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https://www.courtlistener.com/api/rest/v3/opinions/7219031/ | GALSTON, District Judge.
This is a motion for an order vacating the seizure and attachment and dismissing the libel proceedings and directing that the seized cargo be returned to the claimant, Peter Le Blanc.
The libel recites a breach of the Tariff Act of 1930 and section 4377 of the Revised Statutes (46 USCA § 325), and alleges that on or about April 19, 1932, at Greenport Harbor, Long Island, N. Y., the collector of customs of the port of New York seized the American oil screw America and her cargo, consisting of G38 bags of assorted liquors.
Por a first cause of forfeiture it is alleged that this vessel was duly licensed for the cod and mackerel fisheries, and that in violation thereof she was employed in a trade other than that for which she was licensed, in that she carried a cargo of assorted liquors.
The facts in respect to the seizure are set forth in the deposition which the government took of Glenn T. Phillips, chief boatswain’s mate of the United States Coast Guard, who testified that, while on the patrol boat, CG 234, on April 19, 1932, he entered Greenport Harbor and observed the American oil screw America. This vessel was moored alongside of Tuttle’s Gas Dock. She was listing to the starboard and was well down in the water. No one was on the boat. He boarded the vessel at about 5:30 p. m. the same day accompanied by Tesson, boatswain’s mate T. In the engine room they found a small quantity of iee and fish stored in the bins, stored equally on port and starboard sides. They searched the engine room. No member of the crew of the vessel was on board, and finally they cut a hole through the floor of the engine room and found the 938 bags of intoxicating liquors in the bilges.
It seems to me that the only question presented is whether there was probable cause for making a search. 1 think such cause existed. A decided listing of the vessel to starboard throughout the day and the fact that she was unattended certainly gave some cause for suspicion. U. S. Code, title 19, § 1581, 19 USCA § 1581 (June 17, 1930, c. 497, title 4, § 581, 46 Stat. 747), in respect to boarding vessels and powers to officers of the custom, seems to me to afford full authority in the premises.
The search, therefore, was legal, and the result of the search certainly revealed that the vessel was employed in a trade other than that for which she was licensed. There was, therefore, a violation of section 4377 of the Revised Statutes (U. S. C. title 46, § 325 [40 USCA § 325]).
Nor was the search conducted in an unreasonable manner. Nothing visible at the time of boarding and search of the engine room accounted for the listing. It was but natural to suppose that a cargo of something more than the exposed fish and iee was the cause.
The motion, therefore, to vacate the seizure and dismiss the libel is denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219033/ | BOURQUIN, District Judge.
This patent (U. S. No. 1,582,500) infringement suit is of trifling importance. But in one respect it is unique if not a scintillating gem.
For the evidence was presented and the cause argued all in less than 30 minutes. The evidence is scanty, though like Mereutio’s wound, “twill serve,” disclosing that in 1925 O’Nate made at least one appliance like that patented.
No question is made of equitable jurisdiction or validity of the patent. Accordingly, the court finds for plaintiff, who may have a reference for an accounting, if deemed worth while. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219034/ | JOHNSON, District Judge.
The plaintiffs brought this action of assumpsit on a policy of accident insurance issued to John C. Stahl by the defendant company. By the terms of the policy the deceased was insured in the principal sum of $15,000 in the event of his death. The issue raised was submitted to a jury and a verdict was rendered for the plaintiff in the sum of $16,417.50, the principal sum of the policy plus interest. The defendant has filed a motion for a new trial and has assigned therefor a number of reasons.
From the evidence produced at the trial, it appears when John C. Stahl applied for the policy he stated in his application in response to questions relating to his occupation as follows: “Owner, National Lime Stone Quarries, * * * 5. My occupation is Proprietor, Inspecting Only, Not superintending. 6. The Duties of my occupation are fully described as follows: Proprietor, Inspecting Only, not Superintending.”
The standard provisions of the policy contain the following: “Change of Occupation. 1. This policy includes the endorsements and attached papers, if any, and contains the entire contract of insurance except as it may be modified by the company’s classification of risks and premium rates in the event that the Insured is injured after having changed his occupation to one classified by the Company as more hazardous than that stated in the policy, or while he is doing any act or thing pertaining to any occupation so classified, except ordinary duties about his residence or while engaged in recreation, in which event the company will pay only sueh portion of the indemnities provided in the policy as the premium paid would have purchased at the rate but within the limits so fixed by the Company for such more hazard^ ous occupation.”
The testimony is somewhat conflicting as to what actual work the deceased was doing when he received the injury which caused his death, but this much seems clear: Two laborers at the stone quarry, owned by the insured, were underneath the stone crusher replacing one of the toggle plates, which weighed about 600 pounds, by means of a chain hoist. The insured was underneath the stone crusher with the two laborers and was either actually assisting in the work or was inspecting the work of the other men. After the insured had been so engaged for about an hour and a half, the other toggle plate was dislodged in some unknown manner and fell a distance of over six feet, striking the insured and causing injuries to him from which he died.
Throughout the trial of the ease, the defendant contended, and now urges in its motion for a new trial, that under the terms of the policy relative to ehange of occupation, which is quoted above, the defendant, if it is liable at all, is not liable for the full amount of the policy because'at the time of the accident the insured had changed his occupation to one classified by the defendant company as more hazardous than that stated in the policy, or in any event the insured was doing an act or thing pertaining to an occupation which was classified as being more hazardous.
The defendant had on file in the proper office of the commonwealth of Pennsylvania, when the policy was issued and during the life of the policy, its Manual of Rates and Instructions, Description of policy Forms, *778Accident and Health Department. The defendant contends that the insured was performing the work of an ordinary quarryman when he was injured and under such classification the limit of risk to the defendant company was only $1,500.
The court, following the decision of the Circuit Court of Appeals, Sixth Circuit, in the ease of Gotfredson v. German Commercial Accident Company, 218 F. 582, L. R. A. 1915D, 312, submitted the case to the jury under instructions that if the act or thing which the deceased was doing at the time the accident occurred was other than that pertaining to his duties as inspector or owner of the quarry and that such act was merely casual or temporary, and not habitual, then the jury should find for the plaintiffs in the full amount of the policy, but if the jury found that the deceased had habitually and continuously performed the acts, which caused his injury and thereby changed his occupation to one classified by the company as a more hazardous risk, then the jury should find that the plaintiffs were entitled to receive such an amount as the premium paid by the deceased would have purchased at the rate fixed for the more hazardous occupation.
While the defendant has filed a number of reasons for a new trial, they all turn on the question whether the court’s charge to the jury, as stated above, was a correct statement of the law.
In the ease of Gotfredson v. German Commercial Accident Company, supra, the facts are similar to the facts in this case. The insurance' company had grouped its risks into five classes and fixed premiums and losses according to the risks attending the occupation of the persons insured. The assured’s occupation was described in his application as “Proprietor of a trucking company, no manual labor” and was assigned to the first class. The occupation of an elevator conductor was within the fifth class for which a relatively higher rate was charged. The policy provided that if the assured was injured after having changed his occupation to one more hazardous, or was injured while doing any act pertaining to any more hazardous occupation, the liability for any loss specified should be such an amount as the premium paid would purchase at the rate fixed for the more hazardous occupation. The evidence showed that the decedent was moving the location of his business to a new building. On the day of the accident, the regular elevator man employed in the building having left for the day, the decedent, desiring to complete the unloading of the truck, entered the elevator and operated it himself. On the third trip the cable parted and the decedent received injuries from which he died. The Circuit Court of Appeals of the Sixth Circuit in reversing the decision of the District Court held that the policy class must in each instance be interpreted with reference to the particular occupation of the assured, and did not apply to a mere temporary or casuál act, and it was error to charge, as a matter of law, that the assured having been injured while performing an act in a more hazardous occupation than that specified in the policy, his administrator could recover only the reduced indemnity.
In delivering the opinion of the court in the Gotfredson Case, Warrington, Circuit Judge, on page 587 of 218 F., said: “However, we think the evidence gives rise to questions of fact, which should have been submitted under appropriate instructions to the jury. There was error in assuming, as matter of law, that the mere performance of the act of temporarily running the elevator justified the practical assignment of the assured to a more hazardous occupation and the reduction of his indemnity accordingly. The facts and circumstances under which the act was brought about would naturally characterize it, and so open the ease to legitimate inference as to the existence or not, for example, of an unforeseén necessity or emergency under which the elevator was operated. Indeed, the ultimate issue of fact might fairly be resolved under an inquiry whether the operation of the elevator by the assured was casual or habitual. If the former, the indemnity should be allowed as it was written; if the latter, the indemnity should be limited to that of a conductor of an elevator. The usual course is to submit such questions to the jury. Standard life & Acc. Ins. Co. v. Fraser, supra, 76 F. 709, 22 C. C. A. 499 (C. C. A. 9th Cir.); Eggenberger v. Guarantee Mut. Accident Ass’n (C. C.) 41 F. 172, 173; Fox v. Masons’ Fraternal Accident Association of America, supra, 96 Wis. 396, 71 N. W. 363; Everson v. General Accident, etc., Assur. Corp., supra, 202 Mass. 174, 175, 88 N. E. 658; Simmons v. Western Travelers Accident Ass’n, 79 Neb. 20, 26, 112 N. W. 365; Taylor v. Illinois Commercial Men’s Ass’n, supra, 84 Neb. 805, 122 N. W. 41 [24 L. R. A. (N. S.) 1174].”
In the ease at bar the issue was presented to the jury, both in the charge of the court and in the points for charge submitted by counsel in accordance with the doctrine as announced by the Circuit Court of Appeals *779in the Gotfredson Case, and counsel for the defendant in the argument on the motion for a new trial has not cited any federal eases which are contrary to the doctrine in the Gotfredson Case. Counsel for the defendant has cited the decisions of several state courts to the effect that the only question for determination is whether the insured at the time of his injury was doing any act or thing pertaining to a more hazardous occupation. Jessie W. Ebeling v. Bankers’ Casualty Company, 61 Mont. 58, 201 P. 284, 22 A. L. R. 777; Metropolitan Accident Ass’n v. Hilton, 61 Ill. App. 100; Aldrich v. Mercantile Acc. Ass’n, 149 Mass. 457, 21 N. E. 873; Montgomery v. Continental Casualty Co., 131 La. 475, 59 So. 907. This court cannot agree with the conclusions reached in the foregoing state court decisions and is constrained to follow the logical reasoning and doctrine of the Gotfredson Case, which appears to have become the well-settled doctrine in the federal courts. See Schwartz v. Northern Life Ins. Co. (C. C. A.) 25 F.(2d) 555; Elkins v. Ætna Life Ins. Co. (D. C.) 26 F.(2d) 277; Union Indemnity Co. v. Ethel Acord (C. C. A.) 48 F.(2d) 1084.
For the foregoing reasons, the motion for a new trial must be refused.
And now, October 31, 1933, the motion in arrest of judgment and for a new trial is refused and dismissed, and the clerk of the court is directed to enter judgment in favor of the plaintiff and against the defendant in the sum of $16,417.50. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219035/ | DICKINSON, District Judge.
There are two of these eases, alike in the questions of law raised. The plaintiffs together seek to recover the rather tidy sum of $6,000,000. If the cases are tried, it will he at the cost of much time, labor, and expense. The questions of law raised go to the cause of action asserted, and hence “to the whole of the claim” made. Counsel in consequence join in the expression of the hope that it may be found that the fact and law merits of the cause may be brought before the court by the pleadings, so that the judgment to he rendered may be reached without the necessity of a protracted trial.
The parties are represented by experienced counsel, who have made an exhaustive investigation and present a complete analysis of the respective contentions made. We accordingly, knowing the opposing interests to he in competent hands, feel that we can safely follow the analysis thus made, and accept the questions discussed as the questions which arise in the case.
In order to get the point of view of the defendants, it is helpful to premise that the railroad ‘defendant is a common carrier en*787gaged in interstate and intrastate commerce. Philadelphia is a city on its line. There is an advantage to consignors and consignees in availing themselves of the lower tariff rates given to shippers in carload lots, and hence the practice grew np for those who would otherwise be consignees of less than carload lots to join together in getting a car-load shipment. This made it necessary, or at least convenient, for them to choose one consignee to whom, or in whose care, the carload shipments could be made, and helpful further to have this consignee distribute the contents of the ears to the several real owners. There was the like necessity or advantage in making shipments. The shipments to and from Philadelphia were some to points within the state and some to points outside. There was need that this representative receiver and sender of shipments should be trained and equipped for the service he was to render. In response to this need and consequent demand, what are called warehousemen came into existence. The appellation is itself descriptive of the work they did. The plaintiff is one such warehouseman and the codefendant is another. The further practice years ago grew up for the different railroads eaeh to select a warehouseman to render the service indicated. Por it the warehouseman chosen was compensated by the railroad, and substantial sums of money were received by the eodefendant for the services thus rendered by it. The codefendant was made, or made to figure as, an employee of the railroad, and its warehouse was made or called a freight station of the railroad. Incidentally, for whatever it may be worth, the averment is made that the railroad was part owner of the codefendant warehouse and received a share in its profits, and the suspicion would be justified that the officials of the railroad likewise profited by the arrangement made, for this, in former years, was the common practice. However, at the time this was done and for years afterwards, there was not thought to be, and there was not, any illegality in it. What was done was openly done and avowed, and was made the subject of a written agreement. When it is recalled that the plaintiff and the eodefendant, as well as others, were competitors in the same field of business endeavor, it would be idle to deny that the arrangement thus made greatly favored the chosen warehouseman and put its competitors to a great disadvantage. Whatever wrongs the outsider warehousemen felt, there was no legal wrong done them, and they were obliged to submit and accept the situation as thus created. Then came the act of Congress creating the Interstate Commerce Commission, to which the complaining ware-housemen finally went with their complaint. The Commission, after á full and lengthy inquiry, ruled in favor of the complainants, and the defendants (the codefendant here having been permitted to intervene) were ordered to desist from the practice above outlined. Gallagher v. Pennsylvania R. Co., 160 I. C. C. 563.
The defendants brought this order before the statutory court, which was convened for the purpose, for review, and the Commission was by that court sustained and upheld in what it has done. Merchants’ Warehouse Co. v. U. S. (D. C.) 44 F.(2d) 379.
On appeal to the Supreme Court the rulings made by the Commission and by the statutory court were affirmed. 283 U. S. 501, 51 S. Ct. 505, 75 L. Ed. 1227.
This recital will enable us to appreciate the questions of law raised by this statutory demurrer. They are:
(1) The remedy to which the plaintiff has a right is that afforded by the Interstate Commerce Act (49 USCA § 1 et seq.). This is exclusive and has been exhausted by the plaintiff, hence no right of action is given by the Sherman Anti-Trust Act (15 USCA §§ 1 — 7, 15 note) under which the plaintiff is now claiming, nor does any cause of action arise thereunder.
(2) The business charged to have been in part monopolized and restrained is not commerce within the meaning of the commerce clause of the Constitution, nor is it interstate.
(3) The railroad defendant and the warehouse defendant are not competitors nor have they competed, so that no agreement nor arrangement between them could nor did restrict competition.
(4) Interstate commerce is not directly affected by the agreement between the railroad defendant and the warehouse defendant nor by anything done thereunder, and in consequence no cause of action arises under the Sherman Act.
Discussion.
In discussing these questions, we shall depart from the order in which listed, and- to some of them give only a more or less perfunctory consideration. It is unnecessary to premise that we are dealing, not with trial questions, but with questions of pleading; with what is averred, not with the truth of the averments. The statement of claim avers (1) that the plaintiff is engaged in commerce, and (2) that this commerce is in part interstate, *788but these general averments are qualified by statements of what the plaintiff does, for it likewise avers what it is in which the plaintiff is engaged, and hence the questions do arise (1) whether this is commerce, and (2) whether it is interstate. What the plaintiff did was to receive interstate shipments carried by the railroad, either, consigned to him or in his care, for the patrons of his warehouse, and to receive from the latter shipments to be made in interstate commerce. It is true he did not have title to the shipment, but the commercial character of the shipment does not turn upon the ownership of what was shipped. Commerce is business intercourse. If it takes the form of transportation, its commercial character is independent of what is shipped or who owns it. Gibbons v. Ogden, 22 U. S. (9 Wheat.) 1, 6 L. Ed. 23.
We are of opinion that the plaintiff was engaged in commerce and in interstate commerce. We see a well-defined difference between the Commerce Act and the Sherman Act. They have different objectives. The former is aimed at control of the carriers to the end that they may not exact excessive rate charges; the latter is aimed at those who would restrain or monopolize commerce. It is true that the forbidden thing in the former may, and we assume always would, tend to interrupt or diminish the flow of commerce, although it is conceivable that it might not. The forbidden thing in the latter is the restraint or monopoly of commerce. It might well be that the trade of A could be destroyed through a conspiracy which used as one of its instrumentalities the imposition of killing tariff transportation rates upon B. The distinction between the two injuries is no less real if A and B were th„e same person. If they were, we see no legal obstacle in either act to A appealing to the Commission to stop the illegal exaction under the one act and to appeal to the courts to award him damages under the other. In moving to this conclusion, we do not encounter Keogh v. Chicago & N. W. R. Co., 260 U. S. 156, 43 S. Ct. 47, 67 L. Ed. 183.
In that case the question was not of commerce but of rates. The charge was that a number of carriers had conspired to exact undue tariff rates. An appeal was made to the Commission, with the result that the rates were held to be reasonable and lawful. An appeal was then made to the courts under the 'Sherman Act, but there was no complaint other than a conspiracy to exact an excessive tariff charge. It was held that the plaintiff had no cause of action and that the Sherman Act gave no right of action; the sole remedy for an excessive tariff rate injury being given by the Commerce Act.
Here the injury complained of is not the exaction of an undue transportation rate but an injury to plaintiff’s trade. The charge has no reference to the tariff rate other than that this was used as one of the instrumentalities by which injury to trade was done.
The argument addressed to us assumes the plaintiff to have no complaint (as in the Keogh Case) except of an excessive tariff charge. This is not only not the only complaint but it is not the complaint at all.
The conclusion reached is that the plaintiff may resort to the Sherman Act for redress of the injury to his trade.
The further point made that the carrier and its favored warehouseman axe not competitors is a fact, but we cannot accept the application made of it beyond its possible trial use to acquit the carrier of participation in a conspiracy to monopolize a trade in which it had no interest. The plaintiff and the warehouse defendant are, however, competitors, and, if the carrier, although without interest, joined in the conspiracy charged, it would be answerable. Moreover, the further complaint is that it is interested.
The remaining points made we find no need to pass upon at this time. It may or may not be true that the contracts do not in themselves “constitute a restraint or monopoly of the warehousing business.” The charge, as several times said, is the wholly different one of a conspiracy to monopolize with the contracts averred to be among the means used to achieve the plotted result. What the fact may be is a trial question. So likewise the defensive proposition, that the plaintiff having appealed to the Commission has lost his right of appeal to the courts. The answer is a reiteration. The basis of the action is a conspiracy to give one of the defendants a monopoly of the warehousing business to aid in accomplishing which the other defendant made unlawful use of its rate making powers. This unlawful use was stopped ■by the Commission, but it does not follow that the plaintiff is thereby shut out from seeking the remedy given by the Sherman Act.
We are of opinion that the questions of law raised should be ruled in favor of the plaintiff, with leave to defendants to file an affidavit of defense to the fact averments of the statement of claim, in accordance with the *789Pennsylvania Practice Act of 1915 (12 PS Pa. § 382 et seq.).
An appropriate order may be submitted, and a like order entered, in No. 16774, March sessions, 1932. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219036/ | CAFFEY, District Judge.
The ultimate facts which I deem pertinent —applicable throughout the period under consideration, but for convenience (unless otherwise indicated) recited in the present tense — are as follows:
1. The club has the physical equipment of the ordinary social club.
2. The university owns the land and constructed the clubhouse.
3. Except that house charges are paid by the individuals who incur them and the club cares for repairs inside the building, the entire expense of maintaining the property (including upkeep, external repairs, light, and heat) is borne by the university.
4. The membership of the club is almost wholly restricted to the officers and teaching staff of the university.
5. The membership is made up completely of such officers and staff, save for a negligible few whose work so much affects or is so closely allied to the affairs of the university that it is desirable, from the standpoint of the university itself, that its officers and staff have ready access to or association with them.
6. The controlling purposes and the controlling activities of the club are exclusively *790in furtherance of the educational work of the university.
7. The club has no activities outside the clubhouse, and except to the extent essential to render the clubhouse sufficiently comfortable and attractive to promote the assembly there of the administrative and teaching personnel of the university, who are engaged in the conduct of the university as a seat of learning, the club has no activities whatever.
8. Sleeping accommodations are meager, consisting only of a room for the steward and a suite reserved for guests of the university, but rarely used at all.
9. The principal meal is luncheon, when, it is customary for groups from a single department of the university or professionally occupied on a single subject to sit at the same tables, so as there to discuss or dispose of university matters of mutual concern.
10. The service of meals, the provision of space for games of kinds prevalent among professional men while relaxing and the arrangement of occasional, but infrequent, entertainments for members — sometimes accompanied by their wives or children — are confined to what may be reasonably estimated' as needed in order to induce the members to gather at the clubhouse, so as thereby to assist in the efficient discharge of strictly university functions.
11. The social purposes of the club are merely incidental to the accomplishment of the university’s own purposes.
12. In design, as well as in practice, the club is but an integral part of the organization of the university as an educational institution.
Upon the facts, as I have stated them, if the statute (26 USCA § 872) stood alone, I should be inclined to hold that the club is “social.” ' Article 36 of regulations prescribed for the enforcement of the statute, however, contains a definition of the type of club which, within the terms of the statute, is “social.” The courts lean strongly to the interpretation put on a statute by executive officials charged with its administration, particularly when, as here, the interpretation has prevailed for some years. Accordingly, I shall accept the view of the Treasury Department, as set out in the regulation cited, of what is a social club. Under the regulation, as I see it, the issue in the present ease turns on the phrase “a material purpose” employed in the regulation. What it means is not altogether free from doubt.
Counsel agree that the club is not entitled to recover unless it be within the exempting clause of the regulation. So, also, both say that the exempting clause embodies two characteristics, which must inhere to a club, if it is to escape taxation on its dues. One of these is negative; the other is positive. It must appear that the social features (1) “are not a material purpose of the organization” and (2) “are subordinate and merely incidental to the active furtherance of a different and predominant purpose.”
On the proof it seems to me manifest that the social features of the club now involved are quite subordinate and are purely incidental to the objects for which the university created and supports it; to what the club exists for, as well as to what it actually does. In other words, its chief and ascendant objectives are not social. If that be so, then necessarily we must pass to a sole further inquiry, namely, whether social features constitute “a material purpose of the organization.” It is out of this inquiry alone, as I see it, that any uncertainty can arise.
I think it cannot be gainsaid that the intention is that the club members engage,. as they actually do engage, in social intercourse in the clubhouse. The facilities are obviously appropriate to social enjoyment. Yet it is equally well established by the testimony that the means for social enjoyment are afforded so as to increase attendance at the clubhouse of those the university wants to have come together there. In a sense plainly the club has-social features. That fact, however, is not enough, within the regulation, to subject the dues to taxation.
I take it as incontrovertible that the regulation permits some social features in a club without its dues being taxable. The question apparently is one óf degree. Unless the mere possession of social features were, in and of itself, insufficient to subject a club to taxation, the provision of the regulation relieving from the tax if the “social features are not a material purpose of the .organization” would be without rational, much less a natural, field of operation. The very structure of this portion of the sentence recognizes the right of a club to social features without rendering itself taxable on its dues. It is a prerequisite that these features be “a material purpose of the organization.”
Construing the regulation as best I can, it strikes me that while in form it may be said to embrace two elements, nevertheless these are conjoined or interrelated. One assists in. *791finding the significance of the other. Within the phraseology of the regulation if social features he “subordinate and merely incidental” to the real and primary pursuit of something other than social features — i. e., if there be “active furtherance” of something “different” from “social features” and if that different thing be the “predominant purpose” of the organization — then the “social features” are not “a material purpose.” While the social features may be a purpose, at least that purpose cannot be treated as “material” if it be but an unsubstantial portion of the whole set of purposes for which the club is set up and carried on. Unless the regulation were interpreted in this way, as I conceive it, the language could not be harmonized. If it had been the intention to express something else, then the word “material” in the description of the purpose of the club’s “social features” in the first part of the exception clause ought to have been omitted. It was brought in so as to draw a line of demarcation. The very task was to fix a line. The line, as it exists, seems to me to be this: If the social features be “subordinate and merely incidental to the active furtherance of a different and predominant purpose,” then those social features as a purpose are not “material.”
The relevant court decisions are numerous. Out of them, so far as I can determine, no clear uniformly governing principle has emerged. The only thing I discover, on which there is accord, is that every case stands by itself and raises an issue of fact. As nearly definite a test as I have found was laid down by the Court of Claims in Army and Navy Club of America v. United States, 53 F.(2d) 277, 282. It was there said that: “If the predominant purpose of the organization is not social, and its social activities are merely incidental to the furtherance of this different and predominant purpose, then the club is not a social one within the meaning of the law.” Compare Washington Club v. United States (Ct. Cl.) 38 F.(2d) 130; Cosmos Club v. United States (Ct. Cl.) 42 F.(2d) 321; The Cordon v. United States (Ct. Cl.) 46 F.(2d) 719; Houston Club v. United States (Ct. Cl.) 58 F.(2d) 487; Builders’ Club of Chicago v. United States (Ct. Cl.) 58 F.(2d) 503.
While frankness compels the admission that I do not feel sure what the regulation means, I do feel that the weight of argument favors the conclusion I have reached.
Accordingly, a verdict will be directed for the plaintiff in the sum of $3,711.30, with interest. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219037/ | STRUM, District Judge.
Plaintiff sues in equity to restrain the threatened cancellation of six insurance policies issued by defendant upon plaintiff’s life, and to recover certain disability benefits under the policies.
One policy contains the provision that “whenever the company receives due proof * * * that the insured * * * has become wholly disabled by bodily injury or disease so that he is and will be presumably, thereby permanently and continuously prevented from engaging in any occupation whatsoever for remuneration or profit, and that such disability has then existed for not less than sixty days, * * * ” then certain disability benefits will be paid and further premiums waived.
The other five policies contain the provision that upon receipt by the company “ * * * of due proof that the insured is totally and permanently disabled * * * ” certain disability benefits will be paid and future premiums waived; that “disability shall be deemed total whenever the insured is wholly disabled by bodily injury or disease so that he is prevented thereby from engaging in any occupation whatsoever for remuneration or profit” and shall be presumed to be permanent “whenever the insured will presumably be so totally disabled for life” or “so totally disabled for not less than three consecutive months immediately preceding receipt (by the company) of proof thereof.”
The controlling issue is one of fact,— whether or not the insured, during the life of the policies, became wholly (or totally) and permanently disabled within the meaning of the policies.
Plaintiff asserts that he became so disabled about April, 1928, and has remained so. Defendant denies that plaintiff was ever so disabled.
For a substantial number of years prior to April, 1928, plaintiff had been secretary and treasurer of several lumber companies, having charge of the financial and accounting affairs of the business. He was an office or clerical man. Generally speaking, and with certain unimportant exceptions, plaintiff’s health had been good all his life until about 1926, when he suffered a severe attack of fever, since whieh he claims not to have been strong or well, and claims to have become extremely nervous, sometimes hysterical. Plaintiff resigned his position on April 1, 1928, assigning ill health as the cause. Soon thereafter he submitted his claim for disability benefits here sued for. Plaintiff has since followed at least three gainful occupations at intervals, but not continuously. One of them, followed for about eight and a half months during the year 1930, was quite similar, though not identical, with his former occupation with the lumber companies. It is significant that the lumber companies with whieh plaintiff was associated for many years prior to 1928 suffered financial difficulties, and practically suspended business about the time plaintiff resigned, at whieh time plaintiff acquired from the lumber companies five of the policies here sued upon, whieh had theretofore been taken out and the premiums thereon paid by said companies; only one of the policies having been originally issued direct to the insured. Very shortly after his resignation aforesaid, plaintiff consulted a physician in Jacksonville for the declared purpose, so the' physician testified without contradiction, of' ascertaining whether plaintiff was totally and permanently disabled within the terms of these policies so as to claim the disability-benefits. This physician, after a thorough examination/ advised plaintiff that he was not disabled, that he could, follow his vocation, and that he-could and should go back to work and forget about his insurance.
There is voluminous testimony, both expert and lay, as to plaintiff’s physical and mental condition. It is impracticable to do more than recapitulate it' within reasonable bounds.
There is credible evidence that plaintiff apparently-has some ailment of the gastrointestinal tract and possibly a recurring, but not chronic, thyroid ailment; that he manifested symptoms of psyehoneurosis, both functional and organic, with episodes resembling psychosis or borderline psychopathic tendencies; it being the opinion of some of the physicians that plaintiff’s nervous symp-. toms are the result of the underlying organic-ailments mentioned, or some of them, and that such mental symptoms will continue until the underlying organic ailment is cured.
On the other hand, however, there is credible, and preponderant, counter testimony that, with the possible exception of chronic-gall bladder trouble, less than disabling, and the existence of whieh in fact is left in doubt, plaintiff suffers from no ailment of the gastrointestinal tract, nor of the thyroid gland;, that his heart action and general physical reactions are normal; that he is not extremely-*793nervous; showed no unusual signs of exhaustion following a strenuous medical examination covering five or six hours; has not lost, but has gained, weight, though employed at one time for eight consecutive months at both physical and mental tasks; that he is not suffering and has not suffered from psychoneurosis, or neurasthenia; that he is not in, nor bordering upon, a psychopathic state; and that there are no peculiarities about plaintiff’s eyes suggesting any of the mental ailments mentioned; that he displays a bright, clear mind and memory, even in small details (which testimony of the physicians is thoroughly sustained by an examination of the plaintiff’s own testimony in this case); that plaintiff possesses substantial, if not altogether normal, physical endurance, and is capable of withstanding sustained physical and mental effort. It does appear, however, that plaintiff seems to brood over his business reverses, and those of the firms with which he was formerly connected, and subjects himself to abnormal mental stress on account thereof, that plaintiff has chronic inguinal rings, though a truss is unnecessary, and that neither this ailment nor chronic gall bladder trouble from which plaintiff probably suffers is in any substantial sense disabling, certainly not wholly or totally so. Plaintiff clearly is not insane, but is mentally alert and active.
Taking the conflicting medical testimony as a whole, viewing it in the light of the lay .testimony, including that of the plaintiff himself, together with the inescapable deductions and inferences to be drawn therefrom in the light of the physical facts evidenced by such testimony, the court is of the opinion that plaintiff suffers from nothing more serious than inguinal rings and possibly a chronic gall bladder ailment of minor degree, but that plaintiff is decidedly introspective, with neurotic tendencies, and subjects himself to abnormal mental stress over his business reverses and other affairs, a too ready capitulation to which influences results in a state of hypertension, — what would ordinarily be called nervousness — coupled with reeufring lachrymal emotion. His nervous tendencies, however, appear to be emotional, rather than organic or functional, with but slight foundation in physical disorders.
Though there is credible testimony, medical and lay, tending to support plaintiff’s claim, the clear preponderance of the medical testimony supports defendant’s contention, and the latter testimony is convincingly corroborated by the physical facts which appear from other testimony in the case. Besides the testimony of the doctors, the undisputed testimony of defendant’s witnesses as to plaintiff’s personal activities in the conduct of this case strongly tend to negative the existence of infirmities in the plaintiff, either mental or physical, amounting to total disability within the terms of the policies.
The term “wholly and permanently disabled” is to be given a rational meaning,— not strained in either direction. The term does not mean a state of absolute helplessness. Nor does the mere inability, at infrequent intervals, to perform some of the acts required in the conduct of a business or occupation constitute total disability. Disability is total if it prevents the party suffering it from performing acts necessary to the prosecution of his business in substantially the customary and usual manner. Standard Accident Ins. Co. v. Bittle (C. C. A.) 36 F.(2d) 152; Metropolitan life Ins. Co. v. Blue, 222 Ala. 665, 133 So. 707, 79 A. L. R. 852; New York Life Ins. Co. v. McLean, 218 Ala. 401, 118 So. 753.
Attempts by the insured to work, especially when made in such circumstances as to imperil his life or health, will not of themselves defeat recovery, even though plaintiff may have succeeded in doing some work. Mutual Benefit Health & Accident Ass’n v. Mathis (Miss.) 142 So. 494; Rathbun v. Globe Indemnity Co., 107 Neb. 18, 184 N. W. 903, 24 A. L. R. 191. Nor, to be “permanent,” is it necessary that it be apparent that the disability will last forever. Penn. Mutual Life Ins. Co. v. Milton, 160 Ga. 168, 127 S. E. 140, 40 A. L. R. 1383; Wenstrom v. Aetna Life Ins. Co., 55 N. D. 647, 215 N. W. 93, 54 A. L. R. 289.
Even if mental ailments are comprehended within the term “bodily injury or disease” as used in the policies (see Accident Ins. Co. v. Crandal, 120 U. S. 527, 7 S. Ct. 685, 30 L. Ed. 740. Compare Connecticut Mutual Life Ins. Co. v. Akens, 150 U. S. 468, 14 S. Ct. 155, 37 L. Ed. 1148; Mutual Life Ins. Co. v. Terry, 82 U. S. (15 Wall.) 580, 21 L. Ed. 236; Blackstone v. Standard Life & Accident Ins. Co., 74 Mich. 592, 42 N. W. 156, 3 L. R. A. 486), the plaintiff has not been thereby prevented nor incapacitated from engaging with reasonable regularity in substantially gainful occupations, nor from performing the duties thereof in substantially the usual manner.
The court concludes that neither plaintiff’s mental nor physical ailments, nor both, have rendered plaintiff wholly (or totally) and per*794manently disabled ■within the terms of the policies sued on. The equities are therefore with the defendant.
Plaintiff’s bill is dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219038/ | PAUL, District Judge.
I am of opinion that the condition in the insurance policy providing that the insured shall maintain an approved watchman, time clock, and water gong, and the maintenance of which is made a consideration of the issuance of the policy, is an essential condition, compliance with which was necessary to the keeping of the policy in force.
The clause in the policy referred to reads : “In consideration of the reduced rate at which this policy is written, it is expressly stipulated and made a condition of this policy that the insured shall maintain, in so far as it is under his control or supervision, approved watchman and clock and approved outside water motor gong, operated by a sprinkler alarm.”
While the word “warranty” is not used, the very text of the provision is sueh as to indicate that it was regarded as an absolute condition which the insured undertook to perform throughout the life of the policy; and that upon his agreement to comply with this condition, the premium was fixed and the policy was issued.
The fact that the terms “approved watchman,” “clock,” and “water gong” are .not definite in setting forth exactly what the insured *795should do, does not, in my opinion, lessen the effect of the condition; but it only introduces a difficulty in establishing what nature of service is understood by these terms. The condition to maintain the service is, I think, binding and absolute; but there is, of course, some latitude in arriving at the definition of what is meant by the terms. It must be conceded that a watchman service of some substantial nature was meant.
It is contended that the character of service maintained throughout the life of the poliey was substantially that which had been maintained in previous years and during the life of other policies written by the defendant, and of which this policy was a renewal; that the defendant had knowledge of the character of the service then maintained; and that by its acquiescence in and implied approval of the character of service maintained throughout those previous years, the defendant, in substance, waived its right to insist on a more extensive service than has been maintained or was maintained to the time of the damage sued for. In other words, that during the life of the poliey sued on, the defendant had no right to expect any more extensive service than existed at the time the poliey was written and of which it had full knowledge.
Following principles laid down in the case of Lumber Underwriters v. Rife, in 237 U. S. 605, 35 S. Ct. 717, 59 L. Ed. 1140, I think it must be held that the rights of the defendant under the policies issued in May and in September, 1931, and now sued on, are in no way affected by any knowledge which the defendant might have had as to the character of watchman service enforced during the life of the previous policy. That case holds that each poliey of insurance, although a renewal of others, is to be treated as a new poliey, and that the insurer, by consenting to the existence of certain conditions with regard thereto while one poliey of insurance was in force, does not thereby waive any of these rights upon a renewal of that poliey, but has a right to expect full compliance with the terms of the new contract. It seems to me, therefore, that we cannot consider any knowledge by the defendant or any action taken by it, or lack of action, prior to the issuance of the poliey sued on. The latter poliey was a new contract, and the rights of the parties must be determined with relation to it and as to what was done after it became in force. It appears that at the time the poliey sued on was issued, the plaintiff here maintained a watchman service which included, so far as the storage building was concerned, regular visits to two of the watch stations in this building throughout the entire night, and as to the third of the stations in this building, visits for the first three hours of the night. It did not include any inspection of the interior of the building or visits to the watch stations therein on Sundays, holidays, or other days that the plant was not in operation.
We must assume that the inspector for the Southeastern Underwriters’ Association was acquainted with these facts, due to his inspection of the recording dials in the watch clock, and that he was acquainted with these facts after the policy became in force and as late as January, 1932, a few months before the loss. Whether knowledge to this inspector, without further proof that it was brought home to the defendant, binds the defendant, may be an open question, which I do not think it now necessary to comment on. The fact remains that even after the inspector acquired this knowledge in January, 1932, the plaintiff, without informing the defendant and without the defendant being in any way in possession of the knowledge, discontinued all watchman service within the storage building. The service up until that time had not been complete and had not complied with what the- defendant’s witnesses have stated did constitute an approved watchman service; but beginning about February 24,1932, the plaintiff discontinued this service altogether.
Our question then reverts to one of whether or not at the time of the loss the plaintiff was maintaining, in connection with the storage building where the loss occurred, any service that could fairly be stated to come within the provisions of the poliey. Witnesses for the defendant have testified as to what the defendant considered an “approved watchman” service; and while the plaintiff does not give its version of the term, it is evident that the plaintiff had some notion as to what constituted approved watchman service, as shown by the fact that it voluntarily and without instruction did -maintain clock stations within the storage building and that over a long period of time these were regularly visited for at least a part of the night and two of the three of them were regularly visited throughout the night.
Even if we suppose that the character of service maintained prior to February 24‘could be fairly said to be an approved watchman service within the meaning of the poliey, the question arises whether the plaintiff had the right to discontinue that service to the full extent of having no interior inspection of the building at all, and whether a service which *796provided for no inspection of the interior of the building, no visits to the clock stations, and which relied entirely upon an outside gong, could be called an approved service within the terms of the policy.
Even if the inspector, who was acting in the interest of the defendant, had allowed the plaintiff to whittle away a part of what might be called a complete watchman service, did this permit the plaintiff itself, without giving notice to that effect, to do away with the balance of such service ? I do not think so.
While there may be a difference of opinion as to what is to be an approved watehman service, there can be no difference in opinion that no service at all does not come within the terms of the policy; and there is no evidence at all to warrant the contention that the defendant company had any knowledge of the fact that prior to the loss, no visits were being made to any of the watch stations in the storage building and that it was at no time being entered by the watehman.
There is no material dispute in this ease in the evidence. What was done and was not done, by either party appears to be rather clearly established. This being the case, it seems to be neeessary that the court should determine the legal effect of the facts here proved; and upon these facts, I am forced to say that, in my opinion, no watchman service within the terms of the policy was maintained in the storage building at the time of the loss or for approximately a month previous thereto. Even if we say that the more or less imperfect service maintained prior to that time had been approved by the defendant, there is nothing to show that it approved any lesser degree of service or consented to the maintenance of no service at all.
I have thought it improper to allow testimony to the effect that the property was as well protected without the service as it would have been with it, for that would be to substitute the judgment of outside persons for the agreement of the parties. Where the facts are not in dispute, I do not think the jury should be permitted to put its interpretation upon the legal effect or legal result of those facts, nor should I run the risk of having the jury say that an approved watehman service was maintained when, in the opinion of the court, by every proper construction of the terms of the contract and of the law applicable thereto, none such was maintained.
With my present feeling, I would be constrained to set aside any verdict which the jury might render in favor of the plaintiff; and I think it is, therefore, proper that I should assume the responsibility of directing a verdict in favor of the defendant.
On Motion to Set Aside Verdict.
At the trial of this case at the regular January term at Roanoke, a verdict for the defendant was rendered upon the instruction of the court. A motion to set aside the verdict was made and taken for further consideration, and has now been fully and ably argued.
The contention of the plaintiff that the court erred in directing a verdict against it and that the veirdiet should be set aside revolves largely around two points which were stressed in the argument:
1. That the clause in the policy providing* for an approved watchman and clock and approved water motor gong was not a warranty, but merely a representation; that strict compliance therewith was not necessary and that substantial compliance was all that was required. That since the policy did ’ not set forth definitely and specifically the nature, extent, and detail of the service to be maintained, the plaintiff had a right and was required to place its own interpretation upon the meaning of the policy, and to invoke its own judgment as to the nature and extent of the watchman service that was neeessary for the protection of its property. That if the service maintained by the plaintiff was, as it thought, adequate and in substantial compliance with the policy, this was sufficient. And that there should have been submitted to the jury the question of whether there had been a substantial compliance with the clause of the policy relating to watchman service. ■
2. That the defendant had waived its right to deny liability because of an alleged breach of the watehman clause, for the reason that after the loss and with full knowledge of all facts, the defendant had promised to pay the loss insured against.
The first of these contentions was earnestly set forth by the plaintiff during the trial. It was involved in the question of the admissibility of certain evidence offered, and was relied on in the argument in opposition to an instructed verdict. It was, in fact, the eonr tention upon which the whole case largely hinged.
Prior to instructing the verdict, the court read into the record its reasons for believing that such instructed verdict was proper. It stated its view of the law applicable to the case, and why it considered the position token by the plaintiff untenable. Further and careful consideration has not caused me to alter *797tlie views expressed at the time of the trial. And while the opinion then stated was not elaborate or detailed, I find, upon reference to what was then said, that there is little that I can add to it. It may be taken as setting forth the view which I now hold.
The second contention that the defendant had waived its right to deny liability on the policy because it had, subsequent to the loss, and with knowledge of the alleged breach, promised to pay the amount of the loss sustained, was also raised during the trial; but it has now been argued more fully than at that time.
It appears that on March 31, 1982, about a week after the loss, the defendant, by F. G. Tucker, its adjuster, and the plaintiff, by T. C. Coleman, its president, entered into an “Agreement as to Sound Value and Loss or Damage,” the effect of which was to stipulate or agree upon the amount of loss suffered by the plaintiff, but with the express understanding that no liability was fixed thereby and that no conditions or provisions of the policy were waived. The purpose of such agreement seems to be to permit the parties to agree upon the amount of the loss suffered by the insured at a time when the evidence of that loss is freshly before them; at the same time reserving to the insurer its right to deny liability on the contract should investigations develop that for any reason it is not liable.
The policy provided that any loss for which the defendant might be liable should be payable sixty days after proof of loss was received and ascertainment of the loss had been made. After signing the agreement of March 31,1932, fixing the amount of loss, the plaintiff heard nothing more from the defendant company until in June. On June 3, 1932, the. president of the plaintiff corporation wrote to the defendant at its home office in New York, calling attention to the fact that more than sixty days had elapsed since the conference with the adjuster and asking that a check be sent covering the amount of the agreed loss. Some five or six days thereafter the plaintiff received through the mails a post card. This card was a form card used in acknowledging receipts of proofs of loss. Most of the matter thereon was printed, there being blank spaces for the insertion of policy number, dates, names, etc. The contents of this card were as follows (the words italicized were written with pen and ink, the words in capital letters were made with a rubber stamp, and the remaining matter was printed):
“THE HOME INS. CO. Insurance Co.
“59 Maiden Lane
“Telephone John 4 — 5809
“New York.....June 7,1932.....19—
“Dear Sir:
“We are in receipt of your — licA.pf. letter in relation to loss under policy No. 951-967 Coleman Furniture, assured, which occurred on Mch. 25, 32 and the same has been referred Herbert C. Taylor, State Agent, American Nat’l Bank Bldg., Richmond, Va.
“Yours Truly
“THE HOME INS. CO. Insurance Co.
“He will issue draft in payment of loss.”
The signature to this card (THE HOME INS. CO.) is by rubber stamp. The matter written on the lower left-hand comer of the card is with pen and ink, but with no signature or initials to show who actually prepared or mailed the card.
On June 29,1932, after the receipt of this card, the plaintiff was called upon by Mr. Taylor, state agent of the defendant company, in person, and was informed that the company would contest liability on the policy.
The plaintiff contends that this card contains a positive and unconditional promise to pay the amount of the loss, made with full knowledge of the breach of contract upon which the defendant now relies; and that, having made such promise, the defendant has waived its right to rely on such breach.
It appears from the evidence of Herbert C. Taylor, referred to as the state agent for the defendant, that he “supervises the operations of the company's business'in the State of Virginia.” He states that the payment of the loss in question was entirely in his hands, that he issues drafts in payment of losses in the state of Virginia, and that no payment is ever made except by him. That several weeks after this loss he went in person to plaintiff's factory in the course of investigation as to the cause of the loss and there talked with Mr. Coleman, president of the plaintiff company, and obtained certain information from him. He further states that on June 7, 1932, when the post card was sent to the plaintiff in response to Mr. Coleman’s letter asking payment of the loss, the loss had not been approved for payment by him (Taylor) and had not been approved by the home office for any payment by him, and he had not been instructed to pay the loss and was not so instructed at any time. That all “contact” which the plaintiff had as to payment of the *798loss was with him (Taylor) and all correspondence had been with him, and that Mr. Coleman knew that he (Taylor) had charge of the loss at the time Coleman wrote to the home office on June 3, 1932. That some time (the date not determined) after his visit of investigation to the factory in April, Mr. Coleman had ’phoned him about payment of the loss and had been told by Taylor that he was “still investigating” and wanted to investigate further before deciding whether the defendant was liable. That on June 29; 1932, he (Taylor) again visited Mr. Coleman and told the latter that the company denied liability on the policy. The inference from Taylor’s testimony is that, until this latter visit on June 29th, he had no knowledge of the post card sent from the home office on June 7th; although this does not clearly appear.
There seems no doubt that all information relating to the alleged breach of the policy, now relied on as a defense, was in possession of representatives of the defendant company prior to June 7th, the date when the post card ■was mailed. When the post card was sent, they had full knowledge' of the conditions which are now invoked as a defense. •
It is an accepted principle that an insurance company which has, with full knowledge of a breach of a condition of the policy, promised to pay an admitted loss, will be deemed to have waived its right to rely on the breach. But the application of this principle must not overlook other considerations which enter into the law of waiver and estoppel; and those considerations are no different when applied to a promise to pay a loss than when applied to other actions by the insurer relating to other aspects of the contract. There is sound authority for and much force in the view that the insurer is not estopped unless the insured relied upon the action of the insurance company and.that his situation has been changed as a result thereof, and that it would operate as a fraud upon him to allow the insurer to retract or disown its previous conduct.
See Globe Mut. Life Insurance Co. v. Wolff, 95 U. S. 326, 333, 24 L. Ed. 387, where it is said: “The doctrine of waiver, as asserted against insurance companies to avoid the strict'enforcement of conditions' contained in their policies, is only another name for the doctrine of estoppel. It can only be invoked where the conduct of the companies has been such as to induce aetion in reliance upon it, and where it would operate as a fraud upon the assured if they were afterwards allowed to disavow their conduct and enforce the conditions.”
In Lewin v. Telluride Iron Works Co. (C. C. A. 8th Cir.) 272 F. 599, page 598, it is stated that among the indispensable elements of estoppel are the following: “a representation by the party estopped which misleads” and “an innocent and detrimental change of the party asserting the estoppel in reliance upon the representation.”
In the case of Joye v. South Carolina Mut. Ins. Co., 54 S. C. 371, 32 S. E. 446, 447, there seems to have been raised the exact question here involved, where it was contended that a letter written by the president of the insurance company, promising payment of the claim, constituted a waiver of a condition of the breach of which he had knowledge. The court, upholding a directed verdict for the company, said in part: “Again, it was suggested that the president of the company, by his letter to her, dated April 22, 1898, had stated her claim would be paid, and thereby there was a waiver of the right to regard her policy as vitiated by her own act of failing to pay the assessments before the loss by fife. It is quite true, such a letter was written, but it was followed by one some time afterwards, denying all liability. There was no proof that any change in the condition of plaintiff had been the result of the first letter of the president.”
In the case of Phoenix Ins. Co. v. Lawrence, 4 Metc. (Ky.) 9, 81 Am. Dec. 521, the same situation arose, and the lower court instructed the jury that if- the company’s agent, having authority to adjust and pay losses, with knowledge of a breach of a condition of the policy, promised to pay the loss, the verdict should be for the plaintiff. In holding this erroneous, the appellate court says, in part: “Conceding the most ample authority to the agent to bind the defendant, yet, if the policy was void at the time of the fire, there was no consideration for the promise to pay the loss.”
In other words, in order that the waiver by an insurance company of a breach of the policy may be invoked to estop its denial of liability, there must have been some consideration for the waiver in the form of continued business or otherwise, or the insured must have so far acted in reliance upon the conduct of the company as that it would be inequitable to permit the company to disavow its action.
Nothing of the sort exists in the present case. Mr. Coleman, president of the plaintiff company, had talked with Mr. Taylor, the *799state agent, with regard to the loss a few weeks after the loss occurred. He knew that some investigation was being made concerning the loss; and, so far as the evidence discloses, knew that Mr. Taylor was handling the question of this loss. After waiting for some time, Mr. Coleman wrote, not to the man with whom he had had his previous negotiations, but to the home office of the company in New York, requesting payment of the amount of the loss. In response to this letter, he received a form post card stating that the matter had been referred to Mr. Taylor, the state agent at Richmond, Va., the very man with whom he had already been negotiating and who he knew was in charge of the settlement.
In the lower left-hand margin of this same post card there was written in ink the words, “He will issue draft in payment of loss.” The post card was signed with the name of the defendant by a rubber stamp. No attempt has been made to show that this post card was sent by or with the knowledge of any responsible officer of the defendant having authority to make promise of payment; and while it does bear the signature of the defendant in the form stated above, it was quite apparently sent as a matter of routine, and most probably by some clerk in the office, who appended the words written in ink. Indeed, the language of the words alleged to be a promise to pay may be taken to mean simply that Mr. Taylor, the person to whom the claim had been referred, was the person who would issue a draft when the claim was paid. It might simply have been meant to inform Mr. Coleman that any payment to be made would come from the Richmond office and not have been meant to state that the company, after investigation, had decided to and would pay this claim. The indications are that the notation on this post card was due to the mere inadvertence of some clerk in the home office, who made an unhappy choice of words without any real knowledge of the status of the claim which was being entirely handled by the state agent in Richmond.
It may be said that if this is the case, it was incumbent upon the defendant to show these facts and that the plaintiff is entitled to rely upon the statements made in this communication. This may be true, but there is no evidence that he placed any reliance on the post card unless it be merely that after its receipt, he did expect or hope that the loss would be paid. There is no evidence, and no claim is made, that the receipt of this card or his expectation that the claim would be paid in any way altered his situation to his disadvantage or affected him in any way whatever, and which made it inequitable that the company should have, a few weeks later, refused to pay the loss.
Under all of these circumstances, I am of opinion that it would be going far afield to hold that the defendant is now estopped to deny liability on the policy because of the alleged promise to pay contained on the post card in question. After full consideration of the questions raised at the trial and upon the motion to set aside the verdict which was then directed in favor of the defendant, I am of the conclusion that no error was made in directing the verdict; and the motion to set it aside will be overruled. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219039/ | COXE, District Judge.
The principal question in this case is whether the trustee is entitled to the surrender value of various life insurance policies on the life of the bankrupt, payable to his wife as sole beneficiary, with reserved power in the bankrupt to change the beneficiary at will.
It is conceded that section 55-a of the New York Insurance Law (Consol. Laws N. Y. c. 28) has no application, because a considerable portion of the bankrupt’s indebtedness arose prior to March 31, 1927. In re Messinger (C. C. A.) 29 F.(2d) 158, 68 A. L. R. 1205. But it is insisted by the bankrupt that the policies are exempt under section 52 of the New York Domestic Relations Law (Consol. Laws N. Y. c. 14), despite the fact that there is reserved power in the bankrupt to change the beneficiary. The law in this circuit is, however, to the contrary. In re White (C. C. A.) 174 F. 333, 26 L. R. A. (N. S.) 451; In re Samuels (C. C. A.) 254 F. 775; In re Greenberg (C. C. A.) 271 F. 258, 20 A. L. R. 253; In re Messinger, supra. Nor have these cases been overruled by In re Reiter (C. C. A.) 58 F.(2d) 631, although the opinion severely criticizes In re White, supra, and In re Samuels, supra.
It is also urged by the bankrupt that the New York courts have construed section 52 so as to exempt the policy when payable to the wife, irrespective of any reserved power to change the beneficiary; and the main reliance in support of the argument is placed on Wagner v. Thieriot, 203 App. Div. 757, 197 N. Y. S. 560, affirmed without opinion, 236 N. Y. 588, 142 N. E. 295; Chatham Phenix Nat. Bank & Trust Co. v. Crosney, 251 N. Y. 189, 167 N. E. 217, and Maurice v. Travelers’ Ins. Co., 121 Misc. 427, 201 N. Y. S. 369. In Wagner v. Thieriot, supra, the action was by a widow to recover from her deceased husband’s estate the amount which the insurance companies had deducted from various life policies on account of loans made to the husband on the security of the policies; and it was held that under the New York Insurance Law these loans merely lessened the amounts payable on the policies, and that the widow could not recover from her husband’s estate. It is true that, in the opinion in the Appellate Division, Mr. Justice Merrell used language regarding section 52 which is out of harmony with the decisions in this circuit, but this discussion was not necessary to the decision, and I do not think that the affirmance by the Court of Appeals, even, though expressly stated to be on the opinion of the lower court, is to be deemed an authoritative expression on the subject. Chatham Phenix v. Crosney, supra, was a suit brought by creditors against the widow of the insured after the husband’s death; and it was held merely that section 55-a exempted the insurance moneys in the hands of the widow. Maurice v. Travelers’ Ins. Co., supra, decided only that a receiver in supplementary proceedings, appointed by the state court, was not entitled to the cásh surrender value of life policies payable to the wife, even though there was a reserved power in the insured to change the beneficiary. The basis of the decision was that the receiver did not take the reserved power, and that Cohen v. Samuels, 245 U. S. 50, 38 S. Ct. 36, 62 L. Ed. 143, was inapplicable; and, although the opinion considered section 52, I do not think the court’s interpretation of that section is binding. I am satisfied, therefore, that In re White and In re Samuels are still the law of this circuit.
The referee held that the trustee could not proceed against the bankrupt by summary petition, but should be relegated to a plenary suit. It is well settled, however, that the bankrupt court has summary jurisdiction over the bankrupt during the bankruptcy proceedings ; and this summary power continues even after discharge, provided the estate is still open. In re Margolies (C. C. A.) 266 F. 203.
The proceedings, in so far as the Equitable and Fidelity Mutual Companies were concerned, were discontinued by the trustee after those companies had made timely objection to the court’s summary jurisdiction. The John Hancock Company, however, appeared generally, and answered the trustee’s petition on the merits; and this, in effect, constituted a waiver on its part of the summary jurisdiction ; and the subsequent attempt to withdraw was plainly abortive.
It follows that the petition to review is sustained, and the trustee is entitled to a summary order against the bankrupt and the John Hancock Mutual Life Insurance Company, as prayed for in the petition. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219672/ | MOSCOWITZ, District Judge.
On the trial the court ordered a decree in favor of the yachts Virginia and Vanities, and against the schooner T. X. Bentley and tug Stella, and reserved for consideration the question of limitation of liability on the part of the T. K. Bentley.
The captain of the T. K. Bentley had gone ashore. Had he been on board it is not likely that the accident would have occurred.
The captain’s absence cannot prevent limitation of liability on the part of the T. K. Bentley. Even though the absence of the master, pilot, or some other competent person constituted negligence on the part of the T. K. Bentley, the absence of the master and the pilot cannot be charged to the privity and knowledge of the owner.
Settle decree accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219042/ | GALSTON, District Judge.
The bankrupt was adjudged a bankrupt on January 7, 1980. He was denied a discharge by the referee on the ground that he failed to keep books of account or records from which his financial condition and business transactions might be ascertained. There was no finding that such failure or acts were justified in all the circumstances of the ease.
The bankrupt owned all of the capital stock of the Wycombe Realty Company, Inc. That business was closed in 1927, and the personal -indebtedness of the bankrupt arose under leases for premises occupied by the realty company. He seeks to explain his failure to keep books of account on the ground that he owned all of the capital stock, of the real estate company, and that he had no other assets, and hence there was no need for him to keep books of account.
It seems to me that in all the circumstances of the case the bankrupt’s contention is well founded. From the suspension of operations of the realty company and its ensuing bankruptcy, up to the time of the filing of the petition herein, a period of almost three years, there is no showing that the bankrupt was in any calling or occupation which required him to keep books. He was no longer in the real estate business. It appears that at times during those three years he worked as an upholsterer at a salary, and he neither sought nor obtained credit.
In this proceeding there are only two creditors; one, the Tishman Realty & Construction Company, Inc., the objecting creditor, and the other, a sister-in-law of the bankrupt, Minnie Patenande.
The rule of reason must prevail in measuring the requirement of the statute. Karger v. Sandler (C. C. A.) 62 F.(2d) 80, 81, holds no more.
I conclude that in all the circumstances of his occupation and activity during the three years preceding the filing of the petition herein, sufficient justification appears for his failure to keep books of account.
I am therefore unable to agree with the conclusion of the referee, and accordingly deny the motion for an order to confirm his report. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219043/ | NIELDS, District Judge.
July 30, 1930, the motor boat Don, with a cargo of intoxicating liquor, was seized at Fleming’s Landing, in this district, and delivered into the custody of the collector of customs for the eleventh collection district. That district includes not only Delaware, but also South Jersey. Shortly thereafter the vessel was removed for safekeeping to the Coast Guard at Section Base 9 Cape May, N. J.
January 22, 1931, the libel in this cause was filed seeking forfeiture of the Don for violation of sections 4214 and 4377, U. S. R. S. (46 USCA §§ 103, 325), and section 3, title 2 of the National Prohibition Act (27 USCA § 12). Attachment and monition was issued and the marshal made return thereon “I did seize and attach the within named gas screw motor boat * * * and I have cited all persons to appear and assert their claims.” No one appearing, a decree of condemnation and forfeiture was duly entered February 7, 1931.
March 2, 1981, upon petition of the deputy collector of-customs, filed under the provision of the Act of Congress of March 3, 1925 (43 Stat. 1116), an order was entered directing the marshal, in lieu of the sale of the condemned vessel, to deliver her to the deputy collector of customs for use of the United States Coast Guard in enforcement of the customs laws and National Prohibition Act.
November 5, 1932, Wheeler Shipyard, Inc., successor to Wheeler Shipyard, a copartnership, filed a petition in this cause, alleging that Wheeler Shipyard between May and July, 1980, furnished repairs and supplies to the Don in New Jersey and filed its libel against that vessel in the District Court of the United States for the District of New Jersey and obtained a decree in the sum of $4,111.11.
The petition in this cause prays that the proceedings against the Don in this court be opened and reviewed; that the decree of forfeiture be vacated; the petitioner permitted to intervene; and that the motor boat be redelivered to the marshal of this district and sold to pay petitioner’s claim. A petition seeking an order for the return of the Don. to the marshal of the district of New Jersey and an order of sale to satisfy libelant’s claim was filed in the New Jersey proceeding and dismissed. The Don (D. C.) 1 F. Supp. 353.
Petitioner bases its right to intervene upon a purported attachment of the Don by the United States marshal in the district of New Jersey. She was not, however, subject to- attachment at the instance of the libelant in the admiralty proceeding in New Jersey. She had been duly seized here and taken into the custody of the collector of customs. That seizure had not been abandoned. On the contrary, the vessel remained in the custody of the collector of customs pending the disposition of the criminal proceedings against those in charge of her at the time of seizure^ Upon conclusion of those proceedings the libel of forfeiture was filed and the vessel delivered by the collector of customs to the marshal in this district and seized under the attachment issued in this cause. The purport*810ed attachment of the Don in the district of New Jersey was wholly void and of no effect. The court in New Jersey acquired no jurisdiction over the vessel and could acquire none while the vessel remained in the custody of the collector of customs under a valid and lawful seizure. The Whippoorwill (D. C.) 52 F. (2d) 985, The Motor Boat No. L-7869, 21 F. (2d) 594 (C. C. A. 3).
The petitioner is also barred by laches. When the libel was filed in New Jersey, the marshal returned on the attachment “Motor boat Don in custody Coast Guard at Section Base Nine Cape May.” Notwithstanding tbis return, proctors for the libelant in applying for the issuance of an alias attachment stated: “We want the motor boat Don seized in this matter even though the same vessel may have been seized by somebody else.” November 3, 1980, five days before the issuance of the alias attachment and nine days before the service thereof, the proctors for the libelant were informed that libel proceedings by the United States against the Don were not to be filed in New Jersey as the matter came under the Delaware jurisdiction. Proceedings in Delaware were not instituted until January 22, 1931. Libelant was put upon notice and the court will assume that inquiry of the office of the United States Attorney in this district. would have afforded libelant full information as to the seizure of the Don and the contemplated forfeiture proceedings. Petitioner would have had full opportunity to assert its rights in this proceeding before the vessel was forfeited and delivered to the United States.
Leave to intervene must be denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219044/ | INCH, District Judge.
On August 7, 1931, an involuntary petition was filed against the bankrupt and on the 24th day of August, 1931, he was duly adjudicated.
His schedules, filed November 8, 1931, show liabilities: Secured claims $496,783. Unsecured claims $208,424.82. Notes and bills which ought to be paid by other parties $52,945.51. Accommodation paper $202,-751.66, making a total of $960,904.99, while his assets are stated as real estate, value unknown, cash on hand none, debts due $85,-653.58, stock bonds, etc., value unknown, deposit in bank $76.71, property claimed to he exempt $250, making a total of $85,980.29.
On or about April 22, 1932, the bankrupt’s petition for discharge came before the court and specifications of objections were duly filed by certain hank creditors.
The trustee of the bankrupt’s estate was duly authorized by the creditors to object to the discharge, but, beyond noting his appearance in opposition seems to have relied upon the specifications filed by others.
The specifications were duly referred to a referee and proof was taken by him. Several witnesses were presented by the banks, including the introduction of documentary evidence. ‘ The bankrupt likewise was a witness.
The learned referee has dismissed the specifications of objection and recommended the bankrupt’s discharge.
Most of the material facts appear not to he disputed.
In view of the long experience of the referee, I would hesitate to disagree with his conclusions were it not that the consideration of these undisputed facts results, in my opinion, in conclusions contrary to those held by him.
I need only consider one of the specifications of objection filed by the Underwriters Trust Company.
This specification is predicated upon section 14b, subdivision 3 of the Bankruptcy Act, as amended in 1926, 44 Stat. 663, § 6, 11 USCA § 32 (b) (3).
Under this section the bankrupt must he denied his discharge if the evidence shows that he “obtained money or property on credit, or obtained an extension or renewal of credit, by making or publishing, or causing to he made or published, in any manner whatsoever, a materially false statement in writing respecting his financial condition.” It is also provided under the amended act (section 14b (7), 11 USCA § 32 (b) (7), and’pursuant to the proviso therein contained, a creditor has the burden of showing to the satisfaction of the court that “there are reasonable grounds for believing that the bankrupt has committed” this act complained of, and-, having done so, "then the burden of proving that he has not committed any of such acts shall he upon the bankrupt.” In re Tobias (D. C.) 49 F.(2d) 651.
This creditor claims that on February 13, 1931, the bankrupt signed and gave to this hank creditor a written statement, which was materially false, purporting to set forth his assets and liabilities. This statement is as follows:
FINANCIAL STATEMENT
NATHAN STRAUSS
February 2, 1931.
Assets:
Cash in Banks.......................1.... $ 49,500.00
Accounts Receivable..................... 79,300.00
*74,400 Shares Nathan Strauss, Inc., Stock at $9............$669,600.00
100 Nathan Strauss 6% 10 yr. Con. Bonds.................. 60,000.00
Other Securities............... 310,500.00
1,040,100.00
Real Estate Equity...................... 1,574,500.00
$2,743,400.00
Liabilities:
Notes Payable............................. 59,000.00
Net Worth................................. 2,684,400.00
$2,743,400.00
Real Estate Schedule:
Net Equity:
37 Nevins St., Brooklyn, N. Y............. 60,000.00
383-385 Bridge St., Brooklyn, N. Y....... 50,000.00
455 Atlantic Ave., Brooklyn, N. Y....... 25,000.00
524 Carlton Ave., Brooklyn, N. Y......... 10,000.00
Flushing Acreage......................... 250,000.00
Elton Ave., Brooklyn, N. Y............... 6,000.00
24r-165 Puntine St., Jamaica, N. Y....... 12,000.00
99 Water Street, Stapleton, S. 1.......... 45,000.00
114-10 Liberty Ave., Richmond Hill, N. Y...................................... 15,000.00
3% acres,. Flushing, N. Y................. 10,000.00
228 Livingston St., Brooklyn, N. Y....... 45,000.00
119 Willoughby St., Brooklyn, N. Y...... 15,000.00
189 Duffield St., Brooklyn, N. Y.......... 12,000.00
191 Duffield St., Brooklyn, N. Y.......... 7,500.00
626-628 Pacific St., Brooklyn, N. Y....... 30,000.00
79.Bond St., Brooklyn, N. Y.............. 12,00*0.00
245 Bergen St., Brooklyn, N. Y.......... 10,000.00
Cash paid for Leasehold (to run 48 yrs) 426 Fulton St., Jamaica, N. Y.......... 220,000.00
Cash paid for Leasehold (to run 44 yrs) 569 Fulton Street, Brooklyn, N. Y... 200,000.00
Garage Property-Puntine St., Jamaica, N. Y...................................... 40,000.00
Emmons Ave., Sheepshead Bay, N. Y..... 100,000.00
571 Fulton St., Brooklyn, N. Y., Leasehold ...................................... 400,000.00
$1,574,500.00
*Majority Stock of Nathan Strauss, Inc.
Nathan Strauss
February 13, 1931.
Exhibit A
*812The reason for the making and the giving of the above statement was as follows:
During the year 1929 this bank had personally loaned the bankrupt $40,000 taking his promissory note, unsecured. This loan had been on the books since that time and had been reduced from time to time so that on February 2, 1931, it had been reduced to $21,000 and was due on that date.
During the month of January, 1931, the bank, knowing that this note would soon become due, requested the bankrupt to “furnish the bank with an up-to-date financial statement.” The bankrupt did not comply at that time but promised to do so.
When February 2,1931, arrived, the nóte was not renewed by the bank. The bankrupt then attempted to renew it by sending a new note for $20,000 together with a check for $1,100 representing interest and a payment on account. He was told, however, by the bank officials that this “could not be accepted until the statement was given.” The proposed renewal note for $20,000 was returned to him.
Accordingly, on or about February 13, 1931, the bankrupt made and presented to the bank the financial statement above set forth.
An officer of the bank testified that after receiving this statement he gave instructions that the note be renewed. That he made this order based on what “he had observed in the statement and noting the statement of assets and liabilities contained therein.”
There is sufficient evidence in the record, unexplained, to show that, therefore, this renewal or credit was extended to the bankrupt because of the financial statement.
Later, on April 3, 1931, the .bankrupt paid $500, on May 13, $1,500, and on July 2, 1931, about a month before his bankruptcy, $500. The loan remaining unpaid, at the time of the bankruptcy, was $13,500. At this time the bankrupt had less than $100 on deposit in the bank.
No new statement was furnished after February 13, 1931. Gerdes v. Lustgarten, 266 U. S. 321, 45 S. Ct. 107, 69 L. Ed. 309.
The burden of making a prima facie case, under the statute, rested upon the creditor. In re Wolff (D. C.) 11 F.(2d) 293.
It was not sufficient, to make a prima facie ease, simply to show some error or omission in the statement, but facts must also be shown sufficient to reasonably, indicate directly or by reasonable inference, unrebutted, that material error or omission was made in the statement and that- it was intentionally and knowingly false. In re Kerner (C. C. A.) 250 F. 993; In re Smith (D. C.) 232 F. 248.
The learned referee has found that while the statement was untrue, it was not false. He also finds that it did not mislead the bank.
Because of this fact, it has become necessary to carefully examine all the testimony before the referee in order to see whether or not there is some evidence to support such findings.
In the first place there is no dispute that the statement was signed and delivered by the bankrupt and that it purports to relate to his personal liabilities and assets.
The loan and note were his personally.
It would also seem to be plainly shown that credit was extended on and because of the statement.
In fact, counsel for bankrupt, at the close of the hearing, stated, “Yes, I think the testimony is by one of the officials of the Underwriters Trust Company that they extended credit or extended the loans on the basis of the statement. There is no question about it.” The referee then stated that that “phase of it is eliminated from further discussion.”
The bankrupt started in the meat business thirty-five years ago, commencing with a single store. The corporations formed by him accumulated several chains of such stores until he had approximately 224 stores. He testifies: “I worked that business up myself, without owing anybody a dollar, until this misfortune happened in 1929 and everything I had went to pieces.”
He thus started with a single store and later formed a corporation Nathan Strauss, Inc., of which he had control and was president. In 1928 this corporation had 100 stores. Later he acquired another chain of stores called the Strauss-Roth, Inc., of which he also had control, and became president. He also speculated in real estate to a large extent and states that he was interested in approximately forty parcels.
It is evident from the record that this business had expanded rapidly. It required the repeated borrowing of large sums of money, represented by personal loans, indorsement of notes, and the making of notes with other comakers. When the depression arrived, the whole structure collapsed.
The bankrupt testified that he became “very nervous” because of the constant demands and financial worries of keeping this *813business afloat with a steadily increasing storm of financial depression.
It is unnecessary to recite all the details of these efforts on his part, as shown by the record, except to thus refer to them in connection with the obtaining of this renewal of the note in question, which, plainly, was but an incident in his energetic efforts to keep going until better times arrived and to avoid a suit and possible judgment which would have precipitated a crash which he hoped to avert. It was plainly important to him that every creditor be satisfied.
An we are discussing the question of-a prima facie case, such intention or motive appears a reasonable inference in the absence of any evidence to rebut it.
The bankrupt testified: “I did not keep any books. That Mr. Rosenthal looked-after them.” He further states: “I looked to Mr. Rosenthal most of the time to take care of them for me. I don’t think I wrote ten cheeks in my life. Of course, I am a little handicapped in good writing therefore I never use my own writing.”
Taking into consideration the large amount of business being done by his companies, this is not at all unreasonable so far as mere entries affecting the business is concerned. In re Sugarman (D. C.) 3 F. Supp. 502, 23 A. B. R. (N. S.) 184; In re Stafford (D. C.) 226 F. 127.
But, in the case before me we are not dealing with company assets or liabilities, we are dealing with the bankrupt’s personal obligations and personal assets. These are facts, which, in the absence of proof to the contrary, he must be presumed to know. In re Savarese (C. C. A.) 209 F. 830. A mere reliance on a bookkeeper under such circumstances would not suffice.
Moreover, the bankrupt testified: “I instructed Mr. Rosenthal to prepare the statement. I had a conversation with Mr. Rosenthal when he had the statement prepared.” This shows that his attention was called to the statement before it was presented to the bank.
Consequently, this was not a case of inadvertence but a matter apparently of some deliberation. The bankrupt further testified: “We had about fifty statements to sign; we are sending out statements every day for Strauss, Inc., and Strauss-Roth, Inc.” Showing that bankrupt was familiar with financial statements and with their purposes.
However, in answer to his counsel, bankrupt testified in regard to this statement “I felt it was true, I did not intend to mislead, mis-state or over estimate or make a false statement in connection with my financial transaction. I know I was worth that much and in fact more in 1930. In 1931 my assets depreciated some. I think this statement is absolutely true because in my estimation I was worth three times that much.”
The above constitutes practically the explanation of the bankrupt which seems to be that he did not intend to mislead for he was, in his opinion, worth so much more than he owed, that the creditor bank could not possibly have been misled. That he thought the statement to be true.
This view has apparently been followed by the learned referee who says: “I do not believe that the inclusion or the failure to include these obligations would have made any difference. I do not believe that the failure of the bankrupt to list his secured or contingent obligations made this a ‘material false statement.’ ”
The learned referee finds, however, that “none of the real estate listed under the ‘Real Estate Schedule’' was personally owned by the bankrupt.” He finds that “these properties were owned by corporations in which the bankrupt owned a stock interest.” “The values were predicated upon an appraisal, in the main, made by one Joseph M May, in or about 1929, and, in some instances, on actual cost.”
There are other things that could be said about this statement so far as the statement of assets is concerned, but it seems to me that an even more important question arises as to the omission of liabilities. These were personal liabilities.
In regard to this the referee reports as follows: “In the financial statement the bankrupt lists notes payable $59,000.00. The proof shows that, in addition to the note of the Underwriters Trust Company there were three other notes payable and on which bankrupt was directly responsible at the time of the making of the financial statement, the Brooklyn National Bank, $65,000.00, Brooklyn Trust Company, $45,000.00 and Brooklyn National Corporation, $42,160.49, the latter note had had eight other co-makers and was partly secured.”
There were other large obligations also omitted as to which the referee finds: “These obligations consisted of about ten in number, on seven of which the bankrupt was an indorser on notes made by others and the other three were direct obligations of the bankrupt *814but all of which were amply secured by collateral.”
The referee, however, then goes on to say, “I do not believe that the failure of the bankrupt to list his secured or contingent obligations made this a 'materially false statement.’ ” There does not seem to be any such reference to the omission of the first three notes mentioned, aggregating over $150,000, except that the referee apparently decides that as one of the comakers on the Brooklyn National Corporation note of some $42,000, the bankrupt’s responsibility was for only approximately $4,000, a legal conclusion which is not exactly clear to me in the absence of any evidence to that effect.
If we consider, therefore, all of the personal obligations of the bankrupt omitted, both direct and indirect, representing a maker or indorser of notes, we have a deliberate omission from the statement of almost $500,-000. If we consider only his direct personal obligations, excluding the note of this objecting creditor, we have approximately almost half that sum.
It seems to me that the omission of such an amount of personal obligations, in the absence of some explanatory proof to the contrary, is material.
Moreover, the statement makes the additional affirmative statement of “net worth,” which could not possibly be true.
We therefore have the following record: The bankrupt, after refusal to renew and upon request by the creditor, signed personally and delivered to the creditor what purported to be a statement of his financial condition on February 13, 1931. Credit was then extended to him and his notes renewed by the creditor after reading such statement and because of it. The statement was untrue both in regard to assets and liabilities.
If it was “false,” a discharge must be refused. In re Weitzman (D. C.) 11 F.(2d) 897; In re Wolff (D. C.) 11 F.(2d) 293; Morton v. Snider (C. C. A.) 20 F.(2d) 469, 10 A. B. R. (N. S.) 194; In re Kerner (C. C. A.) 250 F. 993.
Reckless indifference to actual facts and with no reasonable ground to believe the statement was in fact correct is insufficient explanation. Morimura, Arai & Co. v. Taback, 279 U. S. 24-33, 49 S. Ct. 212, 73 L. Ed. 586.
Actual knowledge of falsity and conscious intent to deceive are not necessary where bankrupt made no effort to verify facts and did not inquire as to liabilities which he knew were omitted. Woolen Corp. of America v. Gitnig (C. C. A.) 33 F.(2d) 259, 14 A. B. R. (N. S.) 324; In re Perlmutter (D. C.) 256 F. 862; In re Smith (D. C.) 232 F. 248.
The referee has found as follows: “While a reading of the statement might lead one to believe that the bankrupt owned the whole property, yet it does not so set forth.”
With this finding by the referee one might inquire just why any detailed statement was given? If the bankrupt’s position is correct, all he needed to do was to give a statement of “net worth.” He plainly knew this would not be sufficient and so itemized to some extent his assets and liabilities. When he did this, certainly he should have set forth the truth. His failure to do so needs explanation, and, so far as I can see, none was given.
This was not a ease where the facts showed immaterial omissions as in Bolles v. Kelley (C. C. A.) 222 F. 63; In re Rosenfeld (C. C. A.) 262 F. 876 (see dissent of Judge Hough); In re Hargrove (D. C.) 55 F.(2d) 996; Morris Plan Bank v. Henderson (D. C.) 57 F.(2d) 326.
Nor a case where the liabilities were correctly totaled but not itemized. In re Little (C. C. A.) 65 F.(2d) 777.
The referee has found that he did not personally own the real estate although one might think from the statement that he did. In re McGillis (C. C. A.) 40 F.(2d) 268; Swift & Co. v. Fortune (C. C. A.) 287 F. 491; In re Ratner (D. C.) 2 F. Supp. 530; In re Kellerman (D. C.) 2 F. Supp. 530; In re Simon (D. C.) 268 F. 1006.
He omitted material personal obligations and stated “net worth.” In re Maaget (D. C.) 245 F. 804; In re Trimble (C. C. A.) 55 F.(2d) 165.
As Judge Coxe says in Josephs v. Powell & Campbell (C. C. A. 2) 213 F. 627, 628: “Were not those who were asked to extend credit to the bankrupt entitled to know that he owed $13,000 to his relatives?”
There is no proof in the record, that I can find, that the bank knew of these omitted obligations or that they knew sufficient facts as to the assets to justify the inference that such statement of assets or omissions were immaterial and that the credit would have been extended in any event.
This being so, the creditor made out a cáse, which, being unrebutted, requires a denial of the discharge.
The motion to confirm is denied and the discharge denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219045/ | WILLIAM C. COLEMAN, District Judge.
This ease is before the court on a petition by the employer, the Baltimore & Ohio Railroad Company, to set aside, for lack of jurisdiction, an award of the deputy commissioner of the United States employees’ compensation commission for the fourth compensation district, under the Longshoremen’s and Harbor Workers’ Compensation Act (33 U. S. Code § 901 et seq. [33 USCA § 901 et seq.]), to the person found to have been the widow of George M. DeWald, who was drowned under conditions hereinafter referred to. This court has power under the provisions of the Longshoremen’s Act to review compensation awards and to suspend or set them aside in whole or in part “if not in accordance with law.” 33 U. S. Code, § 921 (33 USCA § 921). The deputy commissioner acts as a fact-finding body, and it is the duty of the court to determine whether or not, upon the evidence adduced before the. deputy commissioner, bis award has beep in *816accordance with, law, that is, whether there is any substantial evidence sufficient to justify the finding of the deputy commissioner.
In this ease there is raised initially the question of jurisdiction, which is the sole question now before tins court for review. We must first, therefore, ask and answer these questions: What is the scope of the act? What kind of persons does it embrace, and under what conditions? Judge Soper explained in the case of United States Casualty Company v. Taylor (C. C. A.) 64 F. (2d) 521, page 524, that this act “is applicable only to workmen engaged in maritime employment, and that compensation under the act may lawfully be paid only in those .cases in which a state has no authority to act.” That is a correct abbreviated interpretation of the jurisdictional provisions of the act (33 U. S. Code, § 903 [33 USCA § 903]), which read as follows: “(a) Compensation shall be payable under this chapter in respect of disability .or death of an employee, but only if the disability or death results from an injury occurring upon the navigable waters of the United States (including any dry dock) and if recovery for the disability or death through Workmen’s Compensation proceedings may not validly be provided by State law. No compensation shall be payable in respect of the disability or death of — (1) A master or member of a crew of any vessel, nor any person engaged by the master to load or unload or repair any small vessel under eighteen tons net.” Then follow provisions with which .we are not concerned and which, therefore, need not be quoted.
The evidence discloses, as found by the deputy commissioner, that although there was no eyewitness, DeWald must have been drowned when he accidentally fell overboard from one of the three barges on which he was assigned to work, while they were lying at a pier in Baltimore Harbor. His body was recovered some days later. The drowning of DeWald thus occurred in navigable waters, and therefore the first question which we have to decide is, Was the work in which he was engaged maritime? That can, of course, only be determined by examining the record and considering the character of his work at the time he was drowned.
The statement of the character of De Wald’s work, as contained in the deputy commissioner’s findings of fact, is accurate and sufficiently ample, with perhaps one or two additions. The deputy commissioner found that he was employed as a barge man; that his duties consisted of checking and supervising the loading and unloading of cargo from barges to steamships and vice versa; of seeing that the cargo was safely loaded and unloaded; making a record of all damaged freight, signing receipts for cargo, loaded and unloaded; opening and closing hatches on barges; putting in gangway boards; pumping water out of barges; making lines fast and unfast at docks of alongside vessels when the barges were moved about the harbor; that he lived ashore and reported for work each morning at a specified time to see whether he was needed; that he was given work averaging about three days a week. It was also found that the three barges on which he was employed at the time he met his death by drowning had no motive power, equipment, or steering apparatus, being towed or pushed by tugboats; that their radius of operations was confined to Baltimore Harbor; that when the barges were moved about the harbor the deceased always accompanied them on such trips, which averaged one per day, and that he then had duties to perform with respect to-loading and unloading; that on such trips the deceased was not responsiable for the navigation of the barges and performed no duties in connection with such navigation, except the incidental one of making lines fast and unfast when tying up to docks or alongside vessels. It should be added that the barges were all of about the same model, wooden covered lighters, 180 feet long, 34 feet beam, square ended, flat bottom, with aft deck house.
We must conclude from the aforegoing that what the deceased was doing at the time of the accident was maritime in nature. But such a finding- is not alone sufficient to indicate jurisdiction to entertain a suit under the act. As has been pointed out, there are exceptions to the coverage of the act, and the exception with which we must now concern oursélves is the one above quoted, namely, that “no compensation shall be payable in respect of the disability or death of a master or member of a crew of any vessel.”
Was the deceased a master or member of the crew of these barges as that phrase “master or member of a crew of any vessel” is used or intended to be used in- the act? That he was a seaman seems to be clear. The Supreme Court has held that persons working on barges are seamen. See Ellis v. United States, 206 U. S. 246, 27 S. Ct. 600, 51 L. Ed. 1047, 11 Ann. Cas. 589. But we still have to determine whether, as a seaman working on the barges, he was of the class of persons intended to be included under the *817words “master or member of a crew of any vessel?” Tbe definition of “seaman” is contradictory of the finding that he was of a more superior position, and therefore I think it may be assumed that the facts are not sufficient to warrant a declaration that the deceased was a “master” of a vessel, as that term is used in the act; although it is true that he appears to have been the only person working at the time on these barges, and the only person in charge of them, and therefore his duties may well be said to have been somewhat — even though not exclusively — of the character of a barge master’s duties.
But, however that may be, I find less difficulty in bringing him, by reason of his duties, within the definition of the phrase “crew of any vessel,” as I believe that phrase is intended to be used in the Longshoremen’s Act. The merchant marine act (46 U. S. Code, §§ 688-713 [46 USCA §§ 688-713]) thus defines a seaman: “Every person (apprentices excepted) who shall be employed or engaged to serve in any capacity on board the same [any vessel as previously defined] shall be deemed and taken to be a ‘seaman’ ” (46 USCA § 713). The fact that a stevedore has been declared, under certain conditions, to be a seaman does not fully answer our question, because the rights of that kind of seaman, since the decisions of the Supreme Court determining when a stevedore is a seaman, International Stevedoring Company v. Haverty, 272 U. S. 50, 47 S. Ct. 19, 71 L. Ed. 157, Uravic v. Jarka Company, 282 U. S. 234, 51 S. Ct. 111, 75 L. Ed. 312, have simply been transferred to the Longshoremen’s Act. As was said in the latter case (Page 239 of 282 U. S., 51 S. Ct. 111, 112): “While the section 33 [of the Merchant Marine Act, 46 USCA § 688] is construed to give the rights of seamen to stevedores it does not say or mean that stevedores are to be regarded as seamen on the particular vessel upon which for the moment they happen to be at work.”
Bearing in mind that “within its sphere the statute [Longshoremen’s Act] was designed to accomplish the same general purpose as the Workmen’s Compensation Laws of the states,” and as such is constitutional (Crowell v. Benson, 285 U. S. 22, 40, 52 S. Ct. 285, 288, 76 L. Ed. 598), we must now answer the question whether or not what the deceased did really brings him within the generally accepted term of a “member of a crew of any vessel,” and I believe this question must be answered in the affirmative, because what he did seems to me to have partaken more of the duties of one charged with the general safety and control of these barges while afloat and in use, whether under way, or at anchor or at dock or pier, rather than of the duties of one charged merely with acting in the capacity of a watchman, or helper, or stevedore, whose work has no direct application to navigation, crude and unskilled as the duties of the deceased were. It was his duty to operate the pumps on the barges, to attend to the hatches, to make lines fast and unfast at docks or alongside of other vessels. He was the crew, the “ship’s company,” albeit he was its solitary member, and while he had other duties which did not admittedly partake of the character of those of a member of the crew of a vessel in any direct sense, nevertheless most, if not all, of these other duties were perhaps not very different from what the master or a member of the crew of the average small vessel might be called upon to' do with respect to the cargo. In short, I am inclined to adopt a rather broad definition of the phrase “member of a crew of any vessel,” as used in the act. Nor do I think that such construction does violence to the definition that has been given to the word “crew” by the weight of the decisions rendered before the passage of this act, and which we must assume was in the minds of those who drafted it, namely, all persons on board who, together with the master, constitute the ship’s company. See U. S. v. Winn, Fed. Cas. No. 16,740; The Bound Brook (D. C.) 146 F. 160; Saylor v. Taylor (C. C. A.) 77 F. 476; The Buena Ventura (D. C.) 243 F. 797; Leary Const. Co. v. Matson (C. C. A.) 272 F. 461.
If it were not common for some person to be employed on barges of this sort in connection with their custody or control or management while in navigable waters, I think the argument would be considerably strengthened that the deceased in the present ease was not the crew, and then he would fall more within the class of persons intended to be included in the operation of the act. See the very recent case of Seneca Washed Gravel Corporation v. McManigal (C. C. A.) 65 F.(2d) 779. There the court found that the person who had charge of the vessel was nothing but a night watchman; that he did nothing that assisted in any way in the navigation of the vessel; and that as a matter of fact the vessel was not actually in navigation at the time.
In conclusion, suffice it to say, I think in the present ease it is clear from the duties performed by the deceased that he may properly be considered as falling within the term “crew” as that word is used in the Long*818shoremen’s Act. That being true, I find that this court is without jurisdiction to allow an award under that act, and that the claimant is relegated to such rights, if any, which she may have under the merchant marine act (46 U. S. Code, §§ 688-713 [46 USCA §§ 688-713]).
I will sign an order in conformity with this opinion. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219046/ | TAYLOR, District Judge.
This suit attacks the validity of the National Industrial Recovery Act, 48 Stat. 195 (to be hereinafter called act), and the Code of Fair Competition for the Underwear and' Allied Products Manufacturing Industry, as approved on September 18th and made effective October 2,1933 (to be hereinafter called code).
The original bill was amended and supplemented October 9th by consent of the parties, and notice and motion for temporary restraining order and interlocutory injunction pendente lite waived, and the matter set for hearing October 21st.
At this hearing, the defendant J. B. Frazier, Jr., moved to dismiss the bill as amended and supplemented, upon the ground that no facts are alleged therein showing legal injury to the complainant, threatened or otherwise, entitling him to maintain the suit.
After argument in behalf of the defendant J. B. Frazier, Jr., in support of the motion to dismiss and in behalf of the complainant in opposition thereto, the court desiring to give the question presented further consideration before decision, counsel for the last-mentioned parties agreed to also argue the questions raised by the motion for temporary restraining order and interlocutory injunction pendente lite, which was done. The defendant Southern Silk Mills was represented at the hearing by counsel, who did not participate in the argument of either motion. 'That defendant filed no pleading.
The sole question before me on the motion to dismiss is whether the bill of complaint states legal injuries to the complainant, threatened or otherwise, which entitle him to maintain the suit. For the purpose of this motion, the invalidity of the statute and code adopted pursuant thereto must be assumed. It is unquestionably true, and was conceded in argument, that any manufacturer in the industry directly and adversely affected by the code might in a proper proceeding test the validity of the act. The question whether the complainant may maintain the suit depends upon whether the act and the code undertake to operate directly upon his employment and his freedom to contract with respect thereto.
What the aet authorizes and what the code provides, as set forth in the bill, and attacked as invalid because unconstitutional, is part III of the code, which provides:
“1. No sewing machine shall be operated for more than one (1) shift of forty (40) hours per week.
“2. No knitting machine shall be operated for more than two (2) shifts of forty (40) hours per week.”
*819The complainant, a dyer formerly in the employ of the defendant silk mills, aptly pleads that these provisions resulted in his loss of employment; that but for them he would be re-employed at a wage satisfactory to himself and his former employer; that the defendant silk mills, before the code became effective, operated its machines for a much longer period of time than permitted under the code, and would continue to do so but for the provisions of the code; that the shortening of hours of use of the machines required by the code resulted necessarily in complainant’s loss of position, since the defendant silk mills was financially unable to purchase other machines, and that in any event a compliance with this provision of the code would be economically unsound by reason of facts pleaded; that no other causes contributed to his loss of position, and that he remains unemployed “solely because of the application of part III of the Code to defendant Southern Silk Mills, and of fear on the part of said employer of prosecution under said part III of the Code, and of the Act.” The bill further alleges, “that except for the coercion incident to prosecution under said void and invalid Code and Act, Southern Silk Mills would, and if such coercion is removed, will resume operations on its machines as before October 2, 1933, and employ complainant as a dyer,” at his former wages, or at wages provided by said code, “all of which complainant and defendant Southern Silk Mills desires to do, but of which right to contract complainant is denied by reason of the coercion” of threatened prosecution under the act and code.
The relief prayed in the bills is a temporary restraining order and an interlocutory injunction pendente lite enjoining the defendant United States attorney from enforcing part III of the code by prosecution or otherwise, as against the defendant Southern Silk Mills, and for an injunction against the defendant Southern Silk Mills from complying with part III of the code solely because of fear of criminal prosecution thereunder, and for the removal of all coercion. There are also allegations in the bill pointing out specifically the injury that will follow operation of the provisions of the code to others in whose behalf the complainant sues. Those allegations are certainly immaterial to a determination of the question raised by the motion to dismiss. The right to raise a constitutional question is not dependent upon volume. It must be personal and direct.
Nothing in the act or in the code provision complained of expressly operates upon the right of the employer defendant, Southern Silk Mills, to employ complainant or any other necessary or even unnecessary labor. In Truax v. Raich, 239 U. S. 33, 36 S. Ct. 7, 8, 60 L. Ed. 131, L. R. A. 1916D, 545, Ann. Cas. 1917B, 283, Raich, an alien, was about to be discharged by his employer because the employer had in his employ less than 80 per cent, qualified electors or native-born citizens of the United States or some subdivision thereof. An unconstitutional act of the state of Arizona undertaking to protect citizens of the United States in their employment against noncitizens of .the United States, in Arizona, penalized the employment of less than 80 per cent, of such citizens. After the adoption of the act, “Raich was informed by his employer that when the law was proclaimed, and solely by reason of its requirements and because of the fear of the penalties that would be incurred in case of its violation, he would be discharged.” Raich’s bill was grounded upon this situation, and its allegations were not controverted. Among other defenses interposed, it was asserted that the “plaintiff was not entitled to sue for the relief asked.” It was urged that the employer only, he being the one threatened with prosecution, might maintain the suit. This contention was overruled by the court in this language: “The discrimination against aliens in the wide range of employments to which the act relates is made an end in itself, and thus the authority to deny to aliens, upon the mere fact of their alienage, the right to obtain support in the ordinary fields of labor, is necessarily involved.” Truax v. Raich, supra, pages 41, 42 of 239 U. S., 36 S. Ct. 7, 10.
In Herbring v. Lee, Insurance Commissioner of Oregon, 280 U. S. 111, 50 S. Ct. 49, 51, 74 L. Ed. 217, 64 A. L. R. 1430, an act of Oregon was assailed as unconstitutional upon the ground that it forbade foreign insurance companies to do business other than through licensed local agents and restricting the number of such agents to two in each city of the state having more than a certain population, unless and until such company should apply to the insurance commissioner therefor and pay a license fee of $500 for such additional agent. Herbring was offered employment as an agent to represent the insurance company in the city of Portland. Under the statute, Lee, the insurance commissioner, declined to issue the license because the nonresident company declined to pay the additional $500 license fee. Herbring brought suit *820against Lee attacking the constitutionality of the act and seeking to require the issuance of his license without compliance with the statute. In this case the exact question presented in the case at bar was not before the court, but the court in passing over that insistence used this language:
“The appellant also urges in argument, that ‘if the statute be regarded as a corporate regulation, rather than as an individual prohibition, it is unconstitutional, in that it is unreasonable, arbitrary and capricious’ and cannot be sustained under the police power of the State. In other words, he seeks in argument to challenge the validity of the statute on the ground that it is an infringement of the Company’s constitutional right to appoint an additional agent. The Company itself is not here insisting that the statute constitutes an impairment of its own right; it raised no such question before the Commissioner, and for aught that appears acquiesced in that officer’s view of the validity of the statute.
“It may well be that under the facts in this case Herbring’s individual interest in this question is not direct but merely collateral and remote and not such as would have entitled him to challenge the constitutional validity of the statute on the ground that it is an impairment of the Company’s own rights.”
In that case, as in the case at bar, the statute complained of was the sole reason why complainant could not be employed. While the language quoted is obiter dietum, it is an expresión upon facts more nearly like the facts of the case at bar than any revealed in the eases decided by the Supreme Court which have been cited or which I have been able to examine.
I think the true test is whether the invalid statute, or, as in this ease, the invalid statute and code adopted thereunder, were intended to, and necessarily operate to, infringe the rights of complainant. In the Truax Case, as it will be noted from the quotation therefrom hereinabove, the court sustained -Raich’s right to maintain the action upon the ground that the right was “necessarily involved”; that the discrimination complained of was “made an end in itself.”-
In the instant ease I think the right is legally remote and indirect, and not necessarily involved by the assailed act or the code. I do not think it was intended by the Congress, in authorizing the limitation of the hours of use of machines, to deprive dyers of their employment or right to contract with respect thereto any more than to interfere with the manufacturers of dyes to be used in the process or furnishers of materials to be operated upon by the machines, or the manufacturers of boxes within which to pack for shipment the manufactured products, or any other person remotely affected by incidental curtailment of production. Neither the act nor the code expressly or necessarily required the defendant silk mills to discharge complainant. The relationship of employer and employee was not the subject-matter or “made an end in itself,” nor does either necessarily prevent his being re-employed. No such result being intended or legally necessarily involved, I am of opinion complainant is not entitled to maintain his action.
An order dismissing the suit may be lodged with the clerk or agreed to for approval and entry. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219047/ | CAMPBELL, District Judge.
This suit is brought to recover on a marine insurance policy for damages caused by the explosion on and sinking of motorboat Wheeler Shipyard Hull No. 304, alleged to be covered by said policy.
I find the facts as follows:
At all the times hereinafter mentioned and at the time of the trial, the libelants Edith Wheeler, E. Lawrence Wheeler, and Wesley I. Wheeler were partners doing business under the firm name and style of Wheeler Shipyard, having "their principal office and shipyard on Coney Island 'creek, at the foot of Harway avenue, borough' of Brooklyn, city and state of New York, within this district.
At all of said times the respondent ¿Etna Insurance Company was a corporation organized and existing under and by virtue of the laws of the state of Connecticut, having been duly authorized to transact business in the state of New York, and having an office for the transaction of such business at 149' Pierrepont street, borough of Brooklyn, city and state of New York, within this district.
At all of said times the libelants were the owners of the motorboat Wheeler Shipyard Hull No. 304.
On or about November 12,1929, in consideration of a premium of one-quarter per cent., to wit, the sum of $28.75, duly paid to the respondent by libelants, said respondent issued to libelants its policy of insurance No. Y 62871, for $11,500 agreed value, loss, if any, payable to libelants and/or any owner or owners of the vessel, as interest may appear at the time of the happening of the loss, or order, covering said libelants from November 12,1929, to December 12,1929, upon said motorboat Wheeler Shipyard Hull No. 304, and from time to time thereafter, the libelants paid to the respondent certain further additional premiums, in consideration of which said respondent, among other things, extended the period of said policy to a time not later than June 12, 1930.
The policy as issued was a builders’ risk policy, and contained, among others, the following terms and provisions:
“Ætna Insurance Company by this policy of insurance do make insurance and cause Wheeler Shipyard for account of themselves, loss, if any, payable to them or order, to be insured for the sum of Eleven thousand, five hundred dollars ($11,500), upon the good hull called No. 304, her body, tackle, apparel, stores, supplies, furniture, engines, boilers, machinery and appurtenances. * * *
“It is also agreed that this policy shall become void, if any other insurance is or shall be made, upon the interest hereby insured, which together with this insurance shall exceed the sum of - dollars. * * * Touching the adventures and perils which we, the said assurers, are contented to bear and take upon us, they are of the seas, men-of-war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisals, takings at sea, arrests, restraints and detainments of all kings, princes and people, of what nation, condition or quality soever, barratry of the master and mariners, and all other perils, losses and misfortunes that have or shall come to the hurt, detriment or damage of the said ship, &e., or any part thereof, a » * With leave to sail with or without pilots, to tow and be towed, and to assist vessels and/or craft in all situations and to any extent, and to go on trial^ trips. With liberty to discharge, exchange and take on hoard goods, specie, passengers and stores, wherever the vessel may call at or proceed to, and with liberty to carry goods, live cattle, &e., on deck or otherwise, but warranted free of any claim in respect of deck cargo. • • *
*822“Clauses for Builders’ Risks.
“This insurance is also to cover all risks, including fire, while under construction and/or fitting out, including materials in buildings, workshops, yards and docks of the assured, or on quays, pontoons, craft, &c., and all risk'while in transit to and from the works and/or the vessel wherever she may be lying, also all risks of loss or damage through collapse of supports or ways from any cause whatever, and all risks of launching and breakage of the ways.
“This insurance is also to cover all risks of trial trips, loaded or otherwise, as often as required, and all risks whilst proceeding to and returning from the trial course, but warranted that all trials, and proceeding to and returning therefrom, shall be carried out within a distance by water of 100 nautical miles of the place of construction or held covered at a rate to be arranged. * * *
“In the event of deviation to be held covered at an additional premium to be hereafter arranged. * * *
“The words ‘owner’ and ‘assured’ as used in this policy shall be interpreted to mean either ‘builder’ or ‘owner’ or both.”
The policy by successive indorsements and payment of additional premiums was in force on May 6, 1930, and the libelants by their broker informed the respondent of their desire to send the said motorboat by water to Syracuse, and to have it covered on said voyage by said policy.
In consideration of an additional premium of $57.50’, the said respondent, on May 6, 1980, made the following indorsement on said policy: “In consideration of an additional premium as noted hereon, this insurance is extended to cover the above vessel for one trip by water from the yard of the assured via any port or place to Syracuse, N. Y. sailing on or about May 6th, 1930 against the perils covered by this policy.”
The motorboat left Brooklyn, N. Y., bound for Syracuse, in charge of an employee of the libelants, and on May 9, 1930, was taken in charge from him by Capt. Brown, an employee of the libelants.
Between Brooklyn and Albany the said motorboat suffered damages from striking a submerged object, a notice of which was given in writing by the broker of the libelants to the respondent on May 16,1930', formal proof of which damage was later made by libelants and paid to them by respondent.
The motorboat was taken to Watervliet, where repairs were made, and she then continued on her voyage. '
The boat never went to Syracuse proper, but was taken to Brewerton, at the western end of Oneida Lake, 14 miles from Syracuse, by automobile, where the libelants had their boathouse, where she arrived before May 16, 1930, and where her engine was taken out of her for the making of repairs.
On May 16, 1930’, on the payment of an additional premium of $28.75 by libelants to respondent, and.with knowledge of the loeartion of the motorboat, the said respondent made the following indorsement on said policy: “It is understood and agreed that this insurance covers this vessel whilst at Brooklyn, N. Y. and/or Syracuse, N. Y., and that this policy is extended for a further period of one month, or until June 12th, 1930', Noon.”
Shortly after the arrival of the motorboat at Brewerton, further repairs were made on the engines, which were taken out and reinstalled. Thereafter a trial trip was made, Lewis Rapp, an employee of the libelants, piloting the boat, and Capt. Brown, another employee of the libelants, and the mechanic who had made the repairs being on board.
The noise in the engine, which had been the cause of the taking out at Brewerton, was still heard, but the mechanic told them to take it easy, and that by running it slow gradually the noise would disappear.
After being out about three-quarters of an hour or more, the boat was taken back and tied up at the libelants’ dock.
The witness Rapp was to take another boat of the libelants known as the 36-footer, a single cabin boat, to Ithaca, for the Cornell University boat races to be held there, and on May 20th he started in that boat from Brewerton bound for Ithaca.
Capt. Brown took the No. 304 and went ahead. They ran very slowly from Brewer-ton to Baldwinsville, where they tied up for the night.
The next morning, about 9 or 9:30 o’clock, Mrs. Brown, Mrs. Valentine, and Miss Mary Lee Valentine boarded the No. 304, and the boats proceeded as before, the No. 304 leading during that day, and in the evening docked at Cayuga village behind the breakwater, at the end of Cayuga Lake.
The next day they proceeded down the lake to Ithaca.
*823On Saturday morning, May 24th, both the 36-footer and the No. 304 were in the canal at Buffalo Street bridge, Ithaca.
A Mr. Reamer and his chauffeur came down, and on the orders of Capt. Brown the witness Rapp took them out in the 36-footer for a demonstration.
Capt. Brown had placed the No. 304 next to the Students’ Transfer and made arrangements for the gas wagon to come down and fill up the tanks of the No. 304.
The tanks of the No. 304 were filled with gas.
When the witness Rapp returned, the No. 304 had suffered from an explosion. He turned the wreck of the No. 304 around facing her the other way, so that when she was pulled out she would not interfere with the Students’ Transfer.
A number of those on board the No. 304 were injured by the explosion.
A survey was held of the No. 304, and the salvage value of the No. 304 was fixed at $1,-000, the surveyor for the respondent signing without prejudice, for account of whom it may concern, and that his agreement to the foregoing measure of salvageable value was not to be construed as an admission of liability under any policy of insurance which might pertain to the property involved.
In February, March, and April, 1930, Capt. Brown offered to persons acting on behalf of Cornell University Athletic Association the use of a 40-footer which he expected to have by the time of the races.
The No. 304 was taken to Ithaca for demonstration, not on a trial trip.
From the facts as found, there is no liability established on the part of the respondent.
The contract of insurance in this case consists of the policy and all the indorsements, and must be construed by the court as a whole liberally to accomplish the intent of the parties under the peculiar circumstances of the case, and not on the basis of the meaning customarily ascribed to certain words in exclusively builders’ risks policies, and with the purpose of preventing a forfeiture, if possible. Wright v. Ætna Life Ins. Co. (C. C. A.) 10 F.(2d) 281, 46 A. L. R. 225; Ætna Ins. Co. v. Houston Oil & Transport Co. (C. C. A.) 49 F.(2d) 121; Marine Ins. Co. v. McLanahan (C. C. A.) 290 F. 685; Fireman’s Fund Ins. Co. v. Globe Nav. Co. (C. C. A.) 236 F. 618; Thompson v. Phenix Ins. Co., 136 U. S. 287, 10 S. Ct. 1019, 34 L. Ed. 408.
The policy as originally written did not cover voyages but only trial trips within 100 miles of Brooklyn, N. Y.
This did not mean demonstrations as distinguished from trial trips, which were to test out the running of the boat to ascertain if she was satisfactorily completed, but such trial trips did not lose their character as trial trips simply because a prospective purchaser or purchasers were taken on such trips. The test, as I see it, was that the trips that were covered were those taken to test the boat to determine if she was satisfactorily completed, and not pleasure trips or trips to demonstrate the boat to secure a purchaser.
No damage was sustained while- the boat was at Brooklyn, N. Y., and no question of the termination of the policy while the boat was at Brooklyn, N. Y., is presented, as the policy was continued in force by. subsequent indorsements.
By the indorsement of May 6, 1930, the nature of the contract was changed, as that indorsement was not for a trial trip within 100 miles of Brooklyn, N. Y., but for a trip by water from the yard of the assured via any port or place to Syracuse, N. Y., sailing on or about May 6,1930, against the perils covered by the policy.
On the evidence I am satisfied that the boat never went to Syracuse; on the contrary, the evidence of the witness Rapp is that she went to the boathouse and dock of the libelants at Brewerton, 14 miles from Syracuse.
This was obviously the end of the trip covered by that indorsement. While the boat was at that dock, the libelants’ representative caused repairs to be made to the engine of the boat, and, while the boat was at Brewerton, the libelants procured the last indorsement showing that the trip to Syracuse had been completed.
It is not of moment that the indorsements in question may have been prepared by the broker of the libelants, as they were accepted by the respondent and must be construed more strongly against it. Bushey & Sons v. American Ins. Co., 237 N. Y. 24, 142 N. E. 340.
On the trip and between Brooklyn and Albany the No. 304 suffered damage by striking a submerged object, notice of which was given to the respondent, and for which the respondent subsequently made payment.
On May 16, 1930, while the No. 304, to the knowledge of libelants, was lying at Brewerton undergoing repairs to her engine, and to *824the knowledge of the respondent she had been permitted to make a trip to Syracuse, the respondent for a further consideration by way of additional premium made the following indorsement on said policy: “It is understood and agreed that this insurance covers this vessel whilst at Brooklyn, N. Y. and/or Syracuse, N. Y. and that this policy is extended for a further period of one month, or until June 12, 1930, Noon.”
In the light of the knowledge possessed by both libelants and respondent, it seems to me that the parties could have intended by that indorsement but one thing, and that was to substitute Syracuse for Brooklyn as the base from which the area in which trial trips were to be covered by the policy.
In other words, Syracuse was to be substituted for Brooklyn, N. Y., the place of construction, or held covered as provided in the policy.
No evidence was offered by the respondent which in any way negatives that construction.
Such a construction gives a meaning to all of the provisions of the policy and indorsements, and it was for this that the additional premium was paid.
The boat having been allowed to make the trip from Brooklyn to Syracuse, the last indorsement would be meaningless, unless it be held to cover trial trips to determine whether it had been satisfactorily completed, and, as the boat received damages on the way, as the result of which or of the repairs made there was a knock in the engine which was repaired at Brewerton, the parties by such last indorsement intended to cover any trial trip or trips necessary to determine if the boat was satisfactorily completed. The indorsement, however, did not extend coverage to demonstration or pleasure trips.
The trip of the mechanic, the witness Rapp, and Capt. Brown was such a trial trip.
A trip to Baldwinsville and return might have been such a trial trip, if taken for the purpose of determining if the engine repairs were satisfactory, even though the mechanic had so reported them and said all that was needed was to run the boat easy for a time.
This leaves for consideration but one question, viz., What was the nature of the trip the No. 304 was on at the time of the explosion?
The trip with Capt. Brown and his wife and their guests on board, from Baldwinsville to Ithaca, was not a trial trip, but was taken to demonstrate the boat, and to enjoy the boat races of Cornell University.
This is shown by the use made of the No. 304 while at Ithaca, as appears by the testimony of the witness Rapp. A trip for demonstration and pleasure was not a trial trip, and was not covered by the policy of insurance in question.
I find as conclusions of law:
That by the policy of insurance in question issued by the respondent to the libelants upon the motorboat Wheeler Shipyard Hull No. 304, the said motorboat after May 16, 1930, when she was at Brewerton, was covered on trips only that were trial trips taken for the purpose of determining if the boat was satisfactorily completed.
That the trip of the motorboat on which she was destroyed by explosion was not a trial trip, but was a trip taken to demonstrate the boat for possible purchasers at the Cornell University boat races at Ithaca, and to enjoy the races.
That the libelants have failed to show by a fair preponderance of the evidence that the said motorboat No. 304 was covered by the said policy of insurance at the time of the explosion, or that any loss therefor of the libelants is payable to them from the respondent under the terms of said policy.
The respondent is entitled to a decree against the libelants dismissing the libel, with costs.
A decree may be entered iñ accordance with this opinion.
Settle decree on notice.
If this opinion is not considered a sufficient compliance with rule 46% of the Rules in Admiralty (28 USCA § 723), proposed findings of fact and conclusions of law in accordance with this opinion may be submitted for the assistance of the court, as provided by the rules of this court. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219048/ | LINDLEY, District Judge.
Petitioners, claiming to be the owners of paid-up policies in the Security Life Insurance Company of America, have filed their motion for leave to intervene and to file a petition of intervention. The end sought is the vacation of an order of this court approving certain amendments to the contract of reinsurance hereinafter mentioned.
A receiver was appointed herein for the Security Life Insurance Company of America (hereinafter termed the Security) on April 18, 1932. The first action of the court and its receiver was to determine whether or not there was any possibility of reorganization of the company beneficial to the parties in interest. After careful investigation and full consideration of this matter, it became evident that no such possibility existed. The reserves were so impaired and depleted that under then existing industrial and financial conditions of the country, the additional capital necessary to any such reorganization could not be procured.
Realizing that the condition of the estate was such that the only parties in interest who could derive any benefit from the court’s administration were the policyholders and that delay in attempting to make provision for protection of such beneficiaries might produce irreparable damage to them, the court immediately directed that proposed contracts of reinsurance be solicited. After thorough advertisement in approved channels, various contracts were tendered to the receiver. These were submitted to actuaries, not only of the Security but also of one of the well-known companies of the United States who was not a bidder, blindly, without the names of the respective bidders being disclosed. The tendered contracts were submitted in the same form to the court and to counsel for the receiver. After analysis of the various proposals had been made by counsel, and the reports of the actuaries upon the same re*826ceived and considered, the court directed the acceptance of that bid which as a result of the investigation it was apparent was for the best interest of Che policyholders. Such bid proved to be that of the Central life Insurance Company of Illinois, (hereinafter termed the Central). The original proposals, however, were none of them in form satisfactory to the court and supplements thereto were directed to be and were filed.
Under the law of Illinois, insurance companies are subject to regulation by the insurance departmental officers (heretofore in the department of trade and commerce) and contracts of reinsurance must be approved thereby. The contract was submitted to the state authorities shortly after its approval by this court on August 15, 1932, and the matter was pending with them until on 'November 14, 1932, after the amendments, now in question, were authorized by the court, the department approved the contract as amended. Whether the department requested the amendments to the contract or whether the request originated with the insurance company is immaterial. The fact is that not until the so-called clarifying amendments had been approved by the court and filed with the department was final approval given by the state authorities. Until that time the contract was not effective inasmuch as it had not been approved by the state of Illinois, and the re-insurer had no right to proceed with the performance thereof.
The original contract contemplated that there might be occasion for amendments thereto, and accordingly contained provision therefor. Some time after the original contract had been approved and before final approval by the state authorities, the Central filed with the court its petition for leave to amend the contract, wherein it was represented that the original contract had been filed with the state authorities and tentatively but not finally approved, and that in the interest of clarity, and to avoid all ambiguity and uncertainty in the first paragraph, it was necessary that certain clarifying amendments be adopted. As authorized by the court and submitted to the state authorities in the original draft, the parts of paragraph first material in the present situation were as follows:
“Central agrees to and does hereby rein-sure and assume all policies of insurance of the Security in force on April 18, 1932, including all annuity and/or supplementary contracts and all policies reinsured by it and extended term and paid up insurance in force by their terms on said date, and (except as iherein provided) to carry out all the provisions and agreements contained in said policies subject to any and all defenses against claims under or actions upon said policies which Security rightfully might have asserted had this contract not been made and subject to the lien hereinafter specified. * * * ’*
“As part of the consideration moving the Central to execute this contract and to assume the liabilities herein assumed there is hereby established and placed against each policy and contract reinsured and assumed by Central hereunder a lien equal to the full legal reserve thereof (including dividend and coupon additions and accumulations and an adequate reserve for disability and double indemnity benefits, if any) as such reserve has been or under the laws of the State of Illinois should have been established and carried by the Security on the 18th day of April, 1932. The amount of such lien shall bear interest at the rate of 5 % per annum, compounded annually, both the lien as reduced from time to time as hereinafter provided and the interest thereon (which interest shall be a part of said lien) to be deducted from any payment made by Central pursuant to the terms of said policies and from any settlement made thereunder and from the values used to establish any paid up on extended insurance on any policy of the Security as of April 18, 1932, or thereafter, and from any loan thereon and from any other disbursement required by the terms of said policies, if any, except as otherwise hereinafter expressly provided. * * * ”
It was suggested to the court that an ambiguity arose upon the face of the contract with regard to paid-up policies. The court at that time again examined the original contract and after examination announced that in its opinion there was no ambiguity in the original contract; that it was the intention of the court that all policyholders should share pro rata in the liquidation of the assets of the Security and that it was not the intention of the court that paid-up policyholders should be paid in full, whereas present premium paying policies should receive only pro rata share of the remaining assets, and that in the opinion of the court the proper construction of the original contract was to the effect that there was a lien imposed against all paid-up policies to the extent of their share in the reserve of the company, and that any reinsurance thereof by the Central would mean that the latter company would receive from the trustees the pro rata shares of the liquidating assets of the Security to be applied against the liens upon the paid-*827up policies thus reinsured. In other words, the court never contemplated that there should be an advantage to paid-up policies over other policies. They were no longer capable of growth, but were for fixed amounts, matured in character, liquidated liabilities.
For these reasons the court believed that the amendments were not ne'cessary, but at the insistence of the parties, upon their contention that though they agreed with the court, the amendments would achieve no different result but would clarify the meaning, an order was entered authorizing certain amendments by virtue of which the portion of the second paragraph above quoted beginning with the word “as” and ending with the word “provided” was altered. The first part of paragraph first, set forth above, was altered to read as follows: “Central agrees to and does hereby reinsure and assume all policies of insurance of the Security in force on April 18, 1932, including ■ all annuity and/or supplementary contracts and all policies reinsured by it in force by their terms on said date (except extended term and paid up insurance and all claims under or in connection with same which shall be handled and/or paid by Central from proceeds of liquidation as directed by the Trustees hereinafter mentioned in a like manner as provided in Paragraph Ninth hereof with respect to policy claims and rights not specifically mentioned therein) and, except as herein otherwisé provided, to carry out all the provisions and agreements contained in said policies, subject to any and all defenses against claims under or actions upon said policies which Security rightfully might have asserted had this contract not been made and subject to the lien hereinafter specified.”
Furthermore, a portion of paragraph eighth in the original contract, as follows: “In the event of the death of an assured on or after April 18, 1932, and while his or her policy is in force, Central shall waive said Hen or any balance thereof then remaining, upon the relinquishment by the beneficiaries of any claims to future proceeds of liquidation and the waiving of all claims against the Trustees, the Receiver, Security and Central,” was replaced with an amended paragraph reading as follows: “In the event of the death of an assured on or after April 18, 1932, and while his or her policy is in force on a premium paying basis, Central shaH waive said Hen (but no accrued interest thereon) or any balance thereof then remaining, upon the relinquishment by the beneficiaries of any claims to future proceeds of Hquidation and the waiving of aH claims against the Trustees, the Receiver, Security and Central.”
These amendments were then submitted to the state authorities, and on November 14, 1932, the contract as amended was approved by the state department and for the first time became a binding and effective contract of reinsurance under the law of the state of Illinois. Not until this approval was had could the Central proceed and then only did the rights and liabilities of the parties become finally fixed.
It is now contended by the petitioners that they should be allowed to intervene for the purpose of attacking the said order of the court. The rule is that when parties are permitted to intervene in a suit they are so permitted, not for the purpose of disturbing an order that has previously been made, but in subordination thereto and for the purpose of securing relief in the future. Consequently they are estopped from attacking any previous order of the court. Thus in North American Company v. St. Louis & San Fran. Ry. Co. (D. C.) 288 F. 612, at page 627, Judge Sanborn said: “It is the established and general rule that those who intervene in a suit in equity on their own applications enter subject to and are thenceforth bound and estopped by aH the previous orders, decrees, and acts of the court in the suit to the same extent as they would have been if they had been parties to the suit when those orders, decrees, and acts were respectively made, and under this rule the interveners are conclusively estopped from avoiding, disregarding or assailing the decrees, the sale, the estoppels thereof, or the title to the property in the purchaser.” The Supreme Court of the United States, in U. S. v. California Co-op. Canneries, 279 U. S. 553, 49 S. Ct. 423, 73 L. Ed. 838, referred to the “settled rule of practice that intervention wiU not be allowed for the purpose of impeaching a decree, already entered.” See, also, Commercial Elec. Sup. Co. v. Curtis (C. C. A.) 288 F. 657, and Swift v. Black Panther Oil & Gas Co. (C. C. A.) 244 F. 20. Consequently, if the parties were permitted to intervene, the purpose of such intervention would necessarily be denied them (in view of the rule cited), for they can have no relief from the situation they complain of except by vacation of the order by the court heretofore entered.
But the court deems it necessary to consider this.matter further even though petitioners have no right to intervene for the *828purpose they assert, for the reason that if it is complained that there has been fraud or deceit upon the court, it is the duty of the chancellor of his own motion to make inquiry of the same and prevent effectuation thereof. Consequently, I deem it necessary to consider the exact situation in this cause and determine whether or not there has been any fraud or deceit upon the court.
The quotations from the original contract and amendments thereto as herein-before set forth indicate that under the original contract the situation as to paid-up insurance was that the Central agreed to assume paid-up insurance in force by its terms on April 18, 1932, and contracted, as provided in the contract, to carry out the provision of such policies, subject, however, to the policy lien provided to take care of the deficiency in the depleted reserves. Because of such impairment, such lien was as of the date the receiver was appointed equal to the full amount of the reserve, and the contract provided that both the lien and the interest should be deducted from the values used to establish any paid-up insurance on any policy of the Security as of April 18, 1932, or thereafter. Consequently the entire reserve was as of said date, if the contract became effective, covered by a lien and no policyholder had any right then existing except his pro rata share of such depleted reserve.
The effect of such a situation upon a paid-up policy is somewhat different from that upon a policy being carried upon a premium paying basis, for on paid-up insurance there are no longer any premiums being paid, and it has nothing of potential character to increase its future value. A premium paying policy, however, is not a static thing, but a live, kinetic interest increasing in accordance with the wisdom of the management of the reinsuring company-. Nothing that the reinsurer may do will increase the fixed value of a paid-up policy. Everything that it does affeets the future value of continued premium paying policies. Consequently, if a rein-surer should agree to pay a paid-up policy in full, though it is to receive only a small percentage thereof in reimbursement from depleted reserves, it would be making a pure gift, and perhaps contracting to do something without legal consideration. Such situation the court did not contémplate and such situation the court did not then believe and does not now believe the original contract contemplated.
If there were any indefiniteness about this interpretation of the original contract, it was probably increased by the language of parar graph eighth. Therein it was agreed that with reference to a death occurring on or after April 18,1932, and while the policy was in force, the Central would waive the lien. If, by reason of the situation arising from paragraph first, a paid-up policy could not be considered in force, then the provision of paragraph eighth, providing for a waiver of lien in case of death, would not be operative with respect thereto. The language simply increased the ambiguity. The court’s feeling was that as to paid-up insurance the waiver provided by paragraph eighth could not operate as a waiver of the lien provided in paragraph- first, the deduction of which from the reserve prevented such paid-up insurance from being in force or existence. Therefore, to avoid any misunderstanding in the premises, paragraph eighth was amended to read so as to apply only to contracts upon a premium paying basis. The court believed at that time that the amendments to the contract added nothing thereto, modified the same in no way, but merely made more clear to all parties what had been the intent of the original contract. The court believed then and believes now that the proportionate interests of paid-up policyholders under the amendments are exactly the same as they were under the original contract, except perhaps that the intent is clarified and the situation of paid-up policyholders thus improved somewhat. ■
The only protection afforded policyholders by the reinsurer is paid for directly or indirectly from the proceeds of sale of the insolvent company’s assets except as the poliey may grow in the future. The amendments clearly recognized the unfortunate situation of holders of paid-up policies in an insolvent insurance company, which have no possible future growth. They recognized that the lien created covered the entire reserve, and thereby eliminated the only basis for protection of paid-up insurance, and left to such policyholders only that which the law could give them, a pro rata share of the proceeds of liquidation of the reserves. Consequently, the amendments provided that the Central should pay all claims upon paid-up insurance from the proceeds of liquidation of the Security, as accomplished by the trustees named by the court. In this manner the court authorized the trustees to endeavor to work o.ut some method whereby the interest of the paid-up policyholders in the proceeds of liquidation might be utilized to obtain or keep reinsurance.
To construe the original contract in any other manner than that which the court has *829indicated proper would be to place the other participants in the liquidation of the assets of the Security at a disadvantage. In other words, if the original contract can be construed to place upon the Central an absolute contract to pay all paid-up policy liabilities, other provisions of the same contract put upon other policyholders the eventual cost of sueh reimbursement by the Central. Paragraph eighth of the contract provides for the payment of death claims and the waiver of liens, but in addition it contains a provision that the total amount so paid on or in connection with such death claims, including liens with interest at the rate of 5 per cent, per annum, shall be deducted from the proceeds of liquidation. It is provided that all disbursements made by the reinsurer under this paragraph shall be “a first and prior lien on all assets in the hands of the trustees until such disbursements are repaid by the trustees” as elsewhere provided in the contract. The inevitable result of these provisions is that every dollar paid to the holder of paid-up policies in excess of their equitable share of their impaired reserve could come only from the other policyholders. In other words, if death claims are to be paid in full and the reinsurer is to be reimbursed from the depleted reserve, such reserve will afford just so much less a return to the other policyholders. Under no condition should a court of equity allow preference in distribution of proceeds of liquidation amongst unsecured creditors. To create and recognize a preferred special class of sueh unsecured creditors is not equity.
Some contention is made that the amendments were sought by the reinsurer to avoid its obligations. If under the original contract the latter assumed full liability for paid-up policies, then under paragraph eighth it was entitled to reimbursement for all such payment out of reserves of the Security. Consequently it stood no chance to lose unless the whole of the depleted reserve was insufficient to pay the comparatively small number of paid-up policy demands. The amendments, therefore, did not benefit the reinsurer.
Considerable is said concerning collusion between state authorities and the Central. Nothing submitted to the court indicates in the slightest degree any sueh collusion and the court is not interested in that question. It is of little moment whether the Central requested the amendments originally or whether the ideas originated with the insurance company or whether they originated with the receiver. The sole question which the court had to consider was whether it was worth while to make more explicit the intent and meaning which the court placed upon the original contract. In the interest of clearness it was desirable to make it impossible for there to be any question as to the right of all policyholders to share equitably and pro rata in the depleted assets. Therefore, the court permitted the amendments, and sueh amendments having been made prior to the final approval by the state authorities, the contract, in its final form, was not effective until the amendments had been approved.
The amendments complained of injured in no way the petitioners’ rights. They were the same after the amendments as they were before, namely, the right to participate with the other creditors on an equitable basis in all the assets of the defunct company. This court could give them nothing more then and can give them nothing more now. To allow them to intervene at the present time, therefore, in an attempt to accomplish more, would be a futile gesture. Furthermore, as we have seen, the petitions for leave to intervene attack something which the court has previously fully considered and which is not now open to attack by subsequent interveners.
Accordingly, the motion will be denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219050/ | Findings of Fact.
COX, District Judge.
In 1925 the city of Starkville was the owner of and was operating a municipal light and water plant and distribution system. This it was authorized to do by the law of Mississippi and its charter. Some time during the year 1925, negotiations were begun between the city of Starkville and the Mississippi Power Company, a Maine corporation, looking to the purchase by the power company from the city of the city’s light plant and distribution system, and the negotiations finally, on the 14th day of March, 1925, culminated in a sale of said light plant and distribution system by the city to the power company by warranty deed. At the same time, and as a part of the same transaction, the city granted to the power company a franchise for a period of twenty-five years authorizing the power company to engage in the business of furnishing electric power to the citizens of the city of Starkville. The power company contracted to pay and did pay to the city of Starkville for said warranty deed and franchise the sum of $70,000 in cash. In addition the power company agreed to furnish the city electricity for its street lighting system for one year from the date of the contract of purchase free of cost to the city. This provision of the contract the power company fully performed. There was also a provision in the contract of sale which obligated the power company to furnish to its patrons in the city of Starkville hydro-electric power, which was to come from the hydroelectric system of the Alabama Power Company; and in carrying out this provision of the contract the power company acquired rights of way, erected high-power lines, etc., for a distance of approximately fifty miles from a point near Sulligent, Ala., to the city of Starkville. This was done at a cost of approximately $200,000. The mayor and board of aldermen of the city of Starkville and the citizens of Starkville generally knew that this line must be built to carry out the terms of the contract and no complaint is made that the cost thereof was in any way excessive.
