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KATIONAL REPOKTER SYSTEM-UNITED STATES SERIES
FEDERALREPORTER
WITH KEY-NUMBER ANNOTATIONS
VOLUME 262
PERMANENT EDITION.
CASES ARGUED AND DETERMINE©
m TUE
CIRCUIT COURTS OF APPEALS AND DISTRICT COURTS
OF THE UNITED STATES AND THE COURT
OF APPEALS OF THE DISTRICT
OF COLUIMBIA
MARCH — APRIL, 1920
ST. PAUL
WEST PUBLISHING CO.
1920
Copyright, 1920
BY
WEST PUBLISHIN6 COMPANÎ
(262 FED.)
FEDERAL REPORTER, VOLUME 262
JUDGES
OF THE UNITED STATES CIRCUIT COURTS OF APPEALS AND DISTRICT COURTS
AND COURT OF APPEALS OF THE DISTRICT OF COLUMBIA
FIRST CIRCUIT
Hon. OLIVER WBNDELL HOLMES, Circuit Justice Washington, D. C.
Hon. GEORGE H. BINGHAM, Circuit Judge : Mancliester, N. H.
Hoa. CHARLES F. JOHNSON, Circuit Judge >„ Portland, Mo
Hon. GEORGE W. ANDERSON, Circuit Judge Boston, Mass
Hon. CLARENCB HALE, District Judge, Maine Portland, Me.
Hon. JAMES M. MORTON, Jr., District Judge, Massa,ohusetts Boston, Masa
Hon. EDGAR ALDRICH, District Judge, New Hampshire Littletou, N. H.
Hon. ARTHUR L. BROWN, District Judge. Rhode Islaud Providence, R. I.
SECOND CIRCUIT
Hon. LOUIS D. ERANDEIS, Circuit Justice WaRbington, D. C
Hon. HENRY G. WARD, Circuit Judge New Yorl{, N. Y.
Hon. HENRY WADB ROGEUS, Circuit Judge New Haven, Conn.
Hon. CHARLES M. HOUGH, Circuit Judge New York, N. Y.
Hou. MARTIN T. MANTON, Circuit Judge New Yorls, N. Y.
Hon. EDWIN S. THOMAS, District Judge, Concecticut New Haven, Conn.
Hon. THOMAS I. CHATFIBLU, District Judge. E. l). N'ew Yorlj Brooklyn, N. Y.
Hon. EDWIN L. GARVIN, District Judge, B. D. New York Brooklyn, N. Y.
Hon. GEORGE W. RAY, District Judge, N. D. New York Norwicli, N. Y.
Hon. LEARNED 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 .lurti;e, R. D. Nr-w York New York, N, Y.
Hon. JOHN CLARK KNOX, District Judge, S. D. New York New York, N. Y.
Hon. JOHN R. HAZEL, District Judge, W. D. New York Bultalo, N. Y.
Hon. HARLAND B. HOWB, District Judge, Vermout Burlington, Vt
THIRD CIRCUIT
Hon. MAHLON PITNEY, Circuit Justice Washington, D. 0.
Hon. JOSEPH BUFFINGTON, Circuit Judge Pittsburgli, Pa.
Hon. VICTOR B. WOOLLEY, Circuit Judge Wilmington, Del.
Hon. THOMAS G. HAIGHT, Circuit Judge Jersey City, N. J.
Hon. HUGH M. MORRIS, District Judge, Delaware Wilmington, Del.
Hon. JOHN RELLSTAB, District Judge, New Jersey Trenton, N. J.
Hon. CHARLES F. LYNCH, District Judge, New Jersey Newark, N. J.
Hon. J. WARREN DAVIS, District Judge, New Jersey Trenton, N. J.
Hon. J. WHITAKBR THOMPSON, District Judge, B. D. Pennsylvanla...Plilladelphla, Pa.
Hon. OLIVER B. DICKINSON, District Judge, B. D. Peunsylvanla Pbiladelpliia, Pa.
Hon. CHARLES B. WITMER, District Judge, M. D. Peuusylvauia Sunbury, Pa.
Hon. CHARLES P. ORR, District Judge, W. D. Pennsylvanla Plttsburgh, Pa.
Hon. W. H. SB WARD THOMSON, District Judge, W. D. Pennsylvanla Pittsburgh, Pa.
(T)
Vi 262 FEDERAL KEPOETEB
FOURTH CIRCUIT
Hon. EDWARD D. WHITB, Circuit Justice Washington, D. O.
Hon. JETER C. PRITCHARD, Circuit Judge Ashevllle, N. G.
Hon. MARTIN A. KNAPP, Circuit Judge Wasliington, D. C.
Hon. CHARLES A. WOODS, Circuit Judge Marion, S. C.
Hon. JOHN C. ROSE, District Judge, Maryland Baltimore, Md.
Hon. HENRY G. CONNOR, District Judge, B. D. Nortii Carollna Wiison, N. C.
Hon. JAMES E. BOYD, District Judge, W. D. North Carolina GreeaKboro, N. C.
Hon. EDWI.NT Y. WEBB, District Judge, W. D. Nortli Carolina Charlotte, N. C.
Hon. HENRY A. MIDDLETON SiVtITH, District Judge, E. D. S. C Charleston, S. C.
Hon. HENRY H. WATKINS, District Judge, W. D. S. c Anderson, S. G.
Hon. EDMUiMD WADDILL, Jr., District Judge, E. D. Virginia Rlchraond, Va.
Hon. HENRY CLAY McDOWBLL, District Judge, W. D. Virginia Lynchburg, Va.
Hon. ALSTON G. DAYTON. District Judge, N. D. West Virginia Philippi, W. Va.
Hon. BENJAMIN F. KBLLEB, District Judge, S. D. West Virginia.... Ciiarleston, W. Va.
FIFTH CIRCUIT
Hon. JAMES CLARK McREYNOLDS, Circuit Justice Washington, D. C.
Hon. RICHARD W. WALKER, Circuit Judge Huntsville, Ala.
Hon. NATHAN p. BRYAN. Circuit Judge' Jacljsonvilie, Fia.
Hon. HENRY D. CLAYTON, District Judge, N. and M. D. Alabama Moatgomery, Ala.
Hon. WILLIAM I. GRUBB, District Jude,e, N. D. Alabama Birmingham, Ala.
Hon. ROBERT T. ERVIN, District Jurlge, S. D. Aloh:ntia Mobile, Ala.
Hon. WILLIAM B, SIIEPPARD, District Judge, N. D. Florlda Pensacola, Fia.
Hon. RHYDON M. CALL, District Judge, S, D. FlorMa Jacksonvllle, Fia.
Hon. WILLIAM T. NEWMAN, District JudKc, N. D. (i'-'oigia^ Atlanta, Ga.
Hon. SAMUEL H. SIDLEY, District- Judge. N. D. Ocir-ia Atlanta, Ga.
Hon. BEVERLY D. EVANS. Dir.tri:>t .l;idgc, S. D. Gr i (; :; Savannah, Ga.
Hon. EUFUS E. FOSTEIt Dlstrici Judge, R. D. Li.i'r :.:ta New Orléans, La.
Hon. GEORGE W. JAC1\, i.lslut Judac, W. D. Lmi.;.; ii . Slireveport, La.
Hon. EDWIN R, HOLili'.S, uhiih t Jud.cie, N. and S. D. ill- K^sijjpi Jackson, Miss.
Mou. w. LEE ESTiîS. Dislriel .laJge, B. D. Texas- Texarkaiia, Te.x.
Hon. EDWARD R. MEEIC, Hlstrict Judge. N. D. Toxiis Dallas, Tex.
lion. JAMEd CLIETON WlLaON, District Judge, N. D. Texas Pt. Worth, Tex.
lion, DUV.'ilj Vv'EST, DiKtrirt .ludgo, W. D. Texas San Antonio, Tex.
lion. JOSEPH C. Hb'TCiliSSON, Jr., District Judge, S. D. Texas Houston, Tex.
Hon. WILLIAM R. SMITH, District Judge, W. D. Texas El Paso, Tex.
SIXTH CIRCUIT
Hon. WILLIAM R. DAY, Circuit Justice Washington, D. C.
Hon. LOYAL E. KNAPl'EN, Circuit Judge Grand Rapids, Mlch.
Hon. ARTHUR C. DBNISON, Circuit Judge Grand Rapida, Mlch.
Hon. MAURICE H. DONAIIUE. Circuit J^iuge Columbus. Ohio.
Hon. ANDREW M. J. COCHRAN, District Judge, B. D. Kentucky Maysville, Ky.
Hon. WAI.TBR EVANS, District Judge, W. D. Kentucky Louisvllle, Ky.
Hon. ARTHUR J. TUTTI,E, District Judge, E. D, Michigan Détroit, Mlch.
Hon, CLARENCE W. SESSIONS, District Judge, W. D. Michigan Grand Rapids, Mlch.
Hon. JOHN M. KILLITS, District Judge, N. D. Ohio Tuledo, Ohlo.
lion. D. C. WESTBNHAVBR, Dtstriet Judge, N. D. Ohio Cleveiand, Ohio.
Hon, JOHN E, SATER, District Judge, S. D. Ohlo Columbus, Ohlo.
Hon. JOHN W. PECK, District Judge, S. D. Ohio Cincinnati, Ohio.
Hon. EDWARD T. SANFORD, District Judge, B. and M. D. Tennessee.. Knoxvllle, Tenn.
Hon. JOHN B. MoCALL, District Judge, W. D. Tennessee Memphis, Tenu.
SEVENTH CIRCUIT
Hon. JOHN H. CLARKB, Circuit Justice Washington, D. a^
Hon. FRANCIS E. BAKER, Circuit Judge Goshen, Ind.
Hon. JULIAN W. MACK, Circuit Judge Chicago, III.
Hon. SAMUEL ALSCHULBR, Circuit Judgo Chicago, IlL
« Appointée! April 23, 1920. » Died March 14, 1920. » Appointed February 18, 1920,
JUDGES OF THE COXIRTS VU
(262 F.)
Hon. BVAN A. EVANS, Circuit Judge Baraboo, Wis.
Hon. GEORGE T. PAGE, Circuit Judge Peoria, 111.
Hou. KENESAW M. LAiVDlS. District Judge, N. D. Illinois Chicago, lU.
Hon. GEORGE A. CAIIPENTER, District JudL;e, N. D. Hiioois Chicago, 111.
Hou. LiOUIS FITZHE.NRY, District Judge, S. D. Illinois Peoria, 111.
Hon. GEORGE W. ENGEISH, DiUrict Judge, E. D. Illinois Danville, 111.
Hon. ALBERT B. ANDERSON, District judge, indiana Iridiariapolls, Ind.
Hon. FERDINAND A. GEIGER, Dislrict Judge, E. D. Wisconsin Miiwaukee, Wis.
lion. ARTHUR L. SAN130RN, District Judge, W. D. Wisconsin Madison, Wis.
EIGHTH CIRCUIT
Hon. WILLIS VAN DEVANTER, Circuit Justice Washington, D. C.
Hon. WALTBR H. SANIiORN, Circuit Judge St. Paul. Mlnn.
Hon. WILLIAM C. liOOK, Circuit Judge Leavenworth, Kan.
Hon. WALTER I. SMITH, Circuit Judge Council Bluffs, lowa.
Hon. JOHN E. CARLAND, Circuit Judge Washington, D. C.
Hon. KIHUROUGH STONE, Circuit Judge Kansas City, Mo.
Hon. JACOB TRIEBER, District Judge, E. D. Arkansas Little Rock, Ark.
Hon. FRANK A. YOUMANS, District Judge, W. D. Arlîa;is;;s Ft. Smith, Ark.
Hon. ROBERT B. LEWIS, Dislrict Judge, Colorado Deuver, Colo.
Hon. HENRY T. REED. District Judge, N. D. lowa Cresco. lowa.
Hon. MARTIN J. WADB, District Judge, S. D. lowa Davenport, lowa.
Hon. JOHN C. POLLOCK, District Judge, Kausas Kansas City, Kan.
Hon. PAGE MORRIS, District Judge, Minnesota Duluth, Mlnn.
Hon. WILUliR F. BOOTH, District Judge, Miunesota Miuneapolis, Mlnn.
Hon. CH.IKLES B. FARIS, JJistriot Judge, E. 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, Neb.
Hon. JOSEPH W. WOOUltOUGH, District Judge, Nebraska Omaha, Neb.
Hon. COLIN NEBLETT, District Judge, New Mexico Santa Fé, N. M.
Hon. CHARLES P. AMIDO.N, District Judge, North Dakota Fargo, N. D.
Hon. HUIJERT L. WILLIAMS, District Judge, H. D. Oklahoma Muskogee, 0kl.
Hon. JOHN H. COTTERAL, District Judge, W. D. Oklahoma Guthrie, 0kl.
Hon. JAMES D. ELUOTT, District Judge, South Dakota Sioux Falls, S. D.
Hon. ÏILLMAN D. JOHNSON, District Judge, Utah Sait Lake City, Utab.
Hon. JOHN A. RINER, District Judge, Wyoming Clieyenne, Wyo.
NINTH CIRCUIT
Hon. JOSEPH McKENNA, Circuit Justice Washington, D. C.
Hon. WILLIAM B. GILBERT, Circuit Judge Portland, Or.
Hon. ERSKINE M. ROaS, Circuit Judge Los Angeles, Cal.
Hon. WILLIAM W. MORROW, Circuit Judge San Francisco, Cal.
Hon. WILLIAM H. HUNÏ, Circuit Judge San Francisco, Cal.
Hon. WILLIAM H. SAWTELLE, District Judge, Arizona Tucson, Ariz.
Hon. BENJAMI.M F. BLEDSOB, District Judge, S. D. California Los Angeles, Cal.
Hon. OSCAR A. TRIPPET, District Judge, S. D. California Los Angeles, Cal.
Hon. WILLIAM C. VAN FLEBT, District Judge, N. D. Califernia San Francisco, Cal.
Hon. MAURICE T. DOOLING, District Judge, N. D. Caliloruia San Francisco, Cal.
Hon. FRANK S. DIETRICH, District Judge, Idaho Boise, Idaho.
Hon. GEORGE M. BOURQUIN, District Judge, Montana Butte, Mont.
Hon. EDWARD S. FARRINGTON, District Judge, Nevada Carsou 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 Spokaue, Wash.
Hon. EDWARD B. CUSHMAN, District Judge, W. D. Washington Tacoma, Wash.
Hon. JERBMIAH NETBRBR, District Judge, W. D. Wa.shington Seattle, Wash.
COURT OF APPEAI.S OF DISTRICT OF COL,UMBIA
Hon. CONSTANTINE J. SMYTH, Chief Justice Washington, D. C.
Hon. CHARLES H. ROBB, Assoclate Justice Washington, d! C.
Hon. JOSIAH A. VAN ORSDBL, Assoclate Justice Washington, D. C.
*
CASES REPORTED
Page
Acme Motion Pîcture Projector Co., De Vry
Corporation v. (C. C. A.) 970
Adams Exp. Co. v. Lansburgh & Bro.
(App. D. C.) 232
A. Kimball Co. v. Noesting Pin Ticket Co.
(C. C. A.) 148
A. L. Jordan Lumber Co., Northern Idaho
& Montana Power Co. v. (C. C. A.) 765
AUey V. Bessemer Gas Eîngine Co. (C.
O. A.) , . . . . 94
Ail Package Grocery Stores Co., Sweet v.
(C. C. AO 727
American fionding Co., Miller v. (0. C. A.) 103
American Car & Foundry Co., Edward
Hines Lumber Co. v. (C. C. A.) 757
American Mercantile Corporation v. Spiel-
berg (C. C. A.) 492
American Métal Ce, Compania Minera y
Compradora de Metales Mexicano, S. A.,
V. (D. C.) 183
American Mills Co., American Surety Co.
of New York v 691
American Ry. Exp. Co. v. State of Mary-
land (C. C. A.) . .* 1016
American Suretv Co. of New York v.
American Mills Co. (D. C.) 691
Ammerman v. United States (0. C. A.).. 124
Ammon & Person v. Narragansett Dairy
Co. (C. C. A.) 8S0
Anderson. Keyes v. (C. 0. A.) 748
Andersen, New York Life Ins. Co. v. (D. C.) 215
Anzolotti V. McAdoo (D. C.) 568
Apple, United States v. (D. C.) 200
Aragon, The (D. C.) 212
A. Schrader's Son v. Dill Mfg. Co. (C. C.
A.) 604
Atha T. Walter (C. C. A.) 75
Atlantic, The (C. C. A.) 405
Atlantic Steel Co. v. R. O. Campbell Coal
Co. (D. C.) 555
Ausable, The (D. C.) 783
Backstay Machine & Leather Co. v. Hamil-
ton, two cases (C. C. A.) 411
Bain v. United States (C. C. A.) 664
Baker-Whiteley Coal Co. v. Wilson (C.
C. A.) 1016
Baker-Whiteley Coal Co., Wilson v. (C.
C. A.) 1022
Bald Eagle Mining Co., In re (O. C. A.). . 62
Baltimore Dry Docks & Ship Kldg. Co. v.
New York & P. R. S. S. Co. (C. C. A.) 485
Baltimore & O. R. Co., StafCord v. (D, C.) 807
Baltimore & O. R. Co., State of Maryland
V. (C. C. A) 11
Baltzley v. Spengler Loomis Mfg. Co, (C.
C. A.) 423
Page
Bank of North America, Wysong & Miles
Co. (C. C. A.) 130
Bank of Waynesboro, First Nat. Bank of
Evanston, Wyo., v. (C. C. A.) 754
Bank of Waynesboro, Murphy v. (C. C. A.) 756
Bank of Waynesboro, Sullivan v. (C. C. A.) 756
Barber & Co., Dorrance v. (C. C. A.) 489
Barnes, F. Lewald & Co. v. (0. 0. A.)... . 137
Barues, Moore v. (C. C. A) 318
Barr, Kiug v. (C. C. A.) 56
Barra v. Mills (C. C. A.) 1016
Beich Co. v. Kellogg Toasted Corn Flakes
Co. (App. D. C.) 040
Beitman v. Strater (D. C.) 443
Bell & Howell Co. v. Bliss (C. C. A.) . . . 131
Benedicto v. Compania de los Ferrocar-
riies de Puerto Rico (C. C. A.) 932
Benowitz, United States v. (D. C.) 223
Ronson, Bul^er v. (C. C. A.) 929
Bentall v. United States (C. C. A.) 744
Berksliire Hills Paper Co. v. Byron West-
on Co. (C. C. A.) 685
Bernheim Distilling Co., Gregory v. (C.
C. A.) 1018
Berriiigcr, Cosden v. (O. C. A.) 1017
Bessemer Gas Engine Co., Alley v. (C.
U. A.) 94
Bothke, Scaunell v. (App. D. C.) 1023
Bethlehcm Steel Co., Churchward Interna-
tional Steel Co. V. (D. C.) 438
Bevcridge v. Crawford Cotton Mills (C.
C. A.) 381
Bishop, Sanderson v. (C. C.) 228
Blakeslee & Co., Impérial Machine & Foun-
dry Corporation v. (C. C. A.) 419
Blanchard. In re (C. C. A.) 75
Bland v. Reeves (C. C. A.) 1016
Bliss, Bell & Howell Co. v. (C. C. A.) 131
Block, United States v. (D. C.) 205
Blnmlien v. United States (C. C. A.) 1016
Bodden, Ingalls v. (C. C. A.) 245
Borden Stove Co., Jost v. (D. C.) 16;i
Border Line Transp. Co. v. Canadian l'ac.
E. Co. (D. C.) 989
Borraan v. United States (O. O. A.) 20
Brant Independent Mining Co. v. Palmer
(C. C. A.) 370
Bi-ann v. Wiegand (App. D. C.) 047
Brisham v. John F. Schmadeke, Inc. (1).
C.) 571
lîrill V. Jewett (C. C. A.) 985
lîrimi, In re (D. C.) 527
Brinson, In re (I). C.) 707
r.ritannia, The (C. C. A.) 1016
Britanuia, The (C. C. A.) 1022
Britton v. Union Inv, Co. (C. C. A.) 111
262 F.
(ix)
262 FEDERAL REPORTEK
Page
Brooke Glass Co. v. Hartford-Fairmont Co.
(C. C. A.) 427
Brown-Forman Co., Gregory v. (O. O. A.)- .1018
Buford, Gooch v. (O. O. A.) 894
Buja, Hogan v. (D. C.) 224
Bulger V. Benson (C. O. A.) 029
Burgess v. Standard Oil Co. (C. C. A.) . . ÏG7
Burgess Battery Co. v. Novo Mfg. Co.
(C. C. A.) 072
JJushoiig V. II. R. Thompson Estate Uo. (C.
C. A.) 297
Business Mcn's Accident Ass'n of America
V. Schiefelbusch (0. C. A.) 354
Byron Weston (îo., Berkshire Hills Paper
Co. V. (C. O. A.) 086
Calumet Coal & Supply Co., City of Ham-
mond, Ind., v. (C. C. A.) 938
Campbell Coal Co., Atlantic Steel Co. v.
(D. C.) 555
Camp Bird v. Howbert (C. 0. A.) 114
Canadian Pac. R. Co., Border Line Transp.
Co. T. (D. C.) SS9
Caps, Kennicott v. (App. D. C.) €41
Carnegie Steel Co., Martin v. (C. C. A.).. 5
Carolina Public Service Co., Kennedy v.
CD. C.) 8o;î
Casey, Vnited States Steel Co. v. (C. C. A.) 8S!1
Cataluna. The (D. C.) 212
C. Gallagher, The (C, C. A.) 97
Chan M'y Sheung, Ex parte (I). C) 221
Chapin, The fC. C. A.) 119
Chelsea Lighternge Co., McCole v. (C. C. A.)1018
Chicago Jîonding & Insurance Co., Copper.
I>]-occ.ss Co. V. (G. C. A.) m
Chicago, R, I. & P. R. Co. v. O'Dell (C.
C. A.) 1010
Chicago & N. W. R. Co. v. E. C. Tecktoni-
us Mfg. Co. (D, C.) 715
Churchward Internationa! Steel Co. v.
Bethlehem Steel Co. (U. C.) 4SH
City of Hammond, Ind., v. Calumet Coal &
Supplv Co. (C. C. A.) 938
City of Mouroe, Détroit, M. & T. S. L. Ry.
V. (D. C.) 177
City of Oakland, Standard American
Dredging Co. v. (G. C. A..) 315
City of Raton, Colfp.x Cnnnty, N. M., Ra-
ton WateîTvorks Co. v. (C. C. A.) 1021
Cleveland. C, C. & St. L. R. Ce, United
States V., two cases (D. C.) 775
Cleveland Cliffs Iron Co. v. Kinney (D.
C.) 980
Clinchfield Fuel Co. v. Henderson Iron
Workn Co. (C. C. A.) 392
Commercial Xat. Bîiuk Passaic Nat. Bank
V. (App. D. C.) 234
Commercial Sec. Co. v. Ilolcombe (C. C.
A.) 657
Comnania do los Ferrocarriles de Puerto
Rico, Bencdicto v. (C. C. A.) 032
Conipar.ia Minera y Conipradora de Me-
tales Mexieano, S. A., v. American
Métal Co. (D. C.) 183
Concrète Appliances Co. v. Meinken (C.
C. A.) 958
Conkling v. New York Lifo Insurance &
Trust Co. (App. D. C.) 620
Conncr, Scbeuerie v. (App. D. O.) 050
Consolidated Fuel Co., St. Louis South-
we.stcra R. Co. of Texas v. {C. C. A.). ..1021
Page
Coots, Omaha Nat. Bank v. (C. 0. A.)... 1020
Copper l'roccss Co. v. Chicago Bonding
& Insurance Co. (C. O. A.) 00
Cosden v. Berringer (C. C. A.) 1017
Cowgill, Johnson v. (C. C. A.) 300
Cox, Ware v. (C. C. A.) 1022
Coyle & Co. v. North America S. S. (Corpo-
ration (C. C. A.) 250
Crawford Cottou Mills, Beveridïe v. (C.
C. A.) 381
Crockett v. United States (C. C. A.) 1017
CromweJI. Simons v. (C. C. A.) 680
Cudahy Packing Co. v. Frey & Son (C.
C. A.) 1017
Cuyamel Fruit Co. v. Johnson Iron Works
(G. G. A.) 387
Daltou, Pétition and Appeal of (C. C. A.) 257
Daizell, The F. B. (D. C.) 218
Danville Ben. & Bldg. Ass'n v. Huff (G.
C. A.) 403
Davis, The M. Mitchell (C. G. A.) 1016
Davis. The M. Mitchell (C. G. A.) 1022
Day, MeCaffrey v. (G. C. A.) 80
De Groisset v. Vitagraph Go. of America
(G. C. A.) 100
Delawaro, D. & W. R. Co., Howell v. (C.
C. A.) 119
Deiiison, Dupre v. (D. C.) 975
Dcniiis-Simmons Lumber Co., Guenther v.
(C. C. A.) 1018
Détroit, M. & T. S. L. Ry. v. Monroe
(D. G.) 177
De Vrv Corporation v. Acrae Motion Fie-
tiire Projector Co. (C. C. A.) 970
Dexter. Zidell v. (C. G. A.) 145
Diaz. Patterson v. (G. C. A.) 899
IHIl Mfg. Co., A. Schradcr's Son v. (C.
G. A.) 504
Dillon. Kx parte (D. C.) 503
Dixou Co., Lockport GIpss Co. v. (D. C.).. »76
ïîoetor, Appoiil of (C. G. A.) 500
1 )on<,hoc, 'l'josevig V. (G. C. A.) 911
Dnnovan v. Universal Motor Truck Go.
(C. C. A.) 322
Doremns v. United States (C. G. A.) 849
Dorrfnice v. Barber & Go. (G. C. A.) 4.8»
I>«rset, Rtichel v. (App. D. C) 652
Downs V. ÎTiilted St.-îtes (G. C. A.) 1017
Dressler Producing Corporation, In re (G.
C. A.) 257
Drohen, Rowe v. (G. C. A.) 15
Dur-ktowi Sulphur. Copper & Iron Co. v.
Galloway (G. C. A.) 609
Dunellon, The (G. C. A.) 119
Dupre V. Denison (D. G.) 975
Duqnesne, The (C. C. A.) 1
•Duquesno, The (C. C. A.) 5
Durham, Prcston v. (D. C.) 843
Dye V. United States (C. G. A.) 6
Dyer v. International Banking Corporation
(G. C. A.) 292
East Carolina Lumber Co., Eastern Transp.
Co. V. (D. C.) 195
East St. Louis Connecting R. Co. v. Rob-
erts (C. C. A.) 1017
Eastern Transp. Go. v. East Carolina
Lumber Co. (D. G.) 195
Eastland, The (D. C.) 535
CASES RE
C262
Page
E. O. Tccktonîus Mfg. Co., Chicago & N.
W. E. Co. V. (D. G.) ns
Edward Ilines Liimbor Co. v, American
Car & Fotindry Co. (C. C. A.) 757
Edwards Lumber & Mfg. Co. v. Miller (C.
C. x\.) 4(10
K. R. Forbes Piano Co., In re (C. C. A.). . . 037
E. H. Freeman Electric Co. v. AVeber Elec-
tric Co. (C. C. A.) 7GS)
Ely lîoal Estate & Investmont Co. v.
Watts (C. C. A.) 721
Empii-e Fiiel Co., Lyons v. (C. C. A.) 4i;j
Kmijire Tire & Hubber Co., Moore v. (C.
C. A.) S18
ElnKle V. Manchester, two cases (App. D.
C.) 645
Encle V. Manchester & Spooner (App. D.
C.) 645
Equitable Trust Co. o£ ÎS^ew York, Lane v.
(C. C. A.) 9tS
Bsrom, The (C. C. A.) ilO:^
Etta McElroy. The (C. G. A.) i<4:]
Evans v. Ourc (D. C.) 550
Everett, l'hiiiips Co. v. (C. C. A.) 341
Famons Players' Easkv Corporation, Man-
nors V. (r>. C.) 811
Farmcrs' Elevator Co. of Miranda, S. D.,
Thayer v. (C. C. A.) 1021
Farmors' Life Ins. Co., Slicarer v. (C. 0.
A.) 801
Farmers' Elfe Ins. Co., Wible v. (C. C. A.) 861
F. B. Dalzcll, The (D. C.) 218
First Nat. P.ank of Evanf;ton, Wyo., v.
Bank of Waynesboro (C. C. A.) 75 5
F. Levvald ,Sr Co. t. Earncs (C. C. A.)... 137
Florence, The (D. C.) 21 S
Fontana v, XJnited States fC. C. A.) 2S-;
Forbes Piano Co., In re (C. C. A.) a'7
Forde, The (C. C. A.) V.n
Forney, Hendrix v. (C. C. A.) 1018
Foster v. United Stat<>s (C. C. A.) I*i17
Fousck, Henkin v. (C. C. A.) '.':'>7
Frankmere. The (1). C.) 8iy
Freeman Electric Co. v. Weber l'ili'ctric
Co. (C. C. A.) 7G9
Frey & Son, Cudahy Packing Co. v. (C. O.
A.) 1017
Fuld Store Co., United States v. (D. C.).. 836
Gallagher, The C. (C. C. A.) 97
Gallowav, Dncktown Sulphur, Copper &
Iron Co. V. (C. 0. A.) 669
Geisenberfrer & Friodler v. Robert York
& Co. fC. C. A.) 739
(jicneral Electric Co., Harvey Ilubbell, Inc.,
V. (D. C.) 155
General Pireproofing Co. v. Tcrami (C.
C. A.) 106
George D. Mayo Mach. Co. v. Ilemphill
Mfg. Co. (C. C. A.) 4'.','>
Getty V. Eayne (C. C. A.) 141
Ginaca v. Peterson. two cases (C. C. A.) . . 804
Giyins, Ex parte (D. C.) 702
Gill V. United States (G. C. A.) 502
Gooch V. Buford (C. C. A.) 8i)4
Gore, Evans v. (D. C.) 550
Gottlieb, In re (C. C. A.) 730
Grandi v. United States (C. C. A.) 123
Gregory y. Bernheiin DistiUing Co. (C.
C. A.1 KI18
îpouted XI
p.)
Page
Gregory v. Brown-Forman Co. (C. C.
A.) 1018
Grier v. United States (C. C. A.) 407
Griisedioik Bros. l'rewery Co. v. Moore
(O. G.) 582
G. S. i'.lak.'slee & Co., Impérial Machine &
Fnnndry Corporation v. (C. C. A.) 419
Gncï tlier v. Dennis-Simmons Lniuber Co.
(G. G. A.) 1018
Gu;;goIz v. United States (C. C. A.) 764
IIa;:rn]ann Pickling Co., Priée Bonker Mfg.
Go. v. (C. G. A.) 1020
IlnuiiUon, lîaclistav Jlachine & Leathcr Co.
V., tv,() cases (G. C. A.) 411
Ilammerschlag Mfg. Co. v. Importera' &
Traders' Nat. Bank (C. G. A.) 266
Hanrnhan y. Pacifie Transport Co. (C.
G. A.) 951
Hartlord-Fairmont Co-, Homer Brooke
Gilass Co. y. (C. C. A.) 427
Iliuvev Hubbell, Inc., y. General Electric
Go. (!>. C.) 155
Hattie Thomas, The (C. C. A.) 943
Il.anbtman & Uoeb Co. v. Hooven-Owens-
Kentsehler Go. (G. C. A.) 408
H. D. Smith & Co. y. Peck, Stow & Wil-
cox Co. (C. 0. A.) 415
ITeath y. Port of Para (D. C.) 815
ÎJoIemis, The (C. G. A.) 1016
Helenus. The (G. 0. A.) 1022
Ilemphill Mfg. Co., George D. Mayo Mach.
Go. v. (C. C. A.) 435
ITemphill Mfg. Co., Scott & Williams v. (C.
C. A.) 068
Henderson Iron Works Co., Clinchfield Fuel
Go. v. (C. C. A.) 302
lîeiidrix y. Forney (C. C. A.) 1018
TT<-nkin v. Foursek tC. C. A.) 957
Uniniiig. Turner v,' (App. D. C.) 637
îlenric hs, Mickle y. (D. G.) 687
TTerl^ert A: Co., In re (C. G. A.) 682
Hetherington v. Palmer (C. C. A.) 367
Hilgcr, Marks y. (C. C. A.) 302
Hines v. Itittenberg (C. O. A.) 87
llines Luml)er Co. v. American Car & .
Foundry Co. (G. G. A.) 757
Ilitt Lnmber & Box Co., In re (C. C. A.) . .1020
II. L. Dixon Co., Eockport Glass Co. v. (D.
C.) 976
n. L. Herbert & Co., In re (C. C. A.)... 682
IIog:',n V. J iu.ia (D. C.) 224
Holeon.be, Commercial Sec. Co. v. (C. C. A.) 657
Homer Brooke Glass Go. y. liartford-Fair-
uiont Go. (C. C. A.) 427
Hooveu-Owcns-Rentschlcr Ce, Haubtman &
t..;"b Co. v. (C. 0. A.) 408
Ilopkins v. Kiegger (App. D. C.) C42
Horn, Monk v. (C. C. A.) 121
Horowitz V. United States (G. C. A.) 48
Howard v. Mechanies' Bank {X). C.) 699
Howard, Ecnke y. (C. G. A.) 946
Howbert, Camp Bii d v. (C. C. A.) Il4
Howell, The (G. G. A.) 1018
Howell v. Delaware, L. & W. R. Co. (O.
C. A.) 119
Ilubbell, Inc., v. General Electric Co.
(U. C.) 155
Hudson, In re (D. C.) 778
Uudson Nav. Co., Appeal of (C. 0. A.).. 1021
xu
262 FEDERAL REPORTER
Page
Huff, Dauville Ben. & Bldg. Ass'n v. (C. 0.
A.) 403
Huffman v. Paige-Detroit Motor Car Co.
(C. C. A.) 116
Hughes, In re (C. C. A.) 500
Hunau v. Northern Région Supply Corpo-
ration (D. C.) 181
Huttonwood, The CD. 0.) 452
Imbrie, Martin v. (O. C. A.) 44
Impérial Machine & Foundry Corporation
V. G. S. Blakeslee & Co. (C. C. A.) 41i>
Imponers' & Traders' Nat. Banlc, Hammer-
schlag Mfg. Co. V. (0. C. A.) 266
Incoiporated ïown ot Laurens, lowa, v.
Northern lowa Gas & Electric Co. (D.
C.) 712
Incorporated Town of Luverne, lowa,
Northern lowa Gas & Electric Co. v. (D.
C.) 711
Individual Driiiking Cup Co. v. Public
Service Cup Co. (C. O. A.) 410
Ingalls V. Bodden (C. C. A.) 245
Ingle V. Landis Tool Co. (D. C.) 150
International Banking Corporation, Dyor v.
(C. C. A.) r 202
International Harvester Co. of America
V. Langermnnn (C. C. A.) 498
International Sugar Feed No. 2 Co., M. 0.
Peters MiUing Co. v. (C. 0. A.) 336
Interocean Oil Co., Transcontinental Petro-
leum Co. V. (C. C. A.) 278
Isabela, The (C. C, A.) 48o
Jay V. Weinberg (C. O. A.) 973
Jewett, Brill v. (C. C. A.) 035
John F. Schmadekc, Inc., Brigham v. (D.
C.) 571
Johnson v. Cowgill (C. C. A.) 306
Johnson Iron Works, Cuyamcl Fruit Co. v.
(C. O. A.) 387
Jong Hong v. United States (C. C. A.).. 1019
Jordan Lumber Co., Northern Idaho &
Montana Power Co. v. (C. 0. A.) 765
Jost V. Borden Stove Co. (D. C.) 103
J. W. Kingrose Co. v. W. & J. Sloane
(D. C.) 545
Kambeitz v. United States (C. C. A.) 378
Kansas City Southern R. Co. v. Martin (C.
C. A.) 241
Kawneer Mfg. Co., Toledo Plate & Window
Glass Co. V. (C. C. A.) 510
Kellogg Toasted Corn Flakes Co., Paul F.
Beich Co. v. (App. D. C.) 640
Kolly V. Eohinson (D. C.) 695
Kennedy v. Carolina Public Service Co.
(D. C.) 803
Kennicott v. Caps (App. D. C.) 641
Keycs v. Anderson (C. C. A.) 748
Kimball Co. v. Noesting Pin Ticket Co.
(C. C. A.) 148
King, In re (C. C. A.) 318
King V. Barr (C. C. A.) 56
Klipstein, Simson v. (D. C.) 823
Kovacs, New York Cent. R. Co. v. (C. C.
A.) 1020
Kramer, United States v. (C, C. A.) 395
Kress & Co. v. Lindsey (C. C. A. ) 331
Krocger Bros. Co., In re (D. C.) 463
Page
l.iindis Tool Co., Ingle v. (D. C.) 150
Lane v. Equitable Trust Co. of New York
(C. C. A.) 918
Langermann, International Harvester Co.
of America v. (C. C. A.) 498
Langiey v. United States (C. C. A.) 1010
Lanshurgh & Bro., Adams Exp. Co. v.
(App. D. C.) 232
Laync, Getty v. (C. C. A.) 141
Bedorer v. Northern Trust Co. (C. C. A.) 52
Lederer, Pearcc v. (D. C.) 993
Lederer, Stockton y. (D. C.) 173
Bee V. Vreeland (App. D. C.) 654
Lcflore County, Miss., National Surety Co.
V. (C. O. A.) 325
Lewahl & Oo. v. Barnes (O. C. A.) 137
Lim Chan v. White (C. C. A.) 702
Lindsey, S. H. Kress & Co. v. (O. C. A.). . . 331
Little Kanawha Bog & Tie Co., Reliable
Towing Co. V. (C. C. A.) 108
Lockport Glass Co. v. Irl. L. Dixon Co.
(1). C.) 970
Loen, In re(I>. C.) 166
Long V. Miller (C. C. A.) 362
J.ong Branch Distilling Co., United States
V. (C. C. A.) 768
Looney. In re (D. C.) 209
Louisville & JclTorsonvillc Bridge Co. v.
United States (C. C. A.) 1019
Luekenbach Ce, Sannders v. (C. C. A.) 849
Luckenbach Co., Sannders v. (D. O.) 845
Lum You, Ex parte (D. C.) 451
Lyons v. Empire Coal Co. (C. C. A.) 405
MoAdoo, Anzololti v. (B. 0.) 568
MeCaffrey v. Day (C. C. A.) 80
McCole V. Chelsea Lighterage Co. (C.
C. A.) 1018
McElroy, The Etta fC. C. A.) 943
Maclin-Ziranier-McGill Tobacco Co., In re
(App. D. C.) 635
Manchester, Engle v., two cases (App. D.
C.) 645
Manchester & Spooner, Engle v. (App. 1).
O.) 645
Mann-Anchor Co., In re (O. C. A.) 111
Manners v. Famous Players-Lasky Cor-
poration (D. C.) 811
Manufacturers' & Merchants' Lishterage
Co., Shamrock Lighterage Co. v. (D. C.) . . 844
Marine Nat. Bank v. Swigart (C. C. A.). . 8."i4
Marks v. Hilger (C. C. A.) 302
Martin v. Carnegie Steel Co. (C. C. A.).. 5
Martin v. Imhrie (C. C. A.1 44
Martin, Kansas City Southern R. Co. v.
(C. C. A.) 241
Maryanne, The (O. C. A.) 129
Marvland Dredging- & Contracting Co. v.
State of Maryland (C. C. A.) 11
Mason, In re (h. C.) 527
Mavnard v. United Thaeker Coal Co. (C.
C. A.) 478
Mayo Mach. Co. v. Plemphill Mfg. Co. (C.
C. A.) 435
M. C. Peters Milling Co. v. International
Sugar Feed No. 2 Co. (C. C. A.) 336
Mearns v. Sidlivan, two cases (App. D.
C.) 633
INIcarns, Tuckcrman v. (App. D. C.) 607
Mechanics' Bank, Howard v. (D. C.) 699
CASES EBPORTBD
C262 F.i
Page
Meinken, Concrète Appliances Co. v. (C. C.
A.) 958
Merlini v. Partch (C. O. A.) 1020
Mickle V. Henriehs (D. C.) 687
Miller v. American Bonding Co. (C.
C. A.) 103
Miller, Edwards Lumber & Mfg. Co. v. (C.
C. A.) 405
Miller, Long v. (C. C. A.) 362
Mills, Barra v. (C. C. A.) 1010
M. J. Rudolph, The (D. C.) 780
M. Mitchell Davis, The (C. C. A.) 1016
M. Mitciiell Davis, The (C. C. A.) 1022
Monk V. Horn (C. C. A.) 121
Montoya v. United States (C. O. A.) 759
Moore v. Bames (0. G. A.) 318
Moore v. Empire Tire & Rubber Co. (C. C.
A.) SIS
Moore, Griesedieck Bros. Brewery Co. v.
(T) O ) 582
Moore, SinVlèton V.' (C.' C.' À.) !!!!!*.!!*.!'. 357
Morris, United States v. (D. C.) 514
Morris & Co. v. Thurmond (C. C. A.) 384
Multnomah Hôtel Co., In re (C. C. A.) 297
Murphy v. Bank of Waynesboro (C. C. A.) 756
Nakano v. United States (C. C. A.) 761
Narragansett Dairy Co. v. Ammon & Per-
son (C. C. A.) 880
National Bank o£ Ashtabula, Taylor &
Boumique Co. v. (D. C.) 168
National Discount Co., Pétition of (C. O.
A.) 1020
National Savings & Trust Co. v. Ryan
(App. D. C.) 613
National Surety Co., Appeal of (O. O. A.) 682
National Surety Co. v. Leflore County,
Miss. (C. C. A.) 325
National Surety Co., United States v. (0.
C. A.) 62
Newton, Rhea v. (C. C. A.) 345
New York Cent. R. Co. v. Kovacs (C. 0.
A.) 1020
New York life Ins. Co. v. Anderson
(D. O.) 215
New York Lifo Insurance & Trust Oo.,
Conkling v. (App. D. 0.) 620
New York & P. R. S. S. Co., Baltimore Dry
Docks & Ship Bldg. Co. v. (C. C. A.) 485
9,889 Bags of Malt, In re (C. C. A.) 946
Nirdlinger v. Stevens (D. C.) 591
Nitinat. The (D. C.) 989
Nitrate Producers' S. S. Oo., Sullivan v. (O.
O. A.) 371
Noesting Pin Ticket Co., A. Kimball Co. v.
(C. O. A.) 148
North America S. S. Corporation, W. G.
Coyle & Co. V. (C. O. A.) 250
Northern Idaho & Montana Power Co. v. A.
L. Jordan Lumber Co. (C. C. A.) 765
Northern lowa Gas & Electric Co., Incor-
porated Town of Laurens, lowa, v. (D.
O.) 712
Northern lowa Gas & Electric Co. v. Lu-
verne, lowa (D. C.) 711
Northern Région Supply Corporation, Hu-
nau V. (D. C.) 181
Northern Trust Co., Lederer v. (C. C. A.) . . 52
Northiand, The (C. C. A.) 245
Novo Mfg. Co., Burgess Battery Co. v. (C.
C. A.) 972
XUt
Page
O'DoU, Chicago, E. I. & P. R. Co. v. (O. C.
A.) : .....1016
Old Reliable, The (C. C. A.) 108
Oliner, In re (C. C. A.) 734
Omaha Nat. Bank v. Coots (C. C. A.). . . .1020
One Pord Automobile and Fourteen Pack-
ages of Distilled Spirits, United States v.
(O. C. A.) 374
Pacific Transport Ce, Hanrahan v. (C. C.
A.) 951
Paige-Detroit Motor Car Co. v. Huffman
(C. C. A.) 116
Palmer, Brant Independent Mining Co. v.
(O. O. A.) 370
Palmer, Hethorington v. (C. O. A.) 367
Partch, Merlini v. (C. C. A.) 1020
Passaic Nat. Bank v. Commercial Nat.
Bank (App. D. C.) 234
Patterson v. Diaz (C. C. A.) 899
Paul F. Beich Co. v. Kellogg Toasted Corn
Flakes Co. (App. D. C.) 640
P. B. Mann-Anchor Co., In re (C. C. A.) 111
Pearce v. Lederer (D. C.) 993
Pcck, Stow & Wilcox Co., H. D. Smith &
Co. V. (C. C. A.) 415
Peck, United States v. (C. O. A.) 1022
Pedarre, United States v. (D. O.) 839
Peters Milling Co. v. International Sugar
Feed No. 2 Co. (C. O. A.) S36
Peterson, Ginaca v., two cases (C. C. A.) . . 904
l'hihulelphia, B. & W. R. Co., United States
T. (D. O.) 188
Phiîlips Co. V. Everett (C. C. A.) S41
Pinasco V. United States (C. C. A.) 400
Porterfiold, In re (C. C. A.) 403
Port of Para, Hoath v. (D. O.) 815
Pottier & Stymus Co.,In re (C. C. A.).. 955
Powers V. United States (C. C. A.) 1020
Preston v. Durham (D. C.) 843
Price Booker Mfg. Oo. v. Haarmann Pick-
ling Co. (C. C. A.) 1020
Prince Line, Travelers' Ins. Co. v. (D. O.) 841
Public Service Cup Co., Individual Drink-
ing Cup Co. V. (C. O. A.) 410
Purpura V. United States (O. C. A.) 473
Raine-Andrews Lumber Co., United States
V. (D. O.) 787
Ramona Farmers Warehouse Co., Thaver v.
(O. O. A.) '.....1022
Rathlin Ilead, The (C. 0. A.) 751
Raton Waterworks Co. v. Raton, Colfax
County, N. M. (C. 0. A.) 1021
Reeder v. United States (C. O. A.) 36
Reeves, Bland v. (C. O. A.) 1016
Reichel v. Dorset (App. D. C.) 652
Reliable Towing Co. v. Little Kanawha
Log & Tie Oo. (C. C. A.) 108
Renke v. Howard (O. C. A.) 948
Rhea v. Newton (C. C. A.) 345
IMdgely, United States v. (C. C. A.) 675
Riegger, Hopkius v. (App. D. C.) 642
Kîiisrose Co. v. W. & J. Sloane (D. C.) . . 545
Rittonberg, Hines v. (O. C. A.) 87
Roberts, East St. Louis Connecting R. Oo.
