url
stringlengths 59
59
| text
stringlengths 0
1.13M
| downloaded_timestamp
stringclasses 1
value | created_timestamp
stringlengths 10
10
|
|---|---|---|---|
https://www.courtlistener.com/api/rest/v3/opinions/7219151/ | SCHOONMAKER, District Judge.
This is an action at law by George A. Adamos, beneficiary named in four policies Of *279insurance issued by tbe New York Life Insurance Company, each in tbe sum of $5,000 upon tbe life of Andy Adamos, father of the beneficiary.
The defendant has set up an equitable defense under section 274b of the Judicial Code (28 TJSCA § 398), contained in the “New Matter” set forth in the defendant’s affidavit of defense. To this “New Matter” the plaintiff has replied, and the equitable issue was tried before the court on the new matter set out in the defendant’s affidavit of defense, plaintiff’s reply, and the proofs.
By the equitable defense, the defendant is seeking to have the four insurance policies declared null and void and canceled, by reason of alleged false answers in the application for this insurance.
Findings of Fact.
From the pleadings and proofs upon the equitable issue, we find the facts to be as follows:
(1) The defendant issued and delivered to Andy Adamos four insurance policies, each in the sum of $5,000, two dated April 8,1932, and delivered April 15, 1932, being Nos. 11,-773,180 and 11,773,181. The other two, namely, Nos. 11,780,717 and 11,780,718, were dated April 19,1932, and were delivered during the latter part of May or the first part of June, 1932. Copies of these policies are attached to plaintiff’s statement of claim.
(2) The medical examination for all of these policies was made on April 6, 1932, by Dr. J. C. Wiley. The answers of Adamos to the medical questions are in writing and signed by him, four copies of which are attached to the four policies of insurance that were delivered to him. In part II of the application for the above insurance, immediately over Adamos’ signature, there appears, among other things, the following:
“On behalf of myself and of every person who shall have or claim any interest in any insurance made hereunder, I declare that I have carefully read each and all of the above answers, that they are each written as made by me, and that each of them is full, complete and true, and agree that the Company believing them to be true shall rely and act upon them.”
(3) In the said medical examination blank (copy of which is attached to the policies), Andy Adamos was asked and answered the following questions, to wit:
“7. A. Have you ever had any accident or injury or undergone any surgical operation? No.
“B. Have you ever been under the observation or treatment in any hospital, asylum, or sanitarium? No.
“D. Have you ever been found to have a high blóod pressure? No.
“F. Have you gained or lost in weight in the last year? No.
“8. Have you ever consulted a physician or practitioner for or suffered from any ailment or disease of
“C. The Stomach or Intestines, Liver, Kidneys or Bladder? No.
“10. Have you ever consulted a physician or practitioner for any ailment or disease not included in your above answers? No.
“11. What physicians or practitioners, if any, not named above, have you consulted or been examined or treated by within the past five years? None.”
(4) That each of the answers quoted above in paragraph 3 hereof is false; the actual facts being that on March 14, 1926, he fell while working for the Jones & Laughlin Steel Corporation, fractured certain of his lumbar vertebrae, fractured both of his femurs and his left tibia. As a result of these injuries, he underwent a surgical operation by Dr. H. E. McGuire in South Side Hospital in Pittsburgh, where he was confined from March 14, 1926, to July 8, 1926. From the time of this accident until his death, Adamos collected workmen’s compensation from the Jones & Laughlin Steel Corporation as for total disability.
(5) In addition to this accident and hospital experience, and as the result of the accident noted in paragraph 4, said Andy Adamos repeatedly, prior to the delivery to him of the insurance policies in question, consulted physicians and was under observation or treatment in hospitals, particular incidents of which are as follows: In 1930 or 1931, Adamos was treated six- or seven times by Dr. Spanos for hypertrophy of the prostate gland. In November, 1931, Dr. D. A. Belinky was called to Adamos’ residence, examined him, and prescribed for him. At this time Adamos was confined to bed and was complaining of pain in his back and abdomen. He diagnosed the ease as sacroiliac arthritis and a badly constipated bowel. Again, in December, 1931, Dr. B. T. Owens was called to Adamos’ home to attend him, found him in bed, and complaining of pains throughout his abdomen. Dr. Owens diagnosed the ease as chronic appendix. Dr. Owens attended Adamos the same month, found him still in bed with pain and much weaker than on the *280previous oeeasion. In February, 1932, Adamos again consulted Dr. Spanos, calling at the doctor’s office and complaining of pain in his abdomen, saying to Dr. Spanos that he had been visiting different doctors; that some of them told him he had a bad appendix; that others told him he had gallstones, or something of that kind. Dr. Spanos then sent him to St. Francis Hospital to Dr. Andrew D’Zmura. On February 9, 1932, Adamos entered St. Francis Hospital in Pittsburgh, left there February 12. He was examined there by Dr. D’Zmura, who diagnosed Adamos’ case as inoperable carcinoma involving the prostate gland and surrounding structures. The only prescription that Dr. D’Zmura was able to give him was a narcotic for the relief of pain. At the time he was in St. Francis Hospital under observation of Dr. D’Zmura, he was very weak, was complaining of pain, and had lost weight. Some time while Adamos was in St. Francis Hospital he was examined by Dr. G. H. Davison, a specialist in genitourinary diseases, who diagnosed his case as advanced carcinoma. On February 23, 1932, Dr. Owens was again called to Adamos’ house to attend him, found his condition at that time to be weaker, that he seemed to have lost weight. Dr. Owens also felt a mass in the lower left abdomen, and suspected carcinoma of the rectum and lower bowel. On April 18, 1932, Dr. M. R. Hadley was called to attend Adamos. At that time, Dr. Hadley found Adamos in marked pain, lying in bed and groaning. This doctor did not make a definite diagnosis, but had in his mind the opinion of cancer, and gave a nareotie to relieve the pain. Dr. Hadley referred the ease to Dr. Danger in the West Penn Hospital. Adamos remained at the West Penn Hospital until April 29. While there, Dr. C. B. Sehildeeker, Dr. C. H. Ketterer, Dr. Heinz Langer, and others examined him. These doctors all found Adamos to be suffering from carcinoma in a very advanced stage.
(6) On July 8, 1932, Adamos died, and the official death certificate (Exhibit T offered in evidence) showed that death was caused by carcinoma of sigmoid of eight months’ duration. .
(7) In each of the policies of insurance in part I of the application (copy of which is attached to the policy) it is provided:
“It is mutually agreed as follows: 1. That the insurance hereby applied for shall not take effect unless and until the policy is delivered to and received by the applicant and the first premium thereon paid in full during his lifetime, and then only if the applicant has not consulted or been treated by any physician since his medical examination.”
As a matter of fact, before the last two policies dated April 19; 1932, were delivered to Adamos, he had consulted a doctor and had been in the hospital. Dr. Hadley was called to attend him on April 18,1932; and he was in the West Penn Hospital from April 21 to April 29, 1932, inclusive, where he was examined by a number of doctors.
Conclusions of Law.
From these facts, we conclude, as a matter of law:
(1) That all the policies sued upon axe voidable because of misrepresentation and fraud.
(2) That the two policies dated April 19, 1932, are vitiated by reason of Adamos not having disclosed, when they were delivered to him the latter part of May, or the first of June, 1932, his medical history since his examination on April 6, 1932.
(3) That the defendant is entitled to- have the four policies sued upon delivered to it and canceled.
(4) That this equitable relief bars the plaintiff from any recovery upon the policies sued upon.
Discussion.
This is a very plain ease of fraud upon the insurance company. The plaintiff in this ease offered evidence to show'that Adamos was a Greek and that he did not understand well the English language. But we are of the opinion, from the evidence in the case, and have found, that Adamos falsely answered the questions as to his medical history. We are of the opinion, in addition to that, that he is bound by the answers appearing in his application ; he had no business to sign his name to those answers in his application unless he did understand what was being said to him and what he was signing.
The courts generally hold that, by signing an instrument such as an application for insurance policy, the signer binds himself and those claiming through him to the instrument as actually written. Stanulevich v. St. Lawrence Life Ass’n, 228 N. Y. 586, 127 N. E. 315; Kwiatkowski v. Brotherhood of American Yeomen, 243 N. Y. 394, 153 N. E. 847; Erickson v. Knights of the Maccabees, 71 Colo. 9, 203 P. 674; Lauze v. New York Life Insurance Co., 74 N. H. 334, 68 A. 31; Emanuele v. Metropolitan Life Insurance Co., 137 Misc. 542, 242 N. Y. S. 715; Goldberg v. Knickerbocker Insurance Co., 82 Pa. Super. *281Ct. 302; New York Life Insurance Co. v. Fletcher, 117 U. S. 519, 6 S. Ct. 837, 29 L. Ed. 934; Aetna Life Insurance Co. v. Moore, 231 U. S. 543, 34 S. Ct. 186, 58 L. Ed. 356; Raives v. Raives (C. C. A.) 54 F.(2d) 267.
The medical questions asked of Adamos in the medical examination application are all matters of fact within his knowledge, and required no technical training or education on Ms part to answer. We are of the opinion that he is clearly hound by them, and that these policies of insurance must be vacated and set aside.
The conclusion we have arrived at in this ease, that the false answers of Adamos to the medical questions in Ms application for insurance void these policies, is fully supported by the opinion of the Circuit Court of Appeals in the ease of New York Life Insurance Co. v. Marotta, 57 F.(2d) 1038.
In addition to that, it may be noted that the Supreme Court of the United States has held that an applicant for insurance must inform the insurer when delivery of a policy is tendered to him of any pertinent facts hearing on his health which have occurred between the date of his medical examination and delivery of the policy. Stipcich v. Metropolitan Life Insurance Co., 277 U. S. 311, 48 S. Ct. 512, 72 L. Ed. 895.
A decree may he submitted in accordance with tMs opinion. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219154/ | CAYANAH, District Judge.
This action is brought to foreclose a real estate mortgage given to secure the payment of certain promissory notes aggregating $12,-000 and interest which became due and owing to the plaintiff prior to the time that the Legislature of the State of Idaho enacted chapter 124 of the 1933 Session Laws, which provides: “That the Governor of the State of Idaho be and he hereby is authorized and empowered, whenever, in his opinion, extraordinary conditions exist justifying such action, to declare legal holidays in addition to those no w authorized by law, and to limit such holidays to certain classes of business and activities to be designated by him, but no such holidays shall extend for a longer period than sixty days, provided, however, that it may be renewed for one or more periods not exceeding sixty days each, as the Governor may deem necessary” (section 1), and prior to the issuance of the proclamations of the Governor of Idaho suspending all real estate mortgage foreclosure proceedings within the state.
The defendant Henry M. Hall answers the bill of complaint and alleges as a counterclaim thereto that on or about April 1, 1925, the plaintiff became indebted to him for professional services rendered as an attorney at law and costs advanced on behalf of the plaintiff in an action then pending in the district court of Jerome county, Idaho, entitled Second Alliance Trust Company v. Frank C. Pierce et al., in the sum of $200 attorney fee for such services rendered and $29.45 costs advanced. Further answering the bill of complaint, the defendant Henry M. Hall alleges as a plea in abatement and for suspension of this action that by reason of the enactment of the state statute and the proclamations of the Governor this action should be stayed and suspended.
The plaintiff moves to strike the defenses of counterclaim and plea in abatement from the defendant’s answer upon the ground, (a) The alleged counterclaim is based on an attorney fee and costs incurred in a suit brought, by the Second Alliance Trust Company, a different corporate entity from the plaintiff, and that the liability, if any, in the counterclaim is against the Second Alliance Trust Company and not against the plaintiff, the Alliance Trust Company. It seems clear from the answer and the bill of complaint that the counterclaim is one asserted against a different corporation than the plaintiff, and therefore the motion to strike the same from the answer should be sustained.
The motion to strike the plea in abatement relating to the suspension of this action presents the question as to whether the Legislature of the state has power under the federal and state Constitutions to stay and *286suspend proceedings in the foreclosure of real estate mortgages executed before suspension is enacted, and thereby deny one who has an indebtedness that is due the right to proceed in court to collect the same by authorizing the governor, whenever in his opinion conditions exist, to suspend such proceedings.
The thought is asserted that such power is the exception permitted under the police power of the state, although it does impair the obligations of contracts. When we come to consider this serious question, we will recall that it has been fundamental since the adoption of the federal and state Constitutions, and no principle of our constitutional law is more firmly established than that the extent of the limit of the police power is to those things essential' to the public health, safety, and morals and those promoting public conveniences and general prosperity which do not come in conflict with the limitations of the Constitution. It cannot transgress or supersede the mandates of the Constitution, and when it encounters the prohibitions of the Constitution it must stop. Eubank v. City of Richmond, 226 U. S. 137, 33 S. Ct. 76, 57 L. Ed. 156, 42 L. R. A. (N. S.) 1123, Ann. Cas. 1914B, 192; Edwards v. Kearzey, 96 U. S. 595, 24 L. Ed. 793; Howard v. Bugbee, 24 How. (65 U. S.) 461, 16 L. Ed. 753.
Before the state is justified in interposing its authority in behalf of the public, the interest of the public generally, as distinguished from those of a particular class, must appear. Lawton v. Steele, 152 U. S. 133, 14 S. Ct. 499, 38 L. Ed. 385. Both the federal and state Constitutions expressly prohibit impairing the obligation of contracts, as article 1, § 10, of the federal Constitution says: “No State shall * * * pass any * * * Law impairing the Obligation of Contracts.” While the state Constitution provides that “no * * * law impairing the obligation of contracts, shall ever be passed.” Article 1, § 16. These provisions of the Constitutions appear dear as obstacles standing in the way of the defendant’s defense, for the Legislature of the state is prohibited from enacting any law that will impair the obligation of a contract or attempt to delegate such authority to the Governor of the state. The Governor of the state, after his first proclamation, has in his proclamations following attempted to give to the district courts of the state authority to suspend foreclosure of real estate mortgage under certain conditions. Such authority cannot be conferred upon the courts by the Governor, for the provisions of the note and mortgage executed and accepted by the parties is the contract that governs the determination of the rights of the parties. And any attempt by the Legislature or Governor to deny one to a contract the right to proceed in the manner provided by the law in force at the time the contract was executed to assert a contract right offends constitutional guaranties and is not a valid exercise of the police powers, nor does it serve the public safety, health, and morals and welfare. It is hard to understand how the public welfare generally can be promoted by denying the constitutional right of one to insist upon his rights being carried out according to the terms of their contract. We should test the act of the Legislature and the proclamations of the Governor in the light that the Constitution guarantees the right to enter into private contracts which do not affect the safety, health, and morals and conveniences of the public generally, and not with the idea that the Legislature may thereafter change the terms of the contract under the subterfuge that by denying the right to proceed under the contract comes under the police power of the state. If the latter reasoning is accepted, then there is no such thing as the rights of private contract under the Constitution.
A similar question to the one we have here was disposed of by the Supreme Court of Idaho in the case of Wilder v. Campbell, 4 Idaho, 695, 43 P. 677, where a mortgage was executed prior to the passage of an act of the Legislature extending the time for redemption from six months to one year and the sheriff after foreclosure sale refused to execute a deed at the expiration of six months on the ground that the Legislature had extended the time to one year. The Supreme Court of the state held that the action of the Legislature extending the time of redemption did not affect sales under foreclosure of mortgages where they were executed prior to the passage of the act and that such extension of time impaired the obligations of the contract. Compare State ex rel. Cleveringa v. Klein (N. D.) 249 N. W. 118, 86 A. L. R. 1523; Life Insurance Company of Virginia v. Sanders (Tex. Civ. App.) 62 S.W.(2d) 348.
The remedy given by the laws of Idaho at the time of the execution of the mortgage we are considering was the right to foreclose the same when it became due which became a part of the contract, and a subsequent attempt to change it by staying and suspending proceedings of foreclosure is nothing more than an impairment of the contract which is forbidden by the Constitution of the United *287States, for the value of the remedy is lessened and a substantial remedy does not remain where the right to foreclose is suspended for such time as either the Governor or court may conclude. Edwards v. Kearzey, supra; Conley v. Barton, 260 U. S. 677, 43 S. Ct. 238, 67 L. Ed. 456.
With respect to the motion to dismiss of the defendant Raymond R. Hall which is directed to the sufficiency of the facts alleged in the bill of complaint, it appears that the facts so alleged are sufficient to state a cause of action, and therefore it will be denied, and the motion of the plaintiff to strike the counterclaim and plea in abatement is sustained. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219155/ | INCH, District Judge.
This is an action at law. A jury was duly waived. The action is brought by plaintiff, Brooklyn Trust Company, to recover a stamp tax claimed to have been unlawfully imposed. The tax was paid, under protest, on August 2, 1932, and the amount sought to be recovered is $8,752.55 with interest.
It was imposed pursuant to Schedule A, subd. 2, title 8, of the Revenue Act of 1926 (44 Stat. 101, 26 USCA § 901, Schedule A (3), which is as follows: “2. Capital stoek, issue: On each original issue, whether on organization or reorganization, of certificates of stock, or of profits, or of interest in property or accumulations, by any corporation, on each $100 of face value or fraction thereof, 5 cents: Provided, That where a certificate is issued without face value, the tax shall be 5 cents per share, unless the actual value is in excess of $100 per share, in which case the tax shall be 5 cents on each $100 of actual value or fraction thereof, or unless the actual value is less than $100 per share, in which *288case the tax shall be 1 cent on each $20 of actual value, or fraction thereof.”
This stamp tax was imposed on “Certificates of Ownership,” under an indenture of trust, dated April 22, 1920, and covers the period from April 22, 1929, to June 1, 1932.
The form of this certificate of ownership is as follows:
“Certificate of Ownership
“Brooklyn Trust Company Composite Fund “Series A
“This is to certify that Brooklyn Trust Company has received from itself as Trustee under an agreement with ....... dated ......the sum of......Dollars ($-) to be deposited in its Composite Fund — -Series A-upon all the terms and conditions specified in a Declaration of Trust executed by it and bearing date April 22nd, 1S291, which said sum entitles the owner and holder of this certificate to a participating interest in the Composite Fund aforesaid to the extent of...... units of the face value of $100 each.
.“The terms upon which this certificate shall be valued, redeemed or assigned are fully set forth in the Declaration of Trust aforesaid, the original of which is lodged with Brooklyn Trust Company at its principal office, 177 Montague Street, Borough of Brooklyn, City of New York, and copies of which are available upon request to all persons beneficially interested hereunder.
“In witness whereof, Brooklyn Trust Company has caused this Certificate to be signed by one of its officers thereunto duly authorized and its corporate seal to be hereunto affixed, this-day of-, 19* — .
“Brooklyn Trust Company,
“By.......
“[Seal] Vice-President Assistant
Secretary.”
On the back of certificate:
“Assignment
“For and in consideration of the sum of ......Dollars ($ — ), the receipt of which is hereby acknowledged, the undersigned, owner and holder of this Certificate hereby assigns to Brooklyn Trust Company as Trustee under an agreement with......dated....... all of its right, title and interest in and to this Certificate of Ownership and the Composite Fund therein described.
“Brooklyn Trust Company, as trustee under an agreement with ...... dated......
“By......
“[Seal] Vice-President Assistant Secretary.”
The government has waited, substantially, three years, with full knowledge of the situation, before attempting to assess this tax In addition, the brief statement of the conceded facts, which will hereafter be made, will show that in now assessing such tax the Commissioner reverses his previous ruling which ruling was in accordance with the construction and claim here made by plaintiff.
The direct issue is as to the right to impose this stamp tax, but a much more serious question is also involved.
Congress has defined the term “corpora^ tion” contained in title 1, section 2 (a)', subdivision 2, of the Revenue Act of 1926, 26 US CA § 1262 (a) (2), when used in that act, as follows: “(2) The term ‘corporation’ includes associations, joint-stock companies, and insurance companies.”
This definition was carried, without change, into the Revenue Act of 1928 (section 701 (a) (2) Revenue Act of 1928, 45 Stat. 878, 26 USCA § 2701 (a) (2).
Two questions therefore are presented. The immediate question, as above stated, being whether or not the said “Certificates of Ownership” are “certificates of stock or of profits or of interest in property or accumulations of any corporation.” The second and more serious question is whether or not the “Composite Fund trust” created by plaintiff, and to which this certificate of ownership relates, was in fact an “association” so as to bring it within the definition or inclusion of the term “corporation” as above provided by Congress.
As the decision of the court, in this action, must take the place of a verdict of the jury, findings of fact and conclusions of law will be necessary, although there appears to be no substantial dispute as to the facts involved. It is therefore deemed unnecessary to do more, in this decision, than to briefly outline the situation..
The plaintiff is a bank and trust company, duly incorporated under the laws of the state of New York, and has been such since 1866, the date of its incorporation. It bears a high reputation for integrity and stability, and has maintained this reputation through good and bad times. It is trustee of a large number of individual trusts, reposed in it by agreement or will, some of which are large and some small. The duty imposed upon it, as such trustee, to invest and reinvest a trust fund, constantly met with the inability, in eases of small trusts, to perform this duty to its complete satisfaction because of the necessary overhead cost and smallness of the in*289vestment. The desired “diversity” of investment wás lacking.
Consequently, in 1929, the trust company formulated a plan which we will call the “Composite Fund” to afford the settlors of trusts, by deed or by will, a medium by which relatively small sums of money could be invested in diversified securities without delay, without undue expense, and under conditions which would permit of ready liquidation of the investment in the event the trust fell in.
Of course, the trust company also continued, in many eases, to invest, separately, funds of a trust and the proof shows that as trustee it has not automatically invested the funds of all trusts in the “Composite Fund.” It was deemed advantageous, however, from the standpoint of any trust estate to extend the established form of trust service in such manner as to procure the investment advantages above referred to where the settlor of the trust so desired and agreed.
The plan, therefore, which was put into operation, consisted in the trust company executing a “Declaration of Trust” creating a fund designated “Brooklyn Trust Company Composite Fund, Series A.”
According to Mr. Thirkield, vice president of the plaintiff, and associated exclusively with the trust department of plaintiff, it was felt that this providing of some “means,” whereby a trust fund of an individual trust could be “commingled” and invested as a group, would meet both this need and the repeated requests of settlors. Without the consent of the makers of the trust, there was and could be no authority to “commingle” their trust fund. In fact, such “commingling” was distinctly prohibited without such consent.
It was necessary, therefore, to have such authority and consent by agreement. To avoid long and involved agreements, this plan of declaration of trust was arrived at. This declaration of trust is referred to in the separate trust agreements where the grantor or the maker was of the opinion that it would be advantageous to allow the trust to be invested in the fund. In other words, permission was expressly given the trustee of the individual “trust” to “commingle” the individual trust fund with other trust funds in the “Composite Fund.”
This seems to me to be but an extension of the trust service.
When the plan was finally in shape, it was duly submitted to the superintendent of banks of the state of New York, who, in turn, submitted it to the Attorney General of the state, for his opinion. These officials eonsidered the plan simply a legitimate exercise of the powers already possessed by plaintiff as a trust company, existing under the laws of the state of New York.
Thereafter (in 1929}, it was submitted to the Commissioner of Internal Revenue. He also ruled, in substance, that the “Composite Fund” plan was merely supplementary to an extended trust service then being given by the Brooklyn Trust Company, in that, it permits the “commingling” of trust funds for purposes of investments where the settlor of the trust expressly authorizes such investment.
Accordingly, from and after June 12, 1929, and in accordance with this opinion of the authorities of the state of New York and the ruling of the Commissioner of Internal Revenue, this plan of investment of trust funds was continued.
However, on or about May 27,1932, plaintiff was notified that the Commissioner of Internal Revenue had changed his opinion, and on or about July 20, 1932, the Commissioner of Internal Revenue revoked his ruling of three years before and now holds that this “Composite Fund” is an “association” and the stamp tax on the certificates of ownership was imposed accordingly for the past three years. This has occasioned the controversy.
Since May 1,1929, when the “Composite Fund” became operative, the commingled trust moneys have been invested and reinvested, profits and losses sustained on investments have been allocated to the individual trust estate in the precise proportion of the investment, and the trust company, as trustee of each individual trust, has reported the capital gain or loss on assets held for the sole benefit of an individual trust, the income from the “Composite Fund” passes to the Brooklyn Trust Company as trustee of the individual trusts, and this is reported and the beneficiary of the individual trust includes that income, along with any other income of other investments of this trust, in his income tax return to the state of New York and the federal government. Thus taxes have always been paid on the basis of an actual trust in actual operation.
If the present stamp tax is valid, the beneficiaries of these trusts will now be taxed a “corporate” tax in addition to these other taxes.
It does not seem to me that the mere “commingling” of the individual trust funds for the purposes of investment changes the nature of the act and changes it into an “association” or “corporate activity.” Throughout it is *290merely an extension of a trust service, entered into by the trustee at tbe request and with the consent of the settlor of a trust, in accordance with the law of the state of New York.
Moreover, the proof shows that this “Certificate of Ownership” is simply a matter of bookkeeping. It is signed by the Brooklyn Trust Company and handed to the Brooklyn Trust Company as trustee. It is issued to itself solely for evidentiary purposes. It could be dispensed with entirely. It is an interdepartmental document. It is simply a receipt. It never reaches or is possessed by the settlor of the individual trust. The only obligation imposed by this certificate of ownership is imposed upon the trust company which continues to hold the certificate. It must be redeemed when the trust falls in. It is not a corporate security. It is not handed to the settlor or maker of the trust as evidence of an interest in a fund. It clearly lacks the essential characteristics of a certificate of stock or a certificate of indebtedness.
The above seems to me to be sufficient indication that the commissioner’s first ruling was correct.
But a word or so may be said as to the other contention, which is that this “Composite Fund” is an “association” within the definition or inclusion of the term “corporation.” There are a large number of cases cited in the excellent briefs submitted, but apparently Hecht et al. v. Malley, 265 U. S. 144, 44 S. Ct. 462, 68 L. Ed. 849, is the leading authority o« what constitutes an “association” as the twm is employed in the act.
Defendant seems to rely also on the case of Ittleson v. Anderson (D. C.) 2 F. Supp. 716. There the learned judge stated that to form an “association” there must be shown three requisites. These are: That there must be a quasi corporate form; its trustees must be associated together in much the same manner as directors of a corporation; and, finally, they must be engaged in carrying on a business.
I have examined these eases. Also, there should be considered, the cases of Burk-Waggoner Oil Ass’n v. Hopkins, 269 U. S. 110, 46 S. Ct. 48, 70 L. Ed. 183; Crocker et al. v. Malley, 249 U. S. 223, 63 L. Ed. 573, 2 A. L. R. 1601. Hemphill v. Orloff, 277 U. S. 537, 48 S. Ct. 577, 72 L. Ed. 978. It seems to me that in all these cases the proven facts differ materially from the facts in the action before me.
I do not believe that the mere investing of trust funds loses its character as an investment of trust funds simply because the investment by the trustee is made in a fund in which other trustees invest. The plan before me is simply an investment of a trust fund in a still larger trust fund, with very plain advantages in the way of economy and opportunity to the settlor of the individual trust.
It may well be that, where other facts are present, a trustee of a trust fund may find himself involved in a business, contrary to law, or in the manner indicated in some of the cases already cited or elsewhere to be found; but none of these things is present in the plan shown in this action.
It is my opinion, therefore, that the “Composite Fund” is not an “association” within the contemplation of the act.
Plaintiff is entitled to judgment. Submit findings of fact and conclusions of law. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219156/ | OTIS, District Judge.
The plaintiff has brought this suit to recover from the defendant on two policies of life insurance. To her petition the defendant has filed answer. Both parties have moved for judgment on the pleadings, each admitting that the facts are as pleaded by the adversary party.
The plaintiff was the beneficiary in each of the policies of insurance involved. In neither of the policies did the insured, who was plaintiff’s husband, reserve the right to change the beneficiary. Each policy, however, contained the following provision:
“Cash Loan or Premium Loan. — If this policy be continued in force, the insured may borrow from the company, on the sole security of this policy, an amount up to the limit of the cash surrender value hereinafter specified, by making written application for the loan and assigning the policy to the company as security.”
Pursuant to the loan provision contained in each of the policies, the insured did borrow from the defendant, on the security of the policies, upon making written applications for the loans and assigning the policies, such an amount as that when that amount was deducted from the cash values of the policies not enough remained to continue the policies in effect to the date of the death of the insured. If these transactions are- disregarded, then the cash value of the policies at the time the insured discontinued paying premiums was such as that they were continued in effect until his death. The sole question in the ease is as to whether the insured could borrow on the security of the policies or could lawfully assign them as such security. The contention of the plaintiff is that, since the insured did not have the right to change the beneficiary in either of the policies, he could neither pledge them as security nor assign them as such without the consent of the beneficiary, which consent he did not have.
I have been favored by counsel for plaintiff and defendant with thorough and elaborate briefs, but I cannot perceive that there is any debatable question in the ease or any question not easily determinable upon the most elementary principles.
Whatever may be the rights of a beneficiary in a contract of insurance they can only be such as the contract provides. What the contract provides is to be ascertained from its language, if that language is not ambiguous, and from the applicable law, which, of course, is an essential part of the contract entered into by the parties. Where, as here, the insured has not reserved' the right to change the beneficiary, the beneficiary is given by the settled law an interest in the contract, but that interest obviously is subject to and limited by plain and lawful provisions of the contract itself. To say that an insurer and an insured cannot contract that although the insured does not reserve the right to change the beneficiary, he shall have the right to borrow from the insurer and to assign the policy as security is to assert a doctrine insupportable either by reason or decision.
If there is any ambiguity in the loan provision of this policy, no doubt it should be resolved against defendant, but there is none. It is “the insured” who may borrow from “the company.” It is “the insured” who must make written application for the loan. It is “the insured” who is to assign the policy to the company as security. The rights of the beneficiary are subject to these rights given to the insured. It is just impossible to point out any ambiguity in these loan provisions or in the whole policies.
What is so' obvious does not need-the support of precedent. Reference is made, however, to the following eases: Leeker v. Prudential Ins. Co., 154 Mo. App. 440, 134 S. W. 676; Id., 163 Mo. App. 523, 143 S. W. 1197; Pacewicz (Court of Appeals of Lucas county, Ohio) not reported; Morgan v. Prudential Ins. Co., 209 Ala. 110, 95 So. 355; Schuberth v. Prudential Ins. Co., 86 Pa. Super. Ct. 80.
Learned counsel for the plaintiff in his fine brief has cited many decisions. I do not find that any of them construes a contract like these here. Typical of them is the last, Anderson v. Northwestern Mutual Life Ins. Co., 261 N. Y. 450, 185 N. E. 696, decided by the Court of Appeals of New York April 11, 1933. But in the loan provision in the policy involved in that case it was required that the policy be “properly assigned.” The court particularly pointed out that the right to borrow on and to assign the poliey was not clearly reserved to “the insured.”
Much is said in the brief of plaintiff concerning the effect of amending the contracts *292of insurance. It is urged that an “amendment” in a contract should control over earlier provisions if there is any conflict between the amendment and the earlier provisions. There is nothing, however, in the pleadings in this ease, from which alone the facts are to be taken, concerning any “amendment” of the contracts. Perhaps it may be inferred from an inspection of the photostatie copies of the policies attached and made a part of the answer that the form of policy was altered by striking out a provision authorizing a change of beneficiary by the insured. If that was done, and even that is alleged nowhere in the pleadings, it was in no sense an amendment of the contract, but an amendment of the form of the contract before the contract was entered into. Even if the alteration in the form referred to, however, was an amendment of the contract, it resulted in no ambiguity and, therefore, calls for no application of the rule that an amendment in a contract is to be given special weight as contrasted with other and prior provisions.
I find the facts to be as alleged by the parties in the pleadings and as admitted by the motions for judgment. On the facts, as found, I conclude as a matter of law that the defendant is entitled to judgment. A form of judgment for the defendant may be prepared and submitted for approval and entry. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219157/ | Sur Trial Hearing on Waiver of Jury on Pleadings and Proofs.
DICKINSON, District Judge.
The clerk’s office will please see that a waiver of jury trial has been made in writing and is filed of record.
The Issue.
A tax, levied against the estate of plaintiff’s decedent, was paid under protest, and its return demanded and refused, and this action brought. The sole issue is whether certain shares of stock at one time in the name of plaintiff’s decedent were assigned by the then owner in contemplation of her death.
Pact Statement and Discussion.
James H. Clarke was the owner and operator of a textile mill. As has come to be usual, he had the business incorporated under the name of the Orinoka Mills. The certificates of stock (except a few shares held for organization purposes) were issued to him. Later on he assigned some of the shares to his wife, the decedent in the present ease. Subsequently she received more shares through a stock dividend. The stock was appraised, for tax purposes, at its supposed value, in 1928. What its value was a short time afterwards does not affect the question before us, although it has doubtless empha*293sized the demand for the return of the tax paid. Mrs. Clarke, in 1927 or later (within two years of her death), transferred this stock to her son, A. Vinton Clarke. It was, however, included in her estate because of the fact finding by the collector that this transfer was made in contemplation of death. The sole question is this question of fact. The relations of the father to the son were what they usually are in such eases. The son was always a boy to the father. There was the very common vague hope on the part of the father that some time the son might become old enough to assume the responsible management of the mills. As long as the father, however, was in the active management, that time had not arrived. In September, 1927, the father suffered a so-called! “stroke,” and was thereafter incapacitated. From that time the son took full charge. The stock which had been assigned to the mother, we find as a fact, was in her mind held by her in trust for the son to go to him whenever he succeeded to the management of the business. She accordingly so assigned it. There was no thought of estate distribution and no thought of death which supplied the motive for any of these transfers. We are not ready to say that the real motive of the father in transferring this stock to his wife was not to reduce his income taxes by reducing his income by making part of it taxable to the wife. We are confident, however, that “contemplation of death” had no part in his motive and it makes no difference here whether it did or not. We are equally sure that such thought did not prompt the transfer by the mother to the son. One reason for thinking so is that she had a daughter. The stock had at that time a very substantial value, and if she had been distributing her estate in anticipation of her death she would not have ignored the daughter. This would in itself make clear that she had some other motive than that of dividing up what she had in anticipation or contemplation even of her death. What prompted the transfer was that she felt that she held the stock to be transferred to the son whenever he became the responsible manager of the mills. That the transfer was made when he assumed this responsibility puts the stamp of verity upon this motive. The purpose of the act of Congress is clear. The payment of an estate tax may be evaded by a distribution made before death. The tax is not imposed upon transfers made, but only upon transfers made as a substitute for the distribution of a decedent’s estate.
This disposes of the only question submitted to us, and a formal judgment may be entered in accordance herewith.
The formal requests for findings of fact and conclusions of law submitted to us by the plaintiff are all found as requested.
As in trials on waiver of a jury, there is a question of whether exceptions should be allowed, we now allow an exception to defendant.
Findings of Fact.
1. Plaintiff, A. Vinton Clarke, is the only son of Mary Jane Clarke and James H. Clarke; both parents being now deceased.
2. Plaintiff and Bessie Clarke (now Bessie C. Arthur) were and are the only children born to said parents.
3. Plaintiff is executor under the will of his mother, Mary Jane Clarke, a resident of Philadelphia, who died testate in Philadelphia county, commonwealth of Pennsylvania, on June 7,1928.
4. Plaintiff administered said decedent’s estate as such executor and is still acting as executor, never having been discharged by the orphans’ court of Philadelphia county under the authority of which court he acted.
6. The Orinoka Mills is a corporation organized and existing under the laws of the state of New York. Said corporation is in the business of manufacturing textiles and tapestries. Said corporation was organized and incorporated by plaintiff’s father, James H. Clarke, and associates in 1885.
6. Over one-third of the stock of said corporation has been held by said James H. Clarke, his wife, Mary Jane Clarke, and/or his son, A. Vinton Clarke, since the beginning of the business.
7. In or about December, 1921, the said James H. Clarke transferred and delivered 451 shares of common stock of Orinoka Mills to his wife, Mary Jane Clarke, on the famity understanding that when their son, A. Vinton Clarke, took over the active management of the Orinoka Mills, said stock should be transferred to said A. Vinton Clarke.
8. Said family understanding was known to all members of the family and well understood by each of them.
9. In the recapitalization of the Orinoka Mills on November 15; 1922, 902 additional shares of common stock and 451 shares of preferred stock were acquired by Mary Jane Clarke as stock dividends on the said family understanding under which she received the first shares.
*29410. During the early part of 1927 said James H. Clarke was taken ill and forced to retire temporarily from managing the Orinoka Mills.
11. In or about September, 1927, said James H. Clarke suffered a stroke and never thereafter was able to resume management and control of the Orinoka Mills. As a result thereof, plaintiff, A. Vinton Clarke, in September, 1927, took over the permanent active management of said mill.
12. In or about December, 1937, or January, 1928, Mary Jane Clarke transferred and delivered 1,353 shares of common stock and 451 shares of preferred stock of Orinoka Mills to her son, A. Vinton Clarke, in pursuance of the aforementioned long-standing family arrangement. The transfer of said 1,353 shares of common stock and 451 shares of preferred stock of Orinoka Mills by said Mary Jane Clarke to plaintiff was not made in contemplation of death but in pursuance of the aforesaid family arrangement.
13. In January of 1928, the physical condition of Mary Jane Clarke was practically no different from what it had been in preceding years, nor was it a serious condition.
14. Mary Jane Clarke died June 7,1928, at the age of 68 years; her death resulting from various afflictions from which she had been suffering for more than ten years.
15. On March 1, 1929, plaintiff, as executor, made a return for the purpose of federal estate tax on the estate of Mary Jane Clarke to the then collector of internal revenue for the First collection district of Pennsylvania. In said return, plaintiff, as executor, alleged that the aforementioned shares of stock of Orinoka Mills were not transferred to plaintiff by decedent in contemplation of death.
16. The value of the said Orinoka Mills shares transferred to plaintiff in December, 1927, or January, 1928> constituted nearly the entire estate of the said Mary Jane Clarke. The gross estate of the said Mary Jane Clarke was determined to be $525,599.-82; of this amount the value of the transferred stock was fixed at $518,650’, and the value of other assets $6>,949.82.
17. On March 21, 1929, plaintiff paid to the collector of internal revenue, federal estate tax in the amount of $9,161.24.
18. Subsequently a deficiency assessment was made and a further tax of $4,460.35 was paid by the plaintiff to the collector on March 31, 1930.
19. O'n April 6, 1932, plaintiff filed, in duplicate, with the then collector of internal revenue for the First collection district of Pennsylvania, a claim for refund of the entire tax paid as above, together with interest from the dates of payment.
20. On June 11, 1932, J. S. McLaughlin, collector of internal revenue for the First collection district of Pennsylvania, died.
21. On June 24,1932, plaintiff was notified that his claim for refund was rejected
22. This suit by the plaintiff against the United States of America under the Tucker Act was commenced in the District Court for the Eastern District of Pennsylvania on the 12th day of August, 1932.
Conclusions of Law.
1. Under the Tucker Act (28 USCA § 41 (20), the District Court has jurisdiction of this cause, the parties, and the subject-matter.
2. The statute of limitations runs from the date of payment of the last installment of tax; hence this action was commenced within the three-year limitation period provided by statute.
3. The transfer of stock to Mary Jane Clarke by James H. Clarke on the understanding that said stock should be retransferred to A. Vinton Clarke when he took over the management of the Orinoka Mills vested an absolute estate for a term in said Mary Jane Clarke, with remainder to her son contingent upon the date of his assumption of the management of the Orinoka Mills.
4. Said family understanding was clearly proved by competent uneontradicted testimony and constituted a valid agreement between the parties.
5. The contemplated contingency having occurred, the estate of Mary Jane Clarke in the Orinoka Mills stock terminated and transfer of said stock by her to A. Vinton Clarke constituted a performance of the family arrangement under which she had received said stock from her husband.
6. Plaintiff’s uneontradicted evidence established the family arrangement whereby plaintiff was to receive the Orinoka Mills stock from his mother when he took over the management of the Orinoka Mills, and such uneontradicted evidence rebutted any alleged statutory presumption that the transfer of the stock to plaintiff was made in contemplation of death.
*2957. The transfer of the 1,353 shares of common stock and 451 shares of preferred stock of the Orinoka Mills by Mary Jane Clarke to A. Vinton Clarke was proved not to be a gift in contemplation of death.
8. The United States of America, defendant herein, must repay to the plaintiff, as executor of the estate of Mary Jane Clarke, the full amount of the tax paid ($13,621.59), with interest on $9,161.24 from March 21, 1929, and on $4,460.35 from March 31, 1930. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219158/ | MOSCOWITZ, District Judge.
This ease has been submitted upon an agreed statement of facts. Whether the petition in bankruptcy herein is to be sustained or dismissed depends on whether the recording of the assignment of the award in the condemnation proceedings by the assignee thereof constituted or resulted in an act of bankruptcy.
It is conceded by the petitioner that the assignment was executed and delivered in 1931, about two years prior to the filing of the petition in bankruptcy. It is also conceded that the petitioning creditor had knowledge of the execution and delivery of the assignment more than four months prior to the filing of the petition in bankruptcy.
The alleged bankrupt contends that the date of the delivery and not the date of the filing of the award assignment governs as to whether or not the petition in bankruptcy was filed within four months of the alleged preference, and, further, that in any event the knowledge on the part of the petitioning creditor of the assignment more than four months, prior to the filing of the petition in bankruptcy precluded the petitioner from the right to file the petition.
The alleged bankrupt, in support of its contention that the date of the delivery of the award assignment is controlling on the issue, cites the case of Heiman v. Parness (D. C.) 40 F.(2d) 558, 16 A. B. R. (N. S.) 107. The plaintiff therein, a trustee in bankruptcy, brought a suit in equity under section 60b of the Bankruptcy Act, 11 USCA § 96 (b), to set aside a conveyance made by one of the bankrupts to his wife. The recording statute there involved was section 291 of the Real Property Law of New York (Consol. Laws N. Y. c. 50). It was held that the Real Property Law did not make the failure to record the conveyance void as against general creditors but only as against subsequent purchasers in good faith and for value, and therefore, as against the trustee in bankruptcy, it was not necessary to record the deed, and in consequence the transfer was not made within the four-month period.
The decision therein turned upon the question of what constituted “required filing” within the meaning of section 60b of the Bankruptcy Act, 11 USCA § 96 (b). However, we are concerned in this instant case with section 3b, 11 USCA § 21 (b), which deals with “required or permissive filing,” and therein lies the distinction. Under section 982 of the Greater New York City Charter, as added by Laws N. Y. 1915, e. 606, filing of an award assignment is permitted. Congress has consistently refused to extend the required proof under section 3b to the magnitude of the proof required under section 60b Carey v. Donohue, 240 U. S. 430, 36 S. Ct. 386, 60 L. Ed. 726, L. R. A. 1917A, *296295. Section 3b provides that the four-month period should not expire “until four months after (1) the date of the recording or registering of the transfer * *' * when the act consists in having made a transfer * •* * for the purpose of giving a preference * * * if by law such recording or registering is required or permitted. * * *» therefore follows that, inasmuch as recording of the award assignment herein is permitted, the date of its filing must govern.
The alleged bankrupt’s contention that the knowledge on the part of the petitioning creditor of the assignment more than four months prior to the filing of the petition in bankruptcy precluded the petitioner from the right to file the petition does not find support in section 3b of the Bankruptcy Act. An examination of that section clearly confines the eases where petitioning creditors are restricted from filing a petition because of knowledge to those eases where there is no statutory provision for recording or registering.
The petition will therefore be sustained. An adjudication may be entered forthwith. Settle findings and decree on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219159/ | CHESNUT, District Judge.
This is a habeas corpus proceeding in which the alien, Ciro Damiano, a native and subject of Italy, seeks to avoid deportation, under a warrant issued by the Assistant Secretary of Labor. The warrant was issued after hearing granted the alien at which he was represented by counsel, and after a review of the ease by the departmental Board of Review. The conclusion to deport the alien is based on the finding that he last entered the United States on the 22d day of February, 1927, and “has been found in the United States in violation of the Immigration Act of 1924 in that, at the time of entry, he was a quota immigrant and was not in possession of an unexpired quota immigration visa.”
The scope of the hearing by this court in such a case is summarized in Tassari v. Schmucker (C. C. A. 4) 53 F.(2d) 570, 5.71, as follows;
“The only questions for our consideration are whether the record shows the alien did have a fair hearing; whether the determination of fact by the Department is supported by substantial evidence; and whether the law was correctly applied by the Department of Labor. United States ex rel. Vajtauer v. Commissioner of Immigration, 273 U. S. 103, 47 S. Ct. 302, 71 L. Ed. 560; Zakonaite v. Wolf, 226 U. S. 272, 33 S. Ct. 31, 57 L. Ed. 218; Lewis v. Frick, 233 U. S. 291, 300, 34 S. Ct. 488, 58 L. Ed. 967; United States ex rel. Bilokumsky v. Tod, 263 U. S. 149, 44 S. Ct. 54, 68 L. Ed. 221; Mason v. Tillinghast, 27 F.(2d) 580 (C. C. A. 1st).”
In the instant case there is no question raised by petitioner’s counsel as to the fairness of the hearing afforded by the Department; and the facts are not in dispute. Therefore the only question pres'ented for consideration is “whether the law was -correctly applied by the'Department of Labor.”
The admitted facts are as follows: Damiano first entered the United States at Boston, Mass., in 1922, as a stowaway, thus escaping inspection. The entry was admittedly unlawful. He remained in this country until 1924 when he returned to Italy. He was evidently aware that his first entry was illegal because at his hearing he said: “Since I was aware of the fact that I was a stowaway at first I went to Italy for the purpose of coming back legally.” Desiring to return to the United *298States, hie obtained a visa upon his passport from the American Consul at Naples, as a returning resident under section 2 (d) of the Quota Act of May 19, 1921 (42. Stat. 6), which excepted from the quota restrictions then in force “aliens returning from a temporary visit abroad * * * if otherwise admissible.” With the aid of this consular visa he succeeded in obtaining entry into the United States at the port of New York on May 13,1924, at which time, the record of his entry shows that he stated he had been in the United States previously from 1918 to 1924, although he denies making the statement. In 1926 he applied for and received a re-entry permit under section 10 of the Immigration Act of 1924 (8 USCA § 319), based upon his admission May 13, 1924, at New York; and ■with this re-entry permit he returned to Italy and re-entered the United States on February 22,1937, at which time he stated, according to the record, that he had been in the United States from 1924 to 1926. He was then admitted as a permanent resident. The pending deportation proceedings against him were initiated by the Commissioner of Immigration for the Baltimore District on February 13,1933, after report based on investigation including an interrogation of the alien. It is not denied that he was in fact subject to the quota restrictions on his entry in 1924 and should not have been then admitted, and was permitted to enter apparently because the inspector was not fully advised of his real status; and the same is true regarding the 1927 entry unless the re-entry permit changed the situation.
The petitioner contends that the applicable immigration la~ was misapplied by the Department in that he is not subject to deportation under the Act of 1924 because he secured a valid entry into the United States on May 13, 1924, prior to the effective date of the Immigration Act of 1924, which was July 1,1934 (8 USCA §§ 145; 146,166,167, 179, 201 et seq.); and he further contends that his status as an alien must be determined by the provisions of section 19 of the Immigration Act of February 5, 1917 (39 Stat. 874, 8 USCA § 155) which provides a time limitation of five years after irregular or unlawful entry for purposes of deportation. And it is admitted by the Assistant United States Attorney appearing for the respondent, the Department of Labor, that the alien is not subject to deportation unless the case •is covered by section 14 of the Act of 1924 (8 USCA § 214) which provides:
“Any alien who at any time after entering the United States is found to have been at the time of entry not entitled under this sub-chapter to enter the United States, or to-have remained therein for a longer time than, permitted under this subchapter or regulations made thereunder, shall be taken into custody and deported in the same manner as provided for in sections 155 and 156 of this title.” (Italics supplied.)
The question of law thus presented, as concretely applied to this case, is, whether this alien’s “entry” for purposes of deportation is to be taken as his entry in 1924 or his entry in 1927. It is not disputed by petitioner’s counsel that if the entry of 1924 had occurred after the effective date of the Act, July 1st, the petitioner may be now deported under the facts stated. His contention, however, is that the alien’s entry in 1927 must be disregarded for the purposes of this ease because it was based on a re-entry permit issued under section 10 (a) of the Act of 1924 (8 USCA 210 (a) which provides:
“Any alien about to depart temporarily from the United States may make application to the Commissioner General for a permit to reenter the United States, stating the length of his intended abgenee, and the reasons therefor.”
The effect of such a permit is stated in 210 (f) as follows:
“A permit issued under this section shall have no effect under the immigration laws, except to show that the alien to whom it is issued is returning from a temporary visit abroad; but nothing in this section shall be construed as making such permit the exclusive means of establishing that the alien is so returning.”
As a result of a study of the decided eases I reach the conclusion that the petitioner’s entry of 1927 subjects him to the Act of 1924 which has no time limitation on deportation where the alien is found to have entered without being entitled to do so under the Act, despite the re-entry permit above referred to. It is clear, and indeed is not disputed, that the original entry in 1922 was unlawful. Under the Act of 1917, c. 29, § 3 (l) (8 USCA 136 (I) alien “stowaways” (with exceptions not material here) were excluded. Therefore the petitioner was not entitled to obtain from the American Consul at Naples a visa purporting to classify him as a non-quota immigrant for his return to the United States from Italy-in 1924. And he should not, and doubtless would not, have been admitted to the United States on May 13, 1924, if the facts had been known to the immigration officials. Likewise he was not entitled to the *299re-entry permit obtained in 1927. It is true tbe record of his hearing does' not expressly show that he made affirmative false representations to the Consul, or to the Department in obtaining the re-entry permit, but it is clearly inferable that the important fact with regard to his original unlawful entry was not disclosed by him to the respective officials. In addition it appears from the record that he made an affirmative false answer on the occasion of his entry in 1924, although he disputes the record. The necessary result is that, never having been entitled to be lawfully admitted to the United States, he is now subject to deportation unless protected by the limitation of five years in the Act of 1917 (8 USCA § 155). In my opinion he is not entitled to the benefit of that section under the facts of this case because he voluntarily left the United States in 1926 and his present status is to be determined by his re-entry in 1927. It is clear, and indeed it is not disputed, if the 1924 entry had been after July 1,1924, the alien would be subject now to deportation. Philippides v. Day, 283 U. S. 48, 51 S. Ct. 358, 75 L. Ed. 833; United States v. Vanbiervliet, 284 U. S. 590, 52 S. Ct. 132, 76 L. Ed. 509. And his departure after July 1, 1924, subjects him to the later Act (United States ex rel. Stapf v. Corsi, 287 U. S. 129, 53 S. Ct. 40, 77 L. Ed. 215) unless the re-entry permit changes the result.
Petitioner’s counsel contends that it does, although conceding that there seems to be no authority directly in support of his contention under the facts of the case, maintaining likewise that there is no adverse authority directly in point. But in my opinion the re-entry permit does not have the effect contended for. (8 USCA § 2101 (f). It is said for the petitioner that there is no evidence of affirmative fraud on his part in obtaining the re-entry permit; but it was not necessary to show actual fraud if it does affirmatively appear that the alien was not entitled under the facts to have obtained it. United States ex rel. Tavilla v. Karnuth (D. C. W. D. N. Y.) 3 F. Supp. 776, 777, is almost an exact parallel on the facts to the instant ease, and it was there held that the alien was properly deportable. It was there said, after reviewing prior cases on the particular subject: “The relator contends that the warrant of deportation cannot be sustained unless fraud in obtaining the permit is established. I do not think this is a correct statement of the law, nor do I think the eases cited in behalf of the relator sustain this contention.”
See United States ex rel. Lesto v. Day (C. C. A. 2) 21 F. (2d) 307; United States ex rel. Orisi v. Marshall (C. C. A.) 46 F.(2d) 853; Ex parte Di Stephano (D. C.) 25 F.(2d) 902; United States ex rel. Spina v. Karnuth (D. C. W. D. N. Y.) 3 F. Supp. 774; United States ex rel. Lamp v. Corsi, 61 F.(2d) 964 (C. C. A. 2).
It is true that this alien has been in the United States, with two short absences, for more than ten years and it may be argued that his deportation imposes a hardship (although the facts as to his domestic situation brought out at the hearing may be thought to indicate the contrary), but in administering the immigration law it must not be forgotten by the courts, as was said by the Supreme Court in Lapina v. Williams, 232 U. S. 78, 80, 34 S. Ct. 196, 198, 58 L. Ed. 515:
“The authority of Congress over the general subject-matter is plenary; it may exclude aliens altogether, or prescribe the terms and conditions upon which they may come into or remain in this country. * * * The question, therefore, is not the power of Congress, but its intent and purpose as expressed in legislation.”
And as was also said in Karnuth v. United States, 279 U. S. 231, 243, 49 S. Ct. 274, 278, 73 L. Ed. 677:
“The various acts of Congress since 1916 evince a progressive policy of restricting immigration.”
For these reasons, I feel obliged to dismiss the application for the writ of habeas corpus. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219160/ | BARNES, District Judge.
This is an action brought by the executors of the last will and testament of John J. Mitchell, deceased, against the United States of America for the recovery of federal estate taxes which were assessed and collected under the Revenue Act of 1926. The amount of the refund claimed is $31,573.82, together with interest thereon at the rate of 6 per cent, per annum from June 23, 1930.
The facts are correctly summarized in the brief of the plaintiffs, as follows:
“John J. Mitchell died on October 29, 1927, leaving a last will and testament of which plaintiffs are executors.
“Plaintiffs filed with the then Collector of Internal Revenue at Chicago their return showing federal estate tax due in respect of his estate in the sum of $175,183.17 and paid the same. This return was checked by the Internal Revenue Department, which increased the gross estate by including therein certain stock of the Texas Corporation, which decedent in his lifetime had given to his daughter, Louise J. Kellogg, and refused, to allow certain deductions claimed in the original return. A deficiency of $118,-840.64 was thereupon assessed; Said deficiency was based in part upon the inclusion in the gross estate of said shares of Texas Corporation stock, and; upon the dis-allowance as a deduction of certain pledges made by decedent prior to his death, in the sum of $10,375, and upon the disallowance as a deduction of other claims against the estate in the sum of $171,674.85.
“Said deficiency ($118,840.64), plus interest thereon of $10,998.46, or a total of $129,839.10, was paid to Myrtle Tanner Blaeklidge, the then Collector of Internal Revenue, who is not now in office.
“Thereafter, the Executors filed a claim for the refund of $47,140.97 of the deficiency so paid, plus a proportionate part of the interest so paid. Interest on the aggregate amount of the refund thus sought wás also *302claimed. Said refund claim was based upon the inclusion in the gross estate of said Texas Corporation stock and upon the disallowance as deductions of pledges and claims against the estate in the respective sums of $10,375.00 and $171,674.85. After rejection of said refund claim this suit was brought.
“Subsequent to the filing of this suit the Bureau of Internal Revenue reconsidered its prior action and eliminated from the gross estate said shares of Texas Corporation stock and allowed as a deduction said pledges aggregating $10,375.00 and made refund to the Executors of the tax and interest paid in respect of those two items. This leaves for consideration in the instant proceeding only the question of whether the Executors are entitled to deduct from the gross estate said claims against the estate in the sum of $170,-013.78. As a result of an erroneous computation in interest on one of the claims the amount originally claimed in the refund claim ($171,674.85) has been reduced to $170,013.-78.
“Decedent was chairman of the board of directors of the Illinois Merchants Trust Company, now by succession Continental Illinois National Bank and Trust Company of Chicago. Certain members of his family were largely interested as stockholders and officers in two separate corporations known as Inland Glass Manufacturing Company and Cord Tire Corporation. Said two companies, finding themselves in need of financial assistance, approached Mr. Geddes, one of the loaning officers of Illinois Merchants Trust Company, with a view to obtaining banking credit. Mr. Geddes advised officials of both said companies that since said companies were new enterprises being conducted by unseasoned executives, they should not seek banking credit but that said companies should conduct their business on capital furnished by those interested therein.
“After this conversation the officers of said companies had some negotiations with the Union Trust Company of Chicago with reference to banking connections. When the attention of decedent was called to this fact by members of his family, Mr. Mitchell expressed personal chagrin that the companies in which his family were so largely interested and of which his sons were executive officers and directors could not do their banking business with the institution of which he was chairman of the board of' directors, and he expressed a desire to have said companies do business with Illinois Merchants Trust Company. As an inducement to Illinois Merchants Trust Company to make. loans to said two corporations, Mr. Mitchell stated to Mr. Geddes and to the executive officers of the Trust Company that he would not permit that institution to suffer any loss as a result of loans made to either the Cord Tire Corporation or the Inland Glass Manufacturing Company. He agreed to indemnify the Trust Company against all loss in connection with loans so made. At. the instance of decedent and relying upon his indemnity agreement, the Hlinois Merchants Trust Company from time to time did make loans to said two companies. Prom time to time as these loans came up for renewal decedent reiterated his statement that he would not permit the Bank to suffer any loss by reason of said loans.
“As security for loans made to Inland Glass Manufacturing Company, decedent also hypothecated and pledged to the Bank by a written instrument 200 shares of the capital stock of Commonwealth Edison Company which stock was included for tax purposes in decedent’s gross estate at $33,400. At the time of decedent’s death the Cord Tire Corporation and Inland Glass Manufacturing Company were respectively indebted to the Bank on loans of $100,000 and $60,500'.
“Meanwhile, both Inland Glass Manufacturing Company and Cord Tire Corporation incurred business reverses and were unable to pay said loans. Said companies were insolvent and in such condition financially that suits against them by the Trust Company for the collection of said indebtedness to it would have been idle formality. Both companies were hopelessly insolvent. Thereupon, Illinois Merchants Trust Company filed its claims in the Probate Court of Cook County against the estate of John J. Mitchell, deceased, covering the principal amount of said loans then outstanding, plus interest thereon. After due hearing and upon consideration of the evidence adduced, said Probate Court entered judgment against the estate of John J. Mitchell, deceased, for $66,396.78 on account of liability in connection with notes of Inland Glass Manufacturing Company, and for $163,263.51 and $353.49, or an aggregate of $163,617.00, on account of liability in connection with notes of Cord Tire Corporation. The aggregate of the judgments thus entered against the estate is $176,013.78. The difference between this amount and that originally claimed as a deduction is due to an error in computing interest.
“The amount of said judgments was paid by the Executors to said Trust Company.
“The claim of Illinois Merchants Trust Company against the estate of John J. Mit*303chell, deceased, was founded upon said indemnity agreement of said decedent.”
The plaintiffs contend: First, that decedent’s undertaking was a direct primary-obligation, and not a collateral undertaking, and therefore it was not required to be in writing; second, that the defendant has not pleaded the statute of frauds; third, that the defense of the statute of frauds is personal, and that a stranger to a contract cannot be heard to say that it is not binding; fourth, that even upon the government’s own theory, the estate was entitled to deduct the sum of $66,396.74, representing the sum paid to the bank in connection with the Inland Glass Manufacturing Company notes, because the decedent signed a memorandum in writing whereby he pledged certain Texas Company stock as collateral for the payment of the indebtedness of the Inland Glass Manufacturing Company; and, fifth, that there was adequate consideration for the undertaking of decedent.
The defendant contends: First, that the promise made by decedent to stand good for the loans was a promise given orally, and was in violation of the statute of frauds of the state of Illinois; second, that there is no showing that when the probate court allowed the claims to be paid out of the estate it was done after a genuine contest, or by an agreement in which all of the parties concurred; and, third, that the claims were not incurred for an adequate and full consideration in money or money’s worth, as required by section 303 of the Revenue Act of 1926 (26 US CA § 1095 and note).
The principle that one should not be penalized for being honest ought to be sufficient authority for the decision of this case in favor of the plaintiffs, but the court will briefly consider the various contentions of the parties.
The court is of the opinion, and holds, that the undertaking of the decedent was a collateral, and not a direct primary obliga^ tion.
The court is further of the opinion: (1) that the defendant in this ease was not required to plead the statute of frauds in order that it might contend in this case that the undertaking of the decedent was within the statute of frauds; (2) that the undertaking of the decedent was not void, but was only voidable; and (3) that it is not bound by the order of the probate court of Cook county allowing the claims against the estate on the undertaking of the decedent.
But, finally, the court is of the opinion that the claims against the estate of the decedent were deductible under section 303 (a) (1) of the Revenue Act of 1926, 26 US CA § 1095 (a) (1). That section is as follows:
“See. 303. For the purpose of the tax the value of the net estate shall be determined—
“(a) In the case of a resident, by deducting from the value of the gross estate—
“(1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages upon, or any indebtedness in respect to, property * * * to the extent that such claims, mortgages, or indebtedness were incurred or contracted bona fide and for an adequate and full consideration in money or money’s worth.”
The claims against the decedent were collateral, but they were not. void, only voidable. They were “incurred or contracted bona fide.” Nothing has been called to the court’s attention which reflects upon the good faith of the transactions. The question remains as to whether the claims were incurred “for an adequate and full consideration in money or-money’s worth.”
The decedent promised the bank to hold it harmless, and the bank, in consideration for that undertaking, advanced $170,000, approximately, in money to two corporations. Consideration may be benefit to promisor or detriment to promisee. In this case it was detriment to promisee, and it was money. Accordingly, the court concludes, without hesitation, that the claims were “incurred or contracted * * * for an adequate and-full consideration in money or money’s worth.”
There will be a finding for the plaintiffs:
Counsel for the plaintiffs will present, at the opening of court on Friday, July 14, 1933, findings of fact and conclusions of law and a draft of a judgment order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219161/ | HOPKINS, District Judge.
This is. an action in whieh the plaintiff seeks to have restored to the Prairie Oil & Gas Company its properties and assets consisting of gas producing properties and real and personal property located in this district, which, through a consolidated agreement, was transferred to and absorbed by the Sinclair Prairie Oil Company and Consolidated Oil Corporation. The plaintiff further seeks to enforce against the property the equitable claim that in equity the property still belongs to the Prairie Oil & Gas Company for the benefit of its stockholders, and to set aside the transfers as clouds on the corporation’s title thereto.
The plaintiff is a resident of Chicago, 111., the owner of 12,000 shares of stock of the Prairie Oil & Gas Company (now known as the Commonwealth Oil & Gas Company), brings this bill on her own behalf and all other stockholders similarly situated who may become parties. Two of the defendants, Commonwealth Transportation Company (formerly known as the Prairie Pipe Line C'ompany) and Commonwealth Oil & Gas Company (formerly known as the Prairie Oil & Gas Company), are Kansas corporations. The defendant, the Consolidated Oil Corporation (formerly known as Sinclair Consolidated Oil Corporation), is a New York corporation. The defendant Sinclair Prairie Oil Company is a Maine corporation.
Personal service of subpoena was had on all of the defendants.
Consolidated Oil Corporation moved to quash personal service on it, claiming that it was not doing business within the district of Kansas, and further .objecting to the venue on the ground that neither plaintiff nor de*305fondant was a resident of the district of Kansas. Plaintiff filed her motion in writing consenting to the quashing of the service upon the Consolidated Oil Corporation and moved the court for the issuing of a warning order on the corporation pursuant to section 57 of the Judicial Code (28 USCA § 118). Pursuant to such consent, the court entered an order quashing service on the Consolidated Oil Corporation and reserved its ruling on plaintiff’s motion for a warning order.
The Sinclair Prairie Oil Company has moved to quash personal service upon it, although it was found and personally served within the district of Kansas, on the ground that it is not an inhabitant of this district but is a Maine corporation, contending that suit may not be commenced against it in this district. The Commonwealth Oil & Gas Company and the Commonwealth Transportation Company have moved to dismiss the bill on the ground that the Consolidated Oil Corporation and the Sinclair Prairie Oil Company are indispensable parties over whom jurisdiction cannot 'be obtained because the Consolidated Oil Corporation is a New York corporation upon whom personal service cannot be had in this district; and that Sinclair Oil is a Maine corporation, not an inhabitant of this district and not subject to suit in this district.
The sufficiency of the allegations of the bill or the merits of plaintiff’s right to relief are not challenged by the defendant’s motions. The bill raises only questions of the jurisdiction over the person, venue, and absence of indispensable parties. The motions are narrowed down to a determination of the single question whether the bill of complaint in this case states a case that is a local action within the meaning of section 57 of the Judicial Code (28 USCA § 118).
The bill states, in substance, as follows:
The plaintiff is the owner of 12,000 shares of stock of the Prairie Oil & Gas Company. The company for many years had been profitably operated, enjoyed a good will and reputation of great value, and had accumulated a very large surplus and reserve both in cash and property, and had enjoyed an uninterrupted cash dividend record. The condition of the company was such that its solvency nor its successful continuance in business nor its stockholders’ investments therein were threatened or in danger, nor were there any exigencies existing which required or justified in good faith the. disposition by the company of its business and assets or the abandonment of its corporate functions.
The-bill alleges that the Sinclair Consolidated Oil Corporation did not enjoy as favorable a financial position for the stockholders as had the Prairie Oil & Gas Company, had paid no dividends since 1931 on its common stock, and for the six years prior thereto its dividends were meager as compared with the dividends paid by the Prairie Oil & Gas Company; that the Sinclair Consolidated Oil Corporation showed a loss of $8,366,-000 during the year 1930, and showed even heavier losses in the succeeding periods. It is apparent from the facts stated in the bill the Prairie Oil & Gas Company Was in a much stronger and more favorable condition than the Sinclair Consolidated Oil Corporation.
On January 14, 1933, the directors of the Sinclair Consolidated Oil Corporation, the Prairie Pipe Line Company, and the Commonwealth Oil & Gas Company entered into, an agreement of consolidation by which the name of the Sinclair Consolidated Oil Corporation was to be changed to the Consolidated Oil Corporation, and all of the properties and assets, including names and good will of the Prairie Pipe Line Company and the Prairie Oil & Gas Company, were to be transferred to Consolidated Oil Corporation, in consideration of the issuance and delivery of common stock of the Consolidated Company, and the two Prairie companies agreed to change their name, adopting the name of Commonwealth instead of Prairie. Each stockholder of the Prairie Pipe Line Company was to be paid on the basis of 1.4 shares of Consolidated stock for each share of Prairie Pipe Line Company stock, and the stockholders of the Prairie Oil & Gas Company were to receive share for share. The bill, after an allegation of collusion on the part of certain stockholders and directors, alleges that the plan was consummated.
The bill charges that the scheme and plan so conceived and carried out by the defendant companies stripped the Prairie Oil & Gas Company of its properties and diverted such properties to Consolidated Oil Corporation and its subsidiaries, unlawfully depriving plaintiff and other dissenting stockholders of their pecuniary interest in and their rights as stockholders of the company; that the supposed sale and transfer and the consideration therefor was not fair or adequate or to the best interests of the Prairie Oil & Gas Company nor its stockholders, and was not honestly nor in good faith considered by the directors and the majority of stockholders and was arbitrarily determined without honest and proper regard for the real and fair value of the properties or for the rights and *306interests of the stockholders; and „ that the contract and transfer of the properties was otherwise contrary to equity and good conscience, unwarranted, unfair, and unlawful, and should be set aside by a decree of this court as clouds upon the title to the properties which are located in the district of Kansas and elsewhere, so that the same may be restored to the Prairie Oil & Gas Company for the benefit of the stockholders.
A substantial part of the real and personal property of the gas company is located in Kansas, in this district. The bill designates and describes property of the Prairie Oil & Gas Company located in this district and calls for a disclosure of a more accurate description of these properties and the remaining properties conveyed.
We may consider first the contention of the Sinclair Prairie Oil Company that personal service upon it should be quashed because it is a Maine corporation and not an inhabitant of the district of Kansas. If this is a local action under section 57 of the Judicial Code (28 USCA § 118), the suit may properly be brought where the property in controversy is located, though neither plaintiff nor defendant resides there and service of summons may be had in that district if the defendant can be found there, or, if not found, then under section 57 substitute service may be had. Section 57 of the Judicial Code provides that, if the defendant is not an inhabitant or not found within the district in which the suit is brought, substitute service may be had. It necessarily implies that, if defendant is found within the district, then personal service may be had without the necessity of invoking the privilege to obtain substitute service. Section 57 of the Judicial Code does not make the provision for the service of a warning order the sole or exclusive method of service against nonresident defendants.
The only question therefore remaining to be determined is whether plaintiff’s bill is an action for the enforcement of an equitable claim to and removal of a cloud on title to property located in the district of Kansas, within the meaning of section 57 of the Judicial Code.
Section 57 of the Judicial Code (28 USCA § 118) provides that: “When in any suit commenced in any district court of the United States to enforce any legal or equitable lien upon or claim to, or to remove any incumbrance or cloud upon the title to real or personal property within the district where sueh suit is brought, one or more of the • defendants therein shall not be an inhabitant of or found within the said district, or shall not voluntarily appear thereto, it shall be lawful for the court to make an order directing sueh absent defendant or defendants to appear, plead, answer, or demur by a day certain to be designated, which order shall be served on sueh absent defendant or defendants, if practicable, wherever found, and also upon the person or persons in possession or charge of said property, if any there be. • • •»
The defendant contends that the plaintiff’s action is more in the nature of a suit to set aside a triparty contract. It is true that the bill seeks to set aside a triparty contract, but it does so only in aiding the principal prayer for relief which is to remove as a cloud on title the conveyance of property made in furtherance of the contract.
In the case of McRoberts v. Independent Coal & Coke Co. (C. C. A.) 15 F.(2d) 157, 161, a bill was filed by several stockholders of the Independent Coal & Coke Company, against the company and one John H. Ton-ken, to cancel an option and contract for the sale of all assets of the company to Tonken. The action was brought in the federal District Court of Utah by citizens and residents of Illinois and Kentucky against the company, a Wyoming corporation, and Tonken, a resident of Utah. The jurisdiction of the court was challenged on the ground that the action ■ was one relating to the internal affairs, in the management of the corporation and'that the court had no jurisdiction over the nonresident corporation. Judge Stone, in delivering the opinion of the court, said:
“The question is whether this action is to remove a cloud therefrom or whether it is merely an action to control the intercorporate relations of stockholders in a Wyoming corporation. * * *
“A conveyance of the property in strict accordance with the contract here set out would undoubtedly be a cloud upon the title of the company to this property. Such a contract is not void until validated but is valid until avoided — it is voidable. It is capable of becoming absolutely valid through-ratification or estoppel and the corporation, as sueh, is estopped to deny sueh validity. * * * If the corporation should attempt to convey to some one else, no attorney would pass sueh a title with this contract in existence. Sueh a contract is a cloud upon the title of the most serious character. If it is such a cloud, then the statute gives to anyone injured thereby a right to bring a suit to remove it.' The non-assenting stockholders are in that position. *307Westerlund Case, supra, page 613 [of 203 F.], 121 C. C. A. 627. If, on the other hand (as seems to be held in Commerce Trust Co. v. Chandler (C. C. A.) 295 F. 241, 243, First Circuit), a contract to sell all of the assets of a solvent corporation is void, instead of voidable, where there are dissenting stockholders, it is a cloud which even the corporation itself has power to seek to have removed and here plaintiffs allege unsuccessful efforts to secure such action by the corporation.”
See, also, Mellen v. Moline Malleable Iron Works, 131 U. S. 352, 9 S. Ct. 781, 33 L. Ed. 178; General Investment Co. v. Lakeshore & M. S. R. R. Co. (C. C. A.) 250 F. 160; Dickinson v. Traction Co. (C. C.) 114 F. 232, 242.
In my opinion these decisions indicate that this suit comes within section 57 of the •Judicial Code (28 USCA § 118) as one to remove an incumbrance or cloud upon the title to real estate.
Defendants further contend that this court is without jurisdiction because all the property is not located in this district, and that to enter a decree limited only to its properties within the district would be in effect to decree a partial revision of the contract and to set it aside pro tanto.
I am of the opinion the jurisdiction of this court cannot be defeated by showing that there is other property not subject to its jurisdiction if a substantial portion of the property is within this district. In so< far as plaintiff’s bill relates to property outside of the district, that is an objection that more properly should be viewed as going to the extent of the relief that may be granted by this court, but it does not affect the jurisdiction over the parties and subject-matter so far as concerns the property here where fraud or breach of trust are involved. In a corporate consolidation, equity should not be helpless to grant relief, because it does not have jurisdiction over all the property where a substantial part of the property is within its jurisdiction.
Nor do I believe that the jurisdiction of the court under section 57 of the Judicial Code is affected by the fact that the action may seek personal relief against some of the defendants personally served. The decree as to absent defendants served only by substituted service can affect only their interest ■ in the property within the jurisdiction.
The court concludes that the plaintiff’s bill is an action for the enforcement of an equitable claim and for the removal of a cloud on title to the property of the Prairie Oil & Gas Company, located in the district of Kansas, within the meaning of section 57 of the Judicial Code (28 USCA § 118). The warning order against the Consolidated Oil Corporation should be granted and the motions to dismiss denied.
An appropriate order will be drawn allowing the defendants their exceptions. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219162/ | BONDY, District Judge.
This is a petition by the owner of the steamship Horaisan Maru for exemption from or limitation of liability for cargo loss.
The Horaisan Maru arrived at Grays Harbor, Wash., on or about February 20, 1926. She finished loading at Schaefer’s Dolphins, on the Chehalis river, which empties into Grays Harbor, March 3, 1926, at about 2 p. m. The deck lashings were completed at about 9 o’clock the next morning. She sailed at 12:15 p. m. March 4th, and proceeded on her way through the harbor along a narrow dredged channel, reaching the bar at the mouth of the harbor at about 3:30 p. m. She struck the bar several times, refused to answer her helm, and was pounded heavily on the bottom by swells. At about 6 p. m. it became necessary for her crew to abandon her and she and practically all her cargo became a total loss.
Petitioner contends that due diligence was used to make the ship seaworthy and that the loss was nonnegligent or resulted not from unseaworthiness but from errors in management of the vessel in that she was navigated too far south of the narrow channel while proceeding over the bar, with the result that she struck the submerged spit south of the channel, and that therefore it is not liable for any loss (27 Stat. 445, 46 USCA § 192). Petitioner further contends that in any ease its liability should be limited to the amount of its interest in the vessel and her freight then pending, because if the vessel was unseaworthy, such unseaworthiness was without its privity or knowledge. Rev. St. § 4283,46 US CA § 183.
Claimants contend that the petitioner is not entitled to exemption from or limitation of liability because the vessel was unseaworthy when she broke ground on account of her excessive draft, dangerous list, and instability, and that petitioner had knowledge of her unseaworthiness.
On leaving the Dolphins, the Horaisan Maru carried 6,647 long tons of general cargo, about two-thirds of which was lumber, 570.000 feet thereof loaded on deck and 2,-195.000 feet below deck. Her deck load was 10 feet in height forward and 11 feet aft. Her draft was 26 feet forward and 26 feet 6 inches aft, the latter being the maximum draft which safety permitted for loading at Grays Harbor. She had 520 tons of water on board, leaving her water tanks more than half empty. Had she filled her tanks, some of the cargo would have had to be discharged. Emptying any of her tanks would have decreased her stability.
The claim that she was unseaworthy for crossing the bar when she broke ground is based upon the following evidence:
A bridge tender on the Northern Pacific bridge, 200 to 300 yards above the Dolphins, testified that on the morning of March 4th he noticed that the ship; while lying at the Dolphins, had a bad list, sometimes to port, at other times to starboard, and that her list became the subject of conversation among a group of men with him on the bridge. The master, mate, arid engineer of the tug Tyee, which later assisted the Horaisan Maru through the harbor, gave similar testimony. Hansen, the local pilot who took the vessel through the harbor, testified that Clarkson, the inspector of the ship called him up that morning to come down to take a look at her, because she had quite a starboard list, and he thought she might be aground. He further testified that she took a seven degree list on casting off.
The engineer of the tug which assisted the Horaisan Maru testified that as soon as the lines were taken off and the tug went ahead, the ship took a sheer; that she handled with difficulty throughout the time that the tug was with her, hardly answering her helm; that she sheered several times and had great difficulty in getting through two bridges not far from the Dolphins; that during most of the time she had a starboard list, sometimes up to fifteen or twenty degrees; and that she sometimes rolled over to port. The master and mate of the tug testified to; the same *313effect, the former estimating the list as being at times fifteen degrees.
Observers at various points along the shore all corroborated this account of the vessel’s behavior. A bridge tender on the 0. & W. Railroad Bridge, under which she passed, described her list as “the worst I ever seen.” A mechanic on a dock a short distance from the bridge testified that the men on her deck looked “like they were walking up- hill.” A water tender on a United States Eagle boat at the Port Commission Dock stated that he “wouldn’t hesitate a moment about bucking” a ship in such condition. Captain Ahlman, master of a tug, who observed her negotiating one of the bridges, described her condition at the time as very dangerous and said she sheered several times and rolled from side to side.
The manager of the Grays Harbor Stevedoring Company, who was loading another ship, took a picture of the Horaisan Maru as she passed the Port Commission Dock. The petitioner’s own expert calculated the list shown on the picture as about seven and one-half degrees. Claimant’s expert estimated it at about thirteen degrees.
The captain of the Sujerseyeo, which had crossed the bar about a half mile ahead of the Horaisan Maru, thought that the latter was tender, unstable, and had a dangerous list, estimating it at from ten to fifteen degrees. The chief engineer and a fireman on the Sujerseyeo corroborated this testimony. A deck hand on a tug boat which was waiting outside the bar to take the local pilot off the Horaisan Maru noticed her list, and estimated it to be at least from seven to ten degrees.
Captain Spicer, a friend of Captain Clarkson, the inspector, testified that at a conversation in the captain’s cabin on the morning of March 4th, at which Mr. Nakanishi, connected with the freight department of Mitsui & Co., was present, the inspector expressed some doubt about granting a certificate of seaworthiness on account of the vessel’s list, and that he finally granted such certificate only upon the captain’s promise to straighten her out before taking her out. Spicer testified that on leaving the ship the inspector met the local pilot and told him to he careful, and, if she was not in shape, not to take her out; that while the inspector and he were at lunch they were interrupted by the manager of the port of Grays Harbor who came to tell the inspector that a ship was going out with a very bad list; that the inspector suspected it was the Horaisan Maru and hurried to the Port Commission Dock, from which he hailed the pilot as the vessel passed and told him to anchor down the bay unless the ship was straightened out; that he remarked to the person who snapped the picture mentioned above, who was on the dock at the time, “I told the sons of — to straighten her up before they took her out to sea.”
Petitioner’s witnesses testified that the vessel had a list of only two or three degrees most of the time, always to starboard until reaching Grays Harbor City, when it changed to port upon rubbing the right bank. Petitioner contends that the vessel’s list down the harbor to the bar and the changes in her list were caused by her bilges rubbing the side of the narrow channel in the shallow water and by an error of the first assistant engineer who, it is testified, proceeded contrary to orders, to empty a ballast tank which increased the list, instead of one which would have decreased the list; and that the ship was steered so far south of the narrow channel over the bar that she struck the submerged bank south of the channel.
The evidence presents a conflict on practically every material faet. The inherent weakness of the explanations given by the petitioner, the probabilities, and the credibility of the witnesses as affected by their inter-est require that the conflict be resolved in favor of claimants.
In view of petitioner’s assertion that a three degree list is hardly noticeable, it is remarkable that almost all of petitioner’s witnesses noticed it, and more remarkable still that they did not hesitate to estimate it in degrees.
Petitioner seeks to account for the starboard list and the occasional increases in such list by attributing them to the faet that her bilges were rubbing- the side of the channel. This explanation is hardly consistent with the undisputed increase in the list at the Standard Oil Dock, which is one of the deepest, if not the deepest part of the river, it being 60 or 70 feet in depth according to petitioner’s own witnesses.
It is at about this point, too, that petitioner’s witnesses testify that an order was given to shift coal from starboard to port. The contention that the list was merely a temporary one caused by rubbing the bank is inconsistent with such an order. The master of the Horaisan Maru admitted that he would not proceed thus to remedy a list caused only by the fact that the ship was riding on the port side of the channel.'
The petitioner’s contention that all was well with the ship is hardly consistent with its own evidence of the shifting of coal and ma*314nipulation of ballast tanks, admittedly undertaken to remedy the list. Shortly after leaving the Dolphins the chief engineer considered the list of sufficient importance to warrant his going up to speak to the captain about it. In connection with the ballast tank error, the mistaking of the dry tank, numerically third in order, for the fourth, actually known as No. 3 starboard tank, it may be noted that the chief engineer testified that the dry'tank was never known as No. 3 tank.
The foreman in charge of the loading of the Horaisan Maru and petitioner’s supercargo testified that the vessel had only a slight list on starting, although at one point down the river it increased to five degrees, according to one, and seven degrees, according to the other. Together these men watched her as she left the Dolphins and until she made the turn at the Standard Oil Dock. Thence they followed her course, watching her from several points on the river. Neither admits that this was caused by any concern on his part. In the absence of an adequate explanation, it must be inferred that there was something extraordinary about the vessel’s behavior to warrant such procedure.
Of similar circumstantial value is the fact that the manager of the port considered the matter urgent enough to find and interrupt Clarkson at lunch. Clarkson’s departure for the Port Dock emphasizes this, as does his strong language, noted above. The latter serves to corroborate Spicer’s testimony as to Clarkson’s conversation on the vessel in the morning, when he had issued the certificate of seaworthiness only on the master’s promise to straighten out the ship.
The conclusion indicated derives strong support from the fact that almost all of petitioner’s witnesses are officers and men of the ship, whose tendency to stick by the ship has been judicially noted. See The Benjamin Noble (D. C.) 232 F. 382, 394. Claimants’ witnesses, on the other hand, are disinterested. No reason appears why they should be tempted to lie. The crew of the tug Tyee, besides having no interest, were in a particularly advantageous position to observe the Horaisan Maru, having accompanied her down the river to the Port Commission Dock. Men along the shores, on the bridges, on other tugs, on the Sujerseyeo which preceded the Horaisan Maru over the bar did not have any reason not to tell the truth. So, too, Captain Spicer, who was with Clarkson when he boarded the vessel in the morning, later at lunch, and then on the trip to the Port Commission Dock.
Even if the evidence were evenly balanced, the petitioner must fail since it bears the burden of proof as to seaworthiness. The Wildcroft, 291 U. S. 378, 26 S. Ct. 467, 50 L. Ed. 794; The Colima (D. C.) 82 F. 665, 669.
Although the exact degree of her list cannot and need not be definitely fixed, it is clear that it was great enough to make the ship unseaworthy when she broke ground. Professor Jack, head of the School of Naval Architecture of the Massachusetts Institute of Technology, testified that a list of seven degrees renders a vessel unseaworthy, and that sueh a list has a very detrimental effect upon the steering of the ship. A similar opinion was given by Captain Stillwagon, a licensed pilot of New York Harbor for thirty-seven years. The list of the Horaisan Maru was at least seven degrees during most of the trip down the harbor, and the evidence shows that the vessel actually steered badly. Petitioner’s own -witness, Clarkson, said that he would not grant a certificate for crossing the bar where a vessel had more than a three degree list, or at most four or five degrees.
So, too, the fact that she rolled from side to side showed that she lacked initial stability, according to the opinion of petitioner’s own expert.
Moreover, a list of seven degrees would increase her draft to more than 28 feet, and ten degrees to more than 29 feet. The maximum draft for loading at Grays Harbor was 26 feet 6 inches.
Petitioner’s evidence directed to showing that there was a 38-foot depth prevailing on the bar at the time of stranding is insufficient to establish this. It is based upon a chart more than a month old. The government charts themselves warn that the depth of the water on the bar is subject to frequent change. The chart dated February 2, 1926, shows a minimum depth of 31 or 30 feet at mean low water. The one published just previous to this one, in November, 1925', shows a minimum depth of 37 feet. This further indicates the variability of the depth and unreliability of charts more than a month old.
Striking evidence that there was considerably less than 38 feet on the bar at the time is the fact that the Sujerseyeo, a smaller vessel drawing only 23 feet 9 inches, which preceded the Horaisan Maru by a half mile, struck bottom in going over, though she was on the range line and well within the channel when this happened. The pilot testified that the Horaisan Maru was on the range line going through the channel.
Moreover, the testimony that 3 to 6 feet *315under a ship’s keel was a safe allowance is considerably weakened by the testimony of the inspector that some time before vessels had been striking frequently in crossing the bar, having only 4 or 5 feet under them, which was a very dangerous situation.
The conclusion is inevitable that the stranding resulted from the vessel’s unseaworthiness, particularly her list and resulting excessive draft.
Even were the causal connection between the vessel’s unseaworthiness and the stranding not established, there could be no exemption under the Harter Act (46 USCA §§ 190-195). International Navigation Co. v. Farr & Bailey Mfg. Co., 181 U. S. 218, 226, 21 S. Ct. 591, 45 L. Ed. 830; The Willdomino (C. C. A.) 300 F. 5, affirmed 272 U. S. 718, 47 S. Ct. 261, 71 L. Ed. 491; Earle & Stoddart, Inc., v. Ellerman’s Wilson Line, Ltd., 287 U. S. 420, 426, 53 S. Ct. 200, 77 L. Ed. 403; Compania General De Tabacos De Filipinas v. United States (C. C. A.) 49 F. (2d) 700, 701, 702; California & Hawaiian Sugar Refining Corp. v. Rideout (C. C. A.) 53 F. (2d) 322, 324; cf. Hartford & New York Transportation Co. v. Rogers & Hubbard Co. (C. C. A.) 47 F.(2d) 189, 192; May v. Hamburg-Amerikanische Packetfahrt Aktien-Gesellschaft (C. C. A.) 63 F.(2d) 248, 251; The Turret Crown (C. C. A.) 284 F. 439, 445.
Before arriving at Grays Harbor, the Horaisan Maru had taken on cargo at San Francisco, Seattle, Everett, and Vancouver. The petitioner contends that in any event it cannot be held liable for the loss of cargo loaded at these ports, since no claim of unseaworthiness at these ports is made. This contention cannot prevail. Although the general proposition that unseaworthiness arising after the vessel breaks ground does not deprive the shipowner of the benefit of the Harter Act is correct, this is entirely different from petitioner’s contention, which would require the conclusion that when a vessel contemplates taking on cargo at several ports, her responsibility for the cargo loaded at the first port should be measured only by the capacity of the ship to carry it safely, notwithstanding the fact that the owner knows that more is to be loaded later and that whatever hazard is created by the additional loadings is shared by all the cargo, wherever loaded. In The Steel Navigator (C. C. A.) 23 F.(2d) 590, 592, the court averted to this, saying: “Especially is it necessary to remember that the measure of what can in any event be demanded of her is her fitness for the whole voyage as contemplated at the outset.” And see The Viking (C. C. A.) 271 F. 801; The Willdomino (C. C. A.) 300 F. 5, 12, affirmed 272 U. S. 718, 47 S. Ct. 261, 71 L. Ed. 491.
Whether petitioner may limit its liability to the value of the vessel and her pending freight depends on whether there was unseaworthiness with its “privity or knowledge.” Where the owner is a corporation, the privity or knowledge must be that of a managing officer or agent. Craig v. Continental Insurance Co. of N. Y., 141 U. S. 638, 12 S. Ct. 97, 35 L. Ed. 886; The Colima (D. C.) 82 F. 665. The test is the extent of the person’s authority, not whether he is technically an officer. Boston Towboat Co. v. Darrow-Mann Co. (C. C. A.) 276 F. 778. It is sufficient if the person is “one to whom the corporation has committed the general management or general superintendence of the whole or a particular part of its business.” The Erie Lighter 108 (D. C.) 250 F. 490, 494. This does not include the master of the ship. Craig v. Continental Insurance Co., 141 U. S. 638, 647, 12 S. Ct. 97, 35 L. Ed. 886; Quinlan v. Pew (C. C. A.) 56 F. 111, 117; The Colima, supra.
Claimants contend that the presence of Nakanishi, of petitioner’s freight department, at the conversation concerning the list, which took place between the inspector and the master on the morning of March 4th, constitutes “privity and knowledge” on the part of the petitioner. Although it is by no means clear that Nakanishi’s presence at this conversation would be sufficient to charge him with knowledge of the unseaworthiness, even assuming that it were, the present record shows that Nakanishi did not occupy a position of sufficient authority in Mitsui & Co. to warrant the imputation of his knowledge to the petitioner. Although his testimony in the ease at bar, showing his very limited authority, is somewhat impaired by his testimony in another case involving the wreck of the Horaisan Maru, it is corroborated by Shibagaki, manager of petitioner’s Seattle office, and there is no evidence to show an authority as wide as that required by the cases cited. The court, therefore, finds that the vessel’s unseaworthiness was without petitioner’s privity or knowledge.
Exemption from liability accordingly is denied, and limitation of liability granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219163/ | BYEBS, District Judge.
This is an action at law by the United States against the principal and three sureties in a recognizance bearing date March 4, 1922; conditioned for the appearance of the principal, Matthew Luther, alias M. L. Adams, before the District Court of the United States for the Northern District of Ohio, Eastern Division, at Cleveland, Ohio, on the 4th of April, 1922, at, 10 :00 o’clock a. m., or prior thereto when notified by mail by the U. S. Attorney, and from term to term and time to time thereafter, to which the ease may be continued, then and there to answer the charge of having contrary to law devised a scheme to defraud the Ohio Coal & Supply Co. and divers other persons, etc.
The complaint-alleges that each of the defendant sureties resides in this district and that, on information and belief, the same is true as to the principal; that the recognizance was entered into as above summarized and a copy is annexed to the complaint..
Paragraph Fourth alleges, upon information and belief, that the principal failed to be and appear before the said District Court of the Eastern Division of the Northern District of Ohio on April 4,1922, and, although thrice solemnly called, he did not appear according to the condition of said recognizance, but made default; that the sureties were called to appear and produce the body of the said principal, who likewise made default, whereby said recognizance “remains against them in its full force, as more fully appears from the certified copy of order forfeiting the bond, a copy of which is hereunto annexed and made a part hereof and marked ‘Exhibit B’
The final paragraph of the complaint alleges, upon information and belief, that, by reason of the premises and of the violations of the conditions of the recognizance as pleaded, the principal and sureties have become jointly and severally liable to the United States of America in the sum of $10,000.00, being the amount of the said bond.
There are annexed to the complaint what are said to be correct copies of the recognizance and several affidavits of the sureties, and a certified copy of the proceedings in the District Court for the Northern District of Ohio, Eastern Division, on the 11th of April, 1922, when the recognizance was forfeited.
The defendant Horan, one of the sureties, has filed a verified answer in which he denies the allegations concerning the failure of the principal to appear, and the forfeiture of the bond, and the legal conclusion pleaded in paragraph Fifth of the complaint pursuant thereto.
The defendants Bose Gallo and Bose Tesaroa, the other sureties, have likewise filed a verified answer in which they deny knowledge or information sufficient to form a belief 'as to the truth of the allegations set forth in the paragraph of the complaint which alleges the failure of the principal to appear in court and the order of forfeiture; and, on information and belief, they deny the call to appear directed to the sureties as alleged in the said paragraph of the complaint; also they deny the allegations in the closing paragraph of the complaint above referred to. .
The United States Attorney has moved for 'an order striking out the answers of the three defendants and granting judgment in favor of the plaintiff, relying upon Buie 113 of the Buies of Civil Practice of the State of New York, which, so far as applicable in its present form, is as follows:
“The complaint may be dismissed or answer struck out and judgment entered in favor of either party on motion upon the affidavit of a party or of any other person having knowledge of the facts setting forth such evidentiary facts as shall, if the motion is made ,on behalf of the plaintiff, establish the cause of action sufficiently to entitle plaintiff to judgment.”
From what has been said, it will be apparent that the defendants raise an issue concerning the basic fact upon which the plaintiff relies, namely, the failure of the principal to appear in the court, as to which the removal bond was given, and the consequent forfeiture thereof, and, upon this issue, they are entitled to go to trial. See National Surety Co. v. U. S. (C. C. A.) 29 F. (2d) 92, at pages 96 and 97; U. S. v. Diamond (D. C.) 50 F.(2d) 263.
The denials in the answers of the defendants cannot be disregarded, because they are made under oath and, until they are withdrawn, must be deemed to have been made in good faith in spite of the certified copy of the record in the United States District Court for the Northern District of Ohio, Eastern Division. It would of course be open to the defendants on the trial to show that no such default was in fact taken and no such forfeiture was ordered as is alleged in the complaint, and that the certified copy of the ree*321ord is either mistaken or otherwise open to attack.
The affidavits of the defendants offered in opposition to the motion make no reference to this aspect of the case, but rely entirely upon the statute of limitations pleaded in the Fourth, Fifth and Ninth separate defenses in the answer of Horan, and in the separate and affirmative defense pleaded in the joint answer of the other two defendants.
Horan’s answer contains other separate defenses, namely, that the bond does not contain a description of the crime for which the principal is held and is not a bail bond; that it was not a written undertaking sufficient to constitute bail under section 568 of the Code of Criminal Procedure of the State of New York, and that it is not a bail undertaking; that, under the statutes of the State of Ohio, it is required that a recognizance must be recorded by the Clerk of the Court to be valid, and that such was not done, whereby the recognizance was rendered void; that, under the same law, it is provided that a certified copy of the bond and perfected recognizance must be filed with the County Recorder in the State of Ohio upon a forfeiture, and that forfeiture must be held within thirty days; that there is no allegation in the complaint as to the laws of the State of Ohio where the recognizance was “attempted to be forfeited,” and that consequently the complaint is legally insufficient. These are in addition to the defense of the statute of limitations to which reference has been made.
In his affidavit in support of this motion, the Assistant U. S. Attorney alleges that the Sixth separate defense is frivolous, but, unless his affidavit is misunderstood, there is no reference to the other separate defenses, nor is there any showing whatever of evidentiary facts, according to the requirement of the rule.
The questions of law have not been sufficiently presented by either party to this motion to require disposition at this time.
The contract sued upon was entered into in New York, and whether the law of Ohio, where the performance was to take place, was imported into the contract by the parties, is a question that will require determination when it has been more thoroughly presented than it has been upon this motion. This is an action upon the bond, i. e., a contract under seal, and is not a proceeding in a scire facias on the recognizance; and what statute of limitations applies, would seem to present an issue which should challenge the best efforts of counsel.
Motion denied. Settle order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219167/ | VAUGHT, District Judge.
This matter has been submitted upon stipulation of fact. In April, 1927, the plaintiff purchased from the Griffith Amusement Company an unexpired lease for eight years and nine months of an original ten-year lease on a certain building in the city of Enid, Garfield county, OH., paying for said lease the sum $5,000. In September, 1928, plaintiff purchased the fee-simple title to the building covered by the lease from the owners thereof for a consideration of $63,500.
In the return of plaintiff for said year 1928, the sum of $4,351.93, representing the unexpired and unamortized balance of said payment of $5,000, was taken as a deduction and claimed as a loss by plaintiff for and in the year 1928.
The Commissioner of Internal Revenue disallowed said deduction and capitalized the said unamortized portion of the payment of $5,000 as a part or portion of plaintiff’s capital investment. The Commissioner thereupon made an additional assessment of $921.10 for said year, which has been paid by the plaintiff under protest, and plaintiff now brings this action to recover said sum so paid as additional assessment.
The question here for determination is whether or not the payment made to acquire this lease should be treated as operating expense or as a capital investment. The question has been settled by the courts and as stated in Klein, Federal Income Taxation, 1933 Cumulative Supplement, p. 225:
“Payments made to secure a lease must be capitalized and prorated over the life of the lease. J. Alland & Bros., Inc., v. U. S. [D. C.] 28 F.(2d) 792, affirming 1 B. T. A. 631; King Amusement Co. [v. Com’r], 15 B. T. A. 566, affirmed [C. C. A.] 44 F.(2d) 709, certiorari denied 282 U. S. 900, [51 S. Ct. 212, 75 L. Ed. 792]; Baton Coal Co. [v. Com’r], 19 B. T. A. 169, affirmed [C. C. A.] 51 F. (2d) 469, certiorari denied 284 U. S. 674, [52 S. Ct. 129, 76 L. Ed. 570].”
These various decisions construe the Treasury Department regulation granted under 26 USCA § 986 (a) (1, 7, and 8):
“Article 110. Rents — Where a leasehold is acquired for business purposes for a specified sum tbe purchaser may take as a deduction in his return an aliquot part of such sum each year, based upon the number of years the lease has to run.”
The court is of the opinion that the additional tax was properly assessed, and the court therefore finds for the defendant. A-proper form of judgment may be submitted consistent with this opinion. An exception is allowed the plaintiff. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219188/ | GALSTON, District Judge.
The respondents filed exceptions to the commissioner’s report which awarded the libelant damages of $3,219.98, with interest from February 28, 1931.
The pivotal question involved is the measure of damages.
As appears from the interlocutory decree (D. C.) 60 F.(2d) 172, the libel was brought by the Connecticut Fire Insurance Company, as assignee of the Seaboard Great Lakes Corporation. This latter corporation was the carrier. The Niagara Sprayer & Chemical Company, the consignee of .a certain shipment of sulphur, refused to accept a barge load forming part of the shipment. Two previous barge loads handled by the respondents had been found so contaminated with, iron ore that serious fires resulted. At the trial it was held that the consignee I was justified in rejecting the third barge load, and'that the respondents were liable for damages caused by their negligence.
It was stipulated that the fair and reasonable market value of a cargo of sulphur at Buffalo in sound condition was $23.60 a gross ton. It was also stipulated that the barge load in question had been sold to the Pennsylvania Salt Manufacturing Company for the price of $19 a gross ton at Buffalo. The commissioner found that the libelant was entitled to the difference between the contract price, which was the fair market value of sulphur in sound condition at Buffalo, and the sale price.
This rule of estimating the damage, the respondents urge, is erroneous. They contend that the proper measure is the difference between the contract price and the fair market price of the sulphur, and that, in consequence, the libelant is entitled to nominal damages only.
The circumstances present a very unusual situation. The Freeport Sulphur Company consigned a cargo of sulphur to the Niagara Sprayer & Chemical Company at Middleport, N. Y. The consignee was to pay monthly for such amounts thereof as it used. Therefore it was not a cargo destined for resale in the market, but for consumption by the consignee. Whether the measure of damages be for breach of contract of sale or for damages caused by negligence is of no great moment for there was not an open market for the buying and selling of sulphur at Buffalo. There are only two companies in the world which produce sulphur. Neither one attempts to sell to the customers of the other. Not only was the Freeport Sulphur Company thus limited in its efforts to resell the cargo in question, but clearly the sulphur could not be offered for sale free from the cloud of its rejection by the consignee. It became, irrespective of the fact as to whether it was sound, distressed sulphur. Sulphur is a commodity that is sold on a basis of almost absolute purity running as high as 99.1 per cent, pure, and for that reason buyers are not willing to overlook contamination.
So in offering this particular cargo it became necessary to disclose to the prospective purchasers that the cargo had been refused by the consignee, and also the reason for the refusal.
The number of possible users in the Buffalo area was very limited. ■ The Freeport Sulphur Company offered it to four companies, and the only bid received was from the eventual buyer, the Pennsylvania Salt Manufacturing Company located at Natro*417na, Pa. Obviously, the seller eould not get the same price for sulphur under suspicion as for sound sulphur.
Another different and unusual circumstance is that each sulphur consumer is bound by his contract with the producer for his complete requirements for the year, and is not free to buy from others. To be relieved of such restriction, special permission had to be granted by the seller corporation in each case. However, that practice was discontinued prior to 1930 and, therefore, has no bearing in the circumstances of this libel.
The respondents, as the commissioner found, offered no evidence of the value of the rejected sulphur. Prom the foregoing, it must appear that there was no open market for sound sulphur, and certainly not for distressed sulphur. The damages must, therefore, be ascertained in some rational way. The resale at $19 per ton is competent evidence of the fair market value of the rejected sulphur in its then condition at Buffalo. United S. S. Co. v. Haskins (C. C. A.) 181 F. 962; The President Arthur (D. C.) 28 F.(2d) 391; The Rosalia (C. C. A.) 264 F. 285. And as is said in Ruling Case Law, vol. 8, page 489: “In case there is no local market, the value is properly fixed by the value at the nearest market, deducting the cost of transportation.”
Accordingly, the exceptions are overruled. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219430/ | NETERER, District Judge.
The plaintiff, Greene Process Metal Company, is a Missouri corporation, not engaged in industrial enterprise, but merely a patent holding company of Albert E. Greene inventions, stated at bar to be 53 patents. ,
The suit comprised originally six patents for the smelting of ore, etc. Three of the patents were withdrawn during the taking of depositions, and at the opening of trial two more were dismissed, leaving the patent in issue No. 1,532,052, based on Greene’s 1909 application, which patent was issued in 1625. The idea must comprehend the process, and not the manner of operation or the volume of added ingredients known to the prior art for the reducing slag. The idea in this application is a one-slag process; a single slag to dephosphorize, deoxidize, and desulphurize the metal by a reducing gas. The only use of silica claimed in the application is confined to a dephosphorizing and desulphurizing slag. And the elaim now made is admittedly not a dephosphorizing slag, but is a deoxidizing and desulphurizing slag. In the prior art two slags were employed; one for oxidizing and dephosphorizing the metal, and the other for deoxidizing and desulphurizing the metal. Greene, in his application, says: “My invention on the contrary contemplates blowing the bath with a gaseous agent which will reduce the flux or other slag forming metallic compound, which gas will also incidentally reduee such oxides of the metal under treatment as may be present in the slag, thereby producing conditions more favorable for the taking *400up of phosphorus and sulphur, or either of them, by the reduced slag-forming metal.”
The first step of the prior art process dephosphorized the metal and the second desulphurized the metal by a slag conveniently fluid, made by lime and sand subjected to reducing conditions by the use of pulverized or crushed carbon or solid carbon. This is the process used by the defendant, but is not in Greene’s original application and is a material variance, and if within the amendment cannot be sustained. Chicago & N. W. Ry. Co. v. Sayles, 97 U. S. 554, 563, 24 L. Ed. 1053. Mr. Justice Bradley, in this case, said: “Courts should regard with jealousy and disfavor any attempts to enlarge the scope of an application once filed.”
Defendant operates a basic electric furnace in which it melts steel scrap and provides the resulting molten bath of steel with a fluid slag containing basic and acid oxides. The bath is provided with two slags; the first an oxidizing slag not subjected to the action of a reducing agent, but this slag is removed and discarded after it has served its purpose. The second, reducing slag, is provided, and this is subjected to the action of a reducing agent of crushed, charcoal or coke or of calcium carbide or other substance carrying similar characteristics, and further formation of protoxids is prevented.
It appears obvious that there is a clear distinction in the- two processes. The plaintiff’s one-slag process with a gaseous reducing agent; and the other, a two-slag process, with a reducing agent of solid carbon.
In a highly basic slag there is present iron ore or ferric oxide (Fe20s), and this is more difficult to reduce from the slag than ferrous oxide (EeO), and by increasing the silica content in the slag the ferric oxide is broken up, and more ferrous oxide is found, and the action progresses as the content of the silica in the slag increases; and the plaintiff contends that in the slag of the invention (amended application) with its apparently higher silica content, there is a larger proportion of iron present as ferrous oxide than is usual in the highly basic slag of the prior art, and reduction of iron oxide from the slag by increasing the silica content of the slag facilitates its refining action. The stated higher silica content, however, cannot have any material effect upon the plaintiff’s claim, as the use of silica content was known to the prior art. The claimed invention is not new, and attainment of greater excellence, if made, in that known in the prior art is not patentable. Smith v. Nichols, 21 Wall. (88 U. S.) 112, 22 L. Ed. 566. No new results are shown from the new proportions, or new characteristics of structure or performance. Bethlehem Steel Co. v. Churchward International Steel Co. (C. C. A.) 268 F. 361. And augmentation or diminution of silica for liquidity of the slag for desulphurization is not patentable.
Heroult, in his I960 application, has a slag consisting of lime liquified by silica and Eiehhoff, in 1904-05 used a slag of lime and sand, from which the oxides are reduced by the use of broken charcoal or coke or calcium carbide. And the many prior patents (75) pleaded and the various publications of the prior art pleaded (more than 100), and the . “Canadian Report of 1904,” and many others introduced in evidence, show that sand or silica was in use prior to the plaintiff’s application, and the only difference between Greene’s idea, as set forth in the patent, as amended, granting amendment is allowable, is in degree. The testimony from experts, not only in technical scientific knowledge with relation to operation and effect, but with such technical knowledge, together with the experience of expert heaters in operating a furnace, show that it is impracticable to operate the process, as claimed by the plaintiff, successfully by a fixed standard or rule, but that the quantity of silica to be applied for liquidity must be determined by the expert heater in the operation of the furnace at the time to determine the liquidity of the slag, and cannot be fixed by measured portions, as the quantity of silica necessary varies in different baths of steel. The per cent, of silica used by the defendant is less than the per cent, contended for by the plaintiff, and it obviously must be determined by the conditions present during the operation. The per cent, at the time of trial, when inspected by court and counsel, was about 17 to 19 per cent. In some of its operations the defendant has used as high as 2,0 per cent, to 24 per cent, of silica, perhaps sometimes higher, but the quantity of silica used in making up a slag for steel is immaterial, as it differs only in degree from that known to the prior art. Railroad Supply Co. v. Elyria Iron & Supply Co., 244 U. S. 285, 37 S. Ct. 502, 61 L. Ed. 1136; Willamette Iron & Steel Works v. Columbia Engineering Works (C. C. A.) 252 F. 594; Finley v. MacDougald Construction Co. (C. C. A.) 28 F.(2d) 674; David Belais, Inc., v. Goldsmith Bros., etc., Co. (C. C. A.) 10 F.(2d) 673; Bituminous Products Co. v. Headley Good *401Roads Co. (D. C.) 2 F.(2d) 83, affirmed (C. C. A.) 14 F.(2d) 667.
The testimony does not show that the plaintiff's patent has at any time been in operation, or the process applied to oxidation and dephosphorization and deoxidation and desulphurization in one slag in the presence of a reducing gas; and this is an inference against utility. Henry v. City of Los Angeles (C. C. A.) 255 F. 769, Cocks v. Rip Van Winkle, etc., Co. (C. C. A.) 28 F.(2d) 921. And it is obvious from all the testimony that such ah accomplishment is impossible.
To me it is obvious that the claims in suit are anticipated by prior patents, prior publications, and prior use, and, also, that the claims of 'the patent in suit were covered by patent No. 1,185,394, issued to Greene, the same patentee, in 1916, now expired. The patent in suit contains claims not substantially different from the claims comprehended in the 1916 patent, and the instant patent is therefore void. Miller v. Eagle Mfg. Co., 151 U. S. 188, 14 S. Ct. 310, 38 L. Ed. 121.
From what has been said it is obvious that this court does not think there is infringement as to any of the claims; and the several claims will not be separately discussed, and without extending this memorandum, the court, upon the state of facts, finds no infringement, and an order of dismissal may be on notice presented. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219431/ | VAUGHT, District Judge.
The plaintiff brings this action, as receiver of the Billings National Bank, against the defendants, as members of the board of directors of said bank, charging said directors with negligence in failing to see that the cashier was properly bonded, and also in permitting the bank to acquire $30,000 of Covington Pipe Line bonds and carrying said bonds in the assets of said bank for a period of two and a half years.
Joseph W. Baek, defendant, died in February, 1933, and the cause is revived against Anna Back as executrix of his estate.
The evidence discloses the following state of facts:
Defendant Pierce is a farmer living near Billings and is living upon the same farm that he acquired in the opening of the “Strip” in 1893.
In 1904 a state bank was organized in the small town of Billings which is situated in a strictly agricultural community. This bank, after continuing as a state bank for many years, finally became the Billings National Bank, defendant Pierce continuing as a director in said banks all the while and in 1924 was president of the bank, but not feeling personally capable of operating the bank, he went to A. E. Stephenson of Enid, president of the Central National Bank, and asked for his recommendation of a good man for cashier. Defendant Chatbum was recommended by Stephenson as a competent, able, reliable, and trustworthy man for that position. At that time Chatbum was connected with a bank in Covington, and was associated with defendant Fitzgerald. A contract was entered into between Pierce, on the part of the bank, and Chatham, whereby Chat-bum became cashier of the bank, the owner of 5 shares of stock, and a director.
Defendant Adrianee is an ex-soldier, was at the time of the trial 35 years of age, had been a bookkeeper in the bank and assistant cashier, and was acting cashier at the time Chatbum came into the bank. On account of his health, however, Adrianee found it necessary to retire from the bank for a time, but later came baek as assistant cashier.
Defendant Back was a farmer and business man in the community and had been connected with the bank for some years.
Defendant Frazier had been connected with the bank as bookkeeper and cashier, but his active connection with the bank was many years ago. At the time of the trial he was a man 73 years of age.
In October, 1924, after Chatbum came into the bank on July 1, Pierce sold to defendant Fitzgerald a controlling interest in the bank; Fitzgerald becoming a director. Fitzgerald also was president of the American State Bank at Covington, some thirty miles distant.
' The evidence discloses that the management of the bank was almost entirely handled by Chatbum as cashier and Fitzgerald as a director and principal stockholder; he having in October, 1924, purchased 130 shares out of a total of 250 shares of the capital stock of the bank.
" The evidence further shows that directors’ meetings were held regularly every month, sometimes not exactly on the'day of the month provided in their by-laws, but the meetings were held every month and the semiannual meetings on the 1st of July and the 1st of January were held approximately on those dates but with regularity. In these various directors’ meetings, particularly in the semiannual meetings, the assets of the bank were carefully gone over, the cash counted, and the usual functions of a board of directors were performed. In the monthly meetings a cheek of the assets of the bank was not always had, but the notes, particularly the short time notes, were cheeked and discussed and the ordinary duties of a board of directors were performed.
That on the 19th of October, 1926, an election was held in the town of Covington, Garfield county, Oklahoma, at which was voted $35,000 of Gas Pipe Line bonds. The bonds were to run 25 years, provided for a tax levy to meet payments for the sinking fund and interest, and the usual provisions were made that are ordinarily made for the issuance of municipal bonds. The bonds were duly executed by the proper town officials, submitted to the county attorney and county clerk of Garfield county for their approval and certificate, and were later submitted to, examined, and approved by the Attorney General of the state. Defendant Fitzgerald was the city treasurer of Covington. No contest or suit of any character questioning the validity of the said bonds was begun until October 26,1927, at which time a suit was instituted by a taxpayer of the town of Covington in the district court of Garfield county, contesting the validity of said bonds, and alleging particularly that the election was not held in strict accordance with the statute, in that the qualified voters of the town of Covington living in Otter No. 1 were permitted to vote at the polling place in said Otter No. 1, and that any *405qualified voter living in Otter ISTo. 3 was permitted to vote at the polling place in said Otter No. 3. The voting place of each precinct in the town of Covington was regularly designated by the election officials. One of the said voting places was in Ward 1, the other in Ward 2; there was no voting place in Ward 3; and the voters in said town, offering to vote, were permitted to and did vote in said election, not according to their residence in wards, but according to their residence in precincts Otter No. 1 and Otter No. 3. No one was permitted to vote who was not a qualified voter of said town of Covington.
The said suit filed in Garfield county challenging the validity of said bonds was decided on the 26th of November, 1927, the judgment of the court being that said bonds were illegal, and the town was enjoined from negotiating said bonds or any of them. The bonds, however, had already been executed by the president of the town board and the town clerk, the proper county and state authorities, and were in the hands of Fitzgerald. In August, 1927, prior to filing the action in district court, Fitzgerald brought $25,000 of said bonds to the Billings National Bank and advised Chatbum, the cashier, that these bonds would be a good buy for the Billings National Bank. Chatburn examined the bonds, saw that they were properly executed by the town officials and had been regularly approved by the county attorney and county clerk and by the Attorney General of the state, and after checking them with Adrianee, agreed to buy them at par. No discussion was had by Chatbum with any other member of the board of directors of said bank except Fitzgerald and Adrianee. Later Chatbum and Fitzgerald explained to the board of directors that these bonds were good, that they had been regularly issued, and the certificate of the Attorney General of the state was attached thereto. At the time of the sale of said bonds, however, Fitzgerald reserved the right to repurchase said bonds at par, and requested Chatbum to keep the bonds in the bank at Billings because he might want some of them at any time. On January 10, 1928, he did purchase $10,000, and on March 26 he sold back to the Billings National Bank $15,-000 of said bonds. In August, 1928, Chat-bum saw an article in an Enid paper in which it was stated that the bonds had been held void by the court. He talked with Fitzgerald about it, and Fitzgerald told Chatbum not to tell the other directors, and the other directors knew nothing about the questionable character of said bonds until the day the bank closed. On October 13, 1930, Chatbum told Adrianee that the Covington bonds were invalid, having been held so by the court. Adrianee got in touch at once with the members of the board of directors, who immediately met, and the board decided to close the bank immediately until this matter could be straightened out. The bank was closed, and it is now the contention of the plaintiff, the receiver of said bank, that this transaction was the result of the negligence, carelessness, and failure to perform the proper duties of the individual members of the board of directors.
The defendants, with the exception of Fitzgerald and Chatbum, have answered and in their answers admit that they were members of the board of directors, but contend that as members of such board they performed the duties ordinarily performed by members of a board of directors of a national bank and in no respect did they violate the laws of the United States in failing to perform the duties exacted of them by the national banking laws.
The evidence further shows that Fitzgerald, up to the time the Billings bank closed, was regarded as a safe, successful banker and business man, and that he had the confidence of the people of the town of Covington, where he resided, and where he was president of the American State Bank, as well as city treasurer. No rumors of any suspicions or of a discrediting character, concerning Fitzgerald, had ever reached the members of the board of directors of the Billings bank.
Chatbum came to Billings with splendid recommendations, bearing the personal indorsement of Stephenson, the president of the Central National Bank at Enid, one of the outstanding bankers of the state. After coming to Billings, Chatbum at once entered into the civic life of the town, was a member of the school board, active in church work, and in civic club work. In fact, no act of Chatbum, prior to the closing of the Billings Bank, has been disclosed by the record which would cause an ordinarily prudent person to suspect any wrong doing on his part.
The bank, was doing a successful business. The record discloses no evidence of bad loans, worthless paper, or any other questionable asset approved by the directors. The sole charge against the defendant directors, therefore, upon which the plaintiff urges their personal liability, is the purchase and retention of the Covington bonds, and the fact that the cashier was under only a $5,000 bond.
The statutory duty exacted of directors of *406a national bank is set forth in section 93, 12 USCA (Rev. St. § 5239): “If the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisl&ns of this chapter, all the rights, privileges, and franchises of the association shall be thereby forfeited. . Such violation shall, however, be determined and adjudged by a proper district, or Territorial court of the United States, in a suit brought for that purpose by the Comptroller of the Currency, in his own name, before the association shall be declared dissolved. And in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person, shall have sustained in consequence of such violation.”
This statute has been construed by the appellate courts, but one of the leading cases is Briggs v. Spaulding, 141 U. S. 132, 11 S. Ct. 924, 35 L. Ed. 662. This is a lengthy opinion and is. what is known as a five-four opinion, the dissenting opinion being an extended one also. I shall not quote extensively from this opinion, because counsel for both plaintiff and defendants have cited this ease and quoted copiously therefrom, and I assume they are familiar therewith. However, a few quotations from this rather famous case would be appropriate. As to the duties of directors as to the management in general, the court held: “If nothing has come to the knowledge to awaken suspicion that something is going wrong, ordinary attention to the affairs of the institution is sufficient. If, upon the other hand, directors know, or by the exercise of ordinary care should have known, any facts which would awaken suspicion and put a prudent man on his guard, then a degree of care commensurate with the evil to be avoided is required, and a want of that care makes them responsible.” [USCA Title 12, § 93.] As to the degree of care required, the court held: “The degree of care to which the bank directors are bound is that which ordinary, prudent, and diligent men would exercise under similar circumstances, and in determining whether such care has been exercised the restrictions of the statute and the usages of the business should be taken into account.” [USCA, Title 12, § 93.] As to the delegation of duties, the court held: “The directors are not called upon to devote themselves to the details of the business management, and may properly commit these to their duly authorized officers, but they are not absolved from the duty of reasonable supervision.” [USCA Title 12, § 93.]
As to what is meant by “knowingly violate or knowingly permit,” the court, in Tates v. Jones National Bank, 206 U. S. 158, 27 S. Ct. 638, 51 L. Ed. 1002, said: “Directors of a national bank who merely negligently participated in or assented to the false representations as to the bank’s financial condition contained in the official report to .the Comptroller of the Currency, made and published conformably to U. S. Rev. St. § 5211 [12 USCA § 161], cannot be held civilly liable to any one deceived to his injury by such report, since the exclusive test of such liability is furnished by U. S. Rev. St. § 5239 [12 USCA § 93], which makes a knowing violation of the provisions of the title relating to national banks a prerequisite to such liability.”
In Thomas v. Taylor, 224 U. S. 73, 32 S. Ct. 403, 56 L. Ed. 673, the court held:
“ ‘The test of liability was not negligence, but the fact that the act was violated knowingly. * * * It-is clear, therefore, that the words of the statute “knowingly violate, or knowingly permit to be violated,” still stand as the test of civil liability. These words are not obscure or of doubtful meaning, and must be given effect in applying the statute.’ * * *
“Mere negligence, without proof of an intentional violation, is insufficient to create such liability.” [USCA Title 12, § 93.] Jones National Bank v. Tates, 240 U. S. 541, 36 S. Ct. 429, 60 L. Ed. 788.
In Briggs v. Spaulding, supra, the court, in the body of the opinion also said: “The evidence fairly establishes that this bank was in good credit up to the time of its failure. It had been in existence for 18 years; had been prosperous; had paid dividends regularly down to and into 1881, and its stock had for years stood far above par, — at 50 per cent, above, October 3, 1881, according to complainant. Neither the defendants, nor the bank’s customers, nor the community, appear to have entertained the least suspicion as to its solvency. The losses which it is claimed rendered it insolvent, and for the recovery of which losses this action was instituted, occurred by reason of the discounting by Lee of the paper of persons engaged with him in outside business and speculations, who-were not adequately responsible for their engagements. The vice in the situation lay, not in the reports nor in the books, upon their face, but in the unreliability of the bills receivable.”
In Wheeler v. Aiken County Loan & Sav*407ings Bank, 75 F. 781, 784, the Circuit Court for the District of South Carolina said: “Men of extraordinary prudence and financial foresight might have foreseen the end, hut directors of a small bank in a small town cannot be justly held to personal accountability for failing to select as its managers men of extraordinary gifts. Such men are rare anywhere, and it cannot be imputed as a fault to these directors that such services were not secured for the meager salaries paid to the officials of this corporation.”
In Bates v. Dresser, 251 U. S. 524, 40 S. Ct. 247, 249, 64 L. Ed. 388, the court said: “We are not prepared to reverse the finding of the master and the Circuit Court of Appeals that the directors should not be held answerable for taking the cashier’s statement of liabilities to be as correct as the statement of assets always was. If he had not been negligent without their knowledge it would have been. Their confidence seemed warranted by the semi-annual examinations by the Government examiner and they were encouraged in their belief that all was well by the president, whose responsibility, as executive officer; interest, as large stockholder and depositor; and knowledge, from long daily presence in the bank, were greater than theirs. They were not bound by virtue of the office gratuitously assumed by them to call in the pass books and compare them with the ledger, and until the event showed the possibility they hardly could have seen that their failure to look at the ledger opened a way to fraud.”
The common-law duty is set forth in 12 USCA § 73 (Rev. St. § 5147): “Each director, when appointed or elected, shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such association, and will not knowingly violate or willingly permit to be violated any of the provisions of this title, and that he is the owner in good faith, and in his own right, of the number of shares of stock required by this title, subscribed by him, or standing in his name on the books of the association, and that the same is not hypothecated, or in any way pledged, as security for any loan or debt. The oath shall be taken before a notary public, properly authorized and commissioned by the State in which he resides, or before any other officer having an official seal and authorized by the State to administer oaths, except that the oath shall not be taken before any such notary public or other officer who is an officer of the director’s bank. The oath subscribed by the director making it, and certified by the notary public or other officer before whom it is taken, shall be immediately transmitted to the Comptroller of the Currency and shall be filed and preserved in his office for a period of ten years.”
As stated above, the acts upon which the plaintiff alleges liability as to the defendants are the purchase and retention of the Covington bonds and permitting the cashier to remain under an inadequate bond.
The reports of the national bank examiner, which were introduced in the evidence, over a period of years immediately preceding the closing of the bank and prior thereto, set out the Covington bonds as assets of the bank. No complaint was made by the examiner of those bonds, neither was any exception taken by the examiner to the fact that the cashier was under a $5,000 surety bond protecting the bank against theft or embezzlement, and not for the faithful performance of his duties.
This court has never had very extensive banking experience, but his observation has been rather extended, and rarely do you find a bank in a small town, or even a large city, where the directors generally attend the meetings of the board of directors more punctually and carefully than in the ease at bar. These directors testified and told how they attended the meetings, with what regularity, and what they did at these meetings, and all of the evidence in this case is to the effect .that at least twice a year all of the assets of the bank were carefully cheeked, and in the contention of the plaintiff he does not rely upon the fact that these meetings were not regularly- held and the assets regularly checked, but he contends that the grievous error was in purchasing these bonds. These bonds were voted by the town of Covington, were duly executed by the town officials as provided by the statute, were duly certified by the county attorney and county clerk, were further examined, approved, and certified by the Attorney General of the state, and at the time of the purchase by the bank at Billings these bonds on their face were valid obligations against the town of Covington. There was nothing on their face to suggest that they were invalid, and who wquld question the validity of those bonds from such an examination of them as a director in a bank would be expected to make?
In Board of Education v. James, 49 F.(2d) 91, 99, in a case which went up from this court, the Tenth Circuit Court of Appeals said: “It is well settled that, where a *408municipal corporation has lawful authority to issue bonds on condition that certain facts exist or certain acts be done, and the statute entrusts the power and imposes the duty upon an official or officials to ascertain, determine and certify the existence of such facts at the time of issuing the bonds, the certificate of such official or officials will estop the municipality as against a bona fide holder of such bonds from proving its falsity to defeat them (Independent School Dist. v. New [C. C. A. 8] 111 F. 1, 55 L. R. A. 364), where there is nothing on the face of the bonds to show that the recital is untrue. Gunnison County v. Rollins, 173 U. S. 255, 270, 271, 19 S. Ct. 390, 43 L. Ed. 689; Chaffee County Com’rs v. Potter, 142 U. S. 355, 363, 12 S. Ct. 216, 35 L. Ed. 1040.”
Assuming, therefore, that there might have been conditions actually existing at the time of this election which would invalidate the bonds, what was there that the board of directors could do toward the examination of these bonds which could satisfy them as to their legality? Counsel has indicáted that they might have visited Covington. That would have been a very valuable acquisition of knowledge — see the town of Covington and find out that an election had been held. At the particular time when the bonds were purchased, nothing had been done, and nothing was done for some time thereafter, toward testing the validity of these bonds in court. But this court does not feel that it was the duty and the function of the members of the board of directors of ordinary banking intelligence to presume to pass upon the validity of a bond issue. They had employed a cashier in good faith, who had come highly recommended to them by one of the leading bankers of the state, and up until the time that the bank closed not one word of criticism had ever come to the directors which would cause the slightest suspicion as to the proper conduct of Chatbum and Eitzgerald. Eitzgerald had purchased the controlling interest in the Billings bank; he was the president of the American State Bank at Covington; was the city treasurer; and those directors had a right to assume that the cashier and, in effect, the managing director had exercised reasonable business judgment in the purchase of these bonds. These bonds bore 6 per cent, interest; they were good bonds at the time they were purchased so far as these directors knew.