The city of Starkville acted within its lawful and proper powers in making the sale to the power company and the entire transaction was lawful and binding on both parties to the contract.
The power company expended approximately $100,000 in extensions to and betterment of the distribution system which it had acquired from the city, and in 1926, upon the completion of its high-power lines into the city of Starkville, began to supply its patrons there, including the city of Stark-ville, with hydro-electric energy and has continued so to do and has in all things carried out its contract with the city.
Shortly after the purchase of the Stark-ville properties, the power company seemed a *835franchise to operate in Aberdeen, Miss., a city of approximately the same size as Stark-ville lying to the east of Starkville, and the high-power line connecting Starkville with the hydro-electric system of the Alabama Power Company was constructed to run through the city of Aberdeen and is used to supply it with electric power. Some time after the high-power line was constructed into Starkville, it was extended to the southwest to serve other cities and towns. The extra load placed on the line from the Alabama Power Company’s hydro-electric system to Starkville caused by the extension necessitated additional construction and expense.
It is difficult to say just what part of the entire expense should be allocated to the Starkville distribution; but as this is not a rate case exact figures are not necessary, and it is sufficient to say that to carry out its contract with the city of Starkville and to carry on its business there the power company expended large sums of money, probably in excess of $250,000. These expenditures were made by the power company on the faith of and relying upon its warranty deed and franchise.
The city of Starkville was not authorized by law to grant an exclusive franchise, nor did it by any express stipulations in its contract of sale obligate itself to refrain from again operating a municipally owned light. plant and entering into competition with the power company.
From the time of the contract of sale until late in the year 1930, in so far as the record discloses, the relationship between the power company on the one hand, and the city of Starkville and its citizens on the other hand, appears to have been entirely satisfactory. About this time certain citizens of Starkville, feeling that the city needed additional sources of revenue to help meet its taxation problems, began to discuss a, municipal light plant, and this discussion soon grew into a pronounced agitation for such a plant. As a result of this, contacts were made between the mayor and aldermen of the city and Fairbanks, Morse & Co., an Illinois corporation, whose business is largely that of the manufacture and sale of various types of oil-burning engines and who sell and install light plants using such engines for creation of electric power. Preliminary surveys were made by engineers employed by the city, and approximate costs of a municipal plant such as the mayor and board of aldermen thought was needed were ascertained, and an ordinance was passed by the mayor and board of aldermen proposing the issuance of $102,000 of bonds of the city of Starkville for the purpose of purchasing and installing a municipal light plant and distribution system and calling an election to ascertain the will of the qualified electors of the city thereon. There then ensued a heated campaign in which the power company sought to defeat the issuance of the bonds and Fairbanks, Morse & Co. joined in with the city officials in an effort to carry the election in favor of the issuance, being actuated therein by a desire to sell to the city its engines and equipment. A great deal of advertising was done in the local press by each of these groups, and in all of it there was more or less inaccuracy of the “booster” type, probably not harmful. Certain statements were made in advertisements in the local press signed by citizens of Stark-ville which, however, went beyond mere “booster” statements. One statement, particularly vicious, appeared just before the election in which the charge was made that the power company had sold, bartered, and given away its stock to prominent men in various communities in the state of Mississippi for the purpose of controlling them. This statement was false. The advertising cost of this was paid for by Fairbanks, Morse & Co. Its falsity was either known to those who made it or it was made with reckless disregard as to whether it was false or true. See issue of Starkville News of October 30,1031, at page 12. The record clearly discloses that practically all of the advertisements published seeking to carry the election in favor of the issuance of bonds was paid for by Fairbanks, Morse & Co.; and a fair inference from the evidence is that Fairbanks, Morse & Co. knew the substance of these various published statements.
The election was held and resulted in a substantial majority in favor of the issuance of the bonds.
The registration books of the city were introduced in evidence, and it was agreed that these books were the registration books used in .the election above referred to. Each of the two books of registration, so introduced, have clearly imprinted on the front of the outside cover or binder the words, “Registration Books of the City of Starkville, Miss.” At the top of each page of these books is a caption or form of oath for electors which was clearly devised and intended by its originator for use in county, state, or district elections, and there were blank spaces left in this form to be filled out by the registrar to show the *836voting precinct, district, etc. None of these blanks had been filled in. This was all the evidence introduced with reference to the method of registration.
Following the election there were the usual steps taken by the city of Starkville looking to plans and specifications, advertisements for bids, and the letting of contracts, and the contract in question here was let to Fairbanks, Morse & Go. Various attacks were made on the legality of this contract in the pleadings in this ease; but in the view the court takes of the issues in this case it is unnecessary to state either findings of fact or conclusions of law on this particular issue.
The plans and specifications for the erection of the proposed municipal distribution system and the contract for the erection thereof are in evidence. There is also in evidence the opinion of the engineers testifying both for the plaintiff and the defendant. From this evidence I find that the erection of the proposed municipal distribution system would materially interfere with the use of the distribution system of the power company which they have acquired by warranty deed from the city, would materially increase the cost of operation thereof and would render the operation thereof materially more hazardous.
There is evidence on behalf of defendants that such a competing distribution system can be built without increasing the hazard of operation materially or materially increasing the cost. This is a question not necessary to pass on, as the court finds as a fact that the one now proposed does materially increase both hazard and cost of maintenance.
The court finds as a matter of fact that the amount involved in this suit, exclusive of interest, is more than $3,000.
Conclusions of Law.
Upon a thorough investigation by solicitors of record for all parties in interest, no case has been presented to the court which covers the state of facts in this ease and the cases have been of value to the court largely by reason of analogy to the questions here presented.
The public policy of the state of Mississippi, as evidenced by its legislation and the decisions of its courts, is undoubtedly one which looks with disfavor on any type of monopoly and encourages free and untrammeled competition. The question of whether the city of Starkville is estopped from competing with the Mississippi Power Company by maintaining a municipal light and power system and a sale of electric power to residents of the city of Starkville must be decided in the light of that pronounced public policy of the state. It is undoubtedly true that in Mississippi a municipality acting in its proprietary capacity, as the city of Stark-ville was acting here, can estop itself. This, however, can, in the judgment of this court, be done only on the clearest showing of the right to relief by the plaintiff in equity, and if the case be doubtful the doubt must be resolved in favor of the public. The case at bar is, to say the least, doubtful. Nowhere during the negotiations looking to the purchase of the properties in question from the city was the question ever raised, and the citizens and qualified electors of the city of Starkville never had opportunity to pass on in any election the question as to whether.the city of Starkville was by its action in selling its power manufacturing and distribution system precluding itself from the electric power field for a period of twenty-five years. If this had been intended, a stipulation to this effect could and should have been put in the contract, as was done in the Walla Walla Case, 172 U. S. 1, 19 S. Ct. 77, 43 L. Ed. 341, and the citizens could have then made known their desires on an issue plain and unambiguous.
I therefore conclude that the power company, plaintiff here, is not entitled to an injunction restraining the city from issuing bonds for the erection of a power plant and distribution system.
This brings us to the question, brought out by the evidence, of the physical interference of the proposed municipal system with that of the power company, which was conveyed to it by the city by warranty deed. This question the power company is entitled to have settled under its prayer for general relief.
The distribution system, whether it be real, personal, or mixed property, was conveyed by general warranty. This general warranty included and carried with it the warranty of quiet enjoyment, and I conclude that this warranty executed by the city precludes it from doing anything in its proprietary capacity which would materially interfere with the use of this distribution system by the power company, and since I find as a matter of fact that the system proposed and contracted for would materially interfere with the use of the power company’s system conveyed and warranted to it by the city, *837would increase materially the hazard of its use, and materially increase the cost of its maintenance, I conclude that the power company is entitled to an injunction against the . city and Fairbanks, Morse & Co. restraining them from carrying out the contract in question here.
I conclude that the evidence in the ease is not sufficient to justify the court in holding that the registration of voters in the city of Starkville was unlawful and void.
I conclude that the action of Fairbanks, Morse & Co. in having actively participated in the publishing of false and misleading statements seeking to influence the result of the election, the outcome of which would determine whether or not it could have opportunity to sell its products to the city of Stark-ville, was unfair, inequitable, and made in an effort to interfere with the established business of plaintiff and its customers in the city of Starkville, and that this conduct is such as to warrant an injunction against it restraining it from entering any contract made possible by the result of said election. This court recognizes and respects the right of Fairbanks, Morse & Co. to engage in legitimate efforts to sell its products and to compete with the Mississippi Power Company or any other corporation or individual; but this competition must be based on a fair presentation of the matters at issue; and in equity and in good conscience this court cannot permit such conduct as the record discloses in this ease to affect the established business relationships of third parties.
No evidence being introduced showing any effort generally on the part of Fairbanks, Morse & Co. to use unfair tactics in any other operation in Mississippi, the prayer of the bill that they be restrained generally will be denied.
The parties to this suit will each be taxed with any cost which may have accrued for the summoning and attendance of their respective witnesses. The general court cost will be taxed one-half against the plaintiff, Mississippi Power Company, and one-half against the defendants jointly.
Settle form of decree on ten days’ notice.
The above statements of facts and conclusions of law of themselves answer the various objections to the introduction of testimony on which the court reserved ruling and also the motion made on behalf of defendants at the conclusion of the evidence of the plaintiff. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219051/ | AVIS, District Judge.
The bill of complaint in this cause alleges that the plaintiff is the owner of a certain patent, No. 1,713,628, issued to Richard E. Sehletter on May 21, 1929, covering an attachment for flat knitting machines for the making of hosiery of full-fashioned typé, especially adapted for making clocks, reinforcing, split seam work, splicing, etc.; that defendants have infringed the patent by the use of the appliances patented in an attachment sold and marketed by them; and prays for relief by injunction and accounting.
The answer admits the issuance of the patent, but denies that Sehletter was the inventor of the improvements in the attachments for flat knitting machines, described in the letters patent and the other claims set forth in the bill of complaint, and affirmatively avers that Sehletter had abandoned his invention, and did not assert any claim thereto until after others had independently made large investments in connection with the manufacture and sale to the public in the United States of attachments embodying his claimed invention; that plaintiff was and is barred by his abandonment of a prior application; that Schletter was not the inventor, and was barred by anticipation in sundry other patents, and by *838prior use by others. The answer further sets up various patents issued in the United States, Great Britain, Germany, and France, various publications and users, claiming them to be a complete bar to plaintiff’s right to an exclusive use of the attachment.
Based on these various allegations of faet, the answer claims that because of the state of the art as known at the time and prior thereto, the alleged invention or discovery did not involve invention, but exhibited nothing more than the exercise of mere mechanical skill.
At the opening of the trial, the bill of complaint against Alfred Hofmann, as an individual, was dismissed on motion of defendant’s counsel, and with the consent óf counsel for plaintiff.
The claimed invention is a machine which can be attached to, or built with, a flat or straight hosiery knitting machine, used for the purpose of making full-fashioned stockings.
The basic knitting machine is constructed under the original “Cotton” invention, with such changes and improvements as have been made from time to time. The knitting is accomplished by a battery of straight needles operating with sinkers, dividers, etc., and by various forms of mechanism provided with power through arms, gears, slur cocks, carrier bars, shafts, rollers, clutches, cams, etc., and actuated by power transmitted from what is known as the cam shaft. Attached to these machines is a mechanical contrivance, called a narrowing device, by which the full-fashioned stocking is made.
A full description of the gperation of this full-fashioned knitting machine, as detailed by the witnesses, does not appear to the court to be necessary in the decision of the question at issue. It is sufficient to say that the operations of the machine are complicated, and by co-operation of all of its parts turns out a perfect product.
For the purpose of laying the thread for contact with the needles and attachments required to tie the knots and do the knitting, longitudinal reciprocating yam guide carrier bars are arranged on the machines, their movements in both directions controlled by stops, so that the thread will be laid and knitted the required width of the material to be produced. The width of the main material is controlled by stops arranged at either end of the plurality of knitting sections, in which form the machines are usually assembled in practical operation. Fbr the purpose of narrowing the fabric as desired, and prior to plaintiff’s claimed invention, reversely threaded spindles were attached to each end of the plurality of machines, which operated by a pattern chain and buttons connected therewith, caused the stops to move inward toward each other, and in conjunction with a device which removed the threads from the outer needles, replacing them on the immediately adjoining needles, accomplished the narrowing and thus formed the full-fashioned stocking, made- to conform to the natural shape of the leg.
As new styles of hosiery were demanded by the purchasing public, the art advanced to meet the demand, and new attachments were added to accomplish split seam work, selvage reinforcement, splicing, onyx and pointed heels, shadow clock work, etc.
The attachments were so contrived as to lay threads from the yam carrier bars, on the needles, with a stroke less than those carrying threads for the main material, and in co-operation with the main thread carriers, to accomplish the splicing, clock work, reinforcing, etc.
These various attachments, invented and used prior to the attachment represented by the patent in suit, have been demonstrated and described by sundry witnesses.
By manual manipulation of some character, they produced nearly or fully the same result as can be produced by plaintiff’s attachment.
The plaintiff’s patent describes a claimed new development, which consists of a connected reversely threaded screw spindle, which may be located on a knitting machine individually or at some point in a plurality of machines, with nuts mounted thereon, being stationed one on the right side and one on the left side of the screw, and spaced apart at such distance as may be desired; upon the rotation of the spindle in one direction, the nuts are brought closer together, and when operated in the other direction the distance between the nuts is widened. Attached to the nuts are tiltable stops, intended to limit the stroke of certain of the yam carrier bars, by means of certain stationary lugs fastened to the bars, thus laying the additional thread on the needles at such point within the length or width of the material being knitted as may be desired, and producing splicing, reinforcing, clocks, or other inserts.
In addition, the patent contemplated the automatic control of movement of the reversely threaded spindle, so that by means of levers, pattern chains, pawls and ratchets, mechanically connected with the main cam shaft, the spindle may remain stationary or be re*839volved in either direction, causing the nuts to approach or recede from eaeh other, and produce any desired pattern.
A further description, in this opinion, of the mechanism involved, appears to be unnecessary.
This suit involves five claims of the patent, which are as follows:
“1. In a straight knitting machine having cooperating yarn guide carrier bars, a pair of opposed stops for certain of said carrier bars which have a stroke less than the full width of the' fabric being knitted, and a reversely threaded spindle for moving said stops toward and from each other to vary the stroke of the bars controlled by said stops.
“2. In a straight knitting machine "having cooperating reciprocatory yam guide carrier bars, a reversely threaded spindle, stops connected to the spindle positioned to limit the traverse of certain of the cooperating carrier bars to less than the full width of the cloth being knitted, and pattern controlled means for turning said spindle to vary the distance between said stops.
“3. A device as in claim 2, said pattern controlled means being constructed and arranged to turn said spindle either to increase or to decrease the distance between said stops.
“14. In a straight knitting machine, a set of yam guide carrier bars for operating yam guides traveling less than the full width of the fabric being knitted, a spindle having reversed screw threads, stops operated by said spindle, means for turning the spindle in either direction, pattern-controlled means for determining the time of operation of the spindle, and pattern-controlled means for determining the direction of rotation of the spindle.
“15. In" a straight knitting machine, a set of reciprocating yarn guide carrier bars including bars having a stroke less than the width of the fabric being knitted, pair of stops for said guides, a reversely threaded spindle extending lengthwise of the machine, the respective stops being connected to the reversely threaded portion of the spindle for moving the stops simultaneously toward and from eaeh other, pattern controlled means for determining the time for such movement, and correlated pattern controlled means for independently determining the direction of such movement.”
Defendant admits that if the patent is valid it has infringed, but sets up four reasons which it claims demonstrates the invalidity of the patent:
1. Because of insufficiency and inoperability of disclosure.
The disclosure of the drawings showed some deficiency in the imparting of motion to one of the pawls, intended to work one of the ratchets, which imparts motion to the reversely threaded spindle, but it appeared by the testimony that although this condition existed in the drawing, it required merely a matter of mechanical skill to arrange a lever or other mechanism, to be actuated by the cam shaft, to accomplish the result intended. It is apparent that if mechanism could be and was constructed, so as to automatically revolve the spindle in one direction, it would not be mechanically difficult to actuate the pawl which was to revolve the spindle in the other direction.
The explanation contained in the patent, describing its operation and general method of imparting the power, in my opinion, overcomes the defect appearing in the illustration. This objection does not refer to the idea, but only to putting that idea into effect, which, it appears to me, is not a material defect.
2. Because of want of patentable novelty and complete anticipation.
It is true that the advance in the art, if any, as accomplished by Schletter in this patent, as we view it now after seeing the attachment operate and the result of its operation, seems simple, and appeals to one as exhibiting merely the result of mechanical skill, but, notwithstanding the fact that the so-called “Gotham” attachment interposed as an anticipation, and which of all offered most nearly coincides with plaintiff’s patent,' had been used for possibly ten years, no one before Schletter had conceived the idea, that by simply providing a pawl and ratchet which would operate the spindle in the opposite direction a great advance would be accomplished. He apparently thought of this as an advance in the art, and set to work to accomplish it, by arranging automatic means, so that the spindle would remain stationary, or could be operated in either direction automatically, and by predetermined pattern arrangement.
In my opinion, it has patentable .novelty, and is an advance in the art over the so-called “Gotham” attachment, which automatically caused the nuts to move in one direction only, requiring the use of manual power to widen the distance between the nuts, or to revolve the spindle in an opposite direction. The last-named attachment could not automatically vary the width of the clock or splice.
While the patent in suit combines much of the prior art, it describes and discloses an *840attachment which, applied to flat or straight full-fashioned knitting machines, and used for the purpose of splicing, reinforcing, etc., accomplishes its purpose in a different manner, and, as applied to the manufacture of hosiery, is a decided advance in the art, performing its function more expeditiously than any contrivance or attachment previously used.
See Diamond Rubber Company v. Consolidated Rubber Tire Company, 220 U. S. 428, 31 S. Ct. 444, 55 L. Ed. 527; National Hollow Brake-Beam Co. v. Interchangeable Brake-Beam Co. (C. C. A. 8) 106 F. 693; Krauth v. Autographic Register Co. (D. C. N. J.) 285 F. 199, 204.
There is a presumption of the validity of a duly issued patent, and an evidence of the advance of the invention of Sehletter over the prior art is the popularity of the attachment, the large sales, and the fact that defendant appears to be anxious to use it as an attachment to its flat hosiery knitting machines.
See Kinloch Tel. Co. v. Western Electric Co. (C. C. A, 8) 113 F. 659-665.
What has been said applies also to the contention of defendant as to “complete anticipation.” It is impossible in this opinion to analyze all of the patents presented, and about which testimony has been offered; suffice it to say that the court has scrutinized the testimony, carefully read the briefs, and has concluded that none of the prior patents is anticipatory of the claims of plaintiff at issue in this suit.
3. The contentions of defendant because of prior knowledge and use are, as the court views all of the testimony, also disposed of herein.
While the plaintiff’s attachment in a degree is evolved from the uses of former and other devices attached to flat knitting full-fashioned machines, the question is the novelty of plaintiff’s patent of furnishing, as stated in defendant’s brief, “the necessary mechanism for automatically imparting reverse motion to the spindle of the Gotham attachment.”
Of course, this included the mechanism which reverses and advances the nuts and stops in a predetermined manner by use of pattern chains, or other automatic mechanical means.
4. The question of abandonment has been raised by defendant and is based upon the assumption that the facts indicate that Sehletter intentionally abandoned his invention to the public.
The failure to prosecute the proceedings under the original application for patent appears to have been due entirely to the negligence of the patent attorney.
There is no indication in the evidence that Sehletter ever voluntarily intended to abandon his invention.
From the testimony it is evident that Sehletter never knew of the letter of rejection until long after it was received by his attorney. The letter was received by the attorney on or about April 18,1923, and Schletter was not notified until July 28, 1924.
The attorney testified that at a conference held August 5, 1924, with Sehletter and others, no suggestion was made by him that the original application had been technically abandoned. After this conference the attorney made no effort to revive the application, and it is apparent that later, Sehletter, becoming discouraged because of lack of action; consulted another patent attorney, who, on or about May 20,1925, wrote to the attorney handling the original application for information.
The filing of the second application was considerably delayed because of the tardiness of the draughtsman.
There seems to have been much uncalled for neglect and .delay, but the testimony is quite clear that none of this was chargeable to Sehletter personally.
I am convinced that Sehletter never, by his actions, abandoned his invention, and the claim of abandonment cannot succeed in denying relief to plaintiff.
I find as facts:
(1) That claims 1, 3, 14, and 15 of the patent in question are valid.
(2) That said claims of patent are not anticipated by patents pleaded and offered in evidence, or voided by prior knowledge or use.
(3) That patentee Sehletter did not voluntarily or intentionally abandon the invention as disclosed by the original patent application.
(4) That the defendant Alfred Hofmann, Ine., has infringed the aforesaid claims of the patent. ,
As to the law, I conclude: That the patent being valid and infringed, the plaintiff is entitled to a decree enjoining defendant Alfred Hofmann, Inc., from the use of the at*841taehment so infringing, and for an accounting for damages and profits Decree accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219052/ | JAMES, District Judge.
The petitioning creditor, E. L. Cord, asserts a claim of sufficient amount as against the alleged bankrupt. That claim is stated in the involuntary petition of the creditor as being one on account of stockholders’ liability. Cord on the 14th day of May, 1931, as lessor, entered into a written lease with Auburn-Fuller Company for the leasing of premises in the city of Los Angeles, to include a four-story building to be thereon erected by the lessor. It is alleged that at the time the lease was made all of the corporate stock of the Auburn-Fuller Company was owned by the alleged bankrupt herein. The alleged bankrupt presented a motion to dismiss the petition on the ground that no provable claim was shown to be possessed by the petitioning creditor. The principal grounds of the motion are: (1) That the lease contract is void for uncertainty; (2) that the provision in the Constitution of California creating liability as against stockholders of corporations for corporate debts was repealed prior to the making of the lease contract.
I am satisfied that under the facts shown, the lease constituted a good and valid contract. I am further satisfied, referring to the contention made by the petitioning creditor, that no original or primary debt was created as against the alleged bankrupt.
The determining question, therefore, is as to whether the repeal of the constitutional provision imposing stockholders’ liability effectively wiped out any right of this creditor to make his claim as against the Motor Transit Corporation. The repeal of the constitutional provision was effective November 4, 1930. Section 322 of the Civil Code of California contained at the time provisions identical with those in article 12, § 3, of the Constitution, which was repealed. The Legislature of California repealed section 322 of-the Civil Code on August 14, 1931 (St. 1931, p. 1763). It has already been noted that the lease contract concerned herein was dated May 14, 1931. The Supreme Court of California had held, necessarily, of course, that the provisions of the Constitution respecting liability of stockholders as at the prior time contained in the Constitution, could not be in any wise limited by legislative act. Western Pacific Ry. Co. v. Godfrey, 166 Cal. 346, 136 P. 284, Ann. Cas. 1915B, 825; Wood v. Hamaguchi, 207 Cal. 79, 277 P. 113, 63 A. L. R. 861. The Code section, however, added nothing to the requirements of the constitutional provision as the same existed prior to its repeal. The Legislature, when it proposed the repealing amendment, had no purpose to restrict the Legislature in any wise respecting its right to legislate respecting corporations *842and the liabilities of officers or stockholders. In fact, the declared purpose was to remove limitations on that power. The Senate resolution embodying the proposed amendment, as found in the Statutes of California 1929, at page 2-238, in its material part, read as follows:
“Section 1 of article twelve of the constitution of the State of California is hereby amended to read as follows:
“Section 1. The Legislature shall have power, by general laws and not otherwise, to provide for the formation, organization and regulation of corporations and to prescribe their powers, rights, duties and liabilities and the powers, rights, duties and liabilities of their officers and stockholders or members. All laws now in force in this state concerning corporations and all laws that may be hereafter passed pursuant to this section may be altered from time to time or repealed.
“For the purpose of removing existing limitations upon the power granted by section 1 of article twelve of the constitution amended as herein proposed, sections 2, 3, 9, 11, 12 and 14 of article twelve of the constitution are hereby repealed. * ’’’ * ”
I have read all of the cases which have been cited, and some further cases discovered by my own investigation of the subject. The argument that the repeal of the constitutional provision operated to repeal the Code section, to- my mind, cannot be supported by the logic of any law. There is nothing inconsistent with the constitutional provision while it existed in any of the provisions of section 322 of the Civil Code. The right of the Legislature to create the same liability by act to-day can hardly be questioned. There is no limiting provision of the Constitution which deprives the Legislature of that power. Rather, as before noted, the amendment countenances an express reservation to the Legislature to legislate on the subject. The case recently decided by the California District Court of Appeal, Third District, W. Fine & Son et al. v. Hall et al., 21 P.(2d) 697, which holds that the Code section remained undisturbed in its effect until the Legislature repealed it, to my mind correctly states the law. The opinion is well considered, and calls attention to all of the applicable terms of the Constitution. My conclusion is that the petitioner, Cord, has stated a sufficient claim as for stockholders’ liability against the alleged bankrupt.
The motion to dismiss the petition is therefore denied, and an exception noted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219054/ | SLICK, District Judge.
Petitioner brings this action for a writ of habeas corpus charging that he has been deprived of rights guaranteed-to him by article 4, § 2, of the Constitution of the United States,, and of his liberty vouchsafed him under section 662 of title 18 of the United States Code Annotated.
*850The facts are stipulated and are briefly as follows: Petitioner was indicted by the grand jury of the Marshall county circuit court for bank robbery. He lives in Chicago. The sheriff of Marshall county, accompanied by one Indiana police officer and two police officers of the city of Chicago, arrested petitioner in Chicago without a warrant, took him to a detective bureau, and locked him up. Thereafter he was handcuffed and placed in the sheriff’s ear and driven to Indiana. At South Bend he was placed in jail over night and the next morning he was taken to Marshall county, where a warrant of arrest was read to him. He was then taken to the Marshall county circuit court, where bond was fixed, and upon his failure to give the bond fixed by the court, was delivered for safekeeping on order of the court to respondent, who is warden of the Indiana State Penitentiary at Michigan City, Ind. He then filed his petition for writ of habeas corpus in the Marshall county circuit court, which petition was by the judge thereof dismissed and his case set for trial.
Petitioner contends, not without logic, that having been arrested without right and forcibly taken from the state of Illinois to the state of Indiana — “kidnapped,” in other words, with all the ugly terrifying meaning that word implies — he is entitled to be discharged, or at least returned to the state of Illinois.
There is no excuse for the conduct of the arresting officers and their procedure should not be commended. The Constitution of the United States, article 4, § 2, and the acts of Congress, section 662, title 18, United States Code Annotated, passed pursuant thereto, provide an orderly manner for extradition of persons charged with crime in one state, who have fled to. another state. These constitutional and legislative provisions were designed to procure physical possession of an offender who has fled the jurisdiction of the court without irritation between states and without the necessity of one state invading the territory of an adjoining state with all the resultant violence and terrorism naturally attendant upon such invasion.
The Constitution, the bulwark of the nation’s liberty, was written to “insure domestic tranquillity” as well as to “establish justice,” and “domestic tranquillity” can best be insured by an orderly procedure in all judicial controversies.
There can be no doubt that the acts of the officers were wrong; were without the pale of judicial approval and should not be condoned or encouraged. But these officers are not before this court, and the only question up for decision is the alleged right of petitioner to be discharged because of the wrongful manner of his having been brought into court to answer the charge with which he stands in- . dieted.
Fortunately, this very question has been before the United States Supreme Court in a number of eases. The two outstanding cases are Mahon v. Justice, 127 U. S. 700, 8 S. Ct. 1204, 32 L. Ed. 283, and Pettibone v. Nichols, 203 U. S. 192, 27 S. Ct. 111, 118, 51 L. Ed. 148, 7 Ann. Cas. 1047. In Mahon v. Justice, supra, the opinion is by Mr. Justice Field, and Mr. Justice Bradley and Mr. Justice Harlan dissented. This case was decided in 1888. Pettibone v. Nichols, supra, was decided in 1906. Mr. Justice Harlan wrote the opinion in that case and Mr. Justice McKenna dissented. In this case, Mr. Justice Harlan said: “It is settled that a party is not excused from answering to the state whose laws he has violated because violence has been done him in bringing him within the state. * * * The United States do not recognize any right of asylum in the state where a party charged with a crime committed in another state is found, nor have they made any provision for the return of parties who, by violence and without lawful authority, have been abducted from a state, and, whatever effect may be given by a state court to the illegal mode in which a defendant is brought from another state, no right secured under the Constitution and laws of the United States is violated by his arrest and imprisonment for crimes committed in the state into which he is brought.” Citing Mahon v. Justice, supra, where he dissented from the majority opinion of the Supreme Court.
Petitioner is here seeking by the exercise of the extraordinary remedy of habeas corpus to prevent his trial in a state court on the ground that his apprehension and subsequent arrest were illegal, and for that reason no jurisdiction exists in the state court to put him to trial.
The law is well settled that a person charged with crime in one state, and who is found in and abducted from another state and brought into the state where he is indicted, is not entitled to be discharged upon habeas corpus in a. District Court of the United States. Neither the Constitution nor the laws of the United States entitle such person to a discharge. Pettibone v. Nichols, 203 U. S. 192, 27 S. Ct. 111, 51 L. Ed. 148, 7 Ann. Cas. 1047.
*851The Constitution of the United States does not guarantee the right of asylum to one who has committed a crime in one state and fled to another state. The right of the state of Illinois to demand of the state of Indiana the return of one of its citizens illegally taken from within its borders is a different question and need not be decided in determining the rights of petitioner who stands charged by indictment with a crime against the laws of Indiana.
As was said in one of the eases decided against petitioner’s theory, if one has. committed a crime against a state and has fled therefrom, the law is not particular as to the means or the method by which his return to the state against whose laws he has offended is obtained. No doubt this court has jurisdiction to discharge petitioner if the acts of the arresting officers render the exercise of jurisdiction by the circuit court of Marshall county over his person a violation -of his constitutional rights. The decisions cited above in this opinion, and many others, hold, however, that his constitutional rights have not been violated. There is no emergency here. Petitioner has not been tried on the indictment pending in the circuit court of Marshall county. He may be found not guilty, and in-such event no question would ever arise as to his rights secured under the federal Constitution. It is the duty of this court to presume that the circuit court of Marshall county will enforce, as it has power equally with this court to do, every right secured to petitioner by the federal Constitution.
The application for discharge is denied, and the petitioner is remanded to the custody of the respondent. Petitioner is granted an exception. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219056/ | HINCKS, District Judge.
The order brought under review disallowed: future rent.
As to whether future rent is a .provable claim in bankruptcy has been differently decided in different circuits as the Supreme Court itself has remarked in the Chicago Auditorium Case, 240 U. S. 581, 36 S. Ct. 412, 60 L. Ed. 811. But, as the petitioners in their brief point out, the Supreme Court cites the Second Circuit as upholding the negative of that proposition on the strength of the decision in the Second Circuit in the case of In re Roth & Appel, 181 F. 667, 31 L. R. A. (N. S.) 270. As I understand it, the Circuit Court of Appeals in this circuit has ne7er altered, or even questioned, its decision in Re Roth & Appel, and it is an essential part of' its holding in that ease that rent accruing after the filing of a petition in bankruptcy against the lessee is not provable against the estate. The Chicago Auditorium Case, and in this state, Napier v. Peoples Store Co., 98 Conn. 414, 120 A. 295, 33 A. L. R. 499, were cases in which the rent of real estate was not involved.
Consequently, in this district we are constrained by the authority of the decision in the case of In re Roth & Appel. The order of the referee is therefore'confirmed.
For Rehearing of Petition in Review.
A petition in review of an order of the-referee disallowing future rent' having been dismissed and the order of the referee confirmed by memorandum of decision dated May 12,1933, and the petitioner having thereafter made application for rehearing upon the-ground that the provisions of the amendment to the Bankruptcy Act, approved March 3, 1933 (11 USCA § 201 et seq.), have application to the subject-matter and require a decision favorable to the petitioner’s claim for future rent, said application for rehearing is-hereby denied.
Section 2 of the amendment to the Bankruptcy Act (11 ÜSCA § 201 note) provides: “Proceedings under Section 1 of this Act maybe taken in proceedings in bankruptcy which are pending on the effective date of this Act.” This is not the same as saying that proceedings under section 1 may be taken when proceedings' prior to the effective date' of the-Amendment had -already gone to an adjudication. It may well be that Congress meant by the provision quoted only that resort might be-*859had to section 1 in eases which were pending but not yet adjudicated. Indeed, it is difficult to understand how a petition, voluntary or involuntary, which had already been adjudicated, could properly be described as “pending.”
In any event, it is clear that proceedings under section 1 of the amendment can be initiated only by the “debtor.” Here it does not appear that the “bankrupt” has even attempted to transform himself into a “debtor” by invoking the provisions of section 1 of the amendment, and until he does so certainly this petitioner cannot claim the benefits of a “creditor” under section 1. For it is altogether clear that the amendment of March 3, 1933, was intended for the benefit of debtors and not of creditors. Indeed, .in section 73 of the amendment (11 USCA § 291), it is specifically provided that jurisdiction thereunder shall attach “in proceedings for the relief of debtors.”
But, quite apart from the general applicability of the amendment of March 3, 1983, to the pending ease, it must be held that the provisions for the provability of future rent contained in section 74 (of the amendment [11 USCA § 202]) have no application to estates administered under the original act. For section 74 (a), 11 USCA § 202 (a), specifically states that a claim for future rent is included in the term “debt” only “for the purposes of an extension proposal under this section” ; and that the holder of a claim for future rent is included in the term “creditor” only “for the purposes of an extension. proposal under this section.” True, section 74 (a) concludes with this sentence : “A claim for future rent shall constitute a provable debt and shall be liquidated under section 63b [section 103 (b)] of this title.” But section 63b of the act (11 USCA § 103 (b) has to do only with the liquidation, and not at all with the provability, of claims. This has long since been authoritatively settled. Dunbar v. Dunbar, 190 U. S. 342, 23 S. Ct. 757, 47 L. Ed. 1084.
Consequently, the final sentence of section 74 (a) of the amendment can only be construed to mean that a claim for future rent shall constitute a provable debt for purposes of an extension proposal under section 1 of the amendment (not for purposes of administration under the original act), and that it shall be liquidated for all purposes in connection with an extension proposal, in the same way that all unliquidated claims had theretofore been liquidated, under section 63b of the act (11 USCA § 103 (b). Since, as I have just pointed out, section 63b of the act does not define provable claims, it would not make sense to construe the final sentence of Section 74 (a) as meaning that a claim for future rent shall constitute a provable debt wider section 63b of this act. The phrase just italicized can have meaning only if limited to the liquidation, as distinguished from the provability, of the claim.
Moreover, any other construction would do violence to the context, which, as I have already indicated, is concerned only with the provability of future rent in connection with extension proposals. And, indeed, the preamble of the amendment expressly states that the old act is amended by addling thereto a new chapter; thus implying that the old act is not amended or modified.
Consequently, my previous order confirming the disallowance of the claim must stand. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219057/ | PATTERSON, District Judge.
The ease presents another controversy as to the provability of a landlord’s claim for future rent against the estate of the bankrupt tenant. The referee granted a motion of the trustee in bankruptcy to strike from the landlord’s proof of claim the amount claimed on account of rent to become due in the future. The matter comes up on petition to review.
In 1922 the Hay estate made a lease to the bankrupt of certain real estate in Easton, Pa. The term was for twenty years commencing March 1, 1926. The tenant was to pay a graduated scale of rent monthly in advance and was also to pay taxes and other charges. The petition in bankruptcy was filed and the tenant adjudicated bankrupt on August 29, 1932. All rent had been paid up to September 1, 1932. By notice of November 1,1932, the trustee in bankruptcy notified the landlord that it elected, to reject the lease. Shortly thereafter the landlord rd-entered the premises, rented them to others at reduced figures, and filed claim against the bankrupt estate. The claim is in part for certain taxes for 1932 which under the lease were payable by the tenant prior to bankruptcy. This part of the claim is not disputed. The greater part of the claim, however, is for damages for the loss of rent during the unexpired portion of the term.
The landlord relies upon two provisions in the lease. The first is the one commonly found in leases, that in ease of default by the tenant in any of its covenants or in ease of bankruptcy of the tenant, the landlord may terminate the lease, the tenant to indemnify the landlord against loss of rent by reason of such termination. The second is a provision for confession of judgment, reading: “The lessee confesses judgment for the rent reserved for said term, and for each renewal, with stay of execution until the several days of payment; such judgments to be entered successively as renewals take place, and judgment may be entered for all rent in arrears.”
The provision that on default or bankruptcy of the tenant the landlord might terminate the lease and hold the tenant for loss of rent is of no assistance to the landlord here. His exercise of the option to terminate came after bankruptcy and did not create a provable claim. On this point In re Roth & Appel (C. C. A.) 181 F. 667, 31 L. R. A. (N. S.) 270, is conclusive. It is said that the law is otherwise in the Third Circuit and that since the real estate is in Pennsylvania the rule of the Third Circuit should be applied in this case. I know of no decisions by the Circuit Court of Appeals of the Third Circuit that clash with the rule in Re Roth & Appel. Even if there were such eases, this court would still follow the rule established in this circuit. Matter of Metropolitan Chain Stores (C. C. A.) 66 F.(2d) 482, decided July 17, 1933.
Nor does the clause permitting confession of judgment furnish a firm footing for this claim. The validity of such a clause in a Pennsylvania lease may be conceded. Smith v. Pringle, 100 Pa. 275; Shapiro v. Malarkey, 278 Pa. 78, 122 A. 341, 29 A. L. R. 1358. The landlord’s argument is that a provision for confession of judgment in a lease is equivalent to a clause making the rent for the entire term payable in advance. The parties certainly did not see the confession of judgment clause in this light, the clause itself providing for stay of execution until the several days of payment and other provisions in the lease calling for monthly payments of rent. But even if the clause were deemed the equivalent of a promise by the tenant to pay the whole rent in a lump sum at the beginning of the term, the landlord could not prove a claim for the entire rent without conceding that the leasehold was an asset of the bankrupt estate to be enjoyed free from further claims for rent — a concession that few landlords would be willing to make. Wilson v. Pennsylvania Trust Co. (C. C. A.) 114 F. 742; Rosenblum v. Uber (C. C. A.) 256 F. 584; Electric Appliance Co. v. Ellis (C. C. A.) 4 F.(2d) 108; Remington on Bankruptcy, § 796. As a matter of fact, the landlord here paid no attention to the clause. He did not enter judgment for any rent; he retook possession of the premises when the trustee disaffirmed the lease and has kept the rentals from the new tenants; the very claim filed is for damages and not for rent.
The landlord is under a misapprehension as to the termination of the lease, 'i'he action of the trustee in rejecting it did not put an *861end to its existence; that merely indicated that the trustee would occupy the premises no longer and would he responsible for no more rent. The lease was still in effect between the landlord and the bankrupt tenant. It was the later re-entry by the landlord under the option reserved to him that finished the lease.
The order of the referee expunging the part of the claim for damages due to loss of rent will be affirmed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219058/ | WATSON, District Judge.
The receivers petitioned this court for an order to sell, free and clear of all incumbrances, all of the personal property and choses in action of the Scranton, Montrose & Binghamton Railroad Company. August 31,1931, the court granted a-rule to show cause why said personal property and choses in action should not be sold, free and clear of all liens and incumbrances, returnable September 23, 1931, and directed that at that time bids be received for said property passed upon by the court and accepted or rejected. Notice of the rule was duly published and served upon the Miners’ Bank of Wilkes Barre. At the request of certain prospective bidders and of one of the holders of bonds of the railroad company, the return day of the rule was continued to October 6, 1931, and again to October 20, 1931, at which time bids were received for said property. October 20, 1931, a petition was presented to this court by the Miners’ Bank of Wilkes Barre, the trustee under the mortgage of the Scranton, Montrose & Binghamton Railroad Company, given to secure an issue of first mortgage sinking fund bonds, objecting to the sale of said property of the Scranton, Montrose & Binghamton Railroad Company, and asking for a rule upon the receivers to shów cause why ihe rule granted September 23,1931, should not be discharged, and an order made directing said receivers to disclaim title to the plant and equipment of the Scranton, Montrose & Binghamton Railroad Company, subject to the lien of the mortgage of said company as well as the property belonging to the Dalton Street Railway Company and the Northern Electric Street Railway Company, which rule was granted as prayed for and made returnable October 23, 1931.
The contention of the Miners’ Bank of Wilkes Barre, petitioner, is that this court has not jurisdiction to make ihe order of sale, and, if it has, the making of the order would not be a proper exercise of its jurisdiction.
The Scranton, Montrose & Binghamton Railroad Company operated an electric railroad from Scranton, in Lackawanna county, to Montrose, in Susquehanna county, a distance of 46 miles; also an electric railroad from Factoryville, in Wyoming county, to Lake Winola, in Wyoming county, a distance of 4 miles. It owned that portion of the railroad from Faetoryville to Montrose, a distance of 2’6 miles.
The railroad company was insolvent in October, 1931, and had been for some time prior thereto. It was unable to pay its employees or its debts in due course. Its railroad was dilapidated and out of repair and was being operated at a deficit. For several years it had been in default in the payment of interest on its bonds.
The receivership has lasted for one year, and the Miners’ Bank of Wilkes Barre has made no move and does not now seek to foreclose its mortgage, which was dated October 1, 1919. The receivers, competent and efficient men, were appointed by this court October 31, 1930, worked diligently and conscientiously, and made every effort to operate the railroad and serve the public. May 29, *8631931, the receivers reported to this court that they were without funds to pay their employees or current obligations; that the deficit was increasing, and that in their judgment a continuance of the operation would not be justified. Operation of the railroad was discontinued in July, 1931. Under such conditions, I consider it the duty of the court to order the sale of the property divested of liens. It is clear that this court has the jurisdiction and power to order such a sale. Without citing the many eases recognizing such right, I shall refer to Broadway Trust Company v. Dill, 17 F.(2d) 486 (C. C. A. 3d), appeal dismissed 274 U. S. 765, 47 S. Ct. 763, 71 L. Ed. 1334, where it was held that: “In receivership proceedings, federal court, under general equity authority, has power and jurisdiction to order a public sale of real estate, free and divested of liens, over objection of trustee under mortgage.”
It follows that the order of the sale of the property by the receivers, free and clear of liens, and incumbrances, should be made, and that the petition of the Miners’ Bank of Wilkes Barre should be dismissed, and the rule granted thereon discharged.
The rule to show cause granted August 31, 1931, is made absolute as of October 20, 1931, and the receivers are directed to deliver to this court the bids received by them for the property on October 20, 1931; the petition of the Miners’ Bank of Wilkes Barré is dismissed; and the rule to show cause granted thereon October 20, 1931, is discharged.
Report of James J. Powell, Master.
To the Honorable the Judges of the United States Court for the Middle District of Pennsylvania:
I, the undersigned, James J. Powell, to whom, as master, the issues raised by three petitions and answers filed thereto and rules granted upon said petitions, viz.:
(A) Petition of the Northern Electric Street Railway Company and the Dalton Street Railway Company filed October 31, 1931, for a rule to show cause why the receivers, Acker et a!., should not disclaim all right, title, and interest in and to the property included in schedules H, I, and J, of the appraisement of property of the Scranton, Montrose & Binghamton Railroad Company, etc.
(B) Petition of the Miners’ Bank of Wilkes-Barre, filed October 28, 1931, for a preliminary restraining order upon Ira Fine and Abram Salsburg, restraining them from removing or interfering with any of the property mentioned and described in the petition, etc.
(C) Petition of Miners’ Bank of Wilkes-Barre, filed November 3, 1931, for a rule to show cause why the receiver’s sale, confirmed October 27, 1931, should not be set aside, and why the stock of the Lake Winola Park Company and the Lake Winola Association should not be delivered to the Miners’ Bank of Wilkes-Barre, trustee, etc., were duly referred to me by order dated November 4, 1931, for the purpose of taking testimony and make report thereon, together with my findings of fact, conclusions of law, and recommendations to the court, do hereby report as follows:
The above matter was duly brought on for hearing before me on November 4, 1931, at the courthouse in the city of Scranton, Pa:, and continued from time to time, and proceedings had thereon, of which stenographic notes are filed herewith.
The issues presented for determination are defined by three petitions above referred to and the answers filed by the receivers of the Scranton, Montrose & Binghamton Railroad Company.
All of which petitions were presented to the court and filed after the order of confirmation of sale, which confirmation of sale was made by Hon. Albert L. Watson on October 27,1931.
The principal questions presented to me for determination in these proceedings are:
First. Whether the federal court has jurisdiction to make the order of sale of the personal property and ehoses in action of the Scranton, Montrose & Binghamton Railroad Company, free and clear of all liens and incumbrances, since the personal property and ehoses in action were covered by a mortgage of the said company to the Miners’ Bank of Wilkes-Barre, successor to the Anthracite Savings Bank of Wilkes-Barre, trustee.
Second. Whether all of the personal property disposed of by the receivers at the sale held on October 20, 1931, was the property of the Scranton, Montrose & Binghamton Railroad Company.
Third. Whether the stock of the Lake Winola Association and the stock of the Lake Winola Park Company passed to the purchaser by virtue of the receiver’s sale.
Fourth. Whether the sale of personal property was advertised and conducted in conformity with law.
*864Fifth. Whether Ira F. Fine, one of the receivers appointed by the court, had a legal right to bid at the receiver’s sale.
Discussion.
The matters referred to me for determina^ tion are somewhat complicated because of the opposing interests of the various corporations involved and the intimate association of each of the said corporations to the other.
It would seem at first hand that their interests were identical, but, as the matter unfolds, the Northern Electric Street Railway Company owns that part of the railway from Providence square in the city of Scranton to Chinchilla.
The Dalton Street Railway Company owns from the Scranton City Line to Factoryville, and from Faetoryville to Lake Winola.
The Scranton, Montrose & Binghamton Railroad Company owned that part of the line extending from Faetoryville to Montrose. It was mortgaged by the said company to the Miners’ Bank of Wilkes-Barre, trustee.
This portion of the line was sold by the Miners’ Bank, trustee, at public sale, to G. Tracy Rogers et al., and by them conveyed to the Scranton, Montrose & Binghamton Railroad Company.
The main contention of the Miners’ Bank, trustee, is that the court is without jurisdiction to make the order of sale, and, if such jurisdiction lies in the court under the facts in this ease, it would be an improper exercise of its jurisdiction.
The arguments presented by the attorneys-for the Miners’ Bank, trustee, were to the effect that, no matter what the federal courts have held in other jurisdictions, the federal courts never decided in a Pennsylvania case that the jurisdiction existed in the federal courts exercising jurisdiction in Pennsylvania to order a sale of personal property and ehoses in action, free and clear of liens and incumbrances.
The order is to sell “the personal property and choses in action of the Scranton, Mont-rose & Binghamton Railroad Company free and clear of all liens and encumbrances,” was made by the honorable Albert Watson, September, 1931, in the face of the fact that the mortgage of the Scranton, Montrose & Binghamton Railroad Company purported to be, and under the law was, a first lien upon the personal property sold by the receivers.
An examination of the authorities discloses that the federal courts, in the exercise of its equity powers, has long since exercised the power to order trustees in bankruptcy to sell, free and clear of liens.
A court of bankruptcy may in its discretion order the trustee to sell property of the estate, free and clear from liens and incumbrances, preserving and transferring bona fide and valid liens on the property to the proceeds of the sale. In re Franklin Brewing Company (U. S. C. C. A. N. Y. 1918) 249 F. 333; In re Torchia (U. S. D. C. Pa. 1911) 185 F. 576.
Where there is no express authority in the bankruptcy law for a sale of real estate, free and clear of liens and incumbrances, such sales may be made and good title is thereby given. In re Progressive Wall Paper Corp. (U. S. D. C. N. Y. 1915) 222 F. 87; Gantt v. Jones (U. S. C. C. A. S. C. 1921) 272 F. 117; In re Keet (U. S. D. C. Pa. 1903) 128 F. 651.
Where the estate of a bankrupt includes real estate subject to the liens of valid mortgages and judgments, the court may order it sold by the trustee in bankruptcy, free from incumbrances, the liens being transferred to the proceeds of the sale, and may direct the method of sale and distribution so as to -protect the rights and interests of all parties concerned. In re Leslie-Judge Co. (U. S. C. C. A. N. Y. 1921) 272 F. 886; In re Eatsum Prod. Corp. (U. S. D. C. Fla. 1923) 286 F. 447; In re Worland (U. S. D. C. Iowa 1899) 92 F. 893.
A court of bankruptcy has jurisdiction to order a sale in gross of all the assets of a bankrupt manufacturing corporation in its possession free from incumbrances, notwithstanding the corporation has given a mortgage on such assets to secure its bonds, leaving questions as to what assets are covered by mortgage to be afterwards determined. In re Shoe & Leather Reporter (C. C. A.) 129 F. 588. See, also, In re Union Trust Co., Petitioner (C. C. A.) 122 F. 937.
A court of bankruptcy has jurisdiction to order a sale of property of a bankrupt upon which a lien is asserted free from such lien, and without first determining its validity or amount. In re Loveland (U. S. C. C. A. Mass. 1907) 155 F. 838.
The court of bankruptcy has jurisdiction, by virtue of its exclusive control over the bankrupt’s estate and its equity powers, to restrain mortgage creditors, for a reasonable time, from instituting foreclosure proceedings, and to order the sale of mortgaged property by the trustee in bankruptcy free from incumbrances — the mortgage liens being *865transferred to the proceeds of the sale — in cases where the rights of parties are clear and special circumstances render such a course advisable, after due hearing. In re Pittelkow (U. S. D. C. Wis. 1899) 92 F. 901.
I .am of the opinion that the federal court in all jurisdiction has the power to order a receiver’s sale, free and dear of incumbrances, as was done in this case, and cite as authority a decision rendered in the case of J. J. Van Huffel v. Trace D. Harkelrode, Treasurer of Trumbull County, Ohio, 284 U. S. 225, 52 S. Ct. 115, 116, 76 L. Ed. 256, by the Supreme Court of the United States on December 7, 1931, in which the court, in an opinion delivered by Mr. Justice Brandeis, says:
“The present Bankruptcy Act (July 1, 1898, 30 Stat. 544, c. 541 [11 USCA § 1 et seq.]), unlike the Act of 1867, contains no provision which in terms confers upon bankruptcy courts the power to sell property of the bankrupt free from incumbrances. We think it clear that the power was granted by implication. Like power had long been exercised by federal courts sitting in equity when ordering sales by receivers or on foreclosure. First National Bank v. Shedd, 121 U. S. 74, 87, 7 S. Ct. 807, 30 L. Ed. 877; Mellen v. Moline Malleable Iron Works, 131 U. S. 352, 367, 9 S. Ct. 781, 33 L. Ed. 178.
“The lower federal courts have consistently held that the bankruptcy court possesses the power, stating that it must be implied from the general equity powers of the court and the duty imposed by section 2 of the Bankruptcy Act (11 USCA § 11) to collect, reduce to money and distribute the estates of bankrupts, and to determine controversies with relation thereto.”
I am of the opinion the above-cited decision of the United States Supreme Court to be ample authority to warrant the federal court to make the order of sale of the personal property and ehoses in action of the Scranton, Montrose & Binghamton Railroad Company, free and clear of incumbrances, and recommend that the court should order the liens transferred to the proceeds of the sale and direct the method of distribution of the proceeds of the sale so as to protect the rights and interests of all parties concerned.
Was the Order a Proper Exercise of the Court’s Discretion?
The receivers were appointed upon the 31st day of October, 1930, and continued the operation of the road until July 30, 1931, at a loss until they ceased to operate. During that time no improvements were made either to the rolling stock or equipment of the company, nor was there any money expended upon the rails or roadbeds of the company.
On November 25, 1930, service was suspended by the receivers between Nicholson and Montrose because of the physical condition of the railroad and equipment, there being no money available for necessary repairs and no apparent need for the service which would justify the expense.
Subsequently (the date not appearing in the evidence or papers filed), but prior to July 20,1931, the service was suspended from Factoryville to Nicholson and from Factory-ville to Lake Winola for the same reasons. See Receiver’s Report filed May 29, 1931.
The service from Factoryville to Scranton was continued by the receivers until July 30, 1931.
The entire operation of the road by the receivers was at a loss through no fault of theirs, but because the income from the road was at all times insufficient to meet the necessary expenses of its operation.
The Scranton, Montrose & Binghamton Railroad Company was in default upon its bonds since 1924 (evidence of Gamble, page -of testimony), so that the financial condition of the road was fully disclosed to the trustee for several years prior to the appointment of the receivers, yet, the trustee made no effort to foreclose upon its mortgage until after the sale complained of had been ordered by the court and not until October 27, 1931, the date set by the court for the confirmation of the sale.
The expenses of operation were accumulating, wages of employees were remaining unpaid, and it became necessary that the interests of all concerned should be preserved, so that the honorable Albert Watson ordered the sale complained of, and, in doing so, I am of the opinion the court exercised proper discretion.
Whether all of the personal property disposed of by the receivers at the sale held on October 20, 1931, was the property of the Scranton, Montrose & Binghamton Railroad Company.
Schedule H. Rolling Stock.
Witnesses were called and their testimony taken with reference to the ownership of the property — schedule H — and among the witnesses was R. L. Koehler, who served the railroad under.its different owners from 1907 to 1930 continuously as superintendent of transportation and purchasing agent.
*866While Mr. Koehler was upon the witness stand the following testimony was obtained from him:
“Q. I show you what purports to be a copy of part of the inventory filed, or appraisement by the Receiver in this cause with particular reference to Schedules H. I. and J. showing property of the Receiver’s of the Scranton, Montrose & Binghamton Railroad Company and call your attention particularly to ears 115,117,121 and 122 when and how were these cars acquired? A. 115 and 117 came on the property in 1912, 121 and 122 came on the property in 1915.
“Q. That is during the time it was operated by the Scranton & Binghamton Railroad Company? A. Yes, sir.
“Q. Not by the Northern Electric Co ? A. No, sir. 116 and 118 came on the property in 1915, 120 came in 1916, 0010 came there in 1917.
“Q. The ash car? A. About in 1913.”
This testimony remains uneontradicted, and, as the rolling stock' or ears were purchased by and were the property of the Scranton & Binghamton Railroad Company, then by virtue of the deed of Rogers et al., who had purchased all of the rolling stock and personal property of the Scranton & Binghamton Railroad Company, the title to the said property passed to and became the property of the Scranton, Montrose & Binghamton Railroad Company.
I am of the opinion that the ears concerning which Mr. Koehler testified was the property of the Scranton, Montrose & Binghamton Railroad Company, and have heretofore held that the court had the right to make an order to sell the personal property, free and clear of incumbrances. I am of the opinion that the sale of cars Nos. 115, 117, 121, 122, 116, 118', 119, 0010, and the ash ear were a proper subject of sale by the receivers.
Schedule I. Office Equipment.
The uneontradicted testimony of R. L. Koehler, page 22 of the testimony, discloses that all of the property listed in schedule I, under the heading of “Office Equipment,” on pages 15,16, and 17 of the appraisement, was purchased by the Northern Electric Railroad Company and was leased by'it to the Scranton, Montrose & Binghamton Railroad Company. The master finds that the title to all of the property in schedule I, pages 15, 16, and 17 of the report of the appraisers, filed May 19, 1930, with the single exception of a part of thirty-three lockers purchased by the Scranton & Binghamton Railroad Company, is the property of the Northern Electric Railroad Company, and is not the subject of a legal sale by the receivers.
I am of the opinion that all of the property in schedule I, pages 15', 16, and 17 of the appraisers’ report, filed May 19, 1931,' should be returned by the receivers to the Northern Electric Railroad Company, as it is not a subject of a legal sale in this proceeding.
Schedule J. Materials and Supplies.
The testimony of R. L. Koehler discloses that all of the property listed in schedule J, materials and supplies, was purchased by the Scranton, Montrose & Binghamton Railroad Company. I am of the opinion that title to all of the property listed in schedule J passed to the purchasers at the receiver’s sale.
All of the property listed under schedule J, material and supplies, was purchased by the Scranton, Montrose & Binghamton Railroad Company. This is the material and supplies necessary to keep the railroad in operation, and consists of various articles necessary from time to time for the repair and replacement of parts — material necessary for improvements to railroad or repair of same.
It is true from the evidence that the amount of material in the supply room, car bams, is not equal to the amount held there prior to the- acquisition of the road by the Scranton, Montrose & Binghamton Railroad Company, and it is clear that the Scranton, Montrose & Binghamton Railroad Company, since it acquired the property, did not keep as large supply of materials as its predecessor had, yet, it is also clear that title to the material and supplies of schedule J was in the Scranton, Montrose & Binghamton Railroad Company, subject to the lien of the mortgage. As we have held that the court had jurisdiction to order the sale free and clear of the lien of mortgage, then it follows that title to the material in schedule J, pages 18 and 19 of appraisement, filed May 19', 1981, passed to the purchaser, and the receivers were within their rights in selling same.
Whether the stock of the Lake Winola Association and the stock of the Lake Wino-la Park Company passed to the purchaser by virtue of the receiver’s sale. As to the 540 shares of stock, it appears:
That the said 540 shares of stock of the Lake Winola Association were apparently issued in the name of R. W. Day and "by him assigned in blank. R. W. Day was the superintendent of the Scranton, Montrose & Binghamton Railroad Company and has nev*867er laid claim to this stoek in his own right. An assignment of shares of stock properly delivered amounts to a sale thereof. Act Pa. May 5,1911, P. L. 126 (15 PS § 301 et seq.).
There can be no doubt that the mortgage covered these shares of stoek, and that the assignment was made in blank for the purpose of carrying out the provisions of the mortgage.
Had the delivery been made, that would end this transaction, for the reason heretofore stated, “An assignment of a stoek certificate and delivery to the proper party constitutes a sale thereof.”
Delivery not having been made, the question naturally arises, Upon whom did the obligation to deliver rest? It seems to the master that it rested upon the Scranton, Mont-rose & Binghamton Railroad Company or .its trustee, R. W. Day; he having failed to deliver the said stoek duly assigned, as the Scranton, Montrose & Binghamton Railroad Company, or its trustee, R. W. Day, had undertaken to do by virtue of its mortgage with the Miners’ Bank, trustee, the said company, by its receivers, cannot now expose that stoek for sale to a third party. “Equity considers that done which should have been done.”
The receivers were appointed for the Scranton, Montrose & Binghamton Railroad Company, and their duties were the same as the original company, and it became the duty of the receivers of the said company to deliver, when found, to the Miners’ Bank, trustee, the 540 shares of the stock of the Lake Winola Association. Exposing the said shares of stoek for sale was in violation of their duties and powers as receivers. Their duty to the trustee was the same as the duty of the Scranton, Montrose & Binghamton Railroad Company, which was to comply with the conditions of the mortgage and deliver the stock to it duly assigned. These shares of stock were pledged to the mortgagee for value received, and it would be inequitable and illegal to permit the Scranton, Montrose & Binghamton Railroad Company to again profit by the sale of the same shares of stoek, because, after pledging them, the company had left only its equity of redemption in said shares.
I am of the opinion that the 540 shares of stock of the Lake Winola Association should be delivered to the Miners’ Bank, trustee.
As to the 20 shares of the Winola Park Company.
The deed of conveyance of G. Tracy Rogers et al. to the Scranton, Montrose & Binghamton Railroad Company, 20 shares, $50 par value, of the capital stock of the Winola Park Company, was sold to the Scranton, Montrose & Binghamton Railroad Company. Recital in said deed makes these shares inter alia “being subject, however, to prior pledge thereof to certain outstanding indebtedness of the Scranton & Binghamton Railroad Company aggregating approximately $800,000.00', and the same stock was included in the coverage by mortgage of the Scranton, Montrose & Binghamton Railroad Company to the Miners Bank, Trustee, on October 1, 1919,” the said stocks (including above stocks) to be delivered to the trustee with sueh instruments of transfer as may be necessary in the opinion of counsel satisfactory to the trustee; said shares of stoek of sueh other corporation or corporations shall be duly assigned in blank before being pledged with the trustee.
Prom the evidence it appears that neither the Miners’ Bank, trustee, nor the receivers have possession of this stoek.
According to the evidence, the trust officer of the Miners’ Bank, trustee, has never seen the stoek, and the evidence of the three receivers is that neither of them have ever seen this stock.
The stock at the date of the sale was, according to the evidence, neither in the hands of the receivers nor the trustee.
The 20 shares of stock are specifically conveyed by the deed to the Scranton, Montrose & Binghamton Railroad Company and are pledged by its mortgage to the Miners’ Bank, trustee.
Recital in said deed makes these shares inter aha, “being subject, however, to prior pledge thereof to certain outstanding indebtedness of the Scranton & Binghamton Railroad Company aggregating approximately $800,000.00, and the same stoek was included in the coverage by mortgage of the Scranton, Montrose & Binghamton Railroad Company to the Miners Bank, Trustee, on October 1, 1919.” The said stocks (including the above stocks) to be delivered to the trustee with such instruments of transfer as may be necessary in the opinion of counsel satisfactory to the trustee; said shares of stoek of such other corporation or corporations shall be duly assigned in blank before being pledged with the trustee.
Section 10 of the Act of May 5, 1911, P. L. 126 (15 PS § 310), provides: “An at*868tempted transfer of title to a certificate or to the shares represented thereby without delivery of the certificate shall have the effect of a promise to transfer, and the obligation, if any, imposed by such promise shall be determined by the law governing the formation and performance of contracts.”
While the master can find ño ease wherein this section of the act has received judicial interpretation, it appears to the master that, had proceedings been taken by the Miners’ Bank, trustee, to compel the delivery according to the mortgage undertaking of the Scranton, Montrose & Binghamton Railroad Company under the above-cited section of the act, it is apparent to the master the matter should be determined “by the law governing the formation and performance of contracts,” which would enforce the contract by compelling the Scranton, Montrose & Binghamton Railroad Company to assign and deliver, as it had undertaken to do, the 20 shares of stock of the Lake Winola Park Company to the Miners’ Bank, trustee. The master, therefore, concludes that the stock of said Winola Park Company did not legally pass to the purchaser and should be returned to the Miners’ Bank, trustee.
Whether the sale of personal property was advertised and conducted in conformity with law.
The sale was of the personal property and ehoses in action and was conducted after due public notice at the place designated in the notice.
There is no requirement under the law for such, being conducted at any specified county seat. That provision in the Sales Act having reference to sales of real estate.
I am of the opinion that, as to notice and place of sale, the sale was valid and in conformity with-law.
Whether Ira C. Fine, one of the receivers appointed by the court, had a legal right to bid at the receiver’s sale.
Ira Fine was one of the receivers appointed by the court for the Scranton, Montrose & Binghamton Railroad Company, and continued to act in that capacity from the date of the appointment until the sale of the personal property, October 20,1931, and is still acting in the capacity of a receiver.
The sale by the receivers, of whom Ira Fine was one, was conducted at the Post Office building in Scranton, Lackawanna county, Pa., which building is also the building in which the federal court of this district has its offices.
The master believes it is the legal duty of the receivers to protect the property of the parties for whom he is appointed by using his very best efforts in behalf of the property and the interest involved.
The practice of permitting a receiver to be both a purchaser and a seller at his own sale should be carefully scrutinized by the court, and, unless the court is fully satisfied and convinced that by his so doing the interests of the cestui qui trustent is being better served than otherwise, the practice should be condemned, because it is open to treachery.
Without citing authorities, it is well-established law in Pennsylvania that no school director can lawfully purchase from or sell a school director, which he is serving as a member of the school board of that school district, any property or thing of value, for the very good reason that, where he buys from himself and by the same token he sells to himself, he is most likely to declare a dividend in his own favor, both as buyer and seller. The same applies to couneilmen and all like officers in a fiduciary capacity in Pennsylvania.
In the instant ease, Ira C. Fine, receiver, bid at the receiver’s sale, and was, as I understand the evidence, the highest bidder. His bid was apparently in his own right.
The objections being made to his bid, it appears, from the evidence that the matter of his legal right to bid was objected to by James K. Peck, attorney, and his objection was brought to the attention of Hon. Albert Watson in open court, and whatever objection was made to the bid by James K. Peek, attorney, the record does not disclose, but after the appearance in open court the objection was withdrawn by him, and the bid of Ira C. Fine, he being the highest bidder, was allowed to stand.
The master finds that there was no fraud in the conduct of the sale, and, being without fraud, it should not be disturbed because one of the receivers bid at it.
I am of the opinion that the rule for an injunction and the rule to set aside the receiver’s sale should be discharged.
The rule to disclaim should be modified to conform to this report; that is to say, that the receivers should disclaim all title to the 540 shares of stock of the Lake Winola Association and 20 shares of the Winola Park Company, and to the property designated in *869schedule I, pages 15, 16, and 17 of the appraisers’ report, filed May 19,1931.
In all other respects the sale should, be approved.
Findings of Fact.
1. Ira C. Fine, Warren Acker, and Rex Maxey were appointed receivers for the Scranton, Montrose & Binghamton Railroad Company by Hon. Albert Watson on-, 1930.
2. The receivers continued to operate the road at a loss until July 20, 1931, when operation of the railway was discontinued.
3. The receivers were in possession of the property of the Scranton, Montrose & Binghamton Railroad Company from-until the date of sale, October 23, 1931.
4. On August 31, 1931, petition by receivers for permission to sell the personal property and ehoses in action of the Scranton, Montrose & Binghamton Railroad Company was presented to the court.
5. All of the personal property and ehoses in action sold at the receiver’s sale on October 23,1931, was the property of the Scranton, Montrose & Binghamton Railroad Company, except the 540 shares of stock of the Lake Winola Association and the 20 shares of stock of the Lake Winola Park Company, and all of the property in schedule I, pages 15,16, and 17 of the appraisers’ report, filed May 19, 1931.
6. That the personal property and ehoses in action of the Scranton, Montrose & Binghamton Railroad Company were subject to the lien of the mortgage of the said company to the Miners’ Bank of Wilkes-Barre, as trustee.
Conclusion of Law.
That the sale by the receivers on October 23, 1931, was a valid sale of the property found to be owned by and in the possession of the Scranton, Montrose & Binghamton Railroad Company.
All of which is respectfully submitted.
James J. Powell.
On Rules to Show Cause.
H. C. Reynolds and C. B. & J. H. Price, all of Scranton, Pa., for Miners’ Bank of Wilkes Barre.
H. R. Yan Deusen, of Scranton, Pa., for Northern Electric St. Ry. Co.
Kelly, Balentine, Fitzgerald & Kelly, of Scranton, Pa., for receivers.
Abram Salsburg, of Wilkes Barre, Pa., and James K. Peek, of Scranton, Pa., for Lake Winola Ass’n.
The following rules to show cause were granted in this ease:
a. October 28, 1931, on petition of the Miners’ Bank of Wilkes Barre, Pa., rule upon Ira C. Fine and Abram Salsburg, attorney,, their agents, employees, and assigns, to show cause why they should not be enjoined from, removing or interfering with any of the property mentioned or described in the petition of the Miners’ Bank of Wilkes Barre, Pa., filed October 28, 1931.
b. October 31, 1931, on petition of the Northern Electric Street Railway Company and the Dalton Street Railway Company, rule upon Warren T. Acker, Ira C. Fine, D. Rex-ford Maxey, receivers, to show cause why they should not disclaim all right, title, and interest in and to the property included in schedules H, I, and J of the appraisement of property of the Scranton, Montrose & Binghamton Railroad Company filed in this court May 19, 1931, and why they should not return said property.
e. November 3, 1931, on petition of the Miners’ Bank of Wilkes Barre, Pa., rule upon Warren T. Acker, Ira C. Fine, and D. Rexford Maxey, receivers, to show cause why the receivers’ sale confirmed October 27,1931, should not be set aside, and why the stock of the Lake Winola Park Company and Lake Winola Association should not be delivered to the Miners’ Bank of Wilkes Barre, Pa., trustee.
Answers to the petitions on which the rules were granted were filed by Warren T. Acker, Ira C. Fine, and D. Rexford Maxey, receivers, and the issues raised by the petitions, rules, and answers were referred to James J. Powell, Esquire, as master, to take testimony and make report thereon, together' with his findings of fact and conclusions of law, and recommendations to this court. In pursuance thereof, the master heard the testimony, made the findings of fact and conclusions of law, and made the following recommendations :
“I am of the opinion that the rule for an injunction and the rule to set aside the receiver’s sale should be discharged.
“The rule to disclaim should be modified to conform to this report; that is to say, that the receivers should disclaim all title to the 540 shares of stock of the Lake Winola Association and 20 shares of the Winola Park *870Company, and to the property designated in schedule I, pages 15, 16, and 17 of the appraiser’s report, filed May 19, 1931.”
Exceptions have been filed to the master’s report by the Miners’ Bank of Wilkes Barre, Pa., trustee; the Northern Eleetrie Street Railway Company; Abram Salsburg; James J. Peek, attorney; and Warren T. Acker, Ira C. Pine, and D. Rexford Maxey, Receivers.
In disposing of the exceptions, I shall first refer to the recommendations of the master that the rule for injunction and the rule to set aside the receivers’ sale should be discharged.
As to the conclusion by the master that the injunction should not issue, and that the receivers’ sale should not be set aside, there is competent evidence to sustain the findings of fact by the master, and, there is no evidence of mistake on his part. The conclusions of law by the master, based upon the facts as found, necessarily follow. I find no error there. After careful examination of the testimony taken before the master, consideration of the arguments and briefs of counsel, I approve the master’s findings of fact and conclusions of law, in connection with the rule for injunction and the rule to set aside the receivers’ sale, and adopt the same as the findings of fact and conclusions of law of the court. I approve the opinion of the master and adopt the same as the opinion - of the court. I approve the recommendation of the master that the rule for injunction be discharged, and the rule to set aside the receivers’ sale be discharged.
There remains for consideration the exceptions to that part of the master’s report, wherein the master recommends that: “The rule to disclaim should be modified to conform to this report, that is to say, that the Receivers should disclaim all title to the 540 shares of stock of the Lake Winola Association and 20 shares of the Winola Park Company, and to the property designated in Schedule I., pages 15,16 and 17 of the appraiser’s report, filed May 19,1931.”
The master finds that the rolling stock described in schedule H, page 14 of the appraisers’ report, was the property of the Scranton, Montrose & Binghamton Railroad Company, and that the receivers should not disclaim their right, title, and interest therein and thereto; that the materials and supplies described in schedule J, page 18 of the appraisers’ report, were purchased by and were the property of the Scranton, Montrose & Binghamton Railroad Company, and the right, title, and interest in and to said property should not be disclaimed by the receivers; that the office equipment described in schedule I, pages 15; 16, and 17 of the appraisers’ report, is the property of and belongs to the Northern Electric Railroad Company, and that the receivers should disclaim all right, title, and interest in and to the same.
There is competent evidence to support these findings. The conclusions of law by the master based on the facts as found necessarily follow. I approve this part of the opinion of the master and adopt the same as that of the court.
I cannot adopt the recommendation of the master that the receivers should disclaim all title to 540 shares of stock of the Lake Wino-la Association and 20 shares of the stock of the Lake Winola Park Company.
October 20, 1931, the receivers sold the personal property of the Scranton, Montrose & Binghamton Railroad Company described in schedules C to L of the appraisers’ report, which included all of the right, title, and interest of the Scranton, Montrose & Binghamton Railroad Company in and to 540 shares of stock of the Lake Winola Association and 20 shares of stock of the Lake Winola Park Company. The sale by the receivers was confirmed by this court October 27,1931, and on November 3, 1931, the Miners’ Bank of Wilkes Bajpe, Pa., trustee, under the mortgage of the Scranton, Montrose & Binghamton Railroad Company, petitioned the court for a rule on the receivers to show cause why the receivers’ sale should not be set aside, and why the stock of the Lake Winola Park Company and of the Lake Winola Association should not be delivered to the Miners’ Bank of Wilkes Barre, Pa., trustee. The rule to show cause was granted.
The mortgage of the Scranton, Montrose & Binghamton Railroad Company to the Miners’ Bank of Wilkes Barre, Pa., trustee, dated October 1,1919, purports to convey to the trustee all the right, title, and interest of the Scranton, Montrose & Binghamton Railroad Company in the shares of stock of the Lake Winola Association and the Lake Winola Park Company, and the mortgage contains the following provision: “As certain of the bonds, shares of stock and property above enumerated are at present pledged as eollateral'seeurity for the payment of certain obligations of the Company, the assignment thereof to the Trustee is subject to such prior pledge, although it is intended from the proceeds of *871the bonds hereby secured to pay off said obligations and thus redeem and reclaim the said bonds, shares of stock and property pledged as aforesaid and to deliver same to the Trustee as further security for the payment of the bonds herein mentioned.”
It appears that the parties contemplated a future delivery of the shares of stock as a pledge. The delivery was never made, and the shares of stock were never in the possession of the trustee.
The mortgage to the Miners’ Bank of Wilkes Barre, Pa., trustee, was given by the Scranton, Montrose & Binghamton Railroad Company in 1919, and has been in default for many years. The trust officer of the Miners’ Bank of Wilkes Barre, Pa., testified that he knew of the appointment of the receivers about the time they were appointed, and that, subsequently, he sat in conference with them. The trustee never objected to the receivership nor to the operation of the road by the receivers, from which the receivers’ expenses were incurred; nor did it make any effort to procure possession of the shares of stock until after the stock was sold, the sale confirmed, and the purchaser at the sale had sold and assigned the shares of stock to James K. Peek, attorney. There was no. delivery of the stock to the Miners’ Bank of Wilkes Barre, Pa., trustee, and, therefore, there was no pledge of that stock to the Miners’ Bank of Wilkes Barre, Pa., trustee.
“ ‘Nothing is better settled,’ says one of the courts, ‘than that shares in capital stock of a corporation are the subject of pledge.’ It is essential, however, to a valid pledge of any species of personal property that the thing pledged should be delivered to the pledgee. ‘But a pledge, in the legal sense, requires to be delivered to the pledgee. He must have possession of it. * * * In the case of stocks and other ehoses in action, the pledgee must have possession of the Certificate or other documentary title, with a transfer executed to himself, or in blank (unless payable to bearer), so as to give him the control and power of disposal of it.’ * ® * There must be a continued change of possession. Delivery, momentary possession and return are insufficient. * * ” A pledge of stock by an instrument in writing not accompanied by a delivery of the certificate is not a pledge against third parties, nor is it good as against a judgment creditor of the pledgor. Delivery is always essential to the creation of a pledge. Thompson on Corporations (2d Ed.) Vol. 4, page 716, § 4200.
The Miners’ Bank of Wilkes Barre, Pa., trustee, contends that, the stock of the Lake Winola Park Company and the Lake Winola Association were subject to the mortgage, basing its claim on the Act of June 12, 1878, P. L. 183, § 1, Purdon’s Penna. Statutes Anno., title 67, § 523, page 341 (67 PS § 523). This act authorizes the mortgaging of the real and personal property of a railroad, but does not authorize the mortgaging of stocks and bonds, accounts receivable, bills receivable, cash, or other ehoses in action. The words “personal property” in the statute undoubtedly refer to tangible personal property, such as rolling stock, rails, etc. The courts have never decided that under this statute a mortgage could cover certificates of stock or other ehoses in action, for, to do so, would be contrary to the established policy of the law. It has been the fixed policy of the law in Pennsylvania and elsewhere that negotiable securities are not subject to any constructive lien, and that the possession of the certificates themselves is necessary to the creation and the continuance of a lien. Likewise, it is essential to the maintenance of a pledge that the pledgee retain possession; otherwise, if the possession is lost, the lien is lost. 21 R. C. L. 642, § 10.
The 540 shares of stock of the Lake Wino-la Association and the 20 shares pf stock of the Lake Winola Park Company were never delivered to the Miners’ Bank of Wilkes Barre, Pa., trustee, were owned and possessed by the Scranton, Montrose & Binghamton Railroad Company at the time the receivers were appointed, and the sale of said stock as sold by the receivers should not be set aside, and the receivers should not disclaim title thereto.
The equity maxim, “Equity looks upon that as done which ought to be done,” has no application here, but rather the equity maxim, “Equity aids the vigilant, not those who slumber on their rights.” The trustee was guilty of laches, has presented a stale claim, and is not entitled to equitable relief. Courts should undoubtedly guard against opening doors to complainants who have been guilty of negligence in asserting their rights, and certainly after they have had actual or constructive notice of the existence of a damaging situation.
The receivers have worked diligently, conscientiously, and effectively, and have served faithfully in every way. Employees who worked on the railroad have not been paid their wages for several months. Many other *872necessary expenses incurred in operating the road and serving the public have remained unpaid for many months. The bid of $25,000 made at the receivers’ sale and accepted by the court was not only reasonable but was under all the circumstances as much or more than could be expected, and was the result of efforts on the part of the receivers. Again offering the property for sale would undoubtedly result in a much lower bid for the property, less property to sell, due to the fact that thefts of wire and other property were occurring along the abandoned railroad which, because of the expense, it was not possible to guard; and the depreciation in the value of the property. The many motions made by the trustee during the past four months have hindered the receivers in the delivery of the property sold to such an extent that delivery of all the property sold has been made impossible, and the purchaser, because of delay, has refused to accept delivery of parts of the property, and has demanded the return of oyer $5,000 of the amount of his bid paid to the receivers. This may, and probably will, result in a resale of some of the property at a much lower price than that obtained at the receivers’ sale, and further loss to the receivership and to those who are justly deserving of payment for materials furnished and services rendered.
The exceptions to the master’s report filed by the Miners’ Bank of Wilkes Barre, Pa., trustee, and by the Northern Electric Street Railway Company, are dismissed; the exceptions to the master’s report filed by Abram Salsburg and James K. Peck, attorney, and the exceptions to the master’s report filed by-Warren T. Acker, Ira C. Pine, and D. Rex-ford Maxey, receivers, are sustained; the rule to show cause why the restraining order granted O’etober 28-, 1931, should not be continued is discharged, and the restraining order is dismissed; the rule granted October 31, 1931, to show cause why the receivers should not disclaim all right, title, and interest in and to the property included in schedules' H, I, and J of the appraisement of property of the Scranton, Montrose & Binghamton Railroad Company filed May 19, 1931, is discharged as to the property included in schedules H and J, and made absolute as' to the property included in schedule I; the rule granted November 3,1931, to show cause why the receivers’ sale confirmed October 27,1931, should not be set aside, and why the stock of the Lake Winola Park Company and the Lake Winola Association should not be delivered to the Miners’ Bank of Wilkes Barre, Pa., trustee, is discharged, excepting as to the property included in schedule I of the appraisers’ report, as to which property the sale thereof is set aside.
And it is further ordered that the compensation allowed to the master, as fixed by this court, shall be paid by the Miners’ Bank of Wilkes Barre, Pa. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219060/ | HOLMES, District Judge.
The plaintiff, by bill in equity, is attempting to fix a lien upon the cash which was turned over to the receiver of an insolvent national bank. She claims to have established a trust fund with the bank as trustee. The agreed statement of facts discloses that she is the widow of E. E. von Seutter, who died in October, 1918, leaving a will in which she, as the main beneficiary, was devised and bequeathed certain real and personal property. The final clause of the will provided for the payment of $1,000' to the testator’s son, “in ease my wife marries again.”
In making three warranty deeds of parcels of real estate, the title to which passed to her under said will, the widow, “desiring to provide for the protection of the warranty” against the son’s contingent legacy in the event of her remarriage, recited in each of said deeds that, to satisfy the provisions of the will, she had placed on time deposit with the First National Bank of Jackson, Miss., the sum of $1,000, which was to be held by it in trust until her marriage or death, but the interest thereon was to be paid to her.
The deposit was made in the form of a cheek for that amount payable to Mrs. Seutter and drawn on said First National Bank by the Jackson Building & Loan Association. The cheek was indorsed by the payee, delivered to the bank on which it was drawn, and for it she received a deposit slip, in words and figures as follows:
“The First National Bank
“$1,000.00 Jackson, Miss.
“8 — 20—21
“Certificate of Deposit No. 15858
“Not Subject to Cheek.
“Mrs. A. M. v. Seutter in trust for Alfreda, Ned and Arinin Seutter, has deposited with this Bank One Thousand Dollars subject to trust conditions on file with us in agreement between Dr. L. H. Howie and H. S. Howie and J. T. Williams payable to the order of the above in current funds on return of this Certificate properly endorsed, subject to conditions above. With interest at 4 per cent, per annum if left 12 months.
“Payable Aug. 20/22
“O. J. Waite, V. P.”
Appended to each of the warranty deeds was an acknowledgment of the vice president of the bank, as follows:
“Personally appeared before me the undersigned authority the within named O. J. Waite, an officer of the First National Bank, duly authorized to make acknowledgments for and on behalf of the First National Bank, who acknowledged that the sum of $1,000.00 has been deposited by Mrs. A. M. v. Seutter in the First National Bank of Jackson, Mississippi, in trust, the said $1,000.00 to be held by it until the marriage or death of Mrs. A. M. v. Seutter, in trust for the purposes stated in the above deed of conveyance, and the First National Bank, by its proper officers has agreed to carry out the conditions of the payment of $1,000.00 as provided herein.
“Witness my signature for the First National Bank of Jackson, Mississippi.
“O. J. Waite, Vice-President.”
It is further stipulated that the bank was solvent when the original deposit was made; that the certificate of deposit was renewed annually from 1923 to 1930; that Mrs. Seutter was paid the interest thereon annually during all of this time; that more than $1,000 in *878cash was in the vaults of the hank when the original deposit was made, remained therein until a receiver was appointed, and passed into the hands of the defendant; that no money was actually deposited in the hank, but there was merely a shifting of credits; that there was no segregation of any part of the assets to protect the trust; and that, except as above stated, the transaction was treated as an ordinary deposit, the item not appearing in the trust department of the bank, but simply a memorandum thereof being made in the record of the outstanding certificates of deposit upon which interest was paid from time to time.
We have here a clear intention on the part of all parties to create a trust, and that such was done is beyond doubt. It is not one implied by law or resulting from the acts or misconduct of one of the parties, such as equity sometimes raises to prevent an injustice, but is an express trust, wherein the intention of the parties is material. There is no question as to who was the founder or who is the trustee or beneficiary, but (there having been no augmentation and no segregation) the controversy is as to what constitutes the trust estate; what is the res? Was it a part of the assets, i. e., the cash in the vaults, or was it merely the indebtedness due by the bank upon a general deposit, i. e., a chose in action? It is not reasonable to conclude that any of the actors contemplated a transaction wherein the bank would set aside $1,000' of its cash during the widowhood or lifetime of Mrs. Seutter, and pay her interest thereon at the rate of 4 per cent, per annum. On the contrary, obviously, it was the intention of the parties that the bank should have the use of the money. This fact is strong evidence that the title to the fund passed to the bank. Taken with the other facts in this case, and the absence of proof that the bank had any assets in its trust department, it is conclusive evidence thereof. Scammon v. Kimball, 92 U. S. 362, 23 L. Ed. 483; Commercial Bank of Pennsylvania v. Armstrong, 148 U. S. 50, 13 S. Ct. 533, 37 L. Ed. 363; McNulta v. West Chicago Park Commissioners (C. C. A.) 90 F. 900; Davis Trust Co. v. Smith (C. C. A.) 226 F. 410.
The title having passed to the bank, and it having become a debtor for the amount of the deposit, with interest thereon, the bank occupied a dual relation, that of creditor and trustee. It was trustee of its own indebtedness. This chose in action was the res or thing which was intrusted to the bank. It was liable to depreciate in value if the bank suffered losses or became insolvent in like manner as if another bank or person had been designated trustee. Because the trustee has become insolvent, it may resign or be removed, but the plaintiff, who made the deposit, is not entitled to recover in full the indebtedness with interest, either for herself or others, merely because the bank is insolvent and the trust estate has shrunk in value. The receiver is willing to pay the pro rata dividends on the deposit to whomever is entitled to receive them, but the plaintiff is not such person, and, therefore, cannot recover in this suit. An appropriate decree may be entered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219061/ | CAFFEY, District Judge.
The present inquiry is whether the respondent, David Paris, committed a contempt of this court in presenting to it affidavits which were forged, in support of an application by him, as attorney in behalf of his brother Sidney Paris, for a new trial.
The question is important. It is important to the respondent; it involves him as a member of the bar of this court. It is important to the government officials who are accused, in the affidavits alleged to be forged, of misconduct; even worse, of subornation of perjury in connection with the five persons in whose names the alleged forged affidavits were made and who testified as witnesses for the government at the Bennett trial. It is important to the court. The court sits to do justice; it cannot succeed in'the performance of that office unless it can trust documents presented to it by members of the bar. The court is helpless to administer justice if it must stop to investigate in every instance, when a member of its bar presents for its consideration a document, as to whether or not it is genuine. The court has a right to rely with confidence on the good faith of documents brought to it by lawyers. It is therefore of extreme importance to the court to determine whether or not affidavits submitted for its action upon a motion for a new trial are forged and fictitious.
Jn the challenged affidavits, on their face, it is sought to disclaim the testimony of five persons who were witnesses for the government at the trial of the Bennett case. In those affidavits it is charged by each of the alleged signers: First, that what they then testified was perjury; secondly, that they were procured so to perjure themselves by coercion or by offers of reward by those connected with the government, both in the United States attorney’s office and in the postal service, that they were induced either by threats or by promises to testify falsely, to commit perjury, the government officials therefore being charged with having suborned perjury; third, that now the alleged makers of those affidavits recant their testimony given at the trial and explain that they gave it under the circumstances I have related about being suborned by the government officials to give it.
What could be graver for the consideration of a court than to determine whether such affidavits, which are handed up for its official action upon a motion for a new trial, are genuine, when in response there are presented on the same day, in opposition, affidavits, eoneededly signed by the same individuals whose names purport to be affixed to the affidavits in support of the motion, which say that their names were forged to and that there is not a word of truth in the affidavits presented in support of the motion ?
When that situation arose, it became the duty of the court, instantly, immediately, and to the sacrifice of the conduct of other business of the court, to institute this inquiry. It has been pursued since the 10th of July. Adequate opportunity has been afforded to both sides to put in whatever testimony they saw fit. Much consideration has been given to this testimony.
I repeat, hardly anything can be of more importance in the administration of justice by the court than to reach a correct solution of the problem thus presented.
There are five affidavits which it is claimed were forged.
First are those by Samuel Walters and David Walters. The testimony as to the genuineness of the signatures to those two affidavits is in dispute. It is not essential to the disposition of the present inquiry that I determine that dispute. Those affidavits I shall dispose of when I come to the motion for a new trial. I shall, therefore, for the present purposes lay them aside for the moment.
The other three affidavits are by Mrs. Mayer, Lapkin, and Waterman. Were they forged? The proof is manifest and incontrovertible that each of them was forged. It is beyond the realm of rational controversy that three of the affidavits presented to this *880court by the respondent in support of the motion for a new trial were forged. In argument yesterday it was conceded that they were forged.- Counsel for the respondent frankly said so. This admission was not necessary, however, because the proof had already established that they were forged, though, it should be noted, it is not claimed that the respondent personally signed the affidavits. Nevertheless, the- admission removes the issue as to whether they are forged.
Under the proof also no issue arises as to who forged the affidavits, except as between Samuel Walters and Sidney Paris. Plainly one or the other forged the three affidavits. I am satisfied by the proof that all of them were forged by Sidney Paris. The testimony is convincing that that is what happened.
The witness Bertha Friedman told the truth. There is no need to resort to experts about the Lapkin affidavit. Bertha Friedman’s testimony satisfied me that Sidney Paris signed the name of Lapkin to the affidavit presented.
Neither in law nor in common sense is a judge or a jury, any trier of facts, bound to abide by the opinions of people as to the facts. Expert testimony is taken for the assistance of triers of the facts. The proof here convinces me, without resort to any expert opinion, that the handwriting in which the names of Mrs. Mayer and Waterman are signed to the affidavits presented in the names of those two-, is that of Sidney Paris. Even the signature of one of the notaries is forged. The elderly gentleman, Mr. Paul, who appeared on the stand perfectly satisfied me that where the name of Mr. Peterson is included, bunglingly made and altered, even misspelled, in one of the affidavits, it is not the signature of Mr. Peterson.
There was therefore forgery of the three, affidavits, ánd the name of the notary public was forged in one of them.
What is the responsibility of the respondent? That is the serious feature of the inquiry.
No action should be taken by this court affecting a member of its bar without the exercise of great caution. Moreover, in a case of this character guilt should not be declared unless it be established by a high measure of proof.
There is a good deal of conflict in the testimony bearing on this phase of the matter; whether the respondent had knowledge or what would be the equivalent of knowledge; whether he exercised due care or whether he closed his eyes; whether he presented the forged affidavits to the court without any effort to ascertain whether they were genuine. He testified as to the two Walters affidavits that he was present when they were signed. I have laid them aside to be dealt with when I come to the motion for a new trial. I am now dealing with the three affidavits of Mrs. Mayer, Lapkin, and Waterman. They are coneededly forged.
What is the duty of a lawyer who comes into court and lays affidavits before it as a basis for its action? As T have indicated, no conclusion adverse to the respondent should be drawn unless it be based on proof beyond reasonable doubt. I shall not give weight for the moment to the testimony given by other witnesses to the contrary of what was said by the'respondent himself. I shall take up for consideration now only what he himself said. What is it?
First, he personally drew all the affidavits.
Second, he never made inquiry of any of the persons whose names purport to be signed to the affidavits. These were affidavits in which the persons whose names were attached confessed perjury on their own part at the trial of the Bennett case, accused the government officials of subornation of perjury, and wholly recanted their own testimony given at the trial. Yet, according to the respondent’s own testimony, he never asked any one of the three a single question as to whether or not what he, without inquiry, had put into the -affidavits was true or untrue.
Third, the respondent says that he relied on the statements to him of Samuel Walters to the effect that the three persons concerned would sign the affidavits. As I have said, I do not at present go into the dispute of that. I take the statement on the subject as made by the respondent himself. The respondent knew that Samuel Walters was a crook; the respondent knew that Samuel Walters was a forger. It is argued by the respondent, through his counsel, that in no respect was Samuel Walters to be relied upon. Yet the respondent says in his own behalf that he relied exclusively on Samuel Walters when he (Walters) said that he would procure affidavits from three persons confessing perjury, charging government officials with subornation of perjury, and recanting their testimony, without ever propounding a question or attempting to propound a question to those persons. In addition, concurrently, while the scheme was in progress, the scheme for getting affidavits and making use of them *881for a new trial motion or otherwise, which resulted in the three being actually used on the motion for a new trial, the respondent says that he became the attorney for Samuel Walters, without fee, and put Walters under obligation to himself. Further, during the same period the respondent acted as attorney in the foreclosure contempt proceedings fori Samuel Walters and his parents. Yet, without inquiry of the three witnesses, the respondent relied wholly upon Samuel Walters’ statement that these people would sign the affidavits he had drawn.
Fourth, there were produced, late in the present trial, after Mrs. Mayer had testified, other affidavits bearing her name which had been in the possession of the respondent for a number of weeks preceding July 5, the day the papers on the motion for a new trial were served. The respondent had in his hands, at the time the affidavit in the name of Mrs. Mayer was presented in this case, two other affidavits purporting to have been made by her. Mere inspection and comparison of the handwriting of the signatures on those affidavits would have demonstrated clearly that the three papers were not signed by the same person. One of those affidavits even had the given name “Edith,” in the body of the affidavit as well as in the signature, plainly written over a scratched or altered surface, thus disclosing that the word “Edith” had been substituted for another name.
Lastly, did the respondent have any reason to suspect that any of the affidavits would be repudiated? Again, I resort only to his own statement. He testified, and he has proved to my satisfaction, that on July 10, in advance of the submission of the new trial motion at a later hour that day, the day on which he offered all the affidavits, Samuel Walters was in his office and then notified him that at least two of the involved persons would repudiate the affidavits he had served. Did he stop or halt or hestiate ? Not at all. He walked into court with that information given to him, within half an hour after he had received it, and presented the identical affidavits to the court and insisted on their genuineness.
What are the excuses?
First, the respondent says that Samuel Walters proposed to get the affidavits and either deliver them or cause them to be delivered. This is the man in whom, according to his own testimony, no credence whatsoever is-to be placed; a crook and a forger, and known by him to be a crook and a forger. Yet the respondent says he should be deemed blameless because that kind of a man brought the affidavits to him. He says he had no actual knowledge that the documents were forged. Is that enough? Is that sufficient to constitute lack of knowledge? He says he made no inquiry either of Samuel Walters or of anybody else. He concedes that he made no effort whatever to find whether the affidavits were genuine. Even when Walters warned him that two of the affidavits would be repudiated, he made no effort. He went further. He continued the effort to show the authenticity of the affidavits throughout the trial until during the closing argument by his counsel yesterday.
In connection with the law of the case, I shall come back to the question of knowledge and of what constitutes knowledge, not only in this branch of the law, but under any aspect of the law; the law as to when a man is on inquiry, when he is put on inquiry.
Second, the respondent offers Zektzer to corroborate him.
Zektzer in no material respect helps the respondent. Zektzer says that he never opened the two sealed envelopes left in his possession and said by Samuel Walters to contain, one of them the affidavit of Mrs. Mayer, and the other the affidavit of Waterman. If he had inquired of Zektzer, the respondent would have been told that Zektzer had no knowledge whatsoever with respect to what was contained in the envelopes. Whatever Zektzer knew about the affidavits was acquired solely from Samuel Walters, to whom the proof shows the respondent had frequent personal access.
Again, the respondent testifies to certain telephone conversations during the session of the Legislature in Albany, to the effect that Zektzer had received affidavits of Waterman and Mrs. Mayer.
The Legislature adjourned April 10. The only one of the affidavits with which we are now concerned which bears date of execution earlier than April 10 is that of Waterman. It purports to have been verified on April 5. Waterman testifies that he was in the state of Virginia at that time, and I believe him. The affidavit presented in the name of Mrs. Mayer is dated June 3, nearly two months after the Legislature had adjourned.
Not even can there be corroboration out of the testimony of Zektzer with respect to two other affidavits claimed to have been signed by Mrs. Mayer, which respondent had in his possession. Exhibit 40 purports to *882have been signed on May 13, and Exhibit Y on May 17. The respondent brought forward a fourth affidavit purporting to bear the signature of Mrs. Mayer. This is dated March 31. It is the affidavit that he said he redrafted. He says he used this in drawing the one he turned over to Walters. There is no claim that the fourth affidavit, said to have been verified March 31, was ever in the hands of Zektzer.
On analysis of the testimony, Zektzer furnishes no corroboration. On the contrary, there is most serious conflict. When the respondent took the stand first, his testimony was unequivocal that Zektzer was the attorney for Mrs. Mayer; that Zektzer told him that she had consulted him (Zektzer) as to the signing of the affidavit, and he advised her to sign it. Mrs. Mayer testified and Zektzer testified that he was not and never was her attorney subsequent to January, 1931, while the affidavits are dated in 1933. Zektzer testified that she never conferred with him about any affidavit; that she never consulted him a.t all and he never advised her, and he did not even see a document with her name signed to if. All that he saw was a sealed envelope. Whether or not there was inclosed an affidavit by Mrs. Mayer rested wholly upon an inference he drew from something Samuel Walters had said to him.
Later in his testimony the respondent stated that he was in error and withdrew his statement with respect to Zektzer having consulted with and advised Mrs. Mayer. Nevertheless, this does not help the respondent. There is no support of him. On the other hand, there is direct conflict between the testimony of Zek'tzer and that given by the respondent.
Furthermore, if Zektzer had the conversation from Albany while the respondent was in Albany during the session of the Legislature, referring to having in possession affidavits of Waterman and Mrs. Mayer, a question propounded to him by the respondent would have revealed that Zektzer had no information, and, as he testified on the stand, to this day he has had no actual information whatever, about either affidavit.
I repeat that the fact that the latest affidavit, the one presented in support of the motion in the name of Mrs. Mayer, is dated June 3, demonstrates that it could not have been in the possession of Zektzer at the time of the Albany conversation preceding April 10. The March 31 affidavit, Exhibit 0, purporting to have been executed in the presence of the notary Rosenthal, who was not produced, is the only one of the four produced in the name of Mrs. Mayer dated earlier than April 10. While I would not accept without corroboration anything that Samuel Walters says about it, the circumstances in this ease indicate pretty plainly that Mrs. Mayer never signed that affidavit with anything in it at the time of her signature relating to this case or relating to Sidney Paris. Her signature is on page 6. The circumstance as to page 6 of that affidavit, devoted to merely extraneous matter about Samuel Walters, having nothing whatever to do with Sidney Paris or with anything connected with the Bennett ease, convinces me that the explanation given by Samuel Walters as to how that March 31 affidavit was procured from Mrs. Mayer is probably the truth and that, when it was signed, the affidavit contained none of the pages, preceding page 6, which relate to the Bennett ease.
I have already pointed out that Exhibit V, the alleged affidavit brought forward at a late stage by the respondent, the alleged affidavit of Mrs. Mayer purporting to have been executed on May 17, before the notary Peterson, is a plain forgery. Mrs. Mayer never signed it. Look at it. The forgery is obvious. The name “Edith” was substituted. You can see the forgery in the name “Edith”, at the end by mere inspection.
What follows from all this?
As I have indicated, in the law what any man in the exercise of ordinary care might learn, what he purposely shuts his eyes to exclude, is just as much within his knowledge as is actual direct knowledge.
Consider what the respondent was engaged on. He was going to court to present affidavits calling for action by the court. The action he was seeking was setting aside the solemn verdict of a jury. In those affidavits the alleged makers said that they had committed perjury at the trial in which the verdict was rendered. In those affidavits the alleged makers said that their commission of that perjury had been brought about by government officials. In those affidavits the alleged makers said that they recanted what they had testified at the trial; that now they wanted to relieve their souls of the injury they had done.
Was there any duty on the part of the lawyer to inquire or to make some investigation, and not to rely exclusively upon things a crook and forger told him, before he *883brought such affidavits for such a purpose to the court, which had a right to rely upon his having taken due care to ascertain that those documents were genuine before they were presented? The question answers itself. In practically every branch of the law, where knowledge or notice is involved, the rule is the same; you know what you ought to have known, when you were under the duty to make inquiry and to ascertain for yourself what is the truth.
The subject, however, has been expressly dealt with by the courts. The case of United States v. Ford (D. C.) 9 F.(2d) 990, 991, is particularly in point. It was there held, in respect to a matter like this, that negligence on the part of an attorney is equivalent to actual knowledge.
In that case an attorney submitted to the court a bill of exceptions which contained a number of exceptions that had not been taken at the trial. He presented also an assignment of error which had no basis whatsoever in the record. "When cited for contempt his excuses were, as to the exceptions not taken at the trial and which were embodied in the proposed bill of exceptions, that he had left to the court reporter the preparation of the bill of exceptions, had failed himself to examine it, and had no knowledge that there were contained any exceptions which had not been taken at the trial. As to the assignment of error which had no basis, his explanation was that he turned a form over to his own stenographer and left to the stenographer the preparation of the assignments of error. He had not looked at these and had not observed the unfounded assignment of error, which was important.
The court was in some doubt as to whether he told the whole truth, or had actual knowledge in respect to some phases of the matter. It therefore made no finding against him upon the issues of fact in dispute. Nevertheless, in convicting him of contempt of court, it said:
« * * * j^ck of actual knowledge does not constitute a defense, but only an extenuating circumstance in mitigation. It is counsel’s duty to know the contents of documents he presents for action by the court, and presentation is a representation that this duty has been performed. It is presumed, he knows. It is also counsel’s duty to knowingly present none but documents true in their statement of facts, and therein again presentation is a representation of this duty performed — that counsel believes the facts to be true, and that in so far as they purport to relate counsel’s acts they are true.
“In its action therein, the court perforce relies upon counsel, and justice depends upon performance of these duties by counsel. If counsel presents improper or untrue documents, in respect to which he has failed in any of the duties aforesaid, it is his voluntary and intentional act, and in any aspect is so far culpable and contemptuous that his other labors, haste, carelessness, neglect, or consequent ignorance is no defense, but may go in mitigation.
“So, too, of lack of evil intent. In contempt, as in many varieties of crime, not always needs there be an evil quality of the mind. It suffices if the latter’s equivalent appears in forgetfulness, neglect, or failure of or indifference to duty or consequences. * • •
“Little need be said to emphasize that the administration of justice depends upon the integrity of judicial proceedings and records. Falsification of either obstructs and defeats justice. In consequence, if falsification be done or attempted intentionally in fact or equivalent as aforesaid, it is contempt of the authority of the court, and usually also a crime. Done by an attorney of the court, it is more reprehensible than by others; for it is an abuse of his office, a betrayal of his trust, a violation of his oath, infidelity to the court to which, and not to his client, is counsel’s first duty always, and a profanation of the temple of justice.”
As long ago as 1850, Chief Justice Taney, in Lord v. Veazie, 8 How. 251, 255, 12 L. Ed. 1067, declared deception of a court to be punishable contempt. The latest pronouncement by the Supreme Court of the United States I have found on the subject of contempt committed in judicial proceedings is Clark v. United States, 289 U. S. 1, 53 S. Ct. 465, 468, 77 L. Ed. 993, which was decided on March 13 of this year. There deception was practiced on the court by a juror, in withholding information or giving false answers on the examination on the voir dire as to qualifications to serve on a jury. Mr. Justice Cardozo wrote the opinion. He discussed fully and completely all the governing questions. He cited with approval the Ford Case (D. C.) 9 F.(2d) 990, from which I have quoted at length. He said, among other things: “Deceit by an attorney may be punished as a contempt if the deceit is an abuse of the functions of his office.”
He also cited Bowles v. United States, 50 F.(2d) 848, 850, decided by the Circuit Court *884of Appeals for the Fourth Circuit, in which there are assembled and discussed the authorities relating to contempt by an attorney through failure to perform his duties, or otherwise misleading or attempting to mislead the court, including a number of decisions in this circuit.
It is the judgment of the court, therefore, and I find that the respondent, David Paris, is guilty' of contempt of this court in presenting on a motion for a new trial, in which he appeared as attorney for his brother, the three forged affidavits of Mrs. Mayer, Lap-kin, and Waterman, without having made inquiry as to their genuineness, other than in the most superficial respect and from a source which he himself repudiates as wholly unreliable, and, through neglect and failure to exercise that care which was owing by him to this court as a member of its bar, in seeking to interfere with the due administration of justice in this court.
There are circumstances in mitigation.
Nobody actually told the respondent that the three affidavits were not signed by the alleged makers. He was told, however, that two of the alleged makers would say they had not signed them.
The respondent is the brother of the defendant in whose behalf the motion was made. I am satisfied that he was largely animated by affection for his brother. That is a mitigating circumstance of great consequence. I have gained the impression also, while sitting here for the past five weeks and listening to all the testimony, that the respondent in a sort of way got an obsession on the subject of his brother. That perhaps is creditable to his heart. I think I should take that into account.
I shall therefore temper the sentence. I shall make it less severe; I shall make it even of a different kind than I would have made it but for the mitigating circumstances.
The sentence of the court is that the respondent be, and he hereby is, suspended from practicing at the bar of this court for a period of five years; with leave at the end of five years, but not earlier, to make a showing of his conduct in the meanwhile upon application for permission to appear again at the bar of this court.
I feel that I would not perform my judicial duty unless I added that I commend the action of the assistant United States attorneys who have presented the testimony in this case to me. This was done with the utmost fairness. It has been done with industry, and it has been done with persistence. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219062/ | CLARK, District Judge.
Most citizens of New Jersey are familiar with the Raritan Canal link in the Atlantic Coast waterway system. This canal connects the Delaware river at Bordentown with the Raritan river and bay at New Brunswick. The canal was opened on June 27, 1834. It was once an important part of the canal system of the state and nation. Nowadays it seems to be chiefly used as an excuse for securing river and harbor appropriations and as a pathway for the numerous small boats whose owners winter in Florida. One such boat sub nomine, Flying By, came to grief on the return trip, June 2,1931, of its annual hegira. The Flying By was a 44-foot, twin screw eahin cruiser with an 11-foot beam and with a draft' of 3 feet 4 inches. The grief aforementioned was a collision with a rock or rocks in the Raritan river about 1,600' feet east (towards New York) of the outlet lock whereby boats are lowered or raised (as the case may be) between the canal and the river. At the time of the collision the Flying By was being piloted by Capt. Mills, a navigator who had been in the habit of bringing boats from Florida by this route. He testified that this was his twentieth trip (the fifth in the Flying By). As insurance against loneliness, he had with him as a passenger (we assume with the consent of the owner and present libelant, Woodworth) the lady who, he testified, has now become his wife and whose absence from the trial is, he says, due to an interesting and commendable event in his family.
Libelant does not attribute the unfortunate happening to the Flying By to inevitable accident or to his agent’s negligence, but rather ascribes it to the failure of the respondent, the dredge Empire, to use due care under the circumstances. This dredge was spending part of some government appropriation on widening the channel in the Raritan river just north of the New Brunswick lock. It was anchored in the northern half of the existing 100-foot channel with a clearance of 65 feet between the scow lashed to its starboard side and the south or starboard bank of the river. The depth of the channel ranged from 9> to 11 feet and the depth of the river outside of the channel from 2 to 3 feet. It is admitted that the rock or rocks with which the Flying By collided came into the shallow or nonehannel part of the river through the operations of the dredge Empire.
Capt. Mills’ version of the accident is substantially as follows: He was at the wheel of the Flying By as she left the lock. He was proceeding on the starboard side of the channel. He saw the dredge, but, because of the curve of the river, was of the opinion that she and her scow were very close to the right bank. Apparently because of that opinion, he determined to pass the dredge on the port side. To that end he blew two blasts or toots on the klaxon of the Flying By (coneededly the correct passing signal for an overtaking boat intending to pass with the dredge on its starboard). The dredge gave no signals of any kind, either answering or alarm. Continuing, however, with intention indicated by them, Capt. Mills changed his course to the port and shallow side of the river, and passed the Empire on that side. In doing so, he ran into a submerged rock or rocks just beyond the dredge, and was wrecked. He did not see the arrows on the Empire. He attributed this to the swinging to and fro of her bucket boom.
The only other witnesses called by the libelant were a wrecker, employed by the libelant, and the lock tender. The former claimed that the arrows on the dredge wei*e hard to distinguish because of the boom and because it was not sufficiently above the dredge’s deck house. He admitted on cross-examination that the time between swings of the allegedly obscuring boom was very short. The lock tender said that after, but not before, the accident he received orders from the United States engineer to warn eastbound boats to pass to the right of the dredge. This testimony would seem subject to the vice of “subsequent repair” evidence, and to be therefore of doubtful cogency. The lock tender also told of the safe passage to the starboard of the dredge of a large houseboat which immediately followed the Flying By. The libelant called the United States chief inspector, who was on the Empire on June 2d, who testified as to the exact position of the dredge from charts made at the time and as to the arrows.
The respondent offered two eyewitnesses, the dredge superintendent and the man who operated its launch (no longer employed by the respondent company). The former was on the shore close to the dredge, and the latter was standing at the outlet lock. Their account of the circumstances leading up to the *886accident agrees, and is diametrically opposed to that of Capt. Mills. They both say that he was not at the wheel at all when the Flying By left the lock, and only returned, thereto when the boat was about 300' feet from the Empire. The launch operator said that only the port motor of the Flying By was running, and that the captain’s absence was due to his going down into the motor compartment. Both witnesses agree with Mills that the Flying By was proceeding on the starboard side of the channel for some time after leaving the lock. They say that upon his resuming the wheel she swerved sharply from this course and crossed the channel to’pass the Empire on the port side. Neither eye nor ear witness heard any whistle from the Flying By.
It is the court’s opinion that the story told by Capt. Mills represents what he now believes happened rather than anything that actually transpired. In saying this, the court does not wish to be understood as accusing the witness of conscious falsehood. If that were the court’s belief, grand jury action would have to be in order. _In this vale of tears it is impossible to eradicate the numbing influence of self-interest. Combine that with our ordinary feeble powers of observation (see Munsterberg, “On the Witness Stand”), and it results in a story which coincides with the witness’ interest rather than with his actual observation. He tells what he would like to have had happen rather than the actual occurrence.
The court realizes that the two witnesses for the respondent, the dredge superintendent and the launch operator, may also be said to have an interest averse to accurate recollection. The latter’s motive for such blindness to the truth would seem to be rather faint, he being no longer in the service of the respondent, Dunbar & Sullivan Dredging Company. We are therefore going to attempt the touchstone of inherent probability. Such a test leaves no doubt in the court’s mind.
The undisputed fact was that there were 65 feet of- clear channel between the dredge’s scow and the starboard or south banks of the Raritan river. The undisputed fact was also that Capt. Mills knew that the depth of the river in this channel was from 9 to 11 feet, and that the depth of the river outside of this channel was from 3 to 4 feet, barely more than the draft of the Flying By. The captain explains his choice of a course by the statement that the “shape of the river had presented his seeing the open water to the starboard of the Empire.” This, of course, would be so only if there was a pronounced bend or rather bulge in the river at the point where the dredge was anchored. It is not necessary to- figure elaborately any angles of incidence in order to refute this assertion. One-glance at the map (Exhibit 4, libelant’s) indicates plainly such -a gradual curve that no-angle of vision would shrink the proportion of open water.
The motive assigned for Capt. Mills’ surrendering the helm to his fair passenger was engine trouble. By his own admission his starboard engine started only because of the pull (encouragement) of its twin engine. He further admitted that it was slow in starting on this particular occasion. According to his-story, he showed no curiosity or interest in the recalcitrant engine, and wants us to believe that the industrious example of its companion was sufficient. It seems unlikely.
Capt. Mills would have us believe that he-kept to the starboard side of the channel until .he had nearly reached the dredge, although he had already made up his mind and his whistles to pass on the opposite side. In other words, his action was sudden and his intention deliberate. Most people suit their actions to their thoughts (as well as to their words). We think Capt. Mills is no exception.
In the light of this, we hope, reasonably critical analysis, Capt. Mills’ story has three Weak points which are inconsistent with the undisputed facts. If he had been at the-wheel and looking where he was going, he would have seen plenty of open water to-pass in a channel whose depth he knew to be-beyond doubt adequate. There was something wrong with one of his engines. There was only’ controversy about the extent of the disability and what he did about it.’ Because there is little advantage in a hypocritical thought, our actions do not usually have an abruptly different appearance. Why should Capt. Mills remain on one side of the channel if he had made up his mind to pass the dredge on the other? In short, the eyewitnesses of the accident can be reconciled with Capt. Mills’ admissions. His own story depends solely upon his own veracity.
Libelant will agree that, if Capt. Mills, for one reason or another, has given us an incorrect picture of the occurrences of June 2d, he has no case. It may bo, however, that some other court will feel that Ms story lings truer than our own analysis of it. In that event, it becomes necessary to consider a legal *887situation. The facts as then assumed indicate, it is asserted, a breach of duty on the part of the Empire in two particulars. The duty, if any, is statutory, and the statute is for the benefit of the class injured. We have only to ascertain, therefore, whether the violation contributed to the injury. To answer this question requires a somewhat detailed examination of the pertinent provisions of the United States Code.
The physical laws of space make it quite apparent that restriction of area without anticipation of use spells disaster. This is true whether the area be earth, air (fire), or water. So it is that the regulation of traffic on the highways, the waterways, and now in the air [title 49 USCA § 176 (a); Neiswonger v. Goodyear Tire & Rubber Co. (D. C.) 35 F.(2d) page 761, information bulletin No. 7, Department of Commerce] has been undertaken by the government. As is not unusual with us, there exists both confusion in the legislation itself and in the designation of the particular agency (department) through which the sovereign acts.
We find Congress sometimes enacting their own rules (33 USCA §§ 302, 311 et seq.); sometimes adopting international regulations by statute, Act of March 3, 1885, 23 Stat. c. 354, page 438 (afterwards superseded by various legislation and finally compiled and enacted as title 33 USCA § 61 et seq.), and sometimes intrusting the formulation of rules to various departments in the government. As might be supposed, such procedure leads both to a nonuniformity not justified by conditions and to conflict of authority between the departments. We have an excellent illustration of this in the principal case. By section 2 of the Act of 1897, 30 Stat. 102, as amended by the Act of May 25, 1914, 38 Stat. 381, title 33 USCA § 157, it is made the duty of the supervising inspectors to establish rules “to be observed by steam vessels in passing each other and as to the lights to be carried by ferryboats and by barges and canal boats when in tow of steam vessels, and as to the lights and day signals to be carried by vessels, dredges of all types.”
On the other hand, the second amendment to section 4, Act of August 18, 1894, 28 Stat. 362, title 33 USCA § 1, pp. 15, 16, makes an assignment to the Secretary of War in terms as follows: “It shall be the duty of the Secretary of War to prescribe such regulations for the use, administration, and navigation of the navigable waters of the United States as in his judgment the public necessity may require for the protection of life and property, or of operations of the United States in channel improvement, covering all matters not specifically delegated by law to some other executive department.”
This inclusive language (cf., “navigable waters of the United States” and “protection of life and property”) makes it apparent that regulations thereunder must be compared with all other delegations to ascertain whether or not the limitation contained in the last sentence is or is not applicable. It seems to us rather doubtful if Congress intended this result. Legislation prior to the amendment of 1917 related to the protection of United States property; i. e., canals, etc., and the protection of the War Department as an agency for the improvement of such property. It would be our guess that the general terms above referred to were added for good luck. It seems curious, otherwise, that a different and rather unsuited department of the government should be given the duties for many years belonging to the Department of Commerce. Thus the latter department has had a vessel inspection service and appropriately has concerned itself with the prevention of accidents on the high seas and on inland waters. The War Department, on the other hand, through its engineer service, has had charge of that part of navigation which relates to the improvement of the medium thereof rather than with the improvement of the conduct of those who take advantage of that medium.
A practical illustration of this confusion is found in the contention of the libelant with respect to the wooden arrow. This arrow is required by public notice No. 25, published April 9, 1931, by the War Department, the pertinent part of which reads as follows: “Wooden arrows will be placed on the different pieces of plant engaged on this work to indicate to navigators the course to be followed in passing them.”
This action of the War Department is nugatory. Title 33 USCA § 157, above quoted, states that the supervising inspectors shall establish rules for day signals to be carried by dredges. As the wooden arrow is plainly such a signal, the regulation, if given, should have been issued by the Department of Commerce and not by the War Department, Counsel for both sides at the trial seemed to assume that the “wooden arrow provision” was properly promulgated. We suggest that a more careful examination of the rather intricate laws concerned would have led them to *888a different conclusion. The only effect that can be given to the “wooden arrow provision” is that it is a wise precaution “in the opinion of a Department having in its service men of technical training familiar with the conditions.” The Michael Tracy (C. C. A.) 43 F. (2d) 965, at page 966.
Considered in that light, we think that the arrow erected on the dredge fulfills all requirements of reasonable care. It is not, and scarcely can be, contended that the warning arrow is not large enough to be fairly visible. The complaint is rather directed towards its position. It is difficult to see in exactly what position the arrow could have been placed. From the photographs (Libelant’s Exhibits 2 and 3 and Respondent’s 3 and 4), it appears that the arrow is affixed to the port upright about 10 feet above the superstructure and extends for its entire length over the water. There can be no question, therefore, but that an arrow of such construction and so placed would be clearly visible for many times the distance from the lock to the dredge. It is urged, however, that this condition is only spasmodic, because of the operation of the boom apparatus for lowering and operating the dredge bucket or scoop. It is a fact that this rotating apparatus does in certain positions obscure the arrow as far as those approaching from the north side of the dredge are concerned. The complete answer to that argument lies in the fact that the same situation is applicable to any place on the dredge in which the arrow could have been placed. In other words, this large boom in the course of its functioning swings from one side of the dredge to the other, and ultimately comes between every part thereof and the outside world. It might be stated in passing that the swinging operation occupies a period of from 25 seconds to a minute, and it seems difficult to believe that the obscuring on the day of the accident was of anything but momentary duration. However that may be, it is conceded that Capt. Mills was thoroughly familiar with the operation of dredges and with the fact that arrows indicating the proper side to pass are customarily displayed at the request of the government engineers. It would seem to be clear, therefore, that, if parts of the dredge were obscured by its boom, it would be his duty to wait until such parts were clear and the presence or absence of arrows thereon be ascertained. Otherwise, of course, it would be impossible to operate dredges without having movable arrows and the means for moving them. We conclude, therefore, that there was no negligence on the part of the dredge in so far as the arrow is concerned, and further the fault, if any, was by Capt. Mills in not making certain of its position.
The libelant insists that the Flying By was entitled to rely upon the failure of the dredge to perform its duty to sound the alarm signal in answer to its starboard to starboard passing signal. This theory assumes that the failure contributed to the injury. This contention is somewhat astonishing in view both of the exigencies of navigation and the conforming state of the authorities. We agree that the Regulations of the War Department of May 19, 1928 (Supplemental Regulations of the War Department), pages 3 to 5, were promulgated under proper statutory authority. The supervising inspectors, for some strange reason, are given no supervision of the passing of vessels and dredges. This is the more curious, as we have just seen that they are given supervision over the light and day signals to he carried by such dredges. In other words, they are supposed to be wise as to visible, but not vocal, signals.
We have another instance of legislative and administrative confusion in the varied terminology of the rules governing passing signals. In the International Rules and Great Lakes Rules, the passing course of both end on and overtaking vessels is definitely prescribed (title 33 USCA §§ 103, 109 [articles 18 and 24]; sections 282, 287), and the sound signals section (sections 113, 288) gives the meaning of the blasts. The Great Lakes Rules provide for a dissent (section 291). The Inland Rules, on the other hand, in addition to a prescribed course^ permit of a choice for overtaking vessels and for an alarm signal upon dissent (title 33 USCA § 203, rules 1, 3, and 8 of Pilot rules, art. 18). The special floating plant rule applicable in the principal case also contains the alarm signal clause.
The exact wording of these various rules is material in only one particular. All, except the Great Lakes regulation, are phrased in the conditional form. So the Inland Rules say:
“Which the other vessel shall answer promptly by a similar blast of her whistle, and thereupon such vessels shall pass on the port side of each other.” (Article 18, rule 1.)
“And if the vessel ahead .answers with two blasts, shall put her helm to starboard" (article 18, rule 8);
■ — and in the rule of the principal case: “Which shall be answered in the usual man*889ner if the channel is clear and the approaching vessel may pass on the course indicated.” (Section 2, War Department Regulations, if ay 1928, page 4.)
These conditions cannot he overridden except by express language. We do- not find any such explicit meaning in the alarm signal provisions. They simply state a duty on the part of one vessel, but do not attempt to relieve the other of its obligation to proceed only upon the fulfillment of the condition. In other words, the obligations imposed are reciprocal, both vessels playing at the same game. This, of course, effectually disposes of libelant’s contention that he was entitled to proceed without an answering signal and simply because of the failure of the dredge to sound the alarm. The negligence of the dredge in not so sounding an alarm did not, therefore, contribute to the accident. On the contrary, it was due to the Flying By’s proceeding in the absence of an answering signal.
The United States Supreme Court in the case of The New York, 175 U. S. page 187, at pages 201, 202, 20 S. Ct. 67, 72, 44 L. Ed. 126, said: “The Conemaugh had construed her failure to reply as an acquiescence in her own signals. The New York might have construed such failure as a refusal to acquiesce. In such a case it was clearly incumbent upon the Conemaugh to stop until the mystery of her silence was explained, and in failing so to do she was guilty of fault.”
A galaxy of similar authority is to be found in title 33 USCA, listed under the appropriate sections and notes. So under “vessels meeting end on,” section 203, note 74; “overtaking vessels,” section 203, notes 146 and 149; Navigation of the Great Lakes, section 291, note 7. It will be noticed that the authorities here are even more persuasive. This because the particular rule in the Great Lakes Rules is not in the conditional form which we have noted above (The City of Erie (D. C.) 250 F. page 2591). The rule of law announced in these eases is manifestly a sensible one. There may be situations in which standing mute imputes acceptance and silence gives assent. The always hazardous maneuvering of vessels is not one of them. There must be no uncertainty or misunderstanding. A meeting of the minds is as essential to safety on the water as to agreement in the law of contracts.
The libel will be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219063/ | CAFFEY, District Judge.
Plaintiff is a Delaware corporation, and defendant is a New Jersey corporation. They are citizens of the states in which they are incorporated. They have their residences and domiciles, respectively, in those states. In re *890Hudson River Nav. Corporation (C. C. A.) 59 F.(2d) 971, 972. If this he a suit for unfair competition, the jurisdiction is founded only on the fact that the action is “between eitizens of different states.” Judicial Code, § 24 (1) (b), 28 USCA § 41 (1) (b). Upon that proposition counsel are agreed. They are further in accord that if jurisdiction rests exclusively on diversity of citizenship, then, by force of section 51 (a) of the Judicial Code (28 USCA § 112 (a), the suit is maintainable of right only in Delaware or in New Jersey, as “the district of the residence of either the plaintiff or the defendant,” and, over the objection now made by the defendant, cannot be maintained in this court. Camp v. Gress, 250 U. S. 308, 39 S. Ct. 478, 63 L. Ed. 997. The issue, therefore, is whether there is disclosed a sufficient basis for jurisdiction on some ground other than diversity of citizenship.
Section 16 of the Clayton Act (15 USCA § 26) authorizes a suit for “injunctive relief * * * against threatened loss or damage by a violation of the antitrust laws.” The section permits such a suit to be brought “in any court of the United States having jurisdiction over the parties.” Plaintiff says that the bill charges violation by defendant of the Sherman Anti-Trust Act (15 USCA §§ 1 and 2) and that an injunction is sought against “threatened loss or damage” by such violation. The sole reason urged for sustaining jurisdiction is that this is an injunction suit of the type prescribed by section 16 of the Clayton Act.
Section 4 of the Sherman Anti-Trust Act (15 USCA § 15 note) provides that a person “injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent * * * and shall recover threefold the damages by him sustained,” plus costs and an attorney’s fee.
This is not an action for treble damages. Such an action is triable by a common-law jury, recovery of treble damages under section 4 cannot he had in an equity suit, and the sole relief which, pursuant to section 16 of the Clayton Act, can he awarded in an equity suit is an injunction. Decorative Stone Co. v. Building Trades Council (C. C. A.) 23 F.(2d) 426.
Plaintiff says, however, that section 4 of the Sherman Anti-Trust Act comprehends an injunction suit, brought in conformity with séetion 16 of the Clayton Act, and that as the present suit is for violation of the anti-trust laws, it follows that this court has jurisdiction of it.
It is not denied that the defendant was found and has an agent in this district. It will be assumed that section 4 of the Sherman Anti-Trust Act covers injunction suits, as well as treble damage actions. If that assumption be sound, then the section plainly vests jurisdiction in this court if the suit be for injury “in his [plaintiff’s] business or property by reason of anything forbidden in the antitrust laws.” Without inquiring whether the assumption is warranted, the determining question is whether in truth the' suit is to enjoin such threatened injury.
It is manifest, I think, from mere reading the bill that its gravamen is the charge of, and that it only charges, unfair competition. Substantially all the allegations are directed to that end. It is not, in substance even, stated that there is “threatened loss or damage by a violation of the antitrust laws,” nor is there a prayer for an injunction against such threatened loss or damage.
The only part of the bill to which plaintiff specifically calls . attention, and upon which apparently plaintiff relies in argument, as foundation for the claim that the cause of action sued on is of the kind for which section 16 of the Clayton Act authorizes injunctive relief, is paragraph 12. That paragraph does refer to the Sherman Anti-Trust Act; but there is no averment therein of any threatened loss or damage to the plaintiff flowing from an infraction of the Sherman Anti-Trust Act. On the contrary, what is there dealt with is plainly the past. Cf. Continental Securities Co. v. Michigan Cent. R. Co. (C. C. A.) 16 F.(2d) 378.