V. (C. 0. A.) 1017
Robertson v. United States (C. O. A.) . . 948
Robert York & Co., Geisenberger & BVied-
1er V. (0. C. A.) 739
XIV
2G2 FEDERAL REPORTEU
Page
Kobiiîs V. United States (C. C. A.) 120
Robiuson, Kelly v. (D. C.) 695
E. O. Campbell Coal Ce, Atlantic Steel Co.
V. (D. C.) 555
Rosenfeld, In re (C. C. A.) S7()
Eowe V. Droben (O. O. A.) 15
Koxford Knitting Co., Appeal of (C. C. A.) 730
Koyal Duteb West India Mail Co., United
States V. (0. C. A.) 61
E. E. Thompson Estate Co., Bushoug v.
(C. C. A.) 297
Endolph. The M. J. (D. C.) 7<S0
Eyan, National Savings & Trust Co. v.
(App. D. C.) 613
St Joseph-Chicago S. S. Co., In re (D. C.) 535
St. Louis Soutbwestern E. Co. of Texas v.
Consolidated Fuel Co. (C. C. A.) 1021
St. Paul, The (C. C. A.) 1021
Sanderson v. Bishop (C. C.) 228
Saudren v. Ulster S. S. Co. (C. C. A.) 751
Saunders v. Luckenbach Co. (C. C. A.).. 84!)
Saunders v. Luckenbach Co. (D. C.) 845
Scannell v. Betbke (App. D. C.) 1023
Schiefelbusch, Business Mcn's Accident
Ass'n of America v. (0. C. A.) 354
Selimadeke, Inc., Brigham v. (D. CJ 571
Schneider, Application of (App. T>. C).... 718
Schrader's Son v. Dill Mfg. Co. (C. C. A.) 504
Scheuerle v. Conner (App. D. O.) 650
Scotia, The (C. C. A.) 119
Scott & Williams v. Hemphill Mfg. Co.
(C. C. A.) 908
Seebach v. United States (C. C. A.) 885
Shamrock Towing Co. v. Manufacturers'
& Merchants' Lighterage Co. (I>. C.) 844
Shearer v. Farmers' Life Ins. Co. (0. C.
A.) 801
S. H. Kress & Co. v. Lindsey (C. C. A.) . . . :;:'.]-
Simons v. Cromwell (C. C. A.) 0!S0
Simson v. IClipstein fD. C.) S2."i
Singleton v. Moore (C. C. A.) ;!57
Sischo, United States v. (D. C.) 1001
Sloane, J. W. Eàngrose Oo. v. (D. C.) 545
Smith, In re (App. D, C.) «4:'.
Smith, In re (App. D. C). 717
Smith V. Stepbens (C. C. A.) 3021
Smith, United States v. (D. C.) 101
Smith & Co. V. Peck, Stow & Wilcos Co.
(C. C.A.) 415
Spartan. The (O. C. A.) 97
Spengler Loomis Mfg. Co., Baltzley v. (C.
C. A.) 423
Spielberg, American Mercantile Corporation
V. (0. C. A.) 492
Springfield Eealty Oc, In re (C. C. A.) . . . 341
Stafford y. Baltimore & O. E. Co. (D. C.) 807
Standard American Dredging Co. v. Oak-
land (C. C. A.) 315
Standard Oil Co., Burgess v. (0. C. A.). . . 767
Standard Shipyard Co., In re (D. C.) 522
State of Maryland, American Ry. Exp. Co.
V. (O. O. A.) 1016
State of Maryland v. Baltimore & O. E.
Co. (C. C. A.) 11
State of Maryland, Maryland Dredging &
Contraoting Co. y. (C. C. A.) 11
Stephens, Smith v. (C. O. A.) 1021
Stepbens v. United States (C. C. A.) 957
Stcphens-Adamson Mfg. Co., Application
of (App. D. C.) (i35
Page
Stevens, Nirdlinger v. (D. C.) 591
Stimson, The (C. C. A.) 2i~>
Stockton V. Lederer (D. C.) 173
Strater, Beitnian v. (D. C.) 443
Sullivan, In l'o (D. C.) 574
Sullivan V. liunk of Waynesboro (C. C. A.) 75'!
Sullivan, Mcarus v., two cases (App. D. 0.) 033
Sullivan V. Nitrate Producers' S. S. Co. (C.
C. A.) yn
Sweet V. AU Package Grocery Stores Co.
(0. C. A.) 727
Swigart, Marine Nat. Bank v. (C. C. A.). . 854
Tamaha, The (D. C.) 218
Tavlor &. Bournique Co. v. National Bank
of Ashtalnila (D. C.) 168
Tecktonius Mfg. Co., Chicago & N. W. B.
Co. V. (D. C.) 715
Terami, General Fircprofing Co. v. (0.
C. A.) 106
Thayer v. Farmers' Elevator Co. of Miran-
da, S. D. (C. C. A.) 1021
Thayer v. Ramona B^armers Warehouse
Co. (C. C. A.) 1022
Thomas, The Hattie (C. C. A.) 943
Thompson v. United States (C. C. A.) 1022
Thompson Estate Co., Bushong v. (C. C. A.) 297
Thurmond, Jlorris & Co. v. (C. 0. A.) .384
Tjoscvig V. Donohoe (C. C. A.) 911
Toledo Plate & Window Glass Co. v. Kaw-
neer Mfg. Co. (C. C. A.) 510
Transcontiner.tal Petroleum Co. T. Inter-
ocean Oil Co. (C. C. A.) 278
Travelers' Ins. Co. v. Prince Line (D. C.) 841
Travis, Yale & Towne Mfg. Co. v. (D. C). . 576
Tuekerman v. Mearns (App. D. C.) 607
Turner v. Henning (App. D. C.) 037
Dhl. United States v. (D. C.) 226
rhi: United States v. (D. C.) 532
ULster S. S. Co., Sandrcn v. (C. C. A.) 751
Union Bank of Canada, United States v.
(C. C.A.) 91
Union Inv. Co., Britton v. (C. C. A.) 111
Union Tool Co. v. United States (C. O.
A.) 431
Union Trust Co. of Rochester, N. Y., v.
Woodward & Lothrop (App. D. C.) 627
United States, Ammerman v. (C. C. A.) . . 124
United States v. Apple (D. O.) 200
United States, Bain v. (C. C. A.) 664
United States v. Benowitz (D. C.) 223
United States, Bentall v. (0. C. A.) 744
United States v. Block (D. C.) 205
United States, Blumlien v. (C. C. A.) 1016
United States, Borman v. (C. O. A 26
United States v. Cleveland, C, C. & St. L.
B. Co., two cases (D. O.) 775
United States, Crockett v. (O. O. A.) 1017
United States, Doremus v. (C. C. A.) 849
United States, Downs v. (O. C. A.) 1017
United States, Dye v. (C. C. A.) 6
United States, Pontana v. (0. C. A.) 283
United States, Foster v. (C. C. A.l 1017
United States v. Fuld Store Co. (D. C.).. 836
United Statea, Gill v. (C. C. A.) 502
United States, Grandi v. (O. O. A.) 128
United States, Grier v. (C. C. A.) 407
United States, Guggolz v. (C. C. A.) 704
United States, Horowitz v. (C. C. A.).... 48
United States, .long Hong v. (C. C. A.) 1019
CASics t;:
Pag<;
Tiiitod States, Kambeifz v. fC, C. A.) 378
Uiihfiiî States v. Kramer (C. C. A.) [i'JÔ
United States, Lanslcy v. (C. C. A.) lOlt)
United States v. Long Brancli Distiilinjr
Co. (C. C. A.) 7G8
Uuitod States, Ltiiiisville &: Jelîcrsonville
Bridge Co. V. (C. C. A.) 1019
United StateK, Montoya v. (C. C. A.) 75!)
L'nlted States v. Morris (D. O.) til.4
United States, Naliano v. (C. C. A.) 7G1
United States v. National Surety Co. (C.
C. A.) 62
United States v. One Ford Automobile and
Foui'teen Packages of Distilled Spirits
(C. C. A.) ;î74
United States v. Pecis (C. C. A.) 1022
United States v. Ped:;r)'e (D. C.) S.'ii)
Ujiited States v. Pluladelpliia, B. & W. R.
Co. (D. C.) ISS
United States, Pinaseo v. (C. C. A.) 400
United States, Powers v. (C. C. A.) 1020
United States, Purpura v. (C. C. A.) 473
United States v. Raine-Andrews Lumber
Co. (I>. C.) 787
United States, Reeder v. (C. C. A.) 86
U'nited States v. Ridgely fC. C. A.) OTô
United States, Robcrtson v. (C. C. A.) 948
United States, Robins v. (C. C. A.) 126
United States v. Royal Dutch West In-
dia Mail Co. (C. 0. A.) 91
United States, Seebaeh v. (C. C. A.) 885
United States v. Sischo (1>. C.) 1001
United States v. Smith (D. C.) 191
United Staes, Stephens v. (C. C. A.) 957
United States, Thompson v. (C. C. A.)... 1022
United States v. Uhl (D. C.) 226
United States v. Uhl (D. C.) 532
United States v. Union Bank of Canada
(C. C. A.) 91
United States. Union ïool Co. v. (C. C. A.) 431
United States v. United States lirokerugc
& Trading Co. (D. C.) 4'i'.)
United States v. Vogel (C. C. A.) 2';2
United States, Webl) v. (C. C. A.) 1022
United States, Weichen v. (0. C. A.) 941
United States v. Wells (D. C.) S;!.",
United States, Wessels v. (C. C. A.) 3S9
United States, Western Indemnity Co. v.
(C. G. A.) 1022
United States v. Woolley (D. C.) 518
United States, Ya-koot-sa v. (C. C. A.) 398
United States Brokerage & Trading Co.,
United States v. (D. C.) 459
United Steel Co. v. Casey (C. 0. A.) 889
;POiiTED XV
P.)
Page
United Thacker Coal Co., Mavnard v. (C.
C. A.) 478
Universal Motor Truek Ce, Donovan y.
(C. C. A.) 322
Village of Kinney, Clevcland Cliffs Iron
Co. V. (D. C.) 080
Vitagraph Co. of America. De Croisset v.
(C. C. A.) 100
Vogel, United States v. (C. C. A.) 202
Vrceland, Lee v. (App. D. C.) 654
Wakena, The (D. C.) 989
V»' alter v. Atha (C. C. A.) 75
Wai'e V. Cox (C. C. A.) 1022
Watts, Ely Real Eslate & Investmeat Co.
V. (C. C. A.) 721
Webb V. United States (C. C. A.) 1022
Webcr I31cetric Co. v. R. H. Freennin Elec-
tric Co. (C. C. A.) • 769
Weichen v. United States (C. C. A.) 941
^Veinl,lerg, Jay v. (C. C. A.) 973
Wcidon, In re (U. C.) 828
Wells, United States v. (D. C.) 833
AVergeland, The (i>. C.) 785
Vï'essels V. Uinted States (C. C. A.) 389
Western Indemnitv Co. v. United States
(C. C. A.) .■ 1022
V'/. G. Coyle & Co. v. North America S.
S. Corporation (G. C. A.) 250
White, Lim Chan v. (C. C. A.) 762
VVhittlesey, Pétition of (C. C. A.) 955
Wibie V. Farmers' Life Ins. Co. (C. C.
A.) 861
Wiej^and, Braun v. (App. D. C.) 647
Wilson V. liaker-AVinteley Coal Co. (C.
C. A.) 1022
AVilson, Baker-Wliiteley Coal Co. v. (C.
C. A.) 1016
Woodward & Lothrop v. Union Trust Go.
of Rochester. N. Y. (App. D. G.) 627
Woolley, United States v. (D. C.) 518
Wvsong & Miles Co. v. Bank of North
America (C. G. A.) 130
W. & J. Sloane, J. W. Ringrose Co. v.
(D. C.) 645
Ya-koot-sa v. United States (C. C. A.) 398
Yalc &■ Towric Mfg. Co. v. Travis (D. C.) 570
Yarmonth, The (C. C. A.) 250
York & Co., Geisenberger & Friedier v.
(C. C. A.) 739
Young Toy, Ex parte (D. C.) 227
Zidell V. Dextcr (C. O. A.) 145
CASES
ARGUED AND DETERMINED
IN THE
UNITED STATES CIRCUIT COURTS OF APPEALS. THE
DISTRICT COURTS. AND 1 HE COURT OF
APPEALS OF THE DISTRICT
OF COLUMBIA
THE DUQUESNB.
(Circuit Court of Appeals, Thlrd Circuit January 8, 1920.)
No. 2500.
1. OOULISION <@=>98 — NOT NECESSABY TO SOUND WHISTLE BïJFOBE BOUNDINO
BEND, WHERE STEAMER IS IN VIEW.
Kule 6 of the supervising Inspectors, promulgated under Eev. St § 4412,
requiring steamers rounding a short bend or point, whlch would prevent
an approacliing steamer being seen at 600 yards, to sound a wtiistle,
was not violated by failing to whlstle, where the bend was sufficiently
long and flat to permit tbe approacbing steamer to Iseep the other in
slght continuously for at least a mile.
2. Collision <S=98 — Gtjaed and foeecastle lights not a substitute foe
coloeed staok lights.
In determlnlng the responsibillty for a collision between steamers,
guard and forecastle white lights, customarily used, but not required by
law, cannot be considered as a substitute for, or an excuse for not uslng,
the eolored stack lights required by rule 6 of Rev. St. § 4233 (Comp. St.
§ 7948.)
3. Collision <S=>104 — Mannee of eebutting peesumption that failuee to
show coloeed stack lights caused accident.
A Steamer, whlch did not show eolored stack lights at the time of a
collision, as required by rule 6 of Rev. St. § 4233 (Comp. St. § 7948) , can
escape the presumption of fault only by showing that the failure to obey
the rule posltlvely could not hâve contributed to the collision.
4. Collision <S=j105 — Failuee to show coloebid stack lights as conteibut-
ing cause.
Evidence that lights on a steamer*» tow were doubtless concealed by a
river fog, that its guard lights were not so hlgh as Its stack lights, etc.,
held to establish that the failure to show the eolored stack lights as re-
quired by rule 6 of Rev. St. § 4233 (Comp. St. § 7948), probably contributed
to the collision.
5. Collision <®=> 105 — Evidence estabucshing failuee to show coloeed
stack lights.
In a collision case Involvlng two steamers with tows, conflicting évi-
dence, including an admission by a member of the libeled steamer's crew
that one of her stack lights was not bumlng soon after the collision, and
^ssFor other cases see same topic & KEY-NUMBBR in aU Key-Numbered Dlgests & Indexes
262 F.— 1
2 262 FEDERAL REPORTER
testlmony that both stack lights were on the same electric circuit, etc.,
held to estabUsh that the libeled steamer's colored stack lights were not
bumlng at the tlme of the collision, as required by rule 6 of Rev. St. S
4233 (Comp. St § 7948).
Appeal f rom the District Court of the United States for the West-
ern District of Pennsylvania ; Charles P. Orr, Judge.
Libel by the Diamond Coal & Coke Company against the Steamboat
Duquesne; the Carnegie Steel Company, claimant. From a decree
dismissing the libel, the libellant appeals. Reversed, with directions.
Lowrie C. Barton, of Pittsburgh, Pa., for appellant.
Reed, Smith, Shaw & Beal aind John G. Frazer, ail of Pittsburgh,
Pa., for appellee.
Before BUFFINGTON and WOOLLEY, Circuit Judges, and
MORRIS, District Judge.
WOOLLEY, Circuit Judge. On the night of October 23, 1917,
the Steamboat "Duquesne" was bound down the Monongahela River
with a spike tow of seven heavily laden steel barges. Thèse barges
were placed ahead of the steamboat and were arranged in three tiers
of two barges each, with the remaining barge in front. The Steam-
boat "Monitor" with a tow of seven empty flats ahead was bound up
stream. The night was dark. Some rain had fallen and a rain fog
hung on the water. The river was about a thousand f eet wide. The
channel was about midway the river and parallel with the two shores.
Both steamboats with their tows held courses in or near the channel.
The "Duquesne" in descending the river had passed a bend and
had straightened out her course. When the tows of the two steam-
boats were from 200 to 500 yards apart, the "Monitor" sighted the
starboard light on the forward barge of the "Duquesne's" tow. Be-
ing the ascending steamer with the right imder the rule (Pilot Rules,
August, 1911) of selecting the passing manœuvre, the "Monitor"
promptly gave one blast of her whistle, indicating her purpose to
pass port to port, to which the "Duquesne" responded by an assenting
signal.
Both steamers moved their tows to starboard, but before the ma-
nœuvre had been completed both captains discovered that coUision
was imminent. Thereupon, both reversed their engines with the re-
suit that the tow of the "Monitor" cleared the tow of the "Duquesne,"
but the forward barge of the "Duquesne's" tow rammed the "Moni-
tor," causing her to sink and to sustain the damages for which this
libel was filed.
The District Court, finding no négligence on the part of the
"Duquesne," dismissed the libel. The libellant took this appeal.
The record discloses no pertinent question of law. The issue is
solely one of fact and raises the one question: Which steamer by
its négligence caused the collision ?
The évidence is quite sufficient to prove that the "Monitor". had ail
lights set and brightly buming. This évidence is reenforced by the
admission of the captain of the "Duquesne" that he saw the "Moni-
tor" a mile or more away and kept her in sight. It is also proved that
THE DUQUESNE <>
(262 F.)
the "Monitor" was not slow in sighting the "Duquesne's" tow, and
that immediately upon observing its lights, she gave a passing signal ;
and that, considered with référence to the proximity of the two tows,
their relative positions, and the brief time at her disposai, the "Moni-
tor" did not unwisely sélect the signal or negligently carry out the
manœuvre.
Thus acquitting the "Monitor" of négligence, we tum to the tes-
timony on which négligence is chargea to the "Duquesne." This
charge is made upon several grounds:
(1) In violating Rule VI of the supervising inspectors, promulgated
under authority of Section 4412 of the Revised Statutes, which re-
quires a steamer navigating a river at a short bend or point, where
from any cause a steamer approaching in the opposite direction can-
not be seen at a distance of 600 yards, to give a signal of one long
sound of the whistle as a notice to any steamer that may be ap-
proaching on the other side, and within half a mile of such bend or
point.
(2) In violating the Pilot Rules of August, 1911, with respect to
tow lights, which requires, when a barge is towed by a steamer ahead,
that it shall hâve a green light on the starboard bow and a red light
on the port bow.
(3) In violating the rule respecting steamer lights, presently to be
mentioned.
[1] We dispose of the first charge of négligence adversely to the
libellant, on the ground that the bend or point in the river which the
"Duquesne" was passing was not such as the rule contemplâtes. The
bend was not short at ail. It was sufficiently long and flat to enable
the "Duquesne" to pick up the "Monitor" and keep her continuously
in sight for a mile or more. Similarly, we dispose of the second
charge of négligence on a finding that both lights on the tow of the
"Duquesne" were properly set and burning.
The question of négligence résolves itself into this: Were the
lights on the "Duquesne" itself burning? Of thèse lights there
were two kinds: The guard and forecastle white lights customarily
used but not required by law, and the colored stack lights required
by Rule 6 of Section 4233 Revised Statutes (Comp. St. § 7948). This
rule provides that :
"River steamers navigating waters flowing into the Gulf of Mexico, and
their tributaries, shall carry the following lights, namely: One red light
on the outboard side of the port smokepipe, and one green light on the out-
hoard side of the starboard smokepipe. Such lights shall show both forward
and abeam on their respective sides."
[2, 3] Ail the lights with which we are now concemed were in-
candescent electric lights of ordinary candie power. There is much
conflict in the testimony as to whether the guard lights and fore-
castle lights of the "Duquesne" were burning just prior to the col-
lision, from which we find that the forecastle lights were not burn-
ing, though at least five of the ten guard lights (two on one side and
three on the other) were burning. But as thèse lights are not re-
quired by the rules and laws of navigation (though helpful, perhaps.
4 262 FEDERAL REPORTER
in disclosing a craft on which they are burning), they cannot be re-
garded as substitutes for lawful lights; neither can the fact that
some of them were burning exonerate the steamboat from négligence
in failing to hâve burning the lights required by law. Therefore, we
regard the issue whether the guard and forecastle lights on the
"Duquesne" were burning as of no conséquence if it be found that
her stack lights were not burning. If her stack lights were out, then
the "Duquesne" committed a positive breach of a statutory rule of
navigation, promulgated to prevent just such collisions as this one.
To escape the presumption of fault arising upon such a breach, she
was required, under familiar principles, to show, not that her failure
to obey the rule probably did not contribute to the disaster, but posi-
tively that it could not hâve done so. The Pennsylvania, 86 U. S.
(19 Wall.) 125, 136, 22 L. Ed. 148.
[4] The lights of the "Duquesne's" tow were low upon the water
and were, doubtless, long concealed by the river fog from the view
of the captain of the "Monitor." The guard lights of the "Duquesne"
were higher but not so high as the stack lights. Had the stack lighls
been burning, they probably could hâve been seen above the fog by
the "Monitor" in time to hâve prevented the collision. This infer-
ence may fairly be drawn from the fact that the captain of the
"Duquesne" saw the lights of the "Monitor" above the fog for at
least a mile. Therefore, as we regard this case, it turns at the last
on the issue of the "Duquesne's" stack lights.
[5] On "this issue it appears that no one on the "Monitor" saw
the stack lights of the "Duquesne" before the collision. Six witness-
es, officers and deck hands of the "Monitor," testified positively that
immediately after the collision and for a short time foUowing the
port stack light of the "Duquesne" was not burning. It is a per-
missible inference, based on testimony that the two' lights were on
the same circuit, that if the port stack light was out, the starboard
stack light also was out. Against this testimony one witness, the
captain of the "Duquesne," testified that he observed her stack lights
burning a mile and a half above the point of collision, and three wit-
nesses aboard the "Duquesne" testified that they saw the stack lights
burning shortly after the collision. None testified that the lights were
burning at the time of collision. If this were ail the testimony, it
would be another instance of the habit of opposing witnesses to
swear by their ship and we would hâve difRculty in deciding where
lay the truth. But in this case there was a circumstance which lends
force to the testimony of some of the witnesses and justifies the re-
jection of the testimony of others.
Immediately after the "Monitor" had sunk and her officers and
crew had crawled into the pilot house, which remained above the
water, the "Duquesne" moved down to within speaking distance. In
response to a request by the men for coal and clothes, the captain
of the "Duquesne" sent Anderson, the watch of the "Duquesne," over
to the "Monitor" in a yawl. While there, the captain of the "Moni-
tor" called Anderson's attention to the fact that there were no stack
lights on the "Duquesne." There foUowed conversation between the
THE DUQUESNE 5
(262 p.)
two about the absence of thèse lights. This conversation was within
the hearing of five witnesses whose attention was attracted by it and
whose gaze was thereby directed toward the "Duquesne's" stacks.
It was this conversation which aroused the attention of thèse witness-
es and caused them carefuUy to look for lights and which fixed in
their minds the recollection that, on looking, they saw none.
Contrary to usual expérience in such cases, Anderson, when called
to testify for the "Duquesne," admitted that the captain of the "Mon-
itor" had called his attention to the absence of stack lights on the
"Duquesne," and testified positively that the red stack light was not
burning. Being on the port side, he could not testify about the green
stack light because the stacks obstructed his view. After Anderson
returned to the "Duquesne," her port stack light came on.
On this testimony, very briefly recited, we think the issue of nég-
ligence in failing to keep the stack lights burning as required by law,
must be resolved against the respondent. As the respondent has not
sustained the burden of showing that this breach of statutory duty
could not hâve been the cause of the collision, the presumption, aris-
ing from the breach, that the collision was due to this fault, remains.
The Pennsylvania, 86 U. S. (19 Wall.) 125, 136, 22 L. Ed. 148; The
Teaser, 246 Fed. 219, 222, 158 C. C. A. 379 (C. C. A. 3d).
The decree below is, theref ore, reversed with the direction that the
action proceed in harmony with this opinion.
THE DUQUESNE.
MARTIN V. CARNEGIE STEEL 00.
(Circuit Court of Appeala, Thlrd Circuit. January 8, 1920.)
No, 2501.
Appeal from the District Court of the United States for the Western Dis-
trict of Pennsylvania ; Charles P. Orr, Judge.
Liibel by Emma L. Martin against the Carnegie Steel Company, owner of
the Steamboat Duquesne. From a decree dismissing the libel, libellant appeals.
Reyersed, with directions.
liowrie C. Barton, of Pittsburgh, Fa., for appellant.
Reed, Smith, Shaw & Beal, and John G. Frazer, ail of Pittsburgh, Pa., for
appellee.
Before BUFPINGTON and WOOLLEY, Circuit Judges, and MORRIS, Dis-
trict Judge.
WOOLLEY, Circuit Judge. Charles Martin, the englneer of the "Monitor,"
on watch at the time, lest his Ufe in the collision between the "Monitor" and
"Duquesne." His widow, Emma L. Martin, filed this libel in personam
against Carnegie Steel Company, owner of the Steamboat "Duquesne," to
recover damages for his death, charging négligence of that company's serv-
ants In causlng the collision. The District Court, flnding that the collision
was not due to thelr négligence, dismlssed the libel. Thereupon, the libellant
took this appeaL
The asslgnments of error are directed to the decree of dismissal and to the
flnding on which it was based. As we hâve reversed the decree on a similar
6 2G2 FEDERAL REPORTEE
flnding In the companlon case of Diamond Coal & Coke Co. v. Steamboat
"Duquesne," Oamegle Steel Co., 262 Fed. 1, — O. C. A. — , arlsing eut of
tlie same collision, we must reverse thls decree for tlie same reasons.
At the argument on appeal, the appellee raised a question as to the measure
of damages under Pennsylvanla statutes. As the District Court did not
reach the matter of damages, and, accordingly, made no ruling on the question,
we wish to make it clear that the only issue on which we now pass in dis-
posing of thls appeal la the one of negùgence trled by the EUstrlct Court and
determined by its decree.
The decree below Is reversed vrlth the direction to proceed in accordance
with this opinion.
DYE V. UNITED STATES.
(Circuit Court of Appeals, Fourth Circuit October 14, 1919.)
No. 1711.
1. CaeEIEBS <S=338 — INDIOTMENT FOE DISCEIMINATION NKED NOT DESCEIBB DK-
VICB USED.
In an indictment for violation of the provision of Hepbum Act (Comp.
St. § 8597), maklng It unlawful to grant any rebato or concession whereby,
"by any devlce whatever," any advantage is given or discrimination is
practiced In favor of a shipper, It is not necessary to describe the devlce
used.
2. Cabeiebs <g=5>38 — Evidence sufficient to sustain conviction fou dis-
crimination, IN violation of Intekstate Commerce Act.
Evidence held to sustain a conviction of défendant, who as agent for
a railroad company was in charge of distribution of cars between coal
mines, for discriminatlng in favor of one mine, although it also showed
that the discrimination was prlmarily for his own Personal profit, and was
without the request or knowledge of the mine owner.
3. Criminal iaw <S=»1173(4) — Qualification of eequested instruction
habmless.
Qualification of an Instruction, requested by défendant, held not preju-
dlcial error, in view of the évidence.
In Error to the District Court of the United States for the Southern
District of West Virginia, at Charleston; Benjamin F. Keller, Judge.
Criminal prosecution by the United States against I. K. Dye. Judg-
ment of conviction, and défendant brings error. Affirmed.
H. G. Kump, of Elkins, W. Va. (Conley & Johnson and Lilly & L,illy,
ail of Charleston, W. Va., on the brief), for plaintiflF in error
J. Stanley Payne, Sp. Asst. U. S. Atty., of Washiiigton, D. C. (Lon
H. Kelly, U. S. Atty., of Gassaway, W. Va., on the brief), for the Unit-
ed States.
Before KNAPP and WOODS, Circuit Judges, and WADDILL,
District Judge.
WOODS, Circuit Judge. The défendant was convicted on the first
and fifth counts of an indictment charging violation of the following
provision of the Elkins Act, as amended by the Hepburn Act (Comp.
St. § 8597):
" * • • And it shall be unlawful for any person, persons, or corporation
to ofifer, grant, or give, or to sollcit, accept, or receive any rebate, concession, or
discrimination in respect to the transportatlon of any property in Interstate or
£=>For otber cases see same toplc & KBY-NUMBEjR in ail Key-Numbered Dlgests & Indexe*
DTE V. UNITED STATES <
C262 F.)
foreign commerce by any common carrier subject to said act to regulate com-
merce and the acts amendatory thereof whereby any such property shall by any
device whatever be transported at a less rate than that named in the tariffs
publlshed and flled by such carrier, as is required by said act to regulate
commerce and the acts amendatory thereof, or whereby any other advantage
Is given or discrimination Is practiced. Every person or corporation, whether
carrier or shlpper, who shall knowingly offer, grant, or give, or solicit, ao-
cept, or receive any such rebates, concession, or discrimination shall be deem-
ed guilty of a misdemeanor." 32 Stat. 847 ; 34 Stat 584.
On the Une of the Coal & Coke Railway Company there are a num-
ber of West Virginia coal mines dépendent on that company for the
transportation of their product to customers in West Virginia and oth-
er States. In 1917 there was a car shortage. The Interstate Com-
merce Commission made a rule for the équitable pro rata distribution
of available cars among the mines according to their output.
The railway company made a rating of the mines, showing how many
cars each was entitled to receive according to this rule, without dis-
crimination against or in favor of any mine or shipper or consignée.
Governed by this rating, an officiai or employé of the railway made
a daily distribution of the available cars. Cars sent to the mines to be
loaded with coal for railroad fuel were not charged against the mines
on their allotment, but the remaining cars to be used for commercial
coal — coal sold to the trade — were allotted, and notice was given to
each mine of the per centum of the cars called for by its rating that
could be furnished. Thus the number of cars available to each mine
for commercial coal was ascertained. Since the price of commercial
coal was higher than fuel coal, it was to the advantage of each mine to
get as many cars for commercial coal as possible.
The charge of the first count of the indictment is that the défendant
was an agent and employé of the Coal & Coke Railway Company and
had charge of and supervision over the allotment and distribution of
cars to the several mines served by the railway company according
to their rating; that on April 18, 1917, when the Dorfee mine was
entitled to receive only 5 cars, 70 per cent, of its rating, for commercial
coal, the défendant by means of a device, knowingly allotted, distribut-
ed, and placed at the Dorfee mine 10 cars which were to be loaded with
commercial coal, and which were used for the shipment of commercial
coal; that on the same day the other mines mentioned in the indict-
ment standing on the same footing were allotted and received only
70 per cent, of their rating; that this transaction of the défendant was
an unlawful discrimination.
The fifth count of the indictment makes a similar charge of discrimi-
nation in favor of the Tumer mine and against other mines mentioned.
There was no merit in the motion to quash the indictment. The allé-
gation is directly made that the mines discriminated against asked for
ail the cars for commercial coal indicated by their rating and were fur-
nished only 70 per cent., while the Dorfee mine was furnished much
more than the number called for by the rating, and it necessarily fol-
lows that this was on its face a substantial discrimination.
[ 1 ] It was not necessary to describe the device by which the dis-
crimination was effected. In denouncing discrimination "by any de-
8 262 FEDERAL RMIPOETBB
vice" the statute does not mean that a device is necessary to the offense,
i>ut that if any device is used the courts are to look through it to the
real nature of the transaction. Armour Packing Co. v. United States,
209 U. S. 56, 85, 28 Sup. Ct. 428, 52 h. Ed. 681. For the same reason
there was no abuse of discrétion in refusing the motion for a bill of
particulars as to the nature of the device. Besides, the letters of the
défendant and other évidence show that the défendant could not hâve
failed to know the transactions to which the indictment related.
The position that the défendant was tried without having pleaded to
the indictment is based on a mistake of fact. The record shows that
the défendant did formally enter his plea of not guilty. He then mov-
ed to be allowed to withdraw his plea of not guilty and demand a bill
of particulars. The motion was refused in its entirety, and hence
the plea stood as originally made.
The errors assigned in the charge and in the admission and rejection
of testimony are to be considered in the light of the amendment of
1919 of section 269 of Judicial Code (Comp. St. Ann. Supp. 1919, §
1246) :
"On the hearing of any appeal, certlorarl, writ of error, or motion for a new
trial. In any case, civil or crlminal, the court shall give judgment after an
examinatiou of the entire record before the court, without regard to techni-
cal errors, defects, or exceptions which do not affect the substantlal rights of
the parties."
[2] The facts alleged in counts 1 and 5 of the indictment were prov-
ed beyond ail controversy. But by a motion for a directed verdict of
acquittai the défendant asked the trial court to hold that thèse facts
did not constitute an unlawful discrimination as charged in favor of
the Dorfee mine and against Buchanon River Coal & Coke Company
and other mining companies mentioned, because the govemment proved
additional facts showing that Dye himself, and not the Dorfee mine, got
the benefit of the unequal distribution of the cars. Thèse additional
facts were that the Dorfee mine in good faith received and loaded
the cars as fuel cars in fulfiUment of a contract to sell Dye himself
fuel coal, and by his direction consigned them to the Pennsylvania
Railroad Company; that at Elkins Dye had the cars reconsigned to
General Chemical Company at Marcus Hook, Pa., to which he had sold
the coal as commercial coal at a price about $1.10 a ton above the price
paid for it as fuel coal to the Dorfee mine. The argument is that the
discrimination was therefore in favor of Dye himself and not the
Dorfee mine against other mines mentioned.
The fallacy seems évident. Taking the cars from the supply avail-
able for distribution among the mines for commercial coal diminished
the allotment of the Buchanon Company and other mining companies
to their disadvantage. It is true that Dye received the main benefit of
this wrong, since he sold the coal as commercial coal when he had by
deceit bought it at a lower price as fuel coal. But the Dorfee mine also
received benefit from the wrong, though unwittingly, for it was enabled
to get cars and keep its mines in opération, and sell and ship the coal
for which the cars were used, presumably at a profit, although sold at
DYB V. UNITED STATES 9
C2t2 F.>
the price of fuel coal. Dye's appropriation of the chief benefit supplied
the motive. His pretense that the cars were for fuel coal, and his
written déniai to a complaining shipper that such transactions had taken
place, made évident his knowledge that he was violating the law. Sure-
ly the défendant could not be relieved of the guilt of this discrimination
in favor of the Dorfee mine, on the ground of variance between the
charge and the évidence, by proof that he clandestinely appropriated to
himself the main profit of the discrimination. On the contrary, the in-
ference that he discriminated for his own benefit necessarily implied
that there had been discrimination in favor of the Dorfee mine by
sending it an excess of cars as a condition précèdent to his reaping the
principal fruit of the discrimination.
But in addition to that proof of discrimination against other mines
or shippers as charged in the indictment would make out the offense,
even if the préférence to the Dorfee mine was used only as a means of
carrying out the unlawful scheme against the other mines without ac-
tuai benefit to the Dorfee mine. The purpose of Congress -was to eut
up by the roots every form of discrimination, favoritism, and in-
equality. Louisville & Nashville R. R. Co. v. Mottley, 219 U. S. 467,
478, 31 Sup. Ct. 265, 55 L. Ed. 297, 34 L. R. A. (N. S.) 671; New
Haven R. R. Co. v. Interstate Commerce Commission, 200 U. S. 361,
391, 26 Sup. Ct. 272, 50 h. Ed. 515 ; Armour Packing Co. v. United
States, 209 U. S. 56, 72, 28 Sup. Ct. 428, 52 L. Ed. 681 ; LouisviUe
& Nashville R. R. Co. v. Mottley, 219 U. S. 487, 496, 31 Sup. Ct. 265,
55 L. Ed. 297, 34 L. R. A. (N. S.) 671 ; United States v. Union Stock
Yard, 226 U. S. 286, 307, 33 Sup. Ct. 83, 57 L. Ed. 226.
It was further contended in support of the motion to direct a verdict
of acquittai that the defendant's acts alleged to be criminal were mère
administrative irregularities subject to investigation by the Interstate
Commerce Commission. The rule under which the cars were to be
distributed to the several mines was fair and équitable. The charge
and the proof were that the défendant intentionally misapplied this
rule so as to effect the illégal discrimination. This was not an admin-
istrative act, but a violation of the statute. Pennsylvania Railroad Co.
V. Puritan Coal Co., 237 U. S. 121, 35 Sup. Ct. 484, 59 L. Ed. 867.
There is nothing in the point that at the time of the offense Dye was
not the gênerai manager, the officer who usually had charge of the dis-
tribution of cars. He was proved to be the agent of the railway Com-
pany who actually directed the distribution.
[3] The défendant requested the following instruction:
"The jury are instructed that the offense of 'discrimination,' as charged in
this indictment, is the granting of a préférence to a shipper that is not grant-
ed to ail shippers in substantially the same class, whereby the shipper receivlng
the same enjoys an unjust advantage over sueh other shippers, and If the Jury
belleves from the évidence that the fuel coal contracts alleged to hâve been
secured by the défendant and accepted by certain coal mines on the Coal &
Coke Eailway, and the securlng of foreign empty cars for such coal, did not
work an injury or injustice to, or discrimination against, the owner of any
coal mine served by said railroad, then you should find that the placing of
sald cars did not constitute a discrimination as charged in the Indictment."
After reading this request to the jury the District Judge said:
10 262 FBDEBÂL BBFORTEK
"I thlnk, gentlemen, that whlle I Indlcated I would glve that Instruction, I
can only glye It In connection with an explanatlon, because the question Is
not necessarlly as to whether a mine was favored or dlscrimlnated against.
The beginnlng of the instruction Illustrâtes what I want to say ; It is 'the
grantlng of a préférence to a shipper' ; it need not necessarlly be in favor of
or against a mine, and the contention of the govemment In this case was
that the défendant himself was a shipper, and that the discrimination favored
hlm. Of course, that question Is one to be determlned under ail the évidence
in the case ; but it Is not necessary that a spedflc mine should be discrimiuat-
ed in favor of or against, if what was done dlscriminated in favor of a
shipper to the détriment of other shippers or other mines."
Error is charged in refusing to give this request as presented, and
in qualifying it by the language quoted. The ground of the assign-
aient is that the indictment charged discrimination against particular
coal companies therein mentioned in favor of the Dorfee mine, where-
as the instruction given allowed the jury to convict if they reached
the conclusion that the défendant had discriminated against the mines
mentioned in his own behalf . Technically, the assignment is well tak-
en; but there was no évidence upon which the distinction contended
for by appellant could be founded.
The discrimination proved in favor of Dye himself, and against
the particular coal companies mentioned, was linked by the proof
inseparably with discrimination in favor of the Dorfee mine. They
were parts of one transaction. The same évidence proved both offens-
es with equal certainty. For this reason the error in charging that de-
fendant might be convicted if he had discriminated in his own favor
was unsubstantial.
The évidence showing discrimination in intrastate shipments and in
shipments other than those charged in the indictment was admissible,
because it tended to prove a deUberate intent, and thus disprove def end-
ant's claim that the discrimination charged was given only temporarily,
for convenience of administration, with the intent to correct it.
There was no error in excluding an order of Morrow, superinten-
dent of transportation, directing that coal shipped as fuel coal and re-
consigned as commercial coal should be charged against the mine "from
which the car originated." The proof shows conclusively that the de-
fendant, not only had no purpose to charge the cars back to the Dorfee
mine, but that he had placed himself in a position where he could not
do so.
The officiai car distribution sheets of the railroad were admissible
to prove, not that the cars had been actually used as commercial cars
by defendant's order, but that they were not so charged in the officiai
distribution.
It is not necessary to pass on the admissibility of the wheel reports
made by conductors showing delivery of cars, for the reason that the
fuUy verified mine reports showed the delivery.
The other requests to charge ref used by the court were not argued in
the brief and require no discussion, since they were covered by the gên-
erai charge, or are clearly unsound, or are not responsive to the issues.
Even if there had been distinct errors in the admission or rejection
iURYLAND DEEDGIKG & C. CO. V. STATE OF MAEÏIAKD H
C262 F.)
of testimony, or in the charge, tliey would not justify reversai. The
guilt of the défendant was so conchisively proved that his acquittai
would hâve been a clear miscarriage of justice.
Affinned.
MAKYIiAND DRHDGING & CONTRACTING C». V. STATE OF MARY-
LAND, to Use of BODDIB, et al.
STATE OF MARYIiAND, to Use of BODDIB, v. BALTIMOBE & O. B.
00. et aL
(Circuit Court of Appeals, Fourth Circuit October 22, 1919.)
Nos. 1714, 1T15.
1. ShIPPINO <g=s84(l) — NEGLIGENCE CAUSING DEATH OF STBVEDOEE.
A dredge, working in a slip, with two Unes on eaeli slde to the plers,
dropplng and tlghtening altemately, as she worked, which allowed oae
line to sag while a launcli loaded with stevedores was passing, sweeping
off a stevedore, who was drowned, Iveld in fault, It appearing that the
launch signaled and would hâve passed safely, if the line had been held
taut, as customary, but through négligence was not heard nor seen; and
the master of the launch also held in fault for proceeding, knowing the
danger, and wlthout Indication that hls signal was heard and would be
heeded.
2. Cakkiebs <g=240 — Maotee and servant <&=j315 — Woekmen being tbans-
POETED NOT "PASSENQHES"; NEGLIGENCE OF INDEPENDENT CONTBACTOB
TEANSPOBTINO employés CHAEQEABLB TO THEIE EMPLOTEB.
Workmen being transported to thelr place of work by the master at
his expense and in thelr work time, are not "passengers," but employés,
for whose safety the master must exercise reasonable care ; and he can-
not relieve hlmself of this responslbllity by employing an Independent
contractor for their transportation.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Passenger.)
3. Mastee and servant <g=5l94— Stevbdores teanspoetkd to theie woek not
FEIiOW SEBVANTS OF MASTEE DP VE8SBL.
Where an employer of stevedores, under agreement to transport them
to their work, contracted with the owner of a launch to carry them, the
master of the launch was not their fellow servant, and for his négligence,
eontributlng to the death of a stevedore, the employer is llable.
Appeals from the District Court of the United States for the Dis-
trict of Maryland, at Baltimore; John C. Rose, Judge.
Suit by the State of Maryland, to the use of Louise Boddie, widow
of William Boddie, deceased, against the Baltimore & Ohio Rail-
road Company and others. Decree for libelant against respondent
Maryland Dredging & Contracting Company, and it appeals. Modi-
fied.
For opinion below, see 254 Fed. 720.
George Forbes, of BaUimore, Md. (Joseph N. Ulman and Knapp,
Ulman & Tucker, ail of Baltimore, Md., on the brief), for Maryland
Dredging & Contracting Co.
Benjamin H. McKindless, of Baltimore, Md. (Charles W. Main,
of Baltimore, Md., on the brief), for State of Maryland, to the use of
Louise Boddie and others.
(S=»For other cases see same topic & KBY-NUUBIia lu ail Key-Numbered Dlgests é Indexée
12 262 FEDERAL REPOBTEB
Frank Gosnell, of Baltimore, Md. (Marbury, Gosnell & Williams
and Jesse Slingluff, âll of Baltimore, Md., on the brief), for Patapsco
Ship Ceiling & Stevedore Co.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
WOODS, Circuit Judge. [1] In the summer of 1917, the dredge
Chesapeake was working in a slip in Baltimore harbor. The Balti-
more & Ohio Railroad Company owned the land adjacent to the slip,
and had employed for the work the Empire Engineering Company,
and it in tum had employed the Maryland Dredging & Contracting
Company, owner of the Chesapeake. The dredge was made fast to
the piers by two lines on each side. When it was not in opération,
thèse lines were sufficiently taut and elevated above the water for a
launch to pass under. When the dredge was operating, the lines
were alternately slack and taut as the bucket of the dredge went up
and down. Launches frequently passed the dredge, going under
thèse cables when they were taut. The Patapsco Ship Ceiling &
Stevedore Company in the course of business carried its workmen
from place to place in the harbor. For this purpose they sometimes
used their own launches, and sometimes hired the launches of other
owners. By contract the employment and pay of the workmen com-
menced from the time they embarked to be carried to the place of
work.
On August 25, 1917, the Stevedore Company contracted with the
owner of the launch Rosa to carry a number of its workmen from
the pier adjacent to the slip in which the Chesapeake was dredging
to the place where they were to work. The Rosa having taken on
the stevedores undertook to pass under the cables of the Chesapeake.
While passing one of the cables fell on the launch and knocked off
the stevedore, William Boddie, who was sitting in the stern. Boddie
was drowned, and the state of Maryland filed this libel for the bene-
fit of Louise Bcxidie, widow of William Boddie, against the Balti-
more & Ohio Railroad Company, the Empire Engineering Company,
Maryland Dredging & Contracting Company, and the Patapsco Ship
Ceiling & Stevedore Company, alleging that his death was due to
the négligence of ail the respondents. The owner of the launch was
not made a party. The District Court held (1) that the dredge was
at fault and liable; (2) that since the Dredging Company was abun-
dantly solvent it was unnecessary to décide whether the Baltimore &
Ohio Railroad Company and the Engineering Company were ex-
empt from liability on the ground that the Dredging Company was
an independent contractor ; (3) that even if the master of the launch
was at fault, and its owner liable, no decree could be entered against
him because he was not a party to the action ; (4) that the Stevedore
Company could not be held liable for any négligence in the naviga-
tion of the launch because the owner of the launch was an inde-
pendent contractor.
We think the first finding is well supported by the évidence. The
dredge cannot claim, without limitation, the privilèges of a vessel
resting at anchor. True, the vessel itself was stationary, but it was
MARTLAND DEEDGINa & 0. CO. V. STATE OP MARTLAND 13
(262 P.)
at work with movable lines stretched over the water under which
its master knew launches passed from time to time; and he knew,
also, that for their safe passage watchfulness and care were re-
quired to heed the signal of approach, to keep taut the Une under
which a launch was about to pass, and to wam any approaching
launch not to attempt to pass under a Une when he was about to
slacken it. On conflicting évidence, the District Judge held that the
Rosa did give a blast of her whistle to indicate her intention to pass
under the lines then taut; that the master of the dredge or the en-
gineer set to watch on the stern should hâve heard and heeded the
signal; that the watch was négligent in not seeing the launch, es-
pecially after her signal, and either waming her not to try to pass
or holding the lines taut until she passed. Thèse conclusions having
strong support in the testimony of witnesses before the court are not
subject to review hère.