It is true that Eitzgerald knew that he had no right to sell these bonds; that he was holding them as city treasurer of Covington; ' that he had no right to put them in the assets of the Covington bank, and that when he sold the bonds to the Billings bank, that he was perpetrating fraud and deception on that institution. Chatbum, the cashier of the Billings bank, more than two years prior to the close of the bank, knew that there was a serious question as to the validity of these bonds, that they had been held void by the district court of Garfield county, and that the case was on appeal to the Supreme Court, and that that information should have been disclosed by him to the board of directors; but he, at the suggestion and request of Eitzgerald, said nothing to the other members of the board of directors. Clearly the conduct of Eitzgerald and Chatbum was reprehensible and also constituted such a violation of the national banking laws as to make them hable under the complaint filed herein.
As to the defendants Pierce, Frazier, Back, and Adrianee, there is no evidence in this ease that their conduct was anything but in good faith or that they knowingly or willfully violated any regulation governing national banks, or in fact that their conduct was anything other than that which would have been expected of ordinarily careful and prudent persons in their places.
Judgment will be rendered as prayed against defendants Fitzgerald and Chatbum. Judgment will be rendered in favor of defendants Pierce, Frazier, Back, and Adriance. Proper form of judgment may be prepared and submitted consistent with this opinion. An exception is allowed the plaintiff and to the defendants Fitzgerald and Chat-bum. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219433/ | MeCLINTIC, District Judge.
At a term of this court, which was held at Bluefield beginning on the 20th day of June, 1933, an indictment was returned by the grand jury at such term against one, William Mullens, and also an indictment was returned by the grand jury at such term against one William R. Albert. Each was tried and convicted by a jury, and each was sentenced to a term in the federal prison, and on the 22d and 23d days of June, 1933, -respectively, the court, by virtue of process issued under the laws of the United States, committed William R. Albert and William Mullens to the Mercer County Jail, at Princeton, W. Va., in this district, to await transportation to the place at which their sentences were to be served.
At the request of the county authorities of the county of Mercer, the sheriff of Mercer county, the defendant J. C. Fanning was directed to keep William R.' Albert until after he had testified as a witness in a criminal ease pending in one, of the courts of such Mercer county. William Mullens, by coun*413sel, requested that the sentence in his ease be suspended until he could make application for an appeal to the Circuit Court of Appeals for the Fourth Judicial Circuit. Accordingly, his sentence was suspended for a sufficient time to enable his counsel to prepare the proper bills of exception, and apply for an appeal.
Both Albert and Mullens, while thus in the charge of the defendant Fanning, as sheriff of Mercer county, and of Thornton, as jailer, appointed by Fanning, escaped from the Mercer County Jail about the hour of 12 o’clock m. on Thursday, the 3d day of August, 1933.
The record in this proceeding shows that the defendant Fanning was duly elected sheriff of Mercer county on the 8th day of November, 1932, and assumed the office and duties of sueh sheriff on the 1st day of January, 1933, and by virtue of the laws of the state of West Virginia, he, as sheriff, became, from the time he assumed office as such, chargeable with the duties of the office, and likewise it became his duty to assume the custody of the inmates and prisoners in the Mercer County Jail and be responsible for the safe-keeping of sueh prisoners, and to discharge or release such prisoners only upon the expiration date of their respective sentences, or upon the proper order from a court of competent jurisdiction, and in the case of prisoners placed in his custody by the United States marshal, awaiting transportation to a federal prison, to which they were sentenced, until the further order of such marshal or sueh District Court.
The defendant C. W. Thornton was duly and legally appointed jailer of the Mercer County Jail on the 1st day of January, 1933, and on that date assumed the duties thereof, and remained continually as day jailer, in sole charge of the jail and the prisoners therein, until and including the 3d day of August, 1933. He was required to be on duty from 7 o’clock a. m. until 7 o’clock p. m. of each and every day during that time. A Mr. - Long was night jailer, and was required to be on duty from 7 o’clock p. m. of each day until 7 o’clock a. m. of the next day.
The record further shows that on the 1st day of January, 1932, the United States entered into a contract with the then sheriff of Mercer county, wherein the parties thereto mutually agreed, among other things, as follows : “1st. That during the period of this agreement, the party of the first part agrees to receive federal prisoners, committed by process or order issued under authority of the United States, and to provide for their safekeeping, care and subsistence.”
This contract was in force during the year 1933, and it was under this contract that the prisoners, Mullens and Albert, were received at the Mercer County Jail.
■ Under this contract, there was paid by the United States to Sheriff Fanning, for the period from the 1st day of January, 1933, to the 1st day of August, 1933, for the keeping and subsistence of prisoners of the United States, the sum of $3,100.35.
Under the law of West Virginia (chapter 7, article 8, § 2 of the Official Code of 1931), the sheriff of each county becomes the keeper of the jail, but he may, with the assent of the county court, appoint one or more jailers. Sueh jailers may be deputies of the sheriff, and shall take an oath like other officers. Such jailers are removable at the pleasure of the sheriff.
This section further provides certain duties for the sheriff and jailer, and makes the failure on the part of the jailer to perform any of the duties therein required, with respect to any prisoner in his jail, a contempt of any court of record under whose commitment such prisoner is confined, and shall be punished as contempt of sueh court.
“It is the duty of sheriffs, as ex officio jailers of their counties, to keep literally in jail persons sentenced to confinement therein, except when at labor under some statute authorizing their employment at work as therein directed.” State v. Cyrus, 83 W. Va. 30, 97 S. E. 412.
Section 8 of the article and chapter mentioned above provides that the jail of any county may be used for the confinement of persons committed thereto under the laws of the United States, and the jailer thereof shall receive, keep, and discharge such persons pursuant to the commitment, as provided in the laws of the United States.
Under the law of the state of West Virginia, and the contract with the sheriff, the United States had the lawful right to the use of sueh jail in which to confine prisoners committed by the authority of the United States, and the defendants were charged with responsibility for the execution of the writs of the United States court, as keepers of such jail, and for such purposes they were officers of the United States District Court for the Southern District of West Virginia.
On the 29th day of December, 1933, the district attorney, in due form of law, filed an *414information, charging Fanning and Thornton with voluntarily sjiffering and negligently permitting Mullens and Albert to escape from the jail, in the manner and method set out in such information, and with obstructing the administration of justice, and willfully permitting the escape of such prisoners, and a citation was issued, directing Fanning and Thornton to show cause, on the 16th day óf January, 1934, why they and each of them should not be adjudged in contempt of this court.
On that day, each of them appeared, in person and by counsel, and filed their separate answers and returns to such information, so filed.
Later, on the 24th day of January, 1934, the United States, by its district attorney, and each of the defendants, by their respective counsel, appeared, and the court heard testimony relative to the matters and things set up in such information and in such answers.
It was proven that there was an average number of prisoners in this jail, for the period of seven months, from January 1, 1933, to August 1, 1933, of 165 for each day; that the number of prisoners seldom, if ever, ran less than 135, and on some special occasions exceeded the number of 200 at one time; that the defendant Thornton was a man sixty-five years of age, and had had no previous experience as a jailer or in work of like nature; that the only two persons employed by the sheriff, in connection with the keeping of the jail, were Thornton and Long; that no guards or assistant jailers were employed; that under these two jailers, there were employed a number of prisoners in the jail, under the title of “trusties,” who performed the duties of cook and cleaners, and in effect guards, for the conduct of the prison and the control of those incarcerated therein.
These “trusties” were appointed or named by the sheriff alone. Apparently no record was kept of their names or the times of such employment, and it was not shown in the evidence (although asked for) how many there were at any one time. However, it seems plain that the number must have been from 7 to 10, including all those classed as such in the whole jail. No salaries or wages -were paid to these trusties, but they were given many privileges, such as being allowed to go out of the prison, to visit their homes, to spend week-ends with their families, and not to be locked in their cells, as other prisoners were, and to be allowed the run of the jail.
Apparently, these privileges were considered by the sheriff and the trusties to be full payment for the work done by them in. the conduct of the jail. As stated, no money was paid to these trusties by the sheriff for any of their work.
There was paid to each jailer the sum of $126 per month, which, for seven months, would amount to the sum of $1,764.
There was paid to the sheriff, for the keeping and subsistence of state prisoners, the sum of 42 cents per day for each prisoner, and there was paid to the sheriff for the keeping and subsistence of federal prisoners the sum of 55 cents per day for each prisoner.
Thus, taking the average of 165 prisoners for each day, at 42 cents per day, the sum paid to the sheriff for their keeping would be $70 for each day. For 212 days (being the number of days from January 1 to July 31, 1933, inclusive), the total payment to the sheriff therefor would be the sum of $14,840.
As stated above, the payment by the United States to the sheriff for the 212 days was the sum of $3,100.35, which, at 55 cents per day, would amount to the number of 5,637 days. The additional payment of 13 cents for each of these days would amount to the sum of $732.55. For the sake of convenience leaving off the $2.55, the total paid to the sheriff would be $15,570 for the 7 months.
The evidence tended to show that the cost of the food for each prisoner per day was about the sum of 20 cents for each day, although the general belief is that, in many of the jails, the amount is less than that. However, at 20 cents a day for 165 prisoners, the cost would be $33 for the food for one day, and for 212 days the amount would be $7,000. Adding to this sum the amount paid to the jailers, to wit, $1,764, and deducting the same from the total received by the sheriff, there would be left a net profit for the sheriff, for the seven months, of $6,806. In my opinion, this is the minimum, and, in fact, the profits for that period were likely more than this sum.
Under the laws of West Virginia, the sheriff is paid a salary fixed by statute, and the salary of the sheriff of Mercer county is fixed at the sum of $3,800 per annum, and this salary is intended to be in full for his services as such officer. The regular deputies were paid salaries by the county.
In addition, it was shown by the evidence *415that the son of Sheriff Fanning, a boy now eighteen years old, kept, in a place apparently provided for such purpose in the jail, such articles as candies, eigarets and other forms of tobacco, chewing gum, potted. ham and crackers, and possibly other articles, for sale to the prisoners, which sales, according to the evidence of the young man. who was attending school, were made by these trusties, and the profits came to him. The amounts of such profits were not shown by the evidence.
The,reason I set this out in this opinion is: Was it not gross negligence on the part of the sheriff to turn over to one man like Thornton, sixty-five years old, and without any proper experience, the management and control of an average of 165 prisoners confined in this jail? Thornton testified that his duties required him to keep the bool® — that is to say, the books which showed the incoming and outgoing of all prisoners — to receive all prisoners at the entrance while he was on duty, to receive all food supplies brought into the jail, and generally to be in sole charge of the jail, in all of its departments, while on duty.
He further testified that it was impossible to do this without the aid and assistance of the numerous trusties, who were, necessarily, not sworn officers, in any way, and who were confined in the jail for some crime, by order of some court.
The sheriff and the jailer each admit that they knew that Mullens and Albert were men of very bad reputation, each being a resident of Mercer county, and that they were generally regarded as outlaws therein.
The jail is what is called a new and modem jail, having been in use for only a short time — probably not more than a year — when the sheriff took office. It is situated on top of the building called the Courthouse building. The entrance is in the basement, where there is a locked, steel barred door from the outside. The jailer’s office is in this basement, and he has the opportunity, if he takes the proper seat, where his books are kept, to observe the entrance to the jail, the entrance to the elevator, which goes up to the third story, and the entrance to the stairway, which likewise goes up to the third story. The offices of the clerks, prosecuting attorney, and sheriff are on the first floor of the building. The courtrooms and the jury rooms are on the second floor of the building, with the jail on the top, or third, story of the building. The entrance to the jail proper is either by the stairway, from this basement, or by the elevator from this basement. There is a steel barred, locked door from the basement up the stairway. There is another at the top of the stairway, at the entrance to the jail proper. There is a portion of the jail called the “federal section,” where federal prisoners were usually segregated to themselves. There is another portion where colored men are segregated to themselves. There is another portion where the white state prisoners are segregated to themselves. There is another portion set off for the women. There is another portion set off for city prisoners.
Although I personally inspected the jail and the places where the federal prisoners were kept, and the cells from which Mullens and Albert escaped, I do not feel that I can give, on paper, an adequate description thereof, beyond saying that apparently it was the “last word” in jail construction, and that with proper management and supervision by attentive officers, there was no possibility of any prisoner escaping therefrom.
It is shown in the evidence that some days before the escape of the prisoners Albert and Mullens, information was given to the chief deputy United States marshal in this district at Charleston, W. Va., that these prisoners had saws and were sawing bars in the jail, with the expectation of escaping, and this information was promptly communicated to the jailer, the defendant Thornton. The defendant admits receiving this information, and upon examination it was found that in the portion of the jail where these prisoners were then confined, saws had been used for the purpose of making an opening through the iron bars, and a Ford jack, presumably brought in for the purpose of breaking certain bars at the window, was found, and a strong rope, capable of sustaining the weight of two men, was likewise found. Theh it was these two men were transferred to a part of the jail called the “sweat” cells.
On my own examination, and from the evidence, it seemed that with any reasonable supervision, it would have been impossible for any prisoners to have escaped from this last place.
There were four cells, with eight prisoners therein. The two federal prisoners were transferred there just one week before they escaped. With them went three state prisoners, and three other state prisoners refused to go.
The question of visitors to Mullens and' Albert becomes very important in this case. The evidence of the defendants themselves on this point is that after Albert and Mullens, were brought into the jail, there were only *416two visiting days, Sunday and Thursday of each week. However, the evidence is conclusive, in my opinion, that certain visitors were allowed to come to see these two persons, practically speaking, any day they wanted to from the time they were incarcerated, after their conviction, until they escaped. In other words, these prisoners had special privileges in the way of visitors, and the visitors were allowed to bring them articles, and hand them through the bars to them, without any inspection or investigation of any kind as to what they were. In that way, the saws and 'other implements were brought to them, whisky was brought to them, and especially did their visitors make the arrangements with them for their escape after they got out of jail. No proper, or in fact any kind of, supervision was exercised by the sheriff and the jailers over the visitors to these two prisoners. Thornton admits that after the removal of Albert and Mullens from the federal part of the jail to the “sweat cells,” he found saws and whisky bottles in the place which they had vacated. With the full knowledge of their previous attempts to escape, and with the full knowledge of what the visitors had brought to them, yet they were permitted to have these same visitors in the sweat cells, without any investigation or supervision of the visitors, or search of them, or search of the articles which were brought by them.
On the Sunday preceding August 3d, Thornton admits taking a victrola to the cell occupied by Mullens, a privilege never before or since given to any other prisoner.
A woman by the name of Mrs. Kelly was a very frequent, if not almost a daily, visitor to see Mullens. She was allowed the privilege of getting as dose to him as the open bars would permit, and they were given seats on either side of the bars, and had communication with each other for long periods of time, sometimes as long as an hour and a half or two hours. She was permitted to bring various packages and hand them to Mullens, without search, let, or hindrance. One cannot help but infer that there was an agreement or conspiracy, between this woman and one or more of the trusties, to admit her at any time she wished to enter the jail.
The evidence shows that the trusties distributed liquor in this jail while Albert and Mullens were prisoners therein.
After Albert and Mullens were incarcerated in the sweat cells, they sawed completely two iron bars, so that when they wished they could escape (the exact date of such sawing is not conclusively shown, but it was some time between Sunday and Thursday of the week in which they escaped).
Thursday, the 3d day of August, 1933, was another of the visiting days. On that day the elevator was not running, because the county court thought the expense of the electricity was too heavy, so the entrance to the jail proper on the top floor was by the stairway. As stated before, this stairway had four steel barred doors, but on that fated day each was wide open, and any one could visit the top floor of the jail without let or hindrance, and any one could likewise,' without let or hindrance, if they were not locked up in the cells of the jail, go out of the jail by this way.
Mrs. Kelly visited the prisoners, as usual, without search or supervision, and went out to provide the automobile for the eseape of the prisoners. She placed it at a point convenient to the jail entrance. Thornton was called to the portion of the jail where the colored prisoners were kept, by a helpful trusty, to quell what was no doubt a pre-arranged disturbance for the purpose of getting his attention. He had to go by the.door of the sweat cells on his way to this other portion of the jail. Mullens and Albert kicked out the sawed bars, Mullens crawled through the hole first into the corridor, and immediately went down and got into the automobile; Albert followed through the hole. Then three of the state prisoners followed. They stood, for a few minutes, in a recess where there was a shower bath. Then they went down the stairs, like Mullens had done before them, and all of them got into the automobile provided by Mrs. Kelly and departed.
One of the trusties, the cook, was seated in the basement office, talking over the telephone to a relative, and, happening to glance up, saw the last ones going out of the jail. The sheriff was conveniently absent. After-wards the sheriff claimed that he made every effort to recapture them. The three state prisoners came back and gave themselves up. Albert later was either arrested, or gave himself up, when he was pursued by federal officers. Mullens is yet at large. The sheriff, by his answer, and in his evidence, stresses his search for Mullens after his eseape; but his diligence, if real, comes too late.
The specific charges of negligence on the part of the sheriff are:
First. That he put one comparatively old man, without any experience in that kind of work, in charge of a prison in which there were never less than 135, and usually more, prisoners at one time, all sentenced to jail or *417awaiting trial, or having been tried and sentenced and awaiting transportation to some penitentiary.
Second. Instead of employing, out of the ample funds derived from the allowance for the keeping and subsistence of prisoners, the proper persons for such duty, he, by means of giving privileges to prisoners, made some of them into so-called guards, under the name of “trusties.”
Third. Allowing the trusties virtually to have control, of the jail and of its inmates, and to admit visitors to favored persons, like Albert and Mullens, at, practically speaking, any time they wanted to come in, and permitting special privileges to them when they got in.
Fourth. In permitting visitors, whether on visiting days, or any other day, to come into the jail without proper search of the articles which they had, and without proper search of their respective persons for weapons, saws, jacks, or anything else that might be useful to the prisoners in escaping, or doing any other criminal act in the jail.
Fifth. With full and complete knowledge of the outlaw reputations which Albert and Mullens were known to have, in not especially examining and testing the bars of the cells wherein they were incarcerated for the last week before their escape, and in not especially having the jailer, or some other officer, present at any conversation between them and any visitor, and in not making a full and complete search of every visitor coming to see them, and a full and complete search of every package of every kind that such visitors might want to deliver them, or either of them.
In reference to the first specification, it is proper to call attention to the fact that after the escape, the sheriff showed plainly that he recognized his own negligence in making Thornton jailer by first transferring him from the position of day jailer to that of night jailer, and, second, by absolutely dismissing him on the 4th day of October, 1933.
It appears, from the evidence, that prior to his nomination and election, the sheriff promised the defendant Thornton, presumably for political reasons, to make him jailer if he were elected to the office of sheriff. After his dismissal, Thornton, on the 12th day of December, 1933, together with some other persons, filed certain charges in the circuit court of Mercer county, under chapter 6, article 5, § 6, of the Official Code of West Virginia, to have the sheriff removed from office, because, in violation of such law, the sheriff had, when expecting to hold the office of sheriff of Mercer county, contracted to sell and let to farm such office, and had agreed and contracted to share with another person a part of the emoluments of such office. In such charges it was averred that the defendant Fanning had entered into a contract with one C. W. Caffee, by which Caffee was to share with the defendant Fanning a' part of the emoluments of the office of sheriff, to wit, 40 per cent, of the net profits to be derived from the feeding of prisoners confined in the county jail of Mercer county; also, a contract with one J. H. McMullen to appoint him to the office of court deputy of Mercer county; and also, he agreed, in the event of his election, to appoint one J. E. Kade as one of his deputies, and that Kade should have the privilege of purchasing all of the supplies for the jail, for the feeding of the prisoners confined therein. Incidentally, Kade is now day jailer at such jail.
The law required five signers to such charges, and it is plain, from-the evidence, that the defendant Fanning, or some of the deputies interested with him in the office, succeeded in getting two of the five signers to withdraw their names, and the court dismissed the first charges.
Again, on the 28th day of December, 1933, Thornton, through his counsel, again succeeded in having charges filed, based upon the same allegations, for the removal of Sheriff Fanning, and, as shown by the evidence, and admitted by Fanning, this public proceeding was, in my opinion, improperly and illegally compromised by the payment, on the part of Fanning, or some one for him, to Thornton of the sum of $400, and Thornton was permitted to withdraw the charges.
It was gross misconduct on the part of Sheriff Fanning to make the promise he did to Thornton, and in view of the danger to the public, it was worse, if possible; to appoint him to this position of jailer when he ¡became sheriff, and I cannot imagine anything worse than his contract with Caffee to pay him 40 per cent, of what they are pleased to call “profits” from poor starving jail prisoners, and the man who takes such dirty money is 'no better than the man who promises to give it.
It was evident, from the appearance of Thornton, that he was not physically able to cope with prisoners, and I cannot help but believe that if he had been in his office when the escaping prisoners came down the stairway, he would have amounted to nothing if he had attempted to stop them. He, himself, *418testified that when he went around to quell the disturbance in the negro quarters of the jail, he took a number of trusties with him for his own protection.
Therefore, under this specification, the evidence compels me to find as a faet that there was gross negligence at least, if not criminal carelessness, in appointing Thornton as the only official person in eharge of the jail from 7 o’clock a. m. until 7 o’clock p. m. of eaeh day.
Second. This specification is based on the faet that it is gross negligence, if not criminal carelessness,-to make persons either eonvieted of crime, or accused of crime, in effect, jailers and jail guards. The mere statement of the principle is sufficient, without any amplification by argument. It requires the sheriff to give them illegal privileges and opportunity for illegal profits, in return for the work done by them. In addition thereto, unless there is some special reason to the contrary, their sympathies, and, in any way they can, without hurting themselves, their help, is with the prisoners. The old adage still holds good, “A fellow feeling makes one wondrous kind.” Each one in jail wants his liberty. One cannot help but draw the inference from the evidence here that the unnamed, unproduced, and not found trusties were really controlled by Mullens, who was allowed to have all the money he wanted in the jail.
The third specification relates to the faet that, regardless of what Thornton and Fanning may say, the evidence proves conclusively that the good friend, Mrs. Kelly, was admitted whenever she really wanted to be, without supervision, and without being searched.
The architect of the jail had provided a place where inmates could talk to any visitors, and where it would have been impossible for the visitors to have gotten anything through to the persons on the inside. Other prisoners in the jail were compelled to talk in that way to their relatives and friends, but Mullens, being a favored prisoner, notwithstanding his reputation, was permitted to have his friend, Mrs. Kelly, come to the bars, which were a distance of three inches apart, and there be caressed by her, and anything that she desired to give him went through the bars.
Likewise, the trusties themselves brought him liquors, and likely other articles, and passed them through the bars.
The place provided by the architects for inmates to talk to visitors was a part of the iron door, and the holes therein were so made that one could not even put a eigaret through one of them, and probably not even a match. This situation again illustrates the old adage that in spite of everything the architect may do in the construction of a jail, such jail is not a safe place of confinement for prisoners without a jailer.
The fourth specification has been touched upon somewhat, but it is necessary to reiterate that no person, especially visitors to prisoners with the outlaw reputations of Albert and Mullens, should have been permitted, at any time, to see them without a proper officer being present to hear every word that was said between the visitor and the inmate, and without every package delivered to the prisoners being first carefully searched. This was especially true in this particular case, as both defendants had actual knowledge of the previous attempts to escape, and of the previous visits of Mrs. Kelly.
The fifth specification is but an amplification of the one preceding, with the addition that the jailer should have continually tested the bars of this sweat cell, after the removal of Albert and Mullens thereto. Previous knowledge seems not to have impressed upon the sheriff or the jailer the fact that added caution and care should have been exercised in the ease of these two prisoners. Instead of doing that, the jailer very kindly takes up a vietrola to them, a privilege never allowed to any one else, and also kindly carried up ice cream by the quart.
The sheriff attempts to make a point in his favor that Mullens was originally arrested with the help of one of his deputies, and that Albert was likewise so arrested. Just why this was brought in, I do not know, because he was arrested by Mr. Peterfish, a state policeman, Mr. Wilson, the chief of' police of the city of Princeton, and Mr. Bailey, deputy sheriff. Albert was arrested by Mr. Crawford, a state policeman, Mr. Stacey, a state policeman, and Mr. Bailey.
The record shows that the sheriff appeared as a voluntary witness for Mullens when he was tried in the federal court last June. His evidence was not very material, but apparently he wanted to be helpful.
Summing up the whole situation, here were two bad men, known to be such by the defendants, eaeh sentenced to a long term m the federal penitentiary, eaeh known to have attempted to escape, eaeh known to have had saws and other implements, to be used for the purpose of escaping, delivered to them; yet, notwithstanding this especial knowledge *419on the part of each of the defendants, nothing* was done for their safe-keeping except they were placed in another cell, where, presumably, there were already five dangerous prisoners.
Necessarily, I am compelled to find as facts the five specifications set out above.
Then, as a conclusion of law, on the basis of those findings of fact, I necessarily hold that the defendant J. C. Fanning and the defendant C. W. Thornton are guilty of actual contempt of the orders of this court. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219434/ | McCLINTIC, District Judge.
This is a suit instituted by the complainants against Gulf Smokeless Coal Company, a corporation, in 1926, for the purpose of obtaining an injunction to restrain the alleg-ed infringement by Gulf Smokeless Coal Company of certain patent rights claimed by the complainants, Sutton, Steele & Steele, and their licensee, American Coal Cleaning Cor*420poration; to require an accounting by the defendant by reason of its alleged infringement, and to recover gains, profits, and advantages accruing to the defendant by reason of its alleged infringement and damages resulting therefrom to the complainants. Roberts & Schaefer Company appeared in the proceeding, assumed the defense of the suit, and was made a party defendant. There was entered in the cause on July 20,1928, a decree adjudging the patents of the complainants valid and infringed by the defendants Gulf Smokeless Coal' Company and Roberts & Schaefer Company. That decree provided that the complainants recover from the defendants the profits, gains, and advantages which the said defendants had received or made or which had arisen or accrued to them by reason of the complainants’ inventions and letters patent and also the damages which the complainants had suffered by reason of the infringement; and the cause was referred to Luther G. Scott as master to ascertain, state, and report an account of the extent of said infringement, of the profits, gains, and advantages which the said defendants had received or which had arisen or accrued by resuson of their infringement, and to assess the damages suffered by the complainants by reason of said infringement. Further, by that decree, the defendants Gulf Smokeless Coal Company and Roberts & Schaefer Company were enjoined from making, selling, or using any device or apparatus infringing the patent rights of the complainants.
From the said decree, an appeal was prosecuted to the United States Circuit Court of Appeals, Fourth Circuit, where the cause was heard as ease No. 2825 and decided on October 15, 1929, 35 F.(2d) 433. The said appeal presented three questions: (1) Whether the patents sued on were valid; (2) if so, whether the coal company had been guilty of infringement; and (3) whether the court acquired jurisdiction of Roberts & Schaefer Company. Each of the three questions was resolved in the affirmative, and the decree of this court was accordingly affirmed. A petition for rehearing was filed, and, by per curiam opinion handed down November 18, 1929, denied. (C. C. A.) 36 F.(2d) 224. On December 18, 1929, a petition for certiorari was filed in the Supreme Court of the United States; but this petition was denied, 280 U. S. 609, 50 S. Ct. 158, 74 L. Ed. 652, and the mandate of the Circuit Court of Appeals received in the clerk’s office of this court on January 17, 1930.
Thereupon Luther G. Scott, as, special master of this court, proceeded to execute the decree of reference, holding hearings, taking testimony, and considering argument, as set forth in his report filed herein. Pending that hearing, a petition was filed in this court by the defendants, seeking to limit and confine the inquiry before the master to the infringement of complainants’ patents at the, Covel Mine of the defendant Gulf Smokeless Coal Company. That petition was denied.
To the report of the master commissioner both the complainants and the defendants made timely exceptions, the complainants submitting fourteen exceptions, Gulf Smokeless Coal Company two exceptions, and Roberts & Schaefer Company nine exceptions. Upon their several exceptions counsel for the respective parties have submitted their briefs and oral argument.
Much emphasis is placed upon the bona fides vel non of the defendant Roberts & Schaefer Company in respect to their infringement. And properly so; since, if they were innocent infringers, they should be held to one measure-of accountability and to another if they have, in reckless disregard of the rights of others, deliberately for their own profit infringed upon these patent rights, consideration of the whole case, the testimony of the witnesses taken ore tenus in the infringement suit as well as the further evidence taken before the master, the circumstances under which the defendant was informed of these cleaning tables and plans of the complainants to develop the business of producing and selling them, the difficulty in reaching an agreement as to the compensation to Roberts & Schaefer Company for selling the same under a contract over an extended period, the reluctance of the witness Arms to agree to the proposed contract and especially to the payment of consideration for sale of auxiliary equipment, the development of infringing tables while continuing to sell those of the complainants, the sale of infringing tables after notice from the complainants of their claim that these tables did infringe their patent rights and during the long period the issues between the parties were undetermined at a price scarcely in excess of what is now represented to be the cost of production, so as to take all available business with no appreciable profit to be accounted for should the issue of infringement be decided adversely — a full consideration of all these things can leave no doubt of the fact, clearly apparent from the record in this case, that the defendant Roberts & Schaefer Company designedly and willfully set about contriving *421means to take from the complainants business which they could not obtain under acceptable contractual terms, and so cannot be regarded as innocent infringers.
It appears that the defendant Roberts & Schaefer Company manufactured and sold to coal operators in the United States 96 tables held to infringe complainants’ patent rights, and that 9 such tables were manufactured and sold for use outside of the United States. Inasmuch as the infringement by this defendant was through manufacturing and selling, all of which was accomplished, and to the advantage of the defendant, in the United States, no sufficient reason occurs to me why the defendant should not be held to account for all tables so manufactured and sold by it, and, accordingly, the first exception by the complainants will be sustained to the extent of holding the defendant Roberts & Schaefer Company accountable for 105 machines instead of 96, as found by the special master.
Rinding, as I do, that this defendant deliberately and wrongfully set about the infringement for which it is called to an accounting, I cannot feel that it is entitled to be accorded those considerations recognized in proper eases in respect to the innocent infringement of patent rights, and I am of opinion to sustain the plaintiffs’ exceptions 2, 3, 4, and 5 as to the allowance of depreciation, interest on the investment of Roberts & Schaefer Company in the building and equipment used for producing the infringing tables, and apportionment of profits on account of other patented parts included in the infringing tables; and by the same token I would overrule the defendants’ exceptions 1 and 2. This is more clearly proper in view of the fact, as appears from the evidence, that the profits accounted for were those produced only by the manufacture and sale of these tables, and did not include any profits on auxiliary equipment manufactured or sold in connection with these tables, from which this defendant undoubtedly derived substantial profits in addition to those shown in its accounting. But this becomes of little practical importance by reason of the larger recovery for general damages which undoubtedly will be taken instead of the recovery of profits.
The special master’s finding that the 96 tables sold by the defendant Roberts & Schaefer Company represented sales lost to the complainants is sustained, except that the number of sales, as heretofore stated, is increased to 105. It plainly appears from the evidence that the complainants were ready and prepared to supply tables for the infringing sales, that their patent rights gave them a monopoly in the field until invaded by the defendants’ infringement, and that this was done because the industry demanded such a process as complainants’ patents covered.
Exact ascertainment of the damage resulting to complainants by reason of the infringing sales is, of course, not only difficult but impossible of accomplishment, but it is perfectly apparent from all the evidence that the complainants were seriously and greatly damaged in the exploitation of their patent rights by the infringing sales contrived in furtherance of a sales campaign initiated for the development of complainants’ business. The exact damage not being proved or susceptible of calculation and determination with reasonable certainty, the special master properly fixed an amount of recovery by way of general damages. USCA title 35, § 70. The amount fixed, viz., $1,000 for each of the 96 machines sold, is certainly not an excessive allowance, and is accordingly, sustained, but as to 105 machines instead of 96.
In addition to the direct damages attributable to sale of infringing tables, the complainants claim a considerable sum by way of damages in the nature of lost profits on sales of auxiliary equipment to be used in connection with the cleaning tables. There is no doubt that the tables required for their operation considerable auxiliary equipment, it being estimated by one witness that the sales value of such equipment would be approximately $15,006 for each cleaning table, and this estimate was corroborated by the special master, who found that, in connection with 63 of the infringing tables, auxiliary equipment and engineering services were provided by the defendant at a price averaging $16,-233 per table. It is apparent also that such sales were profitable, and division of the profit resulting therefrom was the rock upon which broke the negotiations between American Coal Cleaning Corporation and Roberts & Schaefer Company for sales representation. The sale of this auxiliary equipment was in line with the established business-of Roberts & Schaefer Company, and it is perfectly apparent that its interest might have been advanced by selling the infringing tables at a small enough profit to capture the markets and augment that profit through sales of additional equipment. But the claim here asserted is for indirect damages; and, while it is presented with much plausibility, it does not appear to have been substantiated with such proof as is necessary to sustain a reeov*422ery of indirect damages. Accordingly, the complainants’ seventh exception to the special master’s report should be overruled.
In like manner I find that the complainants have failed to establish their claim for damages in their alleged loss suffered by rear-son of reduction in the price of their tables because of the competition of defendants’ infringing machines and would overrule complainants’ exception No. 8. While it does appear that the defendant put its machines upon the market at a price greatly below the list price of the complainants’ tables, and that the complainants in their competitive sales thereafter did sell their tables at a price below the list price, it does not appear from the evidence with that certainty or sufficiency necessary to sustain a recovery of damages just what reduction in price was made on the several sales shown in evidence, nor that the offering of the infringing tables in the market at a lower price forced the reduction. It is significant that no evidence is offered to show re-establishment of the higher price price claimed by complainants after the infringing sales were enjoined.
This proceeding, commenced in June, 1926, has of necessity entailed very considerable litigation expense, $27,109.63 in connection with the infringement suit and the further sum of $16,510.08 in connection with the accounting up to June 1,1931, or a total of $43,619.71. This litigation was made necessary by the defendant’s infringement continued for a great while after full notice of complainants’ claim. The nature and extent of the trespass provoked litigation necessarily attended by considerable expense; and, while such expense is not commonly allowed as an item of recovery in such suits, it is not to be disregarded in determining the sufficiency of general damages allowed on the basis of proved losses. Having in mind the deliberate nature of defendant’s infringement in this ease and the showing made in respect to complainants’ expense in prosecuting this suit, I do not think the special award of $14,400 is enough, but would increase that to 40 per cent, of the principal sum, viz., $105,000, making a total of $147,-000.
The award of general damages, being for the infringing sales, should carry interest from the date such infringement ceased. The special master’s award should, accordingly, be amended to include interest upon the full rev covery by way of general damages, viz., $1,-000 for each of the 105 machines sold from October 15, 1929, the date on which the infringement ceased. And the additional award of 40 per cent, should bear interest from the date of the master’s report.
The complainants in this case seek to recover the gains, advantages, and profits resulting to the defendant Roberts & Schaefer Company from their infringement by manufacturing and selling, and in addition the gains, profits, and advantages resulting to the Gulf Smokeless Coal Company and other vendees of Roberts & Schaefer Company from their infringement upon complainants’ patent rights through use of the infringing tables. Undoubtedly the complainants are entitled to recover the profits shown to have resulted from the infringement by manufacture and sale, and, in addition thereto, profits shown to have resulted from infringement by use. The right to the use of the patented process is as much the- exclusive property of complainants as is the right to manufacture and sell. But, if the complainants should receive and accept a recovery by way of general damages for the sale of a specific table, such acceptance would operate to adopt the sale of that table as a sale by complainants themselves, and therefore preclude any recovery for its use. Only one user of the infringing tables is a party to this suit. It appears that Roberts & Schaefer Company in selling these tables to the various users agreed to protect them in respect to patent rights, but it does not appear that Roberts So, Schaefer Company participated to any extent in such profits or advantages as may have resulted to their vendees from the use of these tables. For this reason there can be no recovery in this suit from Roberts So Schaefer Company of gains or profits resulting to the various coal companies to whom they sold these tables, notwithstanding their use was an infringement of the complainants’ rights. Such a recovery could not be regarded as damages to be had from a contributory infringer as from a joint tort-feasor. There being no evidence that their tables were let upon a royalty basis by the complainants, it could hardly be said that their use by purchasers from Roberts & Schaefer Company damaged the complainants beyond such profits as the sale of those tables would have yielded.
The defendant Gulf Smokeless Coal Company purchased from Roberts So Schaefer Company and used 6 tables, which have been held to infringe the complainants’ patents. With these tables coal to the amount of 386,-194 tons was treated, and, if you would take the statement of the defendant, at a loss of more than $175,000. But, notwithstanding *423such loss, and with notice that the complainants claimed the tables infringed their patent rights, they were continued in use down to the time of the accounting, and that notwithstanding the injunction order. It is inconceivable that such use would have continued, and especially after the injunction of this court had issued, if it were not profitable and advantageous. The witness Tams sets up a conceded advantage or profit amounting to 20 cents a ton, which, however, he more than offsets by operating costs, depreciation, interest, etc.
An accountant representing the complainants examined the books and records of that defendant, and reports a net profit attributable to the use of these tables amounting. to $160,292.21. This finding appears to reflect a record profit, but it seems to have been produced by the cleaning and grading of the coal, with the result that it is impossible to allocate any definite part of such profit to the use of the infringing tables. The special master reported that there was no possible way by which the benefits accruing from the treatment of this coal could be accurately calculated, but, because it would appear that there were gains and advantages resulting to this defendant from its use of the infringing tables, the special master allowed to the complainants for a reasonable sum as profits 1% cents per ton; that being the amount he had arrived at as a reasonable royalty recoverable by complainants for the infringing use of tables in- violation of their patent rights if recovery should be allowed on that basis. The master appears, however, to have based that allowance upon the selling price and life of the tables rather than upon the advantages accruing to the coal from use of the tables. So I do not think that a proper unit of calculation to be used in determining a reasonable recovery from Gulf Smokeless Coal Company for advantages resulting from its infringing use of these tables.
In considering generally the advantages resulting from the use of the tables in question, the special master found a gross advantage of 32% cents per ton to be a fair average result. To obtain this advantage there was, of course, the expense of operation, and this does not appear to have been shown with certainty. Having in mind the advantages which undoubtedly accrued to this defendant from the use of these tables, I am of opinion, from the evidence before me, to allow the complainants a recovery from Gulf Smokeless Coal Company of $12,551.30. And I would allow interest upon this sum, just as in the master’s report, from January 1, 1930.
From what has been said, it follows that, if the complainants would take this recovery from Gulf Smokeless Coal Company, then they must forego the recovery in the amount of $1,000 each by way of general damages for the sale of the tables sold to this defendant.
The cost of the accounting should be paid by the defendants.
Let a decree be prepared passing upon the several exceptions in accordance with the holding here indicated. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219169/ | FRANK J. COLEMAN, District Judge.
Motion by the defendant to dismiss the complaint on the ground that it does not state a cause of action. The sole question is whether or not.in paragraph 14, § 103-, of the Revenue Act'of 1928 (26 USCÁ § 2103 (14), the word “organized” can be taken to relate to more than the mere certificate of incorporation. Unquestionably this plaintiff was so equipped and manned that during the tax periods in suit it was necessarily confined in its activities and operations to “the exclusive purpose of holding title to property,” etc.; but under its certificate of incorporation it had authority from the state of New York to engage in other' activities.
The justice of the situation, apart from legalisms, is quite plain. Undoubtedly, it was within the .policy of -Congress to exempt the plaintiff during these periods. The only question is whether or not the words used in the. statute are sufficient to give effect to the congressional purpose in this instance. A strict construction in which the word “organized” would be given its ordinary meaning of having powers specified in the certificate of incorporation would, unquestionably,' make the plaintiff liable for the taxes in suit, but it seems to me- that it is possible without doing violence to the language to stretch its meaning so as to .have it include the actual organization regardless of the legal powers given it by the state. The plaintiff was not equipped nor manned in such a way as to exercise its powers, and I believe it may be held that they were outside the scope of its- organization. I, therefore, deny the defendant’s motion with leave to .answer within ten days. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219170/ | KNIGHT, District Judge.
Defendant Ben Levin was engaged in business in the city of Detroit, Mich., under the name of Tilben Cutlery Company. On the morning of February 11,1933, a shipment of goods was delivered to him by the Railway Express Agency, Inc. Payment for the goods was made by means of a cheek for $719.51, on the First National Bank-Detroit, Mich., drawn to the order of the Railway Express Agency. The bank closed at 12 o’clock of the same day, and has not reopened for business.
The plaintiff asserts that at the time of *346delivery the cheek of defendant had been certified by the bank. Defendant’s pleading admitted this, but on the trial defendant contended that the certification was procured by the plaintiff subsequent to its delivery, and that he is thereby relieved from liability under section 9437 of the 1929 Compiled Laws of Michigan. This sections reads as follows: “Where the holder of a check procures it to be accepted or certified, the drawer and all indorsers are discharged from liability thereon.”
Defendant also has raised the contention that no consideration passed from plaintiff in its capacity as principal to defendant Levin, and that plaintiff is barred by institution of its suit against the bank by reason of election of remedy and estoppel.
The evidence preponderates that defendant Levin procured the cheek to be certified before delivery of it to the plaintiff. Orchard, agent of plaintiff, testified that the cheek, when delivered to him, was certified. Plaintiff’s records in evidence bear an indorsement showing delivery of the express order at 10:45 a. m., and other facts and circumstances were shown which tend to corroborate the testimony of the agent.
At the time of trial defendant argued that his discharge was effected whether the certification of the cheek was obtained by the payee or the drawer. At that time citation was made of First National Bank of Washington v. Whitman, 94 U. S. 343, 24 L. Ed. 229. I have been unable to find any ease supporting the observation there expressed to the effect that it is not important whether the certification is secured by drawer or payee. On the contrary, courts in many jurisdictions have found that the question is of importance. The distinction seems to be that certification by the payee is equivalent to payment, because payment could have been had at the time of certification and payee’s election to have certification and make the bank his debtor rather than receive payment should not prejudice the drawer. However, where the drawer secures certification, while the effect as between drawer and drawee is the same, there is no equivalent to payment of the payee. He has not had an opportunity to secure payment in cash, and the drawer by procuring certification cannot force the payee to accept the bank as his debtor to his prejudice. First National Bank v. Union Trust Co., 158 Mich. 94, 122 N. W. 547, 133 Am. St. Rep. 362; First National Bank of Detroit v. Currie, 147 Mich. 72, 110 N. W. 499, 9 L. R. A. (N. S.) 698, 118 Am. St. Rep. 537, 11 Ann. Cas. 241; Olsen v. Bankers’ Trust Co., 205 App. Div. 669, 199 N. Y. S. 700; Lipten v. Columbia Trust Co., 194 App. Div. 384, 185 N. Y. S. 198; Davenport v. Palmer, 152 App. Div. 761, 137 N. Y. S. 796; Born v. First National Bank of Indianapolis, 123 Ind. 78, 24 N. E. 173, 7 L. R. A. 442, 18 Am. St. Rep. 312. The record disclosing that certification of the check in question was procured by the drawer, it follows that he -has not been discharged from liability to the plaintiff.
Plaintiff cites, as its authority for bringing action in its own name rather than that of its principal, section 9300 of the 1929 Compiled Laws of Michigan, which provides: “The holder of a negotiable instrument may sue thereon in his own name, and payment to him in due course discharges the instrument.” Defendant admits that this confers leave to bring the action, but asserts that it is no bar to the interposing of the defense of no consideration. Assuming defendant’s argument to be correct, this defense has not been proved. Defendant received the merchandise consigned to him, which would not have been the case had he not paid for it, either in cash or by check, at the time of delivery. The consideration for the check which he gave plaintiff is amply shown.
Defendant’s contention that plaintiff is barred from action against him by reason of its suit against the bank is not sound. Plaintiff has not elected to proceed against the bank alone but also against defendant Levin, which it had the right to do under the authorities above cited.
Let the plaintiff have judgment for $710.-51, and interest from February 11,1933, and costs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219171/ | KNOX, District Judge.
In 1914 plaintiff purchased thirty shares of the capital stock of Duryea Manufacturing Company for $1,875. In 1916 he received an additional sixty shares of stock by way of a stock dividend of 200 per cent, upon his original holding. In acor dance with section 2 (a) of the Revenue Act of 1916 (39 Stat. 756, 757), which taxed stock dividends as income, and pursuant to the provisions of paragraph 373 of Regulations No. 33 of the Commissioner of Internal Revenue, plaintiff paid an income tax which reflected the cash value of the stock dividend, viz., $6,000, as taxable income. In 1918 he sold the ninety shares for $5,625. Acting upon his interpretation of the requirements of sections 201 (a) and (e), and 213 (a) of the Revenue Act of 1918 (40 Stat. 1057,1059,1065), which were practically identical with section 2 (a) of the 1916 act, and of article 1546 of Regulations 45, which provided the method for figuring the gain or loss on the sale of a stock dividend, plaintiff claimed a deduction of $2,250 upon his 1918 tax return. This sum represented .the difference between the cost of the original thirty shares, plus the $6,000 reported as income in 1916, and the selling price of the ninety shares. The tax shown to be due by the 1918 return was duly paid in installments during 1919.
On March 8, 1920, the Supreme Court decided the case of Eisner v. Macomber, 252 U. S. 189, 40 S. Ct. 189, 64 L. Ed. 521, 9 A. L. R. 1570, holding the levy of an income tax on stock dividends, as provided in the Revenue Act of 1916, to have been unconstitutional. Some months thereafter, and without further change in basic legislation, the Treasury Department thereupon issued Treasury Decision 3059. It revoked articles 1545, 1546 of Regulations 45, and amended article 1547 so as to provide that stock dividends should no longer constitute taxable income, but that the entire proceeds received upon the sale of such stock should be regarded as a taxable gain. Accordingly, in 1923, the Revenue Bureau refigured plaintiff’s 1918 tax return, and disallowed the deduction of the loss which plaintiff had taken on the aforesaid sale of stock. The effect of this procedure was to increase his taxable income to the extent of $3,750, and to create a deficiency tax liability of $2,151.17. Under protest, plaintiff paid the assessment thus made against him. He brings this action to recover the same.
Had plaintiff filed a timely claim for the refund of overpayment of the 1916 tax, after the decision of Eisner v. Macomber, supra, on the ground that the stock dividend had been unconstitutionally taxed, he could have recovered such overpayment. The decision that section 2 (a) of the 1916 act was unconstitutional rendered that section and the corresponding sections in the 1918 act null and void from the dates of their enactment, and made them as inoperative as though they had never been enacted. Chicago, Indianapolis & Louisville Railway Company v. Hackett, 228 U. S. 559, 33 S. Ct. 581, 57 L. Ed. 966; Norton v. Shelby County, 118 U. S. 425, 6 S. Ct. 1121, 30 L. Ed. 178. Under section 252 of the Revenue Act of 1918 (40 Stat. 1085), plaintiff had until March 15, 1922 (five years from the due date of his 1916 tax return), to file his claim for a refund. For some reason he failed so to do. In lieu thereof lie took steps to recover the tax paid upon the aforesaid deficiency assessment, and they have resulted in this suit.
Plaintiff places his chief reliance for success on the proposition that, if the intent of Congress, as expressed in the 1918 act, was not to tax the entire proceeds of the sale of the stock, that intent could not be altered so as to achieve a contrary purpose by the decision which held a tax upon stock dividends to be violative of the Constitution. His argument is that, so construed, the statute subjects him to double taxation, and that *348this is contrary to its end and design. Furthermore, he says the Commissioner of Internal Revenue was without authority so to construe the law, and to read into it an intent which it never carried.
This argument is based upon the assumption that the expressed intention of Congress, as set forth in the Revenue. Aet of 1918, was so specific and definite that the government could, under no contingency, regard the entire proceeds of the sale of a stock dividend as taxable income. In my opinion, this assumption is not well founded. Had the statute specifically contained such a provision, it is apparent that neither the Commissioner of Internal Revenue nor the Treasury Department could have required the payment of a tax upon such proceeds. But such is not the case. The aet merely deelarecl that: “A dividend paid in stock of the corporation shall be considered income to the amount of the earnings or profits distributed.” Section 201 (e).
In the course of administering this provision, article 1546 of Regulations 45 was promulgated. That article — and not the Revenue Aet — provided that only the difference between the sales price of the stock and “the valuation at which it was returnable as income” should constitute a taxable gain or loss. There can be no proper cavil with the regulation, the obvious design of which was to avoid the exaction of a double tax. Inasmuch as the stock dividend had already been taxed as income, the taxpayer, upon a sale of his stock, would have been liable to a double tax had the entire proceeds of the sale been treated as taxable income.
But, upon the decision of the Supreme Court, in Eisner v. Macomber, supra, the officers charged with the administration of the aet were confronted with a new situation. They were faced with the necessity of conforming their regulations to a statute which, by judicial decision, had been drastically - changed, and which, after the change, contained no provision for the imposition of a tax on stock dividends. As the aet then stood, it would have been not only improper, but impossible, for the purpose of ascertaining a taxable gain upon the sale of stock received as a dividend, to take as the cost value of the stock “the valuation at which it was returnable as ineome.” Accordingly, the administrative officials of the Treasury Department recast their Regulations to fit the Revenue Aet as it then existed.
Section 202 (a) of the aet provided:
“That for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, the basis shall be—
“(1) In the ease of property acquired before March 1, 1913; * * *
“(2) In the case of property acquired on or after that date, the cost thei’eof; or the inventory value, if the inventory is made in accordance with section 203.” (Italics mine.)
Obviously, since the cost of a stock'dividend was nothing, the difference between such cost and the price at which the dividend was sold would always be the entire proceeds of the sale.
This section, it is true, was in the statute as originally enacted. Nevertheless, the Regulations had provided for the taxation only of such portion of the proceeds as was in excess over the valuation of the dividend that had been returned as income. In view of the fact that section 201 (c) already had taxed the stock dividend to the extent of its value when it was received, a contrary ruling would have subjected the taxpayer to a double tax. But, once that this section of the aet was no longer operative, there was no occasion for such a regulatory construction. From that time on, the amendment of article 1547 of Regulations 45, so as to impose a tax on the entire profit realized upon the sale of stock received as a dividend, was in complete accordance with the plain language of section 202 (a) of the Revenue Aet. The intent with which Congress had acted in passing section 201 (c) of the statute had now become academic. It may be observed that a legislative intent that is not in accordance with fundamental law need not be the subject of speculation. The purpose of Congress must be discerned from the context only of its valid enactments. The question before the administrative authorities was as to the natural and logical interpretation of the aet under its changed status.
Yery properly, therefore, the new article was so framed as to carry out the valid provisions of the Revenue Act. And, in adapting regulations to fit the requirements of the Revenue Aet, as it existed subsequent to the decision in Eisner v. Maeomber, the Commissioner of Internal Revenue usurped no power. He was confronted with a law that, upon its face, had been changed, and was compelled to alter his regulations to suit new conditions. Certainly he could not continue to govern himself by a provision of law that had been held authoritatively to be beyond the power of Congress to enact. It simply cannot be that, until Congress took action looking to a change in the statute, the Commis*349sioner was under a duty to collect taxes that were covered by a statute that had finally been held to be unconstitutional. To have done so would have been an idle imposition upon those whose incomes fell within the terms of the invalid statute, and he would have subjected himself to grave consequences. See Board of Liquidation v. McComb, 92 U. S. 531, 541, 23 L. Ed. 623; Woolsey v. Dodge, 30 Fed. Cas. page 606, No. 18,032, affirmed 59 U. S. (18 How.) 331, 15 L. Ed. 401. Cf. Ex parte Young, 209 U. S. 123, 167, 28 S. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764.
I cannot but see, notwithstanding the misfortune of plaintiff, that the amendment of the Regulations, and the action of the Commissioner in imposing a deficiency tax upon him, were entirely proper and in accordance with the valid provisions of the Revenue Aet.
Plaintiff’s motion for judgment on the pleadings is denied. The cross-motion by defendant is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219172/ | McCORMICK, District Judge.
This is a libel in admiralty against the Danish motorship Indien for cargo damage. No jurisdictional issue is urged as to the sufficiency of the parties litigant, or as to the fact that the eargo, to which libelant was entitled to delivery upon its arrival in Japanese ports, was damaged on the voyage across the Pacific Ocean from Victoria, British Columbia, The defenses interposed by the claimant and owner, which has duly appeared, are special and are to the effect that the ship was in all respects seaworthy and that due diligence was exercised to make her so before the voyage commenced; that the damage to libelant’s merchandise was caused by perils of the sea or fault and error in navigation and causes beyond their control; and that under the terms of the charter, pursuant to which the eargo was shipped, as well as under section 3 of the Harter Act (title 46 USCA § 192), they are exempted from liability of damage.
The shipment in question, according to the contract of affreightment or charter, as it is termed in the document, consisted of 6,094 tons of ammophos fertilizer in bags. It was taken aboard the Indien on the east coast of the United States, and the shipping contract I provided that inasmuch as the shipment in question did not load the ship she was to have liberty to carry additional eargo for others that her owners and disponer might obtain at ports in the United States and Canadian North Pacific en route to Japan. Upon arrival at Nanoose, British Columbia, on January 30, 1929, the Indien received aboard further eargo in which libelant or the consignors of the ammophos have no interest whatsoever. This cargo was heavy lumber called “Jap squares.” It contained 1,183,847 board feet of this heavy timber that ran from 15' to 40' long and up to 24 x 24" square. These squares or poles were loaded’ in the' ’tween-deck spaces, but were more than could be carried that way. The result was that 425,343 board feet of such squares was built into a deekload on the vessel’s awning deck. This deekload was superimposed upon dunnage and when completed it ranged from 5 to 6 feet high on the after deck and about 6 feet high on the forward deck. This deekload was firmly lashed in place with the usual chain lashings, tightened with turn buckles, and on the evening of February 1, 1929, the loaded ship sailed from Nanoose, British Columbia. She put in at Victoria the next morning for clearance and to obtain a supply of fresh water, and after taking on 82 tons of fresh water she sailed from Victoria on her voyage across the Pacific to Japanese ports. Taking the northerly or great circle course, she encountered nothing significant until February 7th, when the vessel began to experience the turbulent seas and violent winds that are to be expected by mariners in the North Pacific in February. The rough log shows that wind conditions from February 7th to the afternoon of February 9th, according to the Beaufort Seale, ranged from 6 (strong breeze) toll (storm), and the officers of the ship testified that at times on February 9th especially there were hurricane gusts, although neither the rough log nor the deck log show any such wind velocities at any time during the voyage, and it is noticeable that the rough log where it shows the maximum wind scale of 11 on February 9th bears evidence of erasures which have not been creditably explained, and the captain’s voyage report shows a wind force of 9 on February 9th and discloses no higher wind scale at-any time during the voyage. It also appears from the ship’s log that on February 7th, 8th, and particularly the 9th, until the afternoon of that day, the Indien rolled and pitched heavily and shipped much water ovei the deekload, sometimes completely burying the aft part of the ship and poophouse. • So destructive was the wind and wave that on February 9th two bouses of the ship stores that were standing on the aft boat deck and lashed to the ship’s stanchions and to a ventilator were carried away, the railing was bent, *351and an awning stanchion was also carried into the sea. Considerable other damage was done to the ship’s equipment that was carried upon the boat deck and especially the aft part thereof. Conditions became so alarming that about 8 a. m. on February 9th the ship was taken off her course and put head on to the seas and wind with engines going between slow and half speed until later in the afternoon, when the storm subsided and she was put back on her former course and proceeded regularly, although thereafter the log shows that she pitched and rolled hard and shipped very much water, particularly over the deck-load aft. During this storm on February 9th the deck cargo of “Jap squares” on the after deck, directly over the holds in which the ammophos was stowed, was being lifted clear of the deck, and it is not improbable from the evidence that it was this element that pro>duced and caused the damage to the cargo of ammophos. The log of February 10th offered in evidence by respondent and claimant recites:
“It was supposed that some rivets must have gone loose in the ships side during the bad weather, but trying to sound the starboard No. IV bilge, notwithstanding the continuously bad weather, it was found out, that the standing pipe cover was off, so that the water must have run down this way, the ship constantly shipping much water, and having about 3 degrees list to starboard, so that the sounding pipe continually was below the surface of the water. The cover was found in the scupper further forward.
“Last time the bilges had been sounded was on Friday morning at daybreak and the sounding was put down in the sounding book as usual.
“Owing to the bad weather it had been impossible to sound on Saturday, on this account there had been pumped from the bilges on Saturday evening during the 2nd engineer’s watch, and according to his report no water had been in the bilges at that time. Judging by this the cover must have gone off' after 8:00 p. m. on Saturday.
“It,is supposed that it has been loosened by a piece of dunnage-wood lying close to the sounding pipe, so that the seas continually must have been carrying it against the pipe ends in a socket about 2 inches above the deck on top of the cover sits not let down into it, but with its circumference in line with the outside of the sounding pipe — without having the possibility to float away — sticking so far underneath the deck cargo — but without that the deck cargo rested on it — that it could not escape over the ships side, the latter being about nine inches high, and neither forward nor abaft, there sticking against an air-pipe and a stay and here against a fair leader.
“This piece of wood was on top of another piece lying fore and aft, so that these two pieces formed a cron, and in a way made a lever, which with its short arm pointed upon the sounding pipe, and in the past two days bad weather, when the deck cargo sometimes was being lifted clear of the deck, may have acted as that upon the cover.
“An examination of the cover and the sounding pipe found them to be in order. The carpenter who does the daily sounding, declares to have screwed the cover well down last time he had sounded, notwithstanding that the ship shipped some water at that time.”
It is indisputable, and in fact respondent admits, that the direct cause of the damage to the libelant was the dislodging of the sounding pipe cap. The crucial and paramount question for decision is: What caused the sounding pipe cap to become dislodged? If it was dislodged because of dangers of the sea, acts of God, or faults or error in navigation, or in the management of the ship during the voyage, as such terms are applied in maritime law, and if moreover it is shown by the respondent beyond doubt that at the commencement of the voyage from Victoria the Indien was in all respects seaworthy and properly equipped and supplied at that time, or that due diligence was exercised to make her in all respects seaworthy and properly equipped and supplied, then libelant has no standing in this court and must be dismissed without relief in this cause. On the other hand, if respondent has failed to sustain its burden and remove any doubt as to whether at the commencement of the voyage from Victoria the Indien was in all respects seaworthy and properly equipped and supplied for the particular voyage, or if that cannot be established that it has failed to show beyond doubt that due diligence was used to make the ship in that condition, then it and the ship is liable for the damage that libelant has sustained by reason of the dislodged sounding pipe cap and other deficiencies of the vessel that will be mentioned later. International Navigation Co. v. Farr & Bailey Mfg. Co., 181 U. S. 218, 21 S. Ct. 591, 45 L. Ed. 830; The Southwark, 191 U. S. 1, 24 S. Ct. 1, 6, 48 L. Ed. 65; The Jeanie (C. C. A. 9) 236 F. 463; Com*352pagnie Maritime Francaise v. Meyer (C. C. A.) 248 F. 881; Kaufer Co. v. Luckenbach S. S. Co., Inc., (D. C. Wash.) 284 F. 160.
In The Southwark, supra, the Supreme Court said: “But whether fault ean be affirmatively established in this respect, it is not necessary to determine. The burden was upon the owner to show, by making proper and reasonable tests, that the vessel was seaworthy and in a fit condition to receive and transport the cargo undertaken to be carried; and if, by the failure to adopt such tests and to furnish such proofs, the question of the ship’s efficiency is left in doubt, that doubt must be resolved against the shipowner, and in favor of the shipper. In other words, the vessel owner has not sustained the burden cast upon him to establish the fact that he has used due diligence to furnish a seaworthy vessel, and, between him and the shipper, must bear the loss.”
And in California & Hawaiian Sugar Refining Corp. v. Rideout (C. C. A.) 53 F.(2d) 322, 325, Judge Sawtelle, in considering the burden cast by the law upon the shipowner where he claims the ship to have been seaworthy at the commencement of the voyage and seeks to avail himself of the exemptions of the Harter Aet, said: “It will thus be seen that the carrier has the burden of proof to establish due diligence before he can claim exemption from liability on the ground of danger of the sea, and the Harter Act [46 US CA §§ 190-195], is to be strictly construed against the carrier.”
I have carefully read the nearly 900 pages of depositions, and I have examined all of the exhibits in this cause, and I have carefully studied the able briefs of respective proctors, and I now find myself in the position of doubt as to whether the Indien was properly dunnaged under the aft deekload of “Jap squares” so as to make her seaworthy, in other words so as to make her reasonably fit to make the specific voyage across the Pacific on the North Pacific route in February with the cargo that she had in her holds and between and upon her decks, and this doubt under the evidence also extends to the question as to whether due diligence was used to make the Indien seaworthy for the intended voyage. The court finding itself in this state of mind under the weight of authorities cannot exempt the ship or respondents from liability for the damaged cargo.
I shall not -undertake to set out a detailed analysis of the record that leads me to the conclusion just stated. It is deemed sufficient to ehroniele briefly reasons that have impelled this decision.
The deekload dunnage in question was made by laying fore and aft a single line of I%x6" boards, 3 or 4 feet long around the outside edge of the flush deck, just inside of the deekload stanchion sockets. This placed the fore and aft dunnage in close proximity to the “scuppers” and sounding pipes and the particular sounding pipe in question, that were ranged fore and aft of the ship’s deck. The space between the fore and aft dunnage pieces was 1 or 2 feet. Then athwartship dunnage consisting of 1x4" or 1x6" boards 12 to 16' long were placed with the outer ends resting on top of the fore and aft dunnage. On top of the dunnage thus arranged the deekload timbers or “Jap squares” were laid fore and aft, the outer edge of the outer tiers being approximately even with the outer edge of fore and aft dunnage. This method of dunnaging the deekload of heavy timbers was insecure and insufficient according to the evidence because the fore and aft line of dunnage, if used at all, should have been longer so as to prevent just what had occurred, to wit, the loosening and floating about of the fore and aft dunnage. As it was only 3 or 4 feet long, it was only held in place by one or two of the thwartship dunnage, which in turn might or might not be held down by the outside tier of the deekload of timber. It is significant that the experts called by respondents thought that there would be an advantage in using longer fore and aft pieces of dunnage, and the record shows that on a subsequent voyage where the dunnaging was supervised by some of these experts longer pieces of fore and aft dunnage were used. There was less likelihood of fouling the sounding pipe or of interfering with its cap if longer fore and aft dunnage had been used, or if indeed no fore and aft dunnage of any kind had been utilized, and while the record does not justify finding that fore and aft dunnage was improper per se, the respondent has failed to sustain its burden that having been used in the manner in which it was used on the Indien on this voyage due diligence was employed to make the Indien seaworthy in this respeet.
The fore and aft dunnage that was used-on the Indien under the deekload of timber was intended to compensate for the camber or convexity of the ship’s deck from side to side so as to make an even base upon which to lay the deekload, but in using it, while the camber may have been provided for by the *353manner in which this fore and aft dunnage was placed, it made no allowance for. the sheer or concavity of the ship’s deck from bow to stem which, according to the testimony, was of appreciable importance in arranging the dunnage for the deekload cargo. If the fore and aft dunnaging method were to be used at all, it appears to me from the better weight of the evidence that it would have been duly diligent and prudent to have used longer pieces and of varying thicknesses so as to provide for sheer and lay a level base. Deekload dunnage to be seaworthy should be laid so that the superimposed load will bear as evenly as practicable upon all the dunnage. This applies to thwartship as well as fore and aft dunnage, and it is clear from the fact that two pieces of dunnage became loose and were instrumental in causing the damage that the requirement of evenly secured dunnage was not observed in this instance, and in my judgment the failure to observe this requirement amounted to a lack of due diligence in making the Indien seaworthy for the intended voyage.
There is no satisfactory evidence that the seas that the Indien had encountered during the voyage were not to be expected on the North Pacific route at that time of the year. Mariners who had navigated there previously testified that many sea catastrophes had occurred there and that violent storms were to be anticipated. The damages cannot be attributed to dangers of the sea or to causes beyond the respondent’s control.
In order for respondent to sustain the burden of proof that the cause of the dislodgment of the cap of the sounding pipe was one that exempts it from liability under the Harter Act (46 USCA §§ 190-195), it must not only nullify the ordinary effect of the ship;s officers’ opinion as expressed by them in the log, but it must also be permitted to impeach and discredit its own witness, the ship carpenter, who positively and unequivocably testified that he securely replaced the cap on the sounding pipe on the morning of February 8th. This a litigant should not be permitted to do merely to support a contention, and should be precluded from doing so in admiralty because of the strict adverse construction of the Harter Act that is imposed upon the carrier and ship owner.
The court is asked to disregard the sworn testimony of the member of the crew of the Indien whose special duty it was to attend to the sounding pipe at the time when the damage to it occurred, and is also asked to rule out the log entries made by the ship’s officers at a time when there was no reason for them to draw wrong inferences and to record them in a most salutary instrument of nautical evidence, and in place of these forceful agencies of proof to base an inference upon a mere conjecture that it was physically impossible for the cap to have become loosened by the action of the dunnage, and that therefore the evidence which respondent offered to prove what was done aboard ship to tighten the cap is unworthy of belief. It is well settled in law, and I think that the rule should be applicable to admiralty, that an inference must be founded on a fact legally proved, and as the deduction that the carpenter failed to tighten the eap on the sounding pipe can arise only by disregarding sworn testimony that is not inherently improbable, or by permitting a party to vouch for a witness’ credibility and then impeach him, the deduction that is advanced by respondent does not arise to the state of inference, but if adopted would be a mere guess at what happened, and if we consider the stresses and strains of the Indien in a sea such as she encountered and which she expected to meet on this voyage, the more reasonable and surely the better supported deduction by facts legally proved is that, considering the position and appearance of the stick of dunnage that was in proximity to the sound pipe and cap thereof, it is reasonably probable that the . loosened dunnage was instrumental in causing or contributing to the damage to the cargo.
Proctor for respondent argues the impossibility of the loosened dunnage board being instrumental in unscrewing the cap because of the position of the dunnage stick when found being so placed that its motion against the cap would tend to screw it tighter rather than unscrew it. This argument is based upon the testimony of the chief officer as illustrated by a drawing made by him and marked Respondent’s Exhibit A. It appears from the record, however, that when the matter was fresh in the mind of the chief officer and shortly after the voyage in question, he drew another sketch, that is introduced in evidence as libelant’s Exhibit 1, in which he pictorialized and placed the stick of dunnage that is supposed to have connected with the sounding pipe cap in a position where its action against the cap would have resulted in unscrewing it. I think that the more creditable explanation and delineation of this incident is that shown by libelant’s Exhibit 1.
Counsel for respondent cites The Newport News (D. C.) 199 F. 968, as analogous to the present inquiry and as decisive that the Indien was entirely seaworthy and not legally li*354able for the damaged cargo. I tbink there are so many potent dissimilarities between The Newport News and those shown by the record here that little aid is furnished by that case in the solution of our problem. It was dearly shown in The Newport News that the deck cargo of barreled resin was properly stowed, while here, according to our finding, no such condition has been sufficiently shown because of the faulty method of dunnaging. It was also shown that the displacement of the¡ sounding pipe cap was not caused by the manner in which the deck cargo was stowed, while here the legal effect of all the evidence indicates the probability that the faulty dunnaging of the deekload contributed to, if it did not entirely cause, the dislodgment of the cap and consequent damaging of the cargo of ammophos. Here the cap projected out above the end of the pipe, which in turn was elevated some inches above the deck, and the annular circumference of the cap was roughened or notched, making an effective seat for the piece of loosened dunnage to impose force against the cap and tend to unscrew it, while in The Newport News the cap when in place was flush with the flange which was substantially the top of the sounding pipe and could not have been loosened or unscrewed by anything except intentionally or by the straining of the vessel. How the cap in this cause could have been loosened by the straining of the ship has not been shown, and probably could not be shown, and the deck cargo in this matter had little directly to do with the unscrewing of the cap, because throughout the entire voyage the deekload remained aboard. The weather encountered by The Newport News was so destructive that it caused the loss of one-fourth of the deekload of barrels of resin. Here no cargo whatever was lost overboard. I think these differences destroy the application of The Newport News as a decisive authority here.
There is considerable evidence in the record of this cause that justifies the doubt as to whether the seaworthiness of the Indien for the voyage in question was not impaired by overloading. The log entries of the fore and aft drafts and the builder’s blueprint showing the loading scale of the Indien indicate clearly that she was overloaded by four and one-half inches from the winter Plimsoll mark on leaving for this perilous voyage across the Pacific. The effect of this showing is attempted to be offset by oral testimony of the chief officer as to actual observations of the Plimsoll mark at Nanoose and by computations for salt water buoyancy and additional load acquired at Victoria, and by evidence that the Indien had a “Hog” that would account for the inaccurate draft readings. This contradictory evidence is not only subject to the infirmity of being acquired post litam motam, but it is rebutted by experts called by libelant, and in my judgment it is not strong enough to remove the doubt that is created by the log entries and measurements that the ship was overloaded when she left Victoria.
The Plimsoll mark is placed on the ship after careful and mathematical determination of her safe loading point, and it should be regarded in the admiralty courts as very strong evidence of the ship’s capacity. Its efficacy in the ascertainment of whether a vessel has been properly loaded should not be destroyed except upon clear and convincing proof without doubt that it is erroneously placed or that the specific facts in the case undoubtedly warrant a finding that loading a vessel so as to submerge the Plimsoll mark did not render the vessel unseaworthy. Neither of these conditions are present in this cause.
There is one further observation to be noted on the sufficiency of the showing of due diligence by the respondent to make the Indien seaworthy at Victoria. There was no independent survey of the vessel at either Nanoose or Victoria. I think, in view of the danger signals that appeared from the draft readings and the consequent position of the Plimsoll mark, that prudence and foresight should have prompted the obtaining of a competent, impartial, and disinterested opinion of a marine surveyor before commencing this voyage on a course that was new to the navigator of the vessel.
I approach the ultimate question in this proceeding, which is: Assuming that unseaworthiness has been sufficiently shown and that due diligence to make the ship and her equipment seaworthy has not been sufficiently proved, is it necessary for libelant to go further and prove that the damage to the ammophos was proximately caused by the unseaworthiness 9 I think not, especially as to the unseaworthiness because of overloading. The overloading of a ship is 'so fraught with danger that whenever it is satisfactorily shown, all the loss’ or injury that is sustained on the voyage of the overloaded ship should be imposed upon the vessel and the carrier and should not fall upon those who have shipped property or merchandise under the absolute obligation of the carrier to furnish a seaworthy vessel that is fit for the cargo to be carried at the commencement of the voyage.
*355We find lack of harmony on this question in two Circuit Courts of Appeals that have had occasion to consider it, and neither the Supreme Court nor the Ninth Circuit Court of Appeals, has directly passed upon the question as far as I have been able to ascertain.
In the Willdomino (C. C. A. 3) 300 F. 5, 1924 A. M. C. 889, it was held that the carrier was liable when it failed to sustain the burden of proving the seaworthiness of the ship or in exercising due diligence to make her so regardless of whether there was any causal connection between the lack of seaworthiness or due diligence and the loss. While in The Spartan (C. C. A. 2) 47 F.(2d) 189, 1931 A. M. C. 1, and in (May v. Hamburg, etc.) The Isis (C. C. A.) 63 F.(2d) 248, 1933 A. M. C. 390, 396, the contrary doctrine was announced. It is to be noted that the Willdomino, supra, was affirmed by the Supreme Court, 272 U. S. 718, 47 S. Ct. 261, 71 L. Ed. 491. However, the Supreme Court did not pass upon the question of the necessity of showing a causal connection between the unseaworthiness and the loss.
In addition to the damage to the shipment'of ammophos done by the water entering the hold in which it was stowed, there was further damage done to the cargo of fertilizer by the breaking of another pipe leading to the fuel tank. This damage was due to oil soaking the fertilizer and was not discovered until the vessel was discharging cargo in a Japanese port. There is no positive evidence as to the condition of this pipe at the commencement of the voyage at Victoria, and the only inspection that was made of it there was to knock on it with a hammer above the place where it leaked and at a point where visual observation of the region of the defective part of the pipe was not made on account of the flooring through which the pipe led to a fuel tank. This board floor had not been removed to properly examine the pipe since September 15, 1928, about four and one-half months prior to the departure from Victoria. This in my opinion was not sufficient inspection to amount to due diligence. Moreover, if the court is correct in its conclusion as to the effect of unseaworthiness of the vessel on account of overloading, the damage caused by the oil should 'fall upon the respondent as well as the other damage occasioned by the water.
To summarize, I And that respondent and claimant have not met their required burden of proving beyond doubt that the Indien was in all respeets seaworthy, or that due diligence was used to make her so for the voyage from Victoria, and I further find that the damage to the cargo of amm ophos has not beén proved beyond doubt to have arisen from causes that exempt the respondent or claimant from lia-, bility.
It follows that findings and decree are ordered for libelant in accordance herewith and for costs and the cause is now referred to United States Commissioner Head to assess the damages and report his findings to the court for further consideration. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219173/ | Findings of Fact and Conclusions of Law.
HOUGH, District Judge.
1. Plaintiff is now, and at all times hereinafter mentioned was, a corporation organized November 5, 1905, and existing under and by virtue of the laws of the state ofl. *356Ohio, having its office and place of business in the city of Lancaster, in the Southern District of Ohio, Eastern Division, and that it has been, was in 1924, and subsequent thereto, and now is, engaged in the business of manufacturing a general line of glassware.
2. The defendant herein is now, and since April 7, 1921, has been, the duly appointed, qualified, and acting collector of internal revenue of the United States for the Eleventh District of Ohio, in which collection district the plaintiff was required to make returns and pay taxes under the Internal Revenue Laws of the United States.
3. The defendant declined to refund $32,521.09 tax on April 26, 1929, on. claim for refunder made in the regular way.
4. The tax had been paid, for the year 1924, in 1925>, except a small portion that had been subsequently assessed and paid ini 1928.
5. The tax was laid upon a fund of $260,168.70 received from several insurance companies in an amicable adjustment of loss and damage by reason of property destruction by fire, under the provisions of use and occupancy insurance policies.
6. Suit for recovery was brought in February of 1930.
7. Plaintiff, on Monday, March 16,1925, filed with the collector of internal revenue for the Eleventh District of Ohio, at Columbus, its corporation income tax return for the calendar year 1924, showing thereon a tax liability of $52,253.56. Said tax was paid toi the said defendant collector in quarterly installments on March 16, June 16, September 15, and December 15, 1925, at his office in Columbus, Ohio.
8. Thereafter the Commissioner of Internal Revenue (hereinafter called the Commissioner) caused an audit to be made of the plaintiff’s 1924 income tax return and by “sixty-day” letter dated January 18, 1928, advised the plaintiff of a deficiency in taxes for the year 1924 in the sum of $374.52. Said additional tax was assessed by said Commissioner on the March, 1928, assessment list, and upon receipt of notice and demand, was paid on April 13,1928, to said defendant as collector of internal revenue.
9. Prior to the year 1924, plaintiff insured, in the principal sum of $600,000, its automatic sprinkler equipped buildings of its factory plant, including its iron gas producer plant and partially sprinkler equipped office building, and all additions, extension, and attachments thereto and the contents of said buildings, with certain fire insurance companies. Said fire insurance policies were in full force and effect during the year 1924.
10. Prior to the year 1924, plaintiff also secured for a period of three years other policies of insurance in the principal sum of $525,000 on the use and occupancy of its automatic sprinkler equipped manufacturing buildings and machinery and equipment therein. Said “use and occupancy” insurance policies were in effect during the year 1924.
11. On March 6,1924, fire destroyed substantially all of the plaintiff’s automatic sprinkler equipped buildings, machinery, and equipment therein, including inventory and supplies and contents thereof which were theretofore used by the plaintiff in the operation of its business and thus destroyed and prevented the use and occupancy thereof by the plaintiff. Under said fire insurance and “use and oeeupaney” insurance policies plaintiff received during the year 1924:
(a) The sum of $471,520.11 as fire insurance on its physical buildings, machinery, and equipment, including inventory and supplies and contents thereof; and
(b) $260,168.78 as “use and occupancy” insurance representing the amount of loss sustained by it under said “use and oeeupaney” policies as a result of its inability to use and occupy the property destroyed by said fire.
12. Forthwith, after said fire, the plaintiff in good faith, under regulations prescribed by the Commissioner with the approval of the Secretary, expended said fire insurance proceeds of $471,520.11 and “use and occupancy” insurance proceeds of $260,-168.78, or a total of $731,688.89', and more, in the acquisition of other property (i. e., new buildings, equipment, machinery, inventory, and supplies, and the use and occupancy thereof) similar or related in service or use to the property theretofore destroyed by said fire, which property had been thus converted into money as aforesaid.
13. The sum of $471,520.11, or any part thereof, representing the proceeds received by plaintiff under said ordinary fire insurance policies, has not been included in plaintiff’s taxable income for the year 1924 and no tax has been paid on said sum or any part thereof. The sum of $260,168.78, representing the proceeds received by plaintiff under the “use and occupancy” insurance policies, was included in plaintiff’s taxable income for the year 1924 and federal income taxes of $32,-521.09 paid thereon.
14. On June 23,1928, plaintiff filed with the Commissioner claim for the refund of *357$32,521.09 of federal income taxes assessed against and collected from plaintiff for the calendar year 1924. Said claim for refund specifically stated that the sum claimed was refundable because under the provisions of section 203 (b) (5), Revenue Act of 1924 (43 Stat. 256, 26 USCA § 934 (b) (5), no gain or loss was recognized upon the receipt by plaintiff in 1924 of the sum of $260,168.78 the proceeds of use and occupancy insurance, said money resulting from the involuntary conversion of plaintiff’s property and being forthwith in good faith expended in the acquisition of other property similar or related in service or use to the property so converted.
15. Plaintiff was advised by letter dated April 23, 1929, from C. B. Allen, Deputy Commissioner, that:
“Prom an examination of the evidence in your claim this office holds that the proceeds from a use and occupancy insurance policy constitute gross income and is taxable.
' “Therefore your claim will be rejected, and the rejection will appear on a schedule to be approved by the Commissioner.”
Thereafter, by letter dated April 26,1929, plaintiff was advised that its said claim for the refund of $32,521.09, income tax for the calendar year -1924, was disallowed by the Commissioner on a schedule dated April 26, 1929.
The Internal Revenue Department, in refusing the tax refunder, took the position that the proceeds of the use and occupancy insurance was taxable income, because based upon the profits that would have been earned during the interruption. The contention then is that the proceeds of the several policies of insurance amicably adjusted by the parties to! the insurance contracts and used in rebuilding the factory was not to be recognized “no gain or loss,” under the provisions of section 203 (b) (5), Revenue Act of 1924. That section provides, in so far as applicable, as follows : “If property (ás a result of its destruction in whole or in part * * ' *) is compulsorily or involuntarily converted into property similar or related in service or use to the property so converted, or into money which is forthwith in good faith, under regulations prescribed by the Commissioner with the approval of the Secretary, expended in the acquisition of other property similar or related in service or use to the property so converted, * * * no gain or loss shall be recognized.”
The government urges that the doctriné of estoppel is applicable here. From the facts presented, this contention is without merit. The evidence in the case nowhere presents a situation that would warrant a conclusion that the plaintiff unduly delayed or slept on its rights. The point further argued,' that because the plaintiff company, in rebuilding and renewing its factory after the fire loss, created a much more modem plant, with a 25 per cent, greater capacity, although it was created for the conduct of the same business and the manufacture of the same output,, is also without merit. The company only exercised good business judgment in re-creating-its plant with modem construction and modem machinery, and in increasing the capacity-to conform to past as well as probable future-development. This did not change the character of the property, and it became “other property similar or related in service or use, to the property so converted.”
Whether the insurance proceeds voluntarily paid because of the fire loss is nontaxable because of the provisions of the section just quoted, depends upon the legal construction of the use and occupancy contracts. In the first place, the right to the use and occupancy is property, or rather a property right. Whether it is to be classified as tangible or intangible, corporeal or uncorporeal, is perhaps not so important in this case. The conclusion that it is property, or a property right, cannot be gainsaid, in view of the manifest intention of the contracting parties. Without doubt, they so considered it. The contracts insure “against all direct loss or damage by fire * * *, on the use and occupancy of its” (property). The thing insured, then, is the use and occupancy, and it is insured against fire (which occurred), and against all direct loss or damage. The loss or damage is found by other provisions of the policy to be calculated and measured by the “net profits on the business, which is hereby prevented, and such fixed charges and expenses pertaining thereto as must necessarily continue during a total or partial suspension of the business, and such expenses as áre necessarily incurred for the purpose of reducing the loss under this policy * * The loss or damage is the indemnity. The way in which that loss or damage is to be ascertained is pointed out in the contract. It is the method to be used in making an amicable adjustment in ease of loss or damage, or if that amicable adjustment cannot or is not effected, and litigation ensues, those provisions direct the path and fix the bounds and limits for the reception of evidence to prove the loss or damage and fix the liability under the contracts. This character of insurance is in no sense profits in*358surance such as was before the courts in Insurance Co. of North America v. Canada Sugar Refining Co., Ltd. (C. C. A.) 87 F. 491, and O’Brien v. North River Insurance Co. (C. C. A.) 212 F. 102, L. R. A. 1917C, 722. These policies are very similar, if not identical, with policy which was before the District Court of Florida in Wilson & Toomer Fertilizer Co. v. Automobile Insurance Co. (D. C.) 283 F. 501. The court in that case, on page 502 of 283 F., says: “The thing insured in each ease is the continued right and privilege of using the factory in producing new goods for sale, and covered indemnity for fixed charges and expenses and accruing profits in ease of loss or damage by fire. Thus the purpose of the contract was to keep the property of the insured in a condition of continued availability to the owner— * * * the uninterrupted use of the factory for the production and sale of goods, * * * The method of determining the value of the use and occupancy of the factory is fixed by this policy. As indicated, actual loss of net profits, fixed charges, and expenses necessarily incurred, were covered as the matter of indemnity. The policy makes the value of the use and occupancy dependent upon the profits, fixed charges, and expenses.”
It must therefore be said that the use and occupancy was property within the meaning of section 203 (b) (5), Revenue Act of 1924, which being destroyed by fire was involuntarily converted into money, whieh in good faith, under prescribed regulations, was expended in the acquisition of other property, similar or related in service or use to the property so converted, and that the insured (the plaintiff in this ease) realized no taxable gain. The taxes assessed in the sum of $32,521.09 were illegally assessed, and are recoverable in this case, with interest on the installment payments from the several dates paid, at the rate of 6 per cent., to and including June 30, 1932, and thereafter at the rate of 4 per cent. The plaintiff shall recover the costs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219174/ | PATTERSON, District Judge.
The libelant’s intestate, Goodrich, was employed as a water tender on the steamship Davenport, owned by the United States. He signed on at New Orleans on May 7,1928, for a voyage to Rotterdam and Hamburg. The Davenport left on May 14,1928. Three days later two men came down sick with what proved later to be typhoid fever. Goodrich was taken ill on the 24th, but apparently recovered for the time being. In all six or seven men out of the crew of thirty-eight seem to have contracted the fever. Goodrich succumbed to it again while the vessel was between Rotterdam and Hamburg. On arrival at Hamburg about June 11th, he was sent to a hospital, where he died on June 28th. This suit is brought by his administrator, under the provisions of 46 USCA §§ 688 and 742. It is alleged that his death was the result of the negligence of the ship’s officers, both in tolerating conditions which exposed him to the disease and in failing to give him proper attention after he had contracted it. The contention is that the typhoid fever came from the drinking water on the Davenport.
In behalf of the libelant several seamen who were on the voyage testified that the drinking water on the Davenport was muddy .and dirty; that it had the taste and appearance of river water; that it came from the forepeak tank which was in a very dirty condition. I cannot credit any of this testimony. The proof is that the water for drinking was kept in domestic tanks which were on the shelter deck. From these tanks there were two outlets, one in the galley for cooking purposes, the other at the scuttle butt where all on board got their drinking water. The fore-peak and afterpeak tanks and the other tanks held water for the boilers, for washing, and for other nondrinking uses; there was no connection between them and the drinking water system. The condition of the peak tanks therefore is of minor importance in the case; it may be noted, however, that if the water in them had been as bad as described by the libelant’s witnesses, the machinery of the steamer would have broken down. The drinking water used on this voyage and on the voyage preceding it had been purchased in part from the city of Hamburg, Germany, and in part from the city of New Orleans. It was of the same sort as that furnished by these cities to their inhabitants for drinking and was supposed to be pure and potable. The idea of some of the libelant’s witnesses, that the •ship’s officers had filled up the domestic tanks with water from the Mississippi river, must be put down as merely the product of their imagination. So, too, as to the messboy taking water from the afterpeak tank and making coffee with it.
On arrival at Rotterdam the master sent a sample of the drinking water to the hospital for analysis. From the fact that he got no report of the result, he assumed that the water was found to be all right. On the ship’s return to New Orleans in July, the water was tested, no trace of the typhoid bacillus being found. This analysis at New Orleans may have been too late to indicate with certainty that the drinking water in May had not harbored the bacilli. As for the care taken of the domestic tanks, it was shown that they had been thoroughly cleaned in November, 1926, and had been examined on every voyage since. Th'ey had not been cleaned again because no dirt was ever found in them. The drinking water in taste and appearance was always good. ,
The respondent also showed that the food supplied on the Davenport had been pur*365chased from reputable dealers and was or should have been wholesome, that the quarters were kept reasonably elean, and that the crew had undergone a medical examination before the commencement of the voyage.
Upon the foregoing facts, I am of opinion that the libel must be dismissed. To recover in a ease of this type, the libelant must be able to point to some negligence as a result of which the deceased contracted typhoid fever. The mere fact that he got the disease while on the respondent’s ship is not enough. Chicago, etc., Transit Co. v. Moore (C. C. A.) 259 F. 490, certiorari denied 251 U. S. 553, 40 S. Ct. 118, 64 L. Ed. 411; see, also, Canavan v. Mechanicville, 229 N. Y. 473, 128 N. E. 882, 13 A. L. R. 1123; Diller v. Chicago, etc., R. Co., 119 Neb. 494, 229 N. W. 888. From the fact that there was an epidemic of the fever among the crew, the inference is a strong one that they caught it on the ship rather than on shore; that the source of the infection was on the ship itself. But beyond this we get into speculation. The typhoid bacilli may have come on board in the water, in the food, in a carrier who later in some way contaminated the water or the food, or in some other manner. One guess is as good as another. The libelant has endeavored to fasten the guilt on the water. I think, however, that the matter is left wholly in the dark. In any event, whether the bacilli came from the water or not, no culpable negligence has been shown as to the water or in fact as to any other condition aboard. The water system was good in construction, and the drinking water itself was procured from reliable sources of supply. Complaint is made that the domestic tanks had not been cleaned out for over a year. But it was shown that they were frequently inspected and found always to be clean. There is nothing in the ease indicative of a custom on vessels of this sort to scrub out the water tanks on every voyage, irrespective of whether they seem to need it or not. Nor is there proof that the crew entered the domestic tanks and tramped around in them. The ease has no resemblance to the Chicago Transit Case; supra, or to Stubbs v. Rochester, 226 N. Y. 516, 124 N. E. 137, 5 A. L. R. 1396, in both of which the evidence pointed to the water as the probable seat of the trouble and pointed also to culpable negligence on the defendant’s part.
It is insisted that the rule of res ipsa loquitur should be applied to the case. I am not sure that it should. . It is questionable whether the breaking out of several eases of typhoid fever on a ship points to the probability of carelessness on the part of the ship’s officers. But the rule dora not change the result in this case. The evidence introduced by the respondent shows that the ship’s officers used all the care reasonably to be expected of them and that the epidemic came about through no dereliction of theirs.
There was no proof in support of the charge that the deceased had not received proper treatment while down with the fever. The ship’s officers seem to have done all that nonmedieal persons could do for the refief of this man and the other sufferers.
The suit is maintained for the benefit of the deceased’s parents. There was no evidence of actual contributions made by him to his parents during his lifetime, and the respondent insists that consequently there is no reasonable basis for an award to cover pecuniary loss. The City of Rome (D. C.) 48 F.(2d) 333. Under the Jones Act § 33 (46 U8CA § 688), however, recovery may be had by the personal representative for the pain and suffering of a deceased seaman. Luckenbach S. S. Co. v. Campbell (C. C. A.) 8 F. (2d) 223; see St. Louis, etc., R. Co. v. Craft, 237 U. S. 648, 35 S. Ct. 704, 59 L. Ed. 1160. But these matters of damages need not be determined, since in my opinion the merits of the case are not with the libelant.
The libel will be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219175/ | ERVIN, District Judge.
This matter comes up on a motion for rehearing from my order affirming the referee’s finding in the lien claim of Mrs. Florence M. Pineus.as landlord.
After considering the matter and again going over the facts, I am convinced that the finding of the referee was correct in part and erroneous in part, and therefore my affirmance was wrong. The order entered by me on November 25th affirming the referee’s finding is therefore set aside.
As I now gather the facts, the lease was made by the claimant to the bankrupt on May 3, 1928, for ten years at an agreed rental of $1,009 a month to be payable on the last day of each month, and this rent was paid until May, 1931, when a further agreement was entered into between the landlord and the tenant, which provides:
“That the rent payable for the months of May 1931 to and including the month of April 1933, instead of being payable $1,000.-00 on the last day of May 1931, and on the last day of each month thereafter, to and including the last day of April 1933, being payable as follows, * * * $650.00 on the last day of May 1931, and $350.00 with interest on the last day of March 1938, said amount of $350.00 to bear interest at the rate of 8% per annum from the last day of May 1931. * * * That if the lessee shall promptly pay the twenty-four payments of $650.00 each hereinbefore set forth and shall promptly pay the fifty-nine rental payments of $1,000.00 each, stipulated in the lease to be paid, respectively, on the last day of May 1933, and on the last day of each month thereafter, the lessor will release the lessee from its obligation to the lessor to pay the twenty-four installments of $350.00 each, with interest, to be paid by the lessee on the last day of March 1938.”
On April 7, 1932, a further agreement was entered into between the lessor and the lessee by which the rent payable from April, 1932, to December, 1932, was reduced from $650 to $500 per annum. These two agreements had the effect of reducing the payments to be made by the tenant of the original lease to the amount named in the agreements for the specified periods just as though they had been so written in the original lease.
It appears that the tenant paid these installments of rent down to and including DeT cember, 1932, but failed to pay the rent for January, February, and March, 1933. The adjudication was made on March 31, 1933, the day on which the March installment fell due. The landlord filed her claim in the bankrupt court. In the claim the landlord sets up the various items of $350 and $500 which were not paid pursuant to the two amendments to the lease and which under these amendments were payable on the last day of March, 1938.
Objection is made to the claim by the trustee in bankruptcy under provisions of section 8814 of the Code of Alabama of 1923j which reads as follows:
“The landlord of any storehouse, dwelling house, or other building, shall have a lien on the goods, furniture and effects belonging to the tenant, and subtenant, for his rent, which shall be superior to all other liens, except those for taxes. In case the tenant or subtenant is adjudged a bankrupt, such lien on such goods, furniture and effects of the bankrupt, except for a dwelling house, used exclusively as a dwelling, shall, as against the trustee in bankruptcy, attach only for unpaid rent accrued and which shall accrue within six months from the date of adjudication computed pro-rata at the then current rate. The lien amount accrued and to *367accrue shall not be increased by reason of any default or breach of contract by tbe bankrupt. From the amount of such lien, so computed, tbe trustee in bankruptcy may deduct all payments and all demands wbicb could be legally set up against tbe landlord by way of recoupment, set-olf, or counterclaim. If tbe trustee in bankruptcy 'shall dispose of tbe lease as an asset of tbe bankrupt estate, then tbe landlord shall have a lien on tbe goods, furniture and effects of any person bolding under tbe trustee in bankruptcy.” (Italics mine.)
This -objection is based on these words found in this section, “Tbe lien amount accrued and to accrue shall not be increased by reason of any default or breach of contract by tbe bankrupt.”
Much of tbe argument is based on tbe meaning of tbe wording “accrued or accrue” as used in tbe statute. Tbe landlord contends that tbe meaning of these words is whether the rental payments bad been earned, while tbe trustee contends tbe meaning is that tbe payments become due and collectable. Many authorities have been cited on each of these contentions, so that it appears that tbe meaning of tbe word “aeerue” is dependent somewhat on the facts of each case and tbe objects to be accomplished either by tbe statute or contract in which tbe word is used.
In the first place, tbe statute gives to the landlord a lien on tbe goods, furniture, and effects belonging to tbe tenant wbicb receives tbe benefit of protection in the building. This building was occupied as a clothing store and tbe lease contemplated a mercantile establishment where goods are stored for sale. Manifestly, therefore, goods which might be in the store one day would not be there tbe following day, and in tbe course of a period of time, practically tbe whole stock of goods would change, so it appears to me that a claim which could not be in any event collected until 1938 would not be intended to give a lien on tbe goods wbicb were in tbe store in 1931, 1932, and 1933. So when tbe statute says that where tbe tenant is adjudged bankrupt tbe lien shall, as against tbe trustee, attach only for unpaid rent accrued and wbicb shall aeerue within six months from the day of adjudication, then tbe contemplation of tbe statute was that it was rent wbicb became due and payable within that time. Again it says “rent accrued,” that certainly means rent whieh is then payable and which can be collected within six ■ months.
Tbe intent as I gather it is to give a lien on tbe stock for tbe time tbe building is occupied by tbe bankrupt, and for six months thereafter, though not then occupied by tbe bankrupt, but required by tbe trustee to sell and dispose of tbe goods. So it seems to me from all tbe recitals of this particular act that tbe word “accrue” should be given tbe meaning of due and payable, and not that •of being earned.
Tbe next question for determination arises under these words of tbe statute: “Tbe lien amount accrued and to aeerue shall not be increased by reason of any default or breach of contract by tbe bankrupt.”
Applying this provision to tbe facts of this case, let us see bow it works' out. Tbe contract provides that a certain part, either $350 or $500 of tbe monthly rental shall not” be payable on tbe last day of certain months, but shall be payable with interest on tbe last day of tbe lease contract, namely tbe last day of March, 1938. Now suppose tbe tenant does pay tbe $650 or $500, as it may be, during the period contemplated by the amended contracts, and then shall continue to make the $1,000 payments called for by tbe contract to tbe end of tbe term. Certainly, under tbe provisions of tbe amended contract, these deferred payments cannot be collected under this contract. How, then, could any be collected? Only by a default or breach by tbe tenant.
In this aspect it may be observed that tbe construction of tbe word “accrue,” whether “earned” or “payable,” is immaterial, for •these installments can be enforced as a lien by tbe landlord or collected only by tbe default or breach by tbe tenant, and this is forbidden by tbe statute.
Tbe objection of tbe trustee to this part of tbe claim of tbe landlord will be, therefore, sustained.
Tbe next question arises on tbe proposition of tbe attorney’s fee. It is contended that the contract creates no lien for an attorney’s fee, but tbe contract does provide for an attorney’s fee to be paid by tbe tenant under certain contingencies, and I think tbe petitioner is entitled to a reasonable attorney’s fee, which I fix at $500.
So much of tbe claim as is for rent wbicb shall aeerue within six months from bankruptcy as fixed by tbe original and supplemental contracts is allowed. The referee will therefore be instructed to disallow so much of tbe claim as is for tbe amounts post*368poned by the supplemental contracts for payment in March, 1938, but allowing the claim for amounts fixed by the original and supple- - mental contracts for six months from the day of adjudication, and also allowing the ney’s fee of $500. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219176/ | CAVAN AH, District Judge.
The plaintiff, as guardian of Thomas G. Harris, an insane person, brings this action on a yearly renewable war risk term insurance policy in the sum of $10,000 for total and permanent disability benefits.
The complaint was filed June 23, 1933, and alleges, among other things, that the disability of Thomas G. Harris is manic depressive psychosis and insanity, and general weakness and nervousness, incurred during the time of his military service, and that he has been insane at all times since his discharge from the Army, and while the policy was in force.
The government has demurred to the complaint challenging the jurisdiction of the court on the grounds (a) that Congress has by section 17 of the Act of March 20, 1933 (38 USCA §§ 717, 718), repealed all laws granting or pertaining to yearly renewable insurance and denied the right to sue the United States thereafter on such insurance policies; (b) that the action was not instituted on or before July 3, 1931, as provided by section 445, title 38 USCA; and (c) that no disagreement exists as required by the World War Veterans’ Act as amended July 3,1930 (38 USCA § 445), which is necessary to confer jurisdiction on the court.
The plaintiff asserts that, as all laws granting or pertaining to yearly renewable term insurance have been repealed, the suit is brought under the Tucker Act, 28 USCA § 41, subd. (20), which grants to the District Courts of the United States original jurisdiction of all claims “upon any contract, express or implied, with the Government of the United States,” and that “claims of * * * idiots, lunatics, insane persons * * * entitled to the claim, shall not be barred if the suit be brought within three years after the disability has ceased.”
The repealing act being-section 17 of the *369Act of March 20, 1933 (38 USCA § 717), in so far as relevant is:' “All laws granting or pertaining to yearly renewable term insurance are hereby repealed.” We have then: the straight question as to whether the right to sue the United States upon the insurance policy here is granted under the Tucker Act, or whether such right was restricted to the War Risk Insurance Act under' which the policy was authorized to be issued and which was repealed prior to the institution of the present action.
The Tucker Act having given the right to sue the United States “upon any contract, express or implied, with the Government of the United States,” we are, therefore, confronted with the question of whether it applies to the right to sue on those claims of insurance contracts which were authorized to be issued and suit brought thereon under the War Risk Insurance Act where the right to sue is not barred by the six-year statute of limitations contained in the Tucker Act (28 USCA § 41 subd. (20), and the Acts of May 29, 1928 and July 3, 1930, amendatory to the World War Veterans’ Act (38 USCA § 445). Recognizing the settled principle that federal courts have no jurisdiction except that conferred by the Federal Constitution or federal statutes and that the United States can only be sued with its consent and under the conditions imposed by Congress, we find that Congress has on several occasions extended the time within which suit may be brought on these insurance contracts, and on May 29, 1928, and July 3, 1930, permitted suit to be brought against the United States on such contracts if done so within six years after the right accrued for which the claim is made or within one year after July 3, 1930, and that insane persons or persons under other legal disabilities, or persons rated as incompetent shall have three years in which to bring suit after the removal of their disabilities. Consent to sue the United States then having been authorized by Congress and the period of limitation within which suit may be brought being prescribed, and exempting therefrom insane persons whose disability had not been removed, it is obvious that an insane person, through his guardian, may bring suit upon a policy at any time after the right has accrued and while he remains insane. The United States undoubtedly may legislate to change a remedy or announce a policy or prescribe a limitation of time within which suit may be brought against it, and, when it does so, by Congress saying that suit may be brought, and that insane persons are not precluded from suing while they are in-sane, its consent is clear. The complaint discloses that the insured, Harris, became insane during the life of the policy and ever since has been so insane. His policy was, therefore, in force at the time of the adoption of the repealing Act of March 20, 1933, and an action not being barred by the statute of limitations appearing in the acts referred to and in the Tucker Act the obligation of the United States to pay a fixed amount under the policy could not be destroyed by subsequent legislation without a violation of the insured’s constitutional rights and the impairment of contract. The effect of the repealing act was to deprive the insured of a remedy to enforce a fixed liability of the United States to make payment of the amount of the policy and to destroy and deprive him of a right which had vested before the repealing act, and one which in every sense is a property right. Such a right was fixed by the law in force when he became totally and permanently disabled. The plain requirements of the act under which the policy was issued is that the United States will pay to the insured upon him becoming totally and permanently disabled during the life of the policy, the amount provided for in the policy. There is a vested right in an accrued cause of action springing from a contract. 2 Lewis Southerland Statutory Construction, § 671.
This principle is announced in the case of Ettor v. Tacoma, 228 U. S. 148, 155, 33 S. Ct. 428, 57 L. Ed. 773, where it is held that the obligation to make compensation could not be destroyed by subsequent legislation nor are matters belonging to a remedy subject to change or repeal where they operate to impair a contract or deprive one of a vested property right. The principle has been applied in reference to rights accrued under a variety of statutes when affected by subsequent change of the law and the cases draw a distinction between the announcement of a policy or for tort, or prescribing a statute of limitation and constituting the impairment of a contract involving vested property rights. So when Congress passed the repealing Act of March 20, 1933, it, no doubt, was authorized to deny the right from then on to sue the United States upon war risk insurance policies issued under the War Risk Insurance Act where the policies were not kept in force by the payment of the stipulated premiums thereon or the period of the statute of limitations has run, hut those policies on which the premiums are being paid and the actions thereon are pending and those where the right has accrued and are not barred by the statute of limitation, Congress would not have au*370thority to deny a right of action thereon under the principle thus stated, as the cause of action existed at the time of the passage of the repealing act. Compare United States v. Wabash Railway Co., 270 U. S. 1, 46 S. Ct. 182, 70 L. Ed. 435; United States Fidelity & Guaranty Co. v. United States, for the use and benefit of Struthers Wells Company, 209 U. S. 306, 28 S. Ct. 537, 52 L. Ed. 804.
The attempt of Congress when enacting the repealing Act of March -20, 1933, seems clearly to apply to mentally competent veterans residing within the United States who had not filed actions on their war risk insurance policies and are not to have further time within which to sue for the reason they are barred under the limitation statute which Congress had the right to prescribe.
Reliance is placed upon Grubb v. United States from the United States District Court of Tennessee,1 Lynch v. United States (Fifth Circuit Court of Appeals) 67 F.(2d) 490, and Mara v. United States (D. C.) 54 F.(2d) 397, but those cases did not deal with the question we have here as to whether subsequent legislation can deny one the right to sue upon an express contract that is not barred by the statute of limitations and on which the claim is made that there is due and owing from the United States certain amounts and the right has accrued. They are not pertinent here because in the Grubb Case it was held that as a cause of action was barred by the statute of limitations the eourt had no jurisdiction under any statute to try the issues of fact presented by the petition and that Congress had the right to not extend the period of time within which to sue, and any withdrawals of that right or shortening of the statutory period of limitation do not encroach upon the period that was available to the insured at the time of entering into the contract or tend to impair the obligation of a contract. In the Lynch Case where the suit was instituted in April, 1933, after the repealing Act of March 20, 1933, was passed, and when the statute of limitations had run against it and no right existed to sue upon the contract, the court applied under such circumstances the rule that the United States may not be sued without its consent. In the 'Mara Case the eourt said that the claim of the veteran was undetermined in-the Veterans’ Bureau and jurisdiction of the court did not exist until after a disagreement, and, therefore, the Tucker Act di'd not confer jurisdiction on the eourt for at the time suit was instituted the act under which the policy was issued was not then repealed.
The policy of insurance in the present ease is a contract in which the insured has a vested right and the Act of March 20, 1933, impairs the obligation of that contract and deprives him of property without due process of law in violation of the Fifth Amendment and is, therefore, invalid when applied to the facts alleged in the complaint.
Viewing then the right of the plaintiff to maintain the present action under the War Risk Insurance Act, there remains to be considered the question of jurisdiction, which in this class of cases the eourt can only acquire after a disagreement has occurred between the insured and the Veterans’ Bureau as required by the Act of June 7, 1924, 43 Stat. 612, as amended by the Act of March 4,1925-, 43 Stat. 1302, 38 USCA § 445; and as amended by the Act of July 3, 1930, 46 Stat. 992, 38 USCA § 445. The Act of March 4, 1925-, authorizes suit against the United States “in the event of disagreement as to claim under a contract of insurance between the bureau and any person or persons claiming thereunder.” By the Aet of July 3, 1930 (38 USCA § 445), Congress still required that such disagreement as to the claim must exist before suit" is brought and defines the term “disagreement” to “mean a denial of the claim by the director or some one acting in his name on an appeal to the director.” As a condition precedent to maintaining suit against the United States, proof of disagreement in respect to the claim between the claimant and the bureau must be alleged in the complaint and made, and “jurisdiction to entertain suits upon war risk insurance policies arises only in eases of disagreement between the insured and the Veterans’ Bureau in respect to the claim.” Straw v. United States, 62 F.(2d) 757, 758 (C. C. A. 9th Cir.); Falbo v. United States, 64 F. (2d) 948 (C. C. A. 9th Cir.); United States v. Peters, 62 F.(2d) 977 (C. C. A. 8th Cir.); United States v. Kerr, 61 F.(2d) 800 (C. C. A. 9th Cir.); Kelley v. United States, 59 F. (2d) 743 (D. C.).
As the complaint does not allege the jurisdictional fact of disagreement, the demurrer will be sustained.
Oral opinion. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219177/ | TUTTLE, District Judge.
This suit involves reissue patent No. 18,-112 to Moulet, a resident of France. On June 4, 1917, Moulet applied- for, and later secured, a substantially equivalent patent in France, No. 494,871. Then on July 9,1918, he filed a United States application, which was pending in the Patent Office until August 31, 1926, when it issued in its original form as patent number 1,597,689. This original patent was later assigned on October 11,1927, to the plaintiff in this case, and on April 10, 1930, the application for reissue was filed, and on June 23,1931, the reissue patent number 18,112 was issued.
The patent relates to the pumping of gasoline from the supply tank at the rear of an automobile to the engine carburetor which is under the hood at the front. This work of getting the gasoline, or gas as it is commonly referred to, from the large supply tank to the carburetor that uses it in mixing the gas with the air for the use of the engine has passed through four well-known stages:
The first stage used a gravity supply tank near the engine, either under the front seat or the cowl of the automobile and the gas flowed by gravity to the carburetor as needed. Mechanically that was a simple method, because gravity did the work and fed the gas to the carburetor. So long as the tank was kept above the carburetor, it did the work that was desired; but that was not a nice place to have ten or twenty gallons of gasoline. It was right near the occupants of the ear and it was doubly objectionable because the gasoline was near the engine, the sparks, and the heat that might start a fire.
The second stage was to mount an airtight supply tank at the back of the ear and use an engine driven pump to maintain a pressure of air in the tank to force the gas up to the carburetor. This, again, was not entirely satisfactory and an auxiliary hand pump was necessary to pump up pressure initially for starting. There was also a great danger of leaks and fire due to the pressure.
The third stage was, in a way, going back to the first stage: It consisted in placing a small two-chambered vacuum tank in the engine compartment under the hood and using the engine intake manifold vacuum to periodically suck air out of one chamber of the vacuum tank, so that the atmospheric air pressure on the vented rear supply tank *372pushed the gas up into that first chamber of the small vacuum tank above the carburetor, and then by gravity the gas was periodically dumped into the second chamber and fed to the carburetor for its use.
While this third stage was a big improvement over what had gone before, and although it went into general use, it was far short of the fourth stage which we now have.
The fourth stage is so satisfactory in comparison with what has gone before (and the steps that may come hereafter are so hidden in the haze of the future) that every car now sold in the United States, as far as the record shows, is equipped with this fourth thing which, to us who live in this age, is very wonderful. It consists simply of a little pulsating pump which delivers the desired amount of gas from the supply tank to the carburetor just as it is needed — almost like the human heart in the circulatory system.
This fourth stage not only required a pump but it required a pump possessing special characteristics. I go now directly to what is being done by both the plaintiff and the defendant, who supply, either directly or indirectly, the demands of the whole United States. The thing that does the trick and distinguishes this fourth stage from what had previously been in use possesses these characteristics: A pump with a casing wall that is rigid and unyielding, with a circular opening in it and fastened across that circular opening several layers of airplane cloth or fabric that have been treated in a particular way so that gas or air cannot leak through; Metal discs or washers are attached to both the inside and the outside faces of this fabric at its center,-leaving a-flexible annular zone or ring that yields as'the center discs are moved in and out in piston fashion. An actuating mechanism is attached to the discs. There is a valve controlled intake and .a valve controlled outlet to this chamber casing. As the discs attached to the fabric are pulled outwardly, the chamber increases in size and sucks in gas, and as the discs and fabric are pushed in the valve that lets in the gas is closed, the size of the chamber inside is decreased, and the fluid in the chamber is forced out past the valve in the outlet opening, and so this little pulsating heart goes on being actuated by the engine, at direct camshaft speed.
It is so arranged, however, that this pushing in and pulling out is done in this way: The pull-out stroke, which means the suction stroke, the one that increases the size of the chamber, is made positively by a cam of the engine camshaft, and has a fixed outward limit. It always fills the chamber to its full capacity, because in that direction the stroke is fixed, but on the stroke in the opposite direction, which means the discharge stroke, there is lost motion with respect to the cam, and that discharge stroke that I refer to is caused by a spring.
I do not need to describe the spring, because it does not matter what kind of spring it is, but it is a resilient action, while the cam action is positive; that is to say, when the cam releases the actuating member, the spring takes it up and forces it back resiliently, and inasmuch as the discharge stroke is a resilient spring action stroke, it is not a certain stroke but a stroke depending on how much fluid flows from the pump to the carburetor, the carburetor being of the usual type arranged with a float valve.
The carburetor, I find, determines for itself how much gas is needed and used by the engine; and the amount of gas discharged by the pump, by this resilient spring pressing in the discs and fabric, is determined by how much is needed by the carburetor; therefore, we have the carburetor taking only the gas it wants for the engine, whether it be idling or coasting down hill and using little gas, or fighting through mud or sand or climbing a steep hill and using its maximum requirements. The carburetor always feeds the amount of gas the engine needs as the driver of the car steps on the accelerator or releases it, and the flow of gas is regulated by the float valve of the carburetor in so far as the •amount of gas that is taken from the pump is concerned, and the pump always keeps an excess supply of gas for the carburetor. If little gas is fed by the carburetor to the engine, then, of course, the resilient spring on the inward stroke of the plunger does not drive much gas out of the pump to the carburetor, and therefore the positive intake or pull-out stroke is not long and does not suck much gas into the pump. I find always the same amount of gas in the pump chamber at the end of each suction or cam stroke, which means, of course, taken with what I have said, that this intake suction stroke always brings in the same amount as has been forced out by the preceding resilient stroke for the use of the carburetor.
This is the thing that is working today in millions of cars now in use and now being made. This thing I have described is very wonderful. If a man could have gone completely from stage 3 to stage 4, he would, of course, have made a very meritorious invention, but no one person did it. . .
*373The fact that this pulsating gas supply is being used in every automobile sold in the United States, and-the fact that this patent is concerned with the flow of gas from the supply tank to the carburetor, do not mean that this plaintiff is entitled to a patent covering the entire fourth stage. On the other hand, if he is not entitled to all of it that is no reason why he should not have part of it if he has done some part of it, and that part of it is big enough to justify a patent.
Patent decisions relative to the breadth to be given claims, grew out of the fact that patent eases are tried in courts of equity, and when it is found that one has revolutionized an art, the court looks at the matter through glasses whieh are generous, and rather magnify the virtues and diminish the defects in an effort to do justice. On the other hand, a study of patent opinions teaches that when there comes before a judge a very wonderful thing, he is not to jump to the conclusion that he necessarily has a good patent to deal with.
Some of the things whieh I have described as constituting the fourth stage whieh is now in use are not per se and by name found in the plaintiff’s patent, while others came before the plaintiff’s patent. The problem is to find what was ahead of the patent and then by eliminating that prior art from what was disclosed in the patent to find out what part the patent played in the development. ■ Plaintiff has stepped into the shoes of Moulet and is entitled to all that Moulet deserved, and no more.
For this purpose, we do not need to go into details about the first three stages, nor the history of the carburetor, except to say that all three stages had the carburetor with its float valve, before going to the fourth stage, and before Moulet and his patent in suit. The carburetor was and is a little device whieh meters gasoline and mixes it with a comparatively large quantity of air, and does that metering by the rush of the air past a little opening or nozzle whieh supplies the gas, and the float valve in the carburetor regulates that little supply so that when the gas is taken out as needed the valve will open, and when it.has enough the valve will close.
The float valve carburetor just referred to was old before the patent in suit and before the fourth stage began.
We also had before Moulet piston pumps with a positive suction stroke to a certain place or destination, and a resilient discharge stroke or movement the length of whieh would be determined by the “choking,” to use the words of Moulet, of the pump, so that the length of the resilient discharge stroke was determined by the amount of gas which had been used out of the pump. The German patent to Deutz No. 337,157 shows a piston pump of the above type discharging into a Diesel engine requiring definite amounts, but amounts whieh vary with varying conditions of engine operation. The period of the spring actuated discharge and the extent of piston movement is varied automatically by the speed governor. The following suction stroke is positively actuated to a fixed limit, so that it takés in a quantity precisely the same as the quantity expelled by the previous resilient “choked” discharge stroke.
Then there were Lindley et al. patents— U. S. No. 440,485 and British 16057 of 1888, with the Bourdon tube — a tube flattened out and closed at one end and bent around almost in the form of a circle, and whieh made use of the same thought and principle as the piston pump in that if you decreased the size of the fuel chamber you discharged liquid through a valved outlet, and then if you increased the size of the fuel chamber the discharge outlet' valve closed and liquid was sueked past the valve in the intake opening.
Lindley, like others before him, recognized and made use of the idea of increasing and decreasing the size of a fuel chamber, and Lindley did it by pushing against the end of the Bourdon tube in the direction whieh tends to straighten it out, so that the flattened sides of the Bourdon tube became farther apart, and caused a suction in the tube; then as he let the resiliency of the tube move it back more nearly to the form of a circle, the inner side closed towards the other side and expelled the liquid. This breathing or pulsating is caused by the relative movement of the two sides. When they are close together the content of the chamber is smaller; when they are apart the content is greater, and by pushing against the free end of the tube and withdrawing, letting the tube come back more nearly to a circle, there went on this breathing of the sides of the Bourdon tube, sucking in and pushing out the fuel to supply the engine.
Lindley had that idea that I have described, and though his use delivered a fixed quantity of fuel on each breath, it only delivered such fixed quantity when the engine speed governor determined that it was needed. That is what he wanted, but this tube whieh has a positive suction stroke in one direction and a resilient discharge stroke in the other direction is capable of and adapted to produce variable strokes in accordance with *374varying engine needs. In the environment in which Lindley placed, the Bourdon tube pump, he did not require a supply different on one discharge stroke from what he needed on another, and it met his needs, which were a fixed quantity of fuel when a discharge stroke was called for. It was said that there was no lost motion in Lindley; there would not need to be for the purpose for which he used it, but one only needed to put the little lever that pressed against the end of the Bourdon tube at a distance from the Bourdon tube to get that lost motion, and Lindley shows it in that position; therefore, his pump structurally unchanged is equally well adapted to an environment where variable pump strokes are required as a result of varying engine needs.
Then, passing over much that is in the prior art, all that I will say now is that Moulet used what was old in the art, so far as there is any thought in his use of a fuel chamber with inlet and outlet valves, and with provision to decrease the size of the chamber to expel fuel and to increase the size of the chamber to admit fuel, whether the changes in capacity are made by a reciprocating piston or by pressure and relaxation of a Bourdon tube as in the Lindley pump.
Both lindley with his Bourdon tube, and Moulet with the accordion bellows, avoid the need of piston packing. Perhaps both may be regarded as having an improvement in this respect over a piston type of pump. In comparing Moulet' with Lindley, it may be said that Moulet took the inner wall of the Bourdon tube and arranged it with bellows folds so that it could be compressed and expanded because of the folds, instead of bending it as a whole, as did Lindley, in the process of enlarging and decreasing the pump chamber capacity. ‘ '
That was an improvement over Lindley. It is a different way, it would fit a new need, it was a change, but there is a marked similarity between the bellows of Moulet and the Bourdon tube. You can take one.end of the Bourdon tube in one hand and the other in the other hand and straighten it out and shut it up. Here we find Mohlet taking that inner member of the tube and folding it on itself and leaving the other rigid, then collapsing or pulling out the folded part to make the chamber smaller or larger.
I do not belittle the step Moulet made, but he is not entitled to the idea of discharging, even resiliency, from a chamber by making it smaller or sucking into that chamber, even positively, by making it larger, or by doing that by pressure on the outside of an enclosed chamber which has no machinery or parts' moving in it, because that is exactly what the Bourdon tube construction as used by Bindley did; nor did Moulet do the trick that we are enjoying to-day in the automobile art. The thing that Moulet performed was an improvement on the Bourdon tube and was an improvement on the prior art. I am speaking now about his pump and not about its combination with a carburetor. The engine suitable for an automobile is much like the engine suitable for an airplane. Yet the demands for gas by an automobile were quite different from those for an airplane. Even if Moulet did a good job of making a pump for an airplane, it was not the kind of a pump which would meet the automobile needs of today.
B am not talking about how much you would have to modify Moulet’s pump or about substitutions, but I am taking Moulet’s pump as he made it. This record is very unsatisfactory so far as telling this court how well the Moulet pump worked on airplanes, but I reach the conclusion, after giving everybody what I think they ought to ‘have, that his pump worked satisfactorily for a short time. It worked for short periods of time on airplanes as used in the war, but that is not the use required in a mail plane flying from New York to California twice a week or from Detroit to New York every day. The planes used in the war could be overhauled frequently and were serviceable so long as they would give a few hours of flight. The Moulet type pumps were abandoned many years ago even for airplane use in this country.
Moulet made his application for his Ereneh patent just about the time we got into the war. He did a great service when he invented a pump which even for a few hours gave the airplane a better supply of gas than any prior pump. He could put a new one on and if it would run fifty hours that was all right for an airplane in war service. He could have, as he did, an emergency gravity tank to get back home if something did happen, whether by bullet or any other way.
But as you come over into the automobile art, a pump must last two or three years, running at high speeds. You cannot be putting a pump in your automobile every little while; you must have a pump in your automobile that will run from New York to San Francisco over the mountains and back again. In that respect the needs were quite different, and I think the real explanation as to why the fourth stage did not supplant the third *375stage at an earlier date was because the essential characteristics of the pump which made the fourth stage a success had not been discovered. It is an unusual situation to have one produet entirely supplant another and go so quickly into universal use.
Here was Moulet filing his application for patent in France on June 4, 1917, and using the invention to a substantial extent over there, and the world knew about it then. I give the plaintiff full credit for that. I think we can say with reasonable safety that Moulet’s pump was used on airplanes in France in 1917, and later a similar type pump was used on airplanes in this country; later still another similar type pump was . tried out on automobiles, and while this type of pump looked pretty good, yet it would not do the trick because of that continual bending of the metal. It just looks reasonable that it would not have endurance. Even running at greatly reduced engine speed it would stand up for a time sufficiently long to go over the enemy line and get home, but it could not be used to-day and tomorrow and for the next two years without giving trouble. In the automobile field there must be long, lasting, good service and not simply good service for a few hours. The Moulet pump did not possess that quality of durability. It was not the kind of a pump that could supplant the vacuum tank. If no one had thought to use the specially treated fabric, we would still have the vacuum tank.
The fact that the Moulet pump was developed, patented and known to the public, including the defendant, before the pump now in general use was developed does not necessarily mean that this fabric pump is in the nature of an improvement on Moulet. The pump now in use did not grow from the Moulet branch of the art.
The one who invented the pump now in use may have known of the Moulet pump. It does not matter if he did. He designed something different from Moulet. He designed a pump having a circular fabric secured at its periphery to a rigid easing, and with discs and a stem fastened at its center to permit the annular fabric part between the discs and the easing to act like a hinge. This fabric does not yield throughout its area as does the metal wall of the Bourdon tube, nor does it have the collapsible expanding and contracting movement as in Moulet. I am not talking about whether the inventor of the present pump is entitled to a patent. I am saying that it is not an improvement on Moulet, but that it is a separate invention in the art; it is a little nub sticking out all of its own in this old art; and finally, with the old things that were available, it did the trick.
One thing about which I feel very sure is that this art would never have been revolutionized,' and we would never have gone to the fourth state in this' branch of the automobile art except that to what was known was added this specially treated fabric, used in this peculiar way. If one were forced to do without the fabric for this vibrating, pulsating membrane which enlarges and decreases the size of the fuel chamber, and were forced to take and arrange metal means for enlarging and decreasing the size of the chamber by changing the shape of the metal," it would probably be done by something more like Lindley’s Bourdon tube than like Moulet’s bellows. In other words, if accomplished by metal, it would have been a metal means that breathed back and forth by making the sides move dose to one another, and then separate from one another by vibrating throughout its length, rather than by using a larger, more spacious chamber formed by a metal bellows, and collapsing it upon itself by bending the metal at each fold, because, like a weak link in a chain, the weakest fold would give way and spoil the whole pump. Durability is one of the things we must have, so I feel very strongly that you might better start from the flat resilient Bourdon tube' if you are going to use metal at all than to start from a corrugated bellows like Moulet, which collapses the chamber by bending of the metal upon itself at each corrugation, depending upon its toughness for a hinge.
The present fuel pump has a reciprocating part or plunger more nearly like a piston. I do not think the circular fabric with the discs can be called a piston in the strict sense of the word. It does not conform to the definition of a piston. But in a court of equity, when we consider that this last trick of using fabric is the one that makes possible this wonderful pump that we all enjoy, we ought to consider how much it is like a piston. We have a rigid casing with one round opening covered by fabric, which at its eenter point is pushed in and pulled out by reinforcing washers or discs that cover the greater part of the fabric, and which assembly moves in to almost completely fill the chamber. You have without doubt the same effect as a piston or plunger, with a flexible ring or skirt around the center or plunger part to form the equivalent of a packing.
In other words, a fabric skirt is a way we know of letting things yield. I know I have *376seen a lot of things done that way in the world that I cannot recall at present. I think of the heavy metal vestibule frames on Pullman ears, with the folded canvas- seal to permit movement, and the old household insect powder spray can with its fabric top with a center metal disc to be pushed down against an inside spring. It is not a far step to think of that as a piston which, instead of having a packing, has a fabric stretched from the rigid center portion across to the casing or cylinder, so that although it is not a true piston, it is the thing that meets the requirements of the automobile pump as to durability and sealing, and gets away from the necessity of bending metal.
What Moulet really had in mind as to what he was inventing, whether he had ever seen a Bourdon tube or not, was to increase and decrease the capacity of a sealed metallic chamber in a fuel pump; and instead of doing it by vibrating the tube from end to end he would collapse it.
He uses some language in his reissued patent claims that possibly might apply even to cloth; and though I do not think he is bound by all that was said in the Court of Appeals of the District of Columbia (Giesler v. Moulet, 56 App. D. C. 196, 11 F.(2d) 911), I see that what he was fighting about and contending for in that court, and what the people representing him believed to be his invention, was the use in a fuel pump of a sealed metallic collapsible envelope, and that it must be resilient.
It was argued that one could not make his collapsible vessel out of cloth, but that it had to be metal that would bend upon itself, back and forth. That is what the record shows he thought he had invented, and for short hours of service in war-time it evidently was a good thing.
Moulet did not invent the creating of suction by positively enlarging a chamber and the reverse idea of expulsion from it by compressing it; and eliminating from Moulet’s pump all the things either well known in the art or shown in prior patents. I think Moulet is properly limited to the use of a collapsible, resilient metallic envelope in a pump. This is what he had in mind, and what one reading his patent would think he had in mind. You may read his patent, you may look at his drawing, and you feel that he thought he had made an invention in using the collapsible metal bellows. I think he had accomplished something, performed a useful service with it, but the record shows it was not used and was not practical in the automobile art even though the engines are almost interchangeable from automobile to airplanes. The work of a man who will take one of the old rigid pump chambers and put into it the fabric diaphragm must not be measured as an invention on Moulet, but instead as a separate invention. The use of the special fabric stands out in my mind so far as the pump alone is concerned. (I am not talking about any connection with the carburetor.) I am talking about the pump per se, the way it works, the way it is built, and the things it will do. I think that what the defendant does, and the entire public is using, is not developed from Moulet but is an invention that should ride along beside and be a separate nub on the patent art. I am not able to see the two hinged together. Loew Supply, & Manufacturing Co. v. Fred Miller Brewing Co. (C. C. A.) 138 F. 886; Adams Electric R. Co. v. Lindell R. Co., 77 F. 432, 23 C. C. A. 223 (quoting from Chicago & N. W. Railway Co. v. Sayles, 97 U. S. 554, 24 L. Ed. 1053).
