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Full text of "Federal Reporter (F1), Volume 234"

This volume was donated to LLMC 

to enrich its on-line offerings and 

for purposes of long-term préservation by 

Northwestern University School of Law 



NATIONAL REPORTER SYSTEM-UNITED STATES SERIES 



THE 

FEDERAL REPORTER 

WITH KEY-NUMBER ANNOTATIONS 



VOLUME 234 



PERMANENT EDITION 



CASES ARGUED AND DETERMINED 

ra THE 

CIRCUIT COURTS OF APPEALS AND 
DISTRICT COURTS OF THE 
UNITED STATES 



SEPTEMBER — OCTOBER, 1916 



ST. PAUL 
WEST PUBLISHING CO. 

1915 



Copyright, 1916 

BY 

WEST PUBLISHING COMPANY 

(234 FED.) 



FEDERAL REPORTER, VOLUME 234 



JUDGES 



UNITED STATES CIRCUIT COURTS OF APPEALS 
AND THE DISTRICT COURTS 



FIRST CIRCUIT 



Hon. OLIVER WENDELL HOLMES, Circuit Justice Washington, D. C. 

Hon. WILLIAM L. PUTNAM, Circuit Judge Portland, Me. 

Hon, FREDERIC DODGB, Circuit Judge Boston, Mass. 

Hon. GEO. H. BINGHAM, Circuit Judge Concord, N. H. 

Hon. CLARENCE HALE, District Judge, Maine Portland, Me. 

Hon. JAS. M. MORTON, Jr., District Judge, Massachusetts Boston, Mass. 

Hon. EDGAR ALDRICH, District Judge, New Hamp.shire Littleton, N. H. 

Hon. ARTHUR L. BROWN, District Judge, Rhode Island Providence, R. I. 

SECOND CIRCUIT 

Hon. LOUIS D. BRANDEIS, Circuit Justice Washington, D. C. 

Hon. ALFRED C. COXE, Circuit Judge New York, N. Y. 

Hon. HENRY G. WARD, Circuit Judge New York, N. Y. 

Hon. HENRY WADE ROGERS, Circuit Judge New Haven, Conn. 

Hon. CHARLES M. HOUGH, Circuit Judge' New York, N. Y. 

Hon. EDWIN S. THOMAS, District Judge, Connecticut New Haven, Conn. 

Hon. THOMAS I. CHATFIELD, District Judge, E. D. New York Brooklyn, N. Y. 

Hon. VAN VECHTEN VEEDER, District Judge, E. D. New York Brooklyn, N. Y. 

Hon. GEORGE W. RAY, District Judge, N. D. New York Norwlch, N. Y. 

Hon. CHARLES M. HOUGH, District Judge, S. D. New York' New York, N. Y. 

Hon. LBARNED HAND, District Judge, S. D. New York.. New York, N. Y. 

Hon. JULIUS M. MAYER, District Judge, S. D. New York New York, N. Y. 

Hon. AUGUSTUS N. HAND, District Judge, S. D. New York New York, N. Y. 

Hon. MARTIN T. MANTON, District Judge, S. D. New York" New York, N. Y. 

Hon. JOHN R. HAZEL, District Judge, W. D. New York Buffalo, N. Y. 

Hon. HARLAND B. HOWE, District Judge, Vermont St. Johnsbury, Vt. 



THIRD CIRCUIT 



Hon, MAHLON PITNEY, Circuit Justice Washington, D. C. 

Hon. JOSEPH BUFFINGTON, Circuit Judge Pittsburg, Pa. 

Hon. JOHN B. McPHERSON, Circuit Judge Philadelphia, I>a. 

Hon. VICTOR B. WOOLLBY, Circuit Judge Wilmington, Del. 

Hon. EDWARD G. BRADFORD, District Judge, Delaware Wilmington, Del. 

Hon, JOHN RELLSTAB, District Judge, New Jersey Trenton, N. J. 

Hon. THOS. G. HAIGHT, District Judge, New Jersey Jersey City, N. J. 

Hon. J. WARRBN DAVIS, District Judge, New Jersey Trenton, N. J. 

Hon. J. WHITAKER THOMPSON, District Judge, E. D. Pennsylvanla. ..Philadelphia, Pa. 

Hon. OLIVER B. DICKINSON, District Judge, E. D. Pennsylvanla Philadelphia, Pa. 

Hon. CHAS. B. WITMBR, District Judge, M. D. Pennsylvanla Sunbury, Pa. 

Hon. CHARLES P. ORR, District Judge, W. D. Pennsylvania Pittsburg, Pa. 

Hon, W. H. SBWARD THOMSON, District Judge, W. D. Pennsylvania Pittsburg, Pa. 

> Appointed Circuit Judge August 21, 1916. 

• Appointed AUgust 23, 1916, to succeed Charles M. Hough. 

(V) 



VI 234 FEDERAL REPORTER 



FOURTH CIRCUIT 

Hon. EDWARD D. WHITE, Circuit Justice Washington, D. C. 

Hon. JETER C. PRITCHARD, Circuit Judge Asheville, N. C. 

Hon. MARTIN A. KNAPP, Circuit Judge ;. Washington, D. C. 

Hon. CHAS. A. WOODS, Circuit Judge Itfarlon, S. C. 

Hon. JOHN C. ROSE, District Judge, Maryland Baltimore, Md. 

Hon. HENRY G. CONNOR, District Judge, E. D. North Carolina Wllson, N. C. 

Hon. JAIVIES E, BOYD, District Judge, W. D. North Carolina Greensboro, N. C. 

Hon. HENRY A. MIDDLETON SMITH, District Judge, E. D. S. C Charleston, S. C. 

Hon. JOSEPH T. JOHNSON, District Judge, W. D. S. C Greenville, S. C. 

Hon. EDMUND WADDILL, Jr., District Judge, B. D. Virginia Rlehmond, Va. 

Hon. HENRY CLAY McDOWELL, District Judge, W. D. Virginia Lynchburg, Va. 

Hon. ALSTON G. DAYTON, District Judge, N. D. West Virginia Phllippi, W. Va. 

Hou. BENJAMIN F. KELLBR, District Judge, S. D. West Virginia.... Charleston, W. Va. 



FIFTH CIRCUIT 



Hon. JAMES CLARK McREYNOLDS, Circuit Justice Washington, D. C. 

Hon. DON A. FARDEE, Circuit Judge Atlanta, Ga. 

Hon. A. P. McCORMICK, Circuit Judge Waco, Tex. 

Hon. RICHARD W. WALKER, Circuit Judge Huntsviile, Ala. 

Hon. HENRY D. CLAYTON, District Judge, N. and M. D. Alabama... .Montgomery, Ala. 

Hon. WM. I. GRUBB, District Judge, N. D. Alabama Birmingham, Ala. 

Hou. HAHRY T. TOULMIN, District Judge, S. D. Alabama Mobile, Ala. 

Hon. WM. B. SHEPPARD, District Judge, N. D. Florida Pensacola, Fia. 

Hon. RHYDON M. CALL, District Judge, S. D. Florida Jacksouvllle, Fia. 

Hon. WILLIAM T. NEWMAN, District Judge, N. D. Georgla Atlanta, Ga. 

Hon. BMORY SPEER, District Judge, S. D. Georgla Maçon, Ga. 

Hon. WM. WALLACB LAMBDIN, District Judge, S. D. Georgla Savannah, Ga. 

Hon. RUFUS E. POSTER, District Judge, E. D. Louisiana New Orléans, La. 

Hon. ALECK BOARMAN, District Judge, W. D. Louisiana» Shreveport, La. 

Hon. HENRY C. NILES, District Judge, N. and S. D. Mississippi Kosciusko, Miss. 

Hon. GORDON RUSSELL, District Judge, E. D. Texas Sherman, Tex. 

Hon. EDWARD R. MEEK, District Judge, N. D. Texas Dallas, Tex. 

Hon. WALLER T. BURNS, District Judge, S, D. Texas Houston, Tex. 

Hon. THOMAS S. MAXEY, District Judge, W. D. Texas Austin, Tex. 



SIXTH CIRCUIT 



Hon. WILLIAM R. DAY, Circuit Justice Washington, D. C. 

Hon. JOHN W. WARRINGTON, Circuit Judge Cincinnati, Ohlo. 

Hon. LOYAL B. KNAPPBN, Circuit Judge Grand Raplds, Mlch. 

Hon. ARTHUR C. DENISON, Circuit Judge Grand Raplds, Mlch. 

Hon. ANDREW M. J. COCHRAN, District Judge, E. D. Kentucky Maysville, Ky. 

Hon. WALTER EVANS, District Judge, W. D. Kentucky Louisville, Ky. 

Hon. ARTHUR J. TUTTLE, District Judge, E. D. Michigan Détroit, Mlch. 

Hon. CLARBNCB W. SESSIONS, District Judge, W. D. Michigan. ...Grand Raplds, Mlch. 

Hon. JOHN M. KILLITS, District Judge, N. D. Ohlo Toledo, Ohlo. 

Hon. JOHN H. CLARKE, District Judge, N. D. Ohlo* Cleveland, Ohlo. 

Hon. JOHN B. SATBR, District Judge, S. D. Ohio Columbus, Ohio. 

Hon. HOWARD C. HOLLISTBR, District Judge, S. D. Ohio Cincinnati, Ohio. 

Hon. EDWARD T. SANFORD, District Judge, E. and M. D. Tennessee.. Knoxyilie, Tenu. 
Mon. JOHN B. McCALL, District Judge, W. D. Tennessee Metaphis, Tenu. 

SEVENTH CIRCUIT 

Hon. JOHN H. CLARKE, Circuit Justice' Washington, D. C. 

Hon. FRANCIS B. BAKER, Circuit Judge Goshen, Ind. 

Hon. CHRISTIAN C. KOHLSAAT, Circuit Judge Chicago, 111. 

Hon. JULIAN W. MACK, Circuit Judge Chicago, 111. 

Hon. SAMUEL ALSCHULER, Circuit Judge Chicago, 111. 

• Died August 30, 1916, * Appointed Assoclate Justice of Suprême Court, July 24, 1916. 



JUDGES OF THE COURTS Vil 

Hon. EVAN A. EVANS, Circuit Judge Baraboo, Wis. 

Hon. KBNBSAW M. LANDIS, District Judge, N. D. Illinois Chicago, III. 

Hon. GEORGE A. CARPBNTER, District Judge, N. D. Illinois Chicago, III. 

Hon. FRANCIS M. WRIGHT, District Judge, E. D. Illinois Urbana, 111. 

Hon. J. OTIS HUMPHREY, District Judge, S. D. Illinois Springfleld, II!. 

Hon. ALBERT B. ANDERSON, District Judge, Indiana Indianapolis, Ind. 

Hon. FERDINAND A. GBIGER, District Judge, E. D. Wisconsin Milwaukee, Wis. 

Hon. ARTHUR L. SAKBORN, District Judge, W. D. Wisconsin Madison, Wis. 

EIGHTH CIRCUIT 

Hon. WILLIS VAN DEVANTER, Circuit Justice .Washington, D. C. 

Hon. WALTER H. SANBORN, Circuit Judge St. Paul, Minn. 

Hon. WILLIAM C. HOOK, Circuit Judge Leavenworth, Kan. 

Hon. ELMBR B. ADAMS, Circuit .ludge' St. Louis, Mo. 

Hon. WALTBR I. SMITH, Circuit Judge Council Bluffs, lowa. 

Hon. JOHN E. CARLAND, Circuit Judge Washington, D. C. 

Hon. JACOB TRIEBBR, District Judge, B. D. Arkansas Little Rock, Ark. 

Hon. F. A. YOUMANS, District Judge, W. D. Arkansas Ft. Smith, Ark. 

Hon. ROBERT E. LEWIS, District Judge, Colorado Denver, Colo. 

Hon. HENRY THOMAS RËED, District Judge, N. D. lowa Cresco, lowa. 

Hon. MARTIN J. WADE, District Judge, S. D. lowa lowa City, lowa. 

Hon. JOHN C. POLLOCK, District Judge, Kansas Kansas City, Kan. 

Hon. PAGE MORRIS, District Judge, Minnesota Duluth, Minn. 

Hon. WILBUR F. BOOTH, District Judge, Minnesota Minneapolis, Minn. 

Hon. DAVID P. DYER, District Judge, B. D. Missouri St. Louis, Mo. 

Hon. ARBA S. VAN VALKENBURGH, District Judge, W. D. Missouri... Kansas City, Mo. 

Hon. THOMAS C. MUNGER, District Judge, Nebraska Lincoln, Keb. 

Hon. JOSEPH W. WOODROUGH, District Judge, Nebraska Omaha, Neb. 

Hon. WM. H. POPE, District Judge, New Mexico» Santa Fé, N. M. 

Hon. CHARLES F. AMIDON, District Judge, North Dakota Fargo, N. D. 

Hon. RALPH B. CAMPBELL, District Judge. E. D. Oklahoma Muskogee, 0kl. 

Hon. JOHN H. COTTERAL, District Judge, W. D. Oklahoma Guthrie, 0kl. 

Hon. JAMES D. BLLIOTT, District Judge, South Dakota Sioux Falls, S. D. 

Hon. TILLMAN D. JOHNSON, District Judge, Utah Ogden, Utah. 

Hon. JOHN A. RINER, District Judge, Wyoming Cheyenne, Wyo. 

NINTH CIRCUIT 

Hon. JOSEPH McKENNA, Circuit Justice Washington, D. C. 

Hon. WILLIAM B. GILBERT, Circuit Judge Portland, Or. 

Hon. BRSKINE M. ROSS, Circuit Judge Los Angeles, Cal. 

Hon. WM. W. MORROW, Circuit Judge San Francisco, Cal. 

Hon. WM. H. HUNT, Circuit Judge Washington, D. C. 

Hon. WM. H. SAWTELLE, District Judge, Arizona Tucson, Ariz. 

Hon. BENJ. F. BLEDSOE, District Judge, S. D. California Los Angeles, Cal. 

Hon. OSCAR A. TRIPPET, District Judge, S. D. California Los Angeles, Cal. 

Hon. WM. C. VAN FLBET, District Judge, N. D. California San Francisco, Cal. 

Hon. MAURICE T. DOOLING, District Judge, N. D. California San Francisco, Cal. 

Hon. FRANK S. DIETRICH, District Judge, Idaho Boise, Idaho. 

Hon. GEO. M. BOURQUIN, District Judge, Montana Butte, Mont. 

Hon. EDWARD S. PARRINGTON, District Judge, Nevada Carson City, Nev. 

Hon. CHARLES B. WOLVERTON, District Judge, Oregon Portland, Or. 

Hon. ROBERT S. BBAN, District Judge, Oregon Portland, Or. 

Hon. FRANK H. RUDKIN, District Judge, E. D. Washington Spokane, Wash. 

Hon. EDWARD E. C0SHMAN, District Judge, W. D. Washington Seattle, Wash. 

Hon. JEREMIAH NETERER, District Judge, W. D. Washington Seattle, Wash. 

' Died October 24, 1915. • Dled September 13, 1916. 



CASES REPORTED 



Page 
Actieselskabet Neptun v. New York & Ber- 

mudez Co. (D. 0.) . . T44 

^olian Co. v. Wanamaker (C. C. A.) 90 

^tna Life Ins. Oo., Pilgrim v. (D. 0.)... 958 
Alaska Gastineau Mining Co., Macaulay v. 

(C. C. A.) 611 

Albright, United States v. (D. C). 202 

Alco Film Corp. v. Alco Film Service of 

Minnesota (C. O. A.) 55 

Alco Film Corp. v. Progressive Inv. Co. 

of Portland, Or. (C. C. A.) 55 

Alco Film Service of Minnesota, Alco Film 

Corp. V. (C. C. A.) 55 

Alwart Bros. Coal Co. v. Royal CoUiery Co. 

" O. A.) 20 



(0. 



American Bank of Alaska, Richards v. (C. 

C. A.) 300 

American Can Co., United States v. (D. 

C.) 1019 

American Caramel Co. v. White (C. C. A.) 328 
American Graphophone Oo., Gibsou v. (0. 

C. A.) 633 

American Graphophone Co. v. Gimbel Bros. 

(D. O.) 344 

American Graphophone Co. v. Gimbel Bros. 

(D. 0.) 361 

American Trading Co., Levis v.(0. C. A.) 863 
Andersen, New York Mail & Newspaper 

ïransp. Co. v. (0. C. A.) 590 

Appam. The (D. C.) 389 

Astoroga Paper Co., In re (D. O.) T92 

Atkinson, Granville Lumber Oo. v. <D. 0.) 424 
Atlanta Gaslight Oo., Riter-Conley Mfg. 

Co. V. (D. C.) 896 

Aunt Jemima Mills Oo. v. Rigney & Oo. 

(D. C.) 804 

Autopiano Co. v. Claviola Oo. (0. 0. A.) . . 314 

Baird v. Smith (C. C. A.) 58 

Baker, In re (0. O. A.) 604 

Baltimore & 0. S. S. Oo., Gaines v. (D. C.) 786 
Baltimore & O. R. Oo., Dernberger v. (D. 

C.) 405 

Barnes, Williams v. (0. 0. A.) 339 

Bay State Milling Oo., Appeal of (C. O. A.) 67 
Becker Bros., Bush & Lane Piano Oo. v. 

(0. C. A.) 79 

Berg V. Erickson, two cases (C. C. A.) 817 

Beseler Oo., Pagano v. (D. 0.) 963 

Bishop, Pryor v. (0. 0. A.) 9 

Blakeley, The (D. C.) 959 

Boatmen's Bank, Chicago Mill & Lumber 

Co. V. (0. C. A.) 41 

Boggs, Higginbotham v. (0. C, A.) 253 

Braun v. John Griffiths & Sons Co. (0. 

O. A.) 636 

Bright V. Virginia & Gold Hill Water Co. 

(0. C. A.) 839 



Page 
Brooklyn Eastern Dist. Terminal, Lehigh 

Valley R. Co. v. (C. 0. A.) 310 

Brovvn Portable Elevator Oo. v. Interior 

Warehouse Co. (D. O.) 649 

Brunson v. Georgia Chemical Works (C. 

O. A.) 826 

Buffalo Sr)ecialtv Co. v. Indiana Rubber & 

Insulated Wire Co. (O. O. A.) 334 

Bump, Compagnie Générale Transatlan- 
tique V. (0. 0. A.) 52 

Burke Electric Co. v. Indepcndent Pneu- 

matic Tool Oo. (C. O. A.) 93 

Bush V. Metropolitan Trust Co. of City of 

New York (D. C.) 809 

Bush & Lane Piano Oo. v. Becker Bros. 

(C. C. A.) 79 

Oaldwell, Northwestern Terra Cotta Co. 

v. (C. C. A.) 491 

Carlisle v. Smith (D. 0.) 759 

Central Coal Co., Eroutier S. S. Oo. v. (O. 

O. A.) 30 

Central Trust Oo. of Illinois, H. Petronio & 

Oo. V. (C. C. A.) 1023 

C. F. Ilarms Oo. v. Upper Hudson Stone 

Oo. (0. 0. A.) 859 

Chas. Beseler Oo.. Pagano v. (D. 0.).... 963 

Chas. H. Lilly Co., Day v. (D. 0.) 661 

Charles Keller & Co., Herzog v. (C. C. A) 85 
Chemung Iron Co., Niles Land Co. v. (C. 

C. A.) 294 

Chicago, K. & S. R. Oo. v. Kindlesparker (C. 

O. A.) 1 

Chicago Mill & Lumber Co. v. Boatmen's 

Bank (0. 0. A.) 41 

Chicago, M. & St. P. R. Oo. v. Irving (C. 

C. A.) 563 

Chicago, M. & St. P. R. Oo., United States 

V. (D. 0.) 386 

Chicago Rys. Oo. v. Kramer (C. 0. A.) .... 245 
Chicago Title & Trust Co., Zuttermeister v. 

(C. C. A.) 277 

Chicago & N. W. R. Co. v. United States 

(0. 0. A.) 268 

Chicago & N. W. R. Oo. v. United States, 

two cases (C. O. A.) 272 

Ohin Hing v. White (C. 0. A.) 616 

City of Wichita, Wichita Water Co. v. (D. 

0.) 415 

Clark, Grimes v. (O. C. A.) 604 

Clark Realty Oo., In re (O. 0. A.) 576 

Claviola Oo., Autopiano Oo. v. (C. O. A.) . . 314 
Cleveland, C, C. & St. L. R. Co., Unit- 
ed States V. (D. O.) 178 

C. L. Greeno Oo., Murray v. (0. C. A.) 91 

Cohen v. Lowe (D. 0.) 474 

Compagnie Générale Transatlantique v. 

Bump (0. 0. A.) 62 



234 F. 



(viii) 



CASES EEPORTED 



K 



Page 
Condamnation Suits by TJnited States, In 

re (D. C.) 443 

Confectioners' Machinery & Mfg. Co., Ra- 
cine Engine & Machinery Co. v. (0. C. 

A.) 876 

Continental Engine Co., In re (0. C. A.) . . . 58 
Conway Lumber Co., United States v. (D. 

0.) 961 

Corn Products Refining Co., United States 

V. (D. C.) 904 

Oushinan & Denison Mfg. Co. v. Grammes 

(D. C.) 952 

Cushman & Denison Mfg. Co. v. L. F. 

Grammes & Sons (D. C.) 049 

Outting V. Woodward (0. C. A.) 307 

Dalil V. United States (C. C. A.) 618 

Dannenberg Co., Hawkins v. (D. C.) 752 

Davoplane Bed Co., Freedman v. (C. C. A.) 70 

Day V. Chas. H. LiHy Co. (D. C.) 661 

Decker v. Smith (C. 0. A.) 646 

De Jonge & Co., Oriental Tissue Co. v. (C. 

C. A.) 895 

Delaware, L. & W. B. Co., Hartwell v. 

(D. C.) 112 

Delaware, L. & W. R. Co., Madden v. (D. 

O \ 7^1 

Del Xorte, Tiiè'(D.' C.) '.'.'.'.'.'.'.'.'.'.'.W'.'.W'. 667 
Dernberger v. Baltimore & O. R. Co. 

(D. C.) 405 

Dewey Portland Cernent Co. v. Texas Bldg. 

Co. (0. C. A.) 622 

Doyle V. Hamilton Fish Corp. (C. C. A.) 47 
Dozier Wholesale Grocerv Co., In re (D. C.) 169 

Dreveno, Kaplan v. (C. C. A.) 868 

Du Pont V. Du Pont (D. C.) 459 

Eastman Kodak Co. of Xew York, Southern 

Photo Material Co. v. (D. 0.) 955 

Edward G. JInrray, The (C. C. A.) 61 

Eibel Proeess Co. v. Remington-Martin Co. 

(G. C. A.) 624 

B. J. Willis Co., Rubes v. (C. C. A.) 341 

E. Petronio & Co. v. Central Trust Co. o£ 

Illinois (C. C. A.) 1023 

Erber v. United States (C. C. A.) 221 

Brickson, Eerg v., two cases ((!. C. A.). . 817 

Evans, Warren Bros. Co. v. (D. C.) . . . . 657 

Farmers' Dairy Ass'n, In re (D. C.) 118 

Feist, Inc., Haas v. (D. C.) 105 

Field V. Ilafnia S. S. Co. (D. C.) 187 

Fircman's Fund Ins. Co. v. Globe Nav. Co. 

(C. O. A.> 273 

Firestone ïire & Rubber Co., Seiberling v. 

(D. C.) 370 

Fîemington, The (C. C. A.) 864 

Forter-Miller Engineering Co. v. Morgan 

Const. Co. (C. C, A.) 324 

Fowler & Wolfe Mfg. Co. v. Riehmond Ra- 

diator Co. (C. C. A.1 C35 

Frank, In re (D. C.) 665 

Fransioli v. Prest-O-Ute Co. (C. C. A.),. 63 
Freedman v. Davoplane Bed Co. (C. C. A.) 70 
Freeport Texas Co., Union Sulphur Co. v. 

(D. C.) .. 191 

Freeport Texas Co., Union Sulphur Co. v. 

(D. C.) 194 

Fritch, Inc., v. United States (C. C. A.).. 608 



Page 



Frontier S. S. 
(C. O. A.) . . . , 



Co. V. Central Coal Co. 



30 



Gaines v. Baltimore & C. S. S. Co. (D. C.) 786 
Gas l'owei* Machinery Co. v. Wisconsin 

Trust Co. (C. C. A.) 281 

Georgia Chemical Works, Brunson v. (C. 

C. A.) 826 

Gibson v. American Graphopbone Co. (C. 

C. A.) 633 

Gilman v. Lamson Co. (C. C. A.) 507 

Gimbel Bros., American Graphophone Co. 

V. (D. C.) 344 

Gimbel Bros., American Graphophone Co. 

V. (D. C.) 361 

Gleason v. Thaw (C. O. A.) 570 

Globe Nav. Co., Fireman's Fund Ins. Co. v. 

(C. C. A.) 273 

Gormlev v. Thompson-Uockhart Co. (D. C.) 478 

Gradwell, United States v. (D. C.) 446 

Grammes, Cushman & Denison Mfg. Co. v. 

(D. C.) , 952 

Grammes & Sons, Cushman & Denison 

Mfg. Co. v. (D. C.) 949 

Granville Lumber Co. v. Atkinson (D. C.) 424 

Greeno Co., Murray v. (C. C. A.) 91 

GrifTiths & Son Co., Braun v. (C. C. A.). . 636 

Grimes v. Clark (C. C. A.) . . , . 004 

Guile, Waters v. (C. C. A.) 532 

Haas V. Léo Feist, Inc. (D. C.) 105 

Hafnia S. S. Co. v. Field (D. C.) 187 

Hamilton Fish Corp., Doyle v. (C. C. A.). . 47 
Hammond v. Manhattan Electrical Supply 

Co. (C. C. A.) 337 

Hanley v. Pacific Ldve Stock Co. (C. C. A.) 522 

Hanson v. Hanson (C. C. A.) 853 

Harms Co. v. Upper Hudson Stone Co. (C. 

Q, ^) ... 859 

Hartwell v. Deiàwàrè," h. & W. iV. CÔ.' (D. 

C.) 112 

Ilastings v. Hoog (D. C.) 103 

Hawkins Y. Dannenberg Co. (D. C.) 75li 

Herzog v. Charles Keller & Co. (C. C. A.). . 85 
H. G. Kroncke Hardware Co., United 

States Expansion Boit Co. v. (C. C. A.). . 868 

Higginbotliam v. Bopgs (C. C. A.) 253 

Hill V. United States (C. C. A.) 39 

Hoog, Ilastings v. (D. C.) 103 

Hopkins v. United States (C. C. A.) 867 

Hiiffman-Salvar Roofing Paint Co., In re 

(D. C.) 798 

Humarock, The (D. C.J 716 

Illinois Cent. R. Co., United States v. (D. 

C.) 433 

Illinois Surety Co., Pacific County v. (D. 

C.) 97 

Independent Pneumatic Tool Co., Burke 

Electric Co. v. (C. C. A.) 93 

Indiana Kubber & Insulated Wire Co., Buf- 

falo Specialty Co. v. (C. C. A.) 334 

Individual Drinking Cup Co. v. Public 

Service Cup Co. (D. C.) 653 

Inland Nav. Co., Swift v. (D. C.) 375 

Innovation Pvleetric Co., Vacuum Cleaner 

Co. V. (D. 0.) 942 

Interior Warehouse Co., Brown Portable 

Elevator Co. v. (D. C.) 649 



234 FEDBHAL REPORTER 



Page 

International Trust Co., In re (0. C. A.). • . 65 
Interocean Transp. Co. 6f America, In re 

(0. C. A.) 863 

lowa Wasliing Mach. Oo. t. Montgomery 

Ward & Oo. (C. C. A.) 88 

Irving, Chicago, M. & St. P. R. Co. v. (0. 

C A ) 562 

I. T. s! RÙWiGr Oo.ypànthér Kubber'Mfg. 

Co. V. (D. C.) 377 

James, Pacific Coast Co. v. (C. C. A.) 505 

J. Homer Fritch, Inc., v. United States (C. 

C. A.) 608 

John Griffiths & Son Co., Braun v. (C. C. 

A.) 630 

John Rugge, The (C. C. A.) SOI 

Johnson v. Lambert (C. C. A.) 880 

Kaestner & Hecht Co., Otis Elevator Co. v., 

two cases (D. 0.) 926 

Kaestner & Hecht Co., Sprague Klectrio 

Co. V. (D. C.) 926 

Kaplan, In re (C. C. xV.) SOO 

Kaplan v. Dreveno (C. C. A.) 860 

Keller & Co., Herzog v. (C. C. A.) 85 

Kentucky Distilleries & Warehouse Co., 
Old Lcxington Club Distillery Co. v. (D. 

O.) 464 

Kever v. Philadelphia & Keadiug Coal & 

Iron Co. (D. C.) 814 

Keys V. Meyer (0. C. A.) 94 

Kindlesparker, Chicago, K. & S. II. Co. v. 

(C. C. A.) 1 

Kinsey, United States v. (U. C.) 702 

Kletzly, In re (C. C. A.) 891 

Kline, L. E. Waterman Co. v. (C. C. A.) . . 891 

Komar, In re (D. 0.) 378 

Kramer, Chicago Eys. Co. v. (C. C. A.) . . . 245 
Kroneke Hardware Co., United States Ex- 
pansion Boit Co. V. (0. C. A.) 868 

Kruse, lu re (D. C.) 470 

Kuhn Bros., In re (C. C. A.) 277 

Lambert, Johnson v. (C. C. A.) ' 886 

Lamson Co. v. Gilman (C. C. A.) 507 

Landon v. Public Utilities Comiriission of 

Kausas (D. 0.) 152 

Leggat V. McLure (C. C. A.) (j20 

Lehigh Valley 11. Co. v. Brooklyn Easteru 

Dist. Terminal (C. C. A.) 310 

Lehigh Valley R. Co. v. United States 

(D. C.) 682 

Léo Feist, Inc., Haas v. (D. C.) 105 

Lesser, lu re (C. C. A.) 05 

Levi, In re (D. C.) 118 

Levis V. American Trading Co. (C. C. A.) . . 8ti3 
L. E. Waterman Co. v. Kline (C. C. A.). . . 891 
L. F. Grammes & Sons, Cushman & Deni- 

son Mfg. Co. V. (D. C.) 949 

Lilly Co., Day v. (D. C.) 001 

Linn v. United States (C. C. A.) 543 

Loek Joint Pipe Co. v. Melber (C. C. A.J . . 319 

Louise Rugge, The (D. C.) 708 

Louis De Jonge & Co., Oriental Tissue 

Co. V. (C. C. A.) 895 

Lowe, Cohen v. (D. G.) 474 

Lowe, Wm. E. Peck & Co. v. (D. C.) 125 

Luten V. Sharp (C. C. A.) SSO 



Page 
Macaulay v. Alaska Gastineau Mining Co. 

(C. C. A.) 611 

McCrackcn, In re (D. C.) 770 

McCutchen, United States v. (D. C.) 702 

McKey v. Pinekard (C. O. A.) 285 

McLure, Leggat v. (C. C. A.) 020 

Madden v. Delaware, L. & W. R. Go. (D. 

C.) 731 

Manhattan Electrical Supply Co., Ham- 

mond V. (C. C. A.) 337 

Meccauo v. Wagner (D. C.) 912 

Melber. Lock Joint Pipe Co. v. (C. C. A.) 319 

Mercer, Tlie (C. C. A.) 259 

Metropolitan Trust Co. of City of New 

York, Bush v. (D. O.) 809 

Meyer, Keys v. (C. C. A.) 94 

Midland Oilfields Co., United States v. 

(D. C.) 702 

Montgomery Ward & Co., lowa Washing 

Mach. Co. V. (C. C. A.) 88 

Morgan Const. Co. v. Forter-Miller En- 
gineering Co. (C. C. A.) 324 

Morris Plan Co. of New York, Universal 

Sav. Corp. v. (D. C.) 382 

Moy Wing Sun v. Prentis (C. C. A.) 24 

Murray, The Edward G. (C. C. A.) 61 

Murray t. C. L. (îreeno Co. (C. C. A.) 91 

Murray v. Third Nat. Bank of St. Louis 

(C. C. A.) 4SI 

Musgrove Mining Co., In re (D. C.) 99 

Nashville Grain Exch. v. United States 

(D. C.) 699 

National Bank of Barnesville. Ohio, Town 

of Newbern v. (C. C. A.).. 209 

National Malléable Castings Co. v. T. H. 

Symington Co. (O. C. A.) 343 

Newberry, Shall v. (D. C.) 792 

New l^ork Mail & Newspaper Transp. Co. 

V. Anderson (C. C. A.) 590 

New York & Bermudez Co., Actieselskabet 

Neptun V. (D. C.) 744 

New York & Bermudez Co., Orvig Damp- 

skibselskab Actieselskabet v. (I). C.) . . . 744 
Niles Land Co. v. Cheniung Iron Co. (C. 

C. A.l 294 

Northern Colorado Coal Co. v. United 

States (C. G. A.) 34 

Northnip v. Philadelphia & R. R. Co. (G. 

C. A.) 264 

Northwestern Terra Cotta Co. v. Caldwell 

(C. O. A.) 491 

Odom T. United States (0. C. A.) 1023 

Oesting v. United States (C. C. A.) 304 

Old Lexiugton Club Distillery Co. v. Ken- 

tuckv Distilleries & Warehouse Co. 

(D. C.) 404 

One Case, No. 1,577, United States v. (C. 

C. A.) 850 

Oregon Short Line R. Co. v. United States 

(C. G. A.) . 584 

Oriental Tissue Co. v. Louis De Jonge & 

Go. (C. C. A.) 895 

Orvig Dampskibselskab Actieselskabet v. 

New York & Bermudez Co. (I). C.) 744 

Otis Elevator Co. v. Kaestner & Hecht Co., 

two cases (D. C.) 926 



CASES EEPOETED 



XI 



Page 

Pnoific Coast Co. v. James (C. C. A.) 595 

Pacific County v. Illinois Surety Oo. (D. 0.) 97 
Pacific Live Stock Co., Hanley v. (C. C. A.) 522 
Pacifie Power Co. v. Shcafe (C. 0. A.). ... . 553 

l'asano v. Chas. Beseler Co. (D. C.) 963 

Pîiutbcr Krbber Mfg. Co. v. I. ï. S. Rub- 

l!«i- Co. (I). C.) 377 

l'arker v. Jfoss (C. 0. A.) 289 

l'eckett V. Wood (C. C. A.) 833 

Pcck & Co. V. Lowe (D. 0.) 125 

iVddrick, Peiinsylvania K. Co. v. (D. 0.).. 781 
Pennsylvaiiia K. Co. v. Peddrick (Ù. C). . . 781 

Perth Amboy, The (C. 0. A.) 861 

Peti-onio & Co. v. Central Trust Co. of Illi- 
nois. (C. C. A.) 1023 

l'biladelphia & Eeading Coal & Iron Co., 

Kever v. (D. C.) 814 

Pbiladelphia & R. R. Co., Northrup v. 

(0. C. A.) 264 

Pilgrim v. iBtna Life Ins. Co. (D. 0.) 958 

Pinches, Ransom & Randolph Co. v. (C. 

C. A ) . . , 847 

Pinckard, 'McKey 'v.' (c! C.' A.) '.'.\'.\\'.'. '.'.'. 285 

Pitt V. Rodgers (C. 0. A.) 1023 

Prentis, Moy Wing Sun v. (C. C. A.) 24 

Prentis, Wong Yuen v. (C. C. A.) 28 

Prest-O-Llte Co., Fransioli v. (C. 0. A.) . . 63 
Progressive Inv. Co. of Portiand, Or., Alco 

Film Corp. v. (C. O. A.) 55 

Pryor v. Bishop (C. O. A.) 9 

Public. Service Cup Co., Individual Drink- 

ing Cup Co. V. (D. C.) 653 

Public Utilities Commission of Ivansas, 

Landon v. (D. C.) 152 

Purdy, Sutherland v. (C. C. A.) 600 

Racine Engine & Machinery Oo. v. Confec- 

tioners' Machinery & Mfg. Co. (C. C. A.) 876 
Ransom & Randolph Co. v. Pinches (C. C. 

A.) 847 

Reed v. St. Paul, M. & M. R. Co. (D. C.) . . . 123 
Reed v. St. Paul, M. & M. R. Co. (D. C). . . 207 
Remington-Martin Oo., Eibel Process Co. v. 

(0. C. A.) 624 

Resolute, The (D. C.) 101 

Richards v. American Bank of Alaska (C. 

C A ) 300 

Richards'Bros!,'in're (C. C.' A.)'.'.'.'.'.'.'.'.'. .'1023 
Richmond Radiator Co., Powler & Wolfe 

Mfg. Co. y. (C. C. A.) 635 

Ricketts. In re (C. C. A.) 285 

Riguey & Co., Aunt Jemima Mills Co. v. 

(O. C.) 804 

Riter-Conley Mfg. Co. v. Atlanta Gaslight 

Co. (D. C.) 896 

Rodgers. Pitt v. (O. C. A.) 1023 

Ross, Parker v. (C. C. A.) 289 

Royal CoUiery Ce, Alwart Bros. Coal Co. 

V. (C. C. A.) 20 

Rubes v. E. ,1. Willis Co. (0. C. A.) .341 

Rugge, The John (C. 0. A.) 861 

Rugge, The Louise (D. C.) 768 



St. Louis, I. M. & S. R. Co., Union Trust 
Co. of New York v. (D. C.) 809 

St. Louis Southwestern R. Co. v. United 
States (D. O.) 608 

St. Paul, M. & M. R. Ce, Reed y. (D. C.) 123 



Page 
St. Paul, M. & M. R. Co., Reed v. (D. C.) 207 

Salas v. United States (C. C. A.) 842 

Samson Iron Works, Westinghouse Electric 

& Mfg. Co. V. (C. C. A.). 16 

Seiberling v. Firestone Tire & Rubber Co. 

(D. C.) 370 

Senator Rice, The (D. C.) 101 

Seneca, The (C. C. A.) 312 

Shall v. Xewberry (D. O.) 792 

Sharp, Luten v. (C. C. A.) 880 

Shealï, Pacific Power Co. v. (C. 0. A.) 553 

Sioux City Terminal R. Co., United States 

V. (D. C.) ; 663 

Smietanka, Western Extracting Co. v. (C. 

C A ) . . . . . . 229 

Smith, Baïrd'v.' (C! C.' 'À')'. '. '.'.'.'.'.'.'.'. '. '. '. '. '. 58 

Smith, Carlisle v. (D. C.) 759 

Smith, Decker v. (C. 0. A.) 646 

Snare & Triest Co., Wright & Cobb Light- 

erage Co. v. (D. C.) 774 

Snobomish River Boom Co., United States 

V. (O. C.) 95 

Soloway & Katz, In re (0. C. A.) 67 

Southern Photo Material Co. v. Eastman 

Kodak Co. of New York (D. C.) 955 

Sprague Electric Co. v. Kaestncr & Hecht 

Co. (D. C.) 926 

Stringer, In re (D. C.) 454 

Sundquist, Titlow v. (C. C. A.) 613 

Sutherland v. Purdy (C. C. A.) 600 

Swift V. Inland Nav. Co. (D. C.) 375 

Symington Co., National Malléable Castings 

Co. V. (C. C. A.) 343 

Texas Bldg. Ce, Dewey Portiand Cément 

Co. V. (C. C. A.) 622 

Thacher v. Transit Const. Oo. (C. C. A.). . . 640 

Thaw, Gleason v. (0. C. A.) 570 

Thermogene Co. v. Thermozine Oo. (C. 0. 

A.) 69 

Thermozine Co., Thermogene Co. v. (0. 

0. A.) 69 

Third Nat. Bank of St. Louis, Murray v. 

(C. C. A.) - 481 

Thompson-Lockhart Co., Gormley v. (D. 

Cl 478 

T. H. Symington Co., National Malléable 

Castings Co. v. (C. C. A.) 343 

Titlow V. Sundquist (C. C. A.) 613 

Tonawanda Iron & Steel Co., In re (D. 

C.) 198 

Town of Xewberu v. National Bank of 

Barnesville. Obio (C. C. A.) 209 

Transit Const. Co., Thacher v. (C. C. A.). . 640 

Union Sulphur Co. v. Freeport Texas Oo. 

(I). C.) 191 

Union Sulphur Co. v. Freeport Texas Co. 

(L). C.) 194 

Union Trust Co. of New York v. St. Louis, 

1. M. & S. R. Co. (D. C.) 809 

United Shoe Machinery Co., United States 

V. (D. C.) 127 

T'iiited States v. Albright (D. C.) 202 

United States v. American Can Co. (D. C.) 1019 
United States v. Chicago, M. & St. P. R. 

Co. (D. C.) 386 

United States, Chicago & N. W. R. Co. v. 

(C. C. A.) 268 



Xll 



234 FEDERAL EEPORTEK 



Page 
United States. Chicago & N; W. R. Co. t., 

two cases (C. C. A.) 272 

L'nited States v. Clevelandt C, C. & St. L. 

R. Co. (D. G.) 178 

United States v. Oonway Bumber Go. (D. 

C.) 961 

United States v. Cern Products Itefining 

Co. (D. G.) 964 

United States, Dabi v. (C. C. A.) 618 

United States, Erber v. (C. C. A.) 221 

United States v. Gradwell (D. C.) 446 

United States, Hill v. (C. C. A.) 39 

United States, Hopkins v. (0. C. A.) 867 

United States v. Illinois Cent. R. Co. 

(!>. C.) 433 

United States, J. Homer Fritch Inc. v. (C. 

0. A.) 608 

United States v. Kinsey (D. C.) 702 

United States, Leliigh Valley R. Co. v. (D. 

C.) 682 

United States, Linn v. (0. G. A;) 543 

United States v. McCutchen. (L). C.) 702 

United States v. Midland Oilfields Co. (D. 

O.) 702 

United States, Nashville Grain Exch. v. 

(D. C.) 699 

United States v. Northern Colorado Coal 

Co. (C. 0. A.) 34 

United States, Odom v. (C. C. A.) 1023 

United States, Oesting v. (O. C. A.) 304 

United States v. One Case, No. 1,577 (0. 

0. A.) 856 

United States, Oregon Sliort Line R. Co. v. 

(0. C. A.) 584 

United States, St. Louis Southwestern R. 

Co. V. (D. C.) 668 

United States, Salas v. (C. 0. A.) 842 

United States v. Sioux City Terminal R. 

Co. (D. C.) ; 663 

United States v. Snohomish River Boom Co. 

(D. C.) 95 

United States v. United Shoe Maehinery Co. 

(D. C.) 127 

United States Expansion Boit Co. v. II. G. 

Kroncko Hardware Co. (C. C. A.) 868 



Page 

United States Fidelity & Guaranty Co. v. 
United States & Mexican Trust Co. (0. 
0. A.) 238 

United States & Mexican Trust Ce, Unit- 
ed States Fidelity & Guaranty Co. v. (0. 
,C. A.) 238 

Universal Sav. Corp. v. Morris Plan Oo. of 
New ïoi-k (D. C.) 382 

Upper Hudsou Stono Co., G. F. Harms Co. 
V. (C. O. A.) 859 

Vacuum Cleaner Co. v. Innovation Electric 
Go. (D. C.) 942 

Virginia & Gold Hill Wator Co., Bright v. 
(C. C. A.) 839 

Wagner, Meccano v. (D. C.) 912 

Wanamaker, ^olian Co. v. (0. G. A.) 90 

Ward & Co., lowa Washing Mach. Co. v. 

(C. C. A.) 88 

Warren Bros. Co. v. Evans (D. C.) 657 

Waterman Co. v. Kline (G. G. A.) 891 

Waters v. Guile (C. C. A.) 532 

Western Extracting Co. v. Smietanka (C. 

C. A.) 229 

Westiiighouse Electric & Mfg. Oo. v. Sam- 
son Iron Works (G. G. A.) 16 

White, American Caramel Co. v. (C. C. 
A ) . . . . . . . , 328 

White,' Chin' HÏng' v."(C. C." A.) .' '.[['.'.l\[['. 616 

Wichita AVater Co. v. Wichita (D. C.) 415 

Wm. E. Pcek & Co. v. Lowe (D. C.) 125 

Williams v. Barnes fC. O. A.) 339 

Willis, Co., Hubes v. (C. C. A.) 341 

Wisconsin Engine, Co„ In re (G. 0. A.)... 281 
Wisconsin Trust Co., Gas Power Maehin- 
ery Co. V. (0. G. A.) 281 

Wong Yuen v. Prentis (C. C. A.) 28 

Wood, Peckett v. (C. C. A.) 833 

Woodward, Outting v. (C. C. A.) 307 

Wright & Cobb Lightcrage Co. v. Snare & 
Triest Co. (D. C.) 774 

Zuttermeister v. Chicago Title & Trust Co. 
(G. C. A.) 277 



CASES 

ARGUED AND DETERMINED 

IN THE 

UNITED STATES CIRCUIT COURTS OF APPEALS 
AND THE DISTRICT COURTS 



CHICAGO, K. & S. RY. CO. v. KINDLESPAKKER. 

(Circuit Court of Appeals, Sixth Circuit. June 6, 1916.) 

No. 2757. 

1. Commerce ©=27 — Interstate Commerce — JT^debal Empmjyers' Liabilitt 

ACT. 

A railroacî lying wholly wlthln a state, wliich formed a link between 
carriers wliose Unes extended without tlie state, and wliicli Indiscrimi- 
nately transported interstate shipments and intrastate sliipments, is an 
interstate carrier, within tlie fédéral Employers' Liability Act (Act 
Aprll 22, 1908, c. 149, § 1, 35 Stat. 65 [Comp. St. 1913, § 8657]), declaring 
tbat every common carrier by railroad, whlle engagiug in commerce be- 
tween the several states, shall be liable in damages by reason of any 
defect or liisufficlency, due to Its négligence, in its cars, engines, appli- 
ances, roadbed, etc. 

[Ed. Note. — For other cases, see Commerce, Cent. Dlg. § 25; Dec. 
Dlg. <g=>27. 

For other définitions, see Words and Phrases, First and Second Séries, 
Interstate Commerce.] 

2. Commerce i®=>27 — Interstate Commerce — Ikstrumentalitibs Tiiereof. 

A railroad lying within a state, formlng a link between Interstate car- 
riers, transported both interstate and intrastate shipments and passen- 
gers. The freight and iiassengers of both kinds were commingled, and 
the several engines of the road were indiscriminately used in hauling 
trains transporting both kinds of freight and in switching cars similarly 
loaded. Held, that an engine devoted to such purposes was an instru- 
mentality of interstate commerce, and therefore oue injured in repair- 
ing such an engine may sue under the fédéral Employers' Liability Act ; 
the repairer's services partaking of the nature of the instrumentality. 

[Ed. Note. — For other cases, see Commerce, Cent. Dlg. § 25; Dec. 
Dig. ©=527.] 

3. Commerce ©==27 — Interstate Commerce — Instrumentalities Thereof. 

Where an engine used in interstate commerce was withdrawn from 
service for repairs, and on being repaired was again used to transport 
Interstate commerce, the engine, though the repairs extended over sev- 
eral mouths, was not withdrawn from interstate commerce, and a repairer 
injured might sue under the fédéral Employers' Liability Act. 

[Ed. Note. — For other cases, see Commerce, Cent. Dig. § 25; Dec. 
Dig. ©=27.] 

©=>For other cases see same topic & KEY-NUMBER 1q ail Key-Numbered Digests & Indexes 
234 F.— 1 



2 234 FEDBEAL EEPOETEB 

In Error to the District Court of the United States for the West- 
ern District of Michigan; Clarence W. Sessions, Judge. 

Action by Gale Kindlesparker against the Cliicago, Kalamazoo & 
Saginaw Railway Company. There was a judgment for plaintiff, and 
défendant brings error. Afiîrmed. 

S. E. Knappen, of Grand Rapids, Mich., for plaintiiï in error, 
C. F. Hext, of Grand Rapids, Mich., for défendant in error. 

Before WARRINGTON and DENISON, Circuit Judges, and 
SANFORD, District Judge. 

WARRINGTON, Circuit Judge. Kindlesparker recovered a ver- 
dict and judgment under the fédéral Employers' Liability Act for Per- 
sonal injuries sustained while in the employ of the railroad company; 
it will be convenient to refer to Kindlesparker as plaintiff, and the 
railroad company as défendant. The sole issue presented hère is 
whether plaintiiï was engaged in interstate commerce at the time he 
received his injuries. The southern terminus of defendant's railroad 
was at Kalamazoo and the northern terminus at Woodbury, within the 
State of Michigan, and the business consiste^d of gênerai passenger 
and freight trahie. The railroad, however, connected with "ail of the 
roads" passing through Kalamazoo, and at Woodbury with the Père 
Marquette line. It is not shown what railroads pass through Kala- 
mazoo, though the superintendent testified that defendant's local agent 
in that city "would hâve the records of shipments, say from any sta- 
tion on our line to Chicago." Further, it was conceded by défendant, 
at the trial below, that the freight trains operated on its Une "contained 
indiscriminately cars bound between — cars and freight generahy bound 
between — points entirely within this state, and points from outside 
of the State to this state, and from points in this state to points out- 
side of the state" ; and admittedly the defendant's connection at Wood- 
bury was with an interstate road — the Père Marquette line, 

The défendant owned and operated six locomotive engines ; only 
three of thèse engines were used daily, one in the passenger service, 
and one in the freight traffic over the line, and one in the switching 
service at Kalamazoo. The other three, except on extraordinary oc- 
casions, were kept in the roundhouse and ready for service, or in the 
shops under repair; in other words, subject to this rotation in service, 
five of the engines were used alike in gênerai service and one of them 
in switching service; and the engines were ail used indiscriminately 
in the movement of intrastate and interstate traffic, regardless of the 
particular service in which they were employed. 

Plaintiiï received his injuries from engine No. 4, July 3, 1914, and 
while engaged in repairing it. He was in the employ of défendant as 
helper in its shops at Kalamazoo, and at times acted as fîreman. April 
15, 1914, engine No. 4 was placed in the shops for gênerai repairs, 
and the repairs were completed July 4th. July 3, engine No. 4 was 
removed under its own steam from the shops to the turntable, where 
the boiler maker "set the pops" ; it was then taken to the cinder pit, 
and plaintiff, acting under instruction to enter the pit beneath the 
engine and place the grease cellar upon it, received his injuries while 



CHICAGO, It. & S. EY. CO. V, KINDLESPAEKEB à 

so engaged. This was the last work required inthe repair of the en- 
gine, and it was completed by another person on the day following. 
As regards this engine it was agreed at the trial, as follows : That for 
eleven days in March, between the 3d and 31st, and for four days in 
April, from the Ist to the 4th, inclusive, the engine was used in the 
switching service at Kalamazoo; March 12th, 13th, and 14th it was 
used in the passenger service between Kalamazoo and Woodbury ; 
on ail other days between March Ist and April ISth it was not in 
use; and after the repairs were completed, the engine was used for 
six days in July, between the 7th and 16th, in the switching service 
at Kalamazoo, for four days in that month, between July 13th and 
20th, in the freight service between Kalamazoo and Woodbury, and on 
ail other days between the 3d and 20th of July it was not in service 
of any kind. It was further stipulated that while engine 4 v/as used in 
switching opérations, as stated, "it handled indiscriminately intrastate 
and Interstate freight," and while used in freight opérations as pointed 
out, the freight trains were "composed of cars containing intrastate 
and Interstate commerce." 

[ 1 ] In determining whether plaintiff was engaged in Interstate com- 
merce at the time of his injuries, considération must be given to the 
character of the instrumentality upon which he was working and the 
nature of the work he was performing. The character of the locomo- 
tive, the instrumentality, may be ascertained both from the nature of 
the railroad on which défendant was accustomed to operate the engine 
and of the traffic handled by it. In view of ail the facts above pointed 
out, it would seem plain enough that defendant's road constituted a 
link in interstate lines for ail purposes of Interstate and intrastate 
traffic. At the time in question, as we hâve seen, défendant was trans- 
porting freight both ways upon its line, and also handling freight in 
its yards, which originated upon its connections at points without and 
was destined to points within the state and also freight which originat- 
ed within and was destined to places without the state ; and, it is true, 
défendant was also transporting freight originating and destined locally 
within the state. The former fact, however, concerning freight in- 
terstate cannot be ignored because of the latter fact touching freight 
intrastate. Every road, which physically extends into or through two 
or more states and is so operated, necessarily carries both classes of 
freight, interstate and intrastate, and yet we do not see how it can in 
reason be said of such a carrier that it is any more certainly "engaging 
in commerce between any of the several states," within the meaning 
of the Employers' Liability Act, than the présent défendant was at 
the time plaintifï received his injuries; the latter situation as well as 
the former answers to the language of the act, "that every common 
carrier by railroad while engaging in commerce between any of the 
several states * * * shall be liable in damages * * * i-|y j-gg^_ 
son of any defect or insufficiency, due to its négligence, in its cars, 
engines, appliances, machinery, track, roadbed," etc. 35 Stat. 65 
(Comp. St. 1913, § 8657). True, defendant's railroad, in a physical 
sensé, was entirely within the limits of the state of Michigan, but this 
did not prevent défendant from Connecting the road with admittedly 
interstate lines and so engaging in interstate commerce ; in every prac- 



4 234 FEDERAL REPORTER 

tical sensé, according to the présent record, défendant had at the time 
in question appropriated its road as well as its yards to the transporta- 
tion and handling of interstate traffic as definitely as it had of traffic 
of an intrastate character, and thèse conditions existed at the time of 
the accident and afterwards. When a company thus in efïect dedi- 
cates such a road and the yards to a dual use — interstate and intra- 
state — it invests the road with the characteristics of an interstate line 
and subjects it to the obligations of that sort of a hne. It makes it a 
part of the through line and becomes entitled to a part of the re- 
ceipts derived frora the through service. Its duties must correspond 
with the benefits it seeks ; it must respond to fédéral law and régula- 
tion ; this, however, is not in any true sensé violative of its rights and 
and duties as an intrastate carrier ; nor does it open either the de- 
fendant or its road to the objectionable features found in the first 
Employers' Liability Act (Act June 11, 1906, c. 3073, 34 Stat. 232) 
207 U. S. 463, 28 Sup. Ct. 141, 52 L. Ed. 297. The principle declared 
in relation to rates over an intrastate road in Cin., N. O. & Tex. Pac. 
Railway v. Int. Com. Com., 162 U. S. 184, at page 192, 16 Sup. Ct. 
700, at page 703 (40 L. Ed. 935), is applicable as regards the interstate 
character of the présent railroad. It was there said : 

"Having elected to enter Into tlie carrlage of interstate freights and thus 
sub,ie(;te(l Itself to the control of the Commission, it would not be compétent 
for the Company to llmit that control, in respect to foreign traffic, to certain 
points on Its road and exclude other points." 

In United States v. Union Stockyards, 226 U. S. 286, 304, 33 Sup. 
Ct. 83, 88 (57 L. Ed. 226), when speaking of an intrastate service in 
connection with an interstate movement of f reight, it was held : 

"That the service is performed wliolly in one state eau malîe no difCerence 
if it is a part of interstate carriage." 

It results that such an appropriation as défendant bas made of its 
railroad and yards subjects it to the exactions .of the fédéral Em- 
ployers' Liability Act, since it prevents effective distinction from the 
rule laid down in the opinion of the court in the Pedersen Case, 229 
U. S. 146, 152, 33 Sup. Ct. 648, 650 (57 L. Ed. 1125, Ann. Cas. 1914C, 
153): 

"True, a traclî or bridge may be used in botli interstate and intrastate com- 
merce, but wlien it is so used it is none tlie less an instrumeutality of the 
former ; nor does its double use prevent tlie employment of tliose wlio are 
engaged in its repair or in keeping it in suitable condition for use from beiug 
an employment in interstate commerce." 

[2] We are therefore not convinced of the soundness of an argu- 
ment urged by the learned counsel that defendant's road is primarily 
an instrument of intrastate commerce and that the plaintiff's rights 
must be tested upon the theory that the engine he was engaged in 
repairing was of the same character. We thus come to a considéra- 
tion of the locomotive as an instrument of commerce, and of the kind 
of commerce in which plaintiff was engaged when injured. The con- 
sidérations which hâve induced us to believe that defendant's road 
is an essential part of an interstate line, would naturally lead to a 
similar conclusion as respects the interstate character of the locomo- 



CHICAGO, K. & S. RY. CO. V. KINDLESPARKEE 

tive. This does not mean that in point of character of instrumentalities 
— that is, whether interstate or intrastate — there is necessarily identity, 
not to say interdependence, between the railroad line and a particular 
locomotive passing over it ; and yet it is apparent, and we understand 
counsel to daim, that in the présent instance the nature of the service 
in which plaintiff was engaged when injured must dépend largely upon 
the character of the engine he was repairing. 

It has already been shown that défendant possessed six angines and 
used three of them respectively in the passenger, freight and switch- 
ing service daily; that it used the engine in question. No. 4, in the 
switching service at Kalamazoo for fifteen days in March and April, 
1914, in the passenger service for three days in March, in such switch- 
ing service for six days between the 7th and 16th of July, and in the 
freight service for four days between the 13th and 20th of that month; 
that the engine was undergoing necessary repairs in the shops between 
April 15th and July 4th; that, except as to the service described, the 
engine was either idle or under repair between the dates of service 
in March and July, as stated ; and that while this engine was used 
in switching opérations, as stated, "it handled indiscriminately intrastate 
and interstate freights." It is to be observed that in describing the 
traffic opérations in which the engine was used there is no showing 
of any spécifie intrastate service ; such service as to switching was in- 
terstate and intrastate indiscriminately, and as to freight opérations on 
the road the trains were "composed of cars containing intrastate and 
interstate commerce." 

The nature and effect of such service as this, both before and after 
the period of repair, now becomes still more évident. It was the same 
double service to which the road and yards and (when in use) ail the 
engines of the company were alike constantly devoted ; the strong 
tendency of the évidence is that the service was uniformly of such a 
nature that the engine in issue could not at any time hâve been placed 
in use at ail (it certainly was not put in use) except in this double 
and unitary character of service — if indeed this was not true as to ail 
the engines. The inévitable effect of this service was to impress every 
instrumentality, so used, with an interstate character, quite as certainly 
as with an intrastate character, and also to impose upon the 
carrier the same degree of duty and liability respecting the fitness 
and condition of the instrumentality for use under the fédéral act as 
if it had been designed and used cxclusively for interstate service; in- 
deed, while such conditions as arc liere shown prevailed, the instru- 
mentality was not susceptible of use or repair without regarding and 
treating it as an instrument of interstate commerce. This is not to 
say that if plaintiff had been engaged as enginem.an or fireman and 
injured in operating this engine while handling purely intrastate com- 
merce, he could bave recovered under the fédéral act ; nor is it to say 
that in such event the service which the engine may hâve performed 
either before or after the accident, would bave changed the nature 
of the service he was so performing as engineman or fireman at the 
time of his injury. The theory of the carrier's nonliability in the 
situation thus assumed is for présent purposes sufficiently illustrated 
by the décision of the Suprême Court in Chicago, Burlington & Quincy 



6 234 FEDERAL RErORTEB 

R. R. Co. V. Harrington, 241 U. S. 177, 36 Sup. Ct. 517, 60 L. Ed. 
941, decided May 1, 1916, and by the décisions there commented on. 
But those décisions are a class of their own, and as a rule the cases 
they détermine are respectively dépendent upon their own peculiar 
facts (Pittsburgh, C, C. & St. h. Ry. v. GHnn, 219 Fed. 148, 150, 135 
C. C. A. 46 [C. C. A. 6]); however, the situation so assumed is not 
involved hère. We are concerned with an injury suffered in the 
course of repairing the engine, not in its use or opération. 

When the décisions are considered, which, on the one hand, allow 
recovery, and on the otlier disallow recovery, under the fédéral act, 
a marked distinction is found concerning the responsibiUty of a car- 
rier for injuries suffered by an employé engaged in repairing an in- 
strument interstate in character, and injuries received by an employé 
using or operating the same kind of an instrument while handling only 
intrastate traffic. As to the repairer, his service partakes of the char- 
acter of the instrumentality ; as to the operative, his service partakes 
of the character of the traffic. The reason for this distinction is that 
the repair is so directly and vitally related to commerce between the 
States as to characterize the work of the employé engaged in the re- 
pair as an act of interstate commerce. This distinction, for example, 
is well stated by Judge WooUey in Boyle v. Pennsylvania R. Co., 228 
Fed. 266, 142 C. C. A. 558, vvhere, in view of the facts of that case, 
the reason for denying application of décisions which concern the re- 
pair and not the use of the instrumentahty in question received ex- 
pression (228 Fed. 269, 142 C. C. A. 561) : 

"There is a distinction between employment in preparing an Instrument of 
commerce for use, and employment in usiiig such an instrument in commerce. 
Préparation of an instrament for use In commerce of botU kinds necessarily 
means préparation for use in commerce of elther kind, and as one kind is 
interstate commerce, it follows logically ttiat such préparation is for use in 
interstate commerce, but employment çonnected with the actual use of such 
an insti-ument is a part of intrastate or interstate commerce according as 
the instrument is in use in commerce of one kind or the other," 

Under the facts of the instant case, however, the controlling illus- 
tration of the distinction thus sought to be made clear, appears in the 
Pedersen Case, where it was held that a railroad company engaged in 
interstate commerce was liable to its employé who suffered injury while 
carrying bridge bolts for use in repairing one of the company's rail- 
road bridges, Mr. Justice Van Devanter saying (229 U. S. 151, 152, 
33 Sup. Ct. 649 [57 L. Ed. 1125, Ann. Cas. 1914C, 153]): 

"Tracks and bridges are as indispensable to interstate commerce by rail- 
road as are engines and cars, and sound économie reasons uuite with settled 
rules of law in demanding that ail of thèse instrumentalities be kept in 
repair. The security, expédition and efflciency of the commerce dépends in 
large measure upon this being done. Indeed, the statute now before us pro- 
ceeds upon the theory that the carrier Is charged mth the duty of exercising 
appropriate care to prevent or correct 'any defect or insufficiency » • • 
in its cars, engines, appllances, machlnery, track, roadbed, works, boats, 
wharves, or other equipment' used in interstate commerce. But Independently 
of the statute, we are of opinion that the work of keeping such instramen- 
talities in a proper state of repair while thus used is so closely related to 
such commerce as to be in practice and in légal contemplation a part of it. 
• * * The true test always is: Is the work in question a part of the inter- 
state commerce in which the carrier is engaged?" 



CHICAGO, K. & 8. EY, CO. V. KINDLESPAEKEB 7 

Aside from a daim urged by counsel that the length of time con- 
sumed in repairing engine No. 4 amounted to a withdrawal of the 
engine from use in interstate commerce, which will be considered later, 
further relevant instances of liability under the fédéral act for in- 
juries incurred by employés while engaged in repair work may be seen 
in the following décisions : Walsh v. N. Y., N. H. & H. R. R. Co., 
22Z U. S. S, 6, 59, 32 Sup. Ct. 169, 56 L. Ed. 327, 38 L. R. A. (N. 
S.) 44, affirming recovery for injuries received by plaintiflE while en- 
gaged in replacing the drawbar of a car then in use in interstate 
commerce; Central R. Co. of New Jersey v. Colasurdo (1911) 192 
Fed. 901, 903, 113 C. C. A. 379 (C. C. A. 2), approving judgment in 
favor of plaintiff, who, while engaged in the repair of a yard switch, 
was struck and injured by a car employed by clefendant in interstate 
commerce — the fact that the carrier and the employé may also hâve 
been engaged in intrastate commerce being regarded as immaterial ; 
Northern Pacific Ry. Co. v. Maerkl (1912) 198 Fed. 1, 4, 5, 117 C. 
C. A. 237 (C. C. A. 9), sustaining recovery in favor of an employé 
injured while engaged at shops in repairing refrigerator car, which 
had been "indiscriminately used in interstate and intrastate commerce, 
and was to be again so used when repaired" ; B. & O. R. Co. v. Darr 
(1913) 204 Fed. 751, 753, 124 C. C. A._ 565, 47 L. R. A. (N. S.) 4 
(C. C. A. 4), aiïirming judgment for injury suffered by an employé 
when replacing hanger boit in brace beam of engine's tender while it 
was standing on "fire track," to which removal had been made for 
the purpose; Law v. Ilhnois Cent. R. Co. (1913) 208 Fed. 869, 871, 
126 C. C. A. 27, L. R. A. 1915C, 17 (C. C. A. 6), reversing déniai of 
recovery by boiler maker's helper, who was injured in shops while 
repairing freight engine regularly employed in interstate commerce, 
though 21 days had been consumed in making ail the repairs; Thomas 
y._ Boston & M. R. R. (1915) 219 Fed. 180, 181, 182, 134 C. C. A. 
554 (C. C. A. 1), reversing judgment sustaining demurrer to déclara- 
tion alleging injuries to railroad carpenter while engaged in repairing 
roundhouse, which, under allégations, was regarded as an instrumental- 
ity of interstate commerce ; and see, although case not finally disposed 
of, Gaines v. Détroit, etc., R. Co. (1914) 181 Mich. 376, 148 N. W. 
397, reversing judgment under common-law count and remanding for 
further proceedings, on ground that case arose under fédéral act, 
plaintiff having been injured while engaged at defendant's yards in 
repairing drawbar of car carrying interstate freight, although the rail- 
road, like the one involved in the instant case, lies wholly within the 
state of Michigan. 

We are not unmindful of the contention of counsel that analysis of 
the décision in the Pedersen Case fairly shows that the court did not 
intend the rule there laid down as to railroad tracks and bridges to 
be extended to an ambulatory instrument hke an engine, which may 
be used entirely for one or the other kind of commerce, or both kinds. 
It is true that after enumerating tracks, bridges, engines and cars as 
instrumentahties in interstate commerce, the court mentioned the fact 
that it was then concerned "only with the work of maintaining them 
in proper condition after they had become such instrumentalities and 
during their use as such"; but this is in récognition of the fact that 



8 234 FEDERAL REPORTEE 

engines and cars are as essential to commerce and as fit to be invested 
with a status in commerce, and so to become the subjects of mainte- 
nance therein, as tracks and bridges are, and Congress has made no 
distinction between the two classes of instrumentalities. The fédéral 
act, as we hâve seen, points out the objects as to which duty and 
HabiHty are imposed by distinctly associating engines and cars with 
appHances, machinery, tracks and roadbed; and the poiver to enact 
such législation was sanctioned in the Second Emplovers' Liability 
Cases, 223 U. S. at 46, 47, 32 Snp. Ct. 169, 56 L. Ed. '327, 38 L. R. 
A. (N. S.) 44, by the announcement of certain propositions which were 
declared to "hâve come to be so firmly settled as no longer to be open 
to dispute"; one of which (223 U. S. 47 [5], 32 Sup. Ct. 174 [56 h. 
Ed. 327, 38 L. R. A. (N. S.) 44]) is: 

"Among the instruDients * * * to whicli the power extends are the 
railroads over which transportatlon from one state to auother Is conducted, 
(and) the engines and cars by which such transportatlon is effected. * * * " 

In view of that décision and the other décisions before cited, it can- 
not be necessary to dwell upon this feature of counsel's argument. 

[3] It is, however, earnestly claimed, as stated, that the engine in 
dispute had been withdrawn from use in interstate commerce, and 
consequently that the engine cannot be regarded as an instrument, nor 
the plaintifif's work thereon as an act, of such commerce. No évidence 
was ofifered tending to show any intention on the part of défendant 
to withdraw the engine from active use, except only for the purpose 
of necessary repairs. This results from the testimony of defendant's 
employés, among whom vi'as the superintendent who stated that he 
could not tell how long the engine had been out of repair, but that it 
had been "in a gênerai décrépit state for some time." It is not 
suggested that the engine was kept in the shops for a longer time than 
was required for its repair ; and certainly such a f act is not to be 
presumed. We need not repeat that within three days after comple- 
tion of the repairs, the engine was placed in the same service as that 
in which it was used before; nor is it necessary to point out again the 
fact that defendant's service on the road and in the yards comprised 
a constant double use — interstate and intrastate. Plainly, in view of 
the évidence actually introduced, the burden rested upon défendant 
affirmatively to show an intent on its part, if such .was the fact, to 
make a permanent withdrawal of this engine from use in interstate 
commerce ; in the absence of such proof, its admitted conduct in so 
quickly returning the engine tO' its former service cannot be explained, 
except upon the theory that the purpose of the withdrawal was to refit 
the engine for the same service and therefore but temporary in char- 
acter. This court, in Pittsburgh, C, C. & St. L. Ry. Co. v. Glinn, 
supra, 219 Fed. 148, 150, 135 C. C. A. 46, 48, had occasion to say of 
certain décisions there commented on : 

"They hardly go heyoïul fixlng the burdon of proof and declarlng that, where 
the facts show the case ma y well hâve been within the statute (fédéral Ein- 
ployers' Liability Act), the Initial burden is satlsfied, and it Is for the défend- 
ant to show the contrary." 



PRTOB V, BISHOr 9 

Nothing then remains to consider in regard to the claim of with- 
drawal save its légal effect ; and this must be tested by the reasonable 
inference that may be deduced from the fact that the engine was 
undergoing repair in the shops during a period of 79 days. In the Law 
Case the engine involved was under repair 21 days; and of this we 
said (208 Fed. 872, 126 C. C. A. 30 [h. R. A. 1915C, 17]): 

"Under the existing facts, can the length of time required for the repairs 
change the légal situation? If, so, where Is the Une to be drawn? How 
many days' temporary withdrawal would suliice to take It ont of tlie purvlew 
of the act? And is it niaterial whether tlie repuirs take place in a roundhouse 
or in gênerai shops '? Is not the test whether the withdrawal is merely tem- 
porary in character?" 

No sufficient answer to this could be found in that cr^se; and the 
only différence perceived hère is in point of time, not in principle. 

We conclude upon the whole that the engine was at the time of the 
repair in question an instrument of the interstate commerce in which 
the défendant was engaged, and that the work of plaintiff thereon was 
a part of such commerce. 

The judgment must be affirmed, with costs. 



PRYOR V. BISHOP. 

(Circuit Court of Appeals, Seventh Circuit. April 18, 1916.) 

No. 2210. 

CoMMEECE i©=>27 — Employées' Liability — Sebvaxt Employed in Interstate 
Commerce. 

A member of a train crew was not at the time of his injury employed 
in interstate commerce, as is necessary to maUe the employer carrier 
liable under fédéral Emi)loyers' Ijiabillt.y Act (Act April 22. 1908, c. 149, 
35 Stat. 65 [Comp. St. 1913, §§ 8057-800.5]), his crew though subject to call 
for an interstate trip, to which, wheu given, they had to respond in an 
hour, not having been called for service, but belng merely for tlieir owii 
convenienee in their caboose, which was belng- moved by a transfer 
train between local stations. 

[Ed. Note. — For other cases, see Commerce, Cent. Dig. § 25; Dec. 
Dig. ®=27.] 

In Erfor to the District Court of the United States for the Eastern 
Division of the Northern District of Illinois. 

Action by James F. Bishop, administrator of Orville Bordner, de- 
ceased, against Edward Pryor, receiver of the Wabash Railroad (Com- 
pany. Judgment for plaintiff, and défendant brings error. Reversed, 
with direction for new trial. 

Plaintif!: in error, herein described as défendant, was sued by défendant In 
error, termed plaintiff herein, under the so-called fédéral Employers' Liability 
Act, in an action on the case for damages arising out of the négligence of de- 
fendant resulting in the death of plaintiff's décèdent. Défendant pleaded 
the gênerai issue. The only question involved is: Was plaintiff's décèdent, at 
the time of the In jury, employed by défendant in interstate commerce? The 
évidence disclosed the folio wing state of facts: 

©:=5For other cases see same topic & KEY-NUMBER in aU Key-Numbered Digests & Indexes 



10 234 FEDERAL REPORTEE 

On December 19 and 20, 1913, plaintiff's décèdent was In the employ of de- 
fendant as a member of a train crew, conslstlng of an engineer, a fireman, a 
conductor, and two brakemen, as a brakeman in charge of freight train No. 95, 
covering the run between Forty-Seventh street, Chicago, and Montpelier, 
Ohio, a distance of 171 miles. The employment in maklng said run was in 
Interstate commerce. The train arrived at the Forty-Seventh street yard of 
défendant at about 12:30 p. m. on the 20th of December, 1913. At Forty- 
Seventh street the engine was sent to the roundhouse, the cars were taken in 
charge by a switching crew, while the caboose was left on the track in the 
yard. The conductor thereupon registered for his crew in the usual manner 
at the defendant's office. The crew was then entitled to take an 8-hour rest. 
The conductor and the two brakemen, herelnafter termed the train crew, ail 
being résidents of Montpelier, Ohio, proceeded to the caboose, where as a con- 
venience to themselves they cooked their meals, and at nlght went to bcd in 
the car, themselves provlding the food and bed and cooklng utensils. They, 
as a rule, used the same caboose in their runs, no matter what run they took. 
While there was no arrangement in regard to the use of the caboose for 
meals and sleep, the défendant knew of such use. The caboose in question 
was expected to be used in Interstate service on the next day or soon thereafter, 
though it had no deflnite seheduled starting timo. As a matter of fact, the 
next train was called at 6:15 o'clock the following morning, December 21. 
1913, but did not actually leave until 8 o'clock. Why so late the record does 
not State. But for the accident, decedent's crew and caboose would hâve been 
then next in Une for service, though that fact did not absolutely détermine 
whether or not his crew would take charge of that train. Landers was 7 
miles from the Forty-Seventh street station. In order to be within call, it 
was necessary for the members of decedent's crew, being. as above stated, 
the crew of incoming train No. 95, to go from Forty-Seventh street to 
Landers which they might do in several ways. Tliey could take the street 
cars to Seventy-Flfth street, a distance of about 5 miles, at their own expense, 
and then take a dummy, or so-called "hurdy-gurdy" train from Seventy-Fifth 
street to Landers, a distance of two miles. This train was for the accommo- 
dation of defendant's employés, and ran every half hour up to midnlght. The 
other and more convenient way was to stay in the caboose and be included 
in a transfer train moving cars from P^orty-Seveuth street to Landers, whlch 
train was made up by and was in control of other employés of défendant, and 
ran regularly every night for that purpose. At about 11:30 p. m., December 
20, 1913, decedent's crew and caboose were picked up by the transfer train at 
Forty-Seventh street as usual, and were located next in front of the regular 
caboose of the transfer train. This latter train then proceeded to Landers 
on defendant's tracks. "While standing at Sixty-Fourth street, at atwut 12:50 
a. m., and about a mile from Landers, the rear of the transfer train was run 
into tlirough the négligence of defendant's servants, whereby the two ca- 
booses on the transfer train were badly broken up and plaintiff's décèdent 
killed while in bed. Under defendant's rules, train crews were called from 
Landers an hour and a half before trains were seheduled to leave, and were 
required to be on hand lialf an hour before leaving time. Tliey were, in a 
gênerai way, subject to call at any time after the expiration of tlieir 8-hour 
rest period ; that is, they were not exempt from service. There was some 
uncertainty whether the crew and caboose would stay at Forty-Seventh street 
or be taken to Landers. Often the men would go to sleep at Forty-Seventli 
street and wake up in Landers. As a rule they were taken to Landers. 
When stationed at Forty-Seventh street, tlie crew were usually called at the 
caboose or the office, unlei^s they or some of them went away for their own 
purposes, in which case they were expected to leave their addresses for 
calling them. 

At the close of ail the évidence, défendant moved to dismiss the suit for 
vvant of jurisdiction, wliich motion was overruled. Thereupon the défendant 
moved the court to instruct for défendant, whicli motion was also denied. 
Exceptions to thèse rulings of the court were saved. No exceptions were 
taken to the instructions. The jury found défendant guilty, and assessed dam- 
ages at $18,000. 



PBTOB V. BISHOP 11 

The errors assigned are: (1) The court erred in denylng said two motions; 
(2) in entering the sald judgment; (3) in holding that the évidence proved 
or tended to prove facts constituting a cause of action under the fédéral 
Employers' Liabillty Act; (4) the verdict and judgment are against the 
law and the évidence. 

John M. Zane, of Chicag-o, 111., for plaintiff in error. 

C. Helmer Johnson, of Chicago, 111., for défendant in error* 

Before BAKER, KOHLSAAT, and MACK, Circuit Judges. 

KOHLSAAT, Circuit Judge (after stating the facts as above). 
While the record cites that decedent's caboose and crew were subject 
to call at any time after the expiration of the 8-hour rest period, viz., 
8:30 o'clock p. m., December 20, 1913, it aiso appears that the several 
members of the crew were masters of their own time and whereabouts 
up to the period of 1% hours preceding the departure of a train to 
which they were to be assigned. They were then expected to be within 
call for the purpose of necessary notice. After notice, they still had an 
hour during which they were subject to no control by défendant. 

The so-called fédéral Employers' Liability statute under which this 
suit is brought provides that every common carrier by railroad while 
engaging in Interstate commerce shall be liable in damages to any per- 
son suffering in jury while he is employed by such carrier in Interstate 
commerce, or, in case of the death of such employé, to his personal 
représentative for the benefit of certain parties named for such injury 
or death resulting in whole or in part from the négligence of the car- 
rier or his employés, etc. 

The question hère presented is: Was décèdent at the time of his 
death in the employ of défendant in the sensé in which the word "em- 
ployed" is used in said act? "The true test of employment in such 
commerce in the sensé intended is," says the Suprême Court in Shanks 
V. The Delaware, Eackawanna & Western R. R. Co., 239 U. S. 556, 36 
Sup. Ct. 188, 60 E. Ed. 436, decided on January 10, 1916: "Was the 
employé at the time of the injury engaged in Interstate transporta tion 
or in work so closely related to it as to be practically a part of it?" 
The court in that case f urther says : 

"Thus it is essential to a right of recovery under the act, net only that the 
carrier be engaged in Interstate commerce at the time of the injury, but also 
that the person suffering the Injury be then employed by the carrier in such 
commerce." 

In the case just cited the plaintiff was employed in the machine shop 
of the défendant, which was engaged in both intrastate and Interstate 
commerce. His work consisted in repairing certain parts of loco- 
motives, but on the day of the injury he was engaged solely in taking 
down and putting into a new location an overhead countershaft, a 
heavy shop fixture, through which power was communicated to some 
of the machinery used in the repair work. "The question for décision 
is," says the court, speaking through Mr. Justice Van Devanter : "Was 
Shanks at the time of the injury employed in Interstate commerce with- 
in the meaning of the Employers' Liability Act? What his employ- 
ment was on other occasions is immaterial, for, as before indicated. 



12 234 FEDERAL REPORTER 

the act refers to the service being rendered when the injury was suf- 
fered." It was there held that Shanks was not employed in interstate 
commerce within the meaning of tiie Employers' Liability Act — citing 
Walsh V. New York, New Haven & Hartford R. R. Co., 223 U. S. 1, 
32 Sup. et. 169, 56 L. E-d. 327, 38 h. R. A. (N. S.) 44; Norfolk & 
Western Ry. Co. v. Earnest, 229 U. S. 114, 33 Sup. Ct. 654, 57 L. Ed. 
1096, Ann. Cas. 1914C, 172; Pederson v. Delaware, Eackawanna & 
Western R. R. Co., 229 U. S. 146, 33 Sup. Ct. 648, 57 L. Ed. 1155, 
Ann. Cas. 1914C, 153; St. Louis, San Francisco & Texas Ry. Co. v. 
Seale, 229 U. S. 156, 33 Sup. Ct. 651, 57 L. Ed. 1129, Ann. Cas. 1914C, 
156; North Carolina R. R. Co. v. Zachary, 232 U. S. 248, 34 Sup. Ct. 
305, 58 L. Ed. 591, Ann. Cas. 1914C, 159; New York Central R. R. 
Co. V. Carr, 238 U. S. 260, 35 Sup. Ct. 780, 59 L. Ed. 1298; Illinois 
Central R. R. Co. v. Behrens, 233 U. S. 473, 34 Sup. Ct. 646, 58 
h. Ed. 1051, Ann. Cas. 1914C, 163; Delaware, Lackawanna & West- 
ern R. R. Co. V. Yurkonis, 238 U. S. 439, 35 Sup. Ct. 902, 59 E. Ed. 
1397. 

The accident was caused by defendant's engine, which was running 
behind the transfer train without any cars, operated by defendant's 
servants. Said engine was at the time bound for the Landers yard, 
there to take out and haul a train from Landers to Forrest, 111., an 
intrastate haul. Those in charge of the transfer train, which was also 
engaged in intrastate commerce so far as the record discloses, were 
also chargeable with négligence and conceded to bave been guilty of 
not using due care. Thus neither defendant's transfer train nor the 
said engine were at the time of the death engaged in interstate com- 
merce. 

In St. Louis & San Francisco Ry. v. Seale, 229 U. S. 156, 33 Sup. 
Ct. 651, 57 L. Ed. 1129, Ann. Cas. 1914C, 156, where the train consist- 
ed of intrastate and interstate cars, one whose business it was, as a 
yard clerk, to examine in-coming and out-going trains, make a record 
of the seals on car doors, check the cars with conductors' list, and 
put labels on the cars to guide switching crews in breaking and mak- 
ing up out-going trains, and who was killed while on the way to meet 
an in-coming train, for that purpose, was held to be in the employ of 
the railroad in interstate commerce. Suit was begun in the state court 
by those authorized under the Texas statute. Held, that the suit was 
one which arose exclusively under the fédéral Employers' Liability Act, 
which requires suit to be brought by the légal représentatives. It was 
therein further decided that decedent's service was in interstate com- 
merce notwithstanding the train had arrived at its terminus hauling 
both intrastate and interstate cars. 

In Pedersen v. Delaware, Lackawanna & Western R. R. Co., 229 
U. S. 146, 151, 33 Sup. Ct. 648, 649 (57 L. Ed. 1155, Ann. Cas. 1914C, 
153), the court says: 

"Among the questions wliich naturally arise in this connection are thèse: 
Was that work [of the plalntlff] belng done Independently of the Interstate 
commerce In which the défendant was engaged, or was It so closely con- 
neeted therewlth as to be a part of it? AVas its performance a matter of in- 
différence so far as that commerce was coucerned, or was it in the nature of 
a duty restlng upon tlie carrier ï" 



PEYOK V. BISHOP 13 

In that case the plaintiiï was engaged at the time of the injury in 
carrying bolts or rivets f rom a tool car to a bridge which he was help- 
ing to repair, when he was run down by an intrastate passenger train. 
The tracks and bridge at that point were used by défendant both in 
intrastate and interstate commerce. Held, that the plaintiiï was in the 
employ of défendant in interstate commerce. "There can be no doubt," 
says the court, "that a right of recovery thereunder [fédéral Employ- 
ers' Liability Act] arises only where the injury is sufïered while the 
carrier is engaged in interstate commerce and while the employé is 
employed by the carrier in such commerce." This rule is approved in 
Illinois Central R. R. Co. v. Behrens, Adm'r, 233 U. S. 473, 34 Sup. 
Ct. 646, 58 L. Ed. 1051, Ann. Cas. 1914C, 163. In this case the dé- 
cèdent was engaged at the time of his death as a member of a switch 
engine crew, operating only within the city of New Orléans. Some- 
times the switch engine handled interstate cars, sometimes intrastate 
cars, and sometimes both. At the time of the accident it was handling 
only intrastate cars. Held, the act did not apply. 

In Korth Carolina R. R. Co. v. Zachary, 232 U. S. 248, 260, 34 Sup. 
Ct. 305, 58 L. Ed. 591, Ann. Cas. 1914C, 159, v/hich was a case in 
which décèdent, a locomotive fireman, had been oiling up, firing, and 
preparing his engine for an interstate trip, but had left his engine to 
go to his boarding house within the limits of the railroad yard, on a 
Personal errand, with intention shortly to return to his engine to take 
his run, and v^'as killed. Held, that décèdent had entered upon his 
interstate duties and was, when killed, employed by défendant in in- 
terstate commerce. This case is approved in N. Y. C. & H. R. R. R. 
V. Carr, 238 U. S. 260, 35 Sup. Ct. 780, 59 L. Ed. 1298, decided by 
the United States Suprême Court on June 14, 1915. 

In St. Louis S. W. Ry. Co. v. Harvey, 144 Fed. 806, 75 C. C. A. 536, 
the Circuit Court of Appeals for the Eighth Circuit states the rule 
as follows: 

"The second query is: Was there substantial évidence that the act of 
running this car upou the traek at night without a light was done in the con- 
duct of any of the business of the master? For if a servant step aside from 
tlie business of his master for never so short a titne to do any act that is not 
a part of that business, the relation of master and servant is for the time 
suspended, and the acts of the servant durlng that interval are not his mas- 
ter's, but his own." 

In Harvey v. Texas & Pacific Ry. Co., 166 Fed. 385, 92 C. C. A. 237, 
the Circuit Court of Appeals for the Fifth Circuit said: 

"We are of the opinion that the servant should be deemed in the master's 
service whenever présent to perform his duty and subject to orders." 

Plaintiff in that case was on his way to the place where he was to 
work, but was subject to orders and ready to help, if needed, in mov- 
ing an engine. Where one had finished his day's work and was tak- 
ing a hand car back to a designated place under the direction of his 
employer, he was still in his master's employ. San Pedro, Los Angeles 
& Sait Lake R. R. Co. v. Davide, 210 Fed. 870, 127 C. C. A. 454. 

In Lamphere, Adm'r, etc., v. Oregon R. R. & Navigation Co., 196 
Fed. 336, 116 C. C. A. 156, 47 L. R. A. (N. S.) 1, the décèdent, a 



14 234 FEDERAL ^REPORTER 

fireman, was proceeding to his work under explicit orders when killed. 
Held that, even though his work had not yet begun, he was acting 
in the capacity of a servant of défendant in interstate commerce. 

Where, after hours of work, one Dishon was attempting to pass 
from a section house, where lie boarded, across defendant's tracks 
through an opening between the cars, maintained for that purpose 
by the other employés, which opening was at the time of the accident 
closed while Dishon was going through, it was held by the Circuit 
Court for the Eastern District of Kentucky, in Dishon v. Cincinnati, 
N. O. & T. P. Ry. Co., 126 Fed. 195, that those closing the gap were 
fellow servants of Dishon. On appeal, however (133 Fed. 471, 477, 
66 C. C. A. 345), the court failed to sustain the judgment on the fel- 
low-servant theory, but held that décèdent was guilty of contributory 
négligence. 

In Best V. N. Y. C. & H. R. R. R. Co., 117 App. Div. 739, 102 
N. Y. Supp. 957, the plaintiff was an extra brakeman. He was noti- 
fied that he niight be called to go out on a run. He was crossing the 
tracks to the company's clubhouse in order to be on hand, if called, 
when he was struck. Held, not employed by the défendant at the time. 

It was held in Harris v. City & E. G. R. R. Co., 69 W. Va. 65, 70 
S. E. 859, 50 L. R. A. (N. S.) 706, Ann. Cas. 1912D, 59, that one who 
was riding on defendant's train, going to his work before the hour 
when his work began, must be regarded as a passenger, and not a 
servant. 

Plaintifï relies upon the case of Moyse v. Northern Pacific Ry. Co., 
41 Mont. 272, 108 Pac. 1062. Moyse was conductor of a freight train. 
He was required at ail finies to be within call, was subject to discipline 
if he was not, and < was expected to occupy the caboose while waiting. 
Pie had a right to use the caboose, a right which the company was not 
at liberty to withdraw at will. He was injured by defendant's employés 
after his pay had stopped on registration. Held, that he was in the 
caboose in the course of his employment, and that the company was 
liable for injuries caused by the négligence of its other servants under 
a statute abolishing the fellow-servant rule as to railroad employés. 

Assuming that the court correctly held that the jury in the Moyse 
Case was juslified in finding the relation of master and servant actually 
to exist at the time of the injury, it is to be noted that this was based 
upon the finding of a contractual right as well as a duty to be in the 
caboose at the time. Moyse was there pursuant to a definite obligation 
and, even though merely awaiting a call, might be held to be acting as 
an employé in so occupying the caboose. In the instant case, however, 
there was no sucli duty; the deceased could as well hâve been at a 
city hôtel ; his only duty at the time was to be within call, either Per- 
sonal or téléphonie, That he was on the company's property at the 
time of the injury was due, not to an obligation, but to a privilège, 
a license; in being there, he was acting, not as an employé, but as a 
licensee. 

If, however, he could be deenied to be in the employment of the 
comiiany at the time of the injury, nevertheless he vv-as not tlien ac- 
tually employed in interstate commerce. His actual employment at 



PETOB V. BI8HOP 15 

the time was holding himself ready in the city of Chicago to respond 
to a call for service. That the call, when it came, would be for an 
interstate trip, does not make the waiting in Chicago an actual engage- 
ment in interstate commerce, within the terms of the fédéral act. 

PlaintiflF's claim that, by the hitching on of the caboose in question 
to the transfer train, decedent's crew was called, and that his inter- 
state service had thus actually begun, does not commend itself to 
our judgment. It was not, nor was it intended as such. Clearly the 
crew had not started with the caboose upon their home run. Neither 
does it appear from the évidence that the caboose and train crew were 
at the place of the injury for the benefit of défendant, or that they 
were wanted there at the time, or that there was any understanding 
that they should be at Landers at or near that time, or that they were 
at the place of the accident with other right than the mère suflferance 
of défendant, that being the most convenient way for them to get to 
Landers and secure sleep and other accommodations for the night, 
or that they were under any expectancy of a call, or that their acts in 
the premises had any bearing upon interstate commerce, or that the 
facts of the case brought the décèdent within the provisions of the 
fédéral Employers' Liability Act. 

We are unable to discover from the évidence or the law upon what 
ground plaintiff's decedent's présence at or near Landers at the time 
of the accident can be said to hâve been a stçp in the performance of 
any actual service to défendant in interstate commerce. He was there 
in no sensé under the direction of défendant growing out of the re- 
lation of master and servant. He was his own master. As was said 
in Illinois Central R, R. v. Behrens, supra : 

"That he [the servant] was expected, upon the completion of that task 
[moving intrastate cars], to engage in another which would hâve been a part 
of interstate commerce, Is Immaterlal under the statute, for by its terms the 
true test is the nature of the work being done at the time of the injury." 

To hold that décèdent was, at the time of the injury — some 4 or 
5 hours before he was wanted by défendant — employed in interstate 
commerce, would practically make the défendant liable to him as en- 
gaged in interstate commerce at ail times. Such is not the purpose 
of the act. The statute was enacted only with référence to those rail- 
road employés who, while in the actual discharge of their duties in 
interstate commerce, are injured. 

The facts pertaining to the question of jurisdiction are conceded. 
The record présents no other ground of fédéral jurisdiction than the 
bringing of the suit under the fédéral Employers' Liability Act, so 
called. It was error on the part of the District Court to deny the mo- 
tion to dismiss. 

The judgment of that court is therefore reversed, with direction to 
grant a new trial. 



16 234 FEDERAL REPORTER " 

WESTINGHOUSE ELECTRIC & MFG. CO. v. SAMSON IRON WORKS. * 
(Circuit Court of Appeals, Ninth Circuit. July 3, 19ie.) 
No. 2074. 

1. Sales <S=>340 — Actions — Purciiase Peice. 

To sue in indebitatus assumijsit is not to sue for the purciiase price 
of goods sold. 

1 Ed. Note. — For otlier cases, see Sales, Cent. Dig. §§ 927-942 ; Dec. Dig. 
®=>340.] 

2. Sales ©=384(7) — Actions fob Bbeach^Purciiase Pbice. 

Défendant breached Its contract to purciiase machiuery froni plaintifC, 
and thereafter plaintiff, the contract provldlng tliat tltle sliould not vest 
in défendant untU payment, disposed of part of the maclilnery to thlrd 
pei-sons. l'IalntifC tlien sued in Indebitatus assumpsit for damages. Ileld, 
that as tltle to the property had never passed to défendant, tliougli part 
of It was dellvered, as a suit in indebitatus assumpsit Is not one for the 
purciiase price, plaintiff cannot complain that uuder the Instructions its 
recovery was llmitod to damages resulting from defendant's breach. 

[Vj(]. Xote. — For otlier cases, see Sales, Cent. Dig. § 1107; Dec. Dig. 
©=^384(7).] 

3. Sales (®:=33S8 — Actions — Instructions. 

In an action for breach of contract to purchase niachinery, part of 
whicli was dellvered and installed, instructions on plalntifC's measure of 
damages are not objectlonable, as precludhig the jury from awarding 
damages for exjieiise of installation and reiuoval of i)art of the macliln- 
ery, where the court elsewliero expressly iiistructed that, if the jury fouud 
for pbiintlff, they should allow such damages as expansé of dellvery, 
installation, and removal. 

[I]d. Note. — For other cases, see Sales, Cent. Dig. § IIOS; Dec. Dig. 
>S==3<S8.] 

4. Sales ©=3oS2 — Actions — Evidence. 

In such case, where the machinery was to be installed by défendant 
in a building, aud défendant coutended that liecause of plaintlff's delay 
the owner repudiated bis contract with it, évidence of a conversation be- 
tween the owner and defendant's manager, whereln the contract was re- 
pudiated, was admissible. 

[Ed. Note.— For other cases, see Sales, Cent. Dig. § 1096; Dec. Dig. 

<S::^3S2.] 

5. Evidence <ê=5l55(10) — Admissibility — Evidence Admissible Iîecause of 

OiiiEH Evidence. 

Where plalntlif's wltness testified to statemeiits by defendant's man- 
ager, whereln lie detalled a conversation wlth a thlrd person, défendant 
is entitled to prove the conversation with such tliird person. 

|i;d. Note. — For other cases, see Evidence, Cent. Dig. § 455 ; Dec. Dig. 
<®==>155(10).] 

In Error to the District Cotirt of the United States for the Second 
Division of tht; Northern District of California; Wm. C. Van Fleet, 
Judge. 

Action by the Westinghouse Electric & Mantifacturing Company 
against the Samson Iron Works. There was a judgment for défend- 
ant, and plaintiff brings error. Affirmed. 

The plaintiff in error and the défendant in en-or were respectively plain- 
tiff and défendant in the court below, and they wlU be so designated liere. 

iÊ=3For other cases see .same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 
•Rehearlng denied October 9, 1916. 



WESTINGHOUSE ELECTRIC & M. CO. V. SAMSON lEON WORKS 17 

The défendant had undertaken to iiiRtall in tlie Spalding Buildin^j; at Tort- 
land, Or., tlien under construction, an ele(;tric yower plant of three nuits, each 
unit to be composed of a generator and a gas engins. Ou May 25, 1910, tlie 
défendant entered into an agreement witli tlie plaintiff whereby the latter 
agreed to deliver and erect on foundatious in the baseuient of the building, 
three generators, the first generator to lie shipped iiumediately from San 
Francisco, the other two to be built and sent froni the plaintiff's factory at 
Pittsburg. The contract provided that the lirst generator wlth its gas englne 
was to be in opération by July 1, 1910, tliat payment in the amount of .$1,500 
should be made on the total contract price iuimediately upon the Installation 
and acceptance of the first generator, or not later than July 15, 1910. As 
to the other generators it was agreed that delivery should be niade from the 
factory in approximately 90 days from May 25, 1910, the date of receipt of 
order. The plaintiff In its complaint alleged that it was readj' to comply 
with its contract as to the delive'ry and érection of the flrst generator, but 
that by reason of the fact that the building was not in readiness for the in- 
stallation, and that the défendant failed to furnish proper applianees for 
opération, the plaintiff was prevented from furnishing, delivering and erect- 
ing said generator on or about July 1, 1910, but that as soon thereafter as the 
building was in readiness, and as soon as défendant complied with its contract 
as to applianees for opération, plaintiff furnished and delivered and erected 
said generator; that within approximately the 90 days stipulated in the con- 
tract the plaintiff was ready and able and willing to deliver the other two 
generators, and to comply with its contract as to the same ; that the défend- 
ant failed and neglected and refused to pay the .$1,500 agreed to be paid im- 
niediatcly upon installation and acceptance of the first unit, and still fails 
to pay tlie same ; that on or about Angust 25, 1910, and before tlie time speci- 
fled in the contract for the delivery of the second and third generators and 
apparatus, the défendant notified tlie plaintiff tliat it would not accept plaln- 
tiffl's generator or any other part of plaintiff's niachinery ; and that the con- 
tract was void and of no efl'ect. The ])laintiff claimed damages in the sum 
of $.3,100. The défendant answered denying its indebtedness to the plaintiff, 
or that the plaintiff had performed its contract, and alleging that the plain- 
tiff failed and neglected to install the flrst unit by July 1, 1910, and neglected 
to deliver the other two generators within 90 days from the receipt of the 
order, or at ail, and alleged that in conséquence of the plaintiff's failure to 
keep and perforni its contract, défendant was prevented from completing the 
installation of the electrical apparatus and applianees in the said building, 
according to its contract with th(> owner thereof, and was otherwise put to 
large cost and expense in attempting to perform said contract, and was 
thereby damaged in the sum of $7,(19;5 ; that on September 6, 1910, the de- 
fendant notiiied the plaintiff that the owner of the building had by reason of 
plaintift''s failure to carry ont its portion of the contract, rescinded his con- 
tract with the défendant, and that the défendant would hold the plaintiff 
liable for ail loss and damage accruing therefrom, and that on September 12tli 
the défendant rescinded its contract with the plaintiff. Upon the conclusion 
of the trial the jury roturned a gênerai verdict in favor of the défendant, 
and Judgment was tliereupon rendered for the défendant. 

David L. Levy, Walter Shelton, and Campbell, Weaver, Shelton & 
Levy, ail of San Francisco, Cal., for plaintiff in error. 

Nathan H. Frank and Irving H. Frank, both of San Francisco, Cal., 
for défendant in error. 

Before GILBERT, ROSS, and MORROW, Circuit Judges. 

GILBERT, Circuit Judge (after stating the facts as above). [1, 2] 
The plaintiff relies principally upon alleged errors in the instructions 
of the court to the jury on tlie subject of the plaintiff's claim for dam- 
ages. It was agreed in the contract between the plaintiff and the 
234 F.— 2 



18 234 FEDERAL EEPOETER 

défendant that no property in or title to any part of tlie apparatus 
furnished by the plaintiff, and no right to use the same, should pass 
to the défendant, but that ail thereof should remain the personal 
property of the plaintifif until fully paid for, and that, on default of 
the défendant in making stipulated payments at tlie time specified, 
plaintiff should be entitled to immédiate possession of the apparatus 
and free to enter upon premises wherever the same might be located 
and remove its property. The court, referring to this provision of the 
contract, said to the jury: 

"If, therefore, you find for the plaintiff, it will not be entitled to recover 
for the value of the apparatus iustalled by plaintiff, or any part thereof, 
since it remains its property, and there is no évidence that it has been lost 
or Injured, but it will only be entitled to recover such damages as it has sus- 
tained in the endeavor to carry out the contract, such as the expense of de- 
livery and installation thereof, and the necessary steps to hâve it retumed 
to it." 

As to the plaintiff's claim for damages in connection with the sec- 
ond and third generators, the court charged the jury that if they found 
that the two generators which were not shipped, but were subse- 
quently sold by the plaintiff, were sold for as much as the plaintiff' 
would hâve realized for them under the contract, the plaintiff could 
not be allowed anything for the failure of the défendant to accept 
them. The plaintiff, while excepting to thèse instructions, requested 
the court to instruct the jury that, if they found for the plaintiff, its 
damages should be the whole contract price, $7,850, deducting there- 
from, first, the market value of the second and third generators at 
Portland, Or., in September, 1910; second, the value of the compo- 
nent parts of the switchboard at Portland, if the jury found that they 
had no value as a ])ermanent switchboard, but only as dismantled ar- 
ticles ; third, freight charges on the switchboard f rom Pittsburg to 
Portland, had it been shipped; fourth, cost of labor and material 
necessary to erect and install the second and third generators, perma- 
nent switchboard, and otlier apparatus. 

To the alleged error in the instructions and refusai to instruct the 
plaintiff cites authorities to the proposition that if, notwithstanding 
the réservation of the title of goods in the vendor, he elects to sue 
the vendee for the purchase price thereof, he waives his claim of 
title to the goods, and the title passes to the défendant. That prop- 
osition is not applicable hère, for the reason that the plaintiff did not 
and could not under the facts sue for the purchase price. It set forth 
in its complaint the provision of the contract whereby the title was 
to remain in the plaintiff, and it sued in the first count for damages 
in the sum of $3,100 for the alleged failure of the défendant to carry 
out its contract, and in the second count it sued upon indebitatus as- 
sumpsit for goods sold and delivered and labor and material furnish- 
ed, of the reasonable value of $3,100. To sue upon an indebitatus 
assumpsit is not to sue for the purchase price. Barrere v. Somps, 
113 Cal. 97, 45 Pac. 177, 572. By the contract there was a single 
sum agreed upon as the total purchase price for ail the machinery 
iiîcluded therein. Before the action was begun, the plaintiff had sold 
to others the second and third generators. The plaintiff was no long- 



WESTINGHOU8E ELEOTKIO <b M. OO. V. SAM80N lEON WOKK8 19 

er in condition to waive its title to the property or to transfer the 
title to the défendant. It had elected to retain the title. 

[3] Nor do we find that the instructions so given by the court were 
subject to the objection that the jury were thereby precluded from 
awarding the plaintifif damages for the expense of installation and 
removal of the first generator. The court elsewhere instructed the 
jury that, if they found for the plaintifï, it would be entitled to such 
damages as it sustained in its endeavor to carry out the contract, such 
as the expense of delivery and installation, and the necessary steps 
to hâve it returned, together with such profit as it would hâve re- 
alized on its sale, had the contract been fuUy executed. 

The plaintifï contends that the évidence was insufficient to justify 
the verdict, and that it showed without conflict that the plaintifï per- 
formed the contract. There was no exception taken, and there is no 
assignment of error to présent to this court any question of the évi- 
dence or the want of évidence. There was no request that the jury 
be instructed to return a verdict for the plaintifï, and the record sug- 
gests no error of law in any of the rulings of the trial court on the 
efïect of the évidence. The trial court, in instructing the jury, said 
that the whole sum and substance of the case was, Who was re- 
sponsible for the failure to hâve the contract carried out? and that as 
to that question the évidence was "more or less conflicting." With 
that statement we agrée. 

[4] The plaintifï contends that the court below erred in admitting 
testimony given by Head, the defendant's manager, as to a conversa- 
tion between him and Spalding, the owner of the building. The de- 
fendant, in making out its case, relied upon the allégation that by the 
plaintifï's default it was prevented from carrying out its contract, and 
it alleged in its complaint that on September 6, 1910, it informed 
the plaintifï that Spalding had rescinded his contract with the de- 
fendant on account of the plaintifï's failure to perform its contract. 
Under the issues it was proper for Head to testify to the fact that 
Spalding gave notice that he canceled the contract. He testified that 
Spalding said: 

"It Is Impossible to get power. I miist hâve It. The only thlng for me to 
do Is to contract with the Electric ComiJany. I will cancel your eoutract 
now, and you must take your things out." 

It is impossible to see how the évidence could hâve prejudiced the 
plaintifï. 

[5] Again, the admission of the évidence was not error for the 
reason that Wernicke, a witness for the plaintifï, had testified to a 
conversation with Head, in which Plead had told him what Spalding 
had said to him on that occasion, and thereby the plaintifï had opened 
the way for the défendant to prove by Head what the conversation 
was. His version, however, did not difïer materially from that of 
Wernicke. 

We find no error. The judgment is affirmed. 



20 234 i'EDERAL REPORTER 

ALWAKT BROS. COAL CO. v. ROYAL COLLIERY CO. 

(Cil-cuit Court of Appeals, Seventh Circuit. April 18, 1916.) 

No. 2;U3. 

1. Sales <®=3isi(ll) — Breacii of Contiîact— Cancellatiox and Resoissioît. 

Evidence h(;lû suflieient to sustain a flnding tliat buyer breaclied a con- 
tract for tlie sale and delivery of coal, by faillug to order the amount of 
coal coiitracted for, and tliat seller was withiu its rights in canceling the 
contract. 

[Ed. Note.— For otlier cases, see Sales, Cent. Dig. §§ 486, 487, 490; Dec. 
Dig. <S=>181(11).] 

2. Sales <S=>152—Contracts— Breacii. 

Wliere buyer failed to order from défendant coal in quantities as con- 
traeted for, to be delivered monthly, and thereat'ter dernanded luontlily 
dellveries in excess of the contract requirenients to make up the deficiency, 
and threatened suit for failure to deliver such deficiency, the seller was 
relieved from any obligation to make furtlier deliveries as for want of 
proper order. 

[Ed. Note. — For other cases, see Sales, Cent. Dig. § 357; Dec. Dig. iS=» 
132.J 

3. New Trial <@=>165— On Motion of Botii Parties— Vacation on Motion of 

Oke Part y. 

Where the court grauted a new trial on motion of both plalntiff and 
défendant, a vacation of the order thereafter on motion of plalntiff held 
proper, since the évidence was not in dispute, and there liad already been 
tliree nisi prius heaiings. 

|Ed. Note.— For other cases, see New Trial, Cent. Dig. §§ 334, 335; Dec. 
Dig. ©=105.] 

4. Trial <S=>251(4) — Instructions — Conformity to Pleadings. 

In a suit upon contract, the court properly refused to submit the issue 
of an alleged agreenient in modiflcation or settlenient of the original ob- 
ligation ; such agreenient not belng witliin the issues pleaded. 

[Ed. Note. — For other cases, see Trial, Cent. Dig. § 591 ; Dec. Dig. 
©=251(4).] 

In Error to the District Court of the United States for the Easf.- 
ern Division of the Northern District of Illinois. 

Suit by the Alwart Bros. Coal Company against the Royal Colliery 
Company. From a judgment for défendant, plaintifï brings error. 
Affirmed. 

See, also, 211 Fed. 313, 127 C. C. A. 599. 

For the purpose of enabling it to flll its contract with the board of éducation 
of the city of Chicago, plalntiff in error, termcd plalntiff lierein, entered into 
a written agreenient with défendant in error, ternied défendant, whereby de- 
fendant undertook to sell and deliver to plalntiff in, approximately equal 
monthly quantities between July 25, 1911, and March 31, 1912, as ordered by 
purchaser, four-sevenths of the requlrements for the scliools of certain dis- 
tricts mentioned, approximately 20,000 tons of <'oal as speclfled in tho contract, 
at the price of $1.071/2 per ton at the mine in Virden, 111. Both contracts con- 
tained a certain clause D, by which the board of éducation should charge 
back to plalntiff coal that it necessarily purchased in the market to supply the 
schools during such times as plalntiff failed to supply the prescribed amount 
of coal, as ' to which défendant in its turn agreed to iiideinnify plalntiff for 
any such loss as niiglit be ascrlbed to its failure to comply with the contract. 
riaintiff was required to pay défendant on or before the 20th of each montli 
50 per cent, of the value of ail coal shipped during the previous month. The 

©^^For other cases see saine topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 



ALWART BEOS. COAL CO. V. EOTAL COLLIERY CO. 21 

remaining 50 per cent, was to be paid on or before the lOth day of the second 
succeedlng month. If payments were not made vvithin the agreed tlme, the 
seller could suspend further shipments, on five days' notice, until payaient, or 
could treat the contract as broken by plaintlff. The présent demand covers 
only the right of plaintlfC under said contract for the months of January, Feb- 
ruary, and March, 1912. Other contentions between the parties were disposed 
of bv this court in Âlwart Bros. Coal Oo. v. lloyal Colliery Co., 211 Fed. 313, 
127 b. C. A. 599. 

From the évidence it appears that plaintlfC ordered and received on the con- 
tract less than 6,000 tons of coal up to January 1, 1912. Durlng January, 
1912, plaintlff ordered 2.500 tons and received but 1.690. During February, 
1912, plaintlfC llbewlse ordered 2,.500 tons and received but 1,570 up to Febru- 
ary 20, 1912. On February 17, 1912, plaintlff denianded that défendant dellver 
between that date and March 31, 1912, 7,500 tons of coal not ordered or de- 
livered prior to January 1, 1912, in addition to the 2,500 tons, which coal plain- 
tlfC was entitled to hâve had dellvored, had It been ordered, prlor to January 
1, 1912. On February 19, 1912, plaintlfC threatened suit if défendant dld not 
dellver 12,000 tons of coal, to apply ur>on the 20,000 tons covered by the con- 
tract, before Aprll 1, 1912. In the meantlme the prlce of coal had advanced 
materlally. Paul J. Alwart and Frederick W. Alwart, of the plaintlff company, 
testlfy that on February 19, 1912, they called upon défendant, asking for more 
coal, and that IMaloney, representing the défendant company, promised, "1 
wlU give you 6,000 tons In two weekg." This promiise was not deelared on. 

On February 20, 1912, plaintlff wrote to défendant as follows: "We tried 
to get you on the phone this morning. Since talklng wlth you yesterday, we 
bave found the school .supply is very low. In order that there may be no mls- 
understandlng, we thought it well to write you confirmlng what our Mr. Al- 
wart said in his interview with you Saturday, and to let you know our needs 
in the niatter of dellvery of coal under our contract wlth you. Although this 
contract calls for 20,000 tons of coal, we had received only about 6,000 to 
February Ist. For the month of January we gave orders for 5,000 tons of 
coal, but received only 1,600 tons. The loss on this In money actually paid 
ont or now due is not less than $3,000, and It is probable that wlll not nearly 
cover onr loss. For the next two weeks we wlll require 6,000 tons of coal 
under our contract, and would ask you to eonnnence dollverlng it at once at 
the rate of 8 to 10 cars a day. Between now and x\pril Ist we want you to de- 
llver the balance of our 20,000 tons. Please let us hear from you, and let us 
know what we may expect in the way of Immédiate dellveries. Your early 
reply will greatly oblige. Referring to the question of releasing you on part 
of your dellveries, we decided to wait till we see what effort you make to sup- 
ply us between now and April Ist." 

To this défendant repllod on February 21, 1912 : "Your letter of February 
20th received. You bave failed to eoniply with the terms of your contract in 
important respects, and we hâve elected to resclnd the contract, and accord- 
Ingly hereby so notify you. As stated to you orally, we bave been willing to 
ship the coal whieh the schools will consume during the remainder of this 
month and the next month, notwlthstandlng the fact that you bave deprlved 
us of ail beneflt of the contract by fallure to take the coal in monthly install- 
ments as provided, and notwithstanding this notice, we stand ready to help 
you ont to any reasonable extent. We offer to ship, under the same terms 
and conditions provided in the contract, the coal which the schools will con- 
sume during the remainder of this month and next month." 

On February 22, 1912, plaintlff wrote to défendant: "This is to conflrm con- 
versation had between your Mr. Maloney and our Mr. Alwart to-day. Our 
understanding is that if you dellver us 8,000 tons of coal of the kind requlred 
by our contract with you, between now and April Ist, commencing shipments 
])romptly and continuing at the rate of about 300 tons per day for 10 days, and 
thereafter approximately equal dally dellveries, so as to make the 8,000 tons 
by April Ist, we will release you from further llabilities on your contract wlth 
us dated July 25, 1911. If we do not recelve the full 8,000 tons as specifled in 
this letter, you will not be released from any of your obligations under the 
contract of July 25th." 



22 234 FEDERAL REPORTER 

Défendant, on February 28, 1&12, repUed: "Your letter of February 22d re- 
ceived. We hâve no such understanding as y ou therein say yoti liave. Our 
position is defliied in our letter of tlie 21st instant. We stiU offer to sliip, 
under the same terms and conditions, the coal whlcli the seliools will eonsunie 
during the remainder of this month and next month. Thls offer is made in 
the splrlt of concession, and is subject to withdrawal at any tlme before ae- 
ceptance." 

On the same day plaintiff replied : "We hâve your lotters of the 21st and 23d 
inst. Our contract with you bas been lived up to by us in every partieular. 
It is évident that you do not intend to comply with the terms of your con- 
tract wlth us, and of course you bave nOt complied ^Yitb it to date. You say 
that you ofCer to ship us the coal necessary for the schools. It is not enough 
to offer to do It ; we want you to do it. Please get busy and ship us the coal 
for the schools. We renew the demands contained in our letter to you of the 
20tb inst., and, unless shipments are comnienced at once, we will buy coal in 
the open market to supply tlie school and to niake np the amount due us un- 
der our contract with you for 20,000 tons, and charso you with the différence 
between what we pay for it and the priée you agreed to furnish it to us for, 
and also charge you with the other damage we sustain by reason of the school 
board paying extra priées for any coal that we may not be able to rtellver and 
other damage that we may sustain by reason of your failure to fulflll your con- 
tract with us." 

To thls défendant answerod on February 24, 1912 : "We acknowledge receipt 
of your favor of the 2.3d instant. As per our letter of the 21st instant, we 
Iiave rescindcd the contract and will niake no fui'tlier shipments under It. 
We repeat, howevcr, that we are willing to ship foiir-sevenths of the coal 
the schools wUl consume until April 1, 1912, at tlio same prlce and on the same 
conditions as specifled in the contract. You are demanding practically 12,000 
tons, and at the same time admitting that the requircments will not be for that 
tonnage. You are ask-ing us to ship you coal to be used several montlis after 
Mareh 31, 1912. If you eare to accept our proposition and will advise us of 
the aetual requirements, we will ship the coal, or we will engage to ship a 
specified tonnage," 

On February 24, 1912, plaintiff writes: "We bave your letter of the 24th 
inst. You owe ns abont 12,000 tons of coal under our contract with you of 
July 25, 1911. We ostiniate that tlie requirements of the schools by the end 
of the scliool j'oar will be ,^5,000 tons of coal, of which .you were requlred to 
ship 20,000 tons. The future requirements of the schools we estimate to be 
20,000 tons, and tlio immédiate requirements for the next month or two will 
be some 15 cars per day. We a gain demand that you proeeed to sbip us coal 
under your contract to supply the schools. Failing to do so, we will hold you 
lialilfi for sucb damages as we may sustain by reason of your breach of con- 
tract." 

And again, on March 2, 1912: "On account of your failure to deliver coal 
to us aceordhig to our demands during January and February, we are short 
in our .snpi)lies for the schools, and will requlre much larger shipments during 
the month of March on that account. Please ship us coal ail during the month 
of Mareh .nt tho rate of -"00 tons a day, to talve care of our requirements in 
supplying the seliools. Wo are making this demand under our contract with 
you dated July 25tb, 1911. Any coal sbipped us during the month of ilarch 
by you, in excess of our requirements for the school, will be applied on the 
shortages of your sbipments for the months of .lanuary and February, and 
will consequently releaso you to that extent froni the damages that we are 
entitled to recover from you on account of your failure to ship ua during Jan- 
uary and February." 

To which défendant niakes a final reply on March 4, 1912 : "Your letter 
of JTarch 2d received. It is not in accordance with our conversation. We are 
willing to make reasonablo concessions to close ui> the situation. To put the 
matter finally at rest, we state our position as foUows : (1) The contract bas 
been teruiinated by our letter of February 21st. (2) Under the contract you 
U'Ould be entitled to reei'ive no more than 2,500 tons in any one month. (3) 
l'on cainiot, iViulor Ibe conti'act, ask us to ship in February and March what 
you shoiild hâve taken in August, September, and October. (4) Under the 



ALWAET BROS. COAL CO. V. KOYAL COLLIEKY CO. 23 

ooiitiact, we could not ship until you gave us orders. ïour failure to give or- 
ders when the market was way below the contract priée materially damaged 
us. (5) In January and February we shipped your proportion o£ our output 
as provided In the contract. But, as repeatedly stated to you, we are willing 
to, and hereby offer to, ship during March the actual requirements of the 
schools, not to exceed 2,500 tons ; or we wUl agrée to ship a si)eeified tonnage 
— giving you not only the 2,500 tons, but an additional 1,000 tons. We wlU, 
in addition, walve our claim for damages. Tiiis is to be open for acceptance 
until Wednesday next." 

Payments were not made by plalntiff as provided in the contract, to coUect 
wliich défendant brought suit. 211 Ferl. 313. No shipments of coal were made 
after February 20, 1912. As will be seen froin the letters, défendant treated 
the contract as broken by plalntiff as of about February 20, 1912, for failure 
to pay as agreed, and for the demands and threats made by plalntiff with 
regard to the amount of coal claimed. The amount of coal charged back to 
plalntiff which défendant agreed to pay for was, in January, roundly 353 
tons, and, for the flrst 20 days of February, roundly 74 tons. Evidence in re- 
gard to thèse Items, together with the évidence as to claim for damages for 
coal which should hâve been and was not delivered according to the contract 
on the 2,500 orders in January and up to February 20, 1912, the court sub- 
mitted to the .iury. The latter were instructed that the contract was ended 
February 20, 1912, and that no case was made for damages for failure to dc- 
liver 6,000 tons of coal before March 31, 1912. After verdict both parties mov- 
ed for a new trial, which was granted. On request of plaintifC's associate 
counsel, the order for a new trial was vacated. The instruction of the court 
to the effect that the contract called for the delivery on order of 2,500 tons 
of coal each month — month by month — spread out reasonably over each month, 
and not bunched, even though not so ordered, is assigned for error, as are 
the instructions that the contract was ended on February 20, 1912, and the 
direction to the jury to ignore the conversation with regard to the alleged 
settlement on 6,000 tons of coal. No other errors are assigned. 