We think the District Judge was right in the opinion he intimated
that the navigator of the launch was also négligent. The master of
the launch knew the great danger of attempting to pass under the
lines when the dredge was in opération, and he knew, also, that if
not then in opération it might begin to operate at any moment. Al-
though his beat was loaded with men, ail of whose lives would be im-
per iled if the lines fell while he was passing, he subjected them to
the hazard of the passage, on the chance that the master or watchman
on the dredge had heard and would heed his signal, although he had
had no response to it and no évidence of assent to his passage. Thiî.
was négligence for which we can find no excuse.
[2] Some authorities hold that employés being transported to their
place of work in pursuance of a contract with the master, the trans-
portation being a part of their compensation, are passengers. Klinck
v. Chicago City Ry. Co., 262 111. 280, 104 N. E. 669, 52 L. R. A.
(N. S.) 76, Ann. Cas. 1915B, 177, and authorities cited; note 19 L.
R. A. (N. S.) 718. But by the great weight of reason and authority
such workmen, in course of transportation, sustain the relation of
employés for whose safety the master must exercise reasonable care.
Northern Pacific R. R. Co. v. Peterson, 162 U. S. 346, 355, 16 Sup.
Ct. 843, 40 L. Ed. 994; Martin v. Atchison, Topeka, etc., R. R. Co.,
166 U. S. 399, 17 Sup. Ct. 603, 41 L. Ed. 1051 ; note 12 L. R. A.
(N. S.) 856.
We are unable to agrée that the Stevedore Company can escape the
conséquences of the négligence of the master of the launch on the
ground that its owner was employed as an independent contractor.
Doubtless the owner of the boat was an independent contractor as be-
tween himself and the Stevedore Company, and in his relation to the
gênerai public. For any négligence the conséquences of which would
fall on the Stevedore Company he would be liable over to the Steve-
dore Company. For any in jury inflicted by his négligence on the out-
side public, such for example as an injury to another boat by collision,
the owner of the launch as an independent contractor would be liable to
the exemption of the Stevedore Company. Sturgis v. Boyer et al.,
24 How. 110, 16 L. Ed. 591; The Eugène F. Moran, 212 U. S. 466,
14 262 FEDKRAL REPOBTEB
29 Sup. Ct. 339, 53 L. Ed. 600; Casement v. Brown, 148 U. S. 615, 13
Sup. Ct. 672, Z7 L. Ed. 582; Wilmington Railway Bridge Co. v.
Franco-Ottoman Shipping Co., 259 Fed. 166, C. C. A. , Fourth
Circuit, filed January 7, 1919.
But the Stevedore Company having contracted to convey its em-
ployés to their work, its obligation to use reasonable care in the car-
nage is implied as a part of the contract; and it cannot shift this
obligation to another by an independent contract to which the em-
ployés were not parties and to which they did not assent. Water Co. v.
Ware, 16 WaU. 566, 21 L. Ed. 485; City & S. Ry. Co. v. Moores, 80
Md. 348, 30 Atl. 643, 45 Am. St. Rep. 345 ; Atlanta & F. R. Co.
V. Kimberly, 87 Ga. 161, 13 S. E. 277, 27 Am. St. Rep. 231 ; John
;J. Rade! Co. v. Borches, 147 Ky. 506, 145 S. W. 155, 39 L. R. A.
(N. S.) 227; note 66 L. R. A. 148, 150; Hussey v. Franey, 205 Mass.
413, 91 N. E. 391, 137 Am. St. Rep. 460; 14 R. C. L. 99. There is
no évidence that Boddie or any other employé consented to look to
the owner of the launch for the saf ety of their transportation.
[3] The master of the launch whose négligence contributed to the
death of Boddie was not a fellow servant of the workmen on the
launch. In New England R. Co. v. Conroy, 175 U. S. 323, 20 Sup.
Ct. 85, 44 L. Ed. 181, overruling Chicago, etc., R. Co. v. Ross, 112
U. S. Z77, 5 Sup. Ct. 184, 28 L. Ed. 787, the Suprême Court held the
conductor of a freight train to be a fellow servant of the train crew.
There has been much diiïerence of judicial opinion on the question
whether under the gênerai admiralty law the master of a vessel is a
fellow servant of the crew, or the représentative of the owner for
whose négligence resulting in personsil injury to a seaman the owner
would be liable. The Osceola, 189 U. S. 158, 23 Sup. Ct. 483, 47 L.
Ed. 760; The Hamilton, 207 U. S. 398, 28 Sup. Ct. 133, 52 L. Ed.
264; Gabrielson v. Waydell, 135 N. Y. 1, 31 N. E. 969, 17 L. R. A.
228, 31 Am. St. Rep. 793 ; Thompson v. Hermann, 47 Wis. 602, 3 N.
W. 579, 32 Am. Rep. 784; Scarff v. Metcalf, 107 N. Y. 211, 13 N. E.
796, 1 Am. St. Rep. 807; notes 31 Am. St. Rep. 807, and 21 Ann.
Cas. 110.
But the question was settled by the following statute:
"In any suit to recover damages for any injury sustalned on board vessel
or In Its service seamen haying command shall not be held to be fellow
servants with those under their authority.". Act March 4, 1915, e. 153, § 20, 38
Stat 1185 (Comp. St. § 8337a).
Hence, even if the launch had been the property of the Stevedore
Company and the master its employé he would hâve been its repré-
sentative, and for his négligence it would be liable to the workmen it
had contracted to transport.
But, even if that were not true, Boddie and the other workmen were
not fellow servants of the servant of one with whom the Stevedore
Company had contracted to perform for it its contract obligation for
their safe transportation. It chose to displace its own servants with the
servants of another master, and it cannot be heard to say that the
servant of that other over whom it had no control was a fellow servant
of its own workmen. 18 R. C. E. 762, and cases cited; Bernheimer
EOWE 7. DBOHEN 15
C262 F.)
V. Baker, 108 Md. 551, 70 Atl. 91, 129 Am. St. Rep. 458; City & S.
Ry. Co. V. Moores, 80 Md. 348, 30 Atl. 643, 45 Am. St. Rep. 345 ;
Charron v. Northwestern Fuel Ce, 149 Wis. 240, 134 N. W. 1048, 49
L. R. A. (N. S.) 162, Ann. Cas. 1913C, 939.
The resuit is that the owner of the launch is not a necessary party,
and that the Stevedore Company is liable equally with the Dredging
Company for the damages found by the District Court. A decree
will be entered, so modifying the decree of the District Court.
Modified.
ROWE V. DROHEN et nx. •
(Circuit Court of Appeals, Second Circuit. November 26, 1919.)
No. 5.
HUSBAND AND WITE i©=149(4) — PeOPEETY BESULTINa FBOU WIFE'b BUSINESS
NOT SUBJECT TO HUSBAND's CBEiDITORS.
Where, after a husband was deeply Indébted and tnsolvent, a wtCe on
her own capital entered business and acquired property, the spouses can-
not be treated as partners, and the profits of the business subjected to
clalms of the husband's creditors, though he assisted In the business and
at times spoke of It as his ; the business being that of the wlfe, who fur-
nlshed the capital.
Rogers, Circuit Judge, dissentlng.
Appeal from the District Court of the United States fof the West-
ern District of New York.
Bill of Mûrie L. Rowe, as trustée of James L. Drohen, bankrupt,
against James L. Drohen and Mabel R. Drohen, his wife. From a de-
cree dismissing the bill (245 Fed. 684), complainant appeals. Affirmed.
Herman J. Westwood, of New York City, and Nelson J. Palmer, of
Dunkirk, N. Y. (Mûrie L. Rowe, of Dunkirk, N. Y., and Louis G.
Monroe, of Fredonia, N. Y., of counsel), for appellant.
Nugent & Heffernan and Warner & Woodin, ail of Dunkirk, N.
Y. (T. P. Heffernan, of Dunkirk, N. Y., of counsel), for appellees.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
WARD, Circuit Judge. March 1, 1916, James L. Drohen was ad-
judicated a bankrupt on his own pétition, and on September 15 his
trustée, Rowe, filed a bill in equity against him and his wife under
section 70e of the Bankruptcy Act (Comp. St. § 9654), praying that they
might be required to convey to him certain pièces of real estate in the
city of Dunkirk, N. Y., standing in the name of Mrs. Drohen, the
leases in his and her names of certain moving picture theaters, to-
gether with their furniture and equipment, also a balance of account
in the Merchants' National Bank of Dunkirk in the name of Mrs. J. L.
Drohen, ail of which property the plaintiff charged was acquired out
of the proceeds of J. L. Drohen's business and fraudulently transfer-
red to Mrs. Drohen or purchased in her name for the purpose of
hindering, delaying, and defrauding his creditors. Judge Hazel dis-
<g=iFor other cases Bee same topic & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexes
•Certiorarl denled 261 U. S, — , 40 Sup. Ct. 396, 64 L. Ed. — .
16 262 FEDERAL REPORTER
missed the bill, and his opinion is reported in 245 Fed. 684. The
plaintiff's counsel states his theory of the situation as f oUows :
"The eomplainant now feels that It bas justifled the statement, made earlier
in the brief, that in the latter part of December, 1906, or early in 1907, whiie
the Dunkirk Theater was in contemplation, or about the tlme the parties were
gettlng ready to open It, the two défendants entered Into the fraudulent and
uneonscionable agreement or understanding that. If the venture should prove
a success, they would both déclare that the business was hers, and point to
the bank account as proof, while, if it tumed out a failure, they would both
assert that the venture was his, and point to the lease and the contracts he
had made as évidence thereof ; the resuit of which would be that, if it should
succeed, success should inure to thelr beneflt through her apparent ownership,
while, if it should fail, credltors on the exeeutory agreements or his owu
future creditors might seek in vain for thelr money, for, to use Drohen's own
language. In a similar case later, where the venture dld faîl, 'I hâve a large
judgment against me.' "
The bill allèges that on the Ist day of December, 1906, and for some
time previous thereto, James L,. Drohen was insolvent and at no
time thereafter had any property whatever, unless that claimed in the
bill belonged to him. Furthermore the plaintiff concèdes that ail of
the property so claimed was the direct resuit of the success of a little
moving picture show called the Bijou Theater opened in Dunkirk in
February, 1907.
In March, 1906, Mrs. Drohen, her husband, and her mother lived
in a small house inherited by Mrs. Drohen and her mother from her
father. March 31 of that year Mrs. Drohen bought a small additional
property, 414 Central avenue, paying $500 down, lent her by a warm
Personal friend, and securing the balance of the purchase money by
mortgage. What property there was in the family at that time belonged
to her, and the plaintiff does not contend that James L. Drohen had
any interest whatever in thèse premises. In 1905 James L,. Drohen
was being sued for infringement of a patent, and April 23, 1906, an
interlocutory decree was entered against him on the merits, which
ripened in January, 1910, into a final decree for some $10,000.
In 1906 Mrs. Drohen opened a little notion store in the Central av-
enue house, and, and while engaged in that business her attention was
attracted to a moving picture show. Concluding that this would be a
good business venture, she sold out her stock in trade, and December
12, 1906, opened a bank account in the Merchants' National Bank of
Dunkirk in the name of Mrs. J. L,. Drohen, with a crédit of $300 given
to her personally by the bank, and in February, 1907, started the Bijou
Theater in a vacant store, 303 Lion street. Subsequently, in 1909, she
opened another little moving picture theater in the neighboring town
of Silver Creek, where she employed a manager named Geitner, and
in 1910 she built a larger theater in Dunkirk, known as the Drohen
Theater.
During the whole of this period James L. Drohen managed the the-
aters, made some leases and contracts in his own name, and often
spoke and acted as if the business were his own. While the conduct
of the défendants during this period of 10 years was sometimes more
consistent with ownership in James L. Drohen, and sometimes with
ownership in his wife, the plaintiff's theory does not commend itself
EOWE V. DEOHEN IT
(262 F.)
to US at ail. To state in détail ail the particulars and weigh the évi-
dence would make an interminable opinion. Suffice it to say that in the
small town of Dunkirk it could not but be perfectly apparent to every
one that ail the property hère involved was the resuit of thèse moving
picture enterprises. Whether the business failed or succeeded, the un-
paid creditors of the business would look to thèse properties for pay-
ment. The creditors existing at the beginning of the business in
1906 were James L. Drohen's and they were, in view of this mod-
erate enterprise, of considérable amount. If it was intended to hinder,
delay, or defraud creditors, thèse are the creditors who would hâve
been considered. As against them it would hâve been more natural
to put the bank account in the name of Mabel R. Drohen than in that of
Mrs. J. L. Drohen, and Drohen could hâve drawn checks on such an
account under authority from Mrs. Drohen. It would hâve been.still
more natural to let her sign the checks, as she might well hâve donc,
only about 3,000 checks having been drawn in about 10 years. More-
over as to such creditors he would hâve been careful not to speak of
it as his, or to contract in his own name. Everything was done for
a long time after the business was obviously a success openly and
with such inconsistencies as preclude a premeditated purpose to de-
fraud. Just such inconsistencies are what might be expected in deal-
ings between husband and wife, and they rebut any inference of the
calculated conspiracy which the plaintiff suggests. Schreyer v. Scott,
134 U. S. 405, 10 Sup. Ct. 575, 33 L. Ed. 955.
The real question is, With whose capital was this successful séries
of adventures started? because their profits belong to the owner of
that capital. The évidence is quite clear that this capital was Mrs.
Drohen's, and though the success was largely due to her husband's
management and skill, her right to the profits was in no way afïected by
that fact. Aldridge v. Muirhead, 101 U. S. 397, 25 L. Ed. 1013 ; Mer-
chant v. Bunnell, *42 N. Y. 539. It would be quite natural that, in
managing, he would often act and speak as if he owned the business.
We should not expect to find formai agreements to be made and the
usual business précautions to be taken between husband and wife. If
the conduct of the parties is consistent with honesty, we should adopt
that theory, rather than the very artificial conspiracy which the plain-
tiff suggests. The conclusion of the trial judge, who saw and heard
the witnesses, is entitled to great weight in an appellate court, and we
are entirely satisfîed with it.
The decree is affirmed.
HOUGH, Circuit Judge (concurring). That plaintiflf has not proved
"the fraudulent and unconscionable agreement" adverted to in the
opinion of WARD, J., I agrée. There was no definite plan or meeting
of minds, except that which customarily springs from matrimony — i. e.,
an agreement to work together.
In 1906 the husband was deep in debt and determined not to pay,
wherefore the common American habit of keeping whatever flowed
into the family coflfer in the husband's name was deliberately changed
for the plan of keeping everything in the wife's name. But the hus-
262 F.— 2
18 262 FEDERAL BEPOETEE
band transferred nothing to his wife, because he then had nothing
worth mentioning to transfer.
The évidence shows only the practice, so well known in this country,
of the man "doing business in his wife's name," i. e., making the wife
owner of the fruits of the debtor husband's labor, in considération o£
support and protection. To be sure the measure of support is usually
(as hère) what the husband takes, and the protection is only required
(as hère) against old creditors, but the plan is as yet, I think, lawful in
this country.
We cannot treat husband and wife (as such) as partners, and per-
mit the creditors of one to demand an accounting ; and rarely does the
married pair enter into that formai relation, for to do so (assuming
its possibility) would usually defeat the avowed object of both, which
is ta shield the husband behind the wife. This may, I think, be done
as to earnings after the shield is erected.
It is plain enough that this Husband often spoke of the business of
Mrs. Drohen as "his," and boasted of "his" success. But the évidence
falls far short of proving "reputed ownership," even if that doctrine
obtained in the United States — which, however, is not the case.
For thèse reasons, I concur in affirming the decree.
ROGERS, Circuit Judge (dissenting). I do not concur in the con-
clusion which my Associates hâve reached. The trustée in bankruptcy
of James L. Drohen is, in my opinion, entitled to make available to
the creditors certain assets which stand in the name of the bankrupt's
wife.
The claim is that the wife in 1907 began the moving picture business
in the Bijou Theater in Dunkirk in December, 1906, and that her hus-
band acted as her agent in its management. The husband at that time
was insolvent; a judgment having been entered against him on April
23, 1906, in the sum of $10,723.30, which still remains wholly unpaid.
In addition to that indebtedness, he was liable on a bond dated July 12,
1904, and given to the Title Guaranty & Trust Company, upon which
judgment has since been entered in the sum of $17,321.02, upon which
judgment he has paid nothing. According to the testimony of the
husband, the wife had not been engaged in any business of any kind
prior to entering upon the moving picture business in the Bijou Thea-
ter. He also testified that his wife had no property of any kind at
that time, except her interest in the house where they were living. The
house belonged to his wife and mother-in-Iaw, and was sold subse-
quently for $2,500 or $3,000.
A week after the judgment for $10,723.30 was entered the husband,
on April 30, 1906, closed the account which he had always kept in
the Merchants* National Bank of Dunkirk ; and on December 12, 1906,
an account was opened in the same bank in the name of the wife. It
is somewhat significant that it was not opened in the name of Mabel R.
Drohen, nor in that of M. R. Drohen, but in that of Mrs. J. L. Drohen.
Prior to that time she had never had a bank account. It does not
appear that she ever drew a single check against that account. Sôme
3,000 checks were before the court below, and every one of them was
EOWE V. DROHEN 19
(2S2 P.>
signed in the husband's handwriting. The profits realized in the mov-
ing picture business were ail deposited to the crédit of this account.
The record discloses that the husband drew checks against this account
to pay for his lodge dues as well as for his clothing, and to pay the
family doctor's bills, and the bills for groceries, méats, coal, gas, elec-
tricity, and other family expenses. He purchased with funds drawn
from his wife's bank account an automobile, and in applying to the
secretary of state for its registration and for renewals of that registra-
tion he had in 1914, 1915, and 1916, three times described himself as
owner and swore to it. In other words, he exercised the same domin-
ion over the bank account of his wife that he had exercised over his
own. While the proceeds of the business were deposited to her crédit,
the liabilities stood against him. The lease of the Bijou Theater ran
to him as lessee, and the contracts for electric current for the theater
and other supplies, as well as with the employés, were made in his
name. As late as 1916 he gave his note for $5,000 to the Goodman
Piano Company of Cleveland, Ohio, for a fotoplayer No. 40, which
was to be used in the theater. The reserve seat tickets issued for ad-
mission to reserved seats in the Drohen Theater had the following
printed thereon:
"Theater ticket. Drohen Theater, James Drohen, Owner and Manager."
Frorii the time the Drohen Theater was opened in 1910 Mrs. Dro-
hen handled ail thèse tickets. She testified she did not know whether
she ordered them printed, or whether he did, but said, if he ordered
them, she knew ail about it. The record shows that there was no agree-
ment on the part of the wife to pay to the husband any salary for his
services, and that there was no accounting to her for any moneys he
saw fit to draw from her bank account. The Bijou business having
proved a success, a second theater, called the Drohen Theater, was
opened in Dunkirk, and la ter another in Silver Creek, and still an-
other in Jamestown. The leases in thèse enterprises ran to the hus-
band as the party of the second part, and contracts were made as be-
fore in his name, and the proceeds realized from the theater enter-
prises were deposited in the wife's account.
I do not accept the theory that the husband was simply the wife's
agent. The record discloses a conversation between Mrs. Drohen and
a third party, in which Mrs. Drohen objected to something Drohen
was thinking of doing in the business, and Mrs. Drohen remarked that
she wished Drohen would not do it, but it would not do her any good
to say anything, as he would do as he wanted to anyway. The rea-
son why he did as he wanted, rather than as she wished, is disclosed in
another conversation between Drohen himself and a contractor, who
was making certain altérations in one of the theaters, in which Drohen
said that he had to do business in his wife's name, because he did not
dare to hâve anything in his own name. That the business was his,
and that he carried it on in his wife's name, explains everything.
But the understanding that the business was to be carried on in the
wife's name was not always consistently carried out, although the
proceeds of the business were always consistently placed to her crédit
20 262 FEDERAL REPOETER
in the bank. The Jamestown theater was not a success, and the wife
testified that that was his venture, and that she had nothing to do with
it, although she admitted that the checks to cover running expenses
were paid out of her account. When Drohen found that that particular
venture was not a success, he wrote the agent representing the lessor,
"I am sorry to say that I am busted, and cannot pay the rent" of the
theater any more. The resuit of those business opérations carried on
by the husband in the wife's name, and into which she had little or
nothing of money or expérience to put at the beginning, may be seen in
the f ollowing excerpt f rom her testimony :
"I own at the présent time the following pièces of real estate: The Drohen
theater, and the Blood lot. The house and lot on Fourth and Eagle streets
my mother and I own. Those are the only pièces of real estate I own. In
addition to that I hâve the fixtures and Personal property at the Bijou The-
ater, the flxtures and Personal equlpment at the Drohen, one-quarter interest
in the equlpment, lease, and fixtures of the Silver Creek theater, and tlion
such liousehold goods as I hâve. I hâve no other property besldes that, which
I recall. I also hâve a $500 certifieate, or a certlficate calling for $500 capital
stock In the Mann Company. I bought that. It was In my name. That was
bought out of the proeeeds of the moving picture show ventures that I epoke
Ofv"
What Drohen himself thought about it appears from what he said
to Judge Fisher when he was taking, in his own name, the lease of the
Jamestown theater. He stated:
"That he owned the new Drohen Theater in Dunklrk, free of Ineumbrances,
in his own name ; that he owned the Bijou Theater in Dunkirk, and the Bijou
Theater in Silver Creek, ail In his own name, with no Judgments against
hlm ; and that he was worth over $40,000."
It is said that statements made by the husband, and not known by
or assented to by the wife, are not binding upon her. They are to be
considered, however, in connection with ail the circumstances of the
case, and if the testimony shows that husband and wife were parties
to an unconscionable and fraudulent agreement or understanding
that they should engage in the moving picture business under such con-
ditions that if the venture should prove a success they should be in a
position to say that the business was hers, as shown by her bank ac-
count, and if it turned out a failure to say that the venture was his,
as shown by the leases and the contracts, then his acts and déclara-
tions during the pendency of the illégal enterprise, even if made in her
absence, affect them both. This being in brief outline the facts disclosed
by the testimony, what is the law that is applicable to them ?
Do the facts of the case at bar show good faith on the part of Dro-
hen and his wife, and that he acted really in what was done simply
as her agent, or was he in fact a principal? In answering that ques-
tion it is to be kept in mind that direct évidence is not necessary to
prove fraud, but circumstantial évidence is sufficient. That principle
of law is well settled. Beardsley v. Duntley, 69 N. Y. 577; Mon-
tréal River Lumber Co. v. Mihills, 80 Wis. 540, 50 N. W. 507; Wool-
enslagel v. Runals, 76 Mich. 545, 43 N. W. 454; Trimble v. Reid, 97
Ky. 713, 31 S. W. 861 ; Bank of North America v. Sturdy, 7 R. I.
109; Bronson v. Vaughn, 44 W. Va. 406, 29 S. E. 1022; Grier v.
ROWE V. DROHEN 21
(262 F.>
Dehan, 5 Houst. (Del.) 401 ; Granrud v. Rea, 24 Tex. Civ. App. 299,
S9 S. W. 841. In Beuerlien v. O'Leary, 149 N. Y. 33, 38, 43 N. E. 417,
418, the New York Court of Appeals déclares that fraud "can seldom
be proved by direct évidence." In Kaine v. Weigley, 22 Pa. 183, the
court, speaking through Chief Justice Black, says that —
"Wlien creditors are about to be cheated, It Is veiy uncommon for the
perpetrators to proclaim their purposc, and call In witnesses to see it done.
A resort to presumptive évidence, tlierefore, becouies absolutely necessary to
protect the rigbts of honest men froni this as from other invasions."
And in Montgomery Web. Co. v. Dienelt, 133 Pa. 585, 19 Atl. 428, 19
Am. St. Rep. 663, the court, speaking through Chief justice Mitchell
and criticising the charge of a trial judge, comments as follows :
"But the substantial defect of the charge is in Its treatment of the Items
of évidence, one by one, without at any time directing the view of the jury
to their united force. There probably never was a case of circumstantlal
évidence that could not be blown to the winds by taking up each item sep-
arately, and dismissing it with the conclusion that It does not prove the case,
The cumulative force of many separate matters, each perhaps slight, as in the
familiar bundle of twigs, constitutes the strength of circumstantlal proof."
The property of a debtor belongs to his creditors, and he cannot
transfer or conceal it with a view of hindering, delaying, or defraud-
ing them. But a distinction exists between property and services. It
may be conceded that a man's services, time, talents, and industry are
his own, to use or not to use as he sees fit. The law may compel him
to give up his property for the payment of his debts, but it may be
conceded that it does not compel him to employ his time or talents for
the benefit of his creditors.
At common law a married woman could not engage in trade or busi-
ness in her own name for her personal profit. The reason was that
she could make no contracts and her earnings belonged to her husband.
The law bas been changed by statute in this country and in England,
and for years a married woman in the state of New York, where Dro-
hen and his wife resided, has been expressly authorized by statute to
engage in trade or business as if unmarried. Bodine v. Killeen, 53
N. Y. 93.
For the same reason a married woman at common law had no power
to authorize her husband to become her agent. Capacity to act by agent
dépends on capacity in the principal to do the act himself which he
authorizes his agent to perform. But when the wife's disability to
contract was removed, she acquired the right to appoint her husband
as her agent, to perform for her whatever acts of business she is ca-
pable of performing for herself. She may therefore constitute her
husband as her agent within the sphère in which she is compétent to
appoint an agent. Voorhees v. Bonesteel, 16 Wall. 16, 21 L. Ed. 268.
And in the case just cited the court said :
"Under the lavrs of New îork a married woman may manage her separate
property, through the agency of her husband, without subjecting it to the
clalms of his creditors, and It is held that she is entitled to the profita of a
mercantile business conducted by the husband in her name, if the capital Is
fumlshed by her and he has no interest but that of a mère agent."
22 262 FEDERAL EEPOETBE
That was the law of New York then, in 1872, and for years prior
thereto. And of course it is the law of that state now. Knapp v.
Smith, 27 N. Y, 277; Buckley v. Wells, 33 N. Y. 518; Draper v.
Stouvenel, 35 N. Y. 507; Sammis v. McLaughlin, 35 N. Y. 647, 91
Am. Dec. 83; Owen v. Cawley, 36 N. Y. 604; Abbey v. Deyo, 44
N. Y. 343; Woodworth v. Sweet, 51 N. Y. 11; Bodine v. Killeen,
53 N. Y. 93; Stanley v. National Union Bank, 115 N. Y. 122, 22
N. E. 29.
When a business is carried on in the wife's name and by her hus-
band as her agent, it becomes necessary to détermine whether the
arrangement is one made in good faith, or whether her name ïs used as
"a cover and a fraud" to protect what belongs to the husband in whole
or in part. That ownership in the wife cannot be employed as "a cover
and ^ fraud" to cheat creditors is abundantly established upon the
authorities.
In Abbey v. Deyo, supra, the court held it to be well settled that a
married woman could carry on business on her separate account
through her husband as her agent, and that the fact that the husband
gave his services without compensation other than his support, which
she provided out of the income of the business, would not give his
creditors any interest in the profits. But that case, and ail the cases
so far as I am aware, requires good faith. In Abbey v. Deyo the
court said :
"The Jndge charged the Jury that they were to find whether the plaintlff
was in fact carrying on business herself, her husband acting merely as her
agent, or whether the business was in fact her husband's, and the agency a
form or devlce for carrying on business with his own means and her son's
services. If the former, he charged them that the wlfe could hold the prop-
erty. If the latter, he charged them that the property belonged to the cred-
itors, and the wlfe must be defeated. This was the précise question for the
jury to décide, and it was clearly and fairly placed before them. Thelr dé-
cision Is concluslve hère."
In Knapp v. Smith, supra, the New York Court of Appeals, speaking
through Chief Justice Denio, said :
"Where the husband is Indebted and tnsolvent, as was the case hère, there
is generally more or less reason to suspect that such arrangements are adopt-
ed as a cover to dlsguise the substantlal ownership of the husband and to
defraud the creditors. Whether, in a glven case, the transaction Is sincère
and bona flde, or a colorable deviee to cheat the créditera of the husband, Is
a question of fact, to be detennined by the jury or other forum Intrusted with
décision of such questions."
In Seitz v. Mitchell, 94 U. S. 580, 24 L. Ed. 179, the Suprême Court
declared that purchases of property, real or personal, made during
coverture by the wife of an insolvent debtor are justly regarded with
suspicion, and that she cannot prevail in contests between his creditors
and her, involving their right to subject property so acquired to the
pa)Tnent of his debts without overcoming by affirmative proof the pre-
sumption against her. "Such," said the court, "has always been the
rule of the common law ; and the rule continues, though statutes hâve
modified the doctrine that gave the husband absolutely the personal
EOWE V. DBOHEN 23
(262 F.)
property of the wîf e in possession, and the right to reduce into his pos-
session and ownership ail her choses in action."
In Glidden, Murphin & Co. v. Taylor, 16 Ohio St. 509, 91_ Am.
Dec. 98, it appeared that the husband used the money of his wife in
establishing and conducting the business professedly as her agent
and the business made large profits. There was no contract between
them as to his compensation, and no accounts were kept between the
parties. He applied a part of the proceeds to the support of the fam-
ily, used some of them for his own purposes, and invested the rest in
real and personal property in the name of his wife. The court allowed
the creditors of the husband to subject the property so purchased to
payment of his debts.
In Lachman v. Martin, 139 111. 450, 28 N. E. 795 (1891), a judgment
for $1,802.43 had been obtained against one Martin and another and
exécution was returned unsatisfied. The bill sought to subject to the
payment of the judgment certain lands the title to which was in the
name of Martin's wife. It was claimed that Mrs. Martin had purchased
with her own funds one-half of the stock of an Illinois corporation,
and that the money with which the property was purchased had been
earned in the business of this corporation, while her interest in it was
under the management and control of her husband acting therein as
her agent. The profits which she derived from the corporation
brought her between $25,000 and $30,000, which she had invested in
farms and stock, which at the time of the hearing had so increased in
value as to be worth $50,000. The Illinois statute gave a married
woman the right to hâve her own separate property, and to make con-
tracts and do business as a feme sole, and declared that she might
avail herself of the services and agency of her husband in the conduct
of her business or management of her property, "without necessarily
subjecting it, or the profits arising from his management, to the claims
of his creditors." The court, upon the facts disclosed in the case, held
that the property in thèse farms was subject to the rights of the hus-
band's creditors. The court said:
"But an Insolvent debtor cannot use his wlfe's name as a mère devlce to
cover np and keep from his creditors the assets and profits of a business which
Is tn fact his own. The marrlage relation affords many opportunlties for
oonductlng schemes to defraud creditors, and hence transactions between
husband and wife, whleh hâve the appearance of belng fraudulent, will be
closely scrutlnlzed. It Is a question of fact, to be determlned from ail the
clrcumstances of the case, whether or not the husband Is carrying on his own
business, or Is merely managing his wlfe's business. It must clearly appear
that the wife is the bona flde owner of the capital Invested in the business,
and that the accumulations, which resuit from the conduct of the business,
are the legltimate outcome of the Investment of her property."
In Murphy v. Nilles, 166 111. 99, 46 N. E. 772 (1897), the court held
that where a wife fumishes capital to her husband and allowed him to
employ it in spéculations on his own account and in conducting the
business the profits derived therefrom are subject to the claims of his
creditors. In the course of the opinion the court again declared
that—
24 202 FBDBBAL RBPOKTEB
"An Insolvent debtor cannot use hls wife's name [nor her capital] as a mère
devlce to cover up and keep from hia credltors the assets and profits of a busi-
ness which is In f act his own."
In Talcott v. Arnold, 54 N. J. Eq. 570, 35 Atl. 532 (1896), the court
held that while a debtor cannot be compelled to work for his cred-
itors, still, if he puts his latent property-earning ability into action,
equity will apply any property created to the payment of his debts.
It declared that a wife may employ her husband as a servant in the
management of her separate business, but that a court of equity will
closely scrutinize the case, to détermine whether the employment is
bona fide and whether the business is clearly the wife's; that if the
husband, in conducting the wife's business, is a servant of the wife
under a bona fide employment, then his services in the business will not
subject any portion of the property to the claims of the husband's
creditors. In this New Jersey case it appeared that after the failure
of a firm in which the husband was a partner the wife advanced to
him $10,000, which she had received from the estate of her uncle.
The husband was an inventer, and carried on a séries of experiments,
and caused to be issued in his wife's name a number of patents, from
which large sums of money were realized, and a portion of the pro-
ceeds was put in property in the wife's name. AU the contracts in
the business were made in her name, and the property in which the
business was conducted and the bank accounts were also in her name.
No contract of employment was proved, and the entire course of con-
duct showed that the husband was master of the business, over whom
the wife exercised no control, and from whom she expected no ac-
count. The court held that the business was the husband's, and its
proceeds would be applîed to the payment of his debts. The husband
and the wife testified that they had entered into an agreement at the
time the $10,000 was advanced by which he assigned to her the patents
issued and to be issued, in considération that she should pay him $1,200
a year, and should pay ail the shop expansés for the development of
the patents.
The court declared it found no foundation in the testimony to sup-
port the theory that the business which was carried on ostensibly in
the name of the wife was in fact the business of the wife. "Now,"
said the Vice Chancellor in his opinion, "the entire history of the
business, from the year 1879 down, is convincing that she let him hâve
her money whenever he wished it, without a question, and that he put
ail the patents in her name, for the purpose of securing his property
to his family in case of business trouble, while in fact he retained as
complète control over it as if he was its absolute owner. Every
step taken in the business was the ofïspring of his thought and will
alone. In ail the transactions it is perfectly obvious that everything
was left to him. His wife naturally had but the faintest knowledge
of the work in which he was engaged, and exercised no oversight over
the conduct of the business." The bank accounts were in the name
of the wife, and he drew checks under a power of attorney from
her. Contracts made were made in her name. The property in which
the machines were manufacturée was in her name. "But," said the Vice
BOWE V. DROHEN 25
(262 F.)
Chancellor, "it seems to me transparent that ail this was merely col-
orable. It was the husband who suggested the agency, who settled
the terms of the contracts, who received and deposited the money
arising from them, and who spent it, with no expectation, on his part
or on her part, that he would ever be called upon to account to her
for its receipt or expenditure. He kept no books of account, except
of the most meager and partial kind of the receipts and expenses of
the business. The wif e never asked for an accounting, and never ex-
pected any, and he knew that she never expected any."
This case was reversed in the Court of Errors and Appeals (55 N.
J. Eq. 519, Z7 Atl. 891), but solely on the ground that that court
believed, and the Vice Chancellor did not, in the substantial truth
of the testimony of the husband and the wife conceming the agree-
ment made between them. The court said their testimony was un-
contradicted, ànd was corroborated by their conduct ever since the
alleged making of the bargain. The court declared that —
"On the grounds above stated, we believe the contraet to hâve been made
bona flde for valuable considération on both sides, and without any im-
proper design."
In Taylor v. Wande, 55 N. J. Eq. 491, 37 Atl. 315, 62 Am. St. Rep.
818, the New Jersey Court of Errors and Appeals declared that a
court of equity would carefully scrutinize the employment of an in-
solvent husband by a wife engaged in carrying on a business on her
own account. In the circumstances of that particular case the court
said it could find nothing in the facts which indicated that the husband
acquired any interest in the profits or earnings of the business. "Had
the husband's services been rendered to her gratuitously," it was said,
"such would probably be the conclusion, for the debtor is not obliged
to work for the benefit of his créditer ; but when, as in this case, the
services were rendered upon compensation, not shown to be unusual
compensation for such services, it is beyond doubt that the profits and
earnings of the business belonged to the wife, notwithstanding they
were in part due to the husband's skillful services, precisely as they
would do, had she employed a stranger of like ability to carry on the
business."
In Mayers v. Kaiser, 85 Wis. 382, 55 N. W. 688, 21 L. R. A. 623, 39
Am. St. Rep. 849, it is laid down that the mère fact that the wife em-
ploys her husband as her agent to carry on her business in her name,
will not give his creditors a right to hâve their claims paid out of the
profits of the business, especially where the husband has been paid by
the wife for his services. And so in Martin v. Remington, 100 Wis.
540, 76 N. W. 614, 69 Am. St. Rep. 941. In Kendall v. Beaudry, 107
Wis. 180, 184, 83 N. W. 314, 316, the court points out that there must
be good faith and then says:
"In ascertaining the existence of this élément, the question Is whether the
debtor does in fact give or hire his services to another, the fruits thereof to
belong to that other, or does he merely exert himself under the color of an-
other's name, with the understanding or purpose that the fruits of his exer-
tion shall be his, but screened by that other's name from his creditors. The
former situation satisfles ail that Is meant by the expression 'good faith' in
26 262 £<BDS:iU.Ii bbfobter
thiB connection. • • • He may be led to so act because of the hopelessness
of attempting to dévote hls efforta to a business of bis own, where they
would be rendered abortlve by the prompt attack of credltors as soon as tbey
became at ail productive. Sucb motive or reason is not Inconsistent wlth tbe
good faith of tbe transaction."
In Boggess v. Richard's Adm'r, 39 W. Va. 567, 20 S. E. 599, 26
L. R. A. 537, 45 Am. St. Rep. 938, the court held that a husband may
engage in business with fais wife's capital in her name and on her créd-
it for her benefit ; but if, owfng to his skill and labor, large profits ac-
crue therefrom over and above the necessary expenses and indebted-
ness of the business, including the support of himself, his wife and
family, a court of equity will justly apportion such profits between his
wife and his existing creditors.
The record in this case has convinced me that husband and wife were
not acting in good faith, and that the husband had an interest in the
proceeds of the moving picture business which his creditors are en-
titled to reach, and I think the judgment should hâve been reversed.
BORMAN et al. v. UNITED STATES.
(Circuit Court of Appeals, Second Circuit November 20, 1919.)
No. 35.
3, Sales ®=»4(3)— "Bailment" distinguished from "sale."
Where articles are dellvered by one person to another, vi^ho Is to per-
form labor en them or to manufacture them Into other articles for the
former, the transaction is a "ballment"; but if the person who recelves
the articles may dcliver in return articles whlch are not the product of
those recelved, the transaction is in fact a "sale."
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Ballment ; Sale.]
2. Conspiraot <g=>33 — TiTtE to linings fdenished by United States to
MANUFACTOEING CONTBACTOB DOE8 NOT PASS.
Under a contract between the United States and one of the défendants
for the manufacture of leather Jerkins, which requlred the United States
to fumish the linings, held, that title did not pass, so that the contractor
and a confederate, who conspired to obtaln linings from the United States
In excess of needs and sell the same, etc., were gnilty of vlolating Crimlnal
Code, §i 36, 37 (Comp. St §§ 10200, 10201).
8. CEmiNAL LAW <Ê=»1178 — ErROB WAIVED WHEaSE NOT MENHONED IN BBCOBD
OE BHIBF.
In a prosecution against a contractor, who manufactured leather Jerkins
for the United States, and another, for conspiracy to defraud the United
States, etc., In violation of Crlminal Code, §§ 36, 37 (Comp. St. §§ 10200.
10201), where it appeared that the contractor disposed of linings fur-
nished by the United States, title to which did not pass to him, it was
imnecessary to Inquire whether, at the time he demanded the linings, dis-
posed of, he knew that they were in excess of his requirements, where
there was no évidence in the record, and nothlng was sald In the argu-
ment concemlng it
Manton, Circuit Judge, dissentmg.
In Error to the District Court of the United States for the South-
ern District of New York.
^ssFor otoer cases see same topic & KEY-NUMBBR In ail Key-Numbered Dlgests & Indexes
BORMAN V, XTNITED STATES 27
(262 F.)
Jacob A. Borman and another were convicted under Criminal Code,
§§ 36, 37, of conspiring to apply to their own use property of the
United States, and of conspiring to sell, convey, and dispose of such
property, and they bring error. Affirmed.
Wood, MoUoy & France, of New York City (Henry P. MoUoy
and Melville J. France, both of New York City, on the brief), for
plaintiffs in error.
Francis G. Caffey, U. S. Atty., of New York City (Robert A.
Peattie, Asst. U. S. Atty., of New York City, of counsel), for the
United States.
Before WARD, ROGERS, and MANTON, Circuit Judges.
ROGERS, Circuit Judge. The plaintiffs in error (hereinafter call-
ed défendants) hâve been convicted upon an indictment which in
the first count charged them with having unlawfully conspired to ap-
ply to their own use certain property of the United States, and in
the second count charged that they unlawfully conspired to sell, con-
vey, and dispose of the same property. The indictment is based on
the following provisions of the Criminal Code (Act March 4, 1909, c.
321, 35 Stat. 1096 [Comp. St. §§ 10200, 10201]):
"See. 36. Whoever shall steal, embezzle, or knowlngly apply to hls own
use, or unlawfully sell, convey, or dispose of, any ordnance, anns, ammuni-
tlon, clotliing, subsistance, stores, money, or otiier property of the United
States, furnished or to be used for the mllitary or naval service, shall be
punished as prescribed in the preceding section.
"Sec. 37. If two or more persons conspire either to commit any offense
agalnst the United States, or to defraud the United States in any manner or
for any purpose, and one or more of such parties do any act to efifect the
object of the conspiracy, each of the parties to such conspiracy shall be fined
not more than ten thou-sand dollars, or imprisoned not more than two years,
or both."
The testimony shows, and défendants admit, that défendant Bor-
man caused to be shipped to défendant Phillips about February 25,
1918, some 2,664 yards of linings which Phillips received and which
had been furnished by the govemment to the défendant Borman to
be used in making up leather jerkins under contracts which will be
more fully referred to — which jerkins were intended to be used by
the military forces of the United States. The 2,664 yards of linings
were delivered at varions times on the demand of Borman made upon
the Quartermaster's Department to be used under the contracts, and
which were in excess of the amount of linings it was necessary for
the govemment to furnish. It appears that défendant Phillips, act-
ing under Borman's direction, sold this extra lining material for the
sum of about $6,000, checks for which were delivered to Borman,
who in turn indorsed them over to an employé, who, at the direction
of Borman, deposited the check to his (the employé's) crédit in his
bank. The money was afterwards applied to the use of the défend-
ants. And the défense relied upon is that at the time the défendants
appropriated thèse linings to their own use the title was not in the
United States,
28 262 FEDERAL REPORTER
It appears that two contracts were made between the United States
and the Borman Sheep Lined Coat Company, one on September 27,
1917, and the other on October 20, 1917. Contract No. 1112 calls
for the manufacture of 63,000 leather jerkins, and is on a blank
printed in part and typewritten in part. It has printed on it that it
is "to be used for ail purchases of supplies, clothing, wagons, harness,
bacon, etc., which are purchased in bulk or large quantities to be
dehvered at dépôts or to purchasing quartermasters." It contains a
typewritten statement that the supplies are "to be manufactured from
materials fumished in part by the Quartermaster Corps, and to be
delivered at the dépôt of the Quartermaster Corps, U. S. Army,
Philadelphia, Pa." It states that "the government is to furnish lin-
ing, buttons, and rings only; contractor is to furnish ail other ma-
terials"; also that "the materials furnished by the government are
to be received by contractor f. o. b. New York, N. Y. ; * * * con-
tractor to be liable for any loss of or damage to any of the materials
furnished by the Quartermaster Corps from any cause whatsoever
while in his possession. Ail rags and clippings from the linings shall
remain the property of the United States and be delivered with the
finished jerkins."
Contract No. 1464 calls for the manufacture of 50,000 leather
jerkins, and is on a blank also printed in part and typewritten in part.
Like the first contract it states that it is to be used for ail purchases
of supplies, etc. It contains the foUowing provision:
"The government Is to furnish the llnlng and buttons only. Contracter to
furnish ail other materials. The llnlng and buttons to be recelred by con-
tracter f. o. b. New York. Ail rags and clippings from linings furnished by
the government delivered at the Philadelphia dépôt of the Quartermaster
Corps, U. S. Army, wlthout expense to the United States for packlng or trans-
portatlon ; contractor to be liable for any loss of or damage to any materials
fumished by the Q. M. Corps, U, S. Army, from any cause whatsoever while
In contractor's possession."
Both contracts specify the amount to be paid for each jerkin and
then provide as follows:
"That for and in considération of the faithful performance of the stipula-
tions of thls contract, the contractor shall be paid, at the office of the con-
tracting offlcer, or by ^isburslng offlcer designated by him to make payments,
the priées stlpulated In thls contract for those supplies delivered and accepted;
and, except as otherwlse provlded, payments wlU be made as sooh after the
acceptance of each delivery as Is practlcable and funds on hand for the pur-
pose will admit."
Both contracts provide:
"That the articles hereln contracted for shall be examined and Inspected,
wlthout unnecessary delay after being delivered, by a person or persons ap-
polnted by the United States; and upon such Inspection, the articles found
to be in ail respects as required by thls contract shall be received and be-
come the property of the United States. Any arid ail articles that may, upon
such Inspection, be condenmed or rejected, shall be removed from the prem-
Ises by the contractor withln 10 days after the sald contractor or hls agent
shall hâve been notlfled of such rejeetlon ; otherwlse, at the rlsk and expense
of the contractor."
Counsel for the défendants argue that the contracts show that the
transactions involved a sale of the materials which the government
BORJLA.N V. UNITED STATES 29^
(262 P.)
furnîshed, as the word "purchases" and "purchased" necessarily im-
ply a sale; so that at the time of the delivery of the linings to the
contractor the title passed out of the United States and to the con-
tracter, the amount finally to be paid by the government for the fin-
ished jerkins being reduced by the amount due to the government for
the hnings furnished.
[1, 2] It is elementary that where articles are delivered by one
person to another, who is to perform labor upon them or to man-
ufacture them into other articles for the former, the transaction is
a bailment; but if the person who receives the articles may deliver
in retum articles which are not the product of those received, the
transaction is in efifect a sale. Now it is not necessary to inquire, for
reasons which will presently appear, whether under the provisions of
the contracts herein involved the delivery of thèse linings involved
a bailment or a sale, whether the contractor was bound to use the
linings which the government delivered, or whether other linings
might hâve been used in their stead. Neither is it conclusive that the
blanks used in filling in the terms of the contracts contained the words
"to be used for ail purchases of supplies." The government was un-
doubtedly purchasing supplies, and they were to be manufactured in
part from materials furnished by it and in part from materials fur-
nished by the contractor. But for the purpose of the argument we
shall assume that under the contracts there was a sale of the linings,
and not a bailment. Then the question arises whether or not under
the sale the title had passed to the linings herein involved.