If somebody invented and held a patent on the idea that every time you decreased the size of a chamber you expelled liquid, and when you increased you sucked in liquid, then I would say both Moulet and defendant ought to pay royalty to that man; but, of course, that idea is as old as the hills.
Moulet wished to move the pump chamber walls for the purpose of varying the size of the chamber and he did it one way, while defendants are doing it another way. If you say defendant is making the chamber smaller ■and larger, sucking in and expelling, the answer is — not in the way Bindley did it nor in the way Moulet did it.
It looks as if the defendant, under the teachings of the Carter U. S. patent No. 1,695,534, was the one who created the pump in controversy, but that is not for me to determine in this lawsuit. My problem is to bear in mind the history of the art and the Moulet patent, and to determine how broadly or narrowly its claims are to be construed.
Here is a patent applied for in France on June 4,1917, for a thing that was commercially used on airplanes; applied for in this country in the summer of 1918 and granted August 21,1926. No one used it in the automobile art at all. It slumbered from then on until April 10, 1980, when there was an application for a reissue, finally granted on June 23, 1931. In the meantime, beginning in 1927, or three years before the reissue application was filed, these very defendants and the entire industry began to use the thing that has done the trick, so that defendants *377and all automobile manufacturers as well as other engine makers and users, and all persons that purchased automobiles, went ahead and universally adopted this new thing that did the trick. With the above history, the patent in suit must be closely scrutinized.
The defendant began to develop the pump in suit in 1925, and subsequently marketed it to the exclusion of the vaeuum tanks used in the third stage; and then even the plaintiff followed in 1928, using this same fabric disc that has done the trick, and not using the structure of the patent in suit. Now when practically the whole world is riding with that sort of pump, surely this wonderful development of the art that has occurred ought not under those circumstances to be given to these plaintiffs. That would not be right and it would not be equity.
The rule of law relative to patents and reissue patents, except in special cases, is such that after two years from the date of the original patent, all that was not claimed in the original patent is given to the public, and the applicant may not ask for a claim broader than the broadest claim of the original patent. He may correct claims of the original patent that might otherwise be invalid due to their being too broad, by making them narrower or more limited in the reissue patent; but here, again, as to the glasses the court uses, a court of equity ought to have in mind the commercial situation and history. The law is that a patentee, after two years, may ask for a reissue patent and get any claim less than those asked for in the original patent; he cannot get a broader claim, and he cannot get a claim on what was not originally shown. Mahn v. Harwood et al., 112 U. S. 354, 5 S. Ct. 174, 6 S. Ct. 451, 28 L. Ed. 665; Miller v. Bridgeport Brass Co., 104 U. S. 350, 26 L. Ed. 783; White et al. v. Dunbar et al., 119 U. S. 47, 7 S. Ct. 72, 30 L. Ed. 303.
Now again, though it is not covered by proof, I feel satisfied from little things that I see in the present device, and from the history that we have unfolded in this court, that undoubtedly the people that developed this fine thing we have to-day had seen the Moulet pump or pumps of that type, but I do not think they got anything from Moulet that was not in the art prior to him, and it is even plainer that whoever drafted the claims of the reissued patent which is now in suit saw this fine thing whieh has been developed by the defendant and which we are all using.
So here we have a case of this old patent issued in France in 1919, issued in this country in 1926, never used on automobiles, and with claims admittedly void because they were so broad, or admittedly so narrow that they did not read at all on what we are all using now, and what the defendant is doing.
I recognize the law that I have already tried to point out, and yet in a reissue patent as close to the line as this is the court is entitled to use some straws to see what it means. When Moulet went into details in his original patent, he did not refer to the things which are now claimed and the details whieh would reach the thing now done, but rather he talked about things which come very far from making the defendant here an infringer.
The court must go back to the original claims and gather their true intent and meaning. After defendant had developed this very practical and useful pump, the plaintiff drafted new claims for the reissue patent whieh fitted exactly the defendant’s pump and found only remote and flimsy suggestions for their support in the original patent. The court must not permit such conduct to result in profit to plaintiff. White v. Dunbar, supra; Carley v. Matthes, 56 App. D. C. 20, 6 F.(2d) 718.
This plaintiff should not be treated any differently than Moulet would be if he were right here in person. I have not any notion that there is anything in the law that causes-that to be done. Plaintiff bought the patent, paid a substantial sum for it, and is entitled to all that Moulet would be entitled to. I do think-that we should bear in mind that plaintiff bought the patent after defendant had developed this pump, which is so worthwhile, and which is the only thing that ever caused a change from the third stage to the fourth. This patent was bought and very drastic efforts made to change it into something which would fit the defendant’s device, and every motive to do that, of course, was present. There was the plaintiff who during the third stage had developed a marvelous business in the vaeuum tank, and controlled it in such a way that it monopolized that device almost completely, if not altogether. Then along came defendant with this new pump development, whieh started its production curve upward for the fourth stage. No automobile needed both the vaeuum tank and this pump; therefore, the production curve on vacuum, tanks started down. Just as fast as one curve went up the other went down; they were reciprocating curves. The plaintiff saw that. We need that picture to understand and appreciate the form in whieh these claims of the reissued patent were drawn. Some of them read in a manner to indicate that the drafter *378was thinking more about what the defendant was doing than he was about what Moulet originally claimed or what he had shown or suggested. The Moulet patent in suit, interpreted in the light of the art, the light of that history, and the way it ought to be interpreted, does not reach defendant’s pump-. Counsel have not gone over the Moulet reissue patent claims one by one, and in our desire — on the litigant’s part and on my part — to do justice to the merits of the ease, we have been dealing with bigger and broader things than the exact words of a particular claim.
During the prosecution of the original patent in the Patent Office and the Court of Appeals of the District of Columbia, Moulet was asking for and representing his invention to be for a pump with an elastic inner metallic envelope, and to overcome prior art cited against him his attorney argued that such an elastic metallic envelope is essential in a gasoline pump. I do not intend to hold any claim void and invalid that is so limited. I think he is entitled to that, and I think he performed a real service with his pump, but I do not find anything in the original patent as filed that would justify claims on pushing in and pulling out fabric in the manner done in the pump in suit, and any claim that is so worded that it can be construed to cover such a construction I hold to be void. Those claims, such as 1, 2 and 3, which are clearly limited to the collapsible and extensible metallic envelope — this metal bellows — are not sued upon and quite evidently are not infringed.
Thus far I have not said anything about combination claims. There was not a claim in the original patent for a combination. Those claims are not worded in the kind of language I look for in a combination claim— I refer to a claim for a combination that includes a carburetor.
We very seldom find any claim in a patent suit that is not for a combination of elements, but what I mean is that I do not think there is any ground for a combination claim including a pump and a carburetor in the first patent. When I first looked at the patent, it did not look like such a combination patent. For example, it is not a combination drawing; there is no carburetor or tank or engine shown, and the whole disclosure and specification go to show that Moulet thought he was inventing a pump, even though he mentioned that it is particularly to go on airplanes, and also mentions that it is to bé used with carburetors. He does not even bother to tell us what kind of carburetor. In fact, Moulet intended, as the evidence shows, to use his pump in its characteristic way with carburetors of other kinds than those having a float valve. It was also customary at that date to drive airplane gasoline pumps by wind-driven propellers independently of the engines and at a distance from them. I will readily agree that it is proper to refer in general ways to the use to be made of the pump, but if you want to get the float valve of a carburetor into a combination and get a patent on the combination of a float valve carburetor, or the carburetor with a float valve in it and a particular pump and the action of that pump, the public should be advised, and it should be explained. Moulet did not do that in his first patent as originally filed.
There are really three thoughts running through this suit as I see it, as presented now to the Court by counsel: One is this relation between a carburetor with its float valve, and this particular kind of a pump in suit. Thq second thought concerns the structure and use-of the metal bellows in a fuel pump; and the third thought — the location of the operating-mechanism outside the fuel chamber of the pump.
In considering the first thought I may say that the float valve shuts off and lets in the supply of fuel from the pump. The resilient stroke of the pump is arranged so that it meets the need of the float valve of the carburetor, and the float valve does regulate the length of pump stroke and the amount of fuel delivered by the pump to the carburetor. I see that relation and that co-operation, and the first one who did that may have had room for getting a patent. Moulet, however, could not have gotten a patent if he had asked for it on that ground, because we have HansenEllehammer British patent No. 23474 of 1912 supplying a float valve carburetor, with the length of the resilient discharge stroke of his-pump regulated as much by the float valve of his carburetor as would be the case had the Moulet patent shown a float valve carburetor. I recognize a difference on the intake stroke because in Moulet that is a positive stroke; the same as it had been in other pumps ahead of Moulet, while in Hansen-Ellehammer it was a resilient intake stroke as well as a resilient discharge stroke; but- as to the cooperation of that discharge stroke of Ha-nsen-Ellehammeris pump with its float controlled carburetor and the co-operation of the discharge stroke of Moulet’s pump with its carburetor, I discover (on that discharge stroke) the same mechanical principles of co-operation in one that there is in the other.
We had the old positive intake and resili*379ent discharge before Moulet; we had HansenEllehammer with its resilient intake and a variable resilient discharge stroke used in connection with a float valve carburetor; so even if Moulet had shown and described and asked for the combination, it could not be said to be invention over the prior art. I think the co-operation is too theoretical to say that it would have been invention to take an old pump with its resilient discharge and its positive intake and put it in the place of HansenEllehammer’s pump, even though it did work better. Hansen-Ellehammer had discovered the co-operation between the pump and a float valve carburetor, and as far as the discharge stroke is concerned, it is identical with Moulet. Therefore, I do not think it was open for Moulet to claim that combination in the first place, and while the intake stroke of the Hansen-Ellehámmer pump was resilient and not positive, there were other pumps lying around in the art that did have the positive intake with the resilient discharge, like the Lemp, Deutz, Szanto, and Iindley pumps. In the next place, he did not claim it in his application as originally filed; and in the third place, even when he did claim it as a result of the interference with Giesler, whose claims he adopted, the Patent Office criticized him because he was not justified in asking for it (I think the Patent Office was right about it), and he yielded to that criticism and took it out. I do not think it would be right to say Moulet had, or properly could have had a patent on any combination between pump and carburetor. Grand Rapids Showcase Co. v. Baker et al. (C. C. A.) 216 F. 341; Corbin Cabinet Lock Co. v. Eagle Lock Co., 150 U. S. 38, 14 S. Ct. 28, 37 L. Ed. 989; Dobson v. Lees, 137 U. S. 258, 265, 11 S. Ct. 71, 34 L. Ed. 652.
As to the second thought relating to the pump having a resilient discharge and a positive intake, I have explained that I believe Moulet is only entitled to protection on a pump having this feature in connection with a rigid chamber associated with a collapsible and expansible metallic bellows, which construction is not used by defendant.
As to the third thought relating to the location of the actuating mechanism outside the pump chamber, I have explained that this feature is old in the art, as shown in the Lindley patent.
So I say my conclusion is that there is no combination with a carburetor involved here at all. That is not in the Moulet patent and never was intended to be there. When he asked for his original patent the Patent Office did not intend to allow him a combination claim. He did not ask for combination claims in his original application — they got in there in a peculiar way — and as soon as the Patent Office discovered that he had not furnished the ground work to support those combination claims they called it to his attention and he yielded and took them out.
Sb the original patent was issued without combination claims, surely for the reasons, first, that he could not have gotten combination claims if he had originally asked for them, second, for the reason that he did not originally ask for them, and third, for the reason that he consented to take them out when they had been inadvertently brought in by the interference. Therefore, the reissue application had no parent case to support combination claims at all.
I therefore hold claims 4, 5, 6, 7, 8, 9, 10 and 11 of the Moulet reissue patent in suit No. 18,112, which refer to a combination or fuel feeding system, to be invalid; first, because the subject-matter of said claims is old and was shown in patents, such as Lindley British No. 16,057 of 1888 and Hansen-Ellehammer British No. 23,474 of 1912, more than two years prior to the date of the original Moulet patent application in this country; second, because the showing or specification of the original Moulet patent has no basis for claiming a pump and float-valved carburetor combination or a fuel feeding system; third, because said claims are for an invention different from the claims of the original patent, and were not applied for until more than two years after the date of the original patent; and, fourth, because all such combination claims fail to include the elastic metallic bellows to which the Moulet pump is limited.
Then, as to the pump itself, I say that Moulet’s invention had only to do with the use of a collapsible and expansible metallic bellows in a fuel pump per se, as defined by claims 1, 2 and 3, and no structure in accordance with claims so limited has been made, used and/or sold, or caused to be made, used and/or sold by the defendant, and as exemplified by plaintiff’s exhibits Nos. 44, 45, 46, 47, 49, 50, 51, 52 and 53.
I hold claims 12, 13, 14, 15 and 16 of the Moulet reissue patent in-suit No. 18,112 which refer to a diaphragm fuel pump invalid because not supported by the original patent and also in view of the prior art, and because they fail to recite the collapsible, elastic, metallic bellows, which was the only contribution made by Moulet to the fuel puinp art.
*380The result is a decree in favor of the defendant, dismissing the bill with costs to be taxed.
Upon authority of Briggs v. United States (C. C. A. 6) 45 F.(2d) 479; Lewys v. O’Neill et al. (D. C.) 49 F.(2d) 603; Hazeltine Corp. v. Radio Corp. (D. C.) 52 F.(2d) 504, my opinion may stand as the findings of fact and conclusions of law under Equity Rule 70½ of the Supreme Court (28 USCA § 723). | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219178/ | NIELDS, District Judge.
Motions were filed by defendants (1) for a bill of particulars under Equity Rule 20 (28 USCA § 723), and (2) for discovery under Equity Rule 58 (28 USCA § 723) in three suits. against American Telephone & Telegraph Company, Western Electric Company, Inc., and Electrical Research Products, Inc. (referred to as “Telephone,” “Western,” and “Products,” respectively), under section 16 of the Clayton Aet (15 USCA § 26) to restrain alleged violations of section 3 of that aet (15 USCA § 14) and of sections 1 and 2 *381of the Sherman Anti-Trust Act (15 USCA §§ 1, 2);
The bill of complaint spans the entire existence of the talking motion picture industry. The allegations cover generally a period of fourteen and more particularly a period of seven years. In 1919- patents relating to this art and to allied arts were pooled by two powerful groups called the Telephone group* and the General Electric group. The field covering the production and reproduction of talking motion pictures and the field covering the manufacture, sale, and leasing of equipment and apparatus therefor was allocated to Western and Products. The bill recites significant steps in the development of the art by Western and Products. Today Products is licensor of the recording equipment in almost all of the moving picture studios. It is licensor of reproducing equipment in approximately 5,500 theaters. The personnel of Products is extensive and widely scattered.
Plaintiffs charge that the defendants have monopolized two businesses: (1) The business of producing and reproducing talking motion pictures; and (2) the business of manufacturing and leasing apparatus and equipment for the first named business. Further, that defendants conspired to restrain such trade by the terms and covenants of certain agreements made by Western and later by Products with producers and exhibitors of talking motion pictures; that the effect of these terms and covenants was to establish monopoly; that defendants, pursuant to agreements with producers and exhibitors, resorted to unfair business práctiees; and that these agreements and practices on the part of defendants entailed great damages to plaintiffs. Accordingly, defendants seek particulars and discovery concerning the allegations of monopoly and unfair practices. Defendants seek to test plaintiffs’ charges by learning whether the characteristic results of monopoly and unfair practices followed.
The old system of pleading concealed as much as possible what was going to be proved at the trial. It is difficult to estimate the extent to which secrecy before trial serves the cause of justice. In some measure it may prevent perjury. This advantage, however, is far outweighed by the onesided and perverted view it imposes. To prevent surprise at trial and to confine the contest to the real issues, the Supreme Court promulgated Equity Rules 20 and 5S (28 USCA § 723).
Equity Rule 25 (28 USCA § 723) requires that a bill in equity shall contain “a short and simple statement of the ultimate faets upon which the plaintiff asks relief, omitting any mere statement of evidence.” Under Equity Rule 20 (28 USCA § 723) defendant may move for an order requiring plaintiff to set out “further and better particulars of any matter stated in any pleading.” In view of the particular ease disclosed in the bill of complaint, or the particular issues framed after answer filed, the court, in the exercise of its discretion, may require plaintiff to furnish a bill of particulars. Such a bill of particulars may well be a further and better statement of the ultimate facts or certain of the ultimate facts alleged in the bill of complaint. “To avoid unfair surprise, the claimant’s pleadings may be required to state with greater particularity the faets upon whieh his claim is based.” 3 Wigmore on Evidence, § 1848. The ultimate faets are the faets upon whieh plaintiff’s claim is based and upon whieh he asks relief. Those ultimate faets stated with further and better particularity appear to be the “intermediate faets” in the oft-quoted passage of Judge Morris that “it becomes obvious that ‘evidence’ and hence ‘ultimate facts’ are always relative terms * * * and that, in the chain of causation leading from remote evidential circumstance to the ultimate fact lying next below the conclusion of law, there may be, and usually are, intermediate faets whieh, to the end that the adversary may be better apprised of the case he has to meet, a court may, in its discretion properly exercised under the facts, and rule 20, order set out in whole or in part in a bill of particulars.” Universal Oil Products Co. v. Skelly Oil Co. (D. C.) 12 F.(2d) 271, 273. 3 Cyc. Fed. Proc., § 844.
Equity Rule '58 of 28 USCA § 723 authorizes the filing of interrogatories “for the discovery by the opposite party or parties of facts * * * material to the support or defense of the cause.” Discovery under this rule hinges largely upon the character of the cause and upon the issues framed by the pleading. There should be no hard and fast interpretation of this rule for all cases. Upon objections filed, the court may exclude answers to interrogatories amounting in a particular case to “fishing” or interrogatories seeking in a particular ease the disclosure of the identity of an adversary’s witnesses. If the bill of complaint contains evidentiary matter, as distinguished from ultimate facts, further and better particulars respecting such matter will not be ordered, yet discovery respecting it under rule 58 (28 USCA § 723) may be appropriate. Moreover discovery by the opposite party respect*382ing all material facts may well serve the ends of justice. 3 Wigmore on Evidence, § 1856b.
Rules 25 and 20 (28 USCA § 723) deal with ultimate facts. Rule 58 (28 US'CA § 723) does not. Rule 25 restricts the pleader to ultimate facts. Rule 20 authorizes an order requiring the pleader to particularize ultimate facts. Rule 58 provides for discovery of evidentiary matter material to the issue. The first two rules deal with pleading, the' third with proof.
Under the above interpretation of the rules it may well be that the motion for certain particulars should have been granted. The general denial of the motion is not, therefore, to be taken as a precedent. In view of the statement of counsel for defendants that it is immaterial whether the information sought is obtained by way of particulars or interrogatories the order denying the motion for particulars will stand.
It is unnecessary to deal with the interrogatories seriatim. All interrogatories filed in each of the three eases, as modified by defendants at the hearing with the exception of interrogatories respecting damages, should be answered. Objections to the latter interrogar tories should be sustained. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219179/ | ANDREW M. J. COCHRAN, District Judge.
This suit is before me upon final hearing and for decree. It was brought to recover from the defendant Title Trust Company $8,-436 held by it as stakeholder under an agreement dated March 27, 1931, between plaintiff and the defendant receiver of the Mt. Vernon Bank, the other claimant thereto. The controversy in regard to this fund came about in this way. On February 27, 1930, the Bank of Kentucky and the Mt. Vernon Bank were going concerns. The former held three notes of the latter, one for $10,000, another for $20,000, and a third for $20,000, amounting altogether to $50,000, secured by collateral. The articles of incorporation of the Mt. Vernon Bank provided: “That the highest amount of indebtedness which the corporation may, at any time, incur other than for money received upon deposits, shall not, at any time, exceed the sum of $50,000.00.”
By reason of its indebtedness on these three notes, it had exhausted its power to incur other such indebtedness. On that date the Bank of Kentucky discounted the note of the Mt. Vernon Bank of $9',000', placed the proceeds to its credit, credited $1,060' on the note, and charged it with the same amount, leaving $8,000 as the balance due on the note. The proceeds of the note were used by the Mt. Vernon Bank in repurchasing from the Bank of Kentucky, Rockcastle county, warrants amounting to $5,370.86 which the latter had purchased from the former August 1, 1929, under a repurchase agreement, and the balance, which was placed to its credit, was used in meeting drafts on the latter drawn by the former. The collateral held by the Bank of Kentucky as security for its $50,000 indebtedness was then pledged as security for the $8,000 indebtedness, and the Rockcastle warrants were pledged as security for the entire indebtedness. The Mt. Vernon Bank was then in a precarious financial condition. The additional credit thus given to it by the Bank of Kentucky was to enable it to continue in business. It was understood that the additional indebtedness of $8,000 was in excess of what the Mt. Vernon Bank had power to incur, and steps were taken to cover it, by amending its charter, but the contemplated action was not put through. On April 4,1930, two other banks, one in Mt. Vernon and- the other at Broadhead in the same county, came to the rescue of the Mt. Vernon Bank by purchasing certain of its notes for $30‘,000. The bank of Kentucky accepted a renewal of its note for $8,000 on April 5, 1930', and renewals of its other notes in the course of the month as they became due. It was thought that those steps would enable the Mt. Vernon Bank to continue to operate, but they were of no avail. On April 22,1930, it was compelled to close. The state banking commissioner took charge of its affairs and appointed defendant Hiatt as its receiver. At that time the notes held by the Bank of Kentucky were to mature as follows:
$ 8,000.00 note April 28, 1930
10,000.00 note May 7, 1930
20,000.00 note May 14, 1980
20,000.00 note May 19', 1980'
There was to the credit of the Mt. Vernon Bank $1,980.81, which it applied to its indebtedness. On May 20, 1930, the Bank of Kentucky sent all its collateral to the defendant receiver of the Mt. Vernon Bank to collect and apply proceeds in payment of its indebtedness. The collateral consisted of notes amounting to $148,949.72 and the Rockcastle warrants, above referred to, for $5,370.86. The defendant receiver testified that this collateral was received by him “just as a matter of trust.” Thereafter he made collections on account of this collateral and remitted same to the Bank of Kentucky. It applied them first to payment of the $8,000 note, which was the first to become due. They resulted in its payment on August 28,1930. Thereupon the Bank of Kentucky returned the $8,000 note to the defendant receiver as paid in full. He testified that he gave no directions as to the application of the remittances made by him of the collections on -account of the collateral —that the $8,000.00 note was received by him from the Bank of Kentucky as paid — and that he recognized same as paid in full. On No*386vember 17,1930, the Bank of Kentucky closed its doors, and a receiver was appointed for it, who has been succeeded by the plaintiff. On May 27,1981, the defendant receiver had remitted to plaintiff from collections on account of the collateral held by him sufficient to reduce the indebtedness on account of the three notes for $50,000 to $8,436, and he had in his hands that amount so collected. Instead of remitting same to the plaintiff as required by his trust, he proposed to appropriate same in reimbursing himself on account of the amount paid in satisfaction of the $8,000 note and to hold the rest of the collateral in his possession as free from any claim on the part of the plaintiff. The plaintiff refused to accede to this, and demanded payment of the $8,-436 belonging to it and in defendant receiver’s possession in satisfaction of the balance due on the Bank of Kentucky indebtedness. Thereupon it was agreed that the $8,436 should be paid to the defendant Title Trust Company as stakeholder, to be paid as thereafter designated by the parties or by order of any court of competent jurisdiction. Hence this suit.
I think that the plaintiff is entitled to recover for three reasons.
(1) The plaintiff was entitled to have the $8,436 paid to him in accordance with the trust under which the defendant receiver held it whatever may be the correct position as to whether the latter had a claim against the former for the amount paid in satisfaction of the $8,000 note. It was his duty to make such payment, and, if he thought he was entitled to reimbursement, to bring suit against plaintiff therefor.
(2) The defendant receiver is not entitled to recover such payment from the plaintiff whether he was bound to make it or not. He knew what he was doing when he consented to the payment of the $8,000 note out of the collections made from the collateral. I know of no equitable ground upon which he is entitled to recover same.
In the case of Bell & Coggeshall Co. v. Kentucky Glass-Works Co., 106 Ky. 7, 50 S. W. 2, 1092, 51 S. W. 180, a corporation whose power to incur indebtedness was limited by its charter to $8,000' incurred an indebtedness of $48,000', and gave a mortgage to secure it. Afterwards it became insolvent, ■and made an assignment for the benefit of its creditors. In a contest between the mortgagee and general creditors, it was held that the mortgage as against them was good only to the extent of $8,000. After the assignment, ’ the assignee made payments to the mortgagee without designating their application. The question arose as to how they should be applied, to the $8,000 for which the mortgage was held to be good, or to the rest of the indebtedness. It was held that they should be applied to reduce the $8,000’. The court said: “Those payments were made by the assignee after the estate came into his hands for the purpose of being administered and distributed to the creditors of the assignor, with due regard to their priorities. It is not to be presumed, therefore, that the assignee made any payment upon any claim to ■any creditor, except in the order in which such claim was entitled to payment out of the fund in his hands as assignee. Payments otherwise made, unless the estate proved sufficient to pay all claims of higher grade, would have been illegal, and the assignee would not have been entitled to credit therefor. But, being presumed to have made on the claim with respect to which the bank was entitled to priority, those payments must be applied to the reduction of that claim, viz. the $8,000 held to be secured by the mortgage; and the assignee is therefore entitled to credit for those payments in the settlement of his accounts.”
This was as much as to say that, if the assignee had directed the application of the payments to the indebtedness in excess of the $8,000, they would stand. The creditors’ remedy would be to see that the assignee did not get credit for such payments. Here it is true the defendant receiver did not give directions that his payments be applied to the $8,000 debt. He gave no directions at all. The Bank of Kentucky applied the payments thereto, and he acquiesced in it and consented to such application.
(3) The defendant receiver not only had the right, but was bound, to pay the $8,000 debt out of the proceeds of the collateral. The transaction, it is true, was ultra vires and known to be so by both parties. But the Mt. Yemon Bank cannot repudiate it and hold on to what it received. It received the whole $8,000.- The matter is thus put in 7 R. C. L. pp. 678 and 679':
“According to what would seem to be the more logical view, a corporation, though it has received the benefits of a strictly ultra vires contract is not estopped to set up the defense of ultra vires when sued upon the contract, though it is universally recognized that recovery may at least be had on a quantum meruit for the benefits received by the corporation. A corporation cannot violate its charter for pecuniary gain and retain the *387benefits of its illegal conduct by putting up tbe shield of ultra vires.”
Again it is said: “In many jurisdictions the plea of ultra vires is looked on -with such disfavor that the rule seems to prevail that if the corporation has received the benefits growing out of a contract, sueh contract will be enforced against it, unless it was entered into through fraud, or there are persuasive considerations of public policy involved.”
In the case of In re Kentucky Wagon Mfg. Co. (D. C.) 3 F. Supp. 958, 964, I had this to say: “A contract of a corporation may be ultra vires and yet if it receives the fruits or benefits of the contract it cannot escape liability. This principle has been applied in the case of National Banks. American Nat. Bank v. Nat. Wallpaper Co. (C. C. A.) 77 F. 85; Portsmouth, etc., Corp. v. Fourth Nat. Bank, supra [(D. C.) 280 F. 879]; Fourth Nat. Bank v. Portsmouth, etc., Corp., supra [(C. C. A.) 284 F. 718]; Citizens’ Central Nat. Bank v. Appleton, 216 U. S. 196, 30 S. Ct. 364, 54 L. Ed. 443; Rankin v. Emigh, 218 U. S. 27, 30 S. Ct. 672, 54 L. Ed. 915.”
In the case of Lewis v. Fifth-Third National Bank of Cincinnati, 274 F. 587, 594, the appellate court of this circuit said: “Undoubtedly a private corporation may defend against an action to enforee.an executory contract upon the plea of ultra vires, where neither party has performed, or it may repudiate an ultra vires contract, upon making full restitution to the other contracting party, but the authorities are uniform that it cannot keep the property of another obtained under and by the terms of sueh contract, and refuse performance on its part upon the theory that the contract is ultra vires its charter powers; otherwise, the plea of ultra vires would degenerate into a mere instrumentality of fraud, deceit, and dishonesty, by means of which a corporation might appropriate to its own use the private property of others, without fear of punishment or the necessity of making restitution.”
But in this state it may be said that, when a corporation becomes insolvent and its assets are distributed amongst its creditors, those whose debts do not exceed the charter limit of indebtedness have the right to have those whose debts do excluded from participating in such distribution until they are paid in full. The eases which may be relied on as so holding are First National Bank of Covington v. D. Kiefer Milling Co., 95 Ky. 97, 23 S. W. 675; Bell & Coggeshall Co. v. Kentucky Glass-Works Co., supra; Citizens’ Bank v. Bank of Waddy, 126 Ky. 169; 103 S. W. 249, 11 L. R. A. (N. S.) 598, 128 Am. St. Rep. 282; American Southern Nat. Bank v. Smith, 170 Ky. 512, 186 S. W. 482, 486; Ann. Cas. 1918B, 959.
The matter is thus put in the last ease: “We are cited to a great number of cases from many states, as well as from the federal courts, to the effect that a corporation, as sueh, when sued upon the character'of contract under consideration, cannot rely upon the want of its power to make the contract, without returning to the other party the consideration which it received, but in eaeh ease the facts were that the corporation which had exceeded its powers, and which the courts said must do equity by returning the consideration, was a solvent and going concern. No question as to the right of creditors was involved, and the holding of the courts in such eases may be conceded to be correct, especially so far as this case is concerned, because those composing the corporation, being the stockholders, could not complain, as they had received the consideration and perhaps appropriated it for corporate purposes. The creditors of sueh corporations could not complain because they were only interested to the extent of their respective debts, and as the corporation was solvent, thus guaranteeing the payment of its debts, there remained nothing upon which the ultra vires nature of the contract could operate. As neither the corporation nor the stockholders in such a ease could complain, and there being no necessity for a creditor to complain, there existed no obstacle in the way of- applying the doctrine contended for. The rule, however, is altogether different when the borrowing corporation to such an ultra vires contract is insolvent.”
The reason for this position is thus stated in Bell & Coggeshall Co. v. Kentucky Glass-Works Co., supra: “A creditor whose own debt against the corporation does not transgress the limitation — who does not know, and has no reason to know, that the limitation has been exceeded — has a right to rely upon the ‘implied warranty on the part of the corporation, through its officers, that the power has not been exhausted, and that the conditions do not exist which render it unlawful for the corporation to contract the debt.’ And this reason, it seems to us, applies equally as against the creditor who participated in creating the excessive indebtedness, and was bound to know that it was so doing.”
I gather, however, from the decision in the ease of Lewis v. Fifth-Third National Bank *388of Cincinnati, which involved the same hanking corporation as that involved in the case of American Southern National Bank v. Smith, supra, and like it arose after its insolvency, that such is not the doctrine of general jurisprudence, and that apart from statute is not binding on this court. It said: “The rights and remedies of the parties to this ultra vires contract are questions of general jurisprudence, and therefore the decision in that respect is not controlling, but must be decided by this court upon the facts in this ease.”
It held that the decision in the Smith Case was not binding upon it because that was a suit on behalf of creditors and the one in hand was not. It indicated that, if the suit were on behalf of creditors, it would have been bound to follow it, inasmuch as it was based on the statutes of this state. It said: “This decision is based upon a construction of the statutes of that state, and to that extent is controlling upon this court.”
But I would submit that the decision in upholding the creditor’s rights was to no extent based upon such statutes. What it held was based thereon was the right of the banking commissioner to assert such right. The right of the creditors was based on general jurisprudence as the above extract from the opinion therein clearly shows.
But I find nothing in these decisions justifying the position that, in a case where it is clear that complaining creditors have received the benefit of the consideration for the ultra vires contract, the obligee should be excluded from his rights thereunder. In neither one of them was it clear and certain that they had received such benefit, and in one, if not two of them, it was clear and certain that they had not. In case of First National Bank of Covington v. D. Kiefer Milling Co., the secretary of the borrowing company had received the money loaned, appropriated it to his own use, and fled the state. In the case of American Southern National Bank v. Smith the loan had been made in 1907, and the debtor bank was placed in the hands of the banking commissioner in 1914, seven years later. It was contended “that the creditors of the Alexander Bank have not been deprived of anything, and their rights, consequently, not impaired, because that bank, at the date of the borrowing of the money, got value received, and consequently the assets of the bank were not depleted, or impaired, and therefore the creditors have no equities justifying the plaintiff 'as their representative, in prosecuting this action.”
To this the court responded: “In reply it may be said, that it is exceedingly likely that many of the creditors of the Alexander Bank, at the time the commissioner took charge of its affairs, may not have been such in 1907, at the date of the borrowing of the money. Furthermore, the purpose of the limitation is to not allow the officers of the bank to have an opportunity to misappropriate by way of unauthorized dividends, or otherwise, the proceeds of an unauthorized borrowing, and thus imperil the security -of creditors by unlawfully increasing the indebtedness of the corporation.”
Here it is reasonably certain that the creditors of the Mt. Vernon Bank did receive the benefit of the consideration furnished for the ultra vires contract. It was made February 27,1930. The bank was closed April 23,1930. At the time of that transaction, the bank was undoubtedly being subject to a run by its depositors and this run kept up until its closure. It is very unlikely that any new deposits were made during that time. But, however that may be, it is certain that all the depositors received the benefit of the Rockcastle County warrants amounting to $5,370.86. It was amongst the collateral turned over to the defendant receiver May 20, 1930. He would hold on to these warrants and pay nothing for them. It is reasonable to infer that the creditors received’the other consideration given for the contract complained of.
I am therefore constrained to hold that the plaintiff is entitled to a decree. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219180/ | CAYANAH, District Judge.
This is a suit to quiet title to a mining claim, and, to determine its character for the purpose of jurisdiction, recourse must be had to the allegations of the complaint, and for that purpose inay be summed up as stating that in July, 1928, James A. Long died testate, leaving a will in which he directed that his mining property situate in Idaho be sold for not- less than $15,000, of which $5,000 to be paid to certain legatees, and the remainder to go to T. A. Long. Of the bequests of $5,000, plaintiff was to receive $3,000. The bequests were to be paid after the debts of the testator and expenses of administration were paid. The will was admitted to probate. T. A. Long has assigned his interest in the estate to the plaintiff. The plaintiff is a citizen and resident of the state of California, and all of the defendants are citizens and residents of Idaho, excepting the defendant Warren Creek Dredging Company, who is organized under the laws of Nevada. The amount claimed by the plaintiff in controversy exceeds the value of $3,000, exclusive of interest and costs.
The motions of the defendants to dismiss present the same grounds, excepting the motion of the defendant Warren Creek Dredging Company, which urges that the court has not jurisdiction, for the reason that the plaintiff is a citizen and resident of California, and it is a citizen and resident of Nevada, and therefore a diversity of citizenship does not exist.
The complaint, fairly considered, shows that the amount and value claimed by the plaintiff exceeds $3,000, exclusive of interest and costs, which satisfies the statute as to requisite amount in controversy to give the court jurisdiction; that the alleged title of plaintiff rests upon the will of James A. Long, which is made a part of the complaint, and from it the testator expressed his intention not to give or grant any title in the mining property to any one, but directed that the property be sold and out of the proceeds his debts and expenses of administration be first paid and then the bequests and whatever remained to go to T. A. Long.
The legatees under the will took nothing more than money bequests and not title, to the realty. Therefore, under the statute of the state, they are neither “heirs nor devisees” which confess the right to “maintain an action for the possession of the real estate or for the purpose of quieting title to the same,” upon “heirs or devisees.” Section 15-410,• I. C. A. The statute does not include legatees who take personal property under the will. The interest the plaintiff has under the will is as a legatee for $3,000, and an assignee of a legacy of the remainder, if any, of the proceeds after the sale of the real property. The legacy of the plaintiff of $3,-000 and the assignment of T. A. Long to her of the remainder of the fund after sale of the realty are funds or choses in action, and fall within the principle of law that, where a testator directs" his real property to be sold *390and the proceeds distributed among certain persons, no interest in the real property passes to the legatees, as they acquire under the will nothing more than a right to receive a sum of money out of the proceeds of the sale, and does not vest them with any estate or freehold in the real property. Such provision in the will for the sale of the real property and distribution of the proceeds is effective only to work a conversion of the real property into personalty. It is a claim of a personal character, and a chose in action appears. Compare 2 Alexander on Wills, § 807; Lambert v. Morgan, 110 Md. 1, 72 A. 407, 132 Am. St. Rep. 412, 17 Ann. Cas. 439; Griffith v. Witten, 252 Mo. 627, 161 S. W. 708; In re Pforr’s Estate, 144 Cal. 121, 77 P. 825; Darst et al. v. Swearingen, 224 Ill. 229, 79 N. E. 635, 115 Am. St. Rep. 152. The executor under such a provision •in the will becomes a trustee of the property, and as such was charged with the unconditional duty to sell the fee-simple title to the real property. By implication of law he acquired by the will such estate in the real property as was necessary to enable him to convey it, and the doctrine of equitable conversion of real property into personal will apply. Backesto’s Estate, 63 Cal. App. 265, 218 P. 597; Lash v. Lash et al., 209 Ill. 595, 70 N. E. 1049; Bedford v. Bedford, 110 Tenn. 204, 75 S. W. 1017; Matter of Taft’s Will, 144 Misc. 896, 259 N. Y. S. 887; Dodge et al. v. Williams et al., 46 Wis. 70, 1 N. W. 92, 50 N. W. 1103. But the plaintiff insists that, as the freehold remains in the heirs until sale of the real property, they have a right as such to bring the action. That would be true had the will devised the real property to the heirs and not ordered that it be sold and the proceeds be distributed to certain persons, which places them only as legatees of money bequests under the will. They are not heirs in whom title to an estate vests under the succession statute. The testator, intercepted the statute of devolution by making a will, and provided for conversion of his estate into cash. The conversion took place upon the death of the testator,.and the bequests are obligations or claims against the estate. The executor under the will, where the property is directed to be sold, is authorized under the Idaho statute and decisions of the Supreme Court of the state to sell the real property without notice and order of the court. Section 15-730, I. C. A.; Jones v. Broadbent, 21 Idaho, 555, 123 P. 476; In re Backesto’s Estate, supra.
As the plaintiff has not acquired title to the real property involved in the present action either in her own right or by the assignment from T. A. Long under the will, she cannot invoke the jurisdiction of the federal court, and her action is also within the provisions of section 24 of the Judicial Code (28 USCA § 41), governing suits by assignees, which denies jurisdiction of the District Courts of the United States when a suit is brought therein “ * * * to recover upon any promissory note or other chose in action in favor of any assignee.”
In respect to the contention of the defendant Warren Creek Dredging Company that as neither it nor the plaintiff are citizens and residents of Idaho, the court has not jurisdiction of it under its objections as to venue, it seems clear under subdivision (a), § 112, title 28 USCA, providing that, “where the jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant,” the contention should be sustained.
The motions to dismiss of the defendants will be sustained. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219182/ | BYERS, District Judge.
This is a trustee’s petition to review a referee’s order directing payment to the claimant of all the assets coming into the trustee’s hands, under the following circumstances:
An involuntary petition was filed on June 25, 1932; twenty-three days before that the bankrupt had executed an assignment to his father-in-law, the said claimant, of a judgment recovered by the bankrupt on that day and any money “that may be had or obtained by means thereof or on any proceeding to be had thereon”.
It is therein recited that on that day the bankrupt did recover a judgment in the Supreme Court, Kings County, against the Radio Corporation of America, for $10,174.57, which was duly filed, and that, in consideration of the sum of One Dollar and other good and valuable considerations, the bankrupt sold, assigned, etc., the said judgment; and constituted the assignee his attorney in fact to recover the money due on the said judgment, and to satisfy the same. Also that the said agreement was subject to the lien of the attorneys for the plaintiff for their services and disbursements incurred in connection with the said action.
*393The foregoing, having been executed within the period of four months prior to the filing of the petition, clearly constituted a preference, and, as such, would be set aside at the instance of the trustee for creditors; it is claimed, however, that the transaction evidenced by the assignment was merely the consummation of an antecedent transfer made by the bankrupt to his father-in-law on August 3,1930. The latter is in writing and recites that—
“In consideration of the sum of One ($1.) Dollar and other good and lawful consideration, receipt whereof is hereby acknowledged, I (the bankrupt) do hereby transfer and assign to Samuel Klar, residing at 2407 Avenue J, Brooklyn, New York, all my right, title and interest in and to any verdict, decision, judgment, recovery or proceeds thereof, which I may recover or become entitled to arising from an action commenced by me in the Supreme Court of the State of New York, Kings County, entitled Julius Modell against Radio Corporation of America and John Harley.
“I hereby authorize the defendants in said action or my attorneys to pay to said Samuel Klar the share that may become payable to him from said verdict, decision, judgment or recovery and I hereby give to said Samuel Klar the full power and authority to ask, demand, collect or receive my share, and who in my name or in his name, to satisfy or discharge any judgment I may obtain in said action.”
The claimant urges that the foregoing created an equitable lien upon the proceeds of the judgment (which was for a personal tort), which should be given effect even though other creditors of the bankrupt are thereby deprived of any share of his estate.
The conditions under which the last mentioned instrument was signed are deemed to have been established substantially as follows:
In September, 1930, the bankrupt was indebted to his father-in-law in the sum of about $35,000.00, which was reduced in that month to about $16,000.00 through sources not presently involved. The latter balance was owing on October 3, 19301, and at that time the bankrupt and his family were living in the home of his father-in-law.
The extent of the bankrupt’s indebtedness to other creditors at that time was not less than $70,000.00.
There was no present consideration for the instrument of October 3, 1930, and the following statement in the referee’s memorandum to the contrary must have been inadvertent : -
“As security for loans previously made to the bankrupt and for future loans the bankrupt executed, on October 3rd, 1930, an assignment to his father in law, Samuel Klar, of any judgment which he might obtain against the Radio Corporation.
“The record shows that Samuel Klar thereafter advanced substantial sums for the living expenses of the bankrupt’s family and also for the expense of the litigation. The total loans made by him to the bankrupt aggregate approximately $16,000.”
There is no evidence that loans were made by the claimant to the bankrupt after October 3, 1930; or that he advanced any money in connection with the said litigation, or that he advanced sums for the living expenses of the bankrupt's family. ■
The trustee’s brief states, in reference to the living expenses of the bankrupt in his father-in-law’s home, that the claimant’s wife was listed as a creditor of the bankrupt in the sum of $6600.00' in the schedules for board and lodging furnished the bankrupt and family from April 21,1929; to June 25,1932, and she filed a claim for that sum; this statement is not challenged in the reply brief of the claimant and indeed the latter’s whole ease is based upon the theory that the $16,000’.00, in round figures, owing to him on October 3, 1930, being a past consideration, was sufficient to sustain the claim.
This difference between the referee’s memorandum and facts as shown in the testimony is important in the light of what is said in the various cases referred to by the referee and relied upon by the claimant.
Whether the claimant had what is called an “equitable lien” has been properly described as a close and difficult question. Massachusetts Trust Co. v. MacPherson (C. C. A.) 1 F.(2d) 769, at page 774.
It clearly appears! that in October, 1960, the claimant knew that the bankrupt was hopelessly insolvent, and that the effect of carrying out the arrangement embodied in the document in question would be to deprive other creditors of any participation in the assets. Equally it is clear that the claimant did not contribute anything to the success of the bankrupt’s cause of action against the Radio Corporation' of America (which had been pending for at least three years) by paying counsel fee or other expense of the litigation; he was not in a position to either add to or subtract from the outcome of that litigation except by helping to finance it, and he did not do that, because it was being conducted for á contingent fee.
*394The referee cites eight eases, -and quotes from one of them; the entire passage is as follows (In re Interborough Consolidated Corporation (C. C. A.) 288 F. 334, at pages 349, 350, 33 A. L. R. 932):
“It has been held that even an agreement to pay a debt out of a designated fund does not in itself create a lien upon the fund. Thus it is laid down in 19 Am. & Eng. Encyc. of Law (2d Ed.) p. 16, as follows:
“ ‘But a mere agreement to pay a debt out of a designated fund does not give an equitable lien upon the fund, or operate as an equi-.. table assignment thereof. There must be an appropriation of the fund pro tanto, either by giving an order, or by transferring it otherwise in such a manner that the holder is authorized to pay the amount directly to the creditor without the further intervention of the debtor.’
“Cases are cited in its support. And in Bispham’s Equity (8th Ed.) it is said that the better opinion would seem to be that a mere promise to pay out of a fund does not operate as an assignment of the fund. But it is now definitely settled in the federal courts that a promise based on a consideration to pay out of a particular fund creates a lien on the fund, which attaches to the fund when it comes into existence and which equity will enforce, holding the promisor to be a trustee as soon as he gets title. Barnes v. Alexander, 232 U. S. 117, 120, 121, 34 S. Ct. 276, 58 L. Ed. 530.
“A contract whereby a contracting party sufficiently indicates an intention to make some particular property or fund which it describes a security for a debt or other obligations creates an equitable lien on the property so indicated. Ingersoll v. Coram, 211 U. S. 335, 368, 29 S. Ct. 92, 53 L. Ed. 208. A contract which shows an intention to charge a particular property therein identified with an obligation creates an equitable lien thereon. Hauselt v. Harrison, 105 U. S. 401, 26 L. Ed. 1075; Gregory v. Morris, 96 U. S. 619, 24 L. Ed. 740. And if a party by agreement creates a charge or claim in the nature of a lien on property of which he is the owner or in possession, a court of equity will establish and enforce it, not only against the party who stipulated to give it, but also against third persons who are either volunteers, or take with notice. Walker v. Brown, 165 U. S. 654, 664, 17 S. Ct. 453, 41 L. Ed. 865.”
The foregoing follows a quotation on page 349 of 288 F., to the effect that “the words equitable hen are intensely undefined”.
The opinion was delivered in a ease in which it was decided that a deposit carried by the bankrupt separately from its other funds in an account entitled “Interest on Interborough-Metropolitan Company 4%% Bonds” constituted a portion of the general assets of the bankrupt corporation and should not be held applicable to the payment of interest on the bonds described in the said deposit; it was held that no trust was created for the benefit of the bond holders and no equitable hen was established under the circumstances revealed. That opinion probably contains the most recent statement of eontrolhng views held in this Circuit, with respect to so-called equitable hens and equitable assignments, and the eases cited, and many referred to in the various opinions, have been examined in connection with this decision.
Without attempting a formulation of principles derived from that process, it may be stated that the eases lend themselves to convenient grouping somewhat in this wise:
(A) Those in which lawyers having a contingent fee were held to possess an equitable hen upon the proceeds or results of litigation, as against a trustee in bankruptcy, or other person concerned. Barnes v. Alexander, 232 U. S. 117, 34 S. Ct. 276, 58 L. Ed. 530; Ingersoll v. Coram, 211 U. S. 335, 29 S. Ct. 92, 53 L. Ed. 208; Voltz v. Treadway & Marlatt (C. C. A.) 59 F.(2d) 643.
In these eases the lawyers contributed by their services to the preservation, promotion, or final success of a cause, of action or a legal right, and, while the recognition of the equitable lien is not stated to be founded in that reason, in so many words, the decisions hken the cases to others in which a contribution to or participation in the promotion of the assignor’s interests or property are concerned.
(B) Cases in which money was advanced to a bankrupt by the claimant, in reliance upon certain security, which thereby became impressed with a special responsibility to respond, according to the intent of the parties, which it would.be inequitable to avoid: Hauselt v. Harrison, 105 U. S. 401, 26 L. Ed. 1075; Walker v. Brown, 165 U. S. 654, 17 S. Ct. 453, 41 L. Ed. 865; Thompson v. Fairbanks, 196 U. S. 516, 25 S. Ct. 306, 49 L. Ed. 577; Crosby v. Packer (C. C. A.) 22 F.(2d) 611; Sexton v. Kessler & Co., 225 U. S. 90, 32 S. Ct. 657, 56 L. Ed. 995.
Foster v. Manufacturers’ Finance Co. (C. C. A.) 22 F.(2d) 609: Here such a lien was held not to attach to certain accounts receivable which had been substituted for others of a fictitious character.
In re Pfau Mfg. Co. (C. C. A.) 294 F. 158: *395Here such a lien would not be recognized as attaching to merchandise in hulk, not earmarked as between the parties. Union Trust Co. v. Bulkeley (C. C. A.) 150 F. 510; Hurley v. Atchison, T. & S. F. R. Co., 213 U. S. 126, 29 S. Ct. 466, 53 L. Ed. 729; Mass. Trust Co. v. MacPherson (C. C. A.) 1 F. (2d) 769.
In some of these cases, the property was completely in existence when the lien arose, and in others it was subsequently received, perfected, or completed; but in all of them there was present the element of contribution by the claimant to performance by the assignor of some function, duty or activity which was important to him in the pursuit of his calling or affairs, or that of another.
It is thought that this claimant does not bring himself within either of these two groups of eases, because he did nothing to advance the bankrupt’s cause of action against the Radio Corporation of America, bv helping to finance it, or by contributing any effort whatever whereby it was brought to fruition. It was through no act of his that any property was acquired, maintained, finished or marketed; no business activity of the bankrupt was carried on, and no credit was extended to him, in reliance upon any act or forbearance on the part of the assignee. If this is true, he was not in the position of the holder of an equitable lien against the intangible possibility of favorable judgment in that case, on October 2, 1930, when the first document was- executed. Whether he might have brought himself into such a holding by appropriate act, need not be considered, for none is asserted on his behalf.
It results therefore that the first property right which was his, so far as the lawsuit was concerned, came into existence when the assignment of June 2, 1932, was executed and delivered.
This view is consistent with the conduct of the parties, for, if the earlier document alone had been regarded as potent to accomplish its proclaimed purpose, the second would not have been deemed necessary.
The latter is drawn in the guise of a self-contained conveyance, and does not purport to be a eonfirmatbry transfer of that which had been tentatively set over at an earlier time.
This does not mean that the rights of the parties would be determined by mere matter's of form, but that resort to the documents themselves somewhat confirms that which is thought to be otherwise discernible, of the legal infirmity of the claimant’s status.
The ease of Glegg v. Bromley, 81 L. J. K. B. 1081, cited by the claimant, has not been overlooked. It is not deemed to be controlling as against the trustee, under the facts presented by this record.
The transaction here under examination was doubtless sufficient between the parties but, as no equitable lien was created within the authorities by the transaction of 1930; it is concluded that the rights of the claimant must stand or fall by the assignment of June 2, 1932, and that the latter is clearly preferential.
Of the cases cited by the trustee, the following have been found helpful: Security Warehousing Co. v. Hand (C. C. A.) 143 F. 32; In re Webb Co. (D. C.) 224 F. 258; Long v. Farmers’ State Bank (C. C. A.) 147 F. 360, 9 L. R. A. (N. S.) 585.
The Court is indebted to both counsel for their industry in briefing this interesting question.
The order of the referee is reversed, and the petition of Samuel Klar for an order directing the trustee to pay to him the money in question is denied.
Settle order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219183/ | KIRKPATRICK, District Judge.
For the purposes of the jurisdictional question involved, the facts may be assumed to be as follows :
The American Legion, through action by the appropriate Department Executive Committee, has revoked the charter of Anthony Wayne Post No. 418, one of its subordinate bodies, because the latter, in violation of a departmental regulation, caused to be published in the public press copies of its resolutions condemning the position taken by the national body in favor of the prepayment of the bonus. The prayers of the bill are that the revocation of the charter be declared void; that the post be reinstated; and that interference with its functioning be restrained by injunction. The plaintiffs are members of the post who sue for themselves and for the unincorporated body, with whom is joined a corporation which holds title to the post’s real estate; and the defendant is the American Legion, a federal corporation.'
Jurisdiction is claimed upon the ground that the matter in controversy arises under laws of the United States, and the law involved is the Act of Congress of September 16,1919 (e. 59, 41 Stat. 284, 36 U. S. C. § 41 [36 USCA § 41]), by which the American Legion was incorporated. That act empowers the corporation “to adopt a constitution, bylaws, and regulations to carry out its purposes, not inconsistent with the laws of the United States or of any State.” (36 USCA § 44.)
The plaintiffs contend that the departmental “regulation" by virtue of which its charter has been revoked is inconsistent with article 1, § 7, of the Constitution of Pennsylvania which guarantees freedom of speech and of the press. Upon this point arises the issue upon the merits.
It is a federal question, say the plaintiffs, because the Act of Congress which limits the powers of the American Legion to make regulations, by the laws of the several states, impliedly incorporates into itself all the laws of each state in which any regulation is operative. Hence, any controversy as to whether or not a regulation contravenes a state law necessarily involves an interpretation of the Act of Congress as so expanded and brings the controversy within the general rule that where some right, title, privilege, or immunity on which a recovery depends will be defeated by one construction of an act of Congress, or sustained by opposite construction, the ease arises under the laws of the United States. Starin v. New York, 115 U. S. 248, 6 S. Ct. 28, 29 L. Ed. 388.
But even if this reasoning be sound (and I do not say that it is not), it fails to take into account the Act of February 13, 1925 (e. 229, § 12, 28 U. S. C. § 42 [28 USCA § 42]), which provides that “no district court shall have jurisdiction of any action or suit by or against any corporation upon the ground that it was incorporated by or under an Act of Congress. * * * ”
The plaintiffs’ position is that the only thing done by the Act of 1925 (and the preceding Act of January 28,1915, § 5, 38 Slat. 804) was to take away jurisdiction so far as it depended upon the existence of a constructive federal question arising from the mere-fact of federal incorporation; and that, since a genuine controversy as to the interpretation of the act incorporating the American Legion is here involved, jurisdiction remains. The trouble with this is that there never has been any ground of jurisdiction of suits by or against federal corporations other than that an actual question of interpretation of the act of incorporation was involved in each ease. Hence, when the acts of 1915 and 1925 eliminated federal incorporation as a ground of jurisdiction, they eliminated the only ground which had ever existed.
That the construction of the act of incorporation was the only basis of jurisdiction prior to 1915 appears plainly from the rea.soning of the decisions. For example, in Shoshone Mining Company v. Rutter, 177 U. S. 505, 20 S. Ct. 726, 727, 44 L. Ed. 864, the court said: “A corporation has no powers and can incur no obligations except as authorized or provided for in its charter. Its power to do any act which it assumes to do, and its liability to any obligation which is sought to be cast upon it, depend upon its charter, and when such charter is given by one of the laws of the United States, there is the primary question of the extent and meaning of that law. In other words, as to every act or obligation the first question is whether that act or obligation is within the scope of the law of Congress, and that being the matter which must be first determined, a suit by or against the corporation is one which involves a construction of the terms of its charter; in other words, a question arising under the law of Congress.”
The whole question of the effect of the Act *397of 1915 was considered in Bankers’ Trust Company v. Texas & Pacific R. Co., 241 U. S. 295, 36 S. Ct. 569, 572, 60 L. Ed. 1010, a suit to enforce a mortgage given by a federally chartered corporation, and the conclusion there reached that the intent of the act was to make the fact that the corporation “is incorporated under an act of Congress, — that is to say, derives its existence, faculties, and powers from such an act, — an entirely negligible factor in determining whether a suit by or against the company is one arising under the laws of the United States.” This simply means that so far as any question of the extent or limitation of its charter powers forming a basis for federal jurisdiction is concerned, the company may as well have been incorporated under the law of one of the states.
The court, in referring to the effect of the act, further said: “These are direct and comprehensive words, and, when read in the light of the settled course of decision just mentioned, must be taken as requiring that a suit by or against a railroad company incorporated under an act of Congress be not regarded, for jurisdictional purposes, as arising under the laws of the United States, unless there be some adequate ground for so regarding it other than that the company was thus incorporated. Plainly, there was a purpose to effect a real change in the jurisdiction of Such suits. Counsel for plaintiff concede that this is so. But they urge that all that is intended is to eliminate the mere creation of a railroad corporation under an act of Congress as a ground for regarding the suit as arising under the laws of the United States. In this there is an evident misapprehension o£ what constitutes incorporation, as also of the real basis of the jurisdiction affected. A corporation is never merely created. Being artificial, possessing no faculties or powers save such as are conferred by law, and having in legal contemplation no existence apart from them, its incorporation consists in giving it individuality and endowing it with the faculties and powers which it is to possess. It is upon this theory that the decisions have proceeded. The ruling has been that a suit by or against a Federal corporation arises under the laws of the United States, not merely because the corporation owes its creation to an act of Congress, but because it derives all of its capacities, faculties, and powers from the same source.”
This definition of the scope of the Act of 1915 compels the conclusion that the court is without jurisdiction of this cause and the bill may therefore be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219184/ | This is a suit in assumpsit brought, by tbe plaintiff, 0. Howard Wolfe, against the defendant, Blakely D. MeCaughn, Commissioner of Internal Revenue, to recover tbe sum of $66.26, representing additional assessment of income tax against tbe plaintiff upon bis income for 1918, paid by tbe plaintiff, under protest, on May 14, 1923.
Tbe case was tried by tbe court without a jury and from the records, stipulations of tbe parties, and tbe evidence taken, tbe court has found tbe facts and arrived at the conclusions of law presented to tbe court by tbe plaintiff which are now for tbe purpose of this opinion made tbe findings of fact and conclusions of law of tbe court and are filed herewith as the findings of fact and conclusions of law of tbe court. Tbe facts in the case of Upham v. Commissioner of Internal Revenue, 16 B. T. A. 950 (1929) appear to be substantially like tbe facts of tbe ease in band and appear to rule tbe questions involved in tbe present ease in favor of tbe plaintiff.
Prom tbe aforesaid findings of fact and conclusions of law, tbe court finds tbe verdict in favor of tbe plaintiff, 0. Howard Wolfe, and against the defendant, Blakely D. MeCaughn, Commissioner of Internal Revenue, for tbe sum of $66.22, with interest thereon from May 14, 1923, and tbe clerk is directed to enter judgment in favor of the plaintiff and against tbe defendant for tbe sum of $66.22, together with interest thereon from May 14, 1923.
ALBERT W. JOHNSON
United Sitates District Judge,
Specially Presiding. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219185/ | KNOX, District Judge.
On November 21, 1928, the steamship Casper, owned by American Seantic Line, Inc., left New York upon a voyage to Copenhagen and Helsingfors and return to a port of the United States. The vessel stranded off the Finnish Coast on December 14, 1928.' Nine days later, and while still ■aground, the vessel took fire and burned to the water’s edge. She was totally destroyed, and all of the belongings of her crew were lost.,. ■
The day following the necessary abandonment of the. vessel, the American consul at Helsingfors, Mr. Wilkinson, was telegraphically informed of what had happened. He at once proceeded to Abo, where the crew had assembled. He-found that the vessel’s agent was caring for the men, furnishing them with food, clothing, shelter, and necessary. medical attention. . Notwithstanding this succor, one of the seamen died at Abo and later another at Helsingfors, to which city the men, in order to be within reach of proper care, were taken on Christmas Day.-
The-.record shows that, upon Mr. Wilkinson's arrival at Abo, he was without government funds with which to defray the cost of relief to the crew. Neither did he have the wherewithal to cover the expenses of travel of the men to Helsingfors. The burden of bearing these charges was assumed, temporarily at least, by the agents of the wrecked ship. At Helsingfors, the consul advanced the sum of $297.67 from his personal money in giving necessary aid and comfort to the stranded mariners. Revealing this fact to representatives of petitioner, he told them that, if they would reimburse him for the outlay, he would place the question of liability of this government in the premises before the State Department at Washington. The- consul thereupon received the amount which he had personally expended upon behalf of the crew.
Thereafter the consul, as provided by law, and for the purpose of repatriating the crew of the Casper, issued certificates to the masters of vessels, owned and operated by petitioner, for the transportation of members of the crew to the United States, agreeing that, upon presentation of the certificate,' properly indorsed, to the Department of State, the masters would be entitled to receive the statutory rate of 2 cents per mile for the transportation of each of the men. These certificates, however, contained a notation to the effect that the consul’s agreement was subject to any decision to the contrary by the Comptroller of the United States, citing Comptroller General’s Decisions, 252 and 632.
In January, 1929, petitioner submitted vouchers showing the payments which it had made for relief of the crew to' the consul. These expenditures appear to have been altogether reasonable, and to have been necessary in furnishing proper care to the men. The consul then took up the question of the right of petitioner to receive reimbursement of its expenses from the government. In reply to his inquiry, the consul was informed that the Comptroller General had previously ruled (3 Comptroller General, 148) that, "As soon.as the owners of a wrecked -vessel take up the burden of subsisting and transporting members of the crew they cease to be destitute seamen on the hands of the Consul and claimant may not be reimbursed from public funds for any part of the eost to it of the transportation and subsistence expenses of the crew of the steamship to a port in the United States.”
The State Department accepted this ruling as being immediately determinative of the consul’s query, but added that “In event Messrs. Moore and McCormack are of the opinion that they should, nevertheless, be reimbursed by the Government for any part of their expenditures in this case, it is assumed that -a formal claim will be presented to the Department for administrative action and transmission to the Comptroller General of the United States, for determination as to its merits.”
Claims for all of petitioner’s expenditures, together with transportation charges, were subsequently presented to the Comptroller General for payment, but were disallowed. This suit, founded on the Tucker Act, brings the matters to this court for decision.
Section 593-of title 46 USCA is in these words: “.Termination of wages by loss of vessel; transportation to place of shipment. In eases where the service of any seaman terminates before the period contemplated in the agreement, by reason of the .loss or wreck of the vessel, such seaman shall be entitled to wages for the time of service prior to such termination, but not for any further period. Such seaman shall be considered as a destitute seaman and shall be treated and transported to port of shipment as provided *412in sections 678, 679, and 681. (R. S. § 4526; Dec. 21, 1898, e. 28, § 3, 3» Stat. 755.)”
This statute recently engaged the attention of the Court of Appeals for the Ninth Circuit, in the case of The Yukon, Alaska S. S. Company v. United States, 63 F.(2d) 398, 401, 1933 A. M. C. 541. Speaking of the section, the court said that, when construed in connection with sections 678, 679 and 681, 46 USCA, it “provides for the return transportation of the seamen to the port of shipment at the expense of the government, provided, of course, such transportation is from a foreign port, and that suitable arrangements for such transportation are made as required by said statutes. In the absence of a provision in the shipping articles obligating the owner of the vessel to return the seamen to the port of shipment, the contract was terminated by shipwreck; otherwise the law would not have placed the burden of returning such seamen upon the government.”
This pronouncement, it seems to me, must be sound. It is based upon a statutory enactment which gives a definite status to the shipwrecked marine of an American vessel who finds himself in a foreign land. The language of the statute is so plain that I do not see the justification of an administrative construction which can operate to a contrary effect. The purpose behind the statute, I infer, was that an American seaman cast ashore in a foreign land should not be required to rely upon his own resources, or upon the charity of those among whom he might come, to take him to the country on which his ill-fated voyage began. Congress also conceived, I assume, that shipwreck might come to a vessel at a place where no representative of the owner, capable of furnishing relief to the seaman, was to be found. Hence, care of the seaman, as well as the duty of sending him back to America, was committed to American consuls who may be found in most parts of the world, and it was intended that the government, if the expenditures and charges were made or incurred by a consul, should bear the cost. The legislative branch of the government might well have placed an obligation upon the owners of the wrecked vessel to repay the government for such outlay as it might make, but apparently this has not been done. Hence the chance circumstance that destitute seamen, upon proper consular certificates, are carried from a foreign land to the United States upon vessels belonging to the owner of the lost or stranded eraft, should not deprive the carrier of statutory compensation for the service. In saying this, it must be remembered that this is not a case in which the destitution of the seamen is attributable to the fault or misconduct of the vessel’s owner. See 26 Op. Attys. Gen. 631. While the government here says that petitioner has neither alleged nor proved that the wreck of the Casper was without fault of the shipowner, and this is true, the burden of showing such fault, I think, rests upon the government. In other words, a defense of this nature is of an affirmative character. As the Attorney General said in the opinion just cited, “the guilt of a vessel owner or responsibility for violation of the law, as charged here, is not, of course, to be assumed.”
I shall rule, therefore, that petitioner is entitled to recover for the transportation charges which constitute the second, third,, and fourth eauses of action in the complaint. The recovery sought by the fifth cause of action has all but been abandoned by petitioner. It possesses no merit, and Contentions with respect thereto are resolved in favor of defendant.
The first cause of action remains. It relates to moneys expended by petitioner for subsistence and necessaries for the crew of the Casper. Unfortunate as it may be from humane considerations, these expenditures do not carry the consular validation which characterizes the repatriation charges. The expenditures of petitioner for subsistence of the erew must be regarded as those of a volunteer, and they may not here be recovered from the United States. True, enough, the consul was without funds to comply with the duties which the law laid upon him. It is also the fact that, had it not been for. the generosity of petitioner, the suffering and distress of the erew might well have been of a much more serious character, but these considerations cannot avail petitioner. As was said in Gibbons v. United States, 8 Wall. 269, 274, 19 L. Ed. 453: “No government has ever held itself liable to individuals for the misfeasance, laches, or unauthorized, exercise of power by its officers and agents”— nor, I might add, for their neglect to provide for the proper performance of their duties. In saying this, there is no intention to reflect in any way upon Mr. Wilkinson. He did all that he reasonably could, but he had no funds with which to act. Therefore the government’s obligations had to be discharged through the charity of petitioner. Under the law, as I see it, the dispenser of the charity must And reward in the virtue that was displayed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219375/ | LITTLETON, Judge.
The elaim for additional interest on the overpayment for 1917 credited on March 31, 1926, to a tax due for 1929 cannot be allowed. This credit was made under section 1116 of the Revenue Act of 1926 (26 USCA § 153 note), which provides that interest on over-payments credited shall be paid only to the due date of the tax against which credited. The Commissioner computed and paid interest to the due date of the 1929 tax in accordance with the statute. No additional tax was assessed for 1917.
The claim for an overpayment of $18,-736.88 for the fiscal year 1919, based on the alleged erroneous determination by the Commissioner of Internal Revenue of the inventory for that year, cannot be considered for the reason that no claim for refund on this ground was filed until August 29, 1931, more than five years after the return was due and more than four years after the tax was paid. Moreover, the evidence introduced by plaintiff with respect to this item does not support *129the claim that the inventory was erroneously determined by the Commissioner.
The main contention of plaintiff, and the ground upon which the suit was originally predicated, is that the additional taxes for the fiscal years 1918 and 1919 were barred by the statute of limitation at the time they were assessed and collected for the reasons that (1) E. P. Rhyne, manager, secretary, and treasurer of the corporation, was without authority to execute the waivers, and (2) all of them were secured under duress and by fraud. We cannot sustain this contention. E. P. Rhyne was an executive officer of the corporation and it held him out as authorized to act for it in the matter of its tax liability for the years involved. The Commissioner, by letters addressed to plaintiff, requested the waivers for 1918 and 1919 and in response to these requests plaintiff transmitted to the Commissioner and filed with him such waivers bearing' its corporate seal, and executed by it by said E. P. Rhyne as secretary and treasurer. Central Aguirre Sugar Co. v. United States (Ct. Cl.) 2 F. Supp. 538. An executive officer or manager of North Carolina corporations has broad authority to act therefor. Rumbough v. Improvement Co., 112 N. C. 751, 17 S. E. 536, 34 Am. St. Rep. 528; Morris v. Basnight, 179 N. C. 298, 102 S. E. 389; Beck v. Wilkins-Ricks Co., 186 N. C. 210, 119 S. E. 235; Kelly v. Newark Shoe Stores Co., 190 N. C. 406, 130 S. E. 32; Fuller v. Motor & Tire Service, 190 N. C. 655, 130 S. E. 545, and such authority is the same as to third persons; Powell & Powell v. Lumber Co., 168 N. C. 632, 84 S. E. 1032. See, also, Hammond v. Carthage Sulphite Pulp & Paper Co. (D. C.) 34 F.(2d) 155; Liberty Baking Co. v. Heiner (D. C.) 34 F.(2d) 513; Id. (C. C. A.) 37 F.(2d) 703; Stevens Engraving Co. v. United States (C. C. A.) 53 F.(2d) 1.
Upon the record we think E. P. Rhyne acted within the scope of his authority as manager, secretary, and treasurer of the corporation in signing the waivers consenting to assessment and collection of the tax in question after the statutory period of limitation and that plaintiff is not entitled to recover on the ground that the waivers were invalid for lack of authority in Rhyne to act for the corporation in the premises.
The claim that the waivers were obtained under fraud and duress is not sustained by the evidence. The waivers in question were sent to plaintiff by the Commissioner in the usual way with request that they be executed and returned. This was done without protest of any kind.
The petition must be dismissed. It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219193/ | TUTTLE, District Judge.
The defendant in this case is charged with the offense of having violated the National Prohibition Act, 27 USCA (being the so-called Volstead Law), prior to the time when the repeal of the Eighteenth Amendment to the United States Constitution became effective, and the criminal proceedings against him for such alleged offense are still pending herein. The sole question now presented in this cause is whether the repeal of the Eighteenth Amendment has deprived this court of the power to convict the defendant of the offense so charged against him.
There can be no doubt that, in the absence of statutory provisions to the contrary, the repeal of a criminal statute, without express provisions therein providing otherwise, terminates liability to punishment, after the time of such repeal, for a violation of such statute committed prior to its repeal. United States v. Tynen, 11 Wall. (78 U. S.) 88, 20 L. Ed. 153; United States v. Reisinger, 128 U. S. 398, 9 S. Ct. 99, 32 L. Ed. 480; Landen v. United States, 299 F. 75 (C. C. A. 6).
As was said by the Supreme Court in the first of the cases just cited (11 Wall. [78 U. S.] 88, at page 95, 20 L. Ed. 153): “There can be no legal conviction, nor any valid judgment pronounced upon conviction, unless the law creating the offence be at the time in existence. By the repeal the legislative will is expressed that no further proceedings be had under the act repealed.”
In the language of Judge Denison, speaking for the Circuit Court of Appeals for the Sixth Circuit, in Landen v. United States, supra, 299 F. 75, at page 78: “It was a familiar common-law rule that, after a stat*430ute creating an offense was repealed without a saving clause, there could be no further criminal prosecution for its violation, and even prosecutions pending at the date of the repeal were abated.”
The government, however, cites in this connection section 29 of title 1 of the United States Code, 1 USCA § 29 (which was formerly section 13 of the United States Revised Statutes), which provides as follows: “The repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute, unless the repealing Act shall so expressly provide, and such statute shall be treated as still remaining in force for the purpose of sustaining any proper action or prosecution for the enforcement of such penalty, forfeiture, or liability.”
The statute just quoted was enacted by Congress and can, of course, have only such force and effect as Congress has constitutional power to give to it. If this statute is inconsistent] with any provision of the United States Constitution, it is to that extent necessarily invalid and void. In other words, if the statute so relied upon here by the court be unconstitutional in so far as it is claimed to be applicable to the present ease, such statute must be ignored in the consideration of the question here involved.
Now it will be noted that the last-mentioned statute provides that, even after the repeal of a statute, such statute so repealed “shall be treated as still remaining in force for the purpose of” prosecution thereunder, and that obviously constituted the basis of the statutory rule there prescribed. In substance and effect Congress, by this statute, expressly qualified and limited the scope and effect of its subsequent repeal of other statutes so as to' make such repeal subject to the condition that it should not affect pending prosecutions for the violation of the statute so repealed, just as if it had inserted in every such subsequent repeal a saving clause to that effect. If, therefore, this statute is applicable to the present ease, its effect would be -to render the repeal of the Eighteenth Amendment subject to a saving clause continuing in force, after such repeal, such amendment for the purpose of criminal prosecutions for previous violations of statutes, such as the National Prohibition Act, enacted thereunder. The power, however, of Congress to enact the National Prohibition Act was derived solely from the Eighteenth Amendment, and except for that amendment such act would have been clearly without any constitutional basis, as is not here disputed by the government. So that, if section-29 of title 1 of the United States Code, already quoted, were applied to this ease, the result would be that, notwithstanding the absolute repeal, without any reservation, limitation, or saving clause, of the only constitutional basis of the National Prohibition Act, that act would remain in force for the purpose of prosecutions for previous violations of it. This, however, would mean in effect that Congress could qualify, and thus amend, a constitutional provision, namely, the repeal of the Eighteenth Amendment.
It thus becomes clear, beyond the need for further discussion, that the said section 29 has no application here, and that therefore, under the settled rule of common law already ¡stated, the repeal of the Eighteenth Amendment terminated the power of this court to punish or convict the defendant for any violation of the National Prohibition Act.
For the reasons stated, the defendant is entitled to an order in accordance with the terms of this opinion, and such an order may be entered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219194/ | STRUM, District Judge.
In an action at law in the circuit court for Duval county, Fla., this plaintiff, Standard Asphalt Company, recovered judgment against Finley Method Company. Writ of error was taken by the Finley Company to secure a review of that judgment by the Supreme Court of Florida (Finley Method Co. v. Standard Asphalt Co., 104 Fla. 126, 139 So. 795).
American Surety Company of New York, the defendant in the present case, executed a supersedeas bond as surety. The condition of the bond -was that it should be void “if said Finley Method Company should pay the plaintiff herein the amount of said judgment and all interest thereon, in ease said final judgment of said (state) circuit court should be affirmed.”
The judgment of the Supreme Court of Florida was: “If, within thirty days after filing the mandate in the court below, the plaintiff shall pay all costs of this writ of error and file a remittitur for the item of $1,207 with any interest' thereon which may have been included in the judgment, such judgment will stand affirmed for the remainder; otherwise, it will be reversed, and a new trial awarded with directions to have such further proceedings as may accord with law and this opinion.” 104 Fla. 126, 139 So. 795, 797. The mandate of the Supreme Court of Florida, filed in the state circuit court on March 11,1932, contained the same command. That mandate having been issued at the January, 1932, term of the Supreme Court, all jurisdiction thereover ceased with the adjournment of that term on June 13, 1932. Section 4690, Comp. Gen. Laws Fla. 1927.
On May 25,1932, Standard Asphalt Company instituted in the state circuit court its action at law upon the supersedeas bond aforesaid, which action was removed to this court. In the declaration it is alleged that the Supreme Court “affirmed the final judgment of said (State) Circuit Court upon the condition that the plaintiff should enter” a remittitur and pay the costs above mentioned, “which said remittitur was by plaintiff 'duly1 entered and said costs by plaintiff paid”; further averring that neither the judgment debtor nor the defendant surety had paid said judgment so affirmed, hence this action on the supersedeas bond.
In its pleas to said declaration, the defendant surety company pleads the command of the mandate aforesaid, and further avers in one plea “that the remittitur specified in and required by said mandate was not filed within thirty days after March 11,1932,” and in another plea “that the plaintiff did not within thirty days after March 11, 1932, pay the said costs so specified in and required by said mandate.”
Plaintiff demurs to these pleas, taking the position that for the purpose of entering the required remittitur and paying said costs it is not limited to the time fixed in the aforesaid mandate, but that if such action be taken at any time before institution of this suit on the supersedeas bond it would be effective to affirm the state court judgment and hence charge the surety. Upon this premise plaintiff concludes that the pleas under consideration are pleas in abatement, and ad such are insufficient.
In so far as the judgment standing in the lower court is concerned, the mandate of an appellate court is the last word in authoritative judicial direction and command. It is binding upon the lower court and the parties, and must be strictly followed. No provision can be ingrafted upon or taken from the terms of such a mandate. 2 R. C. L. p. 289. The lower court is bound by the mandate as the law of the ease, and must carry it into execu*432tion according to its terms. Tlie lower court cannot vary it, nor examine it for any other purpose than execution. Sanford Fork & Tool Co., 160 U. S. 247, 16 S. Ct. 291, 40 L. Ed. 414; Kansas City S. R. Co. v. Guardian Trust Co., 281 U. S. 1, 50 S. Ct. 194, 74 L. Ed. 659; Sibbald v. U. S., 12 Pet. 488, 492, 9 L. Ed. 1167, 1169. Such a mandate leaves nothing to the judgment and discretion of the lower court, as the latter can take no action but to effectuate the mandate. Perkins v. Fourniquet, 14 How. (55 U. S.) 328, 330, 14 L. Ed. 441, 442; Morris v. U. S. (C. C. A.) 185 F. 73; U. S. v. Howe (C. C. A.) 280 F. 815, 23 A. L. R. 531, 535.
In the nature of things, such an affirmance as is involved in the above-mentioned mandate is not absolute, but is conditional; the prevailing party having the option to accept the reduced amount or to submit to a new trial. Affirmance of the judgment was made to depend upon an event which might or might not happen. It puts the prevailing party to an election, the time within which the same may be exercised being specifically fixed by the appellate court. A remittitur cannot be entered after the expiration of the time allowed therefor. 4 C. J. 1137, 1146; People v. Secor (Sup.) 119 N. Y. S. 185, which holds that where a prevailing party failed to enter his remittitur within the time fixed by the mandate, the other party became absolutely entitled to a new trial on that date, even though the prevailing party subsequently agreed to reduce the judgment.
In Carre v. City of New Orleans, 42 La. Ann. 1119, 8 So. 399, 400, it was said: “When a cause, the judgment in which is contingently affirmed, is remanded to the court of first instance, the party in whose favor this qualified affirmance exists is bound to fulfill the conditions that are thus imposed, and make it clear that he is entitled to the absolute affirmance of same.” In that case a remittitur' was not involved, but the principle announced is applicable here.
In Turner v. Adams, 39 Fla. 86, 89, 21 So. 575, the Florida Supreme Court refers to a judgment of this character as giving the prevailing party an “option.” In Standard Growers’ Exchange v. Martin, 80 Fla. 864, 87 So. 54, 57, the Supreme Court of Florida again uses the same language: “We will give the plaintiff below the option to retain his judgment if he will enter a further remittitur.”
It seems plain that where there is a conditional affirmance of the character here involved the prevailing party must strictly comply with the conditions fixed by the appellate court, and within the time so fixed. Any attempt to comply with them at a later date is unavailing, if properly objected to.
In determining the liability of the defendant in the present cause upon the supersedeas bond sued upon, the doctrine of strictissimi juris applies. This defendant surety is not liable on the supersedeas bond unless the state court judgment appealed from is affirmed.
The allegation in plaintiff’s declaration that the required remittitur was “duly” entered, and the costs paid, is a material allegation because plaintiff’s “option” to have the judgment affirmed became irrevocably lost unless plaintiff complied with the terms of the mandate within the time fixed. As these pleas, by issuable averments of fact, deny the performance of the conditions precedent fixed by the state Supreme Court upon which the judgment secured by the bond shall stand affirmed, and as the defendant surety is liable only if such judgment is affirmed, said pleas traverse a material allegation of the declaration (see section 4321, Comp. Gen. Laws Fla. 1927), and if true constitute a complete defense to this action. The pleas are in bar, not in abatement, and for the reasons stated are good as-against demurrer.
Demurrer overruled. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219195/ | KERRIGAN, District Judge.
The plaintiff is suing upon a policy of insurance in the sum of $15,000 upon his “leasehold interest” in certain real property on the shore of the town of Belvedere. The company refused payment of the policy on the ground that the plaintiff had no lease of the property and no insurable interest therein, which was the sole defense relied on at the time of the trial.
The nature of plaintiff’s tenure of the property is most unusual and can only be understood in the light of a full statement of the facts. Plaintiff was the owner of a valuable house of considerable beauty known as “The Anchorage” and regarded as one of the show places of Belvedere. The house stood on land of which he was not the owner. This house was built by Hugo D. Keil prior to 1896 when certain dealings in connection with the land were commenced, a transaction which will be discussed in detail later. In 1910 Keil deeded the house to a Mrs. Bland; in 1928 plaintiff purchased the house from the trustee under the will of Mrs. Bland. Both deeds passed title to the house with its appurtenances, wharf, float, and outhouses; but neither deed makes any reference to any leasehold or other interest in the land upon which the property is located.
The house, as shown by maps introduced in evidence, stood in part on property which originally belonged to the Belvedere Land Company, and in part on property which *436originally belonged to a man named Coleman. All of this property now belongs to tbe town of Belvedere. There is no evidence as to the terms of the agreement of lease between Keil and the Belvedere Land Company. It is apparent that there was such an agreement, for Keil invested his capital in the construction of the house. On September 14, 1896, at a meeting of the Belvedere Land Company, a corporation, a resolution was adopted expressing the intention of deeding certain water-front land to the town of Belvedere if and when it should be incorporated “to be held by the town in trust for the use of all its people as a general public beach or parkway,” upon certain conditions and reservations. On March 12, 1897, the town having been incorporated, the deed was executed and was subsequently recorded. In the deed the resolution of intention was quoted and the deed was made expressly subject to the reservations and conditions of the recited resolution, providing further that if any of the conditions be at any time broken the title to the property would at once revert to the Belvedere Land Company. The reservations and conditions that are material to this controversy are the following: The reservation “of all rents collected by the said town for the use of any portion of said strip of land and particularly of the land rents paid by the owners of the Keil, Crocker and Magill cottages and the owners of the Red and White Cottages.” The condition “that no private structure other than private wharves, boat houses or bathing houses * * * shall be permitted to stand wholly or partially upon said land and that neither of the five private residences or cottages now standing upon said beach shall be renewed in case of destruction by fire or otherwise and that said cottages shall remain thereon as long and subject to such conditions as shall be determined by said town.” The condition “that if any of the conditions of this grant when made axe violated the said strip of land shall revert to the company.”
The deed was formally accepted by the board of trustees of the town. A search was made of the minutes of the board of trustees of ’the town of Belvedere, and no record was found of any reference to the terms of any lease of the land upon which the Keil or other cottages stood. In July, 1898, the town marshal was instructed to post a notice to the effect that no structures might be erected or arks or sailing craft moored or beached on this property. In June, 1899, there was another reference to this property and the tide lands adjacent to it. In a resolution the board of trustees recognized the rights of the owners to the wharves privately constructed as well as the rights of the public to the use of the beach and wharves, providing that the owners might not shut off the wharves from public use by gates, etc., but might construct gates barring the public “at such points as said wharves, or the approaches to them, join private property.” The public was given the right of passage over the wharves, but not the right to moor boats or store property on the privately owned wharves. I mention this in detail because it shows the disposition to recognize the rights of the owners of structures on the public land to remain there and receive certain protection.
October 3, 1928, we find the next reference to the property, when the plaintiff was granted a permit to make extensive alterations and repairs to the cottage. Pursuant to this permit, he spent a large sum of money, approximately $25,000, in improving the house and garden. May 6, 1929, plaintiff’s application for a permit to build a garage was refused on the ground that it was a new structure and the deed prohibited the erection of any new structures on the land. Plaintiff paid the taxes on the house and improvements and paid a monthly rental of $3 for the ground directly to the land company, to which it was reserved. This was apparently the rent that had been paid by plaintiff’s predecessors. It was paid to September 30, 1932, and was paid more than four months in advance when the house was destroyed by fire May 17, 1932.
The other piece of real property upon ■which the structures belonging to plaintiff stood was known as the Coleman water lot No. 21, which adjoined the lot just referred to. In 1909, a lease of this lot was executed by the trustee of the Coleman estate to Keil. It was a year to year lease for an annual rental of $1 with a clause that the lessor might terminate it at any time upon thirty days’ written notice. This lot was included in a purchase of property by the town of Belvedere in 1924 to provide a place for the public mooring of water craft, the funds having been provided by a bond issue.
In 1929 plaintiff took out various policies insuring the house and its contents against fire, earthquake, etc. July 12, 1929, plaintiff received the poliey of insurance in question executed by defendant company. It is what is known as a valued poliey in the sum of $15,000 upon plaintiff’s leasehold interest in the property. It provided in substance that if the house were destroyed by fire and the léase canceled for that reason and no *437re-lease could be obtained, that tbe whole of the insurance should be payable to plaintiff. It further provided that there should be no loss payable “except as a result of fire of sufficient extent to cause the cancellation of the lease.” The circumstances under which the policy was written will be discussed later in connection with the admissibility of the testimony concerning it.
May 17, 1932, the house and adjacent structures were destroyed by fire. It is conceded that it was a total loss and operated as a forfeiture of plaintiff’s right to maintain a structure upon the lands under the terms of the deed of 1897. Plaintiff asked the town for permission to rebuild the house, and permission was refused on the ground that to grant it would cause the property to revert to the Belvedere Land Company. Plaintiff also sought permission from the land company, the reversioner under the deed, and it likewise refused.
It is apparent that plaintiff did not have what is commonly known as a “lease,” namely, a written agreement for the hiring of real property for a fixed term at an agreed rental. It is equally apparent that plaintiff had a valuable interest in the occupancy of the land. The question here is: May this interest be described as a leasehold interest and as such be protected by insurance ? It is my view that under all of the facts and circumstances of this ease it may be so described and protected.
The term “lease” has a broader meaning than the one referred to. It has been defined as “a species of contract for the possession and profits of lands and tenements, either for life, or for a certain term of years, or during the pleasure of the parties.” 3 Words and Phrases, Second Series, 54; Stone v. City of Los Angeles, 114 Cal. App. 192, 299 P. 838; In re Barnett, 12 F.(2d) 73 (C. C. A. 2); Asher v. Johnson, 118 Ky. 702, 82 S. W. 300; Harvey Coal Co. v. Dillon, 59 W. Va. 605, 53 S. E. 928, 6 L. R. A. (N. S.) 628. It accordingly includes a lease for an indefinite term as well as a lease for a definite term, a tenancy from month to month orally agreed to as well as a long term tenancy under a formal written instrument. An essential of a lease as distinguished from a license is that it gives a right of possession of the real property as against even the landlord. Shaw v. Caldwell, 16 Cal. App. 1, 115 P. 941; 3 Words and Phrases, Second Series, 57 and cases there cited.
Since the term “lease” or “leasehold interest” is capable of describing a number of different types of tenancy, it becomes important to know in what sense the words were used in drafting the insurance policy in suit. The introduction of evidence as to the conversations and dealings between plaintiff and his insurance broker on the one hand, and the officers and agents of the insurance company on the other, was vigorously objected to by the defendant on the ground that it was for the purpose of varying the terms of a written instrument by parol evidence. In the federal courts, the parol evidence rule is strictly followed in insurance eases and is the foundation of the rule established by the United States Supreme Court in Lumber Underwriters v. Rife, 237 U. S. 605, 35 S. Ct. 717, 59 L. Ed. 1140, that an express provision in a policy may not be waived by introducing parol evidence to show that the insurer knew at the time the policy was issued that the provision was being violated. The rule is otherwise in California (see Waiver and Estoppel in Insurance Law in California, by Stephen I. Langmaid, 20 California Law Review, 1); but since insurance cases are considered matters of general jurisprudence, the principles as stated by the federal courts are controlling. Were the terms “lease” and “leasehold interest” narrowly defined and restricted to a tenancy for a long term under a written lease, the fact that plaintiff had no written lease would bar his recovery. It would be immaterial that the defendant knew at the time the policy was written that plaintiff had no such formal lease and testimony introduced to show defendant’s knowledge of the fact would be inadmissible. Since, however, the terms are bnoadly defined to include a number of different kinds of tenure, it is necessary to know in what sense the parties used the term. Where a' term is used in a written instrument in a connection whore more than one meaning may be given to it, it is elementary that parol evidence may be introduced to show the sense in which it was understood to be used by the parties. The evidence was admissible for this purpose.
Prior to applying for the leasehold insurance, plaintiff’s broker procured a search of the title from the local title insurance company, doing so on plaintiff’s instructions. The first report stated that they found no lease of record from the town of Belvedere to plaintiff. It contained no mention of the deed of 1897 from the Belvedere Land Company. A second report disclosed this deed and summarized its pertinent provisions. The whole situation concerning plaintiff’s interest was disclosed to the officers of the insurance company by plaintiff’s broker, and *438their advice and assistance were sought as to the wording of a policy which would cover plaintiff’s unusual interest. The officers consulted were men with authority to bind the company. There is some conflict in the testimony as to just what instruments were shown the officers of the insurance company. It is conceded that the deed of 1897 was left with the company for several days. I believe and find that the whole situation concerning plaintiff’s occupancy of the land was fully disclosed to them by plaintiff’s broker. No, form of policy which they had fitted the situation, and it was found necessary to work out what was referred to as a “tailor-made policy.” Apart from the testimony of the broker, there is a clear inference that the insurance company knew that there was no lease with a fixed term. A preliminary draft of certain provisions was submitted by the company, and after corrections by plaintiff and his broker, the policy was written. The changes made from the preliminary draft indicate such knowledge. As an instance, the clause referring to' a lease of a specific date was stricken and the policy as drawn was more general in its terms referring simply to a lease of land for which there is paid a monthly rental of $3. The fact that a valued policy was written instead of the usual form of leasehold insurance where the amount of insurance decreases as the lease advances toward its termination supports this conclusion. The insurance company through its agents knew the circumstances surrounding plaintiff’s tenure before the policy was executed and the terms lease and leasehold interest were used to describe it.
Not only were the terms “lease” and “leasehold” used with the intention of describing plaintiff’s interest in the real property, but under the law they properly described it. It is true that both as to the Coleman “water lot” and the Belvedere Land Company property, plaintiff’s tenancy was legally subject to termination by the board of trustees of the town on thirty days’ written notice. As to the Cioleman property, Keil’s lease was subject to termination on thirty days’ written notice, and plaintiff stood in no better position than Keil. The clause in the deed of 1897 making the rights of the owners of the mentioned cottages to remain on the land terminate on the destruction of the cottages, made the right also subject to termination by the action of the town. ■ Doubtless the town had the power to demand the removal of plaintiff’s structures upon legal notice. It was a power that was not used so long as the structures remained undestroyed. It is implied in the record that the other cottages held under similar conditions have never been removed. The town manifested its intention of not exercising its power when it granted permission to make extensive alterations and invest more capital. Had the power been exercised prior to the fire, it would have bean practically a confiscation of plaintiff’s rights in the house and other structures. The lot was a hill lot, and it would be difficult, if not impossible, to remove the house from it without making it worthless. Had the fire not occurred, it is apparent that plaintiff’s occupancy would not have been disturbed during the life of the policy.
Plaintiff’s occupancy of all the property except the land under and leading to the wharf was that of a lessee and not a licensee. He had a right of possession good against the world and good against the town until the expiration of the period after legal notice to terminate the tenancy. See Shaw v. Caldwell, supra.
The fact that an interest in property is uncertain in duration does not deprive it of insurability. In general, one who has an interest in real property subject to termination at his death may, if he takes out insurance for his own benefit and pays the premiums, insure it, and in the event of its total destruction, collect the whole amount of the insurance. It is immaterial that he may be in ill health and may die in the near future.. Merrett v. Fanners’ Ins. Co., 42 Iowa, 11; Trade Ins. Co. v. Barracliff, 45 N. J. Law, 543, 46 Am. Rep. 792; Rayner v. Preston, 18 Ch. D. (C. A.) 1, 15; Harrison v. Pepper, 166 Mass. 288, 44 N. E. 222, 33 L. R. A. 239, 55 Am. St. Rep. 404; 11 Harvard Law Review 512. A month to month tenancy terminable upon notice gives rise to an insurable interest. Schaeffer v. Anchor Mut. Fire Ins. Co., 113 Iowa, 652, 85 N. W. 985. In the case of Berry v. American Cent. Ins. Co., 132 N. Y. 49, 30 N. E. 254, 28 Am. St. Rep. 548, it was held that an agreement that a tenant should remain in possession for life provided he paid taxes, insurance, and costs of repairs, created an insurable interest despite the fact that the agreement was not enforceable against the landlord because not in writing.
It is, however, necessary that the insured have a present and real interest in the property to which the peril insured against would cause pecuniary damage. Moving Picture Co. v. Scottish Union Ins. Co., 244 Pa. 358, 90 A. 642; In re Reynolds’ Estate, 94 Vt. 149, 109 A. 60; sections 2550 and 2551 of the *439California Civil Code. In this case plaintiff had an extensive and real financial interest in the continuance of the lease. He was paying $3 a month for a site for a beautiful dwelling in which he had a cash investment of approximately $31,000. This right, though subject to termination by the owners of the land and difficult to fix the value of, was terminated by fire, the peril insured against. The fact that it was difficult to estimate the value of the right gave rise to the execution of a valued policy instead of an ordinary leasehold policy. The company thereby consented to a fixed valuation of the right. I find that plaintiff had a leasehold interest in the land and an insurable interest in the lease.
No other point raised in the argument merits discussion.
Plaintiff is entitled to recover the full amount of the policy with interest from July 12, 1932, as prayed, and costs of suit. Let judgment be entered accordingly.
I adopt the statement of my views in this opinion as my findings of fact and conclusions of law. As to any matters not specifically covered in the opinion, I find generally in favor of plaintiff. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219196/ | KNIGHT, District Judge.
In 1912 a judgment was taken against Andrew Pacer by one Stanley Messier. This judgment was subsequently assigned to Ella Wilhelm, who, in 1923, brought a new action on the judgment. Execution was issued on the judgment recovered in this action. Pacer, having filed a voluntary petition in bankruptcy, moves for an order to restrain levy of execution until his discharge is granted or refused, or the time in which he may apply therefor has expired.
It is bankrupt’s contention that the judgment is dischargeable in bankruptcy on the ground that a cause of action on a judgment is a cause of action on contract. Bankrupt also sets up that no tort was committed against the present holder of the judgment, Ella Wilhelm. A further contention is that the question of a discharge cannot be determined on motion, but that the question should be determined by reference to a referee in bankruptcy and that proceedings should be stayed pending this determination.
The schedule of indebtedness filed by the *440bankrupt shows that the original cause of action was for assault. The creditor points out that a judgment based on a cause of action for assault and battery is not affected by a discharge in bankruptcy, being classed as a liability for willful and malicious injury to another under section 17a (2) of the Bankruptcy Act, 11 USCA § 35 (2), and that the renewal of the judgment does not change the character of the original debt.
A restraining order of this nature may be granted provided the debt involved is one which is dischargeable. If it is not discharge-able the execution is not to be interfered with. In re Scheffler (D. C.) 1 F. Supp. 582; In re Lusch (D. C.) 251 F. 316; In re Kalk (D. C.) 270 F. 627. No issue as to the right of the bankrupt to a discharge is raised, except incidentally by reason of the fact that this debt alone was scheduled by the bankrupt.
Section 17 of the Bankruptcy Act provides that “a discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as * * * are liabilities * * * for willful and malicious injuries to the person or property of another.” That a judgment for assault and battery is one for a willful and malicious injury has been adjudged many times. Tinker v. Colwell, 193 U. S. 473, 24 S. Ct. 505, 48 L. Ed. 754; In re Conroy (C. C. A.) 237 F. 817; Peters v. U. S. (C. C. A.) 177 F. 885; In re Colaluca (D. C.) 133 F. 255; In re Wernecke (D. C.) 1 F. Supp. 127.
Bankrupt’s argument is based on the contention that a cause of action on a judgment is a cause of action on contract. This may be so for some purposes, such as to secure to the holder of a judgment rendered in a cause of action in tort, the right to provisional remedies. Gutta-Percha & Rubber Manuf’g Co. v. Mayor, etc., 108 N. Y. 276, 15 N. E. 402, 403, 2 Am. St. Rep. 412. The court there stated that the authorities “recognize the implied obligation of every judgment debtor to pay the judgment and that, for the purpose of actions and remedies upon them, they are to be treated as contracts.” The court prefaced its remarks by the statement, “A judgment is not for all purposes and under all circumstances to be treated as a contract, and yet it has frequently been so treated,” thus recognizing the limited operation of the rule. In the present ease the question is as to how to treat a judgment for the purpose of deciding whether or not a judgment taken thereon is dischargeable in bankruptcy.-
In determining the dischargeability of a liability it is well settled that reduction to judgment does not change the character of the liability. Tinker v. Colwell, 193 U. S. 473, 24 S. Ct. 505, 48 L. Ed. 754; Peters v. U. S. (C. C. A.) 177 F. 885; In re Wernecke (D. C.) 1 F. Supp. 127. Thus, within the contemplation of the Bankruptcy Act, a judgment for assault, being one for willful and malicious injury, remains a liability for willful and malicious injury, and a new judgment taken on that liability is also a liability for willful and malicious injury. The merger of the cause of action in the original judgment does not change the character of the obligation, so that a subsequent judgment rendered thereon is dischargeable. Consequently as to this debt the bankrupt is not entitled to a discharge.
I know of no authority, nor has any been cited, nor any reasion advanced, why an assignment of such a judgment should affect the character of the liability of the bankrupt, and on the same line of reasoning above set forth it is clear that the judgment is not made dischargeable-by reason of the fact that an assignment was made.
The motion is dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219197/ | NETERER, District Judge.
The Dimon Steamship Corporation, prior to insolvency, was engaged as a common carrier of lumber between the Puget Sound and Atlantic Coast ports. The respondent is a corporation engaged in the manufacture and shipping of lumber on Puget Sound. The steamship company operated the Pacific Hemlock, the Pacific Pine, Pacific Cedar, and Pacific Oak. The Pacific Hemlock was due to arrive on Puget Sound during the middle part of October, 1931; the other ships at different times in November; all were without return cargo commitments. The market and economic conditions curtailed operation of Pacific Coast mills, resulting in large surplus in space of lumber carrying vessels, beginning before September, and particularly emphasized in October and November, in inter-coastal trade. Carriers in intereoastal shipping, while openly maintaining east-bound rates, privately sought cargo at available rate, and there was much negotiation between the shippers and carriers. On one ship the instant shipper obtained a $9 rate (September). The testimony does not disclose other commitments during this time, but the testimony does not show that the rate was being maintained.
The objection to the interoffice correspondence must be sustained. It is hearsay as to the respondent.
In October 13, 1931, the shipper and the carrier entered into a contract by which a cargo of lumber was furnished by the shipper to the Pacific Hemlock for $8 per thousand for lumber sold on delivery in New York, and for lumber sent “in transit” for storage in New York, unless sold prior to arrival. The steamship company was to grant the shipper 39, 69, and 99 days’ time on the payment of the freight, except upon cargo which was consigned; the steamship was to collect the freight from the consignee on sold shipments, the lumber sold C. I. F. (cost plus interest plus freight). The bill of lading noted $19 freight rate, to be collected from the consignee on sold cargo, the steamship to apply $8 per thousand to the freight on consigned cargo, and credit the shipper with $2 per thousand on its freight account, retaining the $2 as an operating fund until the freight account was settled. Negotiations for cargo were carried forward for the Pacific Pine, Pacific Cedar, and Pacific Oak, due to arrive in November, the shipper endeavoring to obtain a $6 per thousand rate. On November 2,1931, a contract was agreed to and consummated, which provided, as far as material : “All details surrounding these three vessels to be the same as the Steamship Pacific Hemlock.”
On the 16th of October, 1931, a carriers’ agreement was signed by thirteen, providing, as far as material “ * * * That each of such carriers shall from this date up to and including October 31, maintain a $19.99 for one thousand feet net board measurement rate from Pacific Coast to Atlantic Coast. “ * * ” This was approved by the Sloping Board October 21. The vessels commenced taking cargo and sailed, as follows: The Pacific Pine, November 6, and sailed November 17; the Pacific Cedar, November 29, and sailed November 28; the Pacific Oak, November 39, and sailed December 12.
On November 16, 1931, a carriers’ agreement signed by fourteen ion November 13 was filed with the United States Shipping Board November 18, and provides that they Would not quote or book lumber at less than $9 per thousand feet, b. m., “from this date until December 31,1931.” The carriers filed, and the Shipping Board approved, the agreements pursuant to section 814, title 46 USCA, and from the date of approval became a regulatory tariff within the limited period for carriers of luntber from Puget Sound to the Atlantic Coast.
The conclusion appears inevitable that the agreement contended for by the respondent with the Pacific Hemlock was entered into and the booking was complete, and is not within the carriers’ agreement of October 16, approved October 18, nor contrary to any *442other maintained tariff. The carriers’ agreement ended October 31, except as to inhibition against quotations for commitments for November, December, and January following. While it is obvious that negotiations were carried forward, the $8 rate was quoted prior to the October agreement. By the negotiations it appears that' the shipper endeavored to secure a lesser .rate. There were no quotations or commitments during the inhibited period, but thereafter, on the 2d day of November, the $8 rate was agreed to for the three other vessels, and the commitment for the three vessels was wholly closed prior to the November carriers’ agreement; nor did the notation, “$10.00,” on the bill of lading, control. Toyo Kisen Kaisha v. W. R. Grace & Co. (The Tokuyo Maru) (C. C. A.) 53 F.(2d) 740, 1932 A. M. C. 34; Mobile & Montgomery R. Co. v. Jurey, 111 U. S. 584, 4 S. Ct. 566, 28 L. Ed. 527; Northern Pacific R. Co. v. American Trading Co., 195 U. S. 439, 25 S. Ct. 84, 49 L. Ed. 269. It might afford a basis for negotiation between shipper and consignee on basis of C. I. F. sale, as to which no opinion is intended. The unsold lumber necessarily required storage; in this situation the agreement was made, without evil intent, but inspired by overruling “economic forces” which changed the “economic level.” Atchison, etc., R. Co. v. United States, 284 U. S. 248, 254, 52 S. Ct. 146, 76 L. Ed. 273. No discrimination was made by the common carrier for the special return cargoes on imposed terms and conditions, in view of available cargo, which was unfair or unjustly discriminatory, and it is not apparent how or in what manner it created “an undue preference,” since the shipper furnished the full cargo and hazarded a greater expense for storage for unsold cargo to furnish emergency cargo for carrier, and gave it no undue advantage ov.er competitors. It is readily conceivable that the expense of storage of cargo might create a greater liability to the shipper than the difference between the $8 rate and the $10 rate, and be not a beneficial condition, and lifted the arrangement above any undue or unreasonable preference, placing it on a more equal economic basis by reason of economic conditions which neither could control; and likewise distinguishes it from any unjust, unfair, or unduly discriminatory relation, and certainly comes within the standard of “due regard being had for the proper loading of the vessels and available tonnage.”
Prince Line v. American Paper Exports (D. C.) 45 F.(2d) 242, affirmed (C. C. A.) 55 F.(2d) 1053, is distinguished, in that the arrangement was an unjust device to secure an unjust rate and was a continuous general practice and foreign to available tonnage, and obviously was undue preference. In the instant ease, there is no relation of unjust or unfair device to secure a less rate than the “regular rates then established and in force” applicable to any of the ships. In any event, the shipments are out of the limit of the time of the herein carriers’ tariff agreement.
Decree in accordance with the stipulation as to the amount due. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219200/ | COXE, District Judge.
This is a suit for infringement of the Watters patent, No. 1,597,129, issued August 24, 1926, for a bedpan cleanser and sterilizer. The claims relied on are Nos. 1, 2, 3, 4, 5, 8, 12, 13, 14, 18, 19, and 20 ; and claims Nos. 2 and 19 are cited as typical. These two latter claims read as follows:
2. “A bed pan washer comprising a vertical hopper set within a wall and having its face inclined rearwardly at the top, a cover hinged on a horizontal axis to swing over the face of the hopper in one position and present a shelf receptive of a bed pan when in another position, and pedal means for first releasing and thereafter initially actuating the cover permitting it to drop by gravity into a horizontal position.”
19. “A bed pan washer having a door forming a shelf when opened and pairs of in-reaching curved aims fixed at one of their ends on opposite sides of said shelf and extending immovably thereover for holding a bed pan in position on said shelf.”
The defense is noninfringement.
The early hospital practice of cleansing bedpans was by means of -an open faucet or hose, and a brush. Subsequently hoppers of various types were introduced, and these served both as cleansers and sterilizers. The most recent hopper device, prior to the invention of the patent, was the circular hopper with the revolving cradle, illustrated by Exhibit 6. This hopper was developed by the plaintiffs, and has been sold by them in fair quantity for a number of years, principally for use as a sterilizer. It has also been made the subject of a patent to Watters, No. 1,501,-826, issued July 15, 1924.
These hopper devices never proved satisfactory for routine hospital work, and it was the uncontradieted testimony of the witnesses at the trial that they were dirty, unsanitary, and inconvenient to operate. The problem then was to find a simple apparatus which would satisfy the needs of hospital workers, and which might become standard hospital equipment; and, in an effort to develop such a device, Neergaard, -a well-known hospital engineer, in 1923 requested four of the leading manufacturer? of hospital supplies to attempt a solution of the problem. This resulted in 1924 in the production of the Watters device of the patent; and almost immediately it received general recognition, and, since its introduction, has been specified for practically all new hospital construction. The sales from 1925 to 1932 were approximately 2,500, with installations in from 600 to 700 hospitals in the United States, Canada, and foreign countries; and the defendant itself, prior to 1929, paid mute tribute to the merit of the invention by making sales of the device for the plaintiffs. In 1929 the defendant brought out its own design, and since that time it has sold two types, represented by Exhibits 4 and 5, in direct competition with the plaintiffs.
The Watters eleanser is a simple piece of apparatus which allows a nurse quickly and conveniently to handle a heavy bedpan without spilling the contents, and makes it possible thoroughly to clean the pan and the inside of the hopper by means of an ordinary water spray, without hand scrubbing. The main features of the device are: (1) A design which permits effective cleansing; (2) a pedally operated door, which, when closed, is tilted out of the vertical position, and, when released, is permitted to fall by gravity into a horizontal position to receive the pan; (3) a vent to carry off the foul odors; (4) immovable arms, designed and positioned on the inner surface of the door so as not easily to *452become fouled, and capable of holding the pan securely in place; and (5) a pedal arrangement so constructed that a slight movement of the foot will bring the door to its vertical position.
The prior art contains nothing fairly approximating this arrangement. That, indeed, is not disputed, inasmuch as the defendant concedes validity. It is, however, insisted that the invention is so limited in its scope that the claims do not read upon the defendant’s deviee.
The closest reference to the patent cited by the defendant is the circular hopper with the revolving cradle (Exhibit 6); and, aside from the fact that it is operated by a foot pedal, it bears no close resemblance to the Watters deviee. Moreover, it is open to all the objections of the earlier hopper types, and has been completely supplanted by the device of the patent. The Jennings British patent, No. 5,487 (1898), shows only a hopper with a vertically hinged door closed by a thumb nut, and a hook upon which the pan may be hung. It has none of the pedal arrangement of the Watters device, and is without any of its advantages. The same is true also of the Ehmann German patent, No. 228,-446 (1909), which discloses merely a bowl with a hinged cover frame capable of receiving in its open position a bedpan for cleansing. The deviee of this patent is in many respects similar to Exhibit 6, and is open' to the same objections already noted with respect to that exhibit.
The remaining patent references cover merely separate elements of the Watters combination, such as the swinging cover operated from a vertical to a horizontal position by a foot treadle, shown in the Daggett patent, No. 244,381 (1881); and the clamps or engaging fingers of the patents to Hayworth, No. 1,075,287 (1913), and Heidbrink, No. 1,479,236 (1824), These patents were all cited in the Patent Office proceedings, and the patent issued over them; and the mere fact that they disclose separate elements of the patented combination is insufficient of itself to deny to the patent some equivalents commensurate with the advance made by Watters.
The differences between the two devices pointed out by the defendant’s expert are: (1) That the defendant’s deviee has no lock or keeper to hold the door shut against the body of the washer; (2) that the cover is not tight against the washer body; (3) that the defendant’s deviee does not have the four independent uprights for holding the pan in place, as called for by the claims; and - (4) that the exact pedal means of the patent are not present. Claim 2 of the patent specifies “pedal means for first releasing and thereafter actuating the cover permitting it to drop by gravity into a horizontal position.” There is nothing in this language which limits the patent to a construction having a lock or keeper to hold the door in closed position. Obviously, the door must be closed sufficiently to counteract the slight pressure from the spray head, and this is accomplished in both devices primarily by the tilting of the cover from its vertical position. In both types of the defendant’s device (Exhibits A and B) the offset shelf helps to keep the door in place; and in the defendant’s present or later type (Exhibit B) there is in addition a spring to overcome any tendency to open; but in both plaintiffs’ and defendant’s devices the door is kept closed in substantially the same way. ,-
It is insisted, however, that the words “first releasing,” appearing in claim 2, mean the opening of a lock or the throwing of a' bolt, and that Watters expressly placed this limitation on the language of the claim in the Patent Office proceedings. It is, I think, a sufficient answer to this contention: (1) That the word “releasing,” as used in the claim, means “opening” or “allowing to fa'll”; (2) that the patent itself contains, in addition to general claims, limited claims which specifically mention a “spring catch” or a “snap catch” (claims 6, 7, 9, and 10); and it is a familiar rule of construction that limitations of specific claims are not to be imputed to claims containing more general language, French v. Buckeye Iron & Brass Works (C. C. A.) 10 F.(2d) 257, 262; and (3) that no such limitation as insisted on by the defendant is to be found in the file wrapper, Art Metal Works v. Abraham & Straus (C. C. A.) 61 F.(2d) 122; Deitel v. Unique Specialty Corp. (C. C. A.) 54 F.(2d) 359. Furthermore, it is well settled that arguments of an applicant for a patent are entitled to no weight. Spalding & Bros. v. John Wanamaker (C. C. A.) 256 F. 530, 534. I can see no reason, therefore, for limiting claim 2 in the manner contended for by the defendant.
The second point of distinction urged by the defendant’s expert, namely, that the defendant’s door does not fit tightly, and therefore avoids infringement, is unfounded. Both devices are sufficiently sealed to prevent leaking, as obviously their entire purpose would be defeated iff they failed in that respect. Moreover, the defendant describes its device in its advertising matter as sanitary, odor*453less, and leak proof; and eoncededly this is its normal method of operation. It is of no consequence, therefore, that under purely ah-normal conditions some leakage may take place. Wright Co. v. Herring-Curtiss Co. (C. C. A.) 211 F. 664.
The third, point of distinction asserted is that the defendant’s device does not have “pairs of inreaehing curved arms,” as specified in claim 19, for holding the pan in position. It was admitted, however, that it would make no difference in the operation of the plaintiffs’ device if the curved arms were connected by longitudinal bars; and that is exactly what the defendant uses. It seems too plain for argument, therefore, that the two expedients are the same. Infringement is not avoided, either, because the defendant finds in the prior art clamps similar to those it uses in its devices. So1 also is it possible to find in the prior art counterparts of the plaintiffs’ arms; but their presence in the patented combination was new, and it is the combination which constitutes the invention, and which is entitled to protection.
The fourth difference urged by the defendant requires no discussion, as it is clear from a mere Superficial examination of the two devices that the pedal of the defendant’s device is operated in substantially a straight line; and any slight deviation creates no difference in function or in method of operation.
The above covers all of the asserted differences urged by the defendant, and disposes of all of the objections to the claims involved in the suit.
It follows that the plaintiffs may have a decree holding claims Nos. 1, 2, 3, 4, 5, 8, 12, 13, 14, 18, 19, and 20 valid and infringed, with costs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219201/ | MeLELLAN, District Judge.
Richard Ward, J. Rodney Ball, and James H. Eaton filed a petition seeking to have the lien of a certain mortgage attached to funds in the hands of the trustees in bankruptcy received from a sale of the assets of the bankrupt. After a hearing, the referee entered an order dismissing the petition. The petitioners applied for a review, and the matter comes before me upon the referee’s certificate and report, including, certain exhibits made a part of the report by reference.
The question certified is whether the *454mortgage, under which the mortgagees claim a lien on the funds in the trustees’ hands, was void as to the trustees in bankruptcy of the mortgagor, the bankrupt in these proceedings.
On or about August 11, 1932, an agreement was entered into between the petitioners, Ward, Ball, and Eaton, and the Pilot Radio & Tube Corporation, the present bankrupt, which recited in substance that this corporation was indebted to the Bay State National Bank of Lawrence on account of certain notes held by the bank and desired that the bank refrain from pressing for immediate payment upon their becoming due; that the bank was willing to refrain from making demand for payment of. the notes when they were due and was presently willing to extend the time for renewal of the notes, provided the bank should be given some added measure of collateral and protection; that the corporation was desirous of obtaining a loan of $50,000 from the Essex Savings Bank; that the Essex Savings Bank was willing to make such a loan, provided additional security or protection should be received; that the banks and the corporation were agreed that a mortgage of all the corporation’s tangible personal property should be executed as such additional collateral or protection; that both the banks and the corporation desired that the mortgage should run to private individuals as trustees for the banks; that said Ward, Ball, and Eaton had been selected as such trustees; and that a chattel mortgage was in the process of being executed by the corporation to said trustees simultaneously with the execution of the agreement. Such, in substance, were thé introductory portions of the contract, which was under seal. The contract contained the following covenants:
“Said Trustees shall hold said chattel mortgage for so long a period of time as said corporation shall continue to be indebted to the said Bay State National Bank, and for so long a time as said corporation shall continue to owe said Essex Savings Bank any part of the said fifty thousand dollar ($50,000) loan this day made by said Essex Savings Bank to said corporation; but when said corporation shall cease to be indebted to the said Bay State National Bank and shall have paid off said fifty thousand dollar ($50,000) loan to said Essex Savings Bank and be entitled to a discharge of its mortgage of real estate which it has this day executed to said Essex Savings Bank, then the Trustees shall promptly execute and deliver to the corporation a discharge of said chattel mortgage. If said corporation shall, however, default on any payment of interest when due to either of said banks or if it shall fail to make any payment of principal on account of its obligation to either of said banks when either of said banks -shall demand such principal payment, ór if said corporation shall fail to perform any of the conditions mentioned in said chattel mortgage, then the Trustees shall be authorized to take such action as is permitted by said chattel mortgage, including the right to foreclose the same, and they shall thereafter divide the proceeds of such foreclosure sale between the said banks in such proportion as the said two banks may then agree upon.
“And the corporation promises the Trustees that it will pay said banks as demanded all sums which it may owe said banks, that in the meantime it will promptly pay all interest charges thereon and will faithfully and punctually do and perform all of the terms, covenants and conditions contained in said real estate mortgage of even date and in said chattel mortgage to be done and performed by the mortgagor, that it will promptly pay to said Trustees whatever expenses said Trustees may be put to on account of these premises, together with a reasonable compensation for the service rendered by said Trustees.”
Simultaneously with the execution and delivery of the foregoing contract, the Pilot Radio & Tube Corporation, pursuant to a vote of its board of directors, executed an instrument in the form of a personal property mortgage, reciting a consideration of $1 and other valuable considerations paid by Richard Ward, J. Rodney Ball, and James H. Eaton, and transferring to them all its tangible personal property in Lawrence, “in trust nevertheless, under the terms of a certain agreement dated this day ánd executed by the said Ward, Ball and Eaton, and by said Pilot Radio & Tube Corporation.” This instrument contained a proviso “That if said Pilot Radio & Tube Corporation, or its successors or assigns, shall perform all the duties required of it by the terms of said agreement of even date, and pay said 1931 taxes, as aforesaid,” etc., “then this deed shall be void.” It was provided that upon any default in the performance or observance of the aforesaid duties and conditions, or upon the failure to pay said 1931 taxes aforesaid, the vendees or their assigns might sell the property at auction under certain conditions, and retain all sums necessary to carry out the *455performance of the duties required to be performed under the agreement of even date, and pay any surplus to Pilot Radio & Tube Corporation.
This ease, as counsel have agreed in open court, involves no question of a preferential payment or of any transfer in fraud of creditors.
The referee’s report indicates that he regarded the mortgage as invalid and void for want of consideration, a conclusion with which I do not agreed. A personal property mortgage is, of course, a conveyance, and as such does not need to be supported by any such consideration as is essential to a contract not under seal. No authority is required in support of the proposition that a personal property mortgage is valid if given by way of security for an antecedent and existing debt. Nor, as I view it, does it make any difference whether the mortgage is given by the debtor to the creditor, or by the debtor to some person as trustee for the creditor. Nor am I able to adopt the argument made this morning by counsel for the trustee in bankruptcy that since neither of the banks was named as a party to either of the instruments, they cannot be regarded as the beneficiaries of any trust. ,
The question as to whether the mortgage is void because the terms of Massachusetts General Laws (Ter. Ed.) e. 255, § 1, applying to the recording of mortgages of personal property, were not complied with, presents, as it seems to me, greater difficulty. This section reads in substance, so far as applicable to this situation, as follows: “Mortgages of personal property shall, within fifteen days from the date written in the mortgage, be recorded on the records of the town where the mortgagor resides when the mortgage is made, and on the records of the town where he then principally transacts his business. * * * The mortgage shall not be valid against a person other than the parties thereto until so recorded; and a record made subsequently to the time limited shall be void. This section shall apply to bills of sale given for security, but shall not apply to assignments which transfer the title of a lessor or conditional vendor to a lease or other instrument containing a conditional sale agreement and to the personal property therein described. If the condition for redemption of the property included in such bill of sale is in writing, it shall be recorded with and as a part of the bill of sale; if the condition for redemption is oral, a written statement of such condition signed by the mortgagee shall be so recorded.”
Manifestly, the word “mortgagee” in the last line of this section refers to a transferee in a bill of sale who, by virtue of the understanding that the bill of sale was given as security, becomes a mortgagee.
Prior to the amendment of this statute in 1913, the recording of a mortgage, unaccompanied by the agreement, would probably have been sufficient. Henshaw v. Sumner, 23 Pick. (Mass.) 446. Nor does it seem to me that the amendment, which applies to transfers absolute in form, such as bills of sale, and requires in this connection a written statement of an oral agreement of defeasance, makes it necessary to record with what purports to be a mortgage of personal property, such a simultaneous agreement as exists in this case.
Even if the fact that the trust agreement was under seal be disregarded, it constituted a valid obligation, and the mortgage was an appropriate security for it; The petitioners, who held the mortgage in trust, were the proper persons to enforce the lien. Richter v. Jerome, 123 U. S. 233, 8 S. Ct. 106, 31 L. Ed. 132; Palmer v. Bankers’ Trust Company (C. C. A.) 12 F.(2d) 747.
Erom the referee’s report it appears that “no evidence was submitted as to what portion, if any, of the after-acquired property of the bankrupt since the date of the mortgage came under the mortgage.”
The referee’s order dismissing the petition to establish a lien on the funds in the hands of the trustees in bankruptcy is reversed, and the matter recommitted to the referee for further proceedings not inconsistent herewith.
The trustees in bankruptcy excepted to the foregoing ruling, and their exception is noted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219202/ | McLELLAN, District Judge.
This is a bill in equity in which the plaintiff seeks to enjoin the United States attorney for this district from the prosecution of an indictment recently returned against him. The defendant’s motion to dismiss the bill of complaint is, under the equity rules, the equivalent of a demurrer.
The bill of complaint sets forth the pertinent provisions of the Act of Congress of March 9,1933 (48 Stat. 1), entitled “An Act to provide relief in the existing national emergency in banking, and for other purposes,” and the executive order of the President of the United States, dated August 28, 1933, issued pursuant' thereto. The bill also contains a copy of an indictment returned by the grand jury on October 26, 1933, for failing to make and file a return, pursuant to the executive order of August 28, 1933, and for retaining a legal and equitable interest in certain gold coin without a license therefor.
The plaintiff says that the act and order are unconstitutional and in violation of the Fifth Amendment of the Constitution, which provides that: “No person * * * shall be compelled in any Criminal Case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
It is stated also that the requirements of the executive order constitute an unreasonable search and seizure, contrary to the provisions of the Fourth Amendment to the Constitution, and that it constitutes an exercise by the President of the legislative power as distinguished from an administrative act of investigation and regulation, in violation of section 1, article 1, of the Constitution.
These are matters which should be decided if the case is of such a nature that this court has jurisdiction of it, and, unless such jurisdiction exists, they are matters which should properly be considered and decided only in connection with a direct attack upon the indictment made on the criminal side of the court. For present purposes, it makes no difference whether or not the act and order are unconstitutional, unless the bill states a ease for equitable relief.
The additional allegations of the bill of complaint on which the power of the court of equity to interfere with a criminal prosecution must depend are, in substance, as follows:
It is averred that the act and order, are penal enactments, creating a new offense amounting to a felony, the penalties where-for are severe, that the law gives the complainant no appeal from an adverse decision upon a demurrer or motion to the indictment, and that the only way in which the sufficiency of the indictment and the constitutionality of *457the act and order can be tested in a criminal proceeding is by appeal after trial and upon conviction and sentence. The bill states further that the complainant is a lawyer engaged in active practice, that he has established a good reputation, and that, notwithstanding the unconstitutionality of the act and order, if the complainant is placed before the bar of a criminal .court in company with criminals and other offenders charged with! crimes involving moral turpitude, his standing and reputation in his profession will be seriously impaired, and his ability to earn a livelihood by the practice of his profession will be destroyed, and he will suffer irreparable damage therefrom by delay.
In my opinion, the plaintiff does not state a case for the interference by a court of equity with orderly procedure on.the criminal side of the court. If the Act of Congress of March 9, 1933, is unconstitutional, that can be adjudicated as well by direct attack upon the indictment as in this proceeding. As á general rule, an injunction will not be granted to stay criminal proceedings. It is. only where the statute on which the indictment is founded is unconstitutional and there is a direct violation of property rights resulting in irreparable injury that injunctive relief is' afforded. In the case at bar, no special circumstances are shown which take the case out of the ordinary rule that a court of equity will not interfere with prosecuting officers in the discharge of their duties. Such cases as Weed & Co. v. Lockwood, 255 U. S. 104, 41 S. Ct. 305, 65 L. Ed. 532, and Id. (D. C.) 264 F. 453; Griesedieck Bros. Brewery Co. v. Moore (D. C.) 262 F. 582; Morgan v. Nolan (D. C.) 3 F. Supp. 143; Wilson v. New, 243 U. S. 333, 37 S. Ct. 298, 61 L. Ed. 755, L. R. A. 1917E, 938, Ann. Cas. 1918A, 1024; Dobbins v. Los Angeles, 195 U. S. 223, 25 S. Ct. 18, 49 L. Ed. 169, on which the plaintiff relies, all involve direet and irreparable damage to property rights, and are, in this respect, distinguishable from the case at bar. If it be said that the right to practice law is a property right, the answer seems to me to ba that the prosecution of this indictment will not result in such direct and irreparable damage as on the authorities is essential to injunctive relief against a public official.
Under the circumstances, as I view them, the plaintiff has an adequate remedy at law in his right to raise the constitutional question on which he relies by way of defense to the indictment. See Lord Montague v. Dudman, 2 Ves. Sen. 396; Dalton Adding Machine Company v. State Corporation Commission, 236 U. S. 699, 35 S. Ct. 480, 59 L. Ed. 797; In re Andrew J. Sawyer, 124 U. S. 200, 8 S. Ct. 482, 31 L. Ed. 402; Amalgamated Oil Gas Corporation v. City and County of San Francisco (D. C.) 263 F. 617.
The motion to dismiss the bill of complaint is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219203/ | CAMPBELL, District Judge.
This suit is brought to recover damages for personal injuries alleged to have been received by the libelant on board the steamship West Selene, on November 30, 1920, due to the negligence of the defendant.