John A. McKeown, of ChicagO', 111., for plalntiff in error, 
Frank Crozier, of Chicago, 111., for défendant in error. 

Before BAKER, KOHLSAAT, and ALSCHULER, Circuit Judges. 

KOHLSAAT, Circuit Judge (after stating the facts as above). 
[1] When this cause was before us with case No. 1999, on January 6, 
1914, we held that the contract called for monthly shipments as near 
as might be, and that in the absence of orders nc' obligation rested on 
the shipper to deliver such monthly installments of coal up to January 
1, 1912, either during the month or thereafter; that each monthly re- 
quirement was severable. Alwart Bros. Coal Co. v. Royal Colliery Co., 
supra. We find no material variation in the évidence there adduced, as 
disclosed in the opinion, and hère, sufïicient to justify any différent con- 
clusion. The only change consisted in adding the words "within two 
weeks." The évidence herein fully sustains the contention, there as- 
sumed, that défendant had the right to and did cancel the contract on 
February 20, 1912, under the provisions of the contract. 

[2] We are, moreover, of the opinion that, by reason of its demands 
for deliveries, far in excess of 2,500 tons per month, together with its 
threats to bring suit for failure of défendant to make good the ship- 
ments neither ordered nor attempted to be delivered prior to January 
1, 1912 — which deliveries we held, in effect, in the above-named case, 
it was not bound to make — and the intimations contained in the let- 
ters to the effect that delivery of 2,500 tons of coal per month would 



24 234 FEDERAL REPORTER 

not be accepted as a compliance with the contract, défendant was re- 
lieved from any obligation to make further deliveries after February 
20, 1912, as for want of proper order as well so to do. Park Steel 
Co. V. Staver Carriage Co., 125 111. App. 105. No shipment was made 
after February 20, 1912. 

[3,4] With regard to the plaintifF's failure to take a new "irial, it 
was not bound to do so. It had had three nisi prius hearings, and u^as 
advised of the court's judgment as to the matters hère involved. The 
évidence was not in dispute. Plaintiff was entitled to this court's judg- 
ment upon that évidence. There was no nierit in the assignment of 
error upon the District Court's failure to submit the alleged agreement 
to deliver 6,000 or more tons of coal between February 20, 1912, and 
April 1, 1912. The suit was on the original agreement. No case was 
made out upon the pleadings with regard to tbat agreement, which, if 
made, was a new one, and in the nature of a settlement. 

We find no error, and the judgment is afïirmed. 



MOY WTNG SUN v. PREKTIS, Immisration Inspector. 

(Circuit Court of Apiieals, Seventh Circuit. Aprll 18, 191G.) 

No. 2273. 

1. Habeas Corpus (ê==>30(1) — Wbit — Scope. 

A (îliiuese porsoii arrested under a warrant signod liy tlie Assistant 
Secretary of Labor will not be dlscliargeil ou habeas corjuis because the 
wai'raiit should hav(> lieen signetl by the Secretary of Labor as the objeet 
of the wrlt Is uierely to ascertaln whetlier the petltiouer can be lawfully 
detalned. 

[Kd. Note. — For otlier cases, see Habeas Corpus, Cent. Dlg. § 25 ; Dec. 
Dlg. .§=30(1).] 

2. Searches and Sbizttbes <S=^7 — Unlawful Seizures — Wiiat Constitutes. 

Wliere govermneut wituesses took a buneli of letters from a rack In a 
lauudry where petltioner, a Chinese person, and others, were employod, 
and with the cousent of tlie proprletor retaliunl souie of the letters, petl- 
tioner's coiistitutlonal rights against an unlawful search and selzure of 
lais papers were not vlolated, as he clahued the letters were not ad- 
dressed to him. 

[Ed. Note. — For other cases, see Searches and Seizures, Cent. Dig. § 5; 
Dec. Dlg. ©=37.] 

3. Aliens <Ê=332(S) — CniNEKE Pebsons — Evidence. 

Evidence that letters were wrltten to petltioner, a Chinese person, by 
a woman in China who clalmed him as her liusband and l'eferred to a 
récent partiug, do not, there belng no shownig that petltioner answered 
the letters, establlsh that lie was born in China and had entered the 
L'nlted States at a récent date. 

[Ed. Note. — For other cases, see Aliens, Cent. Dlg. § 84; Dec. Dig. 
€==32(8).] 

4. Aliens ©=54 — Chinese Peesons — Déportation. 

Where a Chinese la.borer entered in violation of Immigration Act 
Feb. 20, 1907, c. 1134, § 30, 34 Stat. 908 (Comp. St. 1913, § 4285), and was 
unlawfully in the United States, because not in possession of a certificate 
of résidence as required by Chinese Exclusion Act May 6, 1882, c. 126, § 

@=3For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Inflexa» 



MOY WING SUN V. PRENTIS 25 

6. 22 Stat. 60 (Cornp. St. 1913, § 429S), he iiiay within tliree years after 
hls entry be summarily deported under Innnisration Act, §§ 20, 21 (Comp. 
St. 1913, §§ 4209, 4270); but after the expiration of that time proceed- 
ings for his déportation must be brouglit under Chinese Exclusion Act 
Sept. 13, 1888, c. 1015, § 13, 25 Stat. 479 (Comp. St. 1913, § 4313) pro- 
viding for a hearing before a United States commissiouer witli right of 
appeal to a judge of the District Court for the remedy provided In the 
Immigration Act only exists for a period of three years after entry. 

[Ed. Note. — For other cases, see Aliens, Cent. Dig. § 112; Dec. Dig. 
<S=>54.] 

Appeal frora the District Court of the United States for the East- 
crn Division of the Northern District of Illinois. 

Pétition by Moy Wing Sun for writ of habeas corpus against Percy 
L. Prentis, Immigration Inspecter. From an order discharging the 
writ, petitioner appeals. Reversed and remanded, with directions to 
discharge petitioner. 

Frank T. Milchrist, of Chicago, 111., for appellant. 
Chas. F. Clyne and Benjamin Epstein, both of Chicago, 111., for ap- 
pellee. 

Before BAKER, KOHLSAAT, and ALSCHULER, Circuit Judges. 

ALSCHULER, Circuit Judge. This appeal brings for review a pro- 
ceeding by habeas corpus whereby the petitioner, a Chinese, inefïectu- 
ally sought discharge from custody under a warrant of déportation. 

[1] The original warrant of arrest, dated December 8, 1914, was 
signed "Louis F. Post, Assistant Secretary of Labor," and recited that 
petitioner landed at an unknown port on or about July 10, 1913, and 
was subject to be taken into custody and returned under section 21 
of the Immigration Act of 1907, and was subject to déportation under 
the provisions of section 6 of the Chinese Exclusion Act, being a Chi- 
nese laborer not in possession of a certificate of résidence. The warrant 
of déportation contained like récitals. 

It is contended that petitioner should be discharged because the orig- 
inal warrant was signed "Louis F. Post, Assistant Secretary of La- 
bor," and not by the Secretary of Labor. The writ of habeas corpus 
was sued out after the hearing and the issuing of the warrant of dé- 
portation. Objection to the original warrant cornes too late. As v^-as 
said bv the Suprême Court in Ekiu v. United States, 142 U. S. 651, 
662, 12 Sup. Ct. 336, 339 (35 L. Ed. 1146): 

"A writ of haliens corpus is not like an action to recover damages for an 
unliiwful arrest or commitment, but its object is to ascertain whetlier the 
prisoner can lawfully be detained in custody ; and it suflicient ground for 
his détention by the government is shown, ho is not to be discharged for de- 
fects in the original arrest or commitment. Ex parte Bollman & Swartwont, 
4 Cranch, 75. 114, 125 [2 L. Ed. 5.")4,] ; Coleman v. Tennessee, 97 U. S. .509, 
519 (24 L. Ed. 11181; United .States v. Mcl5ratney, 104 U. S. 621, 624 [26 L. 
Ed. SC9]; Kelley v. Thomas, 15 Gray (Mass.) 192; ïhe King v. Marks, 3 
East, 157 ; Shuttleworth's Case, 9 Q. B. 051." 

[2] It is next objected that certain letters used against appellant 
at the hearing wcre taken in violation of the constitutional provision 
against unlawful search and seizure. 



26 234 FEDERAL BEPORTEU 

Petitioner denied knowledge of the letters, and denied tliat he had 
a wife (the only letters of any possible relevancy, purporting to be 
written by a wife in China to her husband hère). From the uncon- 
Iradicted testimony of government's witnesses Kan and Brekke, who 
took the letters, they were not in petitioner's possession at ail. It ap- 
pears they took a bunch of letters from a rack in the laundry where 
petitioner and others were employed, and with the consent of the pro- 
prietor of the laundry took away some of thèse letters and returned the 
balance to the proprietor. Since petitioner himself disclaims the let- 
ters, and as they were not in fact in bis possession, nor taken from 
him, bis constitutional rights were not in any event thereby invaded. 

[3] The Secretary of Labor found that petitioner entered the Unit- 
ed States on or about July 10, 1913. Is there évidence to warrant this 
finding? Petitioner claims he was born and bas always lived in the 
United States ; that he came to Chicago between three and four years 
prior to bis arrest, and lived there ever since. An uncle and another 
Chinese testified in corroboration of this claim. Five white witnesses 
connected with a Sunday school in Chicago testified to petitioner's at- 
tendance at the Sunday school since about the middle of 1912, but that 
they knew of him for a considérable period — perhaps six months — 
before that time. Aside from the letters, nothing appears in the rec- 
ord to show a différent state of facts. 

The two letters purport to be written to Dong Shok (which petitioner 
testified was bis school name), and the writer of them terms him "hus- 
band." One is dated April 2, 1914, and refers to the fact of their 
having been parted for a year past. The other, dated September 25, 
1912, refers to bis going from Canada to Chicago, but it does not ap- 
pear how the writer of the letter got information of that fact. There 
is no évidence that petitioner departed the United States between thèse 
two dates. Petitioner testified without contradiction that another man 
known as Dong Sl«k also worked at the same laundry. But for any- 
thing to the contrary in the letter of September 25, 1912, the person 
therein referred to as husband may hâve entered the United States in- 
(4efinitely prior to its date; and so, conceding the admissibility of the 
letters, they alone do not warrant the finding that petitioner entered 
on or about July 10, 1913, nor indeed at any time within three years 
before his arrest. 

But in the absence of proof that petitioner replied to thèse letters, 
or in some way recognized them, or acted in pursuance of them, they 
afl^orded no compétent évidence against him. In Razor v. Kazor, 149 
m. 621, 36 N. E. 963, it was said: 

"This letter, If addressed to the wife and found in her possession, would 
not be évidence against her unless the contents had been adoptod, or sanc- 
tioned by some reply or statement or act done on her part, sliown by proof 
aliunde the letter itself." 

The same rule was reaffirmed by that court in Crumbaugh v. Owen, 
238 m. 497, 87 N. E. 312. In Commonwealth v. Eastman, 1 Cush. 
(Mass.) 189, 48 Am. Dec. 596, the court said : 

"The letters, however, if properly identified, vrould not of themselves au- 
thorize any inference against the défendants. They were only the acts and 



MOY WING SUN V. PEENTIS 27 

déclarations of others ; and, unless adopted or sanctioned by the défendants, 
by some reply or statement, or by some act done in pursuance of tbeir sug- 
gestions, they ouglit not to préjudice tlie défendants." 

And to like effect are Consolidated Grocery Co. v. Hammond, 175 
Fed. 641, 99 C. C. A. 195 (C. C. A. 5th Cir.), and Securitv Trust Co. 
V. Robb, 142 Fed. 78, 71 C. C. A. 302 (C. C. A. 3d Cir.). 

[4] The warrant of déportation recites also that petitioner has been 
found within the United States in violation of section 6 of the Chinese 
Exclusion Act, being a Chinese laborer not in possession of a certifi- 
cate of résidence, and that he entered the United States in violation 
of section 36 of the Immigration Act. If it be granted there is évi- 
dence to support thèse conclusions, yet if it does not appear that the 
entry into the United States was within three years of petitioner's ar- 
rest, can he be deported under the summary proceedings of sections 20 
and 21 of the Immigration Act, which provide for arrest and déporta- 
tion on the warrant of the Secretary of Labor, or must the déportation 
proceedings be under section 13 of the Chinese Exclusion Act, which 
provides for a hearing before a United States commissioner, with right 
of appeal in case of Conviction, to a judge of the District Court? 

Prior to the décision of the Suprême Court in United States v. 
Wong You, 223 U. S. 67, 32 Sup. Ct. 195, 56 U. Ed. 354, it was much 
mooted whether in the déportation of Chinese aliens the provisions of 
the Chinese Exclusion Act must alone be followed, or whether the 
procédure of sections 20 and 21 of the Immigration Act might also be 
employed. In section 43 of the Immigration Act it is provided that 
the act sliall not be construed to repeal, alter, or amend existing laws 
relating to the immigration or exclusion of Chinese. In the last-cited 
case the Chinese were arrested in transitu on charge of having entered 
the United States surreptitiously f rom Canada at a point not designated 
as a port of entry, and without having produced a certificate of ex- 
amination as required by the immigration laws of the United States, 
and were ordered by the Secretary of Labor to be deported in a pro- 
ceeding brought under sections 20 and 21 of the Immigration Act. 
The District Court held that, while the Immigration Act did not re- 
peal any provision of the Chinese Exclusion Act, it did provide for its 
enforcement the additional and more summary remedy afforded by the 
former for deporting Chinese who came within its provisions, and the 
Chinese there seeking relief by habeas corpus were remanded. 176 
Fed. 933. On appeal it was held by the Circuit Court of Appeals, 
Second Circuit, that Chinese could not be deported under the provi- 
sions of the Immigration Act, but only under the Chinese Exclusion 
enactments, which alone applied to Chinese aliens. 181 Fed. 316, 104 
C. C. A. 535. But the Suprême Court, holding the Circuit Court of 
Appeals erred in its interprétation, said (Wong You v. United States, 
supra) : 

"By the language of the act [Immigration Act] any alien that enters tlie 
country unlawfully may be summarily deported by order of the Secretary of 
Commerce and Labor at any time within three years. It seems to us unwar- 
ranted to except tlie Chinese from this liability beeause there is an earlier, 
more cumbrous proceeding which this partlally overlaps." 



23 234 FEDBRÂIi RBFORTER 

Sections 20 and 21 of the Immigration Act provide for déportation 
only where the entry was within three years of the arrest, and con- 
cluding as we do that this record affords no basis for finding that this 
petitioner entered the United States within three years before his ar- 
rest, his déportation under the Immigration Act is unauthorized. 

The order of the District Court, discharging the writ of habeas cor- 
pus and remanding the petitioner, is reversed, and the cause remanded 
to tliat court, with direction to discharge the petitioner. 



WONG TUEN V. PRENTIS, Immigration Inspecter. 

(Circuit Court of Appeals, SeventLi Circuit. Aprll 11, 1910.) 

No. 2308. 

1. Aliens ©3354 — CniNESE Peesons — Déportation. 

To déport a Chinese person on the ground of his belng in the TJnlted 
States in violation of Immigration Act Feb. 20, 1907, c. 1134, 34 Stat. 898 
(Comp. St. 1913, 8§ 4242-42S9), in that he was a person llkely to become a 
public charge and that he entered without Inspection, it must appear 
that déportation proceedings were l)egun within three years after his 
entry. 

[Ed. Note. — For other cases, see Aliens, Cent. Dig. § 112; Dec. Dig. 
<©==>54.] 

2. Aliens <S=»54 — Entry — Uni,awful Entrt. 

That a Chinese person was foundi in a freight car billed and sealed 
f rom a point in New York, and passing thence into and out of Canada and 
l ack into the United States, after the car returned to the United States, 
does not show that the Chinese person entered the United States in viola- 
tion of law. 

[Ed. Note. — For other cases, see Ailens, Cent. Dig. § 112; Dec. Dig. 
<©==354.] 

3. Aliens <©=>54 — Depobtation — Uptlawful Entbt. 

l'roof that a Chinese person had been deported in November, 1910, for 
attempting to enter on a fraudulent certificate, does not show, nearly four 
yeai-s later, that his subséquent entry into the United Statos was within 
three years of the institution of proceedings for his déportation. 

[Ed. Note.— For other cases, see Aliens, Cent. Dig. § 112; Dec. Dig. 
<S=554.] 

Ajjpeal from the District Court of the United States for the Eastem 
Division of the Northern District of Illinois. 

Pétition by Wong Yuen for a writ of habeas corpus against P. L. 
Prentis, Immigration Inspecter. From an order dismissing the writ 
and remanding petitioner, he appeals. Reversed, and cause remanded, 
with directions to discharge petitioner. 

Wm. R. Medaris, of Chicago, 111., for appellant. 
Chas. F. Clyne, M. L. Igoe, and Benjamin Epstein, ail of Chicago, 
111., for appeliee. 

Before KOHLSAAT, MACK, and ALSCHULER, Circuit Judges. 

ALSCHULER, Circuit Judge. [1] In a proceeding under the Im- 
migration Act, the Secretary of Labor ordered the déportation of ap- 

<gr::oFor olher f-ases see same topic & KEY-NUMBER In ail Key-Numbered Digesta & Indexes 



WONG YUEN V. PKENTI8 29 

pellant, a Chinese, on the ground o£ his being in the United States in 
violation of the Immigration Act of February 20, 1907, as amended, 
in that he was a person liable to become a public charge at the time 
of his entry into the United States, and that he entered without the 
inspection contemplated by said act. Section 36, rule 12. Writ of 
habeas corpus to obtain his release was dismissed by the District Court, 
and the petitioner was ordered remanded, such action of that court be- 
ing involved in this appeal. Being brought under the procédure of the 
Immigration Act, we are met at the outset with the question whether 
there is évidence from which it may be fairly concluded that the pro- 
ceedings were begun within three years of petitioner's entry into the 
United States, an essential prerequisite in proceedings under that act, 

as we held in Moy Wing Sun v. Prentis, No. 2273, 234 Fed. 24, 

C. C. A. . 

Petitioner claims he was born in the United States, and that he nev- 
er departed therefrom. That he lived at Chicago quite a number of 
years, prior to about 4 years before his arrest, is without contradiction 
shown by the évidence. He maintains that on leaving Chicago he went 
to Boston, remaining there until, traveling west and intending ultimate- 
ly to go to Chicago, he was arrested at Gary, Ind. The government 
contends that he, with two other Chinese, was taken from a sealed 
Wabash Railroad freight car, which had started from New Jersey, 
passed into Canada, and again back into the United States at Détroit, 
on its way to Chicago ; that at Gary one of the trainmen became aware 
that there were persons inside of the car, and upon opening the car 
found petitioner and the other two, and had them placed in jail. Pe- 
titioner testified he was net in any freight car at ail, but that he came 
to Gary on a passenger train, and was walking along the railroad 
tracks when arrested. 

No évidence was oirered to prove this contention of the government, 
save that on the hearing Mr. Ebey, an immigration inspector before 
whom the hearing was had, and who also conducted it on the part of 
the government, made the following ofïer : 

"The government olïers in évidence the transeript of an examination of 
R. H. Deadman and C. M. Kitchey made in the immigration office September 
22d, and advises counsel for the alien that, if lie desires to submit any coun- 
ter statement from tliese witnesses, it wlll be received in évidence." 

The statements appear to be an unsigned transeript of what purport 
to be stenographers' notes of some conversation with Mr. Ebey, or 
examination by him, out of the présence of the accused or any one rep- 
resenting him, some days prior to his hearing. The statement recites 
that Deadman was sworn, but no certificate of any oath appears, nor 
anything to indicate who administered the oath. It does not appear 
that Ritchey was sworn at ail. 

Thèse men were Wabash train employés, running through Gary, and 
probably to Chicago, and it is fair to présume that, had the govern- 
ment desired, they would hâve been présent at the hearing, quite re- 
gardless of whether or not their attendance could hâve been compelled. 
Where the issue is far less grave than the right to réside in this coun- 
try of a human being claiming to be a citizen thereof, witnesses are 



30 234 FEDERAL REPORTER 

frequently and properly brought long distances and at much expansé 
to testify. The use by the government of ex parte statements of per- 
sons whose oral testimony would hâve been conveniently, readily, and 
inexpensively available might bear on the fairness of an administrative 
hearing such as this. Mr. Ebey's proposai to receive in évidence any 
counter statement of thèse men wliich counsel for the Chinese might 
succeed in procuring, while probably made in good faith and as an in- 
tended act of grâce, did not confer a privilège of any appréciable prac- 
tical benefit. 

[2] But the statements themselves merely say that three Chinese 
were taken f rom the car. Petitioner was not identified as one of those 
so taken. Some photographs of Chinese were submitted to Deadman, 
who said Chinamen ail looked alike to him. Deadman says the car 
was originally billed from Hoboken, N. J., and rebilled from Black 
Rock, N. Y. If sealed at one of thèse places, and the seal was first 
broken at Gary, Ind., then petitioner entered the car in the United 
States and remained in it continuously till he left it in the United 
States, and the fact that the car en route passed into and out of Canada 
would not of itself make unlawful petitioner's entry into the United 
States. 

Petitioner may hâve lied in saying he came to Gary on a passenger 
train, but it is not material whether he came thus or by f reight ; and, 
besides, proving him a liar does not of itself show his entry into this 
country within three years of his arrest. 

[3] It is claimed that he answers the description of a Chinese who 
was deported in November, 1910, for attempting to gain entry on a 
fraudulent certificate. But that déportation took place nearly four 
years before this arrest, and does not prove petitioner entered within 
three years before his arrest on the charge hère in issue. 

There is an entire want of évidence to show that the petitioner's ar- 
rest was within three years of his entry into the United States, and we 
therefore hold invalid this déportation proceeding under the Immigra- 
tion Act. 

The order of the District Cotu't, dismissing the writ of habeas cor- 
pus and remanding the petitioner, is reversed, and the cause is remand- 
ed, with direction to the court to discharge the prisoner. 



FRONTIER S. S. 00. v. CENTRAL COAL 00. 

(Circuit Court of Appeals, Seventh Circuit. April 18, 1916.) 

No. 2243. 

Shipping <g=>150 — Actions — Bill of Lading — Pbesumptions. 

Défendant entered into a contract with a slilpplng company to carry its 
coal for a whole season. Sucli company contracted with a second com- 
pany to transport defendant's coal, and the second company's manager en- 
gaged one of libelant's steanishlps for such pnrpose. The bill of ladlng 
issued by the master of libelant's vessel referred to the contract for the 
freight rate. In case of préviens shipments in libelant's vessels, defend- 

®=3For other cases see same topic & KEY-NUMBBR in aU Key-Numbered Digests & Indexes 



FEONTIEB S. 8. CO. V. CENTRAL COAL CO. 31 

ant paid the company with whlch it contracted, and such company paid 
the actual carriers. Held that, while the law implles a promise to pay 
the freight, where there is a blll of ladlng, and acceptance by the con- 
signée is proven and unexplained, yet, in view of the knowledge of libel- 
ant and the préviens method of freight payments, such Implied promise 
was rebutted, though défendant accepted the coal transported in libel- 
ant's shlp, and the bill of lading Issued by the master provided for pay- 
ment at the agreed freight rate. 

[Ed. Note.— For other cases, see Shipplng, Cent. Dig. §§ 225, 226, 511; 
Dec. Dig. <g=Jl50.] 

Appeal f rom the District Court of the United States for the Eastern 
District of Wisconsin. 

Suit by the Frontier Steamship Company against the Central Coal, 
Company. From a judgment for défendant, plaintiff appeals. Af- 
firmed. 

Appellant, a New Yorlt corporation, is engaged In transportation upon the 
Great Lakes. Appellee Is a corporation of Wisconsin, and is a large dealer 
In coal. Appellant, on September 25, 1912, brought thls suit against appellee 
in the District Court to recover freight charges earned by its steamer Munro 
In carrying coal from Lorain, Ohio, and dellvering same to appellee at Mil- 
waukee, Wis. The record discloses the foUowlng facts and clrcumstances 
with référence to the transaction : 

Appellee contracted with Franklin Steamship Company and Fremont Steam- 
ship Company, jointly, for the transportation of ail coal whlch should be re- 
ceived by it at Milwaukee and Green Bay, Wis., and Escanaba, Mich., during 
the navigation season of 1909, and agreed to pay freight at the rate of 40 
cents per ton for coal delivered at Milwaukee, and 35 cents for coal delivered 
at the other two ports. Said Franklin and Fremont Companies subsequently, 
on May 27, 1909, through Herbert K. Oakes, thelr respective manager, entered 
into a contract with the Weston Transit Company, through W. M. Mills, its 
manager, whereby the latter company agreed to carry a part of such coal. The 
provisions of this latter contract essential to a considération of the case are 
as follows: 

"For and in considération of the rates of freight hereinafter named, the 
party of the second part [Weston Transit Company] hereby agrées to transport 
from Lake Erie ports, during the season of navigation of 1909, ail coal re- 
qulred by the Central Coal Company, of Milwaukee, Wis., * * * and said 
first parties agrée to f urnish such coal to said second party. • * • It is here- 
by agreed that the rate of freight to be paid for transporting said coal from 
lÂke Erie ports shall be as follows : To Escanaba, Michigan, 35 cents per ton 
of 2,000 pounds ; to Green Bay, Wisconsin, 35 cents -per ton of 2,000 pounds ; 
to Milwaukee, Wisconsin, 35 cents per ton of 2,000 pounds. AU of said coal 
to be conslgned to Central Coal Company, and unloaded at its docks at said 
ports." 

At the time thls contract was executed, appellant, through its agent, the 
Lake Transportation Company, was advised that the Franklin and Fremont 
Steamship Companies had the contract for carrying ail of appellee's coal de- 
livered at its docks at Milwaukee, Green Bay, and Escanaba. The contract 
follows the terms of and makes évident référence to the contract between 
appellee and the two steamship companies — Franklin and Fremont. So that 
there can be no doubt that both Mills and Sp«ddy, managers respectively of 
the Weston and Frontier Companies and the Lake Transportation Company, 
knew that appellee's contract was with the so-called Oakes companies. 

TJnder the above contract the Weston Transit Company transported and 
delivered to appellee during the season coal aggregating about 115,000 tons. 
Having but three boats of its own, it found it necessary to engage additional 
vessels for carrying thls tonnage. Its manager, Mills, belng also manager of 
appellant, as well as of other steamship companies, was in a position to and 
did place at the disposai of the Weston Transit Company, in performing its 
said contract of carriage, a number of boats whlch he thus controlled, in- 



82 234 FEDBEAL RBJPOETUB 

oludlng appellant's steamer Munro. It also appears that the Labe Transporta- 
tion Company as agent of appellant and under the management of said Mills, 
had to do with direetlng the movements of the latter's beats. On November 
17th and 30th respectively, the Munro, at the direction of the Lake Transporta- 
tion Company upon instructions from Mills, transported two cargoes of sald 
coal, aggregatlng between 19,000 and 20,000 tons, from Lorain, OMo, to Mll- 
waukee, as above stated, wBere appellee presented the blUs of lading which 
had been issued by the master of the ship, and receired the coal at its docks. 
It appears from the évidence that on ail coal transported by appellant's boats 
and dellvered to appellee prevlous to the two November cargoes in question, 
appellant recelved Its frelght charges from the Lake Transportation Company, 
the latter havlng recelved the same from the Franklin and Fremont Steamshlp 
Companies, to whom appellee had contraeted to make payment for the car- 
rlage of its season's coal. No demand for the frelght charges was made upon 
appellee by the master of the ship or appellant at the tlme of maklng dellvery 
of thèse Munro cargoes. Thereafter, on November 24th and December 7th, 
as it had done in ail prevlous like Instances, and wlthout any notice other 
than the sald bills of lading that it was expected to pay appellant the frelght 
therefor, appellee In good falth pald said freight charges to the Franklin and 
Fremont companies. Appellant, not havlng recelved the frelght thus eamed 
by its steamer Munro, brought suit to recover the same from appellee, baslng 
its suit upon the bills of lading coverlng sald cargoes. Thèse bllls of lading 
were in the usual form. One of them, omittlng its number and date, Is as fol- 
lows: 

"Shlpped in good order and condition by the Lorain Coal & Dock Com- 
pany for account and at the risk of whom It may concern on board the steamer 

J. G. Munro, whereof is master, bound for Milwaukee, Wis., the fol- 

lowing articles as hère marked and described, as addressed on the margin, or 
to his or their asslgns or consignées, upon paylng the frelght and charge» 
as noted below (danger of navigation, fire and collision excepted). 

"In wltness whereof the master of sald vessel hath affirmed to bllls 

of lading, of thls ténor and date, one of which being aeeomplished, the otherfs 
to stand void. 

Consignée and Destination. Description of Articles 

Central Coal Co., 400 

Milwaukee, 786 ,.. Net tons #8 Plttsburg 

Wis. Orescent % coal 

"Rate of frelght hereon is as agreed per net ton. C. E. Sayre." 

The District Court fouud the issues for the respondent and dismissed the 
llbel, wlth costs. The décision of the court tliat the receipt of the cargoes 
of coal with knowledge of the bills of lading set ont in the libel was not con- 
cluslve as to appellee's liability and that libelant was in law chargeable with 
knowledge of ail the facts pertaining to respondent's relation to the trausporta- 
tion of the two cargoes in question, is assigned as error. 

John B. Richards, of Buffalo, N. Y., for appellant. 
Frank S. Masten, of Cleveland, Ohio, for appellee. 

Before BAKER, KOHLSAAT, and ALSCHULER, Circuit Judges. 

KOHLSAAT, Circuit Judge (after stating the facts as above). It 
is appellant's contention that the receipt of the bills of lading by ap- 
pellee and its acceptance of the two cargoes of coal covered thereby 
created an absolute liability on appellee's part to pay the freight charges 
to appellant. It is also contended that appellee is liable for the freight 
as consignor. It is no doubt the gênerai rule that the fact that a con- 
signée named in a bill of lading recelved by him which provides that 
the cargo is to be delivered upon his paying the freight, who accepts 
the goods described therein, is évidence sufficient to establish an im- 
plied promise to pay the freight charges to the carrier or shipowner, 



FRONTIEK S. S. CO. V. CENTEAL COAL CO. 33 

in the absence of other qualifying circnmstances. Philadelphia R. 
R. Co. V. Barnard, Fed. Cas. No. 11,086; Hatch v. Tucker, 12 R. I. 
501, 34 Am. Rep. 707. In the latter case, after re-^lewing the author- 
ities, both English and American, the court concludes that: 

"The welght of authority, therefore, seeins to be that where there is a blU of 
ladlng, and the acceptanee by the consignée is proven and unexplained, the 
law will imply a promi.se to pay freight." 

To the same effect is Union Pacific R. Co. v. American Smelting 
& Refining Co., 202 Fed. 720, 723, 121 C. C. A. 182, citing Hatch v. 
Tucker, supra; Cock v. Ta)dor, 13 East. 399; Dougal v. Kemble, 3 
Bing. 383; Merian v. Funck, 4 Denio (N. Y.) 110; Pelayo v. Fox, 
9 Pa. 489; Blanchard v. Page, 8 Gray (Mass.) 281; North German 
Llovd V. Heule (D. C.) 44 Fed. 100, 10 L. R. A. 814; Taylor v. Fall 
River Iron Works (D. C.) 124 Fed. 826; Neilsen v. Jesup (D. C.) 
30 Fed. 138; Gates v. Ryan (D. C.) 37 Fed. 154; Davidson v. City 
Bank, 57 N. Y. 81, 85 ; Grant & Stone v. Wood, 21 N. J. Uw, 292, 
295, 47 Am. Dec. 162. 

And the reason for this rule, as said by the court in Union Pacific 
R. Co. V. American Smelting, etc., Co., supra, "is that the consignée 
accepts the goods with knowledge that the carrier looks to him for pay- 
ment of the transportation charges and vvaives his lien for them by 
delivery in reliance upon the consignee's implied promise, evidenced 
by his acceptanee of the goods, that he will pay the charges." The 
same implication arises if there be no bill of lading, provided the 
consignée accepts tlie goods knowing that the carrier expects him ta 
pay the charges. Same case, citing a number of authorities. 

In either case, the acceptanee of the goods under such circumstances 
constitutes but prima facie évidence of such promise on the part of 
the consignée. The question then is : Are the bills of lading hère in- 
volved, notwithstanding the other facts bearing upon that question, 
to be taken as conclusive évidence of such knowledge on the part of 
appellee? If not, and the other évidence in the record is considered, 
it is very clear, not only tliat appellee had no such knowledge, but 
also that, so far as the record discloses, there was wanting sufficient 
notice to advise appellee that appellant, at the time of making deliv- 
ery of the Munro cargoes in question, had any intention of holding 
appellee for the freight charges. 

It is legally deducible from the évidence that appellant was advised 
of the circumstances attending the whole transaction. Its agent, the 
Uake Transportation Company, was actually told by Oakes, manager 
of the Franklin and Fremont Steamship Companies, that those com- 
panies had the whole contract for carrying appellee's coal for that 
season. As such agent, it received ail payments for other cargoes of 
said coal from those companies. The contract between those com- 
panies and the Weston Transit Company discloses the existence of the 
original contract. Mills, manager of appellant, signed that contract, 
while the bills of lading themselves make such référence to that con- 
tract as to charge appellant with knowledge of its terms. Thus ap- 
pellant was chargeable with knowledge that appellee had contracted 
with the Franklin and Fremont Steamship Companies for carrying 
234 F.— 3 



34 234 FEDERAL REPORTER 

ail its season's coal, that the latter two companies had contractée! with 
the Weston Transit Company to carry part of that coal for them, and 
that through their common manager appellant was assisting the Wes- 
ton Transit Company in that service. 

Thèse facts, we hold, were sufficient to overcome any presumption 
which may hâve arisen from the circumstances attending the bills of 
lading in the premises. 

The judgment of the District Court is therefore affirmed. 



NOETHEEN COLOEADO COAL CO. v. UNITED STATES. 

UNITED STATES v. NOETHEEN COLOEADO COAL CO. et al. 

(Circuit Court of Appeals, Eightli Circuit. May 1, 1916.) 

Nos. 4437, 4438. 

1. Public Lands <S=>120 — Suir foe Oancellation^ of Patents — Bueden 01* 

Peoof. 

Where the United States has sliown that patents to public lands were 
obtained fraudulently, a subséquent purehaser, claiming through the 
patentées, has the burden of proving affirmatively that he was a good- 
faith purehaser. 

[Ed. Note.— For other cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. <©=îl20.] 

2. Mines and Minekals ®=>45 — Suit foe Cancellation of Patents — Bona 

FiDE Pubchasee. 

A coal Company acquired a bond for a deed to a large quantity of land, 
800 acres of which was then a part of the public domain and was known 
coal land. Subsequently the obliger obtained patents through dùmmy 
locators and conveyed the land to the company. Ileld, that the company 
was chargeable with linowledge of such facts that it was not entitled to 
protection as a bona fide purehaser. 

[Ed. Note. — For other cases, see Mines and Minerais, Cent. Dig. § 131; 
Dec. Dig. ®=345.] 

3. Mines and Minbeals <g=>ll — Entet of Coal Lands — Coepoeations. 

A corporation, which purehased coal lands previously patented to 
other entrymen, did not by such act "take the benefit" of the statute au- 
thorizlng a single entry only by an association or its members. withln the 
meanlng of Eev. St. § 2350 (Comp. St. 1913, § 4602), so as to disqualify Its 
stockholders from making personal entries. 

[Ed. Note. — For other cases, see Mines and Minerais, Cent. Dig. §§ 14, 
17; Dec. Dig. <S=>11.] 

Appeal from the District Court of the United States for the Dis- 
trict of Colorado ; Robert E. Lewis, Judge. 

Suit in equity by the United States against the Northern Colorado 
Coal Company and others. From the decree, both parties appeal. 
Affirmed. 

John A. Gordon, Asst. U. S. Atty., of Denver, Colo. (Harry B. 
Tedrow, U. S. Atty., of Denver, Colo., on the brief), for the United 
States. 

or other cases see same toplc & KEY-NUMBBR In ail Key-Numbered Digests & Indexes 



NORTHERN COLORADO COAL CO. V. UNIXED STATES 35 

Henry McAllister, Jr., of Denver, Colo. (N. E. Corthell, of Laramie, 
Wyo., and Joël F. Vaile and William N. Vaile, both of Denver, Colo., 
on the brief), for défendants. 

Before CARLAND, Circuit Judge, and AMIDON and VAN VAL- 
KENBURGH, District Judges. 

AMIDON, District Judge. This îs a suit brought by the United 
States to cancel patents for 1,280 acres of coal land situated in Lari- 
mer county, Colo. Title to 800 acres of the property is held by the 
défendant Coal Company as purchaser. The remaining 480 acres is 
held by the défendants Miller, Peters, and Smith under patents issued 
upon their individual entries. The bill asserts that the company dérives 
its title through dummy entrymen, and further asserts that the individ- 
ual défendants at the time they made their entries were stockholders 
of the Coal Company; and as it had already acquired coal lands in 
excess of the 320 acres allowed by the United States Revised Stat- 
utes, §§ 2348-2350 (Comp. St. 1913, §§ 4660-4662), they, as stock- 
holders, were disentitled to file individual claims. The trial court .en- 
tered a decree in favor of the government against the Coal Company, 
canceling the patents under which it claims, and dismissed the bill 
on the merits as against the individual défendants. Cross-appeals are 
brought to review the decree. 

To understand the case the facts must be stated more fully. Two 
brothers by the name of Riach executed a bond for a deed in favor 
of a Mr. Lee, bearing date December 16, 1902, binding them to con- 
vey to him by perfect title 4,240 acres of land, specifically described 
by tracts, and including the 800 acres involved in this suit. The bond 
was acknowledged and presumptively delivered January 9, 1903. On 
December 26, 1902, Mr. L,ee organized the défendant corporation, and 
became its secretary, and a member of its board of directors. Janu- 
ary 15, 1903, he entered into an agreement with the company binding 
himself to convey to it 3,600 acres of land, including 160 acres of the 
800 acres hère involved, also three mining claims, and a controlling 
interest in the stock of a gold and copper mining company. This agree- 
ment is acknowledged and was presumptively delivered March 22, 
1903. August 5, 1904, Lee released the company from ail existing 
obligations under this contract. On the same day he assigned to it his 
bond with the Riachs, the company acquiring ail his rights and assum- 
ing ail his obligations under the bond. 

Nearly two years afterwards one of the brothers, James C. Riach, 
employed dummy entrymen to give him the use of their names for 
the purpose of acquiring title to the 800 acres under the coal land stat- 
utes. Thèse entrymen appointed Mr. Riach their attorney to make 
and perfect the entries. He paid ail the expenses and the purchase 
priée of the land. The first of the entries was made in April, 1905, 
three of them in March, 1906, and the fifth in August, 1906. Re- 
ceiver's receipts were issued on the first claim in April, 1905, and on 
the other claims in 1906, at about the time the entries were made. As 
soon as the receiver's receipts were issued, deeds were executed for 
the property by the several entrymen to James C. Riach. Patents 



36 234 FEDEKAL EEPOKTBR 

were issued on the five daims as follows : Three in August, 1906, 
and two in July, 1907. James C. Riach executed a warranty deed for 
the 800 acres tO' the company in October, 1907. 

[1] It is conceded that under the law as declared by the Suprême 
Court in U. S. v. Keitel, 211 U. S. 370, 29 Sup. Ct. 123, 53 L. Ed. 
230, and U. S. v. Munday, 222 U. S. 175, 32 Sup. Ct. 53, 56 L. Ed. 
149, the patents as against the entrymen and Riach are void. The Coal 
Company must prevail, if at ail, as a good-faith purchaser. The law 
in regard to that défense, when title is derived through f raudulent pat- 
ents, has been greatly clarified by the décision of the Suprême Court 
in Wright-Blodgett Company v. United States, 236 U. S. 397, 35 Sup. 
Ct. 339, 59 E. Ed. 637. In many opinions language vvill be found to 
the effect that, when the government seeks to set aside a patent for 
fraud, the respect due to such instruments and the stability of titles 
emanating from the government demand that the case be established by 
clear and convincing proof. This rule has sometimes been extended 
so as to require the government to show, net only that the patent was 
obtained by fraud, but also that a purchaser acquiring title upon the 
faith of the patent had actual notice of the fraud. Such is not the 
law. AU that the government is required to do is to show that the pat- 
ent was obtained by fraud. It is then entitled to a cancellation of the 
patent, except as against a holder who can show that he acquired title 
to the land as a good-faith purchaser. That défense is affirmative. 
The burden of proving it rests upon the purchaser. The government 
is not required to show that he tool< the title with notice of the fraud. 
On the contrary, the burden is upon him to sliow that he acquired the 
title for a valuable considération and without notice. L'nder the law 
as thus declared in the Wright-Blodgett Case, the government hère 
is entitled to a cancellation of the patents, unless the coal company 
has shown by a prépondérance of the évidence that it is a good-faith 
purchaser. Has it discharged that burden ? For two reasons we thinl< 
the trial court properly held that it has not. 

[2] First. By taking from Mr. Lee the assignment of his bond for 
a deed, the Coal Company stepped into his shoes and sustains the same 
relations to the lands which he sustained. At the time this assignment 
was made the lands were still a part of the public domain, and re- 
mained such for nearly two years before the f raudulent entries were 
made. The company had actual knowledge that the lands were public 
lands. This is a fair inference from the language of the bond for the 
deed, and from the whole course of dealing between the parties. The 
officers of the company were also intimately familiar with the lands. 
Mr. Miller, its vice président, had visited the properties from time to 
time every year subséquent to the year 1902. He also had a coal 
claim of his own, which was situated within one mile of the several 
tracts vi'hich made up the 800 acres. During ail of this time he was 
on intimate terms with James C. Riach, and made his home when 
visiting the property at Mr. Riach's house. Other officers of the com- 
pany had a similar, though less extensive, knowledge of the properties. 
What is the fair import of the bond for a deed in the light of this 



NOETHEHN COLORADO COAL CO. V. UNITED STATES 37 

knowledge ? The company knew that the land was coal land, and that 
title could properly be obtained for it only in accordance with the coal 
land laws. Thèse laws limited Mr. Riach to 160 acres, and he had 
already exhausted that right. The only way in which he could acquire 
the title called for by his bond was to induce other entrymen to make 
entries for his benefit. The direct effect of the bond for a deed was 
to induce the Riachs to do just what they did. There was no other 
way in which they could f ulfill their contract. Notwithstanding the pro- 
tests "of the officers of the company that they did not know the entry- 
men personally, and did not know of the spécifie fraudaient acts of 
the Riachs, it is incredible that they did not intend that the Riachs 
should get title by means of entrymen who should be at ail times un- 
der their control. Counsel say in their brief : 

"The Riachs contract did not require that Riach must pursue a dishonest 
course in order to comply with its terras. It was entirely ijossible that other 
persons might in their own interests lawfuUy acquire thèse lands before 
Riach was obliged to convey title under his contract, in which event he would 
hâve to treat witli tliem in order to fulfll his contract." 

But is that argument based upon reasonable probability? Did the 
company intend that the Riachs should wait until independent entry- 
men should file upon thèse lands, and then take the chance of acquir- 
ing title from them, after they had obtained title from the government? 
To indulge in such an assumption would render the contract itself 
illusory. Whether the company would ever get title to the property 
would dépend upon two events, indefinite in time and wholly beyond 
the control of the company and its vendors, viz. : First, the making of 
entries by independent entrymen ; and, second, the willingness of such 
entrymen to part with their title after they had obtained it from the 
government. If the law is a practical science, courts must draw from 
circumstances and proofs the inferences which sensible and experienced 
men would draw from them. Acting upon that principle, it is our 
judgment that the bond for a deed contemplated that entries should 
be made for the benefit of the Riachs, and be at ail times subject to 
their control. Upon that interprétation the bond was an illégal con- 
tract because of its natural and probable tendency to induce a viola- 
tion of the law. By acquiring that bond the Coal Company became a 
party to its illégal purpose. 

The défendants hère crossed the line to which défendants in United 
States V. Clark, 138 Fed. 294, 70 C. C. A. 584, Id., 200 U. S. 601, 26 
Sup. Ct. 340, 50 L. Ed. 613, and United States v. Barber Lumber 
Company, 194 Fed. 24, 114 C. C. A. 44, drew perilously near. In those 
cases, however, there was no contract to convey specifically described 
portions of the public domain. In the Clark Case the défendant 
loaned money to one Cobban, and knew that it was to be used by 
him in acquiring lands, and there was further an understanding be- 
tween them that Clark would purchase timber lands of Cobban if, 
upon inspection, the timber and the title were found to be satisf actory ; 
but there never was, at any time, any agreement between them for the 
acquisition or conveyance of any spécifie tracts of public lands, 



38 234 FEDERAL EBPOETEE 

and ail the courts found as a fact that Clark had no knowledge of any 
fraudulent practices of Cobban. In the Barber Lumber Company Case 
défendant went one step nearer the line. In that case the défendant 
entered into a contract in vvriting with one Steunenberg for the convey- 
ance within six months of 25,000 acres of timber land. At the date 
of the contract the vendor had title to only 6,400 acres of the land 
and claims had been filed on only 5,000 acres more. This left 13,600 
acres for which entries would hâve to be made and title obtained. 
The contract, however, did not relate to any spécifie parcels of the 
public domain and the évidence clearly showed that the entries had 
been and were being rapidly made by persons acting independently 
of both Steunenberg and the défendant, and in antagonism to them. 
In the présent case the bond was between défendant and the Riachs, 
and bound them to acquire and convey title to spécifie tracts of coal 
land, which at the time were part of the public domain. For reasons 
which we hâve already explained, we think this contract contemplated 
a violation of the coal land statutes. 

Second. The trial court found, and in our judgment, was amply jus- 
tified by the évidence in finding, that the Coal Company had actual 
knowledge of the fraudulent practices of James C. Riach in obtaining 
the patents for the land. As already stated, Mr. Miller, its vice prési- 
dent, was on the most intimate terms with Riach during ail the time 
down to the issuance of the patents. When examined as to whether 
he ever talked with Mr. Miller in regard to the character of the en- 
tries, Mr. Riach's testimony is evasive. Again and again he was asked 
whether he discussed that subject with Mr. Miller, and he evaded an- 
swering the question. Finally, when pressed, he stated that he thought 
there was somè discussion of the subject. Mr. Miller testified at first 
that there was no such conversation, but, when pressed, he would do 
no more than say that he did not remember any such conversation. 
A plat of the varions lands will show how important the 800 acres 
were to the entire coal property. It is incredible to us that the sub- 
ject was not fully discussed between the Riachs and the officers of 
the Company. The company was paying out large sums of money for 
the title before the entries were made and while they were pending. 
It would require us to départ from the ordinary inferences of life 
to believe that the company did not keep itself informed as to the 
steps which were being taken to obtain the property for which it was 
paying. If its officers did not acquire such knowledge, they studiously 
avoided doing so for the purpose of making the défense which they 
hâve interposed in this suit. 

Some point is made of the fact that under the bond for the deed 
the considération was double the purchase price paid to the govern- 
ment, and under the contract with Mr. Lee it was some four times 
the price fixed by the statutes for coal lands. The évidence does not 
support this argument. It is based upon the assumption that ail the 
lands were of equal value. The contract, however, with Mr. Lee, 
covered gold and copper mining properties, and a controlling interest 
in a mining corporation. Both the bond and the contract also covered 



HILL V. UNITED STATES 39 

water rights. We cannot attempt, therefore, to apportion the consid- 
ération and assume that ail the lands were of equal value. So far as 
the évidence shows, the considération paid for the lands hère involved 
may hâve beeii no greater than that paid to the government. 

In our judgment, the decree canceling the patents for the 800 acres 
was right, and should be affirmed. 

[3] The other branch of the decree requires only a few words. The 
appeal of the government rests upon the theory that the Coal Com- 
pany in acquiring title to the 800 acres "took the benefit" of the coal 
land lavvs within the meaning of that phrase as used in section 2350 
of the Revised Statutes. We do not think this contention is sound. 
In our judgment the phrase quoted requires that the corporation shall 
either file an association claira itself, or that it shall directly cause 
such a claim to be filed by others for its benefit. The Coal Company 
hère obtained its title not as a locator but as a purchaser. It did this, 
however, with guilty knowledge, both actual and presumed, of the fraud 
practiced by its grantor. But, as it took as purchaser, it cannot prop- 
erly be said to hâve "taken the benefit of the act," which requires that 
title shall be obtained either directly or indirectly by location. 

In the briefs there is some argument of the question whether a per- 
son who becomes a stockholder in a corporation that has previously 
taken out an association claim under the coal land laws becomes disen- 
titled to file an individual claim. We do not deem it necessary to dé- 
cide that question in the présent case. It can properly be disposed of 
without such a décision, and we deem it botter to defer deciding the 
question until its décision shall become necessary. 

The decree of the trial court will be affirmed upon both its branches. 



IIILL V. UNITED STATES. 

(Circuit Court of Appeals, Eightli Circuit. May 16, 1916.) 

No. 438,3. 

1. Public Laxds iS=>120 — Suit for Cakcellation of Patents— Buhden of 

PlîOOF. 

Iii a suit by tlie government for caneellation of patents to coal lands 
obtained by fraud, tlie défendant lia.s the burden of establlshing the dé- 
fense that he was a good-faith purchaser without notice by affirmative 
évidence. 

[Ed. Note.— For other cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. <@=3l20.] 

2. EVIDEKCB <S=»77(1) — INFEBENCE FROM FaILURE TO PbODUCE EVIDENCE. 

Fallure of a party to produce the only witness who lînows the facts 
authorizes the inference that the testimony would be adverse to hini. 
[Ed. Note. — For other cases, see Evidence, Cent. Dig. § 9T; Dec. Dig. 

®=>77(1).] 

Appeal from the District Court of the United States for the Dis- 
trict of Colorado; Robert E. Lewis, Judge. 

<g=3For other cases aee same topic &. KEY-NUMBER in ail Key-Numbered Digests & Indexes 



40 234 FEDERAL REPORTER 

Suit in equity by the United States against Charles B. Hill. De- 
cree for complainant (217 Fed. 841), and défendant appeals. Affirmed. 

J. Poster Symes, of Denver, Colo. (Ivor O. Wingren, of Denver, 
Colo., on the brief), for appellant. 

Frank Hall, Sp. Asst. Atty. Gen. (Harry B. Tedrow, U. S. Atty., of 
Denver, Colo., on the brief), for the United States. 

Before CARLAND, Circuit Judge, and AMIDON and VAN VAL- 
KENBURGH, District Judges. 

AMIDON, District Judge. This is a suit by the government to 
cancel a patent and deed for 320 acres of coal land located in Colo- 
rado. The trial court entered a decree in accordance with the bill, 
and the défendant, Flill, appeals. 

The lands were filed on by a joint entry in the name of Lewis M. 
Allen and Charles D. Richards. Allen was a witness for the govern- 
ment, and testified that he gave the use of his name for $2.50; that 
he signed ail the papers at one time, including the deed and a power 
of attorney to perfect the location. After signing the papers he never 
had anything more to do with the entry, and never received any 
payment, except the $2.50. He did not know his associate, Richards, 
and the government was unable to trace or discover him. 

[1,2] It is too plain for discussion that this entry was fraudulent, 
and the défendant must prevail, if at ail, upon his défense as a bona 
fide purchaser. He hiniself resided in New York, and acquired title 
to the property through his brother, who resided in Colorado. The 
défense of good-faith purchaser is affirmative, and must be pleaded 
and proved by the défendant. Wright-Blodgett Co. v. United States, 
236 U. S. 397, 35 Sup. Ct. 339, 59 L. Ed. 637; Northern Colorado 

Coal Co. V. United States, 234 Fed. 34, C. C. A. . To estab- 

lish it he must show that he paid the considération to his grantor, and 
that he had no notice of his grantor's fraud. The défendant hère 
failed to establish either ground. He testified that he sent about 
$3,400 to his brother to be used in acquiring the property. He had 
no knowledge of what his brother did with the money — whether he 
paid it to the entrymen as a considération for the deed, or paid $3,200 
of it to the government as the purchase price of the land, and used 
the balance for incidental expenses in perfecting the entry. The cir- 
cumstances of the case justified the inference that the money was used 
for the latter purpose. The brother was not called as a witness. He 
alone knew the actual facts of the transaction. It was clearly in the 
defendant's power to hâve produced him, and the défense of good 
faith required him to do so. Failure to call this witness justifies the 
inference that, if he had been called, his testimony would bave been 
fatal to the defendant's case. . Choctaw, etc., Co. v. Newton, 140 
Fed. 225, 71 C. C. A. 655 ; Kirbv v. Tallmadge, 160 U. S. 379, 16 
Sup. Ct. 349, 40 h. Ed. 463; Wigmore on Evidence,, § 285. The 
évidence clearly showed that the brother was defendant's agent in the 
transaction. To establish the défense of good faith it was necessary 



CHICAGO MILL & LUMBKB CO. V. BOATMEN's BANK 41 

to show that he had no knowledge of the f raud underlying the entries, 
for notice to him would be just as fatal to the défense as notice to 
the défendant himself. Story's Equity Pleading, § 808. 
The judgment is affirmed. 



CHICAGO MILL & LUMBER CO. v. BOATMEN'S BANK. 

(Circuit Court of Appeals, Eighth Circuit. April 27, 1916.) 

No. 4570. 

Corporations ®=»?.80 — Liabiliïy fo-b Debts oi' Anotiiek Coiîporation— Pak- 
TiciPATioN IN Management. 

Where eue corporation owns or controls the entire property of miotlier, 
and opérâtes its plant and conducts its business as a departnient of its 
own business, it is responsible for the oljlisations of the controUed corpora- 
tion ; but such responsibility does not follow because a corporation, which 
is a large créditer of another of doubtful solvency, talces an interest in 
the business of the latter, or even because it takes au active part in its 
management for the sole purpose of protecting Its own interest as a cred- 
itor. 

[Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1540; Dec. 
Big. <&=5380.J 

In Error to the District Court of the United States for the Eastern 
District of Missouri ; David P. Dyer, Judge. 

Action at law by the Boatmen's Bank against the Chicago Mill & 
Lumber Company. Judgment for plaintifif, and défendant brings error. 
Affirmed. 

George F. Haid and James C. Jones, both of St. Louis, Mo. (Jones, 
Hocker, Sullivan & Angert, of St. Louis, Mo., on the brief), for plain- 
tif? in error. 

Sears Lehmann, of St. Louis, Mo. (Lehmann & Lehmann, of St. 
Louis, Mo., on the brief), for défendant in error. 

Before HOOK and ADAMS, Circuit Judges, and ELLIOTT, Dis- 
trict Judge. 

ADAMS, Circuit Judge. The Boatmen's Bank, plaintiff below, sued 
the Chicago Mill & Lumber Company, a business corporation organiz- 
ed under the laws of Illinois, on a promissory note of $25,000. 

The défendant, for its answer, admitted liability on the note, but 
pleaded a counterclaim against the plaintiff: of this kind : It alleged 
that the bank was a créditer in a large amount of a corporation known 
as the Tiger Tail Mill & Land Company, and also an owner of a large 
part of its capital stock, and as such had the control and management 
of its business and property, for its own use and benefit; that the 
Paepcke-Leicht Lumber Company, another corporation, was the agent 
of the défendant; that, as such agent, it made certain loans and ad- 
vances to the bank, under the name of Tiger Tail Mill & Land Com- 
pany, and agreed to make certain purchases of lumber from it, the 
value and agreed price of which to be applied in réduction of the ad- 

©=3For ott](er cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes 



42 234 FEDERAL REPORTER 

vances made and to be made; that afterwards the Paepcke Company, 
"acting as such agent, entered into certain contracts with the bank, under 
the name of the Tiger Tail Mill & Land Company, by the provisions 
of which the bank agreed to deliver to the Paepcke Company, as agent 
for the défendant, ail the output of its mill located at Tiger Tail, Tenn., 
during the period from September 8, 1910, to October 1, 1912 ; that 
the défendant, acting by and through its said agent, agreed to make 
certain advances of money as the Imnber output of the Tiger Tail 
Company should be loaded on barges for shipment to the défendant, 
and did from time to time make such advances, and from time to time 
loaned to the plaintiff other sums of money in addition to such ad- 
vances ; that the défendant from time to time received from plaintiff, 
under its name of Tiger Tail Mill & Land Company, various shipments 
of lumber, the value and contract price of which were credited to the 
plaintiff ; that the différence between the amount so advanced to plain- 
tiff and the value of the lumber received from plaintiff was $32,387.57, 
which (less the crédit of $4,445.18, which it concèdes) it avers the 
plaintiff agreed and promised to pay to the défendant, but bas failed to 
do so. 

Plaintiff, for its replication, denied each and every allégation of the 
counterclaim, and alleged that any such contract or agreement as de- 
fendant claims to hâve been made with it was beyond its power as a 
banking corporation. 

The case was tried to a jury, the défendant taking the burden of 
proof, and at the close of defendant's évidence the trial court, at the 
request of plaintiff's counsel, instructed the jury to find a verdict for 
the plaintiff for the fuU amount of the note sued on, and to find a ver- 
dict against the défendant and in favor of the plaintiff on defendant's 
counterclaim. On a verdict returned accordingly, judgment was enter- 
ed for the plaintiff, and the défendant Lumber Company prosecutes 
this writ of error, not complaining of the judgment against it on plain- 
tiff's cause of action, but complaining of the action of the court in di- 
recting a verdict against it on its counterclaim. 

The proof showed that the Tiger Tail Company was organized in 
1892 with a capital of $25,000, divided into 250 shares of $100 each, 
practically ail of which was taken by Henry C. Bagby and Joanna L. 
Bagby ; that some time af ter its organization Luther H. Conn became 
the owner of one-half of its capital stock, or 125 shares, the remaining 
125 shares being owned by the original incorporators— Henry C. Bagby 
and his wife, Joanna L. Bagby. Mr. Bagby became the président of 
the Company, and as such its chief executive ofïîcer, and continued so 
until 1906, during which time be secured for and on behalf of his Com- 
pany financial assistance from time to time from the Boatmen's Bank. 
During that time, and prior to July 25, 1906, the Tiger Tail Company 
became indebted to the bank in the total sum of $115,000, represented 
by its several promissory notes for various sums given from time to 
time as the exigencies of business required, upon which Luther H. 
Conn and Mrs. Bagby were indorsers ; and Mrs. Bagby was also then 
personally indebted to the bank in the sum of $14,000, represented by 
notes, upon which both Conn and McRee were indorsers. 



CHICAGO MILL & LUMBEK CO. V. BOATMEN'S BANK 43 

At about this time the St. Louis Clearing House began to criticize 
the loans of the bank to the Tiger Tail Company, and the amount of 
the loan not being reduced gradually, or at ail, the indorsers became 
uneasy about the matter, and the bank itself became dissatisfied with 
the management of the company under Bagby, as its chief officer. As 
a resuit, a new deal was arranged by the parties interested, which was 
f ormally expressed in a contract of which the foUowing is a copy : 

"For and in considération of the sum of two thousand dollars ($2,000.00) to 
us this day in hand paid by Luther H. Oonn, of the city of St. Louis, we, H. 0. 
Bagby and Joanna L. Bagby, of the city of St. Louis, do by thèse présents 
jointly and severally bargain and sell, transfer, assign, and set over unto the 
said Luther H. Oonn, and unto his helrs and assigns, f crever, ail and every of 
our right, tltle, and interest in and to the stock of the Tiger Tail Mill & Land 
Company, a corporation, organlzed under tlie laws of the state of Missouri, 
with its principal office at the city of St. Louis ; it being our intention, for 
the considération above named, that ail right, title, and interest of whatever 
kind and description of either of us in or to our stock holdings in said company 
shall pass absolutely to said Luther H. Conn, free from any rights or claims 
on our behalf. And we do by thèse présents deliver to the said Luther H. Oonn 
ail and every of the certificates of stock as they aiipear of record in the record 
books of said corporation, issued to or in the name of either of us, or in the 
name of any other person or persons, and do authorize the said Luther H. 
Oonn to cause necessary transfers to be made on the record books of said com- 
pany. The undersigned do further transfer, assign, and set over unto the 
said Luther H. Conn any and ail claims of whatever kind and description 
which we may bave agalnst the Tiger Tail MlU & Land Company. 

"Said Luther H. Conn by thèse présents undertakes and agrées that the 
indorsement of Joanna L. Bagby on notes of the Tiger Tail Mill & Land Com- 
pany, held by Boatmen's Bank, aggregating approximatelv one hundred and 
flve thousand flve hundred dollars (.¥105,500,00), shall be canceled, so that the 
said Joanna L. Bagby shall be released from anv liability under said indorse- 
ment. The said Luther H. Conn further undertakes and agrées that the said 
Joanna L. Bagby shall be released from ail liabllltv on aecount of the exécu- 
tion by her of a certain note of fourteen thousand dollars ($14,000.00), now 
held by Boatmen's Bank. 

"Said Luther H. Conn further eovenants and does hereby release the said 
Joanna L. Bagby from any further liability on aceount of a certain contract 
of sale between the said Joanna L. Bagby and the said Luther H. Oonn of one 
anndred and twenty-flve (125) shares of said Tiger Tail Mill & Land Company; 
said contract being dated St. I>uis, Missouri, February 1, 1898. And the said 
Luther IL Oonn does hereby further undertake and agrée to secure from the 
Tiger Tail Mill & Land Company a release to the said H. C. Bagby and Joan- 
na L. Bagby of any and ail Indebtedness which may be due bv either of them 
to the said company, as they appear on the books of the company as of this 
date. 

"In witness whereof the undersigned bave set their hands at St. Louis, Mis- 
souri, this 25th day of July, 1906. [Signed] H. 0. Bagby. 

"Joanna L. Bagby. 
"Luther H. Conn. 

"Witness : Simon L. Boogher." 

Pur suant to the terms of this contract Mr. Conn secured cancella- 
tion and surrender by the bank of ail the notes upon which Mrs. Bagby 
was indorser, and the substitution in lieu thereof of the notes of the 
Tiger Tail Company, indorsed by himself, and secured by a pledge 
of ail the stock of the Tiger Tail Company, which was put up with the 
bank as collatéral security therefor. Afterwards, E. M. Hubbard, 
assistant cashier of the Boatmen's Bank, was elected président of the 



44 234 FEDERAL EEPORTER 

Company, to succeed Mr. Bagby in that office, and, as frequently ex- 
pressed by ail concerned, to incidentally protect the interests of the 
bank, which was, as a créditer, so largely interested in the success 
of the Company, and one Harold J. Richards, was employed to be 
gênerai manager of the company, and as such to take charge of the 
actual conduct of its business at the mill. Mr. Conn, being then the 
owner of ail the capital stock of the company, transferred to Hubbard 
and Richards, each, 82 shares, or one-third thereof, subject, hovvever, 
to the pledge of the same to the bank for the payment of its debt. 

The new régime started out then with a debt of $115,000 due to the 
bank, represented by new notes upon which Mr. Conn, who was then 
considered entirely solvent, was indorser, and further secured by a 
pledge of ail the capital stock of the company. The Tiger Tail Com- 
pany soon made a contract with the défendant in this case, through its 
agent, the Paepcke Company, to ship its entire output to the défend- 
ant, the Chicago Company, and to secure f rom that company advances 
of money from time to time on shipments made and to be made to 
that company. In the meantime the business demanded the use of 
more money for its successful opération, and the bank undertook to 
furnish it, and did make such advances from time to time as were 
required by the Tiger Tail Company, until its debt had increased to 
$283,000. Bankruptcy of the Tiger Tail Company then supervened, 
and the bank was relegated to such relief, so far as the Tiger Tail 
Company was concerned, as the administration of the estate in bank- 
ruptcy afforded. 

The foregoing are the substantial and uncontroverted facts of the 
case. In addition to them, Mr. Richards, who was the manager of the 
company at its mill at Tiger Tail, Tenn., testified that he got his di- 
rections from Mr. Hubbard, who frequently conferred with Mr. Lack- 
land, the président of the bank, and that on one occasion Mr. Hub- 
bard told him the property was to be run by the bank. Mr. H. C. 
Bagby testified that Mr. Lackland told him he had put Hubbard in 
as président of the Tiger Tail Company. Mr. William Wilms, vice 
président and treasurer of the Paepcke Company, agent of the de- 
fendant, testified as f ollows : 

"Throughout our entire dealings in connection with the opérations of the 
Tiger Tail Plant, we were led to believe, and it was atlirmed to us and stated 
to us repeatedly, that the Boatmen's Bank owned asd controUed the prop- 
erty ; that Mr. Hubbard was in charge of the Tiger Tail Mill & Land prop- 
erty in order to protect the bank's interest in that investment." 

In addition to this, it appears that the bank loaned the Tiger Tail 
Company money without security, other than that already mentioned, 
and when the Clearing House examiner criticized the loan of the bank 
to the Tiger Tail. Company, a statement of its assets was obtained by 
Mr. Hubbard. It also appears that Mr. Conn took no active personal 
participation in the aflfairs of the company, and that the bank was the 
holder of ail the bills payable of the Tiger Tail Company. 

On this state of facts the defendant's contention was, and now is, 
that the bank so owned and controlled the Mill Company as to make 
it liable for debts contracted in the name of the latter company, and 



CHICAGO MILL & LUMBEE CO. V. BOATMEN'S BANK 45 

also that the bank so undertook and promised to pay the excess due 
to the défendant as to render itself liable to it as on a direct promise 
to pay the same. The trial court ruled against thèse contentions, and 
held the proof to be insufficient to warrant, either a finding that the 
bank was the owner of the Tiger Tail Company, and, as such, liable 
for the payments of its debts, or that the bank ever promised to pay 
the debt due to the défendant; and on the defendant's évidence alone 
the court directed a verdict, and rendered a judgment, for the plain- 
tiff on the defendant's counterclaim, as well as the plaintifï's cause of 
action. An exception was taken to this ruling, and upon it the assign- 
ment of error is predicated. 

We think there was no error in this ruling. It is true that, apart 
from the question of ultra vires, not presently involved, when one 
corporation owns or controls the entire property of another, and op- 
érâtes its plant and conducts its business as a department of its own 
business, or as its alter ego, it is responsible for its obligations in- 
curred in so doing. American National Bank v. National Wall Paper 
Co., 23 C. C. A. 33, 77 Fed. 85 ; Westinghouse Electric & Manufactur- 
ing Co. V. Allis Chalmers Co., 100 C. C. A. 408, 176 Fed. 362; Phil- 
lips V. Railroad, 211 Mo. 419, 438, 111 S. W. 109, 17 h. R. A. (N. S.) 
1167, 124 Am. St. Rep. 786, 14 Ann. Cas. 742; Union Savings & 
Trust Co. V. Krumm (Wash.) 152 Pac. 681. 

Was the proof that the business of the Tiger Tail Company was 
a part of the business of the bank, or that the bank had control and 
management of its business, as a department of its own, sufficient to 
make its obligations the obligations of the bank? Counsel for plain- 
tiff in error contend that there was such actual évidence, or such fair 
and reasonable inferences deducible from that which was produced, 
as required a submission of this issue to the jury. 

They argue that Conn paid no considération for the Bagby stock, 
and that the pretended purchase by him was fictitious ; the real pur- 
chaser being the Boatmen's Bank. In our opinion, this argument is 
not well taken. There is some controversy as to whether the $2,000 
cash payment to Mrs. Bagby was ultimately paid by Conn, the Boat- 
men's Bank, or the Tiger Tail Company ; but this is of little importance 
when the greater considération paid by Conn is considered. Money 
was not the only considération for the trade. Conn undertook to 
and did secure the release of Mrs. Bagby from ail liability to the 
bank. He not only did that, but he subjected himself alone to liability 
as indorser on notes upon which Mrs. Bagby had been cosurety with 
him, amounting to $115,000. In other words, he took upon himself 
the sole liability for that debt and surrendered ail right of contribution 
from Mrs. Bagby. This manifestly was a good, valuable, and sufh- 
cient considération for the transfer of the stock to him. 

They argue that the transfer by Conn of a substantial part of the 
capital stock to Hubbard and Richards, without considération, demon- 
strates that Conn placed little or no value upon the stock. They 
forget, however, that it is a very common thing in business to stimu- 
late the zeal of employés by giving them an interest in the business, 
with a view of promoting their effîciency. They also argue that, be- 



i6 234 FEDERAL EEPOETBR 

cause the assistant cashier of the bank was made président of the 
Tiger Tail Company, a purpose was manifested to control the Com- 
pany by the bank. This argument overlooks the fact that the bank 
was a large créditer, and as such largely interested in the prosperity 
of the Gompany, and most naturally should désire to keep an oversight 
over its doings. 

It is further argued that proof of the déclarations of the président 
of the bank and of Mr. Hubbard, the assistant cashier, to the gênerai 
effect as already pointed out, and of Mr. Wilms as to the gênerai un- 
derstanding, indicate that the bank was the owner of the business of 
the Company, or was conducting it in its own behalf, or at least con- 
stituted évidence, taken in connection with other facts of the case, 
sufficient to require submission of the case to the jury. But, when the 
generality and doubtful import of those statements are considered, it 
is apparent that, in so far as the one attributed to the président of 
the bank is concerned, it cannot afford the basis of a finding that the 
président intended to admit that his bank was the owner of this ex- 
traneous business, and in so far as the statements are attributed to 
the assistant cashier, they are manifestly so outside the gênerai usage, 
custom, and course of dealing of banks and banking as to fall without 
the scope of his employment as assistant cashier, and in so far as they 
consist of a statement of Mr. Wilms, the vice président of the P'aepcke 
Company, as to what was generally understood the bank was doing, 
they were totally incompétent and valueless. 

Comprehensively speaking, they are alleasily and naturally ref érable 
to a legitimate and customary practice of keeping an oversight by a 
creditor over the business, management, and opérations of a debtor 
of doubtful solvency. Ail the facts of this case and ail the reasonable 
inferences deducible from them would not, in our opinion, hâve war- 
ranted a jury in finding either that the Boatmen's Bank was carrying 
on the business of the Tiger Tail Mill & Land Company as a part of 
its own, or that it ever promised to pay the défendant its demand 
against the Tiger Tail Company. 

We think there was no error in the direction by the District Court 
to find a verdict in this case in favor of the plaintifï on both its cause 
of action and the defendant's counterclaim. This conclusion renders 
any considération of the question of ultra vires, debated by counsel, 
unnecessary. 

The judgment is afîirmed. 



DOTLB V. HAMILTON FISH OOBP. 47 

DOYLB T. HAMILTON FISH COEP. 

(Circuit Court of Appeals, Second Carcuit June 6, 1916.) 

No. 274. 

1. JUDGMENT <©=»725(1) — CONCLTJSIVENESS — SCOPE Oï EsTOPPEL. 

As to matters whlch need not be detennlned, a Judgment Is not con- 
cluslve. 

[Ed. Note.— For other cases, see Judgment, Cent Dlg. §§ 1255-1257; 
Dec. Dig. ©=725(1).] 

2. Judgment ®=>713(1) — Estoppel — Scope of Estoppel. ' 

Where the finding of fact on whicli a conclusion of law Is based can 
be ascertalned with certainty from Oie judgment roll, such finding wlU 
constltute an estoppel. 

[Ed. Note.— For other cases, see Judgment, Cent Wg. §§ 1063, 1234-1237, 
1239; Dec. Dig. ®=j713(1).] 

3. CONTKACTS ■g=23 — ACCEPTANCE PeOPOSAL OF NeW CONDITIONS. 

A proposai of new conditions in response to an ofCer Is a refusai. 

[Ed. Note.— For other cases, see Contracts, Cent Dlg. §§ 96-99, 160; 
Dec. Dig. ©=23.] 

4. JUDGiiENT <S=>526 — Conclttsiveness — Opinions. 

It is Improper to détermine the scope of a judgment by the opinion 
rendered by the appellate court. 

[Ed. Note. — For other cases, see Judgment, Cent. Dlg. § 969 ; Dec. Dlg. 

<S=526.] 

6. Judgment <©=3622(1) — Conclusiveness — Mattees Concluded. 

Défendant was the assignée of a lease oontalning provisions for re- 
newal. Plaintifif, the lessor, after expiration of the term, sued in the state 
courts, to dispossess défendant, on the ground that as no renewal had 
been eft'ected, he was holding over, but was defeated. Thereafter défend- 
ant who claimed a right to the appraised value of the buildings on the 
leasehold on the ground that no renewal had been offered hlm, sued 
plaintifE, who counterclaimed for the use and occupation of the premises 
down to the date of his answer. Défendants suit was dlsmissed, and 
plaintift was defeated in its counterclaim for use and occupation, save 
as to the period between the expiration of the ler»se and appraisal of the 
premises. Ileld, that as défendant would hâve been entltled to the value 
of the buildings, uuless plalntlflf offered a renewal, and as the déniai of 
recovery on plaintifC's counterclaim in defendant's action in the state 
court was a finding that the offer of renewal had been made and accepted, 
and a lease existed, such judgment is concluslve between the parties, in 
a subséquent suit by plalntifC for rent accrued, that plaintiff had offered a 
renewal, which had been accepted, and will bar a counterclaim by de- 
fendant for the value of the buildings. 

[Ed. Note. — For other cases, see Judgment, Cent Dlg. § 1136; Dec. 
Dig. <S=622(1).] 

6. Judgment i@=3622(1) — Conclusiveness — Fobmeb Judgment. 

Despite Code Clv. Proc. N. Y. § 1209, declaring that a final judgment 
dismis.sing the complaint does not prevent a new action, unless it express- 
ly déclares or appears by the judgment roll to be rendered on the merits, 
a judgment dismissing the counterclaim of a lessor for use and occupa- 
tion, save as to a small portion of the time durlng which the tenant was 
In possession and for which recovery was sought, Is a concluslve adjudica- 
tion that the lessor was not entltled to recover for the remalnder of the 

■E — .Pnr other cases see same topie & KEY-NUMBBR In ail Key-Numbered Digests & Indexe* 



48 234 FEDERAL REPOEÏEE 

period, and in that manner rendered the judgment conclusive tliat a 
lease existed between the parties. 

[Ed. Note. — For otlier cases, see Judgment, Cent. Dig. § 1136; Dec. 
Dig. ®=a622(l).] 

7. Judgment (g=3719 — Jurisdiction of Court — Pleadings. 

The lessee, holding under lease providing for reuewal. sued to recover 
the appraised value of the buildings, on the ground that the lessor had 
not offered him a renewal, and the lessor counterclalmed for use and oc- 
cupation of the premises after the expiration of the lease, on the ground 
that its offer of renewal had l>een rejected. Rcld, that in such case the 
pleadlugs dld not prevent the court from finding that a lease existed be- 
tween the parties, and a Judgment so finding iw a conclusive adjudication 
of that' fact. 

[Ed. Note. — For other cases, see Judgment, Cent. Dig. §§ 1240, 1250; 
Dec. Dig. <®=3719.] 

8. Election of Remédies «g^lS — Kffect of Election. 

VVhere a lease actnally existed, the fact that the lessor, under the mls- 
tak(>n bellef that no lease existed between the parties, sued for use and 
oecnpatiou of the premises, will not preclude recovery on the lease ou 
the ground that there was an élection of remédies, for there can be no 
such élection unless there is a cholce. 

[I{;d. Note. — For other cases, see Election of lieniedles. Cent. Dig. § 17; 
Dec. Dig. <S=>15.] 

In En-or to the District Court of the United States for the South- 
ern District of New York. 

Action by the Hamilton Fish Corporation against Alexander Doyie. 
There was a judgment for plaintifï, and défendant, whose counterclaim 
was dismissed, brings error. Affirmed. 

The statement of the case and opinion of Dearned Hand, District 
Judge, in the court below, is as f oliows : 

This Is an action for rent upon the renewal of a lease of premises on 
Tj'Ast Twentieth street in the clty of New York. The défendant was the as- 
signée of the former lease to the premises which had provisions for a renewal 
that are the cause of the controversy. The old terin expired on the Ist of 
November, 1907, but before that tlme the parties had not completed the ap- 
Iiraisal requlred by the terms of the lease for its renewal, nor had they in 
conséquence renewed the saine. During the iirst two weeks of November, 
1007. however, an appraisal was completed by flxing the value of the premises 
at .flS.OOO and of the buildings at .$5,000, as required. Thereupon, on the 18th 
day of November the plaintlff sent a letter to the défendant stating that the 
dlrectors of the jjlnintiff had declded to renew the gi-ound lease and had plac- 
ed the matter In the hands of their attorney. A considérable correspondence 
ensued, which it is not necessary to set forth in full, but it never resulted lu 
the lessee's acceiitlng or executing a wrltten renewal lease. The plalntifif 
now inslsts that the défendant becaine bound by accepting the offer of renew- 
al made by tlie letter of November 13th. The défendant urges that the minds 
of the parties never met upon a new contract beeause the plaintlff always at- 
tached to the renewal <!ertain terms which the défendant never aecepted. 

The right of renewal itself, as provlded in the original lease, of which the 
défendant was the assignée, provided that the lessor should liave the op- 
tion either to grant a renewal for 21 years at the appraised rent or to pay to 
the lessee the appraised value of the buildings. In the case of Zorkowskl v. 
Astor, 156 N. Y. 39.'î, 50 N. E. 983, the Court of Appeals of the state of New 
York had declared that the landlord must either pay for the buildings, or 
ofCer a renewal to the tenant which the latter might accept, but whleli, If he 
dld not, gave the landlord the buildings wlthout payment. It was therefore 
only If the landlord refused to renew, as he miglit do, that the tenant got bis 

<S:=5For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes 



DOTLE V. HAMILTON FISH CORP. 49 

right to the appralsed value ot the buildings. The plalntlfif having falled to 
compel the défendant to exécute or receive a written renewal lease, owing to 
the conditions imposed, sued to dispossess hlm in the Municipal Court, alleg- 
Ing that there was no lease outstanding between them, and that he was 
holding over. In this he was unsuceessful, as well before the Municipal Court 
as upon appeal to the Appellate Tenu of the Suprême Court. Thereupon, in 
June, 1&08, more than six months after the expiration of the lease, the de- 
fendant sued the plaintiff for the appraised value of the buildings, contendtng 
that the défendant had not ofEered him a renewal of the lease. The plaintiff 
answered and counterclalmed for the use and occupation of the premises from 
the Ist of November down to the date of his answer, which was November 30, 
1908. When this cause came on for trial the défendant (who was the plaintiff 
tlierein) was defeated in hia claim, and the plaintiff (who was the défend- 
ant) got judgment on his counterclaim for use and occupation up to the date 
claimed. The défendant (plaintiff therein) then appealed to the Appellate 
Division, which reversed the judgment (144 App. Div. 131, 128 N. Y. Supp. 
898), upon the ground that there had been a renewal of the lease on the 13th 
of November, 1907, and that therefore the plaintiff (défendant therein) could 
not recover on his counterclaim for use and occupation beyond that date. On 
the new trial the complaint was agaln dismissed and the plaintiff (défendant 
therein) reeovered judgment for use and occupation at the rate of the old rent, 
but only from the Ist to the 13th of November. The plaintiff (défendant 
therein) dld not appeal from the judgment on the counterclaim, but the de- 
fendant (plaintiff therein) appealed from the judgment dismissing his com- 
plaint on the merits, both to the Appellate Division and to the Court of Ap- 
peals, and in each case was defeated. 

The plaintiff, having failed to recover for the use and occupation after 
November 13th, thereupon sued the défendant in the state court for rent, the 
défendant removed to this court, and thereupon counterclalmed again for 
the value of the buildings. The plaintiff now is claiming for rent upon the 
renewal which was found to hâve existed in the judgment in the state court, 
and bases his claim upon two théories: First, that as matter of fa et the lease 
was renewed, as shown by the correapondence between the parties ; and, sec- 
ond, that it was conclusively determined that the lease had been renewed in 
the judgment in the state court. The défendant dénies each of thèse positions, 
and bases his counterclaim to the value of the buildings as appraised upon the 
theory that the landlord has never ofEered to renew the lease and has at 
length dispossessed him. 

[1-5] I shall first consider the effect of the judgment in the state court in 
Doyle V. Hamllton Fish Corporation. I agrée with the défendant that that 
judgment, in so far as it dismissed the complaint upon the merits, does not 
create an estoppel hère, though I thlnk it does raise a bar to the counterclaim. 
The plaintiff, indeed, does not urge that it does create an estoppel, and the 
New York Court of Appeals has sald that the second conclusion of law was 
not necessary to the judgment of dlsmissal when that was before them. This 
is true, because in Zorkowski v. Astor, 156 N. Y. 393, 50 N. E. 983, it was held 
that, in a lease of this sort the lessee's right to the buildings depended upon 
the lessor's failure to offer hlm any renewal but that, when the lessor dld 
offer the renewal, he must either aceept or reject the renewal, and in either 
event lose ail rights, exeept to the lease. Therefore it wa« whoUy Immaterial, 
in ascertaining whether the lessee should recover for the buildings, to décide 
more than the question whether the lessor had offered a renewal. If the court 
had found that the offer of renewal had been accepted, It would not hâve been 
an estoppel. Landon v. Clark, 221 Fed. 841, 137 C. O. A. 399. In disposing of 
the counterclaim, however, this question became necessary of solution, ) nd its 
answer created an estoppel for the following reasons: 

The plaintiff (défendant therein) in his counterclaim had sued for use and 
occupation from November 1, 1907, to November 30, 1908, at the rate of 
$1,300 ^er annum and it reeovered $20.58 for the use and occupation during 
the periôd from November 1, 1907, to November 13, 1907, which is in fact the 
old rent though not so stated. The facts which led to this déniai of the 
plaintiff's (défendants therein) claim for use and occupation from Nov«mber 
234 F.— 4 



30 234 FEDERAL REPORTER 

13, 1907, to Kovember 30, lOOS, therefore became a necessary condition to tho 
renditlon of the judgment Itself and ereated an estoppel. Wliat weré thèse 
facts? The eightli finding of fa et is tliat the lessor elected to renew and 
notified the lessee. The fourteentli finding of fact is that the lessee still re- 
mains in possession. The second conclusion of law finds that the parties after 
November 13, 1907, were in the relation of landlord and tenant, under the re- 
uewed lease. Tliis last is neither in form nor in fact a finding of fact, and 
as such It does not croate an estoppel ; but it présupposes some finding of 
fact, and If that finding of fact can be ascertalned with enough certainty from 
the judgment roll and tlie évidence, and was necessary to the judgment, it 
will in turn constitute an estoppel. Russell v. Place, 94 U. S. 606, 24 L. Ed. 
214. 

The relevant issue upon this question was joined by the thlrteenth article 
of the amended answer, which alleged that "the plalntlfC" (défendant hereln) 
"refused to accept the sald renewal," and by the fourth article of the reply, 
which denled that allégation of the thirteenth article and no other. The is- 
sue was therefore, whether the lessee liad or had not refused to accept the 
renewal, and the second conclusion of law could, under thèse pleadings hâve 
jtroceeded only upon the lessee's success upon that issue by a finding that the 
lessee had not so refused. It is true that tlie lessee might not hâve refused 
to accept the lease, and yet might not hâve accepted it ; he might hâve made 
no answer to the offer whatever, but this an examination of the évidence 
shows that he did not do. He answered the letter of November 13, 1907, by 
lils own letter of November 14, 1907, and then foUowed much further corre- 
s])ondence between tbe parties. This answer to the letter was either an accept- 
ance of the offer of renewal or it was a refusai, for to propose new conditions 
to an offer is to refuse the offer as it stands, as tiie défendant truly urges. 
Minn. & St. Louis R. Co. v. Columbus Rolling Mill Co., 119 U. S. 149, 7 Sup. 
et. 1G8, 30 L. Ed. 376. When therefore the issue of tlie lessee's refusai to 
accept was found against the lessor it could only be beeause the court in- 
terpreted the letter of November 14, 1907, as an acceptance, and upon this 
iiudiiig of fact only could it hâve concluded as matter of law, that there had 
been a renewal. The judgment roll and évidence show that the second conclu- 
sion of law which was necessary to support the judgment on the counterclaim, 
was itself supported by the finding of fact tliat the lessee had accepted the 
offer. 

While it is not proper to décide the scope of tlie judgment by the opinions 
reudered, at least it does not milltate against my conclusion that this was In 
fact the ratio decidendi. 

[6] One of the defendant's answers to this is that the judgment is not a 
bar, beeause it does not cxpressly say that the counterclaim was dismissed on 
the merits for the perlod after November 13th, and that this is necessary un- 
der section 1209 of the New York Code. AU the cases that hâve arlsen over 
that section hâve been where the complaiiit was altogether dismissed ; no- 
where has it been suggested that, where judgment is given upon a part only 
of a daim, it must recite that the coinplaint is dismissed as to the balance. 
Such a requlrement would be an idie refinement, unnecessary and artificial. 
A judgment for part only of several installments of rent upon a complaint is 
a bar to a second action for those not recovered. Davies v. New York, 93 N. 
Y. 250. I do not forget that the judgment in the case clted was entered ou 
consent, but that does not alïect its scope as a bar, liecause the consent Is to 
be read as extending to no more tlian the same judgment after trial. 

[7] The défendant further insists that the whole judgment, not only that 
part which disposed of the counterclaim, but that which dismissed the com- 
plaint, was vold, beeause the court had no jurisdiction of tlie matter under 
the pleadings. Ilis argument upon this point is as follows: The défendant 
(plaintjff therein) asserted that there was uo outstanding lease between the 
parties, beeause the lessor had refused to renew the lease. The plaintifl: (de- 
fendant therein) had also asserted that there was no outstanding lease be- 
tween the parties, beeause, although the lessor had elected to renew the lease, 
the lessee had refused to accept it. Hence the parties went to trial upon the 
fact, conceded in the i)leadings, that the lease had not been renewed. In giv- 



DOYLB V. HAMILTON FI8H GOEP. 51 

!ng Judgment upon a flndlng that the lease was renewed on NoTember 13, 
1907, the court, therefore, dlsregarded the conoeded facts in the pleadings and 
exeeeded Its jurlsdictlon, under the rule, thoroughly well settled, that juris- 
âietlon is always limlted to clalms submitted to the court in the pleadings. 

This reasonlng confuses the légal effect of the pleadings wlth the facts 
pleaded. The parties dld not plead that there was no renewal but each 
pleaded a separate version of the facts from which it chanced to foUow, if 
true, that there was no renewal. The lessor pleaded that he had ofiCered to 
renew and that the lessec had not accepted. It so happened that, if both allé- 
gations were false or both true, there was no renewal; but, when each Issue 
was separately made, the court could not be compelled to dedde them hoth in 
the same way. It is only in case every possible combination would hâve ré- 
sultée in no renewal that the court would hâve necessarily reached the resuit 
of no renewal. 

The matter may be further lUustrated by the demanda of the parties. The 
lessor demanrîed the buildings free without the incubus of a renewal. The 
lessee demanded the price of the buildings without the incubus of a renewal. 
Therefore the défendant says the court was bound, however it found, to flnd 
that there was no renewal. The fallacy is that the parties, by mating oppo- 
site claims having a common condition, do not assent to the condition taken 
alone. The court got no consent from either party to décide the fate of the 
buildings without regard to the lease. The lessor may well hâve preferred the 
buildings wlth a renewal to no buildings at ail, and the lessee the price with 
a renewal to no price at ail ; at least, nothing in the pleadings gave the least 
warrant to the court to disregard such alternatives. The court had no right 
to break up the integrity of the claim of each by selecting ont a common term, 
as though they had agreed upon that term independently. 

It Is quite clear that the New York Court of Appeals interpreted the second 
conclusion of law in this sensé when the same arguments were made before 
It Judge Bartlett, on the motion for reargument, in answer to the argument 
that the pleadings, conceded the absence of a renewal, said that the rule in- 
voked applied only to facts, and that no finding of fact contradieted the 
pleadings ; that the finding of a renewal was only an inference based upon 
flndings of fact which the court was bound to suppose sufHdently supported 
in the évidence, and open to the court to find. He must hâve meant that it 
was open under the pleadings. It is quite true that he went on to say that 
the conclusion was immaterial, but this was tnae only because the court had 
before it only the judgment dismissing the complaint, to which no flndiug upon 
refusai or acceptance was necessary. I do not thlnk that the opinion is to be 
taken as holding that the impliod finding was unnecessary to so much of the 
Judgment on the counterclaim as refused any allowance for use and occupa- 
tion after November 13, 1907. 

[8] As to the défense of an élection, based upon the unsuccessful effort to 
dispossess the lessee upon allégations that there was no lease, it is enough to 
say that a party bas an élection only between existing, not supposed, rights. 
Bierce v. Hutchins, 205 U. S. 340, 27 Sup. Ct. 524, 51 L. Ed. 828. The plain- 
tifï could not destroy his rights under the lease hy mistakenly following other 
supposed rights which turned out not to exist. Tliat would be to put him, not 
to an élection, but to a correct estimate of his right under pain of forfeiture. 

I shall not décide the question independently as to whether the Appellate 
Division of the Suprême Court was right in its original décision which found 
In the defendant's answer of November 14, 1907, an unequivocal acceptance 
of the élection of November 13, 1907. Obviously the case was not like Stan- 
ley V. DowdesweU, L. R. 10 C. P. 102, because hère every détail of the lease 
was settUd, and nothing remained except to notify the lessee of his élection. 
The letter of November 14th might well be thought to contain no condition on 
Its acceptance, nothing more than a warning against the lessor's possible 
wrong constructiMi, a caution justified by the future as it developed, but nev- 
ertheless not a condition to the assent. That on November 14th the parties' 
minds had corne to a complète accord is certainly a most reasonable conclu- 
sion, but, however much 1 may agrée wlth it, it is redundant, as I view the 
efîect of the judgment, and I shall make no finding upon it. 



52 234 FEDERAL KEPORTBR 

Finally It Is plaln that tinless the plaintiff cati obtain relief in this action 
it must lose ail return for the defendant's occupation ol the premises from 
November 13, 1907. It has been beaten In the attempt to reeover for the rea- 
sonable value, includiug that based on the old rent, upon the theory that 
there was a lease. If it cannot now reeover on the new lease, it ean reeover 
iiothing. Thus the défendant wlU hâve enjoyed possession without paying any 
rent, certainly an inéquitable resuit. It is true that he will hâve to pay the 
new rent, but that was fixed by three disinterested persons, and is not likely 
to be unfair in aniount. He had it in his power to refuse the lease, but he 
clearly was uuwilling to do this, and so to lose his buildings. If he made 
no bénéficiai use of his possession vphile he had it, the fault was his, not the 
defendant's. 

As to the defendant's counterclaim in the case at bar, it needs no independ- 
ent considération, in view of the foregoing. 

The plaintiff may take judgment on tlie complaint, with costs, and dis- 
missing the counterclaim upon the merits. 

Max J. Kohler, of New York City, and Alexander Doyle, for plain- 
tiff in error. 

Montgomery & Peabody and John S. Montgomery, ail of New York 
City, for défendant in error. 

Before COXE, Circuit Judge, and HOUGH and MAYER, District 
Judges. 

PER CURIAM. We hâve read the clear and comprehensive opinion 
of Judge Learned Hand and nothing need be added to ils reasoning. 
We think his conclusions of law are fuUy sustained by the évidence, 
and therefore afiSrm the judgment, with costs, upon his opinion. 



COMPAGNIE GÉNÉRALE TRANSATLANTIQUE v. BUMP, 

(Circuit Court of Appeals, Second Circuit. June 6, 1916.) 

No. 293. 

1. SniPPiNQ <Ê=>166(5) — Carriage or Passengers — Actions — Jury Question. 

In an action by a passenger on a shlp, injured by a fall resultlng from 
a sudden lurch du ring a storm, the questions whether the passenger was 
gullty of contrlbutory négligence, antl whether the shlpowner was négli- 
gent in faillng to provide safeguards and in leaving a loose mat sllding 
about the passageway where the accident occurred, lield, under the évi- 
dence, for the jury. 

[Ed. Note. — For other cases, see Shipping, Cent. Dig. § 550; Dec. Dig. 
■Ê^loeiS).] 

2. Shipping iS=>166(1) — Cabriage of Passengers — Actions — Négligence. 

For a shipowner to leave a loose mat sliding about a passageway used 
by passengers when a violent storm was raging was négligence. 

[Ed. Note. — For other cases, see Shipping, Cent. Dig. §§ 538-546, 549; 
Dec. Dig. <S=3l66(l).] 

3. Shipping ©==166(1) — Carriage of Passengers — Shipowners. 

Where the servants of a shipowner placed a passenger in a position ex- 
posing her to iiijury, and under the circumstances she was unable to 
help herself, the shipowner is liable for not extendingi to her required 
protection. 

[Ed. Note.— For other cases, see Shipping, Cent. Dig. §§ 538-546, 549; 
Dec. Dig. €=100(1).] 

<S=iror other cases see same topic & KEY-NUMBER in aU Key-Numbered Dlgests & Indexes 



COMPAGNIE GÉNÉEALB TRANSATLANTIQUE V. BUMP 53 

4. Evidence <S=>517 — Fobeign Laws — Interprétation. 

In an action agalnst a French steamship company, where relevant sec- 
tions of tlie French Civil Code were clear and plain, a translation is ad- 
missible, without interprétation by an attorney leamed in the law of 
France. 

[Ed. Note.^For other cases, see Evidence, Cent. Dig. § 2327 ; Dec. Dig. 
<S=517.] 

5. Appeal and Bbrob <S=3l026 — Review — Habmless Errob. 

Brrors in the conduct of a trial, whieh are inconsequential, do not war- 
rant a reversai. 

[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 4029, 
4030; Dec. Dig. <g==>1026.] 

In Error to the District Court of the United States for the South- 
ern District of New York. 

Action by Teresa M. Bump against the Compagnie Générale Trans- 
atlantique. There was a judgment for plaintiff, and défendant brings 
error. Afifirmed. 

The District Court entered a judgment upon the verdict of a jury- 
for $15,056.33 in favor of the plaintiff for injuries received by her 
while a passenger upon the steamship Rochambeau, owned by the de- 
fendant. The parties will be alluded to hereafter as they appeared in 
the District Court — as plaintiff and défendant. 

Joseph P. Nolan and John M. Nolan, both of New York City, for 
plaintiff in error. 

Abram I. Elkus and William M. Wherry, Jr., both of New York 
City, for défendant in error. 

Before COXE and WARD, Circuit Judges, and CHATFIELD, Dis- 
trict Judge. 

COXE, Circuit Judge. [1-3] The plaintiff was a passenger upon the 
defendant's ship, the Rochambeau. While in the custody and under 
the direction of the ship's captain she was seriously and permanently 
injured by reason of a fall occasioned by the violent lurching of the 
ship during a storm of more than ordinary violence. The plaintiff had 
a dog on board for which she had paid passage. She was not satisfied 
with the accommodation given the dog and complained to the captain 
regarding it. In reply he requested her to follow him, saying that he 
would show her where the dog could be cared for. They proceeded 
down two companionways to the main deck, the captain leading the 
way. After inspecting the dog's quarters they started to return and 
when they reached a broad passageway extending to a tide door which 
was closed and bolted, the ship took a sudden lurch and the plaintiff 
was thrown against the bolts and projections on this closed door and 
received the injuries complained of . There were no railings on either 
side of this passageway and the plaintiff testified that there was a 
loose mat, or jute runner, which slipped when the sudden lurch came 
and threw her off her feet. The question is, not what we would hâve 
found if we had been sitting as triers of the facts, but, was there suffi- 

4=»For other cases see same topic & KBY-NUMBER in ail Key-Numbereû Digests & Indexes 



54 234 FEDERAL REPOETEK 

cient évidence of the defendant's négligence to warrant the jury in find- 
ing a verdict for the plaintiff. We think there was. 

The question of defendant's négligence and of the plaintiff's contrib- 
utory négligence were for the jury. It cannot be successfully asserted 
that the place where the accident happened was a dangerous place per 
se ; it was rendered dangerous by the prevalence of an unusually vio- 
lent storm. The plaintiff was, however, in the custody of the master 
of the ship, on whose judgment she had a right to rely. When he 
said, "Come with me. I will show you where your dog can go," she 
was justified in relying upori his superior knowledge and intelligence. 
It v^'as tantamount to saying "I know my ship and I know the force 
of the présent storm ; come with me and you will be safe." With such 
an implied assurance can négligence of the plaintiff be predicated of 
a compliance with the captain's direction? What passenger would 
hâve the temerity to say directly, or by implication, "Captain, I do not 
think you know what you are talking about; this storm is one of un- 
usual violence and we may be thrown down and seriously injured. I 
propose to stay where I am." Again, the plaintiff was warranted in 
assuming, if the way led through dangerous passages, that rails or 
ropes would be provided and that the rugs and mats on the floor would 
be securely fastened. There is no prêteuse that any ropes or rails were 
provided where the passagevt'ay crossed the broad space where the ac- 
cident occurred. Whether there was a loose mat, or runner, at the 
point where the plaintiff slipped and fell was a question for the jury. 
She testified, "I had already started and felt myself going, and at that 
moment the rug, the jute runner as it were, slipped." 

It can hardly be questioned that it was négligence to leave a loose 
mat sliding about the passage way when such a storm was raging. The 
jury may hâve found that this was what happened; it was clearly a 
question of fact. We think it plain that the court could not say as 
matter of law that the défendant was free from négligence or that the 
plaintiff was guilty of négligence. Both of thèse were questions for 
the jurv and their verdict was not against the évidence. Chicago 
Co. V. Lynch, 201 Fed. 70, 119 C. C. A. 408 ; The Prinzess Irène (D. C.) 
139 Fed. 810; The Annie L. Van Sciver (D. C.) 161 Fed. 640; Smith 
V. Steam Packet Co., 86 N. Y. 408. In Smith v. Steam Packet Ce, 
the Court of Appeals of New York says, at page 412 : 

"If the plaintiff was placed in a position, by tlie act of ttie defendant's 
servants, whicli exposecl lier to injury, and, under tlie circumstances, was 
unable to protect lierself, tlie défendant was liable for not exercising proper 
care in extending to lier such protection as was required." 

In Chicago Co. v. Lynch, the Circuit Court of Appeals for the Sev- 
enth Circuit says : 

"Error is assigned for not excludlng évidence of the slippery condition of 
tlie cabin floor. As we hâve seen, this was one of tlie attending circumstances 
to be considered by the jury in determining whether there was auy négli- 
gence. It was as pertinent, though perhaps not as influential, as the lurching 
of the vessel or tlie physical condition of the plaintiff." 

[4] The relevant sections of the French Civil Code, 1382, 1383 and 
1384, were received in évidence. They seem clear and understandable 



ALOO FILM COBP. V. ALCO TILM 8EBTI0B OF MINNESOTA 55 

and do not need the interprétation of a lawyer leamed in the law of 
France. If there was anything esoteric or complicated about thèse 
provisions it is possible that the services of a French lawyer might be 
required, but, with the translation admitted, the meaning of the law is 
so plain that no explanation was necessary. 

[5] Other alleged errors are argued, but we deem it unnecessary 
to discuss them in détail. In every hotly contested jury trial a lawyer 
who reads the record with a désire to find some action by the trial 
judge which is open to criticism, will generally be successful. The 
most learned and conscientious judge will frequently make a ruling 
which subséquent testimony and further reflection show to hâve been 
of doubtful propriety. But if it appears that the ruling was inconse- 
quential and that the resuit was a just and proper one, it would be a 
raanifest injustice because of such ruling to start the parties again up- 
on the weary pilgrimage through the courts. The principal question 
was one of fact — was the défendant acting through its agent, the mas- 
ter of the Rochambeau, guilty of négligence in inviting the complainant 
to go to the main deck of the vessel when a storm of extrême violence 
was raging? Should he hâve taken her to a part of the vessel where 
there were no railings or supports and where the mat or runner was 
loose on the floor? 

Thèse were questions of fact and the verdict has solved both of 
them in favor of the plaintiff. The place where the master took the 
plaintifï was not ordinarily dangerous, but the severe storm rendered 
it an unusually dangerous place. At least the jury were justified in 
finding it to be a dangerous place. The questions of négligence were 
properly submitted to the jury and their verdict in favor of the plain- 
tifï was fully justified by the évidence. 

The judgment is affirmed with costs. 

WARP, Circuit Judge, concurs in the resuit. 



ALCO FILM CORP. v. ALCO FILM SERVICE OF MINNESOTA. 

SAME V. PROGRESSIVE INV. CO. OF PORTLiiND, OR. 

(Circuit Court of Appeals, Second Circuit. June 10, 1010.) 

Nos. 149, 237. 

Bankruptct <g=s>293(4) — Summabt Obdeks— Jubisuictiow. 

Though appellants were adverse claimants, residing in other states, 
and tbe property, for tlie surrender of whicli the bankrupt's receiver mov- 
ed, was in other states, appellants, by their failure to move to quash the 
service of suunmons, or to except thereto, waived any right to object that 
the court of bankruptcy was without jurisdiction to enter a summary or- 
der in the premises. 

[Ed. Note. — For other cases, see Bankruptcy, Cent Dig. §§ 411, 417; 
Dec. Dig. <S=>293(4).] 

^=>For other cases see same tapie & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



s*» 234 FEDERAL RErOETBH 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

In the matter of the bankruptcy of the Alco Fihn Corporation. On 
motion by receivers for an order against the Alco Film Service of 
Minnesota (the Sherjiian Feature Service) and against the Progressive 
Investment Company of Portland, Or. From orders in favor of the 
receiver, the Alco Film Service of Minnesota (Sherman Feature Serv- 
ice), appeals. Aifirmed. 

The following is the opinion in the court below of Mayer, District 
Judge : 

Tlie receivers hnve nioved for nn order directinE; respoiidents to tnni over 
certain motion jMcture films now In tlieir i>ossessioii nnd 70 per cent, of the 
recelpts obtalned b.v tliem from the rentals of sald motion plctures from tlie 
tlme they obtalned tbem to date. XJnder date of Sept(>mber 12, 1914, the baiik- 
rupt corporation (herelnafter called "Alco") and a partnership ktiown as the 
Hheruian Feature Comjniuy entered liito a wrltteu agreemeut b.v wliich tlie 
Sherman Company obtalned from Alco wliat the p-arties called tlio exclusive 
ajîency or tranchiKe, which !»ermittod the Sheniuin Company the exclusive 
right to obtaiu and exhibit picturcs r(>leased throusli the Alco. ïbls "fran- 
chlNe" covered Minnesota, Nortli Dakota, South Dakota, and Wisconsln. Alco 
retalned tltle and Sherman Oo. is referred to as the "lessee." 

l'aragraph 15 ijrovided: "It is distinctly understood and agreed that ail 
film furnished to the lessee is the i)roperty of the company and is leased to 
the lessee, and not sold or donated, and that ail lllnis must be returned to the 
company vv'ithin 12 niontlis of tlieir delivery to the lessee unless sucli tluie 
Is extended by written agreenient. * * * " 

Paragraph 14 iixed the compensation, or rental, or whatever the money re- 
quirement may be called, as folio «•.=!: "14. A sum eipial to 70 per cent, of the 
gross recelpts from ail plctures supplied hereunder sliall be remîtted by the 
lessee promptly * « * uot latcr than 6 p. m. of Monday of each weelv ; 
and failure so to remit may, at the oiJtiou of the comiiany, constltute a breach 
of this eontract and justify the company in withholding the production for 
the next ensuing weclc. while a répétition of the offense may, at the option 
of the company, constltute sufilcient reason for a. tei'nilnation of this agree- 
nient, and a conclusion and deteruùnation of the relationship herein and here- 
by estahlished In the manner hereinafter set forth for the cancellation of the 
sald eontract." The remaining 30 per cent, was to be the property of the 
"lessee." 

O'rtain plctures were forwarded to aiul received by the Sherman Company, 
and were exhibited hy it in Its allotted territory, and the Slierman Company 
accounted and paid rentals up to about December, 1914. On Jaruiary 26, 1915, 
the receivers were a])pointed and duly qualltied, and were autliorized to 
continue business. After deniand, the Sherman Company bas refused to ac- 
coiuit for the 70 per cent, or to return the lilms. ïlie ground of refusai is 
that the Alco was guilty of breach of its eontract, and dld not live up to its 
représentations, ail to the great damage of the Sherman Company. 

The Sherman Company (who were to do business as JMinnesota Klm Service) 
among other thlngs allèges that certain films proniised lo it were not deliv- 
ered and as a resuit: "(14) That owlng to the sald breach of eontract by the 
sald Alco Film Corporation, and the failure to deliver any further fllm pro- 
ductions or iihoto plays, the said Miimesota Fllm Service was in turn un- 
able to perform or carry out its contracts with exhibitors and others, and 
has suffered and will suffer great damage by reason of sald breach ; that said 
Minnesota Fllm Service had assumed obligations to provide films to said ex- 
hibitors and others under more than 20 contracts, ail of whicli contracts and 
obligations they hâve been compelled to break, and many claims for damages 
are now being made and will be made against them." 

It is further alleged; "(15) ïhat the said Minnesota Film Service now has 



ALCO FILM CORP. V. ALCO FILM SERVICE OF MINNESOTA 57 

œrtain fllm productions or motion pietures delivered by the Alco Film Cor- 
poration in Its possession and imder its control and outside tlie state of New 
York, but by the terms of the said contract wlth tlie said Alco Film Corpora- 
tion It was to be and is entitled to retain ail films received by It initil the ex- 
piration of twelve months from delivery. * * « "(17) That neitlier of tbe 
copartners above referred to, nor any of the ofRcers of the Minnesota Film 
Service, réside in the Southern district of New Yorlv, and the said Minnesota 
Film Service has its principal office and place of business in the city of Mlnne- 
apolis, State of Minnesota, and has no office or place of business in the sai^ 
Southern district of New York." 

A summary order is resisted on the foUowlng grounds: (1) That respond- 
ents are adverse claimants. (2) That the order will be ineffective outside of 
the Southern district of New Yorlv, the property not being hère. 

The first objection proceeds upon the theory that, where facts are undis- 
puted, and only a question of law is involved, and the question of law is de- 
batable, the person resisting is an adverse claimant. Such is not the law. 
What Judge Hough said in Re Michaelis & Lindenian, 27 Am. Bankr. Rep., 
299, (D. C.) 196 Fed. 718, has recently been clearly reiterated by the Circuit 
Court of Api)eals for the Second Circuit, in Matter of K. & W. Skirt Company, 
222 Fed. 256, 13S C. C. A. 67, March 9, 1915, opinion by Judge Coxe. 

Assuming the facts to be as set forth by Mr. Davies in his affidavit sub- 
mitted on l)ehalf of the respondents, it becomes the duty of the court, upon an 
application of this kind, to détermine the law of the case. First, respondents 
hâve no lien; and, secondly, under the i)rinciple of Michaelis & Lindeman, 
supra, respondents cannot set ofl the receir)ts since the date of the flling of 
the pétition against tlieir claim for damages for a breach pi'lor tliereto. 
Tblrdly, tlie "twelve months" pr()\ision in section 15 merely nieans that the 
'lease," so called, is for that period. 

TJpon failur(> to account (remeniberlng always that the titie to the property 
reniained in Alco), Alco was entitled to bave its property returned. The re- 
spondents might refuse to pay over gross receipts and flght that battlc to its 
finish, but I see no theory upon which they could successfuUy retain the 
films. 

As to the second ground, I may observe that, while respondents bave cited 
many cases, it will be found that wlth a possible single exception they are not 
applicable. In I{e Waukesha Wator Co., 116 Fed. (D. C.) 1(X)9, for 'instance, 
service was niade outside of tbe jurlsdictlon. In Staunton v. Wooden, 179 
Fed. 61, 102 C. C. A. 855, it is not eutirely clear whether service was withiii 
the Northern district of California, or in Nevada. 1 am inciined to think it 
was in Nevada ; " but, in any event, as respondents in the proceediugs at bar 
were served in tliis jurisdictlon and the order is in personam, I think there is 
Ijower in this court to niake tbe order. 

If respondents should not return to the Southern district of New York and 
should refuse to délirer, tbe recel vers may or niay not flnd it necessary to take 
proceediugs ancillary to lay hold of the property; but that bridge may be 
crossed If the lourney takes tbe receivers tbat far. I couclude, therefore, 
that tbe receivers are entitled to a summary order directing the respondents 
to return the tilms. 

As the situation Is a practical one, which should be dealt with promptly 
and equitably, so far as possible, and as thèse films, from the production 
standpoint, hâve an uneertain life, I will autliorize and dire<-t the receivers to 
let respondents keep tbe films upon payment of the 70 per cent, for tbe period 
from fiUng pétition to date and hereafter, leaving the question as to receipts 
prior to the bankruptcy and tbe claims for damages to be settled later on. 

In respect of the varions pétitions to intervene, the motions will be granted ; 
but those rights and relations cannot be determined until the receivers get the 
films or the money. As the same priuciples apply to ail tbe peuding applica- 
tlo]is, a récital of tbe particular facts is not necessary, and similar orders 
will be made in ail the applications. 

While, in a sensé, it is not the court's business to compromise disputes, I 
think it would be to the interest of ail concerned if some fair and reasonable 
settlement could be arrived at, in order that everybody should get his just 



58 234 FEDERAL EBPORTEK 

share while the films liave an earning capacity. If Mr. Watkins States the 
facts correctly, his expérience has been especially unfortunate. 

H. W. Goddard, of New York City, for appellant. 
Milton M. Goldsmith, of New York City (L. Frankel and David 
Cohen, both of New York City, of counsel), for appellees. 

Before COXE, WARD, and ROGERS, Circuit Judges. 

PER CURIAM. The appellants in this case appeared specially, 
but not to raise the question of jurisdiction of their persons. Their 
theory was that they were adverse claimants, and that because they 
resided in other states, and the films which the court was asked to re- 
quire them to surrender were in other states, the United States District 
Court for the Southern District of New York had no jurisdiction to 
make any summary order in the premises. No motion was ever made 
to quash the service of process nor was any exception taken to it, either 
in the District Court or in this court. Conceding the service of process 
to hâve been invalid, the objection was waived. 

The orders of Judge Mayer are afïirmed, except that the référence 
to the film known as "Tillie's Punctured Romance" should be stricken 
out from the order in the case of the Progressive Investment Com- 
pany. 



In re CONTINENTAL ENGINE CO 

BAIRD V. SMITH. 

(Circuit Court of Appeals, Seventli Circuit. April 18, 1916.) 

No. 2309. 

1. Bankhuptct <g=>100(l)— Adjudication— Pebsons Estoppbd. 

Wliere the alleged bankrupt and a creditor resisted an involuntary péti- 
tion because a petitioning creditor's claim was invalid and not provable, 
but later consented to the adjudication, held, that the trustée was not es- 
topped from contesting the claim on behalf of ail, or any noncontesting, 
creditors. 

[Ed. Note.— For other cases, see Bankruptcy, Cent. Dig. §§ 60, 142, 143 ; 
Dec. Dig. <®=»100(1).] 

2. Bankruptcy <3=>339—Claims— Réduction. 

The réduction of an alleged debt to judgment in a state court before 
bankruptcy does not exempt it from attack by or on behalf of creditors 
who would be injuriously afCected by Its allowance in bankruptcy proceed- 
ings. 

[Ed. Notes.— For other cases, see Bankruptcy, Cent Dig, §§ 525, 526; 
Dec. Dig. <®=339.] 

3. Biixs and Notes <S=303— Deliveky— Additioxal Deliveet. 

Where the maker's président signed and handed a note to the payée 
as évidence of a commission he was to receive, and with the understand- 
ing that it was not to be effective until signed by the maker's treasurer, 
held, there was no delivery. 

[Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 93-103; 
Dec. Dig. <S=»63.] 

<®=3For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



IN RE CONTINENTAL ENGINE CO. 59 

4. Corporations (3=429 — Presumptive Authobity &f Président— to Wiiom 

available. 

Any présomptive authorlty tliat the président of an Illinois business 
corporation niay hâve to exécute notes for its ordinary business transac- 
tions is not avallable to a paj'ee who linew the notes were given for other 
purposes. 

[Ed. Note.— For other cases, see Coi-porations, Cent. Dig. §§ 1720-1723, 
1725 ; Dec. Dig. ®=>420.] 

5. Corporations <S=>406(2) — Authoritt of Officers— Président. 

Neither the securing of new capital by selling additional stock, nor 
agreeiug to pay commissions for such sales, is an ordinary business trans- 
action, withln the implled povver of a corjioration's président, who acted 
as its gênerai manager. 

[Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1612 ; Dec. 
Dig. <®=5406(2).] 

6. Corporations <®=3414(2) — ^Authority of Officebs— Président— Note. 

A note signed by a corporation's président for commissions to be earned 
by selling the corporation's stock is invalid between the parties, when its 
making was unauthorized by the corporation's directors or shareholders. 

[Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1641 ; Dec. 
Dig. ©=5414(2).] 

7. BiLLS and Notes <S=>97(1) — Requisites — Failtjre of Considération. 

AVhere a note is given by a corporation for commissions to be earned 
by selling its stock, and the payée does nothing, tliere is a failure of con- 
sidération. 

[Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. § 166; 
Dec. Dig. <g==>97(l) ; Contracts, Cent. Dig. §§ 399, 400.] 

S. Biles and Notes <S=>354— Assignmeni'— Eights of Assignée — Statuts. 

L'nder Negotiable Instrument Law 111. (Laws 1907, p. 410) § 54, a trans- 
férée can recover only the amount paid for a note before receiving notice 
of defects in it. 

[Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 904, 905 ; 
Dec. DlG. <^:^35i.] 

9. BilijS and Notes <S=>332— Bona Fide Puroifaser— Actual Notice of Con- 
dition. 

The transférée of a note heUl to hâve taken it with notice, where he 
admitted having known where the payée got it and what It was for. 

[Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 805, 815, 
816 ; Dec. Dig. ©=332.] 

Appeal from the District Court of the United States for the South- 
ern Division of the Southern District of lUinois. 

In the raatter of the bankruptcy of the Continental Engine Com- 
pany. From an order overruling the referee's disallowance of a claim 
filed against the bankrupt's estate, the trustée appeals. Reversed and 
remanded, with directions. 

Wm. H. Hartzell, of Quincy, IlL, for appellant. 
Wm. E. Rafferty, of Chicago, 111., for appellee. 

Before MACK and AESCHULER, Circuit Judges, and ANDER- 
SON, District Judge. 

MACK, Circuit Judge. Appeal from an order overruling the ref- 
eree's disallov^'ance of a claim filed against the bankrupt's estate and 
allowing it for $5,026, something less than the amount claimed. 

iS=3For other cases see same topic & KEY-NUMBEH in ail Key-Numbered Digests & Indexes 



60 234 FEDERAL REPORTER 

[1] 1. Smith was one of three petitioning creditors. The bankrupt 
and one créditer contested the pétition, asserting, inter aha, that Smith's 
daim was not valid and provable. Subsequently, however, and after 
a partial hearing, the adjudication was expressly consented to and 
the order of adjudication was entered. For the reasons fully stated by 
Judge Sanborn in his dissenting opinion in Ayres v. Cône, 138 Fed. 
778, 71 C. C. A. 144, with which we entirely agrée, this adjudication 
cannot estop the trustée acting on behalf of ail creditors or any non- 
contesting creditors from denying the validity and provability of 
Smith's claim. 

[2] 2. The claim was founded on a judgment rendered by default 
in the state court. The réduction of an alleged debt to judgment in a 
State court before bankruptcy does not exempt it from attack by or on 
behalf of creditors who would be injuriously affected by its allow- 
ance, when such allowance is sought in bankruptcy proceedings. 
Chandler v. Thompson, 120 Fed. 940, 57 C. C. A. 230. 

3. The judgment was rendered on a demand note for $5,000, dated 
March 27, 1913, and executed in the name of the bankrupt by its 
président. It was purchased by the claimant on April 10, 1913, for 
$2,500, of which $600 was paid in cash and $320 in driblets thereafter. 
No more appears ever to hâve been paid. Suit thereon was begun 
April 18, 1913, and the bankruptcy pétition was filed June 16, 1913. 

[3,] (a) The note was never delivered as a note. Under the un- 
contradicted testimony, it was handed to the payée simply as évidence 
of a commission that he was to receive for selling bankrupt's increased 
capital stock, but not to be effective until signed by bankrupt's treas- 
urer in accordance with the by-laws requiring both signatures. Storey 
V. Storey, 214 Fed. 973, 131 C. C. A. 269. 

[4-6] (b) Whatever may be the presumptive authority of the prési- 
dent of an Illinois business corporation to exécute notes for its ordi- 
nary business transactions (see cases cited in Hallett v. St. Vincent 
Collège, 201 Fed. 471, 119 C. C. A. 647), there is no such presumption 
in favor of a payée who knows that the notes were given for other 
purposes. Neither securing f resh capital by the sale of additional stock, 
nor contracting to pay commissions therefor, is an ordinary business 
transaction of the corporation, within the implied powers of the prési- 
dent acting as gênerai manager ; so that, irrespective of the by-laws 
or tlie spécifie condition upon which alone the note was to become 
effective, it was invalid as between the parties, because unauthorized 
either by the directors or the shareholders of the bankrupt. 

[7] (c) The considération totally f ailed ; the payée did absolutely 
nothing that would hâve entitled him to commissions, even had the 
exécution of the contract or note been duly authorized; and the deal 
was off before the transfer to Smith. 