This court had under its considération in Re Liebig, 255 Fed. 458,
166 C. C. A. 534, the question as to the time when title passes under
a sale. We said in the case cited that in sales the transfer of title
dépends upon the intention of the parties however indicated. And in
Hatch V. Oil Co., 100 U. S. 124, 25 L. Ed. 554, the gênerai rule was
said to be that the agreement as to the passing of title is just what the
parties intended to make it, if the intent can be collected from the
language employed, the subject-matter, and the attendant circum-
stances. We think the intent of the parties to thèse two contracts
is clearly indicated in the language they employed.
The provision already referred to which provided that the contrac-
tor was to be liable to the United States for any loss of or damage
to any of the materials furnished by it would seem to indicate that
the title to the property continued in the government and had not
passed to the contractor. If the title had passed out of the United
States, the property was the property of the contractor, and there
was no necessity for such a provision.
Moreover, it was provided, as we hâve seen, that "ail rags and
clippings from the linings 'shall remain' the property of the United
States"; that is to say, the title in the rags and clippings must un-
der this language hâve been ail the time in the United States. If the
title to the linings had passed out of the United States at the time
of their delivery to the contractor, the title to so much of the linings
as subsequently became rags and clippings originally passed along
with the rest, and it could not properly hâve been said that as to
30 262 FEDERAL EEPOETER
them the title should continue or "remain" in the United States.
Some other language would hâve been necessary to indicate that the
United States was to be reinvested with the title which it lest when
the linings were delivered. Assuming, then, a sale, it is clear that
the title could not hâve been intended to pass until the linings were
eut out, and then only as to so much as were used in the jerkins.
In view of what has been said, it is not necessary to consider cer-
tain cases which hâve held that contracts in some particulars not
unlike those in this case hâve held that the transaction amounted to
a sale and not a bailment. Power Co. v. Burkhardt, 97 U. S. 110,
24 L. Ed. 973 ; Hargraves Mills v. Gordon, 137 App. Div. 695, 122
N. Y. Supp. 245. Neither is it important to consider a class of cases
of which Dixon v. London Small Arms Co., Ltd., 1 App. Cases, 632,
is the most notable, in which the courts hâve considered whether such
contracts resuit in a sale or in an agreement for service.
An important fact is that thèse linings were not obtained in ac-
cordance with any contract. The govemment was under no con-
tractual obligation to fumish them. It was only contractually oblig-
ed to fumish the amount of linings necessary to enable the con-
tractor to manufacture the number of jerkins contracted for. An-
other important fact is that the amount of the linings the government
was to furnish was not furnished altogether, but as required and call-
ed for by the contracter. The Quartermaster's Department made an
allotment to each contracter of the amount of the material he was
entitled to receive under each contract, and material was issued from
time to time as called for. When Borman in New York applied to
the Quartermaster's Department for material the officiais there called
up the department in Philadelphia and said: "Mr. Borman is hère
for material; is it ail right to give it to him?" So that Borman,
using the contract as a reason for his demand, asked for his material
in excess of what he was entitled to under his contract, and obtained
the 2,664 yards of the linings which he sold. This yardage cannot be
said to hâve been obtained in accordance with any contractual ob-
ligation.
Moreover, as it was never eut, but remained in the form in which
it was received, no title passed, and it continued to be the property
of the government. And the clandestine manner in which it was
sold and the proceeds put in the name of Borman's employé indicates
that Borman very well knew that it was not his property, and that
he knew he was acting dishonestly in what he did. The court in his
charge said:
"In other words, as reasonable men, pass upon this situation and ail tbê
évidence in the case, and détermine whether or not thèse défendants acted
as honest men or as dishonest men ; and If you conclude that they acted dis-
honestly, whether thelr intent and purpose was knowlngly to apply to their
own use property of the United States, and whether their purpose was to un-
lawfuUy sell, convey, and dispose of property of the United States."
And it was also charged :
"That thèse défendants cannot be convleted In this case, unless the Jury
believe from the évidence to a moral certainty and beyond a reasonable doubt
BOEMAN V. UNITED STATES 31
(263 F.)
that they oonspired to apply the llnlnga to their own use, or consplred to
unlawfully dispose of them knowing that the Unings belonged to the United
States."
Under the charge, as given, Borman could not hâve been convicted
if the jury beheved that Borman honestly thought that he had ob-
tained title to the 2,664 yards of linings which he sold. We must
conclude, therefore, not only that the linings which he sold were as
a matter of law the property of the United States, but that défend-
ants did not believe that the title to the linings had passed from the
govemment to Borman.
[3] Under the circumstances it is not important to inquire whether
Borman, at the time he demanded the additional yards of linings,
knew that they were in excess of the amount which he was entitled
to receive under the contracts. There is no évidence upon that sub-
ject in the record, and nothing was said concerning it upon the
argument in this court; and we fnust assume that Borman did not
obtain possession by a trick or by fraud. If possession had been ob-
tained by a trick and animo furandi, title, according to many cases,
would not hâve passed. See Kerr on Fraud and Mistake, pp. 10, 11 ;
Cole V. Northwestern Bank, L. R. 10 C. P. 354, Z7Z; Whitehorn
Brothers v. Davison, [1911] 1 K. B. 463, 470; Oppenheimer v.
Frazer, [1907] "2 K. B. 50, 70; Kingsford v. Merry, 1 H. & N. 503;
Regina v. Middleton, L. R. 2 C. C. 38; Bailey v. State, 58 Ala. 414;
State V. Williamson, Houst. Cr. Cas. (Del.) 155; Cooper v. Com-
monwealth, 110 Ky. 123, 60 S. W. 938, 52 L. R. A. 136. 96 Am. St.
Rep. 426; Wolfstein v. People, 6 Hun (N. Y.) 121; Goff v. Golt,
5 Sneed (Tenn.) 562.
The défendants are in this court, as they were in the court below,
admitting that they obtained the linings v/rongfully, that they sold
them wrongfully, and that they appropriated to their own use wrong-
fully the moneys realized from their sale. They seek to escape upon
a technicality the punishment which the Criminal Code of the United
States imposes. In this they cannot succeed. The défense interpos-
ed is not tenable. The title to the 2,664 yards continued in the United
States.
Judgment affirmed.
MANTON, Circuit Judge (dissenting). The défendants below
were charged in the indictment with having conspired to commit an
offense against the United States, by applying to their own use jerkin
linings, the property of the United States. The prosecution proceed-
ed upon an alleged violation of sections 36, 37, of the Criminal Code
of the United States.
The défendant Borman was engaged in business under the name
of Borman Sheep Lined Coat Company and had contracts with the
government to furnish in ail 113,000 leather jerkins. Under the terms
of the contracts, the Quartermaster's Department delivered to Bor-
man quantities of linings to be used in the making of jerkins. On
the 25th of February, 1918, Borman caused to be shipped to the
défendant Phillips 2,664 yards of such linings, which were delivered
32 262 FEDBBAL RBPOBTBB
to Borman pursuant to the contracts with the government. Phillips,
acting under the instructions of Borman, sold the linings for $6,000,
and the check therefor was delivered to Borman, who indorsed it
over to an employé, and this was deposited to the employé's crédit in
his bank.
The main inquiry is whether the linings in question were the prop-
erty of the United States at the time they were sold under Borman's
instructions. The District Judge charged the jury, as a matter of
law, that the title to the linings was in the United States at the time
of their sale by the défendants, or at the time of the commission of
the crime as charged. It is the contention of the défendants that
the contracts were of manufacture and sale, and that the possession
of the linings by them was not by mère bailment, with a contract of
service. An examination of the language of the contracts will re-
veal that the transaction is referred to as a purchase and sale of
the jerkins; the purchaser being the government. In order to make
a valid sale of the jerkins to the government, it was necessary for
the contractor to pass a good title, not only of the materials which
he purchased and placed in the jerkins, but each and ail of the ma-
terials which went to make up the manufactured product; otherwise
the sale wouid amount to a portion of the jerkins — such of the ma-
terials as were purchased by the contractor and placed in the jerkins.
The linings were delivered to the contractor in bulk, and the inquiry
is whether title thereto passed and when it passed. The contracts
provided in part as follows:
"Contract for supplies to be delivered in bulk at dépôts and the purchasing
quartermaster for distribution or use in manufacture, etc. To be used for
ail purchases of supplies, clothing, wagons, hamess, etc., which are purchased
in bulk or large quantities to be delivered at dépôts or to purchaslng quarter-
mastera"
"Contract for army clothing (to be used exclusively for the manufacture of
army clothing where raw matériel is fumished by the United States)."
It would appear that a purchase of jerkins was intended, and not
a contract for service upon materials furnished by the government.
Another form of contract used by the government, which is in évi-
dence, but is not the contract under which the lining was sold, reads
in part :
"8. Title to Uaterial Furnished. — ^TJnless otherwise expressly provided here-
in, ail materials paid for or furnished by the government under thls contract,
and ail parts and pièces thereof and clipplngs therefrom, In whatsoever form
or process of manufacture, shall be and remain the property of the govern-
ment, and, while In the contractor's possession, shall be suitably marked as
such by the contractor, in the manner dlrected by the contracting offlcer, so
as to be identified as the property of the government."
This, it will be'observed, indicates a manufacturing service. The
Word "purchase" is not used, and the ténor of the provisions is that
the contractor is to return to the government, in manufactured form,
the materials which it furnished.
Purchase implies a substitution of one owner for another. The
word "purchase," as used in the title of the contracts, must be con-
sidered in its usual and ordinary meaning, for the contracts are ex-
BOBMAN V. UNITED STATES ^
(262 F.)
clusively concerned with the buying of supplies by the governn-.ent,
and the word "supplies" indicates a contract of purch se, and not
one of service.
Section 3 of the contracts provides:
"3. That the articles herein contracted for shall be examined and inspected,
without unneeessary delay in being delivered, by a person or persons appoiated
by the United States; and upon such inspection the articles found to be in îdl
respects as requlred by this contract shall be received and become the prop-
erty of the United States. Any and ail articles that may, upon such inspec-
tion, be condemned or rejected, shall be removed from the premlses by the
contracter within ten days after the said contractor or his agent shall hâve
been notifled of such objection; otherwlse, at the rlsk and expense of the
contractor."
If the goods on inspection are rejected, they do not become or
remain the property of the United States, but remain the property
of the contractor, who is obliged to remove the same at his own ex-
pense. Nothing in the contracts requires the contractor to part the
rejected jerkins and, while keeping for himself the portion supplied
by him, retum to the government the linings supplied by it. On th»
contrary, the contractor in such a case would be required to furnist
in place of the rejected jerkins, completed ones complying with the
terms of the contract, and when he has done so, he would be free to
dispose of the rejected jerkins for his own benefit. It will be noted
that the other contract referred to (not involved hère) provided that
ail materials throughout the entire process of manufacture, remain
the property of the United States ; but it is f urther provided that, in
case of rejected goods, "the government shall be paid by the con-
tractor a sum equal to the actual cost or market value at the time of
such rejection of ail materials furnished hereunder by the govern-
ment for the making of such articles."
The spécifications provide the kind of materials used for linings.
Thèse were what the government was to furnish to the manufactur-
er, and the government was necessarily to get its own linings back.
If they hâve always remained its own, it would not insist that the
linings be of a certain kind. A buyer of leather jerkins would so
insist. The contracts refer to the price paid, and that indicates the
sum which the seller will receive in exchange for his completed
product. The contracts further provide that, in case of the failure
of the contractor to perform any part of the contracts, the government
shall hâve the right to supply the deficiency by procurement in the
open market, or otherwise purchase any of the supplies so required,
at such places as it may elect. This is to be done at the expense of
the contractor. It is the usual provision of the contract expressing
the légal right of any buyer in a contract of bargain and sale to buy
in the open market an article similar to that to which the seller has
agreed to deliver to him, and to charge the seller the excess in price
over the price contracted for, where breach of contract results.
If it were a mère contract of service, another rule of damages would
apply involving the cost to get the work done by another. The idea
of the contract, that only upon acceptance shall the jerkins become
the property of the government, was intended to mean that then only
262 F.— 3
34 262 FEDERAL RBFORTBB
would the title pass to the government. This imposed upon the man-
ufacturer the entire responsibility for the goods, the process of man-
ufacturing, and the resuit of such process. Under the terms, the
contractor became liable for any loss of or damage to the materials
furnished by the government, and the government inspecter might in-
spect the goods and reject any of the articles or materials because of
inferior workmanship. In the case of such rejection, the materials
necessarily were thrown back upon the contractor, and it became the
duty of the contractor to produce, at his cost, other materials to take
the place of the rejected, and make satisfactory jerkins. It is clear
to me that there was a sale of the linings in question, and not a bail-
ment thereof. Power Co. v. Burkhardt, 97 U. S. 110, 24 L. Ed. 973 ;
Hargraves Mills v. Gordon, 137 App. Div. 695, 122 N. Y. Supp. 245.
Since it appears that the contracting parties by their written con-
tracts intended a contract of manufacture and sale of the jerkins,
title to the parts of the constituent parts of said completed product
were the subject of a sale. In Buffiun v, Merry, 4 Fed. Cas. No.
2112, Judge Story said:
"It was not a contract whereby the spécifie yam was to be manufactured
into clotli whoUy for the plalntlff's account and at his expense, and nothing
but his yam was to be used for the purpose. There the property in the yam
might not be changea; but liere the cloth was to be made of other yarn as
well as the plalntifC's, the warp of the plaintiff's yarn, the fllling of the de-
fendant's. The whole cloth, when made, was not to be dellvered to the plain-
tiff, but se much only as at 15 cents per yard would pay for the plaintiflf's
yarn at 65 cents per pound. What is this but the sale of the yam at a Bpec-
Ifled prlce, to be paid for in plaids at a specifled price."
In Dixon v. London Small Arms Co., Ltd., 1 App. Cases, 632, a
somewhat similar case, Lord Chancellor Cairns said:
"New, * * * m order to answer that question you must tum to the
contract itself. • * • Therefore * * • in substance the resuit of the
whole is this: What I may eall the raw materlal for the barrel, the steel tube,
is supplied by the government at a certain prlce ; the butt or stock of the rifle
is supplied by the government at a certain prlce; ail the other component parts
of the arm hâve to be provided or made (for the contract Is consistent with
either view) by the contractors. The whole component parts hâve to be in-
spected from time to time by the offlcers of the government. They hâve the
right from time to time to reject any part of the arm while in the course of
manufacture, which is not consistent with the contract and the spécification ;
and when the whole is, to use the teehnical term, 'assembled,' when ail the
pièces of the arm are put together, then if it complied with the spécification,
and lu that case only, it is to be taken over and accepted by the government,
and the property in it is to pass to the government, and, on the other hand,
the prlce is to be paid for the article to the contractors. * • * The ques-
tion then bas to be asked: During thla process, what Is the position of the
person who is called the contracter? He is elearly not a servant of the crown.
That was not contended. There is no contract of service whatever between
hlm and the crown. He Is not an oflacer of the crown, engaged in the service
of the crown. Is he, then, an agent of the crown? • * * i cannot flnd
any ground whatever for contending that the C"ontractor is an agent of the
crown. He Is a person wlio ia a tradesman, and not the less a tradesman
because he is engaged in works of a very lai^e and extensive character; he
Is a tradesman manufacturing certain goods, for the purpose of supplylng
them accordlng to a certain standard, which Is laid before hlm as a condition
on which the goods wUl be accepted. During the time of the manufacture
the property, at ail events, in that which concems the présent case, namely.
BOEMAN V. UNITED STATES 35
C262 F.l
the property In the lock, or the breech action of the rifle, is not the property
of the crown. The materials are not the materlals of the crown. If the
respondents make the loek themselves, the materials are provided by the
respondents, and the respondent's work upon those materials, not as the agents
of the crown, but as conducting thelr own work and their own manufacture
for the purpose of supplying the complète arm. » » • i can find hère no
délégation of authority — no mandate from a principal to an agent; I find
hère simply the ordinary case of a person who has undertaken to supply
manufactured goods, who has not got the goods ready manufactured to be
supplied, and who has to make and produoe the goods in order to exécute the
order wliieh he has received. I find him engaged in that work on his own
aecount up to the time when the article Is completed and handed over to, and
aceepted by, the person who has given the order. I therefore arrive at the
conclusion that there is not hère on the part of the respondents that which
amounts in any way to the character or the statua of an agent, a servant, or
an offieer of the crown."
Lord O'Hagan said:
"ïhe contract was not of service, but of sale, for the contractons' ovm bene-
flt, of certain commodities, fulfiUing certain conditions and to be paid for on
certain terms; and if those conditions were fulfllled, whether by thelr own
workmanship or articles provided at their instance, I apprehend the crown
could uot hâve rejected the commodities; as, on the other hand, its rights of
rejection on nonfulfillment until the moment of dellvery remalned intact, a
State of things dlflicult to be reconciled with the theory of agency or service."
In effect, the delivery of the linings in question was in part pay-
ment of the cost or price of the finished product. The parties evi-
dently intended this. The price paid to the contracter was reduced
to the extent of the value of the Hnings. The question of title must
necessarily turn upon the intention of the contract and the intent of
the parties as therein made plain.
But it is said that because of the provision, "AU rags and clippings
from the Hning shall remain the property of the United States and be
delivered with the finished jerkins," a clear indication is given by the
parties that title to the linings vested in the government at ail times.
But, to me, the requirement for such a provision indicates that the
parties intended just the reverse. If the lining material did not vest
in the contracter on the delivery to him by reason of the nature and
effect of the contract itself, the clause would be entirely unnecessary
and without meaning, because, in such case, they would be reserved
to the government by the very force of its title, without the necessity
of such a clause or réservation. On the other hand, if the title to
the lining material did become the property of the contractor on de-
livery to him, then such a réservation has both meaning and effect,
and constitutes an exception to the gênerai grant of the linings.
When the government indicated a wish to accept such linings in the
contract ofïered in évidence (Défendants' Exhibit D, Contract 108 —
not involved hère) it said:
"AU unused material fumlshed by the government shall remain the prop-
erty of the United States, be properly prepared for shipment and held for such
disposition as may be necessary by the government. AU rags and clippings
from material fumlshed by the government shaU remain the property of the
L'nited States."
From the foregoing, it is apparent that the government, when in-
tending to reserve ownership in property which it furnishes to the
36 262 FBDBKAL KEPOETBB
contractor, can and does plainly express its intent therefor. The lan-
gtiage of the contract, since it is drawn by the govemment, must be
presumed to be that of the govemment. It is the gênerai rule that
exceptions and restrictions are to be construed strictly against the
writer of the contract, and not to be extended beyond a fair import
of the language expressed, except by necessary implication. Duryea
V. Mayor, 62 N. Y. 592. It was well said in Mallory v. Willis, 4 N.
Y. 76:
"Whatever the motive was, the express provision requiring Willis to return
the oflfals and a spécifie quantity and quallty of flour for a given quantlty of
good merchantable wheat, taken In connection with the other provisions of
the contract, implies the exclusion of any claim or right of the plaintifCs to
any greater quantity of flour, vchatever the quantity produced was, and I
think it is falrly implied that the surplus, If any, was to belong to Willis."
In Clarkson v. Stevens, 106 U. S. 505, 1 Sup. Ct. 200, 27 L. Ed.
139, Stevens had been under a contract to build a ship for the Unit-
ed States. Materials for the ship were delivered at Stevens' dock
and under contract, were there received by the United States officiai,
and stamped "U. S.," and "became the property of the United States."
It was claimed that the contract provision made the ship built from
thèse materials also the property of the United States as it was built.
It was held that title to the unfinished vessel remained in Stevens,
and that no property therein vested in the United States. The court
said :
"For the inference is obvious, from the particularity of such a provision,
that the larger interest would not be left to mère Intendment."
I am of the opinion that title to the linings passed when delivered
to the contractor and that the transaction as to the linings was a sale
thereof and not a mère bailment. It was therefore error for the
court to charge, as a matter of law, that the title remained in the
govemment. Exception was taken to this charge, and, in my opin-
ion, présents error which requires reversai from this judgment.
REBDEB et al. v. UNITED STATES.*
(Circuit Court of Api>eals, EUghth Circuit. November 19, 1919.)
No. 5355.
1. InDICTMBNT and INFORMATIOIT ®=>71 — ^SuinCIENCT OF ACCUSATION.
A crime is made up of acts and Intent, and thèse must be set forth In
the indictment with reasonable particularity of tlme, place and circum-
stances.
2. CONSPIEAOT €=»43(11) — InDIOTMENT FOK SEDinoUS CONSPIBACT.
An Indictment under Criminal Code, § 6 (Comp. St. § 10170), for con-
spiracy to prevent, hinder, and delay by force the exécution of the Sé-
lective Draft Act May 18, 191T. heU sufficient.
S. CoNSPiBAcr <S=j43(11) — Indictment under Espionaqe Act.
Counts In an indictment under BIspionage Act June 15, 1917, tlt l, § 4
(Comp. St. 1918, § 10212d), respectively charging conspiracy to violate
^ssFor otber cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgusts & Indexes
•Certiorarl denied 251 U. S. — , 40 Sup. Ct. 346, 64 L. Ed. — .
REEDEB V. UNITED STATES 37
(262 F.)
sections 2 and 3 of the act by atteœptlng to caiise Insubordination, dis-
loyalty, and refusai of duty In tlie military and naval forces, and to
obstruct the recrulting and enlistment service, held sufficient.
4. Indictment and information ©=129(1) — Joindeb of counts.
Oounts charging separate and distinct offenses grounded upon the same
transaction may properly be joined in an indlctment, under Kev. St {
1024 (Comp. St. § 1690).
5. Céiminal law ®=3508(9), 780(1) — Testimony of accomplices.
While it is the better practice for courts to caution juries against too
much reliance upon testimony of aceompliees, there is no absolute rule
of law preventlng conviction upon the testimony of aceompliees, if juries
believe them.
6. CONSPIBAOY <®=527 OVEET ACT8.
Acts of défendants held to constltute overt acts in furtherance of the
conspiracy charged.
7. Abmy and navy ®=40— Obstbuctinq' BECBUiTiNa OB enlistment.
The offense of obstructing or attempting to obstruct the recrulting or
enlistment service of the United States, within Espionage Act June 15,
1917, tit. 1, § 3 (Comp. St. 1918, § 10212c), may be committed by the use
of vFords, and It is not essential to conviction that défendants' words or
acts actually prevented recrulting or enlistment.
8. Cbiminai. law <g=j423(l) — Evidence or acts or conspieatoes.
Where the évidence showed that an organization formed by défendants
affiliated with other organizations for a common and unlawful purpose,
an act of such other organizations in furtherance of the common, pur-
pose is évidence against ail the conspirators.
In Error to the District Court of the United States for the Western
District of Oklahoma ; Colin Neblett, Judge.
Criminal prosecution by the United States against Walter M. Reed-
er, J. T. Cumbie, B. F. Bryant, T. A. Harris, Macli F. Clark, and M.
E. Stuart. Judgment of conviction, and défendants bring error. Af-
firmed.
Patrick S. Nagle, of Kingfisher, 0kl., for plaintiffs in error.
Herman S. Davis, Asst. U. S. Atty., of Frederick, 0kl. (John A.
Fain, U. S. Atty., of Lawton, 0kl., on the brief), for the United States.
Before CARLAND and STONE, Circuit Judges, and ELLIOTT,
District Judge.
ELLIOTT, District Judge. The indictment against the plaintiffs
in error, hereinafter ref erred to as défendants, is in three counts. The
first, under section 6 of the Criminal Code (Act March 4, 1909, c. 321,
35 Stat. 1089 [Comp. St. § 10170]), charges a conspiracy to hinder and
delay by force the exécution of a law of the United States approved
May 18, 1917 (40 Stat. 76, c. 15), entitled "An act to authorize the
Président [of the United States] to increase temporarily the military
establishment of the United States, * * * " and by force to pro-
cure arms and ammunition, and to arm themselves with the same, and
while armed to combine and ofïer résistance to the authority of the
United States and to the enforcement and exécution of said act of
Congress, proclamations, etc. ; the second count charges a conspiracy
to cause and attempt to cause insubordination, disloyalty, mutiny, and
refusai of duty in the military and naval forces of the United States,
4=9For otber cases see same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes
38 262 FEDERAL KEPOBTER
and to induce, entice, persuade, and coerce the persons named in this
count of the indictment to refuse to submit to and to perform their
duties as a part o£ the military and naval forces of the United States ;
and the third count charges défendants with conspiracy to obstruct
the recruiting and enlistment service of the United States, to the in-
jury of the service of the United States.
Défendants were convicted upon ail three counts, and sentenced
for a term of six years upon the first count and for a period of two
years each upon the second and third counts, the terms of impris-
onment to run concurrently.
[ 1 ] The first contention of the défendants is that the court erred in
overruling the demurrer to the indictment, insisting that no facts were
alleged in the indictment under which a court could décide whether
they were sufficient in law to sustain a conviction.
In criminal cases prosecuted under the laws of the United States,
the accused has the constitutional right to be informed of the nature
and cause of the accusation. The indictment must set f orth the offense
with clearness and ail necessary certainty to apprise the accused of the
crime with which he stands charged, and every ingrédient of which
the offense is composed must be accurately and clearly alleged. The
object of an indictment is, first, to furnish the accused such a descrip-
tion of the charge against him as will enable him to make his défense
and avail himself of his conviction or acquittai for protection against
a further prosecution for the same cause ; and, second, to inf orm the
court of the facts alleged, so that it may décide whether they are suffi-
cient in law to support a conviction if one should be had. For this
facts are to be stated, not conclusions of law alone. A crime is made
up of acts and intent; and thèse must be set forth in the indictment
with reasonable particularity of time, place and circumstances. U. S.
V. Cruikshank et al., 92 U. S. 542, 23 L. Ed. 588.
[2] The statute under which the first count of the indictment is
drawn provides that —
"If two or m'ore persons • • • conspire to overthrow, put down, or to
destroy by force the govemment of the United States, * • • or to oppose
by force the authority thereof, or by force to prevent, hlnder, or delay the
exécution of any law of the United States, • • • they shall each be" pun-
Ished.
It will be observed that under this particular statute an overt act
is not made an ingrédient of the offense, and the first inquiry is as to
the sufficiency of the indictment under this statute. Has the pleader
substantially complied with the rule of law as admirably stated in U.
S. v. Cruikshank et al., supra ?
The indictment désignâtes the time and the place of the alleged of-
fense definitely. It names the défendants, and allèges that they did
then and there knowingly, willfuUy, unlawfully, and feloniously con-
spire, etc., with other persons named in the indictment to knowingly,
willfuUy, unlawfully, and feloniously hinder and delay the exécution
of a certain law of the United States, designating it as the act of Con-
gress approved May 18, 1917, giving the title of the act, and referring
also te the proclamations of the Président of the United States and
KEEDEB V. UNITED STATES 39
(262 F.)
régulations in aid of said act. The indictment further alleged that the
défendants knowingly, willfully, unlawfuUy, and feloniously opposed
by force the authority of the United States, its agents and officers, in
the enforcement of said act, proclamation, and régulations in so far
as their provisions applied to persons subject to military duty and serv-
ice thereunder, and particularly in so far as the same applied to
Wright, Ratcliffe, Blackwood, and others named in the indictment.
It is further alleged that the défendants did conspire, combine, and
agrée together with persons named in the indictment by force to pro-
cure arms and ammunition, and to arm themselves with the same, and
while armed to ofïer individual and combined résistance to the au-
thority of the United States and to the enforcement and exécution of
said act of Congress, proclamation, and régulations, to the end that
they would thereby hinder, delay, and prevent the said persons from
being drafted into and inducted into the military forces of the United
States ; alleging further that such persons and each of them were citi-
zens of the United States within the state of Oklahoma, having regis-
tered in said state and not having been exempted from military service
as provided in said act, and that they were then and there under the
duty to submit to being drafted into the military service of the United
States under the provisions of said act, etc.
It will be noted that this count of the indictment with both clear-
ness and certainty allèges the conspiracy of the défendants, entered
into for the purpose of committing the ofifense therein specified, de-
scribing it in the words of the statute which créâtes it, and to thèse
allégations is added the names of the persons with whom they con-
spired, and who, with others, were to be influenced by them, together
with allégations of intent and purpose, and that they were armed and
prepared to carry out the purpose of the conspiracy by force. The
conspiracy in this count is the gist of the crime, and every ingrédient
of the offense is accurately stated, and apprises the accused of the
crime with which they stand charged. Clearly the accused were fur-
nished by the allégations of this count of the indictment with such a
description of the charge against them as would enable them to make
their défense and avail themselves of their conviction or acquittai for
protection against a further prosecution for the same cause.
[3] Counts 2 and 3 of the indictment are drawn under the provi-
sions of the act of June 15, 1917 (40 Stat. 217, c. 30), which provide
that :
"If two or more persons conspire to vlolate the provisions of sections two
or three of this titlc, and one or more of such persons does any act to effect
the object of the conspiracy, each of the parties to such conspiracy shall be
punished," etc. Title 1, § 4 (Comp. St. 1918, § 10212d.)
This Statute prohibits two or more persons conspiring to willfully
cause or attempt to cause or incite or attempt to incite insubordina-
tion, disloyalty, mutiny, or refusai of duty in the military or naval
forces of the United States, in the first instance; and, in the second,
to willfully obstnict or attempt to obstruct the recruiting or enlist-
ment service of the United States.
40 262 FEDERAL REPORTER
The second count of the indictment sets forth the offense charged
fuUy and clearly in the language o£ the statute, and in addition there-
to, with the évident purpose of preventing uncertainty or ambiguity,
further allèges éléments entering into and constituting the offense, as
the time, place, the persons conspiring, whom they conspired with,
and that the purpose of this conspiracy with the persons last named
in the indictment was to knowingly, willfuUy, unlawfully, and felo-
niously' combine, conspire, conf ederate, and agrée with each other and
with the persons last named in the indictment to cause and attempt to
cause insubordination, disloyalty, mutiny, and refusai of duty in the
military forces of the United States ; and in said count it is specifically
alleged that the défendants did conspire, combine, confederate, and
agrée with each other and the persons named in the indictment to in-
duce, entice, persuade, and coerce Monroe Wright, and others in said
count named, to fail and refuse to submit to and perform their duties
as a part of the military and naval forces of the United States, when
called for duty under the provisions of the act of May 18, 1917, known
as the Sélective Service Law, and the proclamation and régulations
duly prçmulgated thereunder.
This count further allèges that the persons last named, with whom
défendants conspired, were citizens of the United States, alleging their
âges, and that they had submitted to and had been registered in accord-
ance with the terms of said act, and it is then alleged that it was the
purpose and intent of the défendants that thèse various persons named
in the indictment, when called for duty and service in the military and
naval forces of the United States, were to be disloyal to the United
States, and were to mutiny and rebel against the authority of the Unit-
ed States, and refuse to perform their duties as a part of the military
and naval forces of the United States. Thereupon overt acts are al-
leged, specifying the time and the place of meeting of défendants in
pursuance of this unlawful conspiracy, and that it was for the purpose
of effecting the object thereof, and it recites with defîniteness and cer-
tainty the time, place, and substance of what was done by défend-
ants pursuant to said alleged conspiracy and for the purpose of effect-
ing the same.
The références to the allégations of the second count are true as
to the third count, except the conspiracy alleged in the third count
is a violation of that provision of the statute prohibiting obstructing
the recruiting and enlistment service of the United States.
It will be seen, therefore, that this indictment is not subject to
the criticism that it is uncertain, vague, or indefinite. The conspiracy
charged is set out with particularity, and counsel for défendants has
failed to point out any insufficiency in the statements of any of thèse
counts, and has failed to name a single subject or particular in which
there is any uncertainty or any indefiniteness. The indictment is defi-
nite and certain as to time and place, with the names of the parties
charged with having entered into the conspiracy — even the identical
place where it is alleged the conspiracy was formed, "at Mack Clark's
farm," is set forth — and the intent and purpose with which the con-
spiracy was formed ; and the indictment does not stop there, but par-
EEEDER V. UNITED STATES *1
ticularizes the îndîviduals whom the défendants are alleged to hâve
intended to influence, and just what the défendants would influence
them to do and net to do, with the manner in which this was to be ac-
complished.
It will therefore be seen that the question is not presented hère
as to whether or not each count of this indictment is sufficient to de-
scribe a statutory offense in the language of the statute, because the
pleader has fully covered the provisions of the statute in the différent
counts of the indictment, and in addition thereto has definitely alleged
facts and circumstances which include ail material éléments entering
into the ingrédients of the offense charged. Clearly the indictment
fumished the accused with a description of the charges against them
which would enable them to make their défense and avail themselves
of their conviction or acquittai for protection against a further prose-
cution for the same cause. It fully informed the court of the facts
relied upon, and the court rightly decided they were sufficient in law
to support a conviction, if one should be had, and properly overruled
the demurrer to the first, second, and third counts of the indictment.
Cochran v. U. S., 157 U. S. 286, 15 Sup. Ct. 628, 39 L. Ed. 704.
[4] Objection is made that the court denied the motion of the de-
fendants that they should be proceeded against upon only one count of
the indictment to be elected and designated by the prosecution. Thèse
three counts are for the same transaction, and the allégations of the
separate counts are stated within a distinct and separate provision of
the statute; each being entirely independent of the others. This is
permissible by express statute of the United States. R. S. § 1024
(section 1690, U. S. Comp. Stat.). The purpose of pleading the same
transaction in several counts as to the manner or means of its commis-
sion is to avoid at the trial an acquittai by reason of any unforeseen
lack of harmony between the allégations and the proof. In Dealy v.
U. S., 152 U. S. 542, 14 Sup. Ct. 681, 38 L. Ed. 545, the Suprême
Court of the United States said :
"It Is farailiar law that separate counts are unlted In one Indictment, elther
because entirely separate and distinct offenses are intended to be cbarged, or
because the pleader, having In mind but a single offense, varies the state-
nient in the several counts as to the manner or means of its commission, in
order to avoid at the trial an acquittai by reason of any unforeseen lack of
harmony between the allégations and the proofs. ♦ • * Yet, whatever
the purpose may be, each count is in form a distinct charge of a separate of-
fense, and hence a verdict of gullty or not gullty as to it is not responsive
to the charge in any other count."
See Corbin v. U. S., 205 Fed. 278, 125 C. C. A. 114; Kreuzer v.
U. S., 254 Fed. 34, 165 C. C. A. 444; Boone v. U. S., 257 Fed. 963,
— C. C. A. — .
It may be added that the longest term of imprisonment imposed
by the trial court upon any of the three counts of the indictment was
no greater than that which might hâve been imposed upon either count,
and the terms of imprisonment run concurrently. The sentence im-
posed, therefore, does not exceed that which might properly hâve been
imposed upon conviction under any single count.
There is an exception to the failure of the court to direct a verdict
42 262 FEDERAL BEPOBTEB
of not guilty at the close of the plaintifï's évidence. The question
ofthe sufficiency of the évidence to sustain a verdict of guilty was not
raised in the trial court by a renewal of the motion at the close of
ail of the évidence, and it may not now be urged by the défendants,
unless, in our discrétion, we détermine to consider it. We find in the
record no sufficient reason for the exercise of such discrétion.
Défendants' exceptions numbered 2 to 7, inclusive, are largely de-
voted to the considération of the effect of the testimony, and there-
fore to the weight to which it is entitled. The jury having seen the
witnesses and heard the évidence, the weight that should be attached to
the statements of the witnesses, complained of by counsel for défend-
ants, was a matter peculiarly within the province of the jury. The
record contains proof of the existence in the state of Oklahoma, where
this cause of action arose, of an organization the declared purpose of
which was to do the very thing prohibited by the statute above cited,
and that thèse défendants, acting as members of such organization, ac-
tually conspired, agreed, and confederated together to do the things
the indictment allèges against them and for the purposes alleged in the
indictment. Numerous overt acts were shown, including the défend-
ants arming themselves and others, and agreeing to do by force and
violence the things prohibited by the statute above quoted.
Défendants object to the testimony of the witness Parker, alleging
he was permitted to testify to what one of the défendants told him.
The record discloses that he was présent with défendants at a meet-
ing, and that his testimony, complained of hère, was an account of
a report made by one of the members of the organization as a part
of the proceedings at this meeting. This testimony was compétent as
to ail défendants présent.
[5] Défendants contend they were convicted on the testimony of
Monroe Wright, a coconspirator, and that his uncorroborated testi-
mony was insufficient to warrant such conviction. Wright was only
one of a number of witnesses who testified to the circumstances at-
tending the formation of the organization to which thèse défendants
belonged, as well as an account of différent meetings held by members
of the organization, défendants and others. The facts and circum-
stances, independent of what was said and done at the meetings, tend to
support and corroborate the statements of the witness Wright. The
record contains no request that the court caution the jury against too
much reliance upon the testimony of this witness as an accomplice,
and against believing such testimony without corroboration ; and
while it is the better practice for courts to caution juries against too
much reliance upon testimony of accomplices, and to require corrobo-
rating testimony to give credence to such évidence, there is no absolute
rule of law preventing convictions upon the testimony of accomplices,
if juries believe them. Caminetti v. U. S., 242 U. S. 470, 495, 37 Sup.
Ct. 192, 61 L. Ed. 442, L. R. A. 1917F, 502, Ann. Cas. 1917B, 1168;
Bishop, Crim. Proc. (2d Ed.) §■ 1081, and cases cited in the note.
[8] Défendants insist that the alleged overt acts are not such as
contemplated in the provisions of the statute alleged to hâve been vio-
lated, being merely a séries of acts embraced within the original con-
EEEDEB V. UNITED STATES *3
4262 p.)
fédération. If we understand the argument presented by counsel, it
is that, because they occurred upon the date upon which the proof s
showed the meeting was held and the purpose of the organization dis-
closed, they were not acts intended to carry into effect the original
agreement. The conspiracy was complète when the agreement was
entered into. Immediately thereafter défendants participated in
holding further meetings, sêcuring additional members of the organi-
zation, securing arms and ammunition, ap~pointing one of défendants
the représentative of that organization to go to Chicago for conférence
with the I. W. W., and to act with them against the government of the
United States in violation of the particular statute in question — ail
overt acts within the allégations of the indictment.
Counsel for défendants argues that the défendant Stuart's name
is mentioned but three times in the record. This goes to the suffi-
ciency of the évidence, and that question is not hère for our con-
sidération. In passing, however, it may be noted that we find much
in this record in criticism of an attempt to minimize the part this
défendant assumed in this prohibited transaction. It is very évi-
dent upon the face of the record that he was one of the moving spirits
in the enterprise ; that he was one of the first to report to the meeting
at Mack Clark's farm, when he presented a report there of 75 or 100
that he had secured to join the organization and who were ready for ac-
tion. The fact that he had taken this action before this meeting at
Clark's farm and presented the report there as an encouragement for
organization for this unlawf ul purpose, does not relieve him of responsi-
bility for the agreement that was then and there entered into ; nor does
it tend to relieve him from responsibility for the completed offense,
which is evidenced by overt acts of other coconspirators subséquent
to the meeting.
[7] Défendants then contend that language is not proximately ca-
pable of causing insubordination, disloyalty, mutiny, and refusai of
duty in the military and naval forces of the United States, or obstruct-
ing the recruiting service of the United States, unless the circum-
stances assure that it will reach members of the actual forces, or con-
flict with agencies of the recruiting service, as the case may be, and,
further, that there was nothing said or donc by défendants that ever
reached members of the actual forces of the United States, or con-
flicted with any of the agencies of the recruiting service, and that it
does not appear that a single person was ever influenced to the détri-
ment of the government by anything said or donc by the alleged con-
spirators.
The answer to this objection is that the indictment allèges the names
of certain persons, whose âges are given and their citizenship alleged,
with the further allégation that they had registered and' were liable
for service, and that défendants conspired with the persons so named
with the intent and purpose to do the things prohibited by this statute.
The Circuit Court of Appeals of the Fifth Circuit, in Deason v. U.
S., 254 Fed. 259, 165 C. C. A. 547, properly construed the provisions
of the act of June 15, 1917, making it an offense to willfully obstruct
the recruiting or enlistment service of the United States, wherein the
4Â 262 FEDERAL REPOBTEB
court saîd : The word "obstruct" is not used as the équivalent of "pre-
vent," but rather of "to make difBcult," and to warrant conviction for
its violation it need not be shown that défendants' words or acts pre-
vented recruiting or enlistment.
The jury, having considered the testimony and the facts and cir-
cumstances, determined this question against ithe défendants, and
there is substantial évidence to sustain such finding.
[8] The court refused to strike out and take from the jury testi-
mony wrhich défendants say vi^as practically an assumption that the
organizations known as "W. C. U." and "I. W. W." were and are
illégal and outlavi' organizations, without proving the same by compé-
tent évidence. An examination of this record discloses that ail of this
testimony had relation to the common purpose of violating the provi-
sions of the statute, the proclamation, and régulations as chargea, and
that thèse organizations were working with défendants in the carry-
ing out of the intents and purposes of the alleged conspiracy. A con-
spiracy has been shown, and thèse other organizations entered into
that conspiracy. An act of such organizations in furtherance of the
common purpose is évidence against ail coconspirators ; and this is so,
though the conspirator committing the act was not a défendant in the
case being tried. Clune v. U. S., 159 U. S. 390, 16 Sup. Ct. 125, 40
L. Ed. 269; Isenhouer et al. v. U. S., 256 Fed. 842, C. C. A. .
That the plans and purposes of thèse défendants were not con-
summated is due to no fault of theirs. It is clear that the organ-
ization of which they were members had for its purpose the viola-
tion of the statutes of the United States in question. It is equally
clear they were each of them active in the formation of this organi-
zation, with a full understanding of its unlawful purpose, and co-
operated toward efTecting its object.
Finding no prejudicial error, the judgment of conviction is af-
firmed.
MABTIN V. IMBRIB et al.
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 39.
1. Action <S=»22 — Bill tob specifio peefoemance, but seekinq damages, to
be tbeated as law action.
A bill for spécifie performance of an alleged contract to purchase cer-
tain corporate stock and sell one-half to plalntlft, but really seeking dam-
ages for the refusai to sell half the stock to plalntlfC, should hâve been
treated as a eommon-law action for breaeh of contract.
2. Joint adventubes <S=>1 — Fob indefinite peeiod teeminate at wiix op
bithee pabty.
An arrangement for an Indeflnlte perlod, under which défendants were
to purchase corporate stock at a speclfled price for joint account of
plaintiff and défendants, could be terminated at the wlll of either party.
3. Joint adventubes ®=»5(2) — Evidence sufficient to show tebmination.
Evidence held to sustain a finding that défendants had terminated a
contract for purchase of stock for joint account by notifying plaintlff of
such termlnation.
€==>For otber cases see same topic & KEY-NUMBEÎR in ail Key-Numbered Dlgests & Indexes
MARTIN V. IMBEIE 45
C2e2 F.y
4. Appeal and ebbob i®=>197(4) — Objection that évidence was outsidb
issue too late on appeal.
In équitable action for spécifie performance of a contract for purchase
of stock for joint account, where évidence regarding the termination of
the contract was recelved without objection, the plaintifE cannot contena
on appeal that the termination of the contract should hâve been pleaded.
5. Appeal and ebbob <ê=>171(3) — Question not kaised below cannot be
consideeed.
Where a case Is tried below on a theory that a partlcular matter is
withln the issues, it cannot be contended on appeal that such matter was
without the pleadlngs.
6. Joint adventubeb <ê=5(2) — Teemination or conteact pbovable under
GENEBAL DENIAL.
In suit on contract for purchase of stock for joint account, a gênerai
déniai authorlzed défendant to show that the contract had been terminat-
ed at the time of the transactions involved.
Appeal from the District Court of the United States for the South-
ern District of New York.
Bill for an accounting by George A. Martin against William Mor-
ris Imbrie and others copartners trading and doing business as Wil-
liam Morris Imbrie & Co. Decree for défendants, and complainant
appeals. Affirmed.
Arthur N. Sager, of New York City (William A. Griffith, of Pitts-
burgh, Pa., of counsel), for appellant.
Rabenold & Scribner, of New York City (Mark Hyman and Al-
lan R. Campbell, both of New York City, of counsel), for appellees.
Before ROGERS, HOUGH. and MANTON, Circuit Judges.
MANTON, Circuit Judge. A bill of complaint filed by the ap-
pellant alleged that the appellees on the 14th of November, 1919,
entered into a contract by the terms of which the appellees were to
purchase common stock of the Cambria Fuel Company for the joint
benefit of the .parties to this litigation. This stock was to be pur-
chased at a price not to exceed $10 per share. The appellant agreed
not to purchase any of the stock, but to refer ail the persons who of-
fered any of the stock to him for purchase to the appellees, so that ail
purchases of this stock for the joint benefit of the parties, under the
agreement, would be made through the appellees. It further allèges
that certain purchases were made in the months of November and
December, 1910, and further that during the years 1912 to 1916, ap-
pellees purchased common stock of the Cambria Fuel Company to
the extent of 3,608 shares; that 2,500 shares of this stock were of-
fered to the appellant, and he declined to purchase the same, and
ref erred the seller to the appellees as probable purchasers of the stock.
It is then alleged that, because of this agreement referred to, the
appellees were the agents and trustées of the appellant, and that the
appellant was ready and able to pay his share toward the purchase
of said stock, and demanded that the appellees account for this stock
as to any dividends paid, and directing that one-half the stock thus
purchased be delivered over to the appellant upon payment of the
^ssFor otber cases see same topic & KSY-NUMBBR in ail Key-Numbered Digests & Indexes
46 262 FSDIiBAL BSPOBTKB
just and correct amount due and owing by the appellant. From the
record, it does not appear that this stock was of a peculiar kind, or
was not purchasable in the market. The appellant has proceeded for
spécifie performance of a contract which deals merely with personal
property. The relief he seeks really is money damages for the re-
fusai to sell one-half of this stock to him, in addition to his share of
the dividends as may hâve been declared. The contract is purely one
of an agreement to sell stock or an interest in stock to the appellant,
which, if broken, entitled the appellant to maintain an action for
damages for breach of a simple contract. There could be no trust
created as to this stock, unless the appellant had some property in the
stock, as it was at the time in the custody of the appellees. The
case was tried in equity, but should hâve been treated as a common-
law action for breach of contract.