In August, 1922, the libelant commenced in the United States District Court for the Southern District of New York an action at law against the United States Shipping Board Emergency Fleet Corporation and Moore & McCormack Company, Inc., to recover for injuries alleged to have been sustained by him aboard the steamship West Selene, on November 30, 1920, due to the negligence of the defendants. The defendants appeared and answered and set up among other defenses that the United States of America was the registered owner of the steamship West Selene, and that the plaintiff’s (the present libelant’s) sole remedy for bis injuries was under the Suits in Admiralty Act (46 USCA §§ 741-752).
The action at law was tried in February, 1929, before the court and a jury, in the Southern District of New York, and a verdict found for the plaintiff, on which a judgment was entered on February 28,1929.
An appeal was taken from said judgment by defendants, and, while the appeal was pending the Supreme Court of the United States, on January 6> 1930, in the cases of Johnson, Lustgarten et al. v. United States Shipping Board, 280 U. S. 320, 50 S. Ct. 118, 74 L. Ed. 451, decided that the remedy afforded by the Suits in Admiralty Act was exclusive of all other remedies at law as well as in admiralty, for any seaman injured on a merchant vessel registered in the name of the United States of America.
Shortly after the decision, the defendants moved’ thereon to dismiss the plaintiff’s complaint on the ground that the court lacked jurisdiction of the subject matter of the action of the complaint.
The motion was based upon an affidavit by Mr. Donovan, counsel for the government, setting forth that the steamship West Selene was owned by the government, and that under the Lustgarten decision, upon which the application was based, the court was without jurisdiction. There were attached to Mr. Donovan’s moving affidavit (a) a copy of the Lustgarten decision, and (b) a copy of the certificate of registry of the steamship West Selene, showing that the “United States represented by the Shipping Board is the only owner of the vessel called the West Selene.”
That motion to dismiss came on to be heard, and in opposing the motion Mr. Brooks, the attorney for the plaintiff (present libelant), contended that, even if the Lustgarten decision controlled, the motion should have been made in the Circuit Court where the appeal was pending. Mr. Brooks was advised in court that the Lustgarten decision did apply, and that the motion would be granted, and thereupon he signed a stipulation consenting to the withdrawal of the defendants’ appeal, the vacating of the judgment, and the discontinuance of the action, and that upon such stipulation an order was entered on August 18,1930, discontinuing the action without costs:
“On the ground that the Court lacks jurisdiction of the subject matter herein as set forth under a decision handed down by the Supreme Court of the United States in the cases of John Johnson, Petitioner, v. United States Shipping Board and Lustgarten v. United States Shipping Board.”
At the time of the decision in Johnson v. United States Shipping Board, supra; there were a large number of such suits pending *459against the United States or its agencies, which on the authority of that case were subsequently dismissed for lack of jitrisdiction after the two-year period for instituting actions under the Suits in Admiralty Act had expired, and to afford relief to those seamen Congress, by Act of June 30, 1932, 47 Stat. 420, amended section 5 of the Suits in Admiralty Act of March 9, 1920, 41 Stat. 526. (46 USCA § 745), which had-limited the time of bringing of actions thereunder to a period of two years after the cause of action arose, so as to provide as follows:
“Suits as authorized in this chapter shall be brought within two years after the cause of action arises: Provided further, That the limitations in this section contained for the commencement of suits hereunder shall not bar any suit against the United States or the United States Shipping Board Merchant Meet Corporation, formerly known as the United States Shipping Board Emergency Fleet Corporation, brought hereunder on or before December 31, 1932, if such suit is based upon a cause of action whereon a prior suit in admiralty or an action at law or an action under subdivision (1) of section 250 of Title 28, was commenced prior to January 6, 1930, and was or may hereafter be dismissed because not commenced within the time or in the manner prescribed in this section, or otherwise not commenced or prosecuted in accordance with its provisions: Provided further, That such prior suit must have been commenced within the statutory period of limitation for common-law actions-against the United States cognizable in the Court of Claims: Provided further, That there shall not be revived hereby any suit at law, in admiralty, or under subdivision (1) of section 250 of Title 28 heretofore or hereafter dismissed for lack of prosecution after filing of suit.”
On December 30, 1932, the libelant filed this libel in personam under the Suits in Admiralty Act as so amended, to recover for said alleged personal injuries sustained by him on the steamship West Selene on November 30, 1920.
That the respondent is a sovereign corporation and was the owner of the steamship West Selene which was operated as a’ merchant vessel was admitted.
By the original answer filed herein, the respondent admitted allegations to the effect that this court had jurisdiction of the subject-matter of this action, but, it being made to appear that such admissions were erroneously made, at the beginning of the. trial,' due notice of the motion therefor having been given, the respondent was permitted to amend its answer by not only denying the allegations of article seventh of the libel, as to the jurisdiction of the court, but also specifically alleging, in the thirteenth article of the amended answer, that it does not appear that any previous suit in admiralty or action at law, etc., based on the cause of action alleged in the libel, was commenced against the United States or the Fleet Corporation within the statutory period of limitation for common-law actions against the United States cognizable in the Court of Claims.
The point of the respondent’s objection to the jurisdiction of this eourt is that this suit is not a revival of a previous action within the contemplation of the amendment. The previous action was commenced against the Fleet Corporation and Moore & McCormack Company, Inc. This suit is against the United States of America.
Respondent points out that the first proviso contained in the amendment is that the limitations contained in the section, that is, the two-year limitation, shall not bar a suit against the United States or the Fleet Corporation commenced before December 31, 1932, “if such suit is based upon a cause of action whereon a prior suit in admiralty * 9 * was commenced,” etc.; and contends that this suit is not based upon the same cause of action set forth in the former suit, because it is against a new and distinct party.
In Pabst v. Roxana Petroleum Co. (D. C.) 30 F.(2d) 953, at page 955, Judge Hutcheson said on this general subject:
“In Phœnix Lumber Co. v. Houston Water Co., 94 Tex. 456, 61 S. W. 707, it is said: ‘The courts have found it very difficult to'give any general definition of the phrase “cause of action” which would apply to all cases alike and few courts have attempted to do so-. * * * However, the following definition will be sufficient for the disposition of the case now before us. In the abstract, a causé of action consists of “the right claimed or wrong suffered by the plaintiff, on the one hand; and the duty .or delict of the defendant on the other.” ’ ”
In Phœnix Insurance Co. of Hartford v. United States of America, 3 F. Supp. 112, 113, 1933 A. M. C. 308, in which the amended statute in question was considered, Judge Hincks said:
“Every judicial action has in it certain necessary elements, — a primary right beL *460longing to the plaintiff, and a corresponding primary duty devolving upon the defendant; a delict or wrong done by the defendant, which consisted in a breach of such primary right and duty; a remedial right in favor of the plaintiff, and a remedial duty resting on the defendant springing out of this delict; and, finally, the remedy or relief itself. Every action, however simple, must contain these essential elements, and, however complicated, it has no more.” Wildman v. Wildman, 70 Conn. 700, at pages 707, 708, 41 A. 1. And further said, page 113 of 3 F. Supp.:
“ ‘Of these elements, the primary right and duty and the delict or wrong combined constitute the cause of action in the legal sense of the term, and as it is used in the codes of the several states.’ Pomeroy’s Code Remedies, § 453.”
From this I conclude that the cause of action depends upon the violation of a primary right.
The plaintiff’s primary right was violated.
The defendant was, at the time that plaintiff suffered such violation, the owner of the steamship West Selene. The United States Shipping Board Emergency Fleet Corporation and the United States Shipping Board Merchant Fleet Corporation were agencies or agents of the United States, and any recovery .that might have been had in the original action, against the Fleet Corporation, would have been paid by the United States.
We therefore have here a situation where the principal is substituted as. defendant for the agent, and certainly that is in effeet no change of party.
This, it seems to me, is even a stronger case against the government than Phcenix Insurance Company of Hartford v. United States of America, supra, where it was held that the second suit was for the same cause of action as the first, although the second suit was brought by the insurance company .by right of subrogation, from having paid .the original plaintiff on the policy of insurance issued by it.
Mellon v. Weiss, 270 U. S. 565, 46 S. Ct. 378, 70 L. Ed. 736; Herbert v. Payne (C. C. A.) 291 F. 555; and Davis v. Chrisp, 159 Ark. 335, 252 S. W. 606; cited on behalf of defendant, are clearly distinguishable, first, because these actions were commenced after the statute of limitations had run, whereas in the ease at bar, by reason of the remedial legislation in the form of the amendment, it has not; second, because in those cases it was not the change of representatives for the government which was the principal, t>ut the change from an action against the railroad corporation to one against the United States government.
Sidener v. Galbraith, 63 Ind. 89; Murphy v. Board of Supervisors, 205 Iowa, 256, 215 N. W. 744; and Third Nat. Bank & Trust Co. v. White (D. C.) 58 F.(2d) 411, are clearly not in point.
Larwill v. Burke, 19 Ohio Cir. Ct. R. 472; is clearly distinguishable. In that case the statute of limitations had run when the second action was brought. The first aetion was to recover plaintiff’s share of the proceeds of sale of certain lands; the second included additional defendants, and was for fraud in the sale of the land.
While this court is of course familiar with the rulings that the United States cannot be sued without its consent, and that statutes subjecting the government to suit are subject to strict construction, I do not see even on such construction that this action fails, but we must not lose sight of the fact, which clearly appears from the committee reports to the Congress recommending the adoption of the 1932 amendment, that such amendment was intended to be remedial legislation.
The defendant’s contention is not sustained. This court has jurisdiction.
Haying found that the court has jurisdiction, I will now proceed to consider the ease on its merits. , . ,
On November 9,192.0, the libelant was signed on the steamship West Selene as third assistant engineer, at a salary of $170 per month and found, as alleged in the amended libel, for a voyage of that vessel from New York to South American ports and return. The voyage commenced on November 13, 1920, and ended May 27, 1921.
The libelant was assigned to the 8 to 12 engine room watch.
On November 30, 1920, the vessel was at sea and about eight days steaming from Rió de Janeiro.
The libelant says, and he is neither corroborated nor contradicted by any witness who was present at the time or place, that at about 11:50 o’clock p. m. on said November 30,1920, while standing upon the upper platform or grating, he heard the engine was taking water over from the boilers, and did not taka time to walk around the ladder, but jumped down and ran for the throttle handle; that he -released it and found the pressure was too great, and grabbed hold of it with *461both hands and held it down for a few minutes to reduce the speed of the engine, because she was making between 75 and 78 revolutions a minute, and to reduce it down to around 5 or 6; that he took it for granted that the trigger had caught the quadrant, and was going to leave the throttle handle to go over to the middle column and open the water drain to let the water out of the engine, and had barely had his hands off, when the throttle handle came up and struck him and broke his glasses, and knocked him way back between the pumps, about 12 feet away.
. The libelant further says that the next thing he remembered was that the oiler picked him up; that he saw the engine started in motion again and was going for the throttle handle, but his eyes were blurred, and he put his hands to his face and it was all full of blood. So he told his oiler to get hold of the throttle handle and check the engine’s speed.
He further says, and from then on there are witnesses who in many respects differ •with him, that then the second assistant came down and the chief engineer and oiler helped him up the ladder; that, after the oiler helped him up the ladder, he went to amidships where the master, Capt. Svane, the supercargo, Mr. Greer, and the chief steward, Mr. Johnson, dressed his wound; that they washed it, put some medicine on.it, and they tied it up; that after that the libelant went to his room and tried to sleep, but suffered pain, “his head was all buzzing and he was hollering so loud that he woke himself up.”
Up to this point, while there are some improbabilities in the libelant’s story, the fact remains that he was injured by receiving 'a cut on the upper eyelid and also a cut over the eye, partly in the eyebrow, and that the glasses offered in evidence, which he claimed that he wore on that occasion, were badly bent and apparently had been in contact with some hard object.
His wounds were washed, treated, and bandaged, or the edges drawn together with adhesive tape.
He is clearly in error in the belief that he was struck in the eyes or on the forehead by the throttle handle. Any such blow as that would have destroyed the eye and fractured the skull.
He did not lose his eye or sight, and he did not have a fractured skull.
Whatever blow he received was received first on his glasses and transmitted by them to his eyelid and forehead. This is clearly shown by the fact that after arriving on deck he was able to go unassisted to midships for treatment.
The respondent attempted to cast doubt on the libelant’s story as to the throttle handle suddenly coming up, but the evidence offered in its behalf was not only negative but was not convincing.
The chief engineer certainly did not testify to any inspection of the throttle handle, its spring or trigger, or whether the trigger would properly engage with the teeth on the quadrant, which would justify me in accepting the negative testimony on behalf of respondent as against the positive testimony on behalf of libelant.
The oiler could not with reasonable diligence be found and produced as a witness on the trial, and the second assistant engineer is dead.
The libelant testified, and there was no positive denial, that, after arriving at Rio de Janeiro, the throttle gear was taken down. In the base of the throttle lever was a small wire spring, the purpose of which was to force the worm on the throttle lever into mesh with the teeth on the quadrant, and to hold the two in mesh.
The libelant further testified, and it was not absolutely denied, that, when the throttle ■lever was taken apart at Rio de Janeiro, this spring was found to be spent, and that under the direction of his superior officers the libelant was directed to stretch the spring to increase its tension, and that the spring was put back in the base of the lever, but, even after such stretching, it did not function efficiently. The chief engineer denied any knowledge of such condition or any report thereof.
The libelant also testified that at Rio Grande Do Sul the boiler was drained and the drum inspected through the manhole, and that he found the dry pipe lying on the floor of the boiler drum in two pieces instead of being attached to the top of the drum.
The function of the dry pipe was to prevent priming, and libelant contends that the boilers started to prime when the dry pipe fell. This is only a conclusion, as there is no evidence when the dry pipe fell, and it is quite remarkable that the dry pipe should have fallen, due to the substantial manner of construction usually followed, and that the falling of a dry pipe would not have been reported to the chief engineer.
The contention of the libelant that the closing of the balance valve played any part in his injury was not sustained.
*462The evidence is not convincing that the balance valve was closed, and I am not convinced on all the evidence that the closing of the balance valve would have contributed to the injury to the libelant, and the burden of proof is on the libelant. ■
While it may have been that the libelant could have' relieved the situation by opening the drain cocks, he was met with a sudden emergency, and the method he pursued would quickly accomplish the result; therefore he is not to blame for the selection he made,
The defective condition of the spring in the base of- the throttle handle was the cause of the injury to libelant, and for that the respondent is liable, as it was guilty of negligence in so maintaining it.
This brings us to a consideration of the amount of damages.
It is contended on behalf of the libelant that he is now suffering from traumatic neurosis, and that it is permanent. I do not believe that such is the ease, but he may well have been suffering from traumatic neurosis until the numbness disappeared after his operations. On the contrary, I believe that he is now suffering from what is termed compensation neurosis,-and that with the termination of this litigation the libelant will be gradually relieved, substantially if not wholly, although, of course, the sears will remain.
The libelant received injuries and endured pain and suffering, but the history of his efforts subsequent to the injury clearly shows that he has not been rendered unfit to perform the duties of the employment which he followed before receiving the injuries in question. '
For the balance of the six months’ voyage of the West ‘Selene after receiving the injuries, 'he never lost a day or failed to perform his duties on auy watch. On the arrival of the ship in New York, in May 1921, he left her. There was then in progress a strike of marine engineers. In January, 1922, he went .on the steamship Eastern Breeze of the same line, in the same capacity of third assistant engineer, and served until August 30, 1922. From August 30, 1922, to October 27, 1922, •the libelant served as third assistant engineer on the Commercial Scout. After that, in 1923, he was third assistant engineer on the steamship George. Allen. In 1931 the libel-ant went out on a Ward Line vessel as fourth assistant engineer. This reduction, however, was due to the fact that marine engineers found it difficult to secure positions in the ranks they were .entitled to, and were willing to take what they could get.
In September, 1923, the libelant applied for and took the examination and obtained a license as first assistant engineer. An examination of the questions and answers is conclusive proof that the mental condition of the libelant was not impaired.
The letters presented by the libelant himself to the local inspectors from the chief engineers under whom he had served, as well after as before the injuries of which he now complains, show clearly his ability to perform his duties.
In 1928 the libelant allowed that license to expire, and in January, 1931, he applied for a renewal of his license as first assistant engineer. At that time he was not required to present letters of recommendation, because he had already had a license as first assistant engineer, but he did present a letter from Moore & McCormack Company, Inc., showing the various vessels of theirs on which he had served. An examination of the questions and answers of that examination, in his handwriting, clearly shows that his mental condition was not impaired. »
The libelant did suffer from neuroma, and was operated on by Dr. Barber, there being two operations, one dissecting out the tumor in the right superorbital nerve, and the other cutting the nerve on both sides of the tumor and bringing the ends together and a suture. This was undoubtedly followed by numbness on the right side of the head, for some six months to a year. The dizziness, nightmares, and such symptoms may well have been caused by other conditions, and I believe his twitching of the face does not regularly occur, and that his deliberateness in speech is not unusual with him and not greater than before his accident, except when he allows himself to brood over things that are not real, and, if real, are largely exaggerated) due to the lapse of time and the length of this litigation.
The length of the litigation is not chargeable to respondent, as the injury was suffered on November 30, 1920, the action was not commenced until August, 1922, and:first tried in February, 1929.
The vision of the eye was not affected, although undoubtedly with the advance of years he has required stronger glasses.
Undoubtedly for a period of time after his operations the libelant did1 find it hard to endure the heat of an engine room.
The libelant is entitled to a decree against the respondent for $4,500, with Costs.
A decree may be entered in accordance with this opinion.
*463Settle decree on notice.
Submit proposed findings of fact and conclusions of law in accordance with this opinion, 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/7219204/ | CAMPBELL, District Judge.
This suit is brought to recover the stun, of $852.70, deducted by the charterer’s agent from gross freight payable to the libelant under a charter party between the libelant, as owner of the steamship August, and Manganexport, G. m. b. H., as charterer. The deduction was made under clause 2 of the charter party as a charge for the use of shore cranes employed in unloading a cargo of ore at Baltimore, Md. The charter party is dated December 11, 1931, and was for the carriage of a cargo of ore from Nieolaieff, in Soviet Russia, to Baltimore, Md.
Freight was to be paid at the rate of $3.-10 per ton 20 hundredweight delivered. The total weight of the cargo transported and delivered was 8,527 tons, and the gross freight thereon at the charter party rate of $3.10 per ton amounted to $26,433.70, from which, according to the charter party, the respondent or its agents or the charterer or its agents were entitled to make deductions; for advances, discharging expenses, etc., so! that only the net freight after such proper deductions was payable to the libelant. In computing and paying the net freight, the charterer’s agents deducted 10 cents per ton for the use of respondent’s shore cranes, and the sole question is whether or not the deduction of the said sum of $852.70 was proper under the charter party.
In the stipulation of facts on which this suit was tried, it is stipulated as follows: “If libellant is obligated to pay cranage in the circumstances of this case, in addition-to-the-55 cent rate for discharging, libellant admits that 10 cents per ton would be a reasonable rate. But libellant denies that it was obligated to pay any cranage whatsoever.”
This removes, any question of the reasonableness of the charge and leaves only the construction of the contract to determine whether a charge for cranage was proper.
So much of clause 2. as is necessary for consideration as originally printed' reads as follows: “Ship paying for discharging one shilling per ton on'quantity delivered, also cranage if delivered in a Scottish port.”
Before execution, the charter party was changed by striking put the words “one shilling,” and interlining. in handwriting in black ink the words, “55 cents U. S. currency,” and by striking out the words, “discharged in a Scottish port,” and interlining in typewriting in red ink the words “shore, cranes are employed,”, thus making the clause in the charter party as executed read as follows : “Ship paying for discharging 55 cents *464U. S. currency per ton on quantity delivered, also cranage if shore cranes are employed.”
This clause seems to be free from ambiguity, and should be construed as it plainly reads, and of course most strongly against the one who prepared the contract, and also as intending to change the printed form of contract by the interlineations in handwriting and typewriting, which must be considered as overruling any portions of the printed contract which are inconsistent with them.
It seems to me to have been the intention of the parties, as expressed in the charter party, that the ship should pay the expense if shore cranes are employed.
Libelant contends that the charterer was only entitled to be reimbursed for such charges as it might have to pay, but the contract does not so provide.
The duty of discharging is a duty resting on the ship, and the ship furnishes winches and men to operate them, but in the contract in question provision is made for paying a certain sum by the ship to the charterer’s agents for discharging and also cranage if shore cranes are employed.
If the ship’s winches were used, the steam and men would be furnished at the expense of the ship. What reason is there if the charterer’s agent employs its shore cranes why it should not be paid its reasonable expenses for the steam used, labor employed iif operation, and the wear and tear of the cranes'?
This would be so even if we assumed the correctness of libelant’s argument, that the rate to be paid when shore cranes were employed, not being fixed, the charterer or its agent could not make money at the expense of the shipowner, but is limited to reimbursement, because no question is presented in this ease as to the reasonableness of the charge of 10 .cents a ton, as that has been stipulated as reasonable if any charge is to be allowed. Lowry v. United States Shipping Co. (D. C.) 84 F. 685, cited by libelant, is not in point.
That a charge has not been made for shore cranes employed by the same charterer’s agent for cargoes discharged at Baltimore from vessels in a majority of cases where the vessels of various owners had been chartered by the same charterer, even in cases where such provision was contained in the charter party, does not seem to me to control the construction of the charter party in this case.
We know nothing" of the reasons moving the parties in those eases, and a waiver of its rights in a particular ease does not deprive the charterer or its agents from asserting its rights in this ease.
The words stricken out and the words interlined on the printed form of charter party clearly show the intent to fix the expense for stevedoring at 55 cents United States currency a ton instead of one shilling, and to require payment of cranage at any port where shore cranes are employed, instead of limiting cranage to cargoes discharged in Scottish ports.
I see no force to the libelant’s argument based on the dictionary definitions of the word “cranage,” which follow:
Century Dictionary: “1. The liberty of using at a wharf a crane for raising wares from- a vessel. 2. The price paid for the use of a crane.”
Bouv. Law Diet., Yol. 1, page 725: “A toll paid for drawing merchandise out of vessels to the wharf; so-called because the instrument used for the purpose is called a crane.”
On the contrary, those definitions sustain my view, that what the ship contracted toi pay, if shore cranes were employed, was the fair, reasonable, and customary charge for such services at the place of discharge, and! not what the charterer or its agent should! pay to some one else without any right to collect for the use of shore cranes employed, if furnished by them or either of them.
This construction is supported by other provisions of the charter party, notably that portion of clause 2, which reads as follows :’ “That the said ship * * * shall with all convenient speed proceed to (naming several ports, including the Port of Baltimore) and there deliver the same as customary, when, where and as directed by the consignee”— thus giving the charterer or its representative the option to direct the method by which the cargo should be discharged.
And also by the provision of clause 7, which reads as follows: “The ship to- load and discharge as rapidly as possible, and; give use of steam winches and steam free of expense, and crew to drive the winches, if permitted by local labor regulations, otherwise shore hands to be employed, and owners to pay cost of same.”
The word “owners” in the last-quoted clause of thfe charter party was substituted in said charter party in red ink for the word “charterers.”
*465This clearly shows, as I have hereinbefore pointed out, the duty of the ship to furnish winches, steam, and operators in discharging cargo, and, read with that portion of clause 2 which provides for charges against the ship for cranage, they show that, when the ship is relieved at the option of the charterer from furnishing winches, steam, and operators, by the employment of shore cranes, the ship is required to pay cranage; that is, the fair, reasonable, and customary charges for the use of cranes at that port.
The word “employed” as used with reference to shore cranes means “used,” and it is for their use, whether owned by the charterer or its agents or hired by them, that the ship is bound to pay.
The following eases have been cited by counsel:
Lowry v. United States Shipping Co., supra, holds that, when the charter party authorized the charterer to have stevedoring done, but no specific rate was agreed upon between the charterer and the owner, thef charterer could not charge the owner with the amount of the stevedore’s bill as presented, the charterer having received a rebate from the stevedore, and, the owner having paid the amount of the bill as presented, was entitled to recover the rebate. This is quite different from this case where there is no question of any rebate, but a fair, reasonable, and customary charge made for a service rendered, of a kind for which the ship agreed to pay.
In the same ease there was a provision in the charter party that “wharfage under this charter $20 per day to be paid by the steamer,” and- it was held to authorize the charterer to charge the owner $20 per day wharfage irrespective of what the charterer might be required to pay.
Muller v. Spreckels (D. C.) 48 F. 574, 575. In that case the charter party did not specify any wharfage rate, and the consignee whose wharf the ship used charged wharf-age at the rate prevailing at the port of discharge.
The Bencliff (D. C.) 155 F. 242, affirmed (C. C. A.) 161 F. 909. In that case the charter party required the vessel to discharge by night as, well as by day, if required by the charterer or consignee, and also gave the charterer the option to provide the stevedore for discharging, for which the vessel agreed to pay not exceeding 40 cents per ton. ■ The charterer employed a stevedore and required night work for which he incurred additional expense over and above the 40-eent rate, and the court held that the charterer could not recover from the ship more than 40 cents per ton.
Consideration of these cases does not furnish authority for a construction other than I have found is the plain meaning of the clause in question. On the contrary, in view of the conceded reasonableness of the charge in this case, I believe they support my construction.
The copy of the Prunus Arbitration award has neither been examined nor considered by me, as I do not consider it a legal precedent.
The libelant has failed by a fair preponderance of the evidence to establish that the deduction by the charterer or its agent of $852.70 as cranage was improper.
The respondent is entitled to a decree against the libelant dismissing the libel, with costs. Settle decree on notice.
If this opinion is not considered a sufficient compliance with rule 46% of the Rules in Admiralty, 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/7219205/ | KNIGHT, District Judge.
One Sylvan S. Grosner, son of the plaintiff, on February 8,1933, purchased for cash from the defendant hank a cashier’s cheek for $1,900. The cheek was payable to the plaintiff, and was promptly deposited by her in Washington, D. C., for collection. It was forwarded through several banks to the Detroit branch of the Federal Reserve Bank. It bore the indorsement, “Paid through Detroit Clearing House Feb. 14,1933, Detroit Branch Federal Reserve Bank 9-29 of Chicago 9-29'.” This indorsement has superimposed upon it these words, “cancelled Feb. 14, 1933, 9-291.” The First National Bank-Detroit closed its doors February 14, 1933, at the direction of the Governor of the state of Michigan, and subsequently, without reopening, was legally declared to be insolvent. The check has not been paid, and plaintiff brings this action to have the cashier’s cheek declared a preferred claim against the assets of the bank. Plaintiff makes these contentions:
(1) That the issuance of the cashier’s check, paid for in cash, payable to one not a depositor in the defendant bank, created a trust relationship between payee and the hank, and therefore plaintiff is entitled to preference in payment; and
(2) That the defendant bank accepted this check, as evidenced by the indorsement thereof, and that such acceptance was not revocable.
The rule of law, as I view it, is that a cashier’s check evidences only the relation of the hank and payee as .debtor and creditor. This rule is supported by leading text-writerd and many authorities. It is necessary to cite only a few of these. 7 C. J., § 547 et seq.; Michie on Banks and Banking, vol. 3, 1932, c. 6, § 207 et seq. and cases cited; R. C. L. permanent supplement vol. 2, p. 867, § 272; Charleroi Supply Co. v. Kelly (D. C.) 40 F. (2d) 297; Clark v. Chicago Title & Trust Co., 186 Ill. 440, 57 N. E. 1061, 53 L. R. A. 232, 78 Am. St. Rep. 294; Leach v. Citizens’ State Bank of Arthur, 202 Iowa, 879, 211 N. W. 526.
The cases cited by plaintiff present facts pot comparable with those here. The illustration is found in these cases. Where a draft was received for collection, it was held that the hank did not have title in Clark Sparks & Sons Mule & Horse Co. v. American National Bank (D. C.) 230 F. 738; In re Citizens’ State Bank of Gooding, 44 Idaho, 33, 255 P. 300; Taylor v. Corning Bank & Trust Co., 183 Ark. 757, 38 S.W.(2d) 557; City of Miami v. First National Bank of St. Petersburg (C. C. A.) 58 F.(2d) 561. Where a bank operating with knowledge of its insolvency and issued checks, the payee was held to be entitled to preference. Clark Sparks & Sons Mule & Horse Co. v. American National Bank, supra; Cochrane v. Florida Co., 107 Fla. 431, 145 So. 217; Ramsey County National Bank v. Kelly, 54 N. D. 122, 208 N. W. 831; Charleroi Supply Co. v. Kelly, 40 F. (2d) 297 (D. C. Pa.) and cases cited. Where a mortgage was left for collection and moneys therefrom received, it was held that those moneys were preferred. Sherwood v. Savings Bank, 103 Mich. 109, 61 N. W. 352; Manufacturers’ National Bank v. Continental Bank et al., 148 Mass. 553, 20 N. E. 193, 2 L. R. A. *469699, 12 Am. St. Rep. 598; Fifth National Bank v. Armstrong (C. C.) 40 F. 46.
The first contention of plaintiff must be dismissed.
It is evident that the indorsement of payment was made by the Detroit branch of the Federal Reserve, and that the attempted cancellation was made by the same bank. The constitution of the Detroit Clearing House Association, section 18, provides that all cheeks presented for payment, in lieu of written indorsements “shall be stamped * * * by the bank presenting the same, with the words ‘paid through the Detroit Clearing House’ (name of bank to be here inserted) with the date thereon.” This indorsement meets the requirements of section 18. There is no express or implied authority that the Detroit Federal Reserve Bank was authorized to pay this cheek or make this indorsement. Its acts were not binding upon the defendant bank. As was said in South Carolina Nat. Bank of Charleston v. McCandless (C. C. A.) 44 F.(2d) 111, 113: “It is held that, notwithstanding clearing house entries, charging checks against banks upon which they are drawn, the question of payment is not ultimately decided until the drawee bank has had opportunity to examine the cheek at its banking house.” Columbia-Knickerbocker Trust Co. v. Miller, 215 N. Y. 191, 109 N. E. 179, Ann. Cas. 1917A, 348; Eastman Kodak Co. v. National Park Bank (D. C.) 231 F. 320; Id. (C. C. A.) 247 F. 1002.
The second contention of the plaintiff must also be dismissed.
The complaint is dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219209/ | STRUM, District Judge.
East Tennessee National Bank filed original aud amended petitions in bankruptcy against A. B. Day, to which motions to dismiss were heretofore sustained. The bank now moves to further amend its petition.
If the motion be granted, the petition as then amended will allege in substance as to the nature of petitioner’s claim that on April 2, 1932, the bank loaned Day $87.000, evidenced by a promissory note secured by the pledge of certain corporate stock, the property of Day. Amongst other things, the note authorized said bank to sell the pledged collateral, without notice, either at public or private sale, on the nonperformance of the debtor’s promise to pay, applying the net proceeds of the sale to the payment of said note; and, should the net proceeds of the sale of the said collateral be insufficient to discharge the indebtedness evidenced by the note, the debtor promised to pay said bank the amount of such deficiency forthwith after said sale; and, in ease of public or private sale as aforesaid, said bank was authorized to buy said collateral as any other person.
The note is a Tennessee contract, having been executed and made payable in that state.
The note remaining unpaid after' maturity, the bank notified Day, by registered mail, on June 4, 1932, that on June 14, 1932, at the hour of 10 a. m., at the cashier’s desk in the main banking room of the petitioner bank, it would offer for sale, and sell, the collateral securing said note, a copy of said notice being posted on June 4,1932, at the front door of the county court house in Knoxville, Tenn., where it remained so posted to and including the day of sale. It is further alleged that there was no statute or rule of law in the state of Tennessee regulating the enforcement of pledges of this character, but that the established custom and usage in Knoxville was to hold such sales in the manner above stated.
*474The sale was held on the appointed day in the banking rooms of the creditor bank, which bank was the highest bidder and became the purchaser of the collateral for $25,000, that sum being credited on the note, leaving an alleged deficiency of $64,777.62, principal and interest on the note, for which sum the bank claims to be an unsecured creditor, and as such has filed its involuntary petition. The petition further alleges that the pledged securities were not listed on any stock exchange or broker’s board, and that the bid price of $25,000 was a fair and reasonable price for said securities at the time and place of sale.
The respondent Day, questioning the 'validity and regularity of said sale, objects to 'the allowance of the amendment, asserting that the facts alleged do not constitute the bank an unsecured creditor, for the reason, amongst others, that to recognize the bank as an unsecured creditor for the balance of $64,777.62 would enable the bank to arbitrarily, and without affording Day an opportunity to be judicially heard upon the validity of the sale, reduce Day’s assets by the value of the collateral, and at the same time increase his liabilities by the amount of the deficiency, thus vitally affeeting his solvency. The acts of bankruptcy in the petition depend upon Day’s insolvency.
A secured creditor has a provable claim, and may become a petitioning creditor, for all sums in excess of the value of the securities held. 11 USCA §§ 93, 95.
The vital question here is whether or not the sale of the collateral is valid so> as to constitute the bank an unsecured creditor for the remainder and thus qualify it to become a petitioning creditor.
No ease has been cited which presents this exact state of facts. The question may be decided, however, upon authority of Turner v. Metropolitan Trust Co. (C. C. A.) 207 F. 495. In that case a debtor corporation pledged certain of its own bonds to secure its note. There was a default, and the pledgee bank sold the bonds, purchasing them itself at a sum far less than the debt. The terms of the note and the conditions of the sale were in principle the same as here. The debt- or corporation later became bankrupt. It was held that the sale was valid and the pledgee who purchased the pledged bonds at its own sale could prove its claim for the full amount of the bonds so purchased, which greatly exceeded the balance due on the debt evidenced by the note — a much more severe situation than that here presented. There are cited in the above case numerous other cases which sustain, for various purposes, sales of collateral in the circumstances here involved. See, especially, Fidelity Ins., Trust & Safe-Deposit Co. v. Roanoke Iron Co. (C. C.) 81 F. 439, 449; In re Mertens (C. C. A.) 144 F. 818; Hiscock v. Varick Bank, 206 U. S. 28, 27 S. Ct. 681, 51 L. Ed. 945.
There is no difference in principle between the Turner Case and this ease.' If 'such a sale is valid for the purpose of enforcing the collateral, it is valid for the purpose of establishing an unsecured balance on the debt.
From the doctrine of the Turner Case, supra, and other eases therein eited, it follows by analogy that a pledgee who has lawfully and in good faith sold pledged securities in conformity with the contract of pledge has a provable claim for the excess of his debt over the proceeds of the sale. Therefore a creditor with such a claim may qualify as a petitioning creditor as to such excess.
Of course, petitioner must allege and prove a sale conformable to the contract of pledge. The petition as now sought to be amended sufficiently alleges prima facie such a sale. Whether or not the sale was in fact conformable to the contract of pledge may 'be put in issue in this proceeding upon .the-question of the existence vel non of petitioner’s unsecured claim and of the respondent’s solvency, so that respondent may here have-his day in court upon those questions.
When a sale in conformity with the-contract of pledge is shown, the burden of proving that such sale was unfair is upon him who asserts the unfairness. Hiscock v. Varick Bank, 206 U. S. 28, 27 S. Ct. 681, 51 L. Ed. 945. It follows that such question must, be herein raised by answer.
Motion to amend is granted, and respondent ordered to answer. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219210/ | ANDREW M. J. COCHRAN, District Judge.
This action is before me for judgment. It is a war risk insurance ease; a jury has been waived, and I have heard the evidence. The plaintiff was the mother of the veteran, who died March 14, 1933, and was the beneficiary in the policy. He enlisted May 29, 1918, and was' discharged August 5, 1919. He ceased to pay premiums after that day, and, unless it had then matured, it lapsed shortly thereafter. The claim of the plaintiff is that it had then matured, in that the veteran was then totally and permanently disabled. This she claims was due to the fact that he was then afflicted with pulmonary tuberculosis. The plaintiff might have brought this action when it matured, or, if uncertainty as to the permanency of the disease was such as to justify a delay without payment of premium, upon his death. This she did not do*. She did not bring it until July 26,19301. It is therefore a belated claim. This makes the burden which is on her to establish such disability by a preponderance of the evidence heavier than it would have been had she brought it promptly. It should be taken that she knew that the policy provided for the payment of $10,000 in ease her son became totally and permanently disabled as well as of his death. Such is the very first provision in it. That no claim was asserted under it for so long a time can hardly be accounted for save on the ground that she did not con-; sider that he had been totally and permanently disabled.
In the case of Eggen v. United States (C. C. A.) 58 F.(2d) 616, 618, it was said: “In most cases the insureds lapsed their policies when they left the service in 1919. They did not consider themselves then totally and permanently disabled. If they had, they would have made claims under their policies, and, if *476there had been any substantial doubt in their minds as to whether they were not so disabled, they would have paid premiums in order to avoid any controversy over their right to collect upon the policies.”
In the case of United States v. Linkhart (C. C. A.) 64 F.(2d) 747, 748, it was said: “While under the successive statutes enlarging the time wherein such actions may be brought the long delay does not of itself bar the action, it is a fact to be considered with all the other facts in determining, even upon appeal, whether there is substantial evidence to support the claim.”
In the case of Keelen v. United States (C. C. A.) 65 F. (2d) 513, it was said: “This suit was brought on August 31, 1929, more than ten years after plaintiff’s discharge from the service. During these ten years plaintiff neither paid premiums on his policy nor asserted claim under it. Under these circumstances plaintiff was under a heavy burden to ‘show, by evidence contemporaneous with the life of the policy, the then totality and permanence of his disability as a fact existing and accepted, or * ' * * conditions then existing which, read in their own light and in the light of subsequent events, make it reasonably probable that, though then unclaimed and unrecognized, total and permanent disability did then in fact exist.’ Wise v. U. S. (C. C. A.) 63 F.(2d) 307, 308.”
Before coming to the ease in hand, note should be taken of the positions which have been established as to the right of recovery in pulmonary tuberculosis eases. The leading case is that of Nicolay v. United States (C. C. A.) 51 F.(2d) 170, 173, a decision of the appellate court for the Tenth circuit. It paved the way for a correct and easy handling of such eases. It has been followed in these subsequent tuberculosis eases, to wit, Nalbantian v. United States (C. C. A.) 54 F.(2d) 63; Hirt v. United States (C. C. A.) 56 F.(2d) 80, 82; Roberts v. United States (C. C. A.) 57 F.(2d) 514, 515; Eggen v. United States (C. C. A.) 58 F.(2d) 616, 620; Long v. United States (C. C. A.) 59 F.(2d) 602; United States v. Rentfrow (C. C. A.) 60 F. (2d) 488; United States v. McCreary (C. C. A.) 61 F.(2d) 804, 808; Garrison v. United States (C. C. A.) 62 F.(2d) 41, 42; United States v. Diehl (C. C. A.) 62 F.(2d) 343, 345; United States v. Rosborough (C. C. A.) 62 F.(2d) 348; United States v. Peters (C. C. A.) 62 F.(2d) 977; United States v. Stack (C. C. A.) 62 F.(2d) 1056; United States v. Thompson (C. C. A.) 63 F.(2d) 111; Andrews v. United States (C. C. A.) 63 F.(2d) 184, 187; Walters v. United States (C. C. A.) 63 F.(2d) 299, 301; Mason v. United States (C. C. A.) 63 F.(2d) 791, 793; United States v. Hodson (C. C. A.) 64 F.(2d) 119; United States v. Perkins (C. C. A.) 64 F.(2d) 243; United States v. Thomas (C. C. A.) 64 F.(2d) 245; United States v. Bass (C. C. A.) 64 F.(2d) 467; United States v. Howard (C. C. A.) 64 F.(2d) 533; United States v. Dunaway (C. C. A.) 64 F.(2d) 535; United States v. Linkhart (C. C. A.) 64 F. (2d) 747; Bailey v. United States (C. C. A.) 64 F.(2d) 779; Falbo v. United States (C. C. A.) 64 F.(2d) 948; McCleary v. United States (C. C. A.) 64 F.(2d) 1016; Meyer v. United States (C. C. A.) 65 F.(2d) 509; Le Blanc v. United States (C. C. A.) 65 F.(2d) 514; United States v. Jones (C. C. A.) 65 F.(2d) 652; Combs v. United States (C. C. A.) 65 F.(2d) 787. In disposing of a tuberculosis case, one need not take into consideration any other of such eases, of which there are not many. It will be well if he does, not. These cases aE come from appellate courts. They impress one with the difficulty of making out the right to recover in a tuberculosis ease. Their number is thirty-one. The plaintiff succeeded in only three of them, to wit, United States v. Thomas (C. C. A.) 64 F.(2d) 245; United States v. Bass (C. C. A.) 64 F.(2d) 467; United States v. Jones (C. C. A.) 65 F.(2d) 652. In each of these three eases there was a trial before a jury, the jury found a verdict for the plaintiff, judgment for him was entered therein, and on apr peal it was held that the case was properly' submitted to the jury. There was no holding in either case that the plaintiff was entitled to recover. In the other twenty-eight cases the defendant succeeded. In two of them, to wit, United States v. Rentfrow (C. C. A.) 60 F.(2d) 488, 489, Combs v. United States (C. C. A.) 65 F.(2d) 787, the trial was by the court. In the other twenty-six the trial was before a jury, and in each of them it was held either that a directed verdict should have been given or that it was properly given.
I g-ather from these cases that, where the veteran at the time of his discharge is afflicted with active pulmonary tuberculosis, it is not hard to make out a case of total disabEity. The difficulty Ees in making out that the disability is permanent. This is so because in such eases, usually, if not invariably, the disease is in its incipient stage, and whilst it is in such stage it may he cured. It is a matter of common knowledge that such is the case. In the Nieolay Case it was said: “Wa *477have at best an insured in the early stages of tuberculosis. It is a matter of common knowledge that many such incipient tuberculars respond readily to the simple treatment of rest and nourishment; the activity is arrested, and, while there probably always will be a susceptibility of recurrence, they are able to, and do, live out their lives following gainful occupations. On the other hand, there are some that do not respond to treatment, and their condition is incurable from the start. The burden of proof is upon the plaintiff; if his evidence leaves it a mere matter of speculation as to the permanence of his condition in May, 1919, he cannot recover.”
In the Hirt Case it was said: “We take notice of the medical fact that very often tuberculosis, in its early stages, at least, is curable.”
In the Roberts Case it was said: “In the light of modem medical science it is well known that the disease of tuberculosis may with care and attention be brought to an arrested state, and it is likewise well known that when the disease is properly treated that a person suffering from it may respond and be able to carry on in a variety of different vocations of a substantially gainful nature.”
In the Eggen Case it was said: “Courts recognize the fact that tuberculosis in its incipient stage is usually not an incurable malady.”
In the Rentfrow Case it was said: “An incipient tubercular stands at a cross roads: If he continues his ordinary activities, his condition is a hopeless one. On the other hand, if he will follow a program of complete rest and wholesome nourishment for an indicated period, the chances are strongly in favor of an arrested condition and a substantial cure.”
In the McCreary Case it was said: "Courts do take notice of medical evidence that very often tuberculosis, in its early stages at least, is curable.”
In the Garrison Case it was said: “As has been pointed out in a number of recent cases, the mere fact that a man has tuberculosis does not necessarily mean that he is totally and permanently disabled. The tuberculosis may not result in total disability, and, even if it have this result temporarily, unless the condition is such as to preclude the possibility of arresting the disease, it cannot be said that the disability is permanent.”
In the Andrews Case, it was said: “Incipient tuberculosis does not necessarily render one totally disabled. While active pulmonary tuberculosis generally amounts to total disability, and incipient may, it is a matter of common knowledge that incipient tuberculosis can be arrested, and in itself is not destructive of the ability to continuously pursue some gainful occupation.”
In the Walters Case, it was said: “We may take notice as a matter pertaining to public health that today it is generally considered that many cases of tuberculosis in the earlier stages may be cured by proper treatment.”
In the Mason Case, it was said: “At the worst he was in the early stages of tuberculosis. This is often curable, and need not incapacitate permanently from the performance of outdoor work.”
It is apparent from these quotations that what is meant when it is said that tuberculosis is curable is that it is capable of being arrested. When the disease is arrested, the subject is substantially cured. His condition is such that he can carry on continuously substantially gainful occupations without detriment to his health. The significance of the Nieolay Case lies in the fact that there for the first time such curability was recognized. The last of the tuberculosis cases before such recognition is that of McNally v. United States (C. C. A.) 52 F.(2d) 440, where the) right to recover was upheld. Though decided shortly after the Nieolay Case, the attention of the court vías not called to it. There were cited therein the following previous tuberculosis eases, to wit: Mulivrana v. United States (C. C. A.) 41 F.(2d) 734; Malavski v. United States (C. C. A.) 43 F.(2d) 974; United States v. Meserve (C. C. A.) 44 F. (2d) 549; United States v. Phillips (C. C. A.) 44 F.(2d) 689.
Whether the recognition of such fact would have made any difference in these decisions I have not considered. In that earlier day I stumbled in the ease of Humble v. United States (D. C.) 49 F.(2d) 600. Note of this was taken in the Rentfrow Case, where it was said: “We are cited to Humble v. United States, 49 F.(2d) 600, 601, where the District Court allowed a recovery because it was ‘impossible to say that the disease would not continue active for the rest of his life/ But the burden of proof is upon the plaintiff to prove that the disability was permanent, that is, ‘founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it.’ This burden is not carried by leaving the matter in the realm of speculation.”
*478Due to this fundamental conception, the plaintiff does not make a ease entitling him to recover by establishing that, at the time of his discharge, he was afflicted with tuberculosis in its incipient or early stage. In each of the twenty-six cases where it was held that it was not for the jury, recovery was denied notwithstanding it was established that the plaintiff was so afflicted. That the plaintiff was so afflicted does not necessarily make out that he was then totally disabled. It may, however, be of such extent as to so establish. It usually is. But it is hardly possible for it to be of such extent as then to establish that the disability is permanent. In order to do this, it must be established that it is incurable. Usually, if not invariably, reliance has to be had on the subsequent course of the disease to establish that at the time of the discharge it was incurable and hence permanent. It is possible that such subsequent course may so establish. In the Nicolay Case it was said: “The question is not, however, his present condition; the question is, What was his physical condition on or before May 2, 1919? Evidence as to his condition since is pertinent, but only as it bears upon his condition while his policy was in force.”
In the Eggen Case it was said: “In the ease of a total disability resulting from incipient tuberculosis before lapse, and ending in death or permanent disability after lapse, the subsequent history might disclose the existence of conditions during the life of the! policy not then known or recognized, which would justify a conclusion that it had been reasonably certain while the policy was in force that the disability would continue throughout life.”
And again: “The subsequent events may be such in point of time or circumstance as toi constitute evidence of the conditions upon' which the disability existing during the life of the policy was based, but they are of no importance unless they do constitute such evidence, because they do not of themselves condition the right of recovery under the policy, which must depend entirely upon the conditions which existed when the policy was alive.”
In the Diehl Case it was said: “Of course, the subsequent history of the insured may be considered for the purpose of determining whether a disability deemed only partial or temporary at the time of the lapse of the policy was in fact total and permanent. But partial disability existing at the time of lapse does not warrant a recovery, even though total. disability may subsequently result; and total disability based upon conditions which at the time of lapse do not render it reasonably certain that such total disability will continue through life is not to be deemed permanent, even though a subsequent change of conditions may render such disability permanent in character.”
In the Jones Case it was said: “What happens to-morrow may throw a white light on what exists to-day.”
But that death or a permanent disability subsequently happens from the disease does not in and of itself establish that the disability was at the time of the discharge permanent. In the Eggen, Rentfrow, Peters, and Stack Cases, before the action was brought, the veteran died of the tuberculosis with which he was afflicted at the time of his discharge and yet recovery was denied. In the Peters Case the policy lapsed August 31, 1919, and he died April 11, 1922. In the Hirt Case it was conceded that the plaintiff, who was discharged April 20, 1919, was totally and permanently disabled November 20, 1922, and yet recovery was denied.- That it becomes evident subsequently that the disability is permanent and that the disease is incurable does not necessarily establish that such condition existed at'the time of the discharge arises from the fact that such result may have been due to neglect or refusal to take proper treatment. If it affirmatively appears that he did so' neglect or refuse, it is clear that there can be no recovery. In the Eggen Case, referring to the case in hand, it was said: “No one could determine from the evidence whether there were, during the life of the policy, conditions not disclosed' which then placed the insured in the class of incipient tubereulars who cannot be cured, or whether, subsequent to lapse, such conditions developed during the natural progress of the disease, or because of the failure of the insured to take treatment, or as the combined-result of both the disease and such failure. The appellant calls attention to the fact that there was nothing in the contract requiring the insured to take treatment. That is true, but an insured may not convert a total temporary disability existing before lapse into a total permanent disability by neglecting his condition after lapse, and the failure to take treatment may destroy whatever probative value death or permanency of disability occurring after lapse would otherwise have.”
In the case of Wise v. United States (C. C. A.) 63 F.(2d) 307, 308, which was not a tuberculosis ease, it was said:. “It is undisputed that the condition of his shoulder and *479ankle could have been remedied by a comparatively minor operation. It certainly cannot be said that an injury which, in its nature is alleviable by proper treatment is permanent, because many years afterward, no such treatment having been given, it still persists.”
In the Walters Case it was said: “It is evident that, when appellant was discharged from the army, his tuberculosis was in the earlier stages. He was afforded every opportunity to receive adequate treatment without expense in government hospitals. While he frequently took advantage of such treatment, he always left these hospitals of his own accord, against medical advice. It was his duty to remain until cured or discharged as incurable.”
Such neglect or refusal makes it so that it cannot be said that the disease was incurable and the disability was permanent at the time of the discharge, for the incurability or permanency which subsequently becomes evident may be due to such neglect or refusal and not to the fact that the disease was then incurable. This suggests that the plaintiff, to sustain his burden by showing that subsequent events make evident the incurability of the disease, must also show affirmatively that he had undergone proper treatment. Otherwise it cannot be said that such condition existed at the time of the discharge. It also suggests that though subsequent working because of economic conditions but such as to affect harmfully his physical condition does not show that he was not totally disabled at the time of the discharge, as has been held, may render it impossible to say that he was then permanently disabled, i. e., that his disease was then incurable. The incurability subsequently manifesting itself may be due to such working, which involved the failure to undergo proper treatment, i. e., complete rest. Nothing is to be gathered from any of the tuberculosis eases hereinbefore referred to' bearing on either of these matters. It is to be noted that in most, if not all, of the twenty-six eases where it was held that no issue was presented for the jury and the defendant was entitled to a directed verdict, there was a work record which negatived total disability at the time of the discharge. In a case where there is no work record it may be a question how far they have a bearing upon it. There is a work record in this ease, but its disposition does not depend on it. Hence I do not find it necessary to go into that question here. Nor is it necessary to consider the three cases in which it was held that there was an issue for the jury. Even if they are authority for the position that, jf this ease were before a jury, apart from a certain feature of it, it should be submitted to it, that feature would in and of itself require a directed verdict.
This brings me to the case in hand. I would first present a skeleton of it. The veteran enlisted May 29, 1918, and was discharged August 5, 1919. He was discharged at Camp Taylor near Louisville, Ky., and returned that evening to his home with plaintiff in Henry county in this district. He remained there until April or May, 1920, when he went to Indianapolis, Ind. On May 3, 1920, he entered into-the employ of Kingan & Co., meat packers at that place, as meat cutter or butcher, and remained in their service until May 6, 1921. On October S3, 1920, whilst so employed, he married. He spent a few days before his marriage with the plaintiff at her home. On February 21, 23, 23, 24, and 28 he was examined by Dr. J. William Hoffman, acting assistant surgeon at the Veterans’ Bureau’s headquarters in that eity and four different specialists. On May 9, 1921, he entered the Methodist Hospital at Indianapolis and remained there until June 2,1921. On leaving there he returned to plaintiff’s home. He remained there until August 17, when he went to the Hazlewood Sanitarium, a hospital for tubereulars at Louisville, Ky. O'n July 13,1921, before going there, he was examined at Louisville, Ky., on behalf of the Veterans’ Bureau by Drs. L. P. Spears and E. McD. Trabue. On August 15, 1921, also before going there, Dr. J. C. Hartman, a local physician, who had treated him after his return from the army, made to the Veterans’ Bureau a written statement regarding such treatment. On August 31,1921, the hospital made a report regarding his condition. On September 19, 1921, the Veterans’ Bureau requested of Dr. J. C. Hartman certain information as to Smith, and shortly thereafter he gave it. On September 30, 1921, the hospital made another report as to his condition. On November 30, 1921, it made another such report. He left the hospital in December, 1921. Dr. S. W. Bates, medical director and superintendent, made a report to the Veterans’ Bureau December 17, 1921, concerning his leaving. Some time after this he went to Asheville, N. C., with a view of entering a government hospital, but only stayed a week, as he could not stand the air. On March 10, 1922, he was examined at Louisville, Ky., by Drs. L. P. Spears and J. I. Taylor on behalf of the Veterans’ Bureau. On December 0,1922, he was examined again by Drs. K. C. Adams and E. McD. Trabue *480on behalf of that Bureau. He died March 14, 1923. ■
This skeleton should now be filled out with facts as to which there can be no question. When he entered the army he was in good health and weighed 137 pounds. Whilst he was there nothing happened to him to impair his health. This does not appear affirmatively. In the absence of evidence to the contrary, it is to be taken that such was the case. On his discharge he answered “No” to the question as to whether he had any reason to believe that at that time he was suffering from the effects of any wound, injury or disease or had any disability or impairment of health, and his captain certified at the same time that he did not know nor did he have any reason to believe that he had a wound, injury, or disease at that time. In his statement of August 15, 1921, Dr. Hartman said that Smith called at his office August 2-0, 1919, for medical attention, that he was at that time suffering with gastric symptoms and bronchitis, for which he received treatment, and that he treated him at intervals for this trouble until April 10, 1920, at which time he passed from under his observation. In his statement in response to the request from the Veterans’ Bureau of September 19,1921, he said that he first treated him at intervals between August 20,1919, to April 18, 1920, and that at that time he had gastric symptoms and bronchitis. After entering the employment of Kingan & Co-, on May 3,1920, he worked continuously every weekday until October 8, 1920, except on Decoration Day, 4th of July, and Labor Day, which were holidays, and August 2,1920. The one day which he missed during that time outside of holidays when the establishment was not operating, was August 2, 1920. Each day he worked it was for at least 8 hours, except on October 7th and 8th, and on most of the Saturdays, when he worked 5 hours. Three days he worked 9% hours, one day 10% hours, thirty-one days 11 hours, one day 12% hours, and two days 15% hours. He did not work from October 9 to October 20, 1920. This was just before his marriage on October 23d, .when he visited the plaintiff at her home in Henry county. From October 21, 1920 to April 13, 1921, he worked every day except on Thanksgiving Day, Christmas and January 1st, holidays, and on November 2d, 5th, December 4th, 23d, 28th, January 27th, February 3d, 7th, 8th, 17th, and March 26th. In this nearly six months’ time outside of holidays he missed eleven days. Except on Saturdays and December 20th, January 4th, February 9th and 10th, 15th and 16th, and March 29th, he worked at least 8 hours a day. On Saturdays he usually worked 5 hours a day, but often 8 hours. On the other excepted days he worked 7 hours. He did not work from April 13 to April 25, 1921, and worked again from April 26 to May 7, 1921, 8 hours a day except three days at 5 hours. He was paid for his services 54%, 57, 58, and 50 cents an hour, usually 58 cents. It is likely that the examination by Dr. Hoffman and the four specialists in the latter part of February, 1921, at Indianapolis on behalf of the Veterans’ Bureau was brought about by the veteran’s application for compensation. He never had received compensation or applied for it before this time. His complaint was sore eyes, vertigo, deafness, rheumatism, and internal hemorrhoids. Dr. Hoffman reported that he weighed 138 pounds, one pound more than when he entered the army; that he was only fairly well developed and nourished and somewhat sallow in appearance. ' His diagnosis was internal hemorrhoids and chronic otitis media, and his prognosis was fair. He said nothing about his complaining of or being afflicted with tuberculosis. The specialists who examined and reported as to his condition were such in hemorrhoids, eyes, ears, and tuberculosis. The hemorrhoids specialist reported that his complaint was eyes, ears, rheumatism, and piles; that his past history was negative; that he stated that during May, 1919, while doing heavy work, he noticed pain and protrusion from rectum, which prolapse was then occurring two or three times a month. His diagnosis was internal hemorrhoids. He recommended that he receive hospitalization and operation treatment and that he be examined by the tuberculosis specialist. The eye specialist reported that he claimed that his left eye bothered him more than the right; that sometimes there was a mist over the left eye and it also jumped. His diagnosis was hypermetropia and prognosis good. The ear specialist reported that he claimed that in April, 1919, he had abscess form in head with discharge from nose and ears, that he had dizziness at times, and that he had attacks of rheumatism at different times affecting shoulders and hips. His diagnosis was otitis media chronic and prognosis favorable. The tuberculosis specialist reported that he complained of pains in left lung and through shoulders; that ha coughed at night and was short of breath; that he had abscess in head and ears in France in April, 1919; and that he had not been well since then. He reported further that he did not look well, was not well developed or nour*481ished; that he had long broad flat chest depressions above and below both clavicles, one at ensiform cartilage; that his mobility was fair; that he had hyperresonanee and feeble breathing over entire chest; and that he heard no rales. His diagnosis was emphysema, aggravated by military service, and that his prognosis was not good for cure. He recommended easy work and right living. These examinations by the Veterans’ Bureau were thoroughgoing. They found no trace of tuberculosis, and there was no complaint thereof on the part of the veteran.
He was admitted to the Methodist Hospital at Indianapolis May 9, 1921, with the diagnosis of internal hemorrhoids and otitis media made in latter part of the previous February by the Veterans’ Bureau, and on May 25, 1921, he was treated with hemorrhoidectomy, and the result thereof was that he recovered from hemorrhoids. Whilst in the hospital he was examined by their tuberculosis specialist. His diagnosis was tuberculosis chronic, pulmonary, both upper lobes, right apparently arrested and left upper lobe active. His prognosis was fair with treatment. He recommended hospitalization. The physician in charge of the hospital reported his pulmonary condition as fair and disability major temporary. He recommended treatment at a tuberculosis sanatorium, and stated that the veteran would accept, preferred to be sent to Johnson City, Tenn., or Oteen, N. C., was able to travel alone any distance, and in one month from the date of his discharge June 2,1921, would be ready to leave for the sanatorium. These facts were certified to the Veterans’ Bureau at Indianapolis by the physician before referred to on June 2,1921. This is the first indication of the veteran suffering from tuberculosis apart from plaintiff’s testimony yet to be stated.
The report of Drs. Spears and Trabue of their examination of the veteran on July 12, 1921, gave their diagnosis as chronic pulmonary tuberculosis, active and advanced, and their prognosis was grave. The report of the Hazlewood Hospital on August 31, 1921, stated its diagnosis was chronic pulmonary tuberculosis, and his weight on admission and at the time of the report was 121 pounds. The report on November 30, 1921, stated its diagnosis was chronic pulmonary tuberculosis, that he was improved and general progress was good, and his then weight was-129 pounds. The report of Dr. Bates, medical director and superintendent of the Hazlewood Sanitarium, of December 17, 1921, after he left it, stated the circumstances thereof. He said: “About a week ago he left the institution with our permission upon receiving a telephone message saying his wife was seriously ill in Indianapolis, but we are reliably informed he spent the next few days in a questionable hotel in this city on a drinking expedition. He was advised that unless he returned at once he would be discharged. He did return yesterday during my absence, and said he was unable to remain at this time owing to the illness of his wife. This man has an active pulmonary tuberculosis and is badly in need of treatment.”
The testimony of the veteran’s wife accorded with this report in its statement that he voluntarily left the hospital. She said that “he wouldn’t stay there.” Drs. Spears and Taylor in their report of their examination of the veteran on March 10, 1922, at Louisville stated their diagnosis to have been “chronic pulmonary tuberculosis, active and prognosis very poor.” They stated that they advised hospital care and that the veteran would not accept it. The report of the final examination on behalf of the Veterans’ Bureau December 6, 1922, by Dr. Adams and Trabue stated their diagnosis as “tuberculosis active advanced and prognosis poor.” They stated that they advised hospital care, and that the veteran was willing to accept it.
As stated, these facts have to be accepted as true. There was no evidence offered by plaintiff in contradiction of any of them. According to them, no physician diagnosed the veteran as being afflicted with tuberculosis prior to his confinement in the Methodist Hospital at Indianapolis. The diagnosis of Dr. Hartman, the local physician, was “gastric symptoms and chronic bronchitis.” That of the Veterans’ Bureau and its specialists in Indianapolis in the latter part of February, 1921, was “internal hemorrhoids, otitis media and emphysema,” They found no trace of tuberculosis, and the veteran did not claim that he was so afflicted. Dr. Hoffman, however, conceded that he might then have had a mild ease of incipient tuberculosis. Thus it was, according to these facts, nearly two years elapsed before tuberculosis made its appearance. That such was the case bears heavily against the veteran’s having been afflicted at all with tuberculosis at the time of his discharge. The work record with Kingan & Co. is to the same effect. These circumstances certainly make a very strong ease against his being then so afflicted as to be rendered totally and permanently disabled.
This brings me to a consideration of the evidence tending to show that he was afflicted *482with tuberculosis at the time of his discharge and that the affliction was of such a character as to render him totally and permanently disabled. Eleven witnesses testified on behalf of plaintiff. Seven of them were relatives, the plaintiff, the mother, three sisters, a brother-in-law, an uncle, a Miss Hays, who had lived with plaintiff for nearly twenty-two years, a neighbor, Dr. Hartman, the widow, and two acquaintances in Indianapolis. ■All but the widow and the two Indianapolis acquaintances testified as to his looking bad7 lv on his return from the army as compared with his looks before he entered it. The plaintiff testified that on the evening after he returned, whilst he was eating at dinner, he had to leave the table on account of a very bad hemorrhage; that thereafter whilst he was at home before he went to Indianapolis in April or May, 1920, he had hemorrhages frequently, especially if he tried to do any work; that he had night sweats, nightclothes would be wet, almost wringing wet; that he coughed very hard, had coughed continuously though he did not cough all the time after he came home until he died; that along in Oeto? ber he seemed to be a little better, but got worse in December and January; that his digestion was very bad, hardly ever retained his food, appetite varied, not regular, sometimes would not eat anything and then have appetite to eat; that when he came home in October just before his marriage he had lost weight, was coughing incessantly, could hardly draw breath without coughing; that on his return from Indianapolis on June, 1921, he was very thin and weak and could not walk' up to his home; and that his condition did not improve whilst he was at Hazlewood Sanitarium. The three sisters, the brother-in-law and uncle testified substantially to the same effect, though that of the uncle was not so strong. Miss Hays testified as to the hemorrhage the day he returned home. The neighbor testified to the veteran’s changed looks and his inability to work. Dr. Hartman testified that he first saw the veteran on August 7th at plaintiff’s home; that he was called there by her and he had some temperature and some harsh rales; that he saw him again the latter part of August when he had some r&les through his chest, temperature, expectoration, and a cough and had been vomiting; that he treated him until spring of 1920; that his diagnosis was bronchitis and gastritis; that he saw him in June, 1921, after his return from Indianapolis, when he had hemorrhages and evening temperature and mucus or moist rales; and that from the time he first examined him he was not able to follow continuously a substantially gainful occupation. The widow testified that whilst working at Kingan’s he would come in at night so tired that he could not eat; that he lived mostly on eggs and milk; that he had night sweats and his bed was wet in the morning; he wore two sets of pajamas at night so he could change during the night; that he was not at work a part of the time, some days would not go until noon and some days come at noon, and did not work after the first of the year 1921; that he coughed and spit all the time and expectorated yellow mucus; that he lost 39 pounds whilst in Methodist Hospital, was losing weight all the time; and that whilst he was at Hazlewood he was getting weaker. The two Indianapolis acquaintances testified that he appeared in a very much run-down condition, was very pale then and coughing, had a bad color, seemed to gradually grow weaker and thinner, and that he did not work regularly.
Such then is the testimony on which plaintiff relies to make out that her son, the veteran, was afflicted with tuberculosis at the time of his discharge and that it was of such a character as to render him totally and permanently disabled. It is not an easy matter to accept it as presenting a true picture of the veteran’s physical condition before it was discovered at the Methodist Hospital in May, 1921, that he was afflicted with tuberculosis in the face of the facts stated, which must be accepted as true. There is no medical testimony that he had tuberculosis at the time of his discharge or that it was such as to disable him to the required extent. Dr. Hartman’s testimony is in conflict with his statement on August 15 and September 19, 1921, when things were fresher in his mind. He there states that the first time he saw the veteran was on August 20,1920, when he called at his office. This is in conflict with his testimony that he saw him on August 7th at plaintiff’s home. Then his statement that on August 7th he had temperature and some harsh rales and the latter part of August he had some rales through his chest, temperature, expectoration, and a cough is hardly reconcilable with his diagnosis of chronic bronchitis. So the testimony of the widow as to his work at King-an’s is in conflict with its record in regard thereto. It is hard to conceive of Mm being allowed to act as meat cutter or butcher if he was eougMng, spitting, and expectorating yellow mucus. If put to it, I might be constrained to hold that plaintiff has not sustained the *483burden oil her to establish by a preponderance of the evidence that the veteran was suffering from tuberculosis at the time of his discharge and that it was such as then to totally and permanently disable him. The necessities of this case do not require that I go that far. She is not entitled to recover because of his leaving Hazlewood Hospital against the advice of its medical director and superintendent, as to which there can be no question. That such was the case is shown by Dr. Bates’ report and the testimony of the widow. When he did so, he was improving. This is shown by the report of November 30, 1921. That report states that his symptoms were improved and the progress good, and what is more to the point that he was gaining in weight. He then weighed 129 pounds or 8 pounds more than he weighed on August 17,1921, when he entered the hospital. Then again on March 10, 1922, he was advised by the physician of the Veterans’ Bureau to accept hospital care, and he was unwilling to do so.
I am therefore constrained to dismiss the petition. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219212/ | NETERER, District Judge.
Elliott performed labor for the bankrupt from June 12 to August 12, 1931, at $150 per month, and no part) is paid. August 8, 1931, bankrupt made a common-law assignment. The assignee proceeded to liquidate after possessing himself of the estate. Soon thereafter, and before bankruptcy,. Elliott filed his claim with the assignee as a prior claim under the state statute, and it was allowed, and on November 6,1931, the petition in bankruptcy was filed. On November 27, 1931, proof -of claim was filed in the bankruptcy proceedings for $300 as a preferred claim. The claim was denied. On review denial was reversed in Septémber,. 1932 (5 E. Supp. 483), and thereafter the claim was allowed by the referee in the sum of $30 as a wage preferred claim, and $170 as a general claim; the $30 being wages earned from Am gust 6 to August 12, 1931, within three months prior to the filing in bankruptcy, as priority under section 64b (5) of the Bankruptcy Act, 11 USCA § 104 (b) (5), and $100 earned more than three months prior to bankruptcy and. within 60 days prior to the assignment for the benefit of creditors (section 1204, Rem. Comp. Stat. Wash.), and entitled to payment under section 64b (7) of the Bankruptcy Act, 11 USCA § 104 (b) (7).
The claimant, feeling aggrieved, seeks review. On October 17, 1933, this court held that since the order of September, 1932, had not been appealed from or modified, it became the law of the ease, and affirmed the order of the referee without further opinion.
On October 27,1933, a petition for rehearing was filed claiming that that claim was not considered under section 64b (7) by the court on the former hearing, and that law, as to this claim under that section, was not considered and could not be considered as the law of the ease. Messenger v. Anderson, 225 U. S. 436, 32 S. Ct. 739, 56 L. Ed. 1152; King v. West Virginia, 216 U. S. 92, 30 S. Ct. 225, 54 L. Ed. 396.
The court in its decision of September 22, 1932 (5 F. Supp. 483) said:
“Section 64b (7), 11 USCA § 104 (b) (7) provides for priorities of ‘debts owing to any person who by the laws of the states or of the United States is entitled to priority.’
“The court' recognizes that exemption laws of the state are liberally construed. In re Crook [D. C.] 219 F. 979; Hills v. Joseph [C. C. A.] 229 F. 865. See, also, Creditors’ Collection Ass’n v. Bisbee, 80 Wash. 358 [141 P. 886]; Lemagie v. Acme Stamp Works, 98 Wash. 34 [167 P. 60].
“It is apparent that upon assignment for the benefit of creditors the property of the assignee became, in effect, in custodia legis; and upon the filing of the claims by the employee and the allowance thereof by the assignee, became a fixed obligation under the laws of the state and entitled by section 64b (7) to priority. Section 64b (7) is founded upon humane considerations upon the exigencies inherent to life to the toiler and predicated on justice, which the bankruptcy court must administer in harmony with the priority established by the state law as would a like priority provision in the Bankruptcy Act.”
It is contended that in the consideration of this section the court did not consider the applicability of the status of the claims claimed under the Bankruptcy Act, § 64b (7), 11 USCA § 104 (b) (7), but considered the question of the limitation at the date the property came into custodia legis (common-law assignment) instead of the time of the filing of the petition in bankruptcy, and that error was committed, and the court should *486on this petition for review distinguish the state law and the bankruptcy law and distinguish the rights of parties with relation to each.
It is strongly urged that “the law of the case” is a phrase which expresses the practice of courts, which generally refuse to reopen what has been decided, but is not a limit of power. While there is nothing in the Constitution of the United States to require it or to prevent a eourt from reconsidering a claim and modify its ruling while a ease remains in eourt (San Francisco v. Itsell, 133 U. S. 65, 10 S. Ct. 241, 33 L. Ed. 570), there is, however, this difficulty which cannot be overcome, and which leaves no discretion with the eourt, that the order not only became the law of the ease, but that this court is without jurisdiction to grant any other relief. The order entered was a final order with relation to that particular claim. It adjudicated the right between the claimant and the trustee in bankruptcy. It was an order from which an appeal could be prosecuted. The court’s power ceased on the day before the first Tuesday of November, 1932, the close of the term of eourt in which the order was entered, and nothing further was done in the matter until near the close of the next term of court, which ended the day before the first Tuesday of November, 1933. The terms of eourt begin on the first Tuesday of May and of November. 28 USCA § 193.
The Supreme Court in Bronson v. Schulten, 104 U. S. 410, 414, 26 L. Ed. 797, says: “We are of opinion that, if there was any mistake in the report of the referee and in the judgment rendered thereon, it was so clearly due to the negligence and inattention of plaintiffs or their attorney, that no ease is made for relief in any of the modes known to the law, of correcting an erroneous judgment after the term at which it was rendered.”
And, again, in Phillips v. Negley, 117 U. S. 665, 673, 6 S. Ct. 901, 904, 29 L. Ed. 1013, the court said: “ * * * After the term has ended all final judgments and decrees of the court pass beyond its control, unless steps be taken during that term, by motion or otherwise, to set aside, modify, or correct them. * * * ”
Again, on page 673 of 117 U. S., 6 S. Ct. 901, 904, 29 L. Ed. 1013: “So strongly has this principle been upheld by this eourt that, while realizing tjhat there is no eourt which can review its decisions, it has invariably refused all applications for rehearing made after the adjournment of the court for the term at which the judgment was rendered.”
In United States v. Benz, 282 U. S. 304, at page 306, 307, 51 S. Ct. 113, 114, 75 L. Ed. 354, the Supreme Court said: “The general rule is that judgments, decrees and orders are within the control of the court during the term at which they were made. They are then deemed to be 'in the breast of the court’ making them, and subject to be amended, modified, or vacated by that court. Goddard v. Ordway, 101 U. S. 745, 752, 25 L. Ed. 1040. The rule is not eonfined to civil cases, but applies in criminal cases as well, provided the punishment be not augmented. * * * ” (Italics supplied.)
See, also, Tiberg v. Warren (C. C. A.) 192 F. 458, at page 463 (9th Circuit).
It is obvious that t(he eourt is without jurisdiction to review the proceeding, even though the conclusion of the court at that time is erroneous. Petition for rehearing should have been made during the term when the court) had power to correct any error, or appeal should have been prosecuted to the appellate eourt.
The order heretofore entered, that the order of September, 1932, became the law of the ease, must be affirmed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219214/ | GARDNER, Circuit Judge.
This is a suit in equity, brought by the plaintiff against the defendants, as members of the state board of equalization and assessment and the state tax commissioner of the state of Nebraska, to enjoin defendants from certifying to the county assessors of eighty-four counties of that state a “franchise value” of $245,999, assessed by the state board of equalization and assessment against plaintiff, pursuant to the provisions of sections 77-801 and 77-802, Compiled Statutes of 1929. The matter is before us on motion for a temporary injunction.
Plaintiff is a corporation, organized un*494der the laws of the state of New York, and owns and operates a telegraph system and business throughout the United States and foreign countries. for the purpose of transmitting .messages by telegraph, and as a part of this system and business it owns and operates telegraph lines and does a telegraph business in the state of Nebraska. On June 8,1867, it filed with the Postmaster General of the United States its written acceptance of the Act of Congress of July 24, 1866 (14 Stat. 221, 223, R. S. §§ 5263-5268, U. S. C., Title 47, §§ 1-6 [47 USCA §§ 1-6]). In the year 1939, plaintiff’s real and personal property throughout eighty-four counties of Nebraska was assessed in the aggregate sum of $1,261,-978, upon which it paid state, county, school, city, and village taxes amounting to $26,735.-25. In the same year its intangible property, consisting of money, bank deposits, book accounts, open accounts, judgment, ehoses in action, and contracts for sale and labor, was assessed at $179,282, upon which it paid a tax of $954.33. Plaintiff also paid an occupation tax, pursuant to the provisions of sections 2A1701 to 24-1706, inclusive, Compiled Statutes of Nebraska 1920', in the sum of $950; and for the same year it also paid occupation taxes to ninety-five cities and villages in Nebraska in the aggregate sum of $3,227.51.
Sections 77-801 and 77-802 of the Compiled Statutes of Nebraska of 1929 provide as follows:
“77-801. Each and every person, association, co-partnership, joint stock company or corporation, organized under the laws of this state or any other state or government engaged in' street railways, waterworks, electric lights, gas works, natural gas, mining, express, ' telegraph, telephone business in the State of Nebraska, and all other like companies and like associations, or owning or operating a pipe line in the State of Nebraska, whether such line is used for the transmission of oil, heat, steam or any substance to be used for lighting, heating, power or other purpose, or for the transmission of articles by pneumatic or other power, shall, in addition to listing the tangible property owned in each governmental subdivision by such person, association, co-partnership, joint stock company or corporation, and being taxed thereon in like manner as other tangible property is taxed in the governmental subdivision, shall furnish to the local assessor and to the tax ' commissioner a sworn statement of the amount of the capital stock, setting forth particularly:
“First. The name and location of the company;
“Second. The , amount of capital stock authorized, and the number of shares into which capital stock is divided;
“Third. The amount of capital stock paid up;
“Fourth-. The market value, or if of no market value, then the actual value of the shares of stock;
“Fifth. Thé true value of its franchise,, if any, granted under and by virtue of any law of this state or ordinance of any eity or village;
“Sixth. The length of time such franchise was granted; together with the date of same ;
“Steventh. The total amount of indebtedness, except the indebtedness for current expenses, excluding from expenses- the amount paid for the purchase or improvement of property;
“Eighth. The amount of capital on which a dividend was declared during the last preceding year;
“Ninth. The date of each dividend declared during said year, ending with the last, day of the last preceding December;
“Tenth. The rate per cent of each dividend declared;
“Eleventh. The total amount of each dividend declared during the year ending with the last day of the last preceding December;
“Twelfth. Gross earnings during said year;
“Thirteenth. Net earnings during such year; ■ ■
“Fourteenth. Amount of surplus;
“Fifteenth. Amount of profit added to sinking fund during said year;
“Sixteenth. Maximum price at which shares of stock sold during said year;
“Seventeenth. Minimum price at which shares'of stock sold during said year;
“Eighteenth. Average price at which shares of stock sold during said year.
“77-802. The sworn statement, as set forth in section 1 of this article (77-801), together with any other information available, shall ,b,e used by the state board of equalization in determining the franchise value of such companies for each of the local assess-4 ing districts. The tax commissioner shall certify to the county assessors the value so determined and the same shall be listed and as-' sessed on. the same basis as' tangible property in each governmental'subdivision.”
*495In 1929, plaintiff, pursuant to the requirements of the Nebraska statutes, furnished to the state tax commissioner a sworn statement, touching the value of its franchise as follows: “This company has no franchise of any kind, from the State of Nebraska or any of its municipalities. Telegraph lines in Nebraska were constructed, and are now maintained and operated under Act of Congress approved July 24, 1866, being 'An Act to aid in construction of telegraph lines, etc.’ ”
Plaintiff alleges that its business and property within the state of Nebraska has been maintained and operated under and by virtue of the Act of July 24, 1860 (TJ. S. C., Title 47, §§ 1-6 [47 USCA §§ 1-6]), and that it has never owned, acquired, nor exercised any franchise or charter derived from the state of Nebraska, or from any county, municipality, or governmental subdivision thereof.
Defendants in their answer allege that plaintiff holds franchises from the state of Nebraska and from .many of its municipalities and governmental subdivisions, said franchise from the state being granted by chapter 87 of the Laws of 1887, Compiled Statutes 1929, § 86-301. This Nebraska statute purports to grant to telegraph and telephone companies incorporated or doing business in the state, a right of way along the public roads of the state for the erection of poles and wires. It is also alleged that franchises had been granted to the plaintiff without charge by many cities and villages, granting it' the use of the streets; that the franchise value includes, not only these franchises, but also intangible values accruing to plaintiff’s tangible property in the state as a going concern and as a part of its general telegraph system throughout the United States, which intangible values have a situs in the state of Nebraska. The answer further alleges that defendants “deny that the plaintiff’s tangible property was assessed in any county as part of the general telegraph system of plaintiff but allege that the assessments in the several counties related only to tangible property therein, separate and distinct from its value as part of a general system.”
It is also alleged in the answer that defendants “deny that in assessing plaintiff’s said franchise value, the defendants assessed such value upon the basis of the physical and other property enumerated in paragraphs seven and eight of the petition but allege that the assessment was based solely upon the franchise value and the intangible value appertaining to and inhering in the plaintiff’s physical property in this State as a going concern and as an integral part of the entire telegraph system of the plaintiff.”
When the challenged assessment was made plaintiff owned, maintained, and operated 3,750.23 miles of pole lines throughout eighty-four counties of the state in which it operated its business, of which 3,747.64 miles were located and maintained along railroad rights of way, and 2.59 miles were located and maintained over and along streets and highways of cities, towns, and villages. It also maintained and operated 35.264 miles of conduits, of which 18.12-3 miles were along railroad rights of way, and 17.141 miles were along streets and highways of towns and villages.
It is the contention of plaintiff (1) that sections 77-801 to 77-803 of the Compiled Statutes of Nebraska of 1929 authorize the state board of equalization and assessment to assess only special franchises granted to those engaged in a public utility or public service business, and not franchises “to be” or “to do,” or “the intangible value appertaining to and inhering in plaintiff’s physical property in the state as a going concern and as part of plaintiff’s general telegraph system throughout the United States and foreign countries”; (2) that plaintiff' exercises no special franchise granted by the state of Nebraska because it does not occupy public roads for the erection of its poles and wires, and, if it did occupy such public roads, the grant in the cited Nebraska statutes added nothing to its rights already possessed under the Federal Post Roads Act (19 Stat. 319), and, hence, such grant was of no value; (3) that it neither exereised nor enjoyed any special franchise granted by the municipalities in Nebraska because the ordinances of such municipalities alleging to grant franchises were not in fact grants of franchises, but were purely regulatory, but that, even interpreted as grants of franchise permitting plaintiff to occupy the streets of the municipalities, they added nothing to the rights which it already possessed under the Federal Post Roads Act, and, hence, were of no value; (4) that defendants, having admitted that the challenged assessment includes a valuation of alleged, municipal franchises, such value may not be allocated to all of the eighty-four counties and numerous municipalities of the state where plaintiff does business, but may only be certified for levy purposes to its own representative municipality because that is its sole situs for taxation purposes; and no attempt has1 been made in the “franchise tax law,” or any other provision of the laws of *496the state, to change or disturb such situs; and (5) that the only special franchise exercised or enjoyed by the plaintiff in the state of Nebraska was such right, power, privilege, permission, or franchise as was granted it by the federal government, which is not taxable by the state or any of its subdivisions.
The primary franchise of a corporation, often referred to as the “to be” franchise, is that granted ,by the state under whose laws the corporation is organized. It is described in Home Insurance Co. v. New York, 134 U. S. 594, 10 S. Ct. 593, 595, 33 L. Ed. 1025; as “the right or privilege given by the state to two or more persons of being a corporation, that is, of doing business in a corporate capacity, and not the privilege or franchise which, when incorporated, the company may exercise.”
Such a franchise could, confessedly, only be taxed by. the state of New York, under whose laws the plaintiff was incorporated. Louisville & Jeffersonville Ferry Co. v. Kentucky, 188 U. S. 385, 23 S. Ct. 463, 47 L. Ed. 513; London & San Francisco Bank v. Block (C. C.) 117 F. 900. The correctness of plaintiff’s position in this contention is sustained also by the Supreme Court of Nebraska in Northern Nebraska Power Co. v. Holt County, 120 Neb. 724, 235 N. W. 92, and Western Union Telegraph Co. v. City of Omaha, 73 Neb. 527, 103 N. W. 84. It seems clear that plaintiff’s franchise “to be” was not taxable in Nebraska.
In various forms plaintiff contends that it has a federal franchise, granted it by the act of Congress approved July 24, 1866, to operate upon the post routes or roads of Nebraska, including city streets, state highways, and railroad rights of way, all of which are made post roads by the federal act, and that this federal franchise cannot be taxed by the state authorities. This contention of the plaintiff must also be sustained. California v. Central Pacific R. Co., 127 U. S. 1, 8 S. Ct. 1073, 32 L. Ed. 150; Central Pacific R. Co. v. California, 162 U. S. 91, 16 S. Ct. 766; 40 L. Ed. 903; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 16 S. Ct. 1054, 41 L. Ed. 49; Williams v. Talladega, 226 U. S. 404, 33 S. Ct. 116, 57 L. Ed. 275; City and County of San Francisco v. Western Union Telegraph Co., 96 Cal. 140, 31 P. 10, 17 L. R. A. 301; Western Union Telegraph Co. v. Los Angeles County, 160 Cal. 124, 116 P. 564; Western Union Telegraph Co. v. City of Visalia, 149 Cal. 744, 87 P. 1023; Western Union Telegraph Co. v. Lakin, 53 Wash. 326, 101 P. 1094, 17 Ann. Cas. 718.
It appears that substantially all of plaintiff’s telegraph lines are upon the rights of way of railway companies, and that a comparatively insignificant mileage of lines or conduits is maintained in cities and villages. It is therefore contended by plaintiff that none of these lines are operated under a permission or franchise from the state, nor under a permission or franchise from the cities or villages, but are maintained and operated-solely under authority of federal legislation, subject only to regulatory ordinances in each of the cities, towns, and villages, prescribing the height, size, and location of poles, and the elevation of aerial lines, and the placing of equipment under ground. It appears that most of these municipalities have required plaintiff to allow the respective cities to use its poles for the purpose of attaching thereto their fire alarm boxes and fire alarm and police wires, and in addition some of the cities impose a charge of $1 for each telegraph pole erected in the streets and alleys of such cities.
Plaintiff asserts that sections 77-801 to 77-803 of the Compiled Statutes of Nebraska of 1909 authorize an assessment only of special franchises, such -as a right to occupy the highways,- and not the franchise either “to be” or “to do”; that is, to exorcise the functions for which the plaintiff was incorporated, and for that reason do not authorize a taxation of “the intangible value appertaining to and inhering in plaintiff’s physical property in this state as a going concern, and as a part of plaintiff’s general telegraph system throughout the United States and foreign countries.”
Succinctly stated, these contentions amount to the assertion that plaintiff enjoys no franchise in Nebraska, other than its federal franchise, which Nebraska cannot tax, and that the Nebraska taxing statutes here under consideration -are framed to reach such grants from the sovereignty in Nebraska as may be classed as “special franchises,” but do not attempt to tax the value of plaintiff’s property in Nebraska as part of a general telegraph system extending throughout the United States and foreign countries, and that the only use of public highways or streets that plaintiff malíes in Nebraska is a use under and by virtue of regulatory ordinances which do not amount to franchises. In the final analysis, this may be said to be the battle field for the contentions of the parties to this suit.
Viewing the statutes as a whole, they seem to exclude the thought that special grants from a sovereign power were meant to be taxed, but were to be considered by the tax*497ing body as an element in arriving at the value of the system of the plaintiff as an entirety in the state of Nebraska, and as a component part of a vast and extensive system extending throughout the United States and foreign countries. The question is: What was the value of plaintiff’s property in Nebraska — not a scrap value, nor the value of a segregated portion, independent of the entire property —but what was the value of that part of plaintiff’s entire system, considered as a going concern which is located in Nebraska? This includes intangible values. Whether that be technically properly termed as “franchise values” is not very material. A franchise “to be” or “to do” is a right or privilege granted by the sovereignty to persons or corporations, to do some act or acts which they could not perform without this grant from the sovereign power. McPhee & McGinnity Co. v. Union Pacific R. Co. (C. C. A. 8) 158 P. 5. If there is no special grant from the government, there is, in the sense above noted, no franchise; but as said by the Supreme Court in Educational Films Corp. v. Ward, 282 U. S. 379, 51 S. Ct. 170, 171, 75 L. Ed. 400: “The nature of a tax must be determined by its operation rather than by particular descriptive language which may have been applied to it.”
This would seem particularly true of a tax on that elusive class or quality of property variously and often loosely described as a franchise. In a taxing statute it is not essential to hold to a hard and fast definition of the term. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193, 204 S. W. 94. It may appear from a consideration of the statute that the intent of the legislation was to reach and tax what is frequently referred to as the “corporate excess.” This involves assessing the property of a great business system, not only as so much property segregated from and without any relation to the whole system, but to value the property in the state as a part of one entire and continuous system, and to give it such added value as it may have because of its being a part of that system. Southern R. Co. v. Com. of Kentucky, 274 U. S. 76, 47 S. Ct. 542, 71 L. Ed. 934; Western Cartridge Co. v. Emmerson, 281 U. S. 511, 50 S. Ct. 383, 74 L. Ed. 1004; Educational Films Corp. v. Ward, 282 U. S. 379; 51 S. Ct. 170, 75 L. Ed. 400; Maine v. Grand Trunk R. Co., 142 U. S. 217, 12 S. Ct. 121, 35 L. Ed. 994; Kansas City, Ft. S. & M. R. Co. v. Botkin, 240 U. S. 227, 36 S. Ct. 261, 60 L. Ed. 617; Cream of Wheat Co. v. Grand Forks County, 253 U. S. 325, 40 S. Ct. 558, 64 L. Ed. 931; Western Union Telegraph Co. v. Missouri, 190 U. S. 412, 23 S. Ct. 730, 732, 47 L. Ed. 1116; Postal Telegraph Cable Co. v. Adams, 155 U. S. 688, 15 S. Ct. 360, 39 L. Ed. 311; Western Union Telegraph Co. v. Norman (C. C.) 77 F. 13, 23; Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530, 8 S. Ct. 961, 965, 31 L. Ed. 790; Adams Express Co. v. Kentucky, 166 U. S. 171, 17 S. Ct. 527, 530, 41 L. Ed. 960; Massachusetts v. Western Union Telegraph Co., 141 U. S. 40, 11 S. Ct. 889, 35 L. Ed. 628; Western Union Telegraph Co. v. City of Omaha, 73 Neb. 527, 103 N. W. 84, 85; Gamble-Robinson Fruit Co. v. Thoresen, 53 N. D. 28, 204 N. W. 861, 865, 42 A. L. R. 1039.
In Western Union Telegraph Co. v. Missouri, supra, it appeared that the taxing authorities of the state of Missouri valued the poles, the wires, and the instruments of the telegraph company, and then valued “all other property” at $856,400.56; and it was the contention of the telegraph company that the “all other property” so assessed necessarily included the federal franchise, and, hence, the tax was void. In the course of the opinion in that ease, the court quoted with approval from the opinion of the Supreme Court of Missouri, 165 Mo. 502, 65 S. W. 775, as follows: “ 'So, that, when, in determining the value of the property of the defendant in this state, the board of equalization took into consideration “the cost of construction and equipment of said Western Union Telegraph Company, and the location thereof, and its traffic and business, and the par value of its stock and bonds, and the gross receipts and net earnings and franchises owned by said company; and the value thereof,” it did not and could not have included therein any franchise derived by the defendant from the government of the United States, because that government had conferred no such franchise; nor was such a valuation placed upon “all other property,” a tax upon the franchise of the defendant company. The franchise derived by the defendant from the state of New York was considered by the board in determining the value of the property of the defendant located in this state. That is, that property was valued, not as so many poles, so much wire, so many instruments, or so much “other property,” in the abstract, but was valued in the concrete, in the relation that such property in the abstract bore to other property in the abstract, which being brought into relation towards each other — into a system, located partly in this state and partly in other states — gave each part a concrete value, which was much greater than its abstract *498value. The right to exist — the franchise — of the defendant was property, and was subject to taxation, either directly, in the proportion that the portion of the franchise exercised in this state bore to the proportion of the franchise exercised in all other states, or indirectly, as was done in Massachusetts and was done here, by being impressed upon the tangible property owned by it, thereby increasing its value, and by considering the franchise and its tangible property as a system, and then assessing the part of the property forming a part of the system and located in Missouri as of its proportionate value of the whole property constituting the system.’ ”
Reviewing many of the decisions, the court in its opinion concluded as follows: “These eases establish that, in estimating the value of the property of a telegraph company situate within a §tate, it may be regarded, not abstractly or strictly locally, but as a part of a system operated in other states, and that the state was not precluded from taxing the property because the state had not created the company or conferred franchise upon it, or because it derived rights or privileges under the act of July, 1866, or was engaged in interstate commerce.”
In Western Union Telegraph Co. v. Massachusetts, supra, it was contended, as in this ease, that most of the company’s lines •were over post roads. The tax under consideration involved an apportionment made by the treasurer of the state of the taxable value of the shares of the corporation, the treasurer giving to the shares of stock taxed in Massachusetts a value bearing the same proportion to the entire capital stock of the corporation that the miles of line of the company in Massachusetts bore to its entire mileage in the United States. In sustaining the tax, the court said: “The tax in the present case, though nominally upon the shares of the capital stock of the company, is in effect a tax upon that organization on account of property owned and used by it in the state of Massachusetts, and the proportion of the length of its lines in that state to their entire length throughout the whole country is made the basis for ascertaining the value of that property. We do not think that such a tax is forbidden by the acceptance on the part of the telegraph company of the rights conferred by section 5263 of the Revised Statutes [47 USCA § 1], or by the commerce clause of the constitution.”
In Adams Express Co. v. Kentucky, supra, the Kentucky statute required the furnishing of information similar to the information required to be furnished by the Nebraska statutes here under consideration. The court held that the word “franchise” was not employed in its technical sense, and in disposing of that contention said: “ * * * It is evident that the word ‘franchise’ was not employed in a technical sense, and that the legislative intention is plain that the entire property, tangible and intangible, of all foreign and domestic corporations, and all foreign and domestic companies possessing no franchise, should be valued as an entirety, the value of the tangible property be deducted,' and the value of the intangible property thus ascertained be taxed under these provisions; and as to railroad, telegraph, telephone, express, sleeping ear, etc., companies, whose lines extend beyond the limits of the state, that their intangible property should be assessed on the basis of the mileage of their lines within and without the state.”
The principle of these decisions is well expressed by District Judge Barr in Western Union Telegraph Co. v. Norman, supra, in which a statute of Kentucky was under consideration. The statute purported on its face to tax franchises. Holding that the court was not restricted to the technical meaning of the word “franchise,” Judge Barr said: “Notwithstanding the use of the words ‘franchise’ and ‘corporate franchise’ in the several sections of this statute, we are of the opinion that the property to be taxed under its provisions as intangible property is not confined to franchises or corporate franchises, but it is intended to include all intangible property, by the mode indicated, whether or not such property be legally ‘franchises’ or ‘corporate franchises.’ It is not a tax upon an occupation or franchise granted by other states or by the United States, but a tax upon the property owned and enjoyed by these several associations, companies, and corporations, which is claimed to be within the taxing power of the state.”
In Gamble-Robinson Fruit Co. v. Thoresen, supra, the Supreme Court of North Dakota said: “There may be a tax upon the corporate franchise rated according to the corporate excess, or there may be a tax upon the property of the corporation (principally intangible) which- is measured by the same standard.”
It seems clear from the authorities that the name which may be given to a tax is not controlling; but the question in every case is what is the inherent nature of the tax. An examination of the .statutes here involved, under which the defendants seek to justify their *499action, convinces that the intention is to tax the value of the property used in the state as a component part of a larger whole, and thereby reach that intangible value which is not otherwise taxed in the state of Nebraska, but which the authorities recognize as a legitimate subject of local taxation. The Supreme Court of Nebraska has in effect so said in Western Union Telegraph Company v. City of Omaha, supra. It is there said: “While the Legislature has termed this intangible property ‘a franchise,’ the concept, the idea, might as well have been expressed by some other name. It is this intangible right which possesses value, which is intended to be reached and valued for taxation by these provisions, independent of the tangible property which is otherwise assessed. It is, no doubt, true that, if the word ‘franchise’ were used in the more restricted sense, it would not embrace these privileges and rights; but, as has often been said, the word ‘franchise’ is sometimes used as a generic term, which may include not only the right granted by the crown in England, or by the state in this country, to be a corporation, but the right to exercise certain rights or privileges of a public nature, which properly and in the first instance belonged to the royal prerogative. There is a clear distinction between ‘corporate franchise’ and franchises or privileges which a corporation or individual may exercise, and it is the latter which are made the subject of taxation by these provisions.”
Further the court said: “Considering and construing together these sections of our statute, it seems clear that the object of the law is to reach the intangible value which may appertain to the use by individuals or corporations of the usual tangible agencies and instrumentalities employed in the telegraph, telephone, and express business, and that the words ‘franchise value,’ as used in section 78, are used in a broad sense, and really mean the value of the intangible property. This may or may not include ‘corporate franchise,’ since it may be either an individual or a co-partnership or a corporation which conducts the business, and the ‘corporate franchise,’ if included, is only an incident, and not the subject-matter which it was intended to tax.”
The fact that plaintiff may rightfully exercise rights or privileges in the nature of franchise granted by the federal government, and may be engaged in interstate commerce, does not prevent the state from taxing its property located within the boundaries of the state. It must be presumed that the taxing authorities did not assess the federal franchise granted plaintiff by act of Congress, nor the franchise “to be,” granted plaintiff by the state of New York, both of these being immune from taxation, but that they taxed the property of plaintiff which was not so immune. Central Pacific R. Co. v. California, 160 U. S. 91, 16 S. Ct. 766, 40 L. Ed. 903; People v. State Board of Tax Commissioners, 224 N. Y. 167, 120 N. E. 193.
There is a suggestion that the tax under consideration is void under the Constitution of Nebraska, but the point is not pressed in argument, and, certainly, in the absence of argument, the statute should not be held to violate the State Constitution, unless it is clearly violative of the Constitution. The question will, therefore, be given no further consideration.
It is also urged by the plaintiff that in the eases in which a tax similar to the one here involved was upheld the statute directed the taxing officials as to the method of assessment and taxation, while the Nebraska statutes failed to prescribe such method. But, considered in connection with other Nebraska statutes relative to the taxation of property of similar corporations, these statutes seem to furnish a sufficiently definite guide to enable the taxing officers to discharge the duties imposed upon them thereby. It is no objection to a statute that it leave to the taxing officials the adoption of a method. In Western Union- Telegraph Co. v. Missouri, supra, the court said: “ * * * It would seem incontestable that the state could either prescribe the method or confer upon its taxing officers the power to adopt a suitable one.”
The objection that the statute provides for the assessment of the tax as a whole, but fails to provide for a distribution and allocation to the eighty-four different counties, is not available to the plaintiff. If its property is regularly and fairly taxed, it is no concern of it that, in the distribution among the various counties of the state, there may result inequality.
In a second cause of action plaintiff seeks an injunction to prevent there being certified to some eighty-four counties in Nebraska an increase in the’assessed valuation of the tangible property of plaintiff to the amount of 30 per cent, of the value of such property. This increase was made by the state board of equalization and assessment on August 2, 1929'. We -are not called upon to consider the regularity or validity of this additional assessment, because the defendants in their answer to this cause of action confess that this increase was without authority. ,
*500It follows that, as to the first cause of action, the preliminary injunction prayed for should be denied. As to the second cause of action, it appears from the allegations of the defendants’ answer that they did not, at the time of the filing of their answer, and do not now, threaten to certify any of. the increased valuation referred to in that cause of action. As no rights are further asserted under the second cause of action by the defendants, it would seem to be unnecessary to enjoin the officers from doing something which they of record disclaim any intention of doing. Doubtless - the plaintiff was warranted in bringing suit on the second cause of action, and, hence, no costs should be awarded to either of the parties. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219215/ | CAVANAH, District Judge.
This suit is one upon a policy of war risk insurance to which the government has answered and asserts as one of its defenses the plea of the statute of limitation. The case was tried before the court on stipulation -of the parties, and a motion was made to dismiss upon the ground of lack of jurisdiction, as the claim was not filed with the Veterans’ Bureau within the time required by section 445, Title 38 USCA,' as amended.
Upon agreement of the parties, testimony was first taken on the question of fact as to whether the claim was filed with the bureau within the time required by law. The evidence shows that the plaintiff mailed on. July 3, 1931, at Hailey, Idaho, the claim in a stamped envelope addressed to the bureau at Washington, D. C., and it was received by the bureau on July 7, 1931.
The inquiry is, Can the claim be treated as filed with the bureau as of July 3,1931, the date on which it was mailed at Hailey, and treated as denied on September 21, 1932, when plaintiff received the denial in a letter? The statute as amended July 3,1939 (38 USCA § 445), provides that the limitation sháll be suspended for the period elapsing “between the filing in the bureau of the claim sued upon and the denial of said claim by the director.” The use of the word “filing” is the delivery of the paper or document to the proper officer and lodged by him in his. office. Barber Asphalt Paving Co. v. O’Brien, 128 Mo. App. 267, 107 S. W. 25, 28; Masterson v. Southern R. Co. et al. (Ind. App.) 82 N. E. 1021; United States v. Lombardo, 241 U. S. 73, 36 S. Ct. 508, 60 L. Ed. 897. When the claim was filed in the bureau on July 7, 1931, the statute of limitation had run against it, as the last day upon which the claim could have been filed in the bureau was on July 3,1931, and was after the expiration of the period permitted by the statute for the filing of the claim and bringing of suit thereon. Mere mailing of the claim does not satisfy the statute. It must have been received by the bureau. Leahy v. United States et al. (D. C.) 19 F.(2d) 617; Creasy v. United States (D. C.) 4 F. Supp. 175; Smith v. United States (D. C.) 2 F. Supp. 319; Miller v. United States (D. C.) 57 F.(2d) 889.
A prerequisite necessary to give the court jurisdiction and the maintenance of an action on a war risk insurance claim is the presentation of the claim to the bureau and its rejection. Berntsen v. United States (C. C. A.) 41 F.(2d) 663. And this requirement must be within the time and in the manner as prescribed by the statute.
The claim in the instant case not having been filed in the bureau within the time, the court is without jurisdiction, and therefore the motion to dismiss is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219217/ | WAY, District,Judge.
In the above-entitled ease, I have concluded from the evidence that the collision in question was caused by the unseaworthy condition of the tug P. F. Martin, in that the link in the steering chain, which broke, was defective in manufacture and unfit for the use to which it was then being applied; that the presence of the defective lap link in the steering chain is directly attributable to the failure of the 'person who ordered the lap links, for use on the tug P. F. Martin, or any one else representing that vessel, in ordering the links to specify links of material and workmanship known or reputed to be reasonably fit and proper for the use to which they were to be applied and to the failure of petitioner’s employees properly to inspect and test the lap link in question before inserting it in the steering chain.
Stated another way: The evidence shows clearly that an order was given to Swan, the dealer, by Renshaw through Hutson, representing the tug, for one dozen lap links, without specifying any particular brand, make, grade, or quality of link, or otherwise imposing any requirement upon the dealer to furnish links reasonably fit and proper for the intended use and without specifying the intended use. This conclusion is illustrated by the testimony of Renshaw (Transcript, pp. 27, 28) and Swan (Transcript, pp. 70-72). It is apparent from an inspection of the links introduced as exhibits that an indifferent lot was supplied and accepted. Furthermore, the evidence signally fails to show that any reasonable or proper inspection of these lap links was made (Renshaw, p. 27) or that the link which broke was ever adequately tested before it was permanently inserted in the steering chain. An inspection of the links in evidence corroborates the testimony of the witness Mirfield (Transcript, p. 265) to the effect that the broken link “is just an ordinary commercial link”- that may be found in hardware stores generally. It is a significant fact that the manufacturer of the link which broke, has not been identified.
Under the circumstances, I am forced to the conclusion that the collision was not the result of an inevitable accident as contended by petitioner, but rather that it is directly attributable to the causes above referred to, and that the petitioner should be held responsible for the damages to the steamship Michael Tracy, at least to the extent of the value of the tug P. F. Martin immediately following the collision.
With respect to the petition to limit liability to the value of the tug, I am of opinion this relief should be granted. While the evidence discloses negligence on the part of those who purchased and installed the defective link in the steering chain, it fails signally to show that Hutson, who had charge of purchasing the links in question, stood in the place of the officers of the corporate owner, and had such general control of its affairs that his knowledge, or rather lack of knowledge, was that of the owner. “ ‘Mere negligence, pure and simple, in and of itself,’ does not establish privity or knowledge. To do that, there must be something more than mere thoughtlessness or casual oversight.” The Virginia (D. C.) 264 F. 986, 997, affirmed (C. C. A.) 278 F. 877. Hutson, at most, it seems to me, was only a subordinate employee of limited authority, and his negligence consisted of mere thoughtlessness or casual oversight, notwithstanding the admitted fact that the duty, thus performed indifferently, related to the repair of a vital part of the tug. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219218/ | M0SC0WITZ, District Judge.
This is a motion for an order directing that a writ of venditioni exponas or monition issue to the United States marshal to attach the tug Forrest E. Single in satisfaction of a judgment entered against the claimant and its stipulators.
It appears from the moving papers that, after the filing of the libel herein, a stipulation for value in the sum of $700, the amount of the libelant’s claim, executed by the New York Towing & Transportation Corporation, as principal, and the National Surety Company, as surety, was duly filed in this court. Thereafter the ease proceeded to trial, and a final decree was entered awarding the libelant a recovery in the sum of $752. Subsequently, a summary judgment was entered against the National Surety Company.
The libelant by this motion is seeking to assert at this time a lien which it had against the tug Forrest E. Single for damages caused to its eoalboat. The rule is well settled that, when a stipulation for value in the amount demanded in the libel has been filed, such stipulation is a substitute for the res, and that the claim or lien against the res is thereby extinguished, the action proceeding against the stipulation for value and the claimant. The stipulation for value takes the place of the tug for all the purposes of the libel, and the tug cannot be rearrested for the cause of action therein stated in the libel. The Nahor (D. C.) 9 F. 213; The William F. McRae (D. C.) 23 F. 557; The Mutual (D. C.) 78 F. 144; The Cleveland (D. C.) 98 F. 631; J. K. Welding Co., Inc., v. Gotham Marine Corporation (D. C.) 47 F.(2d) 332.
The tug may be attached by the marshal under an execution issued against the claimant’s property, the same as an execution issued to the sheriff in a state court action. Should it develop, however, that the tug is not owned by the claimant, a marshal selling it under an execution issued against the elaimiant’s property could not transfer a title “good as against the world.” He could only transfer the right, title, and interest of the claimant in the vessel. A marshal’s sale in an in rem action is the only sale which transfers absolute title. If the libelant was seeking to have the tug sold under an execution issued against the claimant’s property, it would not be necessary to apply to this court for leave to: do so; it would merely be necessary for the libelant to issue an execution to the marshal, under which the marshal would advertise for sale the right, title, and interest of the claimant in the vessel. That remedy is open to the libelant. The libelant, however, cannot rearrest the boat and have wha,t might be termed an “in rem sale,” which would carry with it absolute title. The right to an in rem sale flows from the existence of a lien against the tug in libelant’s favor. This lien was discharged upon the filing of the stipulation for value.
As was stated in U. S. v. Ames, 99 U. S. 35, 44, 25 L. Ed. 295: “None of the authorities afford any countenance whatever to the theory that the property released can be recalled for any purpose after the property has been condemned and the libellants have proceeded to final judgment against the principal and sureties in the bond or stipulation for the release of the property seized. Difficulties of the kind, it would seem, must be insuperable.”
The motion must therefore accordingly be denied. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219219/ | KENNERLY, District Judge.
Indicted November 16, 1932, by a grand jury at the Waco Division of the United States District Court for the Western District of Texas, arrested in this district upon process issued upon such indictment,. and committed by a United States Commissioner to the custody pf the United States Marshal of this district, and incarcerated in jail by him awaiting order of removal to such Western district for trial, petitioners, complaining that such incarceration is illegal, and that they are unlawfully restrained of their liberty, petition for the issuance of the writ of habeas corpus, and that they be enlarged and discharged. This is a hearing, with written briefs, on such, petition, by agreement upon the record (including stenographer’s transcript) before the Commissioner.
The indictment (offered in evidence by the government) charges a conspiracy during the period from January 1, 1931, to June 1, 1932, in violation of section 88, title .18 US CA, and possession of, and transportation of, six hundred twelve quarts of intoxicating liquor, on or about May 20,1932, in violation of the National Prohibition Act (27 USCA). The indietment’eharges an offense against the United States. It is shown that petitioners are the identical persons so indicted. It appears tjhat the court in which the indictment is pending has jurisdiction of the offenses charged.
But petitioners say that there is not probable cause to believe that defendants are guilty as charged in the indictment. The Commissioner heard evidence offered by the government, in addition to the indictment. From such evidence, the presence of the defendants in Temple, Tex., in the division and district in which the indictment is pending, was shown for quite a period of time during the period (January 1,. 1931, to June 1, 1932) it is alleged the conspiracy was being carried out. Some activities on the part of defendants, or some of them, while in Temple, which to say the least are not inconsistent with their guilt, are shown. Also that a large number of witnesses testified before the grand jury that found the indictment, only a few of whom were called to testify before the Commissioner. Eor petitioners, there was the testimony of several witnesses, who claimed to have seen defendants, or some of them, in Galveston and Beaumont on or about the dates of some of the overt acts alleged in the conspiracy count of the indictment, and the dates of the alleged possession and transportation of intoxicating liquor under the other counts. One of them, a deputy sheriff, fixes the dates by one or more of the defends ants having aided him in locating some 'persons for whom he had process for service, and by the fact that he tried to borrow $50 from Ross, but was only successful in borrowing $20.
The Commissioner saw and heard all these witnesses testify, and reached the conT elusion that the evidence, with the indictment, is sufficient to show probable cause that the defendants are guilty-of the offense charged. I have reached the same conclusion from the record made before the commissioner. This renders it] unnecessary to determine the question raised of whether the indictment alone is sufficient to show probable cause.
Let an order enter, denying the writ of habeas corpus, and remanding the defendants to t¡he custody of the Marshal, as and when order of removal is signed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219220/ | TUTTLE, District Judge.
This matter comes before the court on the petition of the plaintiff, the receiver of an insolvent national bank, to be allowed to settle and compromise the amount due said bank upon the note and chattel mortgage on which this suit is based, and the court costs herein, by the payment, by the defendants, to the plaintiff, of the sum of $1,000, which settlement has been approved by the Comptroller of the Currency. This application is filed under section 5234 of United States Revised Statutes (section 192, tit. 12, United States Code [12 USCA § 192]), which, among other things, provides: “Such receiver, under the direction of the comptroller, 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, upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts.”
The proposed settlement has been eonsented-to by all the.parties, and proofs have been taken in open court upon the advisability of the settlement.
The bill of complaint charges that the defendants Roy Marzolf and Lottie Marzolf, prior to the closing of said bank and the appointment of the plaintiff as such receiver, were indebted to said bank upon a promissory note and chattel mortgage; that on February 8,1933, there was due upon said note and chattel mortgage the sum of $1,072.01; and that the chattel mortgage covered certain farm property belonging to said defendants; that plaintiff on said date, in a lawful manner, accompanied and assisted by the sheriff of the county of Gratiot, proceeded to make public sale of all the property covered by the said chattel mortgage; that the defendants other than Lottie Marzolf proceeded, by force and violence, to prevent said sale and by force and violence removed the plaintiff, from the place where he was attempting to hold said sale, to the residence of the defendant Roy Marzolf, where said plaintiff was held in custody; that said plaintiff was struck, thrown to the ground, kicked, and trampled and threatened with hanging, a rope being produced in his presence; that said plaintiff was threatened with further violence unless he would consent to deliver up said note and mortgage; that by reason of force and fear said plaintiff did so consent, and said note and mortgage were given up to the said defendant Roy Marzolf; that the said sheriff, at the demand of the defendants and through fear, then proceeded with a fraudulent sale, as a result of which all of the property covered by the said chattel mortgage, consisting of a large amount of live stock and farm machinery, was sold in parcels to various defendants for a few cents each, the total proceeds of all the pretended sales being only $3.80; and that the said defendants claim title to such property because of such fraudulent sale. The bill further alleges that the amount due on the note and chattel mortgage at the date of filing the bill was $1,084.85; that the said defendants other than Lottie Marzolf conspired to, and by these acts did, hinder the plaintiff in the execution of his duty to sell the property as a federal officer; and that this was done by such defendants in violation of the federal statutes. The relief prayed is that the defendant Roy Marzolf be required to surrender to plaintiff the said note and chattel mortgage, and that the defendants who bid in said property at said sale be required to deliver to plaintiff such property or to account for the full value of the same; that such property, if and when returned, be .sold under order of this court; and that the defend*506ants who prevented said sale be required to pay any deficiency then remaining unpaid upon said note and chattel mortgage. The bill also prayed for general relief.
The defendants filed answers under oath, each either alleging lack of knowledge sufficient to answer or denying the use of threats and violence and denying that there was any conspiracy or concerted action on their part. It is stated in the answers that none of the property has been removed from the premises, except certain live stock sold, by said Roy Marzolf since said pretended sale, for $9*7.87.
After the case was at issue, but before á hearing thereon, the plaintiff filed a petition herein alleging that the defendants had offered to pay the plaintiff $1,000 in full settlement of the amount due upon said note and chattel mortgage and the court costs incurred by plaintiff, and that the Comptroller of the Currency had given his approval to said settlement. It was prayed that this court give its approval to the said settlement and compromise.
Because of the unusual features of the case, this court set the matter down for hearing on the said petition, and testimony has been taken in open court as to the offer and as to the value of the property covered by the chattel mortgage. No proof has been taken as to the threats, violence, and duress placed in issue by the bill and answers-. The undisputed evidence shows that the value of the property covered by the chattel mortgage was and is the sum of $500'; that the defendant makers of the note and chattel mortgage have no property of any kind, except such interest as they may have in the property covered by the chattel mortgage; and that the sum of $1,0-00 so offered in settlement of said note, mortgage, and costs has been raised and tendered by the other defendants because they fear criminal prosecution if this ease goes to hearing and if proof is taken as to the issues raised by the bill and answers. Although it was stated to the court that no definite promise or agreement had been made not to bring criminal proceedings against the other defendants, it seems probable that such is the motive behind the offer, and that such is the unworded understanding.
If the suit went to final hearing, the plaintiff could recover a deficiency decree against the defendants Marzolf. From the proofs taken, it is plain that such personal decree would be uncollectible and of little or no value. There is, therefore, no doubt that the proposed settlement is a fortunate one from the standpoint of the plaintiff receiver. The proposed settlement is for less than the full amount owing upon the note and chattel mortgage by the defendants Marzolf, and, therefore, the -court should approve of the settlement as fair to- the defendants Marzolf. The only real problem presented to the court results from the fact that the defendants other than the defendants Marzolf cannot be held liable in this action for more than $500. They are not liable on the note and chattel mortgage. The plaintiff in his official capacity as receiver cannot recover from those defendants in this action for anything except the value of the property which the undisputed proofs fix at $500. It is plain that this court should not approve of this settlement if it is being made upon any express or implied agreement that it settles and compromises anything other than the indebtedness of the defendants to the plaintiff receiver in his official capacity. As a matter of law, this court could not grant immunity to any of the defendants from criminal prosecution. However, this court should not approve of the settlement if it is tainted by such a void arrangement. Those so-called other defendants may loan money to the defendants Marzolf or they may make the defendants Marzolf a present if they choose, but it must be expressly understood that their dealings and arrangements in that regard are entirely with the defendants Marzolf, and that no adjustment of any criminal matter is being made. This court is anxious to help in every proper way the depositors in closed banks, but it has no right to use the criminal law as a club to obtain money from those not owing it. The so-called other defendants are not liable on said note and mortgage and are not liable to the receiver for anything except the- value of the property in question and for the costs of this suit. They must not be permitted to contribute more on any theory that they are securing immunity from the criminal law. If the parties to this suit wish to settle merely for the value of the property covered by the chattel mortgage, the balance remaining due on the note- and chattel mortgage, and the costs of this suit, by paying to the plaintiff the sum of $1,000, the court is willing to approve such settlement and dismiss the suit. It must, however, be clearly understood that neither such settlement nor the dismissal of this suit shall in any way, except as otherwise stated in this opinion, release any of the defendants from any liability, either civil or criminal, to- which they may be subject by reason of the alleged unlawful conspiracy or acts charged in said bill of complaint. The question as to instituting criminal proceedings has no place in this *507opinion, and this court leaves that matter to the proper law-enforcing' authorities, without suggestion or intimation.
An order may be entered in conformity to the terms of this opinion. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219221/ | BREWSTER, District Judge.
The petitioner seeks to recover upon a contract of war risk insurance in the amount of $19,000, for which he applied May 1,1918, and which was kept in force by the payment of premiums to July 31,1919. The petitioner was discharged from service on June 20, 1919, and his claim is that at the time of his discharge he was totally and permanently disabled within the purview of the contract.
He entered the service in good physical condition, except that his doctor had suspected a predisposition to tuberculosis but had never been able to find any positive symptoms. When in Camp Devens he was inoculated for typhoid fever, and this resulted in three weeks’ hospitalization in the base hospital, where the patient ran a temperature hut was not seriously ill. He did develop *510then a cough which persisted until long after his discharge from the service. He recuperated, however, and returned to his duties, went overseas in July, 1918, was later transferred to the engineering corps, and was in France until the Armistice, some of the time in active combat, and was thereafter with the army of occupation until May, 1919.
While in France he endured the hardships, exposures, and privations of those actively engaged in warfare. There is no record of any illness or hospitalization while in France and, so far as the records disclose, he was at all times able to perform his full duties as private and later as corporal. He participated, on September 11 and 12, 1918, in the St. Mihiel offenses.
According to the testimony of the veteran, during his stay in France he did have pain in the baek intermittently and with varying degrees of severity just below the right shoulder blade, and he was more easily fatigued than he had been before his illness at Camp Devens. On June 20, 1919, he was discharged, and, according to the service records, he was discharged without disability. Upon his discharge he returned to his home in Pittsfield, Mass.
A month later he resumed his pre-war occupation with the General Electric Company, his former employer, working as tester in the laboratory at the Pittsfield plant.
He remained there until July, 1920, when he was transferred to the company’s plant in Lynn. On January 13, 1921, he was laid off on account of lack of work and because there was no available position to which he could be transferred. During all this period, from July 8, 1919, to January 13, 1921, the petitioner carried on his employment without loss of time or wages which could be attributed to any physical impairment. At the Pittsfield plant he earned over $1,200, and at the Lynn plant his wages averaged slightly over $28 per week. According to the employment record, his work was at all times satisfactory. His wages during his post-war employment were increased from 47 cents per hour to 60 cents per hour.
In March, 1921, the petitioner suffered an acute attack of pleurisy and in May was removed to a hospital in Pittsfield, where he underwent an operation for empyema. It was then definitely ascertained that he had tuberculosis of the pleura, and a portion of two ribs was removed. He was in the hospital until December, 1921, and for three years thereafter he was totally incapacitated for any work. Since that time he has not entered upon any gainful employment with reasonable regularity.
Taking as favorable a view of the evidence as is possible, the petitioner’s ease comes to this: Prior to his entry into the service his physician suspected that he might have a latent tubercular condition, and in 1921 it was found that he had chronic tuberculosis of the pleura. This condition was aggravated, first, by the inoculation and resultant fever, and again by the hardships and exposures of his service overseas. But at no time during the period of his service or of his occupation did his disease progress to the point where it interfered with a full and satisfactory performance of the duties assigned to him. The petitioner’s testimony that he received medical treatment while he was working at Pittsfield is not borne out by the affidavits of the physician who, according to the petitioner, attended him.
There is no substantial evidence that his employment at comparatively light work was detrimental to his health or accelerated the progress of the disease to any great degree.
If it be conceded that the petitioner had a disability which arose while the contract of insurance was in force, this disability was due to a progressive disease which, up to the time of the acute attack of pleurisy, had not advanced to such a stage as to render the petitioner unable to carry on with reasonable regularity a substantially gainful occupation. Botts v. United States (C. C. A.) 65 F.(2d) 1011.
It is the petitioner’s contention that, since he was afflicted with a chronic tubercular condition during the period of his employment, the employment jeopardized his health or retarded his recovery and that, therefore, the record of employment should not operate to defeat recovery on the policy, citing United States v. Thomas (C. C. A.) 64 F.(2d) 245; United States v. Burleyson (C. C. A.) 64 F.(2d) 868.
Ford v. United States (C. C. A.) 44 F. (2d) 754, and United States v. Godfrey (C. C. A.) 47 F.(2d) 126, in this circuit, also lend support to petitioner’s argument; but in Cranshaw v. United States (C. C. A.) 65 F.(2d) 649, 650, it is said that these cases “mark the extreme limit to which this or any other court has gone in a liberal interpretation of the statute in favor of war victims.”
United States v. Alvord (C. C. A.) 66 F. (2d) 455, and United States v. Clement (C. C. A.) 67 F.(2d) 150, evince a noticeable swing toward a more narrow interpretation of war risk contracts, at least in those cases *511where there is involved the question of the legal effect of a record of employment. In the Alvord Case there was a finding that the employment was frequently interrupted because of illness, and there was medical evidence tending to show that the arduous labor undertaken by the veteran was detrimental to his health. Nevertheless, the court held that the employment was fatal to the petitioner’s claim of total disability.
In the ease at bar, the facts are less favorable to the petitioner in these respects than were those before the court in the Alvord and Clement Cases. These cases rule and require a judgment for the defendant.
See, also, United States v. Hammons (C. C. A.) 66 F.(2d) 912; United States v. Perkins (C. C. A.) 64 F.(2d) 243.
I allow defendant’s motion for a judgment in its favor. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219222/ | KIRKPATRICK, District Judge.
This was a reclamation proceeding for a pneumatic tubing system installed, under a *514conditional sale agreement, in a department store operated and owned by the bankrupts.
As to the character of the goods and as to the manner of their attachment to the realty, the following quotation from the testimony of one of the claimant’s officers may be taken as establishing the facts:
“The motor and compressor and .the line and station materials could easily be "unscrewed and taken away without in any way damaging the freehold. The tubes themselves were not new and were suspended from the ceiling by brackets which can be easily unscrewed, and all of said tubing, except the tubes actually embedded between the floors or going through partitions could be unscrewed and detaehed by skilled workmen without material injury to the freehold. Tubes in the walls are not customarily removed by The Lamson Company, but such parts of the tubes could be sawed off flush with the walls and allowed to remain in the walls and properly capped and covered so as to preserve the appearance of the wall. The value of the small portion of the tubes in the walls or between the floors would not exceed $20.00. Outside of such portion of the tubes, the whole system could be easily removed from the store without damaging the freehold.”
The contract of conditional sale specifically provided that “no part of the apparatus * * * shall become a fixture by reason of being attached to real estate.”
The contract was not recorded as required by the Pennsylvania Uniform Conditional Sales Act (1925, May 12, P. L. 60S [69 PS § 361 et seq.]).
The claimant’s entire argument depends upon section 7 of the Act (see 69 PSi § 404) being applicable to its tubing system. His argument is that section 4 (69 PS § 401), reversing the traditional policy of the common law of Pennsylvania, makes all conditional sales agreements presumptively valid. Section 5 (69 PS § 40-2), however, imposes a condition upon the validity so granted and requires that, in order to obtain it, the contract must be filed as provided in the act, otherwise it will be void as to any purchaser from or any lien creditor of the buyer.
If this were all, the claimant coneededly would have no ease, because section 5 contains no limitation as to the kind and character of the goods to which it relates, the claimant has failed to record his contract, and the trustee is coneededly in the position of a lien i creditor.
But, says the claimant, the next section of the Act, section 7, deals specifically with fixtures and it was obviously the intention to deal with them only in that section, thus removing them from the general provisions of section 5, changing the conditions to be met by the seller, and providing that only certain classes of persons (limited to owners, purchasers, mortgagees, and' incumbrancers of the realty) can take advantage of his default. It is true that section 7 does not make the reservation of property void as against .creditors on failure to record the contract.
Whether the argument is a sound one need not be determined because the goo ds which are the subject of this proceeding are not fixtures within the meaning of either the first or second clauses of section 7. They are not “so attached to the realty as to form a part thereto” nor “so attached to the realty as not to be severable without material injury to the freehold.” This is the conclusion of the referee from the testimony of the plaintiff’s officer and I affirm it.
Citing a New York case (Madfes v. Beverly Development Company, 251 N. Y. 12, 166 N. E. 787, 788), the claimant argues that the seventh section of the act covers a third class of “fixtures” not specifically mentioned which ineludes his goods. But the Court of Appeals of New York, in concluding that the act applied to “a large class of movables which, after attachment, continued to be personal property, or became real estate, accordingly as the owner of the chattels and the owner of the real estate might have agreed,” was apparently referring to a clause of the act which has not been adopted in the Pennsylvania statute. That elause, as quoted on page 14 of the opinion of the court in 251 N. Y., 166 N. E. 787, 788, begins, “If the goods are so affixed to realty * * * as to become part thereof but to be severable without material injury to the freehold.” There is no similar clause in the Pennsylvania act. The purpose of the Pennsylvania act taken as a whole clearly was to treat goods attached to the realty but severable without material injury to it, not as fixtures at all but as ordinary moveables, and to deal with them in the same manner as any other personal property. This construction brings them under section 5 of the act. The provision in the contract reserving property in the seller is therefore void because the contract was not filed, and the title is in the trustee.
The claimant raises the question of his right to participate .as a general creditor. *515It does not appear that this question is before the court.
The court affirms the findings and order of the referee and the reclamation petition may be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219223/ | DAWSON, District Judge.
This cause is submitted on the special and general demurrer of the defendants to the petition. There is a very apparent misjoinder of parties, and the petition is perhaps fatally lacking in definiteness as to the acts relied upon to justify'recovery. Aside from these defects, however, the demurrers must be sustained.
Boyd, a private citizen who brings this suit in behalf of the United States and in his own behalf, seeks to sustain his right to maintain this action under sections 231 and 232, title 31 USC A. These sections read as follows :
Ҥ 231; Any person not in the military or naval forces of the United States, or in the militia called into or actually employed in the service of the United States, who shall do or commit any of the acts prohibited by any of the provisions of section 80 of Title 18, shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act, together with the costs of suit; and such forfeiture and damages shall be sued for in the same suit.