[8, 9] (d) As Smith bas not even paid the agreed purchase price, 
his claim could in no event exceed the amount paid (Illinois Neg. 
Instr. Act [Laws 1907, p. 410] § 54), even if he were otherwise a 
holder in due course. But in view of his own testimony, that he knew 
where the payée got the note and what it was for, and irrespective of 



THE EDWARD G. MURBAY 61 

any possible charge of constructive notice because of the inadéquate 
price paid, he must be held to hâve had actual notice of ail the facts. 
The order allowing the claim must be reversed, and the cause re- 
manded, with directions to sustain the objections and to disallow the 
claim. 



THE EDWARD G. MUREAY. 

(Circuit Court of Appeals, Second Circuit. May 24, 1916.) 

No. 260. 

1. Collision <st=>67— Stabboard Hand Rule— Application. 

The starlioard hand rule does uot apply where one of the vessels is not 
on any course, but Is maneuvering a tow and in effect stationary. 

[Ed. Note.— For other cases, see Collision, Cent. Dig. §§ 85, 86; Dec. 
Dig. <®=»67.] 

2. Collision >©=72(2) — Très witii Tows—Common Faults. 

A collision in the daytime near the middle of East River between a 
loaded car float, which her tug had taken out from a slip on a hawser and 
was turning, so as to take her in tow alongside, and a tug and tow coming 
upstream, held due to faults of both tugs ; the tug of the car float, which 
was on her up-river side pushlng, being in fault for not maiiitaining a 
lookout on the tow, in conséquence of which she did not see the approaeh- 
ing tug, and the latter for not stopplng sooner. 

[Ed. Note. — For other cases, see Collision, Cent. Dig. § 102 ; Dec. Dig. 
©==72(2).] 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Suit in admiralty for collision by the Susquehanna Coal Company, 
owner of the steam tug Paoli and barge Devon, against the steam tug 
Edward G. Murray, the Edward G. Murray Lighterage & Transpor- 
tation Company, claimant, and the New York Central Car Float No. 
46, the New York Central & Hudson River Railroad Company, claim- 
ant. Decree for respondents, and libelant appeals. Modified. 

Oscar Dibble Duncan and Warner C. Pyne, both of New York City, 
for appellant. 

William J. Martin and George V. A. McCloskey, both of New York 
City, for appellee Murray Lighterage & Transportation Co. 

T. Catesby Jones, of New York City, for appellee New York Cent. 
& H. R. R. Co. 

Before COXE and WARD, Circuit Judges, and HOUGH, District 
Judge. 

COXE, Circuit Judge. The collision in question occurred in the 
middle of the East River at about 3:30 p. m. on February 20, 1914. 
The steam tug Paoli was proceeding up the river with the coal barge 
Devon in tow on her port side. She collided with the New York 
Central car float No. 46 which was lying in the river about opposite 
Wall Street. The tug Murray had towed the No. 46 from between 
Piers 14 and 15 East River to the position as stated above and had 

®=3For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



62 234 FEDBRAL REPORTER 

cast off lier lines. She intended to shove the bow of the float clown 
stream and take her alongside prior to towing her to her destination, 
which was the West Shore Railroad docks at Weeliawken. The float 
had on board twelve loaded cars. It was necessary for the Murray 
to tow the float out of the slip between Piers 14 and 15 by a short 
hawser and so maneuver in the middle of the river that she could get 
the float's toggle end down stream. Up to this time the Murray had 
done nothing to warrant holding her liable for the collision which aft- 
erwards followed. She was on the Brooklyn side near the center of 
the river. While in that position the Paoli with her tow came up the 
river. The Paoli's master saw the car float and the tug's stack when 
they were about a third of a mile away. The Murray's master could 
not see over the float and there was no lookout thereon. The Paoli 
saw the car float in the middle of the river as stated above and kept 
on until, as the District Judge finds, she took a rank sheer just before 
the collision. As there was plenty of room in the river, there was no 
necessity for the Paoli to keep on when it was plain that the float 
and tug were stopped — the tug apparently in distress and without 
control. 

[1] We do not think the starboard hand rule applies to this situa- 
tion for the reason that the vessels were not approaching each other ; 
the tug and car float were lying in the middle of the river and were 
not under way at ail. 

The boats were not approaching on courses which involved risk 
of collision. The Murray and the car float were not on any course 
but were moving back and forth on the Brooklyn side of the center 
of the river. Unless an observer knew of her gênerai destination 
from the business in which the tug and float were engaged, lie could 
not bave told whether the Murray's ultimate course was up or down 
the river. 

[2] We are inclined to think that both vessels were négligent. The 
Murray should not bave attenipted to turn the unwieldy car float 
around and make f ast to her side when her master could not see over 
the car float and did not knovv the exact course and destination of 
the Paob. There was no lookout on the float to warn him of the ap- 
proach of the Paoli and her tow. The car float was not négligent as 
she was wholly under the control of the Murray and could do nothing 
to prevent the collision. 

We are of the opinion that the damages should be divided between 
the two tugs. The PaoH is liable for proceeding until it was plain 
that she could not do so without collision and the Murray is liable 
for blocking the center of the river without a lookout on the float and 
without informing the Paoli by proper signais of the danger in at- 
tempting to pass such an unwieldly structure as the loaded car float 
until the Murray had got full control of her. Apparently the Murray 
neither saw the Paoli nor heard the whistles which she says were 
sounded. If there had been a lookout on the car float, he would bave 
seen the approaching danger and warned the Murray in time. Such 
knowledge would probably hâve prevented the collision or at least 
lessened its force and the f allure to take so obvious a précaution was 



FKANSIOLI V. PBEST-O-LITE CO. , 6S 

a serious fault. Especially was this so in view of the testimony of 
the master of the Murray as foUows: 

"Q. Before the collision oceurred did you see something of the approach 
of the Paoli? A. I did not. Q. Did you hear anything? A. I did not. Q. 
What were you doing at the time the collision happened, were you pushing on 
the carfloat? A. Pushing under one bell, yes, sir." 

It seems obvious that if a lookout had been stationed on the float 
the situation would hâve been known in time to prevent the collision 
or greatly to mitigate its force. 

The decree is reversed with costs of this court to the appellant and 
the decree is modified so as to hold both vessels jointly liable. 



PRANSIOLI et al. v. PREST-0-LITE CO. 
(Circuit Court of Appeals, Sixth Circuit. June 30, 1916.) 

No. 2G91. 

Teade-Mabks and Trade-Names <S=3lOO — Injuxctions — Conditions. 

Where défendants, who had engagea in the practice of reflUing Prest-0- 
Lite tanks, whieh are tanks fllled with acétylène gas and are used on 
motor cars, without obliterating the Prest-0-Lite Company's name and 
trade-mark, they wlll, on appeal from an order enjoining them from con- 
tinuing such practice, be presumed, the Prest-0-Lite Company consenting 
to modification of the order to conform to an order in another case, whieh 
did not necessarlly require absolute oblitération, to agrée to such modiflca,- 
tion, it heing in their favor. 

[Ed. Note. — For other cases, see Trade-Marks and Trade-Names, Cent. 
Dig. § 114 ; Dec. Dig. ©=5100.] 

Appeal from the District Court of the United States for the West- 
ern EHstrict of Tennessee ; John E. McCall, Judge. 

Suit by the Prest-O-Lite Company against Frank T. Fransioli and 
others. From an order granting a temporary injunction, défendants 
appeal. Remanded, with directions to modify order. 

P. M. Canale, of Memphis, Tenn., for appellants. 

Wright, Miles, Waring & Walker, of Memphis, Tenn., for appellee. 

Before KNAPPEN and DENISON, Circuit Judges, and COCH- 
RAN, District Judge. 

PER CURIAM. The Prest-O-Lite Company, a manufacturer and 
distributor of acétylène gas for lighting automobiles and other vehi- 
cles, brought suit to restrain alleged unfair compétition and infringe- 
ment of trade-mark by the copartnership called the Blufï City Weld- 
ing Company, whieh acted as sales agent for the Memphis Acétylène 
Gas Company, whieh latter company was permitted to become a co- 
de fendant. Plaintiff stores its gas in portable, copper-plated steel 
cylinders, the container being marked "Prest-O-Lite Gas Tank" and 
bearing plaintifif's corporate name as manufacturer, etched in the métal 
surface of the cylinder, together with a notice licensing its sale and use 
only when filled with gas and acétone compressed by plaintifï, who 

C=3For other cases see same toptc & KEY-NUMBHR in aU Key-Numbered Oigests & Indexes 



64 234 FBDEKAL EEPOIITER 

furnishes its customers in the first instance with the filled package, the 
empty container being exchanged for filled packages under a System 
and on terms described in the opinion of this court in Prest-O-Lite 
Co. V. Davis, 215 Fed. 349, 131 C. C. A. 491, where also plaintifï's 
trade-mark rights are set forth. The gist of the charge against de- 
fendants is that they are recharging empty Prest-0-Lite containers 
with gas made by the Memphis Company, and in effect selling Prest- 
O-Lite tanks charged with the gas referred to. CoUins and others, 
who own Prest-O'-Lite tanks, and hâve been in the habit of having 
them refilled by défendants (as well as by another party) at priées said 
to be much less than charged by the Prest-O-Lite Company, were 
given leave to intervene for the protection of their asserted right to 
continue such practice. The appeal is from an order granting a tem- 
porary injunction restraining défendants, in substance, from refilling 
Prest-O-Lite tanks with any material, and from dealing in such tanks 
refilled by others than plaintifï, without in ail cases removing or ob- 
literating plaintifï's trade-mark, and from passing ofï such refilled 
tanks as Prest-O-Lite gas tanks, exchanges, or refills. 

The prominent grounds on which défendants contest plaintifï's right 
to the relief granted are : (1) That défendants hâve not been guilty 
of f raud or unfair trade ; and (2) that the attempt to limit the use to 
which plaintifï's gas tanks shall be put after sale by plaintifï is void, 
whether rested upon trade-mark rights or the System of exchanging 
filled for empty tanks. 

The case difl'ers in no essential feature from the Davis Case, and 
défendants' contentions in the instant case are, with one exception, 
fuUy covered by what was said in the former case and in the opinion 
rendered by Judge Hollister in that case in the District Court. 209 
Fed. 917. The views announced by us in the Davis Case are in har- 
mony with the décision of the Circuit Court of Appeals of the Seventh 
Circuit in Searchlight Gas Co. v. Prest-O-Dite Co., 215 Fed. 692, 131 
C. C. A. 626, and the décision of the Circuit Court of Appeals for the 
Eighth Circuit in Prest-O-Lite Co. v. Heiden, 219 Fed. 845, 135 C. 
C. A. 515, L. R. A. 1915F, 945. On the authority of thèse décisions, 
the order appealed from must be affirmed except in one particular : 
it forbids the refilling of or dealing in Prest-O-Lite tanks without 
"completely removing and permanently obliterating from said cylin- 
ders or tanks the said trade-mark 'Prest-O-Lite,' " etc. Défendants' 
only attempt to obliterate the trade-mark "Prest-O-Lite" is by cover- 
ing it over with black paint. Such covering is no more permanent 
than the covering by printed paper label, held in the Searchlight, Davis, 
and Heiden Cases to be an insufficient oblitération. But by an amend- 
ment of the oblitération provision of the order in the Davis Case (made 
after the décision of the District Court in the instant case and subsé- 
quent to the amendment of the order in the Searchlight Case) the re- 
filling or dealing in refilled Prest-O-Lite tanks was forbidden without 
"replating or enameling the outer surface of such cylinders or tanks 
so that the name of the Prest-O-Lite Company and the word 'Prest- 
O-Lite' shall be obliterated to the complète extent that either plating 
or enameling can be made to so obliterate, and such oblitération by 



IN EE LES8EB 65 

plating or enameling shall not be dispensed with, no matter how such 
name and trade-mark appear, whether plated, etched, or otherwise, 
and without in addition thereto plating or stamping on the outer sur- 
face of the tank in legible and permanent form notice that such tank 
has been refilled or recharged by the défendants or their agents." 

Défendants, by their brief (presumably written before they learned 
of our amended order in the Davis Case), ask that the order, unless 
reversed, be made to conform to that in the Searchlight Case, which 
difïers somewhat f rom that in the Davis Case. Plaintifï now consents 
to amendment conformably to that had in the latter case. We take it 
for granted that défendant would rather bave the order conf ormed to 
that in the Davis Case than to hâve it affirmed. 

The record is accordingly remanded to the District Court, with di- 
rections to modify the order so as to conform substantially to the 
amended order in the Davis Case. The costs of this court vi^ill be 
divided. 



In re LESSER. 

In re INTERNATIONAL TRUST CO. 

(Circuit Court of Appeals, Second Circuit. June 6, 1916.) 

No. 283. 

Bankruptct <©=>408(1) — Discharge — Geounds fok Refusal — Perjurt in 
Other Pkoceedings. 

Bankr. Act July ], 1898, c. 541, § 14b, 30 Stat. 550 (Comp. St. 191.3, § 
9598), provides for ttie granting of discharges unless the bankrupt shall 
hâve committed an offense punishable by imprisonment, or shall hâve 
been guilty of certain other enumerated acts. Section 29a (section 9613) 
denounees the offense of conversion or misapproprlation by a trustée of 
property belonging to a bankrupt estate, as well as the offense of maklng 
false oaths in bankruptcy proceedings. Ileld,, that any perjury commit- 
ted by a bankrupt in any bankruptcy proceeding, though it be not his 
own case, is ground for refusal of a discharge; the statute plainly indi- 
catlng that it was not llmited to the bankruptcy in which the discharge 
was sought. 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. § 732; Dec. 
Dig. <S=3408(1).] 

Pétition for Revision of Proceedings of the District Court of the 
United States for the Southern District of New York. 

In the matter of the bankruptcy of Joseph S. Lesser. On pétition 
to revise an order of the District Court (232 Fed. 368) sustaining an 
exception to spécifications of objections to discharge by the Interna- 
tional Trust Company. Order reversed, with directions. 

"On pétition by the International Trust Company, a créditer of the bank- 
rupt, to revise an order of the District Court for the Southern District of 
New York which sustalned an exception to the third spécification of objec- 
tion to granting a discharge. This spécification allégea that the bankrupt 
had made false oaths in a proceeding in bankruptcy other than hls own. 
The court held that the alleged false oath having been made in a différent 
bankruptcy proceeding from the one at bar the objection was radically détec- 
tive and no amendment could cure the defect. The exception was therefore 
sustained and leave to amend was refused." 

©ssFor other cases see same topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 
234 F.— 5 



66 234 FEDERAL REPORTER 

Selden Bacon and Saul S. Myers, both of New York City, for pe- 
titioner. 

Montague Lessler and Léonard J. Obermeier, both of New York 
City, for bankrupt. 

Before COXE, WARD, and ROGERS, Circuit Judges. 

COXE, Circuit Judge. The only question involved in this review 
is whether the false oath which bars the bankrupt's discharge must 
be made in the pending bankruptcy proceeding. The bankrupt con- 
tends for the affirmative and the petitioner for the négative of this 
proposition. The District Judge followed the décision in the Blalock 
Case (D. C.) 118 Fed. 679, in which it was held that the making of a 
false oath by a bankrupt in a proceeding in bankruptcy not against 
himself, but against a corporation of which he was an officer, was not 
a sufficient ground for refusing his discharge. The judge says in his 
opinion : 

"I am satisfled that although it is a crime to make any false oatli in any 
proceeding in bankruptcy, it is not a ground for refusing a discliarge unless 
the oath be made in the bankruptcy proceedings of the bankrupt himself." 

We are unable to agrée with this ruling, principally for the reason 
that the statute contains no such Hmitation. Section 14b provides that: 

"The Judge * • * shall discharge the appllcant unless he bas com- 
mitted an offense punishable by imprisonment.as herein provided." 

"As herein provided," means as provided under the head of "Of- 
fenses" in Bankruptcy Act, § 29a. If a bankrupt applying for a dis- 
charge has committed an offense covered by section 29a, his discharge 
must be refused. It would be an absolute impossibility for him to com- 
mit some of thèse offenses in his own bankruptcy. One of the of- 
fenses punished by section 29a is the embezzlement by a trustée in 
bankruptcy of property belonging to the estate of the bankrupt. If 
the trustée is convicted of such embezzlement and subsequently be- 
comes a bankrupt himself, he can, if the ruling of the District Judge 
is correct, obtain his discharge, notwithstanding his conviction under 
section 29a of an offense which section 14 déclares is an absolute bar 
to a discharge. There is nothing in the act which confines the perjury 
which bars a discharge to that committed in the bankrupt's own pro- 
ceeding. On the contrary, many of the offenses conviction of which 
bars a discharge cannot, as before stated, be committed in the bank- 
ruptcy proceedings of the apphcant for a discharge. We cannot think 
that the lawmakers intended a resuit so illogical as to permit a trustée, 
who has embezzled the estate of the bankrupt placed in his care by the 
court, to file a pétition of his own and procure a discharge, notwith- 
standing his crime, because it was committed in a bankruptcy proceed- 
ing other than his own. There is nothing compelling such a construc- 
tion; on the contrary a harmonious and logical interprétation of the 
law forbids it. The construction urged by the bankrupt would elimi- 
nate entirely many of the offenses which the law says shall bar a dis- 
charge. He might be convicted in another bankruptcy proceeding of 
perjury, of presenting a false proof of claim, of receiving money from 



IN EE SOLOWAY & KATZ 67 

a bankrupt af ter pétition filed against him, of extorting money from a 
persoii for acting or forbearing to act in bankruptcy proceedings ; and 
yet he would receive his discharge if thèse crimes were committed in 
other bankruptcy proceedings and many of them could be committed 
only in other proceedings. It seems to us that the construction con- 
tended for by the bankrupt will defeat the intention of the lawmakers 
and involve the interprétation of the sections in question in inextricable 
confusion. We think that the intention of the lawmakers was to re- 
fuse a discharge to a bankrupt who has taken a false oath in any bank- 
rupt proceeding. If he can commit perjury once and succeed he will be 
quite likely to attempt it again. The contention that the perjury must 
be committed in his own bankruptcy is contrary to the letter of he 
law and if sustained may lead to déplorable results. 

The order is reversed and the District Court is instructed to permit 
an amendment to the third spécification. 



In re SOLOWAY & KATZ et al. 

Appeal of BAY STATE MILLIX6 CO. 

(Circuit Court of Appeals, Second Circuit. May 24, 1916.) 

No. 96. 

Bankeuptcy <S=3384 — Composition'. 

Wtiere nearly five years had elapsed slnce bankruptcy, and mucli of 
tlie assets had been wasted by fruitless lllisation, an oft'er of composition, 
approved by 98 per cent, of the creditors in nuiiiber and aniouiit of claims, 
will, where fair and for the beneflt of creditors, be confiruied, notwlth- 
standing objections of the remaining creditors ; tlie object of bankruptcy 
proceedings being to settle insolvent estâtes as speedily as possible. 

[Ed. Note.— For other cases, see Bankruptcy, Cent. Dig. §§ 590-592; 
Dec. Dig. <©=3384.] 

Appeal from the District Court of the United States for the District 
of Connecticut. 

In the matter of the bankruptcy of Soloway & Katz, Maurice Solo- 
way, and Samuel Katz. From an order confirming bankrupts' offer 
of composition, the Bay State Milling Company appeals. AiBrmed. 

Walter J. Walsh and William J. McKenna, both of New Haven, 
Conn., for appellant. 

De Forest & Klein, of Bridgeport, Conn., for respondents. 

Before COXE, WARD, and ROGERS, Circuit Judges. 

COXE, Circuit Judge. This matter was before this court January 
13, 1914, when we decided that the order of the District Judge giving 
the two creditors, objecting to the proposed composition, an oppor- 
tunity to be heard in opposition thereto was within his discrétion and 
should be affirmed. In re Soloway & Katz, 211 Fed. 333, 128 C. C. 

<Ês»For other cases see same topio &. KBY-NUMBBR In ail Key-Numbered Digests & Indexes 



68 234 FEDERAL REPORTEE 

A. 12. The controversy was submitted to the référée as spécial mas- 
ter and af ter notice and hearing he f ound, inter alia, as f ollows : 

"Thèse bankruptcy proceedings hâve been pending slnce Deeember, 1911, and 
from the records and files of thèse proceedings It appears that a great deal of 
lltigation has beeu indulged In, and a great deal of money, part of the assets 
of said bankrupt estate, was expended in said lltigation for counsel fées and 
disbursements, and no results whatever accompllshed. Ont of a very large 
number of creditors, in ail exceeding 100, the 2 credltors who filed spécifica- 
tions alone oppose the confirmation of this composition, thereby preventlng the 
closing up of said bankrupt estate. 

"In View of the hlstory of thèse bankruptcy proceedings, as shown by the 
records and flles pertalning thereto, the inference is justifiable that the con- 
duct of the 2 opposing credltors is captious and perhaps vexations. * * * 
That the confirmation of said composition wUl be for the best interests of 
credltors, and is made in good falth and not procured by any means, promises, 
or acts prohlbited by said Bankruptcy Law, nor hâve the bankrupts been 
guilty of any of the acts, or falled to perform any of the duties, whlch would 
be a bar to their discharge. That because of the prolonged lltigation, and the 
amount of money expended out of the assets of said bankrupt estate, It is for 
the best interests of creditors to approve the recouunendation of my predeces- 
sors, and to couflrm the offered composition. * * * 

"Upon the foregoing facts it Is my opinion, and I do therefore recommend, 
that the bankrupts' otïer of composition be confirmed, and that an order to 
that effect be i>assed." 

The Bay State Milling Company, being one of about 100 creditors, 
is the only one now opposing the composition. The matter has been 
delayed for more than five years and nothing has been accomplished. 
This delay was pardy due to the death of the first référée, but it is 
principally due to other causes which it is unnecessary to characterize. 
Tlie resuit is that a law which was intended to produce quick results 
has kept the estate in statu quo during this long period with the resuit 
that the estate has been depleted. The opinion of the District Judge 
filed March 26, 1915, contains the following: 

"Nearly five years hâve elapsed slnce bankruptcy proceedings were insti- 
tuted in this court and the matter is stlll unsettled. Much of the assets hâve 
been wasted and wliat the dividend creditors will ultimately receive has been 
rednced as a resuit of the prolonged lltigation over this estate. No one has 
profited thereby save varions attorneys. Up to this point credltors hâve re- 
celved no dividend whatever, even thougli It Is conceded that a substantial 
f und for distribution is lu the hands of the trustée, who Is the custodlan of the 
fund. More than 100 creditors whose clalms in ail represent about 98 per cent, 
of the credltors in number and total amount of obligations, strenuously urge 
the déniai of the motions of the objectlng creditors and the granting of the 
bankrupts' motion to confirm the composition offer in order to save somethlng 
from this financial wreck. Further lltigation ought therefore to cease unless 
there is somethlng substantial presented as a reason for granting the motions 
of the objectlng credltors now under considération." 

The spécifications of objection to the composition are vague and 
gênerai in character and were excepted to, or demurred to, for thèse 
reasons, among others. A motion made to strike out the spécifica- 
tions was granted. In other words, they were treated as demurrable 
and in niost cases they clearly were so and as to ail we are not con- 
vinced that the court erred in considering them as insufficient. 

VVe see no reason for prolonging further a controversy which can 
only resuit in delay and in depleting still further the funds which ail 
the other creditors wish divided. A proceeding in bankruptcy is in- 



THEEMOGENE CO. V. THEBMOZINE CO. 69 

tended to get the assets as speedily as possible into the hands of the 
creditors, whose rights are first of ail to be considered. We are con- 
vinced that a just resuit bas been reached by the District Court and 
do not think the proceedings should be longer delayed to enable the ob- 
jecting creditor to make another attempt to defeat the composition. 
The decree is affirmed with costs. 



THERMOGENE CO., Limited, v. THERMOZINE CO., lue, 
(Circuit Court of Appeals, Second Circuit. May 24, 1916.) 

No. 275. 

Tkade-Maeks and Tbade-Names <g=»3(4) — Names Subject to Teade-Mabk— 
Descbiptive Names — "Thermogen." 

The Word "tliermogen," vvliich is an English word derlved from the 
Greek, Is practlcally synonymous with the word "calorie," whlle the word 
"thermogene" is the Freiich équivalent for that same word. Ileld that, 
as such word is a descriptive term, no trade-mark thereln can be ac- 
quired, so as to provent other manufacturers of slmilar goods from uslng 
a shuUar désignation. 

[Ed. Note. — For other cases, see Trade-Marks and Trade-Names, Cent. 
Dig. § 7; Dec. Dig. <S=>.3(4).] 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Bill by the Thermogene Company, Limited, against the Thermozine 
Company, Incorporated. From a decree (225 Fed. 446) dismissing 
the bill, complainant appeals. Affirmed. 

On appeal by the complainant from a final decree dismissing the 
complaint which allèges infringement of the complainant's trade-mark 
"Thermogene." Judge Augustus N. Hand held that the word "ther- 
mogene" is not arbitrary or fanciful, but is a descriptive term and is, 
therefore, not the subject of a trade-mark. (D. C.) 225 Fed. 446. 

Lanier McKee and Arthur W. Barber, both of New York City, for 
appellant. 

Frederick M. Czaki, of New York City, for appellee. 

Before COXE, Circuit Judge, and HOUGH and MAYER, District 
Judges. 

COXE, Circuit Judge. The word "thermogen" is an English word 
derived from the Greek and is practically synonymous with the word 
"calorie." It means to bring forth beat. Either of thèse words could 
be used by the parties to this controversy in describing its wares. This 
being so, it seems contrary to reason to assert that the addition of the 
final "e" so changes the word "thermogen" that it may^be monopolized 
by an individual or a corporation to designate a particular line of mer- 
chandise. It is the same word whether we adopt the French spelling 
"thermogene" or the English spelling "thermogen." In both cases it 
has the same meaning and if one cannot be monopolized by a single 
individual to designate his wares, neither can the other. The com- 
plainant might as well hâve attempted to pre-empt "chlorine" or 
"calorie." 

©=3For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes 



70 234 FEDERAL REPORTER 

There can be no doubt that the word which is the subject of the 
trade-mark— thermogene— whether it be spelled with or without the 
final "e," whether it be treated as having an English or a French déri- 
vation, is a word descriptive of that which owes its birth to beat. No 
one person can monopoHze such a word by procuring a trade-mark. 
We agrée with the District Judge that the reasoning of the Suprême 
Court in the case of Standard Paint Co. v. Trinidad Asphalt Co., 220 
U. S. 446, 31 Sup. Ct. 456, 55 L,. Ed. 536, is appHcable to the case in 
hand. In that case the trade-mark of the Paint Company was "Ruber- 
oid" and the court said at page 455 of 220 U. S., at page 458 of 31 
Sup. Ct. (SSL. Ed. 536): 

"The Word, therefore, Is descriptive, not Indicative of the orlgin or the 
ownership of the goods; and, being of that quality, we cannot admit that 
it loses such quality and becomes arbitrary by being mlsspelled. Bad orthos;- 
raphy has not yet become so rare or so easily detected as to make a word the 
arbitrary slgn of somethlng else than its conventional meanlng, as différent, 
to bring the example to the présent case, as the character of an article is f rom 
Its orlgin or ownership." 

The decree is affirmed with costs. 



FRBEDMAN et al. v. DAVOPLANB BBD CO. 

(Circuit Court of Appeals, Seventh Circuit April 18, 1916.) 

No. 2305. 

Patents <s=»328— Validitt and Infkingement— Sofa Bed. 

The Holmes, Bostrom & Bostrom patent, No. 848,305, is for a sofa-bed, 
the main élément of which Is such an arrangement of the parts wUen 
closed as to form a réceptacle for the beddlng in its inade-up form. While 
showing only a sllght advance, the comblnation also embodles other Im- 
provements on prlor structures which, reinforced by the presumptlon arls- 
ing from the grant and a marked commercial success, Is sufflcient to dis- 
close patentable invention. Clalms 2 and 4 also held infrlnged. 

Appeal from the District Court of the United States for the East- 
ern Division of the Northern District of Illinois. 

Suit in equity by the Davoplane Bed Company against Hyman Freed- 
man and Nathan Freedman. Decree for complainant, and défendants 
appeal. AfErmed. 

Appellants prosecnte thls appeal from the decree of the District Court find- 
Ing clalms 2 and 4 of patent No. 848,305, granted to Holmes, Bostrom & Bo- 
strom on March 26, 1907, for sofa-bed, to be valid and infrlnged by the two 
forms of appellants' sofa-beds, shown as "PlalntifE's Exhibits. Défendants' 
bed s 1 and 2." 

Claim 2 reads as foUows, viz.: "In a sofa-bed, a pivoted and overturnlng 
seat, and a bed-bottom In three sections hlnged to each other, adapted to be 
folded to form a clothes-receptacle under the seat and to be unfolded to form 
an expanded bed-bottom In a plane above the seat." 

Clalm 4 reads as foUows, vlz. : "In a sofa-bed, a pivoted and revolubly- 
overtumlng seat, a bed-bottom in three longitudinal sections, the two marginal 
sections being comparatlvely wide and the medlal section being comparatlvely 
narrow, means supporting the medlal section pivotaUy whereby it can be 
swung to horizontal iwsitlon and In the same iilane with the marginal sections 
and also can be swung to vertical position and the two marginal sections to 
opposite and parallel positions at a distance apart substantially equal to the 
width of the medlal section." 

A=:3For other cases see same topio & KKY-NUMBER In ail Key-Numbered Dlgests & iBdexei 



FEEEBMAN V. DAVOPLANE BED CO. 



71 



Drawîngs 2, 4, and 5 of the patent are Jbere reproduced. 

"The invention," Say tlie patentées, 
"is dlrected chiefly to tlie novel struc- 
ture of the auxiliary bed-bottom and 
to the nieans related thereto whereby 
It is snugly packed away in the sofa 
when not in use and can be easlly 
and quickly converted into a usable 
bed-bottoni, ineluding the means for 
properly supporting and securing the 
l)ed-bottoni in position. * * * 

"In the drawings there is shown a 
sofa franie or body consisting of a 
l)acli A and the arms or ends of the 
sofa B B. Thèse parts are of any sult- 
able size and form to malîe up a sofa 
franie or body lilîe or slmilar to those 
in common use, the arms or ends being 
rigid to the back, making a strong and 
durable franie or body of the sofa-bed. 

"The sofa-seat G Is also of a form In 
common use and consists of a rec- 
tangular frame having thereon an up- 
holstered or other cover forming the 
seot proper of the part. This rec- 
taiigular or iio.x-like seat in this sofa- 
bed is niounted on the frame pivotally, 
so thnt It is adapted to be turned over 
upside down, the pivotai support of 
the seat being at its respective ends 
and niedially of its wîdth. * * « 

"In connection witli the sofa-seat C 
there i.s a bod-l)ottom, composed In a 
gênerai way of slde and end rails and 
a spring-wire mattress, which bed- 
bottom is in three .sections or inemhers 
— an inner section 15, an intermediate 

or medial section IS, and an outer section 17. Tlie transverse end rails of thèse 
inner and outer sections are liinged to the end rails of the medial section in 
the manner showu best in Figs 2, 4, and 7, the rails being of angle-bar and the 
vertical flanges of the rails of the sections 15 and J7 being made to overlap 
the vertical tlange of the rails of the sections Ifi and being hinged thereto by 
pivot-pins 18. The horizontal flanges of thèse thus-liinged rails are eut away 
near the ends of the rails to permit of the overlapping and flttiiig close togetli- 
er of the flat sides of the vertical flanges at and ad.iacent to the pivot, and the 
vertical flanges of the rails of sections 15, 17, and 1!) severally pro.1eet rear- 
wardly underiieath and fit upvvardly against the horizontal flange of the rails 
of the thereto-hinged section when the sections are unfolded and extended in 
the saine horizontal plane in the manner shown in Fig. 4. This construction 
strengthens the structure and assista in pfeventing the sections 15 and 17 from 
tilting downwardly out of the plane of the section IS when the bed-bottom 
is extended. The section IG is jiivoted at each end on legs 20, secured rigidly 
to the frame of the seat in such manner that the section 16 can be swung to 
the horizontal position with référence to the legs 20 vVhen in an upright posi- 
tion, as shown in Flg. 4, or can be swung to a vertical position iu the manner 
shown in Fig. 2 when the t>ed-bottom is folded up wlth référence to the sofa- 
seat 0. * * * 

"The l)ed-bottom niay be provided wlth a fle-xible wlrc mattress of any chnr- 
acter adapted to serve as a mattress and at the same time to permit of the 
folding up of the sections. * » * 

"It wlU be observed that when the structure Is folded np and In the condition 
for use as a sofa, as shown in Figs. 1 and 2, that the Inner section 15 of the 
bed-bottom is held close to and praetically against the under side of the frame 
of the sofa-seat and that the outer section ^7 of the bed-bottom is located at 




72 



234 FEDERAL REPORTER 



a distance below the section 15, thus provldlng a space or réceptacle D between 
thèse sections, which is utilized for holding bedclothes. The bed Is made up 
on the bottom, and Is folded up In thls space at the time of folding up the 
bed-bottom and before the sofa-seat, wlth the bed-bottom thereon and the 
bed therein, are turned over from the position of the seat as shown in Flg. 4 
to the position shown in Fig. 2. Of course by the reverse opération the bed Is 
opened out for use on the extended bed-bottom. 

"It wlU be understood that because of the construction of the bed-bottom, 
consistlng of the leaf-llke sections 15 and 17, hinged to the Intermediate sec- 
tions 16, whIch Is pivoted medially on standards, and because of the arrange- 
ment of the folding legs 21 the two leaf-llke sections 15 and 17 of the bed- 
bottom are held apart when the bed-bottom is folded up, thus forming the 
réceptacle for the bed. It will also be noted that in unfolding the bed-bottom 
the swinging of the sections 17 and 15 into horizontal positions as illustrated in 
Figs. 7 and 4 the section 15 wlU be elevated from its position as shown in 
Fig. 2 by reason of the Interlocking end of the rails of the sections at the 
loeallty of their hlnges, as shown in Fig. 7 in connection wlth the elevating 
effect of the folding legs 21, caused by theIr being swung upwardly and rear- 
wardly by the unfolding of the sections to the position shown in Fig. 4." 

The spécification proceeds to describe a modifled form of construction, 
which we deem it unnecessary for our purposes to consider at thls tIme. In 
this device a non-rotating sofa-seat Is employed. 

Appellants' alleged Infrlnglng devices 1 and 2 are both of the so-called 
rotary seat and bed type. Appellants concède that, if the claims of the patent 
are valld, theIr form No. 1 infringes. They deny that form No. 2 infriiiges. 
The record contains drawings of this device, of which those numbered 2, 4, 
and 5, to correspond with Figs. 2, 4, and 5 of the drawings of the patent, are 
lierewith reproduced. 



JZ 




FEEEDMAN V. DAVOPLANE BED CO. 



73 



FIG.Z 




Both the patented and the alleged 
infringing forms contain a sofa bed- 
frame A B, having rotatably mounted 
thereon the seat G. Tlie seat on Its 
under side earrles a folding sectional 
bed-bottom eonstructed to retain the 
bedding in a niade-up form, both when 
the bed is made up and when the sofa 
is In position. The seat is provided 
wlth a standard 20, wliich serves, in 
eacli case, as a partial support for the 
folding bed-bottom, and with a link 21, 
the lower end of which is pivoted to 
the seat frame while the upper end is 
pivoted to the rear part of the bed- 
bottom. 

The beds are alike as to the relative 
size, shape, and arrangement of the 
several sections. Eacli bas a jointed 
border frame in combination with a 
continuons flexible wire mattress ear- 
ried thereby, which is stretched across 
the space bounded by the frame, and 
forms the bed-bottom. In each case, 

the inner section comprises the inner side rail 15a and those parts of the 
two end rails l'> extending from said side rail to the nearest section joint 
pivots, in combination with that part of the wire mattress which is attached 
to and lies between said side rail and said parts of the end rails 15. In like 
manner. the outer section in each case comprises the outer rail 17a and those 
parts of the two end rails 17 extending from said side rail to the nearest sec- 
tion joint pivots in combination wlth that part of the wire mattress which Is 
attached to and is disposed between said outer side rail 17a and said parts 
of the end rails 17. The middle section in ail the forms in question comprises 
the middle or Connecting rails 16 in combination with that part of the wire 
mattress which is disposed between said middle rails, and is connected to 
the jointed border frame at points substantially opposite the joint pivots in 
such manner as to cause the middle part of the mattress to lie at ail times 
between and substantially parallel with said Connecting rails 16, and to oper- 
ate substantially as though attached thereto, though, in fact, actually con- 
nected to the inner portion of the adjacent end rails 15 and 17. With respect 
to the features hère involved, appellants' devices differ from the patent, in 
so far as the sectional character of the bed-bottom is concerned, only in that 
the spring fabric is not directly attached to end rail 16, but instead has the 
wires and spring members at each end of its middle part extending diagonal- 
ly and attached directly to end rails 15 and 17 at the ends of rails 16, leaving 
the rails 16 free from the wire mattress fastenings, but carrying the support 
thereof to a point slightly removed from said rails 16, and there unitlng with 
a section of the wire mattress which spans a space in the mattress corre- 
sponding exactly to the medial section 16 of the patent, and constitutlng, 
through means not hère in question, the upright section of the book-cover like 
réceptacle which serves to space apart the so-called wing sections 15 and 17 of 
the bed-bottom when adjusted to form a compartment in which the bedding 
■will be contained when the device is in use as a sofa. 

It will be observed that the claims nowhere call for the attachment of the 
wire or spring fabric of the medial section directly to the end rails of that 
section. This latter feature constitutes the only différence between the patent 
în suit and appellants' sofa-bed, Exhibit 1. In both of appellant's structures, 
the spring fabric is flexed in the same Unes to form the same bedding récepta- 
cle. When the structure is in the sofa position, the wire or other spring fabric 
forms the top, bottom, and back of that réceptacle, while the apron 28 forms 
the fourth wall. Both appellee's and appellants' devices are provided wlth 
this apron 28 in the form of a wooden panel which extends down from the 
ïront of the sota-seat when in sofa position. This gives a finished look to the 



T4 234 FEDERAL REPORTEE 

sofa front and removes ail appearance of the devlce belng anythlng else than 
a sofa. In the prlor art the sofas elther show a hlnge in front, or a break 
In the face of the structure, or are of two sections, or otherwise vary from the 
patent In suit. 

The term "bed-bottom" of the patent Includes the end and side rails of the 
three bed sections and the mattress. That of the patent and those of the 
alleged infringing devices are practlcally identlcal in form so far as hère In- 
volved, both when extended and when folded under the sofa-seat. The flexlng 
Unes indlcate the three sections In each, when folded. Thèse are the linea 
upon whlch the bed-bottom Is folded and unfolded. The term "in a plane 
^bove the seat" refers to the fact that when the sofa-seat is rotated It passes 
beneath the bed portion, which is thereby rotated to the top or sofa-seat 
proper position. The alleged fact that by measurement the bed-bottom is 
found lu Figs. 2 and 4 of the drawings to be slightly higher from the floor 
than the normally positioned sofa-seat is not deemed proof of a différent sig- 
nlficance. By the arrangement of the patent, space for spring action of the 
bed-bottom Is attained, as well as space for beddlng. It is appellants' conten- 
tion that they hâve only a two-section bed-bottom. The claims were allowed 
in the Patent Office without amendment. 

In support of the défense of invalidity in view of the prior art, appel- 
lants hâve introduced a number of prior patents, of which, however, we 
need mention only patent No. 29,832, granted to Tendler and Moeshlln, for a 
sofa bedstead, on August 28, 1860, patent No. 248,959, granted to O. Stechhan 
for a bed lounge on November 1, 1881, patent No. 453,474, granted to Hallquist 
and Wennberg for a sofa-bed on June 2, 1890, patent No. 497,191, granted to 
R, Lundberg for a sofa-bed on May 9, 1893, patent No. 617,754, granted to A. 
Martenson for a bed-sofa on January 17, 1899, patent No. 749,307, granted to 
H. A. Linderoth for a bed-chair or bed-sofa January 12, 1904, patent No. 
779,819, granted to W. Tliompson for a divan folding bed on January 10, 1905, 
and patent No. 368,472, granted to F. W. Herlnghausen for a sofa-bed August 
16, 1887. 

"What the patentées In suit did in one exempliflcation of their so-called in- 
vention," says the appellants' counsel, "was to take the old bodily-revoluble 
or overturning sofa-seat (Hallquist, Lundberg, Martenson, Linderoth) and sub- 
stitute for the partleular form of sectional bed thereln disclosed a spécifie 
form of old three-seetlon bed (Thompson, Tendler, Stechhan). Or, to state 
It differently, they took an old form of three-sectlon bed (Thompson) con- 
structed, so far as the bed-frame and wire mattress were concemed, exactly 
Uke that of the patent in suit, and hitched it onto an old revoluble sofa-seat 
In the place of the folding bed thereon. The spécifie way in which the 
hltching was accompllshed, that is, by pivoting the medlal section or hinge 
or link medially to the supporting post, was novel, but, we urge, not patentably 
novel." 

Thèse prior patents and other évidence will be dealt wlth in the opinion. 

The findings of validity and infringement by the District Court are relied 
on as error. 

Walter H. Chamberlin, of Chicago, 111., for appellants. 
William R. Rummler, Cyrus W. Rice, and Fred M. Davis, ail of 
Chicago, m, for appellee. 

Before BAKER, KOHLSAAT, and ALSCHULER, Circuit Judges. 

KOHLSAAT, Circuit Judge (after stating the facts as above). The 
main élément of the combination patent in suit is that which makes 
provision for a bedding réceptacle — the three-section bed-bottom. By 
means of it, the bedding can be stored in a made-up form, so that, 
when the sofa-seat is overturned and the bed-bottom extended, the 
bed will be ready for occupancy. Other features are achieved, such 
as those which deceive the eye by the almost perfect représentation 
of a device which is a sofa and nothing more. Other advantages are 



FEEEDMAN V. DAVOPLANE BED CO. 75 

found in the ease with which the device may be manipulated, whereby 
it can be operated by a woman ; the f act that it need not be pulled away 
f rom the wall when rotated to bed form ; the résilient character and 
mounting of the spring feature; the cheapness of manufacture _ and 
simpleness of construction. Ail thèse désirable ends are found within 
the patent. Its success as an article of commerce was and is marked. 
The combination of ail thèse and others in one symmetrical and at- 
tractive whole, other things being equal, furnishes patentable novelty. 
It is, however, a matter of common knowledge that this field of in- 
vention has been prolifically exploited. The record présents a num- 
ber of prior patents covering sofa beds, as above noted. 

The Tendler and Moeshlin sofa bed-bottom contains but two sec- 
tions. It does not appear to hâve been on the market. The sofa-seat 
is hinged to the front face of the sofa-bed frame and, when the device 
is to be changed to a bed- form, is swung forward on the hinges, thus 
exposing the bed. It is not of the rotary form of sofa-beds. Its two 
bed-bottom frame sections are connected by a link or bar placed flat- 
wise against the end, and so as to lap an equal distance on each frame. 
"The distance between the centers of both of the pins c, c, of each 
of the bars C, C," says the spécification, "should be somewhat greater 
than double the thickness of the mattress in order that such mattress 
may be bent in its middle and one-half of it be turned over upon the 
other half during the process of turning the front half of the bed 
foundation toward and over the rear half thereof." 

It is évident that if the Connecting links are extended to space the 
so-called foundation parts sufficiently to receive the doubled-up mat- 
tress and other bedding, there will be presented a chamber or réceptacle 
having only a top and bottom and having no back wall. Moreover, 
this device does not utilize the clearance space between the bed-bottom 
and the sofa-seat for spring action of the bed-bottom. Thèse facts, 
together with the failure to disclose a merchantable article, seem fairly 
to disqualify this patent as an anticipation. Its slatted bed founda- 
tion or mattress does not permit of expansion. The hinges on the 
front would clearly indicate the double character of the sofa-bed. 

Stechhan also provided a bed-bottom with but two sections. It has 
no medial section. "The invention," says the spécification, "prin- 
cipally consists in the application of a peculiar form of double ïiinge 
to the lounge." The device présents no adéquate bed clothing récep- 
tacle. It resembles the Tendler and Moeshlin structure. It is not of 
a rotary character. Even when extended, the bed-bottom parts are 
separated by an appréciable space which must niake itself felt even 
when covered by a mattress. It comes far short of the combination 
of the patent. 

The Hallquist and Wennberg patent was cited by the Patent Office 
during the prosecution of the patent, against claim 1. The device is of 
the rotary type. No provision is therein made for retaining the bed- 
ding, thougii space is not wanting if properly inclosed. The structure 
of the patent does not seem to hâve been deemed in the Patent Office 
as suggestive of claim 2 in suit. The patent shows a bodily revoluble 
and overturning sofa-seat with a three-section bed-bottom in which the 



76 234 FEDERAL REPOETEB 

medial section is wide and the wing sections may be folded onto the 
medial section, but not in such a manner as to produce a réceptacle 
for the bedding. Tlie device lacks any suggestion of the concept of 
the patent in suit. The wing sections serve and can serve no such 
purpose as those in suit. There is no réceptacle. While thèse wing 
members carry a woven wire mattress and stretch it for use as a bed, 
they are not intended to, and do not, serve to form any room or ré- 
ceptacle. In the patent sofa-bed it is the medial section that does this, 
and no amount of adjustment could efïect that end in Hallquist's 
device. 

The Lundberg patent calls for a sofa-bed of the rotary kind, It is 
not pertinent as a référence hère. Its folding head and front boards 
do not justify its citation as against the wing sections of the patent in 
suit. 

The Martenson bed-sofa calls for a construction whereby, when fold- 
ed or closed to serve as a sofa, the clothing of the bed is contained 
therein, and ail parts so adjusted and secured as to maice the article 
look like a sofa. The seat is rotatable. When rotated there is dis- 
closed a bed folded in two sections which are hinged together, the 
one folding over upon the other. The edges of the rails of the two 
sections "stand higher than the surface of the mattress so as to form a 
space between the frames [edges] when folded for the rétention of 
the bed clothes," etc. This is not apparent from the drawings. Space 
for storing the bedding is not shown. Certainly if any there be, it 
must be very inadéquate and not suitable for compassing the bedding 
in a made-up form. To provide such a space must inevitably interfère 
with the closing of the sections, and consequently the opération of the 
sofa. The hinge or folding line cannot fail to présent what is known 
as a hard-center, by reason of the cross-piece of the frames. Each 
section bas its own bed spring and bed-bottom. It comes far short 
of an anticipation of the patent in suit. 

Linderoth shows a bed chair or sofa of the rotary construction. 
The combined sofa or chair and bed is rotated upside down, presenting 
the bed portion in folded form. The upper frame is turned on its 
hinges to a plane with the lower section. This is further extended by 
drawing out a'third section having slidable support in the second sec- 
tion. The device makes no provision for bedding space, and in no 
way anticipâtes the patent in suit. 

Thompson's particular object was to produce such a bed suitable 
for a divan. It is not rotatable. While it makes provision for stor- 
ing a mattress and other bedding, it lacks almost entirely the concept 
of the patent. It would require a degree of adjustment amounting to 
invention to change it into the sofa-bed of the patent. The bed-bot- 
tom is not in a plane spaced above the seat. The opération of the 
device involves the shifting of bearings and pivots. Its parts could not 
be combined with Tendler or any other of the prior art devices to 
produce that of the patent in suit without adjustments made in the 
light of the patent, which, but for the patent in suit, would be pat- 
entably new. 

Heringhausen's sofa-bed is of the non-rotatable type, and has no 
bearing upon the features hère in suit, except that it may be uniolded 



FREEDMAN V. DAVOPLANE BED CO. 77 

into bed form, though by means entirely foreign to those of the patent 
in suit. No provision is made for the storage of bedding. There is 
nothing in it to suggest the Holmes and Bostrom construction. 

Thus we see that there is nothing in the prior art which, without 
serions modification, can be said to anticipate appellee's device as cov- 
ered by either claim 2 or claim 4. As stated by its counsel : 

"The patentées of the patent in suit were the flrst to place a résilient bed- 
bottom capable of flexing in three sections, in a new situation, in which it 
vvns spaced above a supportlng substructure in such manner as (1) to utilize 
the space for clearance to permit proper spring action of the bed-bottom, 
and (2) also to utilize said space for coUapsing one of the sections upon the 
substructure so as to permit part of the bedding to occupy part of the space 
before used for such clearance, and to suitably support and retaln the bedding 
therein in a made-up form." 

We are not impressed with the daim of appellants that the patent 
covers rather an aggregation than a combination. Ail the parts claim- 
ed are — ■ 

"associated in a unitary structure and there co-operate to produce either a 
new mode of .opération or a new resuit, or the old resuit in a modified or Im- 
proved way." Eailroad Supply Oo. v. Hart Steel Oo., 222 Fed. 261, 138 0. 
C. A. 23. 

The advance made by the patent upon the prior art is slight. In- 
deed, there seems to hâve been little room for marked advance. Per- 
haps there is no article designed for man's comfort in which slight 
advances are more appreciated. The éléments entering into what con- 
stitutes a perfect sofa-bed are set out in the record by a dealer in sup- 
plies for sofa-beds of many years' standing. Among thèse are the fol- 
lovi^ing : That the sofa-seat should be of the usual height f rom the 
floor when in sofa form; that the sofa should not suggest adaptation 
to beds or other f orms ; that there should be a substantial spring f abric 
forming the main part of the bed-bottom with clearance below for 
spring action; that there should be cushion springs for the seat and a 
flat spring mattress for the bed-bottom, independent of each other; 
that the bed spring should be continuons and f ree from contact with un- 
der rigid braces ; that the sofa-bed be capable of containing the bed- 
ding at ail times in made-up form; that the device .should be easily 
operated by women ; that the operating parts be simple and not liable 
to get out of order ; that the bed be opérable without moving it away 
from the wall ; that it be inexpensive and easily handled for shipment 
and reassembling. Ail of thèse, the sofa-bed of the patent possesses. 
The most marked novel élément is the three-section bed-bottom, where- 
by provision is made for storing the made-up bed. Another feature is 
the simplicity, whereby ease of opération and cheapness are attained, 
as above set out. 

Two forms of sofa-bed are covered by both the claims in suit, viz., 
that wherein the standards upon which the bed frames are pivoted are 
mounted upon the stationary frame, and that in which said standards 
rest whoUy upon and are carried by the sofa-seat. Claim 2 is broad 
enough to include sofa-seats hinged at the front of the sofa frame. 
Claim 4 specifically calls for a medial section which is wider than the 
wing sections and limits the device to a revolubly overturning seat. 



78 234 FEDERAL REPORTER 

As above stated, appellants admit that if the patent in suit îs valid, 
their form No. 1 infringes. Appellants' expert testified that claim 2 
reads on both forms 1 and 2 of appellants' device— 

"unless the court finds tlie language used in the claim to the effect that the 
bed-bottom when unfolded forms an expanded bed-bottom in a plane above the 
seat, to mean such a form of structure as is illustrated in Fig. 4 of the patent 
in suit in which this bed-bottom plane is actually above a horizontal plane 
whieh would pass through the top of the upholstered surface of the sofa-seat 
when in its assembled form as a sofa." 

As we hâve above stated, that language of claim 2 applies to the 
sofa-seat when overturned. Appellants' attempt to avoid the patent 
by altération of some détail of the frame construction claimed to be 
taken from Tendler fails entirely to escape the concept of the patent 
in suit or of either of the claims in suit. In the form 2 of appellants' 
device the end rails of the medial sections are not directly supported 
by the uprights 20, the end rails l'ï being extended beyond the point 
of their pivoted attachment to the medial section end rails, and the ex- 
tended parts of said end rails 17 being pivoted to said uprights W. 
While in appellants' device 2 the ends of the rails 11 and 15, when in 
bed position, are spaced apart only slightly, yet when the sections are 
folded in préparation for the sofa position, they are very considerably 
spaced apart. In the first form they may resemble Tendler, but in the 
latter the variance is emphatic — practically the équivalent of the medial 
section of the patent in suit as to spacing. Moreover, the mattress 
of the bed-bottom flexes just as does that of the patent and on the 
same lines. We concur in appellee's statement that the bed-bottom 
"sections are divided from each other by the lines on which they are 
folded and unfolded." The appellants' sofa bed-bottom No. 2 is there- 
fore the full équivalent of appellee's three-section bed-bottom. 

The utility of the device, appellants' appropriation thereof concèdes. 
While not décisive of the question of invention, the commercial success 
of the patented sofa-bed adds probability to its patentable character. 
None of the alleged prior art devices bave survived, if, indeed, any of 
them ever went into commerce. Both the sofa-bed of the patent and 
that of the appellants bave found considérable favor in the market. 

The foregoing, re-enforced by the presumptions growing out of the 
grant of the patent, lead us to the conclusion that the patent is valid, 
atid that both of the claims in suit are infringed by each of appellants' 
sofa-bed forms. 

The decree of the District Court is therefore affirmed. 



BUSH <fc LANB PIANO CO. V. BECKER BK08. 79 

BUSH & LANE PIANO CO. v. BECKEE BROS. 
(Circuit Court of Appeals, Second Circuit. May 9, 1916.) 

No. 265. 

1. Patents <®=318(6) — Suit for Ikfeingement — Accountino fok Profits — 

CosT OF Production. 

A corporation infringer eannot reduce tlie amount for whicli it is lia- 
ble as profits of the infringement by voting the greater part of its gross 
profits as salaries to Its offlcers, who with tlie présidents wife were the 
only stockholders ; but in sucb case the court will détermine upon évi- 
dence the usual cost of superintendlng and managing the business, and 
only such amount will be allowed. 

[Ed. Note. — For other cases, see Patents, Cent. Dig. § 576; Dec. Dlg. 
<®=»318(6).] 

2. Patents ©=»318(3) — Infeingement of Design Patent— Profits Recoveka- 

BLE. 

On an accounting for profits made by an infrlnger of a patent for a 
design of a piano case, the évidence showed the profits made from the 
sale of pianos having cases of the patented design, and also the cost of 
such cases and of the completed instruments ; but there was no instance 
in which either the case or the mechanism was sold separately, and no 
évidence from which it eould be determined to what extent the use of the 
patented design contributed to the sales. Held that, under Act Feb. 4, 
1887, c. 105, § 1, 24 Stat. 387 (Comp. St. 1913, § 9476), eomplainant was 
entitled to recover ail of the profit made on the cases as the "article to 
which the design had been applied," and that on the évidence the court 
properly awarded that proportion of the total profits which the cost of 
the case bore to the cost of the completed piano. 

[Ed. Note. — For other cases, see Patents, Cent. Dig. §§ 570, 571, 575; 
Dec. Dig. ©=3318(3).] 

Ward, Circuit Judge, dissenting. 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Suit in equity by the Bush & Lane Piano Company against Becker 
Bros., a corporation. From a decree awarding damages for infringe- 
ment of a patent, both parties appeal. Affirmed. 

For prior opinion, see 222 Fed. 902, 138 C. C. A. 382. 

Cross-appeals from a decree awarding to plaintiff damages for Inf lingement 
of its design patent. No. 37,501. The patent in suit covers a "design for a 
piano case." Défendant made and sold 958 pianos for $158,302.95. The fac- 
tory cost to défendant of that number of pianos was (by its own books) 
$113,044, and the expense of marketing, with allowance for overhead charges, 
brought up production cost to $122,441.98, leaving a profit of $35,860.95, on 
the pianos containing the infringing design. 

It was proven that the piano cases (as distinct from the piano mechanlsm) 
were assembled and flnished by défendant from partly prepared material pro- 
cured from other manufacturers, that the construction of the flnished piano 
was such that the case and works were merely component parts of an in- 
tégral whole, and that there was no instance of a, sale of a piano without a 
case, or a case without works. The names indicate no more than two por- 
tions of a product commercially uuitary. 

This cause was before this court in 222( Fed. 902, 138 0. C. A. 382, and 
was remanded for further proceedings before the master. By his report tne 
court below was informed of the cost of the piano case and of the completed 
Instrument, as well as the profits above set forth. Thereupon decree was en- 

®=»For other cases see same topic. & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes 



80 234 FEDERAL REPORTER 

tered for that proportion of the profits wMcli tlie cost of the case bore to tlie 
cost of the completed piano. Tlie appeal of défendant assails ttie metliod of 
tîxing profits. Botli parties complain of the amount awarded; plaintiff de- 
manding ail the profits derived from a.11 pianos containing the patented de- 
sign, and défendant contending that no more than $250 can be granted. The 
other matters raised by assignments of errer requlre neither mention nor 
comment. 

John J. O'Connell, of New York City, for plaintiff. 
John McCormick, of New York City, for défendant. 

Before WARD and ROGERS, Circuit Judges, and HOUGH, Dis- 
trict Judge. 

HOUGH, District Judge (after stating the facts as above). [1] 
The piano business of Becker Bros, is an incorporation of the trade 
created by Jacob H. Becker, its président. The stockholders hâve al- 
ways been Becker himself, his wife, and his attorney. The corporate 
books of account show that Becker drew on the pay roU only $15 
weekly, in what capacity does not appear. At the year's end, the ex- 
cess of receipts over expenses was for a time transferred to the "Cap- 
ital Account of Jacob H. Becker." This practice continued until after 
this suit was threatened, if not begun, when the end of the year was 
marked by charging up salaries to président and secretary (the attor- 
ney), which for the year 1912 produced an apparent loss of over $20,- 
000. The justification for this procédure is a directors' vote that J. H. 
Becker should receive for his services 85 per cent, of gross profits, 
and the secretary 5 per cent. Whether this vote was taken and entered 
on the ver}^ informai minute book of this corporation before or after 
suit brought is a matter of contest, into which we need not enter, be- 
cause it makes no différence when 90 per cent, of gross profits was 
voted to the président and secretary for services. Such disposition 
was but one method of distributing earnings to stockholders in a "close 
corporation" (as Becker called it) which has never paid a dividend. 
The formality was unnecessary, for if the owners of the concern drew 
90 per cent, of profits, it made no différence to them by what name 
their gains were called. 

Defendant's contention that it is only answerable for such profits 
as remain after paying out nearly ail the différence between expenses 
and receipts in salaries credited at year's end is absurd. The District 
Court rightly took évidence as to the usual cost of superintending and 
managing a business of the kind and extent shown by Becker himself, 
added that to factory cost of product, and, having thus fixed manu- 
facturing and selling expense, credited the same against receipts ac- 
knowledged by Becker. The différence is the profit of the business. 

[2] The question as to how to ascertain a patentee's share in the 
gains of an infringer, when the infringement constituted but a part, 
possibly a small part, of the business from which profits flowed, has 
several times received our attention on occasions other than the first 
appeal in this cause. Tuttle v. Claflin, 76 Fed. 227, 22 C. C. A. 138; 
Wales V. Waterbury Mfg. Co., 101 Fed. 126, 41 C. C. A. 250; West- 
inghouse v. New York Air Brake Co., 140 Fed. 545, 72 C. C. A. 61 ; 
Force v. Sawyer-Boss Mfg. Co., 143 Fed. 894, 75 C. C. A. 102; Un- 



BUSH & LANE PIANO CO. V. BECKEK BROS. 81 

derwood, etc., Co. v. Stearns & Co., 227 Fed. 74, 141 C. C. A. 622. 
Whether the decree below is consonant with thèse rulings as modified 
or enlarged by Westinghouse v. Wagner, etc., Co., 225 U. S. 617, 32 
Sup. Ct. 691, 56 L. Ed. 1222, 41 L. R. A. (N. S.) 653, Dowagiac, etc., 
Co. V. Smith, 235 U. S. 641, 35 Sup. Ct. 221, 59 L. Ed. 398, and 
Hamilton-Brown, etc., Co. v. Wolf Bros. Co., 240 U. S. 251, 36 Sup. 
Ct. 269, 60 L. Ed. 629, is one way of putting the chief problem hère 
presented. 

There is said to be a radical différence between the principles gov- 
erning recovery on design, as compared with other, patents. This is 
thought to arise from the act of February 4, 1887. That act (after 
granting $250 for any infringement of design) provides that in case 
the total profit made by an infringer from the manufacture or sale of 
the article or articles to which the design bas been applied exceeds 
$250, the infringer shall be furtlier liable for the excess of such profit 
over and above $250. Plaintiff asserts that, having shown infringe- 
ment by something sold with and as part of a piano, the "article to 
which the design" was applied must be the whole piano. Défendant 
insists that under the statute ail recoveries for design infringement are 
penaltîes, and therefore strictissimi juris ; consequently, plaintiff not 
having shown any separate or spécial profit derived from the case, 
recovery can be $250 only, because it was to the case, and not to the 
piano as a whole, that the design was applied. 

As pointed out on the previous appeal, the act of 1887 was intended 
to mitigate the harsh rule of the Dobson Cases, 118 U. S. 10, 6 Sup. 
Ct. 946, 30 h. Ed. 63. It is true that in Dunlap v. Schofield, 152 U. 
S. 244, 14 Sup. Ct. 576, 38 L. Ed. 426, the minimum recovery of $250 
was said to be "in the nature of a penalty," and it bas usually been 
referred to as a penaltv since that time. Lichtenstein v. Phipps, 168 
Fed. 62, 93 C. C. A. 483 ; Frank v. Geiger (C. C.) 121 Fed. 126. But 
when a design patentée seeks to recover more than $250, because either 
he lost a greater sum by the infringement, or the infringer made a 
greater profit thereby, no reason is seen for departing from the con- 
struction of the statute announced by us in Untermeyer v. Freund, 58 
Fed. 212, 7 C. C. A. 190: 

"The inaiiifest purpose of Congress was to enlarge the remedy against in- 
fringers of design patents, and to déclare that the measure of profits recov- 
erable on account of the infringement should be the total net profits upon 
the 'whole article.' " 

But there is no statutory définition of the phrase "whole article." 
Each litigation présents its own problem; it is impossible to define in 
advance. Probably each solution dépends on the relation to the busi- 
ness whole of the part embodying the patent, and that relation must 
be considered from ail viewpoints, technical, mechanical, popular, 
and commercial. Thus a patented design for a "portable house" would 
seem to apply to the whole structure; otherwise, if for an "entrance 
door." A patent for a "book binding" cannot, either justly or logi- 
cally, be so identified with the entire book as to give ail the profits on 
a work of literary genius to the patentée of a binding, although the 
binding was manufactured with and for that one book, and has no 
234 F.— 6 



82 234 FEDERAL REPORTEE 

separate commercial existence. The binding and the prînted record 
of thought respond to différent concepts ; they are différent articles. 

Accordingly we held on the former appeal herein that the article 
to which the patented design had been applied was the piano case, 
and ail the évidence taken since mandate confirms that view. 

Impediments to recovery of both damages and profits hâve arisen, 
not so much f rom difïiculty in ascertaining in what the inf ringing thing 
or article consisted, as in assigning to that infringement any particular 
or specified portion of the gains made or prevented by a defendant's 
wrongdoing. The main source of such difficulties bas been the narrow 
field of évidence, suggested by counsel or approved by the courts, in 
endeavors to precisely assign profits or damages to their source ; af ter 
the actof infringement, the thing or article containing the infringement 
and the existence of profits or losses bave been amply demonstrated. 
Great hardship bas been wrought by the rule of impossibility enunciat- 
ed in Garretson v. Clark, 111 U. S. 120, 4 Sup. Ct. 291, 28 L. Ed. 371, 
concerning the popularity of which case with infringers we entirely 
agrée with the remarks of the court in Yesbera v. Hardesty, 166 Fed. 
120, 92 C. C. A. 46. The other extrême is to treat an infringer as a 
trustée ex maleficio in the manner approved in Westinghouse, etc., Co. 
v. Wagner Co., supra. 

It îs not often that giving ail the profits to the patentée can be jus- 
tified, as in Wales v. Waterbury Co., supra, on the ground that there 
\vould bave been no profits, had it not been for the appropriation of 
the patented idea. The enormous increase in improvement patents and 
minor inventions bas of late greatly accentuated thèse long-recognized 
obstacles. 

Dowagiac v. Smith, supra, related to an assessment of damages and 
a mechanical patent; but the court pointed out that the introduction 
of évidence as to what would bave been a reasonable royalty should be 
regarded as a proper method of ascertaining damages, having regard 
to the nature of the invention, its utility, advantages, and extent of 
use involved. Such évidence was declared to be "quite as admissible 
as that of an established royalty." There is no reason why this view 
of proper évidence should not be applied to the estimation of profits, 
as well as the ascertainment of damages. 

There is hère ample proof that profit was derived from the use of 
plaintifï's design, which was chosen because it gave to the piano some- 
thing which the trade demanded, namely, a "massive appearance." It 
also appears from the whole testimony (which largely consista of 
Becker's admissions and opinions) that there was just as large profit 
(proportionally) on the ornamented and infringing casing, which at- 
tracted the customer's eye, as upon the piano mechanism, which pleased 
the ear. The cost of each separate élément of the finished product is 
known, and there is no différence perceivable between admitting ex- 
pert opinions as to a proper royalty and similar opinions as to the origiri 
and expense of the constituent parts of a piano. Indeed, as between 
expert opinions upon royalties and the statements of expert manufac- 
turers and accountants, we consider the latter rather more reliable and 
persuasive. 



BUSH & LANE PIANO CO. Y. BECKER BROS. 83 

Since, therefore, the plaintiff has shown a real profit attributable in 
some degree to the infringed design, the ends of justice are best served 
by apportioning, and thus separating, profits which were derived from 
the investment in infringment. Exactly this method was approved in 
Herman v. Youngstown Car Mfg. Co., 216 Fed. 607, 608, 132 C. C. 
A. 612; and of it the appellate court for the Sixth circuit remarked 
that: 

"Seml-independent parts [of the wliole device] may each in volve substan- 
tially the same cost of materlal and labor and may each contrlbute equally 
to the final marketability. In that event, an equal division of the profits 
among thèse parts is both arbitrary and reasonable; arbitrary because of 
its form, but reasonable because obviously fair and just." 

The Circuit Court of Appeals for the Sixth Circuit in Underwood, 
etc., Co. V. Fox, etc., Co., 220 Fed. 887, 136 C. C. A. 446, has referred 
to this décision with approval. We think there could be no better set 
of facts for the application of this method of separating or segregating 
profits than is presented by this case. 

Some phrases in the opinion of this court upon the former appeal 
herein assumed for purposes of argument that the piano case could 
be shown to be a separate thing with possibly a separate market from 
the action or mechanism. This appears unsupported by the évidence; 
but it makes no différence in the rule of law, when once the article 
to which the design was applied has been ascertained. 

It is net held that such évidence as was hère received is always the 
best, nor that the method pursued is préférable to ail others, nor that, 
where other and better means of measuring liability exist, they can be 
neglected. But it is held that this method of allotting profits in cor- 
respondence to cost of production between the whole and its parts is 
permissible. 

As both parties hâve appealed, the decree below will be affirmed, 
without interest, and without costs in this court. 

WARD, Circuit Judge (dissenting). The biU in this case was filed 
expressly upon the act of February 4, 1887. That act does not apply 
to ail infringements of design patents, but only to such infringements 
as are willful and deliberate. Such infringements are punished by giv- 
ing the patentée $250, even if no profits hâve been made by the défend- 
ant on the article manufactured or sold to which the patented design 
was applied, together with ail profits, if any bave been made, on the 
article in excess of that sum. Thèse provisions are penalties, and hâve 
been so regarded in Dunlap v. Schofield, 152 U. S. 244, 14 Sup. Ct. 
576, 38 L. Ed. 426; Monroe v. Anderson, 58 Fed. 398, 7 C. C. A. 272; 
Lowell V. Hogg (C. C.) 70 Fed. 787 ; Fuller v. Field, 82 Fed. 813, 27 
C. C. A. 165 ; Gimbel v. Hogg, 97 Fed. 791, 38 C. C. A. 419. 

The first section of the act is as follows: 

"Sec. 1. Vnatithorized Use of Patented Design — Penaltv and LiaMUty — Suits. 
That hereafter, durlng the term .of letters patent for a design, it shall be un- 
lawful for any person other than the owner of said letters patent, without 
the license of such owner, to apply the design secured by such letters patent, 
or any colorable imitation thereof, to any article of miinufacture for tho pur- 
pose of sale, or to sell or expose l'or sale any article of manufacture to which 



84 234 FEDERAL EEPOKTBR 



such design or colorable imitation shall, wittiout the lîcense of the owner, 
hâve been applied, knowing that the same has been so applied. Any person 
violating the provisions or either of them, of tliis section, shall be liable in 
the amount of twoi hundred and flfty dollars ; and in case the total profit 
made by hini from the manufacture or sale, as aforesaid, of the article or 
articles to which the design, or colorable imitation thereof, bas been applied, 
exeeeds the sum of two hundred and fifty dollars, he shall be further liable 
for the excess of such profit over and above the suni of two hundred and 
fifty dollars. And the full amount of such liabllity may be recovered by the 
owner of the letters patent, to hls own use, in any Circuit Court of the 
United States having jurisdiction of the parties, either by action at law or 
upon a bill in equity for an injunction to restraln such Inf ringement." 

The second section provides that nothing in the act contained shall 
lirait any remedy at law or in equity that the owner of a design patent 
might hâve, had it not been passed, except that he shall not twice recov- 
er the defendant's profits. Accordingly a patentée whose design patent 
has been willfully infringed may either pursue remédies existing be- 
fore and outside of the act of 1887 or he may sue under that act. If 
he takes the latter course, he is bound by the act. Its purpose was to 
relieve a design patentée, in the case of a deliberate and knowing in- 
f ringement, from any obligation to prove what part of the wrongdo- 
er's profits were due to the inf ringement. If there were no profits on 
the article manufactured and sold, or if they were less than $250, the 
patentée could recover that sum. If they were more than that sum, 
then ail in excess of it. This court, speaking through Judge Shipman, 
in Untermeyer v. Freund, 58 Fed. at page 211, 7 C. C. A. at page 189, 
said of the case of Carpet Co. v. Dobson (C. C.) 10 Fed. 385 : 

"Upon appeal, the Suprême Court disagreed with the conclusion of the Cir- 
cuit Court, and held that the complainant must be required to establish the 
acftial damages or profits by trustworthy légal proof ; and, as there was no 
évidence in the case of the value which the patented designs had contrlbuted 
to the infringing carpets, the decree must be reversed, and nominal damages 
only should be awarded. Dobson v. Carpet Ce, 114 U. S. 439 [5 Sup. Ot. 945, 
29 Tj. Ed. 177]. The statute of 1887 was passed in conséquence of this déci- 
sion. The mauifest purpose of Oongress was to enlarge the remedy against 
infringers of design patents, and to déclare that the measure of profits recov- 
erable on account of the infringement should be considered to be the total net 
profits upon the whole article. A construction, which should llmit a. reeov- 
ery above ?250 to the amount which the complainant could clearly establish 
to be the value which the design had contributed to the infringing carpets 
would be at variance, not only with the apparent législative intent, but with 
the language of the statute. The rule which Congress declared for the compu- 
tation of profits was the total profit from the manufacture or sale of the arti- 
cle to which the design was applied, as distlnguished from the pre-existing 
rule of the profit which could be proved to be attributable to the design." 

A great deal that is said in the opinion of the court would be per- 
fectly appHcable if the suit in this case were not under the act of 1887, 
which made an entirely new rule to cover cases of willful infringement 
of design patents. No light is aiïorded by décisions in cases of in- 
fringements of other patents, especially upon the question of damages 
as distlnguished from profits. 

If the article sold to which the patented design was applied in this 



HERZOG V. CHABLE8 KELLER & CO. 85 

case had been the piano, then the complainant patentée would hâve 
been entitled to ail the defendant's profits on the piano over $250, as 
Judge Hazel originally held. As, however, this court on appeal bas 
held that the article sold was not the piano, but the piano case, the 
question is: What profits did the défendant make on the sale of the 
case? It is conceded, and indeed is obvions, that it is impossible to 
prove any such profit separately. The design contributes only to the 
selling of the piano; it does not affect either its tone, its durability, 
its economy, or its use. Therefore I think ail the complainant can re- 
cover in this case is $250. The method adopted by the court below on 
the accounting and approved by this court is purely arbitrary. To say 
that the design contributes to the profits in the proportion that the cost 
of manufacturing the case bears to the cost of manufacturing the whole 
piano i* a pure guess. It seems to me that the logical resuit of the 
opinion of the court should be that the complainant recover ail the de- 
fendant's profits on the piano. We should not be dismayed by the con- 
séquences of a statute whose construction is plain. 



HERZOG V. CHARLES KELLER &. CO., Inc. 

(Circuit Court of Appeals, Second Circuit. May 9, 1916.) 

No. 24.3. 

1. Patents <S=:532S— Vai-idity and Infbingement— Method of Foeming Cttfp 

BUTTON. 

The Herzog patent, No. 979,163, for a method of forming cufE buttons, 
construed, and held not infringed. 

2. Patents <S=32S — Validity and Infbikgement— Cuff Button. 

The Herzog patent, No. 973,864, for a cuff button, construed as it must 
be to sustain its validity, held not infringed. 

3. Patents <g=>20 — Invention— Uniting Separate Paets in One. 

The case is rare in whleh the bare idea of consolidating several mem- 
bers into one involves invention. 

[Ed. Note.— For other cases, see Patents, Cent. Dig. §§ 20-22; Dec. 
Dig. ®=>20.] 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Suit in equity by Joseph L. Herzog against Charles Keller & Com- 
pany, Incorporated. Decree for défendant, and complainant appeals. 
Afiîrmed. 

The f ollowing is the opinion below of Learned Hand, District Judge : 

[1] I shall first consider the method patent, vvhich I find not to hâve been 
infringed. The claims are ail of the niost spécifie charaeter ; they speak of 
forming the disks from the thin portions and the Connecting bar, portion, or 
meta! from the rib of a "ribbed blank." This by référence to the figures is 



<Ê=s>For other cases see same topic & KEY-NUMBER In ail Key-Numbered Digests & luiisxea 



86 234 FEDERAL REPORTER 

plain language ; it Is still plainer wlien one examines tlie language of the 
spécification. I start witli "tlie blanlc A, having a rib or tliicliened portion B 
extending transverscly across the same, as illustrated In Pigs. 1, 2, and 3" 
(lines 64-67). Again, "the disks D and E belng formed from tlie tliiu portions 
of the blank A, and the thickened portion F from the rib B of the blank A" 
(Unes 23-76). Agaln, "it will be seen that thus far the disks D and E with 
their flattened edges G~G lie in substantially the same plane" (lines 82-85). 
Ail this language is wholly inapplicable to the defendant's process. The 
modifications siiggested in the patent also both start with the same blank. 

The plaintiff iuvokes the doctrine of équivalents, which as a doctrine no one 
dénies. It does not apply hère, becanse the metbod is not substantially the 
same. The patented button is to be made with the two disks in one plane, 
while the defendant's disks are made in parallel planes. The patented button 
is to be made with two disks of substantially the same thickuess as the thin 
portion of the blank; one of the defendant's disks niust be hammered out 
from a thick rib, while the other disk is not properly a disk at ail. Ko one 
can call the defendant's I-beara a "ribbed blank" witbout altogether deserting 
the spécifications. The plaintiff insists that this may be done if we measure 
the I-beam through its longer axis: then it may be called a "ribbed blank," 
but it is as little a "ribbed blank" measured one way as the other. The lan- 
guage is plain enough, till we treat it sophistically. If ail thèse specifled 
features be called unessential to the patent, I confess tbat I can see nothing 
left but the process of making the button by the use of dies out of an original 
blank, taken as nearly .as conveniejit to the eventuii.1 sliaiie. Tliat was not 
the patent granted; it would not bave been valid. if it bad been grauted. The 
doctrine of équivalents would destroy the patent itself. 

Therefore I dismiss the hill as to the process patent for noninfringement, 
without passing upon its validity. It may well be tliat invention was required 
to devise the process of each party, but the first inventer could not cover ail 
other processes arriving at the same resuit. 

[2] I next come to the manufacture patent, which soems to me to be învalid 
unîess so construed that the défendant does not infringe. The claim con- 
sists of three éléments: First, a single pièce cuft' button; second, two disks 
conneeted by a bar; and, third, the bar merging into the disks at points 
wlthin their outer ed?4es. Solid cuff buttons were not in themselves new 
(Hills, 543,244), and the file wrapi^er shows that the thickness of tlie bar 
relative to tlie disks .'lud the merging of the métal into a dislc was not suf- 
ficient in the judgment of the examiner to differentiate from Hills. The 
single claim was allowed only in tliat the métal of the bar merged into the 
disks at points witliin their outer edges. This feature is, however, sliown 
in three patents now in évidence, one of which was before the examiner, 
Allen, 645,307; the other two ave Ilenerlau, 778,241, and BalJ, 944,251. A 
close scrutiny of figures 2 and 4 of Henerlau show that each leg of the bar 
runs into the disk at points wlthin its outer edge, probably as niuch within as 
the patent in .suit. See Fig. 2. The same feature is even more clearly shown 
in Bull, which lias a turued-up edge. 

[3] The only iiossible invention involved in the patent is to make out of one 
pièce Henerlau's or Ball's button. In view of Hill's patent for a one-i)leee 
button, tliis can hardly be regarded as invention ; indeed, it would scarcely 
hâve been invention even if Hill bad not shown a one-piece button. Howard 
V* Détroit Stove Works. 150 II. S. 164, 14 Sup. Ct. 68, 37 L. Ed. 1039; General 
Electric v. Yost, 1-39 Fed. 568. 71 C. C. A. 552; Lawson v. Métal Products 
Oo., 209 Fed. 51, 126 C. C. A. 193. I do not mean that thèse cases décide that 
it is never invention to consolidate into one pièce what bas formerly been 
composed of three pièces. Tbi.s may at finies resuit in a consolidation of 
functions. The case must, liowever, be very rare in whicli the bare idea 
învolves invention to consolidate several members into one. To Overconie diffi- 
culties of manufacture Involved in sueh a change may involve the very highest 
invention; but, since tlie patent does not concern such difflc-ulties, it must 
rest solely upon the idea of the integrity of the button. 

Nor do I thiuk it fair to attribute the suceess of this button to this idea. 



HERZOG V. CHARLES KELLER & CO, 87 

Its success rather, it seems to me, must be attributed to the fact that an 
intégral button could be manufactured cheaply by ordinary machine processes. 
Tlie success of Herzog's button may well bave depended upon bis being the 
first to secure a cheap process for an intégral button. 

However, it does not follow that this patent is invalid. The phrase of the 
claim, "merging into the métal of which the disks are formed," is defined in 
lines 70 to 80, particularly in Unes 75 to 80, as follows; "This métal, therefore, 
not only serves to strengthen the article at the junetion of the ends of the post 
and disks, but also tends to reinforce and strengthen the disks themselves." 
The Word "merging" in the claim may be held to include the particular form of 
button shown in the figures and described in the language just quoted. If so, 
it may be valid, but the post of the defendant's button does not merge in 
such way as to strengthen the disks themselves. 

It is urged that one cannot Justly treat a combination patent by treating 
its éléments as though separate. To this I agrée, but I know no other way 
of determinlng the validity of a combination patent than to see how far tlie 
prier art shows ail the éléments in combination. If it shows ail but one, and 
the necessary .step does not involve invention, the combination itself is void. 
That seems to me to be the case hère. 

The bill will be dismissed for noninfringement, wlth costs. 

Archibald Cox, of New York City, for appellant. 
Livingston Gifford and Charles S. Jones, both of New York City, 
for appellee. 

Before COXE and WARD, Circuit Judges, and VEEDER, District 
Judge. 

PER CURIAM. Affirmed, with costs, on the opinion of Judge 
Learned Hand. 



88 234 FEDEKAL REPORTER 

lOWA WASHING MACH. CO. v. MONTGOMERY WAED & CO., Inc, 

(Circuit Court of Appeals, Second Circuit. April 11, 1916.) 

No. 252. 

Patents ®=3.32S — Validity and Infringemekt — Wasiiing Machine. 

Tlie Stocking and Meudenliall reissue patent, No. 12,733 (original No. 
702,<S51), for a wasiiing machine, is valid, and covers an invention of 
great utility and etHciency ; also held infringed. 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Suit in equity by the lowa Washing Machine Company against 
Montgomery Ward & Co., Incorporated. Decree for complainant, and 
défendant appeals. Affirmed. 

For opinion below, see 227 Fed. 1004. 

The decree of the District Court held valid reissued letters patent 
No. 12,733 granted to Stocking and Mendenhall, December, 1907, for 
a washing machine and that claims 3, 4, and 7 of said patent are in- 
fringed by the defendant's machine, as exemplified by complainant 's 
Exhibit No. 7, sold by the défendant in the state of New York. 

Ralph L. Scott and C. A. L. Massie, both of New York City, and 
Taylor E. Brown and Clarence E. Mehlhope, both of Chicago, III., for 
appellant. 

Robert H. Parkinson and Wallace R, Lane, both of Chicago, 111., for 
appellee. 

Before COXE and ROGERS, Circuit Judges, and HOUGH, Dis- 
trict Judge. 

COXE, Circuit Judge. That the patentées hâve invented a washing 
machine which is a manifest improvement over anything which pre- 
ceded it in the art is too obvions for discusson. Very soon after the 
original patent was issued it became apparent that its single claim, 
which contained 20 separate éléments, was absolutely valueless as a 
protection against infringers. Any one who had wit enough tO' omit 
one of thèse éléments could inf ringe the claim with impunity. The pat- 
entées soon became aware of the fact that though they had made an 
invention of unusual merit, by solving the problem of a cheap and effi- 
cient washing machine, their patent offered them no protection what- 
ever. Their only remedy was by reissue and that they were diHgent 
in its prosecution is shown by the fact that the original was dated June 
14, 1904, and the application for the reissue was filed February 14, 
1905, eight months thereafter. 

That the patentées made a most valuable contribution to the art is 
manifest; that the claim afforded them no protection is also manifest. 
The omission of one useless élément avoided infringement. Prior to 
the passage of the statute regulating reissues, the Suprême Court, 
speaking through Chief Justice Marshall, said in the case of Grant v. 
Raymond, 6 Pet. 218, at page 243, 8 E. Ed. 376: 

©ssFor other cases see same topic & KEY-NUMBER lu ail Key-Numbered Disests & Indexes 



lOWA WASHING MACH. CO. V. MONTGOMERY WAKD ii CO. 89 

"The communication of the discovery to tlie public lias been made in pur- 
suanee of law, wltli tlie intent to exercise a privilège which is tlie considéra- 
tion paid by the public for the future use of the machine. If, by an innocent 
mistake the instrument introduced to secure this privilège faits in its object, 
the public ought not to avait itself of tliis mistake, and to appropriate the dis- 
covery, without paying the stlpulated considération. The attempt would be 
disreputable in an individual, and a court of equity might Interpose to re- 
strain him." 

From that time to the présent it lias been the purpose not only of 
the courts, but of Congress as well, to protect an honest inventer who, 
through no fault of his, is deprived of the fruits of bis invention. 
There is, in our opinion, no doubt as to the utihty and efficiency of the 
invention. Any one who bas seen it in opération as compared with the 
prior art machines must be convinced of this proposition. Some of its 
advantages are pointed out in the appellee's brief as follows : 

"Continuous oscillation of the agitator can be effiected by either pushing or 
pulllng the hand lever in one direction only. It is unnecessary to bend over 
the tub when operating it, or bend at ail, as in turnlng a crank, and the gears 
and other rotating mechanism, instead of inducing a tendency to capsize, as 
they would if mounted on the side of the tub, give increased stability and In- 
sure against any such tendency. Instead of exposing to injury the fingers and 
clothing of the operator or others (a very substantial Reril if rotating gear 
were operated on the side of the tub by persons unaccustomed to machinery), 
they are completely housed and sheltered by their positions uuder the tub, 
within the circuit of the tub legs, where they neither threaten nor incur 
harm." 

We hâve then, first, a meritorious invention which bas proved to be 
popular and remunerative ; second, a patent which, through inadver- 
tence, accident or mistake, and probably through ail thèse conditions 
combined, is rendered utterly wortbless as a protection ; third, an in- 
fringer who is making large gains out of sales of the patented device. 
In such circumstances the effort of the court should be to brush asidc 
technicalities and give the inventors the fuU fruits of their invention. 

We are unable to fînd that any rights were acquired by the défend- 
ant because of the inoperative claim of the original patent. Its act 
was an open appropriation of the complainant's property when the ex- 
piration of prior patents enabled it to use the machines of those patents 
legally if it had desired to do so. Instead of using the prior art ma- 
chines it copied ail the valuable features of the patent in suit. The de- 
fendant acquired no rights based upon the original patent. It began its 
infringement after the reissue and cannot successfuUy contend that it 
invested its money relying upon the invalidity of the patent, or the in- 
sufficiency of the claim properly to protect the invention. It entered the 
field deliberately and with fuU knowledge of ail the facts. 

We think the decree is correct and should be affirmed. 



90 234 FEDERAL EEPORTEB 

JEOLIAN CO. V. WANAMAKER. 

(Circuit Court of Appeals, Second Circuit. April 11, 1916.) 

No. 184. 

Patents <S=532S— Invention — Piano. 

The Votey patent, No. 780,0T8, a combinée! pneumatic and manually 
operated grand piano, is for tlie adaptation of the pneumatic mechanlsm 
long in use in uprlght pianos to use in grand pianos, whlcti could be 
done by a skllled mechanlc, and Is void for lack of patentable invention. 

Appeal from the District Court of the United States for the District 
of Connecticut. 

Suit in equity by the yEolian Company against John Wanamaker. 
Decree for défendant, and complainant appeals. Affirmed. 

For opinion below, see 221 Fed. 666. 

The decree of the District Court dismissed the bill alleging the 
validity and infringement of letters patent No. 780,078, granted to Ed- 
win S. Votey January 17, 1905, for improvements in pianos. 

George D. Beattys, of New York City, and George D. Seymour, of 
New Haven, Conn., for appellant. 

Frederick P. Fish, John P. Bartlett, J. L. Stackpole, and R. C. Mit- 
chell, ail of New York City, for appellee. 

Before COXE and WARD, Circuit Judges, and LEARNED 
HAND, District Judge. 

COXE, Circuit Judge. The alleged invention relates to combined 
pneumatic and manually operated grand pianos, the object of the pat- 
entée being to enable a manually operated grand piano to be played by 
pneumatic apparatus and devices incorporated in the construction of 
the piano, without interfering with the manual playing devices. In 
brief, the patent seeks to monopolize the playing of a grand piano by 
pneumatic apparatus. 

The patent contains 63 claims and of thèse 32 are said to be involv- 
ed. In the view which we take of the présent controversy it will only 
be necessary to examine a single claim. The first claim is as f oUows : 

"1. In a combined pneumatic and manually operated grand piano and In 
combinatlon with the frame and soundlng-board tbereof, pumping mechanlsm 
secured and supported upon said frame beneath the said soundlng-board and 
provided with actuated mechanlsms extendlng longitudlnally of the frame and 
connected with actuating-treadles." 

This claim, like ail the rest, seeks to monopolize the old pneumatic 
playing devices which had long been in use in upright pianos, by plac- 
ing them in grand pianos. 

There can be no invention in transferring a mechanlsm from one 
machine to another, where it accomplishes the same resuit, because in 
one machine it is horizontal and in the other perpendicular. The mo- 

(g^^^For other cases see same topie & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



MUHRAT V. C. L. GREENO CO. 91 

ment the demand for a grand player piano became urgent the service 
of the skilled piano workman was in demand. To change the mechan- 
ism f rom one to the other did not require inventive genius ; any skilled 
piano workman could make the change. If the claim dealt broadly 
with ail pianos it will hardly be pretended that they could be sustained 
in vievv of the numerous pneumatic pianos of the prior art. The ques- 
tion, therefore, reduces itself to this : Can mechanism which was well- 
known and free to ail, when applied to other types of pianos, become 
the subject of a monopoly when applied to a horizontal instead of a 
perpendicular piano? If so, the question of invention will dépend not 
on whether any new and useful resuit bas been produced but on wheth- 
er the précise combination, no matter how plain and obvions it may 
be, had ever been produced before. 

We cannot resist the conclusion that when a demand came for a 
pneumatic grand piano player the skilled mechanics of the piano fac- 
tories were perfectly compétent to make the change from the upright 
and that doing so did not involve invention. 

The decree is affirmed with costs. 



MIJRRAY V. c. li. GREENO CO. 
(Circuit Court of Appeals, Sixth Circuit. June 16, 1916.) 

No. 2809. 

Patekt.s i©=52.34 — Infeikgement — Wiiat Oonstitutes. 

Where the only invention of complainanfs patent No. 692,535 for a 
sprlng seat conslsted in the particular means for attachlng tlie springs 
to their supports, the springs being screwed through four perforations in 
an arclied metallic supiwrt, ail of which, being in a horizontal plane, the 
spring-ends were distorted, and the springs securely locked In place by the 
top and bottoni friction induced by the rise of the spiral, a spring seat, 
whereby the spring coils were inserted through four perforations, but 
which were not in the same horizontal plane, so that the spring had to 
be locked in its position by cojnpressing the lower coil agalnst the support, 
does not eoiistltute an Infringoment. 

[Ed. Note. — For other cases, see Patents, Cent, Dig. §§ 370, 381; Dec. 
Dig. <Ê=>234.] 

Appeal from the District Court of the United States for the South- 
ern District of Ohio ; Howard C. Hollister, Judge. 

Suit by William A. Murray against the C. L. Greeno Company. 
From a decree for défendant, complainant appeals. Affirmed. 

W. F. Murray, of Cincinnati, Ohio, for appellant. 
W. R. Wood, of Cincinnati, Ohio, for appellee. 

Before WARRINGTON and KNAPPEN, Circuit Judges, and 
SATER, District Judge. 

PER CURIAM. Suit for infringement of United States patent, No. 
692,535, issued February 4, 1902, to Murray for spring seat. The 
district court found noninfringement. 

<@=:jFor other ca.ses see same topic & KBY-NUMBER in aU Key-Numbered Dlgests & Indexes 



92 234 FEDERAL EEPORTEB 

The patent lias already been twice considered by this court, and lield 
to disclose patentable invention only in the particular means shown for 
attaching the springs to their support. Thèse means comprise four 
perforations in an arched metallic support, through which the lower 
end of the spring is screwed ; thèse perforations being ail in the same 
horizontal plane, the spring-end is thereby distorted and the spring se- 
curely locked in place by the top and bottom friction induced by the 
rise of the spiral. Murray v. D'Arcy Co., 161 Fed. 352, 88 C. C. A. 
364; Murray v. Détroit Wire Spring Co., 206 Fed. 465, 124 C. C. A. 
371. 

In the D'Arcy Case défendant was held not to infringe because the 
locking means of the patent in suit were absent. In the Détroit Spring 
Company Case défendant was held to infringe because it employed 
those means. 

In the instant case, while the lower coil of defendant's spring is 
inserted through four perforations in the arched strip, thèse perfora- 
tions are not in the same horizontal plane; on the contrary, the dif- 
férence between the horizontal planes of the two sets of perforations 
is the same as the rise of the spiral. There is thus no appréciable dis- 
tortion of the spring due to its entering the support; and it is not 
held in position by the friction due to the rise of the spiral, for there 
is no such appréciable friction. The spring is required to be locked 
in position by compressing the lower coil of the spring against the sup- 
port. Defendant's device thus lacks the characteristic feature of com- 
plainant's device, constituting its only claim to patentability. The dis- 
trict court properly held that défendant does not infringe. 

It becomes unnecessary to consider the alleged new anticipatory réf- 
érence. 

The decree of the district court is affirmed, with costs. 



BUKKE ELECTRIC CO. V. INDEPENDENT PNEUMATIC TOOL CD. 93 

BURKE ELECTBIC CO. v. INDEPENDENT PNEUMATIC TOOL Ca 

(Circuit Court of Appeals, Second Circuit. May 16, 1916.) 

No. 117. 

Patents ®=376 — Validity — Pbior Sai-e — Resale — "On Sale." 

Within Rev. St. § 4886 (Comp. St. 1913, § 9430), denying patents for an 
article whieh has been on sale for more tlian two years prior to the ap- 
plication, articles for which a patent is sought, on hand ready to be de- 
livered to any purcliaser, are "on sale," regardless of whether any of 
them are sold ; but wbere orders are taken only for subséquent delivery, 
the article is not on sale at that time, though the invention be complète. 

[Ed. Note. — For other cases, see Patents, Cent. Dlg. §§ 92, 98 ; Dec. Dlg. 
<g=>76. 

For other définitions, see Words and Phrases, Second Séries, On Sale.] 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

On pétition for rehearing. Pétition denied, and former opinion af- 
firmed. 

For former opinion, see 232 Fed. 145, -^ — C. C A. . 

Dyer & Taylor, of New York City (J. Edgar Bull, of New York 
City, of counsel), for appellant. 

Edwards, Sager & Wooster, of New York City, for appellee. 

Before COXE, WARD, and ROGERS, Circuit Judges. 

PER CURIAM. The proofs in this case show that the patented 
motors were ordered two years and a few days before the application 
for the patent was filed, but were not delivered and could not hâve 
been delivered until a time within the two-year period. The question 
is as to the proper construction of the words "not in public use or on 
sale" in Rev. St. § 4886 (Comp. St. 1913, § 9430). The combination of 
the words indicates that the sale contemplated is such as créâtes an 
opportunity for présent public use. It is a situation quite différent 
from the réduction to practice necessary to sustain anticipation. Judge 
Learned Hand apparently had this in mind when he held that the com- 
pletion of the invention, though very important in a compétition as to 
priority, was not important upon the question whether the public was 
using or given the opportunity of présent use of the invention. The 
provision ought to be construed favorably to patentées. If patented 
articles are on hand ready to be delivered to any purchaser, they are 
on sale, whether any of them has been sold or not. But, if they are 
not, they cannot be said to be on sale within the meaning of the act, 
though the invention itself has ceased to be expérimental and is com- 
plète. This certainly should be true of articles which can be carried in 
stock, like the motors in question. Such was the case in Covert v. 
Covert (C. C.) 106 Fed. 183 ; National Cash Register Co. v. American 
Cash Register Co., 178 Fed. 79, 101 C. C. A. 569. Although in Dittgen 
V. Racine Co. (C. C.) 181 Fed. 394, it was the practice not to make the 
patented articles until after they were ordered, still thousands of them 

(g=3For other cases see same topie & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



94 23-1 FEDERAL REPORTER 

had been made and delivered more than two years before tbe in- 
venter applied for his patent. We incline to follow McCreery v. Fan 
Co., 195 Fed. 498, 115 C. C. A. 408. 
The pétition is denied. 



KBYS V. MEYKR et al. 

(Circuit Court of Appeals, Second Circuit. May 9, 1916.) 

No. 264 

Patents iS=»328 — Invention— Necktie. 

ïtie Keys patent, No. 78!),69G, for a necktie, Jield void for lack of in- 
vention, in view of tlie prior art. 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Suit in equity by WilHam A. Keys against William K. Meyer, Rob- 
ert L. Bacharach, and Arthur Friedheim, copartners as Meyer, Bacha- 
rach & Friedheim. Decree for défendants, and complainant appeals. 
Affirmed. 

Kenyon & Kenyon, of New York City, for appellant. 
S. Bernstein, of New York City, for appellees. 

Before COXE, Circuit Judge, and VEEDER and MAYER, District 
Judges. 

COXE, Circuit Judge. The patent in question relates to neckwear 
and consists in a construction of ties whereby the strain is taken from 
the bow or knot. Claims 2 and 3 are involved. They are as follows : 

"2. As an article of manufacture, a necl^tie consisting of a. neekband and 
two end portions, tliese end portions belng adapted to fonn a tie, and tabs 
on tlie inner side provided with a buttonhole adapted to iit over a collar- 
button, said tabs being intégral wlth the Inner face of tlie tie, substantially 
as set forth. 

"3. As an article of manufacture, a necktie consisting of a neekband and 
two end portions adapted to form a tie, and tabs made ont of tlie same ma- 
terial as the inner face of the tie and intégral with said inner face, said tabs 
provided wlth buttonlioles adapted to fit over tlie coUar-button, substantially 
as set forth." 

The District Court held that the défendant did not infringe, as the 
claims in question must in any event be narrowly construed. We are 
of the opinion that the change made by the plaintifï over the prior 
art did not amount to invention. Ail that can be said of the plaintifï's 
necktie is that it may be a trifle more symmetrical and may fit a little 
better than the neckties of the prior art. As Judge Hough points out, 
there can be no novelty, where the prior art shows two tabs each con- 
taining a buttonhole, in sewing on one long tab with a buttonhole at 
each end. The basic idea was in use before Keys secured his patent 
and he merely improved upon some of the minor détails of existing ties. 
He added nothing fundamental to the prior ties. 

The decree is affirmed. 

<g=>For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



UNITED STATES V. 8NOHOMISH EIVEE BOOM CO. 95 

UNITED STATES V. SNOHOMISH EIVER BOOM CO. et al. 

(District Court, W. D. Wasliington, N. D. May 10, 1916.) 

Indians <g=>12 — Réservation — Boundaky — Tkeaties. 

Treaty and executive order construed wlth respect to boundary of an 
Indian réservation on the shore of Puget Sound. 

[Ed. Note. — For other cases, see Indians, Cent. Dig. §§ 27, 28; Dec. 
Dig. <S=12.] 

Action by the United States against the Snohomish River Boom 
Company and the Everett Improvement Company. On motion by 
défendants to dismiss. Motion granted. 

Clay Allen, U. S. Atty., and Winter S. Martin, Asst. U. S. Atty., 
both of Seattle, Wash. 

J. A. Coleman, of Everett, Wash., and Francis H. Brownell, of 
Seattle, Wash., for défendants. 

NETEKER, District Judge. The United States seeks to recover 
from the défendants the possession of certain tidelands situated at 
Port Gardner, Snohomish county, Wash. The land was sold by the 
state of Washington to the Everett Improvement Company as tide- 
lands, and was by the Improvement Company leased to the Boom Com- 
pany. The issue involves the construction of executive order of De- 
cember 23, 1873, and the Indian treaty of 1855 (Act Jan. 22, 1855, 
12 Stat, 928). Section 2 of the treaty provides, among other things: 

"Tliat the amouut of tvi^o sections, or 1,280 acres, on the north side of 
Hwhomish Bay and the creek emptying Into the same ealled Kwilt-seh-da, 
the peninsula at the southeastern end of Perry's Island, * * * ail of 
which tract shall be set apart, and so far as necessary surveyed and marked 
out for their exclusive use. * • * " 

And f urther that : 

"There is also reserved from out the lands hereby ceded the amount of 
thirty-six sections, or one township, of land on the northeastern shore of 
Port Gardner, and north of the mouth of Snohomish river, including Tulalip 
Bay and the before-mentloned Kwilt-seh-da creek. * » * " 

And article 4 : 

"The said tribes and bands agrée to remove to and settle upon the said 
first above-mentioned réservations within one year after the ratification of 
this treaty, or sooner, if the means are furnished them. * * * " 

Article 5 : 

"The right of taking flsh at usual and accustomed grounds and stations is 
further secured to the Indians. * • * " 

Président Grant, December 23, 1873, by executive order, fixed the 
boundaries of the Tulalip Indian réservation pursuant to the treaty, 
as foUows : 

"Beginning at low-water mark on the north shore of Steamboat Slough, at 
a point where the section Une between sections 32 and 33 of township 20 

(gcsFor other cases eee same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexe» 



96 



234 FEDERAL REPORTER 



north, range 5 east, Intersects the same ; thence north ; * * » thence 
west * * * to low-water mark on the shore of Port Susan ; thence south- 
easterly with the line of low-water mark along said shore to the shores of 
Tulalip Bay and Port Gardner, with ail the meanderings thereof, and across 
the mouth of Bbey's Slough to tho place of begiuning." 

The following sketch exhibits the land: 




^^enerr 



It is contended by the plaîntiff that the meander line along the 
shore should extend from the most southerly point of the réservation 
(Priest Point) across the channel to Steamboat Slough, which would 
include the wedge-shaped tidelands colored black on the sketch ; 
whereas the défendants contend that the boundary follows low-water 
mark along the channel to the mouth of Ebey's Slough, which, it is 
contended, is above the lands in question, and thence to the point of 
beginning. At the conclusion of the évidence défendant moved to dis- 
miss. 

According to the meander notes of the United States government, 
the mouth of Ebey's Slough is practically at "X," indicated upon the 
sketch. The testimony shows that the land in question is a part of 
the tidelands which extend from and adhère to Smith Island; that 
thèse lands are separated by a deep-water channel on the west and 



PACIFIC COUNTY V. ILLINOIS SUEETY CO. 97 

north, and are independent of the réservation; that Steamboat Slough, 
which is navigable, is north of the land, and the water of Port Gardner 
is west and forms a navigable channel between the réservation and 
the land in question entermg into Ebey Slough. I think it must be 
apparent from an examination of the treaty and likewise of the execu- 
tive order, that the purpose was to grant to the Indians tillable land 
with such accretions as would naturally belong thereto. I do not 
think that it could hâve been the intention of the executive order to 
hâve included tidelands which were entirely separated and segregated 
from the uplands of the réservation. If it had been the intention to 
grant any spécial water privilèges across the navigable water upon 
which the réservation borders, fitting language would hâve been em- 
ployed. A casual reading of the executive order, together with a 
considération of the mouth of Ebey Slough as fixed by the United 
States government notes, however, is conclusive upon the plaintifï. 
The mère fact that the executive order, in gênerai terms, reads "south- 
easterly" with the line of low-water mark "along said shore * * * 
of and across the mouth of Ebey Slough to the place of beginning," 
cannot be read to extend across the waters of Port Gardner, but must 
be carried to the mouth of Ebey Slough, even though the course may 
not be directly southeasterly to the point of commencement. 
The motion to dismiss is granted. 



PACIFIC COUNTY et al. v. ILLINOIS SUKETY CO. 
(District Court, W. D. Washington, S. D. April 15, 1016.) 

No. 1962. 

1. PKIXCIPAL AMD SURETY "©='59 — OBLIGATIONS OF SuBETY— COXSTRL'CTIOX. 

Whlle tliere is a libéral construction of liability of a surety for com- 
pensation, a surety company for a considération is entitled to hâve its 
contract interpreted by the ordinary rules of law, and its liability can- 
not be extended beyond the scope of the contract. 

[Ed. Note. — For other cases, see Principal and Surety, Cent. Dig. §§ lOo, 
103% ; Dec. Dig. <S=359.] 

2. Principal and Surett <S=>71 — Liability or Surety — Construction. 

Where bond giveii by a bank in which connty moneys were deposited 
was conditioned that the bank should from July 1, 1914, to July 1, 1915, 
in due and ordinary course of business pay ail moneys dei)osited and 
should froin July 1, 1914, keef) and hold harniless the county treasurer 
from ail liability of loss which might accrue by reason of the deposits, 
the bond did not render the surety liuble for nonpayment of county moneys 
deposited during the years 1914-15, and reniaining on hand ai'ter July 
Ist ; the bank having fulfilled ail conditions up to that tlme. 

[Ed. Note. — For other cases, see Principal and Suretv, Cent. Dig. §§ 117- 
119; Dec. Dig. <S=71.] 

At Law. Action by Pacific County and another against the Illinois 
Surety Company. On demurrer to complaint. Demurrer sustained. 

John I. O'Phelan, of Raymond, Wash., and Bâtes, Peer & Peterson, 
of Tacoma, Wash., for plaintiffs. 

Piles & Howe, of Seattle, Wash., for défendant. 

<gS3>For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes 
234 F.— 7 



98 234 FEDERAL REPORTER 

NETERER, District Judge. A surety bond was executed by the 
défendant on behalf of the First International Bank of South Bend, 
Wash., to the county treasurer of Pacific county, in the sum of $10,- 
000, which was to run one year from July 1, 1914. Various sums 
were deposited in the bank on behalf of the county during the year 
beginning July 1, 1914, and at the close of the year $51,175.14 was 
on hand and remained on deposit until the close of the bank on July 
19, 1915. Action is commenced by the county and county treasurer 
to recover the amount of the bond, alleging suspension of the bank, 
notice of proof of loss, and demand for payment. The défendant has 
demurred to the complaint. 

The défendant contends that its liabiHty is limited by the express 
provisions of the bond and that the duration of its risk extends only 
for the period of one year. Plaintiffs' contention is that the défend- 
ant is liable for ail deposits made and unaccounted for, irrespective of 
duration of time. 

[1] The rule of strictissimi juris does not apply to sureties for 
compensation. This rule was only invoked for the protection of indi- 
viduals acting gratuitously. Libéral construction of liability against 
sureties for value is the rule. Cowles v. United States, etc., G. Co., 
32 Wash. 120, 72 Pac. 1032, 98 Am. St. R«p. 838 ; American Surety 
Co. V. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977. A surety 
Company for a considération is, however, entitled to hâve its contract 
interpreted by the ordinary rules of law. Gilmore & P. R. Co. v. 
United States Fidelity & G. Ce, 208 Fed. 277, 279, 125 C. C. A. 477. 
And the liability cannot be enlarged beyond the scope of the terms of 
the contract, and where the language is unambiguous the question 
of construction does not enter. 

[2] The pertinent part of the bond recites: 

"If the sald principal herelnbefore named shall, from noon of the Ist day 
of July, 1914, to noon of the Ist day of July, 1915, in due and ordinary course 
of business promptly pay to the said treasurer * * * upon demand 

* * * ail moneys and proceeds * * * which hâve been or shall here- 
after be deposited with, transferred to, or placed in charge of said principal, 
by or on behalf of the said treasurer, and shall from noon of the Ist day of 
July, 1914, lieep and hold harmless the above named * * ** as such 
treasurer, of and from ail liability, loss, and damage which may arise or accrue 
against said treasurer by reason of the deposit * * * as aforesaid 

* * * then this obligation shall be void. * * * » 

The language employed seems to be clear, and capable of convey- 
ing but one idea, and that is the lirait of liability to the Ist day of July, 
1915, and giving efïect to every part of the contract. United States 
Fidelity & Guaranty Co. v. Board of Commissioners, 145 Fed. 144, 
148, 76 C. C. A. 114. And applying the same rules to this as any 
other contract (American Bonding Co. v. Pueblo Investment Co., 150 
Fed. 17, 24, 80 C. C. A. 97, 9 L. R. A. [N. S.] 557, 10 Ann. Cas. 357), 
the intention of the parties appears to be conclusively established. 
The case of United States Fidelity & Guaranty Co. v. City of Pensa- 
cola, 68 Fia. 357, 67 South. 87, relied upon by plaintiffs, is readily 
distinguished from the case at bar, in this : That liability in that case 
was not limited, but the défendant obligated itself to account and pay 



IN EE MUSGROVE MINING CO. 99 

over ail moneys which may be deposited withiri the time, and was 
not merely to insure the payment by the city of its deposits during the 
contemplated period, but to pay over ail moneys received by the bank 
by deposits of the city during the stated period, and this obligation 
continued though the time had expired during which deposits could 
be made under the obligation of the bond ; whereas, in the instant case, 
the life of the bond is fixed on its face, and in view of the express 
stipulation of the bond it cannot be reasonably contended that Hability 
would extend for an indefinite period during which the funds would 
be under the protection of the opération of the bond, and until the 
plaintiffs saw fit to withdraw them. United States Fidelity & Guar- 
anty Co. v. American Bonding Co., 31 0kl. 669, 122 Pac. 142. 
I think the demurrer must be sustained, and such is the order. 



In re MUSGROVE MINING CO. 
(District Court, D. Idalio, E. D. July 11, 1916.) 

1. Bankeuptct <@=>ô0 — "AcTs OF Bankbuptcy" — Statute. 

Bankr. Act July 1, 1898, c. 541, § 3a (2), 30 Stat. 546 (Comp. St. 1913, 
§ 9587), déclares that acts of bankruptcy by a persoii shall consist of his 
having transferred wliile insolvent any portion of his property to one or 
more of his creditors with intent to prefer such credltors over others, 
while section 3a (3) déclares that one who shall, while insolvent, permit 
any creditor to obtaln a préférence through légal proceedings, and not 
liaving, at least flve days before a sale or final disposition of any prop- 
erty afEected, vacated or discharged such préférence, shall hâve commit- 
ted an "act of bankruptcy." lïeld that, where an insolvent confessed 
judgment with intent to prefer a creditor, the confession of judgment 
was an act of bankruptcy falling within section 3a (2), while, if the préf- 
érence was efCected without any intent or purpose on the part Of the 
insolvent, the act falls within section 3a (3). 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 81, 82 ; Dec. 
Dig. <S=>59. 

For other définitions, see Words and Phrases, First and Second Séries, 
Act of Bankruptcy.] 

2. Bankruptcy ©=381(4) — Pétition — Sufficiency. 

A pétition in bankruptcy, which merely alleged that défendant con- 
fessed Judgment with intent to prefer, is sufflcient to charge that the con- 
fession was intended to secure a préférence, without any averment of 
facts, and so to bring the act within Bankr. Act, § 3a (2). 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 59, 118 ; Dec. 
Dig. <®=581(4).] 

In Bankruptcy. In the matter of the bankruptcy of the Musgrove 
Mining Company, a corporation. On demurrer to the pétition. De- 
murrer overruled. 

Ariel C. Cherry, of Salmon, Idaho, for petitioning creditors. 
O'Brien & Glennon, of Salmon, for Musgrove Mining Co. 

DIETRICH, District Judge. [1] Certain of its creditors hâve filed 
a pétition in involuntary bankruptcy against the Musgrove Mining 

4S=5For other cases see same topic & KKY-NDMBER in ail Key-Numbered Digests & Indexes 



100 234 FEDEKAL REPORTEE 

Company, to which it interposes a demurrer. The acts of bankruptcy 
alleged are two confessions of judgments by the mining company. No 
exécution bas been issued, but under the state statutes the judgments 
create Hens upon ail real estate owned by the debtor. Assuming that 
it was intended to charge acts of bankruptcy under subdivision a (3) of 
section 3 of the Bankruptcy Act, the mining company's objection is 
that it is not alleged that it f ailed to cause the préférences to be vacated 
or discharged five days before a sale or the final disposition of its 
property. 

The petitioning creditors concède that the pétition is insufficient un- 
der subdivision a (3), but contend that it does fuUy charge an act of 
bankruptcy under subdivision a (2), which provides that an act of 
bankruptcy by a person shall consist of bis having "transferred, while 
insolvent, any portion of bis property to one or more of bis creditors 
with intent to prefer such creditors over bis other creditors." It ap- 
pearing that the préférence, if any there be, has been efïected through 
a légal proceeding, the question arises as to what distinction could be 
made between cases covered by subdivision a (2) and those covered 
by subdivision a (3). If this case should be held to be embraced 
within subdivision a (2), would it not lie within the power of 
creditors to nullify the provision that a préférence accomplished 
by a légal proceeding does not become an act of bankruptcy until notice 
of sale is given and the debtor fails to discharge the lien within the 
prescribed time? Upon considération it is conchided that while a 
préférence efïected through judicial proceedings may fall within one 
class or the other, the two provisions do not necessarily overlap. The 
distinction is to be f ound in the présence or absence of an intent on the 
part of the debtor to give a préférence, and by intent is meant an 
actual, and not merely a constructive, intent. If the debtor has acted 
in such a way as to give a préférence with the intent and purpose so 
to do, it is quite immaterial by what means such purpose is accomplish- 
ed, whether by judicial proceedings or in some other manner. In such 
case the act falls within a (2). Upon the other hand, if, through légal 
proceedings, a préférence has in fact been permitted or procured, but 
without any intent or purpose on the part of the debtor to give it, then 
the act falls within the terms of subdivision a (3). 

[2] The further objection that the pétition is insufficient, in that it 
is alleged only that the confession of judgment was made with the 
intent to prefer, without setting forth the facts and circumstances 
from which such intent may be inferred, is not thought to be well 
taken. It would be quite impracticable to set ont ail the facts and cir- 
cumstances upon which a party may rely to show intent, especially 
where, as hère, it is necessary to show actual rather than constructive 
intent. 

Accordingly the demurrer will be overruled, and the défendant w-ill 
be given 10 days from this date in which to answer. In view of the 
great distance the parties live from any point in the district where 
court is held, I shall be very willing, if counsel so désire, to refer 
the case to a spécial master or examiner for the taking of the testi- 
mony. Such examiner may be a stenographer, and thus the ordinary 



THE SENATOR EICE 101 

compensation of a stenographer may cover the entire expense of such 
référence. Il: is suggested that, if possible, counsel agrée upon such 
person and advise me. 



THE SENATOK EICE. 

THE RESOLUTE. 

(District Court, E. D. New York. May 26, 1916.) 

A.DMIRAXTY lS=3lS) — JUKISDIOTION — MARITIME TORTS. 

A drilllng platforni erected upon posts or piles driven in the eartli, 
althougli standing in navigable ^Yater and used for drilllng in connection 
with the uiaking of a channel for navigation, is a part of the land, and a 
suit to recover damages for injury to such platform through collision be- 
tvveen two passlng vessels is not within the admiralty jurisdiction ; but 
damages for iiijury resulting from the collision to an attendant scow, 
f rom whicli power to operate the drills was furnished, and including de- 
niurrage for loss of use of the scow and wages of its crew during the mak- 
ing of repairs, are recoverable in admiralty. 

[Ed. Note.— B'or other cases, see Admiralty, Cent. Dig. §§ 233, 234 ; Dec. 
Dig. ®=>19.] 

In Admiralty. Suit by John D. Miller against the steam tugs Senator 
Rice and Resolute. On exceptions to report of master. Sustained in 
part, and decree for libelant. 

Foley & Martin and J. A. Martin, ail of New York City, for libelant. 

H. H. Flemming, of Kingston, N. Y., and James K. Symmers, of 
New York City, for the Senator Rice. 

Burlingham, Montgomery & Beecher and E. C. Rouse, ail of New 
York City, for the Resolute. 

CHATFIELD, District Judge. The facts with regard to the colli- 
sion between two tows, and the résultant injury to a drilling platform 
standing on spuds with a scow alongside as tender, are shown in 
the décision rendered in this case. 2i2 Fed. 960. The court found 
fault resulting in some damage cognizable under admiralty jurisdiction. 

Upon a référence the master lias ruled that the scow, which was 
anchored independently in the river, was subject to admiralty jurisdic- 
tion, and lias allowed the damages directly made up from the items of 
lost anchors, ropes, etc., attached to the scow. 

Power from this scow was conveyed by piping to the plant, from 
which, by means of a rigid tube, adapted to resist the tide, the drills 
were actually operated. This plant consisted of a large, heavy, and 
firmly fixed platform, which stood upon the bottoni of the river ; but 
its four large legs, or spuds, with sharpened lower ends, were actually 
driven into the bottom like piles, wherever they rested upon the mud. 
If the structure rested upon hard bottom or rock, it would stand upon 
the surface. But in either case it was a stable and solid structure, and 
differed from one attached to piles driven in the bottoni only in de- 
gree of stability. 

^z:>FoT other cases see same topic & KEY-NUMRER in ail Key-Numbered Digesis & lutle-xes 



102 234 FEDERAL REPORTER 

Under thèse circumstances, the master has disallowed such damages 
as he attributes to injuries occurring upon or to this platform. This 
distinction seeras to be correct. The cases of Phœnix Con. Co. v. The 
Poughkeepsie, 212 U. S. 558, 29 Sup. Ct. 687, 53 L. Ed. 651, affirm- 
ing 162 Fed. 494, and the case of United Engineering & Contracting 
Co. V. N. Y., N. H. & H. Tug Transfer No. 5, The Moran, and The 
Lackawanna (unreported, but stated in the opinion in 162 Fed. 494), 
as also the case of Martin v. West, 222 U. S. 191, 32 Sup. Ct. 42, 56 
h. Ed. 159, 36 h. R. A. (N. S.) 592, show that injuries occurring upon 
a structure constituting a part of the land or carrying out land activities 
(Cleveland, T. & V. R. Co. v. Cleveland S. S. Co., 208 U. S. at page 
321, 28 Sup. Ct. 414, 52 L. Ed. 508, 13 Ann. Cas. 1215) are not with- 
in the jurisdiction of the admiralty court. See, also, Postal Telegraph- 
Cable Co. v. P. Sanford Ross, 221 Fed. 105, in which thèse cases are 
generally discussed. 

The rule apparently now well established is to the effect that a plat- 
fé^rm erected upon posts or piles and given the character of a dock 
or land structure, even though entirely isolated from the land and 
standing in navigable water, is a part of the land itself, and that acts 
occurring thereon are not within admiralty jurisdiction. Nor was the 
mère fact that the drilling was being done in connection with the mak- 
ing of a channel for navigation sufficient of itself to treat this entire 
plant as an aid to navigation, as was the beacon or buoy in the case 
of The Bïackheath, 195 U. S. 361, 25 Sup. Ct. 46, 49 E. Ed. 236, and 
in the récent case of Eatta & Terry Construction Co. v. Tlie Raith- 
moor, 241 U. S. 166, 36 Sup. Ct. 515, 60 L. Ed. 937, decided by the 
United States Suprême Court on May 1, 1916, reversirig 186 Fed. 849. 

Hence the report of the master should be confirmed generally. 
Two items, however, should be allowed to the libelant which the mas- 
ter has excluded. The sums of $225 demurrage for loss of use of 
the scow, and $196.25 wages, were disallowed by the master upon 
the theory that the delay was caused by inability to use the platform. 
The master, therefore, held thèse items to be a part of the damage not 
recoverable in admiralty. But the proximate cause of ail the damage 
was the collision. The loss of use of the scow was the loss of use 
of the floating vessel, and it makes no différence that the time for 
which demurrage is asked was coextensive with the time necessary 
to repair damage to something on land. If the proximate cause of 
the in jury were something occurring on the platform, the master 
would be correct in his conclusion. The claimant contends that the 
word "damage" should be distinguished from "in jury," which he claims 
was confined to the platform. But the "damage" in question is not 
the restoration or repair of the platform. It is for loss of use of the 
scow. 