[1] Upon the merits of the claim, we are of the opinion that the
court correctly decided against the claim of the appellant. The
Cambria Fuel Company was a corporation organized under the laws
of the State of Wyoming, with a capital stock of $2,000,000. Its
business was mining coal and maintaining a gênerai store and elec-
tric power plant near the mines; 1,500,000 of this stock was com-
mon stock of the par value of $10, and the agreement to purchase
for the account of the appellant and appellees, made shortly prior
to December 10, 1910, is not disputed. The agreement itself was
oral. The fact of its existence has support in letters exchanged, in-
dicating the purchase of stock for the joint or common account of the
parties in the months of November and December, 1910. Upon the
trial, such an agreement was not disputed. The appellees were bank-
ers having an office in New York City. The appellant testified that
in November, 1910, he called at the appellees' office and had an in-
terview, which constitutes the agreement on which he seeks to main-
tain this action. Then and there it was agreed that common stock
from time to time be purchased by the appellees as cheaply as it
could be purchased, with a view of ultimately controlling the inter-
ests of the Cambria Fuel Company. AU the common stock was to
be divided as bought from time to time, and the appellant was to pay
one-half of the purchase price and receive in return one-half of the
stock. The price limit of the purchase was fîxed at $10.
The appellees' claims do not materially difïer from this version of
the agreement. The appellant has not received one-half of the stock,
nor paid therefor; that is, the purchases made beginning May 23,
1911, and ending April 25, 1916; and the reason therefor is asserted
to be that this contract was terminated about January, 1911. The
reason for the termination, as given, is that the appellant's partner
was in charge of the funds, books, and offices of the Cambria Fuel
Company, at Cambria, Wyo., being its secretary and treasurer during
the year 1910. It was said unauthorized withdrawals were made
from the funds of the Cambria Fuel Company, and unauthorized in-
debtedness incurred by one Law, a partner of appellant, and that
thèse matters were called to the attention of the appellees, and re-
sulted in an investigation by the directors of the Cambria Fuel Com-
MABTIK V, niBRIE 47
(262 p.)
pany. Report of this investigation was submitted at a directors' meet-
ing on January 21, 1911, and a record thereof was made in the
minutes of the company, resulting in a demand at the meeting for the
résignation of the appellant's partner, Mr. Law. The appellant op-
posed this, and renominated Mr. Law as secretary and treasurer, and
in the contest which ensued the appellant and his partner were de-
feated.
Then, the appellees testified, they told appellant they would give
appellant no further interest in any purchase of said stock. They
terminated the contract, and so stated on two or three occasions with-
in a few weeks after January, 1911. This testimony was not refuted
or denied by the appellant, and stands uncontradicted. The oppor-
tunity to make déniai thereof was accorded the appellant, for he was
présent in court during the trial and after this testimony of the
appellees was given. During this period from January 31, 1911, to
March, 1916, lîie appellant did not institute a suit, nor even demand
an accounting or damages. He did ask for a reconsideration of the
appellees' décision to permit of no further interest for appellant in
the purchases, and this they refused. The appellant states that he
was refused information as to the purchases in 1912. The coal
properties were of a spéculative kind, with ail the uncertainties of
mines and markets, and the value of the stock was very uncertain,
and subject to many contingencies. The war produced a high value
for coal because of the shortage, and the priées thus obtained made
the stock more valuable, and this undoubtedly gives rise to the prés-
ent demands and this litigation.
[2] We are of the opinion that, assuming the appellant's version
of the contract to be the truthful one, it was for an indefinite time
and an arrangement which might be terminated at the will of either
party. It could not be binding forever, and it was not an agreement
that required mutual consent before its termination. Karrick v. Han-
naman, 168 U. S. 328, 18 Sup. Ct. 135, 42 L. Ed. 484. In Marston
V. Gould, 69 N. Y. 220, a similar arrangement was made for the pur-
chase of stock for a joint account. No time was fîxed for the op-
érations. The court said:
"The armngement could hâve been terminated at any time by the mutual
consent of the parties, or at the option of either upon notice to the other. The
connection was dissolvaWe at the will of either of the parties."
[3] The appellees exercised their right to dissolve the arrangement
and terminate it as stated above, and the détermination below of this
question of fact has ample évidence to support it, and, indeed, stands
uncontradicted in the record.
[4-6] The appellant contends that it was necessary for the appel-
lees to plead a rescission of the contract, for this défense was open to
them. The answer denied the existence of the contract. The is-
sue then presented was whether there was a binding and enforceable
contract at the time of the purchase of the stock in question. The
évidence as to the termination of the contract was not objected to,
and the question of pleading was not raised at the trial, either by
objection or motion. Effect must therefore be given to the rule that
48 262 FEDERAL RBPOKTBB
where the parties, with the assent of the court, united in tryîng a case
on the theory that a particular matter is within the issues, that theory
cannot be rejected when the case cornes up for review. San Juan
Light Co. V. Requena, 224 U. S. 89, 12 Sup. Ct. 399, 56 L. Ed. 680.
We are of the opinion that the theory of the appellant that a rescis-
sion should hâve been pleaded cannot now be présentée upon this ap-
peal. Huse v. U. S., 222 U. S. 496, 32 Sup. Ct. 119, 56 L. Ed. 285;
Grant Bros. v. U. S., 232 U. S. 647, 34 Sup.. Ct. 452, 58 L. Ed. 776.
But, aside from this rule, we are of the opinion that, on a gênerai
déniai, it was permissible for the appellees to prove that the contract
was terminated at the time of the purchase of the stock in question.
The decree below is affirmed.
HOROWITZ et al. v. UNITBD STATES. •
(Circuit Court of Appeals, Second Circuit. Deoember 19, 1919.)
No. 23.
1. Cbiminai, law <&=>1149 — Discbetion to grant bili, of pabticttlabs.
Déniai of a motion for blll of partlculars by défendants in a crlmlnal
case Is a raatter of discrétion, and not revlewaWe, except in case of plaln
abuse of discrétion.
2. Indictment and information <g=>127 — Counts fob ttsino and bellinq
QOVEBNMENT PEOPEBTY WHICH MAT BB JOINED.
Counts, each charglng défendants wlth applying to thelr own use and
selling, at the same place and about the same tlme, cloth, the property of
the United States, fumlshed under the same contract to be iised in
maklng clothing for soldiers of the army, in violation of Crlmlnal Code,
§ 36 (Comp. St. § 10200), heU properly Jolned under Rev. St. § 1024 (Comp.
St. § 1690).
8. Abmy and navt i©=a40 — TJni-awfui, selling of cloth fuenished fob aemy
CLOTHING CBIMINAL OFFENSE.
The unlawful selUng of cloth, fumlshed by the United States to be made
into clothing for use of the army, 'keU an offense within Crlmlnal Code,
§ 36 (Comp. St. § 10200).
4. AeMT AND NAVT (@=>40 INDICTMENT FOB SELLING PBOPEETY FUENISHED FOB
ARMT USE SUFFICIENT.
In an Indictment under Crlmlnal Code, § 36 (Comp. St. § 10200), for
unlawfully selling property of the United States fumlshed for use of the
army, it Is not neeessary to state hov? the property came into possession
of défendants.
6. Ceiminal law i®=>730(14) — Aegument of counsel not peejudicial eeKok.
In prosecutlon for selling property of United States fumlshed for the
army, remarks made to the jury by counsel for the prosecutlon conoemlng
existence of war and the need of clothing, taken in connection with those
of the judge, when objection was made, heU, not to constitute prejudicial
error.
In Error to the District Court of the United States for the Southern
District of New York.
Ciiminal prosecution by the United States against H3mian Horowitz
and Benjamin Horowitz. Judgment of conviction, and défendants
bring error. Affirmed.
®=7For oUier cases see same topic & KflY-NUMBEB In aU Key-Numbered Digests & Indexe»
•Certlorarl denled 251 U. S. — , 40 Sup. Ct. 396, 64 L. Ed. — .
HOROWITZ V. UNITED STATES 49
C262 F.)
Fitzgerald, Stapleton & Mahon, of New York City (E. N. Zoline and
L. D. Stapleton, both of New York City, of counsel), for plaintiffs in
error.
Francis G. Caffey, U. S. Atty., of New York City (F. M. Roosa,
of New York City, of counsel), for the United States.
Before WARD, ROGERS, and MANTON, Circuit Judges.
WARD, Circuit Judge. This is a writ of error to a judgment of
conviction of Hyman Horowitz and Benjamin, his son, upon an indict-
ment under section 36, U. S. Criminal Code (Comp. St. § 10200), which
reads :
"Whoever shall steal, embezzle, or knowingly apply to his own use, or un-
lawfuUy sell, convey, or dispose of, any ordnance, arms, ammunition, clothlng,
subsistence, stores, money, or other property of the United States fumished
or to be used for the mllitary or naval service shall be punished as prescribed
in the preoeding section."
The indictment contains six counts, in each of which both défend-
ants are charged with willfully, feloniously, and knowingly, apply-
ing to their own use, and knowingly, feloniously, and unlawfully
selling certain pièces of woolen cloth in the first five counts, and
10 baies of cotton drilling in the sixth count, ail being property
oi the United States intended to be used for the military service,
on six separate occasions between November 8 and December 11,
1917. Counts 2, 3, 4, and 5 were dismissed during the trial against
Hyman Horowitz, and 3 and 5 as against Benjamin Horowitz; both
being convicted on the first and sixth counts, and the jury disagreeing
as to Benjamin Horowitz on counts 2 and 4.
October 22, 1917, the corporation of Horowitz & Marcowitz, of
which Hyman Horowitz was vice président and Benjamin Horowitz
was an employé, entered into a contract with the Quartermaster's Corps
of the United States Army for the manufacture of 150,000 pairs of
woolen breeches. The woolen cloth and cotton drilling were to be fur-
nished by the United States, and were to remain, including rags and
clippings, the property of the United States. The verdict of the jury
conclusively settles the fact that the défendants did commit the offenses
charged.
[1] The défendants moved for a bill of particulars, which motion
was denied. This was a matter of discrétion, not to be reviewed, ex-
cept in case of plain abuse of discrétion, of which we discover no évi-
dence. The défendants were not surprised or misled, or in any way
prejudiced, hy want of this information. Indeed, what was asked for
amounted to a complète discovery of the whole of the government's
case.
[2] The joinder of thèse separate offenses and the trial of the de-
fendants together was entirely proper within section 1024, U. S. Rev.
Stat. (Comp. St. § 1690), which reads :
"When there are several charges against any person for the same act or
transaction, or for tvi'o or more acts or transactions connected together,
or for two or more acts or transactions of the same class of crimes or of-
fenses, wMch may be property jolned, instead of having several indlct-
ments the whole may be jolned in one indictment in separate counts; and if
262 F.— 4
50 262 FBDEBA.L RBPORT&B
two or more Indlctments are found In euch cases, the court may order them
to be Consolidated."
The several charges were connectée! together and were of the same
class of offenses. The same persons were charged in each count with
acts connected together, viz. applying to their own use, etc., property
of the same person which was to be used in the same contract at the
same place and about the same time and they were charged with exact-
ly the same offense in each count. McElroy v. United States, 164 U.
S. 76, 17 Sup. Ct. 31, 41 L,. Ed. 355, on which the défendants rely, was
quite différent. In it four separate indictments were consolidated,
which charged différent classes of crime, viz. two for assault with
intent to kill and two for arson. Five of the défendants were indicted
in three of the indictments, and cnly three of them in the f ourth. The
instant case is more like Pointer v. United States, 151 U. S. 396, 14
Sup. Ct. 410, 38 L. Ed. 208.
[3] It is argued that section 36 applies only to cloth, and not to
clothing. It is said that cloth has been held by the Suprême Court to
be a différent thing from clothing. Arnold v. United States, 147 U.
S. 494, 13 Sup. Ct. 406, 37 L. Ed. 253. The construction of every
statute dépends upon its own language and intent. Arnold v. United
States was a revenue case, and a décision that cloth and clothing are
différent things in respect to custora duties does not prove that cloth
is not included as a similar thing to "clothing" under a criminal stat-
ute. We think the gênerai words with which the classes enumerated
in this section end, "ail other property of the United States furnished
or to be used for the military or naval service," make it clear that
cloth is covered as property similar to clothing. Indeed, having in
mind the mischief to be corrected, it is inconceivable that Congress
intended to protect clothing, and leave such property as cloth, intended
for use in making it for the military or naval service, unprotected.
[4] It is further argued that the motion in arrest of judgment
should hâve been granted, because the indictment did not state how
the property came into the possession of the défendants. This might
be so, if the government were charging the crime of embezzlement,
although such an objection at the end of the trial, without any pre-
vious demurrer or motion to quash, might well be held too late. More-
over, there being no reason to think that the défendants were surprised,
misled, or prejudiced in any way, the indictment must be held suffi-
cient under U. S. Rev. Stat. § 1025 (Comp. St. § 1691), which reads:
"No Indictment found or presented by a grand jury In any District or Cir-
cuit or other court of the United States shall be deemed Insufficient, nor shall
the trial, judgment, or other proceeding thereon be affected by reason of any
defect or Imperfection in matter of form only, wlilch shall not tend to the
préjudice of the défendant."
The offense charged was, in the words of the statute, that the "de-
fendants had knowingly," etc., "applied to their own use" and sold
the property in question. The statute does not restrict the offense to
acts of servants, agents, or bailees, who, coming rightfully into pos-
session of property, subsequently misappropriate it. Any one who does
the things specified in the act commits the offense and is liable to pun-
ishment. The first word of the section is "whoever."
HOKOWITZ V. UNITED STATES 51
(262 F.>
There is nothing in the objection ihat the court struck out the firsl
count, and therefore the défendants should not hâve been convicted
under it. In a colloquy with counsel, Judge Learned Hand did say,
no doubt inadvertently, that the first count was stricken out ; but be-
fore the colloquy ended he stated that the first count remained as
against both Hyman Horowitz and Benjamin Horowitz. It is also
complained that he did not state with sufificient cleamess to the jury
in his charge what counts remained for their considération, and upon
which of them the défendants could be convicted. The hast évidence
that the jury comprehended the situation clearly is that their verdict
was against Hyman Horowitz on two counts, 1 and 6, and against
Benjamin Horowitz only on two, 1 and 6, disagreeing as to 2 and 4.
[5] One reading the quotations from the United States attomey's
summing up to the jury, of which the plaintiflfs in error complain, sep-
arately, might infer that the jury must or at least may hâve been im-
properly inflamed; but taken with the whole address, and especially
with the judge's remarks on the two occasions when the défendants'
counsel objected at the time, we are quite clear that they could not
hâve been:
"It Is a crime which It seems to me demands your utmost considération m
thls hour. It Is a crime which — ^well, I cannot get a word bad enough to
descrlbe It, gentlemen, at thls tlme when the boys need clothing, when they
need thls cloth for clothing, when men are giving their blood, and when ail
you men are giving your money —
"Mr. O'Gorman: If your honor please, on behalf of the défendant Hyman
Horowitz, I object to the remarks of the prosecutor, which are calculated to
dlvert the attention of the jurors from the Issue before them. It is an attempt
to inflame and préjudice the jury, and Is objectlonable, If not reprehensible.
"The Court : I think he only meant to impress them with the serlousness of
the conditions before them, just as you were talking about the seriousness of
It to the défendants.
"Mr. Eoosa: Yes, your honor.
"Mr. O'Gorman : But he is divertlng the attention of the jury from the thlng
which Is before them. I take exception to your honor's refusai.
"The Court : You bave not asked me to do anythlng for you yet
"Mr. O'Gorman : To instruct the jury to disregard hls référence, that Is,
the référence of the prosecutor which he has just made, and to admonlsh the
prosecutor not to repeat them. The défendants are enUtled to a fair, impar-
tial trial of thls case on the Issues framed by the pleadlngs.
"The Court: Absolutely. » » •
"You know that every great war is attended with Its profiteers, and Its
thieves, and you know how dlfBcult it Is —
"Mr. O'Gorman: If your honor please, I regret I must again object to thls
summatlon of counsel; counsel is obvlously and hitentlonally diverting the
attention of the jury from the issues In thls case. Thls Is clearly an attempt
to inflame and Influence and préjudice the jury, and to appeal to their
sympathies.
"The Court: No, I don't thlnk so; If he confines himself to the questions
that are at issue hère.
"Mr. O'Gorman; I ask an exception, if your honor please, on behalf of both
défendants.
"The Court : Confine yourself to the issues, but you may state that they are
important Issues to both sides ; I will allow that, as I allowed the défendants
to state that It was important to them. I don't tlùnk you ought to refer to the
Instance of the war."
The judgment is affirmed.
52 262 FEDSRAL BBFORTSB
LEDERBE, Collecter of Internai Eevenue, v. NORTHERN TRUST CO. et al.»
(Circuit Court of Appeals, Third Circuit. January 7, 1920.)
No. 2496.
1. CouBTS <S=366(6) — Décisions of state oouets constbuino inhkmtanck
TAX LAWS BINDING ON FEDERAL COUBT.
Décisions of state courts, eonstruing inheritance tax laws of state, are
binding on ttie fédéral courts.
2. Intebnal eevenue ®=»25 — Déduction of state collateeal inhebitanck
tax roe asskssment of fedheal estate tax.
In View of the history of tlie Législature, collatéral Inheritance taxes
imposed by the state of Pennsylvania under Collatéral Inheritance Tax
Act 1887, §§ 1, 5, 9, 15, is a tax on the estate as distlnguished from a
tax on the inheritance, and the amount of taxes paid thereunder may be
deducted as a charge against the estate of a décèdent allowed by the laws
of the jurisdletlon in Computing the net estate under Act Gong. Sept. 8,
1916, §§ 201-203 (Comp. St. §§ 6336%b-€336J^d) imposlng a fédéral tax
on the transfer of the net estate of décèdent
In Error to the District of the United States for the Eastern Dis-
trict of Pennsylvania ; J. Whitaker Thompson, Judge.
Action by the Northern Trust Company and Henry R. Zesinger, ex-
ecutors under the will of Lewis W. Klahr, deceased, against Ephraim
Lederer, Collecter of Internai Revenue. There was a judgment for
plaintiffs (257 Fed. 812), and défendant brings error. Affirmed.
The Collecter of Internai Revenue assessed the decedent'a estate with a
tax under the provisions of Sections 201, 202 and 203 of the Act of Congress
of September 8, 1916, entitled "An Act to Increase the revenue and for other
purposes." 39 Stat. 777, Comp. St. 1918, §§ 6336%b, 6336%c, 6336%d. The
executors claimed that in ascertalning the value of the decedent's "net estate"
as a basls of assessment, in the way provided by Section 203 of the act,
there should hâve been deducted from the gross estate the collatéral inherit-
ance tax of $39,450.92, due and subsequently paid the Commonwealth of Penn-
sylvania under the Act of Assembly of May 6, 1887 (P. L. 79). This déduction,
had it been allowed, would hâve reduced the net estate of the décèdent in the
amount of the state tax, and, correspondingly, would hâve reduced the assess-
ment of the Fédéral tax in the sum of $2,331.56. The Collector of Internai
Revenue refused to allow the déduction. On appeal, the Commlssioner of In-
ternai Revenue approved the 001160101*8 assessment The executors paid the
tax under protest and brought this suit to recover It. By stipulation, the
Issue was tried before the District Judge, who, on an opinion reported at 257
Ped. 812, entered judgment for the executors of the estate for the latter sum
and luterest. This writ, prosecuted by the CoUector, brings the judgment hère
for review.
The applicable provisions of the dted statutes are as foUows:
The Act of Congress of September 8, 1916, provides, Inter alla:
Witle II. Estate Tax.
"Section 201. That a tax (hereinafter • • « referred to as the tax),
equal to the followlng percentages of the value of the net estate to be detes-
mined as provided in section two hundred three, is hereby imposed upon the
transfer of the net estate of every décèdent dying after the passage of this
act"
"Section 203. ^'e( Value of Estate, Bow Determined. — For the purpose of
the tax the value of the net estate shall be determined —
"(a) In the case of a résident, by deductlng from the value of the gross
estate —
®=3For otJier cases see same topic & KEY-NUMBBB in ail Key-Numbered Digests à Indexes
•Certiorarl denied 252 U. S. — , 40 Sup. Ct. 483, «4 lu Ed. — .
LEDERER V. NORTHERN TRUST CO. 53
(262 F.)
"(1) Such amounts for fimeral expenses, administration expenses. clalms
against the estate, * • • and such other charges against the estate, as
are allowed by the laws of ttie jurisdictlon, « * * under which the estate
is being administered."
The Collatéral Inheritanee Tax of the General Assembly of Pennsylvania
of May 6, 1887, provides, Inter alla:
"Section 1. • * * That ail estâtes, • • • passing from any person,
who may die seized or possessed of such estâtes," to collaterals "shall be
* * * subject to a tax of flve dollars on every hundred dollars of the dear
value of such estate or estâtes, ♦ * * to be paid to the use of the common-
wealth. * * * AU owners of such estâtes, and ail executors and admin-
istrators and thelr sureties, shall only be dlscharged from llabUlty for the
amount of such taxes * * • by having paid the same over for the use
aforesaid."
Section 5 provides that before the exeeutor or administrator shall pay any
legacy or share in the distribution of an estate subject to the collatéral in-
heritanee tax, he shall deduct therefrom the tax at the rate prescrlbed in Sec-
tion 1 and pay it to the Commonwealth.
Section 9 provides that the Reglster shall issue duplicate receipts for the
tax when paid by an exeeutor or administrator, which, when countersigned
by the Auditor General, shall be "a proper voucher in the settlement of the
estate."
Section 15 authorizes the Orphans' Court, on discovery by the Eegister that
the tax has not been paid, to cite the exeeutor or administrator to appear
and show cause why the tax should not be paid.
Francis Fisher Kane, U. S. Atty., and Robert J. Sterrett, Asst. U. S.
Atty., both of Philadelphia, Pa. (R. D. Thurber, of New York City, of
counsel), for plaintiff in error.
William Henry Snyder and William M. Stewart, Jr., both of Phil-
adelphia, Fa., for défendants in error.
Before BUFFINGTON and WOOLLEY, Circuit Judges, and
MORRIS, District Judge.
WOOLLEY, Circuit Judge (after stating the case as above). The
question is: Whether the collatéral inheritanee tax imposed by the
Pennsylvania Act of 1887 falls within the déductions allowed by sec-
tion 203 of the Fédéral estate tax Act of 1916 in arriving at the value
of the "net estate" on which alone the Fédéral act imposes the tax. In
other words : Is the amount which the decedent's estate paid the Com-
monwealth of Pennsylvania as a collatéral inheritanee tax either (a)
"an administration expense," or (b) "a claim against the estate," or (c)
one of "such other charges against the estate, as are allowed by the
laws of the jurisdiction * * * under which the estate is being
administered?"
This controversy concerns broadly the privilèges which governments
make tlie subject of "death duties" — the privilège of giving and the
privilège of receiving property on death, and the conditions imposed
and price exacted by the State for the exercise of those privilèges.
Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, 287, 18
Sup. Ct. 594, 42 L. Ed. 1037; Maxwell v. Bugbee, 250 U. S. 525, 40
Sup. Ct. 2, 64 L. Ed. — .
The question hère tums on the nature of the two taxes, Fédéral and
State. It concerns generally the Fédéral tax, which both parties con-
cède to be an estate tax, that is, a tax that relates not to an interest
54 262 FEDERAL REPORTER
to which some person has succeeded by inheritance, bequest, or de-
vise, but to an interest which has ceased by reason of death; and
it is imposed not upon the interest of the récent owner or upon his
privilège to dispose of it, but upon the transfer of the interest in its
dévolution. The nature of the Fédéral tax being conceded, the matter
for décision concems particularly the nature of the collatéral inher-
itance tax of Pennsylvania, éind raises the question, whether that tax is
an estate tax, which, like the Fédéral tax, concems an interest which
has ceased upon death, the burden of which is imposed upon the es-
tate of a décèdent, as claimed by the executors, or is a legacy or suc-
cession tax, which concems the privilège of receiving such an inter-
est, the burden of which is imposed upon the legatee or other benefi-
ciary, as claimed by the Collector.
The bearing of this question on the case in hand is, that if the col-
latéral inheritance tax of Pennsylvania is an estate tax and is therefore
a "charge" against the estate "allowed" in its settlement by the laws
of Pennsylvania, then the refusai of the Collector to deduct aie amount
of the tax from the gross in ascertaining the net estate of the décè-
dent as a basis of assessment was unwarranted. If, on the other hand,
it is a tax charged not against the estate, but against the legatee as a
condition imposed upon the transfer of the legacy, then the net estate of
the décèdent, determined without deducting the collatéral inheritance
tax paid the Commonwealth of Pennsylvania, was properly computed
under the Fédéral act and the tax assessed against the same was law-
ful.
The nature of collatéral inheritance taxes has been the subject of
many décisions, both Fédéral and State. The gênerai principle of
such of them as are termed legacy and succession taxes, when not
otherwise affected by statutory provisions, is that the tax is upon the
legacy before it reaches the hands of the legatee, whose property it
becomes only af ter it has yielded its contribution to the State and after
it has suffered a diminution to the amount of the tax in return for the
Legislature's assent to the bequest. Knowlton v. Moore, 178 U. S. 41.
20 Sup. Ct. 747, 44 L. Ed. 969, following United States v. Perkins, 163
U. S. 625, 16 Sup. Ct. 1073, 41 L. Ed. 287; Magoun v. Illinois Trust
& Savings Bank, 170 U. S. 283, 18 Sup. Ct. 594, 42 L. Ed. 1037 ;
Mager v. Grima, 8 How. 490, 493, 12 L. Ed. 1168.
But in looking for the nature of the collatéral inheritance tax under
considération, it is not necessary to seek light from statutes and dé-
cisions of other states, for the act shows its nature by its own clear
expressions aided by interprétations repeatedly made by the Suprême
Court of Pennsylvania.
The act provides that "ail estâtes * * * shall be subject" to
the tax; that executors and administrators shall pay the tax; that
until they pay it they shall not be discharged ; that the Auditor Gen-
eral's receipt for its payment shall be a proper voucher in the settle-
ment of the estate; and that in stating an account in the Orphans'
Court the tax shall be allowed and deducted before a balance for dis-
tribution is struck.
LEDEEEB V. NORTHERN TRUST CO. 55
(2«2 F.)
The tax, which opérâtes practically as a déduction from the share
of the beneficiary, is, nevertheless, charged against and paid by the es-
tate. In using the words "ail estâtes" shall be subject to the tax, the
Suprême Court of Pennsylvania has held that the Législature contem-
plated the property of the décèdent, not the interest therein of the
legatee or distributee, Del Buto's Estate, 45 Leg. Int. 474; How-
ell's Estate, 147 Pa. 164, 23 Atl. 403; that the tax is imposed only
once, and that is before the legacy has reached the legatee and before
it has become his property ; that it must be retained and paid by the
exécuter or administrator who has the decedent's property in charge;
that which the legatee really receives is not taxed at ail; his property
is that which is left after the tax has been taken off, Finnen's Estate,
196 Pa. 72, 46 Atl. 269. In Jackson v. Myers, 257 Pa. 104, 101 Atl. 341,
L. R. A. 1917F, 821, where the question was squarely raised, the Su-
prême Court decided that the collatéral inheritance tax of Pennsylvania
is not levied upon an inheritance or legacy but upon the estate of the
décèdent, holding that what passes to the legatee is simply the por-
tion of the estate remaining after the State has been satisfied by re-
ceiving the tax.
[1] Thèse décisions by the Suprême Court of Pennsylvania, con-
struing a statute of its own state, are binding on this court in a case
of this kind. From thèse décisions it appears to be settled in Penn-
sylvania that the collatéral inheritance tax of that state is an estate tax,
not a legacy tax, and that as such it is levied upon and made a charge
against the estate of the décèdent.
Consistently with this view, the Suprême Court of Pennsylvania
recently held, in a situation just the reverse of this, that in determin-
ing the amount of a decedent's estate for the purpose of assessing
the Pennsylvania collatéral inheritance tax, the Fédéral estate tax un-
der considération should first be deducted as a charge against the
estate. Knight's Estate, 261 Pa. 537, 104 Atl. 765.
[2] We are of opinion that the collatéral inheritance tax of Penn-
sylvania clearly falls within the provision of the Fédéral act as a
"charge" against the estate of a décèdent "allowed by the laws of
the jurisdiction * * * under which the estate is being settled," ana
is, therefore, properly déductible from the gross estate in determining
the net estate against which the Fédéral tax is assessed. There is,
therefore, no occasion to go further and décide the other questions
raised at the argument, whether the State collatéral inheritance tax is
also an "administration expense," or a "claim against the estate,"
similarly déductible under Section 203 of the Fédéral act in ascertain-
ing the decedent's net estate as a basis of taxation. A considération
of thèse aspects of the tax would require -us to reconcile at least two
opposing décisions rendered under state statutes with différent pro-
visions, Corbin v. Townshend, 92 Conn. 501, 103 Atl. 647; In re Sher-
man's Estate, 179 App. Div. 497, 166 N. Y. Supp. 19; and to déter-
mine whether the terms "administration expenses" and "claims against
the estate," as found in the statute, are restricted to or expanded be-
yond their ordinary meaning.
56 262 FEDERAL BHPOETBE
As thîs case arose before the Act of February 24, 1919 (40 Stat.
1057, c. 18) by which the ternis of the Act of September 8, 1916, were
materially changed, this décision bas no bearing on the later statute.
The judgment below is affirmed.
KING et al. v. BARR et al.»
(Circuit Court of Appeals, Nlnth Circuit. January 5, 1920.)
No. 3313.
1. Eqxtity <g=»114 — Intebveneb cannot challenge jtjeisdiction or court.
An Intervener cannot challenge the court's jurisdictlon, beeause, If the
court Is without jurisdictlon, the proceedings are void and wlthout effeet
upon the intervener, and also beeause equity rule 37 (198 Fed. xxviii, 115
C. C. A. xxviii) provides that interventions shall be in subordination to
and In récognition of the proprlety of the main proceeding.
2. Judgment ®=»299(1) — Nkcessity of cobbecting dubinq ouehent tebm of
COUET.
Errors In final Judgments can only be corrected by appeal, unless steps
be taken In the trial court for that purpose during the term In which
the judgment was entered.
3. EQurrT <®=114 — Inteevention aftbe entet of final decbee babbeo by
LACHES.
Where the final decree in a suit Involving the recelvershlp of a cor-
poration to satlsfy mortgage demands had been entered some six months
before a bondholder flled an application to Intervene which ehallenged
the validity of the entire proceeding, tield, that trial court did not abuse
its discrétion in denying such pétition, with leave to contest the disposai
of funds remainlng in the receiver's hands, in vlew of the fact that the
petltioner had known of the pending proceeding long before entry of the
final decree.
Appeal frora the District Court of the United States for the Central
Division of the District of Idaho ; Frank S. Dietrich, Judge.
Application hy E. A. King to file a pétition of intervention, in be-
half of himself and those who wish also to intervene, against Robert
H. Barr and others. From an order denying the application, the appli-
cants appeal. Affirmed.
W. C. Bristol, of Portland, Or., for appellants.
Eugène A. Cox, of I^ewiston, Idaho, and Richard W. Montague, H.
H. Parker, Joseph Simon, Wirt Minor, and John H. Hall, ail of Port-
land, Or., for appellees.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
ROSS, Circuit Judge. The présent appeal is from an order denying
(without préjudice to certain specified rights) the appellant King's ap-
plication to file a profïered pétition in intervention in a suit commenced
in the court below November 19, 1915, growing out of the undertak-
ing by the Lewiston Land & Water Company, Limited (hereinafter
called the Land Company), a corporation organized under the laws
of the State of Idaho, to plant fruit trees upon certain lands adjacent
to the city of Lewiston, in that state, the necessary water for the ir-
ÊS5»For other cases see same toplo & KBY-NUMBER In aU Ke7-Numbered Disests & Indexe*
•Rehearing denled February 9, 1920. Certlorari denled 252 U. S. — , iO Sup. Ct. 4SI, M Ia
KDIQ V. BAEB SI
(262 P.)
rigatîon of which was to be furnished through an extensîve water Sys-
tem by a subsidiary water company called Lewiston Sweetwater Irri-
gation Company, and to sell in small tracts to the public on the install-
ment plan the lands so improved and watered. The money with which
to do those things was, at least in large part, procured by borrowing
it upon bonds, secured Ijy trust deeds or mortgages, and in part by cer-
tain so-called gold notes, likewise secured. At the time of the com-
mencement of the suit, which was brought by a holder of stock in the
Land Company named Barr, a résident and citizen of the state of
Washington, on his own behalf and in behalf of ail other such stock-
holders similarly situated, the Land Company had outstanding por-
tions of four différent issues of such bonds, the first three of which
issues were secured by trust deeds or mortgages upon certain specified
and distinct portions of the lands, and the fourth covering ail of the
lands owned by the company, including those embraced by the first
three mortgages. In each of the instruments the Idïdio Trust Company
(hereinafter called the Trust Company, and which was also an Idaho
corporation) was made trustée.
In Barr's bill of complaint it was alleged, among other things, that
of the lands owned by it the Land Company had then sold 3,320.52
acres in small tracts to purchasers residing in varions parts of the
United States, for a price aggregating $1,312,236.25, and that there was
then owing to it from purchasers and unpaid on contracts of sale ap-
proximately $487,115, of which $150,000 was then due and collectible
under the terms of the contracts, and that the Land Company still owned
4,054 acres of such lands, of the value of $1,500,000; that the Land
Company was then in debt in the aggregate amount of $1,250,000, of
which $907,000 was in the f orm of bonds secured by mortgages or trust
deeds made to the défendant Trust Company as trustée, covering the
property of the Land Company ; that of the first issue of the bonds re-
ferred to ail but $20,000 had been paid, and of the second issue ail but
$41,000 had been paid, and that of the third issue there remained out-
standing $172,000 in amount; that ail of the outstanding bonds of the
first two issues had then, "in great measure," been taken up and re-
placed by the fourth issue of bonds, known as refunding bonds of date
October 1, 1911, of which refunding bonds there was then outstanding
and in the hands of many holders scattered throughout the United States
the amount of $605,000 in the aggregate. It was alleged that the semi-
annual interest upon the refunding bonds due April 1, 1915, and Octo-
ber, 1, 1915, respectively, was then due and unpaid, and of the principal
thereof $25,000 became due and payable October 1, 1915, which like-
wise remained unpaid, and that the semiannual interest upon the second
issue became due and payable Octoher 1, 1915, and was then due and
unpaid. It was alleged that the Land Company was also indebted on
various notes, accounts, and other obligations in the aggregate amount
of $264,000, a large part of which was then secured by various notes,
stocks, and other properties of the Land Company, in addition to ail of
which taxes upon the real property of the Land Company in the amount
of $29,000, including penalties and interest, were then delinquent, cer-
tificates of such delinquency having been then issued ; that the time for
58 262 FEDERAL REPORTER
rédemption of a considérable part of the property would very shortly
expire, to wit, December 15, 1915, and unless provision was made for
the payment thereof the title of the property would pass to the pur-
chasers, and be lost to the Land Company and its creditors ; that f ur-
ther taxes, with penalties and high rates of interest, would soon accrue
and become delinquent, and that the L,and Company owed other debts,
approximating $7,000, which constituted liens upon its lands superior
to the lien of the mortgages and trust deeds ; that the L,and Company
was in imminent danger of insolvency, and that the appointment of a
receiver or receivers of its property was essential to the protection of
both the Company and its creditors.
The défendant Trust Company answered the bill of complaint, ad-
mitting most of its averments, ana joining in the request for the appoint-
ment of a receiver or receivers, and also filed a cross-bàll, in which it
alleged, among other things, that on or about October 1, 1911, the Land
Company issued the refunding bonds in the sum of $1,050,000, chiefly
for the purpose of taking up and retiring its previously existing indebt-
edness, and issued to the cross-complainant, as trustée, the mortgage
securing them that has been mentioned, a part of the lands covered by it
being subject to the prior mortgages issued by the Land Company
to the extent specified in the bill of complaint, and setting forth
other reasons why it was necessary for the protection of the prop-
erty that a receiver or receivers be appointed to take possession and
administer the property under the orders of the court, and for
such other relief as should be appropriate, including the foreclosure
of the mortgages. Two receivers were appointed by the court —
one being the président of the Trust Company, who resided at
Lewiston, and the other being a résident of Portland, Or., where
the Land Company maintained its financial headquarters, by whom
funds were obtained for the préservation of the title to the property
and the protection of the orchards through the issuance of receivers'
certificates.
Af ter referring to the many difficulties experienced by both the court
and the receivers in preserving and protecting the property during the
years it was under such administration, the court below said in its
opinion :
"The snit was brought In the Central division of the district, and was
there pendlng when, on February 9, 1918, In order to fadlitate furtlier pro-
ceedings, the parties, through their attomeys of record, stlpulated in writing
that it be tried and a decree entered at Boise, In the Southern division, with
the same effect as If tried In open court at Moscow, in the Central division,
and pursuant to thls stipulation a hearlng was had upon the pleadings al-
ready referred to and a supplemental answer and cross-bill filed by the
Trust Company, and decree was entered at Boise on February 15, 1918.
Thereafter, upon March 28, 1918, by stipulation of ail the parties, and for the
purpose of making certain corrections In the original decree, an amended
final decree was slgned and filed as of February 15, 1918. It appearlng from
the supplemental cross-bill that the flrst and second mortgages had In the
meantime been fully pald, and that therefore the fourth mortgage constituted
a flrst lien upon ail the lands, except those covered by the thlrd mortgage, the
decree In effect detennlned the total amoimt of outstandlng recelvership in-
debtedness, Indudlng the receivers' certificates, allocated to the lands cov-
ered by the thlrd mortgage a sum which was deemed to be a just proportion
KING V. BARS 59
(262 F.)
thereof, and to ail other lands covered by Uie fourth mortgage the balance
of such expenses, and authorized the sale of the lands in two corresponding
groups, the one subject to the lien of the thlrd mortgage, wlth directions to
apply the proceeds arislng from the sales, first, to the payment of the amount
of the receivership expenses so apportioned, and, second, to the discharge of
the refunding bonds. The recelvers were appointed spécial masters to con-
duet the sale, and after some delay a sale waa reported of the lands covered
by the third mortgage, by which only enough money was realized to discharge
the receivership indebtedness apportioned thereto, and the same was con-
flrmed upon the acceptance by the bidder of the condition that within a cer-
tain designated period the holders of thèse bonds mlght, by paying their
ratable nart of the amount bid, corne In and sha^e proportionately in the
property purchased. The bid reported for the property under the fourth
mortgage was rejected, and a resale ordered, and upon the second sale an
ofCer was received, whlch was conlirmed, after being so modifled by require-
ments of the court as to provide an amount of cash sufficient to pay the
balance of the receivership indebtedness, and for the coming in of ail bond-
holders within a designated time and upon specitîed terms and sharing in
the purchase. The last order was made in July, 1918, and thereupon certifl-
cates of sale were issued and possession of the property was delivered to the
purchasers, and pursuant to the orders of the court the proceeds of the sales
were applied to the discharge of the receivership Indebtedness.
"On November 2, 1918, three years after the recelvers were appointed, and
six months after decree, and long after the expiration of the term at whlch
the decree was entered, and at a time when the court was no longer in pos-
session of either the property or the funds arislng from the sales thereof,
the petltioner, who Is the holder of some of the refunding bonds taken by
hlm in exchange for holding of prier Issues, Informally by mail tendered
his proposed blll of intervention, with request for leave to file. During the
three years which had elapsed since the commencement of the action many
proceedings had been taken by the recelvers, and there had been many trans-
actions with thlrd persons, ail upon the apparent assumptlon of the propriety
of the suit and of the orders and decrees appolnting the recelvers, and con-
ferring authority upon them, and conflrmlng their accounts. Moneys were
received and paid, contracts were entered into, and tltles were passed. With
one exception, which has no relation to the questions hère involved, during
ail of this time no bondholder appeared to protest or suggest. So far as
appears, the court and its offlcers and the trustée were permltted to carry
the responsibllity of working out the perplexlng problems as best they could.
The petltioner, with his counsel, reslded at Portland, where, as already stat-
ed, one of the recelvers lived, and where much of the business of the Com-
pany was transacted. It aflSrmatlvely appears that he knew of the receiver-
ship at a comparatively early date, and in the absence of an averment to the
contrary it must be presumed that he had such knowledge practically from
the beglnning."
Within about a month after the issuance of the refunding bonds and
the exécution of the mortgage securing them, the petitioner exchanged
the bonds of the first three issues held by him for such refunding bonds.
The mortgage securing the latter expressly showed, upon its face, that
it was designed to provide the funds necessary to pay the then existing
indebtedness of the company, and also further funds with which to
continue the opérations of the company.
[1] The contention made in the assignment of errors, and also in
the brief of the appellant, that the court below was without any juris-
diction of the case, is obviously without any merit, first, because, if
so, ail of its proceedings were absolutely void, and consequently without
effect upon the appellant; and, secondly, because it is only in a valid
pending proceeding in which any party is under any circumstances
60 262 FEDBRAL REPORTER
permitted to intervene — equity rule 37 (198 Fed. xxvîîî, 115 C. C. A.
xxviii) declaring, among other things :
"Any one clalmlng an Interest In the Utlgatlon may at any time be per-
mitted to assert his rlght by Intervention, but the intervention shall be in
subordination to, and in récognition of, tlie propriety of the main proceeding."
Assuming, as we must for the purpose of disposing of the further
contentions of the appellant, jurisdiction of the cause by the court to
which the application for leave to intervene was made, we find from
the record that ail of the property in question had been disposed of
under and by virtue of the decree of the court made and entered more
than six months before the appellant applied to intervene, save only
such proceeds thereof as remained in the hands of the receivers and
spécial masters, as to which the court entered the order which is the
subject of this appeal and which is in the f ollowing words :
"It is ordered that the application of B. A. King (and two others) to inter-
vene be and the same is hereby denled, without préjudice to the right of
said applicant, upon making a showing that he Is the holder of bonds and
that his Interests as such holder are or will be affeeted by the accounts of
the receivers or spécial masters yet to be acted upon, and that he Is no longer
deslrous of relying upon the trustée to protect such interests, to apply for
leave to intervene for the purposes of such accounts, and not for the purpose
of questioning the validity of the decree or of any order heretofore made."
[2] The final decree was entered at Boise, Idaho, Fehruary 15, 1918,
and it appears from the affidavit of the petitioner's counsel that the
pétition for and the accompanying bill in intervention were not deliv-
ered to the clerk of the court for the judge until November 2d of the
same year, more than six months after the entry of the final decree
establishing the rights of the respective parties to the suit, and long
after the expiration of the term of the court during which the decree
was entered. Nothing is better settled than that errors, if any, in a
final judgment, can only be corrected by appeal, unless steps be taken
in the trial court for that purpose during the term at which such judg-
ment is rendered. Bronson v. Schulten, 104 U. S. 410, 415, 416, 26 L,.
Ed. 797, and cases there cited.
The proffered bill of intervention is so voluminous (covering 127
pages of the printed record) that it is practically impossible within the
proper limits of an opinion to make even a gênerai statement of its va-
rions allégations, the purpose of which is, in part at least, to open up
and again try the issues determined by the final decree already entered
in the case, necessitating, also, if permitted, the bringing into the suit
of new parties.
[3] That the petitioners had ample opportunity to intervene in the
suit prior to the entry of the final decree and set up any and every right
possessed by them as bondholders (which ownership is the basis of
every right asserted in the proposed bill of intervention) we think
sufficiently appears from the admitted knowledge by their counsel of
the proceedings in the case at least as early as June, 1916, nearly two
years before the entry of the final decree.
The record shows that the disposai of a portion of the property as
directed by that decree involved the sale of that portion by the trustée,
for which a bid was made by a committee of a majority of the holders
KING V. BAEB 61
C262 F.J
of the refunding bonds, and that to hear the parties in interest in re-
gard to that matter the judge of the court below, in part, at least, for
the convenience of the parties and their counsel, took the trouble to go
to the city of Portland in July, 1918, where two meetings were held be-
fore the judge, at the first of which the counsel for the petitioners was
personally présent, and the second of which he failed to attend — pur-
posely, we can but conclude, from one of the letters to him, printed in
his own reply brief on this appeal. That meeting resulted in this order,
confîrming the sale of the property last referred to, which was filed
by the clerli of the court August 10, 1918 :
"Order Conflrming Sale of Number 4 Properties.
"Now, at this time, comlng on to \>e heard the application of the spécial
masters for an order upon their report and supplemental report in respect
of the bids made at the foreclosure sale of the properties of the Lewiston
Land & Water Company, Limited, covered by the mortgage known as the
Eefundlng Bond Mortgage or Mortgage No. 4 ;
"The parties of record appearing by their respective counsel, the masters
being présent in person, Morris Bros, and John Latta, bondholders, appearing
by Wirt Miner, Mrs. E. J. Jefifery, a bondholder, appearing by J. L. Conley,
the Security Savlngs & Trust Company appearing by R. L. Sheppard, and the
holders of receivers' certiflcates appearing by Hon. Joseph Simon and Blain
B. Coles ; the matter having been set for hearing heretofore and on the 16th
day of July, 1918, and having for the convenience of the parties, in order
that ail might be represented, been continued to this date, the court having
heard and considered the reports of the masters and matters presented by
counsel and by the varions parties represented, and being advlsed in the
premises:
"It is now hère ordered that the bid presented by the masters, entitled
'BId of Refunding Bondholders,' submitted by the bondholders' committee,
and approved by W. C. Bristol and Wirt Minor, be accepted In aecordance
■with its terms, except, however, that the bidders shall comply with the fol-
lowing conditions:
"(1) That said bidders pay Into court within nlne days from this date, to
wit, on or before August 3, 1918, the araount necessary to liquidate the out-
standing and unpaid receivers* certiflcates and adjudicated claims, with ac-
crued and accruing receivers' costs and expansés, and the costs and expensea
of this proceeding, amounting to $120,000.