Even if, however, liberal interpretation would permit what is stated in paragraph 12 to be regarded as designed to constitute complaint of threatened loss or damage through breach of the anti-trust laws,. at best it is merely “collateral and incidental.” Continental Securities Co. v. Michigan Cent. R. Co., supra (C. C. A.) at page 380 of 16 F. (2d). It hardly squints even toward the statement of a cause of action.
Elsewhere in the bill (outside of paragraph 12) there are scattered allegations of monopolization; but these may fairly be treated as relevant to the charge of unfair competition, and they fall far short of indicating an intention of the pleader to lay basis *891for an injunction against threatened loss or damage from violation of the anti-trust laws.
That the conclusion at which I have arrived is correct is borne out by the suit being labeled in the caption as “for unfair competition”; also by the statement in paragraph 2 of the bill, pursuant to subdivision second of Equity Rule 25 (28 USCA § 723), that '“the action is between citizens of different states for unfair competition and the amount involved, exclusive of interest and costs, exceeds the sum or value of three thousand dollars”, as “the grounds upon which the court’s jurisdiction depends.” These averments negative any purpose merely to seek an injunction against threatened loss or damage through violation by the defendant of the anti-trust laws.
Again, the presumption is that a cause is without the jurisdiction of a federal court. We are concerned now with jurisdiction of the person, as distinguished from jurisdiction of the subject-matter. As sometimes put, we are dealing witlnvenue. Nevertheless, I think the language in Hanford v. Davies, 163 U. S. 273, 279, 16 S. Ct. 1051, 1053, 41 L. Ed. 157, is pertinent. It was there said that the presumption against jurisdiction will prevail “unless the contrary affirmatively appears; * * * t is not sufficient that jurisdiction may be inferred argumentatively from averments in the pleadings, but the .averments should be positive.” Here the very slight indications (if any) in paragraph 12, .and elsewhere in the bill, that plaintiff predicates the suit on conduct of the defendant condemned by the anti-trust laws, for which section 16 of the Clayton Act (15 USCA § 26) affords a remedy, seem to me to fall far below the minimum requirement to support jurisdiction.
I have endeavored to devise a method by which I could afford plaintiff opportunity, by amendment, to eliminate the extraneous matters in the bill and directly to aver, if so advised, that there is threatened loss or damage of the kind for which suit will lie on service in the way in which it has been made or attempted upon the defendant. The difficulty I have encountered, as I see it, is that, if jurisdiction has not already attached, the defendant is not in court and that, as solicitors have appeared specially only for the defendant, service upon them of an amended bill would be insufficient to bind the defendant or to enable the plaintiff to proceed further with the suit on the amended bill without again serving process on the defendant. Moreover, as I understand from counsel, defendant is regularly doing business in this district and can be easily served in a fresh suit.
Lastly, even though I were merely doubtful of jurisdiction it would be good administration to reject the suit and allow the question of jurisdiction to be settled by an appellate court decision before subjecting the parties to the large expense which would be inevitable if jurisdiction were now retained and the case were carried on to final decree.
Motion granted. Settle order on two days’ notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219067/ | LOWELL, District Judge.
These are ten suits brought against the United States Shipping Board Emergency Fleet Corporation and United States of America for the loss of cargo loaded on the City of Brunswick at New Orleans and Mobile in July and August, 1921. The vessel was built at the Oscar Daniels Shipyard at Tampa, Fla., and, after taking on her cargo, proceeded on her voyage, but was lost by stranding. She was the last of ten vessels of the same size built at this shipyard for the United States government. She left Tampa on July 19, 1921, and proceeded to New Orleans, where she took on part of her cargo. She then proceeded to Mobile, and loaded the rest of the cargo. She left Mobile on August 13, 1921, on a voyage to Antwerp. During the voyage the boilers would not function properly, owing to the faet that the condenser leaked, which caused the tubes in two of her three boilers to blow out. When this condition was discovered, the vessel was ordered by the Shipping Board to go into Halifax for repairs. The weather on the voyage was calm. The vessel ran on a reef at the entrance to Halifax Harbor, and was totally lost with all her cargo.
Three of the eases were tried before me on June 8, 1927, when I decided for the libelants. The other eases were tried before the Court of Claims in Washington. Since that time the United States Supreme Court has decided that the cases were not properly brought, for jurisdictional reasons. U. S. Shipping Board Emergency Fleet Corp’n v. Cal. Wine Ass’n (The West Aleta), 276 U. S. 202, 48 S. Ct. 256, 72 L. Ed. 531. After that a remedial act was passed through Congress, and it is admitted that all the suits here brought were properly prosecuted under the terms of that act.
The testimony of the many witnesses was taken almost entirely by deposition; the only oral evidence being that of Professor Jack, Mr. McNaught, and one other at the former trial, and Mir. Jordan at the present trial.
The contentions of the libelants are that the Shipping Board is responsible because, even if the stranding was due to negligent navigation, the vessel was not seaworthy when it left New Orleans or Mobile, and, under the terms of the Harter Act (46 USCA §§ 190-195), the vessel cannot exempt itself from liability for negligent navigation, unless it is proved that she was seaworthy or that due diligence was used to make her so. There is also the question of whether there was a deviation, in which case the Shipping Board became an insurer of the cargo and was liable for whatever happened to it.
The defective machinery which the libel-ants allege rendered the vessel unseaworthy was the condenser, the feed pumps, and the telemotor steering mechanism. Only the first need be considered. The vessel was equipped with three Foster water-tube boilers, two feed pumps, and one condenser. In a water-tube boiler the steam is generated in the tubes instead of in a larger container, which was the practice in the older so-called Scotch boilers. In both kinds of boilers there is danger of the parts of the boiler becoming weak through the deposit of impurities from sea water, which gets into the boiler principally from the leaking of the condenser. A condenser is a large chest having many tubes running through it. It is operated by salt water, which is pumped in on one side and discharged on the other. Only fresh water is used in the operation of the boiler, and it is iised over and over; The function of the condenser is to condense the steam, which comes from the engine after it has been used, *910into water. It is delivered from the condenser to the so-called “hot well,” whence it is pumped back into the boiler, goes through the engine, and completes its circulation by being returned to the condenser. If the condenser tubes leak, as they are full of salt water, they contaminate the fresh water used for the operation of the boiler, and it is from this source that the danger to the boiler arises. Certain magnesium and lime particles held in solution in salt water become iherusted in the boiler and thereby interfere with its action to such an extent that the boiler is apt to burn out. This is due to the fact that the parts of the boiler which .are in connection with the furnace become so incrusted that they do not impart their heat to the water in the boiler, but are burned themselves. The danger of this burning is greater in water-tube boilers than in the Scotch boiler, because the tubes which hold the water which is to be turned into steam are so small that a slight incrustation of the foreign matter will be as dangerous as a much greater one in the larger space of a Scotch boiler.
The vessels built for the Shipping Board by the Daniels Shipyard had been in process of construction for about two years, and it was in evidence that the condensers had been delivered to the yards about two years before the City of Brunswick was launched. The City of Brunswick left Tampa for New Orleans on July 19, and took two days to make the trip. The condenser had been lying out in the yard for two years. It was thoroughly repacked at Tampa before the vessels started for New Orleans. It had about eighteen hundred tubes in it. The condenser was a box about nine feet long, through which the condenser tubes passed. Where the tubes entered the casing, they were so arranged as to allow for a change in length, to make up for the effect on the tubes of varying temperatures. The tubes passed through the casing, leaving a small space for packing, which is held in place by a nut called a ferrule. The packing is a very important part of the condenser, as, if it gives out, there will be a leak, which will enable salt water to get into the boiler. When the vessel arrived at New Orleans, it was found that many of the tubes in the condenser were leaking. The condenser was not thoroughly repacked, as the chief engineer requested, but, after .a test, only those tubes were repacked which showed leaks.
No trouble was found with the eondensei on the trip from New Orleans to Mobile, but several days after it had left Mobile it began to leak to such an extent that some of the water tubes in two of the three boilers gave out, and the vessel had to proceed to Halifax under one boiler. The power generated by one boiler was much less than if all three boilers had been in commission. The vessel struck the reef quite lightly, and there was evidence that, if the three boilers had been in commission, she could have been backed off.
The vessel had not been finally accepted by the Shipping Board when she left Mobile, and was tested on a sixteen-hour trial trip from Mobile out to the Gulf and back to Pensacola Buoy, where the officers who were conducting the test were sent back on a tug.
The contention of the Shipping Board is that the condenser was properly repaired at New Orleans and was seaworthy when it left that port, and also when it left Mobile. As has already been said, the condenser was not entirely repacked at New Orleans, but only three hundred or four hundred tubes, which were shown by a test to. be leaking. Expert oral evidence was offered before me on both trials that this was not a proper repair, for the reason that when as many as three hundred or four hundred tubes were found to be leaking after a voyage as short as that from Tampa to New Orleans, when the whole condenser had been repacked shortly before, it showed conclusively that the job was badly done and that the other tubes, which did not then show evidence of leaking, would probably leak very soon. This expert evidence seems to me conclusive, and I rule that the condenser was not seaworthy when it left New Orleans, and also when it left Mobile, and that due diligence had not been used to make it so.
I am satisfied on the evidence that, while the stranding resulted from negligent navigation, the vessel and cargo would not have been a total loss if all the boilers had been in prop er condition, as the vessel could have been backed off the reef.
The question of deviation remains to be considered. The direct route from Mobile to Antwerp was a different one from that-which the vessel took as it went on a sixteen-hour trip from Mobile out into the Gulf and back to Pensacola Buoy. It is required of a carrier of goods by sea that he furnish a seaworthy vessel at the beginning of the voyage and that he complete the voyage by the nearest route to the destination. In this case in a sense the Shipping Board did not furnish a vessel at New Orleans or Mobile, as she was not accepted by the Board until after she had left Mobile, gone out into the Gulf, and returned to Pensacola Buoy. This might raise *911an interesting question of law, but it need not be further considered, as it seems perfectly clear on the authorities, and indeed on common sense, that a trial trip is not a customary part of a voyage from loading place to destination; and where, as in this ease, on the trial trip the vessel went out of the usual course from Mobile to Antwerp, there seems no question that it was guilty of a deviation. United States v. City of New York (The Waubesa) 8 F.(2d) 270 (D. C.); The Will-domino, 272 U. S. 718, 47 S. Ct. 261, 71 L. Ed. 491.
The deviation was not excused by the liberty clauses in the bills of'lading issued at New Orleans and Mobile. They provided, among other things, that the shipowner might have liberty to proceed to any port or ports in any order, etc. In this instance the vessel did not proceed to the port of Pensacola, as the gentlemen who were acting as a trial board were transferred to a tug at Pensacola Buoy. The Ixia, [1932] A. C. 328. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219068/ | McVICAR, District Judge.
Plaintiff brought an action in the court of common pleas of Bedford county, Pa., on a fire insurance policy to recover the sum of $4,990, with interest. Defendant, by reason of the diverse citizenship of the parties, had the action removed to this court. Defendant filed an affidavit of defense herein where it set up as new matter, inter alia, that the policy in suit contained the following provisions:
“Appraisal.
“In case the insured and this Company shall fail to agree as to the amount of loss or damage, each shall, on the written demand of either, select a competent and disinterested appraiser. The appraisers shall first select a competent and disinterested upnpire; and failing for fifteen days to agree upon such umpire, then on request of the insured or this Company such umpire shall he selected by -a judge of a court of record in the state in which the property insured is located. The *912appraisers shall then appraise the loss and damage, stating separately sound value and loss or damage to each item; and failing to agree, shall submit their differences only, to the umpire. An award in writing, so itemized, of any two when filed with this Company shall determine the amount of sound value and loss or damage. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally. * * *
“When Loss Payable.
“The amount of loss or damage for which this Company may be liable shall be payable sixty -days after proof of loss, as herein provided, is received by this Company and ascertainment of the loss or damage is made either by agreement between the insured and this Company expressed in writing or by the filing with this Company of an award as herein provided. • * *
“Suit.
“No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, nor unless commenced within twelve months next after the fire.”
Defendant averred that the plaintiff, the insured, and the company, the defendant, had failed to agree as to the amount of loss or damage; that it had appointed an appraiser and had made a written demand of plaintiff to select a competent and disinterested appraiser as provided for in the provision of the policy aforesaid; that plaintiff had refused, and still refuses, to comply with said demands of the defendant, and has refused and still refuses, to appoint an appraiser.
The plaintiff, in her reply to the above provisions of the affidavit of defense, admitted them to be true. Defendant moved for judgment for want of a sufficient reply, and contends in support thereof that under the admitted facts aforesaid plaintiff did not have a right to bring this action.
Under the law of Pennsylvania, an appraisal covenant, such as the covenant contained in the policy in suit, is revocable, and the insured may bring an action on the policy without complying with the terms thereof. Rubenstein v. Dixie Fire Insurance Company, 51 Pa. Super. Ct. 447 (1912); Gratz v. Insurance Company of North America, 282 Pa. 224, 127 A. 620 (1925); and Dudzinski v. Great American Insurance Company of New York, 90 Pa. Super. Ct. 540.
Where an action is brought in the federal courts to recover on a policy containing such covenant, the plaintiff must show that he has complied therewith before bringing his action. Hamilton v. Liverpool & London & Globe Insurance Company, 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419, and Commercial Union Assurance Co. v. Dalzell, and London & Lancashire Fire Ins. Co. v. Dalzell, 210 F. 605 (C. C. A. 3, 1914).
What law applies where an action on a policy containing such covenants is brought in a state court and by reason of diversity of citizenship is removed to a federal court? The state law applies. Montgomery’s Manual of Federal Jurisdiction and Procedure (3d Ed.) § 277; Whittemore et al. v. Ætna Insurance Co., 296 F. 238, 239 (D. C., S. D. Fla., 1924); Collins Manufacturing Co. v. Wickwire Spencer Steel Co., 14 F.(2d) 871, 873 (D. C., D. Mass., 1926); and Great Southern Life Ins. Co. v. Burwell, 12 F.(2d) 244, 245 (C. C. A. 5, 1926).
In Montgomery’s Manual of Federal Jurisdiction and Procedure, § 277, it is stated: “If the plaintiff has asserted rights which are recognized by the state courts, the defendant cannot escape an enforcement thereof by removing the suit to the federal court.”
In Whittemore et al. v. Ætna Insurance Co., supra, it is stated: “This action was begun in the circuit court of Pinellas county, Fla., and was transferred to this court on the ground of diversity of citizenship. The -rights of the parties are to be adjudicated as they would be in the state tribunal, according to the laws of the state.”
In Collins Manufacturing Co. v. Wickwire Spencer Steel Co., supra, which was a suit in equity brought in a state court in Massachusetts, and which was removed to the District Court of the United States therein by reason of diversity of citizenship, the court in its opinion said: “But I look upon the asserted rights as substantive equitable rights, and if they are recognized by the courts of Massachusetts as adequate grounds for the interposition of equity, or, in other words, if they are held by the courts of that state to be rights of an equitable character when tested by general principles of equity, this defendant cannot avoid the enforcement of these equitable rights by removing the suit from the state to the federal court.”
In Great Southern Life Ins. Co. v. Burwell, supra, Circuit Judge Foster said: “It must be remembered that this suit was instituted originally in the state court. Citation of authority is hardly required to show that *913a litigant cannot be deprived of any substantial rights by removal to the federal court.”
Our attention has not been called to any case or authority holding to the contrary.
The motion for judgment for want of a sufficient reply by the plaintiff is refused.
Supplemental Opinion.
The question involved is, What law applies where an action is brought on a fire insurance policy providing for an appraisement of loss before bringing action thereon, the action having been brought in a Pennsylvania state court and subsequently removed to this court by reason of diversity of citizenship?
In our former opinion we held that under the law as applied by the highest appellate courts in Pennsylvania, such a covenant was revocable, and that action might be brought on such a policy without compliance with the covenant relating to appraisal; that where an aetion is brought originally in the federal courts the insured must comply with the terms of such a covenant before bringing action, and that where such an action is brought originally in a state court, and is removed to the proper federal court, that the state law applies. In support of this latter proposition we cited as authority three eases, only one of which is directly in point, being the decision of the District Court for the Southern District of Florida, in the case of Whittemore et al. v. Ætna Insurance Co., 296 F. 238. Attention was called to the fact that no citation was cited holding the contrary. Since the filing of that opinion supplementary briefs have been filed by plaintiff and defendant. By reason thereof, it is necessary that the above question be further considered.
The statutory provisions applicable and relating to this question are 28 U. S. C. §§ 72, 81, and 725, sections 29 and 38, Jud. Code, and section 721, R. S. (28 USCA §§ 72, 81, 725).
Section 72 provides, that after a ease has been removed and defendant has pleaded to plaintiff’s declaration, that “The cause shall then proceed in the same manner as if it had been originally commenced in the said district court.”
Section 81 provides: “The district court of the United States shall, in all suits removed under the provisions of this chapter, proceed therein as if the suit had been originally commenced in said district court, and the same proceedings had been taken in such suit in said district court as shall have been had therein in said State court prior to its removal.”
Section 725 provides: “The laws of the several States, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply.”
Section 725 applies to trials at common law in the United States courts, without regard to whether the action was originally brought therein, or whether it was removed from a state court.
The interpretation of the phrase, “The laws of the several states,” as made by our Supreme Court in the basic case of Swift v. Tyson, 16 Pet. 1, 18, 19 L. Ed. 865, is: “And we have not now the slightest difficulty in holding, that this section, upon its true intendment and construction, is strictly limited to local statutes and local usages of the character before stated, and does not extend to contracts. and other instruments of a commercial nature, the true interpretation and effect whereof are to be sought, not in the decisions of the local tribunals, but in the general principles and doctrines of commercial jurisprudence. Undoubtedly, the decisions of the local tribunals upon such subjects are entitled to, and will receive, the most deliberate attention and respect of this court; but they cannot furnish positive rules, or conclusive authority, by which our own judgments are to be bound up and governed.”
Section 725 does not extend to insurance contracts. Hamilton v. Liverpool & London & Globe Insurance Company, 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419; Commercial Union Assurance Co. v. Dalzell, and London & Lancashire Fire Ins. Co. v. Dalzell, 210 F. 605 (C. C. A. 3); Hartford Fire Insurance Co. v. Nance, 12 F.(2d) 575 (C. C. A. 6); Home Insurance Company of New York v. Scott, 46 F.(2d) 10 (C. C. A. 6); Bancroft v. Hambly, 94 F. 975 (C. C. A. 9), and Meigs v. London Assurance Company, 126 F. 781 (C. C. Pa.).
In Hartford Fire Insurance Co. v. Nance, 12 F.(2d) 575, 576 (C. C. A. 6), an action was brought on an insurance policy in a state court in Ohio. It was removed by the insurance company to the federal court upon the ground of diversity of citizenship.' The court held that whether an insurance contract may be varied by parol evidence for the purpose of asserting estoppel to insurer’s defense that policy was vitiated, where insured’s interest in property was other than unconditional, is a matter of general jurisprudence, and the *914state law of Ohio does not control. The court saying, inter alia: “We think the state law does not control, because neither the validity of the contract nor any statute of the state or local rule of property is involved. The contract was valid under the Ohio law. What we must finally determine is not a matter of validity or interpretation; it is whether the terms of a written contract — where the contract itself prohibits modification except in writing — may be varied by parol evidence for the purpose of asserting estoppel. This, we think, is a matter of general jurisprudence. Carpenter v. Insurance Co., 16 Pet. 495, 10 L. Ed. 1044; Liverpool & G. W. Steam Co. v. Phenix Insurance Co., 129 U. S. 443, 9 S. Ct. 469, 32 L. Ed. 788; Ætna Life Insurance Co. v. Moore, 231 U. S. 543, 34 S. Ct. 186, 58 L. Ed. 356.”
In Home Insurance Company of New York v. Scott, 46 F.(2d) 10, 12 (C. C. A. 6), suits were brought in a state court in the state of Ohio to recover loss on insurance policies, and were removed to the appropriate federal court. The defense to the policies was that plaintiff had placed a chattel mortgage on the property in violation of a provision in the policies. The question arose whether the state law, or the law as laid down in prior decisions of the federal courts, should prevail. The court followed its former ruling in the Hartford Fire Insurance Co. v. Nance Case, supra, and held that “the question is not controlled by Ohio law, but is one of general jurisprudence.”
In Bancroft v. Hambly, 94 F. 975, 979 (C. C. A. 9), an action was brought on a contract of employment to recover salary for services rendered in a state court, which was removed to the appropriate federal court. The question arose whether the state law would control or not. The court held that it did not apply, saying: “The present ease, however, involves the interpretation of a contract not in any way dependent upon the construction of any state law, and, that being so, we are not at liberty to follow the decision of that court construing the contract if such construction does not meet with our approval, but are bound to exercise our independent judgment.”
In Meigs v. London Assurance Co., 126 F. 781, 784 (C. C. Pa.), which was an insurance ease removed from a court of Pennsylvania to a District Court in this circuit (according to statement of counsel which does not appear in the record of the ease), the Pennsylvania and federal rules of law were in conflict. Judge McPherson, speaking for the court, said: “While I regret to differ from the view of this controversy taken by the Supreme Court of Pennsylvania [Meigs v. Insurance Co. of North America, 205 Pa. 378, 54 A. 1053], I am bound by the decisions of the appellate tribunals of the United States. The question is one of general commercial law, upon which the federal courts are at liberty to entertain an independent opinion, and such opinion must furnish the rule for my decision.”
In Cain v. Commercial Publishing Co., 232 U. S. 124, at page 131, 34 S. Ct. 284, 286, 58 L. Ed. 534, the court, in stating what it had held in Goldey v. Morning News, 156 U. S. 518, 15 S. Ct. 559, 39 L. Ed. 517, said: “A suit must he actually pending in a state court before it can be removed, but its removal to the court of the United States does not admit that it was rightfully pending in the state court, or that the defendant could have been compelled to answer therein; but enables the defendant to avail himself in the United States court of any and every defense duly and seasonably reserved and pleaded to the action [page 524 of 156 U. S., 15 S. Ct. 559, 562] ' “in the same manner as if it had been originally commenced in said circuit court.” ’ ”
The court further considered sections 72 and 81 aforesaid, and stated at page 133 of 232 U. S., 34 S. Ct. 284, 287: “In other words, the cause is transferred to the district court as it stands in the state court and the defendant is enabled to avail himself in the latter court of any defenses, and, within the time designated, plead to the action 'in the same manner as if it had been originally commenced in said district court.’ ”
The weight of the authority seems to be that the federal courts will not apply the state law in a removed ease where it would not have done so if the action had been originally brought therein.
The order of this court, filed September 24, 1931, refusing judgment in favor of defendant for want of a sufficient reply by plaintiff to the new matter alleged in the affidavit of defense, is vacated, and the motion of defendant for judgment for want of a sufficient reply is granted, without prejudice to plaintiff to bring another action on the policy sued upon after compliance with the covenant as to appraisal and the other covenants contained therein. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219069/ | WEST, District Judge.
Suit in equity by trustee in bankruptcy to recover a preference, in which the defendant counterclaims for $3,140. Taking up the defendant’s counterclaim first: As executor of one Leras, he loaned some $5,22-5 to the bankrupt company of which company he was president. These moneys were turned over by him in January, March, April, August, and $100 in September, 1931, and the petition in bankruptcy was filed on February 10, 1932. These loans or advances were from funds of the estate of which the defendant was executor, and were made without any warrant or authority. The bankrupt repaid a portion of the money prior to bankruptcy, and the first question is: Does the executor have an equitable lien on the balance? I think not. The funds were not in the bankrupt’s hands when' the petition was filed and were not traced into property of any kind. Whether they were used to buy goods or pay off debts is unknown.
“If a court of equity can trace money or property unlawfully obtained and appropriated, into any other shape, it will intervene to secure it for the owner, by holding it to be his or by giving him a lien on it; but such a lien can not be enforced on other property which has not been enhanced or augmented by the unlawful appropriation.” 37 C. J. 320; Schuyler v. Littlefield, 232 U. S. 707, 34 S. Ct. 466, 58 L. Ed. 806; Board of Commissioners of Crawford County v. Strawn, 157 F. 49, 15 L. R. A. (N. S.) 1100 (C. C. A. 6); In re Dorr (C. C. A.) 196 F. 292; Ullman v. N. Sobel (D. C.) 47 F.(2d) 612; In the Matter of Horigan Supply Co. (C. C. A.) 2 F.(2d) 791; In re Morris Bros. (C. C. A.) 293 F. 294.
Defendant cites and chiefly relies on Smith v. Township of Au Gres, 150 F. 257, 9 L. R. A. (N. S.) 876 (C. C. A. 6). The bankrupt embezzled township funds for which he gave a mortgage reciting that he had invested the moneys in his business and property. He had orally admitted having used the money “in connection with his business in paying for stock.” The court say the fair inference was that the bankrupt used the public money to purchase goods and mingled them with his own stock and out of this stock sold parcels *916not distinguishable in respect of the means with which they were paid. The court recognized and enforced an equitable lien of the township because there had been a mingling of the goods purchased by its money with those paid for by Smith’s funds, and as the one class of goods was indistinguishable from the other, the lien was enforced on the entire stock. But that ease is not authority here, for there is no satisfactory evidence in this record that the funds of the Leras estate were used by the bankrupt to buy goods which went into a stock that was on hand at bankruptcy. Nor that these advances, all but $500 of which were made in the first four months of 1931, enhanced the estate as the trustee took it at the date of bankruptcy in February of the next year. On the evidence the court finds against the defendant’s counterclaim.
In support of the plaintiff’s case, it appears that the bankrupt company repaid to the defendant as executor $1,360 within four months prior to the filing of the petition. The payments were made by five cheeks, the first of which was dated October 27, 1931, and the last January 16, 1932.
The defendant claims that the bankrupt having no title to the moneys of the estate, in view of the misappropriation by its president, the executor, the trustee can have none. But since the amendment of 1910 (Bankr. Act § 47a (2), 11 USCA § 75 (a) (2), that has not been true. Collier, p. 1647; In re Hammond (D. C.) 188 F. 1020. The trustee has the powers of a creditor holding a lien by legal or equitable proceedings, and is entitled to recover the payments if they were preferential. The court will compel the trustee to recognize equitable liens, and if these funds, when repaid by the bankrupt, were subject to such a lien, the trustee cannot recover.
The evidence shows that the funds of the Leras estate, when received by the bankrupt, were deposited in its account and used in its business. When the bankrupt so mingled these funds with its own, its entire hank account became subject to an equitable lien, and it will be presumed that withdrawals were of funds that the bankrupt could properly use. But no sum greater than the smallest balance remaining in the bank account at any time could be claimed under the lien. Central National Bank v. Conn. Mut. L. Ins. Co., 104 U. S. 54, 26 L. Ed. 693; Cunningham v. Brown, 265 U. S. 1, 12, 44 S. Ct. 424, 68 L. Ed. 873; Hewitt v. Hayes, 205 Mass. 356, 91 N. E. 332, 137 Am. St. Rep. 448; Board of Commissioners v. Strawn, supra.
On October 31,1931, four days after the date of the first of the five checks, the amount of this cheek being $100, the bankrupt’s bank account was overdrawn $2,513.30. I think it is fairly inferable that it was also overdrawn, to some extent at least, when said $100 check was given. So that any equitable lien which attached to the funds in the bankrupt’s hands had been discharged when these repayments were made to the executor, and the funds so repaid were not trust funds or impressed with any lien, and can he recovered, provided the bankrupt was insolvent when the payments were made. I find from the evidence that it was so insolvent and that the defendant knew of such insolvency, and that the payments were preferential and should he returned.
Decree will he entered in favor of the plaintiff for $1,360 with interest, and dismissing the defendant’s counterclaim, at the defendant’s costs. Counsel for plaintiff will prepare findings and conclusions under Equity Rule 70½ (28 USCA § 723). | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219070/ | PATTERSON, District Judge.
Gross assets in this estate were about $9,-400, of which $5,835.51 came into the hands of the trustee. The referee recommends the following allowances: $156.75 as commissions to the trustee; $484 to the attorneys for the trustee; $484 to the attorney for the bankrupt.
On reviewing the papers and on consideration of the entire ease, I am of opinion that the sum of $313.50, being twice the trustee’s commissions, is fair compensation to the attorneys for the trustee, and the allowance to them will he at this figure.
It appears that the bulk of the work done by the bankrupt’s attorney was in objecting to the jurisdiction of the bankruptcy court, in applying for the vacating of the receivership, and in resisting adjudication of the bankrupt. These efforts were undertaken in good faith, but all of them were unsuccessful. The allowance recommended by the referee is a reasonable one if such services are compensable out of the assets of the estate. The ease therefore raises the question whether the bankrupt’s attorney may be given compensation out of the estate for services rendered in good faith in resisting adjudication and otherwise opposing administration of the estate in bankruptcy.
The statutory authority for an allowance to the bankrupt’s attorney is section 64b of the Bankruptcy Act as amended in 1926, 11 USCA § 104 (b), to the effect that the court shall allow as a prior claim to be paid in full out of the bankrupt estate “the cost of administration, including * * * one reasonable attorney’s fee, for the professional services actually rendered * * * to the petitioning creditors in involuntary eases while performing the duties herein prescribed, and to the bankrupt in voluntary and involuntary eases.”
The allowance to the bankrupt’s attorney ordinarily covers only work done in promoting the administration of the estate and in assisting the bankrupt to perform his duties, such as drafting and filing the petition, drafting and filing the schedules, attendance at the first meeting, and other services in furtherance of the winding up of the proceedings. In re Michel (D. C.) 95 F. 803; In re Kross (D. C.) 96 F. 816. Services rendered in resisting the bankruptcy proceedings and in opposing adjudication do not fall in this category and may not be paid for out of the bankrupt estate. The attorney’s efforts in thus trying to thwart the administration of the estate are of no benefit to the creditors, and for payment he must look elsewhere than to the assets of the estate where such efforts are unsuccessful. See Randolph v. Scruggs, 190 U. S. 533, 539, 23 S. Ct. 710, 47 L. Ed. 1165; Platt v. Archer, 13 Blatch. 351, 354, Fed. Cas. No. 11,214; Pratt v. Bothe (C. C. A.) 130 F. 670; In re Munford (D. C.) 255 F. 108; In re Secord (D. C.) 296 F. 231; Remington on Bankruptcy, § 2720; Collier on Bankruptcy, page 1364. See, also, Culhane v. Anderson (C. C. A.) 17 F.(2d) 559, 560. If bankrupt estates are to be burdened with the expenses of the bankrupt in unsuccessfully resisting adjudication, very little will be left for creditors. To permit an allowance of this character would be to compel the parties who have been adjudged owners of the property to pay the counsel fees of the defeated party.
It is argued that the rule has been changed by the 1926 amendment to 64b. In this amendment the clause “while performing the duties herein prescribed,” which formerly qualified the words relative to the bankrupt, was shifted so as literally to qualify the words relative to the petitioning creditors. This change was obviously a slip on the part of the draftsman. The petitioning creditors have no “duties” imposed on them under the act, while the bankrupt has many. The .ehange did not restrict the work for which the attor*918ney for "the petitioning creditors might be paid, nor did it enlarge the services for which the attorney for the bankrupt might be paid. See In re Poe (D. C.) 1 F. Supp. 658, 659.
The allowance to the attorney for the bankrupt will therefore be reduced to the sum of $100, to cover the work done by him in preparing the schedules and in otherwise assisting the bankrupt in performing its duties under the Bankruptcy Act. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219071/ | MOSCOWITZ, District Judge.
The libelant, Alba G. Sherbo, then an infant nineteen years of age, sailed on the Leviathan on December 15, 1927, from the port of Cherbourg, France, to the port of New York.
Prior to November 26, 1927, the libelant purchased her passenger ticket. The libel-ant, who was the owner of' a trunk which contained personal property, delivered the same to the respondent on or about the 15th of December, 1927, for the purpose of having it transported upon the Leviathan. While the trunk was being loaded onto, the Leviathan, the trunk and its contents were allowed to fall and drop into the water, causing damage to the trunk and its contents. This constituted negligence, which is conceded by the respondent.
The passenger ticket, which was purchased by the libelant, contained the following provisions on the face side thereof: “The Luggage carried under this engagement, whether'in excess of 200 lbs. or-20 cubic feet, or not, shall be deemed to be of a .value not exceeding 20 pounds sterling unless the value in excess of that sum be declared and paid for.”
On the reverse side of the ticket appeared the following provisions:
“4. Neither the Shipowner, Agent, Master or Passage Broker shall be liable as carrier in any form or manner for any articles specified in Section 4281 of the Revised Statutes of the United States, shipped or taken on the vessel by any passenger in any baggage, unless the passenger at the time of such lading shall give to the Shipowner, Master, Agent, Clerk or Broker of the vessel, a written notice of the true character and val*919ue thereof, and, if required, produce the same for inspection and have the same entered on a Bill of Lading therefor, or unless such articles be delivered into the personal custody of the Purser of the vessel, and the true character and value thereof stated in writing; and in the event of such deposit, neither the vessel, her Owner, Master, Agent or Passage Broker shall be liable in respect of the articles deposited beyond the sum of 20 pounds sterling, which sum it is mutually agreed that the value of the articles does not exceed, unless value in excess of that sum be declared, and a further charge thereon be paid or tendered in advance on the excess value at the rate of 1 per cent. Neither the Shipowner, Master, Agent or Passage Broker shall be liable for the loss of or damage to any such article when arising from any of the causes enumerated in clause 3, nor in any event beyond the value and according to the character thereof notified and entered as aforesaid, nor except as may be provided by the Bill of Lading if a Bill of Lading is issued, or by the certificate of deposit if the property be deposited.”
“5. In the event of the loss of, or damage to, or delay in the delivery of the baggage of any passenger carried under this contract, or a part thereof, for which the shipowner may be liable, it is subject to the preceding clause hereof mutually agreed that such liability shall not exceed the sum of 20 pounds sterling, which sum it is agreed the value thereof does not exceed, and to which value the Shipowner, subject to clause 6, undertakes to carry the same free of charge, unless the passenger, before embarkation under this contract, shall declare in writing to the Shipowner, Agent or Passage Broker the true value of such baggage, if in excess of 20 pounds sterling, and shall pay or offer to pay in advance on the value thereof in excess of 20 pounds sterling of the rate of 1 per cent.”
The libelant contends that the conditions printed upon the reverse side of the ticket are not a part of the contract, that these conditions were not specifically called to libel-ant’s attention, and that she was an infant at the time the contract was made, and therefore the contract was not binding upon her.
The law is well settled that carriers of passengers, by specific regulations distinctly brought to the knowledge of the passenger which are reasonable in their character and not inconsistent with any statute or their duties to the public, may protect themselves against liability, as insurers, for baggage exceeding a fixed amount in value, except upon additional compensation proportioned to the risk. New York Central & Hudson River R. R. Company v. Fraloff, 100 U. S. 24, 25 L. Ed. 531.
Where the language of the valuation clause contains notice to the shipper or passenger of a definite agreed valuation or limitation unless a higher value is declared and increased compensation paid to the carrier, the liability of the carrier must be measured by the ordinary valuation, since it has received only the ordinary rate. Hart v. Pennsylvania R. R. Co., 112 U. S. 331, 5 S. Ct. 151, 28 L. Ed. 717.
The clause appearing on the face of the ticket herein contains all the necessary elements of an agreed valuation. For the purposes of the contract, the parties agreed that the baggage shall not exceed twenty pounds in value, and the further definite notice to the passenger that a value in excess of that sum may be declared, which shall govern, provided increased compensation is paid to the carrier. If there was any doubt as to the meaning of the clause in question, such a doubt would be clarified by the reference which is invited by the words “see back,” which appears on the face of the ticket referring to the reverse side thereof, which contains a more complete clause. The clause contained on the face side of the ticket stated the value which should govern the rights of the parties, unless a greater value should be declared and on the reverse side thereof incorporated by reference the alternative rate, and it is therefore a valid valuation clause. The fact that the libelant was an infant at the time of the voyage does not relieve her from compliance with the valuation clause of the ticket on which she traveled. Evelyn v. International Mercantile Marine Co. (D. C.) 35 F.(2d) 47.
The libelant is therefore entitled to a decree in the sum of 20 pounds sterling, with interest and costs.
Settle findings and decree on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219072/ | NIELDS, District Judge.
John B. Morris filed a libel in personam against Rosamund A. Ulizio and Patricia G. Ulizio, both residing in New Jersey, owners' of the power boat Phantasy, now in this district. The libelant prays “that a yrit of execution may issue from this court directing the Marshal to seize and sell said power boat ‘Phantasy’ under and by virtue of the final decrees and summary judgments and executions entered by the United States District Court for the District of New Jersey in admiralty herewith transferred to this court.” The libelant moves only for execution.
In February, 1931, three separate libels in rem were filed in the district of New Jersey against the power boat Phantasy. After attachment the usual claim and stipulation for value, with surety, was filed in each- ease and the vessel released. The cases proceeded to final decree. These decrees were assigned to Morris, the libelant here. Certified copies of the proceedings in New Jersey were filed as exhibits to the libel. No process or notice to respondents has issued and neither has voluntarily appeared.
Can execution issue upon the New Jersey decree? A final decree entered in another district does not become the decree of this court. Such a decree has no extraterritorial operation. A new suit must be instituted in the district in which the decree is sought to be enforced. Upon the filing of a libel in personam, process “by a simple monition in the nature of a summons to appear and answer to the suit” issues with or without attachment clause. Admiralty Rule 2 (28 USCA § 728). The issuance and service of such process, or attachment of respondent’s properly within the district, is necessary to give the court jurisdiction to proceed to judgment. Nothing could be more unjust than that a person should have his property seized on execution and disposed of by a tribunal without some process being served upon him by which he will have notice to appear and defend himself. The final judgment in the New Jersey court cannot relieve this court from ascertaining whether the judgment is one this court should enforce. In such ascertainment the respondents are entitled to their “day in court.” Libelant relies on Pennsylvania Railroad Co. v. Gilhooley (D. C.) 9 F. 618. In that case a final deeree was entered in New York. A libel based upon it was filed in Pennsylvania. The respondent appeared and filed exceptions to the libel, later, by agreement, considered as an answer. The ease was heard on libel and answer, and the court in Pennsylvania entered its decree for the libelant and for execution. The ease clearly has no application to the facts here.
Further, if a citation with attachment clause issued the Phantasy could not be attached. That vessel was seized in New Jersey upon libels in rem based on the same cause of action as is this libel. The claimants, re*921spondents in this action, entered into bonds with sureties and the vessel was released. Bonds given on the release of the vessel in actions in rem become the substitute for the vessel, and the remedy of the libelants in ease they prevail is transferred from the vessel to the bond or stipulation. United States v. Ames, 99 U. S. 35, 42, 25 L. Ed. 295. “That a vessel discharged from arrest upon admiralty process by the giving of a bond or stipulation for her value, or for the payment of the amount claimed in the libel, returns to her owner freed forever from the lien upon which she was arrested, and can never be seized again for the same cause of action, even by the consent of parties, is a proposition too firmly established to be open to question.” The William F. McRae (D. C.) 23 F. 557, 558.
The motion for execution must be denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219074/ | CAVANAH, District Judge.
This matter is now before the court on the motion of Joseph M. Murphy, a creditor, for a reconsideration of the order of the court entered September 28, 1933, whereby Abigail Manning was permitted to file her claim after the time for filing claims had expired, upon the ground that there is no reason in law why the claim was not filed within time, and no evidence that the claim came into the hands of Thomas B. Hargis, the attorney for the bankrupt.
On September 28, 1933, the claimant petitioned for an order allowing her to file her claim as of a date within the six-month period required by law and annexed thereto her affidavit stating that the bankrupt was indebted to her in the sum of $2,351.24 due upon certain promissory notes; that she mailed the notes with proof of claim to the bankrupt after the adjudication, who delivered them to Thomas B. Hargis, who' was then acting as attorney for the bankrupt; that he neglected to file the same, although he had informed her that it had been filed, and the first knowledge she had that the claim was not filed was on September 24, 1933, after more than six months had elapsed from and after the adjudication in bankruptcy; that the attorney Hargis has removed from Ashton, Idaho, to some unknown place in Oregon.
The objecting creditor contends that to allow the claim to be filed after the expiration of the six-month period would contravene section 57n of the Bankruptcy Act, 11 USCA § 93 (n), which provides that: “Claims shall not be proved against a bankrupt estate subsequent to six months after the adjudication”; and, further, that General Order 21 (11 USCA § 53), provides: “Proofs of debt received by any trustee shall be delivered to the referee to whom the cause is referred.”
The provision of the law requiring claims to be filed within six months from date of the adjudication is a statute of limitation and is mandatory and leaves no discretion to the court. In re Brill (D. C.) 52 F.(2d) 636; In re Richmond Hill Electrical Supply Co., Inc. (D. C.) 47 F.(2d) 948; In re R. B. Rose Co., Inc. (D. C.) 43 F.(2d) 446; In re Silk (Cloutman v. Weill et al.) 55 F.(2d) 917 (C. C. A.); In re Ealy et al. (D. C.) 31 F.(2d) 314. Remington on Bankruptcy lays down the rule to be: “Section 57 (n) is an absolute termination of the court’s power to allow claims that are not presented until after the expiration of one year.” 2 Remington on Bankruptcy, § 872.
The statutes and authorities, without doubt, bar the filing of claims subsequent to six months after adjudication, and the court seems to have no discretion in the matter unless there was a claim filed in time and the filing of an amended claim is requested. We have here a strict provision of the statute and the holdings of the courts generally to the effect that a court of equity cannot ignore the mandatory provision of the statute and its requirements.
The ease cited by counsel for petitioner of Scottsville National Bank v. Gilmer (C. C. A.) 37 F.(2d) 227, is where the court considered a request to file an amended claim and not an original one. The law permits the court to allow an amended claim where the facts warrant it in doing so, but not the filing of an original claim after the statutory period has lapsed.
At the time of the entering of the Order of September 28, 1933, allowing the creditor *923to file her claim, the court was of the impression that under the facts set forth in the petition and affidavit a court of equity had the power to permit the filing of a claim, although after the period of-six months had expired, but, upon objection now being made by a creditor, and in view of the strict provision of the statute and the authorities cited, it seems that the order heretofore made was without power in the court to do so, and therefore the same must be set aside.
From what has been said the order of the court entered September 28, 1933, allowing the filing of the claim will be vacated. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219075/ | GIBSON, District Judge.
On July 3, 1933, judgment for the defendant was ordered in each of the above eases. Later counsel for the plaintiff moved for a new trial, and the eases have been reargued. Exhaustive briefs have been submitted by counsel, and we have endeavored to carefully review the matters involved.
Counsel for the plaintiff take special exception to the following excerpt from the opinion: “As stated, Congress has given the Commissioner great power in the matter of amortization, and, since originally conferring that power, has taken no action to curb or confine it. For ten years the regulations of the Commissioner have been established, and for that period his interpretations of them have been known. During that period he has applied the regulations in the same manner as in the amortization allowance to the plaintiff. This application of the law has been accepted and followed by the Board of Tax Appeals and by various courts, during the existence of the regulations, as being a correct observance of the statute providing for amortization. Under such circumstances, it is not for this court to undertake to establish a new regulation, or to interpret the existing regulation in another way than that, in whieh it has been construed by its author, and as universally accepted.”
It is claimed that the court was mistaken in the allegation that the method of determining amortization adopted by the Commissioner of Internal Revenue in the instant eases was the method regularly adopted by him for the preceding ten years, and accepted by the courts during that period. Counsel point to Senate Report No. 27, 69th Congress, being the report of the Committee on Investigation of the Bureau of Internal Revenue, commonly known as the Couzens Committee. That report shows that the Commissioner, in a rather small percentage of the cases examined by the committee, had used the method claimed by plaintiff; and for these variations from the usual practice the committee has criticized the Commissioner. Counsel for the defendant admit some variations from the present method prior to 1925, but assert that since that year the method has been as in the present cases.
It may be that we were in error in asserting that the Commissioner had consistently followed his instant interpretation of his amortization regulation for ten years. Possibly the period was suggested by the opinion in United States v. Briggs Manufacturing Co. (C. C. A.) 40 F.(2d) 425. The statements therein made accorded with the experience of this court in all prior amortization cases coming under its notice. It may be that the Commissioner within the ten-year period has not followed his present amortization method so consistently as we stated, and has in some instances deviated from it. Whether that be true or not is of little importance, in view of our opinion that he has correctly interpreted and followed his regulation in the instant cases — and to that opinion we still adhere despite the forcible argument of counsel for the plaintiff.
The motion for a new trial will be denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219076/ | GREEN, Judge.
This action is begun to recover the sum of $6,611.68 with interest on account of taxes alleged to have been erroneously assessed and collected for the year 1919. On the submission of the case the parties agreed that the only issue in the case was whether a certain liquidating dividend of $8,000 which the commissioner included in the taxable income of plaintiff for 1919 was properly taxable in that year. This depends on whether the dividend was received by plaintiff or placed under his control during the year 1919; or, on the other hand, whether it was not received by him and did not come under his control until the year 1920, as plaintiff alleges. This matter is wholly a question of fact to be determined from all of the evidence in the case. The commissioner of this court who heard the testimony and made a report thereon has found in favor of the plaintiff on this matter. His report recites: “Not only was the dividend not paid plaintiff until January 19, 1920, as heretofore shown, but, also, it was not subject to his unqualified demand until subsequent to December 31, 1919.”
To this finding and other findings on which it is in part based the defendant has excepted. We have carefully examined the testimony and from this examination conclude that the preponderance of the evidence sustains the commissioner’s findings and have therefore adopted them. While the testimony is not long, no useful purpose will be sub-served by .discussing it.
It is sufficient to say that upon these findings and the stipulation of the parties as to the amount of overpayment, if the findings of the commissioner are sustained, judgment must be rendered in favor of the plaintiff for the sum of $3,094.60 with interest at 6 per cent, from September 28, 1925, for the period provided by law. It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219077/ | CAMPBELL, District Judge.
This is a motion to remand the above-entitled action to the Supreme Court of the State of New York, County of Kings.
The sole ground for the removal was diversity of citizenship.
*926This action was brought under the Jones Act, Act of June 5, 1920, c. 250, § 33 (title 46, § 688, U. S. C. [46 USCA § 688]), and therefore was not removable to this court. Engel v. Davenport, 271 U. S. 33, 46 S. Ct. 410, 70 L. Ed. 813; Goetz v. Interlake S. S. Co. (D. C.) 47 F.(2d) 753; Atianza v. United States Shipping Board Emergency F. Corp. (D. C.) 3 F.(2d) 845; Beer v. Clyde S. S. Co. (D. C.) 300 F. 561.
The complaint alleges an action for damages for negligence under the Jones Act, and the complaint is the only criterion on a motion of this kind. Wile v. Burns Bros. (D. C.) 2 F.Supp. 951.
Defendant cites The Red Eagle (C. C. A.) 3 F.(2d) 541, 543, in which the court held that there cannot be two proximate causes of a disaster; but that ease is not in point for the reason that in the ease at bar negligence is the sole proximate cause of the damage alleged.
Keefe v. Matson Navigation Co. (D. C.) 46 F.(2d) 123, cited by the defendant, is not authority in support of defendant’s contention that the ease at bar is based on unseat worthiness.
In the Keefe Case the complaint alleged: “That such condition of the stateroom constituted the vessel unseaworthy; that the said unseaworthy condition was the proximate and sole cause of plaintiff’s illness.” No charge of negligence was made, and the complaint alleged that the unseaworthiness was the proximate and sole cause. This is clearly distinguishable from the ease at bar, in which negligence as the cause of the damage is alleged, and the word “unseaworthy” describes a condition which had resulted from the negligence alleged, and which negligence was the proximate cause.
In view of the statement as to the contents of the complaint in Engel v. Davenport, supra, at page 34 of 271 U. S., 46 S. Ct. 410, 411, 70 L. Ed. 813, which is as follows: “The complaint alleged, in substance, that the vessel had been negligently sent upon her voyage when unseaworthy and equipped with defective appliances, in that a pelican hook, which was a necessary part of the chain lashing used in carrying the cargo, had in it a flaw observable upon ordinary inspection; that this hook was not inspected; and that it broke by reason of this flaw, causing the injuries in question,” and the fact that the use of the word “unseaworthy” therein did not prevent the Supreme Court from sustaining the right to remand, I do not see any reason why the use of the word “unseaworthy,” used in the same manner, should be given greater effect in the case at bar.
The case at bar is grounded only on negligence, and I see nothing in Mikkelson v. Pacific S. S. Co. (D.C.) 46 F.(2d) 124, cited by defendant, which would be authority for a refusal to remand in the case at bar.
In view of the decision of the Supreme Court in Engel v. Davenport, supra, I respectfully disagree with the decision in Petterson v. Hobbs, Wall & Co. (D. C.) 300 F. 811, cited by defendant.
The desire of the defendant to keep the case in this court pending the appeal in a limitation proceeding cannot be gratified. Mikkelson v. Pacific S. S. Co., supra (D. C.) at page 125 of 46 F.(2d) : “When the action is brought in the state court, jurisdiction attaches, and this court cannot acquire jurisdiction by removal.”
The motion to remand is granted. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219078/ | JOHNSON, District Judge.
The question of law to be decided is ¡raised on an affidavit of defense raising questions of law to plaintiff’s statement of claim. The plaintiff brought his action of assumpsit to recover the sum of $304.20, a premium paid on October 18, 1930, on an insurance policy, No. 4069323, issued to the plaintiff on his life, October 18, 1928, and also to recover $100 per month from July 3, 1930, down to the time of trial, with interest; also the sum of $408.90, a premium paid on October 18, 1930, on an insurance policy, No. 4069324, issued to the plaintiff on his life October 18, 1928.
The plaintiff contends that on July 3, 1930, while at the age of thirty-four years, he became totally and permanently disabled by disease causing an impairment of his body so that since that date he has been continuously prevented thereby from following a gainful occupation and that by section 3 of policy No. 4069323, which provides, “If, before attaining the age of sixty years and while no premium on this policy is in default, the Insured shall furnish to the Company due proof that he is totally and permanently disabled, as defined above, the company will grant the following benefits during the remaining lifetime of the insured so long as such disability continues. * * * The company will pay a monthly income to the Insured of the amount stated on the first page hereof ($10. per $1,000 face amount of Policy), beginning upon receipt of due proof of such disability, etc. * * * The Company will also, after receipt of such due proof, waive payment of each premium as it thereafter becomes due during such disability.” The plaintiff is entitled to recover $100 per month from October 18, 1930, to the time of trial, and the premium of $304.-20, which he paid October 18, 1930, after he became totally and permanently disabled by disease on July 3, 1930. The plaintiff contends that by the provisions of section 3 of policy No. 4069324, which provides, “If, before attaining the age of sixty years and while no premium on this policy is in default, the Insured shall furnish to the company due proof that he is totally and permanently disabled, as defined above, the company will waive payment of each premium as it thereafter becomes due during such disability,” he is entitled to recover the premium of $408.90 paid on this policy October 18, 1930.
But in the defendant’s affidavit of defense raising questions of law, the defendant ¡contends that the plaintiff’s statement of claim is insufficient to show a cause of action for the reason that it fails to set forth that the plaintiff furnished to the defendant company “due proof” that he was totally and permanently disabled on July' 3, 1930.
The plaintiff could not recover in this action unless at the trial he showed that he had furnished due proof of his permanent and total disability or that such proof was waived by the defendant company, and since such proof is an essential condition or requisite for recovery, it is necessary that plaintiff’s statement allege such proof. In this respect plaintiff’s statement is insufficient and the defendant’s affidavit of defense raising questions of law must be sustained.
And now, November 13, 1933, the defendant’s affidavit of defense raising questions of law is sustained, and the plaintiff is allowed fifteen days in which to file an amended statement of claim. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219079/ | LITTLETON, Judge.
With reference to the sufficiency of the claim for refund filed by plaintiff for the fiscal year 1930, the facts clearly establish that the grounds of this claim were those upon which the refunds made and the overpayment of $74,350'.90 involved in this ease were determined. There is no question as to the amount of the overpayment for 1920. The amount claimed was determined by the Commissioner, hut his reason for refusing to schedule this overpayment and refund the same was that it resulted from" adjustments of income and invested capital; that the claim for refund theretofore filed had not specifically made these items a basis of the refund claimed; and that as no timely claim for refund had been filed based on the adjustments made by the Commissioner in consolidated income and invested capital, the refund of the overpayment in question was haired by the statute of limitation. This is the government’s sole defense to this suit on this phase of the case. We can find no merit in it.
As shown by the findings, plaintiff filed a consolidated income and profits tax return showing in detail the items of income, invested capital, deductions, and credits, and paid a tax of $190,433.73 after taking a deduction against the tax shown on the return of $49,-841.48, taxes actually paid to Canada. Plaintiff employed the accrual method of accounting and was entitled under the statute to deduct from the tax shown on the return the Canadian tax accrued for 1920', which, at the proper rate of exchange, was $311,727.73. Thereafter plaintiff filed a timely claim for refund for 1920 based upon the specific ground that all of the items shown in the return filed were correct except the deduction for Canadian taxes, which had been understated in the amount of $318,903.83. The claim stated that “It is now claimed that this company-erred in deducting from item No. 12 [on the return] the Canadian business profits war tax paid during the taxable year and that it should have deducted the Canadian business profits war tax actually related to the income of the taxable year ended June 30, 1920. * * * ” The refund claim went further. It set out the law, set forth and quoted the computation of the return as made, and gave a new computation based upon the new deduction which showed that by reason of the increase in the deduction on account of Canadian taxes plaintiff had overpaid its tax for the year in question in the amount claimed. Even if it had been necessary for plaintiff to specify, in connection with its claim for refund, the various adjustments which the Commissioner from time to time proposed in the income, invested capital, and deductions shown on the return, we think the facts clearly show that plaintiff sufficiently did so specify in the original claim for refund and the written protest filed in connection therewith, which protest was considered by the Commissioner in connection with the claim for refund. This protest related to and was directed to the contention made in the claim for refund that plaintiff was entitled to the refund of the total overpayment resulting from the increased deduction for Canadian taxes. However, we need not pursue this matter further for the reason that, in the circumstances of this ease, it was not necessary under the statjite relating to claims for refund that plaintiff file a refund claim or amend the one already filed so as to claim a refund based on the proposed adjustments by the Commissioner to items set forth *943by the taxpayer in the return when such proposed adjustments did not result in any additional tax, and no additional assessment in excess of the tax shown on the return was ever made by the Commissioner. The Commissioner ultimately, when he rendered his final decision on plaintiff’s claim for refund, receded from his earlier position that the consolidated net income shown on the return should be increased because of adjustments in the consolidated invested capital and deductions taken on the return and from the positions taken by him in the refunds allowed and paid, with the result that the balance' of the overpayment here involved resulted directly from the original allowance of plaintiff’s claim for the increased deduction for accrued Canadian taxes. No additional tax was ever assessed or collected from plaintiff and no portion of the overpayment involved grew out of any item other than the deduction for Canadian taxes. Moreover, the claim for refund involved in this ease especially set forth, as a ground thereof, that the return as filed and the computation shown thereon as corrected by the proper deduction for Canadian taxes were correct. The ultimate decision of the Commissioner determining the overpayment in question was substantially an agreement with this contention. No new items of income were ever brought into the ease and the Commissioner at no time ever assessed, or proposed to assess, any tax in excess of that shown on the return.
The Commissioner never finally rejected plaintiff’s claim for refund until he refused, some time in 1930, to schedule and refund the overpayment of $74,350.90. At the time the Commissioner made the partial allowances of an overpayment of $49,903.38, some time in 1926, and of $15,433.12, about December 13, 1927, the matter of the overpayment to which plaintiff was entitled on account of deductions for Canadian taxes had not been finally determined on account of the fact that the matter of the correct invested capital and tax for the fiscal years 1918 and 1919 was pending before the Board of Tax Appeals. Both the Commissioner and the plaintiff knew that if any of the plaintiff’s contentions before the Board as to prior years should be allowed, these adjustments would necessarily carry over into the year 1920 and affect the amount of its tax for 1920 as computed by the Commissioner without giving effect to any such adjustments. In these circumstances it was understood and agreed between the plaintiff and the Commissioner that the final determination of the tax and the amount of the overpayment to which plaintiff was entitled for 1920 would await the decision of the Board of Tax Appeals for prior years.
Plaintiff is therefore entitled to recover the admitted overpayment of $74,350.90; with interest as provided by law.
The next phase of the case involves the withholding by the Comptroller General on June 21, 1926, of $26,557.67 of the overpayment of tax and interest allowed by the Commissioner in the amount of $63,524.50, on the ground that plaintiff had been overpaid by the government under a war contract for furnishing ammonia. This alleged indebtedness of plaintiff represented the amount paid plaintiff by the War Department under an original and a supplemental contract on account of an increase in freight rates added to the price of 8% cents a pound for ammonia delivered to the defendant under the original procurement order of February 15, 1918, the formal contract of January 1, 1918, and the supplemental contract executed in October, 1918.
The Comptroller General based his action on the conclusion that the original procurement order and the original contract did not provide for the payment to plaintiff of any increase in freight rates, that this was never intended by the parties to the contract, was not omitted from the formal contract of January 1, 1918, through inadvertence and mutual mistake, and that the supplemental contract executed in October, 1918, was without consideration, made without authority, and, therefore, void. Counsel for the defendant makes the same contention here and insists that plaintiff is not entitled to recover the amount withheld. We cannot agree. The undisputed facts disclose that the War Department in December, 1917, negotiated with plaintiff for the purchase by the government and delivery by plaintiff of a designated quantity of aqua ammonia at a specified price of $0.08% a pound; that a procurement order correctly embracing the terms agreed upon was given and accepted; that a formal contract was entered into, intended to embrace the terms of negotiation and the procurement order; and that, by oversight, inadvertence, and mutual mistake, the freight clause above quoted was omitted from the formal contract. The defendant, then in charge of the railways, increased freight rates and plaintiff thereafter included this increase in its invoices for ammonia delivered; because of such inclusion the payment of the invoices was held up by the New York ordnance office, thus, for the *944first time, calling plaintiff’s attention to the fact of such omission of the freight clause from the formal contract. The matter of correcting the error was taken up with those who had made it and the error was corrected hy a supplemental contract under an order of the Chief of Ordnance who stated that the omission of the freight clause was due to inadvertence, and the supplemental contract recited that the omission was “through inadvertence and mutual mistake.” The Chief of Ordnance, the contracting officers, and the official who carried on the negotiations with plaintiff and arrived at the original contract agreed with plaintiff that the addition of any increase in freight rates to the specified price of 8% cents was intended and provided for in the original procurement order and that specific provision therefor in the original form of contract was omitted through inadvertence and mutual mistake. There is no evidence to the contrary.
Counsel for the defendant contends that the original procurement order is not susceptible of the construction that any increase in freight rate charges was to be allowed plaintiff on ingredients entering into the manufacture of ammonia or on shipments by plaintiff to the defendant of the finished product at certain, designated points. In our opinion the plain language of the procurement order and all the evidence in the case refutes this contention. The original procurement order, which was signed by plaintiff, provided for the manufacture and delivery of aqua ammonia at a stated price per pound f. o. b. any point designated by the Chief of Ordnance within a certain radius, and then provided that “any * * * increase in freight rate to be • * * * added to delivered price, $0.08¼.” We think this could only mean that plaintiff was entitled to add to the price specified any increase in freight rates, whether on the ingredients entering into the manufactured product or on the finished product delivered to the defendant. There are no other provisions in the contracts calling for a different conclusion and there is not the slightest evidence in the record that supports the contention made by the defendant. There was clearly a mutual mistake and the supplemental contract executed in October, 1918, was valid. Plaintiff was therefore entitled to the allowance made and paid by the War Department and is entitled to recover the amount of the overpayment of tax withheld by the Comptroller General and applied as an offset against such allowance. Even if there had been no supplemental contract, we would hold under the facts disclosed by the record in this case that plaintiff should recover the increased freight rates, amounting to $26,557.67, because of the mutual mistake. Harvey v. United States, 105 U. S. 671, 26 L. Ed. 1206; Cramp & Sons Ship & Engine Bldg. Co. v. United States, 239 U. S. 221, 36 S. Ct. 70, 60 L. Ed. 238; Ackerlind v. United States, 240 U. S. 531, 36 S. Ct. 438, 60 L. Ed. 783; Poole Engineering & Machine Co. v. United States, 58 Ct. Cl. 9; Chicago, Wilmington & Franklin Coal Co. v. United States, 59 Ct. Cl. 708; Ordnance Engineering Corp. v. United States, 62 Ct. Cl. 204. In Heid Brothers v. United States, 63 Ct. Cl. 392, a case very similar to the present one, this court said: “It is quite evident that both parties to the contract believed the provision providing for the increase or decrease in freight rates was embodied in the contract when it was signed by them; due to mistake, which was mutual, the provision aforesaid was omitted from the contract. Both parties understood the obligations imposed by the contract to be different from those stated in the written instrument. In such a ease the court will reform the contract in accordance with the real intention and understanding of the parties shown by the evidence. * * * ”
The omission of the freight clause agreed upon and contained in the procurement order as accepted was, by mutual mistake and inadvertence, omitted from the formal contract. This omission was corrected by the parties themselves who were in a position best to know what had been agreed upon. The defendant received the goods contracted for and a final settlement agreement, made in good faith, was entered into by the parties. We can find no valid reason for ignoring what was done. The plaintiff is, therefore, entitled to recover the amount of $26,557.67 withheld on June 21, 1926, with interest thereon at 6 per cent, per annum from that date until March 3, 1933, under the Act of March 3, 1875,18 Stat. 481 (31 USCA § 227). Ernest C. Whitbeck, receiver, L-W-F Engineering Co., Inc., v. United States, no. F-322, decided April 10, 1933; Chicago, Indianapolis & Louisville Ry. Co. v. United States, no. K-474, decided June 5, 1933.
Judgment will therefore be entered in favor of plaintiff for $100,908.57, together with interest, as set forth in- the conclusion of law-herein. It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219080/ | JOHNSON, District Judge.
The petitioner, and Harry C. Flohr, alias Herman Andrews, were jointly indicted, tried, and convicted in the United States District Court for the Southern District of New York and were sentenced on May 12,1933, to imprisonment in the United States Northeastern Penitentiary at Lewisburg, Pa., for a term of one year and one day on count 1 and one year and one day on count 5, to run concurrently. Both defendants have filed petitions for writs of habeas corpus alleging that they are illegally restrained of their liberty because the indictment under which they were convicted does not charge an offense against the United States of America. A rule to show cause why a writ of habeas corpus should not issue was granted and a hearing had thereon at which the petitioners appeared in person.
Count 1 of the indictment reads as follows : “That heretofore, to wit, on or about the 13th day of February, 1933, at the Southern District of New York and within the jurisdiction of this Court, Harry C. Flohr alias Herman Andrews and Tracy M. Landis, alias Tracy Landers, alias John Williams, the defendants herein, unlawfully, wilfully and knowingly and with intent to defraud the United States, did utter, publish and pass a certain obligation of the United States, that is to say, a United States Postal Savings Certificate bearing the serial number E165439 issued by the General Post Office, New York, N. Y., on August 22, 1932, of the denomination of $20.00, drawn payable to one Eva Smith, and of the following tenor: (Photograph of certificate annexed) knowing said Postal Savings Certificate to contain a forged material endorsement, to wit, the forged endorsement of the depositor, Eva Smith aforesaid; against the peace of the United States and their dignity and contrary to the form of the statute of the United States in such ease made and provided (Title 18, section 265, U. S. Code).”
Count 5 of the indictment reads as follows: “And the grand jurors aforesaid, upon their oath aforesaid, do further present that heretofore, to wit, on or about the 12th day of February, 1933, and continuously thereafter up to and including the date of the filing of this indictment at the Southern District of New York and within the jurisdiction of this Court, Harry C. Flohr alias Herman Andrews, and Tracy M. Landis, alias Tracy Landers, alias John Williams, the defendants herein, unlawfully, wilfully and knowingly did conspire, combine, confederate and agree together and with each other to commit an offense against the United States in the Southern District of New York, namely, 'to violate section 265 of title 18 of the United States Code [18 USCA § 265] that is to say, at” the time and place aforesaid the defendants herein unlawfully, wilfully and knowingly conspired and agreed to pass, utter, publish and sell and to keep in their posses*946sion and conceal with like intent four certain obligations of the United States, to wit, four Postal Savings Certificates all issued by the General Post Office, New York, N. Y., all drawn payable to one Eva Smith and being of the tenor more particularly set forth in Counts First, Second, Third and Fourth hereof, knowing each of said Postal Savings Certificates to contain a forged material endorsement, to wit, the endorsement of the depositor Eva Smith aforesaid.”
From the foregoing it appears that the indictment was drawn under the erroneous theory that the acts alleged constituted an offense under section 265, title 18, USCA. The same question presented here was decided by the Circuit Court of Appeals of the Eighth Circuit in the ease of Webster v. United States, 59 F.(2d) 583, on page 586, and the court said:
“While the indictment before us cannot be sustained as charging an offense under section 265, title 18, USCA, we are convinced that the allegations of the indictment sufficiently charge an offense under section 73, title 18, USCA (section 29, Criminal Code) which, among other provisions, contains the following: ‘Whoever shall * * * cause to be uttered or published as true, any such false, forged, altered or counterfeited deed, power of attorney, order, certificate, receipt, contract, or other writing, with intent to defraud the United States, knowing the same to be false, altered, forged, or counterfeited * * * shall be fined not more than $1,000 and imprisoned not more than ten years.’
“The indictment specifically charges that the accused did pass and utter a certain obligation of the United States with a certain falsely made and forged indorsement written thereon with intent to defraud the United States of America. We are satisfied that the broad language of the statute is designed to punish those who, with intent to 'defraud the United States, pass or utter any forged, false, altered, or counterfeited writing. The indictment specifically charges that the indorsement was such a writing; that accused well knew the same to be forged and falsely made; and that he did pass and utter the same with intent to defraud the United States of America. These allegations constitute a statement of an offense under the section quoted last above. The fact that the offense is not stated in the exact language of the statute is immaterial so long as the essential elements of the offense are charged.”
The only questions which can be considered on a petition for a writ of habeas corpus are whether the petitioner was convicted by a court having jurisdiction of his person and the offense and whether the sentence pronounced was one within the power of the court. Cardigan v. Biddle, Warden (C. C. A.) 10 F.(2d) 444; Knewel v. Egan, 268 U. S. 442, 45 S. Ct. 522, 69 L. Ed. 1036.
The mere fact that the indictment, after charging an offense against the United States, recited a section of the Code which was not applicable to the offense charged, is not a ground for discharging the defendant on a writ of habeas corpus. At the most, this was only a technical defect in the indictment which will not be inquired into on a petition for a writ of habeas corpus. Knewel v. Egan, 268 U. S. 442, 45 S. Ct. 522, 69 L. Ed. 1036.
The indictment by its language did charge an offense against the United States, to wit, a violation of section 73 of title 18 of the United States Code Annotated; by alleging that the defendant unlawfully, willfully, and knowingly, and with intent to defraud the United States, did utter, publish, and pass a certain obligation of the United States knowing such obligation to contain a forged material indorsement. This was sufficient to give the trial court jurisdiction.
The petitioners rely upon the decision of the Circuit Court of Appeals of the Tenth Circuit in the case of Martin v. White, Warden, 47 F.(2d) 835. The court in that case held that a count in an indictment charging possession of a forged government obligation and forgery thereon of registered owner’s indorsement with intent to defraud the registered owner did not state a federal offense because it charged an intent to defraud an individual and not the United States of America and directed the trial court to issue the writ of habeas corpus.
In the ease at bar an offense against the United States of America is distinctly charged in the indictment and distinguishes this case from the case of Martin v. White.
.The petition for a writ of habeas corpus accordingly must be dismissed.
And now, November 13, 1933, after hearing on the petition for a writ of habeas corpus, rule, and answer, it appearing from the petition itself that the petitioner is not entitled to a writ of habeas corpus, it is ordered that the petition be, and the same is hereby, dismissed, and the rule granted thereon discharged. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219081/ | GODDARD, District Judge.
This action is brought by the owner of the Italian steamship Isarco against the former United States collector of customs of the port of New York for the recovery of $5,000, with interest, the sum of $5,000 having been deposited on June 2, 192.7, by the vessel owner with the collector under protest pending the determination of the question of the liability of the owner, charterer, agent, consignee, or 'master of the Isarco for an alleged violation of sections 19 and 20 of the Immigration Act of 1924 (8 USCA §§ 166, 167).
It has been duly stipulated that the case should be tried by a jury of one, and that, when all the evidence was in, each counsel should move for the direction of a verdict in favor of their respective clients. Both sides have now presented their case, rested, and moved for a favorable verdict. The ease presents not issues of facts but questions of law.
The Facts.
On June 2, 1927, the Isarco, then in the port of New York, was being refused clearance by the defendant on the ground of an asserted liability to pay a fine alleged to have been incurred because of the failure to detain aboard the ship when previously in the port of New York in March, 1927, five alleged alien seamen as required by the immigration officials of that port. To obtain clearance of the ship, the owner, the plaintiff, deposited with the collector a certified check for $5,-000, reserving all its rights to demand its return.
On March 15,1927, a notice addressed “To the Master, Officer in charge, or Agent of S/S Isarco, Columbus Marine Line,” was served upon the master of the Isarco at quarantine, requiring the detention on board the Isarco of five aliens suspected of planning to abandon the ship. Upon arrival of the ship at her dock, the aliens immediately escaped.
The only notice of intention to assess a fine against anyone was given to “Columbus Marine Corp. Agent of the vessel ‘Isarco,’ ” and it reads as follows:
“Notice of Liability for Pine on Account of Pailure to Detain on Board, etc.
Alien Seamen.
“U. S. Department of Labor “Immigration Service
“Office of Commissioner of Immigration
Ellis Island, New York Harbor
“March 31, 1927
“To Columbus Marine Corp. Agent of the vessel ‘Isarco’ at NY 3/15/27 17 Battery Place NYC
“You are hereby notified that it appears that the alien seamen whose names are shown herein were permitted to land in the United States contrary to regulations prescribed by the Secretary of Labor, or were not detained on board until inspected by the Immigration officers, or were not detained on board after such inspection, or deported as required by such Immigration officers, or the Secretary of *952Labor. It therefore appears that a fine should be imposed, under the provisions of sections 19 and 20 of the ‘Immigration Act of 1924.'
“If you desire a hearing as to whether a fine should be imposed in this instance, you will be allowed sixty days from the date of this notice for that purpose, and the vessel on which the said alien arrived will be grant-. ed clearance papers when she is ready to sail and allowed to proceed upon her outward-bound voyage upon condition that you deposit with the Collector of Customs at this port, prior to her sailing, the sum indicated below as security for the payment of the said fine, should it be imposed. Please submit evidence in duplicate.
“For the Commissioner
“ [ Signed] Frank Hayes
(name)
“Inspector-in-Charge Law Division
(Official Title)
“Received the above notice April 1, 1927
“Columbus Marine Corporation
“Per Floyd Crawford, Treasurer.
“Witness Joseph J. Jiuliano.”
The imposition of the fine is evidenced by a minute dated July 2,1927,.contained in the government’s file, which reads:
“In re Francesco Giliberto, Allesandro Quirino, Luigi Pissa, Cristofaro Juliano and Giuseppe Mennella ex s/s/ Isareo
March 15, 1927.
“This case comes before the Board of Review in Fine Proceedings.
“No hearing. No interested parties, Comptroller General should be advised.
“This record relates to five alien seamen who arrived on said vessel and date and who were ordered detained on board the ship because the examining inspector was of the opinion that they would abandon their calling and remain indefinitely in the United States if permitted shore leave.
“No protest has been made against the imposition of a fine in this case. The master’s letter of March 19 admits the escape of these aliens.
“Considered and recommended that the penalty as provided in section 20 of the Act of May 26, 1924 be imposed. The sum involved is $5,000.”
“(Signature illegible)
“Acting Chairman Secy, and Com’r.
Genl’s Board of Review.
“So ordered:
“(Signature illegible)
“Assistant to the Secretary.”
From this it does not appear that the fine was imposed upon any particular person; and in the notice of the actual imposition of the fine dated July 16, 1927, sent by the Acting Commissioner General of Immigration to the Commissioner of Immigration, and in the communication of July 16, 1927, from the Acting Commissioner of Immigration to the Comptroller General of the United States, and in a letter of July 19', 1927, from the Commissioner of Immigration at New York to the collector of customs, it is stated that the fine was imposed “against the S/S Isareo.”
Section 20 of the Immigration Act of 1924 (8 USCA § 167) or the pertinent portion of it reads:
“§ 167. (a) Detention of Seamen on Board Vessel Until After Inspection; Detention or Deportation; Penalty; Clearance to Vessels. The owner, charterer, agent, consignee, or master of any vessel arriving in the United States from any place outside thereof who fails to detain on board any alien seaman employed on such vessel until the immigrartion officer in charge at the port of arrival has inspected such seaman (which inspection in all cases shall include a personal physical examination by the medical examiners), or who fails to detain such seaman on board after such inspection or to deport such seaman if required by such immigration officer or the Secretary of Labor to "do so, shall pay to the collector of customs of the customs district in which the port of arrival is located the sum of $1,000 for each- alien seaman in respect of whom such failure occurs. No vessel shall be granted clearance pending the determination of the liability to the payment of such fine, or while the fine remains unpaid, except that clearance may be granted prior to the determination of such question upon the deposit of a sum sufficient to cover such fine, or of a bond with sufficient surety to secure the payment thereof approved by the collector of customs.”
It may be observed that this statute provides for no fine against the vessel itself.
In light of the authorities of United States v. J. H. Winchester & Co., Inc. (C. C. A.) 40 F.(2d) 472, and United States v. Columbus Marine Corp. et al. (C. C. A.) 62 F.(2d) *953795, 1983 A. M. C. 582, I think a verdict in the case at bar must he directed in favor of the plaintiff.
“The owner, charterer, agent, consignee, or master” who fails to detain alien seamen if “required” to detain an alien hy the immigration officer or Secretary of Labor shall pay $1,000 if the alien is not detained. However, there are two conditions precedent that must be fulfilled before a valid fine may be imposed upon any one. He must first be “required” to detain the seaman, and the government must also give him notice of its intention to assess a fine against him with an opportunity of being heard. United States v. Columbus Marine Corporation, supra. The only notice of the government’s intention to fine any one was the notice addressed to and served upon “Columbus Marine Corp., Agent of the vessel Isarco.” It is therefore plain that no valid fine was assessed against the owner, the plaintiff.
Counsel for the defendant urges that the plaintiff, the owner, did have notice of the government’s intention to assess a fine against it as it alleges in its complaint, paragraph “Third,” “that * * * the plaintiff deposited with the said defendant the sum of five thousand dollars ($5,000) to he held by the said defendant pending the judicial, proper and lawful determination of the question of the liability of the owner, charterer, agent, consignee or master of the Italian steamship Isarco, * * * to a fine for an alleged violation of sections 19 and 20 of the Immigration Act of 1924, which said offense, * * * consisted of the failure to detain on hoard the said steamer - * * * or to deport * * * five seamen-employed aboard said steamer and alleged to have been aliens,” but there is nothing in this to indicate that the owner knew the government intended to assess the fine against it; so far the government had only given notice to the agent that it intended to assess a fine against the agent; it never did give any one else such notice; and that is just the difficulty.
While it seems to me that this disposes of the case, and it is perhaps unnecessary to pass upon the question as to whether the order requiring the “owner” to detain the seamen was properly served upon him, I think it does present another reason which also requires the direction of a verdict for plaintiff. The order to detain was served upon the master only, and was addressed to “The Master, Officer in charge, or Agent of S/S Isarco, Columbus Marine Line.” While the master of a vessel is the agent of the owner in respect to the possession and general management of the vessel, this notice was not addressed to the “owner”; it was addressed to the master himself. The immigration officials apparently felt that it would be sufficient to fine him, and apparently a fine imposed upon him could have been collected providing that they proceeded to properly assess the fine against him.
As stated by Judge Learned Hand in United States v. Columbus Marine Corporation, supra, at page 796 of 62 F.(2d):
“The clause, ‘if required,’ in section 20 (a), meant, we thought, that the ‘owner, charterer, agent, consignee or master,’ to become liable, must he personally ordered to detain the alien. If that be true, though the agent learned of the orders directed to the master, the information did not impose any duty upon it; nor the escapes, any fine. It is true that both orders were addressed to all the persons mentioned in the statute, hut that, as we view it, made no difference. The master was not the agent of the others — except perhaps of the owner — to receive the notice; each person must be ordered to detain the seamen, on whom any duty was to be imposed.”
Another point raised by counsel for plaintiff is that, so far as the record shows, the fine was not imposed upon the owner, agent, or master, but was “imposed against the S/S Isareo”; but in view of the foregoing it is unnecessary to consider this.
Accordingly, a verdict is directed in favor of the plaintiff for $5;006, with-interest from October 9,1929, the date when the $5,000' was covered into the Treasury and the date conceded by counsel for defendant from which plaintiff is entitled to interest in the event of a verdict being directed in favor of the plaintiff. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219082/ | WAY, District Judge.
The libel in this proceeding is against the fishing boat Henry S, a motorboat about 52 feet long, her fishing outfit and equipment, “including three nets and rings and lines thereto, and 400 fishing stakes or poles.”
The title to the Henry S was in respondents, R. F. and Carroll Adams, doing business as Adams Brothers, from some time in 1937 until certainly as late as December 13, 1932. On or about December 13, 1932, R. B. Moore, Incorporated, at the instance of Adams Brothers, installed in the Henry S an engine at the contract price of $864. Following the installation Moore executed and delivered to Adams Brothers a writing signed by both parties designated, “Contract of Sale of Goods and Chattels Reserving Title,” in an attempt to comply with the provisions of section 5189 of the Code of Virginia as amended by Acts 1923 (Ex. Sess.) c. 159 relating to conditional sales of personal property, where the title thereto is reserved in the vendor until the purchase price is fully paid. This contract purports to transfer conditionally to Adams Brothers title, not only to the engine, but also to “1-50 boat,” and “fishing outfit including three nets and equipment.”
The evidence signally fails to disclose any prior valid transfer of the Henry S to Moore, so that the attempt of the latter to reserve title to the boat was futile, since that company had never been the owner of the boat and was, therefore, not in a position conditionally to transfer title to any one, much less to Adams Brothers who were already the owners. On account of this and other facts rendering the contract invalid as an instrument reserving title, it is not necessary for the court to determine the relative dignity as between a valid conditional sale contract and maritime liens. The intervener, Northern Neck Finance Corporation, elected to assert a maritime lien against the boat for $764, the balance of the purchase price of the engine.
On December 13, 1932, Moore duly assigned for full value the contract covering the sale of the engine to said Northern Neck Finance Corporation. The delivery and installation of the engine by Moore, and the assignment and transfer of its claim against the boat, engine, and equipment, to the finance corporation axe parts and parcels of one transaction, so that the finance corporation, I think, clearly occupies the same position as to the Henry S and its proper equipment which Moore did, unless the finance corporation has by other proceedings on its claim waived its right to assert a maritime lien in this proceeding.
Adams Brothers failed to make the required” payments on the engine, and on April 6, 1983, the finance corporation obtained a judgment by confession against them in the circuit court of Northumberland county, on *955their homestead waiving note for $764, covering the balance of the purchase price of the engine. Execution issued on the judgment, upon which execution the sheriff has made the following return: “May 20, 1933, at the request of the plaintiff the return ‘no property ’ is hereby made. J. E. Anderson, Sheriff.”
It further appears that respondents, R. F. and Carroll Adams, have filed homestead deeds claiming their respective homestead exemptions in certain property, among which are the nets and poles in question.
At the trial it was urged by libelant, but denied by the finance corporation, that this judgment has been paid, or at least that it is a lien on real estate of ample value to satisfy it in full, without the necessity of the finance corporation asserting any claim against the Henry S, or her equipment, but no evidence was offered by libelant to support that contention.
It was also urged that the finance corporation by taking said proceedings in the state court has waived its right, if any, to assert a maritime lien against the Henry S. The finance corporation has filed exceptions to the libel, urging, among other points, that the three nets and poles are no part of the equipment of the Henry S.
The nets in question are what are ordinarily known as “pound” nets. When libeled the marshal found them in Chesapeake Bay, about three miles off shore, and southeast of the Great Wicomoeo Lighthouse. The pound poles referred to are from 48 to 62 feet in length and were driven into the ground to a depth of from 6 to 15 feet. The nets were permanently attached to the poles by rings and other fastenings, for the duration of the fishing season, Which usually commences some time in March and lasts for about three months, or until around the middle of June. The Henry S was not used in driving the pound poles and the nets were never delivered to and have never been on her.
During the fishing season respondents used the Henry S for towing a 32-foot boat to and from the nets. This latter boat alone was used for taking fish from the nets and bearing them ashore. At the close of a fishing season it is the regular practice to take these nets and such of the pound poles as are pulled up ashore and to store them there until the fishing season the following year. The work of repairing the pound nets is performed while they are on shore. In the autumn and winter the Henry S was used by Adams Brothers in oystering. Apparently, the Henry S, the three nets, and the poles are all of the property owned and used by respondents, Adams Brothers, in their fishing operations, and the nets referred to in the contract between R. B. Moore, Incorporated, and Adams Brothers, are the same that were libeled in this cause. The 32-foot boat mentioned above does not belong to Adams Brothers and was not attached. In order legally to operate these nets Adams Brothers were required to obtain a license from the Virginia oyster inspector covering the place at which they were located, which license covered a period of 12 months.
The defense that Moore, Incorporated, has been paid for the engine, and consequently that no debt representing the purchase price of the engine now exists, is without merit. The situation on whieh libelant relies to sustain that contention results solely from Moore’s selling and assigning its claim against the vessel for a necessary furnished to and installed therein. The finance corporation, upon taking the assignment and paying Moore the balance due for the engine, assumed the position theretofore occupied by Moore. A complete answer to the contention is that Adams Brothers, the debtors, have paid only $100 of the $864 representing the original purchase price of the engine.
1. Is the finance corporation entitled to assert a maritime lien against the Henry S and her equipment?
It seems to me that this question must be answered in the affirmative. That corporation’s assignor furnished and installed in the boat a new engine to replace an old one. That the engine was sueh a supply or necessary as entitled the person furnishing it to a maritime lien against the boat is not open to debate. And while the finance corporation’s assignor attempted unsuccessfully to retain title to the boat and engine pursuant to provisions of the Virginia statute, I can see no sound reason why that act barred Moore or its assignee from claiming a maritime lien on the boat for the value of the engine. The Pearl (D. C.) 189 F. 540; In re Gambrill Mfg. Co. (D. C.) 283 F. 349; The E-270 (D. C.) 16 F.(2d) 1005, engine installed in boat; Ricou & Sons v. Fairbanks, Morse & Co. (C. C. A.) 11 F.(2d) 103, engine and other equipment installed in boat; The Fannie F. Hickey,1 1931 A. M. C. 794, 800. And see the comment of the court in The Katherine (D. C.) 15 F.(2d) 387, at page 388.
*9562. Has the finance corporation, by taking judgment in the state court on the note covering the purchase price of the engine, waived its right to assert a maritime lien against the Henry S?
The finance corporation as a result of the assignment from Moore acquired a promissory note which represented a personal claim against the makers, R. F. and Carroll Adams, and at the same time acquired a lien against the Henry S for the value of a necessary or supply furnished to and installed in that vessel. By pursuing the personal claim the finance corporation has obtained a personal judgment against the makers, but that judgment remains unsatisfied. How may it properly be said that as a result of that unfruitful proceeding the finance corporation has lost its other remedy for the collection of at least a part of its claim by enforcing its lien against the vessel? It would seem that the creditor should be permitted to pursue each of the remedies open to it until it finally collects. In The Eastern Shore (D. C. Md.) 24 F. (2d) 443, 444, the court so held, quoting from the opinion by Judge Benedict in The Brothers Apap (D. C.) 34 F. 352, as follows: “ ‘The only question in the case arises out of the fact that prior to instituting this proceeding the libelant brought suit against the master of the vessel in a state court for these same supplies, in which action he recovered a judgment against the master, but of which judgment he has been unable to obtain any satisfaction. The contention on the part of the claimant is that the libelant lost his lien upon the ship by suing the master as he did. I cannot agree with the claimant in this contention. Upon principle, it seems to me that in cases where a lien upon the ship arises, and also a personal liability on the part of the master and the owner as well, the creditor must be allowed to pursue each of these remedies in succession, until he obtains satisfaction of his debt. That he should be able to do this seems to me to be the reason why these several remedies are given by law. Surely the value of the rule will be largely diminished if it be held that a futile attempt to enforce the master’s personal liability deprives the creditor of the benefit of the ship’s liability.’ ”
Libelant relies on The Kalorama, 10 Wall. 204, 218, 19 L. Ed. 941, where the court, referring to the effect of another proceeding then pending for the enforcement of the same claim, said that, “Had the judgment been rendered it might be different.” The court in The Eastern Shore Case points out that this expression was a mere dictum and dearly was not intended by the Supreme Court to indicate its views as to what would be the effect of reducing the claim to judgment in the other proceeding.
3. Are the pound nets and poles part of the equipment of the Henry S?
I think it is clear that this question should be answered in the negative. It is true that the decisions have been liberal, holding “not merely those things which are physically material and absolutely necessary to her existence or preservation which are incorporated into her, or used on board” to be necessaries for a vessel, “but also those which a careful and provident owner would provide, to enable her to perform well the functions which, as a maritime agent, she is designed to perform.” 1 Benedict On Admiralty, pp. 87-89 and 138-139; The Artemis (D. C.) 53 F.(2d) 672; The Pinthis (C. C. A.) 286 F. 122.
However, no decision has been called to the attention of the court which holds that “necessaries,” as used in the statute, ineludes pound nets and poles operated as those in controversy are shown to have been operated at the time they were attached. Cases holding that seines, seine boats, and purse nets were necessary to enable a fishing vessel properly to perform the functions for which such vessel was designed, are cited on behalf of libelant. The Hiram R. Dixon (D. C.) 33 F. 297, nets furnished to a vessel for the purposes of a menhaden fishing voyage; The Mountaineer (C. C. A.) 286 F. 913, vessel designed and built to be used for purse seine fishing only; The Geisha (D. C.) 200 F. 865, seine boat towed by steamer and used by her on fishing trips; The Sam & Priscilla (D. C.) 275 F. 937, purse seine for catching mackerel, and the same case on appeal, Linen Thread Co. v. Shaw et al. (C. C. A. 1) 9 F. (2d) 17. But I think that the radically different manner in which these pound nets were operated is decisive of the question now under consideration. The owners had set and were operating the nets in stationary and permanent positions. While the pound nets were set, the power of the Henry S was not used to move, manipulate, or handle them. That vessel was used merely as a means of conveying the owners to and from the nets and to tow the smaller boat. The pound nets were not a necessary or even convenient part of the'equipment of the Henry S and were never carried aboard her. In the eases last above referred to, the owner was operating a fishing boat as a business, using its power to move, manipulate and handle the nets and *957seines which were in no way attached to land, but were regularly carried and used by the fishing boat as a part of its equipment. In the instant ease each pound net, at the time it was attached, constituted a mechanical fisherman complete in itself and in no way dependent upon the Henry S to aid in capturing fish, while in the cases referred to, the boat itself was the mechanical fisherman and the nets, seines, or seine boats were merely parts of its equipment.
The court’s conclusions, therefore, are that the nets and poles do not constitute a part of the equipment of the Henry S; that as to them the libel will be dismissed, and all claims for materials supplied to the nets will be disallowed.
The claims of libelant, Reed & Rice, Incorporated, and interveners for materials supplied or repairs made to the Henry S will be allowed.
The claims filed by or on behalf of seamen for wages earned while working on the Henry S will be allowed in the amounts shown by the testimony of the respondent R. F. Adams, with leave for such claimants, in case they desire to contest the correctness of the amounts testified to be due them by said respondents, to offer additional testimony on that question.
Upon presentation, an order in conformity with the foregoing conclusions will be entered.
Commissioner’s report. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219083/ | BYERS, District Judge.
This motion was argued on November 2, 1933, and the papers and briefs were received on the 6th at 4:30 p. m.
A review is sought of an order made by the Referee in Bankruptcy having this case in charge, dated October 26, 1933, in which he denied a motion to dismiss the petition of a creditor to remove William M. Greve as one of the trustees in bankruptcy herein.
The motion was addressed to the sufficiency of the petition as a matter of law, and ’ for present purposes, therefore, the material allegations must be treated as true.
In substance they aver': That the said trustee is the president and a director of New York Investors, Inc., the parent corporation of the bankrupt, i. e., the owner of all of its stoek; that he is a member of the loan committee of that corporation, which made loans to this bankrupt some of which are unpaid, i. e., that he is the president, etc., of a creditor of this bankrupt; that this bankrupt was organized by the parent company to build theatres, pursuant to an agreement between it and Paramount, etc., Corporation and Thompson-Starrett Co.; that this bankrupt has filed a claim in the sum of $6,000,000.00 as a creditor of said Paramount, etc., Corporation, now in bankruptcy, which sum was advanced to it by said New York Investors, Inc.; that such claim is sought to be defeated or diminished in that proceeding by a protective committee, one member of which is the partner of another member of the same loan committee of New York Investors, Inc., of which Mr. Greve is a member; that Mr. Greve received from “a seeret special payroll account” of the New York Investors, Inc., during the five years ended in 1930, $494,977.-16, in payment of services rendered to that company and its subsidiaries, of which the bankrupt is one.
Finally, that the group of corporations comprising the said parent corporation and others including the- bankrupt, were treated as one in the consolidated balance sheet of New York Investors, Inc., and that the latter guaranteed a $20,000,000.00 loan by the Reconstruction Finance Corporation to the Prudence Company, Inc. (one of the group) and pledged all of its stock in the various corporations so owned (including- that of this bankrupt) to secure the payment of that loan.
The objections to the legal sufficiency of the petition are five in number. The first four go to the petition, and the fifth is directed to the status of the petitioner, i. e., that “he is not a creditor entitling him to institute this proceeding, and no proof of claim has been filed by him or on his behalf.”
Paragraph Second of the petition alleges: “That your petitioner is a creditor of the above named bankrupt corporation.”
Like other averments in the petition, this must be deemed to be true for the purposes of this motion.
It is natural to suppose that, if the matter were to proceed to a hearing on the merits, the petitioner’s status would require determination in limine.
The first two objections are such as would be appropriate to a demurrer, if that convenient vehicle of objection were presently available, namely, that the faets alleged do not constitute a cause for removal, and that their insufficiency is apparent as a matter of law.
The third objection is that none of the facts arose subsequent to the appointment of the trustee. Manifestly there can be no such requirement, because antecedent incidents, unknown and perhaps unaseertainable at the time of election, might well constitute sufficient reason for the Court or the Referee to exercise the duties imposed by Rule XIII of the General Orders in Bankruptcy of the Supreme Court.
The fourth objection is that the matters comprised in the petition constitute issues which have been passed upon by Judge Moscowitz and consequently are res judicata.
Clearly this is the objection which requires examination primarily.
The opinion of the Court upon which the order of September 14,1933, was based, which reversed the order of the Referee to the extent that the latter disapproved the selection of this trustee, reveals that the latter action was based upon certain incidents which occurred at the adjourned first meeting of creditors, and which the opinion sets forth in hase verba; namely, the statement by a receiver in equity of the New York Investors, Inc., that Mr. Greve was “an officer of the New York Investors (Inc.). As a matter of fact he never had any financial interest directly in this bankrupt concern. * * * ” The omitted remarks of Judge Kelby, the receiver quoted, had to do with Mr. Greve’s assistance to him in conducting negotiations concerning the theatre properties of the bankrupt, as the representative of the stockholders (i. e., New York Investors, Inc.) in dealing with third persons. There was no testimony taken by the Referee on the occasion in question, and *959his order was based upon the recital quoted in the said opinion.
Such was the record before Judge Moseowitz, and it forms the basis of his view that no reason therein was shown, why the Referee should have exercised his power under Rule XIII. It was the “mere fact that William M. Greve was associated with affiliated eompa^ nies of the bankrupt” that did not disqualify him, as the opinion clearly states.
Does it follow that Judge Moseowitz decided that, despite any facts which might be appropriately brought to light, disqualification could not be shown in any wise, based upon activities connected with and arising from office or stockholding in or direction of the associated corporations?
It is thought that no such sweeping rule of decision is to be discovered in the opinion or the order in question.
If the foregoing is sound, it becomes necessary to consider whether, under the first and second objections, the challenged allegations in the petition, if sustained by competent evidence, eoxdd lead to a determination adverse to the trustee.
In this connection, what was said by the Court in Re Gordon Supply & Mfg. Co. (D. C.) 129 F. 622, indicates that the problem here presented is not entirely novel:
“Archbald, District Judge. There can be no objection personally to the trustee who has been chosen by a majority of those interested in the estate, at the creditors’ meeting; and the right of such majority, under ordinary circumstances, to control the matter, must be conceded. The trustee is the representative of creditors, and they are the ones to decide who he shall be, subject only to the right of the court to supervise the choice where it is objected to. In the present instance the trustee chosen is not only a stockholder in the bankrupt corporation against which the proceedings were instituted, but he has been admittedly associated closely, as attorney and legal adviser, with those who have been hitherto in control; and their management is not only the subject of criticism, but may call for action on the part of the trustee to hold them personally responsible. To approve of the trustee now selected comes too near, therefore, to a continuation of previous conditions, to be warranted. With so many others who would be fully as efficient and entirely acceptable, the majority have no right to impose their present choice on the objecting minority.
“The election is therefore set aside, and a new election ordered.”
See, also, In re Anson Mercantile Co. (D. C.) 185 F. 993.
These eases are not authorities on the facts, and are cited merely to show that prior business affiliations in at least two instances have been considered incompatible with holding the office of trustee in bankruptcy. As in those cases, so here, the issue is entirely im-' personal.
The allegations in this petition cannot be thought to be either sufficient or insufficient as a matter of law. Disqualification might or might not result according to the proof. Office holding by this particular trustee in the New York Investors, Inc., and participation in its loans and its distribution of bonuses from time to time, might or might not lead to administrative exigencies requiring solution solely in the interests of the creditors of this bankrupt, depending upon what the evidence might disclose. It would be inappropriate to comment as to what might be shown pro or con.
Whether embarrassment would arise over the issue if any, concerning the bankrupt’s claim against Paramount, for the reason that this trustee was associated on the New York Investors loan committee with the partner of one who is now engaged in contesting the bankrupt’s claim in the Paramount proceeding, cannot be determined as a naked issue. It must be clothed with facts before it can be assigned to either a positive or a negative role in the proceedings.
It may be regretted that the situation here presented has been permitted to arise at all. A reading of the record made before the Referee indicates that, with his customary care, he has sought to preserve the equities that pertain to both aspects of the controversy. The proceeding calls for the exercise of great circumspection lest the manifest necessities of administration be somewhat thwarted by too great latitude of inquiry into matters not plainly within the allegations of the petition, and by argument and colloquy not calculated to clarify the issues.
If the petitioner has the legal right to proceed, and if he has evidence of disqualification, he should be directed promptly to make his ease, according to his petition, in order that a determination upon the merits may not be permitted to delay or hamper the solution of larger problems than those involved in the objections of one creditor to the appointment or election of one of three trustees.
*960Motion to dismiss petition for insufficiency as a matter of law, is denied. Settle order on two days’ notiee.
The disposition of the foregoing necessarily controls the decision of the order to show cause, dated November 1, 1933. The motion arising upon that order sought to prevent the petitioner in this proceeding from seeking to develop, in connection with the adjourned first meeting of creditors, matters thought to be germane to the petition for removal, in avoidance of the ruling of the Referee sitting in the latter proceeding, to the effect that evidence would not be taken pending the ruling by this Court upon the review of the Referee’s order, above discussed.
For reasons above stated, the motion will be denied, and the stay vacated. The Referee can be relied upon to conduct the proceedings of the first meeting with entire regard for the rights and duties of all parties in interest. Settle order on two days’ notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219084/ | GIBSON, District Judge.
The relator, Franjo Borich, was held by William H. Marshall, district director of immigration, upon a departmental warrant ordering his deportation. Pursuant to his petition a writ of habeas corpus issued upon the district director, who has filed his return, wherein he asserts that he legally has custody of said Borich by reason of a warrant of the Department of Labor which avers that Borich “has been found in the United States in violation of the Immigration Act, * * * in that after entry he became a member of one or more of the classes of aliens enumerated in section 1 of the aforementioned act, as amended [see 8 USCA § 137 (c)], to wit: Aliens who are members of an organization, association, society, or group that believes in, advises, advocates, and teaches, the overthrow by force and violence of the Government of the United States.”
Upon hearing it developed that the relator had been arrested upon a departmental warrant, and had been given a hearing before an immigration inspector upon several charges, the principal one of which was that he was then a member of a body which advocated the overthrow of the government of the United States by force and violence. After a number of hearings, a new charge was added, and the relator was given a hearing upon it. The charge was the one set forth in the present deportation warrant. The contention of the relator is that said hearing was unfair and that it produced no evidence sufficient to form a basis for the warrant under which he is held in custody. He asserts that the hearing upon the existing charge was illegal, in that the Department of Labor failed to issue a warrant upon the charge, but relied upon the original one, setting forth other charges. He also contends that the hearing was unfair, for the reason that the Department of Labor, through its agents, inspectors, and examiners, performed the functions of prosecutor, marshal, and judge.
The contention last mentioned may be passed over with but slight comment. It is based upon certain criticisms of the procedure recited in the report of the National Commission on Law Observance and Enforcement relative to the enforcement of the deportation laws of the United States. Such criticism is doubtless worthy of the consideration of Congress, but, by existing laws, that body has confided the deportation of aliens illegally in the United States to the Department of Labor, and the Supreme Court of the United States has, in the past, affirmed, as legal, many deportations based upon hearings similar to the one given this relator. Unless and until Congress changes existing laws and prescribes other tribunals and other methods, fair hearings before, and properly supported decisions by, officials of the Department of Labor may not be declared illegal.
As to the failure of the Department of Labor to issue a new warrant upon the added charge, also little comment is needed. The function of a warrant is to produce a defendant or respondent before the trial tribunal. Even in a criminal charge, if a defendant be already before the court, it is not necessary that a warrant issue for his production. He may be required to plead to an indictment without additional arrest. It will be remembered that a deportation is a civil, and not a criminal, matter, and the rules in respect to such proceeding should not be more strict than in criminal eases. The procedure in the instant matter was pursuant to paragraph 2 of the rules of procedure provided by the Department of Labor in respect to the deportation of aliens. The alien was summoned before the officer, who had held other hearings, was notified of the additional charge against him, which had been disclosed by prior testimony, and was given full opportunity to be heard thereon. Even if the failure to issue a new warrant were regarded as an irregularity in procedure, it was cured by the later regular proceedings. Bilokumsky v. Tod, 263 U. S. 149, 44 S. Ct. 54, 68 L. Ed. 221.
An examination of the testimony introduced at the hearing leads us to the conclusion that the evidence was sufficient to sustain the finding reeited in the deportation warrant. It appeared, by admission of the relator, that he was an alien, also that he had been a member of the National Miners’ Union from 1928 and thereafter; that from 1930' to date he had been national secretary of that organization, and that he had been editor of the Mine Worker, the official organ of the National Miners’ Union, which had prominently printed thereon, in each edition, the words: “Affiliated to the Trade Union Unity League.” At the hearing was offered in evidence a pamphlet purporting to be the constitution of the National Miners’ Union. The relator contends that the pamphlet was not *967properly identified as being such constitution. This contention does’not seem to us to be well founded. A number of members of the Union, some of them local officers of it, testified that the pamphlet was a copy of the constitution in existence at the time they joined the Union, the dates of the admissions of these witnesses being subsequent to the connection of the relator with the Union and prior to March 20, 1932, when relator claims a new constitution was adopted. Above all, the relator, himself, upon the pamphlet being exhibited to him, failed to deny its existence as the constitution of the National Miners’ Union prior to March 20,1932. The alleged constitution, in its first article, asserts that the National Miners’ Union declares “adherence to the program, principles and statutes of the Red International of Labor Unions.” Other documents offered in evidence tend to establish the fact that the National Miners’ Union was affiliated with the Trade Union Unity League. It is a matter of common knowledge that the Red International of Labor Unions, and its American branch, Trade Union Unity League, is a body which is opposed to organized government and favors the overthrow of the government of the United States by force. In numerous decisions by courts judicial notice has been taken of this fact, and the Secretary of Labor has fully as much right to accept common knowledge in this respect as have the courts. See Murdoch v. Clark (C. C. A.) 53 F.(2d) 155; United States ex rel. Yokinen v. Commissioner (C. C. A.) 57 F.(2d) 707; Kjar v. Doak (C. C. A.) 61 F.(2d) 566; United States v. Tapolcsanyi (C. C. A.) 40 F.(2d) 255.
It appearing to the court that the hearing before the immigration officer in the instant case was in accordance with the ordinary practice in deportation proceedings, and that there was sufficient evidence to sustain the charge set forth in the deportation warrant, the relator must be remanded to the custody of the district director of immigration. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219419/ | MAJOR, District Judge.
On December 22, 1927, an involuntary petition in bankruptcy was filed against A. B. Claudon, and on December 31, 1927, a subpoena, together with a copy of the involuntary petition, was served upon Mis. A. B. Claudon, wife of the alleged bankrupt, at the home of N. J. Claudon, a son of the alleged bankrupt, who now appears in this proceeding as administrator of the estate of the alleged bankrupt.
It is claimed and admitted that this service was illegal and void.
The matter was referred by the clerk of the court to the Honorable George K. Foster, referee in bankruptcy, where an adjudication was made on January 21, 1928. C. R. Voris was selected as trustee and his bond was approved.
The alleged bankrupt was the president of the Claudon State Bank of Fairbury, Ill., which closed prior to the time of the filing of the involuntary petition and from that time until several years later, the whereabouts of the alleged bankrupt were unknown.
During this period certain legal papers were filed in the recorder’s office of Livingston county, signed by A. B. Claudon and acknowledged before N. J. Claudon, and the files in the case indicate that the said N. J. Claudon had knowledge of his father’s whereabouts.
The proceedings took the usual and ordinary course before the referee, in which the said N. J. Claudon participated. On October 12, 1927, N. J. Claudon filed for record in the recorder’s office of Livingston county, a lease on a 480-aere farm owned by the alleged bankrupt, in which the said N. J. Claudon was mentioned as tenant, and which lease was afterwards assigned by N. J. Claudon.
The estate of the alleged bankrupt was of considerable proportion and the trustee, *350among other things, sold property, including a right of way over farm land.
Prior to the filing of the involuntary petition, a number of creditors commenced attachment proceedings against the alleged bankrupt in the circuit court of Livingston county, which proceedings were dismissed after the order of adjudication. During the course of administration, numerous claims were filed against the alleged bankrupt.
On January 7, 1931, the alleged bankrupt appeared in court by Bracken, Livingston & Murphy, his attorneys at that time, and filed a motion which questioned the jurisdiction of the court, on the grounds that no legal service had been had on the alleged bankrupt. The alleged bankrupt did not appear in person and the motion was supported by affidavits made by various members of his family.
On October 28, 1931, an order for alias subpoena was entered, which was personally served on the following day. November 9, 1931, the alleged bankrupt filed a motion to dismiss the involuntary petition on the grounds that it failed to charge him with an act of bankruptcy. This motion has never been passed upon and is now before the court.
On October 20, 1933; N. J. Claudon filed a petition in which it was alleged that A. B. Claudon, the alleged bankrupt, died August 8, 1932, and, as administrator of the said bankrupt estate, renewed the motion filed by A. B. Claudon on November 9, 1931, to dismiss the involuntary petition; and it is this motion with which the court is now concerned.
The involuntary petition charged but a single act of bankruptcy and is as follows:
“And your petitioners further represent that said A. B. Claudon is insolvent, and that within four months next preceding the date of this petition the said A. B. Claudon committed an act of bankruptcy, in that he did heretofore, to-wit, on the 9th day of September, A. D. 1927, permit attachments to be entered in the Circuit Court of Livingston County, and levied upon property of the said Á. B. Claudon.”
It is claimed by counsel for the alleged bankrupt that the act of bankruptcy charged is fatally defective for the following reasons:
First. It is not charged that the alleged bankrupt was insolvent at the time of the levy of said alleged attachment.
Second. It is not charged that the alleged bankrupt did not vacate or discharge the said attachment within thirty days from the date of such levy.
Third. It is not charged that the alleged attachment became a lien on any property of the alleged bankrupt, or that such attachment resulted in a preference of the attaching creditors over other creditors of the same class.
It is admitted by counsel for petitioning creditors that this, allegation of bankruptcy is not sufficient, but on January 9, 1934, and before the court had passed upon the motion to dismiss, filed a petition praying leave to amend the original petition so that the same may read as follows:
“And your petitioners further represent that the said A. B. Claudon is insolvent and that while insolvent, within four months next preceding the date of this petition, the said A. B. Claudon committed an act of bankruptcy, in that he did, heretofore, to-wit: on the 9th day of September, A. D. 1927 permit attachments to be entered in the Circuit Court of Livingston County, Illinois, and levied upon the property of the said A. B. -Claudon; that the said A. B. Claudon, while insolvent, suffered or permitted certain creditors, (naming creditors with the amounts of their respective claims) to obtain through legal proceedings commenced on said date, in the Circuit Court of Livingston County, Illinois, attachment writs, which were duly and regularly issued out of said Court and duly and regularly delivered to J. A. Searratt, Sheriff of said County, who; on September 13th, 1927, by virtue of said attachment writs, levied on the real estate of the said A. B. Claudon, to-wit: (description of real estate); and that the said A. B. Claudon did not vacate or discharge the same, and the lien created thereby, to be vacated or discharged within thirty days from the date of said levies.”
In support of said petition for leave to amend, there is included paragraphs 4, 5, 6, 7, 8, 9, 10, 11, and 12 which respondent has moved to strike as being scandalous, impertinent, and redundant, and it is conceded by the respondent “that the matter's and things set forth in said petition, exclusive of the paragraphs sought to be stricken, contain a sufficient showing under General Order in Bankruptcy No. 11 (11 USCA § 53), to permit said petitioning creditors to amend said original involuntary petition, provided the court has the right to permit the petitioning creditors to amend the same, and allow such amendment to relate back to the *351date of the filing of the original petition in bankruptcy.”
The paragraphs objected to in the main were a recital of the proceedings in this cause as shown” by the files, and, in view of the conclusion which I have reached, I do not believe they are subject to the criticism, made. If the court has discretion to permit the amendment sought, the allegations in this petition to amend are material as to the exercise of that discretion. Therefore, the motion to strike the paragraphs referred to is denied.
The main and essential question which the court is called upon to decide is whether or not it is vested with the authority to permit the original involuntary petition to be amended in the manner sought and, if so, can the amendment be made effective as of the date of the filing of the original petition.
Counsel for the respective parties, in addition to oral argument, have presented extensive written briefs and arguments in which many authorities are cited and quoted from and they, no doubt, appreciate the serious nature of the question presented, and which the court is called upon to decide.
A decision involves a construction of Equity Rule 19 (28 USCA § 723) promulgated by the Supreme Court of the United States, which provides as follows: “The court may at any time, in furtherance of justice, upon such terms as may be just, permit any process, proceeding, pleading or record to be amended, or material supplemental matter to be set forth in an amended or supplemental pleading. The court, at every stage of the proceeding, must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.”
General Order in Bankruptcy No. 11 (11 USCA § 53), provides in part: “The court may allow amendments to the petition and schedules upon application of the petitioner.”
The Bankruptcy Act (section 2 (15) of the act, 11 USCA § 11 (15), itself, in defining the jurisdiction of courts of bankruptcy, provides: “Make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of this act [title].”
In Armstrong v. Fernandez, 208 U. S. 324, on page 330 of the opinion, 28 S. Ct. 419, 421, 52 L. Ed. 514, it is said: “The power of a court of bankruptcy over amendments is undoubted and rests in the sound discretion of the court.” This statement has been quoted and followed in many cases.
See In re Cleveland Discount Company (D. C.) 5 F.(2d) 846; In re Bieler et al. (C. C. A.) 295 F. 78; Harney Shoes, Inc., v. National Fabric & Finishing Co. et al. (C. C. A.) 44 F.(2d) 517; Kay v. Federal Rubber Co. et al. (C. C. A.) 46 F.(2d) 64.
The court on page 858 of 5 F.(2d) in Re Cleveland Discount Company, supra, said: “An amendment may be allowed at any stage in the proceedings as justice may require. The power of the court is not limited in this respect. * * * All of these defects, jurisdictional defects, may be cured by an amendment filed at any time, even though it be more than four months after the act of bankruptcy alleged in the original petition, and the amendment is held to relate back to the filing of the original petition.”
In the ease of In re Fidelity Savings & Loan Association (D. C.) 53 F.(2d) 241, on page 243, it is said: “That the original petition is defective in substantial particulars we have no doubt. We are equally certain that the petitioning creditors are not entitled, as a matter of right, to file an amended petition, but that, on the contrary, the granting or denial of permission to file the same is a matter which rests in the sound discretion of the court.”
In Volume 7, Corpus Juris, § 132, page 79, it is said: “Amendments may be made at any stage of the proceedings, regardless of the time which has elapsed, if otherwise authorized; and when made, relate back to the time of the filing of the original petition.”
It seems the Circuit Court of Appeals of this Circuit has been even more liberal with reference to the authority vested in courts tp permit amendments in bankruptcy proceedings than the courts generally in the country. One of the leading eases which has often been quoted with approval is that of In re Shoesmith (C. C. A.) 135 F. page 684, on page 688, where the court said: “It it contended that because the first petition filed by the creditor was defective, and a sufficient amended petition was filed more than four months after the last fraudulent transfer of the property, the court had no power to permit an amendment, and was therefore without jurisdiction to entertain the proceedings. The district court had jurisdiction of the parties. It had jurisdiction of the subject-matter. It has general and *352exclusive jurisdiction of bankruptcy proceedings. The objection goes to the want of equity exhibited by the petition, not to the want of power in the court. There was jurisdiction to determine the sufficiency of the petition, and it was complete to permit any amendment. The jurisdiction in such eases comes from the statute, and is not conferred by the accuracy and precision of the averments made in the petition. (Citing eases.) And the amendment, when filed, relates to and takes effect as of the date of the filing of the original petition.”
In Chicago Motor Vehicle Company v. American Oak Leather Co. et al., 141 F. 518, on page 520, the opinion rendered by the Court of Appeals of this Circuit, where the right of the District Court to permit a petition to be amended was raised, the court said: “The ease in that respect is ruled by the decision of this court in Re Shoesmith, 135 F. 684, 688, 68 C. C. A. 322, and the allowance was within the judicial discretion, whether necessary or unnecessary at that stage.”
In the case of Morrison v. Rieman, 249 F. 97, on page 102, an opinion by the Court of Appeals of this Circuit, it is said: “The general power to permit amendments within sound discretion inheres in bankruptcy as well as in other courts.”
In re Pangborn (D. C.) 185 F. 673, it was held that where a petition alleges insolvency only at time of filing petition, it may be amended to show insolvency at the time of the commission of the alleged act of bankruptcy.
In the 11th Edition of Collier on Bankruptcy, page 1197, in commenting upon the effect of General Order in Bankruptcy No. 11, it is said: “This power of amendment is substantial and conferred for effecting the broad purposes of the Act, and is not confined to niceties of diction or other immaterial or merely formal matters. To hold that it does not embrace the insertion of material and essential averments in any stage of the proceedings before judgment would reduce it to a shadow.”
In Re Hollywood Land & Water Co. (D. C.) 41 F.(2d) 778, on page 779, Remington on Bankruptcy is quoted as follows: “There is a right of amendment to an ineffective and inefficient petition in bankruptcy, and the courts are as lenient in this respect as in reference to pleadings in other eases. There must be something, however, in the original petition by which to amend. The right to amend can go no further than to bring forward and to make effective that which in some form is already there.”
In Harney Shoes, Inc., v. National Fabric & Finishing Co. et al., supra, the court on page 518 of 44 F.(2d), said: “The general allegation of preferences to persons unknown, while insufficient, was amendable, as held by the Court of Appeals in the Second Circuit in Bradley v. Huntington, 277 F. 948. The defect was not jurisdictional. If the respondent had seasonably asked for a hearing on the motion to dismiss, it might perhaps have been granted, but with leave to amend.”
In Re Yellow Motor Company of St. Louis (C. C. A.) 34 F.(2d) 118, on page 120, the court said: “On the other hand, if the original pleading is sufficiently specific to identify the cause of action, however defective and imperfect it may be, and it appears that the amended pleading introduces no new cause of action, but merely enlarges, amplifies, or makes more definite and certain the allegations of the original pleading with reference to the same cause of action, then the amended pleading ought to relate back to the date of the filing of the original pleading.”
It would serve no useful purpose to quote further what the courts have said with reference to the power of the court to permit amendments in bankruptcy proceedings. It seems to me, however, that the power is clearly vested in the court, subject, of course, to the exercise of a sound discretion. A reading and study of the many eases cited by counsel for the respective parties, while apparently disclosing a considerable conflict among the various courts, are convincing that the opinions in the various eases have rested largely upon the particular facts in the ease, under consideration.
It can also be said that most of the cases lay down a general rule, often expressly referred to as such, applicable to an ordinary case. No case is cited where the facts are even similar to those in the present ease, and I doubt if such facts have before been presented to a court. It is not an ordinary case where a general rule might be controlling.
If the court does not have the authority to permit an amendment such as is sought, Equity Rule 19 (28 USCA § 733) and General Order in Bankruptcy No. 11 (11 USCA § 53), with reference to amendments, are idle gestures, and, as was said concerning the latter by Collier on Bankruptcy, supra, “would reduce it to a shadow.”
*353It is true, of course, there must be something on which to base an amendment, but to hold that the original petition can only be amended with reference to technical and informal matters and that amendments of a substantial or material matter cannot be permitted, would circumvent the intention of the rule and would likewise deprive the court of the right to do equity and justice between parties involved. It is true and conceded that the original petition is not sufficient and that it omits essential and material averments; it is likewise plain to me that the amendment sought to be made describes the same act of bankruptcy as was sought to be set forth in the original petition. Each charges A. B. Claudon with committing an act of bankruptcy within four months; each charges the act to have been committed on the same day; and each charges that it was committed by permitting attachments to be levied upon his property in the same court and in the same county.
Having concluded that the authority to permit this amendment is vested in the court, it seems to me that the ends of justice require that the court’s discretion should be exercised in allowing the amendment. What harm can be done this alleged bankrupt estate by permitting such action? . It may result, it is true, in the application of the assets to meet the provable claims filed against it; certainly this is what the law intends should be done. On the other hand, to refuse the petitioning creditors the right to amend and dismiss the petition would mean that all the proceedings heretofore had are declared null and void. If no one was concerned except the petitioning creditors, a different situation might be presented, so far as the exercise of the court’s discretion in this matter is concerned, for they are at least partly responsible for the predicament in which they find themselves. However, numerous parties relying upon the legality of this proceeding have acquired and been divested of property rights which they otherwise would have had or not lost. Attaching creditors have lost their liens on the property of the bankrupt estate; creditors whose claims have been filed in the court of bankruptcy against this estate would lose their rights, and it is apparent under the Illinois law, it would be too late for them to file their claims in the probate court against the estate of the alleged bankrupt. The trustee, who, so far as this court knows, has acted in the utmost good faith, under bond and under the supervision of this court, might be in a serious predicament.
To dismiss the petition and hold that all proceedings in this bankruptcy matter are null and void, it seems to me, would mean, that all the estate would be turned over to the administrator and the heirs, free of debts and claims, and. the creditors and others who have acquired rights would be left without any recourse whatever.
As some of the opinions heretofore quoted have said: “The Court has jurisdiction of the parties and the subject matter” and it likewise has the authority and duty to do justice between the parties. The proceedings in this ease convince me that the alleged bankrupt in his lifetime, as well as some members of his family who are now interested as his heirs, have played “hide and seek” with the court, and should not at this late day be permitted to take that which by law belongs to the creditors. I realize that the result which the court anticipates might follow, should the petition to dismiss be allowed, has no bearing upon the question as to whether or not the court is vested with the power to permit this amendment, but having determined that that power rests in the court, the result which might be expected to follow in such event, it seems to me, is not only material, but controlling upon the court in the exercise of a discretion which will do, so far as lies within the power of this court, justice to the parties concerned.
The motion by respondent to dismiss the original petition is therefore denied and the motion by the petitioning creditors for leave to amend the original petition will be allowed as requested, and the same will date back and be effective as of the date of the filing of the original petition. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219085/ | LOWELL, District Judge.
The question arising in this case is whether specifications in opposition to a discharge may be filed when no creditor entered his< appearance in opposition to a discharge on the return day of the order to show cause. The question depends on the meaning of General Order No. 32, which was amended in April 1933 (11 USCA § 53). Before amendment, the order provided that an appearance in opposition to a discharge must be filed on the return day, and specifications in writing must be filed within ten days thereafter, unless further time was granted by the court. The rule as amended provides that specifications in opposition to the discharge must be filed at the same time as the appearance on the return day of the order to show cause. The decisions under the old rule, some of which allowed the appearance to be filed after the date of the return day, depend largely on the fact that under the old rule the specifications may be filed at a later date. I am of the opinion that the present rule, which requires appearance in opposition to a discharge as well as specifications to be filed on the return day, does not allow the court to extend the time. The difference in phraseology is significant. If the order had meant to give the court a discretion to extend the time for opposing a discharge, the discretion allowed under the old rule for extending the time for filing specifications would have been retained in the new rule as to the time for filing the appearance in opposition to a discharge. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219420/ | DAWKINS, District Judge.
This suit was filed in the name of the United States, on the relation of and for the use and benefit of General Iron Works & Supply Company, and its receiver, Charles Eisen, in which it was alleged that the “defendant, L. C. Maples, was at the time of the transactions hereinafter mentioned, doing business in the name of L. C. Maples Construction Company.” It was further alleged that the Hartford Accident & Indemnity Company had become the surety upon the bond of “L. C. Maples, doing business as aforesaid,” for the faithful performance of the contract with the government for the construction of “thirty-four sets of double non-commissioned officers quarters” at Barks-dale Flying Field, in Bossier parish, for the price of $383,303. It was alleged that the bond was in the sum of $191,651.50. The petition then proceeded to allege that the defendant L. C. Maples, contractor and principal in the original contract and bond with the government, later entered into a subcontract with the O’Pry Heating & Plumbing Corporation, whose name was subsequently changed to Smith-Jones Company, “one of the defendants herein,” for the furnishing and installing of the plumbing and heating fixtures in said quarters; that relators “have no copy of said contract,” but its terms were recited in substance; further, that the relators, “at the instance and request of said O’Pry Heating & Plumbing Corporation, entered into a contract in writing, wherein and whereby the said General Iron Works Company agreed to furnish said O’Pry Heating & Plumbing Corporation” certain materials for installing in the said buildings, originally contracted for by Maples, and in which the O’Pry Heating & Plumbing Corporation was to install the plumbing and heating fixtures; that the prices charged for said materials by relators were reasonable and proper, and the said O’Pry Heating & Plumbing Corporation promised and agreed to pay the same within thirty days after the dates of the respective invoices; that the materials were furnished and partly paid for, but there *355remained due and unpaid $11,356, as shown by “statement annexed and made a part hereof.”
Petitioner further alleged as “an additional cause of action” that O’Pry Heating & Plumbing Corporation had made a contract with one “Marcus E. Warden, doing business as Warden Sheet Metal Works,” for the furnishing of certain materials and labor, “and which entered into the construction both of the non-commissioned officers’ quarters under said contract of said Maples with the United States government, and of-forty-two commissioned officers’ quarters under the contract of the Ashton-Glassell Company, Inc. with the United States.” Further, that the said Warden had contracted with Charles Johnson Company, Inc., of Peoria, Ill., to furnish certain materials for use in the said noncommissioned officers’ quarters under the contract of Warden with the Smith-Jones Company (formerly O’Pry Heating & Plumbing Corporation), which materials were furnished to the extent of $2,992.87, “the reasonable prices thereof,” and which Warden furnished to Smith-Jones Company, and the latter in turn furnished to the said Maples, and to’ said Ashton-Glassell Company, Inc., and which “entered into the construction of said non-commissioned officers’ quarters,” as respectively contracted for by said Maples, and the said Ashton-Glassell Company, Inc.; that there was a balance due to said Charles Johnson Company, Inc., by Warden of $1,192.95, and “that the said General Iron Works Co., Inc., prior to the appointment of the said Charles Eisen as receiver, had guaranteed in writing to said Charles Johnson Company, Inc. the payment by the said Marcus E. Warden; that Warden had failed to pay said indebtedness and on August 2, 1932, the claim against him had been acquired by relators “for valid and sufficient consideration”; that the balance due for materials to Maples for use in the noncommissioned officers’ quarters amounts to the sum of $549.95.
Petitioners further alleged the completion by Maples of the contract with the government, the lapsing of the time required by the statute without the government having sued and prayed for service upon “L. C. Maples, the said Smith-Jones Company and the Hartford Accident & Indemnity Company,” and for judgment “against said defendants, individually and in solido,” in said sums of $11,356 and $549.95, with interest, “and such further amounts, under the penalty of said bond, in the sum of $191,651.50, as may on the trial hereof be shown to be due, either to relators or to any or all others who may intervene herein,” and for reasonable attorney’s fees.
This suit was filed on May 10, 1933, and on May 27th following Crane Company, alleging itself to be an Illinois corporation, domiciled at Chicago, intervened and alleged the same facts as to the name of Maples and O’Pry Heating & Plumbing Company, as in the original petition, and that the said “Smith-Jones Company, formerly O’Pry Heating & Plumbing Corporation, L. C. Maples, doing business as L. C. Maples Construction Company, and Hartford Accident & Indemnity Company, are justly and truly indebted unto your petitioner in solido” in the sum of $3,693.5^, with interest. The Crane Company further alleged the same facts as to the making of the contracts “by L. C. Maples, doing business as L. C. Maples Construction Company,” with the government, for the erection of thirty-four noncommissioned officers’ quarters and the furnishing by Maples of “a standard government performance bond with the Hartford Accident & Indemnity Company as surety thereon”; that the O’Pry Heating & Plumbing Corporation had entered'into a. contract with Maples to furnish the labor and materials for the installation of the plumbing and heating fixtures; that at various times shown on an itemized statement the Crane Company had furnished O’Pry Heating & Plumbing Corporation plumbing and heating materials to the amount of $22,019, upon which payments had been made reducing the balance to the sum claimed in the intervention; that payments were to, be made on the 15th of each month following the month in which the materials were furnished; that all of the materials furnished “were used” under the subcontract in said noncommissioned officers’ quarters; and that demand had been made upon Smith-Jones Company, L. C. Maples, and the Hartford Accident & Indemnity Company, without avail.
On June 2d Peden Iron & Steel Company, a Texas corporation, also intervened. It likewise alleged the contract by Maples with the government, describing this defendant in the same manner as the other petitioners, as well as the giving of the bond with the Hartford Accident & Insurance Company, as surety; the subcontract between Maples and O’Pry Heating & Plumbing Corporation which had “changed its name to Smith-Jones Company”; that O’Pry Heating & Plumbing Corporation had given a performance *356bond in the sum of $61,300, “ * * * signed by the United States Fidelity Company, a corporation organized under the laws of the state of Maryland,” as surety for the faithful performance of the subcontract with Maples, and which had been duly recorded; that O’Ply Heating & Plumbing Corporation had sublet a portion of the work to be done for Maples to Marcus E. Warden of San Antonio, Tex.; that Warden’s contract included the obligation to furnish and install warm air furnaces on the said job, “with the exception of electrical work and gas piping,” in accordance with the contract-awarded by the United States; that Warden gave a performance bond signed by the New York Casualty Company as surety, in the sum of $7,000, “covering this and other work undertaken by Warden at Barksdale Field, Louisiana”; that all of said contracts, subcontracts, and bonds are governed by the Heard Law; that interveners, at the instance and request of the above-named contractors and subcontractors, agreed to furnish, and did furnish, said Marcus E. Warden materials and supplies necessary for the construction and completion of the said public buildings and for which $1,688.13 remained due and unpaid. Petitioner prayed for services on “L. C. Maples, O’Pry Heating & Plumbing Corporation, Marcus E. Warden and their respective sureties, the Hartford Accident & Insurance Company, the United States Fidelity & Guaranty Company, and the New York Casualty Company,” and for judgment in solido against all of them.