The libelant is entitled to recover in this case ail the damage result- 
ing within admiralty jurisdiction from the collision which happened 
over by the New York shore and (whether or not damage is also re- 
covered for the losses on the platform) this court has the right to fix 
the loss from interférence with the using of the scow itself. The 
item for demurrage will be allowed. 

The item for wages of the crew of the scow is in the same category, 



HASTINGS V. HOOG 103 

but the libelant has admitted that at least one-half of thèse wages cov- 
ered work devoted to repairing and resetting the platform, and hence 
one-half of the wage item will be disallowed. 

The exceptions therefore will be sustained to the extent of allowing 
$225 for demurrage and $93.12 wages, for which the libelant may hâve 
a decree in addition to the sum of $244.49 found by the master. The 
libelant will be allowed a docket fee and one-half of other taxable 
costs. 



HASTIXGS et al. v. HOOG et al. 

(District Court, M. D. Pennsylvania. January Term, 1915.) 

No. 209-A. 

1. Courts <®=3308 — Fédéral Courts — Jurisdictiox — Diversitx of Citizej;- 

SHIP. 

Wliere there are two or more joint plalntlfCs and two or more défend- 
ants, eacli of the plaintifCs, having sued .iointlv, must be capable of suing 
eacli of the défendants in order to support jurisdictlon of the fédéral 
court on the ground of diversity of citlzenship. and where some of the 
plaintifCs are citizens of the same state as défendants the fédéral court 
has no jurisdietion. 

[Ed. Note. — For other cases, see Courts, Cent. Dig. §§ 855, 856; Dec. 
Dig. ©=308.] 

2. CouETs ©=324 — Fédéral Courts — Jueisdiction — Mode of Kaisinq. 

In the fédéral courts, where jurisdietion is based on diversity of citl- 
zenship, the objection that the court was without jurisdietion may be 
raised after défendants, liave answered to the merits. 

[Ed. Note.— For other cases, see Courts, Cent. Dig. §§ 882-SS4; Dec. 
Dig. ©=324.] 

In Equity. Bill by Phillip flastings and others against Dr. E. Hoog 
and others. On motion to dismiss. Motion sustained, and bill dis- 
missed. 

A. A. Vosburg, of Scranton, Pa., and J. B. Jenkins, of Carbondale, 
Pa., for plaintiffs. 
John J. Toohey, of Scranton, Pa., for défendants. 

WITMER, District Judge. [ 1 ] Défendant cames by motion to dis- 
miss this suit for want of jurisdietion. The bill discloses the fact that 
not ail of the parties, either plaintiffs or défendants, are citizens of 
States other than Pennsylvania. In fact, ail are citizens hère, with 
the exception of one of the numerous plaintififs named in the bill. 
Where there are two or more joint plaintiffs, and two or more défend- 
ants, and as in this case, having sued jointly, each of the plaintiffs must 
be capable of suing each of the défendants, in order to support the 
jurisdietion founded on diverse citizenship. Strawbridge et al. v. 
Curtiss, 3 Cranch, 266, 2 L. Ed. 435; New Orléans v. Winter, 1 
Wheat. 91, 4 L. Ed. 44; Coal Co. v. Blatchford, 11 Wall. 172, 20 
L. Ed. 179; Bissell v. Horton, 3 Day, 281, Fed. Cas. No. 1,448; Ward 
V. Arredondo, 1 Paine, 410, Fed. Cas. No. 17,148; Anderson v. Jack- 

®=»For other cases see same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



104 234 FEDERAL EEPORTER 

son, 2 Paine, 426, Fed. Cas. No. 357; Ketchum v. Farmers' Loan & 
Trust Co., 4 McLean, 1, Fed. Cas. No. 7,736; Bargh v. Page, Fed. 
Cas. No. 980, 4 McLean, 10; Tuckerman v. Bigelow, 21 Law Rep. 
208, Fed. Cas. No. 14,228. Accordingly the test was reiterated by 
Chief Justice Waite in delivering the opinion in Pacific R. R. Co. v. 
Ketchum, 101 U. S. 298, 25 L. Ed. 932 : 

"In the Removal Cases, 100 U. S. 457 [25 L. Ed. 593], it wns lieW that, for 
the purposes of iurlsdlction, the court had power to ascertaiii the real mat- 
ter in dispute, and arrange the parties on one side or the otlier of the dis- 
pute. If in sucli arrangement it appeared that tliose on one side were ail 
citizens of différent states from those on the otlaer, jurisdiction miglit be eu- 
tertained and the cause proceeded with." 

[2] But counsel argues that défendants may not take exception, 
having answered to the merits. The reply is that, if Congress has not 
conferred the authority upon the court to entertain the action, it is of 
no importance what the suitors do to invoke it. Tlie fédéral courts 
hâve only limited jurisdiction. Their authorities and powers are strict- 
ly statutory, and they can acquire jurisdiction of a case only in the 
manner pointed out by the statute. Farmington v. Pillsbury, 114 U. 
S. 138, 5 Sup. Ct. 807, 29 L. Ed. 114. Hence consent of parties to a 
suit cannot confer jurisdiction. Pacific R. R. Co. v. Ketchum, supra; 
Dawson v. Columbia Trust Co., 197 U. S. 181, 25 Sup. Ct. 420, 49 
L. Ed. 713 ; Thomas v. Board of Trustées, etc., 195 U. S. 207, 25 
Sup. Ct. 24, 49 L. Ed. 160. In the latter case. Justice Harlan, deliver- 
ing the opinion of the court, says : 

"It is equally well established that, when jurisdiction dépends upon diverse 
citizenship, tlie absence of sufïicient avennents or of faets in tlie record sliow- 
ing such required diversity of citizenship is fatal, and cannot be overlooked 
by the court, even if the parties fail to call attention to the defect, or con- 
sent that it may be waived. Mansfield By. Co. v. Swan, 111 U. S. 379 [4 Sup. 
Ct. 510, 28 L. Ed. 402] ; Martin v. Baltimore & Oliio R. R. Co., 151 U. S. 673 
[14 Sup. Ct. 533, 38 L. Ed. 311]; Powers v. Chesapeake & Ohio Ky., 169 U. 
S. 92. 98 [18 Sup. Ct. 204, 42 L. Ed. 673]. As late as in Minnesota v. North- 
ern Securities Co., 194 U. S. 48, 62, 63 [24 Sup. Ct. 598, 48 L. Ed. 870], we 
said both parties insisting upon the jurisdiction of the Circuit Court: 'Con- 
sent of the parties eau uever confer jurisdiction upon a fédéral court.' If 
the record does not affirmatively show jurisdiction in the Circuit Court, we 
must, upon our own motion, so déclare, and make such order as will pre- 
vent that court from exercising an authority not conferred upon it by stat- 
ute." 

The motion is sustained, and the bill is dismissed. 



HAAS V. LEO FEIST, INC. 105 

HAAS V. LEO FEIST, Inc., et al. 
(District Court, S. D. New York. May 23, 1916. On Eehearing, June 8, 1916.) 

1. Copyrights i©=»83 — Infbingement — Bvide:^ce. 

In an action for infringing a copyrighted song, évidence lield to warrant 
a flndlng of infrlngement. 

[Ed. Xote. — For other cases, see Copyrights, Cent. Dlg. §§ 74-76; Dec. 
Dlg. <S=>83.] 

2. Copyrights ®='52 — Inpringement — Damages. 

One who publishes a song Infringing an earlier copyrighted song is 
liable in damages, regardless of his innocence of intent. 

[Ed. Note. — For other cases, see Copyrights, Cent. Dlg. § 50 ; Dec. Dlg. 
®=>52,] 

3. Copyrights <S=>87 — Infringement — Accountino. 

Where a copyrighted song is infringed, and défendant is required to 
acconnt, the accounting will follow the ordinary rules governing equity. 

[Ed. Note. — For other cases, see Copyrights, Cent. Dlg. § 81 ; Dec. Dlg. 
<g=o87.] 

4. Copyrights <©=387 — Infringement — Delay. 

Those interested in a copyrighted song after leamlng of the infrlnge- 
ment delayed proceedlngs. Tliereafter the publisher, who was innocent 
of any intentional wrongdoing, expended large sums in pusliing the sale 
of the song. Held that, as against him, the owuers of the copyright could 
not recover any profits accruing after they discovered the Infringement, 
but as against the aotual Infringer they inlght recover any profits, this 
being pavticularly true where the song was of a purely ephemeral nature. 

[l'.d. Note. — For other cases, see Copyrights, Cent. Dlg. § 81; Dec. Dlg. 
'©=587,] 

5. Copyrights <S=390 — Infringement — Attorney's Fées. 

Wliere the owners of a copyright, wliich was Infringed, did not make 
objections on first discovering tlie infringement, and thus allowed de- 
fendant to expend large sums of m'oney lu advertising, an allowance of 
attorney's fées, being a matter of discrétion, will not, in a suit for injunc- 
tion and an accounting, be granted. 

[Ed. Note. — For other cases, see Copyrights, Cent. Dig. § 85; Dec. Dlg. 
<g=90.] 

On Reliearing. 

6. Copyrights iS==>75 — A'alidity' — Applhîation. 

Copyright Act March 4, 1909, c. :!20, § 9, 35 Stat. 1077 (Comp. St. 1913, 
§ 9530), déclares that any person entitled thereto may secure a copyright 
for his work by publication with the required notice of copyright, while 
section 18 (Comp. St. 1913, § 9539,i déclares that the notice of copyright 
shall be accompanied by tlie nauie of tlie copyright proprietor. A copy- 
right proprietor first took a copyright for a song in his own naine, but 
the printed copies stated the copyright owner to be a Company which had 
no existence. On being asked to correct tlie discrepancy, the proprietor 
again applied in his own name, but stated he was président and treasurer 
of the flctitlous couipany, and ail copies bore the name of the company. 
By the laws of the state In which the proprietor resided the use of such 
name was illégal. Jleld that, while a contract inade under such flctitlous 
name might be enforced ir^ the courts, yet relief protecting such name 
could not be granted, and therefore no suit for infringement of copy- 
right will lie. 

[Ed. Note. — For other cases, see Copyrights, Cent. Dlg. | 65 ; Dec. Dlg. 
<®=>75.] 

fiC3For other cases eee same topLc & KEY-NUMBER ia ail Key-Number«d Digests & IndwtoB 



106 234 FEDERAL REPORTER 

In Equity. Suit by Harry Haas against Léo Feist, Incorporated, and 
another. Decree for an injunction and an accounting by défendants. 

Thls is a suit in equity to enjoln the Infringement of a copyrighted song 
entitled, "You Will Never Know How Much I Really Cared." In the spring of 
1914 tlie plalntiff, who was at that tlme in the eniploy of one Adolph Deutsch, 
composed the melody and diorus of the song In question, which was reduced 
to notation by one Rouch, and for which one Cahalin wrote some words. A 
copyright to the song was taken in the name of the Haas & Cahalin Music 
Company, a trade-name of Deutsch. Haas was to get one-third of ail the 
profits from the sale of the song, and Cahalin one-third, and Deutsch the 
remaining third. About 2,000 copies were struck ofC, 1,000 for sale and 
1,000 to be distributed among singers and other performers in the hopes 
of popularizlng it. AU the copies were sold by the Ist of January, 1915, 
but the song proved a failure, except to the extent of the 1,000 copies 
mentioned, and no further édition was published. In November of 1914 
Cahalin, who had a number of the songs for distribution, gave one to Samuel 
Smith, a cabaret singer, who at the time was in and out of the studio of the 
défendant, Léo Feist, Incorporated, where the défendant Piantadosi was 
employed. About the middle of December, 1914, Cahalin called at the de- 
fendant Feist's studio and there saw Smith and the défendant Piantadosi. 
Smith invlted him to corne in to hear a song which Piantadosi had just 
written and which they were both to exploit. He went in, and Piantadosi 
played upon the piano the infringing song, which is entitled, "I Didn't 
Baise My Boy to be a Soldier." Cahalin at once was struck with the 
similarlty between the chorus of Piantadosi's song and Haas', but said 
nothing at the time. In December the défendant Feist began wldely to ad- 
vertlse the infringing song in newspapers ail over the country. It was copy- 
righted on December 19, 1914, as an unpublished work, and as a published 
work on January 5, 1915, after which it was put on sale, and at once sprang 
into the widest possible popularity. During the flrst three months of 1915 
more than 650,000 copies were sold, but, being of a most ephemeral and trivial 
character, its vogue quickly dlminished, and at présent it bas substantially 
dlsappeared from the market. Haas flrst heard the song in the latter part of 
January, 1915, when performed at a public restaurant, and the similarlty 
between the choruses at that time struck him. He and Cahalin spoke of it 
together during the month of January, but did nothing until the followlug 
March, when they consulted a lawyer, who In turn took no action until thls 
suit was brought on the 28th of January, 1916, at wlilch time the song 
had long since run its course. 

The défendant Feist bas a large publishing house in the city of New York 
and employed the défendant Piantadosi as a casual composer of mélodies, 
though he has small knowledge of musical notation and small skill in 
playing. His custom was, when lie composed a song, to play it over to some 
other employé of Feist, in this case one Dauks, who took down the simple 
thème upon a "lead sheet," as it is called, and afterwards worked it up into 
so much musical form as was necessary, for which work the défendant Feist 
paid Danks by the pièce. The whole melody of the song, "I Didn't Ralse My 
Boy to be a Soldier," Piantadosi gave to Danks during the week of November 
21-28, 1914, as appears with certainty by the mémorandum which Danks made 
at the time and upon which he charged the défendant Feist. Piantadosi swore 
tliat he had composed it about the middle or latter part of October in the 
year 1914, at which time he had never heard of the plaintifî's song. He tes- 
tified that the words were in existence before that time, and that It was to 
them that he had written the music, although the author of the words was 
not called, nor was his présence accounted for. He denied that Smith had ever 
given to him a copy of the plaintiff's song, or that at the time when he wrote 
the song Smith was in tlie employ of the défendant Feist, or that he ever 
played over the song for Cahalin personally while Smith was présent, as 
Cahalin testifled. The plalntiff in rebuttal called Woods and DuUy, who each 
swore that Piantadosi in December, 1914, played the song for Cahalin In their 
présence, as Cahalin had said. Neither party called Smith, who was said to 
be In Canada at the time of the trial. 



HAAS V, LEO FBIST, INO. 107 

William H. Griffin, of New York City, for plaintiff. 
Nathan Burkan, of New York City, for défendant Léo Feist, In- 
corporated. 

Charles Goldzier, of New York City, for défendant Piantadosi. 

LEARNED HAND, District Judge (after stating the facts as above). 
[1] Piantadosi's piracy of the chorus seems to me sufficiently estab- 
lished for a finding. That Cahalin gave a copy to Smith and that 
Smith had access to Piantadosi I believe upon the weight of évidence. 
Cahalin was a better witness than Piantadosi, who did not impress me, 
and who was not only contradicted in one matter by Woods and Dully, 
but was proved untruthful as to his borrowing of thèmes upon other 
occasions. The opportunity I therefore find to bave existed at about 
the proper time. For the remaining part of the inference, I rely upon 
such musical sensé as I hâve. I am aware that in such simple and 
trivial thèmes as thèse it is dangerous to go too far upon suggestions 
of similarity. For example, nearly the whole of the leading thème of 
the plaintiff's song is repeated literally from a chorus of Finafore, 
though there is not the slightest reason to suppose that the plaintiff 
ever heard the opéra. Nevertheless, between the two choruses in ques- 
tion there is a parallelism which seems to my ear to pass the bounds 
of mère accident. If the choruses be transposed into the same key 
and played in the same time, their similarities become at once apparent. 
In certain of the bars, only a trained ear can distinguish them, and 
their f orm and rhythm is quite the same. It is said that such similari- 
ties are of constant occurrence in music, and that little inference is per- 
missible. Perhaps I should not take them as enough without the op- 
portunity proved, the habits of Piantadosi shown in other instances, 
and the serions question of his credibility ; but it would be absurd not 
to regard them as évidence of the most impressive character in com- 
bination with the rest. The case is not of the mère suggestion of a 
bar common to each, but of a continuously suggestive mélodie parallel- 
ism, except at the end. Identity was not to be expected, but dérivation 
seems to me proved. 

[2] The plaintiff's right to damages against the défendant Feist, re- 
gardless of its innocence, is unquestionable. Gross v. Van Dyk Gra- 
vure Co., 230 Fed. 412, C. C. A. . And in spite of some lan- 

guage in that opinion looking to the possibility of a différent rule for 
profits, I think the same should apply to them as to damages. When, 
as in copyright, the law provides a form of notice, it imposes upon 
every one at his péril the duty to learn the facts conveyed by the 
notice. Without some such rule it could not be a tort innocently to copy 
a copyrighted work, because it could not be said that among the rea- 
sonable resuit of the def endant's acts was comprised an inf ringement. 
It becomes a tort only when the statute imposes a duty on every one 
to advise himself of the copyright. I cannot see why there should 
be any différence between damages and profits in this respect. Hence 
a decree for an accounting of profits will go against both défendants. 

[3, 4] It does not necessarily foUow, however, that the accounting 
shall be exempt from the usual principles of equity. Indeed, the con- 



108 234 FEDERAL REPORTER 

duct of the plaintiff may hâve a controlling effect upon ît. West Pub. 
Co. V. Edward Thompson Co., 176 Fed. 833, 100 C. C. A. 303. The 
plaintiff's assumption that the statute always rigidly requires an ac- 
counting is shown by that case to be without warrant. The delay was 
of 16 years in that case, but the infringing publication took that long 
to appear, and the principle is as well illustrated in the case at bar 
as it was there. Equity will control its peculiar remedy of an account 
of profits according to its own sensé of justice. It must be obvions 
to every one familiar with équitable principles that it is inéquitable for 
the owner of a copyright, with full notice of an intended infringement, 
to stand inactive while the proposed infringer spends large sums of 
money in its exploitation, and to intervene only when his spéculation 
bas proved a success. Delay under such circumstances allows the 
owner to speculate without risk with the other's money ; he cannot pos- 
sibly lose, and he may win. If the défendant be a deliberate pirate, 
this considération might be irrelevant, and I think it such as to Pianta- 
dosi ; but it is no answer to such inéquitable conduct, if the défendant 
Peist is innocent, to say that its innocence alone will not protect it. It 
is not its innocence, but the plaintiff's availing himself of that inno- 
cence to build up a success at no risk of his own, which a court of 
equity should regard. A few weeks' delay in the case of a song so 
ephemeral as this may hâve the same effect as 16 years, when the pub- 
lication is a légal encyclopedia in 30 volumes. 

This rule cannot be effectively applied until there is a référence. 
Cahalin had a bénéficiai interest in the song to the extent of one-third. 
His knowledge of the proposed infringement went back to December, 
and debars bim from any profits whatever, since the défendant did 
most of its exploitation after that time. To the extent, therefore, of 
one-third of the profits, the plaintiff cannot recover. Haas learned of 
the infringement from Cahalin about the middle of January, and he 
cannot recover, to the extent of his interest of one-third, after that 
date, provided the défendant spent substantial sums in exploiting the 
song thereafter. It would be impossible to say how much of its sub- 
séquent success may hâve been due to its subséquent exploitation. 
Deutsch, who was the légal copyright owner, does not appear to bave 
had Personal notice of the song, and his interest may be affected by no 
estoppel. The relations of Haas, Cahalin, and Deutsch will be the 
subject of inquiry upon the référence. It may very well develop that 
the three stood in such relation that notice to one was notice to ail ; the 
master will exercise a reasonable degree of latitude in inferencé upon 
that subject. It is impossible, before such facts are ascertained, more 
precisely to fix the rights of the parties. 

It may perhaps be impossible for the défendant Feist, under the 
rule in Dam v. Kirk La Shelle, 175 Fed. 902, 99 C. C. A. 392, 20 Ann. 
Cas. 1173, 41 L. R. A. (N. S.) 1002, to avoid a recovery of ail the net 
profits subject to thèse limitations, although it is perfectly apparent to 
unsophisticated common-sense that the song's success was due to its 
sentiment and its appositeness to a certain strain of popular feeling at 
the time. This makes it ail the more pressing that, if Haas and Cahalin 
allowed the matter to go on without protest, they should be defeated 
in such a spéculative enterprise as far as the ruies of law allow. 



HAAS V. LEO FEIST, INO. 109 

[5] There must be costs, since the statute requires it; but there 
will be no attorney's allowance, for that rests in discrétion. There 
were no damages (for there was nothing of value to injure), unless 
the accounting turns out wholly in favor of the défendants, in which 
case the damages against Feist will be $250. 

A decree may therefore pass for an injunction and an accounting. 
The défendant Piantadosi must account without condition; but, upon 
the défendant Feist's accounting, the master, after first stating the ac- 
count in full, with proper crédits for ail the exploitation of the song, 
and ascertaining the net profits, will consider whether Haas' one- 
third shall be allowed after January 15, 1915, or whenever he finds 
Haas learned of the song, and report the proper figures upon the sev- 
eral hypothèses open. He will then consider whether Deutsch's one- 
third while he had title was not affected by notice of the proposed 
inf ringement, and, if so, to what extent. 

On Rehearing. 

The défendant now moves for a rehearing upon new proof, which 
I hâve heard, and upon a point of law raised in the answer, bvtt not 
previously urged in the argument. As to the new proof it has not 
changed my conviction ; the witness Gilhooly appeared much more 
convincing to me than Smith, and the resuit was only to confirm my 
belief that Smith got the song at about the time Cahalin originally says 
he gave it to him. 

[6] The point of law is this: Deutsch, the copyright proprietor, 
was a maker of raincoats, and employed Haas and CahaHn on a 
salary to write songs and words for him, giving them each also a third 
interest in the profits. The agreement was that Deutsch should hâve 
title to the copyright and should take it out personally. His first 
application to the Copyright Office on April 22, 1914, was in his own 
name, but the printed copies of the song stated the copyright owner to 
be "'Haas & Cahalin Music Company." When asked to correct the 
discrepancy by letter of April 27, 1914, he filed a new application 
April 28, 1914, again in his own name, and wrote a letter, saying that 
he was président and treasurer of the Haas & Cahalin Music Com- 
pany, of which he was sole owner. The letter was certainly mislead- 
ing, if not actually false. There was no such company, but the name 
was merely fictitious, chosen by him for his own purposes as a trade- 
name in the venture which he proposed with Haas & Cahalin. AU 
the copies of the song bore the name "Haas & Cahalin Music Com- 
pany" ; none bore the name "Deutsch." 

Section 18 of the Copyright Act requires that ail copies shall bear the 
"name of the copyright proprietor," in compliance with section 9. 
Therefore the question is whether the name, "Haas & Cahalin Music 
Company," was the name of Deutsch, the copyright proprietor. It 
may be that a copyright proprietor may make his application for regis- 
tration in his real name, and still use an assumed name upon his no- 
tices (Werckmeister v. Springer Lith. Co. [C. C] 63 Fed. 808), al- 
though it is quite possible that in that case both the application and 
the notice were in the assumed name (Werckheimer v. Pierce & Bush- 



110 234 FEDERAL REPORTEE 

nell Mfg. Co. [C. C] 63 Fed. 445). I may assume, however, that the 
use of two names does not invalidate the copyright, provided the pro- 
prietor has the right to use either. No doubt he may use any name 
both in appîying for registration and in making his notice of copyright ; 
but it seems to me qui te clear that the names which he uses must be 
légal where he uses them, else they cannot be called his name at ail. 
The trouble in the case at bar was that Deutsch was forbidden by the 
laws of New York, of which he was a citizen, to use the name, "Haas 
& Cahalin Music Company." He was forbidden in the first place to 
use the name "Company" by section 22 of the Partnership Law 
(Consol. Laws, c. 39) and section 924 of the Pénal Law (Consol. Laws, 
c. 40), and thèse same provisions forbade his using the name "Haas 
& Cahalin" as his partners when they were not partners. This pro- 
hibition is absolute regardless of any certificates. Nothing could hâve 
made it valid. If the name be thought to be a merely fictitious one, he 
was forbidden to use it by section 440 of the Pénal Code, which is a 
quite independent provision and does not take the place of section 
924. Jenner v. Shope, 205 N. Y. 66, 98 N. E. 325. At common law 
it is true that a man may adopt any name he chooses so long as he 
be engaged in no fraud, and he need not use it exclusively in ail his 
businesses. But New York has regulated this common-law right, and 
limited it by the statutes mentioned, and so under the law of Deutsch's 
domicile, by which he was governed, he had not the common-law right 
to use any name that he chose. 

This statute has been many times before the courts of New York, 
but in every case, so far as I hâve found, as a défense to actions upon 
contracts executed by one of the parties in an illégal name. Those 
défenses hâve failed each time, the courts as a rule saying that, no 
matter whether the name be illégal or not, the contract was actually 
made, and was no less an obligation because the obligée had used a 
name which he ought not to hâve used. On principle there can be no 
question of this doctrine, for a contract is made with a person, and 
not with a name, and it is an irrelevant défense in an action on con- 
tract that the party may hâve committed a crime provided it does not 
affect the contract itself. In some cases there is talk of the distinc- 
tion between an executory and executed contract, but this was aban- 
doned and the law of New York became settled, as I hâve stated. The 
most important cases are Gay v. Seibold, 97 N. Y. 472, 49 Am. Rep. 
533 ; Wood v. Erie R. R. Co., 72 N. Y. 196, 28 Am. Rep. 125 ; Sin- 
nott V. German-American Bank, 164 N. Y. 386, 58 N. E. 286. There 
are many cases in the Appellate Division which it is not necessary 
to cite, as the preceding cases control. 

It so happens that in none of the cases, either in the Court of 
Appeals or in the Appellate Division, did the plaintiiï sue in equity, 
and it therefore must be still held an open question whether his use 
of an illégal name would disquahfy him from suing there. That ques- 
tion in my judgment does not arise hère, as I shall show hereafter, 
and I wish it to be distinctly understood that I do not dismiss this bill 
on the theory that the plaintiff does not come into equity with clean 
hands. The vice in my judgment goes to the notice itself and the 



HAAS V. LEO FBIST, INO. 111 

statute forbids a suit where notice bas not been given. Section 12. 
Yet I can hardly think that the courts of New York would permit 
a plaintiff to protect an illégal name, for example, against unfair trade 
use, if that question arose. 

In Jenner v. Shope, supra, it was held that a contract for the sale 
of a partnership name used illegally by the plaintiff's décèdent was 
itself illégal and could not be enforced. The case shows, if proof 
be necessary, that the use is illégal for ail purposes, and, that being so, 
I think that Deutsch had no right to use the name upon bis notices. 
It was not, therefore, the "name of the copyright proprietor," as in- 
tended by section 18. The plaintiff urged that such a doctrine would 
allow a State statute to control the copyright law ; but when that law 
required copyright proprietors to afSx their names it certainly intended 
only such names as they may lawfuUy use under the law of their 
domicile. It cannot be supposed that Congress intended to make that 
lawful in this instance within a state which the state made unlawful 
for every other purpose. Doubtless Congress might bave the power 
to make such an enactment, but so to interpret this statute would pré- 
suppose a wanton purpose of discord. It seems to me whoUy fanciful 
to suppose that Congress intended to permit the use of names which 
it was a crime under the state law to use. 

Judge Shipman's décision in Scribner v. Allen (C. C.) 49 Fed. 854, 
upon which plaintiff chiefly relies, is not in point, because in that 
case the plaintiff's name was not illégal under the statute as it then 
existed. Section 1, chapter 262, L,aws of 1886 (now section 22 of the 
Partnership Law). That law then provided and now provides that 
the name of a partnership should not contain the name of a partner 
who was not a member of the firm, and that, if the word "Company" 
was used, it should represent an actual partnership. The plaintiff's 
name in that case was Charles Scribner's Sons, and Charles Scrib- 
ner was the person doing business. The word "Company" did not 
appear, and the name is therefore not within the statute in fact. Sec- 
tion 440 of the Pénal Code was not then in existence, nor was section 
363b of the old Pénal Code. On the facts, therefore, the case 
does not apply, and Judge Shipman's language gives no reason for 
thinking that he had in mind any such défense as is hère presented. 
The name, "Charles Scribner's Sons," probably in fact was quite légal 
under the then existing law, which bas been re-enacted into sections 
20 and 21 of the présent Partnership Law. The case came before 
Judge Shipman on demurrer, and ail he decided was that the alléga- 
tion of ownership was suihcient without setting up ail the facts requi- 
site under sections 20 and 21. In effect his décision was that the 
facts, if relevant at ail, were only matter of défense. 

For thèse reasons I think that the présent point taken by the défend- 
ant is good and that no suit lies under section 12 under the notice of 
copyright in its présent form. The resuit is that the bill will be dis- 
missed upon the merits, with costs. 



111 234 FEDERAL REPORTEB 

EARTWELL et al. v. OELAWARE, L. & W. H. CO, 
(District Court, N. D. New York. July 22, 1916.) 

1. Bailboads <&=5328(1) — Crossino Accidents— Dutt of Car-e. 

One about to drive from behind a railroad station onto tlie track, who 
could not see the tracks for any great distance, is bound to loolî and 
listen before venturing on the traelis and, if neeessary, to stop. 

[Ed. Note.— For other cases, see Kailroads, Cent. Dig. §§ 1057, 1060, 
1009; Dec. Dig. cg=>328{l).] 

2. Eailboads <S=>347(2) — Cbossinq Accidents— Nkgligekck. 

Wliere the tracks of two railroad companies ran parallel and only a 
stiort distance apart, so tliat travelers on the highvvay could not dis- 
tinguish whether a train was on one track or anotUer, évidence that It 
was customary to equip much traveled crossings with an automatic bell 
is admissible in an action for the killing of a traveler at the crossing by 
a train, but the absence of a bell will not, as a matter of law, establish 
the company's négligence. 

[Ed. Note. — For other cases, see Eailroads, Cent. Dig. $ 1125; Dec. 
Dig. ®=>347(2).] 

3. Railroads <S=350(1, 13) — Ceossing Accidents. 

In an action for the death of one run down at a railroad crossing, 
questions of the railroad company's négligence and of deceased's contrib- 
utoiy négligence held, under the évidence, for the jury. 

[Ed. Note.— For other cases, see Eailroads, Cent. Dig. §§ 1152, 1166; 
Dec. Dig. ®=>350(1, 13).] 

4. New Trial ®=>44(3) — Misconduct of Jubors. 

Before a map, showing the crossing at which deceased was ran down by 
defendant's train, was put in évidence, it was hung up in plain sight of 
the jury, and sonie of the jurors, their attention having been directed to 
It, examlned it before it was introduced in the évidence. ïhe attention 
of the court being called, the jurors were told that it was improper for 
them to examine or consider the map until it was placed in évidence, and 
they immediately desisted. Held, that as the map was subsequently put 
in évidence, that the jurors had previously examlned It, coupled with 
tlie fact that they were heard discussing the case without any show- 
ing of the nature of the discussion, does not warrant a new trial, the 
court directing them not to dlscuss the case before it was submitted to 
theui, because it must be assumed that the jurors do their duty. 

[Ed. Note.— For other cases, see New Trial, Cent. Dig. §§ 82-84 ; Dec. 
Dig. <g=44(3).] 

At Law. Action by Edward H. Hartwell and another, as adminis- 
trators of the esta te of Grâce E. Hartwell. deceased, against the Dela- 
ware, Lackawanna & Western Railroad Company. There was a ver- 
dict for défendant, and plaintifïs move for new trial. Motion denied. 

Motion to set aside the verdict of the jury in favor of the défendant 
and for an order directing a new trial on the grounds of error in the 
admission and rejection of offered évidence ; that the verdict was con- 
trary to the évidence ; but principally on the ground of misconduct of 
certain of the jurors in examining a map showing the place of the acci- 
dent with distances and .structures before same was part of and of- 
fered in évidence, and in discussing the case in the corridors of the 

@=7For other cases see sune topic & KBY-NUMBER In ail Key-Numbered Dlgests & Indexes 



HAKTWELL V. DELAWARE, L. & W. K. CO. 113 

courthouse during the progress of the trial, and not in the présence of 
the court, and before the case was finally submitted to the jury. 

Stephen Holden, of Mt. Vernon, N. Y., for the motion. 
Thomson & Byrne, of Syracuse, N. Y., opposed. 

RAY, District Judge. The neghgence of the défendant alleged in 
the complaint was failure to ring the bell on the engine and blow the 
whistle, thereby giving warning to the plaintiffs' intestate of the ap- 
proach of the defendant's passenger train, running past the station at 
Galena, N. Y., without stopping, at the rate of about 30 or 40 miles 
per hour. Early in the trial, and after the jury had been impaneled 
and sworn, the plaintiiïs offered évidence, and proposed to give évi- 
dence, showing that there was in use at the time of the accident in 
question a gong or bell, located at railroad crossings on defendant's 
road and on other railroads, and well known, which would give notice 
and warning to persons about to cross the tracks, operated by the train 
itself as it approached the crossing, but that no such gong or bell had 
been installed or was in use at the crossing in question, and that the 
conditions were such as to make the installation of such bell or gong 
reasonably necessary, and that its absence was négligence on the part 
of the défendant in view of ail the circumstances and surroundings 
and was the proximate cause of the collision and injury to the plain- 
tiffs' intestate which resulted in her death, even if the bell was rung 
and the whistle was sounded. As no such négligence on the part of 
the défendant railroad company had been pleaded unless by mère sug- 
gestion, the court permitted an amendment to the complaint, fully cov- 
ering that proposition, and then allowed proof that such gongs or 
bclls were installed and in use at similar railroad crossings, not only 
by the défendant company, but by other railroad companies, and were 
a well-known appliance for giving warnings to travelers on the public 
highway about to pass over railroad crossings. 

At Galena, a small hamlet in the town of North Norwich, about 6 
miles north of the city of Norwich and for a distance of at least half 
a mile northerly and southerly from the station at that point, the Dela- 
ware, Lackawanna & Western Railroad tracks and the New York, 
Ontario & Western Railroad tracks parallel each other at a distance of 
about 100 feet from each other. The tracks of the Delaware, Lacka- 
wanna & Western Railroad are laid on a fil!, and are at least 3, 4, or 5 
feet higher at the highway crossing than those of the New York, On- 
tario & Western Railroad. A public highway running easterly and 
westerly crosses the tracks of both railroads leading from Galena west- 
erly to Plymouth and South Plymouth some 5 or 6 miles distant. This 
highway is traveled mainly by farmers. The station at Galena of the 
Ontario & Western Railroad Company is north of this highway, and 
on the westerly side of its tracks, while the station of the Delaware, 
Lackawanna & Western Railroad Company is on the easterly side of 
its tracks, and some 12 or 15 feet south of the traveled part of this 
public highway. The dépôt of the défendant company is about 40 
feet long, parallel with the tracks, and 20 feet wide, and its platform, 
10 feet in width, extends to within 3 feet of the most easterly rail of 
2U F.— 8 



114 234 FEDERAL REPORTER 

the tracks. This dépôt is built into the side of the fill on which the 
tracks are laid, so that the easterly side of the dépôt is 3 or 4 feet 
lower down than the platform in front on a level with the tracks. At 
a distance of about 1,000 feet south of the dépôt there is a curve, 
which prevents a person at the dépôt and on the easterly side thereof 
from seeing whether a train approaching from the south is on the 
defendant's tracks or on the tracks of the Ontario & Western Railroad 
Company, which are east of the defendant's tracks. A person on the 
easterly side of the dépôt can see a train approaching from the south 
for 2,000 feet at least, but cannot détermine whether the engine and 
train approaching is on the one road or the other, even if familiar 
with the locality. A passenger train passes north on the Ontario & 
Western Railroad nine minutes ahead of the train moving north on the 
defendant's road at about 4:.50 p. m. each day. 

The dépôt of the défendant railroad company at Galena is a com- 
bination dépôt, and used for passengers, freight, and express matter, 
so that people come and go at any hour of the day or evening, and are 
notified and permitted so to do by the railroad company. The ground 
is open and well trodden and beaten from the highway proper up to 
the north end of the dépôt ail along on its easterly side and for some 
few rods on the south side of the dépôt, and hère people drive in, 
and are accustomed to drive in, and are invited to drive in, for the 
purpose of receiving and discharging freight and express matter. It is 
obvious that a person on the easterly side of the dépôt and near there- 
to, even if he or she heard the sound of an engine whistle or the ring- 
ing of a bell, and even if they saw the approaching engine at a dis- 
tance of 2,000 feet, would be uncertain which road the approaching 
train was on. Such was the situation on the day of the accident in 
question which resulted in the death of Grâce Hartwell and of her 
aunt, who was in the buggy with her. 

It appeared from the évidence and was uncontradicted that shortly 
before the north-bound train of the défendant company reached the 
Galena station. Grâce Hartwell, the plaintifïs' intestate, with her aunt 
by her side in a buggy with the top up and back curtain down, but 
with no side curtains, drove in on the easterly side of the defendant's 
dépôt to the large doors near the south end and discharged a crate of 
eggs for shipment on the défendant company's road, either as freight 
or by express. The defendant's station agent acts both in that capacity 
and to receive and deliver express matter. A Mr. Frink, who was there 
for the purpose of receiving and conveying to the post office the mail 
bag when thrown from the train, was also présent and assisted in dis- 
charging the eggs. The station agent and Frink testified that as the 
eggs were being discharged, or just as they had been discharged— -and 
the latter seems to bave been the fact — the sound of a train and the 
whistle of an engine approaching from the south was heard. The sta- 
tion agent remarked, as he testified, "There comes a train on our 
road," and Miss Hartwell remarked to the efïect that, "You always 
hâve a train when I am hère," or "Almost always hâve a train when I 
am hère." Miss Hartwell was to bave a receipt, and the station agent 
left the door on the east side and passed to the westerly side, where 



HARTWBLL V. DELAWAEE, L. & W. E. CO. 115 

the train would pass, and thence along the platf orm to the door where 
passengers enter and then into his little office, for the purpose of draw- 
ing a receipt, and just then the train went by and struck the horse driv- 
en by Miss Hartvvell with her aunt by her side, who had driven away 
from the door on the easterly side, nioving first south and then around 
to her left or easterly, and who had driven the length of the dépôt 
and turned into the northerly side of the highway westerly, and was 
in the act, when her horse was struck, of driving over the defendant's 
tracks. As the railroad agent left Miss Hartwell to draw the receipt, 
he made a remark to the effect that she could go away or move away. 

Two witnesses called by the plaintiffs testified that they were look- 
ing and observing and in a position to hear and see, but that they nei- 
ther heard the bell nor whistle of the approaching train, although 
they saw it. The défendant called at least a dozen witnesses in addi- 
tion to several employés of the railroad company, who testified that 
they were in a position to see and hear ail that took place, and that they 
saw the approaching train and plainîy heard the whistle which was a 
long, loud blast, but most of them testified that they did not hear the 
bell. The employés on the train testified, however, that the bell was 
rung continuously. If the whistle was blown, and the évidence was 
overwhelming to that effect, it must hâve been heard at the dépôt and 
by Miss Hartwell, if she was paying any attention whatever. Consid- 
ering the distance she must hâve traveled before her horse was struck, 
it is very doubtful that the approaching train was in sight when she 
drove away from the door on the easterly side of the dépôt, and she 
had to go south a little distance, turn to the left and east, and then 
drive more than the length of the dépôt, and then more than its width, 
to bring her horse head and shoulders onto the track. She could not 
hâve moved rapidly in making thèse movements, and, considering the 
speed of the train, it is plain, I think, that she did not see the engine 
approaching. If she did, she could not hâve knov^^n which road the 
approaching train was on, as it is impossible to détermine that fact 
froin the position she was in at the time she made the turn to drive 
back around the dépôt into the highway and thence cross the track 
to the west. She may hâve heard the whistle, and it is possible that 
she saw the approaching train or engine, but believed it was on the 
Ontario & Western Road, and not on the Delaware, Lackawanna & 
Western tracks. In either event, it was her duty, of course, to proceed 
with care and caution, and to look and listen as she approached the 
defendant's tracks at the northerly end of the dépôt. 

Miss Hartwell lived at Sherburne Four Corners, about 2 miles north 
of Galena, and near to and within plain sight of the Ontario & Western 
Railroad tracks, but not near or within sight of the defendant's tracks, 
as the Lackawanna road passes over the Ontario & Western and moves 
off to the east before reaching Sherburne Four Corners. The station 
agent lived nearer to the Ontario & Western tracks or road than to 
the Lackawanna tracks, and it was contended on the trial, and is 
quite probable, that Miss Hartwell understood the remark of the sta- 
tion agent, "There comes a train on our road," as a statement that the 
train was approaching on the Ontario & Western tracks, and not on the 
defendant's road, and that for this reason she was misled and turned 



116 234 FEDERAL REPORTER 

to the west instead of the east. However, there was évidence tending 
to show that on prier occasions, when coming to the dépôt, she had 
driven over the Lackawanna tracks to a watering place for the pur- 
pose of watering her horse and on other occasions to call on a friend 
living near by. 

[1-3] The évidence clearly showed that after turning round, and 
while moving northerly along by the side of the dépôt, towards the high- 
way, and while passing the northerly end of the dépôt in the highway. 
Miss Hartwell could not hâve seen the approaching train, going, as it 
did, f rom the south to the north. After turning into the highway, while 
proceeding westerly to cross the defendant's tracks, the head and 
shoulders of the horse would hâve been upon the easterly rail of the de- 
fendant's road bef ore Miss Hartwell could hâve seen past the northwest 
corner of the dépôt far enough to see an approaching train more than 
100 or 200 feet away. This situation was apparent to her, and called 
for care and caution on her part, and if she heard the noise of a train, 
either the roar or of the whistle, it was her duty to exercise great care 
by looking and listening, and, in this case, perhaps stopping before go- 
ing upon the tracks. It is obvious that the added précaution on the 
part of the railroad company of adding one of the gongs or bells to 
its warnings of the approach of its trains would hâve notified Miss 
Hartwell that a train was approaching from the one direction or the 
other on the defendant's tracks. The absence of such a warning by 
bell or gong located at the crossing was not however négligence as mat- 
ter of law. It was évidence proper to submit to the jury, and it was 
for the jury to say whether, considering the situation, due care on the 
part of the défendant required it to establish such a bell at this cross- 
ing. That question, with others, was submitted to the jury. Mr. 
Byrne, for the défendant, excepted to the charge, to the effect: 

"That if the jury found that this whistle was hlown and the bell ning, then 
iinder those circumstances they mlght flnd nesligeiice In not having a gong 
there in view of the situation at the crossing." 

The court said and charged then : 

"Yes, under ail the circumstances and surroundings. Of course, before you 
corne to that fact, you would hâve to flnd that the ringlng of the bell and 
the soundlng of the whistle at such a place was not sufflcient warning; you 
would hâve to flnd that of course. The duty Is to give reasonably adéquate 
warning, use due care." 

The jury was plainly instructed that if they found, considering ail 
the circumstances and surroundings, that the ringing of the bell and 
sounding of the whistle on the train was not reasonable and ordinary 
care to he exercised at such a crossing, then they might find négligence 
in not having a gong at the crossing. The jury was plainly charged 
that, even if the railroad company was négligent in not sounding the 
bell and whistle, one or both, and in not having a gong, if in view of 
ail the circumstances Miss Hartwell knew of or had reason to appre- 
hend the approach of a train on the defendant's tracks, it was her duty 
to look and listen and perhaps stop, and that if she was guilty of con- 
tributory négligence, or négligence which contributed to her injury 
and death, then the plaintiffs could not recover. 



HARTWELL V. DELAWARE, L. & W. R. CO. 117 

[4] I do not think any compétent évidence offered by the plaintiffs 
was rejected, or that any incompétent or improper évidence offered by 
the défendant was received. I think the question of the neghgence of 
the défendant company, as well as the question of contributory negh- 
gence on the part of Miss Hartwell, were for the jury, and pecuharly 
for the jury to détermine, and that their verdict should not be disturbed 
unless on the ground that the jury, or some of them, improperly dis- 
cussed the case out of court during the trial, or got wrong impressions 
by looking at the map to which référence bas been made. The map in 
question had been drawn to a scale by a civil engineer employed by the 
défendant, and who was subsequently sworn and fuUy explained it. It 
was then placed in évidence and frequently referred to during the trial. 
At the beginning of the trial this map was hung up without objection 
in plain sight of the jury, for purposes of référence, and at the time it 
was examined by some of the jurors, before it went in évidence, it 
had been referred to and the attention of the jury called to it without 
objection. The court dismissed the jury at an early stage of the trial, 
and before the map went into évidence, or was offered, but was pro- 
ceeding with some other business when its attention was called by the 
clerk to the fact that some of the jurors were examining the map and 
conversing among themselves. The court immediately called their at- 
tention to the fact that it was not in évidence, and that it was improper 
to examine the map until it had been explained and put in évidence. 
The jurors immediately departed. This court is of the opinion that 
no harm was donc, and that no harm could hâve been done, inasmuch 
as the map was thereafter fully explained and described by the sworn 
testimony of the civil engineer, and that of other witnesses to an ex- 
tent, and there was no dispute or question as to its accuracy. The affi- 
davits submitted show that at a subséquent stage of the trial some of 
the jurors were heard discussing the case in the corridors of the court- 
house, but what was said does not appear, and it does not appear that 
any opinions were expressed, or that the évidence was under discussion 
or the credibility of the witnesses or the facts, So far as appears, the 
discussion may hâve been as to the length of the trial, etc. The jury 
had been cautioned, and was cautioned at each recess for the day, not 
to discuss the case among themselves, or to listen to any discussion 
from others, or by others, or remarks concerning the case. The pre- 
sumption is that the jurors do their duty, and that they refrain from 
any discussion of the merits of the case or the weight or bearing of 
the évidence until the case is summed up and submitted under the 
charge of the court for final considération and détermination in the 
jury room. 

The day was clear, and there was no wind, and it was broad day- 
light. Miss Hartwell, as the évidence showed, was not unfamiliar 
with the dépôt and its surroundings. It is évident that the jury either 
found that the défendant was not négligent; that is, that it sounded 
the whistle in due time, and that the situation and surroundings were 
such that the installation of a gong or bell operated by the approaching 
train was not necessary at this crossing, or that having found the rail- 
road company négligent it further found that Miss Hartwell was her- 



118 234 FEDERAL REPORTER 

self guilty of négligence which contributed to the injury. Tliere was 
sufficient évidence to establish négligence, but there was also sufïïcient 
évidence to establish contributory négligence; and, as the jury was 
fuUy and carefully instructed on every point, and no exception was 
taken to the charge, and I find no error in the admission or rejection 
of testimony, and it does not affirmatively appear that there was im- 
proper action prejudicial to plaintiffs on the part of the jurors, or 
any of them, during the progress of the trial, the court feels compelled 
to deny the motion to set aside the verdict and for a new trial. 
So ordered. 



In re FARMERS' DAIRY ASS'N. 

In re LEVI. 

(District Court, S. D. Californla, S. D. May 29, 1916.) 

No. 2155. 

1. Bankktjptct i@=>140(1) — Retuen of Pkoperty — What Law Governs. 

In deterinining whether title to chattels passed to a bankrupt, or 
remained in the seller, the state law governs. 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 198, 199; 
Dec. Dig. <®=140(1).] 

2. Bankbuptct <g=3 140(1) — Rettjrn of Goods — Rigiits of Seller. 

Where, under the state law, the seller's réservation of title was good 
as agalnst the bankrupt and his creditors, such réservation of title is 
good as against the trustée In bankruptcy, and the goods may be reclalmed 
by the seller. 

[Ed. îTote. — For other cases, see Bankruptcy, Cent. Dig. §§ 198, 199; 
Dec. Dig. ©=5140(1).] 

3. Sales ©=460 — Conditional Sales — Statutes. 

A conditional sale, in the absence of statute, may be verbal. 
[Ed. Note. — For other cases, see Sales, Cent. Dig. § 1348; Dec. Dig. 
<S=>460.] 

4. Sales ©=454— Coxditional Sales — Efkect of. 

The assumption of a positive obligation by a buyer to pay the pur- 
chase price does not in itself serve to change a sale, which would other- 
wise be conditional, into an absolute one. 

[Ed. Note.~For other cases, see Sales, Cent. Dig. §§ 1324, 1325, 1333, 
1334 ; Dec. Dig. ®=5454.] 

5. Sales <S=3454^Cokditional Sales — Note. 

Where a buyer gave a note for the purchase prIce, that fact does not 
change the sale from a conditional into an absolute one, but the note 
must be taken as évidence of the debt owing rather than as a payment. 

[Ed. Note.— For other cases, see Sales, Cent. Dig. §§ 1324, 1325, 1333, 
1334; Dec. Dig. ©=5454.] 

6. Bankruptcy <®=>303(1) — Claim Against Trustée — Burden of Pboof. 

One clalœlng property which passed to the trustée in bankruptcy, on the 
ground that the sale to the bankrupt was conditional, has the burden of 
proof ; there being a presumption that the sale was absolute. 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. §| 458, 459; 
Dec. Dig. <S=>303(1).] 

7. Corporations <®=>40€(2) — Président — Powers or. 

A verbal understanding with the président of a corporation that title 
to horses should remain in the seller until payment is not binding on the 

<5=5For other cases see same topic & KEY-NUMBER in ail Key-Numberefl Digests & Indexes 



IN EE FAEMERS' DAIRT ASS'N 119 

corporation, and where there was no further contract wlth the corpora- 
tion, altliougli the liorses were delivered, there was no meeting of the 
minds of the parties as to the contract. 

[Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1612; Dec. 
Dig. ®=406(2).] 

8. Bankbuptct <S='228 — Ordees — Rbview — Refeeeê. 

In reviewing an order of a référée in banltruptcy, ail presumptions 
with respect to the want or sufficieney of évidence are in favor of the 
order. 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. § 387; Dec. 
Dig. (S=»228.] 

9. Banketjptct <g=140(l) — Right to Goods — Conteacts. 

Where there was no meeting of minds between a corporation and a 
seller of horses, there being no binding agreement as to whether tltle 
should pass, the seller may, upon surrender of notes given to évidence 
the purchase price and of ail moneys paid, less the reasonable value of 
the use of the horses while in possession of the corporation, recover the 
animais from the trustée; the corporation having become a bankrupt. 

[Ed. Note.— For other cases, see Bankruptcy, Cent. Dig. §§ 198, 199; 
Dec. Dig. ®=140(1).] 

In Bankruptcy. In the matter of the bankruptcy of the Farmers' 
Dairy Association. Proceeding by Adolph Levi for review of or- 
der of référée denying his pétition for the return of property. Order 
of référée reversed, and matter remanded for further hearing. 

Adolph Levi flled his pétition "in reclanïation" for an order for the return 
to him of certain horses held by the trustée and which he alleged had been 
sold to the bankrupt on conditional sale, title to remain lu him till full pur- 
chase price was paid. The référée, after hearing, ordered that sald pétition 
be "dismissed and denied." A review by the judge was sought. 

The referee's certiflcate on review contained merely a summary of the évi- 
dence on which his order was based, and showed that one Peavey, called in 
behalf of petitioner, testifled that he, during the times mentioned in said péti- 
tion, was the président of the said Farmers' Dairy Association, the bankrupt, 
and "at certain tinïes during said perlod was manager of said Farmers' Dairy 
Association" ; that he had certain dealings with the petitioner relative to the 

purchase of certain horses; that "on or about the day of , 1915," 

witness had a conversation with petitioner relative to purchase of said hors- 
es for the association, another officiai of the association being présent. Wit- 
ness and petitioner negotiated for the sale of said horses, and witness under- 
stood that title to said horses was to remain in the seller until the purchase 
price therefor had been paid. The contract and the understanding were 
verbal ; the promissory notes of corporation representing the purchase price 
were given by the corporation, as was understood by witness and petitioner 
should be done. Other transactions, involving other horses, and under similar 
circfimstances, were also had between petitioner and tlie witness. The wit- 
ness also testifled "that the matter of said purchase was brought to the at- 
tention of the board of directors of said coriwration, and they took action on 
same ; that said corporation asserted indicia of ownership over said horses, 
and used said horses in the business of said corporation; that said horses 
were carried on the books of corporation as the property of said corporation, 
and monthjy statements were gotten eut by the corporation to the creditors, 
in which statements said horses were carried as an asset of the corporation." 
Witness further testifled that one Stephenson was the secretary of the cor- 
poration at the time of the purchase of the last flve horses, and witness did 
not State the horses were purchased on conditional sale, and did not state 
that title of said horses was to romain in seller until paid, nor was anything 
sald to Mr. Stephenson concerning any conditions under which the horses 

igssFor other cases see same topic & KEY-NUMBER in ail Key-Numberei Digests & Indexe» 



120 234 FEDERAL REPORTER 

were purchased. Other évidence of similar import, given by ottier persons, 
was aiso set out in a suinmary way in the certlficate of the référée. 

Tlie secretary of tlie corporation was calletl, and testifled tliat he was In- 
fornied by Mr. Peavey, the président, that lie had purchased certain horses 
from the petltioner, and tliat tiie company would hâve to give its notes there- 
for ; that no statement was made as to any condition attaehed to the sale of 
the horses, and that the witness considered that the notes were given in pay- 
nieut of the purchase prlce ; "that witness did uot know, nor did Mr. Pesivey 
tell him', that the tltle to said horses was reserved in the seller ; tliat wituoss 
was also a member of the board of directors of said corporation, and the 
board of directors took action on said matter." The only action sliown by tlie 
certiflcate to hâve been taken by the board of directors was an excerpt copied 
from the minutes of the corporation, whicli excerpt In substance set fortli 
that it was regularly moved and seconded that tbc horses in question ''be i)ur- 
cîiased" at a certain jn-ice and on certain ternis wlth respect to tlme of pay- 
nient .specifled. It was also shown by the books of the corporation that tlu^ 
horses were entered on the books as an asset and that statements were issued 
showing this fact. 

The promissory notes given by the corporation were in ordiuary form, and 
contained uo statement or intimation of any "conditional sale." 

James E. O'Keefe, of San Diego, Cal., for petitioner. 
A. L. Wissburg, of San Diego, Cal., for trustée. 

BLEDSOE, District Judge (after stating the facts as above). In 
this case, from the certiflcate sent up by the référée, it is impossible 
to détermine the reasons which actuated him in arriving at the con- 
clusion as to which a review is sought, and which resulted in the con- 
cli^sion complained of. The order entered by the référée is merely 
to the efïect that the pétition of réclamation filed by petitioner Levi 
is dismissed and denied. The court is not advised, therefore, of the 
findings of fact and conclusions of law, if any, arrived at by the référée. 

[1-5] In a proceeding of this character, respecting ownership and 
title to property, the law of the state wherein such property is situate 
Controls. In California, it may be considered as established that, in a 
contract of sale such as was relied upon by petitioner herein, the title 
to chattels sold may be retained by the seller pending full payment 
of the purchase price, or the performance of any other conditions 
named by him. This réservation of title by the seller is good as against 
creditors, and consequently as against the trustée in bankruptcy of the 
buyer.^ Perkins v. Mettler, 126 Cal. 100, 58 Pac. 384; Van Allen v. 
Francis, 123 Cal. 474, 56 Pac. 339. The contract may be verbal, un- 
less some local statute requires otherwise. Blackwell v. AValker (C. 
C.) 5 Fed. 419. No such statute of California bas been called to my at- 
tention. The assumption of a positive obligation by the buyer to pay 
the purchase price does not in itself serve to change a sale which other- 
wise would be conditional into an absolute one. Neither is it to be 
assumed by the court, in the light of present-day business transactions, 
that the giving of a promissory note is to be considered as payment 
and complète satisfaction in itself of the obligation therein represented 
and thereby ordinarily sought to be evidenced. In other words, in 
the absence of any contrary proof, the court, in accordance with 
usnal business procédure, must assume that a promissory note is given 
as évidence of a debt owing, rather than as payment and satisfaction 
thereof. 



IN KE FARMERS' DAIEY ASS'n 121 

[B-8] Under the évidence in this case, therefore, if it were the fact 
that a contract was shown to exist, as between the petitioner and the 
bankrupt corporation, providing for the conditional sale of the herses 
mentioned in the pétition, and title was to vest only upon f ull payment 
therefor, it would follow that the pétition should hâve been granted, 
and that the order made by the référée should be reversed in its en- 
tirety. There is a matter involved, however, which arises upon the 
record, and which has impelled the court to give to the proceeding 
some considération other than that suggested by arguments of counsel. 

Ail the authorities seem to hold that in a proceeding of this sort 
the burden of proof rests upon him who claims the sale to hâve been 
condttional rather than absolute. In other words, upon the transfer 
of Personal property and the receipt of promissory notes in payment 
therefor, the presumption ordinarily would be that an absolute sale 
was intended and had been effectuated. The bankrupt in this case 
is a corporation, and the petitioner must bave shown a contract as 
between himself and the corporation, if he would sustain his claimed 
réservation of title. The record, which consists merely of a summary 
of the évidence taken before the référée, obviously is very meager; 
but it does not, in my judgment, meet the burden imposed upon the 
petitioner. It fails to show that a contract was entered into between 
petitioner and the corporation. It does show that the petitioner had 
dealings with a Mr. Peavey, who was at said times the "président of 
the association," and was "at certain other times," but not necessarily 
at any times when sales of horses were being consummated, the "man- 
ager of the corporation," and that, in the sales which were made, verb- 
al understandings were had that title to the respective horses was to 
be reserved by the petitioner until fuU payment of the purchase price. 
The mère fact that this arrangement was had with the président does 
not, in my judgment, under the authorities, serve to bind the corpora- 
tion. Fontana v. Pacific Can Co., 129 Cal. 51, 61 Pac. 580. There 
is no suggestion anywhere in the record that the corporation itself was 
at any time, through its board of directors or otherwise, apprised of 
the fact that a réservation of the title to the horses was a part of 
its contract. On the contrary, as shown by the record, the contract 
of the corporation, as evidenced by the resolution of its board of di- 
rectors, was that of an absolute sale. 

There is no showing as to the number of directors of the corpora- 
tion, or as to the number who were informed even privately of the 
understanding had between the petitioner and the président, and no 
showing, therefore, that the board of directors, or even a majority of 
the board, were advised of the fact of the réservation of title, or at ail 
consented to or acquiesced in the verbal agreement purporting to re- 
tain title to the horses in the petitioner until the full purchase price 
therefor had been paid. In tbis connection it must be remembered 
that the référée has denied the pétition, and because of this fact ail 
presumptions with respect to the want or sufficiency of évidence are 
in favor of the validity of his order, and the court must not assume 
that évidence with respect to any matter was given which would be in- 
consistent with the conclusion reached by the référée, unless such évi- 
dence is succinctly set forth in the record brought to this court. 



122 234 FEDERAL REPORTER 

It thus appears, as I view the case, that the petitioner attempted by 
verbal understanding had with the président of the corporation, who, 
in so far as the record shows, was unauthorized to bind the corpora- 
tion, to retain the title to his horses until the entire purchase price 
had been paid. In this he was unsuccessful, in so far as the actual 
negotiation of a contract was concerned, in that the président was 
not authorized, apparently, to bind the corporation in this respect. 
The purchase price not having been paid, it would not be proper, how- 
ever, to hold, as did the référée, that the petitioner now be deprived 
of the title to his horses. He consented to no such arrangement, en- 
tered into no such contract, and the court should not by its judgment 
decree that he did. It must be that as to the matter of the rétention 
of the title to the animais there was no meeting of the minds sufficient 
to constitute a conditional sale contract, and the rights of the parties 
will hâve to be determined on some other basis. 

[ 9 ] Though this f eature of the case has not been argued by, or pre- 
sented in the briefs of, counsel, it seems to me that under the circum- 
stances the only fair and équitable thing to do is to hold that the peti- 
tioner is still the owner of the horses, and that the bankrupt corpora- 
tion is entitled to a return of so much of the purchase price as has 
been paid thereon, less such a sum, not to exceed in any event the 
amount of the purchase price thus far paid, as will suffice to reim- 
burse the petitioner for the reasonable value of the use of the horses 
during the time they were in the possession of the bankrupt and up 
to the date of the adjudication herein. 

The order of the référée is therefore reversed, and the matter re- 
manded for further hearing by him. Upon such further hearing he 
will take évidence and détermine the reasonable value of the use of 
the horses during the period mentioned, and will make an order di- 
recting the trustée to return the horses to the petitioner, upon the 
repayment by the petitioner of ail sums of money received by him 
as part of the purchase price of the said horses in excess of the 
amount which he may be entitled to retain as the reasonable value of 
such use. Petitioner will also be directed to deliver up for cancella- 
tion the promissory notes received by him as évidence of the purchase 
price to be paid. 



128 



REBD et ux. T. ST. PAUL, M, & M. RY. CO. et al. 
(District Court, W. D. Washington, N. D. November 23, 1915.) 

No. 74. 

1. Public Lands ®=3l03(4) — Jurisdicïion of Courts — Quieting Title. 

The fédéral courts hâve no jurisdlction to quiet tltle and détermine ad- 
verse claims to public land, title to which. Is in the United States, for 
ttie Land Department bas exclusive jurisdlction over sueh matters. 

[Ed. Note. — For other cases, see Public Lands, Cent. Dig. § 307; Dec. 
Dig. <®=103(4).] 

2. Public Lands <S=»103(1) — Title to — Land Depaetment. 

The Land Department of tbe United States is a spécial tribunal vv'ith 
judiclal functions, and bas exclusive jurisdlction over issues afCecting ti- 
tle to public lands untU patent is issued. 

[Ed. Note. — For other cases, see Publie Lands, Cent. Dig. § 298; Dec. 
Dig. .©=103(1).] 

3. Adverse Possession <S=37(2) — Title to — Perfection. 

Adverse possession for 10 years under the limitation statutes of the 
State of Washington confers no right, where the légal title to the land 
is In the United States. 

[Ed. Note. — For other cases, see Adverse Possession, Cent. Dig. § 40 ; 
Dec. Dig. <S=»7(2) ; Limitation of Actions, Cent. Dig. §§ 223, 224.] 

4. HUSBAND AND WlFE <g=>252 — COMMUNITT PEOPERTY — B.I6HT OF WlFE. 

Rem. & Bal. Code Wash. §§ 5915-5918, relatlng to the property of the 
spouses, glve the wlfe as a niember of the communlty no interest vphlch 
attaches to public land squatted upon by the husband and wlfe prior to 
homestead entry. 

[Ed. Note. — For other cases, see Husband and Wife, Cent. Dig. § 895; 
Dec. Dig. <S=>252.] 

In Equity. Bill by Charles W. Reed and Dora Reed, his wife, 
against the St. Paul, Minneapolis & Manitoba Railway Company, a 
corporation, and the Great Northern Railway Company, a corpora- 
tion. The first-named company disclaimed, and the Great Northern 
Railway Company demurred. Demurrer sustained. 

■Cari E. Croson and E. H. Flick, both of Seattle, Wash., for plain- 
tiffs. 

F. V. Brown and F. G. Dorety, both of Seattle, Wash., for de- 
fendants. 

NETERER, District Judge. The plaintiffs allège, in substance, that 
they are a marital community, and as such in good faith settled upon 
public lands upon homestead entry under the provisions of Act Cong. 
May 14, 1880, c. 89, 21 Stat. 140 (Comp. St. 1913, §§ 4536-4538), 
on November 24, 1906 ; that on February 6, 1907, Charles W. Reed 
made application for homestead entry; that during the summer of 
1901, J. J. Tinckner, a qualified entryman under the act of Congress, 
supra, had settled upon the land, and during the years 1902 and 1903 
he posted notices, giving a description of the land, advising the pub- 
lic that he claimed the land under the homestead laws of the United 

©SjFor other cases see Bame topic & KEY-NUMBBR ia ail Key-Numbered Digests & Indexes 



124 234 PEDKRAL REPORTEE 

States; that on April 1, 1902, he commenced to erect a cabin, and 
asserted rights to the land until August 21, 1906, at which time he 
conveyed his riglit in the land to W. M. Smithey, and "notices of 
daim under the scrip land laws of the United States, or otherwise, 
were never posted on said land up to said time last mentioned" ; that 
W. M. Smithey was a qualified entryman during ail the time he held 
such land, and on the 24th day of November, 1906, sold his daim 
to the land to the plaintiffs; that the land was not surveyed until 
July, 1905, and survey was not accepted by the Land Department 
until November 27, 1906. It is then alleged that plaintiffs hâve at alf 
times mentioned claimed said land, and occupied and improved the 
same ; that plaintiffs and their predecessors in interest hâve held said 
land more than 10 years openly and notoriously, "with adverse inter- 
est to the world at large," and then stated that the défendants daim 
some right to the land, but that the daim is junior to plaintiffs', and 
pray judgment quieting title in plaintiffs. It is alleged that the de- 
fendants are each a corporation organized under the laws of Minne- 
sota. 

A disclaimer bas been filed by the St. Paul, Minneapolis & Manitoba 
Railway Company, and a demurrer is presented by the Great North- 
ern Railway Company on the ground that the complaint does not state 
any matter of equity entitling plaintiffs to the relief prayed for, in 
this: That the complaint shows that the title to the land is in the 
United States, does not show that the plaintiffs were deprived of their 
alleged homestead right by any erroneous décision of the Land De- 
partment of the United States, and that Dora Reed, the wife, is liv- 
ing with her husband, and is not entitled to enter lands under the laws 
of the United States. 

[1,2] The demurrer must be sustained. The court has no juris- 
diction to quiet title to public land, the title to which is in the United 
States. Manquez v. Frisbie, 101 U. S. 473, 25 L. Ed. 800. The Land 
Department of the United States is a spécial tribunal with judicial 
functions, and has exclusive jurisdiction of issues affecting title to the 
public lands until patent is issued. Bockfinger v. Foster, 190 U. S. 
116, 23 Sup. Ct. 836, 47 L. Ed. 975; Humbird^^ Avery, 195 U. S. 
480, 25 Sùp. Ct. 123, 49 L. Ed. 286. 

[3, 4] Adverse possession for 10 years under the limitation of ac- 
tions of the state of Washington, confers no right, where the légal 
title is in the United States. Gibson v. Chouteau, 13 Wall. 92, 20 
L. Ed. 534; Redfield v. Parks, 130 U. S. 625, 9 Sup. Ct. 642, 32 L. 
Ed. 1053. Nor do sections 5915-5918, R. & B. Codes of Washington, 
give the wife, as a member of the community, an interest which at- 
taches to public land "squatted" upon by the husband and wife prior 
to homestead entry. McCune v. Essig, 199 U. S. 382, 26 Siip. Ct. 
78, 50 L. Ed. 237; Wadkins v. Producers' Oil Co., 227 U. S. 368, 33 
Sup. Ct. 380, 57 L. Ed. 551. 



WM. E. PECK & CO. V. LOWE 125 

WM. E. PECK & CO., Inc., v. LOWE, Collector. 

(District Court, S. D. Xew York. June 1, 1916.) 

Commerce iS=»77 — Incc/me Taxes — Exportation — "Income." 

ïhe Income Tax Law, in so far as It imposes taxes npon income re- 
sulting from exportation of goods and sale in forelgn countries, is not 
invalid as imposing a tax on exports ; tlie exportation being complète 
before the income, wliich presupposed a successfuUy completed transac- 
tion, arises for taxation. 

[Ed. Note.— For other cases, see Commerce, Cent. Dig. §§ 61-70; Dec. 
Dig. ®=377. 

For other définitions, see Words and Plirases, First and Second Séries, 
Income.] 

At Law. Action by William E. Peck & Co., Incorporated, against 
John Z. Lowe, Jr., Collector. On motion by both parties for directed 
verdict. Verdict directed for défendant. 

John C. Spooner and Charles P. Spooner, both of New York City, 
for plaintiff. 

Earl B. Barnes, Asst. U. S. Atty., of New York City, for défend- 
ant. 

HOUGH, District Judge. Plaintiff is engaged in buying goods in 
the United States, and selling them largely to foreigners, making de- 
liveries abroad. Having been taxed upon its corporate income from 
ail sources, it sues to recover that proportion of the tax, compulsorily 
paid, which its foreign business bears to its whole trade, upon the 
ground that a tax on income derived from the profitable sale of ex- 
ported articles is a tax on the articles so exported, and therefore un- 
constitutional. 

It will be assumed (but not held) that the sixteenth amendment does 
not affect the matter, which is therefore to be decided in the light of 
a long line of cases of which Thames & Mersey, etc., Co. v. United 
Statues, 237 U. S. 19, 35 vSup. Ct. 496, 59 L. Ed. 821, Ann. Cas. 1915D, 
1087, is the latest. No elaborate review of décisions will be attempted. 
Such temptations, in constitutional matters, are to be resisted by 
trial courts, whose décisions thereon may interest the writers, but bave 
no other importance. 

Constitutional inquiries are political rather than légal. The funda- 
m.ental law is not to be interpreted like a statute. The only décision 
worth having is that of the tribunal whose singular duty it is, uncler 
légal forms, either to finally withdraw some matter from political ac- 
tion, or precipitate constitutional amendment, according to the ac- 
ceptance or popularity of the judgment, not among bar and bench, 
but with the men in the street. The only justifiable exception to this 
rule of réticence arises when is presented a glaring instance of in- 
vaded private right, demanding instant action to redress patent wrong. 
This is not such a case. 

A récent commentator on the décisions most relied upon by plain- 
tiff (Fairbank v. United States, 181 U. S. 283, 21 Sup. Ct. 648, 45 

iÊ=3For other cases see same toplc & KEY-NUMUER in ail Key-Numbered Digests & Indexes 



126 234 FEDERAL REPORTEE 

L. Ed. 862, United States v. Hvoslef, 237 U. S. 1, 35 Sup. Ct. 459, 
59 L. Ed. 813, Ann. Cas. 1916A, 286, and Thamas & Mersey, etc., Co. 
V. United States, supra) thus summarizes them: 

"Any governmental burden which affects In any way the processes of ex- 
portation is unconstitutional and vold." 

This expresses my view of their resuit, and it is as far as the Su- 
prême Court has definitely gone in identifying the substance exported 
with its accidents, attributes, and adjuncts. How far the process will 
go cannot be foreseen. I shall go further only under compulsion. 
At présent it is held by still ruling cases, that taxation which antici- 
pâtes exportation is not within the constitutionvl prohibition (e. g., 
Cornell v. Coyne, 192 U. S. 418, 24 Sup. Ct. 383, 48 L. Ed. 504). 
Obviously gênerai taxation on production may discourage exports, yet 
that gives no relief as to articles intended for foreign parts. By the 
same reasoning, profits or income from exports should be taxable, 
because subséquent to the act of export. Income or profit présupposes 
a successfully completed transport. It is no part of the act of ex- 
portation, though it may be said to be a resuit thereof. Similarly 
the fact that taxation of the fruits of exportation may discourage 
business quite as much as anticipatory taxation on the goods transport- 
ed is immaterial. 

Against ail this are presented the numerous opinions holding that 
a tax on a salary is on the oiifice producing it (Collector v. Day, 11 
Wall. 113, 20 L. Ed. 122), that a tax on the receipts from Interstate 
commerce is a tax on the commerce itself (Phila., etc., Co. v. Penn- 
sylvania, 122 U. S. 326, 7 Sup. Ct. 1118, 30 L. Ed. 1200), and the 
like. Such décisions usually describe themselves as busied in piercing 
through form to substance. They are even more logically viewed as 
seeking a définition of the subject of prohibition, and then laying down 
what in patent law is called its "range of équivalents." 

Under the constitutional clause hère to be considered, we must find 
équivalence between the articles exported and the processes or inci- 
dents of the act of exportation or transport. But protection begins 
with that act, and must end with its completion, because the act is the 
subject of the constitutional prohibition, After export, profits come, 
and taxation with them. 

Verdict directed for défendant. 



UNITED STATES V. UNITED 8H0E MACHINERY CO. 127 

UNITED STATES v. UNITED SHOE MACHINERY CO. et al. 
(District Court, E. D. Missouri. June 6, 1&16.) 

1. Bquity ®=j153 — Pleading ®=»34(1) — Libéral Consteuction of Plead- 

INGS. 

In modem practlce, pleadings In civil actions at law or In equlty are 
not construed with the strlctness formerly applied to criminal Indlct- 
meuts, but are to be taken to mean wîiat thelr language falrly imports. 

[Ed. Note.— For other cases, see Equlty, Cent. Dlg. §§ 386-389; Dec. 
Dlg. <S=153 ; Pleading, Cent. Dlg. §§ 66, 6T, 71 ; Dec. Dlg. <S=>34(1).] 

2. Equitt <®='362 — Pleading — SurnciENCT of Bill. 

In the fédéral courts of equlty, Indeflniteness of statement In a blll is 
not ground for a motion to dlsmiss, if, falrly construed, It states a cause 
of action; but the défendant has an adéquate remedy under equlty rule 
20 (198 Fed. xxlv, 115 C. 0. A. xxlv) by motion for more partlcular state- 
ment. 

[Ed. Note. — For other cases, see Equlty, Cent. Dlg. §§ 758-761; Dec. 
Dig. ®=)362.] 

3. EqxJiTT <S=>141(1) — Pleading — Pleading Written Instruments. 

Instruments of wrlting need not be set out in extenso in a blll, unless 
the blll shows that it is essential to the proper construction of the par- 
tlcular clauses complained of, and whlch are set out. 

[Ed. Note.— For other cases, see Equlty, Cent. Dlg. §§ 323-330, 333 ; Dec. 
Dlg. <S=5l41(l).] 

4. Monopolies <S='24(2) — Suit Under Claïton Anti-Trust Act — Parties. 

To a suit by the United States to hâve leases of shoe machlnery ex- 
acted by défendants from shoe manufacturers adjudged illégal, as in vio- 
lation of Clayton Act Oct. 15, 1914, c. 323, § 3, 38 Stat. 731, because of 
provisions thereln Intended to prevent compétition and to secure a mo- 
nopoly by virtually compelling the lessees to purchase or lease other ma- 
chines from défendants and preventing them from purchasing or using 
machines made by competitors of défendants, and to enjoin the further 
making or enforcement of leases containing such provisions, the lessees 
are not necessary parties ; no relief being asked agalnst them. 

[Ed. Note.— For other cases, see Monopolles, Cent. Dig. § 17 ; Dec. Dlg. 
«S=24(2).] 

5. EQUITY <S=»94 JUEISDICTION OF FEDERAL COURTS PARTIES. 

The fallure to join one who is a proper, but neither a necessary nor an 
indispensable, party does not deprive a fédéral court of equlty of jurlsdlc- 
tion. 

[Ed. Note.— Fo» other cases, see Equlty, Cent. Dig. §§ 246, 252; Dec. 
Dig. <S=>94.] 

6. Corporations <S=5380 — Liabilitt for Corporate Acts — Subsidiaet Cor- 

porations. 

Where one corporation owns ail of the stock of another and controls its 
policy and business, it is responsible for the acts of the subsldiary cor- 
poration, vchich are consldered in equlty as Its own acts. 

[Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1540; Dec. 
Dig. <@=»380.] 

7. Monopolies <S=>24(2) — Clayton Anti-Teust Act — Suit for Violation — 

Parties. 

AU of the stock of one corporation was ovs^ned by a second, and 98% 
per cent, of the stock of the second was owned by a thlrd, and ail three 

Os»For other cases see same toplc & K&Y-NUMBER In ail Key-Numbered Digests & Indexes 



128 234 FEDERAL REPORTER 

had for the most part the same offlcers and directors. BrJâ, tliat, In a 
suit by the United States for violation of Clayton Act Oct. 15, 1914, c. 
323, 38 Stat. 730, by the flrst corporation, the other two corporations were 
properly joined as défendants. 

[Ed. Note. — For other cases, see Monopolles, Cent. Dig. § 17 ; Dec. Dig. 
<S==24(2).] 

8. OONSTITXJTIONAL TjAW <S=548 — StATXTTES— DETERMINATION OF VaLIDITY^ 

riiBSinuPTioN IN Favob of Valibity. 

A fédéral statute will not he declared vold by the courts, unless it ap- 
pears beyond a reasonable doubt that It is not wlthin the constitutional 
powers of Congress. 

[Ed. Note.-^For other cases, see Constitutional Law, Cent. Dig. § 46; 
Dec. Dig. <g=»48; Statutes, Cent. Dig. § 50.] 

9. Commerce <Ê=»ie — "Interstate Commebce" — Leasing of Machines. 

The fact that every lease Is not commerce is not conclusive that none 
may be, and where a large corporation, doing an Interstate business 
aniountlng to millions of dollars ammally in disposing of muchinery 
whicli It manufactures, sees proper to lease iustead of sell its machines, 
it Is no less eiigaged in Interstate commerce than it would be if it sold 
the machines, and Its lease contracts are proper subjects of Congresslonal 
régulation. 

[Ed. Note. — For other cases, see Commerce, Cent. Dig. § 2 ; Dec. Dig. 

<S=3lO. 

For other définitions, see Words and Phrases, First and Second Séries, 
Interstate Commerce.] 

10. Monopolies <S=>10 — Clayton Anti-Trust Act — Constitutionalitt. 

Clayton Act Oct. 1.5, 1914, c. 323, § 3, 38 Stat. 731, inaking it unlawful 
for any person engaged In commerce. In the course of sucli commerce, to 
lease or sell goods, inaehlnery, etc., on any condition, agreement, or un- 
derstanding that the lessee or purchaser shall not use or deal in goods or 
machlnery of a competltor of the lessor or seller, where the effect may 
be to substantially lessen comi)etltion or tend to create a monopoly, as 
applied to leases made in the conduct of Interstate business, Is withln the 
constitutional povver of Congress. 

[l'^d. Note. — For other cases, see Monopolles, Cent. Dig. § 9; Dec. Dig. 

11. Statutes <S=321C — Construction — Extrinsic Aids. 

It is only when an act of Congress Is amUiguous that the debates when 
it was under considération may be resorted to in aid of its construction ; 
where the language is clear, it is coiitroUing and conclusive. 

[Ed, Note. — For other cases, see Statutes. Cent. Dig. § 292 ; Dec. Dig. 
<®=>210.] 

12. Monopolies <g=>24(2) — Suit for Violation of Clayton Act— Suffi- 

CIENCY OF F)1IX. 

A bill alleglng that the corporation défendants made leases of shoe 
niiichinery to manufacturers for use througliout the United States whlch 
contained provisions prohibltlng the lessees from purehnsing or using 
machines of other mnkers under penalty of increased rental, or of tlie 
cancellation of leases under whlch Indispensable machines not otherwlse 
obtainable were in use, hcld to state a cause of action for violation of 
Clayton Act Oct. 15, 1914, c. 323, § 3, 38 Stat. 731, although it was not 
alleged that the lessees expressly bound themselves to observe such re- 
strictions. 

[Ed. Note. — For other cases, see Monopolles, Cent. Dig. § 17 ; Dec. Dig. 
<S=>24(2).] 

®=3For other cases see same tgpie & KEY-NUMEER in ail Key-Numbered Digests & Indexes 



UNITED STATES V. UNITED SHOE MACHINERY CO. 129 

13. Monopolies <S=:524(2)— Suit fob A'iolation or Clatton Act— SuFriciEsCY 

op Bill. 

Such a blll, if it charges the doiiig of acts by the défendants which are 
in ternis made unlawful by the act, and that such acts tend to substan- 
tially lessen compétition and to create a monopoly, is not Insufficient be- 
cause it does not allège that they were "unduly and improperly exer- 
cised." 

[Ed. Note. — For other cases, see Monopolies, Cent. Dig. § 17 ; Dec. Dig. 
<S=>24(2).] 

14. COKSTITUTIONAL LaW <@=27— OBLIGATION OF CONTRACTS— PoWEBS O» 

CONGBESS. 

ïhe constltutional provision prohibiting the states from passing laws 
impairing the obligations of contracts is not a limitation upon the pow- 
ers of Cougress, to which it has no application. 

[Ed. Note. — For other cases, see Constitutional Law, Cent. Dig. § 31; 
Dec. Dig. i®=>27.] 

In Equity. Suit by the United States against the United Shoe 
Machinery Company and others. On motion to dismiss. Denied. 
See, also, 227 Fed. 507. 

This is an action to en.ioin the défendants, the United Shoe Slachinery Com- 
pany, a corporation existing under the laws of the state of Maine, the United 
Shoe Machinery Company, a corporation existing under the laws of the state 
of New Jersey, the United Shoe Machinery Corporation, also existing under 
the laws of the .state of New Jersey, and certain individuals, alleged to be the 
directors and oflicers of thèse corporations, from enforcing, or attempting to 
enforce, certain provisions of leases alleged to be prohihited by section 3 of the 
act of Congress approved October 15, 1914. 38 Stat. 730, known as the "Clayton 
Act." For convenienee the défendant United Shoe Machinery Company of 
Maine wlll be referred to in this opinion as the "Maine Company," the United 
Shoe Machinery Company of New Jersey as the "New Jersey Company," and 
the United Shoe Machinery Corporation as the "corporation." 

The complaint is brief and concise, and will be practically set ont in full. 
It charges: That the Maine Company is a corporation organized under tlie 
laws of the state of Maine, with an authorized capital stock of .$3,000,000. Its 
original corporate name was "Goodyear Shoe Machinery Company." AU of its 
capital stock, assets, and business were acquired in 1889 by the United Shoe 
Machinery Company of New Jersey, which now owns the same. That in 1902 
the uame of the "Goodyear Shoe Machinery Company" was changed to "Unit- 
ed Shoe Machinery Company," and, while it continues its corporate existence, 
it is merely a selllng and leasing department of the New Jersey Company. It 
is the only one of the defendaniis which does business in the Eastern district 
of Missouri. That the ofHcers and directors of ail three companies are in 
eflfeet the same. That the New Jersey Company has a capital stock of $20,850,- 
519, ail of which is substantially owned by the défendant the United Shoe 
Machinery Corporation. That ever since its incorporation it has been engaged 
in manufacturing, selllng, and leasing shoe machinery, and it is the operating 
Company of the business followed by the défendants. Its chief manufacturing 
plant is at Beverly, Mass., and its offlcers and directors are, for the most part, 
the same as those of the other corporate défendants. That the corporation has 
an authorized capital stock of $50,000,000, and is empowered by its cliarter to 
engage in manufacturing, selllng, and leasing shoe machinery, but its activi- 
ties hâve been confined chiefly to those of a holding company. Shortly after 
its organization it acquired and now owns 98% per cent, of the outstanding 
capital stock of the New Jersey Company and througli this company dominâtes 
the other corporate défendants. In addition it controls the stock of certain 
other afhliated corporations, engaged in busine.ss related to the shoe machinery 
interest. That the défendant Sidney M. Winslow is président, director, and 

(g=sFor other cases see same topio & KEY-NUMBER in ail Key-Numbered Digests & Indexes 
234 F.— 9 



130 234 FEDERAL REPORTER 

managing offlcer of ail thèse three corporations, and numerous other corpora- 
tions owned and subsidiary corporate défendants, and the other Indivldual de- 
fendants are officers and dlrectors, souie of ail three corporations, and others 
of two of the défendant corporations. ïhat the défendants hâve leased, sold, 
and are leasing and selling their maehlnery, supplies, and repairs, and In 
certain instances hâve fixed and are fixing the priées thereof, and discounts 
and rebates from such priées, on condition, agreement, and understanding 
that the lessee or purchaser shall not use the maehlnery, supplies, or other 
commodities of competltors of the lessors, which agreements tend to create 
a monopoly in that branch of Interstate commerce which relates to the shoe 
maehlnery business. 

The bill then allèges: That nearly ail shoes now niade in the United States 
are manufactured by maehlnery. Over 1,500 manufacturers are engaged in 
cities and towns of nearly every state in the Union In the production, annually, 
of more than 300,000,000 pairs of machine-made shoes. With ail but a very 
few of thèse manufacturers the défendants hâve business relations. That the 
défendants dévote themselves particularly to the production of maehlnery 
used in preparing and stitchlng soles to the uppers of shoes. They also manu- 
facture maehlnery used In other shoe-making opérations. That the de- 
fendants divide certain of their Important machines into two classes, "prin- 
cipal" and "auxiliary." In a gênerai way machines which perform opéra- 
tions of major importance are spoken of as "principal" wlille machines 
which exécute opérations necessary to the work of "principal" machines 
are called "auxiliary." The distinction, however, It is charged, Is large- 
ly arbitrary, and results chiefly from the défendants' System of leasing. Many 
of the more important machines are put out by the défendants on leases. On 
some the lessees are required to pay royalties, and on others an annual rental. 
Ail machines on which royalties are exacted are designated as "principal," and 
ail those on which an annual rental is paid "auxiliary." 

The cutting of the soles, uppers, and lining, and the stitching of the uppers 
and lining, follow about the same course with respect to ail kinds of shoes. 
It is when the sole cornes to be attached to the upper of the shoe — "bottomed," 
as it is called in the trade — that the fundamental différence in construction 
arises. Hère two chief catégories appear: In the one the soles are fastened 
by thread ; the other, by wire, nails, or wooden pegs. ïlie flrst category Is 
subdivided into three classes : (A) McKay sewed ; (B) turned ; (C) welt shoes. 
The second category is divided into two classes : (a) Metalllc fastened ; (b) 
pegged shoes. The McKay sewed shoe is so called because It is bottomed on 
a McKay sewlng machine ; the turned shoe takes its name from the fact that 
it is turned inside out durlng the process of attachlng the sole, which is done 
on a welt and turn sewlng machine ; the welt shoe is so designated because a 
narrow strip of leather, called a welt, Is sewed to the upper and Insole, by 
a welt sewlng machine, and the outsole is attached to the welt by an outsole 
stitching machine. Metalllc fastened shoes bave their soles attached to the 
insoles on a "loose naller," or by wire screws on a "standard screw" machine ; 
pegged soles are bottomed on a "pegging" machine. In connection with the 
working of thèse machines are certain accessory opérations which are executed 
for the most part by "auxiliary" machines. The bill then describes how this 
work Is done. It is then charged that "principal" machines cannot be operat- 
ed profltably without the use of some, if not ail, of the "auxiliary" machines. 
The "auxiliary" machines are of substantlally no value, except as they are 
used in connection with the "principal" machines. 

The illégal actions of which complaint is made are described as foUows: 
The writlngs under which the défendants put out most of their maehlnery 
are variously designated "ordinary and temporary lease and agreement," 
"lease and agreement," "lease and license agreement," or "agreement," but 
are in the bill referred to as leases. Under thèse leases it is charged the de- 
fendants ship, and for many years hâve been shlpplng, in Interstate and for- 
elgn commerce, the shoe maehlnery and supplies herein referred to, from Bev- 
erly, Mass., to points in other states and foreign countrles. The leases gener- 
ally run for a period of 17 years. Many of them were made before, and some 
since, the passage of the Clayton Act, but ail are now being enforced by the 



UNITED STATES V. UNITED SHOE MACHINEKY CO. 131 

defenclants. The blU does not complain of the leases as a whole, but only 
parts thereof, wMch are described in the bill as "tying clauses" and "discounts 
and rebates." The bill charges that in each of the leases there are certain 
provisions denominated the "tying clauses," because they tie together the 
uses of several leased machines, and in efCect, though not always in ternis, 
prohibit the lessees f rom using machines of lessor's competitors. For example, 
the fastening machines may not be used on any shoe not welted, stitched, 
slugged, heeled, or seat-naiied on machinery leased from the défendants. In 
other words, machines are "tied" in a similar nianner. The tying clauses 
provide in substance that the lessee : (1) Shall not use machinery in the manu- 
facture or préparation of footwear which has not had certain essential opéra- 
tions performed upon it by other machines leased from the lessor. (2) Shall 
use the leased machinery to its full capacity. (3) Shall use excluslvely the 
leased machinery for the class of work for which it is designed. (4) Shall 
obtain from the lessor excluslvely, at such prices as it may establisli, ail dupli- 
cate parts, mechanisms, or repairs needed in operating the leased machines, 
and ail supplies needed in connection with them. (5) Shall use pateuted in- 
soles made on défendants' machinery only in connection with certain footwear 
manufactured by machinery leased from the lessor. (6) Shall lease from the 
lessor any additional machinery which he may need for work in the same de- 
partment as that of the machine leased. (7) Shall permit the lessor to déter- 
mine whether the lessee has in his factory more machinery adapted for doing 
the same wcrk than he needs, and, if so, to remove such machines as, in the 
opinion of the lessor, are unneeessary. (8) Shall, at the élection of the lessor, 
sutt'er a termination of ail leases which he may hâve, and the removal of ail 
machines leased by him from the défendants, in the event of any violation of 
any term of any one of the leases. 

Copies of the clauses above referred to are attached to the bill as Exhibits 
1, 2, 3, 4, 5, 6, 7, and 8. 

Exhibit 1. 

The leased machinery shall be used tor no other purpose than for lasting boots, 
Bhoes, or other footwear made by or for the lessee. The leased machinery shall not, nor 
shall any part tliereof, he used in the manufacture or préparation of any welted boots, 
shoes, or other footwear, or portions thereof, which hâve been or shall be welted in 
■whole or in part, or the soles in whole or in part stitched, by the aid of any welt-sewing 
or sole-stitching machinery not held by the lessee under lease from the lessor, or in 
the manufacture or préparation of any turned boots, shoes, or other footwear or portions 
thereof the soles of which hâve been or shall be in whole or in part attached to their 
uppers by the aid of any turn-sewing machinery not held by the lessee under lease 
from the lessor, or In the manufacture of any boots, shoes, or other footwear which 
hâve or shall be in whole or in part puUed-over, slugged, heel seat-nailed, or other- 
wise partly made by the aid of any pulling-over or "metallic" machinery not held by 
the lessee under lease from the lessor. 

Exhibit 2. 

Subject to the foregoing limitations, the lessee shall use the leased machinery to its 
full capacity upon ail boots, shoes, or other footwear, or portions thereof, made by or 
for the lessee in the manufacture or préparation of which such machinery is capable 
of being used. 

Exhibit 3. 

It at any time the lessee shall fail or cease to use excluslvely lasting machinery held 
by him. under lease from the lessor for lasting boots, shoes, and other footwear made 
by him or for him, which are lasted by the aid of machinery, or shall fail or cease 
to use excluslvely tacking mechanisms and appliances held by him under lease from 
the lessor for doing ail work in the manufacture of ail boots, shoes, and other footwear 
made by or for him which is done by the aid of tacking mechanisms and appliances, the 
lessor, although it may hâve walved or ignored prier instances of such failure or cessa- 
tion, may, at its option, termlnate forthwith, by notice in writing, any or ail leases or 
licenses of lasting machines, lasting machinery, lasting mechanisms, or lasting devices 
then existing between the lessor and the lessee, whether as the resuit of assignment to 
the lessor or otherwise; and the possession of and full right to and control of ail last- 
ing machines, lasting machinery, and lasting mechanisms shall thereupon revest In the 
lessor free from ail daims and demands whatsoever. 



132 234 FEDERAL REPORTER 

Exhlblt 4. 

The leasee shall obtain from the lossor exclusively, and shall pay therefor at the 
regular priées troiii time ta tlme established by the lessor, ail the duplicate parts, ex- 
tras, mechanisms, and devices of every kind needed or used in operating, repairing, 
or renewing the leased machinery, and the same shall form part of the leased machin- 
ery, and the lessee shall not otherwise make or allow to' be made any addition, sub- 
traction, or altération to, from, or in the leased machinery without the consent in 
writing et the lessor, nor interfère with the proper opération of the same. The lessee 
shall also purchase from the lessor exclusively, at the priées from time to time estab- 
lished by the lessor, ail supplies, including string nail, tack strips, and other fastening 
materials used in connection with the lasting machinery. 

Exhlblt 5. 

The leased machinery shall be used only in the manufacture or préparation of rein- 
forced Insoles which embody the inventions patented in letters patent of the United 
States of America, No. 849,246, dated April 2, 1907, owned by the lessor, for use in 
welted boots, shoes, and other footwear known in the trade as "Goodyear welts," which 
bave been or are to be welted whoUy by Goodyear welt and turn shoe machines or 
Goodyear inseam sewing machines held by the lessee under lease from the lessor, and 
the soles of which hâve been or are to be attached to their welts wholly by Goodyear 
outsolG rapid lockstitch machines held by the lessee under lease from the lessor, or for 
use as insoles or soles of turned boots, shoes, and other footwear known in the trade 
as "Goodyear turns," the soles of which hâve been or are to be attached to their 
uppers by Goodyear welt and turn shoe machines or Goodyear Universal inseam sew- 
ing machines held by the lessee under lease from the lessor, and in the manufacture 
or préparation ot such patented insoles (or soles) the lessee shall use the principal 
machinery hereby leasod to Its fuU capacity so far as the lessee uses reinforced insoles 
(or soles) in the manufacture of such lootwear. The auxiliary machinery hereby leased 
shall be used only in the manufacture or préparation of sald patented Insoles (or soles) 
which hâve been or are to be reinforced wholly by an Bconomy insole relnforcing ma- 
chine hereby leased or held by the lessee under other leases and license from the lessor. 

6. The lessee is hereby licensed under letters patent of the United States, No. 849,245, 
dated Aprll 2, 1907, to manufacture by the use ot the principal machinery hereby leased 
during the continuance in force of this lease and license the patented insoles covered 
by said letters patent and to use such patented insoles so made by the lessee in the 
manufacture of welted or turned boots, shoes, or other footwear which hâve been or 
are to be manufactured as provided in article 5 hereof. 

Exhibit 6. 

In case the lessee has more work of the kind which can be performed by any ot the 
machines belonging to the metallic department of the lessor than the capacity ot the 
metallic machinery which he has under lease from the lessor will permit, then the 
lessee shall elther take from the lessor, under a like lease and agreement, sufHcient 
and additional machinery to perform the work, or in case the lessee does not thus lease 
additional metallic machinery from the lessor, then the lessor may, it it so elects, 
cancel torthwith this lease and any other lease ot metallic machinery then in force 
between the lessor and the lessee, whether as the resuit of assignment or otherwise. 

Exhibit 7. 

12. In case the lessee, at any time, shall hâve in his factory more machines adapted 
for doing the same work as any machine or machines hereby leased than in the opinion 
of the lessor are sufflcient for performing the work which the lessee has in his factory, 
based upon the capacity ot such machines and the number and kind of boots, shoes 
and other footwear made by the lessee for any period of twelve (12) consécutive months 
next preceding, the lessor may, at its option, upon thirty (30) days' notice in writing to 
the lessee, terminale the lease and license herein contained and in respect to such of 
the said machines as in the opinion of the lessor are unnecessary. 

Exhibit S. 

This lease and license shall continue, unless sooner terminated by the lessor as here- 
in provided for seventeen years from the date hereof. But if any breach or default 
shall be made in the observance of any one or more of the conditions contained herein 
or contained in any other lease or license agreement existing between the lessor and 
the lessee, whether as the resuit of assignment to the lessor or otherwise and expressed 
to be obligatory upon the lessee, the lessor shall hâve the right by notice in writing to 
the lessee to terminate torthwith any and ail leases of or licenses to use machinery 
then lu force between Ihe lessor and the lessee, whether as the resuit of assignment to 



UNITED STATES V. UNITED 8H0E MACHINERY CO. 133 

the lessor, or otherwise, and this notwithstanding that previous breaches or detaults 
may hâve been unnotlced, waived or condoned by or on behalf cl the lessor. 

The bill then charges that competitors of défendants hâve produced, sold, 
and leased, and are now producing, selling, and leasing, in Interstate coinmeroe, 
machines slmilar in function to maiiy iui])ortant machines put ont by the 
défendants and affected by the "tying clauses" hereln descrlbed. Exhibit 13 
to the complaint is a list showlng the différent machines used in the manu- 
facture of shoes showiiig, in one column, how many of thèse différent machines 
are put eut to shoe manufacturers in the Tnlted States by the défendants, and 
in another column by ail other shoe machinery manufacturers in the United 
States. 

Exhibit 13. 

Machines Put Out to Shoe Manufacturers In the United States. 



By Détendants. By AU Others. 



Clicking machine 3,655 

Eyeletting machine 4,473 

PuUing-over machine (1) 

Lasting machine 7,496 

Standard screw machine (1) 

Pegglng machine (1) 

Tacking machine 3,488 

McKay sewing macliine 898 

Welt sewing machine 2,527 

Outsole stitching machine 2,676 

Loose-nailing machine , 1,83-5 

Heeling machine 2,019 

Slugging machine 1,876 



None 
1.50 
(1) 
7 
(1) 

(1) 
6 

S 
142 
758 

24 

17 

23 



(1) No compétition in the United States. 

In nearly ail cases where shoe manufacturers hâve used or are using any 
machines procured froiii competitors of the défendants, the latter hâve threat- 
ened and do now threatei! to remove from the factories of the said manufac- 
turers, ail machines leased from them. In some cases the défendants hâve 
l'emoved the machines, and In other instances hâve imposed heavy penalties 
upon manufacturers because of the use of such machines, secured from défend- 
ants' couiiietitors in violation of said "tying clauses." That some of thèse 
competitors of the défendants are prepared to supply certain machines of the 
kinds referred to, as well as other machines ada])ted to the making of shoes, 
at priées mueh less and on ternis more favorable than those exacted by the 
défendants for sinillar machines, and shoe manufacturers désire to procure 
them, but are deterred from doin.g so by the "tying clauses," and from fear 
of the severe financial conséquences that would foUow thelr violation. ISe- 
sides, competitors of the défendants, other than those now in existence, would 
arise, and other shoe-raaking machines would be manufaetured and put out 
by them, If the field of compétition was free from the restralning efllect of said 
"tying clauses." 

Some indispensable machines can be obtained only from the défendants, for 
example, the stitch indenter and burnisher. In the lease under which the de- 
fendants put out thèse machines, tliey tle thelr use to other machines which 
they manufacture, and thereby compel the lessees to procure ail such other 
machines from the défendants, the effect of which is practically to prohibit the 
shoe manufacturers from obtaining any such other machines from competitors 
of the défendants. That .some lea.ses init out by the défendants bave clause.* 
which provide for a discount or rebate on priées fixed for the use of the ma- 
chines rented — in certain conthigencies eliminating the prlce entirely — in con- 
sidération of the lessees using other machines of the défendants. Copies of 
thèse clauses are filed as Exhlbits 9, 10, 11, aud 12. 

Exhibit 9. 

6. The lessee shall pay to the lessor throughout the fuU term of thls agreement the 
respective ainounts set forth in the loUowing schedule in respect to each pair of welted 



134 



234 FEDERAL REPORTER 



boots, shoes, or other footwear, or portions thereof, manutacturecl or prepared by or 
for the lessees, which shall bave been v/elted In whole or in part or the soles ot whlch 
shall bave been in whole or in part attacbed to welts by the use ol any weltlng or 
stitcbing or sewlng machinery, and in respect to eaoh pair of "turned" boots, shoes, 
or other footwear, or portions tbereot, manulactured or prepared by or tor the lessee, 
the soles of which shall bave been sewed or attacbed to their uppers, in whole or In 
part by tbe use of any sewing or stitching machinery, yiz. : 





Schedule of Payments per Pair. 








Sizes, Form Nos, . 


Welts, 
Cents, 


Turns. 
Cents. 






3 
4 
6 
4 
6 
8 


1 






iy3 


Women's 




iy2 


Boys' 




1% 






IVa 






1V2 









AU payments and the guaranty in tbis agreement provided for are independent of 
and in addition to ail payments and guaranties provided (or in any other leases or li- 
censes or agreeraents between tho lessor and the lessee: Provided, however, tbat (ex- 
cepting in so far as is required by the guaranty herein contained or contained in other 
lease and license agreements between tbe lessor and the lessee), in case under any 
other "Goodyear department" Icase and license agreement between the lessor and the 
lessee covering one or more Goodyear welt and turn shoe machines, Goodyear Universal 
inssam sewing machines, or Goodyear outsole rapid lock-stitch machines, tbe lessees 
shall hâve paid to tbe lessor the amount set forth in the schedule of payments ia such 
lease and license agreement contained in respect to any pair of boots, shoes, or other 
footwear, then the lessee shall be relieved from said payment bereunder in respect to 
tbat pair o£ boots, shoes, or other footwear. 

Exhlblt 10. 
Order and Temporary Loan Agreement, No. 236 "A." 

8. The licensee, until such time as he shall bave redelivered ail of said machinery 
to tbe United Company, as hereinaftor provided, shall pay to the United Company the 
sum of one-half ol one cent (VzO in respect to eacb and every pair of boots, shoes or 
other footwear, or portions thereot, manulactured and prepared in said laotory or in 
any factory to which any of the said machinery shall be removed which iiave been 
pûlled over in any way, whether wholly or in part, by the aid ol machinery, whether 
or not of the United Company; and the licensee shall also pay to the United Company 
in respect to eacb pair of boots, shoes, or other footwear, or portions thereol, in the 
manufacture or préparation ot which any machine hereby ieased is used, the sum ol one- 
quarter of one cent (%(i) for eacb machine so used: Provided, however, tbat tbe total 
of the payments required to be made under tbis article hereof or under tbe correspond- 
ing article ol any other pulllng-over department lease or license agreement or agree- 
ments heretolore executed between the lessee and tbe United Company shall npt exceed 
such amount aa shall make the total of such payments for such factory and of the 
payments for such factory required to be made under tbe oorresponding article of any 
lease or license agreement or agreements between the licensee and the United Company 
covering lasting machines equal to a payment in respect to tbe total number of pairs 
of footwear made In whole or in part in such factory at the foUowing rates, vlz.: 

In respect to ail footwear lasted by machines held by the licensee under lease or li- 
cense agreement from the United Company an amount tor each pair three-fourths (%) ol 
one cent in exoess of tbe amount required to be paid under the terms of the lease or 
license agreements covering such lasting machines. 

In respect to ail footwear not lasted by machines held by the licensee under lease 
or license agreement from the United Company one and tbree-fourths (1%) cents for 
each pair of children's (slzes 1 to 10% inclusive) or misses' (sizes 11 to 2 inclusive) 
footwear and two (2) cents for each pair of ail other Itinds, excepting alone tbat turned 
footwear in the manufacture of which no lasting machine shall be used shall in such 
computation be included at tbe rate o£ three-fourths (%) of one cent per pair only. 



Exhibit 11. 
ti Ti-.r. jiernaoo shall loy to tbe United Company, in accordance with tbe foUowing 
"Schedule of Payments," in respect to each pair ot footwear made in said factory or 
iu any factory to which any ol tbe said machinery shall be removed, in the manu- 



UNITED STATES V. UNITED SHOE MACHINEKY CO. 135 

facture of which any one or more of the opérations which eau be pertormed by the 
machines of tlie metallic department of tlie United Company or any of them is per- 
formed by maehinery, -whether performed by machinery of the United Company or by 
other machines, viz. : 

Schedule of Payments. 

Per Pair. 
For each pair ot turned footwear lu •which no metallic fastening machine is used 

for attaching sole ^M 

For each pair ot welted or slip soled or McKay sewed footwear in which no 

metallic fastening machine is used for attaching either a welt, slip sole, or 

outsole 10 

For each pair ot footwear the outsoles of which are attached by metallic fasten- 

ings 3(i 

For each pair of footwear ot ail other kinds 2(i 

— exeepting, however, that in the case of eacli pair of footwear in which ail such metal- 
lic opérations as are performed by maehinery in the manufacture thereof are performed 
by metallic department maehinery of the United Company, held by the licensee under 
lease or license agreement from the United Company, and in which ail of the metallic 
materials inserted by such maehinery are obtained from the United Company at the 
priées from time to time established by the United Company (which priées include not 
only the priée for the materials themselves but also an additional araount as royalty 
(or the use ot the machines by which the same are inserted), such payment in a/;- 
cordance with the foregolng "Schedule of Payments" shall not be required to be made. 
[The words "United Company" appearing in the above exhibits refer to one of the 
corporate défendants.] 

Exhibit 12. 

Four. The lessee, as rent and royalty for the leased maehinery, shall purchase ex- 
clusively of the lessor ail the fastening material used by him in connection with the 
leased maehinery, and shall pay the lessor in cash on delivery the regular and uniform 
priées therefor as established from time to time by the lessor, which shall not be more 
than ten (10) per cent, in excess of the priées to be established from time to time by 
the lessor for like fastening material to be used in its metallic department maehinery 
by lessees who shall agrée not to use the metallic department maehinery leased to 
them in the manufacture of boots and shoes which are lasted on machines other than 
those leased from the lessor, or of welted boots, or shoes which are not welted and 
stitched on welt sewing and sole stitching machines leased from the lessor, or turned 
shoes the soles of which are not attached by turn sewing machines leased from the 
lessor. 

Some of the machines are leased by the défendants on what they call an 
"unrestrlcted" form of lease. Under tliat form the lessee in certain cases Is per- 
mltted to use with the machine leased from the défendants maehinery obtained 
from the competitors of the défendants. Thèse "unrestrlcted" leases Involve 
the payment of certain "initial premiums" which hâve remained the same for 
many years. Thèse "initial premiums" are in addition to the royalties and 
other charges, which are the same as under the "restricted" form of lease. 
The amounts of thèse "initial premiums" are so large as to practically prohlbit 
the cliolce of the "unrestrlcted" forrn. It is char.ged that thèse premiums 
vvould amount to about $250,000 upon the maehinery in a factory having an 
output of 25,000 to 30,000 pairs of shoes daily. 

The blU then sets eut how the défendants obtained control of the shoe 
maehinery business, by charging that the New Jersey Company, soon after 
its or,ganization, acquired and stlll owns the capital stock of the Goodyear 
Maehinery Company, Goodyear Maehinery Company of Canada, the Inter- 
national Goodyear Jlachinery Company, Consolidated & McKay Lastlng Ma- 
chine Company, McKay Shoe Maehinery Company, and Eppler Welt Machine 
Company, ail of which companies were, at the time they were so acquired, 
engaged in the business of manufacturing, selling, and leasing, and otherwise 
dealing in shoe maehinery : that thèse companies conveyed to the New Jersey 
Company ail of their business, including letters patent of the TJnited States 
and ail other countries. Afterwards from time to time this corporation se- 
eured and stlll maintalns eontrol of 56 other eoncerns engaged In the manufac- 
ture, sale, and leasing of some form of shoe maehinery, or supplies, thereby 
eontrolling a complète Une of "principal" and "auxiliary" maehinery used in 
the bottoming of shoes. Before then no one company could supply such a Une 
nor can any company do so now outslde the défendants. By reason ol this 



136 234 FEDERAL REPORTER 

control the défendants make tlie unlawful lease clauses set out in the com- 
plaint, whereby slioe manufacturers are prohibited from using in the bottoming 
of shoes mâehinery or supplies of défendants' competitors, and to tliis cause is 
due the fact that the défendants eontrol as they do 9Sy2 per cent, of the shoe 
mâehinery business of the Tnited States, as sliown by Exhibit 13. 

The prayer of the bill is that the clauses of the leases hereinbefore referred 
to, and ail clauses of lilie ténor and efl'ect, and the conditions, agreements, 
and understandings upon whieh the leases were made, as aforementioned, be 
declared illégal and void under the said Olayton Act, and that the défendants 
be enjoined from enforcing or attenipting to enforce the same, and from mail- 
ing any siniilar clauses or leases upon liUe conditions, agreements, or under- 
standings in the future. 

The défendants hâve flled motions to dlsniiss the complaint, assigning 20 
causes. As many of thèse are mère répétitions, and as the grounds relied on 
by the défendants will be referred to in the opinion, it is uunecessary to set 
them out in thls statement of facts. 

Constantine J. Smyth and H. La Rue Brown, Sp. Asst. Attys. Gen., 
for the United States. 

Charles F. Choate, Jr., of Boston, Mass., Chester H. Krum, of St. 
Louis, Mo., Cordenio A. Severance, of St. Paul, Minn., and Frederick 
P. Fish, of Boston, Mass., for défendants. 

TRIEBER, District Judge (after stating the facts as above). Sec- 
tion 3 of the Clayton Act, which was invoked as the basis for this 
action, is as f ollovvs : 

"Sec. 3. That it sliall be unlawful for any person engaged in commerce, in 
the course of such commerce, to lease or maive a sale or contract for sale of 
goods, wares, mercUandise, mâehinery, supplies or other eommodities, whether 
patented or unpatented, for use, consumption or resale within the United 
States or any territory thereof or the District of Columbia or any insular 
possession or other place under the jurisdiction of the United States, or lix 
a price charged therefor, or discount from, or rebate upon such prlce, on the 
condition, agreemeut or tmderstanding tliat the lessee or purchaser thereof 
sliall uot use or deal in the goods, wares, mercliandise, mâehinery, supplies 
or other eommodities of a competitor or competitors of the lessor or seller, 
wliere the effect of such lease, sale, or contract for sale or such condition, 
agreement, or understanding may be to substantially lessen compétition or 
tend to create a monopoly in any Une of commerce." 

We will first dispose of those grounds of the motion which af- 
fect the pleadings only. 

[1] It is claimed that the allégations in the complaint are not spé- 
cifie enough to enable the court to détermine whether the acts charged 
are within the meaning of the statute, nor sufficient to enable the 
défendants to prépare their défense. 

Counsel in their arguments, as well as in their briefs, stated their 
position as follows : 

"In any pleading, whether eriniinal, at law, or in equlty, the thlng charged 
should be stated wlth such précision and certainty tliat the défendant may 
know with what lie is charged, that he may prépare hls défense, and so that 
the court may be able to détermine whether the offense charged is within the 
provisions of the statute." 

While this rule is applied to indictments in criminal proceedings, 
the rule in civil actions, either at law or in equity, is much more lib- 
éral. Mr. Justice Holmes, delivering the opinion of the court in Swift 



UNITED STATES V. UNITED 8HOE MACHINERY CO. 137 

& Co. V. United States, 196 U. S. 375, 395, 25 Sup. Ct. 276, 279 (49 
L. Ed. 518), which was an action under the Sherman Anti-Trust Act, 
held : 

"Whatever may be thought concerning the proper construction of tlie stat- 
ute, a bill in equity is not to be read and construed as an Indictinent would 
liave been read and construed 100 years ago, but it is to be taken to mean 
what it fairly conveys to a dlspassionate reader by a fairly exact use of tlie 
English speech." 

Nor does the old rule, that "every intendment is against the pleader, 
and therefore the pleadings must be strictly construed against him," 
govern the courts at this day ; but, on the contrary, the courts now 
recognize the fact that it is of more importance to détermine issues 
than pleadings, provided, of course, the facts alleged in the complaint 
entitle the plaintifif to the rehef sought. 

[2] The new equity rules, which in effect are similar to the Code 
procédure prevailing in most of the states, are clearly intended to 
simplify pleadings and do away with many of the technicalities there- 
tofore required. That under the Codes a demurrer upon mère techni- 
cal grounds would not lie, but that the proper remedy is a motion to 
make the complaint more spécifie, is now well settled. 4 Standard 
Enc. of Procédure, 859; Bliss on Code Pleading (3d Ed.) § 425 A; 
McAllister v. Kuhn, 96 U. S. 87, 24 L. Ed. 615; United States v. 
Parker, 120 U. S. 89, 94, 7 Sup. Ct. 454, 30 E. Ed. 601 ; Singers- 
Biggers v. Young, 166 Fed. 82, 91 C. C. A. 510; Locker v. American 
Tobacco Co. (D. C.) 194 Fed. 232; Phillips v. Jones, 79 Ark. 100, 
104, 95 S. W. 164, 9 Ann. Cas. 131 ; Sanders v. Carpenter. 102 Ark. 
187, 190, 143 S. W. 1091. Equity rule 20 (198 Fed. xxiy, 115 C. 
C. A. xxiv) ofifers the défendants an adéquate remedy, if the al- 
légations in the complaint are not spécifie enough to enable them to 
prépare their défense. 

Even under the old rule gênerai certainty only was required in plead- 
ings in equity. St. Eouis v. Knapp Co., 104 U. S. 658, 661, 26 E. 
Ed. 883. Only when the uncertainty in the pleadings is of such a 
nature that it does not state a cause of action will a demurrer, or, 
under the présent equity rules, a motion to dismiss, lie. The com- 
plaint does not lack that certainty which is necessary to enable the 
court to détermine whether it states a cause of action ; nor can it 
be said that the allégations are too uncertain to enable the défendants 
to prépare their défense. 

It sets out as fuUy as is necessary for a proper défense what the 
plaintifï expects to rely on, and therefore enables the défendants to 
prépare their défense. To a similar objection made in Swift & Co. 
V. United States, supra, which, as stated before, was an action under 
the Sherman Anti-Trust Act (Act July 2, 1890, c. 647, 26 Stat. 209), 
Mr. Justice Holmes replied : 

"This objection is serious, but it seems to us inhérent in the nature of the 
case. The scheme alleged is so vast that it présents a new problem in plead- 
ing. If, as we must assume, the scheme is entertained, it is, of course, con- 
trary to the very words of the statute. Its size maljes the violation of the 
law more conspicuous, and yet the same thing makes it impossible to fasten the 
principal fact to a certain time and place. The éléments, too, are so numerous 



138 234 FEDERAL REPORTEE 

and shifting, even the constituent parts alleged are and from theîr nature must 
be so extensive in time and space, that something of the Same impossibillty 
applies to ttiem. Tlie law lias been upheld, and therefore we are bound to 
enforce it, notwltbstanding thèse dlffieultles." 

The complaint in this case is drawn in concise terms and, without 
répétitions and unnecessary verbiage, states the f acts which the plead- 
er claims show that the plaintiff is entitled to rehef under the Clayton 
Act. The failure to set out the leases in full only tends to reduce the 
size of the record, as the complaint expressly allèges that only the parts 
set out in the exhibits are contrary to the statute, and only as to them 
is relief sought. If other provisions of the leases would show that 
thèse excerpts are misleading, that tlie lease as a whole would show 
a différent state of facts than is alleged in the complaint, they may be 
set out in full in the answer, as counsel during the argument admitted 
that they had the original leases in their possession ; or, if they believe 
that with the entire leases before the court it would appear that they 
are not subject to the construction put upon the clauses set forth in 
the complaint, and that they do not violate any statute of the United 
States, a motion under equity rule 20 would give them ail the relief 
needed. This rule is a copy of the English chancery rule (Order XIX, 
rule 7), and as stated in Spedding v. Fitzpatrick, 38 C. D. 413 : 

"The bill of particulars is to enable the party asking for them to know what 
case he bas to nieet at the trial, and to save unnecessary expense and avoid 
allowing parties to be taken by surprise." 

[3] In the opinion of the court instruments of writing need not be 
set out in extenso in the pleadings, unless the bill shows that it is es- 
sential to a proper construction of the particular clauses complained 
of. Such is not the case hère. 

[4] Is the pétition defective for failing to make the lessees défend- 
ants? 

The leading authority upon which the défense relies to sustain this 
ground of their motion is Minnesota v. Northern Securities Ce, 184 
U. S. 199, 22 Sup. Ct. 308, 46 L. Ed. 499. But the facts in that case 
dififer so materially from those set out in the plaintiff's bill that it is 
wholly inapplicable to the instant case. In that case the state of Min- 
nesota brought suit to enjoin the Northern Securities Company from 
exercising any control in the management or opération of two separate 
railways, existing under the laws of the state of Minnesota, which it 
was charged it attempted to do by reason of the ownership and con- 
trol of the majority of the stock of the two railways and numerous 
other roads controlled by thèse railways, by virtue of stock ownership, 
and in violation of the laws of the state of Minnesota. Mr. Justice 
Shiras, delivering the opinion of the court, stated the object of the bill 
to be : 

"The narrative of the bill unquestionably dlsclosed that the parties to be 
affected by the décision of the controversy are, directly, the state of Minne- 
sota, the Great Nortliern Railway Company, the Nortliem Pacifie Railway 
Company, corporations of that state, and the Northern Securities Company, a 
corporation of tlie state of New Jersey, and, Indirectly, the stockholders and 
bondholders of thèse corporations, and the numerous railway companies whose 
Unes are alleged to be owned, managed, and controlled by the Great Northern 



UNITED STATES V. UNITED SHOE MACHINEET CO. 139 

and Northern Pacific Railway Companies. * * * But it is not alleged that 
the stockholders of the Northern Securities Company constitute or are com- 
posed of ail the stockholders of the two railroad companies, and, In fact, the 
contrary Is conceded In the allégations of the bill that a majority only of the 
stock of one, or perhaps both, of the two railroad companies is owned, or at 
least controUed and managed, by the Northern Securities Company." 

Some of the relief prayed in the bill was that the Northerti Securi- 
ties Company, and its officers, be enjoined "from in any way aiding, 
advising, directing, interfering with, or in any way taking part, direct- 
ly or indirectly, in any manner whatsoever, in the management, con- 
trai, or opération of any of the lines of railway of either of said com- 
panies, * * * and from doing any and ail acts and making any 
arrangements or combinations, by contract or otherwise, having for 
their object, efifect, or resuit, the consolidation or establishment of a 
joint management or control in any manner whatsoever of the said 
Great Northern and Northern Pacific Railway Companies, their lines 
of railway or properties." No such relief is asked in this case, nor 
does the complaint seek the cancellation of any leases made by the 
défendants, but only to enjoin the enforcement of those clauses in the 
leases, which it is charged are prohibited by section 3 of the Clayton 
Act. 

