repeatedly held by this court that there is no reversible error. . Chesapeake & Ohio Ry. Co. v. Coffey (C. C. A.) 37 F.(2d) 320, and cases there cited. There wás no prejudicial error; there was ample evidence to sustain the verdict of the jury; and the judgment of the court below is accordingly affirmed.

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UNITED STATES v. RANES. No. 6332. Circuit Court of Appeals, Ninth Circuit. March 30, 1931. George J. Hatfield, U. S. Atty., and Hubert Wyckoff, Jr., Asst. U. S. Atty., both of San Francisco, Cal. Frederic C. Benner and Alvin Gerlack, both of San Francisco, Cal., for appellee. Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges. Rehearing denied May 11, 1931. RUDKIN, Circuit Judge. This was an action on a converted policy of war-risk insurance in the sum of $7,000. After defining total and permanent disability, paragraph 11 of the Conditions, Benefits, and Privileges attached to the policy provides: “The total permanent disability benefits may relate back to a date not exceeding six months prior to receipt of due proof of such total permanent disability, and any premiums paid after receipt of due proof of total permanent disability, and within the six months, shall be refunded without interest.” The complaint contained no direct averment that due proof of total and permanent disability had been furnished to the Director of the United States Veterans’ Bureau, but did aver: “That plaintiff, on January 22,1929; made application to the defendant, through its Veterans’ Bureau and the Director thereof, for the payment of said insurance for total and permanent disability and said Veterans’ Bureau, and the Director thereof have refused to pay plaintiff said insurance, and on April 26, 1929, disputed plaintiff’s claim to said insurance and disagreed with him concerning Ms rights to the same.” This allegation of the complaint was admitted by the answer. Under such circumstances, and in the absence of a timely objection to the complaint, the above should be deemed a sufficient averment of the presentation of due proof of total and permanent disability as of the date alleged. Upon the trial, the jury returned a verdict in favor of the plaintiff, fixing the date of total and permanent disability as of October 1, 1928. Upon tMs verdict a judgment was entered for the sum of $644, representing accrued monthly installments at the rate of $40.25 per month, beginning October 1, 1928. From the judgment thus entered, the government has appealed. The assignments of error challenge the sufficiency of the testimony to establish total and permanent disability, and the right or power of the court to give judgment for installments accruing more than six months prior to the date of the verdict. On the question of total and permanent disability, the testimony tends to prove that the appellee has suffered for a number of years from a disease known’as psoriasis. A physician testified that this is a disease of the skin, of unknown origin; that it usually involves certain parts of the body, and is regarded as chronic; that it disappears at times, but is subject to recurrence; that it is supposed by some to be due to blood parasites, and by others to be of nerve origin; that there are several cases on record where infection has been found; that he himself did not consider the malady contagious, .although it was so regarded by others; that the cure is more or less of an ephemeral nature; that in the majority of cases it can be cleared up in a month, but it sometimes takes six months or longer; that it is subject to recurrence, and there is no .assurance that it will not come back; that the longest time he has known a person to be free from it was seven years; and that it usually returns in two or three months. The appellee testified that the disease first appeared in the form of a scale, about May, 1922; that it spread from his face to his sealp; that at times his scalp is a solid crust; that now and then it spreads to all parts of his body; that his arms are practically covered with it; that at times it heals up for a short time only, but there has always been a few spots left. On the question of his ability to work, he testified that he has been unable to perform manual labor for a number of years last past; that he attended school and took a business course in vocational training; that in 1926 he was employed in a bakery in a clerical capacity; that after two weeks of work he was discharged because the drivers objected to coming in contact with him; that he then took a civil service examination, and .was employed in the post office in 1926 for a period of 1,-175 hours, and for about three days during the holidays in December of that year; that from October, 1927, to October, 1928, he was employed in the same capacity for 1,125 hours; that he was then discharged because his physical appearance was objectionable to other employees of the department; that since that time he has sought employment and has applied to numerous agencies to obtain employment, but has been unable to do so because of his appearance, and because others refuse to work or come in contact with him. The testimony of the .appellee as to his physical appearance, his efforts to obtain employment, and his inability to do so is fully corroborated by other testimony. The case thus presented is in some of its aspects a peculiar one. The appellee is physically able to follow a substantially gainful occupation continuously, but is unable to obtain employment, through no fault of his own, because others are unwilling to associate or come in contact with him. The question of disability is a practical one, and upon the facts above outlined we think a finding of total and permanent disability was warranted. Thus, in Wood v. United States (D. C.) 28 F.(2d) 771, 772, the insured was subject to epileptic seizures. The court found that he was a young man of excellent physique and much more than ordinary intelligence; that in the intervals between his seizures he was quite able to pursue successfully any number of substantially gainful occupations; that there was no evidence of any mental or physical deterioration; that probably 90 per cent, of the time, or more, he was a normal, healthy young man; that his seizures came without warning and with no regularity, and with such frequency that as a matter of fact he could not find a job, or could not hold it if he found one. In reference to such a situation, the court said : “The government urges that Wood is physically and mentally able to hold a position a very large percentage of the time, and that there is no real reason why employers should not employ him. At the same time, it is all too clear that employers will not in fact employ him. It may be superstition, it may be prejudice, it may be illogical, but the truth still remains that other men won’t work with one who is apt to any time go off into an epileptic convulsion. So we are confronted with .this situation: An insured, physically and mentally able to hold a job, cannot, because of his epilepsy, find, or ever hope to find, employment. Is there liability? * * * “I am of the belief that when, by reason of physical or mental disability, the insured is compelled to drop out of the ranks of the workers of the world, and stand by the side of the road and watch the world go by, there is liability under the policy. The insured may not be fastidious as to his employment; if, as a matter of fact, he is able to do any honorable work, he is not disabled. But neither is he chargeable with circumstances over which he has no control; and, if employers will not employ epileptics, the soldier is confronted with a condition and not a theory, and he is totally disabled.” The appellant further contends that ultimate cure is reasonably certain, but this is problematic, to say the least. The probabilities'would seem to be tbe other way; but, in any event, the poliey itself provides for such .a contingency, because the insured may be called upon at any time to furnish proof satisfactory to' the Director of the United States Veterans’ Bureau of the continuance of his total permanent disability, and, if he fails to- furnish such proof, all payments of monthly installments on account of total permanent disability shall cease, -and all premiums thereafter falling due shall be payable in conformity with the policy. The appellant also contends that the complaint -failed to allege, and the proof failed to show, the receipt of due proof of total permanent disability by the Veterans’ Bureau, from which it is argued that due proof Whs not made or furnished until the date of the trial, and that a judgment awarding benefits relating back to a date exceeding six months prior to the date of the verdict is erroneous. If it were a fact, as claimed by the government, that there was neither allegation nor proof of the receipt of due proof of total1 permanent disability, the defect would not1 Only "affect the amount of recovery, but the jurisdiction of the court would be entirely defeated, because the receipt of due proof of total permanent disability and a denial of the elaim for insurance benefits by the Veterans’ Bureau, or a disagreement in relation-thereto, is a prerequisite to the exercise of jurisdiction by the courts. Manke v. United States (C. C. A.) 38 F.(2d) 624; Bernsten v. United States (C. C. A.) 41 F.(2d) 663; United States v. Burleyson (C. C. A.) 44 F. (2d) 502. For the like reason, the denial of liability by the government can have no such effect as is claimed for it by the appellee. As. already stated, the poliey expressly limits back payments to a date not exceeding six months from the receipt of due proof of total permanent disability, and we entertertain no doubt that this limitation is binding on both the Bureau and the courts. Were it not for a concession made by the government, it'is not at all clear to us that the courts can give judgment for installments antedating the receipt of the due proof specified in the poliey. The policy provides that payments may relate back to a date not exceeding six months prior to receipt of due proof; and the word “may” is usually permissive, not mandatory. This is especially true where, as here, it is followed in the same sentence by the word “shall.” And, if the allowance of back installments is discretionary with the Bureau, as it seems to be, it is questionable, at least, whether that discretion may be exercised by the court or jury. -But, in view of the concession made by the government, we will not pursue the inquiry further. For reasons heretofore stated, we are of opinion that the complaint contained a sufficient allegation of the presentation and receipt of due proof of total and permanent disability on January 22, 1929, and that allegation was .admitted by the answer. Judgment was given for back installments to October 1, 1928, that is, for a period of less than six months prior to the receipt of the due proof. In other words, the six-month period runs from the date of the receipt of due proof, and not from the date of the verdict as claimed. The judgment is therefore affirmed.

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UNITED STATES v. WHITE. No. 6298. Circuit Court of Appeals, Ninth Circuit. March 30, 1931. Geo. J. Hatfield, U. S. Atty., and Hubert Wyckoff, Jr., and H. A. Van Der Zee, Asst. U. S. Attys., all of San Francisco, Cal. Alvin Gerlack, of San Francisco, Cal., for appellee. Before RUDKIN, WILBUR and SAWTELLE, Circuit Judges. RUDKIN, Circuit Judge. The complaint in this case contained an allegation similar to the allegation found in the complaint in United States v. Ranes (C. C. A.) 48 F.(2d) 582, decided this day, alleging that on February 23, 1929, application was made to the Veterans’ Bureau for the payment of insurance benefits on account of total permanent disability. This allegation was denied by tbe answer, and no evidence was offered at the trial tending to prove the date upon which proof of total permanent disability was received or furnished, if at all. A letter from the Veterans’ Bureau, under date of June 19, 1929, disallowing the claim for insurance benefits, was received in evidence, in which it was stated that the letter was evidence that a disagreement existed under the provisions of the World War Veterans’ Act, but no reference was made to the date upon which the proof was received. The action was tried by the court without a jury. The court found that the plaintiff has been totally and permanently disabled since September 1, 1927, and gave judgment for all insurance benefits accruing since that date. It will thus be seen that the court awarded judgment for installments accruing for about eighteen months prior to the receipt of proof of disability. For the reasons stated in the Ranes Case, supra, this was error, for which the judgment must be reversed. The judgment is therefore reversed and the case is remanded, with instructions to take further testimony as to the date of receipt "of due proof of total permanent disability, and to enter judgment in favor of the plaintiff for installments accruing not exceeding six months prior to that date.

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FIRST NAT. BANK OF FORSYTH, MONT., et al. v. FIDELITY & DEPOSIT CO. OF MARYLAND. No. 6316. Circuit Court of Appeals, Ninth Circuit. March 23, 1931. Sterling M. Wood and Robert E. Cookfe, both of Billings, Mont., for appellants. Thomas A. Mapes, of Denver, Colo., and Thomas E. Davis, of San Francisco, Cal., fo^ appellee. . , , Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges. ...... Rehearing denied May 11, 1931. RUDKIN, Circuit Judge. G. G. Davis was county treasurer of (Rofefebud county, Montana, from the first Monday of March, 1923, until the first Monday of March, 1925. March 7, 1923, the board of county commissioners of the county made an order designating certain banks as depositories of county moneys and approving thfe bonds of the banks so designated; We are here only concerned with the First National Bank of Forsyth, Montana. That'bank was designated as one of the depositories’and’its bond in the sum of $100,000 Was áp'provédi The order approving the bond hu'thorize'd Dhvis, as county treasurer, to deposit county moneys in the Forsyth Bank to an amount not exceeding the amount or penalty of the bond as approved. The bond was executed pursuant to the requirements of section 4767 of the Revised Codes of Montana 1921, as amended by chapter 89, Laws of Montana, 1923, which provides that it shall be the duty of the county treasurer to deposit all public 'moneys in his possession and under his control in a bank or banks to be designated by the board of county commissioners, and no other. The section further provides that the treasurer shall take from the bank such security as the board of county commissioners may prescribe, approve, and deem fully sufficient and necessary to insure the safety and prompt payment of all such deposits on de- • mand, together with the interest thereon. October 3, 1923, a second order was made approving certain other depository bonds, including a bond of the Forsyth Bank in the sum of $100,000. This bond apparently superseded the former. At least, there is no claim that the security at any time exceeded the amount or penalty of either bond. The latter order was silent as to any limit on the amount of deposits that might be made in any of the several depositories named. December 13,1923, the Forsyth Bank became insolvent and closed its door. On that date the balance due on the account of the county treasurer, as disclosed by the bank ledger, was $100,369.98. There was an additional amount of $18,290.66, represented' by two checks issued to the county by the cashier of the bank on December 3 and December 7, 1923, for county funds deposited with the bank on these dates. Subsequent to the closing of its doors, the bank became further liable to the county upon a draft, for protest fees, a returned cheek, and for interest on deposits, in amounts aggregating approximately $4,700. After the failure of the bank, the county brought an action against the Fidelity & Deposit Company of Maryland, as surety on the official bond of the county treasurer, to recover certain sums of money, including the sum or sums in excess of the amount authorized to be deposited by the county treasurer in the Forsyth Bank, and for.other .purposes. This suit was later compromised by the payment of the sum of $20,-734.75, and upon such payment the county assigned to the surety all its right, title, and interest in and to its claim against the Forsyth Bank. December 18, 1923, a receiver was appointed for the bank, and when the receiver took charge there came into his possession and custody $5,393.82 in cash, representing the actual cash on hand in the bank at that time. There was also on deposit in three corresponding banks further sums aggregating $6,030.05. The present suit was instituted by the surety against the receiver to recover as a preferred claim the amount 'paid on the settlement .above referred to, less the amount of certain dividends received. The court below entered a decree in favor of the plaintiff for the sum of $11,381.66, made up of the following items: First, $5,351.61, the smallest amount of cash and cash items in the bank between the time of the unlawful deposits and the close of the bank; and, second, $6,030.05, the amount on deposit in the three corresponding banks, to which was added interest at the rate of 8 per cent. per. annum from March 1, 1923. From this decree the defendant has appealed. The foregoing summary covers the facts stipulated by the parties, so far as deemed material. On these facts the appellant contends that there was no trust ex maleficio as against the bank; that the deposit of county funds did not augment the assets of the bank; that the deposits have not been traced to the funds that came into the hands of the receiver; and that the .allowance of interest was contrary to law. In American Surety Co. v. Jackson, 24 F. (2d) 768, 769, this court said: “If the city funds were lawfully deposited in the. depository bank, the relation of debtor and creditor existed between the city and the bank, and it is well settled that neither the -city nor those claiming under it can under such circumstances claim any preference over general creditors. On the other hand, if the deposits were made by the city treasurer in violation of the laws of the state, it is equally well settled that the bank became a trustee, and that the city, or those claiming under it, may, recover from the receiver the amount of thp trust fund, if less than the amount of cash coming into his hands at the inception of the receivership, unless it is made to appear that some portion of the trust fund had theretofore been paid ‘out or dissipated by the bank. Spokane County v. First Nat. Bank (C. C. A.) 68 F. 979; Merchants’ Nat. Bank v. School District No. 8 (C. C. A.) 94 F. 705; Smith v. Mottley (C. C. A.) 150 F. 266; Board of Com’rs v. Strawn (C. C. A.) 157 F. 49, 15 L. R. A. (N. S.) 1100; In re J. M. Acheson Co. (C. C. A.) 170 F. 427; Titlow v. McCormick (C. C. A.) 236 F. 209. We do not understand that this rule is controverted.” The appellant contends that there was no trust ex maleficio because the deposits made by the county treasurer in excess of the amount of penalty of the bond approved by the board of county commissioners were, not in violation of law, citing City of Missoula v. Dick, 76 Mont. 502, 248 P. 193, 195, and Missoula County v. Lochrie, 83 Mont. 308, 271 P. 710. In the City of Missoula Case it was held that deposits by a city treasurer in excess of the amount or penalty of the bond approved by the city council were not in violation of law, and constituted a general deposit from which no trust could arise or be implied. But the court significantly added: “As the matter of the amount of security was left to the discretion of the council, it was its duty, if it deemed the bond on file insufficient to protect the full amount of the deposits, to prescribe what further bond should be furnished and to so notify the treasurer, or it might with propriety have directed the treasurer, at the time it prescribed the bond for the period mentioned, not to deposit to exceed .a certain amount until further security was prescribed and approved; it did neither, and therefore, as the bond prescribed was in effect and covered all deposits made the law was complied with and the - deposits made became merely general deposits.” Here, there was an express direction from the board of county commissioners to the county treasurer not to make deposits during his term of office in excess of the amount or penalty of the bonds approved by the board, and this explicit direction was wholly disregarded. The act of the county treasurer in making the excess deposits, and the act of the bank in receiving them were therefore clearly wrongful and in violation of law. The contention that the deposits wrongfully made did not augment or increase the assets of the bank is apparently based on the fact that the stipulation used the term county funds instead of public moneys, as employed in the statute relating to deposits of public moneys. This contention is fully answered by the decision of this court in American Surety Co. v. Jackson, supra, where we said: °“But, in the absence of proof to the contrary, we must presume that the city treasurer obeyed the law and that he accepted and deposited nothing but cash, or the equivalent of cash.” The further contention, that the deposits have not been sufficiently traced, is fully answered by repeated decisions of this court which were followed by the court below, in so far as concerns the cash which actually came into the hands of the receiver upon his appointment. Thus, in Merchants’ Nat. Bank v. School Dist. No. 8, 94 F. 705, 708, this court said: “In the former case it was held that the depositor of a fund intrusted to a bank, by which it has been misapplied, is not entitled to' a general lien upon the assets of the bank for the repayment thereof, but that he can follow the same, so far as it can be traced in the possession of the bank, either in its original form or in forms to which it has been converted, or into a general fund, with which it has been commingled, and that his right to recover it in the latter instance will depend upon whether or not a sum of money still remains in the possession of the bank equal to the amount so due him; it being the presumption of the law that, if moneys has been disbursed out of such fund, it was the money which the bank had the right to pay out, and not the money which was intrusted to it in a fiduciary capacity.” This rule, however, would not include moneys on deposit in corresponding banks, because as to them there was no commingling of funds or property. The reason therefor is thus clearly stated by Judge Lurton in Board of Com’rs v. Strawn (C. G. A.) 157 P. 49, 52, 15 L. R. A. (N. S.) 1100: “But the.complainant assigns as error that the court did not extend this rule to the balances to the credit of the Galion Bank in banks with which it kept a deposit account. The balances to the credit of the Galion Bank in these hanks which have been received by the receiver aggregate something, over $6,000. The balances with these several banks was shifting from day to day during the currency of the tax deposit account. The credits given to the Galion Bank are shown to have sometimes come from collections, .sometimes from proceeds of rediscounts, and sometimes from moneys sent from the vaults of the Ga-lion Bank to these reserve or corresponding banks. On the other hand, the account was drawn against'when exchange was sold and for other purposes. The trust fund is not traced into any of the rediscounts or collections, which in part made up the credits in these banks. That the moneys remitted were' not out of the trust fund is to be presumed,; for the presumption upon whieh equity acts in respect of the character of the funds drawn out of the mingled mass of money in the bank’s vaults is that the bank drew out only its money, leaving in its vaults the money which it was obligated to retain and not use for any private purpose. The court below was right in holding that no part of the money deposited with the corresponding banks and which has come to the receiver’s possession has been identified.” The court below awarded interest at the legal rate from March 1, 1923, which according to the decree was the date of the filing of the bill of complaint. The date thus fixed is manifestly a clerical error, because March 1, 1923, antedated the deposits -complained of by several months and the actual date of the filing of the complaint by three years. The error in this regard should have been corrected by motion in the court below; but it w.as error to allow interest at all prior to the final decree. This court so held in Merchants’ Nat. Bank v. School Dist. No. 8, supra, and the ruling in that case is supported by the weight of authority. Butler v. Western German Bank (C. C. A.) 159 F. 116; Poisson v. Williams (D. C.) 15 F.(2d) 582; Smith Reduction Corporation v. Williams (D. C.) 15 F.(2d) 874. Such is the rule in the state of Montana. Guignon v. First Nat. Bank, 22 Mont. 140, 55 P. 1051, 1097. The decree of the court below is reversed, with instructions to enter a decree in favor of the plaintiff below for the sum of $5,351'.-61, with interest at the legal rate from the date of the former decree, and for costs in that court. The appellants will recover costs •in this court

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AMERICAN BANK & TRUST CO. v. HON. No. 4444. Circuit Court of Appeals, Seventh Circuit. March 28, 1931. Harry W. Lippincott, Charles S. Deneen, and Roy Massena, all of Chicago, Ill., for appellant. Louis J. Behan and William J. Corrigan, both of Chicago, Ill., for appellee. Before ALSCHULER, EVANS, and SPARKS, Circuit Judges. SPARKS, Circuit Judge. The State Commercial & Savings Bank and the Milwaukee-Western State Bank, hereinafter referred to respectively as savings bank and state bank, were Illinois banking corporations, and on June 5, 1928, the name.of the state bank was changed to American Bank & Trust Company. Appellee, on June 8,1922, filed suit in the District Court against the savings bank, which resulted in a judgment by that court, on February 1,1928, against the savings bank for $8,200. Execution was issued on that judgment, and was returned not satisfied in any part. In 1924, during the pendency of that action, proceedings were instituted in the circuit court of Cook county on relation of the auditor of public accounts of the state of Illinois against the savings bank, and a receiver was therein appointed who took possession of the property of the bank. On December 15, 1924, the state bank submitted to the receiver a proposal to purchase the assets and property of the savings bank, and as a consideration therefor it agreed to assume and to pay all liabilities of the savings bank, and to pay all costs of administration, receiver’s fees and expenses, and attorneys’ fees. By order of the court, of December 15,1924, the receiver was authorized to accept such proposal and to comply with its term's, and thereupon an order was entered dissolving the savings bank. On January 6, 1925, the receiver reported to the court that he had complied with the proposal by assigning and delivering to the state bank all tbe property and assets of the savings bank .except $32,600, which he retained as fees and expenses of the receiver and his attorneys. He further reported that the state bank had assumed the liabilities and obligations of the savings bank, and that, because of such assumption of liability, he did not give notice to the creditors of the savings bank to present their claims against it. The court thereupon approved and confirmed the transaction in all respects. The instant bill alleges that appellee’s judgment is a liability assumed by the state bank, and that, because of the transfer of the assets to the state bank, appellee is unable to collect his judgment by legal process; that the savings bank has no assets subject to execution, by reason of which appellee has no adequate remedy at law. The prayer is that the American Bank & Trust Company, which is the present name of the state bank, b§ directed to pay appellee’s judgment, with interest, costs, and attorneys’ fees, and, failing to do so, that execution issue therefor. Appellant filed its motion to dismiss the bill for the reason that appellee has an adequate remedy at law, and for the further reason that the judgment is void and unenforceable. This motion was overruled, and thereupon appellant filed its answer, in which it admitted the proceedings in the circuit court of Cook county against the savings bank, but alleged (1) that the liabilities of that bank which were assumed by the state bank, exclusive of appellee’s claims, exceeded the value of the assets received by more than $58,-000, which appellant has paid; (2) that no claim of appellee was included in the statement of liabilities furnished to the state bank by the receiver; (3) that neither the state bank nor appellant has possession of any assets of the savings bank; (4) that the proceedings in the circuit court of Cook county were prosecuted in strict conformity with the Illinois statutes with relation to notice to creditors; (5) that appellee’s judgment is void for the reason that it was entered after the savings bank had been dissolved by the decree of the circuit court of Cook county. The District Court rendered judgment for appellee, directing appellant to pay appellee’s judgment, with interest and costs, within twenty days, that execution issue, and that jurisdiction' be reserved for the purpose of enforcing the decree by such proceedings as may be deemed proper; and it is from this decree that the present appeal is prosecuted. It is contended by appellant that appellee’s judgment against the savings bank, having been recovered after that bank had been dissolved by order of the Cook county circuit court, is void; and cannot form the basis of the instant action. In passing upon this controversy, this coúrt will be governed by the laws and declared public policy of Illinois in so far as they aré not inconsistent with the basic law of the United States. New York Life Ins. Co. v. Cravens, 178 U. S. 389, 20 S. Ct. 962, 965, 44 L. Ed. 1116; McClain v. Provident Sav. Life Assurance Soc. (C. C. A.) 110 F. 80, 91; Bucher v. Cheshire Railroad Co., 125 U. S. 555, 8 S. Ct. 974, 31 L. Ed. 795; Blackwell v. Southern Pac. Co. (C. C.) 184 F. 489, 495. In the case of New York Life Ins. Co. v. Cravens, supra, the pourt, referring to the meaning, which-the Supreme Court of Missouri had given to a statute of Missouri, said: .“Our review.is only invoked of that part of the opinion whieh decides that the Missouri statute is the law of the policy, and which annuls the provisions of the policy whieh contravene the statute. And even of this part our inquiry is limited. If we are bound by the interpretation of the statute we need not review the reasoning by whieh that interpretation was reached. And we think we are bound by it. * * * The interests of the state must be deemed to be expressed in its laws. The public policy of the state must be deemed tó be authoritatively declared by its courts. Their evidence we cannot oppose by speculations or views of our own. * * * Against them no intention will be inferred or be permitted to be enforced.” In the case of McClain v. Provident Sav. Life Assurance Society, supra, the court said: “In extending the judicial power of the United States to controversies between citizens of different states, the only purpose indicated by the constitution was to provide another forum than that of the state, not another law than that of the state. In this case the court below was exercising a jurisdiction concurrent with that of the court of the state of Pennsylvania. It was administering the law of that state, and was as much bound by its statute and common law, and its declared public policies, as would be the state courts in a like case.” In the ease of Blackwell v. Southern Pac. Co., supra, the court said: “ * * * the matter for decision involving no federal question, the ease being here merely by reason of diversity .of citizenship, this court will adopt the declared policy of the state in which it sits, as found either in its statutes or the decisions of its highest tribunal.” The decree, by/virtue of which appellant claims that the savings bank, was completely dissolved, pro.vides, among other things: “Third: That upon the filing with this court of a report by said Receiver setting forth the execution. oL such deeds and the making of .such.'transfer, conveyance and assignment by either said Bank and its officers or directors or said Master in Chancery, as the ease may be, said State Commercial and-Savings Bank be dissolved and all of its corporate rights, privileges, and franchises ■ declared forfeited! and terminated, and all of its powers extinguished and terminated forever.” “Fifth: That * • .* the Receiver heretofore appointed * * * be, and he is hereby, authorized and directed * * * to institute and prosecute in his own náme as such Receiver, or otherwise, all such suits and proceedings of every kind and nature, * * * as he may deem necessary, proper or advisable for the collection of moneys now due or whieh may hereafter become due said State Commercial and Savings Bank * * * and that * * * he be further authorized to defend all such suits-as may have heretofore been or as may hereafter be brought against said State Commercial and Savings Bank or against himself as such Receiver.” It is not denied that the receiver made report to the court as contemplated in the third section, as above quoted. In the case of Life Association v. Fassett, 102 Ill. 315, the court said: “if is not denied, or even questioned, that by the common law a corporation which has been dissolved absolutely, for all purposes whatsoever, stands upon the same footing as a dead person with respect to any power in the courts to enter a valid judgment against it. In the absence of any statutory-provisions, on the subject, the manifest logic and reason of the thing is the same in both cases.” The court, however, in the same opinion, used the following language: “In addition to the.reasons already given why we hold the company to be still existing for the purposes of enforcing the claim of defendant in error, it may be further stated, that although the decree of the St. Louis circuit, court, in terms, declares the corporation dissolved, yet by other portions of the decree, for the purpose of winding up the business of' the company, paying its debts, etc., suits are authorized to be brought and defended in the name of the corporation, and it is also authorized, for the same purpose, to make, in its corporate name, all necessary conveyances of its'property and effects. It is thus clear, when all the provisions of the decree are considered together,' as they should be, the corporation is not absolutely extinguished for all purposes, but, on the contrary, is expressly kept alive, so far as its existence may be necessary, to collect and apply- its assets to the payment of its debts (Ramsey v. Peoria Marine & Fire Ins. Co., 55 Ill. 311), and therefore it eannot with propriety be said to be civilly, dead, to the extent of abating suits pending against it in a foreign State.” In the ease of Commercial Loan & Trust Co. v. Mallers, 242 Ill. 50, 89 N. E. 661, 662, 134 Am. St. Rep. 306, 17 Ann. Cas. 224, the trust company recovered a judgment against Mailers prior to December 2,1898, on which last-named date the trust company went into voluntary liquidation. On January 6, 1909, an execution was issued to enforce the collection of the judgment, and levy was made. Mailers thereupon moved to quash the execution on the ground that the trust company had gone into liquidation prior to the issuing of the execution, and by reason of that fact the trust company was without legal capacity to sue out the execution. The court said: “It was held in Life Association of America v. Bassett, supra, that it is a part of the settled publie policy of this state that- upon the dissolution of a corporation, no matter how the dissolution may be effected, the corporation shall nevertheless be regarded as still existing for the purpose of settling up its affairs. In this case the suit was commenced while the defendant in error was a going corporation, and we see no reason why it should not be permitted to prosecute its suit to final judgment for the purpose of collecting its assets and settling up its affairs, even though it went into voluntary liquidation pending the litigation. * * * We can see no reason why a banking corporation should not be held to fall within the general public poliey of the state which permits a corporation to do such acts as may be necessary to collect its debts and settle up its affairs after dissolution.” It seems quite clear under the Illinois decisions that a publie poliey has been adopted for this state in relation to the controversy before us which is at variance with appellant’s contention, and that the rights of the claimant and the corporation in such cases are reciprocal'. It is contended, however, by appellant, that the Illinois decisions on this subject are based upon a provision of the general incorporation laws which are not applicable to banks, and that there is no such provision in the Illinois laws relating to the incorporation of banks, and for this reason it says the decisions are erroneous and not binding. This contention cannot be sustained, for, under the rule laid down in New York Life Insurance Co. v. Cravens, supra, we are bound by the interpretation of the statutes and publie policies of Illinois as laid down by its Supreme Court, regardless of whether we think them right or wrong, in cases such as the instant one, where there are no federal questions presented. It is further contended by appellant that in the proceedings to dissolve the savings bank it will be presumed that the auditor of publie accounts did his duty, under paragraph 11, c. 16a (Cahill’s Rev. St. Ill. 1929), relating to giving notice to claimants to present their claims to the receiver; and, inasmuch as appellee failed to present his claim to the receiver, he is precluded from enforcing it against appellant. It will be observed .that the section referred to does not require the auditor of publie accounts to give the notice, but it provides that he shall cause the notice to be given. In the proceeding for the appointment of the receiver and the dissolution of the savings bank, he was the relator, and in the decree the court specifically orders the receiver to give the notice as required by the section referred to. 'If the auditor requested this order for notice to the creditors to be placed in the decree, and if the receiver had given such notice, then the auditor would be considered as having .complied with the statute in so far as notice to the creditors is concerned. It is quite apparent that some one suggested this order to the court, and we know of no one more likely to do so than the auditor in his capacity of relator, as the duty of causing notice to be given was enjoined upon him, if he had not already done it. The suit apparently was not contested, and it is quite evident that the complainant was the moving spirit, as the decree bears the “O. K.” of all the defendants and of the receiver. The relator certainly knew the contents of the decree, and if he had already given the notice to creditors there was no necessity of having the notice duplicated. Neither he nor the court will be presumed to have done a useless thing, especially when it would have added considerable unnecessary expense to the estate. To have done so would have been a clear violation of the auditor’s duty. It is admitted that the receiver gave no notice, and under the circumstances we think the trial court was right in concluding that the statute in that respect had not been complied with. It is further contended by appellant that the decree is erroneous in holding that the purchase of the assets of the savings bank from the receiver by appellant’s predecessor amounted to fraud in law as against appellee. It is evident that appellant misconstrues the court’s finding, for it said the fraud upon appellee consisted “in receiving the property and assets of State Commercial & Savings Bank in the manner in which the same were received and transferred, 'as hereinbefore found, and by failing to pay the amount due to the complainant.” The gist of the fraud as considered by the trial court was appellant’s failure to comply with its agreement after its purchase of the property at judicial sale. It cannot be considered as a collateral attack upon the sale itself, but it is an effort to enforce the terms of the sale. In other words, appellant has failed to- pay the consideration for that which it received at judicial sale, and the fact that it received assets less in value by some $58,000 than the liabilities assumed cannot relieve it from its promise to pay. The sustaining of appellee’s contention in this respect will not, as suggested by appellant, warrant every debtor who has executed a promissory note and fails to pay it being subjected to a suit in equity for fraud. Such a statement of facts does not fairly describe appellee’s situation. It is insisted by appellant that the decree is merely a personal judgment against it, and is not justified by the pleadings and evidence, and that appellee should not have been permitted to proceed in both law and equity, as his remedy was at law. The trial court answered this objection correctly in the following language, which we adopt: “That the assets of a dissolved corporation will be protected in equity as a trust fund for creditors and stockholders, and that persons receiving them with notice of their character take, them subject to such trust and to the decrees of a court of equity with respect thereto, is well recognized. Ruling Case Law, vol. 7, p. 740; Wheeler v. Pullman Iron and Steel Co., 143 Ill. 197, 32 N. E. 420, 17 L. R. A. 818; Curran v. State of Arkansas, 15 How. 304, 14 L. Ed. 705; Clokey, Adm’x, v. International, etc., Co., 28 Misc. Rep. 326, 59 N. Y. S. 878. Chapter 22, § 49, of Illinois Revised Statutes, is sufficiently broad in its terms to confer upon courts of equity this well-recognized jurisdiction. * * * “It is urged that, inasmuch as defendant, in consideration of the conveyance of the bank’s assets to it, promised to pay the debts of the bank, plaintiff, as a creditor of the latter, may sue at law; that such remedy is adequate, and that therefore a court of equity is without jurisdiction. Granted that such right exists upon the theory that a third person may sue upon a contract made .for his benefit, it does not follow that the demonstrated right in equity to reach the trust funds is thereby defeated. One may have a right to sue at law a solvent mortgage debtor, but that right does not prevent' him' from also seeking to reach the property héld in trust ■* * * to secure his debt.” ■; Erom the facts surrounding this-case we cannot say that the court erred in' retaining jurisdiction for the purpose of enforcing, if necessary and proper, its order and decree. The decree of the District Court is affirmed.

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TAYLOR et al. v. AMERICAN LIABILITY CO. No. 5685. Circuit Court of Appeals, Sixth Circuit. April 10, 1931. J. Smith Hays and D. L. Pendleton, both of Winchester, Ky. (M. C. Redwine, V. W. Bush, and H. T. Lisle, all of Winchester, Ky., on the brief), for'appellants. B. R. Jouett, of Winchester, Ky. (John T. Metcalf and Jouett & Metcalf, all of Winchester, Ky., on the brief), for appellee. Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges. HICKENLOOPER, Circuit Judge. This was originally an action by the insurer to cancel a policy of automobile liability insurance because of misrepresentations material to the risk in the schedule of warranties. The defendant filed his answer and by counterclaim also sought judgment for a policy loss which he is alleged to have suffered. When the ease was called for trial, the two issues, at law and in equity, were submitted together, a jury being waived by stipulation as to the issue at law, i. e., the counterclaim. The “Decree” held that the complainant was entitled to cancellation, which was granted, and further held that the defendants “are not entitled to recover anything from this complainant upon their Answer and Counterclaim * * * presented in this action." Since the latter holding must necessarily follow as a result of or concomitant to the first, we treat the appeal as one in equity, and the only question raised as that of a right in the insurer to cancellation. The schedule of warranties, being part 6 of the policy, contained the following: “8. During the past three years * * * no accident has been caused by an automobile owned or driven by Assured; nor any claim made against Assured as the result of an automobile accident except — No exceptions;” and “9. During, the past three years no company has refused to issue Automobile Insurance to the Assured, nor cancelled any insurance after issued, except — No exceptions.” It is not disputed that these representations were material to the risk and that the answers were false. The defense is that the soliciting agent made no inquiries whatever with reference to this subject-matter, but himself inserted the .answers knowing them to be false, and that the insured did not read the policy nor know of the representations which he was apparently charged with making. This defense cannot prevail. The ease is, we think, controlled by our decisions in Columbian Nat. Life Ins. Co. v. Harrison (C. C. A.) 12 F.(2d) 986, and Maryland Casualty Co. v. Eddy (C. C. A.) 239 F. 477. The policyholder is held strictly to knowledge of the contents of his policy (New York Life Ins. Co. v. Fletcher, 117 U. S. 519, 534, 6 S. Ct. 837, 29 L. Ed. 934; Lumber Underwriters v. Rife, 237 U. S. 605, 609, 35 S. Ct. 717, 59 L. Ed. 1140; Wyss-Thalman v. Maryland Casualty Co., 193 F. 55 [C. C. Pa.]; Conner v. Manchester Assur. Co., [C. C. A. 9] 130 F. 743, 70 L. R. A. 106; Louis P. Hyman & Co. v. U. S. Cast Iron P. & F. Co., 225 Ky. 510, 9 S.W.(2d) 226; Metropolitan Life Ins. Co. v. Freedman, Exec., 159 Mich. 114, 123 N. W. 547, 32 L. R. A. (N. S.) 298; the eases already cited from this circuit, and many others), and retention of it constitutes an adoption of the application and of the representations upon which such policy was issued. Nor is knowledge of the soliciting agent of the falsity of the answers to be imputed to the principal. By so falsifying the application or schedule of warranties, if such was the fact, the agent would make himself a party to a fraud upon the company, and his knowledge is not then to be imputed to the principal, although under the statutes of some states, not applicable here, the defense may not be available to the insurer. See New York Life Ins. Co. v. Goerlich, 11 F. (2d) 838 (C. C. A. 6); Mutual Life Ins. Co. v. Hilton-Green, 241 U. S. 613, 36 S. Ct. 676, 60 L. Ed. 1202; and compare: Thomson-Houston Elec. Co. v. Capitol Elec. Co., 65 F. 341 (C. C. A. 6), and Kean v. National City Bank, 294 F. 214, 219, et seq. (C. C. A. 6). Affirmed.

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UNITED STATES v. JUN. No. 337. Circuit Court of Appeals, Tenth Circuit. March 10, 1931. William Earl Wiles, Asst. U. S. Atty., of Oklahoma City, Okl. (Roy St. Lewis, U. S. Atty., of Oklahoma City, Okl., on the brief), for the United States. E. E. Blake .and Mr. J. S. Estes, both of Oklahoma City, Okl., for appellee. Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges. McDERMOTT, Circuit Judge. The government brought this action at law to recover $4,184.27. There are six causes of action in the petition, the plaintiff seeking judgment (1) for $500 for possessing an unregistered still; (2) for $500 for setting up a still without first obtaining a permit therefor; (3) for $1,000 for engaging in the business of .a distiller without giving notice thereof; (4) “under Section 35 of the National Prohibition Act,” for $1,000 for illegally and unlawfully manufacturing intoxicating liquor; (5) for $1,166.67 for carrying on the business of a distiller in the state of Oklahoma contrary to the laws of that state; and (6) “under Section 600 of the Eevenue Act of 1918, ,as amended by the Eevenue Act of 1926,” for $17.60 for the manufacture of 2.75 gallons of distilled spirits. In answer, the defendant pleaded that the acts complained of were violations of the National Prohibition Act, and that he had been convicted for such acts, and that such conviction w,as a bar to the prosecution of this action under section 5 of the Willis-Campbell Act (27 USCA § 3). The government moved for judgment notwithstanding the answer; this motion was denied; the government declined to plead over; and the trial court entered judgment on all counts in favor of the defendant. The government concedes that recovery on the first, second, third, and fifth causes of action is barred by the Willis-Campbell Act. This leaves for consideration the fourth and sixth causes of action. The fourth cause of action is based on title 2, section 35, of the National Prohibition Act (27 USCA § 52), which imposes “a tax * * * in double the amount now provided by law, with an additional penalty of * * * $i,000 on manufacturers.” The sixth cause of action is based upon section 600(a) of the Internal Eevenue Act of February 24, 1919, as amended by the Act of February 26, 1926 (26 USCA § 245). This section imposes a tax of $1.65 a gallon on liquors manufactured between January 1, 1927, and January 1, 1928, which is the period involved in this case; the same section provides that there shall be a tax of $6.40 a gallon imposed on such liquor if it is diverted to beverage purposes. The recovery sought on the sixth cause of action is for $6.40 a gallon. It thus appears that the government seeks to recover a penalty under both the ■fourth .and sixth causes of action. The sum sought to be. recovered under the fourth cause of action is a specific penalty. The sum sought to be recovered under the sixth cause of action is a penalty in part, $1.65 a gallon being tax, and the balance in fact being a penalty, .although described as a tax. Waterloo Distilling Corporation v. United States, 51 S. Ct. 282, 75 L. Ed.-. In United States v. La Franca, 51 S. Ct. 278, 280, 75 L. Ed.-, the Supreme Court of the United States ruled that, “if an exaction be clearly a penalty it cannot be converted into a tax by the simple expedient of calling it such.” It further ruled that a civil action .to recover penalties is a “prosecution” under section 5 of the Willis-Campbell Act, and is barred by a prior conviction for the same acts or offenses. That decision disposes of this case. The judgment is therefore affirmed.

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GAY v. NEW YORK LIFE INS. CO. No. 5811. Circuit Court of Appeals, Sixth Circuit. April 10, 1931. J. M. Benton and S. T. Davis, both of Winchester, Ky., for appellant. Wm. Marshall Bullitt, of Louisville, Ky. (Leo T. Wolford, John E. Tarrant, and Bruce & Bullitt, all of Louisville, Ky., on the brief), for appellee. Before MOORMAN, HICKS and HICKENLOOPER, Circuit Judges. PER CURIAM. Following the former appeal to this court in the instant case, New York Life Ins. Co. v. Gay, 36 F.(2d) 634, the plaintiff below, now appellant, amended his reply by denying that Gay, the insured, made any fraudulent misrepresentations or that he was guilty of fraudulent concealment, either at the time the application was made or at the time the policy was delivered. The evidence introduced at the second trial was substantially identical with that introduced at the first. The same arguments are now urged as were then made, to the effect that, by reason of advance payment of the first year’s premium, the policy was written as effective on the date of the application, that the court may not look to the application to see what disclosures were or were not made therein, the copy of such application attached to the policy being said to have been illegible under the statutory rule in Kentucky (sections 656 and 679, Kentucky Statutes), and, no other evidence being competent, it is claimed, to show false representations, that it was therefore impossible to establish the defense of either fraudulent concealment or fraudulent misrepresentation as of the time of making the application, and that, by making the policy effective as of the date of the application, the company assumed the risk of any changes in the condition of health of the insured between the date of the application and that of delivery of the policy. We see no good reason for departing from our decision upon the former appeal. There we found it unnecessary to determine whether the copy of the application was or was not legible, or whether that was a question of fact or of general law upon which we must be guided by our own judgment, or one of construction of local statutes in which we would follow the court of last resort of the state. It seemed to us sufficient that Gay had good reason to believe that he was suffering from cancer at the time of his application, even if he did not positively know this to be the fact, and that his fears were confirmed and made certain between that date and the delivery of the policy. Under these circumstances, to uphold the validity of the policy would operate as a distinct fraud upon the defendant company. We applied the doctrine of Stipcich v. Metropolitan Life Ins. Co., 277 U. S. 311, 48 S. Ct. 512, 72 L. Ed. 895. Our views in this respect are unchanged. On the authority of New York Life Ins. Co. v. Gay, supra, the judgment of the District Court is affirmed.