“§ 232. The several district courts of the United States, the supreme court of the District of Columbia, the several district courts of the Territories of the United States, within whose jurisdictional limits the person doing or committing such act shall be found, shall, wheresoever such act may have been done or committed, have full power and jurisdiction to hear, try, and determine such suit. Such suit may be brought and carried on by any person, as well for himself as for the United States; the same shall be at the sole cost and charge of such person, and shall be in the name of the United States, but shall not be withdrawn or discontinued without the consent, in writing, of the judge of the court and the district attorney, first filed in the ease, setting forth their reasons for such consent.”
Section 80 of title 18, referred to in section 231, is a part of section 35 of the Criminal Code (as amended by Act Oct. 23,1918, 40 Stat. 1015), which was drawn from Rev. St. § 5438 (Act March 2,1863,12 Stat. 696), as amended by Act May 30, 1908 (35 Stat. 555).
Prior to the amendment of October 23, 1918, it was well settled that section 35 of the Criminal Code was directed solely against those offenders who made, or caused to be made, fraudulent claims against the government. For the first time the amendment of October 23, 1918, made it a criminal offense, under section 35 of the Criminal Code, to knowingly and willfully falsify, conceal, or cover up by any trick, scheme, or device, a material fact, for the purpose and with the intent of cheating, swindling, or defrauding the government of the United States, or any department thereof, or any corporation in which the United States -is a stockholder. Capone v. United States (C. C. A. 7th Cir.) 51 F. (2d) 609, 76 A. L. R. 1534.
Section 231 of title 31 USC A, appears in the Revised Statutes as section 3490, and was derived from the Act of March 2, 1863 (12 Stat. 698, § 3), and its language has not been changed by amendment since that time. As it appears in the Code, the language is identical with that found in section 3490; except that reference is made to section 80 of title 18 instead of section 5438 of the Revised Statutes. Of course, this change was merely an editorial change to let the section refer to a Code section rather than the Revised Statutes.
Section 232, title 31 USCA, is found in the Revised Statutes as section 3491, and was derived from the Act of March 2, 1863 (12 Stat. 698, § 4), and it has not been amended since its enactment.
Section 231 (Rev. St. § 3490) does not, in terms, define the causes of action therein created; but it refers to Rev. St. § 5438, for enumeration of such causes of action. When we turn to section 5438 and learn its legislative history, we find, as heretofore stated, that prior to October 23, 1918, the only offenses therein denounced were those having to do with the making of fraudulent claims against *517the government. Therefore such acts must be held to have been the causes of action created by section 3490 of Revised Statutes (section 231, title 31 USCA), and authorized to be maintained by a private citizen by section 3491, Revised Statutes (section 232, title 31 USCA).
The subsequent amendment of section 5438, made in 1918, did not become a part of sections 3490 and 3491 (sections 231 and 232, title 31 USCA). As pointed out by Mr. Justice Thompson in Kendall v. U. S., 12 Pet. 524, 625, 9 L. Ed. 1181, and referred to with approval in the case of In re Heath, 144 U. S, 92, 12 S. Ct. 615, 36 L. Ed. 358, it is permissible and not an uncommon practice for a legislative body to adopt by reference other legislative acts; but “such adoption has always been considered as referring to the law existing at the time of adoption; and no subsequent legislation has ever been supposed to affect it. And such must necessarily be the effect and operation of such adoption; no other rule would furnish any certainty as to what was the law; and would be adopting prospectively, all changes that might be made in the law.”
The fact that that part of section 5438 of the Revised Statutes which contains the amendment of October 23, 1918, appears in the United States Code as section 80 of title 18, and that the same compilation contains sections 3490 and 3491 of the Revised Statutes as sections 231 and 232 of title 31, does not change the situation. The inclusion of these sections in the Code did not have the effect of re-enacting them. The act providing for the codification of the general and permanent laws of the United States expressly declares that the act shall not be construed as repealing or amending any law, or as enacting as new law any matter contained in the Code (see 1 USCA p. 3).
The basis of the liability attempted to be asserted against the defendants in this ease is, not that they made or assisted in the making, or permitted the making, of any false claim against the United States; but that they “for the purpose of defrauding and cheating the United States of taxes due and payable under the said Revenue Act of 1918, connived and schemed to circumvent the laws of the United States, in order to relieve the said Knebelkamp from the payment of the said taxes which are now due and owing.”
If any part of section 5438 of Revised Statutes (section 80, title 18 USCA) covers the acts complained of, it is the part added by the amendment of October 23, 1918; but, as heretofore stated, these acts could not have been acts in contemplation of the Congress, for which a right of action was given by the enactment of sections 3490 and 3491, Revised Statutes, many years before the amendment.
I am therefore of the opinion that the plaintiff cannot maintain this action, and counsel for the defendants will prepare an order conforming to the views herein ex-, pressed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219225/ | KENNERLY, District Judge.
This is a suit (subdivision 16, § 41, title 28 USCA) by Maleolm M. Meek, receiver (appointed by the Comptroller of the Currency) of the City National Bank & Trust Company of Corpus Christi, Tex., a national hank (hereinafter for convenience called bank), against George H. Belote and wife, Ruby S. Belote, on a note of Belote to such bank, dated April 13, 1931, for $3,500, bearing interest and providing for attorney’s fees, and bearing certain credits, and long past due. Also on a note for $4,500, executed by Belote and Mrs. Belote to Ed Grossman and wife, Sadie Grossman, dated March 31, 1931, bearing interest, and providing for attorney’s fees, and secured by the vendor’s lien retained by the Grossmans on lot 11, block 7, Bay View addition to Corpus Christi, Tex., which note has been, it is alleged, transferred by the Grossmans to such bank, and is held by such hank as collateral security for the $3,500 note. As this ease involves alleged liens on the Belotes’ former and present homesteads, in order to distinguish between the two homesteads, lot 11, block 7, on which the $4,500 is alleged to be a lien, is sometimes hereinafter referred to, for brevity, as new homestead.
Defendants plead a discharge in bankruptcy (of Belote) against both notes, lack of consideration and failure of consideration of the $4,500 note, and that the vendor’s lien claimed by plaintiff to secure the $4,500 note is void under the Constitution and other laws of Texas, relating to homesteads. They also deny that the bank is the owner of the $3,500 note. They also deny that Mrs. Belote executed eithér of the notes, or the liens securing same.
The facts are as follows :
(a) The $3,500 note is owned by the bank. The indebtedness of Belote to the bank, evidenced by such $3,500 note, arose in this manner: On December 7, 1929, Belote, who had been a customer of, and borrowed from, the bank, for some time, owed it $2,000, evidenced by a note for that sum, dated November 30, 1929, due ninety days after date, which was unsecured. On December 7, 1929, he borrowed from the bank $1,500 additional, executing his note, of that date, to the bank for that sum, due ninety days after date, and to secure both notes executed a deed of trust mortgage on lot 22, block 2, in the Oak Park addition to Corpus Christi, Tex., which is *520sometimes hereinafter, for brevity, referred to as old homestead. Other property was included, which has no bearing nor effect on the questions here, and need not be further considered. This mortgage was filed for record August 12, 1930. Mrs. Belote executed neither these notes nor the mortgage. The $3,500 note sued on is a continuation, extension, and/or renewal of these notes of December 7,1929.
September 1, 1930, Belote having completed a dwelling house, etc., on old homestead, moved thereon with his wife and family. Prior to September 1, 1930, but subsequent to December 7, 1929, he had placed thereon certain building material, preparatory to the erection of such dwelling house, etc., and it became the homestead of himself and wife probably prior to September 1, 1930, but was not their homestead on, or prior to, December 7, 1929, when such deed of trust mortgage was executed by him to the bank to secure the $3,500 indebtedness. Neither Belote nor his wife intended as early as December 7, 1929, to make such property their homestead, nor had they made any preparation so to do. Whatever building material (if any) was placed on the property prior to December 7, 1929, was not placed there with the then intention of using same-in erecting a building, etc., to be used as a homestead. While the evidence as to the date such property became their homestead is conflicting, taking all of it into consideration, including statements made by Belote and wife in certain other later liens executed by them on the property, prior to the time (September 1, 1930) they occupied it as their homestead, and including their statements and action respecting such matters throughout the entire period of time, the weight of the evidence supports, and compels, the above finding.
The old homestead continued as the homestead of the Belotes until exchanged by them for new homestead, as hereinafter set forth.
About May 15, 1930, while Belote and wife apparently were planning the erection of, and to enable them to erect, the dwelling house, etc., on old homestead, they borrowed $8,500 from a trust company in Corpus Christi (Corpus Christi Bank & Trust Company, hereinafter sometimes for convenience called trust company), executing and creating liens thereon in favor of such trust company. In November, 1930, it was proposed that the trust company sell and transfer $8,000 of such $8,500 loan to a life insurance company, but such insurance company declined to take same, unless and until the bank’s mortgage securing the $3,500 indebtedness was either released or made inferior and secondary to the lien of the insurance company. Thereupon, the bank, at the special instance and request of Belote, made its lien against the old homestead secondary and inferior to that of the insurance company. This was done by instrument, executed by the bank, dated November 20, 1930, and duly recorded.
The lien of the bank, first as a first lien and then as a second .lien, on the old homestead to secure such $3^500 indebtedness, thus continued in full force and effect until released in connection with the exchange of the old homestead for the new homestead, as herein set forth.
(b) The $4,500 note is owned by the bank, and was executed by Belote and Mrs. Belote under the following circumstances: On and prior to March 16, 1931, Ed Grossman and wife, Sadie Grossman, owned lot 7 in block 11, Bay View addition to Corpus Christi (the property which secures the $4,500 note and which is referred to as new homestead), and, on that date, the Grossmans, upon the one hand, and the Belotes, upon the other 'hand, entered into an exchange agreement, whereby it was 'agreed that Grossman’s property (new homestead) should be exchanged for Belote’s property (old homestead). In the exchange agreement, the value of Belote’s property (old homestead) is stated to be $18,500, against which -there is stated to be a lien of $8,000, and another lien of $500, or a total lien of $8,500. Therein, the value of the Grossman property (new homestead) is stated to be $10,000, against which there is stated to be certain minor paving liens. Such exchange agreement sets forth that the Gross-mans are to convey to the Belotes their property, and the Belotes are to convey to the Grossmans their property, and such exchange agreement further provides as follows:
“Each of the parties hereto shall assume the encumbrances and liens on the property conveyed to him. The party whose property to be conveyed and equity therein is of least value as fixed hereby shall pay to the other party such difference in cash and notes as follows: -
“No Cash Difference nor Notes other than those assumed as stated above.
“Each party hereto agrees to furnish the other with a complete abstract or title policy of the property to be conveyed showing merchantable title to his property which shall be eonveyed free and clear of all encumbrances except those herein named, and subject to all restrictions applicable to the plat or addition of which said land is a part.
*521“Within ten days from the receipt of abstract, the party receiving same shall accept title or return abstract with written objections thereto. Failure to comply with this provision shall be construed as an acceptance of the title.
“In the event title is not good and cannot be made good within a reasonable time, the earnest money deposited is to be returned to the party depositing same upon cancellation and return of this contract, but the right to enforce specific performance hereof is retained at the option of either party hereto.
“When title objections have been cured, each party agrees to deliver a good and sufficient warranty deed properly conveying his property to the other as per the terms above stated.”
The lien of the bank securing the $3,500 indebtedness is not mentioned in such exchange agreement. However, an examination by the Grossmans of the Belotes’ abstract informed the Grossmans of sueh lien, and thereupon they notified the Belotes that they would not make the exchange, unless the bank’s mortgage securing such $3,500 indebtedness be released. It was then agreed that, in connection with the conveyance of the Grossman property to the Belotes in making such exchange, the Belotes would execute to the Grossmans the $4,500 vendor’s lien note sued upon, secured by vendor’s lien retained by the Grossmans in their deed to the Belotes, and that the Grossmans would transfer sueh $4,-500 note, and lien securing same, to the bank, such note to be held by the bank as collateral security for the $3,500 indebtedness. And that the bank would thereupon release its lien against Belote’s old homestead. In addition, the arrangement was that Belote would obtain some person to purchase and take over from the bank the $4,500 note, and, when this was done, Belote was to receive out of the proceeds of sale thereof $1,000, and the other $3,500 was to be retained by the bank to pay off the $3,500 indebtedness. Except that Belote was unable to find a purchaser for the $4,500 note, and it remained the property of the bank, and the Belotes never at any time received the $1,000, these arrangements were carried out, and papers, deeds, ete., carrying out same were duly executed, and/or acknowledged.
There is no pleading in this case by the Belotes, attacking as a fraud upon them, or upon Mrs. Belote, either sueh exchange of property, or the execution of the $4,500 note, or the reservation of the vendor’s lien securing same. Neither axe there pleadings setting up accident or mistake. Even if it had been pleaded, there is no sufficient evidence of either fraud, accident, or mistake to permit the Belotes to escape the effect of their action. All the papers in connection with the property exchange and the $4,500 note and lien securing same were executed and/or acknowledged, in the manner required by Texas law, and Mrs. Belote (as well as Belote) then had full knowledge of the bank’s $3,500 lien on the old homestead, and of all other facts in connection therewith, and in connection with sueh exchange, and sueh $4,500 note and the lien securing same.
(c) On July 15, 1931, Belote filed in this court his petition in bankruptcy, and was duly adjudged a bankrupt, in accordance with the acts of Congress relating to bankruptcy. The property new homestead was in sueh proceeding set aside to him as his homestead, and as exempt. He was on December 22, 1931, discharged from all debts and claims which' are made provable against a bankrupt estate, and which existed prior to the date the petition in bankruptcy was filed, excepting such debts as are by law excepted from the operation of a discharge in bankruptcy.
1. It is at once apparent that the Be* lotes must be sustained in their resistance against the foreclosure of a lien against the new homestead, in so far as $1,000 of the $4,* 500 note is concerned, for the reason (among others) that sueh $1,000 was never advanced or paid by the bank to the Belotes, and there is no consideration to support that portion ($1,000) of the $4,500 note.
2. Defendants insist that the vendor’s lien claimed by the bank as security for the $4,500 note is void under article 16, § 50, of the Constitution of Texas. Reminding the court that a federal court sitting in a state will ordinarily follow the decision of the highest court of that state construing its Constitution and other laws, plaintiff and defendants each plant themselves and stand upon a decision of the Texas Supreme Court., and say, like Fitz-James, in Scott’s “Lady of the Lake,” when confronted by Roderick Dhu and his henchmen, “Come one come all, this rock shall fly from its firm base as soon as I.” '
Defendants stand upon Andrews v. Security National Bank, 121 Tex. 409, 50 S.W. (2d) 253, 83 A. L. R. 44. But it is clear that the facts in the Andrews Case and this case are essentially different. There, there was a finding of fraud on the wife, and laek of knowledge by the wife of the execution of the notes in question. Here, the finding is to *522the contrary. There, the indebtedness sought to be made a lien on the new homestead, at the time of the exchange,, was not a lien on the old homestead. Here, the $3,500 indebtedness was a valid lien on the old homestead. There, there was shown, as found by the court, an effort to defraud the wife, and, without her knowledge or consent, place a heavy lien and burden on and against her new homestead, which did not exist against her old homestead. Here, without fraud and with Mrs. Belote’s full knowledge and consent, there was placed on and against the new homestead only the same lien and burden as was already against the old homestead.
Plaintiff stands upon Woods v. West, 37 S.W.(2d) 129, 131, by the Commission of Appeals, but in which the Supreme ' Court approved the holdings of the commission. Either in the light of, or independently of, Woods v. West, I think plaintiff is right. Such vendor’s lien is not void under the Texas Constitution. See eases listed and discussed in the Andrews Case.
3. At the time of filing (July 15, 1931) of Belote’s petition in bankruptcy, the lien of the bank on the new homestead, securing the $4,500 note, was in full force and effect. The bank was named as a creditor in' the bankruptcy schedules, and such homestead listed and claimed as such. It was set aside to Belote as exempt.
The bankruptcy court was without jurisdiction to foreclose the bank’s lien on such homestead. It only had jurisdiction to set aside (as it did) the homestead to Belote. Lockwood v. Bank, 190 U. S. 299, 23 S. Ct. 751, 47 L. Ed. 1061. That the discharge of the bankrupt does not, under these circumstances, affect the lien of the bank on the homestead is well settled. •
4. It follows that plaintiff is entitled to a decree, directing the sale, in the manner to be set forth in such decree, óf the property securing the $4,500 note (new homestead), with application of the proceeds of sale to the costs of court and the balance owing on the $4,500 note (after deducting, as of its date, $1,000 not advanced by the bank thereon), but in no event to exceed the balance owing the bank on the $3,500 indebtedness, and with no personal judgment against defendants. In view of the circumstances of this case, equity calls for defendants to have 60 days after date of entry of decree in which to prevent sale by paying the required amount into the registry of the court.
Let' a decree be drawn and presented accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219226/ | KENNERLY, District Judge.
Walker-Craig Company (hereinafter called creditor) are here on briefs of their counsel, complaining of an order (not sent up) of a referee in bankruptcy, dated October 20, 1933, with respect to- their claim against this estate. No petition for review such as is required by Supreme Court General Order 27 (11 USCA § 53)1 appears to have been filed, but creditor delivered to the referee a paper excepting to the ruling of the referee, and giving notice of appeal to the judge of the court. The referee did not file *523the paper, hut both he and the trustee waived “Notice of Appeal.” 2
The referee transmits findings of fact and conclusions of law. These have not been filed by tbe clerk, but were doubtless intended by tbe referee to meet tbe requirements of General Order 27 that tbe referee “certify to the judge the question presented, a summary of the evidence relating thereto, and tbe finding and order of the referee thereon.”
1. There is first presented tbe question of whether tbe judge of tbe court has, by these proceedings, acquired jurisdiction to review the referee’s order complained of. That a mere exception to, and notice of appeal from, a referee’s order does not confer such jurisdiction is clear. Tbe proceedings will be dismissed.
2. Since no petition to review has been filed, and that justice may be done, creditor should not be precluded by this dismissal from seasonably filing such petition. Creditor may do so if filed within five days.
Let an order be presented accordingly.
Supreme Court General Order 27 is as follows: ‘‘When a bankrupt, creditor, trustee, or other person shall desire a review by the judge of any order made by the referee, he shall file with the referee his petition therefor, setting out the error complained of; and the referee shall forthwith certify to the judge the question presented, a summary of the evidence relating thereto, and the finding and order of the referee thereon,**
This paper is as follows: “Comes now, Walker-Craig Company, claimants in the above entitled and numbered cause, and excepts to the rulings of the Honorable Ira Webster, Referee in Bankruptcy, heretofore handed down on the 20th day of October, A. D. 1933, and gives Notice of Appeal to the Honorable District Judge of the United States for the Southern District of Texas, Brownsville Division.
“This the 28th day of October, A. D. 1933.
“Walker-Craig Company,
“By [Signed] H. B. Galbraith, B; N. Goodrich, Oscar C. Dancy, attorneys.
“Notice of Appeal in the above cause hereby-waived, this October 28th, A. D. 1933.
“[Signed] Ira Webster, Referee in Bankruptcy.
“[Signed] B. M. Freudenstein, Trustee in'Bankruptcy of J. W. Ainsworth, Bankrupt.*' | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219227/ | KENNER.LT, District Judge.
This is the petition of Walker-Craig Company, a creditor of this estate, to review an order of a referee in bankruptcy, refusing to allow creditor’s claim as secured, and allowing it only as unsecured. The matter was previously before the court. (D. C.) 5 F. Supp. 522.
The petition to review does not bear the file marks of tbe referee, bnt tbe record otherwise shows it to have been filed with him December 1,1933, and witbin the five days heretofore allowed. (D. C.) 5 F. Supp. 522.
The referee certifies the question presented by the petition for review,1 and transmits "Findings of Fact and Conclusions of Law.” 2
The petition for review is very general. In aid thereof, petitioner refers to certain *525briefs filed with tbe referee.3 Tbe briefs have been sent up and consist of a number of typewritten pages, citing eases and discussing various questions of law and fact. There has also been sent up:
(a) Certified copy of chattel mortgage from I. W. August to J.- C. Bennett, dated February 13, 1930, covering certain personal property (on which creditor is claiming a lien) to secure August’s note for $3,859.58 of that date to Bennett, bearing interest and providing for attorney’s fees.
(b) Certified copy of an assignment of such $3,859.58 note and mortgage, from Bennett (as party of first part) to Ainsworth & Colgin (as parties of second part). The consideration to Bennett for such assignment, as expressed therein, is Ainsworth & Colgin’s note for $2,700, dated December 5,1930', bearing interest, etc., payable to J. C. Bennett, in monthly installments of $150 each. In tbe assignment, Bennett reserves a lien to secure tbe $2>700 note in tbe following language: “Providing however, that the Party of the First Part hereby reserves a lien npon the said fixtures to secure the payment of the said note of $2,700.00.”
The $2,700 note was indorsed over to creditor (Walker-Craig Company) by Bennett.
(e) Copy of a lien, dated September 16, 1932, from Ainsworth & Colgin to creditor, covering three notes executed to Ainsworth & Colgin by G. C. Ellis, A. S. Lanier, and L. J. Schmidt, respectively, to secure the indebtedness of Ainsworth & Colgin to creditor. There are other copies of documents having reference to these three notes.
Creditor’s claim, filed with the referee, is substantially in the form prescribed by the Supreme Court, and is for a balance of $1,-266.46, claimed to be owing on tbe $2,700‘ note. The claim of security is in tbe following language: “That tbe consideration of said debt is balance due on note dated Dec 5-1930 — secured by Chattel Mortgage and three notes as collateral.”
There is among the papers sent up a written objection hy the trustee to creditor’s claim. Sueh objection does not bear the file marks of the referee, but presumably it was filed with him. It contains this language: “Your petitioner objects to the allowance of the claim, of the said Walker-Craig Company herein as a secured claim upon the ground that the said claimant, Walker-Craig Company, is not vested with the Chattel Mortgage heretofore referred to.”
The question before the referee and the question sought to be raised here is whether creditor, as set forth in its claim, has a lien on the personal property described in the-chattel mortgage, dated February 13, 1930[, from August to Bennett.
1. While it is contemplated by the Bankruptcy Act and amendments (11 USCA) and' the General Orders in Bankruptcy (11 USCA § 53) that petitions to review proceedings before a referee shall be filed with the referee, and the file marks and date of filing placed thereon by him, jurisdiction to review such proceedings is conferred upon the judge of the court, if a petition in proper form is delivered to the referee for filing, and treated as filed hy him. In re Wood (C. C. A.) 248 F. 246, 248.
2. Where as here the trustee’s objection to a claim has been delivered to the referee, and no file marks or date of filing placed thereon, but it has been treated as duly filed by the referee and all parties, it will be so treated by tbe co-urt.
3. Notwithstanding this view, referees, to preserve the rights of creditors and others, and in the interest of orderly administration, should place the file marks and date of filing on all papers filed with them under the Bankruptcy Act.
*5264. Petitions to review proceedings before a referee may not be aided by references therein to briefs on file, either with the referee or clerk. It is not contemplated by the Bankruptcy Act that the court shall search through many pages of briefs to discover the issue or question sought to be raised and presented by the petition for review.
5. The petition for review here states the questions sought to be raised and presented in this language: “That such order was and is erroneous in that it denied your petitioner’s claim as a secured claim in so far as being secured, by a chattel mortgage lien on the fixtures and equipment used in the grocery store of the said J. W. Ainsworth, bankrupt.”
Under this wording, the conclusions of the referee on the law with respect to this particular question may be reviewed, but not his findings of fact thereon.
6. When Bennett assigned the $3,859.-58 note, secured by such chattel mortgage, to Ainsworth & Colgin, in consideration of their $2,700 note to him, he retained a lien against the property described in such chattel mortgage to secure the payment of such $2,700 note. Subsequently, the $2,700 note was transferred by Bennett to creditor. Such transfer of the note carried with it to creditor the lien so retained by Bennett. It is the unpaid balance of $1,266.46 of the $2,700 note and such lien that creditor is presenting here. No rights of lien creditors or of third persons being involved, the issue being between creditor, upon the one hand, and the bankrupt and his trustee, upon the other hand, unaffected by the Texas Registration Laws, it is clear that creditor has a valid lien which equity will protect.
The referee should have allowed creditor’s claim as a lien against such property as well as against the three notes of Ellis, Lanier, and Schmidt. And after so doing, should have allowed creditor to proceed in some appropriate manner, either in the bankruptcy court or elsewhere, to subject such property to his lien, saving to general creditors the excess, if any, in the value of such property, over and above creditor’s claim.
The order of the referee will be reversed, and the matter sent back to him for proceedings not inconsistent with the views herein expressed.
Let an order be drawn and presented accordingly.
The referee’s certificate is as follows:
“I, Ira Webster, one of tbe Referees of said court in bankruptcy, do hereby certify that in the course of the proceedings in said cause before me, the following question arose pertinent to the said proceedings: Whether or not a creditor holding a lien upon fixtures and equipment of a grocery store could by assignment convey said lien to a purchaser, who afterwards filed his voluntary petition in bankruptcy, and retain a lien on said propérty. Title to said property having remained in the person executing lien, he never having been divested of such title by-foreclosure proceedings or otherwise.
“Brief Summary of Evidence.
“It is shown by the evidence and conceded by all parties concerned, that the subsequent bankrupt to whom the said chattel mortgage was conveyed by ‘assignment, was willing that the creditor making such assignment of chattel mortgage might retain a lien on said property and left it to the holder of said chattel mortgage lien to prepare such.papers as might be necessary to complete the transaction.
“It is conceded by the-Trustee and by the Referee that the transaction was. such as to sustain an equitable lien between the assignor and assignee ,of said original chattel mortgage lien, if they held such title as would enable them to execute a valitl lien upon said property.
“Findings .of the Referee.
“The Referee found, and so held, that the creditor, although holding a valid chattel mortgage lien on the fixtures and equipment aforesaid, had no •such title in and to the property as would enable ‘him to retain a lien on said property after assigning to another all of its right, title and interest in and to said lien and conveyed no such title in and to the property to the assignee of said lien as would enable the assignee to execute in favor of the assignor a valid lien on said property.
“The order of the Referee is attached hereto and asked to be considered as a part of this certificate.
“Upon petition of the attorneys for the creditors above referred to as assignor of 'said chattel mortgage lien asking that the finding and -ruling of .the Referee be sent up to his honor, Judge of' the District Court of the United States for the Southern District of Texas, for his opinion thereon and the matter is hereby so certified.
“Dated at Brownsville, Texas, this 2nd. day of December, A. D. 1933.”
The referee’s findings of fact and conclusions of law are as follows:
“Findings of Facts,
“On the 13th day of February, A. D. 1930, one I. W. August executed to J. C. Bennett a Chattel Mortgage, covering certain grocery store fixtures, and equipment, and a note in the principal sum of $3,-859.58 with interest at the rate of 8 per cent per annum from date.
“Later, and before said note had been paid, the mortgagor, I. W. August, closed his place of business and departed.
“The said J. C. Bennett did not then, nor has he as yet foreclosed his lien on the said fixtures.
“On the 5th day of December, A. D. 1930, the said J. C. Bennett transferred and assigned his lien on the said fixtures to Ainsworth and Colgin in consideration of their note dated December 5th, 1930, In the principal sum of $2,700.00 and the said J. C. Bennett assigned his lien on said fixtures to 'Ainsworth and Colgin, the said assignment reading in part as follows:
“ ‘Now, therefore, in consideration of the execution and delivery by the parties of the Second Part (Ainsworth and Colgin) to the Party of the First Part (J. C. Bennett) of their promissory note, dated at Brownsville, Texas, December 5, 1930, in the principal sum of $2,700.00, payable in equal monthly installments of $150.00 each, bearing interest at the rate of 8 per cent per annum, executed and delivered to the Party of the First Part, the receipt of which is hereby acknowledged and confessed, Party of the First Part does hereby assign, transfer and sell to Parties of the Second Part or their assigns the said note herein referred to secured by the said chattel mortgage; said Party of the First Part does hereby assign, . transfer, and set over to the said Parties of the Second Part and their assigns; all his right, title, lien, and -interest to the property in said chattel mortgage mentioned and described, as well as such chattel mortgage and all the rights, liens and powers under same to$ which the Party of the First Part is entitled and empowered, providing, however, that the Party of the First Part hereby reserves a lien upon the said fixtures to secure the payment of the said note of $2,700.00.’
“The note executed by Ainsworth and Colgin to J. C. Bennett bears the following endorsement:
“ ‘Pay to the order of Walker-Craig Company
“ ‘[Signed] J. C. Bennett*
'“J. W. Ainsworth, doing business' under the firm name of Ainsworth and Colgin, was adjudicated a bankrupt on April 18th, 1933. .On May 10th, 1933, Walker-Craig filed a Proof of * Claim in the sum of $1,266.46, the consideration of said debt being, ‘Balance due on note dated December 5th, 1930, sé•cured by.Chattel Mortgage and three (3) notes as collateral.*
“On August 8th, 1933, B. M. Freudenstein-, the trustee herein, filed objections to the allowance of the said claim of Walker-Craig Company as a secured claim.
“At a hearing on August 21st, 1933, set for the purpose of determining the validity of the purported- Chattel Mortgage held by Walker-Craig Company, the following testimony was introduced:
“1.. That J. C. Bennett was acting at all ■ times for Walker-Craig Company;
“2. That it was the intent of Walker-Craig Com‘pany to' retain, and the intent of J. W. Ainsworth to give a lien upon the said fixtures;
“3. No proceedings had been instituted nor effort made to foreclose the Chattel Mortgage given, by I. W. August to J. C. Bennett on the 13th day of February, A D. 1930.
“Conclusions of Law.
“1. The Referee is of the opinion that title to the fixtures in question was vested in I. W. August;
“2. That ¿either J. C. Bennett nor J. W. Ainsworth had any such title to the fixtures as would afford a basis for the execution of a lien thereon.;
“3. In order to have capacity to create a lien on property, the party attempting to give such lien must have some character, of title thereto.
“When J. C. Bennett, acting for Walker-Craig *525Company, executed the assignment of lien, said assignment conveyed to J. W. Ainsworth all of the right held hy Walker-Craig Company or J. C. Bennett which was a lien only; and conveyed to the said Ainsworth nothing more than a lien; hence, neither of the parties to the transaction had the capacity to create a lien as between Walker-Craig Company or J. C. Bennett and J. W. Ainsworth.
“The undersigned Referee, therefore, holds that neither Walker-Craig Company nor J. C. Bennett hold a valid lien as against said fixtures and equipment”
The petition for review is as follows:
“That your petitioner is a creditor of J. W. Ainsworth, the above named bankrupt, and that its claim has been allowed as a general claim, but .denied as being secured by a chattel mortgage on fixtures and equipment as asserted in petitioner’s claim filed herein.
“That on the 20th day of October, 1933, an order, a copy of which is hereto annexed, was made and entered herein.
“That such order was and is erroneous in that it denied your petitioner’s claim as a secured claim in so far as being secured, by a chattel mortgage lien on the fixtures and equipment used in the grocery store of the said J. W. Ainsworth, bankrupt.
“Reference is here made to briefs filed with the Referee on behalf of petitioner, one of said briefs filed before the Referee’s ruling on the claim, and the other afterwards.
“Wherefore, your petitioner feeling aggrieved because of such order, and prays that the same may be reviewed as provided in Bankrupt Baw' of 1898, and General Order XXVII. Dated December 1, 1933. ” | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219228/ | WAV, District Judge.
This is an action instituted by Mrs. Bodenheimer, a citizen and resident of North Carolina, against “Confederate Memorial Association,” a corporation chartered under the laws of Mississippi.
In her declaration plaintiff alleges that defendant is the owner of a parcel of land sit-, uate in the city of Richmond, on which is located a building known as “Battle Abbey,”, in which building defendant conducts a mu*527seum and art gallery to which admissions are charged to the members of the public; that on the 28th of November, 1931, in company with her husband, she visited the building and grounds so owned and operated by defendant, paying the usual admission fees charged by defendant to members of the public, and, upon the payment of such fees, she and her husband entered “Battle Abbey,” and, after viewing the exhibits, met the superintendent, who invited them to visit the buildings and grounds known as “Confederate Soldiers’ Home,” located nearby. Plaintiff alleges that she and her husband accepted the invitation, and in leaving “Battle Abbey” by a regular exit they passed over a concrete walkway on the property of defendant, maintained by it for the use of plaintiff and other’s visiting “Battle Abbey,” which walkway it is alleged, due to improper and negligent construction and to improper repairs, had become broken, buckled, and uneven, thereby rendering it unsafe to walk thereon; that said walkway had been in such bad state of repair for a long time prior thereto and defendant’s agents and servants had failed to repair the same, although the condition of the walkway was well known to them and to defendant; that as plaintiff emerged from the building, and while she was passing over the walkway in question, and in the exercise of due care for her own safety, she stepped on a part of the walkway where the same was buckled and broken, which gave way in such manner as to throw her violently against the walkway, as a result of which fall she sustained serious permanent injuries.
Plaintiff further alleges in general terms that defendant corporation was also guilty of negligence in the selection of its agents, servants, and employees whom it had placed in charge of the museum and grounds, but there is no showing in the declaration of any causal connection between the alleged failure to exercise reasonable care in the selection of its agents, servants, and employees and plaintiff’s injuries.
Defendant pleaded the general issue, and filed a special plea in which it avers that defendant association is a charitable institution, and for that reason cannot be held liable to plaintiff for the damages sustained by her as the result of the negligence charged in the declaration. With its special plea defendant filed a duly certified copy of its charter of incorporation, from which document it appears that the purposes for which defendant association was formed are as follows:
“The purpose of this incorporation is, to erect at some suitable place to be hereafter selected as herein provided for, a building to be known and designated as The Confederate Memorial Institute and to collect, arrange and preserve therein statues, portraits, photographs and other pictures of the soldiers and sailors of the Confederate States Army and Navy of every rank, from that of the private to that of the General Commanding, who served faithfully the Confederate Cause, and also of civilians, including our noble women, who were devoted to the South; also such archives, relics, mementoes, records, histories, papers, books, orations, poems, paintings, pictures and literature of every kind, and everything else illustrative of the self-sacrifice and denial of the Confederate soldiers and sailors, and the Southern people, their courage- and heroism during said war, and their constancy and devotion to the cause for which they fought, together with the official acts of each of the States of the Southern Confederacy, and all debates therein and proclamations of their Governors, just before, during, and just after the war, and all other matters illustrative of the character, life, spirit and motives of the South and her people, including the period anterior, during and subsequent to the war, calculated to enable future historians to obtain such reliable facts and data as will assist them, in writing fair, accurate and impartial history of said war and of the South, the said Association being educational, patriotic and historical at all times. And this Corporation shall have the right to compile and publish, and to have compiled and published books, plans, charts, and other papers and documents relating to the purposes for which it is organized and to apply for and hold copyrights and patents neeessary for its- protection and to sell and dispose of the same.” (Italics supplied.)
Plaintiff .traversed the special plea; by agreement of the parties a jury was waived, and all matters of law and fact presented by the special plea were submitted to the court for decision. At the hearing on the special plea, defendant, to show that it had adhered in its activities to the purposes set forth in its charter of incorporation, introduced two witnesses who described somewhat in detail its activities from its incorporation until the present time. No other testimony was offered by either side. This testimony shows beyond doubt that those in charge of the association have at all times adhered strictly to the purposes for which it was originally created.
*528From the testimony it clearly appears that the funds derived from admission fees are scarcely sufficient to pay the necessary expenses of keeping “Battle Abbey” open for the benefit of historians, students, and the general public; that there has never been any profit from the operations of the association, and, even if there were profits therefrom, the trustees, under the terms of the charter, would be required to expend such profit in the acquisition of additional historical data; that defendant is a nonstock corporation, and the sole purpose for which the institution is maintained is to make available for historians, students, and the public generally valuable Confederate historical documents, portraits, paintings, and the like, which purpose is wholly public in its nature; and that the only paid employees of the association are a hostess, a superintendent of buildings and grounds, and an assistant to such superintendent. It further appears from the testimony that the total income for the year was $4,665, $2,565 of which was derived as income from endowments and from other sums donated for the purpose of furthering the objects of the association, that the remaining $2¡,100' was derived from gate receipts or fees, and that the association ever since its organization has been, and still is, dependent upon the voluntary contributions and services of its members and friends for the continuance of its existence and activities.
Is defendant a strictly charitable institution in the broader and more inclusive sense? The text-books and decisions contain numerous definitions and descriptions of charitable institutions, but it is deemed desirable to refer here to a few only of them. In Ettlinger v. Trustees of Randolph-Macon College (C. C. A. 4th) 31 F.(2d) at page 870, it is said:
“It is clear that a corporation is to be deemed eleemosynary or charitable where its property is derived from charitable gifts or bequests and is administered, not for the purpose of gain, but in the interest of humanity; and an educational institution, established and endowed by private charity, falls clearly within the classification.”
In his “Notes on Municipal Corporations” (1922 Ed., pp. 101,102), Professor Lile gives the following illustrations of charitable trusts and organizations:
“For convenience these trusts are usually incorporated, and such corporations are termed charitable corporations. Familiar illustrations of such public charities or private foundations (i. e. not owed, or directly controlled by the state, nor supported by public funds) are educational institutions, like Washington and Lee University, and the numerous other colleges in Virginia, not established by the State; hospitals not conducted for profit; endowed fellowships and scholarships; funds for education generally (e. g. the Slater fund for the education of negroes); orphan asylums; widows’ homes; pension funds for teachers, or others (e. g. The Carnegie Foundation for the Advancement of Teaching); funds for combatting disease (e. g. The Rockefeller Foundation); funds for public libraries, art galleries, etc.; Young Men’s Christian Associations; The Salvation Army, and religious organizations generally.
“It is especially to be noticed that the circumstances that some or all of the beneficiarries of such trusts are charged fees for services rendered or benefits enjoyed, does not alter the nature of the trust, since the fees so received are converted into the corporate treasury and become at once as completely dedicated to the purposes of the trust as the original corpus. One distinctive feature of such corporations is that no dividends are paid out as private profit to individuáis. A college or hospital, therefore, requiring payment of fees or other compensation from students or patients may be as completely and technically a charitable institution as a like institution whose services are free to all who apply.”(Italics supplied.)
That the query above stated must be answered in the affirmative is hardly open to serious controversy. It is at once apparent from the charter and the testimony that all of defendant’s purposes and activities are absolutely foreign to any thought of pecuniary or personal profit, and that the real purpose of its incorporation and perpetuation is essentially a public purpose.
Therefore, it seems to me that the sole remaining issue presented by the pleadings and the proof, is whether or not, assuming that defendant’s representatives, employees, and servants, in the course of their work of maintaining the institution in question, were guilty of negligence in the construction and maintenance of the walkway in question leading from “Battle Abbey,” and that such negligence was the sole proximate cause of plaintiff’s injuries, she is entitled to recover against defendant a judgment therefor, and to enforce such judgment by appropriate process against the property and assets of defendant association.
Decisions in eases more or less similar to the instant case are numerous, but not without serious apparent conflict in their eonclu*529sions. To undertake to analyze and distinguish many of them for the purpose of the decision of the instant case would be to extend the opinion unduly and unnecessarily. Many of the decisions are discussed and reviewed in the opinions in the following cases: Ettlinger v. Trustees of Randolph-Macon College (C. C. A.) 31 F.(2d) 869-873; Weston’s Adm’x v. St. Vincent’s Hospital, 131 Va. 587-618, 107 S. E. 785, 23 A. L. R. 907; Hospital of St. Vincent of Paul v. Thompson, 116 Va. 101-119, 81 S. E. 13, 51 L. R. A. (N. S.) 1025; and Roosen, Adm’r, v. Hospital, 235 Mass. 66, 126 N. E. 392, 14 A. L. R. 563, and the notes to the latter case found in 14 A. L. R. pages 572-604.
Recovery of damages for personal injuries was sustained in Hospital of St. Vincent of Paul v. Thompson, supra, 116 Va. 101, 81 S. E. 13, 51 L. R. A. (N. S.) 1025, on the ground that the injured party was not a beneficiary of the charity but a stranger thereto, she having, at the request of a sick friend who was entering the hospital for treatment, accompanied the latter for the purpose of looking after the sick friend until she was placed in charge of the hospital authorities. The court held that to such stranger to the charity, the hospital owed the duty to exercise ordinary care to have its premises in a reasonably safe condition, and that it had failed to perform that duty, as a proximate result of which negligence Mrs. Thompson was injured by falling into an elevator shaft.
In Weston’s Adm’x v. Hospital, supra (decided in 1921) 131 Va. 587, 107 S. E. 785, 23 A. L. R. 907, recovery against the hospital was denied in a suit by the personal representative of an infant to recover damages for death by wrongful act. The facts on which recovery against the hospital was sought were such as to make a strong sympathetic appeal. In that ease, the husband of an expectant mother engaged a room for her as a pay patient, to be occupied by her during confinement. The infant, immediately after birth, was delivered to the night nurse, an employee of the hospital, and died soon afterwards as the sole result of burns caused by a hot water bottle negligently applied by the nurse in the course of nursing furnished by the hospital. The court held that the hospital owed the duty to decedent to exercise due care in the selection and retention of the nurse in charge of the patient; that no negligence in that respect was shown, and, therefore, denied recovery against the hospital. The basis of the decision was that the infant, being a beneficiary of the charity, although a pay patient, there could be no recovery for its death in the absence of a showing that the hospital authorities had been guilty of negligence in the selection and retention of the nurse whose negligence caused the death.
In Ettlinger v. Trustees of Randolph-Macon College (C. C. A.) 31 F.(2d) 869, 870 (1929) plaintiff, a student in RandolphMaeon Academy, sought to recover damages from the trustees of Randolph-Maeon College, Inc., for personal injuries sustained by him when that academy was burned. The facts are stated in the opinion by Circuit Judge Parker, as follows:
“This action was instituted in the court below in behalf of one Reginald Ettlinger, hereafter called the plaintiff, against the Trustees of Randolph-Maeon College, Inc., as defendant, to recover damages for personal injuries sustained by him when the RandolphMaeon Military Academy at Front Royal, Va., was destroyed by fire. The academy was owned by the defendant, and plaintiff was a student therein. He alleges that defendant was negligent in not maintaining the electric wiring and fixtures in the aeademy in proper condition, in not providing that building with adequate fire escapes, and in not maintaining a night watchman on the premises. The trial judge directed a verdict for defendant, and from a judgment thereon plaintiff has appealed.
“The defendant is a nonstock corporation chartered and organized at the instance of the Conference of the Methodist Episcopal Church of Virginia, for the purpose of carrying on the work of education. It operates a system of schools and colleges, not for the sake of profit, but for the education and enlightenment of the people. Its property has come to it through charitable gifts and bequests, and this together with what is received from tuition is used for the purpose of education. It makes special rates to sons of ministers and young men studying for the ministry' and loans to needy and deserving students. A charge is made for board and tuition, but the amount realized therefrom does not by any means equal the cost of the work which is being carried on. The Military Academy at Front Royal was one of the schools operated by defendant, and plaintiff was attending it as a regular paying student.” (Italics supplied.)
/After referring to the different theories upon which recoveries against charitable corporations and institutions have been denied, Judge Parker continued:
*530“A policy of the law which prevents him who accepts the benefit of a charity from suing it for the torts of its agents and servants, and thus taking for his private use the funds which have been given for the benefit of humanity, which shields gifts made to charity from ‘the hungry maw of litigation’ and conserves them for purposes of the highest importance to the state, carries on its face its oiun justification, and, without the aid of metaphysical reasoning, commends itself to the wisdom of mankind. It is significant that almost without exception 'the courts, while giving different reasons for the rule, have not hesitated to apply it where the one seeking to enforce liability against a charitable institution is one who has accepted benefits from it.” (Italics supplied.)
However, counsel for plaintiff contends that the instant case is distinguishable from the three cases last above cited and referred to in that here the declaration charges that defendant corporation was negligent not only in permitting the walkway in question to become and remain in an improper and unsafe condition, but was also guilty of negligence and lack of care in the selection and retention of the agents, servants, and employees whom'it placed in charge of the museum and grounds.
It is true that in Weston’s Adm’x v. St. Vincent’s Hospital, supra, it was held that the hospital owed the decedent the duty to exercise due care in the selection and retention of the nurse in charge of the patient and exempted the hospital from liability in that ease because the evidence failed to show any negligence of that character.
But in Ettlinger v. Trustees of Randolph-Macon College, supra, the court used this very significant language:
“It is true that many of the eases have stated the rule to be that a charitable corporation is not liable for the torts of its agents where due care is used in selecting them. This, however, is a correct statement of- the rule properly applicable in the ease of ordinary private corporations who employ physicians and surgeons to treat their injured employees. See Metzger v. Western Maryland R. Co. (C. C. A. 4th) 30 F.(2d) 50; Powers v. Massachusetts Homeopathic Hospital (C. C. A. 1) 109 F. 294, 298, 65 L. R. A. 372. We do not think that it is properly applicable in the case of charitable corporations. The subject was thoroughly considered' by Chief Justice Rugg of Massachusetts in Roosen v. Peter Bent Brigham Hospital, supra, 235 Mass. 66, 126 N. E. 392, 14 A. L. R. 563, and we agree with the conclusion which he reached in that case.” (Italics supplied.)
It will be noted that Judge Parker referred particularly to Roosen v. Hospital, 235 Mass. 66, 126 N. E. 392, 14 A. L. R. 563. An examination of the report of the Massachusetts ease will at once disclose that it holds squarely against the contention here made on behalf of plaintiff. In the opinion in the Roosen Case, 235 Mass. 66, 126 N. E. 392, 394, 14 A. L. R. at page 567, the court used this language:
“The ease at bar presents, as one of its • main questions, whether a hospital can be held liable for the negligence of its managing officers in selecting incompetent servants and agents.”
And in the Ettlinger Case Judge Parker quoted from the Roosen Case with reference to that very question, as follows:
“There is no sound distinction in reason between the liability of a hospital for the negligence of its inferior agents and its liability for the carelessness of its managers. The conduct of both relates to the execution of the charity. The inferior agents usually work for pay, while the. managing officers as matter of common knowledge generally undertake the administration of the public charity without compensation, solely out of public spirit in a desire to serve the general welfare. If the hospital is held responsible for their acts of negligence, the funds devoted to the relief of suffering humanity must be diverted in the one instance to the same extent and manner as in the other to the payment of claims wholly foreign to the purposes of the public trust.”
I am, therefore, unable to agree with counsel that what was said in the Ettlinger Case with reference to the negligence of the management of charitable institutions in selecting and retaining employees and servants, is a mere dictum and without any binding force on this court in the instant ease. It is binding in both reason and authority.
It is also urged on behalf of plaintiff that the allegations of the declaration show that Mrs. Bodenheimer was not a beneficiary of the charity maintained by defendant but a stranger thereto, and that, therefore, the decision in this ease should be controlled by the principle announced in Hospital of St. Vincent of Paul v. Thompson, supra, and similar eases, and not by the decision in Ettlinger v. Trustees of Randolph-Macon College. In support of that contention, an effort is made to distinguish this case from the Ettlinger Case, on the ground that plaintiff here was not *531a beneficiary of the charity maintained by defendant, but merely paid an admission fee for the privilege of seeing the exhibits; that as to her, the situation was not different from what it would have been had she entered a private museum or art gallery maintained for profit. It seems to me that the error in such contention is in ignoring the real purpose for which defendant maintains Battle Abbey. That purpose is to collect, preserve, and make available to historians, students, and the general public historical material and data, which purpose is essentially charitable in its nature since it is devoid of any idea of material profit. It is true no charge is made to historians and students while a comparatively nominal charge is made to the members of the general public, for the privilege of viewing and studying the historical material owned by the in-' stitution. The reason for allowing to historians and students free access is, no doubt, that in this way the institution may, through them, the more successfully convey to the public the historical information which it has made available, as it is reasonable to assume that historians and students, in many cases at least, will not only acquire the historical information themselves hut will probably impart it to many others and thereby greatly extend the public benefit of the institution. In the case of members of the general public the situation is different. Some probably visit the institution through curiosity, while many others visit it in order to obtain for themselves the benefit of the historical data there assembled, but not with any definite intention . of imparting the information they thus obtain to other members of the public.
It seems to me that this is a sound distinction between the different classes of persons who patronize the institution, and that, for all essential purposes, plaintiff, although she did pay an admission fee for the privilege of entering Battle Abbey and viewing the exhibits there, was as much a beneficiary of the charity maintained by defendant as was the student in the Ettlinger case a beneficiary of the charity maintained at Randolph-Maeon Academy. In one ease, plaintiff was a pay student at a preparatory school, while in the instant case, plaintiff was a pay patron of the institution maintained by defendant. There is no sound distinction between this case and the case mentioned, and the conclusion from the facts is inevitable that plaintiff was a beneficiary of the charity maintained by defendant.
That it is a hardship on plaintiff to have sustained the serious injuries of which she complains and yet be denied recovery of damages therefor is not open to controversy. Many similar cases in which recoveries have been denied may be found in the reports. Notwithstanding that sueh hardships occur from time to time, our Circuit Court of Appeals and many other courts, as indicated in the decisions above cited and quoted, have for sound reasons taken the view that persons charitably disposed should be encouraged to make charitable donations and to establish and maintain charitable institutions, rather than be deterred from sueh course by fear that their donations are liable to be consumed in paying damage claims which result from the negligence and default of the agents, servants, and employees of sueh institutions.
In this connection it may not be amiss to point out what would very probably occur in this ease were plaintiff permitted to maintain her aetion for damages and to obtain a verdict and judgment against defendant. Such verdict and judgment would probably be substantial. The judgment could be paid only from donations heretofore or hereafter made by friends of the institution. If it were not paid, execution would in due course issue. If the execution were not satisfied through the intervention of liberally disposed friends of the institution, it would become necessary for the marshal to levy upon the invaluable historical material which defendant has collected and is preserving in Battle Abbey solely for the benefit of this and future generations. This historical material, or a great part of it, would have to be sold at public auction to satisfy the execution. The institution would probably be disrupted with the result that no doubt it would be impossible ever again to assemble such an extensive and valuable collection of historical data, so that the loss to the public would be irreparable.
For the foregoing reasons, a judgment sustaining the special plea and dismissing the case will be entered upon presentation. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219229/ | ADLER, District Judge.
This is a suit for infringement of a, patent (No. 1,729,070) granted September 24, 1929, to Howard S. Gerken for improvements in apparatus for washing and separating or grading materials, as for instance, gravel from waterways, on an application filed February 27, 1926. The patent has thirty claims. Those in suit are claims 16 to 30, inclusive.
Corporate capacity and title to the patent axe admitted. Infringement and validity *534of the claims are denied. With respect to infringement, it is the contention that each and all of the claims in issue are either invalid, or, when interpreted by the prior art, do not cover either of defendant’s constructions. To establish invalidity, defendant relies on patents of the prior art, on prior use, on prior knowledge, on abandonment, and on failure to disclaim, under circumstances which it is alleged made disclaimer obligatory.
The invention of the claims in suit is described in the specification as “a washing, separating and grading apparatus particularly adapted to be used on a boat or scow, so that it can be positioned lengthwise of the boat over the hold or hatches, whereby the washed, separated material can be discharged from the apparatus into separate compartments in the hold, or delivered to one or another part of the hold, as may be desired, (in order) to segregate the different grades of material or evenly load the boat.” The invention is described in broad terms in claim 30, as follows: (a) An inclined chute the length of which is many times its width; (b) means for delivering solid materials and a relatively large volume of water to the upper end of said chute and causing them to flow down the chute at a relatively rapid rate, said chute having screened openings in the bottom at intervals along its length, each screened opening being adapted to discharge a small portion of the water and such of the materials as are small enough to pass through the screen; (e) secondary screening means arranged to receive the water and material from said screened openings in the chute and to divert laterally the larger particles thereof, said secondary means being adapted to pass the water and other particles received from said screened openings; and (d) means for receiving all the water and finer particles passing through said screen means and conveying them away by the flow of the water content thereof. (The italicizing is not in the patent.)
It is the contention of defendant that claims 16, 18, 22, 26, 28, and 30 are “completely anticipated in terms and substance by the prior art”; that claims 28, 24, and 25 are “anticipated in substance by the prior art and substantially anticipated’ in terms”; that claims 27 and 29 are “completely anticipated in terms and substance,” provided “the express limitations are ignored”; and that the remaining claims are “void for want of invention.”
The object of employing means for collecting and conveying away the water and finer particles, the function of element (d) of claim 30, is explained thus in the specification: “In apparatus heretofore used, the sand and water were discharged directly into the hold or compartments of the boat, the water being gradually displaced by sand settling in the hold until the water finally overflowed the hatch combings and thence went overboard.”
The patents of the prior art relied oh as anticipations are patent to Roberts, No. 997,-854, patent to Thompson, No. 1,149,989, British patent to Wilkinson, No. 25,823 of 1913, and patent to Woolley, No. 349,675. Of these the Thompson patent and the British patent to Wilkinson were considered by the Patent Office as citations against Gerken’s application. The patents of the prior art relied upon as disclosing “various details of the Gerken construction” are patent to Keller, No. 126,968, patent to Schultz, No. 174,981, patent to Jewett, No. 475,568, patent to Diers et ah, No. 1,165,077, patent to Kavanaugh, No. 583,259, patent to Stetson, No. 714,755, patent to Evans, No. 1,032,746, patent to Hoyt, No. 1,064,223, patent to Mark, No. 1,-269,947, patent to Lamb, No. 1,368,267, French patent to Rey, No. 415,130 of 1910, and German patent No. 291,693 of 1915. Of these prior art patents the following were considered by the Patent Office, namely: The Keller patent, the Diers patent, the Kavanaugh patent, and the Marks patent. The patents relied on as anticipations, and which were not cited by the Patent Office, are the only ones that need be considered specially, viz.: The Woolley patent and the Roberts patent.
The Woolley patent is on a coal separator adapted for installation at the mine. The oversizes are scalped by a grid screen in the chute that receives the coal. The material passing through the screen falls upon a secondary screen of gablelike form, employed for grading purposes, each end of which discharges into a bin. On comparing the structure of the Woolley patent with that described in broad claim 30 of the Gerken patent in suit, it is seen that the structures are designed for different purposes; that the Woolley structure is not adapted (with any modifications that are obvious or that have been suggested) to be used on a boat for washing and separating gravel; and that the Woolle3r structure does not suggest the long, inclined chute of the patent in suit, with its screened openings,' adapted to receive water in volume at its upper end; nor does it employ means for receiving all the water and finer particles passing through the screens *535•and conveying them away by the flow of the water. The Woolley patent does not anticipate claim 30.
The Roberts patent was not cited by the Patent Office. It shows and describes a washer designed for treating “pebble phosphate and the like.” It is constructed so that it can be set up on the deck of a dredge, where the material from the bottom of the waterway can be pumped into it. It has an inclined trough or raceway, with a grating in the bottom. From the surface of the grating (at its lower end) is discharged into a chute that projects from one side of the trough the materials that will not pass through the grating in the trough. During the travel of the materials over the grating in the trough, the finer stuff falls through onto an inclined screen from which it passes to other screens in chutes that lead to the sides of the barge, where the pebbles are delivered into scows, and the water and sand that flows below the screens is discharged overboard.
On comparing the structure of the Roberts patent with the elements of claim 30 of the patent in suit, it is seen that the structures are designed for different purposes; that the Roberts structure does not suggest the long, inclined chute of the patent in suit, with its plurality of gratings, each adapted to discharge sand and a portion of the water onto a secondary screen, or means (the lower parallel trough of the patent) adapted to receive the water and finer particles that pass through the secondary screen and convey them away by the flow of the water content. In the Roberts apparatus the transverse troughs that convey to the side of the vessel the water, sand, and pebbles that go through the screen located beneath the trough are not the equivalent of the lower parallel trough of the Gerkin apparatus, and, accordingly, Roberts is not an anticipation of claim 30.
The patent to Wilkinson, put forward as an anticipation, was considered by the Patent Office. It describes apparatus for washing and grading gravel, sand, and the like, and comprises (a) a easing or trough in combination with (b) a series of primary screens of different mesh (the finer mesh at the top) supported within the casing and so arranged that the material passes from one screen to another and the graded material is delivered from the respective screens; (e) another screen of fine mesh behind the graduated screens and diagonally across the easing, which extends from the top to the bottom of the casing (to make it possible to change the screening effect of the middle primary screen); (d) another screen arranged between the two first mentioned to produce the required screening effect with the upper primary screen; (e) still another screen of fine mesh, behind the before-mentioned graduated screens, extending diagonally across the easing, from top to bottom, divided by partitions across the casing, located at the lower end of each primary screen, to form compartments, each having an opening through the side wall of the casing, just above the lower end of the partition, to which a chute is attached. In use the material passes over the screens by gravity. During its passage over the primary screens, the material is washed by water discharges from pipes connected to a suitable source of supply, preferably in the form of spray, which is stated to facilitate the passage of the material through the screens. The material that does not pass through the primary screen falls off the end thereof, and then off the lower end of the easing. Obviously it is not contemplated that the Wilkinson apparatus shall be used on a boat to separate gravel that has been sucked up from the bottom of a waterway and discharged into gravel boxes on the deck or into the hold of a boat by a stream of water under high pressure. Such a process and the problem involved had no part in the designing of the Wilkinson apparatus. The British patent to Wilkinson does not anticipate claim 30.
The other patents cited as disclosing features resembling structurally or functionally the elements of the claims in suit need not be discussed.in detail. It is apparent on inspection that separately considered they do not anticipate. As pointed out above, many of the patents of the prior art cited in defense were considered by the Patent Office, and the claims sued on were allowed over them. In infringement suit .the courts apply the rule that, when it has been held by the Patent Office that the structure described in the claims is patentable over the prior art, the patent is entitled to the presumption of invention that attaches to a patent. And, when patents alleged in defense to anticipate were considered by the Patent Office, the presumption is materially increased. Walker on Patents (6th Ed.) § 535; Gray v. Eastman Kodak Company, 67 F.(2d) 190, 193 (C. C. A. 3).
In this connection it should be noted specially that broad claim 30 was inserted by an amendment dated August 9,1929, that was filed after a long discussion devoted to drawing the line between the prior art and Ger-ken’s real invention, and was allowed as filed.
*536The prior use relied on is the use of certain gravel washing and separating apparatus that was first put into use on the Burton about 1905 and later transferred to the Trenton.
Before an intelligent comparison can be made between the construction and functions of the apparatus of the patent in suit and the apparatus of the Burton, Trenton, and other vessels, that we are called upon to consider, it must be understood that some of these vessels were of the so-called flush-deck type, that were provided with cargo boxes located on deck to receive the gravel (to whieh the equipment used on the Burton'and Trenton was adapted); that others (like plaintiff’s gravel vessels Gerken and Niagara, and defendant’s Carroll and Lakewood) were of the so-called cargo-hold type, that is to say, vessels in whieh the gravel after it has been washed and screened is delivered to cargo boxes in the hold; that in the case of vessels in which the gravel after having been washed and screened is deposited on deck in cargo boxes some of the finer may be drawn off to be discharged overboard; that, when cargo boxes in the hold receive the gravel, after if has been washed and screened, it is necessary to discharge with the gravel into the hold water and finer particles that pass through the screens employed for separating out the gravel, unless means are provided for receiving them and conveying them away, to be discharged overboard or otherwise disposed of. Such also was the ease in the use of the earlier single trough equipment, for then also both the gravel and water went into the hold. It should be noted also that when the water flows into the hold a “sumptank” in the hold is made use of in order that the water may be pumped out of the hold at the conclusion of the loading operation.
Defendant’s vessels Carroll and Lakewood as first equipped in 1926 were provided with deck cargo boxes in combination with transverse screens from whieh the screened gravel was delivered into the boat and transverse troughs for disposing of the water. In 1929 these vessels were reconstructed so as to provide cargo space in the hold for the screened and washed gravel, and apparatus of the double, parallel chute description was installed, on which this suit was brought.
Captain Gamble’s equipment, of the Burton prior to 1995 has been described as comprising inclined single flumes extending athwartship with grids in its bottoms, secondary screens adapted to discharge the gravel coming off them into a starboard cargo box, and located below the secondary screens inclined troughs that extended in the opposite direction athwartship, to carry away the water and sand that fell through the secondary screens, and discharge it into a port cargo-box. The Burton apparatus performed in the same way as the old single trough with its grid openings and overboard spillway. The Burton equipment is said to have been transferred to the Trenton in 1995, and it appears that Gerken was familiar with it. It is obvious that the equipment of the Burton floes not afford a prior use that anticipates the invention described in claim 39 of the patent in suit. (The terms “chute,” “flume,” and “trough” have been used interchangeably by the witnesses and are so used in this decision.)
Much testimony was devoted to an inquiry regarding the possibilities of using apparatus of the deck cargo type and of the hold cargo type for grading purposes, the comparative results obtained, and to a comparison of the quality of clean gravel obtainable on treatment by these two types of apparatus. It appears that both grading and the quality of the product obtained depended so much on the character of the material sucked up from the bed of the waterway and skill and judgment in operation that comparisons are untrust-, worthy from the evidence. Such a finding, however, is not necessary to a decision. The question to be decided is whether the claims in suit, describing a two-trough apparatus designed for use in gravel vessels of the ear-go-hold type and provided with means for receiving the water and finer particles passing through a secondary screen located beneath the main (upper) trough and conveying them away, are invalid in view of prior art patents cited, and/or the Burton prior use, and/or knowledge of the Charles Dick installation, and/or abandonment, and/or failure to disclaim.
Prior knowledge as a defense is predicated on equipment of the Charles Dick, a steamer of Canadian registry, dating from 1924 when the equipment was installed while the steamer lay at dock at Detroit. In the season of 1924 the Charles Dick operated in Canadian waters. In 1926 the secondary screen units were removed and some installed on the Baxter Dick, others on the O’Connor Dick.
According to testimony of witnesses produced by defendants to describe the installation onr the Charles Dick, secondary screens were carried by boxes, whieh in turn were attached to a main flume provided with grids, controlled by sliding gates. The boxes also *537provided inclined chutes below the screens that opened at their ends. Water, sand, and gravel passed through the grids in the main flume onto the secondary screens in the boxes, which served to scalp the gravel and discharge it into the cargo space. The water, sand, and silt flowed along the inclined chutes located below the secondary screens to lateral spillways from which they were discharged overboard. On the Charles Dick such a secondary unit was provided for several grids in the main flume. It is apparant that there was no essential difference between this equipment of the Charles Dick and that of the Burton.
Abandonment is also relied on, based on a crude experiment carried out by Gerken in 1920 on a boat ealled the Excavator on which he was employed, and on a disclosure in 1921 to his employer, Mr. Knowlton. It was shown on the trial that the drawing made at ■ that time was designed to show how the Ger-ken invention could be installed on a steamer called the T. B. Phelan, then laid up at Kingston for repair, that Gerken was trying to persuade Mr. Knowlton to buy for use as a gravel boat. It also appears that at or about that time Gerken and Mr. Knowlton went to Kingston, saw the boat and opened negotiations to purchase it, which culminated in the purchase in the summer of 1925. As soon as the boat had been acquired, it was equipped with Gerken’s apparatus and a patent attorney was employed by Gerken to prepare an application for a patent. The application was filed February 27, 1926. As a rule an inventor is encouraged to reduce to practice before filing an application, and in this ease no intervening interests are involved, since defendant did not install the equipment of which complaint is made till 1929. Mr. Gerken’s conduct appears to have been discreet and reasonable, and there are no grounds for maintaining the defense of abandonment.
It is accordingly held that claim 30 is a valid claim, in that it describes a separating apparatus adapted for use on gravel boats of the hold cargo type, of the character described in the specification, which ineludes as an essential and distinctive element means for receiving the water and finer particles passing through the screens and conveying them away by the flow of the water content thereof.
Other claims in suit on this same combination of elements, in which this same element is described as “an inclined second chute,” and in some of which minor features are included, are claims 17, 18, 19, 28, and 29. Claims 16, 20, 21, 22, 23, 24, 25, and 27 do not mention a second chute, but describe secondary screens that are adapted to direct the gravel into the hold, and they also include “means adapted to discharge overboard the water passing through the chute screens and the secondary screens.” Claim 26 describes the secondary screens as “arranged along the chute to receive the water, sand and gravel passing through said (the) primary screens and separate the gravel therefrom and discharge the gravel into the hold of the boat to the side of the chute.” This claim (26) makes no provision for conveying away the water and finer particles passing through the secondary screens to discharge them overboard. Claim 26 is invalid in view of the prior use of single trough apparatus. Claim 27 is invalid in view of the Burton prior use and the disclosure of the Roberts patent and British patent to Wilkinson. The other claims in suit (16-25, inclusive, 28, 29, and 30) are valid and infringed by the structure on defendant’s steamer Weston M. Carroll (shown in blueprint in evidence as Plaintiff’s Exhibit 5), and also by the structure on defendant’s steamer Lakewood (shown in blueprint in evidence as Plaintiff’s Exhibit 6). Claims 16-29, inclusive, are distinguished from claim 30 and from each other by the way in which the elements are referred to, and in some eases by the inclusion of the gates that control the openings in the bottom of the upper chute for the purpose of diverting the gravel to the different locations in the hold at will, but the combination of essential elements is the same in all.
Defendants have alleged and argued that under sections 65 and 71, title 35, U. S. Code (35 USCA §§ 65, 71), on disclaimer it devolved on plaintiff to file a disclaimer in view of Gerken’s knowledge of Captain Gamble’s apparatus on the Burton. Inasmuch as it was necessary for the effect of that prior use on the validity of the claim of the Gerken patent to be determined by the pronouncement of a court, there has been no undue or unreasonable delay. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219230/ | TUTTLE, District Judge.
Plaintiff, as a residuary legatee under the last wijl of Thomas E. Cheesebrough, deceased, filed its bill of complaint in this court for the purpose of having declared null and void a certain so-called “election” -filed in the probate court of Barry county, at Hastings, Mich., whereby it was made to appear that Hattie E. Cheesebrough, the mentally incompetent widow of Thomas E. Cheesebrough, deceased, by her guardian, Ward Moore, elected to take her portion of the estate of her husband, Thomas E. Cheesebrough, under the statutes of the state of Michigan instead of taking the provisions made for her in the will, of her deceased husband. Defendants answered, making many admissions and also denying many allegations of the bill. Proofs have been taken in open court.
Plaintiff is an Indiana educational corporation, operating a college for the instruction of young men and young women at Huntington, Ind., under the auspices of the United Brethren denomination (old constitution).
The defendants Ward, Clyde, and Leda Moore are residents and eitizens of Michigan and are the sole legatees under an instrument alleged to be the last will and testament of Hattie E. Cheesebrough, now deceased, and are the real parties in interest. Defendant Charles F. Parker, merely a nominal defendant, is the special administrator of the estate of Hattie E. Cheesebrough, deceased, by appointment of the probate court of Barry county, Mich.
Thomas E. Cheesebrough died testate at Freeport, Barry county, Mich., on September 17, 1929. His last will and testament was duly probated in the probate court of Barry county, Mich., and disposed of an estate consisting of real and personal property appraised at the time of his death of upwards of $40,000. His widow,. Hattie E. Cheesebrough, died August 11, 1932. Her alleged will was offered for probate by defendant Ward Moore in the probate court of Kent county. The brother and sole heir of deceased, one Frank Whittenberg, appeared in said probate court of Kent county and objected to the jurisdiction on the ground that his sister was a legal resident of Barry county at her death. His objection was sustained, and the alleged will has now been presented to the probate court of Barry county, where objection to its allowance has been filed by said brother.
The Grand Rapids Trust Company of Grand Rapids, Mich., was named as executor of the will and as trustee of the residue of the estate of Thomas E. Cheesebrough, duly qualified, and is at present still acting as executor, the administration of said estate being still pending owing, principally, to the controversy involved in this bitigaton.
The will of Thomas E. Cheesebrough, so far as material to this controversy, provided:
“Sixth. I give, devise and bequeath the rest, residue and remainder of my Estate, wherever situated, to the said Grand Rapids *542Trust Company, in trust, however, with powers and authority the same as set forth in division (a) of the fifth paragraph of my Will and as -to said Perpetual Fund, I direet my Trustee as follows:
“(a) If my wife Hattie E. Cheesebrough, survives me, I direet my Trustee to pay to her, 'in quarterly installments, all the net income arising from this Fund, as long as she shall live; and in the event of serious injury or sickness to her, or other reasons, her income and support is not sufficient for her reasonable eare, in my Trustee’s judgment, I authorize and direet my Trustee to pay to her from the principal of this Fund, such amounts as it deems necessary to enable her to have such care.
“(b) Upon the death of my wife, if she survives me, or in the event she does not survive me, in either event, I direet my trustee to pay the net income arising from this Trust Fund, forever, in semi-annual installments, to the said Lane Memorial Home, and the said Huntington College, share and share alike, or to the survivor of them.
“Seventh. I hereby nominate and appoint the Grand Rapids Trust Company, the Executor of this, my Last Will and Testament, giving and granting unto it as such Executor, full power and' authority to sell and convey and in any lawful manner dispose of my estate, real, personal and mixed, or any part thereof, upon such terms, at such times and in such manner as it shall deem proper and for the best interest of my Estate.”
On October, 12, 1929, less than 30 days after the death of said Thomas E. Cheesebrough, his widow, Hattie E. Cheesebrough (•in the presence of defendant Ward Moore, who for many years theretofore had been trustee of her property), executed the instrument now claimed to be her last will and testament, wherein and whereby she bequeathed all of her estate to the defendants herein, Ward Moore, Leda Moore, and Clyde Moore.
On May 27,1930, Hattie E. Cheesebrough was adjudged to be mentally incompetent by the probate court of Kent county and defendant Ward Moore was appointed her guardian, in a proceeding instituted in that court upon petition of defendant Leda Moore. That petition' alleged Mrs. Cheesebrough to be a resident of Kent county and to be mentally incompetent, and prayed that Ward Moore be appointed her guardian. The petition was not contested. The brother had no actual notice of the proceedings. No appeal was taken, and the order has never been set aside.
On September 12, 1930, defendant Ward Moore filed in the probate court of Barry county, at Hastings, Mich., the following paper, the legal effect of which is the question, for determination in this suit.
“State of Michigan
“County of Barry
“To the Probate Court for the County of Barry
“In the Matter of the Estate of Thomas E. Cheesebrough, Deceased.
“Election
“Hattie Cheesebrough, widow of said Thomas E. Cheesebrough, hereby elects to take under the provisions of the statute in the above estate.
“Dated this 12th day of September, 1930.
“Hattie E. Cheesebrough
“Ward Moore, Guardian.”
This “election” was filed without the knowledge, consent, or approval of the probate judge, the judge being absent from the city on that date, and no action has been taken approving or disapproving the alleged election by the probate court of Barry county at any time since said paper was filed.
A brief review of the life of Hattie E. Cheesebrough is necessary to a complete understanding of the situation. She was bom lipón a farm near St. Johns, Clinton county, Mich., about the year 1873. When a small child her mother died, leaving Hattie, a brother Frank, and a husband, Frederick Whittenberg, surviving. William Moore and Eliza Moore, his wife, lived in the same community, and in due time adopted Hattie as their child in proceedings had in the probate court of Clinton county, Mich. These proceedings were completed by order of the probate court of that county on June 27, 1879.
At that time defendant Ward Moore was a young child two or three years of age, and at a later time two other children were bom unto the Moore family, defendants Clyde Moore and Leda Moore. Shortly after -the adoption of Hattie, the Moores moved to the village of Freeport, Barry county, Mich., and made their home there for many*1 years. There Hattie was brought up in the Moore household, _ and there she attended the village school with her foster brothers and sister.
When Hattie was about twenty-three years of age, her natural father, Frederick Whittenberg, asked her to return to the Clin*543ton county farm and keep house for himself and the brother Frank. This Hattie did, but at the time she left the Moore home she relinquished her rights to inherit as an heir of William Moore for the sum of $25, and record of such relinquishment was formally made in the probate court of Clinton county under date of September 2, 1897. Thereafter, for about 17 years, Hattie continued to be housekeeper for her father and brother on the Clinton county farm. During that same time the Moore children, defendants in this suit, secured a higher education; defendant Ward being a graduate of the University of Michigan and defendants Clyde and Leda being graduates of the Michigan State Agricultural College of Lansing, Mich.
About the year-1914, Frederick Whittenberg, father of Hattie, died. His estate was settled, the brother Frank being administrator, and as a result of such settlement approximately $2,500 was inherited by each of the children, Hattie and Frank. The two children then went to Lansing, Mich., where Hattie kept house for Frank for a short time and until Frank married. Then Hattie went back to Freeport, Mich., and secured work and lived for a part of the time with her former foster parents, William Moore and Eliza Moore.
Prior to the time of Hattie’s return to the Moores, they had learned of her inheritance from her own father, and immediately interested themselves for the avowed purpose of protecting her rights; and shortly after her return to Freeport secured from her a written instrument under date of November 17, 1915, in which instrument said Hattie was named as party of the first part and Dr. Ward Moore, one of the defendants herein, was named as a party of the second part. This instrument, after reciting that Hattie had become possessed of certain personal property, consisting of cash on hand in bank and a certain mortgage on real estate in Clinton county, and that she desired, because of her own lack of business judgment and experience, to turn over said cash and mortgage to Ward Moore, and that he was willing she should do so, provided, among other things, that all of said property should be turned over to him, that the mortgage should be assigned to him, all in trust for first party, for certain uses and purposes specified. Among other things, it was provided in the body of the instrument that:
“Second party also agrees that upon the request of first party, he will advance to her such sums of money as he may, in his judgment,, deem to be reasonable in amount, the question of the reasonableness of the amount being a question left entirely in the discretion of second party hereto.”
The instrument further gave second party complete power to invest and reinvest the money and property as he might desire without referring the matter to first party and as though the property belonged to him personally,
“It being the desire of first party that so far as third parties are concerned, second party shall be held out to be, and to all intents and purposes be the owner of the title in and to all of said personal property herein described, and the owner of all of the title in and to such property, either real or personal, as such personal property mentioned herein may be later re-invested in.”
Second party agreed to use his best endeavors and judgment in the execution of the trust, and the instrument authorized him to retain out of such moneys or property his reasonable charges and compensation for loss of time while engaged on first party’s affairs. The instrument further provided:
“It is mutually agreed by and between the parties hereto that this agreement shall be irrevocable, and that first party shall make no contracts, agreements, notes or any undertaking of any kind, with any person or persons, in regard to, or in any manner affecting the funds in the hands of second party during the continuance of this agreement, but that she shall at all times refer any person or persons desiring to borrow money of her, or any person attempting to interest her in any business project, to the party of the second part, and she agrees hereby, and intends hereby to be governed entirely and exclusively by second party’s judgment in and about all of her financial affairs.
“Second party agrees that immediately upon the death of first party, he will account to the executor of first party’s estate, fully, completely and in every manner as he would account to first party were she still alive.”
The instrument was signed by Hattie Whittenberg and Ward Moore and duly acknowledged on the date of the instrument before a notary public. Otherwise the instrument is not witnessed.
The foregoing instrument continued in force throughout the life of Hattie E. Cheesebrough. During her life she received no funds, either principal or interest, from the trustee, Ward Moore.
In 1919 Hattie E. Whittenberg became the second wife of Thomas E. Cheesebrough *544of Freeport, Mich. Mr. Cheesebrough’s first wife had died 2 or 3 years earlier. Mr. Cheesebrough was a prosperous and highly respected citizen of Freeport. He owned a mill in the village which manufactured rake handles and other similar wood products. He owned a substantial farm near the village, and was a lifelong and devout member of the United Brethren Church of that place. His marriage with Hattie Whittenberg was satisfactory, and she was in full sympathy with his attitude toward his church, she herself became a member of that church, and was active in her support of, and attendance upon, its various services. Both Mr. and Mrs. Cheesebrough were substantial contributors in their lifetime to Huntington College, and Mr. Cheesebrough was a member of the board of trustees of the Lane Duleenia Memorial Home, an institution located at Charlotte, Mich., for the care of aged women. These institutions are the residuary legatees in Mr. Cheesebrough’s will.
On December 4, 1923, Thomas E. Cheesebrough made his last will and testament. His wife knew about the will, and was in accord with its provisions. The material portions of the will appear above.
The said will was duly probated in the probate court of Barry county at Hastings, Mich., and the Grand Rapids Trust Company of Grand Rapids/ Mich., was appointed executor of the will, duly qualified, and assumed its duties as executor under the will. In connection with those duties, it sent its representatives to Freeport, Barry county, Mich., and took into its possession the personal property of the deceased, including therein various securities which stood in the joint names of the deceased and his wife, Hattie. Among other property held jointly was $4,000 in certificates of deposit on the Old Kent Bank of Grand Rapids, Mich., and a quantity of Automatic Music Company stock.
Upon learning that the executor of Mr. Cheesebrough’s will held this joint property, Ward Moore presented himself at the office of the company with the trust agreement above referred to, and asked that the property belonging to Hattie Cheesebrough be turned over to him. This request was refused unless accompanied by a receipt or other paper signed by Hattie Cheesebrough, subsequent to the death of her husband, authorizing the delivery to Ward Moore. Later a receipt was presented to the said trust company by Ward Moore, signed by Hattie E. Cheesebrough, authorizing him to take the property, and on October 12, 1929, said Ward Moore entered into a so-called supplemental agreement with Hattie Cheesebrough wherein reference was made to the agreement of November 17, 1915, reciting that she had recently and would in the future become possessed of other properties which she desired to have included in the agreement above referred to.
Then followed an agreement:
“To turn over to second party in addition to the’ items mentioned in said agreement, any and all property of every kind and nature, real and personal, that may come to or belong to her, and particularly such properties as may come to her either by the will of her late husband or under the laws of descent and distribution, IN TRUST, for first party, for the uses and purposes as set forth in detail in the original agreement above referred to.”
This so-called supplemental agreement was signed by Hattie Cheesebrough .and Ward Moore in the presence of Frances Lewis and Fred Roth, and was duly acknowledged before Fred Roth, a notary public.
On the same date, and at the same place and witnessed by the same witnesses, Hattie Cheesebrough made the instrument now claimed to be her last will and testament. This instrument purported to give all of her property to Ward Moore, Leda Moore, and Clyde Moore, and nominated Ward Moore as the executor of the alleged will.
On.December 4, 1929, the probate court for the county of Barry awarded Hattie Cheesebrough a widow’s allowance of $100 a month from the estate of her husband. For the first few months, that allowance was paid by the Grand Rapids Trust Company direct to her; the remittances being sent by mail. Beginning with the April, 1930, remittance, all further remittances of this $100 a month were made to Ward Moore, he having secured an order from Hattie Cheesebrough covering the April, 1930, payment, and later payments were made to him by virtue of his appointment as guardian of the estate of Hattie E. Cheesebrough, mentally incompetent, by the probate court for the county of Kent.
The petition for the appointment of Ward Moore as guardian of Hattie Cheesebrough was filed in the probate court of the county of Kent at Grand Rapids, Mich., on April 28, 1930. The petition was signed and sworn to by defendant Leda Moore. It recited that Hattie Cheesebrough was a resident of Kent county, was possessed of real estate of the value of $500 and of personal *545property to the extent of an income of $200 annually. The order of appointment found that Hattie Cheesebrough was a resident of Kent county, was mentally incompetent, and appointed Ward Moore her guardian, and required him to give a bond of $200.
A short time before the petition for appointment of guardian was filed, Leda Moore rented a furnished house at 701 Fuller Avenue S. E., in the city of Grand Rapids, Mich., and brought Hattie Cheesebrough there, where they lived until the close of the public schools in June following. The house in question was rented from a public school teacher who was going away for a few weeks to take a course of instruction at the Western State Teachers’ College at Kalamazoo, and the house in question was rented for not to exceed 12 weeks, and to the time when school would close. Hattie Cheesebrough at no time moved her belongings from the homestead at Freeport, and the testimony shows that, while she was in Grand Rapids on this occasion, she left a house plant with a neighbor, the wife of her pastor, to care for until her return. At the close of the public schools, Mrs. Cheesebrough and Leda returned to Freeport and resumed their residence at that place. In the guardianship proceedings an order for personal service of notice of hearing upon Hattie Cheesebrough was made by the court, and the proof of service shows that such service was made upon her by defendant Ward Moore. In the petition for the appointment of guardian, Frank Whittenberg was named as brother of Hattie, but his residence was reported upon the petition to be unknown. Notice of hearing upon such petition was duly published, and proof of publication was duly filed. Throughout her life Hattie Cheesebrough continued to reside in Free-port, Barry county, Mich., in the family residence, save as she was absent temporarily therefrom.
On September 16, 1930, Ward Moore caused certified copies of his letters of guardianship issued by the probate court for the county of Kent to be filed in the Thomas Cheesebrough estate in the probate court for Barry county, Mich., and simultaneously placed on file in that court the alleged election set forth above.
No action has been taken by the probate court of Barry county either approving or disapproving the election, and it is undisputed that the so-called election was made without laying the facts relating thereto before the probate court of Barry county. No action was taken by the Grand Rapids Trust Company, executor of the Thomas E. Cheesebrough will, to set aside to Ward Moore, guardian, any property under said election, and the filing of the election has operated to hold up and delay the final closing of the Thomas Cheesebrough estate.
On October 18, 1930, Leda Moore stored a quantity of her household furniture in the Cheesebrough home at Freeport, where the same remained until after the death of Hattie Cheesebrough.
On January 7, 1931, the probate court of Barry county made an order, upon the petition of Ward Moore, guardian, continuing the widow’s allowance theretofore made, at the rate of $100 a month until her portion of the Thomas Cheesebrough estate should be assigned to her.
On August 11, 1932, Hattie E. Cheesebrough died without having changed her residence.
On August 15, 1932, Ward Moore filed his petition in the probate court for the county of Kent, presenting the will of Hattie E. Cheesebrough for probate, and asking that he be appointed executor of the will.
On September 3, 1932, Frank Whittenberg, brother of Hattie, filed his petition in the probate court of Barry county praying for the appointment of a special administrator of his sister’s estate and securing the appointment of defendant Charles F. Parker as special administrator.
Upon objections of the brother, the probate court for the county of Kent dismissed Ward Moore’s petition for the probate of Hattie Cheesebrough’s will in the Kent probate court. The will was then presented for probate at Hastings, Barry county, Mich., where proceedings relating to the will are now pending.
On June 13, 1930, defendant Ward Moore, as guardian of Hattie Cheesebrough, filed an inventory in the Kent county probate court showing a total of assets in his hands belonging to his ward of $10,595.49.
On July 16, 1931, Ward Moore filed his first annual account as guardian of Hattie Cheesebrough, showing balance then in his hands of $11,558.02.
On July 9, 1932, defendant Ward Moore filed his second annual account as guardian of Hattie Cheesebrough, showing a balance of $12,150.47.
On December 16, 1932, Ward Moore filed in the Kent county probate court his final account as guardian of Hattie Cheesebrough. *546None of the foregoing accounts has been allowed or approved by the probate court for the county of Kent, and Frank Whittenberg, brother of Hattie Cheesebrough, has filed formal objections to the allowance of any and all of those accounts.
The undisputed evidence in the case shows that there are no adequate vouchers filed to support the disbursements reported to have been made in said accounts. There is undisputed evidence indicating that substantial amounts of the income from the property in the hands of Ward Moore, guardian, were used by the Moores themselves, and the proof is undisputed that Hattie Cheesebrough, from the time that Ward Moore became guardian, received from the guardian much less than the amount allowed to her by the probate court of Barry county, and that she received nothing from the income accruing upon her own personal property in the hands of said guardian.
Plaintiff’s bill of complaint charges that the defendants Ward Moore, Leda Moore, and Clyde Moore fraudulently conspired together to procure for themselves the estate of Hattie E. Cheesebrough, and also as much as possible of the estate of her husband, Thomas E. Cheesebrough.
In addition to the foregoing facts, all of which are either admitted or undisputed, the following facts are found:
(1) That the said charge of fraudulent conspiracy in plaintiff’s bill of complaint is, as a matter of fact, fully sustained by the proofs.
(2) That the alleged election filed by Ward Moore as guardian in the probate court of Barry county at Hastings, Mich., on the 16th day of September, 1929, was a part and parcel of such fraudulent conspiracy, and was made and filed, not for the use and benefit of Hattie Cheesebrough, but for the intended use, benefit, profit, and advantage of the defendants Ward Moore, Leda Moore, and Clyde Moore.
(3) That the legal residence of Hattie E. Cheesebrough at the time the guardianship proceedings were instituted against her in the probate court for the county of Kent at Grand Rapids, Mich., was not the county of Kent, but was in the village of Freeport, Barry county, Mich.
(4) That the administration of the estate of Hattie Cheesebrough, mentally incompetent, by her guardian, Ward Moore, was in truth and in fact primarily in the interest of defendants Ward, Clyde, and Leda Moore, and not primarily in the interest of Hattie E, Cheesebrough, the ward.
(5) That the claims of the defendants Moore to be brothers and sister of Hattie E. Cheesebrough were not asserted in good faith, but were a mere pretense, sham, and fraud, whereby a simple-minded and trusting woman was misled and deceived to her damage and to the benefit of her deceivers, the defendants Ward, Clyde, and Leda Moore.
(6) That Hattie E. Cheesebrough and her husband, Thomas E. Cheesebrough, were devout and faithful members of the United Brethren denomination, and in their respective lives made liberal contributions, not only to the local church of that denomination at Freeport, but also to various institutions maintained by that ehureh, and, among others, the plaintiff, Huntington College.
(7) That the provisions in the will of Thomas E. Cheesebrough for the support of his widow after his death were more advantageous to the widow than the benefits that would accrue to her under an election such as was attempted by Ward Moore, her guardian.
(8) That Hattie Cheesebrough knew of the provisions of her husband’s will before his death, was in full accord with those provisions, and that there is no evidence that she ever changed her mind about them.
(9) That the provisions made in the will of Thomas E. Cheesebrough for his widow were reasonable, liberal, and in ease of necessity permitted the use of the entire estate for her benefit and support.
(10) That the election, if sustained, would have transferred from the Grand Rapids Trust Company, trustee, to Ward Moore, as guardian, on the basis of the inventories of the Grand Rapids Trust Company, approximately $16,000 of property.
(11) That such transfer would have inured to the benefit of the Moores, but would not have inured to the benefit of Hattie E. Cheesebrough.
(12) That the probate court of Barry county never approved, ratified, confirmed, or otherwise gave its assent to the attempted election placed in its files in the estate of Thomas E. Cheesebrough, deceased, by defendant Ward Moore, then acting as guardian.
The court makes the following conclusions of law:
(1) That the so-called election filed by defendant Ward Moore, as guardian, in the estate of Thomas E. Cheesebrough, deceased, in the probate court of Barry county, Mich., at Hastings on September 16, 1930, is null *547and void and of no legal force or effect whatever.
(2) That Ward Moore, as guardian, was disqualified at the time he attempted to make such election by reason of having an interest in the matter adverse to that of his ward, Hattie E. Cheesehrough, and for that reason he could not make a valid election for her.
(3) That the law is that, in the ease of a mentally incompetent widow, the probate court and not the guardian of the incompetent must elect for the widow. An attempted election by such a guardian without the knowledge, consent, and approval of the probate court where the election is attempted is a nullity. In re Estate of Andrews, 92 Mich. 449, 52 N. W. 743, 17 L. R. A. 296.
(4) That plaintiff, Huntington College, is entitled to a decree clearing the title to its legacy under the last will and testament of Thomas E. Cheesehrough, deceased, from any and all claims of defendants Ward, Clyde, and Leda Moore and of the estate of Hattie E. Cheesehrough, deceased, and of each and every of them.
(5) That plaintiff, Huntington College, is entitled to recover its costs to be taxed against the defendants Ward Moore, Leda Moore, and Clyde Moore.
Decree may be prepared accordingly.
This opinion will stand as the court’s findings of fact and conclusions of law. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219231/ | DEWEY, District Judge.
The above-entitled cause came on for hearing in open court at Des Moines, Iowa, on the 9th day of December, 1933, upon a special appearance and motion to dismiss the bill on the ground that this court is without jurisdiction to hear and determine the cause of action alleged in the bill of complaint. Said special appearance and motion to dismiss was duly submitted and, being advised, the court finds:
The plaintiff invokes the jurisdiction of this court solely on the ground that the plaintiff, as receiver of the Chicago Joint Stock Land Bank, is a public officer with authority to sue within the meaning of the Constitution and statutes of the United States and by reason thereof entitled as such to bring suit in the federal courts.
It is provided by the Judicial Code, section 41, title 28, U. S. C. (28 USCA § 41), that the District Courts of the United States shall have jurisdiction “of.all suits of a civil nature, at common law or in equity, brought by the United States, or by any officer thereof authorized by law to sue.” Subdivision 1.
The only question then for decision as raised by the motion to dismiss is whether or not James B. Gallagher, as receiver of the Chicago Joint Stock Land Bank, is an officer of the United States authorized to sue. It seems to me the question has been decided in this circuit by the cases of Krauthoff v. Kansas City Joint-Stock Land Bank (C. C. A.) 23 F.(2d) 71, and Id. (C. C. A.) 31 F.(2d) 75. The movant, however, insists these cases are not decisive of the question. If they are not, the question is decided by the case of Wheeler v. Greene, 280 U. S. 49, 50 S. Ct. 21, 74 L. Ed. 160. The original action in this latter case was brought by Greene as receiver of a joint-stock land bank, and ju*548risdietion could only have been predicated upon his being a public officer with the necessary authority to sue. The Supreme Court of the United States, which always protects its own jurisdiction, would have dismissed the ease for want of jurisdiction had Greene, the receiver, not been an officer of the United States authorized to sue. It is a well-recognized rule that where the Supreme Court of the United States passes upon a question that the jurisdiction, although not expressly stated in the opinion, has been considered and decided by it.
The clerk will enter the following order:
The above-entitled cause came on for hearing in open court at Des Moines, Iowa, on the 9th day of December, 1933, upon a special appearance and motion to dismiss the bill of complaint for want of jurisdiction, and the same is by the court overruled. Defendants except. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219232/ | STRUM, District Judge.
Plaintiffs sue at law to recover income taxes alleged to have been wrongfully exacted of them for the calendar year 1917. The cause comes on for final hearing upon the pleadings, and evidence heard by the court.
On April 1, 1918, plaintiffs filed their partnership return of income and profit taxes for the calendar year 1917. An assessment of $1,729.51 was made thereon. Said assessment was reduced by an abatement of $36.01, certificate of which was issued on May 28, 1923, leaving a net tax of $1,693.50 here in question.
Plaintiffs claim to Have paid the original assessment to the Collector of Internal Revenue for the district of Georgia, on April 1, 1918, by cheek transmitted by mail when they filed their return. This payment is denied by the United States. To enforce payment of the tax, warrant for distraint was levied upon certain properly of the plaintiffs on August 12,1925, and the property was advertised for sale on November 9,1925, pursuant to section 3190, Rev. Stat. (26 USCA § 119).
In order to secure a postponement of the sale and additional time within which to pay the assessment, and in consideration of such postponement, plaintiffs on November 9,1925, paid one-fourth of the disputed assessment and executed a surety bond conditioned to pay the remainder at the expiration of the extended period of twelve months. On the same *549•day plaintiffs executed the customary waiver of limitations as to the time within which collection of the tax could be enforced by the United States. On July 15, 1927, plaintiffs paid the remainder of the disputed assessment, and, after filing claim for refund which was denied, instituted this suit to recover said sum of $1,693.50 so paid.
Said claim for refund was based solely on the ground that collection of said tax was effected after the same had become barred by the statute of limitations, and that the above-mentioned waiver of limitation was void and of no effect because executed after the statute had run. This contention is the basis of the first count of plaintiffs’ declaration in this suit. A second count proceeds upon the theory that plaintiffs have been compelled to twice pay this assessment, and that the second payment is an overpayment of tax, (but this contention was not advanced as a basis for the claim for refund.
The fact that an “abatement” of $36.01, instead of a “refund” in that amount, was made on May 28,1923, five years after plaintiffs claim to have originally paid the tax, indicates that the assessment had not theretofore been paid. It is unnecessary, however, to determine that question of fact.
The above-mentioned waiver of limitation as to the time within which said tax might be enforced by the United States is effective even though executed after the statute had run. Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335; Burnet v. Chicago R. Equipment Co., 282 U. S. 295, 51 S. Ct. 137, 75 L. Ed. 349; Florsheim Bros. Dry-goods Co. v. U. S., 280 U. S. 453, 50 S. Ct. 215, 74 L. Ed. 542; Aiken v. Burnet, 282 U. S. 277, 51 S. Ct. 148, 75 L. Ed. 339; Stevens Engraving Co. v. United States (C. C. A.) 53 F.(2d) 1.
Even if plaintiffs had in fact paid the assessment, as they contend, at the time their return was made on April 1,1918, so that the subsequent payments would be overpayments, the bond executed by them on November 9, 1925, being an unconditional promise to pay that part of the tax therein mentioned ($1,-333.63) would itself be an implied waiver of limitation upon collection of the tax, and would bar plaintiffs’ recovery of the amount therein mentioned. The bond is a contract substituted for the tax obligation, and rests upon a valid consideration. Simmons Mfg. Co. v. Routzahn (C. C. A.) 62 F.(2d) 947. The one-fourth payment above mentioned, made at the time the bond was given, was voluntarily made with knowledge of all the facts to secure an extension of time, and in these circumstances cannot now be recovered. This disposes of the first count of the declaration.
In an action for refund of income tax under the statutes which are applicable here, the scope of the action must be limited to the scope of the claim for refund which the statute requires to be submitted to the Collector of Internal Revenue as a condition precedent to suit, and must rest upon the same ground. The ground of recovery relied upon in the second count of the declaration, namely, that the tax had been previously paid at the time the return was made, and that plaintiffs were therefore compelled to pay the same a second time, was not incorporated in plaintiffs’ claim for refund submitted to the Collector of Internal Revenue. That official has had no opportunity to determine whether that state of facts did or did not exist. Not having been submitted for the preliminary determination of the Collector, that ground cannot be made the basis of recovery here. Snead v. Elmore (C. C. A.) 59 F.(2d) 312; Stevens Engraving Co. v. United States (C. C. A.) 53 F.(2d) 1; H. Lissner Co. v. United States (Ct. Cl.) 52 F.(2d) 1058; Taylor-Lockwood Co. v. United States (Ct. Cl.) 45 F.(2d) 284; Red Wing Malting Co. v. Willcuts (C. C. A.) 15 F.(2d) 626, 49 A. L. R. 459; Solomon v. United States (D. C.) 49 F.(2d) 638; J. H. Williams & Co. v. United States (D. C.) 46 F.(2d) 155. This disposes of the second count of plaintiffs’ declaration.
Judgment on the merits for defendant. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219233/ | LITTLETON, Judge.
This ease presents two questions, namely, whether the claim for refund filed February 18,1925, was sufficient in law to entitle plaintiff to a refund for 1919 based upon a pro-ration to invested capital for that year of the correct tax for 1917 and 1918 after special assessment for those years had been allowed and the tax theretofore paid on the return and the additional tax collected by credit were found to be greatly in excess of the tax due, and whether there was such a disallowance or rejection of this claim by the Commissioner oii May 14,1926, ás would result in this suit, which was instituted January 2, 1931, being barred.
Plaintiff contends that the claim was sufficient and that it was not finally or specifically rejected by the Commissioner until his letter of August 28, 1029, in which he refused to allow the refund. The defendant, on the other hand, insists that this claim was insufficient in that it was in general terms and contained no statement of facts showing that the tax for 1919 had been overpaid, and that, while it was susceptible of amendment before rejection, it was disallowed and rejected by the Commissioner by the issuance of certificates of overassessment allowing a separate claim filed by plaintiff on other grounds, and that the last claim of November 15,1928, was therefore an original claim filed after the statute of limitation had expired.
In the circumstances of this case, we are of opinion that the claim of February 18, 1925, was sufficient under the statute and the regulations and that it was not finally disallowed and rejected by the Commissioner within the meaning of that term ás used in section 3226 of the Revised Statutes (as amended 26 USCA § 156) until the action taken by him in his letter of August 28, 1929. The case is in principle similar to that of Arthur K. Bourne et al., Executors, v. United States, 2 F. Supp. 228, 76 Ct. Cl. 680, in which the Commissioner made certain allowances of overpayments from time to time on a claim timely filed, and within two years from the institution of the suit definitely and finally disallowed a portion of the overpayment claimed. The facts and circumstances in the instant case distinguish it from the cases of Maxson v. United States, 50 F.(2d) 276, 72 Ct. Cl. 335, and Moses et al. v. United States (D. C.) 43 F.(2id) 653, upon which the defendant relies. In those cases the courts held upon the facts there disclosed that an allowance of a claim for refund in part amounted to a rejection of the balance. But, even in a case where there is only one claim, there may be extenuating facts and circumstances showing a lack of intention to reject the claim as to the'balance, and we have come to the conclusion that there are such facts and circumstances in the instant case.
With reference to the sufficiency of the claim of February 18,1925, the facts disclose that prior to the filing thereof the Commissioner had under consideration and audit plaintiff’s taxable years 1017 and 1918, and the question whether its profits tax for those years should be computed under the special provisions of sections 210 and 328 of the Revenue Acts of 1017 and 1918 was involved. Plaintiff thereupon filed a claim for refund for each of the years based on this ground. These claims were definite and specific in their statement of facts, the claimed rate of profits tax, the amount, of overpayments, and the corporate taxpayers engaged in a like or similar trade or business which it was believed should be used as comparatives. It was well known to the Commissioner and to the plaintiff that the amount of the statutory invested capital for a particular taxable year, with respect to which the statute imposed an excess profits tax, was affected by the amount of tax due for the previous year; the greater the tax for the previous year the less the invested capital and the greater the profits tax for the subsequent year.
While the matter of the tax liability for 1917 and 1918 was under consideration by the Commissioner in connection with plaintiff’s claims for refund based on special assessment and before he had proceeded very far with his consideration of the year 1019, for which a revenue agent had made a report *556recommending overassessment, the Commissioner wrote plaintiff a letter, on January 21, 1925, suggesting that, inasmuch as the correct tax liability for the prior year for whieh plaintiff had filed claims for refund, was indeterminate, a claim for refund be filed for 1919 in order that a refund of any overpayment that might ultimately be found to have been made for that year might not become barred. Accordingly the claim of February 18,1925, was filed and this letter of the Commissioner was attached to and made a part of the claim. It seems evident that this letter of the Commissioner had reference to two grounds upon whieh an overpayment for 1919 might result when a final decision with respect thereto was made, namely, special assessment for 1917 and 1918 which, if allowed, would reduce the tax paid for those years and thereby increase invested capital for 1919, and the adjustments made by the internal revenue agent in charge hi his report recommending thé allowance of an overassessment on other grounds.
At the time this letter was written, the Commissioner had under consideration the plaintiff’s claims for refund for 1917 and 1918 based on special assessment, and there was therefore no indefiniteness in the claim of February 18, 1925, or lack of understanding of the ground thereof and the facts disclosed and relied upon by plaintiff, as plaintiff pointed out that it was entitled to an overpayment for 1919 because of its claims for refund based on special assessment for 1917' and 1918. The claim appears to have been as definite and as specific as the circumstances required or permitted. It definitely stated a ground, namely, that special assessment for 1917 and 1918 would result in an overpayment for 1919. The overpayment, for which this suit is brought, resulted from that cause. The claim was sufficient to advise the Commissioner of the reasons the plaintiff put forward then and now for its allowance. The Commissioner was not misled by plaintiff’s failure to set forth at greater length and in more detail the reasons why there would be an overpayment for 1919 if special assessment should ultimately be allowed for 1917 and 1918. Such overpayment would result as a matter of course if the reason advanced by plaintiff in its claim should prevail. The amount of the overpayment vas only a matter of computation of the invested capital and the tax in accordance with the statute and the regulations. The specific facts from which an overpayment for 1919 would result were impliedly, at least, contained in the Commissioner’s letter to the plaintiff of January 21, 1925, whieh was made a part of the claim. The refund claim of February 18,1925, in addition to the ground based on special assessment, included a claim in broad and general terms that “an examination thereof [1919] has been made and an overassessment recommended in the amount of $209,847.45.” Therefore the second claim filed October 29, 1925, whieh was timely, was a claim intended specifically and definitely to state the facts and ground relied upon by the taxpayer which had been included in general terms in the earlier claim of February 18. The last-mentioned claim was based wholly and specifically upon the revenue agent’s report recommending an overassessment of $200,847.45, whieh did not involve the ground stated in the earlier claim that there was also an overpayment for 1919 because the tax for 1917 and 1918 had been overpaid. In these circumstances we think the claim of October 29, 1925, was not an abandonment by the taxpayer of the earlier claim for an overpayment for 1919 based on special assessment for 1917 and 1918. The same is true with reference to the third claim for refund filed February 23, 1926, based specifically upon a supplemental report, of the revenue agent and the Commissioner’s letter of February 6 increasing the overassessment shown in a previous report upon whieh the claim of October 29 was based.
In addition to the foregoing, we are of opinion, for the reasons hereinafter stated, that the claim of February 18, 1925, was not specifically and finally disallowed until August 28-, 1929, and that the claim, in two parts, filed November 15, 1928, based on the segregation of the year 1919 into two taxable periods of six months each, was a proper amendment and amplification of the earlier claim of February 18, 1925. There is and can be no question as to the sufficiency of the claim of November 15, 1928', as an amendment of the previous claim of February 18,1925.
Was the statement made by the Commissioner in the certificate of overassessment of May 14,1926, for the last six months of 1919, that “in the determination of this overassessment, the statements made in your claims for the refund of * * * $655,436.43 have been given careful consideration,” a definite disallowance and rejection of the claim of February 18, 1925? This statement in the certificate of overassessment must be interpreted in the light of conditions existing at the time it was made and also in connection with other statements contained in both eer*557tificates of overassessment showing the subject-matter or grounds upon which the over-assessments disclosed therein had been based. It should be noted at this point that no such statement was contained in the certificate pf overassessment for the taxable period consisting of the first six months of 1919, and $12,592.01 of the overpayment here claimed was for this period. The Commissioner may give consideration to statements contained in a claim for refund without definitely rejecting the claim or intending to do so.
The question whether there was an overpayment for 1919 on account of the tax for 1917 and 1918 being less than that determined and collected was not before the Commissioner for decision at the time he audited the 1919 return or at the time he issued the certificates of overassessment allowing an overpayment on grounds entirely different from those stated by plaintiff in the claim of February 18,1925, and such question had not been before him for decision since his determination of October 19, 1925, which was appealed to the Board of Tax Appeals December 18,1925.
The question whether plaintiff’s tax for 1917 and 1918 should be computed under sections 210 and 328, and consequently whether there was an overpayment for 1919' on the ground stated by plaintiff in the claim of February 18, 1925', had passed out of the hands of the Commissioner and was pending before the Board of Tax Appeals, undecided, when the certificates of overassessment for 1919 were prepared and issued by the Commissioner. In these circumstances we think a proper interpretation of the statute requires the conclusion that the Commissioner was not in a position legally to reject a timely and sufficient claim for refund so as completely to deprive a taxpayer who had filed such claim from receiving the benefit thereof when he succeeded in establishing the overpayment on the ground specified. This view finds support in the provision of the statute to the effect that, if a taxpayer files a timely claim for refund for a particular year and the Commissioner, instead of allowing it in whole or in part, determines a deficiency for that year, any overpayment resulting from a final decision by the Board shall be refunded, although the claim may have been definitely and specifically rejected at the time the Commissioner proposed the deficiency.
In both certificates of overassessment for 1919, quoted in finding 9, the Commissioner pointed out in the first statement contained in these certificates that “An audit of your income tax return and a consideration of all the claims filed by you indicate that the tax assessed, for this year was in excess of the amount due. The adjustments shown in the accompanying schedules [attached to the certificates] disclosing this overassessment have been made on the basis of facts and data now before the Unit, in connection with a revenue agent’s report dated September 6, 1924.” These were clear statements by the Commissioner that, although he had not overlooked the claim of February 18, 1925, he was not deciding the question presented by that claim, and that the overassessments allowed and disclosed in the certificates were based upon the foots and information before the Unit as disclosed in the revenue agent’s report, which report, as hereinbefore pointed out, in no way involved any facts, information, or recommendation with reference to the ground stated in the claim of February 18. These facts, when considered in connection with the further statement inserted in the certificate of overassessment for the last six months of 1919 that “in the determination of this overassessment, the statements made in your claims for the refund of * * * $655,436.43 have been given careful consideration,” and other pertinent facts and circumstances in connection with the case, show, we think, that the last-mentioned statement was not a disallowance or rejection of the claim of February 18, 1925. This conclusion • is further supported by the letter of August 28, 1929, in which the Commissioner, instead of holding that the claim of February 18,1925, had been decided and disallowed, took the position that' the claim of November 15,1928, based on the same ground and facts as the earlier claim, presented “the issues involving adjustment to invested capital for 1919 on account of 1917 and 1918 income and profits taxes and the relief provided by sections 327 and 328 of the Revenue Act of 1918 * * * for the first time,” and that, inasmuch as the limitation period for filing claims for 1919 had expired prior to the submission of these issues in the claim of November 15, no refund or credit could be made. The Commissioner’s letter of January 30, 1980, simply reaffirmed this position.
It is our opinion that this suit was not barred at the time it was instituted January 2, 1931, and that plaintiff is entitled to judgment for the amount of the overpayment of $29,505.93, with interest, as provided by law. Judgment will be entered accordingly. It is so ordered.
*558BOOTH, Chief Justice, and WILLIAMS, Judge, concur.
WHALEY and GREEN, Judges, concur in the result. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219234/ | WHALEY, Judge.
This is a 611 case.
The special findings of fact are taken from the stipulations of the parties and are, therefore, not in dispute.
The plaintiff on December 15, 1919, filed its income and profits tax return for the fiseal year ended June 39, 1919, showing a total tax liability of $862,129.55, of which amount $775,557.94 was duly paid in installments. On June 15, 1929, plaintiff filed an amended return showing a tax liability of $775,557.94 and at the same time filed a claim in abatement for $86,563.51; this amount being the difference between the tax liability as shown on the original and amended returns. The claim in abatement was rejected on May 9, 1924; the amount involved was thereafter paid on September 2, 1925, after seizure of plaintiff’s property, and suit was subsequently brought for its recovery.
In Routzahn, collector, v. Petroleum Iron Works, 56 F.(2d) 938, the Circuit Court of Appeals (Sixth Circuit) held that section 611 of the Revenue Act 1928 (26 USCA § 2611), was applicable and recovery was denied. While the facts relating to the foregoing suit are set out in the stipulations they are not repeated in detail in the findings of this suit for the reason that the aforesaid suit was against the collector and for an entirely different amount than that involved in this suit and are unnecessary for a disposition of the *560issues in this case. See Sage v. United States, 250 U. S. 33, 39 S. Ct. 415, 63 L. Ed. 828.
On March 3,1924, the Commissioner notified plaintiff of a proposed assessment of $27,830.64 in addition to all amounts theretofore assessed and on May 19, 1924, duly assessed this additional tax. After notice and demand by the collector and after conferences between the plaintiff and the Commissioner, the plaintiff filed on November 15, 1924, a claim in abatement of the additional assessment of $27,830.64, and the collection of the tax was stayed until the claim in abatement was rejected on. April 13, 1925.
The plaintiff paid the additional tax with interest on May 29, 1926, and, after a claim for its refund was rejected, brought this suit for its recovery.
This ease falls squarely within the provisions of section 611 of the Revenue Act of 1928 and accordingly recovery is barred.
Section 611 provides: “If any internal-revenue tax (or any interest, penalty, additional amount, or addition to such tax) was, within the period of limitation properly applicable thereto, assessed prior to June 2, 1924, and if a claim in abatement was filed, with or without bond, and if the collection of any part thereof was stayed, then the payment of such part (made before or within one year after [May 29, 1928] the enactment of this act) shall not be considered as an overpayment under the provisions of section 607 [2607] relating to payments made after the expiration of the period of limitation on assessment and collection.”
In the case of Graham v. Goodcell, 282 U. S. 409, 416, 51 S. Ct. 186, 189, 75 L. Ed. 415, the court in construing section 611 said: “As to the construction of the statute: Section 607 [26 USCA § 2607] provides that a tax assessed or paid after the expiration of the period of limitation applicable thereto shall be considered an ‘overpayment’ and shall be credited or refunded to the taxpayer, if claim therefor is duly filed. Section 611 enacts a qualification by providing that in stated circumstances the payment of the tax shall not be considered an overpayment under the provisions of section 607. These circumstances are (a) an assessment of the tax within the time applicable thereto and before June 2, 1924, (b) the filing of a claim in abatement, (e) the stay of the collection of any part of the tax, and (d) the payment of such part of the tax before, or within one year after, the enactment of the act of 1928.”
The plaintiff’s return for the fiscal year ended June 30, 1919, was filed December 15, 1919. Under section 250 (d) of the Revenue Act of 1921 the Commissioner had five years from that date in which to assess the tax, therefore the period for assessment expired on December 15,1924. The additional tax of $27,830.64 having been assessed on May 19, 1924, was seasonable and likewise was prior to the date of June 2,1924, named in the statute. A claim in abatement was filed November 15, 1924, the collection of the tax was stayed until after the rejection of the claim in abatement and the tax was collected May 29, 1926, which was prior to the enactment of the act of 1928. At that time the statutory period for collection had expired under section 250 (d) supra; and therefore but for section 611 the payment would have been refundable under section 607 of the Revenue Act of 1928 (26 USCA § 2607). It is readily apparent that all requirements of the statute have been satisfied.
The plaintiff, however, contends that section 611 is not applicable because the claim in abatement was filed after the period mentioned in section 250 (d)' in which appeals are allowed and therefore was a nullity.
We find little merit in this contention. It is based on a narrow technicality. It is sufficient to say the permission to file the claim in abatement was granted at the earnest entreaty of the plaintiff; it was carefully considered and the taxpayer benefited thereby. It is only necessary to say that on October 10, 1924, the plaintiff made a formal application for the benefit of special assessment and on November 15, 1924, filed the abatement claim. It must be borne in mind that up to that time the statutory period for collection had not expired, and it is a fair assumption that the delay in collection up to that time was due to the earnest entreaties of the plaintiff and the delay was beneficial to the plaintiff.
As the court said in Magee v. United States, 282 U. S. 432, 434, 51 S. Ct. 195, 196, 75 L. Ed. 442, decided at the same time as Graham v. Goodcell, supra, “The taxpayer benefited by the claim and is not in a position to contest its legality.”
The plaintiff is not entitled to recover, and the petition is therefore dismissed. It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219236/ | BYERS, District Judge.
The libellant, as owner of the covered barge No. 310, seeks to recover for damage it sustained on the afternoon of March 14, 1933, when it was taken in tow by the tug Grace to be moved from the outer side of pier 33, South Brooklyn, to the inner side. This occurred at about 2:30 in the afternoon, when an ebb-tide prevailed, on a clear day with no wind.
The Grace had the barge on her port side, having picked her up by nosing in between the barge and the pier, and, after making fast, the tow swung around at a distance of nearly 1,000 feet south of the gap, in a complete semicircle, so that for about that distance the tow travelled in a southerly direction with the tide under foot; at a point off the southerly end of pier 33, the course was changed so as to swing the barge around and head into the gap; the New York Central Diesel lighter No. 35 was headed out through the gap under circumstances to be described, and when each discovered the other, the tow and the lighter were headed so that a collision was probably inevitable. Both the tug and the lighter stopped and reversed their engines, but too late to avoid contact, and the starboard bow of the lighter struck the starboard bow of the barge, but no damage was done to the tug Grace because the latter was made fast so that her bow was aft of the bow of the barge.
While the evidence is not precise as to the strength of the ebb-tide, it is found that it was not less than two miles an hour.
The libellant’s barge No. 310 was 85 feet in length and 28 feet in beam; the tug Grace was 78 feet long and about 20 feet in width. The lighter New York Central No. 35 was 122 feet long and had a beam of 32 feet. It is possible that these dimensions do not appear in the testimony but in effect were stipulated.
The gap in the Atlantic Basin is about 300 feet at the opening, representing the navigable water between piers 33 and 38.
The questions to be determined are, first, whether the tug Grace navigated her tow in accordance with the requirements of the sit-*566nation, in view of the ebb-tide, and, second, whether the New York Central No. 35 was properly maneuvered in making her exit from the Basin.
As to the first, it is found that the Grace did not swing wide enough, in coming down alongside pier 33, to enable her to round to and breast the ebb-tide in a sufficient are to enable the navigator of the tug to open up the gap in such away that he would be afforded a clear view of the Basin and an emerging vessel. The circumstances are quite like those discussed by the Circuit Court of Appeals for this Circuit in The Poling Bros. No. 2, 62 F.(2d) 357:
“We agree with the judge that the 'Poling’ was at fault for coming down too close to the pier. * * * The actual distance is a mere guess, but we may safely say that she was within three hundred feet. This was too close, especially as she was on a tide of four knots, and though her engines had been stopped, she had not yet run off her way. In view of the possibility that other vessels might be coming out, she should have kept further off until she could see into the basin. If this required her to turn more than ninety degrees and enter against the tide, it was not troublesome to do so, and she could not be excused if it had been. Her actual course made dangerous the exit of the 'Sterling,’ or. any other vessel so situated.”
It is true that the tide in this case did not equal in strength the conditions described in the foregoing opinion, but safety of maneuver was just as requisite here as there.
The testimony differs as to the exact distance between the barge No. 310 and pier 33 at the time that entrance was attempted. The barge Captain puts it at 30 to 40 feet, and the Captain of the tug says '300 feet. His other testimony, in which he vindicates the course that he followed instead of rounding to against the tide, suggests that his estimated distance last above stated is not accurate, and it has not been relied upon in reaching this decision.
It is found that the tug was really shaving the end of pier 33, although her Captain says that he would have rounded to well out in the stream if he had had a heavy tow to maneuver. It is thought that the evidence discloses that the .Captain deliberately .elected to make an entrance to the Basin which was ppposed to' the actual requirements of the situation because he heard the slip whistle of the No. 35 when he was alongside pier 33, and says that he at once stopped his engines and drifted slowly with the tide down toward the southerly end of pier 33; had he been far enough off that pier, it is reasonable to suppose that the collision would not have occurred.
The seeond question has to do with the handling of the Diesel lighter New York Central No. 35. Just before the collision, this vessel was on the inshore side of pier 36 in the Basin, and made out for the entrance under slow speed, keeping about midway between the pier ends; the Captain was in the pilot house, and, when about 400 feet from the entrance, he blew a slip whistle and went into half speed, which is five knots an hour. He heard the whistle from outside the gap and recognized it as that of the tug Grace, but did not slacken his speed. He headed for the outboard end of pier 33 so as to keep about 2Ó feet off, having in mind that he would have to buck the ebb-tide in getting out of the slip. As the lighter approached pier 33, the shed obscured the navigator’s view, because the pier shed extends to within 15 or 20 feet of the pier end; he says that the tow was about 60 feet away from his vessel when they came into mutual sight. He immediately signalled to go into reverse, and the engineer testified that the engines would not turn in that movement for an interval- of about 5 or 5% seconds; probably the lighter did not entirely lose her way, as she was travelling at about 500 feet a minute, which is better than 8 feet a second. The cross-examination of the Captain on this point is significant:
“Q. In other words, knowing that you were coming out of the gap and another vessel was coming in, you kept right on going, is that right? A. Is that a yes or no answer?
“Q. That is a faet, isn’t it? A. No, that is not a faet.
“Q. Didn’t you keep on going? A. Because I know the practices that Grace does there.
“Q. Did you keep on going? A. Yes, to get out of his way.”
The foregoing seems to imply that' the Captain of the lighter recognized that under ordinary circumstances it would have been his duty, upon hearing the whistle from the tug .Grace, to arrest the progress of his own craft sufficiently to have it under absolute control so as to avoid contact with what he knew to be an incoming vessel; and that he elected not to do that because he thought he could foreeast what the tug Grace would do. Whether he was right or wrong in his guess, the fact remains that the collision occurred, and it might not have occurred if he had kept his vessel under control.
*567For these reasons, it is thought that the libellant has sustained its burden of proof, and that both the tug Grace and the lighter New York Central No. 35 must be held equally at fault for the damage sustained by the barge, with costs, and a decree to that effect may be settled on notice.
If findings are desired, they may be settled at the same time, and are to embody appropriate reeitals as to ownership and incorporation. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219237/ | BORAH, District Judge.
This libel filed under the Suits in Admiralty Act approved March 9,1920 (46 USCA §§ 741-752), seeks a recovery against the United States of America for the damage sustained to a shipment of flour which was received on board the steamship Afel at the port of New Orleans during the month of September, 1926, for carriage to the port of Santos, Brazil.
The bills of lading which libelant offered in evidence acknowledge receipt of the flour in apparent good order and condition, and it is conceded by respondent that upon discharge at Santos the flour which was stowed in No. 2 hold was damaged by sea water. Such being the situation, the burden lies upon the respondent to show, not only the cause of the damage, but that the cause is within a valid bill of lading exception or statutory exemption from liability, otherwise respondent’s liability as an insurer against all losses is established. It follows that if the cause of the damage is left in doubt, that doubt must be resolved against the carrier. The Folmina, 212 U. S. 354, 29 S. Ct. 363, 53 L. Ed. 546, 15 Ann. Cas. 748.
The respondent pleads exemption from liability under the Harter Act (46 USCA §§ 190-195) and the general exemption clauses of the bill of lading covering the damaged cargo. It is quite clear, however, from the pleadings and the testimony, that the respondent’s main defense is predicated upon the contention that the Afel, while made fast with her starboard side alongside the Oil Company’s Quay at the port of Pernambuco, collided with and ranged against a submerged concrete ledge extending from the wall of said quay. The alternative defense of heavy weather finds no support in the testimony, hence need not be considered.
The Afel, a comparatively new vessel, was built for the respondent by the American Shipbuilding Corporation at Hog Island, Pa., and upon completion in August, 1919, was given the highest possible rating *568accorded to vessels classified under the regulations of the American Bureau of Shipping. Thereafter she was placed in operation and first comes into this ease on April 23, 1926, when she was brought from temporary lay up to Pier 11, Staten Island, N. Y., where she was taken for the purpose of being placed in readiness for immediate operation. The vessel was then thoroughly inspected and surveyed and thereafter for a period in excess of four months, part of which time was spent in dry dock, she remained in that vicinity undergoing repairs under the observation and inspection of surveyors representing the American Bureau of Shipping, the United States Local Inspectors, and the technical representatives of the Shipping Board. During this period the Afel also passed her annual inspection under the supervision of the steamboat inspectors at New York, and a certificate of inspection certifying as to her fitness was issued. Having completed these extensive repairs involving an expenditure of $30^000, in addition to other work necessary to place the Afel in first-class condition, the vessel was on August 31, 1926, accepted by the Mississippi Shipping Company from the Shipping Board after inspection by its agents and the ship’s officers. With a competent personnel in charge the Afel sailed for New Orleans on September 1, 1926. She completed this voyage in eight days, and though light and encountering variable winds blowing at forces three and four, there was no evidence upon arrival at New Orleans of any defects or deficiencies in either her riveting or shell plating. Before loading commenced, she was again inspected by the port captain of the Mississippi Shipping Company, who was accompanied at all times by either the master or chief officer and two or three members of the crew. The inspection was a thorough one and covered every available portion of the ship. At each hold the ceiling was lifted to see if any cargo was deposited underneath; a number of the bilge boards were lifted and the tank tops and ship’s sides were inspected for leaking rivets or corrosion. The manhole plates were removed and the cofferdams inspected, and the sheathing was removed from the strainers and the sounding pipes to facilitate their inspection in the holds; in fact, the inspection was such as to reflect the condition of the Afel in each hold, and nothing was observed to indicate that the vessel was not fit and seaworthy for the contemplated voyage. The Afel was likewise inspected by the surveyor to the New York Board of Uni -derwriters. The purpose of this inspection was to ascertain if the ship’s holds were clean and in proper condition to receive cargo, and if cargo was properly stowed, handled, and dunnaged. Finding no defects in the vessel’s fittings or equipment and nothing to criticize or disapprove, the surveyor issued a certificate showing full compliance with the rules of the New York Board of Underwriters.
When all the cargo at New Orleans was loaded, including the flour involved in this action, the Afel sailed for Port Arthur, Tex., where she took on additional cargo for South American ports, including 9,000 bags of flour which were laden in No. 2 lower hold. Loading completed, she sailed for Pernambuco, Brazil, the first port of call, arriving thereat on the afternoon of October 22,1926. During the twenty-two days that were consumed in making this passage, the vessel encountered no unseasonable weather and the voyage was wholly without incident save for a minor detention to plug fourteen tubes in the main condenser. On this voyage soundings were made twice a day to inform the ship’s officers of the conditions presented in the holds, and the record of the soundings is persuasive that no water was discovered in the No. 2 cofferdam during the course of the voyage from New York to New Orleans, and from New Orleans to Pernambuco.
Upon arrival at Pernambuco the Afel was taken in charge by a compulsory pilot and moored with her starboard side along the concrete quay at the south end of what is variously termed Warehouse No.-1, the Oil Company’s Quay, or the Inflammable Warehouse. As the pilot brought her in, the vessel approached the dock at a slight angle and lightly touched her bow against the quay wall at a point well forward of the area where damaged rivets were eventually discovered. A line was then put out on the starboard bow and the ship hove alongside. Upon approaching the dock a stern line was put out aft and the vessel hauled alongside, after which she was breasted off between two and three feet from the top of the wall of the quay by using the ship’s port anehor forward and a kedge anehor aft with thirty fathoms of chain on each, and mooring lines • ashore.
On the following morning the Afel commenced discharging cargo, and shortly thereafter soundings were made and thirty inches of water was found in the bilge of No. 2 hold. This condition was reported to the ship’s officers and orders were given to pump *569the bilge well dry. This order was immediately carried out, and the bilge water as it came from the pumps was observed and it showed no trace of discoloration. The chief officer in an effort to diagnose the trouble inspected the No. 2 hold but found no visible trace of water. Confronted with this situation, the master instructed the chief officer to make soundings around the vessel and alongside the dock. This was done, and the soundings revealed that the Afel which was then drawing 20'10" forward and 24/2" aft had sufficient water under her bottom, but the presence of an unknown ledge was discovered protruding 18 inches from the face of the quay at a depth of 21 feet from the water surface.
From the time that water was first discovered in No. 2 bilge the Afel continued to make water and she was sounded and pumped out at frequent intervals. While the inflow of water in No. 2 cofferdam at times was at the rate of five inches per hour, it did decrease to the point where soundings and pumping were conducted only at two hour intervals. On the fifth day after arrival, discharge at Pernambuco was completed and the Afel proceeded to the port of Rio de Janeiro. During the five days which were consumed in making this passage, soundings consistently showed the presence of water in No. 2 hold and the vessel was pumped at regular intervals; however, there were no traces of flour in the discharge to suggest that the bilge water had come in contact with the cargo. After a stay in port of approximately six days, the Afel set sail for the port of Santos where she arrived on November 7, 1926. Discharging was commenced on the following day and periodical soundings and pumping continued with no indication that water had at any time reached the cargo until on November 13th, when forty-eight inches of water was discovered in No. 2 cofferdam and which when pumped out showed a decided trace of flour. Upon this showing the discharge of the cargo in No. 2 hold was commenced and continued night and day without interruption. After working down in the hold it was discovered that at some time during the voyage water had entered this hold and eight feet of cargo had sustained damage. When all the cargo was discharged it was found that approximately twenty-one rivets on the starboard side of No. 2 hold were leaking badly and approximately twenty rivets were leaking slightly. A survey was thereupon called, temporary repairs which included replacement of the damaged rivets were carried out as reeommended, and the vessel returned to New Orleans, where she was put in dry dock. There it was discovered that the vessel had scrubbed against some apparently irregular object at each of the places on the starboard side of the ship at No. 2 hold where temporary repairs had been made. It was found that the plating on the butts was shredded and scored and the rivets scored below the edge of the plate, and that the paint and barnacles had been scraped off alongside of where these rivets had been replaced in Santos, and that the plates in this locality were set in.