Shields V. Barrow, 58 U. S. (17 How.) 130, 15 L. Ed. 158, another 
case relied on by défendants, is wholly inapplicable to the facts in this 
case, as that was an action for the rescission of a compromise, and it 
was held that ail the parties who, by the compromise sought to be re- 
scinded, had been released of liability, were indispensable parties, as 
the object of the bill was to restore the plaintiff to bis original rights 
as they existed before the compromise, and therefore would place 
upon thèse absent parties a liability of which they had been released 
by the compromise. It is hardly necessary to say, as it clearly appears 
from the language of the act, that the object of the statute invoked 
by the plaintiff was for the protection of the lessees and indirectly the 
public; Congress evidently presuming that the lessees accepted thèse 
leases under duress, and it is so charged in the complaint. It allèges : 

"In the leases under which the défendants put out thèse machines they tie 
their use to other machines, which they manufacture, and thereby compel the 
lessees to procure ail such other machines from the défendants, the eftect of 
which is practically to prohlblt the shoe manufacturers from obtaining any 
such other machines from competitors of the défendants." 

And again: 

"Competitors of the défendants hâve produced, sold, and leased, and are 
now producing, selllng, and leasing, In Interstate commerce machines slmilar 
in function to many of the important machines put out by the défendants and 
afifected by the 'tylng clauses' hereln described. In nearly ail cases where 
shoe manufacturers hâve used or are using lasting machines procured from 
competitors of the défendants, the latter hâve threatened, and do now threat- 
en, to remove from the factories of said manufacturers, ail machines leased 
from them. In some instances the détendants hâve removed such machines, 
and in other instances hâve imposed heavy penalties upon shoe manufacturers 
because of the use of such machines procured from the défendants' competitors 
in violation of said 'tying clauses.' " 



140 234 FEDERAL REPORTER 

[5] Aside from thèse allégations, it is expressly stated in the bill 
that no relief is souglit against the lessees. What relief could the gov- 
ernment ask against them? They are alleged to be bound hand and 
foot by thèse clauses in the leases, and must either submit to them, or 
do without those machines, which are under the absolute and sole con- 
trol of the défendants, and if compelled to do without them, go out 
of business. Even if the lessees were proper parties, which is doubt- 
ful, the jurisdiction of the court would not be ousted for a failure to 
join them, as only indispensable parties, and in some instances neces- 
sary parties, must be joined. Cella v. Brown (C. C.) 136 Fed. 439; 
affirmed Id., 144 Fed. 742, 75 C. C. A. 608; O'Neil v. Wolcott Mining 
Co., 174 Fed. 527, 536, 98 C. C. A. 309, 318, 27 h. R. A. (N. S.) 200; 
Silver King, etc.. Mines Co. v. Silver King C. M. Co., 204 Fed. 166, 
122 C. C. A. 402; Lion Tractor Co. v. Bull Tractor Co., 231 Fed. 156, 
C. C. A. , opinion filed February 12, 1916. 

An indispensable party has been defined as : 

"When he has such an Interest In the sub,1ect-matter of the controversy that 
a final decree cannot be rendered in the suit without Injurlously affectlng the 
absent party, or without leaving the controversy in such a situation that its 
final détermination mav be inconsistent witli equlty and good conscience." 
Rogers v. Penobscot Mining Co., 154 Fed. 600, 83 C. C. A. 380, and authori- 
tles there clted. 

A necessary party is : 

One who has "an interest In the controversy, and wlio ought to be made 
a party, in order that the court may act on tliat rule, wlilch requires it to 
décide on and finally détermine the entire controversy, and do complète jus- 
tice, by adjustlng ail tlie rights involved in it." Shields v. Barrow, supra. 

No title to nor possession of property is involved in this case. Still, 
if any of the lessees believe that their interests may be injuriously 
affected by this action, they can apply to the court to be made parties, 
and the court will then détermine whether leave to do so should be 
granted. So far none of the lessees has asked to be made a party. 
United States v. Du Pont De Nemours & Co. (C. C.) 188 Fed. 127. 
In the court's opinion the lessees are not indispensable nor necessary 
parties to this action, as the relief prayed in the bill, if granted, can 
in no wise affect them or their rights, except that it may relieve them 
of an onerous, and, as the complaint allèges, illégal, burden. Vetter- 
lein V. Barnes, 124 U. S. 169, 8 Sup. Ct. 441, 31 L. Ed. 400. 

[6, 7] Are the New Jersey Company and the New Jersey Corpora- 
tion improperly joined as défendants? 

It is urged that, as the Maine Company is the only défendant alleged 
to hâve made the leases complained of within the jurisdiction of this 
court, the other corporate défendants, each of whom has filed a sep- 
arate motion to dismiss, are not proper parties. The allégations in the 
bill are that the entire capital stock of the Maine Company is owned 
by the New Jersey Company, and that the New Jersey Corporation 
owns 98% per cent, of the capital stock of the New Jersey Company ; 
that the officers and directors of the three corporations are practically 
the same, ail of them serving as such officers and directors in at least 
two of the corporations, and some in ail three. But it is claimed that 



UNITED STATES V. UNITED SHOE MACHIN EKY CO. 141 

as each corporation is an entity, and as there is no charge of conspir- 
acy, the mère fact that they are the owners o£ the capital stock of the 
Maine Company, the only offender, does not justify their being made 
parties défendants. 

Whatever may hâve been the views of the courts in the early days 
of corporate existence, when there were but few corporations, and 
they mostly confined to business of a quasi pubhc nature, at this date 
courts, and especially courts of equity, will look behind the corporate 
fiction, and if it clearly appears that one corporation is merely a 
créature of another, the latter holding ail the stock of the former, 
thereby controlling it as eiïectively as it does itself, it will be treated 
as the practical owner of the corporation, when necessary for the 
purpose of doing justice. In McCaskill v. United States, 216 U. S- 
504, 514, 30 Sup. Ct. 386, 391 (54 h. Ed. 590), Mr. Justice McKenna, 
delivering the opinion of the court, said : 

"Undoubtedly a corporation is, in law, a person or entity entirely distinct 
from Its stockholders and offlcers. It may liave interest distinct from tlieirs. 
Their Interests, it may be conceived, may be adverse to its interest, and lience 
bas arisen against the presumption that their linowledge is its linowledge the 
counter presumption that In transactions wlth it, when their interest Is ad- 
verse, their Isnowledge will not be attrlbuted to it. But while this presump- 
tion should be enforced to protect the corporation, it sliould not be earried so 
far as to enable the corporation to become a means of fraud or a means to 
évade its responslbilitles. A growing tendency Is therefore exhlbited in the 
courts to look beyond the corporate form to the purpose of It, and to the of- 
flcers who are identifled wlth that purpose. Illustrations are glven of this lu 
Cook on Corporations, §§ 663, 664, 727. The principle was enforced In this 
court in Simmons Oreek Coal Co. v. Doran, 142 U. S. 417 [12 Sup. Ct. 239, 
35 L. Ed. 1063]." 

The same rule was recognized in Linn & Lane Timber Co. v. United 
States, 236 U. S. 574, 35 Sup. Ct. 440, 59 U. Ed. 725. In Miller & Lux 
y. East Side Canal Co., 221 U. S. 293, 29 Sup. Ct. 111, 53 L. Ed. 189, 
it was held that a plea that the plaintiff Miller & Lux, who instituted 
the action in a national court of the state of California, claiming to 
be a Nevada corporation, was organized under the laws of Nevada to 
act as the agent of Miller & Lux, a California corporation ; that the 
California corporation owned ail the capital stock of the Nevada cor- 
poration; that ail the property of the Nevada corporation was held 
as agent for the California corporation, and that it had no other ex- 
istence ; that it was incorporated with the sole object to enable it to 
maintain suits in the national courts of California by reason of a 
diversity of citizenship ; that it transacted no business except such as 
was necessary to carry out the performances of the California cor- 
poration ; that therefore the Circuit Court should not retain jurisdic- 
tion of the cause, there being, in fact, no diversity of citizenship, both 
parties being citizens of the state of California — was rightly sustained 
by the Circuit Court, and its judgment affirmed by the Suprême Court. 
In Northern Securities Co. v. United States, 193 U. S. 197, 24 Sup. Ct. 
436, 48 L. Ed. 679, Mr. Justice Harlan said : 

"Necessarily by their combinatlon or arrangement (referrlng to the Securi- 
ties Company as holder of a majority of the shares of the constituent com- 
panles), the holding company in the fuUest sensé dominâtes the situation in 



142 234 FEDERAL REPORTER 

the interest of tliose :svho were stx)ckholders of the constituent eompanles ; 
as much so, for every practlçal purpose, as If it had been itself a, railroad cor- 
poration which had built, owned, and operated both Unes, for the exclusive 
benefit of its stockholders." 

In the same case, when pending in the Circuit Court (120 Fed. 721, 
725, 726), Judge Thayer, delivering the opinion of the court, in which 
Circuit Judges Caldwell and Sanborn concurred, said: 

"It will not do to saj' that, so long as each railroad company has its own 
board of directors, they operate independently, and are not controUed by the 
owner of a majorlty of their stock. It is the! common expérience of man- 
kind that the acts of corporations are dictated and that their policy is con- 
troUed by those who own the majorlty of their stock. Indeed, one of the 
favorite methods in thèse days, and about the only method, of obtaining con- 
trol of a corporation, is to purchase the greater part of its stock. * « * 
The fact that the ownership of a majorlty of the capital stock of a corpora- 
tion glves one the mastery and control of the corporation veas distlnctly recog- 
nized and declared in Pearsall v. Great Northern Eailway, 161 U. S. 646, 671 
[16 Sup. et. 705, 40 L. Ed. 838]," and numerous other cases cited in the opinion. 

Referring to Pullman Car Co. v. Missouri Pacific Ry. Co., 115 U. 
S. 587, 6 Sup. Ct. 194, 29 L. Ed. 499, another case relied on by counsel 
for défendants, the same learned judge distinguished it by saying: 

"In that case the meaning of the vs-ord 'controlled,' as used in a private 
contract, was the point uuder considération, and what was said on the sub- 
ject cannot be held applicable to cases arising undor the Anti-Trust Act, when 
the poln^ l'nvolved is vvhether the ownership of ail of the stock of two com- 
peting and parallel railroads vests the owner thereof with the power to sup- 
press compétition between such roads. We entertain no doubt that it does. 
Indeed, we regard the suppression of compétition, and to that extent a re- 
straint of commerce, as the uatural and inévitable resuit of such ownership." 

In Chicago Mill & Lumber Co. v.. Boatmen's Banl<, 234 Fed. 41, 

C. C. A. , opinion filed April 27, 1916, Judge Adams, speak- 

ing for the Circuit Court of Appeals of this circuit, said : 

"It is true that, apart from the question of ultra vires, not presently in- 
volved, when one corimration ovv'ns and controls the entire property of an- 
other, and opérâtes its plant and conducts its business as a department of its 
own business, or as its alter ego, it is responsible for its obligations," citing a 
number of authoritles. 

In Re Rieger (D. C.) 157 Fed. 609, the court said: 

"The doctrine of corporate entlty is not so sacred that a court of equity, 
looklng through forms to the substance of things, may not in a proper case 
ignore it and préserve the rights of innocent parties or to circumvent fraud." 

In United States v. Milwaukee Refrigerator Transit Co. (C. C.) 142 
Fed. 247, it was charged that the défendant vi'as a dummy corpora- 
tion, organized, owned, and operated by the stockholders of a brew- 
ing company, as a device to cover rebates on interstate shipments of 
béer, and the court held : 

"A corporation, from one point of view, may be considered an entity, witli- 
out regard to its shareholders, yet the fact remains self-evident that it is not 
in reallty a person or thing distinct from its consistent parts. The word 'cor- 
poration' is but a collective name for the members who compose the associa,- 
tion [eitlng authorities]. If any gênerai rule can be laid down, in the présent 
State of authority, it is that a corporation will be looked upon as a légal en- 
tity as a gênerai rule, and until sufficient reason to the contrary appears; 



UNITED STATES V. UNITED SHOE MACHINERY CO. 143 

but, when the notion of légal entlty is used to defeat public convenlence, Jus- 
tify WTong, protect fraud, or défend crime, the law will regard the corpora- 
tion as an association of i)ersons." 

Of the many other cases to the same effect, see State ex rel. v. 
Standard Oil Co, 49 Ohio St. 137, 30 N. E. 279, 15 L. R. A. 145, 
34 Am. St. Rep. 541 ; First National Bank v. F. C. Trebein Co., 59 
Ohio St. 316, 52 N. E. 834. 

From the allégations in the complaint it is beyond question that the 
Maine Company is merely a subsidiary of the New Jersey Company, 
and that both are under the absolute control, by reason of its stock 
ownership, of the New Jersey Corporation. The acts of one are the 
acts of ail thèse corporations; in fact, it may truthfully be said that 
they are the acts of the United Shoe Machinery Corporation. This 
being the case, they are properly joined as défendants. 

[8-10] Is section 3 of the Clayton Act, so far as it applies to îeases, 
unconstitutionalf 

Counsel for défendants challenge the constitutionality of so much of 
section 3 of the Clayton Act as applies to Ieases. It has been earnestly 
and ably argued that a lease is no more commerce than insurance or 
manufacturing, and it is claimed, if not commerce, it cannot be inter- 
state commerce. The diligence of the able counsel has not been re- 
warded by finding any authority wh'ich has determined that question, 
nor has the court been able to find any. In the argument many ex- 
trême illustrations were made. It is a well-settled rule that courts are 
slow to déclare the acts of co-ordinate departments of the government 
void, and unless it appears beyond a reasonable doubt that the act 
is violative of the fundamental law of the United States the courts 
will uphold it. As stated by Mr. Justice Holmes in Interstate, etc., 
Railway Co. v. Massachusetts, 207 U. S. 79, 128 Sup. Ct. 26, 52 L. 
Ed. 111, 12 Ann. Cas. 555 : 

"It is not enough that a statute goes to the verge of constitutlonal power. 
We must be able to see clearly that it goes beyond that power. In case of a 
real doubt a law must be sustained." 

This principle of law was settled at an early date by Chief Justice 
Marshall in Fletcher v.Peck, 10 U. S. (6 Cranch) 87, 3 L. Ed. 162. 
The fact that the question has never been before the courts, or that 
the power has never been exercised by Congress, is no proof that the 
Constitution does not authorize it. As stated by Mr. Justice Brewer 
in Re Debs, 158 U. S. 564, 591, 15 Sup. Ct. 900, 909 (39 L. Ed. 1092) : 

"Constitutlonal provisions do not change, but their opération extends to 
new matters as the modes of business and the habits of life of the people 
vary with each succeeding génération. The law of the common carrier is the 
same to-day as when transportation on land was by coaeh and wagon, and 
on water by canal boat and sailing vessel, yet in Its actual opération it touches 
and régulâtes transportation by modes then unknown, the railroad train and 
the steamship. Just so it is with the grant to the national government of 
power over Interstate commerce. The Constitution has not chr.nged. The 
power is the same. But it opérâtes to-day upon modes of Interstate com- 
merce unlinown to the fathers, and it will operate with equal force upon any 
new modes of such commerce which the future may develop." 

It may be conceded that every lease is not commerce, but that is 
not conclusive that none may be. Each case must be determined from 



144 234 FEDERAL REPORTER 

the peculiar facts shown to exist in that case. When a corporation 
with millions of capital, doing an annual business amounting to mil- 
lions of dollars, sees proper to conduct its business by only leasing 
its chattels, instead of selling them, why is it not as much engaged in 
commerce as if it sold them outright? But, aside from that, cannot 
a person be engaged in interstate commerce, although, if its business 
is confined exclusively to its own state, it would not be engaged in 
commerce ? 

The act of Congress of June 25, 1910, c. 395, 36 Stat. 825 (Comp. 
St. 1913, §§ 8812-8819), commonly known as the "White Slave Act," 
makes it an offense to transport, or cause to be transported, in inter- 
state or foreign commerce, any woman or girl, for the purpose of 
prostitution, or for other immoral purposes. In Hoke v. United States, 
227 U. S. 308, 33 Sup_. Ct. 281, i7 L. Ed. 523, 43 L. R. A. (N. S.) 906, 
Ann. Cas. 1913E, 905, arising under that Act, it was contended that 
the imnioralities of their citizens can only be controlled by the states, 
and as women are not articles of commerce, there can be no reason 
for holding that, by reason of transporting them from one state to 
another, or furnishing means for such transportation, the acts can 
become interstate commerce. But the court unanimously held that, 
while it is true that women are not articles of commerce, if transpor- 
tation is employed as a facility for their wrongs, Congress has the 
povver to regulate or prohibit such acts under the commerce clause. 

Acquiring an éducation would not ordinarily be commerce, but in 
International Text-Book Co. v. Pigg, 217 U. S. 91, 106. 30 Sup. Ct. 
481, 54 L. Ed. 678, 27 E. R. A. (N. S.) 493, 18 Ann. Cas. 1103, it 
was held that, as contracts between the company and its patrons in- 
volved the transportation from one state to another of books, appara- 
tus, and papers, use fui or necessary in the particular course of study 
the scholar is pursuing, the company was engaged in interstate com- 
merce. 

In Butler Bros. Shoe Co. v. United States Rubber Co., 156 Eed. 
1 to 17, 84 C. C. A. 167, 183, the issue involved was whether a con- 
tract of factorage, under which the Rubber Company consigned to 
the Shoe Company goods from an Eastern state to Colorado, to be 
sold by the Shoe Company as a factor. Judge Sanborn, after,a very 
thorough review of the authorities bearing on that subject, held: 

"Xor is the fiift that thèse contracts did not évidence sales of the goods 
determinative of this (inestion. A sale is not tho test of interstate commerce. 
AU sales of soniul articles of commerce, which necessitate tlie tran,sportation 
of the î:oo<1s sold from one state to another, are interstate commerce ; but 
ail interstate commerce is not sales of goods. Importation into one state from 
another is tlie indispensable élément, tlie test, of interstate commerce; and 
every ne.iiotiation, contract, trade, and deallnia: between citizens of différent 
states, wliicli conteîiiplates and causes such importation, whether it be of 
goods, persoiis, or information, is a transaction of interstate commerce." 

From this it appears that every negotiation or dealing between citi- 
zens of différent states which causes such importation is a transac- 
tion of interstate commerce. In Marienelli v. United Booking Offices 
(D. C.) 227 Eed. 165, it was held that booking performers for a the- 
atrical circuit, which requires them to pass from state to state, taking 



UNITED STATES V. UNITED SHOE MACHINEKY CO. 145 

with them paraphernalia and stage properties, constitutes interstate 
commerce. 

It is not necessary to cite the many authorities found in the books 
sustaining tiiis conclusion, as they will be found collated in the opin- 
ions hereinbefore cited. It is sufficient to say that as new methods 
of transacting business are devised, if they are found to be in efïect 
methods of carrying on commerce in any business, and the means for 
commercial transactions between the owner of the article on the one 
hand, and the person who wants to deal in it or use it in carrying on 
his business on the other hand, whether it be manufacturing, selling, 
trading, leasing, transportation, communication, or information, and 
it is sent or transported f rom one state to another, it is interstate com- 
merce, and therefore, subject to be regulated by Congress under the 
commerce clause of the Constitution. 

The bill charges that the machinery manufactured by the défendants 
is leased for the purpose of enabling the lessees to manufacture shoes ; 
that they deal with over 1,500 shoe manufacturers in ail parts of 
the United States, and, when the leases are made, the machinery is 
shipped by the défendants from the state of Massachusetts, the place 
of manufacture, to other states of the Union and to foreign countries. 
Upon thèse facts there can be no other conclusion than that the de- 
fendants are engaged in interstate commerce, and subject to be reg- 
ulated by Congress. Whether it applies to leases made and sold in 
the same state, and not transported to another state, it is unnecessary 
to deternTfne, on this motion, as the bill charges shipments to other 
States. By référence to the act under considération, it will be noticed 
that, while section 1 defines the word "commerce" as used in the act, 
section 3 prohibits any person engaged in such commerce from doing 
the acts prescribed and enumerates them. The act is not limited to 
leases, and sales in interstate commerce, as is the Employers' Liability 
Act of April 22, 1908, c. 149, 35 Stat. 65 (Comp. St. 1913, §§ 8657- 
8665) ; but the language employed is like that used in the amendment 
of March 2, 1903, c. 976, 32 Stat. 943 (Comp. St. 1913, §§ 8613-8615), 
to the Safety Appliances Act (Act March 2, 1893, c. 196, 27 Stat. 531 
[Comp. St. 1913, §§ 8605-8612]). This amendment had, prior to the 
enactment of the Clayton Act, been held to embrace ail locomotives, 
cars, and vehicles used on a railway that is engaged in interstate com- 
merce, and is not confined exclusively to vehicles engaged in interstate 
commerce. Southern Railway Co. v. United States, 222 U. S. 20, 
32 Sup. Ct. 2, 56 L,. Ed. 72, reaffirmed at the présent term of the Su- 
prême Court in Texas & Pacific R. Co. v. Rigsby, 241 U. S. 33, 36 
Sup. Ct. 482, 60 L. Ed. 874. But whether this act should be so con- 
strued, and held to apply to the intrastate business as well as the 
interstate business of the défendants, in view of the fact that the de- 
fendants are charged to be engaged in interstate commerce, need not 
be determined now, as the question may never arise. Référence is 
made to it only for the reason that during the oral argument counsel 
for défendants stated that a very large part of the défendants' busi- 
ness is intrastate. 
234 F.— 10 



146 234 FEDERAL REPORTER 

[11] Do the allégations in the complaint show a violation of section 
S of the Clayton Àct? 

The act déclares unlawful any lease, etc., where the price is fixed, 
or a discount or rebate upon such price is granted, under the condi- 
tion, agreement, or understanding that the lessee or purchaser thereof 
is not to use or deal in the goods, etc., of a competitor of the lessor, 
or seller, where the efifect of such lease, sale, or contract for sale, or 
such condition, agreement, or understanding, may be to substantially 
lessen compétition, or tend to create a monopoly in any line of com- 
merce. For the purpose of aiding in the construction of the act, coun- 
sel in their argument hâve read copious extracts from the reports and 
debates in Congress, while the act was under considération. They hâve 
also f urnished the court with copies of thèse reports and debates, and 
they hâve been carefully read ; but so far as the construction of the 
act is concerned the court does not feel justified to consider them. It 
is only when the language of a statute is ambiguous that thèse sources 
can be referred to. If the language is clear and free from ambiguity, 
there is nothing for the courts to construe. United States v. Union 
Pacific Railroad, 91 U. S. 72, 23 L. Ed. 224; United States v. Trans- 
Missouri Freight Asso., 166 U. S. 290, 17 Sup. Ct. 540, 41 L. Ed. 
1007; Dunlap v. United States, 173 U. S. 65, 19 Sup. Ct. 319, 43 L. 
Ed. 616; Maxwell v. Dow, 176 U. S. 581, 20 Sup. Ct. 448, 494, 44 L. 
Ed. 597; Dewey v. United States, 178 U. S. 510, 20 Sup. Ct. 981, 44 
L. Ed. 1170; MacKenzie v. Hare, 239 U. S. 299, 307, 36 Sup. Ct. 106, 
60 U. Ed. 297. 

Aside from this, the record of the proceedings of the two Houses 
of Congress shows that section 3 of the Clayton Act, as finally enact- 
ed, differs materially from the section as passed by each House. The 
words "where the efïect of such lease, sale, contract for sale, or such 
condition, agreement, or understanding may be to substantially lessen 
cor»petition, or tend to create a monopoly in any line of commerce," 
are not found in either of the acts as passed by the House of Repré- 
sentatives or the Senate. Nor does the act as finally passed make the 
violation of that section a pénal offense, although each of the houses 
had made such a provision. The act as finally passed was the resuit of 
the conférence committees appointed by the two houses. What induc- 
ed the conférées to make the changes, and Congress to adopt them in 
the final enactment of the statute, is unknown. Whether the speeches 
made, while the bill was pending, influenced the conférence commit- 
tees, and, if so, to what extent, is merely spéculative, and for the courts 
to consider them in construing the act, as finally passed, might be mis- 
leading. 

[12] A careful reading of this section of the act leaves no room for 
doubt as to what Congress intended. The language is plain, and the 
court is unable to find any ambiguity in it, which would make it neces- 
sary to resort, for aid in its construction, to any source outside the act 
itself. In plain and concise language it déclares that it shall be unlaw- 
ful for any person engaged in Interstate commerce to lease, sell, or con- 
tract for sale of any commodity, whether patented or not, for use, con- 
sumption, or resale, and fix a price for, a discount from or rebate up- 



UNITED STATES V. UNITED SHOE MACHINEKY OO. 147 

on such price, on the condition, agreement, or understanding, that the 
lessees shall not purchase such articles from the competitors of the 
lessor or the seller, and then is added : 

"If the effect of such an agreement, or understanding, may be to lessen 
compétition, or tend to create a monopaly." 

That the leases made by the défendants, as shown by the extracts 
attached to the complaint as exhibits, provide for rebates on condition 
that the lessee shall only use the machines and materials manufactured 
and dealt in by the défendants, and forbids the use of machines pur- 
chased from other manufacturers, under penalty oi having the leases 
canceled and machines taken from them by défendants, is beyond ques- 
tion. But it is claimed that there is nothing in the leases whereby the 
lessees covenant or bind themselves not to use any machines manufac- 
tured by other parties, or purchase materials which are dealt in by the 
défendants, from others. This is true, but as the lessors retained the 
right, in case any other machines are used in the manufacture of shoes 
than those manufactured by the défendants, of canceling the leases 
and removing the leased machines, and further provide for a rebate 
to those who comply with thèse terms, which those using other ma- 
chines or material do not receive, there is an implied promise on the 
part of the lessees not to violate thèse conditions of the leases, or suf- 
fer the penalties set eut in the leases. It is charged in the bill : 

"In nearly ail cases, however, they [lessees] are deterred from doing so by 
the said 'tying clauses,' and by fear of the serious financial conséquences 
that would foUow their violation. * » * Some indispensable machines caii 
be obtained only from the défendants ; for example, the stitch indenter and 
bumisher." 

Exhibit 5 shows that the machine therein mentioned is protected 
by letters patent of the United States and provides that : 

"The lessee is hereby lieensed under letters patent of the L'uited States No. 
849,245, dated Aprll 2, 1907, to manufacture by the use of the principal ma- 
chinery hereby leased, during the continuance in force of this lease and li- 
cense, the patented insoles covered by said letters patent, and to use such 
patented insoles so made by the lessee in the manufacture of welted or turned 
boots, shoes, or other footwear, which hâve been or are being manufactured 
as provided in article 5 hereof." 

The acceptance of a deed poil containing a provision that the grantee 
assumes payment of a certain mortgage or lien on the premises con- 
veyed binds the grantee to the perforinance of the terms, and an ac- 
tion, in some states at law, while in others in equity, will lie on the im- 
phed promise. Keller v. Ashford, 13.3 U. S. 610, 10 Sup. Ct. 494, 33 
L. Ed. 667; Willard v. Wood, 164 U. S. 502, 17 Sup. Ct. 176, 41 L. 
Ed. 531 ; Fiske v. Tolman, 124 Mass. 254, 26 Am. Rep. 659 ; L,ocke 
V. Homer, 131 Mass. 93, 41 Am. Rep. 199; Johnson v. Rluzzy, 45 Vt. 
419, 12 Am. Rep. 214; Patton v. Adkins, 42 Ark. 197; Dismukes v. 
Halpern, 47 Ark. 317, 1 S. W. 554; Hand v. Kennedy, 83 N. Y. 149; 
Bowen v. Beck, 94 N. Y. 86, 46 Am. Rep. 124; Finley v. Simpson, 22 
N. J. Law, 311, 53 Am. Dec. 252; Crowell v. St. Barnabas Hospital, 
27 N. J. Eq. 650; Maule v. Weaver, 7 Pa. 329. The right to impose a 



148 234 FEDERAL RErOKTBR 

heayy penalty for doing certain things is just as effective to prevent 
thein as a covenant not to do them. 

It is therefore unnecessary that the lessees should bind themselves 
to thèse conditions or agreements by covenants. It is sufficient if the 
natural and inévitable effect of the leases, accepted by them, leads to 
the same resuit as if they had in express terms bound themselves not 
to use any other machines or materials than those manufactured or 
dealt in by the défendants. But, to remove any doubt upon the sub- 
ject, Congress, out of abundant caution, added the words "or under- 
standing" after the words "contracts or agreements." The word "un- 
derstanding," as defined by lexicographers, includes mental discern- 
ment, compréhension, clear knowledge. Professor March, in his val- 
uable Thésaurus Dictionary, defines it as équivalent to "compréhen- 
sion." 

Counsel contend that "understanding" is équivalent to "agreement," 
except that it imports that it is oral. The court cannot adopt this défi- 
nition. In its opinion it means something more. It means an implied 
agreement, resulting from the expressed terms of the agreement, 
whether written or oral, or where the lavv from certain acts of the par- 
ties implies an agreement to do a certain act. A right to recover on a 
quantum meruit is based upon an understanding or implied agreement 
to pay for services rendered for one's benefit, although there is no 
express agreement to pay therefor. 

Can there be any doubt that thèse clauses in the leases are understood 
by the lessees to mean that by using no other machines than those of 
the défendants they are relieved of certain royalties, othervi'ise exacted 
for the use of the défendants' machines? See Exhibits 9, 10, 11, and 
12. And can there be any doubt but that, if the lessees use the de- 
fendants' lasting machines for shoes welted on machines made by 
other manu facturer s, or fail to use exclusively défendants' machines 
for lasting shoes, or fail to purchase from the défendants exclusively 
ail duplicate parts, extras, and devices of every kind, needed or used 
in operating, repairing, or renewing the lasting machinery, or fail to 
use exclusively the auxiliary machinery of the lessor in the manufac- 
ture or préparation of insoles licensed under letters patent No. 849,- 
245, or fail to buy any additional machines needed in their shoe fac- 
tory, which can be leased from the lessor, that under the terms of the 
leases set out in the Exhibits 1, 3, 4, 5, and 6, ail of the leases can 
be canceled and the lessees be deprived of the use of them and be com- 
pelled to pay certain royalties, which otherwise they would not hâve 
to pay? Exhibit 9 expressly authorizes the lessor to terminate ail 
leases for thèse breaches, although the lessee is bound by them for 17 
years from the date of the lease, whether the patents, if there be 
any, hâve expired or are still in force. 

Can it be doubted that thèse provisions are not only within the spirit 
but the letter of the statute? What is the natural, direct, and neces- 
sary effect of thèse conditions? There can be but one answer to this: 
To compel the lessees to use défendants' machinery and material, re- 
gardless of whether the terms granted by the défendants are as favor- 



DNITED STATES V. UNITED SHOE MACHINERT CO. 149 

able as can be obtained from other manufacturers of some of the 
machines or dealers in some of the materials. 

In addition, it is charged that by reason of thèse leases there is no 
market for any one inclined to manufacture thèse or some of thèse 
machines, and therefore ail are deterred from engaging in their 
manufacture, as, there being no market for them, financial failure is 
bound to resuit from the attempt. Such a condition of affairs clearly 
tends to substantially lessen compétition, and create, in favor of the 
défendants, a monopoly in that line of commerce. 

In addition, it is charged in the bill that the New Jersey Company 
acquired and still owns the capital stock of 56 other concerns, at one 
time engaged in the manufacture and selling and leasing of some 
f orm of shoe machinery or supplies. The bill allèges : 

"Thus the control of a complète line ol 'principal' and 'auxiliary' machinery 
used in the bottoming of slioes became vested in one establishment. Before 
this no one company could supply such a line, nor can any company do so 
now outside the défendants." 

The reason other manufacturers do not engage in making ail the ma- 
chines as the défendants do are not stated as specifically as they might 
be. Whether it is due to the fact that many of thèse machines, or some 
of them, are protected by letters patent, or what other reason there 
may be, might well be stated more explicitly, in order that the court 
may détermine whether they are sufficient to sustain the conclusions 
of the pleader, who during the argument stated that some of thèse 
machines leased by the défendants are protected by letters patent and 
for that reason cannot be made by others. The only référence to 
patented machines is in Exhibit 5, and refers to the Goodyear insole 
machines. But under the présent libéral practice this is not sufficient 
to sustain a motion to dismiss, although it would be better pleading to 
set out more fully the reasons why other parties cannot manufacture 
ail thèse machines. The efifect is shown by Exhibit 13. 

[13] Is the coinplaint defective because it does not charge that the 
acts of the défendants zvere undiily and improperly exercisedf 

It is claimed that in view of the construction of the Sherman Act 
in the Standard Oil and Tobacco Cases, 221 U. S. 1, 31 Sup. Ct. 502, 
55 L. Ed. 619, 34 L. R. A. (N, S.) 834, Ann. Cas. 1912D, 734, and 
221 U. S. 106, 31 Sup. Ct. 632, 55 L. Ed. 663, it is not sufficient to 
charge acts which may resuit in creating a monopoly, unless further 
shown that the actions of the parties were "unduly and improperly 
exercised." There can be no doubt that upon well-established princi- 
ples of law the courts présume that Congress, when legislating upon 
a subject included in previous statutes, uses the same language found 
in the previous statute and if it had prior to the enactment of the later 
act been construed by the courts, especially the Suprême Court, it in- 
tended to adopt that construction as a part of the new act. 

But is the language used in the Clayton Act, even if not identical, 
so similar to that used in the Sherman Act, construed in those cases, 
as to make that rule applicable? By referring to sections 1 and 2 
of the Sherman Act (Comp. St. 1913, §§ 8820, 8821), it will be seen 
that Congress used merely generic words, without defining what spe- 



150 234 FEDKKAIi REPORTER 

ciiic acts shall constitute restraint of trade or commerce, or a monop- 
oly. The Chief Justice, in delivering the opinion of the court, said: 

"The merely generic enumeration which the statute makes of the acts to 
whlch it refers and the absence of any définition of 'restraint of trade' as 
used in the statute leaves room foi" but one conclusion, which is that it was 
expressly designed net to unduly llmit the application of the act by précise 
définitions, but whlle elearly flxing a standard; that Is, by deflning ulterior 
boundaries which could not be transgressed with luipunity, to leave it to be 
determined by the light of reason, guided bj the principles of law and the 
duty to apply and enforce the public policy embodied in the statute, in every 
giveri case, whether any partieular act or contract was within the contem- 
plation of the statute." 

On the other hand, the act now under considération, instead of 
using the generic words of the Sherman Act, in plain and unequivoca- 
ble language states what acts shall be unlawful, if they "substantially 
lessen compétition or tend to create a monopoly." This being the case, 
the presumption is, not that Congress intended that the construction 
of the Sherman Act should control, but, on the contrary, that it should 
not control. Had Congress intended that the construction placed upon 
the Sherman Anti-Trust Act in those cases should apply to the Clay- 
ton Act, it would hâve used the same or like generic words, instead 
of defining what acts shall be unlawful, if the natural resuit of such 
acts tends to substantially lessen compétition or create a monopoly 
in any line of commerce. 

It will be noticed that in this act there is nothing said of combina- 
tions or conspiracies, nor that the parties complained of are monopoliz- 
ing or attempting to monopolize any part of the commerce among the 
several states, as was required in the Sherman Act. This applies to 
the many cases cited by counsel for défendants on this point, ail of 
which arose under the Sherman Act. Evidently Congress was not 
satistîed to only prohibit actual lessening of compétition, or monopoliz- 
ing, but to make it unlawful for any person to do those acts, which 
may put it in his power to do so. 

For thèse reasons, in the opinion of the court, ail that is necessary 
to state a cause of action under the Clayton Act is to charge that the 
défendants committed the acts prohibited by the statute and that they 
tend to substantially lessen compétition or create a monopoly in Inter- 
state commerce. 

So far as the wisdom of the act is concerned the courts cannot ques- 
tion it. Congress alone can détermine that. Veazie Bank v. Fenno, 
75 U. S. (8 Wall.) 533, 19 L. Ed. 482; United States v. Union Pa- 
cific R. Co., 91 U. S. 72, 23 L. Ed. 224; Angle v. Chicago, etc., R. 
Co., 151 U. S. 1, 14 Sup. et 240, 38 L. Ed. 55; Hunter v. Pittsburgh, 
207 U. S. 161, 28 Sup. Ct. 40, 52 h. Ed. 151. As stated in the Em- 
ployers' Liability Cases, 207 U. S. 463, 492 (28 Sup. Ct. 141, 143, 52 
L. Ed. 297) : 

"In testing constitutionality of an act of Congress this court confines itself 
to the power of Congress to pass the act, and may not conslder any real or 
hnaginary evils arlsing froiu its exécution." 

In Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 49, 
33 Sup. Ct. 9, 15 (57 L. Ed. 107), Mr. Justice McKenna, speaking for 
the court said : 



UNITED STATES V. UNITED 8HOE MACHINERY CO. 151 

"The law is its own measure of right and wrong, of what it permits, or for- 
bids, and the judgment of the courts cannot be set up against it in a supposed 
accommodation of its policy witli the good intentions of parties, and it may 
be, of some good results." 

Or as has been so tersely expressed by Judge Dyer, when this case 
was before him ( [D. C] 227 Fed. 507, 511) : 

"If the course adopted by the défendants has the eflfect to stifle compétition 
and create a monopoly within the law, then the law should be enforced, even 
if it resulted in golng back to the awl and wooden peg." 

Are the provisions in the leases requiring lessees to use lasting 
wachinery to its full capacity, and in case the lessee shall hâve more 
machines adapted for doing the same work than is necessary, for a 
period of 12 consécutive months, the lessor can remove the machines 
not necessary, unreasonahle? 

Thèse provisions are found in Exhibits 2 and 7. The court is un- 
able to see anything unreasonable in thèse provisions. The only com- 
pensation for the use of the machines provided in the leases is the 
royalty upon the shoes manufactured on them. To permit the lessees 
to retain more machines than are necessary for the manufacture of 
his product vifould resuit in the lessors receiving no compensation 
therefor, consequently no return on the investment. As thèse pro- 
visions are only to be enforced, if the machines are not used to their 
capacity for the period of 12 consécutive months, the court is unable 
to say that they are in violation of any provisions of the Clayton Act, 
or can in any way tend to substantially lessen compétition or create 
a monopoly. 

Is the act rétroactive or rétrospective, so as to apply as to leases 
entered into before the enactment of the act? 

That question was fully discussed by counsel, but in the opinion of 
the court it is unnecessary to détermine it on this motion, as on the 
final hearing there may be no such leases in force. If there should 
be, it will be time enough to détermine that question then. 

Is the act unconstitutional in attenipting to apply it to patents pre- 
viously granted? 

Neither in the oral argument, nor in the elaborate briefs filed by 
counsel, was this ground of the motion urged. It may therefore be 
assumed that it has been abandoned by the défendants. But in any 
event the court can conceive of no reason why Congress cannot re- 
strict the rights of patentées, if in its opinion they are used in a man- 
ner resulting in oppressing the public. A patent is merely a privilège 
granted to inventors by Congress, and whenever that privilège is 
abused or is found to be exercised in a manner contrary to the pub- 
lic policy of the government, Congress certainly has the power to 
enact laws which will prevent such an abuse. Whether it can de- 
prive a patentée of ail the privilèges granted by the patent before its 
expiration is a question which cannot arise under this act. 

[14] Something was said in the oral argument about an impair- 
ment of contracts, but there is nothing in the Constitution of the United 
States which prohibits Congress from enacting législation impairing 
the obligations of contracts. Article 1, § 10, applies to the states only. 



152 234 FEDERAL REPORTER 

and is not a limitation of the powers of Congress. Légal Tender 
Cases, 79 U. S. (12 Wall.) 457, 547, 20 L. Ed. 287, et seq. ; Mitchell 
V. Clark, 110 U. S. 633, 643, 4 Sup. Ct. 170, 312, 28 L. Ed. 279; 
Evans-Snider-Buel Co. v. McFadden, 105 Fed. 293, 44 C. C. A. 494, 
58 L. R. A. 900, affirmed McFaddin v. Evans-Snider-Buel Co., 185 
U. S._ 505, 22 Sup. Ct. 758, 46 L. Ed. 1012. 

This disposes of ail the issues raised by the motion to dismiss, which 
is overruled. 



LANDON et al. v. TURLIC UTILITIES COMMISSION OF KAXSAS et al. 
(District Court, D. Kaiisas, First Division. May 2G and Juue 3, 191G.) 

No. 13G-N. 

1. COUHTS (©=3-197 — JURIRDICTTON OF NaTIOSAL COURTS — CONFLICT — EeCEIVEB- 

SIITP — CONFISCATORY RaTES. 

A national covirt, wliich lias .inrisdlftion of a suit in it to foreclose a 
mortîia.ge upon the property of a public service corporation wliicli is 
Oj)eratins in tliree states under a receiver of its property in one of the 
States appointed by a state court, and under the same person appointed 
a receiver of its property in tlie two other states by the national court, 
and directed by that court to operate the business and property of the 
corporation In the three states as a unit, under the direction of the 
state court until fuvther orders of the national court, has jurisdiction, on 
the pétition of tlie receiver, to iirevent the public utilities commissions of 
the states from destroying or irreparably injuring tlie business or prop- 
erty of the receiver and the corporation by making or enfurcing unrea- 
sonably low and confiscatory rates for the sale of their product (in this 
case natnral gas) to tlie purchasers froui them in those states. 

[Ed. Note.— For other cases, see Courts, Cent. Dig. §§ 1386, 1397. 139S, 
1404-140G; Dec. Dig. .©='497.] 

2. Gas <§=3l4(l) — Natural Gas Cojipany — Rates Fixed by State — Constitu- 

TIONALITY. 

Rates for gas fixed by a state commission to be charged by a natural 
gas Company, whicli purchased, piped, and distributed gas to a lai'ge 
uumber of cities and towns, hcld contiscatory and uncoustitutional, ou the 
ground that tlie commission failed to take into considération in fixing tlie 
rates the diniinlsbing supply of gas and the conséquent constantly In- 
creasing priée, and the necessity for tlie company to extend its pijie lines 
into new fields, or the probable short life of the company, due to the 
same facts ; also hcld that, taking into aceouut the nature of its business, 
the company was entitled to eam 8 per cent, on its capital invested, In- 
stead of 6 per cent., which was the basis of the rates flxed by the com- 
mission. 

[Ed. Note. — For other cases, see Gas, Cent. Dig. § 10 ; Dec. Dig. 
<®^14(1).] 

3. Gas ®=5l4(l) — Nattjral Gas Company^Operation by Receiver. 

Wliere the creditors of the gas company, wliich was being operated by 
a receiver, consented to its expenditure of certain snms from its annual 
earnings for extensions and betterments, on condition that tlie property 
be operated at compensatory rates, the custoniers of the company are 
entitled to hâve such expendltures made to the extent necessary to sup- 
ply them with gas at reasonable rates, before payments are made on 
the principal of the company's debts. 

[Ed. Note. — For other cases, see Gas, Cent. Dig. § 10; Dec. Dig. ©=> 
14(1).] 

@=»For other cases see same topic & KEY-NUMBER in aU Key-Numbored Digests & Indexes 



LANDON V. PUBLIC UTILITIES COMMISSION 153 

4, Courts <S=o371(1) — Fédéral Courts — Enforcinq Remédies Given bt 
State Statutes. 

Rights created by the statutes of the states, to be pursued In the state 
courts, may be enforced and administered in the national courts, either 
at law, in equity, or In admiralty, as the nature of the rights or remédies 
may require. 

[Ed. Note. — For other cases, see Courts, Cent. Dig. § 972; Dec. Dig. 
€=>371(1).] 

6. CoMMEBOE <S=357 — "Interstate Commerce" — Transportatiout and Sale op 
Natural Gas. 

Natural gas, procured by a company or Its receiver in one state and 
piped into and sold in another state, is an article of Interstate commerce, 
and does not lose that character because It is mixed in the pipes with a 
small quantlty of gas procured In the state in which It is sold. The Com- 
pany, or Its receiver, conductlng such business, is engaged in "Interstate 
commerce," and the enforcement by the state in which the sales are 
made of any law or régulation which substantially burdens the business, 
or renders it impossible to conduct it at a fair profit, is an undue inter- 
férence with Interstate conunerce, in violation of the commerce clause of 
the fédéral Constitution. 

[Ed. Note.— ï'or other cases, see Commerce, Cent. Dig. §| 72-76, 88, 90, 
92-102; Dec. Dig. <@=:357. 

For other définitions, see Words and Phrases, Elrst and Second Séries, 
Interstate Commerce.] 

6. JUDGMENT (©=^740 — Mattees Concluded — Nonessential Holdings. 

Reasons given by courts in thelr opinions for conclusions they reach, 
which are not necessary to, and are not embodied in or made parts of, 
the adjudications which foUow, do not work the estoppel of res judicata. 

[Ed. Note. — For other cases, see Judgment, Cent. Dig. § 1268; Dec. 
Dig. <S=>740.] 

7. Equity <s=3l95 — Cross-Bill — Nature and Office. 

A cross-bill may not interpose new controversies between codefendants 
to the original bill, the décision of which is unnecessary to a complète 
détermination of the controversies between the complainant and the de- 
fendants over the subject-matter of the original bill. 

[Ed. Note. — For other cases, see Equity, Cent. Dig. §§ 446-449; Dec. 
Dig. <S=19d.] 

In Equity. Suit by John M. Landon, as receiver of the Kansas 
Natural Gas Company, and others, against the Pubhc UtiUties Com- 
mission of the State of Kansas and others. On motion for interlocu- 
tory injunction. Granted as to certain of the défendants. 

John H. Atwood, of Kansas City, Mo., Robert Stone, of Topeka, 
Kan., Chester I. Long, of Wichita, Kan., and T. S. Salathiel, of In- 
dependence, Kan., for complainant receiver. 

H. O. Caster and Fred S. Jackson, both of Topeka, Kan., for de- 
fendant Public Utilities Commission of Kansas. 

William G. Busby, of CarroUton, Mo., and Alex Z. Patterson, of 
Jefferson City, Mo. (James D. Lindsay, of Jefferson City, Mo., on the 
brief), for défendants Public Service Commission and Attorney Gen- 
eral of Missouri. 

J. A. Harzfield and A. F. Evans, both of Kansas City, Mo., for de- 
fendant Kansas City, Mo. 

William E. Stringfellow, of St. Joseph, Mo. (Olin, Butler, Stebbins 

$=3For other cases see same topic & KBT-NUMBSR lu ail Key-Numbered Dlgests & Index** 



154 234 FEDERAL REPORTER 

& Stroud, of Madison, Wis., and Culver & Phillip, of St. Joseph, Mo., 
on the brief), for intervener St. Joseph Gas Co. 

J. W. Dana and C. E. Small, both of Kansas City, Me, for Kansas 
City Gas Co. and Wyandotte County Gas Co. 

T. F. Doran, of Topeka, Kan., for Consumers' Light, Heat & 
Power Co. 

Charles A. Loomis, of Kansas City, Mo., for Ottawa Gas & Electric 
Co. and other distributing companies. 

Charles L. Faust, of St. Joseph, Mo., for city of St. Joseph, Mo. 

Charles Blood Smith, of Topeka, Kan., for Fidelity Title & Trust Co. 

A. M. Baird, of Carterville, Mo., for city of Oronogo, Mo. 

E. F. Cameron, of Joplin, Mo., for city of Joplin, Mo. 

Before SANBORN, Circuit Judge, and CAMPBELL and BOOTH, 
District Judges. 

On Challenge of the Jurisdiction of the Court. 

SANBORN, Circuit Judge. The receiver of this court and of the 
district court of Montgomery county, Kan., brings a dépendent bill in 
this court in the original suits brought by a créditer and the trustée 
for mortgage bondholders to take possession of the property of the 
Kansas Natural Gas Company and that of some other défendants, to 
appoint receivers of that property, administer the property, foreclose 
the mortgage, dispose of the property, and distribute its proceeds, 
first to the lienholders; second, to the unsecured creditors; third, to 
thé stockholders. This receiver claims that, while he is operating the 
p:ï;pperty for the benefit of the beneficiaries, the commissions of Mis- 
souri and Kansas are fixing rates which are and threaten to be un- 
reasonable, noncompensatory, confiscatory, and to interfère with the 
Interstate commerce in natural gas which he is conducting. The bill is 
challengèd, and his right to an injunction from this court to prevent 
thèse alleged wrongful acts is objected to, on the ground that this 
court bas no jurisdiction to issue an injunction to prevent thèse alleged 
wrongful doings. 

[1] On February 14, 1913, this court had jurisdiction and complète 
ccntrol of ail this property in tlie original suit to which référence has 
been made. The power is conferred and the duty is imposed upon 
e-very court in equity, which takes into its possession for administration 
and disposition the property of owners and lienholders, to exercise any 
power it has to protect that property from dépréciation by the wrong- 
ful act of any person or party. Hence it was that, when this court 
originally took jurisdiction of this property in the original suits, it 
issued its injunction against ail persons, requiring that they interfère 
not with any of this property. Hence it is that under the law, when a 
court of equity has taken possession of property for such purposes, 
a circle of ségrégation is drawn around it and the ordinary processes 
of the law cease to reach it. Neither attachment nor exécution may 
seize one iota of the property, but ail controversies concerning it, ail 
claims to it, must be adjudicated upon appHcation to the court which 
holds the dominion of the property for the beneficiaries. Such was the 
condition of this cause in this court on February 14, 1913. This court 



LANDON V, PUBLIC UTILITIES COMMISSION 155 

subsequently learned that the officiais of the state of Kansas had 
brought a suit in the district court of Montgomery county, Kan., for 
the purpose of seizing the property of the Kansas Natural Gas Com- 
pany, winding up that corporation, selUng or disposing of or operating 
its property as the court should see fit, because it was alleged to hâve 
violated the anti-trust law of Kansas. When that fact was discov- 
ered, because the court in Kansas had the primary right to discharge 
its duty regarding this property, first, because the suit in that court 
was brought before the suit in this court, this court turned over to 
the receiver appointed by the Kansas court the possession, manage- 
ment, and control of that property until such time as it should renounce 
possession, and until it should hâve discharged its duty to the state of 
Kansas and to the owners of this property under the anti-trust law. 

The fact then developed that the property in Kansas, the property 
in Missouri, and the property in Oklahoma constitated a unit, and 
that it should not be divided into its three parts and separately oper- 
ated, without that very spoliation and destruction that is alleged may 
come from noncompensatory rates, without a dépréciation of the 
value of the property and an impracticability of wise and bénéficiai 
opération. At this time the properties in Oklahoma and Missouri were 
still within the jurisdiction and complète control of this court, and the 
court in Kansas had not then and never has had any inhérent power, 
nor could the state of Kansas give it any power, to take, manage, or 
control the property in Oklahoma or Missouri. It was in the power 
of this court at that time to order its receiver, Mr. Sharritt, to 
operate the property in Missouri and Oklahoma in harmony with the 
receiver in Kansas. It was in its power to appoint a master, and to 
direct that he should see that the receiver of this court should operate 
in that way. It was in its power to appoint the same man receiver 
that had been appointed by the Kansas court, and to direct him to 
operate in harmony with himself ; and upon considération of the facts 
and circumstances the court came to the conclusion that the wise meth- 
od of opération was to appoint the same man whom the Kansas court 
had appointed receiver of the Kansas property its receiver of the Mis- 
souri and Oklahoma property, ancillary to the receivership in this 
court. The Kansas property was delivered over, because the Kansas 
receiver, the receiver appointed by the Kansas court, had the primary 
right to take it, to enable that court to discharge its duty, leaving the 
reversion of the property and the control of it, subject to that temporary 
opération of the Kansas court, still within the jurisdicnon of this court. 
This court, therefore, appointed the same man who was the receiver 
of the Kansas court the receiver of this court of the Oklahoma and 
Missouri property. I say the Kansas receiver, because, although 
two receivers, I know, were appointed, one of them has deceased. It 
is more convenient to treat this matter as though there was only one 
receiver in Kansas then, as there is only one now. 

Now, whenever it appears to the receiver of this court, or of any 
court, which has control or management of property of this character, 
that there is danger of its destruction or dépréciation by the wrongf ul 
act of any one, it is the duty of that receiver to apply to the court, 
whose hand he is, to protect that property from such destruction or 



156 234 FEDERAL REPORTEE 

interférence. And pursuant to that cluty this receiver, wîiose only 
power over the Oklahoma and Missouri property is derived from this 
court, has applied to this court by this dépendent bill to exercise its 
power to prevent the dépréciation of the property in his possession. 

It is the opinion of the court that under thèse circumstances, hovv- 
ever desirous the court might be to renounce or avoid the exercise of 
power or jurisdiction, it cannot lawfully do so, and that, if the alléga- 
tions of this bill are true (a question that of course must be hereafter 
determined), this court has jurisdiction to exercise ail the power that 
it had in the beginning over the property in Missouri and Oklahoma, 
and over the reversion of the property in Kansas, to prevent the dé- 
préciation of any of that property by the wrongful acts of any one. 

The court is also of the opinion that under section 21, chapter 238, of 
the Session Laws of 1911 of Kansas, in accordance with the opinion 
of the Suprême Court of Kansas, this is a compétent court to which 
the receiver may apply for the purpose of determining whether or not 
the rates established Jay the commission in Kansas are compensatory, 
reasonable, or confiscatory, and that for this reason there is jurisdic- 
tion in this court to hear and détermine the question suggested in the 
dépendent bill. 

It is urged that the receiver is estopped from applying to this court, 
because it is decided by the Suprême Court of Kansas, as it is claimed, 
that he is not engaged in Interstate commerce in that state, but in in- 
trastate commerce. It is not necessary to détermine the question of 
res adjudicata in order to détermine the question of the jurisdiction 
of this court, because, if he is not engaged in Interstate commerce, still 
if thèse rates are noncompensatory, unreasonable under the Kansas 
statute, or if they are confiscatory, thus in' violation of the Constitu- 
tion of the United States, the jurisdiction still inheres. It is said that 
in the Kansas case the receiver claimed that he was doing an intrastate 
business, while he now claims that he is doing an Interstate business ; 
but it is not inconsistent with the fact that he is doing an Interstate 
business that he is also doing an intrastate business; and it is not 
thought, though he may hâve urged that he was doing an intrastate 
business there, that that fact is inconsistent with or can estop him from 
urging hère, if it be material, that he is doing an interstate business in 
Kansas. 

It is said that the receiver had a remedy at law in the mandamus 
case in Kansas, in the state court, and that consequently there is no 
jurisdiction of this court in equity, because one may not apply to a 
court of chancery where he has a plain and adéquate remedy at law. 
The answer is : First. The remedy at law, which will prevent the ap- 
peal to a national court of equity, must be a remedy at law in a nation- 
al court. A remedy at law in a state court will not ordinarily hâve that 
effect. And, second, in order to bar the remedy in equit}', the remedy 
at law must be as prompt, complète, efficient, and adéquate as the reme- 
dy in equity which the court of equity may grant. The remedy at law 
which might hâve been obtained in the mandamus case is neither of 
thèse, and for that reason it does not bar the remedy in equity in this 
court, if there be facts to sustain the application. 

It is insisted that the fact that the receiver put in force the 28-cent 



LANDON V. PUBLIC UTILITIES COMMISSION 157 

rate fixed by the Kansas commission is a bar to its application to this 
court to consider whether or not the rate is compensatory, or confisca- 
tory, or violative of or an interférence with interstate commerce, and 
that for that reason he may not apply to this court. But it has fre- 
quently been the practice of the courts, when one came to it to aslc such 
équitable relief as is hère sought, to require as a condition to listening 
to the application that the rates fixed by the commission should be iîrst 
tested, and then the matter should be determined as to whether or not 
they were confiscatory. And it cannot be that a course that has become 
so common with the courts, and an act which they hâve frequently re- 
quired a litigant to do before he should be heard in his appeal to them, 
can deprive a litigant of the right thus to appeal for relief. 

The Missouri défendants claim that they are not within the juris- 
diction of this court, because the process of this court was served on 
them within the state of Missouri, and not within the state of Kansas. 
The court is of the opinion that this is one of those cases referred to 
in section 56 of the Judicial Code, that the original jurisdiction which 
this court obtained by the filing of the original bills and the appoint- 
ment of the receivers in the original suits still inheres in this court, 
subject, as has already been said, to the opération of the property in 
Kansas temporarily until that court shall hâve discharged its duty in 
the anti-trust case, and that the power which was invested in this 
court by the filing of those bills and the orders thereon, copies of which 
were filed in the fédéral courts in Oklahoma and Missouri, gave to this 
court the power to issue its process in any suit brought in aid of the 
original suits, for the purpose of the protection and administration of 
the property, to any of the jurisdictions which were ancillary to the 
original jurisdiction in those suits, and consequently to the défendants 
in the state of Missouri. This statute says : 

"In any case coiuing within the provisions of this section, in which a re- 
celver shall be appointée!, process may issue and be exécutée! within any dis- 
trict ot the circuit In the saine manner and to the same extent as if the prop- 
erty were wholly within the same district." 

Missouri is within this circuit, and the court is of the opinion that 
the process was properly issued and served. The court is of the opin- 
ion that it has jurisdiction of this dépendent suit, brought in aid of the 
original suits, and that it has the power, and that the duty is imposed 
upon it, to consider whether or not the charges made in the dépendent 
bill are true, and whether or not it ought, when the facts hâve been 
presented to it, to issue its orders to protect the property in its control. 

On Motion for Preliminary Injunction. 
After the delivery of the foregoing opinion voluminous évidence was 
introduced, counsel presented briefs and arguments on the merits of 
the motion, and after considération the court delivered the following 
opinion : 

PER CURIAM. John M. Landon is the receiver of the property 
of the Natural Gas Company, a corporation of the state of Delaware, 
by appointment of the district court of Montgomery county, Kan., and 
of the United Siates District Court of the District of Kansas, and he 
is operating the business and property of that company under tlie di- 



158 234 FEDEEAL REPORTER 

rection of the former court. That company is directly and indirectly 
the owner of the pipe line extending from gas fields in the state of 
Oklahoma to 37 cities in Kansas and 8 cities in Missouri, and by means 
of the receiver is conducting natural gas from Oklahoma to thèse cities 
and their inhabitants, where it is distributed under contracts between 
the natural gas company and other corporations that for convenience 
are termed distributing companies. The receiver obtains about 92^/^ 
per cent, of his gas from fields in Oklahoma and about 7% from fields 
in Kansas. He purchases the gas he obtains from Oklahoma, and 
produces from leaseholds of the company most of that obtained from 
fields in Kansas. He supplies about 46 per cent, of his gas to the Kan- 
sas cities and towns, and about 54 per cent, of it to cities and towns 
in Missouri. On December 10, 1915, the Public Utilities Commission 
of the state of Kansas made an order to the efïect, among other things, 
that the net rates for the sale of natural gas by the receiver to the 
public in the state of Kansas should be : 

"For domestic gas In Montgomery county, 23 cents per thousand cubic feet 
except at Elk city, where the présent rate of 25 cents is to remain ; boiler 
gas In said county 10 cents peu thousand cubic feet. In ail other counties ex- 
cept those supplied by the Gunn pipe line 28 cents per thousand cubic feet; 
In the counties supplied by the Gunn pipe line, the présent rate of 30 cents 
per thousand cubic feet; and on ail boiler gas, except Montgomery county, 
121^ cents per thousand cubic feet." 

As the rate of 28 cents named in this order applies to much the 
larger part of the gas affected by the order, the rates so fixed hâve 
been and will be termed the 28-cent rate. The receiver has brought this 
suit against the members of the Public Utilities Commission of the 
state of Kansas and the Attorney General of that state to prevent by 
the injunction of this court the enforcement af the order fixing this 
28-cent rate, on the ground that it is unreasonably low, confiscatory 
of the property and destructive of the business of the natural gas 
company, and violative of the Constitution of the United States. He 
has made the distributing companies through which, and the cities to 
which, he furnishes gas parties défendant. He has also made the 
members of the Public Service Commission of the state of Missouri 
parties défendant, and has set forth a complaint and prayed an in- 
junction somewhat similar against them. After the commencement of 
the suit an application for an interlocutory injunction against the en- 
forcement of the rates fixed by the orders of the commissions was made 
and has been heard in accordance with the provisions of section 266 
of the Judicial Code as amended (Act March 4, 1913, c. 160, Z7 Stat. 
1013 [1 U. S. Comp. Stat. § 1243, p. 519]). 

[2] The crucial question for décision upon this application for an 
injunction by the court constituted under section 266 is whether or not 
the 28-cent rate is confiscatory or unreasonably low. Ten days hâve 
been devoted to the réception of évidence and tlie hearing of argu- 
ments. Time has been taken for examination of évidence and briefs 
and for délibération and consultation. Many issues of fact and of law 
hâve been presented that were proper for considération, but that are 
not controlling of the décision of the question at issue. The act of 
Congress requires that the hearing on this application "shall be given 
precedence and shall be in every vi'ay expedited," and the situation of 



LANDON V. PUBLIC UTILITIES COMMISSION 159 

the property in the hands of the receivers and of the parties to this 
litigation is such that delay may be as fatal to the interests of ail con- 
cerned as an adverse décision. For thèse reasons the court pretermits 
référence to matters that are not indispensable to the détermination 
of the crucial question in hand, as well as discussion of those that 
are indispensable to such a question, and confines itself to a statement 
of the conclusions which the law and the évidence in its opinion com- 
pel. 

One of the bases of the conclusion and order of the commission is 
the following table, which is copied f rom its opinion : 
Table No. 5 — Kansas Natural Gas Company. 
Statement of Estlmated Revenue and Requlrements for the Ensuing 
Year, Based on 1914 Figures, Revised as Prevlously 
Explalned, for the State of Kansas. 
Requlrements. Transportation. Kansas. 

25,671,445 M. cubic feet gas at 4c ?1,026,857.80 $ 514,045.01 

Operatlng expenses and taxes assignée! to trans- 

portatlon 510.53«.14 223,245.11 

Receivership expenses 32,228.00 14,093.30 

Uncollectlble gas accounts 12,555.07 6,359.14 

Taxes, Kansas City pipe Une 32,288.27 16,860.51 

Taxes, Marnet mining company 10,497.35 6,316.91 

Maintainlng organization, Marnet Mining Com- 
pany ' 690.20 349.59 

Total $1,626,652.83 $ 780,269.57 

1 Présent value of transportation propertv. .$7,08:'.,- 

605.64; dépréciation on basls of twelve years. . 590,300.00 268,468.44 



Requlrements exclusive of a return on property In- 

vestment $2,216,952.83 $1,048,738.01 

iReturn on présent value $7,083,605.64 

Add for worklng capital 200.000.00 

Total $7,283,605.64 



at 6% 437,016.35 198,755.00 



$2,653,969.18 $1,247,493.01 

Estlmated Revenue. 

Gas sales, 1914 $1,192,089.82 

2 Gas used In compresser station (on basis of use) 31,737.70 



Total $1,223,827.52 

Estlmated revenue from proposed increased rates 171,513.63 



Total estlmated revenue from Kansas $1,395,341.15 

Deduct requlrements as above 1,048,738.01 



Estlmated net revenue $ 346,503.14 

Which is equal to a return of 10.46 per cent, on the présent value 
$3,312,583.83, which is 45.48 per cent, to Kansas of the total 
of $7,283,605.64 or 

Total estlmated revenue for Kansas $1,395,341.15 

Less requlrements including a 6 per cent, return 1,247,493.01 

Surplus 147,848.14 

1 The division of thèse items between Kansas and Missouri has been made 
on the basls of the use of the property as shown in Table 1. 

2 This item is placed hère to balance an equal sum included in the expendi- 
tures. It is a bookkeeping entry solely. 



360 234 FEDERAL REPORTER 

The commission found the reproduction value of the property of 
the gas Company, less dépréciation for âge and use, to be $7,083,605.64, 
the probable life of the going concern to be 12 years, amortized the 
$7,083,605.64 by the allowance of one-twelfth thereof, $590,300, as a 
yearly requi rement for its opération, and allocated ail the requirements 
between Kansas and Missouri on the basis of 45.48 per cent, to Kansas 
and 54.52 per cent, to Missouri. The évidence before the commission, 
a great volume of évidence which was not before the commission, in- 
cluding a discl'osure of the actual results of the opération of the prop- 
erty during the first four months of the year 1915 under the 25-cent 
rate, which existed before the commission established a 28-cent rate, 
and the results of its opération during the first four months of the year 
1916 under the 28-cent rate, évidence of the exhaustion of gas fields, 
of the increase of the cost of gas, of the value of the property of the 
Company, and of every other conceivable issue relative to the gênerai 
question has been presented to this court. Upon nearly every issue this 
évidence is conflicting and the détermination of some of thèse issues is 
difficult. "And yet," as the Suprême Court said in Chicago, Milwau- 
kee & St. Paul Ry. Co. v. Tompkins, 176 U. S. 167, 172, 20 Sup. Ct. 
336, 338 (44 L. Ed. 417) "this difficulty affords no excuse for a failure 
to examine and solve the questions involved." Bearing this caution in 
mind, and conceding the présent value of the property of the company 
to be $7,083,605.64, as the commission found it, a deliberate considér- 
ation of the entire case has forced our minds to thèse findings and con- 
clusions, which in our view are determinative of the real question to 
be decided. 

A supply of gas adec|uate to the reasonable needs of the customers 
of the natural gas company for domestic lighting, cooking, and heat- 
ing is the real desideratum in this case. Without it no rate will be 
compensatory. Tlie company now has no such supply. It cannot get 
such a supply without adéquate extensions to its pipe lines. It can 
make such extensions by the expenditure of a reasonable amount of 
money. It cannot make such extensions without such money, and it 
cannot get the money to make them without compensatory rates for tha 
gas it procvires and sells. Any rate which will not compensate it for 
making the necessary extensions to secure such a supply, for paying 
its other necessary expenses of opération and a reasonable income on 
the value of its property, is unavoidably confiscatory, because without; 
thèse extensions it must lose its customers, cease its opération, and the 
value of its property must greatly decrease. 

In the earlier years of its opération the natural gas company pro- 
duced most of its gas from its leaseholds in Kansas, but the fields sô 
leased hâve been gradually exhausted until it is able to produce there- 
from only about 7^^ per cent, of the gas it transports and sells. In or- 
der to get gas it has already extended its pipes far into the state of 
Oklahoma, wliere it purchases and whence it transports to the cities of 
Kansas and Missouri 921/; per cent, of its gas. It is conceded that the 
business of the company is temporary, that the exhaustion of the fields 
which it can reach with permissible extensions must eventually conie, 
and that the time when it can no longer reach fields from which it eau 



LANDON V. PUBLIC UTILITIES COMMISSION 161 

obtain gas cannot be delayed many years. The creditors' agreement o£ 
December, 1914, which provided for the payment of the bonded debts 
of the company within 6 years and for the expenditure of $1,500,000 
for extensions and additional gas supply, indicates that they estimated 
the life of the company as a going concern at 6 years from that date. 
The first opinion of the Kansas commission, which was based upon this 
creditors' agreement, provided for the payment of the bonded debts of 
the company, except the principal of the second mortgage bonds, within 
the 6 years, 1915, 1916, 1917, 1918, 1919, and 1920, and for the expen- 
diture by the receiver for extensions and additional gas supplies of $1,- 
500,000. The life of the company as a going concern is necessarily un- 
known and unknowable, a matter of opinion, and yet the court must 
détermine what it probably is, and a considération of the évidence, of 
the history of the gas fields in Kansas and Oklahoma, of the testimony 
of witnesses familiar with that history, with the fields, and with the pro- 
duction, purchase, transportation, and sale of gas, bas brought the 
minds of ail the members of the court to the conclusion that the prob- 
able life of the natural gas company as a going concern is approximately 
6 years from this date, June 3, 1916. 

The creditors by their agreement provided for an expenditure of 
$1,500,000 within 6 years from December, 1914, for the extensions of 
the pipes of the company and an additional supply of gas. The Kan- 
sas Commission in its opinion, founded upon that creditors" agreement, 
made a like allowance. The extensions contemplated bave not been 
made, and the exhaustion of the available gas fields bas proceeded for 
17 months since the creditors' agreement and for about 11 months 
since tire opinion and finding of the commission founded upon it. In 
order to procure and maintain a reasonably adéquate supply of gas 
for the coming winter it is necessary for the receiver to extend the 
pipe lines 50 or 60 miles, and to construct compressors at an aggregate 
expense of at least $750,000 to $900,000 during the fîrst year af ter the 
filing of this opinion. And it is the opinion of the court that, in order 
to procure and maintain such a supply of gas during the 6 years of the 
probable life of the company as a going concern, it will be necessary 
for the receiver to expend for extensions and compressors at least 
$750,000 the first year and $200,000 in each of the 5 years thereafter, 
amounting in ail to $1,750,000. As the life of the company as a 
going concern is 6 years, the salvage value of the pipes and other ma- 
terials at the end of the 6 years, when they will be no longer useful 
in their places in the ground, is estimated to be $262,500, and deducting 
this from the $1,750,000 leaves $1,487,500 which must be return- 
ed within the 6 years. The commission in its finding and estimâtes 
made no allowance for thèse extensions. 

The commission allowed $1,026,857.80 yearly for the purchase of 
25,671,445 M cubic feet of gas at 4 cents per cubic foot. Gas is con- 
stantly becoming more difficult to procure, the cost of it in the fields 
has increased and is increasing as the fields one after another are ex- 
hausted, and the évidence that has been produced before this court has 
convinced us that the gas requisite reasonably to supply the customers 
of the natural gas company will cost at least 6 cents per M cubic foot, 
2.14 F.— 11 



162 234 FBDBBAI/ REPORTER 

and that on this account there should be allowed as a part of the re- 
quirements of the receiver and the company 2 cents more per M cubic 
foot yearly than the amount which was allowed by the commission; 
that is to say, $513,428.90. 

The commission allowed for interest 6 per cent, annually on $7,283,- 
605.64, or $437,016.64. The business of and the investment in the 
property of this gas company is of the most precarious and hazardous 
nature. Seven per cent, per annum is deemed a just and reasonable 
allowance on investments in railroads, and in the property of water, 
artificial gas, and lighting companies of a permanent nature, and at 
least 8 per cent, per annum should be allowed in this case, or an in- 
crease of the amount allowed by the commission of 2 per cent, on $7,- 
283,605.64, or $145,672.10. 

The commission allowed $590,300, which is one-twelfth of $7,083,- 
605.64, for future dépréciation of the property of the company, on 
the basis that the lif e of the company as a going concern would be 12 
years. As the évidence has convinced that its life will not exceed 
6 years, there should hâve been allowed $590,300 more each year dur- 
ing the 6 years than was allowed by the commission. 

Turning now to the table of the commission quoted above, the re- 
suit is that, laying aside other considérations and conceding the sub- 
stantial correctness of the commission's other findings for the purpose 
of the décision of this application for injunction, its estimâtes of the 
requirements of the company and of the receiver for the first and the 
succeeding 5 years of the life of the gas company as a going concern 
were too low by the f oUowing amounts : 

On account of estimatlng 12 years, instead of 6 years, as the life 

of the going concern by $ 590,300.00 

On account of lack of allowance for extensions by 247,916.00 

On account of estiuiate of cost of gas at 4 cents per M cubic 
foot instead of 6 cents per M cubic foot by 513,428.90 

On account of allowance of 6 per cent, instead of 8 per cent, 
interest 145,672.10 

Total $1,497,317.00 

The commission assigned to the Kansas property 45.48 per cent, of 
its estimated revenue and requirements ; and 45.48 per cent, of $1,- 
497,317 is $680,979. The commission estimated that upon the basis 
stated in its table a surplus of $147,848.14 would be produced. De- 
ducting this estimated surplus from the $680,979, it appears that its 
estimated revenue falls short by $533,131.10 of producing an amount 
sufficient to pay the necessary expenses of the maintenance and opéra- 
tion of the property and business of the natural gas company and a 
reasonable interest upon the présent value of its property. 

The expérience of the future may, and it is hoped that it will, teach 
that the necessary requirements of the receiver and the company will 
be less than those which the évidence convinces the court will be in- 
dispensable to provide and maintain an adéquate supply of gas for its 
customers, to operate the business of the company, and to return a 
fair income upon the value of its property. The opinion of the court 
can rest only on the évidence before it, and upon that évidence it is 



LANDON V. PUBLIC UTILITIES COMMISSION 163 

its opinion that a less rate than 32 cents per M cubic foot will be found 
insufficient to accomplish this resuit. But even if there are errors in 
some of the conclusions to which the court lias arrived, and even if 
they are so great as to reduce the necessary increase of the require- 
ments fixed by the commission by one-half, still moneys must be pro- 
vided for the extensions of the pipes of the company, for which the 
commission allowed nothing. The amount it allowed for the cost of 
gas and the interest rate which it fixed were largely too low, 12 years 
was too high an estimate for the life of the plant, and in the opinion 
of the court there is no escape from the conclusions that the 28-cent 
rate is not and will not be compensatory, that, on the other hand, it is 
unreasonably low, confiscatory, and violative of the Constitution of 
the United States, and that the complainant is entitled to the interlocu- 
tory injunction of this court to prevent its enforcement pending the 
hearing of this cause upon its merits. 

[3] The creditors by their agreement consented that there should 
be reserved during the year 1915 $500,000 out of the annual earnings 
for that year and 8200,000 annually thereafter for extensions, better- 
ments, and additional gas supply, upon condition that the properties 
were being operated on a compensatory rate. Those amounts hâve 
not been so reserved and applied, and yet $1,000,000 has been paid on 
the principal of the creditors' debts during thèse years. Under thèse 
circumstances the rights of the public— that is to say, of the customers 
of the gas company — to a reasonably adéquate supply of gas from the 
receiver and the company, at a rate that is not unreasonably high, are 
superior to the rights of the creditors to the payment of their debts, 
and the making of necessary extensions of the pipes and the construc- 
tion of the requisite compressors to procure and furnish to thèse cus- 
tomers that reasonably adéquate supply must be made primary in the 
administration of this estate, and the payments upon the principals of 
debts of the creditors secondary. To this end the issue of the in- 
junction herein will be conditioned upon the giving by the receiver, 
or by some one on his behalf, of a bond or undertaking in the sum of 
$750,000, with adéquate security, that lie will pay no more upon the 
principals of the debts of the creditors who were parties to their agree- 
ment of December, 1914, or to the Fidelity Title & Trust Company, 
until $750,000 has been invested in the necessary extensions and com- 
pressors, and that he will proceed speedily to make them, and will in- 
vest therein at least $500,000 within six months after the issue of the 
injunction herein. 

Elaborate arguments hâve been made and extensive briefs hâve been 
submitted on the questions whether the gas which the receiver is buy- 
ing, carrying, and selling is an article of Interstate or of intrastate 
commerce, whether he is engaged in interstate or intrastate commerce, 
and, if in the former, whether the rate fixed by the commission directly 
or indirectly burdens or interfères with interstate commerce. Thèse 
questions hâve received examination and considération. Their déci- 
sion, however, is not indispensable to the détermination of the ques- 
tion before this court, for, if the gas is not an article of interstate com- 
merce, and if the business of the receiver in dealing with it is not in- 



■1-64 234 FEDERAL REPORTEE 

terstate commerce, nevertheless this court has plenary Jurisdiction to 
adjudge the issue whether or net the 28-cent rate is unreasonabl}' low, 
or is confiscatory, and to enforce its adjudication by injunction under 
the Public Utilities Act of Kansas (Laws of 1911, c. 238, § 21). State 
V. Flannelly, 96 Kan. 833, 154 Pac. 235, 237. 

[4] Rights created or provided by the statutes of the states to be 
pursued in the state courts may be enforced and administered in the 
national courts, either at law, in equity, or in admiralty, as the nature 
of the rights or remédies may require. "A party by going into a na- 
tional court does not lose any right or appropriate remedy of which 
he might hâve availed himself in the state courts of the same locality. 
The wise policy of the Constitution gives him a choice of tribunals." 
Davis V. Gray, 16 Wall. 203, 221, 21 L. Ed. 447; Ex parte McNiel, 13 
Wall. 236, 20 L. Ed. 624; Darragh v. H. Wetter Mfg. Co., 78 Fed. 
7, 14, 23 C. C. A. 609, 616, and cases there cited; Broderick's Will, 21 
Wall. 503, 520, 22 L. Ed. 599; Cowley v. Railroad Co., 159 U. S. 
569, 583, 16 Sup. Ct. 127, 40 L. Ed. 263. 

[5] Discussion of thèse questions is therefore omitted, but the mem- 
bers of the court are unanimously of the opinion: (1) That the gas 
purchased or procured in Oklahoma, transported from Oklahoma, and 
sold or delivered by the receiver or by the gas company to parties in 
Kansas or Missouri, is an article of Interstate commerce, as is the gas 
procured in Kansas and sold or delivered by them, or either of them, 
to parties in Missouri ; (2) that this gas, which is probably at least 
95 per cent, of ail the gas the receiver or the company handles, does 
not lose itfi Interstate character by the fact that a small portion, proba- 
bly not exceeding 4 per cent., of the gas they handle is procured and 
delivered in Kansas, is an article of intrastate commerce, and is in- 
separably mingled in the pipes with the Interstate gas; (3) that the 
purchase or procuring of Interstate gas in Oklahoma, its transporta- 
tion, sale, and delivery by the receiver, or the gas company, to parties 
in Kansas and Missouri, is Interstate commerce, and the receiver and 
the company are engaged in Interstate commerce ; (4) that the en- 
forcement by a state through its officers of any législative act prevent- 
ing Interstate commerce in this article of Interstate commerce, either 
by a direct prohibition of such commerce in this article by state law, 
or by an inhibition of a sale of the article in the state at any price 
whatever, or at any price above a price so low that the laws of trade 
make it impossible to purchase or procure it in another state and to sell 
and deliver it in the prohibiting state at that price with profit, sub- 
stantially burdens and unduly interfères with Interstate commerce in 
violation of the commerce clause of the Constitution of the United 
States. 

[6] Counsel for the Public Utilities Commission of Kansas argue 
that the issues relative to the Interstate or intrastate character of the 
business and gas of the receiver are rendered res adjudicata between 
him and the commission by the judgments of the Suprême Court of 
Kansas in State ex rel. Caster v. Flannellv, 96 Kan. 372, 152 Pac. 
22, and State ex rel. Caster v. Flannelly, 96 Kan. 833, 154 Pac. 235, 
to which the receiver and the commission were parties, and in which 



LA>DON V. PUBLIC UTILITIES COMMISSION 165 

that court in its opinions expressed the view that this business and 
this gas was not of an interstate character. But reasons given by 
courts in their opinions for conclusions they reach, which are not nec- 
essary to and are not embodied in or made parts of the adjudications 
which they render, do not work the estoppel of res adjudicata. One 
of the judgments of the Suprême Court in the case mentioned was 
founded on its décision that Judge Flannelly had no jurisdiction of 
the case before him, for the sole reasons that the summons against the 
commission and its members, and the service thereof, were unauthor- 
ized and void. The other judgments were the déniai of the pétition 
of the receivers for an injunction against the commission to prevent 
it from putting the 28-cent rate in force, and this was founded on the 
ground that the receiver had already voluntarily put it in force and 
no longer pressed in that court for relief against it, and the other was 
the dismissal of the mandamus proceeding because there was no longer 
any function for it to perform. The opinion and conclusion that the 
business and the gas of the receiver were not of an interstate char- 
acter was unnecessary and immaterial to any of thèse judgments, and 
for that reason the court is of the opinion that the questions in rela- 
tion to the interstate or intrastate character of the business or gas of 
the receiver and of the natural gas company were not rendered res ad- 
judicata by the adjudications of the Suprême Court of Kansas in the 
cases to which référence has been made. 

Now as to the Missouri défendants : First, hâve the receivers estab- 
lished their right to the preliminary injunction prayed against the 
Missouri Public Service Commission? In paragraph 2 of the bill it 
is alleged that on September 27, 1915, the Public Service Commission 
of Missouri held a conférence with the Public Service Commission of 
Kansas, after which John M. Atkinson, as chairman of the Missouri 
Commission, and for the commission, announced that the Missouri 
Commission would not permit a higher rate to be charged in the cities 
of Missouri than was charged in the border cities of Kansas. In 
support of this allégation affidavits were introduced, from which it 
appears that about September 28, 1915, the three members of the Kan- 
sas Commission and two members of the Missouri Commission, held a 
private conférence in the Baltimore Hôtel at Kansas City, Mo., after 
which one of the members of the Missouri Commission stated that : 

"If application Is evcr made to the Missouri Commission for an Increase of 
natural gas rates in thèse Missouri cities which are suppliée! with gas b.y dis- 
trihutlng companies bu.ving from the Kansas Natural, no action wlll be talien 
until ail the cities hâve been given a hearing. Neither will the commission, 
if called upon to take action, agrée to a higher rate in Missouri cities — ail of 
which are upon the border — than in cities of Kansa.s similarly situated. This 
applles with partieular force to Kansas City. Mo., and Kansas City, Kan., 
which the commission regards as practically one city." 

Certainly this statement of a single member of the commission, made 
under thèse circumstances, outlining what he believed would be the 
action of the commission in the future in case the question of thèse 
rates should be brought before it, furnishes no ground in itself for 
the granting of the injunctive relief prayed. 

It is further alleged that on September 13, 1915, the local distribut- 



166 234 FEDERAL RBPOKTEE 

ing companies of Oronogo and Cari Junction, Mo., filed with the Mis- 
souri Commission schedules prescribing a rate of 30 cents for each of 
those towns, which the commission suspended, and has ever since re- 
fused to permit said rates to be put into effect. Under the law of that 
State the commission may, upon the fihng of a prpposed schedule of 
rates, suspend its opération pending a hearing. It does net appear 
that a hearing as to thèse last-mentioned rates has ever been had, so 
that it cannot be said what will be the action of the commission as to 
such rate, and it further appears that the applications for the allowance 
of such schedules hâve been since withdrawn. 

So far as concerns the case of the plaintiff, the receiver, against the 
Missouri Commission, as to the order of the Missouri Commission in 
relation to the St. Joseph rates, it will be noted that the order of the 
Missouri Commission complained of was entered at a proceeding to 
which neither the receiver nor the Kansas Natural Gas Company was 
a party. The order entered in that proceeding was directed only 
against the St. Joseph Company. In the course of its opinion the com- 
inission said: 

"The Company [St. Joseph Company] has been paying the Kansas Com- 
pany 2QS/s cents per tliousand cubic feet, wblle other distrlbuting companies 
are paying 16% cents, except the local company in Kansas City, Mo., which 
pays IB.ST cents. The Kansas Company is not before us, and we hâve no 
.iurisdietion over the contract between that company and the défendant, un- 
der which the latter recelves its gas from the former. However, it is well 
recognized that in rate-making cases only reasonable charges, as operatlng 
expenses, will be allowed against the public. * * • " 

The increase from 40 to 60 cents, prayed by the St. Joseph Com- 
pany, was denied. There is nothing in the order of the Missouri Com- 
mission to prevent the receiver continuing to collect from the St. Jos- 
eph Gas Company his proportion of the rate as provided by the con- 
tract. So long as the St. Joseph Company continues to collect the 40- 
cent rate the receiver may under his contract collect as his proportion 
the 26% cents. A considération of ail the évidence does not convince 
us that 26% as the proportion of the St. Joseph rate received by the 
receiver is unreasonably low, noncompensatory, unremunerative, or 
confiscatory. Therefore no ground is shown in référence to the Mis- 
souri Public Service Comraission's order regarding St. Joseph rates 
that entitles the receiver to the preliminary injunction prayed. 

[7] So far as concerns the application of the St. Joseph Gas Com- 
pany for an interlocutory injunction as against the Attorney General 
of the State of Missouri and the officers of the Public Service Com- 
mission of that State as prayed in what it terms its intervening bill of 
complaint in this case, it appears that to the original bill of the receiver, 
plaintiff, both the St. Joseph Gas Company and the Attorney General 
and Public Service Commission of Missoiu-i were made parties de- 
fendant. By its answer filed in this case on January 28, 1916, the St. 
Joseph Gas Company states that it has no knowledge, save as is al- 
légea in said bill, as to the several allégations thereof, and leaves the 
complainant, receivers, to make such proof thereof as they may be ad- 
vised is material, and further states that it has no interest in the re- 
suit of the receiver's suit or in the matters to be litigated herein, and 



LANDON V. PUBLIC UTILITIES COMMISSION 167 

specifically disclaims any such interest, and prays to be dismissed, with 
its costs. At the hearing upon the application of the receiver in Kan- 
sas City, the St. Joseph Gas Company, through counsel, asked and 
was granted leave within a certain time thereafter to file an interven- 
ing bill. 

It has now filed what it styles its intervening bill of complaint, and 
upon the allégations therein contained it bases its application for the 
interlocutory order above referred to. The Attorney General of Mis- 
souri and the Public Service Commission of that state challenge the 
jurisdiction of this coui-t in this cause to grant such relief to the St. 
Joseph Gas Company. In vievv of the fact that that company and the 
aforementioned Missouri défendants were ail made parties to the 
original bill, what the St. Joseph Gas Company terms its intervening 
bill is in reality a cross-action or cross-bill against its codefendants, 
the Attorney General and the Public Service Commission of Missouri. 

In Stuart v. Hayden, 72 Fed. 402, 18 C. C. A. 618, the Circuit Court 
of Appeals for this circuit said : 

"A cross-blll is brought elther to aid in the défense of the original suit or 
to obtain a complète détermination of tlie coiitroversics betwoen the original 
eomplainant and the cross-complalnant over the sub.iect-matter of the original 
bill. If its pui-pose is différent froni this.it is not a cross-bill, although it 
uiay hâve a connection with the gênerai snbjeet of the original bill. It may 
not interpose nevv controversies between codefendants to the original bill, the 
décision of which is unnecessary to a complète détermination of the contro- 
versies between the complalnant and the défendants over the subject-matter 
of the original bill. If it does so, it beoomes an original bill, and must be 
dismissed, because there cannot be two original bills in the same case. Story, 
Eq. PI. § 3S90; Cross v. De Valle. 1 Wall. 1, 140 [17 L. Ed. 515]; Ayres v. 
Carver, 17 How. 591 [15 L. Ed. 179] ; Rubber Co. v. Goodyear, '.) Wall. 807, 
S09 [19 L. Ed. 587]; Stonemetz Printer's Mach. Co. v. Browu Folding Mach. 
Co. [C. C] 46 Fed. 851 ; Fidelity Trust & Safety Vault Co. v. Mobile St. Ry. 
Co. [C. C] 53 Fed. 850, 852 ; McMuUen v. liitchie [C. 0.] 57 Fed. 104." 

In Gilmore v. Bort (C. C.) 134 Fed. 658, it is said : 

"Tlie purpose of a cross-blll is eitlier (1) to obtain a discovery in aid of a 
défense to the original bill, or (2) to obtain fuU relief to ail the parties touch- 
ing the matters of the original bill. Story's Eq. PI. par. 389. And it must 
be made to appear that a settlement of the controversy presented by the cross- 
bill is fairly uecessary in order to enable the court to fully dispose of the 
matter of the original bill. It is auxiliary to the original suit, and a depend- 
ency upon it, and should not introduce any new or distinct matter not em- 
braced in the original bill. Neither may it introduce new controversies be- 
tween the codefendants to the original bill, the décision of which is in no 
way necessary to a complète détermination of the controversy between the 
comiilninant and the défendants over the subject-matter of the original bill. 
If it does, it is not a cross-bill, but an original 1)111, and should be dismissed. 
Cross V. De Valle. 1 Wall. 5 [17 L. Ed. .515] ; Rubber Co. v. Goodyear, 9 Wall. 
807 [19 L. Ed. 587] ; Stuart v. Hayden, 72 Fed. 402, 18 C. C. A. 618." 

The relief sought as set forth in the prayer of what is termed the 
intervening bill is that, should the court find and decree that the mat- 
ter of the division of the proceeds received from the consumers for 
gas sold in St. Joseph or the amount paid by the St. Joseph Gas Com- 
pany to the Kansas Natural Gas Company, or its receiver, for gas is 
a matter within the jurisdiction and control of the Public Service 
Commission of Missouri, that the court should further find and de- 



168 234 FEDERAL REPORTER 

crée that 17 cents per thousand cubic feet, the amount fixed by the 
Missouri Public Service Commission as the maximum operating 
charge which it will allow against the public as the cost o£ gas, is an 
insufficient and unreasonably small operating charge, the enforcement 
of which results in the confiscation of intervener's property as set 
forth in the bill, and that the court find and détermine whether 26% 
cents per M cubic foot is a fair, reasonable, and proper sum to be 
paid by the intervener to the Kansas Natural Gas Company, or its 
receiver, for gas, and a fair and reasonable operating charge against 
the public as the cost of gas, and that the aforementioned Missouri 
défendants be temporarily and permanently enjoined and restrained 
from attempting to enforce the provisions of the order and décisions 
of the Missouri Commission, or authorizing or directing the institution 
of any suit or action against the intervener, or its ofiîcers, agents, or 
employés, for the recovery of any penalties because of its failure to 
observe such order. 

A careful considération of the allégations of this intervening bill, 
which we treat as a cross-bill, convinces us that it neither serves to aid 
in the défense of the original suit nor to obtain a complète détermi- 
nation of the controversies between the original complainant and the 
several défendants to the original bill. In our judgment it interposes 
new controversies between codefendants to the original bill, the dé- 
cision of which is unnecessary to a complète détermination of the 
controversies between the complainant receiver and the several de- 
fendants to the original bill over the subject-matter of that bill. It 
is in the nature of an original controversy between the St. Joseph Gas 
Company and the several Missouri défendants, and the fact that in 
the détermination of this controversy it may and probably will be- 
come necessary to consider questions very similar to those involved 
in this case as between the receiver and the several défendants to the 
original case, makes it none the less a new and distinct controversy, 
'of which, in the présent state of the record, we conclude we bave not 
jurisdiction to grant the relief prayed by the St. Joseph Gas Com- 
tpany, and its application for an interlocutory injunction will there- 
fore be denied. 

It bas not been and is not necessary for this court as at présent con- 
stituted to détermine the validity of the city ordinances, the contracts 
between the cities and the distributing companies, the contracts be- 
tween the distributing companies and the Natural Gas Company and 
the duties and obligations of the receiver under them, in order to ad- 
judicate the issues it was constituted to décide, and for that reason 
no opinion is expressed or adjudication made concerning them. 



IN RE DOZIER WHOLESALE GROCEEY CO. 169 

In re DOZIER WHOLESALE GROCERY CO. 

(District Court, S. D. Alabama, X. D. March 25, 1916.) 

No. 1688. 

Bajjkruptcy iS=>,381 — Composition — Objections to Confikmatioî;. 

Evidence considered, and lield not to sustain ol),1ections to tlie <'onflrnia- 
tion of a composition offered by a liankrupt on statutorj' j^rounds, and to 
sliow tliat tlie comi)osition would yield a larjier dividend to gênerai cred- 
Itors tlian could probably be realizi^d from the administration of the es- 
tate, and was for tlieir best interest. 

[Ed. Xote. — For other cases, see Baukruptcy, Cent. Dig. § 591 ; Dec. 
Dig. ©=.'3S1.] 

In Bankruptcy. In the matter of the Dozier Wholesale Grocery 
Company, bankrupt. On report of W. K. Campbell, référée and spé- 
cial master, on objections to confirmation of composition. Objections 
overruled, and composition confirmed. 

The following is the report of W. K. Campbell, Spécial Master : 

Tlie évidence offered by objecting creditors assumed a very wide range, 
and obviously nrach of it is iinniaterial to any of tlie issues teiidered by the 
.speciticatious. Counsel for objecting creditors filed a brief froui which it ap- 
l)ears tliat tbe propositions relied upon by them may be briefly summarized as 
follows: (1) That the letter of Mr. E. Lainar and that of Mr. A. W. Stewart, 
the bankrupt's attorney, "were calculated to mislead the creditors" as to the 
flnancial status of the bankrupt. (2) That the daim of C. H. Dozier, Sr., 
]iresident of bankrupt, should not hâve been allowed. (.3) Tliat tlie true con- 
dition of bankrupt's financial condition was concealed. (4) That the sub- 
scription of C. H. Dozier for §12,000 of stock on or about January 14, 1914, 
lias not been pald at ail, or bas not been fully paid. (5) That the real value 
of the warehouse, belonging to bankrupt's estate, was concealed fvom the 
creditors. (6) That large sums of money were paid out by bankrupt to sonie 
of its creditors for debts due theni within four months preceding bankruptcy, 
thereby constituting préférences wlilch are recoverable by bankrupt estate. 
As tliese are the ouly propositions pointed out by objecting creditors In brief, 
upon which they rely to sustain tlieir spécifications of objection, the suin- 
mary of the évidence will be limited to that having some probative relations 
to said propositions. 

The first and third propositions appear to be based on the letters of Laniar 
and Stewart to the creditors. Botli of tliesa appear to be prlnted in type- 
writer type, that of Mr. Laniar being dated January "41," 1016 (evidently in- 
tended for 14). Briefly summarizing its contents, it Is to tho following ef- 
fect: That soiue days ago the Selnia creditors of bankrupt liad a conférence, 
and wlth such facts as were before them, it appeared that bankrupt's prési- 
dent and its principal business factor had become incapacitated by disease 
from giving any attention to the business ; that he had been in confinement in 
a hospital for tliree months ; that the business was in the hands of bis young 
son, of but little expérience; that it was obvious that it was to the interest 
of ail creditors to place the coneern in liankruptcy ; that Reese & Reese, at- 
torneys at Selma, Alabama, had been authorized and eniployed to flle a pé- 
tition in involuntary bankruptcy for the benefit of ail the creditors ; that au 
adjudication had been obtained ; that Mr. Blalock of Selma had been ap- 
pointed receiver, and was in charge of the effects, having an inventory made ; 
that according to the judgment of said (petitioning) creditors "it would seeni 
that the best Interests of the creditors would be best proteeted by being Con- 
solidated or centralized in the hands of one firm of attorneys, those already 
employed by said creditors" (the names of the petitioning creditors are hère 
stated) ; that the writer is a member of the firm of L. & B. Lamar, who in- 

C=»For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Iniexei 



ITO 234 FEDERAL REPORTER 

forins the cretlitors of the foregoing f.iets and invites their co-operation. 
Suggestion is uiaOe tlmt, "if you désire to co-operatè witli us In handling 
tliis estate, « * * you can sign up and mail your claim to tliem (Reese 
& Reese) If you so détermine it to be to your best interest to co-operato witli 
us ; otherwise, of course, you can handle your claiiu in any way you thinlv 
l)est. In either event, we will be glad to keep you informed as to progress." 
Tb.e testimony sliows tliat tlils letter was mailed to some of ttie creditors, but 
fails to sliow how many. Tlie manuscript from which tliis letter was printeti 
was delivered to printer by Mr. Reese. 

The letter of Mr. Stewart is dated January 27, 1916. The pertinent parts 
are; That the failure of bankrupt is largely due to ill health of C. H. Dozier 
for last two years, during which tinie he has mostly been eonfined in hospi- 
tals, iucluding the State Insane Hospital; that "the assets of the company, 
as shown by the inventory of the recelver, are as foUows: [Hère foUows the 
inyentory value and the appraised value of the assets as shown by said re- 
ceiver's inventory, and the tigures correspond in each particular vrlth the re- 
spective figures in in\entory flled in niy office.]" It turther stntes that the 
writer has arranged to provide money to make a 25 per cent, composition, and 
concludes as follows: "I hâve arranged to provide money to carry out tliis 
oiïer, which I think is to the interest of the creditors. Without in any way 
attempting to influence your action, I hâve for your convenience attached 
hereto a perforated slip, with the suggestion that, if you decm it to your in- 
terest, you sign and send to your attorney, or Hon. Wm. King Campbell, réf- 
érée, Selraa, Ala,, prior to first meeting of creditors. If a sufficient number 
Indieate acceptance the money will be immediately paid into court on the 
day of said meeting and promptly paid to the creditors, or you can mail to 
me direct your acceptance." 

The évidence shows that Mr. Stewart sent or brought the original from 
which said letter was printed to Mr. Reese at Selma, and asked him as a 
"courtesy" to deliver it to the printer. After it was printed, Mr. Stewart 
mailed it out from Marion to the creditors, and mailed some of them to Reese 
& Reese, who represented a majority of the creditors who had- filed their 
claims, who mailed them to some of the creditors wliom they represented, 
writing a letter therewith as follows: "We luclose herewitli a circular let- 
ter from Mr. A. W. Stewart, of Marion, Ala., bankrupt's attorney, which we 
ha.ve compared with the officiai inventory and schedules on lile in the ref- 
eree's office, and find the figures taken therefrom correct. We hardly thinic 
at this season and under the prevailing depressed conditions that the assets 
will sell for more thau $5,000. Book accounts remaining unpaid at this season 
in this section are generally of little value ; when sold in block rarely bring 
more than 10 per cent. In order to pay the expense, fées, and eosts of bank- 
ruptcy, and the claims entitled to payment In fuU, and leave sufficient amount 
for a dlvidend of 25 per cent., it would be necessary for the trustée to realize 
about $8,500 from tbe sale of the assets. This we think very improbable, if 
not impossible. Kindly instruct your wishes in the matter." At the time of 
mailing the letters by Stewart, he had Mr. Reese to file one of the letters in 
my otHce. 

As it seems a contention of objecting creditors that the warehouse is the 
basis of the alleged coneealment of the value of the assets, a summary of the 
évidence relating thereto is substantially as follows: 

Said warehouse is a brick structure witlr a cément fioor. It is loeated ou 
the right of way or lands of the Southern Railway Company, under a li- 
cense from said railway. The written contract evideneing said license is in 
évidence. In said contract the bankrupt is styled the "licensee." It provides 
a payment of $57 per aninim to the railway company, and contains among 
others, the following provisions: 

"(3) That this license is a Personal privilège to the licensee hereunder, and 
is not transférable or assignable, and any attempt to transfer or assign same 
shall operate as a forfeiture of this license. 

"(4) That the, licensee will post, and at ail times thereafter and during the 
life of this agreement niaii\tain, in a conspicuous place upon said vvareliouse, 
a notice reading as follows: 'No goods, ivares, merchandise, or other prop- 



IN RE DOZIEB WHOLESALE GROCEET CO. 171 

erty, except ihat of Dosier Wholesale Qroccry Company, shall le stored or 
placée in this ivareliouse, ivithout the consent, in writinff, of Southern BaiB- 
vxby Company.' " 

"(6) That it [llcensee] wlU iiidemnify and save harmless tlie railway Com- 
pany against any and ail loss of or damage to the property of the railway 
Company, and against ail daims, demands, suits, judgments, or sums of money 
aecruing to llcensee or to any other party, against the railway company, for 
loss or Injury, caused by flre or otherwise, however resulting, either to person 
or estate, and arlsing by reason of or in connection with the occupation and 
use by liceusee of sald premises of the railway company, and the présence 
of the warehouse of the licensee thereupon." 

"(8) That in the event that the licensee shall be in default for 30 days in 
the payment of any reutal payment, payable to the railway company here- 
under, then forthwith upon suoh default or violation, and at ail events upon 
30 days" notice in writing so to do, served upon it by the company, the licensee 
will remove sald warehouse from the premises of the railway company, and 
Yacate said premises, and restore the same to their condition existing prior 
to the occupation and use thereof by the licensee and the érection of said 
warehouse thereupon, or in default thereof the railway company may itself 
re-enter upon said premises, remove said warehouse, and restore the said con- 
dition of said premises, but at the expense of the licensee. And it is under- 
stood and agreed; that the right of the railway company to revoke this 11- 
cense and require the licensee to remoTe said warehouse and vacate sald 
premises by notice, as aforesaid, shall always obtain, notwithstanding pay- 
ment of rental In advance and fuU compllance by the licensee with ail of its 
covenants in this agreement contalned." 

On the scïïedule as filed by bankrupt at the end of Schedule B, appears the 
following note: "Note. In addition to the above property, bankrupt erected 
a warehouse on the property of the Southern Rallroad, and under hls [Its] 
contract, it has the rlght to remove the material therein. It Is Impossible to 
estimate its value." 

It appears from the évidence that the cost of construction of this ware- 
house was $3,220, of which the labor constituted about $1,024 ; that the floor- 
ing is of concrète, and constitutes about one-third of the total cost of the 
building; that the walls are of brick, cemented with a mortar of cernent, 
lime, and sand, whlch makes a harder substance than the brick. Stewart also 
testified (same page) that the wooden structure on the lot would not be worth 
$50 if torn down and used. J. O. Foster, the attorney for objecting creditors, 
testified that the value of the brick warehouse In hls opinion was $2,000; 
that of the wooden building belng $500. This witness stated that he had only 
llved in Marion since the middle of last Aprll ; that he had never been In 
the real estate business, nor bought or sold real estate there. This witness 
also swore that the property referred to in the pétition as belng worth $3,000 
was this warehouse ; witness being asked in référence to said warehouse the 
following question: "Q. You swear in hère [in spécification] that the ware- 
house is worth at least $3,000? A. I swore that was my bellef. Q. You 
don't know what It is worth? A. No, sir; I was swearing to what I be- 
lleved it was worth." 

Mr. T. D. Kemp, of Marion, testified that he was a civil engineer and archi- 
tect; had had much expérience In construction work of varions kinds; that 
he was f amiliar with the plans and spécifications of said warehouse ; that the 
mortar therein, from its degree of hardness, contained a large percentage of 
cément ; that In tearing down a building containing such cernent the salvage 
would be less than in case of ordlnary mortar ; that the iiooring was of con- 
crète, and constituted from one-fourth to one-third of entire cost of building ; 
that in removing the building he would not conslder it of any value; that 
"it would only be fit for rubbish, for fiUing holes" ; that it would hâve no 
market value; that the wooden building was built of "merehantable rough 
stufC, what we call log run lumber"; that the material salved from taking 
down the buildings, under the terms of the contract, would hardly be suffl- 
cient to put the ground In its original condition. 

J. A. Wood, a witness for objectors, was asked: "Can you say that you 



172 234 i^EDBRAL REPORTER 

know the œai'ket value of that property, the warehouse of the Dozier Wlaole- 
sale Grocery Company?" to whieh he answered, "I couldii't say that I do, 
but I could give an idea of wliat I think the value is." Subsequently, in an- 
swer to question as to market value of said warehouse, he sald: "I would say 
$2,000," and as to the wooden structure said, "$500, I would say." This wit- 
ness was asked as to the value of the material in said building if torn down, 
but objection to said question vi^as sustained on the ground that witness was 
not shown to knovr the market value thereof. His answer, however, was 
taken dowu — respectively, $400 for brick building and $100 for wood build- 
ing. He further testlfled that he did not know what would be the cost of 
tearing down the brick building, and that he thought it would cost $25 to 
tear down the wood building ; that wlth a higher per cent, of cément in mor- 
tar there is a greater loss in brick in tearing down ; that he never examined 
the mortar in said building. 

F. V. Woodfln, on behalf of objectors, testlfled that prior to the building of 
the brick warehouse lie had a license from the railway company for the 
ground uow occupied by said building — ■ that is, the brick warehouse; that 
said wooden structure was then on sald ground ; that the railroad was willing 
for him to continue said occupation under said license ; that the Dozier 
Wholesale Grocery Company waiited said place, and paid witness $900 for 
his privilèges, Including the buildings on said ground ; that after said trans- 
action said wooden building was moved of£ the space on which brick building 
stands. 

W. C. Dozier, for bankrupt, testlfled that the bankrupt had tried to sell 
the wooden building to Mr. Ed. Curb, and asked him to make a bid for it ; 
that he offered nothlng for it, but was willing to niove it ofC for the salvage. 
Witness further testifled that when the brick building was erected the eon- 
tractor was required to tear down sald wood building or move it, and he 
moved it, instead of tearing it down ; that it was cheaper for said contractor 
to move said building than to tear it down; that at time of said transac- 
tion with Woodfln he had a Une of business which bankrupt desired to handle, 
and it desired to get him out of business, said Une being brick, lime, and cé- 
ment. 

There is no évidence before me having any tendency to show any collusion 
or conspiracy between Lamar, Stewart, Reese & Keese, and the receiver, or 
between any of them, in connection with said letters. 

In relation to the claim of C. H. Dozier, filed and allowed in this case, a 
brief sunimary of the évidence is: Said claim is in due form required by law, 
and sworn to, and was allowed, as admitted in the spécification of objection 
directed against it. Its basis is flve notes made by the bankrupt, two of 
which are payable to C. H. Dozier, respectively, for $2,000 and $.5,030.66, due 
lespectively one day after date and on demand ; the dates of sald notes be- 
ing Mardi 16, 1015, and May 1, 1915. ïhe otlier three notes are payable to 
Marion Central Bank, dated March 15, 1915, AprU 1, 1915, and May 8, 1915, 
respectively, for $1,057.78, $1,057.78 and $1,052.44. Each of them are duly 
trausferred and indorsed by the cashler of said bank to said C. H. Dozier ; 
the date of said transfer being November 13, 1915. From the testimony of 
C. H. Dozier, testifying with the books before him, it appears from said 
books of aceount that the considération of the !S3,030.66 note was notes to the 
amount of $3,000 owing from the bankrupt to the People's Bank and the $30.66 
being the interest thereon. This witness also proved the signature of the 
cashier to the transfers of the three notes from the Marion Central Bank, 

Counsel for objecting creditors assume in their brief, on the sixth page 
thereof, that the witness Dozier testlfled that the aniounts embraced in the 
three notes (trausferred by Marion Central Bank to C. H. Dozier) is the same 
as the amount embraced in the note to C. H. Dozier for $3,030.66. I did not 
understand the witness to so testify, and as a matter of fact he explained that 
he did not so mean to testify. The three notes referred to were payable to 
Marion Central Bank, and according to the books, and testimony of said wit- 
ness, C. H. Dozier, Jr., the considération of the $3,030.69 was cash paid by 
C. II. Dozier to the People's Bank to ta.ke up $3,000 worth of notes of bank- 
rupt due sald bank, and that the $30.66 was interest thereon. The aggregate 



IN EE DOZIER WHOLESALE GBOCEBY CO. 173 

amount of said three notes to Marion Central Bank is $3,168.10, whlle that 
of the note to Dozler Is $3,030.66. This wltness fully explains that he^ did 
not mean to so testify. Furthermore, one of said three notes is subséquent 
in date to the §3,030.66 note. As to the question of whether said latter note 
Is dated "Mardi 1, 1915," or "May 1, 1915," I caunot conceive of any reason, 
beneflc-ial to Dozier, for such altération ; and if any altération has been made 
It seenis to me that it could hâve easily been explalned by said cashier and 
the books of the bank. WitnesS further testifled from the books that none 
of the notes attached to said proof of claim appear as crédits on the Per- 
sonal account of C. H. Dozier with the bankrupt. There is no évidence be- 
fore me tending to show any défense against said notes. A transcript of 
said C. H. Dozier account is attached to testimony of C. H. Dozier, Jr. 

As to the payment of the capital stock, the évidence shows from the books 
of account, as explalned by said wltness C. H. Dozier, Jr., that the first 
$18,000 was paid on dates from December 24, 1912, to February 27, 1913, as 
follows: December 24, 1912, $1,500; .Tanuary 1, 1913, $1.000; January 6, 
1913, $6,000 ; December 27, 1912, $3,479 ; Januarv 6, 1913, .$120 ; Januarv 23, 
1913, $1,540; January 29, 1913, $1,500; February 24, 1913, $2,000; February 
27, 1913, $861— maklng $18,000 In ail. The item of $1,540 was charged to 
the individual or Personal account of O. H. Dozier. The last $1,500 was cash, 
and the other payments were by check, and the books, as well as the pass- 
books of the People's Bank and the Marion Central Bank, show that said 
cash item and ail of said checks were doposited in one or the otlier of said 
banks to the crédit of the bankrupt firjn ; the items of deposit in said pass- 
books being identlfied in the stenographer's minutes by a red cross mark. 
On the individual account of C. H. Dozier with the bankrupt he is, on Jan- 
uary 14, 1914, charged with treasury stock $12,000. On the date said charge 
was made against said Dozier on his account, said account showed a crédit 
balance in favor of him of $13,193.63. It also showed a crédit balance in liis 
favor at time of bankruptcy of $765.56, exclusive of any of the items em- 
braced in the claims of said Dozier flled in this bankruptcy. 

Xo évidence was offered before me having any tendency to show nonpay- 
ment of any of the stock subscrlbed for, nor any showlng that said Dozier 
owed the bankrupt anything, which was proper to set ofC against said claim 
of Dozier, or against the said payments on account of said stoclî. 

In this case objectiug credltors, without objection, offered in évidence ail 
the books of bankrupt, and ail the proceedings in the credltors' meeting; it 
being stated that I would consider same so far as I could remember sarue. 
The books are exceedlngly numerous and bulky, and no particular portions of 
them liave been called to my attention, except as shown by the sténographie 
minutes. Collier on Bankruptcy, p. 33, déclares this practice is loose and 
should not be followed ; that the better metbod, where a, stipulation is i)os- 
sible, is to call out those portions that are pertinent and lead them in. How- 
ever, I am unable to say that the books show any such preterential payments 
as would be recoverable by the trustée; it not being even suggested by any 
évidence as to whom the payments were made, and there being no évidence 
before me, as to the knowledge or intent of such credltors, such as wouhl 
make them recoverable, if any may hâve received such payments within said 
four months. 

The purpose of spécifications of objection is to give the bankrupt notice of 
particular conduet of his which is challenged (Collier, 322 ; In re Hirsch 
[D. C] 2 Am. Bankr. Rep. 715, 96 Fed. 468), and they should contain alléga- 
tions sufflcient to show ail essentlal facts exlsting briuging the opposition 
within the grounds specifled by the statute (Collier, 324). They must be clear 
and unequivocal, and contain spécifie averments of facts. They should be 
pleaded with greater particularity than complaints in civil actions. Collier, 
324. Spécifications and proof in support must be clear, positive, and direct. 
The opposing créditer must distinetly allège and prove one or more of the 
statutory grounds. In re Griffin Bros. (D. C, Toulmin, Judge) 19 Am. Bankr. 
Kep. 78, 154 Fed. 537. See, also, In re McGurn (D. C.) 4 Am. Bankr. Rep. 
459, 102 Fed. 743 ; In re Thomas (D. G.) 1 Am. Bankr Rep. 515, 92 Fed. 912 ; 
In re Holman (D. C.) 1 Am. Bankr. Rep. 600, 92 Fed. 512 ; In re Hixon (D. C.) 



174 234 FEDERAL REPORTEE 

1 Am. Bankr. Rep. 610. 93 Fed. 440; In re Kaiser (D. C.) 89 Fed. 689; In re 
Hirsch, supra: In re Peaeock (D. 0.) 4 Am. Bankr. Eep. 136, 101 Fed. 560; 
In re guaekenbush (D. 0.) 4 Am. Bankr. Rep. 2T4, 102 Fed. 282; In re Gross, 
5 Am. Bankr. Eep. 271; In re Wolfensohn, 5 Am. Bankr. Rep. 60; In re 
Wetmore (D. C.) 99 Fed. 703 ; In re Idzall (D. C.) 2 Am. Bankr. Rep. 741, 96 
Fed. 314 ; In re Main (D. C) 30 Am. Bankr. Rep. 547, 205 Fed. 421. 

The allégations must be spécifie and of sucli a character that their suf- 
flcicncy uiay be met by demurrer, or by exceptions analogous to those allowed 
in equity. Mère gênerai averments are uot sutlicleut. If they fail to allège 
any fact which by construction would be deemed ground for déniai, they 
may be disregarded, though not excepted to. Collier, pp. 325, 326; In re 
Troeder, 17 Am. Bankr. Rep. 723, 150 Fed. 710, 80 C. 0. A. 376 ; In re Steed 
(D. C.) 6 Am. Bankr. Rep. 73, 107 Fed. 682 ; In re Peck CD. C.) 9 Am. Bankr. 
Rep. 747, 120 Fed. 972; In re Parish (D. C.) 10 Am. Bankr. Rep. 548, 122 
Fed. 553 ; In re Ohandler, 14 Am. Bankr. Rep. 512, 138 Fed. 637, 71 C. 0. A. 
87. It Is held in Re Mlntzer (D. 0.) 197 Fed. 647, 28 Am. Bankr. Kep. 743, 
that spécifications in gênerai terms following the language of the statute are 
Insuflicient. The grounds speclfled must be one of those enumerated in the 
statutes. In re GrifHn Bros., supra. Thls case, declded by the Judge of this 
district, is one of the clearest and most lucid discussions of the necessary 
allégations and proof requlred in spécifications. 

In my opinion, the first spécification is Insufiiclent. It does not allège any 
of the grounds enumerated in the statute, no évidence was offered in sup- 
port of it, and, further, it is a fact that I malled notice of the flrst meeting 
of eredltors to ail of the credltors scheduled, including the creditor men- 
tioned in said spécification. The envelope containing each of sald notices had 
my ofiiclal return address thereon, and has never been returned to me. I 
therefore flnd that said spécification is not,sustalned by the évidence. 

The second spécification, so far as its meaning can be gathered by reading 
it, and the évidence offered relating thereto, is predlcated on the fact that 
certain property — the warehouse— is scheduled as valueless, vphich is worth 
at least $3,000, and that the offler of composition is less than would be 
realisied ou sale of the assets of the bankrupt. The allégation that it "is 
scheduled as valueless," seeiuiugly the conclusion of the pleader, is not borne 
ont by i:he évidence, as the officiai schedule shows that this warehouse was 
listed with the explanatory note relating thereto, which note is set out here- 
tofore in this report, and from which note it appears that the bankrupt was 
'unable to estimate its value as an asset; and from said note I am unable 
to dérive any suggestion even intimating that same was valueless. The ex- 
planatiou is plainly that bankrupt is unable — dld not know how — to fix or es- 
timate its value as an asset ; and for reasona herelnafter set out I think 
such conclusion was fully justlfled. 

No évidence was ott'ered in support of the allégation that more would be 
realized to the credltors by a sale of the assets than is offered by the com- 
position ; on the contrary, Mr. Monk, président of the Central Alabama Dry 
Goods Company, shown to hâve large expérience in bankrupt sales, testifled 
that in his opinion the assets would not likely sell for over $5,000, and that 
is the conclusion I reach, and I do not think that more could be realized to 
credltors by sale than is offered by the comiwsition, and this would still be 
my conclusion, even though It were shown that several hundred dollars could 
be realized by sale of the warehouse. 

Section 70, subd. "a," of the Bankrupt Act (Act July 1, 1898, c. 541, 80 Stat. 
565 [Comp. St. 1913, § 9654]), spécifies and détermines what property passes 
to the trustée and beconies assets in his hands. The only part of said sub- 
division "a" which could by a possibility relate to this warehouse is the fol- 
lowing part of the clause numbered (5): "(5) Property which prior to the 
flling of the pétition he could by any means liave transferred, or which might 
haye been levied upon and sold under judicial process agalnst him. * * * " 

Under the terms of the coutract with the Southern Rallway Company, re- 
f erred to heretof ore in thls report, it is my opinion as a matter of law, and 
I so hold, that, except as to the privilège of removing the material from the 
railroad, the bankrupt had no property rights arising out of said contract, 



IN EE DOZIEB WHOLESALE GEOCERY CO. 175 

which he could by any means hâve transferred or which might hâve been 
levied upon and sold under judiclal process agalnst hlm and I further hold 
that the only property right whlch could pass to the trustée as an asset was 
the right to remove and sell said material according to the ternis of the con- 
tract. As to the value of such material one wltness, Wood, testifled that the 
material in the brick warehouse he thought vpould be worth $400, and that 
in the wood building $100; that the cost of tearing down the wood building 
would be about $25. He failed to testify as to what would be the cost of 
tearing down the brick warehouse, or restoring the ground to the condition 
required by the contraet. The questions which elicited thèse answers as to 
the value of said materials were objected to, and such objections were sus- 
talned, because said witness was not shown to know the values inquired about. 
The witness Kemp, a very intelligent man of many years' expérience in such 
matters, testifled that the material salved from the taking down of the build- 
ings would hardly be sufflcient to pay expenses thereof and of putting the 
ground in its original condition according to the terms of said contraet. 
There is therefore before me no évidence from vi^hich I can conclude, as a 
matter of fact, that this right to remove this material is of any value as an 
asset of the estate; but, if so, its value at least is problematical and uncer- 
tain. 

The approval of a majority of the creditors is évidence, prima facie, that 
the composition is for the best interests of the creditors, and the burden is 
on those who attack it to show the contrarv. Collier, p. 297 ; In re Waynes- 
boro Co. (D. C.) 19 Am. Bankr. Rep. 487, 157 Fed. 101 ; In re Hoxie (D. C.) 
25 Am. Bankr. Rep. 32, 180 Fed. 508; In re Barde & Levitt (D. C.) 31 Am. 
Bankr. Rep. 736, 207 Fed. 654; City Bank v. Doolittle, 5 Am. Bankr. Rep. 
736, 107 Fed. 236, 46 C. C. A. 258. There must be a positive showing to rebut 
this presumption that the action of the majority is for the interest of ail. 
Collier, p. 297; In re Weber Co., Fed. Cas. No. 17,330; Id., 17,331; In re 
Greenebaum, Fed. Cas. No. 5769. 