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UNION INDEMNITY CO. et al. v. FLORIDA BANK & TRUST CO. No. 945-M. District Court, S. D. Florida. March 17, 1931. Miller & McKay and James A. Dixon, all of Miami, Fla., for complainants Union Indemnity Co. and United States Fidelity & Guaranty Co. Hudson & Cason and Park H. Campbell, all of Miami, Fla., for complainant Hartford Accident & Indemnity Co. Gedney, Johnston & Lilienthal and Harry A. Johnston, all of West Palm Beach, Fla., for defendant Florida Bank & Trust Co. RITTER, District Judge. This cause comes on for final hearing upon an agreed statement of facts, and the court, having considered the same and heard argument of counsel, finds as follows: On 'March 20, 1926, the First American Bank & Trust Company, a state bank under the laws of Florida, was appointed by due order of this court as a depository of bankrupt funds of estates in the hands of receivers or trustees. In order to qualify such depository, First American Bank & Trust Company executed four certain bonds, to wit, $70,000* with Union Indemnity Company as surety, $35,000 with United States Fidelity & Guaranty Company as surety, and two bonds aggregating $19,000 with Hartford Accident & Indemnity Company as surety. Each of the said sureties have instituted separate actions in this court against the defendant, all of similar import, and a decision in this cause of the Union Indemnity Company shall be accepted as a decision in the other eases. On the 18th day of June, 1928, the First American Bank & Trust Company became insolvent and was taken over under the state banking law by the comptroller of the state of Florida ' designating W. H. Tunnicliffe as receiver, said appointment being under the proper proceedings and confirmation as provided by law. Said receiver has been succeeded by J. F. Cochrane, and later by Florida Bank & Trust Company as liquidator. At the time of such suspension of business there was on deposit in said First American Bank & Trust Company the funds of several bankrupt estates totaling $90,629.09, said deposits being in the name of the respective trustees or receivers of said bankrupt estates, and were subject to check as provided by acts of Congress relating to bankruptcy, as follows: The bills of complaint in the other cases, namely, United States Fidelity & Guaranty Company, No. 946-M Equity, and Hartford Accident & Indemnity Company, No. 947-M Equity, set out like deposits of different trustees or receivers of bankrupt estates. The respective trustees or receivers aforesaid filed claims with the said liquidator, asking that the funds on deposit in said bank be considered as debts due the United States and given preference on account thereof. The said liquidator has denied said claims as preferred. After such denial, the said trustees and receivers made demand upon the surety companies, and the surety companies paid to the United States the sums of money secured by their respective bonds and received an assignment of the claims of the said receivers and trustees, subject to an approval order of this court. The surety companies, after making such payments, again filed claims with the receiver as preferred creditors, and the preference was again denied. The suits are brought for the purpose of establishing these claims as preferred claims under sections 191 and.193, title 31, USCA. Conclusions of Law. 1. There is a controversy arising out of and based upon the laws and statutes of the United States. There are the requisite jurisdictional matters present in this case and the other two cases hereinbefore enumerated, and the court has jurisdiction of the subject-matter of this and the other such cases. 2. The question presented for decision is whether the claims of the complainant are debts due the United States under section 191 and 193, title 31, USCA. If they are, complainant is entitled to a judgment of preference. Section 191 provides: “Whenever any person indebted to the United States is insolvent ® * * the debts due to the United States shall be first satisfied.” Section 193 provides that where a surety on a bond, as presented in this case, pays the obligation, it shall have “the like priority for the recovery and receipt of the moneys out of the estate and effects of such insolvent or deceased principal as is secured to the United States; and may bring and maintain a suit upon the bond, in law or equity, in his own name, for the recovery of all moneys paid thereon.” Is this a debt due the United States? The possession of the trustee is the possession of the court. The trustee is only the agent of the court. Remington on Bankruptcy, § 2365. The money so deposited was in custodia legis. When it was deposited in the bank, there was created the relation of debtor and creditor, as exists between any ordinary depositor. The title to the money in the bank vested in the trustee who deposited it, and was in his possession, and under such conditions it»is considered as placed in the custody of the bankruptcy court. Property in custodia legis is so when it is shown that it has been and is subject to the official custody of a judicial executive officer. McFarland Carriage Co. v. Solanes (C. C.) 108 F. 532; In re Franklin Lumber Co. (D. C.) 147 F. 852. In re Bologh et al. (D. C.) 185 F. 825, 829, is a case with similar facts, but where the court was petitioned to take summary action for the return of the deposit. This the court declined to do, but said: “A receiver or other officer of the court who deposits money in a trust company, in my opinion, simply creates thereby the same relation of debtor and creditor as is created by any bank deposit. The debt may have a preference, but it i's nevertheless a debt, and I do not think that the bankruptcy court can, exercise the same summary authority over such a depositary that it can over a receiver.” In the instant ease, the parties are before the court in an action at law. The above ease is the only ease among the federal decisions which may be considered as paralleling' the case we are considering. In Gardner v. Chicago Title Company, 261 U. S. 456, 43 S. Ct. 424, 67 L. Ed. 741, 29 A. L. R. 622, the court says: “We assume that when money is deposited in a designated bank under § 61 of the Bankruptcy Law of July 1, 1898, c. 541, 30 Stat. 562 [11 USCA § 101], it is deposited as other money is, and becomes the property of the bank, leaving the bank a debtor for the amount.” I think the case of Bramwell v. U. S. F. & G. Co., 269 U. S. 483, 46 S. Ct. 176, 70 L. Ed. 368, is in point. It is true that the deposits considered in that case were of moneys arising out of the guardianship of Indians on the reservation, and the United States was charged with the care and distribution of the funds. Title was in the United States until the money was paid out. In the case at bar, title is in the bankruptcy court as a matter of fact, which is the United States in effect, until paid out by the officers of the court under court order and direction. In 208 Iowa, 1248, 224 N. W. 499, is considered the ease of Andrews, State Superintendent of Banking, v. Crawford County State Bank of Denison, Iowa, et al., decided April 2, 1929, in which that court holds that the Crawford County State Bank had been designated by the Federal District Court as a depository for the funds of bankrupt estates. The bank becoming insolvent, claims were made as are asserted in the instant case. The court disallows the claims as preferred claims because they are not debts due the United States within the meaning of the considered statute, refusing to follow Bramwell v. U. S. F. & G. Co., supra, but the reasoning of the court does not appeal to me as being correct. I cannot escape the conclusion, after considering the theory of administration of bankrupt estates, as provided by the acts of Congress, that it was the intention of Congress that the obligation of the depository for bankrupt estate funds should be construed as a debt due the United States so as to be entitled to a preference. The statute should be given a liberal construction, and protection should be afforded the United States as far as such construction will permit. I conclude that the deposits presented in this ease are debts due the United States, and so hold, and the complainant is entitled to have the same allowed as preferred claims. This same ruling will apply to case No. 946-M Equity and No. 947-M Equity, and judgment will be entered accordingly.

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THE DALZELLITE. THE W. F. DALZELL. THE FRED B. DALZELL, Jr. SUN OIL CO. v. DALZELL TOWING CO., Inc. District Court, S. D. New York. Nov. 25, 1930. Duncan So Mount, of New York City (Frank A. Bull and Charles R. Millett, both of New York City, of counsel), for libelant. Burlingham, Veeder, Fearey, Clark & Hupper, of New York City (Chauncey I. Clark and P. Fearson Shortridge, both of New York City, of counsel), for respondent. KNOX, District Judge. The trial of this suit developed the following state of facts: On May 15, 1925, the steamship Sabine Sun, laden with oil, was off Stapleton, Staten Island. She was desirous of delivering the cargo at the dock of Texas Oil Company, at Bergen Point, N. J. On the preceding day, Leopold A. Turnbull, assistant marine superintendent of Sun Oil Company, in the ordinary course of his duties, had telephoned to respondent, and requested that tugs be sent to the Sabine Sun to take her to Bergen Point. Realizing that the waters leading to' that destination were shallow at certain points, the libelant’s representatives told respondent that the vessel would be lightered so as to bring her draft to twenty-four feet. When this had been done, the tug W. F. Dalzell proceeded alongside the steamer. The tug captain went upon the lighter’s bridge to act as pilot. The tanker, using her own steam, accompanied by the tug, got under way. When the vessels were opposite St. George, they were joined by the tug Dalzellite. The three boats then proceeded through the Kill von Kull, and off Port Richmond, the tug Fred B. Dalzell, Jr., became a part of the flotilla. Her master, Howard B. Port, ascended the bridge of the Sabine Sun to assume the role of pilot, relieving Captain Bennett of°the W. P. Dalzell, who nevertheless remained on board. Turnbull, the captain of the tanker, his third officer, and a quartermaster were also there. The weather was clear, the tide was within an hour of high water, and the wind was such that it played no part in subsequent events. In passing, it should be observed that Port, in order to equip himself with knowledge of conditions existing along the channel through whieh the steamer was to go, and whieh was in process of being dredged, and which was also unmarked with the usual aids to navigation, had visited the locality on the previous day, and taken soundings of the depths of water through which the steamer was to move. He had also communicated with the engineers of the War Department, in an endeavor to procure a blueprint of the work then in progress. This he secured. He also bought a copy of the latest chart of the waters. These aids, it is said, were not of a character to furnish him with accurate knowledge of what he might expect to find. As a result, Port was apprehensive of his ability to get the vessel to her destination in safety. In fact he states that he explained the difficulties of the situation to Turnbull, and that, had the latter not remarked that he would “take the risks” and would be very much pleased if the job were executed as well as when it was last performed, he (Port) would have returned the ship to anchorage. Turnbull denies that any such conversation occurred. Whatever may be the truth as to this feature of the case, the tanker, using her own steam, with a tug on either quarter, and one forward on the port side, proceeded on her way. In navigating the vessel, Port took his ranges from a, gas tank and a street end on Staten Island that he had used successfully on former occasions when taking vessels into Newark Bay. On this trip, however, as he was rounding about Bergen Point, on an angle of 90 degrees to starboard, the forward part of the Sabine Sun struck against some obstruction, and went fast aground. She so remained for about three hours, during whieh time she was lightened of a part of her cargo. When this had been accomplished, the vessel floated, and, under the pilotage of Captain Fountain, who was brought aboard, was taken to her dock. The grounding of the vessel injured some of her plates, and this suit is designed to recover the resultant damages. Captain Fountain testifies that, when he went on board the steamer, she was out of the channel and I so find. When Fountain took charge and the steamer had been floated, he backed her into the Kill von Kull, and then maneuvered in such fashion that the turn in the channel, which Port had apparently missed, was made without trouble. On reaching1 the dock of the Texas Oil Company, Fountain returned the vessel to Port, who warped her into the berth. Upon the facts as they have been recited, it is clear that libelant can have no recovery against the tugs, or any of them. None of them contributed to the accident in any way, shape, or form. Por this reason, each of them must be exonerated. The Edward G. Murray (C. C. A.) 278 P. 895. But, as for the respondent’s part in the occurrence, somewhat different considerations must receive attention. The first of these is that the representative of the owners of libelant, paid, or rather gave, the sum of $15 to Port upon the completion of his work in handling the vessel. This payment, I think, should be regarded as a mere gratuity, and in no way determinative of the question of respondent’s liability in the premises. See The Edward G. Murray, supra, and The Procida (D. C.) 243 P. 251. So far as the conversation, in whieh Port says that Turnbull assumed the risks incident to the navigation of the Sabine Sun, is concerned, I am of the belief that it should not, granting that it took place, affect the question of liability. There is an element of the ease that renders Port’s disclaimer of responsibility, if he actually made it, more or less academic. It is that respondent’s engagement with respect to the Sabine Sun was qualified by a claim appearing upon its rate sheet, and bills for services, which reads as follows: “When the captain of any tug furnished to or engaged in the service of assisting a vessel which is making use of her own propelling power goes on board said vessel, or any other licensed pilot goes on board said vessel, it is understood and agreed that said tugboat captain or licensed pilot becomes the servant of the owners of the vessel assisted in respect to the giving of orders to any of the tugs furnished to or engaged in the assisting service and in respect to the handling of such vessel, and neither those furnishing the tugs and/or pilot nor the tugs, their owners, agents or. charterers shall be liable for any damage resulting therefrom.” ■ Copies of respondent’s “Pro Forma Tow-age Rates and Contract with Dalzell Towing Company, Iné.,” containing the above-quoted clause, were forwarded to libelant’s office on November Í5, 1923, December 28, 1923, and June 10, 1924, in response to inquiries concerning towage charges. One of such copies was received by Mr. Innis, a clerk in libel-ant’s office; another by the office manager of libelant’s marine office; and a'third by Mr. Turnbull himself. In a letter which accompanied the rate schedule which was sent to libelant and received by Innis, the respondent said: “We are attaching herewith a tow-age schedule and would like to call your attention to the last paragraph marked with an 'X.’ ” This reference was to the pilotage clause set out above. Respondent usually handled the vessels of libelant in this port, and, inasmuch as the pilotage clause is printed on the bills for services rendered by respondent, to say nothing of the attention which was drawn to the clause by respondent’s letter, there can be no doubt that libelant should be charged with knowledge of the terms on which respondent offered to furnish towing services. So far as appears, libelant never informed respondent that it would not accept towage services on the terms proposed, as was the fact in McWilliams Bros., Inc., v. Davis, Director General (C. C. A.) 285 F. 312. Not was the existence of the pilotage claim only brought to the attention of a superannuated and inactive employee of the respondent, as was done in G. Robitzek & Bro., Inc., v. Davis, Director General (C. C. A.) 296 P. 107. On the contrary, the responsible officials had every opportunity to know of the limitation contained in the terms of respondent’s offer to undertake engagements such as it assumed for - libelant. While Turnbull denies that he had ever actually read the clause pri- or to the trial, he does admit that he had “heard of it.” ' The faets here present bring the ease within the rule of law as announced by the Circuit Court of Appeals in this circuit in The Oceaniea, 170 P. 893; in Ten Eyck v. Director General (C. C. A.) 267 P. 974, and in The Cutchogue (C. C. A.) 10 F.(2d) 671, to the effect that, under circumstances such as those now before me, the tow assumed the risk of injury. The principle of these eases must here be'recognized. Appreciation is had, of course, of the circumstance that the law of this circuit on the question now before me is not in harmony with that followed by the appellate courts ■of several other circuits, and may indeed be in conflict with the pronouncement of the Supreme Court in The Syracuse, 12 Wall. 167, 20 L. Ed. 382. • It is true, nevertheless, that the latter court refused-to-review the Ten Eyck Case, supra, and there is nothing which indicates that the appellate court of the circuit is inclined to change its previous rulings on the question. Until that change be made, I shall follow the law as it has been here repeatedly declared. As for the contention that the Supreme Court cited its decision in The Syracuse as a basis of its conclusion in The Wash Gray Case, 277 U. S. 66, 48 St. Ct. 459, 72 L. Ed. 787, it needs only to be remarked that the facts- recently before the court in that litigation are easily and fundamentally distinguishable from those in the ease at bar. Prom what has-been said, it would seem as though libelant cannot escape the binding effect of the' decisions of the local Circuit Court of Appeals, to which reference has been made, even though it be assumed that Port was guilty of negligence in getting the Sabine Sun out of the channel and onto the ground. By reason of my conclusion, I need make no finding on the question of Port’s negligence. The libels axe dismissed.

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PUGH v. UNITED STATES. No. 2637. District Court, S. D. West Virginia. May 11, 1931. Edgar J. Goodrich, of Charleston, W. Va. (Price, Smith & Spilman, of Charleston, W. Va., on the brief), for plaintiff. James Damron and Okey P. Keadle, both of Huntington, W. Va., for the United States. McCLINTIC, District Judge. This is a petition filed by the plaintiff to recover an alleged overpayment on an assessment for income tax in the sum of $1196.20. With a slight exception, the facts are stipulated. Plaintiff was a partner in the firm of Pugh Furniture Company on the 1st day of January, 1926, and owned 77% per cent, of the ■business. E. G. Hubbard owned 17% per ■cent. Helen M. Moore owned 23ío per cent E. 0. Byrd owned 2§io per cent. Early in the year 1926 plaintiff purchased the interest of E. G. Hubbard, which gave him 95 per cent, ownership of the business of the Pugh Furniture Company. Immediately upon such purchase, plaintiff transferred and set over as a gift to his wife, Flora B. Pugh, the ownership of 40 per cent, of the partnership, attempting to make her a partner in the business. There was a net taxable income of the Pugh Furniture Company for the year 1926 of $22,108.92. Flora B. Pugh received 40 per cent, thereof, which amounted to $8,843.57, and she reported that amount under her invidual income tax report for the year 1926— and paid the tax thereon. Plaintiff received 55 per cent, thereof, amounting to $12,159.90, and reported that amount on his individual income tax report for the year 1926, and paid the tax thereon. The other partners reported their shares and paid the tax thereon. On the 13th day of April, 1926, the Commissioner of Internal Eevenue assessed a deficiency tax against plaintiff, and of the deficiency assessed, $1196.20 resulted from the act of the commissioner in adding to the return of plaintiff’s income the entire sum reported as income from the Pugh Furniture Company by Flora B. Pugh, on the ground that a husband and wife cannot contract together to form a partnership, under the laws of the state of West Virginia, and that Flora B. Pugh was not a member of the partnership and was not entitled to a distribution of profits therefrom. Plaintiff paid this deficiency assessment and filed a claim for refund of that amount and interest in the proper way and manner, which claim was rejected by the commissioner and plaintiff notified of the rejection. Thereupon, plaintiff instituted this suit within, the statutory period. I further find as a fact that the plaintiff made this gift to his wife, Flora B. Pugh, not in fraud of any creditors, and that Flora B. Pugh had a very substantial estate of her own, and that due notice was given to the mercantile agencies, and to other persons with whom the partnership dealt, of the fact of the new partner coming in, and that a substantial amount was added to the credit side of the partnership by reason of the advent of Flora B. Pugh as a partner with the amount of the separate estate owned by her, and that she took an active part in the business of the partnership, and worked and labored therein. Upon the foregoing findings of fact the question arises: “What is the position of Flora B. Pugh in law?” The defendant claims that under the statutes and decisions of the state of West Virginia, a husband and wife cannot be partners, and that for that reason the decision of the commissioner is correct. The plaintiff claims that she was, in fact, a partner in the Pugh Furniture Company, and as such was entitled to her distributive share of the earnings thereof, which should be and was included in her individual taxable income for said year, and further that if the court should hold that she was not a partner, nevertheless, 40 per cent, of the earnings thereof belonged solely to and was receivable by and taxable to her as the return on property owned by her as separate estate. Plaintiff cites a decision of the United States Board of Tax Appeals, Docket 15255 and promulgated March 26, 1929, entitled J. W. Biggs, Sr., Petitioner, v. Commissioner of Internal Revenue, Respondent, 15 B. T. A. 1092. This case came from West Virginia, and the Board of Tax Appeals held that where the petitioner, his wife and two sons, with four others, formed a partnership for operating a coal mine, during the taxable years there should be included as taxable income to the petitioner only the share of the partnership’s net earnings that did not belong to the others, and, in effect, held-that under the laws of West Virginia, a wife can be a partner with the husband. The claim was made in that particular case by the commissioner that the petitioner and his wife and sons were not, in fact and in law, partners in the particular company, and that the agreement of partnership-, so far as it related to the petitioner and his wife and two sons, amounted to nothing more than a gift of income by petitioner to his wife and two sons. The claim was made therein that in West Virginia a partnership between a husband and wife is void. In the brief of defendant, filed in that ease, the action of the commissioner was based on the ease of Bolyard v. Bolyard, 79 W. Va. 554, 91 S. E. 529, 530, L. R. A. 1917D, 440. This same case is likewise quoted in the present case as authority for the claim that a partnership between a husband and wife is void. A. careful consideration of the Bolyard Case convinces me that the Supreme Court of the State of West Virginia did not intend to hold, nor did it hold, that a partnership between a husband and wife was void. It did hold that in law a contract between a husband and wife is not recognized. The language of the court in the opinion on this subject is as follows: “The disability of the husband and wife to contract with one another, though absolute in the legal forum, is purely technical. Their contracts are enforceable in equity, if just and fair. They are denied a legal status to the end and purpose that they may be always within the power of the chancellor for enforcement, annulment, or modification, as the equities of the situation require. The ban under which such contracts fall is only partial. They' are not wholly bad, nor are they prohibited by positive law. They are merely unenforceable in courts of law, or by strict legal process. In the broad sense of the law, including the equity jurisprudence as well as the legal, they are valid. The partial .condemnation does not rest upon anything vicious in the sense of immorality. It goes no farther than exclusion from legal cognizance, and this exclusion is effected merely to place them within the exclusive cognizance of that class of courts whose procedure and remedies are sufficiently flexible and varied to enable them to do justice under all circumstances. To put them on a par with contracts fraudulently procured and contracts prohibited by positive law, as being morally or economically vicious, would be logically indefensible.” This language primarily indicates that the opinion of the Supreme Court of the State of West Virginia was and is that such partnership was not void, and while the rights there^ under could not be enforced at law, they could easily be taken care of in equity. I am of opinion that the income of Mrs. Pugh from such partnership is solely her own sepárate property, and that while she is taxable thereon, her husband is not. It necessarily follows, from this view, that there should be judgment for the plaintiff for the amount set out in his petition.

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GENERAL MFG. CORPORATION v. GRAY et al. No. 1073. District Court, W. D. Oklahoma. March 21, 1931. J. S. Estes, Frederick B. Owen, and E. E. Blake, all of Oklahoma City, Okl., for plaintiff. Edward Spiers, of Oklahoma City, Old., and Arthur C. Brown, of Tulsa, Old., for defendants. KENNEDY, District Judge (of Wyoming, sitting in the Western District of Oklahoma) . The above-entitled cause is before the court upon a citation for contempt particularly directed to two of the defendants, Lyman J. Gray and W. H. Coyle. A sketch of the history of the litigation and the transactions involved wi’l be necessary for the proper consideration of the controversy. One Jacob Young of Oklahoma, the inventor, made application for patent upon a mechanical ball game for which thereafter and on May 14, 1929, letters patent No. 1,-713,247 were issued to General Manufacturing Company, his assignee and plaintiff herein. Some time thereafter in the same year, a controversy arose between the plaintiff and a number of defendants, including those against whom relief is here sought, claiming infringement of plaintiff’s patent together with the uses of apparatus of defendants in the manufacture of the patented machine. Before the suit came to trial a compromise was effected between the litigating parties, or such of them as were actually interested in the litigation, and an agreement perfected whereby the defendants in interest here were by a written contract given certain privileges and rights, presumably as licensees, to manufacture and sell the patented machine in certain designated territories and under certain prescribed conditions. Terms were provided by which the plaintiff would receive certain consideration from the sales thereof. Thereupon a consent decree was entered in said infringement suit by the terms of which defendants were restrained and enjoined from any infringement of plaintiff’s patent. The evidence tends to show that the defendants here attacked thereupon proceeded with the attempted manufacture and distribution of the plaintiff’s apparatus which they claim did not result satisfactorily. Some difficulty evidently arose in the set-up of the machine, and the inventor Young, whose interests were aligned in the proceeding with those of the plaintiff, was taken into the manufacturing plant for the purpose of aiding in the mechanical development of the patented apparatus. Some time thereafter, and when the breach between the plaintiff and defendants had widened considerably through the alleged failure to pay royalties and properly label the few machines which were turned out in accordance with the demands of the plaintiff, the defendants began the manufacture of another machine in conjunction with one Carpenter, who purported to invent such machine and make application thereon for a patent. A company was organized in which the defendants are actively interested. Thereupon in September, 1939, the plaintiff made an application for a citation against the defendants Emenhiser, W. H. Coyle, and Cray as for contempt on account of their alleged acts amounting to a violation of the injunetional order contained in the final decree heretofore referred to. At the trial, the proceeding against the defendant Emenhiser seemed to have been dropped, as he did not appear to have been longer connected with the alleged infringement. A citation was issued by the court, and upon its return the defendants W. H. Coyle and Cray appeared and made a response which in substance admits the former decree and the contract and alleges that the machines attempted to be manufactured under plaintiff’s patent were inoperative and unsaleable, which frailties the plaintiff was unable to correct, although repeatedly requested by defendants so to do. They further allege that the machine which they are now manufacturing is á different machine from that covered by plaintiff’s patent and in no way an improvement upon or an infringement of plaintiff’s device, but that it is a machine being manufactured as an invention of one George W. Carpenter for which an application for patent is pending. The case thereupon proceeded to a hearing upon the citation and the response of the defendants W. H. Coyle and Gray. At the hearing the issues were narrowed to the consideration of two points by counsel for defendants, the first being to the effect that the plaintiff had not pursued the proper remedy, it being the contention of counsel for the defendants in this respeet that the remedy of the plaintiff was properly a suit at law upon the contract which purported to cover and regulate the relations between plaintiff and defendants concerning the manufacture of plaintiff’s apparatus. This position on the part of defendants I hold to be untenable, for the reason that the issue tendered by the application and citation is solely one of infringement which contemplates the manufacture and distribution of a slightly different machine than that of plaintiff’s but so similar as to represent but a colorable imitation. Likewise the response of the defendants' in substance meets this tendered issue. If there should be a determination of infringement, the matter of stipulated amounts set forth in the contract might possibly govern the question of damages as to manufactured and distributed machines. The second issue, as indicated is, whether or not the machine admittedly manufactured by the defendants is an infringement of plaintiff’s patent, and to this issue the attention of the court will therefore be directed. At the outset, for a judge rather inexperienced in patent law, a surprise was occasioned by the fact that counsel devoted such slight attention in argument and brief to the scope of an investigation upon a eon-tempt proceeding in patent cases. This may have been based upon the erroneous presumption that one called to sit in a ease of this character was already advised. However, it appears to me important to analyze the nature of the proceeding here for a correct solution of the main infringement issue. A brief review of the authorities will be helpful. In California, etc., Paving Co. v. Molitor, 113 U. S. 609, on page 618, 5 S. Ct. 618, 622, 28 L. Ed. 1106, a contempt proceeding in a patent case, Mr. Justice Bradley, speaking for the court, says: “It is a question which the circuit court must decide for itself in the ordinary way. If the judges disagree there can be no judgment of contempt; and the defendant must be discharged. The complainant may then either seek a review of that decision in this court, or bring a new suit against the defendant for the alleged infringement. The latter method is by far the most appropriate one where it is really a doubtful question whether the new process adopted is an infringement or not. Process of contempt is a severe remedy, and should not be resorted to where there is fair ground of doubt as to the wrongfulness of the defendant’s conduct.” In Crown Cork & Seal Co. v. American Cork Specialty Co., 211 P. 650, on page 653 (C. C. A. 2), the following language is found: “Complainant moved to attach for contempt because of the use of this reorganized machine. It has been the practice in this circuit (Bonsack Machine Co. v. National Cigarette Co. [C. C.] 64 P. 858) not to deal with modifications of a machine held to be an infringement, on motions to punish for contempt, unless the change was plainly a mere colorable equivalent; if the change was substantial, fairly arguable as to its being covered by the patent, it has been the practice to leave the patentee to an application to enjoin its use.” In Charles Green Co. v. Henry P. Adams Co., 247 P. 485, at page 486 (C. C. A. 2), Judge Hough observes: “The practice of reaching evasive and persistently infringing defendants by supplementary injunction we have already substantially approved. Bead Machinery Co. v. Jaburg, 223 P. 1022,138 C. C. A. 659. That approval we reiterate, but the propriety of granting such relief should be ascertained with due regard to settled rules regarding alleged contempt of patent injunctions. “Modifications of enjoined devices have not been dealt with on motions to punish for contempt ‘unless the change was a mere colorable equivalent’ (Crown Cork, etc., Co. v. American, etc., Co., 211 P. 653, 128 C. C. A. 154).” In the more recent case of Electro-Bleaching Gas Co. v. Paradon Engineering Co. (D. C. N. Y.) 15 P.(2d) 854, at page 855, the court says: “The plaintiffs must establish the law and the facts relied on to make out the alleged contempt; but, as this is a proceeding to have the defendant adjudged guilty of a civil contempt, I am not prepared to say that the plaintiffs must establish their case beyond all reasonable doubt. Gompers v. Buck’s Stove & Range Co., supra [221 U. S.] at page 444 (31 S. Ct. 492 [55 L. Ed. 797, 34 L. R. A. (N. S.) 874]). But the burden is heavy on the plaintiffs, and where there is reasonable ground to doubt as to the wrongfulness of the conduct of the defendant, it should not be adjudged in contempt. California Artificial Stone Paving Co. v. Molitor, 113 U. S. 609, 5 S. Ct. 618, 28 L. Ed. 1106; Hanley v. Pacific Live Stock Co., 234 P. 522’, 148 C. C. A. 288; General Electric Co. v. McLaren (C. C.) 140 P. 876.” One of the most concise and clear statements of the rule, evidently well supported by authority, is made by District Judge Pollock of Kansas in the case of Wire Rope Appliance Co. v. Eureka Tool Co. (D. C.) 256 P. 677, on page 678, in his pronouncement: “The entire question of infringement in this case has passed to' final decree absolute; hence no such issue is here raised, or may be determined. True, if the defendant and its officer here proceeded against are, and since the decree herein entered against them have been, engaged in good faith in making and vending a socket so different in its character and nature from' the infringing device defendant was enjoined from making, vending, and using by the final decree herein as not to fall within the issues of the case in which the decree was entered, in such case it would be the duty of plaintiff to file a new bill to have such determination made, and the application for contempt denied. Howard v. Mast, Buford & Burwell Co. (C. C.) 33 P. 867; Temple Pump Co. v. Goss Pump & Rubber Bucket Manuf’g Co. (C. C.) 31. P. 292; Crown Cork & Seal Co. v. American Cork Specialty Co., 211 P. 650, 128 C. C. A. 154; Kelsey Heating Co. v. James Spear Stove & Heating Co. (C. C.) 158 P. 414; Bonsack Mach. Co. v. National Cigarette Co. (C. C.) 64 P. 858. “On the other hand, if the change made from the original infringing device is merely colorable, and not substantial, and a court can clearly see the obvious intent of those enjoined from infringement was to further infringe upon the rights protected by the decree and thus escape punishment for wrongdoing, contempt will be adjudged. Frank F. Smith Metal Window Hardware Co., v. Yates, 244 F. 793,157 C. C. A. 241; Davis v. Perry, 120 F. 941, 57 C. C. A. 231; New York Scaffolding Co. v. Whitney, 224 F. 452, 140 C. C. A. 138; Leeds & Catlin v. Victor Talk. Mch. (No. 2) 213 U. S. 325, 29 S. Ct. 503, 53 L. Ed. 816; Parsons Non-Skid Co. v. Atlas Chain Co., 198 F. 399,117 C. C. A. 286. “The question thus raised is this: Do the appliances themselves in evidence in this case and the proofs adduced on this hearing clearly show the change made by defendant and its president, Towne, to be such a mere color-able mechanical equivalent as will be disregarded in this proceeding for contempt?” Clearly, then, the issue in the case at bar is not solely the question of infringement which might be determined in a new proceeding or one supplemental to' plaintiff’s original suit, but it is whether or not the invention and device which it is claimed the defendants are manufacturing and selling is merely a colorable equivalent or imitation of plaintiff’s patented device. Proceeding therefore to an investigation of the principal issue in the light of these authorities, we are confronted with the contention of the plaintiff that under the law of patents laid down in Title 35 TJSCA, § 69, which provides that only upon giving thirty days’ notice in writing to the plaintiff the defendant may prove on the trial that plaintiff’s device had been patented or described in some printed publication prior to his supposed invention or discovery thereafter for more than two years prior to his application for patent therefor, and the defendants not having given said thirty days* notice are precluded from offering testimony in regard to the prior state of the art through evidence of prior patents. In regard to this, the defendants respond that under a construction by the courts this estoppel is a limited one and does not restrict against evidence to assist the eourt in determining the scope of the patent. Authorities supporting this view are 48 C. J. p. 356, which says: “Under general issue defendant may show the prior state of the art, that plaintiff’s device is not operative, or matters, other than statutory defenses, which affect the validity of the patent and cannot well be made the subject of a special plea; and he may give in evidence the act of congress relating to patent tability. “Statutory defenses. Under the statute providing for proof at the trial of certain special matters of defense, all relating to the Validity of the patent, where defendant has given previous written notice thereof, such" matters are admissible in evidence for the purpose of defeating the patent where they have been pleaded or sufficient statutory notice thereof has been given; but not otherwise, unless notice thereof is waived, as by failure to object to' the reception of the evidence. However, matters which are inadmissible under the foregoing rule for the purpose of showing the invalidity of the patent may nevertheless be admissible to show the state of the art and to aid in the construction of the patent.” In Brown v. Piper, 91 U. S. 37, at page 41, 23 L. Ed. 200, is found the following language: “There is another view of the ease that may properly be taken. “Evidence of the state of the art is admissible in actions at law under the general issue, without a special notiee, and in equity eases without any averment in the answer touching the subject. It consists of proof of what was old and in general use at the time of the alleged invention. It is received for three purposes, and none other, — to' show what was then old, to distinguish what was new, and to aid the eourt in the construction of the patent.” See, also, Grier v. Wilt, 120 U. S. 412, 7 S. Ct. 718, 30 L. Ed. 712, in which the pertinent syllabus reads as follows: “In a suit in equity for the infringement of letters-patent, prior letters-patent, though not set up in the answer, are receivable in evidence to show the state of the art, and to aid in the construction of the claim of the patent sued on, though not to invalidate that claim on the ground of want of novelty, when properly construed.” We therefore arrive at the conclusion, in the light of these authorities, that prior patents and the file wrapper of plaintiff in connection with his patent are admissible in this proceeding, not for the purpose of invalidating plaintiff’s claim on the ground of want of novelty, but for the purpose of distinguishing what was at the time then old and what was new and to properly assist the court in the construction of the patent. Having proceeded this far in the analysis of the limited scope of the issue and the evidence admissible to determine that issue, we shall proceed to consider plaintiff’s patented machine and the defendants’ alleged infringing machine. Plaintiff’s specifications outlined in patent No. 1,713,247, in lines 1 to 31, inclusive, read as follows: “This invention relates to mechanical hall games, and particularly to a mechanical basketball game. “The general object of the invention is tó provide a miniature basketball court enclosed in glass and having the similitudes of baskets at the opposite ends of the glass ease, and provide manually controllable means whereby the ball may be shifted from one end of the court toward the other by one player or in a reverse direction by the other player and whereby the ball may be discharged upward, if possible, to make a goal from the field. “A further object is to provide a device of this character having the floor of the ease formed to provide a plurality of depressed portions, each depressed portion having a cup-shaped center in which the ball will lodge, each cup-shaped depression having a kicker or finger disposed therein, half of the cups having their kickers connected to one operating means for one player and the other half of the cups having their kickers operatively engaged with another operating means operated by the other player, the kickers or fingers being so disposed that when it is operated it will tend to throw the ball from one cup to another cup of the same players and so on until the ball is in position for a try for goal.” The alleged infringing machine is similar in mechanical equipment and general design, with the exception that the substantial difference between the two machines is that while plaintiff’s machine is designed to kick the ball in a diagonal course across the field through the cups of a corresponding series where the basket may be thrown from two cups, the defendants’ machine is so arranged that the attempt is made to throw the desired basket from each and every cup of its own series. As is stated in the patent, the device is intended to simulate a basketball game, and in this respect experts testify in this hearing that there are, speaking generally, two different methods of playing such a game in a genuine contest with living players. One is known as “nursing” or “dribbling” the ball across the field toward the desired goal until a player near the basket is better able to accomplish the result than by a long throw. This method is the one commonly in use, as was testified among the more skilled teams. The. other method is where the players usually without such nursing or dribbling attempt to throw baskets from any point where the player may be located without particular regard to his proximity to the basket, which the expert professional coaches in basketball denominate the “amateur” or “dub” game. On first impression, the similarity would be so close that one might easily say that the second is clearly an imitation of the first. A closer scrutiny, however, is needed if we are required to examine the prior state of the art with respect to former patents, together with the representations of the plaintiff patentee prior to the issuance of his patent concerning the scope' of his patented machine. It appears from the file wrapper in connection with plaintiff’s patent, that certain claims of plaintiff were rejected in the light of six prior patents for similar devices. Only three of the claims of plaintiff were allowed, to wit: Claims 5, 6, and 9, whereupon the plaintiff amended his claims and upon such amended claims the patent was granted. At the same time the patentee made representations to the Patent Office in the way of remarks which indicated the distinction between his device and that shown by patents already granted to others for similar devices. In the amended claims, claim 5 as allowed was made claim 1, in which the following language appears: “Said kickers being so arranged as to project the ball in the general direction of the next succeeding cup of a series.” Original claim 6 allowed was thereafter'ineorporated in the amended claims as No. 3,. in which the following language appears:' “The kickers of one series being arranged to discharge the ball from a cup of one series to an adjacent cup of the same series and into the corresponding goal.” In original claim 9, which as amended became claim 6, the following language appears: “The kickers of one series of cups being arranged to direct the ball from one cup of a series to the next adjacent cup of the series in a direction toward one end of the casing.” It must therefore b.e apparent that this particular feature of plaintiff’s patented machine, in each instance directing the ball in a diagonal course across the field from one cup of a series to the next succeeding cup of the same series until the ball is in a position to be thrown from a cup designed only for the purpose of throwing the basket, is an integral part of plaintiff’s device. Further, it appears by the former patents introduced in evidence, to which reference was made by the Examiner passing upon plaintiff’s patent and respecting a portion of the claims, that there was no expression of the “nursing” game at the time in case of the Smith, Bush, Johnson, Biertuempfel, and Garver patents, many features of which otherwise resembled in mechanism and result the features of plaintiff’s machine, and as a consequence the scope of plaintiff’s patent in view of this prior state of the art was considerably limited. The contention of defendants is not that plaintiff did not have a patentable device which was novel, nor do they now attempt to dispute the patentability of plaintiff’s device, but they contend that in view of the prior state of the art and in view of the limitations imposed upon plaintiff, the scope of his patent is so limited that he cannot now assert an alleged infringement on the part of defendants. The defendants contend that the rule which should be invoked is fairly laid down in the ease of Barley v. G. E. Witt & Co. (C. C. A.) 261 P. 77, at page 84, where the court says: “We are unable to expand the claims of the patent in question beyond the fair meaning of their terms, and we cannot find that identity of mechanical elements, as well as identity of function, necessary to sustain the charge of infringement. Notwithstanding the fact that there are the same mechanical elements present in the device of the patent in suit as in the construction of appellants, the manner of operation described in the patent claims determines whether there has been infringement; and, as we understand it, appellants do not use the manner of operation described by the patent claims. “Believing, therefore, that there is a lack of substantial identity between the combinations in respect to their capacity to do the same work in substantially the same way, appellants are not shown to infringe. Westinghouse Co. v. Boyden Power-Brake Co., 170 U. S. 537,18 S. Ct. 707, 42 L. Ed. 1136; Pittsburgh Meter Co. v. Pittsburgh Supply Co., 109 F. 644, 48 C. C. A. 580; Westinghouse Air Brake Co. v. New York Air Brake Co., 119 F. 874, 56 C. C. A. 404; Imperial, etc., Co. v. Crown Cork & Seal Co., 139 F. 312, 71 C. C. A. 442; Thacher v. Transit Co. (D. C.) 228 F. 905 The thought is also expressed in the case of Puller v. Yentzer, 94 U. S. 288, at page 296, 24 L. Ed. 103, where Mr. Justice Clifford, in speaking for the court, says: “Valid letters-patent undoubtedly may be granted for an invention which consists entirely in a new combination of old elements or ingredients, provided it appears that the new combination of the ingredients produces a new and useful result; but the rule is equally well settled that the invention in such a case consists merely in the new combination, and that a suit for infringement cannot be maintained against a party who constructs or uses a substantially different combination, even though it includes the exact same elements or ingredients, if the combination is in fact new and useful, and substantially different from the one which preceded it. Gill v. Wells, 22 Wall. 14 [22 L. Ed. 699]. “Such an invention, if it produces a new and useful result, is the proper subject of a patent, and such a patent is valid and operative; but the right of the patentee under it differs in one respect from those of a patentee for an invention which consists of an entire machine, or of a new and useful device, as the rights of a patentee for a mere combination of old ingredients are not infringed, unless it appears that the alleged infringer made, used, or sold the entire combination. Gould v. Rees, 15 Wall. 194 [21 L. Ed. 39]; Prouty v. Ruggles, 16 Pet. 341 [10 L. Ed. 985]; Vance v. Campbell, 1 Black, 428 [17 L. Ed. 168].” There remains to be considered the representations and statements made by the patentee plaintiff in the' matter of securing a patent, which are pertinent in determining its scope. Shepard v. Carrigan, 116 U. S. 593, 6 S. Ct. 493, 29 L. Ed. 723; I. T. S. Rubber Co. v. Essex Rubber Co., 272 U. S. 429, 47 S. Ct. 136, 71 L. Ed. 335. In the latter case, on page 443 of 272 U. S., 47 S. Ct. 136, 141, 71 L. Ed. 335, the late Mr. Justice Sanford, speaking for the court, said: “It is well settled that where an applicant for a patent to cover a new combination is compelled by the rejection of his application by the Patent Office to narrow his claim by the introduction of a new element, he cannot after the issue of the patent broaden his claim by dropping the element which he was compelled to include in order to secure his patent. Shepard v. Carrigan, 116 U. S. 593, 597, 6 S. Ct. 493, 29 L. Ed. 723. If dissatisfied with the rejection he should pursue his remedy by appeal; and where, in order to get his patent, he accepts one with a narrower claim, he is bound by it. Shepard v. Carrigan, supra [116 U. S. 597, 6 S. Ct. 493, 29 L. Ed. 723]; Hubbell v. United States, 179 U. S. 77, 83, 21 S. Ct. 24, 45 L. Ed. 95. Whether the examiner was right or wrong in rejecting the original claim, the court is not to inquire. Hubbell v. United States, supra [179 U. S. 83, 21 S. Ct. 24, 45 L. Ed. 95]. The applicant having limited his claim by amendment and accepted a patent, brings himself within the rules that if the claim to a combination be restricted to specified elements, all must be regarded as material, and that limitations imposed by the inventor, especially such as were introduced into an application after it had been persistently rejected, must be strictly construed against the inventor and looked upon as disclaimers. Sargent v. Hall Safe & Lock Co., 114 U. S. 63, 86, 5 S. Ct. 1021, 29 L. Ed. 67; Shepard v. Carrigan, 116 U. S. 598, 6 S. Ct. 493, 29 L. Ed. 723; Hubbell v. United States, supra [179 U. S. 85, 21 S. Ct. 24, 45 L. Ed. 95]. The patentee is thereafter estopped to claim the benefit of his rejected claim or such a construction of his amended claim as would be equivalent thereto. Morgan Envelope Co. v. Albany Paper Co., 152 U. S. 425, 429, 14 S. Ct. 627, 38 L. Ed. 500. So where an applicant whose claim is rejected on reference to a prior patent, without objection or apt peal, voluntarily restricts himself by an amendment of his claim to a specific structure, having thus narrowed his claim .in order to obtain a patent, he ‘may not by construction, or by resort to the doctrine of equivalents, give to the claim the larger scope which it might have had without the amendments, which amount to a disclaimer.’ Weber Elec. Co. v. Freeman Elec. Co., 256 U. S. 668, 677, 41 S. Ct. 600, 603, 65 L. Ed. 1162. “It results that as the claims in suit were limited by the proceedings in the Patent Office to the specific form of a three-point contact lift, they are not infringed by the heels made by the Essex Company, which, are not three-point contact lifts, their upper side edges having no vertical curve and lying entirely in the same horizontal plane as the rear edge and breast comers.- Hof can they be held to be infringements even if we assume that, as asserted, they function in the same manner as three-point contact lifts, and would infringe, as was conceded in the District Court, if the claims were not restricted by the- limiting clause and were entitled to a construction warranting a wide range of equivalents. By the limitation of the claims in the Patent Office proceeding to the three-point contact lift the patentee made this precise form a material element, and having thus narrowed the claims, cannot, as was said in the Weber Electric Company Case, now enlarge their scope by a resort to the doctrine of equivalents. This would render nugatory the specific limitation.’* - While, strictly speaking, it may not be contended that the plaintiff in the matter of securing his patent injected a new element in his amended claims known here as the “nursing” or “dribbling” element, yet it does appear that he relied upon this feature as distinguishing it from other devices already patented or known to the art as being generally capable of the same general results. On page 3 of plaintiff’s response to the action of the Patent Office in rejecting a portion of plaintiff’s claims, the following representations were made: “A nearer citation is the patent to Bush which is in some respects similar to applicant’s ball game in that there is a field provided with cups arranged in two series with a plurality of ball projectors arranged in two series each series of projectors being adapted to be operated by corresponding handles, but these projectors are not arranged to project the ball diagonally or in other words in the general direction of the opponent’s goal but diagonally across the field nor is there a projector arranged on the median line of the board and adjacent the goal whereby a goal may be made as called for in the last two claims nor are the cups arranged in two series in staggered relation to each other and alternating with cups of the other series.” On page 4, in discussing the features of other patents cited by the examiner, the patentee says: “The kickers or strikers are entirely different, the mechanism whereby the game is played is different, the ball is not kicked diagonally across the field from a pocket of one series to a poeket of the next series or in that direction.” From this undisputed evidence it would appear that one of the principal features upon which the plaintiff relied for a patent, in distinguishing his invention from that of previous patentees,' was the kick of the ball diagonally across the field from cup to cup of the same- series and attempting to discharge thé ball from certain cups in close proximity to the desired basket as representing the so-called “nursing” game of basket-bad. In view of this development,of the entire evidence in the ease, I feel unwilling to say that the alleged infringing device of the defendants is a mere colorable equivalent or imitation upon which to base a finding of contemptuous conduct in violation of the original decree of the court; especially in view of the fact, that the two devices, when considered in the light of purporting to simulate a basketball game, are really intended to play such a game by different methods. The ease is at least close enough in my opinion so that the question of infringement under the authorities ought to be determined in a proper proceeding brought for that purpose. For the reasons stated, the defendants will be discharged from the alleged citation for contempt, and findings of fact and conclusions of law with an appropriate decree in accordance with the views herein expressed may be submitted within thirty days from the date of this memorandum, reserving to the plaintiff proper exceptions.