On June 14, 1933, the original relators, General Iron Works Company, and its receiver, appeared and moved to dismiss the cause “with prejudice.”
On the same day Marcus E. Warden filed an intervention. He also alleged the same facts and the contract between Maples with the government for the construction of the noncommissioned officers’ quarters and the giving of the bond with the Hartford Accident & Insurance Company as surety; the subletting by Maples of the work of installing the heating and plumbing fixtures to O’Pry Heating & Plumbing Corporation; the giving by the latter of a performance bond to Maples in the sum of $61,300, with the United States Fidelity & Guaranty Company as surety; that under the terms of said contract and bond O’Pry Heating & Plumbing Corporation and United States Fidelity & Guaranty Company “became liable and bound unto the United States and to L. C. Maples, to prosecute said work and improvements to completion according to the terms of the sub-eontraet,” “ * * * and to make prompt payments to all persons supplying the contractor with labor and materials in the prosecution of said work provided for in said contract”; the subletting by O’Pry Heating & Plumbing Corporation of a portion of the work to petitioner in “a formal sub-eontraet” for the installation of the warm air heating furnaces in the forty-two commissioned officers’ quarters at Barksdale Field, as well as in the thirty-four noncommissioned officers’ quarters, for which O’Pry Heating & Plumbing Corporation would pay to petitioner $14,940, “total for the two jobs of which the sum of $9,015.00 is for the work under this construction job”; that additional work was done and materials furnished under the terms of the contract “on this construction job” to the amount of $2,548, making a total of $11,563, which was earned by the furnishing of the materials and doing the work “on this construction job,” and that there remains due to petitioner $4,661.76, “for the portion of the sub-contract covering this construction job * * * interven oFs damage Ten Thousand ($10,000.00) Dollars”; that in performing said contract petitioner obtained materials and supplies from other concerns as follows:
Further, that O’Pry Heating & Plumbing Corporation “had not filled its part of its contract with petitioner,” or its subcontract with L. C. Maples Construction Company, in that petitioner “has not been paid in compliance with the terms of its sub-eontraet”; that Maples had not filled his contract with the government because of the failure to pay petitioner, and the said “United States Fidelity & Guaranty Company and the Hartford Accident & Indemnity Company, as surety, thereby became liable” to petitioner for the sum of $4,661.76 “on this construction job.” Petitioner also prayed for service upon “L. C. Maples, L. C. Maples Construction Company, Hartford Accident & Indemnity Company, O’Pry Heating & Plumbing Corporation, and United States Fidelity & Guaranty Company”; that petitioners’ creditors above named be notified of their right to intervene herein; that further notice be given by publication; and “that its demand be allowed and established and that *357it have judgment against all of the defendants, in accordance with law and the Heard law for its debt, interest and attorneys fees,” etc.
On June 14, 1933, Taylor-Seidenbaeh Company, Inc., a Louisiana corporation, domiciled at Shreveport, intervened and alleged substantially the same facts with respect to the original contract between Maples and the government, the former’s subcontract with the O’Pry Heating & Plumbing Corporation, the making of the bonds with the Hartford Insurance Company, United States Fidelity & Guaranty Company, and the New York Casualty Company, as sureties; that petitioner had sold to said Marcus E. Warden certain materials to the amount of $238.11, which were used in the construction of the noncommissioned officers’ quarters. This intervener also prayed for judgment against Maples, O’Pry Heating & Plumbing Corporation, Warden, and the three bond companies, in solido.
June 26, 1933, the Peden Company filed an amended petition, in which it was alleged that the Ashton-Glassell Company and L. C. Maples were the principal contractors and the Union Indemnity Company and Hartford Accident & Indemnity Company were sureties, respectively, of the two contractors and the performance bonds by the subcontractors, O’Pry Heating & Plumbing Corporation and Marcus E. Warden, were signed by the United States Fidelity & Guaranty Company and the New York Casualty Company, respectively; that $1,125.48 remained due by Warden and O’Pry Heating & Plumbing Corporation on the Ashton-Glassell Company contract and $1,688.13 upon the Maples contract. Other details as to the time the materials were furnished and interest claimed are set forth; and that all of the materials were furnished to Warden “at the express request of all the defendants herein.” The prayer was for judgment in solido in the sum of $3,043.61, attorneys’ fees, etc.
On June 30, 1933, exceptions were filed by the same counsel, as follows:
(1) By United States Fidelity & Casualty Company to the intervention of Peden Iron & Steel Company of no right or cause of action “and that your petitioner is improperly impleaded in this suit”;
(2) By L. C. Maples, an exception of vagueness to the intervention of Peden Iron & Steel Company, in that (a) it does not state whether the contract between O’Pry Heating & Plumbing Corporation and Marcus E. Warden “was verbal or in writing”; nor is it set out. in substance, (b) that, although copies of the subcontracts and bonds are alleged to have been annexed to the said intervention, they were not so annexed; (e) that it is not alleged whether the agreement between the said intervener and Warden was oral or in writing; (d) that, although the petition alleges an account of the work and materials furnished is annexed, it was not so annexed; (e) and that the intervention does not allege whether the materials were furnished for the work at Barksdale Field or somewhere else, or that they went into the buildings covered by the original contract;
(3) By the Smith-Jones Company to the intervention of Peden Iron & Steel Company, on the same grounds as urged by Maples;
(4) By the Hartford Accident & Indemnity Company to the intervention of Crane Company, that (a) it is not alleged whether the contract between O’Pry Heating & Plumbing Corporation and Maples was in writing or verbal; (b) intervener does not state whether its agreement with O’Pry Heating & Plumbing Corporation was written or verbal; (e) nor does it state whether the work and materials were furnished at Barks-dale Field or elsewhere;
(5) By Hartford Accident & Indemnity Company to the intervention of Peden Iron & Steel Company upon the same grounds as urged to the intervention of Crane Company, as Tyell as the further ground that, although an account was alleged to have been annexed, none was so annexed;
(6) By the United States Fidelity & Guaranty Company, to the intervention of Peden Iron & Steel Company, because (a) it is not stated whether the contract between O’Pry Heating & Plumbing Company and Warden was verbal or in writing; (b) that copies of the subcontract and bond were alleged to be annexed, but were not so annexed; (c) that it does not say whether its contract with Warden was verbal or in writing; (d) that the petition of intervention alleges that an account was annexed, which was not done; and (e) does not show whether the work and materials furnished were used at Barksdale Field or some other place;
(7) By L. C. Maples to the intervention of the Crane Company, upon the same grounds as set forth in (a), (b), and (e) of the exception of the United States Fidelity & Guaranty Company, last mentioned; and
(8) By the O’Pry Heating & Plumbing Corporation to the intervention of Peden Iron & Steel Company, on the same grounds *358as set forth in (a), (b), (e), (d), and (e) of the exception of United States Fidelity & Guaranty Company to the intervention of this same intervener.
On September 26,1933, additional exceptions were filed by the same counsel, as follows:
(1) By L. C. Maples to dismiss the intervention of Marcus E. Warden as to “L. C. Maples Construction Company,” for the reason that the latter “is merely a trade name under which your appearer operates,” and any judgment against it “may be construed to constitute a judgment herein.”
(2) By Smith-Jones Company, to dismiss the intervention of Marcus E. Warden, in so far as it attempts to make O’Pry Heating & Plumbing Corporation a party to the suit, for the reason that the petition “shows on its face that there is no longer any such corporation,” its name having been changed to that of this mover.
(3) By L. C. Maples, Hartford Accident & Indemnity Company, Smith-Jones Company and United States Fidelity & Guaranty Company, to the intervention of Warden, operating as Warden Sheet Metal Works, because it “has no right or capacity to sue or stand in judgment herein.”
(4) By Maples to dismiss the intervention of Taylor-Seidenbaeh Company, Inc., because it “attempts to make your appearer a party to said proceedings,” under the title of L. C. Maples, doing business as L. C. Maples Construction Company, whereas no such legal entity exists. * * * ”
(5) By Smith-Jones Company to the intervention of Taylor-Seidenbaeh Company, Ine., because it states no cause or right of action against mover.
(6) By Hartford Accident & Insurance Company to the intervention of the said Taylor-Seidenbaeh Company, Ine., because there is a misjoinder of parties defendant in said petition.”
(7) By New York Casualty Company, represented through counsel other than those appearing in the foregoing exceptions, to the intervention of Peden Company, Ine., because it discloses no eause of action against mover.
On October 5, 1933, counsel for intervener Peden Company, filed a plea suggesting that it had previously filed an amendment to its intervention “which should satisfy the exceptions of vagueness of L. C. Maples, Hartford Accident & Insurance Company, O’Pry Heating & Plumbing Corporation, Ine. (Smith-Jones Co.).”
The motion of the General Iron Works and its receiver, who originally filed this proceedings, to dismiss the intervention of Crane & Co. and all other proceedings herein, was on September 20, 1933, overruled by the court, for reasons stated in a memorandum handed down at that time.
These numerous exceptions will be disposed of in the order above stated.
Exceptions filed June 30, 1933.
(1) Taking up first the exception of no eause of action by the United States Fidelity & Guaranty Company to the intervention of Peden Iron & Steel Company, I am of the view that, while a subcontractor or those having claims for labor or materials furnished either to him or to the original contractor may have a right of action in this proceeding upon the bond by the principal contractors with the government (Bartlett & Kling v. Dings [C. C. A.] 249 F. 322; Chicago Bonding & Surety Co. v. U. S. [C. C. A.] 261 F. 266; Taylor v. Connett [C. C. A.] 277 F. 945; Mankin v. U. S. to Use of Ludowici-Celadon Co., 215 U. S. 533, 30 S. Ct. 174, 54 L. Ed. 315, affirming [C. C. A.] 158 F. 1021), they cannot implead the surety upon the bond of a subcontractor given for the protection of the principal contractor. This is a statutory proceeding (title 40, § 270, U. S. C. [40 USCA § 270]) upon the bond required to be given to take the place of the lien which the furnishers of labor and material would have against the work in the ease of a private individual. There can be no lien upon government property, and it cannot be sued without its consent. Any one having a claim against the contractor with the government, after certain delays and after its failure to sue, may proceed in the name of the United States upon the bond which the law requires the government to exact in letting public works. It provides that there shall be but one suit, and “any person, company, or corporation who has furnished labor or materials used in the construction or repair of any public building or public work” may sue or intervene in the proceeding after it has been instituted, regardless of the amount of the claim. It cannot be commenced until after the completion of the work and final settlement by the government, and then not later than one year thereafter. “If the recovery on the bond should be inadequate to pay the amounts found due to all of said creditors, *359judgment shall be given to each creditor pro rata of the amount of the recovery.” The fact that it is required to be brought in the name of the government carries the idea that the claimants authorized to sue on the bond shall, in effect, occupy the position of the United States, if it were compelled to pay the furnisher of labor and materials to discharge a lien. In other words, it substitutes them in place of the government, and reasonably contemplates that the proceedings shall be limited to and determined by the rights of all parties in and under the bond or obligation given to the United States. To this extent it is in the nature of a proceeding in rem on the bond. To engraft either a contractual or legal claim or controversy between these claimants and a third person, such as the surety on a subcontractor’s bond, who has voluntarily appeared or under process been brought into the matter, and as to whom the government has no interest and is not privy, would, I think, go beyond the purpose of the law and bring in persons and parties who could not otherwise, because of citizenship, etc., be sued in this court, under the limited jurisdiction conferred by this statute. I see no reason why any one having claims which, but for the fact that those were public buildings, would have had a lien thereon, may not avail himself of the benefits of the statutory bond, but, as to those bonds given by subcontractors to persons other than the government (which are not required by law), claimants are relegated to the normal remedies and proceedings which exist in suits to which the government is not a party. My view, therefore, is that the motion of the United States Fidelity & Guaranty Company to dismiss the demand as to it, by the Peden Iron & Steel Company, should be sustained.
(2) As to the exception of L. C. Maples to the intervention of Peden Iron & Steel Company, (a) I think the intervener should set forth, if it has that information, whether the contract between O’Pry Heating & Plumbing Corporation and Marcus E. Warden (the latter being the person to whom the said intervener claims to have furnished the labor and materials) was oral or in writing; (b) and, if it has copies of the contract and bonds alleged to have been annexed to the intervention, but which appear to have been omitted, they should be produced and filed; (e) it should also state whether the agreement between it and Warden was oral or in writing, and annex it to its reply. With reference to (d) and (e), an amendment subsequently filed by this intervener has copies of the accounts against Warden annexed, and otherwise gives the information called for under these headings.
(3) A compliance with the ruling just made will suffice to meet the objections contained in the exception against Smith-Jones Company resting upon the same grounds.
(4) As to the exception of Hartford Accident & Insurance Company and the intervention of Crane Company, (a) it is sufficient to say that the intervention of Marcus E. Warden discloses that the contract between L. C. Maples and O’Pry Heating & Plumbing Corporation was in writing and recorded in Mortgage Book YY, page 494, of Bossier parish, La., and I think affords all the information on that score necessary in this proceeding; (b) this intervener should state whether its agreement with O’Pry Heating & Plumbing Corporation was oral or in writing; (e) and it should state affirmatively whether all the work and materials sued for were done and furnished at Barksdale Field and covered by contract and bond with the government on this job.
(5) As to the exception of Hartford Accident & Indemnity Company to the intervention of Peden Iron & Steel Company, the same will be disposed of by a compliance with the ruling made upon a similar exception to this intervener’s claim by L. C. Maples.
(6) What has just been said is equally applicable to the exception of the United States Fidelity & Guaranty Company’s exception to the claim of Peden Iron & Steel Works, and, besides, an exception of no cause-of action by this exceptor to this intervention has been sustained.
(7) A compliance by the Crane Company with the ruling under No. 4 above upon the exception of Hartford Accident & Indemnity Company will dispose of the same exception filed by L. C. Maples under this number.
(8) This exception of O’Pry Heating & Plumbing Corporation to the intervention of Peden Iron & Steel Company will be met by a compliance by the latter with the rulings made above upon similar exceptions of other parties.
Exceptions Filed September 26, 1933, by Same Counsel.
(1) I think this exception of L. C. Maples is without substance, and should be overruled.
*360(2) This exception of Smith-Jones Company is also without merit and will be overruled.
(3) The joint exception of L. C. Maples, Hartford Accident & Indemnity Company, Smith-Jones Company, and United States Fidelity & Guaranty Company to the intervention of Warden is also without merit and will be overruled.
(4) This exception of Maples to the intervention of Taylor-Seidenbaeh Company, Inc., is without merit and will be overruled.
(5) This is an exception of no cause of action by Smith-Jones Company, formerly operating under the name of O’Pry Heating & Plumbing Corporation, to the claim of Taylor-Seidenbaeh Co., Inc. The intervener alleges the contract between the United States and L. C. Maples, the subcontract between the latter and O’Pry Heating & Plumbing Corporation (now Smith-Jones Company), the subcontract of the latter with Marcus E. Warden, and that the present intervener, Taylor-Seidenbaeh Company, Inc., had delivered to Warden materials for use in the construction of the thirty-four noncommissioned officers’ quarters contracted for by Maples with the government. In so far as this claimant asserts the right against the bond given by Maples to the government, I think it does state a cause of action. U. S., for Use of Hill, v. American Surety Company of New York, 200 U. S. 197, 26 S. Ct. 168, 50 L. Ed. 437.
(6) What has just been said applies to the exception of Hartford Accident & Insurance Company to the intervention of Taylor-Seidenbach Company, Inc.
(7) This is an exception by the New York Casualty Company, represented by counsel other than those appearing in all of the foregoing exceptions, to the point that the intervention of Peden Iron & Steel Company discloses no cause of action against the present exceptor. Marcus E. Warden gave the performance bond to O’Pry Heating & Plumbing Corporation for the faithful performance of his contract with them, upon which the New York Casualty Company was surety, and the Peden intervention seeks to recover against this surety in the present proceeding. For the reasons given above in No. 1 of the first list of exceptions, involving an identical question raised by the United States Fidelity & Guaranty Company to the intervention of Peden Iron & Steel Company, seeking to recover upon the bond of O’Pry Heating & Plumbing Corporation, given to L. C. Maples, the present exception of no cause of action will be sustained.
The amendment of Peden Iron & Steel Company, filed October 5, 1933, referred to hereinabove, will be allowed, subject to the rulings made on the exceptions disposed of in this opinion, in so far as they affect this claim. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219422/ | VAUGHT, District Judge.
In No. 4527 the plaintiff, a New York corporation, brings this action as a replevin action against the defendant, an Oklahoma corporation, alleging that it is the owner of, and entitled to the immediate possession of, certain goods, chattels, and mechanical devices, to wit, a certain electrical sound projector and reproducing equipment known as type 2—S equipment of the value of $6,600; that the plaintiff is the owner of said property, is entitled to immediate possession thereof, and that the defendant, although due demand has been made, refuses to deliver said property to plaintiff.
In No. 4613 the plaintiff alleges that it is a New York corporation, that the defendant is an Oklahoma corporation, that the amount in controversy exceeds $3,000, and for its first cause of action alleges that on the 30th day of November, 1928, the plaintiff and defendant entered into a written contract wherein it was agreed that the plaintiff was to install in the Savoy Theatre at Shawnee, Okl., a certain sound reproducing device which was the property of the plaintiff, said device being described as: “Type 2 — S equipment designed for use with two (2) simplex, powers or motiograph projectors for disc and film reproduction.”
The contract referred to is set out as an exhibit to said petition, and among other things provides, first, a grant of license and installation of equipment; second, for the use of equipment, for the removal to another theater, and instruction and inspection service. Under paragraph 5, it provides for installation charge as follows: “The Exhibit- or agrees to pay to Products in New York Exchange an initial charge of Twenty-Six Hundred Twenty-Five ($2,625.00) Dollars less 10% quantity discount ($262.50) payable as follows: The sum of Ten Hundred Fifty ($1,050.00) Dollars less 10% quantity discount ($105.00) on or before the execution of this instrument, receipt of which is hereby acknowledged, and the balance, namely, Fifteen Hundred Seventy-Five ($1,575.00) Dollars less 10% quantity discount ($157.50') by a demand promissory note satisfactory to Products in the amount last mentioned, made by the Exhibitor and delivered to Products oil or before the execution of this agreement and bearing no interest prior to presentation, which demand note Products agrees not to present for payment prior to the date on which the installation of the Equipment is completed and the Equipment made available to the Exhibitor as ready for public exhibition.”
Paragraph 6 provides for a weekly payment during the life of the contract, as follows: “In addition to any other payments required to be made by the Exhibitor hereunder, the Exhibitor agrees to pay to Products throughout the term of the license hereby granted, a weekly payment which, for the first two weeks of said term, shall be payable on the Saturday next succeeding the day upon which the installation shall have been completed and the Equipment made available to the Exhibitor as ready for use, and thereafter throughout the balance of said term on each and every Saturday in advance. The amount of such payment shall be One Hundred Sixteen and 05/100 Dollars ($116.05) less 10'% quantity discount ($11.60) per week for the first two years (104 weeks), and thereafter for the balance of the term of said license such weekly payment shall be in accordance with *369Products’ then current schedule of weekly payments for similar licenses, but not exceeding one-fourth of the weekly payment hereinabove agreed upon to be paid for the first two years.”
The contract also provides for transportation charges, payment for parts, etc., and changes in theater. Paragraph 10 provides as follows: “Title to and ownership of all equipment at any time furnished hereunder and also all tools of all kinds, drawings, prints and written descriptions and instructions, remains vested in Products” (the plaintiff herein).
The contract further provides that the defendant shall pay all taxes, provides for access to equipment, liability for interruptions, injuries, etc., and paragraph 14 provides for events of default, which paragraph is here set out as follows:
“This agreement and the license hereby granted shall, at the option of Products, terminate and come to an end upon the happening of any of the following events, hereby designated to be events of default, to wit:
“(a) Upon the bankruptcy or insolvency of the Exhibitor or the assignment of any of its assets for the benefit of creditors.
“(b) Upon the failure or refusal of the Exhibitor for any reason to pay any of the items or sums herein agreed to be paid by it, including the payment of the note provided for in Section 5 hereof, within five days after sueh item or sum is or may become due, and as to this provision time shaH’be of the essence.
“(c) Upon the Exhibitor’s ceasing to own or operate the Theatre, unless the Exhibitor shall previous to its ceasing to own or operate the Theatre have notified Products in writing of the date it will cease to own or operate the Theatre and shall have made provision, satisfactory to Products, for the care and custody of the Equipment or for the assumption of this agreement by the successor operator of the Theatre.
“(d) Upon a breach by the Exhibitor of any of the covenants herein contained relative to the use or maintenance of the Equipment, continued for more than fourteen (14) days after notice thereof by registered mail from Products.
“(e) Upon the removal of the Equipment or any part thereof without the consent of Products from the location and position in which it was installed by Products.
“(f) Upon the failure of the Exhibitor to accept delivery of the Equipment from the transportation company or common earner, or to facilitate the work of Products in installing the Equipment. In the event of a default under any of the provisions of this section at any time during the first two years of the term of this license, the entire balance of weekly payments for the first two years shall be due and payable forthwith at the option of Products and whether or not it terminates this license or removes the Equipment as hereinafter provided. The license hereby granted and all obligations imposed upon Produets by virtue of this agreement shall be suspended during the continuance of any event of default.”
Paragraph 15 provides for the repossession of equipment, and is set out as follows: “Upon termination or expiration of this license by lapse of time or otherwise, the Exhibitor will surrender up and deliver possession of the Equipment to Products in good order and condition, reasonable wear and tear and obsolescence due to proper use thereof in the manner and place and for the purpose set forth in this agreement only excepted, and Products may repossess the Equipment and may, for the purpose of reducing the same to possession, enter the Theatre or any other premises where said Equipment may be and without any legal proceedings whatever possess and remove said Equipment, and the Exhibitor agrees to cooperate in sueh removal. If this license shall be terminated by default, or if the Exhibitor permits any of the events of default, hereinbefore enumerated, to oecur, whether or not Products shall exercise the option to terminate this agreement, Products shall thereupon have the right without notice to take immediate possession of said Equipment, or any part thereof, and for that purpose may pursue the same wherever it or any part thereof may be found and may enter, with the aid and assistance of any person or persons, the Theatre or other premises of the Exhibitor and such place or places whatsoever, whether belonging to the Exhibitor or not in which the Equipment or any part thereof may be placed, and may take and seize the same to its own proper use forever, free from any right of the Exhibitor under this agreement. Products shall also have the right in like manner to enter the said premises and remove the Equipment in the event of the said premises being destroyed or damaged by fire or otherwise, to an extent which, in the opinion of Products, endangers the Equipment. The Exhibitor expressly covenants that in any sueh event no claim will be made for damage on account of sueh removal or otherwise, and the Exhibitor further agrees that *370it will hold and save harmless Prodnets from and against any and all claims for damages by any parties whatsoever on aeeount of such removal.”
The petition further alleges that, after said contract had been entered into, the equipment completely installed, and the payment of the installation charge, the defendant continued to use said equipment up to and including the 9th day of May, 1931; that after the 17th day of May, 1930, the weekly installments due to the plaintiff from the defendant were reduced to the sum of $94.70 per week, which weekly installment was due and payable on Saturday of each week thereafter.
The petition further alleges that the defendant has violated the terms of said written agreement, in that on the 14th day of October, 1930, there became due and owing to the plaintiff from the defendant on said written contract the sum of $94.70; that no part of said sum has been paid to the plaintiff, although due demand has been made for the payment thereof; that thereafter, and upon Saturday of each successive week from the 4th day of October, 1930, up to and including the 9th day of May, 1931, there became due and owing to the plaintiff from the defendant an installment of $94.70 for each week, and that none of said weekly installments and payments due from the defendant has been paid, although demand has been made for the payment of same, and that there was due on said payments and installments in the sum of $94.70 for 32 weeks, all in the total sum of $3,030.40. The petition further alleges that on the 16th day of May, 1931, the plaintiff reduced said weekly installments to the sum of .$20 per week; that the defendant has failed and refused to pay any of said weekly installments becoming due and payable on Saturday of each week from May 16,1931, to June 13, 1931, or a total of $100, which the defendant has failed and refused to pay, although due demand has been made therefor.
The petition further alleges that during the month of October, 1930, the plaintiff furnished at the request of the defendant merchandise in the total sum of $6.70, and that defendant has failed and refused to pay said sum, and that there now remains due and owing to the plaintiff from the defendant the sum of $3,137.10 as above set out, together with interest on $3,030.40 at 6 per cent, from the 9th day of May, 1931, interest on $100 at 6 per cent, from the 13th day of June, 1931, until paid, and interest on the sum of $6.70 at 6 per cent, from the 6th day of October, 1930, until paid.
The second cause of action alleges that, as a part payment of accounts and installments due prior to September 4,1930, the defendant executed a promissory note in favor of the plaintiff in the sum of $243.95, which the defendant has failed and refused to pay, although due demand has been made therefor, and that the defendant, therefore, is indebted to the plaintiff the sum of $243.95, together with interest at 6 per cent, from September 4, 1930, until paid, and plaintiff asks judgment against the defendant on the several counts for a total sum of $3,381.05, together with interest thereon at 6 per cent, as hereinbefore set out.
The defendant in its answer denies generally the allegations of the plaintiff's petition, except the installation of the equipment and its use by the defendant, and by way of cross-petition alleges that the equipment described in plaintiff's petition was leased by the defendant for a period of 10 years; that the total payments to be made by the defendant to the plaintiff over the 10-year period was $10,131.30, and that said sum was to be paid during the first 2 years of the contract; that as a matter of right and equity said sum should be equally distributed over the 10-year period, and, if that were done, that the defendant has already paid more than the sum due at the time the replevin action, No. 4527 law, was instituted; that the plaintiff, having brought an action for the recovery of the equipment, could not in law collect the rentals due for the period subsequent to the demand for the equipment, and that therefore the defendant has overpaid the plaintiff in the sum of $5,529.17, for which sum it asks judgment.
The case was submitted to the court upon stipulation of facts and the written contract. The stipulation admits the jurisdictional facts, admits that the contract was duly executed and subscribed by both parties; that said contract was prepared by the plaintiff and was the standard form of contract used by the plaintiff at the said time throughout the United States; that said equipment was installed in the Savoy Theatre at Shawnee, Okl., on or about the 13th day of May, 1929, pursuant to the terms of said contract; that, in connection with the installation of said equipment, the defendant complied with the terms and provisions of the contract of paragraphs 7 and 9, and has complied with section 8 in all respects, except as to the payment for merchandise; that the amount due for merchandise is correctly listed as $6.70; that said merchandise was received by the *371defendant, and no portion thereof has been paid for by said defendant; that the plaintiff has complied with all the provisions and terms of the written contract from the time of its execution to the cancellation of said contract hereinafter mentioned; that the defendant paid the plaintiff the sum of $2,362.-50 provided for in paragraph 5 of the contract; that paragraph 6 of the contract provides for 104 weekly payments or installments of $104.45 each, and that each of said weekly payments or installments originally included an item of $29.75, service and inspection charges, which charges were voluntarily reduced by the plaintiff to $25 per week, effective with the week ending October 12, 1929; that said service and inspection charge was again voluntarily reduced to $20 per week, effective with the week ending April 12,1930; that the defendant has paid the plaintiff 72 of said weekly installments or payments provided for in paragraph 6 of the contract, including the service and inspection charges as modified by voluntary reductions thereof, and the defendant admits the execution of the promissory note in the amount of $243.95, it being agreed that the amount of said note is included in the 72 installments or payments referred to as having been made, and that said note has not been paid; that no service was' rendered by the plaintiff, or inspections of said equipment made in said theater after January 12, 1931.
The stipulation further admits that defendant failed to pay the installment or payment which fell due on the 4th day of October, 1930, and has paid no installments or payments thereafter; that, after repeated demand for payment, which demands were refused by the defendant, the plaintiff on or about the 24th day of April, 1931, made written demand on the defendant for possession of the equipment described in the contract; that on or about the 28th day of April, 1931, the plaintiff filed a replevin action in the United States District Court for the Western District of Oklahoma, being cause No. 4527 law, for the possession thereof which action is still pending; that the defendant gave a redelivery bond pursuant to which it held the possession of said equipment until about the 16th day of October, 1931, when it was surrendered to the plaintiff, and that the plaintiff has retained possession of said equipment since said date; that thereafter, on the 20th day of June, 1931, the plaintiff formally canceled the written contract involved in this action by a written notice; and that the action, No. 4613 law, is brought by the plaintiff for all weekly payments or installments falling due up to and including the week ending June 13,1931.
The defendant contends that since the action, No. 4527, law, was instituted, the plaintiff has exercised its right of election of remedies; in other words, that the plaintiff is not entitled to possession of the equipment and also to collect the rentals due up to the time the equipment was removed, and sets up its contention that the replevin action constitutes an election of remedies. Its second defense is that the contract as written is unconscionable. The defendant also urges as a third defense (which really is a part of the second) that the contract contravenes the statute against penalties and forfeitures (St. Okl. 1931, §§ 9488-9490).
The material facts in this ease having been stipulated, there is nothing left for the court but the construction of the contract. Paragraph 5 of the said contract provides for the payment of the installation charge. Paragraph 6 provides for a weekly rental of a certain sum for a period of 104 weeks, and further provides: “ * * * And thereafter for the balance of the term of said license such weekly payment shall be in accordance with Product’s then current schedule of weekly payments for similar licenses, but not exceeding one-fourth of the weekly payment hereinabove agreed upon to be paid for the first two years.”
This language is clear, unambiguous, and constitutes a part of the written contract duly entered into by the parties hereto. The first charge is designated as an installation charge and that it should be paid in cash and by note on or before the completion of the installation. The second charge provided for in the contract is for certain weekly payments to be made during the first 2 years of the contract. The third charge provided for in the contract is that, after the 2-year payments shall have been completed, thereafter the weekly charge of a certain sum, not to exceed one-fourth of the weekly payment exacted during the first 2 years of the contract, shall be made.
The defendant contends that the contract should be so construed as to provide that the installation charge plus the sums paid over the period of the first 2 years should be divided into 520 payments, and that the contract in substance provides for paying the total sum over a period of 10 years, and therefore it should be divided equally. Doubtless this would have been a more satisfactory contract for the defendant, but that is not the contract that was entered into. There is no evidence *372here of any fraud or deception that was prae tieed by the defendant. On the other hand, the inference to be drawn is that they were both practical picture show institutions with experience in those matters and that both parties to the contract knew what they were entering into at the time of the execution of the contract. The mere fact that conditions have changed since the execution of the contract, making defendant’s business less lucrative, is no justification for an effort to revise or rewrite the contract. A contract once having been duly and legally entered into is expected to be carried out as written.
The defendant has rather exhaustively briefed the proposition that, notwithstanding the fact that the defendant had breached the contract by failing and refusing to pay the weekly rental from October, 1930, to June, 1931, and that therefore the plaintiff was entitled under the terms of the contract to the possession of the equipment, and that since the plaintiff had seen fit to bring an action in replevin for the possession of said equipment, the bringing of that action constituted an election of remedies to the extent that the plaintiff was not entitled to recover for the weekly rentals accruing during the default from October, 1930, to June, 1931, and is therefore barred, in bringing said action to recover the rentals due by the previous action in replevin. The contention of the defendant is not supported by the authorities cited in its brief. Many of the eases cited referred to the sale of property. It is true that, if one sells property, one may not maintain one action to recover the property and another for the purchase price thereof. The second action would be inconsistent with the first, and the rule in the election of remedies is applicable only where the two actions are inconsistent. If one purchases property and then is made to pay for the property, the property may not be recovered because upon the payment of the purchase price the title passes to the purchaser. In the case at bar, however, the plaintiff retained expressly in the contract the title to the property, and the contract in no uncertain terms provides for the payment of, first, an installation charge, and, second, weekly rentals during the life of the lease. To say defendant is entitled to retain the property without paying the rental thereof is in violation of the terms of the contract. Furthermore, the contract explicitly provides that upon the breach of the contract and the happening of other events the plaintiff should be entitled to possession of the property.
In Peters v. Bain, 133 U. S. 670, 10 S. Ct. 354, 362, 33 L. Ed. 696, the Supreme Court of the United States says: “The doctrine of election rests upon the principle that he who seeks equity must do it, and means, as the term is ordinarily used, that where two inconsistent or alternative rights or claims are presented to the choice of a party, by a person who manifests the clear intention that he should not enjoy both, then he must accept or reject one or the other. * * * ”
The Supreme Court of Oklahoma in Invader Oil Corporation v. Commerce Trust Company, 111 Okl. 85, 238 P. 441, said: “No irrevocable 'election of remedy’ exists, unless there is knowledge of material facts, and there are two inconsistent remedies, pursuit of either of which would accomplish same legal result.”
The District Court of Appeal of California, in Crittenden v. St. Hill, 34 Cal. App. 107, 166 P. 1016, 1017, says:
“The defendant contends as a matter of law that, when she became in default, respondent had an election of two remedies: He could either commence an action for rent, or he could institute unlawful detainer proceedings; but, having elected to pursue the former, he thereby affirmed the lease and waived his right to the latter remedy. * * *
“In our opinion the mere institution of the rent action did not have the legal effect claimed for it, nor did it indicate a waiver of the right to maintain an action for the possession of the premises. By the original action plaintiff was seeking to recover the rent due him, and, being resisted in that action, he has resorted to a more expeditiojis proceeding to accomplish this result. * * * The rights litigated in the two actions are therefore entirely different; and where the law affords distinct, but not inconsistent, remedies, the election to follow one does not operate as a waiver of the other.”
The court, therefore, is not impressed with the defendant’s contention that the replevin action is a bar to an action to recover the rentals due.
The next proposition relied upon by the defendant is that the contract sued upon is unconscionable. Similar contracts have been construed many times by our courts, and a rule of construction of written contracts has been definitely determined and laid down for our guidance.
“It is not the province of a court, however to change the terms of a contract which has been entered into, even though it may be a harsh and an unreasonable one. Nor will the *373dictates of equity be followed if by so doing the terms of a contract are ignored, for the folly or wisdom of a contract is not for the court to pass upon. Its terms, however onerous they may be, must be enforced if such is the clear meaning of the language used, and the intention of the parties using that language.” 13 C. J. 541.
“A contract must be so interpreted as to give effect to the mutual intention of the parties, as it existed at the time of contracting, so far as the same is ascertainable and lawful.” Okla. Stats. § 9460 (1931).
“When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible, subject, however, to the other provisions of this article.” Okla. Stats. § 9463 (1931).
“A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable and capable of being carried into effect, if it can be done without violating the intention of the parties.” Okla. Stats. § 9467 (1931).
The foregoing section of our statutes was construed in King et al. v. Turner, 109 Okl. 77, 234 P. 564, and Anderson v. Reed et al., 133 Okl. 23, 270 P. 854.
In Hansbrough v. Peck, 72 U. S. (5 Wall.) 497, 18 L. Ed. 520, the court said, quoting from the syllabus: “The party who has advanced the money, or done an act in part performance of an agreement, and then stops short and refuses to proceed to its ultimate conclusion, the other party being ready and willing to proceed and fulfill all his stipulations according to the contract, will not be permitted to recover back what has thus been advanced or done.”
In Oklahoma Petroleum & Gasoline Co. v. Winship, 83 Okl. 146, 200 P. 844, 849, the court said: “The rule is well settled that, where there is an express contract of bailment, the terms thereof control, as the parties are entitled to impose upon each other any terms they may choose and may abridge, qualify or supersede the obligations which otherwise would arise from the bailment by implication of law.”
A ease cited by the plaintiff in its brief, which is applicable to both contentions of the defendant, is the Electrical Products Corporation v. Mosko et al., 88 Colo. 447, 297 P. 991. In that ease the Electrical Company rented a sign to Mosko, retaining title in the sign; the court held, upon the default in payment of the rents, the plaintiff was not only entitled to possession of the sign, but to the rents due up to that time.
“Eor it is a rule of interpretation that, where a contract is fairly -open to two constructions, by one of which it would be lawful and the other unlawful, the former must be adopted.” Hobbs v. McLean, 117 U. S. 576, 6 S. Ct. 870, 29 L. Ed. 940.
“Where contracts are open to two reasonable interpretations one defeating a claim for balance due, the other enforcing it, the court is at liberty to adopt the latter interpretation.” Cole Motor Car Co. v. Hurst (C. C. A.) 228 F. 280.
As to the defendant’s third contention that the contract contravenes the statute against penalties and forfeitures, the court is of the opinion that these statutes are nor. involved in this contract. Ho penalties or forfeitures are exacted. It is true that there was an agreement that a certain sum should be paid for the installation of the machine; the parties agreed to that, and the sum was paid. They also agreed that the rent for 2 years should be at a certain rate and the rent for the remaining 8 years should be a certain sum. These are most assuredly matters about which the parties were contracting, and, they having entered into such a contract, the contract is binding. The counsel for the defendant cites the case of Hargrove v. Bourne, 47 Okl. 484, 150 P. 121, an Oklahoma case, but the court can hardly see how that case helps the defendant. Quoting from syllabus 5: “If a tenant wrongfully abandons leased premises before the expiration of the lease, the landlord may, at his option, re-enter and terminate the contract, and recover the rent due up to the time of the abandonment.
This is exactly what the plaintiff seeks to do in this case. The recovery of its property and the collection of its rents, during the time the defendant had possession of the property as provided in the contract, constitutes neither a penalty nor a forfeiture.
The court is of the opinion that the rule is too well established for any doubt to exist. Under this contract upon the default, as admitted in the stipulation, the plaintiff was entitled to recover the possession of its equipment, and, in addition thereto, it was entitled to collect the weekly rentals, provided in the contract, falling due up to the time that the equipment was recovered.
In the replevin action, as admitted in the stipulation, the equipment has already been *374recovered, which should be so shown in the judgment.
In No. 4613 the plaintiff is clearly entitled to judgment as prayed for in its petition.
Exception allowed defendant in each ease. Forms of judgment may be submitted consistent with this opinion. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219423/ | PATTERSON, District Judge.
The Munson Line brought suit against Rosenthal to recover $1,028.85, representing freight and charges on a shipment of tomatoes carried on the steamship Pan America from Nassau to New York and delivered here to Rosenthal. The latter filed a cross-libel against the Munson Line for $8,500, alleged to be the damage to the tomatoes caused by the carrier’s negligence in transit.
The tomatoes, packed in 2,372 crates, were shipped by one Slater in Nassau and were carried on a straight bill of lading consigned to Rosenthal. Rosenthal is a commission merchant in New York who sells produce for the account of those who ^end it to him. He had made pre-harvesting advances to the growers of the tomatoes, the amount of such advances not being stated. There is undisputed proof that the tomatoes were not in uniformly good condition on *375receipt by the carrier on January 20, 1929. Some were over-ripe; others had green rot; the greater part, however, were merchantable. The carrier’s agents discussed their condition with the shipper, who conceded that the tomatoes were not up to standard. The bill of lading recited that they were “in apparent good order and condition.” It contained, however, the additional notation in typewriting in a conspicuous place on the face of the bill, “Not Responsible For Condition On Arrival.” The Pan America arrived in New York on January 24, 1929, the tomatoes being then in substantially the same state as at the time of shipment. The defectives ranged from 2 per cent, in some crates to 16 per eent. in others. There was no damage to them on the voyage. They were delivered to Rosenthal in lots commencing on the 24th and ending on the 28th. He received the bill of lading on the 24th and paid the customs duty, $474.40, before he received the tomatoes. He refused to pay the freight. On being sued for the freight, he filed a cross-libel for damages to the goods alleged to have come about because of the carrier’s negligence.
1. The right of the carrier to recover the freight cannot reasonably be questioned. It surrendered the goods and waived its lien in consideration of the implied promise of the consignee to pay the freight. A consignee who receives goods under a bill of lading which incorporates the charter provisions is personally responsible for the freight. Union Pacific R. Co. v. American Smelting & Refining Co. (C. C. A.) 202 F. 720; Vane v. A. M. Wood & Co., Inc. (D. C.) 231 F. 353; Yone Suzuki v. Central Argentine R. Co. (C. C. A.) 27 F.(2d) 795. It is no defense that the goods were damaged through the carrier’s fault, although any such damage may be offset against the claim for freight by recoupment or cross-libel. The Gwalia’s Cargo (D. C.) 26 F. 919; Relyea v. New Haven Rolling Mill Co. (D. C.) 75 F. 420.
2. The other question is whether the consignee is entitled to> damages from the carrier because of the damaged condition of the go'ods at destination. The consignee was a commission merchant. He had no title to the goods in question; he had, however, a lien or special property in them by reason of the advances he had already made to the owner. This is a sufficient interest to enable him to bring suit for damage alleged to have been sustained by the goods in transit. Grove v. Brien, 8 How. 429, 12 L. Ed. 1142; Grinnell-Collins Co. v. Illinois Central R. Co., 109 Minn. 513, 124 N. W. 377, 26 L. R. A. (N. S.) 437. The issue is whether liability on the part of the carrier was made out.
No attempt was made to prove that the damaged condition on arrival was actually the result of lack of care by the carrier or that it occurred in the course of the voyage. As already pointed out, the uneont.radicted proof is that the tomatoes were in poor shape when received by the carrier. The consignee insists, however, that because of the recital as to< good condition in the bill of lading the carrier is estopped to show that the tomatoes were in poor condition on shipment. The rule is that a carrier who has given a clean bill of lading, stating that cargo has been received in good order when it was at the time manifestly damaged, is estopped to deny the truth of the assertion against a purchaser of the bill of lading who has been misled by the representation and has altered his position on the faith of the representation. Sears v. Wingate, 3 Allen (Mass.) 103; Compania Naviera Vasconzada v. Churchill & Sim, [1906] 1 K. B. 237; Higgins v. Anglo-Algerian S. S. Co. (C. C. A.) 248 F. 386; The Carso (C. C. A.) 53 F.(2d) 374. The rule is applicable to straight bills of lading as well as to order bills of lading.
There are two reasons, I think, why the rule does not fit the facts of this ease. In the first place, the bill was not the usual clean bill of lading. True, it did carry the customary words, “in apparent good order and condition.” But it also bore the bold legend, “Not responsible for condition on arrival.” This was sufficient to put the consignee on notice as soon as he saw the bill of lading. In this feature the case is indistinguishable from Craig & Rose v. DeLargy, 16 Scottish Law Reports, 750, where the decision went in favor of the carrier.
In the second place, the consignee did not alter his position or act to his prejudice. He did not purchase or pay for the goods. He was simply the agent of the shipper, to whom he had made advances long prior to shipment. He asserts that he paid the duty on the tomatoes, $474.40, in reliance on the statement in the bill of lading that they were in good order and condition on shipment. But this payment was one made for the account of his principal, who was the eulpable party so far as the condi*376tion of the shipment was concerned and who certainly has no grievance against the carrier. Moreover, the consignee’s statement that he would not have paid this relatively small sum but for the statement in the bill of lading cannot be credited when the circumstances of the case are taken into consideration. For one thing, he had an interest in the tomatoes because of the money he had advanced on them before they were harvested, and he obviously wanted them in order to sell them and reimburse himself for his advance. It is plain that in their damaged condition they were worth far more than $474.40, for less than 16 per cent, was defective and the consignee claimed damages in this ease in the sum of $8,500. It is also to be noted that after he had learned of the actual condition of the tomatoes he accepted delivery and thereby took on an additional liability for freight to the extent of $1,028.85. The only rational conclusion is that he was not led to pay the duty by anything that he saw in the bill of lading. No act of prejudice beyond the payment of duty is claimed.
The carrier therefore was not estopped to prove that the goods were in a damaged state at the time of shipment. The proof being uneontradieted that the tomatoes were delivered at destination by the carrier in substantially the same condition as they had been on receipt by the carrier, the consignee is not entitled to damages from the carrier.
The carrier will have the relief demanded in its libel for freight. The consignee’s libel for damages to the cargo will be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219424/ | KNIGHT, District Judge.
The Union Guardian Trust Company, as receiver of Andrew Battani and Julius Battani, doing business as Battani Brothers, bankrupt, on February 11,1933, filed a petition with the referee in bankruptcy for an order compelling the Guardian National Bank of Commerce, Detroit, to surrender the moneys in the bankrupts’ estate deposited with the Guardian National Bank of Commerce, Detroit. Such petition also asked the consolidation of all proceedings commenced by various receivers and trustees for the recovery of moneys similarly deposited in various banks. An order was thereafter made consolidating all the proceedings in the eases mentioned. The various proceedings are of a like nature and relate to the same questions. Subsequent to the bringing of the action, Sehram, as conservator, was joined as a defendant. He was appointed receiver subsequent to the taking of the proofs herein but prior to final submission. On April 12, 1933, issue was joined upon the petition by the service of an answer denying the material allegations of such petition. On February 27, 1933, an order was made by the District Court of the Eastern District of Michigan canceling the designation of the Guardian National Bank of Commerce of Detroit as a depository for bankruptcy funds and directing the last-mentioned bank to surrender all such funds held by it to the Union Guardian Trust Company. On May 18, 1933, the referee made an order requiring the respondents immediately to surrender and pay to Union Guardian Trust Company $335.16 on account of the bankruptcy funds deposited with it in the ease of Battani and one, bankrupts. At the time of the filing of the petition, such deposit amounted to $558.-50. This amount was later reduced to $335.-*37816 by tbe payment .of dividends by the receiver. Sneh dividends were accepted without waiver of petitioners’ right to recover the balance of the deposit. The referee further ordered that on failure of the respondent receiver to pay the aforesaid balance within ten days from the date of the service of such order the United States marshal be authorized to seize assets of said Guardian National Bank of Commerce of Detroit in sufficient amount to pay to the Union Guardian Trust Company the said sum of $335.16.
Certain findings of fact and conclusions of law made by the referee are the basis for such order. The questions for review broadly are: (1) Whether the referee was disqualified to act in this proceeding by reason of an interest in the outcome thereof? (2) Whether funds deposited by a receiver or trustee in bankruptcy in a depository designated pursuant to the Bankruptcy Act are in custodia legis, in effect held in trust, and are to be paid in full by respondent receiver? (3) Whether the bond of the depository was valid, and, if not, did these deposits by operation of law become deposits in custodia legis?
1. Was the referee disqualified to act because he was interested in an increase in his fees by reason of an increase in the amount payable from the depository. Upon reason and authority, the basis for this contention is without foundation. Such a reason for disqualification would to a large extent prevent referees functioning in office. In every proceeding involving accumulations to an estate they would be disqualified. The statute prohibiting referees from acting in cases in which they are directly or indirectly interested (section 39 of the Bankruptcy Act [11 USCA § 67]) was not intended to apply to cases like the instant one. The rule is well stated in Black on Bankruptcy, § 39: “The statutory restriction as to referees acting in eases in which they are interested does not apply to the interest of a referee by way of commission on sums paid to creditors as dividends. This is a necessary interpretation of the law.” Other pertinent authorities are Remington on Bankruptcy, § 595 (3d Ed.); In re Abbey Press (C. C. A.) 134 F. 51; Bray v. Cobb (D. C.) 91 F. 102; Anchor Grain Co. v. Smith (C. C. A.) 297 F. 204; In re Gardner (D. C.) 103 F. 922; Meyers v. Shields (C. C.) 61 F. 713, 726; and Turney v. State of Ohio, 273 U. S. 510, 47 S. Ct. 437, 71 L. Ed. 749, 50 A. L. R. 1243, cited by respondents, are not comparable cases. In each case a direct financial benefit would have resulted to the official from his act. Turney v. State of Ohio also is a criminal ease. Here referees’ fees may or may not be increased. There are other points distinguishing the eases mentioned. I find that the referee was not disqualified to act.
2. Are the funds deposited by the receivers or trustees in bankruptcy in the several cases in a depository designated pursuant to the Bankruptcy Act held in custodia legis and as such entitled to preference in payment?
It is my opinion that the deposits of the receivers and trustees in these bankruptcy estates are general deposits and axe not held in custodia legis.
There is no question that a reeéiver or trustee in bankruptcy is an officer of the court, that a bankrupt’s title to property passes to the receiver or trustee as of the date of the filing of the petition, and that the receiver or trustee is vested with all the rights “of a creditor holding a lien by legal and equitable proceedings.”
Respondent bank was designated a depository pursuant to section 61 of the Bankruptcy Act (11 USCA § 101), and the deposits made in the bankrupt’s estate were subject to withdrawal only on cheeks countersigned by the Judge or the Referee. General Order 29 (11 USCA § 53). Rule 18 of the Eastern District of Michigan also specifies certain particulars to be observed by the depository with reference to keeping of accounts, reports, and withdrawals. It is undisputed that the deposits in question were kept in commercial cheeking accounts upon which interest was paid the estates under agreement with the court. The account was handled as were all other general accounts of the bank, save the cheeks were required to be countersigned as heretofore stated, and periodical reports to the court required. John Bridge, Receiver, v. First National Bank-Detroit (D. C.) 5 F. Supp. 442, involved the question as to whether funds deposited by an equity receiver constituted general or special deposits. It seems to me the reasons therein given and the authorities cited axe applicable here, and that deposits made by the receivers or trustees in bankruptcy herein are general and not special deposits. It is uniformly the holding of the courts that to constitute a special deposit an express agreement must be shown, and such agreement must clearly be implied from the conditions surrounding the deposit. No express agreement is shown nor does the evidence sustain the claim that there was an implied agreement that this would -be a special deposit. Proof of a claim as preferred must be *379clear and convincing. The idea of a special deposit is one held for a particular purpose in identical or equivalent form as when deposited, subject to return at any time and not commingled by the depository with the other funds. Neither the fact that the deposit was made by one as receiver or trustee, nor the fact that the depository knew the fiduciary character of the depositor is sufficient to impress the deposit as a trust fund. In Gardner v. Chicago Title & Trust Co., 261 U. S. 453, 43 S. Ct. 424, 67 L. Ed. 741, 29 A. L. It. 622, Justice Holmes, delivering the opinion, said: "We assume that when money is deposited in a designated bank under section 61 of the Bankruptcy Law, * * * it is deposited as other money is, and becomes the property of the bank, leaving the bank a debtor for the amount.” While this statement may be considered dictum, nevertheless it is entitled to great weight and is in harmony with a great majority of the decisions on the point involved here. In re Bologh (D. C.) 185 F. 825; Minard et al. v. Watts (C. C.) 186 F. 245; In re Potell (D. C.) 53 F.(2d) 877. In Florida Bank & Trust Co. v. Union Indemnity Co. (C. C. A.) 55 F.(2d) 640, 611, 83 A. L. R. 1102, referring to deposits made by receivers and trustees in bankruptcy, the court said: “The deposits now in question created debts owing by the depository bank to the representatives of the several bankrupt estates. * * * ” National Bank of the Republic v. Millard, 10 Wall. (77 U. S.) 152, 19 L. Ed. 897; Keyes v. Paducah & I. R. Co. (C. C. A.) 61 F.(2d) 611. 86 A. L. R. 203; Northern Sugar Corp. v. Thompson (C. C. A.) 13 F.(2d) 829; American Surety Co. v. Akron Savings Bank, 212 U. S. 557, 29 S. Ct. 686, 53 L. Ed. 651; Michie on Banks & Banking, vol. 5, § 328, c. 9.
The court’s attention is called to the recent decision In the Matter of The Standard Company of Raleigh, Inc., In Bankruptcy No. 2182, decided by District Judge Meekins, United States District Judge for the Eastern District of North Carolina, January 22,1934.1 The record in that case indicates facts comparable with those at bar as regards the type of deposits. With the conclusion that the funds there were held in custodia legis, this court cannot agree.
The respondent bank closed February 11, 1933, pursuant to a bank holiday declared by the Governor of the state of Michigan. It continued closed upon renewal of such holiday until a national banking holiday was proclaimed by the President on March 5, 1933. Respondent conservator was appointed on March 11,1933, and continued to act as such until May 11, 1933, at which time respondent bank was declared insolvent and the conservator appointed a receiver. On February 27, 1933, an order was made by the District Court of the United States for the Eastern District of Michigan directing the Guardian National Bank of Commerce, as depository of bankruptcy funds for said District Court, to deliver over all bankruptcy funds in its possession. The referee has found that the respondent bank was solvent on February 11, 1933, when its doors were closed. This finding cannot be sustained, nor is any order against the receiver enforceable. The determination of the Comptroller of Currency on the appointment of the receiver on May 11, 1933, that the bank was insolvent, cannot be attacked in this proceeding. Section 192, tit. 12, USCA; Liberty Nat. Bank of S. C. v. McIntosh (C. C. A.) 16 F.(2d) 906; United States Nat. Bank of La Grande v. Pole (D. C.) 2 F. Supp. 153; Crawford v. Gamble (C. C, A.) 57 F.(2d) 15. The lights of the parties are fixed as of the time of the closing of the bank rather than as of the time of the appointment of the receiver. Steele, County Treasurer, v. Randall, Receiver (C. C. A.) 19 F.(2d) 40. The receiver is simply the representative of the Comptroller, and the assets of the bank are not in his possession, but that of the Comptroller. Hulse v. Argetsinger (C. C. A.) 18 F.(2d) 944; Lehman, Sheriff, v. Spurway (C. C. A.) 58 F.(2d) 227. The order of the District Court could not change the character of the deposit when made. The District Court had the right to change the designated depository. It had the light to order and direct the Comptroller to pay over the estates’ deposits ratably with other depositors. Section 194, 12 USCA. However, the court did not have the right to make an order directing the payment forthwith of any deposits to the credit of any of these bankrupt estates. The orderly and proper administration of the banking laws as regards insolvent banks requires that debts should be paid on a ratable basis and when and as the funds of the bank justify distribution. The statute requires that the distribution be so made that each creditor and depositor receive the share to which he is legally entitled. Necessarily a determination in respect to distribution must be made by the Comptroller of the Treasury. Such determination, however, is subject to the order *380of the proper court in ease of untoward delay or proposed illegal distribution. So, with regard to any ratable proportion to which these bankruptcy estates are entitled, the distribution should be made by the Comptroller as hereinbefore indicated. The finding that a summary order issue directing the payment of all deposits made in these several estates cannot be sustained.
3. Was the depository bond valid, and, if not, what was the effect of the failure to give the required bond? Section 61 of the Bankruptcy Act (11 USCA § 191) requires that a bond be given by a depository for bankrupt’s estates. The order designating the respondent bank a depository required it to furnish a bond in the amount of $1,250,000, with sufficient surety. The proposed depository did submit a bond with the Guardian Detroit Union Group, Inc., as surety. This bond was given and approved by the District Judge prior to the making of the deposits in question. The Guardian Detroit Union Group, Inc., was a holding company owning substantially all of the stoek of respondent depository, together with the stoek of other banks. This corporation was organized under the Domestic Corporation Law of the state of Michigan, known as Act No. 84 of the Public Acts of Michigan of 1921. The Insurance Code of the state of Michigan, Act No. 256, Public Acts of 1917, as amended, provides for the organization of corporations “to guarantee the fidelity of persons in positions of trust, private or public, and to act as surety on official bonds,” Compiled Laws of 1929, § 12389, c. 1, pt. 3, subd. 1, § 2, and also /provides that no corporate body shall be incorporated for the purpose of transacting any form of insurance or surety bonding business, without complying with the provisions of the insurance law, Compiled Laws of 1929, § 12287, c. 1, pt. 2, § 1. It is not claimed that the holding company had authority to act as a surety under the provisions of the Insurance Code. It is not claimed that it is authorized under any law to engage in the business of acting as a surety. It is claimed that such authority is implied in so far as it relates to this suretyship in question; that acting as such surety for its own subsidiary was legal, because it was done as an incident to and in furtherance of its own business. It is also claimed that under the provisions of Act No. 327, § 10, par. i, Public Acts 1931 of Michigan, the holding corporation was authorized to act as such surety.
Questions relative to the effect of the failure to give a depository bond have been frequently decided by the courts. Various states of facts are shown. Variety is illustrated in these eases: In Hancock County et al. v. Hancock National Bank of Sparta et al. (C. C. A.) 67 F.(2d) 421, in which no bond was given, and in which it was held that, since the officer was not required to make the deposit in the particular depository, the bank acquired title and was not a trustee ex maleficio; in the case of In re Potell (D. C.) 53 F.(2d) 877, in which deposits made in an undesignated depository were held to be trust deposits; in Re Weiss (D. C.) 2 F. Supp. 767, 17 A. B. R. (N. S.) 647, in which no bond was given by the depository and the court held the funds on deposit in custodia legis (in that case the officer of the bank represented that the depository bond had been given); in Board of Commissioners of Crawford County v. Strawn (C. C. A.) 157 F. 49, 15 L. R. A. (N. S.) 1100; and in numerous other eases in which it has been held that where deposits were prohibited by law to be made, when made they became funds in trust for the depository. In the instant case the receivers and trustees were required by law to deposit all bankrupt estate funds in a designated depository. Section 47a (3) of the Bankruptcy Act (11 USCA § 75 (a) (3). While it does not appear that there were depositories other than the respondent bank, it seems to me the effect is the same as though respondent bank were the sole depository and that the deposits in these bankrupt estates became trust funds by operation of law in case the depository bond was invalid.
It is my opinion that the bond in question was a valid bond. The authority to act as surety is not within the specific charter powers of the holding corporation. Its corporate powers are such only as are conferred by statute. Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co., 118 U. S. 290, 6 S. Ct. 1094, 30 L. Ed. 83. There is no express statute giving the holding company the, authority to act as a surety unless it is found in Act No. 327, § 10, par. i, Public Acts 1931 of Michigan. Nevertheless a corporation has power to do certain acts which fire incidental to the general authority of the corporation and which are done in furtherance of such general business. The question regarding the rights of corporations in this respect have been the subject of adjudication many times by the courts. It is apparent that the facts must be much diversified. However, there are numerous eases in which the courts have held that the corporation is authorized to act as a surety or guarantor although the statutes' under which organized did not so specifically authorize. In Timm v. Grand Rapids Brewing *381Co., 160 Mich. 371, 125 N. W. 357, 27 L. E. A. (N. S.) 186; Munoz v. Brassel (Tex. Civ. App.) 108 S. W. 417; McBroom v. Cheboygan Brewing & Malting Co., 162 Mich. 323, 127 N. W. 361. In numerous cases it has been held that a corporation might guarantee an indebtedness of its subsidiary. Lumbermen’s Trust Co. v. Title Ins. & Investment Co. of Tacoma (C. C. A.) 248 F. 212; In re New York Car Wheel Works (D. C.) 141 F. 430; General Investment Co. v. Bethlehem Steel Corp. (D. C.) 248 F. 303. The rule for guidance clearly is stated in Green Bay, etc., R. Co. v. Union Steam-Boat Co., 107 U. S. 100, 2 S. Ct. 221, 223, 27 L. Ed. 413, in which the court said: “But whatever, under the charter and other general laws, reasonably construed, may fairly be regarded as incidental to the objects for which the corporation is created, is not to be taken as prohibited.” Henderson Tire & Rubber Co. v. Gregory (C. C. A.) 16 F.(2d) 589, 49 A. L. R. 1503; Hummel v. Warren Steel Casting Co. (C. C. A.) 5 F.(2d) 451; In re John B. Rose Co. (C. C. A.) 275 F. 416; the opinion of the Attorney General of the state of Michigan under date of January 27,1931, in which he held that “a holding company organized to own the stock of other corporations, including stock of banks and trust companies, * * * may become a surety on bonds securing the deposits of the public funds in the subsidiaries.” Among the authorities cited in such opinion is State Bank of Fairfax v. Pacific Elevator Co., 159 Minn. 94,198 N. W. 304, 305, in which an action was brought against a corporation practically owning through interlocking directorates and stock holdings the company executing the notes in question. The guarantor was held liable. The court there said: “While a corporation cannot become a surety on obligations in which it has no interest, it may guarantee the obligations of its subsidiary companies.”
The Guardian Detroit Union Group, Ine., was interested in the deposits made in bankruptcy estates in the Guardian National Bank of Commerce of Detroit and the analogy between this condition and that of parties in these and other eases in this respect seems clear. Increased deposits in the subsidiary bank were beneficial to the holding company. The subsidiaries’ business in its entirety was carried on for the benefit of the other company. See, also, 7 R. C. L. 603, and cases cited. Aet No. 327, Public Acts of 1931, which is an amendment to the Corporation Law under which the Guardian Detroit Union Group, Ine., was incorporated, was enacted to extend the powers of corporations such as this holding company. It provides that such a company may guarantee “evidence of indebtedness created by, any other corporation or corporations.” Section 10, subd. i. Having in mind the statutes hereinbefore mentioned which provide for the incorporation of surety companies, it seems to me that the aet of 1931* was directed particularly to holding companies. The exceptions in the act, including the authority to become a surety “upon any bond or other undertaking securing the deposit of public moneys” (section 10, subd. i), supports the view that the act intended that a company such as the' Detroit Union Group, Inc., should have power to guarantee other bonds or undertakings. The funds in question were not public moneys.
The views hereinbefore expressed obviate the necessity of the discussion of any other questions raised upon this proceeding to review the findings of the referee.
Concluding, I find: (1) That the referee herein was not disqualified to aet in these proceedings; (2) that the deposits with referees and trustees in bankruptcy herein in the Union Guardian Trust Company as made are not in custodia legis and are not entitled to preference in payment over other general depositors in the Guardian National Bank of Commerce of Detroit; (3) that the depository bond herein given by the Guardian Detroit Union Group, Ine., was a valid depository bond.
No opinion filed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219425/ | BREWSTER, District Judge.
This is a suit to recover interest on an overpayment of income taxes for earlier years credited to the petitioner’s income tax for the fiscal year 1922.
Judge Lowell heard the ease upon an agreed statement of facts, and held that the petitioner was entitled to recover.1 After the hearing, he allowed the petitioner to amend by the substitution of a new petition. Respondent moved for a new trial, which motion was allowed. Thereafter the petitioner waived its substituted petition and asked to amend certain allegations in the original petition. It was allowed to do so.
The case is now before me for a new trial. Respondent has moved to strike out from the agreed statement of facts a certain portion of paragraph 20, wherein it was agreed that the Commissioner, on February 6, 1926, approved the Schedule of Refunds and Credits, as prepared by the collector. This motion I allow.
Over the objection of the petitioner, I received evidence tending to show the mode of procedure in the Bureau of Internal Revenue which obtained in 1919 and up to the time when the enactment of the first statute, giving interest on refunds and credits, required the adoption of a new procedure. In the view I have taken of the questions hereafter considered, this evidence becomes immaterial.
The parties have filed requests for findings of fact and rulings of law. So far as these requests are granted, they will appear in the following statement of facts, to which I have added certain findings not requested but which, to me, seem to be material.
Special Findings of Fact.
1. The petitioner is now, and at all times hereinafter mentioned was, a corporation organized and existing under the laws of the state of Maine, having a place of business in Boston, Mass., within the jurisdiction of this court-.
2. On- the below named dates and for the amount also shown for the years 1909, 1913, the two-month period ending February 28, 1914, and the fiscal year ending February 28, 1916, the petitioner filed returns and paid the taxes shown thereon as follows:
*3833. On October 18, 1919, the Commissioner approved a schedule of allowance of claims for refund, known as Schedule IT: 108 (old procedure), showing the allowance of the following amounts as refunds:
The amount allowed for the fiscal year ended February 29, 1916, $3,109.64, was reduced by the amount credited to the additional tax for 1915, resulting in a refundable balance of $2,824.15, shown above.
4. On February 14, 1920, the petitioner filed a claim with the collector requesting that the above allowances be credited against a then outstanding tax due for the fiscal year ended February 28,1919.
5. On March 7, 1920, the Treasurer of the United States issued “settlement warrant” No. 45317 for the amount of $4,941.11 in favor of the petitioner which was transmitted to the collector for delivery to the petitioner in full payment of the aforesaid over-payments allowed for the years 1909, 1910, two-month period ended February 28, 1914, and fiscal year ended February 29,1916. Upon receipt thereof, tbe said warrant was returned by the petitioner to tbe Treasury Department, for the reason that it had taken credit for said amount, $4,941.11, against its taxes outstanding for the fiscal year ended February 28, 1919.
6. On May 6, 1920, the Auditor of the Treasury Department addressed a letter to the Commissioner advising him that the said warrant had been returned, inasmuch as the petitioner had already taken credit as set forth in the preceding finding.
7. On June 7,1920, the collector addressed a letter to the petitioner in which it was advised that the full amount due for the said fiscal year 1919 had been fully paid, and that therefore it was entitled to have the settlement warrant of $4,941.11 returned.
8. On May 13, 1920, the petitioner paid an installment of taxes for the fiscal year ending February 28, 1920, and deducted the $4,941.11, inclosing by way of explanation a claim for a credit upon the 1920 tax of this amount.
9. On June 11, 1920, replying to the letter of June 7, 1920, the petitioner advised that it had erroneously paid the. taxes for 1919 and advised that it now desired credit against the current year tax (1920).
10. On July 27, 1920, in accordance with the practice, the settlement warrant was canceled and the proceeds covered into the Treasury.
11. On October 26,1922, after an audit of the petitioner’s return for the fiscal year 1920, the Commissioner determined an overassessment of $16,604.89, and a certificate of over-assessment on Schedule IT :2292 was issued disclosing $4,941.11, the unpaid balance as abated, and $11,663.78, the balance to be refundable.
12. On November 17, 1922, the collector advised the petitioner, based upon request for the status of its account for the fiscal year ended February 28,192-2, that, inasmuch as the amount of $4,941.11, previously requested as a credit against 1920 tax, had been abated, “tbe tentative credit” bad “been transferred to your fiscal 1922 account.”
13. On June 22, 1925, the collector of internal revenue wrote tbe Commissioner advising him that, according to the records of the collector, there, was an outstanding tax liability against the petitioner for the fiscal year ending February 28, 1922, and adding that, since it did not appear that the corporation had ever been given credit for the allowance of $4,941.11, it was requested that the ease he investigated and the collector advised relative thereto.
' 14. On December 10, 1925, tbe Commissioner of Internal Revenue signed and forwarded to the collector of internal revenue at Boston, Mass., a Schedule of Overassessment IT :A — 17563, Treasury Department Form 7805, which stated: “The amounts listed in Column 4 as overassessments (or Reduction of tax liability) are hereby approved, and the related claims, if any, allowed in the respective amounts indicated by the ‘Certificates .of Overassessment’ or ‘Notices of Adjustment of Refund’ attached thereto”'; the taxable years and the amounts of the overassessments being as follows:
15. On January 18,1926, pursuant to the printed instructions on the said Schedule of Overassessment, the collector of internal revenue at Boston, Mass., made the following *384entries in columns 9 and 11 of the said schedule:
16. On January 18,1926, pursuant to the instructions of the Commissioner, the collector of internal revenue at Boston, Mass., prepared the Schedule of Refunds and Credits IT — R—17565, Treasury Department Form 7805 — A, which showed in columns 5 and 8 thereof (1) the amounts credited and (2) the dates that the said sums had been paid as follows:
17. The Schedule of Refunds and Cre3its referred to in the next preceding paragraph was received in the Bureau of Internal Rev- . enne, and on February 6, 1826, the assistant to the Commissioner approved the schedule, but neglected to sign the authorization to the disbursing clerk. Inasmuch, however, as the items in question were credits rather than refunds, I do not regard this omission as important, and I find as a fact that the Schedule of Refunds and Credits was approved by the collector of internal revenue on that date; and thereupon the collector of internal revenue forwarded to the petitioner four certificates of overassessment showing the overpayments and the allowances of the credits therefor on account of the petitioner’s taxes for the fiscal year ending February 28, 1922. . Each of the said certificates contained the following statement:
“This certificate is being issued expressly for the purpose of authorizing the Collector to credit the overassessment to the taxes now outstanding on his accounts.
“This allowance is made under the provisions of Section 281 — C of the Revenue Act of 1924.”
18. The issuance of the Schedule of Over-assessments and the Schedule of Refunds and Credits' by the Commissioner and collector was for the purpose of advising the collector to make the necessary adjustments to his accounts with reference to the 1922 unpaid taxes from petitioner.
19. The petitioner has duly requested the Commissioner of Internal Revenue to compute, allow, and pay interest on the said “credits” as shown on the aforesaid schedules, as provided in section 1019 of the Revenue Act of 1924 (26 USCA § 153 note), and the Commissioner of Internal Revenue has refused to. allow or pay any interest thereon whatsoever.
20. The interest on the aforesaid sums (at the rate of 6 per cent, per annum) from the respective dates of payments as shown in . column 8 of the Schedule of Refunds and Credits, Exhibit K, to the due date of the 1922 overassessment against which the credits were taken, as shown in column 11 of Exhibit J, amounts to $2,433.85 as alleged in paragraph 8 of the amended petition.
21. The petitioner has in all respects fully and sufficiently complied with the statutes and regulations in regard to all of the matters material to this suit; has not filed any waiver or made any transfer or assignment of said claim or of any part thereof or interest therein; has at all times borne true allegiance to the government of the United States; and has not in any way voluntarily aided, abetted, or given encouragement to rebellion against the said government in violation of section 159 of the Judicial Code, 28 USCA § 265.
Conclusions of Law.
Two questions are presented on the foregoing faets: First, Is the petitioner entitled to interest on the overpayments applied to the 1922 tax? and, second, if so, are petitioner’s rights to recover barred by the statute ' of limitations (Rev. St. § 1060, now Jud. Code § 156, 28 USCA § 262) ?
It appears that the government attempted to refund the overpayments in 1010, but it accepted a return of the amount refunded and consented to apply the amount as a credit against taxes for other years. For reasons not necessary to repeat, the attempted applications against the taxes for 1919 and 1920 failed until finally the taxpayer took the credit against the taxes falling due February 15, 1923. At this time Congress had enacted section 1324 (a) of the Revenue Act of 1921 (42 Stat. 316), authorizing the payment of interest on refunds and credits. If the due date of the tax upon which the credit was applied eoiitrolled the petitioner’s right to interest, then this right would he governed by the Revenue Act of 1921, but it has been defi*385nitely decided that there is no “allowance” of a credit within the meaning of the statute authorizing interest until there had been official and final action by the Commissioner of Internal Revenue, and that such official act consists of the approval by the Commissioner of Internal Revenue of the certificate of refunds and credits. Girard Trust Company et al. v. United States, 270 U. S. 163, 46 S. Ct. 229, 70 L. Éd. 524; United States v. Boston Buiek Co., 282 U. S. 476, 51 S. Ct. 206, 75 L. Ed. 470.
It is equally well settled that the law in force at the time of this official act determines the amount of interest to which the taxpayer is entitled. United States v. Magnolia Petroleum Co., 276 U. S. 160, 48 S. Ct. 236, 72 L. Ed. 509; Blair, Com’r, v. United States, 271 U. S. 348, 46 S. Ct. 506, 70 L. Ed. 983; United States v. Boston Buick Co., supra.
In the case at bar, it is apparent that on the books of the collector the taxpayer’s liability for the balance of the 1922 tax was not extinguished until the certificate of refunds and credits, submitted by the collector, had been approved by the Commissioner. Conceding that the sole purpose of the proceedings in December, 1925, and January, 1926, was to enable the collector to record a proper entry on his books, it is nevertheless the law and the fact that the credit was not allowed until February 9,1926. The petitioner is entitled to interest to be computed according to the provisions of section 1019 of the Revenue Act of 1924 (43 Stat. 253 [26 USCA § 153 note]).
This petition was brought December 9, 1931. Did its cause of action arise within six years prior to that date ? From the standpoint of the taxpayer, it might be said that its claim for the overpayments was satisfied when it applied them toward the payment of its 1922 tax on February 15 of that year; but, if so treated, the application would not satisfy the government’s obligation to pay interest which can be made the subject-matter of a suit. Girard Trust Co. et al. v. United States, supra.
If the cause of fiction arose then, this suit is too late, but I am convinced that it did not then arise. Apart from the statute, the petitioner is not entitled to interest. United States v. Magnolia Petroleum Co., supra. The statute providing for interest clearly authorized the payment of interest only upon the allowance of a refund or credit. Until such refund or credit is allowed, within the meaning of the statute, no cause of action accrues to the taxpayer. Leisenring et al. v. United States (Ct. Cl.) 3 F. Supp. 853. Compare United States v. Swift & Co., 282 U. S. 468, 51 S. Ct. 202, 75 L. Ed. 464; Bonwit Teller & Co. v. United States, 283 U. S. 258, 51 S. Ct. 395, 75 L. Ed. 1018.
It was said in United States v. Swift & Co., supra, at page 476 of 282 U. S., 51 S. Ct. 202, 205, that the payment of the tax upon which the credit was applied “must be taken to have occurred on the date of the allowance of the credit by the Commissioner’s signature approving the schedule of refunds and credits.” That this is so is further evidenced by the eases holding that the act in force at the time of the allowance is the law that fixes the government’s liability for interest.
While the signature of the Commissioner of Internal Revenue does not appear on the certificate of refunds and credits, I have no hesitation in finding and ruling that the schedule was approved on behalf of the Conn missioner sufficiently to effectuate an allowance of the credit. Compare R. H. Stearns Co. v. United States, 54 S. Ct. 325, 78 L. Ed. - (decided Januaiy 8, 1934).
The claim of the government that it is entitled to interest on the delayed payment of the 1922 tax while it had in its possession the amount of it is entirely without merit, and hardly warrants consideration.
Judgment may be entered for the plaintiff for the sum of $2,433.85.
The requests of the petitioner and of the respondent for findings of fact and rulings of law, so far as inconsistent with the foregoing, are denied.
I continued the trial of this ease until to-day in order to give counsel an opportunity, in the course of the trial, to preserve their rights in connection with my findings and rulings.
No opinion filed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219426/ | O’BRIEN, District Judge.
The question at issue is whether an alien has access to the District Court by a bill in equity to enjoin the operation of an excluding order entered against him by the Secretary of Labor based upon a hearing by a board of special inquiry and upon a hearing by the board of review on appeal.
The bill was brought by an alien, Irwin Rash, who was excluded at the port of Detroit while attempting to return to the United States to what he contended was his unrelinquished domicile. There was no record of his prior entry. The order was based upon section 213 (a) of title 8, U. S. C., 8 USCA § 213 (a), section 13 (á) of Immigration Act of 1924, in that the alien was an immigrant not in possession of an unexpired consular immigration visa.
The bill of complaint seeks to overrule the Secretary of Labor upon a question of fact. If the board of special inquiry had found that the alien had previously been lawfully domiciled in the United States, as he contends he was, it might have admitted him without an immigration visa under section 213 (b) of title 8, U. S. C., 8 USCA § 213 (b), if he was found upon further examination to be otherwise admissible.
The plaintiff relies upon the authority of United States ex rel. Shore v. Day, 36 F.(2d) 264, in which the District Court held that the mere absence of a record of the alien’s prior admission to the United States is not evidence to support the Secretary of Labor’s finding that the alien is a member of an excluded class. Since this decision, however, the Circuit Court of Appeals for the Second Circuit, on November 7, 1932, reversed the District Court. United States ex rel. Shore v. Corsi, 61 F.(2d) 761, 762. The court said:
“The rules of law applicable to this case have long been clearly defined. Findings by the Board supported by some evidence are conclusive. U. S. ex rel. Vajtauer v. Com’r, 273 U. S. 103, 47 S.Ct. 302, 71 L. Ed. 560; *391Gegiow v. Uhl, 239 U. S. 3, 36 S. Ct. 2, 60 L. Ed. 114; U. S. ex rel. Mantler v. Com’r, 3 F.(2d) 234 (C. C. A. 2). The alien has the burden of proving his right to enter the United States. U. S. ex rel. Soy Sing v. Chinese Inspector, 47 F.(2d) 181 (C. C. A. 2); U. S. ex rel. Cateehes v. Day, 45 F.(2d) 142 (C. C. A. 2). This appellee sought to bear this burden by his own testimony and a joint affidavit of two others, saying that they had known the appellee as a resident of Canton, Ohio, for nine years. * * * All this may be consistent with his having previously spent some time in this country, but that is far from establishing that his entry was lawful at the time he claims he first entered. * * * Departmental exclusion based on rejection of conflicting testimony has support of authority. U. S. ex rel. Soy Sing v. Chinese Inspector in Charge at Port of New York (C. C. A.) 47 F.(2d) 181; U. S. ex rel. Fong Lung Sing v. Day, 37 F.(2d) 36 (C. C. A. 2).”
Plaintiff claims that the facts in the present case are similar. Before going into that, however, we note that the foregoing decision was made upon appeal from an order sustaining a writ of habeas corpus, and to that extent supports the defendant’s contention that a well-settled and adequate remedy at law exists whereby the plaintiff might, if he chose, obtain a judicial review to determine the legality of the excluding order made by the Secretary of Labor. No authority has been cited, nor is a single ease known to the court, in which the higher courts of the United States have sanctioned the use of a bill in equity by an alien to test the validity of an excluding order made by the Secretary of Labor. On the contrary, there is substantial authority for the proposition .that a bill in equity by an alien to obtain a declaration of his right to remain in the United States will not lie. Darabi v. Northrup, 54 F.(2d) 70 (C. C. A. Ohio 1931). In Fafalios v. Doak, 60 App. D. C. 215, 50 F.(2d) 640, certiorari denied by Supreme Court (1931) 284 U. S. 651, 52 S. Ct. 31, 76 L. Ed. 552, the court held that a bill in equity will not lie to cancel a deportation order; the remedy of review by habeas corpus being adequate. Jung See v. Nash (C. C. A.) 4 F.(2d) 639; holds that habeas corpus is the proper remedy to obtain a judicial review of the rights of one claiming to be a citizen.
In Poliszek v. Doak, 61 App. D. C. 64, 57 F.(2d) 430, 431, the court said: “Whether the Supreme Court of the District has jurisdiction in any ease to issue a writ of prohibition against an executive officer of the government, we need not decide, for, assuming the existence of the power, the court below rightfully refused to exercise it in the present ease. The Immigration Act of 1917 (39 Stat. 874) prescribes the procedure for the exclusion and deportation of aliens and makes the decision of the Secretary of Labor final. So long, therefore, as he keeps within his jurisdiction and his decisions are not arbitrary or capricious, they are beyond the control of the courts. That the Secretary has jurisdiction both of the subject-matter and of the person in the present case is too plain to admit of question. Moreover, the writ of prohibition will never issue where there is another adequate remedy. In re Macfarland, 30 App. D. C. 365; In re Rice, 155 U. S. 396, 15 S. Ct. 149, 39 L. Ed. 198; Alexander v. Crollott, 199 U. S. 580, 26 S. Ct. 161, 50 L. Ed. 317. In Fafalios v. Doak, 60 App. D. C. 215, 50 F.(2d) 640, we rule that habeas corpus is the proper remedy to review deportation proceedings."
In the course of the opinion in the case of Wong Sun v. Fluckey (D. C.) 283 F. 989, 994, the court said: “Congress has committed the power to hear and decide that status to the immigration authorities. The courts through necessity have used the writ of habeas corpus as the only available procedure to determine whether the immigration authorities have exceeded or abused their power." This case was affirmed in the Circuit Court of Appeals for the Sixth Circuit in 293 F. 273, and again in the Supreme Court in 265 U. S. 239, 44 S. Ct. 524, 68 L. Ed. 999. Thus it appears that the plaintiff’s only and proper remedy in this case is by a writ of habeas corpus; there being no authority in the law to sustain the bill in equity. The judgment is affirmed.
Plaintiff’s bill is dismissed, the restraining order is vacated, and the temporary injunction is denied. The plaintiff is remanded to the custody of the Immigration and Naturalization Service for deportation. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219427/ | KIRKPATRICK, District Judge.
This is a claim for additional compensation by a stevedoring company which discharged the respondent’s cargo under a written contract. The work has been done and the libelant has received payment according to the rate fixed on page 1 of the contract. It is conceded that the libelant has been paid in full, unless the fact that the cargo was damaged and some portion of it, not definitely ascertained, had to be handled under distress conditions, entitles it to additional compensation. The libelant claims that it does, first, because of the contract itself, and, second, because of the existence of an alleged custom of the port of New York.
The contract contained an agreed schedule of rates by means of which the amount to be paid for the work could be definitely ascertained. It contemplated that there might be a change in the agreed rate. A clause provided: “All rates quoted herein are based on and subject to the present wage scale and working conditions prevailing in the port of loading or discharging. In the event of increase or decrease in such wage scale or change in working conditions the rates will, as a consequence, be increased or decreased.”
This clause, however, is not applicable to the contingency of the cargo being damaged. Even though the libelant’s agreement with his longshoremen compelled him to pay them higher wages for work on damaged cargo,' there was no increase in “the present wage scale.” The same wage scale was in force at thé time the contract was made as when the work was done, and the provision for double pay for work on damaged cargo was then as now a part of it. The “change in working conditions” appears by the first sentence to refer to “working conditions prevailing in the port * * * of discharging.” This I suppose means place and conditions of unloading, docking, and berthing facilities. At any rate it clearly does not mean working conditions upon the vessel itself.
There is therefore nothing in the contract affecting the rate of payment in the event of damaged cargo.
The respondent offered evidence of a custom of the port of New York by which the stevedore received his additional cost plus 10 *393per cent, in case he had to work upon damaged cargo.
Assuming that the evidence was sufficiently definite to establish the existence of such custom, it cannot affect the contractual relations of these parties, for two reasons:
First. There is no evidence that the parties contracted with reference to it. Nor can this be presumed from the mere existence of the custom, since it is coneededly a local custom and one of the parties was a nonresident and there is nothing to show that he knew of it. The rule is that such knowledge cannot be presumed, without proof, except in the case of a custom prevailing generally in the trade or business in which both parties axe engaged. Chateaugay Ore & Iron Company v. Blake, 144 U. S. 476, 12 S. Ct. 731, 36 L. Ed. 510; Isaksson v. Williams (D. C.) 26 F. 642; The City of Atlanta (D. C.) 17 F.(2d) 311.
Second. The evidence of the custom, if accepted, would be in contravention of the terms of the written contract. The contract does not expressly refer to payment for discharging damaged cargo, but that does not mean that that point is not covered. Had the agreed rates been fixed for discharging sound cargo, there would, of course, have been a hiatus which might have been supplied. But the consideration is to be paid for “Discharging Corkwood,” and that includes damaged as well as sound corkwood. Evidence of a custom will not be received upon a matter as to which the contract has spoken. Barnard v. Kellogg, 10 Wall. 383, 19 L. Ed. 987; Dewitt v. Berry, 134 U. S. 306, 10 S. Ct. 536, 33 L. Ed. 896.
The claimant may therefore have a decree of dismissal, with costs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219428/ | FARIS, District Judge.
Plaintiff, a bondholder of defendant St. Louis Joint Stock Land Bank, sues in equity for himself and all others similarly situated, for an accounting touching certain assets alleged to constitute a trust fund held for the bondholders of defendant St. Louis Joint Stock Land Bank, and which defendant Cantley, as administrative receiver, or statutory receiver, unlawfully, it is alleged, now holds,, and, in effect, to oust Cantley, and also to have this court appoint a receiver in equity.
Defendant St. Louis Joint Stock Lana Bank (hereinafter called Land Bank, simply, for brevity) became and was, in June, 1932, declared by the Federal Farm Loan Board to be insolvent. Defendant Cantley was thereupon appointed by the Federal Farm Loam Board, receiver to take possession, and he now has possession, of all books, records,, property, and assets of whatsoever sort of said Land Bank, including mortgages and other property deposited with defendant, Campbell, as registrar of defendant Land Bank to secure the bonds held by plaintiff and divers others.
Plaintiff contends that defendant Cantley, as receiver appointed by the Farm Loam Board, has no authority to take possession of the mortgages and other assets deposited, it is alleged, as collateral, by the Land Bank, with Campbell, registrar, because such collateral is not an asset of the bank, but that power to liquidate and wind up the affairs of the' Land Bank inheres in a court of equity only,, and lawful possession of such pledged assets lies, therefore, only in a receiver appointed by such a court.
Defendants contend contra, and insist,, that not only does section 961, title 12, U. S, C. (12 USCA § 961), confer this power on a. receiver, such as is Cantley, appointed by the Farm Loan Board, but that the whole policy, tenor, and language of the Federal Farm Loan Act (12 USCA § 641. et seq.) indicate an intention of the Congress so to confer such power.
Obviously, the decision of but a single question will solve this case. That question is, Has Cantley the right of possession of the assets named, and the authority to liquidate them and wind up this insolvent Land Bank ?
Section 961, supra, after providing for the appointment by the Farm Loan Board of a receiver for national farm loan associations, proceeds to set out the authority and duties of such receiver, thus: “Such receiver, under the direction of the Federal Farm Loan Board, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to it, and, with the approval of the Federal Farm Loan Board, or upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubt— *396ful debts, and, on a like approval or order, may sell all the real and personal property of such association, on sueh terms as the Federal Farm Loan Board or said court shall direct.”
It will be observed that, while the above section does not specifically mention a joint-stock land bank, sueh as is here being dealt with, yet, by a subsequent statute (section 963, of title 12, U. S. C. [12 USCA § 963]), such banks are put in precisely the same category as are national farm loan associations, and the provisions of section 961, supra, are specifically made applicable to joint-stock land banks.
Section 656, title 12, U. S. C. (12 USCA § 656), provides for the appointment of a registrar who, by the provisions of this same section, is a public and not a private officer, and whose salary is paid by the Land Bank. Section 781, title 12, U. S. C. (12 USCA § 781), .provides that the mortgages taken by the Land Bank shall be deposited in trust by the Land Bank with the registrar to be used by .him as collateral security for farm loan • bonds, such as plaintiff and those for whom he sues now hold and own.
Arguing by analogy to the ruling of the Supreme Court of the United States, in the case of Merrill v. National Bank, 173 U. S. 131, 19 S. Ct. 360, 43 L. Ed. 640, wherein it was held that a receiver of a failed national bank has no more right to the collateral pledged by a bank to secure its debt than the bank itself would have [see, also, Schumacher v. Eastern Bank & Trust Co. (C. C. A.) 52 F.(2d) 925], and heartened, no doubt, by the decision by the Supreme Court of the United States in the ease of Wheeler v. Greene, 280 U. S. 49, 50 S. Ct. 21, 74 L. Ed. 160, it is upon the provisions of section 781, ...supra, that plaintiff bottoms his ease. In other words, the bald contention is that the mortgages and other collateral deposited by the ..Land Bank with the registrar are not assets of the Land Bank, within the terms of section 961, supra; therefore, these mortgages are to' be foreclosed for the benefit of bondholders only in a court of equity and by a receiver appointed by sueh court. And this, too, notwithstanding the statute which gives possession of all books and records to a receiver appointed, as defendant Cantley was, by the Federal Farm Loan Board.
This latter provision, above referred to, seems to me to throw much light on the intention of the Congress, touching the manner in which that legislative body intended insolvent land banks to be liquidated. I think it is clear that the term' “all books (and) records” includes those books and records which are in the hands of every officer of the bank. So, the term used embraces books and records in the hands of the registrar, because he is an officer of the Land Bank. If so much be conceded, as I think it must be, then the registrar’s possession was not adverse to either the bank or to the statutory receiver, defendant Cantley. In short, the registrar held this collateral as an officer of the Land Bank for all the uses and purposes of the act. Moreover, it must also, I think, be conceded that the boobs and records, pursuant to the statute above quoted, pass on insolvency into the absolute custody and possession of the statutory receiver, and it is thus rendered well-nigh impossible for a receiver appointed by a court in equity to get such data as would enable him to function in the performance of the powers and duties sought by plaintiff to be conferred on him.
I think no one can read the Federal Farm Loan Act without reaching the conclusion that the Congress intended to pass a self-contained and comprehensive act to govern the organization, powers, duties, and functions of, and to fully provide for, the winding up and liquidation of insolvent farm loan organization of all sorts, without the necessity of a resort to the courts, save in exceptional circumstances. Largely,-the Congress took for its model the long-existing laws governing like subjects in the case of national banks. If it fell short of complete analogy, the failure, to my mind, was one of inadvertence. True it is, that in the ease of Wheeler v. Greene, supra, 280 U. S. loc. cit. 51, 50 S. Ct. 21, 74 L. Ed. 160, the Supreme Court finds what to it is a convincing reason why power was given to the Comptroller of the Currency* to collect through a receiver the so-called double liability of stockholders in failed national banks and withheld such power from the Farm Loan Board in the other. Obviously, if sueh power is lawful and constitutionally valid in the ope ease, it ought to be valid and constitutional in the other. I assume, without deciding, that, if too much be assessed against and collected from the stockholders, in either the liquidation of a national bank or a farm loan organization, any sueh surplus exacted could be recaptured by the stockholders after all debts of the bank had been paid in full. It is clear, because the Wheeler Case, supra, so 'rules, that the power of the receiver, such as is defendant Cantley, to collect from stockholders of an insolvent land bank, was not by the act creating him specifically conferred. This, I think, was sufficient, whether it was *397■withheld intentionally, or by mere inadvertence, by a slip of the scissors, so to speak, or not. By virtue of the ruling in the Wheeler Case, supra (with which, of course, I have no quarrel), we are already confronted with a situation where two receivers are necessary in liquidating a land bank, one to collect the double liability of stockholders, and one to take charge of all books, records, and assets of the insolvent land bank, and to collect all debts due to such banks. Surely the Congress never intended, even in this golden age of receivers, that there should be three receivers to liquidate one insolvent land bank. But to this situation the contentions of plaintiff would inevitably lead us.
As said, in effect, by Judge Wilkerson, the thing sought by plaintiff here does not so much involve reading into the aet things doubtfully implied, but it does involve reading out of the statute and the easting away of much language clearly and specifically used therein.
I wholly agree with what is said in Merrill v. National Bank, supra, as in duty bound, but to me there seems a vast difference in principle between the title and rights of a creditor of a bank, who is secured for his debt by collateral security pledged with him for that purpose, and an officer of the Land Bank who holds collateral, as here, to secure the bonds of plaintiff, and others, similarly situated. In the one ease the collateral is held by a stranger for his sole benefit, and in the other by a statutory officer of the Land Bank, who holds it as a convenient detail in the administration of the affairs of the Land Bank. In trust, of course, the statute says, but not in complete title.
A similar final conclusion was reached in this circuit, in the case of Krauthoff v. Kansas City Joint-Stock Land Bank (C. C. A.) 23 F.(2d) 71, as also in the later ease of Krauthoff v. Kansas City Joint-Stock Land Bank (C. C. A.) 31 F.(2d) 75. True it is, that some of the broad language used in both of the Krauthoff Cases, supra, has now been modified by the ruling in Wheeler v. Greene, supra, but not at all on the point here up for judgment.
As forecast by what has been said’already, the Wheeler Case rode off in the Supreme Court on two questions. One of these was whether the double liability was an asset of the Land Bank (loe. cit. page 52 of 280 U. S., 50 S. Ct. 21), and the other was what authority, if any, was given to the statutory receiver by the Land Bank Act, to collect assessments against the stockholders. It was held, first, that the aet gave no specific power to the statutory receiver to collect these assessments, and, second, that such liability is not among the assets of the Land Bank. Obviously, the court did not intend to say that, if statutory power had been specifically given to the statutory receiver to enforce the double liability of stockholders of the bank, the mere ' use of the term “assets of the bank” would of itself have destroyed this power. This, for the simple reason that the National Bank Aet uses similar language in setting out the powers of the receiver to take charge of the books, records, and assets of the bank, and it is well settled that a receiver of an insolvent national bank may sue for and collect assessments made against stockholders [Jones v. Jenkins (C. C. A.) 22 F.(2d) 642], and this, too, notwithstanding the provisions of section 65, title 12, U. S. C. (12 USCA § ' 65).
It follows, in my opinion, that the finding should be for defendants and against the plaintiff, dismissing his bill of complaint with costs, which accordingly is ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219089/ | WOOLSEY, District Judge.
This motion is in all respects denied.
Now that I am satisfied that I have jurisdiction of the second cause of action because the aggregate amount claimed therein, together with the amount claimed in the first cause of action, is far above the necessary amount to give this court jurisdiction, cf. Kaus v. American Surety Company (D. C.) 199 F. 972, 975, my only concern herein has been the locus standi of the plaintiffs Hugh M. Morris and Harold S. Schutt, who describe themselves as receivers of the People’s Light & Power Company, a corporation of Delaware, appointed by the United States District Court for Delaware, to maintain an action in this court.
I have come to the conclusion, however, that the locus standi of the receivers as plaintiffs cannot be successfully challenged.
1. By reason of the fact that the note on which the first cause of action is founded was made to them — described “as receivers” —long after their appointment, and in the second cause of action the services are alleged to have been rendered long after their appointment, and
2. Because under Delaware law, section 3884 (section 41 of the act) of the Revised Code of Delaware of 1915, of which I am required to take judicial notice, receivers of a Delaware corporation are “without any act or deed” vested with title to all property thereof save real estate situated outside of Delaware. Thus as assignees by law of the corporate assets to the extent noted they are entitled to maintain such an action as this in any jurisdiction. Bernheimer v. Converse, 206 U. S. 516, 534, 27 S. Ct. 755, 51 L. Ed. 1163; Converse v. Hamilton, 224 U. S. 243, 259, 260, 32 S. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292. It becomes, therefore, unnecessary to consider the interesting question whether a federal court should in a removed ease adopt the doctrines of comity observed in the New York state courts towards receivers appointed in other states.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219090/ | WOOLSEY, District Judge.
This motion is in all respects denied.
I. The decision in Re Gaynor Homes (C. C. A. 2, May 1, 1933) 65 F.(2d) 378, is apparently the inspiration of this belated motion. It was published in the New York Law Journal on September 27, 1933, and these motion papers are dated September 29, 1933.
II. This motion opens up the whole record, and I have regarded all filed papers as before me hereon. Cf. Sklarsky v. Great Atlantic & Pacific Tea Company (D. C.) 47 F.(2d) 662, 665, and cases therein cited.
III. In Re Gaynor Homes, Judge Swan says that allegations of acts of bankruptcy which may be challengeable for vagueness only are sufficient to support an adjudication if not properly challenged. Here the second act of bankruptcy alleged in paragraph 7 of the amended petition is jurisdietionally adequate, though too vague if challenged as a pleading.
IV. In the Gaynor Homes Case Judge Swan says that the alleged bankrupt in its answer asserted that this petition was insufficient on its face, and reserved in its answer “the right to move for dismissal on that ground.”
In the instant ease, after a motion to dismiss on that ground, which Judge Coleman, according to the affidavit of Mr. Welling, petitioning creditors’ counsel, felt that he must deny, the alleged bankrupt withdrew its motion, and Judge Coleman noted on the papers “Motion withdrawn with leave to alleged bankrupt to file answer within 10 days —5/3/33.”
Then the alleged bankrupt answered, raising issues of fact only, and not reserving the right to dismiss for insufficiency on the face of the petition. Thereupon alleged bankrupt moved, on ground of simplicity of the issues, for trial immediately, and the issues of fact were referred to a special master to hear and report by an order reciting that it was made on motion of alleged bankrupt’s attorney.
So much water, therefore, has gone under the procedural bridge in this cause since the motion to dismiss was made and withdrawn before Judge Coleman, that it has pro hac vice washed out of the amended petition any fault of allegation not jurisdictional.
An attorney cannot be permitted thus to blow hot and cold with this court and change his course of procedure in accordance with newly observed phenomena in the appellate courts, where, as here, subject-matter jurisdiction is not involved.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219091/ | WOOLSEY, District Judge.
Motion granted, with leave to plaintiff to amend second cause of aetion within twenty days from entry of order hereon, and if not so amended within said time, the second cause of aetion is to be finally dismissed.
I. The locus standi of plaintiff in these two actions to maintain any action against the defendants under the Clayton Act, §§ 2 and 3, title 15 U. S. C. §§ 13 and 14 (15 USCA §§ 13, 14), must be based on damages suffered by the plaintiff, title 15 U. S. C. § 15 (15 USCA § 15). Cf. Jack v. Armour & Co. (C. C. A.) 291 F. 741, 745; Gerli v. Silk Association of America et al. (D. C.) 36 F.(2d) 959, 960. See, also, Keogh v. Chicago & N. W. R. Co., 260 U. S. 156, 163, 43 S. Ct. 47, 67 L. Ed. 183.
A plaintiff may not, therefore, assume the role of a deus ex machina for other parties and found a cause of action in its own favor on discrimination in violation of the Clayton Act as to such other parties.
II. Until the plaintiff, in each of these causes by proper sworn allegations shows a damage to itself (or himself) by the alleged acts of the defendants, the other interesting questions raised by this motion remain moot.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219092/ | GREEN, Judge.
In the argument for new trial it is contended that this case is identical with the case of Bonwit Teller & Co. v. United States, 283 U. S. 258, 51 S. Ct. 395, 75 L. Ed. 1018, in which judgment was rendered for the plaintiff. We have undertaken to show both in the case of David Daube v. United States, 59 F.(2d) 842, 1 F. Supp, 771, 75 Ct. Cl. 633, affirmed 289 U. S. 367, 53 S. Ct. 597, 599, 77 L. Ed. 1261, and in the opinion originally filed in the ease at bar that the decision in the Bonwit Teller Case was based upon the assumption not disputed in the briefs of counsel that there was in fact an account stated in favor of the plaintiff. But aside from this, there is an important difference between the case now before the court and the Bonwit Teller Case, supra. This difference is found in finding 6 which recites:
“6. There is nothing in the evidence that shows or tends to show that there was at any time any agreement or promise, express or implied, on the part of the defendant through its officials to refund or pay to the taxpayer the sum for which suit is brought, or any other sum beyond the amount to be refunded as specified in the certificate of overassessment for the year 1919, which showed a credit of a portion of the overassessment against the taxes of 1917 as set forth above.”
This statement is criticized as being a negative finding, but negative findings are often made by this court as a matter of necessity and are absolutely required where there is *994any question as to whether or not there is evidence on certain points which are vital to the ease. There is not and cannot be any objection to this finding on the ground that it does not correctly show the condition of the evidence.
There was no such finding made in the Bonwit Teller Case, supra.
This finding is determinative of the case, but in order that all that appeared from the evidence may be shown by the findings we have concluded to add thereto the words, “nor was there anything in the evidence that tended to show an admission on the part of the taxpayer of the correctness of the balance struck by the account.”
In the original opinion herein, we referred to the ease of David Daube v. United States, supra, and the opinion of the Supreme Court affirming the decision therein. In the Daube Case, supra, the majority opinion referred to the rule that in order to constitute an account stated the parties must agree upon the balance struck and there must be a promise, express or implied, for the payment of the balance, and further that “the parties cannot state an account by agreeing to part of the items, and leaving the others open for future adjustment or litigation.” This principle has been supported by a uniform line of authorities for more than a hundred years and no court has ever deviated therefrom when the question came before it for determination. In 1 C. J., § 263, p. 685, more than fifty eases are cited in note 34 as following the rule. Also in 1 C. J., § 265, p. 686, it is said that:
“In order to create an account stated, the debtor must not only assent to the correctness of the account but also admit his liability therefor.” Citing numerous eases among which is Columbia River Packing Co. v. Tallant (C. C.) 133 F. 990, wherein it is said that an action upon an account stated is an action upon the promise to pay.
Hundreds of eases could be cited where the question was whether the minds of the parties met upon the correctness of the account stated. It is also to be noted that, to put it as stated in the original opinion in the ease at bar, in the ease of David Daube, supra, the Supreme Court said that the evidence must be such that it “sustains the inference of an agreement that the tax shall be repaid.” Finding 6 negatives such a conclusion.
Nevertheless, it seems to be contended now that in the ease of Toland v. Sprague, 12 Pet. 300, 335, 9 L. Ed. 1093, cited by the Supreme Court in the Daube Case, it was held that the nature of an account stated is not changed by there being a controversy as to the balance due thereon. We are clearly of the opinion that such was not the holding with reference to the account itself and that so far from sustaining the contention made on behalf of defendant the case by implication sustains the rule we have above stated. The action in "the case last cited was upon an account for merchandise as to which the court said in the opinion, “neither party asks to open the account, and both admit the same balance.” The defendant in the ease refused to pay this, balance by reason of a claim set up by him on matters having no connection with the account. The account and the balance having been agreed to, the court properly held that this constituted an account stated.
We think it is obvious that if the rule contended for was adopted the consequences would overturn a number of other well-settled principles of commercial law. Under such a rule a creditor could not send out an account containing items of debit and credit without fixing his liability for the items of credit contained in the account and giving the debtor an extension of the period of limitations to sue thereon. So also if no assent is necessary, the mere sending out of a statement of an account on the part of the creditor would bind the debtor and extend the time of limitations for bringing suit thereon.
We see no reason for further argument, and the motion for leave to argue the motion for new trial orally is therefore overruled. The motion for new trial is also overruled. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219094/ | PER CURIAM.
This is a suit for the recovery of $16,599.-01, taxes on initiation fees and dues, alleged to have been erroneously assessed and collected by the Commissioner of Internal Revenue, on the ground that the plaintiff was not a social, athletic, or sporting club within the meaning of section 501 of the Revenue Act of 1926 (26 USCA § 872 note) and section 413 of the Revenue Act of 1928 (26 USCA § 872).
The court, upon the report of a commissioner, makes the following special findings of fact:
1. The plaintiff was organized on March 29, 1871, and incorporated as the Quinnipiaek Club of New Haven under a charter granted to it by the General Assembly of the state of Connecticut during the January session of 1878, approved by the Governor February 27, 1878, and accepted at a special meeting of the club on March 6,1878.
It was provided in the charter that the club should “be located in the city of New Haven, for establishing and maintaining a library, reading room, gallery of art, and for the promotion of city improvements and social intercourse by such lawful means as shall be expedient and proper for the above-named purposes.”
2. This suit was brought to recover the sums of $3,288.81, $4,071.82, $4,040.07, $4,-442.00 and $756.31, representing taxes alleged to have been paid on dues and initiation fees for the periods January 1, 1927, to December 31, 1927, January 1, 1928, to December 31, 1928, January 1, 1929, to December 31, 1929, January 1, 1930, to December 31, 1930, and January 1, 1931, to February 28, 1931, respectively. Five separate claims for refund covering said amounts were filed with the collector of internal revenue for the district of Connecticut on April 14,1931, on the ground that the plaintiff did not qualify as a social, sporting, or athletic club within the meaning of section 801 of the Revenue Act of 1921, section 501 of the Revenue Acts of 1924 and 1926, nor section 413 of the Revenue Act of 1928, inasmuch as it had never been' used for dances, card parties, or theatrical performances; that it possessed no golf course, tennis courts, swimming pool, nor outside properties of any character, nor did it in any way eater to the usual athletic or social features of social clubs; that any social features were entirely subordinate and incidental to its predominant purpose of providing a place for daily luncheon to its membership; and that it was composed entirely of business and professional men.
The said claims for refund were rejected by the Commissioner of Internal Revenue on June 27, 1931, in a letter addressed to the plaintiff by the Commissioner on that date, in which the Commissioner held that the dues and fees paid by the plaintiff’s members were properly subject to the tax imposed. The several claims for refund, along with the Commissioner’s letter of rejection, are in evidence as plaintiff’s Exhibits 2, 3, 4, 5, 6, and 8, and are by reference made a part of this finding.
3. During the first several years of its existence the plaintiff occupied rented quarters. Some time prior to 1894 it purchased a fine old four-story and basement residence, located at 986 Chapel street, which had been built in about 1812, and which it occupied as its clubhouse until October, 1931, when it moved into the new clubhouse which it had erected at 221 Church street. On the first floor there were the office, a lounge, two large dining rooms, and several small private dining-rooms. The library and reading room and barber shop were on the second floor. Thirteen bedrooms were located on the upper floors. Two bowling alleys were installed in the basement in 1905 or 1906, within a year or two after the plaintiff’s restaurant services were first inaugurated in its clubhouse.
The plaintiff’s present clubhouse at 221 Church street is located at the edge of New *998Haven’s business center, and but a moment’s walk from the Green. It is built of colonial red brick along traditional Georgian lines, resembling-a fine colonial residence and in keeping with the interior, which is invitingly comfortable. The member’s entrance opens into a lobby, about which are grouped the office, coat room, wash room, a small reception room, and a broad stairway giving access to the main floor above. The lounge is located on the main floor, overlooking Church street. The comfortable chairs and large open fireplace make the room an attractive gathering place. The library is also on the second floor and also overlooks the street. The govern- or’s room adjoining the library may be used as a second lounge or large card room. Dining facilities are provided on the main floor. The principal dining room will seat 100 comfortably. There are five private dining rooms constructed in such a way that they can be opened into one large room. An open-air dining terrace adjoins the main dining room.
The ladies dining room has a separate entrance from the street through a private lobby and reception room.
The sleeping accommodations for members' who may wish to make the club their home and for nonresident members and guests are on the upper floors. There are thirty-six of such rooms attractively furnished, most of them having private batías, either shower or shower "and tub. Facilities have been provided for various social and recreational activities. There are four bowling alleys with comfortable space for spectators, and there are handball or squash courts for those who desire more strenuous exercise. Locker and shower rooms are conveniently located adjacent to these facilities in the basement, where activities of this character may go on without disturbance to those in other parts of the clubhouse. There are billiard and pool tables in a handsomely appointed and fully equipped billiard room on the ground floor. Several large card rooms are provided on the second floor.
There is a large room in the basement which has an open fireplace and is decorated with the stuffed heads of wild animals and furnished with furniture brought over from the old clubhouse. It is contemplated that liquor will be served in that room from a íaearby serving pantry whenever the sale of liquor is legalized. There was no bar in the old clubhouse. There was, however, a butler’s pantry which was used as a serving room, and all drinks were prepared there and served in the dining room or lounge, but in no other part of the club.
4. The plaintiff’s constitution provided that its officers shotdd be a president, two vice presidents, who should be elected at each annual meeting, and that it should have a board of fifteen governors who should hold office for the term of 3 years; that every candidate for membership should be at least 21 years of age when proposed, and should be proposed and seconded by two resident members of the club; that the limit of membership should be at the discretion of the board of governors; that the number of resident members should not exceed 375 and the number of nonresident members should not exceed 150.
The by-laws provided that members should be of two classes, viz., resident members, consisting of those who resided or who had their usual place of business in New Haven, and nonresident members, consisting of those who did not have their residence or place of business in New Haven; that officers of the Army and Navy, while on duty in New Haven, might by vote of the board of governors be given the privileges of the club during their official residence in the city; that judges of the Supreme and,superior courts, while on duty in New Haven, should be entitled to the privileges of the club; that entrance fee should be $50' for resident members and $10 for nonresident members; that annual dues of the resident members should be $100, and the annual dues of nonresident members should be $24; that the board of directors should at its annual meeting elect a finance committee, a house committee, an entertainment committee, and a committee on art, each to consist of three or more members of the board and such other members as the said board might elect; a committee on admissions, to consist of five members of the boai’d; a committee on nominations, to consist of three members of the board and two other members; and such other committees as it might deem desirable.
The house rules provided that the supply room should be closed at 12:30 a. m. and that on Saturday night both house and supply room should be closed at one a. m.; that no beverages should be served in the parlor or reading room; that no games for money should be allowed in the clubi'ooms, and no games should be played in the house on Sunday; that members might extend the privileges of the club for a period of two weeks to guests not having their residence or usual place of business at New Haven; that no un*999dergraduate student or minor should be introduced as guest or visitor, and no resident of New Haven should be introduced as a visitor oftener than once in three months.
5. The dining room in the plaintiff’s old clubhouse, although open for breakfast and dinner as well as luncheon, was patronized but very little except during the luncheon period. Prior to 1914 or 1915 is was usually the habit of the plaintiff’s members to go to their homes for luncheon, and it was not until after that time that the now general custom of lunching at town clubs became popular.
The plaintiff is the oldest and one of the most exclusive and aristocratic of- New Haven’s town clubs. Its membership' is composed of many of the leading professional and business men of New Haven. The club has afforded its members a convenient and satisfactory place to entertain their friends and business associates and to meet and over the luncheon table discuss matters of mutual personal, professional, or business interest, and to read and relax and play cards, pool, or billiards, or bowl, and avail themselves of the recently added facilities for their physical well-being. It appears that many of the plaintiff’s members were motivated to join the club by the fact that such membership would enhance their professional and business standing in the community, and that such friendships and contacts as they might make through such membership would inure to their financial advantage. Many committee meetings of a public or semipublie nature, including those of the community chest committees, have been held in the plaintiff’s clubhouse. Various committees of several organizations, including the Connecticut Bankers’ Association and the New Haven Chamber of Commerce, likewise from time to time held meetings and luncheons in.the plaintiff’s clubhouse.
6. Most of the plaintiff’s members are also members of the New Haven Country Club. The plaintiff has never had a definitely planned entertainment program. It has for a number of years held an annual fall golf tournament and golf dinner. The tournament is held at the New' Haven Country Club. The prizes are purchased from funds subscribed by the participants in the tournament, and the expense of conducting the tournament is met in the same manner.
In past years members of the boxing and' fencing teams of Yale University from time to time gave exhibitions in the lounge of the old club. In the early part of the present century a group of the club’s younger members organized the Qunmipiack Club Minstrels and staged several shows for the entertainment of the members. Women were never admitted to the old clubhouse. The plaintiff’s card rooms are seldom used, except for an hour or an hour and a half after the luncheon hour. Relatively few of the plaintiff’s members made use of its lounge and library except during that same period. A charge is made for the use of the billiard and pool tables and for bowling. Attendants have always been provided by the club for the billiard and pool tables and to set up the pins in the bowling alleys.
The club has a barber shop for the convenience of its members. The bowling season ordinarily begins about the 1st of November and continues until the middle of March or 1st of April. Ordinarily eighteen or twenty 5-men teams compete in the plaintiff’s tournaments. As in the ease of the golf tournaments, the participants contribute the funds from which the prizes for the winners of the events are purchased. The fine bowling alleys, handball and squash courts, gymnasium equipped with a punching bag, medicine ball, rowing machine, electric bicycle, pull and chest weights, stall bars, and other usual gymnasium equipment, steam room masseurs, and athletic instructors were provided in the new clubhouse for the convenience of the members and for. the purpose of attracting the younger group of men who were just coming along in the community. Although an athletic director is on the club pay roll, his salary is contributed by those members of the club who make use of the athletic facilities.
There was no gymnasium or any athletic facilities provided in the old club, with the exception of the bowling alleys.
7. The plaintiff’s library contained files of. various daily newspapers, magazines, and periodicals in which its members were interested, including Punch, London Illustrated News, Sketch, American Magazine, Judge, Current History, Scribner’s, Harper’s, Life, Literary Digest, Liberty, Collier’s, Vanity Pair, Country Life in America, Commercial Chronicle, North American Review, etc. The library, while not large, is well selected and contains an excellent collection of old books and papers and historical scrapbooks having particular reference to the early life of New Haven and Connecticut.
8. The plaintiff has collected and possesses one of the finest and most valuable collections of prints of old New Haven outside of the Yale collection. The collection has been acquired by the art committee from *1000funds voluntarily contributed by members of the club to a special art fund. The respective amounts of their contributions are automatically charged against the accounts of the contributing members, who comprise approximately one-half of the entire club membership. A number of large, valuable oil paintings have been acquired in the same manner. The pictures, as well as the prints, are rather generally of an historic character.
9. The plaintiff’s income during the years 1928, 1929, and 1930 was derived from the following sources, in the following amounts:
1928 1929 1930
Dues & entrance fees §40,016.80 §40,920.44 §40,180.34
From restaurant, etc. 47,396.18 46,806.36 46,360.40
From rooms*......... 4,747.50 4,347.75 3,477.00
From pool & billiards 651.34 590.38 478.05
From bowling..... 623.90 831.85 749.86
Fi*om interest..... 74.49 95.68 267.21
93,510.21 93,592.46 91,512.86
During the year ended March 31, 1927, plaintiff expended $25,914.64 for service and salaries, $7,200 for employees’ meals, $473.07 on its reading room, $101.39 for entertainment, $162.72 for pool and billiards, and. $369.85 for bowling.
For the year ended March 31,1028, plaintiff expended $4,000 for the salary of its steward, $3,012 for the salaries of office clerks, $9,237.52 for service wages, $2,664 for employees’ meals, $453.06 on its reading room, and $661.75 for entertainment.
For the year ended March 31,1929, plaintiff expended $3,416 for the salary of its sfewárd, $2,792.67 for the salaries of office clerks, $9,084.72 for service wages, $2,664 for employees’ meals, $520.80 on its reading room, and $289.71 for entertainment.
For the year ended March 31,1930, plaintiff expended $3,250 for the salary of its steward, $2,693.50 for salaries of office clerks, $9,604 for service wages, $2,664 for employees’ meals, $494.07 on its reading room, and $51.57 for entertainment.
In its March 31,1930, balance sheet, plaintiff carried its land and buildings at $187,500, its house furnishings at $31,160.53, and its art objects at $17,779.23, or a total of $236,-439.76.
10. Although the plaintiff has been a definite and useful factor in the civic, professional, and commercial life of the city of New Haven, and its activities during the period involved herein were largely centered around the luncheon hour, the plaintiff in its inception was, and has since continued to be, primarily a social club for gentlemen, and its main purpose has been to minister to the social enjoyment of its members. Its social activities were not merely incidental to its other activities, but constituted an important and material part of the life of the organization.
Conclusion of Law.
Upon the foregoing special findings of fact, which are made a part of the judgment herein, the court decides as a conclusion of law that the plaintiff is not entitled to recover, and the petition is therefore dismissed.
Judgment is rendered against the plaintiff for the cost of printing the record herein, the amount thereof to be ascertained by the clerk and collected by him according to law.
See Army & Navy Club of America v. United States, 53 F.(2d) 277, 72 Ct. Cl. 684, and Block Hall v. U. S., 57 F.(2d) 918, 74 Ct. Cl. 609. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219097/ | BYERS, District Judge.
This is an action under the War Risk Insurance Act and the World War Veterans’ Act (38 USCA § 421 et seq.), based upon the plaintiff’s claim to insurance benefits under his war risk insurance policy, which the petition alleges was kept in full force and effect by premium payments and operation of law until on or about August 31, 1926. Total disability is alleged prior to the last mentioned date.
The petition was verified September 1, 1932, and filed in this court on September 6, 1932.
Paragraph first avers that the plaintiff is a resident of Brooklyn in this judicial district.
Paragraph seventh alleges that the plaintiff became entitled to the benefits of the insurance as above stated, and that he has made demand for payment, which has been refused, and “disagreement now exists between the parties as contemplated by law.”
An answer was verified February 6,1933, taking issue, among other things, with the allegations of the first and seventh paragraphs, and pleading, as a separate and distinct defense, the statute of limitations,
The case was duly noticed for trial and note of issue was filed on February 8, 1933.
Apparently the ease was reached for trial in due course and answered “ready” for the defendant on several occasions, but finally was marked off at the request of the plaintiff’s attorneys. When this took place, the affidavits do not disclose. It is said that a notice of trial for the November, 1933, term has been served by the plaintiff, and, by affidavit filed October 20th, plaintiff’s attorney gave notice of motion for an order directing that the petition filed as stated on September 6, 1932, be deemed to have been filed as of October 13, 1932, and the motion arising thereunder was adjourned to November 1, 1933.
By affidavit verified October 27th, the defendant has made a motion, returnable November 1, 1933, for an order dismissing the petition for the reason that the action was brought prior to the date of the disagree*1021ment, and that the plaintiff did not reside in the Eastern District of New York and hence this court is without jurisdiction,in the action.
The information as to the plaintiff’s residence seems to have been obtained on or about October 25, 1933, when a bill of particulars was served on his behalf, pursuant to demand made October 17, 1933, and in that it is shown that “to the best of plaintiff’s recollection, he resided at 329 East 73rd Street, Borough of Manhattan, City of New York.”
The question of the timeliness of the plaintiff’s action is the most important one presented by the motion. It appears from the bill of particulars that the plaintiff filed his claim for payment under his policy on June 29, 1931; namely, on that date, he “made demand addressed to Frank E. Hines, Administrator of Veterans Affairs, Washington, D. C.”
Apparently that demand was dated four days prior to the expiration of the time within which a claim might be made under the applicable provisions of the statute enacted for World War veterans’ relief (World War Veterans’ Act 1924, as amended July 3, 1930, title 38 U. S. C. § 445 [38 USCA § 445]).
This gives the plaintiff the benefit of the entire time which elapsed between the commencement of the 30th day of June, 1931, and the expiration of the entire day of July 3,1931.
Action by the Veterans’ Bureau upon his claim is said, in the bill of particulars, not to have been taken until May 21, 1932, when a letter was directed to him, signed by the Director of Insurance. The date of receipt of that letter is not stated in the bill of particulars and, under the decision of Creasy v. U. S. (D. C.) 4 F. Supp. 175, for reasons therein convincingly stated, the duty of beginning suit would not arise until the receipt of that letter.
It is unnecessary to take testimony on that point, however, because, while that letter is stated elsewhere in the motion papers to have contained the clause, “This may be treated as a letter of disagreement if you desire it to institute suit in the U. S. District Court,” and to have been signed by H. L. McCoy, Director of Insurance, it appears to have been the subject of an appeal which resulted in a letter dated October 7, 1932, affirming the conclusions stated, which latter letter was received, according to the bill of particulars, on or about October 12, 1932.
The contention offered by the defendant is that there was no disagreement until the date of the receipt of the last mentioned letter, which embodied a decision of the Administrator’s Board of Appeals, and consequently, when the petition was filed on September 6, 1932, no disagreement existed.
There seems to be no escape from the conclusion that this is so. Had the plaintiff not taken an appeal from the letter dated May 21, 1932, he might have urged (without success if Harp v. U. S. (D. C.) 2 F. Supp. 32, were followed) that it constituted a disagreement sufficient to sustain h'is petition; but, in order to do that, he would have to show that the petition was filed within four days after receipt of that letter. While the presumption is that that letter was delivered in due course and long prior to September 2, 1932, the plaintiff would be given an opportunity to show the date of actual receipt and the matter would not be disposed of on motion; but, as he relies upon the letter dated October 7, 1932, for his disagreement, by moving to have this cause postdated as to its filing, it is apparent that the defendant’s motion must be decided upon the theory held in common by the plaintiff and the defendant, that the disagreement did not arise until the receipt of the letter of October 7, 1932.
The necessity for the existence of a disagreement is clearly stated in the statute, and has been repeatedly recognized in the decisions of the courts. See, among other cases: Mara v. U. S. (D. C.) 54 F.(2d) 397, and U. S. v. Peters (C. C. A.) 62 F.(2d) 977.
The infirmity of the plaintiff’s position is the basis for the motion which he makes to postdate this action so that he may be permitted to benefit by the disagreement which was not in legal existence at the time the petition was filed.
It must be apparent that the court does not possess the power to grant that motion, for the allegation of disagreement speaks as of the date that it was asserted, by the act of filing, and an order which would provide that it be deemed to have been made at another time, would not alter the fact. If the court thus could retard the date of the allegation, it could advance it, and so afford suitors an easy and convenient- method to nullify a statute of limitations. It must be apparent that the courts possess no such power, for which reason the plaintiff’s motion must be denied.
The defendant’s motion to dismiss is granted, on the ground that it has been made *1022affirmatively to appear that, when the petition was filed, no disagreement existed.
The plaintiff complains somewhat at length of the treatment that he has been accorded by the various attorneys who have represented him; in order that there might be a full record on this aspect of the ease, the court afforded to his first attorney of record an opportunity to file an affidavit setting forth all the facts pertaining to the commencement of this case, which has been done. An examination thereof reveals that the plaintiff is mistaken in much that he says in his opposing affidavit verified October 31, 1933. These matters bear largely upon the question of the venue of this action, which is the second aspect of the defendant’s motion.
In view of the granting of the latter to the extent herein indicated, it is unnecessary to consider the other matters presented, and an order may be entered in accordance with the foregoing, which will dispose of both the plaintiff’s and the defendant’s motions as indicated, to be settled on two days’ notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219098/ | GALSTON, District Judge.
This is a motion to review the order made by the referee, which directed the bankrupt, individually and as an agent of S. Marino & Co., Inc., to turn over to the trustee in bankruptcy 250 eases of tomatoes, or in lieu thereof the sum of $579.50.
The proceeding was initiated by the trustee in bankruptcy, who filed a petition and obtained an order to show cause directing S. Marino & Co., Inc., a New York corporation, to turn over these tomatoes or to account for them.
The petition alleges that, prior to the bankruptcy, this shipment of tomatoes was consigned to S. Marino & Co., Inc., and, after arrival, and subsequent to the filing of the petition in bankruptcy, was received and accepted by S. Marino & Co., Inc.
' S. Marino & Co., Inc., as respondent, filed its answer raising the question of the jurisdiction of the referee to determine in a summary proceeding the issue raised; and, without waiving the objection of jurisdiction, admitted that, prior to the bankruptcy, the bankrupt had contracted to receive this consignment of tomatoes, and alleged that, prior to the delivery thereof, the consignor, on learning of the fact “that the bankrupt had filed his voluntary petition in bankruptcy,” refused to deliver to the bankrupt in order that the delivery thereof be stopped before it was completed.
The trustee’s petition is not sufficient. I find no allegation therein that title ever passed to the bankrupt. By consignment is meant the goods or property sent by means of a common carrier by one or more persons, called the consignors, in one place, to one or more persons, called the consignees, who are in another. The word “consigned” carries an implication that the title to the property is not in the consignee. 2 Words and Phrases, First Series, page 1449; Rolker v. Great Western Ins. Co., 4 Abb. Dec. (N. Y.) 76; Sturm v. Boker, 150 U. S. 312, 14 S. Ct. 99, 37 L. Ed. 1093.
*1023The motion challenging the jurisdiction of the referee based on the showing of the trustee’s petition should have been granted.
Moreover, it will be noted that the bankrupt was not a party to this turnover proceeding. As appears from the certificate of the referee, at the outset of the proceedings the bankrupt appeared personally and by counsel. The referee states that the trasteéis motion was “deemed amended” by all parties to include the bankrupt as a party respondent in his individual capacity and as agent of S. Marino & Co., Inc., and accordingly allowed the amendment.
I do not find, however, that the trustee’s motion was “deemed amended” by all the parties. On the contrary, the referee’s order recites that the attorney for the respondent was in opposition to the motion to amend the petition. If the amendment was proper, leave certainly should have been granted to the bankrupt to file an answer.
Now it may well be that all the proof that could be adduced by the bankrupt is before the court in this proceeding. Nevertheless, since a failure on the part of the bankrupt to comply with the referee’s order may be followed by a motion to punish him for contempt, and in consequence subject him to incarceration for failure so to comply with such order, it seems to me that all formalities of practice should have been strictly observed.
When the bankrupt testified in this proceeding, he was not on notice that any claim was being asserted against him individually or as the agent of S. Marino & Co., Inc.
The order should be reversed.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219099/ | ANDREW M. J. COCHRAN, District Judge.
This action is before me on plaintiffs’ motion for new trial. The ground of it is that I erred in instructing the jury that the plaintiffs were entitled to recover $2,000 only on the policy sued on. It contained a provision in these words: “The Company reserves the right to cancel this policy or any part thereof on giving notice to that effect and refunding a ratable proportion of the premium for the unexpired term of the policy, and the assured may cancel when the premium or note or other obligation given for such premium has been actually paid in cash in which case the Company shall retain the customary short rates from the date of the policy to the time it is received at the Chicago office of the Company for such cancellation.”