My report of this composition shows its acceptanee by 42 creditors, whose 
claims aggregate $13,115.79. The objecting creditors are Van Camp Products 
Company and Hancock Bros. & Co., whose claims amount, respectlvely, to 
$316.80 and $37.82. It is my conclusion, based on ail the évidence, that the 
creditors would realize more under the composition than by a sale of the 
assets. Without passing on the pleadings, I find upon the évidence that the 
second spécification is not sustained. 

In my opinion, the third spécification does not allège any of the grounds 
enumerated by the statutes ; but I do not deem it necessary to pass on the 
exceptions to it. There is no évidence before me showing a concealment, nor 
an attempted concealment, nor any false statement sent ont by the bankrupt, 
or any of the other persons mentioned therein. This spécification, which is 
very vague, according to the évidence is based on the fact that the warehouse 
was an asset of great value, and Mr. Stewart in his letter failed to mention 
it as an asset, and that Reese & Reese failed to call it to the attention of 
their clients that it was a valuable asset. As already stated, in my opinion 
it Is an asset of but small and problematic value. I find that this third spéci- 
fication is not sustained by the évidence. 

The fourth is also based, so far as its meaning can be gathered, on the value 
of the warehouse, it avers it to be worth $5,000; that the bankrupt "col- 
luded with the petitioning creditors, the attorneys representing a majority of 
the creditors and the receiver to "conceal and deceive creditors" as to the 
condition of bankrupt estate ; that bankrupt sent out a statement to the crea- 
Itors "in which it failed to list" the warehouse ; and that attorneys repre- 
senting a majority of the creditors wrote their clients that they had recel ver's 
inventory, and that bankrupt's statement as to what it showed was correct. 
The évidence is without dispute that bankrupt sent out no statement, and 
that allégation probably refers to the letter written by Mr. "W. A. Sewart, Its 
attorney. The figures given in that letter, upon comparison, are identical 
vi'ith those shown by the said inventory filed in my office by said receiver. 
There is no évidence before me having any tendency to show any conspiracy 
to deceive any of the creditors. It is unnecessary for me to again state my 



176 234 FEDERAL RBPOETBR 

conclusion as to the value of the vvareliouse as assets. I flnd that the fourth 
spécification is net sustained by tlie évidence. 

No évidence was offered in support of tlie flfth spécification, and I there- 
fore flnd that it is not sustained by the évidence. 

The sixth spécification is to the effect that O. H. Dozier, who was prési- 
dent of the bankrupt, "did file a claini w'ith the référée, * * * which was 
allowed, and wliich is not a bona fide (?) claim or charge against the estute 
of said bankrupt." Pretermitting any discussion as to the extent of the ef- 
fect or limitation afCected by the use of the words "bona fide," and without 
passing on the suflk-iency of said spécification, it will be observed that said 
spécification admits that said claim bas been allowed. The bankrupt's coun- 
sel strongly couteuded that the allowance of said claim was a .l'udgment in 
favor of said C. H. Dozier; that it could not be attacked collaterally on this 
référence ; that said Judgment was in the nature of res adjudlcata ; that said 
claim could only be attacked on pétition of the trustée to re-examine aiid 
disallow or reduee said claim (a trustée lias been duly appointed and (pialitied 
in this cause) — citing in support of said proposition the case of In re Lewen- 
sohu, 9 Am. Bankr. Eep. SOS, 121 Fed. 538, 57 C. 0. A. 60O. In niy view 
of the évidence relatlug to this claim, a décision of the above question of 
évidence is unnecessary. As already stated in this report, said claim is 
properly proveu accordlng to the statute and In the form provided therefor. 
Ko évidence in rebuttal thereof, or from which a contrary inference is raised, 
lias been iireseiited. I therefore find that the évidence does not sustain the 
sixth spécification. 

I am of the opinion tbat the composition sliould be confirmed, and I do 
therefore recoinmend that it be coiifinued. Consideralile costs and expenses 
hâve been incurred in the exécution of this référence, an Itemized statement 
of whicli is handed ui> with this report, and which should be taxed against 
the objecting creditors. 

Reese & Reese, of Selma, Ala., for petitioiiing creditors. 
A. W. Stewart, of Marion, Ala., for bankrupt. 
J. C. Foster, of Marion, Ala., and Brovvn & Ward, of Tuscaloosa, 
Ala., for objecting creditors. 

HENRY D. CLAYTON, District Judge. This cause, coming on to 
be heard, is snbmitted for order and decree upon the motion of the 
bankrupt and certain of his creditors to dismiss or strike from the 
file the additional spécifications of objection to the confirmation of the 
composition, and also for decree upon objections of certain creditors 
to the composition, and for decree in the matter of such composition 
reported and recommended by the spécial master in his report dated 
March 25, 1916. 

The report and the testimony in the case hâve been carefully consid- 
ered by me, and I bave heard and considered the argument of the at- 
torneys in opposition to the confirmation of the composition, as well 
as that of the attorneys in behalf of the confirmation. After careful 
examination and reflection, I hâve reached the conclusion that the real 
question to be decided in this case is whether or not the composition 
is for the best interest of the creditors of the estate. If this view be 
correct, and the whole controversy is reduced to that one question, it 
is unnecessary for me to pass upon several minor or incidental ques- 
tions discussed during the oral argument. It is my opinion that the 
confirmation of the composition, as recommended by the spécial master, 
is to the best interest of ail the creditors. 

1. The letter of E. Lamar and that of A. W. Stewart to certain of 



IN RE DOZIER WHOLESALE GEOCERY CO. 177 

the creditors in connection with the composition were fully and sat- 
isfactorily explained, and are far from persuasive that they were in- 
struments of déception or were even instrumental in deceiving or mis- 
leading the creditors who accepted the composition. Further, no in- 
jury was worked to any of the creditors by thèse letters. 

2. The contention that the claim of C. H. Dozier, Sr., président of 
the bankrupt, should not hâve been allowed, perhaps, ought not now 
to be considered by the court. But, it having been considered, I find 
from ail the évidence in the case that it was just and proper. 

3. The alleged concealment of the "true condition of the bankrupt's 
financial condition" cannot hère furnish a reason for disapproving the 
composition recommended. An examination of ail the évidence in the 
case convinces me that there was no real, or at any rate no fraudulent, 
concealment of the assets of the bankrupt. 

4 and 13. The objection that the subscription of C. H. Dozier, Sr., 
for $12,000 stock of the bankrupt corporation has not been paid is not 
well founded. The évidence satisfies me that such subscription has 
been paid. 

5. The conditional leasehold interest in the warehouse, or conditional 
license to use the same, in accordance with the limitations of the con- 
tract between the bankrupt and the railroad company, was not such a 
part of the bankrupt's assets as that a failure to schedule the same 
can be held to be a concealment of assets. Eut, even if this be an as- 
set at ail, then it does not furnish any reason why the composition 
should not be allowed. 

The liabilities of the bankrupt to unsecured creditors total $14,- 
945.09. The claims of creditors who bave admitted preferential liens 
amount to $3,288.02. Omitting the contract lease or license of the 
warehouse property, the assets of the bankrupt were appraised at $6,- 
935.50. It is not to be doubted that this appraisement was fair, and 
that the reasonable value of the assets of the estate is not more than 
$5,000. So it is a matter of simple mathematics to show that, although 
the leasehold or license interest in the warehouse, if treated as a part 
of the available assets of the bankrupt and as worth $2,000, the maxi- 
mum amount of value which the objecting creditors can fairly claim 
it has, this would not furnish any reason why the composition should 
not be approved as being in the best interest of ail the creditors. 

Treating the warehouse interest as an asset worth $2,000, and as- 
suming that it could be sold for that amount, and that the other as- 
sets (as shown by the évidence) sell for more than $5,000, this would 
produce an aggregate amount of $7,000; from which, deducting the 
$3,288.02, amount of preferred claims, there would be left a balance 
of only $3,711.98. From this amount, of course, there must be fur- 
ther déductions for the costs of administration, including receiver's 
and trustee's fées and expenses, insurance, and fées of the varions 
attorneys and officers. It is not necessary to hazard an estimate of 
the aggregate amount of thèse déductions, as it is already entirely 
obvions that the above amount of $3,711.98 is of itself insufficient 
to pay a dividend of 25 per cent, on $14,945.09, which dividend of 
25 per cent, is what the creditors will receive under the composition. 
234 F.— 12 



1.78 234 FEDERAL REPORTER 

Ifowever, assuming — as the court does — that the license in the ware- 
liouse property is not such property as passes to the trustée, the above 
figures would be reduced $2,000, and would be only $1,711.98, from 
which the costs of administration must be paid before being divided 
among the creditors; and it would be very doubtful even if as much 
as 5 per cent, could be reallzed to the gênerai creditors. 

6 and 10. It does not seem necessary to now consider the claim that 
large sums of money were paid out by the bankrupt to some of his 
creditors for debts due them within four months preceding bankruptcy. 
But, it being considered, I find that the évidence does not sustain thèse 
grounds of objection. The findings of fact and the conclusions of law 
applicable to the question raised by these objections are correctly stated 
by the spécial master in his report. 

7. The seventh ground of objection to the report is not well taken. 
There was no collusion between the attorney representing the cred- 
itors and the attorney representing the bankrupt, whereby any fraud 
was perpetrated upon or done to the creditors of the bankrupt. The 
whole matter raised by this objection is fully and satisfactorily ex- 
plained by the évidence. 

And I find that the other objections, numbered 8, 9, 11, 12, 14, and 
15, of a Hke ténor, are not well founded. 

8. As to objection 16, it is no more than a gênerai objection, predi- 
cated upon the second, third, fourth, fifth, and sixth spécifications, 
which I hâve dealt with, and, in dealing with them as I hâve, neces- 
sarily the efïect is to hold that objection 16 is without any worth. 

9. As to objection 17, which is a gênerai exception to that part of 
the report in which the spécial master finds that there was not suffi- 
cient évidence to support either of the objections to the said confirma- 
tion of said composition, it is sufificient to say that this is a gênerai 
objection, which, if necessary to deal with at ail, has been dealt with 
in my considération of the several spécifie objections. 

I am convinced that there is not sufficient merit in any of the 17 
objections to the composition, or in ail of them considered together, 
to warrant the court in disallowing the proposed composition. 

Accordingly decree will be entered, approving the report of the spé- 
cial master and authorizing the composition recommended by him. 



UNITED STATES v. CLEVELAND, C, C. & ST. L. RY. CO. et al. 

(District Court, N. D. Illinois, E. D. Angust 16, 1915.) 

Oaehiees ©=38 — Oahriaoe of Goods — Rebating — Indiotmext — Sufficienct. 
An indictment, cliarging three carriers with rebating, averred that 
two of them were engaged in carrying coal over their respective routes; 
that a third corporation, which was the owner of the majorlty of the stock 
of the other two aud controlled and managed their affalrs, did unlaw- 
fuUy aud knowhigly glve to a shipper of coal a sum of money as a rebate 
of the freight rates and charges collected, which were the regular fixed 
rates. Interstate Commerce Act Feb. 4, 1887, c. 104, § 6, 24 Stat. 380, 
as amended by Act Juue 29, 1906, c. 3591, § 2, 34 Stat. 587 (Oomp. St. 

<g=3For other cases see same topic & KBY-NUMBER in aU Key-Numbered Dlgests & Indexes 



UNITED STATES V. CLEVELAND, C., C. & ST. L. KY. CO. 179 

1913, § 8569), déclares that no carrier sliall refund or remit, in any man- 
ner or by any device, any portion of rates, fares, or charges, except such 
as are specifled in the tariffs, wliile section 10 (section 8574) provides tliat 
if the carrier be a corporation, penalties for violation may be vislted 
upon any director, or offlcer thereof, or any recelver, trustée, llcensee, 
agent, or person employed by such corporation. The Elkins Law (Act 
Feb. 19, 1903, c. 708, § 1, 32 Stat. 847 [Comp. St. 1913, § 8597]) provides 
that anything done or oniitted to be done by a corporate common carrier 
subject to the act to regulate commerce, which, if done or oml'tted to be 
done by any director or officer, agent, or employé, would constitute a 
misdemeanor, shall be held a misdemeanor committed by the corporation, 
that it shall be unlawful for any person or corporation to ofCer, grant, 
accept, or receive any rebate, and that in construing the provisions of 
the section, the act, omission, or fallure of any officer or other person 
actlng for or employed by any common carrier or shipper acting within 
the scope of his employment shall be deemed the act of the common 
carrier. Held, that while the mère fact that the third corporation owned 
the majority of the stock of the other two carriers did not constitute it 
their agent or give it the management of thelr affairs, yet the indictment 
was sufflcient to charge an offense, averring that the rebate was made by 
such third corporation as their agent, and clearly indicating that such 
procédure was a device to a,void the penalties of the acts, therefore the 
averments of ovi'nership of stock cannot be taken as controlling the 
allégations of ageney. 

[Ed. Xote. — For other cases, see Carriers, Cent. Dig. §§ 98, 97 ; Dec. 
Dig. <g=38.] 

At Law. The Cleveland, Cincinnati, Chicago & St. Louis Railway 
Company and others were charged with rebating. On demurrer to 
the indictment. Demurrer overruled. 

The case is before the court on demurrer of the three défendants to an in- 
dictment eharging rebating. The allégations of fact essential to a considéra- 
tion of the questions presented, and which are common to the three counts of 
the indictment, are: 

The défendant the Cleveland, Cincinnati, Chicago & St. Louis Railway 
Company — commonly known as the Big Four Company — is an Ohio corpora- 
tion, and, for seven years prior to the présentation of the indictment (Novem- 
ber, 1912). engaged in carrying coal from liarrisburg to Danville ; the défend- 
ant Chicago, Indiana & Southern Eailroad Company, an Illinois corporation, 
was engaged in carrying coal from Danville to Gibson, Ind. Both companies 
hâve been carrying such coal over their respective routes for delivery at 
Gibson, Ind., to the Indiana Harbor Belt Eailroad, for carriage by the latter 
to connections with other carriers for further transportation. Some of it 
has been transported from liarrisburg under common arrangement between 
such two défendants and such other carriers for continuons shipment, some 
under joint tariffs. The Big Four Company, durlng the period specified, filed 
its separate established rate, also its concurrences in joint schedules. 

Most of the coal carried from liarrisburg was delivered by the O'Gara Coal 
Company, a New York corporation ; and "in respect to ail such transportation 
of such property for said O'Gara Coal Company, in such Interstate commerce 
over the routes of said (défendants, Big Four Company, and Chicago, Indiana 
& Southern Railroad Company) during such period of fime, the full, lawful 
freight rates and charges earned by both of said last-mentioned railway com- 
panies hâve been paid to them by said O'Gara Coal Company." 

The giving of a rebate by the two défendants above referred to, and the 
connection of the third défendant, Lake Shore & Michigan Southern Railway 
Company, therewith, is then charged: "And the grand jurors aforesaid, upon 
their oath aforesaid, do further présent that said Cleveland, Cincinnati, Chi- 
cago & St. Louis Kailway Company, and said Chicago, Indiana and Southern 
Railroad Company, during said period of time, to wit, on the 24tli day of 
November, in the year 1909, at Chicago aforesaid, in said Eastern Divi.sion of 
said Northern District of Illinois, through the Lake Sliore & Michigan South- 



180 234 ffEDBBAL REPOETEB 

ern Ealhray Company, a corporatton theretofore organlzed and then exlstleg 
under and by virtue of tlte laws of the state of Illinois (said the Lake Shore & 
Micliigan Sonthern Railway Company tlien and there aeting as the agent ot 
said Cleveland, Cincinnati, Chicago & St. Louis Railway Company, and saiU 
Chicago, Indiana & Southern Raiiroad Company in that behalf, and thls by 
reason of the fact that it was then the owner of the majority of the capital 
stock of both of said companies, and controlled and managed their affalrs), un- 
lawfuUy dld knowingly give to said O'Gara Coal Company a sum of money, 
to wlt, the sum of $10,000, as a rebate of the frelght rates and charges so as 
aforesald before that time paid by said O'Gara Coal Company to said Cleve- 
land, Cincinnati, Chicago & St. Louis Railway Company, and said Chicago, 
Tndiana & Southern Raiiroad Company in respect to the transportatlon in In- 
terstate commerce of said property of said O'Gara Coal Company as afore- 
sald ; by which giving of said rebate the said property was by said several 
common carriers transported in Interstate commerce at less rates than the 
rates so named therefor in said tarifCs and schedules as said Cleveland, Cin- 
cinnati, Chicago & St. Louis Railway Company, said Chicago, Indiana & 
Southern Raiiroad Company and said the Lake Shore & Michigan Southern 
Railway Company, when so as aforesaid giving the same, well knew." 

The formai charge is thereupon incorporated into each count that the three 
défendant carriers did unlawfuUy and knowingly give a rebate in respect to 
the transportatlon of property in Interstate commerce. 

Each of the three counts Is challenged as insufficient in its charge of the 
commission of an offense by any of the défendants, bccause: 

"First. A légal conclusion Is set out as the basis of the agency. 

"Second. The count allèges that the agency existed solely by reason of the 
fact that the Lake Shore & Michigan Southern Railway Company was the 
owner of a majority of the capital stock of the défendants, and controlled and 
managed their afCairs. It therefore faiis to aver facts of agency within 
the limitations of the Elklns Act. 

"Third. The facts set forth show afflrmatively tliat the Lake Shore & 
Michigan Southern Railway Company was wlthout authority to act as the 
agent of the two other companies. 

"Fourth. The Indictment faiis to aver, in accordance with the language of 
the Elklns Act, that the agent acted for or was employed by the alleged 
prindpals whlle aeting within the scope of his employment. 

"Fifth. The count faiis to set forth any spécifie rates, fares, and charges 
specified in the tarifCs, which were received by elther défendant in respect of 
which it is alleged to hâve given a rebate. 

"Sixth. The count faiis to specify the sliipments for which elther défendant 
received frelght rates and charges as compensation for the carrying of the 
same and in respect of which such défendant is alleged to hâve given a rebate. 

"Seventh. The count faiis to set forth any frelght rates or charges separate- 
ly due each of the défendants which were received by it as considération for 
services rendered, and further faiis to specify the sum alleged to hâve been 
separately given by each défendant as a rebate of the frelght rates and 
charges separately received or accounted for to it. 

"Eigbth. Each count faiis to show any spécifie violations of the statute, in 
that It déclares ouly that the défendants gave divers sums of money as re- 
bates to a certain party who for seven years previous thereto had been en- 
gaged in shipping coal over the défendant railroads to points beyond." 

Charles F. Clyne, U. S. Atty., of Chicago, 111. 

Glennon, Cary, Walker & Howe, of Chicago, 111., for défendants. 

GEIGER, District Judge (after stating the facts as above). The 
allégations of the indictment may be thus summarized : Two railroads 
are carrying Interstate shipments of coal for a shipper who pays the 
fuU lawful freight tariffs. Such coal is forwarded by them to a belt 
line, which in turn receives it for transportatlon to connections with 
other carriers by whom it goes to points of ultimate destination. ^ 



UNITED STATES V. CLEVEI^ND, 0., 0. * ST. L. ET. CO. 181 

sum of money, charged to be a rebate, is paid to the shipper, in the 
f ollowing manner : The two carriers give it through a third corporcp- 
tion carrier, who, the indictment says, parenthetically, was then and 
there acthig as the agent (of the two carriers) in that behalf, and this 
by reason of the fact that it was then the owner of the majority of the 
capital stock of both of said companies and managed and controlled 
thdr affairs. This alleged rebate operated to carry the property at 
less than the published rate, as the three carriers, when giving the same, 
well knew. The three companies are charged with knowingly paying 
a rebate to the shipper. Do thèse facts justify the inference that the 
offense defined in the following sections of the Interstate and Elkins 
Acts bas been committed? 

"Sec. 6. Nor shall any carrier refnnd or remit in any manner or by any 
device, any portion of rates, tares or cliarges so specifled, nor extend to any 
shipper or person any privilèges or facillties in the transportatlon of passen- 
gers or property, except sueh as are specifled in such tariflfs." Comp. St. 1913, 
§ 8569. 

Under section 10 of the original act, although the prohibition under 
section 6 comprehended ail carriers, the penalties for violation could 
be visited, if the carrier was a corporation, upon — 

"any director or officer thereof, or any receiver, trustée, lessee, agent, or per- 
son acting for or employed by such corporation." Comp. St. 1913, § 8574. 

But the Elkins Law declared : 

"That anyttiing done or omitted to be done by a corporation common car- 
rier, subject to the act to regulate commerce and the acts amendatory thereof, 
which, if done or omitted to be done by any director or ofQcer thereof, or any 
receiver, trustée, licensee, agent, or person acting for or employed by such 
corporation, would constitute a misdemeanor under said acts or under this 
act, shall also be held to be a misdemeanor committed by such corpora- 
tion. * * *" 

And further: 

"And it shall be unlawful for any person, persons, or corporation to ofCer, 
grant, or give or to solicit, accept, or receive any rebate, concession, or dis- 
crimination in respect to the transportatlon of any property in Interstate or 
foreign commerce by any common carrier subject to said act to regulate com- 
merce and the acts amendatory thereto whereby any such property shall by 
any device whatever be transported at a less rate than that named in the 
tariffs published and filed by such carrier, as is required by said act to regu- 
late commerce and the acts amendatory thereto, or whereby any other advan- 
tage is given or discrimination is practiced." 

Also : 

"In constnilng and enforcing the provisions of this section the act, omission, 
or failure of any officer, agent, or other person acting for or employed by 
any common carrier [or sliipper] aotivff mthin the scope of his employment 
shall in every case be also deemed to be the act, omission, or failure of such 
common carrier or shipper as well as that of the person." Comp. St. 1913, f 
8597. 

Considering the first four grounds assigned on the demurrer, the 
argument in support thereof is, in substance, that the indictment fails 
to show any relation between the Lake Shore Company and the other 
two carriers, save that growing out of the ownership of a majority 



182 234 FBDBEAI, BHPORTEIR 

ofitheîr. capital shares ; that it must be construed a? showins: that Com- 
pany possessed of only such cpntrol and management of their affairs 
as résides in a majority ownership of stock ; hence it not only f ails 
to show a relation of agency, but, in the absence of other disclosure 
of such relation, its légal existence is really negatived. It is therefore 
insisted that, even if the Lake Shore Company did make a payment 
which, if made by either of the other carriers, would be a rebate, the 
indictment shows it to hâve been made by one, or in a manner, not 
yet comprehended within the prohibitive terms of tiie statute. In other 
words, it was made by a stranger; the payment was not made by 
the corporation which bore the relation of carrier to the shipper, nor : 
( 1) By an agent ; or (2) person acting for, or (3) (a person) employed 
by, such corporation; and in no event coiild the act of the Lake Shore 
corporation, as a distinct légal entity, be deemed to be the act of either 
or both of the other two corporations, as: (1) Their agent; or (2) 
person acting for ; or (3) employed by (them) any common carrier act- 
ing within the scope of his employment. 

It may be assumed that the ownership of a majority of the capital 
shares in a corporation by an individual or by another corporation con- 
stitutes neither agency nor managerial control, as those terms 
are usually used in implying a contractual relation of principal 
and agent, master and servant, or the like. And, if this were ail that 
could be spelled out of the indictment before us, it might be said that 
not suflîcient has been alleged to show the existence of a relation be- 
tween the Lake Shore Company and the other companies to justify the 
inference required by the statute; that is to say, if we start with the 
assertion that the statute refers to agency, a delegated authority to act 
for the principal, or that, as to a person acting for or employed by an- 
other, there be the contractual élément, the conclusion that an owner of 
a majority of the shares of a corporation is neither, is as évident as it 
is necessary. 

But, granting that an indictment which predicates an agency 
solely upon the ownership by the agent corporation, of the majority 
of the stock of the alleged principal corporations may be infirm, it is 
important to recognize the probable relations intended to be reach- 
ed by the law as it now stands; and this may be donc, conced- 
ing to the utmost the proposition that a rebate, to be such as îs; 
condemned by the law, must corne from and be paid by or on behalf of 
the corporation which is in the relation of carrier to the shipper. 
It may be conceded that a payment by a stranger — if it be thought 
that a stranger ever does such things — is permissible. Thèse ele- 
meritary concessions do not aid us ; they bring us back to the funda- 
mental question, who, other than strangers, are comprehended; or, to 
put it in another way, when does a third person or corporation ceasc 
to be a stranger legally, and what is a sufficient allégation, in an indict- 
ment, of complicity in the commission of the alleged offense? And, in 
my judgraent, the law, in its intention to reach not only the particular 
corporation which sustains the relation of carrier to the shipper, but also 
its agents and jjersons acting for it, comprehends either individuals or 
corporate entities who contribute, knowingly and understandingly, to 
a refund or remission "in any manner or by any device," and it is whol- 



UNITED STATES V. CLEVELAND, C, C. & ST. L. EY. CO. 183 

ly îmmaterial that, in other respects, the latter may bear no relation to 
the carrier which may bè the foundation of a légal relation of agency 
or employment having ascertainable scope. To put it more particularly, 
when the payment is made to a shipper, when it is charged to hâve been 
intended to operate, and did operate, as a rebate, when two corpora- 
tions are charged to hâve given it through a third, does not the in- 
dictment sufficiently charge a devicef When it further charges, though 
only formally, knowledge by each of the participants of the character 
and intended opération of the payment, does it not sufficiently charge 
that the ref und or rebate was made by one acting for the real carriers ? 
Grant that the ownership of the majority of capital stock did not 
constitute the Lake Shore Company the agent, nor in any sensé a légal 
delegate which could bind the other two companies in ordinary trans- 
actions. The statute is not limited to that sort of relation. It com- 
prehends a matter of conduct in respect of making rebates ; it aims to 
reach those on whose behalf the rebate is paid and those who hâve com- 
plicity, with knowledge, therein. If the individual or corporation guilty 
of complicity in fact is to be relieved because he or it had no other duly 
constituted relation with the principal offender, then, as in the prés- 
ent case, the law can easily be frustrated. The latter goes acquit be- 
cause he did not pay; the former because he or it was a volunteer. 
Plainly, the statute, considering its purpose to reach any device, in- 
tends to reach precisely those situations where the one making the pay- 
ment in fact may be shown to hâve acted for that purpose alone, though 
possibly in ail other respects a légal stranger. Therefore, granting that 
the ownership of the stock does not in and of itself show agency, as 
that term is ordinarily to be understood, it does show a hasic relation 
of interest sufficient to justify the inference that the shipper was really 
the beneficiary of a device. Granted that the two carriers hauled coal 
for the O'Gara Company; that the latter paid the full freight; that 
the Lake Shore Company, the holder of the stock control in the car- 
rier companies, paid to the shipper knowingly sums which are charged 
lo be rebates (that is, refunds on f reights), is it reasonable to interpret 
this State of facts as giving the Lake Shore Company the status of a 
stranger ? Or is it reasonable — even as against the necessity of giving 
an innocent rather than a culpable color — to say that thèse facts alone 
justify the inference that such company acted for the other companies ; 
that they ail acted understandingly and knowingly to accomplish in 
a devious way that which the two carriers were f orbidden to do di- 
rectly? I am satisfied that good sensé requires an affirmative answer 
to this latter question; that thèse facts of themselves justify the in- 
ference that the Lake Shore Company sustained the relations toward 
the other companies which are necessary to establish the commission 
of the offense. This does not mean that they establish the fact con- 
clusively or irrebuttably, but they justify its inference. Therefore the 
parenthetical clause of the indictment may be rejected except in so far 
as it charges the fact of majority stock ownership. The allégation that 
this was the reason of the agency may be ômitted, and we may still 
draw the inference f rom the combined state pf facts charged that 
there was, perhaps not a contractual agency or employment, but their 
équivalent in the criminal law, an abetting or complicity or confedera- 



184 234 FEDERAL REPORTER 

tion. That, after ail, ought to suffice, unless the statute be construed 
to indicate the most palpable of devices for its own évasion. That is 
to say, if a majority owner of the stock in a carrier can pay what he 
is charged to hâve known and intended to be a refund, and still not 
be subject to the inference that he and the carrier agreed that he should 
do so, if further allégation or proof must be adduced before he must 
answer, or must furnish countervailing proof, then the law has left free 
to be practiced the most palpable device to commit that which, in most 
svi'eepnig terms, it aimed to stop. 

It may be a thème for reflection whether, where a corporation, not 
itself the carrier, but the owner of a majority of stock in the carrying 
corporation, knowingly pays to a shipper of the latter what is in effect 
a rebate, it should not be conclusively held to hâve "acted for the oth- 
er" corporation, whether the latter was a formai party to it or not. 
It may be that, when once it appears that the latter did not hâve 
actual knowledge, or that under the circumstances it could not be said 
to hâve knowledge presumptively, there is a want of that relation nec- 
essary to a iùnding of comphcity. But the idea is certainly suggested 
that where the intercorporate stockholding situations exist, the law can 
easily be frustrated where the interrelationship itself furnishes the 
basis upon which the one corporation may "act for" the other ; where 
the relationship is one of interest which may dispense with the neces- 
sity of formai délégation of authority or request to do the prohibited 
act. It is not necessary, however, to détermine the case on so narrow 
a basis of fact. 

It may be true, as suggested by counsel during oral argument, that 
when one speaks of another as having management or control of a 
railway, it ordinarily means such managerial control as an individual, 
a gênerai or traffic manager, exercises. But it is not true that, when 
a statute denounces an act done by a carrier or any one "acting for 
it" the latter, of necessity, must hâve acted only upon the promptings 
of direct delegated authorization. As a pénal statute, it must be con- 
strued reasonably to give it the greatest efficacy to accomplish its ob- 
ject. Therefore, when this indictment charges that the O'Gara Coal 
Company, as a shipper, received thèse refunds; that the two com- 
panies were the actual carriers ; that the Lake Shore Company had 
a majority of their stock; that it paid the refunds which the O'Gara 
Company received ; that the three companies knowingly paid them as 
rebates — there is a sufficient statement of facts upon which to found 
a charge, to be answered by each of the carriers, of a violation of the 
statute. In other words, when it charges that the three companies 
knowingly paid or suffered to be paid what is charged to hâve been 
a rebate, each and ail are charged with complicity therein, even though 
the Company which did the actual paying may, in ail other respects, 
hâve been and be, a légal stranger to the other two. When once the 
latter is charged with having knowingly paid the rebate, that it was the 
médium through which the other companies paid it, justification for 
the payment on other grounds is, it seems to me, sufficiently negatived ; 
and the parenthetical efïort to give the ownership of a majority hold- 
ing of stock as a basis of légal agency to bring the situation within the 



UNITED STATES V, CLEVELAND, 0., C. <fe ST. L. ET. CO. 185 

terms of the statute need only to be considered as supportive of the 
necessary allégation that the three companies knowingly and under- 
standingly co-operated, each for the other, in doing the prohibited act. 
If the statute were to be limited only to relations, agencies, or em- 
ployment or of delegated authority between carriers and other s, in- 
dividual or corporate, which hâve a formai or express contractual basis, 
the allégations of the indictment hère might be infirm; but if the 
language, agent, or person acting for or employed by such corporation, 
be considered in the light of settled principles respecting joint wrong- 
doers, under which each is the représentative of ail others, no diffi- 
culty is apprehended in treating the facts averred as a sufficient basis 
for inferring, even though it be circumstantial, the ultimate fact of 
violation. 

Nor is this conclusion forbidden by the language of the Elkins Act 
which directs that in construing and enforcing its provisions, the act, 
omission, or failure of any officer, agent, or other person acting for 
or employed by any common carrier or shipper, acting within the scope 
of his employment, shall be deemed to be the act of such common car- 
rier as well as that of the person. This may hâve the effect of defin- 
ing the limitations of imputed responsibility. That is to say, the law 
does not contemplate that such responsibility arises always from the 
mère fact of any agency, no mattter what its scope may be. For ex- 
ample, if a locomotive engineer or conductor should pay to a shipper 
a refund in respect of a shipment, the law might not impute his act 
to the corporation, as it would if the payment were made by a traffic 
manager or freight solicitor. But, under the law, are not averment 
and proof permissible to show that he in fact acted for his carrier 
principal? Plainly so. And therefore the question, as upon the prés- 
ent indictment, is, What is a sufficient allégation of fact to justify the 
inference? To put it concretely, suppose an indictment charged that 
A. B. shipped coal over the C. D. Railway and paid the full freight; 
that the C. D. Railway Company paid him a rebate through E. F. (said 
E. F. then and there acting as the agent of the C. D. Railway 
Company, and this by reason of the fact he was one of its locomotive 
engineers). Granting that a locomotive engineer's act in paying a sum 
of money to a shipper is not to be imputed to his principal as the pay- 
ing of a rebate, because he is not acting within the scope of his employ- 
ment as an engineer, do the allégations that the carrier paid through 
him ; that the payment was in fact a rebate ; that the carrier and the 
engineer knowingly paid it as a rebate — still require that the alléga- 
tion of agency by reason of the relationship as engineer be accepted 
as controUing and in conclusive négation of the construction of a de- 
vice, and in négation of his "acting for" the carrier in respect of the 
particular transaction? This seems to me not open to serions doubt. 
It is clear that certain agents or employés of a carrier hâve duties 
within whose scope the payment of rebates, if lawful, would naturally 
fall. The section intends that the acts of such agents, when done, 
shall, as matter of law, be deemed to be the act of the carrier, and 
to dispense with further proof. But certainly it does not, and cannot, 
intend that instances where the relation was constituted for no other 



186 234 FEDERAL EBPORTEB 

purpôse and with no wider scope than the commission of the partîcu- 
lar act complained of should be beyond reach. In such cases, nat- 
urally, the indietment must contain either the appropriate gênerai aver- 
ment, or facts £rom which the inference may be drawn. 

Therefore when, as in the présent case, Âe indietment charges the 
payment of a refund which is a rebate on f reights, and it appears that 
the payment was made to the shipper by a corporation which holds a 
majority of the stock of the two carriers, there is herein — when coupled 
with the further allégation that such payment was knowingly made by 
thèse carriers as a rebate — a sufficient allégation of rebating by a 
device; and such allégation involves and necessarily tenders, among 
others, the question of fact whether the corporation making the pay- 
ment was acting for the two carriers. In other words, the relationship 
and mode of opération described in the indietment is a sufhcient al- 
légation of a demce which, if proven, and until counter proof be forth- 
coming, is sufficient basis for the necessary inference that the paying 
corporation acted for the others, and the averment of agency by rea- 
son of stock control cannot négative or limit such inference. 

Counsel for défendant has stated the theory of the indietment thus : 

"That If one rallroad company own a majority of the stock of another rail- 
road Company, the former can tlirmt responsiMÎity upon the latter under the 
provisions of the Elklns Act by paying a sum of money as a rebate to a 
shipper of freight over the rallroad of the latter company." 

It is but répétition of what has been said to suggest that, if the in- 
dietment alleged: (1) The carriage of freight by two carriers for the 
O'Gara Company ; (2) the payment of f ull freight rates ; (3) the own- 
ership of a majority of their stock by the Lake Shore Company: (4) 
the payment of sums of money by it to the O'Gara Company — it might 
well be urged to be infirm because of its failure to allège: (1) The 
relationship which must exist; and (2) the fact that the payment 
charged to hâve been made effected a rebate or déviation from the 
tariffs. But, when there are added the two circumstances that the pay- 
ment was made knowingly — to the knowledge of the three companies — 
and that it did to their knowledge effect a rebate, the larger theory 
embodying the élément of complicity, of acting fer each other, of re- 
funding freights, is disclosed. Without thèse, the required conclusion, 
under the statute, might be reached by conjecture only. With them, 
every ingrédient of fact necessary to constitute the offense is expressly 
averred, excepting that respecting the relationship between the Lake 
Shore and the other two companies. In my judgment the fact of 
such relationship may justifiably be inferred to be that of "acting for" 
the carrying corporations. It is then no longer reasonable to adopt — 
to the exclusion of such view — ^the notion that such corporation was a 
stranger to the other two, and, being such, acted as a volunteer. 

The other grounds assigned in support of the demurrer do not, in 
my judgment, require notice. The criticisms respecting insufficient 
détail of rates, fares, shipments, payment of rebates, and the like may 
be entitled to considération upon a demand for a bill of particulars, 
but do not vitiate the indietment. 

An order may be entered overruling the demurrer. 



FIELD V. HAFNIA S. S. CO. 187 

FIBLD et al. v. HAFNIA S. S. CO. 

HAFNIA S. S. CO. v. FIELD et al. 

(District Court, E. D. Pennsylvania. May 24, 1916.) 

No. 27. 

1. Shipping <S='49(3) — Ciiartees — Interel-ption of Service — Liabilitt or 

OWNER. 

The niaster of a steamsliip under cliarter held not chargeable with nég- 
ligence because of a flre wliich started in an extra coal bunker, on évi- 
dence sliowing tliat tlie coal was stored and cared for in the usual and 
customary manner, and the owner held not liable for the resulting dam- 
age to the charterer under an exception of flre in the charter party. 

[Ed. Note.— For other cases, see Shlpping, Cent. Dig. §§ 194-196 ; Dec. 
Dig. (©=>49(3).] 

2. Shipping i®=>40 — Charter — Termination by Fire — Right of Charterer 

TO Payjiekt fob Coal. 

By a time charter of a steamship the charterers were to leave 500 tons 
of coal in the bunkers on redelivery, for which they were to be pald a 
stlpulated priée. The vessel was damaged and rendered inefflcient by 
fire, and withdrawn from the charter by the owner, havlng then in her 
bunkers coal in excess of 500 tons. Held, that the charterers were en- 
titled to pay for 500 tons at the charter price, and for the remainder at 
the market price at the place where the charter was terminated. 

[Ed. Note. — For other cases, see Shipping, Dec. Dig. iS=>40.] 

3. Shipping <®=»49(3) — Time Charter — Hiue — Disabihtï of Vessel. 

Where a flre disabled a steamship from further performing a time char- 
ter, and under its provisions terminated the contract, the owner is not en- 
titled to recover hire after such time. 

[Ed. Note. — For other cases, see Shipping, Cent. Dig. §§ 194-196; Dec. 
Dig. ©=49(3).] 

In Admiralty. Suit by John W. Field and others, trading as Wil- 
liam Haskins & Son, against the Hafnia Steamship Company, with 
cross-libel. Decree for libelants. 

Howard M. Long, of Philadeljjhia, Pa., for Hbelants. 
H. Alan Dawson, of Philadeljjhia, Pa., and Burlingham, Montgom- 
ery & Beecher, of New York City, for cross-Hbelant. 

DICKINSON, District Judge. The above are cross-actions. The 
respective claims arise ont of a charter party. The proceedings are in 
personam. The causes of action set up are, in the inverse order of the 
institution of the proceedings, in substance as follows : 

The steamship claims for the agreed hire stipulated in the charter 
party, less an admitted déduction for hire from October 8 to October 
15, 1911, amounting to $1,623.23. The charterers deducted hire to Oc- 
tober 24th, increasing the amount deducted to $3,652.27. The différ- 
ence, or $2,029.04, measures the amount of the claim. The libel in 
the one proceeding is by stipulation to be taken as the answer to this 
claim. The claim in the first case is by the charterers. It is for loss 
of the use of the ship through the act of the owners in withdrawing its 
service, and for time lost at two ports at which the ship touched, for 

®::»For other cases see same toplc & KEY-NUMBER In ail Key-Numbered Digests & Indexes 



188 234 FEDERAL REPORTER 

overpayment of the charter hire, and for coal of the charterers on 
board the steamship when withdrawn from their services. The aggre- 
gate of thèse claims approximates $50,000. 

The défense to thèse counterclaims can be most succinctly stated in 
connection with the facts. The amount due for hire is undisputed, ex- 
cept that a larger déduction is claimed than the owners allovv. The 
charter party contract was entered into June 24, 1911. The hire was 
£1,250, British sterling, per calendar month, and ratably for a part of 
the month. The hiring was for six calendar months from time of de- 
livery ; the place of delivery "a port in the U. S. Gulf ," other than the 
ports excluded. Redelivery to the owners was to be made at "a port 
in the River Plate at charterers' option." Charterers were to pay for 
ail coal in the steamer's bunkers at the current market price prevailing 
at the port of delivery, and were to leave 500 tons in the bunkers when 
the ship was redelivered, for which they were to be paid a stipulated 
price per ton. The charter party was of the usual printed form type, 
embodying the conditions and covenants ordinarily inserted. The spé- 
cial facts and the applicable provisions of the charter party are thèse : 

The vessel was delivered to the charterers, and her charter hire be- 
gan to run, August 4, 1911, with the vessel at Gulf port. Miss. She was 
there loaded, and proceeded thence on a voyage to Buenos Ayres, Ar- 
gentine. On the way some crew trouble arose, and the vessel put in at 
St. Thomas, Danish West Indies. The trouble with the crew was there 
submitted to the authorities. As a conséquence, some of the crew were 
left at St. Thomas. The vessel left that port September 13th, and pro- 
ceeded on her voyage to Buenos Ayres, arriving in the outer harbor 
October 6, 1911. The captain went ashore to make arrangements for 
discharging the cargo. During his absence, the vessel took fire. The 
time of the fire is fixed as between 7 and 8 o'clock in the morning of 
October 8th. It started in an extra bunker just aft of the part of the 
cargo stowed through cargo hatch No. 2. It became necessary to flood 
the ship in order to control the fire. This, in turn, of course, necessi- 
tated the ship being pumped dry. The resuit was the ship did not reach 
the inner harbor until October ISth. Arrangement (interrupted by the 
fire) had been made to begin discharging October 9th. The resuit was 
that a discharging wharf was not secured until October 27th, and the 
work of discharging was not begun until October 30th. It was not 
completed until December 4th. Surveys were had and temporary re- 
pairs made to enable the vessel to get to a port at which she could 
be finally put in condition. She left Buenos Ayres December 16, 1911, 
stopping at Montevideo and Los Palmos for a renewal of her coal sup- 
ply, and reached AVallsend January 20, 1912. Repairs were made 
there, and the vessel made ready to be again put in commission, March 
6, 1912. 

We observe in passing that the time limit of her hiring expired Feb- 
ruary 4, 1912. During the time the vessel was at Buenos Ayres, the 
charterers and owners conferred through telegrams, correspondence, 
and agents upon the subject of the disposition of the vessel. The view 
pressed by the owners then, as now, is that the charter was practically 
at an end. The charterers insist now, as then, that the vessel should 



FIELD V. HAFNIA S. 8. CO. 189 

have been refitted for her charter purposes. As there were no facili-- 
ties for making the needed repairs in Buenos Ayres, the vessel should 
have been taken to the most convenient port in the United States and 
put in condition to have taken on fresh cargoes. The claim of the 
charterers is that they had profitable use for the ship, of which they 
were deprived by the sending of her to the British Isles for repairs. 
One of their contentions is that the fire was due to the négligence of the 
ship ; another, that she might have been repaired in the United States 
and some of her charter time saved to the charterers. An alternative 
claim is that, in any event, the allowance for déduction f rom hire should 
have been extended to include October 27th, and, under paragraph 16 
of the charter party, a further allowance for déduction of about two 
days should be made for the détention of the vessel in going to St. 
Thomas. Still further déductions are asked because of the condition 
of the vessel after the fire, because of whicH she was delayed in dis- 
charging at Buenos Ayres. Claim is likewise made for 689 tons of 
coal, of an averred value of $7,118.75, which was appropriated by the 
owners. The loss sustained by the charterers was swelled by the fact 
that the charterers were compelled to secure the services of another ves- 
sel at an enhanced price. The reply of the owners to thèse counter- 
claims of the charterers is indicated with sufficient clearness in this 
statement of facts out of which the claims arise, except with respect to 
the claim for coal which will be considered by itself . 

[1] LA convenient starting point in a discussion of the matters in 
controversy between the parties is in the considération of the averments 
of négligence. Thèse involve two assertions : One is that the coal 
was negligently stovi'ed. The other is that the condition of the coal was 
not properly watched. The first finding of négligence asked relates 
to the coal in what is called the extra coal bunkers. More coal was tak- 
en aboard than the regular bunkers would hold. In conséquence, a 
temporary bunker was improvised by partitioning off a portion of the 
cargo hold space for the extra coal. Thèse partitions were of wood, 
so that no obstacle to the spread of the fiâmes was provided. The 
second finding of négligence, if made, must rest upon the failure of the 
master to have the température of the coal taken from time to time. 
We are unable to find négligence. No discussion of the évidence is call- 
ed for beyond the statement of its négative efïect upon the mind. The 
principles of law involved are admittedly the familiar ones that the coal 
was required to be so stowed and cared for as that no greater risk of 
damage was created than is ordinarily and in reasonable expectation 
présent when what is done is done in accordance with the usages, cus- 
toms, and ordinary requirements of the conditions with which the man- 
agers of the vessel were confronted, and the évidence of what précau- 
tions, either in construction or management, might have been taken to 
minimize the danger, is f ully met by the fact that the construction and 
management employed was the usual and ordinary construction and 
management known and adopted as adéquate to meet the conditions of 
danger instant and prospective. 

There was some évidence in the case which would have justified a 
finding that a safer construction might have been introduced to lessen 



190 234 FEDERAL EEPOETBB 

the danger of fire, and added oversight given to havé prevented its 
spread by anticipating its breaking out. The finding would not be jus- 
tified, however, that the précautions taken were not the usual and or- 
dinary ones, and such as the Usages, customs, and ordinary require- 
ments of the business in hand demanded. This is aside from the fur- 
ther thought that fire was excepted from the charter party, and this in- 
cluded fire caused by négligence. 

2. The second main point involved is whether the owner breached 
the covenants of his charter party in taking the vessel to Wallsend on 
Tyne, The hiring was for full six calendar months. For this length 
of time the vessel was at the disposai of the charterers. Had she be- 
come unfitted for use and repaired within the term, the charterers 
could use her when made efficient up to the end of the term, or under 
paragraph 5 of the charter party up to the end of her then uncompleted 
voyage. 

It is admitted that, under paragraph 17, fire suspended the obliga- 
tions of the contract, or annulled them, according to the f act of wheth- 
er the efficiency of the vessel was restored within the time of the run- 
ning of the contract. The fact of fire rendering the ship inefficient is 
asserted by both parties. The fact that repairs could not be made in 
Buenos Ayres is not disputed. The vessel was taken to Wallsend on 
Tyne, and not restored to efficiency until after the charter party had 
expired. There is no complàint of delay in what was donc. The 
complaint is limited to the assertion that she might bave been taken to a 
port of the United States and there sooner repaired. Unless, how- 
ever, she could hâve been repaired in the United States before the ex- 
piration of the six months time limit, taking her to England did not af- 
fect the rights of the charterer. The whole question presented by this 
feature of the case turns on the fact, and the fact is found with the 
owner and against the charterer. 

[2] This brings us to the claim for coal. The only défense urged is 
that it is not one of which admiralty will take cognizance, not being 
within the charter party, nor of the claims of the libel, or if, to be con- 
sidered, the charterer is limited to the agreed price fixed by the charter 
party. To sustain the former position would require the drawing of 
overfine lines of distinction. The complaint is that the owners, in défi- 
ance of the charter party, resumed possession of the vessel, and along 
with her confiscated the coal of the charterers. The provisions of 
the charter party as to the effect of fire and as to the bunker coal re- 
lieve the owners from liability only for the time the efl^ects of the fire 
lasted, and limited the coal price only up to the stipulated quantity. 
The charterers are entitled to recover for their coal 500 tons at $4.86 
per ton, the agreed price, and 189 tons at $10.33, its undenied value, or 
$1,952.37, with interest from December 16, 1911. 

[3] This brings us to the claim of the owners for hire. Recurring 
again to the charter party, the fact of fire suspended or annulled ail the 
obligations of the contract. This relief is accorded to each of the par- 
ties. The fire took place October 8th. Its relief effect was in opéra- 
tion on October 24th as fuUy as on October 15th. The cross-libel is 
theref ore dismissed. This is meant to dispose of the charterers' claim 



UNION SULPHUK CO. V. FEEEPOET TEXAS CO. 191 

for further allowances for the St. Thomas incident and the fiire incident. 
We hâve spoken of the former as if the stop at St. Thomas was caus- 
cd by the difficulty with the crew, or to hâve them reduced to subordi- 
nation by the authorities there. The inadvertence is scarcely worth 
correction, but it is corrected by the finding that the trouble arose dur- 
ing the ship's stay in the port, and did not interfère with her naviga- 
tion or affect the charterers. The allowance of déductions on fire ac- 
count was made by the charterers, and the hire paid by them a volun- 
tary payment made under circumstances which do not entitle them to 
recover bacli what they thus paid. 

Formai decrees embodying thèse findings may be submitted. 



UNION SULPHUR 00. v. FRERPOIiT TEXAS CO. et al. 

(District Court, D. Delaware. November 15, 1915.) 

No. 336. 

Equity «©=5371 — Pbactice — Sepaeate Heamng — Riciit to. 

Complainant's blU chargée! that défendant and a second corporation con- 
trolled bj' défendant, whlch was named a défendant, but not served, con- 
spired together to infrlnge complainant's patent. The Mil of particulars 
specified infringements as the resuit of a couspiracy, and declared that 
complainant did not waive the right to rely on Infringements by the cor- 
porations or either of them. Equlty rule 29 (198 Fed. xxvi, 115 C. 0. A. 
xxvi) déclares dennirrers to pleas are abolished, but every défense hereto- 
fore présentable by plea in bar or abatement shall be made in the answer, 
and in the discrétion of the court dlsposed of before trial of the principal 
case. Eeld, that as, In a suit to enjoin Infringement of letters patent and 
recover profits and damages, the interlocutory decree enjoining infringe- 
ment marks the divisional line between the introduction of évidence of 
Infringement for the purpose of obtaining such decree and of évidence 
showing profits, no separate trial on the défense that the défendant serv- 
ed did not conspire with the second corporation to Infringe the patent and 
did not control it can be had, for that would be calculated to resuit in 
confusion. 

[Ed. Note. — For other cases, see Equlty, Cent. Dig. § 782 ; Dec. Dig. ©=» 
371.] 

In Equity. Bill by the Union Sulphur Company against the Free- 
port Texas Company and the Freeport Sulphur Company, which latter 
défendant was not served. On motion for separate hearing of the 
défense of nonliability of the Freeport Texas Company for the acts 
of the Freeport Sulphur Company. Motion denied. 

Alan N. Mann and Fish, Richardson, Herrick & Neave, ail of New 
York City, for complainant. 

Thomas F. Bayard, of Wilmington, Del., and L,. F. H. Betts and 
James R. Sheffield, both of New York City, for défendants. 

BRADFORD, District Judge. The bill was filed by the Union 
Sulphur Company against the Freeport Texas Company, a cor- 
poration of Delaware, and the Freeport Sulphur Company, a cor- 
poration of Texas ; but the last named company is not before the 

or other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgeats & Indexe» 



192 234 FEDERAL EBPOGTER 

court, not having been served vvith process and not having appeared. 
The seventh paragraph of the bill states : 

"That the said Freeiwrt Texas Com'pany at tlie time of the commission of 
the acts hereinafter complained of vvas controlling and is now controlling ail 
of the acts and ail of the property of the Freei)ort Sulphur Company and was 
and is now operating and conductlng or directing and controlling the opération 
and conduct of its plant and business." 

The ninth paragraph states that the Freeport Texas Company and 
the Freeport Sulphur Company conspirecl and contrived together 
to commit the acts of infringement complained of. The tenth para- 
graph states that the Freeport Texas Company and the Freeport Sul- 
phur Company "conspiring together, and acting in concert" hâve been 
guilty of infringement. The twelfth paragraph states : 

"Tliat the Freeport Texas Company has itself committed sucli acts of in- 
fringement in that it has authorized, directed and coutrolled, and is now au- 
thorizing, directing and controlling the acts of the Freeport Sulphur Company, 
herein aîleged to be infringements of said letters patent." 

The eighth paragraph of the answer allèges: 

"That said défendant, Freeport Texas Company, never owned, controlled, 
operated, directed or conducted, and does not now own, control, operate, direct 
or conduct the property, plant or business of the Freeport Sulphur Company." 

The ninth paragraph dénies : 

"That at any time the défendant Freeport Texas Company was controlling or 
is now controlling the acts, or ail of the acts, or the property, or ail of the 
property, of the said Freeport Sulphur Company, or was at any time or is now 
operating, condxicting, directing or controlling the opération or conduct of 
the plant or business of said Freeport Sulphur Company, * * « or that 
the défendant Freejjort Texas Company has itself committed any acts of in- 
fringement or has authorized, directed or controlled, or is now autliorizing, 
directing or controlling * * * any acts of said Freeport Sulphur Company 
alleged in said bill to be iufringements of any of the several letters patent in 
suit." 

The tenth paragraph allèges : 

"That it [the défendant] is not in any way liable or responsible for any of 
the alleged acts of said l'reepoi-t Sulphur Company alleged in said bill to be 
infringements of said several letters patent." 

The twelfth paragraph dénies that the défendant and the Free- 
port Sulphur Company conspired or contrived together to infringe. 
The thirteenth paragraph dénies that the défendant and the Free- 
port Sulphur Company hâve conspired together or acted in concert 
to infringe. 

'Equity rule 29 (198 Fed. xxvi, 115 C. C. A. xxvi), prescribed by the 
Suprême Court, provides : 

"Demuvrers and pleas are abolished. * * * Every défense heretofore 
présentable by plea lu bar or abatement shall be made in the answer and may 
be separately heard and disposed of hefore the trial of the principal case io 
the discrétion of the court." 

The parties on both sides hâve applied through their counsel "for 
a separate hearing, under equiFy rule 29, of the spécial défense and 
issue raised in paragraphs, 8, 9, 10, 12 and 13 of the answer of the 
défendant Freeport Texas Company, that it is not liable for the in- 



UNION SULPHOE CO. V. FREEPOKT TEXAS CO. 193 

fringement charged in the complaint, either through control of or as 
a so-called conspirator with the Freeport Sulphur Company." And 
it is argued that the paragraphs in the answer above referred to raise 
"a single spécial issue as a défense to the whole bill, viz., the non- 
liability of the défendant for the alleged acts and opérations charged 
to be infringements of the patents in suit, either through control 
of or acting in conspiracy with the Freeport Sulphur Company." 
Aside from the bill of particulars, the bill nowhere spécifies particular 
acts of infringement or the particular times when committed, but 
charges that the Freeport Texas Company and the Freeport Sulphur 
Company conspiring together and acting in conjunction hâve with- 
in six years next before the filing of the bill infringed the letters 
patent therein referred to. In the bill of particulars it is alleged that 
the character of the infringing apparatus and devices "is exempli- 
fied by mines and appurtenances such as défendants' wells 143 and 
■146 and their appurtenances, situated on Bryan Heights at Free- 
port, Texas," and that of the alleged infringing processes by those 
"used in the opération of such mines as défendants' wells 143 and 
146, aforesaid." The bill of particulars further allèges that the dates 
of the infringing acts "include ail times at which wells such as those 
described were constructed and operated" as alleged in the bill; 
"for example, during the year 1914." The alleged acts of infringe- 
ment are not particularly enumerated or assigned to particular dates. 
The concluding paragraph of the bill of particulars is as follows : 

"Thèse particulars are given wltho'Jt wniving the plalntlff's right to rely, in 
this or other sults, upon any infringinj? acts of thèse défendants or either of 
them, or iipou any other patents or claims which it may subsequently learn 
hâve been infringed by thèse défendants or either of them." 

The counsel in their brief in support of the plaintiff's interroga- 
tories say: 

"The défendant tried to make it appear that the plaintifi! claimed reeovery 
only for infringement during the year 1914. However, in the bill of particulars, 
it is deflnitely stated that the particulars are given without waiving the right 
of the iilaintiff to reeovery for any other infringem'ent which it might dis- 
cover." 

The granting of the présent motion would not, I think, be an ex- 
ercise of sound discrétion. No case tending to show its propriety has 
been brought to my attention. Référence was made to Alexander 
V. Fidelity Trust Co. (D. C.) 214 Fed. 495, and 215 Fed. 791, and to St. 
IvOuis Union Trust Co. v. Studebaker Corporation (unreported),^ 
recently decided by the district court of the United States for New 
Jersey. In the former case the issue raised was lâches, and in 
the latter res adjudicata. Either défense could, I think, prior to 
the adoption of equity rule 29, hâve been presented by a plea in 
bar, and consequently the issue could properly "be separately heard 
and disposed of before the trial of the principal case." 

But wholly aside from the question whether an issue of infringe- 
ment under conspiracy together with an issue of infringement pur- 

1 Since reported in 226 Fed. 797, under the title of Sanitary Street Flushlng 
Mach. Co. v. Studebaker Corporation. 

234 F.— 13 



194 234 FEDBKAL HHPORTBB 

suant to control, authority or direction, formerly could properly form 
the subject-matter of a plea, or can now, under rule 29, be heard 
and disposed of "before the trial of the principal case," it is obvious 
that considérations différent from those usually applicable to other 
cases apply to suits in equity to recover profits and damages for 
infringement of letters patent. In such a suit the granting of the 
interlocutory decree, if there be one, marks the divisional Une be- 
tween the introduction of évidence touching infringement for the 
purpose of obtaining or preventing the granting of such decree, and 
the introduction of évidence as to infringement before the master 
to establish the amount of profits or damages. It does not follow 
that because one act of infringement was the resuit of conspiracy or 
of control, authority or direction, on the part of the défendant, that 
ail others were. If upon a separate hearing before the granting of 
an interlocutory decree it should be determined that a single act of 
infringement was committed — ^which so far as infringement is con- 
cerned is ail that is required to support such a decree — under con- 
spiracy or pursuant to control, authority or direction, manifestly 
that deternjination should not control the action of the master in 
dealing with évidence of acts of infringement committed under cir- 
cumstances différent from those found to exist by the court on the 
separate and preliminary hearing and justifying an interlocutory de- 
cree. To require ail évidence touching infringement to be introduc- 
ed before the time for the entry of the interlocutory decree would 
be to uproot the settled practice in patent suits in equity. On the 
other hand, if the master is not bound with respect to infringement 
by the action of the court in the first instance, save so far as the court 
bas specifically found acts of infringement, the question of conspira- 
cy, or control, authority and direction touching other acts of in- 
fringement is left open for détermination on the circumstances sur- 
rounding and explanatory of such other acts, and "the examination 
must be at large." It is a matter of regret that the hearing and dé- 
cision of this case should be attended with what at first sight might 
seem unnecessary delay and expense; but for the reasons above giv- 
en the court is compelled to hold that in the exercise of a sound dis- 
crétion the motion must be denied. 



UNION SULPHUR OO. V. FREEPOKT TEXAS CO. et aL 

(District Court, D. Delaware. May 12, 1916.) 

No. 336. 

t. COUBTS <©=5>351 — INTEEBOGATOBIES — DISCRETION OF COUBT. 

Equity rule 58 (198 Fed. xxxlv, 115 C. O. A. xxxlv), authorlzlng the 
parties to flle iuterrogatories for discovery from the opposite party of 
facts and documents materlal to the support or défense of the action, 
and declaring that, if either party be a public or private corporation, 
the opposite party may apply to the court for an order allowing him to 
flle Interrogatories to be answered by any offlcer of the corporation, and 

®:3For other cases see same toplc & KEY-NUMBBK In ail Key-Numbered Dlgests & Indexe» 



UNION SULPHUR CO. V. FBEEPOET TEXAS CO. 195 

that an order may be made for examinatlon of such officer as may 
appear to be proper and upon such interrogatories as tbe court shall 
think fit, is not intended to deprlve the parties, or either of them, of tbe 
right to Introduce at the trial évidence of facts and documents materlal to 
the support or défense of the cause, but to enable the parties to obtaln 
évidence prior to trial, and therefore, in allowing the propoundlng of in- 
terrogatories to corporate offlcers, the court should exercise Its discrétion, 
so as to avold neeessarily vexations résulta. 

[Ed. Note.— For other cases, see Courts, Cent. DIg. § 924; Dec. Dlg. 
<g=.S51.] 

2. CouEïs <S=351 — Intebbogatobibs — Right to Pbopound. 

In au action agaiust tvvo corporations for conspiring to Infringe and 
infringing letters patent, the président of the corporation, which was 
served, in answer to interrogatories conceming the infringement, stated 
that his Company was only a holding company, that he was the flnancial 
and executive officer, and lacked the knowledge to state what infringe- 
ments, if any, had been had, and that no other ofBcer of such corporation 
was conversant with the infringement. Complainant sought to compel 
further answers, demanding that the président of such corporation as- 
certain from the agents of the second company the nature of the inf ringe- 
ments. It appeared that the officers of the two corporations were prac- 
tically identical. Held that, under equity rule 58 (198 Fed. xxxiv, 115 C. 
G. A. xxxiv), authorizing the propoundlng of interrogatories to cor- 
porate offlcers in the discrétion of the court, such additional Interroga- 
tories should not be allowed, for it would either resuit in binding the 
corporation by hearsa.y statements of its inferior agents, or the answers, if 
not treated as admissions, would be unavailing, being mère hearsay. 

[Ed. Note. — For other cases, see Courts, Cent. Dig. § 024; Dec. Dig. 
€=351.] 

In Equity. Bill by the Union Sulphur Company against the Free- 
port Texas Company and the Freeport Sulphur Company, which was 
not served. On motion for further answers to complainant's inter- 
rogatories. Denied. 

Alan N. Mann and Fish, Richardson, Herrick & Neave, ail of New 
York City, for complainant. 

Thomas F. Bayard, of Wilmington, Del, and L. F. H. Betts and 
James R. Sheffield, both of New York City, for défendants. 

BRADFORD, District Judge. The Union Sulphur Company, a cor- 
poration of New Jersey, brought its bill in this case against the Free- 
port Texas Company, a corporation of Delaware, and the Freeport Sul- 
phur Company, a corporation of Texas, hereinafter referred to as the 
Texas corporation. No service of process having been made upon 
the Texas corporation and it not voluntarily appearing, the only de- 
fendant in court is the Delaware corporation. The plaintitï has filed 
under rule 58 (198 Fed. xxxiv, US C. C. A. xxxiv), of the equity rules 
promulgated by the Suprême Court interrogatories to be answered by 
Eric P. Swenson, who is the defendant's président, or by such other 
officer of the défendant as has knowledge of the facts inquired about; 
one class of interrogatories being directed to the question of such 
control by the défendant over the Texas corporation, or such combi- 
nation or co-operation between the two, as to render the défendant 
liable for the acts of the Texas corporation, and the other class of inter- 

fissFor other cases see same toplo £ KEY-NUMBBR in ail Key-Numbered Digests & Indexe) 



196 234 FEDERAL EEPOETEK 

rogatories to the question of infringement of certain patents Iield and 
owned by the plaintifif. The interrogatories relating to the question of 
control, combination or co-operation were specifically answered by 
Swenson, and no exception has been taken to his answers in that re- 
gard. Exception, however, has been taken by the plaintiff to his an- 
swers to the interrogatories touching the question of infringement. 
Swenson in reply to such interrogatories says : 

"Referring to the interrogatories directed to tlie issue of infringement, I say 
as folio ws: 

"I am a banker, and my connection witli tliese matters has been that of a 
financier and executive offlcer. I hâve had no technical training. I hâve no 
know'ledge or information, either persoually, or as président of the défendant 
corporation, which will enable me to answer the said interrogatories, and I 
am not compétent or qualifled to answer the same. Furtliermore, I hâve 
niade an investigation to ascertain whether the facts iuquired about in thèse 
interrogatories are known to any offlcer, or to any employé, of the défendant 
Freeport Texas Company, which Is a holding company and not an operating 
Company, and to tlie best of my knowledge, information and belief, there is 
no offlcer or employé or any one under the control of said company who is 
compétent or qualified to answer any of thèse interrogatories, and there is no 
writing, record or drawing in the file of the said défendant company giving 
information on which the said interrogatories might be answered. The de- 
fendant company, its officers and employés, are, therefore, unable to answer 
any of the said interrogatories." 

The plaintiff, not being content with the above statement, has moved 
that Swenson be ordered to file — 

"further full and fair answers to each and ail of the interrogatories directed 
to the issue of infringement, and further, that if he hâve not sufficient Per- 
sonal knowledge or information to give such full and fair answers, that lie be 
directed, before answering, to niake such further inquiry concerning tlie 
facts inquired about as to the court shall appear just and proper under the 
circumstances." 

As it appears from Swenson's statement that he has not sufficient 
Personal knowledge or information to give such full and fair answers, 
and, further, that such knowledge or information is not possessed by 
any other officer or employé of the défendant, the question is presented 
whether Swenson should be directed, with a view to making further 
answer, to make inquiry of persons other than officers or employés of 
the défendant, touching the facts inquired about. It is urged by coun- 
sel for the plaintiiï that for the purpose of the présent apphcation it 
must be assumed that the Texas corporation is under the control of 
the défendant, and should be treated as its agent, and that Swenson, 
therefore, is under an obligation to ascertain the facts bearing upon 
the alleged infringement from the officers or employés of the Texas 
corporation. On the above assumption of control and agency, how- 
ever, of whom shall Swenson make inquiry? Certainly this court has 
no means of indicating the person or persons capable of imparting to 
him the desired information. The officers of the défendant and of the 
Texas corporation, namely, the président, vice président, treasurer and 
secretary, are and fbr a number of years hâve been the same; and 
knowledge or lack of knovidedge on the part of such officers of the 
défendant would equally be knowledge or lack of knowledge on the 
part of such officers of the Texas corporation, The apparatus em- 



UNION SULPHOK CO. V. FEEEPORT TEXAS CO. 197 

ployed in conducting the alleged infringing process is used by the 
Texas corporation in carrying on its mining opérations in that state, 
and there is a violent, if not conclusive, presumption that knowledge of 
the facts inquired about in the interrogatories relative to infringement 
is possessed by those or some of those of the employés of that corpora- 
tion who handle or inspect such apparatus ; and it is strongly urged in 
efifect that Swenson is under an obligation or should be directed by 
the court to identify the employé or employés of the Texas corpora- 
tion having such knowledge and gain sufficient information to enable 
him to make satisfactory answers to the interrogatories touching in- 
fringement. 

[1, 2] For varions reasons this position does not commend itself to 
the approval of the court. The practical enf orcement of rule 58 in the 
case of corporations is often beset with perplexity and embarrass- 
ment ; and the granting of the application in hand would be calculated 
aptly to illustrate the confusion, uncertainty, vexation and injustice 
which may or must resuit from the construction of the rule contended 
for. The filing of interrogatories in the case of corporations is not a 
matter of course or of strict right. On the contrary, the rule expressly 
provides that : 

"Any opposite party may apply to the court or judge for an order allowing 
liim to flle interrogatories to be answered by any offlcer of the corporation, 
and an order may be made accordingly for the examinatlon of such officer as 
may apnear to be proper upon such interrogatories as the court or judge shall 
thiiili: fit." 

The purpose of the rule is not to deprive the parties or either of 
them of the right at the trial to adduce évidence of "facts and docu- 
ments material to the support or défense of the cause," but to enable 
the parties or either of them in proper cases to obtain évidence, prior 
to the trial, of such facts and documents, and thus render unneces- 
sary the production of such évidence at the trial. The rule is intended 
to facilitate the proper disposition of the cause, and not to needlessly 
harass and vex parties or those representing them, or either of them. 
Hence, as heretofore held by this court in this case, the application 
of the rule involves the exercise of sound discrétion by the court, 
which, while not withholding from the part}-- filing the interrogatories 
the benefit of the disclosure to which he is entitled, should observe 
proper care that the party interrogated shall not be unduly and unneces- 
sarily burdened, oppressed or harassed. And equally, the party or 
person interrogated should not be required in order to make answer 
to incur great and unreasonable expense and trouble, which cotild be 
obviated by the taking of évidence by déposition or by the production 
of proof at the trial. 

The course of judicial décision up to the présent time touching the 
scope and efifect of the rule has not been such as to throw much light 
upon the subject. The reported cases, both under rule 58 and under 
order XXXI of the English rules, leave much to be desired in the way 
of consistency and perspicuity. While rule 58 contemplâtes "discov- 
ery" of material facts and documents that term evidently is not em- 
ployed in its technical sensé. The effect of an answer to interrogatories 



198 234 FEDERAL EEPOItTKR 

filed under the rule is, under the language of the décisions, by no 
means clear. Is the answer to be treated as an admission by or on 
behalf of the corporation and as such conclusive upon it? Or should 
it be regarded as having only such probative force against the cor- 
poration as would be possessed by an ordinary déposition containing 
the same matter, its weight to be largely determined by its inhérent 
probability or improbability and the circumstances of personal knowl- 
edge or its lack on the part of the person answering? An acceptance 
of either hypothesis involves difficulty. On behalf of the plaintifï it 
is contended that "it is perfectly apparent that the theory upon which 
answers to interrogatories are admissible as évidence is that they 
constitute admissions." It is Swenson and not unsworn operatives of 
the Texas corporation handling the apparatus employed in the alleged 
infringing process who is required to make answer to the interroga- 
tories ; and I f ail to perceive any justification, reason or excuse for 
an order requiring him to seek information from such operatives, un- 
named and unsworn, who, whether honestly or dishonestly, may vary 
in the information they may impart to him touching the multifarious 
détails covered by the interrogatories, and upon the basis of this mère 
hearsay make answer operating as an admission binding upon the de- 
fendant. If, on the other hand, the answer under rule 58 should be 
treated, not as an admission, but as having only such force as would 
be accorded to the same matter appearing by déposition, it would, as 
wholly based upon hearsay, hâve no force whatsoever in this case. 
It is unnecessary to review the décisions in this opinion. I find no 
case, well considered or otherwise, lending support to the présent ap- 
pKcation. The plaintiff could hâve brought suit in Texas and probably 
hâve obviated ail difficulty. Not having sued there, it has ample op- 
portunity to take by déposition the necessary testimony in Texas and 
hâve it returned hère for use at the trial. In view of the situation 
of the parties and the circumstances of the case, the granting of the 
présent motion would, in my opinion, be a gross abuse of discrétion, 
and it consequently must be denied. 



In re TONAWANDA IRON & STEEL CO. 

(District Court, W. D. New YorlJ. February 29, 1010.) 

No. 998. 

1. SEA^rEN <3=329(2) — Injury — Liability of Vessbl. 

LiîiMUty of a vessel for injury to a seanmii dépends either upon tîie un- 
seawortliiness of the ship or her failure to supply and keep in order 
proper appliances. 

[Ed. Note.— For other cases, see Seanien, Cent. Dig. §§ 186, 188; Dec. 
Dig. ©=29(2) ; Master and Servant, Cent. Dig. § 211.] 

2. Seamen "3=329(2) — Liability of Vessel for Injury — Unseawoethiness. 

Vessel owners are not bound to provide the best, safest, and most con- 
veuicnt appliauces, and a, failure to do so does not rendcr the vessel un- 
seaworthy. 

[Ed. Note. — For other cases, see Seamen, Cent. Dig. §§ ISC, 188; Dec. 
Dig. <^:^2iH2) ; Master and Servant, Cent. Dig. § 211.] 

(3=:3For other cases see same topio & KBY-NUMBëR in ail Key-Numbered Digests & Indexes 



IN EE TONAWANDA IBON & STEEL CO, 199 

3. Seamen ig=>29(3) — Liability for Injury — Negliounçe of Fem-ow Serv- 

ants. 

Tliat the insufflclent lightlng of the part of the deck where a seaman 
was required to work caused or contributed to his injury does not ren- 
der the ship liable, where proper lanterns and lamps were supplied, and 
the failure to hâve them lighted and in place was due to négligence of 
some member of the crew, who was a fellow servant of the seaman in- 
jured. 

[Ed. Note.— For other cases, see Seamen, Cent. Dig. §§ 186, 188; Dec. 
Dlg. <®=>29(3) ; Master and Servant, Cent. Dig. § 492,] 

4. Seamen ©=34 — Suit for Injuries — Construction of-Statute. 

The provision of Seamen's Act March 4, 1915, c. 153, § 20, 38 Stat. 
1185, that, "in any suit" to recover for injury to a seaman, "seamen hav- 
ing command shall not be held to be follow servants with those under 
thelr authority," is not rétroactive, and does not apply to suits com- 
menccd before It went into effect. 

[Ed. Note. — For other cases, see Seamen, Dec. Dig. ©=34.] 

In Admiralty. Pétition of the Tonawanda Iron & Steel Company, 
as owner of the steamer Oceanica, for limitation of liability. On claim 
of John Moran for injury as seaman. Claim disallowed. 

Dempsey, Tuttle & Rice, of Niagara Falls, N. Y. (S. Wallace Demp- 
sey, of Lockport, N.Y., of counsel), for claimant. 

Brown, Ely & Richards, of Buffalo, N. Y., for petitioner. 

HAZEL, District Judge. On the night of November 2, 1913, in St. 
Mary's river, while the steamer Oceanica, with tow, was bound from 
Duluth to North Tonawanda, the claimant, John Moran, a deckhand, 
stood by the tow chock in the stern of the vessel preparatory to hand- 
ling the tow line for tying the steamer up to the dock for the niglit. 
When the steamer was checked down the barge came ahead on the tov/ 
line, causing it to slack and slide to the right of the tow chock. The 
tow line running from the barge through the tow chock was fastened 
to timber heads on the steamer after passing over a sliding block posi- 
tioned in the tow chock, which was about 7 feet wide and 18 inches 
high. Moran testified that he was ordered to take in the slack of the 
line and trice it along the rail ; that while complying with such order he 
looked down on the deck to avoid stepping on ropes thrown there, 
when a sudden pull on the tow line caused it to come against one of 
the uprights of the chock, catching and crushing his hand, making nec- 
essary the amputation of three fingers. 

In this proceeding for limitation of liability it is claimed that the 
steamer Oceanica should be held responsible for the accident, on the 
ground that as the place where the accident occurred, and where it was 
necessary for claimant to stand, was insufiiciently lighted and littered 
with ropes, there was a complète failure on the part of the vessel to 
furnish a reasonably safe place in which to work. 

[1] It is unnecessary to examine the many authorities cited in the 
briefs, for I conceive that the law of the case is clearly and definitely 
set forth by the Suprême Court of the United States in The Osceola, 
189 U. S. 158, 23 Sup. Ct. 483, 47 L. Ed. 760, where it is expressly held 
that liability of a vessel for injuries received by a seaman dépends ei- 

ig;=5For other cases see same topic & KEY-NUMBER in aU Key-Numbered Digests & Indexe» 



200 234 FBDEKAL REPORTER 

tlier upon the unseaworthiness of the ship or upon her failure to sup- 
ply and "keep in order the proper appliances appartenant" thereto; 
that the crew, except perhaps the master, are as between themselves 
fellow servants; that seamen receiving injuries because of the négli- 
gence of a fellow servant can recover only for maintenance and cure ; 
and that indemnity for the négligence of the master and crew is not 
allowable. No claim is made in this case for maintenance and cure. 

[2] 1. There is no évidence to support the view that the vessel was 
unseaworthy, though it was contended that the tow chock at the stern 
was f aultily constructed, in that the tow line was permitted to hâve un- 
due play, and that the injuries were partially attributable thereto ; but 
I think the construction of the tow chock and the manner of rigging 
the tow line were proper and seaworthy. Tow chocks of the kind on 
the Oceanica were common in ships of her class and construction, and 
indeed towing chocks allowing good play of line were regarded as con- 
venient and proper appliances ; but, even if such were not the case, no 
négligence for failure to provide more modem appliances is attribut- 
able to the vessel, as it has often been decided that owners are not ob- 
liged to provide the best, safest, and most convenient appliances. The 
Santa Clara_(D. C.) 206 Fed. 179. 

[3] 2. It is claimed that there was but a single oil lantern aft, which 
hung from the center of the ceiling and gave insufficient light; that 
on each corner of the cabin there was a place for a lamp, but that there 
were no lamps at such places at the time of the accident, and claimant 
could not see the tow chock or the sliding movements of the tow line. 
Even assuming that ail the lamps were not in place, and that the deck 
was dimly lighted (although the second mate testified that both lan- 
terns at the corners of the cabin were lighted and in place, in addition 
to the lantern suspended from the ceiling, and that the lighting was 
sufficient), liability on the part of the vessel is not proven, in view of 
the fact that the lamp room aboard the ship contained lanterns and 
lamps for adéquate lighting which were supplied by the owner for use. 
The owner discharged its full duty to the crew when it supplied prop- 
er and suitable equipment for doing the work with reasonable safety, 
and as lamps had been supplied they shonld bave been lighted and used 
when required. Madigan v. Oceanic Steam Nav. Co., Ltd., 178 N. Y. 
242, 70 N. E. 785, 102 Am. St. Rep. 495 ; The Osceola, supra. As- 
suming, therefore, that the proximate cause of the injuries sustained 
by claimant was the insufficient lighting of the stern deck of the vessel, 
it must then be held on this record that the mishap was due to the nég- 
ligence of fellow servants or a fellow servant, either the master or 
mate, for which the ship was not responsible. The City of Alexandria 
(D. C.) 17 Fed. 390; Cornell Steamboat Co. v. Fallon, 179 Fed. 293, 
102 C. C. A. 345; Benson v. Goodwin, 147 Mass. 238, 17 N. E. 517. 

3. So, also, as to littering the deck with rope. The owners of the 
vessel having furnished the rope necessary for purposes of navigation, 
it was, of course, the duty of the officers to keep ii in a proper place, 
and not to allow it to litter the deck and render it unsaf e for work, to 
the injury of seamen there employed ; but their failure to perform their 
duty in this respect does not constitute négligence which is attributable 
to the ship or her owner. 



IN RE TONAWANDA IRON & STEEL CO. 201 

[4] The maritime law at the time of the accident was in its applica- 
tion essentially diiïerent from the common and statutory law dealing 
with injuries to servants arising from the négligence of the master or 
of fellovv servants, and the adjudications already cited herein point out 
such différences with clearness and understanding. But it is contended 
that section 20 of the Seamen's Act, so called, passed by Congress on 
March 4, 1915 (38 Stat. 1185, c. 153), radically changed the existing 
maritime law as to the liability of the ship to seamen, in that it abolish- 
ed the fellow servant doctrine by expressly providing: 

"That in any suit to recover damages for any injury sustained on l>oard 
vessel or in its service seamen liaviug comniand sliall not he lield to be fel- 
low servants with those under thelr autliority." 

Was such act rétroactive ? By section 18 it is provided that the act 
shall take effect as to ail vessels of the United States eight months 
after its passage; i. e., on November 4, 1915. The injuries in question 
were sustained November 2, 1913, and tliis procceding was begun in 
January, 1915. Proctor for claimant urges that the language of sec- 
tion 20, referring to "any suit" and "any injury sustained," is broad 
enough to include the claim for injuries uncler discussion. But with 
this I do not agrée. Had it been the intention of Congress that sec- 
tion 20 should be effective prior to other provisions of the act, or that 
it should apply to actions pending or to causes of action already in 
existence, explicit words would bave no doubt been used to express 
such intention. Upon reading sections 18 and 20 together, it seems 
to me that they are clearly of a prospective character. The ordinary 
presumption is that législation provides for the future and that there 
is no rétrospective intention, and both fédéral and state courts are 
slow to incorporate words into a statute which will permit such an in- 
terprétation. White V. U. S., 191 U. S. 545, 24 Sup. Ct. 171, 48 L. 
Ed. 295. 

In Winfree v. Northern Pacific Railway Co., 227 U. S. 296, 33 Sup. 
Ct. 273, 57 L,. Ed. 518, the Suprême Court had before it the Employ- 
ers' Liability Act of 1908 (Act April 22, 1908, c. 149, 35 Stat. 65 
[Comp. St. 1913, §§ 8657-8665]), which it was argued was rétroactive. 
That act substantially declared that in al) actions subsequently brought 
against any common carrier contributory négligence should not be a 
bar, etc. While the référence to future actions was perhaps somewhat 
more definite than in section 20 of the Seamen's Act, standing alone, 
I nevertheless think the principle enunciated in that case is applicable 
to the présent situation. It was there contended, as it is hère, that the 
statute was merely remédiai, and should be construed to apply to ail 
suits, whether already begun or not ; but the Suprême Court said : 

"While there are exceptions, especially in the case of remédiai statutes, the 
gênerai rule Is that statutes are addressed to the future and not to the past ; 
and, In the absence of explicit words to that efCeot statutes are not rétroac- 
tive in thelr application. The Employers' Liability Act of 1908 Introduced 
a new poliey, and radically changed existing law, and will not be construed 
as a remédiai statute havlng rétrospective eft'ect." 

So, also, in the case at bar the Seamen's Act made a substantive 
change in the maritime law of the land creating a new liability — not 



202 234 FEDERAL RBPOETER 

simply changing methods of procédure or rules of évidence or affect- 
ing the statute of limitation — and niaking the ship or her owner an- 
swerable for the négligence of the officers charged with the responsibil- 
ity of her navigation, as a resuit of which a seaman sustains injuries. 
Such change in an existing law does not concern the remedy nierely, 
but, as said in the Winf ree Case, supra : 

"It, however, takes away materlal défenses, défenses which dld something 
more than resist the remedy; they dlsproved the right of action." 

For the foregoing reasons I am constrained to hold that Congress 
did not déclare in the Seamen's Act an intention that the act should 
operate retrospectively, that the claimant is without right of action 
against the steamer Oceanica, and, further, that his claim not being for 
maintenance or cure must be disallowed. 



UNITED STATES v. ALBEIGHT et al. 
(District Court, D. Montana. July 1, 1916.) 

1. Statutes ©=^225% — Constijuction — xVdoptiox. 

The Législature, in adopting a statute, is presumed to hâve acted with 
knowledge of previous construction of simllar statutes, and to hâve in- 
tended such construction, unless It otherwise iudicated. 

[Ed. Note.— For other cases, see Statutes, Cent. Dig. § 306; Dec. Dig. 
<S=225%.] 

2. Limitation of Actions <S=»100(3) — Rbnning op Statute — Fraud. 

The six-year limitation prescribed by Act March 3, 1S91, c. 561, § 8, 
26 Stat. 1(M9, In which suit to cancel patents must be commenced, does 
not, as to a patent secured through fraud, in that the patentée was act- 
ing for spéculative purposes and under an agreement to convey wheu he 
should receive hls patent, begin to run until those facts are discovered, 
for a limitation statute, in so far as it applies to actions based on fraud, 
does not, where the fraud is concealed, begin to run until dlscovery. 

[Ed. Note. — For other cases, see Limitation of Actions, Cent. Dig. §§ 
482, 483; Dec. Dig. <S=>100(3).] 

3. Public Lands <S=3l31 — Patents — Issuance. 

Under Eev. St. §§ 2290, 2291 (Comp. St. 1913, §§ 4531, 4532), requiring 
an appllcant for a patent to public lands to make oath his purpose is not 
spéculation, but to secure a home, and that he lias not made and will 
not make any agreement by which thei title shall inure to any other's 
beneflt, and on final proof to make oath that he has not alienated the 
land, the fact that an entrynian who flled for spéculative purposes recog- 
nized the possibility of a ifuture aliénation, and that he asked one who 
purehased a considérable tlme after the issuance of a patent if he would 
buy the land when the patent was secured, does not show that the pur- 
chaser knew the entry was spéculative, or deprlve the purchaser, who 
was bona flde, of the beneflt of his good f aith. 

[Ed. Note. — For other cases, see Public Lands, Cent. Dig. § 347; Dec. 
Dig. <®=5l31.] 

4. Public Lands «©=135(2) — Patents — Spéculative Purposes. 

Where an entryman on public lands, who secured a patent, was not 
actuated by spéculative purpose at the time of his entry, he may, despite 
Rev. St. U 2290, 2291 (Comp. St. 1913, §§ 4531, 4532), declaring that a pat- 

®=3For other cases see same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



UNITED STATES V. ALBKIGHT 203 

ent shall not be issued to one entering for spéculative purpose, dispose 
of the land after acquiring his patent. 

[Ed. Note. — For other cases, see Public Lands, Cent. Dig. §§ 353, 354; 
Dec. Dig. <©=5l35(2).] 

5. Public Lands <S=»120 — Patent. 

Unless proof ttiat a patent to public land was secured tlirough fraud 
Is clear and convincing, tlie patent should not be overthrown. 

[Ed. Kote.— For otber cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. <S=5l20.] 

6. Public Lands ®=3l20 — Evidence — Sufficienct. 

In a suit to cancel a, patent to public lands, évidence hcld insufflclent 
to show that défendant, to whom it was subsequently conveyed, had a 
contract for the purcbase of the land when it was patented. 

[Ed. Note.— For other cases, see Public Lands, Cent Dig. §§ 332-335; 
Dec. Dig. <g=3l20.] 

7. Public Lands <S=>120 — Evidence — Sufficiency. 

In a suit to cancel a patent to public lands, on the ground that the 
patentée was acting under a contract to subsequently couvey to défend- 
ant, évidence held insuffieient to establish any such agreement, or that 
the patentee's entry was not In good faith. 

[Ed. Note.— For other cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. ©=120.] 

In Equity. Suits by the United States against William H. Albright 
and others. Decree for défendants. 

B. K. Wheeler, U. S. Atty., and Frank Woody, Asst. U. S. Atty., 
both of Butte, Mont., and H. G. Murphy, Asst. U. S. Atty., of Helena, 
Mont. 

Cooper, Stephenson & Hoover, of Great Falls, Mont., for défendants 
W. H. and V. C. Albright. 

BOURQUIN, District Judge. April 22, 1901, a homestead patent 
issued to Whitaker, and August 18, 1902, one issued to Carter. Thèse 
suits to cancel the patents, against the patentées and their transférées, 
were commenced September 11, 1915, and hâve been tried as one. 

The complaints, in brief, are that the patentées made application for 
the lands, inspired by spéculative purposes, and not for homes, under 
agreements to convey the lands, after final proof, to défendant Al- 
bright ; that they did not comply with law in the matter of résidence, 
improvement, and cultivation of the lands; that their final proofs, 
showing the contrary to ail the f oregoing, were false and to the knowl- 
edge of Albright; that the lands were so conveyed that title is now 
vested in Albright's wife for his benefit; that ail the facts aforesaid 
were concealed from and not discovered by plaintiff until 1911. Carter 
was not served, Whitaker defaulted, and the Albrights denied, and 
pleaded bona fide purchase and limitations. 

[1,2] The statute (26 Stat. 1099) provides suits to vacate patents 
"shall only be brought within six years after the date of issuance of 
such patents." Long before it, the construction of like statutes, in 
courts of equity, was that they commenced to run only from discovery 
of fraud that is concealed or self-concealing. And this rule has been 
applied to this statute. See Linn, etc., Co. v. U. S., 203 Fed. 394, 121 

©=3For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes 



204 . 234 FEDERAL REPORTER 

C. C. A. 498, and cases cited ; s. c, 236 U. S. 574, 35 Sup. Ct. 4-10, 
59 Iv. Ed. 725, affirmed on other grounds. 

Congress knevv this construction, and intended it, when enacting said 
statute, or it would hâve indicated otherwise by appropriate language. 
This, too, is a settled rule of interprétation. The fraud alleged in the 
matter of résidence, improvements, and cultivation was open to ob- 
servation prior to and at final proof, and as cause of action is barred 
by the statute. That alleged to consist in spéculative purpose and 
agreement to convey is concealed and self-concealing fraud, hidden 
until some participant discloses it, which was only done herein in 
1911, and so is not barred. 

[3-6] That the patentées conveyed to Albright, and the deeds were 
recorded, some six and nine months subséquent to patent, neither dis- 
closed the fraud nor put on notice; for on their face they appeared 
honest transactions. From Whitaker's testimony, as a witness for 
plaintiff, it appears he needed money to apply on his home in Michigan. 
To procure it he made original entry of the land involved, intending 
to sell it to the best advantage. Having so entered it, he asked Al- 
bright if the latter would buy it after final proof ; Albright with some 
demur saying he would, if able. After final proof a tentative agree- 
ment was made, and one year later, and six months subséquent to pat- 
ent, Albright did buy the land, paying $750 therefor, and received and 
recorded a deed. 

In this is perceived nothing warranting cancellation of the patent. 
The Homestead Law (R. S. §§ 2290, 2291 [Comp. St. §§ 4531, 4532]) 
requires the applicant to make oath his purpose is not spéculation, but 
to secure a home, and that he has not made and will not make any 
agreement by which the title to the land "should inure" to any other's 
benefit, and at final proof requires him to make oath that he has not 
alienated any of the land. Whitaker's purpose was spéculative, but 
nothing appears that would warrant a finding that it was known to 
Albright. True, after original entry Whitaker inquired if Albright 
would buy the land when final proof was made ; but this was not notice 
that Whitaker was inspired by spéculation rather than désire for a 
home, when he made his original entry or at ail. It was but oral ut- 
terance of the thought necessarily in every entryman's mind — the pos- 
sibility of a sometime sale — and in no wise inconsistent with his good 
faith. Furthermore, if it was, to deprive Albright of his status as a 
bona fide purchaser it would be necessary to find (and the court does 
not) he kept and had the fact in mind when he purchased some 29 
months later. See U. S. v. Clark, 200 U. S. 608, 26 Sup. Ct. -340, 50 
L. Ed. 613. 

After original entry made, Whitaker could lawfully entertain a pur- 
pose to sell the land, rather than to retain it as a home; for the law 
stipulâtes his freedom from spéculative purpose, and possession of 
intent to secure a home, shall exist at original entry only, recognizing 
circumstances may efifect change therein in any honest entryman. The 
Eand Department so construes the law, and see the analogous case of 
Williamson, 207 U. S. 461, 28 Sup. Ct. 163, 52 L. Ed. 278. And from 
the inquiry Whitaker made of AllDright, the latter, if required to infer 
anything, could infer Whitaker's contemplation of possible sale arose 



UNITED STATES V. ALBRIGHT 205 

subséquent to original entry. After testifying as aforesaid, in response 
to leading and double questions, and questions assuming his testimony 
was othervvise than the fact, put by plaintiff's counsel, Whitaker testi- 
fîed he made the inquiry of Âlbright before original entry. Although 
no objections were made, under the circumstances, the witness only in 
theory adverse and not in fact, such testimony and so extracted de- 
serves little considération and weight. Furthermore, the conflict is 
not explained, and nothing persuades that the witness' last statement 
is more to be relied on than his first. At best, there is conflict, which 
must be resolved against the party tendering the witness. If the wit- 
ness does not know, the court cannot know. It is obvions there is no 
évidence of the agreement to convey, alleged to hâve been made be- 
fore final proof. Albright testifies to purchase in good faith. Circum- 
stances from which suspicion might arise, in itself amounting to noth- 
ing, ail taken together and with ail else, are consistent with bona fide 
purchase by Albright. 

A grant of lands by the United States, over its seal, upon every con- 
sidération must stand, unless overthrown by clear and convincing évi- 
dence of the fraud charged, in quality and quanti ty that inspires con- 
fidence and produces conviction. U. S. v. Budd, 144 U. S. 161, 12 
Sup. Ct. 575, 36 L. Ed. 384. None such appears hère. The doubtful, 
ambiguous, and conflicting recollection, 15 years subséquent to events, 
of those acknowledging themselves particeps criminis if the law was 
violated, does not satisfy the measure of évidence exacted; and less 
would make of patents mère scraps of paper, disturb titles, impair 
confidence, and destroy values. 

[7] From Carter's testimony, as a witness for plaintifif, the situation 
appears much the same as in Whitaker's case, save that a like spécula- 
tive intent seems absent. When he had testified that "along about the 
time of filing, or after," he had told Albright, "if I got title, why I 
would sell it to him," that he sold to Albright after final proof, on an 
agreement made after patent, that he (Carter) paid ail costs, mort- 
gaging the land to a bank to secure money to pay the purchase price 
of the land, he was asked by counsel for plaintiiï that, if he had testi- 
fied in a former case, as recited in narrative by counsel in considérable 
détail, amongst other things, that prior to filing he had talked with 
Albright in substance that, if Carter did not want the land, Albright 
"was to take it ofl: my hands," that he "had this agreement to transfer 
the property to Mr. Albright prior to the time I filed, we talked it 
over in that way," "Would that be correct, was your recollection better 
then ?" and he answered, "Well, I don't know ; I expect it would be." 
He was then asked, "Do you recall having testified that way?" and 
answered, "Why, yes, something like that"; and the like were put, 
terminating in a leading and double question, in substance if there was 
not an understanding and agreement that, if Carter "didn't want to 
keep this land," he would sell it to Albright, and for a price of $640 
agreed on before original entry, to which Carter answered, "Yes ; I 
guess that is right." After testifying to an innocent situation, the 
witness is challengingly asked if he did not testify to an assumed evil 
one when his memory was better ; and the impression created was 
that the witness, embarrassed by suggested earlier conflicting testi- 



206 234 FEDBEAL BBPORTEB 

mony of his, weakly snatched at the way out pointed out by counsel in 
suggested better recollection (and perhaps to f ail in with what he would 
infer was counsel's désire), and assented to the latter, if not to the 
truth of the former. 

On cross-examination, Carter testified he would think his recollec- 
tion was best when he made final proof, and the proof more nearly 
true — nearer the fact than any subséquent testimony, that he had no 
particular understanding with Albright, and that he took the land for 
his own benefit. Whitaker testified he had heard "talk since, more 
than before," "gênerai opinion I would hear," that Carter "had taken 
up some land" for Albright. 

Peterson's testimony that she knew Carter "had a homestead for Mr. 
Albright" is not supported by any facts known to and stated by her. 
She also testified she made a homestead entry at Albright's suggestion ; 
she to "get the same as the rest," $640. Gustafson testified, "Carter 
told me he had a homestead for Albright"; that he (Gustafson) had 
an agreement with Albright, when Gustafson took up a homestead, 
"Give me the same show as the rest of the boys, * * * same 
price." If thèse séant conclusions of Peterson and Gustafson would 
suffice to prove that at some indefinite time they and Albright entered 
into prohibited agreements like those herein alleged, they are not évi- 
dence thèse alleged agreements were made. For the proof herein 
fails in respect to substance^the time and the terms of thèse alleged 
agreements at bar— and not merely in respect to intent and scienter; 
and other like offenses go only to détermine the true character of the 
latter, when otherwise equivocal, and not at ail to establish time and 
terms of otherwise, in thèse particulars, innocent, or even ambiguous, 
agreements. 

Albright denied any agreement with Carter, and testified he paid 
Carter ail the land was worth. It appears Albright operated a quarry 
where he employed some 80 men, and Carter worked for him as master 
mechanic, having a room in a bunk house and boarding at Albright's 
house; that some 18 of his men made homestead entries, a few of 
which he bought ; that he also bought railroad land and entered lands 
with scrip. Tliere is évidence from which it can be fairly inferred 
that Carter (and also Whitaker) availed himself of an opportunity to 
secure land at the same time he was in employment, and without in- 
terruption of his employment; his employer, Albright, favoring him 
therein. Such favor is to be commended, not condemned. But, as 
said of Whitaker's case, the indefinite, ambiguous, equivocal, conflict- 
ing testimony of assumed particeps criminis, taken in connection with 
ail the circumstances and the indefinable impressions created during 
the trial (a trial of loose methods by both parties), does not serve to 
overcome the presumptions attaching to the patent, to measure up to 
the quantum of évidence necessary, and to satisfy the court the fraud 
alleged is proven. 

Carter's testimony, even in view of the doubtful method of his ex- 
amination and the more doubtful applicability of his responses to mul- 
tiple questions, establishes no more than in Whitaker's case — a sug- 
gestion after original entry that, if Carter secured the land, Albright 
would buy it, if Carter did not want it — far short of the prohibited 



REED V. ST. PAUL, M. cSc M. RY. CO. 207 

agreement alleged. So would it be if made before original entry. The 
law forbids agreements by whiçh the land "should inure" to any oth- 
er's benefit ; not those by which it only may so inure if the entryman 
after proof concludes to sell it. If a mère mask for the prohibited 
agreement, it would not avail to escape the conséquences of the lat- 
ter. But the fact that Carter mortgaged the land to secure purchase 
money, and did not sell to Albright until two years after proof and 
nine months after patent, in connection with ail else, forbids belief 
that the alleged agreement was made. 

The finding is the fraud alleged is not proven, save that Whitaker 
made entry with spéculative purpose; that Albright purchased and 
paid value without notice. And since nothing is urged but cancella- 
tion of the patents, decree will go for défendants. 



EEED et ux. v. ST. PAUL, M. * M. RT. CO. et al. 
(District Court, W. D. Wasliington, N. D. December 3, 1915.) 

No. 74. 

1. Public Lands <S:=5l20 — Patents — Suits to Set Aside — Jukisdiction or 

Court. 

A patent to public lands wlll not be set aslde by a court of equity, un- 
less it appears that through errer in the construction of the law the pat- 
ent was issued to the wrong party, or that through fraud or gross mis- 
take patent was issued to the wrong party. Therefore a blll to set aside 
a patent to public lands, which eontained no averments of fraud, mis- 
take, or erroneous construction of law, is demurrable. 

[Ed. Note. — For other cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. (S=120.] 

2. Public Lands "©=120 — Patents — Bill to Set Aside. 

A bill to set aside a patent to public lands, whicli averred settlement 
Tipon, improvement, and failure to post notices of claim, and also averred 
plaintiff's adverse, possession for 10 years, and the subséquent issuance 
of a patent to défendant, is insuffieient to state a cause of action. 

[Ed. Note. — For other cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. <g=3l20.] 

3. Public Lands iS=>120 — Patents — Bill to Set Aside. 

A bill to set aside a patent to publie lands, averring that défendants 
claim some title, estate, and interest in the land by reason of a patent, 
Is insuffieient to give jurlsdiction to a court of equity. 

[Ed. Note.— For other cases, see Public Lands, Cent. Dig. §§ 332-335; 
Dec. Dig. <®=3l20.] 

In Equity. Bill by Charles W. Reed and wife against the St. Paul, 
Minneapolis & Manitoba Railway Company, a corporation, and anoth- 
er. On demurrer to amended bill. Demurrer sustained. 

Cari E. Croson and E. H. Flick, both of Seattle, Wash., for plain- 
tiffs. 

F. V. Brown and F. G. Dorety, both of Seattle, Wash., for défend- 
ants. 

^z^For other cases see same topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 



208 234 FEDERAL REPOETKR 

NETERER, District Judge. A demurrer to the bill in equity in 
this case was sustained. Reed v. Railway Co., 234 Eed. 123. By per- 
mission, the bill bas been amended by interlining paragraph IX of the 
bill so that it reads : 

"That said défendants clalm some rlght, title, estate, and Interest in and 
to the foregolng described lands, more partieularly to tbe S. W. % N. W. Vt 
of section 3 thereof, hy reason of government patent ISlo. 20 issucd April IS, 
1908, to the Oreat Northern Railway Company, but that said claim is junior 
and inferlor to the claim and right of thèse plalutlfCs." (The amendment is 
underseored.) 

A demurrer has been interposed to the bill as amended. The addi- 
tional facts pursuant to this discussion appear in Reed v. Railway Co., 
supra. 

[1] It is apparent that no statement appears of any fact of a fraud- 
ulent nature, or of any act donc or performed by corrupt motives or 
corrupt means by the défendant, or any of the land officers who hâve 
had to deal vvith this land (Marquez v. Frisbie, 101 U. S. 473, 25 L. 
Ed. 800), and a court of equity cannot, under any untraversable alléga- 
tions of error in gênerai, be invoked (U. S. v. Trockmorton, 98 U. S. 
61, 25 E- Ed. 93). A bill in equity to set aside a patent or déclare 
the patentée a trustée must set ont the facts conceded or established, 
upon which it is charged the officers, through error in the construction 
of the lavv, issued the patent to the wrong party, or that through fraud 
or gross mistake they misapprehended the facts, with the same resuit, 
and if mistake of fact is the ground of attack, the bill must allège the 
mistake in the finding, and also state the évidence before the department 
f rom which the mistake resulted, as well as the particular mistake and 
the manner in which it occurred, and the fraud, if any, which induced 
it. U. S. V. Atherton, 102 U. S. 372, 26 L. Ed. 213; James v. Ger- 
mania Iron Co., 107 Fed. 597, 46 C. C. A. 476. If fraud, error, mis- 
take, or wrong has been done, courts of justice présent the only reme- 
dy. Moore v. Robbins, 96 U. S. 530, 24 L. Ed. 848. But to maintain 
a bill in equity it must be averred and proved that the Land Depart- 
ment erred in the construction of the law applicable to the case, or 
that fraud was practiced upon its officers, or that they themselves were 
chargeable with fraudulent practices (Gonzales v. French, 164 U. S. 
338, 17 Sup. Ct. 102, 41 L. Ed. 548), and. the facts upon which thèse 
varions conclusions are predicated must be stated. 

[2, 3] The statement of settlement upon and improvement of the 
lând, and the failure to post "notices of claim under the script land 
laws of the United States or otherwise," does not bring plaintiit within 
the rule; nor does the allégation of adverse possession for 10 years 
constitute a sufficient equity in plaintiiï's favor to control the title sub- 
sequently conveyed to the défendants by the United States. Gibson 
V. Chouteau, 13 Wall. 92, 20 L. Ed. 534. The allégation "that said de- 
fendants claim some right, title, estate, and interest * * * in the 
* * * land * * H= by reason of government patent No. 29 is- 
sued April 13, 1908, to the Great Northern Railway Company," is not 
sufficient, with the other allégations, to invoke the powers of a court 
of equity. 

The demurrer is sustained. 



TOWN or NEWBEKN V. NATIONAL BANK ' 209 



TOWN OF XEWBERN et al. v. NATIONAL BANK OF 
BARNESVILLE, OHIO. 

(Circuit Court o£ Appeals, Sixth Circuit. June 30, 191G.) 

No. 2707. 

1. Courts <^x:^^T2(J) — Precedence — Fédéral Courts. 

AVhere tlie validity of m\iniciiial bonds depended upon the construction 
to be glven Acts Tenn. 1897, c. 1'.',, and Acts Tenn. 1901. c. 450, incorpo- 
rating the municipality, and tlie contract liad been entered into before an 
interprétation of the statutes by the Tennessee court, the fédéral courts 
are not bound by a décision of the Tennessee court holdini? the bond issue 
invalid, and, having obtained jurisdiction of a suit involving the validity 
of some of the bonds, they may exercise an independent judgment. 

[Ed. Note. — For other cases, see Courts, Cent. Dig. § 979 ; Dec. Dig. 
<®=^372(7).] 

2. Courts iS=>372(7) — Precedence — Fédéral Courts. 

Upon questions of gênerai law décisions of the state courts are not 
binding on the fédéral courts sitting within their borders ; therefore a 
décision of the state court that a municipality was not estopped from de- 
nying the validity of its bonds, wliich had passed into the hauds of a 
bona fide purchaseï- for value without notice, is not binding on the fédéral 
courts. 

[Ed. Note. — For other cases, see Courts, Cent. Dig. § 979 ; Dec. Dig. 
<©=»372(7).] 

3. MuxiciPAL Corporations ©=927 — Bonds — Validity. 

Where municipal bonds bore adniittedly officiai signatures of municipal 
officers and tlie city seal, such signatures and seal prima facie established 
the validity of the bonds. 

[Ed. Note. — For other cases, see Municipal Corixirations, Cent. Dig. § 
1940 ; Dec. Dig. «=>927.] 

4. Municipal Corporations <®=3948(4) — Bonds — Bona Fide Purciiaser — 

sstoppel. 

Acts Tenn. 1S97, e. 13, déclares that, to secure pure élections, boards of 
commissioners shall be appointed in the several couuties. Acts Tenu. 
1901, c. 450, incorporating the town of Nevvbern, provides in section 6 for 
tlie holding of an élection by the slierilt for tlie sélection of mayor, al- 
dermen, recorder, and iiiarshal. By Act of IMarch 13, 1907 (Acts 1907, c. 
117), the mayor and aldennen of the town of Newbern were autiiorized 
to issue bonds to erect school buildings, to iniprove and extend tiie wa- 
ter and ligiit system, and to ini])i-ove streets. The bonds contaiued a ré- 
cital that at an élection duly and legally lield by order of the mayor and 
aldernien of the town, in aceordaiice witli an ordinance duly passed, the 
issuance of the bonds was ratified liy a majority of the voters. The bonds 
were signed by the mayor and counteisigned by the clerk of the board of 
aldennen, instead of being signed both by the mayor and aldernien. The 
ordinance referred to in the bond recited that an élection, ordered by the 
mayor and aldermen to ascertain tlie will of the qualified voters as to 
whether the mayor and aldermen should issue the bonds, as provided for, 
was lield, and resulted in sliowing that a majority favored the issuance of 
tlio bonds : the resuit of the élection having been duly and regularly cer- 
tified by the sheriff under whoso supervision the élection was held. Held 
that, as against a bona fide purchaser of tlie bonds for value and without 
notice, the city was estopped to deny the validity of the bonds on the 
ground that the élection, having been held by the sheriff, instead of com- 
missioners, was invalid, for a purchaser could not be charged with notice 
cf the fact that the élection was held by the sheriff, on the ground that 
t'ie bonds were signed by the mayor and clerlj, instead of the mayor and 

@zsFOT other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes 
234 F.— 14 



■210' 234 FEDERAL REPORTER 

aldermen; thèse signatures belng accompanied by a corporate seal îm- 
porting authority. 

[Ed. Note. — For other cases, see Municipal Corporations, Cent. Dig. § 
1985 ; Dec. Dig. <g=>948(4).] 

5. Municipal Corporations ®=931 — Bonds — Validity — Altebations. 

Munieips.il bonds are not iiivalid, on the ground tliat they did not follow 
the form prescribed hy tlic ordinance, beeause of the insertion of provi- 
sion for payment in a particular bank in the eity, where payment was 
provided for, or by déclarations that the total debt of the town, includ- 
ing the bonds, did not exceed any limit of indebtedness prescribed by the 
laws of the state, and that provision for the levy of an annual tax sufli- 
cient to pay the principal and interest of the bonds had been niade and 
would be duly levled upon ail taxable property, for the first provision 
operated to the c-onvenience of the municipality, and the latter did not 
change the obligation of the municipality, which pledged its full faith, 
crédit, and revenues. 

[Ed. Note.—For other cases, see Municipal Corporations, Cent. Dig. §§ 
1944-1947; Dec. Dig. ®=5931.] 

6. Municipal Cokpobations (©=948(5) — Bonds— Validity— Défenses. 

Where coupon bonds issued by a municipality to erect a school build- 
ing were sold, and the purchaser dlsposed of them to bona flde purchas- 
ers, but never paid the purchase price to the municipality, the bonds are, 
in the hands of bona fide purchasers, valid, being negotiable instruments. 

[Ed. Note.— For other cases, see Municipal Corporations, Cent. Dig. §§ 
1986, 1987; Dec. Dig. ®=>948(5).] 

7. Municipal Corporations ®=5948(1)— Bonds— Delivehy—Presumptions. 

Under Negotiable Instruments Act (Acts Tenu. 1899, c. 94) § 16, provid- 
ing that, where a negotiable instrument Is in the hands of a holder in 
due course, a valid delivery by ail parties prior to him, so as to make 
them liable to him, is conclusively presumed, the validity of municipal 
school bonds in the hands of a bona ûde purchaser cannot be questioned 
by a municipality on the ground that there was no valid delivery to the 
one through whom the purchaser traced bis title. 

[Kd. Note.—For other cases, see Municipal Coiixirations, Cent. Dig. §§ 
1982, 1990 ; Dec. Dig. <S=»948a).] 

8. Appkal and Errob ®=5l07S(l)— Eeview — Waiver of Errobs. 

Failure to argue assignments of error opérâtes as a waiver. 
[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. § 4256; 
Dec. Dig. <g=107S(l).] 

In Error to the District Court of the United States for the Western 
District of Tennessee; John E. McCall, Judge. 

Action by the National Bank of Barnesville, Ohio, against the Town 
of Newbern and the Mayor and Aldermen of Newbern, Dyer County, 
Tennessee. There was a judgment for plaintiiî, and défendants bring 
€rror. Affirmed. 

The suit below was to recover .ludgment for interest alleged to hâve ae- 
crued ou certain bonds of the town of Newbern, a municipal corporation lo- 
cated in Dyer county, Tenu. The town was empowered in 1907 to issue $50,- 
000 of coupon bonds for municipal improvements, as foUows : $25,000 par 
value to erect and furnish school buildings, $30,000 to improve and extend 
water and light systeni, and $15,000 to improve streets. The bonds are ail 
outstanding, and the town received the money arising from the sale of the 
water and light and street bonds, though it bas received no money for the 
ischool bonds. The town pays the interest as it accrues on the water, light, 
;ind Street bonds, but it déclines to pay anything on account of school bonds. 
Xhe interest now sought to be recovered is represented by 131 past-due cou- 

<S=3For other cases see same topic & KBSy-NUMBBR in ail Key-Numbered Digests & Indexe» 



TOWN OF NEWBERN V. NATIONAL BANK 211 

pons, for ?30 each, wliich hâve been eut from certain of the sctiool bonds. 
The déclaration sets out the statute Investing the town with power to issue 
the bonds, allèges the steps taUen, including the adoption of certain ordl- 
nances, by the town, and also the vote of a majorlty of the qualifled voters 
of the town, authorlzing the issue and sale of the bonds, plalntiff's posses- 
sion as bona fide owner and holder for value of the coupons sued on, which 
are speclflcally described by their numbers and by the numbers of the bondis 
from which they were detached, and prays judgment upon such coupons with 
Interest from their respective dates of maturlty. To this déclaration the de- 
fendants interpose three pleas : (1) That they dld not "promise, undertake or 
agrée in the manner and form as the plnlntift' in Its déclaration has com- 
plained"' ; (2) that they do not "owe the said sums of money demanded, or 
any part thereof, in manner and form as the plaintiff in its déclaration has 
complained" ; (3) that the coupons and writings obllgatory mentloned in the 
déclaration are not défendants' "act or deed * * * and were not executed 
for or in their behalf by any person authorized to bind them or either of them 
in the promises," and that they demand a jury to try the Issues joined. Upon 
thèse pleas plaintifC joined issue. At the close of ail the évidence the par- 
ties each moved for a peremptory instruction in its tavor. The court treated 
such joint submission as a withdrawal of the case from the jury and, upon 
considération, found ail the issues in favor of the plaintiff, distinctly finding 
that plaintiff Is the owner of the coupons "for value in due course," and judg- 
ment was accordingly eutered for plaintiff. Défendants prosecute error upon 
12 assignments, and thèse assignments are consldered in the opinion as lar 
as necessary. 

Elias Gates, o£ Memphis, Tenn., for plaintiffs in error. 
Wm. R. Collins, of Cincinnati, Ôhio, for défendant in error. 

Before WARRINGTON and DENISON, Circuit Judges, and 
COCHRAN, District Judge. 

WARRINGTON, Circuit Judge (after stating the facts as above). 
We are called upon to détermine which of two innocent parties shall 
suffer a material loss, and their rights must dépend upon the application 
of principles which in effect may engender more serious losses than 
are presently involved; the performance of such a duty is, to say the 
least, perplexing; and this is emphasized by the fact that our conclu- 
sion is not in harmony with that reached by the Suprême Court of , 
Tennessee concerning interest coupons similar to those in issue hère. 
Weil V. Newbern, 126 Tenn. 223, 148 S. W. 680, L. R. A. 1915A, 1009, 
Ann. Cas. 1913E, 25. 

What considérations must enter into the cjucstion whether the cou- 
pons in suit are binding obligations of the town of Newbern? It is 
manif est that the binding effect of the bonds to which the coupons in 
dispute belong must be considered, although the bonds themselves are 
not in suit. Concededly, the statutes incorporating the town in question 
under the name of "Mayor and Aldermen of Newbern," and enabling 
the corporation to issue thèse bonds, are constitutionally valid enact- 
ments; and, apart from a question made upon the élection at which 
the electors of Newbern voted upon the issuing of such bonds, the 
ordinances relating to the issue and sale of the bonds are admittedly 
valid. The facts that the bonds comprised in the entire authorized is- 
sue ($50,000 par value) are outstanding, that the interest accruing on 
one-half of such issue (though not including the school bonds) is reg- 
ularly paid by the town, that ail the bonds (13 in number) v.dth the cou- 



212 234 FEDERAL REPORTER 

pons in suit attached thereto were acquired by the plaîntiff bank and 
others through loans and purchases made before maturity of any of 
such coupons, in good faith and for value, without notice ôf any defect 
in respect either of issue or delivery thereof, and that plaintiff subse- 
quently obtained the rights of thèse former holders in such of thèse 
coupons as it had not previously acquired, are not under the évidence 
open to substantial déniai. The school bonds mentioned severally 
bear date September 1, 1907, and contain a promise — 
"to pay to bearer the sum of one thousand dollars • • • on the first day 
of September, A. D. 1927, together with interest on sald sum from the date 
hereof, until pald, at the rate of six per centuni per annum, payable semi- 
annually on the flrst days of March and September in each year, upou prés- 
entation and surrender of the interest coupons hereto attached, as tliey sev- 
erally become due. Both principal and interest are payable at the Hanover 
National Bank, in the city of New York « * * and for the prompt imy- 
ment of this bond * * * the full faith, crédit and revenues of said town 
are hereby irrevocably pledged." 

And each bond also contains récitals which state that it — 

"is one of a séries of 25 bonds, of like date and ténor, aggregating $25,000 is- 
sued by the mayor and aldermen of Nevvbern for the purpose of erectlng and 
furnishing a school building in and for the town of Newbern, pursuant to and 
in full compliance wlth the provisions of an act of the General Assembly of 
the State of Tennessee," giving its title and date, "and as ordered by a vote 
of a majority of ail tlie qualitied voters of the town of Newbern, at an élec- 
tion duly and legally lield by order of the board of mayor and aldermen of 
said town," on a date named, "and under and in accordance with an ordi- 
nance duly passed" by that board "at a meeting thereof, duly and regularly 
called and held" on a named date. 

It is also certified and recited : 

"That ail aets, conditions and thlngs required to be done précèdent to and 
In the issue of this liond hâve been properly done, happened and been per- 
formed in regular and due form as required by law." 

Each bond is signed by the mayor, countersigned by the clerk, and 
attested by the seal of the town of Newbern, and such exécution pur- 
ports to hâve been directed by the board of mayor and aldermen. 

[1,2] It is practically admitted that if the bonds had been signed by 
the mayor and aldermen the récitals mentioned would hâve estopped 
the town of Newbern from denying the validity of either the bonds or 
coupons. It is insisted, however, that since only the mayor and the 
clerk signed the bonds, while the mayor and aldermen were the officers 
authorized to issue them, every purchaser was bound at his péril to 
examine into the authority of the mayor and clerk to exécute the 
bonds ; and that this would bave led to the discovery of an infirmity 
which justifies the pleas of non assumpsit, nil débet and non est fac- 
tura, relied on. The mayor and clerk appear to hâve been empowered 
by two différent ordinances to exécute the bonds. The first one was 
passed April 19, 1907, "to provide for the issuance of $50,000 in cou- 
pon bonds." The third paragraph of the ordinance provides that "the 
bonds so to be issued shall be signed by the mayor and clerk of said 
board of mayor and aldermen." The second ordinance was passed 
August 17, 1907, to fix "the form and date of the $25,000 school bonds, 
$15,000 Street bonds, and $10,000 water and light bonds." The form 



TOWN or NEWBERN V. NATIONAL BANK 213 

of the school bonds and that of the school coupons are set out, and the 
testatum clause of the former is as follows: 

"In testimony whereof, the said mayor and aldermen of Newbern hâve 
caused this bond to be signed by the mayor and counterslgned by the clerk of 
said board of mayor and aldermen, with the coi-porate seal attached, this third 
day of September, A. D. 1907." 

And the name and officiai title of the mayor, and similarly of the 
clerk as countersigning, are printed immediately under the testatum 
clause and also at the end of the form of coupon. The fîrst of thèse 
ordinances, hovvever, is the one containing the provision which it is 
claimed would inform an intending purchaser, not alone of the author- 
ity of the mayor and clerk to exécute the bonds, but also of the facts 
relied on to invalidate the bonds. It is stated in the preamble of that 
ordinance : 

"The élection heretofore ordered by the mayor and aldermen of Nevvbern 
to be held to ascertaln the vvill of the qualifled voters of the town of Newbern 
* * * as to whether or not the mayor and aldermen should issue the flfty 
thousand dollar (s) in coupon bonds as provided for in the acts of the Gen- 
eral Assembly * * * passed March 1?>, 1907 * * * was held on the 
16th day of April, and resulted in showing that a majority of ail qualified 
voters in said town favored the issuance of bonds as provided for in said. 
acts of the General Assembly, the resuit of said élection having been duly and 
regularly certified by the sherlfC of Dyer county * * * under whose super- 
vision the said élection was held. * * * " 

It is claimed that the sheriff was not the authorized officiai to super- 
vise and certify to the resuit of this élection, and that the présence of 
the names of the mayor and clerk on the bonds put intending purchas- 
ers upon inquiry as to the validity alike of the élection and the bonds. 
This view is sustained in Weil v. Newbern, supra, 126 Tenu, at pages 
257, 265, 148 S. W. 680, L. R. A. 1915A, 1009, Ann. Cas. 1913E, 25; 
and indeed it was there held that the statement contained in the ordi- 
nance that the élection was held by the sheriff "gave plenary informa- 
tion that it was a void élection, and that the board of mayor and alder- 
men of Newbern had no power to issue the bonds. There could, 
therefore, be no innocent purchaser or holder of such bonds." This 
was the resuit of the court's construction of certain statutes of Ten- 
nessee which »ppear in the record. One was passed February 10, 
1897 (Acts Tenn. 1897, p. 131), and its purpose is indicated by its title : 

"An act to secure pure élections by creating boards of comniissioners of 
élection in countles having a population less than .50,000 Inhabltants, com- 
puted by the fédéral census of 1S90, and any subséquent fédéral census, and 
detining the duties and powers thereof." 