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MARK v. WESTLIN. District Court, D. Minnesota, Sixth Division. April 6, 1931. F. H. Peterson, of Moorhead, Minn., for plaintiff. C. G. Dosland, of Moorhead, Minn., for defendant. SANBORN, District Judge. The pertinent facts are as follows: The defendant is the receiver of the First and Moorhead National Bank, having been appointed to succeed B. C. Schram, who was first appointed by the Comptroller of the Currency after the bank was closed on December 22, 1928. The plaintiff, on December 21, 1928, had on deposit in the bank $2,559.71. She then arranged with the assistant cashier of the bank to purchase for her $2,500 of Liberty bonds of the United States, and gave to him a withdrawal slip upon her savings account for $2,534.46, the amount which he estimated would pay for the bonds. He gave her a receipt reading as follows: “Received of Mrs. Ida Mark twenty-five hundred thirty four dollars, forty-six cents ($2534.46) for twenty-five hundred (2500) dollars in Fourth Liberty Loan Bonds to be registered in the name of Mrs. Ida Mark, Moorhead, Minnesota.” The withdrawal from her savings account was noted in her passbook, but was not charged against her account on the books of the bank. The bonds were ordered from the Federal Reserve Bank of Minneapolis, and the amount paid for them was to be charged by the Federal Reserve Bank against the account of the First & Moorhead Bank in the Reserve Bank. It was the intention of the assistant cashier to wait until he received notice of purchase of the bonds and the amount charged against the account of the First & • Moorhead Bank before putting through the charge against Mrs. Mark’s savings account on the books. The First & Moorhead National Bank closed on the following day. The bonds, although purchased by the Federal Reserve Bank, as directed, were never delivered to or paid for by the Moorhead Bank, and were retained by the Reserve Bank. At the time it closed, the Moorhead Bank had on hand some $40,000 in cash. The plaintiff, believing herself to be a preferred creditor, asked for the allowance of her claim in full. The receiver refused to permit her to file a claim as a preferred creditor. The question is whether, under the law, Mrs. Mark is entitled to have her claim paid in full before the other creditors of the bank may receive their pro rata share of its assets. One difficulty which some courts have had in dealing with the question of recovery of funds misapplied by an insolvent bank arises out of a failure to take into consideration the fact that the Controversy is not between the claimant and the bank, but between the claimant and the other creditors with respect to a particular fund in the hands of the receiver. In Larabee Flour Mills v. First Nat. Bank of Henryetta (C. C. A. 8th Circuit) 13 F. (2d) 330, 331, Judge Lewis says: “The real issue in each ease is between the preference claimant and general creditors of the bank. They will get less if the preference is allowed. Each claimant asserted an equity, that the assets taken over by the Comptroller are trust funds in which it is a preferred beneficiary, , It is difficult to explain or understand by what equitable right one who has not contributed to the creation of a fund should be given a. special and superior interest therein, though some of the state courts seem to so hold.” Justice Bradley, in Frelinghuysen v. Nugent (C. C.) 36 F. 229, 239, used the following language: “Formerly the equitable right of following misapplied money or other property into the hands of the parties receiving it, depended upon the ability of identifying it; the equity attaching only to the very property misapplied. This right was first extended to the proceeds of the property, namely, to that which was procured in place of it by exchange, purchase, or sale. But if it became confused with other property of the same kind, so as not to be distinguishable, without any fault on the part of the possessor, the equity was lost. Finally, however, it has been held as the better doctrine that confusion does not destroy the equity entirely, but converts it into a charge upon the entire mass, giving to the party injured by the unlawful diversion a priority of right over -the other creditors of the possessor. This is as far as the rule has been carried.” This statement has been repeatedly approved by the courts of this circuit. See Metropolitan Nat. Bank v. Campbell, Com’n Co. (C. C.) 77 F. 705, 707; Beard v. Independent District of Pella City (C. C. A.) 88 F. 375, 377. It is firmly settled by numerous decisions of the. courts of this and other circuits that, in order to establish a preferred claim, the claimant must show that the funds of the bank were actually augmented by the transaction under which he claims his right to priority. In Empire State Surety Co. v. Carroll County (C. C. A.) 194 F. 593, 604, it was said: “It is indispensable to the maintenance by a cestui que trust of a claim to preferential payment by a receiver out of the proceeds of the estate of an insolvent that clear proof be made that the trust property or its proceeds went into a specific fund or into a specific identified piece of property which came to the hands of the receiver. * * * ” See, also, State Bank of Winfield v. Alva Security Bank (C. C. A.) 232 F. 847; Farmers’ Nat. Bank v. Pribble (C. C. A.) 15 F.(2d) 175; Larabee Flour Mills v. First Nat. Bank (C. C. A.) 13 F.(2d) 330; Mechanics & Metals Nat. Bank v. Buchanan (C. C. A.) 12 F.(2d) 891. In.Beard v. Independent Dist. of Pella City, supra, this language was used (88 F. pages 379, 382): “Unless it appears that the fund or estate coming into possession of the receiver has been augmented or benefited by the wrongful use of the trust fund, noi reason exists for giving the owner of the trust fund a preference over the general creditors. * * * “And to assume (the position) of the owner of a trust fund, and as such to assert a preferential right to payment in full out of the cash fund eoming into the hands of the receiver, to the detriment of the general creditors, it [the claimant] ought to be held to satisfactory proof of the fact upon which the right to a preference rests, to wit, that the fund eoming into the receiver’s hands has been augmented and increased by the addition thereto of the trust money, not as a matter of inference, nor as a result of mere entries on books of account, but because the fund or property against which the preference is sought to be enforced has been in faet augmented or benefited by the addition thereto of the trust fund.” In the ease last referred to, the claimant made, in substance, the same contentions which are made here. The court said (88 F. 381): “It is claimed in argument that the court must treat the ease just as though the treasurer of the school district had presented the cheek, had obtained the money thereon, and had then deposited the money in the bank as the money of the school district, but this was not in faet done; and as againlt the creditors, whose money in faet created the cash amount coming into the hands of the receiver, why should fiction be resorted to in order to sustain a preference on behalf of the school district to payment out of a fund not augmented in faet by any sum belonging to the district?” It is claimed here by the plaintiff that the giving of the withdrawal slip to the assistant •cashier was the same as though she had drawn •out of the bank that much currency and had then delivered it to the assistant cashier for the purpose of purchasing the Liberty bonds. There is nothing which Mrs. Mark did which augmented the assets of the bank which came into the hands of the receiver. Its cash assets were contributed by others. Had the withdrawal slip never been drawn, and had no instructions been given for the purchase of the bonds, the result would have been the same so far as the receiver is concerned. The other creditors were in no way benefited by what Mrs. Mark did. The case is therefore clearly distinguishable from Bartholf v. Milett (C. C. A.) 22 F.(2d) 538. Finding the facts and the law to be as I have herein stated, my conclusion is that the defendant is entitled to a decree dismissing the complaint, with costs. •

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METROPOLITAN NAT. BANK OF MINNEAPOLIS v. NATIONAL SURETY CO. District Court, D. Minnesota, Fourth Division. April 6, 1931. Timerman & Vennum, of Minneapolis, Minn., for plaintiff. Doherty, Rumble, Bunn & Butler, of St. Paul, Minn., for defendant). SANBORN, District Judge. At the close of the testimony, the plaintiff and the defendant each moved for a directed verdict, whereupon the court discharged the jury and took the case under advisement. The facts are as follows: The plaintiff is a national bank; the defendant, a corporation organized under the laws of New York. On November 25, 1929, the plaintiff and the defendant entered into a contract referred to as a “Securities Bond, Standard Form No. 1 Revised.” This contract indemnified the plaintiff against losses sustained by reason of taking and applying as collateral any securities forged, counterfeited, raised or otherwise altered, or lost or stolen. The bond provided that the word “securities” should include warehouse receipts and bills of lading, except those covering motor vehicles. Between April 1, 1930, and June 1, 1930, the plaintiff discounted and became the owner and holder, for value, of seven drafts aggregating $11,816, drawn by the Judith Milling Company, of Lewistown, Mont., upon various drawees. Attached to these drafts were forms of bills of lading describing certain flour and containing the names of supposed consignees. The plaintiff had for several years prior to the payment of these drafts accepted similar drafts with bills of lading attached, drawn by the milling company. The plaintiff, in paying the seven drafts referred to, supposed that the papers attached to them were genuine bills of lading and that the flour described in the bills had been actually delivered to the carriers whose names appeared in print upon the forms. None of these bills were signed by the agent of the carrier named on the form, and the flour described therein was never delivered to the carrier. The form used in each instance was that of the uniform straight bill of lading prescribed by the Interstate Commerce Commission, and was complete in every respect, except that it did not contain the signature of the carrier’s agent, and the space for such signature was left blank. All of the drafts referred to were purchased by the plaintiff in good faith and without knowledge that the flour described therein had not been delivered to the carrier, and -without noticing that the forms were unsigned by the agent of the carrier. The Judith Milling Company, shortly after these drafts were purchased, went into bankruptcy, and the loss which the plaintiff has directly suffered through the purchase of these drafts exceeds the sum of $5,000, the maximum amount for which the defendant is liable under its bond. The plaintiff contends that the unsigned bills of lading were counterfeits, and that it is therefore entitled to recover from the defendant. The defendant claims that, while the forms attached to the drafts were used for the purpose of defrauding the plaintiff, they were not counterfeits, and it therefore denies liability. “A counterfeit is a likeness or resemblance intended to deceive and to be taken for that which is original and genuine.” 15 C. J. 357. “The term ‘counterfeit’ both by its etymology and common intendment, signifies the fabrication of a false image or representation. In its broadest sense counterfeiting means the making of a copy without authority or right, and with a view to deceive or defraud by passing the copy as original or genuine. As thus defined counterfeiting includes forgery. But the term ‘counterfeiting* as used in this article and as ordinarily understood in law is applied to the making and uttering of false money, or the forging of bank notes which are the equivalent of money.” 7 R. C. L. 913. An unsigned deed, mortgage, note, draft, cheek, warehouse receipt, bond, stock certificate, bill of lading, or other instrument, the validity of which, is dependent upon the signature of the person who makes or issues it, • is susceptible of use as an instrument of fraud, but is not a counterfeit. It is not a false image or resemblance. It actually purports to be nothing more than what it is, an invalid instrument, because unsigned. It does not of itself deceive any one. The person who uses it to defraud does the deceiving by representing it to be something other than it actually pretends to be. He represents that it is signed, when the instrument itself contradicts him. By attaching the unissued bills of lading here involved to drafts and sending them to the bank, the Judith Milling Company represented them to be issued bills of lading. The bank relied upon the representations, and was defrauded. The contract here involved did not pretend to indemnify the bank from loss because of the acceptance of unsigned securities as valid. I have found no ease directly in point, but see United States v. Williams (D. C.) 14 F. 550; United States v. Sprague (D. C.) 8 F. 828; Wiggains v. United States (C. C. A.) 214 F. 970. Finding the facts and the law to be as above stated, it is ordered that a judgment of dismissal be entered in favor of the defendant, with costs. The plaintiff is allowed an exception to the denial by the court of its motion for a directed verdict and for judgment in its favor made on the sole ground that the evidence will support no other conclusion.

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ANGIER et al. v. ANACONDA WIRE & CABLE CO. No. 854. District Court, D. Delaware. April 6, 1931. See, also, 48 F.(2d) 614. William G. Mahaffy, of Wilmington, Del., and L. G. Miller (of Emery, Booth, Varney & Townsend), of Boston, Mass., for plaintiffs. Hugh M. Morris, of Wilmington, Del., and George P. Dike, of Boston, Mass., for defendant. NIELDS, District Judge. Edward Angier and Angier Corporation have brought suit against Anaconda Wire & Cable Company. The bill alleges infringement of United States letters patent No. 1,282,167 for “Improvement in Packages,” and prays for an injunction and an accounting. One element of the defendant’s package alleged to embody the invention of the patent in suit is crepe paper. Rinkle-Krinkle Paper Company, a corporation of Massachusetts, relying on Equity Rule 37 (28 USCA § 723), has filed its petition alleging that it is the manufacturer of the crepe paper used by the defendant and has a contract with the defendant to save it harmless and to defend this suit, and praying that it be allowed to intervene herein as a party defendant, and file its “answer, cross-bill or whatever pleading it may be advised is expedient,” and that the plaintiffs be enjoined from commencing or prosecuting other or further suits against its customers. The form or substance of the pleading the petitioner desires to file is not attached to or submitted with its petition. In view of the conclusion hereinafter reached, this defect will, however, he disregarded. The petitioner must show affirmatively that he has an interest in the litigation. “Interest,” as used in this rule, means a' legal interest. The contingency of being held liable under a contract to save the defendant harmless and defend this suit is not such an interest. While it may be true that an injunction against the defendant will deprive the petitioner of a customer for its crepe paper, it cannot be said to have any legal interest in the question whether the patent in suit is valid or invalid, or whether the defendant, in using the crepe paper purchased from the petitioner in putting upon the market defendant’s package, is guilty of infringing the patent in suit. Moxie Nerve Food Co. of New England v. Modox Co. (C. C.) 179 F. 415. The petitioner has, if any, only a commercial interest in this litigation, and even that interest is dependent upon the continuance of business relations between the petitioner and the defendant which, so far as this record shows, may be terminated at any time. All of the cases cited by the petitioner deal with intervention by a manufacturer of the alleged infringing article or device, except that of Stoehrer & Pratt Dodgem Corp. v. Glen Echo Park Co. (C. C. A.) 15 F.(2d) 558. That case has no application here, as it appears from the opinion that the intervention was with the “assent of the original litigants.” This petitioner, however, is not in the same position as the manufacturer and vendor of an alleged infringing device furnished by it to a defendant. In such eases courts have almost uniformly permitted the manufacturer to intervene and join with the defendant in the defense of a suit. Indeed, the petitioner here does not seek to come in as a manufacturer would. It seeks an opportunity in this suit, if permitted to intervene, to set up defenses and seek affirmative relief not available to the defendant. This it should not be’permitted to do. In Allington v. Shevlin-Hixon Co. (D. C.) 2 F.(2d) 747, 749, Judge Morris well said: “To permit, over the objection of the plaintiffs, a person to intervene not pro interesse suo only but as a party defendant * * * and then to permit such intervening party defendant to set up against the plaintiffs a counterclaim for affirmative relief that is not available to the original defendant, and to which the original defendant is not entitled, would he conferring upon such third person broad rights, indeed, with respect to the litigation, and might be extending the rights of such third person beyond the point intended by Equity Rules 30 and 37 [28 USCA § 723].” An order denying the prayer of and dismissing the petition may be submitted.

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ANGIER et al. v. ANACONDA WIRE & CABLE CO. No. 854. District Court, D. Delaware. April 6, 1931. See, also, 48 F.(2d) 612. William G. Mahaffy, of Wilmington, Ill., and L. G. Miller (of Emery, Booth, Varney & Townsend), of Boston, Mass., for plaintiffs. Hugh M. Morris, of Wilmington, Del., and George P. Dike, of Boston, Mass., for defendant. NIELDS, District Judge. Edward H. Angier, patentee and owner of United States letters patent No. 1,282,167 for “Improvement in Packages,” granted October 22,1918, and Angier Corporation, sole licensee, have filed their bill of complaint against Anaconda Wire & Cable Company, a corporation of Delaware, alleging infringement, and seeking the usual relief. The invention of the patent, as stated in the specification, “relates to packages and the pur.pose is to provide an article with a closely fitting and resistant inclosing covering,” and is more particularly designed for packaging torie or annular articles, such as automobile tire shoes, coils of wire, and eoils of garden hose. The defendant has filed a motion to dismiss the bill of complaint. Of the three grounds stated, only the first need be considered, as the second and third are obviously untenable. The first ground is that on the facts stated in the bill and in the patent in suit the patent is void on its face for lack of patentable novelty and invention. The authority of the court to grant a motion to dismiss on this ground has been recognized by this court. Coca-Cola Co. v. Whistle Co. of America, 20 F.(2d) 261. The question for determination is whether it clearly appears from the drawings and specifications and claims of the patent that, resorting to common and general knowledge, the court may say that there is a want of novelty and invention in the patent and that it is so palpable that any competent evidence which might be offered in support of the patent would not show the fact to be otherwise. The defendant contends that it appears from the specification.that tire packages were old; that spiral wrapping with a strip was old; and that prior use of ordinary paper for wrapping tires was old; and, further, that the only difference between the patent in suit and the prior art is the use or substitution of crepe paper for plain paper, burlap, or other material which had been theretofore used as a wrap for annular or torie articles, and advances the proposition that the substitution of one old material for another old material is not invention if the new result claimed is attributable to well-known characteristics inherent in the material. But substitution of one material for another may and often has resulted in invention, depending, of course, on facts leading to or bringing about such substitution or the results obtained thereby. Walker on Patents (6th Ed.) § 66. Whether or not such substitution'of materials, assuming but not deciding, that that is all this patentee has done, resulted in invention, depends on questions of fact. The defendant seeks to draw an inference from the disclosure of the patent and the fact that crepe paper was old, that the new result claimed by the patentee; if any new result is obtained, is attributable, not to inventive genius in the selection or use of the substituted material, but to well-known characteristics inherent in crepe paper. But that is an inference upon which the plaintiffs are entitled to a trial upon the merits. On this motion facts alleged in the bill are, of course, taken as admitted. It alleges that the package of the patent has been eon-tenuously since 1908 extensively used in packaging for storage and shipment annular and torie articles; that many millions of the patented packages have been made and used; that they are used, exclusive of all others, for coils of garden hose, and for 90 per cent, or more of individually "wrapped wire coils, and on many vehicle tires; that there has been public acquiescence in the validity of the patent; that the patented improvements have been generally used by many concerns operating under express lieense from the plaintiffs, the names of twenty-eight of such concerns, constituting a minority in nmnber, being set out in the bill. Further, paragraph 10, reads: “The patented packages, while analogous to, are substantially different manufactures from those of the prior art and by utilizing in a new manner thitherto unrecognized properties o± the materials used give rise to new results and to new and added functions in packages, said packages being much more efficient and of greater durability than those theretofore known and serving to remedy defects of prior packages which those skilled in the art had for a long time prior to the invention vainly endeavored to obviate.” If the allegations of the bill are sustained by competent evidence, invention may well be found, particularly in view of the recent decision of the Circuit Court of Appeals of this circuit m Allen Filter Co. v. Star Metal Mfg. Co., 40 F.(2d) 252. To sustain the motion would be to deprive the , ., , , plaintiffs of an opportunity to support the grant o± the patent. A denial ox it still leaves to the defendant full opportunity to raise all questions now raised and to rebut such evidence as may be offered by the plaintiffs., Even if the question was a doubtful one, the rule expressed by the Circuit Court of Appeals for the Second Circuit in Beer v. Wallbridge, 100 F. 465, 466, would be determinative of this motion. The court there said: “A patent carries with it a presumption of novelty, and the trained experts of the patent office have decided that what was done by the patentee arose to the dignity of • . • TTTi x.i *j. i • mi invention. ^ Whether it was an obvious thing or not is a question of fact; and if it should appear that upon the introduction of the patented article it commended itself to the public, and was accepted as supplying what had long been wanted, and obtained an extensive sale and use, these facts might be decisive.” It appears from defendant’s brief and argument, though not of record, that this patent was before the District Court of the United States for the Northern District of Illinois, Eastern Division, in the suit of the present plaintiffs against Nehring Electrieai Works, and that there the alleged act 0f infringement consisted in wrapping coils 0£ udre with crepe paper. The District Court sustained defendant’s motion to dismiss the bill on the ground that the patent was void- on its face. 37 F.(2d) 953, affirmed (C. C. A.) 45 F.(2d) 354. I am satisfied from a reading of the opinions in that eaSe that the allegations of the bill before the Illinois court were different in material respects from the allegations of the bill before this court, and that the principle of comity urged by the defendant has no application to a decision of this motion, The motion to dismiss must be denicd,

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BREMNER et al. v. MASON CITY & C. L. R. CO. No. 867. District Court, D. Delaware. April 1, 1931. Clarence A. Southerland (of Ward & Gray), of Wilmington, Del., for all plaintiffs. Wm. P. Peter, of Chicago, Ill., for Chicago, R. I. & P. Ry. Co. M. L. Bluhm, of Chicago, Ill., for Chicago, M., St. P. & P. R. Co. Frank H. Towner, of Chicago, Ill., for Chicago Great Western R. Co. Nye F. Morehouse of Chicago, Ill., for Chicago & N. W. Ry. Co. C. W. Wright, of Minneapolis, Minn., for receiver of Minneapolis & St. L. R. Co. Robert H. Richards, of Wilmington, Del., Wm. E. Lamb and T. K. Humphrey, both of Chicago, Ill., and Earl Smith, of Mason City, Iowa, for defendant, FIELDS, District Judge. This proceeding has been instituted by ,r H. Bremner, receiver of the Minneapolis & St. Louis Railroad Company, Chicago & North Western Railway Company, Chicago Great Western Railroad Company, Chicago, Milwaukee, St. Paul & Pacific Railroad ComPaAy> sud Chicago, Rock Island & Pacific Railway Company, five trunk-line railroad companies, against Mason City & Clear Lake Railroad Company, a corporation of Dela.ware, engaged in operating a line about ten miles long of railway from Clear Lake, Iowa, to Mason City, Iowa, with about five miles of street railways in those two towns. The bill alle-?S tllat tbe Plaintif& °Perate lb?es °f rail" W m interstate commerce extending in and through the state of Iowa and adjoining states, with railway lines converging in the city of Mason City, Iowa, and for more than twenty years have maintained in the city of Mason City large terminals with side tracks, industry tracks, switch tracks, and railway faeilities suitabl convenient, and reasonably . , , . , adequate to serve, and have served, all the mdustnes m that territory, including the terntory known generally as the Brick & Tile Field of Mason City, Iowa, in which there are a number of brick and tile plants operated under the name of Mason City Brick & Tile Company. The bill further charges that the defendant company within the last sixty days has built certain extensions of its main lme into some of tbes,e bnek and tüe Plants> wlthoat havln& drst obtamed from the Interstate Commerce Commission a certificate that tbe Present or future convenience and necessity required such construction, and has dedared its purpose and intention of building like extension into all of such plants, and cause the plaintiffs to be excluded wholly or in part therefrom. The matter is before the court on plaintiff’s motion for a preliminary injunction, and has been heard on verified bill of complaint, affidavits, and exhibits. The plaintiffs ask that the defendant be temporarily restrained from constructing, or attempting to construct, any other or further extension of its tracks, other than now constructed, into any of the brick and tile plants or other industries within the territory described in the bill of complaint as the Mason City Brick & Tile Field, unless and until they shall first have obtained from the Interstate Commerce Commission a certificate that the public convenience and necessity require the construetion and/or operation of such extension of the defendant’s Une of railway, as provided in the Interstate Commerce Act as amended; and from disconnecting, taking up, or-removof the tracks, lines of railway, or other property operated by plaintiffs or any of them; and that the court on final hearing make the injunction permanent. The defendant attacks the right of the plaintiffs to maintain this suit, denies that it has constructed, or has any intention of construeting, an “extension” of its line of railway, and declares that it is merely constructing a “spur, industrial or side track”; and further that, even if it be found that the work being done and to be done amounts to an “extension of its Une of railway,” the defendant is a street, suburban, and interurban railway company not operated as a part of a general steam railroad system of transportation, and therefore is not required to obtain from the Interstate Commerce Commission a eertificate of public convenience and neeesSlty- The plaintiffs rely on paragraphs (18) and (20) of section 1 of the Interstate Commeree Act, 49 USCA § 1 (18) and (20). The material provisions of paragraph (18) are: “No carrier by railroad subject to this chapter shall undertake the extension of its line of railroad, * * *' or shall acquire or operate any Une of railroad, or extension thereof, * * * unless’and until there shall first have been obtained from the commission a certificate that the present or future publie convenience an.d necessity require or will require the construction, or operation, or construction and operation, of such additional or extended Une of railroad/ * * * ” t- , ... aragraph (20) provides: “Any construction, operation, or abandonment contrary to the provisions of * * * paragraph (18) * _ may be enjoined by any court of competent jurisdiction at the suit of * * * any party in interest.” The defendant, on the other hand, depends for its sufficient protection on paragraph (22) of section 1 of the same act (49 USCA § 1 (22), which provides: «pbe authority of the commission conferre¿ by paragraphs (18) to (21), both inclusive? sban not extend to the construction * * * 0f sptlr, industrial, team, switch- or side tracks, located or to be located wholly within one State, or of street, suburban; or iuterurban electric railways, which are not operated as a part or parts of a general steam rajlroad system of transportaj-jon » ' The first derfenbe considered is tbat of aehes', ^aebe8 18 not, hke limitation, amer® laps? of ^ but 18 ?™perly f .qUef ^ °f ^ “equity of permitting a claim to be ®nforced bfaase °* f°me change m tbe condition or relations of the parties. PeirceSmith Converter Co. v. United Verde Copper Co. (D. C.) 293 F. 108. The defendant contends that the construction complained of was begun November 5, 1930, and that shortly after that time representatives of all five 0f the plaintiffs were notified of that fact, On the other hand, the general counsel of one of the plaintiff railroads wrote a letter to an attorney representing the defendánt railroad company on November 20, 1930, in which it was stated: “We entertain no doubt whatever but that the Interstate Commerce Commissien would hold your company subject to its jurisdiction in respect to the proposed extensions and would expect your Company to submit an application for a certificate of pubUe convenience and necessity before either eonstrueting or operating the additional track-age. * * * In our opinion your road cannot safely proceed without the certificate. , . .„ Tbe feeord do®s no* .disclose !?at’ *5 a“y’ r®?.Jy ™as “ad® to tins letter, defendant did not go to the Commission. ? 18 unnee®/sal’y to/ f “ detf to'th® evi’ dence ori.this point. I thmfc.the plaintiffs T'f nfMs m ™tmS-a ^re-bl® len/tb °f lme sf ybetber the defendant mt“ded í° apply to tte ^erstate Cornme3(ee ^or a certificate of eonVe“ence‘ ™e deíay “ b™g“g suit may and pTOperly. sbouId llmlt tbe extent «** the preliminary injunction sought, as, for instance, operation of lines constructed and in operation-at the time of bringing suit, such delay as has occurred in this case is not suffieient to bar plaintiffs’ right to all relief by way of preliminary injunction. Further, I am in full accord with the views expressed by the court in Lancaster v. Gulf, C. & S. F. Ry. Co. (D. C.) 298 F. 488, 490: “The very structure of the act shows that injunction Wdl he against the operation of the track, as wed as against its construction, so that it is not possible for any person to claim a right against injunction springing out of the delay m questioning the eonstnietion of a forbidden track, since operation over the track is forbidden equally with construction.” I think the facts do not sustain the defense of laelles- The defendant also urges that the plaintiffs can have no relief in this suit, for the reason that it does not appear that any one of them is a “party in interest” within the provisions of paragraph (20), for the reason that no one of the plaintiffs has an absolute right to demand that the tile company ship its freight over the lines of a particular eompany, and, no individual plaintiff having any such right, collectively they can have no such •right; and, further, that the right of each of the plaintiffs to enter these premises and take any freight is, under a license with the tile company, terminable by either party after diie notice. It also asserts that the tüe company had the right to route its freight over any one or more of the lines of the plaintiffs serving its plant, or over the line of the defendant, and even suggests it may use none of those lines, but ship1 wholly by truck or othér means of transportation, if it saw fit. It may be true that thé defendant has certain legal rights in this connection, but it had not exercised such rights up to the time of the filing of the bill in this ease, and we are not dealing with a state of facts that might arise. These tile plants have been in operation for many years, and were directly served by the rail lines of the plaintiff railroad companies, various of the plaintiffs having rails to one or more of the plants, and in the aggregate all plants were served by the five plaintiff companies. It is fair to assume that such traffic will continue to be hauled either by the lines of the plaintiffs or the proposed line of the defendant: To the extent that such traffic is hauled by other than the lines of the plaintiffs, it will result in a corresponding loss of revenue to the plaintiffs. A railroad eompany with which a proposed extension by another company will come' in competition is a party in interest within the meaning of the act in question, and may maintain a suit to enjoin construction of such extension in, violation of the act. Detroit & M. Ry. Co. v. Boyne City, G. & A. R. Co. (D. C.) 286 F. 540. Any other conclusion would nullify this provision of the act. While the raü Hneg of the defendant are situated wholly vithin the territorial iimits of the fltato o£ Iowa) it appears from the evi_ dence? and; in faet ig coneeded by tbe de_ £endan^ £ba£ ft handles interstate freight. It -g £berefore a common carrier engaged in interstate eommerce. Dahnke-Walker Co. v. Bondurant, 257 U. S. 282, 290, 42 S. Ct. 106, 66 L. Ed. 239; United States v. Union Stock Yard & Transit Co. of Chicago, 226 U. S. 286, 304, 33 S. Ct. 83, 57 L. Ed. 226. This brings me to the two real questions involved in this controversy: First, whether or not the new tracks already constructed and proposed to be constructed by the defendant railway company are “extensions” of its line within the meaning of paragraphs (18) to (22) of section 1 of the Interstate Commerce Act, 49 USCA § 1 (18) to (22), or whether they are separate industrial, team, switching, or side tracks, within the meaning of that act; and, secondly, whether or not the defendant is a street, suburban, or interurban electric railway not operated as a part of a general steam railroad system of transportation. These questions are not free from difficulty. While the first, whether the proposed new tracks of the defendant come within the provisions of paragraph (18), might be deeided on this record with some degree of satisfaetion, I think the second cannot. It inyolves questions of importance not only to the litigants, but, in view of the advance in the use of electricity to replace steam as motive power in connection with the operation 0f railway lines, to the railway industry in general. Moreover, the affidavits with reSpect to material points, both from the standpoint of the plaintiffs and defendant, are not satisfactory. At the argument, counsel for the defendant called attention to three eases before the Interstate Commerce Commission —the governmental body whose duty it is primarily to pass upon these questions — which he claimed dealt directly with the question of the meaning of the exemptions in paragraph (22), so far as they relate to interurban electrie railways being subject to the act, and holding that such railways were, under the facts of those eases, exempt from the operation of the act. At the same time counsel for the plaintiffs called attention to a like or greater number of cases before that Commission, arriving under the facts of those cases, at an opposite conclusion. Counsel went further, and conceded that they knew of no judicial interpretation of the words of this seetion. The importance of the questions involved and the necessity for a careful balaneing of the facts with the principles of law ap-plieable thereto lead me to the conclusion that it will be promotive of justice to postpone a decision on these points until final hearing, after full opportunity for the examination and cross-examination of witnesses. Little need be said on the balance of convenienee. Various tracks of certain of the plaintiffs have been disconnected and damaged, and there are other tracks in respeet to which the same wrongful action is threatened, The revenue from traffic which will continue to move over the rails of the plaintiffs which are still in place, but which are threatened with removal, would be lost to the plaintiffs, even though the court should compel restoration of such connections on the entry of final decree. A preliminary injunction will have the effect of maintaining the status quo. A denial of - such injunction will result in immediate and unquestioned loss to the plaintiffs, whereas the defendant will not suffer any substantial loss by awaiting the outcome of this litigation upon final hearing, and its oss if any, is susceptible of indemnification by bond. The defendant was free to make application to the Interstate Commerce Commission for permission to build what has been called an extension and have the Commission pass upon the question whether such new eonstruction is in fact an extension of its line within the meaning of the act, and also whether as an interurban railway it came within the provisions of the act. The defendant has not seen fit to do so. Instead of so doing, it proceeded with the construction of the new tracks. The plaintiffs, however, had no right to initiate such a proceeding before the Commission. The motion for a preliminary injunction will be granted.

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BARRETT CO. v. SELDEN CO. No. 1781. District Court, W. D. Pennsylvania. Aug. 17, 1929. For former opinion, see 32 F.(2d) 360. See, also, 48 F.(2d) 620. R. T. M. McCready of Pittsburgh, Pa., and Pennie, Davis, Marvin & Edmonds, W. B. Morton, and R. B. Canfield, all of New York City, for plaintiff, Alter, Wright & Barron, George E. Alter and R. A. Norton, all of Pittsburgh, Pa., and Newell & Spencer, of New York City, for defendant. GIBS0N District Judge. On February 27, 1929, this court fi ed an opmion, 32 F.(2d) 360, wherein Downs patent, No. 1,604,739', for an improvement ^ apparatus for promoting catalytic reaetions, was held to be valid and infringed by the defendant company. Subsequent to the filing of said opinion, counsel for the. defendant filed a petition for a rehearing. After notice to the plaintiff’s counsel, argumeat was had upon this petition wherein the matters set forth therein, as well as the issues of the ease, were discussed at eonsiderable length. Briefs were furnished by counsel for both parties, The petition contains some eight assign-men£s of reasons for the rehearing sought, Thé ^ reagon aggi d in substanee aR j t]lat tbe eollrt in its ini discloses & misllnderstanding of the construction and mode of operatioil of a Volhard petroleum £urnaee m operated by Henle, one of the antieipations of piaintiff>s patent claimed in defendant>s answer. Re-examination of the matter bas not satisñed the court that it fail-¿d to und6rstand the action of the Henle apparatus. The court, in describing the Vol-bard oven as used by Henle, mentioned an. iron tube surrounding the glass tube wherejn £be catalyst is contained. The defendant asserts that this iron tube was not an essential part of Henle’s operation of the Vol-bard oven. In the Henle publication refergnee was made to an Annalen article describing the Volhard apparatus. . This article, offered in connection with the Henle publieation, incorporates an iron tube in the Volhard apparatus. But whether the iron tube be included or not was immaterial in so far as concerned the point which the court was attemPting to make in respect to the Henle apparatus; that is, that no means were disclosed for the rapid transmission of heat from the catalyst to the kerosene bath. The second reason assigned for a rehearing asserts that the conclusions reached in the opinion are based upon the state of the /TÍ9°\°f % ^ on the state of the art in the year 1919, when tbe sieged invention of the patent in suit was made. The allegation in respeet to the basis of the conclusions in the opinion is quite without foundation in fact, and it would seem, might easily have been discemed by an examination of the whole opinion instead of picking out a single sentence and disassociating it from the rest of the opinion. This sentence was as follows: “Not to continue the enumeration of points of difference, in our judgment no chemical engineer in 1909 (the approximate date of the Henle article), without the exercise of invention, would have been able to construct any commercial apparatus for highly exothermic catalytic reactions which was based upon the principles of the Downs converter.” In this language we possibly did not clearly set forth our idea. What we were endeavoring to assert was that no chemical engineer possessed of a knowledge of the state of the art prior to 1909 would have been able, by means of the information fur- • -l i i. j.i tt i , . , ni-snea by the Jdenie article, to have conJ ^ ai«<vc> wu. structed a converter based upon the principies of the Downs patent. If this language was unfortunate, it should have been clanfied, it seems to us, by the fact that the opinion discussed all other anticipations offered in evidence either as anticipations pleaded in the answer or as showing the state of the art at the time of the date of the alleged invention. It is unnecessary to diseuss the remaining reasons set forth in the petition for a rehearing. They bring up nothing which was not fully argued and considered at the time the original opinion was filed. A reeonsideration of them — and we have endeavored to give them a careful reconsideration — has not brought any change in the conclusions first set forth. The motion for a rehearing will be denied.