"(2) That there be placed in the hands of the masters on or before said time,
for dellvery to the bidders, a deed of the Lewiston I^and & Water Company,
Limited, conveylng its right, title, and Interest in and to the property sold
under foreclosure.
"(3) That the said bidders on or before said date flle with the masters an
asslgnment to John H. Hall, on behalf of the bondholders under the mort-
gage known as No. 3 mortgage, given by the Lewiston Land & Water Company,
Limited, of the bidders' interest In a one-third part of the spray rigs and
orchard and farm machinery purchased with gênerai funds during the
course of the receivership, such one-third to be designated and selected by
the masters; and authority to the masters to sell, assign, and transfer to the
said John H. Hall, representing said bondholders, said one-third of the above-
mentioned personal property, the remalning two-thirds thereof to be trans-
ferred by the masters' certiflcate of sale to the bidders.
"(4) It is further ordered that upon compliance with the terms and condi-
tions above set forth by the bidders the sale upon such bid be and thereupon
is eonfirmed, and that upon such compliance the masters be and are hereby
authorized and empowered to exécute and deliver to the Security Savings &
Trust Company, named in said bid as the holder of title thereunder, a certifl-
cate of sale of the properties so sold.
"Dated this 25th day of July, 1918.
"Frank S. Dletrich, Judge."
62 262 FEDERAL REPORTER
Counsel for the petitioners contends that the récital in the f oregoing
order of his approval of the bid was without justification and improper.
Let that be admitted, and the f act remains that he had the opportunity
of objecting to it and failed to do so, and, according to his own affida-
vit, made no attempt to intervene until about 3% months after the
filing of the order August 10, 1918. The court below was of the opin-
ion that, when the application to intervene was made, the term at which
that order was entered had expired, saying :
"The court officers In the Idabo district ail réside and malntain their
offices at Boise, and courts in the Northern, Central and Eastem divisions
are as a ruie held open only long enough for the dispatch of business ready
for disposition withln a few days after court convenes. The terms In the
Central division are flxed by law for the second Monday in May and the
flrst Monday In November of each year. Section 78, Judlcial Code (Comp.
St. î 1063). In 1918 the term was adjourned without day on May 24th. As we
hâve seen by stipulation the cause was transferred for trial and decree and
for other purposes, and it Is thought that ail the parties assumed and acted
upon the assumption that ail proceedings requlsite to the foreclosure and
settlement of the recelver's account were to be taken at Boise, where the
ternis are held open quite contlnuously. In that view the last orders referred
to are to be deemed to hâve been taken during the Febmary term in the
Southern division, and that tenu expired wlth the openlng of the September
term."
We are inclined to agrée with the court below in that respect, but,
regardless of that view, are of the opinion that the court committed
no abuse of the discrétion with which it was invested, under the circum-
stances of the case that hâve been mentioned, in denying the petition-
ers' application to file the proffered bill, and in limiting their right to
the particulars specified in the order from which the appeal was taken.
The order is affirmed.
UN1TE3D STATES v. NATIONAL SURBTT CO. *
In re BALD EAGLE MINING CO.
(Circuit Court of Appeals, Eighth Circuit December 10, 1919.)
No. 201.
Bankeuptct i©=349 — Claims of United States and sttbkogated subbtt kn-
titled to e4uai, pbiobity.
Under Bev. St § 3466 (Comp. St. § 6372), which glves the United States
priority over other créditons of the estate of an Insolvent or bankrupt
debtor, and section 3468 (section 6374), providing that, "whenever the prin-
cipal In any bond given to the United States is insolvent, • » * and
• • * any surety on the bond ♦ • • paya to the United States the
money due upon such bond, such surety » • ♦ shall hâve the lik©
priority," where the United States bas a daim, agalnst the estate of a
bankrupt, and the surety on the bankrupt's bond securlng such clalm bas
paid the same to the estent of the obligation of Its bond, the United
States as to the remalnder of Its claim and the surety as to the amoiint
paid are entitled to equal priority.
Hook, Circuit Judge, dissenting.
Pétition to Revise Order of the District Court of the United States
for the Eastem District of Missouri ; David P. Dyer, Judge.
é=>For otber cases see same toplc & KEY-NUMBER in aU Key-Numbered Dlgests & Indexe»
•Grantlng certtorarl 251 U. S. — , 40 Sup. Ct. 396, 64 L. Ed. — .
UKITED STATES V. NATIONAL SUBETY CO. 63
C2$2 FJ
In the matter of the Bald Eagle Mining Company, bankrupt. On
pétition by the United States as a créditer to revise an order allowing
equal priority to the claim of the National Surety Company. Affirmed.
W. L. Hensley, U. S. Atty., and Benjamin L. White, Asst. U. S.
Atty., both of St. Louis, Mo.
Frank E. Williams, of St. Louis, Mo. (S. W. Fordyce, Jr., John
H. Holliday, Thomas W. White, and Lucius W. Robb, ail of St.
Louis, Mo., on the brief), for respondent.
Before HOOK and CARLAND, Circuit Judges, and YOUMANS,
District Judge.
CARLAND, Circuit Judge. The petitioner by this proceeding seeks
to hâve revised in matter of law an order of the District Court made
December 31, 1918, confirming certain orders of the référée with réf-
érence to the claims of respondent against the estate of the Bald
Eagle Mining Company, a bankrupt. The undisputed facts are as f ol-
lows:
On November 3, 1917, the respondent filed two claims against the
estate of the bankrupt, for $3,000 and $150, respectively, which were
allowed on the same day. On the 12th day of December, 1917, the
United States filed a claim against the estate of the bankrupt for
$9,912.84, which was allowed on the same day, and it was further
ordered and directed that said claim be accorded priority over ail other
claims, except those for wages and taxes. On March 12, 1918, the
respondent filed a motion with the référée for leave to amend its two
claims above mentioned, by claiming priority for the same equal to
that of the United States. The motion was granted on March 25,
1918. The United States filed a pétition for review. The proceedings
were duly certified, and after a hearing the District Court aflîirmed the
order of the référée. It is this last-named order which the United
States seeks to hâve revised.
The claim of the United States against the bankrupt was for dam-
ages suffered by them by reason of the failure of the bankrupt to per-
form its contract with the government for supplying coal at Jefferson
Barracks, Mo., after deducting from said damages payments made by
the respondent. The claim of the respondent for $3,000 was for money
paid the United States by reason of its being surety on the bond of the
bankrupt given to secure the faithful performance of the coal con-
tract above mentioned. The claim of respondent for $150 was for
money paid the United States by respondent by reason of its being
surety upon the bond of the bankrupt to secure the faithful perform-
ance of a contract to furnish bituminous lump coal to the United
States arsenal at St. Louis, Mo. In each instance the amount paid was
the full amount of the bond. The question for décision is as foUows :
Has the United States and the respondent an equal priority to the
extent of the amount of their respective claims, or has the United
States exclusive priority as against ail other claims until the full amount
of its claim is paid ? The applicable statutes are as f ollows :
64 262 FEDERAL REPORTES
Section 3466, R. S. (Comp. St. § 6372):
"Whenever any person Indebted to the United States la Insolvent, or whcn-
ever the estate of any deceased debtor, In the bands of the executors or ad-
minlstrators, Is Inaufflclent to pay ail the debts due from the deceased, the
debts due to the United States shall be first satisfled ; and the priority hereoy
established shall extend as well to cases in which a debtor, not having auffi-
cient property to pay ail hls debts, makes a voluntary assignment Oiereof, or
In which the estate and effects of an abscondlng, concealed, or absent debtor
are attached by process of law, as to cases In which an act of bankruptcy is
committed."
Section 3468, R. S. (Comp. St. § 6374) :
"Whenever the principal in any bond given to the United States Is Insolvent,
or whenever, such principal being deceased, his estate and effects which couae
to the hands of hls executor, administrator, or assl^ee, are Insuiiicient for the
payment of hls debts, and, in elther of such cases, any surety on the bond, or
the executor, administrator, or assignée of such surety pays to the United
States the money due upon such bond, such surety, his executor, administrator,
or assignée, shall hâve the like priority for the recovery and recelpt of the
moneys out of the estate and effects of such insolvent or deceased princi-
pal as is secured to the United States ; and may brlng and maintain a suit
upon the bond, In law or equity, in his own name, for the recovery of ail
moneys paid thereon."
There is no question as to the meaning of section 3466. In the cases
specified in said section, the United States has beyond question un-
doubted priority. When we corne to section 3468, it is claimed by
counsel for the United States that it must be so construed as to be of
no force or effect, except in cases where the United States has
no claim whatever to be satisfied, and it appearing in the présent case
that the United States has a claim against the estate of the bankrupt,
said section is inoperative. The ground of this contention is that the
priority granted by section 3466 still attaches to the claim of the United
States, even as against the claims of respondent, and that no priority
exists in favor of respondent until the claim of the United States is
fuUy paid. If this contention is Sound, we must read into section 3468,
a proviso at the end of the last clause but one of the section, reading as
f ollows :
"Provided that said United States has no claim against the Insolvent estate."
We do not think we hâve any authority to interpolate such a proviso.
We are of the opinion that, while the gênerai priority of the United
States is undoubted, it is within the power of Congress to qualify or
limit this priority, and that by the enactment of section 3468 it has
been provided that in the cases mentioned in said section the priority ot
the United States has been transferred to a surety who has paid the
penalty of a bond in full, notwithstanding the latter still has a daim
against the insolvent. It is claimed by counsel for the United States
that the surety in a case like the one at bar has no priority, unless he
pays ail of the debt or debts due from the bankrupt to the United
States. The section which we are endeavoring to construe does not
provide that the surety shall pay ail the debt or debts due from the
bankrupt estate to the United States, but only the money due upon
such bond, and it is conceded that the respondent did this. It paid
tTNITED STATES V. NATIONAL SUEETY 00. 65
(262 p.)
ail the debt for which it was obligated as surety. If it should pay any
more, it would be a mère voluiiteer, and not entitled to the right of
subrogation as to the excess. It is not material, if the contention of
counsel for the United States is right, whether the claim of the United
States arises out of the same transaction as that of respondent or not.
It is contended and it is no doubt the law that the priority of the
sovereign exists in full force and vigor, unless qualified by express
words. But we hâve express words in section 3468. We think that
sections 3466 and 3468 should be construed together, so as to give both
force and efïect ; the United States retaining its priority as to the bal-
ance of its claims against the bankrupt estate, and the respondent
standing on a level with them as to its claim. No case has been cited,
nor hâve we found one, deciding the question involved. The cases
cited simply establish the proposition that, where the title of the United
States and the citizen concur, the title of the United States, except so
far as the Législature has thought fit to interfère, shall be preferred,
and that where the principal in any bond given to the United States is
insolvent, and any surety on the bond pays to the United States the
money due upon such bond, such surety shall hâve the like priority
for the recovery and receipt of the moneys out of the estate and effects
of such insolvent as is secured to the United States. Thèse rights are
ail given by the sections quoted and citation of other authority is un-
necessary. Respondent's rights must be determined by section 3468.
What its rights would be under the équitable doctrine of subrogation
is not involved. The unreasonableness of the contention of counsel
of the United States is made to appear when we consider a case where
différent bonds hâve been given by an insolvent to the United States
with différent sureties. One surety pays the full penalty of the bond
on which he is liable, but he can hâve no priority until he has paid
ail the other bonds on which he is not liable.
We do not think the application to amend the claims of respond-
ent by claiming priority constituted the filing of new claims after
the year allowed by law.
Appeal No. 5362 is dismissed,
Judgment affirmed.
HOOK, Circuit Judge (dissenting). Section 3466 of the Revised
statutes, which provides that "whenever any person indebted to the
United States is insolvent * * * the debts due to the United
States shall be first satisfied," is a statutory adoption for this country
of a public policy which has prevailed in England from a very early
day. The right is one of préférence in the sovereign over the claims
of ail private persons, and is of universal application. No other stat-
ute should be construed to impair or lessen it, unless the intentior^
to do so is clearly manifested.
With the above in mind, let us look at section 3468, R. S., which
provides that —
"Whenever the principal In any bond given to the United States Is insolvent,
• • • and • • * any surety on the bond • • • pays to the United
262 F.— 5
66 262 FEDERAL BEPORTEB
States the money due upon such bond, such surety * • ♦ ghall hâve the
llke priority. ♦ • * "
This is no more than a statutory déclaration of the équitable doctrine
of subrogation in favor of sureties. See United States v. Ryder, 110
U. S. 729, 4 Sup. Ct. 196, 28 L. Ed. 308. There is nothing in the lan-
guage employed or in the décisions of the courts applying it to indicate
that it should be given a more enlarged construction. In the case of
private rights subrogation is not allowed to work loss or injury to a
lien or preferred creditor whose claim has not been wholly discharged,
although the surety may hâve paid in full his obligation for part of it.
See National Bank of Commerce v. Rockefeller, 98 C. C. A. 8, 174 Fed.
22, by this court. Much less should it be allowed to impair or lessen
th'e sovereign preferential right of the government. In Reg. v. O'Cal-
laghan, 1 Ir. Eq. 439, it was held that the surety of a person indebted
to the government who pays the indebtedness does not succeed to the
government's right of priority, if there be a further amount owing it,
though on a différent account.
My Brothers say that such a construction of section 3468 is contrary
to its express language and would deprive it of efficacy. It might be
said that a contrary construction lessens materially the unqualified
language of section 3466. I think, however, both sections may be con-
strued to give each full efîfect according to its terms. That should al-
ways be donc, if possible. The government's priority by section 3466
is over ail private claims. The right given by section 3468 to the surety
who pays his obligation in full is a "like priority" ; that is to say, a
priority over ail private claims. But there is nothing in this to imply,
and it does not follow, that the surety is thereby raised to an equal
or pro rata status with the government as regards an unpaid demand
it holds against the common debtor or his estate, whether on the same
or another account. Statutes declaratory of old principles of public
policy or of the common law should receive the old constructions, and
in that way apparent inconsistencies may be avoided.
Tn think the order of the trial court should be reversed.
COPPER PROOESS CO. v. CHICAGO BONDING & INS. CO.
(Circuit Court of Appeals, Ttdrd Circuit. January 5, 1920.)
Nos. 2490-2494.
1. Triai. <®=359(1) — Oeder of pboof in showing feaud not eeeob.
Where a surety on the bond of a seller asserted that plalntlff buyer was
party to the seller's fraud in procuring the bond, proof of the seller'a
fraud foUowed by proof of the buyer's connivances camiot be objected to
on the ground of the order of proof.
2. Featjd <&=a52 — Latitude in peoving fbaitd is allowed.
When fraud is alleged great latitude of proof is allowed, and accordingly
it is proper to show party's participation in fraud by showing what was
said and done, leadlng up to the transaction.
8. Fbaxjd <S=16 — SUPPBESSION or tettth mat be.
Fraud may be committed by the suppression of truth as well as the
suggestion of falsehood, but the law disttagulshes between passive con-
iÊ=»For otber cases see same topic & KBY-NUMBEK In ail Key-Numbered DIgesta & Indexe»
COPPEK PEOCESS CO. V. CmOAGO BONDINQ & INS. CO. 67
C262 F.)
cealment and active concealment, in that in active concealment tiiere Is
implied a purpose of design.
4. FEAUD ©=»17 — SUPPEKSSION OF TEtTTH TO BE FRAUD MUST CONSIST OF MOEE
THAN SILENCE.
As a gênerai rule, to constitute fraud by concealment or suppression of
truth, ttiere must be something more than silence ; that is, there must be
some occasion wliich imposes on one person the légal duty to si)eak in
order that he may be placed on an equal footing, in v?hlch case fallure to
State a material fact is équivalent to a concealment, and amounts to
fraud equally with an affirmative falsehood.
6. Peincipal and sUBETr <®;=557 — Evasion amounting to fbaud in procueing
BOND.
Where a bonding company, before becoming surety on a bond contingent
for an Iron company's faithful performance of a contract of sale, asked
the offlcer of plaintifC if it had made any advances on the contract, etc.,
and plaintifi's ofiicer gave an evasive answer, whleh, while true as far aa
It went, did not disclose that plaintiff had made advances to the iron
Company under a spécial contract, such évasion amounted to fraud.
6. PEINCIPAL and SXJEETY (g=3l60 EVIDENCD of AGEEEMENT with PI/AINTIFF
lOB ADVANCES TO SELLEE ADMISSIBLE WHEBB SELLES'S BUEETIES ASSEBTED
CONCEALMETNT WAS FEATJD.
After plaintiff contracted. with an iron company for the purchase of
large quantlties of iron at a prlce little, if any, above cost, the parties
entered into an agreement whereby plaintifC advanced to the iron company
a large sum of money under a vague contract, but whlch, among other
things, required the iron company to give bonds for faithful performance,
held, that, where plalntiff's offlcer, on being interrogated by the surety'a
représentative, denied having made any advances under the contract to
the iron company, the agreement was in any event admissible in évidence
to show plaintifPs fraud.
7. Evidence i@=104: — Evidence of subséquent eelations between paeties
accused of feaud.
Where the surety on the bond of a seller asserted that the seller was
guilty of fraud in procuring the same, and that the buyer connlved, évi-
dence of subséquent aets of the buyer and of the seller is admissible to
show the relatlonship between the parties at the time the fraud was
committed.
8. APPEAL AND EEEOB ®=>1047(1) — RULING ON EVIDENCE NOT TO BE DISTUEBKD
UNLESS HABMFUL.
While erroneous nilings In Jury trials are presumptively injurious, the
tendency is to enlarge the sphère of the trial judge in the admission and
exclusion of testiraony, and not to disturb the judgment, where it affirma-
tively appears that his rulings, if erroneous, were harmless.
In Error to the District Court of the United States for the Eastern
District of Pennsylvania ; J. Whitaker Thompson, Judge.
Five actions by the Copper Process Company against the Chicago
Bonding & Insurance Company, which were consolidated and tried as
one. There was a judgment for défendant, and plaintif! brings er-
ror. Aifirmed.
Francis Shunk Brown and William Findlay Brown, both of Phila-
delphia, Pa., for plaintiff in error.
Layton M. Schoch and Harry S. Ambler, Jr., both of Philadelphia,
Pa., for défendant in error.
Before BUFFINGTON and WOOLLEY, Circuit Judges, and
MORRIS, District Judge.
^=3For othei ca»es see eame topio & KEY-NUMBER in ail Key-Numbered Dlgests & Indexe^
68 262 FEDERAL REPOETEB
WOOLLEY, Circuit Judge. Thèse writs-of-error bring hère for
review five judgments of the District Court entered on verdict in a
proceeding wherein five actions were Consolidated and tried as one.
The Copper Process Company was plaintiff; the Chicago Bonding
and Insurance Company was défendant. The actions were on bonds
of the défendant company, each for $52,400, given the plaintifï Com-
pany to assure performance by the Bird Coal and Iron Company of
its undertakings in the same number of contracta between it and the
Copper Company for the sale and delivery of pig iron. The Iron
Company defaulted on ail five contracts. The Copper Company sued
the Bonding Company on ail its corresponding bonds ; verdicts were
rendered and judgments entered for the Bonding Company; where-
upon the Copper Company sued out thèse writs-of-error.
The record is a large one; the spécifications of error are fifty-
nine in number. Of thèse, twelve are directed to the judge's charge;
the remaining forty-seven concem rulings on the admission and ex-
clusion of testimony. Whether any particular ruling or instruction
involved error, and if so, whether such error was prejudicial or
harmless, it is impossible to détermine by considering each ruling or
instruction separately and alone. It is only possible after reading the
whole record in order to ascertain the real issues and to find the
theory on which the trial judge tried them. Expérience shows that
when a trial judge is wrong in his conception of the issues, or of the
principles of law applicable to them, his errors are likely to be many
and also to be prejudicial; but if, on the other hand, the trial judge
has properly grasped the issues and has tried them under applicable
law, his errors are likely to be few and harmless.
On this theory of review, we shall foUow the case in outline as
pleaded and tried.
The Copper Company's statements of claim filed in the five actions
are identîcal, except as the contracts for whose performance the sev-
eral bonds were given called for pig iron deliveries in différent months
of the year 1917, beginning with the month of June and ending with
the month of October. In each statement of claim it appears that
the Copper Company declared on the indemnity bond of the Iron Com-
pany, as principal, and the Bonding Company, as surety, for $52,400,
alleging, first, the exécution of the bond, and, second, its breach by
the Iron Company, making the bond by référence a part of the
pleading. The bond assures the performance of the contract in cus-
tomary terms, and, by référence, embodies the contract. The con-
tract provides for the purchase by the Copper Company and sale by
the Iron Company of 4,000 tons of Talladega pig iron of a given
analysis during a given month at the price of $13.10 per ton deliv-
ered f. o. b. Talladega, Alabama, payments to be made on a given
date.
The contracts bear date March 13, 1917; the bonds April 3, 1917.
Tuming to the record, it appears that at the trial the Copper Com-
pany, to support the averments of its pleadings, formally and briefly
proved the exécution of the bonds, the breach of the contracts by the
COPPER PEOCESS CO. V. CHICAGO BONDINQ & INS. CO. 69
(262 FJ
Iron Company, and the résultant damages, and rested on the liabillty
of the Bonding Company for indemnity.
The Copper Company has assigned but one error in the trial of
its case in chief. This relates to a ruling of the trial judge in al-
lowing the Bonding Company to lay grounds for contradiction. We
dispose of this assignment hère as involving no error.
So far, there was nothing in the case out of the ordinary. The
trouble began with the Bonding Company's defence, and its defence
began with its pleadings.
The defence of the Bonding Company, as pleaded, was, in the
main, twofold:
First. That the contracts appended to the bonds when sued on
were not the contracts appended to and covered by the bonds when
issued; and that, in conséquence, the contracts of indemnity sued on
are not the contracts of indemnity which it executed and delivered.
Second. That it was induced to enter into the bonds by fraud of
the Iron Company with the knowledge and cormivance of the Copper
Company.
Thèse defences, as pleaded, were, in a word, non est factum and
fraud.
To sustain the first defence, the Bonding Company introduced évi-
dence tending to show that the bonds of indemnity into which it
entered with the Copper Company did not cover contracts between
the Copper Company and the Iron Company for the purchase and
sale, monthly, of 4,000 tons of pig iron at $13.10 a ton as declared by
the Copper Company in its pleadings, but covered, on the contrary,
other contracts purported to hâve been entered into by the Copper
Company and Iron Company, for the purchase and sale, monthly, of
2,000 tons of pig iron at $26.20 a ton; that copies of the supposed
contracts between the two companies containing the items last given
were certified to the Bonding Company by the Iron Company and
were appended to the bonds when they were executed and delivered
to the Copper Company; that between the tirae of their delivery and
the bringing of thèse suits, the copies of the contracts so appended
were removed from the bonds and copies of the real contracts sub-
stituted for them, during ail of which time the bonds and accompany-
ing copies of contracts were in the possession and control of the
Copper Company. By this évidence, the Bonding Company offered
to support its charge that there was a substitution of contracts and
that the substitution was the act of the Copper Company. This évi-
dence was, of course, controverted. On this issue of substitution
there was ample évidence, properly admitted under the pleadings,
for a finding by the jury in favor of the Bonding Company. As the
jury's verdict for the Bonding Company was based either on this
issue of substituted contracts or on the next issue of fraud, the Cop-
per Company is concluded by the verdict on this issue.
[1] That the Bonding Company was induced to enter into its in-
demnifying undertakings by fraud and gross misrepresentations of
the Iron Company is not seriously disputed by the Copper Company.
Its position is that it was not a party to the fraud and was ignorant
70 262 FEDERAL HEPORTEB
of the misrepresentations. In its case in chief, the Bonding Com-
pany, in order to sustain its defence of fraud by the Iron Company
and connivance by the Copper Company, first introduced testimony
of the Iron Company's fraud and misrepresentations, to which many
of the Copper Company's exceptions were noted and errors assigned,
and then introduced testimony to show the relation of the Copper
Company to the Iron Company by the acts of their officers and to
show also the part which the Copper Company, through its officers,
took in conniving at the fraud of the Iron Company. Obviously, no
exception can be taken to this order of establishing connivance by
one party in the fraud of another.
The substance of this testimony was that the Copper Company
was not at any time concerned in any business other than its trans-
actions with the Iron Company; and that the Iron Company had as
its one asset an interest in an option or arrangement with Laden-
burg, Thalman & Company of New York, for the opération of a
blast fumace at Talladega, Alabama, which had long been out of use.
When the Iron Company was practically without funds or tangible
assets, it entered into the five contracts with the Copper Company
on March 13, 1917, whereby it undertook to sell and deliver to the
Copper Company, monthly, for a period of five months, 4,000 tons
of pig iron at $13.10 a ton; a price in the Birmingham district, little,
if any, above cost of production. With thèse contracts made, the
two companies entered into another contract referred to at the trial
as the "Underlying Agreement" or the "Y" agreement, reciting the
five contracts just mentioned and providing, in considération thereof,
for an advance or payment by the Copper Company to the Iron
Company of the sum of $50,000, and a further sum of $25,000, both
sums to be placed to the crédit of the Iron Company in the Com-
mercial Trust Company at Philadelphia ; the latter sum, however, to
be drawn on by the Iron Company by voucher checks showing that
the money was to be paid for certain purposes specified in the agree-
ment, the one pertinent to this case being "Premium on surety bond,
believed to be $2,700." This agreement further provided that if the
Iron Company should be prevented by fire, strikes, riot, mob, or earth-
quake from making deliveries on the 20, (JX) tons of pig iron covered
by the five contracts referred to, then the Iron Compcmy would sell
and deliver to the Copper Company its full production of pig iron
of whatever grade and quality, at a price of $7.50 per ton below the
market price. The curious feature of this agreement is, that no-
where in it is there provision for repayment or return to the Copper
Company of the moneys it agreed to advance to the Iron Company.
This agreement was signed some time in March, 1917, and, in part
performance, the Copper Company placed $75,000 in bank to the
crédit of the Iron Company.
With thèse contracts made and outstanding, the Iron Company, in
carrying out its undertaking to give the Copper Company bonds as-
suring the performance of its sales contracts, applied to the Bonding
Company for five bonds of $52,400 each. To induce the Bonding
Company to enter into thèse bonds, an officer of the Iron Company
COPPEE PEOCESS CO. V. CHICAGO BONDING & INS. CO. 1 1
C262 F,)
supplied the Bonding Company with certified copies of what pur-
ported to be its pig iron contracts with the Copper Company, which
showed that the sale and delivery covered, not 4,000 tons a month
at the suspiciously low price of $13.10 a ton, as actually called for by
the contracts, but 2,000 tons a month at what was then about the
market price of $26.20 a ton. On this représentation, Evans, an
agent of the Bonding Company, went to Philadelphia and met one
Wilson, an insurance broker, through whom the Iron Company was
negotiating for bonds. Evans was shown what purported to be an
engineer's report of the property, and an inventory and a financial
statement of the Iron Company. He was informed that the Iron
Company had $75,000 to its crédit in the Commercial Trust Com-
pany (verified by letter from the depository) which was represented
as money arising from the sale of stock; owned 2,511.5 acres of
ore land; and possessed total assets of $1,360,650. In addition to
statements previously made by the Iron Company in its application
for bonds and by Wilson, the insurance broker, that no advance of
any character had been made the Iron Company by the Copper Com-
pany under the contracts, an officer of the Bonding Company ask-
ed the Secretary of the Copper Company, prior to the delivery of
the bonds, whether his Company had made any advance payments
against iron deliveries under thèse contracts, to which the Secretary
replied, "Absolutely not."
To aid the Iron Company in carrying out its undertaking in tlie
"Y" agreement to obtain indemnity bonds for the protection of the
Copper Company on the sales contracts, for which the Copper Com-
pany had -provided $2,700, the Président and Secretary of the Cop-
per Company went to the bank with Wilson, who had received from
the Iron Company a check drawn to his order for $6,000. There the
Président of the Copper Company endorsed Wilson's $6,000 check
and got from the bank a draft for a like sum. With the bonds pre-
pared for signature and with this $6,000 draft, the Secretary of the
Copper Company accompanied Wilson to Détroit. On arriving in
that city, the Secretary had the draft cashed at a local bank and
turned the whole $6,000 over to Wilson. What Wilson did with
it does not appear. This large sum of money was drawn and dis-
bursed supposedly for the payment of premiums on the bonds, when,
in fact, the aggregate amount of ail premiums was but $655. Only
this sum reached the Bonding Company. After the money had been
paid Wilson, Evans, an agent of the Bonding Company, at its Dé-
troit Office, delivered the bonds to the Secretary of the Copper Com-
pany, in the possession of which concem they remained until suit.
The bonds were executed on or about April 3.
When the transactions were reported to its home office on or
about May 1, 1917, the Bonding Company immediately made dis-
claimer and also made formai tender of the premiums paid.
The Iron Company breached its first contract in June; in fact, it
delivered no iron imder any of the five contracts. Testimony was
oflfered and admitted of acts and conduct of officers of the Copper
Company, f oUowing the transactions concluded by the Bonding Com-
72 262 FEDERAL REPORTEE
pan)^s disclaimer and the Iron Company's breaches, tending to show
the close relationship of the two companies and their control by the
same officers. The évidence was, substantially, that the Président of
the Copper Company assumed control of the funds of the Iron
Company on its failure to perform its sales contracts; stopped pay-
ment on checks at his will ; controUed its directorate by his nominees ;
and in July and August caused it to vote for his protection a bond
issue of $500,000 and notes to the amount of $750,000.
It was in the admission of évidence tending to establish thèse facts
that most of the court's rulings now assigned as error were made.
While there is a great number of assignriients of error, the errors as-
signed may fairly be grouped, as w^as done in the plaintifif's brief,
according to the subject matter to which they relate, as follows:
(1) Exception to the so-called "Underlying Agreement," admission
of évidence relating thereto and charge to the jury as to the eflfect
thereof.
(2) Exceptions to admission of évidence of misrepresentations made
to the Bonding Company by officers and agents of the Iron Com-
pany without the Copper Company's knowledge and charge to the
jury as to the effect thereof.
(3) Exceptions to admission of évidence of subséquent transactions
between the Copper Company and the Iron Company and charge to
the jury as to the effect thereof.
The record shows that the judge had a thorough grasp of the case;
that he carefully kept in mind throughout the trial the précise issues
made by the pleadings; and that, in his rulings, he was libéral in
admitting testimony to sustain them. Thèse issues and the manner in
which they should be tried are nowhere better stated than by coun-
sel for the Copper Company himself when addressing the judge on
an objection to an ofifer of testimony. He said:
"The questions that arise In thls case are thèse: First, as I understand it,
were the bonds executed? Second, was there any fraud in the proeurement
of the bonds? Third, bas there been any variation of the terms of the con-
tract since the bonds were executed to release the surety? Thèse are the
three questions involved in this case and any évidence that direotly or indirect-
Vy hears on that is entirely appropriate."
[2] This statement is in accord with the practice everywhere, that
when fraud is alleged, great latitude of proof is allowed, and every
fact or circumstance from which a légal inference of fraud may be
drawn is admissible. Any such fact, no matter how insignificant,
may be shown, provided it bears at ail on the point in issue. Ac-
cordingly, it is proper to prove a party's participation in the fraud by
showing what was said and done leading up to the transaction, De
Ruiter v. De Ruiter, 28 Ind. App. 9, 62 N. E. 100, 91 Am. St. Rep.
107; what was said and done at the time the fraud was committed,
Crump V. United States Min. Co., 7 Grat. (Va.) 352, 56 Am. Dec.
116; and, within certain limits, what was said and done after the
commission of the fraud. Salmon v. Richardson, 30 Conn. 360, 79
Am. Dec. 255 ; 12 R. C. h. 429, 430, and cases.
[3-6] It is of the manner in which the trial judge applied thèse
COPPEB PBOCESS CO. V. CHICAGO BONDINQ & INS. CO. 73
C262 F.J
familiar principles of law in his rulings that the Copper Company
complains. Its most serions complaint relates to the admission in
évidence of the "Y" agreement, which, it asserts, was error, first,
because the agreement had no relation to the fraud and misrepre-
sentations of the Iron Company; and, second, because no duty rest-
ed on the Copper Company voluntarily to disclose its existence or its
provisions ïto the Bonding Company. This contention — which covers
the first group of assignments of error — raises the question, whether
the Copper Company was guilty of fraud by suppressing facts which
the Bonding Company was entitled to know.
Fraud may be committed by the suppression of truth as well as by
the suggestion of falsehood. 12 R. C. L. 305, and cases. But the
law distinguishes between passive concealment and active conceal-
ment, the distinction being that in active concealment there is implied
a purpose or design. As a gênerai rule, to constitute fraud by con-
cealment or suppression of the truth there must be something more
than mère silence, or a mère failure to disclose known facts. There
must be some occasion or some circumstance which imposes on one
person the légal duty to speak, in order that another dealing with
him may be placed on an equal footing. Then a failure to state a
material fact is équivalent to concealment of the fact and amounts
to fraud equally with an affirmative falsehood. Pickering v. Day, 3
Houst. (Del.) 474, 95 Am. Dec. 291 ; 12 R. C. L. 305, 306, 307, 308,
and cases.
We are not prepared to say — assuming the relations of the two
companies otherwise free from fraud — that if the Copper Company
had allowed the Iron Company to negotiate alone for the bonds, it
would bave been its duty to seek out the Bonding Company and in-
form it of the "Y" agreement. But that was not what happened.
The Copper Company was rendering personal as well as financial
aid to the Iron Company in securing the bonds which it exacted for
its own benefit. Its officer came into direct communication with an
officer of the Bonding Company and discussed the bonds. In that
discussion, the Bonding Company was endeavoring to ascertain what
risks it would incur on entering into thê proposed indemnifying ob-
ligations. The Bonding Company, speaking through an officer, asked
the Copper Company, addressing its Secretary, whether any advances
had been made against the contracts it was about to assure. To that
question, the Copper Company, through its Secretary, responded:
"Absolutely not." If the Secretary made that reply (which he de-
nied) he made it with full knowledge of the "Y" agreement.
What bearing had the "Y" agreement on the Bonding Company's
indemnity risks? That agreement provided for an advance by the
Copper Company to the Iron Company of $75,000. Just the char-
acter of the agreement it is difficult to define — ^whether an advance
against contract deliveries of pig iron, an out-and-out loan of money,
or a partnership contribution — at any event, the Copper Company paid
the Iron Company $75,000 and recited as a "considération" for this
payment the five sales contracts in question.
Thèse facts appearing in the "Y" agreement itself, connected with
74 262 FEDERAL REPORTER
the unusual feature that nowhere in it was there provision for the
repa3Tnent or return of the money so advanced, show several things.
Linking the sales contracts to the "Y" agreement by express récital
and making the sales contracts a considération for the "Y" agreement
show an intimate relation between them. But for the existence of
the five sales contracts there would hâve been no reason for making
the "Y" agreement. Whatever its character, whether j*i advance
against iron deliveries, or a loan, the Copper Company was in posi-
tion, when monthly deliveries began, to deduct at will from its month-
ly payments the sum or parts of the sum the Iron Company owed it.
If, in the last analysis, the advance was in the nature of a partner-
ship contribution, it was even more material to the risk. With a con-
tract outstanding, having ail thèse provisions and possible construc-
tions, the Copper Company, when asked by the Bonding Company
concerning advances, was under légal obligation to tell about it. That
question was the circumstance that raised in the Copper Company a
légal duty to speak; and, on its failure, transformed what otherwise
might hâve been passive silence into active concealment. The Bond-
ing Company was seeking facts aflfecting the degree of its responsibil-
ity. The "Y" agreement was such a fact. It was, therefore, the légal
duty of the Copper Company, when responding to the inquiry, to
disclose it and to disclose it fully. The question having been asked
for the purpose of ascertaining the risks involved in the situation,
any equivocal, evasive, or misleading answer, calculated to convey a
false impression, even though hterally true as far as it went, was
fraud. Pidcock v. Bishop, 3 Barn. & Cress. 605; 12 R. C. h. 309,
310, 311, and cases. It will not do for the Copper Company to say
that it answered correctly when its Secretary said, on his own con-
struction of the instrument, that no advances had been made against
iron deliveries. Even if this be its correct construction, the answer
given was but a half truth, for the "Y" agreement was a fact which
showed the financial and contractual relations of the two companies.
As such, it was material to the risks which the Bonding Company
would incur in assuring to one the undertaking of the other. Fail-
ure to disclose this fact, under the circumstance of being asked for
it, was an active concealment of the fact. As the fraudulent char-
acter of the concealment was provable only by the admission in évi-
dence of the thing concealed, we are of opinion that admission of the
agreement was not error, and that the agreement, together with the
circumstance of its concealment, constituted évidence sufficient to
sustain a finding of fraud by the jury.
In the second group of exceptions we find no error in the admis-
sion of évidence of misrepresentations made by the Iron Company
without the plaintiff's knowledge. This because it was necessary,
first, to show the Iron Company's fraud and misrepresentations be-
fore it was possible to show the Copper Company's connivance there-
in. Evidence of connivance was présent, and was sufficient, we think,
to submit to the jury.
[7] In the third group of exceptions covering the admission of
évidence of subséquent acts of the Copper Company and the Iron
WALTER V. ATHA 75
C262 F.)
Company, we find no error. The admission of évidence of this kind
must ordinarily be guarded, but it was admissible in this case for
the purpose of showing by its outgrowth what was the relation of
the two companies at the time the f raud was committed. Salmon v.
Richardson, 30 Conn. 360, 379, 79 Am. Dec. 255.
[8] In our review of this entire record, we hâve considered singly
and in groups the rulings of the court assigned as error and find
only a few open to question, any one of vvhich, if technically error,
is harmless error. We recognize that in the theory of the îaw, er-
roneous rulings in jury trials are presumptively injurious, yet the
tendency is to enlarge the sphère of the trial judge in the admission
and exclusion of testimony and not to disturb the judgment when it
affirmatively appears that his rulings, if erroneous, were harmless.
Fillippon v. Albion Vein Slate Co., 250 U. S. 76, 39 Sup. Ct. 435.
63 L. Ed. 853 ; Norfolk & Western Ry. Co. v. Gillespie, 224 Fed.
316, 320, 139 C. C. A. 552.
The judgment below is affirmed.
WAliTER et aL v. ATHA. ATHA v. WALTER et al. In re BLANCHARD.
(Circuit Court of Appeals, Thlrd Circuit. December 31, 1919.)
Nos. 2484, 2510.
1. BANKEtrPTCT ^=228 FlNDINQa OF BEFEBEE ON TTNCONTBADICTED EVIDENCE
NOT ENTITLED TO WBIOHT GIVEN FINDINQS ON CONFLICTING EVIDENCE.
WMle a finding of fact by a référée on confllcting évidence will not be
disturbed, unless tbere Is cogent évidence of mistake, yet. If the referee's
flndlng be a déduction from established facts or uncontradicted évidence,
the judge is at liberty to draw hia own inferences and deduce his own
conclusions.
2. Bankeuptcy <g=5j467 — Findings of tbiai, couet on uncontradicted évi-
dence NOT CONCLUSIVE ON APPEAL.
Where the findings of fact of the bankruptcy court, whlch were in cou-
flict with those of the référée, were based on déductions from uncontra-
dicted évidence, the appellate court need not foUovr thein, but may deduce
Its own conclusions, just as the trial court can disregard findings of
référée.
3. Bankeuptcy <S=>340 — Evidence held to show that olaimant lent stock
to heb son, the bankeupt, and not to a coepoeation.
Evidence on behalf of claimant, the niother of a bankrupt, held to show
that she lent stock to her son, the bankrupt, and not to a corporation in
which he was interested and which pledged the same.
4. Bankeuptcy <s=>340 — Claims by belative closely sceutinized.
Claims of relatives of a bankrupt should be closely and carefully
scrutinized, remembering, however, that the honest or dishonest character
of sueh clalm is not to be determlned by mère relationship.
B. Bankeuptcy ®=3314(1) — Duty of bankeupt' to eeimbubse one uending
HIM stock to PLEDGE.
Where a mother leut her son corporate stock for the purpose of enabling
the son to pledge the same and obtain funds for a corporation in which
he was interested, the son was under an implied duty to reimburse his
mother for expenses incurred in recovering the shares, because of his
failure to return them, and such expenses may be proven as a claim on
the son's bankruptcy.
©ssFor otiier cases see same toplc & KEY-NUMBER In aU Key-Numbered Dlgests & Indexes
76 262 FEDERAL EEPOETEK
Appeal from the District Court of the United States for the Dis-
trict of New Jersey ; Thomas G. Haight, Judge.
In the matter of Théodore C. E. Blanchard, bankrupt. From an or-
der of the District Court (253 Fed. 758), allowing as reduced the claim
of EmeUne C. Blanchai-d, Effe B. Walter and another, as executors
of the estate of claimant, since deceased, appeal, and Benjamin Atha, as
trustée, cross-appeals. Reversed, with directions to the District Court
to allow claim in full.
Vredenburgh, Wall & Carey, of Jersey City, N. J. (Albert C. Wall,
of Jersey City, N. J., and William F. Allen, of New York City, of
counsel), for Effe B. Walter and others.
Robert H. Southard, of New York City, for Benj. Atha, trustée, etc.
Before BUFFINGTON and WOOLLEY, Cii^cuit Judges, and
MORRIS, District Judge.
WOOLLEY, Circuit Judge. In the proof of claim and amended
proof of claim filed by Emeline C. Blanchard in the bankrupt estate of
her son, Théodore C. E. Blanchard, there is an item of $271,155. On
pétition by the Trustée for its rejection or réduction, the Référée al-
lowed the item in full. On review, the District Court reduced it
to one-fourth and later allowed it for one-half of its amount. From
the order of the District Court, the claimant took this appeal, charg-
ing error to the court in not allowing the item in full. On cross-
appeal, the Trustée assigns as error, first, the action of the court in
not wholly expunging the item from the claim; and failing in this,
second, its action in allowing the item for one-half of its amount in-
stead of for one-fourth.
As the case is stated in the opinion of the trial judge, 253 Fed. 758,
we shall do no more than give in outline the facts on which we think
the case turns.
The transactions out of which this controversy arose extended
over a period of twenty years or more. They began shortly after the
death of the claimant's husband, who, having been one of the founders
of The Prudential Insurance Company of America, left to his widow
and several children a large number of shares of the highly valuable
stock of that corporation. Three of his children, William W. Blanch-
ard, Fred. C. Blanchard, and Théo. C. E. Blanchard, used their shares
freely in borrowing money with which to embark upon varions enter-
prises, which failed with singular regularity. The one with which
we are hère concerned was Blue Ridge Enameled Brick Company. As
the financial needs of this and other projects exhausted their resources,
the sons appealed to their mother from time to time and obtained
her shares on which to raise the funds they required. Thèse trans-
actions, initially small in amount, were many in number. The first
one bearing on this controversy involved 1176*''/ioo shares, represent-
ing in the aggregate shares which the mother had at previous times
and in smaller amounts turned over to her sons. Thèse were pledged
on a note of the Brick Company for $205,000, dated August 1, 1904,
endorsed by the three sons and the mother, and negotiated with the
WALTEE V. ATHA 77
C262 F.)
Fidelity Trust Company of Newark, N. J. In April, 1908, the Trust
Company called this loan and also four loans of the three sons, amount-
ing to $507,000, on which were pledged 2445°'/ioo shares of Pruden-
tial stock, variously owned.
Milton E. Blanchard, another son, took up the loan of the Brick
Company and in return obtained from that Company a new note for
$216,411.67, dated April 6, 1908, secured by the endorsement of the
same three sons and by the pledge of 1225^^/ioo shares of the mother's
Prudential stock. The mother was not an endorser on this note.
Milton held the note until 1914, when ail three sons who had en-
gagea in the brick business, as well as the Brick Company itself, were
in bankruptcy. In this state of affairs, Milton demanded payment
and threatened to sell his mother's shares pledged with the note.
Whereupon the mother hought the note from him, and on its endorse-
ment to her, regained possession of her stock. The sum which she
thus paid is the item in dispute in her claim against the bankrupt es-
tate of Théo. C. E. Blanchard.
The mother's original proof of claim for this sum was based on
her right of action as endorsee of the note against Théo. C. E. Blanch-
ard, one of the endorsers. Her amended proof of claim was made on
the ground that she had loaned her shares from time to time, in dif-
férent amounts, — until they aggregated the number recovered from
Milton — unto her three sons, William W., Fred. C, and Théo. C. E.
Blanchard, for use by them personally in borrowing money for their
various projects, — among them the Brick Company, — upon promises
by them, jointly and severally made, to return the same ; and that, upor.
the failure of Théo. C. E. and the others to keep their promises, she
was compelled to lay out and expend the amount claimed in order to
recover her shares.
The argument on the law of this case has taken a wide range, in-
volving questions of rights and liabilities of endorsers, co-sureties,
and contribution, arising out of the finding of the learned trial judge
that the mother's loans of her shares were to the Brick Company and
not to her sons personally. Before we are called upon to consider thèse
questions of law, we must first ascertain the précise character of
the transactions between the mother and her sons, and détermine, as
a matter of fact, whether she loaned her shares to her sons to enable
them to finance the Brick Company, or whether she loaned her shares
to the Brick Company, and thereby financed it herself.
[1, 2] The testimony on which this case was submitted first to the
Référée, then to the District Court, and now to this court, to détermine,
as a fact, the character of the transactions between mother and sons
is unusual in that it was nowhere in conflict and the credibility of
no witness was at any time attacked. The learned trial judge was
mindful of the rule prevailing in this circuit against disturbing a find-
ing of fact by a Référée, based on conflicting évidence and involving
questions of credibility, unless there is cogent évidence of mistake;
In re Partridge Lumber Co. (D. C.) 215 Fed. 973, 976; but proceeded
to a finding opposite to that of the Référée under the rule, that if the
Referee's finding be a déduction from established facts or uncontra-
78 262 FEDERAL REPOBTEB
dicted évidence, the judge, reviewing the Référée and having before
him the same facts, is at liberty to draw his own inferences and de-
duce his own conclusions. In re New York & Philadelphia Package
Co. (D. C.) 225 Fed. 219, 221 ; Baumhauer v. Austin, 186 Fed. 260,
108 C. C. A. 306; Ohio Valley Bank Co. v. Mack, 163 Fed. 155, 158,
89 C. C. A. 605, 24 L. R. A. (N. S.) 184. We do not believe we are
expanding the latter rule beyond its proper limits by extending it to
ourselves on this appeal.