The poliey was for $3,250, of which $3,-200 was on a dwelling house and $50 on a smokehouse. These buildings were on a farm in Shelby county as I recall the evidence. It was a five-year policy, dated November 25, *21927, and expiring November 25, 1932. At noon on Friday, April 29, 1932, the defendant’s agent, S. B. Moxley, at its instance, delivered to the plaintiff W. E. Gill a -written indorsement reducing the amount of insurance on the dwelling house to $2,000 and his cheek payable to plaintiffs for $9.64, the ratable proportion of the premium on the $1,-250 for the unexpired time of the policy. The reason for the reduction was that it was an unprotected risk and the occupancy of the dwelling house had been changed from the owner to a tenant. The property was destroyed by fire on the afternoon of Monday, May 2, 1932. Moxley testified that, at the time of the delivery of the indorsement and cheek, he explained fully the nature of the transaction to the plaintiff W. E. Gill. Gill did not contradict the testimony, at least squarely. He admitted that Moxley mentioned the matter of reduction to .him, but said that he did not recall what Moxley said. He further testified that he did not read the indorsement or check until after the fire. He never cashed the cheek. The plaintiffs urge three reasons why this did not have. the effect of reducing the policy before the fire. The principal one is that the effect of what was done on April 29, 1932, was not to reduce the policy at that time, but only to reduce it within a reasonable time thereafter, and, at the time of the fire, such time had not elapsed. They claim that the provision in the policy above quoted in so far as it relates to cancellation by the defendant should be interpreted as if it read: “The Company reserves the right to cancel the policy or any part thereof on giving notice to that effect and such cancellation shall become effective at the end of a reasonable time after the assured has been given notice of the Company’s cancellation in whole or in part of the policy.”
The next reason is that the defendant should have paid the refund with legal tender and not with Moxley’s cheek. And the third is that the right to cancel any part of the policy did not include the right to reduce it.
There is one answer to each of these positions. It is that Moxley delivered to the plaintiff W. E. Gill the written indorsement and his cheek, and that Gill accepted them. There is no controversy as to this in the evidence. It is claimed that this was ineffective because Gill did not read them or understand their contents until after the fire. Moxley did and said nothing to lead him not to become acquainted with their contents. It was solely due to his own neglect. Such being the ease, plaintiffs axe chargeable with knowledge of their contents. They cannot be heard to say that they did not have such knowledge, aftér Gill had the opportunity to read the documents and coming to an understanding of them. In the case of Lumber Underwriters v. Rife, 237 U. S. 605, 35 S. Ct. 717, 718, 59 L. Ed. 1140, it was said: “No rational theory of contract can be made that does not hold the assured to know the contents of the instrument to which he seeks to hold the other party.”
And again; “What he cannot do', is to take a policy without reading it, and then, when he comes to sue at law upon the instrument, ask to have it enforced otherwise than according to its terms.”
But apart from this it must be accepted that Moxley explained to Gill fully the nature of the transaction. He testifies positively to this effect. Gill’s testimony as to what took place is so vague and uncertain that it cannot be accepted as a contradiction. A scintilla of evidence is not sufficient to require a ease to be submitted to the jury in a federal court. There must be substantial evidence in order thereto. Gill’s testimony, because of its character, was not substantial evidence against that of Moxley. It follows from what has been said that neither one of the reasons urged by plaintiffs is sound. What took place was an actual cancellation. It was not a mere notice of cancellation. What was delivered was a cancellation — a “written endorsement” it is termed, evidently to be attached to the policy, which with the delivery of the check amounted to an actual cancellation. By accepting the documents Gill acquiesced in and agreed to the cancellation. If what took pla.ee was no more than a notice of cancellation and it was not to take effect until after the lapse of a reasonable time, such time had elapsed before the fire. Plaintiffs had half a day on Friday, all of Saturday, and a half a day on Monday in which to secure additional insurance or to cancel the policy in its entirety and secure a policy in another company covering its amount. No attempt was made to do so. The acceptance of the check was a waiver of payment with legal tender. The check was good and could have been cashed immediately. If a reduction of the policy was not a cancellation of part of it, the plaintiffs by accepting the indorsement and cheek agreed to the reduction. But neither one of the reasons urged is sound except the second one. *3The defendant had to pay the refund in legal tender if plaintiffs had demanded it. By accepting the check they waived this right.
The first reason is not sound. I do not understand plaintiffs to claim that the suggested form of the provision as to cancellation by defendant, according to their contention, is the true construction of that provision. Their position rather is that the provision is ambiguous on the question as to when the cancellation was to become effective ; whether on the giving of notice or upon the lapse of a reasonable time thereafter, and that such being the case the latter construction, which is against the defendant and in favor of plaintiffs, should be adopted. But, as I conceive it, there is no ambiguity in the provision. It says plainly that the right of cancellation which is reserved is upon giving notice to that effect, i. e., that the policy or some part thereof is canceled and making the refund. What brings about cancellation is the giving of notice and the making of the refund. There is no room in the language used for the thought that the cancellation is not to take effect until the lapse of a reasonable time thereafter. To so construe the provision is to arbitrarily inject this thought into it. The rule as to construing provisions in policies of insurance is stated in Imperial Fire Insurance Co. v. County of Coos, 151 U. S. 452, 14 S. Ct. 379, 381, 38 L. Ed. 231: “"When an insurance contract is so drawn as to be ambiguous, or to require interpretation, or to be fairly susceptible of two different constructions, so that reasonably intelligent men, on reading the contract, would honestly differ as to the meaning thereof, that construction will be adopted which is most favorable to the insured. But the rule is equally well settled that contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and, if they are clear and unambiguous, their terms axe to be taken and understood in their plain, ordinary, and popular sense.”
This case comes within the last of these two sentences. The word “notice” does not of itself indicate what it relates to. What it relates to is determined by what it is made to relate to. Here it is made to relate to the fact that the policy was canceled and not that it will be canceled after a reasonable time. This position is upheld by the following decisions, to wit: Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454, 24 N. E. 699, 8 L. R. A. 719; Karelsen v. Sun Fire Office, 122 N. Y. 545, 25 N. E. 921; Springfield Fire & Marine Ins. Co. v. McKinnon, 59 Tex. 507; Mueller v. South Side Fire Ins. Co., 87 Pa. 399; Grace v. American Central Ins. Co., 16 Blatchf. 433, Fed. Cas. No. 5,648; Cain v. Lancashire Ins. Co., 27 U. C. Q. B. 453.
The plaintiffs cite in support of their contention 26 C. J. 139 where it is said: “Where no period of notice is prescribed in the policy, notice must be given for a reasonable time, although some authorities have held that the giving of notice in such case terminates the policy eo instanti.”
It eites in support of this statement these eases, to wit: Chadbourne v. German-American Ins. Co. (C. C.) 31 F. 533; Hibernia Ins. Co. v. Blanks, 35 La. Ann. 1175.
The Louisiana ease has no bearing on the question. In the federal ease there is an expression in support of plaintiff’s contention in the opinion, but recovery was denied because there had been no refund of the premium. The statement in C.- J., therefore, is not supported by the decisions cited. The plaintiffs also rely on the decisions in the lower court in the Lipman and Karelsen Cases, reported in 48 Hun, 503, 1 N. Y. S. 384 and 48 Hun, 621, 1 N. Y. S. 387. But they were overthrown by the decisions in the appellate court. The plaintiffs state that their contention is supported by Massachusetts decisions, but none are cited, and I know of none.
As to the last reason, if a reduction of the amount of a policy is not a cancellation of a part of it, I cannot conceive what it is.
I am constrained to overrule the motion for a new trial. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219100/ | SOPER, Circuit Judge.
This suit in equity was brought by the Chesapeake & Ohio Railway Company, hereinafter referred to as the carrier, under the provisions of the Act of October 22, 1913, e. 32, 38 Stat. 219 (28 USCA § 41 (28), and sections 43-48, inclusive), to enjoin, set aside, and annul certain rulings and orders of the Interstate Commerce Commission; and a court of three judges was accordingly organized to hear and determine it. The rulings and orders related to the proper method of accounting for expenditures of the carrier in rebuilding 2,390 70-ton hopper bottom gondola coal ears during the years 1926,1927, and 1928. The expenditures for 1926 and 1927, aggregating $1,698,933.91 net, were originally charged to operating expenses on the books of the carrier, and those for 1928, amounting to $1,327,872.28 net, would have been .so charged but for the first decision of the commission in this case, reported in 153 I. C. C. *89, which held that the expenditures for 1926 and 1927 should be accounted for in accordance with the requirements prescribed by tbe commission in its Classification of Investment in Road and Equipment of Steam Roads, issue of 1914,- paragraph 9 of section 2 of, the general instructions, relating to “additions,” and hence should he charged to capital investment account.1
The carrier complied, under protest, reversing its charges for 1926 and 1927 and adopting, under like protest, the method of accounting required by the commission’s first ruling, as to expenditures for 1928. A petition filed by the carrier for reopening and reconsideration of the ease was denied by order of tbe commission on September 28,1929, but on September 29; 1930, the commission reopened the proceeding upon its own motion ■and assigned it for further hearing. Much additional evidence was introduced by the carrier, and the entire matter was reconsidered in detail; but the commission reaffirmed its former decision; and the carrier brought this suit to enjoin the enforcement of the commission’s orders. Answers have been filed by the United States and by the commission, which intervened as a party defendant in accordance with section 212 and section 213 of the Judicial Code, as amended (28 USCA § 45a).
The United States for a first defense moved that the petition be dismissed on the ground that the court was without jurisdiction to hear and determine the case under the Urgent Deficiencies Act of October 22, 1913, 38 Stat. 208, 219 (28 USCA §§ 41 to 48), by which jurisdiction is confined to cases wherein an order of the Interstate Commerce Commission is involved. It is contended by the • United States that the Interstate Commerce Commission has merely made reports or decisions in this controversy, and no order or compulsory mandate, and that therefore the point has not been reached in tbe proceeding before the commission at which the District Court is authorized to intervene. The facts bearing on this phase of the case are as follows :
The carrier in the first instance determined that the expenditures for work done on the cars were chargeable to operating expenses as maintenance of equipment, and made the entries upon its accounts accordingly, and reported this fact in its annual reports to the commission for the calendar years 1926 and 1927. Some time during the year 1928; the commission questioned the correctness of this accounting, and, after correspondence between the commission and the carrier, the director of the commission’s bureau of accounts on June 12,1928, notified the carrier that the matter had been given thorough consideration, and that the bureau of service had determined that the ears were new cars, and should be accounted for accordingly. The carrier was offered the opportunity for hearing before division 4 of the commission, in case the carrier should he unwilling to follow the ruling. The carrier being unwilling, a formal bearing was had as suggested on February 25, 1929. In the meantime, tbe carrier was in receipt of a letter of January 18, 1929, from a member of the commission in which it was directed to comply with the ruling, and adjust its accounts accordingly, and that such adjustment should also he made in its accounts' for the year 1928. Thereafter on February 9, 1929,. and after the formal hearing had been set, the carrier in pursuance to the requirements of the letters of June 12, 1928, and January 18, 1929, under protest, and in fear of the penalties imposed by section 20 (7) of the Interstate Commerce Act, as amended (49 USCA § 20 (7), reversed the entries and adjusted its books for the years in question to conform to said rulings and requirements, and made a report thereof to the commission in a letter of protest of February 9.1929. Subsequently the hearing took place as arranged, and thereafter, to wit, on March 14.1929, the commission filed a report wherein it held that the cars in question should have been treated as having been retired from the service and replaced with property of like purpose, and that the carrier’s expenditures should be accounted for in accordance with the requirements of paragraph 9 of section 2 of the general instructions governing classification of investment in road and equipment *9above referred to. The commission declared in its report that no further order was deemed necessary at that time.
Thereafter, on June 22, 1929, the carrier filed a petition wherein it prayed the commission to reopen the proceeding for reconsideration upon the record as made, to grant argument before the full commission, and to set aside, annul, and withdraw the report of division 4 and find that the carrier’s accounting was not unlawful. Upon this petition on September 28, 1929; a formal order was passed, wherein the commission, reciting that it had under consideration the record in the proceeding, and the petition for reconsideration, ordered that the petition be denied.
Thereafter, on September 29, 1939, division 4 of the commission, of its own motion, passed an order whereby it reopened the proceeding for the purpose of receiving evidence pertaining to the accounting, and directed that a further hearing be had. Evidence and exhibits were introduced by the carrier, which have been summarized in the findings of fact in this ease, and thereafter, on December 13, 1932, division 4 issued its report and affirmed the decision and its former report of March 14, 1929. It declared that no further order was deemed necessary at that time.
The defendants contend that the commission has issued merely directory opinions, pointing out what the carrier was expected to do, rather than mandates, the disobedience of which would subject the carrier to punishment under section 29 (7) of the act for willful failure to keep its records in the manner approved by the commission. That punishment, it is said, could, be based in this case only upon the failure of the carrier to observe the general instructions of the commission of 1914; and if a prosecution so based should be instituted, the carrier would have an opportunity to defend on the ground that' under a proper interpretation of the general instructions, the expenditures involved were properly chargeable to operating expenses, rather than capital investment. Reliance is placed on United States v. Atlanta, Birmingham & Coast R. Co., 282 U. S. 522, 51 S. Ct. 237, 75 L. Ed. 513, where it was held that a passage in a report of the commission, which specified the maximum amount that a carrier might include in its accounts as representing an investment in a newly acquired road, and which notified the company that it would be expected to adjust its accounts accordingly, did not amount to an order of the commission so as to give jurisdiction to a District Court of three judges of a suit to annul the commission’s act. We think, however, that the pending case more nearly resembles that considered in Alton R. Co. v. U. S., 287 U. S. 229, 53 S. Ct. 124, 77 L. Ed. 275, where it was held that a carrier illegally deprived of its share of joint rates fixed by an agreement between it and other carriers was entitled to apply to the commission for an order that the agreement of division be maintained; and that an order of the commission denying relief was in effect an order reducing the divisions to which the carrier was justly entitled, and conferred jurisdiction upon the District Court to hear and determine a suit to set it aside. In the pending case, the commission, through its agents, and through the report filed by division 4 on March 14, 1929; had declared the proper method of accounting and had directed the carrier to comply therewith; and thereafter the carrier prayed the commission to annul the report of division 4 and to find that the carrier’s method of accounting was not unlawful. The response of the commission was a formal order denying the petition and declaring that no further or■der was deemed necessary. This order, although negative in form, was equivalent to a direction, and had the effect of a mandate, condemning the carrier’s method of accounting and directing that the carrier keep, its accounts in accordance with the instructions contained in the previous communications from members of the commission and in the reports of the commission itself. We conclude that the motion to dismiss the bill for lack of jurisdiction should be overruled.
The defendants also contend that the plaintiff has no standing to institute or maintain this suit, because the direction to the carrier to make additions to its capital investment does not of itself amount to an invasion of any legal right. The cases of Edward Hines Yellow Pine Trustees v. U. S., 263 U. S. 143, 44 S. Ct. 72, 68 L. Ed. 216, Alexander Sprunt & Son v. U. S., 281 U. S. 249, 50 S. Ct. 315, 74 L. Ed. 832, Pittsburgh & W. Va. Ry. v. U. S., 281 U. S. 479, 50 S. Ct. 378, 74 L. Ed. 980, and Moffat Tunnel League v. U. S., 289 U. S. 113, 119, 53 S. Ct. 543, 77 L. Ed. 1069, are cited in support of this view. But the problems involved in those cases are wholly different from any that may be said to arise in this. The Hines and Sprunt Cases hold simply that the loss of a competitive advantage, as the result of an order of the commission extending the rights of a rival, does not constitute a legal injury; the Pittsburgh & W. Va. Ry. Case merely that a railroad which was not affected by the order as carrier,. *10but only as stockholder of the carrier directly affected, had no greater legal interest than that of an ordinary stockholder, and hence an insufficient interest where the order had no effect upon its stock ownership; while the Moffat Case holds simply that civic and commercial associations devoted to the development of transportation facilities had at best a “sentiment” that the order there in question would adversely affect the development of transportation in their communities. In none of these cases did the order under consideration have any direct effect upon the party suing.
On its behalf the plaintiff says that it has suffered great legal injury through the increase of its income tax liability for the years 1926, 1927, and 1928, caused by the fact that it made its income tax returns on forms prescribed by the Commissioner of Internal Revenue which were in accordance with the accounting classifications prescribed by the commission. According to the returns, the taxable net income of the carrier for the years in question was increased by the sum of $2,024,389.54 and its income tax liability by the sum of $259,2-29.32. We do not think, however, that the carrier can base its standing in this court on this ground; for the Commissioner Is not bound in his determinations by the rules of accounting enforced upon carriers by the Interstate Commerce Commission. In the case of Old Colony R. Co. v. Commissioner, 284 U. S. 552, 52 S. Ct. 211, 76 L. Ed. 484, the question was whether a corporation, which had issued its bonds at a premium received prior to the adoption of the Sixteenth Amendment, should treat the amount of the premium as income for the year in which it was received or should amortize it over the life of the bonds so that a portion of it would be included in the taxable income for each of the subsequent years. The court held that none of the premium was taxable income, as it had been received prior to the adoption of the Sixteenth Amendment; and, in, so doing, rejected a contention' of the Commissioner of Internal Revenue that the amounts amortized were, taxable, because they were accounted for as income on the taxpayers’ books under a method of bookkeeping adopted in accordance with the requirements of the Interstate Commerce Commission. The court said (page 562 of 284 U. S., 52 S. Ct. 211, 214, 76 L. Ed. 484):
“This position is inconsistent with the other arguments advanced. If the amortized premium is to be deducted from interest paid by the taxpayer it is not income.. If.it is income, then by hypothesis it is income received prior to the date of the Sixteenth Amendment, and not income which accrues to the taxpayer from year to year. Moreover, the rules of accounting enforced upon a carrier by the Interstate Commerce Commission are not binding upon the Commissioner; nor may he resort to the rules of that body, made for other purposes, for the determination of tax liability under the revenue acts.”
See, also, Kansas City So. Ry. Co. v. Commissioner (C. C. A.) 52 F.(2d) 372.
However, the right of the carrier to maintain its present suit may be based on another ground. The order complained of requires the carrier to keep its accounts in a particular manner, and, in effect, if its contention is sound, denies it the right to maintain its equipment out of earnings, requires it artificially to inflate and enlarge its investment and decrease its income accounts, and keep its books upon an unreal and untrue basis. The only ground upon which it can be said that the carrier suffers no legal injury as a result of an order having such effect, is that mere accounting entries are involved and that, in the absence of immediate pecuniary or other damage, no legal injury can result. The law, however, is otherwise. The decisions recognize that the right to maintain a reasonable system of accounting is in itself a legal right the deprivation of which will entitle a carrier to relief, if it can show that the order complained of exceeds the commission’s authority or is wholly arbitrary or unreasonable. See I. C. C. v. Goodrich Transit Co., 224 U. S. 194, 32 S. Ct. 436, 56 L. Ed. 729; Kansas City So. Ry. Co. v. U. S., 231 U. S. 423, 34 S. Ct. 125, 58 L. Ed. 296, 52 L. R. A. (N. S.) 1; also opinion below (Com. Ct.) 204 F. 641, 644; Norfolk & Western Ry. Co. v. U. S., 287 U. S. 134, 143, 53 S. Ct. 52, 77 L. Ed. 218. In these cases the courts took jurisdiction and reviewed on their merits orders requiring a particular method of accounting.
In Kansas City So. Ry. Co. v. United States, 231 U. S. 423, 34 S. Ct. 125, 58 L. Ed. 296, 52 L. R. A. (N. S.) 1, it was held that a system of accounting prescribed by the commission for a carrier should be sustained, which permitted the carrier to carry into its property account only the excess of the cost of certain improvements made off its line after deducting the replacement, cost of certain abandoned portions,- and required the latter to be charged to operating expenses. The Supreme Court considered at length the reasonableness;, of the required accounting, and, *11in discussing two of its prior decisions, stated the guiding rule as follows (page 447 of 231 U. S., 34 S. Ct. 125, 133, 58 L. Ed. 296): “In both eases it was recognized that in so complicated a matter as the construction, maintenance, and operation of a railroad line, it is difficult to define and perhaps more difficult to consistently apply a precise distinction between capital and expense accounts; and while the propriety of distributing improvement costs over a series of years was recognized, the impossibility of scientific accuracy in that regard was acknowledged. The question now is, whether the regulations of the Commission under attack do violence to these general principles, — rather, it is whether those regulations are so clearly contrary to these and other applicable principles that they should be set aside as being in excess of the powers conferred by Congress upon the Commission.”
The reasons for the recognition of this right are well put by Judge Parker in the opinion of the District Court in the Norfolk & Western Case, 52 F.(2d) 967, 970: “But while we do not think that an accounting order such as this can be treated either as a binding classification of property in a rate-making or recapture proceeding or as a step in such proceedings, we cannot say that it imposes no burden or hardship furnishing ground for injunctive relief, if in fact it transcends the power of the commission or is so manifestly arbitrary and unreasonable as to evidence an abuse of discretion. Accounting under the order of the commission is not a mere matter of form, but one of substance. It sets forth the condition of public candéis for the information of their stock and bondholders and the investing public as well as for that of the commission. It furnishes the basis of corporate financing, and many other matters affecting their very existence. They are entitled, therefore, not to be subjected to accounting orders which transcend the powers of the commission or which are arbitrary or unreasonable; and we have no doubt that, as against an accounting order which so offends, a carrier is entitled to relief by injunction.- * * *»
The judgment of the District Court was approved on appeal and in its opinion (287 U. S. 134, 143, 53 S. Ct. 52, 55, 77 L. Ed. 218) the Supreme Court expressly said that while a carrier has no right to a particular form of accounting, “doubtless a Commission order under section 201 [of the Interstate Commerce Act] might be so arbitrary and outrageous as to call for correction.”
The authority is conferred upon the commission by section 20 (1) and section 20 (5) of the Interstate Commerce Act, as amended (49 USCA § 20 (1, 5), to prescribe for carriers a uniform system of accounts and the manner in which they shall be kept; and from time to time the commission has promulgated classifications of investments in road and equipment and classifications of operating revenues and operating expenses. Prior to-August 1, 1925, the so-called major portion rule was in effect under the commission’s requirement set out in General Account II, Equipment, 5th paragraph of its Classification of Investment in Road and Equipment effective July 1, 1914 (Exhibit No. 1). This rule provided in effect that, if the cost of renewal, in the event of the reconstruction of a unit of equipment, should constitute the major portion of its value as renewed, the equipment, when taken out of service, should be considered as retired, and the renewed equipment should be considered an addition and the appraised cost thereof should be included in the account appropriate for the cost of equipment. There was great difficulty in the practical application of this rule largely attributable to the fact that the test was not only somewhat arbitrary but more or less subject to the control of the carriers, and consequently on August 1, 1925, the rule was eliminated from the classification by an order which also provided that thereafter all repairs of equipment should be charged to operating expenses. The later order, however, expressly provided that in the application of the rule due consideration must be given to the general instructions in the Classification of Investment in Road and Equipment (above quoted), which provide that when a unit of equipment is retired from service and replaced with property of a like purpose, the newly acquired property shall.be considered as an addition and the cost thereof accounted for accordingly.
' In the report of the commission In a proceeding entitled “Depreciation Charges of Steam Railroads,” 1181. C. C. 295/ 348, there was some discussion of the proper method of accounting under the existing rule for the cost of extraordinary' repairs in the rebuilding of equipment. Noting that the cost of replacements made to maintain continuous structures is chargeable to operating expenses and that the major portion rule had been repealed, the commission pointed out that now the cost of such extraordinary repairs or rebuilding of equipment is chargeable in all' eases direct to operating expenses. However, in the final decision in the pending ease sub*12sequently reported in 196 I. C. C. 382, the commission suggested that the passage quoted was in no way essential to the determination of the issue then before it, and added that while it had stated that the cost of extraordinary repairs, or rebuilding of equipment is chargeable to operating expenses, it did not undertake to define the limits of ordinary repairs or rebuilding or to determine the circumstances which indicate that property has been retired from service.
The parties are agreed that it was correctly said in Parkersburg Iron & Steel Company v. Burnet (C. C. A.) 48 F.(2d) 163, that the question whether an outlay should be charged to expense or to investment as representing improvements is to be tested by the nature of the expenditure rather than by inquiring whether the value of the property was actually increased thereby. We must review in some detail the character and extent of the work done in the reconstruction of the ears, in order to determine whether the carrier is entitled to relief.
During the years 1926,1927, and 1928, the carrier determined to rebuild 2,390 hopper-bottom gondola ears of 70-ton capacity then in a bad state of repair. 1,566 of these cars had been built in 1916 at a cost of $1,500, and 824 in 1917 at a cost of $2,000 each. The life of the body of such a ear is from ten to eleven years. The body may be maintained by the renewal of the worn parts as they fail. The floors, hoppers, and doors are the first to wear out and the sides fail one year later. If the sound parts are renewed as they fail, the commission allows the cost to be charged to operating expenses. A more economical method in the opinion of the carrier is to keep the ear in usable condition by minor repairs to the parts of the body first failing until all the major elements give out and then to provide a new body in one operation. The latter method was employed in this ease.
Contracts were made between the carrier and certain car builders in the years 1926 and 1928. The contracts provided for the removing of the old bodies from the ears, cutting and loading scrap and other parts therefrom, making necessary repairs to the sets of trucks, building new bodies and putting them upon the repaired trucks. For the work of dismantling and loading scrap the cost was $56.-30 per ear body; for work on the trucks, $17.05 per ear set, and for building the new bodies and mounting them on the trucks, $1,-608.22 per ear body under one contract, and $1,516.85 under another. The ledger value of the outshopped cars was $2,156 per car, comprising cost of body of $1,394, value of reused material $573, cost of other materials $172, and labor on the trucks $17. The difference between the stated cost of the new body and the contract price is accounted for by the addition of certain betterments in the new bodies, less an allowance in price to the carrier by the manufacturer of the body steel.
The physical processes to which the cars were subjected under these contracts involved, as we have seen, the cutting of the bodies into scrap. Certain reusable air-brake parts were retained and used. The builders constructed new bodies of the same general type of those which had been, scrapped and added certain improvements and betterments accounted for as such by the carriers at the average cost per ear of $95. The new bodies were mounted upon trucks taken from the old cars and repaired and handled in the following manner: The trucks were placed upon a specially arranged track, the nonusable parts were removed, and necessary new or secondhand parts were introduced, the entire process consuming ordinarily not more than thirty minutes. The most important members of such trucks, approximating 96 per cent, of the cost, are the transverse beams carrying the car bodies, called “bolsters,” the wheels, and the longitudinal members called “side frames.” The wheels are the most expensive. 9'45 pairs or less than 16 per cent, of the total, were replaced; 280 were new; 221 consisted of secondhand axles and pairs of wheels and 446 of secondhand axles mounted on new wheels; 26 bolsters or about one-half of 1 per cent, of the total, were replaced; 1,593 side frames or less than 17 per cent., were replaced, most of which were new; 2>,817 pairs of wheels with axles were sent to the carrier’s shop for returning, at a cost of $1.04 for each ear set, and an equal number were taken from the earner’s pool and sent to the builders and installed in the reconstructed trucks. There were also repairs to minor parts of the trucks, and replacements, and to the extent that they were replaced they were practically all new.
No attempt was made to preserve the former numbering of the cars. Bach truck formerly bore the number of the car from which it was taken and could have been identified at any time before the new body was applied and the ear was painted. No attempt was made to keep together the sets of trucks from the old cars so that the new bodies might be placed upon them. The trucks in fact were removed from the old bodies and stacked and taken for repairs into the truck shop in the order of convenience.
*13In appearance the outshopped ears differed from the inshopped cars in certain details, and 900 of the new bodies had a somewhat greater capacity and inside length; but the changes were not of great importance, and after the work was done the ears turned out were of substantially the same design, type, and capacity, and in the main possessed the same utility and essential qualities as transportation units as the ears received by the builders. In short, it may be fairly said that the outshopped ears were composed of new bodies, substantially similar to the old, mounted upon old trucks which had been repaired and renewed when necessary; no attempt being made to keep together the sets of trucks as they came from the inshopped cars.
The carrier contends that the amount which it should have been permitted to charge to operating expenses for maintenance of equipment on account of this work aggregates the sum of $3,026,806.19, after deductions for salvage and scrap, or an average charge of $1,266 per car. The commission required that the ledger value of the ears sent to the shop amounting to $4,042,790.74, or $1,692 per car, should be credited to the investment account; and that this amount should be balanced by charging accrued depreciation reserve in the sum of $1,140,180.26, or $477 per ear, and the remainder $2,902,610.48, less salvage and scrap, amounting to $663,185.32, and the reused material amounting to $1,369',-795 to operating expenses and profit and loss, together with $133,318.40, the cost of dismantling. Thus, after certain adjustments, the net charge allowed to operating expenses and profit and loss representing service loss on the ears, was $1,002,948.56, and the investment account was increased by the sum of $883,674.30.
The carrier contends that the commission unlawfully deprived it of its property without due process of law in violation of the Fifth Amendment by denying its right to preserve the integrity of its investment through the maintenance of its equipment out of operating revenue. It relies on the well-known expression of the rule in Knoxville v. Water Company, 212 U. S. 1, 29 S. Ct. 148, 152, 53 L. Ed. 371, that a public utility “is entitled to earn a sufficient sum annually to provide not only for current repairs, but for making good the depreciation and replacing the parts of the property when they come to the end of their life.” The recognition of this rule, however, does not solve the question raised in this fiase. It may be said in passing that the record in the ease does not show that the carrier has been denied the right referred to in such a manner as to result in actual financial loss, but aside from this consideration, and acknowledging the carrier’s right to keep its accounts so as to show the expenses and losses to which it has been subjected through current repairs and depreciation of its property through use, we must still determine whether the expenditures in question were made for repairs or for the purchase of new equipment in place of old. In the one case, the amount expended would be properly chargeable as an operating expense, while in the other, the capital or investment account would be charged with the value of the new equipment and credited with the ledger value of that which was retired from service. Correct accounting, of course, would involve the allowance and the entry of adequate amounts for depreciation spread over the life of the units worn out in the service. Still we should be left with the question whether that which was done was the repair of old units or the construction of new.
Depreciation charges allowed by the commission are covered by the commission’s Classification of Operating Revenue and Expenses effective July 1, 1914, Exhibit No. 2, where it is said (item 315, p. 63) “that the account shall include uniform monthly charges representing the depreciation of freight train cars.” In other words, the allowance is designed to take care of the purchase price of the unit of equipment over its estimated- life. The carrier admits that if a proper reserve for depreciation is set up or provided out of earnings, it is not entitled in addition to charge against operating revenues the expense of replacing parts of its property when they come to the end of their life; but the carrier says that it was not permitted by the commission, and it did not in effect set up a depreciation charge sufficient to cover the repairs or the reconditioning of its equipment.
The experience of the carrier in the case of 5,477 cars previously retired was that the average life of a ear was 19.20 years. The life of the body of the ear is 10 to 11 years. The depreciation charge adopted by the carrier upon the equipment in question began at the rate of 1% per cent, which prevailed until June 30, 1916. Thereafter, during the period ending December 31, 1923, the rate of 2 per cent, was charged. During the year 1924, the rate of 3 per cent, was charged, and, after January 1, 1925, the rate of 4 per cent, was charged. Since even the highest figure indicated a service life for the ears of 25 years, it was manifestly inadequate, a fact *14of -which thé carrier was well aware. The record affords no explanation as to why the carrier was content with this allowance, and why no effort was made, as in the pending ease, to test the propriety of the allowance in the courts, so that it is reasonable to infer that the carrier deemed it to its- best interests to maintain' its investment account with as little déduetion as possible. Nor does the carrier seek in this proceeding to correct its accounts so far as depreciation is concerned. It seeks only the right to charge to operating expenses a larger part of the costs of the reconstructed ears than the commission is willing to allow.
The carrier further contends that the action of the commission in compelling it in its accounts to treat the ears as retired from transportation sea-vice was arbitrary and without authority of law, because the ears were not retired and the required entries were therefore contrary to the actual facts. It is pointed out, as above stated, that the average life of a ear is 19.26- years, and that only the bodies i-equire renewal at the end of 10 or 11 years, so that in the present instance, the original units were kept in service by using the parts still serviceable, to wit, the trucks, as nuclei for the rebuilt or reconstructed units. Theoretical identity, it is argued,- is not important, and in established railway -practice, the disassembling and reassembling of a freight ear for the purpose of replacing the body .does not cause it to lose its identity even though certain parts are intermingled or exchanged. The commission itself does not require a carrier to keep the cost of repairs of individual ears.
The carrier objects to the finding of fact by the commission that the inshopped trucks wer*e retired from service, and that the out-shopped trucks constituted additions, and asserts that the ears were not retired at all, but merely supplied with new bodies mounted upon repaired trucks, with the result that this essential part of the unit of equipment remained in service. The ear for-eman of thq carrier testified that the work on the trucks was done in the same manner and to the .same extent as repair work is currently .done by the carrier, in its. own shops. So it is contended that there is no basis for the conclusion of the commission that although the o-utshopped trucks contained considerable amounts of reused and secondhand material, they were substantially rebuilt rather than repaired.
The precise question of accounting under the circumstances is whether it is correct to charge to investment account the cost of cars constructed with new bodies and with repaired and renewed trucks, and to credit to that account the ledger value of the units of equipment from which the trucks were sal- - vaged. The carrier does not dispute the soundness of the commission’s classification of investment, and in order to answer the question proposed in the light of this classification, it is necessary to decide whether the inshopped ears were demolished and retired from the service, although the trucks taken therefrom wei-e rep-aii’ed and reused. The commission made the ultimate finding of fact that such a retirement occurred, and it is perhaps a nice question to determine whether that, finding is supported by substantial evidence and therefore binding on this court. We think, however, that it is not necessary to make the decision, for even if it be conceded that the commission’s method of accounting was technically incorrect, we find no ground to conclude that the commission’s position was arbitrary or unreasonable or productive of substantial injury to the carrier.
It is well settled that, if an attack upon the accounting methods prescribed by the commission is to be successful, it must rest at bottom upon a showing that they are so entirely at odds with fundamental principles of correct accounting as to manifest an abuse of power. So long as the commission acts fairly and reasonably within the granted power conferred by Congress, its orders are not subject to review. Kansas City Southern Ry. v. U. S., 231 U. S. 423, 444, 456, 34 S. Ct. 125, 58 L. Ed. 296, 52 L. R. A. (N. S.) 1; Norfolk & Western Ry. v. U. S., 287 U. S. 134, 141, 53 S. Ct. 52, 77 L. Ed. 218.
What the commission did in this ease was to apply in effect the provisions of its old major portion rule to the peculiar circumstances before it-. That rule was in effect from 1914 to 1925, and was applied, it is conceded, in the case of other ears belonging to the carrier rebuilt'or repaired under circumstances similar-to those in this ease; but no record, has been brought to our attention of 'a protest by this or any other carrier that its rights were jeopardized or impaired by the application of the rule. We do not apprehend such an unfavorable result in the present in-stance. When a ear is plaeed'in seiwiee with an entirely new body, provided at a cost that constitutes the major portion of the value of 'the renewed unit, and with- secondhand trucks, reconstructed by repairs and renewals'to a first-rate condition so-that they may fairly be expected to last throughout tlie life of 'the new body, the unit of equipment so *15closely approximates a new addition, that a system of accounting which so treats it can not be deemed arbitrary or unreasonable.
A decree will be signed dismissing the bill of complaint.
“Additions are additional facilities, such as additional equipment, tracks (including timber and mine tracks), buildings, bridges, and other structures ; additions to such facilities, such as extensions to tracks, buildings, and other structures; additional ties laid in existing tracks; and additional devices applied to facilities, such as air brakes applied to cars not previously thus equipped. When property, such as a section of road, track, unit of equipment, shop or power plant machine, building, or other structure, is retired from service and replaced with property of like purpose, the newly acquired property shall, for the purpose of this classification, be considered as an addition, and the cost thereof accounted for accordingly. (See Section 7). If, however, the property retired and replaced is of minor importance, such as a small roadway building or other structure, and is replaced in kind without betterment, the cost of the replacement.shall be charged to Operating Expenses, and no adjustment made in the road and equipment accounts. * * *
“Property retired means property which is sold, abandoned, demolished, or otherwise withdrawn from transportation service.” (Exhibit No. 1, pp. 10-12). | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219102/ | KNIGHT, District Judge.
In the year 1925, plaintiff was employed in the “distributing department” in the People’s State Bank, Detroit, Mich. On August 18, 1925, he was transferred to the “protesting department.” His duties in the first-named service were in connection with the distribution of cheeks and bank paper to the proper place in the bank. In the other service he protested paper for the bank. He was a duly appointed and authorized notary public, and hence with legal authority to protest such paper. He gave his entire time to this. When he began the latter service, there was no talk with reference to his pay for service or with reference to any change of pay. He continued in the work of protesting checks from the date last mentioned until the early part of the year 1933. During this time, the People’s Bank had been taken over by the People’s Wayne County Bank, and, in turn, the latter was absorbed by the defendant bank. The defendant bank was adjudged insolvent on May 25, 1933, and the defendant receiver has since, and is now acting as such.
During the time plaintiff acted as protesting officer, he was paid a certain sum by the bank twice in each month, on the 15th and 30th. At first it was $75 semimonthly; later it was $87.50; and still later a little larger amount. Plaintiff elaims, and for the purpose of this motion it must be assumed to be true, that he was paid altogether in the manner described $17,000. The plaintiff kept for the bank record books showing checks and other paper protested and amount of protest fees paid to the bank. Fourteen of such record books have been introduced in evidence. It would appear that two or three are not included and have not been found. Plaintiff from all the books made a tabulation showing the total amount paid to the bank from August 18, 1925, to the date insolvency was declared on account of paper protested by plaintiff. In speaking of the “bank,” I wish to be understood to be referring to the three several banks. While proper proof has not been laid to admit the calculation of the total moneys paid to the bank shown on the missing books, defendant has stipulated in open court that plaintiff may testify to the total of all the record books, for the purposes only, however, of this motion. The three record books have not been found, and the statement of counsel is to the effect that further effort to locate these will be made.
The testimony of the plaintiff is that such total of all the records for all the time stated was $45,090.36. Plaintiff seeks to recover from defendant the difference between the sum stated as paid him and the sum stated as paid the bank for or .on account of protest fees. He bases his contention on the well known rule, .of law that an *17agreement of a public officer' to accept something different for his pay or fee than that allowed by law is void as against public policy.
The evidence further discloses this; that when each semimonthly payment was made plaintiff, he gave defendant bank a written receipt purporting to show the payment in full of all moneys due him and purporting to be for a consideration; that plaintiff is an attorney; that at no time until in 1933 did plaintiff inform or notify the defendant bank that he made any claim to any protest fees as such; that plaintiff occupied a room in defendant’s building and paid no rent; was furnished with various necessary equipments to enable him to do his work; that defendant paid insurance for him, furnished books, paper, ink, pens, etc.; that inland, as well as foreign cheeks and notes were protested; that the items of charges paid the bank include amounts in excess of lawful protest fees; that no instructions were given plaintiff as to charges for protesting or as to what should be protested; and the only instructions he received were from his predecessor in the service who was not an officer in the bank. There are other statements of record showing other acts of plaintiff in connection with this service. Sufficient have been noted to point the contention made by defendant. Such contention is that there was no agreement made to pay any amount different than the legal fees to plaintiff; that each semimonthly payment made by defendant was made after the fee had been earned and that then plaintiff could legally assign the fees and therefore could accept the amount paid in full satisfaction of all indebtedness; that each transaction then engaged in amounted to an accord and satisfaction, and hence plaintiff can recover nothing. Defendant also claims that the recovery of any amount paid the bank on these fees more than six years prior to June 6, 1933, is barred by the statute of limitation. If, as claimed by plaintiff, the moneys so paid are the moneys of the plaintiff, and no relation of debtor and creditor arose, the statute could not and has not run. In the.view I take, the plaintiff must stand or fall on the question of whether these moneys paid the bank belong to the plaintiff and therefore partake of the nature of a trust fund. It is conceded that ample funds at all times have been in the bank to meet any liability on this account.
Defendant moves to dismiss the complaint for failure to establish a cause of action.
Plaintiff is a public officer. Pierce v. Indseth, 106 U. S. 546, 1 S. Ct. 418, 27 L. Ed. 254; In re Opinion of Justices, 150 Mass. 586, 23 N. E. 850, 6 L. R. A. 842; Kip v. People’s Bank, 110 N. J. Law, 178, 164 A. 253. The law case reports are replete with eases involving agreements to accept payment for services or fees in lieu of, or different from, those fixed by statute for such services or fees. Questions arising from such agreements repeatedly have been considered by English and American state courts. There is unanimity in the opinions that such agreements contravene public policy. The rule is well stated in Pitseh v. Continental and Commercial Bank of Chicago, 305 Ill. 265, 137 N. E. 198, 201, 25 A. L. R. 164: “The proposition that a contract whereby a public officer * * * agrees to accept for his official services something different from that provided by statute is contrary to public policy and void seems to be well supported by authority as well as justified in principle. * * * The compensation of a public official for the performance of his official duties is not a matter for traffic or trade, for bargaining or for favoritism. * * * Official morality and public policy alike prohibit the undermining of the public service by permitting officers to make merchandise of their official services.”
See, also, Corpus Juris, vol. 13, Contracts, § 360 et seq.; Glavey v. U. S., 182 U. S. 595, 21 S. Ct. 891, 45 L. Ed. 1247; Holt v. Thurman, 111 Ky. 84, 63 S. W. 280, 98 Am. St. Rep. 399, and numerous citations.
In Kip v. People's Bank & Trust Company, 110 N. J. Law 178, 164 A. 253, 255, decided in January, 1933, plaintiff, a notary, agreed to accept a salary of $75 per month and give defendant all fees. The contract looked to the future. The court held the agreement void, but it pointed out that the defendant did not allege an estoppel, and also said: “We express no opinion on the power of the officer to waive or remit a fee if and after it shall have been earned. That question is not before us.” Mussing v. Corn Exchange Bank, 173 Ill. App. 53, Second National Bank v. Ferguson, 114 Ky. 516, 71 S. W. 429, Ohio National Bank v. Hopkins, 8 App. D. C. 146, cited by plaintiff, each involving agreements in anticipation of the earning of fees or salary.
The evil sought to be prevented by this declaration of an act as being against public policy is the bargaining as to fees or sal*18ary to be earned. The fact that it is to be earned is the fact which gives rise to it as directed to the demoralization of public service. Many demoralizing’ possibilities will occur to the thinking mind. It would put a premium on ineompetency and incompetent service; it would encourage the doing of illegal acts to gain increased compensation. So far as I am informed, most of the reported eases are eases which deal with agreements in anticipation of the earning of salary or fee. Pitsch v. Continental and Commercial Bank presents an unusual statement of facts, but presents the same reasons for the rule. There the consideration for the release was the promise to perform future services on. the basis theretofore existing. The appellant could not insist upon its performance and was not bound by it. The court held that such consideration was of no effect and void. In that ease, plaintiff, after the performance of notariál services, gave a release from all claims to a certain date, and there was included in such release, and stated as the consideration therefor, an agreement by the official to perform like future services in consideration of his future employment. The repeated statements in the opinion show clearly that the decision arrived at was on the question of the consideration above stated. One quotation demonstrates this. Said the court: “The sole consideration for the release * * * was the illegal contract to continue the appellant’s employment at the same compensation, and that contract was illegal in toto and void.” Many cases on the question of employment in anticipation of services might be cited. Text-books and distinguished writers on the law are in accord. It is not necessary to quote from them or cite them. Counsel for defendant do not dispute the reason or authority for the rule, but they assert that it has no application in this case. Such counsel' say, as was said of the appellee in the Pitsch Case: “It [appellee] bases its defense upon the proposition that fees or salary which have been earned may be assigned, or the officer may waive his claim to them or estop himself , from claiming them.”
The rule of law that a public officer has the right to assign earned fees or salary is ’equally as well settled as the rule herein-before set forth. It is patent that the reason for the latter rule does not obtain in, ease of earned fee or salary. Defendant claims that at the expiration of each semimonthly period, plaintiff for a'valuable and legal consideration, released his right to the fees in question; and further claims that no agreement was made as to any fees to be earned or for the substitution of any amount in lieu of fees. The court will not inquire into the adequacy of the consideration. The question is whether there was a valid consideration. Defendant incurred all expenses incident to the services rendered; payment was made irrespective of the amount of fees earned. In Second National Bank of Ashland v. Ferguson, 114 Ky. 516, 71 S. W. 429, 430, it was held that payment of salary as clerk in amount of excess of fees as notary was good, not in contravention of public policy, and receipt and retention of salary estopped recovery. Said the court: “For he had a right to assign to the bank or to anybody else his fees for services already rendered.” McGregor v. McGregor, 130 Mich. 505, 90 N. W. 284, 97 Am. St. Rep. 492, cited by defendant, is not in point. It involved application of all salary to a partnership. Fees earned may be assigned. Greenh. Pub. Pol., rule 293, p. 349; Mechem, Pub. Off., § 874; 2 American and English Enc. 31.
The fees of a notary in protesting cheeks, etc., are fixed by the Michigan statute (Comp. Laws Mich. 1929, § 15486). The statute of that state (Comp. Laws Mich. 1929, § 9401) requires protest of foreign paper as a requisite to recovery on it. Defendant asserts that since there was no legal obligation to protest inland paper, as to an agreement in lieu of fees, as to these there could not be any violation of public policy. How many foreign or how many inland were protested has not been shown. It does appear that there were such. The Michigan statute (Comp. Laws Mich. 1929, § 9367) says that inland checks may be protested and proof of the custom of Detroit banks to protest them has been made. But irrespective of custom, since the defendant did authorize their protest and collected the fees thereon and since the plaintiff acted lawfully in protesting them, they stand here in the same status as foreign paper so far as the right of recovery is concerned.
This is an important case and a final determination will doubtless be decisive of the right of many other parties. It is clear that banking institutions have been mindful of the law as regarding agreements for notarial services. The eases point this out and point the methods by which it has been sought to avoid infringement on public policy in this respect. The defendant had this prohibition in mind. It is most important *19that a court should not put such restricture in its interpretation of the law that the reason for the rule may be lightly east aside. It is of equal importance that agreements lawfully engaged in should be observed. There can be little question of good faith on the part of the bank, for the silence of plaintiff for the nearly eight years in question shows this. He received every payment without protest and at each payment executed what was intended by both parties to be a release of all claims to each date of payment.
The gravamen of the illegality of these agreements relative to fees or salary to be earned lies in the very fact that it looks to the future. In this ease, as proof of the efficient services performed, there is proof that plaintiff gave receipts in full following the performance of the services. The receipts purport to show a consideration. In view of the proof of these receipts, it seems to me the burden rests upon the plaintiff to show failure of consideration. The illegal consideration is not to be presumed. Nor is the presumption of illegality to be drawn from the fact, standing alone, that the amounts paid plaintiff from time to time, when first engaging in this work as protesting clerk and officer, continued to be the same as that theretofore paid him in another department. The inquiry is whether there was any agreement which purported to bind the plaintiff. Could he at any time have quit his work and not violated any agreement?
There certainly was no express agreement to pay any salary. An agreement cannot be implied here, where it would be such as would be in violation of law. In other words, it cannot be presumed that defendant agreed to pay the salary theretofore paid in lieu of fees to be earned.
Defendant urges that the plaintiff in his services, in protesting paper was acting not as a public officer, but as the agent and instrument of a private company. It does not seem to me that such is the law nor that the cases, Burke v. McKay, 2 How. 66, 11 L. Ed. 181, and Nicholls v. Webb, 8 Wheat. 326, 5 L. Ed. 628, cited on this point support thát view.
Defendant, also, urges that the plaintiff has by his acts waived any claim. If this contention is based on the assumption that there was no agreement prior to the rendering of the service, such contention would be well taken. It follows, as a matter of course, that if plaintiff could assign or release the claim, he could waive it for a valid consideration. But if these services as notary were rendered pursuant to an illegal and void agreement, I do not think that plaintiff could waive. Any other reasoning would force the conclusion that the rule was wholly ineffective. In every ease of an illegal agreement, all that would be necessary to make it in effect legal would be to obtain a waiver. The reason for the rule would be entirely subverted.
The precise question on facts like those at bar have not been adjudicated by the courts (federal or state) so far as the research of able counsel has disclosed.
It is my decision that the motion be granted. I base this decision on the fact that there is no proof that any agreement with reference to the fees in question was had prior to the rendering of the services which are the basis for the fee, and an accord and satisfaction having been arrived at and the release for consideration having heen given after the services were rendered, the plaintiff is estopped from a recovery. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219103/ | CHESFUT, District Judge.
This case presents a bill in equity by the Rosslyn Gas Company, a corporation of Virginia (engaged as a public utility in supplying gas to consumers in Arlington County, Virginia, and its vicinity), to enjoin the enforcement of a rate order made by the State Corporation Commission of Virginia, on the ground that the rate so fixed is confiscatory.
Upon the filing of the bill, Judge WAY, after notice to counsel for the respondent (who appeared specially and objected to consideration of the bill on the ground of alleged insufficient notice) entered a restraining order upon the condition of the execution of a bond by the plaintiff in the amount of $10,-000, which was duly filed. A three-judge court was -then constituted in accordance with United States Code, title 28, § 380 (28 USCA § 380).
The answer by the respondents (the State Corporation Commission) on the merits, also includes a separate and specific motion to dismiss the bill of complaint on jurisdictional grounds. The court having heard argument on the motion announced orally that it would be overruled. This memorandum is filed to briefly state the basis of the ruling.
In support of the contention that there is lack of jurisdiction, the point is made that the State legislative process affecting the order is not final and complete because under the Virginia Constitution and Statutes there is a permissible appeal by the Rosslyn Gas Company! to the Supreme Court of Appeals of the State of Virginia, which, it is said on sueh appeal, exercises legislative powers. In substance, the contention is that the situation here existing is essentially similar to that presented to the Supreme Court of the United States in Prentis v. Atlantic Coast Line Co., 211 U. S. 210, 29 S. Ct. 67, 53 L. Ed. 150, where, on appeal from this Court, the Supreme Court held that the bill of complaint to enjoin the enforcement of a rate making order by the Commission affecting railroad passenger rates would not be entertained until after action on appeal by the Supreme Court of Appeals of Virginia. But the complainant’s answer to this contention, which in our opinion is sound, is that under the Virginia Constitution and Statutes there is a clear distinction between the function of the Supreme Court of Appeals of Virginia in appeals to it from rate making orders of the State Corporation Commission affecting transportation and transmission companies on the one hand, and, on the other hand, such rate orders as affect other corporations subject to the jurisdiction of the Commission. It is conceded that the complainant in this case is not to be classed as a transportation or transmission company.
The distinction referred to is based on the provisions of the State Constitution. It is not disputed that this fundamental law of the State contains the familiar separation of powers of government between the legislative, executive and judicial branches. The Supreme Court of Appeals (the court of last resort in the State) is provided for in article 6 (§ 87 et seq.) of the Constitution dealing with the Judiciary Department of the State. The composition and jurisdiction of the court is therein outlined, with nothing to indicate that its functions and jurisdiction generally are other than judicial as distinct from legislative. Its power, on appeals from the State Corporation Commission, in rate eases af*26feeling transportation and transmission corporations flows from the special constitutional provision found in section 156- (g) of the Constitution (relating to the subject matter of appeals from the State Corporation Commission) which provides:
“Whenever the court, upon appeal, shall reverse an order of the commission affecting the rates, charges or the classification of traffic of any transportation or transmission company, it shall, at the same time, substitute therefor such order as, in its opinion, the commission should have made at the time of entering the order appealed from; otherwise, the reversal order shall not be valid. Such substituted order shall have the same force and effect (and none other) as if it had been entered by the commission at the time the original order appealed from was entered.”
It is this power to make the rate by substituting its own order as to the proper rate for that of the Commission that characterizes the power of the court in the particular case as legislative rather than judicial. It is admitted by counsel for the respondent that the legislative power thus expressly given as affecting transportation and transmission companies is not so expressly given either in the Constitution or Statutes of the State affecting appeals from the State Corporation Commission in rate proceedings affecting other classes of companies. The argument is submitted that the power is impliedly given in other sections of the Constitution and certain particular sections of the Code of Virginia referred to by counsel which we have carefully considered, but in our opinion the implication contended for cannot be successfully maintained.
The question before us being one of the proper construction and effect of the Constitution and Statutes of the State of Virginia, we must, of course, accept the opinion of the Supreme Court of Appeals itself on the subject. The latest expression of that Court dealing with the particular subject matter is to be found in the case of Ætna Insurance Co. v. Commonwealth ex rel. State Corporation Commission (Supreme Court of Appeals of Virginia, June 15, 1933) 169 S. E. 859, 866. The Court there had before it the appeal of an insurance company adversely affected by a rate making order of the Commission. It was urged upon the Court that the character of its jurisdiction on such an appeal was legislative and not judicial but the decision in short was that its power was judicial and not legislative. In the opinion it is pointed out that while the Court with respect to transportation and transmission companies is acting legislatively under the provisions of section 156 (g) of the Constitution, nevertheless with respect to other classes of companies the Court acts judicially and not legislatively; and the Court said:
“Considering that the constitutional convention employed such language in section 156 (g), conferring legislative powers as to rates of transportation and transmission companies, and omitted to include such power to substitute our judgment for that of the commission in section 156 (f) as to other appeals, it is highly persuasive that no such powers were intended to be conferred by section 156 (f). Constitutional language, conferring powers on an appellate court, should be construed as intended to include only those powers consistent with the discharge of the inherent judicial functions of the court. It would require clear and strong language to justify such a construction as would divest the court of its primary duty, that of judicial review.”
Counsel for the respondent contends that, as the ease before the Court was an appeal of an insurance company sub jected to the jurisdiction of the -State Corporation Commission by a special act of Assembly, the language used by the Court is not necessarily applicable to characterize the nature of appeals in rate eases affecting public utility companies which are provided for in other sections of the Virginia laws. It is, however, we .think quite clear from the reasoning of the Court in this ease that a clear distinction was made between rate eases affecting transportation and transmission companies as one class and the appeals affecting all other classes of companies. Certainly the language used by the Court is susceptible of this understanding and no contrary decision has been called to our attention. We, therefore, accept what we think is the clear decision of the Supreme Court of Appeals of Virginia that its appellate functions in rate malting cases affecting public utilities, including the respondent, are judicial and not legislative.
It necessarily results that the legislative process of rate malting in this case was complete when the order of the Commission became operative as affecting the complainant and the Court is, therefore, not without jurisdiction to proceed in the ease. It was for this reason that we have overruled the motion to dismiss the bill of complaint. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219106/ | ATWELL, District Judge.
The complainants claim that they purchased from the respondents, Rhoads and Spencer, oil properties on credit, and in order to make the note therefor acceptable to the Continental Bank at Fort Worth, they gave to the respondents mentioned an assignment to certain.oil properties of their own, as well as- an additional note seemed thereby. That the understanding between them was that the complainants’ note and additional oil property security should be returned to the complainants as soon as the bank was satisfied. That the bank was satisfied, but prior to that time the said respondents had assigned complainants’ note' and assignment of oil and gas interests to *38respondent Continental Supply Company, in violation of the agreement. That the Continental Supply Company did not, in fact, secure such choses in action and assignments until after their maturity.
Complainants sought a cancellation of the note and the return of the muniment of title to the oil properties, and tendered back to Rhoads and Spencer the property which Rhoads and Spencer had originally sold them. They likewise sought damages against Rhoads and Spencer for the alleged breach of the original contract between them. Complainants and Rhoads and Spencer are Texas citizens.
The Continental Supply Company, a citizen of Missouri, removed the cause to this court alleging a separable controversy.
It relies upon cases such as Brown v. Empire Gas & Fuel Co. (D. C.) 26 F.(2d) 100; Wirgman v. Persons (C. C. A.) 126 F. 449; McKay v. Gabel (C. C.) 117 F. 873; City of Seattle v. Great Northern Ry. (D. C.) 239 F. 1009; Houts v. Scharbauer, 46 Tex. Civ. App. 605, 103 S. W. 679; Lumpkin v. Blewitt (Tex. Civ. App.) 111 S. W. 1072; Dailey v. Kinsler, 31 Neb. 340, 47 N. W. 1045; Adams v. Guyandotte Valley Ry. Co., 64 W. Va. 181, 61 S. E. 341, and Black on Rescission, vol. 3, page 1583.
A suit for cancellation and rescission may not be kept out of the national court by the joinder in the local court of a party who has parted with interest in the subject-matter.
But that is not all of the present ease. The complainants are at equity. They seek an equitable remedy. In order to succeed they must do equity. The parties to whom they are bounden to do such equity must be parties to the suit. Such parties are Rhoads and Spencer, from whom the complainants secured the original property and to whom the complainants must return that which they received in order to entitle them to the cancellation which they now demand.
Therefore, though Rhoads and Spencer have, in reality, parted with all of their interest in the assigned property to the Continental Supply Company, they are, nevertheless, entitled to a return of that which the complainants secured from them; a sufficient reason for the retention of them as indispensable parties.
The motion to remand must be sustained. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219108/ | ERVIN, District Judge.
J. A. Blunt was president of the First National Bank of Greensboro and was also the president of the Planters’ Bonded Warehouse Company of Greensboro, Ala. The warehouse company was incorporated in Hale county in 1907, having a capital stock of $15,000, divided into shares of $100 each, and the shareholders were J. A. Blunt, H. C. Childress, and R. C. Oliver. Childress and Oliver each subscribed for five shares, and Blunt subscribed for the rest, and paid for those of Childress and Oliver. Very shortly after the incorporation of the warehouse company Childress and Oliver transferred their shares to Blunt, and Oliver seems to have gone out of the business altogether.
During this period and up to the time of his bankruptcy Blunt was very prominent in the financial circles around Greensboro, being reputed to be a wealthy man as he in fact was, and being engaged not only in managing the First National Bank of Greensboro and this warehouse company, but also several of the industries in and around Greensboro, and was also a large property holder in the city of Greensboro and was the financial advisor of a large portion of the citizens of Greensboro.
After the transfer of all the shares to Blunt he considered the whole property to be his, and managed it as though he held the legal title to the real estate as well as to the shares of stock. The property owned by the warehouse company was a site close to> the Southern Railroad station in Greensboro, on which the warehouse was formerly located and operated by Blunt and another. This warehouse burned and the insurance collected, and this, with the proceeds of a suit against the Southern Railroad Company for setting fire to the warehouse, paid off the owners of the cotton stored in it at the time of the fire, and probably left something over, but the proof of the amount is indefinite..
After the fire Blunt bought out his partner and shortly thereafter the present warehouse corporation was organized and the present structure, a brick building with reinforced concrete roof, was erected on the site of the old warehouse. In addition to storing cotton, Blunt conducted a business in the warehouse of selling coal, lime, cement, lumber, and some other commodities periodically, which business was run for him by H. C. Childress, until July, 1925, when all these side lines were abandoned and the warehouse was leased by Blunt to George C. Clements and R. Q. Clements for a term of ten years at the annual rental of $2,400, payable in four installments of $600 each. The lessee further agreeing to keep the property in good repair, reasonable wear and tear excepted, during the term of lease. .This lease recites: “By and between the undersigned, J. A. Blunt, who has been doing a warehouse business under the name and style of the Planters Bonded Warehouse Company, and who owns all of the property of said Planters Bonded Warehouse Company and is the sole owner of the said Planters Bonded Warehouse Company, party of the first part, and George C. Clements and R. Q. Clements, the parties of the second part.”
Subsequent to the lease* George C. Clements sold his interest in the lease to H. C. Childress, before the addition to the warehouse was built, and the business was conducted in the name of the Greensboro Warehouse Company, Inc.
The original minute book shows that at the first meeting each of the stockholders were elected as directors, and that J. A. Blunt was elected president and H. C. Childress elected secretary and treasurer. No other minutes appear until 1909 when the president and secretary and treasurer were authorized by the meeting to make a mortgage to Mrs. Ely to secure a loan of $6,000. The minutes of this meeting recite that the stockholders and directors were present and that J. A. Blunt then owned 120 shares, H. C. Childress 2Q shares, and R. C. Oliver 5 shares. According to the recital, 5 shares were then unaccounted for. Thereafter no further meetings are shown.
On December 13, lfl'lO1, a mortgage was executed to the .First National Bank of Greensboro, of which Blunt was president, by the Planters’ Bonded Warehouse Company to secure $11,965. This mortgage was signed by J. A. Blunt, president, and H. C. Childress, secretary-treasurer, and recited a meeting of the "stockholders and authorization by the stockholders and directors. It was recorded and later marked satisfied on the record, March 15,1912.
*43On the second day of March, 1912, a mortgage was made to Mrs. Carrie M. Dickens to secure $12,000. It was signed Planters’ Bonded 'Warehouse Company by J. A. Blunt, president, and was not signed by Childress, and does not recite any authorization by the directors or stockholders, and is marked satisfied on the record, April 13,1929. Presumably this mortgage was made to get the money to pay the First National Bank, as its mortgage was marked satisfied on the 15th day of March, 1912.
On January 19, 1927, H. C. Childress died, and thereafter his wife found in his safety deposit box certificate No. 6 for 10 shares of stock in the warehouse issued to Blunt and indorsed by him.
On March 23, 1927, a deed was executed by the Planters’ Bonded Warehouse Company, by J. A. Blunt president, purporting to convey the warehouse property which was at that time all the property owned by the warehouse company to J. A. Blunt. This deed was recorded March 23, 1929', just two years after its date.
On March 20, 1929, J. A. Blunt executed to Grace McFaddin a mortgage conveying the same property to secure $5,000, which was assigned on January 16,1931, to Frank Fitts.
On December 29, 1930, J. A. Blunt executed a mortgage to H. A. Taylor to indemnify him against such loss as he might suffer because of his signing a bond as a surety of the First National Bank to Hale county. Taylor agreed to subordinate his mortgage to that of Fitts.
The county of Hale had deposits ranging from twenty to thirty thousand dollars in the First National Bank, and this bond was to secure the county for such money as it might have on deposit in the bank.
On January 15, 1931, Blunt executed a mortgage to Frank Fitts for $5,000. All these mortgages were on the same property.’
In the year 1926 an addition to the warehouse was erected at the request of lessees, who agreed to pay $100 a month additional rent, and upon the execution of the mortgages by Blunt to Frank Fitts a policy of insurance was taken oh the property in favor of Blunt, with loss, if any, payable to Frank Fitts, as his interest might appear, and in October, 1931, this new section of the warehouse was destroyed by fire. There were conflicting claims for this insurance between Fitts and the receiver of the First National Bank, and the insurance company paid under a compromise arrangement between these parties the amount of $1,224.20, which is now held by I. N. Hobson, clerk of circuit court of Hale eountj’’, to await determination of these claims.
Blunt borrowed money from Mrs. Herteiine R. Cryer and delivered to her a certain number of shares of stock in the warehouse company to secure the loan.
He also borrowed money from E. P. Walsh and delivered to him a number of shares of the stock as security.
He also borrowed from Mrs. F. T. Tumipseed, delivering a number of shares of stock to her as security, and up to the time of his bankruptcy these loans had not been paid.
Blunt was declared bankrupt on the 4th day of January, 1932, on an involuntary petition filed in this court on November 20, 1931, and on January 18,1932, Richard Muckle was elected as his trustee. The First National Bank of Greensboro, of which Blunt had been president for many years, failed in 1931, and one Montgomery was appointed receiver, and Jacob A. Salmon succeeded Montgomery as receiver for the First National Bank.
Blunt, on December 1, 1927, gave a note for $5,000 to the First National Bank, which was signed Planters’ Bonded Warehouse Company, by J. A. Blunt, president. On December 15, 1927, he gave another for $5,000 to the same bank, signed in the same way. On March 2, 1929, he gave another note for $1,500 to the same bank, signed in the same way. Montgomery, as receiver of the First National Bank of Greensboro, brought suit in the circuit court of Hale county against Planters’ Bonded Warehouse Company, a corporation of Greensboro, Ala., on these three notes, which was filed September 21, 1931, and service was had on J. A. Blunt, as president and director of the Planters’ Bonded Warehouse Company. On October 24, 1931, judgment by default was entered in this case, which was made final in the sum of $19,-168.72, and this judgment was filed in the probate court.
Various bills were filed by Mrs. Cryer, E. P- Walsh, Mrs. Tumipseed, and others, seeking various reliefs as against Fitts and the warehouse company and others. The trustee in bankruptcy, Muekle, then filed this bill making all the various claimants parties, and seeking to remove these claims as clouds on his title, and praying that injunction be granted against the various suits in the state court, and that the property owned by the warehouse company be subjected to the payment of the debts owing by Blunt, and the *44claims of all these various parties be set aside and the property be ultimately sold. The various claimants have come in and attacked the jurisdiction of the court which was overruled. Isaacs v. Hobbs Tie & Timber Co., 282 U. S. 735, 51 S. Ct. 270, 75 L. Ed. 645; Rogers v. Haines, 114 Ala. 50, 21 So. 411.
Answers and cross-bills have been filed and testimony taken, and the court proceeds to determine the equities of the various parties.
As to the claim of the receiver of the First National Bank:
It is based on a default judgment in the circuit court of Hale county. The complaint was a suit on the three notes heretofore mentioned, executed by Blunt in the name of the Planters’ Bonded Warehouse Company to the bank, and was served on Blunt as president of the warehouse company. The proof shows that the warehouse company had conducted business from 1907 to 1925, and had been indebted to the bank at various times between those dates, and had paid up these debts.
That it had executed a mortgage to the bank in 1910, and this mortgage was paid and canceled March 15,1912.
That Blunt, who was the president of both companies, was accustomed to execute notes in the name of the warehouse company to the bank, because he claimed to own all the stock of the warehouse company, and because he could not borrow personally from the bank, as he was its president.
The warehouse company quit business in 1925 when Blunt leased the warehouse property to George C. Clements and R. Q. Clements for a term of ten years at $2,400 a year, reciting that he was the sole owner.
The notes of the lessees were payable in quarterly installments of $600. These notes aggregating $24,000 and the $100 a month for the addition were transferred by Blunt to the bank. The notes sued on by the bank bear date more than two years after the warehouse company quit business.
Blunt testifies he borrowed only $4,000 from the bank for the purpose of erecting the additional section to the warehouse.
How could it have incurred this indebtedness to the bank?
Blunt testifies they were given for the debt of the warehouse company, but there is no proof of how it became so. He does not undertake to give the facts.
There is no proof that the money loaned by Blunt as president of the bank ever went to the warehouse company or paid any of its debts, or was borrowed for any corporate purpose of the warehouse company. I am forced to conclude that Blunt, who at that time was beginning to be financially pressed, borrowed the money, but gave the notes of the warehouse company for it just as he had done before.
Notes executed by a corporation when it does not owe'the debt create only the relation of surety to the real debtor, and if not within the corporate powers axe ultra vires and void. First National Bank v. Winchester, 119 Ala. 170, 24 So. 351, 72 Am. St. Rep. 904.
It may be that Blunt incurred an obligation to the bank when he executed the notes in the name of the Planters’ Bonded Warehouse Company, but they created no liability of the warehouse company, for it had no authority to secure debts of others.
But it is said that the bank reduced the claim to judgment, and the parties cannot go behind such judgment. Conceding for sake of argument that the warehouse company cannot do so, because Blunt, on whom the complaint was served, was its president, and it has had its day in court, and did not set up the defense, still what day has the trustee in bankruptcy, Fitts, Taylor, Mrs. Turnip-seed, Mrs. Cryer, and Mrs. Childress and her children had. No service was had and no notice was given to any of them, and the judgment was by default. Had the suit been defended it could easily have been defeated on the facts regardless of the threats to Blunt.
“Persons having liens on or claims to property which was the subject matter of a former action, or rights of action against one or more of the parties thereto, are not bound by the judgment if they were not made parties to the suit, and had no right to be-heard or to appeal from the judgment, although their claims were brought into issue in such action, or although their rights depend upon the same transaction or'facts which were litigated and decided in that action.” 34 Corpus Juris, p. 988, § 1406.
As to the claim of Frank Fitts:
The Planters’ Bonded Warehouse Company was incorporated in 1907, having three stockholders, J. A. Blunt, H. A. Childress, and R. C. Oliver. Shortly after the corporation was formed Childress and Oliver transferred their stock to Blunt, who then became sole owner of all the stock.
The proof shows that Blunt was then a well-to-do man, and that he built the present warehouse, which cost many thousand dollars *45more than the capital stock of $15,000, and that Blunt paid this excess out of his own pocket.
That Blunt wanted the corporate entity to run the business so as to limit his liability as a warehouseman.
That Blunt hired H. C. Childress to operate the business in the name of the Planters’ Bonded Warehouse Company, and not only ran a warehouse business in it, but also a coal, lumber, lime, and some other lines spasmodically there.
The various lines were run from 1907 to July, 1925, when the property was" leased by Blunt to Clements & Clements.
The property was mortgaged to Mrs. Goldine M. Ely on April 27, 1909, by the warehouse company for $6,000, and the minutes state that Blunt then owned 120 shares, H. C. Childress 20 shares, and R. G. Oliver 5 shares.
There is no proof that either Oliver or Childress bought any stock from Blunt; nor does the stock book show any transfer to them.
Undoubtedly Blunt just delivered to each of them a certificate of stock just for the purpose of the meeting so they could make the entry on the minutes. This mortgage was canceled. On December 13,1910, a mortgage was made to the First National Bank for $11,965. It was signed Planters’ Bonded Warehouse Company, by J. A. Blunt, president, H. C. Childress, secretary-treasurer, and recites a meeting of the stockholders, but no such meeting is shown by the minutes.
This mortgage was canceled March 15, 1912. On March 2, a mortgage for $12,000 was made to Mrs. Carrie M. Dickens and was signed Planters’ Bonded Warehouse Company, by J. A. Blunt president, only. No minutes show authorization for this mortgage. It was marked satisfied on April 13, 1929.
On January 19,1927, H. C. Childress died.
All these mortgages convey the same property, the warehouse and lot, being all the warehouse company owned.
No books seem to have been kept by the warehouse company showing its assets and indebtedness. Under these circumstances I must find that the warehouse company owed no debts, to any person other than J. A. Blunt, to whom the deed of March 23, 1927, was executed signed Planters’ Bonded Warehouse Company, by J. A. Blunt, president, to J. A. Blunt, conveying same property. It recites a consideration of $10 and other good and valuable considerations. Did the warehouse company then owe Blunt anything?
Conceding he advanced from twenty to thirty thousand dollars to build the warehouse, no other evidence of indebtedness or note was given him.
He ran the business as his own, taking all the profits for nearly twenty years until he rented it out in 1925, and then took the rent notes aggregating $24,000 and $100 a month for the addition and running over a period of ten years, and indorsed them over to the First National Bank, of which he was president. There has never been an accounting between Blunt and the warehouse company.
I must conclude that at the time of the execution of this deed the warehouse company did not owe Blunt anything, so it owed no debt at that time.
Was any party other than Blunt the owner of any stock in the corporation at that time?
There can be no doubt that both Oliver and Childress transferred their certificates of five shares each to Blunt shortly after the incorporation in 1907.
There is no claim that Oliver ever acquired any shares thereafter. In fact, both of them were mere dummies for Blunt in order to perform corporate acts.
The only evidence of any shares owned by any one other than Blunt is the certificate for 10 shares in Blunt’s name found by Mrs. Childress in her husband’s box at the bank after his death.
An examination with a powerful glass shows that the date of assignment was July, 1920 or 1925. Both the date and name of the transferee have been erased as well as a name under that of the witness. If the date is July, 1920 or 1925, it was not held by Childress in 1909, the date of the meeting recorded in the minutes. The erasures are not explained.
I conclude, therefore, that just for the purpose of the meeting Blunt delivered 5 shares to Oliver and 20 to Childress, and that these shares were then redelivered to Blunt. Blunt testifies that the certificate was held by Childress to secure a loan of $700.
The lease by Blunt to Clements & Clements expressly recites that Blunt was the sole owner of the property, and that he had run the business in the name of the company.
Now H. C. Childress was hired by Blunt to operate the business for him. Childress died in 1927, so we do not have his testimony, *46but R. Q. Clements testified that during the summer of 1926 Childress became his partner in operating the warehouse under this lease.
Therefore Childress ran all the business ventures operated by Blunt at the warehouse from the time of its incorporation till it was leased to Clements & Clements.
That he never participated in any of its profits or claimed any rights in it up to his death in 1927, but knew all the time that Blunt claimed sole ownership.
That he bought an interest in the lease from Clements when such lease expressly stated Blunt’s claim of sole ownership.
I therefore conclude that H. C. Childress did not own the shares of slock shown by the certificate, but that the same was assigned to him by Blunt to secure a loan, as Blunt testified, and hence that Blunt was the owner of all the shares in the warehouse company.
Finding that Blunt owned all the shares of stock in the Planters’ Bonded Warehouse Company, and that it owed no debts or certainly none to any one other than Blunt, when he executed the deed to himself, then who could complain of its not being recorded? So when he made the mortgage to Mrs. MeFaddm and the one to Fitts they certainly conveyed the equitable title to these parties. First National Bank v. Winchester, 119 Ala. 168, 24 So. 351, 72 Am. St. Rep. 904; Swift v. Smith, 65 Md. 428, 5 A. 534, 57 Am. Rep. 336.
I cannot see where section 7036 of the Code of Alabama has any application. In re V & M Lumber Co. (D. C.) 182 F. 231, 237; Nelson v. Hubbard, 96 Ala. 252, 11 So. 428, 17 L. R. A. 375.
It provides that all the property of a corporation may be disposed of when authorized by the directors and ratified by a vote of four-fifths in value of the stock.
Here I find all the stock was owned by Blunt at the time these mortgages were executed.
“One stockholder owning the whole capital stock could, of course, do what several stockholders could lawfully do.” Button v. Hoffman, 61 Wis. 20, 20 N. W. 667, 669, 50 Am. Rep. page 133.
What is said as to these mortgages is equally true as to the mortgage to Taylor.
Taylor subordinated his mortgage to that of Fitts, and the one to Mrs. McFaddin was prior to that of Taylor, and hers was assigned to> Fitts. So I find that Fitts as owner of these two mortgages has the first lien on the warehouse property.
In addition to this, as against the claim of the receiver of the bank, Taylor’s mortgage was given to secure him for his signing as security of the bank to Hale county for its deposit in the bank.
As the bank could claim as against its surety no priority in the event he is called on to pay its debt, so its receiver can have no greater claim than the bank.
As to the claims of Mrs. Cryer, Mrs. Turnipseed, and E. P. Walsh, assignees of stock in the warehouse company by Blunt to secure them for money loaned by them to Blunt: I find that there was never a dissolution of the warehouse company. Ownership of all the stock of a corporation by one person does not dissolve such corporation. Button v. Hoffman, 61 Wis. 20, 20 N. W. 667, 50 Am. Rep. 131.
While Blunt claimed to own all the stock of the company and hence the property owned by it, he also claimed to keep up its corporate capacity, and when necessary assigned certain shares of stock so as to make an apparent corporate action.
He also paid a corporate tax.
He also used the corporate name whenever it suited his convenience.
The very fact of assigning the certificates of stock to these parties as security for the money he was borrowing from them was a most positive assertion of the continued corporate capacity of the company.
It was not the establishing of any lien on any particular property of the company, but was an assignment of such proportionate interest in its remaining assets as these shares bore to the whole number of shares after payment of the debts of the company, not to exeeed the sum they were pledged for. Having found the company did not owe any debts, I therefore find that the holders of these assigned shares are entitled to be classed with the trustee in bankruptcy of Blunt as the owner of the balance of Blunt’s shares next to the claims of F'itts and Taylor in the pro-: eeeds of the warehouse company.
It is urged that as these claims were not registered on the warehouse books as required by section 6995 of the Code of Alabama, they are bound by that section. This section only declares the failure to record transfers and pledges of stock void, “as to judgment creditors, or subsequent purchasers *47■without notice,” and I find no such persons having adverse interests in this ease. This section has no application to transactions between the parties. The trustee in bankruptcy is in neither class and his claim is ho greater than that of Blunt, the bankrupt.
As to the $1,224.20, the sum paid in by the insurance company for the burning of the portion of the warehouse which was covered by the Fitts mortgage, the insurance policy provided loss, if any, payable to Frank Fitts as his interest may appear, should be paid to said Frank Fitts and credited by him on his mortgage.
As J. A. Blunt was declared bankrupt and not the Planters’ Bonded Warehouse Company, the trustee in bankruptcy can only take such assets of this company as would fall to J. A. Blunt on a final settlement of the affairs of the warehouse company; hence if there is any balance remaining after a sale of the warehouse property and the settlement of the claims of Fitts and Taylor, such balance should be paid over to the trustee in bankruptcy and the assignment of the stock of Blunt according to their respective holdings.
“A legal-distribution of the property after a dissolution of the corporation and settlement of its affairs is the inception of any title of a stockholder to it, although he be the sole stockholder.” Ang. & A. Corp., § 779a; Button v. Hoffman, 61 Wis. 20, 20 N. W. 667, 50 Am. Rep. 133.
After the sale of the property and the settlement of the claim of Frank Fitts the balance of the proceeds of such sale shall be held until the contingent liability of H. A. Taylor is determined.
There is one other matter to be adjusted, and that is the leasehold claim of Clements & Clements, now the Greensboro Warehouse Company, Inc.
It appears that this lease was made in 1925 by J. A. Blunt, and the tenants put in possession, and have remained so to the present time.
This was before any of the rights set up by any of the claimants arose, and when Blunt was unquestionably solvent.
I therefore find this lease valid for its present term, and further that the rentals shall be paid over to the receiver of the bank as Blunt owned all the stock of the warehouse company, and it owed no debts at the time he assigned these notes to the bank. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219109/ | BYERS, District Judge.
Hearing on exceptions to commissioner’s report fixing damages. The libellant sued as owner of the barge “W. C. Block” and bailee of the cargo laden thereon, and on behalf of the bargee whose personal effects were lost as the result of her sinking.
The interlocutory decree awarded to the libellant having been affirmed, the commissioner proceeded to his duties, and his report is assailed, not as to the amount of damages, but because the claimant professes to be aggrieved because the title to the cargo was in the vendee instead of the vendor who paid the loss.
Manifestly such an objection can be based only on the theory that satisfaction of the decree herein would not be a defense if a later claim were to be made by the vendee. *48From the facts shown in the record, that is not a practical possibility, but, if it were, the claimant would not be entitled to sustain its exceptions.
In The Nonpariel (D. C.) 149 F. 521, the carrier sued to recover damages resulting from a collision in the Erie Canal of the Nonpariel with a submerged structure supporting the New York Central Railroad bridge across the Canal; the carrying vessel sank, and her cargo was extensively damaged. „
Among other things, it was urged that the libellant could not maintain the action because the damages to the cargo had been paid by the insurers thereof, and, in discussing that aspect of the ease, the Court said, at page 525:
“It is uniformly held that in a contract of affreightment, such as considered here, the party undertaking the carriage of merchandise or its transportation by water from one point to another is a bailee and’has a special property therein, and on account of his interest in the property carried may bring an action against a wrongdoer to recover damages for its destruction or spoliation. Another action by the cargo owner or insurer to recover for the loss is not permitted, where the damage has been satisfied or the wrongdoer has been released from liability. Payment by the tort-feasor to the libelant of the damages sustained by reason of the injury would be an effectual bar to any further recovery arising out of the same cause of action, either by the cargo owner or the insurer.”
The opinion closes with the statement that the evidence established payment by the libellant to the cargo owners in the full sum of their damages, and recovery with interest was allowed for that sum.
In The Jersey City, 51 F. 527, 528, the Circuit Court of Appeals for this Circuit affirmed a decree of the District Court in a ease in which the libel filed on behalf of the tug which was towing a canal boat sought recovery for collision damages, and in the libel it was alleged that the libellant “paid for the damages to said boat, and thereby became subrogated to all the rights of the owner.” The owner of the canal boat was not the owner of the tug. The proof showed that the latter collected damages from the owner of the tug, which were paid not in recognition of a legal duty because there was no fault on the part of the tug, but in order to preserve good business relations with the canal boat owner. The facts in this connection are held to have been without legal bearing upon the right of the libellant to recover. The language of the Court on this subject is as follows, at page 528:
“The question whether the libelant became subrogated to the claim of the Delaware & Hudson Canal Company does not affect the right of the libelant to recover. It has been unnecessarily introduced into the eontroversy. The libelant was a bailee of the property injured. Either the bailee or the bailor may maintain an action against a tort-feasor who injures the property while in the custody of the bailee, and recover the full damages; but a recovery of damages by one, and payment by the wrongdoer, will be a full satisfaction, and may be pleaded in bar at any subsequent suit- by the other. Thorp v. Burling, 11 Johns. [N. Y.] 285; Hoyt v. Gelston, 13 Johns. [N. Y.] 141, 561; White v. Webb, 15 Conn. 305; Little v. Fossett, 34 Me. 545 [56 Am. Dec. 671]; Stowell v. Otis, 71 N. Y. 36.”
See, also, Hardman v. Brett (C. C.) 37 F. 803, at 804, 805, 2 L. R. A. 173; The Mercedes (D. C.) 108 F. 559; The Beaconsfield, 158 U. S. 303, at page 307, 15 S. Ct. 860, 39 L. Ed. 993.
It is true that in none of the foregoing eases was the precise point raised which is now urged by the claimant, but it is thought that the general rule concerning the right of the bailee to maintain the cause is not thereby impaired.
The question litigated is where responsibility lies for the loss of the cargo, and, once that has been fixed, it does not seem to lie with the unsuccessful party to seek to bring into the ease the question of whether the libellant is required to pay over the damages which have been assessed to the shipper of the cargo or the consignee. It is suggested by the libellant that any such rule as the claimant contends for would introduce into the trial of such causes as this an irrelevant issue, and this seems to be true. So long as the party who is found to have been responsible for the damage is protected in one litigation by paying the damages which are assessed against him, it is difficult to see why the language above quoted from The Jersey City does not meet the situation completely.
Exceptions overruled. Settle decree. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219110/ | ANDREW- M. J. COCHRAN, District Judge.
This suit is befóre me on final hearing and for decree. The relief sought is the removal of a cloud on plaintiffs’ title to sixteen interest-beáring bonds for $1,000 each, amounting in all to $16,000, dated December 1, 19-29, and due $5,000 December 1, 1945; $5,000 December 1,1946; and $6,000 December 1,1947, issued and sold by defendant December 30, 1929, to Magnus & Co. of Cincinnati, Ohio, for $16,026.27, principal and interest to that date paid to the defendant’s treasurer. The plaintiffs, citizens of Minnesota, purchased same, for value, without notice of any defect therein. The cloud complained of is the denial on the part of the defendant that the bonds are valid. That equity has jurisdiction of such a suit was decided in Thompson v. Emmett Irrigation District (C. C. A.) 227 F. 560. That it has jurisdiction of a suit to remove a cloud on title to personal property was held in Chicago Auditorium Ass’n v. Willing (C. C. A.) 20 F.(2d) 837. The decision was reversed by the Supreme Court in Willing v. Chicago Auditorium Ass’n, 277 U. S. 274, 48 S. Ct. 507, 72 L. Ed. 880, on the ground that the cloud complained of was not in fact a cloud.
The defense to the suit is that the bonds are invalid. It is claimed that such is the ease on two grounds. One is that defendant had no authority to issue them. The other is that it did not in fact authorize the issuance. The basis of the latter defense is that there is no record evidence of its having so authorized. Section 4399'a-5* Ky. St., required it to keep a record of its transactions in a book furnished by the state board of education. In County Board of Education v. Durham, 198 Ky. 733, 249 S. W. 1028, 1029, it was said: “The governing body of a municipal corporation can speak only through its records. It can confer authority to make contracts only by proper proceedings had at a meeting regularly called and held for that purpose and where its acts and proceedings are duly recorded.”
The defendant has a record book so furnished. It keeps in it minutes of its meetings and transactions and there is not recorded in it any reference whatever to the issuance and sale of these bonds. It is shown, however, by the evidence that a meeting was regularly held November 23, 1929, all members of defendant being present, and that at that meeting the issuance and sale of the bonds was authorized by them. Minutes of the meeting were prepared by the purchasers, written on a typewriter on loose sheets of paper, and were duly signed. These sheets of paper were attached to the record book with a slip-on paper clip. They in some way became detached and are missing. But certified copies thereof were made at the time and introduced in evidence. I think that what was done was a sufficient compliance with the requirement that authority to issue and sell the bonds must have been shown by record evidence.
The other defense calls for a more detailed consideration. The bonds were issued to fund an existing floating indebtedness of the defendant. That indebtedness was represented by its notes held as follows:
First National Bank of Williams-burg, dated June 4,1927....... $5*000.00
First National Bank of Williams-burg, dated April 2, 1928...... 6,000.00
Bank of Williamsburg, dated Sept. 10,1929 ..................... 2,000.00
First National Bank of Williams-burg, dated October 25* 1929... 3,000.00
Total .....................$16,000.00
The proceeds of the bonds were applied to their payment. The contention of defendant is twofold. There was no authority to incur this indebtedness. If there was, there was none to fund it. Whitley county is a taxing district for school purpose, and the defendant is its arm through which it operates its schools. As such taxing district it is a municipality in the thought of the Constitution of this state. It will first be considered whether, assuming the indebtedness to *51have been valid, the defendant had authority to fund it. To determine this question an understanding should be arrived at as to the authority of municipalities generally to fund their valid floating indebtedness. This depends on sections 157 and 158 of the State Constitution. Section 157 is in these words: “The tax rate of cities, towns, counties, taxing districts and other municipalities, for other than school purposes, shall not, at any time, exceed the following rates upon the value of the taxable property therein, viz: For all towns or cities having a population of fifteen thousand or more, one dollar and fifty cents ($1.50) on the hundred dollars ($100.-00); for all towns or cities having less than fifteen thousand and not less than ten thousand, one dollar on the hundred dollars ($100.00); for all towns or cities having less than ten thousand, seventy-five cents (754) on the one hundred dollars ($100.00); and for counties and taxing districts, fifty cents (50^) on the hundred dollars ($100.00); unless it should be necessary to enable sueh city, town, county, or taxing district to pay the interest on, and provide a sinking fund for the extinction of indebtedness contracted before the adoption of this Constitution. No county, town, city, taxing district, or other municipality, shall be authorized or permitted to become indebted, in any manner or for any purpose, to an amount exceeding, in any year, the income and revenue provided for such year, without the assent of two-thirds of the voters thereof, voting at an election' to be held for that purpose; and any indebtedness contracted in violation of this section shall be void. Nor shall sueh contract be enforceable by the person with whom made; nor shall sueh municipality ever he authorized to assume the same.”
Section 158 is in these words: “The respective cities, towns, counties, taxing districts and municipalities shall not be authorized or permitted to incur indebtedness to an amount, including existing, indebtedness, in the aggregate exceeding the following named maximum percentages on the value of the taxable property therein, to be estimated by the assessment next before the last assessment previous to the incurring of the indebtedness, viz: Cities of the first and second classes, and of the third class having a population exceeding fifteen thousand, ten per centum (10%); cities of the third class having a population of less than fifteen thousand, and cities and towns of the fourth class, five per centum (5%); cities and towns of the fifth and sixth classes, three per centum (3%); and counties, taxing districts and other municipalities, two per centum (2%): Provided, Any city, town, county, taxing district or other municipality may contract an indebtedness in excess of such limitations when the same has been authorized under laws in foree prior to the adoption of this Constitution, or when necessary for the completion of and payment for a public improvement undertaken and not completed and paid for at the time of the adoption of this Constitution: And provided further, If, at the time of the adoption of this Constitution, the aggregate indebtedness, bonded or floating, of any city, town, county, taxing district or other municipality, including that which it has been or may be authorized to contract as herein provided, shall exceed the limit herein prescribed, then no such city or town shall be authorized or permitted to increase its indebtedness in an amount exceeding two per centum (2%), and no such county, taxing district or other municipality, in an amount exceeding one per centum (1%), in the aggregate upon the value of the taxable property therein, to be ascertained as herein provided, until the aggregate of its indebtedness shall have been reduced below the limit herein fixed, and thereafter it shall not exceed the limit, unless in ease of emergency, the public health or safety should so require. Nothing herein shall prevent the issue of renewal bonds, or bonds to fund the floating indebtedness of any city, town, county, taxing district or other municipality.”
Section 157 consists of three sentences and section 158 of two. The question under consideration has to do with the second sentence of the one, and the last or second sentence of the other. The first sentence of section 157 relates to the rate of taxation which a municipality may prescribe, and the first sentence of section 158 to the limit of indebtedness which it may incur. The first sentence of neither section has any bearing thereon, save as it may aid in the interpretation of what follows in the section. The second sentence of section 157 calls for interpretation first, and then the second or last sentence of section 158. They should be interpreted in this order. One is not equipped to interpret the latter until he has mastered the former. The third or last sentence of section 157 calls for no consideration. The second sentence of section 157 covers more than it expresses. All that it expresses is a prohibition against a municipality being authorized to incur indebtedness in any year in excess of the “income and revenue provided for such yearM *52without a vote. It implies a number of other things, each of which is as much a part of the provision as the prohibition which it expresses. One is that a municipality can be authorized to incur an indebtedness in any year not in excess of such income and revenue without a vote. It does not grant power to the Legislature to authorize its incurrence. It does no more than recognize that it has such power, and refrains from prohibiting it. The Legislature is not dependent on section 157 therefor; Not being prohibited from granting such power, it has it. The authority which the Legislature may so grant, however, is limited to an indebtedness not in such excess. This being the ease, the implication is that the indebtedness is to be paid out of such income and revenue. It cannot be carried over into the next year. Why so limit the indebtedness if it is not the intent that it be so paid? There follows from this the further implication that a municipality cannot be empowered to and it cannot contract to pay the debt beyond the year in which it is incurred. It must be payable in that year and out of such income and revenue when received. It cannot be postponed to a subsequent year, and the income and revenue of that year subjected to its payment. But its payment may have to be so postponed or the indebtedness go unpaid. This may happen if the anticipated income and revenue does not materialize, which may result to a certain extent from an inability to collect it, or it may result from default on the part of the collecting officer or the officer to whom same is paid and inability to collect it from either officer or his sureties. But payment may have to be postponed even though the income and revenue is collected and there is no default. This may happen if the municipality disregards its duty to apply the same in payment of the indebtedness and applies it otherwise. If for either reason the indebtedness remains unpaid at the end of the year, what happens ? The indebtedness is not invalidated by reason thereof. It is still to be paid; but when? Inasmuch as the section on its face knows of no other payment than out of the income and revenue for the year in which it was incurred, it must necessarily be taken that the intention is that it be paid out of the income and revenue for the next year. It cannot be postponed beyond that year. That the provision on its face does not contemplate such a contingency indicates that the thought was that the contingency could not arise if the municipal body exercised the-proper care and did its duty. But this does not exhaust the implications of the provision. There is still one more. Apparently an indebtedness can be authorized to be incurred without a vote to the full extent of the income and revenue for the year. This cannot be. The municipality has to operate, and a certain portion of its income and revenue is needed to enable it to do so. It follows that no indebtedness can be authorized to be incurred in excess of so much of the income and revenue as may be left after paying governmental expenses, without a vote.
The sum and substance, therefore, of‘what has thus been put forth is that the provision in question permits the Legislature to authorize a municipality to incur an indebtedness without a vote equal to the amount of its income, and revenue for the year which will be left after paying governmental expenses; such indebtedness to be paid out of the income and revenue for that year. It cannot authorize the payment of such indebtedness out of the income and revenue of a subsequent year. If by reason of any of the happenings heretofore referred to it is not paid out of the income and revenue for the year in which it was incurred, it must be paid out of that for the next year. The only possible contingency in which its payment can be postponed beyond the year in which it has been incurred is the happening of nonpayment in either of the ways suggested, and then its payment cannot be postponed beyond the next year. It follows from this that if at the end of a given year an indebtedness incurred during that year, which is valid in that it did not exceed the portion of the income and revenue for the year applicable to its payment, remains unpaid, the municipality cannot contract to pay it beyond the next year. It must be paid out of the income and revenue of that year.
The whole matter can be put in another way. The provision contemplates' and requires that without a vote a municipality shall do business on a cash basis. It shall always live within its means. It must pay as it goes. This sticks out of the provision and is as plain as the nose on one’s face. The Court of Appeals of Kentucky did not have occasion to think out the full contents of this provision until over a quarter of a century after the adoption of the Constitution. It first did so in the case of McCrocklin v. Nelson County Fiscal Court, 174 Ky. 308, 192 S. W. 494, 499, decided in 1917. By its opinion therein it interpreted the provision aright. This ease came before one of its judges upon an appeal from an order dissolving a preliminary injunction against the issuance of certain bonds by the defendant and appellee, *53Nelson county. The order was reversed and the injunction reinstated. All the judges of the court heard the case, and concurred in the opinion. On its return to the lower court a final hearing was had and injunction decreed. From this the county appealed, and the appellate court affirmed the decree. Nelson County Fiscal Court v. McCrocklin, 175 Ky. 194 S. W. 323, 326. In its opinion therein it adhered to the position taken on the former appeal. It is in order to make extensive quotations from these two opinions. In the first opinion it was said: “We have repeatedly held that the object of the provisions contained in the sections referred to [sections 157 and 158 of the Constitution] is to protect the people from their own improvidence, and that of their officers.”
Again: “It is our conclusion therefore that the controlling idea in section 157, Constitution, is that a county shall not create or contract in any year any indebtedness that cannot be paid out of its revenue and income for that year; and that it is not contemplated by the Constitution that a county shall, without a vote of the people, create in one year a debt to be thereafter paid in subsequent years, and for the payment of which no provision can be made out of the income and revenue provided for the year in which the indebtedness is created; and, moreover, that in any year all the outstanding valid indebtedness of the municipality, not created with the assent of two-thirds of the voters thereof, must be taken into consideration in determining whether in that year the municipality becomes indebted, in any manner or for any purpose, to an amount exceeding the income and revenue provided for the year. There is little or no reason why every county should not observe this rule, because its fiscal court can tell within a few hundred dollars, at least, the amount that will be collected each year, by way of revenue, by comparison with the collections of the previous year or years.”
Again: “The law as well as good'business methods would seem to require that the fiscal court should not create debts in anticipation that the full amount of revenue would be collected. In other words, in creating debts it should make allowance for a loss of such a percentage of the revenue, from failure to collect, as will keep the expenditures for the year reasonably well within the amount of the revenue actually collected.”
Again: “If, however, in good faith, a county does, in anticipation of its proper revenue, create debts in excess of what it collects, this surplus debt must be carried as a debt to the next year, and succeeding years until paid, and must be taken account of as an indebtedness of that year, and succeeding years, until paid, in exactly the same manner as if the carried-over debt was created in the year to which it was carried. This is clearly the meaning of section 157.”
Again: “Under this constitutional rule there is no authority for fiscal courts to issue bonds payable in 2, 10; or 20 years, because a debt created in one year must be paid in that year, or, if not, in the next year.”
And again: “If a fiscal court may issue bonds to take care of a deficit in one year, it can do the same the next year, and so on, as long as it may choose, without limit. The result would be that, in the course of a few years, counties would have large bonded debts, perhaps as much as $50,000 or $100,000, without the sanction of a vote of the people.”
The opinion on the second appeal was directed mainly to the question whether an indebtedness could be incurred without a vote equal to the entire revenue and income for the year, or only to the excess thereof over and above the governmental expenses of the year. There was some uncertainty on this subject in previous decisions of the court. It was held that it could be incurred only to an amount equal to such excess. The court said: “Section 157 of the Constitution was intended to protect the people from the extravagance or recklessness of their officials in whom is lodged the power to levy taxes, such as fiscal courts, city councils, and the like, and these taxing authorities have no jurisdiction or authority to create in any year an indebtedness that cannot be paid out of the income and revenue of that year after there has been deducted therefrom a sum sufficient to satisfy the necessary fixed or current expenses of the county.”
Again: “It will not be difficult for fiscal courts disposed to observe the constitutional limitations as we have described them to follow these rules, because the amount needed to defray the current or fixed charges of the county can be estimated at the beginning of each year with reasonable certainty based on the volume of such expenses for the preceding year, to which there should, of course, be added the amount of such other necessary expenses in the maintenance of public buildings and public institutions as the fiscal court sees proper to expend during the year; and the amount that can be realized from the income, and revenue of the county can likewise be estimated with reasonable certainty based on the income and revenue of the preceding *54year. Possibly in some years fiscal courts, acting in good faith and with the purpose not to violate the Constitution, might create a debt that could not on account of some unexpected or unanticipated cause be paid out of the revenue of the year; but if a condition like this should arise, which under good manágement ought not to be often, the indebtedness remaining unpaid must be carried over and paid out of the next year.”
And again: “This section [157] lays down certain mandatory rales that fiscal courts, city councils, and other taxing authorities must observe. It is so plainly written and so easily understood that there is no room for two opinions about its meaning.”
These decisions were cited with approval in the following cases, to wit: City of Winchester v. Nelson, 175 Ky. 63, 193 S. W. 1040; Carman v. Hickman County, 185 Ky. 630, 215 S. W. 408; Buford v. Jessamine County, 189 Ky. 277, 224 S. W. 769; Wesley v. Tartar, 197 Ky. 493, 247 S. W. 353; Tartar v. Wesley, 200 Ky. 14, 252 S. W. 109; Pulaski County v. Richardson, 225 Ky. 556, 9 S.W.(2d) 523.
They seem to have a like constitutional or statutory provision in Missouri. In the case of Holloway v. Howell County, 240 Mo. 601, 144 S. W. 860; 862, it was said: “The theory of our present system of county government is that counties must ran their business affairs on the ‘cash system.’ Decker v. Diemer, 229 Mo. 296, loc. cit. 330; 129 S. W. 936. Running in debt is easy and pleasant while it lasts. Paying is ‘another story.’ The pleasure of debt making is denied by law to Missouri counties. They can anticipate their revenue, but only for the current year.”
On the other hand there are a dozen recent decisions of the Kentucky Court of Appeals which ran counter to those in the Nelson County Cases in one particular. That particular is as to whether a municipality can. fund a floating indebtedness which is valid in that when incurred it was not in excess of the income and revenue for the year applicable to its payment but which for some reason was not paid out of same, can be funded, i. e., can have its payment extended beyond the next year. These decisions are to the effeet that it can be. This, as we have seen, is contrary to our interpretation of section 157 and to the decisions in the two Nelson County Cases. They began in 1927 about ten years after the decisions in the Nelson County Cases and have been rendered in the last seven years. They are as follows: Vaughn v. City of Corbin, 217 Ky. 521, 289 S. W. 1104; Wilson v. City of Covington, 220 Ky. 795; 295 S. W. 1069; Wilson v. City of Covington, 220 Ky. 798, 295 S. W. 1068; Davis v. City of Newport, 224 Ky. 546, 6 S.W.(2d) 693; Baker v. Rockcastle County Court, 225 Ky. 99; 7 S.W.(2d) 846; Welch v. City of Nicholasville, 225 Ky. 312, 8 S.W.(2d) 400; Rowland v. City of Paris, 227 Ky. 570, 13 S.W.(2d) 791; Hogan v. Lee County Fiscal Court, 235 Ky. 100, 29 S.W.(2d) 611, 614; City of Frankfort v. Fuss, 235 Ky. 143, 29 S.W.(2d) 603; Elliott v. Fiscal Court of Pike County, 237 Ky. 797, 36 S.W.(2d) 619, 621; Pace v. City of Paducah, 241 Ky. 568, 44 S.W.(2d) 574, 575; Bond v. City of Corbin, 241 Ky. 663, 44 S.W. (2d) 576, 577.
The municipality involved in these cases was either a city or county. In no one of them was a school taxing district involved. Whether those decisions apply to such a municipality is passed for the time being. Before taking this up something is to be said about these decisions. In the City of Frankfort Case, a vigorous dissent was entered to the position taken in them by three of the seven judges of the court. There is no indication when this dissent arose. It was not mentioned until then. In the City of Paducah Case, the minority gave in to the majority, not because of change of conviction, but because it was conceded to be useless to dissent further. The court, in its opinion, written by Judge Rees, one of the dissenters, said: “Beginning with City of Frankfort v. Fuss, supra, Chief Justice Thomas, Judge Dietzman, and the writer of this opinion, have consistently registered their dissent from the majority view approving the ruling in the Vaughn Case, and have maintained that the opinion in that case is unsound and should be overruled.- Their views on the question will be found in the dissenting opinion in City of Frankfort v. Fuss, supra, and they are of the opinion that section 1 of chapter 68, Acts of 1892, now section 3077, Kentucky Statutes, is strongly persuasive of the correctness of the views therein expressed. They have those convictions now, but in view of the numerous opinions in which the Vaughn Case has been followed and approved, they deem it to be the better policy to consider the question as definitely settled in accordance with the rale announced in that ease, in order to allay all doubt as to the validity of bonds which have been, or may be, issued by a municipality for the purpose of funding a valid floating indebtedness.”
’ The position taken in these decisions is based on the second or last sentence of sec*55tion 158 of the Constitution, which is in these words: “Nothing herein shall prevent the issue of renewal bonds, or bonds to fund the floating indebtedness of any city, town, county, taxing district or other municipality.”
In none of the opinions of the court in these cases before that in the Lee County Case was mention made of the, decisions in the Nelson County Cases. In the Pike County Case the court said that the Nelson County Cases “appear to have ignored the concluding provision of section 158 of the Constitution.” It cannot be said that they ignored section 158,- for in the first one express reference was made thereto. The fact that it did not refer to its concluding sentence specifically does not indicate that it did not have that sentence in mind in what it said in regard to the section. But there was a real ignoring by the court in these later decisions. Section 157'was wholly ignored. In no one of them was it considered as having any bearing on the question involved. The cases called not only for its consideration, but for its consideration before taking up the concluding sentence of section 158. Section 157 comes before section 158. It has to do solely with the creation of indebtedness, whereas the concluding sentence of section 158 is limited to the renewal 'or refunding of indebtedness. One is not equipped to interpret that sentence until he has first come to terms with section 157. According to the interpretation which I have made of that section, which is the interpretation put on it in the Nelson County Cases, it requires that an indebtedness properly incurred without a vote, in that it was not in excess of the income and revenue provided for the year in which it was incurred above governmental expenses which for some reason is not paid out of that income and revenue and remains valid notwithstanding its nonpayment, shall be paid out of the income and revenue for the next year. It constitutes a part of the budget of that year. Such being the case, its payment cannot be postponed beyond that year. It cannot be funded. If, then, the concluding sentence of section 158 is interpreted as authorizing the funding of such indebtedness, it is brought into direct conflict with section 157. To give that sentence effect it is not necessary to make it apply thereto. It can have application without so doing. It can apply to bonded or floating indebtedness of a municipality existing at the time of the adoption of the Constitution. On its face such is its significance. It was inserted in the section to make sure that a renewal of the one or a funding of the other would not be affected by the limitations prescribed in the first sentence. It does not grant power to renew or to fund. It assumes that such power continues to exist, and merely adds that its exercise is not prohibited by such limitation. The construction placed upon the concluding sentence of section 158 in these decisions may be described as a nullification of section 157 in its requirement that an indebtedness which it permits to be incurred without a vote shall be paid in that or the succeeding year. The case of Knipper v. City of Covington, 109 Ky. 157, 58 S. W. 498, 499, involved, as the court expressed it, an attempted “nullification” of the requirement of section 157 that no indebtedness in excess of the current income and revenue shall be incurred without a vote. The court refused to nullify it. It said: “The first section, in plain and unambiguous language, provides a barrier against any indebtedness for any purpose, without a vote, beyond the revenues of the year. The second section is not a grant of power beyond this, but imposes an additional limitation on the creation of indebtedness in the aggregate.”
It said also: “Each section provides a limitation on the power to create indebtedness. Neither of them is a grant of power.”
And it said further: “We therefore must give each section full effect, and apply the limitation provided for in each of them.”
According to the construction of such sentence in these twelve decisions, it, though negative in phraseology, contains an express grant of power to fund a floating indebtedness which according to the requirement of section 157 cannot be funded.
In the Lee County Case, where first mention was made in this line of eases of the Nelson County Cases, the court first stated the position taken therein in these words: “Any valid indebtedness carried over from one year into another must be taken into consideration in ascertaining the indebtedness which the county may incur in the succeeding year. The outstanding valid indebtedness at the end of a year must be deducted from the revenue of a county for the succeeding year under these opinions, and the county may then contract debts only equal in amount to the remainder after the deduction. These opinions likewise held that fixed charges, such as salaries and other governmental expenses, must be treated as an indebtedness in determining the amount of debts which may be contracted.”
This is a correct statement of the positions *56so taken, except in one particular. The court did not say that the fixed charges should be treated as an indebtedness. What it said was that in determining what indebtedness the municipality may incur without a vote so mueh of the income and revenue as was necessary to pay such charges is not to be considered. Apparently an indebtedness may be incurred to the full extent of the income and revenue. But this is not so. An indebtedness may be incurred only to the extent of the excess thereof over sueh charges.
After making this statement of the position taken in the Nelson County Cases, the court proceeded as follows: “That means that when the aggregate of the valid outstanding floating indebtedness becomes greater than the revenues of the county for the year, the county is without power to function at aM.”
But under those positions it is not possible for the aggregate of such indebtedness to be so great. In the very nature of things according to the conception of section 157 sueh an indebtedness can be very slight only. On its face the section does not contemplate that there will be any, inasmuch as it contemplates that the indebtedness incurred will be paid out of the current income and revenue. The only possibility of there being any indebtedness at all is in a mistake being made as to the income and revenue to be received, a default on the part of the collecting and receiving officers, or a deliberate violation of the section by the municipality in not applying the income and revenue applicable to the payment of the indebtedness thereto, but diverting it to other purposes. Even in the latter contingency the income and revenue for the next year over and above fixed charges should be sufficient to pay said indebtedness. As it was sufficient to meet the indebtedness in the year when incurred, there is no reason why it should not be sufficient in the next year. The sole effect of paying it out of the income and revenue for that year may be to leave nothing above what is necessary to pay fixed charges applicable to any other purpose. In no event will the county be without power to function at all. So mueh of the income and revenue as is necessary to pay fixed charges cannot be used in paying the indebtedness. It is applicable to the payment of sueh charges only. It is clear, therefore, that the court had an incorrect notion as to the effect of the positions taken in the Nelson County Cases, in thinking that under them the municipality may cease to function. Such is not the ease. The sole effect of those positions is to make the municipality pay as it goes and keep from becoming indebted beyond the next year without a vote. The court then said: “A way was provided by section 158 of the Constitution for a county to emerge from its difficulties when it found itself in sueh a condition. The closing sentence in section 158 authorizes a county to fund its floating indebtedness.”
If a municipality lives up to the requirements of section 157 it will not find itself in such condition. There will be no difficulty for it to emerge from. The statement in the closing sentence that section 158 authorizes a county to fund its floating indebtedness is in direct conflict with the requirement of section 157 and in the teeth of the statement in the ease of Knipper v. City of Covington, supra, that section 158 contains no grant of power. The court continued as follows: “When the two provisions of the Constitution, sections 157 and 158, are construed together, and it has always been the rule that they should be so construed, we find that a county may fund its floating indebtedness by the issuance of bonds. This means that an outstanding valid, floating indebtedness, which was created in a legal way and was valid at the time of its creation, may be funded, and when that is done the only thing which it is necessary to consider and charge up against the county in a current year is the amount of interest and the sinking fund that must be set apart to take care of the outstanding funded indebtedness.”
Such is not a true construing of the sections together. It makes them fit, but it does so by nullifying the requirement of section 157, that if an indebtedness properly incurred without a vote, in that it is not in excess of the income and revenue for the year over and above fixed charges, is for some reason not paid out of such income and revenue, it shall be paid out of the income and revenue for the year over and above fixed charges, is for some reason not paid out of sueh income and revenue, it shall be paid out of the income and revenue for the next year. It nullifies it by making it so that it need not be so paid, but by funding its payment may be postponed for years. Construing the two sections together so as not to nullify any of the require'ments of either is arrived at by viewing the-concluding sentence of section 158 as not a grant of power to fund any indebtedness. It is simply a provision that the renewal of bonds or funding of a floating indebtedness existing at the time of the adoption of the Constitution will not be a creation of any in*57debtedness in excess of that to which a municipality is limited by the first sentence of the section. The two* sections cannot otherwise be construed together. Space forbids the consideration in detail of each of these twelve decisions. It is not amiss; however, to analyze the first one, to wit, Vaughn v. City of Corbin, through which this discordant note crept into the decisions of the Court of Appeals, and bring out just how the position there taken came about. Corbin is a city of the third class. It had a floating indebtedness of $75,-000. The court held that it had power to fund this indebtedness by issuing 6 per cent, bonds payable, one-third in ten years, one-third in twenty years, and one-third in thirty years. It was based on- two positions in regard to section 157, in support of which it cited previous decisions of the court. One was as to the rate of taxation which a municipality may levy under the first sentence of sueh section. It was that the municipality was not limited to the rate there prescribed. In addition thereto it may make a levy sufficient to pay the interest on and provide a sinldng fund for the payment of the principal of indebtedness which under the second sentence has been favored by a two-thirds vote. Corbin had a right to levy not only the 75 cents authorized by the first sentence, but sufficient to make sueh provision for sueh indebtedness. The other was as to the indebtedness which a municipality may incur without a vote. It was not limited to the excess of the income and revenue provided by the levy actually made over and above governmental expenses. It could extend to the excess of the income and revenue which would have been provided by a levy to the full extent which it had power to make if the levy actually made was less than this. The soundness of this latter position, and that it is supported by the decisions cited, is accepted without reflection. The suit was brought under the Declaratory Judgment Act (Civ. Code Prae. § 63S*a — 1 et seq.). The petition admitted that the $75,000 floating indebtedness proposed to be funded was valid. The city had for some years an outstanding bonded indebtedness created pursuant to a two-thirds vote. Its levy had been limited to 75 cents. No levy had been made to pay the interest on this bonded indebtedness and to provide a sinking fund for its payment which the municipality had a right to make in addition to the levy of 75 cents. The interest thereon had been paid and provision for the sinking fund had been made out of the 75 cents levy. This was not done purposely. The failure to make this additional levy was because it was not thought that the city had power to make it. It was thought that it was limited to the 75 cents. In the course of time the city was put to certain extraordinary expenses. Corbin is a railroad center. There was a prolonged railroad strike, and it had to spend and spent a very large amount of money in maintaining order. To* protect the health of its citizens it had to enlarge its waterworks and build pits to dispose of its sewage. It had other extraordinary expenses besides those not specified. The amount of revenue yielded by the 75 cents tax was not sufficient to care for these extraordinary expenses in addition to the ordinary governmental expenses and earing for the bonded indebtedness. Hence resort was had to borrowing sufficient money to meet all expenses. The floating indebtedness of $75,000 thus incurred was not in excess of what would have been yielded had there been a levy during these years in addition to the 75 cents of a sufficient amount to care for the bonded indebtedness. The borrowing of this sum was not consciously against this additional levy. The city was not conscious that it had power to make it. ■But as a matter of fact it did not exceed such additional levy. It was in this way that the court conceived that the floating indebtedness was valid. To meet it the court conceived of but two alternatives. One was to make a single levy payable in one year or to fund it. It was contended against funding it that the first alternative should be pursued. The court stated this contention in these words: “It is insisted for the appellant that the city, having failed to make a sufficient levy as it should have done in the years that are past, ought now to make a levy for those years and pay off its indebtedness.”
To this- the court responded: “But this would impose upon the people of the city a very great burden in one year, for to raise $75,000 in one year, in addition to its otherwise necessary levy, would require a very heavy tax in a city of this size.”
It said that such being the case only the question of power is presented.
The ease, therefore, which*, the court had before it, as it conceived it, was how to provide for an indebtedness incurred by the city in ignorance of its right to raise the money by levy of a tax in addition to that which it actually levied and which it had the power to levy to care for the safety and health of its inhabitants, which could only be provided for in one or the other of the two ways stated. This was a hard ease, and it is said that hard cases are sometimes the source of bad law. *58It would seem that in providing for this indebtedness the city as an alternative to funding it was not limited to levying a tax payable in one year sufficient to pay it. No reason occurs why its payment could not be distributed over a number of years so as to lighten the burden of the taxpayer, beginning at once. By so doing the city would not be crippled in its operation. Its wings would simply have been clipped until the indebtedness was paid. By funding the indebtedness it could continue to soar as before. The power to fund was found by the court in the concluding sentence of section 158. Concerning this sentence the court said: “But it will be observed that bonds issued to fund the lawfully contracted floating indebtedness of any city are excepted out of the operation of that section.”
The court concluded from this construction of that sentence as follows, to wit: “It results therefore that the city council has power to issue the $75,000 of bonds, although this may increase the bonded indebtedness of the city beyond the limit fixed in that section.”
The section referred to is section 158. It is true that the concluding sentence of that section excepts out of its operations, i. e., the limitation prescribed by it, the funding of floating indebtedness, by which is meant such as has been “lawfully contracted.” But to except such funding from such limitation does not confer power to fund. That must be found elsewhere in the thought of the sentence. As the court has said in the Knipper v. City of Covington Case, the section contains “no grant of power.” And there can be no power to fund when it is prohibited by section 157. There was no possibility of the limitation prescribed by section 158 being exceeded by funding the $75,000 floating indebtedness. The sole trouble in the way was section 157, which did not occur to and was not considered by the court. There was no attempt made to come to terms with section 157, before construing the concluding sentence of section 158. In the court’s thought that section had nothing to do with the question before it.” The court concluded its opinion with this general statement: “When, in any year, a levy sufficient to cover necessary expenses incurred was not levied, the unpaid balance should have been provided for in the levy for the next year. But the failure to do this did not invalidate the debt, and the council had power then to fund this debt. This is true as to each succeeding year, and the power of the council to fund this debt exists now as it did at the end of each year and may be exercised now at one time. There is no suggestion in the record that the excess of indebtedness now shown was not properly created under the constitutional provision. Its validity is conceded in the pleading. The issuing of bonds to fund a floating debt adds nothing to the indebtedness of the city. It merely changes the form of the existing debt. The power to fund a floating indebtedness is as broad as the power to incur such indebtedness.”
This brings out the unusual character of this ease, in that it involved a floating indebtedness incurred against a levy that might have been made, but was not. In all the other twelve cases the indebtedness held to be valid and capable of being funded was incurred against the levy actually made, which indebtedness was not paid out of the levy. Such is the case here. There is no distinction in principle between the two kinds of cases. If any indebtedness incurred against a levy not made can'be funded, so can an indebtedness incurred against a levy made but not paid out of the levy. Hence the decision is an authority for funding an indebtedness in the latter kind of ease and its reasoning is applicable thereto. This leads me to take note especially of this part of this quotation, to wit: “The issuing of bonds to fund a floating debt adds nothing to the indebtedness of the city. It merely changes the form of the existing debt.”
This is undoubtedly true. But it does not follow from this that power to fund exists. The question is not whether funding increases the indebtedness. It does not. It is whether power to extend the time of payment of the indebtedness involved in funding exists. If it does, then power to fund may exist. If it does not, such power cannot exist. Power to extend time of payment and hence to fund an existing floating indebtedness valid in that it was properly incurred against a levy actually made but not paid out of such levy is prohibited’by section 157, in that it requires same, if not paid out of such levy, to be paid out of the levy next year. Though funding a debt by a municipality does not increase its indebtedness, it enables it to increase it without a vote. It makes it so that it can so do. If it is bound to pay same out of current income and revenue its power to incur indebtedness without a vote until it is paid is curtailed. Take the ease of the City of Corbin. After funding this $75,000 of floating indebtedness pursuant to the decision in that ease, thereby postponing its payment from ten to thirty years, there was nothing to prevent its *59repeating the incurrence of an indebtedness to this amount again without a vote, except the will of its city council. It could either refrain from levying the full tax it was authorized to levy, the same as before, and borrow against the tax not levied, or levy the full tax and borrow against the excess of the income and revenue thereby provided over governmental expenses and requirement of bonded indebtedness, refrain from paying same out of such excess and divert it to other purposes, and could keep this up for years, either funding the indebtedness at the end of each year or after a number of years, i. e., as long as it can hold its creditors off — all this without a vote. The only limit to its so doing would be the limitation prescribed by section 158. It is not true to say that the power to fund a floating indebtedness is as broad as the power to incur it. The power to incur indebtedness by a municipality without a vote is very limited under section 157. So far as what it says is concerned, it does not know of any such power. But the power to fund such indebtedness as it has power so to incur does not exist at all in that that section impliedly requires it to be paid out of the current income and revenue or that of the next year.
The statement above quoted from the opinion in this case, to the effect that funding a debt does not increase it, may be characterized as an epigram. It was quoted a number of times in the later decisions and seems to have been effective in bringing them about. This is an instance which warns one that epigrams are dangerous. As stated it is the decision in this case that brought the discord in the decisions of the Court of Appeals. In the last one, which was another Corbin Case, it is said: “The case of Vaughn v. City of Corbin, 217 Ky. 521, 289 S. W. 1104, is conclusive of this one. The opinion in the Vaughn Case has been approved in the following eases.”
Then follows the ten eases between it and that case.
The position here advanced and taken in the Nelson County Cases is bottomed on the idea that section 157 impliedly prohibits the authorization of a municipality to fund a floating indebtedness which is valid in that it was properly incurred in anticipation of current income and revenue of that year. This it so does in that impliedly it requires same to be paid out of such income and revenue or that of the next year. If that idea is not sound, that position cannot be maintained. That it is sound is inescapable. Not prohibiting the authorization of the incurrence of an indebtedness not in excess of the income and revenue for the year of its incurrence over governmental expenses implies not only that it may be incurred, but that it is to be paid out of such income and revenue. On the face of the section the thought is that it can and will be paid out of it. It does not contemplate that it cannot or will not be so paid. If as a matter of fact it is not so paid, either because of a deficiency in collection, default, or a will not to pay, it must be taken that the implied requirement is that it shall be paid out of the income and revenue of the next year. It cannot be otherwise if the section is to be true to itself.
But as heretofore stated, these twelve decisions had to do with a municipality consisting of a city or county considered as a governmental unit. Neither one of them had to do with a municipality consisting of a taxing district within the meaning of those words as used in sections 157 and 158. It must be taken, however, that they apply to such a municipality which is like a city or county so considered which is operated solely by a single arm; the city by its counsel, and the county by its fiscal court, in that it too is operated by a single arm. There is no room to draw a distinction between such a taxing district and a city or county. Were such a taxing district involved here, the question would arise whether this court is bound by these twelve decisions or whether it is at liberty to follow its own interpretation of sections 157 and 158 and that of the decisions in the Nelson County Cases. The latest expression of the Supreme Court of the United States on the duty of a federal court in the matter of following decisions of the highest court of the state is to be found in the case of Edward Hines Yellow Pine Trustees v. Martin, 268 U. S. 458, 45 S. Ct. 543, 545, 69 L. Ed. 1050. It there said: “When questions affected by the interpretation of a state statute or a local rule of property arise in a federal court, that court has the same authority and duty to decide them as it has to decide any other questions which arise in a cause, and where state decisions are in conflict or do not clearly establish what the local law is, the federal court may exercise an independent judgment and determine the law of the case. * * * This court has refused to follow a rule established only by single state decision rendered, after the rights involved in the case in the federal court accrued * * * or a single decision when not satisfied that it is conclusive evidence of the state law.”
But such a taxing district is not involved *60here. The taxing district involved here does not operate solely through a single arm. It operates through two arms, to wit, a hoard of education and a fiscal court. The hoard administers the schools. It has no power to levy and collect taxes to enable it to so do. The function of the fiscal court is to levy such taxes. The board is required each year to make out a budget of its needs for that year and require the court to levy a tax to meet that budget, which is to be collected by the sheriff and banded over to the board. It has the absolute right to have the fiscal court to make such levy. The court has no discretion in the matter. Fiscal Court of Logan County v. Board of Education, Logan County, 138 Ky. 102, 127 S. W. 527, 529; Grant County Board of Education v. Chandler, 144 Ky. 348, 138 S. W. 271; Spradlin v. Floyd County Board of Education, 162 Ky. 677, 172 S. W. 1065; Breathitt County Board v. Breathitt County Fiscal Court, 188 Ky. 674, 223 S. W. 830, 832; Breathitt County Fiscal Court v. Breathitt County Board, 191 Ky. 437, 230 S. W. 914, 915; County Board of Education v. Fiscal Court, 221 Ky. 106, 298 S. W. 185; Board of Education of Marshall County v. Fiscal Court, 229 Ky. 774, 17 S. W.(2d) 1009.
In the Logan County Case the court said: “When the board of education requests the fiscal court to levy a property and capitation tax within the statutory limit, it is the duty of the fiscal court to levy the property and capitation tax requested by the board, if it is within the statutory limit. The fiscal court has no discretion to exercise on this subject. It must lay the levy demanded. In submitting to the fiscal court an estimate of the amount that in the judgment of the board is needed it is not necessary that the board should mention the specific purposes, or any of the purposes, to which it intends to apply the funds. The expenditure of the funds within the statutory limits is entirely within the discretion of the board of education.”
In the last Breathitt County Case, it said: “It was the intention of the Legislature that such boards should be the sole judges of the needs of the schools, and to make them entirely independent of the city councils and fiscal courts through whose tax levies they-must be supplied with funds for maintaining the schools; otherwise they often might be obstructed in the necessary exercise of their powers or performance of their duties by the whims ox caprices of the latter, to the great injury of those entitled to the education to be bad in the common schools.”
Such being the nature of the taxing district involved here, those twelve decisions have-no application thereto. Unhampered by them I am free to determine what powers the board of education of such district has in the matters-of incurring and funding indebtedness. It is to be noted before proceeding further that the taxing district is not the board of education nor the fiscal court. They are simply the arms by which the taxing district operates. The taxing district is the county operating for school purposes. The powers which the board of education of such a district has depends entirely on the legislation pertaining to it. It has no other power than that which the Legislature has conferred upon it. Conceivably it may confer the power of incur-ring and funding indebtedness on the fiscal' court on request of the board of education the same as the power to tax to meet the necessities of the board of education. If the-concluding sentence of section 158 be taken •as a grant of power, it grants no power to such a taxing district to incur indebtedness. It only grants power to fund it. As to funding indebtedness, it does not say which arm of such a taxing district shall exercise it. That it does not, makes against the position that that sentence contains a grant of power at all. Nor can the second sentence of section 157 be said to grant power to a board of education of such taxing district to incur indebtedness not in' excess of its income and revenue for the year. It contains no grant of power. It merely-limits the power of the Legislature in the matter of authorizing the incurrence of indebtedness. If it be construed as itself granting such authority, it does not say which arm of the taxing district shall have such autboiity. So it must be taken that a board of education of such a taxing district has no other-power than such as may have been conferred' upon it by the Legislature. The courts can-: not supply any omission of that body in this particular.
The legislation relating to a taxing district consisting of a county operated for school purposes by its two arms is to be found in articles 5, 7, 8, 9> 15, and 16 of chapter 113 (section 4-363 et seq.), Kentucky Statutes, entitled, “Schools — Common.”
By section 4434a-7, Kentucky Statutes (19-30 Ed.) art. 8, it is provided: “The various county boards of education in this Commonwealth shall assume the payment of'any legal indebtedness contracted by the old boards of trustees under the old law and pri- or to the taking effect of the act of 1908, by compromise, partial payment or otherwise, *61as is deemed expedient and proper by said board of education. Said payments to be made out'of the general school fund of the county. This law shall also apply to common school subdistriets that have become graded common school districts since 1908.”