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BARRETT CO. v. SELDEN CO. No. 1781. District Court, W. D. Pennsylvania. March 27, 1931. R. T. M. McCready, of Pittsburgh, Pa., and Pennie, Davis, Marvin & Edmonds, W. B. Morton, and R. B. Canfield, all of New York City, for plaintiff. Alter, Wright & Barron, George E. Alter, and R. A. Norton, all of Pittsburgh, Pa., and Newell & Spencer, of New York City, for defendant. GIBSON, District Judge. On February 27, 1929, by opinion filed in this court, plaintiff’s patent was held to be valid and infringed. 32 F. (2d) 360. Upon motion for rehearing, the testimony was reviewed and given further consideration; the motion being denied. An opinion was filed with the order, which set forth the reasons therefor. 48 F.(2d) 619. The case was thereupon taken to the Circuit Court of Appeals, which, on July 11, 1930, affirmed the judgment. 47 F.(2d) 867. A petition for a rehearing was then filed in the Court of Appeals. On November 14, 1930, before decisión upon the motion, the appellant moved the Court of Appeals to remand the case to this court to consider alleged newly diseovered evidence. The Court of Appeals did not pass upon the motion, but made an order whieh permitted appellant to present a petition to this court wherein we are asked to request the Court of Appeals to remand the record to the trial court in order that the decree may be vacated and the cause reopened for the purpose of considering newly diseovered evidence. In due time both parties herein were heard in respect to the petition. Upon hearing it developed that the newly discovered evidence of the appellant was the Belgian patent No. 147,959, dated February 15,1900, granted to Emile Raynaud and Leon Pierron,. for a new process for the manufacture of sulphuric acid. This patent came to file attention of counsel for the appellant a few days prior to the motion to remand in the Court of Appeals. Counsel had relied upon the fact that almost all Belgian patents are also found among those issued by France, Germany, and/or Great Britain. The patent under consideration was an exception to the rule, and counsel, who searched the patent lists of France, Germany, and Great Britain, but not that of Belgium dM not discover it pnor to trial and appeal. While the failure to examine the Belgian patent lists, and to produce the patent when the case was heard, was quite natural, and was one likely to occur even with the most careful and diligent counse , as has* it still must be admitted that counsel for the plaintiff below is correct in his assertion that the opposing party has not established ali the facts which should exist before the court would be justified in granting a new trial by reason of after-discovered evidence. However, we do not desire to base our decision-upon any question of laches, and have endeavored to carefully review the entire testimony of the ease in conjunction with the Belgian patent. ' The Belgian patent No. 147,959 is a process patent. It is termed by the patentees: “New Process of Manufacturing Sulphurie Aeid.” It contains no drawings of any apparatus designed to carry out the process, nor does it set forth a detailed description of any such apparatus. After stating that the apparatus proposed for use in carrying out the process was based upon the principle that a boiling liquid has a fixed temperature, the patentees described their apparatus as follows: “The tube or other apparatus containing the catalytic bodies is surrounded by another tube or apparatus containing a liquid boiling at a fixed temperature. The heating takes place from the outside and may be produced by the passage of the gases which have to be cooled. The boiling may be more or less violent but the temperature remains fixed. * * * “The tubes or- apparatus containing the bodies may be arranged in a methodical series as in the Hargreaves apparatus which readily permits the obtaining of variations of content of the bodies or the variations of temperature and if necessary the suppressing of 0I1e or more of the elements without interrupting the working.” The Hargreaves apparatus, in the-form it appears in publications exhibited to us, shows a sef 0f ten cast-iron cylinders, each 18 feet jn diameter and 12% feet high, arranged in two rows of five cylinders each. The multiplication of cylinders was for the purpose of taking care of progressive steps in the manufacture of sulphuric acid by passing the reaction gases successively through each of the cylinders containing the catalysts, which, incidentally, vary in strength. Thus different degrees of heat are created by the reaction in eacb cylinder. As stated in the Belgian patenj; «. • • This temperature (most favorable for tbe rea<3tion between S02 and 0), witMn certain limits (about 300 to 700° C.), ig ^ lower the more the body is eharged witb piatinum black or metals of the platinum £ot tbe same ous mixture, or, &r fte game eaM tic bod tbe less tbe are diMed and more nearly the fnTTnlli„ qq2J-0 ” , , To accomplish the combination of sol-plmrous anhydride and oxygen, the Belgian patentees suggest, m conjunction with proposed means for maintaining a uniform temPerature, a cylinder which contains catalytic bodies of low platinum content near the point of admission of the gaseous mixture, and below these bodies in the cylinder other catalytic bodies of higher platinum content, and below the last catalyst other bodies of less platinum content. By this arrangement, patentees state: “It then follows that a notable portion of fbe gaseous mixture, while it is rich, is transformed from the start by bodies of low confent an¿ as it becomes impoverished it encounters bodies whose greater content cornpietes the transformation; if the action has gone beyond the objective and a deeomposition of the sulphuric acid formed has taken place, ■ the recombination then operates in contact with bodies of lower content.” It would doubtless be presumptuous on our part to express the opinion that the patentees’ 3 in 1 cylinder would be commercially inoperative, by reason of the impossibility of long preserving the exact relations necessary between the strength of the gaseous mixture and the strength of the catalysts, and the variations in heat of the reactions in the different parts of the cylinders, although such an opinion would have some justification in the fact that patentees’ suggestion has never advanced beyond the obscure paper patent .stage in so far as the manufacture of sulphurie acid is concerned. Whether or not our doubt in this respect is well founded, it is apparent that material differences exist in the process suggested by the Belgian patent and that contemplated by Downs. In the sulphurie aeid reaction, excess of heat at an early or middle stage of the reaction may cause a decomposition of the sulphuric acid, but the elements may recombine upon being brought in contact with a weaker eataiyst; but, in the phthalie anhydride reaction, the partial oxidation of a product, excess of heat ruins, and insufficient heat, if it does not absolutely destroy, results in an inferior produet. It will be noted that the problems of the respective patentees were not identical, but a still more material difference exists, The Belgian patent was for a process, while Downs’ patent was for a specific apparatus. It is true that the Belgian patentees have mentioned apparatus, supra, as suitable for their proposed reaction. No drawings of sueh apparatus have been made a part of the petition for the patent, and the description leaves much — too much, we think — to^ be imagined. It discloses the patentees’ 3 in 1 eylinder within another cylinder containing boiling paraffin or oil; the heating being “from the outside and may be produced by the passage of the gases which have to be cooled.” The patentees also possibly contemplated surrounding with the boiling liquid a series of cylinders each containing uniform eatalyst bodies but of different platinum content. With the Downs patent before us, it is not difficult to imagine the Belgian patent apparatus as a general application of the same means and principles used by Downs, We can attach the condenser, or even the means for varying the pressure upon the boiling liquid, to the proposed Belgian apparatas, although these features are unmen■'tioned in the patent; but getting no light from Downs, and considering the proposed apparatas in connection with the state of the art at the time, it must be agreed that the description is exceedingly vague. The patentees may have had a clear idea as to the meth°d hy which the surrounding fluid was to be heated by the passage of the hot gases' of the reaction, but they certainly have not disclosed it. When we consider the magnitude the apparatus in use at the time for the manufacture of sulphuric aeid, and the neeessary thickness of the walls of the catalyst cylinder, we know that Raynaud and Pierron did not contemplate the intimate heat relation between the reaction within the catalyst cylinder and the surrounding fluid which was 0Ile °f the main features of the Downs apparatas, with its attenuated tubes. As we-view the patent, it cannot be held to be an anticipation of Downs. It does propose to apply certain of the principles and means of' which Downs made use, but, as pointed out ™ our original opinion, the novelty disclosed by the Downs patent did not consist in any chemical discovery, but in specific apparatus-which used and applied old principles and well-known means in such a way as to attain new results and bring about an advance in the manufacture of phthalie anhydride, or in. the promotion of exothermic catalytic reaetions which could be successfully performed, onty within narrow limits of temperature, Counsel for the defendant, in their able- and forcible presentation of their petition for the request to remand the cause, do not asserfc that the Raynaud and Pierron patent is-a complete anticipation of the Downs patent, They are willing, at least for purposes of' argument, to admit that the latter patent is-valid, but only to a very limited degree. They are willing to admit that the Belgian patent adds nothing to the record with respect totae claims which specify mercury as the liquid to be used, or to those claims which add' means to .change the boiling point of the liq-tad by regulating the pressure upon it. The Downs apparatus was evolved for use in the manufacture of phthalie anhydride, an^- possibly its utility may be confined to-such manufacture, or to other exothermic reactions which occur at substantially the same-temperature. The surrounding liquid, if the apparatus is to be commercially effective,, must have in common with mercury the quality of being able to withstand long boiling without breaking up or suffering material deterioration, but we can see no reason for limiting thé patent to apparatus which uses mercury as the liquid part. It may be that many liquids exist which possess that neeessary quality. In our view of the Downs patent, although it combines many well-known chemical and physical principles, it is not to be put in the category of those patents which disclose some slight improvement upon a ba- ,, , ° ,, , , r, . sie patent, and consequently to be confined withm very narrow limits. If the only novelty in tbe Downs apparatus were tbe use of mercury as the bath, the patent would be invalid, because mercury had been so used, in different apparatus, prior to Downs. The same thing is true in respect to the means for varying the pressure upon the liquid bath. The mere addition of such means, or the use of such means plus mercury as the surrounding liquid, did not, in itself, eonstitute patentable novelty. Tbe apparatus as a whole was new and brought about a distinct advance in tbe phthalie anhydride art. Of that whole, however, the pressure means, although an advantageous element, was not an absolute essential to operation. It was used only when the catalyst deteriorated. In our opinion, the validity of the patent is not limited to those claims which specifically designate mercury as the liquid of the bath, and-set out means for varying the pressure; or, conversely, those claims are valid (as limited . ,, . ... . ... . , .» by the description) which do not specify mercury as the bath and do not include pressure means. We have endeavored to examine and weigh the force of the Reynaud and Pierron Belgian patent with that degree of care de- . . .7.. n ,i manded by the force and ability of the eoun- , J°, . selo presenting it. That examination has not led ns to the conclusion that our original decisión would have been other than it was if that patent had been offered in the original trial. This being so, the petition of the defendant, praying- this court to seek the remand of the ease from the Circuit Court of Appeals, must be denied.

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In re BAY CITIES GUARANTY BUILDING-LOAN ASS’N. No. 16175. District Court, S. D. California, Central Division. April 9, 1931. Gold, Quittner & Kearsley, of Los Angeles, Cal., for petitioning creditors. David H Cannon, of Los Angeles, Cal., for alleged bankrupt. JAMES, District Judge.. The questions heretofore submitted , . . m , .. , , , , , ,, o decision, after hearing had, relate to the sux- « . « xi n ? ficieney of the alleged answer to the involuntary petition, as filed m the name of the alleged bankrupt. The petitioning creditors have moved to strike from the flies the alleged answer on the ground that it was not authorized to be made on the part of the alleged bankrupt. Counsel for the answering party has countered with the objection that the bankruptcy court has no jurisdiction of building and loan associations as organized under the California law, and with a showing that the board of directors, after the alleged answer was filed, regularly ratified the filing of the same. The questions briefly are: (1) Is a building and loan association a bankmg corporation, and hence exempt from the jurisdiction of the bankruptcy court ? (2) Did the action of the board of directors of the alleged bankrupt, taken subsequent to the filing of the alleged answer ratifying the filing of the same, give validity to the pleading1? i8) thf answer^is to rzed should the court m the circumstances of the case allow an amendment to be made? As to the matter of jurisdiction, the Eederal Bankruptcy Law as now in force (section 4, subd. (b), 11 USCA § 22 (b), provides that involuntary bankrupts may be: “Any natural person, except a wage eamer or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any moneyed, business, or commerical corporation, except a municipal, railroad, insurance, or banking corporation. * • *» The Bankruptcy Act was amended in igio, and was extended to cover moneyed, business, or commercial corporations. Tfie provisions of the Bankruptcy Act creating exempt classes are strictly construed, and corporations claiming such exempt status must clearly come within the descriptions used. See Collier on Bankruptcy, vol. 1, p. 212. determining characteristic of a banking institution is that it shall receive money or do posits, which it may use in the course of its banking business, but which it is bound to rePa7 to depositors. Building and loan associations are organized for the purpose of investing or loaning the money of its eertifieate or shareholders. The California Civil Code, § 633; provides ^ parfc. . “That 110 such association shall, at any time, have or carry upon its books, for any * a . , member or investor, .any demand, commercial , , . 2 ,.i , , or checking account or any credit to be withdr£Wn the presentation of tia. ble eheck or draft» . ^ xThe same section of that law provides ^at every building and loan corporation m setting forth the purposes for which, it is or|amz<?d in its articles shall state that it is ^ormed «^courage industry, frugality, borne building, and savings among its shareholders and members; the accumulation of sa™igs; the loaning to its shareholders and members of the moneys and funds so accurnulat®d¿ wlth the Profits «“d ™ngs thereon, and the repayment to each of his savings and pronts, whenever they have accumulated to fte M1 value of the sh or at anv time when be shall desire ^ same or when the eorporation shall desire to repay the game> as a may be provided in the by-laws;” _ , , Bui!d^.iand ,loan sociations under the laws of Cahfomia are not under the supervision of the banking department of the state, ánd are excluded from regulations under the state Banking Act; they are not in-g ted b fte superintendent of banks; tbere^ ig a geparate supervising. offleial who examines into their business affairs and who checks improper or unsafe transactions and who may cause' them to be liquidated. The Circuit Court of Appeals for the Eighth Circuit, in the ease of Gamble v. Daniel, 39 F.(2d) 447, 450, had under consideration the question as to whether, under the law of Nebraska, a corporation, there described as the Peters Trust Company, was a banking corporation. What was said of the law there is applieable here; quoting from the opinion: “When Congress spoke of ‘banking corporations’ it spoke as of 1910. It used the words in no technical nor special sense, but as they were then ordinarily understood. At that time, the ordinary conception of a bank was of a business which was based primarily upon the receipt of deposits (general or speeial), which deposits were used by the bank for loans, discounts, buying and selling commereial paper, and other business purposes, * * Other businesses might and did, and still do, deal in commercial paper, make loans or borrow money without any one thinking of them as banks. When a business takes deposits and then does the above or related things, every one knows it is a banking business. [Citing eases.] * * * In short, while there may be other attributes which a bank may possess, yet a necessary one is the receipt of deposits which it may use in its business.” There are distinct differences between the charaeter of the business done by banking institutions properly so called and investment organizations, of which building and loan associations are a marked example. Remembering that business organizations, within the class excepted from the operation of the Bankrupty Act, must answer strictly to their deseriptive character, the conclusion is readily reached that the alleged bankrupt in this case does come within the Federal Bankruptcy Act and that it may be adjudicated a bankrupt. While the point as to jurisdiction appears not to have been made, federal courts in California have assumed jurisdiction in bankruptcy heretofore of building and loan associations. See Circuit Court of Appeals decisions, Ninth Circuit, in Wilson et al. v. Continental Building & Loan Association, 232 F. 824, and Merchants’ National Bank v. The Same, 232 F. 828. The answer herein consisted of a bare denial that an act of bankruptcy had been committed and a denial of insolvency. It was purported to be verified by a director of defendant. The showing was made on the part of the petitioning creditors, and not denied by counsel for the alleged bankrupt, that the filing of the answer was not authorized at any regular meeting of the board of direetors, but that, at a date subsequent to the filing thereof, a meeting had been held, at which the resolution was passed assenting to and ratifying the action of the single director who made the verification. Passing the question which counsel for the petitioning creditors also makes that a director, as distinguished ^rom riie president and secretary of a corporate organization, may not make such a veriNation, it seems quite clear that, where an unauthorized answer was filed, which lacked official direction of the corporate organiza^I0n made through its regularly constituted ?®cers, sue-k a paper could not be given val-i^y by a subsequent ratification attempted k® niade by a board of directors. Being unauthorized when filed, it could not be given a better standing by approval made at a later directors meeting. ^ It follows that the objee^lori khe petitioning creditors to the answer *s taken, and that the answer should be stricken from the files, Touching the question as to whethei leave should be given to the alleged bankrupt to file an amended answer at this time, the) rule relating to the amendments of pleadings may be adverted to. The same rule as relates to amendments to petitions instituting bankjaiptcy proceedings may be applied to the filanswers and amendments thereto, ru^e^hat such amendments will not be allowed unless it clearly appears that' the ends of justice will be promoted thereby, Collier on Bankruptcy, vol. 1, p. 661; Wilder v. Watts (D. C.) 138 F. 426; In re Earthing (D. C.) 202 F. 557. Where amend-menl; to verification was refused, In re Refund Cash Grocery (D. C.) 30 F.(2d) 158. considering the discretion to be used in allowing amendments, the courts have given i=reat consideration to the interests of credi^ors. There are many facts before the court which were referred to at the argument which convince me that it would not be to the inter- ^ of the great number of creditors and shareholders of the alleged bankrupt to further delay the making of an order of adjudieation herein. Prior to the commencement of tJle bankruptcy proceedings, officers of this building and loan association appeared before the court and urged that, on the petition of a creditor in an equity suit, a receiver should be appointed. At that time, the building and loan commissioner of the state of California, under authority given him by the state law, had decided that, after an examination of the books of the alleged bankrupt, it was his duty to take over the business and cause its liquidation. Because of the prospective action intended to be taken by tbe commissioner, a receiver was not appointed in tbe equity suit, and immediately thereafter tbe involuntary petition in bankruptcy Vi , , .-I-was filed. Since tbe fifing of that petition, a great number of creditors have intervened in support of the petition. A receiver in bankruptcy was appointed by this court, and he has been acting for a number of weeks. An intervention by a few creditors was made for the announced purpose of opposing the petition in bankruptcy, but this intervention was finally withdrawn. It appears that, with' the co-operation of the receiver, a creditors’ , , . 1 , committee has been organized, and it may v j? • i * _o t ,, f \ .. n be fairly inferred that a majority of the , . . j , shareholders and creditors favor an immemi -x- •• diate adjudication. The organization is in rm , i •. a sense co-operative. The pretended answer rj 11 •» / n t , n, t , , of the board of directors was filed at a date when the adjudication was almost due to be made. Considering the history of the case, the principal occurrences of which have just , A xixxi «x . been referred to, it seems that the interest of all of the persons principally concerned m obtaining satisfaction, or so mueh thereof as may result, of their claims for money invested, will be best served by bringing the matter to a close and allowing adjudication to be made. It is possible that there may be liability claims against the directors, as to which no definite opinionis intended to be expressed, and which would afford reason why those qffleers should, as against the interest of the general creditors, want to delay liquidation through the bankruptcy court. 6 . ... The answer to the involuntary petition is ordered to be stricken from the files. The clerk is directed to enter forthwith an order adjudicating the association a bankrupt, with the usual reference to a referee.

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UNITED STATES v. STEIN. No. 513. District Court, N. D. Ohio, E. D. July 13, 1921. E. SWertz, Atty., Cleveland, Ohio, for plaintiff. E. H. Moore, of Cleveland, Ohio, and I. G. Mathews, of Youngstown, Ohio, for defendant. WESTENHAVEK, District Judge. The bill in this ease is, in substance, one to quiet plaintiff’s title against adverse claims of the defendant, and more particularly, to enjoin the defendant from repeated acts of malicious trespass and interference with plaintiff’s possession and with its employees and its tenants thereon. Defendant, notwithstanding the general denial of its answer, did not, on this hearing, dispute the allegations of interference and trespass, but, on the contrary, announced its purpose to continue the same in the event the preliminary injunction heretofore granted was dissolved. No point was made on the hearing or is made in the brief of the defendant, going to the jurisdietion of this court. Both parties have argued and presented to the court the single question of the superior title of the plaintiff to the property described in the bill and the superior right to possession thereof. _ This question alone will therefore be considered and decided. Plaintiff’s title depends on certain proeeedings said to have been taken under an Aet of Congress approved May 16,1918, entitled, “An Act to authorize the President to provide housing for war needs.” 40 Stat. 550. This act, among other things, authorizes the President of the United States, in order to provide housing for industrial workers engaged in industries connected with and essential to the national defense, to purchase, lease, requisition, or acquire by eondemnation or by gift, any improved or unimproved land, or any right, title, or interest therein on which such houses, buildings, improvements, and parts thereof have been or may be constructed. The only litigation on this power of purchase or requisition now material to be considered is that no occupied dwelling or place of abode shall be acquired except by contract, unless the necessity therefor shall first be determined by a judge of ^ Cireuit ?r Court °£ the Uni;ted States exercising jurisdiction in the locality where the land is situated. Power is also given to construct such houses and buildings as the President may determine to be necessary for the proper conduct of the existing war. He is also authorized and required to make just compensation therefor, to be determined by him. If the amount of the compensation thus determined is unsatisfactory to the perSQn entitled to reeeive the samej sueh person shall be paid 75 per cent, of the amount so determined and shall be entitled to sue the United States to recover such further sum as added to the 75 p.er cent, will make up such amount as will be just compensation therefor. This suit may be brought and eon-ducted as is provided by section 24, par. 20, and section 145 of the Judicial Code, 28 USCA §§ 41(20), 250. An appropriation of $60,000,000 is made by the act to enable the President to make just compensation to persons whose land is thus acquired, requisitioned, or condemned. Section 5 provides, in substance, that the power and authority granted by the act shall cease with the termination of the present war, except that the power and authority to care for, sell, or rent such property, as remained undisposed of, shall continue thereafter, and that all such property shall be sold as soon after the conclusion of the war as it can advantageously be done. It is further provided that, before any sales are consummated, the same must be authorized by Congress, The President, by another act, approved june 4; 1918 (40 Stat. 595) is authorized, if }¿s judgment such action is deemed neeessary or advantageous, to create a eorporation for the purpose of carrying out the provisions of the act first cited. It was under this act that the United States Housing Corporation was created. The President is also by both acts authorized to exercise all powers of discretion granted him through any agency or agencies he may create or designate. Several later acts were passed making supplementary and additional appropriations and finally authorizing the sale or disposition of property thus acquired and of houses thus constructed. No question is made that ample funds were not appropriated and at all times available to provide compensation. Later, on June 18,1918,-the President designated by executive order the Secretary of Labor as an agency through whom purchases and requisitions of such property might be made. On August 9, 1918, the defendant entered into a contract in writing with the United States Housing Corporation acting by authority of the President and the Secretary of Labor, for the sale and conveyance of the real estate now in dispute. The eon-tract of purchase included a two-story building, but otherwise no property was included which might not be requisitioned without condemnation, pursuant to the provisions of the first act. The defendant agreed to convey a good marketable title, free and clear of all ■ incumbrances, and including dower and homestead rights, and with the usual full covenants and warranties; also that he would furnish within five days an abstract of title showing a good marketable title thereto. This ■abstract was never furnished, and no deed was ever tendered ' j On September 11, 1918, the defendant conveyed to his wife and to his son, Russel Stem, an interest m this property. He and his grantees have ever since refused to perform the original contract of sale. _ The United States Housing Corporation immediately after the execution of the contract of sale, prepared Plans for the improvement of the real estate by allottmg, laying out, and grad-mg the same and constructing buildings thereon and at some date shortly subsequent to the 11th of September, 1918, entered into the possession thereof and proceeded to make such improvements, and m fact constructed thereon some forty-eight houses. No eontention is made that defendant’s wife and son were purchasers for value without notice of the outstanding contract of sale. Owing to defendant’s refusal to perform his contract of sale, plaintiff, through the Secretary of Labor, resorted to the powers of requisition referred to in the acts above cited. The order of requisition was made March 20, 1919. It omitted that part of the land eontaining the dwelling house, which could not be acquired except upon condemnation. Notice of this requisition was served on the defendant and his wife in person March 28, 1919, and on his son by leaving a true copy thereof with the defendant, the same being alleged to be the son’s usual place of abode. Notice of the requisition was also posted on the premises, and filed for record in the county in which the land is situated, March 29, 1919. No point was made at the hearing ■or is now made in argument respecting the technical regularity of the requisition pro■ceedings. Later, compensation in the sum of $8,524.25 was fixed by the Secretary of Labor, and notice given defendant thereof, with further advices that, if dissatisfied with the amount, he might accept 75 per cent, without prejudice to his right to recover just eompensation in the manner provided in said act. Later the defendant, his wife, and son, filed claims with the Secretary of Labor seeking a largely increased amount of eompensation, which was denied, but have never resorted to the remedies provided in the act to recover additional compensation, Upon the foregoing state of fact, I am of opmion that plamtiff has title to the premises described m its bill, and that its right to P°f f31°n “ suPflor the °£ df3^nt ?r a£,h“J?^e T son; T1“ States is undoubtedly the real 3t/nd tion, notwithstanding the United States Houslng Corporation, as a federal agency created for convenience in administering the law, mi M als0 haye been a b plain-m Defendant’s main proposition seems to be tbat tbe war bad terminated before tbe ert was requisitioned, and therefore ^ r to re quisition bad also been end_ ed ag & result o£ tbe isions o£ gection 5 o£ £be ori inal aet This proposition cannoj. be sustained. Tbe W£u, bad not terminated at tbe time fte p 6rty was requisitioned, gee Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U. S. 146 40 S. Ct. 106, 64 L. Ed. m Tbe boldi o£ tMg eage hag been repeatedl reafarmed in later eases by ^ g me Court and in£erior £ederal colu4s No attack was made at the hearing or in defendant’s brief upon the eonstitutionality °£ War Housing Act of May 16,1918. I* is sufficient, therefore, to say that in my opinion it is well within the powers conferred by the Constitution upon Congress, and that none of its provisions violate any elause o£ tlle Constitution. It is well-settled law that, the use being public, the necessity for the requisitioning, or condemning of propel’ty is n°t to be controlled by the courts, and that the judgment and discretion of the Legislature or of the other agencies, to which power is delegated to determine the necessity £°r taking any given property, cannot be controlled or reviewed by the courts. It is further settled law that, in requisitioning or condemning property for this kind of pub-lie use, it is not necessary that compensation should be paid in advance, but it is settled law that, if reasonable provision is made in the law whereby the property owner may be compensated, all legal requirements will be deemed to have been met and the rights of the property owner duly safeguarded. For authorities, see U. S. v. Forbes (D. C.) 259 F. 585; In re Military Training Camp (D. C.) 260 F. 986; U. S. v. O’Neill (D. C.) 198 F. 677; Crozier v. Fried Krupp Aktiengesellsehaft, 224 U. S. 306, 32 S. Ct. 488, 56 L. Ed. 771; Bragg v. Weaver, 251 U. S. 57, 40 S. Ct. 62, 64 L. Ed. 135. . , , A. decree may be entered finding the issues m tavor of plaintin, quieting its title against defendant’s adverse claim of title thereto and enjoining him from further trespass and interference as prayed.

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THE HELEN BARNET GRING. No. 1707. District Court, D. Maryland. Jan. 6, 1931. George Forbes and Henry L. Wortehe, both of Baltimore, Md for libelant. Niles, Barton, Morrow & Yost, of Baltimore, Md., for respondent, SOPER, District Judge. This libel against the schooner Helen Bar-net Gring is based upon a claim for cargo damage. The schooner is a vessel 202 feet in length by 40 feet beam, and was engaged to carry some 1,800 tons of fertilizer from Baltimore to Searsport, Me. The contract was covered by a general charter party for sailing vessels, under which the Gring was tendered to the Davison Chemical Company, the libelant, in the early part of February, 1929. She docked on February 12th at Baltimore, yras loaded during the 13th, 14th, and 15th, issued a bill of lading for the cargo on the l^th, sailed on the 17th, and arrived at her destination on or about Mareh 9th. When she reached Searsport it was discovered that ^bere was damage to her cargo, which has not been described in detail in the evidence, but ls estimated to have affected from 5 to 10 per cent, of the goods. The top of the cargo was dry, but in the lower hold the bags of fertili«F. ^ere- ™\toJ bei^ of four or five feet, ^“reached the fourth tier of bags. There was also a comparatively small damage affecting only 100 or 150 bags which were stored on the starboard side of the ship in the ^veen-decks. There 310 two general theories advanced by tlle respective parties as to the causes of the damage. The libelant claims that the ship was leaky and unseaworthy, and that her ™rs fail®d to e™e that degree of due dlllgenee undCT charter party, they were re(3ulred to USe m °rder to relleve tW selves of liability for damages arising from a defective ship. The libelant says that by reason of certain defective seams and leaks • ,, , „ „ ,, , , , , , m tbe bul1 of the ,vess01 she took water m§> Y07a^e'j "witli the consequent damage te her cargo. On the other hand, the ship owner and claimant of the vessel contends that the vessel was seaworthy in every partieular, but that on this particular voyage she met with particularly heavy weather, high winds, and rough seas, whereby she took only that amount of water which every wooden vessel must take at sea, and that in the rolling and straining of the vessel in the heavy seas, caused by high winds, she blew her bilges; that is to say, the water in her bilges was forced up, due to the rolling of the ship, through the crevices in the ceiling of the ship, and came thence in contact with the cargo. The court is' convinced that, whatever may be said in regard to the tendency of a ship of this sort to blow her bilges and injure her cargo in heavy weather, the preponderanee of the evidence shows that the ship was not seaworthy when she sailed. A number of circumstances contribute to this eonelusion. The vessel had laid at Newport News or Norfolk idle for some six weeks before the voyage in question. She was surveyed by Surveyor Leach on February 8, 1929. His testimony shows that to some extent, certainly so far as the interior of the vessel is eoneemed, he accepted the statements of the mate or engineer as to her condition, but he personally examined the hull of the ship, acting for the Boston Insurance Company. He wired that company on February 8th after his survey that the firing was satisfactory, but her seams must be searched between the light and load lines before loading, and that her owners should attend to this matter. His more formal survey report, of the same date, shows that the condition of the vessel was good in other respects, but under the heading of “Caulking” states that the seams and butts between the light load and the load line in places showed that the cement was broken and the oakum soft; that this condition was not serious, but was one which the owners should attend to before loading the next cargo. He reported that the deck and top side seams were in good condition. Notwithstanding this warning from the surveyor, which was communicated verbally to the captain of the ship, no searching of the seams was made and no caulking was done. When the ship got to Searsport and the damage to the cargo was discovered, she was visited by a representative of the shipper and also by a representative of the consignee. . Their testimony shows that the hold of the vessel was wet, that it was stained with the cargo to a height of four or five feet, and also that there was some damage to the cargo stowed in the ’tween-deeks on the starboard side. Their • testimony also shows that the captain complained that he had had no time to caulk the vessel before she sailed, and that he said he had not been able to secure a certificate of seaworthiness. He also stated that there was a defective steam pipe beneath the main deck underneath which the damaged cargo in the ’tween-deeks was found, A further examination of the ship was" made as to her seams by the surveyor Stein 0n April 3d, after the vessel had returned to Baltimore with a portion of the damaged goods. He found that the seams between the %]•Ioad “d the deck were in bad f ape, and_ that they required caulking be-f™® ,the Jf** f twenty-one P , m ^at Part hull; he found the wood “ tm?era of tbe bold ^’e water-logged; ^at the steam ppe ref erred to was rasty and Plated with pinholes, and be offered the °Pmion aa* tbe vessel must have had, during ™yage to Searsport as much as a foot of water over eellmS of tbe hold- d'he testimony on the other side as to this question of seaworthiness should also be referred to. There was a survey by the Suryoyor Schilpp on February 14th, before the vessel sailed. This survey seems to the court to have been quite casual and superficial. It was undertaken under a general contract between the surveyor and his insurance eompan7 and without particular reference to any repairs that, if necessary, should be made to the ship, or with reference to any particular contract or • proposed contract of freight movement. At that time the vessel was part-loaded so that a portion of her hull was nc|t opposed for examination, and she ■ was tying on the starboard side close to the pier upon which the surveyor stood to examine the hull. He could see only the starboard s^e °i the vessel and that imperfectly by reason of the conditions. He made no examination of the port side. His testimony is supported by a report which he made at that time to the insurance company that the vessei’s condition was good, and that she was sa^e ■®<>r the carrying of her cargo, This testimony does not convince the court that the ship was in good condition, particularly as the surveyor Leach, employed, it would seem, by the same insurance company, had found the defects above described when the vessel was lying in the water at Norfolk, and he had access to her hull. There is also a survey made at Searsport after the vessel arrived with her damaged cargo by Concord 'and Gilkie. There is the unusual cireumstanee that two surveys are offered to the court, one by the libelant and one by the owner of the ship, signed by the same surveyors and contradictory in terms. One of these surveys is undated, but refers to the fact that the surveyors went on board the ship on March 16th and March 19th to survey the •damage to the cargo. The report shows that the cargo was badly damaged from water whieh, according to the report, apparently came down through the thick work at the beam ends, owing to the heavy rolling and straining of the schooner. The report states that the schooner seems staunch, sound, and in every way fit to make the voyage, and in the opinion of the subscribers the damage to the cargo was due to the unusual violent gales encountered in the passage. On the other hand, there is the report offered by the libelant under date of March 21, 1929, referring to the same two visits of March 16th and March 19th. This report shows the quantity of damaged goods then noticed and concludes with the statement as follows: “As the survey was intended only to cover the cargo damage, we did not inspeet the hull of the vessel or examine the caulking.” This report is supported by an affidavit of the surveyors before a notary. tj. ,. ,, . ,, , ,, . . , It seems to the court that the contrast be- , ,, , , . .... , tween these two reports is so striking, and , , ’■ - the statement m the second report mentioned ,, , ... „ , . that no examination of the hull was made is . „ ., , so definite, that it is impossible for the court , ,, . , • . to conclude that there was no damage to the , „ . , „ , . ,, ... . ,, hull or defect m the caulking observable. & Finally evidence was offered by the. captain that there was no leak in the vessel during the early part of the voyage before the rough weather was encountered, and he accounts for the water which the vessel took entirely by reason of the violence of the storm, Reference was made during the testimony and during the argument of the case to some eyidenee of the surveyor Stein that the seams in the vessel at two or. three places were so wide apart that it was possible to insert a %g-inch ruler through the - shell planking, and, indeed, through the seams of the ship. It is argued that this is an extravagant statement at least, because it would have been impossiMe for the vessel, after having been loaded and after going to sea, to proceed without taking substantial quantities of water through these openings. It is not necessary to conclude that the openings in the seams were so very large that the vessel needed to be pumped all the time in order to find that there was defective caulking. It must also be borne in mind that the log of the ship; whieh. has been produced in court, has very little, if any, information in regard to the amount of water in the ship during the voyage, and it may well be that, before the rough weather was encountered, the pumps were adequate to keep the water in the hold within bounds, notwithstanding the defective eaulking. It is also most important in the opinion of the court that after the vessel returned to Baltimore she was caulked, and that she then went to Newport. News where the caulking was continued. There is also evidence that the steam pipe referred to was renewed. The testimony as to the caulking is verified by the captain of the ship, and that as to the renewing of the steam pipe was given by the purveyor Stein and not denied by the captain, N,° °ne has been P^dneed to show precisdy ^at repairs were made by the ship No bills ^ave been offered No survey on the part of the ship seems to have been made. _ Under all these circumstances it seems to eourt conservative to state that the great preponderance of the evidence is that the S^P was leaky when she sailed, that the own-notice of her defect, but failed to take ^™-e remedy it. It is, nevertheless, the theory of the own- ’. ers of the ship that under the terms or the . , , .. . . ,, . . „ charter party the shipper took the risk of , f ,/ 1 L. , ,. damage to the cargo, and that the cargo was , , ,, , • , , . „ , . ,, damaged through no inherent defect m the , ,, . , „ ,, ,, ship, but through the violence of the weather, T, ’ . ? , „ ,, , . It seems also to be the theory of the ship- ... . , , , owners that, even though there might have been some unseaworthiness of the ship, nevertheless, there would have been the same damage in a seaworthy ship if the violent winds which are recorded for the dates in -question had been encountered. The weathea? reports show that the wind ranged from 35 to 55 miles an hour at various points on the voyage. One of the terms of the charter party relates to the loading of the ship, and this is re-Red on by the shipowner in this case. This eiaus0 provides: “The cargo is to be loaded, trimmed and discharged free of expense to the vessel, the vessel providing free use of her tackle and other equipment as on board. Cargo tobe shipped on the vessel’s skin at the risk and expense of the cargo. Dunnage, if required, to be for vessel’s account.” The shipowner claims that by the true construetion of this language the cargo owners assumed all the risk when they put the cargo on the ship; amongst other risks it took that which has been described as the blowing of the bilges in rough weather, such an oeeurrenee as was noticed in the opinion of this court in the Charles Rohde, 8 F.(2d) 506, 1925 A. M. C. 1594. It may be assumed for the moment that the cargo was shipped at the cargo owner’s risk. There are two matters to be considered in this respect, and tbe first one is whether any dunnage placed on the ceiling of the ship would have been adequate to protect the cargo in such a storm. The testimony of Mr. Vane, one of the shipowners’ experts, is that no wooden ship is safe for the shipment of cargo, no matter how seaworthy she may be if she meets a violent storm; that no amount of dunnage will protect the cargo from the water which will be blown from her bilges. There is uniformity of testimony that all wooden ships leak more or less, no matter how seaworthy they may be, and it was Mr. Vane’s opinion that water so taken would necessarily be blown through the crevices of the ceiling, so that no dunnage* would protect a cargo unless it was at least three feet high, and that such dunnage would be impracticable. The other witnesses in the ease do not go so far, but content themselves with saying that wooden ships generally will leak, but the burden of their testimony is that dunnage will protect the cargo. The court is unable in this case, upon the testimony referred to, to reach the conclusion that all wooden ships are to be condemned as ineffieient carriers of goods in rough weather, The preponderance of the evidence is the other way. There remains in this connection the other question, whether the dunnage in this ease was adequate. It consisted of boards or timbers of some four inches thickness which were placed upon the ceiling over the-bilges. It is the testimony of Surveyor Stein that, if the ship was tight, the dunnage was sufficient; of Mr. Vickers, the head stevedore superintendent for the shipper, that in his experience dunnage of this sort was adequate and there is the further persuasive circumstance that the dunnage that was actually_ used was furmshed by the ship, and it would be a fair mference, if there were no testimony to the contrary, that the ship would not furnish m-adequate and insufficient protection to the cargo. On the other hand, there is the testimony of several witnesses, the captain of the ship, Surveyor Leach and Surveyor Schilpp, to the general effect that dunnage should be more than four inches in height and should run from five to eight inches, varying according to the witness. There need be no citation of authority that the burden of proof as to this excuse for the damaged condition of the cargo is upon the ship, and, after a careful consideration of the evidence on the point, the court is unable to say that the dunnage in this case was not adequate. There is testimony to the contrary. But it seems to tbe court that it is sufficiently offset by the testimony of ex-perieneed men who gave evidence for the libelant which, when taken with the fact that the ship furnished the dunnage in question, makes the court unable to say that the charge of inadequacy of dunnage has been proved, Moreover, it is the opinion of the court that the clause in question does not have the meaning for which the ship contends. It is said that the important sentence is this: “Cargo to be shipped on the vessel’s skin at the risk and expense of the cargo.” This is said to be an all-inclusive phrase, and i'ndieates that any damage to the cargo from the placing of the cargo on the vessel’s skin is to be borne by .the shipper. This sentence, it is contended, should influence the interpretation 0f the following one, which is, “Dunnage, if required, should be for vessel’s account,” and from this combination of sentences it is urged that the shipper takes all the risk of shipping 0n the skin or of determining what kind of dunnage should be used and of seeing that it js furnished, and, if the shipper fails to require the proper dunnage, then the loss is at his risk.. It seems to tbe court tbat it is reasonable to apply to the interpretation of this clause the rule .which was laid down in the Caledonia, 157 U. S. 124, 15 S. Ct. 537, 543, 39 L. Ed. 644, where the court, speaking of exeeptions in a bill of lading, exempting the shipowner from certain liabilities, said: “As the exceptions were introduced by the shipowners themselves in their own favor, they are to be construed most strongly against them.” Th¡g charter d is on a p.rinted foIm fumished by the ship’s brokers. The exeeptions referred to are in typewriting. But there geemg nQ a reason to the eourt why these exceptions, having been put in by the brokers for the benefit of the vessel, should-not be eonstrued strictly against the vessel, To the mind o£ the court tliese sentences indieate an alternative option offered to the-shipper: The cargo may be shipped upon the skin of the ship, and, if so, the' shipper takes-the risk; the cargo may be deposited upon dunnage, if the shipper prefers, and, if so, thedunnage is to be furnished by the vessel and charged to the vessel’s account. Under this, interpretation it is the duty of the vessel to furnish the dunnage, and it seems unreasonable to charge .the shipper with the responsibility for getting the proper kind of drnnage. While the shipper in this case happens to be an experienced one, certainly it had i o particular knowledge of the requirements of this-particular ship, and when the shipper gave notice, as he did in this ease, that dunnage would be required, it was the vessel’s duty to furnish adequate dunnage, and, if such was not furnished, the risk was the vessel’s, and not the shipper’s. There is a difference, it seems to the court, between the circumstances of the case at bar and that of the Harry F. Hooper (D. C.) 42 F.(2d) 758, 1930 A. M. C. 1071, and in the ease of the Elizabeth Edwards (C. C. A.) 27 F.(2d) 747, 1928 A. M. C. 1281, for in these eases it is clear that the risk of the particular stowage was taken by the cargo owners, ahd there was no such alternative clause as that referring to dunnage in the charter party in this suit. It is the conclusion of the court that the libelant is entitled to a decree, crediting, how-over, thereon the amount of freight money retained, and that the cross-libel of the owner of the ship for freight should be dismissed.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