[3] In proof of her claim, the mother showed that her three sons
lunched with her and her daughter weekly, and at thèse luncheons
the sons would represent to her their need for money to carry on
their business and would ask her to loan thera her Prudential shares.
The mother was far advanced in years and timid. To thèse requests
she would usually demur ; though later she would unif ormly yield. In
representing their needs, the sons frankly told the mother the uses
for which they wanted her stock, among which was the raising of mon-
ey for the Brick Company, assuring her that the loans to them would
be perfectly saf e and promising always to return them as soon as pos-
sible. The shares when taken were pledged by the sons with the Trust
Company on their own notes and on notes of their business enterprises,
among them the Brick Company.
Thèse transactions began when the mother's inheritance of 2000
shares of Prudential stock was intact, and after the sons' inherit-
ances had been exhausted in their various undertakings. They con-
tinued until the most of the mother's inheritance had been transfer-
red frora her possession to pledges on the notes of the Brick Com-
paiw and of her sons, and until their bankruptcy ensued.
The advanced âge of the mother must, of course, be considered in
appraising her testimony, yet the very simplicity with which it was
given lends force to it. Her testimony tended to prove that while she
knew of the Brick Company as one of her sons' enterprises, she was
not conscious of having loaned her shares to it. The following excerpt
f rom her testimony shows its character :
"Q. Do you know about thla company borrowlng any money?
"A. No, I do not, not specially. I loaned my stock to my boys. • • *
"Q. Can you remember whether there was a wrltten agreement with your
son Théodore as to what he should do with thls stock of yoursî
"A. Why, I loaned it to the boys whenever they wanted it. They knew they
eould hâve It when they needed it."
A daughter, always présent at the luncheons, testified to the con-
versations between the mother and her sons, to their requests for the
loan of her Prudential shares, and to the delivery by the mother of her
certificates to her sons.
The testimony of Fred. C. and William W. Blanchard went directly
to the point that the loans were personal to the three sons. True, the
testimony of the daughter was that of a witness interested in the out-
come of the controversy; but it is doubtful that the testimony of thèse
two sons was affected by any financial intefest. Added to this testi-
mony was that of John R. Hardin, Esq., who, by reason of his rela-
tion to the Blanchard family as counsel for many years, was intimate-
WALTEE V. ATHA 79
C262 V.i
ly acquainted with their business affairs. He had, however, no knowl-
edge of this transaction at its inception, and, therefore, could not tes-
tify that the transfer of shares by the mother to the sons was Person-
al to them. He testified, however, on bis knowledge of the conduct of
the family business, that he believed the shares were loaned by the
mother to the sons. If his testimony was admissible, it would be con-
clusive of the issue. But the ieamed trial judge considered it incom-
pétent, and therefore rejected it. Even with Mr. Hardin's testimony
out of the case, we are satisfied that the claimant has, on other testi-
mony, established, prima facie, a right to the allowance of the item in
dispute.
In opposition to its allowance, the Trustée produced no évidence that
Mrs. Blanchard ever had transactions of any kind with the Brick
Company beyond the fact that she was at one time the holder of 100
of its 6000 shares of capital stock and at another time the holder of
300 shares. He ofïered no testimony in contradiction of the testimony
for the claimant that the loans of the mother 's shares were to her
sons personally, except a paper, dated July 5, 1901, when the sons be-
gan to borrow and use the mother's shares in raising money for the
Brick Company. This paper bears the signature of Emeline C. Blanch-
ard, and is addressed to the Fidelity Trust Company, and purports to
be a continuing authority given the Brick Company to pledge her
shares of stock with the Trust Company in borrowing money. This
paper was signed more than three years before the date of the first
Brick Company note, and it was given by Mrs. Blanchard on the de-
mand of the Trust Company, as stated by its Président, in order that
it might hâve recourse without question to her stock pledged as col-
latéral, in the event of default on the note by the maker.
We do not regard this transaction as inconsistent with the claimant's
proofs that her loans were made to her sons personally. Some of the
loans made to her sons were admittedly made for use by them in rais-
ing money for the Brick Company. They could not get money from
the Trust Company for the Brick Company on her shares unless her
shares were put in a position that the Trust Company could bave re-
course to them in the event of the Brick Company's default. The
Trust Company's demand upon Mrs. Blanchard for written authority
to pledge the shares was one that is quite customary in banking circles
when a bank is loaning money to a person offering as collatéral the se-
curities of another ; and compliance with such a demand is quite cus-
tomarily made by the owner of securities so loaning them. From this
paper, made under the circumstances testified to, we cannot draw the
inference that Mrs. Blanchard loaned her shares to the Brick Com-
pany. The paper évidences nothing but her purpose to place her shares
in position to enable her sons to realize on them.
In our examination of the record, we find that no witness testified
that Mrs. Blanchard loaned her shares to the Brick Company. Op-
positely, several witnesses testified affirmatively and positively that
she loaned her shares to her sons. While the force of the testimony
of some of thèse witnesses is modified by varying degrees of interest,
we cannot, in the absence of their impeachment, reject it. Unless we
80 262 FEDEHAIi EBPOETEB
wholly disregard their testimony, the claimant must prevaîl, for op-
posed to their testimony the Trustée produced nothing. Aside from
the direct testimony of witnesses that the mother loaned her shares to
her sons, the natural and probable inferences, lawfully to be drawn
from the transactions, as evidenced by the acts and conduct of the
participants throughout a long period of time, are, that she loaned
her shares to her sons, not as agents of the Brick Company as a dis-
closed principal (Whitney v. Wyman, 101 U. S. 392, 396, 25 L. Ed.
1050), but to them personally for their use in raising money for the
Brick Company and their other undertakings.
[4] In reaching this conclusion, we hâve endeavored carefully to
keep in mind the rule that a claim of a relative of a bankrupt should be
closely scrutinized; remembering, however, that the honest or dis-
honest character of such a claim is not to be determined by mère rela-
tionship. Davis v. Schwartz, 155 U. S. 631, 638, 15 Sup. Ct. 237,
39 L. Ed. 829; Estes v. Gunter, 122 U. S. 450, 456, 7 Sup. Ct. 1275,
30 L. Ed. 1228; Ohio Valley Bank Co. v. Mack, 163 Fed. 155, 156,
89 C. C. A. 605, 24 L. R. A. (N. S.) 184; Baumhauer v. Austin, 186
Fed. 260, 265, 108 C. C. A. 306.
[5] On this finding of fact, the claimant's right (or that of her Per-
sonal représentatives) to the full allowance of the disputed item in her
claim is established certainly under one of several familiar principles
of law, namely, on her son's implied contract to reimburse her for ex-
penditures she was required to make in recovering her shares because
of his failure to keep his promise to return them.
We direct that the District Court modify its order by allowing in
full the item of the claim in dispute, and that the costs of this case,
both in the District Court and in this court, be paid by the Trustée
out of the estate of the bankrupt as a cost of administration.
McCAFFREY et al. v. DAT et al.
(Circuit Court of Appeals, Ninth Circuit. January 5, 1920.)
No. 3295.
1. Mines and minebals <g=s>S3 — Deed and conteact to fuenish monet fok
DEVELOPMENT HELD SEPAEATE TRANSACTIONS.
In an action for failure to comply with a mining contract, évidence
regarding tlie deeding of mining property In certain proportions to plaln-
tiffs, wlio had an option on the property, and défendants, who furnished
the necessary money, and the exécution on the following day of a con-
tract under whlch défendants agreed to furnish money for developlng
the property, helA to sustain findlngs that the contract was not a part of
the considération for the deeds.
2. Mines and minerals <®=583 — Evidence establishino compuance with
conteact to fuenish monet fob development.
In an action against a défendant for refusing to furnish money for the
development of mining property under a contract committing the opéra-
tion and development of the mine to defendant's best judgment, uncon-
tradieted évidence that the location of a claim was probably Invalid until
certain location work had been done, that property was inaccessible,
@=3For other cases see eame topic & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexe*
M'CAPPRET V. DAT 81
C262 F.J
that completton of a nearby power plant would save considérable money,
etc., held to sustaln flndings that défendant did not act arbitrarily or in
bad faith in refusing to advance more money.
Appeal from the District Court of the United States for the District
of Montana; George M. Bourquin, Judge.
Suit by Edward McCaffrey, R. C. McCaffrey, and Mary Dena Mc-
Caffrey against Harry L. Day, Mrs. Harry L,. Day, whose true name
is Helen D. Day, J. D. Finley, and Mrs. J. D. Finley. Judgment for
défendants, and plaintiflfs appeal. Affirmed.
Graves, Kizer & Graves, of Spokane, Wash., for appellants.
W. W. Zent, of Spokane, Wash., Isham N. Smith, of Seattle, Wash.,
John H. Wourms, of Wallace, Idaho, and C. B. Nolan and William
Scallon, both of Helena, Mont., for appellees.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
ROSS, Circuit Judge. A careful examination of the record in this
case satisfies us of the correctness of the judgment of the court below
denying the rescission of the contract between the parties, sought by
the suit. The bill was based upon the alleged failure and refusai of
the appellee Day to comply with the terms of the contract, and upon
the allégation that such refusai by him was arbitrary and in bad faith,
and "not in the exercise of his judginent, or of any discrétion con-
ferred upon him by the agreement."
The contract related to certain mining property situated in Lincoln
county. Mont., consisting of the Héron Iode mining claim, the Cabi-
net Iode mining claim, the Galena Iode mining claim, and a mill site
known as the Cabinet mill site, situated on Callahan creek, in Troy
mining district. In 1910 the property belonged to a corporation called
Big Eight Mining Company, and during that year it was leased to the
appellant R. C. McCaffrey (one of the complainants below) by the
Company, with an option to purchase the same within a certain stated
time for $50,000 ; deeds theref or being placed in escrow with North-
western Loan & Trust Company, to be by it delivered to the purchaser
upon the payment of the purchase price. The lessee entered into pos-
session of the property under the lease and commenced working the
ground, in which undertaking he was joined by his son and co-com-
plainant below, Edward McCaffrey, during the progress of which
work they shipped a number of cars of lead and zinc ore ; the appel-
lant Edward McCaffrey, who was a plumber, having invested in such
work a considérable amount of money out of his business, stated to be
from $15,000 to $20,000. His father was a prospector and miner.
The appellee J. D. Finley (a défendant below) was vice président and
a director of the Exchange National Bank of Spokane, Washington, of
which bank Day was also a director, and he was a friend of the Mc-
Caffreys, and acted for them in their dealings regardîng the prop-
erty hère in question. As the time approached for the exercise of the
option to purchase the property, the McCaffreys, through Finley, open-
ed negotiations with an eastern corporation called Grascelli Chemical
Company for the advance of the necessary $50,000 with which to
262 F.— «
82 262 FEDERAL EEPORTBB
make the purchase, and for the development of the properfy, which
negotiations were pending at the time Finley, for the McCaffreys, ap-
pUed to Day with the same end in view ; Finley preferring the latter
for the reason, particularly, that he was an experienced and compétent
mining man, as well as one of abundant means. That he was ex-
perienced and compétent is sufficiently shown by the fact that he had
been the manager of the large and important Hercules mine of that
section of the country.
The évidence shows that Finley knew nothing about mining, but
that he was himself able to advance the $50,000 with which to effect
the purchase of the property, and told Day, as well as the younger
McCafifrey, that he was willing to do so if necessary, but, being anxious
to interest Day, for the reason that has been stated, went with him in
the fall of 1912 to see the property. While no one, we think, can justly
claim from the évidence in ûie case that the property had been suffi-
ciently opened up to be called a mine, Day, according to his own testi-
mony, regarded it as a good prospect — so good, indeed, that he said he
would, with Finley, advance, in certain proportions, the necessary $50,-
000 to make the purchase and $50,000 more for the development of the
property. But when it came, as it did, according to the évidence, to the
proposition that such purchase money be so advanced upon an assign-
ment of the lease and bond, Day, after an examination of the papers
by one of his attomeys, and consultation with him, refused the proposi-
tion. Thereafter, time being of the essence of the escrow agreement,
haste became necessary, and Day, having then gone to Spokane, sum-
moned his attorney, Mr. Wourms, there, who arrived at Spokane on
the morning of the 15th of January, 1913, when, according to his tes-
timony, Day handed him the abstract of title to the property and re-
quested him to examine it as expeditiously as possible and advise him
respecting it; that about the time of Wourms' completion of the ex-
amination of the abstract Finley and the younger McCaflfrey came to
the room of the hôtel where he and Day were, and that he informed
them that, while there were some minor defects in the abstract, it was
sufficient, but that he wished to see the deeds that were in escrow, and
which were to be delivered upon the payment of the money, and that he
and McCaffrey then went to the Northwestern Loan & Trust Company
to see the deeds, where the cashier of the bank allowed him to examine
them, but said that they had been notified by the Big Eight Mining
Company not to deliver them ; that he and McCaffrey then returned
to the hôtel, where they found Finley and Day, to whom he reported
the resuit of the visit to the Trust Company, including his report that
the deeds were sufficient, and —
"adyised them that the thlng to do was to prépare deeds, Immediately, make
•* tender. That seemed to appeal to ail the gentiemen présent, and they began
to dlscuss for some little time as to the Interest that each one was to hâve.
1 was interestad," said the witness, "in Mr. Day's Interest Mr. Day in-
sisted on 55 per cent, and there was some talk backward and forward, and
the one remark that I recall that Mr. McCaffrey made was that that would
only give hiinself and his father 25 per cent ; that they had spent two years
on the property and that wasn't enough. Mr. Day then suggested that 51,
what he wanted was control, and he wouldn't go in unless he did get control,
and 51 per cent, was Just as good for control as 55; that he was willing to
M'CAFFRET V. DAY 83
£262 F.)
reduce hls demand to 51 per cent. TJiat was agreed upon, and I Immedlately
proceeded to prépare a deed from the McCalïreys to Mr. Harry L. Day.
I completed that deed; as I recall it Mr. McCaffrey and Mr. Finley went
away."
The witness further testified that he and Finley then went to the
bank to get the money, and that on the way Finley told him that he
might just as well prépare a deed for him also, which the witness did
before going to the bank. The deeds so prepared by Wcurms were
from the McCafïreys to Day and Finley for 51 and 14 per cent., re-
spectively, in the property, to pass to and through the McCafïreys from
the Big Ëight Company. The witness further testified that immedlate-
ly after he had prepared the deed for Finley the two proceeded to the
Êxchange National Bank, where Day directed that he be given $50,000
in money which was donc, and, it being heavy, he and the younger
McCafïrey took it in a taxicab to the Northwestern Trust Company
and made the necessary tender. The witness further testified that the
next morning, January 16th —
"Mr. Finley came to our rooms at the hôtel, that we used as a kind of a
workshop, and informed me that he thought that Mr. Day and himself ought
to enter Into an agreement for the purpose of putting up the money; that the
McOafCreys were not able to adrance any money to amount to anythlng in the
development of the property; and as I recall it I told Mr. Finley that I
didn't see any need of it; that the mining partnershlp law of the state of
Montana was sufflcient for ail purposes, and Mr. Finley then went away.
Mr. Day came to the room a short while afterwards, and informed me that he
had seen Mr. E'inley, and that they had agreed that they would enter into an
agreement with the McCaflreys for the purpose of advancing some money,
and requested me to put their agreement, as he narrated it to me, into form.
I proceeded to do so, and it was discussed backward and forward, and eeveral
drafts made of It that moming by Mr. Day and Mr. Finley and myself.
"Q. That would be on the moming of the 16th? A. On the morning of the
leth.
"Q. Of January î A. On the morning of the 16th of January, as I recall it;
and finally we succeeded in gettlng a draft that was satisfactory to Mr.
Finley and to Mr. Day. Then Mr. Edward McCaffrey came to the rooms
with référence to the agreement; he read it over, and he asked me whether
I would object to going up to Mr. —
"Q. Henley's? A. Henley's, I think; Henley's office; and we went up to
Mr. Henley's office, Mr. McCaffrey and myself.
"Q. Do you remember about the time that you got to Henley's office? Is
there anything that occurred there — A. I belleve Mr. McCaffrey will recall
it. We waited quite a while for him to return from lunch ; that Is, he was
out when we went up there.
"Q. Well, now, when Henley came in, and as the resuit of the vlsit that
you made to his office there, was there any addition made to the agreement
as it then stood? A. As I had wrltten the agreement, there was no proviso
in it that if any of thèse causes should arise that would absolve thèse people
from — Mr. Day and Mr. Finley from — working the property, unless the con-
ditions that made it necessary to desist putting up the money should be
permanent, that they should in the future time be obllged to go ahead, and
he suggested to me that there ought to be some phraseology of that class in
the agreement. And I told Mr. Henley, in the présence of Mr. McCaffrey,
that personally I didn't see any objection to adding an arrangement of that
kind.
"Q. And are you able to refer to the partlcular clause that was added to
the contract, on account of the suggestion made by Mr. Henley? A. Tes,
sir; a clause in paragraph 8, after the comma, in the fifth line from the
bottom of that paragraph, reading like this: 'But nothing hereln shall be
84 202 FEDERAL REPORTER
oonstrned to flnally release the sald parties ot the flrst part from ttieir
obligation to fumish said money as aforesaid, unless the obstacles to the
opération and development of the same shall be permanent.'
"Q. And theu was thei-e a redrafting of the contract as it was amended?
A. I took the matter up with Mr. Day and Mr. Finley, and told them that I
thought fbat was fair, and there was no objection, and I redrafted such
portions of the contract as was necessary to insert that clause."
In substance the clause so suggested is found in the contract which
it is sought by this suit to rescind. It appears from the testimony of
both Finley and the McCaffreys that the former was their représenta-
tive in the transactions in question, and from the testimony of both
Finley and Edward McCaffrey that the latter was présent several
times during the discussions regarding the matter on the 16th day of
January, 1913, when the terms of the agreement were finally settled
and reduced to writing byWourms; and while Edward McCaffrey
does not deny requesting Wourms to go, or going with him, to Hen-
ley's office, he does positively deny that the latter was his attorney.
We insert a brief excerpt from the testimony of that witness:
"Do you remember going to Mr. Ilenley's office on the 16tb, or were you to
Mr. Henley's office during the finie that thèse negotiations were carried on?
A. I don't remember of it.
"Q. Do you remember goiug there in company witli Mr. Wourms, and
waitiug during the noon hour until Mr. Henicy returned? À. I don't re-
uiember.
"Q. In référence to this agreement? A. I don't remember it at ail.
"Q. Well, would you say that you were not? A. I couldn't say whether
I was or I wasn't ; I don't remember.
"Q. Well, now, again trying to refresh your recollection in référence to
that, do you remember going to Jlr. Heuley's office? Mr. Ilenley was acting
as attorney for you, wasn't he? A. No, no ; never was.
"Q. Never acted for you in auy way? A. No capaeity at ail; never.
"Q. You never consultcd him? A. Never consulted him in regard to any
of my business at ail.
"Q. Well, in regard to this business? A. No; nor no business.
"Q. Now, do you remember goiug to his oflice —
"Mr. Graves: I submit that he bas just said that he didn't.
"The Court: Well, that doesn't necessarily dispose of this question; it is
cross-examination.
"Q. Do you remember about this provision baing inserted in this contract
at the instance of Mr. Houley, when you and Wourms were présent: 'But
nothing herein shall be eonstrued to finally release the sald parties of the
first part from their obligation to furnish said money as aforesaid, unless
the obstacle to the opération and development of the same shall be perma-
nent.' A. Well, I told you that I didn't see them papers ; never seen them
until the day I signed them at the bank ; never seen them, nor no part of
them; had nothing to do with the making, and know nothing about it."
The record shows that the two deeds, as well as the contract, were
signed and acknowledged before a notary public at the same time, to
wit, January 17, 1913. The contract in its lirst, second, and third para-
graphs, respectively, set forth the interest of each of the parties in
the property, that is to say, fifty-one one-hundredths in Day, fourteen
one-hundredths in Finley, and thirty-five one-hundredths in the Mc-
Cafïreys jointly; and the fourth, fifth, and sixth paragraphs recited
in substance that in the judgment of the respective parties the proper
development and opération of the property required the installation of
M'CAPFRET V. DAT 85
C262 F.)
suitable mining and milling machinery and other equipment, and their
désire to develop, equip, and operate the property, and the willingness
of Day and Finley to advance money in proportion to their ownership,
for that purpose, upon condition that such advances should bear a spec-
ified rate of interest and be repaid out of the first profits derived from
the opération of the property, or, in the event no such profits should
be eamed, that they should hâve the right to remove therefrom ail of
the machinery, etc., with certain other provisions, in the event of a sale
of the property, not necessary to be mentioned. The foregoing were
followed by paragraphs 7 and 8, which are as f ollows :
"(7) Now, therefore, in considération of the premises, and the mutual bene-
fits which will accrue to the parties hereto, it is hereby agreed that the parties
of the flrst part [Day and Finley] wlll advance, in proportion to their owner-
ship In the property, as it nmy be required in the judgment of said Harry L
Day, the money necessary to operate and further develop and equip the said
property up to and not exceeding the sum of flf ty thousand ($50,000) dollars.
This money to be ftirnished on the express condition that tlie parties of the
flrst part shall be reimbursed for their advances together with Interest thereon
from date said sums are fumished, at the rate of six per cent. (6%) per
annum out of the first profits arislng from the opération of the property.
In the event that there be no profits, they shall hâve the right to remove
ttterefrom any and ail machinery and Improvements which may be placed
thereon and shall crédit the actual cash value of ail said machinery and
improvements, at the time they are removed, on the aceount for money ad-
vanced by them, or In the event of the sale of the said property before the
parties of the flrst part shall hâve been fully repaid for their advances with
interest thereon as aforesald, the parties of the first part shall first be reim-
bursed for any and ail advances made by them, with interest thereon as
a/oresaid, from the money derived from the sale of said property, before any
of the proceeds thereof shall be divided among the owners of the property.
"(8) It Is hereby further agreed that, if the duty on ores and metals be
reduced by Congress, or If, in the course of the opération and development of
the property, the physical condition should be such, or If from any other
cause or causes beyond the eontrol of the said parties of the first part, it
shall in the judgment of the said Harry L. Day not be profitable and advau-
tageous to continue the installation of machinery and the development and
opération of the property, then and in that event the said parties of the flrst
part shall not be obliged to make further advances, nor to continue the opéra-
tion or development of the said property, even though they hâve not advanced
the full sum of flfty thousand ($50,000) dollars at that time; but nothing
herein shall be construed to finally release the said parties of the first part
from their obligation to furnish said money as aforesald, unless the obstacles
to the opération and development of the same shall be permanent"
The contract further gave to Day and Finley an option to purchase
the interests of the McCafifreys in the property, and in the event of
its transfer to a corporation an option to purchase their stock in
such corporation at the same price and on as good terms and conditions
as they (the McCafïreys) might be offered by thlrd parties — such op-
tion to be exercised within 30 days after receiving a like notice of the
ofïer. It further provided that Day, or some person designated by
him, should at ail times hâve the gênerai management and eontrol
of the property, and that, in the event a corporation should be organiz-
ed to take it over, Day, or such person or persons as he might sélect,
should be elected président or gênerai manager thereof —
"It belng the Intention of the parties to this agreement that the said Harry .
L, Day, by reason of his ownership of fifty-one one-hundredths (51/100) of
86 262 FEDERAL EEPORTËK
the mlnlng clatms herelnbefore described, and of hls long and successful
expérience as an owner and operator of mines, sball hâve the control and
management of the said property and of the corporation to be hereafter
organized."
It is insisted on behalf of the appellants that the contract was an
essential part of the considération for the deeds from the McCaf-
freys, which considération failed in a material part by reason of
Day's refusai "arbitrarily and in bad faith, and not in the exercise
of his judgment or of any discrétion conferred upon him by the agree-
ment," to advance the money or to do anything required of him there-
by, in conséquence of which the appellants are entitled to a decree
rescinding the contract and requiring the reconveyance by Day and
Finley of their interests in the property, upon the return to them
of such amounts of money as the court should deem équitable.
[1,2] The court below found the évidence to be insufficient to show
that the contract was a part of the considération for the deeds, and in
that view we agrée. We think that fairly shown by the spécifie facts
testified to by the witness Wourms, and which found strong support in
the testimony of Day. We also agrée with the court below that the
proof fails to show that the latter acted in bad faith or arbitrarily. It
undoubtedly shows that the McCaffreys, as well as Finley, were anx-
ious and insistent that he proceed promptly to install machinery and
work the property, and even suggested the érection of a mill. The
complète answer to such suggestions is that by the agreement of the
parties the development and opération of the property was left to the
honest judgment of Day. He testified, among other things, that he
found that the location of the Galena claim was invalid, for the reason
that there had been no discovery of minerai within its boundaries, and
that therefore he directed the extension of a tunnel on one of the other
claims into the Galena ground for the purpose of making the neces-
sary discovery, and that for the protection of the property, in the event
it should prove to be a valuable one, it was désirable to locate some ad-
joining ground and to acquire a claim called Thomas claim, ail of
which took more or less time, and of which ail of the parties to the
agreement were informed ; that the location of the property was about
six miles from the railroad, the roads poor, and the hauling of ore
and supplies therefore necessarily costly, especially when the snows
were on the ground ; that in the event a mine should be found in the
property an independent production of power for the oneration of a
mill would be very costly, but that a nearby mine was being equipped
with electric power by means of water from which power might be
furnished through the operator of it, with whom he was on friendly
terms and who had actually consented to supply it — that plant costing
about $350,000. None of thèse matters so testified to by Day are
denied, and we think they furnish very good and sufiîcient reasons for
the delay that occurred in the expenditure of any large sum of money;
but the évidence shows without conflict that a very considérable amount
of development work was done from time to time under Day's di-
rection, in which the appellants joined up to, indeed, a very short time
■preceding the commencement of this suit.
HINES V. KITTENBEEQ 87
(262 FJ
We discover nothing in the record tending to show any desîre on
Day's part to take any unfair advantage of his associâtes, and are of
the opinion that the judgment of the court below is right ; and it is ac-
cordingly affirmed.
HINES, Dlrector General of Rallroads, v. RITTENBERG et al.
(Circuit Court ot Appeals, Fourth Circuit. October 7, 1919.)
No. 1735.
1. Railroads <s=34S4(3) — Okigin op fibe question for jubt.
Whether a fire starting on the roof of a house near defendant's rall-
road tracks, whlch spread and destroyed other property, was caused by
sparks froni the engine of a train passing a few minutes before, held,
under the évidence, a question for the jury.
2. Railroads <S=>453 — Statittoby uabilitt fou in.tury by fiée not dépend-
ent ON NEGLIGENCE.
In an action against a railroad company for destruction of property
by fire communlcated by an engine on Its road, under Clv. Code S. C.
1912, § .3226, providing that railroads shall be responslble In damages to
any person whose property may be injured by flre communlcated by its
locomotive englues, as construed by the Suprême Court of the state, ab-
sence of négligence is not a défense.
3. Railroads <S=>249 — Statute imposino liability fob ftbeb conbtittjtional.
Civ. Code S. O. 1912, § 3226, maklng railroad companles llable for in-
juries caused by flre communlcated by thelr engines, regardless of the
question of négligence, held constitutlonal.
In Error to the District Court of the United States for the Eastem
District of South Carolina, at Charleston; Henry A. Middleton
Smith, Judge.
Action by Gus Rittenberg, in his own right and as trustée for cer-
tain insurance companies, against Walker D. Hines, Director Gen-
eral of Railroads. Judgment for plaintifï, and défendant brings er-
ror. Affirmed.
P. A. Willcox, of Florence, S. C. (Benjamin H. Rutledge, Simeon
Hyde, and Octavus Cohen, ail of Charleston, S. C, and S. M. Wet-
more, of Florence, S. C, on the brief), for plaintiff in error.
Louis M. Shimel and J. N. Nathans, both of Charleston, S. C.
(Nathans & Sinkler, Sm)rthe & Visanska, and A. T. Smythe, ail of
Charleston, S. C, on the brief), for défendants in error.
Before KNAPP and WOODS, Circuit Judges, and WADDILL,
District Judge.
KNAPP, Circuit Judge. This action was brought to recover dam-
ages for the loss by fire at St. Stephens, S. C, of certain buildings
and stocks of goods belonging to plaintiff. The fire is alleged to
hâve been caused by sparks from a locomotive operated by défend-
ant as part of the equipment of the Atlantic Coast Line Railroad
Company. Thèse facts appear:
[1] The town of St. Stephens consists mainly of a row of build-
ings along the railroad right of way, which there runs néarly north
<S=5For other oasès see sams topic & KBY-NUMBER In ail Key-Numbered Digests & Indexes
88 2G2 FEDERAL REPORTER
and south. In the early afternoon of Sunday, March 10, 1918, a
freight train of 36 loaded cars passed through, running north at the
rate of 20 to 30 miles an hour. Not long afterwards fire was dis-
covered on the roof, midway between eaves and ridge, of a house
occupied by Mrs. Keller, in which a hole had been bumed "the size
of a barre! head." From there the fire spread to adjoining buildings,
one after another, until most of the row was destroyed, including
plaintiff's property. At the time the fire was first seen a high wind
was blowing from the west; that is, towards the buildings that were
consumed. South of St. Stephens for a couple of miles or more the
grade of the railroad ascends to the north, though through the town
the grade is practically level. The locomotive in question was lighter
than those of more modem type, but adéquate for the train it was
hauling.
There was further testimony by a witness, who said he was stand-
ing at his gâte close by the right of way, about three-quarters of a
mile from plaintiflf's store, when this train passed; that it was run-
ning very fast, and the engine "exhausting very hard"; that cinders
were thrown out, which set fire to the dry grass on his lot; that
some 10 minutes later, after he "whipped this fire out," he looked
up the road and saw people running across the track "over towards
Mr. Rittenberg's side to the fire — the fire that broke out there."
Another witness said that he was near St. Stephens, on his way from
church, as this train passed him; that after lie crossed the railroad
at the station cinders fell on his hat, "came down swift and fast, a
lot of them"; that soon after he got to the station he heard the cry
of "Fire!" and saw that the roof of Mrs. Keller's house was burn-
ing, "about five or six feet from the chimney." Mrs. Keller testified
that there had been no fire in her house that day for cooking or
other purposes, "only the lighting of a lamp early that morning."
Occupants of adjacent houses on either side, and of the other houses
nearby, testified that no fires had been lighted in their respective
dwellings during that day. In a word, the testimony is undisputed
and convincing that the fire which proved so destructive originated
in the roof of Mrs. Keller's house and from an external cause ; and
it seems évident from the proofs recited and other circumstances of
record that the question whelher this initial fire was started by sparks
or cinders from defendant's locomotive was a question of fact, which
was properly submitted to the jury. , Grand Trunk R. Co. v. Rich-
ardson, 91 U. S. 454, 471, 23 L. Ed. 356; lowa Central Ry. Co. v.
Hampton E. L. & P. Co., 204 Fed. 961, 123 C. C. A. 283 ; Chicago
& E. R. Co. V. Ohio City L. Co., 214 Fed. 751, 131 C. C. A. 57;
Hutto V. Railway Co., 81 S. C. 572, 62 S. E. 835.
[2] The défendant insists, however, that, even if the jury were
warranted in finding that the fire was caused by sparks from this lo-
comotive, nevertheless a verdict should hâve been directed in its
favor, because the locomotive was proven to hâve been equipped with
a standard spark arrester in perf ectly good condition. In other words,
it is contended that any presumption of négligence arising from the
fact that the fire may hâve been started by defendant's locomotive
HINES V. BITTENBERG 89
(262 F.)
was fuUy rebutted, and the absence of any négligence established, by
conclusive évidence that the locomotive, including the spark arrester,
was in good order and carefuUy operated. But this contention ap-
pears unavailing in view of a statute of South Carolina (Code of
1912, § 3226), and the construction given the same by the Suprême
Court of that state. The statute reads as foUows:
"Every railroad corporation shall be responsible In damages to any person
or corporation whose buildings or otlier property may be injured by fire coni-
municated by Its locomotive engines, or origlnatlng within the limits of the
right of way of sald road in conséquence of the act of any of its authorized
agents or employés, except in any case where property shall hâve been placed
on the right of way of such corporation unlawfully or without its consent, and
shall hâve an insurable interest in the property upon its route for which it
may be so held responsible and may procure Insurance thereon In Its ovvn
behalf."
That this statute makes a railroad company liable, under such
circumstances as are hère considered, although the company is not
négligent, has been repeatedly held by the courts of South Carolina.
Thus, in Thompson v. R. & D. R. Co., 24 S'. C. 366, the Suprême
Court says:
"Nothing is said in the act about négligence, and the very fact of such
omission shows that the object of the act was to eliminate any question of
négligence, Inasmuch as under the law as it previously stood the company
would be liable only in case of négligence. We are, therefore, forced to con-
clude that the purpose of the act was to dispense with any inquiry into that
subject, for it déclares the company liable for property destroyed by fire,
originating on its right of way from any act of any of Its agents, without any
qualification whatsoever, either as to négligence or otherwise."
Again, in Rogers v. Florence R. Ce, 31 S. C. 378, 383, 9 S. E.
1059, 1060, the same court says:
"It will be observed that the question of négligence cannot arise under this
act, because the company is to be held liable, where the fire orlginates within
its right of way, In conséquence of the act of any of Its authorized agents or
employés, without regard to the fact of négligence one way or the othcr."
And in Hunter v. Columbia, etc., R. R. Co., 41 S. C. 86, at page
91, 19 S. E. 197, 199, the following is said:
"This statute, therefore, créâtes a spécial and exceptlonal liabillty upon
every railroad company for any damages done to the property of another by
fire communicated by Ifs locomotive engines, irrespective of any négligence on
Its part."
That this is the settled construction of the statute is affirmed or
assumed in the subséquent cases of Hutto v. Railroad Co., 81 S. C.
567, 62 S. E. 835, Brown v. Railroad Co., 83 S. C. 557, 65 S. E. 1102,
and Birt v. Railway Co., 87 S. C. 239, 69 S. E. 233.
[3] The validity of such a statute, so construed and applied, is
upheld by the Suprême Court of the United States in St. Louis &
San Francisco Ry. Co. v. Mathews, 165 U. S. 1, 17 Sup. Ct. 243, 41
L. Ed. 611. From the learned and instructive opinion in that case,
it suffices to quote the following (165 U. S. on page 26, 17 Sup. Ct.
252, 41 L. Ed. 611):
90 262 FBDSRAL EBFORTEB
"Rallroad corporations, In order the better to carry ont the public object of
their création, the sure and prompt transportatlon of passengers and goods,
bave been autborlzed by statute to use locomotive englues propelled by steam
generated by Ares Ugbted upon those engines. It Is wlthln the authorlty of
the Législature to make adéquate provision for protecting the property of
othera agalnst loss or injury by sparks from such engines. The rlght of the
citizen not to bave hls property bumed wlthout compensation Is no less to be
regarded than the rlght of the corporation to set It on flre. To require the
utmost care and diligence of the rallroad corporations in taking précautions
agalnst the escape of fire from their engines might not afford sufflcient protec-
tion to the owners of property in the neighborhood of the railroads. When
both parties are equally faultless, the Législature may properly consider It to
be just that the duty of Insurlng prlvate property agalnst loss or injury caused
by the use of dangeroi:is instruments should rest upon the rallroad eompany,
which employa the instruments and créâtes the péril for its own profit, rather
than upon the owner of the property, who bas no control over or interest in
those Instruments. • » • The statute is not a pénal one, Impostag punish-
ment for a violation of law, but It is purely remédiai, maklng the party,
dolng a lawful act for Its own profit, llable in damages to the hinocent party In-
jured thereby, and givlng to that party the whole damages, measured by the
Injury suffered."
As the case at bar was brought under the South Carolina statute
and falls clearly within its terms, we perceive no reason for denying
its full and controlling application. If the fire which destroyed plain-
tiflf's property was "communicated" by defendant's locomotive — and
the testimony permitted the jury to so find — the statute imposes lia-
bility for the resulting damage, even if défendant was in no wise négli-
gent. That this is the meaning and intent of the statute in such case
has been repeatedly held by the highest court of the state, and its
construction of the enactment must be accepted. The question is not
open to further discussion.
The case of Savannah Fire & Marine Ins. Co. v. Pelzer Manufactur-
ing Co., 60 Fed. 39, decided at circuit in 1894, and apparently much
relied upon by défendant, seems to be distinguishable. In that case
suit was brought by an insurance eompany subrogated to the rights
of the owner, and the railroad eompany defended on the ground that
it had been released from liability by express contract. The opinion
indicates that in vievv of those facts the question of négligence arose
independent of the statute. Assuming, however, that anything said by
Judge Simonton implies that a suit under the statute may be defeated
by proof of defendant's freedom from négligence, we must décline to
follow the décision for reasons above stated. AU the other cases cited
by défendant hâve been examined and found to be inapplicable, be-
cause they involve only the common-law rule of liability or turn upon
statutes which were held not to eliminate the question of négligence.
We are therefore constrained to hold that défendant is liable, wheth-
er négligent or not, if the locomotive operated by his agent started
the fire. It f oUows that the question of defendant's négligence was im-
material, and should not hâve been submitted to the jury. It also fol-
lows that défendant cannot justly complain of the refusai to gîve a
requested instruction, even if entitled thereto on the assumption that
négligence was involved, because the charge actually given is more
favorable than défendant had the right to ask.
Exception is taken to the déniai of defendant's motion for a new
UNITED STATES V. UNION BANK OF CANADA 91
(262 F.)
trial on the ground that the damages awarded by the jury, $40,000,
are alleged to be excessive. But as plaintifï testified to a loss of more
than $69,000, to say nothing of the fact that he was examined before
trial, it seems obvious that there ,was no abuse of discrétion in allow-
ing the verdict to stand. This being so, the question is not reviewable
in this court.
The record discloses no réversible error, and the judgment must
therefore be affirmed.
TJNITED STATES v. UNION BANK OF CANADA.
SAMB V. ROYAL DUTCH WEST INDIA MAIL 00.
(Circuit Court of Appeals, Second Circuit Deeember 10, 1919.)
Nos. 60, 28.
Aliens iS=>50 — Exclusion of conthact "laboeee" limited to manual wobk-
KES.
The Word "laborer," as used In the contract labor provisions of Im-
migration Acts, Act Feb. 20, 1907, i§ 2, 4, and Aet Feb. 5, 1917, § 5 (Comp.
St. 1918, Oomp. St. Ann. Supp. 1919, § 4289^40), is llmited to manual la-
borers, and nelther a bookkeeper In a bank nor a clerk In a steamship
office Is wlthln the prohibition.
[Ed. Note.— For other définitions, see Words and Phrases, First and
Second Séries, Laborer.]
In Error to the District Court of the United States for the South-
ern District of New York.
Actions by the United States against the Union Bank of Canada and
against the Royal Dutch West India Mail Company. Judgments for
défendants, and the United States brings error. Affirmed.
Francis G. Cafïey, U. S. Atty., of New York City (V. H. Rothwell,
Asst. U. S. Atty., of New York City, of counsel), for the United
States.
Carter, Ledyard & Milburn, of New York City (Walter F. Taylor,
of New York City, of counsel), for Union Bank of Canada.
Burlingham, Veeder, Masten & Fearey, of New York City (Van
Vechten Veeder and William Paul Allen, both of New York City, of
counsel), for Royal Dutch West India Mail Co.
Before WARD, ROGERS, and MANTON, Circuit Judges.
WARD, Circuit Judge. In the first case there is a writ of error to
a judgment in favor of the défendant directed by Augustus N. Hand,
J., in an action brought by the United States against the Union Bank
of Canada to recover a penalty of $1,000 for violation of section 4 of
the Immigration Act of February 20, 1907, which reads :
"Sec. 4. That It shall be a misdemeanor for any person, company, partner-
ship, or corporation, In any manner whatsoever, to prepay the transportation
or in any way to assist or encourage the importation or migration of any con-
tract laborer or contract laborers Into the United States, uniess such con-
tract laborer or contract laborers are exempted under the terms of the last
two provisos contained in section 2 of this act."
^=3For otheT ;ases see eame toplo & KBY-NUMBER tn ail Key-Numbered Dlgesta & Indexes
92 262 FEDERAL EBPORTBB
Section 2 provides for the exclusion of contract laborers, the relevant
portions being:
"Sec. 2. That the followlng classes of aliéna shall be excluded from admis-
sion into the United States : • ♦ • Persons herelnaf ter called contract la-
borers, who hâve been Induced or solicited to migrate to tMs country by ofifers
or promises of employment or In conséquence of agreements, oral, written or
prlnted, express or impUed, to perform labor In thls country of any klnd,
skilled or unskilled: • • • And provided further, that skilled labor may
be Imported if labor of llke klnd unemployed cannot be f ound in thia country :
And provided further, that the provisions of this law applicable to contract la-
bor shall not be held to exelude professional actors, artists, lecturers, singers,
ministers of any rellgious dénomination, professons for collèges or seminaries,
persons belonging to any recognized learned profession, or persons employed
strictly as personal or domestic servants."
The défendant bank, a corporation of the Dominion of Canada hav-
îng opened a hranch in New Yorlc City, brought from its branch in
Toronto one Schilling, agreeing to employ him at a salary as assistant
accountant in its New York office and paying the cost of his trans-
portation. The question is whether Schilling was a contract laborer
within the meaning of the act.
The first législation on the subject was in chapter 164, Laws 1885,
section 3 of which made it an offense subject to a penalty of $1,000
to encourage in any way the importation of any alien "to perform labor
or service of any kind under contract or agreement" in the United
States.
Section 5 provided exceptions as foUows :
« » • • Nor shall this act be so construed as to prevent any person, or
persons, partnership, or corporation from engaging, under contract or agree-
ment, skilled workmen in foreign countrles to perform labor in the United
States in or upon any new industry not at présent established in the United
States: Provided, that skilled labor foï that purpose cannot be otherwiso
obtained ; nor shall the provisions of thls act apply to professional actorKS, ar-
tists, lecturers, or singers, nor to persons employed strictly as Personal or
domestic servants."
While this act was in force Rev. E. Walpole Warren was called by
the Church of the Holy Trinity to the city of New York as its pastor.
The government brought suit against the church for the penalty and
the défendant demurred. We overruled the demurrer — 36 Fed. 303 —
in view of the language of the act — section 3, "labor or service of any
kind," and of the spécifie exceptions ; section 5, which did not include
ministers. But the Suprême Court— 143 U. S. 457, 12 Sup. Ct. 511,
36 L. Ed. 226 — reversed the judgment, holding that the title of the
act, "An act to prohibit the importation and migration of foreigners
and aliens under contract or agreement to perform labor in the United
States, its territories, and the District of Columbia," and the mischief
which Congress intended to prevent, as shown by the reports of com-
mittees of Congress on the subject, demonstrated that only manual
laborers were intended to be excluded.
Chapter 551, Laws 1891, § 5, amending section 5 of the act of 1885,
added to the exemptions thèse words :
"Nor to ministers of any religions dénomination nor to persons belonging to
any recognized profession nor professors for collèges or seminaries."
UNITED STATES V. UNION BANK OF CANADA 93
£262 F.)
In the case of United States v. Laws, 163 U. S. 258, 16 Sup. Ct.
998, 41 L. Ed. 151, the défendant Laws brought a chemist from Ger-
many to Louisiana under contract to perforna services there, The
Circuit Court of Appeals of the Sixth Circuit certified the question
whether this was within the prohibition of the act of 1885. The
court answered the question in the négative, referring to the amend-
ment of 1891, which had been subsequently passed, as making the
intention of Congress as found in the case of Holy Trinity Church
still plainer.
Chapter 1134, Laws 1907, entitled "An act to regulate the immigra-
tion of aliens into the United States," by section 2 prohibits the entry
of aliens under contract "to perform labor in this country of any kind,
skilled or unskilled" ; the last two provisos being :
"And provlded further, that skilled labor may be Imported if labor of like
kind unemployed cannot be found in this country: And provlded further, that
the provisions of this law applicable to contract labor shall not be held to
exclude professional actors, artists, lecturers, slngers, ministers of any dé-
nomination, professors for collèges or seminaries, persons belonging to any
reeognlzed leamed profession, or persons employed strictly as personal or do-
mestlc servants."
Section 4 made it a misdemeanor to assist the entry of such contract
laborers in any way "unless such contract laborer or laborers are ex-
empted tmder the terms of the last two provisos contained in section
2 of this act."
Thèse provisions, taken together, make a strong support for the ar-
gument that ail contracts for labor are within the prohibition of the
act, unless specifically exempted. This was the view taken by Judge
Neterer in Ex parte Kunijiro Toguchi (D. C.) 238 Fed. 632. Neverthe-
less, we think the décision in Scharrenberg v. Dollar S. S. Co., 245
U. S. 122, 38 Sup. Ct. 28, 62 L. Ed. 189, holds that the act of 1907, like
the prier acts on the subject, prohibits only the entry of manual la-
borers under contract to perform labor in the United States. In that
case the défendant brought 19 Chinamen from Shanghai to San Fran-
cisco, there to ship as seamen on the American registered steamship
Mackinaw. The court held, Mr. Justice Clarke writing, that thèse mon
were not under contract to perform labor in the United States, but
on the high seas, which would hâve been enough to dispose of the
case; but he also held as a second ground that a seaman was not a
laborer. If so, an alien imported to perform labor as a seaman on
vessels enrolled for the coasting trade or the inland waters of the
United States would not be a contract laborer, within the prohibition
of the act. Without inquiring whether an accountant as defined by the
defendant's rules is a member of a learned profession, we affirm the
judgment on the ground that Schilling was not a laborer within the
meaning of the act.
In the second case there is a writ of error to a judgment directed
for the défendant by the same judge in an action for a penalty under
section 5 of chapter 29, Laws 1917 (Comp. St. 1918, Comp. St. Ann.
Supp. 1919, § 428914c), which differs in no material respect as to
contract laborers from the act of 1907. The défendant sent a clerk
94 262 FEDERAL REPORTER
named Mook from its office in Amsterdam to be employed in its office
in New York at a salary of $1,250 per annum and paid the expansés
of his transportation. There was an expectation to send him from
New York to its office at Paramaribo, Dutch Guiana, af ter he had fa-
miliarized himself with the New York business. The grounds on
which the verdict was directed were: First, that this employment at
New York was a temporary one in a business of an international char-
acter ; and, second, that Mook was not a contract laborer at ail, With-
out considering the first reason, we concur in the second.