The testimony in this case establishes the fact that the Afel was moored with her No. 2 hold about opposite the No. 10 door at the southern end of Warehouse No. 1; that Warehouse No. 1 is about opposite the entrance through the breakwater and that because of the seasonable trade winds which were prevalent there was an unceasing swell against the wall of the quay. It further appears that the effect of a southeast wind when accompanied by an ebb tide is calculated to lessen the tension on the anchor chains and cause a vessel to range against the quay wall where, as here, the vessel was only breasted off two or three feet from the top of the wall. The testimony in this case further shows that the construction of the quay wall was such that it tapered out or slanted down from the top towards the base, and the preponderance of the evidence clearly establishes the existence of concealed ledges which could have touched the Afel in the way of No. 2 hold. The respondent has produced twenty-eight witnesses who have testified as to the existence of these projections, three of whom were professional divers, and while there is testimony to the contrary, the proof carries conviction of the existence of a ledge twenty-seven feet from the top of the dock which projected out from the face of the quay a distance of approximately twenty-two inches.
While it is true that the ship’s officers have testified that they had no knowledge of the ship ranging against the quay after she was breasted off, and while it is conceded that the impact which occurred while the ship was being hedged in to the quay did not and could not have caused the damage, the probabilities nevertheless favor the view that the Afel did range against the projecting ledge which was in such close proximity to the point where the damage actually occurred. Furthermore, the character and nature of the damage is mute evidence that the injury to the vessel was sustained in the *570manner claimed. However, if there can be any doubt on the subject, this doubt is removed when the testimony of the boatswain is considered. This witness stated that he went ashore the night that the vessel arrived at Pernambuco but came on board at 5 o’clock the next morning; that he observed a swell inside of the breakwater and the vessel was surging in and he felt her shiver four or five times as though she were hitting the dock, and he thought the ship was being damaged and reported the faet to the chief engineer. I have been asked to disregard the testimony of this witness because of the imputations that are to be drawn from the circumstance that he was ashore all night and because the chief engineer, whose testimony was taken nearly three years thereafter, had no recollection of this incident having been reported to him. There appears, however, no justification for my doing so. The mere fact that the boatswain accepted the language of counsel and described the ship as shivering easts no suspicion on his testimony; in faet, that is the sensation one would expect to feel if the vessel was striking against the ledge.
Since it is admitted that the cargo was damaged by sea water, and satisfactory proof has been offered to show the cause of its presence, and that the damage was occasioned by a peril of the sea, a eause for which the vessel was exempt from liability, and since libelant has failed to offer any proof to establish that the damage might have been prevented by reasonable skill and diligence on the part of the carrier, the only inquiry open is whether the carrier has furnished a seaworthy vessel or exercised due diligence to that end.
The libelant does not seriously contend that the Afel’s underwater body, shell plating, and riveting were not thoroughly inspected when the vessel was in dry dock, nor does it concede the fact; it rather takes the position that the conditions found at the time of dry docking are irrelevant, and there is force in the contention because it does seem logical to assume that the rivets were damaged subsequent to the vessel’s dry docking as she was painted at that time. Accordingly, it is contended that the history of the Afel prior to the commencement of the voyage throws the greatest suspicion on her, and it is pointed out that not only was she in a collision with the tugboat Bathalum, but that certain indentations were found in the plating on the starboard side of the ship when the master took over the command of the vessel at New York. The entry in the logbook under date of June 18th reads: “ * * * Fords tug-boat Bathalum coming out of North side of Pier hit our Starboard quarter damage unknown as yet. Ford’s tug boat’s Port rigging carried and other damages to said boat. * * * ” This entry indicates that the impact was abaft the ship’s beam. Of course, this collision has no relation to the damage to the cargo in the No. 2 hold, and the same is true with reference to the indentations in her shell plating. This evidence was simply offered in an effort to show the lack of attention of which the respondent was guilty in preparing the Afel for her voyage. However, where as here all the direct evidence is to the effeet that the vessel was seaworthy when she entered on her voyage, it cannot be inferred from these facts that her seaworthiness was thereby impaired in the absence of affirmative evidence that she was in fact injured thereby in her hull. Furthermore, the evidence in this case shows 'that the indentations which were in the ship at the time she was accepted by the Mississippi Shipping Company are still present without any repairs having been made thereto, thus negativing the contention that another official inspection should have been applied for.
Though the testimony is all one way that the vessel did not go aground or meet with any'accident on the voyage, it was discovered upon dry docking- at New Orleans that there was damage to the port side of the Afel in the way of No. 2 hold, and it is contended that this fact is significant in relation to the time when the rivets on both sides of the ship sustained damage. While one witness has testified to that effeet, his testimony is admittedly speculative and he frankly admits that the damage could have come about from the vessel rubbing her port side against a dock at some time on the same voyage, and the testimony shows that the Afel did lay with her port side along the dock at Santos for a considerable time.
It is further contended that the libelant’s flour was improperly stowed at New Orleans and that the stowage rendered the vessel unseaworthy. The issue thus presented is whether or not the stowage of the flour was negligent. Rather than prolong this opinion to undue length, it is sufficient to say that on this issue of faet I find that the preponderance of the evidence establishes be<yond doubt that the stowage at New Orleans was eminently proper, and were it not for *571the entry of water into the hold in ‘sufficient volume to move the noimal accumulation of flour dust lying upon the tank tops down to the strainers, there would have been no damage. In this connection attention is invited to clause 18 of the bill of lading, which provides : “ * * * that the insurance surveyor’s certificate shall be accepted by the holder of this bill of lading as conclusive evidence that the vessel has been properly prepared for the cargo in every way.”
Upon the whole case it seems to me that the respondent has discharged the burden which the law imposes upon the owner and has shown that it exercised, not only due diligence to make the Afel fit and seaworthy, but that she was in fact seaworthy at the beginning of the voyage, and that the proximate cause of the loss was a peril of the sea; that is to say, it was an access of sea water through an accident to a seaworthy ship, arising from striking or surging against submerged projections or ledges which existed on the face of the quay wall at the port of Pernambuco. Respondent is therefore entitled to the protection which the Harter .Act affords.
The libel will accordingly be dismissed, at the,libelant's cost. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219242/ | MORRIS, District Judge.
This is an aetion brought by Daniel Joseph Murphy of Boston, Suffolk county, commonwealth of Massachusetts, against the United States of America, to recover on a $5,000 converted war risk insurance policy.
The petition was entered February 13, 1932. Upon June 14, 1932, Agnes MacLean and Maria Connors Leonard filed a motion to be joined as parties defendant in the aetion. This motion was allowed by Judge Lowell, June 14, 1932, on the same day the motion was entered.
All the parties waived in writing the right to a trial by jury, and the case came on for hearing before the court.
I find the following facts: Joseph J. Murphy, the soldier, enlisted in the United States Army at Roxbury, Mass., March 29, 1918, and was honorably discharged at Camp Devens, April 17,1919. On April 1,1918, he made application for and was granted a certificate of war risk insurance in the sum of $10,000, naming as beneficiary therein his sister, Agnes Murphy. During the term of his service, the insurance premiums were paid out of his service pay as a soldier. After his discharge from the army, he allowed his policy to lapse for nonpayment of the premium due on Mareh 1, 1919. The lapse of the poliey became effective thirty-one days thereafter. On June 1, 1920, he reinstated and converted $5,000 of his term insurance to an ordinary life poliey, and named his father, Daniel Joseph Murphy, the'plaintiff in this action, as his designated beneficiary. This insurance was in force on the date of the veteran’s death April 13,1931. On April 8, 1931, Joseph J. Murphy signed a paper made out in due form purporting to change the beneficiary named in his life insurance poliey naming therein three beneficiaries as follows: Maria Connors Leonard, an aunt, Agnes C. MacLean, his sister, and Daniel J. Murphy, his father, who were to share equally. This change of beneficiaries was made at the Boston City Hospital during Murphy’s last illness.
The main issues in the trial of the case involved the validity of this change of beneficiaries. The United States admits liability under the poliey, and takes the position of a stakeholder willing to pay when it is determined who is entitled to the proceeds of the poliey.
The signed notice of the change of beneficiary was mailed to the United States Veterans’ Bureau, Insurance Division, Washington, D. C., April 9, 1931, and bears the stamp of the Bureau as being received April 13, 1931.
The change of beneficiary was not indorsed on the poliey for nearly a year thereafter, as appears by the following:
“Change of Beneficiary.
“In accordance with the request of the *584insured the beneficiary herein is changed to Maria Connors Leonard, his aunt, one third (%), Agnes G. MaeLean, his sister, one third, (Va), Daniel Joseph Murphy, his father, one third, (Ya). (See Form 724 dated April 8, 1931.)
“Washington, D. C., March 10, 1932.
“Hortense Freeman, Registrar.”
From a letter (Plaintiff's Exhibit 8) written by the Bureau to Daniel Joseph Murphy, May 4, 1931, it appears that, upon the death of his son, Murphy obtained blank proofs of claim from the Veterans’ Bureau in Boston, filled them out, and filed them with the Bureau in Washington. Receipt of the same was acknowledged by the Bureau, and Murphy was informed that it had received a document dated April 8, 1931, purporting to be executed by Joseph J. Murphy containing a request for a change of beneficiary.
Whether or not Daniel J. Murphy knew of the change in beneficiary prior to the date of the above-mentioned letter seems to me immaterial. It cannot affect the veteran’s right under the policy to make the change.
The plaintiff bases his claim to the full proceeds of the policy on two grounds. The first, that the insured was not of sane mind at the time he executed the application for a change in the policy, and that, being of weak mind, he was induced to make the change by undue influence of his sister and aunt. The second ground is that what was done was ineffectual as a matter of law to make a change of beneficiaries.
With reference to the first ground, I find that Joseph J. Murphy was taken ill April 6, 1931, and removed to the Boston City Hospital, where he died from lobar pneumonia the 13th day of April, 1931. I find that on April 8th he sent for his sister, Mrs. MaeLean, to come to the hospital. When she arrived, he told her he wanted a lawyer. She made arrangement with her husband to communicate with a lawyer named Sullivan, who came to the hospital and had a talk, with “Joe” to ascertain what he wanted. He explained to the lawyer that he wanted to make a will and have his property go three ways. Sullivan apparently had been told what was wanted, because he had secured the necessary blanks for making a change of the beneficiary in the policy. While Attorney Sullivan was at the hospital, Daniel J. Murphy, the father, came in, and, seeing papers in the hand of the attorney, inquired what was going on. Not receiving a satisfactory answer, a scene was created at the boy’s bedside exciting him to such an extent that Dr. Gallagher, physician in charge, advised that nothing more be done at that time. Later „ arrangements were made for Attorney Thomas J. Kelley to come to the hospital in the evening of the same day, and he arrived about 7:30. He was shown to the bedside by the boy’s father. After talking with the boy, who told him how he wanted' his property to go, the neeessary papers were prepared, and a will was executed in which Daniel J. Murphy, the father, Mrs. MaeLean, the sister, and Mrs. Leonard, the aunt, were made beneficiaries to share equally. An application for change of beneficiary in his life insurance policy naming the father, sister, and aunt as beneficiaries was made. At the same time a change of beneficiaries in his adjusted service certificate was made, naming the same three parties as beneficiaries therein.
While there is no doubt but that young Murphy was a very sick man at the time, I believe and find that he was in possession of all his faculties, sane, and capable of giving instructions as to the disposition of his property, and that there was no undue influence brought to bear upon him.
Law.
Plaintiff’s second ground of recovery appears to resolve itself into a pure question of law. He testified that, after his son’s term insurance had expired for the nonpayment of premiums, he furnished money for it to be reinstated, and that he had paid the premiums on the life insurance policy since it was issued. There is conflicting testimony as to whether or not such was the fact. It is not necessary for me to make a finding one way or the other in order to determine plaintiff’s rights in this ease. Whether or not the father may prove a claim against his son’s estate for money so expended is a question for the state court. An agreement not to change beneficiary in a war risk policy in consideration of money advanced to. insured by beneficiary is invalid. Lewis v. United States et al. (C. C. A.) 56 F.(2d) 563.
Section 12 of the policy of insurance provides :
“The insured shall have the right at any time, and from time to time, and without the consent or knowledge of the beneficiary to change the beneficiary under this policy within the class permitted by the War Risk Insurance Act or any amendment or supplement thereto. Every change of beneficiary must be made by notice, signed by the insured, to the Bureau of War Risk Insurance at its office in Washington D. C. (Accompanied *585by the policy for an indorsement of the change thereon by the said Bureau) and shall not take effect unless such change is indorsed on the policy. After such indorsement the change shall be deemed to have been made as of the date the insured signed said written notice of change whether the insured be living at the time of said indorsement or not.”
Plaintiff’s contention is that paragraph 12 of the contract in the policy determines and controls the method by which a change in the designation of the beneficiary may be made, and that, the rule laid down not having been complied with, the attempted change is invalid.
I cannot so hold. Counsel for the plaintiff cites the following cases: Abbott v. Supreme Colony United Order of Pilgrim Fathers, 190 Mass. 67, 76 N. E. 234; James McCarty v. Supreme Lodge N. E. Order of Protection, 153 Mass. 314, 26 N. E. 866, 11 L. R. A. 144, 25 Am. St. Rep. 637; Thomas v. Thomas, 60 Hun, 382, 15 N. Y. S. 15; Ables v. Ackley, 133 Mo. App. 594, 113 S. W. 698. These decisions do not seem to me convincing.
Section 12 was inserted in the policy for the protection of the United States. It protects the government against payment to any person not entitled under the-terms of the policy. • Daniel J. Murphy, the named beneficiary, had no vested interest in it. The only parties to the contract were Joseph J. Murphy and the United States of America. They were the only ones that could change the terms of the contract. The insured executed a prescribed form for a change of beneficiary which was promptly filed with the Bureau in Washington. It is true that it was not accompanied by the policy for an indorsement of the change thereon by said Bureau, but shortly thereafter the policy was sent in by the plaintiff in this action, and the Bureau was in possession of the veteran’s request and the policy. It is true that the policy was not filed by Daniel J. Murphy for the purpose of having the change of beneficiary recorded thereon, hut was accompanied by a formal claim for insurance benefits under the policy. The Bureau promptly informed the plaintiff by letter dated May 4, 1931, that it was in receipt of a request for a change of beneficiary. The government as a party to the contract apparently waived the provision that the request for a change of beneficiary be accompanied by the policy, and indorsed the change thereon notwithstanding the claim made by the plaintiff. This was not done until March 10, 1932, after correspondence with the plaintiff and his attorney.
In a letter bearing date of February 9, 1932 (Plaintiff’s Exhibit 1), plaintiff’s attorney, Alexander H. Lewis, now deceased, was notified of the determination of the Bureau in the following language: “This claim has received careful consideration and the administrator of Veterans affairs has now rendered a decision to the effect that the change of beneficiary of this insurance policy executed by the insured on April 8, 1931, in favor of Maria Connors Leonard, aunt, Agnes C. MaeLean, sister, and Daniel J. Murphy, father, one third to each is valid, and must be given effect. However, in view of the fact that it appears that your client Daniel J. Murphy intends to file suit in this case payment of the proceeds of the insurance policy in accordance with the change of beneficiary will he held in abeyance for a period of thirty days from the date of this letter in order to give him a reasonable opportunity in which to file suit. If at the expiration of that time suit has not been filed and this office notified to that effect steps will be taken to make payment under the policy to the last designated beneficiary. This letter may be considered as evidence of a disagreement within the meaning of section 19 of the World War Veterans’ Act, as amended (U. S. C. Ann., title 38, § 445).”
Apparently soon after this ruling, indorsement of the change was made upon the policy, but in the meantime suit had been entered February 13, 1932, and plaintiff claims that, the change in the beneficiary not having become effective if at all until after the suit was brought, the rights of the parties could not be changed by any action of the government.
The indorsement on the policy was made in pursuance of a decision already made before suit was entered or .could be entered, waiving any technical irregularities in noncompliance with section 12 in the policy. This provision being inserted in the policy for the protection of the government in making payment under it and not for the protection of any named beneficiary having no vested interest therein, I hold that a change in beneficiary became effective as of the date the insured signed the written notice of change as provided in section 12.
A verdict may be entered in favor of Maria Connors Leonard, Agnes C. MaeLean, and Daniel J. Murphy for one-third each of the face of the -policy, $5,000. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219244/ | ANDREW M. J. COCHRAN, District Judge.
This action is before me on defendant’s demurrer to the second paragraph of the reply. It is an action to recover the sum of $81,000 for the alleged wrongful death of plaintiff’s intestate on February 11,1930. By the fifth paragraph of its answer the defendant pleads in bar of plaintiff’s right to maintain the action that on January 3, 1931, she entered into a written contract with defendant whereby she released it from all liability because of the death of her intestate in consideration of the sum of $3,000 then and there paid to her by defendant. By the second paragraph of the reply the plaintiff pleads that such contract was procured by the fraud of the defendant, not in its execution, but in inducing and persuading her to execute it.
The defendant relies on two grounds in *596support of its demurrer. One is that the plaintiff should have tendered to defendant the $3,000 which she received from it before bringing the action as a condition precedent of her right to do so. The other is the plaintiff has no right to plead such fraud in the procurement of the contract in this action at law. It should have brought a suit in equity to rescind it. I will dispose of the second ground first.
As to the authorities bearing on the question of the right to plead fraud in the procurement of a written contract at law, either as a defense to an action thereon or as a reply to it when it is pleaded as a bar to the action, it is said in the case of Pringle v. Storrow (D. C.) 9 F.(2d) 464, that “their name is legion.” Two distinctions must be noted. One is where the contract is a sealed instrument. The Supreme Court of the United States, in the cases of Hartshorn v. Day, 19 How. 211, 15 L. Ed. 605, and George v. Tate, 102 U. S. 564, 26 L. Ed. 232, held that in such a case fraud cannot be pleaded at law. These two decisions were followed in Pringle v. Storrow, supra, a decision of the District Court, as against that in Manchester St. R. v. Barrett, 265 F. 557, a decision of the appellate court of that circuit. Of course, this position can apply only in a case where the seal is of legal significance. The other distinction is where the fraud complained of has relation to the execution of the contract. In those cases such fraud can be pleaded at law. The question here is as to the right to plead fraud at law where the contract is not under seal or the seal is of no significance and where the fraud relied on was in inducing and persuading the plaintiff to execute it.
However the law on this subject may be elsewhere, it is settled in this circuit, by the appellate eourt thereof, that such fraud can be pleaded in an action at law and this court is bound by its position. In the case of Wagner v. National Life Ins. Co., 90 F. 395, that eourt held that fraud in inducing a contract of release of a cause of action set up as a defense to an action thereon might be alleged in a reply thereto. This decision has been adhered to since. In the case of Norfolk & W. R. Co. v. Hazelrigg (C. C. A.) 170 F. 551, 555, in my instructions to the jury I said, in referring to the question as to the validity of a contract of release of the cause of action sued on, that it was not invalidated because it was an unfair bargain and defendant took advantage of plaintiff in obtaining it from her. I gave as a reason this: “His remedy to invalidate it on this ground was in equity, and he has not seen fit to seek that remedy.” The appellate eourt in referring to this statement said: “It might be that there was error in what was here said about the necessity of resorting to equity in the ease supposed (see Wagner v. National Life Ins. Co., 90 F. 395, 33 C. C. A. 121), but the defendant did not make this point.” That eourt so held again in the ease of Southern R. Co. v. Clark, 233 F. 900. Its position was accepted and followed by Judge Tuttle in the case of United States v. Porter (D. C.) 9 F.(2d) 153. The appellate eourt of the Fifth Circuit takes the same position following the decision in the Wagner Case. Murphey v. Springs & Co., 200 F. 372, 45 L. R. A. (N. S.) 539; Kansas City So. R. Co. v. Martin, 262 F. 241. Judge Hanford in the Ninth Circuit refused to follow the Wagner decision and held to the contrary thereof. Hill v. Northern Pac. R. Co. (C. C.) 104 F. 754. In the appellate eourt it was said that the Wagner decision “seems to be in conflict” with the decision in the case of Hartshorn v. Day and George v. Tate, supra, which was not the case, and it found it “unnecessary in this case” to decide the question. Hill v. Northern Pac. R. Co. (C. C. A.) 113 F. 914, 917. In the case, however, of Cook v. Fidelity & Deposit Co., 167 F. 95, that eourt held that fraud in inducing the execution of a written contract could not be pleaded at law. To the same effect is a decision of a circuit eourt in that circuit in the case of O’Connell et al. v. American Fire Ins. Co., 189 F. 1018. A decision by the District Court in the subsequent case of American Sign Co. v. Electro-Lens Sign Co., 211 F. 196, takes the contrary position and cites and relies on the decision in the Wagner Case. And the decision, of the appellate eourt of that circuit in the case of Whitney Co. v. Johnson, 14 F.(2d) 24, indicates a leaning towards the Wagner decision. The appellate eourt of the Eighth Circuit is against that decision. It so held in the cases of Pacific Mut. Life Ins. Co. v. Webb, 157 F. 155, 13 Ann. Cas. 752; Union Pac. R. Co. v. Whitney, 198 F. 784. Such are the federal decisions on the question as far as I have been able to find them. I think that I am not far wrong in saying that, in any case which may now arise in a federal eourt involving the question, the decision in the Wagner Case will be accepted and followed. In the case of Whitney Co. v. Johnson, supra, it was said that in view of section 274b of the Judicial Code (28 USCA § 398), and the decision of the Supreme Court in the case of Liberty Oil Co. v. Condon Nat. Bank, *597260 U. S. 235, 43 S. Ct. 118, 67 L. Ed. 232, the question whether the Wagner Case was correct or not is now “not very material.”
But it is material in this, that if that decision was correct the question of fraud in the ease is for the jury and not for the court, and the effect of its finding thereon is the same as on any other fact in the ease. It cannot be said that such finding may be treated as advice to the eourt. It must be held that this ground of the demurrer is not well taken.
This brings me to the other ground thereof. Here the law and common fairness are with the defendant. If plaintiff was to repudiate the settlement of her cause of action, she should have repudiated it in its entirety, i. e. the payment made for the release as well as the release before bringing the action. The following authorities support this position, to wit: Vandervelden v. Chicago & N. W. R. Co. (C. C.) 61 F. 54, 59; Barker v. Northern Pac. R. Co. (C. C.) 65 F. 460, 462; Hill v. Northern Pac. R. Co. (C. C. A.) 113 F. 914; Price v. Connors (C. C. A.) 146 F. 503; Mahr v. Union Pac. R. Co. (C. C. A.) 170 F. 699.
In Barker v. Northern Pac. R. Co., the question was as to the right to bring a suit in equity to rescind the contract of release without first making a tender of the amount paid therefor, and in the Vandervelden v. Chicago & N. W. R. Co., that question was considered and decided. It was held that such tender was a condition precedent to the right to bring the suit. In the latter case the court said: “The money was paid for the purpose of avoiding, not only the risk of damages being recovered by the plaintiff, but also to save the costs and expenses of litigation, even if the result should be favorable to the company. If the court, without requiring a repayment of the money paid on the settlement, or the equivalent, should hear the issue as to the validity of the settlement, and decree a rescission of the contract, then the plaintiff could prosecute his law action, and therein litigate the question of original liability. If the judgment was adverse to him on that question, he would still have in his possession the money paid him to procure a settlement, and thus, in effect, the company would have been deprived of all the benefits of the settlement without having secured to it the return of the money which it paid to secure the settlement.”
In the former ease the court said: “Where a party attempts to rescind a contract, the rescission must be complete. He cannot affirm it in part and reject it in part. Common honesty would require him seeking to escape the burdens of the contract to return the benefits which he has received. This is not only a rule of common honesty and fairness, but has been recognized by the courts from time immemorial. There are some few exceptions where railroads have been involved, but they simply illustrate that courts sometimes give way to sentiment, and allow compassion and sympathy to rule, instead of tranquil judgment. And these offers of restitution should come promptly, not reluctantly or tardily. To withhold a restitution is to exhibit a want of confidence in the integrity and justness of his ease, who complains of a contract, and seeks to set it aside because of fraud.”
In the other three cases, the question arose in actions at law to recover damages for a personal injury. In the cases of Price v. Connors and Mahr v. Union Pac. R. Co., the fraud relied on was in the execution of the contract, in which sort of case it is held by all the courts fraud can be pleaded at law. In that of Hill v. Northern Pac. R. Co., the fraud relied on was in inducing and persuading the plaintiff to execute the contract. It was doubted whether such fraud could be pleaded in the action at law, but held that because a tender of the amount paid had not been made before the action was brought it was not maintainable.
The Kentucky decisions are in aeeord with this position. The defendant cites the following decisions to this effect: Louisville & N. R. Co. v. McElroy, 100 Ky. 153, 37 S. W. 844; Illinois Central R. Co. v. Vaughn (Ky.) 111 S. W. 707, 708; Wells v. Royers Wheel Co. (Ky.) 114 S. W. 737; Bramble v. C., F. & S. E. R. Co., 132 Ky. 547, 116 S. W. 742; Broadway Coal M. Co. v. Ortkies, 200 Ky. 8, 254 S. W. 434.
The demurrer is sustained. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219246/ | BYERS, District Judge.
This is a motion by the libellant in a personal injury cause, for an order pursuant to Admiralty Rule 32 (28 USCA § 723) promulgated by the Supreme Court, directing the respondent to make discovery of and to produce on oath a copy of the testimony taken and a record of the proceedings had before the Board of Investigation convened on the Coast Guard Destroyer McDougal, on March 13, 1933.
Apparently the subject-matter of the investigation was the libellant’s injury and the attending circumstances.
The moving affidavit recites the examination and cross-examination of the libellant and respondent’s witnesses, without describing the nature of their testimony, and the taking and transcription of the testimony by a yeoman, second class.
It was stated on the argument, and in libellant’s brief, that the purpose of the motion is to prepare for the cross-examination of respondent’s witnesses in case their testimony at the trial shall differ from that given at the inquiry. If this is all the libellant has in mind, his purpose would be served if the respondent were directed to have the record in court at the trial, and to afford to libellant’s proctors an opportunity to examine it at the close of direct examination as to each witness separately other than .the libellant; this, to enable libellant’s proctors to cross-question as may be found appropriate. • Doubtless, if the matter be explained to the judge conducting the trial, he will permit libellant’s proctors the required time for reading such reeord, intermediate direct and cross examination.
Except to the extent above indicated, the motion will be denied, for the reasons stated in the opinion in The Papoose-Wright (D. C.) 2 F. Supp. 43, 1932 A. M. C. 1419.
Settle order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219247/ | LOWELL, District Judge.
Question of jurisdiction.
The owner of a winch sold on conditional sale to. the motor vessel Donald seeks pos*628session of the winch on the ground that the required payments have not been made. This is a question on which there is apparently very little authority, but I am of the opinion that as it relates to the possession of a chattel which by use has become maritime, this court has jurisdiction. Five Hundred and Twenty-Eight Pieces of Mahogany, 2 Lowell, 323, Fed. Cas. No. 4,845; The Blairmore I. (C. C. A.) 10 F.(2d) 35, 37.
Whether the libel is in proper form is another question. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219248/ | BRYANT, District Judge.
In this suit in equity, brought under R. S. § 4915 (35 USCA § 63), plaintiff seeks to establish his rights to letters patent, which were denied to him by the Commissioner of Patents, and which denial was affirmed by the Board of Appeals.
The matter in issue is directed to an improvement in mufflers. Powell filed application for patent on November 28, 1927, and McNamara an application for patent on the same improvement on January 18, 1928, less than two months later. Certain claims in each application were allowed for interference purposes.
The matter was tried before the Examiner of Interferences, both sides being represented by counsel and both introducing testimony. The Examiner, under date of March 26, 1931, rendered a decision denying the application of Powell and awarding a patent to McNamara. Powell appealed to the Board of Appeals, and the Board of Appeals, by decision dated December 22, 1931, affirmed the decision of the Examiner of Interferences. Powell then filed notice of appeal to the United States Customs and Patent Court of Appeals. McNamara, following the provisions of section 4913 of the Revised Statutes (35 USCA § 61), caused notices to be filed so that the action came into this court for determination, under section 4915 of the Revised Statutes (35 USCA § 63).
Upon the trial plaintiff produced his witnesses and tried his side of the ease de novo. Defendant was examined and cross-examined, and, in addition to this testimony, he offered in evidence the records used before the Commissioner of Patents in the interference proceeding, some parts of which were not received and have not been considered by this court.
The testimony taken in this court does not differ, in any substantial regard, from the testimony presented before the Examiner of Interferences. The facts are set forth in sufficient detail in the decisions of the Examiner of Interferences and the Board of Appeals to make it unnecessary to restate them here.
All of the officials In the Patent Office, including the Board of Appeals, have concurred in finding as a fact that McNamara was the first inventor of the improvement disclosed in plaintiff’s application. This finding of fact creates a presumption in favor of McNamara’s priority which is difficult to overcome. Morgan v. Daniels, 153 U. S. 120, 14 S. Ct. 772, 38 L. Ed. 657; Hermandez v. Prizma, Inc. (D. C.) 39 F.(2d) 196; United Shoe Machinery Corp. v. Muther (C. C. A.) 288 F. 283; O’Donnell v. United Shoe Machinery Co. (D. C.) 2 F. Supp. 178, 181.
The presumption still remains in this case, even though the evidence before this court differs from that taken before the Examiner of Interferences, and “is not to be overthrown” unless, under the language of Morgan v. Daniels, there was testimony which “in character and amount carries thorough conviction.” The above language is quoted from O’Donnell v. United Shoe Machinery Corporation, supra.
A careful weighing of the testimony, taken before this court, does not show that the patent tribunals erred in finding that McNamara was the first inventor, but instead shows proof sufficient to support the decision made.
Plaintiff’s bill may be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219251/ | COSGRAYE, District Judge.
It does not seem to me that Klepper v. Carter (C. C. A.) 286 F. 370; can be considered authority here. In the Klepper Case part of the truck was purchased from one manufacturer and the bodies from another. Klepper caused a truck to exist where none existed before and was a dealer in trucks. Here the plaintiff was an automobile dealer, and at the request of individual purchasers made changes in the automobile. It was at no time used as a truck; that is, for the carriage of freight or merchandise as distinguished from the transportation of passengers. Its use after as before the change was to transport persons with some inconsequential tools. I think, therefore, that the plaintiff cannot be held to be a manufacturer and should have judgment.
Plaintiff will prepare and submit findings in accordance with this memorandum. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219252/ | UNDERWOOD, District Judge.
The above-entitled proceeding came on for hearing and was duly heard by the court.
Petitioner was sentenced in the United States District Court for the Southern District of New York on an indictment in three counts, the first charging conspiracy to violate the National Prohibition Act, and the second charging the maintenance of a nuisance, in violation of said act (see 27 US CA). The third- count was dismissed by the court.
The sentences on the first two counts were as follows:
“Count 1 — Two (2) Years
“Count 2 — One (1) Year
“Sentences on counts 1 and 2 to run consecutively.
“Total sentence three years.
“Sentence to be executed at the United States Penitentiary, Atlanta Ga.
“Sentence to date from May 11, 1932.
Petitioner was committed to the federal penitentiary at' Atlanta, Ga., and served the sentence of two years on the first count. He was thereupon released to the custody of the respondent to be transferred to New York for service of the one-year sentence on the second count in a penal institution in that state.
. Petitioner thereupon applied for writ of habeas corpus upon the ground that the sentence imposed on the second count was void, and his detention therefor unlawful, because the crime charged was a misdemeanor, and could not be served in a penitentiary, and that, since the ratification of the Twenty-First Amendment to the United States Constitution, no legal sentence could now be imposed.
It is clear that the sentence on the second count is void since it undertakes to impose imprisonment in a penitentiary for a misdemeanor.
“The judgment of the court sentencing the petitioner to imprisonment in a penitentiary, in one ease for a year and in the other for six months, was in violation of the statutes of the United States. The court below was without jurisdiction to pass any such sentences, and the orders directing the sentences of imprisonment to be executed in a penitentiary are void. This is not a ease of mere error, but one in which the court below transcended its powers.” In re Mills, 135 U. S. 263, 10 S. Ct. 762, 764, 34 L. Ed. 107. See, also, In re Bonner, 151 U. S. 242, 14 S. Ct. 323, 38 L. Ed. 149; Armenta v. United States (C. C. A. 9th) 48 F.(2d) 568.
Ordinarily, where a sentence is void, the court may reassume jurisdiction and impose a proper sentence, but in this ease, under the ruling of the Circuit Court of Appeals for the Fifth Circuit, in the case of Smallwood v. United States, 68 F.(2d) 244, decided December 19, 1933, no new sentence could be imposed, since there now exists no law under which petitioner can be resenteneed.
This court, therefore, cannot return petitioner to the court in which lie was tried for resentenee, but must, since the penitentiary sentence is void, discharge him.
Whereupon it is considered, ordered, and adjudged that the writ of habeas corpus be, and the same is hereby, sustained, and that respondent discharge petitioner from custody forthwith. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219253/ | THOMAS, District Judge.
This matter is now before the court on exceptions to the master’s report. The trustee has also filed a motion to confirm the report of the special master whereby there was an adjudication by him of certain liens and assignments filed by creditors of the bankrupt with the comptroller and the commissioner of highways of the state of New York against moneys due or to become, due the bankrupt on the completion of a public highway known as Gabriel’s Comers-Starkey, part I, county highway 1918 — 8399, located in the counties of Schuyler and Yates, in the state of New ’York, which the bankrupt had agreed to construct pursuant to a contract with that state, at certain unit prices, based on estimated quantities.
Subsequent to the time of the filing of the petition in bankruptcy herein on May 9,1932, Clarence W. McKay was appointed ancillary-receiver of the bankrupt corporation by an order entered in the Western district of New York.
On May 25, 1932, by an order entered therein, the ancillary receiver was directed to sell and assign to one Stento & Serafini, upon their undertaking to complete the said public improvement contract, and upon condition that they reassign to him the difference between the unit prices on the quantities named in the original contract and the unit prices bid by Stento & Serafini to the ancillary receiver, together with any and all interest in the retained percentages held by the state, and all right, title, and interest in a certain current estimate due the bankrupt in the sum of $1,057.95. It was further provided in said order that the said sale of the said contract to Stento & Serafini be free of any and all claims and liens, and that the proceeds of the said sale, as received by the ancillary receiver, be held by him subject to any and all liens and claims asserted against the said public improvement by creditors of the bankrupt, and to the decree of this court as to the validity, bona tides, extent, and priority of such liens and claims.
It further appears that, as a result of the said salé, the ancillary receiver received the sum of $28,705.07, subject to the liens and assignments filed by lienors or assignees with the public authorities -of the state of New York.
To all intents and purposes, therefore, the moneys in the hands of the ancillary receiver arising out of the partial performance of the said public improvement contract by the bankrupt, and as a result of the sale of such contract to Stento & Serafini, must be treated and disposed of in the manner provided for by the Lien Law or the common law of the state of New York, whichever may be applicable.
*652On. June 6, 1932, the Stamford Road Construction Company was adjudicated a bankrupt by an order of this court, made in this district, and after the election of a trustee on July 12,1932, an order was entered on September 22, 1932, appointing Hon. John Keogh special master for the purpose of finally and conclusively adjudicating the validity, amount, and order of priority of all liens, assignments, claims, and other process file'd against this and other publie improvement contracts of the bankrupt, and directing that such master hear and determine the same on due notice to all persons who had filed liens, assignments, and other process against such publie improvement contracts with the comptroller and commissioner of highways of the state of New York, subject to the confirmation by this court of such adjudication, and restraining all such persons from instituting and prosecuting lien foreclosure actions against the accrued fund, or fund to accrue, in the state courts. This was within the province of the court and a proper exercise of its jurisdiction. Isaacs v. Hobbs Tie & Timber Co., 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645.
In due course a hearing was had upon due notice to all lienors, assignees, and other claimants against the fund in the hands of the ancillary receiver applicable to this public improvement contract, and such liens and assignments were duly adjudicated by the master, who has filed his report herein, consisting of findings of fact and conclusions of law.
The lien of Lackawanna Steel Construction Corporation and the claim of Bartle Gorman under an assignment executed by the bankrupt, against the fund, have been disallowed by tbe master, and exceptions thereto have been taken by them.
Lackawanna Steel Construction Corporation claims to be entitled to a lien against the fund in the hands of the ancillary receiver to the extent of $964.91.
On July 11,1932, Lackawanna Steel Construction Corporation- filed a notice of lien with the comptroller and commissioner of highways of the state of New York, purporting to be in the form required by the statute (section 12 of the Lien Law of the state of New York [Consol. Laws, e. 33]), wherein it claimed to be entitled to a lien for the said sum of $964.91.
The notice filed by such claimant contains the. following statement; “ * * * That the undersigned, therefore, has and claims a lien against the fund now in the hands of the State of New York accruing as specified under and by the terms of the order of the United States District Court above mentioned for the difference between the amount which the undersigned was able to close a contract with the said Stento & Serafini and the amount which the undersigned was entitled to receive under and by the terms of its contract with the said bankrupt, to wit: the sum of Nine hundred thirty-three dollars and seventy-one cents ($933.71), together with the sum of Thirty-one dollars and twenty cents ($31.-20) for the anchor bolts above mentioned, amounting in all to- the sum of Nine hundred sixty-four dollars and ninety-one cents ($964.91).”
It appears from the evidence adduced before the master that the claimant had a contract with the bankrupt, dated August 19, 1931, for the fabrication of steel for certain bridges on this publie improvement, for which the bankrupt had agreed to pay $47,000.45; that the said claimant fabricated the said steel bridges, but did not deliver them to the bankrupt or to this publie improvement, in which they were intended to be incorporated, and that on June 23, 1932, the claimant made a new contract with Stento & Serafini, pursuant to which they agreed to pay the claimant for the same bridges in its possession, $49,~ 474.16; that, on the adjustment of the account between the claimant and Stento & Serafim, an allowance was made to the claimant of $3,400, which the claimant was under no legal obligation to make to Stento & Serafini, and that it received in payment from them, for the bridges which it delivered to them, the net sum of $46,074.16.
The Lackawanna Steel Construction Corporation now contends that it is entitled to a lien for the difference between the sum of $47,000.45 and the sum of $46,074.16, to wit, $926.29, and for the further sum of $31.20 for anchor bolts delivered to the bankrupt, which were incorporated in the public improvement.
Before any lien may be found in favor of the claimant, it must first be decided that a valid obligation exists on the part of the bankrupt; and, second, that the claimant is entitled to a lien for such obligation. The validity of a lien against this public improvement is determined by the Lien Law of the state of New York, and particularly by sections 5 and 12 thereof.
The record discloses no valid obligations on tbe part of the bankrupt to this lienor. Moreover, its claim to the extent of $933.71 (modified upon the hearing to the sum of *653$926.21), under the notice of lien filed by it, appears to be for a loss sustained on a breach of contract by the bankrupt, for which no lien may be filed. Goldberger-Raabin, Inc., v. 74 Second Ave. Corp., 252 N. Y. 336, 340, 169 N. E. 405.
The sale of the fabricated steel by this claimant following its nondelivery to the bankrupt was such an act affecting title and dominion as to destroy its right to file a lien. Giant Portland Cement Co. v. State of New York, 232 N. Y. 395, 406, 134 N. E. 322.
With respect to the further sum of $31.-20 claimed by this claimant, the notice of lien is in all events deficient in a statement of the due date thereof required to be specifically asserted therein by the statute. Bradley & Son v. Huber Co., 146 App. Div. 630, 131 N. Y. S. 388, affirmed 210 N. Y. 627, 105 N. E. 1102; Pascual v. Greenleaf Park Land Co., 245 N. Y. 294, 157 N. E. 144; Toop v. Smith, 181 N. Y. 283, 289, 73 N. E. 1113; Mahlev v. German Bank, 174 N. Y. 499, 501, 67 N. E. 117.
Bartle Gorman claims to be entitled to an interest in the fund to the extent of $2,-436.81 payable out of retained percentage, by virtue of an assignment in writing executed by the bankrupt, dated and filed November 2,1931, with the comptroller and commissioner of highways of the state of New York.
The assignment provides by its terms that the bankrupt “sells, assigns, transfers and sets over unto Bartle Gorman, as attorney, of Utica, N. Y., the sum of $2,936.81/100 Dollars, to be paid as follows: $500 out of estimate No. 4; and $2,436.81/100 dollars out of retained percentages.”
The fund consists of monthly estimates, the final estimate, and the retained percentages. Monthly estimates were those estimates payable during the progress of the work to the extent of 90 per centum thereof, the final estimate representing the last one of such estimates. The retained percentages constituted an accumulation of a reserve made by the state before monthly estimates were paid, and constituted a separate reserve or guaranty fund for the completion of the contract, and payable only to the contractor after the acceptance of the contract by the state. Highway Law of the state of New York (Consol. Laws, e. 25) § 130, subd. 8.
The evidence adduced before the master indicates that, out of the total sum of $28,-705.07 received by the ancillary receiver, $7,-789.76 constitutes the retained percentages.
The assignment eoneededly covers and was intended to secure payment to the claimant of an indebtedness other than one which arose in connection with this public improvement.
The trustee urged, and the master found, that the assignment was not founded upon a valid consideration, and therefore it was void and of no effect.
The assignee contends, on the other hand, that the assignment being under seal was presumed to be given for a valid consideration, and that when he released a levy under execution founded upon a judgment against the bankrupt, against a current estimate due the bankrupt from the state of New York, such release, of itself, was sufficient to constitute a consideration for the execution of the assignment.
While the assignment purports to be under seal, there is no express declaration in the instrument itself so declaring. Under such circumstances it cannot be regarded as a sealed instrument under the decisions of the Court of Appeals of the state of New York. Weeks v. Esler, 143 N. Y. 374, 376, 38 N. E. 377; Matter of Pirie, 198 N. Y. 209, 215, 91 N. E. 587, 19 Ann. Cas. 672. Therefore no presumption of consideration arises by virtue of the imprint of the bankrupt’s corporate seal thereon. The assignment was not required to be under seal. Risley v. Phenix Bank of City of New York, 83 N. Y. 318, 329, 38 Am. Rep. 421, affirmed Phœnix Bank of New York v. Risley, 111 U. S. 125, 4 S. Ct. 322, 28 L. Ed. 374. Lien Law N. Y. §§ 15 and 16. The only other evidence in the record of consideration for the assignment, the validity of which was attacked, is the testimony adduced to the effect that the assignment was given for the release of a levy, which of itself was invalid under the Lien Law of the state of New York. Herrmann & Grace v. City of New York, 130 App. Div. 531, 114 N. Y. S. 1107, affirmed 199 N. Y. 600, 93 N. E. 376, Edison Electric Illuminating Co. v. Horace E. Frick Co., 221 N. Y. 1, 116 N. E. 369, L. R. A. 1917F, 1123. The fund, if amenable to a levy under a writ of attachment or execution at all, was not subject thereto, at least, until the time had elapsed for the filing of liens under the Lien Law of the state of New York. Any estimate payable by the state was merely a debt due from the state to the contractor, or a chose in action. Choses in action in the state of New York have never been the subject of a levy under execution. Baker v. Kenworthy, 41 N. Y. 215, 216; Duffy v. Dawson, 2 Misc. 401, 405, 21 N. Y. S. 978.
*654The so-called levy was apparently made, according to the record in evidence, October 14,1931, whereas the public improvement was completed and accepted by the state on January 11, 1933.
In the absence of proof of a valid consideration for the assignment and the evidence to the contrary, it was of no force and effect. Wilbur v. Warren, 194 N. Y. 192, 196, 10 N. E. 263; Alger v. Scott, 54 N. Y. 14, 15; Shaw v. Tonus, 20 App. Div. 39, 46 N. Y. S. 515.
This assignee presumes to attack assignments in favor of other creditors. A discussion thereof becomes unnecessary, however, since a creditor holding an invalid assignment is in no position to attack assignments in favor of other creditors. Hitchings v. City of New York, 182 App. Div. 28, 169 N. Y. S. 611.
Exceptions overruled, and master’s report confirmed. Submit order accordingly, properly consented to as to form. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219254/ | PRANK J. COLEMAN, District Judge.
The fines sought to be recovered were imposed by the Secretary of Labor under section 2.0 of the Immigration Act of 1924 (8 USCA § 167) which makes an owner, agent, or master of a vessel liable to a fine of $1,000 for failure to .detain on board any alien seaman as to whom a due order of detention has been served. The imposition of a fine is an administrative aet to he performed by the Secretary of Labor who must have sufficient evidence, not only of the escape of the seamen, but also that the party fined had been directed to detain him on board and had been given an opportunity to oppose the fine.
In the present case it is undisputed that two of the five seamen for whom fines were paid under protest had actually escaped. As to the other three, the Secretary of Labor had ample evidence to require a finding by him that they had escaped. The records before tbe Secretary of Labor showed that three seamen answering to the names of the three who had been ordered detained were arrested on board by the immigration authorities and *655charged with impersonating the three who had been ordered detained, that they not only admitted the impersonation, hut pleaded guilty to an indictment based upon it (for which they were sentenced to imprisonment for as long as six months). There was no substantial evidence before the Secretary to rebut these facts, and he was amply justified in finding that the three seamen so arrested were not the three who had been ordered detained. Seven months after the payment of the fines he was requested to reopen the matter on the ground of newly discovered evidence, though the evidence was not disclosed to him in that application; he refused, and I believe was entirely justified in his refusal.
As to the due sendee of the direction to detain and of the notice of the pendency of the fine proceeding before the Secretary of Labor, it appears that the ship’s agent at this port was the Barber Steamship Lines, Inc., to which was addressed the notice of the pendency of the fine proceeding before the Secretary of Labor. This notice was served on the agent, and it not only filed its protest but after the Secretary’s decision paid the fines with its own check. If the agent had been directed to detain the seamen, the fines were properly imposed under the provisions of the statute.
The protest affirmatively alleged that the detention order had been served on the agent and on the master of the vessel, and there was no intimation to the contrary until two years after the payment of the fines, when, at the trial of the present action, it is urged that the detention order was only served on the master. In view of the agent’s express admission that the order had been served on it, the Secretary of Labor was right in imposing the fines. Even if the order was physically delivered only to the master, the agent’s subsequent conduct was a ratification of his authority to accept it on behalf of the agent, and the latter is estopped to deny its own allegation upon which the Secretary of Labor acted. It is undisputed that the agent was apprised of the order at the time of its service, and, if it saw fit to treat the master as its representative in the matter, it cannot now complain. Indeed, it was the agent that employed the watchmen to detain the seamen pursuant to the order.
The present action is not brought by the agent, but by the owner of the vessel, on the theory that the fines were ultimately paid by it. But the fact is they were paid by the cheek of the agent which was the party properly fined, and a subsequent reimbursement of the agent does not deprive the government of its rights.
There are suggestions of various other points which seem to me too specious to justify discussion. Counsel for the plaintiff (who were also counsel for the agent before the Secretary of Labor) are mistaken in their apparent view that, because the subject-matter of the action is a fine, the court will east aside all common sense and seize upon any argument, however trivial, in a determined effort to defeat the plain purpose of the statute. The fines were imposed for a delinquency which had the serious result of admitting five Chinese into the country, and the parties responsible not only had reasonable notice of their obligation but had ample opportunity to contest the fines before the Secretary of Labor. It seems to me little short of preposterous for counsel to ask the court to adopt adroitly shallow reasoning in order-to avoid so just a result.
Verdict directed for defendant. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219256/ | KIRKPATRICK, District Judge.
This was a suit at law by the trustee in bankruptcy of one Morris Baseman, to recover from the defendant bank the sum of $2,-400, as a preference, which sum the bank had applied to the payment of one of Baseman’s notes, within four months of the filing of the petition.
The jury answered certain specific interrogatories and found a general verdict in favor of the plaintiff. The facts established by the verdict are as follows:
In April, 1931, Baseman was engaged in the retail coal business and was insolvent. His liabilities, which were in the neighborhood of $80,000, included a note for $2,400 held by the defendant bank. In an effort to save his trade and continue in business, he organized a corporation, Baseman Coal & Coke Company, and transfered to it, for a fair consideration, his physical assets consisting of stock and equipment. His accounts receivable, amounting to some $10,000, were not transferred to the corporation.
Thereafter the corporation conducted the coal business and Baseman continued to collect the accounts receivable and to deposit the money from them to his own account in the bank. The corporation also had an account "at the bank which was of course the active account for the business. On four different occasions Baseman transferred $500, a total of $2,000, from his individual account and deposited it in the corporation account. In addition he deposited at least $400 more in the corporate account which he got directly from the collection of his accounts receivable.
Baseman’s note had been renewed or extended from time to time, and the last extension came due on August 6> 1931.
On that day an attorney representing Baseman’s creditors called upon the bank, informed one of its officers that Baseman was hopelessly insolvent and that a petition in bankruptcy was about to be filed against him. The corporation then had on deposit with *660the bank more than the amount of the note, and at the close of banking hours, the note being unpaid, the bank applied the eorpora^ tion’s balance to its payment in the amount of $3,400.
The bank knew that Baseman had ineor-* porated his business prior to June 12, 1931, on which date the corporation opened its account with it. The president was also told “that the old business is going to be liquidated, that we cannot continue.” The bank had further been advised that the old business (individual) and the corporation “were one and the same thing, the assets and liabilities of the old firm were being taken over by the corporation.”
The bank, on August 26, when it applied the corporation’s account to the payment of Baseman’s note, had reasonable cause to believe that Baseman was insolvent. It also, prior to the time that the various deposits amounting in all to more than $2,400 and derived from the collection of his own accounts receivable were made by Baseman in the account of the corporation, had reasonable cause to believe that he was insolvent.
The defendant argues that the finding of the jury upon the latter point is not supported by any testimony, but, while the question is a close one, I think the testimony is sufficient. A statement to a bank by a debtor that he cannot continue in business and is going to liquidate, coupled with the simultaneous creation of a corporation which takes over the active conduct of the business, taken in connection with all the circumstances of this ease, are sufficient to put any intelligent person on notice as to the position of the debtor.
The decision of this ease turns upon whether or not the rule of New York County Nat. Bank v. Massey, 192 U. S. 138, 24 S. Ct. 199, 48 L. Ed. 380, applies. That decision holds that a deposit of money to one’s credit in a bank does not diminish the estate of the depositor, for when he parts with the money he creates at the time on the part of the bank an obligation to pay the amount of the deposit against checks as drawn, and, in the absence of fraud or collusion, upon the bankruptcy of the depositor, the bank need not surrender such balance but may set it off against notes of the bankrupt held by it. I think that the rule of New York County Nat. Bank v. Massey does not apply to this ease for two reasons.
In the first place, the vital thing upon which that decision depends is missing here. The deposit of Baseman’s money in the corporation account did not create an obligation on the part of the bank to pay the amount of the deposit upon Baseman’s checks. This is true although it is agreed that the money was really Baseman’s money and remained so at all times and although the bank was advised that he and the corporation were “one and the same thing.” The bank, in spite of these facts, could have refused to pay Baseman’s cheeks from the corporation’s account and would not have been liable to him had they done so. In other words, when Baseman took money from his individual account and put it in the corporation’s account, he was diminishing his estate available to creditors, because no corresponding obligation to pay his cheeks as drawn was created. In faet, I have little doubt that his main purpose was to diminish his estate available to creditors.
But, secondly, even if the creation of a separate corporate entity be wholly disregarded and the transaction viewed as though there never had been any corporation, it seems almost self-evident that Baseman with the consent and knowledge of the corporation was “building up” the account so that it Would be available at the proper time to meet the note. Cases where this is done form a well-recognized exception to the rule of New York County Nat. Bank v. Massey, supra. See Matters v. Manufacturers’ Trust Company (C. C. A.) 54 F.(2d) 1010, 1013. In such a case Judge Hand points out: “It was enough that the depositor alone intended not to use his right of withdrawal until the bank’s right ended it. The deposit becomes a transfer because the depositor means it to be such; that is, he means not to exercise his right of Withdrawal as to all of it, but to leave some part until that right is gone. It is not necessary that the residue shall be determinable in advance; no more need appear than that some part shall be left. When this is so the deposit is not in ordinary course; the part unused becomes a preferential payment when seized by set-off.”
The case here is of that nature. Whenever the bankrupt’s individual account got above $500 he would draw $500 out and put it in the corporation’s account, where he probably thought his general creditors could not reach it, or at least might have difficulty in doing so, but where, by reason of his special arrangement and understanding with the bank that he and the- corporation were one and the same thing, the bank could appropriate it to the payment of its claim against him. Naturally he wished to favor the bank and keep in its good graces, since he was endeavoring to go on with his business under the *661form of a corporation and required credit and banking connections for that purpose. The bank seems to have had no hesitation in appropriating the corporation’s funds to pay the individual note, and apparently the corporation acquiesced and every one understood that it could be done in that way.
The motion for a new trial is denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219257/ | CUSHMAN, District Judge.
In these suits the unconstitutionally is asserted of chapter 166 of the Washington Laws 1933, pp. 613-629 (Rem. Rev. Stat. Wash. §§ 6381 — 1 to 6381 — 38), and chapter 111 of the Washington Laws 1921 (page 338), as amended (Rem. Rev. Stat. Wash. §§ 6387— 6397, also 1933 annual pocket part, §§ 6388 and 6390).
The laws attacked relate to transportation of persons and property by motor vehicles over the public highways of the state.
On account of the denials and allegations of the answers, the limited extent of the stipulations, and the conclusion reached by the court, it will not be necessary to point out all of the particulars wherein the suits differ.
It is not necessary to state at length the statute of 1921 as amended. It is a statute regulating auto transportation companies— common carriers — operating over public highways between fixed termini on over a regular route. This statute, it is provided, does not apply to the exclusive transportation of agricultural, horticultural, or dairy or other farm products from the point of production to the market. Rem. Rev. Stat. Wash. § 6387 (d). A transportation company is required by this law to obtain a certificate of public convenience and necessity. Rem. Rev. Stat. Wash. § 6390, 1933 annual pocket part.
In chapter 166 of the Washington Laws of 1933, the Legislature undertook to extend the regulation of motor vehicle transportation to include what in that act are denominated as the “contract hauler,” “for hire carrier,” and the “private carrier.” In chapter 166 of the Laws of 1933, the “auto transportation company” of the earlier act is described as a “certified operator.” Rem. Rev. Stat. Wash. § 6381 — 1 (e).
Material provisions of chapter 166 (sections 1-3, Rem. Rev. Stat. Wash. §§ 6381 — 1 (f, g), 6381 — 2, 6381 — 3), in so far as they apply to “contract haulers,” are as follows:
“Section 1. * * *
“f. The term ‘contract hauler1 means every person owning, controlling, operating or managing any motor vehicle used in the business of transporting property for compensation, other than as a certified operator, over any public highway between fixed termini or over a regular route: * * * Provided, That the term ‘contract hauler’ shall not include any person owning, controlling, operating, or managing any motor vehicle operated exclusively in transporting agricultural, horticultural, or dairy or other farm products from the point of production to the market.
“g. The words ‘between fixed termini’ or ‘over a regular route’ mean the termini or route between or over which any contract hauler usually or ordinarily operates any motor vehicle, even though there may be departures from said termini or route, whether such departures be periodic or irregular. Whether or not any motor vehicle is operated by any contract hauler ‘between fixed termini’ or ‘over a regular route’ within the meaning of this act shall be a question of fact.
“See. 2. No person, except he be a certificated operator, shall engage in the business *664of transporting property by motor vehicle for compensation over any public highway between fixed, termini or over a regular route, unless such person prior to engaging in sueh business make a written contract or contracts with all persons for whom sueh transportation is to be furnished clearly stating the agreed compensation for sueh transportation, and prior to engaging in sueh business shall file sueh contract or contracts with the department.
“Sec. 3. The department is hereby vested with power and authority, and it is hereby made its duty to supervise and regulate every contract hauler; to fix, alter and amend just, fair, reasonable and sufficient rates, rules and regulations of each sueh contract hauler; to regulate the accounts, service and safety of operations of each sueh contract hauler; to require the filing of annual and other reports and of other data by sueh contract haulers; and to supervise and regulate contract haulers in all matters as aforesaid affecting the relationship. between sueh contract haulers and the persons to whom they furnish transportation. The department shall have power and authority, by general order or otherwise, to prescribe rules and regulations in conformity with this act, applicable to any and all sueh contract haulers; and within such limits shall have power and authority to make orders and to prescribe rules and regulations affecting contract haulers.”
The foregoing section is, in substance, the same as the corresponding portion of the act of 1921 (Rem. Rev. Stat. Wash. § 6389), with the exception that in the earlier law the department (then commission) was vested with power not only concerning the “rates,” but was given authority for the regulation of “fares,” “charges,” and “classifications.” The earlier statute, instead of reading, “persons to whom they furnish transportation,” reads, “traveling and shipping public.”
Further provisions of chapter 166 (sections 4, 6, 7, 10, 11, 13 [Rem. Rev. Stat. Wash. §§ 6381 — 4, 6381 — 6, 6381 — 7, 6381— 10, 6381 — 11, 6381 — 13]) applying to “contract haulers” are as follows:
“See. 4. No contract hauler shall hereafter operate without first having obtained from the department a permit so to do, issued under the provisions of this act. Application for sueh permit shall be made to the department in writing and shall state the ownership, financial condition, equipment to be used and physical property of the applicant, the fixed termini between which o*• regular route over which applicant proposes to operate, the nature of the transportation to be engaged in and sueh other information as the department may require, and such application shall have attached thereto the original or duly verified copies of all contracts to furnish transportation as hereinbefore described. The department shall have power, after hearing when the applicant requests a permit to operate in a territory already served by a certificated operator, who shall be given notice thereof; and in all other eases with or without hearing, to issue said permit as prayed for, or for good cause shown to refuse to issue same, or to issue it for the partial exercise only of said privilege sought, and may attach to the exercise of the rights granted by said permit sueh terms and conditions as, in its judgment, will promote safety upon the highways and conservation of their use in the public interest. The department shall deny any application for a permit when the type of vehicle to be used is an unsafe vehicle to be operated upon the public highways, and when it is not shown that the applicant has complied with the provisions of this act and with the existing motor vehicle laws of the state of .Washington.
“Sec. 6'. Upon the filing of an application for a permit and compliance with all lawful requirements, the department is hereby vested with power and authority to grant a permit to the applicant. * * *
“The department shall have power to supervise and regulate the rates, facilities, service and safety of operations of every such contract hauler for the purpose of promoting safety upon the highways and the con-' servation of their use, and to regulate and supervise the accounts and method of operation of the same; to prescribe sueh rules and regulations as it may deem necessary in carrying out the provisions of this act; and to supervise and regulate all contract haulers in all matters affecting the relationship between such contract haulers and the persons to whom they furnish transportation.
“See. 7. * * * All applications for such permits shall be accompanied by an application fee of twenty-five dollars ($25.00).
“Sec. 10. To the end that the department may enforce the provisions of this act, each contract hauler shall maintain on file with the department the original or duly verified copies of each contract for the furnishing of transportation as hereinbefore described, and of such other matters as the department may require. No contract hauler shall charge, demand, collect or receive a greater or less or different compensation for the transportation *665of property or for any service in connection therewith, than the compensation stated in the contract ox contracts filed by it with the department as herein required; nor shall any such contract hauler refund or remit in any manner or by any device any portion of the compensation as provided by said contract or contracts on file with the department or ordered by the department.
“See. 11. No contract hauler, its officers or agents, shall require or permit any driver or operator of any motor vehicle used in the transportation of property to be or remain on duty for a longer period than ten consecutive hours, and whenever any sueh driver or operator shall have been continuously on duty for ten hours he shall be relieved and not required or permitted again to go on duty until he has had at least eight consecutive hours off duty; and no such driver or operator who has been on duty ten hours in the aggregate in any twenty-four hour period shall be required or permitted to continue or again go on duty without having had at least eight consecutive hours off duty: Provided, That the provisions of this section shall not apply to any ease of casualty or unavoidable accident or the act of God, nor to the crews of wrecking or relief motor vehicles.” (Italics now supplied in all quotations from the statutes.)
The section of the act in so far as it defines a “for hire carrier” is as follows:
“See. 13. The term ‘for hire carrier’ means every person, owning, controlling, operating or managing any motor vehicle used in the business of transporting property for compensation over any public highway, except sueh persons as are included in the terms ‘certificated operator1 and ‘contract hauler’ as hereinbefore defined. * * ® ”
The law provides that a “for hire carrier” obtain a permit, the requirements concerning which are the same as those in the case of a “contract hauler,” as set forth in section 4 (Rem. Rev. Stat. Wash. § 6381 — 4) above quoted, with the exception of the words therein italicized, which are omitted in the case of the “for hire carrier.”
The provision as to the authority of the department concerning the granting of a permit to a “for hire carrier” is the same as in the ease of the “contract hauler” set forth in section 6 above quoted (Rem. Rev. Sta.t. Wash. § 6381 — 6), with the exception of the therein italicized words.
Section 17 of the act (Rem. Rev. Stat. Wash. § 6381 — 17), applying to “for hire carriers,” in part, is as follows:
“Sec. 17. ® ® * All applications for such permits shall be accompanied by an application fee of ten dollars ($10.00).”
The term “contract hauler” does not include persons operating exclusively within the incorporated limits of any city or town.
The material provisions of the act (sections 21, 23, 24 [Rem. Rev. Stat. Wash. §§ 6381 — 21, 6381 — 23, 6381 — 24]) relating to “private carriers” are as follows:
“Sec. 21. The term ‘private carrier’ means any person engaged in the transportation in his own motor vehicle) of property sold or to be sold by Mm in the furtherance of any private commercial enterprise or for the purpose of lease, rent or bailment.
“Sec. 23. * * * The department shall have power and authority, by general order or otherwise, to prescribe reasonable and necessary rules and regulations conformable to this act governing all private motor carriers of property.
“See. 24. It shall be unlawful for any private motor carrier of property to operate within this state without first having obtained from the department a permit therefor. An application shall be made to the department in writing, stating the ownership, equipment to be used by the applicant, and sueh other information as the department may request. Upon receipt of sueh information, and on compliance with the regulations, the department shall issue a permit to sueh applicant.”
A section of this law (section 28 [Rem. Rev. Stat. Wash. § 6381 — 28]) applicable to both the “contract hauler” and the “for hire carrier” is as follows:
“Sec. 28. Every ‘contract hauler’ and ‘for hire carrier’ operating under the provisions of this act shall between the first and fifteenth days of January, April, July and October of each year, file with the director of public works a statement showing the gross operating revenue of sueh hauler or carrier for the preceding three months, or portion thereof, and shall pay to the said director a fee of one per cent of the amount of sueh gross operating revenue.
“AH moneys collected under this act, except those collected under section 27 [section 6326], are for the purpose of carrying out the provisions of this act, and shall be paid into the state treasury and credited to' the pubHe service revolving fund.”
No showing or claim has been made that the moneys to be collected under the provisions of the act would exceed those needed *666for the purpose stated in section 28 of the act.
The following (sections 30, 31, 34, 36 [Rem. Rev. Stat. Wash. §§ 6381 — 30, 6381— 31, 6381 — 34, 6381 — 36] ) are general provisions of this act:
“Sec. 30. The department is hereby empowered to administer and enforce all provisions of this act and to inspect the vehicles, hooks and documents of all carriers to which this act applies. * * *
“See. 31. The department shall promulgate and mail to each holder of a permit hereunder, such regulations as it may deem necessary to properly carry out the provisions and purposes of this act.
“See. 34. Every person who violates or who procures, aids_ or abets in the violating of any provisions of this act, or who fails to obey any order, decision or regulation of the department, or who procures or aids or abets any person in his failure to obey such order, decision or regulation, shall be deemed guilty of a gross misdemeanor, and upon conviction shall be punished by a fine of not exceeding five hundred dollars ($500.00), or imprisonment. * * Each day’s violation of this act or any order, decision, rule or regulation of the department shall constitute a separate offense.
“See. 36. If any section, subsection, clause, sentence or phrase of this act is for any reason held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portions of this act.”
Complainants are neither “certified operators” within the provisions of the 1921 act, as amended, nor “private carriers,” as defined by the 1933 act. Their rights are to be determined either as those of “contract haulers” or “for hire carriers,” as defined in the latter act.
Upon the return of the orders directing the defendants to show cause why interlocutory injunctions should not issue, these cases were submitted for final determination upon the rules and regulations made by the Department of Public Works, admitted in evidence, and the following stipulations :
“It is stipulated that these eases may be finally submitted to the court upon the Acts, rules and regulations introduced and the orally stipulated facts, and it is further stipulated that plaintiffs in one case, Cogdal and Anderson, have made no application for a permit, and that the plaintiff in Deppman ease has made an application for a contract hauler permit and been denied; that the for-hire permits applied for by the Eagle Transfer and DeHvery Company and the McNulty Transfer Company have been granted with ¡restrictions, and that the application for a contract hauler permit made by the Eagle Transfer and Delivery Company has been denied.”
The above reference to the McNulty Transfer Company relates to a suit which it has been stipulated should be governed by the eases now considered.
While the foregoing stipulation does not expressly mention one of the eases at present for determination, that is, No. 507, Manlowe v. G. W. Hamilton, as Attorney General of the State of Washington, et al, it is found that the intent was that it should likewise apply to that case. The bill in No. 507 alleges that complainant was what is herein called a “contract hauler,” not only engaged in hauling freight interstate, but intrastate, and that he had made application for a permit as a “contract hauler,” which, upon hearing, was denied, being protested by certain certified operators and by five of the principal .¡railroad companies doing business in the state.
Upon the hearing it was further stipulated as follows:
“Mr. Vanderveer: We wish to offer some proof — a very small amount — to show to what extent the highways of the State áre being used for the transportation of agricultural produce, to show that that constitutes a very considerable part of the traffic.
“Circuit Judge Wilbur: On this question of the use of the highway, if you .will state to the Court what you intend td show perhaps counsel will admit—
“Mr. Vanderveer: We wish to show that a very large part of the traffic, particularly between the fruit growing sections of the state and the larger cities where those products are marketed consist in the hauling of such produce, particularly between Wenatchee and Seattle and Spokane and Yakima and Seattle and Spokane and Portland routes. And I will state to Your Honor that the purpose of offering this evidence is to distinguish this case on the facts from the Stevenson vs Binford case where the court regarded such traffic as incidental and unimportant. * * *
“Mr. Lindberg: I suppose what counsel wants to show is that there is a substantial portion of traffic engaged in that work.
-“Mr. Vanderveer: A very substantial portion.
*667“Mr. Lindberg: We will admit that. & b ♦
“Mr. Yanderveer: I was asked rather precipitously to enter this ease and have it not as well prepared as I would like to. What we desire to prove, and I wonder if counsel for the defendant will admit that a very substantial part of the truckage on the west side of the mountains consists in the trucking of dairy produce, milk, butter and eggs, etc. on this side of the mountains.
“Mr. Lindberg: That places upon us quite a load. ‘A very substantial part.’ We would hardly admit. A substantial part, I believe. I can’t indicate percentages in this matter.
“Mr. Vandervcer: A substantial part. I am also unable to indicate percentages in more definite terms than that.
“Mr. Lindberg: A substantial part, we will admit.
“Mr. Yanderveer: Would you also admit that some of the heaviest truckage on any of the highways consists of oil tanks with oil trailers, and logging trucks with logging trailers carrying logs, done by private carriers, some of the heaviest truckage, with the heaviest loads.
“Mr. Lindberg: We will admit there is such traffic, and that they carry heavy loads.
“Mr. Yanderveer: The heaviest loads carried over the highways,- among the heaviest loads, are carried in tank ear’s and tank trailers, and logs on logging trucks and logging trailers, all of which is done by private carriers.
“Mr. Lindberg: We can’t admit it is all done by private haulers. A portion is done by private haulers. That it is some of the heaviest truckage, we will admit, and that a portion is done by private haulers, a portion by for hire haulers and a portion by contract haulers. *' ~ 5‘ We will admit that a portion is dono by private haulers.
“Mr. Yanderveer: That will suffice for our purpose.”
Defendants’ contention that complainants have a plain, speedy, and adequate remedy at law, and that these eases arc to be distinguished from Pacific Telephone & Telegraph Co. v. Kuykendall, 265 U. S. 196, 44 S. Ct. 553, 68 L. Ed. 975, and are to be controlled by the ruling in Porter v. Investors’ Syndicate, 286 U. S. 461, 52 S. Ct. 617, 76 L. Ed. 1226, cannot he sustained because of the difference in the Washington and Montana statutes therein considered.
In the ease of the “contract hauler,” Manlowe, caso No. 567, alleged to be engaged m interstate as well as intrastate commerce, complaint is made of the act being contrary to the provisions of the Fourteenth Amendment, article 1, § 10, el. 1, the contract clause, and the Fourth Amendment. In any view the Fourth Amendment restrains Congress rather than the Legislature of a state. No express complaint is made that this act violates the partly corresponding provision (article 1, § 7) of the State Constitution. In these cases there is no specific complaint of this act in any way burdening interstate commerce. In each of the cases complainants’ attack is directed against these acts of the Legislature rather than against any regulation made by the department under their authority.
The contention of complainants that chapter 166 is contrary to the contract clause of the Constitution is untenable. Sproles v. Binford, 286 U. S. 374, 390, and 391. 52 S. Ct. 581, 76 L. Ed. 1167; Stephenson v. Binford, 287 U. S. 251, 276, 53 S. Ct. 181, 77 L. Ed. 288, 87 A. L. R. 721.
Whether permits or licenses expiring January 1, 1934, are so far in the nature of contracts as to defer the effective date of the 1633 act in any particular, it is not necessary to determine, as it is apparent that no decree can he rendered in these eases prior to that date.
Invoking the Fourteenth Amendment, it is complained that chapter 166 imposes upon complainants the duties of a common carrier, thereby depriving them of property and liberty without due process of law. No provisions of this act work any such result. While a number of its provisions regulating the “contract hauler” of section 1 (f) et seq., and the “for hire carrier” of section 13 et seq. are of the nature of those frequently imposed upon common carriers, yet nowhere in this act is either a “contract hauler” or a “for hire carrier” required to devote his property to the service of the public as did the California act considered in the cáse of Frost & Frost Trucking Co. v. Railroad Commission of California, 271 U. S. 583, 591-593, 46 S. Ct. 605, 70 L. Ed. 1101. That such is true was pointed out by the Supreme Court in Continental Baking Co. v. Woodring, 286 U. S. 352, 364, 52 S. Ct. 595, 76 L. Ed. 1155, and Stephenson v. Binford, 287 U. S. 251— 275, 53 S. Ct. 181, 77 L. Ed. 288, 87 A. L. R. 721.
While the “for hire carrier” of chapter 166 may in fact he a common carrier, he is such by reason of the nature of his business voluntarily undertaken rather than by any requirement of this act.
*668It is contended that chapter 166 is in conflict with the Federal Highway Act, § 9 (23 TTSCA § 9) providing that all highways constructed or reconstructed under the provisions of sueh act shall be free from tolls of all kinds, and that, in consequence, the Washington act violates article 6, el. 2, of the Constitution.
The sections of the act in question (Wash. Laws 1933, e. 166) are sections 27 and 28 (Rem. Rev. Stat. Wash. §§ 6326, 6381 — 28). The last-numbered section has been already set out. Section 27 (section 6326) is as follows :
“See. 27. That section 15 of chapter 96 of the Laws of 1921, as amended by section 1 of chapter 140 of the Laws of 1931, he amended to read as follows:
“Section 15. Except as otherwise specifically provided by law for the registration of each motor vehicle, there shall he paid and collected annually three dollars ($3.00); and in addition thereto, for each for-hire car, auto stage or auto stage trader, four dollars and fifty cents ($4.50) per seat for the seating capacity thereof; and for each truck or trailer the following fees, based upon the maximum rated carrying capacity thereof: 5,000 lbs. or less, 75$ per hundred weight or fraction thereof; over 5,000 lbs. and not to exceed 10,000 lbs., 85$ per hundred weight or fraction thereof; over 10,000 lbs. and not to exceed 15,000 lbs., 95$ per hundred weight or fraction thereof; over 15,000 lbs. and not to exceed 20,000 lbs., $1.05 per hundred weight or fraction thereof; over 20,000 lbs. the last mentioned rate shall he increased 10$ per hundred weight or fraction thereof for each ton the maximum rated carrying capacity exceeds 20,000 lbs.: Provided, No such fée shall exceed six hundred dollars ($600.00); and in case any such vehicle shall be propelled by steam or electricity, gas or other fuel upon which an excise tax on liquid fuel has not been provided by this act, an additional fee of seventy-five cents (75$) per hundred weight or fraction thereof of sueh vehicle’s gross weight shall he paid and collected in lieu of sueh excise tax: Provided, That the fee for any truck or trailer used only fox the purpose of transporting any well-drilling machine, air compressor, rock crusher, conveyor, hoist* donkey engine, cook house, tool house, hunk house or similar machine or structure attached to and made a part thereof, shall be three dollars ($3.00) : Provided, further, That no additional fee shall he required to be paid upon trucks or trailers of a maximum rated carrying capacity of one-half (%) ton or less when the same is used by the owner solely for carrying his own produce or property.
“Annual fees for dealer’s licenses, and dealer’s license plates and fees for additional plates, shall be paid and collected as follows : Dealers in motorcycles and motor vehicles five dollars ($5.00) including one set of dealer’s license plates, and additional sets of license plates bearing the same number, two dollars ($2.00) per set of two plates.
“It shall be unlawful for the owner or operator of any motor vehicle, truck or trailer not licensed annually for hire to carry passengers therein for hire.
“The increased fees prescribed in this section shall become effective January 1, 1934.”
While section 27 does not disclose the purpose for which the registration fees are to be used, section 4 of chapter 41, Laws of 1933, page 209 (Rem. Rev. Stat. Wash. 1933 annual pocket part, § 6330), provides that all such fees shall be paid into the state treasury and placed to the credit of the state motor vehicle fund. Sueh fees are not tolls within the meaning of section 9 of the Federal Highway Act. Carley & Hamilton v. Snook, 281 U. S. 66, 50 S. Ct. 204, 74 L. Ed. 704.
Nothing, other than the language of the acts, has been shown as to the use of the one per cent, tax on gross revenue for which provision is made in section 28. See, also, section 10418, Rem. Rev. Stat. Wash. Sueh a fee or tax is not a road toll as ordinarily understood. Johnson Transfer & Freight Lines et al. v. Perry (D. C.) 47 F.(2d) 900, 901, 904. It has not been made to appear but that as to such a fee and fund the complainants would not, if paid, have an adequate remedy at law.
It has been contended that the requirement, by sections 5 and 15 of chapter 166 (Rem. Rev. Stat. Wash. §§ 6381 — 5, 6381— 15), of liability and property damage insurance in the ease of the “contract hauler” and “for hire carrier,” is contrary to the Fourteenth Amendment.
Rule 28 of the Department of Public Works, concerning sueh insurance, provides:
“Rule 28. All insurance policies or surety bonds filed with the Department as required by chapter 166, Laws of 1933, and by these rules, shall provide that the same shall continue in full force and effect unless and until canceled by thirty (30) days’ written notice served on the Department of Public Works by the insurance company, the said thirty *669(30) days’ notice to commence to run from tie date notice is actually received by the Department.
“All policies or bonds filed shall become a part of the permanent records of the Department.
“All insurance policies filed covering liability and property damage shall carry the following form of endorsement:
“Endorsement.
“The policy to which this endorsement is attached is written in pursuance of, and is to be construed in accordance with chapter 166, Laws of 1933, State of Washington, and acts amendatory thereof, and supplemental thereto, and the rules and regulations of the Department of Public Works of Washington adopted thereunder. The policy is to be filed with the state in accordance with said statute.
“In consideration of the premium stated in the policy to which this endorsement is attached, the company hereby waives a description of the vehicles to be insured hereunder and agrees to pay any final judgment for personal injury, including death resulting therefrom, and/or damage to property, excluding cargo, of any person other than the assured, caused by any and all motor vehicles (as defined by section 1 (e) of chapter 166, Laws of 1933, State of Wash.) operated by the assured pursuant to a permit issued by the Department of Public Works of Washington in accordance with chapter 166, Laws of 1933, within the limits set forth in the schedule shown hereon, and further agrees that upon its failure to pay any such final judgment, such judgment creditor may maintain an action in any court of competent jurisdiction to compel such payment. Nothing contained in the policy or any endorsement thereon, nor the violation of any of the provisions thereof by the assured shall relieve the company from liability hereunder or from the payment of any such judgment.
“Schedule.
“(Unless the policy is written for excess limits.)
“On each motor vehicle used for the transportation of property not to exceed
"$5,000 for any recovery for personal injury by one person;
“$10,000 for all persons receiving personal injury by reason of one act of negligence; and not to exceed
“$1,000 for damage to property; excluding cargo, of any person other than the assured.
“The policy to which this endorsement is attached shall not expire, nor shall cancellation take effect, until after thirty (30) days’ notice in writing by the company shall have first been given to the Department of Public Works of Washington, at its office in Olympia, Washington, said thirty (30) days’ notice to commence to run from the date notiee is actually received by the Department.
“Attached to and forming a part of Policy No.-issued by-to-
“(Signatures and/or counter-signatures as provided by conditions of the policy.)” (Italics by the court.)
In view of the foregoing rule, neither section 5 nor section 15 deprives the contract hauler or the for hire carrier of liberty or property without due process of law. Continental Baking Co. v. Woodring, 286 U. S. 352-365, 366, 52 S. Ct. 595, 76 L. Ed. 1155; Stephenson v. Binford, 287 U. S. 251-276, 277, 53 S. Ct. 181, 77 L. Ed. 288, 87 A. L. R. 721; Packard v. Banton, 264 U. S. 140—145, 44 S. Ct. 257, 68 L. Ed. 596.
Until a shipper complains on such ground, the court will not undertake to determine as to his freedom to contract as he sees fit in this particular, under the Fourteenth Amendment. Hall v. Geiger-Jones Co., 242 U. S. 539-554, 37 S. Ct. 217, 61 L. Ed. 480, L. R. A. 1917F, 514, Ann. Cas. 1917C, 643.
By the foregoing it is not to be understood that the court concludes the statute would be unconstitutional if it required insurance for the protection of the goods of the shipper intrastate. Cobb v. Department of Public Works (D. C.) 60 F.(2d) 631, appeal dismissed by the Supreme Court Oct. 9,1933. 54 S. Ct. 50, 78 L. Ed.-. One whose property is injured while being carried over a highway may see fit to sue for injury to such property either for negligence of the carrier or defect in the highway. For its protection against the assertion of claims of the latter nature, it is not perceived why the state has not the right to require such insurance.
It has also been contended that the act is invalid under the Fourteenth Amendment, depriving complainants of property without due process of law, because section 3 of chapter 166 (Rem. Rev. Stat. Wash. § 6381 — 3) undertakes to vest the department with the power, in so far as the “contract hauler” is *670concerned, to “fix, alter and amend just, fair, reasonable and sufficient rates.”
It has not been shown that the department has prescribed any rate or rates pursuant to this section, and upon the trial it was .stated that it had not done so. In such ease an injunction will not be granted. “When the tax is assessed, the ordinary remedies will be available for contesting it, if the assessment is not in accordance with the law.” Continental Baking Co. v. Woodring, 286 U. S. 352-367, 52 S. Ct. 595, 600, 76 L. Ed. 1155; Stephenson v. Binford, 287 U. S. 251-260, 261, 262, 272, 273, 274, 53 S. Ct. 181, 77 L. Ed. 288, 87 A. L. R. 721.
Sections 3 and 6 of the act (Rem. Rev. Stat. Wash. §§ 6381 — 3, 6381 — 6) undertake to vest the department with authority to supervise and regulate every “contract hauler”; to regulate the accounts, service and safety of operations of such hauler; to require the filing by him of annual and other reports and other data; to supervise and regulate them in all matters as aforesaid affecting the relationship between such “contract haulers” and the persons to whom they furnish transportation; to regulate the facilities of such haulers for the purpose of promoting safety upon the highways and the conservation of their use; to regulate and supervise their accounts and method of operation.
Section 16 of this chapter (Rem. Rev. Stat. Wash. § 6381 — 16) undertakes to vest the department with power to supervise and regulate the facilities, service, and the safety of operations of “for hire carriers” for the purpose of promoting safety upon the highways and the conservation of their use and to regulate and supervise the accounts and methods of operation of the same. No complaint has been made of any attempted exercise of authority by the department under any of the foregoing purported grants of authority. Though certain of the foregoing provisions be invalid, Smith v. Cahoon, 283 U. S. 553-562, 563, 51 S. Ct. 582, 75 L. Ed. 1264, yet the department, not having undertaken to exercise an authority claimed under these questioned provisions, save in the particular relating to permits, no injunction will be granted on their account, Continental Baking Co. v. Woodring, 286 U. S. 352-367, 368, 52 S. Ct. 595, 76 L. Ed. 1155.
The attack made in the complaints has not been confined to the due process clause of the Fourteenth Amendment, but also invokes the equal protection clause of that amendment. It has been contended that there is an unlawful discrimination against the “contract hauler” in favor of the “certified operator,” in that the “contract hauler” is restricted to the operations covered by his contracts and is not allowed to engage in casual hauling as is the “for hire carrier.” The complaints in this particular are inconsistent with the contention already considered that the law constrains the contract hauler to become a common carrier. The “certified operator” is a common carrier. Rem. Rev. Stat. Wash. § 6390. Because it is a common carrier, it is not only permitted, but it would be its duty, to serve the public in the matter of carriage. This difference between the two justifies any difference in the rights accorded them under the acts of 1921 and 1933.
Complaint is made that there is an unlawful discrimination against the “contract hauler,” in that section 3 of chapter 166 undertakes to authorize the department to fix rates in so far as such hauler is concerned, but does not give the department such authority in the ease of the “for hire carrier.” As already pointed out, the department has not as yet prescribed any rates. Under the 1933 act, section 1 (f), Rem. Rev. Stat. Wash. § 6381 — 1 (f), the “contract hauler,” and under section 1 (d) of the 1921 act (Rem. Rev. Stat. Wash. § 6387 (d), the “certified operator,” operate between fixed termini or over regular routes. Not so the “for hire carrier.” He is the odd job man engaged in casual hauling. There is a difficulty, as a practical matter, in fixing a rate in the ease of the “for hire carrier” not encountered in the case of a “certified operator” or “contract hauler.” There is a difference in the character of highway used as a result of the difference in the character of operation by the two classes of carriers; the “contract hauler” not using the by-roads or those tributary to main highways to the extent of their use by the “for hire carrier” as a elass. These differences are not so inconsequential as to warrant the court in concluding that the action of the Legislature in this respect was arbitrary and that there had been any unlawful discrimination.
Sections 2, 4, and 10 of chapter 166 (Rem. Rev. Stat. Wash. §§ 6381 — 2, 6381— 4, 6381' — 10), except in the ease of a “certified operator” (who, as pointed out, is a common carrier), forbid one engaging in the business of transporting property by motor vehicle for compensation over a public highway between fixed termini or over regular routes unless the person, prior to engaging in such business, makes a written contract with the shipper, and that such contracts or verified copies thereof be attached to applications for a per*671mit to operate as a “contract hauler” and that each contract for such carriage or a verified copy thereof shall be, by the “contract hauler,” maintained on file with the department, and no other charge than those therein shown received for such carriage, rebates from which are f orbidden.
There are no such requirements as the foregoing in the ease of the “for hire carrier.” However, under the 1921 law, as amended, section 3 (Rem. Rev. Stat. Wash. § 6389-), the department is given authority, in the case of the “certified operator,” to fix, alter, and amend just, fair, reasonable, and sufficient rates, fares, charges, classifications, rules and regulations. Under such authority it has required the filing by such operator of tariffs showing all rates and charges for transportation and that the same shall be kept open for public inspection.
The differences in the three classes of carriage already pointed out warrant this particular requirement in the ease of the contract hauler. The making and filing of such contracts would not only aid the department in the determination of the fees and taxes due from the “contract hauler,” but would enable the department to determine whether the business actually carried on, or part of it, wTas in its nature that of a “certified operator” or “for hire carrier.” The nature of the business of the “for hire carrier” is such that a single charge might not be sufficient to defray the reasonable expense of the preparation, execution, and filing of such a contract.
Section 4 of chapter 1G6 (Rem. Rev. Stat. Wash. § 6381 — 4) requires that the application of a “contract hauler” for a permit shall state “the ownership, financial condition, equipment to be used and physical property of the applicant, the fixed termini between which or regular route over which applicant proposes to operate, the nature of the transportation to be engaged in and such other information as the department may require.” No such information is expressly required in the case of the “certified operator.”
Section 14 of chapter 166 (Rem. Rev. Stat. Wash. § 6381 — 14) requires that the application of a “for hire carrier” shall state “the ownership, equipment to be used and physical property of the applicant, the nature of the transportation to be engaged in, and such other information as the department may require.” In the case of the “certified operator,” the department is given general authority to require the filing of annual and other reports and other data. While the foregoing provisions are not identical in the language used, these requirements and those implied in the ease of the “certified operator,” who must obtain from the department a certificate of public convenience and necessity, and the difference in the nature of their carriage already described, show that the equal protection of the law is not by the act in this particular denied the “contract hauler.” Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78, 31 S. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160; Roadway Express v. Murray (D. C.) 60 F.(2d) 293-299.
By section 5 of the 1921 act, as amended (Rem. Rev. Stat. Wash. § 6391), and sections 5 and 15 of the 1933 act (Rem. Rev. Stat. Wash. §§ 6381 — 5, 6381 — 15), liability and property damage insurance are required of the “certified operator,” “contract hauler,” and “for hire carrier.” No such insurance is required of the “private carrier”; that is, one engaged in the transportation, in his own motor vehicle, of property sold or to be sold by him in the furtherance of any private commercial enterprise or for the purpose of lease, rent, or bailment.
Section 1 of chapter 166 (Rem. Rev. Stat. Wash. § 6381 — 1) recites:
“Section 1. The business of operating as a motor carrier of property for hire along the highways of this state is declared to be a business affected with the public interest. The rapid increase of motor carrier freight traffic, and the fact that under existing law many motor trucks are not effectively regulated, have increased the dangers and hazards on public highways and make it imperative that more stringent regulation should be employed to the end that the highways may be rendered safer for the use of the general public; that the wear of such highways may be reduced*, that congestion of traffic on highways may be minimized; and that the use of the highways for the transportation of property for hire may be restricted to the extent required by the necessity of the general public. Wherefore, the legislature in the interest of the public safety and for the conservation of the highways and the preservation of the use thereof for the public, provides as follows. • # •?»
The requirement of insurance in the ease of these carriers is not an unlawful discrimination against either the “contract hauler” or the “for hire carrier.” Bradley v. Public Utilities Commission, 289 U. S. 92-97, 53 S. Ct. 577, 77 L. Ed. 1053, 85 A. L. R. 1131; Packard v. Banton, 264 U. S. 140-144, 44 S. Ct. 257, 68 L. Ed. 596; Stephenson v. Binford, 287 U. S. 251, 277, 53 S. Ct. 181, 77 *672L. Ed. 288, 87 A. L. R. 721; Continental Baking Co. v. Woodring, 286 U. S. 352, 371-373, 52 S. Ct. 595, 76 L. Ed. 1155.
By section 7 of chapter 166 (Rem. Rev. Stat. Wash. § 6381 — 7), an application fee of $25 is required of the “contract hauler,” and, by section 17 (Rem. Rev. Stat. Wash. § 6381 — 17), an application fee of $10 is required of the “for hire carrier.” No such fee is required of the “private carrier.” By section 28 (Rem. Rev. Stat. Wash. § 6381 — 28), the “contract hauler” and the “for hire carrier” are required to pay a fee of 1 per cent, of the amount of their gross operating revenue shown by their- quarterly reports. No such fee or tax is required of the “private carrier.” The use of the highways by the “private carrier” is incidental to his business, which is not solely that of carriage or the use of the highway. It may be assumed that apart from transportation equipment he has property, including that transported, which affords a source of revenue which it cannot be assumed exists in the case of the “contract hauler” and “for hire carrier.” This difference justifies the discrimination in these particulars. Bekins Van Line v. Riley, 280 U. S. 80, 50 S. Ct. 64, 74 L. Ed. 178, and Packard v. Banton, Bradley v. Public Utilities Commission, Stephenson v. Binford, and Continental Baking Co. v. Woodring, supra.
The difference in the amount of the application fee in the case of the “contract hauler” and the “for hire carrier,” because of the difference already stated in the nature of their carriage, is not an unlawful discrimination.
By sections 11 and 20 of the 1933 act (Rem. Rev. Stat. Wash. §§ 6381 — 11, 6381— 20), it is provided that no “contract hauler” or “for hire carrier” shall require or permit any driver or operator of any motor vehicle used in the transportation of property to be or remain on duty for a longer period than ten consecutive hours, and that he shall not be required or permitted to again go on duty until he has had at least eight consecutive hours off duty. While in the ease of the “certified operator” there is no similar provision, the department has promulgated fully as strict a rule, No. 69. There is no similar provision in the case of the “private carrier.”
It is to be assumed that complainants in these cases are fairly representative of the classes to which they belong. In so far as complainants are “contract haulers,” it is shown by their complaints that they operate over main or trunk highways. The nature of the business of the “for hire carrier” is such as to tend to confine it, in large part, to the vicinity of cities and towns. The business of “private carriers,” as defined by the act, the Legislature may have assumed, is neither restricted to main or trunk highways nor to the vicinity of cities or towns to a degree equal to that in the case of the “for hire carrier.” The “private carrier” has, in the transportation of his own property, a restraining influence calculated to induce care in operation different in character, and it may be in degree, from that in the ease of the “contract hauler-” or the “for hire carrier.”
The fact that the use by the private carrier of the highway is incidental to the disposition of his carried property, it may not be unreasonable to conclude, tends to restrict the employment of the operator .of his motor vehicle in its highway operation to a less extent than in the ease of the other carriers.
The carriage of the private carrier is, to a greater extent, a one-way carriage, it may be assumed, than that of the “contract hauler” or “for hire carrier,” and it may be further assumed there is in the case of a loaded motor vehicle, other things being the same, a greater degree of care required in its operation than an empty one because of the greater momentum. These, with other differences already pointed out, authorize any discrimination in the act in this particular. Bradley v. Public Utilities Commission, 289 U. S. 92-97, 53 S. Cf. 577, 77 L. Ed. 1053, 85 A. L. R. 1131; Continental Baking Co. v. Woodring, 286 U. S. 352, 373, 52 S. Ct. 595, 76 L. Ed. 1155.
The facts stipulated in the present suits regarding the “private carrier” use of oil tanks and trailers, logging trucks and trailers, are not sufficient to distinguish these suits from the decisions already cited.
Section 1 (f) of chapter 166 (Rem. Rev. Stat. Wash. § 6381 — 1 (f), defining a “contract hauler,” provides:
“f. The term ‘contract hauler1 means every person owning, controlling, operating or managing any motor vehicle used in the business of transporting property for compensation, other than as a certified operator, over any public highway between fixed termini or over a regular route, not operating exclusively within the incorporated limits of any city or town: Provided, That the term ‘contract hauler1 shall not include any person owning, controlling, operating, or managing any motor vehicle operated exclusively in transporting agricultural, horticultural, or dairy or *673other farm products from the point of production to the market.”
The above provision excluding a hauler within the incorporated limits of any city or town is not an unlawful discrimination. Continental Baking Co. v. Woodring, 286 U. S. 352-366, 369, 52 S. Ct. 595, 76 L. Ed. 1155.
It has been contended that the above proviso “that the term ‘contract hauler1 shall not include any person owning, controlling, operating, or managing any motor vehicle operated exclusively in transporting agricultural, horticultural, or dairy or other farm products from the point of production to the market” is an unlawful discrimination. In State ex rel. Scott v. Superior Court (Wash.) 24 P.(2d) 87, it was held that the effect of this provision was not to entirely exempt such carriers as those covered by the proviso, but that it did bring them within the classification of “for hire carriers.” “The decision of the state court is controlling as to the meaning and extent of the statutory requirements. St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350, 362, 35 S. Ct. 99, 59 L. Ed. 265; Supreme Lodge Knights of Pythias v. Meyer, 265 U. S. 30, 32, 33, 44 S. Ct. 432, 68 L. Ed. 885; American Railway Express Co. v. Royster Guano Co., 273 U. S. 274, 280, 47 S. Ct. 355, 71 L. Ed. 642.” Hicklin, etc., v. Coney et al., 54 S. Ct. 142, 144, 78 L. Ed.-, decided by the Supreme Court of the United States on Dec. 4,1933.
It was stated by the court in Continental Baking Co. v. Woodring, 286 U. S. 352, at page 372, 52 S. Ct. 595, 602, 76 L. Ed. 1155:
“In sustaining the exemption, the District Court referred to the factual basis for the distinction. ‘The Legislature knew,’ said the court ‘that as a matter of fact farm products are transported to town by the farmer, or by a nonexempt “contract carrier” employed by him. The Legislature knew that as a matter of fact the use of the highways for the transportation of farm products by the owner is casual and infrequent and incidental; farmers use the highways to transport their products to market ordinarily but a few times a year. The Legislature rightly concluded that the use of the highways for carrying home his groceries in his own automobile is adequately compensated by the general tax imposed on all motor vehicles.’ 55 F.(2d) at page 352. And the court properly excluded from consideration mere hypothetical and fanciful illustrations of possible discriminations which had no basis in the actual experience to which the statute was addressed. The court found a practical difference between the case of the appellants ‘who operate fleets of trucks in the conduct of their business and who use the highways daily in the delivery of their products to their customers,’ and that of ‘a farmer who hauls his wheat or live stock to town once or twice a year.’ The Legislature in making its classification was entitled to consider frequency and character of use and to adapt its regulations to the classes of operations, which by reason of their habitual and constant mse of the highways brought about the conditions making regulation imperative and created the necessity for the imposition of a tax for maintenance and reconstruction. As the Court said in Alward v. Johnson, 282 U. S. 509, 513, 514, 51 S. Ct. 273, 274, 75 L. Ed. 496, 75 A. L. R. 9: ‘The distinction between property employed in conducting a business which requires constant and unusual use of the highways and property not so employed is plain enough.’ See, also, Bekins Van Line v. Riley, 280 U. S. 80, 82, 50 S. Ct. 64, 74 L. Ed. 178; Carley & Hamilton v. Snook, 281 U. S. 66, 73, 50 S. Ct. 204, 74 L. Ed. 704, 68 A. L. R. 194.”
Complainants contend that the determination of the present eases in this particular is not controlled by the foregoing decision because of what is claimed to be a difference as to the facts in the present suits shown by the stipulations made upon the trial which have already been stated. It is within the knowledge of the court that the Yakima Valley, the vicinity of Wenatchee and of Walla Walla are important agricultural and fruit growing sections of the state, and' that through them run main or trunk line highways. It is also a matter of common knowledge, of which the court will take judicial notice, that there are many sections of the state where very considerable amounts of agricultural, horticultural, and dairy and other farm products are produced and from which they are transported from the point of production to market over highways of the state tributary to main or trunk line highways.
While it has been stipulated in the present suits that a very substantial portion of the traffic on the highways consists in the trucking of such produce as that covered by the proviso, the court concludes that the stipulated facts are not sufficient to take these cases out of the scope of the ruling in Continental Baking Co. v. Woodring, supra.
It has also been contended that the effect of the proviso is to deny to the owner carrier the right to transport such .products as those described therein. If the proviso is ea*674pable of sueb construction, it is a matter concerning which the court will await complaint from the owner carrier rather than any of the parties now complaining.
Somewhat similar statutes to those herein considered have recently been before the Supreme Court of the United States and of the state of Oregon, which statutes have, by those courts, been held valid. Hicklin, etc., v. Coney et al., 54 S. Ct. 142, 78 L. Ed.-, Supreme Court of the United States, decided December 4, 1933; Anderson v. Thomas, decided by the Supreme Court of Oregon, 26 P.(2d) 60, October 17, 1933.
The complaints in the above-entitled causes will be dismissed, the temporary restraining orders dissolved, and the interlocutory injunctions and complainants’ motions to strike affidavits denied.
The findings of fact, conclusions of law, decree, and indicated orders will be tentatively settled, upon notice, before the resident judge for'submission to the other judges of the court, or, in the absence of the resident judge, by one of the other members of the court for such purpose.
The clerk is directed to notify the attorneys for the parties and those appearing herein of the filing of this decision. He is likewise directed to notify the attorneys for the parties in the following eases of the filing of this decision: Glen K. Cogdal et al. v. Murray et al., No. 508; McNulty Transfer, Inc., v. Hamilton et al., No. 509; V. D. Hamilton, etc., v. Hamilton et al., No. 510; S. R. Stalcup et al. v. Murray et al., No. 516. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219261/ | GALSTON, District Judge.
These two causes were by stipulation tried as one.
The steamer Brenta TI was loaded at Valencia, Spain, on November 15,1926, with the two shipments of onions alleged to have been damaged, one consisting of 19,000 crates and 4,000 half eases; the other of 12,545 crates and 2,473 half eases. The former was consigned to Dingfelder & Balish, the libelants in the first cause and the second to Boera Bros., the libelants in the second cause, by the same shipper, Ramon J. Boera. The shipment was destined for delivery at New York, and arrived there on December 4, 1926, in damaged condition. The onions were in good condition when delivered to the ship.
It is claimed that the vessel should be held because of unseaworthiness arising out of spontaneous combustion due to the poor quality of the coal, because of negligence in failing to remove the coal which had been in the hold from a previous voyage, because of lack of proper ventilation, and because of bad stowage.
The onions were loaded in. No. 1 ’tween-deck, in No. 2 lower hold, and ’tween-decks 4, 5, and 6. There were two ventilators for each hold and six hatches. ’Tween-decks Nos. 4, 5, and 6 were not completely .filled with cargo, and no cargo was stowed on top of the onions. In ’tween-deck No. 1 the onions were stowed on top of other cargo, such as tomatoes and olive oil. In lower hold No. 2, the cargo was not stowed on top of any other *683cargo. Nine hundred tons of coal were carried in hold No. 3, which was located fore of the engine room. The proof shows that the stowage was proper. Indeed, this seems to have been admitted by the shipper, Ramon J. Boera. He said the onions were stowed solid, one crate up against the other, and between every 10 or 15 feet an air space was left horizontally, which was the “usual way of stowing.” This witness was particularly interested in the stowage in hold No. 2. He admitted that the onions were properly stowed therein. Indeed, the examination of the stowage in that hold must have been effected with care, for Boera wrote to the master of the Brenta:
“I hereby confirm our conversation of this morning whereby I agreed to it that yon load the onions in the manner agreed upon, in the hold of No. 2 (lower).
“Therefore if this hold should arrive in worse condition than the other holds I promise not to make any claim for this against the steamer, because I understand that by taking care to give the proper ventilation to this and the other holds you ought to deliver a magnifieant cargo.”
The depositions of the master and other officers of the Brenta II confirm the matter,not only of proper stowage, but show also the provision of adequate ventilation in the circumstances attending the voyage.
Undoubtedly shifting occurred on this voj'age, but it was due not to improper stowage, but to the heavy rolling and pitching of the steamer in the heavy seas and high wind. That .the weather conditions wore unusually bad is indicated also by the length of the trip, which took four days more than the usual voyage.
In respect to ventilation, it appears that the hatches and ventilators were kept open when the weather permitted and were closed only when the weather compelled the taking of that step. The hatch leading to lower hold No. 2 from the ’tween-decks, the only lower hold in which onions were stowed, was kept open at all times during the voyage. It would seem that the master is right in ascribing-the weather conditions as a sufficient explanation of the limited ventilation which was made possible. This in turn sufficiently accounts for the heating and sweating of the cargo. But these causes are within the exceptions covered by the bills of lading.
Not only did the vessel encounter disturbing weather conditions, but on November 20th a fire broke out in the coal carried in lower hold No. 3. This fire was the result of spontaneous combustion. The location of No. 3, as has been stated before, was fore of the engine room. A cross bunker lay between No. 3 and the engine room. Connecting the cross bunker and hold No. 3 was a door from which coal could be removed to the cross bunker. After the fire had started, the men were put to work shoveling coal from hold No. 3 to the cross bunker, and water was pumped into the hold. The water thus pumped was free to run into the bilges and to the bottom of hold No. 2 where the onions were stowed. It is doubtful whether any of the onions, however, in hold No. 2 were damaged by sea water, but it appears to be admitted that they were damaged by coal dust or coal smoke.
Accordingly, the remaining question for determination is whether the vessel should be held for the fire. On the one hand, it is contended that the fire was the result of negligence; on the other hand, the fire statute is urged as a complete exoneration. 46 U. S. C. § 182 (46 USCA § 182, Rev. St. § 4282) relieves the carrier from liability for damage by fire: “Loss by fire. No owner of any vessel shall be liable to answer for or make good to any person any loss or damage, which may happen to any merchandise whatsoever, which shall be shipped, taken in, or put on board any such vessel, by reason or by means of any fire happening to or on board the vessel, unless such fire is caused by the design or neglect of such owner.”
The libelant relies on Arkell & Douglas v. United States (C. C. A.) 13 F.(2d) 555, 556; but the facts can be readily distinguished. The cited ease shows that competent evidence was offered to show that “it seems to be a well-settled custom that old coal in bunkers should be shifted, usually to a place near the fire room door, before new coal is loaded.”
In the instant case no testimony was offered to prove that the coal which had been loaded in Philadelphia had been aboard the steamer Brenta II for too long a time. In Arkell & Douglas v. United States, as in Dingfelder & Balish v. Navigazione Libera Triestina, S. A. (The Carnia) (D. C.) 2 F. Supp. 929, a cause tried during the same term of court as the present case, there -was proof of actual negligence. In those eases “there was warning by actual notice of the coal heating previous to the voyage in question,” and the consequent need for shifting the coal. No such proof was offered in this case.
The claimant may have a decree dismissing the libel.
*684If this opinion, is not in sufficient compliance with the rule requiring findings of fact and conclusions of law, submit findings of fact and conclusions of law in accordance therewith. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219262/ | The report and findings of Commissioner Ernest E. Williams are as follows:
To the Honorable Court above named:
Pursuant to an order heretofore made by the above-entitled court, I have taken testimony and I now have the honor to report as follows:
This action is a proceeding in rem against the American Steamship President Wilson to recover for the loss of 2,640 bags of sugar which were totally destroyed by fire on board the Rideout Barge No. 8.
The facts have, in the main, been agreed to by stipulation between the parties. On June 24,1931, the libelant made a space contract for shipment of 1,000 tons of refined sugar on board the steamship President Wilson from San Francisco to New York, beginning July 2, 1931. The 2,640 bags consumed by fire were part of the 1,000 tons.
Previous shipments of sugar made by the libelant on steamers of the Dollar Steamship Lines, Inc., Limited (the steamship President Wilson belonged to the Dollar Line) established that it was the customary practice of the Dollar Steamship Lines, as a matter of its own convenience, and, at its own expense, to pick up the sugar on libelant’s sugar dock through the medium of barges, and then transport said sugar to the docks of the Dollar Lines, where it was loaded onto the steamers or onto the dock. The loading and transportation were subject to the usual form of bill of lading issued by the Dollar Steamship Lines, Inc., Limited, which contained a provision that the carrier was not liable for 'loss by fire, “on board vessel or on wharf or land or pier or hulk, or lighters or warehouses, or wheresoever occurring.”
To facilitate the loading of the 1,000 tons of sugar Rideout Barge No. 5, and Rideout Barge No. 8, and tugboat Halcyon were sent by the Dollar Lines to the libelant’s sugar wharf in San Francisco, CaL
*685On June 29, 1931, while the said barges were at the sugar dock of the libelant for the purpose of loading sugar, fire broke out on Rideout Barge No. 8 and destroyed 2,640 bags of sugar, the subject-matter of this controversy. At the time the fire started on Rideout Barge No. 8, just the said 2,640 bags of sugar had been loaded thereon. Said barge No. 8 was lying outside Rideout Barge No. 5. The loading was in progress on barge No. 5 at the time.
On the date of the destruction of the sugar the steamship President Wilson was on the high seas. The said steamer arrived at the port of San Francisco on July 2, 1931, and departed therefrom on July 4, 1931,
It is admitted that Rideout Barge No. 8 was seaworthy in construction. The testimony shows that Rideout Barge No. 8 was equipped with a gasoline engine which was used solely for pumping out the bilges. This engine had not been in use for. two days prior to the fire. Rideout Barge No. 8 was equipped with a fire extinguisher which had been filled a few days before the fire, and was of a capacity of three or three and one-half gallons.
The evidence fails to disclose the exact cause of the fire. It is apparent that it could have originated from any of the following sources: First, an incendiary; secondly, a spark; thirdly, a surreptitious smoker.
The libelant maintains that the “fire statute” is not applicable in proceedings in rem. Libelant further contends that the clause in the bill of lading which exempts liability for loss sustained by fire merely easts upon the shipper the burden to prove negligence. To discharge this burden of proving negligence, the libelant invokes the doctrine of “res ipsa loquitur,” upon the theory that, Rideout Barge No. 8 (the place of the fire) being in the exclusive control of the respondent, the presumption is that the fire was caused by respondent’s negligence.
The respondent sets up three defenses, to wit: First, immunity offered by the “fire statute” which provides: “No owner of any vessel shall be liable to answer for or make good to any person any loss or damage, which may happen to any merchandise whatsoever, which shall be shipped, taken in, or put on board any such vessel, by reason or by means of any fire happening to or on board the vessel, unless such fire is caused by the design or neglect of such owner.” Rev. St. § 4282; U. S. C. title'46, § 182 (46 USCA § 182). Two, the doctrine of “rés ipsa loquitur” is not applicable for the reason that the respondent did not have possession of the instrumentality which caused the fire. Three, inasmuch as the steamship President Wilson was on the high seas at the time of the occurrence of the fire, the court is without jurisdiction. These issues will be considered separately.
First, does the “fire statute” apply? Libelant contends that the “fire statute” is limited to personal exemption, and does not preclude liability against the vessel itself; and, as this is an action in rem, recovery may, therefore, be had against ship. To sustain this position libelant relies upon The Etna Maru (D. C.) 20 F.(2d) 143, and Id. (C. C. A. 5th) 33 F.(2d) 232, 234. These Etna Maru decisions, ubi supra, are not convincing authority in support of libelant’s contention. In The Etna Maru the libel in rem was instituted to collect damages for a cargo of sulphur destroyed on board the steamship Etna Maru by fire and water. It was established that the ship was unseaworthy. This fact induced the District Court to deny the operation of the “fire statute.” The Circuit Court conceded that the vessel was unseaworthy but stated: “The conclusion we reach is that, regardless of whether appellant is bound by the expressed warranty of the charter to the extent that it may not limit its liability at all, or whether it has been guilty of negligence personally, it is certain that the unseaworthiness of the vessel at the beginning of the voyage amounted to negligence of either itself or its employees. There is nothing in the statute to bar a recovery against the ship.”
Apparently the latter court feel's that under such circumstances recovery may be had against the ship. The two decisions in The Etna Maru are somewhat confusing. It must be remembered, however, that the Etna Maru was unseaworthy.
Earle & Stoddart v. Ellerman’s Wilson Line (The Galileo), 287 U. S. 420, 53 S. Ct. 200, 77 L. Ed. 403, is not as claimed by libelant, supporting authority for The Etna Maru decision because in the former case the libel was in personam. Mr. Justice Brandéis in the footnote to The Galileo indicates a disapproval of the latter Etna Maru decision.
Undoubtedly, the weight of authority clearly holds that, in actions in rem for the recovery of damage caused by fire, the “fire statute” grants immunity of liability to the vessel, as well as personal exemption; vide The Rapid Transit (D. C.) 52 F. 320; Keene v. The Whistler, Fed. Cas. No. 7,645; Dill v. The Bertram, Fed. Cas. No. 3,910. In the latter ease the “fire statute” was ¡ven eon*686strued to include cargo which, had been brought alongside the ship for loading.
In the very recent opinion in the eases of Dingfelder et al. v. S. S. Brenta (Boera et al. v. S. S. Brenta) 5 F. Supp. 682, United States District Court, Eastern District of New York, decided April 3, 1933, the “fire statute” precluded liability for a cargo of onions destroyed by fire.
Furthermore, the bill of lading involved in this ease provides in clause 1: “Liability of carrier shall in no event, be greater than provided by Sections 4281, 4282, and 4283 of the Revised Statutes of the United States.”
Clause 2 provides against liability originating from, among other causes, “fire or water on board vessel, or on wharf, or land or pier, or in hulks or lighters, or warehouses or wheresoever occurring.”
In The Queen of the Pacific, 180 U. S. 49, 21 S. Ct. 278, 45 L. Ed. 419, a libel in rem was filed to recover damages to certain miscellaneous cargo caused by leakage. The bill of lading contained a provision that such elaims against the company or stockholders must be presented within thirty days; claims were not filed for nearly four years. The Supreme Court reversed the Ninth Circuit (94 F. 180), and declared that to permit recovery under an action in rem was, in effect, an assumption that there were two contracts; one with the company, and a distinct one with the ship. Naturally, the court ruled that the stipulations in the bill of lading extended to the ship as well as to the company.
Moreover, to remove the vessel from the exemption of the “fire statute” it was incumbent upon the libelant to show that the fire was caused by the design or neglect of the shipowner. This burden has not been discharged by the libelant. The Salvore (C. C. A.) 60 F.(2d) 683; Charbonnier v. U. S. (D. C.) 45 F.(2d) 166, affirmed (C. C. A.) 45 F.(2d) 174.
The “fire statute” and the provisions of the bill of lading in the instant case afford complete immunity of liability to the ship. It is, therefore, unnecessary that I consider the other issues involved; for the sake of expediency, I will pass upon the other questions raised herein.
Secondly, does the doctrine of “res ipsa loquitur” apply to the facts in this matter?
As indicated, the cause of the fire is unknown. The testimony shows that it might have been caused from any one of several sources.
An adoption of the libelant’s contention, namely, that, granting the cause of the fire to be unknown, yet, inasmuch as the respondent was in possession of the place of the fire, to wit, the barge, the doctrine of “res ipsa loquitur” applies is going far afield of the principle. Such a view is tantamount to saying that whenever a fire occurs on board a vessel (assuming, of course, that the fire statute does not apply), and the source of the fire is unknown, the mere possession of the place (the vessel) of the fire sets the doctrine in operation. Obviously, this is an unwarranted expansion of “res ipsa loquitur.” Mere possession of the thing as a basis for applying the doctrine is denied in the carbonated drinks eases; vide the footnote to Chiles v. Fort Smith Commission Co., in 8 A. L. R. 493, at page 500 et seq.
It is accepted law that the thing or instrumentality which caused the damage must be under the exclusive control and management of the person against whom the doctrine is invoked. San Juan Light & Transit Co. v. Requena, 224 U. S. 89, 32 S. Ct. 399, 56 L. Ed. 680.
The proper application of the doctrine is clearly expressed in the following-quotation: “To be applied only when the nature of the accident itself, not only supports the inference of the defendant’s negligence, but .excludes all others.” Lucid v. E. I. Du Pont de Nemours Powder Co. (C. C. A. 9th) 199 F. 377, 378, L. R. A. 1917E, 182. Vide; also Hernandez v. Southern California Gas Co., 213 Cal. 384, 2 P.(2d) 360; Scellars v. Universal Service Everywhere, 68 Cal. App. 252, 228 P. 879; City of Denver v. Porter (C. C. A.) 126 F. 288.
In the instant action the law as cited bars the application of “res ipsa loquitur” for the reason that the fire may have been produced from any one of several different causes, and it cannot be said that the thing or instrumentality which caused the damage was under the exclusive control or management of the shipowner. (There is no evidence that the barge itself caused the fire.)
Thirdly, does the fact that the steamship President Wilson was on the high seas remove the ease from the jurisdiction of this court? The court has heretofore determined this issue by overruling the exceptions to the jurisdiction of the court, and, in so far as this proceeding is concerned, the jurisdiction of the court was recognized by overruling the said exceptions.-
Sawyer & Cluff, of San Francisco, Cal., for libelants.
Lillick, Olson & Graham, of San Francisco, Cal., for respondents.
Conclusion.
I find:
First, the “fire statute” is applicable, and, therefore, grants immunity to the ship. (Idem under the bill of lading.)
Secondly, the facts appropriately bar the operation of “res ipsa loquitur”; and the libelant has failed to discharge the burden of proof of establishing negligence. .
Thirdly, the issue of jurisdiction was passed upon by the court in the overruling of the exceptions to jurisdiction.
The respondent is entitled to a decree dismissing the libel and for eosts of suit.
ST. SURE, District Judge.
After due consideration of the report of the honorable Ernest E. Williams, United States Commissioner, dated July 11, 1933, and being fully informed in the premises, and good cause appearing therefor, the said report is hereby confirmed, and it is hereby ordered that a decree be entered dismissing the libel herein, with costs to be awarded to the respondent. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219264/ | McNARY, District Judge.
This suit was brought to enjoin the defendants from enforcing the allocation of production of lumber as to plaintiff, for the reason that it is arbitrary and discriminatory, and, if enforced, will deprive plaintiff of its property without due process of law, and to enjoin the defendants from instituting or causing to be instituted criminal actions against plaintiff for violation of the order of allotments.
A temporary restraining order was granted pendente lite. The matter is before the court on a motion to discontinue the order and a motion to dismiss the complaint.
The National Industrial Recovery Act (48 Stat. 195) was passed by the Congress of the United States as an emergency measure to overcome the depressing effects of widespread unemployment and disorganization of industry. It was declared to be the policy of Congress to provide for the general welfare by promoting the organization of industry for the purpose of co-operative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries and to avoid undue restriction of production, to increase consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and. otherwise to rehabilitate industry, and to conserve natural resources.
*691When an emergency exists justifying the President through an aet of the Congress to assume supervision of the basic industries of the country, and when the President in pursuance of the authority thus granted sets up the agencies by which this supervision is to he made effective, the courts should, so far as the law permits, carefully safeguard the administration of these agencies so as not to destroy the beneficial results that might ultimately accrue thereby.
The rehabilitation of the lumber industry has a vital bearing upon the prosperity of the country. It is of especial importance to the vast number of present and former employees in the industry, and is essential to the commercial welfare of the communities where the mills are located.
The power to grant restraining orders rests largely in judicial discretion. In suits relating solely to private rights it is ordinarily exercised when it appears that there is a probable right and a danger of irreparable loss without the immediate interposition of the court. This liberal practice should not be followed where the subject of the suit involves the administration of emergency legislation and is a matter of public concern. Yet the exigencies of the present emergency are not such as to justify a court in refusing this remedy where it clearly and satisfactorily appears that the government agencies have, with arbitrary discrimination, deprived an individual or corporation of property without due process of law and in violation of the Constitution (Const. U. S. Amend. 5).
Not all inequalities are regarded in law as arbitrary and discriminatory, but such only as are based upon unjust and inadequate determining principles.
The West Coast Division agencies, in making their initial allotments, were confronted with a complex problem, requiring consideration of many factors; the prime object being to distribute the production quota allowed the division so that all of the mills would be able to carry on operations and give employment to a maximum number of employees at a self-sustaining wage.
In view of the economies required to meet the present low prices and market conditions, 30 hours per week is the minimum operating time necessary for the manufacture of lumber products. Likewise 30 hours per week is the minimum operating time on which mill employees can he self-supporting.
It is evident that if the division agencies had made special allotments to limited groups on the basis of manufacturing capacity, productive history, or contractual obligations, it necessarily would have required a greater limitation in operating time of other mills and destroyed uniformity in working conditions, thus creating a situation in which no scheme of distribution of production or labor has been, to the knowledge of the court, conceived whereby the industry as a whole could be vitalized through the operation of the Recovery Aet.
Unfortunately, distribution of allotments requires some mills to make greater sacrifices in productive capacity than others, but this appears to be unavoidable by reason of the diversity in mill operation. However, it is obvious that the administrative agencies have adopted a plan of distribution which, while not perfect, is the most likely to prevent complete disaster to the lumber industry, a plan by which all mills are in one classification, and which does not, in the judgment of the court, arbitrarily discriminate against any mill unit.
The National Industrial Recovery Act provides that any violation of the Code shall be punishable by a fine of $500, and that each day’s continuance shall be a separate offense. Section 3 (f) of the aet, 15 USCA § 703 (f). The Code provides that, if any person shall exceed his allotment, the division agency shall diminish subsequent allotments of the offender by an amount equal to such excess.
It would be of doubtful validity to impose penalties so severe upon plaintiff for bringing this suit in good faith to have its rights under the statute determined. Some courts have held that a law which imposes such conditions upon the right to appeal for relief is unconstitutional.
Pending further investigation of the law relating to the constitutionality of the penalties, the order restraining defendants from enforcing them will be continued, and the motion to dismiss will be continued.
The order restraining defendants from restricting plaintiff’s future production will be vacated. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219265/ | THOMAS, District Judge.
This case is now before this court upon two motions, one filed by defendants and the other by plaintiff. The defendants have moved to vacate the decree heretofore entered and for an order dissolving the injunction issued against defendant L. G. Balfour Company, withdrawing the reference to a master for an accounting, and ordering the entry of a decree dismissing the bill of complaint, with costs to defendants. On the other hand, the plaintiff has moved that) the restraining order, served on it on October. 13, 1932, be dissolved. These motions will be considered together.
The history of this ease is as follows: Early in 1939, the plaintiff filed a bill in equity against Douglas S. MacDonald, the principal of Plainville High School, charging infringement of Peters patent No. 1,579,776, by the sale by L. G. Balfour Company of certain finger rings to the students of one of the classes, the construction of the ring in question being illustrated by Exhibit A. L. G. Balfour Company, the manufacturer, intervened as a party defendant. The case came 'on for trial and, on October 7, 1931, this court rendered an opinion directing that the bill of complaint be dismissed because of noninfringement. The plaintiff appealed to the Circuit Court of Appeals, and on June 13, 1932, that court reversed the -decree of the District Court and held the patent valid and infringed by the Plainville High School ring, as illustrated by said Exhibit A. 59 E.(2d) 974. Thereafter, the defendants filed a petition for rehearing, which was denied. 'In July, 1932, the defendants filed in the Circuit Court of Appeals a petition tp recall the mandate and reconsider the judgment, or to grant defendants permission to apply to the District Court for leave to amend the answer alleging, and to take testimony establishing, inequitable conduct by plaintiff in publishing and disseminating false and misleading statements regarding the decision of the Circuit Court of Appeals, such as should bar all relief to plaintiff, and for an order restraining plaintiff from similar conduct in the future. This petition was based upon affidavits charging that, following the decision of the Circuit Court of Appeals, the plaintiff had published and disseminated, by means of letters and in a newspaper, false and mis*693leading statements regarding the decision. On or about September 6, 1932, the Circuit Court of Appeals granted the alternative relief prayed in the petition. The court said (61 F.(2d) 1031):
“This is a petition to recall the mandate and reconsider our decision (59 F.(2d) 974) or, in the alternative, grant the appellees permission to apply to the District Court for leave to amend their answer alleging inequitable conduct on the part of the appellant in publishing and disseminating misleading statements said to be false regarding the decision of this court, claiming that, by reason thereof, the appellant should be barred from the relief obtained on this appeal.
“On the affidavits which have been submitted and the letters which form the basis of this application, we think the alternative relief should be granted. Leave is hereby granted to the appellee to- apply to the District Court for appropriate relief in view of what has transpired since the rendition of our decision in this cause.”
Thereupon the defendants, pursuant to the permission granted, moved in this court to reopen the case, and that they be permitted (1) to amend the answer to allege inequitable conduct by plaintiff, during the pendency of the suit, of such character as to bar it from all relief herein; (2) that the defendants be permitted to take testimony establishing such inequitable conduct; (3) that, when such inequitable conduct should have been established, a decree should be entered denying all relief to plaintiff; and (4) that an order be entered restraining the plaintiff from publishing or otherwise disseminating any statements regarding the decision of the Circuit Court of Appeals, or any decree entered in the District Court in pursuance thereof, which statements do not accurately indicate the precise limits of the rights of plaintiff as fixed by such decision or decree to threaten customers, or potential customers of defendant, to break or cancel contracts for the purchase of rings not involved in this suit. This motion to reopen was granted, and, on October 10, 1932, an order was entered permitting the defendants to amend the answer, setting times for the taking of depositions, and directing the issuance of a restraining order, as prayed in the motion to reopen. The restraining order was issued on October 11, 1932, and served upon the plaintiff on October 13,1932.
The answer was amended, pursuant to leave granted, by inserting the following paragraph therein: “22. Defendants aver that, both prior and subsequent to the commencement of this suit, the plaintiff has conducted a campaign of threats of patent litigation against customers and potential customers of the defendant, L. G. Balfour Company, and that, subsequent to the decision 'of the United States Circuit Court of Appeals for the Second Circuit, rendered June 13, 1932, the plaintiff published, or caused to be published in a certain newspaper, false and misleading statements, misrepresenting the decision of said Circuit Court of Appeals, and wrote letters to a customer of defendant, L. G. Balfour Company, containing false and misleading statements, misrepresenting the scope of the decision of said Circuit Court of Appeals, and disseminated such false and misleading statements to other customers and potential customers of said defendant, which statements were calculated and intended to induce such customers to break or cancel their contracts with L. G. Balfour Company for the purchase of rings which do not infringe the patent in suit and were not, in any way, involved in said suit, and calculated and intended to prevent the purchase of such rings by such potential customers, all of which constitutes such unfair and inequitable conduct-as to bar the plaintiff from all relief whatsoever in this Court of equity.”
Thereafter, the testimony of a considerable number of witnesses was taken by deposition and in open court. At the conclusion of the hearing, counsel for defendants presented t|he following motion: “Now come the defendants, by their counsel, and, upon the evidence presented herein, move that an order be entered setting aside and vacating the interlocutory decree heretofore entered in this cause, dissolving the injunction heretofore issued against the defendant, L. G. Balfour Company, and withdrawing the reference to a master for an accounting of profits and damages, and that a decree be entered dismissing the bill of complaint with costs to defendants.”
The ease is thus before this court upon all the evidence to determine whether the facts, as shown by such evidence, require the denial of all or further relief to plaintiff, as prayed by defendants’ motion to vacate the decree.
Following the hearing, the plaintiff filed a motion to dissolve the restraining order, served on it on October 13,1932, alleging that the defendants had suppressed, in the affidavits filed with the Court of Appeals, two letters written by L. G. Balfour Company to the superintendent of Pittsfield High School, which letters were said to be material, and,' *694further, that the defendants induced Charles H. Fraser to sign and swear to a false affidavit, which was used before the Court of Appeals.