KING v. RED STAR TOWING & TRANSPORTATION CO. District Court, E. D. New York. Jan. 10, 1931. William F. Purdy, of New York City (John E. Purdy, of New York City, of counsel), for libelant. Burlingham, Veeder, Fearey, Clark & Hupper, of New York City (Paul Tison, of New York City, of counsel), for respondent. inch, District Judge. Libelant King brings this suit against the Red, Star Towing & Transportation Company to recover alleged damages which he asserts was sustained by his coal boat Mifflin through negligence on the part of said respondent. The respondent denies any such negligence. The issue is one of fact, The allegations of the libel assert, in substance, that respondent agreed with libelant to tow the Mifflin from the College Point t, - , „ 0 „ , . T T ^ ^ °/n^|any S. /ar„’ ,on? Island, N. Y., to a berth alongside of a boat ^own as 1-K at Luekenbach Basin, N. J., and that respondent, instead of doing this, “ a-&\th& Pler.head at Luekenbach Basin with her stern projecting out into the Hudson River,” m spite of the fact that respondents’ tug eaptains were there warned of the danger, and tbat> when tbe tide fell, the Mifflin “rested on a submerged bank” which caused “her stem ^roP” below the surface of the water, causinS ber to smk 811(1 sustam tbe images complained of. The specific faults alleged are that respondents “failed to plaee the Mifflin in a plaee agreed upon, that she was left in a dangerous and exposed place without anyone to care for her. That the captains of the tugs did not heed the warning at Luekenbach Basin. That the Mifflin was not placed in a place of safety.” At the trial the sole witnesses for libelant were King, who was not present at the time of the towing, and a Marine surveyor who subsequently surveyed the Mifflin but who had never seen the Mifflin before. The burden of proving the negligence of respondent rested upon libelant. Aldrich v. Penn. R. Co. (C. C. A.) 255 F. 330. Libelant’s testimony fell fax short of the allegations above set forth. In fact, it would not be difficult to find that libelant failed to sustain the burden of proving any damage to the Mifflin directly caused by any act of respondent. However, it is not necessary to rest this decision on any such finding, for libelant has likewise failed to prove, by a fair preponderanee of evidence, that respondent was guilty of any negligence. The mere fact that the Mifflin sunk some time after she had been tied up, and the tags had departed, is not sufficient to prove negligenee. Aldrich v. Penn. R. Co. (C. C. A.) 255 F. 330, 331. The facts as I find them to be are that Ihe tacts, as I hnd tnem to be, are that some time m August, 1926, King brought over to the College Point dock his coal boat Mifflin. She had been damaged in some way on her port side forward, “10 or 15 feet back from her bow about 7 feet above light water mark.” King says he wanted some place to lay her up for repairs, but there is nothing to indicate any such repairs. He made an arrangement by which he was to pay some sum, not indicated, for wharfage, payable monthly, When the northeast wind came the swells would break over her. King allowed her to remain in this place from August, 1926, to December, 1927, when the respondent notified King to take her away. During all this time King says he paid the monthly wharfage bill and it is plain that he knew the situation. In December, 1927, therefore, and when respondent notified King to take her away, the Mifflin was in a condition which can readily be imagined from her unrepaired damage previously sustained before she came to respondent’s dock, and from the ordinary wear and tear produced by the circumstances above stated during a period of more than a year. On December 20,1927, an oral agreement was entered into between respondent and King which, in substance, was as follows: The respondent told King that it would tow the Mifflin, free of charge, if he would find some other place within reason around the harbor. King said to take the Mifflin to Luckenbaeh Basin, N. J. Respondent said that this would be all right and for King to a man on t,oard the Mifflin the follow-iwy morning (December 21). Ring then replied that he couldn’t “very well get a man out ther,e.” The respondent replied that then they would undertake the towage under such circumstances without a captain, provided King would have a man meet the Mifflin at Luckenbaeh Basin. Later the same day King came back and asked if the respondent would put the Mifflin alongside of a boat called the 1-K. The respondent agreed that they would do so “if we could get to it but to be sure to have his *ere to take cbarSe o£ the boat” To “us agreed. ^ these two conversations nothing was said about where the boat 1-K was actually lying at Luckenbaeh Basin, and so far as re-spondent was concerned it apparently relied entirely upon Ring to have Ms man there. This tow service was performed without charge to King in order to get rid of the Mifflin. It does not seem to me, however, that this makes much difference for, having undertaken the towage, it was under the duty to use due care to perform it. Accordingly, respondent that afternoon (December 20) gave an order to-one of its tug captains to take the Mifflin to Luckenbach Basin and, if they possibly could, get it in alongside of the 1-K. Captain Barber to whom this order was given is dead. Shultis, marine superintend-ent of respondent, was, however, an eyewitness to all that occurred, and from his testimony it appears that about 8 o’clock of the following morning (December 21) the Mifflin was pumped out, a canvass patch was placed over her damaged side, and two tugs, the Greenwich/and the Flushing, one. on each side, earned her safely over to Luckenbaeh Basin, where they arrived about 4 or 5 o’clock that afternoon. King failed to have any one at Luekenbaeh Basin. His present excuse that he did not know when the boat was to be towed should not avail in view of his conversation of the previous day. I have not overlooked the interest of witness for the respondent or of King which perhaps colors somewhat the testimony. When they reached Luekenbaeh Basin, they found the slip was full of boats. They did the best they could and duly tied up the Mifflin fore and aft to a earfloat “about 25 feet inside the pier head line.” It was the safest berth apparently available. It subsequently appears that the boat 1-K had been lying back in the slip where there was only a foot and one-half of water, and that it would have been impossible for the tugs, drawing 9 feet, to have reached it. !t was not accessible to the tugs when they arrived had they found it and King had no one present to point out where the 1-K was. King now claims that they should have pulled the Mifflin in by hand, but it is apparent that up to that time he had paid little attention to the matter. In fact, even after he was informed, the following day, that the Mifflin was sunk, he did not go over, but says he sent a man named Perry. The latter was not called as a witness. Finally King did himself go over. If Perry did go over, what he did is speculative, for, according to a witness, the Mifflin, when she was examined, after her submersion, was not in the same position in which the tugs had left her. It is entirely possible that Perry or others had moved or attempted to move the Mifflin after the departure of the tugs. However, this also would not excuse the respondent if its tugs had been careless in their selection of a proper berth. The only eyewitnesses to sueh selection are witnesses for respondent. King was not present. He had no one there to represent him. Perry was not produced as a witness. Two days elapsed between the tying up of the Mifflin and the visit of King. The proof of the. respondent therefore shows that the tug captains exercised reasonable care and skill under the circumstances to place the Mifflin in as safe a berth as they could at Luekenbaeh Basin. , She had been safdy towed a long distance from Long Is and to New Jersey, and she had been safely placed as near as conditions permitted to her designated berth. Schoonmaker-Conners Co. v. New York Tidewater Corp. (C. C. A.) 11 F.(2d) 470; The Milton (C. C. A.) 235 P. 287. The only duty resting on respondent was to take the Mifflin to a reasonably-safe berth and, she having no captain on board, to tie her np in a seamanlike manner. The Britannia (C. C. A.) 252 F. 583. Libelant has failed to prove that this did not take place. On the contrary, respondent’s testimony shows that it did. The Willie (0. 0. A.) 184 P. 279. As I have said, the testimony for respondent indicates that the damage now claimed was the same as the Mifflin had sustained pri- or to the towage. “She looked the same to me as she did when tve towed her. There was no change.” (Shultis.) If ndent was without fault in plae_ £ ber at her bert]l the subseqilent «cost of raigi b to t her ont of the way, cannQt be e]larg.ed to it. For the foregoing reasons, therefore, it seems to me evident that, aside from the fact 0f failure to sufficiently show damage, libel-an£ has failed to prove, by a fair preponderanee of evidence, that respondent neglected any resting upon it under the cireumstances. LiM ^miased> witb costs.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

In re BLOOMBERG. District Court, D. Minnesota, Fifth Division. April 9, 1931. J. J. Courtney, of Duluth, Minn., for petitioners. A. R. Smythe, of Duluth, Minn., for trostee. SANBORN, District Judge. It would serve no useful purpose to state in detail all of the facts shown by the record, which is quite voluminous. The bankrupt herself is twenty-two years old and a clerk in a store in Duluth. She lives at home with her father, Sam Bloomberg, and her mother. Her father managed the business of the Rothschild Shirt Shop, and she was merely the nominal proprietor. He left Rumania when he was about fourteen years old, came to Minneapolis in 1901 > or 1902, where he went into the restaurant business with a brother, and then came to Duluth shortly afterwards, where he went into the clothing business. After the store burned in which he was department manager, he became a salesman for Riehman Clothes, and in March, 1929, opened up the Rothschild Shirt Shop, Por a time he operated other stores in and near Duluth. It is claimed that he received goods for these stores on consignment from the Manhattan Woolen Milla and then sold them. He had an arrangement with the woolen mills for a 5 per cent, commission on the sales. His stores, aside from the one in Duluth, were subsequently taken over by the Boston Mills, a subsidiary of the Manhattan Mills, and he was made the buyer for the Boston Mills. The Manhattan Mills was a eoncern operated by a Mr. Cohen. Mr. Cohen and Mr. Bloomberg were closely associated in business. When Mr. Bloomberg reached a point where he could not or would not pay the creditors of the Rothschild Shirt Shop, he sent out first a circular letter asking the ereditors for an extension of time. Thereafter an involuntary petition in bankruptcy was filed against his daughter; and thereupon, and before schedules were filed, he gave to Mr. Cohen a list of all of the creditors with, the amounts of their claims and their addresses, and Mr. Cohen sent to them a circular letter stating that he was a creditor, and that he was anxious that the creditors should reeeive as large dividends as possible, and solieiting powers of attorney. Mr. Bloomberg called up a large number of the outside creditors on the long-distance telephone and requested them to send powers of attorney to Mr. Cohen. It is apparent that at that time Mr. Cohen and Mr. Bloomberg believed that they could put through a composition with the creditors of the Shirt Shop. At the first meeting of creditors, Mr. Cohen had powers of attorney from a majority of creditors, both in number and amount. The offer of composition was not accepted, and thereupon the creditors proceeded to the election of a trustee. Certain of the creditors objected to Mr. Cohen’s voting the claims for which he held powers of attorney, on the ground that these ha<i been procured through the active solieitation and interference of the bankrupt. He voted all of them for Mr. Paul A. Miller, Ihe other creditors who y/ere represented voted for Mr. E. G. Robie. Tiie appointment-of Mr. Miller was thereupon approved by the referee, in the following language: “I will say this, that the action of Mr.. Cohen in helping to save time in the administration of the estate, and his action in nomi-' nating a Trustee entirely disinterested, so far as any of the controversies in this proceeding are concerned, robs the charge of undue activity of the bankrupt of any partieular sting. So that even if it was conceded that the bankrupt has been overly active, and that that had some disqualifying effect, I could not refuse, I do not believe at this time, to approve of the Trustee that Mr. Cohen has-nominated. If there was any indication here that there was anything that should be investigated that would not be investigated by the party proposed, or if there should be any intimation at all that the bankrupt would be in any way able to cover up things through the connivance with the Trustee proposed by Mr. Cohen, I might use my discretion by disapproving of the selection. It just happens that Mr. Miller is in bed, and I do not know whether he has been consulted in this matter or n°tj hut my relations with Mr. Miller have been such just as they have been with Mr. Robie, that I have entire confidence in him carrying but his duties as Trustee without fear or favor. Both Mr. Robie and Mr. Miller have been extremely satisfactory to work with, and I am really glad to appoint either one or the other rather than some outsider, so that I will approve this nomination and permit the votes of Mr. Cohen to be received and given full value. In view of this decision 1 will make no ruling on the objections of Mr. Smythe.” It is conceded by everyone that Mr. Miller is a man of high character and thoroughly qualified for the position of trustee. Mr., Cohen’s activities and those of Bloomberg would appear to have been directed more to securing a composition with the creditors than to influencing the selection of a trustee friendly to the bankrupt or Bloomberg. The trustee, under the circumstances, contends that the approval of his appointment was a matter within the discretion of the referee, an¿ that no abuse of that discretion is shown, The rule applicable was stated by Judge Lochren in the case of In re Hanson (D. C.) 156 F.717, 718. There it appears that the referee, over objection, had approved the appointment of a Mr. Anderson as trustee. The court said : “As even the objecting creditors freely admit that Mr. Anderson is a man of responsibility, integrity, and high standing, it seems unfortunate that his appointment was brought about by such improper 'interference on the part of the bankrupts as should have caused it to be disapproved. But it is well-settled by all the authorities that the trustee represents the creditors, and not the bankrupt, in the administration of the estate; and that it is improper that the bankrupt shall actively interfere with the matter of his selee-. tion and appointment; and that, if he does interfere and the person aided by him is appointed by votes procured by such interference, the appointment should for that reason be disapproved. In re McGill, 106 F. 57, 45 C. C. A. 218; In re Rekersdres (D. C.) 108 F. 206; In re Henschel (D. C.) 109 F. 861. “More cases to the same effect might be cited, and none to the contrary are found. The rule is a salutary one, and based on obviously sound reason. It often happens that it becomes the duty of the trustee to actively antagonize the bankrupt by efforts to discover secreted assets, or to set aside conveyances as fraudulent, or to recover preferences. There should be no color of basis for suspicion of any partiality or sense of obligation on the part of the trustee toward the bankrupt. Hence, however high the character of a proposed trustee may be, the active interference of the bankrupt in favor of his appointment will render him practically ineligible to appointment as trustee in that bankruptcy.” In re Lloyd (D. C.) 148 F. 92, 93, Judge Quarles said: “By applying to the bankruptcy court, the bankrupt voluntarily surrenders all control over his estate, and the same passes to the officers of the law, under the act. Any effort on his part to control the selection of a trustee, or to shape any of the proceedings of the court, must be resented and rebuked. It is a pernicious intermeddling which cannot be too strongly condemned. Referees should be vigilant to detect, and take all lawful means to prevent, any such interference by the bankrupt in court proceedings. No attorney should be permitted to vote any claim that has come to him through the instrumentality of the bankrupt.” The same rule is either recognized or applied in the following cases: In re Lewensohn (D. C.) 98 F. 576; In re Rekersdres (D. C.) 108 F. 206; In re McGill (C. C. A. 6th) 106 F. 57; In re Machin (D. C.) 128 F. 315; In re Cooper (D. C.) 135 F. 196; Birmingham Coal & Iron Co. v. Southern Steel Co. (D. C.) 160 F. 212; In re Morris (D. C.) 154 F. 211; In re Sitting (D. C.) 182 F. 917; In re Ployd (D. C.) 183 F. 791; In re Kreuger (D. C.) 196 F. 705; In re Stowe (D. C.) 235 F. 463; In re Fisher (D. C.) 193 F. 104, 26 A. B. R. 793; In re White (C. C. A.) 15 F.(2d) 371; In re Stradley & Co. (D. C.) 187 F. 285; In re Rothleder (D. C.) 232 F. 398; Bollman v. Tobin (C. C. A. 8th) 239 F. 469; Petition of Safran (C. C. A. 1st) 275 F. 819; In re Day Lumber Co. (D. C.) 8 F.(2d) 146. As a practical matter, I am satisfied that in this proceeding Mr. Miller could administer the estate as well as any other person, and that the creditors’ interests might even be better subserved by him than by any other person, in view of the fact that he has now had charge of the estate for some two months. However, the complaint is not against him, but against the method used in securing his appointment. There is no question that Cohen, with the assistance of Bloom-berg, solicited powers of attorney, and no question that Bloomberg himself solicited certain of the creditors to give powers of attorney to Cohen. Had it not been for Bloom-berg’s activities, there is no reason to suppose that Cohen could have controlled the appointment of a trustee. In no ease should the appointment of a- trustee ever be approved, regardless of who he is, when it appears that his selection has been, directly or indirectly, brought about by the bankrupt himself or those acting in his behalf. The order approving the appointment of Mr. Miller is reversed, and the appointment disapproved.

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SUNDQUIST v. GRAY et al. THE FRANK LYNCH. No. 7210. District Court, W. D. Washington, S. D. Dec. 22, 1930. Huffier, Hayden, Merritt, Summers & Bucey, of Seattle, Wash., for claimants. Lord & Moulton, of Portland, Or., for libelant. CUSHMAN, District Judge (after stating the facts as above). The question first to be considered by the court is as to the propriety of the exceptive allegations of the claimants and the resistance affidavits of the libelant. Admiralty courts, within the sphere of their jurisdiction, act as courts of equity. Plummer v. Webb, Fed. Cas. No. 11,233, p. 893, decision by Justice Story; Benedict on Admiralty (5th Ed.) § 70. Among the principles controlling courts of equity recognized and applied in admiralty are matters of estoppel and laches. Higgins v. Anglo-Algerian S. S. Co. (C. C. A.) 248 E. 386 at pages 387 and 389; Benedict on Admiralty (5th Ed.) §§ 70 and 470. Whatever may be the propriety of ex-ceptive allegations in admiralty, pleas of the statute of limitations and laches are in the nature of pleas in abatement. In equity, demurrers and pleas were abolished by rule 29 (28 USCA § 723), and it was further therein provided: “ * * * Every defense in point of law arising upon the face of the bill, whether for misjoinder, nonjoinder, or insufficiency of fact to constitute a valid cause of action in equity, which might heretofore have been made by demurrer or plea, shall be made by motion to dismiss or in the answer; and every such point of law going to the whole or a material part of the cause or causes of action stated in' the bill may be called up and disposed of before final hearing at the discretion of the court. * * * ” Decision of Judge Hough in L. Little-john & Co., Inc., v. United States, 49 E. (2d) 467. There would, therefore, appear to be no occasion for the court to attempt to determine in this ease the question of laches upon affidavits in which the affiant states what he pleases and leaves unstated what he pleases. The exceptive allegations and resistance affidavits will not be further considered. There remain the .claimants’ exceptions and further exceptions and motion to elect." Claimants first except upon the ground of the bar of the two-year statute of limitations of the state of Oregon and section 33 of the Merchant Marine Act of 1920 (41 Stat. 1007, title 46, USCA § 688), and the three-year period prescribed by the laws of the state of Washington and for insufficiency of the excuses set out in the libel for such delay. These exceptions are overruled. Lincoln v. Cunard S. S. Co. (C. G. A.) 221 F. 622; The Alabama (C. C. A.) 242 F. 431; The Adour (D. C.) 21 F.(2d) 858 at page 860; Christianssand Shipping Co. v. Marshall (C. C. A.) 31 F.(2d) 686 at page 687; Stiles v. Ocean S. S. Co. (C. C. A.) 34 F. (2d) 627 at page 629. Claimants, in support of their exceptions, have cited the case of Plamais v. The Pinar Del Rio, 277 U. S. 151, 48 S. Ct. 457, 458, 72 L. Ed. 827, in which it was said: “ * * * To subject vessels during all the time allowed by the statute of limitations to secret liens to secure undisclosed and unlimited claims for personal injuries by every seaman who may have suffered injury thereon would be a very serious burden. One desiring to purchase, for example, could only guess vaguely concerning the value. ‘An act to provide for the promotion and maintenance of the American merchant marine’ ought not to be so construed in the absence of compelling language. * * * ” This case, however, was one brought not on account of unseaworthiness of .the vessel, "for it is therein stated: “ * * * He was being hoisted up to paint the smoke stack; a rope broke; he fell to the deck and sustained serious injuries. The aceident resulted from the negligence of the mate, who selected a defective rope. Am abundant supply of good rope was on board. * * * The record does not support the suggestion that the Pinar Del Rio was unseaworthy. The mate selected a bad rope when good ones were available. * * *” Claimants have also filed separate and further exceptions. These the court deems do not require discussion. Each one of them will be overruled. Claimants also move for an order requiring libelant to elect whether he will seek to obtain recovery on account of unseaworthiness or of negligence, and that libelant amend his libel and eliminate allegations material to the theory and cause of action abandoned by him in making such election. As disclosed by article VII, supra, the negligence of which complaint is made is not negligence separate and apart from unseaworthiness. The motion will be denied.

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THE PERTH AMBOY. THE ROCKHAVEN. Nos. 253, 310. District Court, D. Massachusetts. April 9, 1931. In case No. 253: Blodgett, Jones, Burnham & Bingham, of Boston, Mass., for libelant. Elbridge R. Anderson, of Boston, Mass., for garnishee. Maeklin, Brown, Lenahan & Speer, of New York City, for claimant. Storey, Thorndike, Palmer & Dodge and Raymond S. Wilkins, all of Boston, Mass., for American Cyanamid Co. In case No. 310: Burnham, Bingham, Gould & Murphy, of Boston, Mass., for libelant. Maeklin, Brown, Lenahan & Speer, of New York City, for claimant. Storey, Thorndike, Palmer & Dodge, of Boston, Mass., for American Cyanamid Co. BREWSTER, District Judge. On December 24,1929, the barge Rockhaven, carrying a cargo of copper concentrates and crude ore, was stranded while being towed through Arthur Kill by the steam tug Perth Amboy. Libels, to recover resultant damages, have been brought by the owner of the barge and by the owner of the cargo against the Perth Amboy. The two causes were tried together. Statement of Facts. The barge Roekhaven, carrying about 1,-330 long tons of copper concentrates and crude ore, was bound on a voyage from Maine to Chrome, N. J., which lies near the southerly end of Arthur Kill, west of Staten Island. The barge was 188.9 feet long and had a draft at the time of the stranding of 14 feet. She had no motive power. The steam tug Perth Amboy is 138 feet long, and her wheelhouse was about 20 feet abaft her stem. On the evening of December 24, 1929, at Poor House Anchorage, East River, N. Y., the barge Roekhaven was made fast in the usual way alongside of the tug on the latter’s port side. The bow of the barge was about 59 feet forward of the bow of the tug and 79 feet forward of the wheelhouse. Around 8 o’clock in the evening, the tug with her tow left Poor House flats and proceeded down through the channel in Arthur Kill, which lies between the New Jersey shore and Staten Island. They proceeded down the westerly side of Prall’s Island through what is known as the Northwest Reach. As the channel rounds Tremley Point on the New Jersey shore, its course changes, first near the southerly end of Prall’s Island, and about 1,000 feet below at the northerly entrance of the Southwest Reach, so called, it again changes to SW%S. The Southwest Reach begins about 1500 feet northeasterly of the plant of the American Cyanamid Company, impleaded in these proceedings, and the channel runs in a straight line as it passes the Cyanamid Company’s works. At a point on the easterly side of the Kill and opposite the plant of the American Cyanamid Company, there is a charted and well-known shoal known as the “11-foot roek.” The_ chart also shows that northerly of this rock and narrowing the channel at this point there is shallow water of only 14 feet depth at mean low tide. The average depth of the channel through the Kill is approximately 27 feet. Just above the narrow portion of the channel, on the Staten Island side of the Southwest Reach, was a red buoy which not only served to mark the easterly bank of the channel, but to warn mariners of the 11-foot shoal and the shallow waters lying northerly of the rocks. The night was clear and cold, with light, westerly, or northwesterly winds. The tide was ebb, and the current favored the tow. As the captain of the tug navigated his tow around Tremley Point, proceeding at a rate of 7 knots an hour through the water, he encountered a cloud of vapors and smoke. The captain testified that, when he ran into the smoke, he reduced his speed to half speed, but was unable to say at what rate he continued on down the channel. Others on the tug and barge failed to notice any appreciable reduction in speed after the smoke was reached. According to the evidence of the captain of the barge, the tow had proceeded “just a little way” after encountering smoke when the barge hit the easterly bank of the channel. . The location of the stranded barge was about 100 feet from the red buoy which then appeared off the starboard quarter. At this point, according to the chart, the area of shallow water projects into the channel just above the 11-foot shoal. The tide was unusually low at about 10:30 o’clock p. m. when the barge stranded, and soundings showed a depth of only 12 to 13 feet. That the level of the water at the time of the stranding would be below mean low water was predicted by government tide tables. After the barge struck, she began to fill in the forward compartment, and it was impossible to float her even at high tide. She was not taken off until the next day. That the barge ran upon a well-known shoal cannot be doubted. The captain of the tug was unable to state definitely what course he followed in rounding Tremley Point. The best he can give is that he was within the limits of the channel. Prom all the evidence I find that he was not shaping his course down the westerly, or starboard, side of the channel. On the contrary, the location of the stranded barge admits of only one conclusion, and that is that the tug had adopted a course in rounding Tremley Point which brought the tow over to the extreme easterly edge of the channel at a point where the charted depth of the water at mean low water was only 14 feet, which was precisely the draft of the barge, and where, on the day in question, the water being below mean low level, was of insufficient depth to enable the barge to pass without striking the bank: Navigators had been cautioned by the United States Army engineers to use the New Jersey side of the dredged canal when passing Tremley Point because “numerous rocky shoals lie in the easterly or Staten Island side of this stretch of channel commencing opposite the mouth of the Rahway River and extending upstream.” The captain of the tug testified that when he first encountered the smoke he was some distance from the red buoy, and that he immediately sent one of the crew to look for lights along the shore while he himself looked for the red buoy. He had run past the buoy because, when he first saw it, it w,as some 35 feet away on the port side and very near amidships on the barge. He then swung his tug to the westward. • At this time he must have been well over on the port side of the channel, because, notwithstanding his attempt to turn the barge to the starboard side of the channel, the barge struck the easterly bank. The witnesses indicated on the chart the point where the tow first entered the smoke as about 1,200 feet northerly of the plant of the Cyanamid Company. It is difficult to reconcile this evidence with the government weather reports, which showed that on the night in question the wind was light and coming from the northwesterly diréetion, and the testimony of witnesses that the wind was westerly. A westerly wind might have carried the smoke from the Cyanamid plant across the channel at or near the buoy. The buoy was between 800 and 900 feet below the indicated point, and it is extremely unlikely that smoke drifted as far up the stream as is claimed by the witnesses. The conclusion follows that the tow was nearer the buoy before any smoke interfered with the visibility. This fact, together with the position of the stranded barge as it lay immediately after she struck, would clearly indicate that the master had, even before he reached the smoke, so navigated his tow as to bring the barge over to the extreme easterly side of the channel. In December, 1929, the Cyanamid Company was principally engaged in making fertilizer. Whatever smoke drifted across the channel must have come from nine fertilizer driers, each of which had a stack approximately 40 feet from the ground. Between these drier stacks and the Kill were a number of other buildings of the company, the lowest of which was 50 feet high and one 80 feet high. Strictly speaking, it was not smoke, but steam vapor, which came from the driers, but which, in cold weather, would condense sufficiently to form a cloud of more or less density. This vapor was diluted with fresh air, and, in the nature of things, could not at any time have been of sufficient density to seriously interfere with navigation on the channel. There was a conflict in the evidence as to the extent to which this cloud of vapor cut down visibility. The captain of the tug said it w.as impossible to see lights on the shore, and he was therefore unable to determine in what direction he was going or how far he had deviated from the usual course. It is but natural that the captain, in his desire to find excuse for his conduct, should somewhat exaggerate the density of the smoke. The captain made no mention of any smoke in his log. The captain of the barge testified that there was never a time after they entered the smoke that he could not see lights. “They would be very dim, but I think we could see them all the time.” Other witnesses testified that lights could be seen on vessels tied up to the docks of the Cyanamid Company, and nearly all but the captain agreed that, with the exception of intermittent intervals of short duration, it was possible to discern objects on the New Jersey shore. There was also evidence that the smoke was high, so that the nearer the water one stood the greater the visibility. As to lookouts, I find that, up to the time the tug ran into the smoke, no lookout had been stationed on the bow of the tug, and at no time was a lookout stationed on the bow of the barge. The master of the barge was in the wheelhouse with the captain. The wheel of the barge had been lashed a little to port in order to overcome the tendency of the tug to twist her to, port. A member of her crew was on the barge near the wheelhouse awaiting any orders from the tug, but none were received from either the captain of the tug or of the barge. Some doubt arises from the testimony as to whether a sufficient lookout was at any time maintained on the tug, but, in view of my conclusions, this question does not become important. The captain of the tug had full charge of the navigation of the tow, and he admitted that he was aware of the 11-foot shoal and shallow water in the vicinity of it, and that prudent navigation would not admit of any attempt to tow the barge through 14 feet of water. He also testified that he had previously encountered smoke at the same place, and from other witnesses, produced by the claimant, it appeared that such encounters were not to be wholly unexpected. Conclusions of Law. I accept the proposition, urged upon the court by the owner of the tug, that the burden is upon the barge, which alleged a breach of duty to show that there had been negligence and unskillfulness in performing the contract undertaken to its injury (The W. H. Baldwin [C. C. A.] 271 F. 411), and that the liability of the tug is not that of insurer, but it is only held to the exercise of reasonable skill and care such as a prudent navigator would exercise under similar circumstances (Aldrich v. Pennsylvania R. R. Ca. [C. C. A.] 255 P. 330). But when the damage is caused by the stranding of the barge upon well-known shoals, on the wrong side of a charted channel, a prima facie case of negligence is made out, and the burden then passes to the tug to explain the cause of the disaster in such a way as to exonerate it from liability. Susquehanna Coal Co. v. Eastern Dredging Co. (D. C.) 200 P. 817; Burr v. Knickerbocker Steam Towage Co. (C. C. A.) 132 P. 248; Lehigh Valley Transp. Co. v. Knickerbocker Steam Towage Co. (C. C. A.) 212 P. 708; The Neponset (D. C.) 251 P. 752; The Coastwise (C. C. A.) 233 P. 1; The Taurus (D. C.) 91 P. 796. Upon the facts above recited, I have reached the conclusion that the captain of the tug was at fault in two respects: (1) In his failure to adopt a proper course as he came into the Southwest Reach; and (2) his failure to station proper lookouts. Before the captain of the tug had encountered the difficulties which he seeks to hold responsible for the accident, he, if he had acted prudently, would have rounded the point closer to the New Jersey shore and would not have allowed his tow to swing far over to the port side of the channel. As was said in The Mascot (D. C.) 48 P. 917, 918: “The general knowledge that a certain course was the proper course to take in consequence of some obstructions, and that it was the custom uniformly to adhere to that course, is sufficient to put upon the tug the risk of departing from it without reason.” No adequate excuse can be found for the-failure of the tug to observe applicable rules of navigation or to heed the published warning of the United States engineers. The John L. Hasbrouck, 93 U. S. 405, 23 L. Ed. 962; The Arlington (C. C. A.) 19 F.(2d) 285, 54 A. L. R. 101; The Coastwise, supra; The S. W. Morris (D. C.) 59 P. 616. The master of the tug was required to know the width and course of the channel at Tremley Point and to be aware of the existence of the dangers along the bank on the Staten Island side. The Robert H. Burnett (D. C.) 30 P. 214; The Henry Chapel (D. C.) 10 P. 777; See, also, The Mercury (D. C.) 291 P. 797. The master must be held equally at fault whether this deviation from the usual and customary course was due to inattention or to excessive speed aided by the force of the current. A duty rested on the tug to keep the barge within the limits of the channel. The Westerly (C. C. A.) 249 P. 938; The Convoy (D. C.) 12 F.(2d) 93. As to the failure to maintain an adequate and proper lookout, we must consider that the tow was proceeding in the nighttime down the Kill, approaching a point where the direction of the channel changed more or less abruptly, and where it was prudent to keep on the starboard side of the channel and also that at this point the captain, from past experience, had reason to anticipate that visibility might be obscured by drifting clouds of smoke or vapor coming from the works of the Cyanamid Company or other plants on the New Jersey shore. Under such circumstances the reasonably prudent and skillful navigator would have deemed it necessary to have stationed at the bow of the tug or barge a competent lookout to warn the captain in case he was getting too near the port side of the channel. The Oradel-Pittsburgh, 1928 A. M. C. 806 (Oral); The Sagamore (C. C. A.) 247 P. 743; The Williamsport (C. C. A.) 74 P. 653; Dahlmer v. Bay State Dredging & Contracting Co. (C. C. A.) 26 F.(2d) 603; The Oregon, 158 U. S. 186, 15 S. Ct. 804, 39 L. Ed. 943. . Furthermore, when the captain found that the smoke was interfering with the visibility, reasonable care and prudence would dictate the necessity of placing on the bow of the barge an attentive lookout. The Lyndhurst (D. C.) 92 F. 681; Eastern Dredging Co. v. Winnisimmet Co. (C. C. A.) 162 F. 860; British Columbia Mills Tug & Barge Co. v. Mylroie, 259 U. S. 1, 42 S. Ct. 430, 66 L. Ed. 807. It is my opinion that, if he had stationed such a lookout, the disaster would have been averted because the lookout would have been some 90 feet forward of the wheelhouse on the tug and nearer the water, and would have picked up the buoy sometime before the barge came .abreast of it and in ample time to have enabled a reasonably skillful navigator to keep off of the shoals of the easterly bank. His failure to take this ordinary precaution, in my opinion, was one of the principal causes contributing to the stranding, and, for this failure to take the usual and reasonable precaution, no adequate explanation is forthcoming. The defense of inevitable accident, therefore, cannot avail the tug. The Osceola (D. C.) 18 F.(2d) 415; The Mabey, 14 Wall. 204, 20 L. Ed. 881. As to the liability of the Cyanamid Company, impleaded on the petition of the claimant, the evidence does not disclose that the company had knowledge that the vapors coming from its plant constituted a menace to navigation. Nor does the evidence warrant a finding that the company, in its method of drying fertilizer, was guilty of any negligent aet or omission. I am unable to see how it violated any duty which it owed the owners of the tug. It is unnecessary, however, to inquire further into this matter because of my conclusion that the smoke emanating from the factory of the Cyanamid Company was not the proximate cause of the damages done to the barge and cargo. In conclusion, therefore, I find that the Perth Amboy is liable to the Roekland Transportation Company for damages done to the barge, and to the International Minerals & Metals Corporation for damage done to the cargo. Decrees for the libelants in both cases may be entered, and the cases referred for assessment of damages.

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THE M. VIVIAN PIERCE. No. 339. District Court, D. Massachusetts. March 24, 1931. R. Chandler Davis, of Gloucester, Mass., for libelant. John W. Lowrance, of Boston, Mass., for petitioners Crowell & Thurlow and Doane Commercial Touring Co. BREWSTER, District Judge. The above-entitled matter is before the court on the intervening libel of Crowell & Thurlow, Inc., which seeks to establish a maritime lien against the schooner M. Vivian Pierce for $700, advanced to the master, which was used in paying the wages of the crew of said schooner. Findings of Fact. The New England Maritime Company was the owner of the M. Vivian Pierce and other vessels. Crowell & Thurlow, Inc., was the managing agent of the ships of the New England Maritime Company, including the M. Vivian Pierce. They chartered these vessels and received a commission- for their services. They did not disburse the vessel out of their own bank account, and the freights received were, as a rule, deposited in the account of the maritime company and disbursed directly by it. Mr. Lewis E. Thurlow was treasurer of the New England Maritime Company and also of Crowell & Thurlow, Inc., and Mr. Richard R. Freeman was secretary of both the New England Maritime Company and Crowell & Thurlow, Inc. Crowell & Thur-low, Inc., held no stock in the New England Maritime Company,- but both Mr. .Thurlow and Mr. Freeman were stockholders in the New England Maritime Company, holding less than a majority. They were also stockholders in Crowell & Thurlow, Inc., holding more than a majority. Both corporations occupied the same offices, but each kept separate books. The M. Vivian Pierce arrived in Boston in November, 1930, with insufficient funds to pay the crew, and, in order to comply with the navigation laws and discharge the cargo and thereby earn the balance of the freight, Crowell & Thurlow, Inc., advanced $700 to the master, which sum was paid to the crew on account of the wages due them. If it be material, I find that a necessity existed for the advancement. Within a day or two after this money was advanced, the balance of the freight, in the sum of $400, was received and applied by the New England Maritime Company to the general purposes of that corporation, and was not paid over to this intervenor. Conclusions of Law. There can be no question concerning the right of seamen to assert a lien upon the vessel for their wages. The Minnie and Emma (D. C.) 21 F.(2d) 991. And it has long been the established rule in admiralty that one advancing money to discharge a valid lien gets a lien of equal dignity with the one discharged. The Emily Souder, 17 Wall. 666, 21 L. Ed. 683; The Ruth E. Merrill (C. C. A.) 286 F. 355; The Snetind (D. C.) 276 F. 139; The Commack (D. C.) 8 F.(2d) 151; The Little Charley (D. C.) 31 F.(2d) 120. The controlling question is whether such a lien can be asserted by a libelant who is the managing agent of the ship. The established rule is that a general agent does not have a maritime lien for advances which he makes on behalf of vessels belonging to his principal during his agency. The Gyda (D. C.) 235 F. 266, 269; The Ascutney (D. C.) 278 F. 991; The West Irmo (C. C. A.) 1 F.(2d) 87, 88. In the ease of The Puritan (D. C.) 258 F. 271, Judge Morton observes that “as a general rule the agent of a vessel is not entitled either to a lien for advances or to be subrogated to the liens of creditors whom he has paid in the regular course of his agency. * * * The question is essentially one of fact, the decisions referred to proceeding upon the presumption that in such cases the advance or the payment is made on the credit of the owner, not of the vessel.” This presumption is not affected by the Liens on Vessels Act of 1910 (36 Stat. 604), or the Ship Mortgage Act of 1920, § 30, subsec. S (46 USCA § 974). This presumption, however, may be rebutted, but the courts have consistently held that, in order to do so, the agent “must affirmatively prove the existence of an express agreement giving him a lien or such circumstances as justifies the implication of one.” The West Irmo, supra. See, also, The Puritan, supra; The City of Camden (D. C.) 147 F. 847. In the case at bar, the evidence discloses no express agreement. Do the stated facts justify the court in finding an implied agreement? While the libelant corporation owned no stock in the corporation owning the vessel, there was such an interlocking of interest between the two corporations, both having the same individual as treasurer, that the relationship of the agent to the principal must, in its bearing upon the presumption that credit was given to the owner, have the same effect as if the libelant were a part owner of the vessel. Clearly, the libelant had complete control over the management of the vessel and the disbursement of her freights. Such ownership and control, however,’ does not necessarily defeat the right to lien if the facts of the case were sufficient to maintain the libel-ant’s burden of showing that advances were made upon the credit of the vessel and not upon the credit of the owner. The City of Camden, supra; The Puritan, supra. In the case of The Puritan, supra, the libelants were in the general shipping business, were agents of the schooner, and stockholders in the corporation owning her, and in that case Judge Morton sustained the lien on the ground that the parties had expressly stipulated that the libelants relied entirely upon the credit of the vessel and upon the security of existing liens (which were to be paid off), and not upon the credit of the owner. In the ease of The City of Camden, supra, it is intimated that, while a stockholder or treasurer is not prevented from contracting with the company owning the vessel and thereby acquiring a lien on it, the fact that he is the legal custodian of its funds is strong evidence that the advances were made upon the credit of the .owner. In that case the libelant was both a stockholder and treasurer of the company owning the boat, but it appeared that the company had no funds, at the time he loaned the money to the company, .to pay for the claims against the boat, and has had no funds in his' custody since that time. The lien was established, but postponed to those of other creditors. In the case of The West Irmo, supra, the facts are more nearly parallel to those of the ease at bar. In that ease there was the same close identity between the libelant and the company owning the boats without actual part ownership. The court dismissed the intervening libel of the agent. It is urged by the libelant that, although it was the managing agent of the vessel, it did not disburse the vessel, but, on the contrary, kept separate books and paid into and disbursed from the funds of the maritime company, and that these facts warrant the court in holding that the advances were made upon an implied agreement giving the libelant a lien therefor. In my opinion, however, these circumstances are not sufficient to establish an implied agreement that the vessel was to be held liable. Any agreement for such a lien must of necessity be found to exist, if at all, between two corporations which, though distinct entities, were for all practical purposes identical. The financial officer in each corporation was the same person. Such circumstances leave little room for the law to imply an agreement. The law looks to the substance and not to the form. I take this to be as true in admiralty as in other fields. The intervening libel of Crowell & Thur-low, Inc., is therefore dismissed.

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THE HALL. THE SELWYN EDDY. No. 165. District Court, D. Massachusetts. Feb. 20, 1931. Robert A. Terry, of New Bedford, Mass., for plaintiff. John W. Lowrance and Ray Henry, both of Boston, Mass., for defendant. BREWSTER, District Judge. This is a libel in admiralty to enforce a maritime lien upon a steam screw, known at the time as the Selwyn Eddy. Statement of Facts. The steamer ran ashore at Naushon island, in this district, some time prior to February 23, 1927, on which date the wreck was sold to one Osgood S. Gilbert, who obtained a bill of sale of the entire interest in the steamer. On or about July 7,1927, Gilbert requested the libelant to furnish him with a diver and with a boiler and pump, to be used by Gilbert and his crew in floating the vessel. The libelant complied with this request, furnishing a diver for 11 days and the boiler and pump for six weeks. The equipment and the services of the diver were employed in raising the Selwyn Eddy and bringing her to New Bedford on August 12, 1927. The charges for these services were made to the Selwyn Eddy and owners, and the total amount charged was $601.09, according to the following statement rendered by the libel-ant to the owners on September 10, 1927: “Frank C. Taylor “General Contractor * * * * « “New Bedford, Mass., September 10, 1927 “In account with S. S. ‘Selwyn Eddy’ and owners Labor ..................................... $ 72 83 Insurance @ 5.00%....................... 3 64 Services of Diver 11 days @ $25.00....... 275 00 Teaming 3 brs. @ $2.00................... 6 00 $357 47 15% 53 62 Rental of boiler 6 weeks @ $15.00........ 90 00 Rental of 6" pump 6 weeks @ $15.00.... 90 00 Use of lighter 4 hrs. @ $2.50............. 10 00 $601 09” The prices charged for the labor and for the rental I find to be reasonable. The bill rendered shows charges for labor amounting in the aggregate to $72.83 which was principally charges for transporting by truck the machinery and equipment and the diver’s apparatus to the water front. On the date when Gilbert parted with his interest in the boat, July 23, 1927, there was due for such labor and rent at the prices above noted the sum of $190. On the 23d day of July, 1927, Gilbert transferred his interest in the stranded steamer to Philip C. Heald, who subsequently transferred the entire interest in the steamer to the Heald-Hall Transportation Company, the claimant in this proceeding. Heald paid Gilbert $600 for the steamer, and agreed to advance from time to time further sums as they might be required by Gilbert in raising and repairing the vessel, with the understanding that, when the vessel was sold, Heald would be reimbursed for whatever he had advanced, including the $600 paid for the steamer, and the net profits were to be divided between him and Gilbert. Heald advanced, between July 23 and July 28, 1927, $1,550 on account of this work, and subsequently he advanced other sums for the same purpose. Gilbert was supposed to present Heald with vouchers covering all disbursements in connection with the work, but he failed to furnish vouchers sufficient to cover all of the advancements made by Heald. The difference between the amount advanced and the amount covered by vouchers would be more than sufficient to cover the libelant’s claim. When Gilbert requested the libelant to furnish the labor and equipment, he represented that he was the owner of the steamer, and the libelant knew that the steamer was on the rocks in a damaged condition on Naushon Island. The libelant had reason to believe, and did believe, that Gilbert was not undertaking the repairs of the Selwyn Eddy without financial assistance, and when he extended the credit he did so in the belief that Gilbert was the owner, but he was not advised as to whether Gilbert was the sole owner or only a part owner. The libelant was also ignorant of the fact that Heald had advanced money to Gilbert sufficient to enable the latter to pay the libelant’s bill. The libelant had never been advised of the transfer from Gilbert to Heald until after he had fully performed his contract with Gilbert. He did not, during the progress of work, consult the records at the Custom House in Boston or make other inquiries to ascertain whether Gilbert was the true owner or whether he had parted with his title. Conclusions of Law. I am unable to accept the theory of the claimant that the case presents a salvage operation with the owner as salvor. It seems clear to me that Gilbert purchased the steamer while it. was stranded and entered upon the task of repairing her so that she would be able to function as a seagoing vessel. The first step in this work of repairing was necessarily the raising of the vessel, and to that end the libelant furnished labor and equipment to the vessel which could be found to be reasonably necessary in this work of repair. The items for hauling the apparatus to the water front do not give rise to a maritime lien and must be excluded. The William Leishear (D. C.) 21 F.(2d) 862; The American, 1931 A. M. C. 197, 203. The same would he true of the item of insurance. The Wabash (D. C.) 279 F. 921. Respecting the items for the services of the diver and rental for the use of the boiler, pump and lighter, I have no doubt that these items constituted labor and materials furnished to the vessel and come within the scope of the act, which gives to any person furnishing repairs to a vessel a maritime lien which may be enforced by a suit in rem. Title 46, U. S. C. § 971 (46 USCA § 971). See The City of Atlanta (D. C.) 17 F.(2d) 308. The services performed by the diver were necessary in order to render the hull sufficiently water-tight to enable the owner to float the vessel. These services were distinctly as necessary as that of an architect who is held to have a lien for work in preparing plans for repairs. The Schuylkill (D. C.) 249 F. 781. See, also, The Susquehanna (C. C. A.) 295 F. 322. That one furnishing a pump and boiler to a vessel to he used in the work of floating her in order that she may undergo repairs has a lien under the statute is hardly open to dispute. See The Dredge A (D. C.) 217 F. 617; The Convoy (D. C.) 257 F. 843. In conclusion, I find that the libelant would be entitled to assert a maritime lien for the sum of $506.25, made up as follows: Services of diver..................$275.00 15 per cent, of same.............. 41.25 Rent of boiler.................... 180.00 Use of lighter ...•................ 10.00 Total $506.25 The claimant has advanced two reasons why the rights of the libelant to enforce this maritime lien cannot be now enforced in this court. These are: First, that, while the work was in progress, to wit, July 23, 1927, Gilbert sold his interest in the vessel to Heald; and, second, that the new owner put Gilbert in funds sufficient to pay the libelant’s claim. In my opinion neither of these facts operate to defeat the rights of the libelant. When the work was ordered, Gilbert was the sole owner, and, after the transfer from Gilbert to Heald, Gilbert was acting as agent for the new owner with full authority to bind the vessel for necessary repairs and supplies. Moreover, the libelant was in possession of no knowledge which would put him upon inquiry respecting a change of ownership. When the work was ordered, Gilbert was the sole owner, and a careful investigation by the libelant would have only disclosed that fact. Section 972 of title 46 U. S. C. (46 USCA § 972) provides that the managing owner, or any person to whom the management of the vessel at the port of supply is intrusted, shall he presumed to have authority from the owner to procure repairs, supplies, etc., and I do not find in section 973 anything that requires the person furnishing the repairs or supplies to keep constantly on the watch to see that there has been no change of ownership during the performance of the contract. It is sufficient that the contract under which the supplies were furnished was made with the true owner of the vessel, and it is immaterial, as I view it, that a portion of the services was rendered after Gilbert parted with his title to the vessel. The second objection to the libelant’s lien is apparently based upon the doctrine of the earlier maritime law that there is no presumption that credit was extended to the vessel when it appears that the master has funds on hand, or at his command, which he ought to have applied to the payment of the repairs or supplies, and that the material-man knew of that fact, or was in possession of knowledge sufficient to put him upon inquiry so that due diligence on his part would have revealed the fact that the master had no authority to contract on the credit of the vessel. Merchants’ Mutual Insurance Co. v. Baring, 20 Wall. 159. 22 L. Ed. 250. Whether that doctrine still obtains under the existing statute which obviates the necessity of alleging and proving that 'credit was given to the vessel is a question which need not be determined, because, under the earlier rule, it was held that, whenever the necessity for the repairs and supplies is once made out, it is incumbent upon the owner, if he alleged that the funds could have been obtained upon his personal credit, to establish by competent proof that fact and that the materialman knew the same or was put upon inquiry. Merchants’ Mutual Insurance Co. v. Baring, supra. In the ease at bar this burden is not sustained by the evidence. On the contrary, I ■have found affirmatively that the libellant had no knowledge respecting the advances which had been made by Heald to Gilbert. To say that an undisclosed owner could, by putting his agent in funds, defeat the maritime lien of a materialman, who was ignorant of the fact, is to lay down a proposition so astounding that I am loathe to believe it can have any place in the maritime laws of this country, regardless of the statute. The libellant therefore has a good and valid maritime lien for the sum of $506.25 which can be enforced in these proceedings,, and I so rule. Commissioner’s report.