Prior to the act of 1908, here referred to, the various counties of the state were divided into several common school districts, each governed by a board of trustees. Each of these districts was a taxing district. The board of trustees not only operated the school in the district, but also levied the taxes to enable it to operate it. By that act these districts were established and converted into one county district operated by the county board of education and fiscal court in the way heretofore pointed out. The boards of trustees for the old districts had been empowered to incur indebtedness and at the time of the enactment of that act many, if not most of these districts, were legally indebted, and the section quoted originating in that act made provision for the payment of such indebtedness by the county board of education out of the general school fund for the county. Section 4399a-8 provides for the board of education making a budget. It refers to it as “an itemized and detailed school budget,” and provides that it shall show “the amount of money needed for supplementing teachers’ salaries, for permanent improvements, repairs, furniture, old buildings, maintenance and support of schools during the succeeding school year.” This section provides further for the disbursement by the board of education of the moneys raised by the levy pursuant to its request and received by it. It provides that they “shall be devoted first and exclusively, up to the amount of the minimum levy herein provided, for the purpose of supplementing the teachers’ salaries engaged in teaching in the territory affected by the provisions of this section until the minimum salary now allowed by law or as may hereafter be allowed by law for teachers is reached, and after said minimum has been reached the money raised by such levies may be used for supplementing teachers’ salaries, building of sehoolhouses, equipping same, and other costs of maintenance and operation as in the judgment of the county board of education may be determined.” In these provisions no mention is made of indebtedness of the board as having a place in the budget or the items of disbursement, though it would seem that as a matter of fact any indebtedness of the old school districts, existing before the act of 1908, should have a place in them. There is no authority conferred on the county board of education to incur indebtedness in any year in anticipation of the funds to be received by it from the taxes levied by the fiscal court pursuant to its request. A taxing district for school purposes is created as to each city of the first, second, third, and fourth class, and provision is made for its operation by two arms as in case of a comity school taxing district so operated, i. e., a board of education and the city council. In each instance the city board of education is authorized to incur indebtedness in anticipation of the taxes to be received by it. The provision is the same as to each class. It is in these words: “The board shall have power to borrow money on the credit of the board in anticipation of the revenue from school taxes for the fiscal year in which the same is borrowed and to pledge said school taxes for the payment of the principal and interest of said loan: Provided, that the interest paid shall in no ease exceed six per cent (6%) per annum and the principal shall in no ease exceed fifty per centum (50%) of the anticipated revenue.”
Sections 2978a-24, 3235a-25, 3469a-2, and 3587a-16, Kentucky Statutes.' This survey of this legislation would seem to be convincing that a county board of education has no power to incur an indebtedness in anticipation of its revenue. If it has such power it is without any legislative provision conferring the power on it, and it has power to incur an indebtedness to the full extent of the income and revenue coming to it when a board of education of a city of either one of these four classes is limited to 501 per cent, thereof. How then does the matter stand under the decisions of the Court of Appeals? The eases to be considered are the following, to wit: Breathitt County Board of Education v. Breathitt County Fiscal Court, supra; Breathitt County Fiscal Court v. Breathitt County Board of Education, supra; Elliott County Fiscal Court v. Elliott County Board of Education, 193 Ky. 66, 234 S. W. 947, 948; King v. Christian County Board of Education, 229 Ky. 234, 16 S.W.(2d) 1053, 1055; Hockensmith v. Franklin County Board of Education, 240 Ky. 76, 41 S.W.(2d) 656, 659; Fiscal Court of Pendleton County v. Pendleton County Board of Education, 240 Ky. 589, 42 S.W.(2d) 885, 888; Downey v. Board of Education of Logan County, 243 Ky. 66, 47 S.W.(2d) 931.
In the first Breathitt County Case the fiscal court refused to levy a tax required by its board of education, and suit was brought to compel it to make the levy. One item in its *62budget was “old debts unpaid.” Tbe court said: “Tbe board of education cannot arbitrarily fix the rate of taxation in excess of that needed, but the duty rests upon it to exercise a reasonable discretion in preparing the school budget, and it cannot raise a greater sum. by taxation than is reasonably necessary to meet the needs of the schools for the year. It cannot accumulate a surplus in this way, but it can raise sufficient funds to take care of any old indebtedness of the board of education, for under section 4434a-7, Kentucky Statutes, all debts of school districts have become obligations of the board of education, so that the levy may be made to cover all such indebtedness.”
The only indebtedness contemplated in this quotation which was to be eared for by the annual budget and levy was the indebtedness of old districts expressly provided for in section 4434a-7. The second Breathitt County Case was a second appeal of the same ease as the first. The first appeal was from a judgment dismissing the petition which was reversed. The second was from a judgment for plaintiff after answer filed and trial had. In its answer the defendant, the fiscal court, attacked an item in the budget of $6,500, for old unpaid debts. It was held that a demurrer thereto was properly sustained. The court said: “Obviously, the answer makes no triable issue, as it neither specifies the date, amount, nor character of any debt, alleged to be illegal, that is included in the $6,500 total of old debts contained in the budget; nor does it state the purpose for which or names of the persons or any of them to whom the old debts were incurred or are owing.”
And further: “The board of education did not have to specify by date, amount, or otherwise the several items of expenditures totaling $6,500, styled in the budget ‘old debts unpaid.’ If they wére genuine, which should be assumed, it was sufficient to present them by the total amount, as was done, and it was the duty of the fiscal court to provide for their payment in the form presented, unless it was in possession of such information as would have enabled it to charge and prove that in presenting the demand as an item entitled to go into the budget, the members of the board acted corruptly or in bad faith, or that it embraced expenditures not authorized by law.”
Here the court recognized the possibility of a county board of education being liable for indebtedness, and assumed that the $6',-500 embraced in the budget On account of old debts unpaid was legal. This should be viewed, however, in connection with the statement quoted from the opinion on the first appeal, which also recognized such possibility but limited it to the indebtedness provided for in section 4434a-7, Ky. St. It is evident that the item old debts unpaid considered on the second appeal is the same as the item of old debts unpaid on the first appeal. These two cases, therefore, have no bearing on the question as to the power of a county board of education to incur indebtedness. In the Elliott County Case, the county board of education was granted a mandamus against the fiscal court commanding it to levy a tax for the amount of a budget submitted by the board which included an item of $12,000 on account of “Outstanding indebtedness.” It is evident that this indebtedness had not been incurred by the old districts into which the county had theretofore been divided and which the county board of education had been required to assume, but that it had been incurred by that board after their abolishment. The fiscal court attacked the item on two grounds. One was that it had been incurred in violation of section 157 of the Constitution. The court met this with the fact that it was not alleged in the answer of the fiscal court that such was the case. The other was that the Legislature had not authorized its incurrence. Two considerations seem to have been advanced in support of this contention. No notice need be taken of one of them because of its frivolous character. The other was that the statute did not authorize the board to include in its budget an item of outstanding indebtedness. The court’s answer to this was in these words: “While the act of 1920 does not in terms provide that prior indebtedness shall be included in the budget, it must be admitted that the payment of valid debts is as necessary for the proper support and maintenance of schools as for the support and maintenance of any other department of the government, and it is not to be supposed for one moment that the Legislature intended to compel boards of education to repudiate their valid debts by withholding from them the power to include such debts in their regular budgets. We took this view of the question in the ease of Breathitt County Board of Eduea^ tion v. Breathitt County Fiscal Court, supra, and we perceive no reason why that ruling should not be adhered to.”
The court took it for granted that a county board of education can incur indebtedness. It did not inquire into the matter and did not have before it the full argument against the county board of education having power to incur an indebtedness. That no provision *63was made for including indebtedness in the budget was a small and negligible item therein. The full argument is this: There is no provision in the statute authorizing a county board of education to incur indebtedness to any extent. The board has no powers except such as the Legislature confers on it. That it should have certain powers is beside the ease. It is not for the courts to supply an omission of the Legislature. That it did not intend the board to have such power is not dependent solely on the absence of a provision conferring it. There are several considerations which tend in that direction. One is that it is not mentioned as a possible item in its budget. This is weakened somewhat by the fact that, though it was not so provided, the board must have had the right to include indebtedness incurred under the old law and which it was required to assume. Another is that the board was required to assume and pay such indebtedness. This emphasizes the absence of a provision authorizing it to incur indebtedness on its own account. And a third consideration is that in cities of the first, second, third, and fourth classes the board of education is expressly authorized to incur indebtedness, and that this authority is limited to indebtedness in anticipation of income and revenues to be received, and that this indebtedness is limited to one-half of such income and revenue. Because of this last limitation it is so rendered that it is not at all likely that said board will ever have to include outstanding indebtedness as an item in its budget. However, it must be taken that this decision is an authority in support of the position that a county board of education has power to incur indebtedness. A complete statement and analysis of the decision in the Christian County Case will be made later. For present purposes it is sufficient to say that it was a suit by a citizen and taxpayer of that county against its board of education to enjoin it from issuing bonds in payment of its floating indebtedness. That indebtedness had been $150,000, and was then $61,000'. The board was proposing to issue bonds to the extent of $50,000 to provide means to pay that much of its indebtedness. A demurrer to the petition had been sustained, and the court acted on the idea that the petition had been dismissed, which was not the fact. The action of the lower court in this particular was affirmed. The ground of the court’s decision was that the petition alleged no facts showing that the board had no power to incur the indebtedness, and hence that it was invalid. In the course of the opinion the court discussed the question as to the powers of a county board of education to incur indebtedness, and cited the Nelson County Cases as setting forth the law on this subject. It stated that those cases held “that any deficit carried over from one year to another should be taken into calculation in measuring the amount to be expended, or additional debt to bo created in the following year or years to which the deficit or accumulated deficit was carried, and so on as long as any deficit indebtedness exists. As such deficits are created and carried over the amount of allowed expenditures is reduced, and a pleading in such a ease (and to which the present one belongs) should point out, not only the facts hereinbefore referred to, but the further one that the newly created deficit for each succeeding year was permissible when created after taking into calculation the carried-over indebtedness from previous years, and that each annual installment so carried over was itself valid as measured by the foregoing facts.”
It is difficult to make out exactly just what this means. And as I construe the decisions in the Nelson County Cases, it is hardly an accurate interpretation thereof. They require an indebtedness incurred in anticipation of the income and revenue for that year to be paid out of same, and if not so paid to be paid out of the income and revenue for the next year. The income and revenue for the next year is chargeable therewith, and an indebtedness cannot be incurred in that year against so much of that income and revenue. If it is incurred it is invalid. This prevents the indebtedness being carried beyond the next year after it has been incurred and the existence of a large amount of unpaid indebtedness. Under those decisions I do not see how it is possible for a municipality to become indebted as much as $150,000, or even $50,000. The court does not seem to have realized that it was impossible, and the ground of its affirmance of the judgment of the lower court seems to imply that it was possible. It cannot be said that the court decided that a county board of education can incur indebtedness. What it did was to take it for granted that it could and did not question that it might. As to the extent of indebtedness which it might incur, it thought that the matter was governed by the decisions in the Nelson County Cases. It is to be noted that this decision was rendered after seven of the twelve decisions upholding the right of a municipality to fund a floating indebtedness, and that the court cited the decisions in two of them — the Rockcastle and Paris Cases — in *64support of its position that the petition was defective in that it did not allege facts showing that the indebtedness was invalid.
The Franklin County Case was a suit by a citizen and taxpayer of the county against the county board of education thereof to enjoin it from issuing bonds in the sum of $20,-000 to fund an accumulated floating indebtedness that had been incurred by the board because of its spending (mostly for the preceding three years) a sum each year largely in excess of its revenues. The relief sought was based on the grounds that the indebtedness sought to be funded was invalid and that, though it may have been valid, there was no right in the board to fund it. The lower court held that the indebtedness was valid and that the board had the right to fund it, and dismissed the petition. The appellate court reversed the judgment on the ground that the indebtedness was invalid. There was no claim that the indebtedness was incurred in anticipation of the income to be received by the board for the year. It was conceded! that it was in excess of such income. The ground on which it was claimed to be valid was that its budget had not covered the maximum amount which the board had a right to have the fiscal court levy. The position was that if the amount of the budget, to meet which the fiscal court is requested to make a levy, is less than what it might have been the board may incur an indebtedness equal to the difference between the two. The board need not make its budget as large as it is authorized to make it. It has the right to borrow the difference between what it is and what it might have been. This position was based on the decision in Vaughn v. City of Corbin as to a city of the third class. The court doubted whether this holding was sound, but assuming it to be sound it held that it had no application to a county school district operated by two arms, in that the board of education has no power to levy and collect a tax. It said: “A mere cursory reading of the statute forces the conclusion that a county board of education possesses no authority under the law to itself raise and produce any part of the public school fund that it may expend in the maintenance of the public schools. Its authority, in that regard, extends no further than to enable it to request, on certain conditions, the fiscal court of its county to augment the state school funds by levying and collecting a rate of taxes not exceeding the prescribed maximum limit, and if it should make no such request based upon the required conditions, it needs no argument to show that it could not expend the amount of money that could have been raised by such a request, but which it failed and refused to do.”
As to the position taken in Vaughn v. City of Corbin, it said that it “is confined solely to tax-levying authorities and does, not extend to purely an administrative body having no authority or right to levy or collect taxes; but that the latter can expend only such revenue as comes to it through the channels of the law, and if one of those channels be such as is provided in the section of the statutes, supra, which gives' the board of education the conditional right to have enlarged its submitted budget to the fiscal court, such right furnishes no authority for it to become indebted over and above the amount that it sought to obtain by the submission of its budget or budgets to that court.”
This decision supports the position heretofore taken that the twelve decisions conflicting with those in the Nelson County Cases have no application here, in view of the distinction between the character of municipality involved there, which operates by one arm, and that involved here, which operates by two arms. As to the right of a county board of education to incur indebtedness, the court said: “Clearly, as will appear from what we have said, it was the intention of the Legislature that a board of education should operate on the pay-as-you-go plan. Such a plan would result in no hampering of the board in executing and performing its functions; for, if after it has submitted its budget to the fiscal court of the county for the levy of a rate less than the maximum rate that it could have demanded, an emergency should arise, or it should become manifest that an additional levy, not to exceed in all the maximum rate prescribed, will be required, it could then submit an additional budget to the fiscal court accompanied with a request for an additional levy sufficient to meet the emergency, but not to exceed such provided maximum rate. In this manner it could perform its functions to the fullest extent, and at the same time confine its activities within the express provisions of the statute, and which latter, it appears, was enacted for the very purpose of restraining the board of education from expending money and becoming indebted in defiance of such statutory or constitutional restraints.”
The court says nothing as to the right of the board to incur indebtedness against the additional levy after it has been made. Indeed it says nothing as to its right to incur indebtedness against a levy actually made *65and in anticipation thereof. But its statement that it was the intention of the Legislature that the board “should operate on the pay-as-you-go plan” requires that if such indebtedness is incurred it must be paid out of the income and revenue derived therefrom or at the most out of that for the next year. The point decided is simply that a county board of education has no power to incur indebtedness against a levy that it might have requested and might have been made.
The Pendleton County Case was a suit by the board of education against the fiscal court for a mandatory order compelling it to levy 75 cents tax rate in accordance with its budget. In the budget was an item of $5,000’ “for ‘Payment of short term loans.’” This indebtedness was due to an insufficient levy of 50 cents for the previous two years. It was held that the board was entitled to the relief sought. It was based on the Elliott County Case and makes no mention of the Franklin County Case, decided a few months before, and with which it is seemingly in conflict.
It remains to consider the Logan County Case. The county board of education of that county had the power to submit a budget requiring the levy of a 75 cent rate to meet it. On April 4, 1931, it submitted to the fiscal court a budget requiring a 69 cent rate, and that body made the levy requested. Shortly thereafter large school buildings in the county were destroyed by fire. An additional levy of 15 cents bringing the levy up to 75 cents, the maximum rate, together with the insurance, was sufficient to replace them. The board made a request of the fiscal court to make such levy, but it failed to take any action. In anticipation of the yield which such levy would have made, the board borrowed the money necessary to rebuild. January 1, 1932, it discovered that the fiscal court had failed to make the additional levy requested, and on January 20,1932, it adopted a resolution proposing to fund the indebtedness so incurred by issuing bonds therefor. Thereupon a citizen and taxpayer of the county brought suit to enjoin the board from taking such action. It was held that he was entitled to the relief sought. The court, however, held that the indebtedness so incurred was valid. . It said: “Undoubtedly the indebtedness in the instant ease was valid when created, because the board of education had complied with the provisions of section 4399a-8 of the Statutes by submitting an additional budget to the fiscal court accompanied with a request for an additional levy sufficient to meet the emergency.”
As to the remedy of the board, the court held that it might seek a mandatory injunction against the fiscal court to compel it to make the 15 cent levy theretofore requested, or it might carry the indebtedness over into its budget for the following year. The court in so holding recognized that a county board of education may incur a floating indebtedness by borrowing money in anticipation of its income and revenue to be received, but limited its power to carry the indebtedness over, to the next year.
Summing up these seven decisions as to their hearing on the question of the power of a county board of education to incur indebtedness, this is the result: The two Breathitt County Cases have no bearing on the question. They have to do solely with the assumption and payment by the county board of indebtedness incurred by the several school districts into which the counties were divided under the old law. The other five agree to a more or less extent in holding that such a board may incur indebtedness. The Christian and Franklin County Cases assume it rather than directly hold it. The Christian County Case so does in basing its affirmance of the dismissal of the petition by the lower court on the ground that it did not allege facts showing the indebtedness in question was invalid, and not on the ground that it had no power to incur indebtedness. The Franklin County Case so does in holding that the indebtedness there involved was invalid not because it had no power to incur indebtedness, but because it had no power to incur it against a levy which might have been and was not made. The Logan County Case limits the indebtedness which such a board may incur to one incurred in anticipation of income and revenue to be received from a levy. In that cáse it had not actually been but should have been made, and could be compelled. The indebtedness so incurred must be paid out of such income and revenue if possible, and if not possible not later than out of the income and revenue for the next year. To this view the Franklin County Case conforms in its statement that it was the intention of the Legislature that the board “should operate on the pay-as-you-go plan.” That it conforms is recognized in the Logan County Case. The Christian County Case may also be said to conform thereto, in that it is stated therein that the Nelson County Cases govern the incurrence of indebtedness by a county board of education. The Pendleton County Case is not against this view. It is not certain that the Elliott County Case is against it, and if it *66is it is of no weight. The Logan County Case must therefore be taken as determining the law as to the incurrence of indebtedness by a county board of education. Such is the law as to'incurrence of indebtedness'by such a board as I gather if from these five decisions. In taking such to be the law, I lay aside the fact that there is no provision in the legislation’relating to county taxing district for school purposes conferring power on the-county board of -education to incur indebtedness to any extent; a fact not considered by the Court of Appeals in any one of these cases. '
I come now to the question as to the power of a county board of education to fund a floating indebtedness,lawfully incurred, and which is therefore valid. Of course if it has no power to incur an indebtedness to any extent it has no power to fund. If its power to incur indebtedness is limited as held in the Logan County Case, necessarily it' has not the power to fund. According to such holding the indebtedness which may be incurred must be paid out of, the income and revenue against which it is incurred, and if for some reason it cannot be so paid, it must be paid out of that of the next year. That it has to be so paid and that it may be funded, i. e., postponed to a later time, cannot go together. So it was held in that ease that -the indebtedness there involved, which was held to be valid, could not be funded. The decision in that case is therefore a direct authority to the (effect that a county board of education has no power to fund an indebtedness. There is no decision to the contrary. The plaintiff will have it that the decision in the Christian County Case, on the faith of which the purchaser of the bonds here involved claims to have acted, is to the contrary, and that the decision in the Logan County Case in effect overrules it. They are quite confident that such is the case. In view of the position taken therein, that the decisions in the Nelson County Cases determine the power of a county board of education to incur indebtedness, it would be strange indeed if such is the case. This necessitates a more extended consideration of the decision- in the Christian County Clase than heretofore given. The resolution of the county board of education pursuant to which it was proposing .to issue the bonds whose, issuance was sought to be enjoined recited that the indebtedness to be paid had been “legally contracted.” In ■ addition to the prayer for an injunction against their issuance, plaintiff prayed “that defendant be put upon its proof whereby the validity of said $61,000.00 of floating indebtedness, or in any event of $50,000.00 thereof, may be- estimated,” and that “if the validity of such indebtedness is so 'established to the satisfaction of this honorable Court, that it be allowed to be evidenced only in its present form.” A copy of the resolution was filed with the petition as an exhibit. The injunction sought was not only against the issuance of the bonds, but against the payment ‘of the indebtedness in any other way than “at such time or times, no- matter when, as the defendant finds itself in funds available to liquidate the same.” There was no general allegation in the petition that the, involved floating indebtedness was invalid when created, though there was an allegation' that the board that created it “had no authority in law so to do.” Much less was there an allegation of facts showing that such was the ease. The plaintiff's position was that he was entitled to the relief sought, unless the defendant established that the indebtedness was- valid. He seems to have had no idea that it was incumbent on him to allege facts, showing that it was invalid and if denied to establish them. The prayer that if -the validity of the indebtedness was established it be allowed to be evidenced only in its present form, i. e., by notes, and be paid in no other -way than out of funds available for that purpose, was in effect a prayer for an injunction against the issuance of the bonds even though the validity of the indebtedness be established. The, defendant filed at the same time a demurrer and answer. In its answer it admitted all the allegations of the petition, and though it had not styled its pleading, a counterclaim, it sought counter relief by it. It stated that it was “prepared to prove the validity of the indebtedness referred to in its order or resolution of February 4, 1929,” and “that said $50,000 of floating indebtedness intended to be funded, being shown to be valid and a subsisting obligation of this Board, is capable of being funded into bonds by virtue of section 158 of the Constitution of Kentucky.” It prayed that it be permitted to do so; “and that it be authorized to proceed as in the order or resolution of February 4, 1909.” This indicates that it. was thought that Vaughn v. City of Corbin and the cases following it governed the right to fund the indebtedness. A stipulation -by the parties was filed in which was set out the evidence of the floating indebtedness, the duplicate assessments, deilinquent lists, exonerations, etc., for each of the years of the period in which the debt was created. The court stated that the purpose thereof was “to show that if such delinquent *67lists, exonerations etc., for each of the years of the period in which the debt was incurred had not occurred, the revenues would have been sufficient to have met the annual expenses without the incurring of any indebted-, ness.” The lower court sustained the demurrer to the petition and denied the injunction prayed for, but it did not dismiss the petition. It adjudged that the floating indebtedness intended to be funded “was lawfully contracted” and “is now a valid, binding and subsisting obligation,” and that defendant could lawfully fund it by issuing the contemplated bonds. This adjudication was based upon defendant’s pleading. The plaintiff excepted to and appealed from this judgment. The words in which it did so were these: “To which judgment, particularly that portion thereof that authorizes the issuance of «bonds and denies plaintiff’s prayer that defendant be restrained from issuing said bonds, plaintiff by his counsel .excepts and prays an appeal to the Court of Appeals of Kentucky, which is granted.”
The appellate court took note of the fact that the petition had not been dismissed. The litigation, as the court pointed out, was friendly. The plaintiff was represented by the attorney for the concern which desired to purchase the bonds. The court reversed the judgment of the lower court in so far as it adjudged that the indebtedness intended to be funded “was lawfully contracted,” and “is now a valid binding and subsisting obligation,” and directed that court to expunge from its judgment that part thereof. It affirmed the judgment “in all other respects.” This was an affirmance thereof in so far as it sustained the demurrer to plaintiff’s petition, denied the injunction sought, and dismissed the petition; it being assumed that the petition had been dismissed. This affirmance was based on the ground that the petition was defective in not alleging facts showing that the indebtedness referred to therein was invalid. The court said: “If it had gone to the extent of expressly averring that the involved floating indebtedness was illegal, but without stating the facts establishing such illegality, it then would have been insufficient because averring only conclusions and not facts.”
It was held that the statement in the resolution of the board, a copy of which was filed ■with the petition, that the indebtedness had been “legally contracted,” did not help matters, as an exhibit does not supply an omission in a pleading, and the statement was a mere conclusion. The judgment on defendant’s pleading adjudging that the indebtedness had been lawfully contracted and was a valid, binding and subsisting obligation was reversed on the same ground. There was no allegation of facts in defendant’s pleading showing that such was the ease. The court said: “We have seen that, if its answer could be treated as one seeking cross-relief, the same defects existed in it that we have hereinbefore pointed out with reference to the petition, i. e., that it alleged only conclusions and not facts. So that, the entire record -presents to the court no fact upon which a judgment could be based either the one way or the other, i.e., that the floating indebtedness was either valid, or invalid.”
It is in the light of this full and accurate statement of the facts of the Christian County Case that the question whether the Court of Appeals held therein that a county board of education can fund a valid floating indebtedness is to be considered. Plaintiffs’ confidence that a true appraisal of the decision in that case .is that such a board may fund such an indebtedness, is expressed in extravagant language. They say that if such is not the meaning of the decision “there are no terms in the English language.capable of expressing” it. It says to “all the world as plainly as any legislative enactment could say ‘A county Board of Education finding its floating indebtedness to be one validly incurred, it may fund it by issuing bonds.’ ” They say further: “That is exactly the way the world interpreted the Christian County Case, as it had the right to interpret it.”
And further: “The court in the King Case, DID, affirm the power of a Board of Education to issue funding bonds.”
This position is attempted to be made out in two ways. The court affirmed the judgment of the lower court in so far as it sustained the demurrer to plaintiff’s petition, denied his right to an injunction against the issuance of the bonds, and dismissed the petition. The meaning of this is that the court refused to restrain the defendant, the board of education, from issuing the bonds. It follows from this that the court held that the fiscal court had the right to issue the bonds. If such refusal justifies such holding, it would seem to justify it even though the indebtedness sought to be funded was invalid. I cannot see why it does not go this far. If the mere refusal of a court to restrain the issuance of bonds is a holding that they may be rightfully issued, there is no limitation on the right to issue them. Plaintiffs, however, will not have it that the holding goes this far. It goes no further than holding that the *68board has the right to issue them if the indebtedness is valid. They would so limit it because the petition prayed for an injunction against the issuance of the bonds even though it should be held that the indebtedness was valid. This set up the claim that the board has no right to fund valid floating indebtedness. The position that such was the holding of the court is a mere inference from the refusal to restrain the issuance of the bonds. The court in its opinion said not a word to this effect. The position is unsound, and it is incapable of justification. Had the appellate court delivered no opinion and confined itself to affirming this portion of the judgment without setting forth the reason for its action, the judgment so affirmed would not have been res adjudicata as to the right of the defendant board to issue the bonds in a hew suit brought by plaintiff against it. This would be so because there were two grounds upon which the judgment could be based. One was that it did not appear from the petition that the indebtedness sought to be funded was invalid. The other was that even though it was valid there was a right to fund it. It could not be told on which ground the judgment was based. In such a ease the judgment is not res adjudicata on either ground. In Russell v. Place, 94 U. S. 606, 608, 24 L. Ed. 214, it was said: “It is undoubtedly settled law that a judgment of a court of competent jurisdiction, upon a question directly involved in one suit, is conclusive as to that question in another suit between the same parties. But to this operation of the judgment it must appear, either upon the face of the record or be shown by extrinsic evidence, that the precise question was raised and determined in the former suit. If there be any uncertainty on this head in the record, — as, for example, if it appear that several distinct matters may have been litigated, upon one or more of which the judgment may have passed,. without indicating which of them was thus litigated, and upon which the judgment was rendered, — the whole subject-matter of the action will be at large, and open to a new contention; unless this uncertainty be removed by extrinsie evidence showing the precise point involved and determined.”
But the judgment in the Christian County Case was not affirmed without opinion. An opinion was delivered giving the reasons for the court’s action. There is no uncertainty as to that reason. It so acted because the petition did not allege facts showing that the indebtedness sought to be funded was invalid. It did so for that reason and none other. It did not so do because the board had the right to fund the indebtedness if it was valid. It did not pass on that question. It was not necessary for it to do so in view of the fact that the plaintiff was not entitled to the injunction on the other ground. The court took pains to point out that its judgment was not res adjudicata even as to the validity of the indebtedness. It was only such as to the question that the petition did not allege facts showing that it was invalid. It said: “The dismissal of a pleading because of its omitting to state essential allegations is not a bar to a subsequent proceeding seeking the same relief even though it be between the same parties.”
If then the judgment in the Christian County Case affirmed by the appellate court is not a bar to the litigation of the question in a new suit brought by plaintiff against’the defendant to enjoin the issuance of the same bonds either as to the validity of the indebtedness or as to the right to fund it if valid, how is it possible to say that the appellate court by its action in this particular held out to all the world that the defendant had power to issue the bonds if the indebtedness was valid. The position is absurd. It amounts to this: If one does not deny a proposition when the occasion does not call for an expression on it, though it affords an opportunity for it, he affirms it.
The other way in which the position under consideration is'attempted to be made out is this: In the decision of the appellate court reversing the judgment of the lower court, based on the defendant’s pleading, the reversal was confined to its adjudication that the indebtedness had been lawfully contracted and was a valid, binding and subsisting obligation. It said nothing as to its adjudication that the defendant could lawfully fund it by issuing the contemplated bonds. This was a mere omission. The reversal thereof followed necessarily from the reversal of what was expressly mentioned. It was not essential that it be expressly said that it was reversed also. This is on the principle that the tail goes with the hide.
That its decision in the Christian County Case meant no more than that the petition did not allege facts showing that the indebtedness sought to be funded was invalid was recognized by the appellate court in the Eranklin and Logan County Cases. In the one it was said: “The relief therein sought (which was the approving by the court of contemplated bonds for the funding of a floating indebtedness of the county board of edu*69cation) was denied by that opinion because it was not shown that the indebtedness proposed to be funded was valid.”
It said further on the subject of the right • to incur the indebtedness: “The question as to how and when, if at all, a county board of education could become indebted *' * * was not determined.”
In the other case it said: “The question as to whether or not a county board of education could, under any circumstances, fund even a valid floating indebtedness was not determined in that case. The only question decided was that the pleadings did not present facts showing that the indebtedness proposed to be funded was valid.”
The Court of Appeals therefore did not hold in the Christian County Case that a county board of education has the right to fund a valid indebtedness, and there is nothing in its opinion to justify an investor in thinking that it was so held. All that can be said is that there are indications in its opinion in that case and in the Logan County Case that it did not have a clear conviction that such a board did not have such a right, and did not speak out emphatically against it. It seems to have had a vague idea that possibly it might have such right in some ease. In the Christian County Case it said: “Under the harmony course that we have adopted herein, we will pursue the discussion upon the theory that the' court dismissed the petition. In that event the dismissal could not be treated as an adjudication of the validity of the involved indebtedness so as to permit it to be funded by defendant through the issual of the proposed bonds.”
In the Logan County Case it said: “Whether or not a county board of education can fund by the issuing of bonds a valid floating indebtedness under any circumstances is not presented.”
This is to be accounted for by the fact that the decisions in the Vaughn v. City of Corbin and eases following it had muddied the water as to funding valid floating indebtedness. But there is nothing in these expressions to justify the investor in thinking that it was the opinion of the Court of Appeals that a county board of education can under any circumstances fund a valid floating indebtedness, conceding the possibility that there may be such an indebtedness.
The conclusion, therefore, must be that the defendant had no power to fund the floating indebtedness merged in the bonds in suit, even though it may have been valid. Thus far in the discussion I- have assumed that the floating indebtedness was valid. But such was not the ease. The evidence establishes beyond question that it was not. On July 1, 1926, the defendant was free from debt. This indebtedness was all incurred within two and a half years prior to its funding and at the dates of the several notes representing it. It would seem to have been incurred in building and equipping a schoolhouse at Woodbine, in Whitley county. No part of it was incurred in anticipation of income and revenue to be received. The first borrowing was of $5,000 on June 4, 1927. July 1, 1927, was the end of that fiscal year. All of the income and revenue for that year had been collected and expended. Each of the other sums borrowed was in excess of what could be paid from the income and revenue of the year'when created. The case might have been disposed of on the ground that this indebtedness was invalid without the extended consideration given to the question whether the defendant had power to fund it if it was valid had it not been for the recitals in the resolutions of defendant authorizing the issuance of the bonds and in the bonds themselves. The first five of those in the resolutions were as follows:
(1) Beginning with the year 1919 and terminating with the year 1929 delinquencies and losses in the taxes accruing to the defendant produced a deficiency in its income account aggregating $16>000 at the end of the year 1929.
(2) During those years the obligation was entailed on the defendant to pay the costs of properly conducting the schools, providing a minimum salary of $75 per month for teachers, but requiring it in many cases to exceed that minimum in accordance with the schedule of salaries fixed by the state board of education, and pay the tuition for county school districts in the county, all of which was attempted to be done out of the yearly revenues which were depleted from year to year and proved insufficient for those purposes.
(3) To meet those costs from year to year it became necessary to borrow money, and these loans were represented by notes and other evidence of debt aggregating $16,000, which were then outstanding against defendant.
(4) But for the losses in the revenues accruing to the defendant they would have been ample to pay these costs without the necessity for borrowing money therefor.
(5) The proportion of the floating indebtedness incurred in any one of the years *70from 1919 to 1929, together with all other obligations incurred in any such year, were not in excess of the revenues accruing to the defendant for any of those years.
The recital in the bonds was as follows, to wit: “It is hereby certified and recited that all acts, conditions and things necessary to he done precedent to and in issuance of this bond in order to make it legal, valid and binding obligation of said county school district and of said Whitley County Board of Education have been done, have happened and been performed in regular and due form as required by law * * * that no limitation of indebtedness or taxation, either constitutional or statutory has been exceeded in issuing this bond.”
Each one of these statements in the resolution and bond was untrue. It was utterly without basis. No justification or excuse for them has been offered. They came from the purchasers of the bonds who prepared them for adoption and insertion. How far they were aware of their untruthfulness does not appear. It is certain that the plaintiffs, subsequent purchasers of them for value, were not aware thereof, and that they purchased them in good faith relying on their truthfulness. This gives rise to’the question whether defendant is estopped to deny them. It is possible that by reason of them it is es-topped to deny the validity of the indebtedness, but not the power to fund it. Hence the necessity of determining the existence of such power, to which so much of this opinion has been devoted. I have had occasion to present the law on the subject of estoppel of recitals in such bonds in the case of Dietrich v. Bath County, Ky. (D. C.) 292 P. 279; Eyer & Co. v. Mercer County, Ky. (D. C.) 292 P. 292.
My decision in the Mercer County Case was affirmed in Mercer County v. Eyer (C. C. A.) 1 F.(2d) 609.
The appellate court of this circuit has followed its decision in that ease in Henderson County, Tenn., v. Sovereign Camp, W. O. W., 12 F.(2d) 883; State Bank v. Henderson County, Kentucky, 35 F.(2d) 859.
Since these decisions I have rendered judgments on bonds issued by Pulaski and Morgan counties claimed to be invalid, and which probably were, because of recitals in the bond estopping those counties, respectively, from raising the question of invalidity, from which no appeals have been taken. My conception of such law as thus presented is this: Recitals ¡in bonds issued by municipalities are effective as an estoppel only whore they have legislative authority to issue them. Where there is no such authority they are of no avail. They may be effective where there is legislative authority to issue the bonds and they relate to the existence of the conditions on which alone authority to issue them exists. In order for them to be effective in this particular it is essential that they be broad enough to state that the required conditions exist, and the municipality must have authority to make them. If either they are not so broad or, if the making thereof is not authorized, they are and can be of no avail. Authority to make them need not be express. Usually it is implied. It is implied where the purchaser cannot readily determine for himself the’ existence of the required conditions. This is essential in order to enable the municipality to sell them. Here it is open to say that the plaintiffs could readily have ascertained whether the recitals relied on were true and whether the floating indebtedness for which the bonds in suit were issued was valid, and hence that there was no authority on the part of the defendant to make the recitals, and for that reason there can be no recovery on the bonds. But, however this may be, it is certain that there was no legislative or' constitutional authority for their issuance. The plaintiffs were bound to take notice of this whatever may have been the recital on the subject. It follows that I feel constrained to hold that plaintiff cannot recover, and that their bill must be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219111/ | ADLER, District Judge.
These two suits have been tried together. They are both patent infringement suits and each of the twelve patents involved relate to milk can washing machinery or to a process therefor. The patents in suit and the claims alleged to be infringed are as follows:
First Suit.
Patent No. 1,172,808 granted February 22, 1916, to' Lathrop and Paulson. Claims 4, 5, 6, 7, 8, 9.
Patent No. 1,247,692 granted November 27, 1917, to Lathrop and Paulson. Claims 1, 2, 3, 7, 8, 9.
Patent No. 1,249,129' granted December 4, 1917, to Lathrop and Paulson. Claims 1, 2, 3, 4, 6, 7, 8.
Patent No. 1,249,130 granted December 4, 1917, to Lathrop and Paulson. Claims 4, 5, 6.
Patent No. 1,255,896 granted February 12, 1918, to Lathrop and Paulson. Claims 1, 2, 3, 4, 5.
Patent No. 1,336,570 granted April 13, 1920, to Lathrop and Paulson. Claims 1, 2, 12,13,14.
Patent No. 1,336,567 granted April 13, 1920, to Lathrop and Paulson. Claim 1.
Patent No. 1,396,516 granted November 8, 1921, to MeEwan. Claims 1, 2.
Patent No. 1,578,451 granted March 30, 1926, to MeEwan. Claims 1, 2, 3, 4, 5.
Patent No. 1,649,073 granted November 15, 1927, to MeEwan. Claim L
Second Suit.
Patent No. 1,094,785 granted April 28, 1914, to Green. Claims 1, 2, 3, 4, 5, 6, 7.
Patent No. 1,249,129 granted December 4, 1917, to Lathrop and Paulson. Claim 8.
Patent No. 1,249,130 granted December 4, 1917, to Lathrop and Paulson. Claims 4, 5, 6.
Patent No. 1,255,896 granted February 12, 1918, to Lathrop and Paulson. Claims 4, 5.
Patent No. 1,653,219 granted December 20,1927, to Lathrop’. Claims 1, 2,3,4,5.
The first suit concerns a so-called straightaway type of can washing machine in which cans in. inverted position are put through a machine by intermittent movement, during which the cans are successively rinsed, cleaned, sterilized, and dried, and after which they are reversed to upright position and covers applied to them that have been advanced through the machine with the cans, so that a cover has been brought into position from which it can be placed onto a can automatically, after the can has been reversed into an upright position.
The second suit concerns a can washing machine of the rotary type in which the cans (in inverted position) and the covers are placed on a horizontally rotatable carriage, which is inclosed and provided with an opening through which the cans and covers are introduced and removed. In this machine also cans and covers are rinsed, cleaned, and dried, but no provision is made for reversing the cans or for applying the covers automatically, as in the straightaway machine.
In general the patents cover “successive inventions and improvements in the machines or apparatus for use in the mechanical and automatic handling of milk cans and covers in dairies, creameries and the like, during and following the mechanical washing, sterilizing and drying of the cans and covers, after the milk has been dumped into a receiving vat or tank.” (Plaintiff’s brief.)
Referring first to defendant’s straightaway machine on which it has been sued, it appears that the machine of the defendant is a can washing machine in which cans and covers are put through the machine by intermittent movement, during which the cans are successively rinsed, cleaned, sterilized, and dried, and after which they are reversed to upright position, and covers are applied to them that have been advanced through the machine with the cans, so that a cover has been brought into position from which it can be placed onto a can, after the can has been reversed into an upright position, but that the guides on which the can and covers are respectively advanced *72in defendant’s machine are positioned in different relation to each other in defendant’s machine from their relation to each other in plaintiff’s patents on the straightaway type of machine, and that the mechanism of the patents whereby the covers are placed upon the cans is not the same as the mechanism employed for that purpose in defendant’s machine, as will be pointed out.
Defendant’s straightaway machine is shown by charts, Plaintiff’s Exhibits 8-12, inclusive, and charts introduced by defendant as Exhibits 93 and 93A. The same reference numerals are used on both sets of charts. The' following is a brief description of defendant’s straightaway machine by the functions that it is called upon to perform; the reference numerals of the chart being used to identify the parts. The cans are moved intermittently along tracks or guides 17 by reciprocating dog bars 22 on which are pivotally mounted dogs or pawls 23, that are balanced so as to assume normally a position to engage the cans, but will pass freely under the can on rearward movement of the dog bar 22. In the same way covers are .moved along a guide rail 20 by dogs 29 on a dog bar 26. These dog bars 22 and 26 are connected together at the discharge end of the machine by a transverse bar 42. As the can is moved along the track 17 by the dogs 23 and comes to its first stop, it operates a cold water valve 61 so that the can receives a preliminary rinsing. In the next position of the can on the track 17 it is treated internally and externally with a soda solution from nozzles 77 and 79, and in its next position it is treated with hot water from nozzles 114. On assuming other positions on the track 17, a mixture of hot water and steam is discharged against both the can and cover, after which they are sterilized by steam. And, finally, the can and cover is subjected to a discharge of hot air to dry them. Prom the track 17 the can is delivered to a reversing cradle 154, and at the same time, by the action of the cradle that holds the cans, the cover is delivered to a receiving member 159 operatively connected with the can reversing cradle, whereby the cover is delivered to an inclined platform 165 where it rests temporarily right side up ready to be released automatically when the can reaches a position to receive it, when it slides by gravity in a forward direction and falls onto the neck of the can. After the can has been reversed and deposited right side up on a track 174, it is moved by dogs 173 to the end of the track from which it is pushed onto a roller conveyer 175.
Claims 4 — 9, inclusive, of Patent No. 1,172,-808, are alleged to be infringed by defendant’s straightaway- machine. These claims describe in terms that are broad the combination with a main can guide, a can discharge platform, and a can reversing rack, of a cushioning device on an inclined discharge platform adapted to receive the can. The cushioning device of the disclosure is in the form of a pivoted plate, held normally by a weight in position above the platform on which the can is deposited after having been reversed into upright position. The parts of defendant’s straightaway machine claimed to correspond with this cushioning device are the pawls 173 whose function it is to place the cans onto a discharge platform. Any cushioning effect for which the pawls 173 are responsible is casual, incidental, inadequate, and, therefore, immaterial, and claims 4^8, inclusive, are not infringed. Claim 9 is drawn on the minor feature of a roller 52 on the end of the can reversing rack for the double purpose of preventing the can from sliding out of the rack while being reversed and overcoming any friction that might retain the can within the rack, after the rack has completed its rotary movement. In defendant’s straightaway machine there is a lip 154B that serves the purpose first mentioned, as an obvious mechanical expedient. If claim 9 can be sustained, it must be limited to the specific device, which is a roller. Therefore claim 9 is not infringed.
Claims 1, 2, 3, 4, 6, 7, and 8 of Patent No. 1,249,129' are also alleged to be infringed by defendant’s straightaway machine. The distinctive feature of claims 1, 2, 3, 4, 6, and 7 is the mechanism for performing the function of applying a cover to a can after it has been reversed and placed on the discharge guide or platform. In these claims 1, 2, 3, 4, 6, and 7 a mechanism is called for that is operated by the can in its passage along said discharge guide. In defendant’s straightaway machine the cover releasing and applying mechanism is not actuated by the can, but positively by the driving mechanism. Claims 1, 2, 3, 4, 6, and 7 are not infringed. The mechanism described in claim 8 includes as essential elements, valves for controlling the supply of fluid for cleansing the cans and covers, and means for actuating said valves simultaneously with the_ can and cover moving members. Means for simultaneously actuating said valves and said can and cover moving members are not found in defendant’s machine. Claim 8 is not infringed.
Claims 1, 2, 3, 7, 8> and 9 of Patent No *731,247,692 axe also alleged to be infringed by defendant’s straightaway machine. The distinctive feature of claims 1 and 2 is mechanism described in different terms but performing the function of receiving a cover from the cover-guide and depositing it on a can. In claim 1 this element is described as comprising “a pair of vertically movable members between which the cover is adapted to slide.” In claim 2 these members are described as “swingingly mounted,” and as “normally assuming a downwardly inclined position,” and as provided with means for holding said members in elevated position to arrest the movement of a cover positioned between them and for releasing them at a predetermined time in order to permit them to swing downwardly and release the cover. In claims 7, 8, and 9 the guides for the cans and covers are described as inclined so that the cans and covers slide down them by gravity. These claims also describe in broad terms the means employed for arresting them while a cover is above a can, and for guiding the cover from the cover-guide and depositing it on the can when the can and cover are released. In the specification the vertically movable members between which a cover is adapted to slide are the plates 36 and 41, which are adapted to release a cover by pivotal movement of the plate 41. In guiding the cover onto the can plate 41 cooperates with plate 36. In defendant’s straightaway machine the cans and covers axe advanced through the machine by corresponding step-by-step movements. The cover is delivered from the washing machine onto a forwardly inclined platform 165, where it is arrested by a detent 168. When the detent 168 is raised by positive action, so as to release the cover, the latter slides by gravity from the platform 165 onto the can and no guides axe employed to perform the functions of the plates 31 and 41 of this patent. The mechanism described in the patent is not adapted to serve the purpose of transferring a cover from a cover-guide located alongside the can-guide on which the covers are supported on their rims) as in defendant’s machine, and the mechanism employed in defendant’s machine could not be used in the machine of plaintiff’s patent where the cover-guide is located over the can-guide. Accordingly claims 1, 2, 3, 7, 8, and 9 axe not infringed.
Claims 4, 5, and 6 of Patent No. 1,249,130 are also alleged to be infringed by defendant’s straightaway machine. It appears from the file wrappers that when filed the application on which this patent issued contained two sets of claims, one on the conveying mechanism, the other on the washing mechanism. Also that the claims retained were drawn on a machine of a type in which the covers are located above the can-guides, an arrangement favorable to the utilization of the cleansing fluid dripping from the covers for cleansing the exterior of the cans (see claims 4 and 5 of Patent No. 1,255,896, issued as'a division of this patent). The distinctive feature of said claims, 4, 5, and 6 is described in the claims as follows, namely: “a rigid connection between said series of engaging devices for effecting unisonous movement thereof, substantially as described” (claim 4); “means extending between and rigidly connecting said elements for effecting unisonous movement thereof, substantially as described” (claim 5); and “an operative connection between said series of engaging devices for effecting unisonous movement thereof, substantially as described” (claim 6). All three of the claims expressly describe a machine that “comprises superposed can and cover guides; (and) means for individually and intermittently moving said cans and covers simultaneously along said guides, said means comprising two series of reciprocating spaced engaging devices adapted for engagement with the cans and covers.” Except for the fact that in defendant’s machine the cover-guide is located alongside the can-guide and not over it, so that these guides are “superposed,” as described in the claims, all three claims read on defendant’s structure.
The question is whether plaintiff in this patent has disclosed means “for effecting unisonous movement” of the parts by a rigid connection between the can and cover engaging devices, that defendant has appropriated. In the machine of the patent this is accomplished as follows: Pawls adapted to engage and move the cans are pivotally arranged along reeiproeatory bars 18 arranged alongside the lower guide rail 17.. Another set of pawls carried by a reeiproeatory bar 23, arranged between the upper guide rails 17, serves to feed the covers. These two feed mechanisms are connected together for simultaneous operation by vertical bars 28, attached rigidly to the bars 18 and 23 at their rear ends, and stops cooperate with the pawls for limiting the movement. The operating bars are operated manually by a lever 29 fulerumed at 30 by means of the following mechanism, namely, an arm 31 of the lever 29 projects beyond the fulcrum 30 and extends upwardly for connection through the link 32 with the rocker arm 33, pivoted at 34 to the *74frame 15. The upper end of said rocker arm 33 is connected with an arm 35, that is pivot-ally mounted on an element 36, that is mount■ed to slide between guide bars 37. Finally, arm 35 is connected with the connecting bars 38 which rigidly connect the rear ends of the feed bars 18 and 23. In defendant’s straightaway machine the feeding mechanism is power driven for continuous operation, and the cover-guide is located alongside the can-guide. The pawls 251 for engaging and moving the cans are pivoted to reciprocating bars 22 and the latter are located alongside the guide 17. The other set of pawls 29 for engaging and advancing the covers, is carried by the reciprocating bar 26. The reciprocating bar 23 for the cans is level with the bar 26 for the covers and they are connected at the discharge eñd of the machine by the transverse bar 43. This operating bar 42 is operated by an electrie motor 44 through the following eonneetions, namely, link 56, lever 53 pivoted at 54, roller 55, camway 52 on disc 57 on shaft 50 that ha? gearing connection with a horizontally extending, horizontal drive shaft 45 coupled to the motor 44. Taking into consideration the difference in the organization of the machines (in defendant’s machine the can and guide covers being located side by side and in plaintiff’s machine being superposed), and the fact that the machine of the patent is manually driven whereas defendant’s machine is power driven, the ultimate question is, whether the operating mechanisms compared above perform the same function in the same way, so that in the disclosure of the patent defendant had available for his purposes, a complete disclosure of an intermitten.tly operated mechanism, for simultaneously feeding cans and cover? in unison, suitable for a machine that is power driven and has its cover-guides arranged side by side instead of being superposed, as shown and described in the patent. The file wrapper contains an original claim in which the elements are described as,
“Comprising a guide for the objects to be cleaned; and means for individually and intermittently moving the objects along said guide, said means comprising a plurality of spaced pivotally mounted engaging devices for unisonous reciproeatory movement) substantially as described.”
This original claim was rejected and caneeled. The three claims in suit are distinguished from this rejected claim in that they call for can and cover-guides that are superposed, so as to make possible the washing of the covers and the outside of the cans in the manner described in the patent in detail, and covered in patent No. 1,255,896, that issued on the divisional, application. To ignore the explicit restriction of these claims to a machine in which the guides are superposed would be to give the plaintiff a monopoly op both types of machine (though the primary purpose of the construction was to make it possible to use the water from the covers to wash the outside of the cans beneath them), because a minor structural feature that is obviously necessary for any arrangement of separate guides when the objects are to be moved in unison, is made use of in'defendant’s machine. Accordingly it is held that claims 4, 5, and 6 are not infringed.
Claims 1, 2, 3, 4, and 5 of Patent No. 1,255,896 are also alleged to be infringed by defendant’s straightaway machine. This patent was granted on a division of the application on which was granted the patent last discussed (No. 1,249,130). It was filed in order to claim washing mechanism held by the patent office to constitute a distinct and independent invention from that of claims proper to the specific conveying mechanism of these applications. Claims 1, 2, and 3 are on valve control mechanism and claims 4 and 5 are on means for utilizing the cleansing fluid for cleansing the outside of the cans after it has been used to spray the covers. Claim 1 calls for a combination of mechanism for feeding intermittently objects to be cleaned with means for spraying the object when it reaches a position where the spraying means is located.
(a) A valve (24) governing the discharge of fluid towards the object; (b) a movable element (the lever 26) for operating said valve; (e) means (the rod 31) for actuating said movable element (26), these parts (b) and (e) being normally “out of operative relation”; and (d) means (the front end of the lever 36) for moving the element (b) so that it will be operated when the can arrives in position to receive the discharge.
In defendant’s machine the valves are positively actuated by direct engagement by the neck' of the can with the valve lever, so that elements (e) and (d) are lacking. The difference in the requirements of a hand operated machine and a power driven machine, and the difference in organization with respect to the relative positions of the can-guide and cover-guide, called for different valve-operating mechanism, as seen on comparing defendant’s mechanism for this purpose with that of the patent. Claims 1, 2, and 3 are not infringed. Claims 4 and 5 are drawn on means *75for using the cleansing fluid over again when the cover-guide, is located above the can-guide, so as to make it possible to utilize the drippings from the covers to spray the outside of the cans. As explained above,' the can and cover guides are not so arranged in defendant’s machine. Claims 4 and 5 are not infringed.
Claim 1 of Patent No. 1,336,567 is also alleged to . be infringed by defendant’s straightaway machine. This claim calls for a can reversing mechanism, comprising (1) an oscillatory cradle adapted to receive and reverse a can, (2) means for actuating the same, comprising an oscillatory arm, (3) a reeiproeatory bar adapted to rock said arm, (4) a shoulder on the arm adapted to engage with the reciprocatory bar to lock it in can reversed position. The distinctive feature is the shoulder 251, designed to retain the cradle in can-reversed position until by use of the hand lever 13 the actuating bar has begun to return the cradle to the position where it receives the can. Defendant’s machine is positively driven by power, and because of fundamental structural differences has no need for a part corresponding in function to said shoulders. The claim is not infringed.
Claims 1 and 2 of Patent No. 1,396,516 are also alleged to be infringed by defendant’s straightaway machine. The novelty consists in substituting a fork 12 for the shoulder 251, referred to above as the distinctive feature of patent No. 1,336,567. As pointed out in the discussion of the other patent, defendant’s machine is actuated by positive connections with a source of power. In plaintiff’s machine there is a tendency for the saddle or cradle 4 to continue its motion under gravity and momentum, so that the can will be delivered violently, unless provided against. The fork 12 is designed to prevent this by engagement with the roller 13. In defendant’s, obviously, such provision is absent and unnecessary. Claims 1 and 2 are not infringed.
Plaintiff has asked permission to withdraw patents Nos. 1,444,925 and 1,525,304. They are eliminated.
Claims 1-5, inclusive, of Patent No. 1,-578,451 are also alleged to be infringed by defendant’s straightaway machine. It is sufficient to state, without going into detail, that there is no such resemblance in construction or operation between the mechanism of this patent and that of defendant’s machine as to make it possible to maintain infringement of any of these claims. They are not infringed.
Claim 1 of Patent No. 1,649,073 is also alleged to be infringed by , defendant’s straightaway machine. This claim describes a platform on which the can is deposited after having been turned right side up, characterized by rollers and a stationary side-bar on which the can lands. These features are absent from defendant’s machine. The claim is not infringed.
It is also alleged that defendant’s straightaway machine infringes claims 1, 2, 12, 13, and 14 of Patent No. 1,336,570. The distinctive feature of claims 1 and 2 is a combination in a can washing machine with means for intermittently feeding the cans of (a) means adapted for operation by a can in traveling through the machine for starting operation of said can feeding means and (b) automatic means for stopping said feeding means after one feeding operation, substantially as described. This principle of operation has not been adopted in defendant’s straightaway machine. In defendant’s machine there is continuous operation of the mechanism by which the motor operates the feeding means, whereas in the machine of this patent provision is made for stopping the feeding mechanism after each step in the cleansing operation until another can has been put into the machine. Claims 1 and 2 are not infringed. Claims 12, 13, and 14 are drawn on a machine of the type described in the patent in which the can cover-guide is located above the can support and cans and covers are intermittently advanced along their respective guides. In defendant’s machine the cover-guide is not placed above the guide for the can, as has been pointed out in discussing the alleged infringement of other patents also involved in this suit. In claim 14 this cover-guide is explicitly described as located above the can-guide, but in claims 13 and 14 the relative locations of the can and cover guides are not specified. Claim 12 includes also an element described as, “automatically retracting stops limiting the extent of insertion of articles onto said supports (the can and cover guides).”
Claim 13 includes elements described as, “Means, set in the path of a can entering said machine and operable by said can, for starting operation of said can and can cover feeding means, and automatic means for stopping said feeding means after one feeding operation.”
And claim 14 includes elements described as, “A reciprocating carriage operating said can and said cover feeding means, automatically retracting steps limiting the extent of insertion of a. can or cover into said machine; a lever, set in the path of a can entering said *76machine and operable by said ean; a ean carried by said lever; and a clutch controlling the reciprocations of said carriage, said clutch being operatively connected with said can, substantially as described.”
This mechanism comprises stop arms 47 pivoted at 48 to the sides of the reciprocating carriage 16, extended so as to “limit the extent of insertion of a can to proper position for engagement by the corresponding pawls 11,” and adapted to ride upon stationary can blocks 50 secured to the tracks 7. A similar stop for the covers is also provided. Defendant’s machine makes no provision either for starting operation of the can and cover feeding mechanism by the can on engaging with means set in the path of the ean, or for automatically limiting the extent of insertion of a ean or cover into the machine by automatically retracting stops. Claims 12, 13, and 14 are not infringed.
We come now to the question of infringement of certain claims of the six patents on which defendant is sued in Equity Case No. 331, on its rotary machine. The earliest of these patents is No. 1,094,785. All of its seven claims are alleged to be infringed. This patent expired April 28, 1931, so that infringement, if found, ean result only in an accounting. The elements claimed in combination are: (a) A chamber for water, having an annular rim with a gateway; (b) a rotary carrier, having supports for the cans; (e) a movable housing on the rim, circumferentially adjustable and open at one side; (d) a cover for the housing; (e) a plurality of radial partitions forming compartments, with water-tight joints at the outer edges; and (f) 'means for spraying from below cans within the compartments. In defendant’s rotary machine there is no element corresponding to or the mechanical equivalent of the element (c) above. This feature is an element in all of the claims. The machine is hand operated, and the housing is made adjustable not only to enable the cans to be inserted, but to make it possible for the operator by grasping a partition wall to rotate the carrier, when the edge of a partition is exposed by the rotation of the housing (speen. pp. 85-99). In defendant’s machine the housing 15 is immovable. The rotary carriage is loaded through an opening in the housing and the carriage is power driven. The claims are not infringed.
It is also alleged that claim 8 of Patent No. 1,249,129 is infringed by defendant’s rotary machine. The claims of this patent, including the eighth, are drawn'on a machine of the straightaway type in which the cans and covers are moved intermittently and correspondingly advance the cans and covers along their respective guides for cleansing. It describes a machine of a different order from defendant’s rotary machine. Claim 8 is not infringed.
It is also alleged that claims 4, 5, and 6 of Patent No. 1,249,130 are infringed by defendant’s machine. These claims have been discussed in connection with defendant’s machine of the straightaway type. All three claims were found to be drawn on a machine of the straightaway type in which can and cover-guides are superposed. Defendant’s rotary machine bears no resemblance to such a machine. The claims are not infringed.
It is also alleged that claims 4 and 5 of Patent No. 1,255,896 are infringed by defendant’s rotary machine. These claims have been considered in connection with defendant’s straightaway machine. In defendant’s machine the fluid after use is returned to a common supply tank. The claims are not infringed.
Finally, it is alleged that claims 1-5, inclusive, of Patent No. 1,653,219, are infringed by defendant’s machine. These claims were allowed over patent to Green also in suit and other patents of the prior art cited by the Examiner, even after applicant had pointed out that the claims were limited to details not shown in the patents cited, “especially in regard to providing a movable, hood whereby access may be had to a selected compartment at any place about the washer during the rotation of the section,” enabling the attendant to inspect any compartment at any time “to adjust the washing devices and ascertain whether the cans are being properly cleansed.” The rotatable hood is an element of all-five claims, and it is not found in defendant’s machine. Other structural details inserted in these claims to distinguish them from the pri- or art cited by the' Examiner, are not found in defendant’s machine. The claims are not infringed.
There are no claims in either of these suits Nos. 201 and 331 that are infringed by either defendant’s machine of the so-called straightaway type or by defendant’s machine of the rotary type.
Decrees may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219114/ | KENHERLY, District Judge.
Statement of Pleadings.
Plaintiff, a Texas corporation, sues the defendant, the United States of America, in its capacity as owner of merchant vessels operated by the United States Shipping Board, and/or the United States Shipping Board Merchant Fleet Corporation, upon an alleged or so-called arrangement, agreement, or contract of indemnity. It is alleged:
That plaintiff maintained a force of employees (longshoremen) to do the stevedoring work of defendant, i. e., load and unload cargoes into and from defendant’s vessels, at Corpus Christi, Tex., and that, in connection with such work, defendant obligated itself to, at its own cost and expense, carry liability insurance protecting plaintiff against all liability by reason of injury to any of such employees. That defendant arranged for such a policy or policies of insurance with the Lumbermen’s Reciprocal Association of Texas, whereby such association obligated itself to assume, pay off, and discharge any such liability of plaintiff to any such employees.
That Donie Means, one of such employees, was injured while engaged as a longshoreman on board, and loading, the steamship Chatala owned by defendant, but that such association failed and refused to pay, as required by such policy or policies of insurance, the liability fixed against it under the Longshoremen’s and Harbor Workers’ Compensation Act (chapter 18, title 33 USCA §§ 901-950), because of such injury to Means. That such association is insolvent, in the hands of a receiver, and unable to respond to any judgment that plaintiff may obtain against it. That by reason thereof, plaintiff was forced and compelled to, and did, pay to Means the amount of the liability so fixed in favor of the said Means against said association, or a part thereof, and that, under the contract between plaintiff and defendant, plaintiff is entitled to recover from defendant the sums of money so paid by it to Means.
Defendant demurred to plaintiff’s petition. The demurrer was overruled, but subject to the right of defendant to present the same questions upon trial of the case, on its merits. The defendant’s answer puts in issue plaintiff’s allegations. This is a trial of the ease on the merits.
Findings of Fact.
(1) Since some time prior to June, 1919, the Merchant Fleet Corporation vessels of the United States Shipping Board have been operating in the Gulf ports of Texas, and have been stevedored there by private stevedoring contractors. Before August 7, 1919', the stevedoring contractors paid the insurance premiums covering the insurance of longshoremen while at work on government vessels, and the stevedoring bills rendered by the contractors included the cost of such insurance, which varied according to the loss experience of the several stevedoring contractors.
(2) Since August 7, 1919, the Merchant Fleet Corporation has paid the premiums covering the insurance of longshoremen engaged in stevedoring United States Shipping Board vessels, the rates quoted being the cost of handling cargo, less the insurance cost. The government pursued this course because it was considered advantageous to the government, a greater coverage being secured and a saving of money being effected thereby.
(3) The insurance policies covering these risks between 1919 and 1927 were issued in the name of the United States Shipping Board Merchant Fleet Corporation, with no mention made of the stevedoring contractors. With the passage of the Longshoremen’s and Harbor Workers’ Compensation Act effective July 1st, 1927, and because of a technical requirement of that law, the names of the various stevedoring contractors were inserted in the policy as certificate holders in order to comply with section 37 of that statute (33 USCA § 937).
(4) The contract between the parties by which plaintiff did the stevedoring work of defendant at Corpus Christi, Tex., is evidenced by telephone conversations, letters, memoranda, etc. The principal and controlling provision respecting such insurance is found in a paragraph of a memorandum dated July 22,1927, as follows (owner being defendant, and stevedore being plaintiff): *96sons in a single accident (b) liability arising under workmen’s compensation laws of tbe State in which the stevedoring work is performed for injury to or death of employees, and (c) any liability whatsoever for which the Stevedore is legally liable to employees, in the amount of Ten Thousand Dollars ($10,000) indemnity for injury to or death of any one employee and Twenty Thousand Dollars ($20,000') for any injury to or death of any number of employees in a single accident, by policies insuring the Owner, which shall provide that for the purposes of the insurance therein provided all the employees of the Stevedóre engaged in the work covered by this schedule shall be considered employees of the Owner.”
*95“The Owner shall, at its own cost and expense, carry insurance protecting the Stevedore against (a) Liability to the public for which the Stevedore is liable in the amount of Ten Thousand Dollars ($10,000) indemnity for injury to or death of any one person and Twenty Thousand Dollars ($20,000) for any injury to or death of any number of per-
*96(5) Defendant, in accordance with such obligation, originally insured plaintiff’s employees in the Texas Employers’ Insurance Association, but, effective 12:01 a. m. September 17,1929, the insurance with that concern was canceled by defendant, and the insurance placed with the Lumbermen’s Reciprocal Association of Houston, Tex. Such association issued its policy or policies, agreeing to pay off and discharge all liability of plaintiff to its employees. This change was made without the knowledge or consent of plaintiff; plaintiff being notified thereof after the change was made. This change was made also over the opposition of the Insurance Department of the Merchant Fleet Corporation.
(6) The Lumbermen’s Reciprocal Association being an assessment or mutual company, and defendant becoming a “Subscriber” thereto by the issuance of such policy or policies, a policy of reinsurance was arranged by, and at the expense of, such association with the General Re-Insurance of New York, to protect defendant against liability for assessments which might be made upon the defendant as such “Subscriber.”
(7) On or about July 27, 1931, Donie Means, one of plaintiff’s employees, was injured during the course of his employment, in loading one of defendant’s vessels at Corpus Christi, and on October 15, 1930, the deputy commissioner under the Longshoremen’s and Harbor Workers’ Compensation Act made an award of compensation in his favor, because of such injury, in the sum of $259.99, payable at the rate of $20 per week. Demand was made by said Means on said Lumbermen’s Reciprocal Association, such insurer, for the payment of such award, whieh was refused, and such association has not paid same. Such association is insolvent and in the hands of a receiver, and its affairs are being administered by such receiver. It is not shown whether its assets are, or are not, sufficient to pay any part of Means’ claim.
(8) This court has held in other similar eases (but not in this particular case) that, where payment is not made by the insurer (in this ease, such association), both the stevedoring company (plaintiff) and the United States (defendant) are liable to the stevedoring company’s employees. See Globe Stevedoring Co., Inc., v. Peters (D. C.) 57 F.(2d) 256; Houston Ship Channel Stevedoring Co. v. Sheppeard (D. C.) 57 F.(2d) 259.
(9) About July 27, 1931, in compromise, plaintiff paid Means $169, and took a full release from him, and it was agreed that Means should, in addition, receive one-half of any sum of money collected on his claim against such insurer, plaintiff to receive the other one-half.
(19) Plaintiff carried no compensation insurance upon its employees in so far as the work for defendant was concerned, depending entirely upon defendant to carry same in accordance with the above-quoted portion of the memorandum of July 22, 1927.
Conclusions of Law.
(A) Under section 904, title 33 USCA, both plaintiff and defendant were, as of date, July 1, 1927 (when the Longshoremen and Harbor Workers’ Compensation Act became effective), and have been since, and are now, liable for the compensation for injuries provided for by such act, for the employees of plaintiff, engaged in unloading defendant’s vessels. Globe Stevedoring Co. v. Peters, supra; Houston Ship Channel Stevedoring Co. v. Sheppeard, supra.
(B) Under such act, as between plaintiff and defendant, the defendant is primarily, and plaintiff is secondarily, liable to such employees, and, if defendant fails to pay such compensation, and thereby plaintiff is compelled to pay same, plaintiff is entitled to recover from defendant the amount so paid.
(C) Under said section 904, both plaintiff and defendant are required to “secure” the “payment” of such compensation in the manner provided in section 932; the defendant being primarily so required, and plaintiff secondarily so required. In the event defendant fails to so “secure” same, and plaintiff sustains a loss by reason thereof; plaintiff is entitled to recover the amount of such loss from defendant.
*97(D) So situated under tlie Law, plaintiff and defendant agreed- upon the memorandum of July 22, 1927, worded as set forth in the fourth finding of fact, and I conclude that thereunder, and thereby, defendant agreed to indemnify plaintiff against any loss by reason of plaintiff, for any reason, being compelled to pay sneh compensation to such employee.
(E) Without determining whether the compromise made by plaintiff with Means is valid or otherwise, I conclude that plaintiff would be entitled to recover the $160 paid Means as a payment on account, but for the fact that the amount that plaintiff and Means may receive from the receivership of the Lumbermen’s Reciprocal Association is left uncertain by the evidence. Plaintiff has not satisfied the burden of proof upon it to show the amount (if any) it is entitled to recover. No judgment can therefore be rendered for plaintiff.
Judgment for defendant. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219115/ | CAMPBELL, District Judge.
This is a motion for an order vacating and setting aside the order of this court dated the 27th day of June, 1933, and the subpoenas issued thereon, and why the petitioners should not have such other and further relief in the premises as it may deem proper.
This motion comes before the court on an order to show cause dated July 25, 1933, which stayed all proceedings under the order of June 27, 1933, and subpoenas until the hearing and determination of this motion and the entry of an order thereon.
On June 27, 1933, Robert W. Bonynge, as agent of the United States before the Mixed Claims Commission, United States and Germany (42 Stat. 2200), applied under authority of the Act of June 7,1933 (Pub. No. 31, 73d Cong. [22 USCA §§ 270d-270g]), for subpoenas directed to John Qualters, Horace Qualters, and Rose Qualters, the petitioners, and another, requiring each and all of them to appear with certain papers and submit to examination.
On June 27,1933, the court issued the order sought, appointing the United States commissioner to take the evidence, and requiring the clerk of this court to issue subpoenas to the witnesses accordingly. The applicant was ordered to give reasonable notice of the times and places of taking said testimony to the German agent before said commission, and the clerk of this court was ordered to forward to said German agent a certified transcript of the testimony taken.
The subpoena was issued returnable July 26, 1933.
So much of the Act of June 7,1933 (Pub. No. 31, 73d Cong.), which amended the Act of July 3, 1930 (46 Stat. 1005), as is necessary for consideration herein, reads as follows:
“Sec. 5. That the agent of the United States before any international tribunal or commission, whether previously or hereafter established, in which the United States participates as a party whenever he desires to obtain testimony or the production of books and papers by witnesses may apply to the United States district court for the district in which such witness or witnesses reside or may be found, for the issuance of subpoenas to require their attendance and testimony before the United States district court for that district and the production therein of books and papers, relating to any matter or claim in which the United States on its own behalf or on behalf of any of its nationals is concerned as a party claimant or respondent before such international tribunal or commission.
“Sec. 6. That any United States district court to which such application shall be made shall have authority to issue or cause to be issued such subpoenas upon the same terms as are applicable to the issuance of subpoenas in suits pending in the United States district court, and the clerk thereof shall have authority to administer oaths respecting testimony given therein, and the marshal thereof shall serve such subpoenas upon the person or persons to whom they are directed.” (22 US CA §§ 270d, 270e).
In a similar proceeding where the subpoena was directed to and served upon another person in the District Court of the United States for the Northern District, Eastern Division of Ohio, Judge West, on July 17, 1933, rendered an extended opinion1 denying the motion to vacate the subpoena and requiring the witness to appear and answer.
As the questions presented on this motion *99are substantially the same as on that motion, I might rest my decision on that opinion, with which I am generally in accord, and, as the questions appear to have been presented here somewhat differently, although in substance the same, and in different order, I will briefly rule on each objection presented.
In view of the provisions of section 6 of the act, supra, conferring authority upon the District Court “to issue or cause to be issued such subpoenas upon the same terms as are applicable to the issuance of subpoenas in suits pending in the United States district court,” the petitioners have no right to raise many, if any, of the objections presented.
The objection of the petitioners that, since these claims have been three times dismissed, and since there has been no ruling on the part of the Commission that it will entertain the petition for rehearing, there is no claim pending, and no claim in which the United States is concerned as a party claimant, is not sustained.
The act authorizes the issuance of the subpoena when the desired evidence will “relate to any matter or claim in which the United States * * * is concerned as a party claimant or respondent before such * * * commission.”
While it is true that there have been two previous petitions for a rehearing which have been denied, the evidence offered was considered, and there has been no decision that the Commission has no authority to grant a rehearing.
On May 4,1933, a petition for a rehearing was filed, which was accepted by the American joint secretary and refused by the German joint secretary. That petition reserved the right to complete evidence in support thereof.
The object of the act in question was to make possible the securing of such evidence, and the reservation in the petition for a rehearing was to hold the matter open until the passage of an act to make possible securing such evidence.
The objection of the petitioners that the agreement under which this arbitral commission was created, and the rules enacted under it not providing for any rehearings without the consent of both sovereigns, the Commission has no power to grant a rehearing, is not sustained.
Whether the Commission will or will not grant a rehearing is a matter for them, and not for this court, to determine.
The fact remains that the evidence.in question is desired to secure a rehearing of the claim. If the German government was raising this question, the situation would be different, but it is not being raised by a party, but only by those called as witnesses, and is a question they have no right to raise, as they are not concerned” with the result.
The objection of the petitioners that, the German joint secretary having refused to receive the petition for rehearing, the petition therefore not having been filed, the claims attempted to be reheard are not pending, is not sustained.
Rule 7 of the Commission’s Rules, which relates to the filing of documents filed subsequently to the original docketing, provides that the joint secretaries shall “(d) Endorse on each document presented to the commission the date of filing, and enter a minute thereof in the docket.”
The joint secretaries are under the control of the commissioners, and it is not within the power of the secretaries to determine what documents are to be filed. The petition, having been properly presented, is pending.
The objection of the petitioners that, there being nothing in the petition showing the materiality of the testimony of the wit-, nesses, the petition upon which the order was granted is jurisdictionally defective, and consequently the witnesses are justified in raising this objection, is not sustained.
The act contains no such limitation. The objection is not one to be raised by a witness. Blair v. United States, 250 U. S. 273, 39 S. Ct. 468, 63 L. Ed. 979; Bevan v. Krieger, 289 U. S. 459, 53 S. Ct. 661, 77 L. Ed. 1316 (May 22, 1933).
The description of the documents to be produced under .the subpoenas duces tecum shows their materiality as they are limited to those “relating directly or indirectly to the above entitled claims,” the claims in question.
The objection of the petitioners that, federal courts owing their existence to the Constitution of the United States, their jurisdiction must be found therein, that neither article 3, section 1, nor article 3, section 2, of the Constitution, authorizes Congress to grant jurisdiction to federal District Courts to take unlimited testimony, whether material or not, in aid of an international tribunal, whose existence and jurisdiction are created by treaty, is not sustained.
A petition for a rehearing is pending before the Commission, a tribunal which has *100power to' render a final decision in a controversy to which, the United States is a party, and which Commission was created in consequence of a treaty.
By article 3, § 1, the judicial power extends to controversies to which the United States .is- a' party, and to cases arising under treaties made under its authority.
The following cases cited by petitioners are not in point: In re Pacific Railway Commission, (C. C.) 32 F. 241; Ellis v. Interstate Commerce Commission, 237 U. S. 434, 35 S. Ct. 645, 59 L. Ed. 1036; Federal Trade Commission v. P. Lorillard Co., and Federal Trade Commission v. American Tobacco Co., Inc. (D. C.) 283 F. 999, affirmed 264 U. S. 298, 44 S. Ct. 336, 68 L. Ed. 696, 32 A. L. R. 786.
Whatever force there might have been to the petitioners’ argument before .the decision of the Supreme Court in Interstate Commerce Commission v. Brimson, 154 U. S. 447, 14 S. Ct. 1125, 38 L. Ed. 1047, in that case similar legislation was upheld in enforcement of proceedings before the Interstate Commerce Commission.
Since that case legislation of a similar character has been, applied relating to proceedings before the Commissioner of Internal Revenue, Brownson v. United States (C. C. A.) 32 F.(2d) 844, and to proceedings in the Patent Office, Tucker v. Peiler (C. C. A.) 297 F. 570.
The objection of the petitioners that, the petition for rehearing not having been entertained by the Commission, and no answer having been filed, the present examination is a fishing expedition, and therefore not warranted, is not sustained.
This is not an objection which can be raised by the petitioners as a witness. There is a claim of the United States on which there has been filed a petition for a rehearing.
Such rehearing, if one be granted, will only be granted on evidence taken other than orally before the Commission, 'and that is the evidence sought here; the places where the damage occurred are known, and it is information as to them that is desired.
Whether the petitioners were entitled to move to vacate the order and-subpcena requiring them to appear seems to me to require no further extended consideration, as they have moved, and all of their objections have' been considered and overruled.
It is, however, my opinion that the objections here urged should be urged by a party and not by witnesses; and these petitioners, so far as the papers herein disclose, are disinterested witnesses in a controversy between other parties. The allegation of inconvenience can have no weight, and there is nothing in the papers to show that they will be involved in undesirable publicity.
The witness will have a right to refuse to answer questions on any grounds on which a witness may refuse on a trial or hearing or taking of a deposition, .and it will not be until such refusal and on a proceeding to punish for contempt that the matter will become personal to the witness, and the decision thereon final and appealable.
The question of whether an appeal will be allowed from the order to be entered hereqn is premature.
There is no attempt on the part of the agent of the United States before the Commission, in this proceeding, nor does the act in question attempt, to regulate the method of taking testimony before the Commission, or its rules, and certainly not the action of the Commission on the petition for rehearing. The purpose of the act and this proceeding is to furnish to the agent of the United States a means of compelling unwilling witnesses to testify and produce documents.
The objections here presented are raised by the attorneys for the petitioners, who represent them only, and are not raised by the German government, the other party to the controversy with the United States.
The order to show cause is discharged, and the motion made thereon is denied, and, as the time for the giving of the petitioners’ testimony has expired, each and all of the petitioners, John Qualters, Rose Qualters, and Horace Qualters, are required to appear before the United States commissioner named in the order of June 27, 1933, for that purpose, on August 16, 1933, at 10 o’clock in the forenoon.
Said order of June 27, 1933, in all other respects stands as the order of the court, and the subpoenas likewise.
Submit order.
Not for publication. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219116/ | UNDERWOOD, District Judge.
Petitioner, on the 1st day of October, 1918, a few weeks prior to the Armistice, was tried at Brest, Prance, by a general court-martial for the murder, on September 22,1918, of Michael Gapinski, while ón U. S. S. Panning, off the coast of Prance.
Petitioner was fireman, second class, and Gapinski was water tender on said vessel.
The general court-martial was convened pursuant to order dated September 28, 1918, by Vice Admiral H. B. Wilson, Commander, Patrol Force, United States Atlantic Fleet. The order provided that the court should be composed of the following members: Capt. Horace W. Harrison, United States Navy (retired); Commander Clarence M. Stone, United States Navy (retired); Commander Adolphus Staton, United States Navy; lieutenant Commander Robert M. Foyle, Junior, United States Navy; Lieutenant Commander George Joerns, United States Navy (retired) ; Lieutenant Commander Robert E. Tod, United States Naval Reserve Force; Lieut. Charles A. Maegowan, United States Navy; Lieut. John J. Twomey, United States Navy; Lieut. James T. Strimple, Medical Corps, United States Naval Reserve Force.
The order further provided that “no other officers can be detailed without injury to the service.”
The court convened at 10 o’clock a. m. on October 1, 1918, with the following members present: Capt. Horace W. Harrison, United States Navy (retired); Commander Clarence M. Stone, United States Navy (retired); Lieutenant Commander George Joerns, United States Navy (retired); Lieutenant Commander Robert E. Tod, United States Naval Reserve Force; Lieut. Charles A. Maegowan, United States Navy; Lieut. John J. Twomey, United States Navy; and Lieut. James T. Strimple, Medical Corps, United States Naval Reserve Force, members; and Ensign Capers G. Barr, United States Naval Reserve Force, Judge Advocate.
Commander Staton was not present when the court was organized, but, at the afternoon session of the court, explained his absence by saying that notice of his appointment as a member of the court had been reeeivéd by him only a few minutes previous to his appearance. (Record, p. 10.) He was excused from further attendance, and never served as a member of the court.
The record thus shows that only seven of the appointees and the Judge Advocate'actually served as members of the court, and that of these three were officers on the retired list; two and the Judge Advocate were officers of the Naval Reserve Force; one was an officer of the Medical Corps, United States Naval Reserves; and only two were active officers of the regular service.
There was nothing in the record of the proceedings of the court-martial to show that any of the retired or reserve force officers were assigned to active duty, nor was any evidence of this fact presented at the trial in this proceeding, though this was one of the issues in the case.
A copy of the charges and specifications was served on petitioner the day before the trial, and counsel then appointed to represent him.
Petitioner was tried, found guilty of murder, and on October 3,1918, sentenced by the court, two-thirds of the members concurring, “to be shot to death by musketry.”
The proceedings, finding, and sentence were approved on October 12, 1918, by the authority convening the court, Admiral Wilson, and the record was referred to the “Secretary of the Navy, for transmission to the *104President, and for such further action as may be deemed necessary in the premises.”
The reeord, with Admiral Wilson’s approval, was by him transmitted, on October 19, 1918, to “Secretary of Navy (Judge Advocate General) Bureau of Navigation, Washington, D. C.”
The Judge Advoeate General received the reeord and referred it, on November 26,1918, with his opinion upholding the findings of the court-martial, to the Chief of the Bureau of Navigation. The Bureau, on March 15, 1919, concurred “in the endorsement of the Judge Advoeate General,” and recommended “approval of the proceedings, finding and sentence.”
The reeord, with the accumulating opinions, indorsements, and approvals, was submitted to the Assistant Secretary of the Navy, and was acted upon by him as Acting Secretary of the Navy, on April 5, 1919. His action is shown by the following order, appearing .in the record:
“Department of the Navy
“Washington
“26262 — 5400 5 April 1919.
“The foregoing recommendations of the Judge Advoeate General concurred in by the Chief of the Bureau of Navigation are approved, but in view of all the circumstances of the case the sentence is mitigated to confinement for the period of his natural life and to suffer all of the other accessories of said sentence, as mitigated, as prescribed by Section 349, Naval Courts and Boards. The naval prison at the Navy Yard, Portsmouth, N. H. is designated as the place of confinement.”
On April 7,1919, petitioner was, pursuant to the above order, committed to the Naval Prison at Portsmouth, N. H. Paragraph 3 of the commitment, copy of which is attached to the response, provides: “3. The Department on 5 April, 1919, mitigated the sentence to confinement for the period of his natural life and to suffer all the other accessories of said sentence, as mitigated, as prescribed by section 349, Naval Courts and Boards. The Naval Prison at the Navy Yard, Portsmouth, N. H., was designated as the place of confinement.”
By order of May 26, 1920, copy of which is attached to the response, the Secretary of the Navy ordered: “The Department Action of 5 April, 1919, designating the Naval Prison, Portsmouth, N. H., as the place of confinement in the ease of the above-named man, is hereby modified in that the United States Penitentiary, Atlanta, Ga., is designated as the place of confinement.”
Petitioner has been in confinement since his arrest on September 22, 1918, something over fourteen years. He filed his application for writ of habeas corpus in this court and was duly given a hearing. Having no lawyer, and it appearing that serious questions of law were involved, the court appointed an attorney to represent him, and continued the hearing to allow time for the preparation of the ease.
The petition was amended, rehearing had, and briefs filed. As the case was finally presented, petitioner contended that the proceedings and sentence were void for the following reasons:
(1) The general court-martial was not constituted as required by law because nine officers were appointed and only seven served as members, and because, of the seven members who served, three were retired officers, not shown by the reeord or otherwise to have been assigned to active duty, and one was a noncombatant officer of the Medical Corps.
(2) The court had no jurisdiction over the offense, because it was not committed “without the territorial jurisdiction of the United States.”
(3) The- sentence of the court-martial was not approved by the President, as required by law.
Restrictions on the jurisdiction of courts-martial have been repeatedly emphasized by the United States Supreme Court, as will be seen from the following quotations:
“But, the court-martial being a special statutory tribunal, with limited powers, its judgment is open to collateral attack, and unless facts essential to sustain its jurisdiction appear, it must be held not to exist.” Collins v. McDonald, 258 U. S. 416, 418, 42 S. Ct. 326, 327, 66 L. Ed. 692.
“To give effect to its sentences, it must appear affirmatively and unequivocally that the court was legally constituted; that it had jurisdiction; that all the statutory regulations governing its proceedings had been complied with; and that its sentence was conformable to law. Dynes v. Hoover, 20 How. 65, 80 [15 L. Ed. 838]; Mills v. Martin, 19 Johns. [N. Y.] 33. There are no presumptions in its favor so far as these matters are concerned. As to them, the rule announced by Chief Justice Marshall in Brown v. Keene, 8 Pet. 112, 115 [8 L. Ed. 885], in respect to averments of jurisdiction in the courts of the United States, applies. His language is: *105‘The decisions of this court require that averment of jurisdiction shall be positive; that the declaration shall state expressly the facts on which jurisdiction depends. It is not sufficient that jurisdiction may be inferred argumentatively from its averments.’ All this is equally true of the proceedings of courts-martial. Their authority is statutory, and the statute under which they proceed must be followed throughout. The facts necessary to shqw their jurisdiction, and that their sentences were conformable to law, must be stated positively; and it is not enough that they may be inferred argumentatively.” Runkle v. United States, 122 U. S. 543, 556, 7 S. Ct. 1141, 1146, 30 L. Ed. 1167.
“Undoubtedly courts-martial are tribunals of special and limited jurisdiction whose judgments, so far as questions relating to their jurisdiction are concerned, are always open to collateral attack. True, also, is it that in consequence of the limited nature of the power of such courts the right to have exerted their jurisdiction, when called in question by collateral attack, will be held not to have existed unless it appears that the grounds which were necessary to justify the exertion of the assailed authority existed at the time of its exertion and therefore were or should have been a part of the record.” Givens v. Zerbst, 255 U. S. 11, 19, 41 S. Ct. 227, 229, 65 L. Ed. 475.
Petitioner’s first two grounds of objection to the court-martial proceedings will be only briefly referred to.
Petitioner should have raised the question set out in the first of these grounds at the court-martial trial, and, in my opinion, his failure to do so waived any objections he might have had to the personnel of the court. Bishop v. United States, 197 U. S. 334, 340, 25 S. Ct. 440, 49 L. Ed. 780. Indeed, the record shows that he went even further and expressly stated that he did not object to any member. (Record, p. 1.)
The second of the above grounds raises a more serious question, the determination of which depends upon the construction given to the words “territorial jurisdiction” in the statute conferring jurisdiction in murder eases on courts-martial. The statute is as follows : “If any person belonging to any public vessel of the United States commits the crime of murder without the territorial jurisdiction thereof, he may be tried by court-martial and punished with death.” 34 USCA § 1200, art. 6; R. S. § 1624, art. 6.
Petitioner contends that, inasmuch as the U. S. S. Fanning was a war vessel of the United Stales, it was United States territory as long as it was on the high seas and not within the territorial boundaries of another nation, and therefore the crime charged was not committed “without the territorial jurisdiction” of the United States, and the court-martial which tried the offense had no jurisdiction over the crime.
It-is a well-recognized principle of international law that a public vessel or “merchant ship is a part of the territory of the country whose flag she flies. But this, as has been aptly observed, is a figure of speech, a metaphor. “ R s; The jurisdiction which it is intended to describe arises out of the nationality of the ship, as established by her domicile, registry and use of the flag, and partakes more of the characteristics of personal than of territorial sovereignty. c * It is chiefly applicable to ships on the high seas, where there is no territorial sovereign; and as respects ships in foreign territorial waters it has little application beyond what is affirmatively or tacitly permitted by the local sovereign.” Cunard S. S. Co. v. Mellon, 262 U. S. 100, 123, 43 S. Ct. 504, 507, 67 L. Ed. 894, 27 A. L. R. 1306.
It is a question, then, as to whether or not, under the strict rules of law hereinafter cited, covering the jurisdiction of courts-martial, a public ship, in the circumstances of this case, is such territory of the United States as comes within the term “territorial jurisdiction” as used in the statute above quoted.
However, finding, as I do, that petitioner is now detained under an unlawful sentence, as claimed in the third of the above grounds, it is not necessary in this ease to decide this question.
I will proceed, therefore, to consider the case under the third ground of objection.
As above noted, the law is very exacting, and should be, where a person is to be deprived of the right, recognized for centuries, to trial by jury in the civil courts of his country, and demands the strictest compliance with its provisions before the right of life or liberty shall be taken from him by any other kind of procedure.
The law recognizes that in the stress and passion of war, or in the exaggerated ideas of professional exigencies, a military tribunal may not be as careful to preserve the rights of an accused as a civil court in a trial before a jury of his peers.
This danger and the wisdom of providing against it is illustrated by the argument of the Judge Advocate in this case, who said in its *106presentation to the court-martial: “Now, if the Court please, has the accused in this case put himself within the rule of self-defense? In considering that question I will ask the court, in so far as the relations of the parties are concerned, to consider this case not from a rule as established in civil life, but as one under military discipline, because I believe that if this court in this case acquits the accused on the plea of self-defense, or even from the circumstances reduced the crime ’of murder to manslaughter, that this court will put its stamp of approval upon mutiny and against every rule of discipline in the Navy.” (Record p. 49.)
I shall now pass to a consideration of the question as to whether or not the statutory regulations covering the proceedings were complied with.
Article 53, § 1200, of title 34 of the United States Code, Annotated, provides how a court-martial sentence of death may be legally imposed. That article is as follows: “No sentence of a court-martial, extending to the loss of life, or to the dismissal of a commissioned or warrant officer, shall be carried into execution until confirmed' by the President. All other sentences of a general court-martial may be carried into execution on confirmation of the commander of the fleet or officer ordering the court.”
It has been frequently held that the approval of a sentence of death or dismissal of an officer must be the personal act of the President. As noted above, the sentence in this case was not approved by the President;, or even submitted to him for his approval, but was commuted by the Acting Secretary of the Navy.
No statute authorized the Secretary of the Navy, or any other officer than the President, to commute a death sentence. On the other hand, the statutes expressly say they cannot.
“Every officer who is authorized to convene a general court-martial shall have power, on revision of its proceedings, to remit or mitigate, hut not to commute, the sentence of any such court which he is authorized to approve or confirm. (R. S. § 1624, art. 54.)” 34 US CA § 1200, art. 54 (a).
“The Secretary of the Navy may set aside the proceedings or remit or mitigate, in whole or in part, the sentence imposed by any naval court-martial convened by his order or by that of any officer of the Navy or Marine Corps. (Feb. 16, 1909, c. 131, § 9, 35 Stat. 621.)” 34 USCA § 1200, art. 54 (b).
The Supreme Court, in Mullan v. United States, 212 U. S. 516, 521, 29 S. Ct. 330, 332, 53 L. Ed. 632, has differentiated between the commutation and the mitigation of a sentence:
“The court of claims was of opinion that this section did not apply to the action of the President of the United States. If it be conceded for this purpose that it is applicable to the President (§ 1624, arts. 38 and 53 of the Revised Statutes), we are of the opinion that the President’s action did, in fact, mitigate the previous sentence of the court-martial as approved by the Secretary of the Navy. It may be conceded that there is a technical difference between the commutation of a sentence and the mitigation thereof. The first is a change of a punishment to which a person has been condemned into one less severe, substituting a less for a greater punishment by authority of law. To mitigate a sentence is to reduce or lessen the amount of the penalty or punishment. 1 Bouvier’s Law Dict. 374; 2 Id. 428.
“When the President otherwise confirmed the sentence of the Navy Department from absolute discharge from the Navy to reduction in rank and duty for the period of five years on one-half sea pay, he did what in terms he undertook to do; and, by the lessening of the severe penalty of dismissal from the Navy, approved by the Department, reduced and diminished, and therefore mitigated, the sentence which he was authorized to approve and confirm against the appellant, or mitigate in his favor.”
It would seem, therefore, that the sentence under which the petitioner is detained is void. The death sentence could not have been executed because never approved by the President, and the life sentence is void because the death sentence was not commuted by the President, and the attempt of the Acting Secretary of the Navy to do so was futile, even if we assume he had as complete power in the premises as the Secretary of the Navy might have had.
The question remains as to what disposition should be made of petitioner in view of the finding that his present detention is unlawful. The only guidance the statute offers is that the court shall “dispose of the party as law and justice require.” 28 USCA § 461. I interpret this as meaning a sound discretion in the light of all the facts and circumstances of the case. I have more than once read the entire record of the court-martial proceedings for aid in determining what will be lawful and just in this case.
*107 I recognize that this court is not one of review, and that it has no jurisdiction to examine into the merits of the case for the purpose of determining whether or not a writ of habeas corpus should be sustained; but, on the other hand, I understand that the facts and circumstances may be taken into consideration, after it has been first determined that the detention is unlawful, for the purpose of deciding what disposition should be made of the petitioner. I will therefore set out a brief résumé of the facts disclosed by the record in the court-martial proceedings.
Petitioner had been in the Navy about eighteen months and on board the U. S. S. Panning with Gapinski about fifteen months, before the shooting. All witnesses spoke well of petitioner, and the commanding officer of the vessel, Lieutenant Commander Cogswell, himself, testified that “the accused’s general reputation was a quiet, hard-working fireman.” (Record, p. 33.)
On the other hand, several officers and seamen testified that Gapinski, though a good water tender, was a brutal bully (Record, pp. 13 and 22), very overbearing toward those under him (Record, pp. 8, 18,19, and 26), a man who was determined to have his way, and who often abused and struck those under him (Record, pp. 13, 21, 22 and 40). He was a large man, weighing 190 pounds (Record, pp. 7 and 16), while petitioner was a small man. On one occasion petitioner and others saw Gapinski attack another with such violence that he broke the victim’s nose and arm (Record, p. 41), necessitating long hospital treatment. Petitioner testified that he was afraid of Gapinski and tried to stay away from him. On one occasion he asked to be transferred from the electrical gang in order that he could keep away from, and not have to work with, Gapinski, as testified to by the chief water tender and others. (Record, pp. 20 and 26.)
On the morning of the shooting, Gapinski cursed petitioner, and threatened him with se>rious bodily injury. This was established by several witnesses. Later on in the morning Gapinski cursed and threatened petitioner again for opening a hatch to get some fresh air. (Record, p. 35.) Thereafter petitioner, fearing for his life, got a pistol from the racks in the engineers’ petty officer compartment, and put it in his pocket. He carried it the rest of the day. About 11 o’clock that night, after cleaning a burner, petitioner was regulating the steam when Gapinski called him. Petitioner went to Gapinski, noticing at the time that he had a large wrench in his hand. This was not customary and, according to the testimony of the chief water tender, “there is no necessity for the use of a wrench of that size in his line of duty. He might go down to clean burners himself, but a water tender on watch only used a six inch wrench.” (Record, pp. 27 and 28.) The witness testified that, since there were firemen present, he would under no conditions have cleaned it personally. (Record, p. 28.)
According to petitioner (Record, p. 35), Gapinski asked him if the burner which he had just cleaned was clean. Petitioner replied that it was. Gapinski said that he “was a God damned liar,” and petitioner replied that he was another. Whereupon Gapinski struck at petitioner with the wrench and badly injured his right wrist, with which petitioner tried to ward off the blow. At the same time petitioner, who was left-handed, drew the pistol and began shooting and’ backing the while from Gapinski, “who kept coming at’r petitioner. (Record, p'. 35.) All of petitioner’s testimony was corroborated by the other witnesses except as to what took place immediately before the first shot, and as to all of that except as to whether Gapinski struck first with the wrench. The only witness present at that time was Albert Williams, fireman, second class. He was within a few feet of petitioner and Gapinski when the quarrel started, but did not see them at the moment the shooting began, as he had his back turned to them, but he heard the conversation between them, and corroborated petitioner’s statement as to what was said. Williams said that at least three shots were fired before he could turn around (Record, p. 4); that then Gapinski was standing upright, still had the wrench in his hand, and was about three feet (Record, pp. 4 and 5) from petitioner, who was still firing.
After the shooting, Williams reported the occurrence to the officer of the deck, Lieut. John A. Vinson, who came down on the plates where petitioner was. (Record, p. 11.) Petitioner handed Lieut. Vinson the pistol, and asked him what to do. He was told to report on deck, and did so, reporting to the commanding officer, Lieut. Cogswell, the facts as above stated. (Record, p. 32.) Petitioner’s injured wrist was examined by Lieutenant Commander Cogswell, and later dressed by the pharmacist.
Prom a careful study of the record of the court-martial, I believe the above is the truth of the ease. Every part of the petitioner’s testimony is fully corroborated by other witnesses, both officers and seamen, except, as above stated, the fact as to whether Gapinski *108struck first with, the wrench, and there was, on this point, no evidence to contradict petitioner’s statement. There is, I think, at least a grave question as to whether the evidence was sufficient to establish petitioner’s guilt beyond a reasonable doubt.
In these circumstances, then, what should be done with petitioner? He cannot be remanded to the court-martial which tried him, if that were called, since it adjourned and ceased to exist years ago and could not be reconvened.
It is possible that the sentence “to be shot to death by musketry” might still be validated by the approval of the President, but this would hardly seem just, even if lawful, after petitioner has served over fourteen years under an invalid sentence.
On the other hand, if the sentence be sub- . mitted to the President, and he should disapprove the findings, there is no court-martial to which it could be returned for trial.
I have reached the conclusion, therefore, on the facts as I see them, that petitioner has already suffered sufficiently for his offense, even if guilty, and that it will be “lawful and just” to order his discharge, which I have done. The discharge, however, will be delayed for sixty days from this date to allow time for an appeal, should respondent wish to take an appeal. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219118/ | UNDERWOOD, District Judge.
Petitioner was convicted on an indictment of eleven counts, all charging violation of section 320, title 18, United States Code (18 USCA § 320).
The first count charges assault upon two postal employees with intent to rob. The remaining counts charge that petitioner robbed custodians of the mail of certain mail pouches, putting their lives in jeopardy by the use of dangerous weapons'; each count alleging the taking of a separate and distinct mail bag.
A sentence of twenty-five years’ imprisonment was imposed on the second count of the indictment and was to be served first; a sentence of ten years on the first count, to run consecutively to the 'sentence on the second count; and a sentence of twenty-five years upon each of counts three, to eleven, inclusive — all of which were to be served concurrently with each other and with the ten-year sentence on count 1 and. to commence at the termination of the twenty-five year sentence on the second count, making a total of fifty years.
Although in one part of the judgment imposing the sentences it is express^ and clearly provided that they shall run as above stated, at the end thereof it provides: “That the sentence imposed herein, on the first, second, *112third, fourth, fifth, sixth, seyenth, eighth, ninth, tenth and eleventh counts respectively be served concurrently and commence at the termination of the twenty-five yeár" sentence on the second count of -the indictment herein, said total sentence being fifty years.”
It is dear, however, that the inclusion of the second count in the above-quoted provision relating to the concurrent running of the sentences was a clerical error and that the court intended that the total term to be served was fifty years, and that it should be served in the manner previously stated; that is, that the sentence of twenty-five years on the second count bé served first and thereafter the sentences on the other counts, which latter sentences would run concurrently with each other and consecutively to count two.
Where a judgment,' considered as a whole, clearly indicates the intention of the judge and there are express and unambiguous words setting out such intention, as is true in this case, the judgment will not be held to be void for vagueness or ambiguity because of a clerical error in one part thereof, but the reasonable and natural implication from the whole entry will be given effect.
“Sentences in criminal eases should reveal with fair certainty the intent of the court and exclude any serious misapprehensions by those who must execute them. The elimination of every possible doubt cannot be demanded.” United States v. Daugherty, 269 U. S. 360, 363, 46 S. Ct. 156, 157, 70 L. Ed. 309.
The judgment of .the court, therefore, is construed to impose sentences aggregating "fifty years. ,
Petitioner, however, contends that the offense charged in the first count was, as the lesser offense, merged into the greater offense charged in the second count, and that consecutive sentences on the two counts, amounted to double jeopardy.
A similar question.was raised in the case of Schultz v. Biddle, 19 F. (2d) 478, 480, but was decided adversely to petitioner’s contention -by the Circuit Court of Appeals for the Eighth Circuit. In the Schultz Case an indictment like the one in the ease at bar was before the court; and they said:
“But the offense charged in the first count of the indictment was an assault with intent to rob the custodians of -the mail while that charged in the following counts was the robbery of such custodians and the putting their lives in jeopardy by the use of guns, and pistols in effecting that robbery. * * *
“When Congress has prohibited each of several distinct ánd separate acts, as in this ease an assault with intent to rob and a robbery by putting the lives of the victims in jeopardy by the use of dangerous weapons, each of such acts, although comprised in a single transaction, inspired by the same criminal intent, is punishable as a separate and distinct offense if each of such offenses involves a distinctive element not involved in the others. Morgan v. Devine, 237 U. S. 632, 636, 638, 639, 35 S. Ct. 712, 59 L. Ed. 1153; Ebeling v. Morgan, 237 U. S. 625, 629, 631, 35 S. Ct. 710, 59 L. Ed. 1151; Carter v. McClaughry, 183 U. S. 365, 394, 395, 22 S. Ct. 181, 46 L. Ed. 236; Burton v. United States, 202 U. S. 344, 377, 26 S. Ct. 688, 50 L. Ed. 1057, 6 Ann. Cas. 362; Gavieres v. United States, 220 U. S. 338, 31 S. Ct. 421, 55 L. Ed. 489; Ex parte Farlow (D. C.) 272 F. 910; Anderson v. Moyer (D. C.) 193 F. 499; Morgan v. Sylvester (C. C. A.) 231 F. 886, 888; Morris v. United States (C. C. A.) 229 F. 516; Massey v. United States (C. C. A.) 281 F. 293; Reynolds v. United States (C. C. A.) 280 F. 1; United States v. Hampden (D. C.) 294 F. 345, 347.”
Upon the above authorities, and Albrecht v. United States, 273 U. S. 1, 47 S. Ct. 250, 71 L. Ed. 505, it is held that the first and second counts-of the indictment in this case charge separate and distinct offenses and authorize the sentences of ten years on the first count and twenty-five years on the second count, making an aggregate sentence of thirty-five years on these two counts.
Petitioner further contends, however, that the offenses charged in the third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, and eleventh counts of this indictment, which differ from the second count only in that the mail bags described therein were different from the one described in the second count, constitute the same offense as that charged in the second count, and that the court therefore was without jurisdiction.to sentence on .more than one of the counts numbered 2 to 11, inclusive.
This same contention, was made in the Schultz Case, supra; but theuourt there said that this question, is “not now material, because there is- no doubt that the court had jurisdiction to'sentence the petitioner to imprisonment for twenty-five years on the second count. He is not entitled to release until ;he has served those twenty-five years; he *113has not yet done so and the sentences on the other counts specified run concurrently with that on the second count.”
The question seems never to have been decided by any court. At least no decision has been cited by either side, and I have found none.
The statute (18 TTSCA § 320) on which the indictment is based provides: “Whoever shall assault any person having lawful charge, control, or custody of any mail matter, with intent to rob, steal, or purloin such mail matter or any part thereof, or shall rob any such person of such mail or any part thereof, shall, for a first offense, be imprisoned not more than ten years; and if in effecting or attempting to effect such robbery, he shall wound the person having custody of the mail, or put his life in jeopardy by the use of a dangerous weapon, or for a subsequent offense, shall be imprisoned twenty-five years.”
The question here presented is: Whether the words “shall rob any such person of such mail or any part thereof” are to be so construed as to create one crime, or in such manner that the prosecutor may carve out of a single transaction as many separate crimes as there may happen to be separate pieces of mail?
To put the question concretely: Would one who robbed, in the manner described, a person having custody of mail consisting of only ten letters, be guilty of one crime and subject to one penalty of twenty-five years’ imprisonment, or would he be guilty of ten crimes carrying penalties of two hundred and fifty years ?
It is not here a question of legislative power to create multiple offenses, but only the question whether it was the intention of Congress to do so.
I think a fair and reasonable construction of these words will lead to the conclusion that Congress intended to create only one crime, robbery of the mail, which single crime is consummated by robbing the custodian “of such mail,” that is all of it, or “any part thereof,” that is any part thereof less than the whole, the individual pieces of mail being merely component elements of that “part,” regardless of their number; and that Congress did not intend that the mail might be divided up, for the purpose of prosecuting an offender, into as many parts as there might be individual pieces and the robbery of each piece be made a separate offense punishable by the extremely heavy penalty of twenty-five years’ imprisonment.
The language used in the statute, which differs from that of section 194 of the Criminal Code (18 USCA § 317), not only does not demand such construction, but makes it highly improbable that Congress had any such intention. Where Congress intended, section 194 of the Criminal Code, that the taking of each piece of mail should constitute a separate offense) it took care to enumerate the particular articles, the theft of which would constitute a crime, and provided that “whoever shall steal * * * any letter, postal card, package, bag, or mail, or shall abstract or remove from any such letter, package, bag, or mail, any article or thing contained therein” should be subject to fine and imprisonment, and did not merely refer to each piece of mail as a “part” of the mail. Because of this difference in the phraseology of the two sections, the ruling of the Circuit Court of Appeals for the Fifth Circuit in the case of Poffenbarger v. Aderhold, Warden, 67 F.(2d) 250, decided October 25, 1933, and other eases holding similarly, are not in point in this ease.
Penal statutes are to be construed strictly, and “statutes will.not be read to create crimes, or new degrees or classes of crime, unless the purpose so to do is plain.” United States v. Noveck, 271 U. S. 201, 204, 46 S. Ct. 476, 477, 70 L. Ed. 904. A law creating a crime ought to be explicit and any “ambiguity and uncertainty about the meaning of a criminal statute ought to be resolved by a strict interpretation in favor of the liberty of the citizen” (Ex parte Webb, 225 U. S. 663, 689, 32 S. Ct. 769, 779, 56 L. Ed. 1248), and “general terms should be so limited in their application as not to lead to injustice, oppression, or an absurd consequence” (United States v. Kirby, 7 Wall. 482, 486, 19 L. Ed. 278).
From the foregoing it appears that the offenses charged in counts 3 to 11, inclusive, are the same as that charged in count 2, to which they are made to run consecutively, and that punishment on them in addition to that imposed under the sentence on count 2 would be double jeopardy and void.
I conclude, therefore, that only the sentences on counts 1 and 2 of the indictment in this case are valid and that those imposed • on counts 3 to 11, inclusive, are invalid. Bertsch v. Snook (C. C. A. 5th) 36 F.(2d) 155.
*114Whereupon it is considered, ordered, and adjudged that the sentence of ten years on count 1 and the sentence of twenty-five years on count 2, aggregating thirty-five years, are legal and valid, and that the sentences on counts 3 to 11, inclusive, are void; that respondent amend his records accordingly; and that petitioner be remanded to the custody of respondent and be held under said sentences on counts 1 and 2, aggregating thirty-five years, subject to the benefits of parole and good behavior time, and be discharged when he has served the same in accordance with the law. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219120/ | TUTTLE, District Judge.
The amended bill of complaint in this case asserted" infringement of six patents. Pour of these, the patents to Winston, No. 1,197,166, to Currier, No. 1,316,477, to Sparks, No. 1,358,182, and to Shull, No. 1,-566,622, were withdrawn prior to the opening of the trial in court. This leaves but two patents to be here considered, namely, No. 1,428,762, to Currier, and No. 1,438,170, to Currier.
Patent No. 1,428,762 relates to those features which for brevity have been referred to respectively as “noninterfering answering,” “instantaneous disconnect,” and “multiple line lamp recall.” Some of the claims relied upon relate to the first of these features, some to the second, and others to a combination of the three. The second patent, No. 1,-438,170, concerns what is known as “flashing recall.”
Both of these patents have to do with the telephone equipment used in central office switchboards for interconnecting subscribers. The defendants’ switchboard, which is alleged to infringe the “noninterfering answering” claims of patent No. 1,428,-762, is the so-called No. 11 machine ringing board. Some of these same boards are equipped with the “instantaneous disconnect” and “multiple line lamp recall” features and therefore are alleged to infringe, in addition, the claims directed to these features of that patent. Others of these No. 11 boards are equipped with the “flashing recall” and are alleged to infringe some of the claims of patent No. 1,438,170, as are also certain of defendants’ so-called No. 1 switchboards.
Patent 1,428,762.
This Currier patent, No. 1,428,762, relates to improvements in telephone exchange systems. The ease is not free from difficulty. The patent had a long and stormy course through the Patent Office, and it is in an art which bristles with difficulties in comprehension and exposition. The application for the Currier patent was involved in several contested interference proceedings, including one between Currier and Johnson, whose application was owned by the Western Electric Company, the manufacturing subsidiary of the American Telephone and Telegraph Company. All of the principal prior art now relied upon by the defendants was considered by the tribunals of the Patent Office in connection with inter partes motions in these interference eases, and the claims of the patent were finally allowed after having been subjected to the test of various motions to dissolve and other adversary proceedings.
While the inter partes and ex parte proceedings in the Patent Office led to various amendments and substitutions of claims, the plaintiff stands upon the claims as finally allowed. There is no file wrapper estoppel which can be invoked by the defendants, despite the complication of the long and involved Patent Office proceedings. It seems clear in the last analysis that the patent claims as finally issued are entitled to be read and applied upon their own merits, and without too much regard for the pro and eon arguments of the patent solicitors for Currier and his adversaries in the Patent Office. Byers Machine Co. et al. v. Keystone Driller Co., 44 F.(2d) 283, 284 (C. C. A. 6, 1930); Prey et al. v. Marvel Auto Supply Co., 236 P. 916 (C. C. A. 6, 1916); Bundy Mfg. Co. v. Detroit Time-Register Co., 94 P. 524, 542 (C. C. A. 6, 1899); A. G. Spalding & Bros. v. John Wanamaker, 256 F. 530, 533 (C. C. A. 2, 1919); Auto Pneumatic Action Co. v. Kindler & Collins et al., 247 F. 323, 328 (C. C. A. 2, 1917); Traitel Marble Co. v. U. T. Hungerford Brass & Copper Co., 34 F.(2d) 670, 671 (D. C. S. D. N. Y., 1929); General Electric Co. v. P. R. Mallory & Co., Inc., 298 P. 579, 585 (C. C. A. 2, 1924); Hoe & Co. v. Goss Printing Press Co., 30 F.(2d) 271, 275 (C. C. A. 2, 1929).
When telephones first came into use, the number of subscribers was small, and one operator sufficed to make all of the connections between calling subscribers and called subscribers, each of whose telephone lines had but one terminal (or spring jack) in the switchboard.
But the number of telephone subscribers increased and the telephone exchange switchboard grew so large that all of the necessary interconnections could not be taken care of by one operator or one position, or indeed *120by tbe use of only a single spring jack terminal for each line. The art was therefore confronted with the problem of distributing the subscribers’ incoming calls in such a way that the work of answering them and of making the necessary connections with called lines could be divided as equitably as possible among the several operators.
Before the date.of Currier’s application for patent it had been proposed to attain this result by automatic distributing switches which fed the calls evenly to the various operators. It had also been attained to a substantial degree in the defendants’ No. 1 switchboard by the use of an “intermediate distributing frame” and by the use of multiple appearances of the line lamps. In this switchboard each subscriber’s line had enough multiple spring jacks distributed along the face of the board so that any operator could reach one of them to complete a connection to any line called for by a subscriber. In addition a smaller selected group of these same lines terminated before each operator in “answering” jacks, each with a line lamp to indicate incoming calls; these being located below the jacks of the main multiple. The jacks in the main multiple had no line lamps. Except under special circumstances the calls were answered in the answering jacks 'and “completed” in the main multiple. Each operator c-ould reach and serve any answering jack in her own position and those in the positions immediately to her right and left. Tbe intermediate distributing frame was a long narrow rack with all of the subscribers’ lines connected to terminals on one- side and all of the answering jacks to terminals on the other side. By means of jumper wires between the two sides, any line could be connected to any answering jack. The management endeavored so to make these connections that the group of lines connected to the answering jacks before each operator would give her a fair average load of calls to be answered, due regard being given to the probable calling rate on the several lines selected for each group. Instead of having a single answering jack for each line, these boards frequently had two and sometimes three answering jacks for each line connected in multiple and spaced along .the board so that each was available to three different operators. An incoming call might thus be answered by any one of three, six or nine operators (depending upon the number of multiple answering jacks used), the least busy operator being likely to take a waiting • call. Thus a natural distribution among the team of three, six, or nine operators result-’ ed, which supplemented the distribution effected by the intermediate distributing frame, taking care of some of the variation in the expected calling rate of the lines assigned to the several operators. Also, when there was no idle operator at the answering jacks of a line, the supervisor might call out the number of the line and it could be answered in the main multiple by any idle operator.
There was, however, no distribution generally between the teams of operators, except the relatively permanent one effected by the intermediate distributing frame. This involved soldered connections and it was not feasible to be continually changing them. Large variations in the * calling rates on groups of answering jacks, due to seasonal or other causes, were taken care of by a rearrangement of the jumper wires. This switchboard contained no means to prevent two operators from connecting simultaneously to the same line by plugging into separate answering jacks to answer a call thereon. The chances of confusion from this cause were reduced by preferentially zoning the multiple answering jacks and by establishing rules as to the withdrawal by one operator when two got in together.
In addition to these No. 1 switchboards having two or possibly three appearances of separate answering jacks and lamps, there was in actual commercial use also, a switchboard at the Hollenden Hotel, in which it was attempted to avoid double answering by operators. That board had no separate answering jacks, the line lamps being associated with the jacks of the main multiple, and it had series jack contacts to prevent more than one operator from taking the call. It was, however, so arranged that one girl was always in the master chair, and she could always take a line away from any of the other girls who had seized that line and attempted to answer its call. In actual practice the interval of time within which one operator would take an answered call away from another operator would be very short, unless the second operator plugged in deliberately in such a way as to deprive the first operator of an effective response to the subscriber’s call. If, in the Hollenden switchboard, all of the operators simply attempted to plug in upon, seeing a subscriber’s lamp signal light, it would be only a short interval of time by which one would precede the other. Yet it remains a fact that, no matter how many others plugged into a multiple jack for answering the. subscriber’s call, this girl who *121held the master position would take the call away from the others. Whenever the operator who sat in the master chair did plug in to a multiple jack of a calling line, she would he the one that would get the call, and she would he the one who alone could complete the call. To that extent, the Hollenden Hotel switchboard did not provide perfect distribution. Even if the Hollenden Hotel switchboard had an advantage over the No. 1 switeboard such as I have previously described, it had also the disadvantage to which I have last alluded. The disadvantage ran in a series such that the operator who sat at the position next to the master position could take the call away from the third operator, and the operator who sat in the master position could take a call awaj’ from either or both of the others. That did not tend to perfect distribution.
There are many other patents which come on the horizon as we pass down through the years. In so far as I am aware, no switchboards have been built and put into operation in accordance with these other patents; at least the record does not show it to have been done, and the natural presumption to draw is that, in a lawsuit tried as well and so thoroughly covered as this one has been, probably they have not been made and used, or that fact would have been shown. There are many patents that have aimed at this problem that I have been discussing.
For example, the French patent No. 320,-686, of January 5, 1904, attempted to simplify this matter of distribution and avoid the necessity of changing the jumper wires in order to give an operator more work or less work. In this French patent it was proposed to provide all of the multiple spring jacks with line lamp signal sockets so that the line lamp could be removed from the socket associated with a spring jack located before one operator, and inserted into-the lamp socket associated with a spring jack located before some other operator. The effect of this was to decrease the number of calls which would come before one operator and increase the number coming before some other operator. This scheme provided an easy method of shifting the line lamps from position to position in such a way that any particular operator would have more line lamps or less line lamps located before her; in other words,, more subscribers or fewer subscribers to take care of. The French patent succeeded in eliminating the intermediate distributing frame and jumper wires above described, but it made no effort at all in the direction of what has been called “non-interfering answering.”
Coming now to the switchboard which the plaintiff, the Kellogg Company, has produced: This Kellogg switchboard includes some things not covered by the Currier patent in suit, but which adapted themselves very readily and nicely to the invention of the Currier patent. These switchboards manufactured and sold by the Kellogg Company in a substantial commercial way did include the invention of the Currier patent in suit, and, while the switchboards produced and used by the defendants do not make use of every little detail shown by Currier, I find that they are substantially the same.
The Kellogg Company’s “feature” switchboard, which embodies the invention of the Currier patent in suit, has at each operator’s position, or within the reach of each operator, one, but only one, spring jack for each subscriber’s line, and this one spring jack is used both as a calling jack and an answering jack; and at every one of its multiple appearances throughout the switch-hoard each spring jack has associated with it a line lamp signal. (Sometimes in large ¡installations, half of the lines will have spring jacks equipped with line lamp signals at half of the switchboard positions, and the other half of the lines will have spring jacks equipped with line lamp signals throughout the other half of the switchboard, etc.) These spring jacks and their associated line lamps are multipled throughout the switchboard so that every operator at every position of the switchboard has within her reach one, but only one, spring jack representing each telephone line in the exchange; and each of these, spring jacks is accompanied by a line lamp. There are no separate jacks or lamps for answering. There is but one spring jack field for each operator, and, no matter how many times this field may be duplicated or repeated throughout the length of the switchboard, there is in each field one and only one spring jack representing each line, and each spring, jack is associated with a line lamp signal. (I sometimes speak of these positions or separate spring jack fields as being served by one operator. It is convenient to think and speak of them in that way, although it is customary, as previously indicated, to assign three operators to each section of the switchboard as represented by one complete spring jack field.) The result is that every time a subscriber calls, his *122particular spring jack is lighted up within reach of each and every position throughout the length of the switchboard.
In accordance with the noninterfering answering feature of the Currier patent, the arrangement is such that the first operator to answer gets the subscriber and gets his line and completes his call, and the first operator that plugs in, not only gets the line and the subscriber, but she extinguishes her line lamp and all of the other line lamps so that there 'is no longer any incentive for the other operators to answer, unless they are already on their way; and, if they are on their way and plug in, the one first to plug in gets the line, answers the subscriber, and completes the call, and all the other operators are shut out. There is no master girl, no master position, no inferior position. All the operators are of equal rank and standing. The arrangement is not as in the defendants’ No. 1 board, where both operators are connected with the calling subscriber. It is not as in the Hollenden Hotel switchboard, where the master girl gets the call in preference to all others. In the plaintiff’s Currier board, the one first to plug in gets the line, answers the subscriber, and completes the call, and all the others are excluded. If other operators are on their way and do plug in, they will not get the line, they will not get the calling subscriber, they will not interrupt anybody, but they will all be barred. They withdraw their plugs and go to some other work.
This arrangement is such that all the pending work in the way of answering calling subscribers is at all times visible at every position of the switchboard, and all the girls get work so long as there is work to be done. The operators have been referred to as “racing” to answer calls. I am not much impressed with the idea of their racing to answer calls, but I am impressed with the proposition that all of the operators always have before them the total amount of unfinished pending work — calls to be answered — so that they can all work intelligently and understandingly at the job of answering any and all pending calls.
This arrangement may not fit into the needs of some particular exchange in some particular locality, but it is a thing worth while and valuable to the art. This arrangement which I have described will take care of a large number of lines in a large exchange. The operators can all work at the switchboard, and they can all see all of the work ahead of them. They all know whether they are accomplishing results, or whether they are getting behind. They know when they are caught up with the work to be done. They know whether they ought to work harder. The management also can tell whether they are taking care of the work to be done, and whether to lop off one or more operators for reasons of economy. The management can repeatedly reduce the number of operators at the switchboard to a point where those'who remain at work will have enough work to keep them busy. No other adjustment is necessary. With a long row of girls working on such a switchboard, the management can drop off one or more or add one or more operators, and still have this uniform division of opportunity and work. This adjustment of personnel can be accomplished without any mechanical change of any kind. If it should so happen that one girl was new and inexperienced, and therefore slow in her work, whereas another was experienced and rapid, the experienced girl can work rapidly while the inexperienced girl works slowly. Operators of all sorts of capabilities can be mixed in together and each will have an opportunity to do her best, whatever that best may be. There is an advantage in having each position of the switchboard the equivalent of every other position, all of equal rank, so that any operator, no matter whether she sits at the first, second, or third, or what-not position, has the same opportunity as any and every other operator to answer and complete every incoming call.
There may be an advantage in the idea that the operators race or compete with one another in answering calls, but I do not attach much weight to that. It is an incentive in the right direction. It is claimed by the defendant that it is a disadvantage, but I do not agree with that. This switchboard does accomplish even distribution which adjusts itself to changing conditions.
Then, in addition to this matter of even and automatic distribution of incoming calls which I have discussed, there is the so-called “instantaneous disconnect.” This is an arrangement in and of this switchboard such that, when a party has finished talking and hangs up his receiver, he does not have to wait any length of time at all before he can take his receiver off the switch hook and again light his line lamp signal. This matter of handling the “recalls” of a subscriber who may be making a series of calls at one sitting has been a good deal of a problem in this art. In other cases, I have heard much about. various methods devised to take care of such recalls. In the old days the telephone sub*123scriber had to wiggle his switch hook up and down — “jiggle” it — in order to flash the supervisory lamp on the operator’s key shelf to attract her attention. The inventions involved devices such that, when a subscriber hung up his receiver and then took it down, the supervisory lamp would flash automatically. The arrangement of this Currier patent, No. 1,428,762, is such that, when the subscriber hangs up his receiver, the connected cord circuit is split in such a way that electrically it is just the same as if the answering plug of the cord circuit had been pulled out of the spring jack terminals of the telephone line. In other words, the subscriber’s line is all ready for a “recall” by tüe lighting of the line lamp signals associated with the spring jacks, wherever they appear in the switchboard, just as soon as the subscriber hangs up his receiver at the termination of the previous conversation; so that instantly and immediately, upon the subsequent removal of his receiver from the hook, the subscriber’s line lamps are lighted at the switchboard just as quickly and in the same way as they would light if he were making an original call. The only difference is that an answering plug of the cord circuit of the operator who had previously been the winner, and who had completed the previous call, may still be in a spring jack of the recalling line. If this operator, who has handled the previous connection, sees one of her plugs in a spring jack whose associated line lamp is lighted, she will have an incentive to take care of this recall. She has the means of knowing that the glowing lamp of a spring jack in which one of her plugs is inserted represents a recall.
The way the operator who handled the previous connection answers a recall is simply to pull her calling plug out of the spring jack of the line which was last called, and this act connects the operator’s telephone so that she can answer the recalling subscriber without having to insert or reinsert an answering plug. The other operators also have an opportunity to answer this recall. They also see the recalling subscriber’s line lamps light. This recall signal appears before them just the same as though it represented an original call. All of the subscribers’ spring jacks bear a lighted lamp and any of the other operators can insert an answering cord plug. If any one of them does so before the operator that had answered the previous call has pulled down her calling plug, then the new operator would get this recall and complete the connection, to the exclusion, not only of other new operators, but also of the operator whose answering plug still remained in the spring jack of the recalling subscriber.
It is a well-arranged switchboard.
Many of these elements, individually and alone, can be found scattered throughout the old art in either what was done in practice or shown in patents, but not all of them can be found in any one place. Here they are gathered together. All of the claims of the patent in suit are combination claims. During the trial and arguments, some of them were referred to particularly as “combination” claims because they combined the two big principles that’ I have discussed. But in a way all of the claims in suit describe combinations of things which were separately old in the art. I have seen fit to dub the various relays and appliances as “the brick and mortar” of the art, and in this case “the brick and mortar” was found in the prior art. But when the brick and mortar were put together in this Currier patent (and I am not now talking about any particular claim), there was produced a switchboard which was new in the art, and it produced for the art a new, useful, and valuable result, particularly in the way of distributing work between operators. Here you can have your row of operators, your row of positions, and without mechanical change you can increase the volume of the work either as a whole because it is seasonal, or you can increase it in spots when the business of one subscriber greatly increases while the business of his next door neighbor may fall off and become very little. It is a switchboard which automatically adjusts itself from day to day and from hour to hour; and all that it is necessary to do is toi add additional operators to the switchboard or to remove some operators from the switchboard and the whole job of distribution or redistribution is complete.
This principle of distribution has been involved in some of the prior art switchboards, but here it is coupled up with this matter of noninterfering answering which is a useful thing to have. It fills a useful place and serves a useful purpose to have this land of a self-adjusting distributing arrangement, and a desirable part of it, at least for certain uses, is this noninterfering feature. It is valuable to have this noninterfering feature wherein the positions are equal as distinguished from the arrangement in which there is a master position as in the Hollenden switchboard.
Of course, multipling the spring jacks was old; but Currier multiples his jacks and also multiples his lights and he has this *124complete noninterference. With the noninterfering feature the arrangement is satisfactory in every way. In some of.his claims Currier adds the instantaneous disconnect feature so that, for the purposes of handling recalls, the switchboard is just the same as it is for handling original calls, with no need on the part of the operators of watching for supervisory lights or in any other place for recall signals. All of the calling and recalling signals are up in the face of the switchboard.
There may be instances where a telephone manager would prefer for some reason to use a supervisory light for recall signals, but it is valuable in this art to have the Currier arrangement wherein all of the calling and recalling signals are located and combined in one upright of the switchboard.
We have so many of these separate fear tures which can be found in the prior art that it would require a long discussion to take them up one at a time and to attempt to cover them in detail. For instance, there is the McQuarrie and Loveridge patent, No. 1,217,-472. It is entitled to much thought here. When we liken the automatic finder switch to the operator and the potential of the two points that come together and the way they operate there, we find very many things in McQuarrie and Loveridge that are very similar to what is in Currier. On the other hand, the means of-distribution in the two systems are very far apart. If you look at the matter from the standpoint of the operators, they surely are very far apart, because in the McQuarrie and Loveridge system the girl’s work is parceled out to her. She is handed by the machine the things to be done. She does not know how much work is pending. McQuarrie and Loveridge were inventing in the mechanical art and Currier in the art of switchboards operated by human hands. As I have said in previous decisions, we had in this great art as it developed the automatic and we had the manual systems. We have had some automatic exchanges operated almost entirely without the aid of human operators. You probably, can never make the whole world automatic or the United States wholly automatic. There are going to continue to be a large number of these switchboards operated by girls. The situation does not mean that there is no room for invention in these switchboards that are operated by the girls. The telephone art is going to be taking things from one system to the other, and usually the more difficult step is from the manual over to the automatic.
Yet that is not always true. In this matter of distributing calls between operators, which is the thing that Currier’s invention had to do with, we have the human element— the fact that some girls can do more work than others, for example. These facts inject into the matter of distribution an element that is not present with the automatic or mechanical systems. Currier provided a system that takes care of that human element along with the many other elements.