Defendants contend that the evidence shows conduct by the plaintiff, subsequent t.o the decision of the Court of Appeals, which is so unconscionable and inequitable that plaintiff should be denied all relief in equity in accordance with the ancient maxim of equity that he who comes into equity must come with clean hands. Pomeroy, in his Equity Jurisprudence (3d Ed.) § 397, discusses the application of this maxim, and the author says:—
“This maxim is sometimes expressed in the form, He that hath committed iniquity shall not have equity. * * *
“On the other hand, the maxim now under consideration, He whoi comes into equity must come with clean hands, is much more efficient and restrictive in its operation. It assumes that the suitor asking the aid of a court of equity has himself been guilty of conduct in violation of the fundamental conceptions of equity jurisprudence, and therefore refuses him all recognition and relief with reference to the Subject-matter or transaction in question. It says that whenever a party, who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience or good faith, or other equitable principle, in his prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere on his behalf, to acknowledge his right, or' to- award him any remedy.”
This principle has been applied in patent and trade-mark suits where the misrepresentation or inequitable conduct related to the patents or trade-marks involved. Manhattan Medicine Co. v. Wood, 108 U. S. 218, 2 S. Ct. 436, 27 L. Ed. 706; Panay Horizontal Show Jar Co. v. Aridor Co. (C. C. A. 7th) 292 F. 858; General Excavator Company v. Keystone Driller Company (C. C. A. 6th) 62 F.(2d) 48, 49, affirmed by the Supreme Court of the United States and decided December 4, 1933, 54 S. Ct. 146, 78 L. Ed. — . While in general this principle has been applied where the hands of the plaintiff were unclean at the inception of the suit, there seems to me no reason why it should not be applied at any time during the pendency of the suit and while a party is an actor seeking to obtain some remedy from the court. Such was the view expressed in General Excavator Co. v. Keystone Driller Co., supra, wherein Judge Hiekenlooper, speaking for the Circuit Court of Appeals, said: “Doubtless a party may be guilty of such unconscionable conduct during the progress of litigation that a court of equity will refuse him further relief, but in respect of antecedent action it is as of the date of the filing of the bill of complaint that his conduct must be appraised.”
So, also, a continued campaign of threats of patent litigation against users of a competitor’s device has been held to constitute conduct so unconscionable and inequitable as to warrant the interposition of a court of equity. Adrianee, Platt & Co. v. National Harrow Co. et al. (C. C. A. 2d) 121 F. 827, 830. In this ease Judge Wallace said, in speaking of the communications warning the complainants’ customers against selling its harrows: “We are satisfied-that they were sent, not for the purposes of self-protection, but in execution of the defendant’s threat to stop the complainant from building harrows by other means than legal remedies.”
Nor will a patentee, in advance of adjudication, be permitted to harass or obstruct-a rival. Such a patentee would be held to have come into court with unclean hands. Gerosa et al. v. Apco Manufacturing Co. (C. C. A. 1) 299 F. 19. So, also, the publication of misleading statements in a p-atent suit while an accounting was pending, regarding the scope of an interlocutory decree, especially where they disclose a purpose to injure the competitor’s business, was restrained by an order in the very suit itself. Rollman Manufacturing Co. v. Universal Hardware Works (D. C.) 229 F. 579. This procedure was followed by Judge Hand in Asbestos Shingle, Slate & Sheathing Co. et al. v. H. W. Johns-Manville Co. (C. C.) 189 F. 611, 614, a widely cited decision and one particularly relied on by defendants. This case clearly holds that a restraining order may be entered in the suit, and also that, where a complainant misuses a decree, the court may even modify that decree as justice requires. Judge Learned Hand said: “There is no indication in the ease that the complainant has acted in conscious bad faith, yet at the same time it is quite clear that in order to protect its supposed rights .under the patent it has in fact misstated the contents of the decree in part. None of the cases,-whether the application was in the original suit or by plenary bill, seem to raise the precise facts here at bar, but I take it there can be no question that a trade injury is actionable when it arises from actual misstatements. Judge Blodgett’s opinion in Emack v. Kane (C. C.) 34 F. 46, which has been much cited and the decision of the Circuit Court of Appeals of this circuit *695in Adriance, Platt & Co. v. National Harrow Co., 121 F. 827, 58 C. C. A. 163, were both weaker cases for the aggrieved party than this; indeed, in the latter ease, Judge Coxe, who had dismissed the bill, mentions the fact that there was no false statement of fact in any of the circulars. I think there can be no reasonable dispute of the rule that any false statement of the contents of the decree would require some action.”
The opinion then goes on to state what relief should be had against the offending parties. Judge Hand said:
“In view of all these facts I think the complainant should say expressly what axe the limits of his rights as fixed by the decree. * * *
“The order will not contain any provision for its enforcement, but if the complainant disobey its terms, the defendant may apply for a stay of any proceedings under the interlocutory decree, and if necessary that the decree may be recalled. It is not necessary tp decide here whether any attachment could issue if these sanctions prove insufficient. I mean only to decide now that, if a complainant misuses the decree of the court, the court may so modify that decree as justice requires to control such misuse. What might be the ease after expiration of the term in which final decree was entered need not be considered.”
There is therefore ample power in this court to prevent misuse of its decree and to prevent unlawful interference with the business of an injured party, either by restraining order, by modification of the decree, or both, and the question before the court, now, is whether or not the conduct of plaintiff, complained of herein, has been of such a character as to disentitle it to the relief awarded to it by the interlocutory decree and also whether it has been such as tp warrant the continuation of the existing restraining order. Out of the mass of evidence I have decided to discuss certain of the specific instances of alleged misrepresentations relied on and which may be considered representative of the plaintiff’s conduct in general.
The Dedham Transcript Publication.
This article was published immediately after the decision of the Circuit Court of Appeals upholding plaintiff’s patent and ordering an accounting. It was subsequently retracted at the request of the plaintiff. No doubt, it had its origin in the mind of Mr. Peters, president of plaintiff' corporation, who, in the first flush of victory, was eager for publicity. The article in question stated that the award in this, suit “substantiates the Peters’ patent right on stone-protected rings, * • * ” -which statement defendants say is false. It also stated that said award “includes damages to the Peters Co. to the amount of $22,000.00.” That assertion, defendants say, is untrue, and, of course, it was untrue; since, in point of fact, the decision of the Court of Appeals merely sustained the Peters’ patent as covering a certain type of ring construction (Exhibit A), and reversed the decree below. Mnally, defendants assert that the entire article conveys the impression that the effect of the decision was to give the plaintiff a monopoly of stone-protected rings, whieh was also misleading. Defendants sought to prove that the article was based upon, if not copied, by Mr. Eraser, editor of the Dedham Transcript, from a written statement furnished by Mr. Peters. On behalf of Peters this is denied, and from the proofs it is not clear just what statement Peters did make. The original statement was identified by the witness Eraser while his deposition was being taken, but neither defendants nor the plaintiff saw fit to offer it in evidence, nor was Petera called as a witness on the subject. Whether Peters said in the statement that there already had been an award of $22,000, as claimed by defendants, or whether, as claimed by plaintiff, Peters 'merely said that he estimated that there would in the future be an award of damages in this amount, is not clear. Admitting that Mr. Peters instigated this publication, I consider the incident of relatively small consequence, especially as it appears that the Dedham Transcript is a small town newspaper, having a circulation of only 2,700 copies. The statement in the article that the decision substantiated Peters’ right to “stone-protected rings” is undoubtedly misleading, but may be excused, as Mr. Peters may well have believed, at that time, that his patent, as construed by the Court of Appeals, conferred upon his company, for the duration of the patent, a monopoly on all “stone-protected” rings, and, under the circumstances, I am unwilling to find that, in expressing that opinion so soon after the decision, plaintiff acted in bad faith, especially since the term “stone-protected” rings is not clearly definable. Defendants produced evidence to show that the term “stone-protected” rings as used in the trade is a broad one, and that it comprises any ring having a stone whieh is protected against breakage by the metal around it and an emblem above it. On the other hand, plaintiff insisted that, prior to the decision of the Court of Appeals in its favor, *696there were no “stone-protected” rings on the market other than those of the patent in suit made by plaintiff and the infringing rings “Exhibit A” made by the defendant L. G. Balfour Company. I am not impressed with the evidence on this subject and feel that the term needs further definition and clarification.
I therefore hold that defendants have not proved by a preponderance of the evidence that the Dedham Transcript article was instigated or caused to be published by plaintiff in bad faith or with the intention of deliberately misleading the public by misrepresenting the decision of the Circuit Court of Appeals, or that it had any such effect. Defendants have admittedly suffered no injury from this publication other than unfavorable publicity, and that is elearly damnum absque injuria. In this connection, reference may be made to the case of Alliance Securities Co. v. De Vilbiss Mfg. Co., 41 F.(2d) 668, 671 (C. C. A. 6th), wherein Judge Denison, speaking for the court, used the following pertinent language: “When an infringer suffers a judicial defeat and the circumstances make it a valuable news item, the resulting (more or less inaccurate) publicity is a typical instance of damnum absque injuria.”
Pittsfield High School Correspondence.
This instance of alleged unfair conduct is more serious as being an attempt by plainr tiff, immediately after the decision of the Court of Appeals sustaining the patent, to interfere with a contract between defendant L. G. Balfour Company and a class of the Pittsfield High School. This interference took the form of letters to the principal of the high school which referred to said decision as definitely covering all “stone-protected” rings, and which by implication threatened the principal with suit for infringement if he should go through with his contract with the Balfour Company.
It appears that the class graduating in February, 1933, had ordered in June, 1932, from defendant a certain class ring, illustrated in the drawing marked in evidence, Defendant’s Exhibit D-191, and which defendants claim does not infringe the Peters’ patent.
Immediately following the decision of the Circuit Court of Appeals, the plaintiff wrote Mr. Strout the letter, Defendants’ Exhibit D-10, in which it said, regarding the decision : “This decision, therefore, covers all infringers and I must necessarily demand that you deal only with those lawfully allowed to make your merchandise. Please do not- allow anyone to involve you in litigation which (with those who care for no rights of others), will be the result of your dealings with anyone else.”
On June 20, 1932, Mir. Strout wrote the plaintiff the letter, Defendants’ Exhibit D-ll, in which he said: “Believing this, there is but one interpretation which I can apply to your letter and that is that you are attempting to intimidate me to the extent that I will withdraw the order from L. G. Balfour.”
' On the same date, Mr. Strout wrote L. G. Balfour Company the letter, Defendants’ Exhibit D-12, in which he required that the Balfour Company should give him “some assurance that you will be able to deliver the order in accordance with our agreement.”
On June 22, 1932, the plaintiff, by Mr. Peters, wrote Mr. Strout the letter, Defendants’ Exhibit D-13, in which he said: “I notified Mr. Balfour by registered mail ón June 14th not to ship any more stone-protected rings according to the decree handed down by the U. S. Federal Court in New York in which the said Court of Appeals said, Balfour is infringing on both claims of our patent #1,570,776. It is just as unlawful for a concern to deliberately continue to manufacture stone-protected rings when notified by a gentleman that he lias been awarded the decision on an infringement suit pending in the courts 2% years as it is to do any other unlawful act, no matter what it may be.”
This letter concluded with the following postscript: “Get Mr. Balfour to sign a statement that he will pay $4,00 per ring for every ring delivered if demanded by Mr. H. W. Peters for alleged infringement.”
This letter of June 22, 1932, defendants say, was a clear attempt to induce Mr. Strout to cancel the Pittsfield High School contract with the L. G. Balfour Company, by trying to make him believe that the decision, in -this suit, covered all stone-protected rings. Although the contract was not cancelled, — on June 23rd and 24th, L. G. Balfour Company wrote Mr. Strout two letters, Defendants’ Exhibits D-14 and D-15, assuring him that the company would protect him, — this circumstance does not in the least excuse the plaintiff or mitigate’the wrong.
I need not pass upon the question of infringement raised by this Pittsfield High School ring (see Exhibit 19), as defendant, L. G. Balfour Company, is entitled to its day in court on that issue; in my judgment, however, it would have been far better for plaintiff to have warned the manufacturer of *697the ring rather than to harass a school superintendent who must, of necessity, as was done in this instance, refer the entire matter to the manufacturer, the L. G. Balfour Company.
I cannot resist the conclusion that the letter of June 22, 1932, was an inexcusable act of impertinence, intended by plaintiff to place unlawful difficulties in the' path of L. G. Balfour Company, with respect to the fulfillment of an order which had already been placed with that company by the senior class of the Pittsfield High School, and that it was, in effect, an act of intimidation on the part' of plaintiff intended to compel the principal of the high school to bring about a cancellation of this Balfour contract.
I do not consider it necessary to discuss the other instances of unfair conduct occurring prior to the petition to recall the mandate.
Coming now to the alleged conduct of plaintiff subsequent to the petition to recall the mandate, I find here a still more serious situation.
Court of Appeals’ Opinion.
This is, in my opinion, another serious case of misrepresentation. Defendant has introduced in evidence as Exhibit D-16 .a printed document in pamphlet size indorsed "Long Awaited Decision of United States Circuit Court of Appeals for the Second Circuit, H. W. Peters Co., Inc., v. L. G. Balfour Co., (Patent infringement suit),” and which the average person would believe to be a true copy of the decision as it was actually handed down by the court. At least that would be the reaction of one unfamiliar with court decisions. The evidence shows that this pamphlet was published by plaintiff and made available for distribution by its salesmen. The record shows several instances in which a copy of this pamphlet was given by plaintiff’s salesmen to some one interested in class rings, and it is a fair inference that plaintiff intended the pamphlet to be distributed generally. It appears that this opinion was not copied in its entirety, and that it contained parenthetical explanatory remarks evidently added by plaintiff to convey the impression that the Circuit Court of Appeals had definitely and expressly held the patent in suit to cover all so-called stone-protected rings. For instance, on page 2 of the pamphlet, after the names of the Circuit Judges, the words “stone-protected” were inserted. This will be made clear from the following excerpt:
“Before: (Judges of the United States Circuit Court of Appeals) Mantón, Swan and Chase, Circuit Judges.
“Appeal from the District Court for the District of Connecticut. Suit filed for infringement of patent Ho. 1,570,776, (H. W. Peters) for a (stone-protected) finger ring. Decree for defendant; plaintiff appeals. Reversed (In Favor of H. W. Peters).”
Such an instance of misrepresentation cannot and will not be tolerated by this court on the part of one seeking relief in a court of equity.
At the end of the second paragraph of the opinion, the following explanatory note appears: “(Judge explains, as part of his decision, old methods used prior to H. W. Peters’ invention. This is the old drilled stone, or mounted onyx ring, which will be offered to you by concerns not licensed by Mr. Peters.)”
It is charged by defendants, and justly so, that this explanatory remark was inserted by plaintiff in order to create the impression that the only stone rings other than the protected stone rings covered by the patent were the drilled stone rings; also that the same impression is created by the'insertion “on the old mounted stone ring” at the beginning of the next paragraph. Attention is called also to still another alleged misleading explanatory note which consists of the following: “(Note the features outlined by Judge Mantón which are parallel to claims made by Peters’ representatives. Note how the Judge brings out the savings effected by Mr. Peters’ new methods. These savings in themselves denote ‘invention.’ This was immediately recognized by competitors who disregarded the inventor’s rights and made a stone-protected ring. It may be said here that Mr. Peters has many patents believed to cover any practical basic method of making stone-protected rings.)”
Defendants assert that the effect of this explanatory remark is to make the readers believe that Judge Mantón approved Mr. Peters’ claims generally, and that his patents covered all practical methods of making stone-protected rings. All of these so-called explanatory remarks inserted in the body of a judicial opinion deserve to be rebuked as misrepresentations of that opinion and as being calculated to prevent, without judicial authority, the sale by competitors of all rings of this general type.
Also, the addition of an immaterial, if not irrelevant, paragraph from what purports to be a master’s report in O’Neil v. *698Peters is properly criticized by defendants who claim that, by adding this to the last page of the pamphlet, plaintiff intended to create the impression that it was a part of the decision of the Court of Appeals. I agree that this is so, and, after due consideration, have unhesitatingly reached the conclusion that the preparation, printing, and distribution to the trade of this pamphlet by the plaintiff amounted to, and must be characterized as, a flagrant misuse of the decision of the Circuit Court of Appeals.
I have not overlooked the note at the end of the pamphlet by which plaintiff undertakes to differentiate, for the enlightenment of the reader, between the so-called explanatory notes and the “actual opinions,” handed down in the Balfour and O’Neil Cases respectively. This note, however, tends to confuse and aggravate rather than clarify the situation, and would not in any event excuse the above-described misuse of the opinion of the Circuit Court of Appeals.
One other instance of misrepresentation by the plaintiff will be referred to in this opinion, i. e., plaintiff’s letter of September 14,1932, to its salesmen.
Letter of September 14,1932.
On September 14, 1932, the plaintiff wrote a certain letter to its salesmen, of which two copies are in evidence as Defendants’ Exhibits D-8 and D-26. Exhibit D-8 was produced by Bishop, the plaintiff’s Pittsburgh salesman, and Exhibit D-26 was produced by Owens, the plaintiff’s South Carolina salesman. The first sentence of this letter refers to stone-protected rings, as follows: “It is evident that many contracts were taken by concerns other than HerffJo-nes Co. and ourselves on the stone-protected ring.”
Then the letter continues: “Because of a recent litigation with the L. G. Balfour Co., through which the Courts hauded down to us a decision denoting infringement on their part of our patent rights, it would appear to me that you should see the Principal of these schools and tell them that we will continue the manufacture of this stone-protected ring, duplicating the style and price; or taking over the contract, so that the pupils may continue to buy a ring that is now a national affair — A Stone-Protected Victory Ring.”
This paragraph, written by plaintiff (not immediately after the decision of the Circuit Court of Appeals, hut after time for reflection and advice from counsel), taken as a whole, conveys the impression that the decision had definitely and expressly held all-stone-protected rings to be infringements. Moreover, I agree with defendants that this paragraph contains direct suggestions to the salesmen to break Balfour contracts because-of tjie decision. The last paragraph of this letter is especially open to criticism and reads as follows: “You have the right to say that the Balfour Co-. — under penalty of the Federal Court, and according to an injunction issued by the Court — cannot manufacture-this type of jewelry. Therefore, these contracts no longer exist in the form of a Balfour contract but do exist, if the school insists upon buying a stone-protected ring, in the form of a Peters contract.”
This letter can only mean that the decision in the Balfour suit had held that the-L. G. Balfour Company could not manufacture stone-protected rings or “this type of jewelry.” It directs the salesmen to tell the-principal of the school buying rings of this type from the L. G. Balfour Company that such contracts did not exist. This letter tells the salesmen, in so many words, to use the-decision in this suit in an attempt to induce Balfour customers to break or cancel their -contracts with the Balfour Company. Moreover, this letter refers to an injunction issued by the court, whereas no injunction was issued in this suit until October 10,1932. This letter constitutes, in my opinion, another flagrant misrepresentation and misstatement of the decision and decree in this suit. It is worthy of notice that this letter was not withdrawn, but was used by salesmen of plaintiff, with its consent, even after the service on October 13, 1932, of the restraining-order herein, proving a deliberate intention on plaintiff’s part to continue its misrepresentation of the scope of the Court of Appeals’ decision regardless of consequences. '
Not only did the plaintiff misrepresent the decision of the Court of Appeals in written, documents as hereinbefore described, but the evidence clearly shows that Mr. Peters himself indulged orally in misleading statements regarding the decision and decree.
For instance, on December 13, 1932, it appears that Mr. Peters called on Henry M. Stewart of the class ring committee of the Virginia Military Institute at Lexington, Va.,, and told him that no company could make a protected stone ring, and that he had basie patents on that type of ring. Mr. Stewart quoted Mr. Peters as making the following statement: “No, they cannot put in the stone fro-m the inside or the outside. .We have all the basie patents on it. When I invented this *699I offered to let these other companies in on it if they would pay a royalty. They would-n’t pay a royalty but now they, are going to pay me. I have got Balfour for $30,000 and I am going to get the rest of those boys.”
On December 15, 1932, Mr. Peters called upon John N. Hoffman, Jr., who quoted Mr. Peters as saying: “We had gone to the Balfour Company about a year previous and they revised all of our prices more consistent with general conditions, and I felt at that time prices had been reduced to practically the lowest that could possibly be done, and I told him so. ‘Why’ he says, ‘we will guarantee that, besides,’ he said, ‘the Balfour people are very poor people to do business with.’ He says ‘I have just sued them for infringing my patents and I have obtained a judgment of $15,000. in the Federal Court, and Mr. Balfour has offered to settle for $5,-000.’ I said ‘What is this suit you are talking about?’ He said ‘It is on stone-protected rings.’ ”
Mr. Peters was not produced as a witness to controvert any of these statements, and they must, therefore, be taken as true.
I do not deem it necessary to discuss further the voluminous evidence taken by the parties on this issue, as I am satisfied from the evidence discussed in this opinion that the conduct of the plaintiff, as hereinbefore set forth, has been so inequitable as to call for some action by this court.
Defendants have proved to my satisfaction that plaintiff has, since the day the decision of the Court of Appeals was handed down, carried on a campaign of publishing and disseminating misleading statements regarding the scope and effect of the decision of the Circuit Court of Appeals and the decree entered in this court pursuant thereto, and I am satisfied that plaintiff has endeavored to induce customers to break or cancel contracts with defendant by means of intentionally misleading statements, both oral and written, and that plaintiff has acted recklessly and with a disregard for accuracy and truth, thus bringing itself within the rule laid down by Judge Hand in Asbestos Shingle, Slate & Sheathing Co. et al. v. H. W. JohnsManville Co., supra.
In support of its motion to dissolve the restraining order, plaintiff sought to prove that defendant misled and deceived the Circuit Court) of Appeals by suppressing a portion of the Pittsfield High School correspondence in order to convey the impression that an order for rings, placed by the school, was not filled; also that said defendant prepared and induced Mr. Fraser, editor of the Dedham Transcript, to sign a false affidavit giving him, at the same time, a release of any claim the Balfour Company might have against him for the publication of the article heretofore mentioned. The proofs do not, in my opinion, sustain these charges.
In arriving at the final decision of this case, there are no clear guiding beacons of pertinent recent authorities which are decisive of the questions at bar, and this is due largely to the fact that in no two cases are the facts exactly similar; hence an approach must be made from basic principles.
Unfair tactics are reprehensible even in actions at law, but equity demands even more exacting standards of behavior. The litigant at law should have clean hands; in equity he must. And this being true as a condition precedent to entering equity, it is equally certain that his hands must stay clean to remain in equity and claim equitable relief, and his sojourn in equity certainly does not relax the standard initially required.
If this standard is not met by a litigant, equity must either deny relief in toto, or partially, according to the aggravation presented, or confess its maxims obsolete. What are “clean hands” in equity? To consider the literal words throws light. A surgeon about to operate demands absolute cleanliness. But one merely lacking such freedom from contamination does not fairly lack “clean hands.” The strict standards of the surgeon are not demanded in everyday life. Turning from the metaphor of the maxim to its application in practice, we have on .the one hand the mere deviation from rectitude which, though regrettable, must be expected in transactions in which the parties are swept by partisan zeal. In the large, such incidents are a mere badge of human frailty which cannot be too harshly dealt with. Such hands are not surgically clean, but cannot justly be condemned as dirty.
On the other hand, we sometimes face conduct of such deliberate and selfish unfairness as to incite, even in the charitably inclined, the characterization of a “dirty trick.” The author of such conduct, in an equity suit, does not have clean hands. Border line cases may occur, but their consideration does not herein seem necessary. The question, then, is whether or not plaintiff's conduct has those traits of calculated injustice which equity can afford neither to condone or ignore.
The facts established here write a story which cannot be lightly dismissed. It is branded with unfairness, and, if this court is *700to reward the responsible party with the sweeping relief sought, then we may as well confess that equity has at least one less maxim.
After careful consideration and weighing the evidence, I have decided not to recall the decree heretofore entered in its entirety, and not to disturb the provisions thereof upholding the patent and granting an injunction. Substantial justice will be .accomplished by recalling so much of the decree, however, as awards an accounting, the right to which plaintiff has forfeited by reason of its inequitable conduct as hereinbefore set forth; Defendants’ motion to vacate the decree is granted to that extent, and plaintiff’s motion to dissolve the restraining order is denied.
Appropriate orders in accordance with the above views may be submitted, properly consented to as to form, and, if the parties are unable to agree as to form, then the orders may be settled before me on proper notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219266/ | MORRIS, District Judge.
The above-entitled actions aré suits brought October 10,1933, in the federal court because of diversity of citizenship to recover damages on account of an automobile accident occurring in Concord, N. H., July 5, 1933.
Counsel entered a special appearance for the defendants, and the issue to be now determined arises on such special appearance. The question was argued Wednesday January-'3, 1934, and, from the arguments of counsel", it appears that the defendant Thomas D. Owler and/or Park & Pollard' Company, owners of a Chevrolet truck which it is alleged was negligently driven causing plaintiff’s injury, was covered by a policy of insurance issued March 3,1933, by the Lumbermen’s Mutual Casualty Company, a corporation established by the laws of the state of Illinois and having a place of business in Manchester, county of Hills-borough, state of New Hampshire. It further appeared that said insurance, company denied coverage of the accident, and that, in order to have the question of its liability determined, it had on October 16, 1933, filed a bill in equity in this court in which all the parties plaintiff and defendants were joined seeking a declaratory judgment to determine its liability and to determine the question of whether or not it was bound to defend the action under the terms of its policy.
The court is somewhat embarrassed by the fact that no personal service of the bill in equity has been made upon the plaintiffs Elsie Giles and Robert Moulton, both of whom are residents of Rochester in the county of Monroe, state of New York. But I hold that, in bringing the original actions in the federal court in this district, they have so far submitted themselves to the determination of *701all matters growing out of the accident as to give the court jurisdiction to determine the validity of the grounds for special appearance in the action at law as effected by the bill in equity.
The policy of insurance has not been filed in court, but from the petition in the bill in equity it appears to be an ordinary policy of liability insurance on a Chevrolet truck owned by Thomas D. Owler and/or the Park & Pollard Company by the terms of which the petitioner agreed to insure the named assured and any person operating the vehicle with the permission of the assured against liability for bodily injuries while the truck was being used in the usual business of the assured, And that it further contained a provision-that the insurance company would defend the assured in any action brought against it and would pay any judgment rendered if within the terms of the policy.
Laws N. H. 1929, c. 86, provides: “Declaratory Judgments. Any person claiming a present legal or equitable right or title may maintain a petition against any person claiming adversely to such right or title, to determine the question as between the parties, and the court’s judgment or decree thereon shall be conclusive.”
In the case of Sauriolle, Adm’r, v. O’Gorman, 163 A. 717, 723, decided by the New Hampshire Supreme Court October 4, 1932, the court, in construing N. H. Laws 1927, c. 54, § 1 in a case involving coverage of an automobile accident, said: “Having intervened and defended against his claim of negligence, as a matter of right under the policy, it is ordinarily too late to deny the applicability of the policy after a trial of the merits. The insurer’s defense of the suit against Shea, without reservation, with a full knowledge of the facts, and without excusing circumstances, would imply its binding acknowledgment that it had insured him and hence that the use was permissive.”
In a more recent ease determined by the New Hampshire Supreme Court November 7, 1933, American Motorists’ Insurance Company v. Central Garage, 169 A. 121, it was held that a petition for a declaratory judgment for the purpose of determining whether or not an insurance policy had been canceled previously to the happening of the accident involving the automobile on which the policy had previously been written brought in advance of the main trial was correct procedure under the declaratory statute above quoted.
Basing their right to have the question of coverage determined under the New Hampshire, statute and the decisions of the New Hampshire Supreme Court, the defendants’ counsel entered a special appearance in the actions at law, and claimed that the trial should be postponed until the question of liability of the insurance company’s coverage and duty to defend the assured had been determined.
The right of the plaintiffs in this action at law to have their actions speedily tried and determined ought not to be held up- because of some contract between the defendants and a third person or corporation to which they are not a party.
This proceeding is limited in its scope to the question of the special appearance in the actions at law. The question of whether or not the insurance company is liable to pay any judgment against the assured is not involved.
Were the question of a declaratory judgment involved in this limited discussion, it would present a very troublesome question. See Willing v. Chicago Auditorium Association, 277 U. S. 274, 48 S. Ct. 507, 72 L. Ed. 880; Muskrat v. United States, 219 U. S. 346, 31 S. Ct. 250, 55 L. Ed. 246.
The only question is whether or not the insurance company, by defending the actions at law, will themselves be estopped from denying liability in case judgment goes against the assured. In order to protect itself against such an estoppel, it is not necessary to determine the question of the insurance company’s coverage. Its rights against an estoppel will be amply protected by the service of notice upon the plaintiffs seasonably in advance of trial that it denies liability for any damages that may be recovered by the plaintiffs against the insured in the actions at law. McGee v. U. S. F. & G. Co. (C. C. A.) 53 F.(2d) 953. I find nothing in the New Hampshire statute or in the decisions of the New Hampshire Supreme Court denying the insurance company such a right of protection against an estoppel.
The special appearance must be struck off, and the ease will stand for trial on the jury calendar in its order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219267/ | ATWELL, District Judge.
This is a fight for priority between a landlord and creditors, and arises over a Texas statute which announces a lien for land- ■ lords, and a protection for other creditors of the tenant.
It appears that the tenant, bankrupt, is in arrears for rent since December, 1930; that the landlord filed a statutory proof of his rent claim in February, 1933,* and again in October of that same year. The referee declined to allow him any of the claim prior to the time of the first filing, which would date back six months."
The landlord claims that he is entitled,under such filing, to his entire rent from December, 1930, and relies upon section 5238 of the Revised Statutes of Texas. This statute is quoted in full, so far as it is applicable here, in Re Toggery, Inc. (D. C.) 60 F. (2d) 311, 312, affirmed Kokernot-Nixon Properties, Inc., v. Wright, 68 F.(2d) 317, Circuit Court of Appeals, Fifth Circuit, December 20, -1933. Briefly, it declares that a landlord shall have a preference lien upon all property of the tenant in the rented premises for the payment of rent due, and to become due by it; “that in order to secure the lien for rents that are more than six months due,” it shall be necessary for him to file his claim in the office of the county clerk.
Another section of the same statute (article 5238) provides that: “No lien for rent more than six months past due * * * shall be valid as against bona fide purchasers or unsecured or lien creditors of said tenant, unless said statement shall be verified, filed and recorded as above provided.”
From December, 1930, to the time of the filing of the lien in February, 1933, the contesting creditors had made various advances to the bankrupt. Such advances would come within the spirit of the protecting statute just mentioned.
One need not be very critical to discover difficulty in the statute. It evidently has two purposes: First, it was for the protection of the landlord; and, secondly, and perhaps as important, for the protection of the person who might deal with the tenant.
Judge Meek held, in Re McLaughlin (D. C.) 19 F.(2d) 810, that the filing of the notice by the landlord as required by this statute protects him indefinitely. In other words, that the filing of the landlord in this particular case, in February, 1933, preserved his lien as superior back to December, 1930.
Judge Kennerly in Re Toggery, supra, held that a landlord, when the rights of other creditors intervene, may not have the statutory lien for. a period in excess of six months, and that this six months’ superior lien does not exist unless he files the claim in accordance with the statute.
The Circuit Court of Appeals for this circuit, in Re Brannon, 62 F.(2d) 959, held that this particular statute, without any light upon the present matter, was for the benefit of landlord and creditors.
In the case of Gunst v. Dallas Trust & Savings Bank, 8 S.W.(2d) 806, the Court of Civil Appeals for the Fifth Judicial District of Texas, speaking by Judge Looney, said that this particular statute, so far as the *709landlord and tenant were concerned, gave the landlord a lien without any time limitation. The Legislature has amended the statute since these decisions, but not in any part now being considered. See, also, Wooten Grocer Co. v. Wade (Tex. Civ. App.) 37 S.W.(2d) 1090; Second National Bank v. Settegast (Tex. Civ. App.) 52 S.W.(2d) 533.
So it appears to be a case for the careful construction of a statute that is poorly written. When courts speak with reference to a statute, and a legislating body thereafter writes with reference to it, and does not change the wording about which the courts have spoken, the judicial construction is ordinarily accepted as correct. When the highest courts of a state have spoken with reference to a state statute, their construction will be followed by the national courts. When, the words of a statute are given their ordinary significance, and when thus read seem plain, there is no excuse for construction.
While it is not at all free from doubt, the statute has a significant purpose. It must not be rendered wholly useless. It should be made operative for the protection of both of the interests that it manifestly had in view. The Legislature was solicitous. for landlord and dealer with the tenant, and to hold that the landlord might wait a year, or two years, or five years, or ten years, and then file a claim for rents that he had not collected during that time and come in ahead of those who had furnished goods for his tenant to sell during that period, would wholly emasculate the statute as to such dealers. To hold that the landlord may never have but six months’ rent by any action that he may take seems, likewise, to ignore the phrase, “more than six months past due,” which appears in the latter paragraph. There is also a similar wording in the first part of the first paragraph.
It therefore becomes necessary to overlook the letter of the law, if that very superlative phrase may be used, and grasp its soul — its purpose. If that is done, we arrive at the conclusion that the referee ruled properly in denying the landlord, in this particular case, a lien for any rents prior to six months before February, 1933.
When six months’ unpaid rents have accumulated, the landlord may file. That protects for that period. At the expiration of another six months he files again, and is again protected. Such protection extends until extinguished by payment. The practical result is a lien for “past due” rents “for more than six months.”
I am persuaded that that is the result that must be reached, and an order may be drawn accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219268/ | KNIGHT, District Judge.
The General Discount Corporation was organized October 28, 1932. It took over the assets and liabilities of the Federal Discount Corporation and the Republic Corporation. The Federal Discount Corporation had three subsidiaries, to wit: Federal Finance Company, Main Sales Company, and Green Agency, Inc. The General Discount Corporation and these subsidiaries each had funds on deposit on February 11,1933, in the First National Bank, which was on that day closed under the moratorium proclamation of the Governor of the State of Michigan, and remained closed till May 11, 1933, when it was declared insolvent.
The General Discount Corporation was. indebted to the First National Bank in the amount of approximately $70,000, and had on deposit approximately $45,000, which was applied on its indebtedness to the bank. There was also on deposit to the credit of the Federal Discount Corporation $1,138.15; to that o£ the Federal Finance Company, $1,369.33; that of the Green Agency, Inc., $5,650.95 and that of Main Sales Company, $370.11. The plaintiff asks that each of these other deposits be set off against plaintiff’s indebtedness. Assignment was made of the Federal Discount Corporation deposit tq the General Discount Corporation on or about November 30; 1932. It apparently was left on deposit to the credit o£ the Federal Discount Corporation. The amount was not increased. While the defendant bank was not notified of any assignment, it is not questioned, and as the right of no one else is affected, notice was not necessary. The amount of the deposit of the Federal Discount Corporation should be allowed as a set-off against plaintiff’s debt to the bank.
The Federal Discount Corporation had advanced a considerable sum of money to a certain loan agency that operated what is known as the “Small Loan Act of Michigan.” This act (Comp. Laws 1929, § 12198 et seq.) authorized and fixed terms for loans of $300' or less. Such loan agency had pledged certain loans as security for advances made by the Federal Discount Corporation. The Federal Finance Company was organized both to take over the collection of these collateral loans and continue in the making of the small loans under aforesaid act. The Green Agency, Inc., was incorporated as an insurance company. It is claimed that it was organized for the purpose of writing insurance on chattels pledged with the Federal Discount Corporation. Its authority, however, was not limited to that purpose. The Main Sales Company was incorporated to engage in the retail sales business. It took over the business of another company obligated to the Federal Discount Corporation. It engaged in the sale and repair of automobiles and conducted its sales business at a place other than the place of business of the plaintiff.
Neither the Federal Discount Corporation nor the General Discount Corporation was authorized to do any of the business in which any subsidiary was authorized to engage.
The evidence shows that these several corporations were inter-related in the sense that the business actually done by each was in á sense supplemental to the business of each other one. However, none was restricted to this.
The plaintiff owned approximately all of the stock in the subsidiaries, and the directors of the subsidiaries were substantially the same. Each corporation kept separate books of record and separate books of account. Except as to Green Agency, Inc., the business of the subsidiaries was conducted in the offices of plaintiff and by employees of the plaintiff. Each corporation had its separate bank deposits, and all of the business of each subsidiary was conducted in its own corporate name. The record does not disclose that the bank was advised of the special purpose for which plaintiff claims these subsidiaries were incorporated.
The test of liability in this suit is whether there is mutuality in the demands between the parties thereto. Such mutuality means the right of each to maintain suit against the other upoff its demand. In the early case of Scammon v. Kimball, 92 U. S. 362, 367, 23 L. Ed. 483, it is said: “Set-off must he understood as that right which exists between two parties, each of whom, under an independent contract, owes an ascertained amount to the other to set off their respective debts by way of mutual deduction, so that, in any action brought for the larger debt, the residue only, after such deduction, shall be recovered.”
*711This rule as regards set-off has uniformly been upheld in the decisions of the courts. Gray v. Rollo, 85 U. S. (18 Wall.) 629, 21 L. Ed. 927; The Zouave (D. C.) 29 F. 296; Moore v. McGrawl (C. C. A.) 63 F.(2d) 593; Dakin, Receiver, v. Taver Bayly, Liquidator, 54 S. Ct. 113, 78 L. Ed. -; 57 C. J., § 40, p. 387. It is likewise true that such mutuality must have existed at the time of the suspension of the bank. Stone v. Dodge, 96 Mich. 514, 56 N. W. 75, 21 L. R. A. 280; Scott v. Armstrong, 146 U. S. 499, 13 S. Ct. 148, 36 L. Ed. 1059.
Plaintiff concedes that there must be such mutuality of indebtedness and claims that it is shown in the instant ease.
The theory of the plaintiff is that plaintiff was the real principal and each subsidiary its agent, and therefore there is mutuality in the debts. This position is not sound. Even if plaintiff were the principal, it was an undisclosed principal. „The evidence discloses that these subsidiaries held themselves out both to the defendant bank and the public as principals. The subsidiary would, therefore, be liable on a debt which it owed to the bank, and the bank likewise liable to it. Mutuality could not exist both as to the plaintiff and the bank, and the bank and the subsidiary. Equal right in each implies equal rights of action, election or option.
Every corporation is an entity in and of itself and as such a thing separate from its stockholders. In re Watertown Paper Co. (C. C. A.) 169 F. 252, 258; United States v. Milwaukee Refrigerator Transit Co. (C. C.) 142 F. 247; Elenkrieg v. Siebrecht, 238 N. Y. 254, 144 N. E. 519, 34 A. L. R. 592; Green v. Victor Talking Machine Co. (C. C. A. 2d) 24 F. (2d) 378, 59 A. L. R. 1091.
In case of fraud perpetrated by a principal through a subsidiary, the courts will, at the instance of a defrauded party, disregard the fiction of a distinct corporation. The principles on which such actions are based are fundamental. The application of this rule is at the election of the party defrauded. No fraud is claimed here, and therefore the rule has no relevancy.
It is likewise true, as asserted by the plaintiff, that a corporation may be “so organized and controlled * * * as to make it merely an instrumentality or adjunct of another corporation.” In re Watertown Paper Co. (C. C. A.) 169 F. 252.
Except in certain cases such as DeForest Radio & T. & T. Co. v. Radio Corp. of America (C. C. A.) 20 F.(2d) 598, involving certain acts of third party, the corporation itself cannot claim the benefit of transactions of a subsidiary to the damage of a third party. So in this case whatever the relation of the plaintiff and its subsidiaries between themselves may have been, the defendant dealing with the subsidiary as a principal, upon the facts found, is in no wise affected by such relation. Exchange National Bank of Spokane v. Meikle (C. C. A.) 61 F.(2d) 176; Chicago, Milwaukee & St. Paul Ry. Co. et al. v. Minneapolis C. & C. Ass’n, 247 U. S. 490, 38 S. Ct. 553, 62 L. Ed. 1229; Bachrach v. Allen, 239 Mass. 272, 131 N. E. 857; Hunter v. Baker Motor Vehicle Co. (D. C.) 225 F. 1006, 1016. The court said in the last-mentioned ease: “When, as here, these adjuncts are used as mere agents for all purposes, except the payment of their just debts, the liability of the real managing and controlling corporation is neither released nor shifted, unless by some arrangement or agreement made by the creditor with knowledge of the facts, so as to create either an estoppel or ratification. Any other rule, adopted or sanctioned by the courts, not only defeats justice, but opens the door for the perpetration of the grossest frauds.” The same language is applicable to a subsidiary. Permitting the plaintiff to offset deposits of its subsidiaries against its own liability to the defendant would affect the rights of stockholders and depositors of the defendant.
The Watertown Case, hereinbefore mentioned, involved a claim between corporations alleged to be in legal effect one corporation. Concluding its opinion the court said: “This case seems clearly to come within the general rule that the distinct corporate existence of two separate although associated corporations will be regarded by the courts.”
The plaintiff and its subsidiaries had distinct corporate existences.
The plaintiff should be allowed a set-off in the amount of the deposit of the Federal Discount Corporation, and the complaint should be dismissed as to the deposits of the other subsidiaries.
Let judgment enter accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219270/ | PETERS, District Judge.
This is a bill in equity brought by a New York corporation, doing a surety business, against the Portland Contracting Company, Inc., and some sixty other citizens of Maine, including the treasurer of the state, in which it is alleged, among other things, that in April, 1932, the Portland Contracting Company, hereinafter referred to as the contracting company, made a written contract with the state of Maine, through its highway commission, to construct a piece of state highway in the eastern part of the state for the sum of $140,379.90; that the contracting company, as principal, gave a bond running to the state treasurer in the sum of $70,189.95, containing the following condition:
*718“The condition of this obligation is such that if the Principal designated as Contractor in the foregoing contract, shall faithfully perform the contract on his part, and satisfy all claims and demands incurred for the same and shall pay all bills for labor, material, equipment, and for all other things contracted for or used by him in connection with the work contemplated by said contract, and shall fully reimburse the obligee for all outlay and expense which the obligee may incur in making good any default of said Principal, then this obligation shall be null and void; otherwise it shall remain in full force and effect.”
The bill alleges that the signature and seal of the plaintiff were fraudulently attached to said bond by persons acting without authority. It further appears from the allegations in the bill that the contracting company met with financial difficulties and was unable to complete the work contemplated by the contract which was taken over and finished .by the state at a cost which left a deficit of $86,456.02 for the contractor to pay, including in this sum $67,104.21 which the contractor owed various persons, defendants herein and others, in connection with ihe work, and which the contractor was unable to pay.
The plaintiff alleges that it is threatened with a multiplicity of suits by these numerous creditors of the contractor so long as the bond referred to remains outstanding and uncanceled, and that such suits may result in judgments against it totaling more than the penalty of the bond.
Claiming that it has no adequate remedy at law, plaintiff asks that the bond be canceled, so far as the plaintiff purports to be a party thereto. An injunction is also asked for restraining proceedings against .the plaintiff on the bond.
Several answers have been filed, including motions to dismiss. The jurisdiction of this court is invoked by the plaintiff on the ground of diversity of citizenship with .the necessary jurisdictional amount involved. Jurisdiction in equity is asserted on the ground that the bill is filed to avoid a multiplicity of suits.
The motions to dismiss raise as by demurrer the sufficiency of the allegations to give the court jurisdiction in equity. The state treasurer also in his answer questions he. propriety of any injunction against him as an official of the state.
The action cannot be maintained if a case is not stated plainly within the equity jurisdiction of this court.
The Judicial Code, § 267 (28 USCA § 384), declares that suits in equity shall not be sustained in the courts of the United States “in any case where a plain, adequate, and complete remedy may be had at law.” The Supreme Court in the recent case of Mathews v. Rodgers, 284 U. S. 521, 52 S. Ct. 217, 76 L. Ed. 447, says that the effect of that section which was but declaratory of the rule in equity, established long before its adoption, is to emphasize the rule and forbid in terms recourse to the extraordinary remedies of equity where the right asserted may be fully protected at law.
As previously stated, equity jurisdiction is invoked here on the ground that it is necessary to avoid a multiplicity of suits. It is true that the court is asked to relieve the plaintiff from the consequences of an alleged fraud, but, if such occurred, that defense can now be made adequately in any suit at law that may be brought on the bond in question. A breach of the bond has already occurred. It is not a question of reformation or cancellation before breach.
“A Court of Equity ought not to interfere on the ground of multiplicity of suits unless it is clearly necessary to protect a plaintiff against vexatious litigation.” Hale v. Allenson, 188 U. S. 56, 23 S. Ct. 244, 47 L. Ed. 380; Boise Artesian Hot & Cold Water Co. v. Boise City, 213 U. S. 276, 29 S. Ct. 426, 53 L. Ed. 796.
What is the situation disclosed as to the probability of the plaintiff here being unduly harassed by numerous suits? Prom statements made by counsel at the hearing, it appears that the treasurer of the state of’ Maine has brought a suit in the state court against this plaintiff to recover the penalty, of the bond presumably to cover the deficit caused by the contractor’s default, including the amount due the various creditors of the contractor including those made defendants herein. Their rights and interests being thus involved, there is no reason to think that they will now proceed with separate suits against this plaintiff, and no showing of any intention to do so. The question of the validity of the bond, so far as the plaintiff is concerned, obviously would be raised and decided in that suit. No more than the amount of the penalty of the bond could be recovered in any event. As a practical proposition, using the discretion and caution that *719a court is bound to use before interfering with the lawful prosecution of their rights by citizens, including their right to a trial by jury, it is apparent that there is no showing here of any clear necessity to protect the plaintiff from unnecessary litigation. Something more than a possibility must be shown. It must be a real danger.
“Again it has been held that if danger of vexatious suits by the same party or numerous parties is the ground of jurisdiction alleged by the single complainant, he must show more than a mere possibility of such litigation; the danger to which he is exposed must be a real one.” Pomeroy’s Equity Jurisprudence (4th Ed.) par. 251%.
Moreover, while there appears to be some diversity of opinion, the weight of authority is to the effect that in a ease like this, third parties, not parties to the contract and not persons for whose benefit the contract was primarily made, cannot sue directly on the contract. As is said in the case of Parker v. Jeffery, 26 Or. 186, 37 P. 712, 713: “The doctrine (of third party) is not applicable to every contract made by one person with another from the performance of which a third person will derive a benefit, blit is limited to contracts which have for their primary object and purpose the benefit of a third person, and which were made for his direct benefit.” Citing numerous eases. Standard Gas Power Corp. v. N. E. Casualty Co., 90 N. J. Law, 570, 101 A. 281, and cases cited.
From the wording of this contract, the bond in question, it is only incidentally for the benefit of third persons. It is primarily for the benefit of the obligee, the treasurer of the state of Maine, as is shown by the concluding words of the condition which provide that the contractor “shall fully reimburse the obligee for all outlay and expense which the obligee may incur in making good any default of said principal.”
But, regardless of any general principles which would preclude the defendants herein, other than the state officials, from bringing any suit against the surety on this bond, it is well settled in Maine that, “where one covenants with another by deed, under his own hand and seal, to pay him money for his own use or for the use of another, the obligee alone can sue upon the covenant.” Baldwin v. Emery, 89 Me. 496, 36 A. 994, 995; Harvey v. Milk Co., 92 Me. 115, 42 A. 342, 344. The latter case gives also another reason, applicable here, why creditors could not sue directly on such a bond: “The agreement of the defendant was ‘to pay all outstanding debts and liabilities,’ without names of creditors, without amounts of debts, and without any designation or limit whatsoever. ‘It is a general rule of law,’ says Judge Gray, in Carr v. National Security Bank, 107 Mass. 45 [9 Am. Rep. 6], ‘that upon a promise made by one person to another for the benefit of a third, from whom no consideration moves, the latter cannot sue; and the exception to this rule, which holds a person in whose hands funds have been placed to pay creditors of the depositor, liable to actions by them, has not been extended, in this commonwealth or in England, to a ease in which neither such creditors nor the amount of their debts axe named or ascertained at the date of the promise.’ ”
It is clear that these third parties, merely creditors of the contractor, cannot maintain any suits against the plaintiff herein in the courts of Maine.
The plaintiff suggests the possibility of suits in equity being brought against it by the contractor’s creditors. The danger of such a thing is not apparent, but if the plaintiff is sued in equity, it can have any equitable remedies for its protection then applicable to the situation.
It may very well be, as suggested by counsel, that this court is without power in the matter of injunction, as the state of Maine is interested as a party. The obligee in the bond is the treasurer of the state in his official capacity. No copy of the contract is attached to the bill or has been submitted. It is alleged in the bill, however, that the contract was entered into with the state of Maine, through the state highway commission. In view of the other substantial reasons for dismissing the bill, I have not thought it necessary to consider this point.
I am satisfied that a case has not been shown justifying the intervention of this court in equity as prayed for.
The bill is dismissed without costs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219271/ | SHEPPARD, District Judge.
The plaintiffs, who comprise two copartnerships and who are engaged in the business of stockbrokers, seek injunctive relief against the comptroller of the state of Florida by a bill to restrain the enforcement of the Stamp Tax Act (chapter 15787, Laws of Florida, 1931 (Ex. Sess.), on the ground that the same violates the Constitution of the United States (article 1, § 8, el. 3) by laying an undue burden on interstate commerce, and that such enforcement of the act deprives plaintiffs of their property without due process of law (Amendment 14, § 1).
The act assailed levies a tax of 10 cents per $100, inter alia, upon “all sales, agreements to sell, or memoranda of sales or deliveries of, transfers of legal title to shares, or certificates of stock * * * whether made upon or shown by the books of the corporation, or by any assignment in blank, or by any .delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale * * Also, “promissory notes, non-negotiable notes, written obligations to pay money, * * * made, executed, delivered, sold, transferred, or assigned in the State of Florida * * *.” Section 1.
• While plaintiffs are not citizens of Florida, they maintain branch offices in the state through which they act as agents for their Florida customers in the capacity of commission brokers by making purchases and sales of stock on the New York Stock Exchange and on other exchanges outside of the state of Florida. The practice and procedure followed by the two firms in representing their customers on the stock-exchanges is set out in exténso in the bill of complaint, and is that substantially followed by all stockbrokers. It is sufficiently disclosed by the bill that all purchases and sales of stoek and the actual delivery is made in the state of New York, or other state in which the exchange is located, between the floor members or broker*721age firms who take part in such transactions simultaneously with full payment for the stock. The brokerage firm, acting as agent for its Florida customers, completes- the transaction outside of the state of Florida. Prior to the completion of the transaction the only written documents passing between the brokerage firm and the customer in Florida are the written requests of the customer that the firm purchase or sell for his account, and copies of telegraphic communications from the New York office of the broker advising the customer that such requests have been complied with.
Defendant’s motion to dismiss is upon general grounds: That the bill is without equity, plaintiffs having their remedy at law; that it is not alleged that each of the plaintiff brokerage firms will be damaged in an amount in excess of $3,000; that there is a misjoinder of causes of action and of parties plaintiff. After argument, counsel for plaintiffs were allowed to amend so as to sufficiently allege damages to each party in the jurisdictional amount.
The jurisdictional amount for each party plaintiff, and diversity of citizenship being properly averred, all questions of jurisdiction may be disposed of by our holding that plaintiffs’ remedy at law is not plain, adequate, and complete. It is alleged in the bill that the payment of each tax under the act is a separate transaction and consequently the recovery of such payments at law would require a multiplicity of suits, and this alone, we conclude, is sufficient to give a court of equity jurisdiction.
There is not merit in defendant’s contention that there is a misjoinder of parties plaintiff or of canses of action. The joinder is clearly within the scope of Equity Rule 26 (28 TJSCA § 72-3), which allows a joinder where sufficient grounds appear for uniting the causes of action in order to promote the convenient administration of justice. That this ground for joinder applies to parties plaintiff as well as defendants is, it appears, well settled. See International Organization, etc., v. Red Jacket C. C., etc. (C. C. A.) 18 F.(2d) 839, and Shamrock Mfg. Co. v. Radio Corp. (C. C. A.) 37 F. (2d) 675.
It is our opinion that all purchases' and sales of stock by the plaintiff brokerage firms for their Florida customers, whether the stock is bought outright by the customer or upon a margin, are transactions entirely completed outside of the state of Florida and that any memoranda passing between the broker and the customer are not such documents as are subject to taxation in Florida, To hold such memoranda of sales made without the state to be subject to taxation would be giving the statute extraterritorial effect. People ex rel. Hatch v. Reardon, 110 App. Div. 821, 97 N. Y. S. 535. For a state to tax property beyond its jurisdiction is a taking of property without due process of law. Frick v. Pennsylvania, 268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A. L. R. 316; First Nat. Bank v. Maine, 284 U. S. 312, 52 S. Ct. 174, 76 L. Ed. 313.
However, where a sale is made of stock of a Florida corporation and a transfer made upon the books of the corporation in Florida, the state may properly tax the transfer as one made within the state. See People ex rel. Hatch v. Reardon, supra.
Although the point was not argued by counsel nor directly presented in the bill, the allegations of the bill disclose a transaction with reference to the marginal accounts of Florida customers with the brokers' agents in Florida. In view of this showing by the bill, even though not'put in issue, we deem it advisable, as a cautionary suggestion, to decide once for all that such transactions are subject to the tax. The agreement which the customer is required to sign upon opening a marginal account is attached to the bill as an exhibit. It provides that any and all securities, commodities, and other property held by the broker for the account of the customer shall constitute collateral security for any and all of the obligations of the customer to the broker. Upon the execution of such an agreement and the deposit of security the broker advances a portion of the purchase price of the stocks which the customer wishes to buy on margin. This is clearly a loan of money or credit by the broker to the customer and is a transaction collateral to the purchase or sale of stock. The transaction takes place entirely in Florida and is similar to the execution of a collateral note to secure a loan from a bank. This collateral agreement may be subject to the tax in accordance with the amount of money loaned thereunder as it is a written obligation to pay money which is made,' executed, and delivered in the state of Florida.
Interlocutory, injunction will issue in conformity with' the views here, expressed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219272/ | HENRY W. GODDARD, District Judge.
Libels by cargo owners against the owners of the Spanish Steamship Cabo Hatteras for total loss of cargo whieh was on board her and was destroyed with the vessel by a fire at sea on March 4, 1927. The cargo was shipped at Genoa, Valencia, Alicante, and Malaga in January and February, 1927, for carriage to New York. It is conceded that the Cabo Hatteras was a common carrier; that the libelants were the owners of the cargo described in the respective libels; and that it was received on board the vessel at the loading ports and was not delivered at its destination.
The Cabo Hatteras was a steel steamsnip of 3,635 tons net register of the usual three-island type, which is quite similar to the American-built Hog Island vessels. She was built by the Compañía Eskalduna of Bilbao, Spain, under Lloyds inspection and at the time of this voyage was classed by Lloyds as —)—100 A — 1. She was in charge of a competent master with an experience of six years in the same trade and who had been in the service of her owners for thirty-three years, and she carried a competent crew. Originally she was operated as a passenger and cargo vessel, but in 1924 her passenger accommodations were removed and the passenger space was converted into cargo space. The bridge deck compartment in whieh the fire was first discovered was part of the space whieh previous to 1924 had 'been used for passenger accommodations. For three years prior to her loss, the Cabo Hatteras was one of a fleet of 34 vessels operated by the respondent company and had been regularly engaged in service between Mediterranean ports and New York carrying the same general class of cargo.
The Cabo Hatteras sailed from Malaga • for New York on February 13, 1927, with a general cargo, but a large part of it consisted of bales of rags and iron drums of olive oil. Two days before her expected arrival in New York, while in latitude of 38° North, longitude 70° West, North of Bermuda, at 4:30 o’clock in the afternoon of March 4, 1927, her master discovered that “heavy smoke” was coming out of the samson post ventilator leading from the port side of the bridge deck compartment. The alarm of' lire was given immediately. The covers were taken off of the cargo hatch of the bridge deck compartment and the boatswain jumped down into the hatch and looked through and “in that part of the hold where there were stowed bales of rags and drums of oil there was a large fire raging whieh was constantly gaining headway” and whieh apparently had started around the samson post. Water from the sea was poured in upon the fire through the lines of fire hose until the hose was burned and all efforts were made to subdue it. However, owing to the dense smoke and wind which fanned the fire, they were not successful and during the evening it became necessary to abandon her; and the crew, and finally the officers and master, were taken aboard the steamship Cabo Torres which had arrived upon the scene bound from New York to Lisbon. Within forty-eight hours the Cabo Hatteras and her cargo became a total loss and a day or so later she was sunk as a menace to navigation by gunfire from a United States Coast Guard cutter.
The Caho Hatteras was 369 feet and 3 inches long with a beam of 49 feet and 2 inches. The bridge deck compartment where the fire occurred was upwards of 100 feet long and the width of the vessel, from its deck or floor to the ceiling was 7 feet and from the floor to beams was 6 feet 4 inches. The compartment was divided in the center by the engine room casing whieh extends forward from the after end about, half the length of the compartment and which occupies some 16 feet or about one-third the width of the deck. The engine room easing incloses the funnel, uptake, etc., from fire and boiler room below. In the bridge deck compartment were two coal bunkers — one on the port side and the other on the starboard side. These extended inboard from the vessel’s side about 8 feet and ran aft for about 22 feet from a line opposite the forward end of the engine room easing. About 6% feet forward of the engine room easing and of the same width was a hatch 14 feet and 5 inches long. The alleyways or so much of them as were not used for the coal bunkers, the space forward of the engine room easing, and the covered hatch whieh had a 12-in eh coaming around it, were used for cargo. On each side of the bridge deck compartment was a samson post ventilator with a cowl, located about 6 feet out from the engine room easing and just forward of the forward end of it. They extended 24 feet above the superstructure. The interior diameter of the samson posts was 18 inches and the exterior' diameter of a pipe leading up from the lower hold into the samson post at the top of the bridge deck compartment was 14% inches, leaving a 3%-ineh space around the smaller *727pipe for ventilation of the bridge deck compartment. There were.doors on each side of the after end of the compartment 3 feet wide; these were partly dosed by planks placed aeross the door in slots in the door posts, except that an opening of 12 or 18 inches was left at the top. There were also doors on each side of the forward end of the compartment, bnt these were customarily dosed and fastened with bolts or iron dogs. There was a space for the circulation of air above the bales, the distances from the bales to the deck beams above varying between 1 and 3 feet. The deck of the bridge deck compartment had a 12-ineh crown — so that it was that much higher in the center than at her sides. There were two sets of drain.age pipes or scuppers leading from the bridge deck compartment into the bilges; one set located in the outboard corners forward of the coal bunkers and the other set in the outboard corners at the after end of the compartments. She was loaded so as to be a little down by the stem. Below the bridge deck were hanging coal bunkers which extended inward from the sides of the vessel to within 2% feet of the engine room easing. The Cabo Hatteras had steam fire extinguishing lines in some of its compartments but none in the bridge deck compartments. However, it was equipped with the usual lines of fire hose.
Before the vessel’s arrival at Malaga, her last loading port, a quantity of hales of rags and eases of paprika had been loaded and stowed in the bridge deck compartment. Upon her arrival in Malaga, several shipments of olive oil were taken aboard and between 130 and 140 iron drums were stowed in the bridge deck compartment. The drums were inspected just before being loaded and the testimony is that they were new and in good condition. The drums of olive oil were 3 feet long and 2 feet in diameter and of an average weight of 450 'pounds. The rags were what are known in the trade as “Dark Cottons” and were hydraulically pressed into bales averaging 2 feet and 7 inches thick and about 4 feet long with an average weight of 700 pounds and were bound with iron bands or wire.
In the after part of the bridge compartment and in the alleyways were stowed two tiers of bales on their sides. Under the bales was dunnage consisting of a layer of boards or planks an inch or an inch and a half thick spaced 3 or 4 inches apart and laid athwartship or fore and aft, and another similar layer laid in the opposite direction. In the forward end of the compartment bales of rags were stowed two tiers high in each corner and between them were cases of paprika with similar dunnage under the bales of rags and there was also dunnage between them and the paprika. From the after comer of the hatch on the starboard side and running up to the bales on the forward end, aeross to the port side and along the port side, were stowed on end a tier of drums of olive oil upon dunnage consisting of two layers of boards or planks laid in a manner similar to those under the hales of rags. On top of the drums were two layers of dunnage board and then a tier of bales. Around the hatch coaming a row of bales was placed to “chock oft” the drums. Between hatch coaming and the bales, blocks of wood were wedged in to prevent any movement of the cargo. Aeross the top of the hatch was a row of bales on their sides placed'there for the purpose of locking the stowage on each side of the hatch to the other. In the space between the after end of the hatch and the engine room easing and extending aeross to the port side was one tier of bales upon dunnage similar to that under the other bales. The drums and bales were separated by inch boards laid edge to edge so as to form solid partitions. Around the engine room casing there were permanent upright heavy wooden battens providing some 6.inches between the cargo and the casing. All along the vessel’s sides at intervals were permanent dunnage planks, and so located there was a space of about a foot between the sides and the cargo.
The Cabo Hatteras was on the southern track and left Spain in good weather. On March 1st she had winds of force 4 or 5 on the Beaufort scale, but at 4 a. m. on March 2d, she met a hurricane; the wind reached force 12 and she was out of control and adrift in the trough of the sea for twenty-two hours when the storm abated sufficiently for her to resume her course. The words of the “protest” filed subsequently by the master with the Spanish Consul General at Lisbon state (as translated into English) “because for six days prior to the day of the hurricane and on account of severe weather comprising sea and wind, they could not obtain their position astronomically.” That there was a violent storm for six days before hurricane contradicts the testimony of the crew, and also Mr. Scarr of the United States Weather Bureau, who testified that the Cabo Hatteras ran the 35th parallel in good weather “with no storms whatever” and with winds ranging from “force 2 or 3 to force 5 or 6 at the utmost,” although on February 18th *728and 19th and the 22d and 23d, she had “a considerable northerly swell.” During the trial the master testified that just before the fire he had decided to ask an approaching vessel for his position as they had been unable to obtain it. themselves because of the cloudy and overcast sky.
Respondents’ answer sets up as a separate defense that the loss of the cargo was caused by a fire within an exception in the bill of lading that “this shipment is subject to all the terms and provisions of * * * Section 4282 * * * of the United States Revised Statutes,” and that section 4282 (U. S. Code, title 46, § 182 [46 USCA § 182] the American Pire Statute of March 3, 1851) provides that:
“No owner of any vessel shall be liable to answer for or make good to any person any loss or damage, which may happen to any merchandise whatsoever, which shall be shipped, taken in, or put on board any sueh vessel, by reason or by means of any fire happening to or on board the vessel, unless such fire is caused by the design or negleet of sueh owner.”
Libelants contend that the loss of the Cabo Harteras and cargo was due to spontaneous combustion in rags which had been allowed to become impregnated with olive oil as a result of improper stowage of olive oil and rags in the bridge deck compartment, and that this negligence was the personal negligence of the respondent. Their contention or theory is that in the heavy weather preceding or during the hurricane, the stowage was broken and drums containing olive oil were damaged and caused to leak and the oil came into contact with and impregnated the rags which were stowed near the drums, and that this, combined with a high tempera-time in this compartment, particularly in the vicinity of the engine room easing, produced spontaneous combustion resulting in the fire and the loss of vessel and cargo.
The respondents deny that it was improper to stow drums of olive oil in the bridge deck compartment and maintain that it was customary to do so; that the drums and bales of rags were securely stowed and were protected with dunnage; that if the drums had been damaged and any leakage did occur, which is denied, that the oil could not have reached the bales of-rags as it would have run through the dunnage underneath the bales and off into the scuppers; that the compartment was adequately ventilated; and, moreover, that the temperature nowhere in the bridge deck compartment was sufficiently high to produce spontaneous combustion in bales of rags even if it had been possible for the olive oil to come in contact with the bales. And the respondents further assert that if there was any negligence in the stowing, it was not chargeable to them personally as the stowage was solely in charge of the master.
It is urged by the respondents that the fire may have been due to inherent vice in the bales, or to a spark from the vessel’s funnel blown down the samson post ventilator during the storm, or to friction between the drums, or a cigarette thrown from the bridge or deck might have been drawn into the ventilator, but that what actually did cause the fire is unknown.
In the recent decision of the Supreme Court of Earle & Stoddart, Inc., et al. v. Ellerman’s Wilson Line, Ltd., 287 U. S. 420, at page 425, 53 S. Ct. 200, 77 L. Ed. 403, Mr. Justice Brandeis stated:
“The fire statute, in terms, relieves the owners from liability ‘unless sueh fire is caused by the design or neglect of sueh owner.’ The statute makes no other exception from the complete immunity granted.”
And at page 427 of 287 U. S., 53 S. Ct. 200, 201, said:
“The courts have been careful not to thwart the purpose of the fire statute by interpreting as ‘neglect’ of the owners the breach of what in .other connections is held to be a nondelegable duty.”
So that the fire statute (section 4283 [46 USCA § 183]) grants the shipowner full immunity for loss of cargo due to a fire subject to the exception mentioned in the statute. The burden of proving that the shipowners were guilty of “design or negleet” is, under the statute, cast upon those who allege it — the libelants. The respondents, the shipowners, upon showing that the cargo was destroyed by fire have brought themselves within the exemption provided by the statute unless the libelants show that the fire was caused by the “design or negleet” of the owners. If the cargo owner proves facts establishing “design or negleet” on the part of the ship!owners, then and only then are they liable for the fire loss.
The General Limitation Act (R. S. § 4283 [46 USCA § 183]) and the Harter Act (U. S. C. title 46, § 191 [46 USCA § 191]) do impose upon the shipowner, as a condition' of the relief granted by that act, the burden of proving that the loss occurred “without the privity, or knowledge of sueh owner or own*729ers.” But that act is merely an enactment of the ancient law of the sea while the fire statute, which is not a statute of limitation but of exoneration, owes its origin to an English fire statute first passed in 1786 (26 Geo. III C 86). Providence & N. Y. Steamship Co. v. Hill, 109 U. S. 579, 602, 3 S. Ct. 379, 617, 27 L. Ed. 1038. In the Earle & Stoddart v. Ellerman’s Wilson Line, Ltd., supra, the Supreme Court explains that the Harter Act (46 USCA §§ 190-195) and the fire statute differ materially in respect to the bur-, den of proof and in some other features.
In The Older, 65 F.(2d) 359, the Circuit Court of Appeals of this Circuit stated:
“Assuming that he did so represent it, the ease comes down to whether the libelant has proved that the fire was caused by his ‘design or neglect’; the burden in such eases being on the injured party. The Salvore (C. C. A.) 60 F.(2d) 683; The Strathdon (D. C.) 89 F. 374, 378. The situation is like any other where the claimant brings himself within an exemption, in which event the libel-ant must prove that he has been negligent.”
See, also, Craig v. Continental Insurance Co., 141 U. S. 638, 646, 12 S. Ct. 97, 35 L. Ed. 886; Earle & Stoddart v. Ellerman’s Wilson Line, Ltd. (The Galileo) 287 U. S. 425, 53 S. Ct. 200, 77 L. Ed. 403.
It appearing that the cargo during the voyage was destroyed by fire, it follows from the foregoing that the libelants must prove the cause of the fire and that it was caused by the “design or neglect” of the owners. Since they base their right to a recovery upon the contention that the fire was due to the impregnation of the rags by the olive oil producing spontaneous combustion, they must prove that this actually did occur. In order to establish the ultimate necessary fact, libelants have endeavored to prove the following chain or series of. events: (1) That the drums leaked; (2) that a sufficient amount of olive oil was absorbed by the rags to produce spontaneous combustion; (3) that the conditions of temperature, air, and length of time were such as produced spontaneous combustion.
These facts, it seems to me, must be established and by a fair preponderance of the evidence; not left to conjecture or speculation, but they may be proved by circumstantial evidence, and, if definite facts are shown, certain definite and reasonable inferences or conclusions may be drawn from them.
While it appears that the rules which govern spontaneous combustion have never been determined with scientific accuracy, one of the theories which is universally accepted by chemists is that spontaneous combustion in vegetable oils is caused by the absorption or combination of certain acids in the oil- (linolenie and linoleie) with the oxygen in the air or what is commonly known as oxidation. This combination produces heat. When and if a sufficient amount of heat is generated faster than it escapes, it may cause a fire. The higher the temperature of the surrounding air the less tendency for the generated heat to escape or to become dissipated into the air, and it also increases the sum total of heat. However, ignition of a liquid from spontaneous combustion does not occur unless some inflammable material like cotton or rags, etc., with carbon in it is impregnated with the liquid, so as to cause a union of oxygen and carbon. The susceptibility to spontaneous combustion depends upon the rate and the extent'of oxidation. The rate and extent of oxidation depend largely upon the amount of acid in the oil. The less acid the less rapidly oxygen is absorbed and consequently less heat is generated. Chemists divide vegetable oils, which includes olive oil, into three classes; drying oils, which dry or oxidize rapidly; semidrying oils which oxidize less rapidly; and nondrying oils which oxidize so slowly under ordinary conditions that oxidation is disregarded for practical purposes. The typical drying oil is linseed which contains a high percentage both of linolenie and linoleie acid. Cotton seed, containing a high temperature of linoleie acid but no linolenie add is a typical semidrying oil; and olive oil, which contains no linolenie acid and only a small amount of linoleic acid is generally classed as a nondrying oil. And it is well recognized that certain temperatures and conditions will cause a fire in rags wet with linseed oil or other drying liquid when it would not do so in rags wet with olive oil. The danger from olive oil is less because a higher temperature is necessary to materially increase its rate of oxidation. But it is abundantly established by the testimony that given the right conditions of temperature, time, insulation, supply of oxygen, character of rags, amount of olive oil present, ignition will occur in rags impregnated with olive oil.
All the experts agree that raising the temperature increases the ráte of oxidation and that at certain temperatures rags impregnated with olive oil will ignite from spontaneous combustion if all other conditions be ripe for it, and that the higher the temperature the less the time required for it *730to occur. Oxidation, like evaporation, increases with the amount of exposed surface. In a cup of oil the rate of evaporation and oxidation is comparatively very slow. On the other hand, if the oil is spread out upon a surface the rate of oxidation increases but the heat generated is rapidly dissipated and there is little danger of ignition. One of the most important factors in spontaneous combustion is the amount of insulation present. So that if spontaneous combustion is to occur in a bale of rags, the rags must be saturated with olive oil to a point far enough inside the bale to prevent heat that is generated from being dissipated into the air and near enough to the surface of the bale and the air to have an adequate supply of oxygen. Just where this point in one of these bales of rags is located is unknown as it obviously depends upon many uncertain factors. But the consensus of opinion of the witnesses is that this point in a bale of rags is located somewhere about halfway between the center of the bale and the surface — at least several inches in from the surface. They also agree that if the oil saturated point was nearer the surface a higher temperature would have to be maintained to produce ignition, and that a temperature which would cause ignition in a large bale of rags impregnated with olive oil would not produce ignition in one or a few loose rags impregnated with the oil because the heat generated passes away freely into the surrounding air.
A number of elaborate tests have been conducted by the respective experts for the purpose of ascertaining the temperature and conditions necessary to produce spontaneous combustion in a bale of rags and loose rags impregnated with olive oil; also the time required at various temperatures, but there is a sharp difference of opinion among them as to the conditions under which the tests were made and what the tests show or do not show, and how the conditions of the tests compared with those on the Cabo Hatteras. The results of those tests were not convincing proof of the accuracy of the theories which they purported to demonstrate, all of the tests being attacked by the opposing experts- — and properly it seemed to me — on the ground that the heat was so applied as to cause direct or local heating, or that the insulation and supply of oxygen was inadequate or excessive as the case might be. One group of witnesses testified that under the conditions present on the Cabo Hatteras it was impossible that the fire could have been due to it. The other group were equally-positive that the fire could have been due to spontaneous combustion and was in their opinion due to spontaneous combustion in the oil impregnating the rags.
The testimony of several chemists as to what temperature rags saturated with olive oil must be subjected to to produce ignition from spontaneous combustion varies between 90 degrees and 170 degrees Fahrenheit, though at 90 degrees it was admitted it would require many days. But it has been affirmatively established that loose rags saturated with olive oil will ignite from spontaneous combustion within a day or two if subjected to a sufficiently high temperature and all other conditions are right for it. However, there is a wide divergence in the opinion expressed by the several experts during the trial and also among text-book writers on the subject as to the temperatures and precise conditions necessary to produce it. My conclusion, after full consideration of all the testimony and evidence submitted, is that it has not been shown by convincing proof that a temperature of less than somewhere between 140 and 150 degrees would be sufficient to produce ■ ignition in loose rags saturated with olive oil within a day or two, although if the period of time be extended to a number of days, a somewhat lower temperature would suffice. Also that an entire bale of rags impregnated with the oil will ignite at a lower temperature than a few loose rags wet with the oil.
There is a tradition that wet or oily rags are dangerous because of their being liable to spontaneous combustion and many of ihe standard books on stowage refer to this. The Regulations of the United States Interstate Commerce Commission forbid a carrier from accepting them for transportation. This is a general rule and includes rags wet with any liquid or oil, notwithstanding that castor oil is practically free from danger of spontaneous combustion and nondrying oils are not regarded by chemists as liable to produce spontaneous combustion under normal conditions, but such a rule undoubtedly is a wise one for it would be impractical, if not impossible, for a carrier to ascertain just what was the particular oil on the rags tendered for shipment.
The contention .of the libelants is that either an entire bale of rags became impregnated with the olive oil in which event ignition would have occurred within a week if subjected to a temperature of 100 degrees, or that some loose rags became impregnated with the oil and if subjected to a temperature of 130 degrees would ignite within twen*731ty-four hours, and they contend that even higher temperatures than these existed in the bridge deck compartment.
Without passing on the soundness of the first proposition, but merely assuming it to be so for present purposes, I think it is dear that the idea that the fire was caused by an entire bale having become impregnated with olive oil must be eliminated. For the testimony is that it takes ten to fifteen gallons of oil and some time to do this. And not only is there no proof that any bale was so saturated, but from the conditions discussed further on it seems highly improbable if not impossible that any of the bales could have been.
To support the theory that either an entire bale of rags or some few loose rags in the bales became saturated with olive oil, it is essential to show that there was more or less of a substantial leakage of olive oil from the drums. There is no direct proof of it but it is urged by libelants “that a certain amount of leakage was to be expected under normal conditions; in heavy weather it was practically certain that the leakage would be substantial.”
After examining the type of iron drum which contained the olive oil in the bridge deck space and listening to the testimony, I am fully convinced that the normal leakage from such drums is small and generally of slight consequence. Cargo interests may hesitate somewhat to prove that the drums were not sound, but I think that it appears from respondents’ witnesses’ testimony that the drums were in good condition when loaded. There was some criticism of stowing the drums on end instead of on their sides, but the best practice seems to be to stow iron drums on end when only one tier is to be carried. So stowed they are less likely to roll with the vessel for the iron rim on the head of the drums “bites” into the dunnage boards or planks upon which they rest and tends to keep them from moving.
Referring now particularly to the method used in stowing the drums and bales and in dunnaging them rather than to their location. After hearing this discussed by a number of witnesses of long experience— some as stevedores, others at sea on cargo carrying vessels, I believe that it was done in a manner customarily followed to prevent displacement or damage from the rolling of the vessel and which had generally proven to be effective. Of course, if the stowage in the bridge deck compartment was badly broken by the rolling of the vessel in the storm, it is likely that some of the drums would become damaged and leak. On occasions drums containing olive oil or other liquids on a vessel have been damaged in a severe storm and caused leakage. No one has testified that he observed the condition of the stowage in the bridge deck compartment after the vessel sailed, except the boatswain who entered the hatch when the fire was discovered and who said that he saw no evidence of a collapse of stowage. Many witnesses have given their opinions as to the effect the storm would have on the stowage, one group stating that the stowage would shift and the drums would be damaged and caused to leak; another group testifying that if stowed and well chocked up with dunnage the heavy drums and bales would not move or become damaged. Some heavy weather is quite usually encountered upon a winter transatlantic voyage, but with proper stowage it is the exception rather than the rule for cargo to be discharged damaged as a result of break-up of stowage, and, if it remains intact, cargo is ordinarily not damaged. To support the opinion that the drums on this voyage could have been dam. aged in the storm preceding the fire, libelants refer to the previous voyage of the Cabo Hatteras when drums of olive oil were damaged during an equally severe storm and did leak. It appears that on her previous voyage in December, the Cabo Hatteras also encountered a hurricane and heavy weather and that thirteen drums of olive oil' were delivered to the consignees slack out of shipment of two hundred drums made up of three lots. Of the thirteen drums which were delivered slack, ten of them were part of a lot which had been stowed on the forward well deck and her master testified — '“In the hurricane the seas were shipped on board and they broke the stowage and they knocked one against the other and were broken.” But three drums which had been carried below deck were slack — one of a lot of fifty drums weighed only 366 pounds when delivered; in another lot of fifty-one drums one weighed 345 pounds, and the other 75 pounds. It appears from the bills of lading that these drums of olive oil weighed, when shipped, between 430 and 440 pounds. While there is no direct evidence that any of this loss occurred on the vessel, or that it was not due to handling during or after the discharge, I think the clear indications are that it took place on shipboard except possibly the loss from the drum weighing 75 pounds. There were four other lots of drums of olive oil carried on the same voyage, but it does not appear whether or not there was a loss in *732any of them. This, of course, does show that there is a possibility of damage to the drum under certain conditions and there is much testimony to the effect that there is a shortage or leakage of olive oil on occasions and that most instances of leakage were caused by the handling of discharging or loading. But if it be assumed that there was some leakage on this last voyage of the Cabo Hatteras, and there is certainly nothing more than a probability of this, the amount of oil which escaped is a matter of pure conjecture or speculation.
A very considerable amount of oil would have to leak before it would be likely to rise above the dunnage and reach the bales of rags, for underneath the drums and between the deck and the bales were two layers of dunnage boards or planks raising the drums and bales two to three inches above the deck. The normal bale of rags is á hard hydraulically compressed mass with flat sides bound together with steel bands or wires and it could bulge down only to a very slight extent, if any, into the narrow spaces between the dunnage boards or planks if the bale remained intact; one layer of the dunnage was laid athwartship and the other laid fore and aft. One of the purposes of dunnage is to keep baled goods clear of the deck. Unless there was a sudden collapse of a drum and there is no evidence that this occurred, or there was a substantial leak from a number of drums adjacent to each other, it would seem that the natural course of the oil would be to run off through the dunnage underneath the drums down to the scuppers into the bilges as the sides were twelve inches lower than the center line of the deck. The vessel was trimmed aft so that she was down by the stern. There was a difference in level of three inches between the forward and after ends of the bridge deck compartment (about 100 feet) so that the slope of the deck from the center to the side was much greater than toward the after end of the vessel. Any oil on the deck would therefore tend to flow to the side of the vessel and then aft. There was a set of drainage pipes or scuppers leading from the bridge deck space down to the bilges; one set on eaeh side of the vessel. They were located respectively in the outboard corners just forward of the coal bunkers and in the corner of the after end of the compartment. The rolling of the vessel might have some temporary effeet on ¡the course of the flow of any oil, but probably the net result would be to average it so that it flows along in its normal course unless a large quantity of oil suddenly escaped from • the drums, in which event it .would tend to slosh around. The circumstances cast serious doubt upon the assumption that a substantial amount of oil escaped from the drums or certainly any substantial amount during any one day, for the bilges were sounded daily, ineluding the morning of the Are, and no trace of olive oil was found. The ship’s carpenter testified that before lowering his sounding rod into the bilges ho put chalk upon it so when there is any oil in the bilges it sticks to the rod and can be seen. If it is to be assumed that .a substantial amount of oil leaked from the drums —enough to penetrate up and by absorption saturate even one bale, sounding the bilges would have indicated it for there was no other place for the oil that was not absorbed by the bales to go except into the bilges, and it is not probable that all would bé so absorbed as absorption is a slow process. If there was enough oil on the deck to slosh around and wet the bales, by far the greater portion of it would have drained down into the bilges and any such quantity undoubtedly would have been apparent when sounding the bilges. If only a small amount of oil gradually leaked from the drums, it naturally would have trickled through the spaces in the dunnage and across the deck and not reached the bales with the two layers of dunnage between them and the deck. It may have been that some bale had loose rags sticking out which eame in contact with the deck just when the oil happened to flow across it, but if the bales were in normally good condition, this would not be likely for the bales were pressed into a hard .mass, with flat surfaces, and it would seem to be indulging in a series of conjectures to say that just this did occur. Further, there is no evidence that'the bales were not in good condition. The bills of lading are to the contrary.
However, if it be assumed that some loose rags in the bales did become impregnated with the olive oil, the next important question is — were they subjected to a sufficiently high temperature to produce ignition? And from all the evidence, I find that a temperature of around 140 degrees would be necessary and under the conditions that existed would probably require several days.
Libelants do not claim that any such temperature as 140 degrees was to be found throughout the bridge deck compartment, but they do contend that in the vicinity of the deck plates alongside the engine room casing a temperature considerably higher than 140 degrees existed.
Underneath the bridge deck compartment *733were hanging eoal bunkers which extended from her sides to within 2% feet of her engine room easing. This results in there being a narrow strip of the deck plate on the port and on the starboard side of the engine room casing beyond the point to which the hanging coal bunkers underneath extend and protect it from the heat of the fire and boiler rooms below. This strip is considerably warmer than any other part of the deck in the compartment. It is 2% feet wide and 16 feet long but the forward end of it for a distance of 6 feet and 3 inches is protected by a hanging screen or bulkhead below. Many vessels are similar to the Cabo Hatteras in this respect. Others have no coal bunkers underneath the bridge deck so that their bridge deck compartments are more exposed to the heat from the. fire and engine rooms than that of the Cabo Hatteras. Six inches of the width of the strip are taken up by the permanent wooden battens surrounding the steel engine room easing and the air space between them.
There is no definite evidence of the temperature of this strip of the deck plate, merely opinions based upon tests and observations in other vessels. Mr. Robert Haight, a marine engineer, after making observations on other vessels for this purpose, has testified that in his opinion the temperature of this small section of the deck plate would not be more than 122 degrees with a temperature of 85 degrees to 87 degrees at the bottom of the bales — 2 to 3 inches above the deck on dunnage — with the air circulating through the dunnage) and with the engine room easing protected by battens and providing a space of 6 inches between the casing and cargo. Witnesses called by the libelants have estimated the temperature of this section of the deck plate at 170 degrees and over. But after seeing them all and hearing them discuss the various factors which they took into consideration in forming their estimate, I think the evidence indicates a temperature of this section of the deck plate itself adjacent to the uptake and funnel (the warmest point) of somewhere between 122 and 140 degrees, and that the temperature at this point just above the dunnage was between 90 and 100 degrees. While these temperatures existed at or above this particular narrow strip of the deck plate, this heat was rapidly dissipated in the compartment; the general temperature of the compartment was in the neighborhood of 70 to 75 degrees. The average temperature of the outside air during the voyage was 63 degrees and on the day of the fire was 44 degrees, and I find the Cabo Hatteras had the usual amount of ventilation in this compartment for vessels of her type with the samson post ventilators and the doors at the after end of the compartment partly open. Several witnesses of long experience at sea upon steamships, who apparently were disinterested and who impressed me as reliable, testified that under' ordinary conditions there was a difference of 10 to 15 degrees between the temperature of the bridge deck compartment and the outside air and that in their opinion this would have been about the difference on the Cabo Hatteras. The bridge deck compartments of many vessels have no protection from bunkers underneath them, which tends to make their bridge deck compartments warmer than that of the Cabo Hatteras, and all kinds of general cargo, including onions, fruits, cotton, waste wool, burlap, etc., are customarily stowed in them. And quite frequently on long voyages bunker eoal is carried in such space and this is peculiarly subject to spontaneous combustion, and eoal is usually stowed directly on the deck without dunnage. It is undoubtedly true, as one witness said, that all ’tween spaces in a ship on a Mediterranean voyage are “much warmer in summer time than the bridge deck space would be in winter.”
To know where the fire originated is important as it might be helpful in determining how it originated. There is no evidence that it started in the bales of rags stowed over this 2 foot strip along the engine room easing. The only testimony is that when it was discovered it was “around the samson post” and this is somewhat confirmed by the fact that the bulkhead of the temporary coal bunker “was smoking and on fire” at the' point where the bunker hatch was. This bunker hatch comes within 2 feet of the samson post. The samson post is forward and to the port of this strip or “shelf,” about 12 feet from the warmest part of it, which is alongside the uptake and the funnel which is 4 feet and 9 inches inside the easing. The samson post is about 6 feet distant from the “shelf” itself, but the forward end of the “shelf” for a distance of 6 feet and 3 inches is protected by a hanging screen or bulkhead below, which would materially reduce the temperature of that part of it. And while 12 feet is not a great distance, the temperature around the samson post would be very considerably lower because of its nearness to the ventilator and outside air.
In view of all the testimony respecting spontaneous combustion and the conditions *734so far as they are known, I am not convinced that the temperature was sufficiently high in this area around the samson post to produce ignition from spontaneous combustion, at least, within the period of time it might be assumed that the storm had caused a collapse of the stowage and a material leakage of oil. I think it unlikely that the temperature within this area exceeded 75 or 80 degrees although nearer the engine room easing it would be somewhat higher. But with the high winds there would be a strong flow of outside air through the ventilators and openings tending to dissipate the heat rapidly.
I fully realize that witnesses called by libelants have testified that in their opinion the temperatures on the deck plates alongside of the engine room easing and throughout the bridge deck compartment would be very much above those which I have found probable. But the conditions in the bridge deck compartment of the Cabo Hatteras were not unique. There were many vessels of her type and the Hog Island ships with the full width of 'their decks directly over the boiler without the protection of the coal bunkers underneath must be warmer, and yet these vessels regularly carry in their bridge deck compartments perishable cargo, including various kinds of oils, coal, fruit, onions, etc., as it appears the Cabo Hatteras has been doing for several years, and if the temperature claimed by libelants existed such, I think, would not have been the ease. She was constructed under the supervision of Lloyds Register and regularly inspected by its representatives. To sustain a finding that the cause of the fire was spontaneous combustion, the following facts or chain of events must be proven by direct or circumstantial evidence:
(1) That there was sufficient leakage of oil to impregnate a portion of one or more bales or loose rags; (2) that this oil did not drain off into the scuppers on the lower side of the vessel and did flow over this particular small section adjacent the engine room easing; (3) that one or more bales penetrated through the narrow openings in the dunnage and rested on this portion of the deck adjacent to the casing, or that loose rags' came in contact with the deck at this point, or that there was so much loose oil on the deck that reached the bottom of a bale at this particular spot; (4) that the temperature of the rags or bales of rags which became impregnated with oil was sufficiently high to cause ignition; and (5) that these events all occurred sufficiently in advance of the fire to produce ignition by spontaneous combustion.
Unless these facts are established, it seems clear the libelants have not sustained their burden of showing the cause of the fire and that it was spontaneous combustion. They have not been proven, and may not be left to conjecture.
Confirming the conclusion that there is a lack of proof that the fire on the Cabo Hatteras was due to spontaneous combustion as a result of the rags having become impregnated with the olive oil, is the fact urged by the libelants, for the purpose of imputing knowledge to the respondents, that the stowing of rags and olive oil together in the bridge deck compartments of their steamers was and had been a practice of many years standing. That this practice existed is not denied by respondents. On the contrary, it is urged by 'them in support of their contention that the cargo on this voyage of the Cabo Hatteras was properly stowed, for no such fire had ever occurred on any of its vessels before.
Many witnesses, including cargo surveyors, stevedores, ship officers, and others, have testified as to whether or not there was “common knowledge” of danger of spontaneous combustion in stowing olive oil and rags, cotton or rags, etc., in the same compartment,- one group of witnesses holding that it was; the other group holding to the contrary. A number of stowage plans of vessels engaged in the Mediterranean trade were introduced upon the trial showing that olive oil and rags or cotton, or similar materials, frequently were carried in the same compartment and sometimes in the bridge deck compartment.
"While it appears that oily or wet rags, cotton, etc., are not accepted by carriers because of the general fear of spontaneous combustion, it also appears that it is not unusual to stow olive oil either in .cases or drums in the same compartment with rags, cotton, or similar materials if each is properly dunnaged.
Just what “common knowledge” the owners of the Cabo Hatteras and those who loaded her in Spain might or should have of the danger under ordinary conditions of spontaneous combustion if the olive oil and bales of rags are stowed in the same compartment, is problematical in light of the sharp differences of opinion of the highly qualified chemists after conducting many laboratory tests to determine whether it would occur at all, and, if so, under wftat *735conditions. The question of common knowledge of a danger is to be decided from the standpoint of the knowledge, experience, and judgment of competent persons engaged at that time in loading cargos in the port in Spain from whence the Cabo Hatteras sailed. The Titania (D. C.) 19 F. 101; The Indiapura (C. C. A.) 190 F. 711.
Other facts for consideration in relation to contention that the combination of olive oil and bales of rags in the same bridge deck compartment was commonly known to be dangerous because of the liability to spontaneous combustion, are that according to the records of the United States Department of Commerce an average of about 350,000 drums of olive oil and some 600,000 bales of rags are or were imported into this country prior to 1929. And there is no proof by the libelants of any fire from spontaneous combustion as a result of this practice. Of course, we do not know where or how they were stowed except in the instances previously referred to, but it would seem reasonable to presume that, if spontaneous combustion occurred and would occur when olive oil and rags came in contact under conditions which cargo was subjected to on shipboard, that it would be a settled fact with convincing proof of it. The chemists called by the libelants had never heard of a fire being caused by spontaneous combustion of olive oil on rags outside of their own laboratories, and the records of the New York fire department contain no record of any such fire. It is true that libelants called some witnesses who attempted to testify that they had seen or heard of fires due to spontaneous combustion of olive oil on rags, but after hearing their testimony it became very evident that it was unreliable and inconsistent with reports made at the time and contrary to the apparent facts or that their conclusions were open to serious question. ■
In International Mercantile Marine S. S. Co. v. W. & A. Fletcher, 296 F. 855, 858, cited by libelants, Judge Hough, for the Circuit Court of Appeals of this Circuit, said:
“Liability is measured by the known dangers to be guarded against, and if care according to the circumstances is wanting, the natural inference is that injury accrues from the known danger — it is caused by the lack of care. The blowtorch near remover and waste was negligence, the danger of fire was well known, and we find adequate cause proximately existing in that negligence for the ensuing loss. The Strathdon (D. C.) 89 F. 374; Brown v. Standard, etc., Co., 159 C. C. A. 397, 247 F. 303.”
However, as is indicated in the portion quoted from Judge Hough’s opinion, that was a case where a workman was using a blowtorch close to highly inflammable varnish remover composed of alcohol, benzol, and wax. There had been two earlier fires on the same day caused in the same manner, and the court held that it was negligence to use a blowtorch in proximity with so much inflammable material. The workman continued to use the blowtorch under the same conditions and a third fire, the one causing the damage, occurred. The court found that the only reasonable inference was that the negligent use of the blowtorch caused it. The inference in International Mercantile Marine S. S. Co. v. Fletcher, supra, was clear, but the circumstances there were quite different from those in the case at bar where several essential facts necessary to base a conclusion upon are left to conjecture, and inference must be based upon inference. For assuming that there existed on the deck plates along the engine room easing on the Cabo Hatteras sufficient temperature to be an effective agency to produce spontaneous combustion under certain conditions if rags saturated with olive oil were exposed to it long enough, it is but speculation to say that this could or might have happened. It does not seem to me that the facts justify an inference of causal relation. In order to prove a fact by circumstances there should be positive proof of the facts from which the inference or conclusion is to be drawn. The circumstances themselves must be shown and not left to rest in conjecture, and when shown it must appear that the inference sought is the only one which can fairly and reasonably be drawn from these facts. People v. Harris, 136 N. Y. 423, 33 N. E. 65.
It is also true that in International Mercantile Marine S. S. Co. v. Fletcher, supra, the respondent was liable for any negligence of its employees.
The libelants urge that her owners are precluded from claiming exemption under the American fire statute (section 4282 R. S. [46 USCA § 182]) because the bridge deck compartment of the Cabo Hatteras was not equipped with steam smothering lines in the bridge deck compartment as a precaution against fire. She was equipped with the usual lines of fire hose and these were immediately used to pump water from the-sea upon the fire until the fire got too hot to use them. It is conceded that the Cabo Hatteras complied with the requirements of the Spanish law and also with Lloyds. Her classification by Lloyds was —[—100 A — 1—the high*736est. Many foreign vessels are not equipped with fire smothering apparatus and the evidence is that a large part of those which are so equipped do not have it in the bridge deck compartment. Section Rev. St. § 4470, as amended (U. S. C. title 46, § 463 [46 USCA § 463]), relating to steam smothering lines does not apply to the Cabo Hatteras, a Spanish cargo vessel, in view of Rev. St. § 4400 as amended (U. S. C. title 46, § 362 [,46 USCA § 362]).
In The Princess Sophia (C. C. A.) 61 F. (2d) 339, at page 347, a Canadian steamer was destroyed by stranding. She complied with all the Canadian laws in regard to equipment, but not with American requirements, which differed in some respects, and her right to limit was challenged, and the court (C. C. A. 9th) stated that reciprocity of inspection laws existed between Canada and the United States (as between Spain and the United States in the ease at bar) and said:
“As to Canadian law, however, this point is not material, since we do not find that there was any violation of the Canadian law as to equipment or manning, whieh could have contributed to the disaster.
“But it is seriously urged by the appellants that the Sophia violated a number of provisions of American law as to life-saving appliances, including line-carrying projectiles, lifeboats, and life-saving gear, as well as to the manning of the lifeboats, strength of davits, condition of the radio service, and the sufficiency of the crew in general. The facts as to these particulars become immaterial if we find that the Princess Sophia was not subject to the life-saving requirements laid down by American statutes.”
The Cabo Hatteras was an ordinary cargo vessel of quite usual type and her construction and her reconstruction and her equipment in 1924 were under the supervision and approval of Lloyds Register of Shipping and up to the time of her loss she was rated by the Lloyds in its highest classification. She met the requirements of all laws applicable to her. Neither the Spanish law nor Lloyds required her to have steam smothering lines in her bridge deck compartment. She must be in good condition and reasonably safe and efficient for the service in which she is engaged. The Silvia, 171 U. S. 462, 19 S. Ct. 7, 43 L. Ed. 241.
“There are, however, degrees of safety; and she need not be the safest. A new vessel, of the highest order of ■ construction, is safer than one several years old, and of a lower order of workmanship. Yet the latter may be, and, if in good condition, is, seaworthy.” The Marlborough (D. C.) 47 F. 667, 670.
A vessel owner is not bound to equip her with every known safety device nor to adopt all the latest improvements under peril of his ship being held unseaworthy. Latest improvements or not — the question is one of reasonable fitness for the undertaking. McCaldin v. Cargo of Lumber (D. C.) 198 F. 328, affirmed (C. C. A.) 202 F. 735; Brick v. Long Island R. R. Co., 245 N. Y. 222, 157 N. E. 93; Bradley v. Federal Steam Navigation Co., 24 Lloyds List Law Reports 446.
The conditions described by those who first observed the fire indicate that it then had already made such headway that lines of steam smothering apparatus would have had little effect and this is confirmed by the testimony of several who were present. The' fact that there was no steam line in the bridge deck compartment is not, in my opinion, sufficient to charge the owners with neglect under R. S. § 4282 (46 USCA § 182).
That the statute was not specifically incorporated in the bill of lading does not deprive the owners of the vessel of the right to avail themselves of the protection of R. S. § 4282. The Titanic, 233 U. S. 718, 34 S. Ct. 754, 58 L. Ed. 1171, L. R. A. 1916B, 637; The Strathdon (D. C.) 89 F. 374; Id. (D. C.) 94 F. 206, affirmed (C. C. A.) 101 F. 600; The Norge (D. C.) 156 F. 845.
There were many possible causes of the fire and as was said by the Circuit Court of Appeals in The Strathdon, supra, at page 606 of 101 F.: “The occult causes of fire are as numerous as they are mysterious.”
After what I believe is a careful consideration of all the evidence presented by able and diligent counsel, my conclusion is that the proof does not show that the fire on the Cabo Hatteras was caused by the “design or neglect” of her owners. Accordingly the libels are dismissed.
If the foregoing be deemed insufficient compliance with Admiralty Rule 46% (28 U. S. C. § 723 [28 USCA § 723]), findings and conclusions may be settled on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219274/ | HOLLY, District Judge.
Defendant has demurred to plaintiff’s declaration. Plaintiff, administrator of the estate of William A. Swett, charges that decedent met his death in an automobile collision in the province of Ontario, Canada, and sets out the statute of such province, which provides that, where the death of a person has been caused by such wrongful act, neglect, or default, as, if death had not ensued, would have entitled the person injured to maintain an action and recover damages in respect thereof, the person who would have been liable, if death had not ensued, shall be liable to an action for damages, etc.
This is substantially the same as Lord Campbell’s Act and the statute of Illinois (Smith-Hurd Rev. St. 1933, e. 70, § 1) on the same subject.
Defendant raises several objections to plaintiff’s declaration, among which are the following:
(1) That the declaration does not show a cause of action in that, while the action is apparently predicated upon diversity of citizenship, the declaration fails to show the state of which the plaintiff or defendant is a citizen.
(2) There is no allegation sustaining the right of the plaintiff to maintain this action in his name for the benefit of the beneficiaries named in the declaration.
(3) The declaration does not show that the Ontario statute relied upon was in force at the time of the injury.
(4) The declaration does not allege that the beneficiaries were free from contributory negligence.
(5) The action is barred by the Illinois statute prohibiting actions for death occurring outside the state. Smith-Hurd Rev. St. 1933, c. 70, § 2.
The first three objections are well taken. The declaration does not show the residence of either the plaintiff or defendant. There is no allegation indicating who, under the Ontario act, is entitled to recover for the death of the person injured, whether the next of kin or the administrator. Further, the declaration states only that there is now a statute in force in the province of Ontario, but there is no allegation that it was in force at the time of the injury.
*740As to the point that the declaration does not negative contributory negligence on the part of the beneficiaries, that it is unnecessary. In the federal courts the rule is that freedom from contributory negligence on the part of the plaintiff in a personal injury case need not be negatived or disproved by him. The burden of proving it is on the defendant. Texas & P. R. Co. v. Volk, 151 U. S. 73, 14 S. Ct. 239, 38 L. Ed. 78.
The same rule would, of course, apply as to the beneficiaries in an action to recover for death by wrongful act.
The most serious question in the ease is that raised by the fifth ob j eetion. The Illin ois statute giving a right of action for death by wrongful act contains a provision that “no action shall be brought or prosecuted in this state to recover damages for a death occurring outside of this state.” Smith-Hurd Rev. St. 1933, e. 70, § 2. The effect of this statute, if literally construed, and interpreted in the manner contended for by the defendant, is to exempt from civil liability a resident of Illinois who so injures another person that he dies, if death occurs in another state, provided that the one causing the injury evades service in the state in which the death occurred. He has only to remain in Illinois to go scot-free so far as an action for damages is concerned.
It is the general rule that a right of action arising under or a liability imposed by either the common law or the statute of a state may, where the action is transitory, be asserted and enforced in any court having jurisdiction of such matters and the parties, if not in substance inconsistent with the statutes or public policy of the state in which the right-of action is sought to be enforced. Texas & Pac. R. Co. v. Cox, 145 U. S. 593, 604, 12 S. Ct. 905, 36 L. Ed. 829.
It is contended, however, that it is against the public policy of Illinois, as expressed in the statute, to permit an action to be brought in this state to recover for a death outside the state, and, therefore, such an action may not be maintained in the federal courts located in Illinois.
It is true that generally a federal court will follow the public policy of the state in which it is sitting. But it is not bound to do so.
In Boyce v. Tabb, 18 Wall. 546, 548, 21 L. Ed. 757, an action was commenced in the United States Circuit Court in- Louisiana on a note given as consideration for the sale of slaves. The note was given in 1861 and was • then a valid obligation. After the war and before commencement of the suit, the Supreme Court of Louisiana had held contracts for the sale of persons were void and should not be enforced in their courts. Defendant pleaded that the consideration of the note was the sale of slaves, and that the Supreme Court of Louisiana had established that the obligation was void. As to this defense the Supreme Court of the United States said: “It is urged on the part of the plaintiff in error, as the highest court in Louisiana has, on grounds of public policy, refused to enforce contracts like this since the abolition of slavery, that the thirty-fourth section of the Judiciary Act of 1789 [28 USCA § 725] obliges this court to follow that rule of decision. This is an erroneous view of the obligation imposed by that section on this court, as our decisions abundantly show. The provisions of that section do not apply, nor was it intended they should apply, to questions of a general nature not based on a local statute or usage, nor on any rule of law affecting titles to land, nor on any principle which had become a settled rule of property. The decisions of the State courts, on all questions not thus affected, are not conclusive authority, although they are entitled to, and will receive from us, attention and respect.”
Another ease bearing on this question is Dexter v. Edmands (C. C.) 89 F. 467. By the laws of Kansas, a creditor of a corporation who had recovered a judgment against a corporation and had- execution returned nulla bona might maintain an action against a stockholder of the corporation. An action was commenced in the United States Circuit Court for the district of Massachusetts to enforce such liability against a stockholder of the Western Farm Mortgage Trust Company. The state courts of Massachusetts had refused to enforce the laws of Kansas imposing this liability on the stockholder. In this case the defendant demurred to the declaration, one of the grounds being that, the state courts of Massachusetts having refused to enforce these laws on the ground that they wore contrary to public policy, suit could not be maintained upon them in the federal courts sitting in Massachusetts. But Judge Lowell held to the contrary and overruled the demurrer.
The statutes of Illinois and the province of Ontario are alike in permitting a recovery for death by wrongful act. The statutes of Illinois differ only in prohibiting the bringing of an action in Illinois for death outside the state, the effect of which is to exempt a citizen of Illinois from civil liability for his wrongdoing outside of the state. This court *741is of the opinion that the jurisdiction of the federal courts cannot be limited by such an expression of policy. St. Bernard v. Shane (C. C. A.) 220 F. 852.
The Circuit Court of Appeals of this circuit has had occasion to consider the very question presented here. In Missouri Pac. R. Co. v. Larussi, 161 F. 66, 68, the action was brought to recover for a death occurring in Kansas. At the time of the death, the statutes of Illinois provided for recovery for death by wrongful act, but contained no limitation as to actions for death occurring outside the state. That provision was incorporated by amendment later, but before the action was brought. On issue raised by defendant that the death having occurred in Kansas there could be no recovery, the District Court directed the jury to find against such plea. The Circuit Court of Appeals affirmed the judgment of the District Court, holding first that the right to bring action was fixed when the death occurred, and the state could not prevent the enforcement of the right by later legislation, and then said: “Whether such enforcement may be subjected to the further test mentioned in Texas & Pacific Railway Co. v. Cox, 145 U. S. 593, 605, 12 S. Ct. 905, 908, 36 L. Ed. 829—namely, that ‘the statute of the state in which the cause of action arose is not in substance inconsistent with the statutes or public policy of the state in which the right of action is sought to be enforced’ — is a question not involved here for solution, as the terms of the statute in Illinois creating the cause of action are substantially identical with those of the Kansas statute. Both provide alike to remove the common-law bar and establish a cause of action for a tort (committed in the state) which causes death. The right of recovery in the case at bar rests alone on the statute of Kansas — is ‘governed by the lex loci, and not by the lex fori.’ Northern Pacific Railroad v. Babcock, 154 U. S. 190, 199, 14 S. Ct. 978, 981, 38 L. Ed. 958. As the law of Illinois concurs in this policy in creating the cause of action, the test referred to is met, if applicable ; and whether the remedial provisions in Kansas and Illinois are alike or unlike is immaterial under either view. Stewart v. Baltimore & Ohio R. R. Co., 168 U. S. 445, 448, 18 S. Ct. 105, 42 L. Ed. 537. Assuming, therefore, that jurisdiction of the parties was acquired, cognizance in the trial court of the subject-matter was governed by the federal law, with rights to be administered in conformity with the rule of general jurisprudence as above stated, unaffected by any special rule or statute of Illinois, either authorizing or inhibiting suit in the local courts upon such causes of action arising outside the state, except such statute of limitation as may be applicable thereto. So the proviso incorporated in section 2 of the Illinois statute, in reference to a foreign cause of action, which leaves unmodified the rule and policy of the Lord Campbell act adopted in section 1, is inapplicable to the ease at bar. * * * ”
We are of the opinion that plaintiff may maintain an action for the death of his intestate in Illinois, assuming that the Ontario statute vests the right of action in the administrator, but the demurrer must be sustained-on the other grounds above noted.
An order to that effect will be entered on Saturday morning, January 27, 1934, without further notice than this. Counsel may attend at that time if they desire. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219275/ | COXE, District Judge.
These suits grow out of a collision in the East River, near Grand street, on January 15, 1930, at about 7:46 p. m., between the steamship Exbrook and the tow of the tug Bern, consisting of twelve loaded coal barges. The Exbrook was proceeding down stream and the Bern tow up stream at the time of the collision; and the Perth Amboy No. 1 was acting as a helper tug to the Bern. The tide was strong flood, running about 3% knots an hour, and the weather clear. Six of the twelve barges in the tow were sunk; and the' owners of the barges, as well as the owners of the respective cargoes on the barges, have filed libels and claims. Limitation proceedings have also been instituted on behalf of the Bern and the Perth Amboy No. 1, and in these proceedings the right to limit has been conceded in the event liability is 'found. At the trial, the different suits were consolidated, and all have been heard together as one case.
On the night of the eollision, the Bern was proceeding up the East River, bound for Newtown Creek, with a hawser tow of twelve loaded coal barges. The tow was made up in five tiers, with three boats in each of the first three tiers, two boats in the fourth tier tailing behind the middle and starboard boats of the third tier, and one boat in the fifth tier tailing behind the starboard boat of the fourth tier. There were two short wire hawsers of about 30 fathoms to the head tier, and the Perth Amboy No. 1, the helper tug, was stationed alongside the starboard boat in the second tier. The Bern had three staff lights, indicating a length of tow exceeding 600 feet, and all other lights were properly displayed.
Opposite Corlears Hook, and about 570 feet from the Brooklyn shore, lay the sunken wreck of the Glendower, which was buoyed, as shown on the government chart (Exhibit 1); and, with the tide strong flood, the Bern tow necessarily had to pass on the Manhattan side of the Glendower on the way up the river.
When the Bern was off the south end of Corlears Hook, the Exbrook was sighted passing under the Williamsburgh bridge, and about in the middle of the river, slightly favoring the Manhattan shore. The Exbrook was then showing her green light; and the Bern sounded a one-blast signal for a port to port passing. This was answered by the Exbrook with a one blast; and then, after an interval of 15 or 20 seconds, during which, according to Captain Grimes of the Bern, the Exbrook continued to show her green light, the Bern blew a second one-blast signal, which was again answered by the Ex-brook with one whistle. “A couple of seconds” later, the Bern blew the alarm, and the collision followed “in less than a minute” thereafter.
It is insisted on behalf of the Bern that the Bern was in the middle of the river with her tow tailing straight behind, and that the Exbrook, after accepting a port to port passing, failed to change her course to starboard, and came head on for the tow, striking the port barge of the front tier squarely on the bow. It is also, urged that the Exbrook did not act promptly after the probability of collision became apparent. For the Exbrook, it is contended that the Bern tow was out of position, and not in the center of the river, and that the barges were swept broadside across the Exbrook’s bow at a time when the1 *743forward movement of the Exbrook was completely arrested.
All of the witnesses agree that the collision took place off Grand street, below the WiUianisburgh bridge; but the testimony is conflicting as to the distance from the Manhattan shore that the vessels came together, the witnesses for the Exbrook placing the point of first contact between 300 and 500 feet offshore, and the Bern’s witnesses insisting that the tow was “in the middle of the river,” or, as stated by Captain Grimes of the Bern, “between 600 and 700 ft.” out from the Manhattan pier ends. The blueprint of the United States Engineers Department, First District (Exbrook Exhibit K) indicates, however, that two of the barges went down weU on the Manhattan side of the river, which could hardly have taken place if the tow had been in the center of the river, as insisted by the witnesses for the Bern.
There is also a serious conflict as to the way the vessels contacted, Captain Grimes testifying that the Exbrook struck the port barge in the head tier “across the bow a little on the port side” and “not on the side”; whereas the witnesses for the Exbrook all insisted that the steamship struck either broadside or at an angle on the port side of the outside barge in the first, second, or third tiers. But by far the best witness of the collision was Lacey, the lookout on the Exbrook, who was looking down from the stem of the Exbrook when the collision occurred; and he testified that the contact was with the port barge in the first tier “about 10 feet aft of the bow.” Fitzgerald, mate of the Revere tug, which was pushing on the port bow of the Exbrook, was also positive that the contact was with the port side of the tow, although he thought it was the port barge in the second tier, and not the first tier, which was struck. These two witnesses impressed me favorably, and I think their version of the collision is substantially correct. On no other hypothesis is it possible to explain Captain Grimes’ testimony that he saw only the green light of the Exbrook until just before the collision. And if the Exbrook had struck the tow head-on, as shown in Captain Grimes’ diagram (Exhibit A), there surely would have been more damage to the Exbrook than merely “a little paint knocked off of her stem,” as testified to by Captain Chambers.
I think it is clear, too, that the Bern tow was out of position after rounding Corlears Hook. Captain Grimes of the Bern testified that he was “about 600 to 700 ft. off of the Manhattan shore” when he first saw the Ex-brook, and that he left the Glendower wreck “between 2,00. and 300 ft.” on his starboard side; yet two witnesses from the tug Soeony No. 8, who were called by the Bern, testified that the Soeony No. 8, bound down stream with a scow on each side, passed the Bern opposite the Glendower wreck, starboard to starboard, and that, at the time, the Soeony No. 8 “was about 200 ft.” from the Glendower buoy, and the Bern “about 100 ft.” further off, towards the Manhattan shore. Manifestly, if the Bern tow had been in the middle of the river, the vessels would have passed port to port, and not starboard to starboard, as they admittedly did. Moreover, Captain Grimes’ story is further contradicted by Captain King of the tug William A. Jameson, who testified that, as he was coming-out of the Jay Street Terminal, Brooklyn, bound up the river, he saw the Bern off Pier 36, Manhattan, and “she was parallel with the New York shore,” not “more than 400 or 500 ft. off.” I can see no escape, therefore, from the conclusion that the Bern was well on the Manhattan side of the river before rounding Corlears Hook.
But it is argued that, as the set of the tide below Corlears Hook was on the Brooklyn shore, the tail of the tow would inevitably have been carried out into the center of the stream when the Bern rounded the hook. The flood tide unquestionably has a strong set towards Brooklyn below Corlears Hook, but, if the tow was out of position before reaching that point, the spread of the water above Wallabout might well have caught the tow on the starboard side, and prevented it from straightening out in the river. This same argument, with respect to the effect of the flood tide in the neighborhood of Corlears Hook, now pressed on behalf of the Bern, was rejected by Judge Hough in The Montauk (C. C. A.) 9 F.(2d) 882, at page 883, as follows: “Undoubtedly at Corlears Hook the flood tide sets toward Long Island. One need only look at the chart to see why, viz.: The flood tide is caromed off from the downstream side of the Hook and toward Brooklyn, just as a billiard ball bounces from its cushion. But that does not mean that the flood tide is setting toward Brooklyn above the Hook, nor indeed is the tide set pronounced even in midstream.”
The Bern was fully hooked up during the entire period just prior to the collision, and her speed, with an underfoot tide of 3% knots, must have been at least 5 or 6 knots. Captain Grimes testified that, when the first one-blast signal was sounded by the Bern, he put his helm to port, and then, when he blew *744the second one-blast signal, he moved his helm further to port “a couple of more spokes.” The natural effect of such a movement was to open the starboard side of the tow to the full force of the flood tide, and I think this partly explains how the tow got out of line; for I am convinced that it was tailing toward the Manhattan shore at the 'time of the collision.
The Bern is, therefore, held at fault (1) for failing to have her tow under control, The Wrestler (C. C. A.) 232 F. 448; The Fred B. Dalzell, Jr. (C. C. A.) 1 F.(2d) 259; The Overbrook (C. C. A.) 47 F.(2d) 593; and (2) for violating the East River Statute (Laws N. Y. 1882, c. 419, § 757). The New York Central No. 17 (C. C. A.) 256 F. 220; The Wrestler, supra. I do not think, either, that such cases as The No. 1 (C. C. A.) 180 F. 969, and The Saucon (D. C.) 41 F.(2d) 952, have any application, as the violation of ihe statute was clearly a contributing cause of the collision.
The Perth Amboy No. 1 was merely a helper tug, and had nothing to do with the navigation of the tow. She was hanging on to the outside starboard boat in the second tier, with her engines at rest, until after the Bern blew alarm whistles, and then she dropped back to the third tier to make fast a stern line and haul the tow towards Brooklyn. She was entirely under the direction of the Bern, and is not to be held responsible for the Bern's negligence.’ Schuyler’s Steam Towboat Line v. Caleb, 103 U. S. 710, 26 L. Ed. 467.
It only remains to consider whether the Exbrook was also at fault. She was a single screw vessel, 400 feet long, about 53 feet beam, and drawing, on the night of the collision, 21 feet. Her speed down the river was about 3 knots; and, according to her own engine logs, she was under a slow bell from 7:42 p. m. to 7:43 p. m., and at 7:43 p. m. her speed was increased to half speed, and continued at that rate until 7:45 p. m., when her engines were stopped. When passing under the Williamsburgh bridge, she was in the middle of the river, favoring the Manhattan shore, and, at that point, was “under a slight port helm towards the New York shore” and “heading towards Corlears Hook.” When she answered the Bern’s first one-whistle signal, her helm was put slightly “more to port.” Then after an interval of 15 or 20 seconds, the Bern blew a second time, and this was again answered with one blast. Thereupon the Exbrook's engines were stopped, and instructions were given to have the tug Revere, stationed at the Exbrook’s bow, push the bow of the steamship towards the slack water near the New York shore. The Revere commenced at once to push, and was so engaged for “about half a minute” before the collision, moving the Exbrook’s bow during that interval “about two points” toward Manhattan.
In the meantime, alarm whistles had been blown by the Bern, and thereupon the Ex-brook reversed her engines, and also blew alarms. The Exbrook’s bell book (Exhibit L) shows that the engines were stationary from 7:45 p. m. to 7:46 p. m., and at 7:46 p. m. were placed at “half astern,” “full astern,” “hard astern." These engine room orders were given almost simultaneously, and the collision occurred “in less than a minute” thereafter. The forward movement of the vessel had, however, been completely cheeked before there was any contact, and I doubt whether at the time of the collision the Exbrook was moving ahead at all. That was the testimony of the Exbrook’s witnesses; and I think Hauffman’s estimate of 75 feet, as the distance within which the Exbrook could be stopped after her engines were reversed, is fairly accurate. I am of the opinion, therefore, that, at the time of the collision, the Exbrook had little, if any, forward movement, and was from 359 to 490 feet off Grand street, with her-bow headed a little in towards the Manhattan shore.
But it is insisted that the Exbrook failed promptly to reverse her engines after the probability of collision became apparent (The New York, 175 U. S. 187, 20 S. Ct. 67, 44 L. Ed. 126); and the testimony of Hauffman, the pilot of the Exbrook, before the local inspectors, is relied on principally to support the contention. This testimony was taken soon after the collision, and is in part as follows: “He blew me one whistle and I answered his one whistle, and after be blowed it, I saw quite a mess of barges he had. I did not see how in the world he could clear me. He blew another port whistle and I immediately answered,, which would be, I should say — might have been 15 or 29 seconds after-wards.”
The plain meaning of this language is that Hauffman, who was in charge of, and directing, the navigation of the Exbrook down the river, had grave doubts when he accepted the port to port passing signal of the Bern as to whether it could ever be safely executed. It is true that Hauffman was forbidden to cross the Bern’s one-whistle signal (The Fulton (C. C. A.) 54 F.(2d) 467); but, as stated by Judge *745Swan in The Quogne (C. C. A.) 47 F.(2d) 873, “safety is better than pride.” Hauft’man knew that the Bern tow exceeded 600 feet in length, and, if he had the doubts his testimony before the local inspectors indicates, he should have held back, and not speculated on his ability to get by safely. Yet he did not stop his engines until the second exchange of one-whistles, and there was then an interval of a full minute before his engines were reversed at 7:46 p. m. Whether this minute of inaction is of itself sufficient to charge the Ex-brook with fault, it is not necessary to decide (see The Benalla (D. C.) 45 F.(2d) 864); for here the pilot knew when he was at the Williamsburgh bridge that it was extremely doubtful whether the Bern tow “could clear,” and he should have acted accordingly, rather than to have assumed blindly that the navigator of the Bern “knew what he was doing,” when he proposed a port to port passing.
I think, therefore, that the Exbrook must be held at fault for not stopping sooner than she did; and I do not read Judge Chase’s opinion in The Elizabeth Jordan (C. C. A.) 63 F.(2d) 781, 783, as holding anything to the contrary, for in that case there was nothing to show that there was any doubt in the mind of the navigator of the Burlington as to the “apparent ability of the Gramerey to make a safe port to port passing,” which certainly cannot be said of the pilot of the Exbrook in the ease at bar.
I accordingly hold that the tug Bern and the steamship Exbrook. were equally at fault for the collision; and there may be decrees in all suits against both vessels, and dismissing the proceedings against the tug Perth Amboy No. 1; with costs to the successful parties. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219276/ | PATTEB.SON, District Judge.
The plaintiffs brought suit for infringement of patent to Carey, 1,198,326, patented September 12, 1916. Their ownership of the patent and the infringement are not disputed. The sole issue is the validity of the patent, which covers fanfolded forms with isolated spots of transfer material, usually referred to as carbon, on the backs of the leaves.
Fanfolded forms were not originated by Carey. They were familiar long before 1916. This name was given to multi-ply strips of connected forms, first folded lengthwise by zigzag to produce a strip of the same length as the sheet and made up of several superposed plies, and then folded transversely by similar zigzag or else rolled up. They were' used in fanfold machines, such as Elliott-Fisher or Underwood billing machines. Some of the forms folded in this fashion had no carbon on the backs of the leaves. For these forms separate carbon sheets were used. Others had their backs entirely coated with carbon, thus dispensing altogether with the use of separate carbon- sheets. But none of the earlier patents having to do with fanfolded forms disclosed fanfolded forms with isolated spots of earbon on the backs of the leaves.
Nor was the idea of placing isolated spots of carbon on the backs of blank forms original with Carey. Years before his application was filed, Maxedon had taken out a patent on a manifolding sheet for blank forms, on the back of which the transfer material was placed *746in “isolated spots.” It is clear from Maxedon’s sketch that his invention was adapted to what the plaintiffs call “selective transmission” in copying, which means'that some of the data written on one leaf is not copied on one or more of the underlying leaves. Maxedon’s invention was a real step forward in the art. His patent, however, did not mention fanfolded forms or even connected forms, but referred to manifolding forms generally.
Several years later a variation or adaptation of Maxedon’s idea was put into practice by Rathyen, an employee in the department of finance of New York City. Rathyen devised forms for tax records. Like Maxedon’s, these forms had carbon patches on the backs, and the patches were not identically placed on each leaf, being thus adapted if not actually designed for “selective transmission” of data. Rathyen’s forms were also connected forms; each set being made from one sheet of paper folded transversely several times in zigzag fashion. They were fanfolded forms, if that term is proper as applied to a single set rather than to continuous sets. No patent was ever applied for. These forms, changed in minor details from time to time, were used from 1910 to 1926 in the collection of real and personal property taxes, and the number of these forms used ran into the millions. Rathyen installed them in Buffalo and Pittsburgh also.
With the prior art in this condition, what .Carey proposed was the placing of carbon spots on fanfolded forms. There is dispute whether Carey had any idea of putting the spots on fanfolded forms of the continuous type. Certainly the patent cannot be said to be dear upon the point. In his description Carey seems to have had in mind single sets of forms. But from the fact that he frequently uses the word “fanfold” in the patent and from the fact (stipulated by the parties) that fanfolded forms in 1910 meant generally the continuous type as distinguished from the single set, I think it would be an unreasonable limitation on the patent to hold that it does not cover fanfolded forms of the continuous type.
So far as the Carey patent relates to single sets of forms folded in zigzag and fanfold fashion, with carbon patches on the backs of the leaves, it seems fairly certain that the patent is invalid. The prior use of the New York City tax forms is conceded, and these forms performed every useful function of a single set form under the Carey patent. They were used for .the writing of data at a later time, and they were adapted for the copying of data only on certain leaves, which are the two advantages emphasized by Carey in his description. The fact that the earlier forms were connected top and bottom, as contrasted to the lateral connection on Carey’s forms, is immaterial. So also as to using separate carbon sheets with the forms,
The remaining question is whether the patent is valid as to continuous fanfolded forms. In my opinion, it is lacking in invention. What Carey did was to take the old fanfolded forms (continuous) and to apply to them Maxedon’s isolated spots. But Maxedon’s spots were not confined to any particular type of form. They applied to manifold forms’ generally. Maxedon points out that manifold forms with his spots are to be used in lieu and stead of forms which have their backs entirely covered with carbon, and forms of the latter type, in continuous fanfold, were by no means unknown to the art in Maxedon’s day. Then came Rathyen, who demonstrated the use of Maxedon’s spots on connected forms. It seems to me that thereafter Carey, in putting Maxedon’s spots upon a familiar kind of connected form, did nothing more than what might be expected of any person conversant with forms and their uses.
The bill of complaint will therefore be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219278/ | NE.TERER, District Judge.
These -eases have been consolidated for hearing upon the applications for interlocutory injunction and upon the motions to disr miss. The relief sought by each is .to restrain the defendants from enforcing or collecting the excise tax of 1% per cent, of complainants’ gross receipts from intrastate business, as provided by chapter 191, p. 869, Laws of Washington, 1933, an act relating to taxation. The allegations jn all of the bills of eomplaiut are similar!' ■ . ‘ .
*754An understanding of the background of the various complainants with relation to the interstate commerce rate for carriage to meet all requirements and authorized by the Interstate Commerce Commission (a rate-governing body whose official duty the eourt must presume was properly discharged) is necessary. A rate was in force at and prior to the enactment of the challenged act and under the prior system of taxation, and the effect of the change thereof upon the complainants’ intra and interstate revenues and the laws and Constitution of Washington with relation to the railroads should be noted.
For brevity, the Chicago, Milwaukee, St. Paul & Pacific Railroad Company will he referred to as the Milwaukee; the Great Northern Railroad Company, as the G. N.; the Oregon-Washington Railroad & Navigation Company, as the O-W; the Northern Pacific as the N. P.; and the Spokane, Coeur d’Alene & Palouse Railway Company as the S. C. P.
All of the complainants are engaged as common carriers in transportation of passengers and property, intra and inter state. The Milwaukee is a corporation of the state of Wisconsin; the G. N. is a Minnesota corporation; and the O-W is an Oregon corporation. The Milwaukee operates a steam railway system extending from Chicago into the states of Wisconsin, Minnesota, South Dakota, North Dakota, Montana, Idaho, and Washington, with main lines and branches in and extending into the states of Michigan, Indiana, Missouri, and Iowa. The N. P. operates a system of steam railways extending from a point on Lake Superior in Wisconsin, through the states of Minnesota, North Dakota, Montana, Idaho, and Washington, with lines into the state of Oregon and the Dominion of Canada. The G. N. operates a S5-stem of railway lines and branches having eastern termini at St. Paul and Duluth in the state of Minnesota, and Superior in the state of Wisconsin, and extending? westerly from said termini through the states of Minnesota, North and South Dakota, Iowa, Montana, Idaho, Washington, Oregon, California, and the Dominion of Canada, with western termini at Seattle and Tacoma in the state of Washington, Portland in the state of Oregon, and Vancouver in the province of British Columbia, and is now engaged in the transportation of passengers and freight intra and inter state and the United States mail. The O-W operates a system of steam railways situated in the state of Oregon, Washington, and Idaho in intra and inter state commerce. The S. C. P., a local corporation, operates an electric interurban railr way extending from Spokane, Washington, easterly to Coeur d’Alene and Hayden Lake in the state of Idaho, and from Spokane southerly to Colfax, Wash., and to Moscow, Idaho.