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THE MARGE. No. 4379 Civil. District Court, D. Massachusetts. March 24, 1931. Frederick H. Tarr, U. S. Atty., and Ellen L. Buckley, Asst. U. S. Atty., both of Boston, Mass. F. H. Jackman and Abbott & Carroll, all of Boston, Mass., for claimant. BREWSTER, District Judge. This is a petition for the forfeiture of the speed boat Marge, which the government alleges has become liable to forfeiture under 46 USCA § 103 (Rev. St. § 4214, as amended) and 46 USCA § 325 (Rev. St. § 4377). Findings of Fact. The Marge is a speed boat of 60.9 feet in length, 11.5 feet beam, and 6.5 feet deep. = It is equipped with three engines of 450 horse power each and capable of making a speed of 30 to 35 knots. She has two cargo holds, one fore and one aft; the aft hold having two hatches. The pilot house forward of amidships and the trunk cabin over the engine room about amidships were both covered with heavy armor plate, and the glass in the pilot house was of unusual thickness. There were no accommodations on the boat for sleeping, messing, or lounging. The Marge had for some years been under the surveillance of the Coast Guard and customs officers and had never been seen to have any of these accommodations or any yacht fittings or furnishings of any kind. She was enrolled and licensed as a pleasure vessel under said section 4214 as amended (46 TJSCA § 103). On October 22, 1930, the Marge came through the Cape Cod Canal from New Bed-ford, and at 2.15 o’clock p. m. -on that day the Coast Guard officers at Sandwich boarded and examined the boat and saw no cargo of any kind on board. The Marge was seen to go to the eastward in Cape Cod Bay until she disappeared from sight, but was later sighted off Provincetown, going out to sea at full speed. The next morning, October 23, 1930, about 8:30 o’clock, Coast Guard officers approached the Marge in their picket boat, when they observed a sack lying on the deck of the Marge under a hatch cover which was only part way over the hold. There were two small dories on the deck. In the smaller dory were a pair of oars which were bound with cotton gloves where the oars fitted into the thole pins. Upon opening the sack the officers found that it contained 12 bottles of liquor labeled “Peach Brandy,” “Marie Brizard Bordeaux Prance.” The master of the boat appeared shortly after, and his comments and conduct were not at all consistent with the innocence or ignorance which he professed when on the witness stand. Two gaffs were also found in the pilot house of the Marge. About 9 o’clock on the evening of October 22, police officers in Marblehead, who were stationed near the water, heard the sound of a motor and saw a boat without lights entering Salem Harbor. As she came between the officers and the lights on the SaI an side of the harbor, it was possible to get a fairly accurate outline of the motorboat that was passing, and this outline corresponded with that of the Marge. She was then headed toward that part of the harbor known as Wyman’s Cove, A little after midnight, a boat was seen going out of the harbor which answered to the same description as the one that was seen to come in, except that the boat going in had two dories on the deck, and the boat going out had one dory on the deck and one in tow. The witnesses testified that the boat went in laden and came out light. Shortly after the boat was seen going out, the police officers discovered on the shore at Wyman’s Cove 646 sacks of whisky, brandy, and liqueur. Among this liquor were 25 sacks of Peach Brandy identical in appearance with brandy found on board the Marge, and on complete chemical analysis it was found to be absolutely identical, and Dr. Adams testified that ordinarily there would be a variance if they were not of the same lot. There was also found near the liquor overcoats, rubber boots, robes, burlap bags and canvas, and a gaff similar to those found on the Marge but with a longer handle. Two of these police officers, who had observed the boat as she passed in and out of the harbor, later identified the Marge as one corresponding in all particulars with the boat they had seen on the night of October 22. The owner of the Marge did not attend the trial, but it did appear in evidence that his home was in the vicinity of Salem. It also appeared that this boat had been purchased of the United States marshal in May, 1929, and that the present owner had made alterations in the vessel including covering the engine house with armor plate, and from the cross-examination of the master the inference is warranted that both he and the boat had been involved previously in transactions violative of the federal laws. The master of the vessel testified and failed to satisfactorily account for the presence of the Marge as a pleasure vessel at Provincetown on that particular morning. His testimony and that of his witness was not of a kind to inspire confidence. The controlling question of fact in this ease is whether the Marge was the boat which brought into Salem Harbor, and landed at or near Wyman’s Cove, the whisky and other liquors that were found by police officers on the morning of October 23. While the evidence offered by the libelant tending to connect the Marge with this transaction is largely circumstantial, there is such an array of proved circumstances, all pointing in the same direction, that it is difficult to escape the conclusion that it was the Marge that brought the liquor to Wyman’s Cove. There is the evidence of Dr. Adams that the peach brandy was presumably of the same lot as that found at Wyman’s Cove. This evidence, standing alone, would hardly be sufficient to connect the Marge with the landing, but, when taken in connection with all the other facts and circumstances of the case, a special significance attaches to the testimony of Dr. Adams, and the whole abundantly warrants a finding of fact that the Marge was the boat that brought the liquor into Salem Harbor on the night of October 23. • The structure, equipment, and history of the boat was such that it taxes one’s credulity to believe that it was being used for purposes purely innocent; on the contrary, it is impossible to escape the conviction that the vessel was a rum-runner, masquerading on' the high seas as a pleasure vessel, and when such a vessel is discovered with a quantity of liquor- on board, which corresponds in all particulars with that landed on shore in the nighttime, and this from a boat which, in outline and dimensions, is similar to the Marge, it is enough to throw the burden upon the claimant to show that it was not the Marge that was engaged in this unlawful enterprise. This burden the claimant has not sustained. Whether this liquor was of foreign origin or not is immaterial in view of my conclusions of law, and I make no finding respecting its origin. Conclusions of Law. 46 USCA § 103 (Rev. St. § 4214 as amended) provides that yachts used and employed exclusively as pleasure vessels may be licensed, and further provides that: “Such vessels, so enrolled and licensed, shall not be allowed to transport merchandise or carry passengers for pay. * * * Such vessels shall, in all respects” (with immaterial exceptions) “be subject to the laws of the United States, and shall be liable to seizure and forfeiture for any violation of the provisions of this chapter.” 46 USCA § 107 (Act of Jan. 16,1895, c. 24, § 4, 28 Stat. 625) also provides that: “No licensed yacht shall engage in any trade, nor in any way violate the revenue laws of the United States; and every such yacht shall comply with the laws in all respects.” It has been held in this jurisdiction that a yacht enrolled as a pleasure vessel, engaged in the transportation of large quantities of liquor, must be presumed to have been engaged in the transportation of merchandise for pay, even though there is no direct evidence that such was the fact. The Herreshoff (D. C.) 6 F.(2d) 414; Bush v. The Conejo (D. C.) 10 F.(2d) 256; see, also, The Rosemary (D. C.) 23 F.(2d) 103. In a forfeiture proceeding under the statutes invoked in this case, it is immaterial whether the liquor was, or was not, of foreign origin. The Conejo (C. C. A.) 16 F.(2d) 264. I rule, in conclusion, that the vessel is liable to forfeiture under 46 USCA § 103, and a decree of forfeiture may be entered accordingly.

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In re HOLTZMAN. No. 14699. District Court, W. D. Pennsylvania. Nov. 14, 1930. H. J. Schlesinger and A. H. Kaufman, both of Pittsburgh, Pa., for petitioning creditors. SCHOONMAKER, District Judge. This ease comes before the court on certificate to review the action of the referee in bankruptcy in allowing the claim of Grant Berkstresser, tax collector of the county, borough, and school taxes in the borough of Windber, Somerset- county, Pa., for the years 1927, 1928, 1929, as a preferred claim entitled to payment out of the proceeds of the sale of bankrupt’s real estate subject to these taxes, free and clear of liens. Objection was filed to the allowance of this elaim by the United States National Bank of Johnstown, for the reason that there was personal property on the premises sufficient to cover the amount of these taxes, had this personal property been sold by the tax collector on a tax warrant, and therefore the tax collector was not entitled to this tax as a prior tax claim. The referee overruled these objections, and allowed the tax elaim as a claim entitled to priority of claim out of proceeds of sale of the taxed property. We are of the opinion that the referee ruled this ease correctly. By the Pennsylvania Tax Act of May 16, 1923, P. L. 207 (53 PS §§ 2021 — 2061), all taxes thereafter lawfully imposed or assessed on any property in Pennsylvania become a first lien upon the property and entitled to priority in payment over the proceeds of any judicial sale of the property before all other liens and obligations, excepting only the cost of sale. By provisions of this act, section 9 (53 PS § 2029), a municipal elaim for such taxes was required to be filed in the court of common pleas of the proper county on or before the last day of the third calendar year after that in which the taxes are first payable. In the instant case, bankruptcy-intervened before it had been necessary under the provisions of this act to file any of the tax claims in the court of common pleas of Somerset county. Therefore, under the clear provisions of this act, at the time of the adjudication in bankruptcy in this case, these taxes were a first lien on the real estate of the bankrupt. The exceptant claims, however, that the failure on the part of the tax collector to make these taxes out of the. sale of the personal property on the taxed property by a distress warrant takes away the. right of the tax collector to collect these taxes out of the proceeds of the sale in bankruptcy. We cannot so hold. The tax lien provided for in the act of 1923 is not dependent upon the failure of the tax collector to make the amount of taxes out of the personal property upon the premises. The fact that the personal property may be liable for this tax does not in- any way affect the statutory lien given for the taxes. The right of the taxing municipality to the first lien is not affected by any dereliction in the duty on the part of the tax collector in getting tax out of personal property. Although not mentioned in the exceptions filed by the United States National Bank of Johnstown, it appears in the proceedings before the referee that there was some evidence that the tax duplicates placed in the hands of the collector by the taxing authorities of the county had been settled by the tax collector. The evidence that the tax collector may have settled these tax duplicates with the county would not- change the status of the tax lien had these taxes not been paid. Beginning in the year 1923, and coming down to the last session of the Legislature in 1929, there are each session remedial acts passed by the Pennsylvania Legislature extending the time of tax warrants to tax collectors for the collection of taxes where warrants have expired at the time of the passage of these respective acts, so that at the time of filing the tax elaim with the referee in bankruptcy in this ease, the tax collector had a legal right to elaim the taxes involved in this case. Then, too, in our opinion, these taxes might properly have been ordered paid by the referee in bankruptcy under the provisions of section 64 of the Bankruptcy Act (11 USCA § 104), awarding payment of taxes owing by the bankrupt to a municipality in advance of payments of dividends to creditors. Am order of the referee directing payment of these taxes as a preferred claim should therefore be approved.

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Petition of HOROWITZ. No. 149153. District Court, E. D. New York. March 18, 1931. Max Seidenbaum, of Brooklyn, N. Y., for Louis Horowitz.. Merton A. Sturges, District Director of Naturalization, of New York City. MOSCOWITZ, District Judge. Louis Horowitz has presented a petition to become a citizen. The facts set forth in his affidavit, verified October 30, 1930; are as follows: “Louis Horowitz, residing at 1527-40th St., Brooklyn, N. Y., after being duly sworn, deposes and says: “I am the identical Louis Horowitz who filed petition for naturalization, No. 149153, in the U. S. District Court, Brooklyn, N. Y., on September 29, Í930. “I was bom in Nasielsk, Poland, on or about January 4, 1892, my European name being Leib Jozefowiez. On or about May, 1918, I married Pessa Schwarzberg at Nasielsk, Poland, in accordance with the Jewish ritual. There was no civil marriage. I came to New York, N. Y., SS Lapland, on or about October 1, 1923, leaving Pessa in • Poland, as she did not want to come to America. I requested her several times to come to this country, but in the early part of 1928 she wrote me that she liked someone. else and wanted a divorce and would agree to one for a settlement of $1,000. I-accordingly went to a Rabbi in New York and had him prepare the necessary papers in accordance with the Jewish ritual and forwarded the divorce papers and $1,000 to Pessa which she acknowledged at Nasielsk, Poland, on March 26, 1928, and agreed to a civil divorce which was to be obtained within one year at my expense. So far as I am aware no civil divorce has ever been obtained. I have never been in Poland since I came here in 1923 and Pessa has never been in the United States. “On June 24, 1928 I married Dora Mare-son in New York City by a Rabbi on a marriage license obtained at the City Hall, New York City.” Petitioner’s first marriage was not dissolved by a civil divorce. It is not claimed that an ecclesiastical divorce was consummated. Whether or not the divorce was valid in accordance with the Jewish ritual is beside the question, as such alleged divorce as claimed by the petitioner is not recognized under the laws of the state of New York. The second' marriage performed after the procurement of a rabbinical divorce is bigamous under the laws of the state of New York. Chertok v. Chertok, 208 App. Div. 161, 203 N. Y. S. 163. Under the Naturalization Act a person shall not be admitted to citizenship unless he has behaved as a person of good moral character, attached to the principles of the Constitution of the United States, and well disposed to the good order and happiness 'of the United States. The Naturalization Act provides among other things that: “No alien shall be admitted to citizenship unless (1) immediately preceding the date of his petition the alien has resided continuously within the United States for at least five years * • í (2) he has resided continuously within the United States from the date of his petition up to the time of his admission to citizenship, and (3) during all the periods referred to in this subdivision he has behaved as a person of good moral character, attached to the principles of the Constitution of the United States, and well disposed to the good order and happiness of the United States.” Section 6 (b), Act of March 2,1929; 45 Stat. 1513,1514; U. S. C. Sub. 3, title 8, § 382 (8 USCA § 382). The petitioner having contracted a -bigamous marriage cannot be considered as one who has behaved as a person of good moral character for a period of at least five years immediately preceding the filing of his application. In re William Spencer, 5 Sawyer, 195 Fed. Gas. No. 13234; Matter of Ephraim Spiegel (D. C.) 24 F.(2d) 605, decided by Judge Bondy on February 16, 1928. The petition is denied.

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UNITED STATES v. ONE NASH COUPÉ. No. 2035. District Court, W. D. Pennsylvania. March 23, 1931. James H. Dilley, Asst. to Louis E. Graham, U. S. Atty., both of Pittsburgh, Pa. Abraham Pervin, of Pittsburgh, Pa., for intervener C. I. T. Corporation. SCHOONMAKER, District Judge. This ease was heard on forfeiture libel, intervening petition of the C. I. T. Corporation to establish a lien against the libeled automobile, and proofs. From these we find that the allegations under the libel had been sustained,' and that the automobile is forfeitable under section 26, title 2, of the National Prohibition Act (27 USCA § 40). As to the intervening petition of the C. I. T. Corporation, we find that that corporation has an established lien under a bailment contract with one Morris Silverman in the sum of $743.20, which, under the law, should be paid out of the proceeds of the sale of the property at public auction, after deducting the expenses of keeping the property, the fee for the seizure, and the cost of the sale. Let an order be submitted accordingly. Discussion. . The government offered as against the intervening petition of the C. I. T. Corporation, the record of two convictions against •Silverman — Record at 4480-C, criminal, on April 5, 1928, and record at No. 3290, criminal, on January 31, 1928, for violation of the National Prohibition Aet — for the purpose of establishing that the C. I. T. Corporation had notice that the vehicle would be used in violation of i the National Prohibition Aet. There was no evidence that the C. I. T. Corporation had actual notice of these convictions of Silverman; but the government seeks to charge that corporation with constructive notice, contending that ■ it should have searched the criminal records before dealing with Silverman to ascertain whether or not he was an offender against the National Prohibition Aet. This contention we decide against the government on the authority of Shelliday v. United States, 25 F.(2d) 372, adopting the conclusions of Circuit Judge Parker. It may be noted that District Judge Symes has decided exactly the opposite in the ease of United States v. Bailey, 42 F. (2d) 908; but we believe that Judge Parker has correctly ruled the legal point involved.

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UNITED STATES v. ONE BUICK COUPÉ. No. 2069. District Court, W. D. Pennsylvania. March 21, 1931. Louis E. Graham, U. S. Atty., of Pittsburgh, Pa. Robert Mellin, of Pittsburgh, Pa., for defendant. SCHOONMAKER, District Judge. This case was heard on libel to condemn on Buiek coupé seized in the possession of Charles Burger while transporting liquor, in violation of the National- Prohibition Act, and on petition of the North Side Buiek Company to establish a lien against said automobile in the sum of $350 under a bailment contract between Burger and the petitioner. We find that the facts set forth in the forfeiture libel are true, and that .the plaintiff is entitled to a decree forfeiting the automobile in question and providing for the sale thereof under the provisions of section 26, title 2, of the National Prohibition Aet (27 USCA § 40). We further find that the intervening petitioner, North Side Buiek Company, has an established lien under the provisions of said act in the sum of $350, to which it is entitled out of the proceeds of public sale of said automobile, after deducting the expenses of keeping the property, the fee for seizure, and the cost of the sale. Let a decree be submitted accordingly. Discussion. The only question involved in this ease is whether or not the North Side Buiek Company should be refused relief by reason of their alleged laches. The facts with reference to this claim of laches are as follows: The ear was seized by federal prohibition agents on November 30, 1929. Burger secured its release on December 6, 1929, upon giving bond to the government, as required by section 26, title 2, of the National Prohibition Act (27 USCA § 40). The car continued in his possession until February 17, 1931, when it was delivered to the United States after sentence had been imposed upon Burger on the 13th day of February, 1931, in the criminal case against him. The contention of the government was that the North Side Buiek Company should have proceeded against this automobile on its bailment contract while the car was released to Burger under bond. The North Side Buiek Company made known its claim to an attorney for the prohibition unit on the seizure of the car and was told by an attorney in the writ that nothing could be done until the disposal of the criminal ease against Burger. We cannot say, under those circumstances, that the intervener has slept on its rights to such an extent that it should be precluded from establishing its lien, as was the ease in United States v. Kane (D. C.) 273 F. 275. We conclude that the North Side Buiek Company was not guilty of laches and is entitled to its lien of $350, as an intervening lienor.

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BIRKS v. UNITED FRUIT CO., Inc. District Court, S. D. New York. May 7, 1930. See also 48 F.(2d) 656. Allen Caruthers, of New York City, for plaintiff. W. Dale Williams, of New York City, for defendant. COXE, District Judge. This complaint is not only technically insufficient in failing to allege facts showing that a death action may be maintained by the administratrix, The La Bourgogne, 210 U. S. 95, 138, 28 S. Ct. 664, 52 L. Ed. 973, but also is probably fatally defective in that under the maritime law the master has no action against the owners of the vessel for damages for willful assault committed on the high seas by members of the crew. Cain v. Alpha S. S. Corp. (C. C. A.) 35 F.(2d) 717, 1929 A. M. C. 1484; certiorari granted December 2, 1929, 280 U. S. 549, 50 S. Ct. 86. 74 L. Ed. 607, 1929 A. M. C. 1788 ; The Osceola, 189 U. S. 158, 23 S. Ct. 483, 47 L. Ed. 760; Carlisle Packing Co. v. Sandanger, 259 U. S. 255, 42 S. Ct. 475, 66 L. Ed. 927; Davis v. Green, 260 U. S. 349, 43 S. Ct. 123, 67 L. Ed. 299. The motion to dismiss is therefore granted; and although it is doubted whether the defects in the complaint can be cured, the plaintiff may have twenty days within which to amend. For opinion on merits, see 281 U. S. 642, 50 S. Ct. 443, 74 L. Ed. 1086.

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BIRKS v. UNITED FRUIT CO., Inc. District Court, S. D. New York. Nov. 13, 1930. See also 48 F.(2d) 655. Allen Caruthers, of New York City, for plaintiff. W. Dale Williams, of New York City, for defendant. BONDY, District Judge. This is a motion to dismiss the second amended complaint on the ground that it does not state facts sufficient to constitute a cause of action, and on the further ground that the alleged cause of action is barred by the statute of limitations. The first amended complaint which was dismissed by Judge Coxe is stated to have alleged that the crew of a vessel owned and operated by the defendant, willfully and wantonly stabbed and assaulted plaintiff’s intestate, the master, and that he was either thrown from the ship, or in his helpless condition fell therefrom into the high seas and lost his life. In the second amended complaint this last clause has been changed to read, “or in his helpless condition from such assault, fell therefrom by reason of the faulty construction of the ship into the high seas.” The second amended complaint further alleges that the defendant failed to provide a seaworthy ship, in that among the crew there were men of vicious and criminal propensities to the imminent danger of the passengers and other members of the crew. If, as is plaintiff’s contention, the action is based on the statutes of the State of New York, it must be dismissed because the Merchant Marine Act 1920, § 33 (46 USCA § 688), so far as applicable, supersedes all state legislation. Lindgren v. United States, 281 U. S. 38, 50 S. Ct. 207, 74 L. Ed. 686. It cannot be regarded as having been brought under the Death on High Seas Act, § 1 (46 USCA § 761), because the action is at-law. It cannot be sustained on the theory that the vessel was unseaworthy‘because under the Merchant Marine Act no right of action survives the death of a seaman by reason of unseaworthiness. Lindgren v. United States, supra. Nor can it be sustained on the theory of negligence. Though an assault by a foreman on a stevedore to hurry the stevedore in his work may be held to have taken place in the course of employment and in furtherance of the master’s business, Jamison v. Encarnacion, 281 U. S. 635, 50 S. Ct. 440, 74 L. Ed. 1082, a felonious assault cannot be held to have taken place in the course of employment or in the furtherance of the master’s business when it is committed by the crew upon the master, whom the crew must obey. Davis v. Green, 260 U. S. 349, 43 S. Ct. 123, 67 L. Ed. 299. The allegation that members of the crew had felonious and criminal propensities does not sustain a cause of action in negligence in the absence of an allegation that the defendant knew of these propensities or had knowledge of facts putting it on notice. See The Rolph (C. C. A.) 299 F. 52, certiorari denied 266 U. S. 614, 45 S. Ct. 96, 69 L. Ed. 468. Nor is there a sufficient allegation that the injuries were caused by the negligent construction of the ship in the statement in the alternative that plaintiff’s intestate “was either thrown from said S. S. ‘Tivives’ by the agents, servants and employees of defendant, or, in his. helpless condition from such assault, fell therefrom by reason of faulty construction of said ship into the high seas, and lost his life.” The objection to the complaint on the ground of the statute of limitations also seems to be well taken. The original complaint apparently was based on the right to recover for the willful misconduct of the crew in assaulting the master. Basing the amended complaint on unseaworthiness or on negligence in providing a crew among whom were men of felonious and criminal propensities, or in providing a ship that was improperly constructed, constitutes in legal effect a change in the cause of action. See D’Allesandro v. United Marine Contracting Corp. (D. C.) 30 P.(2d) 718. The motion to dismiss accordingly must be granted with usual leave to amend.

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In re ANHALTZER. Patent Appeal No. 2672. Court of Customs and Patent Appeals. April 15, 1931. John E. Jackson, of New Orleans, La. (Edward W. Shepard, of Washington, D. C., of counsel), for appellant. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. HATPIELD, Associate Judge. This is an appeal from the decision of the Board of Appeals of the United States Patent Office affirming the decision of the Primary Examiner rejecting all of the claims in appellant’s application for a patent for an alleged invention relating to a food product and a method of making the same. The involved claims read as follows: “7. A dry food product composed mainly of malt and sugar and having small amounts of cornstarch, casein, sodium chloride, calcium lacto phosphate, calcium suerate, calcium phospho suerate, and magnesium phospho suerate, said product being the result of forming a mixture of from 50 to 60 per cent, malt extract, 26 to 45 per cent, cane sugar, 3 to 4 per cent, cornstarch, .75 to 2.25 per cent, hop extract, .50 to 1.50 per cent, casein, .25 to .75 per cent, calcium sulfate, .25 to .75 per cent, sodium chloride, .125 to .325 per cent, powdered milk, and .03 to .06 per cent, magnesium sulfate, heating said ingredients while they are being mixed, and then drying said mixture by heating said mixture in vacuo. “8. In the manufacture of concentrated food products of the class described, the steps consisting of forming a mixture composed of from 50 to 60 per cent, malt extract, 25 to 45 per cent, cane sugar* 3 to 4 per cent, cornstarch, .75 to 2.25 per cent, hop extract, .50 to 1.50 per cent, casein, .25 to .75 per cent, calcium sulfate, .25 to .75 per cent, sodium chloride, .125 to .375 per cent, powdered milk and .03 to .06 per cent, magnesium sulfate, agitating said mixture while maintaining it at a temperature of not under 30 and not over 60 degrees Centigrade so as to cause said calcium sulfate to be dissolved by said sodium chloride and the lactic acid of the malt and milk and thereby react and combine with the sugar contents of said: mixture and also with the phosphate of said malt extract and with at least some of the lactic acid 'to form ealciuin suerate, calcium phospho suerate, and calcium lacto phosphate, and said magnesium sulfate being caused to combine and react with the sugar content of said mixture and with a phosphate of said malt extract to form magnesium phospho suerate, then desiccating the product resulting from said mixture in vacuo, then' cooling the desiccated mixture, and then comminuting the cooled mixture.” The references are: Horliek, 278,967, June 5, 1888; Rollheuser, 596,945, January 4, 1898; Dodd, 620,645, March 7, 1898; Eiger, 1,100,176, June 16, 1914; Barwell, 1,409,435, March 14,1922. The character of the product and the method of producing the same is clearly set forth in the claims. The Primary Examiner held that the applicant had “merely selected and assembled substances which are old in the same relation, i. e., as beverage constituents and united them in a single compound; and it does not appear that any unusual or unobvious co-operative relationship exists among the respective ingredients nor does it appear that the steps of the process involve and' [an] unobvious procedure for the preparation of a product of the kind herein disclosed.” In affirming the decision of the Primary Examiner, the Board of Appeals, among other things, said: “The patents to Dodd and Horliek show that malt and starch have been used in beverages or foods and that the starch is converted under the action of the heat into dextrin and maltose or grape sugar. The patent to Eiger mixes malt extract with casein ealeium which prevents hygroscopic action and mold. It is well known that cane sugar, sodium chloride and powdered milk are used in beverages and this leaves only calcium and magnesium sulphate unaccounted for. These ingredients are added, according to the specification, as antiseptics to destroy .bacteria.” The Board further said that it was unable to find any authority to the effect that calcium and magnesium sulphates possessed the properties claimed in appellant’s application. Thereafter, appellant filed a petition for rehearing in which it was pointed out that calcium and magnesium sulphates have antiseptic properties and have been used for such properties in medical and chemical sciences; that “ealeium sulfate when dissolved will combine with sugar to form calcium suerate, and with phosphate and lactic acid to form ealeium phospho suerate and ealeium lacto phosphate, * * * That magnesium sulfate will combine and react with sugar and phosphate to form magnesium phospho suerate”; that “magnesium phosphal suerate” is a laxative and digestive; that ealeium is a bone and tissue builder; and that magnesium phosphate is readily formed in mixtures such as claimed in appellant’s application. In support of the above statement, counsel for appellant cited the following authorities: “Materia Medica and Therapeutics— Fourth Edition — Shoemaker—published .by the F. A. Davidson Company, Dictionary of Applied Chemistry — ’Thorpe—Vols. 1 and 3, and General and Industrial Chemistry— Molinari.” The petition for rehearing was denied by the Board of Appeals. It is contended by counsel for appellant that the involved product is new; that it results from the application of a novel method of manufacture, whereby “certain chemical reactions are caused to take place forming ealeium suerate, ealeium phospho suerate, calcium lacto phosphate and magnesium phospho suerate, all of which are compounds not even suggested by the references and compounds not possible to form by combining any or all of the ingredients of any or all of the references”; and that appellant has produced a bacteria proof product possessing both medical and food values heretofore unknown. Counsel for appellant attached to his brief copies of affidavits. In view of the fact that they were not presented to, and were not considered by, the tribunals of the Patent Office, this court will not consider them'. In re Fisher, 37 F.(2d) 628, 17 C. C. P. A. 864. In his| petition for rehearing, filed with the Board of Appeals, counsel for appellant said: “The chemistry involved in this application is complicated and beyond the grasp of those not skilled in the art as set forth in the specification and claims.” In cases involving intricate and highly technical questions, especially in the absence of the evidence of those expert in the art, concurring decisions of the Patent Office tribunals will not be disturbed, unless it appear that they are manifestly wrong. Stern et al. v. Sehroeder et al., 36 F.(2d) 515, 17 C. C. P. A. 670; Stern et al. v. Sehroeder et al., 36 F.(2d) 518, 17 C. C. P. A. 690; Beidler v. Caps, 36 F.(2d) 122, 17 C. C. P. A. 703; Clancy v. DeJahn, 36 F.(2d) 131, 17 C. C. P. A. 714; In re Moulton, 38 F.(2d) 359, 17 C. C. P. A. 891; In re Demarest, 38 F.(2d) 895, 17 C. C. P. A. 904; In re Wietzel, 39 F.(2d) 669, 17 C. C. P. A. 1079; Pengilly v. Copeland, 40 F.(2d) 995, 17 C. C. P. A. 1143. It is true that the references cited by the tribunals of the Patent Office do not show the use of calcium and magnesium sulphates in combination with other substances for producing food products, nevertheless, the authorities cited by counsel for appellant disclose that the use of calcium and magnesium sulphates in combination with other substances for the precise purposes claimed by appellant is old in the art. We are in accord with the conclusion reached by the tribunals of the Patent Office, and, for the reasons stated, the decision of the Board of Appeals is affirmed. Affirmed.

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CROSS v. WILLIAMS OIL-O-MATIC HEATING CORPORATION. Patent Appeal No. 2676. Court of Customs and Patent Appeals. April 15, 1931. Thomas E. Scofield, of Kansas City, Mo. (Henry H. Snelling, of Washington, D. C., of cbunsel), for appellant. Langdon Moore, of Washington, D. C. (James Atkins, of Washington, D. C., of counsel), for appellee. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. GARRETT, Associate Judge. Appellant seeks to register “Coal-O-Matic” as a trade-mark for use on devices for automatically feeding solid fuel, in the form of pulverized coal, to fumaees. Opposition to his application was made by appellee, who alleges ownership, registration, and prior use of “Oil-O-Matic” as a trade-mark for application to devices which automatically feed fuel oil to fumaees. The opposition was sustained and registration denied by decisions of both the Examiner of Interferences and the Commissioner of Patents and the matter is before us on appeal. Appellant alleges use of his mark since April, 1926. Appellee’s registrations pleaded were dated June 16, 1925, and December 28, 1926, respectively. Use was alleged pri- or to the registrations. No proof was taken by either party, but a stipulation as to facts was filed in lieu thereof. This stipulation, among other things, shows the volume of business done by appellee over a period of several years, the amount of its advertising, etc. Appellant insists before us that the goods of the parties are dissimilar. If by this he means that they are not of the “same descriptive properties,” we are unable to agree thereto. Both devices are for feeding fuel to furnaces — one feeds oil and the other eoal. It is not the particular materials whieh they feed, however, that must furnish the test in this ease; the issue is not whether oil -and coal are of the same descriptive properties, but whether the devices that feed them into the furnaces are. Surely there can be no serious question about this. Obviously, they are of the same class and, being so, they are of the same deseriptive properties under the doctrine of Cheek-Neal Coffee Co. v. Hal Dick Mfg. Co., 40 F.(2d) 106, 17 C. C. P. A. 1103, and numerous other eases decided by us since jurisdiction in trade-mark registration appeals was transferred to this court. California Canneries Co. v. Bear Glacé Co., 44 F.,(2d) 866, 18 C. C. P. A.-, and eases reviewed therein. We think, too, that the marks are of such close resemblance as that when applied to goods of the same descriptive properties confusion — particularly confusion as to origin — would likely result. Without being descriptive, both words are suggestive. By the suffix “matie” it is suggested in each instance that there is something automatic in the device. The public might easily conclude from the marks, standing alone and nothing further appearing, that the articles were both products of the same manufacturer, since both are in the same field of activity — feeding fuel to furnaces. We, of course, must consider only the marks, and not such other matter as may accompany them in their use upon the products. After this case had been passed upon by the Examiner of Interferences and the appeal taken to the Commissioner of Patents, appellant gave notice that under the provisions ■ of rule 154 of the Patent Office he ■would refer to certain registrations which had not been theretofore introduced into the record and set out a list of 33 such registrations which do now appear in the record before us, and which are commented on in. appellant’s brief filed in this court. We do not observe any expression in the opinion of the commissioner which indicates that he gave these any consideration. It was proper that he not do so. Rule 154 did not authorize their introduction in the manner proposed by appellant. It provides that any official record may be used as evidence at the hearing upon notice given to the opposite party before the closing of the testimony. In the interest of orderly, procedure and proper practice we once more invite attention to this fact, and refer to what was said and held by us in Standard Oil Co. v. Epley, 40 F.(2d) 997,17 C. C. P. A. 1224. While, as indicated, we are in agreement with the final conclusion reached by the assistant commissioner in this case that appellant is not entitled to the registration sought, we deem it proper and necessary to say that we are not wholly in. accord with his reasoning. As we understand his decision, he held that the specific structures of the respective parties are radically different; that the word “ ‘Coal’ serves to sharply distinguish from opposer’s goods and its trade mark,” and that confusion would not be likely, in part, because of the high prices of the articles, but nevertheless denied the registration because “the applicant has not only adopted the op-poser’s terminology, but has adopted its precise form ‘-O-Matie’ — the hyphens separating the ‘O’ and giving this peculiar character to the mark.” It may be here said that if the matter turned upon the hyphens, appellee’s mark in the record does not show hyphens, but small circles instead. We do not understand that registration may be denied -appellant simply upon the ground that his mark simulates or elosely resembles or contains a part, however prominent, of the mark of appellee. There must be the additional feature that the goods to which the marks are applied are of the same descriptive properties so that confusion would likely result when the marks are applied. Being of the opinion that the latter situation exists, we concur in the assistant commissioner’s conclusion, and same is affirmed. Affirmed.

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In re JENNINGS. Patent Appeal No. 2697. Court of Customs and Patent Appeals. April 22, 1931. Louis W. Southgate, of New York City (Chas. E. Riordon, of Washington, D. C., of counsel), for appellant. T. A. Hostetler, of Washington, D. C., for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. HATFIELD, Associate Judge. This is an appeal from the decision of the Board of Appeals of the United States Patent Office affirming the decision of the Primary Examiner denying all of the claims, Nos. 4 and 6 to 11, inclusive, in appellant’s application for a patent for an alleged invention relating to improvements! in wet vacuum pumping apparatus, and consists in securing the motor and pumps as a unit to the side of the tank, and providing a float control for the electric motor. Claims 4 and 8 are illustrative. They read: “4. A pumping apparatus of the class described including a tank, a easing containing a liquid and a gas pump secured to the side of the tank, a frame rabbeted to the pump casing, a motor carried by the frame, and means for securing these parts as a unit to the tank.” “8. In an apparatus of the class described, the combination of a tank, a lug therein, a yoke fitting said lug, an arm extending from said yoke and carrying a float, a shaft extending through the tank, lug and yoke, means as a screw for adjustably connecting the yoke and shaft, an electric switch, and connections between the shaft and switch.” The references are: Creamer, 404,174, May 28, 1889; Coppus, 1,056,151, March 18, 1913; Wellington, 1,125,611, January 19, 1915; McCarthy, 1,264,315, April 30, 1918; Wilson, 1,463,989, August 7, 1923; Jennings, 1,592,024, July 13, 1926. In his specification, appellant stated that thef object of the alleged invention was to improve the wet vacuum apparatus disclosed in the Jennings’ reference, which comprised a rigid base, a tank and motor secured to the base, and pumps fastened to the side of the tank. Counsel for appellant contends that considerable difficulty was encountered in aligning the motor with the pumps in the apparatus disclosed in the Jennings’ reference, due to the fact that the motor was secured to the base; and that, by securing the motpr and pumps as a unit to the side of the tank, they may be removed ánd replaced as a unit, or separately, as desired, and the motor is retained in alignment with the pumps. Appellant has undoubtedly improved the apparatus disclosed in the patent issued to him in 1926. This is not denied by the Patent Office tribunals. They concurred, however, in holding that, in view of the references of record, the improvements defined in the claims do not involve invention. In its decision, the Board of Appeals described and applied the references in the following language: “The patent to Jennings discloses the combination set forth in claims 4, 6, 7, 9, 10, and 11 except that the motor is supported on the machine base instead of being secured to a rabbeted seat on the pump casing. The patent to Wilson discloses a construction in which the container 51 corresponds to appellant’s container B, the rabbeted pump casing 2 to appellant’s pump easing, and the motor 4 with its legs 3 to appellant’s motor M and legs 11. In Wilson the motor and pump casing are attached to the top of the container but there would be nothing inventive in supporting Wilson’s structure on the side of the tank in view of Jennings in which the pump easing is so located and the motor is axially aligned with the pump. The patent to Cop-pus also shows a motor and pump or fan arranged horizontally and supported as a unit from an opening in the side of the casing. 5. The purpose of appellant’s construction is to insure accurate alignment of these elements which is also stated on page 1, lines 27 to 36 as one object of Wilson’s invention. If Wilson’s perforated motor support is considered not the same as appellant’s legs 11, it is clearly an equivalent therefor, the leg type of support being old, as shown in Wellington. “Claim 8 was rejected on Creamer. In the reference the lug is divided and the float carrying arm is secured between the two parts of the lug whereas in appellant’s construction the lug is single and is embraced by the yoke on the float arm. One structure is a mere reversal of the other. In the reference the shaft appears to be integral with the float arm instead of being adjustable therein but there is no invention in merely making parts adjustable by the common means of a set screw. The reference operates a valve R instead of an electric switch but these elements are recognized equivalents in a float controlled device.” We have given the issues involved careful consideration. Were it proper to grant appellant a patent merely because he has decidedly improved the apparatus disclosed in his patent No. 1,592,024, it would be necessary to reverse the decision of the Board of Appeals. Regardless, however, of the importance of the improvements in a commercial' sense, invention, as distinguished from obvious mechanical changes, must be present to warrant the issuance of a patent. Although counsel for appellant has vigorously urged the presence of invention in the involved application, we are unable to find any error, either in the reasoning or in the conclusion reached by the tribunals of the Patent Office. The decision of the Board of Appeals must, therefore, bé and, accordingly, is affirmed. Affirmed.