In McQuarrie and Loveridge, the machines, like all mechanical things, move necessarily in fixed grooves. If no subscriber were talking, the McQuarrie and Loveridge board would be entirely idle. If that were the situation, a given subscriber upon projecting a call into this entirely idle place would always get through one particular machine to one particular operator; he would always get the same girl. The same machine would always pick up and handle his call in preference to other electrical switches; the one that was second would always be second, and the one that was third would always be third, because it is mechanical. I point this out, not because it is a disadvantage, but to show that the McQuarrie and Loveridge patent is .for a different scheme and a different arrangement than Currier’s arrangement for these operators — these girls — where, regardless of their ability, regardless of their number, regardless of the load, the first to plug in is the one who seizes the line and answers the call and completes the call, and all others are barred out. They all have before them all of the work, and they see it all of the time, and the human elements stimulate them to greater activity when necessary. There are people watching them work, the supervisor can see all of the conditions right there before her all of the time.
As a distributing means, McQuarrie and Loveridge was entirely different from Currier. It undoubtedly had a place in the art. It ought to be taken into account, but it meets a different need.
In many respects what has been said of the McQuarrie and Loveridge patent may be said also of the prior patents to McBerty, No. 780,670, and to Fay and Molina, No. 1,073,-748. They are all automatic switch systems and none is more pertinent nor indeed so much urged as McQuarrie and Loveridge.
The prior patent to Dyson, No. 1,208,718, does not require detailed discussion. - .Dyson did not have call distribution in mind at all. He was concerned with an automatic busy test located at the calling end of a cord circuit. *125An automatic busy test and ringing system such as that of the Dyson patent is designed and intended to permit an operator to plug directly into the jack of a called subscriber’s line without waiting to make the usual busy test (by applying the tip of the plug to the sleeve of the jack) to determine whether the called line is busy or idle. If the called line proves to be idle, the called subscriber’s bell is automatically rung to summon him to the telephone; but, if the called line is busy, the the ringing current will not be applied, but a busy signal will be automatically transmitted back to the calling subscriber to notify him of the busy condition of the called line. Regardless of the mechanism by which Dyson accomplished his results, it is clear that his patent did not relate to the distribution of incoming calls or to the noninterference of operators in answering them.
Another patent of the prior art is that to Andre, No. 816,894. Andre did not have the distribution of calls in mind at all. Currier was not the first to have all of the accumulated work within the view of all of the operators, but Currier included with it the idea of letting the first operator to insert an answering plug in the jack of a calling line complete that call, and complete it without interference by any other operator. Andre did’ not have any such purpose. His noninterfering arrangement was to prevent eavesdropping. It was the sort of thing that Currier might have taken to use in his new combination; but we must give Currier credit, not only for taking it and using it in a way to do the trick, but for thinldng of taking it and doing the trick. Andre was not a distributing device at all, and it was not intended as a noninterfering device. Andre had in mind to keep other operators from listening in to what was going on between two subscribers who were already talking. Andre arranged it so that another girl could not plug in to the jack of a busy line and listen. He was not thinking about doing what Currier did. He did not couple up his eavesdropping preventative with any means which could be used in the distribution of incoming calls.
Whether we look at the old structures separately or collectively, it is plain that Cur-, rier has in this patent produced a new switchboard which accomplishes certain new and useful results. Currier has made an invention which is worthy of a patent.
We turn now to the claims in suit to see whether or not Currier has covered in an effective way this thing which was valuable to the art. The claims of the patent do not cover everything on the switchboard which I have described, but that switchboard uses the claims as a very necessary part. All of the things that I have discussed fit into the scheme of Currier.
I wish first to consider briefly claims 2 and 12. These claims cover multiple jacks, multiple lights, and noninterfering answering — which represent the really big thing that Currier did. The two claims use different words, but I do not see very much difference in them. I think it is noninterfering answering, coupled with the multiple jacks and' multiple lights that entitled Currier to a patent over the defendants’ No. 1 switchboard, the Hollenden Hotel switchboard, and all the other structures of the prior art. I sustain claims 2 and 12 as valid.
Claim 5 leaves out the multiple lights, and I cannot see that it adds anything to the protection afforded by claims 2 and 12. It includes multiple jacks and noninterfering answering, but does not with certainty include signals to tell the operators where to answer. It is my view that without the lights claim 5 presents only an incomplete and fragmentary combination. Without the multiple lights you do not have the whole of the worthwhile thing in Currier. Unless claim 5 be construed as including the multiple lights, the combination lacks the utility which I have ascribed to Carrier’s invention, and I do not think Currier’s claim 5 is entitled to a construction which would include the multiple lights. It has the noninterfering answering, but lacks one of the elements of the combination in which Currier’s noninterfering answering functions, and to construe claim 5 as including the multiple lights would tend to make claim 5 a duplicate in substance of claims 2 and 12. So I think the fair thing to do is to disallow claim 5 because it describes an incomplete combination.
Farrington v. Haywood, 35 F.(2d) 628 at page 630 (C. C. A. 6); Daniel Green Felt Shoe Co. v. Dolgeville Felt Shoe Co., 210 F. 164 at page 165 (C. C. A. 2); Rodman Chemical Co. v. Deeds Commercial Laboratories, 261 F. 189 at page 192 (C. C. A. 7).
I next take up claims 39 and 33, which relate to the “instantaneous disconnect.”
The “instantaneous disconnect” is an arrangement for, in effect, disconnecting the operator’s cord from the subscriber’s line the moment he hangs up his receiver. This puts his line and its signaling equipment at once in normal condition so that he may either make another eall or receive a call from someone else.
*126If he makes another call while the plug is still in the jack, it may be taken by some other operator, or it ma.y be taken by the same operator. If the same operator takes the call, she must reconnect her telephone set to the cord, and, to do this with an “automatic-listening” cord such as shown in the patent, she must withdraw the calling plug. With a key-listening cord she would operate her listening key. In either ease the relay which has opened the cord circuit to accomplish the “instantaneous disconnect” must at the same time be released so that the cord conductors are again continuous. The claims to the “instantaneous disconnect” here relied upon are claims 30 and 33, and these include the idea of the reseizure of the call by the same operator.
The “instantaneous disconnect” idea itself is admittedly very old in the art. A patent to Sabin, issued in 1882, discloses this idea, and the plaintiff itself owned a patent to Dean, No. 854,279, covering such an arrangement, which expired in 1924. The Clausen patent, No. 1,088.879, filed in 1911, shows an “instantaneous disconnect” provided for both ends of the cord circuit, instead of for but one end as in the Currier patent, and it is so arranged that the withdrawal of the calling plug reunites the cord conductors to enable the same operator to reseize the line when another call is made by the same subscriber before the plug is withdrawn from his jack. Clausen shows a key-listening cord, so that the operator’s telephone set is not reconnected by this withdrawal of the calling plug. Automatic listening was, however, admittedly very old before Currier, and, if the conventional automatic listening circuit were applied to the Clausen cord, the withdrawal of the calling plug would, of course, also reconnect the operator to the cord without the use of the listening key. The disconnect relays in the Clausen patent are under the joint control of the' calling and called subscribers, while in Currier the calling subscriber alone controls this relay. Mr. Eaton’s testimony shows that it has been controversial among telephone experts whether ihe better plan is to give the control to a single subscriber or to make it a joint control by both.
The Aitken patent, No. 3,221,404, filed in July, 1913, is another example of an “instantaneous disconnect” and in this ease the disconnect relay is under the control of the calling subscriber alone, as in the Currier patent. In the Aitken patent, if the same operator desires to take another call by the same subscriber after the disconnect relay has operated, she does it by throwing a listening key, which connects her telephone to the cord and reunites the cord conductors. This corresponds with the Currier arrangement, except that the manual act for accomplishing these two results in the Currier patent is the withdrawal of the calling plug instead of the throwing of a listening key, but this difference is merely incidental to the fact that the Currier circuit uses the conventional automatic listening equipment.
Briefly, I hold that these claims are void on Clausen patent, No. 1,088,879, and Aitken patent, No. 1,221,404. In this instantaneous disconnect feature alone I cannot see enough to support a valid patent. In the claims as worded by Currier, there is something a little bit different from Clausen and a little bit different from Aitken, but, when I take Clausen and Aitken together, they tell the whole story.
This leaves claims 13, 35, and 39 for consideration, and they involve rather a peculiar situation. I feel, as I have said, very strongly that Currier’s total accomplishment was valuable. The results are better because the additional features of claims 13, 35, and 39 are combined with those of claims 2 and 12. The additional feature of having the recall signal come in on a plurality of line lamps is not found in the prior art. These claims 13, 35, and 39 represent a creation more valuable than that of claims 2 and 12 which I have just held to be valid. The invention of claims 13, 35, and 39 should, perhaps, be regarded as a refinement of the invention of claims 2 and 12.
Having reached the conclusion that “instantaneous disconnect” standing alone did not involve enough ingenuity over the prior art to give validity to claims 30 and 33, it may seem inconsistent to sustain claims 13, 35, and 39, which we have been designating as the “combination claims.” These claims might perhaps be regarded as narrow claims to the same feature. But in claims 13, 35, and 39 “instantaneous disconnect” becomes a part of a larger combination. It should be said in this connection that this feature fits very beautifully into the whole arrangement. So, despite the prior art which makes me think that standing alone claims 30 and 33 are void, it is my conclusion that the “instantaneous disconnect” fits neatly enough into the whole arrangement to constitute a part of a proper combination. I hold claims 13, 35, and 39 valid as such combination claims. Claims 2 and 12, which do not include the instantaneous disconnect, do not provide as desirable a *127switchboard as the complete combinations of claims 13, 35, and 39. The instantaneous disconnect fits in there advantageously, and the whole combination is new. Currier is the first man to have brought the combination together, he is the first to have made this kind of a switchboard. Claims 13, 35, and 39 taught the art how to build a better board than is shown in claims 2 and 12. Whether we call it a narrowing of claims 2 and 12, or whether we call it a distinct combination, is not a thing to worry about. In any event, I think that all of the elements of these claims are so related that they fit in together, that they work together, and that they co-operate to produce a common, useful, and new result. Therefore, the elements constitute a proper combination, and I hold claims 13, 35, and 39 to be valid.
I think highly of this patent as a thing helpful in its field, and that field a varying one. It is not an invention which would greatly affect the number of telephones in use; the business of the Michigan Bell Telephone Company would doubtless be about as large without this invention as with it; but Currier produced a helpful thing which went into actual and extensive use. It tends to better telephone service at a lesser cost. I find in it an abundance of novelty and merit to sustain the elaim of patentability.
Coming now. to the defendants’ claim that they have a license under claims 2 and 12. My real problem is to take the license agreement which was entered into on June 2,1914, and to determine from all four corners of that instrument what the parties meant and had in mind; and not to do it by any technical or arbitrary rule.
There are three reasons that lead me to the conclusion that the license from the Kellogg Company to the Western Electric Company for patents covering “automatic busy tests” does not apply to the Currier patent in suit.
I have a great deal of confidence in Mir. Bailey, one of the defendants’ engineers, and I know that in his testimony he called the patent in suit one for an “automatic busy test”; and I am aware that Mr. Camp, when acting as the solicitor in prosecuting the application for this Currier patent, used the term “busy test” in connection with his discussion of a prior art patent to McQuarrie, No. 502,466, which discloses shutters mechanically operated in such a way as to bar the insertion of a second plug into any one of a set of multiple connected trunk jacks when some other plug has already been inserted into some other jack of the set, and that Mr. Camp in referring to what he called the “busy test” of this McQuarrie trunk circuit went on to describe this term by saying “that is for preventing a second link circuit from operatively connecting to a calling line.” 1 cannot read Mr. Camp’s communication to the Patent Office in any way which does not carry the implication that he applied the term “busy test” to something comparable to calling lines, rather than to called lines. But it is only by implication' that this construction of his statement can be applied, because the mechanical shutters in the McQuarrie patent are associated with a trunk line extending between two telephone exchanges, and not with the spring jacks of a subscriber’s line at all, - — either a calling or a called subscriber’s line.
What we think of when we speak of “an automatic busy test” is at the other end of the cord circuit, i. e., at the calling end or calling plug. That is what the layman thinks about. He does not say that his own line is busy. He says that the man he is calling is busy. During the trial of this ease-there has been much discussion about busy operators, but in such discussions we have referred to quite a different thing from what we have in mind when we say that a subscriber’s line is busy. The natural thing is to think of a busy line as the called line and of the busy test as associated with the calling end of the cord circuit. I will not say that you could not possibly apply that term to the answering end of a cord circuit, but it is not the natural thing, the easy thing, the simple thing, and nine hundred and ninety-nine out of a thousand automatic busy tests at least would be made with the calling end of the cord circuit and with the calling plug and the spring jack of the called line.
In the second place, the “automatic busy test” is coupled up in section 1 of the license agreement with the calling or ringing end of the cord circuit, in the phrase “automatic busy test or ringing system.” The automatic busy test and the application of ringing current to the called subscriber’s line axe hitched together, and the “ringing system” has to do with the party that one wishes to call and with ringing the bell of the called subscriber’s telephone. In connection with the ringing, I think of the calling end of the cord circuit and of ringing the called subscriber. Who is it that the operator rings? She does not ring the man that is calling. He gets angry if by mistake she does that. The operator rings the subscriber with whom the calling subscriber wishes to talk. I think that, when the *128contract refers to “automatic busy test or ringing systems,” it means to refer to tbe calling end of the cord circuit and to the subscriber to be called.
The third thing is that on the whole the conduct of the parties supports that interpretation of the contract. I do not fail to recall the letter that was written by one of the defendants’ patent attorneys, but that sounds like a letter which one writes when he is thinking of lawsuits and has hopes, but is not certain. These parties entered into this, license agreement, and after that they had this contest in the Patent Office over this very Currier patent in suit. During all the long period of that contest in the Patent Office over this particular patent in suit, there was no claim of a license. The letter was an interdepartmental letter of the Western Electric Company, a subsidiary of the defendant, but no claim of a license was made to the plaintiff company until after this lawsuit was brought.
Now these three considerations, all fitting in together, lead me to the conclusion that this license agreement does not cover or include this particular Currier patent in suit.
It is very clear that claims 2, 12, 13, 35, and 39 are infringed and I so hold.
Patent No. 1,438,170.
The second patent in suit, No. 1,438,170, relates, as I have said, to the.so-called “flashing recall,” which is an arrangement by which a subscriber can give to an operator an automatically flashing lamp signal to indicate that he desires to communicate with her, either in connection with a call she is handling or for the purpose of making another call, before she has pulled her plug out of the line jack following a call which has been finished.
In telephone systems long in common use, the operator’s cord circuit is provided with two “supervisory” lamps, one under the control of thé calling subscriber and one under the control of the called subscriber so long as the plugs are in their respective jacks. While the conversation is going on, that is, while both subscribers have their telephones off thé hooks, these lights are dark. When either subscriber hangs up, his supervisory lamp is lighted. This indicates to the operator that the plugs should be withdrawn from the jacks. ■ With this arrangement, if either subscriber desired to recall the operator while the plug was still in, he did it by moving the switch hook up and down repeatedly to cause an intermittent flashing on and off of his supervisory lamp; ■ and this has for years been the practice in making recalls.
The subject-matter of this patent is simply a means for automatically causing an intermittent flashing of the lamp for this same purpose. It is started by a single depression and release of the switch hook. The automatic flashing is accomplished by so arranging matters that the first-depression of the switch hook (the plug being still in the jack), not only lights the supervisory lamp as usual, but also energizes a relay which locks itself up and makes ready a circuit which will transfer the supervisory lamp from a steady to an interrupted circuit as soon as the switch hook is again released. -
In the old art the steadily burning light indicated to the operator that she should remove the plug, and the flashing light resulting from the up and down movement of the switch hook indicated to her that the subscriber wished to speak to her again, but confusion sometimes resulted from the fact that the subscribers would occasionally remove their receivers without vibrating the switch hook and merely wait to be answered as with an original call; or they would vibrate the hook several times and then wait for attention. If the operator had not been looking at the light when it was thus flashed .by the operation of the hook, she would not know that the subscriber had hung up his receiver at all, and might assume that he was still talking, since the lamp would again be dark; or the subscribers sometimes flashed their hooks too fast, in which ease the lamp would not give any signal to the operator. These are examples of the confusion that was avoided by causing the lamp to flash automatically after a single operation of the switch hook.
There is, in my opinion, clearly ■ room enough for an invention over the old practice just described in the idea of making the lamp thus flash automatically without any thought on the part of the subscriber, so that either by hanging up and immediately taking down the receiver, or by giving a quick flick with his finger to the switch hook, he gives the operator a continuously flashing signal to tell her that he wishes to talk again. It would not in any sense be a revolutionary invention. Doubtless many subscribers would still vibrate their switch hooks to make recalls, not knowing of the automatic equipment; but it was a worthwhile' thing.
However, I find that the patent to Smythe, No. 758,116, which antedated Currier by elev*129en years, discloses a flashing recall circuit which fully anticipates Currier’s invention, so far as anything here involved is concerned. The drawing of the Smythe patent shows only the calling end of the cord, and the flashing recall equipment is illustrated as applied to that end of a cord, but I do not find anything in the specification of the patent which indicates that he considered his invention to be limited at all to use only upon that end, and the testimony shows that it is in fact usable upon either end, or both. Recalls are more often made by the calling subscriber than by the called subscriber, and I do not understand that Smythe, by showing his recalling equipment upon the end of the cord connected to the called subscriber, intended to suggest anything to the contrary. I think it is clear that he showed the equipment on this end of the cord because that end presents a more difficult problem. There, an additional type of signal is necessary if all confusion is to be avoided, and by applying his invention where the problem was most complex he covered the entire field. At the answering end of the cord, the subscriber’s telephone is already off the switch hook when the operator plugs in to answer, so that there are only three types of signals required, namely, one to show that the subscriber is talking or ready to talk, one to show that he has finished and that the plug should be withdrawn, and one to show that he desires to recall. At the calling end of the cord, which is connected to the called subscriber’s line, four types of signals are required, one to show that the subscriber’s telephone is .still on the hook and that his bell should be rung and three more which correspond to the three just enumerated for the answering end of the cord.
Under the old practice there were two chances for confusion in the called subscriber’s signals. When the lamp was burning, the operator would not know (unless she remembered) whether the subscriber had finished the conversation and hung up his receiver or had not yet answered the bell and should be rung again. When the lamp was dark she would not know whether the subscriber was still in conversation or had hung up and again taken down his receiver to make a recall. This last is the same possible confusion which might arise on the answering end of the cord. Smythe provided four distinct signals which were enough to avoid confusion under all circumstances, even at the calling end of the cord. At the answering end, three are enough. In order to* get his four signals, he used the steadily burning lamp as the ringing signal, that is, to indicate that the subscriber had not yet answered; the dark lamp for the talking condition; a slowly flashing lamp to indicate the recalling condition; and a rapidly flashing lamp for the disconnect signal. The evidence shows that the very equipment which Smythe provides may be used upon both ends of a cord circuit without change and serve to provide all of the .signals necessary to avoid confusion on either end of the cord. In such case the steadily burning lamp, which is the ringing signal on the calling end of the cord, would not come into play at all on the answering end, since the calling subscriber’s telephone is already off of the hook before the operator plugs into his line jack.
If one decides, as Currier did, to use the distinctive signals upon the answering end of the cord only, the separate ringing signal used by Smythe becomes unnecessary, and the natural thing to do would be to use the steadily burning light (now unnecessary as a ringing signal) for the disconnect signal just as had been done for years under the old practice. This is what Currier did. I do not find any invention in substituting the old steadily burning light as a disconnect signal for the rapidly flashing light of Smythe, where the signals are to be applied only to the answering end of the cord. Smythe provides a flashing recall signal, just as Currier does, and this is the essence of what Currier claims to have invented. The real ingenuity, such as there is, lies very largely in the conception of the thing to be done and the general conception of how to do it, rather than in the working out of the details. Long before Currier, the telephone development — the brick and mortar of the art, as I have termed it here — was such that engineers were well acquainted with the ways in which relays and their circuits could be used for perfecting the details of such an arrangement.
When Currier’s application was filed in the Patent Office there followed an interference with an application filed by Clausen, one of the defendants’ engineers, which resulted in the study of the prior art, including Smythe of course, to determine the patentability of the interfering subject-matter. It is not necessary for the court, nor for counsel, to harmonize everything that has been said on either side during the long history of this patent either by counsel or by the Patent Office, and it would be difficult to do, because the viewpoints of different people have been different, and the viewpoints of the same peo*130pie have perhaps been, different at different times. I do not regard the proceedings in the Patent Office as creating an estoppel against either party in the present proceeding nor as binding upon this court. I will say, however, that the discussion of the Law Examiner on that first interference between Currier and Clausen is along a line with which I find myself in agreement. It seems to me that the thing which the Patent Office there held to bo unpatentable and took out of the applications of Currier and Clausen constituted the main trunk of the tree we are considering and was, in substance, what we find in the Smythe patent. What was left were really nothing but the shoots which have grown up around it, and I find that these are, all of them, mechanical Ihings and old things.
One of the things which Currier claims to have done that Smythe did not do was to arrange for the operator to reseize the call by pulling down the calling plug. There is nothing in any of the claims here relied upon (33, 34, and 46) which specifies this method of re-seizing the call. Claims 33 and 34 indicate that the flashing mechanism for the recall light is conditioned for operation when the plug is inserted in the calling line. This concerns the so-called dual control which has been much discussed in this ease. All there is to this, in my opinion, is that Currier took Smythe, and, in place of the listening key which in Smythe conditioned the flashing mechanism when the operator “listened out,” used the conventional mechanism for automatically listening the operator in and out, which is responsive to the putting in of the plugs at the opposite ends of the cord. From this substitution it naturally resulted that, when the calling plug was inserted, the operator was listened out and the flashing mechanism conditioned for operation at the same time. The important thing in any recall mechanism is to condition it for operation by the calling subscriber the moment the operator is disconnected from the circuit, because up to that time there is no need of any recalling mechanism, while at any moment thereafter a recall may be necessary. This is just what Smythe did, and it is just what Currier did. It is also just what the defendants do in their alleged infringing boards, except that, in their No. 11 board, they do not condition the meehaiiism for operation when the plug is inserted in the calling line, as specified in these claims, because they do not then disconnect the operator from the cord circuit — they do so a moment later when the ringing key is depressed. Consequently, with the defendants’ No. 11 arrangement, the recall mechanism is conditioned at the time the ringing key is depressed. I am convinced, therefore, that, if the old automatic listening in and listening out of the operator be substituted for the key-listening, in and out, shown by Smythe — a thing easily done by any telephone engineer — we get all that is involved in what the plaintiff has here referred to as reciprocal or joint control; and that, therefore, there is nothing of patentable substance in it.
What I have said about the merits of the claims makes is unnecessary to talk about the infringement, but the situation illustrates how little there is left to hang a valid claim upon after the substance of the Smythe invention is carved out of the Currier disclosure. If the court should try to hold these claims valid over Smythe, they would become so narrow that it would be easy for any one to escape them. For example, I agree with the defendants that in claim 33 the word “when” in the clause “a relay conditioned for operation when the link circuit is connected with the called line” so limits the claim that it would not be infringed by the defendants’ system, in which the conditioning is done after that operation by the depression of the ringing key. Another example is the expression in the claims relating to the series arrangement of the interrupter and the signal lamp. Smythe shows a shunt arrangement of these elements, and the defendants use a shunt arrangement. There is evidence that these are equivalents and I believe them to be, but if I were to hold that Currier distinguished from Smythe in this respect, I should also have to hold that the defendants do not infringe. The thing's by which the claims distinguish from Smythe are merely mechanical and should not be treated as the product of genius.
This opinion shall be construed as a statement of the findings of fact and conclusions of law, as required by Equity Rule 70% (28 USCA § 723).
A decree will be entered for the plaintiff against the defendants, holding claims 2, 12, 13, 35, and 39' of patent No. 1,428,762 valid and infringed, and reference will be made to William S. Sayres, as master, to compute the profits and damages. The master will be instructed also to report a reasonable royalty, so that it may be adopted as the measure of damages if such adoption should seem to the court to be appropriate. Claim 5 is disallowed, and, as to claims 30 and 33 of *131patent No. 1,428,762, and claims 33, 34, and 46 of patent No. 1,438,170, they are held to be invalid, and the decree will be for the defendants.
The decree will be without costs to either party. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219121/ | BOURQUIN, District Judge.
The clerk lays before the court a petition and also a circular by him received. In the former a number of farmers of the county of the caption pray for certain statutory relief, viz. the appointment of a conciliation commissioner, and in the latter (believe it or not) the Attorney General conveys executive order to deny relief unless approved by the President.
It appears that Act March 3, 1933 (11 USGA § 203), under guise of amendment of the Bankruptcy Act, assumes to authorize federal District Courts to appoint “referees to be known as conciliation commissioners.” Section 1 (a), 11 USCA § 203 (a). The status of any such appointee seems more or less that of dry-nurse, his functions to further extension or composition of a farmer’s debts when by him desired, and to supervise or in other words to regulate and control the farmer’s operations or land, labor, and crops, when by any creditor desired. Th§ proceeding is to be initiated in a court of bankruptcy, but is not of the character nor within the principles of bankruptcy, adjudication of bankruptcy with its incidents neither contemplated, sought, nor authorized. Its object is outside of bankruptcy to coerce creditors to enter into new contracts with their debtor (who may be solvent and in less distress than his creditors), and without consideration to extend or reduce their just claims.
Even as in respect to any power by the Constitution granted to Congress, the power to legislate “on the subject of Bankruptcies” is not power to embrace therein by mere label, characterization, form, or forum what is not of, or is foreign to, bankruptcy. Labels, names, go for nothing. A rose, etc. Obviously a law action filed in a court of equity is not transformed to a suit in equity. And no more is a proceeding only to extend or compose debts within the “subject of Bankruptcies” merely because filed in a court of bankruptcy. In so far as composition (bodily lifted by Congress of limited powers from enactments by parliament of unlimited powers) is sanctioned in bankruptcy, it is limited to real bankruptcy proceedings actually commenced, though outside of, and superseding, them. Wilmot v. Mudge, 103 U. S. 219, 26 L. Ed. 536; Myers v. International Trust Co., 273 U. S. 383, 47 S. Ct. 372, 71 L. Ed. 692.
However, whether this new departure be constitutional and judicial, not one but both, and which well may be doubted, may properly be left until made an issue in some adversary proceeding.
Adverting to the circular, dated June 26, 1933, of “instructions” addressed “to all Clerks of United States District Courts,” it concludes that: “The appointment during the fiscal years 1933 and 1934 of conciliation and supervising conciliation commissioners are prohibited unless such appointments are approved by the President.” The order is entirely in keeping with government in defiance of the Constitution, by hectoring, threat, espionage, intimidation, dictatorship, irade, and merry gamble with the fate of 120,000,-*132000 people, but it is a futile brutum fulmen impotent to deprive tbe farmer of any just benefit the statute may afford, or to bring the judiciary to heel at executive command.
Abuse of executive power is notorious, and grows by what it feeds upon. It tends to dominate both legislative and judicial, and unless the axiom to “resist the beginnings” be heeded, it is not unlikely that little by little it will supersede both, undermine and overthrow the Constitution, and upon the ruins of the latter erect some variety of social organization its antithesis.
But as yet the Constitution like the flag is “still there,” and the judiciary by it created equal to and independent of the executive, in that vital character still survives, however it be news, a surprise and displeasing to Washington. And no federal court will betray its trust, impeach its honor, degrade its character, sanction executive arrogance and usurpation, breach the Constitution and imperil the nation, by submission of any its judicial acts to executive scrutiny, dictation, or control.
Incidentally, the author of the circular is not the first Attorney General to be obsessed by a delusion that federal courts are little more than appanages of his and the executive office.
The petition is granted, and N. A. Wilkins is appointed referee to be known as conciliation commissioner for service in said county as in said petition prayed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219122/ | PER CURIAM.
. The facts as stated in the bill are uncontested. The city of St. Petersburg relies upon H. B. No. 766 of the Laws of Florida, enacted in 1933 (chapter 16251). The construction of that act presents difficulties, but assuming that it authorizes the ordinance passed by the city of St. Petersburg, which directed its tax officers to accept in payment of all city taxes levied in 1931 and previous years bonds and past-due coupons of the city in lieu of money, we are of opinion that the ordinance and the act of the Legislature upon which it rests, for the reasons stated in Crummer v. City of Ft. Pierce (D. C.) 2 F. Supp. 737, and in McNee v. Wall (D. C.) 4 F. Supp. 496, decided 22d of August, 1933, are contrary to section 10 of article 1 of the Constitution of the United States as impairing the obligation of the contract between the city and its bondholders. For this cause the application for interlocutory injunction is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219123/ | BOOTH, Chief Justice.
This is a tax case, wherein the plaintiff sues to recover an alleged overpayment of income taxes for the calendar year 1926, levied and assessed against the estate of Henry L. Halff, deceased, of which she is the duly appointed executrix.
The Revised Civil Statutes of the State of Texas imposing inheritance taxes upon the estates of deceased persons provide as follows:
“Art. 7131. Fixing Tax.- — -Immediately after the filing of the appraisal report, or as soon thereafter as practical, the county judge shall calculate and determine the tax due on such property, according to the value thereof as shown in such appraisement, and shall furnish a statement of the same to the Comptroller for verification. If the Comptroller finds the tax to be correct, he shall so advise the county judge, whereupon it shall immediately become the duty of the county judge to- certify such amount tit the collector of taxes, to the executor, administrator or trustee, and to the person to whom or for whose use, the property passes, and said tax shall be a lien upon such property from the death of the decedent until paid.
“Art. 7134. Foreclosure. — If the amount of tax due hereunder, as shown by such assessment furnished by the county judge and Comptroller, is not paid within three months from the date of said assessment, same shall draw two per cent, interest per month until paid, beginning with the date of notice of such assessment, and shall be added to said tax and collected as a penalty. If said tax and penalty are not paid within nine months from the date of such assessment, the Comptroller shall so advise the county attorney, or if there is no county attorney then the district attorney, who must immediately file suit in the district court to foreclose the tax lien, as other tax liens are foreclosed.”
Henry L. Halff was a citizen of Texas. His death occurred in said state on December 7, 1924. The county judge of Bexar county, following the provisions of the state taxing act, determined and assessed against his estate an inheritance tax of $22,938.85 on December 2, 1925. On Mareh 1, 1926, within ninety days after the tax had been assessed, the plaintiff paid the full amount thereof to the authorized collector of taxes for the state.
In plaintiff’s income tax returns for the estate for the calendar year 1926, the full amount of inheritance taxes paid as above was taken as a deduction from gross income, and tax liability computed accordingly. The Commissioner of Internal Revenue declined to allow the deduction for the year 1926, holding that it should have been taken and was only allowable for the year 1925, assessing against the estate an additional income tax for the year 1926, which, with added interest, totaled $3,597.75, and it is for the recovery of this amount, with interest, that the plaintiff sues.
The pertinent sections of the Revenue Act of 1926 are as follows:
Section 219: “(a) The tax imposed by Parts I and II of this chapter shall apply to the income of estates. * * * (26 USCA § 960 note.)
Section 214: “(a) In computing net income there shall be allowed as deductions:
“(3) Taxes paid or accrued within the taxable year except. * * • For the purpose of this paragraph, estate, inheritance, legacy, and succession taxes accrue on the due date thereof except as otherwise provided by the law of the jurisdiction imposing such taxes.” (26 USCA § 955 (a) (3).
Section 212: “(b) The net income shall be computed upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer. * * *” (26 USCA § 953 (b).
Section 200: “(d) The terms ‘paid or incurred’ and ‘paid or accrued’ shall be construed according to the method of accounting upon the basis of which the net income is computed under section 212 or 232 [section 953 or 984]. The deductions and credits provided for in this chapter shall be taken for the taxable year in which ‘paid or accrued’ or ‘paid or incurred,’ dependent upon the method of accounting upon the basis of which the net income is computed under section 212 or 232 [section 953 or 984], unless in order to clearly reflect the income the deductions or credits should be taken as of a different period.” (26 USCA § 931 (d).
The applicable regulation of the bureau is No. 69, article 134, and reads as follows:
“Federal Estate cmd State Inheritance Taxes. — Federal estate taxes, paid or accrued during the taxable year, are an allowable deduction from the gross income of the estate in computing the net income thereof subject to tax.
“The whole amount of such taxes, irrespective of when paid, is deemed to have accrued on the due date thereof, namely, -one *135year after the decedent’s death (see section 305), and, if the accounts of the estate are kept on an accrual basis, is deductible from gross income of the taxable year in which such due date falls. If the accounts are kept on the basis of cash receipts and disbursements, deduction may be taken from gross income of the taxable year or years in which the payment or payments may have been made.
“Estate, succession, legacy, or inheritance taxes, imposed by any State, Territory, or possession of the United States, or foreign country, are deductible by the estate, subject to the provisions of section 214, where, by the laws of the jurisdiction exacting them, they are imposed upon the right or privilege to transmit rather than upon the right or privilege of the heir, devisee, legatee, or distributee to receive or to succeed to the property of the decedent passing to him. * 5' "
“The accrual dates of such taxes shall be the due date thereof, except as otherwise provided by the law of the jurisdiction imposing them. * * * ”
The Commissioner justified his ruling, as we gather from defendant’s brief, upon two propositions of law: First, that under the taxing law of Texas, the inheritance tax to be paid to the state becomes due on December 2, 1925, and hence under the federal law and regulations of the bureau accrued and was deductible in that year; second, that plaintiff kept the accounts of the estate upon an accrual basis, and the provisions of the regulation quoted above govern.
If the due date of the Texas tax is fixed by the statute as of the date of notification and assessment of the same by the county judge and not the last day upon which the tax may be paid without incurring a penalty for nonpayment, then, in our opinion, the Commissioner was right. If the later date is the proper one, the plaintiff is entitled to recover. We say this because both section 214 of the Revenue Act of 1926, supra, and the last paragraph of regulation 69, supra, expressly fix the date of the accrual of deductible state inheritance taxes as of the “di/,e date thereof,” -and these provisions can of course mean nothing else than the due date of the tax as fixed by the Texas statute. The taxpayer’s income tax return for 1926 could not under the Revenue Act and the regulations accrue the tax prior to the due date thereof, unless sections 212 and 200, providing for returns upon the basis adopted by the taxpayer as a method of accounting, intervene to prevent the application of the section.
The 1916 Revenue Act provided a deduction for “taxes paid.” The act of 1918 changed the wording and granted deductions for “taxes paid or accrued within the taxable year,” and this identical provision is carried forward in the act of 1926. Section 214 (a) (3), supra, of the act of 1921 is precisely like that of subsequent acts, including the act of 1926. Undoubtedly it was the intent and purpose of Congress in enacting the above acts to permit the computation of net income upon the basis of allowable deductions “paid or accrued.” United States v. Anderson, 269 U. S. 422, 46 S. Ct. 131, 70 L. Ed. 347.
Section 214 (a) (3) of the Revenue Act of 1926, as well as previous acts noted, after allowing deductions for taxes paid or accrued within the taxable year, provides for specified exceptions to the right, and closes with the express provisions that “estate, inheritance, legacy, and succession taxes accrue on the due date thereof except as otherwise provided by the law of the jurisdiction imposing such taxes.” (Italics inserted.) The final paragraph of the taxing act just quoted is apparently free from ambiguity insofar as the accrual date of estate taxes is involved. The entire section (214 [26 USCA § 955]) is devoted to the subject-matter of deductible allowances from gross income to ascertain net income for the taxable year, and manifests a distinct intent to fix the accrual date for estate taxes deductible under the law if the method of accounting employed by the taxpayer is on the accrual basis.
The difficulty of ascribing a fixed time to the term “due date” arises, as the cases involving such an issue refleet, from the different senses in which the term is used. Sometimes it indicates a debt owing, and in others a debt matured and demandable. It is obvious from the provisions of the Texas taxing act that collection of the inheritance taxes imposed could not have been enforced in the way provided until after the expiration of the ninety-day period allowed for payment. During this period the Texas authorities accorded taxpayers the right to contest the assessment and object to it either in part or as a whole. Undoubtedly the local administrators of the law construed the due date to be the last day upon which payment must be made to escape the provided penalties for nonpayment, and the construction so given is in harmony with a great number of state eases involving an issue similar in principle. Barnes v. Arnold, 45 App. Div. 314, 61 N. Y. S. 85, 90.
In the Riverside & Dan River Mills Case, 37 F.(2d) 965, 968, 69 Ct. Cl. 70, 75, the court passed upon an issue similar in principle to *136the present one. Section 1116 of the Revenue Act of 1926 (26 USCA § 153 note) provided as follows: “Upon the allowance of a credit or refund * * * interest shall he allowed and paid on the amount of such credit or refund at the rate of 6 per centum per annum from the date such tax, * * * was paid to the date of the allowance of the refund, or in the ease of a credit, to the due date of the amount against which the credit is taken, but if the amount against which the credit is taken is an additional assessment made under the Revenue Act of 1921, the Revenue Act of 1924, or this Act, * * * then to the date of the assessment of that amount.”
The court in construing the act said: “We think a proper construction of this section is that Congress intended in the ease of a credit of an overpayment against an additional tax for 1921, or subsequent years, interest should be allowed from the date of payment of such tax to the date of the assessment of such additional amount; that on an overpayment for any year prior to 1921 credited against a deficiency for any other year interest should be allowed from the date of the overpayment to the due date of the amount against which the credit is taken, and that the words ‘due date’ used in the section mean the date fixed by the statute for the payment of the tax, or the several installments thereof; that is, that the due date of a tax is not changed because there is an additional assessment, that the due date here referred to is the same as that of the original assessment, namely, March 15, 1919, the date fixed by law for filing of a calendar year return, or, if paid in installments, then the date provided for the payment of the installments. See Dollar Savings Bank v. United States, 19 Wall. 227, 22 L. Ed. 80; United States v. Chamberlin, 219 U. S. 250, 31 S. Ct. 155, 55 L. Ed. 204; Union Pacific R. R. Co. v. Bowers (D. C.) 21 F.(2d) 856, affirmed (C. C. A.) 24 F.(2d) 788. Generally speaking, the term ‘due date’ means that an account will be paid at the time fixed for its payment. Tyson v. Reinecke, 25 Cal. App. 696, 145 P. 153. The various revenue acts definitely fixed the due date of the tax imposed by them. See sections 250, Revenue Acts of 1918 (40 Stat. 1082) and 1921 (42 Stat. 264), and sections 2,70, Revenue Acts of 1924 (26 USCA §§ 1041, 1042 and notes, 1043-1044) and 1926 (26 USCA §§ 1041-1044). In our opinion it was the date for payment provided in those acts to which Congress had reference when it used the words ‘due date’ in section 1116 of the Revenue Act of 1926 (26 USCA § 153 note).” Riverside & Dan River Case, supra.
See, also, Andrews Steel Co. v. United States (Ct. Cl.) 42 F.(2d) 573.
If it is a correct construction of the acts involved to hold that the accrual date of state inheritance taxes is fixed by the act, and that the due date of such taxes is the last day upon which they may be paid without a penalty, the reason for so holding, aside from the language of the statute, lies in the fact that state laws taxing deceased persons’ estates are not uniform as to time of assessment or payment of the same, and the purpose of Congress was to fix a definite date when the deductible allowance became effective. The Revenue Act uses the words “accrue” and “due date thereof,” and, while it is possible to hold that the due date is the date of assessment of the taxes, it is, we think, foreign to the intent of the act to so construe it, for obviously the Texas act provided a period of time -which should elapse between the date of assessment and payment during which the taxpayer for various reasons retained the option to pay or not to pay the taxes assessed, without incurring penalties for that period. That the date of payment of a tax is a controlling factor in the determination .of tax liability is established in several provisions of the revenue laws. The Revenue Act of 1926 (44 Stat. 9, 56), in paragraph (j) of section 274 (26 USCA § 1053), provides as to a deficiency assessment that interest thereon shall be computed from the date prescribed for the payment of the tax to the date of the deficiency assessment, and, if the tax. is paid in installments, “from the date prescribed for the payment of the first installment.” This modification of existing law was made to avoid the discrimination which hitherto prevailed between taxpayers who paid the full amount of their taxes on March 15th, the due date of payment, and those who elected to make payments quarterly. Obviously the due date mentioned is fixed as date of payment.
Section 1116 (a) of the 1926 Revenue Act (44 Stat. 119 (26 USCA § 153 note), in providing for interest allowances upon refunds and credits, uses this language: “Interest shall be allowed and paid on the amount of such credit or refund at the rate of 6 per cent-um per annum from the date such tax, penalty, or sum was paid to the date of the allowance of the refund, or in the case of' a credit, to the due date of the amount against which the credit is taken.” This provision was inserted for the purpose of supplying an *137omission in former acts wherein the taxpayer escaped the payment of interest in the ease of underpayment up to¡ the date of assessment of an additional tax, and it is to he noted that the date of payment of the tax marks out the periods for computation of the interest due on the tax accounts.
We do not think this case involves section 200 (d) of the Revenue Act of 1926 (44 Stat. 10, 26 USCA § 931 (d). The plaintiff’s income tax returns for the estate were rendered upon a calendar year basis, and the accounts were kept upon an accrual basis; but the distinction between this ease and United States v. Anderson, supra, lies in the fact that in this case the accrual date of the taxes was fixed by statute as the due date thereof. In the Anderson Case no such fixed and definite limitations obtained. One was a corporation subject to an excise tax, maintaining a system of accounting upon an accrual basis; the other, the executrix of a deceased person’s estate subject to one payment of an estate tax to the state of Texas, and entitled under section 214 (a) (3), supra, to a deductible allowance for the amount of the same on the due date fixed for payment, i. e., a period was fixed in the state act within which the executrix was granted time to accumulate the funds or object to paying the tax assessed.
What we have said is confirmed, we think, by the regulations of the Commissioner in making provision for the allowed deductions of federal estate taxes from the annual gross income of the estate, wherein it is provided: “The whole amount of such taxes, irrespective of when paid, is deemed to have accrued on the due date thei'eof, namely, one year after the decedent’s death.” In other words, the tax was susceptible to payment without incurring a penalty until the expiration of a year after the death of the decedent, and this provision is followed by the cited one in reference to state estate taxes that the accrual date is to be the due date thereof.
The Revenue Act of 1913 (38 Stat. 114) did not exact of the taxpayer a computation of the tax in the return to be filed March 1 of each year. The Commissioner was to assess the tax upon the basis of the return, and thereafter, “on or before the first day of June of each successive year,” notify the taxpayer of the assessment made. The tax so assessed had to be paid on or before the 30th of June following, with certain exceptions not here important, and in ease of default in payment on the date fixed, “and for ten days after notice and demand thereof by the collector, there shall be added the sum of 5 per centum on the amount of tax unpaid, and interest at the rate of 1 per centum per month upon said tax from the time the same became due,” etc. No penalty was incurred by the taxpayer under this act if payment of the same came within the time limits. The act fixed the due date; i. e., the date when the taxpayer could by payment discharge his tax liability in full and in accord with the assessment of the tax by the Commissioner, without an added sum for failure so to do. Up1 to the time fixed for payment, a tax liability existed, but the tax itself was not due and demandable prior to that time. Clearly the act fixed the due date of the tax as the last date upon which it could be paid without a penalty.
The Revenue Act of 1916 (39¡ Stat. 756) contained similar provisions as to return, assessment, and payment of taxes. The time limit for payment was fixed at June 15th, instead of the 30 th, but the same provisions as to a penalty for failure to pay were carried forward. We think these and subsequent revenue acts disclose that the tax herein involved was not due until the time expired within which it could be paid without incurring a penalty, and that the term “due date” used in the Texas act had reference to this fact.
The revenue law of Texas is so worded that no taxpayer would regard himself as in default prior to the date upon which he should pay the tax, and by so doing escape the penalty for default and legal proceedings to collect the same.
Judgment for the plaintiff in the sum of $3,597.75, with interest according to law. It is so ordered.
WILLIAMS, Judge, dissents. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219124/ | GREEN, Judge.
There is no controversy over the facts in this ease. About March 12, 192,6, the plaintiff made an income tax return for himself and wife for the year 1925 showing a tax due of $994.66 which was duly paid. In arriving at the net income for this return plaintiff deducted $9,000, being the amount he had invested in the stock of a company known as the Silver Roll Oil Association. This deduction was listed under bad debts and explained under schedule P as “Stock Silver Roll Oil Co. •Worthless.” -
The Commissioner of Internal Revenue disallowed this deduction, and by reason thereof and some other adjustments determined that there was an additional tax due 'from the plaintiff of $2,488.97, which together with interest was paid by the plaintiff. ' On September 12,192,9, plaintiff filed a claim for refund in the sum of $1,393.06 for the year 1925 on the ground that the total cost of his stock in the Silver Roll Oil Association represented a deductible loss on his return for 1925. The Commissioner rejected this claim, and the sole question in the case is whether his action was proper.
We think it was. While the findings of fact show that it was evident as early as 1923 that the real estate owned by the company had little or no value for oil-producing purposes, and in 1925 a receiver was appointed to sell the property, dissolve the corporation, and disburse the remaining assets, the evidence fails to show the value of the assets in 1925 and how much plaintiff might expect to receive as a liquidating dividend when the property of the company was sold and distributed to the stockholders. This did not appear until 1927, at which time the plaintiff received a liquidating dividend of $582.72 and his wife a liquidating dividend of $72.84.
It is generally held that the mere appointment of a receiver or even a showing of bankruptcy of a corporation is not sufficient in itself and alone to entitle a taxpayer to deduct the cost of the stock in such corporation as worthless. Eor all this may happen merely because the corporation is unable to meet its obligations in the ordinary course of business. Nor do we think that the loss could be deducted as a bad debt. The allowance for loss in a ease like the one at bar must be made under section 214 (a) (5) of the 1926 Act (26 US CA § 955 (a) (5) as a loss “sustained during the taxable year * ® * if incurred in any transaction entered into for profit.” Regulations 69, article 144, provide that when the stock of a corporation becomes worthless the cost may be deducted in the taxable year in which the stock became worthless. The distribution of the liquidating dividend showed that the stock never did become' absolutely worthless. It did, however, fix the amount of the loss when made, which was in 1927.
The facts shown in the eases cited by plaintiff are so different from those in the ease at bar as to make the decisions therein not applicable.
We think the decision of the Commissioner was right, and it is therefore ordered that the plaintiff’s petition be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219127/ | HAYES, District Judge.
Amendment 18 of the Constitution of the United States was a grant of power to the federal government prohibiting the manufacture, sale, etc., of intoxicating liquor for beverage purposes. The National Prohibition Act and the amendments (27 USCA § 1 et seq.) thereto were enaeted by Congress under the power granted to it through the amendment. Druggan v. Anderson, 269 U. S. 36, 46 S. Ct. 14, 70 L. Ed. 151. Congress, of course, can exercise no power except such as is delegated to it by the Constitution. In the absence of the amendment, the act would have no constitutional authority upon which to rest; such a law would be unconstitutional and void. Marbury v. Madison, 1 Cranch (5 U. S.) 137, 2 L. Ed. 60.
On December 5,1933, the President of the United States and the Secretary of State proclaimed the adoption of Amendment 21. By it Amendment 18 is repealed without reservation or limitation.
Amendment 21 became effective as law immediately upon its ratification — an amendment to the Constitution becomes a part of it the instant it is ratified. Druggan v. Anderson, supra. The operation and effect of the United States Constitution and Amendments thereto are not construed by rules governing statutes and state Constitutions. Our system of government malms the Federal Constitution the paramount law of the land. Congress, the Legislatures of the several states, the executive and judicial departments, and the people are bound by its provisions. The extent of its powers is to be determined by its existing provisions. The powers are effective only while they remain in the Constitution. “The people made the constitution, and the people can unmake it. It is the creature of their will, and lives only by their will.” Cohens v. Virginia, 6 Wheat. (19 U. S.) 264, 387, 5 L. Ed. 257.
The delegated powers of Amendment 18 are effective only during the retention of the Amendment. Acts of Congress in keeping with those powers are valid only during the life of the Amendment. If the Acts of Congress must be within the powers authorized by the provisions of the Constitution, an act cannot survive as law when the constitutional power authorizing it is eliminated. If the National Prohibition Act is still in force, Amendment 21 is denied immediate effect; it is postponed until all violations of the Prohibition Act, occurring before December 5, 1933, are finally disposed of by the courts. Thus the two amendments would exist at the same time, notwithstanding that one repeals the other. The people granted the powers enumerated in Amendment 18, hut they revoked those powers by Amendment 21. The revocation occurred when the repeal was ratified. It was not repealed in part, but it was repealed in its entirety. When the proposal was offered in Congress, various efforts were made to salvage some portions of the Amendment, but the final form of section 1 was outright repeal, and section 2 is really a new grant of power.
It follows that legislative acts existing only by virtue of the Amendment became inoperative when the power itself was withdrawn by the repeal of the Amendment. Repeal of the National Prohibition Act by Congress is not necessary for the law has no power to function without constitutional sanction. This construction gives full force and effect to the Amendment during the period it was a part of the Constitution.
We have at least one instance of the withdrawal from the Federal Constitution of the power hitherto granted under it, and an opinion rendered by the United States Supreme Court in respect to the effect of such withdrawal. The decision of the court in the case of Chisholm v. Georgia, 2 Dall. page 419, 1 L. Ed. 440, produced a proposal in Congress for amending the Constitution, which later became Amendment 11, as follows: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State or by Citizens or Subjects of any Foreign State.” Prior to the adoption of this amendment, the power existed under the Constitution conferring jurisdiction upon the United States court to try such actions. In Hollingsworth v. Virginia, 3 Dall. (3 U. S.) 378, at page 382, 1 L. Ed. 644, the proposition was presented to the United States Supreme Court to determine whether the adoption of the Amendment deprived the court of jurisdiction to determine pending litigation. Argument in this case, on behalf of the plaintiff, *155was to the effect that the Amendment should not be construed to interfere with pending litigation; that the Amendment should not be given retrospective effect and thus withdraw jurisdiction in pending litigation; that it should follow rules of construction applicable to statutes or laws generally against such retrospective effect. The Attorney General, in behalf of the defendant, contended that the moment Amendment 11 became a part of the Constitution, it thereupon deprived the United States court of any power, whatever, to deal with litigation whether pending, or having arisen in the past, or to arise in the future. The case was disposed of in the following manner: “The Court, on the day succeeding the argument, delivered a unanimous opinion, that the amendment being constitutionally adopted, there could not be exercised any jurisdiction, in any case, past or future, in which a state was sued by the citizens of another state, or by citizens or subjects of any foreign state.”
By analogy, although the principle appears the same, it seems perfectly clear that when Amendment 18 was repealed by the adoption of Amendment 21, all power delegated by Amendment 18 ceased; that any legislation enacted pursuant to it terminated the moment the amendment was repealed. It, therefore, follows that the National Prohibition law has become obsolete, and the power, previously conferred upon the courts, to hear and determine cases, involving the violation of that law, has been effectually withdrawn from the courts, and they are, accordingly, without any power, whatever, to proceed to trial or to impose sentences for the violation of a law no longer existing.
It is contended by the United States Attorney that the court still retains jurisdiction to hear and impose sentences upon convictions for a violation of the law which occurred prior to the repeal of the amendment. Chiefly, he relies upon section 29, title 1, of the .USCA, Revised Statutes, § 13, Act of 1871 (16 Stat. 432), by which it is provided that a repeal of a criminal statute, in the absence of language expressing a contrary intention, shall not deprive the courts of the power to convict and punish in violations which occurred before the repeal of such criminal statute. The court is of the opinion that this statute has no application to the point presented here. The Prohibition Act is not terminated by any Act of Congress; it becomes obsolete without repeal, and, therefore, the point is not presented of a repeal by an Act of Congress, bringing it within the construction of this statute. In the second place, that section is one of construction, binding upon the courts in those eases, only, where Congress still retains the power to continue the criminal statute, or to alter, or amend it, and, in no aspect of it, as this court sees it, can such a statute operate to prolong the life of Amendment 18, which the people themselves saw fit to terminate by repeal.
At common law, when a criminal statute was repealed, the courts had no power to inflict punishment against those who violated the law while it was in existence. A repeal operated to grant amnesty to the former violators. The rule was universally recognized “that no proceeding can be'had or pursued under a repeal act of Parliament, though begun before the repeal, unless by special exception.” Wm. Bb 451. And by Hale P. C., 291, “that when an offense is made treason or felony by an act of Parliament, and then that act is repealed, the offense committed before such repeal and the proceedings thereupon are discharged by such repeal.”
The repeal of a statute pending a prosecution for an offense which it creates] arrests the prosecution and withdraws all authority to pronounce judgment, even after conviction. State v. Williams, 97 N. C. 455; 2 S. E. 55. The principle was recognized in all the states. 16 Corpus Juris, 71.
An indictment cannot bs sustained, under a statute which has been repealed, without any saving clause. United States v. Passmore, 4 Dall. 372, 1 L. Ed. 871, Fed. Cas. No. 16,005. On repeal by an Act of Congress, all proceedings taken under it fall. “There can be no legal conviction, nor any valid judgment pronounced upon conviction, unless the law creating, the offense be at the time in existence.” United States v. Tynen, 11 Wall. (78 U. S.) 88, 95, 20 L. Ed. 153.
When the people saw fit to repeal the amendment, they could have extended its operation until every violator of the law, while it was in existence, had been brought to judgment and punished. But, for reasons satisfactory to Congress, it proposed Amendment 21, and thirty-six states have ratified it, without any such reservation or limitation, and the withdrawal of the Amendment leaves Congress where it was before the Amendment became a part of the Constitution, except section 2 of Amendment 21. This section does not empower Congress to prohibit the manufacture and sale of liquor, but prohibits the transportation or importation of beverage liquors into a state, in violation of its laws; *156for use therein. Hence, the Federal Prohibition law can derive no vitality except such as is sanctioned through Amendment 18, and now, that the Amendment is repealed, the law itself is inoperative and the court is without power to deal with any one for its violation.
To adopt any other construction would result in prolonging the life of the Amendment, and the laws existing thereunder, until every violator could be brought to justice and tried, thereby giving effect to the Amendment and the National Prohibition Act long after the Amendment had been repealed and after the Prohibition Act itself had become obsolete. Moreover, it is difficult to see any advantage that could accrue in the administration of justice by the trial, conviction, and punishment of citizens for violating a law that no longer exists. When a law has been terminated by the solemn act of the people, in the manner of the repeal of Amendment 18, the courts would, in my opinion, be engaged in an unwarranted procedure if they .undertake to deprive citizens of their liberty in the name of such a law. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219128/ | PRAT, District Judge.
A petition was filed herein by the Receiver in the above cause alleging in effect that the stock and property of the Lake Grain Company were in reality the stock and property of the above-named bankrupt, and it sought to restrain the officers, and others acting for and in behalf of the Lake Grain Company, from disposing of any of the books, records, or other property of the Lake Grain Company, or in any maimer disturbing the possession of the receiver; and further it is sought by said petition through summary proceedings to bring the property into the court of bankruptcy, it allegedly belonging to bankrupt with the claim of separate entity colorable and fictitious. These allegations seem to have been clearly and convincingly established at the hearing heretofore held on the return of the order to show eause why the receiver’s petition should not be granted. At the time of hearing, the creditors of bankrupt had met with referee, A. H. Gray, to whom the case after adjudication had been referred, and had elected Warren Toole as trustee, he being the same person who, as receiver, filed the petition herein. Counsel appearing for the Lake Grain Company cite the law controlling the appointment of receivers, as follows: “(3) appoint receivers or the marshalls, upon application of parties in interest in case the court shall find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified.” The foregoing language is plain, and one could hardly have any doubt as to its meaning and applicability to the state of facts found in this ease; or any doubt that the substitution of the trustee for the receiver at the hearing was the correct procedure as indicated in the statute hereinafter quoted. Courts of bankruptcy have the power to “(0) bring in and substitute additional persons or parties in proceedings in bankruptcy when necessary for the complete determination of a matter in controversy.” Section 11, title 11 USCA subd. 0. Many like proceedings have been started by the receiver and continued by the trustee, on application for and order of substitution by the court. The eases cited fairly illustrate the rule to be followed.
Another contention of counsel for the grain company seems to be that this inatter *180cannot be disposed of in a summary proceeding but that recourse must be had to a plenary suit by the trustee. Under the evidence here the property of the two companies, officered by the same persons, are so commingled and the separate entities of each so closely allied it seems to be the duty of the court to determine the issues here presented at once, and thereby forestall any further delay and prevent the additional expense that would have to be incurred in a plenary suit by the trustee. For such authority the court refers to cases cited by counsel on both sides, and esipeeially to the ease cited twice by counsel for the grain company, decided recently in the Ninth Circuit Court of Appeals, as follows: “It is well settled that a court of bankruptcy is without jurisdiction to adjudicate in a summary proceeding a controversy in reference to property held adversely to the bankrupt estate, without the consent of the adverse claimant; but resort must be had by the trustee to a plenary suit. [Cases cited.] However, the eourt is not ousted of its jurisdiction by the mere assertion of an adverse claim; but, having the power in the first instance to determine whether it has jurisdiction to proceed, the court may enter upon a preliminary inquiry to determine whether the adverse claim is real and substantial or merely colorable. And if found to be merely colorable the court may then proceed to adjudicate the merits summarily; but if found to be real and substantial it must decline to determine the merits and dismiss the summary proceeding. [Cases cited.]” In re Bastanchury Corporation (C. C. A.) 62 F.(2d) 537, 541.
There seems to be no question that the bankruptcy eourt has the power in the first instance to determine what are the existing conditions and whether under them it has the right to proceed; and, having heard the testimony at the hearing, and being convinced that the grain company is merely an adjunct or subsidiary of the bankrupt, there appears to be no valid reason why the controversy should not be brought to an end in the peni ing summary proceeding. The findings and conclusions submitted by counsel for the receiver and trustee appear to be justified by the evidence and the principles of law applicable, and they are hereby adopted as the findings of fact and conclusions of law by the eourt.
A decree will be entered in conformity therewith. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219129/ | MORTON, District Judge.
By the decision of the Court of Appeals the decree dismissing the bill was vacated and the case was remandéd to this court for further hearing. 46 F.(2d) 625, 627. In its opinion the Court of Appeals says: “The court should have proceeded to consider the ease on its merits. Had it done so and found that the machine called for in the specification and claims of the reissue patent was the same machine called for in the specification and claims of the original patent, and that the decree in the prior suit was based on a finding that the machine of the original patent did not involve patentable invention, then as that issue would be shown to be the same in the second suit as in the prior one, the decree in the prior suit, that the machine did not involve patentable invention, would conclude that issue in the second suit and a decree should have been entered for the defendant on the merits of the ease.” By “merits” is meant, I understand, the facts bearing on the question of estoppel by a prior judgment. The defendant also contends that the reissue patent is invalid because it is broader than the original patent and was not applied for with*186in two years after the date of the original. R. S. § 4916; 35 USCA § 64 and notes. These two points, and all other issues open on the pleadings, have now been fully heard; all the evidence which either party desired to offer upon them having been presented.
It is agreed by both parties that the drawings of the reissue patent are identical ■with those of the original patent; that the specifications of the reissue are the same as those of the original except for certain minor changes (page 1, lines 89-95), where the original description was erroneous in its reference to the drawings; that this correcting change is not a significant difference; and that the specifications and drawings of the reissue patent may be regarded for present purposes as identical with those of the original patent. Applying the test suggested by the Court of Appeals, it is clear “that the machine called, for in the specifications * * * of the reissue patent was the same machine called for in the specification * * • * of the original patent.” Opinion of C. C. A., supra.
There remains then, on this branch of the case, only the question whether the difference in the elaims between the original patent and the reissued patent prevents the previous judgment from acting as an estoppel. The claims then in suit defined the issues which were tried. The finding that the patent was void for lack of patentable invention affected only those parts of the machine — and the patent — which were brought into the claims; and the estoppel would be limited accordingly. Russell v. Place, 94 U. S. 606, 24 L. Ed. 214. The elaims are, of course, to be read in connection with the drawings and specifications to which they relate, not as mere mechanical abstractions.
Turning to the elaims of the original and the reissued patents, those numbered 3-12, inclusive^ are the same in each. Claims 1 and 2 of the original patent have been completely rewritten in the reissue and .four new elaims, 13-16, have been added. In the previous ease elaims 1, 2, 4, and 12 of the original patent were sued on; in the present ease, elaims 1, 2, 15, and 16 of the reissue.
Judge Lowell heard extensive evidence as to the prior art. At the conclusion of the case he found:1 “That there is no patentable invention-shown by this patent. Everything was old, and in many different varieties, as shown by this series of patents; and in my opinion it required only mechanical skill to so combine them as to get the result shown by the plaintiff’s patent.”
The patent to which this finding applied showed a machine which positioned a flexible tap, advanced it to a rotating knife, fed it past the knife so that the edge of the tap was split — “slit” would be a better word— and then discharged the tap without bringing pressure on the split edges. It also had a spreading device which constituted an element of elaims 3 to 11, inclusive; it was of secondary importance and need not be here considered. Without undertaking a detailed analysis of the elaims then sued on, it may be said that they included all the essential elements of the machine as above stated, except the spreader. That was the mechanical combination as to which Judge Lowell found, to apply the language of the Court of Appeals, “that the machine of the original patent did not involve patentable invention.” Opinion of C. C. A., 46 F.(2d) 625, 627. The claims now in suit bring together the same parts of the same machine. The description of certain of these parts in the reissued claims is very different from the original elaims; but the combination of mechanism to which they relate is the same for both. It is the combination which Judge Lowell held did not involve patentable invention. Abstractly considered, the new claims are different and are broader in their coverage; but neither on principle, nor under the decision of the Court of Appeals as I understand it, does that fact save the plaintiff from the consequences of the former decision. It follows that the defense of estoppel by judgment is established. On all the evidence I so find and rule.
The second ground of defense is that the reissued patent is invalid because broader than the original and applied for more than two years after the date of the original. There is no controversy — and no room for one —that any broadening of a reissue over the original, after the expiration of the time stated, prima facie invalidates the reissue.
I am clearly of opinion that the elaims of the reissued patent which are now in suit broaden the original patent. Claims 1 and 2 of the original patent comprised a combination of elements one of which was feeding mechanism consisting of opposed rollers; this element was minutely described in these elaims taking over eight lines of each. In the reissued claim 2, this descriptive limitation has been wholly dropped. In its place has been substituted a broad element consisting of “feeding means beside the cutter on opposite sides of the plane of the cutting edge, *187arranged to control the tap while it is passing said cutter.” This claim and the new claims 15 and 16 have been so drawn as, in effect, to cover all mechanical means of feeding the tap past the rotary knife. Such broadening is not permitted after the two years have elapsed, unless under very exceptional circumstances, which are neither shown nor claimed to exist in this ease. Even if some elements of the reissued claims were narrower than in the original, that does not save the claim if other elements were broadened. In Corbin Cabinet Lock Co. v. Eagle Lock Co., 150 U. S. 38, 14 S. Ct. 28, 37 L. Ed. 989, a situation resembling this case was presented. The original patent had a single claim incorporating structural details which were omitted in the claims of the reissue. It was held that the reissued claim was invalid. See, too, Fox Typewriter Co. v. Corona Typewriter Co., 282 F. 502 (C. C. A. 6); Troy Laundry Machinery Co. v. Adams Laundry Machinery Co. (C. C.) 112 F. 437. On this ground also I am of opinion that the bill should be dismissed; and on all the evidence I so find and rule.
To obviate further hearings if my judgment on the foregoing issues should be reversed on appeal, and to put the case into condition for final judgment by the Court of Appeals, I heard in full the questions of invention and infringement. As to infringement, it is hardly denied. The reissue was drawn with the defendant’s machine in mind; and the defendant’s machine infringes each of the claims in suit, viz., claims 1, 2, 13, and 14. This view perhaps carries the doctrine of equivalents pretty far as to claim 1; but it seems to me to be justified. As to invention, if that question be open, I incline to the view, in spite of the contrary opinion of my brother Lowell, that the patent does show invention. The problem which it solved was new; nobody had ever slit a rubber tap by machinery, leaving the slit open so that a strengthening piece could be inserted. As has been suggested, the machine had to position the flexible tap with reference to the knife, to hold the tap in position and feed it forward while it was being cut, and to discharge it after the completion of the cut without bringing pressure on the slit edge. There was no existing machine on which this work could be done, or which could be rearranged to do it by mere mechanical changes. The design of such a machine does not seem to have been obvious. Two concerns, one of them of very large experience in the making of shoe machinery, attempted to solve the problem and at first failed. Raneourt accomplished the desired result in a simple and effective way by his circular rotating knife and his arrangement of guides and rolls. It was not a great invention, but it was, I think, a real one; and I so find and rule.
Statements of fact in the foregoing opinion are to be taken as findings of fact, and statements of legal conclusions as rulings of law, under the Equity Rules.
Bill dismissed, with costs.
Orally. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219131/ | HOLMES, District Judge.
The plaintiff was injured in the performance of his duties as an employee in the paper factory of the defendant. At the time of the accident he was engaged in hoisting a cylindrical steel core by means of an overhead crane operated by an electric motor. The cores were of different sizes, and, even when bare, were very heavy, weighing between seven and nine hundred pounds, according to the testimony of the plaintiff, and between a thousand and twelve hundred pounds, according to one of the witnesses for the defendant. When wound full of paper they usually weighed between sixteen and eighteen hundred pounds. Some of them weighed three or four thousand pounds.
The paper is manufactured out of wood. After it gets into the form of paper, it is wrapped on a roller. When it comes off of the roller, it goes to the cutter to be made into sheets, and is finally wrapped on steel cores. The core that was being lifted was taken from a pile of empty ones of various sizes stacked in a fourteen-foot space behind the cutter, in accordance with the custom in the factory. Lt was to be removed to the winding stand to be wrapped with paper, after which it would be called a reel, and put back in the space behind and north of the putter provided for cores and reels to be stacked when the cutter was full. The employees had no discretion as to where to put them, but were required to stack them in the place men*190tioned. On the morning of the injury the cutter was full, and ten cores and reels of different sizes were stacked on the concrete floor in the place designated, being four on top of six others that were lying on the floor, making a pile eight or ten feet high. At the north of the pile, there were two concrete stationary chocks about eight inches long and five inches high, bolted to the floor, which prevented the cores or reels from rolling in that direction; but there were none at the other end, and nothing to keep them from rolling the other way, which was in the direction of the cutter, there being a space between the pile and the cutter into which the plaintiff’s duties often required him to step, and into which he had stepped at the time of his injury. The cutter frame was not permitted to be used to chock the south end for the further reason that it damaged the paper.
At the time he was hurt, the plaintiff was in the act of picking up the core with the crane. As the core came up he saw a sheet of paper, that had become glued to it, hanging from it. The evidence is convincing that the cores have to be free of obstacles when carried over to be put upon the roller, and that it was the plaintiff’s duty to remove anything of the kind. He says that, in order to get it off before it got out of his reach, it was necessary for him to take a couple of steps into the space south of the cores, which he did, and that, as he was pulling' the paper off, the pile rolled down and crushed his leg, pinning him under it. He was held in this position about ten minutes before he could be extricated, and there is no doubt about the serious and permanent character of his injury, his diminished earning power, or that he suffered excruciating pain.
It does not positively appear from the evidence who placed the bottom row of cylinders in the pile, but the plaintiff had placed an eighteen hundred pound reel on top of the others immediately before the accident, and it is a fair deduction from all of the evidence that the plaintiff and his fellow servants, some of whom were working in different shifts, had stacked the cores and reels, but that they did so in the place provided and in the manner required by the defendant in the circumstances. Testimony was introduced to the effect that movable chocks were furnished by the defendant and should have been used by the employees, but this was denied by the plaintiff. The issue of fact as to whether they were furnished was submitted to and determined by the jury.
The court instructed the jury as favorably for the defendant as was requested, except it refused to give a peremptory instruction to find for the defendant. While it is true the defendant took a formal exception “to each of the three charges” given on behalf of the plaintiff, it pointed out no specific objection to any of them, and has assigned none in its brief on the motion for a new trial. The only ground of defense urged during the trial, or on this motion, was the absence of any negligence by the defendant that materially contributed direetly and proximately to the injury. The question of defendant’s negligence was left entirely to the jury, who returned a verdict for the plaintiff.
Under section 513 of the Mississippi Code of 1930, an employee such as the plaintiff does not assume the risk of injury resulting from the employer’s negligence. 'Under section 511, contributory negligence is no defense, but only a cause to diminish the damages in the proportion that the employee’s negligence contributed to the' injury. The jury were properly instructed under these statutes, and whether the plaintiff assumed the risk or was guilty of contributory negligence, under this record, may be put out of consideration.
Neither is there any occasion for the application of the fellow servant doctrine as a defense, because the fellow servants who stacked the cores and reels did so in pursuance of the rule and practice of the defendant, in accordance with the custom in the factory, and there is nothing to show that they did it in a negligent manner, except in so far as the system or method under which they were working, authorized by the defendant, was negligent. If so, this was negligence for which the master is responsible.
Let us turn then to the proposition that there is no substantial evidence of defendant’s negligence to support the verdict, so> earnestly presented by counsel and solely relied upon by him.
The plaintiff contends that not only were there no stationary chocks at the south end, or grooves in the floor, to keep the pile from rolling or falling down upon him, but that the defendant failed to furnish any movable ones to be used for that purpose, and that none were available to the employees, if they had chosen to use them; also that the method of requiring different sizes of reels and cores to be stacked together, in the manner shown by the evidence, made them more likely to fall, which constituted negligence; and that his injury was direetly and proximately caused by such negligence on the part of his employer, which injury a reasonably pru*191dent employer should have foreseen and could have avoided by the use of ordinary care. If he is correct as to these grounds of negligence, the verdict must stand, the resulting injury being clear.
On the other hand, the defendant contends that the plaintiff had no business to be in the space where he was hurt. While admitting that it was his duty to get the paper off, it maintains that, by the use of a pulley, he eould have so operated the crane as to move the core to one side and into a safe place where he would not have been injured by the falling down of the pile. If these facts were true, there was no negligence, and the verdict should have been for the defendant.
Whether the defendant was guilty of material negligence, which directly and proximately contributed to the injury, turns upon the question whether it was the plaintiff’s duty to step into the space above mentioned, between the cores and the cutter, in order to pull the piece of paper off which was stuck on the core with glue.
Much evidence was offered by each side. As to some of the issues, there was a conflict in the testimony which only the jury could settle; as to others, impartial men might reasonably have drawn different conclusions from the same evidence. The jury by their verdict have resolved all issues of faet and deductions therefrom in favor of the plaintiff.
For the purpose of considering the requested peremptory instruction and this motion, it may be regarded as established: (1) That it was the duty of the plaintiff to be where he was at the time he was injured; (2) that, having put stationary concrete chocks at the north end of the place where the employees were intended and regularly required by the master to stack the cores, it was negligent for the defendant to fail to put similar ones at the south end, or to have grooves in the floor, or to provide some other means of preventing the cores from falling upon its employees while at work; (3) that suitable appliances in sufficient number in the form of movable chocks were not furnished by the master; (4) that, in a large factory with great numbers of operatives working in separate shifts, the master was negligent in requiring cylindrical cores and reels of different sizes and ponderous weights to be stacked on a smooth floor, where they were likely to roll or fall, without providing any method or furnishing any appliances to keep them from rolling and falling upon its employees; and, Anally, (5) that some or all of these protective things could have been done at a small expense, without interfering with the reasonably efficient and economical operation of the plant, and should have been done by an ordinarily prudent master in the exercise of reasonable care to avoid injury to its servants.
With these facts established and conclusions drawn, it was a logical and necessary step under the evidence to find that the plaintiff was injured as a direct and proximate result of defendant’s negligence and was entitled to recover. The requested peremptory instruction to find for the defendant was properly refused, and the motion for a new trial should be overruled.
An order may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219132/ | RAC ON, District Judge.
This ease comes up> on review before the court without any dispute as to the facts.
On August 3, 1931, an involuntary petition in bankruptcy was filed against Harris Bros., a copartnership composed of John R. Harris, William L. Harris, and Charles C. Harris. The firm was adjudicated a bankrupt on January 21, 1932. The Fordyee Bank & Trust Company held a claim against the partnership in the sum of approximately $2,500. No proof of claim was filed by the said Fordyee Bank & Trust Company in the office of the referee within six months from the date of the adjudication. A few days prior to September 27,1933, the said'Fordyee Bank & Trust Company filed its petition, asking that it be permitted to file its claim as of February 1,1932. A hearing was held on that date and a carbon copy of the proof of claim which it was alleged by claimant to have been placed in the mail addressed to the referee on February 1, 1932, was introduced in evidence. On this showing the referee made an order permitting claimant to file said proof of claim as of the date on which it was placed in the mail to the referee. The trustee of the estate objected to this order and was allowed until October 15, 1933, to file his petition to set it aside. The trustee filed his petition and on October 11, 1933', the referee on that date made an order overruling the exceptions and the motion of the trustee.
The question comes on review before the court to determine whether or not the action of the referee in these two orders was correct. It resolves itself down to a single question of law whether or not the Fordyee Bank & Trust Company complied with the bankruptcy statutes for the filing of claims by simply placing their claim in the mail addressed to the referee in bankruptcy. The letter was mailed at Fordyee, Ark., and addressed to the referee in bankruptcy at El Dorado, Ark.
The court is of the opinion that simply placing the letter in the mail, addressed to the referee in bankruptcy, does not comply with the terms of the statutes'in the filing of a creditor’s claim with the referee.
Subsection e -of section 57, 11 USCA § 93 (e) provides that: “Claims after being proved may, for the purpose of allowance, be filed by the claimants in the court where the proceedings are pending or before the referee if the ease has been referred.”
Subsection d, 11 USCA § 93 (d) provides that: “Claims which have been duly proved shall he allowed, upon receipt by or upon presentation to the court, unless objection to their allowance shall be made by parties in interest, or their consideration be continued for cause by the court upon its own motion.”
Subsection n of section 57 of the Bankruptcy Act, as amended by the Act of May 27, 1926, 11 USCA § 93 (n), provides: “Claims shall not be proved against a bankrupt estate subsequent to six months after the adjudication.” Prior to the amendment of May 27,1926, the time allowed was one year.
It is contended by the Fordyee Bank & Trust Company that the claim was duly filed by reason of the presumption arising out of the fact that it was placed in the mails and in due course would have reached the addressee, the referee in bankruptcy, at El Dorado. They contend that this presumption is not rebutted or attempted to be rebutted by the trustee. The trustee on the other hand contends that the records of the referee’s court show that the claim was never filed and that there is a still stronger presumption than that claimed by the Fordyee Bank & Trust Company to the effect that an officer is presumed to have correctly discharged a ministerial duty. Regardless of which of these may be the stronger presumption, the deciding factor which the' record discloses is that this claim was never filed. The Fordyee Bank & Trust Company in its petition relates: “That *193no record of the filing of its proof now appears among the Referee’s records in the matter of said bankruptey, and that this petitioner’s proof of claim has either been lost, destroyed or misplaced.” With this statement in the record, it was not incumbent upon the trustee to rebut the presumption that the claim was received and filed by the referee. In the absence of the record showing the filing of this proof, it was incumbent upon the Fordyee Bank & Trust Company to show when this claim was “lost, destroyed or misplaced.” It is true under the decisions that a letter placed in the mail is presumed to have reached, in due course, the addressee. Southern Engine & Boiler Works v. Vaughan, 98 Ark. 388, 135 S. W. 913, Ann. Cas. 1912D, 1062, and other eases cited in this opinion. It is equally true that the presumption is always in favor of the correct performance of his duty by an officer, and every reasonable intendment will be made in sup.port of such presumption. Throop on Public Officers, § 568; Meechem, Public Officers, § 579. This principle has been sustained by our own Supreme Court in several eases.
The Fordyee Bank & Trust Company comes in eighteen months after the adjudica^ tion and seeks to file the claim as of the date of February 1, 1932. The authorities upon this point are practically unanimous in holding that subsection n of section 57 is a statute of limitation and prohibitory against the court in opening up for the purpose of filing claims against an estate when the six-month period has run after adjudication. Orcutt Co. v. Green, 204 U. S. 96, 27 S. Ct. 195, 51 L. Ed. 390; In re Sanderson (D. C.) 160 F. 278; In re Hawk (C. C. A.) 114 F. 916; In re Rose Co. (D. C.) 43 F.(2d) 446; Farmers’ State Bank v. Thompson (C. C. A.) 261 F. 166.
There is nothing in the facts in this case which would bring it under any of the exceptions provided for in subsection n of section 57.
This is doubtless a just claim, but the recent trend of amendments to the bankruptey law has been for the purpose of expediting cases in the bankruptey courts. Other creditors have a right to have their claims seasonably passed upon and are entitled to whatever dividends or payment may be due them from the bankrupt estate. To permit a creditor to merely place his claim in the mail and then to make no other inquiry or investigation to see whether or not it had been properly filed for a period of eighteen months, would constitute an indulgence that certainly would not promote the expeditious settlement of bankrupt estates.
For this reason the referee’s findings are not sustained, and his order of October 15, 1933, permitting the Fordyee Bank & Trust Company to file its petition, is ordered vacated. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219134/ | ATWELL, District Judge.
According to the allegations of the bill, Mrs. Margaret A. Shannon died on December 13,1931. She was the surviving widow of J. M. Shannon, who died on May 27,1928. The community estate vested in the survivor. At the time of her death the property consisted of diverse and sundry lands, stocks, United States bonds, oil and gas leases, commercial paper, individual promissory notes, real estate and chattel mortgage notes, and other personal properties of the aggregate of between one and two million dollars. These properties were amassed by the Shannons during their residence in and around San (Angelo, Tex.
Mrs. Shannon left a will bearing date March 29,1930, having a codicil dated January 9,1931, and another dated June 13,1931. By its terms she set aside $10,000 for the care of the graves of herself and husband, made special bequests to numerous friends, and directed that $50,000 of her estate go to her sister, Mrs. Jura Murray. The death of this sister was the reason for one of the codicils in which she directed that $25,000 of the $50,000 should go to the respondents, who reside in Scotland and New Zealand.
The will then created out of the residue a fund or foundation to be known as the Shannon West Texas Memorial Hospital, to be erected, established, and continued at San Angelo. Executors were named who were to carry out the provisions of the will and who were ultimately to turn over this trust fund to certain named trustees.
On the 28th of December, 1931, this will was probated in the county court of Tom Green county and thereafter the special bequests aggregating many thousands of dollars were paid, and, in the course of administration, state, national, county, and municipal taxes were settled by the executors, the vast properties apportioned as directed, the trust garnered, and the memorial hospital purchased, furnished, and begun capacity functioning.
The respondents were furnished information of the death and copies of the will, in which instrument there was a provision that, “if any legatee named in this will shall file any contest in any court, then in such event such amount as such legatee would receive under this will is not to go to such legatee, but is to become a part of the hospital trust estate hereinbefore created.” To each of the two respondents $12,000 was forwarded under the will and the other $500 each was to be remitted as soon as a construction of the will as to payment of taxes was secured from the proper court. The remaining $1,000 is now in court for the respondents.
All of the negotiations between the executors and trustees and the respondents were carried on by correspondence and written instruments between them and their various acting attorneys. There was no personal contact.
When the respondents elected to take under the will, they signed acceptances and confirmed the provisions thereof and executed receipts therefor and approved the action of the executors in probating the will and in paying the legacies. One of the respondents expressed her great pleasure in the knowledge that her aunt had dedicated a large portion of her properties to hospitalization purposes, and requested information along from time to time as to the progress of the venture, and further expressed her pleasure when copies of newspapers were received giving such information.
The properties which came into the hands of the executors demanded constant atten*199tion. and frequent change in character and nature and the making of contracts for the development thereof. The estate being so bulky and complex it is necessary that they be unhampered in their right of possession! and that their title be unquestioned.
Notwithstanding the acceptance and satisfaction and acquittances of the respondents, and their estoppel to challenge or attack the will or any of the provisions thereof, they are threatening, through correspondence and written communications, to institute legal proceedings for the contest of the will in direct violation of their written contract of confirmation and ratification. That this attitude is in the face of the approval and confirmation theretofore given in the handling, payment, and working with the property under the provisions of the will which included the expenditure of large sums of money in the purchase and acquisition and rumiing of the Shannon West Texas Memorial Hospital.
It is also alleged that in the establishment of this main venture large sums of money have been expended and that it is impossible to keep it as a going institution if the title to the property which is the source of the income therefor, is to be in any way questioned, and that a cloud of that sort results in an immediate injury for which there is no adequate legal remedy.
The pleading is quite long and concludes with a prayer for a restraining order, which shall become perpetual upon final trial, preventing the respondents from instituting or procuring any legal proceedings involving the contest of the Shannon will; also asking for a removal of the cloud upon the title and a judgment quieting their right of possession and title.
A show cause order was issued upon the bill when presented. In obedience to it the respondents’ attorneys appeared as friends of the court and moved for a dismissal, suggesting that it was an effort to confirm the probate of a will when the court had no jurisdiction to set the order of probate aside.
They maintain that since the national court has no jurisdiction to hear the contest of a will, Sutton v. English, 246 U. S. 199, 38 S. Ct. 254, 62 L. Ed. 664, O’Callaghan v. O’Brien, 199 U. S. 89, 25 S. Ct. 727, 50 L. Ed. 101, it has no power to act in a situation such as is pleaded by the complainants. See, also, Kieley v. McGlynn, 21 Wall. (88 U. S.) 503, 22 L. Ed. 599.
The court, however, at this stage of the proceeding, at any rate, views the application as an action for equitable relief against the breach of a written contract. The respondents seem to have legally bounden themselves to the probate of the will and estopped themselves both by written instrument and by election, acts, and conduct from a contest thereof. Utermehle v. Norment, 197 U. S. 40, 25 S. Ct. 291, 49 L. Ed. 655, 3 Ann. Cas. 520; Smithsonian Institution v. Meech, 169 U. S. 398, 18 S. Ct. 396, 42 L. Ed. 793; Crawford v. Briant (C. C. A.) 53 F.(2d) 754; McWhorter v. Gray (Tex. Civ. App.) 4 S.W.(2d) 302.
The complainants also contend that the executors and trustees are authorized to maintain such a bill both under the statutes and at common law, and that the respondents would be in no position to ask a stay of such a suit until they could contest in the state probate court because the facts pleaded constitute both a legal and an equitable estoppel. Nor would they be entitled to have the proceedings stayed unless they tendered into court the $24,000 already received.
In this connection it may be well to remember that under the laws of Texas a will may be probated any time within four years after the death of the maker, and such limitation does not run against a married woman until after her disability shall have been removed.
With this prima facie showing as to legal and equitable rights and without forestalling a decision upon other interesting questions as to the propriety of the remedy being sought by the complainants, it seems to the court that the appropriate thing to doi is to grant a temporary injunction so that all parties may be fully heard and the cause speeded ' to such hearing. The properties and hospital in the meantime being conserved under and by the undisturbed management of the trustees and officers chosen by the deceased.
It is. so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219186/ | BREWSTER, District Judge.
The above-entitled cause is before me on plaintiff’s motion for preliminary injunction and defendants’ motions to dismiss the bill of complaint. The motions were heard upon affidavits filed by both plaintiff and defendants. The principal grounds upon which the court is urged to dismiss the bills of complaint are: First, that there is no infringement if the claims of the patent in suit are properly limited, and, second, that the plaintiff’s patent is invalid for want of invention or anticipation.
It seems to> be within the province of the court to dismiss a patent suit upon the pleadings and ex parte affidavits which clearly show noninfringement even where the court is called upon to construe and limit the claims of the patent. See Alemite Corporation v. Lubrair Corporation (C. C. A. First Circuit, January 3, 1933) 62 F.(2d) 899.
In the case at bar, assuming that the court could, without a hearing on the merits, limit the claims as the defendants argue they should be limited, there still would be, in my opinion, very serious doubts whether the defendants can escape the charge of infringement. Moreover, I-fail, to see how they could be limited without an inquiry into the prior art and the records of the patent office.
Whether the patent was invalid by reason of anticipation or want of invention are questions which cannot be properly determined until final hearing. Deitel v. La Minuette Trading Co. (C. C. A.) 37 F.(2d) 41; I. T. S. Rubber Co. v. Essex Rubber Co. (C. C. A.) 281 F. 5.
The prior patents cited by the defendants are inadequate to establish anticipation of the invention covered by the patent in suit.
I therefore overrule the defendants’ motions to dismiss.
As to the plaintiff’s motion for preliminary injunction, the facts disclosed by the affidavits would seem to warrant the exercise by this court of its power to grant injunctive relief, especially since an injunction will not work any serious hardship to the defendants. It was represented that the manufacturing of the alleged infringing article constituted only a very small percentage of the business of the corporate defendant.
Therefore, a temporary injunction may issue as prayed for by the plaintiff.' | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219187/ | BOURQUIN, District Judge.
Subsequent to adjudication, a creditor in a local court instituted contempt proceedings against the bankrupt, and the latter seeks to enjoin further prosecution thereof by the former.
It appears that years prior to bankruptcy, the creditor in said local court com-' menced foreclosure of a mortgage executed by Lasby upon his lands, and therein procured receivership to conserve the property. In due time the court granted a contested motion to vacate the receivership, and ordered some $7,000' therein accumulated and deposited with the court’s clerk, to be paid to Lasby. Thereupon ensued a race in diligence, Lasby to secure the money, the creditor to procure stay, appeal and supersedeas, in which Lasby won by a throat latch. Although notice of appeal had been filed and Lasby and the clerk had been told by the creditor that the court had been requested and had promised to send a stay order to the clerk, it does not appear that the order had been signed or even made by the court before payment; and the stay order was received by the clerk one hour subsequent to payment by him pursuant to the only order presently of record in his office.
It seems probable that Lasby disbursed the money to Ms counsel and creditors before the Supreme Court some time later enjoined them to hold subject to its further order whatever of the money they yet had. And so it is probable the stable was locked by stay and injunction after the horse was taken but not stolen. Thereafter, the order was reversed on appeal, with instruction that the lower court direct Lasby “to return and pay over, to the clerk * * * the sum” by the former from the latter received as aforesaid. See Burgess v. Lasby, 93 Mont. 610, 23 P.(2d) 1100.
The local court issued order accordingly, but witMn the time for compliance, Lasby was adjudicated a bankrupt. Thereafter, trustee was appointed, claim for the mortgage debt by the creditor filed, and the contempt proceedings instituted and praying only punishment because of noneomplianee with the order.
In this state of the evidence it is believed the local court can rightfully proceed to hear the evidence and render such judgment as justice requires. The fund in the local court was in custodia legis to satisfy if necessary the creditor’s claim; and though Lasby rightfully received it if the stay order load not yet been made, whether rightful or not in Ms hands it was subject to restitution specifically or in kind if and when the order for payment was reversed on appeal and restitution by the lower court ordered to be made. From restitution bankruptcy did not absolve Mm. If the statute extends to money, by virtue of the injunction Lasby was custodian for the local court of any of the fund under Ms control when order of restitution made. It was in the nature of a trust, not Ms property, was subject to the jurisdiction of the local court attacMng years before bankruptcy, was not witMn the jurisdiction of this court, did not vest in the trustee, it and he continued subject to the order of the local court, and failure by Mm its order to obey is contempt of its just authority.
If, however, he had none the specific fund as aforesaid, his obligation therefor is that of a debtor and to be enforced only so far as necessary and out of any Ms estate in bankruptcy in due course of administration. That is to say, the trust fund not in being and to be made good out of the bankrupt’s general funds, all of which vested in the trustee and beyond the bankrupt’s control, this court has exclusive jurisdiction, and the local court none to coerce the bankrupt to do the impossible or suffer the consequences. „
But as before stated, the order of restitution contemplates only the specific fund, and so the local court is not subject to interference by tMs court. In consequence the creditor likewise.
Injunction denied, proceedings dismissed, with costs to the creditor. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219135/ | WOOLSEY, District Judge.
Both these motions are denied.
I. As to the motion to dismiss the complaint :
On September 16, 1931, this patent was adjudicated, and as to claims 3 and 4, read in connection with the specifications, sustained by Judge Coxe in Goldberg v. Orloff et al., and Goldberg v. Sharkey (D. C.) 1 F. Supp. 928.
Therefrom it follows by necessary implication that it has been decided by another judge of this court that the disclosure of this patent is adequate.
The only possible ground for dismissing the complaint for infirmity on its face is, therefore, not maintainable.
On the question of the nature of the commodity involved in the alleged contributory infringement, which is the second point raised in the motion to dismiss, the parties must also be left to plenary proofs on a trial.
II. On the motion for preliminary injunction we have an issue of contributory infringement which is not affected by the previous adjudication.
The patent, claims 3 and 4, as allowed by Judge Coxe, September 16, 1931, are for articles óf manufacture to be manufactured by the use of a pyroxilin composition coating “as described” in the specifications.
Any one who made such an article in such a way would be a direct infringer, but since the patent here involved does not cover the composition, and the elements of the composition are all commodities which are claimed in the defendants’ affidavits to be common articles of commerce, this seems to me to be an attempt on the plaintiffs’ part, analogous to that described and condemned in Carbice Corporation v. American Patents Corporation, 283 U. S. 27, 33, 51 S. Ct. 334, 75 L. Ed. 819, to extend the monopoly of a patent so as to destroy competition with the patentee in the sale by it of a nonpatented article for use in connection with the manufacture of the articles covered by the patent.
Even if I am wrong in this theory, however, it is furthermore true that plaintiff® have not proved that what the defendants sold was identic in composition with plaintiffs’ formula. Putting the ease in the best light for the plaintiffs, they have merely shown that an approximately like result to theirs is reached in appliqué to which the composition sold by the defendants is applied. Non constat but that the defendants’ composition was so different as to be outside the plaintiffs’ formula. Cf. Otley v. Watkins (C. C.) 36 F. 323, 324; Victor Talking Machine Co. v. American Graphophone Co., 151 F. 601, 605, 606 (C. C. A. 2).
Also there are issues of fact as to intent raised which I think should not be dealt with on affidavits.
The moving papers, therefore, do not in my opinion justify the drastic remedy of a preliminary injunction.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219136/ | HOLMES, District Judge.
The defendants are charged with the transportation in interstate commerce of two girls for immoral purposes, in violation of the White-Slave Traffic Act of June 25, 1910, § 2, C. 395, 36 Stat. 825,18 USCA § 398. They have demurred to the indictment on two grounds: First, because it does not allege in the language of the statute that the offense was “knowingly” committed; second, because it does not show that the victims were transported into or through the Western District of Texas.
The pertinent parts of the indictment, omitting formal matters, charge that the defendants, “acting together and each with the other jointly and severally, did unlawfully, willfully and feloniously transport and cause to be transported from one place to another in interstate commerce two certain girls, * * * for immoral purposes, to-wit: for the purpose of inducing and compelling such girls to become prostitutes and give themselves up to debauchery, that is to say, that they, the said (defendants) acting together as aforesaid, did then and there transport and cause to be transported in interstate commerce the said girls (naming them) in an automobile from the City of Las Cruces in the State of New Mexico to a point located at or near the City of El Paso, El Paso County, Western District of Texas at the El Paso Division thereof, and within the jurisdiction of this court, for the immoral purpose aforesaid, that is to say, for the purpose then and there on the part of them, the said (defendants) and each of them, that at the City of El Paso, El Paso County, Texas, and within the jurisdiction of this court, the said victims should each practice prostitution and give themselves up to debauchery.”
The indictment fails to use the specific word “knowingly,” which is employed in the statute to constitute knowledge of the purpose of transportation an ingredient of the offense. The general rule is that all the elements of the offense must be stated, and, if any essential element is omitted, such omission may not be supplied by intendment or implication. The allegations must be made directly, with clearness and certainty, not by way of recital. Pettibone v. U. S., 148 U. S. 197, 202, 13 S. Ct. 542, 37 L. Ed. 419.
On the other hand: “No indictment found and presented by a grand jury in any district or other court of the United States shall be deemed insufficient, nor shall the trial, judgment, or other proceeding thereon be affected by reason of any defect or imperfection in matter of form only, which shall not tend to the prejudice of the defendant.” 18 USCA § 556, Eev. St. § 1025.
This statute applies where “some element of the offense is stated loosely and without technical accuracy. Dunbar v. U. S., 156 U. S. 185, 15 S. Ct. 325, 39 L. Ed. 390. The test is whether the indictment contains every element of the offense intended to be charged and sufficiently apprises the accused of what he will be required to meet, and, in ease other proceedings are taken against him, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction. Horn v. U. S. (C. C. A.) 182 F. 721; Id., 219 U. S. 585, 31 S. Ct. 470, 55 L. Ed. 347. A mistake in expressing the substance of a crime, if sufficiently stated and its meaning is understood, will be looked upon as a formal defect. U. S. v. Jackson (C. C.) 2 F. 502. And, so, if an essential averment bo faulty in form yet may by fair construction be found within the text of the indictment it is sufficient, U. S. v. Howard (D. C.) 132 F. 325, for then, manifestly, no wrong can be inflicted upon the defendant.” Miller v. U. S. (C. C. A. 3) 50 F.(2d) 505, 508. See, also, Peters v. U. S. (C. C. A. 9) 94 F. 127; Cochran & Sayre v. U. S., 157 U. S. 286, 290, 15 S. Ct. 628, 39 L. Ed. 704.
The conclusion is that, if the essential element of knowledge or scienter has been alleged in the indictment, no matter in what words, the indictment is sufficient in this particular. The language used by the court in Ammerman v. U. S. (C. C. A. 8) 262 F. 124, would indicate that, if the charge be that the transportation was unlawfully and feloniously made for the immoral purpose designated, then the indictment should be held sufficient. However, it appears that the attack on the indictment in that case was on the allegation of intent and not of scienter.
Turning to the statute under which the. indictment is drawn, it may be noted that, if we omit the word “knowingly,” it denounces a number of acts which might be performed by an innocent person ignorant of the purpose of the transportation. Every member of the crew assists in transporting, or causing to be transported, the passengers on board a train or vessel. O'ne might assist without knowing the purpose of the transportation. To keep the language of the statute from being broader than its meaning, its authors limited it in terms as well as intent to “any person who shall knowingly trans-, port or,cause to' be transported, or aid or assist in obtaining transportation for” (18 US *203CA § 398), or in procuring any ticket or any form of transportation to be used by, any woman or girl for the purpose of prostitution or debauchery or for any other immoral purpose, or “with the intent or purpose on the part of such person to induce, entice, or compel her to give herself up to the practice of prostitution,” debauchery, or any other immoral practice.
If the word “knowingly” were elinlinated from the statute, the immoral purpose might in some cases exist in the minds of actors' other than the defendant. In such cases the absence in the indictment of a direct allegation of scienter is fatal; but where, in addition to alleging a willful and felonious transportation by the defendant, the indictment charges a purpose or intent on the part of the defendant himself to transport, or assist in transporting, a woman or girl in order that she should practice prostitution or give herself up to debauchery, it is impossible for the defendant to have acted other than “knowingly,” and therefore the omission of that word, eo nomine, is not a defect of substance invalidating the indictment. The ease before us falls within the latter classification, being one where knowledge is sufficiently alleged in the statement of the act itself.
After alleging the felonious transportation in interstate commerce by the defendants, for the purpose of prostitution and debauchery, “acting together and each with the other jointly and severally,” the indictment proceeds, with broadening scope and design, in this manner: “That is to say, for the purpose then and there upon the part of them, * * * the said (defendants), * * * that said (girls) should each practice prostitution with various persons and give themselves up to debauchery.” No distinction can be drawn between the meaning of the words, “purpose” and “intent,” as used in the statute. Carey v. U. S. (C. C. A. 8) 265 F. 515. In giving the purpose of defendants, the indictment also designates their state of mind with reference to a contemplated course of conduct after the completion of the transportation. In alleging the purpose which accompanied the act, knowledge of its character is brought home to the defendants, who both conceived and executed the crime. They are presumed to be sane, and, willfully having done a thing with a definite purpose or intent — admitting the willfulness and the intent — they necessarily did it with knowledge of the purpose of the act. The worst that can be said of the omission of the word “knowingly,” used in the statute, is that the indictment is faulty in form. In such cases the allegation is sufficient, because the elements of the offense as defined in the statute appear in the indictment. Holden v. U. S. (C. C. A. 9) 23 F.(2d) 678; Kotrba v. U. S. (C. C. A. 7) 62 F.(2d) 234; U. S. v. Howard (D. C. Tenn.) 132 F. 325; Tapack v. U. S. (C. C. A. 3) 220 F. 445, certiorari denied 238 U. S. 627, 35 S. Ct. 664, 59 L. Ed. 1495; Ammerman v. U. S., supra (C. C. A. 8) 262 F. 124; Smith v. U. S. (C. C. A. 8) 157 F. 721, at page 726, certiorari denied 208 U. S. 618, 28 S. Ct. 569, 52 L. Ed. 647.
The second ground of demurrer raises a question of jurisdiction or venue, probably both. All that has been previously stated with reference to the construction of the indictment as a whole applies with equal force to this contention, which is that the words “Western District of Texas, at the El Paso Division thereof, and within the jurisdiction of this court,” are descriptive of the city of El Paso. Construing the indictment most strongly against the pleader (Meyer v. U. S. (C. C. A.) 258 F. 212), if it does not appear that the transportation was into or through the Western District of Texas, the demurrer should be sustained.
The court judicially knows that within a very short distance of El Paso is a point common to Mexico, the state of New Mexico, and El Paso county, Tex. The defendants contend that “a point located at or near the City of El Paso” might be either in the state of New Mexico or across the Mexican border, and that an automobile traveling from the city of Las Cruces, in the state of New Mexico, to a point at or near El Paso, need not come into the state of Texas at all. This contention is sound as far as it goes. Applying the rule of strict construction, the words “at or” must be disregarded, so that we have the expression “a point near El Pa-so.” Also, giving words their common and accepted meaning, it is fair to construe “El Paso County, Western District of Texas,” as descriptive of the city of El Paso. By them the city is located in a particular county, district, and state, and identified to the exclusion of every other city. But the addition of the words “at the El Paso Division thereof and within the jurisdiction of this court” can serve only one purpose, namely, to allege venue and jurisdiction. To hold that they, too, are descriptive of the city of El Paso would render them surplusage and of no effect. An allegation necessary to the validity of an indictment should not be treated as surplusage. This leaves sufficient pertinent alie*204gations of an interstate transportation from the city of Las Cruces, N. M., to a point near the city of El Paso, at the El Paso Division thereof, and within the jurisdiction of this court. There is a misuse of the preposition “at” when “in” or “within” was intended, but such slight inaccuracy in the use of a word does not vitiate an indictment, if from the context the meaning is clear and certain.
The demurrer should be overruled. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219137/ | KIRKPATRICK, District Judge.
Rebecca Smaltz, now deceased, was assessed and paid additional income tax for the years 1917 and 1918. Having unsuccessfully claimed refunds, her executor brought this suit. The defendant has interposed an affidavit of defense which admits the facts pleaded in the'statement of claim but challenges their legal sufficiency.
The additional tax was assessed upon income derived from payments of royalty by a coal mining company under a lease of coal lands made by Mrs. Smaliz’s father during his lifetime. The lease and the taxability of the royalties were before the Circuit Court of Appeals for the Third Circuit in Rosenberger v. McCaughn, 25 F.(2d) 699, 701. The decision in that ease was that, whatever the character of the transaction evidenced by the lease might be under the law of Pennsylvania, the royalties were, in part at least, income. As to the method of calculation by which the amounts paid as royalties were to1 be apportioned between income and capital returned, the court held that, inasmuch as the plaintiff had not in her pleadings or assignments of error questioned the method adopted by the commissioner, it would assume that it was correct. The court pointed out that the method adopted by the commissioner was that which had been approved by the same court as correct in New Creek Company v. Lederer, 295 F. 433. It is true that the court in Rosenberger v. McCaughn suggested that the reason that the payments were part income was that interest on the capital- must have been included. But the court nowhere suggests that the method of determining the capital is to subtract interest on deferred payments from the total, royalties. On the contrary, the court said, “But when the capital in the proceeds has been determined and set aside the balance is income, * * * ” and then goes on to approve the method of apportionment by determination of the percentage of capital return included in each installment of royalty.
In the instant case the commissioner determined that the royalties were part income and apportioned them between income and capital according to the method approved in the New Creek Case. Hence, if Rosenberger v. McCaughn and New Creek Co. v. Lederer are still the law of this circuit, the commissioner acted properly and the plaintiff’s case fails.
The plaintiff’s answer is that Rosenberger v. McCaughn has been overruled by the Supreme Court in Burnet v. Logan, 283 U. S. 404, 51 S. Ct. 550, 75 L. Ed. 1143, and that, as a result of that decision, the entire amount of the royalties (except an allowance for interest on deferred payments) must be treated as a return of capital until their sum has come to equal the value of the coal in place as of March 1,19'13, after which it will all be income. Under this theory, the royalties taxed would be entirely capital (except for deferred interest) because their sum has not yet nearly equaled the 1913 value of the property and the tax would have been illegally assessed. "
The plaintiff’s contention, however, Cannot be sustained. It is quite clear that Bur-*205net v. Logan does not overrule or in any way ‘affect the decision in Rosenberger v. McCaughn. In Burnet v. Logan the attempt was to tax part of the price of a sale as income or profit. What the plaintiff owned and sold was not minerals, but stock in a corporation. The corporation in turn owned stock in a second corporation, which second corporation had leased a mine and was taking out ore. It (the second corporation) did not own the land, only the ore which it had taken out and presumably paid the owner for. The price which the plaintiff received when she sold her stock was part cash down and part deferred payments at the rate of 60 cents per ton on the purchaser’s share of the coal mined.
If, as counsel suggests, we should disregard the corporate entities standing between the plaintiff and the ore itself, instead of appearing to be on all fours with the present ease, Burnet v. Logan will be seen to present a diametrically different state of facts. Adopting the suggestion, and assuming that the mineral rights were the only assets involved, the plaintiff in Burnet v. Logan was in the position of the lessee of the mine, not the lessor. In other words, through the medium of two corporations she had an interest in a contract with the owner of the land. This she sold, and the question was whether she had derived any taxable profit from the sale and, if so, how much. The price for which she sold the contract was partly payable in installments. These installments were to be measured by the amount of ore which the purchaser might mine. Of course, the installments would decrease and possibly cease altogether as the ore becomes depleted. But they would also cease if mining was suspended for any other reason, because the lease did not require production of either maximum or minimum tonnage. In Rosenberger v. McCaughn (and in'the instant ease) the taxpayer was on the other side of the lease.
The Supreme Court pointed out explicitly that the case did not involve royalties or deductions from gross income because of depletion of mining property, and the court could scarcely have made it clearer that it did not intend to disturb the rule for apportioning royalties between income and capital in cases is which depletion of mining property is involved.
I conclude that the decision in Burnet v. Logan does not touch this case, and that I am bound by the decisions of the Circuit Court of Appeals for this circuit in New Creek Company v. Lederer and Rosenberger v. McCaughn.
The plaintiff concedes that if the method used by the commissioner is applicable at all, the calculations involved are as fair and accurate as can be. The only question raised is as to the use of the method itself. It follows that an amendment will not help the plaintiff.
Judgment may therefore be entered for the defendant upon the demurrer.
Note. — I have called the instrument a “lease” throughout this opinion for convenience only. Under Rosenberger v. McCaughn, supra, and Von Baumbach v. Sargent Land Company, 242 U. S. 503, 37 S. Ct. 201, 61 L. Ed. 460, it does not matter what it is. The point is that the royalties are taxable under the income tax law. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219138/ | WILLIAM C. COLEMAN, District Judge.
This case involves two patents and the alleged infringement thereof. One patent, to Ottenheimer, Reissue No. 16941, reissued April 24, 1928, relates to refrigerators, and particularly to a refrigerator showcase provided with means for illuminating its interior. The other patent also relates to a refrigerator showcase, but is of more limited scope and design, namely, the patent to Peterson, No. 1,206,464, issued November 28, 1916. This patent, more specifically, has for its object “a show ease of novel and improved construction having embodied therein a refrigerator, so that the contents of the case may be kept in a fresh, attractive and wholesome condition.” (Specifications, lines 19-23).
The defenses raised to the alleged infringements are the usual ones, i. e., non-infringement and invalidity of the patents because of the prior art. It is axiomatic that the burden of proving infringement rests upon the plaintiff in a case of this kind. I reach the conclusion upon all of the credible evidence in the case that the plaintiff has failed to meet this burden with respect to both of the patents.
Taking up the Ottenheimer patent first, I find that it is not infringed by the defendant’s device, because I find that there are structural differences which amount to a substantial, and not a mere colorable departure from plaintiffs’ device.
I refer to two features of the Ottenheimer patent which are not disclosed in defendant’s device, and which I believe are not covered by any substitute in the defendant’s device. Those two features are the baffle or screen, and the glass panel.
In order that this opinion may disclose completely what the patent involved really covers, it will be well to quote one of the more typical claims in the patent, there being involved in the present suit thirteen out of fourteen claims. I. quote in full the third claim, to wit, “The combination of a display ease; means for displaying goods near the bottom of said ease; refrigerating means for cooling the goods displayed; artificial lighting means housed in the top of said case and arranged to illuminate the goods displayed; and a baffle mounted in the top of said ease beneath said lights, and serving to maintain there an inert body of relatively warm air.”
It is too well settled to require the citation of authorities that claims in a patent must be responsive to the specifications. They must have a reasonable, sensible coordination with the specifications. They are, of course, entitled to some flexibility of interpretation, depending upon the state of the art in question; and similarly and conversely, the specifications are entitled to a certain flexibility of interpretation. But, generally speaking, the two must coincide. And where claims are actually broader than described in the specifications, then the invention is void.
Applying, then, this fundamental principle at the outset, I am forced to the conclusion that claims 1 and 11 of the Ottenheimer patent are not sufficiently responsive to the specifications, are very much broader than permitted under any reasonable interpretation of the specifications, and that therefore they are void claims.
Claim No. 1 is as follows: “The combina*207tion of a display ease having a wide bottom, a top defined by a narrow frame structure, and an inclined, transparent front sustained at its upper edge by said frame structure; artificial lighting means concealed within the top of said frame structure; and refrigerating means arranged to exert a localized refrigerating effect in the lower portion of said case.” Claim 11 provides for: “The combination of a display case having a wide bottom, a top defined by a relatively narrow frame structure, and an inclined transparent front sustained at its upper edge by said frame structure; artificial lighting means housed within the top of said frame structure; and refrigerating means operative in the lower portion of said case.”
We find in the specifications, page 1, line 17, and following, this description for the construction of the Ottenheimer patent, and a declaration in no uncertain terms of what is intended to be accomplished: “I locate the lamps in a portion of the frame structure of the ease at the top where they are completely housed and may readily be concealed from the customer. Though they are then in effect within the case, they are isolated from the interior of the ease by a glass panel through which their light is projected.” And quoting further, lines 32-45: “The glass panel below the lamps serves to reduce the transmission of heat, but alone is not always adequate to effect this result. Accordingly I so locate the lamps and so arrange certain screens or baffles that the circulation of air within the refrigerator does not pass close to this glass panel. Stated differently, I maintain immediately below the panel a layer of inert or non-circulating air which serves effectually to retard the transfer of heat and which, as it becomes heated, inherently see]cs a position in the top of the ease'outside the path of circulation within the case.”
In these claims there is no adequate reference to such a structure or apparatus as thus described in the specifications. There is a reference to an artificial lighting means housed within the top of the frame structure, but no reference to a baffle, or to a glass panel, and there is only a very general statement providing for refrigerating means that will operate in the lower'portion of the case, or that will exert a refrigerating effect in the lower portion of the ease, all of which is obviously of the broadest character.
We now turn to the remaining claims, Nos. 2, 3, 4, 5, 7, 8, 9, 10, 12i, 13, and 14 of the Ottenheimer patent (claim No. 6 being removed from the controversy). Each of these claims calls for artificial lighting means either housed, isolated, concealed, or mounted in the top frame structure, by means of a glass panel or partition; and all but claims 4, 9, 10, 12, 13, and 14 refer specifically to •the baffle.
Without referring further to the specific language of the claims or of the specifications, it is self-evident that the panel, if not also the baffle, is a fundamental part of the plaintiffs’ device. One reading of that part of the specifications which I have already quoted, coming at the beginning of the specifications, is sufficient to indicate this to be a fact in connection with the formation of the layer of inert or noncireulating air which serves effectually to retard the transfer of heat, the latter being one of the primary objects of the device. If this be true, and if the defendant’s device does not have substantially the equivalent of those factors, then it is self-evident that there is no infringement.
What do we find, then, in the defendant’s device with respect to these two distinguishing features in the plaintiffs’ device? There is no baffle as such, and there is no glass partition or panel. The plaintiffs assert that there is the equivalent, a mere substitute, a colorable departure from the structure embodied in plaintiffs’ device, in that the solid frame of the front wall is brought down far enough to serve the purpose of the baffle in deflecting the air currents; and it is further claimed with respect to the glass partition, that its purpose is substantially accomplished by the glass shades around each of the electric light bulbs in the top frame structure.
But I do not think that those so-called equivalents are actually equivalents. I do not find that they do accomplish the purpose sought to be accomplished in the Ottenheimer patent, even though they may be intended to accomplish the same purpose. I do not believe that it is possible for them to do so, if for no other reason than that there is no way in the design of the defendant’s box to prevent the air currents from circulating in and around, at least to some extent, the various lights. That means, in other words, that there is no structure whereby a layer of inert or noncireulating air is preserved, completely separate, from the lights, that is from the heated chamber, which is effected in the plaintiffs’ device by the combination of baffle and solid glass partition.
One can find some language in almost every patent infringement decision stating *208general principles of patent law whieh would seem to have application to either side of a given case. But we can determine whether a given decision is, in fact, applicable to another set of facts only by analyzing those facts and seeing whether they are indeed parallel. The plaintiff relies on such eases as Sanitary Refrigerator Company v. Winters, 280 U. S. 30, 50 S. Ct. 9, 74 L. Ed. 147. But I find nothing in that ease inconsistent with my conclusions here. The Supreme Court in that ease was considering entirely different things, latches for refrigerator doors. Here we have a refrigerator showcase. The same general principles apply, to be sure, but what another court may find differentiates one latch from another, does not necessarily control in determining what differentiates one of these refrigerating devices from another.
The Supreme Court in the Sanitary Refrigerator Company Case said that “despite the changes in the Dent latch from the Winters and Crampton structure we find that the two devices are substantially identical, operating upon the same principle, and accomplishing the same result in substantially the same way, and that the slight change in the form of the Dent latch is merely a colorable departure from the Winters and Crampton structure.” Page 41 of 280 U. S., 50 S. Ct. 9, 12.
If I felt that in the present ease both devices accomplish the same result in substantially the same way, and that the change in the form as accomplished by the defendant’s devices was merely a colorable departure from the plaintiffs’ device, then I would say that we had a case which was to be directly governed by the Sanitary Refrigerator Company Case, and like decisions. But I think I have already said enough to indicate that I do not believe the same result is accomplished, or that the' change in the form of the device is slight. I feel that the same result cannot be accomplished by the defendant’s device as by the plaintiffs’ device, because of the structural differences just analyzed, and which thus amount to more than a colorable departure fróm the plaintiffs’ structure.
In this connection it must be borne in mind that we are not dealing with a pioneer patent. If it were a pioneer patent, it would be entitled to a wide range of equivalents. But we are dealing with mere improvements upon an art, whieh, if not crowded, nevertheless was well known in its primary features before the Ottenheimer device came into the field; and, therefore, we are to be limited practically to the structures or instrumentalities that have been disclosed.
Also, it is important to bear in mind that we are not here dealing with a function, but rather with a device, a structure; in effect, a machine; and it is elementary that the mere function of a machine is not patentable, but that the claims of the patent must be construed in -the light of the specifications and drawings to whieh they relate, and are not to be given an interpretation so broad as to cover the function of the machine patented, and thus protect against every possible machine with a like function.
I mention that fact because in this patent, as in the Peterson patent, to whieh I will refer in a moment, it may be said that the function sought to be obtained and actually attained by the defendant’s device, is the same as that attained by the plaintiffs’ device, in so far as the general circulation of cold air is concerned.
But we are not dealing with a patent for the function of circulating cold air in a certain way. We are dealing with a device which affords a certain method of bringing about that circulation -of cold air; and it may be admitted that the circulation is similar, but the amount of heat or the amount of cold that is conveyed through the compartments in the respective devices may be entirely different; and I think it is bound to be different, for the reasons I have just stated, in the Ottenheimer patent from what it is in the defendant’s device.
I understand the law to be that merely to substitute superior for inferior materials in making one or more or all of the parts of a machine or a device is not invention, although the substitution may be of materials that are both new and useful in a high degree. But it is also the law that, if the substitution involves a new mode of construction, or if it develops new properties and uses, or produces a new mode of operation, or results in a new function, or when it is the first practical success in the art in which the substitution is made, or where the practice shows its superiority to consist not only in greater cheapness and greater utility, but also in more efficient action, it may amount to invention.
Now, if any one of these things is true with respect to the defendant’s device, it may be patentable. But, certainly, it is distinctly different, and, if that be true, such device cannot be said to infringe something from whieh it is distinctly different in one of these important respects that I have enumerated.
Coming then, finally, to the Peterson *209patent which, because of its simplicity, we should, perhaps, have discussed first, I find, as previously stated, that also there has been no infringement of that patent.
The Peterson patent comprises only one claim, as follows: “A show-ease refrigerator, comprising an ice receiving chamber having a partially open top-side’ and insulated walls forming the remaining sides and bottom, a display ease mounted on the front portion of said ice receiving chamber and over the open portion of the top side, said ice receiving chamber embodying a deep rear portion, having an ice receiving opening in its top side and a relatively shallow front portion, the bottoms of said portions being coincident with each other, and a horizontal shelf having perforations adjacent its front edge, and forming a top of said shallow portion and the bottom of said display case and provided at its rear edge with an upstanding flange to partially separate the display case from the deep rear portion and to provide an air passage at its top edge, the space beneath said shelf being in open communication with said deep rear portion to form a continuous ice receiving chamber extending the entire area of the bottom of said case and which is accessible through said ice receiving opening in the top of said deep rear portion.”
A rather persuasive argument may be advanced that the prior patent to Farson, No. 275620, issued April 10, 1883, anticipates Peterson. But I am inclined to the view that it does not, because the lower chamber in the Farson device is not intended to be, and cannot be, because of its shallowness, an ice chamber. It is merely a chamber for the passage of cold air. I think this distinction is sufficiently vital to answer conclusively any contention that Farson anticipates and invalidates Peterson. Also it should be noted that the Farson patent does not embrace, and is not intended to embrace, any showcase features. In any event, when we turn to the question of whether Peterson has been infringed by defendant’s device, I conclude that it has not, because I believe that the substitution of the grid, the method of placing the grid in the device, the removability of the grid, resulting in the freer admission or circulation of air, all of these things I conclude are not merely colorable, but material departures, from the Peterson structure.
Here again it must be borne in mind that we are not dealing merely with a function, but with a device which aims to accomplish a circulatory system of cold air in a refrigerator. And I believe that although the circulation of the cold air may at times be sub-, stantially the same, such-would not always be the case, particularly if the pans, placed closely together, are not used on the grid. But this is not conclusive. The question is rather whether the Peterson specifications and claim really include defendant’s structure. I am unable to find that they do. The Peterson structure would have to be rebuilt in order to provide this grid-iron device of removable character. Defendant’s device may be a better one, or it may be a poorer one, but 1 do not believe we can say that it is a mere equivalent, in an art of this kind.
The Peterson patent expressly calls for a fixed floor, or bottom, over the small ice chamber, and for a fixed baffle at the inner end thereof. I fail to see that you can call an equivalent of that a device which has none of its salient features, which is removable, which at a glance obviously permits of the entrance of vastly more cold air than comes through the limited perforations at the front end of the permanent bottom of the Peterson patent.
I do not decide that any one of these elements, if isolated, would in and of itself be sufficient to distinguish the two devices from the infringement standpoint, but applying a practical, common sense test to the defendant’s device, I conclude that it is materially different, otherwise we would be giving to the Peterson claim a scope which I do not think is warranted by anything to be found in the specifications.
I am the more inclined to this view, because I think that the single claim in the Peterson patent is so broad, and indeed so ambiguous in part of its language, that if the patent is to be maintained as valid, we are bound to limit it to a more restricted application than the inartistic language of the claim might possibly warrant.
For the foregoing reasons, I will sign an order dismissing the bill of complaint. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219140/ | JOHNSON, District Judge.
The only questions presented by this petition for review are: First, whether a referee in bankruptcy has the power to order a sale of the bankrupt’s real estate free and clear of all liens and incumbrances over the objection of the first lien creditor; and, secondly, if the referee has such power, whether in this case the evidence warranted the referee in ordering the sale of the real estate free and clear of all liens and incumbrances and directing that all liens be transferred and attached to the fund derived from the sale.
The records show that on March 14, 1933, *219the trustee in bankruptcy of Albert Earl Carl filed his petition with the referee, asking for an order to sell the real estate of the bankrupt at public auction, free and clear of all liens and incumbrances, the same to attach to the fund derived from the sale. After notice to all parties in interest, a meeting of creditors was held when exceptions were filed by the Susquehanna Building & Loan Association, the holder of the first mortgage on the real estate, not to the sale, but to its being sold free and clear of liens, and asked that the sale be made subject to the lien of the first mortgage.
The state of the law with respect to the first question has become so well settled as to require little citation of authority. In the case of In re Prince & Walter, 131, F. 546, 549, 12 A. B. R. 681, this court, by Arehbald, Judge, said: “But notwithstanding what has been said above about liens being unaffected by bankruptcy proceedings, it is in the power of the court to order a sale free and clear of them, regardless of how they would ordinarily stand.”
In 7 Corpus Juris, § 359> p. 231, the general principle is laid down as follows: “Where property of the bankrupt is subject to a mortgage or other encumbrance, it may be sold free of liens, without any prior determination either as to their validity or as to their amount or extent, if there is reasonable ground for believing that more can be realized than the amount of the encumbrance, in which ease the proceeds of the sale are held subject to the liens.” In support of this proposition a large number of eases are cited.
The only question remaining is whether from the evidence the referee had reasonable grounds for believing that a sale of the property free and clear of liens would result in realizing a greater amount of money than the amount of the incumbrances, and whether such sale would be beneficial to the bankrupt estate and the other creditors of the bankrupt.
The testimony shows that the real estate in question was appraised by three disinterested appraisers, two of whom were expert real estate men, at $2,750. The mortgage held by the Susquehanna Building & Loan Association was approximately $2,200. At the hearing before the referee, four witnesses were called and examined by the attorney for the mortgagee. All or most of these witnesses were employees or directors of the Susquehanna Building & Loan Association, the mortgagee. These witnesses appeared not to have a very clear conception of what the result of selling free and clear of incumbrances would be, but they were all of the opinion that it should be sold subject to the mortgage. They were unable, however, to place a valuation on the property. At least one of the witnesses frankly stated that he did not know the value of the property. One of the witnesses was the owner of the adjoining property and under cross-examination testified that several years ago he had offered the then owner of the property $3,750, which offer was refused.
Under all the evidence the referee was warranted in finding that it would be to the best interest of the creditors of the bankrupt estate to sell the property free and clear of all liens and incumbrances and transfer the liens to the fund derived from the sale and his decision will not be disturbed.
The referee, in a carefully considered opinion, has reviewed the law and the evidence in this case, and it is unnecessary to add anything to what has already been said there.
And now, November 29', 1933, the petition for review of the referee’s order is dismissed, and the order of the referee, dated July 6, 1933, directing the sale of the real estate of the bankrupt at public auction to the highest and best bidder, free and clear of all liens and incumbrances, said liens to attach to the fund derived from the sale, is affirmed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219141/ | WILLIAM C. COLEMAN, District Judge.
This suit involves eleven patents, which may be briefly and collectively described as relating to door-locking devices for drop-door cars of varying design, including doors used upon flat-bottom ears which are disposed in horizontal position when closed; doors used upon hopper-bottom ears which are inclined from a horizontal position when closed and are adapted to swing downward from the inclined position when opened; and doors used upon the drop-bottom gondola type of car which swing transversely of the car and are disposed in a horizontal position when closed. All of these doors swing open by gravity, and thus discharge the lading.
These eleven patents and their respective claims that are in suit, are as follows: (1) Kadel and Pilcher patent No. 1268725, issued June 4,1918, claims 2 and 11 only; (2) Kadel patent No. 1434953, issued November 7, 1922, claim 2 only; (3) Wine reissue No. 15792 of March 11, 1923, elaims 6, 7, and 10 only; (4) Wine patent No. 1431499, issued October 10, 1922, claim 1 only; (5) Kadel patent No. 1738057, issued December 3,1929, claims 7, 15, 16, 22, and 27 only; (6) Kadel patent No. 1743144, issued January 14, 1930, elaims 8, 9,15, and 18 only; (7) Kadel patent No. 1737927, issued December 3,1929, claim 6 only; (8) Kadel patent No. 1733736, issued October 29, 1929, claim 8 only; (9) Wine patent No. 1460009, issued June 26, 1923, all elaims, ten in number; (10) Wine patent No. 1455694, issued May 15, 1923, claim 11 only; (11) and Wine patent No. 1486210, issued March 11,1924, claims 1 and 4 only.
*221The various devices of the defendant are properly divisible into three classes, which, with the particular patents they are alleged to infringe, are as follows: First, the Enterprise device (so-called because manufactured by the Enterprise Railway Equipment Company) which is alleged to infringe patents (1) and (2); second, the “XLT” devices (a designation coined by defendant for convenience) which are alleged to infringe patents (1), (3), (4), (5), (6), (7), and (8); and third, the drop-door gondola ear device which is alleged to infringe patents (9), (10'), and (11).
The plaintiff company is engaged in the manufacture of various railway appliances, including those involved in the patents in suit. To the plaintiff’s charge that the defendant, the Baltimore & Ohio Railroad Company, has manufactured and is using, or has used, car door-locking devices of various types which infringe one or more of these patents, the defendant asserts the usual defenses of (1) noninfringement; and (2) invalidity of the plaintiff patents as evidenced by (a) prior public use or (b) prior patents, or both. It is axiomatic that the burden of proving infringement is upon the party alleging it, namely, the plaintiff, and that, likewise, the burden of proving invalidity is upon the party alleging it, namely, the defendant. The various patents will be considered, in the order above named, in their respective relations to the three different types of alleged infringing devices.
Kadel and Pilcher Patent No. 1268725 and Kadel Patent No. 1434963 in Relation to Defendant’s Enterprise and “XLT” Devices.
Of the Kadel and Pilcher patent, only elaims 2 and 11 are in suit. These claims are as follows: “2. A railway car having sides and a hinged door, said door extending transversely of the car from one side to the other, hooks pivoted to the sides of the car and adapted to engage the said door when the latter is drawn into closed position, said hooks being so formed and disposed as to fall by gravity into, engaging position and to be swung toward the door pintles for disengagement with the said door.” “11. A railway car having sides and a hinged door extending transversely of the ear from one side to the other, hooks pivoted to the ear and adapted to engage the said door when the latter is drawn into closed position, and means for closing the door, said means embodying a lever extending outside of the line of one of the ear sides and removably attached to the door, and means on the door for the removable attachment thereto of the lever.”
It is not maintained by plaintiff that a single element embodied in either of these claims is new or that, by itself, it is the proper subject of a patent, but merely that, by the combination of old elements, a new device, producing new results, is accomplished. Summarized very briefly, the basic idea created by the combination as set forth in claim 2 rests in the gravity hooks and the manner of their engaging the doors of the ear. The same is true with respect to claim 11 with the addition of a further means for closing the door, in the form of a lever and a fixed attachment in connection with which the lever operates. Plaintiff asserts that this is a pioneer patent because prior to this Kadel invention, all known car door-locking devices which really had for their object the securely locking of the door rather than merely fastening the door as an auxiliary or aid to some other device for keeping it firmly and tightly closed, were dependent upon a winding mechanism, that is to say, upon a device whereby with the aid of levers, cogs, and chains, the doors were opened and closed, and, when closed, were primarily dependent upon such mechanism for proper security. It is true the Kadel and Pilcher patent in the specifications provides that any convenient arrangement for raising the doors into closed position may be used, but, as further stated, the customary winding arrangement is preferably omitted, and the doors are lifted by hand, or, as was demonstrated by witnesses in the course of the trial, if the doors are of the so-called sawtooth hopper type, that is, doors which are inclined from a horizontal position when closed and are adapted to swing downward from the inclined position when opened, they may be operated by pressure of the foot.