While the opération of this statute was limited to a particular class 
of counties, it is clear that it was applicable to ail counties of the state, 
regardless of the number, falling within the class specified, and so was 
in that sensé a gênerai rather than a spécial law. Commissioners were 
to be appointed by the governor, for every county, and were to com- 
prise in each county "a board of three persons to be known as the com- 
missioners of élection." The commissioners of each county were re- 
quired "within sixty days prior to every élection to be held in their 
county, and in due time therefor, to appoint three judges for each and 



214 234 FEDERAL EEPOETBR 

eyery yoting place in their coimty, to superintend the élection at the pre- 
cinct or voting place for which said judges shall be appointed," and also 
within such time to appoint two clerks of élection for each of such vot- 
ing places. The commissioners were further authorized to appoint "the 
officer or officers of élection at each voting place to the exclusion of the 
sheriff" theretofore "possessing said power of appointment." Further, 
"the county courts, mayors, boards of mayor and aldermen and sheriffs 
of and in the said counties within the provisions of this act" were "di- 
vested of the authority to appoint judges or inspectors and clerks of 
élections," and ail statutes vesting such officiais with such power of ap- 
pointment, which were inconsistent with this provision, were repealed. 
The officer holding an élection was required to deliver the returns to 
the commissioners, who were to compile the returns at the court- 
house, and certify the resuit and also "to deliver to each person elect- 
ed a certificate of his élection." It is agreed that the census population 
of Dyer county was at the time now in question less than 50,000. 

Now, conceding that this statute, considered alone, would in terms 
embrace an élection, not merely for the sélection of local officers, but, 
also, for ascertaining the will of the electors concerning any question 
arising in a political subdivision of any county of the class erected by 
this statute, still(in view of the Newbern charter subsequently enact- 
ed), the concession is not determinative of the question whether the 
statute was exclusively applicable, or even applicable at ail, to the élec- 
tion hère in dispute. It was more than four years aftèr that statute 
was enacted that the town of Newbern was incorporated. The charter 
was granted on April II, 1901, and was entitled "A bill to incorporate 
the town of Newbern, in Dyer county, and to define its powers and 
provide for the élection of officers" (Acts Tenn. 1901, p. 1076), the cor- 
porate name being, as we hâve seen the "Mayor and Aldermen of New- 
bern." The act describes the boundaries of the corporation, provides 
for succession, and invests the corporate body with the usual attri- 
butes and powers of a municipahty. Section 6 of the act is in material 
part as follows (Id. 1081) : 

"Sec. 0. Be It further enacted, that the sheriff of Dyer county, after giving 
ten days' notice, shall by hiiiiself or one of his dcputles hold an élection in 
the town of >Jewbern on the third Tuesday of November, 1901, and said élec- 
tion shall lie hcld for the irarpose of electing mayor, aldermen, recorder, mar- 
shal, and the mayor, aldermen, recorder, and marshal elected at said time 
shall serve for two years. And thereafter, on the thlrd Tuesday of Novem- 
ber, there shall be an élection held for the purpose of electing a mayor, alder- 
men, recorder, and marshal for said town to serve for the ensuing two years, 
it being the intention of this act to ijrovide for the élection of a mayor, alder- 
men, recorder, and marshal of said town one In every two years. The poils 
shall be open at 10 o'clock a. m., and closert at 4 o'clock p. m., of that day. 
The board of mayor and aldermen rnay, by ordluance, make any additional 
provisions that may be found necessary to prépare for and conduct said élec- 
tion. If the sheriff fail to hold said élection at the time herein meutioned. It 
shall be his duty to hold it as soon thereafter as possible, giving the required 
notice. If there be no sheriff, or if no notice has been posted hy him on the 
tenth day hefore tlie regular élection, or if notices hâve been posted by him 
but he is not présent hiniself or deputy on the day of said élection ; then in 
either of said events, the coroner, or sonie person who may be appointed by 
the board of mayor and aldermen shall perforai ail the duties lu and about 
said élection required of the sheriff, » * * and the officers holding said 



TOWN OF NEWBERN V, NATIONAL BANK 215 

élection shall make out and deliver, wlthin three days, to each a certiflcate of 
their élection ; and the jiidges and clerks, after being sworn as provided by 
the élection laws of this state, shall perform simllar duties of judges and 
clerks in state and county élections. And after the votes are eounted and the 
results ascertained, the ofiicers holding said élection shall file poil lists and 
other papers showing the results of said élection, properly certlfled, with the 
recorder, who shall préserve them." 

Claim was made in Weil v. Newbern, supra, that this section con- 
ferred upon the sheriff of Dyer county the power to conduct ail cor- 
porate élections ; but it was held (126 Tenn. 250, 148 S. W. 680, L. R. 
A. 1915A, 1009, Ann. Cas. 1913E, 25) that while the section does pur- 
port to conf er such power, it does so "only in a spécial and limited way ; 
that is, for the purpose of electing a 'mayor, aldermen, recorder and 
marshal.' " It would seem that the resuit of this is to place ail élections 
in which the town of Newbern is alone interested under the control 
of the sheriff, except such as call for an expression of the town electors 
upon questions involving their own indebtedness and ultimate taxation, 
like the issue of municipal bonds, to defray the cost of purely local im- 
provements. 

It is insisted both that this construction, and that the conclusion 
drawn from it that the bonds are void in the hands of bona fide pur- 
chasers, are binding upon the fédéral courts. It is to be observed that 
the infirmity thus claimed to inhere in the bonds as a resuit of such a 
construction of the statute does net show that the electors did not in 
truth vote, and f avorably, upon the question of issuing the bonds ; nor 
does it show that the élection in fact held was not officially supervised 
and reported under apparent color of law; indeed, the contention is 
reducible to a claim of mistake made in officiais, that is, in having the 
sheriff instead of the commissioners of élection, to supervise the élec- 
tion and report its resuit. We say the claim is simply one of mistake, 
because there is not a suggestion of fraud or even unfairness in so ob- 
taining the expression, and the "order," of the voters respecting the 
issue and use of the bonds. Acts Tenn. 1907, p. 343, § 3. 

How far then are the fédéral courts bound by the décision in Weil 
V. Newbern? It is observable that the décision in that case was not 
rendered until after the presently contested bonds with their coupons 
had passed into the hands of bona fide holders for value, without notice 
of the defect in the élection now asserted ; and this court has held with 
référence to an analogous situation, that "the courts of the United 
States exercise an independent judgment." Rondot v. Rogers Tp., 99 
Fed. 202, 210, 211, 39 C. C. A. 462, 470. This was an apparent récog- 
nition of one of the settled exceptions to the gênerai rule that the féd- 
éral courts accept the interprétation of a state statute by the highest 
court of the state as settling the validity and meaning of the statute. It 
is manifest that the exception in that instance proceeded upon the prin- 
ciple that where a contract has been entered into in virtue of a state 
statute, a fédéral court obtaining jurisdiction of a question concern- 
ing the validity, effect, or obligation of the contract, will exercise an 
independent judgment, although "leaning to an agreement with the 
state court," where it appears that the décision of the state court was 
rendered after the rights involved in the controversy originated. Lou- 



216 t'3i FEDICRAL KKl'ORTF.IÎ 

isville Trust Co. v. City of Cincinnati, 76 Fed. 296, 301, 22 C. C. A. 334 
(C. C. A. 6). The présent case need not, however, be rested alone up- 
on those décisions or the class they represent, for a question of gênerai 
commercial lavv arises hère which of itself calls for the independent 
judgment of the fédéral courts. It is of course thoroughly settled and 
understood that upon questions of gênerai law the décisions of the 
state courts are not controlling. Swift v. Tyson, 16 Pet. 1, 17, 10 L. 
Ed. 865 ; B. & O. R. R. v. Baugh, 149 U. S. 368, 370, 13 Sup. Ct. 914, 37 
L. Ed. 772, et seq. ; Burgess v. Seligman, 107 U. S. 20, 33, 34, 2 Sup. 
Ct. 10, 27 L. Ed. 359. As Mr. Justice Harlan said in Presidio Co. 
V. Noel-Young Bond Co., 212 U. S. 58, at page 73, 29 Sup. Ct. 237, 
at page 242, 53 L. Ed. 402 : 

"In respect of the doctrines of commercial law and gênerai .InriRprudence 
tlie courts of the United States will exercise tlieir own independent .ludyment, 
îind in respect to such doctrines will not be coutrolledby décisions based npon 
local sta tûtes or local usage, althougli, if the (luestion is bnlanced wlth doubt. 
the courts of the United States, for the salie of harmony, 'will lean to an 
agreenient of views wlth the state courts.' " 

It might therefore be conceded for présent purposes that the fédéral 
courts must, regardless of their own opinions, yield to the ruîing of 
the learned Suprême Court of Tennessee in Weil v. Newbern that 
the commissioners of élection, and not the sheriff of the county, vvere 
the proper officiais to conduct and report upon the élection in ques- 
tion ; but this concession would not require us to adopt the conclusion 
drawn from the ruling that the bonds are void in the hands of bona 
fide holders. Such a question as this was directly involved and de- 
cided in Pana v. Bowler, 107 U. S. 529, 2 Sup. Ct. 704, 27 L. Ed. 
424. It was there claimed that the township bonds in dispute had 
been sanctioned at an élection conducted by a moderator chosen by 
the electors présent, when it should hâve been presided over and the 
returns made by the supervisor, assessor, and collector of the town- 
ship (107 U. S. 539, 2 Sup. Ct. 704, 27 L. Ed. 424) ; and it appears 
that the Suprême Court of Illinois had held that this defect in the 
proceedihg rendered the bonds absolutely void. In the course of the 
opinion in the Pana Case it was said (107 U. S. 540, 2 Sup. Ct. 714, 
27 L. Ed. 424): 

"It is insisted that this court is bound to follow this décision of the Su- 
prême Court of Illinois and hold the bonds in question void. We do not so 
VTndcî'stand our duty. Wlierc the construction of a state constitution or law 
lias become settled by the décision of the state courts, the courts of the United 
States will, as a gênerai rule, accept it as evidejiee of what the local law is. 
Thus, we niay be required to yield against our owu judgment to the proposi- 
tion that, under the charter of the railway eompany, the élection in this case, 
which was held under the supervision of a moderator chosen by the electors 
présent, was irregular and therefore void. But we are not bound to accept 
the inference drawn by the Suprême Court of Illinois, that in conséquence of 
such irregularity in the élection the bonds issued in pursuance of it by the of- 
ficers of the township, which recite on their face that the élection was iield 
in accordance with the statute, are void iu the hands of bona fide holders. 
ïhis latter propoéltion is one which falls among the gênerai principles and 
doctrines of commercial jurisprudence, upon which it is our duty to form an 
Independent judgment, and in respect of which we are under no obligation 
to follow implicitly the conclusions of any other court, however learned or 
able it may be." 



TOWN OF NEWBEKN V. NATIONAL BANK 217 

See, also, Supervisors v. Schenck, 72 U. S. (5 Wall.) 772, 774, 784, 
18 L. Ed. 556; Oregon v. Jennings, 119 U. S. 74, 94, 7 Sup. Ct. 124, 
30 L Ed. 323. 

[3, 4] It results that the fédéral courts must exercise an independent 
judgment upon the question whether the town of Newbern is estopped 
to deny, as against the plaintiff, that thèse bonds were issued con- 
formably, in ail respects, with the récitals therein contained. It is 
admitted, and is to be borne in mind, that the town of Newbern was 
clothed with power to issue just such bonds as thèse upon the ap- 
proval of a majority of its electors; that the town, through steps in 
fact taken by its board of mayor and aldermen and its electors, sought 
to exercise the power and to issue the bonds; and that the plaintiff 
is an innocent holder of the securities sued on, for value and without 
actual notice of any defect in the proceedings in virtue of which the 
bonds were put into circulation. We are therefore not concerned 
with a question that might arise in a case, such as bas in substance 
been suggested for illustrative purposes, where, either in the présence 
or in the absence of power to issue bonds no steps are in fact taken 
by the appropriate municipal agencies to exercise such a power, the 
executive officers fraudulently, though formally, exécute bonds and 
dispose of them in the name and under the pretended promise and 
récitals of the municipality. In the présent case it is admitted, as we 
hâve seen, that estoppel could not be escaped if the bonds had been 
signed by the mayor and aldermen of Newbern; this admission was 
rightly made. Presidio County v. Noel-Young Bond Co., supra, 212 
U. S. at pages 64, 65, 67, 29 Sup. Ct. 237, 53 L. Ed. 402. The efforts 
made hère to avoid estoppel are bottomed upon the fact that the au- 
thority of the mayor and clerk to exécute the bonds does not appear 
in the statutes but only in the ordinances, and, consequently, that in- 
tending purchasers were bound at their péril to examine thèse ordi- 
nances. This does not question the genuineness of the signature of 
either of thèse officiais; nor does it question the genuineness of the 
corporate seal which appears on the face of the bonds; indced, it is 
not claimed that the bonds were not in truth signed and sealed by 
thèse officiais ; and, f urther, the record contains an admission "that 
the lithograph signatures on the coupons are lithographie facsimiles 
of the signatures" of the mayor and clerk. The natural inference 
arising from the présence of thèse virtually admitted officiai signa- 
tures and seal is that the officers acted with due authority ; moreover, 
this is the prima facie effect in an evidential sensé; and in such 
cases the uniform course of décision in the Suprême Court of the 
United States bas been to treat the signatures of the executive officers 
and the seal of a municipal corporation as importing authority so to 
exécute the bonds, and this, too, where the authority of the signatory 
officers has not appeared in the statutes. Thus, in Von Hostrup v. 
Madison City, 68 U. S. (1 Wall.) 291, 297, 17 L. Ed. 538, Mr. Justice 
Nelson said: 

"Another objection taken Is, that tbe provlso requiring a pétition of two- 
tLirds of the citizens, who were freeholders of the city, was not complied with. 
As we hâve seen, the bonds signed by the mayor and clerk of the city recite 
on the face of them that they were issued by virtue of an ordinance of the 



218 234 FEDERAL REPORTER 

common couneil of tîie clty, passed September 2, 1852. This concludes the 
clty as to any irregularities that niay hâve existed in carrying into exécution 
the Power granted to Subscribe the stock and issue the bonds, as has been 
repeatedly held by this court." 

In Hackett v. Ottawa, 99 U. S. 86, 95, 25 L. Ed. 363, it appears 
that the bonds in question contained récitals of their issue in virtue 
of the charter and certain specified ordinances of the city, but that 
the bonds had been executed by the mayor and tlie clerk and authen- 
ticated by the corporate seal; and in the course of the opinion Mr. 
Justice Harlan said : 

"Such a représentation by the constltuted authorities of the city, under its 
corporate seal, would naturally avert suspicion of bad faith upon their part, 
and induce the purchaser to omit an examination of tlie ordinances themselves. 
It was, substantially, a déclaration by the city, wlth the consent of a majority 
of its légal voters, that purchasers need not examine the ordinances, since 
their title indicated a loan for municipal purposes. The city is therefore 
estopped, by its own représentations, to say, as against a twna fide holder of 
the bonds, that they were not issued or used for municipal or corporate pur- 
poses. It eannot now be heaxd, as against him, to dispute their validity. 
* * * It would be the grossest injustice, and in conflict with ail the past 
utterances of this court, to permit the city, havlng power under some circuni- 
st-ances to Issue negotiable securities, to escape liability upon the ground of 
the falsity of its own représentation, made through ofBcial agents and under 
its corporate seal, as to the purposes with which thèse bonds were issued." 

The ruling in that décision was followed, in respect of bonds sim- 
ilarly signed, in Evansville v. Dennett, 161 U. S. 434, 435, 444, 16 
Sup. Ct. 613, 40 L. Ed. 760; and this is likewise true of the ruling 
made in Waite v. Santa Cruz, 184 U. S. 302, 304, 315 to 319, 22 
Sup. Ct. 327, 46 L. Ed. 552. See, also, Myer v. City of Muscatine, 
68 U. S. (1 Wall.) 384, 388, 17 L. Ed. 564; City of Lexington v. But- 
ler, 81 U. S. (14 Wall.) 282, 295, 20 L. Ed. 809; Grand Chute v. 
Winegar, 82 U. S. (15 Wall.) 355, 358, 373, 21 L. Ed. 170; Coni- 
missioners, etc., v. Thayer, 94 U. S. 631, 632, 642, 24 L. Ed. 133 et seq. 

Furthermore, Fairfield v. Royal Independent School Dist., 116 Fed. 
838, 54 C. C. A. 342 (C. C. A. 8), reviews and reverses the décision be- 
low, which is reported in (C. C.) 111 Fed. 453, 455, and where it ap- 
pears that the président and secretary of the board of directors of the 
school district were authorized by resolution of the board to issue and 
deliver the bonds in dispute, and we do not discover that such author- 
ity otherwise existed. Judge Sanborn, in announcing the opinion of 
the Circuit Court of Appeals, stated the question thus (116 Fed. 840, 
54 C. C. A. 344) : 

"Is a bona fide purchaser of municipal bonds, which recite that they were 
issued in pursuance of a statute authorizing the municipality to issue them 
for a lawful purpose, and in conformity with an ordinance or a resolution of 
a specifled date, which discloses the fact that they were issued for an unlaw- 
ful purpose, charged with notice of the ternis and contents of the ordinance 
or resolution?" 

After stating that the question was not new, and commenting upon 
décisions there cited, the learned judge said (116 Fed. 843, 54 C, C. 
A. 347) : 

"Thèse décisions and opinions of the Suprême Court eonclusively answer 
the question presented in this case, and render any independent discussion of 



TOWN or NEWBEEN V. NATIONAL BANK 219 

It unnecessary and useless. Tbey demonstrate the iact that, so far at least 
as tlie fédéral courts are concemed, It is now the settled law of thls coutitry 
that a bona fide purchaser of municipal bonds, wMch recite that they were is- 
sued in pursuanee of a statute which authorized the municipality to send them 
forth for a lawful purpose, and which. also recite that they were issued in 
conformity with an ordinance or resolution whose date or title is specifled in 
the récital, which, If read, would disclose the fact that they were issued for 
an unlawful purpose, Is not charged with notice of the terms or contents of 
the ordinance or resolution, and the municipality cannot avail itself of the 
facts there disclosed to defeat Its bonds." 

It must be said that thèse décisions do not distinctiy discuss the 
question whether the présence of the officiai signatures of corporate 
executive ofïicers, accompanied by the corporate seal, puts purchasers 
on iflquiry as to the authority of those officers; but if the décisions 
mean what they say, it is certain that an intending purchaser of the 
bonds now in dispute might safely hâve reHed upon the bonds them- 
selves both as to the verity of their récitals and the authority of the 
executing officers. To be spécifie, the intending purchaser was not re- 
quired to look into the ordinance which is referred to in the récitals 
of the bonds in order to gain protection under a good faith purchase, 
Mrithout actual notice of the infirmity claimed in respect of the élection. 
This, it may be remarked, vi^ould undoubtedly be true as to purchases 
of bonds of a private corporation, bearing the guaranty of a railway 
company whose président and secretary, under its seal, had executed 
the guaranty (Louisville, etc., Ry. Co. v. Louisville Trust Ce, 174 U. S. 
552, 574, 575, 19 Sup. Ct. 817, 43 L. Ed. 1081) ; though it is to be noted 
that while considering the rule applicable to private corporations and 
the décision in Royal British Bank v. Turquand (1856) 6 El. & Bl. 327, 
Mr. Justice Gray, apparently relying upon such familiar cases as Knox 
County v. Aspinwall, 21 How. 539, 545, 16 L,. Ed. 208, said: 

"And the justices of this court, while dlffering among themselves in the ap- 
plication of the prindple to municipal bonds, hâve always treated Eoyal 
British Bank v. Turquand as well decided upon its facts." 

It is true that this would indicate that the learned justices had not 
always been in harmony as respects the application of the principle 
to municipal bonds; yet we do not find anything to modify the 
Suprême Court décisions before cited in that behalf. 

We are not unmindful of what was said by this court in Rondot v. 
Rogers Tp., supra, 99 Fed. 212, 39 C. C. A. 462, to the effect that 
a purchaser accepting a township bond signed by the superviser and 
treasurer of the township "ran the risk of the actual existence" of 
authority in such officers to exécute the bonds ; but it does not seem 
to bave been claimed by the défendant in that case that an intending 
purchaser was required to examine any of the proceedings of the 
board for the purpose of ascertaining the existence or not of author- 
ity in the signing officers; on the contrary, évidence was offered on 
the question of whether a resolution vesting such authority was ever 
adopted. The précise question then with which we are now concerned 
does not seem to hâve arisen in that case; indeed, in view of the 
décisions of the Suprême Court above cited, we cannot think that it 
was intended in the Rondot Case to décide that if a resolution vesting 



220 SM FBDBSAL BBPORTEB 

authority had exîsted, it was necessary that it should hâve been ex- 
amined prior to the purchase of a bond. It cannot be forgotten that 
one of the peculiar features of the instant case is that the défendant 
in effect admits the existence of authority in the mayor and clerk to 
exécute the bonds, since it insists that if a purchaser had examined 
the ordinance he would hâve discovered this authority, as well as the 
fact that the vote was supervised by an ofïicer subsequently held to 
hâve been without authority. Surely the fédéral rule of décision 
pointed out, shows that such a défense as this is not sufficient to 
discrédit tbc présent bonds. 

[5] It is claimed that the bonds are invalid because of certain 
changes that were made in the form, fixed by ordinance. The 
form so fixed made the bonds payable in New York City, and before 
the bonds were executed the place of payment was made definite by 
the insertion of the name of the Hanover National Bank of that city. 
The other altération complained of is an addition that was made at 
the end of the récitals before exécution of the bonds, to the effect 
that the total debt of the town including the bonds in question did not 
exceed any limit of indebtedness prescribed by the laws of the state, 
and that provision for the levy of an annual tax sufFicient to pay the 
principal and interest upon the bonds as they fall due, had been made 
and would be duly levied upon ail the taxable property in the town. 
We are not impressed with the contention that thèse changes amount 
to material altérations ; neither could aff ect the identity of the con- 
tract or otherwise operate to the préjudice of the town, The first 
operated to the benefit and convenience of the maker of the bonds ; 
and the other in no way changed the nature or the amount of the 
maker's obligation, and, moreover, the bond in its original form 
otherwise distinctly pledges "the full faith, crédit and revenues" of 
the town. Thèse matters seem to us too plain to require citation of 
décisions, though we call attention to the following: As to the first 
insertion. Major v. Hansen, 16 Fed. Cas. No. 8,982 by Judge Drum- 
mond ; Shuler v. Gillette, 12 Hun (N. Y.) 278, 281 ; as to the second, 
Commonwealth v. Emigrant Industrial Savings Bank, 98 Mass. 16, 
17, 93 Am. Dec. 126; Crawford v. Dexter, 5 Sawy. 201, 204, Fed. 
Cas. No. 3,368. 

[6, 7] It is contended that the board of mayor and aldermen never 
authorized the mayor and clerk, or any one else, to deliver the bonds. 
It is fairly to be deduced from the évidence concerning the disposition 
made of the entire issue of bonds ($50,000), that they were sold and 
delivered through proper représentatives of the town to Hays & Sons 
of Cleveland, Ohio; that Hays & Sons paid for 11 of tlie street, 
light and water bonds, and returned to the town the remaining 14 
bonds of that issue which were then sold to others, but tliat the school 
bonds were neither paid for nor returned. It is plain enough that 
the représentatives of the town dealt with Hays & Sons on the theory 
that they were solvent ; this was the mistake and the misfortune alike. 
So far as the record discloses, tliere is no suggestion of fraud in the 
transactions save only through charges made against Hays & Sons 
after discovery of the fact of their insolvency. The décisive point, 



EBBER V. UNITED STATES 221 

however, is that the validity of the plaintiff's title to the securities 
hère involved does not dépend upon the transactions with Hays & 
Sons. We think the finding made by Judge McCall, to the effect that 
the plaintifif became the owner of the coupons in suit for value and 
in due course, is sustained by the évidence ; every coupon sued on 
passed from the hands of Hays & Sons to bona fide holders, before 
maturity and for value, in transactions conducted in due course and 
without notice on the part of such holders of any of the defects now 
claimed and relied on respecting the issue and sale of the bonds. This 
alone brings the case well within the rule laid down in Cromwell v. 
County of Sac, 96 U. S. 51, 52, 57, 59, 24 L. Ed. 681 ; and it is to 
be observed that the bonds there in controversy w^ere issued for the 
érection of a courthouse and were delivered to the contractor, but 
that "a courthouse was never constructed by the contractor or any 
other person pursuant to the contract." Further, the uniform Ne- 
gotiable Instruments Act existed as a law of Tennessee when thèse 
bonds were authorized and issued (Acts Tenu. 1899, p. 140), and 
section 16, p. 144, provides that where a negotiable instrument "is in 
the hands of a holder in due course, a valid delivery thereof by ail 
parties prior to him, so as to make them liable to him, is conclusivelv 
presumed." Buzzell v. Tobin, 201 Mass. 1, 2, 86 N. E. 923; Massa'- 
chusetts Nat. Bank v. Snow, 187 Mass. 159, 163, 164, 72 N. E. 959; 
Madden v. Gaston, 137 App. Div. 294, 296, 121 N. Y. Supp. 951; 1 
Daniel on Neg. Insfe (6th Ed.) § 838. 

[8] We do not understand, in view of the motions made respectively 
by plaintiff and défendants for a directed verdict, that the action of 
the trial judge in treating the case as withdrawn from the jury and 
submitted to the court on both the f acts and law is questioned ; but 
if any of the assignments of error were so intended, they hâve not 
been argued and so must be regarded as waived. 

Upon ail thèse considérations, and with great déférence to the 
learned Suprême Court of Tennessee, we hold that the défendant is 
estopped to deny the récitals contained in the bonds from which the 
coupons in issue were detached. An order will therefore be entered 
affirming the judgment, with costs. 



ERBER V. UNITED STATES. 
(Circuit Court of Appeals, Second Circuit. June 2, 1916.) 

No. 262. 

1. Ckiminal Law (g=3510 — Evidence — Accomplice's Testimony. 

In tlie fédéral courts a conviction maj' be had ou the testlmony of an 
accoiuplice without corroboratlon. 

[Ed. Note. — For other cases, see Crlminal Law, Cent. Dig. §§ 1124- 
1126; Dec. Dig. ®=j510.] 

<g:::oFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Dige^ts & Indexes 



222 234 FEDERAL EBPOKTER 

2. Criminal Law <S=1056(1) — Appeai- — Présentation or Grounds of Ee- 

viEw IN Court Below — Necessity. 

Where no exception Is takeii, the propriety of Instructions cannot be 
reviewed. 

[Ed. Note.— For otlier cases, see Criminal Law, Cent. Dig. §§ 26G8, 2670; 
Dec. Dig. <S=3lOô6(l).] 

3. CONSPiEAOY iS=345 — Proseoution — Evidence — Admissibilitt. 

It was cliarged tliat défendant, witli otliers, entered into a conspiraey 
to purcliase goods on crédit through a flctltlous company, dispose of them, 
and retain tlie proceeds, witliout making any payment, and tbat to ef- 
fect their sclieme défendant and his co-conspirators gave tliemselves and 
corporations in vrliicli tlioy were interested as références for tlie fictitious 
purchaser, answered the références, recommending crédit, acquired tlie 
goods, and dlsposed of them without payment. The mails were shown 
to hâve been used in carrying on thèse frauds. Défendant was conduct- 
ing a business under the uame of the Photo Play Coupon Corporation, 
and in connection with that business purchased goods from dealers who 
BOld to the flctltlous company. One of the conspirators testified that 
letters to their dupes were sent out every week, and that défendant was 
a party thereto. Ileld, that correspondence between défendant and those 
from whom he and the fictitious company purchased was admissible to 
show that he knew of their existence, but it was improper in such case 
to show that défendant had not paid for goods wliich he purchased for 
himself. 

[Ed. Note. — For other cases, see Conspiraey, Cent. Dig. §§ 100-104; 
Dec. Dig. <©=>45.] 

4. Ceiminal Law ©=3424(1) — Evidence — Admissibilitt — Conspirators. 

In a prosecutlon for conspiraey, in which the mails were used in con- 
nection with the seheme to defraud, déclarations made by one of the con- 
spirators, implicatlug défendant at a time when the conspiraey had ended, 
two of the conspirators being in jail and déclarant being under subpœna 
to appear before the grand .iury, were inadmissible a,s against défendant, 
and letters identifled by such déclarant should not be received. 

[Ed. Note.— For other cases, see Criminal Law, Cent. Dig. §§ 1002, 1006, 
1008, 1010; Dec. Dig. <S=5424(1).] 

Hough, District Judge, dissenting. 

In Error to the District Court of the United States for the Southern 
District of New York. 

Emil Erber was convicted under Criminal Code (Act March 4, 1909, 
c. 321) §§ 37, 215, 35 Stat. 1096, 1130 (Comp. St. 1913, §§ 10201, 
10385), of conspiraey, and of using the mails in connection with a 
seheme to defraud, and he brings error. Reversed and remanded. 

This cause cornes hère on a writ of error to review a judgment 
convicting plaintiiï in error (hercafter Called Erber or défendant) on 
four counts of an indictment; three charging violation of section 215, 
and one charging violation of section 37, of the United States Criminal 
Code. 

C. H. Griffiths, of New York City, for plaintiff in error. 
H. Snowden Marshall, U. S. Atty., and F. M. Roosa, Asst. U. S. 
Atty., both of New York City. 

Before COXE, Circuit Judge, and HOUGH and MAYER, District 
Judges. 

iSz^For other cases see same topio & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



ERBES V. UNITED STATES 223 

MAYER, District Judge. Défendant was tried on an îndictment 
containing five counts; four of which charged a violation of section 
215, and one of section 37 of the Criminal Code of the United States, 
Défendant was indicted jointly with seven other persons, viz., Zipper, 
Stavsky, Starr, Mandelbaum, Nadelman (alias Nadel), Shapiro, and 
Wetstein. Starr and Shapiro were never apprehended. Mandelbaum, 
Nadelman, and Wetstein pleaded guilty the day the trial began, and 
were witnesses for the United States, and as to them sentence was 
suspended. Erber, Zipper, and Stavsky were tried. The first count 
was taken from the jury, and on the remaining four counts the jury 
found Zipper and Stavsky not guilty, and Erber guilty, and thereafter 
the court sentenced Erber to serve a term of imprisonment. 

The first four counts of the indictment are ûie same, except that 
a dififerent letter is alleged to hâve been mailed or received in each 
of the separate counts. Thèse counts charge, in brief , that the défend- 
ants formed a scheme to defraud and for obtaining merchandise, by 
means of false and fraudulent prêteuses, représentations, and prom- 
ises, from various concerns by organizing a business to be known as 
the Manhattan Merchandise Company, and in the name of that Com- 
pany to secure merchandise on crédit. It is alleged as part of this 
plan that various persons and companies were given as références who 
would give satisfactory références regarding their prier transactions 
with the Manhattan Merchandise Company, even though they had no 
such transactions; and it is further alleged that the défendants did 
not intend to pay for the goods received, but intended to sell them 
and couvert the moneys received therefor to their own use and ben- 
efit. The fifth count of the indictment charges that each of the de- 
fendants entered into a conspiracy to devise the scheme described in 
the other counts of the indictment. 

The testimony ofïered by the United States showed that the idea of 
starting a company was first talked over between Starr, Shapiro, Na- 
delman, and Wetstein. Starr, Shapiro, and Nadelman previously had 
been associated together in a scheme to start and carry on a business 
known as the Pan-American Supply Company. Nadelman had filed 
the certificate required under the New York statute to conduct a busi- 
ness under the désignation of a "company." A false financial state- 
ment was to be made to the commercial agencies to procure crédit and 
such a statement was made by Nadelman, but the scheme was not suc- 
cessful, and Wetstein, a friend of Nadelman's, went into this busi- 
ness, and Nadelman, as he says, "got out." Wetstein took the name 
of Excelsior Manufacturing Company. 

Nadelman testified that, a few days before he met Erber, he had a 
talk with Starr and Shapiro about starting another business, and Wet- 
stein also testified to a conversation at the Excelsior Company office 
with Starr and Nadelman, at which Shapiro was présent. From this 
conversation it appeared that Nadelman was to open a store and pay 
the first month's rent, that one Kohler, who knew "how to run such 
a business," and "a party up in Forty-Second street" were to pay fur- 
ther expenses, that fifty per cent, of the profits were to go to Nadel- 
man, Starr, Shapiro, and Wetstein, and 50 per cent, to "Forty-Second 
Street." 



224 234 FEDERAL EErOHTER 

Kohler, who, according to the évidence, was the deviser of the 
scheme, or, in any event, an important participator, was not indicted, 
and was not called as a witness, altliough during the trial he was pre- 
sumably in the jurisdiction, and, as the proseciiting attorney swore on 
cross-examination "available at any time," and at large on a suspended 
sentence after conviction of some préviens offense in the District 
Court for the Southern District of New York. 

Erber was conducting a business of his own at the Long Acre Build- 
ing on Broadway near Forty-Second street, known as the Photo 
Play Coupon Corporation and the United Coupon Corporation. This 
business consisted in selling trading stamps and coupons to merchants 
who gave thèse tokens to their customers to induce the public to trade 
at certain stores. So far as the record discloses this business of Er- 
ber was a lawful enterprise and some months before the transactions 
hère referred to, Erber had sued Kohler in the State Court (presum- 
ably the New York Suprême Court), and had obtained an injunction 
against Kohler or his company, which was conducting a rival business. 
What the controversy was does not clearly appear, and in any event 
is hère immaterial. 

In this way (according to Erber), and later through a broker, who 
brought Kohler to Erber on a proposition to take over Kohler's coupon 
business, Erber became acquainted with Kohler, with the resuit that 
Kohler ultimately took desk room in Erber's office. After Erber be- 
came acquainted with Kohler, Mandelbaum, who was Kohler's nephew, 
worked for Erber getting orders for the Photo Play Company. He 
had known Starr for several years. There is no testimony that Erber 
ever saw Zipper or Stavsky. 

Without setting forth at length the détails of their testimony and 
its indefinite character in some respects, the three accomplices, Nadel- 
man, Wetstein, and Mandelbaum, testified in effect that Kohler, Wet- 
stein, Nadelman, Starr, Shapiro, and Erber, at Erber's office, devised 
the scheme whereby Nadelman, under the name of Nadel, was td 
file a certifîcate in the New York county clerk's office under the name 
of Manhattan Merchandise Company, and order goods for which they 
would not pay, giving as crédit références Wetstein's Excelsior Man- 
ufacturing Company, Zipper Bros, of which concern défendant Zip- 
per was a member, and New York Crédit House, of which Stavsky 
was proprietor. Wetstein, Zipper, and Stavsky were to answer thèse 
références favorably, to the effect that they had dealt with Manhattan 
Merchandise Company and that the company had good crédit up to 
certain amounts. The profits were to be divided half and half, as 
stated supra, the "Eorty-Second street" group being Kohler, Mandel- 
baum, and Erber. 

Nadelman filed the certificate, opened a store, goods were ordered, 
and références given and answered as per scheme. The goods were 
not paid for, but were sold at sacrifice priées and the proceeds appro- 
priated. Nadelman testified that he signed letters which were drawn 
up by Erber at night, and the two other accomplices testified, though 
unable to give spécifie instances, that Erber had answered références 
and written letters. The nearest approach to any proof that Erber 



ERBEE V. UNITED STATES 225 

mailed any letters was Mandelbaum's statement referring to letters 
generally, "They were mailed out. I also mailed some. Two or three 
times a week I guess they were mailed." There was no évidence that 
Erber ever received any money and Mandelbaum said : 

"I iiever gave Mr. Erber any money. I never saw any one give Mr. Erber 
any money." 

[1] Nowhere in the record is there a scintilla of évidence corrobo- 
rating the testimony of the three accomplices against Erber, except, 
possibly, in regard to the Pocket Umbrella Company, hereinaf ter men- 
tioned. Such corroboration is not necessary in the United States 
courts, although f requently required by state statutes ; but the absence 
of corroboration gives emphasis to the errors which we think compel 
a reversai of the judgment of conviction in a case where the attitude 
of the accomplices is vividly portrayed by Nadelman's answer on cross- 
examination, "I am trying now to save myself from further imprison- 
ment." 

Erber took the stand, and denied every essential élément of the 
testimony adduced by the government, admitting, however, that some 
17 years prior to bis trial, when a youth of 17 or 18, he had pleaded 
guilty to some charge of embezzlement in connection with his employ- 
ment as a post office clerk and consequently had served a sentence in 
a reformatory. 

With this sharp conflict as to the facts and this uncorroborated tes- 
timony, the case — and properly so — went to the jury. After retiring, 
"the jury," as the record states, "returned into court and stated that 
they were unable to agrée; that they stood six to six. They asked 
for further instructions." We are not enlightened as to what the re- 
quest of the jury was, but from the additional instructions of the trial 
court, it is apparent that further light was sought as to the weight ta 
be accorded to the testimony of accomplices. 

[2] As no exception was taken to the additional instructions, they 
cannot be reviewed, but the incident is mentioned because affirmance is 
urged by the government on the ground that the error infra largely 
relied on by défendant was "merely a fact to be considered with the 
other évidence in the case," and that "it is not believed that there can 
be a question of a doubt as to Erber's guilt." 

Of the numerous amended assignments of error, we think that con- 
sidération of the group relating to the Photo Play Company and of 
the admission of the letters referred to in assignment No. 16 will be 
sufficient. 

[3] 1. One of the firms from which Manhattan Merchandise Com- 
pany had ordered and not paid for goods was the Pocket Umbrella 
Company of Findley, Ohio. After the vvitness Hyan, manager of the 
Pocket Umbrella Company factory, had testified as to transactions 
with the Manhattan Merchandise Company, the following occurred : 

"Q. I show you Government's Exhlblts 37, 38, 39, and 40. Can you tell 
me what those exhlblts are? 

"Mr. Jordan: I objeet. They state for themselves, if your honor please. 

"The Court: He may answer, if he can identify them, whether he ever saw 
them before ; what they are. 

234 F.— 15 



226 234 FEDEEAL KEPOETEK 

"Mr. Jordan: Exception. 

"A. Thls is correspondenee or letters received by tlie Pocket UmTirella Com- 
pany from the Photoplay Coupon Oompariy of New York, an order for um- 
brellas, and the answer. 

"Mr. Jordan: I move that * * ♦ ail the answer be stricken out as in- 
compétent, irrelevant, and immaterial, not embraced withln the issues in tliis 
case. 

"The Court: Who is this communication to? 

"Mr. Koosa: From the Photoplay Coupon Company, wliere Nadelman tes- 
tifies that thèse letters were written. I offer them in évidence to show that 
Erber himself was communleating wlth thèse people at the same time he 
was communicating under the name of the Manhattan Merchandise Com- 
pany, and that he got goods, and dld not pay for them. 

"Mr. Jordan: * » * i gubmit that it can Jiave no bearing upon the is- 
sues involved in this case. 

"The Court: Doesn't it lead up to or introduce any correspondenee between 
them and the Manhattan Merchandise Company? 

"Mr. Jordan: Mot the slightest. Hère was a corporation doing business, 
and the corporation Is doing business now. 

"The Court: AVhat is the purpose of this. 

"Mr. Roosa: I want to show Erber's knowledge of thèse particular' com- 
panies the Manhattan Merchandise Company was doing business with. Hère 
are some letters w'ritten to the Pocket Umbrella Company. Nadelman tes- 
tifles that Erber wrote the letters and signed them. Now hère we hâve the 
Photoplay Coupon Company, letter signed by Erber, correspondlng with this 
same company, and getting goods on crédit, for whicli he does not pay. 

"The Court: Are you going to show anyï connection? Thèse are entirely 
différent transactions, I don't know any reason why Erber should not do 
business with them. 

"Mr. Roosa : I slmply want this correspondenee identifled. 

"The Court: If that is ail, I will overrule the objection, 

"Mr. Jordan: I object to his getting this before the jury. I respectfully 
except. 

"This Govemment's Exhibit 39 was a letter we received from the Photo- 
play Coupon Company, and this is a copy of our roply and Government's Ex- 
hibit 37 is a copy of the letter received, 38 a copy of our reply ; in other words 
the correspondenee that passed between us. 

"The Court: Thèse are merely introduced for identiiication. 

"Mr. Roosa: For identification at the présent time. 

"Q. Did you shlp any goods to the Photoplay Coupon Corporation? 

"Mr. Jordan: That I object to as incompétent, irrelevant and immaterial. 

"The Court: I will overrule the objection, and you may hâve your excep- 
tion. I assume that counsel will connect it. 

"Mr. Jordan: He cannot connect it. 

"The Court: That remains to be seen. If he does not you may move to 
strike it out. This is a conspiracy case, and conspiracies may be shown by 
circumstances and detached instances whieh, if taken ail together, point be- 
yond a reasonable doubt to the corpus delicti ; why, it is compétent testimony, 
the court can never anticipate what effect an isolated fact or circumstances 
might hâve, when considered with ail the other évidence in the case. 

"Mr. Jordan: I except to the ruling. 

"The Court: Very well. 

"Q. (Last question read) A. Tes, sir. Q. What was the value of the goods? 

"Mr. Jordan: Objected to as before. 

"The Court: I will overrule the objection. 

"Mr. Jordan: Exception. 

"A. I think about $250 worth. 

"Q. Did you get pald for those? A. No, sir. 

"Mr. Jordan: Objected to upon the same ground. Overruled. Exception. 

"Q. You say no, sir. A. No, sir." 

Later the witness Taylor, after testifying to transactions of the 
Economy Manufacturing Company of Philadelphia with the Manhat- 



EEBEB V. UNITED STATES 227 

tan Merchandise Company, stated in answer to a question of the pros- 
ecuting attorney : 

"Exhibits 55, 56, 57, 58, 59, 60, 61, C2, 6?., 64, and 65 is correspondence from 
the Photoplay Coupon Corporation and carbon copies of our replies to them." 

Thereupon the record continues : 

"Q. Did you ship them any goods? 

"Mr. Jordan: That I object to as immaterial, Irrelevant, and incompétent. 

"The Court: Do you purpose to connect it up with any one to malse it 
relevant to this Issue? 

"Mr. Roosa: It is the same thing vve had before in regard to the Pocket 
Umbrella Company, to show that Erber was communicating at just about the 
same time with the same companies the Manhattan Merchandise Company 
was communicating with and in the same office. 

"By the Court: Q: Was that correspondence conducted in the same way? 
And the letters sent by mail? A. Yes sir; I personally attended to the re- 
ceipt of the correspondence and know it came through the mail. 

"The Court: I will overrule the objection. 

"Mr. Jordan: I respectfuUy except. 

"By Mr. Roosa: Q. Did you ship any goods to them? A. Just a line of 
samples. They ordered other goods." 

The exhibits referred to were not offered nor received in évidence, 
although in the présence of the jury the statement supra was made, 
"Now, hère we hâve the Photo Play Coupon Company letter signed 
by Erber, corresponding with this same company, and getting goods 
on crédit for which he does not pay." At the conclusion of the gov- 
ernment's case, counsel duly moved to strike out ail this testimony of 
Hyan and Taylor, which motion was denied, and exception taken. 

"In so far as the testimony showed that Erber knew of the exist- 
ence of the Pocket Umbrella Company and the Economy Manufac- 
turing Company, as evidenced by the fact that he had corresponded 
with them, it was admissible for the reason that such testimony was 
some évidence to corroborate the testimony of Nadelman as to the 
writing of letters to the same concerns with which Manhattan Mer- 
chandise Company had dealt. But the testimony as to nonpayment to 
the Pocket Umbrella Company and the shipment by the Economy Man- 
ufacturing Company was entirely irrelevant. In the one case the fact 
that the goods were not paid for was plain, and in the other the pur- 
pose and efïect were clearly to create a like inference. As the trial 
court truly said: 

"We are not suing on an open account. We are not trying to establish a 
debt." 

The resuit of the testimony was to produce an atmosphère unfavor- 
able to défendant because he had not paid his debts, and its admission 
was error within the principle referred to in the Baron transaction in 
Scheinberg v. United States, 213 Fed. 757, 130 C. C. A. 271, Ann. 
Cas. 1914D, 1258. On the évidence there was a complète failure to 
show any unlawful scheme devised by Erber in connection with his 
Photo Play Coupon Company, and so the prosecution in its brief 
admits when, referring to Marshall v. United States, 197 Fed. 513, 
117 C. C. A. 65, it States: 

"In the Marshall Case évidence of a separate contemporaneous fraudaient 
scheme was introduced; in this case oiily one isolated fact which would pos- 



228 234 FEDERAL REPOKTER 

sibly be objeeted to was Introduced, nainely, tliat the goods recelved by tlie 
Photo Play Coupon Company from the Pocket Umbrella Company had not 
been paid for ; not a separate scheme, and not even a criminal offense, but 
merely a fact to be considered In connection with the other évidence in tlie 
case." 

Whatever may be the view of the courts as to the occasion when 
and the extent to which testimony as to similar transactions are ad- 
missible (and this court has expressed its views as to this statiite in 
the Marshall Case, supra), the transaction must always be similar or 
substantially so. Mayer v. People, 80 N. Y. 364 ; People v. Shulman, 
80 N. Y. 373, note ; United States v. Budd, 144 U. S. at page 164, 
12 Sup. Ct. 575, 36 L. Ed. 384; People v. Thompson, 212 N. Y. at 
page 251, 106 N. E. 78, E. R. A. 1915D, 236, Ann. Cas. 1915D, 162; 
Fish V. United States, 215 Fed. at page 551, 132 C. C. A. 132, L. R. 
A. 1915A, 809; People v. Marrin, 205 N. Y. 281, 98 N. E. 474, 43 E. 
R. A. (N. S.) 754; Boyd v. United States, 142 U. S. at page 457, 12 
Sup. Ct. 292, 35 E. Ed. 1077. 

[4] 2. At the conclusion of the cross-examination of Zipper, the 
government offered in évidence seven letters written by merchants to 
the New York Crédit House, asking for information as to the crédit 
of Manhattan Merchandise Company, and containing answers to thèse 
inquiries, signed New York Crédit House, but not satisfactorily prov- 
ed. The court excluded thèse letters. Thereupon the prosecuting 
attorney took the stand and testified to a conversation with Stavsky. 
Stavsky had testified that he had refused tO' answer thèse letters in 
response to Starr's insistence. In the conversation with the prosecut- 
ing attorney there was no statement by Stavsky that he signed thèse 
letters. 

"I asked hlm" testified the prosecuting attorney, "concerning tlie références, 
aud he made no déniai that he had assigned thèse références. * * * i 
will not say he said he did not or did reçoive them, and the reason was that 
I tooli it for granted." 

The contention of the government is somewhat novel. This spécu- 
lation is indulged in : 

"Since the request for références were in fact answered, as shown by the 
testimony of the witnesses receiving them, it is plain to be seen what probably 
happened, if Stavsky's testimony is true — namely, that uixin Stavsliy's re- 
fusai to answer the request for références, they were answered by Starr or 
Erber, in the same nianner as Wetstein testified was donc in tlie case of re- 
quests recelved by his company." 

At the time when this conversation took place, Nadelman and Wet- 
stein had been arrested and were in the City Prison, and a grand jury 
subpœna had been sent to Stavsky who, being ill, had not responded 
and then the prosecuting attorney, with a post office inspecter, visited 
Stavsky's home and held the conversation above referred to. The 
alleged conspiracy manifestly was at an end, and admissions or con- 
fessions by Stavsky then under subpœna to appear before the grand 
jury, were clearly not admissible against his alleged co-conspirators.^ 

1 NoTK.— The récent case of Stager v. U. S., 2.'î.3 Fed. 510, C. C. A. -— . 

while not in point as to the facts, is a useful référence as to déclarations of 
couspirators. 



WESTERN EXTEACTING CO. V. SMIETANKA 229 

Nevertheless, at the urgent solicitation of the government and over 
objection, the seven letters were admitted against Erber and excep- 
tion was taken. 

We :ire of opinion that the admission of thèse letters was error, and, 
as we cannot say upon this record that this évidence and that relating 
to the Photo Play Coupon Company was not prejudicial, the judg- 
ment is reversed. 

HOUGH, District Judge, dissents. 



WESTERN EXTRACTING CO. v. SMIETANKA, Internai Revenue Collecter. 

(Circuit Court of Appeals, Seventh Circuit. Aprll 18, 1916. Rehearing Denied 

May 25, 1916.) 

No. 2272. 

1. Inteknal Revenue cgssSS — Tax — Isjunction — Bill — Sufficiency. 

Allégations that nontax-paid liquor absorbed by wiiisky barrels In 
bonded warehouse evaporated, and was reiilaced in six months after leav- 
ing the warehouse by tax-paid liquor, with which they were, refiUed, and 
that complainaiit extracted li(iuor only froni refiUed barrels, which had 
been out of the warehouse an average of six months. was insufficient to 
show that ail the extracted liquor was tax-exeinpt, for the tax liability 
on barrels under the six-months average was not canceled because other 
barrels were out over six months before being treated. 

[Ed. Note. — For other cases, see Internai Revenue, Cent. Dig. §§ 76-81 ; 
Dec. Dig. ©=>2S.] 

2. Ikternal Revenue <®=328 — Injunction — Bill — Sufficiekcy. 

An allégation that a barrel Is "single-stamped," indicating refllllng 
sinee leaving the warehouse, does not establish that It has been out longer 
than "double-stamped" barrels containing the original warehouse liquor, 
where it is also alleged that retailers reçoive and empty botli Uinds of 
barrels indiscriuiinately. 

fEd. Note. — For other cases, see Internai Revenue, Cent. Dig. §§ 76-81 ; 
Dec. Dig. <g=^28.] 

3. Ikternal Revenue <§=:52S — In.iunction — Bill — Sufficiency. 

Where a bill allèges that handling, transportation, and température 
variations aceelerate the evai>oration and alisorption in whisky barrel 
staves, and expérience suggests other influential factors. it may be con- 
cluded that the time required for the proce.ss varies with conditions. 

[Ed. Note. — For other cases, see Internai Revenue, Cent. Dig. §§ 76-81 ; 
Dec. Dig. ®=2S.] 

4. Equity ©=3l44 — Pleading — Bills — Repugnancy Between Conclusions 

AND Facts. 

Complainant's statement of conclusion that it treated only "single- 
stamped" barrels is not supported by its allégations of fact that those 
supplying it with barrels bave both single and double stamped barrels, 
and that ail distinguishing marks hâve been obliterated before complain- 
ant secures them. 

[Ed. Note. — For other cases, see Equity, Cent. Dig. § 338 ; Dec. Dig. 
<S=>144.] 

©=>For other cases see same topic & KEY-NUMBER in ail Key-Kumbered Digests & Indexes 



230 234 FEDERAL REPORTER 

5. Inteunal Revenue cg=»i2 — Taxes — Liability of Mixtube to Tax. 

Where It Is Impossible to ascertain the proportions of tax-pald and 
nontax-paid Uquor in whisky barrel staves, one who extracts and markets 
the mixture is taxable upon the entlre amount. 

[Ed. Note.— For other cases, see Internai Eevenue, Cent Dlg. §§ 30-32 ; 
Dec. Dig. ®=5l2.] 

6. Inteenal Revenue ®:=12-^Enforcement of Tax — Régulations — Reason- 

ablbness. 

There is nothing imreasonable in the piirpose of Internai revenue or- 
ders requirlng proof of certain facts to détermine whether liquor ex- 
tracted from empty whisky barrels was tax-paid. 

[Ed. Note.— For other cases, see Internai Revenue. Cent. Dlg. §§ 30-32 ; 
Dec. Dig. <&=3l2.] 

7. Inteenal Revenue <S=ï28 — Enfobcement of Tax — Régulation — Wno mat 

Question. 

Where complainant does not itself know. and cannot prove, what pro- 
portion of the Uquor It extracts from empty whisky barrels is tax-paid, 
It has no interest in the method of proof required before the extract is 
stamped tax-paid. 

[Ed. Note. — For other cases, see Internai Revenue, Cent. Dlg. §i 76-81; 
Dec. Dig. ®=s28.] 

Appeal from the District Court of the United States for the Eastern 
Division of the Northern District of Illinois. 

Bill by the Western Extracting Company against Julius F, Smie- 
tanka, Collector of Internai Revenue at Chicago, 111., and others. From 
a decree dismissing the bill on motion of the named défendant, com- 
plainant appeals. Affirmed. 

Appellant brought a suit in equîty against the Secretary of the Treasury, 
the Commissloner of Internai Revenue, and the Collector of Internai Reve- 
nue at Chicago to enjoin the enforcement of certain orders of the Bureau of 
Internai Revenue of May 18, 1910. The Collector alone appeared, and moved 
to dismlss the bill for want of equity appearing on its face. The court de- 
creed dismissal accordingly, and from such decree this appeal is prosecuted. 

The bill charges: That slnce 1894, and up to July 1, 1910, when the orders 
complained of went into efCect, appellant was In the business of buying from 
retall liquor dealers and others, whisky barrels which they had emptied, 
shlpping them to its plant at Chicago, where they were treated by sorne 
process whereby the spirits which had been absorbcd Into and were held in 
the pores of the wood of the barrels (eommonly called "soakage") was recov- 
ered therefrom, converted into commercial grain alcohol, and sold without 
payment by appellant of the statutory tax of $1.10 per gallon on dlstilled spir- 
its. That for doing such business the Bureau of Internai Revenue issued 
yearly to appellant a rectlfier's license for the recovery, and a wholesale liquor 
dealer's license for the sale of the product The bill charges that appellant 
thus treated, and proposes In the future to treat, only barrels known as "sin- 
gle-stamp" barrels, which had theretofore been "double-stamp" barrels, the 
distinction between which wlll appear from the provisions of the revenue law 
relating to tax on dlstilled spirits, and the signiflcance thereof from the fur- 
ther statement of the facts. 

Section 3247, Rev. Stat. TT. g. (Comp. St. 1913, § 59S1), deflnes a distiller, and 
section 3248 (section 5982) defines dlstilled spirits. Section 3251 (section 
59S5) provides for a tax of $1.10 per gallon to be pald the government on dls- 
tilled spirits. Elaborate and detailed provisions are made for governmental 
supervision of distilleries and the storage and handling of the product, to 
Insure the payment of the tax. Section 3271 (section 6009) makes provision 
for bonded warehouses wherein the product of distilleries must be stored un- 
der control of the Collector. Section 3287 (section 6028) provides that on re- 
ceiving the barrel in the warehouse it shall be gauged and a stamp affixed 

€=3For other cases see same toplc & KI3Y-NUMBER In ail Key-Numbered Digesta & Indexe» 



WESTEEN EXTRACTING CO. V. 8MIETANKA 231 

tnereon showlng the quantlty, date of recelpt, name of distiller, and sériai 
niimter of cask, and that on the cask shall be eut the name and quantlty of the 
contents. It is provlded (3251) that the spirlts may be kept In the warehouse 
not exceedlng eight years, and that the tax must be paid on the quantlty In 
the barrel shown on regauging at the time of removal from warehouse, and 
sections 3294 and 3295 (sections 6036, 6037) make provision for regauging for 
withdrawal, and payment of the tax, and then afflxing another stamp on the 
barrel showing the quantlty then contalned in it on whlch the tax bas been 
paid, name of person paying the tax, and person to whom and place where It 
is to be dellvered on withdrawal. The barrel must then be taken from the 
warehouse (section 32S8 [section 6029]). At the time it is taken from the 
distiller's warehouse the barrel has on it the two stamps described, and is 
then what the bill terms a "double-stamp" barrel. The bill charges that the 
double-stamp barrel on leaving the warehouse would go to one of the three 
classes pi-ovided by law — the rectifier, who combines, mixes, or otherwise 
changes the product, the Wholesale liquor dealer, who disposes of it in 
quantities of more than five gallons, and the retail liquor dealer, who sells it 
in quantities less than five gallons. 

Section 3318 (section 6100) provides that, before a rectifier or wholesaler 
draws off or adds to or alters any part of the contents of the barrel, he must 
enter In a booli of the form provlded by the Bureau the Information afforded 
by the stamps, marks, and brands then on the barrel, and must return monthly 
to the CoUector a transcript of such entries. On emptying the barrel he must, 
under heavy penalty, efface and obliterate ail the marks, brands and stamps 
then on the barrel. Section 3324 (section 6105). Sections 3320, 3322, and 3323 
(sections 6102-6104) provide for gauging barrels flUeJ by rectiflers, and for 
afl3sing stamps to barrels sent ont by them or by wholesalers whlch contairi 
spirlts theretofore received from the distiller's warehouse. After the barrel 
thus received from the distiller is emptied, and ail stamps and brands thereon 
efCaced and obliterated, the barrel may again be used by the rectifier or 
wholesaler for containing distilled spirlts, the same as an entlrely new barrel ; 
but when so used, like any other barrel so fiUed by the rectifier or whole- 
saler, it must bave a staxnp aflixed thereon to indicate that the spirlts con- 
talned therein bave been tax-pald. When such a barrel is so stamped the 
bill denomiiiates it a "single-stamp" barrel. When tlie retail liquor dealer 
or other person gets the barrel from the rectifier or wholesaler, he must on 
emptying the barrel likewise efface ajid obliterate ail marks, brands, and 
stamps thereon, and the bill states it is thereafter that the empty barrels are 
purchased by appellant. 

The blU States that appellant will buy only slngle-stamp barrels whlch had 
theretofore been double-stamped, that an average of six months elapses after 
such barrels leave the distiller's warehouse before they reach appellant for 
treatment, and that in less than six months the soakage contalned In the jwres 
of the wood when the barrel leaves the warehouse wlU hâve evaporated from 
the outside of the barrel, and bave been whoiUy replaced by soakage from the 
tax-paid contents afterwards put in It by the rectifier or wholesaler, and that 
therefore the soakage whlch appellant proposes to recover, has in fact paid 
the tax. 

It is stated that in 1898 Commlssloner of Internai Revenue Scott Issued an 
order in the form of a letter wherein it was provided that persons proposing 
to recover soakage from such barrels must bave a rectifier's license and must 
make application to the CoUector on prescrlbed forms that they propose to 
recover the soakage from a given number of barrels, and expect to recover 
a given quantity of spirlts therefrom ; that thereupon a gauger was to be sent 
to inspect the barrels, and such as he consldered proper for treatment mlght 
be treated accordlngly, and when the contents were recovered they were to ne 
barreled, gauged, stamped and marketed wlthout payment of any tax, and 
that ever since appellant was in thls business up to July 1, 1910, such was the 
practice; that on May 18, 1910, Commlssloner Cabell issued orders discon- 
tinuing thls practice, and provlding that after July 1, 1910, no one may ex- 
tract soakage from empty spirlt barrels unless he first supply to the CoUector 
affirmative proof as to each barrel that ail the spirlts contalned in Its staves 
hâve been properly tax-paid, and requiring also that rectifiers, such as ai>- 
pellant, must tiereafter make the same retums as ordinary rectiflers are re- 



232 234 FEDERAL Rm'OKTKU 

quired to malte as to tlie history of tlie spivits rectified as sliown tiy the 
stamps and brands on the barrel. 

The bill charges that, owing to the reqiiired effacement of ail the marks 
and brands on the barrel, it Is impossible to malie this return, or to supply 
the requested information as to each barrel ; tliat appellant's business was 
built up under the prior practice, and that in reliance upon its continuance ap- 
pellant has invested in its said business .$100.000, and others in like business 
an amount approxiniatiug $1,000,000, and that, if sueh orders of May 18th 
are upheld, the business cannot be carried ou, and tlie investnient tlierein will 
be practically lost ; and that in f act since July 1, 1910, when the orders went 
into effect, appellant's business has been wliolly suspended. It is claimed in 
the bill that the long uniform practice of the Bureau in dealing with tins busi- 
ness is such a construction or récognition by the go'V'ernment as will entitle 
appellant to remedy by injunction to prevent the eiiforcement of the orders of 
May 18th. 

D. S. Wegg, of Chicago, 111., for appellant. 

Charles F. Clyne and Joseph B. Fleming, both of Chicago, 111., for 
appellee. 

Before BAKER, KOHLSAAT, and ALSCHULER, Circuit Judges. 

ALSCHULER, Circuit Judge (after stating the facts as above). 
That soakage recovered from the slaves of empty whisky barrels must 
before entering into commerce bear the government tax on spirits of 
$1.10 per gallon was decided by this court in Hunter v. Corning & Co., 
86 Fed. 913, 30 C. C. A. 483. There Corning received from the dis- 
tiller's bonded warehouse for rectification the barrels of whisky, emptied 
thcm, and recovered the soakage from the barrels. It was assumed 
that the spirits there recovered were a part of such as had entered 
into the pores of the barrel staves while in the bonded warehouse, and 
that therefore no tax had in f act been paid on such soakage, since un- 
der the law the tax actually paid was on the free, pourable contents 
of the barrel as gatiged at time of removal from the warehouse. As 
to this it is f rankly stated in the brief for appellant : 

"We admit in this bill that, at the time a double-stamped barrel leaves a 
distiller's bonded warehouse, the liquid then coutained in the pores of tlie 
wood of such barrel is the original distilled spirits, and that the gênerai tax 
of $1.10 per gallon has not been paid thereon by the distiller. We further ad- 
mit that under Hunter v. Corning, 86 Fed. 913, ;iO C. C. A. -im. it is the law 
of this circuit, while such décision stands, that if such double-stamped bar- 
rel be practically treated at once by the extractor, he should pay the gên- 
erai tax upou the sinrits wliich he obtaius from the pores of tlae wood of such 
double-stamped barrel." 

The relief sought by the bill herein is bottomed on the foundational 
allégation that the soakage proposed to be extracted by appellant is in 
fact tax-paid, and should not, on being recovered for commerce, again 
be taxed. 

[1] The allégations of fact, from which the conclusion of tax pay- 
ment is claimed to follow, are that appellant, in its sole business of 
recovering the soakage froni the barrels, buys of retail liquor dealer: 
and others only single-stamp barrels (as above defined), and that such 
single-stamp barrels, when coming to appellant for treatment, hâve been 
out of the warehouse an average of six months or more, and that 
dtiring such six months ail the nontax-paid spirits in the staves at time 



WESTERN EXTRACTINa CO. V. SMIETANKA 233 

of withdrawal from the warehouse will hâve evaporated from the out- 
side of the barrel, and hâve been whoUy replaced by absorption from 
the tax-paid contents of the barrel. 

Conceding the process of evaporation and absorption to be as stated 
in the bill, the conclusion that the tax has been paid on the soakage 
in the barrels when they corne to appellant, under the bill, dépends in 
large measure on the time the barrels hâve been away from the ware- 
house. As to this ail the bill charges is that "the average time for such 
period is not less than six months," and in appellant's brief it is stated 
"an average of six months' time elapses as to every double-stamped 
barrel which has been changed into a single-stamped barrel from the 
date it leaves the distiller's warehouse and is purchased by us." 

But what has the average to do with the case? The fact that six 
months is the average would imply that in some cases the time is 
longer, and in others shorter, than six months. Indeed, for anything 
that appears in the bill to the contrary, barrels may leave the distiller's 
warehouse, corne into the hands of the wholesaler or rectifier, be 
emptied, replaced by tax-paid liquor and single-stamped, and the barrel 
finally be emptied and sold to appellant, ail within a period of a very 
few vveeks, or even days, and in such case the tax on the soakage would 
clearly be unpaid. 

Suppose a consignment of just such barrels were treated by appel- 
lant, and 1,000 gallons of nontax-paid spirits recovered from them. 
Should this under any circumstances be permitted to enter commerce 
without paying the tax? Then suppose another such consignment 
cornes for treatment, where the intervening time is a year, and a like 
amount recovered which may be considered tax-paid because of the 
evaporation and loss of ail the original nontax-paid soakage and re- 
placement by the tax-paid contents. It is true that as to the two lots 
the average of time intervening between their leaving the warehouse 
and reaching appellant would be six months ; but how would this af- 
fect the right of the government to hâve its tax on the first lot? The 
loss to the owner through absorption of the tax-paid liquor, does not 
give rise to any claim for a refund of the tax which has been paid 
on what has been so lost, whereby it might with show of reason be 
claimed that the tax due the government on the first lot might be bal- 
anced against the counterclaim arising on the second. Under such 
circumstances the very most that could be claimed is that the first lot, 
not having paid the tax, should pay it, and the second, having once 
paid the tax, ought not again to be required to pay. So if the soakage 
in one lot or barrel is tax-paid, this fact would not in any way relieve 
from the liability to pay the tax on the soakage from any lot or barrel 
on which the tax has not been paid. 

[2] Kurthermore, from the allégations of the bill, the fact that a 
barrel is single-stamped does not of necessity require the conclusion 
that it has been materially longer out of the warehouse than the double- 
stamp barrel. The bill states that the barrel becomes single-stamped 
when the distiller's double-stamp package is emptied by the whole- 
saler or rectifier, refilled with tax-paid spirits, and stamped as tax- 
paid — the two stamps theretofore thereon being eflfaced. But it states 



234 234 FEDERAL REPORTER 

also that distiller's double-stamp packages are aiso sold directiy to the 
retail dealer, and to others, who may finally empty them, arid who may 
hâve on hand, and may empty indiscriminately, double and single 
stamped barrels, without rule or probability as to which was first 
emptied. So the allégation that appellant uses only single-stamp bar- 
rels does not, under the facts charged in the bill, necessarily distin- 
guish, as between single and double stamp barrels, which was longest 
out of the bonded warehouse. 

[3] But the bill states yet other éléments than that of time as bear- 
ing on the rapidity of evaporation, in the words following : 

"That such single-stamped barrels are held by such rectiflers and the sald 
Wholesale Uquor dealers uiitil sold, and such barrels are carried or traiis- 
ported by steam cars, wagons, trucks, or other vehicles, and sometlmes by ail 
of them, to divers points and distances, and they are handled and rehandled 
divers times, and become exposed to varying degrees of température, each and 
ail of which largely increase and accelerate the aforesaid process of evapora- 
ti»n and absorption, before any of such barrels become empty in the hands 
of the qualifled retail Uquor dealers or other persons, who hâve poured out, 
used, or consumed the contents thereof." 

Ordinary expérience would suggest yet other materially influential 
conditions, such as the kind and quality of the material of the barrel, 
as bearing on the porousness of the wood, and the nature of the place 
where the barrels are kept after removal from the warehouse — whether 
in a closed, dark, damp place, which would retard, or in a place open, 
light, and airy, which would facilitate, evaporation. And so from the 
bill itself it may be concluded that under some conditions the evapora- 
tion may be considérable in a short time, and under others, may be 
slight during a much longer period. 

[4] While the bill allèges that appellant treats or proposes to treat 
single-stamp barrels only, and that single-stamp can be readily distin- 
gfuished from double-stamp barrels, such statements of conclusions are 
dépendent on the allégations of fact upon which they are predicated. 
In the bill it is stated : 

"That it is Impossible to ascertain or state the exact period of time which 
elapses as to each barrel from the date of its removal from the distillery 
bonded warehouse to the date your orator removes from the pores of the 
wood thereof the llquid contained therein." 

The reason for such impossibility is well stated in appellant's brief 
as f ollows : 

"It is true that, as ail marks, brands, and stamps hâve been efCaced from 
each barrel we buy before Its purchase by us, as provided by section 3324, 
Rev. St. [Oomp. St. 1913, § 6103], it is impossible for us to trace each barrel 
and show the exact lengtli of time which lias elapsed since It left the dis- 
tiller's hands." 

There is nothing distinctive about the barrels themselves, as between 
single and double stamp barrels. Both kinds corne into the hands of 
those who sell to appellant. If the stamps and brands remained there- 
on, the information would be readily available to détermine, not only 
when and from what distillery the barrels were taken, but also whether 
the barrels were single or doublé stamped, though in such case the 
now single stamp would probably be denominated triple stamp. But 



■WESTEKN EXTEACTINQ CO. V. SMIETANKA 235 

the oblitération of ail stamps and brands makes ail barrels then look 
alike, and the same conditions which make it impossible to know when 
the barrels left the warehouse make it alike impossible for appellant 
to know which of the empty barrels were single and which double 
stamped ; and it is not apparent f rom the bill how a gauger, who in- 
spects the barrels when they come into appellant' s possession to déter- 
mine whether they may be treated tax-free, can know any more about 
it than appellant. 

But appellant urges that, as a necessary resuit of the continuous 
process of evaporation and absorption after the barrels leave the ware- 
house, to use the language of its brief : 

"There is no way of ascertaining from time to time by the day, week, or 
month just how much, if any, of the distilled spirits which formed the original 
soal-Lage remain in tlie pores of the wood of each barrel. Hence it is very 
clear that the tax which should be paid by the extractor, if any, must vary 
from time to time, or constantly shift as the length of time increases from 
the date the barrel leaves the warehouse, and also as such evaporation may 
be enhanced by modifications in beat, changes in position, through handlings 
by différent persons, transportation, and the like. Certainly a question would 
arise in each barrel as to what quantity of the original spirits which had 
not paid the tax remained in the pores of the wood thereof." 

This admitted uncertainty as to each barrel is necessarily reflected 
in any accumulation of barrels, and surely does not warrant the alleged 
conclusion that the soakage in any number of barrels is tax-paid. 

[5] What is the rule governing such a condition of uncertainty? In 
appellant's brief it is stated to be : ■ 

"Any doubt as to such quantity must be solved, under the authorities, in 
favor of the extra.etor. There is no way in which such quantity eould be 
ascertained, and any attempt to coUect a tax thereon would be void." 

We find no authorities which support such a doctrine. If under 
the statute it were doubtful whether or not spirits or any other arti- 
cle should be taxed "at ail, such doubt would inure to the benefit of the 
one sought to be taxed. But there is no doubt of the statute requiring 
ail spirits included in its provisions to pay the tax. The question hère 
is not one of statutory construction, but of proof whether or not the 
tax has been paid ; and we are of the opinion that one asking the gov- 
ernment to stamp, as tax-paid, spirits to be marketed in compétition 
with tax-paid goods, must présent to the authorities affirmative proof 
that the tax has been paid; and such requirement is not satisfied by 
showing a state of facts under which it is unknown or unknowable 
whether ail or any part is paid. 

If, when the barrels leave the warehouse carrying in the staves 
spirits on which no tax has been paid, and are so handled that at a 
given time thereafter it cannot be known how much, if any, of the 
soakage in the staves has paid the tax, the owner is very much in the 
situation of one who willfully and indistinguishably mixes and con- 
fuses his own goods with those of another. The mixer must bear any 
résultant loss — often to the extent of losing his own goods. If, as 
applied to circumstances like those hère presented, the rule were other- 
wise, one who would mix some tax-paid alcohol with a quantity on 
which no tax has been paid would be entitled to hâve the whole mass 



23C 234 FEDERAL EEPORTEU 

treated as tax-paid, unless the government could affirmatively show 
the exact proportions of each. 

It is our view that, when tax-paid spirits are mixed or suffered to 
be mixed with nontax-paid spirits. so that the proportion of each 
cannot be ascertained, one undertaking to market the mixture must 
pay tax on the vvhole. In an early case it was held: 

'"That the paymcnt of the tax ou ail the spirits not having been proven, 
there beiiig a mixture of frauduleiit spirits with spirits that had paid the 
tax, tlie whole lot was legally forfeited to the use of the government." United 
States V. Mfty-Four Barrels of Distilled Spirits, 25 Fed. Cas. 1074. 

[6, 7] The bill allèges that on the faith of the Scott letter and oth- 
ers, and the long practice thereunder of permitting such soakage to 
be recovered and marketed without requiring payment of any further 
tax thereon, there has been a long acquiesced in practical construction 
of the statutes and rules governing such a situation by those charged 
with supervision over and collection of the internai revenue, and that 
it would now be highiy inéquitable to permit this practice to be changed 
as against appellant, which has, in reliance thereon, invested $100,000 
in its plant which would become practically valueless. Many cases 
are cited in appellant's brief to the gênerai efifect that, where a statute 
is of doubtful meaning, long and uniform construction and practice 
thereunder by the department or officers of the government charged 
with its en forcement is entitled to great weight, and will ordinarily 
be accepted and followed by the courts. But is there such a question 
or principle hère involved? 

The statute plainly prescribes the records to be kept and returns to 
be made by rectifiers in order to afford proof to the ofificers charged 
with carrying out the law that the rectifier handles only tax-paid spir- 
its. In the practice relied upon, the statute was departed from in 
dealing with appellant, notwithstanding he operated under a rectifier's 
license. In its case proof other than that indicated by the statute was 
accepted as évidence that the spirits it dealt with were tax-paid. As- 
suming that the plain provisions of the statute might be departed from 
in favor of one holding a rectifier's hcense, who is handling spirits on 
which the tax has unquestionably and provably been paid, but who 
cannot make proof in the particular form and manner which the stat- 
ute prescribes for ordinary rectifiers, yet the question hère presented 
is not one of statutory construction or interprétation, but of proof 
as to whether or not the tax has in fact been paid on the soakage which 
appellant would recover. If appellant cannot comply with the statute, 
it surely can hâve no vested right or interest in the kind, degree, or 
character of proof that may properly be required to establish the fact 
of payment before the government shall stamp the recovered product 
as tax-paid. If expérience has convinced the Bureau that under the 
long-existing practice sufficient proof was not afiforded that the tax 
had been paid on spirits which appellant would market as tax-paid, no 
reason is apparent why it may not amend and change the practice, so 
that the government may be amply secured in its revenues. That such 
was the expérience claimed by the Commissioner to be the reason 
for the change in the practice abundantly appears from one of tlie 



WESTERN EXTRACTING CO. V. SMIETANKA 237 

orders of May 18, and a letter of the Commissioner of March 31, 
1910, referred to in the bill. A différent question might be presented 
if it were now undertaken to unsettle and impeach completed transac- 
tions under the old practice. But the orders complained of hâve référ- 
ence only to the future. 

It is urged that the May 18th orders are unreasonable, because their 
enforcement would in effect prevent appellant from carrying on its 
business, since, owing to the required effacement of ail stamps, marks, 
and brands on the empty barrels before appellant buys them, it cannot 
supply the information demanded. But according to the bill the prés- 
ence or nonpresence in the staves of nontax-paid alcohol dépends 
mainly on the time which has elapsed between withdrawal from the 
warehouse and treatment by appellant. The orders require proof of 
the facts from which this may be determined. Surely there is nothing 
unreasonable or improper as to the purpose of the orders ; and if the 
prescribed method cannot be complied with, the bill suggests none 
other, except the untenable assumption of "average of time." The 
effect of the orders on appellant's business is not an exclusive test of 
their reasonableness. In a letter, referred to in the bill, of July 28, 
1905, of Commissioner Yerkes, it is said : 

"It is, of course, évident that ail spirlts in the staves of a new single- 
stamped barrel which has been filled with tax-paid spirits must consist of 
spirits on which the tax has been paid ; and consequently no further tax can 
be collected on such spirits when recovered from the staves." 

If it were proposed to treat such new barrels which could clearly 
and certainly be proved to be such, a différent question might arise. 
But hère the bill expressly disclaims that appellant treats new barrels 
into which the rectifier or wholesaler has put tax-paid spirits, but, on 
the contrary, allèges that the barrels it proposes to treat are those 
which, before being refilled by the rectifier or wholesaler, and sent out 
as single-stamp barrels, were in the bonded warehouse, on leaving 
which the soakage contained in the staves was not tax-paid. And 
since from the bill itself it is apparent that appellant does not and 
cannot know, and therefore cannot prove, whether the soakage in 
such barrels at the time of extraction is tax-paid, it is quite immaterial 
to appellant what rule on the subject the Bureau may promulgate. So 
far as appellant is concerned it could not in any event, under the facts 
of the bill, affirmatively show that the soakage it proposes to extract 
and market is tax-paid, and it is therefore not affected by the précise 
form, kind, or degree of proof which the government may require to 
show that the tax is paid. Even if the orders might be said to be un- 
reasonable as to barrels which never held nontax-paid spirits, that is 
clearly not the case as to barrels within the purview of the bill. 

Holding as we do that the government has in any event the right 
to require satisfactory proof that the tax on the soakage in any and 
ail barrels has been paid before same may be extracted, stamped, and 
marketed as tax-paid, and finding from the bill that appellant in its busi- 
ness as described does not and cannot and will not know whether or 
not the tax has been paid on the soakage it proposes to extract, we 
conclude that tlnp bill was properly dismissed for want of equity, and 
tht decree of the District Court is accordingly affirmed. 



238 234, FEDERAL REPORTEE 



UNITED STATES FIDELITY & GUARANTY CO. v. TJNITED STxlTES & 
MEXICAN TRUST CO. et al. 

(Circuit Court of Appeals, Elghth Circuit. June 16, 1916.) 

No. 4482. 

(Syllabus hy the Court.) 

1. MOETGAGES C=»151(l) LlENS PRIORITY — EQUITABLE CLAIIT. 

:■■: Suretles on supersedens tonds glven at tbe request of the mortgagor to 
stay the collection of judgments on unsecured claims, who, by affirmance 
of the iudgments, are compelled to pay. or become llable to pay, the 
Claims, do not thereby secure any préférence in equlty oyer bondholders 
secured by a prior recorded mortgage on the property and inconie of the 
mortgagor. 

[Ed. Note. — For other cases, see Mortgages, Cent. Dig. § 816 ; Dec. Dig. 
<S=ïl51(l).] 

2. MOKTGAGES ©=5l51(l) LiENS — PBIOEITT EnHANCING SeOURITT. 

The fact that liabilities or guaranties incurred, work done, or money or 
materials furnlshed at the request of the moi'tgagor préserve the mort- 
gaged property, enhance the security of the mortgagees and keep the 
property operating, Is no ground for displaclng the prier lien of the mort- 
gagees, because the record of the mortgage is full notice to ail that such 
acts wlll ordinarily and naturally hâve that effect and will subject the 
enhanced value to the superior lien of the recorded mortgage. 

[Ed. Note. — For other cases, see Mortgages, Cent. Dig. § 316 ; Dec. Dig. 

<S=:>151(1).] 

Appeal f rora the District Court of the United States for the District 
o£ Kansas; John C. Pollock, Judge. 

Bill by the United States & Mexican Trust Company and others 
against the Kansas City, Mexico & Orient Raiiroad Company and 
others to foreclose a mortgage, in which the United States Fidelity 
& Guaranty Company intervenes. From a decree of foreclosure, al- 
lowing the claim of the intervener as a gênerai demand, but denying 
it as an équitable préférence over the holders of bonds secured by the 
mortgage, the intervener appeals. Affirmed. 

Jean Madalene, of Wichita, Kan. (S. B. Amidon, of Wichita, Kan., 
on the brief), for appellant. 

Samuel W. Moore, of Kansas City, Mo. (Samuel Untermyer, of 
New York City, on the brief), for appellees. 

Before SANBORN and SMITH, Circuit Judges, and REED, Dis- 
trict Judge. 

■ SANBORN, Circuit Judge. This is an appeal by the United States 
Fidelity & Guaranty Company, surety on a supersedeas bond of the 
Kansas City, Mexico & Orient Raiiroad Company, from a decree of 
the District Court allowing its claim in proceedings to foreclose the 
prior mortgage on the property of the Raiiroad Company as a gên- 
erai demand, but denying it an équitable préférence over the holders 
of the bonds secured by the mortgage. The mortgage securing the 
bonds covered the property, the after-acquired property, and the in- 

(g=3For other cases see same topic & KEY-NDMBER in ail Key-Numbered Digests & Indexes 



UNITED STATES F. & G. CO. V. UNITED STATES & M. T. CO. 239 

corne of the Railroad Company. It was made and recorded about 
February 1, 1901. On December 6, 1912, in the suit to foreclose the 
mortgage, a prior receivership of the property of the Railroad Com- 
pany was extended over the foreclosure suit. A decree of foreclo- 
sure was rendered on February 2, 1914, in which the court adjudged 
that the mortgage was a first lien upon the property and income of the 
Railroad Company to secure the payment of bonds issued thereunder 
to the amount of $24,538,000, and that the property be sold, and it 
was subsequently sold under the decree for $6,001,000 in this fore- 
closure suit. The Fidelity Company intervened, and prayed that the 
court would order its claim to be paid out of the proceeds of the sale 
of the property in préférence to the claims of the bondholders secured 
by the mortgage. 

Its claim arose in this way: One Madison, on June 19, 1911, re- 
covered a judgment in one of the district courts of Kansas against 
the Railway Company, on account of a personal in jury caused by 
the négligence of servants of the company, for $9,000 and costs, from 
which the Railway Company appealed. At the request of the Rail- 
way Company the Fidelity Company made and filed a supersedeas 
bond to stay the collection of the judgment, the judgment was sub- 
sequently affirmed, and the Fidelity Company paid the penalty of the 
bond, $10,247.05. 

[1] The first reason presented to this court for the reversai of the 
decree below is that the court failed to investigate, fix, and enforce the 
liability of the stockholders of the Railway Company to pay for their 
stock and to apply the payments that should thus be collected to a 
liquidation of the mortgage bonds. But the Fidelity Company pré- 
sents this ground for relief for the first time in this court without 
pleading it in its intervening pétition, or introducing any évidence 
below to sustain it, and without giving the trustée of the bondholders 
any notice of such a claim, or any opportunity to challenge it, or to 
produce évidence to defeat it in the court below. It is clearly too late 
to urge this contention for the first time now, and the considération 
or maintenance of it by this court under thèse circumstances would 
be unjust and inéquitable. 

The second argument is that the judgment in Madison's personal 
injury suit was rendered on June 19, 1911; that at that time and 
when the supersedeas bond was given the Railway Company was in 
def ault in the payment of its interest on its bonds, and was insolvent ; 
that the Fidelity Company had no knowledge of thèse f acts ; that if 
it had known them it would not hâve signed the bond, but that the 
holders of the bonds and coupons neither foreclosed their mortgage 
nor gave any notice of the financial conditions of the Railway Com- 
pany to the Fidelity Company before it made its bond; and that in 
view of thèse facts they are estopped from maintaining the superior 
lien of their prior mortgage. The proof, however, leaves no doubt 
that there had been no def ault in the payment of the interest on the 
bonds when the supersedeas bond was given. Ail the coupons which 
were due, and which had been presented at their respective places of 
payment, had been paid. A small percentage of the bondholders had 



2i0 234 FEDERAL REPORTER 

not yet presented their overdue coupons, and those were still unpaid. 
:Nor would the facts, if they had existed, that the Railway Company 
was insolvent, that the bondholders knew of this insolvency and the 
Fidelity Company did not, that the bondholders did not inform that 
tompany of the insolvency, and that the Fidelity Company wouli 
not hâve made the bond if it had been aware of the insolvency, hâve 
estopped the bondholders from enforcing the superiority of their mort- 
gage lien. If their lien had been a secret one, there might hâve been 
some basis for a claim of an estoppel; but their mortgage was of rec- 
ord, and had been of record for about 10 years, and that record, un- 
t*jr the lavv which made it a public record, was a flaming signal of 
danger that charged the Fidelity Company and ail others dealing with 
the Railway Company with f ull knowledge of the ternis and légal effect 
of the mortgage and of the bonds it secured. After the bondholders 
had recorded their mortgage no duty rested upon them to notify 
the Fidelity Company, or any other party dealing with the Railway 
Company, of any default in the payment of their bonds or coupons, 
or of any insolvency or solvency of the Railway Company. They had 
secured themselves against the risk of the insolvency of the Company 
by their mortgage, and by its record they had given ail men légal 
notice of that fact, and of the further fact that every party who there- 
after dealt with the company took its own risk of the insolvency of 
that company and of its inability to pay any debt or discharge any 
obligation it contracted in the face of the record notice of the prior 
and superior lien of the mortgage. The bondholders were not es- 
topped from enforcing their superior lien by the facts or the alleged 
facts of this case. 

[2] It is next insisted that the Fidelity Company is entitled in 
equity to a préférence over the holders of the bonds, because its bond 
preserved and enhanced tlie value of the property to the bondholders 
secured by the mortgage. But the fact that liabilities or guaranties 
incurred, money or materials furnished, or work done at the request 
of the mortgagor préserve the mortgaged property and enhance the 
security of the mortgagees, is no ground for displacing the prior lien 
of the mortgagees for the reason that the record of the mortgage is 
plenary notice that such acts will ordinarily and naturally bave that 
effect, and will subject the enhanced value to the superior lien of the 
recorded mortgage. Dunham v. Railway Company, 1 Wall. 254, 267, 
17 h. Ed. 584; Railroad Co. v. Cowdrey, 11 Wall. 459, 464, 481, 482, 
20 L. Ed. 199; Railway Co. v. liamilton, 134 U. S. 296, 301, 10 Sup. 
Ct. 546, 33 E. Ed. 905; Porter v. Pittsburgh Bessemer Steel Co., 
120 U. S. 649, 671, 7 Sup. Ct. 1206, 30 E. Ed. 830; Thompson v. 
Valley R. R. Co., 132 U. S. 68, 73, 74, 10 Sup. Ct. 29, 33 E. Ed. 256; 
Morgan's Co. v. Texas Central Ry., 137 U. S. 171, 195, 11 Sup. Ct. 
61, 34 E. Ed. 625 ; Southern Railway v. Carnegie Steel Co., 176 U. 
S. 257, 259, 296, 20 Sup. Ct. 347, 44 E. Ed. 458 ; Eackawanna, etc., 
Co. V. Farmers' Eoan & Trust Co., 176 U. S. 298, 315, 316, 20 Sup. 
Ct. 363, 40 E. Ed. 475; Illinois Trust & Sav. Bank v. Doud, 105 
Fed. 123, 124, 136, 44 C. C. A. 389, 390, 402, 52 E. R. A. 481 ; In- 
ternational Trust Co. v. T. B. Townsend, etc., Co., 95 Fed. 850, 863, 



UNITED STATES F. & G. CO. V. UNITED STATES & M. T. CO. 241 

37 C. C. A. 396, 409. The dominant rule that runs through and con- 
trols this case, and ail other cases t:pon this subject, is thus stated by 
the Suprême Court in Dunham v. Raihvay Company, 1 Wall. 254, 267, 
17Iv. Ed. 584: 

"Contractor, under the clrcumstances, coultl aequire no greater interest in 
the road than was held by the eompany. He did not exact any formai con- 
veyance ; but, if he had, and one had been executed and dellvered, the rule 
would be the same. Reglstry of the first mortgage was notice to ail the 
world of the lien of the complalnant, and in that point of view the case does 
not even show a hardship upon the contractor, as lie must hâve known, when 
he accepted the agreenient, that he took the road suh.1ect to the rlghts of 
the bondholders. Actlng, as he did, with a full knowledge of ail the clrcum- 
stances, he bas no right to complain if his agreenient is less renranerative 
than it would bave been if the bondholders had joined with tln> eompany in 
making the contract. No effort appears to bave been niade to induce them 
to become a party to the agreement, and it is now too late to remedy the 
oversight." 

Finally counsel argue that the fact that the Fidelity Company gave 
a supersedeas bond and thereby prevented Madison from levying an 
exécution on the property of the Railway Company, and thereby in- 
terrupting the running of the railroad, entitles it to an équitable préf- 
érence over the bondholders secured by the prier mortgage, and in 
support of this position a considération of thèse authorities is invoked. 
Union Trust Co. v. Morrison, 125 U. S. 591, 8 Sup. Ct. 1004, 31 L. 
Ed. 825 ; Farmers' Eoan '& Trust Co. v. Northern Pacific R. Co. 
(C. C.) 71 Fed. 245 ; Jones v. Central Trust Co., Ti Fed. 568, 571, 
19 C. C. A. 569; City Trust Co. v. Sedalia Light & Traction Co._(D. 
C.) 195 Fed. 845, 849. An examination of thèse cases discloses little 
support for the position of the appellant. The opinion and décision 
in City Trust Co. v. Sedalia Light & Traction Co. (D. C.) 195 Fed. 
845, 849, sustains that position. But that opinion and décision was 
rendered by Judge Pollock, the same judge whose décision in the case 
in hand that the surety on this supersedeas bond is not entitled to an 
ecjuitable préférence over the bondholders secured by the mortgage is 
now in issue, and his opinion in the case in 195 Fed. 845, was contrary 
to the opinion of Judge Brewer, afterwards Mr. Justice Brewer of the 
Suprême Court, in Blair, Trustée, v. St. Louis, H. & K. R. Co. (C. 
C.) 23 Fed. 523, which was rendered in 1885 and has been the pre- 
vailing rule in this circuit from that time to the présent. As Judge 
Pollock has corne to a différent conclusion in the case before us, his 
décision in 195 Fed. 845, is entitled to no farther considération. AU 
the other authorities quoted above were rendered before that long 
and notable line of décisions of the Suprême Court commencing with 
Kneeland v. American Loan Co., 136 U. S. 89, 98, 10 Sup. Ct. 950, 34 
L. Ed. 379, and including Morgan's L. & T. R. Co. v. Texas Central 
Ry. Co., 137 U. S. 171, 196, 198, 11 Sup. Ct. 61, 34 L. Ed. 625, 
Thompson v. Valley R. Co., 132 U. S. 68, 71, 73, 10 Sup. Ct. 29, 33 
L. Ed. 256, Thomas v. Western Car Co., 149 U. S. 95, 110, 13 Sup. 
Ct. 824, 37 L. Ed. 663, Southern Railway Co. v. Carnegie Steel Co., 
176 U. S. 257, 296, 20 Sup. Ct. 347, 44 L. Ed. 458, Lackawanna Iron 
& Coal Co. V. Farmers' Loan & Trust Co., 176 U. S. 298, 315, 20 
Sup. Ct. 363, 40 L. Ed. 475, and later cases of the same nature, nar- 
284 F.— 16 



242 234 FEDERAL REPORTEE 

rowed and limited the class of cases entitled to an équitable préférence 
over prior mortgages to those incurred for the necessary current ex- 
penses of the opération of the mortgaged property in the ordinary 
course of business within a limited time anterior to the impounding 
of the property by the receiver for the benefit of the mortgagees. 
The influence and authority of thèse earlier décisions is far less than 
those of the modem opinions which conform to the rule established 
by the later authorities from the Suprême Court. 

The opinion and décision in Union Trust Company v. Morrison, 
125 U. S. 591, 8 Sup. Ct. 1004, 31 L. Ed. 825, when carefuUy read, 
fails, as was demonstrated by Judge Lurton, afterwards Mr. Justice 
Lurton of the Suprême Court, in Whiteley v. Central Trust Co., 7(> 
Fed. 74, 77, 22 C. C. A. 67, 34 L. R. A. 303, to sustain the proposi- 
tion that a SUrety who, at the request of the mortgagor, signs a super- 
sedeas or other bond in reliance upon the solvency of the mortgagon 
and in the belief and expectation that it will pay any loss the surety 
sustains out of its income or property, is entitled to any préférence in 
equity over the bonds secured by the prior mortgage. It was not based 
upon that proposition but was founded .on spécial equities which do 
not exist in this case, or in any ordinary case involving an alleged 
preferential equity of a surety upon a supersedeas bond. 

Nor does the décision and opinion of the court in Jones v. Central 
Trust Company, 73 Fed. 568, 19 C. C. A. 569, sustain the contention 
of the surety. In that case an attachment had been levied upon some 
mortgaged property. Thereupon the trustée in the mortgages caused 
the property to be replevied, and brought the sureties to sign the re- 
plevin bonds. Because the trustée induced and caused the sureties 
to make the bonds, the court held that the sureties were entitled to an 
équitable préférence over the trustée and over the bondholders he 
represented in payment out of the mortgaged property. The case 
rests upon the fact that the trustée for the bondholders induced the 
sureties to sign. 73 Fed. 571, 573, 19 C. C. A. 569. Neither the trus- 
tée nor any of the bondholders solicited or caused the Fidelity Com- 
pany to sign the bond in the case at bar. 

Of the cases cited by counsel for the surety there remains Farmers' 
Loan & Trust Co. v. Northern Pacific R. Co. (C. C.) 71 Fed. 245. 
In that case Griggs and Foster had signed a supersedeas bond to stay 
the exécution of a judgment against the Northern Pacific Railroad 
Company for a personal injury. The appeal was dismissed, and the 
judgment became final, after receivers of the property of the Rail- 
road Company had been appointed. At that time there was a rivalry 
between the judge of the Eastern district of Wisconsin, the court of 
original jurisdiction, and the judge of the district of Washington, one 
of the courts of ancillary jurisdiction, over the administration of the 
property of this railroad. Judge Caldwell had delivered his opinion 
in Farmers' Loan & Trust Co. v. Kansas City, W. N. W. Ry. Co. 
(C. C.) 53 Fed. 182, in which he had in efifect held that any meritorious 
claims of unsecured creditors might, in the discrétion of the judge 
administering the property, be given a préférence in payment out 
of the income, or out of the proceeds, of mortgaged property over 



UNITED STATES F. & G. CO. V. UNITED STATES & M. T. CO. 243 

the daims of bondholders secured by a prior mortgage. The Su- 
prême Court, not without knowledge of that opinion, had expressly 
held, and rather sternly insisted upon, the established contrary rule 
in Kneeland v. American Loan Co., 136 U. S. 89, 97, 10 Sup. Ct. 950. 
953 (34 !.. Ed. 379), and had said : 

"The appointment of a receiver vests in the court no absolute control over 
the property, and no gênerai authority to dlsplace vested contract liens. Be- 
cause in a few specifled and limited cases this court bas declared that un- 
secured claims were entitled to priority over mortgage debts, an Idea seems 
to hâve obtained that a court appointing a receiver acquires power to give 
such préférence to any gênerai and unsecured claims. It has been assumed 
that a court appointing a receiver could rightfully burden the mortgaged 
property for the payment of any unsecured indebtedness. Indeed, we are ad- 
vised tbat some courts bave made the appointment of a receiver conditional 
upon the payment of ail unsecured Indebtedness in préférence to the mort- 
gage liens sougbt to be enforced. Can anything be conceived whicb more 
thoroughly destroys the sacredness of contract obligations? One holding a 
mortgage debt upon a railroad bas the same right to demand and expect of 
the court respect for bis vested and contracted priority as the holder of a 
mortgage on a farm or lot. So, wben tbe court appoints a receiver of rail- 
road property, it has no right to make that receivershlp conditional on tbe 
payment of otber than those few unsecured claims which, by tbe rulings of 
this court, bave been declared to bave an équitable priority. No one is bound 
to sell to a railroad company or to v?ork for it, and wboever has dealings witb 
a Company whose property is mortgaged must be assumed to bave dealt vvith 
it on the faitb of its Personal responsibility, and not in expectation of sub- 
sequently displaclng tbe priority of tbe mortgage liens. It is tlie exception, 
and not the rule, tbat such priority of liens can be displaced. We empbasize 
this fact of the sacredness of contract liens, for the reason that there seems 
to be growing an idea tbat the chancellor, in the exercise of bis équitable 
powers, has unllmited discrétion in this matter of the displacement of vested 
liens." 

In tliis State of the décisions the receivers applied to Judge Jenkins 
in the Wisconsin district for authority to pay the claim against the 
sureties on the supersedeas bond out of the income of the property 
in their hands in préférence to the claims of the mortgage bondhold- 
ers. Judge Jenkins reviewed the décision of Judge Caldwell and that 
of the Suprême Court in Kneeland v. Loan Co., 136 U. S. 97, 10 Sup. 
Ct. 950, 34 L. Ed. 379, held that the décision of Judge Caldwell was 
"in direct antagonism to the rulings of the Suprême Court," that lie 
could not follow it, and denied the pétition of the receivers. Farmers' 
Loan & Trust Co. v. Northern Pac. R. Co. (C. C.) 68 Fed. 36, 39. 
Thereupon the sureties, Griggs and Foster, applied to the District 
Court of Washington in the same foreclosure suit, for preferential pay- 
ment of the same claim, and Judge Hanford, although he was aware 
of Judge Jenkins' décision to the contraiy (71 Fed. 246), referred to 
Judge Caldwell's opinion in 53 Fed. 182, 196, said : 

"It is my opinion tbat Judge Caldwell's opinion in that case is sound, and 
that the principles therein enuneiated must prevail as tbe law of this country, 
and I bave no hésitation in following that case in this instance." Farmers' 
Loan & Trust Co. v. Northern Pac. R. Co. (C. O.) 71 Fed. 245, 246, 248. 

On the authority of Judge Caldwell's décision he gave the claim of 
the suieties a préférence in payment over the claims of the mortgage 
bondholders, notwithstanding the décisions of the Suprême Court. 



244 234 FEDERAL REPORTER 

This décision of Judge Hanford is the only décision cited by counsel 
for the Fidelity Company which is in point upon the issue in the case 
in hand. It laclts the support of reason and of authority, and the argu- 
ment in it is not persuasive. 

There is no equity in the claim of this surety to be preferred in pay- 
ment out of the mortgaged property to the holders of the bonds. The 
mortgage was made and recorded a décade before the surety signed its 
bond. That mortgage was made and recorded for the express purpose 
of giving to the bondholders secured thereby a first lien upon the mort- 
gaged property and a préférence in payment out of the income and 
out of the proceeds of the property mortgaged. Such a préférence 
was secured by the express terms of the contract made between the 
mortgagor, the trustée and the bondholders. Probably some of the 
bonds had been repeatedly sold between the time when they were is- 
sued and the date when the supersedeas bond was given. The purchas- 
ers bought them in reliance upon the first lien upon the property of the 
railway company evidenced by the recorded mortgage. They had 
no notice or knowledge that the Fidelity Company was acquiring or 
seeking to acquire a lien superior to their own. The Fidelity Com- 
pany gave them no notice of its attempt so to do, and no opportunity 
to protect or défend themselves against it until, if its preferential lien 
exists at ail, it has become perfect. On the other hand, the Fidelity 
Company, before and at the time it assumed its liability, had full 
knowledge by the record of the mortgage, first, that the bondholders 
had a first lien upon the mortgaged property ; second, that the only 
parties that could waive that lien, or make a lawful contract to give 
another superior to it, were the trustée and the bondholders, and that 
the mortgagor was powerless to do so. Notwithstanding this knowl- 
edge the Fidelity Company neither sought nor secured any contract 
f rom the trustée or the bondholders. In the face of ail this knowledge, 
it voluntarily signed the supersedeas bond and assumed its liability in 
reliance upon and at the risk of the ability of the mortgagor to pro- 
tect and indemnify it, and it cannot now successfuUy appeal to a court 
of equity to throw that risk and the burden thereof upon the mortgage 
bondholders. Its equity is far inferior to theirs. 

The contention that by means of the bond property was preserved, 
and the assets that came to the hands of the bondholders were in- 
creased by the amount of the judgment which the bond prevented the 
judgment créditer from collecting, is fallacious. The judgment was 
inferior in lien to the mortgage, and nothing which was subject to 
the mortgage could bave been taken from the bondholders by a levy 
and sale under the judgment. If the exécution would bave been levied 
upon property upon which the bondholders had no lien, the taking of 
that property would not hâve diminished their security, and if it 
would bave been levied upon property subject to their lien, their mort- 
gage would hâve held that property. And even if it were true that 
the surety, by its bond to pay the judgment, preserved security or prop- 
erty which subsequently came to the bondholders, and which they. 
otherwise would hâve lost, that fact would not give the surety a prefer- 
ential equity over the bondholders. If it would, then every unsecured 



CHICAGO RTS. CO. V. KKAMEB 245 

créditer, whose moneys, labor, material, or guaranty aided to préserve 
or enhance the value of the mortgaged property, might, by delaying 
collection of the mortgagor's debts, secure an équitable lien superior 
to that of the mortgage, and every créditer, whose claim, like that of 
Madison hère, neither preserved nor enhanced the value of the mort- 
gaged property, could give that claim a pref erential lien by hiring some 
surety company for a small percentage of his claim to guarantee its 
payment. If the argument of counsel for the Fidelity Company could 
be sustained, its practical effect would be to strike down the security 
of every railroad mortgage, and to give to unsecured creditors liens 
superior to those of the creditors who by mortgage bonds, in reliance 
upon recorded mortgages, secure their payment. The law and equity, 
the written contract evidenced by the mortgage and its record, and 
the relative equities of the parties, cry out alike against the payment 
out of the income or the proceeds of the mortgaged property of the 
claim of a surety on a bond of a mortgagor in préférence to the claims 
of bondholders secured by a prior mortgage. A mortgagor and his 
sureties cannot, by making a contract or bond with an unsecured créd- 
iter to pay the mortgagor's debt to him, transform his unsecured claîm 
into a claim secured by a lien superior to that of bondholders secured 
by a prior recorded lien, and so are the authorities. Blair v. St. Louis, 
etc., Ry. Co. (C. C.) 23 Fed. 523 ; Farmers' Loan & Trust Co. v. North- 
ern Pacific R. Co., (C. C.) 68 Fed. 36, 39 ; Whiteley v. Central Trust 
Co., 76 Fed. 74, 77, 78. 22 C. C. A. 67, 34 L. R. A. 303 ; Central Trust 
Co. V. Third Ave. Ry. Co., 180 Fed. 710, 711, 103 C. C. A. 492; Penn- 
sylvania Steel Co. v. New York City Ry. Co. (C. C.) 165 Fed. 485 ; 
Gay V. Hudson River Elec. Power Co. (C. C.) 182 Fed. 904, 909. 
The decree below is affirmed. 



CHICAGO RYS. CO. v. KRAMER. 

(Circuit Court of Appeals, Seventli Circuit. April 18, 1916.) 

No. 22.30. 

1. Carriers ©='306(2) — Relation of "Passenoek" — Opeeating ovbr Anotii- 

er's Road. 

One who Is a, passenger of a street railroad company operatlng its 
through cars over the tracks of another sucli company with its consent, as 
evidencerl by its acceptance of an ordlnance, Is in law also a "passenger" 
of the other company, and entitled to the exercise by each of the same 
degrce of care. 

[lîd. Note. — For other cases, see Carriers, Cent. Dlg. § 1249; Dec. Dig. 
©=306(2). 

For other définitions, see Words and Phrases, First and Second Séries, 
Passenger.] 

2. Carriers <g=3316(4) — In jury to Passenger — Res Ipsa Loquitur. 

Regard! ng négligence of défendant, owner of a street railroad, which 
ran its car into the car of another street railroad company standing on 
defendant's track, over which it was being operated with defendant's 

or other cases see same topic &. KEY-NUMBER in ail Key-Numbered DigestR & Indexes 



246 234 FEDERAL KEPORTEK 

consent, Injuring a passenger on the standing car, tha prJndple of res 
Ipsa loqultur Is applicable to a count charglng gênerai négligence. 

[fîa. Note. — For otlier cases, see Carriers, Cent Dig. § 1287 ; Dec. Dig. 
<S=>316(4).] 

3. Négligence ®=» 136(6) — ^Dibecting Verdict — Res Ipsa Loquitub. 

Where the princlple of res ipsa loqultur is applicable, on a count charg- 
lng gênerai négligence, an Instruction to find for plalntiff would be proper, 
In the absence of testlmony tendlng to explain the occurrence on any 
theory other than that of defendant's négligence. 

[Ed. Note. — For other cases, see Négligence, Cent. Dig. S 285; Dec. 
Dig. <Si=>136(6).] 

4. Appeal and Erbob <S=»1062(1) — Haekless Eeeoe — Takinq Count feom 

JUKY. 

The measure of damages on ail the counts In a personal Injury action 
being the same, any error in overruling motion to tate one of them from 
the jury was hamiless, where the jury might properly hâve been Instruct- 
ed to find for plalntiff on one of the others. 

[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. § 4212; 
Dec. Dig. ®=>1062(1).] 

5. Evidence <g=477(4) — Appeabance of Pebson. 

Evidence that a few minutes after plalntifC's Injury, whlle her foot was 
being bathed, she waa screamlng, is admissible. 

[Ed. Note. — For other cases, see Evidence, Cent. Dig. §- 2240 ; Dec. Dig. 
<g=477(4).] 

8. WiTNESSEs ©=248(2) — Responsiveness or Answbb. 

The answer, "She was screamlng wlth pain in her ^de," in the absence 
of spécifie objection that It was not responsive to the question as to how 
she appeared, wlU be deemed to mean, not that her screams were In 
fact due to pain In the side, but that they appeared to witness to be caused 
thereby. 

[Ed. Note. — For other cases, see Witnesses, Cent. Dlg. § 862; Dec 
Dig. <?s=>248(2).] 

7. Evidence <ê=>268 — Statement to Phtsician. 

Uuless It clearly appears that plaintiffs description to a physician to 
whom she had gone of her subjective symptoms was made solely to aid 
an expert to give évidence on the trial in an action for her injury, and 
not in good f aith to asslst hlm in diagnoslng her case for purpose of treat- 
ment, it is admissible, though the welght to be given it by the jury may 
be slight. 

[Ed. Note.— For other cases, see Evidence, Cent. Dig. §§ 1061, 1062; 
Dec. Dig. <ê=j268.] 

b. Evidence <g=3554 — Expert Testimont — Cause and Efeect. 

There being no eonfllct as to the manner of an injury, a physician 
may testify that the accident dld cause, and not merely that it mlght 
hâve caused, the injuries. 

[Ed. Note. — For other cases, see Evidence, Cent. Dlg. § 2375 ; Dec. Dig. 
<&=>554.] 

9. Evidence ©=547 — Experts — Spéculative Testimont. 

Testlmony of a physician, after he had deseribed the conditions found 
during a period of treatment of plalntiff, a profuse discoloration of the 
abdominal région, jaundice, blocUlng of the bowels, rétention of the water, 
high puise, etc., and had stated that he gave her treatment of the 
stomach, bowels, and Uver, that it was his opinion that there had been 
an injury to the stomach and liver, was not spéculative. 

[Ed. Note. — For other cases, see Evidence, Cent Dig. § 2364; Dec. 
Dig. <g=5547.] 

ffi::3For other casas see same topic & KEY-NUMBER In ail Key-Numbered Bigests & Indexes 



CHICAGO RTS. CO. V. KEAMER 247 

10. Appeai, and Ekror <S=1047(3) — Harmless Eeroe — Rulisgs on Evidence. 
There being uncontradicted testlmony as to the injuries received by 
plaintifC, ttieir permanent cliaracter, and the sufiferlngs endured by lier, 
any error in refusing to strlke ont as sjteculative the answer of a phy- 
sician, asked if he formed an opinion as to the trouble with her abdomen 
and bip, that his diagnosis and conclusions were that there were pos- 
sible adhésions there, was harmless. 

[Ed. Note. — For other cases, see Appeai and Error, Cent. Dig. § 4149; 
Dec. Dig. <g=1047(3).] 

In Error to the District Court of the United States for the Eastern 
Division of the Northern District of Illinois. 

Action by Marie Kramer against the Chicago Railways Company 
and another. Judgment for plaintifï, and défendant named brings 
error. Affirmed. 

Charles Le Roy Brown, of Chicago, 111., for plaintiff in error. 
C. Helmer Johnson and Arthur H. Chetlain, both of Chicago, 111., 
for défendant in error. 

Before KOHLSAAT, MACK, and ALSCHULER, Circuit Judges. 

MACK, Circuit Judge. Writ of error to reverse a judgment for 
$3,350 against the plaintifï in error in an action against it and the 
Chicago City Railway Company. Diversity of citizenship is the 
ground of fédéral jurisdiction. At the conclusion of the plaintiff 's 
case, the défendant the Chicago Railway Company moved for a di- 
rected verdict. The motion was overruled, and it rested its case. 
Thereupon the défendant Chicago City Railway Company offered évi- 
dence tending to establish its freedom from négligence. At the con- 
clusion of the entire case each défendant moved for a directed verdict 
on each count of the déclaration separately. Ail motions were over- 
ruled, the cause was submitted to the jury, and a verdict was render- 
ed in favor of the Chicago City Railway Company and against the 
Chicago Railways Company. 

PlaintifiE's injuries were received under the following circumstances : 
She had just stepped upon the rear platform of a south-bound street 
car standing at the north side of the intersection of Western avenue 
and Twelfth street in Chicago and owned and operated by the Chicago 
City Railway Company, when another south-bound car, owned and 
operated by the Chicago Railways Company, came into collision with 
the rear platform of the Chicago City Railway Company's car, break- 
ing it and bending the front end of the other car. Plaintiff introduced 
no évidence as to the condition of the brakes or stopping apparatus. 
The track on Western avenue was owned, operated, and under the 
control of the Chicago Railways Company, and was used by the Chi- 
cago City Railway Company for the opération of through route cars 
under an ordinance of the city of Chicago passed in February, 1907. 

The section of the ordinance relating to the Chicago City Railway 
Company introduced in évidence provides as f ollows : 

"The Company will co-operate with any corporation or corporations oper- 
ating such of the street railway Unes now operated by the recel vers of thî 
Chicago Union Traction Company as may be parts of the through routes in 

iS=^For other cases see same topic & KEY-NUMBER in ail Key-Numterea Digests & Indexes 



248 234 FEDERAL REPORTER 

this ordinance or in 'Exhiblt C referred to, In establishîug and maintaîning 
through lines of cars over the street rallway lines of the coiupany and the 
Street railway lines of tlie Union Traction System entering tlie Soutli Division 
of tlie said city, north of Twelfth street, which sliall carry passengers from 
the Soutli Division of the said city to the other two divisions of the said city, 
or in the reverse directions, through the portion of the South Division of said 
city north of Twelftli street, for a single fare." 

Tliat relating to the Chicago Railvvays Company reads: 

"The Company will co-operate with any corporation or corporations oper- 
ating such of the street railway lines now operated hy the Chicago City Kail- 
way Company as may he parts of the throngh routes in tliis ordinance or 
in 'Bxhibit C referred to, in estahlishing and maintainiug through Unes of 
cars over the street railway lines of the company and the street railway line 
of the Chicago City Railway System entering the South Division of the said 
oity north of Twelfth street, which shall carry passengers from the Korth 
and West Divisions of the said city to the South Division of the said city, 
or in the reverse directions, through the portion of the Soutli Division of said 
city north of Twelfth street, for a single fare." 

Exhibit C therein referred to provides as follows : 

"Route No. 10: 'Beginning at Seventy-First street and Western avenue ; 
north on Western avenue to Belmont avenue, returning by the same route.' " 

It was stipulated that, in accordance with the provisions of the or- 
dinances and the acceptance thereof by each of the défendant com- 
panies, the opération of the througli route cars by tlie one company 
over tracks belonging to the other was under the direction and supervi- 
sion of a board of supervising engineers appointed by the city of 
Chicago, and under the directions of this board each company was 
recjuired to permit the other to operate cars over its various hnes 
and to give and receive transfers theref or. 

Errors in the charge and in denying the Chicago Railways Com- 
pany's motions are based on its contentions made in the trial court 
and renewed in this court that the plaintiff was a passenger of the 
Chicago City Railway Company alone; that the Chicago Raihvays 
Company was a stranger to her, and owed her the duty, not of the 
highest degree of care, but only of ordinary care; that the collision 
alone vmder the circumstances narrated did not justify the application 
of the principle of res ipsa locjuitur at least as against it, the stranger 
company; and that in any event the total failure of affirmative proof 
of the spécifie négligence charged against it in at least one of the 
counts, namely, a négligent failure to keep the equipment of its car 
in proper order, makes the refusai of the court to grant this defend- 
ant's motion for an instruction in its favor on this count réversible 
error. 

[1] 1. In Illinois, the liability of a lessor public service company 
for the acts and omissions of its lessee, is well established. As de- 
clared in Anderson v. West Chicago Street Railway Company, 200 
m. 329, 333, 65 N. E. 717: 

"The relation * * * is not that of landlord and tenant, but that of 
principal and agent, or master and servant." 

While in some of the lower fédéral courts it has been said that in 
the détermination of the relation between lessor and lessee company 



CHICAGO EYS. CO. V, KEAMER 249 

and the liability of the former for the latter's acts, the fédéral courts 
will net deem themselves bound by the state court's views in the 
absence of a controlling statute, \ve are of the opinion that under N. 
C. R. Co. V. Zachary, 232 U. S. 248, 34 Sup. Ct. 305, 58 L. Ed. 591, 
Ann. Cas. 1914C, 159, and I. C. R. R. Co. v. Sheegog, 215 U. S. 308, 
30 Sup. Ct. 101, 54 L. Ed. 208, the local law, as interpreted by the 
state court, controls. While each of thèse cases originated in the state 
court, it is to be noted that in the Zachary Case the question involved 
was the interprétation of the fédéral Employers' Liability Act (Act 
April 22, 1908, c. 149, 35 Stat. 65 [Comp. St. 1913, §§ 8657-8665]), 
and that, while the state Suprême Court held this inapplicable to an 
intrastate lessor corporation not itself actually engaged in interstate 
commerce, the fédéral Suprême Court held it to be a necessary resuit 
of the local law, constituting the lessee the lessor's substitute or 
agent, and making the latter responsible for the former's acts and 
omissions, whether in interstate or in intrastate commerce, that "the 
lessor is a common carrier by railroad engaging in commerce between 
the States," and that an employé of the lessee is employed by such 
lessor in interstate commerce, vvithin the meaning of the fédéral act. 

The statement in the Sheegog Case, "Now whether we agrée with 
it or not, the doctrine is familiar that in the absence of statute a rail- 
road Company cannot get rid of its liability attached to the exercise 
of its franchise by making a lease," was not intended, in our judg- 
ment, to cast any doubt upon the views expressed in Railroad Com- 
pany V. Barron, 5 Wall. 90, 18 L. Ed. 591. There the action was 
begun in the fédéral court. The défendant was the owner of the 
road and the actual carrier of the passenger. It was held liable for 
the négligence of another company operating by consent, on its road. 
The court said that the liability had "been settled, and we think 
rightly, in the courts of Illinois holding the owner of the road liable." 

We are unable to see any real distinction between the lessor and 
lessee cases and the présent case. The Chicago Railways Company 
was the owner of the track and furnished the motive power. It had 
the right and the duty to operate its own cars thereon. The privilège 
granted to the Chicago City Railway Company to operate its through 
cars over the Chicago Railways Company's tracks was necessarily with 
the consent and permission of the latter company, a consent evidenced 
by its acceptance of the ordinance. The Chicago City Railway Com- 
pany while operating its cars over the tracks and under the electric 
power furnished by the Chicago Railways Company was performing 
the public duty of the latter company as its agent or substitute in the 
same measure as a lessee company to which similar privilèges had been 
granted. It follows that, while the plaintiff was a passenger of the 
Chicago City Railway Company, she was also as a matter of law a 
passenger of the Chicago Railways Company and entitled to the ex- 
ercise by each of them of the same degree of care. 

[2,3] 2. Plaintiiï's rights, therefore, are the same as would hâve 
arisen if her injuries had been caused, under similar circumstances, 
by a collision of two cars, both belonging to the défendant Chicago 
Railways Company. In such a case, concededly res ipsa loquitur would 



250 234 FEDERAL REPORTER 

apply. For there, as hère, the uncertainty as to whetlier tlie injury 
was due to the neg;hgence of the employés of the first car or of the 
second car or of both would support a charge of gênerai négligence 
against the défendant Chicago Railways Company. 

While res ipsa loquitur does not shift the ultimate burden of proof, 
and at times only calls for without necessarily requiring explanation 
or rebuttî^l (Sweeney v. Erving, 228 U. S. 233, 240, 33 Sup. Ct. 416, 
57 h. Ed. 815, Ann. Cas. 1914D, 905), in the instant case, in view of 
the passenger carrier relation, the prima facie case made for her 
through proof of the circumstances of the collision and the exercise 
of due care for her own safety would not merely hâve justifiied the 
submission of the question of the defendant's négligence to the jury, 
but, in the absence of any testimony offered by the défendant and 
lof any matters in the testimony ofïered on behalf of the plaintiff 
tending to explain the occurrence on any theory other than that of 
the defendant's négligence, an instruction to find for the plaintiff on 
the count charging gênerai négligence would hâve been proper. North 
Chicago vStreet Railway Company v. Cotton, 140 111. 486. 29 N. E. 

899 ; Central Vermont Ry. Co. v. Cauble, 228 Fed. 876, 878, C. 

C. A. . 

[4] In Wilmington Mining Company v. Fulton, 205 U. S. 77, 27 
Sup. Ct. 412, 51 L. Ed. 708, the failure of the court to grant a motion 
to take from the jury a count unsupported by the évidence was held 
to be réversible error, even though there was évidence justifying the 
submission of another count to the jury, inasmuch as it would be 
impossible to say that the verdict was not based on the former count. 
Subsequently, in Scott v. Parlin & Orendorf, 245 111. 460, 92 N. E. 
318, the Suprême Court of Illinois laid down a contrary rule, basing 
its décision, not on any statutory provision, but on the analogy of 
section 78 of the Illinois Practice Act (Laws 1907, p. 459). 

Assuming that the practice thus sanctioned by the state court is not 
controlling in the fédéral courts, yet inasmuch as the trial court, in 
this case, unlike the Wilmington Mining Company Case, might prop- 
erly hâve instructed the jury to find for the plaintiff on at least one 
of the counts, and as the measure of damages was necessarily the 
same on ail of the counts, the error, if any, in overruling the de- 
fendant's motion, could not be prejudicial or furnish a ground for 
reversai. 