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In re WEEKS. Patent Appeal No. 2636. Court of Customs and Patent Appeals. April 22, 1931. Louis Burgess, of New York City, for appellant. T. A. Hostetler, of Washington, D. C., for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. Rehearing denied May 27, 1931. GARRETT, Associate Judge. Appellant has here appealed from a decision of the Board of Appeals of the Patent Office sustaining the action of the examiner in rejecting his eleven claims numbered 20 to 30, inclusive, for “new and useful improvements in Portable Hoisting Apparatus.’’ Appellant’s claimed invention relates primarily to stevedoring, that is, to the unloading of ships, particularly ocean-going vessels. Claim No. 26 is for the method; the remainder are directed to the article. From appellant’s brief we quote the following : 1 “Claims 20 to 23, 27, 29 and 30 are descriptions of the variants of structure which basically characterize the invention. “Claims 24 to 28 introduce as an additional element the hopper and chute carried by the tower to receive the discharge from the bracket and direct it into the barge. “Claims 25 and 30 introduce as an additional feature that the power unit is integral with the platform and by its weight contributes to the general stability of the structure bn shipboard. “Claim 26 defines broadly the method of unloading a ship which comprises simultaneously operating from a plurality of hatches by means of a portable crane of ’the Weeks type.” With the foregoing statements in mind, it is sufficient to quote in full only claims. 20 and 26. “20. In a portable crane, supporting means comprising a tower freely and selectively positionable on the deck of a ship with relation to the hatch, a beam carried by the tower adapted to extend over the hatch, hoisting mechanism carried by the beam, a power unit carried by said supporting means for actuating the hoisting mechanism,. the entire assembly being lif table as . a unit to, and from the deek of the ship and readily movable from hatch to hatch thereof.” “26. In a method of unloading a ship with a plurality of small cranes, each of which comprises an assembly of a tower small enough to be placed on the deck of the ship between the hatch and adjacent side of the ship,-a beam, hoisting mechanism and a power unit for operating the hoisting mechanism; the steps comprising lifting a plurality of the cranes onto the deek and placing the tower of each crane on the deek alongside the respective hatches of the ship with the beam of each crane extending over the respective hatch, operating the cranes, for simultaneously unloading the ship from a plurality of hatches and thereby lightening it evenly, and after the unloading is completed, lifting the small cranes off the deek of the ship.” The references cited are: Messier, 237,571, February 8, 1881. Bogle, 419,630, January 21, 1890. Sinclair, 658,810, October 2, 1900. Hutchings, 700,051, May 13, 1902. Titeomb, 738,084, September 1, 1903. Titeomb, 742,101, October 20, 1903. Hammond, 845,461, February 26, 1907. McIntyre, 1,010,291, November 28, 1911. Zimmerman, 1,428,809, September 12, 1922. Von Haase, 1,565,875, December 15,1925. Engineering News, July 17, 1913, page 119. In presenting the ease before us, counsel for appellant greatly aided the court by using models, not only of appellant’s own structure, but of several of the devices of the most material references. We were and are impressed with the idea that appellant’s mechanism is a valuable contribution to the art for use in which it was designed. He has developed a device which, in the form made and used, appears to have a number of advantages over any of the patents referred to in the record. It can be moved freely from place to place upon the deek of a vessel without the use of track or rails for its wheels and, apparently, more readily and rapidly positioned by the hatches, in a situation best adapted for hoisting the cargoes from the hold, than can any of the devices of the prior art. But, notwithstanding this, the law is that an applicant’s “claims define the measure of his invention” (italics ours), and if the disclosures of the references read upon his claims, patentability must be denied. None of the claims are specified as being for the combination, but, by reason of the wording, some of them, at least, seem, in fact, to be of a character which makes it proper to regard them as combination claims, and we so treat them. In the brief of the Solicitor for the Patent Office there is found a concise description of appellant’s device which, omitting the numerals, we quote: “The application on appeal discloses a portable hoisting apparatus or crane, and comprises a tower mounted on wheels, so that it can be freely and selectively positionable on the deek of a ship with relation to the hatch. A beam is carried by the tower and is adapted to extend over the hatch. The beam carries hoisting mechanism including trolley and cable arrangement for raising and lowering the grab bucket. The supporting tower carries a power unit for actuating the hoisting mechanism, including the power winch. A hopper is provided on the tower into which the bucket drops its load, the hopper being supported from the tower by chains and having a chute for delivering matter from the hopper to the barge or lighter. The beam is provided at one end with a supporting post pivoted to the beam.” There are four elements of structure in claim 20, to wit: First. “Supporting means comprising a tower freely and selectively positionable on the deek of. a ship with relation to the hatch.” The patent to Zimmerman shows a structure designated therein as a “crane” and described, in part, as “comprising two pairs of obliquely disposed adjustable supporting legs, one pair adjacent either side of the .boat. * * *” These supporting legs, so obliquely disposed, are pivotally united at their upper ends and form the support for the mechanism utilized in the unloading operation. In appellant’s specifications it is said: “In the embodiment shown I use a tower 10 which can be any frame capable of carrying the hoisting apparatus and of a sufficient height to facilitate the work.” Elsewhere in the specifications we find: “ * * * In using the term “portable crane” I mean to include the ordinary or any preferred structure carrying hoisting mechanism. * * *” We assume, although it was not specifically so stated in the decisions of the Patent Office tribunals, that the tower of appellant was regarded as the mechanical equivalent of the crane or frame of Zimmerman, particularly in view of the above-quoted excerpts from appellant’s specifications. They do seem to be equivalent, although it is not necessary so to hold, in view of the fact that the tower structure itself is disclosed in prior art relating to the loading and unloading of vessels. The patent to Messier shows this, as does the illustration from the “Engineering News.” Second. “A beam carried by the tower and adapted to extend over the hatch.” This, or an obvious equivalent thereof, is shown in Zimmerman’s elements, numbered 10 in his drawings, and, apparently, is also present in Titeomb and Hammond. Third. “Hoisting mechanism carried by the beam.” Zimmerman shows this in his features numbered 30 to 34. It is an element old in the art, though, of course, different mechanisms might have varying details. Appellant’s claim is not limited to any detail of structure, but calls broadly for “hoisting mechanism.” Fourth. “A power unit carried by said supporting means for actuating the hoisting means.” Zimmerman disclosed this also in the features numbered 20 and 21. In addition to the four elements of structure, claim 20 adds that the entire assembly is “liftable as a unit to and from the deck of the ship” and is “readily movable from hatch to hatch thereof.” The patent to McIntyre discloses: “An eye * * * at the top of the frame to receive a suspension • rope from a derrick by which the frame is swung into position on the side of the ship.” The Engineering News has a photographic illustration of a 25-ton crane being lifted by another crane of 250 tons capacity. The hopper, chute, and bucket elements referred to in claims 24 and 28 are shown respectively by McIntyre, Hammond, Titeomb, and Von Haase. The adjustment of the power unit in such a way as that “its weight contributes to the general stability of the structure on shipboard,” referred to in appellant’s brief as being contained in claims 25 and 30, is not regarded as patentable. Emphasis has been placed upon the fact that the Zimmerman structure must have a track upon which its supporting wheels operate, and its movements are limited to the track, while appellant uses casters by means of which his device can be moved in any direction requiring no rails upon which to run. We find no claim which is limited to such a structure. It is true that in claim 27 it is said: “ * * * Being operable * * * and requiring no rails or other modifications on the deck of the ship for its use.” But nothing is said there or elsewhere in the claims about casters or other means whereby the device is rendered movable without rails, or, as is stated in some of the claims, rendered “freely and selectively positionable with reference to the hatch.” So, even if the substitution of casters for the track wheels and movement without rails could be held patentable, appellant presents no claim for means of accomplishing these ends. It seems obvious that appellant’s product claims are so broad as that they are anticipated in the prior art cited. The method claim does not relate in any way to the moving of the tower or crane upon the deck, but to the unloading operation. We are unable to see wherein it discloses any new way of handling the material which is taken from the vessel. At most, the claim does no more than describe the method by specifying the apparatus used in the operation. This is not sufficient. In re Weston, 17 App. D. C. 431, 442, declared: “ * * * a process, which amounts to no more than the mere function.of a machine, is not patentable. * * * ” So far as the use of several of the devices for “simultaneously unloading the ship from a plurality of hatches” is concerned, surely there is no invention in that. Even if it were an inventive idea, Titeomb discloses it. Appellant’s brief says: “The concept that a new and useful purpose would be served by creating the .new device is peculiar to Weeks and even though the structure per se involves no invention whatsoever, he is an inventor and entitled to a patent.” This contention, as stated, we think, is entirely too broad. One may not patent an idea of an article unless that idea is expressed in some physical entity, and that entity must be something new and useful and must involve invention. We have examined the cases cited by appellant as authorities upon this contention, viz.: Hobbs v. Beach, 180 U. S. 383, 21 S. Ct. 409, 45 L. Ed. 586; National Cash Register Co. v. Boston Cash Indicator & Recorder Co., 156 U. S. 502, 15 S. Ct. 434, 39 L. Ed. 511; Cutler-Hammer Mfg. Co. v. Union Electric Mfg. Co. et al. (C. C.) 147 F. 266; Comptograph Co. v. Mechanical Accountant Co. (C. C. A.) 145 F. 331. We have also examined the authorities which were referred to in that part of the opinion in the last-named case quoted in appellant’s brief. They do not sustain so broad a principle as appellant seems here to contend for. With a single exception (that of Krementz v. Cottle Co. [C.C.] 39 F. 323), the claims involved in the several eases thus brought to our attention were combination claims, and in each instance they were so worded as that it was held that prior art did not read upon them in the combination disclosed. In the instant ease, as we have shown, the wording of the claims is such as that the disclosures of the prior art do read upon them even when treated as constituting a combination. As stated, appellant seems to have produced an improvement over prior •art, but his claims are not so formulated in the application now at issue as that we can feel justified in holding that there was error in the decisions of ihe Patent Office tribunals. The decision of the Board of Appeals is •affirmed. Affirmed.

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In re BYCK. Patent Appeal No. 2671. Court of Customs and Patent Appeals. April 15, 1931. R. L. Scheffler, of Washington, D. C., for appellant. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for appellee. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. LENROOT, Associate Judge. This is an appeal from a decision of the Board of Appeals of the United States Patent Office affirming the decision of the Examiner, rejecting claims 1, 2, 3, 8, 9, and 10 of appellant’s application for failure to define anything inventive over the subject-matter claimed in appellant’s prior patent, in view of the prior art. Claims 1, 3, and 9 are illustrative of the claims in issue and read as follows: “1. An insulated coil comprising a conductive winding having an insulating coating of infusible, flexible, phenol-fatty oil composition, and an insulating filling for the interstices of said winding.” “3. An insulated coil comprising a conductive winding having an insulating coating of infusible, flexible, phenol-fatty oil composition, associated with a fibrous sheet material, and an insulating filling for the interstices of the said winding.” . “9. As an article of manufacture, a flexible electrical conductor having an adhering insulating coating of an infusible, flexible, phenol-fatty oil composition.” The references are: Baekeland, 1,213,-726, January 23, 1917; Byck, 1,590,079, June 22, 1926. The alleged invention is sufficiently described in the claims quoted. The Board of Appeals in its decision stated: “The patent to Baekeland discloses the making of an insulated coil by first insulating the conductor in various ways, see page 2, lines 8-10, among which is coating it with an insulating varnish and then impregnating the conductor or coil and filling the interstices between the windings with a fluid and mobile phenolic condensation product and finally transforming said product, in situ, into a solid homogeneous, impervious, insoluble and infusible body. “Appellant carries out the same process but uses both as the insulating varnish and as the impregnating material, a composition for which he has been granted a patent No. 1,590,079. “The Examiner holds that there is no invention in substituting the composition of. appellant’s patent for the insulating varnish and the impregnating material in the Baekeland method.” It .appears that on June 22, 1926, appellant was granted the patent cited as a reference, upon an application filed November 5, 1923. The instant application was filed on February 11, 1926, so that it was eopending at the time said patent was issued. Appellant moved for a rehearing before the Board of Appeals upon the ground that the Board had overlooked the fact that his application was eopending when said patent was issued. The Board denied the motion, stating: “The ground of our rejection was that appellant had already been granted a patent on the phenolic condensation product which he proposes to use for insulating electric conductors and coils, as claimed in the present application, and that it involved no invention to use such material for this purpose in view of the Baekeland patent No. 1,213,726. The question is merely whether it involved invention to substitute appellant’s patented composition in the Baekeland process and coil. We held that it did not and it is entirely immaterial that the applications were copending. The situation is like that in Re Isherwood, 46 App. D. C. 507, C. D. 1917, page 226; Ex parte Hammond & Hammond, C. D. 1922, page 15; Ex parte Chapman, C. D. 1924, page 143; and Willcox & Gibbs Sewing Mach. Co. v. Merrow Mach. Co. (C. C. A.) 93 F. 206, C. D. 1898, page 584.” In appellant’s said patent it is stated that his material is adapted for use as a varnish or impregnating solution; it is further stated as follows: “Varnishes and lacquers prepared as above may be applied to wood, metal, fabrics, paper and all other bases, and yield when haired (preferably at about 160°-170° C.) lustrous, adherent, mechanically and chemically resistant, electrically insulating and highly flexible films. They have been found well suited, among other uses, for the manufacture of so-called composite cardboard, or laminated products (U. S. Patent No. 1,019,406 to L. H. Baekeland) comprising sheets of paper, canvas, etc., coated or impregnated with the phenolic condensation product, and consolidated and transformed by sufficient application of heat.” It is dear to us that the decision of the Board of Appeals must be affirmed unless the fact that appellant’s instant application was copending with the application upon which his patent was issued prevents such patent being considered in determining whether appellant has made an invention. It is elementary that there cannot be more than one valid patent for the same invention, and, if appellant’s claims here in issue have ns an element of invention only the use of the composition patented to appellant, it would seem that, in view of the Baekeland reference, appellant was attempting to secure a patent upon an obvious use of a composition for which he has already received a patent. Appellant cites many authorities in support of his contention that his said patent is not a bar to the allowance of the claims in issue. The eases so cited appear to establish'the rule that, where two applications by the same inventor are eopending, it is a matter of indifference which of the patents is issued first, provided that the claims are for separate inventions. Traitel Marble Co. v. U. T. Hungerford Brass & Copper Co. (C. C. A.) 22 F.(2d) 259, and cases cited. In the same case it was held that: “The issuance of the first patent does not abandon the unclaimed matter in its disclosure, the pending of the second application rebutting any such inference.” We think it clear that the application here in issue does not claim a separate invention from that claimed in the issued patent, but only claims an obvious use of the composition there patented. If appellant’s position is well taken, then it would seem that any inventor of a new and useful composition of matter may receive á patent for-it, and he may also, by filing separate applications, secure patents for every use of such composition that he may disclose. An inventor is not entitled to a patent unless his invention is new and useful. It would shock one’s sense of justice if an inventor could receive a patent upon a composition of matter, setting out at length in the specification the useful purposes of such composition, manufacture and sell it to the public, and then prevent the public from making any beneficial use of such product by securing patents upon each of the uses to which' it may be adapted. In the ease at bar, appellant received a patent upon his composition of matter because he had invented something new and useful. He could not have received such patent unless he had disclosed its utility. Such disclosure of usefulness did not constitute separate inventions, but an essential part of a single invention. Of course he might have •disclosed a use of the invention which, together with other elements, might have constituted a separate invention for which he would be entitled to a patent. This, we hold, he did not do, in view of the Baekeland reference. For the reasons stated, there was no error in citing the said patent, not as prior art, but to show that appellant had already received a patent for the only invention that was disclosed in either application. The decision of the Board of Appeals is affirmed. Affirmed.

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In re PEABODY. Patent Appeal No. 2695. Court of Customs and Patent Appeals. April 22, 1931. Meyers & Jones, of New York City (Charles S. Jones, of New York City, of counsel), for appellant. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. HATFIELD, Associate Judge. This is an appeal from the decision of the Board of Appeals of the United States Patent Office affirming the decision of the Primary Examiner denying all of the claims, Nos. 33 to 55, inclusive, in appellant’s application for a patent for an alleged invention relating to improvements in a fuel burner. Claims 34 and 54 are illustrative. They read: “34. In combination, a furnace having a wall with an opening therein, means for delivering a body of air for combustion with a whirling motion to said opening, and means for projecting fuel in a converging cone into said air from a source outside thereof at substantially the entrance to said opening.” “54. A fuel burner comprising a chamber provided with a frusto conical wall for directing air, and an annular slot in the wall thereof, said wall and said slot converging in the same direction and at an angle to the axis of the chamber.” The references are: Schutte, 391,865, October 30, 1888; Case, 950,996, March 1, 1910; Lindsay, 1,378,248, May 17, 1921; O’Neill et al., 1,429,090, September 12, 1922; Leps, 858,189, June 25, 1907. Claim 34 defines a combination including a “furnace having a wall with an opening therein [shown in the patent to O’Neill], means for delivering a body of air for combustion with a whirling motion to said opening [shown in the patent to Sehutte], and means for projecting fuel in a converging cone into said air from a source outside thereof at substantially the entrance to said opening [also shown in the patent to Sehutte].” Claims 44, 46, 47, 54, and 55 define, generally, a burner having a frusto-conieal wall for directing air and an annular discharge opening converging in the same direction and at an angle to the axis of the chamber. With reference to these claims, the Board of Appeals said: “The claims above mentioned by number all call for the delivery of the air through a gradually decreasing air passage. The patent to Lindsay discloses a burner having a gradually decreasing air passage in substantially the same relationship as appellant’s. The gas is delivered to the air column through an annular slot burner but the slot is not inclined as in appellant’s structure and that of Sehutte. An oil burner is found in Lindsay at substantially the same relative location as in appellant’s structure. There are auxiliary air feed openings in Lindsay and appellant contends that the constricted passage is only for atomizing the liquid fuel but inasmuch as the specification of Lindsay in the seeond paragraph clearly states that either, of the fuels may be employed alone it seems apparent that when the oil is not being fed, some of the air will be delivered to the gas burner through the constricted passage. In any event, we do not consider that it would involve invention to give the air passage of Schutte slight constriction if desired, especially in view of the disclosure of Lindsay. In our opinion, therefore, the claims which include the constricted air passage do not patentably distinguish from Schutte.” Other features of appellant’s burner are clearly shown in the other references, and we deem it unnecessary to diseuss them. It may be, as claimed by appellant in his affidavit of record, that his fuel burner is more efficient than any other burner of its class on the market-,' and that it is a commercial success. It may likewise be true that appellant’s specification might support patentable claims. However, after giving the matter careful consideration, we are of opinion that the involved- claims are sufficiently broad to read on the references or on obvious combinations thereof, and .therefore are not patentable. We are in accord with the conclusion reached by the Patent Office 'tribunals, and the decision of the Board of Appeals is affirmed. Affirmed.

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In re RUSSELL. Patent Appeal No. 2873. Court of Customs and Patent Appeals. April 15, 1931. Robt. E. Barry and D. P. Wolhaupter, both of Washington D. C. (Seymour & Bright, of Washington, D. C., of counsel), for appellant. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. HATFIELD, Associate Judge. This is an appeal from the decision of the Board of Appeals of the United States Patent Office affirming the decision of the Primary Examiner denying all of the claims, Nos. 6 and 7, in appellant’s application for a patent fbr an alleged invention relating to improvements in indexes, particularly to the indexing of names in directories, and . is claimed to be applicable to dictionaries, etc. The method of arranging and grouping the names is sufficiently set out in the involved claims. They read: “6. A directory comprising a part in which surnames are arranged phonetically with the given names of the respective surnames arranged otherwise than phonetically, and another part in which the surnames are arranged otherwise than phonetically with reference to the section in the first-mentioned part where surnames are arranged phonetically. “7. A directory comprising a part in which surnames are arranged in groups phonetically with the given names of the respective surnames arranged alphabetically and a second part in which surnames are arranged in columns alphabetically with references to the pages in the first-mentioned part where surnames are arranged phonetically, the several columns of the second part having at their heads designations of the range of surnames in the respective columns.” It is claimed by appellant that his alleged' invention facilitates the finding of' names in directories and the like; and that it comprises “finished tangible subject matter bearing specifically arranged data or means, combined to produce a novel result.” It may be observed, however, that the only matter claimed to be new is the alleged novel arrangement of names. The mere arrangement of printed matter on a sheet or sheets of paper, in book form or otherwise, does not constitute “any new and useful art, machine, manufacture, or composition of matter,” or “any new and useful improvements thereof,” as provided in section 4886 of the Revised Statutes, 35 USCA § 31. Guthrie v. Curlett et al. (C. C. A.) 10 F.(2d) 725; Flint et al. v. Leonard & Co. (C. C. A.) 27 F.(2d) 215; In re Dixon, 44 F.(2d) 881,18 C. C. P. A.-, and cases therein cited. It is contended by ‘counsel for appellant that the decision in the ease of Cincinnati Traction Co. v. Pope (C. C. A.) 210 F. 443, 446, supports his contention that the involved claims present patentable subject-matter. In that ease, the Circuit Court of Appeals, Sixth Circuit, held that so-called transfer tickets for use by street railway traction companies, etc., involved patentable subject-matter, and, in its decision, referred to the case of Rand, McNally & Co. v. Exchange Scrip-Book Co. (C. C. A.) 187 F. 984, also relied upon by counsel for appellant in this ease. The court, however, did not hold that the mere arrangement of the printed text constituted patentable subject-matter, but, on the contrary, based its decision upon the patentable novelty of the physical structure of the tickets, and, in this connection, said: “The specifications describe a distinctive physical structure, viz., a given combination and general arrangement of body and coupon (with the suggestion that the two parts may be printed in different colors), accompanied by ‘conventional indications’ and instructions for the use and interpretation of the ticket. But the alleged patentable novelty does not reside m the arrangement of the printed text, nor does such text constitute merely a printed agreement.” (Italics ours.) It is not claimed in the ease at bar that appellant has invented a new physical structure or a method of producing it. It is contended, however, that his alleged novel arrangement of names in directories and dictionaries is patentable subject-matter. The issues at bar are clearly distinguishable from those involved in the Cincinnati Traction Co. Case, supra, and other cases relied upon by counsel for appellant. The decision is affirmed. Affirmed.

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In re NICKEL et al. Patent Appeal No. 2679. Court of Customs and Patent Appeals. April 15, 1931. Foster & Codier, of Washington, D. C. (Oscar Codier and Ivan P. Tashof, both of Washington, D. C., of counsel), for appellants. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for the Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. GRAHAM, Presiding Judge. Appellant prays an appeal from the decision of the Board of Appeals of the United States Patent Office, which affirmed the decision of the Examiner in refusing to allow claims 1 to 7, inclusive, of appellant’s application for a process and product patent upon furnace slag cement. Two of appellant’s claims are as follows: “1. Process for the manufacture of cement from lime and silicates consisting in the employment of solid vitrified silicates technically free from water in admixture with burned unslaked lime, and a' small amount of gypsum, the ingredients being reduced to the fineness of cement, substantially as set forth.” “3. Cement comprising a mixture of 3 to 20'% of burned unslaked lime and 75 to 95% of water-free vitreous silicates and 1 to 5% of gypsum ground to the fineness of ordinary cement substantially as set forth.” The claims were denied on the following references: Bodmer, 70,510, November 5, 1867; Grau, 905,813, December 1, 1908; Bergmann, British, 4,594, April 2, 1898; Eckel’s Cements, Limes, and Plasters, published by Wiley & Son, New York, 1st Ed. 1905. Appellant proposes to make his cement by first water cooling and vitrifying Ms slag, then drying the same, adding unslaked lime and gypsum, and grinding these substances together into powder. TMs process, he states, is new, and the product is new; hence inventive. It will be observed that, while claim 1 calls for the use of “solid vitrified silicates technically free from water,” no particular method of obtaining the same is claimed. The reference English patent to Bodmer, describes a process of making cement from vitrified furnace slag and unslaked lime, heated and dried after mixing, and then ;ground. He also teaches the mixture of such lime with the slag as it comes molten from the furnace. The reference Grau teaches the making of cement by blowing either slaked or unslaked lime into the molten slag as it issues from the furnace and then grinding the same. Grau also recites that gypsum may be mixed with the other components in making the cement. The reference Bergmann makes the following recitation in his specification: “The production of granulated slag for clinkers or cement stones heretofore, has been by running water directly on to the outflowing hot slag, thereby reducing the same to a foamy glassy wet sand which, for making cement stones, must, previous to grinding undergo an expensive drying process in special furnaces, since it only dries very slowly in the air, and has a tendency to cake into large solid lumps or masses when left for a length of time in a heap.” Bergmann further states that he avoids the disadvantages of the former process and uses furnace slag which is not first granulated, but which, while in its solid state, is broken up and ground after having been allowed to cool slowly in the ordinary slag boxes. This slag, he states, is “absolutely free of water,” and this he proposes to grind with lime, and which lime, he states, is “intensely hygroscopic.” The ease is not free from difficulties, but we are of opinion the application of appellant has been anticipated by the said references. It is not claimed there is anything new in the quality of the cement produced by appellant’s process. Certainly there is nothing new in mixing furnace slag, either vitrified or otherwise, with unslaked lime to make cement. The references fully disclose that this was known to the art many years before appellant made his application. There was therefore no invention shown by his application in this respect. We are also unable to see anything inventive in the particular combination disclosed by appellant in his claims, of which claim 3 is typical. It has been suggested by the Solicitor of the Patent Office that, it being once known that gypsum, unslaked lime, and vitrified furnace slag might be mixed to form a cement, the proper proportions of each to be used would naturally and obviously suggest themselves to one skilled in the art. If it may be claimed that appellant’s claims, typified by claim 3, should be allowed because they teach the mixture of the components in certain percentages, it will be observed that the range of percentages for the various components .is so wide that no real addition to the art is furnished. It amounts to little more than a statement that a mixture of vitrous slag, unslaked lime, and gypsum is used. The decision of the Board of Appeals is affirmed. .Affirmed.

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In re LEASK et al. Patent Appeal No. 2692. Court of Customs and Patent Appeals. April 22, 1931. Meyers & Jones, of New York City (Charles S. Jones, of New York City, of counsel), for appellants. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. BLAND, Associate Judge. The invention involved in this appeal relates to a method and apparatus for burning finely divided fuel. All of the apparatus claims and some of the method claims were allowed by the Patent Office. Method claims 1 to 4 were rejected, and it is from a decision of the Board of Appeals of the United States Patent Office affirming the decision of the Examiner as to these claims, that appeal is taken here. Claim 1 is illustrative, and follows: “1. The method of burning finely divided fuel which consists in delivering such fuel with carrier air to la burner tube, causing the fuel to travel in a spiral path in a general direction transverse to the line of feed toward one end of the tube, and discharging the fuel in a relatively thin stream , around the periphery of the end of the tube into a combustion chamber.” The method consists of three steps enumerated in .claim 1. Centrifugal force is set up in the burner, which causes the mass of fuel carrying air to travel spirally and hug the inner wall of the burner tube. A rotating column of secondary air, required for com'bustion, is also admitted within the interior of the spirally moving mass of fuel. The claims were rejected upon the British patent to Peabody, No. 256,685, August 12, 1926, which relates to a method of burning pulverized fuel, and which method consists, according to the specification found in the record, “in forcing a body of air or other combustion-supporting gas with a whirling motion into a passage leading to a combustion chamber and injecting a mixture of pulverized fuel and air or other gaseous fluid into said rotating body of air, from a source outside said latter, at an angle to the axial direction of travel of said rotating body.” The method in the Peabody patent is carried out by an apparatus which is shown in the drawings. A fuel and carrier medium such as air is admitted through an inlet in the member specified and discharged into the throat opening along an annular outlet, including an inclined wall, “in a thin sheet with a rotary motion relative to the axis of the throat,” as stated at record page 31, lines 67-74. The patent further states that: “Upon passing out of the annular outlet, this thin sheet of combustible material is mixed with a rotating column of air which is entering through the air register and passage formed by the wall 12 of the member 10.” The allowed method claims were drawn so as to provide for the admission of fuel and carrier air into the burner tube “tangentially to its inner wall.” This feature of appellants’ device was found to be new and not covered by the prior art. Appellants seem to argue in this court that, because there was a rotary spiral movement of the fuel and air in Peabody, and also a rotary spiral motion in appellants’ device, which in the latter device was occasioned, in part, by the tangentially placed opening, the Board, therefore, having allowed the claims providing for the “tangentially” placed opening, must have regarded the spiral movement as new. Appellants argue here that, if this is the ease, then the claims in issue here, which omit the tangentially opening feature, should also be allowed. It is sufficient to say that we agree with the finding of the Board that the tangentially placed opening feature is new and the spiral motion feature old. Since appellants’ claims now under consideration leave out the tangentially placed opening feature and are confined to the spiral movement, appellants’ contention is without merit, and the Board of Appeals correctly rejected the claims, and its decision is affirmed. Affirmed.

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In re BRONSON. Patent Appeal No. 2688. Court of Customs and Patent Appeals. April 22, 1931. Kwis, Hudson & Kent, of Cleveland, Ohio (A. J. Hudson, of Cleveland, Ohio, W. T. Estabrook, of Washington, D. C., and W. E. Williams, of Cleveland, Ohio, of counsel), for appellant. T. A. Hostetler, of Washington, D. C. (Howard S. Miller, of Washington, D. C., of counsel), for Commissioner of Patents. Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges. BLAND, Associate Judge. The alleged invention involved in this appeal relates to a coupling in an air connection used in inflating rubber inner tubes during the curing or vulcanizing process, and is particularly directed to the air stem which leads from the inner tube through the outer casing and through the rim of the wheel. The six claims presented were rejected by the Board of Appeals of the United States Patent Office. No. 1 is a combination claim, and claims 2 to 6 are drawn to cover the construction of the stem, and therefore 1 and 2 are regarded as illustrative, and are as follows: “1. An air connection comprising a flexible tube having a nipple at one end, a plunger member to which the other end of the tubing is secured, a casing surrounding the plunger, resilient means between the plunger and the easing tending to normally separate one with respect to the other, an air stem having a part for securing the same with respect to a tire mold and another part with which .said plunger engages, and a non-circular head on said stem, said casing having one end which has a substantially noneircular opening through which the said head may extend and within which it may he turned to properly position said stem for engagement hy said plunger. (Italics ours.) “2. An air stem comprising an integral hollow tubular body, a head at one end thereof, and a second head at the other end which is noneircular.” The italicized portion of elaim 1 is claimed to be the new part of the combination involved in that elaim, and is substantially the subject-matter called for in the other claims involved, although expressed in language differing in each of the claims. The claims were rejected on the prior art, and the following references are relied upon: Kotten, 660,856, Oct. 30, 1900; Rose, 1,362, 189, Dec. 14, 1920; Crumlich, 1,386,603, Aug. 9, 1921; Smith, 1,487,696, March 18, 1924. The rejection is based upon the ground that, in view of the general combination shown in Rose, Crumlieh, and Smith, it is not inventive to substitute in any of these devices the specific coupling disclosed in Kotten. The patents to Rose, Crumlieh, and Smith involved couplings used for the same purpose as those of applicant, while Kotten was an air pipe coupling for a pneumatic tool. Appellant argues to the effect that, since the Kotten patent concerns a nonanalogous art, it should not be cited to defeat appellant’s application. Kotten’s connection operates upon the same principle as applicant’s, and we do not think that invention would lie in placing the Kotten device in a vulcanizer connection in view of disclosures in the other references. We agree with the finding of the Board that the details found in appellant’s structure involved nothing 'more than the usual mechanical skill over the prior art cited. The decision of the Board of Appeals is affirmed. Affirmed.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

J. H. WILLIAMS & CO. v. UNITED STATES. No. H-291. Court of Claims. April 6, 1931. For former opinion, see 39 F.(2d) 1019. Malcolm C. Law, of New York City (James L. Dohr, of New York City, on the brief), for plaintiff. Charles R. Pollard, of Washington, D. C., and Herman J. Galloway, Asst. Atty. Gen. (Ralph E. Smith, of Washington, D. C., on the brief), for the United States. Before BO'OTH, Chief Justice, and LITTLETON, WHALEY, WILLIAMS, and GREEN, Judges. LITTLETON, Judge. This suit was brought to recover $13,571.-13, interest on an overpayment of tax for 1918, which overpayment was duly allowed; $131,477.76 thereof was paid to the plaintiff by check of May 15, 1924, and a balance of $5,671.29 was credited against an additional tax for 1919. The ground upon which the suit was brought in this court was that the plaintiff filed with the Bureau of Internal Revenue a elaim for refund for 1918 on February 10, 1922, and that under the third ground specified in section 1324 (a) of the Revenue Act of 1921 (42 Stat. 316), with "reference to the payment of interest upon the allowance of a claim for refund or credit, plaintiff was entitled to interest upon the overpayment refunded from six months after February 19, 1922-, to the date of the allowance of the claim. Prior to bringing its suit, plaintiff had requested and petitioned the Commissioner of Internal Revenue to allow and pay interest upon the refund made for 1918, but the Commissioner’s office could not locate the claim for refund, claimed to have been filed, or any record of it having been received by the Bureau, and for that reason refused to compute and allow any interest. The overpayment arose out of certain adjustments and allowances made by the Commissioner of Internal Revenue with respect to amortization of war facilities for 1918, and, when the plaintiff requested the Commissioner to allow interest, he took the position that the overpayment had been determined as a result of plaintiff’s claim for amortization in connection with an amended return filed, and that it was not the result of “the allowance of the claim for refund,” but by authority of the provisions qf section 252 of the' Revenue Act of 1921 (42 Stat. 268), which directs the Commissioner to make a refund of any overpayment determined within five years after the return was due. Certain facts were stipulated, and. testimony was taken by the plaintiff and the defendant, and thereafter the court published its special findings of fact. In finding 18 the court found as a fact that plaintiff duly filed a claim for refund of $282,658.63, for 1918 on February 19, 1922, and in findings 19, 29, and 21 the court found facts with reference to the execution of the claim, the grounds thereof, and the reasons stated in support of the claim of taxpayer for its allowance. As a result of these findings, the court decided that plaintiff was entitled to interest under the provisions of section 1324 (a) of the Revenue Act of 1921 from August 19, 1922, six months after the filing of the claim for refund, to April 39, 1924, the date on which the Commissioner made his allowance. Judgment was accordingly entered for the amount sued for. 39 F. (2d) 1919. The United States denied the right of plaintiff to recover, and defended on the ground that plaintiff had never filed a claim for refund. After the findings and decision by the court, the defendant filed a motion for a new trial on the ground that the court had erred in finding that plaintiff had filed a claim for refund and on the further ground that plaintiff had instituted a suit in the United States District Court at Brooklyn, N. Y., seeking to recover an alleged overpayment of tax for 1918 in addition to the overpayment allowed and paid by the Commissioner upon which the suit for interest in this court is predicated. Defendant’s counsel undertook to set up certain inferences drawn from the suit instituted in the District Court and from certain proceedings therein, which it is claimed support the government’s contention that no claim for refund was ever filed with the Bureau of Internal Revenue until the filing of a claim on February 11, 1924, which was less than six months prior to the date on which the Commissioner allowed the refund for 1918. In the motion for a new trial, defendant counsel reargues the position originally taken that the plaintiff failed to prove that it filed a claim for refund in February, 1922, or at any other date prior to February 11, 1924. We have again examined the entire record in the ease, all the testimony and exhibits presented by both parties in the light of the argument originally made by the defendant, and also the brief in support of a motion for a new trial, and we find no reason to modify the findings originally made or to change the decision rendered thereon. When the case was heard, the parties filed a stipulation of certain preliminary and uncontroverted facts accompanied by certain written documents in the form of original and amended returns, schedules of overassessments, refunds, and credits, and a letter dated February 19, 1922, addressed to the Commissioner of Internal Revenue signed by the plaintiff by its attorney, Robert C. Cooley, transmitting an amended return and certain other documents to the Commissioner. In addition, plaintiff produced as a witness Robert C. Cooley, plaintiff’s attorney, who represented and handled all the matters in connection with its claim for amortization, the amended return, and the claim for refund alleged to have been filed February 19, 1922. This witness testified positively with reference to the handling of the matter, the conferences with plaintiff’s officers, the preparation of the amended return showing the great reduction in the tax liability over the amount paid on the original return, the amortization schedules, the claim for refund, and the transmittal of all these documents securely fastened together with the letter of February 10, 1922, to the Commissioner of Internal Revenue. His testimony shows that the amended return, schedules, amortization claim, and the claim for refund were prepared on February 9', 1922, and were brought to Washington by him on the night of that date; it shows the amount of refund claimed therein, that the claim was prepared on standard form 843 of the Bureau of Internal Revenue, that it was sworn to by the plaintiff company by its proper officer before a notary public, and that the grounds of the claim and the reason for the allowance thereof were that the plaintiff was entitled to an allowance of $399,158.90 for amortization of war facilities pursuant to section 234 (a) of the Revenue Act of 1921 (42 Stat. 254), as set forth in the amended return for 1918 filed on that date, to wit, February 10, 1922; that the amount of $282,658.53 which it was claimed should be refunded was the difference between the tax theretofore paid for 1918 on the original return of $384,592.84 and the tax shown to be due by the amended return of $101,934.21. His testimony further shows that the amended return, schedules, the claim, and the letter of February 10; 1922, were securely fastened" together at the time they were filed with the Bureau of Internal Revenue, and that the letter of February 10, 1922, was written in Washington, and that the witness personally delivered and filed all of the papers mentioned with the chief of the amortization section of the Bureau of Internal Revenue on February 10, 1922. The certified copies of the amended return and the letter referred to show evidence of the fact that they were fastened together, and they further show that they had been tom apart and the fastener removed. The original letter of plaintiff’s attorney dated February 10; 1922, a certified copy of which was made a part of the stipulation, does not mention the claim for refund, but only mentions the amended return in supporting amortization schedules, the amount of amortization claimed, and the power of attorney of the writer of the letter. Mr. Cooley presented a duplicate carbon copy of the original, which carbon bears the notation which he testifies he made thereon when he filed the documents with the Bureau of Internal Revenue. This notation is as follows: “Copy filed with refund claim, amended return, amortization claim, power of attorney by R. C. Cooley personally at Washington with Major Delamater, chief of the amortization section.” This testimony was not contradicted by the defendant. ■ We believed, and still believe, the testimony of this witness to be true. In rebuttal of this testimony, counsel for the defendant called as a witness an employee of the Bureau of Internal Revenue in the claims control section of the Income Tax Unit, who testified that her duties were to make a card record of all claims reaching her section, and that, when the matter of the claim involved in this suit came up, she made a search by direction of the Deputy Commissioner of Internal Revenue of the card records in her section and in other sections where the case of the plaintiff might have been considered, but that she could not find any record made of the claim of February 10, 1922. She testified that in her examination of the card records she found a record of other companies of the same name as the plaintiff but at a different address, and that those card records contained statements with reference to claims having been filed. This witness did not, and, of course, perhaps she could not, proceed to investigate the various files in the amortization section or other sections in which the ease of this taxpayer was handled, nor does she testify that she examined the files of the companies having the same name as this plaintiff, but which were shown on the card record as having a different address, to see whether the claim alleged to have been filed by this taxpayer might have found its way into the file of another taxpayer of the same name. We have no reason to disbelieve anything testified to by the defendant’s witness. We think all that she said is true, but her testimony shows nothing more than that she could find no card record of a claim for refund having been filed by plaintiff on February 10, 1922, but this testimony does not controvert the positive fact established by the plaintiff that the claim was prepared and filed. It is quite probable that, with.the many thousands of cases, documents, and claims pending and being constantly considered and audited in the Bureau of Internal Revenue, the claim of this plaintiff, having been attached to an amended return and transmitted directly to the amortization section instead of through the office of the collector of internal revenue, as is the usual custom, became misplaced, lost, or associated with some- other file of some other taxpayer when it was-detached from the amended return and amortization claim. It is a fair inference that the employee of the amortization section did not properly route the refund claim to the claims control section for appropriate record there. The testimony of the government witness and the inferences which the defendant seeks to draw from certain correspondence and from the fact that the claim could not be located does not refute the fact that the claim was duly filed. We find nothing in the suit instituted in the District Court at Brooklyn, N. Y., or in the transcript of the argument before the court on March 5 and April 4, 1930, or in the opinion of the court ‘of March 25, 1930, which in any way affects the question in this suit or throws any additional light upon the question whether plaintiff filed a claim for refund on February 10, 1922. That suit, as hereinbefore stated, was instituted to recover an alleged overpayment for 1918, in excess of that allowed and paid by the Commissioner, and in the hearing and argument before the court plaintiff and the government made reference to a claim for refund filed by plaintiff on February 11, 1924. The petition in that case alleged the filing of the claim for refund on February 10, 1922, as well as the one of February 11, 1924, but apparently at the hearing only the claim of February 11, 1924, which was filed within five years after the return for 1918 was due, was insisted upon. It appears that the February 11, 1924, claim was for the purpose of claiming a larger amount than had been stated in the claim of February 10, 1922) for the 1924 claim asserted the right to a refund of the entire tax paid for 1918. The District Court, upon consideration of the matter, sustained the contention of the government that, to be valid, a claim for refund for 1918 must be filed within four years after the payment of tax as provided by section 3228 of the Revised Statutes as amended (26 USCA § 157), and also that the 1924 elaim did not state grounds sufficient to constitute the basis for a suit, and dismissed the petition. The questions considered and decided by that court are not involved here, and we express no opinion thereon. We refer to that case to show that, nothing said or done therein has any bearing on the question before this court, or in any way supports the contention of the defendant here that plaintiff-did not file a claim for refund on February 10, 1922. Delay in acting upon the defendant’s motion for a new trial was due to a misunderstanding. The motion for a new trial is without merit, and is accordingly overruled.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