We find that the weight of the credible evidence supports plaintiff in this contention. Although defendant, in support of its contention that this patent is invalid because of prior public use, has introduced extensive and uneontradieted testimony to the effect that hooks or latches pivoted upon the sides of ears and adapted to engage by gravity the car doors when the latter were drawn into closed position, were in use as early as 1907 on the Pittsburgh & Lake Erie Railroad, and on the Big Four Railroad as early as 1912; and although such devices of varying types bore prima facie close resemblance to the Kadel and Pilcher device, nevertheless there is no evidence in the ease which proves that the pivoted hooks or latches in these earlier *222devices did more, or were intended to do more, than serve as an auxiliary or substitute for the winding mechanism when it became out of order, as it frequently did. This is evident from the fact that in none of these earlier devices did the pivoted hook or latch engage the door itself, or any substantial stiffening beam or member attached to the door, but merely locked into a keeper or strap of such construction as poorly adapted to carry continuously the strain of the heavy loads, which obviously would rest upon it if the doors were not supported in closed position by some other device such as a winding mechanism, which we find was always employed in these earlier devices; and which, furthermore, rendered it impossible or virtually so, for the operator of the doors to dose them by hand or foot manipulation, because prevented by various parts of this winding mechanism from assuming a position with relation to the car door which would enable him to close it in such manner. Also, it appears from the earlier devices of this sort upon which defendant primarily relies to show prior public use, that pivoted hooks or latches were equipped with cams or dogs underneath as well as above them, the primary purpose of which was “to set” the hooks or latches when the doors were about to be opened, thus necessitating the “unsetting” by hand of these cams or dogs when the doors were about to be closed again, the effect of which was thereby, of course, to do away, for all intents and purposes, with the theory of gravity-latching or locking which is one of the basic principles embodied in the Kadel and Pilcher patent.
Similarly, we find in none of the prior art patents which have been cited, any conception of the basic idea embodied in the Kadel and Pilcher patent. For these reasons, we believe that this patent is valid, but we have still to determine whether it is infringed by either the Enterprise or the “XLT” devices of the defendant. Contrary to the Enterprise device, all of the “XLT” devices embody, instead of pivoted hooks engaging the door or a fixed part thereof, the reverse condition, namely, fixed hooks into which engage movable latches. The same Enterprise device was involved in Wine Railway Appliance Co. v. Enterprise Railway Equipment Co., 25 F. (2d) 236, and was there held by the Circuit Court of Appeals for the Sixth Circuit to have infringed Kadel patent No. 1434953, also involved in this suit. As already explained, the Enterprise device plaintiff claims also infringes Kadel and Pilcher patent No. 1268725.
The Circuit Court of Appeals for the Sixth Circuit in the above case, found claim 2 of Kadel patent No. 1434953 to be valid, and also to have been infringed by a device which, as we have just stated, was identical with the Enterprise device of defendant in the present suit. Claim 2 reads as follows: “2. A door mechanism for railway cars including a door hinged to the car body, a channel secured to the door and having an end thereof extending beyond an edge of the door, a hook pivoted upon the car and arranged to seat beneath either flange of the said channel, the hook being so arranged and proportioned that when seated beneath one of the said flanges, the door will be held in partly closed position, and when seated beneath the other flange, the door will be held in fully closed position.” With the conclusion of the Circuit Court of Appeals for the Sixth Circuit, and the reasoning upon which it is based, we concur, and, therefore, since claim 2 of Kadel No. 1434953 is the only claim here involved, we deem it sufficient to quote the following from the court’s opinion, and to adopt it as part of our own opinion: (pages 237, 238 of 25 F.(2d): “Kadel’s claim 2 is confined to his specific construction, and, in view of the selection by defendant of this particular form out of the variety of forms open to it, we are not satisfied to say that it involved no invention. Instead of extending from the outer end edge of the swinging door some appropriate form of bracket or extension carrying ledges or notches for successive two-step engagement with the swinging hook, he uses a piece of ordinary channel iron having one of its flanges attached to the outer face of the door and projecting beyond its end, making the web of the channel iron to be at right angles to thd door and the other flange to be parallel to the door and two or three inches away. He then employed these already existing flanges of the channel iron as his two successive engaging ledges. This was simple but ingenious. The construction, plainly, is cheap, strong, and efficient. Channel iron had always been familiar, but, during the years of experimenting with this type of device, no one had ever thought of using it. It does not appear that it had ever been used as a two-step engaging member in any art. We consider this claim valid.
“We also think defendant does not escape infringement by the change which it has made. Kadel places his pivoted engaging hook adjacent to the open side of the channel iron. For his final step, the hook swung under what would then be the bottom or outside flange of the channel; for his first step, it swung *223into the open side of the channel, engaging the upper flange thereof. The claim calls for ‘a hook pivoted upon the car and arranged to seat in either flange of the said channel, the hook being so arranged and proportioned that when seated beneath one of the said flanges the door will be held in a partly closed position, and when seated beneath the other flange the door will be held in a fully closed position.’' The defendant reverses its channel so that the open side is away from ■the hook. For the final step the hook seats beneath the lower flange of the channel precisely as in the Kadel, except from the other side; to accomplish the first step, defendant cuts an opening in the channel web, through which opening the hook projects to a position beneath the upper flange. It is true that this opening is placed slightly down from the lower side of the upper flange, so that the hook does not directly engage this upper flange but rather the upper edge of the opening in the web. No purpose is apparent in this unnecessarily awkward and expensive construction, unless it be to escape infringement; and it fails in this purpose. The claim does not literally require that the hook shall successively bear against the under surface of the two flanges, if in some other equivalent way it is seated beneath them. For all functional purposes, the slight portion of the web against which the hook bears is a part of the upper flange, and the hook does not fail to be seated beneath it because it is also a slight distance below. It is true that defendant does not use the ordinary rolled channel. It constructs a rather complicated bracket; but the part which projects and co-operates with the hook has the characteristic web and flanges, and is a channel.”
It is obvious that the novelty in claim 2 lies in the specific two-step operation involved in closing the door. Defendant admits the claim is valid, but denies infringement on the ground that in the Enterprise device the hook by engaging, in both “steps,” the web, and not the flanges of the stiffening member, performs a different function and accomplishes a much tighter, stronger locking of the door. But for the reasons given, we are not persuaded by this argument. In further support of defendant’s contention, that this patent is not infringed, we are referred to two patents both of later application and issuance, namely, patents to Campbell No. 1577688, and No. 1584841, and the point is emphasized that they were therefore not before the court in the Ohio case, and that had they been, there is a presumption that the result would have been different. But in answer to this, it is sufficient to say, first, that although not issued at the time of the Ohio suit, the defendant there could have disclosed the inventions alleged to have been embodied in them; and, second, it is fundamental that infringement is not avoided by any presumptive validity attaching to a patent subsequently issued. See Sanitary Refrigerator Co. v. Winters, 280 U. S. 30, 50 S. Ct. 9, 74 L. Ed. 147.
Having thus found that claim 2 of Kadel No. 1434953 is valid and infringed by defendant’s Enterprise device, we revert to further consideration of the Kadel and Pilcher patent No. 1268725 and are unable to conclude that the Enterprise device also infringes claim 2 of that patent, because if that claim be construed, as we think it cannot be, as broad enough to embrace a two-step operation, then claim 2 of Kadel patent No. 1434953 would be invalid as a subsequent patent embodying the same thing embraced by a prior patent. With respect to claim 11 of the Kadel and Pilcher patent, its basic novelty is the same two-step closing operation but in addition, it embraces a bracket on the angle bar for the insertion of a lever to complete the closing operation, which is not involved in claim 2 of Kadel patent No. 1434953 (although a shouldered bracket designed for the same purpose is embraced in claim 1 which is not here in suit, and appears on the model of the Enterprise device introduced as an exhibit in the present suit). Suffice it to say we find that, although the use of levers or crowbars to assist in the closing of the early types of hinged ear doors was quite common and long antedated the Kadel and Pilcher conception, nevertheless, we find nothing in the testimony in suit which indicates that the means on the stiffening member for accommodating the lever was ever embodied in the earlier devices, and we think it is sufficiently new and practical to amount to patentable invention. Also, we believe that the shouldered bracket on the Enterprise device is an equivalent of this means embraced within a proper construction of claim. 11, but for other reasons already explained, we do not find that the Enterprise device infringes claim 11, namely, because claim 11, just as claim 2, may not reasonably be construed to 'include the two-step closing operation. Summarizing, therefore, we find that claims 2 and 11 of Kadel and Pilcher patent No. 1268725 are valid, but we fail to find that either of them has been infringed by defendant’s Enterprise device, although we do find that the latter device infringes *224claim 2 of Kadel patent No. 1434953, and that that daim is valid.
Before passing from Kadel and Pileher patent No. 1268725, we have still to consider whether it is infringed by the other devices of the defendant, all of which embrace a fixed hook and a movable latch, as opposed to a pivoted hook and a fixed beam or stiffening member, and which are known as defendant’s “XLT” devices. They vary in construction with respect to the form of stiffening member, and the manner in which the latch and housing are designed and attached to the door or stiffening member. However, in view of what we have already said about Kadel patent No. 1434953, with respect to the use of the stiffening member in different positions, without thereby giving rise to another patentable invention, we believe that it is only necessary to state our conclusions with respect to these variations, by saying that we do not think any of them as embodied in the defendant’s “XLT” devices is materially different or novel. We find support for this conclusion in the fact that, as has been admitted on behalf of both plaintiff and defendant, many types of stiffening members, as well as various types of latches and the accommodations of each to the other, are all old in the art.
Coming, then, to the precise question whether or not these “XLT” devices of defendant are the equivalent of the construction contemplated by Kadel and Pilcher patent No. 1268725 and Kadel patent No. 1434953, none of which have fixed hooks, we must determine what is the true rule by which the answer to this question is to be found. The most pertinent .interpretation of the rule governing the range of equivalents in its application to patents of this kind is that contained in the case of Sanitary Refrigerator Company v. Winters, 280 U. S. 30, at page 41, 50 S. Ct. 9, 12, 74 L. Ed. 147, where the Supreme Court said:
“There is a substantial identity, constituting infringement, where a device is a copy of the thing described by the patentee, ‘either without variation, or with such variations as are consistent with its being in substance the same thing.’ Burr v. Duryee, 1 Wall. 531, 573, 17 L. Ed. 650. Except where form is of the essence of the invention, it has little weight in the decision of such an issue; and, generally speaking, one device is an infringement of another ‘if it performs substantially the same function in substantially the same way to obtain the same result. * * * Authorities concur that the substantial equivalent of a thing, in the sense of the patent law, is the same as the thing itself; so that if two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form, or shape.’ Machine Co. v. Murphy, 97 U. S. 120, 125, 24 L. Ed. 935. And see Elizabeth v. Pavement Co., 97 TJ. S. 126,137, 24 L: Ed. 1909. That mere colorable departures from the patented device do not avoid infringement, see McCormick v. Talcott, 20 How. 402, 405, 15 L. Ed. 930. A close copy which seeks to use the substance of the invention, and, although showing some change in form and position, uses substantially the same devices, performing precisely the same offices with no change in principle, constitutes an infringement. Ives v. Hamilton, 92 U. S. 426, 430, 23 L. Ed. 494. And even where,'in view of the state of the art, the invention must be restricted to the form shown and described by the patentee and cannot be extended to embrace a new form which is a substantial departure therefrom, it is nevertheless infringed by a device in which there is no substantial departure from the description in the patent, but a mere colorable departure therefrom. Compare Duff v. Sterling Pump Co., 107 U. S. 636, 639, 2 S. Ct. 487, 27 L. Ed. 517.”
In that ease the Supreme Court was dealing with a patent for a latch of the swinging lever type, particularly adapted for use on refrigerator doors, and found the differences between the patented device and a device which yras held to have been infringed by it, to have been as follows (page 41 of 280 U. S., 50 S. Ct. 9, 12): “Despite the changes in the Dent latch from the Winters and Crampton structure we find that the two devices are substantially identical, operating upon the same principle, and accomplishing the same result in substantially the same way, and that the slight change in the form of the Dent latch is merely a colorable departure from the Winters and Crampton structure.
“In the Dent latch, as stated by the Circuit Court of Appeals for the Seventh Circuit [24 F.(2d) 15], the lug on the inner side of the triangular head of the keeper is a part of the side of the head. And at the place where the shortened upper arm of the latch lever eomes in contact with it, the surface of this lug forms in effect the upper side of the keeper head as a substitute for the upper side in the Winters and Crampton structure, which, while left in place, performs no function whatever, just as if it were cut away.
*225“Although the claims of the Winters and Crampton patent are limited to the structure therein disclosed, we find that they are infringed by the device of the Dent latch. Both Circuit Courts of Appeals recognized that the Winters and Clrampton patent, although thus limited had some range of equivalents; and we think that, though it be a narrow one, it is sufficient.”
Briefly summarized, the rule as laid down by the Supreme Court may be stated to be that if two devices do the same work in substantially the same way, and accomplish substantially the same result with no change in principle, they are the same, even though they differ in name, form, or construction. Applying this test, then, to the two devices, we find that they are both intended to, and do catch and lock the swinging door. By the plaintiff’s device, the stiffening member on the door is swung into engagement with the gravity hook pivoted to the side of the car and then locked; whereas by defendant’s device, the movable latch, instead of a stiffening member on the door, is swung, by exactly the same method, into engagement with a fixed hook on the side of the ear, and thus locked. But nowhere in the Kadel and Pilcher patent, or in the Kadel patent, either in the specifications, drawings, or claims, is there any mention of a fixed hook on the side of the car. On the other hand, it is clear from the testimony that fixed hooks with latches of the same general design as those embodied in defendant’s devices, were well known in other uses at the time these patents were applied for, although there is no evidence that they had been applied to this particular art prior to 1922. This being true, can we say, without extending the rule of equivalents to unreasonable length, that the principle is the same in the two devices here in suit? Of course, no rule of this kind should be too rigidly applied because any language employed in defining the rule must, of necessity, bear in varying degrees of pertinency upon each given state of facts. However, there is another rule which must be applied along with this rule of equivalents, concerning which we must be just as cautious lest we do violence to it, as we must be cautious lest we unduly restrict the rule of equivalents. We refer to the rule that every claim in a patent to be valid must be interpreted in the light of the specifications and drawings that accompany it; that it must be given an interpretation that reasonably corresponds to those specifications and drawings; that neither the specifications, drawings, nor claims shall be given an interpretation broader than may be reasonably inferred from their respective terms, although, of course, it is true that a mechanical equivalent even though not actually described by the claim, may sometimes amount to an infringement. Clough v. Gilbert & Barker Manufacturing Co., 106 U. S. 166, 176-178, 1 S. Ct. 188, 27 L. Ed. 134; Consolidated Safety-Valve Co. v. Crosby, etc., Valve Co., 113 U. S. 158, 161, 178, 5 S. Ct. 513, 28 L. Ed. 939; Walker v. Giles (C. C. A.) 218 F. 637; Yancey v. Enright (C. C. A.) 230 F. 641. Mr. Kadel has testified, and with some force, that because fixed hooks and movable latches were so well known long before his inventions, they must be read into the specifications and claims as an alternate construction reasonably in contemplation of those conversant with the art. But there might be more force to this argument were either of these two patents in fact pioneer inventions in this field as the term “pioneer” is understood, namely, as denoting the first conception of the basic principle. We do not believe this is the case, because although the Kadel and Pilcher patent was pioneer in the sense that it was the first to embody the more simplified form of locking ear doors securely with pivoted gravity hooks without the combination of a winding mechanism, it does not follow that plaintiff should thereby be permitted to adopt, from other arts, devices therein long admittedly common, after defendant has been the first to conceive the advantages flowing from such adoption, and then be permitted,to say, for the first time, in effect, to the defendant, “This is something which we all knew before you ever thought of it.”
While somewhat akin to a change of the relative position or a reversal of parts— which it is conceded does not of itself avert infringement — defendant’s construction is not precisely that, but rather a complete change in the lock mechanism, because if the latch of the Baltimore & Ohio devices were fixed to the side of the ear instead of to the door, and the hook were fixed to the door or its stiffening member, the same locking function could not be accomplished without a very material reshaping of both the latch and the hook. And the same would be true with respect to the parts of the patented device if they were sought to be interchanged. This fact, added to the fact that neither the moving part in the patented device, that is, the pivoted hook, bears any resemblance in construction to the moving part in the Baltimore & Ohio devices, that is, the latch; nor the fixed -part in the *226patented device, that is, the angle iron, hears any resemblance in construction to the fixed part in the Baltimore & Ohio devices, that is, the fixed hook, would seem to prove that there is a material difference between the two devices not accounted for by a mere reversal or transposition of the fixed and the moving part. Furthermore, distinct difference with respect to distribution of strain to or through these parts is apparent. A narrow latch-pin mounted at one end of a stiffening member and engaging a hook on the side of the door, does not indicate the same strength as does the engagement of such stiffening member itself directly with a hook on the side of the door.
The fact that the invention in the patent is a simple one whose function is therefore the more easily reproduced is not the criterion of infringement. We must not confuse the rule that simplicity of invention does not defeat patentability, with the rule whereby alleged equivalents are to be tested. If the Baltimore & Ohio devices are in fact more than a mere colorable departure from the patented device, that is sufficient. They may or may not themselves be patentable. But with this question we are not here concerned.
For the aforegoing reasons, we are forced to the conclusion that the defendant’s “XLT” devices do amount to a substantial, and not merely a colorable departure from the Kadel and Pilcher patent No. 1268725 and Kadel patent No. 1434953, and therefore do not infringe these patents.
Were evidence of success and wide utility with respect to the Kadel and Pilcher basic appliance necessary, it is to be found in the uncontradicted testimony that more than 200,000 units have been sold by the plaintiff company to some 70 railroads throughout the United States, and that in 1931, 96 per cent, of all new hopper cars on American railroads were equipped with this device.
Wine Reissue Patent No. 15792, in Relation to Defendant’s “XLT” Devices.
Claims 6, 7, and 10 only of this patent are involved in the present suit. They each relate to a device embodying hooks fixed to the side of the ear, with latches bracketed upon the door stiffening member, and collectively described they embrace an improvement in the utilization of the latches, latch dogs, and fixed hooks in co-operation with each other, to relieve the door hinges of some of the load imposed upon them in other similar devices, and thereby to prevent the door from sagging downward and from moving sidewise. The three claims are broad and not materially different except to the extent that one or another emphasizes the prevention of endwise or side-wise movement of the door. Defendant asserts that these claims are invalid because anticipated by British patent No. 122, of the year 1878, 'and by the device used upon the Pittsburgh & Lake Erie Railroad as early as 1907, which we have already discussed.
The British patent does, embrace a latch with lever or drop-piece which serves the same purposes, that' is, to lock and hold the latch in position, as does the dog in the claims in suit, but as and when conceived it had no application to use in combination with the other elements involved in these claims whereby an entirely new and useful purpose was accomplished, and in fact its construction —without having anything akin to the support given to the latch by the bracket in the claims in suit — would alone seem to be a distinction sufficient to refute equivalency. Also, we find, for reasons already sufficiently disclosed during our consideration of the Kadel and Pilcher patent, that the Pittsburgh & Lake Erie Railroad device is distinctly different.
Turning to the question of infringement, defendant’s contention is that infringement is avoided by reason of the fact that the claims must be narrowly construed so as to depend upon the latch engaging the bottom of the fixed hook, whereas it is claimed that every latch on every “XLT” device is specially designed so as to escape the bottom of the hook by one-eighth of an inch, and the working drawings introduced in evidence specially, so provide — in some instances by later revision, which may or may not have some significance in this connection. But in any event, this very slight clearance in the one ease and not in the other seems to us to be an entirely insufficient ground upon which to avoid infringement, assuming that in fact such clearance is maintained in the “XLT” structures when in use, which is an assumption not justified upon the evidence, because photographs taken, within the present year, of Baltimore & Ohio ears equipped with “XLT” devices show clearly that the latches do not maintain any clearance above the bottom of the hooks. Nor do we consider this evidence is overcome by defendant’s rebuttal testimony to the effect that such cars are not representative, but are of a class ready to be “shopped” for repairs. On 71 per cent, of all the cars of defendant that plaintiff caused to be examined, the latches were completely *227down. The latches on defendant’s devices have a curved end projection absent in the Wine device, but, although this feature will be again considered with respect to Kadel patent No. 1738057, it has no controlling effect in the comparison just made.
Thus, we find that elaims 6, 7, and 10 of Wine reissue patent No. 15792 are infringed by all of defendant’s “XLT” devices.
Wine Patent No. 1431499, in Relation to Defendant’s “XLT” Devices.
Only the first claim of this patent is involved in the present suit. It reads as follows : “1. A railway car having a door hinged upon the ear body, a stiffening member affixed to the door and extending to near the end of the same, a bracket near the end of the door connecting the stiffening member and the door, a door lock carried by the bracket, and a cooperating member carried by the car in a position for engagement thereby when the door is swung into closed position.”
It will thus be seen that this claim comprises a latch construction on the door stiffening member whieh engages a co-operating member affixed to the side of the door. The main advantage claimed for this patent is that by having the latch bracket support the door beam, or stiffening member, against the door, there is thus overcome more successfully than by the earlier structures, the stress and strain of the load on the doors. However, we find this claim invalid because anticipated as early as 1917 by a structure employed on cars then in use, as testified to by Mr. Argyle Campbell, president of the Enterprise Railway Equipment Company, which designed this earlier structure, and whieh embodies the basic idea of the claim in suit. Therefore, it becomes unnecessary to determine whether the particular “XLT” device of defendant which is alleged to inflinge this claim does in fact do so, although we will say that we incline to the view that the two are not equivalents. It should be noted that both' the issuance of, and application for, this patent antedated the issuance and original application of Wine Reissue patent No. 15792, and therefore the latter would be invalid if embraced within the former. But it is not, because although claim 1 of Wine patent No. 1431499 is extremely broad in its description of the locking mechanism, there is not merely a distinct structural difference, but a distinct functional difference as well, because of the fact that the pivoted latch on the door engages the fixed member on the ear side in a position parallel, or virtually so, to the car side, while m Wme Reissue patent No. 15792, the engagement is at a right angle.
Kadel Patent No. 1738057, in Relation to Defendant’s “XLT” Devices.
In this patent five elaims are involved, 7, 15, 16, 22, and 27. They embrace a latch construction on the door stiffening member whieh engages a fixed hook, bracket, or keeper, on the side of the car. The only novelty asserted in claim 7, 15, and 22 is the curved-end projection of the latch by whieh a more secure, tighter-fitting locking device is ‘obtained, this projection being adapted to cooperate with the hook, bracket, or keeper fixed to the side of the ear, so as to transmit from it the bulging strains of the car body through the latch and its housing to the stiffening member. The only novelty asserted with respect to the remaining two claims, namely, 16 and 27, is that the latch is not mounted on the door plate, but on a wholly independent door beam or spreader. One of defendants “XLT” devices is substantially the equivalent in construction of this device. Plaintiff contends that the projected construction of the latch constitutes a useful improvement not hitherto conceived in the art, and is, therefore, anticipated neither by prior use nor by prior art patents. If this be true, then elaims 7, 15, and 22 are valid and infringed, but on no ground are wé able to find elaims 16 and 27 valid, because the mere mounting of the latch upon the stiffening member wholly independently of the door plate constitutes nothing new in the art, of a patentable nature, and therefore these two claims must be held to be invalid.
Reverting then, to a consideration of elaims 7, 15, and 22, defendant asserts that these claims are invalid because anticipated by the following patents: Inglesby No. 993449, Inglesby, No. 993450, Metcalfe No. 602138, Hahn No. 244889, and Campbell No. 1635398.
Taking up these patents in the order above, we find that Inglesby No. 993449 does not anticipate because there is no curved-end pivoted latch but a fixed hook with a curved-end. Inglesby No. 993450 also does not anticipate because neither its construction nor operation bears any real relation to the elaims now under review. It embraces merely one of the very early ideas in the art relating to auxiliary nongravity looking hooks on the car side, whieh Kadel and Pilcher improved and supplanted by their inventions. So too, Metcalfe No. 602138 bears no real relation to the elaims now before us because it relates to *228an end-gate for wagons and embraces, among other things, the pivoted hooks on a hinged end-gate section adapted to engage perforated shanks or bolts whieh extend through openings of the hinged section. However, Hahn patent No. 244889, which embraces a fastener for end-gates of vehicles, discloses a spring-lock bolt or latch with an extended curved-end bracketed on the end-gate and engaging a hook fixed to the side of the vehicle. This patent was issued July 26, 1881. Campbell patent No. 1635398, for whieh the original application was filed August 26, 1921, embraces the same construction as the claims now under consideration except that the latch projection is not curved. In view of the state of the prior art as disclosed by these early patents, it seems clear that these claims are anticipated by the Campbell patent if not indeed by Wine reissue patent No. 15792, three claims of whieh are here in suit and found to be valid, because both the Camphell and Wine reissue patent are broad enough to include such slight modification as bending the end of a latch, whieh had long been a common thing to do in closely related fields, as evidenced by the Hahn patent,
Kadel Patent No. 1743144, in Relation to. Defendant’s “XLT” Devices.
Of this patent only claims 8, 9,15, and 18 are here involved. Again, this construction embraces a hook affixed to the side of the car, into which engages a movable latch, and the claims relate to the position that the latch occupies with reference to the stiffening member on the door. That is to say, the latch is housed in a bracket, whieh is mounted upon the outermost face of the stiffening member, with the advantageous result that the latch obtains full support of such member, and stress is thereby relieved. The only essential difference between claims 8 and 15 is that claim 8 relates to any style of door, whether formed of one or two' plates, while claim 15 relates to a pair of door plates arranged in spaced connection with the stiffening member. Claims 9 and 18 relate specifically to a particular “U” form of door spreader; that is, one that does not merely have a flat outer surface. We conclude that none of these constructions is essentially different from that embodied in claims 16 and 17 of Kadel patent No. 1738057, and since we have found the latter claims invalid because of the prior art, the same must be true of all four of the claims in the patent now under consideration. In short, since, as is undoubtedly true, the mere substitution of one type of stiffening member for another type does not constitute patentable invention, the same must be true where there is merely a change with respect to the part of a particular type of stiffening member to whieh the latch housing member shall be attached. In other words, there must be a point beyond whieh slight improvements in a rather crowded art cease to be patentable, and such would seem to have been clearly reached in the instant claims.
Kadel Patent No. 1737927, in Relation to Defendant’s “XLT” Devices.
Here only claim 6 is in suit. This patent is a companion to Kadel patent No. 1743134, which we have just considered. The main point of difference between the two is that this later patent employs a “Z” bar as the stiffening member, the object being that moisture, etc., cannot so readily accumulate in the member, thereby causing deterioration. But, as has already been pointed out, the “Z” type, like numerous other forms of stiffening members, is very old in the art, and the mere substitution of one type for another in devices of this kind does not constitute patentable invention. Therefore, we are forced to the conclusion that claim 6 of this patent is invalid.
Kadel Patent No. 1733736, in Relation to Defendant’s “XLT” Devices.
Here only claim 8 is involved. It relates to means for reinforcing the side plates of the hopper, the principal feature of the claim residing in the fact that the rear flanges of the plates lie adjacent to the rear edges of the fixed hooks, thereby counteracting the strain. But again, such reinforcing of the hopper sides is old in the art and, therefore, we conclude there is nc patentable invention in this minor improvement and that claim 8 is invalid.
Wine Patent No. 14600091, in Relation to Defendant’s Drop-door Gondola Car Devices.
Claims 1 to 10, inclusive, of this patent are in' suit. Broadly stated, they relate to a means whereby the Kadel and Pilcher patent locks are utilized on doors employed upon the drop-bottom gondola type of car, which swing transversely of the car and are disposed in a horizontal position when closed. The claims all relate to the adaptation of the locking device to the ear floors or doors, rather than to the form of the device. Claims 1 and 10 are typical and are as f ollows: “1. In a door device for railway ears, a door hinged to the car body, with the door pintles-arranged longitudinally of the car, a pair of *229door-supporting members pivoted upon tbe ear body and arranged to cooperatively engage portions of the door to retain tbe same in closed position, tbe said members being disposed in opposite directions with respect to eaeb other and being arranged to cooperate between tbe door and tbe car body in sucb manner that one of said members will arrest tbe door against slippage longitudinally of tbe car, in one direction and tbe other against sucb slippage in tbe opposite direction.” “10. In a door device for railway cars, a door hinged to the ear body with tbe door pintles arranged longitudinally of the ear, said door being provided with a plurality of portions projecting from tbe edge opposite said pintles, and means for retaining said door in closed position, said means comprising a pair of independently movable gravity actuated members, said members being adapted when in engagement with said projecting portions of said door to bold tbe latter from longitudinal movement with respect to said car, and separate means cooperating with each of said members for retaining tbe same in engaging position.”
Tbe several claims vary in tbe extent to which details of construction are specified. For example, it is to be noted that some of tbe claims do not specially refer to tbe means, namely, tbe “dogs” for bolding tbe pivoted books in place. Claim 3 provides that a bracket shall be near each end of the door, which appears not to be of special importance. Claim 4 provides specifically that tbe books shall swing substantially at right angles to tbe swing of tbe door as well as in opposite directions from eaeb other. Claim 5 embraces apparently no distinguishing features except that tbe brackets or stiffening member shall extend outwardly beneath tbe side of tbe ear. Claim 6 provides for independent movement of the books in opposite directions to each other. Claim 7 provides for a plurality of arms (brackets or stiffening members), which shall be intermediate to tbe side edges of the car body. Lastly, claims 8, 9, and 10 embody general groupings of tbe various elements.
We conclude that all of these claims are valid because they embrace a new adaptation of old devices to tbe drop-bottom gondola type of car not heretofore disclosed by prior public use or prior patents. Defendant asserts that Stucki patent No. 826809 issued July 24,1906, does anticipate but we do not so find. Tbe gist of defendant’s contention seems to be that since the Stucki patent discloses tbe same method for extending tbe channel bars as is necessary in Wine patent No. 1460009, tbe latter discloses nothing new because, as is alleged, tbe gravity locks or books are themselves not new in tbe art and anyone might acquire them and with ordinary mechanical knowledge and skill, apply them to the structure of tbe Stucki patent, thereby producing tbe same structure contemplated by Wine patent No. 1460009. But tbe fact remains that tbe combination of known elements to produce the particular result of tbe Wine patent bad not previously been conceived, and while admittedly but an extension of tbe application of Kadel and Pilcher patent No, 1268725, it nevertheless represents something new and useful. Indeed the Stucki patent might be distinguished upon an equally fundamental ground, namely, that tbe basic idea of tbe invention which it covers is built around a winding mechanism.
Respecting the question of infringement, one of defendant’s devices is virtually identical in construction with the patented device, and therefore, the latter is infringed.
Wine Patent No. 1465694, in Relation to Defendant’s Drop-door Gondola Gar Devices.
Here only claim 11 is involved, and the only new feature therein is that which relates to special means for forcing to a completely closed position a door of the style embodied in the preceding patent, namely, a door used upon the drop-bottom gondola type of car by means of a fulcrum bracket affixed to the side of the ear. One of the Baltimore & Ohio devices in suit embraces a fulcrum bracket identical with that embodied in claim 11, except that the bole for the bar is made in the side of the car itself instead of in a separate bracket or plate affixed to the side of the ear. In short, the Baltimore & Ohio device is in effect an improvement upon claim 11 because of stronger construction. . Canadian patent No'. 136498, issued October 31, 1911, is pleaded by defendant in anticipation of this claim. Claim 27 of that patent, which is typical of a number of others embracing the fulcrum device, reads as follows: “In a dump car the combination with a dump ear of a device secured to the car and adapted to serve as a fulcrum for a removable manually operable lever whereby the door is closed, such device being formed to present a loop through which the said lever may be inserted substantially as described.” This loop or “U” shaped strap is fixed to the side of the car to which tbe door is binged and extends downwardly. Thus it appears to be an equivalent of tbe fulcrum device of tbe patent in suit, and tbe slight change in construction *230does not appear to be sufficient to warrant a declaration of patentable invention, particularly in view of tbe common, as well as very early, adaptation of tbe fulcrum idea as an auxiliary to the closing of any device of this or a related character.
Wine Patent No. 1486210, in Relation to Defendant’s Drop-door Gondola Car Devices.
Here claims 1 and 4 only are involved. They relate primarily to the form and construction of the door stiffening member and particularly to the outermost end of such member. There is no substantial difference between the two claims. For the reasons heretofore given in the course of our consideration of Wine patents Nos. 1743144, 1737927, and 1733736, we conclude that this construction does not embody sufficient novelty to justify the issuance of a patent, although it may be noted that were the contrary true, there may be sufficient similitude in the alleged infringing device of the defendant to justify a conclusion that it amounts to an infringement. It is to be noted that in the Baltimore & Ohio device, the load is carried on the lower flange of the stiffening member while in the patent in suit, it is carried on the top thereof and the construction of the stiffening member is somewhat, but not radically, different.
Summarized, our conclusions -with respect to the various patents are as follows: Kadel and Pilcher patent No. 1268725 is found to be valid as to both claims in suit but not infringed as to either of them. Kadel patent No. 1434953 is found to be valid as to the only claim in suit, claim 2, and infringed. Wine reissue patent No. 15792 is found to be valid and infringed as to all three claims in suit. Wine patent No. 1431499' is found to be invalid as to the only claim in suit, claim 1. Kadel patent No. 1738057 is found to be invalid as to all five claims in suit. Kadel patent No. 1743144 is found to be invalid as to all four claims in suit. Kadel patent No. 1737927 is found to be invalid as to the only claim in suit, claim 6. Kadel patent No. 1733736 is found to be invalid as to the one claim in suit, claim 8. Wine patent No. 1460009 is found to be valid and infringed as to all ten claims in suit. Wine patent No. 1455694 is found to be invalid as to the only claim in suit, claim 11, and lastly, Wine patent No. 1486210 is found to be invalid as to the two claims in suit.
A decree will be signed in accordance with this opinion, granting injunctive relief with respect to those patents found to have been infringed, and also reference to a master for an accounting. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219142/ | BYERS, District Judge.
This is a- motion by the bankrupt for an order “disapproving and disaffirming” the report of the referee to whom specifications in opposition to discharge were duly referred. The specifications are, the making of a false oath by failing to include in his schedules, among his assets, an interest in the respective estates of his deceased parents; and in having transferred or concealed, within twelve months, a one-fourth interest in a certain mortgage representing a portion of the personalty in his father’s estate.
The referee has reported against discharge, and in effect finds as follows: “After hearing the testimony of the bankrupt and other witnesses I am satisfied that at the time of the bankruptcy the bankrupt had an interest in the estates of Louis Hess, his father, and Bertha E. W. Hess, his mother. The schedules fail to disclose such interest.”
The reference to an interest in the mother’s estate was inadvertent because that was confined to real estate in Bronxville and, having been listed in the schedules, so much of the specification as dealt therewith was withdrawn.
The facts with reference to the bankrupt’s interest in his father’s estate have been permitted to become somewhat confused.
Apparently the bankrupt and his brother were the executors of their father’s will, and held a $5,000.00-mortgage which they assigned on October 6, 1931, purporting to have received $5,000.00 consideration therefor from one Annie E. Larkin.
This was about eight days prior to the filing of the voluntary petition, and is discussed by the objecting creditor as the transfer upon which the specification was based. It is urged that it was particularly obnoxious, as being in defiance of a stay contained in an order for examination in supplementary proceedings obtained in the State Supreme Court by the objecting creditor.
Possibly sight has been lost of the fiduciary capacity in which the executors acted in making that assignment, which is to be distinguished from the personal status of the bankrupt which may have been involved in what was done as the result of the conversion of the mortgage into cash through the medium of the assignment.
The individual property of the bankrupt included his distributive share in his father’s estate, receivable by him from the executors of his father’s will.
The nature and extent of that property would be shown as the result of a proceeding judicially to settle the accounts of the executors, in the Surrogate’s Court in which the father’s will was probated. No such settlement has been had. An involuntary accounting proceeding was initiated by the trustee in bankruptcy, which did not result in a decree, but in the filing of an affidavit, apparently intended for verification on May 16, 1932, which is said to have been the basis of a release executed by all beneficiaries, namely, the two sisters of this bankrupt and his brother and co-executor.
Such a release may have operated to adjust the accounts of the executors so far as the other beneficiaries are concerned, and therefore to have satisfied the Surrogate concerning the administration of the estate; but it could not operate to fix the extent of the bankrupt’s inheritance from his father, or so as to be conclusive upon a creditor of the bankrupt as to the actual distribution made to Mm, by the executors, at or prior to the time of filing the petition.
It may be assumed that it was this aspect of the matter that led to the conclusion of the referee quoted above. This is another way of saying that the bankrupt was shown to have had an interest in the estate of Ms deceased father, who died February 2&, 1930', and whose will was admitted to probate on March 19,1930; the only evidence as to what became of that interest is the testimony of an *234attorney by the name of Walsh, that on October 6, 1931, he had no beneficial interest in the assets of the decedent, which was of course an opinion or a conclusion; and the bankrupt’s testimony that, when these schedules were filed, he had received some $700.00 in excess of what his sisters and brother had received, and that he then received no part of the proceeds said to have been realized on the fortuitous sale or assignment by the executors of this $5,000.00 mortgage.
These assertions do not constitute legal proof that the bankrupt had no interest in his father’s estate when he filed his petition, and, as he made no reference thereto in his schedules, the conclusion of the referee seems to be justified.
It would seem fair, however, to afford to the bankrupt an opportunity to establish, by legal proof, the true facts as they existed at the date of his petition. To do this, he will be required to show the equivalent of what would be necessary upon a judicial settlement of the‘executors’ accounts, namely, the debits and credits of the executors. The latter of course involves the exact details of such distribution as has been made to the legatees under the will.
In order to save time and effort upon the part of the referee, perhaps a statement of the accounts can be agreed upon by the attorneys for the bankrupt and the objecting creditor. In any event, the expense involved by such further hearing, if one is desired, should be borne by the bankrupt.
The motion to disapprove the referee’s report will be denied, with leave to the bankrupt to resubmit the proceeding to the referee for the purpose indicated, the cost of the minutes to be payable by the bankrupt, for which indemnity may be required by the referee.
Settle order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219144/ | CHESNUT, District Judge.
This case presents a bill of complaint in equity which is described as “ancillary to and in aid of” a suit at law brought under the Hurd Act (40 USCA § 270) by and against some of the same parties and now pending in this court on the law docket. The proceeding seems to be novel and unprecedented.
The use-plaintiffs are unpaid sub-contractors of the National Contracting Corporation which undertook a government contract for construction work at Fort George G. Meade, Maryland. The defendants are:
(1) The Federal Surety Company (a corporation of Iowa now in receivership in that State), which executed the surety bond for the performance of the said contract, and its Receiver; and (2) three separate insurance companies, to wit, the London and Lancashire Indemnity Company of America; the Guardian Casualty Company, and Lloyds Insurance Company of America, who are sued as re-insurers of the Federal Surety Company.
The ultimate relief prayed for is a money decree against these re-insurers for the amount of the unpaid claims of the use-plaintiffs and to that end a discovery of the terms and conditions of the re-insurance agreements is prayed for, and also an accounting with regard to the claims of the use-plaintiffs and other creditors similarly interested.
The Federal Surety Company of Iowa is alleged to be insolvent and it appears from the papers that it has been dissolved by decree of an Iowa State Court and the Insurance Commissioner of Iowa, E. W. Clark, has been appointed its receiver. He is also in his capacity as receiver made one of the defendants to the bill. He especially appeared and moved to quash the service of summons upon him and separately upon the corporation, which service purports to have been made by a United States marshal in Iowa.
The Lloyds Insurance Company of America, a corporation of New York, one of the defendants, has answered the bill denying the existence of any re-insurance contract or other contractual relation between it and thp Federal Surety Company with respect to the matters alleged in the bill. The London and Lancashire Indemnity Company of America and the Guardian Casualty Company by-their separate counsel have separately appeared specially and moved .to dismiss the bill for various reasons, including the following: (a) Both are corporations formed under the laws of the State of New York and neither is a citizen or resident of the State of Maryland and, therefore, the Court is without venue jurisdiction, over them in this action (28 US CA § 112 (a); (b) lack of any sufficient cause of action against the defendants disclosed by the bill; (e) lack of equitable rights disclosed by the bill; (d) plaintiffs have complete and adequate remedy at law.
*249The bill discloses that there is 'already pending on the law side of this court a suit in the name of United States of America to the use of the Colonial Brick Company v. Federal Surety Company and E. W. Clark, its receiver, under 40 USCA § 270, known as the Hurd Law. The basis of the claim against the re-insurers is set out in the 5th paragraph of the bill. The substance of the allegation is that, the several re-ihsurers (although not expressly described as re-insurers), “did enter into certain agreements with respondent, Federal Surety Company, the exaet dates, terms, provisions and conditions, of whieh are ‘to your petitioner unknown/ by the terms of which agreements said London and Lancashire Indemnity Company, of America, Guardian Casualty Company, and Lloyds Casualty Company and the Federal Surety Company did undertake to apportion among themselves the liability for such loss or losses as might occur by reason of any default in the performance and completion of said public work at Fort George G. Meade, Maryland.” It is further alleged that the consideration to the re-insurers was a portion of the premium paid to the Federal Surety Company for its bond and in consideration therefor, the said “London and Lancashire Indemnity Company of America assumed a one-third portion of the liability for the loss or losses under said bond executed to the United States of America as aforesaid”; and similarly that the Guardián Casualty Company assumed a one-third portion and the Lloyds Casualty Company assumed a one-sixth portion of the liability.
At the hearing upon suggestion by the Court, counsel for the London and Lancashire and for the Guardian Casualty Company produced copies of the respective agreements which were accepted by plaintiffs’ counsel and it was agreed the bill of complaint' would be appropriately amended to adopt the said contracts so produced and to have them filed as exhibits with the bill by appropriate references therein. An examination of these contracts shows them to be the standard form of re-insurance agreement in common use by surety companies in America. Thus, in the case of the Guardian, that Company is expressly named as the re-insurer in the contract and the Federal Surety Company is named as the re-insured. The subject matter of the re-insurance contract is the ordinary simple contract of re-insurance between an insurer and its re-insurer, relating to a particular single risk, and not an assumption by the re-insurer generally of all outstanding risks of the re-insured.
Objection to the venue, made by two of the several re-insurers, is, in my opinion, well taken. 28 USCA § 112 (a) is applicable, and provides in part that:
“No civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant.”
The several re-insurers are all corporations of the State of New York and although some of them may have heretofore been or are doing business in Maryland as foreign corporations, they are not “inhabitants” of this district. Galveston, H. & S. A. R. Co. v. Gonzales, 151 U. S. 496, 14 S. Ct. 401, 38 L. Ed. 248; Standard Stoker Co. v. Lower (D. C. Md.) 46 F.(2d) 678, 683; Rose Fed. Practice, § 301. The return to the summons shows that none of them were served with process in Maryland but by the marshal in New York. It is true that this objection would not be good if the suit were under and authorized by 40 USCA § 270, whieh expressly provides that such a suit shall be “in the name of the United States in the district court of the United States in the district in which said contract was to be performed and executed, irrespective of the amount in controversy in such suit, and not elsewhere,” but it has finally been authoritatively decided that a suit brought under this section is a suit at law and not a suit in equity. Illinois Surety Company v. United States, to Use of Peeler, 240 U. S. 214, 223, 36 S. Ct. 321, 60 L. Ed. 609. See, also, Davidson Bros. Marble Co. v. United States, 213 U. S. 10, 29 S. Ct. 324, 53 L. Ed. 675. Section 270' is a very special statute, conferring jurisdiction both as to subject matter and as to venue, of a very particular matter. Reading its provisions gives no indication of the legal possibility of extending its terms by construction and implication to subject re-insurers of the original surety on the bond therein mentioned to suit- at the instance of sub-contractors either in the district of which they are inhabitants or in the district in which the contract was to be performed. And the plaintiff, I think, gains nothing by merely calling this equity suit one “in aid” of the suit at law, whieh alone is authorized by the section. It is not perceived how there can be two suits, one at law and one in equity, under this statute which expressly provides “that where suit is so instituted by a creditor or by creditors, only one action shall be brought.”. We are not dealing here with a situation whieh might possibly arise after judgment has been obtained in the law suit and proven uncollectible, even though *250this may finally be the result in the pending suit at law, as it is alleged in this present proceeding that the Federal Surety Company is insolvent. If the plaintiffs recover judgment in the law suit and cannot collect it, other supplemental action against the re-insurers (if maintainable at all) would not be under the particular statute but on other general legal or equitable grounds, and the several re-insurers if liable at all to the use-plaintiffs in this ease would seemingly be entitled to be sued in the districts of which they are respectively inhabitants. No precedent or other authority has been called to my attention by counsel to warrant the maintaining of this equitable proceeding under the Hurd Law.
But even if the procedural objection is not conclusive, there is fundamental objection to the maintenance of this suit against re-insurers, arising out of the general law of reinsurance contracts. It is, by the great weight of authority, clearly the law of re-insurance that the original insured may not sue the re-insurer, because there is no privity of contract between them. And the benefit of the ordinary re-insurance contract inures directly to the original insurer as so re-insured, and in the event of insolvency of the original insurer the proceeds of the re-insurance policy are assets for the benefit of general creditors and not of the original insured as a particular creditor. The latter has no lien either legal or equity ble on the re-insurance- policy. This well established law affecting the important subject of re-insurance is generally stated in the case law and recognized by leading text books on insurance. Morris & Co. v. Insurance Co., 279 U. S. 405, 408, 49 S. Ct. 360, 73 L. Ed. 762; Allemannia Fire Ins. Co. v. Firemen’s Ins. Co., 209 U. S. 326, 332, 28 S. Ct. 544, 52 L. Ed. 815, 14 Ann. Cas. 948; Hicks v. Poe, 269 U. S. 118, 121, 46 S. Ct. 29, 70 L. Ed. 187; Consolidated Real Estate & Fire Ins. Co. v. Cashow, 41 Md. 59, 74. The applicable law on the subject is comprehensively but succinctly summarized in 19 Cyc. page 640; Richards on Insurance (4th Ed.) § 456; Couch’s Cyc. of Insurance Law, Vol. 8, § 2260. To the same effect, see, also, 33 C. J. 57, 59; 14 R. C. L. 1452, § 618; Annotation in 35 A. L. R. 1348.
Of course, re-insurance contracts, just as original contracts of insurance, in the absence of statutory regulations, are flexible in their nature, and any particular contract of reinsurance may, by its special provisions, expressly or by necessary implication or by separate agreement between the parties, confer rights upon the original insured which would not otherwise exist. For illustration, see Globe Nat. Fire Ins. Co. v. American Bonding & Cas. Co., 198 Iowa, 1072, 195 N. W. 728, 200 N. W. 737, 35 A. L. R. 1341, recognizing an exception to the general rule where the re-insurance was obtained at the express request of the insured and as a condition of his acceptance of the original policy. The most common exception to the general rule arises in cases of general re-insurance by one company of all its outstanding risks or all those outstanding in a particular locality (compare Shoaf v. Palatine Ins. Co., 127 N. C. 308, 37 S. E. 451, 80 Am. St. Rep. 204), in consideration for a transfer of all or a substantial part of its assets to the re-insuring company. This exception proceeds upon the theory of a substitution of parties by mutual consent. But we .have no such exceptional situation here.
It may be noted that paragraph 13, lines 146 to 155> of the re-insurance contract, provides that:
“If, under any law, this re-insurance agreement is required to be in such form as to enable the obligee or benefieiary of the bond to maintain an action thereon against the Re-Insurer jointly with the Re-Insured, and upon recovering judgment against the Re-Insured to have recovery against the Re-insurer for payment to the extent to which it may be liable under this re-insurance and in discharge' thereof, then this agreement shall be deemed to be a compliance with such law;” —and in paragraph 4 of the general conditions, lines 77 and 78, it is provided that in making payment of a loss under certain conditions :
“The Re-Insurer, if it desires to do so, may pay its share of the loss by means of a cheek drawn in favor of the obligee under the bond.”
I do not consider these provisions of the general conditions applicable to the instant ease. So far as I am aware, there is no federal law, by either statute or decision, that makes these provisions of the bond applicable in this case. They were probably inserted because the general form of bond was prepared for use in any one of the United States and to meet the local conditions in some state or states resulting from special statutes or court decisions contrary in effect to the general law of re-insurance above mentioned. .
The 5th prayer for relief in the bill prays that the plaintiffs “may have full and complete discovery from the respondents and each of them, concerning the arrangements, *251transactions and dealings between respondents, Federal Surety Company, London and Lancashire Indemnity Company of America, Guardian Casualty Company and said Lloyds Casualty Company concerning said public work at Fort George G. Meade, Md.” The only basis for this relief, so far as the London and Lancashire Indemnity Company of America and the Guardian Casualty Company are concerned, appearing in the bill (other than the re-insurance agreements mentioned) seems to be contained in the 17th paragraph of the bill where it is alleged that these two companies, together with the Federal Surety Company and the Lloyds Casualty Company, “maintained a representative on said public work.” The legal significance of this allegation is not apparent. It is hot alleged that the representative was maintained on the work hy reason of the re-insurance and it is entirely possible that there may have been other and unrelated reasons therefor. In any event, I do not consider this allegation sufficient to establish any direct liability on the re-insurance policies from these defendants to the plaintiffs.
It results that the motions of the London and Lancashire Indemnity Company of America and the Guardian Casualty Company to dismiss the bill of complaint as to them must be granted.
The remaining question arises on the motions of E. W. Clark, Iowa receiver of the Federal Surety Company, to quash the service of summons on himself and separately on the Federal Surety Company, on the ground that the Federal Surety Company has been dissolved by the Iowa State Court and in consequence thereof and by said order of that court is no longer suable anywhere; and as to the receiver, because no permission of the court has been obtained to sue him. This question seems to be of little practical importance to the parties in this particular ease, the heart of which is an effort to recover against the re-insurers. The bill must be dismissed as to two of them and the third has, by answer, formally denied any re-insurance relation to the Federal Surety Company. While the plaintiffs are of course not concluded by the answer, it seemed to be assumed at the hearing that the inclusion of the Lloyds Insurance Company of America was probably due to a mistake of facts by plaintiffs’ counsel. Under these conditions the continuance of the suit as against the Federal Surety Company and its receiver would seem to be, so far as the plaintiffs are concerned, the preservation of a shadow rather than the substance of a law suit. If this suit cannot be maintained against the re-insurers there is nothing to be gained by the plaintiffs in continuing the suit against the Federal Surety Company and its receiver beyond what may be obtained against them in the suit at law. Plaintiffs’ counsel, in opposing the motion maintains that, while it is true as a general rule that a dissolved corporation may not be sued [compare, however, Hammond v. Lyon Realty Company (C. C. A. 4) 59 F.(2d) 592], nevertheless in a suit under the Hurd Law against the surety on a contractor’s bond, the rule is not applicable, and furthermore, it is not necessary to obtain the permission of a state court to sue the receiver of such a surety, citing as authority therefor United States v. Illinois Surety Co. (D. C. N. C.) 238 F. 840, affirmed under the title of Hopkins v. United States, 246 U. S. 655, 38 S. Ct. 423, 62 L. Ed. 924. See, also, Bashford-Burmister Co. v. Aetna Indemnity Co., 93 Conn. 165, 178, 105 A. 470. If this particular case were a suit at law under the Hurd Law, in my opinion the position would be sound as to the receiver, at least, and indeed Judge Coleman has so ruled in the suit at law referred to in an oral opinion refusing to quash the service of summons in that case on the receiver. But, as, for the reasons already indicated, this particular ease is not a suit under and authorized by the Hurd Law, I am of the opinion that the motions to quash the service of summons on the Federal Surety Company and its receiver, should be granted. Even if the service of summons were not quashed, these defendants could for the reasons given successfully move to dismiss the bill and their counsel has indicated that he would so do. Counsel for the defendants may prepare appropriate orders accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219145/ | PETERS, District Judge.
This suit is brought by the surety on a guardian’s bond to recover the amount it was obliged to pay on account of the defalcation of the guardian, who was also an officer of the defendant bank where the guardian’s deposit was kept; the liability of the bank being based on alleged notice of, and participation in, the wrongful handling of the account. The plaintiff stands in the position of the ward, so far as this suit is concerned, and the jurisdiction of the court, the propriety of this suit in equity, and the title of the plaintiff appear to be conceded. The matter of the liability of the bank is the only question to be decided.
Findings of Fact.
Hadley H. Kuhn, on November 4, 1930, and thereafter until December 25, 1931, when he committed suicide, was vice president, cashier, and a director of the defendant, a small bank in the town of Waldoboro, Me., and had full charge and management of its *253records and business, without interference from the other directors, whose discharge of their duties was more or less perfunctory, except that the president of the bank exercised supervision over investments. On November 4, 1930, Kuhn was appointed, and soon after qualified, as guardian of Mrs. Frances E. Simmons, the plaintiff being surety on the bond required by the probate court. At that time the assets of the guardianship estate consisted of a deposit of $45,421.91, in the savings department, represented by account No. 2810, on the books of the defendant bank. After his appointment as guardian, Kuhn opened a cheeking account in his name as guardian of Mrs. Simmons, and from time to time transferred amounts from the savings account to the checking account in the same bank. Both accounts were known to the bank to be trust accounts, and Kuhn was known to be the trust officer who had the handling of them.
Soon after his appointment as guardian of Mrs. Simmons, Kuhn began speculating in stocks and opened a margin account with Hornblower & Weeks and with Hayden Stone & Co., reputable brokerage houses having branches in Portland.
To finance his speculations and cover his losses, Kuhn used the money of Mrs. Simmons intrusted to him as guardian, and after his death the guardian who was appointed to succeed him collected from the plaintiff surety company the sum of $42,338.99, which, with interest, is the amount sought to be recovered in this suit.
An analysis of the methods by which the money was wrongfully taken from the Simmons accounts is necessary in order to> determine the liability of the bank. Neither of the brokerage houses mentioned would accept cheeks to be credited to a speculative account if they were drawn or appeared to be given by a trust officer in his official capacity. The rule of the brokers to that effect was probably known to Kuhn, because his cheeks to them were always personal cheeks when they were sent out by him. They were all drawn on the defendant bank against his individual checking account, which was at all times trifling and never approaching the amount necessary to honor the cheeks.
Withdrawals from the Estate Checking Account.
Kuhn began his speculative career, so far as this case is concerned, by purchasing a thousand dollar bond issued by the St. Louis & Southwestern Railroad, and leaving it with Hornblower & Weeks as collateral for his margin account. To do this he drew his personal cheek on the defendant bank for $855.-28, and sent it to the brokers to buy the bond. The cheek reached them December 15, 1930. In the regular course of business that cheek, with others on the same bank, reached the Federal Reserve Bank in Boston, and was included in its collection letter of December 16, 1930, sent to the defendant bank. It was the custom of the latter bank and the duty of one Miss Hoak, a clerk therein, on receipt of the daily letter from the Federal Reserve Bank, to open it in the morning of its receipt, ascertain from the individual depositors’ ledger whether cheeks were good, draw the bank’s cheek on its Boston correspondent for the total amount of checks accepted, and on the same day mail the bank’s cheek, signed by its cashier or assistant cashier, to the Federal Reserve Bank in payment of the checks that had been accepted and honored. In pursuance of this routine the cheek for $855.28, drawn by Kuhn, was found by Miss Hoak in the Federal Reserve letter received December 17, 1930. She found that Kuhn’s account would be considerably overdrawn by payment of this check, and called Kuhn’s attention to that fact. He thereupon added the designation “Grdn” after his name — either that or the words “Guardian of Frances E. Simmons.” The cheek signed in that way would be good, because on that same day Kuhn had withdrawn $855.28 from the savings account of Frances E. Simmons and placed it to the credit of his checking account as her guardian. Miss Hoak was unsuspicious, and in several similar cases unwittingly assisted Kuhn in carrying out his plan by showing him the cheeks as they came in as individual cheeks and suggesting that he had forgotten to put the designation “Guardian” on them; whereupon Kuhn would make that addition to his individual name and transfer from the Simmons savings account sufficient money to cover the cheeks, and they would be cleared in the usual way. Substantially the same course of action was pursued in the ease of a cheek for $856.67, paid by the bank December 19, 1930, a check for $1,014.63) received and paid by the bank December 23, 1930, a check for $966.53, received and paid by the bank December 30, 1930, and a cheek for $2,500, received and paid by the bank October 5,1931. The five cheeks mentioned are the items described respectively as (a), (b), (c), (d),and (q) in paragraph 14 of the plaintiff’s bill.
The possible suspicions of Miss Hoak or of any person coming in contact with the transaction were further allayed by the fact that these cheeks, although purporting to be *254Kuhn’s individual checks, were on a particular pink-colored paper which he used regularly to draw money legitimately from the estate cheeking account. The transaction became, in a way, routine. Miss Hoak, on receipt in the collection letter of one of these individual cheeks on pink paper, would at once take it to Kuhn to put on the apparently forgotten designation of “Guardian.”
That this routine occurred in the ease of the $2,500 cheek is not so certain as in the ease of the four cheeks first above mentioned; but I have included it in the same category by reason of the testimony of Miss Hoak that she did not charge any cheeks to the guardianship cheeking account that were not signed as guardian.
Withdrawals from the Estate Savings Account.
On January 23, 1931, Homblower & Weeks received from Kuhn his personal cheek on the defendant bank for $4,000'. This was credited on Kuhn’s account with that firm, and the check was included in the Federal Reserve letter to defendant of January 24, 1931. January 25th was Sunday. On January 26th the fact was called to Kuhn’s attention, either by the clerk Miss Hoak or the assistant cashier Miss Bailey, that his personal account would not stand payment of a cheek of that size. He directed the check to be paid by the bank, however, and it was paid in the usual way on January 26, 1931. The check remained the individual cheek of Kuhn and not his check as guardian. It was not charged to his individual account, which in that case would have shown a heavy overdraft, but was simply put in the cash drawer and carried there and on the ledger as a “cash item.” It was known by Miss Hoak and Miss Bailey to be in the drawer as a cash item. The bank had paid this cheek out of its own funds. On January 27th the assistant cashier, Miss Bailey, had a conversation with Kuhn about this cheek which was then the property of the bank. On that day, at the request of Kuhn, the assistant cashier made out a withdrawal slip which Kuhn signed and which Miss Bailey entered on the Simmons savings account, withdrawing $4,000 from that account. This withdrawal slip, instead of being filed by her in the usual place, was given by Miss Bailey to Kuhn.- She then, under Kuhn’s direction, •made an entry on the general ledger, or daily journal so-called, increasing by $4,000 the ap- - parent withdrawals from savings accounts of the preceding day by adding the figure “4” to the actual amount of withdrawals, which was $485. The $4,000 check was then taken by Kuhn from the - cash, and was not again seen in the bank.
These proceedings had several objects which were accomplished by Kuhn with the assistance of Miss Bailey: the cash item of $4,000 was eliminated by a transfer of that amount from the Simmons savings account to the general assets of the bank, the worthless cheek was removed by Kuhn from the cash and apparently destroyed, the fact of the large withdrawal from the Simmons savings account was kept from another clerk handling-that department by concealment of the withdrawal slip and otherwise, and the books were made to balance. Miss Bailey, the assistant cashier, knew that Kuhn was interested in stocks, and perceived that Kuhn’s cheek to the brokers was paid by the bank when Kuhn had no funds, and that the-consequent damage to the bank was subsequently repaired by abstracting funds from the estate of which Kuhn was guardian, accompanied by false entries on the books and other irregular proceedings. Miss Bailey was neither inexperienced nor unintelligent. She had been assistant cashier of the bank since 1928, and employed for some eleven years by the bank in various clerical and official capacities. She testified that she asked Kuhn no questions except whether the “cash would come right.”
The above transaction as to the $4,000, which is mentioned as item (e) in paragraph 14 of the plaintiff’s bill, is typical of items (f) to (p), inclusive, of the same paragraph covering the following checks, in addition to, that for $4,000 mentioned, which were paid by the bank on the dates below stated, the bank being recompensed by withdrawals from the Simmons savings account on the dates given, all the cheeks being individual cheeks of Kuhn without balance to meet them, and all sent to one of the brokers mentioned to make good his impaired margin account:
$5,000. February 13, 1931. February 13, 1931.
3.000. February 25, 1931. February 25, 1931.
2.000. April 8tb, 1931. April 14th, 1931
2,000. April 23, 1931. April 23, 1931.
3.000. April 25, 1931. April 25, 1931.
2.000. April 29, 1931. April 29, 1931.
2,000. May 2, 193L May 2, 1931.
2,000. May 23, 1931. June 4, 1931.
3,000. May 29, 1931. June 4, 1931
2,000. June 5, 1931. June 5, 1931.
3,800. June 6, 1931. June 9, 1931.
The two items, one of $2,000 paid by the bank May 23, 1931, -and one of $3,000 paid by the bank May 29, 1931, were both covered by one withdrawal of $5,000 from the savings account June 4th, 1931. The item of $3,800 on June 6,1931, was covered by a withdrawal from the savings account of $4,000 on June ,9,1931.
*255It should be noted, however, that the circumstances as shown by the evidence affecting the items subsequent to the $4,000' item are not exactly the same as those recited in connection with that item. The most important difference is in respect of the disposition of the cheeks when they came in. The first item of $4,000' represented by Kuhn’s cheek for that amount was carried for at least one day by the bank as a cash item. The check was seen in the drawer by employees of the bank, and was carried on the ledger as a cash item. It does not appear that any subsequent check after payment was carried on the books as a cash item. It is clear, however, that, as soon as a check was paid by the bank in each case, it was actually carried as a cash item, or treated as such, for lengths of time varying from a part of a day, or possibly a few minutes, to about ten days, when the amount of the cheek paid would invariably be restored to the bank and abstracted from the Simmons savings account, with a false entry made on the books by the assistant cashier and manipulation of the withdrawal cards to conceal the transaction.
That the cheeks when paid were actually carried as cash items, or so treated, appears from the testimony of Miss Bailey and Miss Hoak, who say that there was no other way that they could have been carried or treated. In no case was the worthless cheek of Kuhn charged to his account to show an overdraft. It was always paid and held until offset by a secret withdrawal from the Simmons savings account — in most eases on the same day the cheek was paid, and probably often at about the same time. The assistant cashier made all necessary false entries on the books and wrote all the withdrawal slips except one. In all cases she gave the withdrawal slips to Kuhn instead of to the clerk who regularly had them for filing. It does not appear that she told any of the directors of the bank or any other person what was going on.
Miss Hoak, the clerk who had charge of the individual deposit ledger and the Federal Reserve collection letter, knew in every case where Kuhn’s check came in it would largely overdraw his account if charged against it (referring, of course, to the checks in question). At his direction she gave Kuhn the checks without charging them. She asked if the cash would come right, and was satisfied upon receiving the answer that it would. Whenever one of these cheeks of Kuhn came in, she made notations deducting the Kuhn cheek from the total items of the Federal Reserve letter, and then saw the check vanish from the bank. She knew that they were not charged to Kuhn or anybody else. I do not find, however, that Miss Hoak actually knew or suspected that Kuhn was stealing from the Simmons accounts. She was young, inexperienced, and guileless. She was satisfied with the assurance of Kuhn that the “cash would come right.”
Cheek to Fidelity Trust Company of $1211.73.
Shortly prior to November 24,1931, Kuhn drew a check — either his personal cheek or a check as guardian — in the amount of $1,211.-73, and sent it to the Fidelity Trust Company of Portland in payment of his own personal note. This check was received and credited by that company November 24,1981, was sent to Boston and came to the defendant bank, with other cheeks from the Federal Reserve Bank, and was paid by the defendant bank November 27, 1931. It was charged to the guardian checking account December 4, 1931, the same day that $2,000 was transferred to that account from the Simmons savings account. In view of the testimony, which I have accepted as true, to the effect that no cheeks were charged to the guardian account that did not purport to be guardian checks, I conclude that this was such a check, either when it was sent out by Kuhn or after it came back, and was apparently a check proper to be charged to that account. At any rate, the proof is not sufficient to include this cheek in the category of withdrawals from the savings account to meet personal cheeks of Kuhn paid by the bank. It required no false entries or other manipulations such as existed in those cases. It may have been carried as a cash item from November 27th to December 4th, but not necessarily a personal item of Kuhn’s.
It has been urged that this cheek must have been sent out as an individual cheek, because the trust company probably would not take a cheek from a trust officer in payment of his individual note. That seems to be a matter of argument, and there is no positive evidence on the point.
Payments of December 23, 1931.
On the date above mentioned, Homblower & Weeks sold all securities remaining in their hands as collateral for the Kuhn account, and sent him a check for $3,440.16 as the balance due him. About the. same time Hayden Stone & Co. closed out Kuhn’s account with them and sent him a cheek for $4,850.55. The total amount of these two cheeks, together with some other money received by Kuhn for some securities sold out belonging to his father, was used by Kuhn to take up and pay certain notes, five in number, held by the defendant bank upon whieh Kuhn’s name did not ap*256pear, but which in most of the cases were signed by persons at the instigation of Kuhn and for his accommodation. Kuhn also furnished some collateral for these notes. Included in the securities sold by Homblower & Weeks were two bonds of the St. Louis & Southwestern Railroad which Kuhn had purchased with Simmons estate money, one for $855.28 and the other for $856.67, and a Western Union bond which Kuhn had purchased for $1,014.63; all of which bonds were left by him with the brokers for collateral security. These three bonds, when sold with the other securities, brought $1,309.78. The cheek received by Kuhn from Hayden Stone & Co. included the proceeds of the sale of a $1,000 United Drag bond which Kuhn had purchased with the Simmons estate money and left with that firm as collateral. That bond, which cost $966.53, brought $901.11. These figures, representing purchases of bonds used for collateral, will be recognized as withdrawals from the Simmons estate through the guardian checking account. The total amount received by Kuhn from the brokers ($8,290.-71) represented principally the result of his speculative activities with the money stolen from the Simmons estate.
There was, however, a considerable debit balance against Kuhn with the brokerage firms at the time he began his thefts from Mrs. Simmons to make good his margins, and such balance was secured by sundry stocks and bonds which were sold and changed from time to time and finally all sold out with the other collateral just before the checks were sent Kuhn. It is impossible, at least without an expert audit, to determine the proportion of the whole amount paid Kuhn that was produced by the different items sold.
The notes taken up and paid by Kuhn with this money were taken by the bank in the usual course of business, without knowledge on the part of any one else that Kuhn had any personal connection with them; but as between him and the makers of the notes they were probably Kuhn’s notes to pay. On the face of the transaction, they were the makers’ notes to pay. There was nothing on the books to the contrary. Upon payment of these notes, they were taken by Kuhn and apparently destroyed. At least they were removed from the bank. Some of the collateral that had been put up to secure these notes was found in the bank box' after Kuhn’s death, but not all. The transaction by which the bank received something over $16,000 in payment of these notes and parted with the notes themselves and á portion of the collateral was wholly executed by Kuhn, including the entries on the books of amounts paid. It is impossible to determine from the evidence what collateral was taken away when the notes were paid, as the testimony of the president of the bank as to this point is not clear. Ho satisfactory records were produced showing either the original collateral or that remaining or substituted.
Conclusions of Law.
The applicable principle of law under which the defendant bank can be held liable for the wrongful diversions from the Simmons account by her guardian, who was also the cashier of the bank, is that a banker who knows that a deposit with him is a trust fund cannot appropriate that fund for his private benefit, or knowingly assist another to appropriate it for his benefit, without being liable to refund the money if a breach of trust is committed by .such appropriation. A participation by the banker in the wrong done to the beneficiary of the trust account is the basis of the liability, and such participation may exist with or without advantage to .the bank.
In the leading case of Bischoff v. Yorkville Bank, 218 N. Y. 106, 112 N. E. 759, 761, L. R. A. 1916F, 1059, the rule is well stated as. follows: “Inasmuch as the defendant [bank] knew that the credits to Poggenburg created by the proceeds of the checks were of a fiduciary character and were equitably owned by the executor, it had not the right to participate in a diversion of them from the estate or the proper purposes under the will. Its participation in a diversion of them would result from either (a) acquiring an advantage or benefit directly through or from the diversion, or (b) joining in a diversion, in which it was not interested, with actual notice or knowledge that the diversion was intended or was being executed, and thereby becoming privy to it.”
The following statement of the law is quoted with approval by Judge Kenyon in Conqueror Trust Co. v. Fidelity & Deposit Co. (C. C. A.) 63 F.(2d) 833, 838: “It is hardly necessary to state that the courts recognize that in the interest of commercial security a bank may safely deal with a depositor without undertaking to scrutinize the source of his deposits, or, even if the trust character is known, seeing to the proper application of the funds. It is well settled that a bank has the right to assume that the depositor is acting within his authority, and will deal justly by his principal; but this rule breaks down, or rather, has no application, where a bank, with knowledge of the trust character of a *257deposit, assists the depositor to misapply it by appropriating it, either by a charge ticket, or through the check of the depositor, to the private obligation owed by the depositor to the bank.”
Also as stated in Allen v. Puritan Trust Co., 211 Mass. 409, 97 N. E. 916, 919, L. R. A. 1915C, 518: “The principle governing the defendant’s liability is that a banker who knows that a fund on deposit with him is a trust fund cannot appropriate that fund for his private benefit, or where charged with notice of the conversion join in assisting others to appropriate it for their private benefit, without being liable to refund the money if the appropriation is a breach of the trust.”
In showing participation by the bank here in a wrongful diversion, Kuhn, the cashier, must be regarded, not as an agent of bank, but as operating individually and fraudulently on his own account. His action is not that of the bank and his knowledge is not notice to the bank.
The rule in ordinary eases that the principal is bound by the knowledge of his agent acquired in the course of the principal’s business and while acting within the scope of his authority does not apply to the case of Kuhn, because, while committing the fraud, he stepped out of his position as cashier and acted wholly for himself and not in the interest of the bank. The presumption that knowledge acquired by the agent would be imparted to his principal disappears where it is against the interest of the agent to give the principal the information.
The following pertinent statements of the rule are quoted from Schneider v. Thompson (C. C. A.) 58 F.(2d) 94, 96:
“In Bank of Overton v. Thompson, 118 F. 798, 800, this court says, concerning the action of a cashier there involved: ‘ * * * His knowledge of all the facts connected with the rights of the complainant to that money is imputable to that bank, under the well-settled general rule that the knowledge of an agent, or notice to an agent, while acting within the scope of his authority, is notice to his principal, because within that scope he is the alter ego of the principal, and because the law will presume that the agent has performed his duty to disclose to his principal all notice to himself necessary to his principal’s protection or guidance. The officer of a corporation, like a cashier of a bank, is such agent. There are, however, well-settled exceptions to this rule, where notice or knowledge on the part of the agent will not be imputed to the principal, and one of these is “where the agent’s relations to the subject-matter, or his previous conduct, render it certain that he will not disclose it.” Meehem, Ag. § 721. “In such eases the presumption is that the agent will conceal any fact which might be detrimental to his own interests, rather than that he will disclose it.” ’ s' * *
“ ‘This presents another phase of the oft-recurring question as to when and how far notice to an agent is notice to his principal. In view of the many decisions on the subject, it is unnecessary to do more than to apply them to the f aets of this case. If Plant, within the scope of his office, had knowledge of a fact which it was his duty to declare, and not to his interest to conceal, then his knowledge is to be treated as that of the bank. For he is then presumed to have done what he ought to have done, and to have actually given the information to his principal.’ ”
I do not consider that there is liability here arising from negligence of the directors in placing Kuhn in full control of the internal machinery and operations of the bank. To establish liability on that ground, it must at least be shown that the results complained of naturally flow from want of ordinary care on the part of the directors. The boundaries of ordinary care in such a situation are necessarily very indefinite. In a small community it is not unusual, and often necessary, to run a bank more or less as a one man bank; nor does it appear that much more diligence than these directors or similar directors would be capable of exercising would have resulted in any discovery of wrongdoing.
Withdrawals from the Estate Checking Account.
Applying the above principles to the cheeks paid from the guardian’s checking account, being items (a), (b), (e), (d), and (q) of paragraph 14 of plaintiff’s bill, I can find no liability on the part of the bank. There was no “participation” on the part of the bank by receiving any benefit from the payment of the cheeks. They were all to other persons. The bank’s assets were not used or impaired at any point, and it had no debt or claim to be made good by their payment. Neither do I think the bank can be said to have assisted in the transaction with notice that a diversion was being carried out. The first four checks were to buy bonds which, when bought, were the property of the estate. They were afterwards converted by Kuhn, but that was another matter. The other check might have been for the same purpose so far as it showed. The only irregularity that appeared was in correcting the seemingly ac*258cidentally omitted designation “guardian” on these particular cheeks after they came in. The color of the cheeks in most, if not all, cases was such as was used in the legitimate withdrawals from that account. The transactions appeared to the bookkeeper as perfectly innocent. I think they would have so appeared to the directors if they had been informed of the circumstances.
Kuhn was at that time a trusted officer and manager of the bank and highly esteemed in the community. It took expert accountants a considerable time to discover the irregularities after they were known to have occurred. Kuhn had a right to cheek out money as guardian, even if there had been some suspicions aroused by the circumstances. Lowndes v. City National Bank, 82 Conn. 8, 72 A. 150, 22 L. R. A. (N. S.) 408.
Withdrawals from the Estate Savings Account.
In the case of these -withdrawals described above, I find “participation” by the bank both through receiving benefits therefrom, to some extent, and also by assisting in the diversions through their agents with notice of the facts. This applies to items (e) to (p), inclusive, paragraph 14 of the plaintiff’s biU.
As to receiving benefits; it is true, as pointed out by counsel, that the benefit came in each case only after Kuhn .had caused the bank a possible loss by paying his worthless cheek, and that the whole thing might be called a “jugglery” in pursuance of a previously formed design by Kuhn to abstract the money from the Simmons account for his ' own benefit; but the benefit accruing to the bank is not the whole foundation of liability. Proof of a benefit received, even temporarily by the bank, under some circumstances, shows a participation in the transaction, which is the important point.
If the transaction is separated into its different parts,-the first is the arrival at the bank of Kuhn’s worthless check. Of course, the matter should have ended then and there, so far as the bank was concerned; but it did not, and the second step was the one taken by the bank in paying the cheek. Doing so, it acquired a claim of little or no value against its cashier, who had control of a large trust deposit. If the matter had ended there, as it also should have, the bank presumably would have lost the amount of the cheek, and the Simmons estate would have saved that amount.
The third and final step was the payment of the doubtful claim held by the bank with money taken from the Simmons savings account. In the last two steps Kuhn was acting for himself to perpetrate a fraud. The bank was represented by its assistant cashier, who observed the whole transaction, and by its bookkeeper, who saw significant parts of it. Thus the bank had notice of and participated in a transaction most irregular on its face and quite obviously resulting in a wrongful diversion from the trust estate. The bank benefited from step No. 3, in that it saved the loss it incurred or made probable by taking step No. 2. The nature or extent of the benefit is not of so mueh importance as the fact that the bank thereby participated in the wrongful act of the trust officer.
It should not be inferred that the assistant cashier, Miss Bailey, was in a conspiracy with Kuhn to steal from the Simmons estate. There is no evidence to that effect or that she benefited in any way from the transaction. She probably did not appreciate the seriousness of the action taken by herself and Kuhn, or she may have thought that it would be remedied afterward. She was concerned in knowing whether the cash would come right, and was assured by Kuhn that it would. It is enough that she assisted, during the regular course of business, in transferring money-from the Simmons estate to the assets of the bank, thereby making good 'the deficiency caused by the payment of the worthless cheeks.
“Notice sufficient to attract attention, and put a party on his guard and call for inquiry is notice of everything to which such inquiry might have led.” Dresser v. Bates (C. C. A.) 250 F. 525, 538.
The bank will have to account to the plaintiff for the money taken from the Simmons savings deposit from January 27, 1931, to June 9,1931, inclusive, amounting to $33,800, and described in items (e) to (p), inclusive, in the plaintiff’s bill.
Cheek to Fidelity Trust Company of $1,-211.73.
In this transaction there is no proof that the defendant bank received any benefit therefrom, or that it participated otherwise in the diversion. The only possible participation would be that of the bookkeeper in giving the cheek to Kuhn and calling his attention to the fact that the word “guardian” was not on it, if it was not already on it; but I regard this as insufficient. When the check was paid, it was paid as a guardian’s cheek out of the funds to the credit, of that account. In this respect, I consider this check stands as the first five checks on the guardian’s account, and *259that the bank cannot be charged with participation in what turned out to be Kuhn’s wrongful diversion.
Payments of December 23, 1981.
When Kuhn received from the brokers the two cheeks, one for $3,440.16 from Hornblower & Weeks, and one for $4,850.55 from Hayden Stone & Co., after he was sold out by both brokers, there was included in the cheeks the amount received from the sale of the four bonds which Kuhn had bought with money cheeked out by him from the guardian checking account. I have not held the bank liable for the withdrawal by Kuhn on his first four cheeks for reasons heretofore stated. The bonds purchased by this money, however, should be considered the property of the Simmons estate. The same bonds were left by Kuhn in the hands of the brokers for his own debt, but, when they came back out of innocent hands into his own, they were recoverable by.the estate as its property. The actual bonds did not come back, but the proceeds did, which is the same thing. First Nat. Bank v. Eastern Trust & Banking Company, 108 Me. 79, 79 A. 4. When Kuhn used this money, with other funds, the origin of which cannot be accurately traced, in his attempt to change the position of the bank to its advantage in respect of certain notes which had been signed by other people as accommodation for Kuhn, he was acting as sole representative of the bank. No other person knew of or had any part in the transaction or made any entries on the books. As cashier, he was accepting payment on some notes held by the bank from funds known by him, in part, to belong to another person. The bank apparently gave up some notes, which, might be still held against the signers if not paid, and received securities' in addition to the amount of the notes. Kuhn was not then acting solely in his own interest, but attempting to act in the interest of the bank. I think, under these circumstances, his knowledge as to the equitable ownership of the proceeds of the particular bonds mentioned would be imputed to the bank. Martin v. First National Bank Rush City (D. C.) 51 F. (2d) 840, and eases cited. Consequently the bank has among its assets $2,2,07.89 which belongs to the Simmons estate and which it should account for.
So far as any other part of the sums received by Kuhn from the brokers is concerned, it is obvious that, so far as it is traceable to the Simmons savings account, the defendant has already been held liable for it when taken from that account. To hold it liable again would be a duplication. As to the sum of $2,500, which was item (q) paragraph 14 of plaintiff’s bill, this was taken from the estate checking account and apparently was absorbed by the brokerage accounts. At any rate, it cannot be traced to any particular securities, and I can find no liability by the bank for it.
As to interest, I think that the bank should account at the rate it paid in its savings department for the money as and when wrongfully withdrawn, as found herein; and, on the $2,2.07.89, from the date it was received. Costs should be paid by the defendant. A decree may be prepared accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219146/ | KNIGHT, District Judge.
The case is submitted on an agreed stipulation of facts. These facts are as follows:
On October 13, 1926, plaintiff filed a federal estate tax return for the estate of Charles Larrowe, deceased, and on February 23, 1927, paid the tax reported thereon of $21,-589.34. Thereafter an additional tax of $284.50 was assessed against the estate, and this, together with interest, was paid October 26, 1927.
On August 15,1931, plaintiff filed a claim for refund of $10,034.41. Thereafter the Commissioner of Internal Revenue redetermined and reaudited the estate tax return, and on March 26, 1932, issued a certificate showing an overassessment of $9,755.03. He rejected a claim for refund, except as to' the sum of $274.63 paid October 26, 1927, on the ground that payment thereof was barred under section 3228, Revised Statutes, as amended (26 USCA § 157). This action is brought to recover the amount .of the over-assessment. Since the commencement of the action the aforesaid sum of $247.63 has been refunded.
The question at issue is whether the amount legally subject to refund is limited to the amount paid within four years immediately preceding the filing of the claim for refund. The provisions of the Internal Revenue Act, section 3220, U. S. R. S. (26 US CA § 149); section 322:6, U. S. R. S. (26 USCA § 156), and section 3228 (a), U. S. R. S., as amended (26 USCA § 157 (a), are applicable. Section 3220 authorizes the Commissioner of Internal Revenue to refund internal revenue taxes erroneously or illegally collected. The taxes in question were illegally collected. Section 3226 fixes the limitations upon the right to bring an action to recover an illegal tax. It is conceded that the conditions of section 3226 have been met. Section 3228 limits the time in which refund of any illegal tax may be made. Section 3228 (a) provides that’ all claims for refund of any internal revenue tax alleged to have been erroneously or illegally assessed or collected must be presented to a Commissioner of Internal Revenue “within four years next after the payment of such tax, penalty, or sum.” In my opinion, such “tax, penalty, or sum” means the entire tax, penalty, or sum paid, and neither is divisible so as to shorten the time in which to file a claim for a refund. In other words, the statutory limitation runs from the final payment on the overassessment. Tax “penalty” and “sum” should be read separately, and not as though “tax” included “penalty” or “sum.” “Penalty” and “sum” evidently apply to those provisions of the Revenue Act which prescribe “penalties” and fix amounts to be paid in addition to the “tax.” “Tax” includes the entire “tax” liability.
The over assessment in this case arises by reason of the decision of the Supreme Court of the United States that a trust fund such as is found in this estate was not subject to the estate tax. May v. Heiner, 281 U. S. 238, 50 S. Ct. 286, 74 L. Ed. 826, 67 A. L. R. 1244; McCormick v. Burnet, 283 U. S. 784, 51 S. Ct. 343, 75 L. Ed. 1413; Morsman v. Burnet, 283 U. S. 783, 51 S. Ct. 343, 75 L. Ed. 1412. The tax on the trust fund was paid and the additional assessment made under provision of section 302 (e) of the Revenue Act of 1924 (26 USCA § 1094 note), as then construed by the Commissioner of Internal Re-venue. The Estate Tax Act of 1924 consists of sections 300 to 318, inclusive, of the Revenue Act of 1924 (43 Stat. 303 [26 USCA § 1091 et seq. and notes]). These sections, among other things, define the property subject to tax, fix the date when the tax is payable, provide that the Commissioner shall “determine the correct amount of the tax” (section 306 [26 USCA § 1099]), and that the Commissioner shall give notice of his determination. Plaintiff urges that a tax liability is imposed which does not become a “tax” until the amount of the liability is determined by the Commissioner, and that the plaintiff did not and could not pay the estate tax imposed until it paid the full amount of *261the determined tax. The amount erroneously assessed was not finally determined until October, 1927. Section 3220 authorizes the refunding of “all taxes erroneously or illegally assessed or collected,” and section 3228 provides that claims must be presented within a specified time after the payment of sueh tax. There is much force in this contention. However, it is not necessary to base my conclusions upon this construction.
The Internal Revenue Act since 1921 has contained, under separate title, an income tax statute and an estate tax statute. Up to and including 1924, the provisions of sections '3220 and 3228 of the Internal Revenue Act were applicable to the entire act, including the income and estate tax provisions. Section 3228 then provided that claims for refund must be presented “within four years next after the payment of such tax, penalty, or sum.” In 1924, section 3228 (a) was amended (26 USCA § 157 and note), and section 281 of the Revenue Act of 1924 (26 USCA § 1065 note) excepted from its provisions. The latter section was a part of the income tax statute, and applied only to “income, war-profits, or excess-profits tax” (section 281 (a) of the act (26 USCA § 1065 note). Section 281 (b) of the act (26 US CA § 1065 note) provided that no credit or refund on account of the payment of sueh taxes should' “exceed the portion of the tax paid during the ’ * four years * 0 61 immediately preceding the filing of the claim.” There was no corresponding amendment to the estate tax statute. Section 281 is substantially the same as section 284 of the Revenue Act of 1926 (26 USCA § 1065 and note). No corresponding change was made, either in the general provisions of the Internal Revenue Act or in the estate tax statute, until the enactment of section 810 of the Revenue Act of 1932 (47 Stat. 283 [26 USCA §§ 1117a, 1120 and note]), which limited the amount of the refund to “the portion of the tax paid during the three years immediately preceding the filing of the claim.” Sections 1111 and 1112 of the Revenue Act of 1926, amending sections 3220 and 3228 (a) of the Revised Statutes (26 USCA §§ 149,157 and notes), excepted from their provisions the limitations of section 319 of the Revenue Act of that year (26 USCA § 1120) as well as those of section 284 (26 USCA § 1065 and note). Section 319 was a new section of the Revenue Act of 1926, and specifically refers to an estate tax. Though enacted two years subsequent to the enactment of section 281, it does not make any change relative to the limitation of the amount of the refund of an estate tax. Section 319 of the act of 1926, effective February 26, 1926, further limited the time for making refunds. Deceased having died February 23, 1926, his estate is without the provisions of this section (see act).
The statutes plainly provide in income tax assessments that the limitation period includes only overassessments, or parts of over-assessments, made within four years of the filing of the claim. It is clear that there was no similar statutory provision in estate tax refund claims. The natural definition of “tax” comprehends one “assessment” or one tax in the entire amount of liability. Strong support for the view here expressed is found in the historical development of the various sections of the Internal Revenue Act, including the income tax and estate tax acts. It shows that the lawmakers were conscious of the distinction made as regards refund in estate taxes and ineome taxes. They clearly differentiated them. In addition to this, to show the intent of Congress, we have the reports of the Congressional Committees on the submission of the amendment incorporated in section 281 of the Revenue Act of 1924 and the reeoi*d of the debates in Congress. Report of Committee on Ways and Means No. 179, 68th Congress, First Session; Report No. 398, p. 33; and Conference Report No. 844 by the Managers on the Part of the House. The amendment of 1924 of the ineome tax statute was under consideration. It is evident Congress realized that the change in the statute was necessary to make it applicable to part payments of a tax. Further, we have the act of 1932 (section 810, Revenue Act, 47 Stat. 283) which specifically supplies the provision to restrict the application of section 3228.
It is the contention of the government that a regulation promulgated by the Internal Revenue Commissioner has the force of statute and limits recovery to that portion of the tax paid within four years preceding the filing of the claim. The first of these. regulations limiting the amount of recovery is No. 70, adopted in 1926, and relates to the estate tax under the Revenue Act of 1924. Since this regulation specifically applies to estate taxes, and since regulation No. 65, relating to income tax, was unchanged, it is obvious that the Commissioner recognized that Congress had intended a distinction as regards the limitation period. Since 1926 the Commissioner has followed his established regulation. The Commissioner of Internal Revenue was authorized to adopt the regulation to carry out these provisions of the *262Revenue Act (section 3220, R. S.). A regulation so adopted may have the force of statute. It is self-evident that it has no such force when in conflict with statute. In the language of the opinion in Maryland Casualty Co. v. United States, 251 U. S. 342, 40 S. Ct. 155, 158, 64 L. Ed. 297, such a regulation “has the force and effect of law if it be not in conflict with express statutory provision.” The overpayment on this estate was made in pursuance of Regulations 63, article 20, and 68, article 18, of the Internal Revenue Commissioner. These purported to construe sections 302 (c) of the Revenue Act. The decision of the Supreme Court waived aside these Regulations. Were there any ambiguity in the meaning of the word “tax” as used in section 3328, that construction which favors the taxpayer should be adopted. United States v. Merriam, 263 U. S. 179, 44 S. Ct. 69, 68 L. Ed. 240, 29 A. L. R. 1547; Reinecke v. Northern Trust Co., 278 U. S. 339, 49 S. Ct. 123, 73 L. Ed. 410, 66 A. L. R. 397; McCaughn v. Hershey Chocolate Co., 283 U. S. 488, 51 S. Ct. 510, 75 L. Ed. 1183; United States v. Maryland Casualty Co. (C. C. A.) 49 F.(2d) 556. Resort to such a rule of construction is not required.
The precise question presented here has been passed upon by the Court of Claims in Hills v. United States, 50 F.(2d) 302; Id. (Ct. Cl.) 55 F.(2d) 1001, and in the District Court for the Territory of Hawaii in Magoon v. United States, C. C. H. Tax Service 1933, vol. III, par. 9294, p. 8753. The opinions in these cases accord with the views expressed herein.
Plaintiff is entitled to recover the admitted illegal assessment, and findings may be submitted in accordance with this decision. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219147/ | MeBELLAN, District Judge.
These are two suits for infringement brought by the plaintiff, the Cheney Company; the first against the City of Medford and American Employers’ Insurance Company; and the second against E. Van Noorden Company. The alleged facts of infringement were the same in both eases and they were tried together.
It was stipulated between the parties, and I find, that the plaintiff is now and continuously has been since the date of issuance thereof, the sole owner of letters patent of the United States No. 1,715,000' for an interlocking metal flashing, grunted May 28,1920, to Allan Cheney, and No. 1,860,240 for a flashing, granted May 24, 1932, to Edmund H. Friedrich.
The plaintiff alleges the infringement by all the defendants of claim 21 of the Cheney patent, and of claims 2, 3, 5, and 6 of the Friedrich patent.
It was stipulated by the parties, and I find, that the defendant city of Medford, since the issuance of the two patents in suit, caused to be built for it by the defendant American Employers’ Insurance Company a school building at Sharon and Holten streets, Med-ford, Mass., which building, as constructed, included walls having through-wall flashings in all respects identical with the flashing marked “Plaintiff’s Exhibit 1 — Sample of Van Noorden Commercial Through-Wall Flashing,” except that the latter is shorter in length than the flashing installed in said building, each flashing as installed having a length greater than the width thereof.
It was also stipulated, and I find, that the defendant E. Van Noorden Company installed its flashings aforesaid in said walls in accordance with architects’ specifications for said school requiring through-wall flashings as follows:
“All through-wall flashing and the flashing on top of projecting stone courses mentioned hereinafter shall be Cheney Interlocking Wall Flashing, or equal, of the proper type. All flashing shall be as indicated on the drawings and as detailed.
“The interlocking waE flashing is to be furnished by the roofing contractor and is to be set by the mason, under supervision of the former, with mortar placed below and on top of the ‘through-the-waE-flashing’ -so as to insure a mechanical bond.” —and that by “Cheney Interlocking WaE Flashing,” as mentioned in said specification, is meant interlocking through-wall flashing as manufactured and sold by the plaintiff.
On aE the evidence I find that masonry materials such as brick, stone, east stone, concrete, etc., are porous to a considerable degree, and, when they are subjected to the action of water from thawing snows, driving rains, etc., seepage occurs which often works its way out of the wall, either on the inside or the outside; that such seepage may and does damage interior walls and ceilings, if inside, or discolor the face of the budding, if outside; that if the seepage does not work out of the masonry wall and becomes frozen, it may and often does crack the walls and dislodge the masonry, thus weakening the structure; that flashings axe used in the mortar between the courses of masonry to provide a cut-off to stop seepage downwardly in the waE and quickly drain it; that many materials which have been used as flashings, such as asphalt composition, budding paper, roofing paper, etc., are unsatisfactory because they-tend to disintegrate when subjected to dampness; that sheet metal such as copper is the most efficacious material for flashings; and that when plain or crimped metal flashings are inserted through a wad in a layer of mortar, the mortar bond is weakened, because the mortar has less adhesive effect or bond with the metal, and in structures subjected to high wind pressures or other disturbing forces it is necessary to use means such as rods, dowels, or the Eke for locking or binding the masonry above and below the flashing.
The Cheney patent, No. 1,715,000 sets forth an interlocking metal flashing so constructed that, when it is interposed between two courses of masonry in conjunction with the usual layer of mortar, it wdl act as a waterproof cut-off and will form a mechanical bond in every direction between the flashing and the adjacent courses of masonry. The flashing is constructed of sheet metal and is folded to provide grooves and ridges alternately arranged upon both sides of the strip. The grooves and ridges have side waEs common to both and inclined to both faces of the flashing material in a manner to form dovetail shaped grooves and ridges. These side walls taper longitudinaEy of said grooves and ridges toward an edge of the material.
Claim 2, reHed upon by the plaintiff, reads as foEows:
“A budding construction comprising superposed courses of masonry, a layer of binding material for said courses, and a section *264of sheet metal flashing embedded within said binding material, said section embodying therein a plurality of grooves and ridges each having sides inclined to the face of the material and also tapering longitudinally thereof in opposite directions on both sides thereof respectively, whereby the masonry is bonded together in all directions.”
The defendants set up the following defenses against the alleged infringement of claim 2 of the Cheney patent set forth above: (1) That the Cheney patent is invalid for want of invention; and (2) that the flashing manufactured and sold by the defendant E. Van Noorden Company does not infringe the said patent.
1. Numerous prior art patents and publications were cited by the defendants against the Cheney patent in suit.
The granting of a patent raises the presumption that the patented device is new, useful, and involves invention, and easts upon the one who denies it the burden of proving lack of invention. J. A. Mohr & Son v. Alliance Securities Company (C. C. A.) 14 F. (2d) 799, 800; Smith v. Goodyear Dental Vulcanite Company, 93 U. S. 486, 23 L. Ed. 952; Diamond Rubber Company v. Consolidated Rubber Tire Company, 220 U. S. 428, 31 S. Ct. 444, 55 L. Ed. 527. This presumption has added force where the patents relied upon as negativing invention were considered by the Patent Office in the prosecution of the patent. J. A. Mohr & Son v. Alliance Securities Company, supra, 14 F.(2d) at page 800. Five of the patents cited against the Cheney patent, No. 1,715,000, were considered by the Patent Office during the prosecution of this patent. “While their [Patent Office officials’] judgment is not absolutely binding on a court, it is entitled to great weight and is to be overcome only by clear proof that they were mistaken and that the combination lacks patentable novelty.” J. A. Mohr & Son v. Alliance Securities Company, supra. Neither in the five patents considered by the Patent Office, nor in any other of the patents or publications cited by the defendants as negativing invention in the Cheney patent is there disclosed a self-bonding interlocking flashing. The evidence shows, and I find, that Cheney was the first to accomplish this result.'
The defendants argue that on the state of the prior art, what Cheney did was merely what any one skilled in the art could have done, and did not involve the use of inventive genius. I cannot adopt this view. There was a recognized want for this type of flashing, and in meeting this want by a new method of approach, Cheney made an invention. Slip Scarf Company v. Wm. Filene’s Sons Company, 289 F. 641 (C. C. A. 1).
2. The defendants urge that the alleged infringing flashing is different in construction from that of the Cheney patent, and does not infringe it.
Cheney having invented the first interlocking or self-bonding through-wall flashing, his patent is a primary or pioneer patent; i. e., one which performs a function never performed in an earlier invention. West v. Premier Register Table Company, 27 F.(2d) 653, 655 (C. C. A. 1); Walker on Patents (6th Ed.) § 416. As a primary invention, this patent is entitled to a wide range of equivalents. “The range of equivalents depends upon the extent and nature of the invention. If the invention is broad or primary in its character, the range of equivalents will be correspondingly broad, under the liberal construction which the courts give to such inventions.” Miller v. Eagle Manufacturing Company, 151 U. S. 186, at page 207, 14 S. Ct. 310, 318, 38 L. Ed. 121. See, also, Cimiotti Unhairing Company v. American Fur Refining Company, 198 U. S. 399, 25 S. Ct. 697, 49 L. Ed. 1100; Paper Bag Patent Case, 210 U. S. 406, 28 S. Ct. 748, 52 L. Ed. 1122.
The defendant’s construction shows an interrupted rib which constitutes a plurality of dove-tail rib sections and complementary dove-tail grooves sections; each rib and groove section tapers at its ends toward transverse depressions, i. e., opposite ends taper in opposite directions and taper lengthwise of the rib; the ribs on one side and the grooves on the other side have opposite tapers. It is clear that the Van Noorden flashing embodies the substance of the Cheney patent construction, and, being an admitted equivalent (see stipulation), constitutes an infringement thereof.
“ * * * One device is an infringement of another ‘if it performs substantially the same function in substantially the same way to obtain the same result.’” Sanitary Refrigerator Company v. Winters, 280 U. S. 30, 50 S. Ct. 9, 13, 74 L. Ed. 147.
It follows that claim 2 of the patent to Cheney, No. 1,715,000, is valid and infringed by all defendants.
The Friedrich Patent No. 1,860,240 in suit discloses a water-tight metal flashing formed with a raised or upwardly extending dove-tail ridge located longitudinally of the upper surface of the wall, the flashing to be *265embedded in a layer of mortar to provide a mechanical on self-locking bond with the masonry. The construction permits the opposite edges of the flashing to be bent down to engage the two opposite sides of the wall, for holding it in place.
The claims of this patent, on which the plaintiff relies, are as follows:
“2. As an article of manufacture, a flashing plate relatively longer than its width formed with a single longitudinally extending rib, said rib which is located midway of the width of the flashing plate being dovetail in shape in cross sections, whereby, when a layer of cement, or the like, is placed on the under side of the flashing plate, it will fill the rib portion, whereby the plate would be secured to the wall against lateral and vertical movement.
“3. As an article of manufacture, a metal flashing having a dovetail longitudinally extending rib, the opposite side edges of the flashing being bendable for engaging the inner and outer faces of a wall, when applied, whereby, when a layer of cement is placed on the upper surface of the flashing, and a block of concrete placed thereon, it will be laterally and vertically secured by said rib against displacement.
“5. A wall flashing comprising a strip of sheet metal formed with a longitudinal and centrally disposed rib, said rib being formed with a flat top portion connected to said flashing by side walls which form acute angles at their intersections with said flashing and said flat top portion.
“6. A building construction comprising superposed courses of masonry interspaced by beds of mortar, and the like, and a flashing sheet of desired width to extend substantially through said wall imbedded in the mortar of one of said courses and provided with centrally arranged longitudinally extending, raised areas, providing dove-tailed shaped recesses for the reception of mortar together against movement of the sheet vertically and laterally.”
The defendants allege that the Friedrich patent is invalid in that it involves no invention. There is no contention by the defendants that the Friedrich patent, if valid, is not infringed, and-1 find that, on the evidence, the defendant’s flashing is like the Friedrich flashing — except that in the former the continuity of the longitudinal rib is interrupted by transverse depressions, which is merely a colorable change and does not alter the function. Fones v. American Specialty Company (D. C.) 38 F.(2d) 639.
The defendants have cited many patents and publications, including the Cheney patent in suit, all of which have received consideration, to show the invalidity of the Fried-rich patent, but on all the evidence I find that they have failed to overcome by the required fair preponderance of the evidence (Slip Scarf Company v. Wm. Filene’s Sons Company, supra) the presumption of validity which attaches to the granting of a patent by the Patent Office.
« * * * patters patent for an improvement on a patented invention cannot be declared void because they include such patented invention. Much less does it lie in the mouth of a party who is infringing both the improvement and the original invention to set up the existence of the first patent as an excuse for infringing the improvement. It is only the patentee of the original invention who has the right to complain of the use made of his invention.” Cantrell v. Wallick, 117 U. S. 690, 6 S. Ct. 970, 973, 29 L. Ed. 1017.
Claims 2, 3, 5, and 6’of Patent No. 1,860,-240 to Friedrich are valid and infringed by all defendants.
Statements of fact in this opinion are to be taken as findings of fact, and statements of legal conclusions as rulings of law, under the equity rules.
Decrees may be entered for the plaintiff in accordance with the prayers of the bills of complaint. „ | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219148/ | ANDREW M. J. COCHRAN, District Judge.
This is an action on a war risk insurance policy. The plaintiff filed his claim with the United States Veterans’ Bureau at Louisville, Ky., on May 7,1929. Thereafter he re eeived a letter, dated June 12, 1929, signed “By direction, J. T. Allen, Regional Adjudication Officer, Louisville, Ky.,” in which it was stated that: “The evidence in his claim had been reviewed and it was held that his disabilities were not shown to be permanent and total for insurance purposes under the present evidence, and he was not entitled to insurance benefits, but he might submit additional evidence showing his present physical condition.” He submitted additional evidence, and thereafter he received a letter, dated July 15, 1929, signed the same as be^ fore, in which it was stated: “This evidence was considered by this office under date of July 3,1929 and held not sufficient to warrant a permanent and total rating for insurance purposes from the date of your discharge from military service. Under this decision *270you are not entitled to payments of insurance.”
Thereupon, i. e., on August 8, 1929, the plaintiff addressed a letter to the Regional Office at Louisville, Ky., giving notice of appeal to the Central Board of Appeals. In answer thereto he received a letter, dated August 21, 1929, signed as aforesaid, requesting that he advise that office of his desire to appeal over his own signature and stating that: “If you have additional evidence that you wish to. file in support of your claim, you should send'it forward for the reason that the Board of Appeals will not consider evidence that has not been previously passed upon by the Regional Office. If your letter in answer to this communication restates your desire to appeal your ease will be forwarded to Section D, Central Board of Appeals, Chicago, 111.”
In answer thereto he restated his desire to appeal under his own signature, furnishing no additional evidence, and the case was forwarded to the Board of Appeals.
Thereafter, on March 4, 1936, he addressed a letter to the Board of Appeals inquiring' as to the status of his claim. In answer thereto, in a letter dated March 17,1930, it was stated: “You are respectfully advised that your ease is receiving appropriate attention and you will he duly advised when action has been completed by this office.” Again, on April 12, 1930, he addressed a letter to the same effect to the Board of Appeals, and in answer thereto he received a letter, dated April 24, 1930, in which it was stated: “Please be advised that every effort is being made whereby an early decision may be had in your case. You will he notified as soon as final action has been taken.” Again, on May 9, 1930, he addressed a similar letter to the Board of Appeals, and in answer he received a letter, dated May 19, 1930, in which it was stated: “You are advised that your claim is receiving appropriate attention at the present time by the Bureau and you will be notified relative thereto at a later date.”
Thereafter he ceased inquiring of the Board of Appeals as to> the status of Iris claim, and waiting until June 24, 1931, he on that date brought this action bn the policy. Within a month thereafter he received a letter dated July 22, 1931, from the director of insurance notifying him that he had been given a rating of permanent and total for insurance purposes from the date of his discharge and that' upon the execution of a certain form action would he taken towards awarding him insurance. This form was executed and the award made. He claims that he is entitled to a judgment herein for his insurance, not on this award, but on tbe policy. In disposing of this claim it is assumed that the policy matured at the time of his discharge, when he ceased to pa.y premiums, and the question is whether he must look to his award or is entitled to judgment herein on the policy. If he had the right to bring the action when he did, it would seem that he is entitled to judgment. The subsequent making of the award should not deprive him thereof. His right to so bring the action depends on whether, at that time, there was the necessary disagreement required in order thereto.
By section 19 of the World War Veterans’ Act of 1924 (38 ÜSCA § 445 note), it is provided that: “In the event of disagreement as to claim under a contract of insurance between the bureau and any beneficiary or beneficiaries thereunder an action on the claim may be brought against the United States either in the Supreme Court of the District of Columbia or in the district court of the United States in which such beneficiaries or any one of them resides.”
By section 5 of that act (38 USCA § 426), it was provided: “All officers and employees of the bureau shall perform such duties as may he assigned them by the director. All official acts performed by such officers or employees specially designated therefor by the director shall have the same force and effect as though performed by the director in person.”
By Special Order No. 387 issued by the Bureau on or about June 15, 1929, it was amongst other things provided: “1. Pursuant to Section 5 of the World War Veteran’s Act 1924, authority is hereby delegated to Regional Managers to effect final denial of claims for insurance benefits in accordance with the provisions of this general order.” “6. The final denial by the Regional Manager of claims for insurance benefits in accordance with the foregoing provisions of this general order shall constitute the final action of the United States Veteran’s Bureau with respect to such claims. After being notified of such final denial, if the claimant shall elect to pursue his right of appeal to the director in lieu of pursuing other remedies proscribed by law, his appeal will he considered in accordance with the established procedure governing appeals.”
The last paragraph of the amendment to section 19 of the World War Veterans’ Act of 1924 made by the act of July 3, 1930 (38 US CA § 445), defined the words “claim” and “.disagreement”, in the portion thereof hereto*271fore quoted. The definition of the word “disagreement” was “a denial of the claim by the director or some one acting in his name on an appeal to the director.”
In an opinion given January 23,1929', by the Solicitor General in the ease of In re Edward Shields Cross, it was said: “If the regulations for successive appeals within the Bureau were intended to benefit the veteran by giving him every opportunity to secure justice why inflict them on him if he does not want to take advantage of the right of appeal? After all, speedy results are what the veterans want, and where the initial board has decided against him, and he thinks it a waste of effort to appeal or that he will get a quicker settlement by suit why prevent it? In my judgment, if there is an adverse decision on a claim by a board or tribunal within the Bureau to whom has been lawfully delegated the power to act on it that constitutes a disagreement between the claimant and the Bureau and the claimant is not required as a condition precedent to suit to take all the appeals and demand all rehearings which the regulations permit and he cannot properly be said to consent and áequiesee in the Bureau’s decision because he brings a suit instead of resorting to appeals within the Bureau.”
The amendment of July 3, 1930, in thus defining the word “disagreement” was intended to meet the position here taken and to require the claimant to avail himself of the entire machinery of the Bureau before bringing suit. The purpose of the amendment was thus explained by the Senate Finance Committee report which accompanied the bill containing it (71st Congress, 2d Session, Senate Reports, No. 885, p. 4): “A paragraph is added to define the meaning of the term ‘claim’ and the term ‘disagreement’ as used herein. It has for its purpose the establishment of a definite rule that before suit is brought a claimant must make a claim for insurance and prosecute his case on appeal through the appellate agencies of the bureau before he shall have the right to enter suit. Your committee felt that in view of the fact that the Government has set up in the bureau expensive machinery for hearing claims it was unfair for a veteran to disregard this machinery on the basis of the disallowance of his claim by some subordinate board and enter suit.” It was further provided in this added paragraph (38 USCA § 445) as follows:
“This section, as amended, with the exception of this paragraph, shall apply to all suits now pending against the United States under the provisions of the War Risk Insurance Act, as amended, or this chapter.”
According to this the entire section with the exception of this paragraph applied to all claims whether in suit or not, and this paragraph did not apply to those for which suits were then pending. The implication is that it, along with the other provisions of the section, did apply to claims not then in suit, irrespective of the condition in which they were. Pursuant to this Act of July 3, 1930, the director was succeeded July 21, 1930, by the Administrator of Veteran Affairs.
In the light then of these provisions of section 19, as it stood originally and section 5 of the World War Veterans’ Act of 1924 and the amendment to such sections by the act of July 3,1930 (38 USCA §§ 445 and 426), did the plaintiff have the right to bring this action? It is well settled that a disagreement between the Bureau and the claimant as to the validity of the claim is essential to his right to bring suit thereon. Gallardo v. United States (D. C.) 5 F.(2d) 678; United States v. Lyke (C. C. A.) 19 F.(2d) 876; United States v. Jackson (C. C. A.) 34 F. (2d) 241, 73 A. L. R. 316; Manke v. United States (C. C. A.) 38 F.(2d) 624; Berntsen v. United States (C. C. A.) 41 F.(2d) 663; United States v. Burleyson (C. C. A.) 44 F. (2d) 502; United States v. Ranes (C. C. A.) 48 F.(2d) 582; Mara v. United States (D. C.) 54 F.(2d) 397; Smith v. United States (D. C.) 56 F.(2d) 636; Maulis v. United States (D. C.) 56 F.(2d) 444; Taylor v. United States (D. C.) 57 F.(2d) 331; Kelley v. United States (D. C.) 59 F.(2d) 743; Griffin v. United States (C. C. A.) 60 F.(2d) 339.
The plaintiff undertakes to meet this requirement in two ways. One is that the denial of his claim on July 3,1929, communicated to him by letter dated July 15,1929, was sufficient to entitle him to bring the action. The answer to this position is threefold. The requirement of the amendment of July 3,1930, was that the machinery of the Bureau should be exhausted before there shall be a right to bring suit. That claim was not then in suit. This action was not brought until the lapse of nearly a year after such denial. Again, General Order No. 387 authorized a denial by the regional manager. The denial relied on was not made by the regional manager. The letters which the plaintiff contends were issued pursuant to the provisions of General Order No. 387 were not in fact issued under this General Order and do not conform to its provisions. The letters were all signed by J. T, Allen, the Regional Adjudication Officer. He was not authorized to sign letters under the *272provisions of General Order 387. The only person so authorized under that General Order was the Regional Manager.
Then the taking of the appeal from the denial annulled its operative effect as a basis for bringing the action, if it otherwise existed. This is evident from the fact that the limitation on the time in which suit might be brought after final denial would begin to run aot from the denial of July 3,1929, communicated July 15, 1929, but from the denial on the appeal. There is nothing in the opinion of the Solicitor General, quoted above, justifying the position that plaintiff could both appeal and sue. What he held was that the claimant need not appeal, but might sue without further dealing with the Bureau.
The other way in which plaintiff undertakes to meet the requirement as to the agreement is that the delay in acting on his claim after the appeal was taken was unreasonable and such delay was the equivalent of an actual denial. In support of this position the decision in Dobbie v. United States (D. C.) 19 F.(2d) 656, is cited. This case was decided before the amendment of July 3, 1930, to section 19 of the World War Veterans’ Act of 1924. The decision in United States v. Golden (C. C. A.) 34 F.(2d) 367, also relied on, to no extent favors the position. Against the position are the decisions in the cases of Smith v. United States, supra; Maulis v. United States, supra. In Griffin v. United States, supra, a decision of the question was waived on the ground that the delay relied on was not unreasonable. There the claim was mailed to the Bureau September 10,1930. October 17,1930, the Rating Board notified claimant that the claim was denied October 13th. October 21,1930, he appealed to the Central Board of Appeals. December 19, 1930, he was notified by the Bureau that the Central Board had decided adversely to his claim. December 23,1930, he appealed to the Council of Appeals. January 17, 1931, he was notified by the Bureau that the file was being forwarded to the Council of Appeals. February 11, 1931, with the case still pending before the Council of Appeals he notified the Administrator of Veterans’ Affairs that if he did not receive notice of final action on his claim within 60 days from that date he would institute suit. June 1,1931, he brought suit, no further action having been taken in his case by the Bureau. The court said: “Appellant’s conclusion that the delay was unreasonable is based entirely upon the several dates of the different actions upon his claim by the various departments of the Bureau. This we think is not sufficient. Being charged with general knowledge of the magnitude of that department, and the enormous and continually increasing number of claims before it, we are unable to say, without other factual enlightenment that sixty days is a rea/sonable time within which the director and those acting under him shall dispose of all appeals presented to him. Indeed the facts involved in this class of eases are usually so radically different that it would be impossible to fix a limit that would be just to claimants or the department.”
After the amendment to section 19 of the World War Veterans’ Act of 1924 by the Act of July 3, 1930 (38 USCA § 445), however it may have been before, it would seem clear that no delay whatever on the part of a subordinate official or board in handling a veteran’s claim for insurance can entitle him to bring suit. Actual denial by him will not be sufficient to so entitle him. How then can delay on his or its part have such an effect? If delay can in any event be thus effective, it must be delay on the part of the Director or his successor, the Administrator of Veterans’ Affairs, and there can be no delay on his part until the claim comes before him on appeal. This consideration of itself is sufficient to dispose of this ease. There is nothing showing that there was any delay in handling the claim in suit save on the part of the Central Board of Appeals. But I do not think that delay on the part of the Director or his successor, the Administrator of Veterans’ Affairs, can in any contingency be treated as the equivalent of an actual denial of the claim on his part. The United States cannot be sued on such claims save by its consent. This being so, it can annex such conditions as it sees fit to a right to sue it. It has provided that it is essential in order to the right to sue it thereon that the Director or Administrator of Veterans’ Affairs shall deny the claim. This I take to mean that he must actually deny it.
In United States v. McLean, 95 U. S. 750, 24 L. Ed. 579; it was said: “But courts cannot perform executive duties or treat them as performed when they have been neglected. They cannot enforce rights which are dependent for their existence upon prior performance by an executive officer of certain duties he has failed to perform.” It is not likely that the Director or the Administrator of Veterans’ Affairs or his subordinates will unreasonably delay action on any elaim. It cannot be taken that he or they will purposely delay such action. If there is any unreasonable delay, it must be due to oversight *273or neglect, and this delay can be corrected by calling attention to it. If a cause for action exists and it is not taken, it can be compelled by mandamus. Whilst courts are of necessity continually determining rights on the basis of what is reasonable, the criterion is at best an uncertain one. If it is to be applied in suits on war risk insurance claims, different positions as to> what is reasonable are likely to be taken by the different judges handling them. Then, if it is understood that a suit can be brought whenever there is unreasonable delay in action on the part of the Bureau, the federal courts will be swamped by such suits. Their dockets are already crowded with cases where there has been an actual denial.
I feel constrained, therefore, to hold that plaintiff’s petition be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219149/ | MOSCOWITZ, District Judge.
This is a suit in equity for the alleged infringement of claims 1, 3,11, and 12 of the Holmes patent, No. 1,769,836, granted July 1,1931.
The patent relates to an improvement in a water feed control. Plaintiff’s title to the patent in suit is not in dispute, it was conceded on the trial that, if the patent is valid, it was infringed.
Claims 1, 3, 11, and 12, which are relied upon by the plaintiff, are as follows:
“Claim 1. A water feed device adapted to deliver water from a source of supply to a sterilizing receptacle, provided with an air gap across .which water will be projected to the receptacle under full flow but down the side of which water will run adhering to the side thereof under slow flow such as produced by a leaky valve whereby water will only be added to said sterilizer when it is desired to do so.”
“Claim 3. A device adapted to deliver water from a source of supply to a receptacle, provided with an air gap across which water will be projected to the receptacle under full flow but down which water will run under slow flow such as produced by a leaky valve, the water supply conduit to said device having a vacuum-breaking air inlet port whereby contamination from said receptacle is prevented from reaching said water supply.”
“Claim 11. A water feed device adapted to deliver water from a source of supply to a sterilizer, provided with an air gap across which water will be projected to. the sterilizer under full flow but down which water will run under slow flow such as produced by a leaky valve, the water supply conduit to said sterilizer having a vacuum breaking means.”
“Claim 12. A device for delivering water from a source of supply to a receptacle comprising a shell provided in its bottom with a waste'conduit and provided higher up at one side with a port for delivery to the receptacle, an air gap across which water will be projected into said port and hence into *274said receptacle under normal flow, but down which air gap water will run to said waste conduit under slow flow such as produced by a leaky valve.”
Defendant claims that the patent is invalid, and that the defendant American Sterilizer Company has’ independently invented and developed the device of the patent in suit, and that that defendant had a license from the inventor.
The invention is described in the patent as follows:
“My invention relates to an improvement in a water feed control and its novelty consists in the adaptation and arrangement of parts as will be more fully hereinafter pointed out.
“In the following description and in the claims, the term ‘tank’ is herein used in a broad sense to include a'receptacle for receiving water from a source of supply such as a city water main.
“In the present state of this art, it is the usual practice to fill such tanks by supply connections arranged to deliver into the tank below the high or normally maintained water level in the tank. In such arrangements, should the house supply be shut off and drained or if, for any reason, partial vacuum should be produced in the supply pipe, there will be produced a back-flow of water from the tank into the house supply pipes. If the water in the tank is chemically treated or if polluted in any way so that it is not a good drinking water, the back-flow into the tank and into the house pipes becomes a very serious matter. In fact, serious results have followed from back-flow such as just indicated.
“Also, if the valve in the supply pipe should leak, there would be a slow flow of water from the supply, assumed to be the city water supply, into the tank and if the water in the tank should be sterilized water such as used in sterilizers, such leakage would, as is obvious, be a serious matter. In the above indicated hitherto used arrangements for supplying water from a source such as city water to a tank such as a sterilizer, for example, other undesirable actions have also been present, all of which, as well as those noted, are overcome or eliminated in my improved water feed control.
“Among the improved actions obtained in my water feed control herein disclosed and claimed the following four may be mentioned.
“Under normal flow of water from the supply pipe to the tank, such as produced when the valve in the supply pipe is purposely opened, the water will be delivered from the supply pipe to the tank through a primary water-sealing trap and across an air gap, the water level in the tank will be maintained at a predetermined level, and overflow from the tank will run to the drain pipe through the air gap.
“Under a very slow flow of water from the supply pipe such as produced by a leaking valve or a valve not tightly closed, the water , will flow not into the tank but to the waste pipe through the air gap and preferably also through a secondary water-sealing trap.
“If, for any reason, there should be a partial vacuum produced in the water supply pipe, such as would tend to produce a back-flow of water from the tank to the supply pipe, such back-flow will be prevented by an inflow of air through a vacuum-breaking air inlet provided in the delivery device and above the water level in the water-sealing traps.
“When a connection is made to a vacuum-creating device or to the atmosphere for the discharge of steam or vapor generated in the tank, such connection is made to the.tank through the delivery device on a path that leads between the two traps so that the steam or vapor will not be delivered into the room.”
The patent relates to a water feed control for sterilizers. The patent covers a water feed and air break combined used in connection with an open type of sterilizer such as is used in hospitals and in physicians’ offices.
The patent provides a protective means for a possible contamination of water at two points, the water flowing through a control valve, which, when the pressure is in toward the sterilizer, the contamination is avoided in the sterilizer by means of an air gap, and, if for any reason the pressure is reversed, the flow through the control valve is reversed, whereby a suction is placed on the sterilizer. The air vent elements of the patent protect the pipe lines connected with the sterilizer from contamination.
Prior to the patent in suit, and for about 25 or 30 years, it was the practice to connect a sterilizer directly with the general water supply and the drain. It was found that this would probably lead to contamination of the sterilizer through leaking valves by water being added to the sterilizer after the sterilization had occurred, and also the siphoning of water into the general supply pipes. Contamination occurred through water backing up and causing a suction or siphoning action so that the water was drawn from the sterilizer into the water supply.
*275There are two problems solved by the patent, one preventing leaking water from entering the sterilizer, and the other preventing water from being siphoned from the sterilizer into the water supply. About twenty minutes is required for the complete sterilization of instruments to be used in an operation. If water drips into the sterilizer wnen sterilization is not complete or toward the end thereof, contaminated water may be added to the sterilizer so as to affect the complete sterilization of the instruments.
The invention of the patent prevents leaking water from entering the sterilizer, and also prevents water from being siphoned from the sterilizer into the general house supply of water. Two feeds are provided, there is a 'pipe which terminates in an open end and is fiat up against the main drain pipe. This arrangement is in such a position that it is always open so that the air can be drawn. In ease of siphoning the air will come in and break that and prevent the water from being actually drawn back of the filling means, and the open spaces will permit the drip to run off the edge and enter the drain without going into the sterilizer. By opening the cock, the water will then reach the sterilizer. In opening the valve, there is a greater flow of water which jumps the gap and then passes into the sterilizer. When the valve is open, the water reaches the sterilizer; when the valve is closed, if there is a drip or leakage, the water does not reach the sterilizer but drips into the drain.
This patent serves two purposes; it prevents contamination of the instruments in the sterilizer, and also prevents siphoning of the sterilizer. The defendant American Sterilizer Company has paid plaintiff’s patent a compliment by adopting its invention.
Plaintiff’s patent has had a large commercial success. The commissioner of health of the city of Chicago, the city of New York, as well as the United States government has specified the construction of the patent in suit for installation in its institutions.
‘ Dr. Kegel, commissioner of health of the city of Chicago, in the early summer of 1928, called a conference of forty or fifty superintendents of Chicago hospitals, and directed them to have the water supply of their sterilizers connected in such a way that there could be no escape, of contaminated water from a sterilizer into the drinking water supply.
The attention of Holmes, the inventor, was called to the suggestion of Dr. Kegel, •whereupon Holmes endeavored to solve the problem raised by Dr. Kegel. Holmes, after working for some time, in October, 1928, prepared a sketch of his idea and submitted a device and sketch to his patent attorneys on January 16, 1929. The invention was conceived by Holmes in the summer of 1928, and he made a complete drawing and disclosure thereof to Dr. S. S. Graves on October 23, 1928. On February 11, 1929, Dr. Kegel approved the Holmes drawing. Holmes submitted the invention to the American Sterilizer Company on March 30, 1929. Holmes’ completed device of the patent in suit was exhibited at the Catholic Hospital Association Convention in Chicago from May 6 to May 10, 1929. Holmes filed his application for the patent in the United States Patent Office on May 1,1929. The invention was offered to the American Sterilizer Company by Holmes early in April, 1929, and thereafter the patent was offered to the plaintiff and purchased by it on April 27, 1929.
The defendants contend that the Holmes patent is anticipated by the prior patented and published art, and contend that this is an independent conception and invention by Raymond L. Jewell, designing engineer of the defendant American Sterilizer Company, the Jewell application serial No. 360,236 having been filed May 3, 1929.
Jewell admitted on cross-examination that he had seen and examined the Holmes drawing embodying the device of the patent in suit before he signed and filed his application. The history of the Holmes and Jewell patent applications shows that they passed through the hands of different Assistant Examiners in two different divisions of the patent office.
The Jewell application is still pending, and, were it not for the Holmes patent, valid claims similar to those of the patent in suit could be secured. However, the Holmes patent will bar the Jewell application, as the Holmes application and other succeeding dates are all earlier than Jewell. The reason that there was no interference between Holmes and Jewell was due to the fact that Holmes was ahead of Jewell in his filing date as well as in his date of conception and reduction to practice.
The Pordon patent, No. 1,572,678, pertains to gasoline, which must be caught and brought back. In the patent in suit leaking water enters the waste pipe. Pordon attempted to eliminate the fire hazard by preventing the spilling of gasoline. Holmes prevents water from reaching a sterilizer while sterilization is in process. Holmes was not concerned with the waste of water, but *276solely to prevent it from dripping into the sterilizer. Pordon’s attempt is to save the gas. The functions of these two devices are different. Pordon does not anticipate Holmes’ disclosure.
The Encyclopedia Britanniea and Klingler patent, No. 76,399, references operate so that contaminated water would enter the reservoir or container in times of low or slow flow. This was admitted by Thatcher, defendant’s expert, who testified:
“XQ61. Now referring to what you have said about the disclosure in the Encyclopaedia Britanniea reference and in the Klingler reference, what would happen to contamination of water supply in times of low flow if contaminating matter appeared in the water shed, or source of water? A. 'The contaminated water in times of low flow would enter the reservoir. We should bear in mind, however, that the contaminated water proceeds in the other direction in these devices we are concerned with.”
All of the prior art patents and the attempts to prove prior use by the defendant relate only to separate elements of the Holmes patent, and no one of these is adapted to perform the functions of the patent in suit. No one of them, anticipate or limit the scope of the patent in suit. Neither the prior art nor anything done by the American Sterilizer Company shows the combination of an air break and an air gap functioning with the supply or inlet valve to protect the sterilizer and the water supply. None of the patents or the prior uses suggest the combination of the patent in suit. An anticipation cannot be made out, nor can a valid claim be limited by selecting part of a disclosure from one patent and part from another, and then by welding the parts together produce an anticipating or limiting structure.
The claim of the American Sterilizer Company that it had a license from Holmes has not been established. Holmes was not a general employee of the American Sterilizer Company; he was employed by the American Sterilizer Company to sell its products in Chicago and adjacent territory on a drawing account and commission basis. During the period of his employment he represented three other concerns. Holmes never consented to the use of his invention by the American Sterilizer Company. The most that can be said is, that he offered to sell the invention.
In order to deprive an inventor of his invention, proof should be strong and convincing that the employee and the employer agreed that the invention was to be the property of the employer. The whole course of conduct between the employer and employee indicates very clearly that there was no agreement or understanding to give the title or license to the patent to the employer. When the patent in suit was submitted to J. E. Hall, president of the American Sterilizer Company, by Holmes, no rights were claimed by the employer in the patent.
The patent is valid, and claims 1, 3, II, and 12 have been infringed.
Decree for plaintiff.
Settle findings of fact and conclusions of law, and decree upon notice. | 01-04-2023 | 07-25-2022 |
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