[5, 6] 3. Error is also assigned on the admission of certain testi- 
mony, ail bearing solely upon the matter of the injuries and the amount 
of the damages. 

(a) Plaintiff lived and worked on Western avenue just north of 
Twelfth street. A few minutes after the accident, she came home. 
Her employer assisted her to her room, got a basin of water, and 
was bathing her foot when a neighbor entered. Asked for a descrip- 
tion as to how plaintiff appeared to her at that time, the neighbor 
testified through an interpréter, "She was screaming with pain in her 
side." 

A motion to strike out this answer was properly overruled; that 
she was screaming, irrespective of the cause, was clearly admissible. 



CHICAGO EYS. CO. V. KBAMEH 251 

Moreover, in the absence of a spécifie objection that it was net re- 
sponsive, the answer must be deemed to mean, net that the screams 
were in fact due to the pain in the side, but that they appeared ta 
the witness to be caused thereby. Plaintiff's actions and geStures, her 
appearance at the time, might well be so described. 

[7] (b) The accident occurred in June, 1913; the trial in No- 
vember, 1914. In February, 1914, the month in which this action 
was brought, her original physician and another doctor examined 
her in Chicago. The first physician testified, in answer to the court's 
question whether she came at that time as a patient, "Yes ; for treat- 
ment and also for examination." He further stated that she was 
in his office twice and that he treated her; that she was to hâve 
corne again, but that she went home; that he supposed she went to 
her family physician. In partial answer to questions as to the ex- 
amination made and complaints of pain at the time, he testified that 
he found tenderness over the abdomen and back, a swelling of the 
left leg, and that she complained of weakness and inability to stand 
any length of time. Objections to the question and motion to strike 
out the answers, on the ground that they called for and gave sub- 
jective symptoms displayed at an examination pending litigation, and 
"after plaintifï testified that she did not go to the doctor at that time 
for treatment," were overruled. 

If plaintiiï had in fact so testified, there would be more force in 
the objections, as her complaints at an examination sought by her 
solely for Htigation purposes are usually held inadmissible (but see 
5 Wigmore, Évidence [2d Ed.] § 688, note 2, commenting on C. & 
O. Ry. V. Wiley, 134 Ky. 461, 121 S. W. 402), even though the physi- 
cian does not know the purpose of her visit. Her testimony on cross- 
examination was as f ollows : 

"Dr. MacFarland examined me about six months a go. Q. Has he examined 
you at any time since then? A. No; lie didn't exactly examine since tlien. 
île examined me tlioroughly six montlis ago. Q. That was when you were 
starting to get ready for your lawsuit? A. Yes, sir. Q. Is tliat what he ex- 
amined you for? A. Yes, sir. Dr. Burns aud Dr. MacFarland examined me 
together about six months ago at Dr. MaeFarland's office. * « * i hâve 
been at home in Burlington, and liave seen Dr. Proudy from time to time, 
but he has not treated me since last spring." 

If "that," in the question, "Is that what he examined you for?" 
means the lawsuit, the answer does not in any manner indicate that 
she did not go to her physician also and primarily for treatment. 
That she required treatment at the time is clearly shown by the physi- 
cian's testimony that he did in fact treat her and her testimony that 
on her return home the local physician continued to treat her. 

We cannot agrée with Kath v. Wisconsin Ry. Co., 121 Wis. 503, 
99 N. W. 217, that such testimony must be excluded unless made dur- 
ing examination before suit and solely for the purpose of treatment. 
As is said in N. P. R. R. v. Urlin, 158 U. S. 271, 274, 15 Sup. Ct. 840, 
39L. Ed. 977: 

"As one of the principal questions in the case was whether the Injuries of 
the défendant were of a permanent or a temnorary character, it was certalnly 
compétent to prove that, during the two years which had elapsed between the 



252 234 FEDERAL REPOETER 

happening of the accident and tiie trial, there were several médical examina» 
tlons into the condition of the plalntlff. Every one Icnows that, when injuri<'« 
are internai and not obvions to visual Inspection, the surgeon has to largely 
depend on the responses aud exclamations of the patient when subjected to 
examina tlon." 

The court cites with approval Fleming v. Springfield, 154 Mass. 
520, 522, 28 N. E. 910, 26 Am. St. Rep. 268, that: 

"It may be fairly inferred that it was made for the purpose of médical 
advice and treatment. At any rate, although It was only a day or two be- 
fore, or possibly during, the trial, it does not appear that sueh is not the 
case." 

Unless it be clear that the patient's description of her subjective 
symptoms was made solely for the purpose of aiding an expert to 
give évidence on the trial, and not in good f aith, to assist the physician 
in diagnosing the case for the purpose of treatment, it is not to be 
deemed inadmissible, though the weight to be given it by the gury, 
varying according to the circumstances, may be but slight. C, C, 
C. & I. R. R. Co. V. Newell, 104 Ind. 264, 270, 3 N. E. 836, 54 
Am. Rep. 312. 

[8] (c) This case falls within the principle of City of Chicago v. 
Didier, 227 111. 571, 81 N. E. 698, and not within that of Schlauder v. 
C. & S. T. Co., 253 m. 154, 97 N. E. 233. Elere, as in the Didier 
Case, there was no conflict as to the manner of the injury. It was, 
therefore, not improper to permit the physician to state that the acci- 
dent did cause, and not merely that it might hâve caused, the injuries. 
5 Wigmore, Evid. § 1976. 

[9| (d) As a resuit of the accident, plaintiff, a hardworking healthy 
woman 24 years old, earning $5 per week and board and lodging, was 
confined to her bed nearly three weeks, and then for over two months 
got about on crutches. The left foot was eut about 31/2, inches on the 
inner border of the heel. It required 14 stitches. Deep abrasions 
of the skin were f ormed over the right bip. A physician attended her 
daily for four or five weeks before she left the city for her home in 
Wisconsin. After he had described the conditions found during this 
period of treatment, — a profuse discoloration of the abdominal région, 
jaundice, blocking of the bowels, rétention of the water, high puise, 
etc. — and had stated that he gave her treatment and medicine for the 
stomach, bowels, and liver, he was asked, "Was it your opinion thafl 
there had been an injury to the stomach and liver?" An objection 
that this was spéculative, and did not call for a physical condition 
which he found, was overruled, and he answered affirmatively. 

The ruling of the court was entirely proper. The diagnosis was 
not, as in Lyons v. Chicago City Raiiway Co., 258 111. 75, 101 N. E. 
211, spéculative; that is, that there might bave been such an injury, 
but clear and positive that there was such an injury. 

[10] (e) Answering the question, "Did you form an opinion as to 
the trouble with her abdomen and hip at that time?" he answered, 
"Why, my diagnosis and conclusions were that there were possible 
adhésions there, from such a crushing injury, adhésions of the in- 
testines." "Possible adhésions" is spéculative; it would hâve been 



HICiGIXBOTIIAM V. BOGGS 253 

proper to grant the motion to strike it eut on that ground. In view, 
hoAvever, of the uncontradicted testimony as to the injuries received, 
their permanent character, and the sufferings endured by the plain- 
tiff, we are of the opinion that, even if the failure to strike it ont 
should be held error (but see 5 V/igmore, § 1976, commenting on the 
Lyons Case, supra), the error cannot be deemed to liave been so 
prejudicial as to justify a reversai. 
Judgment affirmed. 



HIGGIXBOTHAM v. BOGGS et al. 

(Circuit Court of Appeals, Fourth Circuit. May 2, 1916.) 

No. 1405. 

1. Tbusts <S=572 — Resulting Trusts — Création. 

When one person pays for land and has title made to another, a trust 
results lu favor of the purcliaser. 

[Ed. Note.— For otlier cases, see Trusts, Cent. Dig. §§ 102, 103; Dec. 
Dig. <©=72.] 

2. Trusts <©=»43(1), 88 — Resulting Trusts — Establishment. 

Where land Is paid for by one, tliough title is taken In the name of 
another, elttier the payment, raising a resulting trust, or an express 
agreement by the holder of the title to hold in trust for tha real pur- 
chaser, may be established by paroi. 

[Ed. Note.— For other cases, see Trusts, Cent. Dig. §§ 62, 1.30-133 ; Dec. 
Dig. .S=43(l), 88.] 

3. Trusts ©=86 — Resulting Trusts — I'resumptions. 

Where a husband or father, on purchasing land, takes title in the name 
of his wlfe or his child, no presumption of resulting trust arises, as in 
case of strangers or relatives under no obligation to support. 

[Ed. Note. — For other cases, see Trusts, Cent. Dig. § 128; Dec. Dig. 
<S=38e.] 

4. Trusts iS=386 — Resulting Trusts — Presumption. 

The presumption of a resulting trust may be rebutted by évidence of 
the circumstances or déclarations by the real purchaser, who took title 
in the name of another, that a gift was intended to the grantee. 

[Ed. Note. — For other cases, see Trusts, Cent. Dig. § 128 ; Dec. Dig. 
©=86.] 

5. Trusts <S::381(1) — Resulting Trusts — Evidence. 

In determlning wliether a resulting trust arises, where one purchasing 
latKl has title taken in the name of another, the close relationship of 
the grantee to the purchaser and the purchaser's moral obligation to 
support may be considered. 

lEd. Note. — For other cases, see Trusts, Cent. Dig. § 115; Dec. Dig. 
<S^hl(l).] 

6. Trusts i®==î362 — Resulting Trusts — Déclaration. 

A resulting trust will not be declared in favor of a purchaser, who liad 
the légal title made to another for the purpose of defrauding his credltors. 

[Ed. Note.— For other cases, see Trusts, Cent. Dig. §§ 560-562; Dec. 
Dig. ©=^362.] 

©s^For other cases see same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes 



254 234 FEDERAL REPORTER 

7. Trusts i®i=>72 — Resulting Trusts — Création. 

A resulting trust, if it arises at ail, must arise at the time the légal 
title is taken In the naine of one who does not pay a considération for 
tlie conveyance. 

[Ed. Note.— For other cases, see Trusts, Cent. Dig. §§ 102, 103; Dec. 
Dig. ©=72.] 

8. Trusts <©=>S9(5) — Hesulting Trusts — Establishment. 

Paroi évidence, to establish a resulting trust, must be clear, unques- 
tionable, and certain. 

[Ed. Note.— For other cases, see Trusts, Cent. Dig. § 137; Dec. Dig. 

<S=589(5).] 

9. Trusts (S:^,'572(3) — Resulting Trusts— Evidence — Establishment. 

In a suit to establish a resulting trust in land, évidence held to show 
that the purchaser, who paid the considération, liad title taken in the 
name of an ostensible grautee for the purpose of defeating a judgment 
créditer, and so no resulting trust arose. 

[Ed. Note.— For other cases, see Trusts, Cent. Dig. §§ G02, 603; Dec. 
Dig. <S==>372(3).] 

10. Trusts iS=>362 — Resulting Trusts— Création. 

Where purchaser of land took title in the name of another for the 
purpose of defeating the collection of a judgment against him lield by 
the state, a subséquent release of the judgment will not give rise to re- 
sulting trust, as such trust, if it arises, must do so when title vests. 

[Ed. Note.— For other cases, see Trusts, Cent. Dig. §§ 560-562; Dec. 
Dig. <S==>362.] 

11. Trusts i®=>89(1) — Resulting Trusts — Evidence. 

In suit to establish a resulting trust in land, title to which was trans- 
ferred from the original grantee to the purchaser's slster, évidence held 
to establish that, though the purchaser was the équitable owner, he In- 
tended his sister to take the f ee of the land. 

[Ed. Note. — For other cases, see Trusts, Cent. Dig. § 134; Dec. Dig. 
<SS=89(1).] 

12. Trusts <S=3365(4) — Resulting Trusts — Right to Assert — Lâches. 

Where for over 22 years a purchaser of land acquiesced in the title 
reuiaining in his sister, to Vvhom, it was transferred from tlie original 
grantee, and his will affirmed such title, the heirs of the purchaser can- 
not thcreafter assert a resulting trust in the land; it being barred by 
lâches. 

[Kd. Note. — For other cases, see Trusts, Cent. Dig. § 572 ; Dec. Dig. 
<S==:«1.')(4).] 

Appeal from the District Court of the United States for the Eastern 
District of Virginia, at Richmond ; Edminid Waddill, Jr., Judge. 

Suit by Jessie Boggs and others against Fannie W. Higginbotham, 
substituted in the place of Nancy J. B right. From a decree for com- 
plainants (222 Fed. 714), défendant appeals. Reversed. 

William W. Crump and Charles V. Meredith, both of Richmond, Va. 
(Conway R. Sands and Meredith & Cocke, ail of Richmond, Va., on 
the brief), for appellant. 

Marshall M. Gilliam and A. L. Holladay, both of Richmond, Va., for 
appellees. 

Before PRITCHARD, KNAPP, and WOODS, Circuit Judges. 

^ssFor other cases see samo topic & KEY-NUMBER in aU Key-Numbered Dlgests & Indexes 



HIGGINBOTHAM V. BOGG8 255 

WOODS, Circuit Judge. The issue in this case is whether the ap- 
pellant, Fannie W. Higginbotham, holds the légal title to a tract of 
land of 335 acres in Henrico county. Va., as her own property, or as 
trustée of a resulting trust in favor of the heirs of William M. Mc- 
Gruder. The décision of the District Court was in favor of the com- 
plainants, claiming one-eighth interest as grandchildren of a deceased 
sister of McGruder. The bearing of the documentary évidence will be 
made clearer by setting it out in chronological order. 

In 1867 the commonwealth of Virginia recovered judgments aggre- 
gating about $20,000 against Wm. M. McGruder as surety on the bond 
of R. H. Huff, county sheriff. On June 29, 1869, Susan C. Fisher and 
others conveyed a tract of 283 acres of land to Fannie Wrenn, a nièce 
of McGruder, for the considération of $1,800, and on September 13. 
1872, another tract of 335 acres for the considération of $1,600. The 
tract of 335 acres is the land in dispute. 

On August 25, 1880, Fannie Wrenn executed to Wm. M. McGruder 
a power of attorney authorizing him to convey both tracts of land, in 
ail 618 acres giving full discrétion as to the considération. The next 
day under his power of attorney McGruder executed in Fannie 
Wrenn's name a conveyance of the land to John T. Jones for the con- 
sidération expressed in the deed of $9,580. At the same time Jones 
executed a deed of trust to Henry A. Atkinson, Jr., trustée, to se- 
cure $6,333.34, the alleged balance of the purchase money. On June 
11, 1881, Atkinson as trustée and McGruder as the agent of Fannie 
Wrenn acknowledged full payment of the balance of the purchase 
money and released ail claim under the deed of trust. On March 3, 
1884, Jones conveyed the land to Nancy J. Briglit for the considéra- 
tion expressed in the deed of $8,580. On March 7, 1884, the General 
Assembly of Virginia passed an act that no proceedings should be 
taken to enforce judgments like that against McGruder after the Ist 
of January, 1885 ; and on the 20th of December, 1886, McGruder 
compromised the judgment against him by making a small payment and 
was released from ail hability thereon. On May 1, 1906, Nancy J. 
Bright conveyed a portion of the land to T. P. Davie and Jesse À. 
Davie, who executed a trust deed to secure $9,000 of the purchase 
money and interest thereon. The bonds and the notes representing 
this purchase money were indorsed and assigned by Nancy J. Bright 
to Wm. M. McGruder. In November, 1908, McGruder died, leaving 
his will, dated November 26, 1906, by which he undertook to bequeath 
the bonds and notes to certain persons and for certain purposes. The 
will however, contains this récital : 

"Whereas, Mrs. Nancy J. Bright, recently sold a portion of her landed 
estate to Mr. T. Percy Davie, and held his bond for the payment of the same, 
dated May 1, 1906, for nine thousand ($9,000) dollars, payable In five years 
after date, payable to Mrs. Nancy J. Bright, and Indorsed by her, and assign- 
ed to me." 

The will contains no devise of the land in dispute and no intimation 
that McGruder regarded it as his property. After McGruder's death 
Mrs. Bright instituted a suit in the circuit court of Henrico county 
against the executors of McGruder and others interested in the bonds 
and notes, which resulted in a decree to the effect: 



256 234 FEDERAL REPORTEE 

"That the ossignments appearlng on the back of each of the bonds and 
signed by Mrs. Nancy J. Brlght were not made with the Intention of trans- 
ferring the ownershlp of said bonds to Wm. M. McGruder, and that there- 
fore the légal title which i)assed by such a,ssignments should be revested in 
the sald Nancy J. Bright." 

The court, however, exonerated McGruder from any fraudulent 
purpose in securing the assignment. 

On October 7, 1909, the complainants, as the heirs of a sister of 
Wm. M. McGruder, brought this suit against Nancy J. Bright, alleg- 
ing that when Susan C. Fisher and others conveyed to Fannie Wrenn, 
in 1872, McGruder paid the purchase price for the land, that ail of the 
subséquent transfers were made at his instance, and that the grantees 
held the légal title in trust for him and after his death for his heirs. 
Nancy J. Bright died October 2, 1913, after her answer was filed, and 
Fannie W. Higginbotham, to whom Mrs. Bright devised the land, was 
made a party défendant and filed her answer. 

[1, 2] When one person purchases land with his own money and has 
the title made to another a trust results in favor of the former. Bank 
V. Carrington, 7 Leigh (Va.) 566. And either the payment of the pur- 
chase money imposing a resuhing trust on the holder of the légal title, 
or an express trust by agreement of the grantee to .hold in trust for 
the real purchasers may be proved by paroi. Young v. HoUand, 117 
Va. 433, 84 S. E. 637. 

[3, 4] Between strangers a resulting trust is presumed against the 
grantee in favor of the person paying the purchase money. But if the 
purchaser takes the title in the name of a wife or child or other per- 
son for whom he is under some natural or légal obligation to provide, 
the presumption is against a resulting trust and in favor of a gift or 
advancement to the person named in the deed. 1 Perry on Trusts, 143 ; 
Young V. Holland, supra; Jackson v. Jackson, 91 U. S. 122, 23 L. 
Ed. 258. In gênerai there is no légal or moral obligation on one brother 
or sister to support another, and there fore in thèse relations the nominal 
grantee will be presumed to hold under a resulting trust for the real 
purchaser. Madison v. Andrew. 1 Vesev, 57; 1 Perry on Trusts, 144; 
Plarris v. Mcintyre, 118 IlL 275, 8 N. E. 182; 39 Cyc. 136. But the 
presumption of a resulting trust is one of fact, which may be rebutted 
by évidence of the circumstances or of the déclaration of the purchaser 
that he intended a gift to the nominal grantee. W^arren v. Steer, 112 
Pa. 634, 5 Atl. 4; Higdon v. Pligdon, 57 Miss. 264; Jackson v. Jack- 
son, supra. 

[5] Manifestly the relation of close affection or kinship, though not 
amounting to moral or légal obligation, is a fact to be weighed along 
with other évidence tending to rebut the presumption of a trust and 
support the inference of a gift. 

[6] A resulting trust will not be declared in favor of a purchaser 
who had the légal title made to another for the purpose of defrauding 
his creditors. Almond v. Wilson, 75 Va. 613 ; Ratliff v. Ratliff, 102 
Va. 880, 47 S. E. 1007; Sell v. West, 125 Mo. 621, 28 S. W. 969, 46 
Am. St. Rep. 508, and note; Neill v. Keese, 5 Tex. 23, SI Am. Dec. 
754, and note ; 1 Perry on Trusts, 165. 



HIGGINBOTHAM V. BOGGS 257 

[7] A resulting trust, if it arises at ail, must arise at the time the 
légal title is taken. Beecher v. Wilson, 84 Va. 813, 6 S. E. 209, 10 
Am. St. Rep. 883; Miller v. Blose, 30 Grat. (Va.) 744. 

[8] Paroi évidence to establish a resulting trust must be clear, un- 
questionable, and certain. Donaghe v. Tams, 81 Va. 132; Woodward 
V. Sibert, 82 Va. 441. But when the payment of the purchase money 
by one for a conveyance made to another is established, the charge that 
the légal title was made to another to defeat the creditors of the pur- 
chaser must also be established by clear proof. 

[9] There was a feeble effort to show that Mrs. Bright paid the 
purchase money when the Fishers conveyed the land to Fannie Wrenn 
in 1872; but the testimony proves beyond doubt that McGruder paid 
it. The deeds from Fannie Wrenn to Jones and from Jones to Mrs. 
Bright were made without valuable considération. Mrs. Bright and 
McGruder lived together on the land as brother and sister, and Fannie 
Wrenn, their nièce, was a member of the family until her marriage. 
McGruder cultivated the land and used it in ail respects as his own, 
Mrs. Bright no doubt performing the household duties incident to 
her relation with her brother. McGruder also directed the changes of 
the title from Fannie Wrenn to Jones, and from Jones to Mrs. Bright, 
and ail concerned acquiesced in fuU récognition of his control. His 
reason for getting the title eut of Fannie Wrenn and into Jones, his 
confidential friend, was the expected marriage of Fannie Wrenn, and 
for getting the title out of Jones into Mrs. Bright, was the anticipated 
financial embarrassment of Jones. McGruder spoke of the land to 
his neighbors sometimes as his property and sometimes as the property 
of Mrs. Bright, his expressions on this subject no doubt varying as he 
had in mind his own control and dominion or the légal title of Mrs. 
Bright. 

If this were ail, there could be little doubt that ail of the successive 
grantees of the land — Fannie Wrenn, Jones, and Mrs. Bright— took 
and held the légal title with a resulting trust in favor of McGruder, 
and enforceable after his death by his heirs. But inquiry into the 
motive of McGruder for keeping the title out of himself and in an- 
other is fatal to the claim of the complainants. An active and aggres- 
sive man in ail his pursuits, it is évident that there must bave been a 
reason cogent to him for the course he pursued. The record suggests 
no reason except that of preventing the collection of the large judg- 
ment in favor of the state against him; and the affirmative évidence of 
that motive is convincing. The mère fact of the existence of the judg- 
ment and the keeping of the title to the property for which he had 
paid and which was his chief asset in the names of others for so many 
years unexplained is strong évidence (Hickman v. Trout, 83 Va. 478, 
3 S. F. 131, 20 Cyc. 449) ; for the judgment and the land were the two 
largest factors in McGruder's business life. Still stronger évidence is 
the fiction resorted to in the conveyance from Fannie Wrenn to John 
T. Jones. The arrangement was that Jones was to give his check for 
the cash portion to McGruder as attorney in fact for Fannie Wrenn, 
and McGruder was to retum the check or the money collected on it. 
This was done to make that which was a mère fictitious considération 
234 F.— 17 



258 234 FEDERAL REPORTER 

appear to be a real one. Mr. Atkinson, the attorney who drew the 
papers and who was the trustée under the mortgage deed purporting 
to secure a portion of the purchase money, testified that as he under- 
stood the transaction nothing was to be paid, and that the purpose of 
McGrudér in not having the title in himself was to prevent the col- 
lection of the judgment. Objection was made to this testimony of 
Atkinson as to the fraudulent intent, on the ground that it came out 
on a cross-examination which extended beyond the subject of the di- 
rect testimony. The objection is not well founded, since the cross- 
examination related to the explanation of the transaction referred to 
as fictitious in the direct examination. It is true that the witness in- 
timated that he had no positive knowledge of the fraudulent intent, 
but he was a party to the transaction and his understanding that the 
trust deed made to him was a mère pretense is not without weight. 

The conclusion that McGruder had the title made to another for 
the purpose of defrauding his creditors carries with it the finding that 
equity would hâve given no relief to him, and will give none to his 
heirs. 

[10] The claim that the release of the judgment by the state related 
back to the date of ail of the transactions intended to prevent the col- 
lection of the judgment and purgôd them of this intrinsic vice is clearly 
untenable. Under the authorities above cited the relations of the 
parties were fixed when the deeds were made. Because of the fraudu- 
lent purpose to defeat a créditer the resulting trust failed to come into 
existence when the purchase money was paid by McGruder. The sub- 
séquent payment or release of the judgment could not create it. If 
it could a debtor by fictitious transfers could conceal property, secure 
a settlement éf his debts by means of his f raud, and then demand the 
restoration of his property from the holder of the légal title at the 
hands of a court of equity. 

f11] There is another view which is just as conclusive against the 
complainants if we lay to one side the vice of fraud. The évidence 
shows plainly that, while McGruder worked and intended to control 
and use the land as long as he lived, he had no intention of ever 
claiming the fee — of asserting the légal title and ownership. He took 
the utmost pains to escape owning it up to the time of the conveyance 
of Jones to Mrs. Bright. After that and after the satisfaction of the 
judgment against him, when there was no business motive for him 
to keep the légal title in his sister, he allowed her to retain it from 
January, 1885, when the judgment was satisfied, until his death in 1907 
— a period of 22 years. There is no évidence that in ail this time he 
ever asked for a conveyance, or in any way indicated that he desired 
it. More significant still, in his will he solemnly asserts the land to be 
the property of Mrs. Bright, and the proceeds of the sale of a portion 
of it to hâve been transferred to him by her. If it was his property, 
either legally or equitably, it was by far the most valuable part of his 
possessions, and yet he made no devise of it. The will was a solemn 
affirmation that he did not hold the land adversely to Mrs. Bright, and 
that his usé was subject tO: and in récognition of her title. Consider- 
ing the unusually close relationship of this brother and sister, and the 



THE MEKCER 259 

absence o£ other family obligation on the brother, the reasonable con- 
clusion is that, though at one time McGruder may hâve regarded him- 
self, and though he may hâve been, the équitable owner of the land, 
yet he intended the conveyance from Jones to Mrs. Bright to confer 
upon her the full légal title, free from any trust, with the mère ex- 
pectation that he would hâve the Use of the land for the remainder of 
his life. 

[12] Staleness is also a forceful considération against the claim. 
The case of the complainants is that McGruder was the real owner, and 
could hâve required his sister, Mrs. Bright, to convey it to him at any 
time from 1884 until his death in 1908. After 22 years of acquiescence 
by him in his sister's title, follovved by positive affirmation of it in his 
will, it is too late for his heirs to allège against it. Speidel v. Henrici, 
120 U. S. 377, 7 Sup. Ct. 610, 30 L. Ed. 718; Hanner v. Moulton, 138 
U. S. 486, 11 Sup. Ct. 408, 34 L. Ed. 1032; 1 Perry on Trusts, 141. 

The complainants, it is true, were not parties to the suit brought by 
Mrs. Bright in vvhich the circuit court of Henrico county decreed 
that Mrs. Bright was the owner of the bonds and notes given by Davie 
for the purchase of a part of the land conveyed to her by Jones ; but 
the décision of the state court is of great persuasive weight as to the 
légal principles involved, since the Suprême Court of Appeals of 
Virginia denied an appeal on the ground that the decree of the circuit 
court was plainly right. 

Summing up the case in a practical way, the évidence leads to thèse 
inferences as to the relations of the. parties and the status of the 
land: McGruder bought the land and paid the purchase money. He 
had the title made to Fannie Wrenn, and afterwards to his friend 
Jones, and then to his sister, Mrs. Bright, to protect it from the 
judgment against him in favor of the state. After the satisfaction 
of the judgment the conduct of McGruder shov^'s that he expected 
to use the land and the proceeds of the sale of any of it without any 
objection from his sister, Mrs. Bright; but it also shows that he ac- 
quiesced in and affirmatively asserted his sister's ownership, that he 
had no intention of setting up a claim to the title against her, and that 
he intended the conveyance from Jones to her to operate as a gift, 
subject only to the expectation that he would use and control the 
land as long as he lived. There is no equity in the bill, and it must 
be dismissed. 

Reversed. 



THE MEECEB. 

(Circuit Court of Appeals, Second Circuit. April 25, 1916.) 

No. 191. 

Collision ïS=102 — Steam Vessbls Meeting — Mdtual Paults. 

A tug, witli a tow alongside, held in fault for a collisioii with a meet- 
ing tug on North Rirer, for not keeplng a proper lookout, and therefore 
failing to see the other tug untlI withln 600 feet of her, and for then 

(gssFor other cases see same topic & KEY-NUMBER in ail Key-Numhered Digests & Indexes 



260 234 FEDERAL REPORTER 

faillng to reduce speed or stop until Immediately before collision. The 
meeting tug also held in fault on the ground that, when she saw the otlier 
tug approachlng head on and 600 or 700 feet away, it was lier duty under 
article 18 of the Inland Rules (Act June 7, 1897, c. 4, § 1, art. 18, 30 Stat. 
100 [Comp. St. 1913, § 7892]) to port her helm and signal for passlug port 
to port, Instead of whicli she gave alarm signais and reversed. 
[Ed. Note, — For otlier cases, see Collision, Dec. Dig. <®=>102.] 

Appeal from the District Court of the United States for the South- 
ern Distirict of New York. 

Suit in admiralty for collision by John J. Pareis, owner of the steam 
tug Eva May, against the steam tug Mercer; the Pennsylvania Rail- 
road Company, claimant. Decree for libelant, and respondent appeals. 
Modified. 

Burlingham, Montgomery & Beecher, of New York City (Charles 
C. Burlingham and Benjamin W. Wells, both of New York City, of 
counsel), for appellant. 

Alexander & Ash, of New York City (Peter Alexander, of New 
York City, of counsel), for appellee. 

Before WARD and ROGERS, Circuit Judges, and HOUGH, Dis- 
trict Judge. 

ROGERS, Circuit Judge. The libelant is the sole owner of the steam 
tug Eva May and has brought this suit against the steam tug Mercer 
to recover damages for injuries sustained by collision between his ves- 
sel and the steam tug Harrisburg, in tow of the Mercer. The court 
below held the Mercer solely at fault. 

The Eva May left her berth at the foot of West Tenth street in 
the borough of Manhattan, New York City, at about 7 a. m. on De- 
cember 24, 1912. She was bound for Jersey City. She was ready 
to start out at about 6 a. m., but there had been a rather heavy snow- 
storm during the preceding night, and, as it was still snowing, her mas- 
ter deemed it prudent to remain in the slip until the weather conditions 
became favorable. At 7 o'clock the looked-for change came. The 
snow stopped falling and the weather cleared, so that the captain of 
the tugs could see across the river with perfect distinctness. After 
leaving her berth the Eva May headed across the North River to the 
New Jersey side of midstream and then went down the river. It is 
claimed that she was proceeding slowly under one bell. 

The tug Mercer, towing the tug Harrisburg on her starboard side, 
left Pier H., Jersey City, bound for Hoboken. The tide was flood, 
with a strong breeze from the northeast, blowing straight down the 
river. The mate of the Mercer testified that he was at an open window 
of the Harrisburg's pilot house, and the floatman of the Mercer testi- 
fied that he himself was forward near the stemhead of his tug both 
keeping lookout. The Mercer claims it was proceeding slowly and 
caref ully up the river, making about 4,5 knots ; that when she was about 
abreast of Pier 7, Hoboken, and about 500 feet from the New Jersey 
shore, smoke and steam from the Eva May were seen right ahead and 
about 600 feet away by the lookouts on the Mercer and Harris- 
burg; that the weather was so thick on account of fog and falling 



THE MEECEB 261 

snow that the master of the Mercer could not make out the Eva May 
until about 600 feet off the Jersey shore, when she at once blew one 
blast of the whistle, which was answered by the tug with a signal of 
two blasts ; that, as soon as the Mercer received the cross-signal f rom 
the Eva May, her master rang for full speed astern and sounded alarm 
blasts. 

It is alleged, however, by the libelant, that the Mercer was coming 
up the river with the tide at a high rate of speed. The libelant allèges 
that, when the Eva May made out ahead the Mercer, the former blew 
an alarm whistle, stopped, and reversed ; that the Mercer replied with 
a signal of one whistle ; that as the latter signal could not be safely 
complied with the Eva May repeated her alarm signal and continued 
backing; but that, notwithstanding the alarm signais, the Mercer came 
on ahead, without slowing or stopping, until just before the collision, 
and brought the Harrisburg into contact with the Eva May with such 
force that she very shortly thereafter filled and sank. 

There is a conflict of évidence as to the whistle signais exchanged. 
The appellant's witnesses say the first signal, one blast, was blown by 
the Mercer, and ansv,'ered by the Eva May with two ; that the Mercer 
then sounded the alarm, reversed her engines, and again blew the 
alarm. The appellee's witnesses say that, immediately on sighting the 
Mercer, the Eva May blew the alarm and backed full speed ; that the 
Mercer then blew one blast, and the Eva May then blew another alarm, 
and kept backing full speed, and the Mercer then blew an alarm and 
reversed her engines 450 feet from the Eva May. 

The court below was satisfied, and we are satisfied, that the weather 
was not thick with fog and that no snow was falling at the time of 
the accident. The master of the Eva May testified that the atmosphère 
was clear and that one could see from shore to shore. He was cor- 
roborated by other witnesses, and among them by one Capt. Newman. 
The latter was not employed by either party and appears to be an in- 
telligent and wholly disinterested witness. He witnessed the collision 
from the steam lighter Hector, owned by the Erie Railroad Company, 
in whose employ he was, and he testified that the weather conditions 
were good and that he had no difficulty in seeing the New York shore, 

The court below thought the Mercer solely at fault, but failed to 
State the reasons. The captain of the Eva ]May testified that, when he 
discovered the Mercer, that boat was heading directly for the Eva May 
and was 600 or 700 feet distant. He was asked : 

"Q. Was she heading so as to pass you on either side, or if her course 
had continued would you hâve corne together? A. Right for us when I dis- 
covered tliem." 

He also testified that as soon as he discovered the Mercer he im- 
mediately blew the alarm whistle and rang bells to stop and go back 
with the engine, full speed ; and he added that the signais were obeyed 
and his boat kept backing full speed. He testified that the Mercer 
blew one whistle, and that as he could not comply with that signal 
he blew another alarm. Asked what, if anything, the Mercer did after 
he blew the second alarm, he said : 

"She kept coming for us," and "she was coming very fast." 



262 234 FEDERAL KEPORTER 

The resuit was that the boats came together. On cross-examination 
he testified as f ollows : 

"Q. You say that you burn Soft coal? A. I do. Qi And that there was tlils 
exhaust from your exhaust pipe? A. Yes, sir. Q. And that the wind was 
northeast about? A. Yes. Q. That would blow thls smoke and steain in what 
direction? Down the river ahead of you? A. Down, ahead of us; yes, sir. 
Q. You were not blowing any fog signais, were yoviV A. Ko, sir. Q. Thls 
exha.ust steam and smoke somewhat obscured the view below, I believe, you 
sald? A. It did, ahead of nje. Q. When you saw the Mercer, she was about 
dead ahead of you, was she? A. A trlfie on our starboard or inslde. Q. What 
do you mean by a trille on your starboard bow? A. Just the Inslde, I thiiik. 
Q. It was a head and head situation, I believe. You were eomiug head and 
head ? A. Yes. Q. And I think you said that she was headlng rlght for you ? 
A. The two tugs. Q.. And 500 or 60O feet away? A. Yes, sir." 

On examination by the court the foUowing testimony was given by 
him: 

"Q. When you heard the flrst whistle from the Mercer, was the smoke stlU 
ahead of you? A. Yes, sir. Q. And somewhat obscuriiig your vlew? A. They 
came ont of that smoke so that I could see tliem ; but I blew the alarm whis- 
tle, stopped, and backed my boat. Q. When you backed your boat, wheu you 
started to baek your boat, what was the condition as to smoke? It was ob- 
scuring your vlew to some extent? A. To some extent, yes; but we were 
close enough together so that we could see each other. Q. What niade you 
think it was dangerous to continue the course, so as to bririg you port to port, 
instead of stopplng? A. We were too close together to go any doser together 
without stopplng and backing; our rules are to stop and baek to avoid a 
collision, wliicli I did. Q. Then you felt that one or the other of you mlght 
make some error in maueuver, if you didn't stop? A. That is it" 

On his redirect he testified : 

"Q. At the tlme of the collision what effect had the reversed englues upon 
the forward motion of your tug? A. It would swing the bow of the boat to 
port. Q. You don't catch me. I mean, were you still goiug forward in the 
water, or had you stopped your lieadway, or which way were you moving at 
the tlme of the collision? A. She was golug stem llrst ; she had a trlfle steru 
lieadway on lier. Q. That is, your reversed englues had overeome your mo- 
uientum? A. Yes. Q. And you had started to go astern? A. Yes, sir. Q. If 
the Mercer had answered your alarm whistle witli alarm whistles, and stopped 
and backed would there hâve been any collision? A. No, sir." 

As respects the finding by the District Jiidge that the Mercer was in 
fatilt, this court fnlly concurs in that conckision. There is no good 
reason why the Mercer did net see the Eva May long before she did. 
The cloud of black smoke emitted by the Eva May was a much more 
conspicuous object than the tug herself, and if the Mercer had been 
alive to the situation, or her lookout not derelict, she would bave seen 
or been advised by the lookout that a tug was coming down the river 
with her smoke and steam carried ahead of her by the northeast wind, 
and she would also hâve known, or at least had reasonable cause to 
believe, that her own présence in the river might be obscured from 
the pilot of the down-coming vessel. Under those conditions, it was 
her duty to blow passing signais and slow down, and, if necessary, stop 
unti! a passing agreement was entered into between her and the Eva 
May. 

The Mercer did not, however, slow up or stop, but ran right into 
péril, stopping and backing only when she was within 100 or 150 feet 



THE MEKCEB 263 

of the Eva May. Her engineer testified that after the tow had straight- 
ened up the river he got a hook-up bell, and operated under a hook-up 
bell from that time until just before the colUsion, when he stopped and 
reversed full speed. According to the Mercer's own witnesses, she 
was from the time she started running under a hook-up bell with a 
flood tide until she was vvithin 100 or 150 feet of the Eva May. She 
must hâve been making about 6 miles an hour, notwithstanding the tes- 
timony of her witnesses, shown to be inaccurate by their testimony 
concerning the weather conditions. 

The District Judge came to the conclusion that the Eva May was 
navigated with care and caution and he absolved her from ail fault. 
We find ourselves unable to concur in that conclusion. The Eva May 
did not, in our opinion, perform her entire légal duty. What she did 
was to blow her alarm whistle and stop and reverse. The resuit was 
that she was thrown across the track of the Mercer. The testimony 
satisfies us that the Eva May and the Mercer were approaching end on 
or nearly so. Article 18, rule 1, of the Pilot Rules for Certain Inland 
Waters reads in part as follows : 

"When steam vessels are approaching eaeh other head and head, that is, 
end on or nenrly so, It shall be the duty of eaeh to pa.ss on tlie port side of 
the other ; ond either vessel shall glve, as a signal of her Intention, one short 
and distinct blast of her whistle, whleh the other vessel shall answer promptly 
by a siniilar blast of her whistle, and thereupou such vessels shall pass on the 
port slde of eaeh other." 

The rule required thèse vessels to pass eaeh other on the port side. 
There is évidence tending to show that the Eva May starboarded her 
helm. One of the claimant's witnesses testified that when the two tugs 
were close to eaeh other the master of the Eva May was seen trying 
to put his helm aport. On cross-examination it was sought to weaken 
this évidence, but without success. This would tend to show that the 
Eva May 's helm must hâve been starboarded, and that the master tried 
to shift it and could not do so. But, disregarding that, and accepting 
the testimony of the master of the Eva May, then it appears that the 
Eva May stopped and backed, when the law required her to port her 
helm. The master stated that, when he reversed his engines, the ef- 
fect was to swing the bow of his tug to port. There is no doubt that as 
a resuit of vi'hat was done the Eva May was swung considerably across 
the river, and this contributed .to the collision. Instead of porting her 
helm, she stopped and backed. In doing so she violated the law, and 
she bas not shown anything to justify her in her departure frorn the 
statutory rule. The departure from that rule puts on the boat attempt- 
ing to justify it the burden of establishing that the other boat assented 
by proper signais to the departure. And this burden has not been met 
in this case. 

As both tugs were in fault the damages should be divided, and the 
decree below modified to conform to this opinion. It is so ordered. 



264 234 FEDEKAL, EEPORTBE 

NOBTHRUP V. PHILADELPHIA & R. HT. CO. et al. 

(Circuit Court of Appeals, Second Circuit. April 25, 1916.) 

No. 241. 

Collision <S=371(2)— Tow and Stationaet Deedge— Fault of Towixa Tno. 
A collision in Kill von Kull at night between a canal boat, forming part 
of a tow of 15 boats in tiers of 3, and a scow alongside a dredge engaged 
in deepening the channel, held due to the fault of one of the towing tugs 
in directlng tlie castlng off of the Unes between the rear starboard boat, 
whieh was to be taken out of the tow, and the boat ahead of tliem con- 
tinuing to push at the stern of the tow, which forced the latter boat out 
of the course of the tow and into collision with the scow. The dredge 
hcld- not in fault as obstrueting the ehannel ; it appearing that there was 
a clear channel of oA-er 400 feet on the side of the tow. 

[Ed. Note. — For other cases, see Collision, Cent. Dig. § 101 ; Dec. Dig. 
®=571(2).] 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Suit in admiralty for collision by George Northrup, owner of the 
canal boat Senator Rice, against the steam tug Bern, the Philadelphia 
& Reading Railway Company, claimant, and the Morris & Cummings 
Dredging Company, impleaded. Decree against the Bern, and claim- 
ant appeals. Affirmed. 

Armstrong, Brown & Purdy, of New York City (Pierre M. Brown, 
of New York City, of counsel), for claimant-appellant. 

Park & Mattison, of New York City (Henry E. Mattison, of New 
York City, of counsel), for libelant-appellee. 

Everett, Clarke & Benedict, of New York City (A. Léo Everett, of 
New York City, of counsel), for respondent-appellee. 

Before COXE and ROGERS, Circuit Judges, and HOUGH, Dis- 
trict Judge. 

ROGERS, Circuit Judge. This suit arises out of a collision, and 
the libelant sues as the owner of the canal boat Senator Rice. The 
libelant brings the suit on his own behalf as owner, and on the behalf 
of the underwriters on the boat, against the steam tug Bern, owned by 
the Philadelphia & Reading Railway Company. The injury to the Sen- 
ator Rice occurred while that boat was in tow of the steam tugs Bern 
and Wyomissing, and resulted in the beaching of the boat. The in- 
jurjr resulted from a collision with a scow alongside of a dredge 
in the channel of the Kill von Kull. The owner of the Bern 
filed a pétition, under the fifty-ninth rule in admiralty (29 Sup. 
Ct. xlvi), against the Morris & Cummings Dredging Company, alleging 
that that company was responsible for the injury to the Senator Rice. 

On the night of January 7, 1914, the Senator Rice, loaded with 315 
tons of coal, left Port Reading in tow, with other boats, of the steam 
tugs Bern and Wyomissing, bound for Thirty-Seventh street, East 
River, New York. The tow consisted of 15 boats, made up of 5 tiers 
of 3 each. The Senator Rice was in the fourth lier on the starboard 

(g=For other cases see sfl.me topic & KEY-NïmBEH lu ail Key-Number«d Digests &. Indexer 



NOETHRUP V, PHILADELPHIA <fe B. BY, CO. 265 

side. The Wyomissing was in charge of the tow, which it had on a 
hawser, and the tug Bern was assisting at the stern of the tow. The 
tow left on flood tide. The pilot knew that the dredge was there, and 
that the scow was next to the dredge. He had been past the dredge in 
the afternoon, and knew ail about the situation. Moreover, he admit- 
ted that the dredge was lighted up at the time of the accident, and that 
he saw her and the scow. The tugs and tow proceeded on their 
way until in the vicinity of Elizabethport, about 2:15 a. m., when 
the steam tug Bern dropped back to take out of the tow the boat which 
was directly astern of the Senator Rice. The Bern made fast on lier 
port side to the starboard side of the coal boat and started to back 
away before ail the lines were cast off between the boats she had in 
tow and the one next to her. When the tug started to back, the last 
tier of the tow was thrown out of position, and the Senator Rice was 
shoved into a dredge which was lying about in the middle of the 
stream, breaking the stem and three timbers of the Senator Rice. 

The libel charges that the collision was caused through the fault and 
négligence of the Bern and those in charge of that tug, in the follow- 
ing particulars : (1) In attempting to remove the boat from the tow be- 
fore ail the lines from said boat to the tow had been cast off. (2) In 
causing the Senator Rice to corne in contact with a dredge which was 
at anchor. (3) In failing to give signais to the Wyomissing to stop. 
(4) In not preventing the Senator Rice from coming in contact with 
the dredge. The hbel dénies that the collision was caused by the Sen- 
ator Rice, or those in charge of that boat. 

The answer states that the tow was handled with the utmost care 
and with adéquate help; that it was not caused or contributed to by 
any négligence on the part of the claimant, but was caused or contrib- 
uted to by the négligence of said dredge or owners in unlawfully ob- 
structing the channel. The answer of the Dredging Company states 
that it was engaged in the work of widening and deepening the chan- 
nel of Staten Island Sound, between Elizabethport and the Baltimore 
& Ohio bridge, under a contract with the United States government, 
and it was duly permitted under its contract, and by authorization of 
the proper government engineer, to work by night as well as by day ; 
that in doing such work it necessarily placed its dredge in the channel 
of the stream and worked with scows to receive the dredged material, 
and that it did so with as little interférence with navigation as possible ; 
that on the night of January 7, 1914, its dredge was brilliantly illumin- 
ated and had in position so-called passing lights, indicating on which 
side of the dredge a moving vessel should pass; that its dredge was 
not working in the middle of the channel, and there was always abun- 
dant room for a properly made-up tow to pass in safety between the 
dredge and the shore ; that if a collision resulted, as alleged in the pé- 
tition, it was solely due to fault and négligence on the part of the 
Philadelphia & Reading Railway Company, its agents and servants, 
and was in no way due to fault on the part of the respondent. 

The dredge was engaged under the supervision of the government 
in dredging the waters of the Kill von Kull at a point where a channel 
400 feet wide had to be deepened. The channel between the dredge 



266 234 FEDERAL REPORTER 

and the New Jersey shore was 450 f eet ; and between the side of t'ne 
scow next to the dredge and receiying the dredged material and the 
shore it was 415 feet. The contract between the Dredging Company 
and the government expressly requires the contracter to conduct the 
work in such a manner as to obstruct navigation as little as possible, and 
in case the contractor's plant so obstructs the channel as to impede the 
passage of vessels, it must promptly be so moved as to afford a prac- 
ticable passage on the approach of any vessel. 

It is impossible to hâve a drèdge in the Arthur Kill without to a cer- 
tain extent obstructing the charinel. We cannot, however, hold that 
the channel was so obstructedin this instance as to impede the pass- 
age of this tow. Ail that the contract and the law requires is that 
there should be afforded a practicable passage for the tow. A 400-foot 
channel for a 75-foot tow is certainly no such obstruction as would 
render the dredge liable on the ground that it obstructed navigation 
within the meaning of the law. The injury which occurred could not 
hâve happened if those in charge of the tow had not approached so 
near the dredge. But, even as it was, the accident would not bave hap- 
pened if it had not been for an order that was given to which référence 
is hereinafter made. It is perfectly évident to us that those in charge 
of the tow, not only had the necëssary channel, but that they were 
well aware that there was no necessity for withdrawing the dredge, 
and that they did not ask to hâve it withdrawn. 

The government inspecter was on the upper deck of the dredge when 
the accident occurred and saw the collision. He testified that ail the 
liglits were showing on the dredge and that on the approach of the tow 
he heard no danger blasts. This was confirmatory of the master of the 
dredge who heard no alarm from the tug. 

The reason for this collision is not involved in the slightest uncertain- 
ty. That reason was the prématuré throwing off of the Unes between 
the Wayne and the Senator Rice while the flotilla was passing the 
dredge. The Senator Rice was the starboard boat in the fourth tier, 
and the Wayne was directly behind her in the fifth tier. It appears 
that it had been planned to take the Wayne out of the tow at a point 
somewhat further up the Kills. The master of the Senator Rice testi- 
fied that he had been informed of this plan when starting from Port 
Reading. Some time before reaching the dredge he received whistles 
either from his tug, the Wyomissing, or the helper, the Bem, which he 
Gonstrued as a signal to throw ofï the lines between the two barges. 
The resuit of the throwing oiï of the lines was that the Senator Rice 
did not keep its alignment in the tOAv. In no other way is it to be ac- 
counted for that the starboard bdats in the first three tiers cleared 
the scow. 
, : The testin)ony of the master of the Senator Rice is as f ollows : 

;"Q. Where were you oh your boat at the time of this collision? A. I waa 
walklug to the bow about lialf way through her. , Q. Just go on' and tell us 
what you sàw. A. What I sâw, I \vas walklng to the stern lettlng go of the 
Unes on the other boat. Q. Why were you dolng that? A. That was just be- 
fore she strnck I was letting the spring Unes off the boat behind. Q. Why 
were you doing that? A. We were going to take the boat ofC, Q. What Imp- 
pened when you started to take thèse linès off V A. The boàts were swinging 



NOBTHKUP V. PHILADELPHIA & E. RY. CO. 2G7 

towards the tow, and ail I know slie struck tlie dredge. Q. Are you able to 
say wliether ail the Unes on this particular. boat had been taken, off? A. Yes, 
sir. Q. What ahout the Unes from that boat to the boat on the port sideV 
A. I don' know: I didn't see them. Q. You say you got the Unes from the 
stern of your boat to the bow of the boat astern of you free, did you? A. 
Yes, sir. Q. Ho\v many Unes did you throw off? A. Two spring Unes. Q. 
Was that ail you did? A. That was ail. Q. Was it then the collision hap- 
pened? A. Just a little while after." 

The testimony of the captain of the Bern is as follows: 

"Q. Ilad you given any signal to this man on the Senator Riœ or the 
Wayne No. 4 to cast off their Unes before you got by that dredge? A. Yes, 
sir ; one Une the Inside tow Une. Q. How did you do that? A. Well, I was 
laying just like that ready to shove. I said, 'Let go your inside tow Une, so 
you will be handy to get off.' Q. Who did you say that to? A. I guess it 
was the captain of the Wayne 4. Q. Did he do it? A. Yes sir. Q. Was that 
the only Une? A. Yes; and he had breast Unes out besides. Q- Did they 
iu any way interfère with the position of the boats in the tow from what 
they were before the casting off of the Une? A. No. Q. That was before 
you came to the digger? A. Yes, sir. Q. How long before? A. A couple of 
minutes ; I was .iust going by the digger. I thought everything would be ail 
right. Q. You got three tiers through ail right, didn't you, past the scow? 
A. Yes. Q. The Senator Rice hit the scow alongside of the mud digger? A. 
Yes, sir. Q. Do you know how she hit? A. Well, the only thing I know was 
on the corner of the scow. Q. The Jersey corner? A. The Jersey corner, on 
the mud scow. Q. Were you i)ushing then with your tug? A. Yes, sir. Q. 
How did you keep away, to keep yourself from getting In? A. I kept pushing 
ail the tiiiie. Q. Did you succeed tlien in getting the Wayne No. 4 clear? 
A. Yes, sir. Q. And youTself, too? A. Yes, sir. Q. You didn't let go in or- 
der to baek out and get a\'iay? A. Yes, sir. Q. Did the Senator Rice break 
out of the tow? A. Khe hit. I don't know whether she parted the tow Une, 
or not, to the boat ahead. Q. He said he cast them off long before. A. Cast 
bis own tow Unes off. 

"Mr. Mattison: No; cast the Unes astern of him. 

"Q. Do you know what condition the Unes were in between the stem of 
the Rice and the Wayne No. 4? A. No. Q. You don't know whether they 
were on or off? A. Well, they must be on, because she hung on — hung on to 
the tow. Q. They were aU moving right along? A. Yes, sir. Q. If his Unes 
had been off her — A. He would drlft away from the tow." 

When the lines of the Wayne were cast ofif pursuant to orders, the 
strain on the Hnes not cast off, caused by the pushing of the tug Bern, 
resulted in throwing the bow of the Senator Rice so far out to star- 
board that it hit the scow. The collision was due solely to the négli- 
gence and lack of skill on the part of the captain of the Bern in order- 
ing the lines cast off at the time he did and in so navigating the Bern 
as to force the Senator Rice out so far to the starboard. We think the 
court reached the right conclusion in this matter, and we agrée in hold- 
ing that the dredge was not at fault. 

Decree affirmed. 



268 234 FEDERAL EEPORTBR 



CHICAGO & N. W. RT. 00. T. UNITED STATES. 

(Circuit Court of Appeals, Seventh Circuit. Aprll 18, 1016. Eehearlng Denied 

June 1, 1916.) 

No. 2294. 

1. Caebiebs ©=337 — Oakriage of Live Stock — T^ventt-Eight Houe Law — ■ 

Violation. 

Uiider the Twenty-Eiglit Hour Law (Aet June 29, 1906, e. 3594, 34 Stat. 
607 [Comp. St. 1913, §§ 8651-8854]), deelaring that no carrier sliall confine 
cattle or other animais in cars for more tlian 28 hours witliout unload- 
iug for rest, water, and feeding, but that the sliipper may consent to the 
time of confinement being extended to 36 hours, the penalty provided for 
violation may be recovered, though confinement beyond the 36-hour period, 
wliich was consented to by the shipper, was not willful or witb inteut 
to do injury to the stock. 

[Ed. Note. — For other cases, see Carriers, Cent. Dig. §§ 95, 927; Dec. 
Dig. <g=37.] 

2. Cabbters <S=37— Caeeiage or Live Stock — Violation of Twenit-Eight 

HouR Law. 

In an action to recover the penalty Imposed by the Twenty-Eight Hour 
Law, where a carrier keeps cattle conflned longer than the maximum 
period of 36 hours, unless necessitated by storm or accident, it is no dé- 
fense that an accident occurred on the last part of the journey, where, 
desplte such accident, the shipment might hâve arrived in less than 36 
hours, had diligence been exercised. 

[Ed. Note. — For other cases, see Carriers, Cent. Dig. §§ 95, 927; Dec. 
Dig. (S=537.] 

3. Carriers <g=>37 — Carbiage of Live Stock — Actions — Twenty-Eight 

HouB Law — Evidence — Sufficiency. 

In au action to recover the penalty Imposed by the Twenty-Eight Hour 
Law for keeping cattle conflned longer than 36 hours, évidence that the 
confinement was occasioned by the carrier's négligence hdd suflicient to 
go to the jury. 

[Ed. Note.— For other cases, see Carriers, (^ent. Dig. §§ 95, 927; Dec. 
Dig. <S=»37.] 

Appeal from the District Court of the United States for the East- 
ern Division of the Northern District of lUinois. 

Action by the United States against the Chicago & Northwestern 
Railway Company to recover a penalty for violation of the Twenty- 
Eight Hour Law. There was a judgment for the United States, and 
défendant brings error. Afhrmed. 

The action was for violation of the "Twenty-Eight Hour Law." It appears 
that the stock was loaded October 4th at 6 p. m. at Kingsted, lowa, a station 
on defendant's road, and conveyed by défendant over Its road to the stock- 
yards at (Chicago, where it was unloaded at 9:05 a. m. of the 6th, having 
been conflned in the car continuously for 39 hours and 5 minutes. The shipper 
agreed to 36 hours' confinement. The car containlng the stock was one of 
an extra train carrying stock only. Défendant gave évidence that the train 
reached Clinton, lowa, which station it left at 6:30 p. m. of the 5th, for Chi- 
cago ; that at Nelson, 111., there were picked up and put into this train 5 
cars of stock, which had been left there by a prior train, because It was 
foUnd to be too heavy. The schedule running time from Clinton to Chicago 
was 9 hours, but it had been done in 6 hours. The train reached Proviso, a 
station just outside of the clty limits of Chicago, and 16 miles from place of 
unloadiug, at 2:48 a. m. of the 6th, and whiie running through this station a 

©n^jFor other cases see same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes 



CHICAGO & N. W. RT. CO. V. UNITED STATES 269 

drawbar was puUed out of car No. 21239, which was the flfth car from the en- 
gine, aud one of those plcked up at Nelson, and one of the tlmbers which 
held the drawbar, falling upon the rails, caused derailment of the car fol- 
lowing. It was necesaary to send for a wrecber to re-rail the car. 'Ihe 
wrecker was at Palatine, ail ready with its crew to start on sucli emergencles. 
Notice of this derailment was reeeived by the foreman of the wreclîing crew 
at 4 a. m. He immediately started for Provlso, reachlng there at 5:05 a. m. 
The track was eleared at 5:35 and the train proceeded on its course at 5:40. 
This conductor left the train at Fortieth avenue at 6:30 or 6:40, and it was 
tUere taken in charge by another of defendant's conductors, and started for 
the stockyards. After going about 5 miles and reaching Brightcn Park, n'hich 
is about 2 miles from the stockyards, an air hose on one of the cars burst, 
causing a sudden setting of the brakes, and the pulling out of a drawbar on 
another car of the train. This necessitated the setting out of that car, and 
replacing the air hose, causing further delay of 28 minutes. 

A'arious witnesses testified to having examined car No. 21239 prior to the 
pulling out ôf the drawbar, and that they observed nothing to indicate that 
the drawbar was defective. At the conclusion of the évidence for the gov- 
ernment, and agaln at the close of ail the évidence, défendant moved the court 
to instruct the jury to find a verdict for the défendant, which motion the 
court denied. In the eourt's charge to the jury it was stated that the jury 
had a right to consider the movement of the train from the point where the 
stock was reeeived to the Cliicago stockyards, in determining whether the 
défendant exercised due diligence to transport the stock wlthin the 36 hours ; 
that the company may not lay out a slow sehedule over a long distance, de- 
pending upon its ability, toward the end of the journey, to run in the stock 
within the 36-hour liniit. To thèse portions of the eourt's charge défendant 
took exception. The jury retumed a verdict against défendant, and judg- 
ment was entered and fine imposed. It is stated in the record and in briefs 
of counsel that seven other suits are pending against the défendant in the Dis- 
trict Court, dependingi upon thèse same facts, and which by stipulation be- 
tween the parties are to be disposed of in llke manner as the case at bar. 

Charles A. Vilas, of Chicago, 111., for plaintiff in errer. 
Charles F. Clyne and Frederick Dickinson, both of Chicago, 111., for 
the United States. 

Before MACK and ALSCHULER, Circuit Judges, and ANDER- 
SON, District Judge. 

ALSCHULER, Circuit Judge (after stating the facts as above). [1 ] 
It is contended for plaintiff in error that the record herein discloses no 
évidence which would warrant the conclusion that plaintiff in error 
"willfully" violated the Twenty-Eight Hour Law. That the term "will- 
fully," as employed in the act, does not imply deliberate intent to do 
injury to the stock or to its owner, has been too frequently considered 
and definitely determined to require further démonstration. The jury 
may conclude that the violation was willful, if from the évidence they 
find that the carrier in confining the stock beyond the statutory limit, 
manifested disregard of the law, or indifférence toward its require- 
ments. Newport News, etc., Co. v. United States, 61 Fed. 488, 9 C. 
C. A. 579; N. Y. Cent. R. R. Co. v. United States, 165 Fed. 833, 91 
C. C. A. 519; United States v. A., T. & S. Ry. Co. et al. (D. C.) 166 
Fed. 160; United States v. U. P. R. R. Co., 169 Fed. 65, 94 C. C. A. 
433 ; United States v. Atlantic Coast Line R. R. Co., 173 Fed. 764, 98 
C. C. A. 110; C, B. & Q. R. R. Co. v. United States, 194 Fed. 342, 
114 C. C. A. 334; O-W. R. & Nav. Co. v. United States, 205 Fed. 337, 



270 234 FEDERAL REPORTER 

123 C. C. A. 471; St Louis, etc./ Ry. Go. v. Unîted States, 209 Fed- 
600, 126 C. C. A. 422; Grand Trunk Rv. Go. v. United States, 229 
Fed. 116, — C. G. A. — . 

[2] It was stipulated by the company that the overtime of confine- 
ment of this stock was 3 hours and '5 minutes. It seems to be the the- 
ory of the plaintiff in error that, if it appears that unavoidable accident 
delayed tKë train in its course for a period of time at least as long as 
the 3 hours and 5 minutes, a complète défense will hâve been made, 
and that it was error for the court to charge the jury it may take into 
considération the whole period of confinement, in determining whether 
any of the excess over 36 hours was in violation of the statute, and 
whether, in the exercise of due diligence by the carrier, the confine- 
ment should hâve terminated earlier than it did. 

It is claimed that a delay of 2 hours 52 minutes unavoidably oc- 
curred at Proviso through a pulled drawbar, and conséquent derail- 
ment of a car, and another of 28 minutes at Brighton Park through a 
bursting air hose and résultant pulhng out of another drawbar — mak- 
ing 3 hours 20 minutes of unavoidable delay, but for which the stock 
presumably would hâve been unloaded 15 minutes before the expira- 
tion of the 36 hours. 

The statute prohibits the carrier from confining the stock beyond 
the period fixed, without unloading into pens, etc., "unless prevented 
by storm or otlier accidents or unavoidable cause which cannot be an- 
ticipated or avoided by the exercise of due diligence and foresight." 
If the unloading is so prevented, the delay is excused; but if, notwith- 
standing unanticipated and unavoidable delays, the carrier ought nev- 
ertheless in the exercise of reasonable diligence to hâve unloaded the 
stock within the prescribed time, the delay will not relieve it from lia- 
bility for confinement beyond that time. Delay in transportation may 
or may not necessarily delay the time of unloading, depending upon 
the facts of each case. Suppose an instance where, the shipper hav- 
ing consented to 36 hours' confinement, the time reasonably required 
to convey the stock from origin of shipment to unloading point was 
10 hours, and that an excusable delay of 16 hours occurs in transpor- 
tation ; would this excuse the carrier in prolonging the confinement of 
the stock beyond the 36 hours? Plainly not, if in the exercise of due 
diligence the confinement, notwithstanding the delay, should not hâve 
exceeded 36 hours. In other words, since there were still 20 hours 
of the 36 in which to do what reasonably required but 10, the overtime 
of confinement would not be attributâble to the delay in transportation. 
And surely the delay of 16 hours in the transportation would not in 
and of itself give the carrier the right arbitrarily to prolong the con- 
finement from the original 36 to 52 hours, whoUy regardless of the 
time reasonably necessary to reach an unloading point, without in- 
curring the penalty of the statute, if the confinement is willfully and 
knowingly extended beyond 36, though within 52, hours. 

So in the instant case, if conceding 3 hours 20 minutes of excusable 
delay at Proviso- and Brighton Park, the jury nevertheless found from 
the évidence that the confinement of the stock in question ought not, 
in the exercise of due diligence by the carrier, to bave exceeded thfe 



CHICAGO & N. W. KY. CO. V. UNITED STATES 271 

36 hours, or, if exceeding 36, ought not to hâve been as long as 39 
hours 5 minutes, its verdict would in that regard be justified. In con- 
sidering the question of whether ail or any of the overtime of confine- 
ment was made necessary by the proved delays, and whether in the 
exercise of due diligence the carrier could hâve brought the stock to 
the unloading point in materially less than the time hère in question, 
it was entirely proper for the jury to consider the confinement and 
transportation of this stock from inception to unloading, and this only 
is what the court's charge, which is complained of, told the jury it 
might do. There was no error in this. 

[3] Was there any évidence from which the jury might reasonably 
hâve concluded that in the exercise of due diligence the carrier should 
hâve unloaded the stock within the 36 hours, or in any event within a 
period substantially less than the 39 hours of their confinement? In 
brief for plaintifï in error it is said : 

"The train was in Provlso, 136 miles distant, at 2:48 in the morning, or 8 
hours and 43 minutes after leaving Clinton, havlng traversed that distance at 
an average speed of 1.5.7 miles per hour. At that point, but a very few miles 
from the stockyards, they therefore had 4 fuU hours left." 

But the stock was not unloaded till 9:05 — 6 hours 17 minutes after 
reaching Proviso, 16 miles away. Deducting 3 hours 20 minutes for 
the delays at Proviso and Brighton Park leaves 2 hours 57 minutes 
clear running time, which was consumed to make 16 miles, with a 
train carrying stock which had then already been confined 36 hours or 
more. The purpose of the law being, as declared in the act, "to pre- 
vent cruelty to animais while in transit," humanitarian considérations 
would suggest that, as the maximum period of confinement is ap- 
proaching or passed, reasonable diligence on the carrier's part will re- 
quire corresponding increase of effort to minimize further duration of 
the confinement. 

The jury may hâve concluded that, conceding the delay of 3 hours 
20 minutes as claimed, the consuming of 2 hours 57 minutes for a 16- 
mile run with stock which had already been confined by the same car- 
rier since 6 o'clock p. m., of the second day before, manifested such a 
disregard for the statute as to afford sufficient évidence of its willful 
violation. We cannot say that a verdict so based would be without 
évidence to support it, or a judgment given on such a verdict contrary 
to law. And indeed the jury might from the évidence hâve concluded 
that yet another hour was wasted at Proviso, at which station at 2 :48 
a. m., the car in the train was derailed. The wrecker was at Palatine 
with its crew ready to go out on any such emergency. But the f oreman 
of the crew testified that he did not get notice till 4, that he started at 
once, reached Proviso at 5 :05, cleared the track at 5 :30, so that at 
5 :40 the train proceeded. In thèse days of lightning communication, 
the jury might not improperly hâve f ound that under the circumstances 
ordinary care did not admit of such delay in calling the wrecker, and 
that such hour or so of the delay at Proviso was neither necessary nor 
unavoidable. 

We find no error in this record, and the judgment of the District 
Court is affirmed. 



272 ; 234 FEDERA];/ REPORTER 

CHICAGO & N. W. RY. CO. v. TNlTED STATES (two cases). 

(Circuit Court of Appeals, Seventh Circuit. April 18, 1916.) 

Nos. 2295, 2296. 

1. Caeriees <g=>37— Caehiage of Live Stock — Twenty-Eigiit Houiî Law. 

In an action agalnst a carrier to recover tlie penaltv pravided in the 
Twenty-Eiglit Hour Law (Act June 29, 1906, c. 3594, 34 Stat. 607 [Comp. 
St. 1913, §§ 8651-8654]) for knowingly and willfuUy confining stock be- 
yond 36 liours, it is not necessary to recover tlie penalty that there was a 
direct intent to Injure tlie stock ; the question of wlllfulness belng de- 
termlned from the entlre cireumstances. 

[Ed. Note. — For other cases, see Carriers, Cent. Dlg. §§ 95, 927; Dec. 
Dig. <®=537.] 

2. Tbial (g=>142 — DiEEOTED Verdict — ^Eight to. 

Though the facts were couceded, verdict shonld not be dlrected, unless 
reasonable mnids would not differ as to the conclusion to be drawn. 

[Ed. Note. — For other cases, see Trial, Cent. Dlg. § 337 ; Dec. Dig. 
®=5l42.] 

In Error to the District Court of the United States for the East- 
ern Division of the Northern District of Illinois. 

Actions by the United States of America against the Chicago & 
Northwestern Railway Company. There were judgments for the 
United States, and défendant brings error. Reversed and remanded. 

Thèse two cases were àrgued together, and will be so consldered and dls- 
posed of. The actions were against plaintiff In error to recover peualties for 
violation of the "Twenty-Eight Hour Law." In oue of the records it appears 
that by stipulation two cases were trled together in the District Court, thus 
niaking really three to be hère disposed of. The déclarations allège that 
the carrier knowingly and willfuUy confined in cars the stock mentloned in 
the respective déclarations, in excess of 36 hours, in conveyauce thereof over 
the defeudant's rallroad from the points named In the states of Minne-sota 
and lowa to Chicago. Défendant filed pleas of gênerai issue, and ail were 
tried by jury on the sanie day. Jury being impaneled, counsel for défendant 
stipulated that the contînement of the stock was in two of the cases 38 liours 
35 minutes, and in one 37 hoiirs 22 minutes, there being in each case a 36-hour 
agreenient on the part of the shipper. The allégations of the déclarations were 
admitted, exceijting so niuch thereof as charged the défendant with wlUfully 
and knowingly confining the stock beyond the 36-hour perlod, and wliich al- 
leged that tïie défendant was not prevented by storm or olher accidentai or 
unavoidable cause from unloading the stock. Thereupon the government 
rested, and défendant nioved the court to instruct the jury to fine! défendant 
not guUty, statlng as reaaon for the motion that there is no évidence that 
the défendant willfuUy and knowingly confined the stock beyond the statutory 
tlme. The motion was overruled, and, défendant restlng its case, thè court 
dlrected the jury to find the défendant guilty, whlch was done, and judgments 
rendered accordingly, and fines imposed. 

Charles A. Vilas, of Chicago, 111., for plaintiff in error. 
Charles F. Clyne and Frederick Dickinson, both of Chicago, 111., 
for the United States. 

Before MACK and AESCHUEER, Circuit Judges, and ANDER- 
SON, District Judge. 

AESCHULER, Circuit Judge (after stating the facts as above). 
[1] On behalf of plaintiff in error it is urged that the record affords 

®:=>For othïr cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexer 



FIEEMAN's FUND INS. CO. V. GLOBE NAV. CO. 273 

no évidence whatever that the défendant willfuUy and knovvingly con- 
fined the stock beyond the 36 hours ; that the court committed error 
in denying defendant's motions for instructed verdicts of not guilty, 
and in instructing the jury to find défendant guihy. On the other 
hand, it is claimed for the government that the stipulation at the trial 
afforded prima facie évidence that the défendant wihfully and know- 
ingly confined the stock beyond the 36 hours, and that in the absence 
of further évidence the directed verdicts for the government were 
proper. 

In order to establish willfulness of the act of confinement beyond 
the limit, it is not necessary that there be évidence of any direct in- 
tent to do injury to the stock. Our opinion in No. 2294 (234 Fed. 

268, — C. C. A. ■ ), another "Tvventy-Eight Hour Law" case having 

same title as those hère, and which is decided contemporaneously here- 
with, is referred to for some further discussion of the subject of will- 
fulness. 

The ultimate question of the willfulness of the act of confinement 
must be determined from the evidentiary facts, and it makes no dif- 
férence that such facts appear by stipulation of the parties rather 
than through oral or documentary évidence. 

[2] Unless it can be said that reasonable minds would not diflfer 
in the conclusion to be drawn from the conceded facts, the conclu- 
sion must be reached, not by the court as a matter of law, but by the 
trier of facts, the jury. From the facts appearing herein we can- 
not say that on considération thereof reasonable minds would not differ 
as to whether or not the confinement of the stock beyond the 36 hours 
was willful on the part of plaintiff in error. 

We thus find that the District Court properly refused the requested 
instructions to find défendant not guilty, but that it erroneously in- 
structed the jury to find verdicts of guilty. 

Judgments reversed, and causes remanded, with direction to Dis- 
trict Court to grant a new trial in each case. 



FIKEMAN'S FUND INS. CO. v. GTXtBE NAV. CO. et al. 

(Circuit Court of Appeals, Nlntli Circuit. May 15, 1016.) 

No. 2630. 

INSUKANCE <®=>607 — Marine Insurance— Liabiliïy of Insuheb — Insurance 
OF Freight Advanced by Shipper. 

Pursuant to the terms of the charter party, a charterer made an advance 
on freiglit, deducting the cost of Insurance, and taking the receipt on draft 
of the master. Thereupon it insured the freight in its own nauie to the 
aniount of the advance. The ship becaine disabled In a storni, the voyage 
was abandoned, and the Insurer pald the Insurance to the charterer, tak- 
ing an assignment of the niaster's receipt. Held, that it could not recover 
thereon against the shipowner, for whose ultimate beneflt the Insurance 
was effected, through the charterer as its agent. 

[Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1512, 1513 ; 
Dec. Dig. <S=607.] 

©=»For other cases see same topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes 
234 F.— 18 



274 234 FEDERAL REPORTER 

Appeal from the District Court of the United States for the Northern 
Division of the Western District of Washington; Jeremiah Neterer, 
Judge. 

Suit in personam in admirahy by the Fireman's Fund Insurance 
Company against the Globe Navigation Company and S. P. Weston, 
its trustée in bankruptcy, on an instrument in writing executed by 
A. W. Swenson, master of the American schooner Wm. Nottingham, 
as agent for said Navigation Company. Decree for respondents, and 
hbelant appeals. Affirmed. 

Edward J. McCutchen, Ira A. Campbell, and McCutchen, Olney & 
Willard, ail of San Francisco, Cal., and Ballinger, Battle, Hulbert & 
Shorts, of Seattle, Wash., for appellant. 

Clise & Poe, of Seattle, Wash., for appellees. 

Before GILBERT. and MORROW, Circuit Judges, and RUDKIN, 
District Judge. 

MORROW, Circuit Judge. On June 3, 1911, W. R. Grâce & Co. 
chartered the American schooner Wm. Nottingham owned by the re- 
spondent. Globe Navigation Company. Under the terms of the char- 
ter party it was provided that : 

"A siifficient amount for ship's ordinary dlsbursements at port of loading, 
say not exceediiiR one-tliird of the freight, to be advanced by cliarterers, if 
required by captaln, on aecount of freight under tliis cliarter party, subject 
to a charge of 7 per cent, to cover intereat, insurance, and commission; ad- 
vance to be indorsed on captain's copy of charter party and ail the blUs of lad- 
ing." 

No advance was indorsed on captain's copy of the charter party, nor 
was any such indorsement made on any of the bills of lading; but the 
charterer, before the vessel set sail, advanced to the captain the sum 
of £1,650, British sterling ($8,032.20). Upon receipt of that sum, the 
captain gave W. R. Grâce & Co. an instrument in writing, in words 
and figures as f oUows : 

"£1,650/0/0 Stg. Seattle, Sept. 27, 1911. 

"At sight after arrivai of the American schooner Wm. Nottingham, under my 
commaud, at the port of Callao, or any other place at which her voyage may 
terminale, I pronnse to pay to the order of W. It. Grâce & Co. the sum of 
fixteen hundred flfty pounds (£l,050/o/o) British sterling, or approved bankers' 
demand bills on London, for freiglit advance received at Seattle, Wash., as per 
receipt given, for the paymeut of which I hereby pledge my vessel and her 
freight ; and I hereby assign to the légal holder of the obligation ail my lien 
and clalm against freiglit, vessel, and owners, with power to take in my name 
any and ail steps necessary to enforce the same ; and my consignées at p«rt 
of dischargé are hereby instructed to pay this obligation, and deduet the 
amount thereof from the freight due said vessel. In case of nonpayment, the 
holder shall also be entltled to the beneflt of ail liens in law, equity, or ad- 
miralty which tlie. master or owners of the vessel may be entitled to against 
any part of the cargo or its owners for freight, or any other charges wliatso- 
ever. This claim to hâve priori ty of payment over ail others that may be 
presented against the said freight and vessel. My vessel is now lying at the 
jiort of Astoria, Or., loaded with cargo Oregon pine and ready to sali for 
Oallao, Peru. 

"Signed in triplicate ; one being acconipllshed, the others to stand void. 

"A. W. Swenson, 
"Master Am. Schr. Wm. Nottingham." 



FIREMAn'S rUND INS. CO. V. GLOBE NAV. co. 275 

On October 6, 1911, W. R. Grâce & Co. took out insurance on the 
advance mentioned in the foregoing writing, with Fireman's Fund 
Insurance Company, the libelant herein; premium for such insurance 
being paid by W. R. Grâce & Co. for the respondent, the former de- 
ducting that amount from the sum advanced under the terms of the 
charter party. On October 2, 1911, the schooner sailed from the port 
of Westport, Or., for Callao, Peru, with a full cargo of lumber for 
delivery at the latter port. She never reached her destination. Short- 
ly after sailing she became water-logged and was dismasted off the 
Columbia river. The vessel was abandoned at sea by her master, offi- 
cers, and crew, was subsequently picked up by a tug and towed to the 
port of Astoria, and was later towed to the port of St. Johns, Or., 
where her cargo that had not been washed overboard was discharged 
and dehvered to W. R. Grâce & Co., the owner of the cargo, and the 
voyage terminated. Claim was thereupon made to the libelant by 
W. R. Grâce & Co. for the insurance, amounting to $7,920, which was 
paid by the libelant ; and in considération of the payment of the in- 
surance W. R. Grâce & Co. assigned to hbelant ail its right, title, and 
interest in and to the "interest, whether on account of salvage there- 
from or on any other account whatever." This libel was thereafter 
filed by the insurance company against the respondent, based upon 
the instrument signed by the master of the schooner, dated September 
27, 1911. 

The libelant alleged, among other things, that on February 14, 1912, 
for a valuable considération, W. R. Grâce & Co. assigned unto the 
libelant ail of its right, title, and interest in and to its daim for the 
repayment of the said il,650; that the libelant was the owner and 
holder of the claim and of the Hen; that demand for payment of the 
indebtedness had been made by libelant upon respondent, and payment 
thereof had been refused; and that the amount ($8,032.20) remained 
unpaid and was due the libelant by respondent. It was further alleged 
that during the time mentioned the schooner Wm. Nottingham was 
owned by the respondent, and Swenson was the agent of the respond- 
ent in the exécution of the instrument and in the receipt of the advance 
freight mentioned. 

The answer of respondent admits that during ail the times men- 
tioned in the libel it was the owner of the schooner Wm. Nottingham, 
and that Swenson was the master thereof, but dénies, among other 
things, that at any time Swenson was the agent of respondent in the 
exécution of the instrument described in the libel, dénies that he ever 
received the advance against freight mentioned in the libel, dénies that 
W. R. Grâce & Co. became the owner and holder of the instrument for 
a valuable considération, or at ail, dénies that respondent has any 
knowledge that on February 14, 1912, or at any other time, for a valu- 
able considération, or at ail, W. R. Grâce & Co. assigned to the libel- 
ant ail of its right, title, and interest in and to the said instrument de- 
scribed in the libel, and dénies that it has knowledge as to whether 
said libelant is the owner and holder of said claim, and asks strict 
proof of same. The answer allèges, further, that: 



276 234 FEDERAL REPORTER 

"For a considération tliereln [cliarter party] agreed upon, and as a part 
of the considération tlierefor, it was agreed tliat one-tliird of tlie freigtit 
would be advanced and paid l>y cliarterers on account of the freigtit under 
sald cliarter party, subject to a cliarge of 7 per cent, to cover interest, Insur- 
ance, and commission ; tliat wlien said schooner was fully ladea and ready 
for sea said W. R. Grâce & Oo. advanced to tliis respondent the sum of £1,650 
Britisli sterling, and said W. R. Grâce & Co. thereupon under the terms 
of said charter party insured the same, and charged the cost or premium 
therefor to this respondent, and respondent paid tlie same by allowlng sald W. 
R. Grâce & Co. to deduct the same from one-third of the frelght due under 
said charter party, said sum of £1,650 British sterling being said one-third 
of frelght, less said déduction of 7 per cent, as provided in said policy [char- 
ter party] for Insurance charges and interest." 

The libelant is an insurance company, and it appears in évidence that 
on October 6, 1911, it issued a certificate of insurance to W. R. Grâce 
& Co. in the sum of $7,920 on advances valued at sum insured. On 
the margin of the certificate of insurance is indorsed the foUowing: 

"This insurance is to cover agalnst ail the périls enumerated in the policy 
which may prevent the collection of said draft in whole or in part, including 
gênerai average, salvage, and/or other charges arising from sea péril to 
which the advances hereby insured may be subjected. The ownership of draft 
to be deemed sutficient proof of interest." 

It appears that the libelant did not write the insurance based upon 
the master's receipt or draft of September 27, 1911, and did not know 
of its existence until the loss had occurred. After the loss had oc- 
curred and the insurance had been paid, hbelant took an assignment 
of the receipt or draft for the purpose of securing a return of the in- 
surance ; but the insurance had been paid in accordance with the terms 
of the policy, written by itself upon the receipt of a premium paid 
by the respondent through Grâce & Co., acting for the respondent in 
the transaction, Had the voyage of the schooner been completed and 
the cargo dehvered to the consignées, the amount of the receipt or 
draft would hâve been deducted by them from the freight due the 
vessel as advance or prepaid freight, and the respondent would hâve 
sustained no loss. The failure of.the schooner to make the voyage 
and dehver the cargo resulted in a loss to the respondent of the freight 
on the cargo, including the advance or prepaid freight. The loss 
arose from a sea péril, to which the advance or prepaid freight insured 
in the policy was subjected. To protect the respondent against this 
loss, the libelant, upon the payment of the regular premium, issued 
its poHcy of insurance payable to Grâce & Co. or order. It was paid 
by the hbelant on the order of Grâce & Co. upon the risk and for the 
loss for which the libelant had issued its policy, 

E. T. Ford, the submanager of Grâce & Co. at Seattle, in the state 
of Washington, testified that in placing the insurance with the libel- 
ant: 

"We were acting for the Globe Navigation Company, to whom we charged 
and coUected the amount of the premium. * * * \Ve chartered this vessel 
and agreed to pay a certain amount of freight for her. At the same tlme we 
agreed to make a certain amount of advance against the freight, which we did. 
The advance we insured, and, in so doing, we practically stepped into the 
position of the Globe Navigation Company in insuring our own freight, with 



IN BE KUHN BEOS. 277 

the understanding that, If they insured the freight, they wonld not Insura 
more than the balance over the amount of this advance." 

The question, in this case, is not whether the shipper, upon the loss 
of his cargo, can recover advanced freight from the owner of the ves- 
sel, either as advanced freight or upon the receipt or draft of the 
master; but the question is: Can the insurance company avoid îts 
liability to the insured because the insurance was eflfected through the 
shipper as agent for the shipowner? We think not. It seems to us 
to require no discussion of cases to show that, upon the contract of in- 
surance, the loss should remain with the libelant. 

This conclusion renders it unnecessary to discuss the question of 
whether libelant mistook its remedy in suing upon the master's receipt 
or draft, instead of advance or prepaid freight. We do not think the 
libelant is entitled to recover upon either aspect of the case. 

The decree of the District Court is afïirmed. 



In re KUHN BEOS. 

ZUTTEHMEISTER v. CHICAGO TITLB & TRUST CO. 

(Circuit Court of Appeals, Seventh Circuit April 18, 1916. Eehearing Denled 

May 25, 1&16.) 

No. 2288. 

L Bankbuptcy ®=>441 — Pboceedinqs — Mattees of Law. 

A proceeding to détermine whether under the uncontroverted facts, and 
assuming ail controverted facts to be resolved in favor of the trustée, the 
order approving the trustée'» accounts was authorized, is oiie to revlew a 
matter of law under Bankr. Act July 1, 1898, c. 541, § 24b, 30 Stat. 553 
(Comp. St. 1913, 1 9608), glving the Circuit Courts of Appeals jurisdiction 
to review or revise proceedlngs in the inf erior courts in matters of law. 

[Ed. Xote. — For other cases, see Bankruptcy, Cent Dlg. § 914; Dec. 
Dig. <8=>441.] 

2. Banketjptcy ®=s>250(1) — Tbustees — Duties. 

It Is the imperatlve duty of a trustée of a bankrupt estate to exercise 
ail diligence to collect the assets of the estate, and in the absence of ex- 
planation the trustée is deemed to be négligent in failing to collect assets 
listed in the schedules. 

[Ed. Note. — For other cases, see Bankruptcy, Cent Dig. §§ 235, 350; 
Dec. Dig. <g=>250(l).] 

3. Bankkuptcy <S=369 — Tbxistees — Collection or Asbets. 

Tliat the accounts of the receiver, who did not collect notes due the 
bankrupt were O. K.'di by the principal creditor and approved by the 
court, is no défense to a proceeding to surcharge the accounts of the 
trustée for his négligence in coUectlng such notes. 

[Ed. Note. — For other cases, seei Bankruptcy, Cent Dig. § 570; De& 
Dig. <8=»369.] 

4. Bankeuptcy <8=>250(1) — TauBnass — ^Dutles. 

The bankrupt's schedules of his assets recited notes which were not col- 
lected. Thèse notes were in fact secured by a mortgage, but that did not 
appear from the schedules, nor did the schedules show that an action to 
foreclose the mortgage had been instituted, wherein it was alleged that 
th« attorn^ suing was the owner. Beld that, as such allégations in the 

4gs»yaT otbsr casM ae« wm« topl« & KBY-NUMBEK ia aU Key-Numbered Digests & ladexeii 



278 234 iFBDERAL REPORTER 

foroclosure suit did not establifilï that the bankrupt was not beneflcially 
entitled tlie trustee's failuré to' promptly collect the notes by foreclosure 
was not oxcnsed. 

'[Ed. Note.— For other cases, sce Bankruptcy, Cent. Dlg. §§ 235, 350; 
Dec. Dig. <S=a260(l).] ■ 

5. BavNKRuptcy '<©='250(1)— Trustées^— Duties. 

That the ereditor migbt hâve UIscovered the existence of notes due the 
bankrijpt, which were secured by a mortgage, and had the same avenues 
ôl" information as the trustée, will not excuse the trustee's failure to 
■' promptly enforce the obligations. 

[JËd. Note.— For other cases, see Bankruptcy, Cent. Dig. §§ 235, 350; 
Dec. Dig. <g==>250(l).] , 

6. BANKtttJPfTCY lg=5250(l) — TEUSTEES— DUTIES. 

That the banki-upt's schedules did not disclose that notes listed were 

: secured by mortgage, Where it could readily hâve been ascertained by 

the trustée, as could the pendenc.v Of a foreclosure suit, will not excuse tlie 

trustee's failure to promptly foreclose and collect tlie notes, though thel 

maker was insolrent. 

[Ed. Note.— For other cases, see Bankruptcy, Cent. Dig. §§ 235, 350; 
Dec. Dig. €=»250(1).] 

7. Bankruptcy <â:=>250(l) — Tbustees^Dtjties. 

Where the baiikrupt's riglit' to lôst notes was subsequently established 
by the trustée, the fact that investigation of notes listed would hâve es- 
tablished tliat some of tliem were lost will not excuse the trustee's fail- 
ure to promptly foreclose a mortgage securiug sucli notes. , , 

[Rd. Note. — For other cases, see Bankruptcv, Cent. Dig. §§ 235, 350 : 
Dec. Dig. <®=3250(1).] 

Pétition for Révision of Proceedings of the District Court of the 
United States for the Eastern Division of the Northern District of 
Illinois. 

In the matter of the bankruptcy of Kuhn Bros. Pétition and ob- 
jections by Fred J. Zuttermeister to the report of the Chicago Title 
& Trust Company, trustée. The pétition and objections were over- 
ruled, and the report confirmed, and the petitioner pétitions to re- 
view and revise tlie order. Order annulled, and proceeding remanded, 
with directions. 

A'incent D. Wyman, of Chicago, 111., for petitioner. 
Sherman C. Spitzer, of Chicago, 111., for respondent. 

Before BAKER, MACK, and ALSCHUEER, Circuit Judges. 

MACK, Circuit Judge. On a voluntary pétition in bankruptcy fîled 
by Kuhn Bros, on March 10, 1900, respondent was appointed receiver. 
In May, 1900, the bankrupts filed their schedule. Under the heading 
"Bills of Exchange, Proniissory Notes, etc.," in the list of assets, there 
were scheduled 15 items. Each stated a name, foUowed by the words 
"promissory notes," "principal note," "interest note," and in one 
instance "note and mortgage;" then followed the amount. One such 
item read, "James N. Tilton— notes, $3,169.27." 

June 8, 19(30, respondent was appointed trustée of the bankrupt 
estate. June 22,: 1900, it filed its final account and report as receiver. 
This was O. K.'d by the attorneys who then and now represent peti- 

(S=)For other cases see same topic & KEY-NUMBEB in ail Key-Numbered Dlgeat» & Indexes 



_1N EE KUHN BEOS. 279 

tioner, and was approved October 23, 1900. No mention of the Til- 
ton notes appears therein. The report recites, inter alia : 

"This receiver further shows that Kulm Bros, vvere engagea in the real es- 
tate, loan, and rehting business at 88 La Salle street, Chicago ; that they had 
been engaged In sald business for a considérable tlme ; that they had made 
a large number of loans to varlous persons ; and that afterward they sold the 
loans, retainlng In thelr possession the abstracts of tltle, Insurance policles, 
and other papers connected wlth sald loans. Thls receiver further shows that 
It prepared a list of the parties shown by the books of Kuhn Bros, to be in- 
debted to that flrm, and sent notices of Its appolntment to ail of sald parties, 
wlth a, request to remit the amount of indebteduess ; that a large number of 
sald debtors called at this office and denied that they were indebted to said 
Kuhn Bros, in any sum whatsoever." 

Prior to November, 1906, the trustée filed three reports, and in 
none of them is there any mention of the Tilton notes and mortgage. 
No inventory was ever filed by the receiver or by the trustée. In 
fact, the bankrupts owned a principal note of Tilton for $2,500 and 
interest notes. They had been executed by him in 1893 for a building 
loan, and were secured by a real estate mortgage to one of the bank- 
rupts. In the course of business, the notes and mortgage had been 
sold to a customer, bought back in 1898, and delivered to an attorney 
for foreclosure. Foreclosure proceedings were begi«j in 1899 in the 
name of the attorney as légal owner of the notes. Neither as re- 
ceiver nor as trustée did respondent bave any actual knowledge either 
of the pendency of this suit, or of the bankrupts' interest therein or 
in the notes, until the end of 1906. 

The bankrupts' loan register contained a statement of the transac- 
tion, with a notation that the abstract had been given to the attorney 
in 1899, and that the loan was being foreclosed June, 1899, by the 
attorneys. This register was one of hundreds of books of the estate 
in the possession of the trustée. The trustée began foreclosure pro- 
ceedings in 1907. Without reciting the détails, it is undisputed that 
if the trustée had made inquiries at once, and had ascertained the 
facts in 1900, much expansé would hâve been saved, taxes could hâve 
been paid, avoiding forfeitures and tax sales, and a much greater sum 
would hâve been brought into the estate. 

Petitioner objected to items of expenditures in the foreclosure suit 
in several reports of the trustée, on the ground that they were occa- 
sioned by the trustee's neglect in f ailing to act promptly. He further 
objected to the failure to charge the trustée with the amount due on 
the mortgage at the time of appointment, with interest, less the net 
amount realized, or the value of the property, less reasonable expenses 
of foreclosure in 1900 and taxes and operating charges, plus reason- 
able rental. The référée found "that said trustée is not guilty of sucb 
acts or négligence as to warrant the court in surcharging said trustée 
with its expenses as reported." Pie dismissed the pétition, overruled 
the objections to the report, and confitmed it. ■ ■ 

The présent pétition seeks to revise the order of the District Court 
affirming the order of the référée. 

[1] 1. In the considération • of this pétition, we hâve asstimed ail 
controverted facts as determined in favor of the respondent. That 



280 234 FEDEKAL REPORTEE 

a review tliereof and o£ the uncontroverted facts to détermine whether 
there is any substantial évidence to sustain the order, is a review 
as to a matter of lavv within the provisions of section 24b of the Bank- 
ruptcy Act, is well settled. Good v. Kane, 211 Fed. 956, 128 C. C. A. 
454. The motion to dismiss is overruled. 

[2] 2. The schedule gave notice to the trustée that the banlcrtipts 
claimed to own some notes executed by Tilton. It is the imperative 
duty of the trustée of a bankrupt estate to exercise ail due diligence 
to gather in the assets of the estate, and it would seem clear that an 
examination of the schedule and a following up of ail leads naturally 
suggested thereby would be the first step to be taken. In the absence 
of some explanation for a failure so to act, the trustée must be charged 
with négligence and must respond for the conséquences thereof. In 
re Reinboth, 157 Fed. 672, 85 C. C. A. 340. In excuse, the trustée 
makes several contentions which we shall consider. 

[3] (a) The receiver's accounts, silent as to this item were O K.'d 
by petitioner and approved by the court. No appeal was taken from 
that order. But the receiver's report did not purport to set f orth that 
it had gathered in ail of the assets of the estate ; the approval thereof 
in no manner modified the trustee's obligations ; at the best, it dis- 
charged the receiver, a mère temporary custodian, from liability for 
failure to get in this asset after approving its statement of cash re- 
ceipts and disbursements. No basis whatsoever is afforded thereby 
to the trustée, the permanent officer in whom title is vested by law, 
for failing properly to examine the schedules and to take the neces- 
sary steps to conserve the estate. 

[4] (b) The allégation in the pending foreclosure suit that the at- 
torney was the légal holder of the notes is utterly immaterial, for, 
firstly, the trustée had no actual knowledge of the allégation or of the 
suit; and, secondly, there is no inconsistency between the allégation 
and équitable ownership thereof by the bankrupts. 

[5] (c) The trustée cannot be excused from the performance of 
the duties for which it receives compensation because its beneficiaries, 
the creditors, hâve the same avenues of information open to them and 
fail to take advantage thereof. The creditors may, but are under no 
duty to, investigate and search for assets, or to suggest to the trustée 
possible sources of information, which the latter has at least the same 
opportunity of knowing. That this petitioner was the chief créditer, 
and could also hâve found ont the facts in référence to the Tilton 
notes, neither estops him from charging the trustée with négligence 
nor lessens the latter's obligations to the estate. The créditer 's acts 
and omissions furnish no measure of the diligence imposed upon the 
trustée. 

[B] (d) Respondent's officiai in charge of the estate testified as fol- 
lows: 

"Q. What if any inqulry did you make tp ascertain tlie wliereabouts of the 
notes of James K. Tilton wliicti were selieduled by the bankrupt? A. I ne ver 
niade any. I didn't know anything about it till 1900. Q. Did you ever look 
at the schedule to see what assets the bankrupt had? A. I présume I did. 
Q. Did you see that in the schedule? A. I don't remember seeing it, no. I 
may hâve seen it at the time." 



IN EE WiaCONSIN ENGINK CO. 281 

A mère looking at a schedule and an overlooking of such an item is 
clear négligence. It is therefore no excuse for the failure to follow 
up tlie information that would hâve been acquired if the schedule had 
been carefully examined. Had this been donc, the examination of the 
bankrupts, an inspection of the loan registers, and an inquiry at the 
attorney's office could not hâve failed to disclose the bankrupts' béné- 
ficiai interest in the notes and mortgage. 

That the schedule failed to mention the mortgage securing the 
Tilton note, though it gave this additional information as to one o£ 
the 15 items, or that the amount of the principal and interest was 
not separately stated, could not hâve misled the trustée; the most 
cursory investigation based upon the bare statement that Tilton ovved 
the bankrupt money on notes would hâve led to the discovery that 
thèse notes were secured by a first mortgage and that Tilton' s insolven- 
cy, therefore, did not destroy their value. 

[7] That such an investigation would also hâve disclosed that the 
principal and some interest notes were lost would not bave affected 
the situation. The bankrupts' ownership thereof, and the conséquent 
right of the respondent to foreclose the mortgage, could bave been 
proven in 1900 as readily as it was proven in the latter foreclosure 
proceedings. 

The order dismissing the pétition and approving the trustee's ac- 
counts must therefore be annulled, in order that the District Court or 
the référée may détermine the issues, and charge the trustée with such 
losses as may be found to bave been sustaincd by the estate through 
its négligence. 



In re WISCONSIN EXGIXE CO. 

GAS POWER MACHINERÏ CO. v. WISCOXSIX TRUST CO. 

(Circuit Court of Appeals, Se\'entli Circuit. April 3.8, 1016.) 

No. 2.312. 

1. Baimkrupicy <S=150— Peopkrty of Banicrupt— Patext License— Duty op 

Trustées to Accept. 

A trustée in bankruptey is under no obligation to accept a patent license 
burdened witli executory obligation. 

[Ed. Note. — For other cases, see Bankruptey, Cent. Dlg. § 228; Dec. 
Dig. (©=150.] 

2. Barkrtjpïcy ■©=3322— Claims— License — Pr.o.MissoRY Note in Payment of 

Royalties. 

Negotiable promissory notes given by a patent licensee in payment for 
the license ou a royalty basis hcld pajable in any event and properly 
allowed by the trustées in bankruptey of such licensee at their discount 
value as of the date bankruptey proceedings were begun, and not the 
pro rata amount of earnea royalties apportionable to the date of bank- 
ruptey. 

[Ed. Note. — For other cases, see Bankruptey, Cent. Dig. §§ 508-510 ; 
Dec. Dig. ©=322.] 

®=oFor other cases see same topic & KEY-NUMBBR m ail Key-Numbered Digests & Indexes 



282 , 234 FEDERAL REPORTEE 

3. Bankkuptcy ©=3316(1) — Claims— Neootiable Notes in Payment of Con- 

DiTioNAL Obligation. 

The uiere giviiig of notes, to évidence or in prepayment of elearly con- 
ditioiied oblijrations, wll! uot annvil thé conditions, or niaise an otherwise 
iinprovable claim allowable in bankruptcy. 

[Ed. Note. — For other case.s, see Banliruptcy, Cent. Dig. § 477 ; Dec. 
Dlg. ©=316(1).] 

4. Baxkboptcy ©=5322— Claims— Allowance— Neootiable Notes. 

A contract provision tliat notes should be given in payment for patent 
license on royalty basis, and shoiild be negotiable, is évidence teuding to 
sliow that the aniount of sucli notes should be payable in any event and 
should be allowable by the tru.stee in bankruptcy of tlie licensee at tbeir 
face value, regardless of wtiether the notes had been negotiated, 

[Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 508-510 ; Dec. 
Dig. ©=>322.] 

Alschuler, Circuit Judge, dissenting. 

Appeal from the District Court of the United States for the East- 
ern District of Wisconsin. 

In the'matter of the Wisconsin Engine Company, bankrupt. From 
a judgment of the District Court, reversing the order of the Wisconsin 
Trust Company, trustée in bankruptcy, allovving the claim of the Gas 
Power Machinery Company, the latter appeals. Reversed and remand- 
ed, with directions. 

Howard M. Harpel, of Chicago, 111., for appellant. 
Joseph H. Marshutz, of Milwaukee, Wis., for appellee. 

Before BAKER, MACK, and ALSCHULER, Circuit Judges. 

MACK, Circuit Judge. A claim on three negotiable promissory 
notes, ail dated January l, 1912, one for $2,5(X), which matured Janu- 
ary l, 1913, and two for $5,000 and $3,750, respectively, maturing 
January 1, 1914, and January 1, 1915, ail pa3'able to appellant, was ai- 
lowed by the référée for $10,537.51, their discounted value as of Jan- 
uary 21, 1913, the date bankruptcy proceedings were begun, over ob- 
jections going to the validity both of the entire claim and of so much 
thereof as was not earned before bankruptcy. This order was re- 
versed by the District Court, and the claim allowed for the pro rata 
amount held apportionable from January 1, 1912, to January 21, 1913. 
The claimant appeals. 

On January 1, 1912, appellant, owner of certain letters patent and 
rights to inventions, entered into a license agreement with the bank- 
rupt. After reciting this ownership, licensor's désire to hâve licensee 
undertake the exploitation thereof, licensee's désire to secure the ex- 
clusive rights therein, it contained, inter alla, the f ollowing provisions : 

(1) An exclusive perpétuai license to manufacture, use, and sell was graut- 
ed subject to the further provisions of the agreement. 

(2) Licensee agreed, so long as it enjoyed a praetical monopoly in tlie ma- 
chines and processes for producing gas in the manuer specified in détail, to 
pay to the licensor a royalty of 50 cents per horse power capaclty of each 
machine nianufactured and sold under the agreement, "it being understood 
and agreed in this behalf that in any event the licensee shall pay to the li- 
censor during the flrst year from the date hereof royalties to the total mlni- 

©ssFor other cases see same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes 



IN SE WISCONSIN ENGINE CO. 283 

mum amount of at least flve thousand dollars ($5,000), and during tlie flrst 
two years from tbe date liereof royalties to the total mlnimuiu amount of 
at least flfteen thousand dollars ($15,000), and during the first three years 
from the date liereof royalties to the total imnluium amount of at least 
twenty-two thousand flve hundred dollars ($22,500) ; and as évidence or pre- 
payment of such, suni the llcensee wlU deliver to the licensor, at the time 
of the slgning of this agreement, two sets of negotiable promissory notes of 
equal amounts for the aggregate sums of twenty-two thousand llve hundred 
dollars ($22,5(X).00), made and executed respectively by the licensee and Ed- 
ward A. Rumley, of La Porte, Ind,, said notes to bear llke date herewith, 
draw interest at the rate of 6 per cent, per annum, after maturity, and he 
payable at the following times and In the foUowing amounts : Flve thousand 
dollars ($5,000) shall be payable at the end of one year from the date hereof ; 
ten thousand dollars ($10,000) at the end of two years from the date hereof ; 
and seveui thousand five hundred dollars ($7,500) at the end of three years 
from the date hereof. But if during substantially ail of said third year from 
the date hereof tlie licensee enjoys or shall enjoy such substantial or practi- 
cal monopoly of such exclusive right, then and in that event said royalties 
shall aggregate for said three years the sum of at least thlrty thousand dol- 
lars ($30,000), and if at the end of said three years from the date hereof the 
licensor shall not bave received royalties aggregating this amount, then and 
in such event the licensee will pay to the licensor an additional sum sufflcient 
to make up such aggregate amount." It further provided for $100,000 for 
the first six years under like conditions, with the right, however, by payment 
of $200,000 in ail during the first four years, to bave the entlre interest of 
the licensor free from any further royalties. 

(7) Licensee agreed to push the business, to prosecute infringements, to 
advance the necessary money, "and to this end the licensee shall open an a,c- 
count on its books with the licensor, into whieh sliall be cbarged against the 
licensor one-half of such sum of money as shall be so advanced and paid out 
by the llcensee, and the same shall be repaid by the licensor from the sums 
whlch shall become due and payable to tbe licensor as royalties and to this 
end the licensee may retain 50 per cent, of such royalties until such advances 
are repaid: Provided that the share of such sum or sums iiayable by the li- 
censor, and chargeable against it as aforesaid, shall in no event exceed one- 
half of said royalties, and in no event shall any portion of said $22,500 be 
applied toward payment of costs, but tlie same shall be payable to tbe licensor 
in any event in full, and no part thereof shall be retained by the licensee for 
any purpose after the same shall become due as aforesaid." Neglect l)y either 
party for 60 days after notice by the other to comply with any provision 
enabled such other at its option to terminale tbe agreement. 

(0) Licensee might terminate the agreement if permanently enjoined, and 
if no longer able to enjoy the practlcal monopoly provided for, but it should 
reniain liable for ail royalties up to that time accrued. 

(10) In the event of llcensee's insoivency, licensor shall bave the right to 
cancel the agreement; the contract shall not be assigned except to M. Rume- 
ly & Co. 

The claim filed against the bankrupt estate is on the three notes ex- 
ecuted by the bankrupt pursuant to section 2 of the license agreement. 

[1] It is undisputed that a trustée in bankruptcy is under no obliga- 
tion to accept a patent license burdened with executory obligations. 
It is, in this respect, like other property rights belonging to the bank- 
rupt, whether resulting from a grant or conveyance coupled with ex- 
ecutory obligations, like a lease of real or personal property, or from a 
purely executory agreement. Whether such a license is to be dealt 
with like the exclusive transportation privilèges considered in Re Frank 
E. Scott Transfer Co., 216 Fed. 308, 132 C. C. A. 452, affirmed on 
this point in the Suprême Court April 3, 1916, in which bankruptcy 
was held to create an anticipatory breach, giving rise to a provable 



284 234 FEDERAL EEPOETER 

claim for such damages as could be deemed certain, or wliether the 
relation thereby created is like tliat of landlord or tenant, in vvhich the 
tenant's bankruptcy bas been held not to amount to an anticipatorj 
breach (see cases cited in Re Desnoyers Shoe Co., 227 Fed. 401, 142 C. 
C. A. 97), we need not hère détermine, for the claim filed is neither 
for damages caused by such a breach nor for future royalties to be 
paid like rent solely for the continued use of the property granted. 

[2] In our judgment, the indebtedness represented by the notes was 
the considération for the grant of the exclusive license. It was ex- 
pressed in terras of royalties, and properly so, because, in so far as 
royalties up to that amount would be earned under the agreement, 
payment of the notes would cancel any obligation in respect thereto. 
But it was not expressed as conditioned upon such royalties being 
earned. The parties contemplated the possible cancellation of the 
license before the expiration of three years because of licensee's breach 
of the agreement or its insolvency. Nevertheless the obligation to pay 
the $22,000 remained. It was to be paid in fuU "in any event," to 
quote the language of both the second and the seventh clauses of the 
agreement. Compare it with the provision for a $30,000 minimum for 
the first three years ; both are described as l'oyalties. The $30,000 is 
to become due, however, only if the licensee actually enjoys the very 
thing he contracted for, a practical monopoly. The $22,500 obliga- 
tion, represented by the two sets of notes, is unconditioned. 

[3, 4] There is no guaranty that, if royalties shall in fact become 
due, they shall amount to at least $22,500 for the period; there is 
an absolute undertaking that this amount shall be paid. While the 
mère giving of notes to évidence or in prepayment of a clearly condi- 
tional obligation would not annul the condition or make an otherwise 
unprovable claim allowable in bankruptcy (Atkins v. Wilcox, 105 Fed. 
595, 44 C. C. A. 626, 53 L. R. A. 118), the provision that notes should 
be given and that they should be negotiable is additional évidence tend- 
ing to résolve any doubt as to the intention of the parties that the 
amount therein stated was to be payable in any event. That the notes 
were not in fact sold is of no moment. The parties necessarily con- 
templated that they might be negotiated. 

The order disallowing a portion of the claim must be reversed, and 
the cause remanded, vi'ith directions to allow the claim in the sum of 
$10,537.51. 

ALSCHUIyER, Circuit Judge (dissenting). I cannot concur in the 
conclusion that the notes hère in question represent considération to 
the licensor for granting the exclusive license. The contract nowhere 
so States, but spécifies "a royalty of 50 cents per horse power," etc., 
and provides for the guaranty of the annual minimum of "royalties" 
of the stated sums, and for the giving of the notes "as évidence or 
prepayment of such sum." The notes bear no interest till after their 
maturity at the respective times for payment of the minimum royal- 
ties, and so, if a présent considération, the payee's bénéficiai use of it 
is postponed till the minimum royalties would become payable. While 
the contract mentions thèse minimum sums as being payable "in any 



IN BE BICKBTTS 285 

event," thèse words, in my judgment, are but a différent form for 
stating that for each of those years the royalties shall not be less than 
the sums named; and, besides, elsewhere in the instrument are found 
conditions under which the payments might never accrue. Section 8 
provides for cancellation of the contract by either party in case the 
other does not comply with its terms ; section 9 for cancellation by 
licensee in case it is enjoined and cannot hâve practical monopoly of 
the rights granted, but in this case "it shall be liable for ail royalties 
up to that time accrued," and shall hâve no further use of the patents. 
And so, if for any such reason the contract is terminated further roy- 
alties thereunder cannot accrue, any more than can rent accrue after 
the termination of the tenancy. In re Roth & Appel, 181 Fed. 667, 
104 C. C. A. 649, 31 L. R. A. (N. S.) 270; Atkins v. Wilcox, 105 Fed. 
595, 44 C. C. A. 626, 53 L. R. A. 118. Thèse conditions seem to me 
quite inconsistent with the inference that the notes represent anything 
but royalties, as specified. The claim is on the notes, and I believe the 
District Court was right in rejecting so much thereof as did not repre- 
sent the minimum royalties accrued at time of bankruptcy. On the 
authority of the récent opinion of the Suprême Court in Re Frank E. 
Scott Transfer Co., 240 U. S. 581, 36 Sup. Ct. 412, 60 L. Ed. 811 
(April 3, 1916), it would seem that a claim based on an anticipatory 
breach of the contract through the bankruptcy would havc been prov- 
able to the extent of the résultant damages shown. 



In re KICKETTS. 

McKBY V. PINCKARD, 

(ClrtTilt Court of Appeals, Seventh Circuit. April 18, 1916. Rehearing Denled.) 

No. 2267. 

1. BXCnANGB or PbOPEETT lg=3lO — Conbtkuctive Deliveey. 

Where claimant's husband, wtio had inany transactions witli tlie bank- 
rupt, a dealer In pictures, exchanged, for Oie benefit of clalmant, pieturcs 
belonging to her for otlier pictures, and the exchange was noted in the 
banknipt's bocks, and a receipt for conslgnment of the new pictures for 
sale on commission was executed, but possession was not taken, and 
notlilng was donc to make the change in ownership manifest to the public 
or to any part thereof, there was no eonstructive dellvery of the new 
pictures to claimant. 

[Ed. Note. — For other cases, see Exchange of Property, Cent Dig. §| 
19, 21, 22, 24; Dec. Dig. <s=»10.] 

2. Fbauddlent Convetances ®=139— Deliveby— Necessitt. 

A dellvery of chattels is necessary in Illinois to pass tltle to the buyer. 
except in the case of judicial sale, or where the bill of sale may by law be 
recorded, and where there is no dellvery of the chattels, and possession is 
not taken by the buyer, the sale is f raudulent as to credltors of the seller. 

[Ed. Note. — For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 
439-442 ; Dec. Dig. <S=>139.] 

4t=s>?or other cases see same topic & KKY-NUMBER in aU Key-Numbered Digeste & Indexes 



286 234 FEDBEAL REPORTER 

3. FBATJDtTLENT CONVETANCBS <@=>138— EXCHANGE— DSXIVÏMT — NECESaiTT. 

Where there is a sale of cMttels by way o( exchange, delivery la Just 
as essential to pàss tltle as If the transaction were one of sale for money 
considération. 

[Ed. Note.— For other cases, see Fraudulent Conveyances, Cent. DIg. 
§§ 438, 443, 448-452 ; Dec. Dlg. <3=>138.] 

4. FBAtlDtTLBNT CoNVEtANCES ®=>16&^RlGHTS OP SELLŒB'B CEEDITOBS— DE- 

IIVEBT. 1 

While tlie rlght of a defrauded vendor Is superior to that of the fraudu- 
lent vendeè's exécution credltor, delivery is essential to pass title to the 
buyer, and If there be no delivery, and the buyer does not take possession, 
In Illinois, the sale is, regardless of the buyer's good faith, deemed fraudu- 
lent in law, and the buyer, because of his légal fraud, cannot assert his 
title as against exécution creditors of the selle». 

[Ed. Note.— For other cases, see Fraudulent Conveyances, Cent Dig. 
§§494,518; Dec. Dig. <S=165.1 

5. BankBuptct <S=185— TeuSTEe— RroHTS. 

Under Bankr. Act, § 47a,t the trustée has the rights of an exécution cred- 
ltor of the bankrupt, and as such may assert such rights as against one 
who bought cliattels from the bankrupt, but never received possession ; 
there belng no delivery. 

[Ed. Note.— For other cases,, see Bankruptcy, Cent. Dlg. §§ 234, 235, 273 ; 
Dec. Dig. ©=185.] 

6. CouETS ®=5372(4) — Fedebal Cotjbts— State Eules. 

In determining vrhether a sale has been consuramated, the fédéral courts 
wlU follovr the State rules. 

[Bâ. Note.— For other cases, see Courts, Cent. Dlg. S 979 ; Dec. Dig. <S=> 

372(4).] 

Appeal from the District Court of the United States for the East- 
ern Division of the Northern District of Illinois. 

In the matter of the bankruptcy of Robb R. Ricketts, doing business 
as Moulton & Ricketts. Claim by Mary L. Pinckard, opposed by Frank 
M. McKey, trustée in bankruptcy of the estate of the bankrupt. From 
a decree for claimant, the trustée appeals. Reversed and remanded. 

Clarence J. Silber, of Chicago, 111., for appellant. 
James Rosenthal, of Chicago, 111., for appellee. 

Before KOHLSAAT, MACK, and ALSCHULER, Circuit Judges. 

MACK, Circuit Judge. Husband of appellee, a physician, had fof 
several years invested and dealt in pictures, through the bankrupt. 
The plan followed was substantially this: Ricketts, either as owner 
or as agent for other dealers, would sell to Pinckard. Sometimes the 
pictures thus bought would be taken to his home or office, there hung, 
and at a later date returned to Ricketts, as agent to sell. Often, how- 
ever, they vi^ould not be taken away from Ricketts' store. At times 
they were not even seen by Pinckard, but purchased by name or de- 
scription. Frequently he had seen, known of , or even owned such 
pictures at an earlier time. Sometimes a lot of pictures then owned, 
or supposed to be owned, by Pinckard, would be exchanged for others 
that Ricketts had on hand. Whether so returned to Ricketts, or not 
taken away, but left with him, the pictures were to be sold by Ricketts 
for Pinckard at not less than the purchase price with 6 per cent, in- 

AssjFor other cases see same topic & KEY-NUMBER In ail Key-Numbered Dlgests & Indexe* 
_t_Act Juy 1, 189S, c. 541, 30 Stat. 557 (Comp. St. 1913, § 9631). 



IN RE BICKETTS 287 

terest from the date of Pinckard's investment. Any éxcess above this 
price was to be shared by the parties. 

When and how an accounting was to be made, does not seem to 
hâve been determined by the parties. A receipt was given by Ricketts 
for each picture so left with him to be sold, irrespective of vi-hether 
Pinckard's ownership was through a sale or an exchange, in the fol- 
lowing f orm : 

(Name of Artist.) (Date.) Keceived on consignment from Dr. C. P. Plnckard 

one oil painting, size (spedfied), subject ( ), by (name of artist), (style 

of frame). Value ($ ). 

[Sigiied] Moulton & Ricketts, by (Xame of Employé). 

In the case of an exchange, however, the receipt would be dated 
back to the time of the original purchase of the picture given by Pinck- 
ard in exchange, so that the 6 per cent, interest would be calculated 
from that date, and if the transaction involved a number of pictures, 
as in the case now before us, the time would be averaged. 

Pursuant to this plan, Ricketts had sold to and received back from 
Pinckard in 1913, 12 pictures, valued at $40,(300. Pinckard then do- 
nated them to his wife and proper entries showing the transfer were 
made in Ricketts' books. In January, 1914, Pinckard, acting for his 
wife accepted Ricketts' proposition to exchange the 12 for 41 other 
pictures of the same value. New receipts were executed to Mary L. 
Pinckard, and were dated back in accordance with the practice as 
above described. A "value" price was placed on each picture. In fact, 
the 12 pictures had theretofore been sold by Ricketts, and no account 
of the sale rendered to Pinckard, so that the actual transaction, while 
not so intended, was a sale, and not an exchange. 

Bankruptcy proceedings were instituted against Ricketts on March 
6, 1914, and the receiver came into immédiate possession of 36 eut 
of the 41 pictures. The other S were in the hands of prospective cus- 
tomers. This is an appeal from the order of the District Court con 
firming the order of the référée granting the prayer of appellee's réc- 
lamation pétition as to the 36 pictures. 

1. No question of rescission for fraud is raised; inasmuch as the 
proceeds of the sale of the 12 pictures are not traceable, such a pro- 
ceeding, if maintainable, would be fruitless. 

[ 1 ] 2. The référée f ound, and his uncontested findings are f ully sup- 
ported by the évidence, that : 

"Said pictures were never removed at any time, after said sale [by Ricketts 
to Mrs. Pinckard] from the premises of said baukrupt; that they were not 
separated from said bankrupt's stock of ijictures owned by him, but were left 
with said bankrupt by said petitioner, under the same physical conditions as 
before said sale to said petitioner, and said consign)neut back to said bankrupt, 
and that no delivery thereof was made by said bankrupt to said petitioner 
other than as herein found ; that no actual possession of said 41 pictures, nor 
any of them, was ever taken by said petitioner, but ail of them remained with 
said bankrupt, until the 6th day of March, A. D. 1914, on which day the Chi- 
cago Tltle & Tnist Company, as receiver in banliruptcy of said estate, took 
possession of said pictures, as part of the assets of said bankrupt estate, ex- 
cepting only the foUowing, whicli were not then in possession of said bank- 
rupt," specifying 5 of them ; "that said pictures and ail of them were capable 
of actual manual delivery, to said petitioner ; that there was no actual or 
manual delivery or change of possession." 



288 234 FEDERAL ÈEPOETËB 

From the fîndings he deduced the conclusion that: 

"The facts as herein ,fonnd coustitute a constrnctive dellvery of sald pîctures 
by said banlînipt to said petitioner, and that the title to said pictures Is in the 
petitioner, and that the petitioner as against sald respondent trustée, is en- 
titled to possession thereof as prayed' for In said pétition." 

We cannot conçut in this conclusion. No fact, either found by the 
référée or testified to by any witness, furnishes the slightest basis for 
holding that there was a constructive delivery. The pictures were in 
Ricketts' store ; some of them were hanging on the walls. Pinckard 
not only did not take actual possession of them; he did not even see 
them at the time. He knew them ; he had theretofore owned some 
of them ; but neither of the parties did anything to the pictures as a 
resuit of or pursuant to the sale, or in any manner made manifest to 
the public, or to any part thereof, the change in the ownership. 

Constructive delivery can be effected by a turning over of the pos- 
session of the premises, or of the key thereto, or, in case of property 
incapable of manual delivery, by a delivery of a symbol or a docu- 
inent of title. A séparation of the articles themselves from others not 
sold, and a proper marking thereof, or of the place into which they 
are put, even a ségrégation without physical séparation, as by marking 
them with the vendee's name (In re Pease Car & Locomotive Works 
[D. C] 134 Fed. 919), may amount to either a constructive or an ac- 
tual delivery according to the circumstances. 

[2] But the entry of the sale in the vendor's books and the exécution 
by him of a trust or consignment receipt, though evidencing a sale and 
a bailment back, valid inter partes, in no sensé amounts to a delivery, 
either actual or constructive. And delivery of chattels is essential in 
Illinois to pass title