BULGER BLOCK COAL CO. v. UNITED STATES. No. K-87. Court of Claims. April 6, 1931. Claude W. Dudley, of Washington, D. C., for plaintiff. Ralph C. Williamson, of Washington, D. C. , and Charles B. Rugg, Asst. Atty. Gen., for the United States. Before BOOTH, Chief Justice, and GREEN, WHALEY, WILLIAMS, and LITTLETON, Judges. GREEN, Judge. The controversy in this ease is with reference to a dividend declared by the plaintiff and entered upon its books to the credit of one D. J. Kennedy, under the heading “Dividends payable, D. J. Kennedy,” but not actually paid during the taxable years in question. The plaintiff claims that, as the money was .used in the business, it was a part of the surplus or undivided profits of the company. The defendant, on the other hand, insists that it represented borrowed money which should be deducted from plaintiff’s invested capital during the years in question. The Commissioner of Internal Revenue took the latter view of the case, and deducted the amount of dividend due Kennedy in computing the invested capital of plaintiff. This, plaintiff’s counsel says, was an error, and, having paid the additional taxes assessed by reason of this action on the part of the Commissioner and duly filed claims for refund, plaintiff brings this suit to recover the amount by which its taxes were thereby increased. There is no dispute as to the facts in the case. The taxable years of 1918, 1919, and 1920 are involved. During those years, one D. J. Kennedy owned 99 per cent, of the stock of the plaintiff corporation and also 98 per cent, of the stock of the D. J. Kennedy Company, another corporation. The plaintiff and the D. J. Kennedy Company accordingly filed consolidated income and profits tax returns; it being conceded that the two corporations were affiliated. It appears that the plaintiff was engaged in mining and shipping coal at wholesale. The D. J. Kennedy Company was engaged in the sale of coal and builders’ supplies at retail. The business of plaintiff was a profitable one, while that of the D. J. Kennedy Company was not. The plaintiff supplied the D. J. Kennedy Company with coal and extended credit therefor by reason of which a large indebtedness was created from the D. J. Kennedy Company in favor of plaintiff during the years involved. In order to provide D. J. Kennedy with funds which he might advance to the D. J. Kennedy Company with which to liquidate its indebtedness to plaintiff, it was planned to have a 100 per cent, dividend declared by the plaintiff, which was accordingly done on November 8, 1917. After the dividend had been declared, D. J. Kennedy was informed that, if the plan was carried out, it would necessitate his paying an income tax of approximately $40,000. This led to the abandonment of the "plan to furnish funds to the D. J. Kennedy Company. D. J. Kennedy’s share of the dividend was credited to an account on the books of the plaintiff entitled “Dividends payable, D. J. Kennedy.” The minority stockholders were paid their share of the dividend, but the balance of $104,950 remained in said account on the plaintiff’s books until May 31, 1918, and under that date the amount of $24,339.-76 was entered as a charge thereon and. credited to D. J. Kennedy’s personal account. The balance of D. J. Kennedy’s share of the declared dividend ($80,610.24) continued to be carried on plaintiff’s books in this account through the years involved in the case, and is the amount which the Commissioner treated as borrowed money. It is this action of the Commissioner of which the plaintiff " complains. Under section 326 (a) of the Revenue Act of 1918 (40 Stat. 1092), which controls the ease, “invested capital” does not include “borrowed capital,” and section 325 (a) provides: “That as used in this title— * * * “The term ‘borrowed capital’ means money or other property borrowed, whether represented by bonds, notes, open accounts, or otherwise. * * * ” (Italics ours.) The ultimate, question in the case is whether this $80,610.24, carried in an account as above stated, was borrowed capital. The brief filed on behalf of plaintiff practically concedes that, by the declaration of the dividend, an indebtedness was created in favor of the stockholders and against the corporation for the amount of their respective shares. Nevertheless, it is argued that, by reason of the fact that the greater portion of the dividend involved was not paid to D. J. Kennedy, but remained with the corporation and was used in its business, this sum, amounting to $80,610.24, remained part of the capital of the company as surplus or fin-divided profits. In determining this question, the language used in some of the decisions of the courts which have held that the declaration of a dividend created an indebtedness in favor of the stockholders will be found enlightening. The leading authorities on the relation of a stockholder to a corporation after a dividend has been declared are reviewed in the case of W. E. Caldwell Co., Inc., 6 B. T. A. 47, 51-52, in which it is said: “The reasoning advanced in the Stange Case [1 R. T. A. 810] was to the effect that upon the declaration of a dividend the corporation immediately becomes the debtor of the stockholder for his proportionate part of the dividend, regardless of the fact that actual payment is not to be made until later. There is abundant authority for this proposition and we have seen no authority to the contrary.” Reference is further made to the case of Wheeler v. Northwestern Sleigh Co. (C. C.) 39 E. 347, 348, wherein the court declared: “By the declaration of a dividend, however, the earnings, to the extent declared, are separated from the general mass of property, and appropriated to the then stockholders, who become creditors of the corporation for the amount of the dividend. The relationship of the stockholder to the corporation, as to the amount of the dividend, is thus changed from one of partnership ownership to that of creditor. He thereafter stands * * * with respect to the dividend, as creditor upon a par with other creditors of the corporation. * * * That the dividend is payable at a future date can work no distinction in the right. The debt exists from the time of the declaration of dividend, although payment is postponed for the convenience of the company.” (Italics ours.) That the same rule has been laid down by all of the leading text-writers on corporations is shown in Staats v. Biograph Co. (C. C. A.) 236 E. 454, 458, L. R. A. 1917B, 728, in which, after quoting from Taylor on Corporations (5th Ed.) § 568; Machen on Modem Law of Corporations, vol. 2, § 1358; Morawetz on Corporations, vol. 1, § 445, the opinion recites: “But if a board of directors should declare a cash dividend and make a public announcement of the fact, the courts have held that thereafter the board has no right to reconsider and rescind its action. The reason seems to be that the declaration of the dividend sets apart from the profits of the corporation a sum which is to be paid to the stockholders in proportion to their shares, and that it creates a débt due from the corporation to each shareholder, resulting in the relation of debtor and creditor. A dimidend divides the property which belongs to the corporation into that which the corporation retains and that which the corporation agrees to pay to the stockholders, and which it is thereby bound to pay.- That which one person is bound to pay to another is a debt. Lockhart v. Yan Alstyne, 31 Mich. 76, 78, 18 Am. Rep. 156 (1875).” (Italics ours.) ' In 14 C. J. § 1238, p. 815, the rule is laid down that: “The declaration of a dividend creates a debt against the corporation in favor of each stockholder to the amount due him as his pro rata share” — citing more than 50 eases from 14 different states. Also: “And this is true although the dividend is made payable at a future date *' * K. When a dividend has been declared and no fund has been set apart for the payment thereof, a stockholder stands in the same position as other general creditors of the corporation” — citing a number of cases. In McLaran, Administrator, v. Crescent Planing Mill Co., 117 Mo. App. 40, 49, 93 S. W. 819, 822, after reviewing the authorities on this point and quoting at length from leading text-writers on the subject, the court reached the conclusion that: “The doctrine is that by the mere declaration, the dividend becomes immediately thereby separated and segregated from the stock and exists independently of it; that the right thereto becomes at once immediately fixed and absolute in the stockholder, and from thenceforth the right of each individual stockholder is changed by the aet of declaration from that of partner and part owner of the corporate property to a status absolutely adverse to every other stockholder and to the corporation itself, in so far as his pro rata proportion to the dividend is concerned.” (Italics ours.) These cases.show that authority is abundant for the proposition that the declaration of a dividend is sufficient by itself and alone to set apart from the profits of the corporation (if the profits are sufficient for that purpose) a sum which is to be paid to stockholders in proportion to their shares. But counsel for plaintiff contend that this is merely in a bookkeeping sense, and that, until the dividend has actually been paid over to the stockholders, it still remains a part of the surplus and undivided profits of the corporation. We will discuss this proposition later after considering the decisions cited on behalf of plaintiff, which we will next take up. The cases relied upon by counsel for plaintiff are all distinguishable to some extent in respect to the facts upon which the decisions made therein were based, but it must be conceded that all of them contain some statements which, taken by themselves and alone, might tend to support the theory upon which counsel for plaintiff seeks to maintain the case. The case of Eaton v. English & Mersick Co. (C. C. A.) 7 F.(2d) 54, 59, is largely relied upon by plaintiff, but in that ease the court held upon the facts that the directors could not legally declare a dividend, and, in effect, that, their action having been illegal in this respect, no indebtedness to the stockholders arose by reason of' the .declaration of the dividend. In other words, the situation was the same as if no dividend had been declared. Counsel for plaintiff quotes from the opinion with reference to the fund in controversy in this ease the following: “The surplus having never been distributed but during the entire period was retained in its own treasury, it could not have constituted ‘borrowed capital.’ ” But this language must be considered as applying to the particular facts in that case where no dividend had been properly declared. True, the court held therein that no indebtedness had been created, but obviously, as we think, it would not have so held if it had found that there was a legal declaration of the dividend, and this finding that there was no indebtedness created inevitably led to the conclusion that the fund in question could not be “borrowed capital,” as there was ni> claim of any contractual borrowing. In the ease of Davidson & Case Lumber Co. v. Motter (D. C.) 14 F.(2d) 137, it appeared that the amount in question, although credited to the stockholders on the books, not only had not been paid to the stockholders, but had not been declared as a dividend. A reading of the decision in full will show that it was based on the fact that no dividend had been declared, and to that extent we have no disagreement with it. We have no occasion here to determine the effect of merely crediting an amount to the account of a stockholder. The opinion quotes with approval the language used in the case of Eaton v. English & Mersick Co., supra, and also a statement made by the Supreme Court in Eisner v. Macomber, 252 Ü. S. 189, 40 S. Ct. 189*, 194, 64 L. Ed. 521, 9 A. L. R. 1570, to which reference will hereinafter be made. But the decision does not thereby become an authority in a ease where a cash dividend has actually been declared as in the case at bar. In Flynn v. Haas Bros. (C. C. A.) 20 F.(2d) 510, another ease cited on behalf of plaintiff, the court found that the directors did not intend to declare a dividend.' While the court quoted, with approval, from the case of Eaton v. English & Mersiek Co., supra, to show that the resolutions of the directors created no separate fund distinct from the capital stock or surplus profits, and that the company did not set aside any fund which had become the property of the stockholders, the ease was evidently treated as if the' action of the directors did not constitute a valid declaration of a dividend. We therefore do not think it sustains the plaintiff’s position. Feick & Sons Co. v. Blair, 58 App. D. C. 168, 26 F. (2d) 540, 541, cited by plaintiff (a case in which an appeal had been taken from the decision of the Board of Tax Appeals), appears in some respects to support plaintiff’s contention. Counsel for defendant say in argument that no dividend was declared in that case. It is true that the opinion does not refer anywhere to a declaration of a dividend, but there are numerous references all through’ the opinion to “dividends,” “accumulated dividends,” and “undistributed dividends” in the case, and we are at a loss to understand how such matters could exist if there never had been anything in the way of a declaration of a dividend. In the opinion the court said: “It is elementary law that before title tó a dividend passes to the stockholder there must be a declaration of a dividend; and the fund for its payment must be separated from the capital or surplus profits of the corporation. When this is done, it becomes the property of the stockholder, and a debt of the corporation on which the stockholder may recover, and it is likewise exempt from action by creditors of the corporation.” The implication from this statement would seem to be that, unless there was an actual separation so that a separate fund was created, there was no segregation of the dividend. Although the opinion does not show definitely whether there had been any declaration of a dividend, it recites that certain amounts “representing the accumulated dividends and undrawn salaries * * * bad been credited to the three individual stockholders on the books of the corporation.” But the court also found that the “surplus dividends under the agreement of the stockholders in this case remained the property of the corporation tobe used in its business, and as such a part of its invested capital” (Italics ours.) If the stockholders made an agreement that the dividends should remain the property of the corporation and a part of its invested capital, such an agreement would present a very different state of facts 'than is shown in the instant ease. The most significant feature of the decision in the Feiek & Sons Case, supra, is found in other parts of the opinion where it is stated: “It is conceded by the Assistant Attorney General that the amount of accumulated dividends should not be excluded from appellant’s invested capital.” And also: “The Assistant Attorney General, referring to the discussions contained in the brief prepared by the Bureau of Internal Revenue, states that 'we are not in accord with its reasoning nor with the conclusion reached by the Board of Tax Appeals.’ ” Such a statement not only indicated the position taken by the Department of Justice, but amounted to a confession of error, under which the case would be reversed as a matter of course without anything further. But in this particular case it seems that an opinion was asked and therefore rendered. If the Department of Justice still takes this position with reference to accumulated dividends which had not been paid out, there is reason to expect a similar result would follow■ in this ease if judgment was rendered in favor of the defendant. We shall undertake to show, however, that the reasoning and logic used in every decision directly involving the question upon which the case at bar turns do not accord with this concession. Before leaving the eases cited by plaintiff, mention should be made of two others upon which plaintiff relies. One is the ease of Eisner v. Macomber, supra, from which an extensive quotation is made in the Feiek Case, supra, including the following: “The dividend normally is payable in money, under exceptional circumstances in some other divisible property; and when so paid, then only (excluding, of course, a possible advantageous sale of his stock or winding-up of the company) does the stockholder realize a profit or gain which becomes Ms separate property, and thus derive income from the capital that he or his predecessor has invested.” But the Supreme Court in this case was considering the question of whether a stock dividend was subject to tax as income. What was said in its opinion had reference to stock dividends only, and what is quoted above to the question of whether a party in receipt of a stock dividend had realized any profit or gain which was taxable. We think, therefore, this language has no application to the instant ease. Moreover, when a stock dividend is declared, the same rule does not apply as where a cash dividend is declared, and the stockholder cannot sue and recover his proportionate share in cash. Terry v. Eagle Lock Co., 47 Conn. 141; State v. Baltimore, etc., R. Co., 6 Gill (Md.) 363, 386. The opinion in the ease of United States v. Mellon (D. C.) 279 F. 910 (also cited by-plaintiff), shows that the court held the dividend therein involved was in effect a stock dividend, and the court followed the rule laid down in Eisner v. Macomber, supra, wherein it was said with reference to stock dividends that: “The essential and controlling fact is that the stockholder has received nothing out of the company’s assets for his separate use and benefit; on the contrary, * * * whatever accretions and accumulations have resulted from employment of his money and that of the other stockholders * * * still •remains the property of the company.” In the case at bar the evidence does not show the form of the declaration of the dividend, but we tMnk that the circumstances clearly show that it was a cash dividend, and have so found. The Commissioner also so found in his finding XVI, and the plaintiff has taken no exception thereto. It will be observed that the dividends due the minority stockholders were paid in cash shortly after the declaration thereof. Coming now to the ultimate question in the case, which is, whether the dividend declared remained a part of the assets of the company and could be included in its surplus, we think it has been shown that there is in fact little, if any, conflict in the authorities, and that the rule is, as stated in Jermain v. Railroad Co., 91 N. Y. 483, that: “When a dividend has once been declared out of net earnings, the amount of such dividend is no longer a> paA-t of the assets of the company, but is appropriated or set apart for the shareholders.” (Italics ours.) Indeed, when it is once conceded that the declaration of a dividend creates an indebtedness in favor of the stockholders, it is difficult to see upon what line of reasoning a different conclusion could be reached. We know of no rule of bookkeeping or principle of law by which an indebtedness of a corporation could be made part of its surplus or undivided profits. The Supreme Court said in Edwards v. Douglas, 269 U. S. 204, 46 S. Ct. 85, 88, 70 L. Ed. 235, that: “The surplus account represents the net assets of a corporation in ex- éess of cell liabilities including its capital stock.” (Italics ours.) That the unpaid portion of this dividend was both a debt and a liability there is no doubt, and it is equally certain that suit could' be brought thereon at any time by the stockholders. The plaintiff argues that the fact that no interest was paid on the account in which the dividend was carried shows it was not borrowed money. But this contention loses its force (if it has any) when it is considered that'D. J. Kennedy owned 99 per cent, of the stock in the plaintiff corporation, and that paying interest on the account would have been merely taking it out of one pocket and putting it into another. We think, we have already shown quite conclusively, that the declaration .of a dividend is by itself and alone sufficient to set apart the amount thereof to the stockholders; but, if it should be heid that some other segregation should be made thereof in order to take the fund out of the surplus account, we think it was done in this ease when the amount of the dividend in controversy was, after the declaration of the dividend, carried on plaintiff’s books in an account headed “Dividends payable — D. J. Kennedy.” The plaintiff calls attention to the faet that a portion of the dividend due D. J. Kennedy was credited directly to his personal account. The evidence fails to show why this was done, and we do not think it alters the relation of the parties. There is another matter which should be considered in this connection. When the amount of the dividend of D. J. Kennedy was carried in a separate account headed “Dividends payable — D. J. Kennedy,” and placed upon the credit side thereof, it necessitated a countercharge somewhere upon the books of the company, otherwise the books would not’balance. There is no place where this countercharge could have been made except in the surplus or undivided profits account, and, while the evidence does not directly so show (the books of the corporation not being in evidence), we can come to no other conclusion but that the plaintiff’s books showed in the surplus account a charge of the amount of this dividend. The evidence shows that in making up.statements.of the condition of the corporation for the banks the amount of this dividend was included in the surplus. We have no occasion to determine in what position such a statement put the party who made it. It is sufficient to say that like any other liability the amount of the dividend could not properly be included in surplus, and that, if the books were properly kept, it would not be so included. The statute under which the ease must be determined makes borrowed money include open accounts with the intent, as we think, of covering just such cases as we now have before us. We have already shown that the amount of the dividend could not constitute surplus, and it certainly could not constitute undivided profits, for the express purpose of the dividend was to divide profits. This leaves no other classification for the purpose of the statute except that of “borrowed money.” It is true it was used in the business, but money borrowed by a corporation always is, or at least should be. In the case of W. E. Caldwell Co., Inc., supra, in determining the effect of the declaration of a dividend, after quoting from Park v. Gilligan (D. C.) 293 P. 129, the following statement: “It is well settled that the declaration of a dividend creates a debt from the corporation to the stockholders,” the Board went on to say: “If such a relationship is created upon the declaration of a dividend, from that moment the corporation has no right to have the amount of the dividend included in its statutory invested capital, as defined by section 326 of-the Revenue Act of 1918. If it uses the money or property with which it must pay the dividend, to the amount of the dividend declared it is using borrowed money and such is excluded from statutory invested capital.” With this statement of the law we are in entire accord. The Commissioner rightfully excluded the amount of the unpaid dividend from plaintiff’s capital and surplus, and its petition must be dismissed. It is so ordered.

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MOHAWK CONDENSED MILK CO. v. UNITED STATES. COLORADO CONDENSED MILK CO. v. SAME. Nos. H-234, J-126. Court of Claims. Nov. 3, 1930. Robert N. Anderson, of Washington, D. C. (Chester A. Gwinn and Humphreys & Day, all of Washington, D. C., on the brief), for plaintiffs. P. M. Cox, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen. (Charles F. Kincheloe, of Washington, D. C., on the brief), for the United States. Before BOOTH, Chief Justice, and GREEN, LITTLETON, and WILLIAMS, Judges. LITTLETON, Judge. These two cases were instituted to recover amounts growing out of; overpayments of tax for 1917 and 1918, about which there is no controversy. The controversy in both cases is the same, and is whether plaintiffs are indebted to the United States for over-payments made to them for evaporated and condensed milk sold and delivered to the defendant for its military forces during the period November 1, 1917, to December 31, 1918. The defendant filed a counterclaim in eaeh case. Under these counterclaims it is the contention of the defendant that, under the agreement set forth in the findings, a profit of not more than 42 cents per case on evaporated and 59 cents per ease on condensed milk was to be computed on sales to the Army, Navy, and Marine Corps separately; that the plaintiffs were overpaid in the amounts set forth in the notices mailed to them by the Comptroller General. Plaintiffs deny these claims of the defendant. There is no competent proof by the defendant to support the allegations of the counterclaims. The notices from the Comptroller General to the plaintiffs do not prove the correctness of the figures therein used. It appears that the Comptroller General’s office obtained the figures shown in his notices from some one in the Federal Trade Commission, hut there is no competent proof as to who compiled these figures or how they were arrived at. For the purpose of showing how the Comptroller General arrived at his figures the defendant offered in evidence certain sheets of paper containing certain totals and summaries which the Comptroller General certified that he had received from the Federal Trade Commission. No one who had anything to do with the preparation of these figures was called to testify as to their correctness or how they were arrived at. The defendant claims that these documents represented an audit on the basis of the Federal Trade Commission cost accounting, as set forth in a pamphlet issued by the Federal Trade Commission, of July, 1917, entitled “Uniform Contracts for Cost Accounting, Definitions and Method.” There is no competent proof of this. This court will not accept certified copies as proof of facts as to the correctness of figures contained in documents certified by an official of the government who has received Such documents from some other official, department, or commission. Certification of documents proves only the document itself, and permits its introduction in evidence without further proof of identification, but such certification does not establish as a fact the correctness of the statements or figures therein contained. When there is as ¡here a controversy concerning the correctness of the contents of such documents, such contents must he proved hy the party relying thereon the same as other facts We cannot accept the sheets certified by the Comptroller General as proof of their contents or of the correctness of his determination. Inasmuch as we have no competent evidence to establish the correctness of the figures for which the defendant contends, we cannot allow any portion of the counterclaim even if the theory of the defendant that the sales of evaporated and condensed' milk to the departments of the military services were to be considered separately in arriving at the profit to be paid. While we are of the opinion that the contract was one for the sale of evaporated and condensed milk to the government and that, under its terms, the sales to the Army, Navy, and Marine Corps were to be considered collectively in ascertaining whether the manufacturers had made during the period an average profit of more or less than 42 cents per ease on the evaporated milk and 59 cents per case on the condensed milk, Libby, McNeill & Libby v. United States, 65 Ct. Cl. 64, we need not discuss this feature, in view of the lack of competent proof by the defendant to support its counterclaims on its theory. Judgment will therefore be entered in favor of the Mohawk Condensed Milk Company for $8,491.54, with interest at 6 per eent. from December 14, 1925, until paid. Act of March 3, 1875, 18 Stat. 481, section • 227, USCA title 31. Judgment will also be entered in favor of the Colorado Condensed Milk Company for $427.71, with interest at 6 per cent, from February 16,1927, until paid. Act of March 3,1875, 18 Stat. 481, section 227, USCA title 31, supra. WHALEY, Judge, did not hear this case and took no part in the decision thereof.

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BENEFICIAL LOAN SOC. OF BETHLEHEM v. UNITED STATES. No. L-223. Court of Claims. April 6, 1931. Jackson R. Collins, of New York City (Syme & Syme, of Washington, D. C., on the brief), for plaintiff. Ralph C. Williamson, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States. Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges. WHALEY, Judge. The defendant has interposed a demurrer to the petition on the ground it does not state a cause of action against the United States. The petition alleges the plaintiff was affiliated with the Beneficial Loan Society, a Delaware corporation, and that from the time the plaintiff was incorporated (April 20, 1923) to May 1, 1925, the income of the plaintiff was shown in the consolidated return filed by the Beneficial Loan Society, the parent company; that the Beneficial Loan Society having disposed of the common voting stock of the plaintiff on May 1, 1925', the plaintiff could no longer include its income in the consolidated return, and was required to file an individual return (section 240 (e) and (d), Revenue Act of 1926 [26 USCA § 993 (c, d)]). An information return on Form 1122 was filed each year showing such consolidated return. Plaintiff filed its separate corporation income-tax return setting forth a statement of its net income for the period from May 1, 1925, to January 31, 1926, and also an information return (Form 1122) showing its income from February 1, 1925, to April 30, 1925, was included in the consolidated return of the Beneficial Loan Society. The Beneficial Loan Society made its consolidated return on the fiscal-year basis from February 1 to January 31 each year. The plaintiff, after severance of the affiliation with the Beneficial Loan Society, adopted and retained the same fiscal-year basis for its individual income-tax return. In preparing and submitting its income-tax return for the period from May 1, 1925, to January 31, 1926, a prorated credit of $1,500 was taken instead of the full credit of $2,-000, which latter sum was the full specific credit allowed a domestic corporation with a net income of $25,000 or less (section 233, Revenue Act of 1926 [26 USCA § 985]). As a result of prorating the credit for the nine months which it had been out of consolidation with the parent company, the plaintiff paid $963.38, whereas had the full credit of $2,000 been taken only' $898.10 would have been payable, or a difference of $65.28. A claim for refund of this amount was timely filed and rejected by the Commissioner of Internal Revenue. The claim was reopened and again denied on February 13, 1930. Plaintiff is suing to recover the amount disallowed with interest from the date of the payment of the tax. Section 226 of the Revenue Act of 1926, 44 Stat. 38, 39 (26 USCA § 968), provides: “See. 226. (a) If a taxpayer with the approval of the Commissioner changes the basis of computing net income from fiscal year to calendar year a separate return shall be made for the period between the close -of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate return shall be made for the period between the close of the last calendar year for .which return was made and, the date designated as the close of the fiscal' year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. “(b) Where a separate return is so made, and in all other cases where a separate return is required or permitted, by regulations prescribed by the Commissioner with the approval of the Secretary, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate return is made. * * * “(e) In the case of a return made for a fractional part of a year, except a return made under subdivision (a), the credits provided in subdivisions (e), (d), and (e) of section 216 shall be reduced respectively to amounts which bear the same ratio to the full credits provided in such subdivisions as the number of months in the period for which return is made bears to twelve months.” Section 230 of the revenue act of 1926, 44 Stat. 39 (26 USCA § 981 note), provides for the tax on the net income of corporations in excess of the credits provided for in sections 236 to 263. Section 239 (b) of the Revenue Aet of 1926, 44 Stat. 45 (26 USCA § 991), provides: “Returns made under this section shall be subject to the provisions of section 226. In the case of a return made for a fractional part of a year, except a return made under subdivision (a) of section 226, the credit provided in subdivision (b) of section 236 shall be reduced to an amount which bears the same ratio to the full credit therein provided as the number of months in the period for which the return is made bears to twelve months.” The plaintiff contends the return made by it from May 1,1925, to January 31,1926, was its first return and therefore was a “taxable year,” and, being such, it is entitled to the full amount of the credit. But this contention is not true. The plaintiff was in existence for its entire fiscal year of twelve months ending January 31, 1926, and previous thereto. Until May 1, 1925, plaintiff was affiliated with another corporation and the consolidated return was the return of the plaintiff until the affiliation ceased, and this is true whether the consolidated return was filed by or in the name of another corporation as the parent company. It was the return of the plaintiff as much as if it had been a separate return. Each member of the affiliated group at all times retained its separate identity and was a separate taxpayer under the statute. The commissioner was required to assess against the plaintiff and collect from it its proportion of the tax computed upon the consolidated net income in proportion to the net income assignable to the plaintiff unless there existed an agreement among the corporations for a different apportionment or payment. The consolidated return from February 1 to April 30,1925, was therefore the plaintiff’s return for that period. Swift & Co. v. United States, 38 F.(2d) 365, 69 Ct. Cl. 171; Cincinnati Mining Co., 8 B. T. A. 79. On the last date the affiliation, so far as the plaintiff was concerned, was terminated by a change in the stock ownership and the plaintiff was no longer required or permitted to include its income in an affiliated return. Under section 226 (b) of the Revenue Act of 1926, in article 634 of Regs. 65 and 69; plaintiff was required to make and file a separate return for the period May 1, 1925, the date of the termination of the affiliation, to the end of its taxable year, January 31, 1926'. The regulations mentioned provide that where a return is filed for a fractional part of a year as the result of the termination of the affiliated status the tax shall he computed in accordance with the provisions of sections 226 and 239 of the Revenue Acts of 1924 and 1926, respectively (26 USCA §§ 968, 991). Section 239 provides that the return shall be subject to the provisions of section 226, and the latter section provides, with a certain exception not material here, for the proration of the credit where a return is filed for a fractional part of a year. These sections of the statute and the regulations referred to are clearly applicable to the issue here involved and the action of the commissioner in prorating the specific credit was correct. The separate return filed by plaintiff for the period May 1, 1925, to January 31, 1926, was not a return for a “taxable year” any more than was the consolidated return for three months of the plaintiff’s fiscal year a return by it for a taxable year. Under the facts there was merely a change in the basis of reporting net income which required the plaintiff to file a return for a fractional part of a year. If the contention of the plaintiff were correct, it would receive the benefit of a specific credit in excess of the maximum of $2,-000 allowed. During that portion of the fiscal year ended January 31, 1926, that plaintiff was included in the affiliated return it received the benefit of one specific exemption for the affiliated group; to again allow it the full specific credit for the remainder of the fiscal year, after termination of the affiliation, would be in direct violation of the statute. The demurrer is sustained, and the petition is dismissed. It is so ordered.

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UNITED STATES v. TUJUNGA WATER & POWER CO. No. 6294. Circuit Court of Appeals, Ninth Circuit. April 6, 1931. Rehearing Denied May 11, 1931. Samuel W. McNabb, U. S. Atty., and Ignatius F. Parker, Asst. U. S. Atty., both of Los Angeles, Cal., and H. P. Dechant, Asst. to the Solicitor, U. S. Department of Agriculture, of San Francisco, Cal. Donald M. Keith, of Los Angeles, Cal., for appellee. Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges. SAWTELLE, Circuit Judge. This is an appeal from a decree in favor of the appellee, Tujunga Water & Power Company, denying forfeiture of a grant of right of way or easement on public lands comprised within the Angeles National Forest Reserve, county of Los Angeles, state of California. As stated in the opinion of the trial judge (D, C.) 18 F.(2d) 120, 121, and the brief of the appellant: “In September, 1901, Samuel Merrills obtained approval of an application accompanied by a map of location covering a contemplated system of water conduits with a great number of storage reservoirs in the Tujunga Canyon. This contemplated system was of many miles in extent. One Wilcox, in 1905, obtained like approval of an application to construct a conduit line and reservoir, which application covered the final or lower section of the work indicated upon the prior map of Merrills. [The Los Angeles Mountain Water Co. also filed similar application.] On February 25,1916, this defendant, which had acquired by transfer the rights of the prior locators, filed a map of definite description, covering what was designated as reservoir No. 1, being at the same location indicated for similar work on the Wilcox and Merrills maps. There were other maps of location filed at different times, covering intended work described under the extensive plan indicated on the Merrills map, but there was no contention at the trial that any section of that work had ever been commenced” — and the decree of the District Court in that respect was in favor of the appellant here. Said Los Angeles Mountain Water Com.pany also made application for the construction of .a ditch, tunnel, and conduit lines on part of the lands in question, which application was duly approved by the Secretary of the Interior on May 28, 1910. As above stated, appellee, Tujunga Water & Power Company, successor in interest to all prior locators or permittees, on Jime 10,1915, filed in the United States Land Office at Los Angeles a certain map on which appeared and was set forth a certain proposed reservoir site designated on the said map .as “Reservoir Site No. 1” on the same location designated for similar work on previous applications. On February 25, 1916, this map was duly approved by the Secretary of the Interior. The evidence shows that during the year 1911, approximately five years prior to the time the latter application was approved, appellee as the successor in interest to the prior locators began the construction of a dam .at dam site No. 1; that in the following year said dam was partially constructed to a height of 35 feet, whieh brought to the surface the waters of the underground stream above that point. Appellee also purchased what is known as the Wilson tunnel for use in connection with said .dam. This tunnel had its mouth at a point back of the concrete dam, was 6 or 7 feet in dimension, and extended for a distance of about 600 feet through a mouhtain to a point below the dam where a conduit commenced. According to the testimony of one of the witnesses, “at certain seasons of the year temporary obstructions' were thrown across the top of the dam to height of several feet, thereby causing the back waters to enter the mouth of the Wilson Tunnel and flow through the tunnel into the ditch and conduit system below the dam. * * * The floor level of the tunnel is about two feet high from the top of the permanent dam, but the placing of temporary obstructions across the top of the dam raises the water sufficiently to force it to flow through the tunnel.” There is no contention that appellee has added to the height of the dam since 1914 or 1915 when the water was actually diverted from the dam, and we think that it cannot fairly be said that the dam as constructed impounds any body of water, except to a very limited extent and then only the subterranean and.percolating waters. As a master of fact, “the stream continues to flow in its old course across the top of the dam,” and certainly no such reservoir as set forth on the map and contemplated by the appellee and appellant was ever created. The trial court said: “The issue is narrowed, therefore, so as to require a decision only as to whether the defendant and its predecessors, by the work that they caused to be performed under the permission given by the Interior Department, upon reservoir No. 1 and the contemplated tunnel and conduit system leading therefrom, created a practical storage place for the gathering of water and a means to conduct the same across the public lands, as their application promised they would do” — and held that “if, within the general plan outlined by the maps of location, substantial improvements are made, which are of practical use to an irrigation company in its business of supplying water to the inhabitants of the particular territory, the requirements of the statute are satisfied and the rights obtained may not be disturbed.” In our view of the ease, we think this holding was error. An agreement was entered into between the government and the Tujunga Water & Power Company, the nature of which is shown by the appellee’s map filed June 10,1915. It is designated as “map, showing definite location of reservoir for the Tujunga Water and Power Company, Los Angeles County, California.” The drawing shows a cross section of a dam with the caption “height of dam 115'.0.” There is indorsed on the map an affidavit of the engineer who was employed by appellee to make the survey of said reservoir the following: That the reservoir site covered 92.85 acres, and that the “survey of the said reservoir accurately represents a level line, which is the proposed water line of the said reservoir and * * * no lake or lake bed, stream or stream bed is used for the said reservoir, except as shown on this map.” There is also indorsed thereon an affidavit of the president .and the secretary of said corporation to the effect that “the said reservoir as represented on this map and by said field notes was adopted by the company by resolution of its board of directors on the 10th day of June, 1915,” that the total area to be covered is 92.85 acres, “and that the map has been prepared to be filed for the approval of the Secretary of the Interior in order that the company may obtain the benefits of sections 18 to 21 inclusive of the Act of Congress approved March 3, 1891, entitled 'An Act to Repeal Timber Culture Laws and for Other Purposes,’ and section 2 of the act approved May 11, 1893, and I further certify that the right of way herein described is desired for the main purpose of irrigation.” The map also bears, the approval of the Secretary of the Interior as of February 16, 1916. . The submission of this map by the appellant company and the approval of the details thereon by the Secretary of the Interior created a binding contract. It went further than a mere continuance of the grants to the precedent companies and a recognition of the work that had been done; it constituted a new obligation, a new understanding between the parties. A reservoir is defined by the Standard Dictionary as “a place where anything -is kept i,n store; especially a place where water is collected and kept for use when wanted.” One of the conditions of the contract between the government and the appellee was the formation of a reservoir of the size and extent indicated on the map. It is agreed that the present dam does not impound a reservoir, and that its sole effect is to stop the flow of the waters in the gravel between the stream bed and bed rock; to the end of creating a large reservoir that would effectually conserve large quantities of water at present lost, the existing dam is quite ineffectual. There is no provision made for collecting the water, no provision for keeping it so that it may be available whenever it may be required. If two individuals had entered into an agreement whereby one was to receive certain rights over the property of the other, in return for which he agreed to build a dam 115 feet high and to create a reservoir covering 92.85 acres, and he did nothing to what had already been done and asserted merely that he had partially fulfilled his obligation by the fact that he could build sand piles on top of existing structures whenever he might think it necessary, no court of law or equity would hold that the obligation had been fulfilled and that the grantee had done what was required of him. So to hold in the present case would be merely to state that, in any ease in which the government grants certain rights in return for certain specified work to be done, the grantee is made the sole judge of the terms of the contract and is able to do as much or as little as he desires. If the government is generous enough to allow certain privileges to its citizens, it has the right to expect something in return; and, when the government makes a grant or an easement with the understanding that certain specifically noted things will be done, then the government has the right to exact compliance with the strict terms of the agreement. The language of the statute is explicit on that point. Sections 18 to 21, inclusive, of the Act of March 3,1891 (43 USCA §§ 946-949), in so far as material, are as follows: “Section 18. The right of way through the public lands and reservations of the United States is hereby granted to any canal or ditch company * * * to the extent of the ground occupied by the water of the reservoir and of the canal and its laterals, and fifty feet on each side of the marginal limits thereof. * * *. “Section 19. Any canal or diteh company desiring to secure the benefits of this act shall, within twelve months after the location of ten miles of its canal, if the same be upon surveyed lands, and if upon unsurveyed lands, within twelve months after the survey thereof by the United States, file with the register of the land office for the district where such land is located a map of its canal or diteh and reservoir; and upon the approval thereof by the Secretary of the Interior the same shall be noted upon the plats in said office, and thereafter all such lands over which such rights of way shall pass shall be disposed of subject to such right of way. * * • “Section 20. * * * Provided, That if any section of said canal, or diteh, shall not be completed within five years after the location of said section, the rights therein granted shall be forfeited as to any uncompleted section of said canal, ditch, or reservoir, to the extent that the same is not completed at the date of the forfeiture. “Section 21. Nothing in this act shall authorize such canal or ditch company to occupy such right of way except for the purpose of said canal or ditch, and then only so far as may be necessary for the construction, maintenance, and care of said canal or diteh.” The words of the statute must be read into and are an integral part of the contract. There is nothing here about “substantial improvements,” nothing that says or implies that “it is not that the government is interested in having, constructed works, conduits, and storage reservoirs of the exact and particular kind contemplated by the parties who make location of government land,” but rather is there a clear statement that, “if any section of said canal, or diteh, shall not be completed” within the specified time allowed, the rights granted shall be forfeited. The case of the Union Land & Stock Co. v. United States, 257 F. 635, 636 (C. C. A. 9th), was, as appears in the statement of the facts prepared by Judge Gilbert, “a suit in equity to declare forfeited a right of way and easement for the storage of water.” It was alleged in the bill that the appellant, under the provisions of the act of 1891, filed in the land office at Susanville, Cal., its application for an easement for a reservoir for irrigation purposes, describing the same in the map which was attached to the application as reservoir No. 1, and which covered certain portions of the public lands of the United States, that the application was duly approved by the Secretary of the Interior, and that no part of the reservoir had been completed since the approval of said right of way by the Secretary of the Interior. The prayer of the bill was that the easement be declared forfeited and canceled. “It was stipulated in open court that in the. years 1894 and 1895 the appellant went on the ground at the point A, indicated on the map attached to the bill of complaint, and after November, 1895, constructed a dam which at that time was 35 feet high; that said dam remained at that height until the winter of 1897-98, when a portion of it was washed away; that in the fall of 1898 the dam was reconstructed to a height of 26 feet, but settled down to a height, at its lowest, of 23 feet, at which point it now remains. * * * 'It was also shown by competent evidence that the dam as constructed would not store water over more than 100 acres of the land in said reservoir, and that it did not have a capacity of more than 600 acre feet of water; that the dam was in a bad state of repair, but that it was strong enough to store water in the reservoir to a depth of 20 feet; that the base was not of sufficient width to build the dam to a height of 50 feet; and that said reservoir is one of a series of reservoirs, the others being known as dams Nos. 2 and 3, and that they are all used in connection with each other. * * * That said reservoir has been used to store water every year since its construction, with the exception of dry years, when there was no water to store.’ ” Judge Gilbert, speaking for this court, said, among other things, that the grant of rights under the act of Congress of 1891 is a general one. “It opens the lands of the United States to the occupation of various and numerous applicants. By a general and permanent statute it provides the steps which they must take to acquire the rights contemplated by the grant, * * * [and] a failure to comply with the requirements of the statute of itself operated to divest the grantee of title and revest it in the government”— citing United States v. Whitney, 176 F. 593 (C. C. A. 9th). The decree of the court declaring the easement forfeited was affirmed. An analogous case of “substantial compliance” arises in the ease of United States v. Big Horn Land & Cattle Co., 17 F.(2d) 357. 365 (C. C. A. 8th). There the map approved by the Secretary of the Interior for a reservoir for irrigation purposes called for and represented construction work which would raise the waters of a certain lake 16 feet above their natural level. The facts of the ease show and the Circuit Court of Appeals concludes that the dam there in question would not raise the waters of the lake in excess of 2 feet above its natural level. In that case,’ as here, the lower court found that the defendant and its predecessors had partially performed their obligations to the government under the map and filings. This decree was reversed by the appellate court with the statement that they could not .agree with the finding of the trial court and its decree that “ 'the defendant and its predecessors in title, after they had made this application for right of way for a reservoir site and ditch, went out there .and attempted in good faith to make the construction contemplated, and did construct a dam in substantial compliance with the proposal.’ Indeed, we find no evidence of any attempt to comply with the proposal after the filing of the map with the Secretary of the Interior. They may have been in good faith when they made the survey and mapped the project, but as we read the Act of March 3, 1891, faith will only avail the applicants to the extent of their works.” In that ease the appellate court considered the scope and meaning of the words “any section,” and stated: “We think the clear spirit and intent of the act applies to a failure to complete the reservoir as well as the canal or ditch proper; that in the particular clauses mentioned the words ‘canal or ditch’ were used in an inclusive sense, embracing the whole project.” The unit to be considered must be the “section,” and not merely a certain part of a certain ditch or canal. The grant could not be made so that, in the ease of a project involving a dam and a system of canals, the government might seize one ditch or one 10-foot section of the dam that had not been constructed. So to construe the act would mean that, in a ease where a dam of a certain height had to be built to meet the needs of the surrounding community, if the dam were only half constructed, the government eould seize only the uncompleted upper portion. The holder of the fee would have the lower part of the dam and the government the unconstructed upper part, but no good would flow therefrom to either of the parties involved or to the public for whose protection the law is framed. The grant is allowed in the first place as a whole, with the idea that a certain unit of work is necessary and conducive to the best interests of the public. If the grantee is allowed to do his work by halves and then to retain control over the whole project, the desire of the government is thwarted and the puhlie generally must suffer. This is not desirable, nor does the law so read. In the instant case the unit to be considered is the dam and the reservoir that would, result if the dam were built. It is not enough to say that the existing dam is a substantial improvement over conditions as they were before 1910; the question is whether or not the unit of work indicated on appellee’s map of 1916 was completed, and it was the finding of the court below that the work was not done. Appellee admits that no work was done on other proposed sections of the project and that therefore they are subject to forfeiture by tbe government, but we are unable to distinguish wherein his failure to carry out his obligations with respect to the construction of the ditch and the conduits differs from his failure to carry out his obligations with regard to the construction of & dam. Appellee asserts that courts of equity generally refuse to aid in the enforcement of the penalty of forfeiture, and insists that forfeiture should be enforced in equity consonant with the principles of right and justice and in a clear case. We think that the law on this point has been clearly stated in the case of Farnsworth v. Minn. & Pac. R. Co., 92 U. S. 49, 68, 23 L. Ed. 530, as follows : “But it is said that provisions for forfeiture are regarded with disfavor and construed with strictness, and that courts of equity will lean against their enforcement. This, as a general rule, is true when applied to eases of contract, and the forfeiture relates to a matter admitting of compensation or restoration; but there can be no leaning of the court against a forfeiture which is intended to secure the construction of a work, in which the public is interested, where compensation cannot be made for the default of the party, nor where the forfeiture is imposed by positive law. ‘Where any penalty or forfeiture,’ says Mr. Justice Story, ‘is imposed by statute upon the doing or omission of a certain act, there courts of equity will not interfere to mitigate the penalty or forfeiture, if incurred; for it would be in contravention of the direct expression of the legislative will.’ Story’s Eq. Jur., sec. 1326. The same doctrine is asserted in the ease of Peachy v. The Duke of Somerset, reported in 1st Strange, and in that of Keating v. Sparrow, reported in 1st Ball & Beatty. In the first case, Lord Macclesfield said that ‘cases of agreement and conditions of the party and of the laws are certainly to be distinguished. You can never say that the law has determined hardly; but you may that the party has made a hard bargain.’ In the second case, Lord Manners, referring to this language and taking the principle from it, said that ‘it is manifest, that, in cases of mere contract between parties, this court will relieve when compensation can be given; but against the provisions of a statute no relief can be given ’ ” — cited by this court in the case of Union Land & Stock Co. v. United States, supra. The decree of the District Court is reversed, with directions to enter a decree for appellant in accordance with the prayer of the bUl.