The corporate situs of the complainants upon tax issues bear different relations. Local corporations are differently related to the state than foreign corporations. Great Northern R. Co. v. State, 147 Wash. 630, 267 P. 506; Spokane International Ry. Co. v. State, 162 Wash. 395, 299 P. 362. And all have other statuses than the N. P., operating under a federal franchise (13 Stat. 365). Lasby et al. v. Burgess, 76 Mont. 452, 248 P. 190. By Act February 28, 1919 (40 Stat. 1204), Congress referred to the N. P. R. R. Co. as the predecessor in interest of the complainant N. P. Ry. Co. In Northern Pacific Ry. Co. v. Townsend, 190 U. S. 267, 23 S. Ct. 671, 47 L. Ed. 1044, it is said that the N. P. Ry. Co. succeeded to the property of the N. P. R. R. Co. See, also, Northern Pac. Ry. Co. v. Ely, 197 U. S. 1, 25 S. Ct. 302, 49 L. Ed. 639.
It is strongly contended in the reply brief that the tax could in no way attach to the N. P. complainant as it would he a tax on a federal franchise, and that it impairs obligation of a contract with the United States. Neither of these objections apply to the relation and status of the N. P., on the record and history in this case.
Due consideration has been given to the eases cited by complainants and the defendants, including those in the reply briefs. The conclusion which is inevitably forced upon the court is that they are not decisive upon the issue here. These instant eases are distinguished from the eases, as is later shown, but undue extension of this memo forbids an analysis of the eases, and urgency for speedy conclusion, for reasons which later appear, inhibit more extended discussion.
The defendants Hedges and Jenner are members of the state tax commission of Washington, a continuing board composed of three members, of which defendants have been appointed and qualified, are citizens of Thurston county within the Southern division of the Western district of Washington, and organized by virtue of chapter 18, p. 33, Laws of Washington 1925, and amendatory acts, two members of the board to constitute a quorum to transact business, and, as such' board, are charged with the duty of enfore*755ing the provisions of and collecting the tax imposed by virtue of the challenged act.
We think the court has jurisdiction, and the motion to dismiss on that ground is denied. The motion of the defendants to dismiss for want of equity admits as true all matter well pleaded, unless the contrary is judicially known. The Circuit Court of Appeals of this circuit, in Gleeson v. Imperial Irr. District, 59 F.(2d) 529, 530, said: “When.a pleader states matter as fact which is out of harmony with facts which the court judicially knows, the averments in the pleading are disregarded. Jones v. United States, 137 U. S. 202, 11 S. Ct. 80, 34 L. Ed. 691; Pearcy v. Stranahan, 205 U. S. 257, 27 S. Ct. 545, 51 L. Ed. 793; Middlesex Transportation Co. v. Pennsylvania R. Co., 82 N. J. Eq. 550, 89 A. 45; Heiskell v. Knox County, 132 Tenn. 180, 177 S. W. 483, Ann. Cas. 1916E, 1281; McSween v. State Live Stock Sanitary Board, 97 Fla. 750, 122 So. 239, 65 A. L. R. 508. Judicial knowledge is taken of all matters generally known. * * * And the court is bound to take notice of public facts and geographical positions, and also ¡copulations of cities and counties, public documents, reports of Commissions made to Congress, and proceedings thereon, etc. The Apollon, 22 U. S. (9 Wheat.) 362, 6 L. Ed. 111, and of public activities within the common experience of men within the jurisdiction, and more especially of public conferences and meetings of members of a community of common interest and wide concern of which the court ought to have known. Brown v. Spilman, 155 U. S. 665, 670, 15 S. Ct. 245, 39 L. Ed. 304. And if the judge’s memory is at fault he may resort to means he may deem safe to refresh his memory. Brown v. Piper, 91 U. S. 37, 23 L. Ed. 200.” See, also, Arizona v. California, 283 U. S. 423, 51 S. Ct. 522, 75 L. Ed. 1154.
By the same token, the court may, and it is its duty to, advise itself of public records required by law to be made and kept unfolding the status and relation of tax assessments of the litigants, pertaining to the instant issue, in considering the motion to dismiss and the motion for interlocutory injunction. The court may, and in the instant ease obviously must, to determine the equities of the litigants, in view of the charges made in the several bills of complaint, advise itself of the assessments made against the properties of the several complainants prior to the change of the taxation system, and the enactment of the challenged law, an “emer■geney measure” to meet a condition because of the economic stress in the change of the revenue system.
The act in issue is for a brief period (2 years), and imposes a tax of $167,604, and the new revenue laws of which this act is a part reduces the taxes of complainant from $1,676,512 to $938,637, or a gain to complainants of $737,825. Public stress, neutralization of threatened dangers, rioting, defiance of processes, closing of the public schools for want of funds to carry on, and shifting of public burdens in a changing revenue system, and placing additional burdens ($737,-825) upon those less able to bear them, and to the credit of the complainants who have not complained, heretofore, that $1,676,512 was a burden to interstate commerce, or made application to the Interstate Commerce Commission for relief, at a time when conditions evidently produced by the collapse of the credit system present “a condition and not a theory,” requires critical, very critical, consideration of the claims made before adjudicating impoteney of the Legislature to relieve the pressure of public stress for a brief time by invalidating this “emergency measure” to supply needed revenue for governmental functioning, unless such duty is plain.
The crisis before the Legislature is thus expressed by the Supreme Court in holding valid the act in issue in State ex rel. Stiner v. Yelle (Wash.) 25 P.(2d) 91, 95: “The state is facing stark necessity. The Legislature has earnestly endeavored to meet this critical situation. This law is, perhaps, not perfect. No tax law yet devised has been entirely fair and just to all in its practical workings. This is an emergency measure limited by its terms to a two-year period. If it works injustice to some, it will be but temporary, and such temporary injustice, if any, must be borne for the common good.”
That abnormal conditions because of economic stress require emergency measures is no longer open to doubt. In Block v. Hirsh, 256 U. S. 135, 41 S. Ct. 458, 460, 65 L. Ed. 865, 16 A. L. R. 165, Justice Holmes for the court said: “A limit in time, to tide over a passing trouble, well may justify a law that could not be upheld as a permanent-change.”
In People ex rel. Durham v. La Fetra, 230 N. Y. 429, 130 N. E. 601, 606, 16 A. L. R. 152, Pound, J., stated that emergencies, even in times of peace “may, as the alternative of confusion or chaos, demand the enactment of laws that would be thought arbitrary under normal conditions.” Laws are *756merely rules of civil conduct for the common good, and must be considered in somewhat the same relation as civil contracts in times ■of stress or emergency for the common welfare, and as “contracts are made subject to the exercise of the power of the state when otherwise justified,” so the constitutional limitations are elastic to the exercise of the legislative powers to avoid domestic confusion or epidemy or social disruption or economic chaos. Johnson v. Duncan, 3 Mart. (O. S.) (La.) 530, 6 Am. Dec. 675. Unprecedented unemployment, many thousands of people dependent upon charity, mortgage foreclosures, and entering of deficiency judgments, loss of homes, closing of public schools, and unsettling of family ties and social contacts, are all fraught with dangers which go to the very existence of government.
The motion to strike the Jenner affidavit is denied, and portions thereof will be considered as exposition of publie records made and kept by authority of law, of which it speaks, and which the court may notice.
To change its taxing system, the electors of the state, by initiation, adopted chapters 4 and 5, pp. 47, 49, Laws of Washington 1933 (40-mill levy limit on real estate and the income tax measure), and the Legislature, the act in issue, an “emergency measure,” as a new taxing system. The preamble to chapiter 5, p. 49, Laws of 1933, exposes the state of mind as follows:
“Existing methods of taxation, primarily based on property holdings, are inadequate, inequitable and economically unsound. Present conditions point the need of a new subject matter for taxation, which should be based on the ability to pay. Earnings for a given period are a fair measure of such ability.
“The people of the State of Washington, therefore, exercising herein their supreme power and fundamental right, declare their purpose hereby to tax all annual incomes within the state as such, and not as property.” Laws 1933, c. 5, p. 49, § 1.
The Supreme Court of the state held this Income Tax Law unconstitutional [Culliton v. Chase (McKale’s, Inc., v. Chase) 25 P. (2d) 81], and thus deprived the state of a portion of its revised system, and further disorganized the revenue situation. The 40-mill limit tax on real property authorized by chapter 4, p. 47, Laws of 1933, is grossly inadequate and the need of the “emergency measure,” and the act in issue, chapter 191, p. 869, Laws of 1933, effective from August 1, 1933, to July 31, 1935, became vital; and, in considering this issue, chapter 166, p. 613, Laws of 1933, should be noted. The state Supreme Court sustained the act in issue in State ex rel. Stiner v. Yelle, September 8, 1933 [25 P.(2d) 91, 95]. At page 95 of 25 P.(2d), the court said: “The aet does not offend against either the Federal or the State Constitution.” It is admitted that income from interstate commerce cannot be taxed, and that the percentage must be computed on intrastate business.
Consideration of the new system to supersede the old, and the status of the litigants under the old system, and the traffic rates approved by the rate-making body, the Interstate Commerce Commission, which must be presumed as sufficient for interstate commerce, is enlightening. May it be said that any burden has- been placed on interstate commerce by the challenged act, when, as later particularized, the new system, including the excise law (term used merely for designation) in issue, commerce, intra and inter state, has been relieved of $737,825 taxes?
The principle that these laws must be considered together is approved in Baker v. Druesedow, 263 U. S. 137, 44 S. Ct. 40, 68 L. Ed. 212, and cited cases; Greene v. Louisville & I. R. Co., 244 U. S. 499, 37 S. Ct. 673, 61 L. Ed. 1280; Gregg Dyeing Co. v. Query, 286 U. S. 472, 52 S. Ct. 631, 76 L. Ed. 1232, 84 A. L. R. 831. If the state has not, by all of its taxation legislation, burdened interstate commerce, it may not be criticized. Hebert v. Louisiana, 272 U. S. 312, 47 S. Ct. 103, 71 L. Ed. 270, 48 A. L. R. 1102; Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 31 S. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160. The state has the right to tax property used in interstate commerce. Pullman’s Palace-Car Co. v. Pennsylvania, 141 U. S. 18, 11 S. Ct. 876, 35 L. Ed. 613; Ficklen v. Shelby County, 145 U. S. 1, 12 S. Ct. 810, 36 L. Ed. 601; United States Express v. Minnesota, 223 U. S. 335, 32 S. Ct. 211, 56 L. Ed. 459. See, also, Wells Fargo & Co. v. Nevada, 248 U. S. 165, 39 S. Ct. 62, 63 L. Ed. 190; Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 38 S. Ct. 373, 62 L. Ed. 827; Southern Railway Co. v. Watts, 260 U. S. 519, 43 S. Ct. 192, 67 L. Ed. 375. In rate-making, state taxes have always been deemed proper operating expenses. Railroad Commission v. C. B. & Q. R. Co., 257 U. S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086. The state does not deny equal protection of its laws or burden interstate commerce by adjusting its taxing system in *757such a way that some taxes may appear for a limited time to be an apparent burden on interstate commerce. Quong Wing v. Kirkendall, 223 U. S. 59, 32 S. Ct. 192, 56 L. Ed. 350; McLean v. Arkansas, 211 U. S. 539, 29 S. Ct. 206, 53 L. Ed. 315; Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 22 S. Ct. 431, 46 L. Ed. 679.
The plaintiffs are receiving all of the revenue they received prior to the act in issue, with no added burden on interstate commerce, or at all. No burden could be placed upon interstate commerce by the changed taxing system, if the tax has been lessened and no reduction of tariff rates made, as in this case.
Under the old taxing system the ad valor-em tax for 1933 would have been: N. P., $700,086; G. N., $460,684; O-W, $272,507; Milwaukee, $238,705; S. C. P., $4,530 — total, $1,676,512.
The ad valorem tax levy, under the new system, for 1933 is: N. P., $221,992; G. N., $211,884; O-W, $125,335;' Milwaukee, $109,788; S. C. P., $2,884-total, $771,083. The excise taxes (for designation) estimated by complainants are: N. P., $90,000; G. N. , $46,500; O-W, $11,250; Milwaukee, $19,350; S. C. P., $504 — total, $167,604.
The total ad valorem and excise (designated) taxes for 1933 are: N. P., $411,992; G. N., $258,384; O-W, $136,585; Milwaukee, $129,138; Si C. P., $2,588 — total, $938,637; saving, under the new system, with the excise taxes under the act in issue included, to: N. P., $288,094; G. N., $202,300; O-W, $135,922; Milwaukee, $109,537; S. O. P., $1,942 — a total of $737,825.
The levy for 1933, under the old system, as seen, totals $1,676,572, distributed as stated. No application was made for relief from the tax (old system to the Interstate Commerce Commission for increase of notes), and until relief is sought and denied, and since taxes are greatly reduced by the new system, complainants may not be heard to claim burden to their interstate business in violation of the commerce clause in the instant case. Postal Telegraph-Cable Co. v. Fremont, 255 U. S. 124, 41 S. Ct. 279, 65 L. Ed. 545.
The levy for the five complainants for 1933 under the new system totals' $771,083, and the estimated excise tax under the challenged act, fixed by the plaintiff, totals $167,-604. Obviously complainants “suffer no harm from the provisions of the statute.” Osborne v. Florida, 164 U. S. 650, 17 S. Ct. 214, 216, 41 L. Ed. 586. The net saving to the complainants, under the new system, including the excise tax, is $737,825. The excise tax is in no event a direct charge against interstate commerce, and, if it indirectly affects it, it is not forbidden. Oliver Iron Co. v. Lord, 262 U. S. 172, 43 S. Ct. 526, 67 L. Ed. 929; State v. Express Co., 80 Wash. 309, 141 P. 757.
This does not take cognizance of benefits to the complainants of the Motor Truck Act (chapter 166, p. 613, Laws 1933), curtailing truck competition and increasing the traffic revenues for the complainants’ roads. Instead of taking from other states and contributing to the state of Washington, as contended by complainant in argument, thercis actually taken from the taxpayer and patrons of the complainants’ roads in the state of Washington, $737,825 to apply in other states. Assuredly, complainants may not invoke the Fourteenth Amendment. Gant v. Oklahoma City, 289 U. S. 98, 53 S. Ct. 530, 77 L. Ed. 1058. The status of the litigants at the time of the enactment of the laws changing the taxing system, and the protecting arm extended to complainants of the Interstate Commerce Commission, as given, must obtain until the changed system is completed, or relief sought from Interstate Commerce Commission. Postal Telegraph-Cable Co. v. Fremont, supra. That the legislators studiously avoided burdening interstate commerce is obvious.
“In computing the amount of any tax imposed under subdivisions (2) (e), (2) (d), (2) (e) and (2) (f) of section 2 of this act, there shall be excepted from gross proceeds of sales or gross income so much thereof as is derived from s i:' * business which the State of Washington is prohibited from taxing under the constitution of this state or the constitution or laws of the United States. * * * ” Section 5, pp. 879, 880, Laws 1933.
“If any clause, sentence, paragraph, subdivision, section or part of this act shall for any reason be adjudged invalid, such judgment stall not affect, impair, or invalidate the remainder of the act, but shall be confined in its operation to the clause, sentence, paragraph, subdivision, section or part thereof directly involved in the controversy in which such judgment shall have been rendered. * * * ” Section 30, p. 896, Laws 1933.
That the Motor Truck Act, supra, is of benefit to the complainants is manifest on the face of the act, and that it was considered so by the complainants is shows by the appearance of some of the complainants’ attorneys *758as amici euriie in cases before tbe statutory court (section 266, Jud. Code [28 USCA § 380]) when the constitutionality of the act was challenged by a number of motorbus operators.
The contention that the law must fail for that intra and inter state business of the complainants is so inseparably interwov* en that interstate business cannot be renounced, is not convincing. Equity does not require a useless thing. The complainants would not renounce intrastate business, which is: N. P., $6,613,958.98; interstate, $6,-231,366.63. O-W., intrastate, $779,676.88; interstate, $3,026,256.60. Milwaukee, intrastate, $1,171,236.56; interstate, $2,163,054.-27. G. N., intrastate, $1,860,608; interstate, $2,616,837.' S. C. P., intrastate, $81,568.98; interstate, $1,333,410.73. Such claim, in the face of the history and record in the case, is fallible. Ohio Tax Cases, 232 U. S. 576, 34 S. Ct. 372, 58 L. Ed. 737; Gant v. Oklahoma City, supra. While these cases are not directly in point, they are lucid and bear upon the history in the instant issue. Complainants’ claim is narrow and without equity, and does not weigh upon conscience. No attempt has been made to renounce, nor purpose to do so, and, until this is done, complainants cannot complain. No right is withheld or denied. The laws and Constitution of the state give way to the commerce clause of the United States Constitution (art. 1, § 8, el. 3), and the vitalizing Commerce Act (491 USCA § 1 et seq.). See Colorado v. United States, 271 U. S. 153, 46 S. Ct. 452, 70 L. Ed. 878. And the rate-making body could and would afford relief, and, if denied, complaint might be available.
Nor can we conclude that complainants’ revenues, when equitably apportioned, and application of the expense of intrastate operation, are greater than the revenues from intrastate commerce. Upon the record the contrary appears, the Jenner affidavits' not being denied after opportunity was afforded.
Common sense in approaching the issue must dictate what reasonable men would do under like circumstances. Upon the record a person may reasonably assert that the new taxing system has relieved every complainant, and the Motortruck Act can be given a like earmark, and because of the emergency excise act in issue and the failure of the income tax law and the chaotic conditions, upon the relative his'tory and status of the various complainants, the conscience of the chancellors may not be moved.
In all of the eases cited principles axe announced for the purpose of illustration in their relation to a particular point, but their bearing upon other eases must be considered with circumspection. Chief Justice Marshall, in Cohens v. Virginia, 19 U. S. (6 Wheat.) 264, 399, 5 L. Ed. 257, said: “It is a maxim, not to be disregarded, that general expressions, in every opinion, are to be taken in connection with, the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit, when the very point is presented for decision. The reason of this maxim is obvious. The question actually before the court is investigated with care, and considered in its full extent. Other principles which may serve to illustrate it, are considered in their relation to the case decided, but their possible bearing on all other eases is seldom completely investigated.” See, also, Myers v. U. S., 272 U. S. 52, 47 S. Ct. 21, 71 L. Ed. 160.
These cases are in a class by themselves. There is none in the books like them. The claim of the complainants that they have no adequate remedy at law, if the tax is paid and the law declared invalid, in that it would require a multiplicity of suits, and no money be paid without legislative appropriation and no appropriation being made, they are without an adequate remedy, and in this it would seem that the claim is well founded.
Judge Dietrich, just before his decease, in an opinion adopted by the appellate court after his decease, said: “No court of equity will, therefore, allow its injunction to issue to restrain their action, except when it may be necessary to protect the rights of the citizen whose property is taxed, and he has no adequate remedy by the ordinary processes of the law. It must appear that the enforcement of the tax would lead to a multiplicity of suits, or produce irreparable injury, or, where the property is a real estate, throw a cloud upon the title of the complainant, before the aid of a court of equity can be invoked.” Port Angeles Western Ry. Co. v. Clallam County, Wash. (C. C. A.) 44 F. (2d) 28, 30.
The Circuit Court of Appeals in Skagit County v. N. P. Ry. Co., 61 F.(2d) 638, 86 A. L. R. 1012, has held that, where the state has empowered counties to levy personal property taxes, it cannot by statute, inhibiting injunction to restrain collection of such taxes, deprive a court of equity of jurisdiction in proper cases to restrain collection of *759excessive taxes, and held that, tinder the tax law of the state, to he relegated to payment of taxes, suit to recover would involve a multiplicity of suits, and did not afford a speedy and adequate remedy at law. See, also, Hill v. Wallace, 259 U. S. 44, 42 S. Ct. 453, 66 L. Ed. 822.
A careful consideration of the cases convinces us that interstate commerce is not so burdened as to justify a finding that the law is unconstitutional on the issue presented. Postal Telegraph-Cable Co. v. Richmond, 249 U. S. 252, 39 S. Ct. 265, 63 L. Ed. 590. The appropriation, however, of $10,-000 (section 28 of the act in issue) is insufficient and does not afford the complainants a speedy and adequate remedy.
In view of the importance of this litigation and the “stark necessity,” as stated by the state Supreme Court, and the extra burden which would be cast upon the man with the hammer and the hoe, or the plow and the plane, mechanic and merchant, and the industries of the state, all of whom contribute to the support of the complainants by payment of transportation charges, etc., and taxes for the maintenance of the state government, whose protection and benefits the complainants enjoy, and the Legislature being now in extraordinary session, for the common good the court will withhold disposal order during the present legislative session to afford the Legislature opportunity to amend section 28, supra, by making adequate appropriation to meet the requirements, and, if so made, interlocutory injunction will he denied; otherwise, it must be granted and the motion to dismiss denied. In the event the appropriation is not made, it is suggested that the issues be speedily joined, and the cause will be referred to a special master to take the testimony and make his findings and conclusions to the eourt, unless the parties can stipulate to the faets.
Exigency has unduly pressed the preparation of this memo.
GARRE CHT, Circuit Judge, concurs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219280/ | HOLMES, District Judge.
This is a suit in equity to foreclose a deed in trust given to secure a partnership indebtedness. It was filed by the receiver of an insolvent national bank, who alleges that he has every reason to believe that the property described in the trust deed will not bring enough to satisfy the indebtedness, and asks for a decree for any deficiency against the individual members of the firm.
At the time the bank closed its doors, the indebtedness was evidenced by a note of $2,300, and one of the partners, Mrs. E. B. Guess, had on deposit $2,095. The other partner, D. W. Love, being unable to make any substantial contribution to the payment thereof, Mrs. Guess paid to the receiver the interest, accrued to date, and $300 upon the principal, thereby reducing the firm’s indebtedness to $2,000, and directed the receiver to charge this balance against her individual deposit and cancel the note. This, the receiver refused to do, claiming that a partnership is a separate entity, distinct from the individuals composing it, and that a set-off of an individual deposit against a partnership debt is not permissible. The defendants are not asking for any decree in their favor, but merely to offset an amount of Mrs. Guess’ deposit equal to the plaintiffs’ claim, after all proper credits have been deducted from the indebtedness due by the partnership.
The Mississippi statute with reference to releasing one or more joint or joint and several debtors, and giving the right to sue them separately or to sue jointly and obtain separate judgments against them, without releasing the others (chapter 39, Code 1930 [sections 2027, 2028]), abolishes all distinctions in remedies upon joint and several obligations (Steen v. Finley, 25 Miss. 535), but does not abolish the distinction in substance between such obligations. Kimbrough v. Ragsdale, 69 Miss. 674, 13 So. 830. Equity Rule 42 (28 USCA § 723) provides: “In all eases in which the plaintiff has a joint and several demand against several persons, either as principals or sureties, it shall not be necessary to bring before the court as parties to a suit concerning such demand all the persons liable thereto; but the plaintiff may proceed against one or more of the persons severally liable.” Although cited and relied on in the briefs, neither the above statute nor rule will solve our present problem, wherein there is a plea of set-off to a suit in equity, and all interested parties are represented. The solution will be found in the general principles of equitable set-off, and a local law creating set-off as a statutory right, considered in connection with the relation of individual partners to firm liabilities.
According to the modem view, the question is one of substance and not of procedure. The Gloria (D. C.) 286 F. 188, 192, 193; Champlin Refining Co. v. Gasoline Products Co. (C. C. A.) 29 F.(2d) 331, 338, affirmed U. S. v. The Thekla, 266 U. S. 328, 45 S. Ct. 112, 69 L. Ed. 313. It is controlled by federal decisions, except to the extent that the right may be enlarged by section 537, Mississippi Code 1930, as construed by state decisions. Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co. (C. C. A.) 15 F.(2d) 509, 513; Id., 276 U. S. 518, 529, 48 S. Ct. 404, 72 L. Ed. 681, 57 A. L. R. 426; First National Bank of Shenandoah v. Liewer (C. C. A.) 187 F. 16, 18; United States v. Robeson, 9 Pet. 319, 323, 9 L. Ed. 142. Debts which are mutual may be set off against each other. Barrington v. Maner (C. C. A. 5th Cir.) 54 F.(2d) 917. There must be mutuality of rights as well as of parties. A trustee may not set off a trust deposit against a personal debt. Thomas v. Potter Title & Trust Co. (D. C.) 2 F. Supp. 12. A separate debt may not be set off against a joint debt, and vice versa. 2 Story’s Eq. (6th Ed.) § 1437; Scammon v. Kimball, 92 U. S. 362, 367, 23 L. Ed. 483. Courts of equity frequently deviate from the strict rule of mutuality when the justice of the particular ease requires it; for instance, on account of the insolvency or nonresidence *764of the judgment plaintiff. Blount v. Windley, 95 U. S. 173, 177, 24 L. Ed. 424; Scott v. Armstrong, 146 U. S. 499, 507, 13 S. Ct. 148, 36 L. Ed. 1059. In North Chicago Rolling Mill Co. v. St. Louis Ore & Steel Co., 152 U. S. 596, 14 S. Ct. 710, 38 L. Ed. 565, it is held that insolvency of the party against whom a set-off is claimed is a sufficient ground for equitable interference. The court also stated (at page 615 of 152 U. S., 14 S. Ct. 710, 715): “The adjustment of demands by counter-claim or set-off, rather than by independent suit, is favored and encouraged by the law, to avoid circuity of action and injustice. Morida Railway Co. v. Smith, 21 Wall. 255 [22 L. Ed. 513].”
This brings us to the concrete question, whether a separate debt may be set off against a joint and several obligation in a suit in equity, by the receiver of an insolvent national bank, when a personal decree is being sought against each of the individuals composing the partnership. The receiver contends that, while the debt to Mrs. Guess is several, the debt of the partnership to the bank is joint. The fundamental error in this is believed to lie in the distinction between joint and joint and several obligations. A partnership is not an entity distinct from its members. Blackwell v. Reid, 41 Miss. 102; Francis v. McNeal, 228 U. S. 695, 33 S. Ct. 701, 702, 57 L. Ed. 1029, L. R. A. 1915E, 706. In the latter case, Mr. Justice Holmes said: “But the fact remains as true as ever that partnership debts are debts of the members of the firm, and that the individual liability of the members-is not collateral like that of a surety, but primary and direct, whatever priorities there may be in the marshaling of assets. The nature of the liability is determined by the common law, not by the possible intervention of the bankruptcy act. Therefore ordinarily it would be impossible that a firm should be insolvent while the members of it remained able to pay its debts with money available for that end. A judgment could be got and the partnership debt satisfied on execution out of the individual estates.” This ease is cited and followed by the Supreme Court of Mississippi in Nashville Saddlery Co. v. Green, 127 Miss. 98, 89 So. 816. To the effect that the liability of partners is joint and several, see, also, Dinwiddie v. Glass, 111 Miss. 449, 71 So. 745; Bank of Tupelo v. Hulsey, 112 Miss. 332, 73 So. 621; Wise v. Cobb, 135 Miss. 673, 100 So. 189.
While the decisions of state courts are persuasive only, except as previously indicated, many, in actions at law, uphold the defendants’ contention that the set-off should be allowed.- Some, with blended legal and equitable jurisdictions, administer the relief without stopping to consider whether they are construing a statute or invoking inherent equitable powers. Wilson v. Exchange Bank, 122 Ga. 495, 50 S. E. 357, 69 L. R. A. 97, 2 Ann. Cas. 597; Leach v. Lambeth, 14 Ark. 668; McAllister v. Millhiser, 96 Ga. 474, 23 S. E. 502; Boeger & Buchanan v. Hagen, 204 Iowa, 435, 215 N. W. 597, 55 A. L. R. 562; Loeb v. Loeb, 24 Okl. 384, 103 P. 570; McKay v. H. A. Hall & Co., 30 Okl. 773, 120 P. 1108, 39 L. R. A. (N. S.) 658; Pitcher v. Patrick’s Adm’rs, Minor (Ala.) 321, 12 Am. Dec. 54. In a note to Gregg v. James, 12 Am. Dee. at page 156, it is stated: “Where the demand sued is joint and several, any one of the defendants may set off a debt due to himself alone from the plaintiff. This is put on the ground that in reality there is a distinct action against each defendant in such a case for the whole debt, to which he may separately plead payment or tender out of his own money; and that a plea of set-off rests upon the same principle. [Citing authorities.]”
In 24 R. C. L. 866, the rule is thus stated: “It is established in most of the states that in a suit against two or more persons on a joint obligation, set-off is not available to less than the entire number of defendants. The reason of this rule is plain. A joint obligation is indivisible. Each one of the obligors is bound to the same extent and in the same manner as all the others. A separate judgment against less than the entire number would be impossible; and in this very fact of indivisibility lies the security to the obligee of accepting a joint obligation. But though contrary to the English rule, it is quite generally held in the United States that where two or more defendants are joined in an action to which they are severally liable, and in which a separate judgment may be taken against them, a cross demand in favor of any one of the defendants against the plaintiff comes within a fair construction of the requirement of mutuality, and may be asserted. This is put on the ground that in reality there is a distinct action against each defendant in such a case for the whole debt, to which he may separately plead payment or tender out of his own money; and that a plea of set-off rests upon the same principle. This rule has been made statutory in a number of states. Though the demand was originally joint, if it afterwards becomes separate, as in an action by a surviving partner, a separate debt due from him is a good *765set-off. And if the plaintiff has treated an obligation as due from him to all the defendants he is estopped to allege that it is an obligation due to one only. In several jurisdictions it is held that one of the makers of a joint obligation may set off a debt due from the obligee to him individually, and in some jurisdictions all distinctions between joint and several obligations have been abrogated by statute. It seems that in the absence of any statute requiring it, a claim to recoup need not exist solely in favor of the defendant and against the plaintiff to the action, since it goes merely to the abatement of the plaintiff’s recovery, and does not call for a judgment for any balance against him.”
In Citizens’ Bank of Greenville v. Kretschmar, 91 Miss. 608, 44 So. 930, 933, the court said: “The trend of all modern authority leans toward liberality in the allowance of set-offs, and particularly is this true in the ease of the insolvency of the party against whom the set-off is claimed, to the end that only the true balance may be required to be paid to the representative of the estate of the insolvent.”
No federal decision has been cited which can fairly be said positively to settle this controversy; but several by the Supreme Court of the United States indicate that it is in accord with Mississippi decisions on the subject, and that the rule in this ease is the same whether the source of the right is the equitable doctrine or the local statute. In Tucker v. Oxley, 5 Cranch, 34, 40, 3 L. Ed. 29, there was a suit by the assignee of a bankrupt member of a partnership on an individual debt due the bankrupt. The firm of which the bankrupt was a member owed the defendants, and they were allowed to offset the firm debt against the individual debt. The court said: “It is a debt, which, by a suit against both the partners, might have been recovered against either of them, and either might have been compelled to pay the whole. Although due from the company, yet it is also due from each member of the company; and the claim of the creditor for its satisfaction extended, previous to the act of bankruptcy, to the whole property of each member of the firm, as well as to the joint property of the firm.” From this it seems clear that, if Mrs. Guess had sued the bank to recover the amount of her individual deposit, the bank might have offset her several liability on the partnership note. In its opinion, the court distinctly held that the right of set-off is reciprocal. Therefore, Mrs. Guess should have the same right, in the absence of any intervening equities of her individual creditors, as the receiver would have had if she had sued him. There is dictum by the Chief Justice that “at law, independent of the statute of bankruptcy, the court is of opinion that this discount could not have been made in a suit instituted by Thomas Moore against the Tuckers”; but, while what the court said is entitled to respectful consideration, it is not so important as what the court did, and the court actually decided that the set-off should be allowed under a statute which provided for the same in the ease of “mutual debts” between the bankrupt and any other person (2 Stat. 33, § 42); and that the right was a reciprocal one. In addition, the present suit is not at law, but in equity where the rules are flexible and the remedies expansive. Union Pac. R. Co. v. Chicago, R. I. & P. R. Co., 163 U. S. 564, 601, 16 S. Ct. 1173, 41 L. Ed. 265.
On the other hand, if it be conceded that the statute (2 Stat. 19) which was being construed in Tucker v. Oxley was different from the rule prevailing at law or ill equity, then section 537 of the Mississippi Code of 1930 creates the right of set-off (a substantive right) “where a mutual indebtedness exists between the plaintiff and defendant,” language practically identical in meaning with section 42 of said Bankruptcy Act. This right with the construction put upon it by the highest court of the state (Bergman v. Bly [C. C. A.] 66 F. 40; National Bank of Oxford v. Whitman [C. C.] 76 F. 697), was written into all contracts between persons dealing together in Mississippi (as were the parties in this case) and will be enforced in the federal court (R. S. § 721 [28 USCA § 725]). The prototype of the Mississippi statute (section 1551, Code 1880) was construed in Eyrich v. Capital State Bank, 67 Miss. 60, 6 So. 615, in which it was held that a bank may apply the individual deposit of a partner to the payment of a firm debt due the bank. It is true that the ease at bar is in equity, but equity follows the law, and if the right of set-off has been enlarged by local statute; the jurisdiction in equity is sufficiently expansive to administer the remedy necessary to protect the right. Holland v. Challen, 110 U. S. 15, 24, 3 S. Ct. 495, 28 L. Ed. 52; Reynolds v. First Nat. Bank, 112 U. S. 405, 5 S. Ct. 213, 28 L. Ed. 733; U. S. v. Wilson, 118 U. S. 86, 6 S. Ct. 991, 30 L. Ed. 110. It may be suggested that the Mississippi statute was merely intended to enable legal tribunals to recognize the equitable doctrine of set-off, which was unknown to the common law. We have seen that the better modern view regards set-off as *766a. substantive right, and this is the view which is contended for in the briefs on behalf of the receiver. A different contention under this statute would not only be inconsistent, but, if upheld, would not improve his status, because, if both statutes (chapter 39 and section 537, Miss. Code 1930) be held to be remedial, set-off becomes a question of procedure, and, at law, the federal court will follow state statutes and decisions in procedural matters. R. S. § 914 (28 USCA § 724). In this view,' at law, we see that the set-off should be-allowed; and in a federal equity court a set-off should not be denied, when if the case were on the law side of the same court it would be allowed. If such a situation existed, it would be the duty of the court to transfer, the case or, at least, the particular issues of debt and set-off, to the law side. Equity Rules 22 and 23 (28 USCA § 723); 28 USCA § 397; Edward Hines Lumber Co. v. Bowers (Miss.) 238 F. 782, 151 C. C. A. 632; Chanslor-Canfield Midway Oil Co. v. U. S. (C. C. A.) 266 F. 145; Id., 258 U. S. 631, 42 S. Ct. 273, 66 L. Ed. 801; Liberty Oil Co. v. Condon Nat. Bank, 260 U. S. 235, 43 S. Ct. 118, 67 L. Ed. 232.
The correct view is thought to be, as stated, that set-off is a matter of substantive right. It was bom in equity, but under statutory authority has been adopted by courts of law in probably all of the states. Following its adoption at law, courts of equity, wherever there was applicable the doctrine that “equity follows the law,” applied the benefits of any broader defense given by the statute without yielding its primitive jurisdiction in those instances where the law originally did not afford an adequate remedy. The relief afforded by the statute being essentially equitable, the fact that jurisdiction in such eases had been given to courts of law within the state did not deprive equity of its original jurisdiction. De la Vergne Refrig. Mach. Co. v. Montgomery Brewing Co. (C. C.) 46 F. 829. Where the statute enlarges a remedy in equity, or creates a new one, or enlarges an equitable right, either or both will be enforced in the federal courts of equity. Thus, relief in equity is ordinarily as great and sometimes greater than at law; and, therefore, defendants in the federal courts may avail themselves of state laws “concerning the right of set-off generally.” Partridge v. Insurance Co., 15 Wall. 573, 580, 21 L. Ed. 229. In the case just cited, at page 580 of 15 Wall., the court said: “It would be a most pernicious doctrine to allow a citizen of a distant State -to institute in these courts a suit against a citizen of the State where the court is held and escape the liability which the laws of the State have attached to all plaintiffs of allowing just and legal set-offs and counter claims to be interposed and tried in the same suit and in the same form.”
If it be conceded that Tucker v. Oxley extends the allowance of set-offs under the Bankruptcy Act beyond that technical operation previously given the term “mutual debts” in ordinary eases, nevertheless Mrs. Guess has the Mississippi statute (section 537, supra) to rely on, conferring a substantive right, construed by the Mississippi court, and holding that the bank had the right to set off Mrs. Guess’ individual deposit against her several liability on the firm debt. This is supplemented by Tucker v. Oxley at least to the extent of holding that the right of set off is reciprocal, and that she has the same right in a suit by the bank against her. The right to prove a partnership debt against the estate of a bankrupt member, emphasized in Tucker v. Oxley, is analogous to the right to sue separately an individual partner who is not a bankrupt.
In Gray v. Rollo, 18 Wall. 629, 631, 21 L. Ed. 927, the court declined to allow Moses Gray to offset his one-half interest in the proceeds of a fire insurance policy due to him and his brother, Franklin Gray, doing business under the firm name of Gray Brothers, against two promissory notes made by Gray jointly with one Gaylord, because it said: “It is clear that these claims are not mutual debts. They are not between the same parties.” The court distinguished Tucker v. Oxley, as follows: “The ease of Tucker v. Oxley, which arose out of the Bankrupt Act of 1800, has been pressed upon our attention by the counsel of the appellant, on the supposition that it is decisive in his favor. The clause relating to set-off contained in that act does not materially differ from the corresponding clause in the act of 1867. Mutual credits given, and mutual debts existing, before the bankruptcy, are made the ground of set-off in both acts. But the case of Tucker v. Oxley wall be found to differ from the present. There two persons by the name of Moore, being partners, became indebted to Tucker. They afterwards dissolved partnership, and Tucker became indebted to one of them, ■who continued the business, and who afterwards became bankrupt. Oxley, the assignee, sued Tucker for this debt, but the latter was allowed to set off his claim against the two. The court put the decision upon the ground that the *767debt due from the two Moores to Tucker could have been collected from the property of either of them, and was provable under the bankruptcy proceedings against the estate of him who became bankrupt, and hence it might be set off against any claim which the bankrupt had against Tucker. The ease, therefore, was the same as the case before us would have been if the complainant had been solely entitled to the insurance-money, and if he and not the company had become bankrupt. In such ease, the company, according to the case of Tucker v. Oxley, could have set off the notes of the complainant and Gaylord against the claim for insurance. The reciprocal form of this rule would have enabled the complainant to succeed in this ease had he been the sole claimant of the money due for insurance. In other words, the ease of Tucker v. Oxley decides that a joint indebtedness may be proved and set off against the estate of either of the joint debtors who may become bankrupt, and the fact that it may be subject to be marshaled makes no difference. The joint debtors are severally liable in solido for the whole debt. But the case does not decide that a joint claim, that is to say, a debt due to several joint creditors, can be set off against a debt due by one of them. If a debt is due to 'A. and B., how can any court compel the appropriation of it to pay the indebtedness of A. to the common debtor without .committing injustice toward B.? The debtor who owes a debt to several creditors jointly cannot discharge it by setting up a claim which he has against one of those creditors, for the others have no concern with his claim and cannot be affected by it; and no more can one of several joint creditors, who is sued by the common debtor for a separate claim, set off the joint demand in discharge of his own debt, for he has no right thus to appropriate it. Equity will not allow him to pay his separate debt out of the joint fund. And if he had the assent of his co-obligees to do this, it would be unjust to the suing debtor, because he has no reciprocal right to do the same thing.”
In Beauregard v. Case, 91 U. S. 134, 23 L. Ed. 263, which was an action by the receiver of an insolvent national bank against partners, who in the particular jurisdiction were liable severally only for their proportionate part of the firm indebtedness, it was held that one partner could not set off against his separate liability a separate indebtedness due to another partner who was not a party to the suit, but the court stated that such partner might set off his personal demand against the debt of the firm. This, to use a term of Mr. Justice Cardozo, is “considered dictum,” favorable to the defendants, at a later date than that previously quoted from Tucker v. Oxley, and consonant with the substantive right conferred by the Mississippi statute (section 537), as construed by the Mississippi court in Eyrich v. Capital State Bank, supra.
Adding to the force of these eases the facts that a receiver takes the assets of an insolvent bank subject to all legal or equitable claims that might have been interposed against the insolvent corporation, that there axe no individual creditors of Mrs. Guess to be prejudiced, and that no question of marshaling assets between individual and partnership creditors is presented, we think in a court of equity, the birthplace of the doctrine, the set-off should be allowed to the extent requested. Scott v. Armstrong, 146 U. S. 499, 13 S. Ct. 148, 36 L. Ed. 1059; Fidelity & Deposit Co. v. Howard (C. C. A. 5) 67 F.(2d) 961.
There remains only the necessity to consider the equities of other depositors. They have none, except in the assets of the bank at the .time it closed. We have seen that the receiver took the note sued on subject to all proper offsets which at that time existed against the insolvent corporation. If this note were unsecured and uncollectible, it would be to the interest of other depositors to allow the set-off, and we cannot doubt the receiver would do so. A substantive right of this nature does not depend upon the accident of advantage to either side. It is a reciprocal right that arises out of the facts at every stage of mutual dealings between the parties. If the receiver has the right to charge the partnership note to Mrs. Guess against her will, under the same facts he should be required to do so against his will. Since the insolvent bank could not fairly object to the payment of this debt by Mrs. Guess out of her individual funds, the court will not permit the receiver to do so.
Having denied a proper offset sufficient to extinguish the partnership indebtedness, the receiver is not entitled to the attorney's fees provided for in the note in ease of default in payment.
An appropriate decree may be entered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219281/ | KENNERLY, District Judge.
July 27, 19'32, plaintiffs brought this suit against the defendant International-Great Northern Railroad Company, a Texas railway corporation, in the district court of Harris county, Tex., to recover for alleged overcharges on shipments of freight over the lines of defendant railroad company. It is alleged that such shipments were made in 1929.
■September 9, 1932, the case was removed into thisicourt.
Subsequently (June and July, 1933), L. W. Baldwin and Guy A. Thompson were, by •a court of bankruptcy (the District Court of the United States for the Eastern District of Missouri), appointed trustees of such railroad .e.ompany under the acts of Congress relating to bankruptcy and the amendment of March 3, 1933 (title 11 and section 205, title 11 USCA), and such trustees forthwith took, and still have, possession of, and are operating, the business and properties of such railroad company under orders of such bankruptcy court.
August 26, 1933, plaintiffs -filed amended pleadings, making such trustees parties defendants hereto. September 23,19133, such trustees filed their plea, questioning the jurisdiction of this court over them, because of the failure of plaintiffs to obtain permission of the bankruptcy court to sue them. Tiffs is a hearing under District Court Rule 25 of such plea.
1. That, except in eases arising under section 125, title 28 USCA, a receiver in equity may not be sued except by permission of the court appointing him, seems well settled. Barton v. Barbour, 104 U. S. 126, 26 L. Ed. 672; Oklahoma v. Texas, 265 U. S. 491, 44 S. Ct. 607, 68 L. Ed. 1116; Richle v. Margolies, 279 U. S. 226, 49 S. Ct. 310, 73 L. Ed. 669. And if the principles announced in such cases are controlling here, the plea of the trustees must be sustained.
I think, however, they are not, but that the Bankruptcy Act of 1898 and amendments, including the amendment of March 3> 1933 (particularly section 29, title 11 USCA, and subdivision (l) of section 205, title 11 USCA) are controlling.
In Re Barrett & Co. (D. C.) 27 F.(2d) 159, 161, Judge Sibley uses this language (italics mine): “Again, in section 11, dealing with suits pending at the time of the bankruptcy, it is provided: ‘(b) The court may order the trustee to enter his appearance and defend any pending suit against the bankrupt. (c) A trustee may, with the approval of the court, be permitted to prosecute as trustee any suit commenced by the bankrupt prior to the adjudication, with like force and effect as though * * * commenced by him.’ 11 USCA § 29 (b), (e). If the trustee thus defends, he, of course, is bound by the judgment; but the act studiously subjects his entrcmce into litigation in other courts to the direction of the bankruptcy court.”
While the precise question which we have here was not before Judge Sibley, I think the italicized portion of the quotation correctly states the rule.
If this court permits plaintiffs to make the trustees parties defendants hereto without the consent of the bankruptcy court, thereby making the judgment rendered here binding npon such trustees, when otherwise, under the rule in this circuit, it would not be binding [(C. C. A.) 29 F.(2d) 737], this court thereby invades the province of the bankruptcy court to give direction to the *769trustees to become parties, or not to become parties, to this suit.
I think, also, that the true meaning of the amendment of March 3,1933, is that the matter, as well as the matter of the right to stay proceedings here, is within the province of the bankruptcy court, and the bankruptcy court only. Otherwise, it would be impracticable to carry out either the letter or the spirit of the amendment.
It follows that the plea to the jurisdiction of the trustees should be sustained. Let an order be presented accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219283/ | ' GREEN, Judge.
The plaintiff brings this suit to recover $43,927.65, being a portion of the overassessment of its income and profits tax for the year 1918 which was applied against an additional assessment timely made of tax for the year 1917, with interest. .
The case before the court is one in which, the Bureau of Internal Revenue having had under consideration the amount of plaintiff’s taxes for the years 1916 to 1920, inclusive, the Commissioner notified plaintiff by letter that he had determined that $53,973.35 additional taxes were due for 1917 and that there was an overassessment for 1918 of $73,925.53. In the same letter plaintiff was advised of other adjustments on its taxes which are not necessary to be considered here. The plaintiff then referred the matter to its duly authorized attorney, Charles A. Crawford. Crawford had a conference with the collector in charge of the collection of these taxes and certain communications passed between them. In this conference and by letters to the collector the attorney for plaintiff requested the collector “to hold up action upon the above items [meaning plaintiff’s taxes under consideration], until the certificates are received from Washington and the whole matter closed.” This same request was repeated in different communications and different forms, and the collector answered that the collection of these amounts would be held in abeyance in accordance with the request. Later, and on February 19, 1924, the Commissioner made an additional assessment for 1917 in the amount of which the plaintiff had been before notified ($53,973.35), and also a small additional assessment for the year" 1920, and directed the collector to withhold demand pending comparison with the schedule of overassessments. This assessment was in time, and there was nothing to prevent its collection except the agreement above shown. On February 25, 1924, the Commissioner approved the schedule of overassessments showing an overassessment of plaintiff’s taxes for the year 1918 in the amount of $73,925.53, and sent the same to the collector with instructions to apply the overpayment as a credit against taxes due, if any, which was accordingly returned to the Commissioner by the collector showing that of the said overassessment in the amount of $73,925.53, $29,997.88 had been applied as a credit against the unpaid original tax for 1920 and the balance of $43,927.65 against additional assessment for the year 1917 in the amount of $53,973.35, leaving $10,045.70 still due thereon. Before the schedule was signed, the collector had sent to plaintiff a notice and demand for the balance of the 1917 taxes as above stated which the plaintiff shortly after paid, and thereafter and on June 4, 1924, the Commissioner signed the schedule of refunds and' credits transmitted to him by the collector.
The record as a whole shows that the plaintiff for its own convenience all through these transactions was requesting that the collection of its taxes be held up and that all of them be adjusted in one final transaction, and that the matter was carried to a conclusion in accordance with its request. At the time, the plaintiff expressed its appreciation and paid the amount still remaining on its 1917 taxes. After having thus confirmed the transaction no further objections were made until more than five years afterwards when it filed the claim for refund of $43,927.65 for the year 1918 upon which the suit is now brought.
It is urged on behalf of plaintiff that these communications and agreements were had and made with the collector and not with the Commissioner. It is not necessary to here lay down any general rule with reference to the effect of communications made to a United States collector of taxes or agreements made with him. It is sufficient to say that in this particular case we find that the collector had full charge of the matter of collecting these *781taxes subject to special directions from the Commissioner of Internal Revenue. By the negotiations and agreement entered into with the collector made at a time when the tax could be collected, the plaintiff succeeded in having the collection postponed, and, the arrangement which it had requested having been carried out by the defendant, it cannot now be heard to complain thereof.
In view of the recent decisions of this court, it will not be necessary to state herein further reasons why the plaintiff cannot maintain its action. If any be sought, reference is made to the cases of Naumkeag Steam Cotton Co. v. United States, 2 F. Supp. 126, 76 Ct. Cl. 687, certiorari denied 289 U. S. 749, 53 S. Ct. 694, 77 L. Ed. 1495, R. H. Stearns Co. v. United States, 290 U. S. -, 54 S. Ct. 325, 78 L. Ed. -, decided Jan. 8, 1934, affirming the decision of this court, 2 F. Supp. 773, and the opinion in the case of Samuel Daube v. United States (Ct. Cl.) 5 F. Supp. 769, this day rendered, all of which show that the plaintiff is estopped under the circumstances from maintaining its action. We might also add that under the rale laid down in the last-named decision the plaintiff’s action is barred, no claim for refund having been filed in time in view of the fact that the evidence shows there was no account stated.
Defendant also bases a defense on the fact that what is called “Form 368 — M” was attached to the schedule of overassessments, but we do not find it necessary to consider this matter.
Plaintiff’s petition must be dismissed. It is so ordered.
BOOTH, Chief Justice, and WHALEY and WILLIAMS, Judges, concur.
LITTLETON, Judge, concurs in the result. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219377/ | WHALEY, Judge.
This is a suit to recover from the United States: (1) The sum of $6,801.90 on account of overpayment of income and profits taxes for the years 1917 and 1918, together with interest; and (2) the sum of $874.86, due under a contract of settlement with the United States dated January 5, 1921. There is no dispute as to the validity of these claims and the Comptroller General has approved them. Defendant, however, has asserted an offset against them on account of an alleged overpayment made to the plaintiff in the course of a settlement of war contracts which the defendant had with the plaintiff. The sole question in this case revolves around the validity of the counterclaim which the Comptroller General has asserted.
During the World War plaintiff entered into some fourteen contracts and a like number of orders with the government for the manufacture of war materials. It was necessary for the plaintiff to employ subcontractors under these contracts. At the termination of the war these contracts were canceled by the defendant. Each of the contracts contained a provision whereby it was agreed that in the event of termination, prior to its completion, the defendant would protect the plaintiff against its outstanding obligations to an extent apportionable to the unfinished portion of each of its contracts. Among the subcontractors with whom the plaintiff had to deal was the Albany Chemical Company. The plaintiff furnished the raw material to .the Albany Chemical Company and the Albany Chemical Company manufactured it into finished products. The Albany Chemical Company, in addition to its contracts with the plaintiff as a subcontractor, also had contracts directly with the government. These contracts were also terminated after the Armistice. The Albany Chemical Company filed its claim with respect to its canceled contracts with the government but made no claim as the subcontractor of plaintiff.
The plaintiff on-June 6, 1919, filed its claim with respect to the canceled contracts and thereafter made proof of its obligations incurred under the provisions of the contracts and included in its sworn-statement that the Albany Chemical Company was indebted to it for material winch had been furnished to it by the plaintiff for the manufacture of finished products under the contracts which the plaintiff had with the defendant. The government made an audit of the plaintiff’s statement of its obligations and investigated the relevant books, records, and plants of its subcontractors and determined that there was due from the Albany Chemical Company, the subcontractor of the plaintiff, to the plaintiff under the contracts which the plaintiff had with the government, the sum of $40,421.78. In order to dispose of the contracts involved, in which the Albany Chemical Company was the subcontractor, a supplemental agreement was drawn up by the government whereby it was agreed that'the plaintiff should be paid the stun of $49,421.78 in full settlement of its claims against the defendant on account of its canceled contracts. The agreement specifically mentions the contracts involved, and these are the only ones with the Albany Chemical Company as subcontractor. It provides that the plaintiff was to furnish a statement from the Albany Chemical Company that it would look to the plaintiff alone for the settlement of its claims as subcontractor under these' contracts. It was further provided that the supplemental contract should not be obliga*139tory upon the defendant until approved by the Air Service Section of the War Department Claims Board, which approval “shall be deemed also as approval of said ‘statement’, or said ‘satisfactory evidence’ as sufficiently determining for the Government, for the purpose herein intended, the contractual relations existing between the contractor and the said subcontractor respecting commitments (Italics inserted.)
In August, 1929, the Albany Chemical Company executed and delivered a statement in which it asserted that it looked alone to the plaintiff for the payment of the sum of $40,421.78, in settlement of its claims against the government, as subcontractor on the contracts with plaintiff, and upon the receipt of this statement from the Albany Chemical Company, the Air Service Section of the War Department Claims Board executed and delivered in September, 1920, the supplemental contract to the plaintiff and paid to the plaintiff the sum called for in the contract, and this amount was duly applied by the plaintiff on its books to the amount which was owed to it by the Albany Chemical Company for the raw materials furnished to it under the canceled contracts.
Among the items for which the government paid the plaintiff, and which entered into the sum agreed upon in full settlement of this particular subcontractor’s indebtedness to the plaintiff, was $6,764.04 for 8,308.6 gallons of methyl alcohol. Previous to this settlement with the plaintiff and while these negotiations were going on, the defendant made an audit of the contracts which the Albany Chemical Company had directly with the government on the claims which had been presented by the Albany Chemical Company, and determined that the Albany Chemical Company, under these direct contracts, was entitled to the sum of some $23,000. In the examination of the books, records, and plant of the Albany Chemical Company by the auditor, there was found at this plant the methyl alcohol which had been furnished to it by the plaintiff. Without any claim from the Albany Chemical Company and without notice to the plaintiff, the government auditor included in the claim of the Albany Chemical Company the additional amount of the value of this methyl alcohol and increased the amount due the Albany Chemical Company by the sum of $6,764.04, and payment was duly made to the Albany Chemical Company on June 1,1920, in the sum of $29,421.29, and the Albany Chemical Company delivered to the government the 8,308.6 gallons of methyl alcohol which had been furnished to it by the plaintiff to be manufactured into finished products under plaintiff’s contracts with the government. When the supplemental contract was made with the plaintiff some months after the payment had been made to the Albany Chemical Company, the plaintiff being unaware, and having no knowledge of the Albany Chemical Company’s receipt of the payment for this alcohol from the government, applied the voucher given to it by the government to the account of the Albany Chemical Company in full satisfaction of the Albany Chemical Company to it for the material which it had furnished to the Albany Chemical Company, as subcontractor under the government contracts with the plaintiff. The Albany Chemical Company knew when it executed the statement in August that it looked to the plaintiff for the settlement of its account, and that it had been paid by the government through the action of the auditor of the government in including this amount in its claims against the government under its direct contracts. The government knew, or should have known, that this amount had been paid, as the books, records, and plants of the subcontractors of the plaintiff had been examined by the government auditors, but the plaintiff had no way of knowing, and did not know, that the auditor of the government had included the value of the methyl alcohol in the settlement of the government’s direct contracts with the Albany Chemical Company, or that payment had been made to its subcontractor. The indebtedness of the'Albany Chemical Company to the plaintiff for this methyl alcohol remained open on plaintiff’s books and was well known to the auditors of the government who had made the examination of the books and plants of the plaintiff, as well as of its subcontractors.
The discovery of these duplicate payments to the Albany Chemical Company and to the plaintiff was made by the War Department on June 9,1921. The plaintiff was then notified that it would be held liable for the payment of the methyl alcohol for which the Albany Chemical Company had been paid. The plaintiff sought to collect from the Albany Chemical Company, but payment was refused upon the ground that the government owed the Albany Chemical Company more than this amount and it was a matter between the Albany Chemical Company and the government. In 1923 the Albany Chemical Company was adjudged a bankrupt.
The government seeks now to offset the payment made to the plaintiff against an *140amount which is admittedly due to the plaintiff, and the question arises as to the liability of the plaintiff for the value of this methyl alcohol because of the double payments made by the government. The principal contention of the defendant is that its obligation under the cancellation provisions of the contracts was to protect plaintiff against its “outstanding obligations” incurred in connection with the performance of the war contracts, and, since the Albany Chemical Company had been paid for the alcohol in its prior settlement with the government, there was no obligation outstanding for this item at the time of settlement with the plaintiff for which plaintiff required protection, and therefore the payment was improperly made to the plaintiff.
The facts in the ease do not support this contention. The alcohol belonged to the plaintiff and was furnished by it to its subcontractor for the purpose of having it manufactured into completed articles as called for in the plaintiff’s contracts with the government. It was charged on plaintiff’s books against its subcontractor and the subcontractor owed this amount to the plaintiff, and the plaintiff only owed to the subcontractor the price of the finished product less the value of the raw material furnished.
When these contracts were canceled the Albany Chemical Company was indebted to the plaintiff for raw materials furnished it, and the auditor of the War Department established this amount in the sum of $40,421.78. The payment to the Albany Chemical Company by the government for this alcohol was not in fulfillment of -any contract that the government had with the Albany Chemical Company. It was entirely a voluntary payment outside of the contractual relations and in no way protected the plaintiff for the sums due it from its subcontractor.
The record shows no attempt by the government to recover this amount from the Albany Chemical Company. It appears that the government’s agents simply assumed that the second payment necessarily was the erroneous one and attempted to collect from the plaintiff which happened to be the last paid. It must be borne in mind that the payment made to the plaintiff was in settlement of canceled contracts, in compliance with the supplemental contract entered into with the government, and there was no fraud, overreaching, or connivance in the execution of this contract. The contract was drawn by the government. The amount to be paid was the amount found by the auditors of the government, and the contract was executed in order to liquidate the amount due to the plaintiff from the Albany Chemical Company as established by an examination of the books, not only of the plaintiff, but the books, records, and plant of the Albany Chemical Company also.
No attempt is made by the defendant to recover the full amount paid on the ground that it was not “an outstanding obligation.” The value of this raw material alone is singled out as not being within the terms of the agreement because it was paid twice. If this amount is not an outstanding obligation as covered by the agreement, then the rest of the account due the plaintiff by the subcontractor is in the same class. Both were due from the subcontractor to the contractor and the government in dealing with these accounts classified them as involved in the outstanding liabilities of the contractor. Although, strictly speaking, they were outstanding obligations of the subcontractor to the contractor, nevertheless, the government was obligated to pay for them and it took the straight and short course and made payment to the one who had furnished the material and who ultimately would have to be paid;
The record is singularly clear of all error on the part of the plaintiff. It was unaware that the auditor had included this amount.in the claim of the Albany Chemical Company. It had no knowledge that the government-had made the payment to the subcontractor, and when it received payment from the government, it applied the amount received to the account for which it was made, and which account had been duly audited by the agents of the defendant and found owing by the government to the plaintiff. The knowledge of this payment to the Albany Chemical Company was in the possession of the government and the Albany Chemical Company, and, even if it had been conveyed to the plaintiff, the liability of the defendant to pay the plaintiff for the material furnished under its contracts would remain.
We can find no mutual mistake so far as the plaintiff and the defendant are concerned.. If there were a mistake, and it is plain that there was, it is due entirely to the wrongful inclusion of the value of this methyl alcohol by the auditor of the government in the settlement of the direct contracts with the Albany Chemical Company. This company has gone ' out of existence and the money cannot be collected from it, and the government has paid twice for the same item; but this does not justify the recovery of the amount from the *141■wrong party, or the innocent party, and the only one from whom collection can be made.
The plaintiff is entitled to recover the sum of $6,676.76, with interest.
It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219378/ | GARDNER, Circuit Judge.
This is a suit in equity, brought by the plaintiffs, who are citizens of states other than Arkansas, and are not citizens of the state of Arkansas, against the defendant Roy V. Leonard, individually, and as treasurer of state of the state of Arkansas, to enjoin and restrain him from paying out certain funds of the state derived from taxation of motor vehicles and gasoline.
Plaintiffs constitute a committee, and under the terms of a written agreement dated June 1, 1933, are assignees of certain bonds and interest coupons issued by the state of Arkansas, and as such assignees are empowered to bring this suit. There is therefore a diversity of citizenship between the plaintiffs and the defendant; the amount in dispute, exclusive of interest and costs, exceeds the sum or value of $3,000; and the suit, it is alleged by appropriate averments, arises under the Constitution of the United States.
The suit has been finally submitted on the pleadings and certain admitted facts.
There are two counts in the bill of complaint, each charging a violation of section 10, article 1, of the Constitution, providing that no state shall pass any law impairing the obligation of contracts, and of the Fourteenth Amendment, providing that no state shall deprive any person of life, liberty, or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws. The material facts in connection with count 1 are as follows: By Act of the General Assembly of the State of Arkansas, known in the record as Act No. 80 (page 215), approved March 4, 1927, which amended Act of the same legislature, known as Act No. 11 (pages 17, 20),'approved February 4, 1927, it was, among other things, provided as follows:
“Section 5. To hasten the completion of the state highway system as rapidly as possible, the Commission shall for each of the years 1927, 1928, 1929> and 1930, allot for new construction a sum equal to twice the aggregate amounts allotted to road districts, and for each year thereafter, until the road system of the state is brought to a parity, shall allot as a minimum a sum at least equal to the aggregate amount allotted to road districts. To provide the funds to meet this requirement, the state shall borrow each year whatever amount may be necessary, in addition to the money derived from automobile licenses and fees, gasoline and motor oil taxes, and from Federal Aid, on such terms as to interest and maturities and subject to the limitations hereinafter set out, as may be determined to be for the best interest of the highway system, and to issue State Highway notes for the amount borrowed, to be secured by a pledge of the revenues derived from automobile licenses and fees, and gasoline and motor oil taxes, and to pledge said revenues, or so much thereof as may be necessary, for the payment of said notes, and the State of Arkansas hereby pledges to the purchasers and future holders of State Highway notes that the State of Arkansas will never so long as any of said notes are outstanding permit sections 35 and 36 of Act No. 5 of the Extraordinary Session of the General Assembly of the State of Arkansas, approved October 10, 1923, to be repealed or amended so as to in any manner reduce the revenue therein provided for, and the State of Arkansas further pledges that in the event of a substitute fuel for motor vehicles, or in the event of improvement in equipment that would reduce gasoline consumption or other change of conditions that would reduce the annual revenue from automobile licenses and fees, and gasoline and motor oil taxes below seven million five hundred thousand dollars ($7,500,000.00) that in such event the state will amend section 35 and 36 so as to provide for an annual minimum revenue from automobile licenses and fees and gasoline and motor oil taxes of seven million five hundred thousand dollars ($7,500,000.00) and the State of Arkansas further pledges that it will not issue in the aggregate more State Highway notes than can be fully paid, with interest thereon, from a revenue of seven million five hundred thousand dollars ($7,500,000.00) a year during the period beginning with the first maturity date and ending with the last maturity date of said notes.
“The State Treasurer shall set aside out of the first revenue collected from automobile licenses and fees, and from gasoline and motor oil taxes during the first half of each fiscal year, a sum sufficient to pay the interest on the State Highway notes, and the maturing notes, due and payable during the first half of the fiscal year, and shall set aside out of the first of said revenues collected during the last half of each fiscal year, a sum sufficient to pay the interest on the State Highway notes, and the maturing notes, due and payable during the last half of the fiscal year.
“Such notes issued by the state shall be known as -State Highway notes, shall be signed by the Governor, the State Treasurer and the State Highway Commissioner, and *147attested by the Secretary of State, and shall state in the face of said notes that the revenues derived from automobile licenses and fees, and from gasoline and motor oil taxes, are pledged for the payment of such notes.
“The State Auditor, 'with the approval of the Governor, shall prepare the form of said notes. Said notes shall be in denominations of one thousand dollars or multiples thereof, and shall be payable to bearer, but shall contain a provision for being converted into registered notes by being registered in the office of the State Treasurer. Said notes shall be negotiable paper notwithstanding they are payable out of a special fund derived by the state from automobile licenses and fees, and gasoline and motor oil taxes.
“The state shall sell State Highway notes only as the Highway Commission finds that funds are needed, and shall not sell more than thirteen million dollars of notes in any calendar year. No notes shall be sold until the State Treasurer shall first have advertised for bids in newspapers, periodicals, or financial journals selected by him, the advertisement to be published not less than twenty (20) days before the day of sale. All bids shall be opened in public, and the state shall have the right to rejeot any and all bids, and may if it deems best, auction the sale of such notes. Said notes shall not be disposed of at less than par on the basis of interest at the rate of five per cent per annum plus accrued interest from date of notes to date of delivery, but if said notes should bear a less rate of interest, they may be disposed of at less than par, provided that on the basis of the amount at which the notes are sold, and the rate of interest they bear, the interest shall not exceed the equivalent of five per cent per annum on the par or face value of the notes, exclusive of the expenses incident to the sale of said notes.”
By Act No. 6 of the General Assembly, approved October 3, 1328, it was provided that, in addition to the provisions contained in the above-quoted act, the state highway commission might sell short-term notes maturing within a year, the issuance of which, however, was not to affect the power to issue state highway notes pursuant to the terms of the statute, but the proceeds of the sale thereof were to be used to pay any outstanding short-term notes and interest. This statute further provided that not more than $18,000,000 par value of notes should be sold in any calendar year beginning with the year 1928, and, if in any year the sale of notes should be deemed inadvisable, .sufficient in amount might be sold in subsequent years to bring the average up to $18,000,000 a year.
By Act No. 65 (page 264), approved February 28, 1929, the General Assembly again in substance re-enacted the provisions of the foregoing statutes.
Pursuant to the authority contained in these various acts, the state from time to time issued certain highway obligations amounting in the aggregate to the par value of $84,000,000, bearing interest at the rate of 4% per cent, per annum, payable semiannually.
Plaintiffs are the owners and holders of the legal title to a large quantity of each of these issues of bonds under these various statutes, aggregating $41,833,000, and on all of which one semiannual installment of interest falling due in 1933 is past due and unpaid.
In each of these obligations, it is, among other things, provided:
“The State of Arkansas also covenants that this and all other obligations of this series shall be paid promptly as they mature, and to that payment the full faith and credit of the State are irrevocably pledged. As special security for the payment of this and the other obligations of this series, the State of Arkansas hereby pledges its revenues derived from automobile licenses and fees and from its tax on gasoline and on any substitute therefor used in propelling automobiles on its highways.
“The State of Arkansas covenants that its treasurer of state will set aside out of the first revenue collected from automobile licenses and fees and from taxes on gasoline and on any substitute therefor during each semi-annual period, funds sufficient to pay all obligations of this series and interest thereon maturing and accruing during such period.”
By sections 35 and 36 of Act No. 5 of the General Assembly, approved October 10,1923 (Ex. Sess., pp. 53, 54), a tax of 4 cents per gallon was levied on each gallon of gasoline sold in the state for the purpose of propelling any automobile or motor vehicle on the public roads in the state, and a tax of 10 cents per gallon was levied on each gallon of motor oil so sold, and a fee for the registration and licensing of all motor vehicles was also levied.
Section 6 of this act (page 19) created a special fund in the state treasury, to be known as the “state highway fund,” and provided *148that thereafter the state’s portion of all automobile fees, licenses, and privilege taxes, gasoline tax, motor oil tax, and all other moneys received by the state from owners of motor vehicles in connection with the use of the public roads, should he paid into this fund.
Section 64 of the same act (page 80) provided that it should be the duty of the treasurer of the state to credit the money collected and received by him from the gasoline and motor oil tax, under the provisions of the act, to the state highway fund, and that the money so collected should he used exclusively for the purposes set forth in the act.
This act was modified by Act No. 65 (page 264), approved February 28, 1929, as to the amount of fees to be charged for the registration and licensing of motor vehicles, but the provisions of sections 6, 35, 36, and 64 were re-enacted and retained.
By Act No. 63 (page 171), approved February 25, 1931, provision was made for the levy of a privilege tax of 6 cents on each gallon of motor vehicle fuel sold in the state, and of this tax five-sixths was to he deposited in the state treasury to the credit of the state highway fund, and-one-sixth, under certain conditions, was to be credited to a fund known as the county highway fund. Section 6 of this act (page 178) reads in part as follows:
“Section 6. Nothing contained in this Act shall he construed as conflicting with or repealing Section 20 of Act 65 of the Acts of 1929, and to this end it is hereby provided that should the revenue produced under Act 65 of the Acts of 1929 be less than $7,500,000 for any year, then and in that event, such deficit shall be taken from the county highway fund for such year, before an allotment to the counties is made as provided for in this Act.
“It being expressly understood that all funds derived from the operation of this Act or from the operation of said Act 65 of the Acts of 1929 shall he applied first to the payment of state highway notes or bonds and coupons issued by the State of Arkansas under the provisions of Act 11 of the Acts of 192,7 and under the provisions of Act 65 of the Acts of 1929.”
During each of the years from 1927 to 1932-, both inclusive, the avails of the taxes arising from the tax on gasoline and automobile license taxes, provided for by the above-mentioned acts, amounted in the aggregate as follows:
By Act No. 6 (page 19), approved January 39, 1933, and by Act No. 36 (page 95), approved February 27, 1933, the fee theretofore provided for the registration and licensing of motor -vehicles was reduced, so that during- the months from January to June, 1933, both inclusive, the avails of the taxes levied for gasoline tax and auto license fees by virtue of the legislative acts of 1933, were as follows:
The amount of funds required to meet the interest payments and maturities upon the state highway obligations issued and sold pursuant to statutory enactments from the years 1927 to 1934, are as follows:
The 1933 General Assembly passed a series of statutes which plaintiffs assert are unconstitutional; among these acts being Acts Nos. 6 and 36.
Among the other acts complained of is Act No. 48 (page 130), approved February 22, 1933, which amended the first paragraph of section 6 of Act No. 63 of the Acts of 1931 (page 178), approved February 25, 1931, by striking therefrom the following:
“And to this end it is hereby provided that should tho revenue produced under Act 65 of the Acts of 1929 be less than $7,500,000 for any year, then and in that event, such deficit shall be taken from the county highway fund for such year, before an allotment to tho counties is made as provided for in this Act.”
This act further provided that the counties should receive the one-eent allotment under Act No. 63 by the following ¡provision:
“Except the said sixth-eent gasoline tax refund to the counties, it is hereby expressly understood that all funds derived from tho operation of this act or from the operation of said Act 65 of the Acts of 1929 shall be ap*149plied first to the payment of state highway notes or bonds and coupons issued by the State of Arkansas under the provisions of Act 11 of the Acts of 1927 and under the provisions of Act 65 of the Acts of 1929.”
By section 4 of this act (Acts 1933, p. 134) it is declared that the specific purposes of the act are to so amend and repeal existing laws as to insure adequate aid for the construction of permanent roads constituting school bus routes, rural mail routes, United States mail routes, and farm-to-market roads in the various counties, and to further assure that the gasoline tax apportioned to the various counties under the provisions of Act No. 63 of the Acts of 1931, will be used for such purposes; “to preserve and protect to the respective counties of the state the allotment of gasoline taxes as provided in subdivision (f) of Section One of said Act 63 of the Acts of 1931 and to prevent and prohibit any part of said tax from being paid into the State Highway fund regardless of whether or not said highway fund annually recevoes an income of $7,500,000.00, and to prevent the transfer of said tax to the State Highway fund, or any other fund except the county highway fund under any circumstances whatsoever.” (Italics supplied.)
By Act No. 19 (pages 44, 45), appro\’ed February 7, 1933, it is provided as follows:
“Subject to the requirements for paying maturing State Highway notes or bonds and interest thereon, the state treasurer shall, during each of the fiscal years from March 1, 1933, to March 1, 1935, set aside semi-annually out of the first moneys coming into the State Highway Fund the sum of $1,000,000.-00 for the maintenance of the state highways and the expense of the highway department.” Section 1.
By Act No. 82 (page 245), approved March 7, 1933, the General Assembly provided that the state highway fund as such should be abolished; that all funds arising from the operation of toll bridges be credited by the state treasurer to a fund to be known as the bond refunding fund, and all appropriations for the maintenance and operation of tollbridges should be paid from that fund; all funds arising from other sources to be credited to a fund to be known as the unapportioned fund. The act created in the state treasurer a fund to be known as the highway maintenance fund, and all appropriations for the expenses of the highway department and for the maintenance of the state highway system were made payable from this fund. The state treasurer was required to transfer each month from the revenues in the unapportioned fund to the highway maintenance fund the sum of $166,666.66, and the remainder of the revenue from the state highways to a fund to be known as the bond refunding fund.
By Act No. 167 (page 496), approved March 28, 1933, it is provided, among other things, that beginning January 1, 1934, the state treasurer shall set aside out of the bond refunding fund the sum of $125,000 every three months as a sinking fund to be used exclusively for the purchase of state bonds. It authorizes the issuance of state bonds in a total sum equal to the aggregate of the entire outstanding indebtedness of the state on account of the construction and maintenance of the state highway system, and for the exchange of state bonds for obligations issued on account of the state highway system.
By Act No. 183 (page 573), approved March 28, 1933, there is appropriated the sum of $4,380,000 from the bond refunding fund for the purpose of paying interest on state bonds for the fiscal year ending June 30,1934, and a like sum for the same purpose for the fiscal year ending June 30, 1935, and appropriating from that fund, for the purpose of purchasing state bonds during the biennial period ending June 30,1935, the sum of $250,000 for the year ending June 30, 1934, and the sum. of $500,000 for the year ending June 30, 1835.
By Act No. 270 (page 837), approved March 30, 1933, it is provided that the auditor of the state, and the state treasurer, shall transfer from the bond refunding fund for each fiscal year ending June 30, 1935, the sum of $250,000, and place this amount to the credit of the charities fund.
By Act No. 12 (1st Ex. Sess.), approved August 24, 1933, it is provided, among other things, that the refunding board, created by Act No. 167 for the year 1933, be directed and empowered to defend all suits 'brought against the state, or any of its officers, making an attack upon Act No. 167, or seeking to prevent the refunding of obligations therein mentioned, or to prevent the maintenance of state highways; and this board is authorized to compromise, discharge, and adjust any obligations to be refunded under Act No. 167, except such claims a§ might be compromised and settled by the highway audit commission. This act appropriates the sum of $60,000, or so much thereof as may be necessary to enable the board to carry out the provisions of the act.
*150Various other acts of the same general character were passed by the 1933 General Assembly, the purpose and effect of which was to divert the funds that had theretofore been pledged and appropriated to the payment of interest and principal of the state highway bonds, to some other purpose.
The second count of the bill of complaint involves tollbridge bonds issued by the state, and the issues there presented are in principle identical with those raised in the first count.
The defendant as state treasurer, pursuant to the provisions of the various acts passed by the 1933 General Assembly, has paid out and disbursed of the funds in his possession and in the state highway fund, or the highway maintenance fund, or the bond refunding fund, the sum of at least $52,000 for and on account of warrants of less than $100 par value each, and has set aside from the moneys in his hands in these funds, or some of them, during each month from January to June, 1933, both inclusive, the sum of $166,666.06 for road maintenance, and he intends to continue to set aside and disburse these funds pursuant to the various acts of the 1933 General Assembly. He also intends to disburse, pursuant to the various 1933 legislative acts, all of the funds theretofore pledged, and it is the contention of the plaintiffs that the diversion of these revenues is an impairment of the contracts entered into between the state of Arkansas and the holders of the highway and tollbridge obligations issued pursuant to the prior legislation, in violation of section 10 of article 1 of the Constitution of the United States; that the holders of these obligations beeame vested with the right to have these various fees' and taxes levied and collected as set forth in the legislative acts authorizing the issuance of the bonds and in the bonds themselves.
In their prayer for relief, plaintiffs ask that the defendant, individually and as state treasurer of the state of Arkansas, together with his agents, servants, and employees, be enjoined from disbursing or paying out any of the revenues derived from the imposition of the taxes and license fees described in the bill of complaint, pursuant to the unconstitutional acts of the 1933 General Assembly, and that it be adjudged that the holders of these bonds are vested with the first, prior, and paramount rights to such revenues, and that the various acts of the 1933 General Assembly, seeking to divert said revenues from the purpose for which they were originally levied and authorized, be held to be null and void.
The ease has been ably presented by counsel on either side, both by oral argument and printed briefs.
At the very threshold of this controversy, the jurisdiction of the court is challenged, on the ground that the suit, though in form against Roy V. Leonard, individually and as treasurer of state, is in effect a suit against the state. This objection is to be considered with reference to the Eleventh Amendment and with reference to section 10 of article 1 of the Constitution.
The Eleventh Amendment to the Constitution provides that the judicial power of the United States shall not be construed to extend to any suit in law or in equity commenced or prosecuted against one of the United states by citizens of another state. Section 10 of article 1 in effect provides that “No State shall * * * pass any Bill of Attainder, ex post facto law, or law impairing the obligation of contracts.”
The Legislature authorized the issuance of these bonds and made provision for their payment. The validity of this legislation was passed upon by the Supreme Court of Arkansas before the bonds were actually negotiated. Bush v. Martineau, 174 Ark. 214, 295 S. W. 9, 11; Jobe v. Urquhart, 102 Ark. 470, 143 S. W. 121, Ann. Cas. 1914A, 351; Tapley v. Futrell (Ark.) 62 S.W.(2d) 32.
In Bush v. Martineau, supra, the court held that the Legislature had plenary power to contract for and create interest-bearing indebtedness on the part of the state. In the course of the opinion it is further said:
“If the Legislature has ‘plenary power to contract for and create interest-bearing indebtedness/ when ‘the authority to bind the state to the payment of interest on her indebtedness’ is'plainly expressed in the act, as held in Jobe v. Urquhart, supra, then it would appear to be certain that it could validly exercise such power for the building of roads when the act expressly declares it to be the policy or ‘purpose’ of the state so to do.”
Again the court said:
“It is difficult to perceive why the state’s, full faith and credit should not be pledged, if it is to borrow any money. The fact that it pledges the funds arising from the tax on gas, oil, and motor vehicles does not relieve the state otherwise.”
Accepting the construction of the Arkansas Supreme Court as to the validity of this legislation, we may properly assume that the bonds issued pursuant to these acts constitute valid obligations of the state. These acts of! *151the Legislature authorizing the issuance of the bonds and contracting for their payment, became a part of the state’s contract, and in effect these provisions are embodied in the bonds themselves, leaving no doubt of the intention of the parties that the legislation should be read into the contract. United States ex rel. Von Hoffman v. Quiney, 4 Wall. 535, 18 L. Ed. 403; Board of Liquidation v. McComb, 92 U. S. (2 Otto) 531, 23 L. Ed. 623; Louisiana v. Pilsbury, 105 U. S. 278, 26 L. Ed. 1090; Wolff v. New Orleans, 103 U. S. 358, 26 L. Ed. 395; Moore v. Otis (C. C. A. 8) 275 F. 747, 751; Moore v. Gas Securities Co. (C. C. A. 8) 278 F. 111.
The Circuit Court of Appeals for this circuit, in Moore v. Otis, supra, had before it this identical question, and in the course of the opinion it is there said:
“The laws existing at the time of the issuance of the bonds and under the authority of which they were issued, enter into and become a part of the contract in such way that the obligation of the contract cannot thereafter be in any way impaired or its fulfillment hampered or obstructed by a change in the law.”
There can be no doubt that the effect of the various acts of the 1933 General Assembly was to impair the obligation of these contracts. With commendable frankness this was admitted on oral argument. In the brief of defendant which has been submitted since the oral argument, it is urged that the question whether the acts of the Legislature impair the obligation of the contract or furnish protective color for the threatened act of the defendant cannot be considered or adjudicated until it is first determined whether or not the suit in effect is a suit against the state, because it is said that, if the suit is in reality a suit against the state, this cqurt is without jurisdiction to determine any other question or issue, and has no alternative but to dismiss the suit.
The state is not named as a party to this suit, but, if the state is the real party in interest, and the officer is merely a nominal party, then the suit is in substance one against the state, and cannot be maintained. Carolina Glass Co. v. South Carolina, 240 U. S. 305, 36 S. Ct. 293, 60 L. Ed. 658; Farish v. State Banking Board, 235 U. S. 498, 35 S. Ct. 185, 59 L. Ed. 330; Lankford v. Platte Iron Works Co., 235 U. S. 461, 35 S. Ct. 173, 59 L. Ed. 316; Hopkins v. Clemson Agri. College, 221 U. S. 636, 31 S. Ct. 654, 55 L. Ed. 890, 35 L. R. A. (N. S.) 243; Cunningham v. Macon & B. R. Co., 109 U. S. 446, 3 S. Ct. 292, 609, 27 L. Ed. 992; Christian v. Atlantic & N. C. R. Co., 133 U. S. 233, 10 S. Ct. 260, 33 L. Ed. 589; Cargile et al. v. New York Trust Co. (C. C. A. 8) 67 F.(2d) 585.
We cannot, however, agree with counsel for defendant that in considering the question as to whether this is a suit against the state, we should not give attention to the question as to whether’ the legislative acts, under color of which the defendant claims the right to act, are void as violative of, the contract clause of the Constitution. If these acts are unconstitutional, and for that reason void, they furnish no protection for the acts of the officer, and hence a suit to enjoin such acts 'could not be said to be a suit against the state. Greene v. Louisville & I. R. Co., 244 U. S. 499, 37 S. Ct. 673, 676, 61 L. Ed. 1280, Ann. Cas. 1917E, 88; Ex parte Young, 209 U. S. 123, 28 S. Ct. 441, 450, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764; Poindexter v. Greenhow, 114 U. S. 270, 5 S. Ct. 903, 962, 29 L. Ed. 185, 207; Pennoyer v. McConnaughy, 140 U. S. 1, 11 S. Ct. 699, 701, 35 L. Ed. 363; Rolston v. Crittenden, 120 U. S. 390, 7 S. Ct. 599, 30 L. Ed. 721; Tindal v. Wesley, 167 U. S. 204, 17 S. Ct. 770, 42 L. Ed. 137; Hopkins v. Clemson Agri. College, 221 U. S. 636, 31 S. Ct. 654, 656, 55 L. Ed. 890, 35 L. R. A. (N. S.) 243; Looney v. Crane Co., 245 U. S. 178, 38 S. Ct. 85, 62 L. Ed. 230; Houston v. Ormes, 252 U. S. 469, 40 S. Ct. 369, 370, 64 L. Ed. 667; Old Colony Trust Co. v. City of Seattle, 271 U. S. 426, 46 S. Ct. 552, 70 L. Ed. 1019; Terrace v. Thompson, 263 U. S. 197, 44 S. Ct. 15, 68 L. Ed. 255; Public Service Co. v. Corboy, 250 U. S. 153, 39 S. Ct. 440, 63 L. Ed. 905; Cavanaugh v. Looney, 248 U. S. 453, 39 S. Ct. 142, 63 L. Ed. 354; Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, 14 S. Ct. 1047, 38 L. Ed. 1014; Sterling v. Constantin, 287 U. S. 378, 53 S. Ct. 190, 193, 77 L. Ed. 375; Cargile et al. v. New York Trust Co. (C. C. A. 8) 67 E. (2d) 585. 588.
In Greene v. Louisville & I. R. Co., supra, the Supreme Court was met with, the contention that the plaintiff could not maintain the suit to restrain certain state officers from performing certain acts under legislative acts which were claimed to be unconstitutional. In the course of the opinion the court said:
“A fundamental contention of appellants is that the present actions, brought to restrain them in respect of the performance of duties they are exercising under the authority of the state of Kentucky, are in effect suits against the state. Questions of this sort have arisen *152many times in this court, but the matter was set at rest in Ex parte Young, 209 U. S. 128, 150, 155, 52 L. Ed. 714, 725, 727, 13 L. R. A. (N. S.) 932, 28 S. Ct. 441, 14 Ann. Cas. 764, where it was held that a suit to restrain a state officer from executing an unconstitutional statute, in violation of plaintiff’s rights and to his irreparable damage, is not a suit against the state, and that ‘individuals who, as officers of the state, are clothed with some duty in regard to the enforcement of the laws of the state, and who threaten and are about to commence proceedings, either of a civil or criminal nature, to enforce against parties affected an unconstitutional act, violating the Federal Constitution, may be enjoined by a Federal court of equity from such action.’ ”
We think this pronouncement may well be accepted by this court as an authoritative statement of the law based upon all the previous decisions of the Supreme Court.
Great reliance is placed upon the decision in In re Ayers, 123 U. S. 443, 8 S. Ct. 164, 31 L. Ed. 216. That case was urged on behalf of petitioner in Ex parte Young supra, and in reviewing the Ayers Case, the court in Ex parte Young, said:
“The eases upon the subject were reviewed, and it was held (Re Ayers, 123 U. S. 443, 31 L. Ed. 216, 8 S. Ct. 164), that a bill in equity brought against officers of a state, who, as individuals, have no personal interest in the subject-matter of the suit, and defend only as representing the state, where the relief prayed for, if done,'would constitute a performance by the state of the alleged contract of the state, was a suit against the state (page 504 [of 123 U. S., 8 S. Ct. 164]), following in this respect Hagood v. Southern [117 U. S. 52, 6 S. Ct. 608, 29 L. Ed. 805], supra.
“A suit of such a nature was simply an attempt to make the state itself, through its officers, perform its alleged contract, by directing those officers to do acts which constituted such performance. The state alone had any interest in the question, and a decree in favor of plaintiff would affect' the treasury of the state.”
Again the court said, in referring to the Ayers Case:
“But the injunction asked for in the Ayers Case, 123 U. S. [443, 8 S. Ct. 164, 31 L. Ed. 216], supra, was to restrain the state officers from commencing suits under the act of May 12, 1887 (alleged to be unconstitutional), in the name of the state and brought to recover taxes for its use, on the ground that, if such suits were commenced, they would be a breach of a contract with the state. The injunction was declared illegal because the suit itself could not be entertained, as it was one against the state, to enforce its alleged contract. It was said, however, that, if the court had power to entertain such a suit, it would have power to grant the restraining order preventing the commencement of suits. (Page 487 [of 123 U. S., 8 S. Ct. 164]). It was not stated that the suit or the injunction was necessarily confined to a ease of a threatened direct trespass upon or injury to property.”
In the instant case, no affirmative relief is sought against the defendant, but it is sought to enjoin him from carrying out unconstitutional statutes invading the constitutional rights of the plaintiffs.
In Pennoyer v. MeConnaughy, supra, suit was brought to restrain an officer from acting under a statute which was violative of section 10, article 1, of the Constitution. In considering the question whether the suit was in effect one against the state, the court, in an opinion by Mr. Justice Lamar, among other things, said :
“A very large number of eases involving a variety of questions arising under this amendment have been before this court for adjudication; and, as might naturally be expected, in view of the important interests and the wide-reaching political relations involved, the dissenting opinions have been numerous. Still, the general principles enunciated by these adjudications will, upon a review of the whole, be found to be such as the majority of the court and the dissentients are substantially agreed upon.
“It is well settled that no action can be maintained in any federal court by the citizens of one of the states against a state, without its consent, even though the sole object of such suit be to bring the state within the operation of the constitutional provision. which provides that ‘no state shall pass any law impairing the obligation of contracts.’ This immunity of a state from suit is absolute and unqualified, and the constitutional provision securing it is not to be so construed as to place the state within the reach of the process of the court. Accordingly, it is equally well settled that a suit against the officers of a state, to compel them to do the acts which constitute .a performance by it of its contracts, is, in effect, a suit against the state itself.
“In the application of this latter principle, two classes of cases have appeared in the decisions of this court, and it is in determin*153ing to which class a particular ease belongs that differing views have been presented.
“The first class is where the suit is brought against the officers of the state, as representing the state’s action and liability, thus making it, though not a party to the record, the real party, against which the judgment will so operate as to compel it to specifically perform its contracts. * * *
“The other class is where a suit is brought against defendants who, claiming to act as officers of the state, and under the color of an unconstitutional statute, commit acts of wrong and injury to the rights and property of the plaintiff acquired under a contract with the state. Such suit, whether brought to recover money or property in the hands of such defendants, unlawfully taken by them in behalf of the state, or for compensation in damages, or, in a proper ease where the remedy at law is inadequate, for an injunction to prevent such wrong and injury, or for a mandamus, in a like case, to enforce upon the defendant the performance of a plain, legal duty, purely ministerial, is not, within the meaning of the eleventh amendment, an action against the state.”
As has been observed, in the instant case no affirmative relief is asked against the defendant. It is not sought to compel him to perform the state’s contract, but we are asked to enjoin him from acts authorized by the unconstitutional statutes which would be violative of plaintiffs’ rights guaranteed by the Constitution.
By valid legislative enactments, which became part of the contracts involved, certain revenues were set aside and appropriated to the payment of the interest and principal of these obligations. The defendant now, acting under color of unconstitutional statutes, is threatening to divert these funds to the irreparable injury of the plaintiffs. His threatened affirmative action is what is sought to be enjoined. As said by the Supreme Court in Hopkins v. Clemson Agricultural College, supra:
“The many claims of immunity from suit have therefore been uniformly denied, where the action was brought for injuries done or threatened by public officers. If they were indeed agents, acting for the state, they — • though not exempt from suit — could successfully defend by exhibiting the valid power of attorney or lawful authority under which they acted. Cunningham v. Macon & B. R. Co., 109 U. S. 446, 452, 27 L. Ed. 902, 994, 3 S. Ct. 292, 609. But if it appeared that they proceeded under an unconstitutional statute, their justification failed, and their claim of immunity disappeared on the production of the void statute.”
In Houston v. Ormes, supra, there was involved a suit to establish an equitable lien for attorney’s fees upon a fund in the treasury of the United States appropriated by Congress to pay a claim found by the Court of Claims to be due to one Sanders. It was contended that the suit was in effect one against the United States. In the course of the opinion it is said:
“But since the fund in question has been appropriated by act of Congress for payment to a specified person in satisfaction of a finding of the Court of Claims, it is clear that the officials of the Treasury are charged with the ministerial duty to make payment on demand to the person designated. It is settled that in such a case a suit brought by the person entitled to the performance of the duty against the official charged with its performance is not a suit against the government.”
In Sterling v. Constantin, supra, the United States District Court entered an interlocutory injunction restraining the Governor and certain military officials of Texas from enforcing military orders restricting the production of plaintiff’s oil wells, and it was contended that the suit was one against the state. In denying this contention, the court succinctly said:
“The suit is not against the state. The applicable principle is that, where state officials, purporting to act under state authority, invade rights secured by the Federal Constitution, they are subject to the process of the federal courts in order that the persons injured may have appropriate relief.”
The Circuit Court of Appeals of this circuit, in Cargile v. New York Trust Company, supra, in discussing the contention that the suit in that case was one against the state, said:
“The mere fact, therefore, that the defendants are officers or agents of the state, does not in itself place them beyond the reach of equitable power. Immunity from suit is an attribute of sovereignty which cannot be invoked by public officers when sued for their own wrongful acts, even though such acts might be committed under color of an unconstitutional statute. Individual officers of a state do not constitute a privileged class, but are amenable to the law, and they cannot interpose the shield of the Eleventh Amendment.”
*154To attempt a.review of the various decisions of the Supreme Court on this subject would unduly extend this opinion and serve no useful purpose.
Immunity from suit is an attribute of sovereignty. It was the theory of the English law that the king could do no wrong, but it developed that his ministers could. When the acts of officers, sought to he controlled by injunction or mandamus, represent the sovereign will, the suit cannot be maintained because the state is then the real party. The converse of this rule is likewise true, that, when the acts of the officers are in violation of the sovereign will of the state, then their acts may be controlled by injunction or mandamus. A distinction is to be drawn between the government or administrative agencies of the state and the state itself. The state in contemplation of the Eleventh Amendment, is an abstraction, an ideal entity, “intangible, invisible, immutable.” The government, on the other hand, is the agency through which the state acts. When the government functions within the limitations of its powers as fixed by the Constitutions of the state and the United States, it represents the state, but when that government violates these inhibitions and transcends its limitations, it is a lawless usurper. The government of the state, and the state’s administrative agencies, as distinguished from the sovereign state which can do no wrong, are subject to the sovereign will — -the mandates and inhibitions of the State and Federal Constitutions — as are the private citizens. Hence, when the Legislature of a state passes an act within the limits imposed by the State and Federal Constitutions, that act is the sovereign will, but, if an act transcends such limits, it is a mere nullity, and the legislative agency thereby commits 'a wrongful act. The principle is well stated by the Supreme Court in Poindexter v. Greenhow, 114 U. S. 270, 5 S. Ct. 903, 914, 962, 29 L. Ed. 185, where the court, among other things, said:
“In the discussion of such questions, the distinction between the government of a state and the state itself is important, and should be observed. In common speech and common apprehension they are usually regarded as identical; and as ordinarily the acts of the government are the acts of the state, because within the limits of its delegation of power, the government of the state is generally confounded with the state itself, and often the former is meant when the latter is mentioned. The state itself is an ideal person, intangible, invisible, immutable. The government is an agent, and, within the sphere of the agency, a perfect representative; but outside of that, it is' a lawless usurpation. The constitution .of the state is the limit of the authority of its government, and both government and state are subject to the supremacy of the Constitution of the United States, and of the laws made in pursuance thereof. So that, while it is true in respect to the government of a state, as was said in Langford v. United States, 101 U. S. 341 [25 L. Ed. 1010], that the. maxim, that the king can do no wrong, has no place in our system of government; yet it is also tree, in respect to the state itself, that whatever wrong is attempted in its name is imputable to its government, and not to the state, for, as it can speak and act only by law, whatever it does say and do must be lawful. That which, therefore, is unlawful because made so by the supreme law, the constitution of the United States, is not the word or deed of the state, but is the mere wrong and trespass of those individual persons who falsely speak and act in its name.”
In the instant case, the legislative acts of 1933, which purport to divert and appropriate these funds to other purposes, are unconstitutional and hence there has, been no lawful appropriation of the revenue in the hands of the treasurer to these other purposes. On the other hand, by prior acts confessedly constitutional, these funds have been pledged, set aside, and appropriated.
We conclude that the suit is not one against the state,_ and that the plaintiffs are entitled to the injunetional relief prayed for as against the defendant.
We have permitted the county judges of the various counties to intervene in this suit, and they assert that the defendant has in his possession funds belonging to the county highway fund which were appropriated by Act No. 48 of the 1933 General Assembly (page 130), and which are the property of the various counties. It is their contention that these funds should not be subject to injunction.
Under the provisions of Act No. 606 of the 1921 Session of the General Assembly (page 685), there was imposed a tax of one cent per gallon on gasoline sold in the state, this tax to be collected by the county collectors and divided by the county courts, one-half to the county general road fund, and one-half to the Treasurer of the State of Arkansas for the benefit of the state highway improvement fund. Prior to 1921 the principal source of revenue available for the construction and maintenance of county roads was a 3-mill road tax. By Act No. 501 of the 1923 *155General Assembly (page 408), there was imposed a tax of 3 cents per gallon on gasoline, 75 per cent, of whieh was dedicated to the county highway improvement fund, and 25 per cent, of whieh was dedicated to the state highway improvement fund. By Act No. 5 of the 1923 General Assembly (Extra Session, p. 11) there was established a comprehensive system of state highways, and a tax of 4 cents per gallon on gasoline was levied for the purpose of constructing and maintaining the highways of the state system and to assist the counties in maintaining and improving county roads.
Under the provisions of Act No. 81 of the 1927 General Assembly (page 221), 50 per cent, of the 3-mill road tax whieh had theretofore been used by the counties for the maintenance and construction of county roads was appropriated for the purpose of improving streets in municipalities. Under the provisions of Act No. 11 of the 1927 General Assembly (page 17), a tax of 5 cents a gallon was imposed for the purpose of benefiting the state highway system. At least, this is the conclusion of the pleader in intervention. In 1931 a 6 cents tax was imposed on gasoline, five-sixths of which was to be deposited in the state treasury to the credit of the state highway fund, and one-sixth to the credit of a fund known as the county highway fund. The proceeds of the fund were to be distributed to the counties quarterly. The statute provided, however, that, if the total revenue produced from the 6 cents tax should be less than $7,500,000 a year, the deficit should be taken from the county highway fund for any such year before an allotment to the counties was made (Act No. 63, 1931 General Assembly [page 171]).
Act No. 48 of the 1933 General Assembly repealed and struck out from Act No. 63 of the 1931 General Assembly section 6 thereof, which contained provision that, in the event the revenue should be less than $7,500,000 in any one year, the allotment to the counties should not be made until after the deficit should have been provided for. This legislation has already been referred to and need not again be set out nor summarized.
The question to be determined is whether the one-cent revenue from the gasoline tax, allocated to the county highway fund by the 1931 General Assembly, could constitutionally be so allocated by the 1933 legislation, regardless of whether the revenue from gasoline tax was less than $7,500,000 per annum, contrary to the provisions of the 1931 act to the effect that none of it should be paid into the county highway fund until and unless the revenue produced should equal that sum. Prior legislation pledged this revenue to the payment of interest and principal of the highway and tollbridge bonds. As has already been observed, by contract set out in legislative enactment and embodied in these bonds, the revenue of the state derived from automobile licenses and fees, and from a tax on gasoline, and on any substitute thereof used in propelling automobiles on its highways, was set aside out of the first revenues collected in an amount sufficient to pay the accruing interest and the maturing bonds during the periods designated. It was expressly covenanted in the statutes that as long as any of these contract obligations were outstanding, the state would not permit sections 35 and 36 of Act No. 5 (Ex. Sess.), approved October 10, 1923, to be repealed nor amended so as to reduce the revenue therein provided for, and that, if the revenue arising from these sources should fall below $7,500,000 per annum, it would amend sections 35 and 36 so as to provide for an annual minimum levy of $7,500,000, and in 1929 such an amendment was adopted.
The interveners contend that the legislation relative to the funds derived for improvement of county highways in no manner violates the contracts of the state; but the manifest purpose and effect of Act No. 48 of the 1933 General Assembly was to displace the guaranteed priority of payment of the bonds of the state and interest from funds raised by taxation of motor vehicles and gasoline and to substitute therefor a priority in favor of the county highway fund. It is clear that this act, in providing that certain funds should go to the county highway fund from the revenue raised by taxation of motor vehicles and gasoline, impairs the obligation of the contracts made by the state, to the effect that the treasurer should set aside out of the first revenue collected from these sources during each semiannual period, funds sufficient to pay all obligations of the series of bonds and interest thereon maturing and accruing during such period.
The prayer of the interveners must therefore, be denied.
Counsel for plaintiffs may prepare findings and conclusions and form of decree in accordance with this opinion. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219286/ | FRANKLIN E. KENNAMER, District Judge.
This action was originally filed in the District Court of Tulsa county, O'kL, against St. Louis-San Francisco Railway Company, James M. Kurn, and John G. Lonsdale, receivers of St. Louis-San Francisco Railway Company, seeking the recovery of damages on account of an injury sustained by plaintiff. The cause was removed to this court upon the petition of James M. Kum and John G. Lonsdale, receivers, reciting the fact of their appointment as receivers by the federal court. A motion to remand the cause has been interposed by the plaintiff and those portions of plaintiff’s petition pertinent to a determination of the questions presented alone will be set out.
Plaintiff alleges that on or about the 5th day of May, 1932, he was employed as a special agent to inspect ears used in trains operated between points in Missouri, Oklahoma, and Texas, and that the trains he was required to ride upon and examine carried interstate shipments of commerce through these and other states; that plaintiff’s injuries resulted from him being shot by en*786emies of the corporate defendant because of harsh treatment administered by special agents of the defendant corporation upon persons upon trains and right of way of the defendant; that the enmity of persons in and near the town of Claremore, Okl., was well known to plaintiff’s superiors but was unknown to him, but that plaintiff, without knowledge of the conditions or the dangers, was directed to ride a passenger train to Claremore, Okl., and there to inspect the yards and to ride back to Tulsa on a freight train, and that while he was carrying out the orders, he started walking in the railway yards in the town of Claremore, Okl., and was there met by certain persons incensed against the defendant railway company, and shot with a revolver, striking plaintiff directly in the mouth. Plaintiff seeks to recover under the Federal Employers’ liability Act (45 USCA §§ 51-59), but also sought the recovery of punitive damages in the sum of $30,000 by alleging that the said railway system was being operated in violation of the laws of the state of Oklahoma and of the United States. Plaintiff dismissed his cause of action for punitive damages, leaving only for the consideration of the court his cause of action under the Federal Employers’ Liability Act.
At the outset, it should be observed that the receivers were appointed for the corporation on November 2, 1932, several months after plaintiff suffered his alleged injuries.
Plaintiff insists (1) that the cause having been brought under the Federal Employers’ Liability Act in the state court of Oklahoma, it is not removable because of the federal statute creating the Federal Employers’ Lia-' bility Act; and (2) that actions instituted against receivers appointed by federal courts are not removable from the state to federal courts unless the action is directed personally against the receivers; and (3) that the injury having occurred prior to the appointment of receivers by the federal court, that the same is not removable.
The contentions asserted by the defendants are likewise three-fold. In the first place, it is urged that the allegations of plaintiff’s petition show that plaintiff was not engaged in interstate commerce or in work so closely related to interstate transportation as to be practically a part of it, and that the action is therefore not governed by the Federal Employers’ Liability Act (45 USCA §§ 51-59), and that the cause is removable on account of diversity of the citizenship between plaintiff and defendants, plaintiff being a resident of Oklahoma and the defendants being residents of Missouri. The second contention is that the action is removable to the federal court because the receivers appointed by this court are made parties-defendant, and that title 28 USCA § 76, provides for removal by officers of the federal courts of actions brought against them in the state courts. The last contention is that the action is removable to the federal court for the reason that plaintiff attempts to state two causes of action, one under the Federal Employers’ Liability Act, and the other under the statutes of Oklahoma, or common law, in plaintiff’s endeavor to seek punitive damages.
We are here concerned with the consideration of two statutes; one, that portion of the Federal Employers’ Liability Act pertaining to the removal of causes, and the other, title 28 USCA § 76, relating to the removal, of causes pending against officers of the courts of the United States. The pertinent section of the first statute, upon which plaintiff relies for a remand of the cause, is as follows:
USCA 45, e. 2, § 56, p. 515: “ * • * Under this chapter an action may be brought in a district court of the United States, in the district of the residence of. the defendant, or in which the cause of action arose, or in which the defendant shall be doing business at the time of commencing such action. The jurisdiction of the courts of the United States under this chapter shall be concurrent with that of the courts of the several States, and no case arising under this chapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States. (Apr. 22, 1908, c. 149, § 6, 35 Stat. 66; Apr. 5, 1910, c. 143, § 1, 36 Stat. 291.)”
The statute (28 USCA § 76) upon which the defendant receivers base their right of removal, is as follows:
“When any civil suit or criminal prosecution is commenced in any court of a State * * * against any officer of the courts of the United States for or on account of any act done under color of his office or in the performance of his duties as such officer, * * * the said suit or prosecution may at any time before the trial or final hearing thereof be removed for trial into the district court nest to be holden in the district where the same is pending upon the petition of such defendant to said district court and in the following manner. * * * ”
Before discussing the above statutory provision and considering the cases bearing *787upon the questions here presented, it is necessary to dispose of the other contentions relied upon by the parties.
It is first insisted that plaintiff has not set forth a cause of action in his petition under the Federal Employers’ Liability Act. It is urged that plaintiff’s petition discloses that plaintiff was engaged in work in intrastate commerce rather than in interstate, by reason of having pleaded that he was directed by his superior to proceed from Tulsa, Okl., to another point in Oklahoma, to wit, Claremore, upon a passenger train, and .to inspect the cars and railway yards of the defendant company at Claremore, and upon the completion thereof to return to Tulsa upon a freight train. The defendants insist that 'the plaintiff, at the time of the injury, was not engaged in interstate transportation or in work so closely related to it as to be practically a part of it. Numerous authorities are presented in support of this contention.
It is well established that the test for the determination of an injury arising under the Federal Employers’ Liability Act is the nature of the work being done by the employee at the time of the injury, and further, in order to bring the cause under the federal act, the employee must have been engaged, at the time of the injury, in interstate transportation or in work so closely related to it as to be practically a part of it. New York Cent. R. Co. v. White, 243 U. S. 188, 37 S. Ct. 247, 61 L. Ed. 667, L. R. A. 1917D, 1, Ann. Cas. 1917D, 629. Numerous eases are reported applying the above principles of law to the facts in the particular ease. It is often difficult to apply the above principles to the facts in a given case. The question is presented herein, but its decision is unnecessary in view of the conclusions set out hereafter. However, a review of the facts involved in some of the eases and the decisions thereon is enlightening.
A yard conductor on an interstate railway, injured while alighting from a slowly moving freight train, for the purpose of reporting to the yard master’s office for further orders, was held not to have been employed in interstate commerce, although the orders which he would have received, had he not been injured, would have required him to make up an interstate train. Erie Railroad Company v. Welsh, 242 U. S. 303, 37 S. Ct. 116, 61 L. Ed. 319. The reason for the decision is that the duties of the particular employee were restricted to the yard and his employment was held not to have been closely related to interstate transportation.
A night watchman, employed for the purpose of guarding tools and materials intended to be used in the construction of a railway station and tracks, was held not to have been engaged in interstate commerce, although such station and tracks were to have been used in interstate commerce when completed. New York Central Railway Company v. White, supra.
A police officer, employed by a railroad, was held not to have been engaged in interstate commerce at the time he was injured, even though at the time of injury he was investigating the theft of property which had been moving in interstate commerce. Delaware, L. & W. R. Co. v. Scales (C. C. A.) 18 F.(2d) 73. See, also, Kelly v. Pennsylvania R. Co. (C. C. A.) 238 F. 95; Alabama Great Southern Co. v. Bonner, 200 Ala. 228, 75 So. 986, 10 A. L. R. 1160; Chicago & Alton Ry. Co. v. Industrial Commission, 290 Ill. 599, 125 N. E. 378; Chicago, Rock Island & Pacific Railway Co. v. Industrial Board of Illinois, 273 Ill. 528, 113 N. E. 80, L. R. A. 1916F, page 540.
A fireman, employed by an interstate railway carrier on a switching engine, killed while aiding in the work of moving several ears, all loaded with intrastate freight between two points in the same city, was held not to have been employed in interstate commerce within the meaning of the Federal Employers’ Liability Act (45 USCA §§ 51-59), in Illinois Central Railroad Co. v. Behrens, 233 U. S. 473, 34 S. Ct. 646, 58 L. Ed. 1051, Ann. Cas. 1914C, 163.
It is to be observed from these eases that the injured employee, at the time of receiving the injury, was not engaged in interstate commerce or in work sufficiently closely related to it as to be practically a part of it. The facts in the reported cases differ widely from those here presented. In my opinion, the work of the plaintiff, as set forth in his petition, was sufficiently closely related to interstate eomineree as to be practically a part of it.
In Philadelphia, B. & W. R. Co. v. Smith, 250 U. S. 101, 39 S. Ct. 396, 63 L. Ed. 869, the United States Supreme Court held that a cook in a camp car, at a siding near a railroad bridge being repaired, who was employed to assist and was assisting the bridge carpenters by keeping their bed and board close to their work, was employed, as were, the carpenters, in interstate commerce within the Federal Employers’ Liability Act.
*788A railroad servant, killed by a passing train while shoveling snow upon the railroad company’s premises, between the platform and the tracks used for interstate and intrastate ears in commerce, was held to have been employed in interstate commerce. New York Central Railroad Co. v. Porter, 249 U. S. 168, 39 S. Ct. 188, 63 L. Ed. 536.
A yard clerk, killed while proceeding through the railroad yards to meet an incoming interstate freight train for the purpose of taking down the numbers and initials on the ears, of inspecting and making a record of the seals on the ear doors, and of labeling them to guide the switching crews, was employed in interstate commerce within the Federal Employers’ Liability Act. St. Louis, San Francisco & Texas Railway Co. v. Scale, 229 U. S. 156, 33 S. Ct. 651, 57 L. Ed. 1129, Ann. Cas. 1914C, 156. See, also, Southern Pacific Co. v. Industrial Accident Commission of California, 251 U. S. 259, 40 S. Ct. 130, 64 L. Ed. 258, 10 A. L. R. 1181; Clemence v. Hudson & M. R. Co. (C. C. A.) 11 F. (2d) 913; Eng v. Southern Pacific R. Co. (D. C.) 210 F. 92; Freeman v. Frasher, 84 Colo. 67, 268 P. 538; Coil v. Payne, 114 Kan. 636, 220 P. 172.
I cannot agree with defendants that this cause is removable under the diversity of citizenship statute because the action does not come within the Federal Employers’ Liability .Act. Since I conclude that it is within the purview of that act, it is not removable on account of diversity of citizenship of the parties.
Defendants next contend that the cause is removable because plaintiff sought, in addition to a recovery under the Federal Employers’ Liability Act, a judgment for punitive damages. Plaintiff dismissed his cause of action based upon his right to recover punitive damages, but defendants insist that the dismissal having been made after the removal of the cause to the federal court, that it is without effect, and cannot deprive this court of jurisdiction. Defendants’ contention finds support in a decision of the United States District Court for the Northern District of Texas, in Givens v. Wight, 247 F. 233, wherein a petition sought in the alternative two different grounds of recovery, one upon the Federal Employers’ Liability Act and the other upon a statute of the state of Texas. A similar decision was rendered by the United States District Court for the Northern District of Ohio, in Bedell v. Baltimore & O. R. Co., 245 F. 788. The contrary result has been reached by the United States District Court for the Northern District of Georgia, in Reese v. Southern Railway Co., 26 F.(2d) 367, and Mitchell v. Southern Railway Co., 247 F. 819. The same decision has been announced by the United States District Court for the Northern District of New York in Peek v. Boston & M. R. R., 223 F. 448, and Rice v. Boston & M. R. R., 203 F. 580. In my opinion the better view is expressed by the eases last referred to, and I adhere to the proposition that a suit framed under two distinct counts, one based on the Federal Employers’ Liability Act, and one on the state laws, where both arise out of the same set of circumstances, that there is in substance but one case, and it is one arising under the Federal Employers’ Liability Act (45 USCA §§ 51-59), and is not removable by reason of the diversity of citizenship of the parties. It, therefore, becomes unnecessary to consider the other proposition of the defendants, to wit, that the dismissal of the cause of action bottomed upon the state statute or common law, for punitive damages, does not prevent a removal. However, there are decisions to the effect that after a case has been properly removed to the federal court, a plaintiff cannot, by reducing the amount sought, or amending it, require a remanding of the case. Kirby v. American Soda Fountain Co., 194 U. S. 141, 24 S. Ct. 619, 48 L. Ed. 911; Kanouse v. Martin, 15 How. 198, 14 L. Ed. 660; Twin Hills Gasoline Co. v. Bradford Oil Corporation (D. C.) 264 F. 440; Jellison v. Krell Piano Co. (D. C.) 246 F. 509.
It is well established that a cause arising under the Federal Employers’ Liability Act, and instituted in the state court, wherein it is alleged the injured person was employed in interstate commerce at the time of the injury or death, which brings the case within such act, cannot be removed from the state to the federal court because of diversity of citizenship, or because it arose under the Constitution or federal statute. Great Northern Railway Co. v. Alexander, 246 U. S. 276, 38 S. Ct. 237, 62 L. Ed. 713, Kansas City Southern Railway Co. v. Leslie, 238 U. S. 599, 35 S. Ct. 844, 59 L. Ed. 1478; Reese v. Southern Railway Co., supra; Thompson v. Chicago & Northwestern Railway Co. (D. C.) 14 F.(2d) 230. But the proposition established by these eases is not decisive of the question here presented. The removal of this cause to the federal court was not under the federal statute providing for a removal of causes because of the diversity of citizenship of the parties, or as arising under the Constitution, or laws of the United States. *789The removal in this ease is predicated upon the statute set forth herein, providing for the removal of suits commenced in any court of the state against officers of the courts of the United States, for or on account of any act done under color of his office or in the performance of his duties as such officer. There is a division in the authorities as to the removability of a cause commenced in a state court against a receiver appointed by a federal court, wherein a recovery is sought for the negligent operation of the properties under the control of the receiver. There does not appear to have been a decision by a Circuit Court of Appeals of the precise question here presented, to wit, the removability of an action based upon the Federal Employers’ Liability Act, commenced against a federal court receiver. The cases uniformly hold that a receiver appointed by a court is an officer of the appointing court within the purview of the statute providing for a removal of causes. However, there is a division in the authorities as to which cases are removable, the Eighth Circuit Court of Appeals in Newell v. Bryam, 26 F.(2d) 200, taking the broader view of the statute and holding that all eases commenced against federal court receivers are removable, while the Fifth Circuit Court of Appeals in the recent case of Ruff v. Gay, 67 F.(2d) 684, has limited the effect of the statute and held it applicable, as regards receivers, only to actions and proceedings to hold receivers responsible in their own person or property. The Tenth Circuit Court of Appeals, which is controlling of this court, has not passed upon the question, and since there is a difference in the holdings of two Circuit Courts of Appeals, the question is properly for the United States Supreme Court, rather than for this court’s determination. However, it is not difficult to decide that the ruling of the Eighth Circuit Court of Appeals is controlling of the decision of the question now before the court. This court was formerly a part of the Eighth Judicial Circuit, having become disengaged therefrom upon the creation of the Tenth Judicial Circuit. The decisions of the Eighth Judicial Circuit axe binding upon this court in the absence of decisions of the Tenth Circuit. It is proper to observe that the decision of the Eighth Circuit Court of Appeals, in Newell v. Bryam, supra, was rendered by Hon. Walter H. Sanborn, and concurred in by Hon. Robert E. Lewis, then a member of the Eighth Circuit Court of Appeals, and Hon. Orie L. Phillips, then a District Judge within the Eighth- Circuit, but sitting as a member of the Eighth Circuit Court. Upon the creation of the Tenth Circuit Court of Appeals, Hon. Robert E. Lewis was designated as a member of the Tenth Circuit Court of Appeals, and is its senior Circuit Judge at this time. Hon. Orie L. Phillips was appointed á member of the Tenth Circuit Court of Appeals, and is now a member of that court. Thus, the Eighth Circuit Court of Appeals’ decision was rendered by two of the present judges of the Tenth Circuit Court of Appeals, and in my opinion the decision is controlling of this court. However, I have no difficulty in following the decision as I consider it sound upon principle and the proper construction of the statute involved.
I cannot accept the reasoning of the caso of Ruff v. Gay, supra, in so lightly dismissing the holding of the Eighth Circuit and the District Court decisions, that in the conduct of the business the receiver was carrying out his duties as an officer of the court. It appears to me that the only relation a receiver can have to the operation of property over which he has control is one arising by virtue of an order of the appointing court. Whatever he does in the conduct of the affairs of the estate over which he has control, he performs in a representative capacity, representing the court from which he obtained his appointment. He is made an officer of the court by reason of the order appointing him receiver; he is responsible to the appointing court for all assets delivered to him under orders of the court, and is responsible to the appointing court for all of his acts and doings while executing the orders of the court, and carrying on the business and administering the affairs of the properties over which he was made receiver. The instances are few indeed where a receiver is subjected to litigation for responsibility in his own person or property; numerous actions arise against receivers in the conduct of the business over which they act as receivers. Certainly it was the intention of Congress to give officers of the courts, including receivers appointed by them, protection against responsibility in their own person and property, and since the jurisdiction of the court over property for which a receiver has been appointed is exclusive of the jurisdiction of all Other courts [Harkin v. Brundage, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457; Superior Oil Corporation v. Matlock (C. C. A.) 47 F.(2d) 993; Barnett v. Mayes (C. C. A.) 43 F.(2d) 521], the appointing court should have complete control over all litigation involving the property under its domination. The appointing court does not only have ex-*790elusive jurisdiction over the property, but under the statute, all suits commenced against its officers are removable to the federal court. It occurs to me that the statute meant what it expressly said when it states that any civil suit commenced in any court of a state against any officer of the courts of the United States, for or on account of any act done under color of his office, or in the performance of his duty as such officer, may at any time before trial be removed for trial to the federal District Court. The statute (28 US CA § 76) does' not say that a particular suit or a suit seeking to hold a receiver responsible in his own person or property may be removed, but says “any civil suit” may be removed ; the act does not limit the removal of civil suits against officers of the courts to acts done under color of his office, but goes beyond that by including civil suits commenced against an officer of the court on account of any act done under color of his office or in the performance of his duties as such officer. Certainly it was the duty of the receivers in the instant ease to operate trains upon the properties of the corporate defendant; there would have been a dereliction of their duties to have not so operated the trains of the corporate defendant, unless expressly ordered by the appointing court.- The instant suit was commenced against them by reason of an act done by them in the performance of their duties as receivers. By-the same token that legislation should not be construed as to enlarge the jurisdiction of federal courts, Acts of Congress should not be construed to defeat their purpose or to lessen, the effect of express language employed in them. It is noteworthy that the statute above referred to was enacted on August 23, 191G, while the provision in the Federal Employers’ Liability Act (45 USCA §§ 51-59), preventing removal of causes instituted in the state courts, was passed in the year 1908'. The; difference in the dates of the enactments of the statutes explains the existence of decisions prior to 1916, holding that actions instituted against federal court receivers under the Federal Employers’ Liability Act, were not removable. Gableman v. Peoria, D. & E. R. Co. et al., 179 U. S. 335; 21 S. Ct. 171, 45 L. Ed. 220, decided December 10, 1900; People of State of New York v. Bleecker, St. & F. F. Co. (C. C.) 178 F. 156; decided March 5, 1910; Dale v. Smith (C. C.) 182 F. 360, decided November 3, 1910; Rural Home Telephone Co. v. Powers (C. C.) 176 F. 986, decided February, 1910. Since 1916, in addition to the, decisions by the Fifth Circuit Court of Appeals, Ruff v. Gay, supra, a per curiam decision was rendered by Judges Cant, Molyneaux, and John B. Sanborn, sitting as a District Court in Minnesota. A very forceful opinion was rendered, but subsequently the Circuit Court of Appeals of that circuit (8th C. C. A.) modified the effect of the decision in ruling that all actions against receivers were removable under the above cited statute.
The United States District Court for the Western District of Missouri, in Slover v. Chicago, M. & St. P. R. Co., 16 F.(2d) 609; concluded that the federal act, covered only such actions as were designed to hold the officer personally liable because of his official conduct, reaching the same conclusion, in effect, as the Fifth Circuit Court of Appeals. However, after the Eighth Circuit Court of Appeals announced its decision in Newell v. Bryam, supra, Judge Reeves of the United States District Court for the Western District of Missouri rendered an opinion, in Elliott v. Wheelock, 34 F.(2d) 213, and passed squarely upon the question here presented. In the cited case an action was commenced against a federal court receiver under the Federal Employers’ Liability Act. In that case, as in this, after removal from the state to the federal court, plaintiff presented a motion to remand. The District Court remarked that the amendment providing for the removal of causes against officers of the courts of the United States, because of any act done under color of his office, or in the performance of his duties as such officer, was adopted 8 years after the enactment of the liability act, and that the Court of Appeals, Eighth Circuit, had definitely decided that a federal receiver in all suits against his trust, without regard to the question of value or citizenship> had the right to remove such suits to the federal courts for trial. He further concluded that under the broad construction placed upon the statute by the Eighth Circuit Court of Appeals, a federal receiver has the absolute right in all civil actions against him, at any time before the trial, to remove such actions to the District Court, provided that such civil suit is for or on account of any act done under color of his office or in the performance of his duties as such officer, and that it includes suits brought under the Federal Employers’ Liability Act (45 USCA §§ 51-59). The same District Court reached a similar conclusion in a ease not involving the Federal Employers’ Liability Act, in American Locomotive Co. v. Histed, 18 F.(2d) 656. In Berens v. Bryam, 26 F.(2d) 953, Judge Elliott of the United States District Court of South Dakota, reached the same conclusion. *791as did the Circuit Court of Appeals for the Eighth Circuit in Newell v. Bryam, supra. The reasoning employed by Judge Elliott differs from that of the other courts, but contains great force. The first construction of this statute seems to have been in Matarazzo v. Hustis, 256 F. 882, a decision of the District Court for the Northern District of New York, wherein that court announced that there could be no doubt that suits against a receiver appointed by a court of the United States, brought in the state court, may be removed for trial to the United States District Court. See, also, Barnette v. Wells Fargo Nevada National Bank of San Francisco, 270 U. S. 438, 40 S. Ct. 326, 70 L. Ed. 669.
There is a conflict in the two statutes involved in the determination of this ease, in so far as they pertain to the removal of eases based on the Federal Employers’ Liability Act (45 USCA §§ 51-59). That act expressly says that such cases are not removable, while the act providing for the removal of any civil action commenced in state courts against officers of United States courts is equally explicit. In such instances, both statutes being special in that they pertain to definite matters and situations, under a well-established rule of statutory construction, the latest enactment will control, and will be regarded as an exception to, or qualification of, the prior statute. Washington v. Miller, 235 U. S. 422, 35 S. Ct. 119, 59 L. Ed. 295; U. S. v. Mullendore (C. C. A.) 35 F.(2d) 78; 59 C. J. 1052. As set out herein, the employers’ act was passed in the year 1908, while the removal act for officers of United States courts was enacted in 1916, and must be regarded as an exception to, or qualification of, the earlier act, as to the removal feature contained therein.
I, therefore, have no difficulty in concluding that a civil suit instituted in the state court against a receiver appointed by a federal court is removable to the federal court at any time before trial, if the cause of action arose against the receiver on account of any act done when under color of his office or in the performance of his duties as such officer, and that the statute comprehends and includes all actions, whether arising at common law, state statutes, or under the Federal Employers’ Liability Act.
The remaining contention of the plaintiff upon which he relies for the remanding of this cause, as his petition alleges, is that plaintiff sustained the injury upon which the action is predicated on May 5, 1932, which was prior to the appointment of receivers by the United States District Court, for the properties of the corporate defendant. There can be no doubt but that a civil action based upon a cause of action arising prior to the appointment of receivers, if instituted against the corporation in the state court after the appointment of receivers by the federal court for the assets of the corporation, is not removable to the federal court upon the petition of the receivers. This question has had the consideration of the United States Supreme Court in Riehle v. Margolies, 279 U. S. 219, 49 S. Ct. 310, 73 L. Ed. 669. However, the joining of federal court receivers as defendants in such an action renders the entire cause removable upon the petition of the receivers. It is a civil action commenced against officers of the federal court and is removable under the statute referred to above. If a cause of action is prosecuted against receivers even though the injury occurred prior to the appointment of the receivers, the cause is removable and may be tried in this court. The reason for such a holding is practical. If plaintiff prosecutes his action against the corporation, without asserting a cause of action against the receivers, the judgment obtained must be filed in an appropriate federal court and payment ordered upon the distribution of the estate. It may be inferior to secured claims and costs and expenses of the receivership. If an action is successfully prosecuted against a receiver, the judgment obtained constitutes an item of expense and is a liability of the receiver in his operation, payable out of the operation, and is superior to corporate claims, into which class a judgment rendered against the corporation would be. The reason, therefore, is practical; judgments against the corporate defendant, for injuries, will constitute general claims, junior to the expenses of the receivership and the costs of administration ; a recovery against the receivers will stand as a portion of the cost of administration. There is thus a practical reason for such a rule, which asserts itself upon the payment of claims and the distribution of the estate.
Plaintiff’s motion to remand the case to the District Court of Tulsa county is denied. | 01-04-2023 | 07-25-2022 |
Subsets and Splits