Judgment affirmed in each case.
ALLEY V, BBSSEMER GAS ENGINE CO.
(Clrcnlt Court of Appeals, Pifth Circuit. November 19, 1919. Rehearing
Denied Decembcr 15, 1919.)
No. 3326.
1. Appeal and eibbob ®=»1035 — ^Absence or juby teiai, not PEEatrDioiAL.
The judgment of the court on the bar of limitations being sustained
by the undlsputed évidence, absence of a Jury trial was not prejudicial.
2. Limitation of actions <g=84(2) — Absence of défendant at accbual of
CAUSE.
Eev. St Tex. 1911, art. 5702, tolling the runnlng of the statute, if
défendant be without the state at any tlme during whlcb the action
mlght be malntained, has no application, where défendant was without
the state when the cause of action accrued and did not retum within the
period of limitations.
3. Limitation Of actions <S=88 — Eobeign coepobations not without state
duking limitation pebiod.
Défendant forelgn corporation was, for purpose of citation on it, not
only within the state when plaintlfl's cause of action for Personal injury
accrued, but also never without It during the two years thereafter, so
that under Eev. St. Tex. 1911, art. 5687, subd. 6, and article 5702, action
was barred ; it at ail times having local sollcitlng agents, on whose orders,
when approved at the home office, It shipped, article 1861 allowing it to
be served by citation on any local agent within the state.
4. CoBPOBATioNS <S=5>668(5) — Sebvice on "local agent."
A "local agent," within Eev. St. Tex. 1911, art. 1861, allowing a forelgn
corporation to be served by citation on its local agent within the state,
Is one at a glven place or within a district.
[Ed. Note. — For other définitions, see Words and Phrases, Blrst and
Second Séries, Local Agent.]
6. Coepobations ®=»380 — Cobpobation agent of anoteeb cobpoeamon.
A corporation may act as agent of another corporation, unless pro-
hiblted by statute.
6. CoBPORATioNS <g=668(5) — Sebvice on ooepoeation's agents, in absence
OF OFFICEBS.
A domestlc corporation Is capable of belng served as local agent of a
forelgn corporation, though ail its ofBcers live without the state ; it having
agents living in the state, through whom It acts for the forelgn corpo-
ration.
In Error to the District Court of the United States for the North-
ern District of Texas; Edward R. Meek, Judge.
e=For otber cases sce same toplc & KEY-NtTMBBR in ail Key-Numbcred Disests & Indexe*
iXI/ET V. BESSEMEK GAS ENGINE CO- 9&
C262 F.>
Action by Robert F. AUey against the Bessemer Gas Engine Com-
pany. Judgment for défendant, and plaintiff brings error. Affirmed.
W. H. Kimbrough, of Amarillo, Tex., Y. W. Holmes, of Comanche,
Tex., and Kimbrough, Underwood & Jackson, of Amarillo, Tex., for
plaintiff in error.
Cockrell, Gray, McBride & O'Donnell, of Dallas, Tex., for défend-
ant in error.
Before WALKER, Circuit Judge, and FOSTER and GRUBB, Dis-
trict Judges.
GRUBB, District Judge. This was a suit for damage for personal
injuries. In the District Court the statute of limitations of two years
was held to apply to it, and there was a judgment for the défendant,
from which this writ of error is taken.
[1] The plaintifï in error contends that the EHstrict Judge erred
in determining the issue without submitting it to a jury. The appli-
cability of the statute was presented by demurrers and exceptions
to the amended pétition and by plea. Evidence was taken in support
of the plea. The court sustained the plea, after considering the évi-
dence. No objection to this method of trial was made in the court
below, and the parties treated it as being properly tried by the court.
In the view we take of it, the judgment of the court may be sustained
by tlae undisputed évidence, and the absence of a jury trial was not,
therefore, prejudicial to the plaintiff in error.
[2-4] The injury occurred July 28, 1912, and the suit was filed Oc-
tober 8, 1914, more than two years thereafter. The claim was therefore
barred by subdivision 6 of article 5687, Rev. Statutes of Texas, unless
the bar was prevented by article 5702, Rev. Statutes of Texas, which
provides that, if the défendant be without the limits of the state at any
time during which the action might be maintained, the plaintiff bas
the right to bring the suit after defendant's return to the state, and
the time of defendant's absence shall not be taken as part of the time
limited by the statute.
The article bas been held not to apply to one who was absent from
the state when the cause of action accrued and at ail times thereafter.
Tourtelot v. Booker (Tex. Civ. App.) 160 S. W. 293 ; Wilson v. Dag-
gett, 88 Tex. 375, 31 S. W. 618, 53 Am. St. Rep. 766; Veeder v. Gil-
mer, 103 Tex. 458, 129 S. W. 595. If the défendant was at ail times a
nonresident of Texas, the statute would bave run in its favor. The
défendant was a Pennsylvania corporation. It solicited orders through
a local salesman in Texas, shipped the machines, in response to the
orders, after they had been approved at the home office in Pennsyl-
vania, and coUected for the shipments in Texas, through its local rep-
résentatives there. The local salesmen had no right to accept orders
or compromise claims. This was the regular course of defendant's
business in Texas and was not confined to isolated cases. In the case
of International Harvester Co. v. Kentucky, 234 U. S. 579-585, 34 Sup.
Ct. 944, 946 (58 L. Ed. 1479), the Suprême Court said :
"In order to hold it responslble under the process of the state court, it must
appear that It was earrying on business wlthln the state at the time of the
96 262 FEDERAL REPORTER
attempted service. As we hâve sald, we think It was. Hère was a continuons
course of business In the soUcitatlon of orders, which were sent to another
State, and in resjwnse to which the machines of the Harvester Company were
delivered wlthin the state of Kentucky. This was a course of business, not
a single transaction. The agents not only solicited such orders in Keutùcky,
but might there reeeive payment in money, checks, or drafts. They might
take notes of customers, whleh notes were made payable, and doubtless were
collected, at any bank in Kentucky. This course of conduet of authorized
agents within the state in our judgment constituted a doing of business there
in such wise that the Harvester Company might be fairly said to bave been
there, doing business, and amenable to the process of the courts of the state."
We think the part quoted covers this case, and shows that the de-
fendant was doing business in Texas when the cause of action ac-
crued.
If so, then it could be served by citation on "any local agent, within
this state, of such corporation." Rev. Stat. of Tex. 1911, art. 1861.
The défendant, at the time the cause of action accrued, had two agents,
one located at Dallas and one at Laredo, each with a defined territory
under his control. A local agent, under the Texas statute, is held to
be "an agent at a given plàCe or within a district." W. E. Co. v.
Troell, 30 Tex. Civ. App. 200, 70 S. W. 324; W. C. P. & Co. v.
Anderson, 97 Tex. 432, 79 S. W. 516. The agents at Laredo and Dal-
las were local agents, within the meaning of the Texas statute, and
capable of being served as such.
[5, 6] As the défendant was doing business in Texas, and had local
agents there upon whom service could hâve been had, when the cause
of action accrued, and as the suit was filed more than two years after
the injury, the statute is operative to bar the suit, unless the défendant
was absent from the state during the period of two years after the
cause of action accrued. It is so contended by plaintifï in error. The
évidence showed that the défendant had a local agent in Texas, one
C. H. Bishop, at Dallas and Laredo, from July 29, 1910, until June
29, 1913. His présence covered the two-year period, except the part
of it from June 29, 1913, until July 28, 1914. Was the défendant out
of the state during any part of that period? On October 23, 1912, it
organized a domestic corporation under the laws of Texas, which
acted as its agent in Texas from that date until after the bar of the
statute was complète. A corporation may act as the agent of another
corporation, unless prohibited by its charter. 3 Thompson on Cor-
porations, § 2156.
The plaintifï in error contends, however, that the domestic corpo-
ration was not capable of being served, because ail its officers lived
beyond the state of Texas. The record shows that the Texas cor-
poration sold 20 gas engines for the parent company prior to the
time of the institution of the suit. The Texas corporation could hâve
acted in doing so only through agents, and, if its officers ail lived out
of Texas, it must hâve had agents, not officers, who lived in Texas,
and through whom such sales were made for it. A corporation can
act only through agents. The record also shows that the Texas cor-
poration kept a stock of parts in Texas, to be there fumished to the
customers of the parent company. Résident agents were essential
also to conduet that business. The Texas corporation also had two
THE C. GAIiLAGHBB 97
a«i p.)
designated principal places of business in Texas, for the purpose of
service.
We think the record shows that the défendant was never absent
from Texas, for the purpose of citation upon it, during the two years
succeeding the accrual of the cause of action on which the suit is
brought, and that the bar of the statute of limitations of two years
was complète, when the présent suit was brought, October 8, 1914.
The judgment of the District Court is affirmed.
THE 0. GALLAGHBE.
THE SPARTAN.
(Circuit Court of Appeals, Second Circuit. November 12, 1919.)
No. 12.
1. Collision <S=»95(2) — Ovebtakinq xug with tow solelt in fault.
An overtaking tug, with tow, which unnecessarily attempted to pass
between two other tows, held solely in fault for collision between her tow
and another in Long Island Sound.
2. Collision <3=s>95(1) — Custom vabtino fboh naebow channel bulb jua-
TIFIED.
A gênerai practice of west-bound tows in Long Island Sound, when
approaching North Brothers Island on a flood tide, to keep to the port slde
of the channel, to give east-bound tows room to round the island and pass
the railroad piers on the north safely, held justifled, and not In violation
of the narrow channel rule.
Appeal from the District Court of the United States for the South-
ern District of New York.
Libel for collision by Rogers & Hubbard, Incorporated, against the
steam tug Spartan, claimed by the Hartford & New York Transpor-
tation Company, with pétition to limit liability by the Goodwin-Gal-
lagher Sand & Gravel Corporation, owner of the tug C. Gallagher, as
well as a libel against the Spartan. lyibel by E. E. ly. Hammer, Public
Administrator of Bronx County, as administrator of F. F. Borch, de-
ceased, against the Spartan. From the decree, the claimant of the
Gallagher appeals. Reversed.
Foley & Martin, of New York City (William J. Martin and G.
V. A. McCloskey, both of New York City, of counsel), for appellant.
Haight, Sandford & Smith and Ellsworth J. Healy, ail of New York
City (C. B. Smith and E. E. %. Hammer, both of New York City,
of counsel), for appellee Hartford & N. Y. Transp. Co.
Han-ington, Bigham & Englar, of New York City, for appellee
Rogers & Hubbard, Inc.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
WARD, Circuit Judge. August 18, 1915, about 2:30 p. m., the
tug Spartan, bound west, with four schooner barges abreast in the
first tier and one tailed on in the second tier, behind the starboard
@=3For other casea see same tciplc & KBY-NUMLEÏR in ail Key-Numbered Dlgests & Indexes
262 F,— 7
98 262 FEDERAL REPORTER
barge in the first tier, had just rounded North Brothers Island in Long
Island Sound. She was rapidly overtaking the tug Robert Robinson,
with a hawser tow of five boats, three in the first and two in the
second tier. At the same time the tug C. Gallagher, close to Riker's
Island, was approaching North Brothers Island on her way west with
the Goodwin-Gallagher sand-laden scows No. 74, No. 36, No. 44,
and No. 8 on hawsers tandem. The tide was flood and the day clear.
The Robinson, as she passed.around North Brothers Island, steered
a course which passed the Gallagher, which was heading for the black
buoy on the north end of the island, starboard to starboard. The
Spartan, when close to the Robinson's tow, ported to pass with her
own tow, which was 128 feet wide and in ail some 600 feet long, be-
tween the Robinson's and Gallagher's tows.
Seeing that the clearance was very small, the Gallagher starboarded
and the Spartan slowed, with the resuit that her tow sheered toward
the Gallagher's tow, and the Gallagher's tow was swung by a very weak
tide coming through the narrow channel between North and South
Brothers Islands, and sheered slightly towards the Spartan's tow.
Thereupon the Spartan ported, with a view to bring the strain on her
starboard hawser, to break her tow's sheer, and then starboarded to
straighten the tow out. This is a familiar maneuver, making a course
something like a reversed curve, sometimes described as snapping the
whip. Notwithstanding this, No. 18, starboard scow in the Spartan's
first tier, struck a glancing blow on the starboard side of No. 74, the
first barge in the Gallagher's tow, shoving it aside and breaking the
line between it and the next hoat. No. 36. No. 18 then struck the
starboard corner of the stern of No. 36, which was towing stem first,
overturning her with her cargo, then striking the next boat. No. 44,
and breaking the line between her and the last boat. No. 8, and then
overturning No. 8, whose master, Frederick F. Borch, was drowned,
There was plenty of clear water for the Spartan to pass between the
Robinson's tow and the New York shore, and the effort to pass be-
tween the Robinson's and the Gallagher's tows was reckless in the
extrême.
Rogers & Hubbard, Incorporated, owners of the cargo on No. 18,
filed a libel against the Spartan. The Goodwin-Gallagher Sand &
Gravel Corporation, owner of the tug Gallagher, filed a pétition to limit
its liahility, and also a libel against the Spartan to recover damages to
the barges and cargo in her tow. E. E. L,. Hammer, public adminis-
trator of Bronx county, as administrator of F. P. Borch, deceased,
filed a libel against the Spartan to recover damages for his death. The
cases were tried together, and the District Judge found both vessels
at fault and the owner of the tug Gallagher entitled to limit liability.
The owner of the tug Gallagher appealed f rom each decree.
The District Judge held the Spartan at fault for attempting to pass
between the tows of the Robinson and Gallagher, instead of slow-
ing until the Gallagher had passed, and the Gallagher for navigat-
ing on the port side of the channel in violation of article 25 of the
Inland Régulations (Act June 7, 1897, c 4, § 1, 30 Stat. 101 [Comp.
St. § 7899]).
THE C. QALIiAGHEB 99
(262 -p.i
[1,2] We think the Spartan was solely at fault. Article 25 re-
quires steamers to keep the starboard side of a narrow channel "when
it is safe and practicable." The testimony is quite convincing that
hawser tows west bound, in approaching North Brothers Island on a
flood tide navigate on the port side of the channel in order to give
east bound hawser tows room to round North Brothers Island and
pass the railroad piers on the north side in safety. The flood tide in
the main channel sets on Oak Bluff and the New York side opposite
the northern end of North Brothers Island, and is then deflected
slightly toward Riker's Island; this set being somewhat counteracted
by the direction of the weaker tide coming through the shallow chan-
nel between North Brothers Island and South Brothers Island. We
regard this as a reasonable practice, justifying a departure from the
gênerai rule described in article 25 and hâve recognized similar prac-
tices at other points. The Three Brothers, 170 Fed. 48, 95 C. C. A.
322 ; The Transfer No. 21, 248 Fed. 459, 160 C. C. A. 469.
The proctors for the Spartan cite two décisions of the late Judge
Adams in the District Court that at this particular point steamers
must conform to article 25. The Transfer No. 10 (D. C.) 138 Fed.
221 ; The Abram F. Skidmore (D. C.) 160 Fed. 265. In those cases
there was no évidence of the practice proved in this case, and the dé-
cision of the same judge arising out of a collision at a bend in the
Harlem River in the later case of the Three Brothers (D. C.) 162 Fed.
388, was reversed (170 Fed. 48, 95 C. C. A. 322), on the ground that
local conditions justified a departure from article 25.
Assuming that the Gallagher was on the wrong side of the chan-
nel, that fault did not contribute to the collision, because the fact was
obvions, and made it the plain duty of the Spartan to pass upon the
port side of the Robinson's tow, instead of forcing a passage between
the two tows.
The District Judge awarded the sum of $5,000 to Hammer, admin-
istrator of Borch, deceased, who was a man of 65 years of âge, in good
health, of good habits, and earning at the highest $55 a month. His
wife had been living for six years previous to his death in Norway.
The couple had no children, and there is no accurate évidence of the
amount he was in the habit of sending his wife. If we concède it to
hâve been $25 a month, which would certainly hâve been most libéral,
the présent value of an annuity of $300 would be $2,400 ; his expec-
tation of life by the mortality tables being less than eight years. This
amount, we think, covers in full the pecuniary damages sustained by
the widow, as provided for in section 1904 of the New York Code of
Civil Procédure. We cannot award more than the intestate could hâve
paid out of his wages because of the présent high cost of living.
The decree is reversed, with directions to the court below to enter
a decree in favor of the libelants Rogers & Hubbard, Incorporated,
and the Goodwin-Gallagher Sand & Gravel Corporation, for their
damages as found against the tug Spartan, with costs, and in favor of
Ernest E. L. Hammer, public administrator of the county of the Bronx,
as administrator of the estate of Frederick F. Borch, deceased, in the
100 262 FBDBBAL REPORTES
sum of $2,400, with interest from the date of his întestate's death.
Costs of this court to Rogers & Hubbard, Incorporated, and to the
Goodwin-Gallagher Sand & Gravel Corporation, against the Spartan.
DE CROISSBT et al. v. VITAGRAPH CO. OF AMERICA et al.
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 79.
1. BQUITT ®=3l49 — MiaJOINDEB OF PABTIES EEIÇDEBED BIZI, MULTIFABIOTJS AND
DEVOID or EQUITT.
Misjoinder of parties plalntlff havlng no Interest, and to whom no re-
lief can be granted, renders a MU of complaint multlfarious.
2. Equity i®=149 — Complaint fob ineeingement of copyrights demubbablb
ab multifaeious.
One having a proprletorsliip in a copyright of a drama, and another who
was the sole exclusive owner of motion picture rights in and to the
drama, may not In one action sue another, alleged to hâve infringed botli
copyrights,! in the absence of allégations showlng a communlty of
Interest.
Appeal from the District Court of the United States for the South-
ern District of New York.
Suit by Francis De Croisset, Maurice Le Blanc, and Société des
Films Menchen against the Vitagraph Company of America, J. Stu-
art Blackton, and Albert E. Smith. From a decree dismissing the
bill, complainants appeal. Affirmed.
Rogers & Rogers, of New York City (Gustavus A. Rogers and
Saul E. Rogers, both of New York City, of counsel), for appellants.
William M. Seabury, of New York City, for appellees.
Before WARD, ROGERS, and MANTON, Circuit Judges.
MANTON, Circuit Judge. By this bill of complaint the appel-
lants seek to enforce their alleged right to infringement of two copy-
rights. One copyright is upon a drama written by the appellants,
De Croisset and Le Blanc, prior to 1909, and copyrighted in the
United States on March 3, 1909. There is a copyright claimed to
hâve been procured by one Cromelin on June 6, 1916, for the bene-
fit of the Société des Films Menchen, upon the photoplay of the
same name, which was produced by the London Film Company. The
appellees produced and exhibited a photoplay entitled Arsène Lupin,
which is said to be based upon the same plot, thème, and incidents
to which the respective appellants claim rights by the copyrights hère
mentioned.
The complaint allèges, in paragraph 10, that the Société des Films
Menchen "is, and at ail the times hereinaf ter mentioned was, the sole
and exclusive owner of motion picture rights in and to said drama."
The title of the copyright granted by the United States on March 3,
1909, is as f ollows : "Arsène Lupin, Pièce en Trois Actes et Quatre
Tableaux par Francis De Croisset et Maurice Le Blanc" — and the
ig^ssFor otber cases see same toplc & KEY-NUMOER In ail Key-Numbered Dlgests & Indexes
DE CROISSET V. VITAGRAPH CO. OF AMERICA 101
(262 P.)
copyright granted on June 6, 1916, to Paul H. Cromelin for the
motion picture photoplay was entitled "Arsène Lupin" by Maurice
Le Blanc.
[1, 2] Paragraph 12 of the bill of complaint allèges that this was
done for the benefit of the appellant Société des Films Menchen, and
"that the aforesaid photoplay was adapted and produced as aforesaid
by the London Film Company from the aforesaid work of Maurice
Le Blanc and Francis De Croisset." The assignment of the copy-
right by Cromelin to the Société des Films Menchen is alleged to be
on March 27, 1918, and that this assignment was filed in the United
States Copyright Office April 11, 1919. The bill of complaint does
not disclose how Cromelin reserved any individual right or interest
in the copyright after having registered it for the benefit of the
Société des Films Menchen. Examining the bill of complaint, it is
apparent that neither De Croisset nor Le Blanc bave any interest in
the alleged infringement of the photoplay copyright, and none is
claimed to exist. We bave, therefore, a bill in which the appellants
hâve no community of interest. What is alleged is a cause of action
for infringement of the dramatic copyright in which De Croisset and
Le Blanc alone are interested, and under a separate cause of action
a claim for infringement of a motion picture photoplay, the copy-
right of which, at the date of the commencement of the action, the
Société des Films Menchen is alleged to be the sole and exclusive
owner. The sufficiency of this complaint was tested by a motion
to dismiss the bill, and the District Judge sustained the appellee's
motion. The motion was made because of this misjoinder of parties.
It was granted without préjudice to any subséquent suit upon the
copyright of 1916, and the dismissal was made final as to the rights
accruing under the copyright of 1909.
We are unable to reach any other conclusion than that the para-
graphs from 6 to 10 of the bill of complaint allège a cause of action
in which the individual appellants, De Croisset and Le Blanc, claim
an alleged infringement of their copyright of the drama Arsène
Lupin, and in which the Société des Films Menchen bas no interest.
Paragraphs 10 to 13 of the bill of complaint allège that the appellant
Société des Films Menchen is the sole and exclusive owner of the
copyright of the motion picture photoplay founded upon the same
drama. And the fourteenth paragraph of the bill of complaint al-
lèges that the —
"défendants by the production of the motion picture photo play without the
consent of the complainants, and In violation of the complaiuant's rights, and
lu infringement of the copyright of said drama Arsène Lupin, and in in-
fringement of the motion picture copyright of said drama, and with fuU
knowledge of tlie rights of the complainants made and caused to be made a
motion picture photo play which is the production of the complète story,
scènes, situations, characters, and business of the said drama Arsène Lupin."
Thèse paragraphs of the bill, assuming that Cromelin had a valid
copyright, allège a right of action in the Société des Films Menchen
for the infringement of the copyright for the motion picture photo-
play. It is very apparent that De Croisset and Le Blanc bave no
interest in this copyright. The pleader hère joins the owners of
102 262 FEDERAL REPORTER
separate copyrights — first, the copyright proprietor of the play, and
then another party which claims to own the motion picture rights
without specifying the extent of its interest in those rights. In do-
ing this, the pleader renders his bill multifarious. TuUy v. Triangle
Film Corp. (D. C.) 229 Fed. 297. Misjoinder of parties plaintiff,
having no interest and to whom no relief can be granted, renders the
bill of complaint multifarious and devoid of equity. Nor does it
appear from the complaint that appellants hâve any community of
interest in the causes of action alleged, and unless some such inter-
est appears they may not be joined in one bill against the appellee.
A bill States différent causes of action where it seeks to enforce dis-
tinct and separate rights of différent plaintiffs or distinct and sep-
arate liabilities of différent défendants. Haie v. AUinson, 188 U.
S. 56, 23 Sup. Ct. 2^, 47 L. Ed. 380; 1 Corpus Juris, § 25, p. 1064.
The Société des Films Menchen has no interest in any damages
suffered by De Croisset and Le Blanc and likewise the latter hâve
no interest in damages suffered by the Société des Films Menchen.
There is no allégation in the bill of complaint that Cromelin was
the author of the photoplay or that he ever acquired any proprietary
rights therein from appellant. De Croisset or Le Blanc, whicla might
hâve authorized him to procure a copyright registration upon the
photoplay based upon the drama written by the author.
It was held by this court that the registration by Cromelin, as
pleaded in the complaint there under considération, was void for the
reason that under the copyright no power exists in an agent to
copyright anything, as that privilège is reserved to authors or pro-
prietors. Société des Films Menchen v. Vitagraph Co., 251 Fed.
258, 163 C. C. A. 414; Act March 4, 1909, c. 320, § 8, 35 Stat.
1077 (U. S. Comp. Stat. § 9524).
The bill does not allège that the Société des Films Menchen is a
licensee, nor is it said to be an assignée, but it is alleged to be the
sole and exclusive owner of the motion picture rights in the drama.
Sueh ownership as alleged in the motion picture rights does not in-
clude ownership of the copyrights in the drama.
The attempt thus to join two causes of action, in which the appel-
lants hâve not a common interest against the appellees, made the
bill demurrable. The appellants, one having a proprietorship in the
copyright, and the other having a proprietorship in an entirely dif-
férent copyright, may not in one action sue défendants alleged to
hâve infringed both copyrights.
We are of the opinion that the District Judge correctly dismissed
the bill without préjudice to proceeding upon the copyright granted
in 1916.
The decree is afîirmed.
MILLER V. AMERICAN BONDINQ CO. 103
(262 F.)
MILLEE V. AMERICAN BONDING CO.
(Circuit Court of Appeals, Third Circuit. January 8, 1920.)
No. 2481.
TJHrTED States <g=>67(3) — Claimants must join in onb action on contbac-
T0B*8 BOND.
Under Act Aug. 13, 1894, c. 280, as amended by Act Feb. 24, 1905, c. 778
(Comp. St I 6923), providlng that materlalmen and laborers on public
Works may join In one action on the contractor'B bond, etc., the right of
action Is a new one, created by statute, and is not based on a common-law
right of trial by jury, and a clalmant refusing to proceed to trial at the
same time as the other claimants, without offering any reason to the
trial court for hls refusai, is barred from subsequently malntalning a
separate action on the bond.
In Error to the District Court for the Middle District of Pennsyl-
vania ; Charles B. Witmer, Judge.
Action by C. E. Miller against the American Bonding Company.
From an order striking the case from the trial list (256 Fed. 545),
plaintiff brings error. Affirmed.
R. W. Archbald, of Scranton, Pa., and James G. Glessner, of
York, Pa., for plaintiff in error.
Charles H. Welles, of Scranton, Pa., and F. B. Bracken, of Phila-
delphia, Pa., for défendant in error.
Before BUFFINGTON and WOOLLEY, Circuit Judges, and
MORRIS, District Judge.
WOOLLEY, Circuit Judge. An action was brought under the
Act of August 13, 1894, c. 280, 28 Stat. 278, as amended by the
Act of February 24, 1905, c. 778, 33 Stat. 811 (Comp. St. § 6923),
on a bond given the United States by Mark P. Wells, contractor for
the construction of certain public works, and American Bonding Com-
pany (defendant-in-error), his surety. The plaintiflf was the United
States for the use of Caesar Francini. C. E. Miller (plaintiff-in-er-
ror) was one of several intervening claimants.
At the trial, the use plaintiff and ail intervening claimants, except
Miller, appeared and successfully prosecuted their claims to verdict.
After verdict, and while a motion for a new trial was pending, Mil-
ler ordered the case on the trial list for the trial of his claim, The
trial judge struck it off pending review by this court on writ-of-er-
ror, upon the theory, doubtless, that, if the judgment were reversed,
he might allow Miller to litigate his claim with the others in the
retrial of the case. In due course, the motion for a new trial was
refused, judgment entered, and a writ-of-error issued. On hearing
by this court, the judgment was affirmed as to ail claims except one,
and was reversed as to that one on an error of the court in refusing
binding instructions for the défendant. American Bonding Co. v.
United States, 233 Fed. 364, 147 C. C. A. 300. As to that one claim,
the court entered a formai order for a new trial. Slocum v. New
York Life Insurance Co., 228 U. S. 364, 33 Sup. Ct. 523, 57 L. Ed.
^zs>Foi other cases see came toplc & KEY-NUMBBK in aU Key-Numbered Dlgesta & Indexer
104 262 FEDERAL REPORTER
879, Ann. Cas. 1914D, 1029. Thereafter, the claîm was compromised
by the parties and the action ended.
More than two years after review by this court, and long after
the judgment had been satisfied, Miller again ordered the case on
the trial list. On the defendant's motion to strike it off, Miller
took the position that there is nothing in the statute under which
the case was brought which required him to prosecute his claim with
the other intervening claimants in one trial, and that, in conséquence,
he was entitled to hâve his claim adjudicated singly and at a separate
trial before a jury of his own sélection. The court, thinking other-
wise, struck the case from the list. This is the matter brought hère
for review on this writ-of-error.
The Act of August 13, 1894, provided that persons fumishing ma-
terials and labor for the construction of public works, shall, after
complying with certain formalities, be authorized to bring suit in
the name of the United States for their use against the contractor
and his sureties. This statute gave each of such persons a sep-
arate and independent right of action on the bond, permitting as
many suits against the surety as there were claimants, and as many
trials as there were suits. This involved manifold inequities. It
left claims of the United States on a parity with the claims of oth-
ers; it permitted inequalities of recovery between claimants of the
same class when the bond proved inadéquate; it afforded no oppor-
tunity for contest by one claimant against the claim of another in
preserving the security from diminution; it subjected sureties to
multiplicity of suits and made possible divergent rulings by différent
courts on the same issues, resulting in préjudice and confusion. To
overcome thèse and perhaps other disadvantages arising out of this
statute, Congress, by the amendatory Act of February 24, 1905, did
two things, first, it assured to the United States priority in its claims,
Illinois Surety Co. v. Peeler, 240 U. S. 214, 218, 36 Sup. Ct. 321,
60 L. Ed. 609; and, second (while preserving the original right of
action to materialmen and laborers), it provided:
"That where suit is so Instltuted by a créditer or by creditors, orUy one
action shaU fie irought, and any creditor may file his claim in such action
and tie made partv thereto withln one year from the completlon of the work
under said contract, and not later. If the recovery on the bond should be in-
adéquate to pay the amounts found due to ail of sald creditors, judgment
shall be given to each creditor pro rata of the amount of the recovery."
It is dear from this amendment that Congress did not change
the liability of sureties or withdraw from claimants their remedy on
bonds for the construction of public works, previously provided by
the Act of 1894; but changed simply the manner, and also the time,
in which their remedy against sureties should be asserted. To over-
come the inequalities and infirmities of the original statute, Congress
intended, after the claims of the United States had been satisfied, to
unité ail claimants in a single proceeding, A. Bryant Co. v. N. Y.
Steam Fitting Co., 235 U. S. 327, Z2,7, 35 Sup. Ct. 108, 59 L. Ed. 253,
to the end that, ail matters in controversy between ail claimants and
the surety, as well as between the claimants themselves, arising out
MILLER V. AMERICAN BONDINQ CO. 105
(262 P.)
of the obligations of the bond, should be litigated in one action, re-
sulting in one recovery, in which, on the bond provirig inadéquate,
distribution should be pro rata of the amount recovered.
This was, without doubt, the gênerai intent of Congress. Wheth-
er there is any exception to it, we are not called upon to décide,
because, in this case, none was claimed. If Miller was entitled to
a separate trial by a jury of his own sélection, or if he had a right to
décline to submit his claim for trial with his co-intervenors, it could
only hâve been because of some matter or circumstance addressed to
the j'udgment or discrétion of the trial judge> taking him out of the
gênerai provisions of the statute and placing him within some excep-
tion of the statute. No such matter or circumstance was claimed by
Miller. He did not even move for a continuance of the case. As
shown in the opinion of the learned trial judge, what Miller did was
this; — ^being represented by counsel in court
"when the case was called for trial, after issue joined and the usual publica-
tion of the list, [he] refused and neglected to submit his claim for adjudication
îoithout apparent reason or excuse."
Miller's action against this surety is not based on any right of
action involving a common law right of trial by jury. It is based
solely on the new right of action created by the statute "upon the
terms named." Texas Cément Co. v. McCord, 233 U. S. 157, 34
Sup. Ct. 550, 58 L. Ed. 893; Illinois Surety Co. v. Peeler, 240 U. S.
214, 217, 36 Sup. Ct. 321, 60 L. Ed. 609. Thèse terms provide for
one action for ail claimants, after the United States has been satis-
fied, and one recovery for ail, under which distribution is made on
the claims proved according as the security is adéquate or inadéquate.
In this scheme of the statute, the necessary implication is, that there
shall be one trial of the "one action." By refusing to submit his
claim to trial in the manner and at the time afiforded by the statute,
without offering to the trial judge any reason or excuse which might
hâve removed him beyond its gênerai terms — as to the possibility of
which we express no opinion — Miller waived the right of action
which the statute gave him. As the right of action which Miller
thus discarded could in no way hâve been revived and restored to him
in the subséquent proceedings, it is not necessary to review those
proceedings in search for irregularities involving error.
The order of the court below must, therefore, be afRrmed.
106 282 FEDERAL BSPORTEB
GEINERAL FIREPROOFING CO. v. TBRAMI.
(Clrcnlt Court of Appeals, Second Circuit December 19, 1919.)
No. 73.
1. SaUS €=sS2(3) — CORBESFONDIiNCI] ADMISSIBLE 017 QUESTION OF FABTIES TO
OONTBAOT.
On the question whether a contract of défendant to sell was wlth
plaintlfF, or with the T. Company, mentloned In defendant's letter to
plaintifl, and as against contention that a letter from plalntiff to défend-
ant and said letter from défendant to plaintlff, together with a letter
of crédit of a bank, constituted a closed contract between plaintlff and
défendant for sale by défendant to plaintlff, held prlor and subséquent
letters between défendant and the T. Company were admissible as throw-
Ing light on the letters between plaintlff and défendant.
2. Sales <@=>53(1)— Pabtiks to contbact question fob jxjbt.
Whether a contract for sale was by défendant with plaintif?, or with
the T. Company, held not a question to be determined by the court, con-
strulng merely the two letters between plaintlff and défendant, but a
question of fact for the Jury, on ail the correspondence, including prlor
and subséquent letters between défendant and the T. Company, and the
oral testlmony.
In Error to the District Court of the United States for the South-
ern District of New York.
Action by Fumio Terami against the General Fireproofing Com-
pany. Judgment for plaintifï, and défendant brings error. Reversed.
William H. Griffin, of New York City (James M. Beck, of New
York City, of counsel), for plaintifï in error.
Elkus, Vogel, Gleason & Proskauer, of New York City (Joseph M.
Proskauer and Wesley S. Sawyer, both of New York City, of counsel),
for défendant in error.
Before WARD, ROGERS, and MANTON, Circuit Judges.
WARD, Circuit Judge. This is a writ of error to a judgment di-
rected by the court in favor of the plairitiff on the merits, leaving to
the jury only the question of the amount of the plaintiff's damages.
[1, 2] There is no dispute that the défendant agreed to sell 3,000
boxes of tin plate for export to Japan, but the question is whether
the contract was made with Terami or with the Tsunoda Company,
Incorporated. The complaint allèges that the contract was with Ter-
ami, the plaintifï, while the answer allèges that it was with the Tsu-
noda Company, though the plaintifï had an interest of some kind in it.
The plaintifï ofïered in évidence two letters as foUows :
"New York City, Aprll 26, 1917.
"General Fireproofing Co., 395 Broadway, New York City— Gentlemen : I
hâve now the pleasure of handing you an order for the following:
"3,000 boxes of coke tin plate I.C.W.
"20" X 14"— 112 sheets— 100 Ibs. at $9.713 per box f.o.b. mlIU.
"Shlpments to be made durlng August and September, 1917.
"I requested the Bank of Taiwan to issue a conflrmed letter of crédit for
the above amount. In your favor, to be available against shipplng documents,
which I believe you hâve duly received.
"IVusting you will glve this order your careful attention, I remain,
"Yours truly, P. Terami."
4=>For other cases see eame toplc & KEY-NUMBBR In ail Key-Numbered Dlgesta & Indexe»
GENERAL FIREPROOPINQ CO. V. TERAM 107
(262 F.)
"Aprll 27, 1917.
"Mr. Fumlo Teraml, 233 Broadway, New York City.
"Our B.O.P.O. X-780 (T-3348)
"Dear Sir: We hâve received your letter of April 26th, wMch we under-
stand is a confirmation of the letter order from the Tsunoda Company, In-
corpora ted, dated April 19tli, and which called for the foUowlng:
"3,000 boxes of I.O.W. tin plate 20x14—112 sheets, 100 Ibs. per box in tln-
lined cases packed for export at $9,85 per box, f.o.b. New ïorU. The freight
allowanee from Sparrows Point, Md., to New York, on thls order is 10%c. per
100 Ibs., and an addltional allowanee of 3.2c. per 100 Ibs., which represents
half of the différence between the freight rate from the Pittsburgh district and
Sparrows Point to New York.
"It is also understood that the conflrmed letter of crédit to which you refer
In your letter Is the letter of crédit issued by the Bank of Taiwan, Limited,
under date of April 23d, and applying on this same order from the Tsunoda
Company.
"We are glad tndeed to hâve been able to enter the order for this materlal,
and sincerely trust we may continue our présent pleasant relations,
"ïoura very truly, The General Fireprooling Company,
"K. L. Brockway, Export Department."
The défendant offered in évidence two earlier letters of April 17th
and 19th; the latter being referred to in the letter of April 27th:
"Aprll 17, 1917.
"Attention of Mr. Brockway.
"The General Flre Prooflng Company, 395 Broadway, New York — Gentlemen:
We beg to confirm our verbal order to you of this momlng for 3,000 boxes
of I.C.W. tin plate 20x14 — 112 sheets — 100 Ibs. in tln-lined cases packed for
export, at $9.85 f.o.b. New York, wlth freight allowed from Pittsburg, Pa.,
to New York, if shipment is made to the West Coast direct from the mill.
Shipplng instructions will be fumlshed you later.
"You wlU recelve Instructions from us to-morrow In référence to payment
for thèse goods, or letter of crédit. Thanking you for the quotation, and
trustlng this may lead to considérable business between our flrms, we are,
"Very truly yours, Tsunoda Company, Inc.,
"Tsunoda."
"Aprll 19, 1917.
"The General Fire Prooflng Company, 395 Broadway, New York City—
Gentlemen: Referring to your favor of Aprll 17th and our letter dated April
17th ordering 3,000 boxes of I.C.W. tin plate 20x14—112 sheets, 100 Ibs. per
box, in tln-lined cases packed for export, at $9.85 per box, f.o.b. New York:
AUow us to conflrm this order wlth the agreement made to-day as to a freight
allowanee of 10^^ cents per hundred pounds from Sparrows Point, Md., and 3.2
addltional allowanee.
"Thia arrangement was entered Into with your Mr. Brockway, as we under-
stood the materlal to be in the Pittsburg fleld or Yotmgstown, and freight
allowanee from that point to New York would be made to us, and in figuring
our quotation we figured this way, and the addltional 3.2 cents was allowed
specially to cover the loss that would hâve been Incurred on the basis of
freight allowanee from Sparrows Point, Md.
"Thanking you very sincerely for your courtesy In this matter, and hop-
Ing that thls may lead to large and continuous business between our firms
we are, '
"Yours very truly, Tsunoda Company, Inc.,
"Tsunoda."
Thèse two letters and letters subsequently written by the défendant
to the Tsunoda Company were excluded on the ground that the let-
ters of April 26th and 27th, together with the letter of crédit of the
Bank of Taiwan, constituted a closed contract with Terami.
108 262 FEDERAL REPORTEE
We think the court should hâve admitted, not only thèse two let-
ters excluded, but subséquent correspondence between the défendants
and the Tsunoda Company, which were also excluded. The two letters
threw light upon the letters of April 26th and 27th. Quite plainly the
défendants wished to make it clear that they were under but one con-
tract, and that contract was with the Tsunoda Company, as to which
they were secured by the Bank of Taiwan's letter of crédit. Upon the
two letters of April 26th and 27th, together with the letter of crédit,
we cannot say that the contract was with Terami. It is true that sub-
sequently the défendants, in letters to him and to the Tsunoda Company,
spoke of the order for the tin plate as made by Terami through the
Tsunoda Company, or as being on account of Terami, or of Terami's
order through the Tsunoda Company, or that the plate was bought
by the Tsunoda Company and sold to Terami. But their correspond-
ence was continuously and consistently with the Tsunoda Company.
The correspondence between the défendants and the Tsunoda Com-
pany and Terami should hâve been admitted, so as to détermine from
it, together with the testimony of the witnesses, whether the défend-
ants' contract was with the Tsunoda Company or with Terami. The
original order given by the Tsunoda Company disclosed nothing to
show that it was acting for an undisclosed principal and, if it were,
the défendants could insist upon the contract with the Tsunoda Com-
pany, if made with it, whether it was buying for or on account of or
as broker of Terami. Moore v. Vulcanite Co., 121 App. Div. 667, 106
N. Y. Supp. 393. It was not a question to be determined by the court,
construing merely the two letters of April 26th and 27th, but a ques-
tion of fact, to be determined by the jury upon ail the correspondence
and the testimony of the witnesses.
The appellant has filed 235 assignments of error, and a brief of 221
pages, citing a multitude of décisions. The exhibits, not printed in
chronological order, are unusually confusing. Under thèse circum-
stances, we shall say no more than the foregoing for the guidance of
the court on a new trial.
Judgment reversed.
THE OLD KBLIABLE.
tlHLIABLE TOWING CO. et al. v. LITTLB KANAWHA LOG & TIE3 (X>.
(Circuit Court of Appeals, Fourth Circuit October 7, 1919.)
No. 1724.
1. TOWAGE <®=>11(11) — ^TlTO EESPONSIBLE FOB INSECUBE MOOEINO OF TOW.
A tug owner, contracting to tow loaded barges up Ohlo river, and com-
pelled by state of water to temporarily tie them up at an Intermediate
port, held responslble for tlieir being properly secured, and liable for
loss due to thelr breaklng away on a rise in the river, owing to Insuffi-
clency of the Unes.
2. TOWAGE iS=>ll(ll) — Tua NOT UABLE FOR L0S3 OF BABGB LEFT IN POSSESSION
OF OWNEB.
A tug, contracting orally to tow three barges on Ohlo river, with no
tlme limlt, which took two, leavlng the other for a second trlp, held not
^sjFor other cases see same topic & KEY-NUMBER in ail Key-N umbered Disests & Indexe*
THE OLD EELIABLE 109
(262 F.)
llable for loss of the third barge, which remained In possession et the
owner, by breaking from its mocrings during a rise of the river.
8. TOWAGE ®=3l5(3) — ^TUG HELD LIABLE FOR SALVA&E SERVICE TO, BUT NOT
FOB VALUE OF, BABQE.
Where a barge broke adrlft through négligence of a towlng tug, but
was salvaged by the owner vj'lthout serious damage, the tug was properly
charged witb expense of salvage, but could not be required to pay for
the barge,
4. TOWAGE <g=5l5(3) MEASUEE of DAMAGES FOE LOSS OF TOW STATED.
In admiralty, the measure of recovery for goods lost is the priée at place
of purehase, together with frelght, Insurance, and other charges of trans-
portation.
5. Towage <s=3l5(3) — Allowance of inteebst in case of injuby to tow
DISORETIONAEY.
Refusai of the court to allow Interest on recovery from a towing tug for
loss of property held withln its discrétion.
Appeal from the District Court of the United States for the Nor-
thern District of West Virginia, at Parkersburg; Alston G. Dayton,
Judge.
Suit by the Little Kanawha Log & Tie Company against the steam-
boat Old Reliable (the Rehable Towing Company, claimant) and the
Fidelity & Deposit Company of Maryland. Decree for hbelant, and
respondents appeal. Modified.
See, also, 256 Fed. 112.
l^wrie C. Barton, of Pittsburgh, Pa. (George W. Johnston, of Par-
kersburg, W. Va., on the brief), for appellants.
Reese Blizzard, of Parkersburg, W. Va., for appellee.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
WOODS, Circuit Judge. In this libel for breach of a towing con-
tract the decree of the District Court was in favor of the libelant. In
October, 1917, Reliable Towing Company made an oral contract with
the Little Kanawha Log & Tie Company for its tug, Old Reliable, to
tow three barges loaded with cross-ties iÉrom Parkersburg, W. Va., to
McKeesport, Pa. As no time limit was specified, the contract implied
performance within a reasonable time, considering the distance, the
speed of the vessel, the stage of the water, and other circumstances.
The Old Reliable, not having power to tow the three barges at once,
took the barges No. 68 and No. 131 in tow, leaving the third, No. 111,
for another trip. Owing to the stage of the water the dams above were
down, so that the barges could not at the time be towed above Sisters-
ville. They were tied up there to await more favorable conditions.
Temporary stop and delay at Sistersville were expected by the owner
of the barges, for it sent a man there to ask that the tug be sent back
for the third barge. Under the conditions stated there was no breach
of contract or négligence in stopping the barges at Sistersville.
The barges were tied abreast at Sistersville with insufficient Unes, and
consequently a sudden and great rise in the river broke them away.
One of them, 131, was caught by libelant, and salvaged with little
£=3For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
110 262 FEDERAL EBPOETER
damage; the other, 68, struck a pier of the Parkersburg bridge and
was lost, with nearly ail of its cargo. Both parties allège négligence
in failing to securely tie the barges at Sistersville, and each imputes
the duty and the négligence to the other.
[1] The owner of the barges and cargo had under the contract no
responsibility for them after they were taken in tow by the Old Re-
liable. The facts that it lent Unes to be used in making fast the barg-
es, either at Sistersville or McKeesport, and that Frazier, one of its
"subordinate employés, assisted in tying them at Sistersville, do net
prove that it assumed responsibility for the security of the barges.
It did not represent the lines to be sufficient, and its assisting employé
was not in charge of the work for it, nor authorized to waive any of its
rights. It is not pretended that there was any considération for the
alleged assumption of responsibility. The correspondence imme-
diately after the loss shows conclusively that the Towing Company
attached no blâme to the libelant. The évidence seems to us con-
clusive that the obligation was on the master of the Old Reliable to
make the barges fast, that he did not use due care, and that the loss
resulted from his négligence in this respect.
[2] The third barge. No. 111, which never left the possession of
the libelant, was carried away by the force of the ice movement in the
river and became a total loss. The breach of the contract to tow was
not the proximate cause of the loss, and therefore the Old Reliable
cannot be held for the loss and the salvage. St. L., I. M. & S. Ry. Co.
v. Commercial Union Ins. Co., 139 U. S. 223, 237, 11 Sup. Ct. 554,
35 L. Ed. 154.
[3] There was error in the allowance of the damages. Barge No.
131 was salvaged at a cost of $50, properly chargeable to respondent,
but it was not mater ially damaged. There was no conversion of the
barge by respondent, nor do we find évidence of abandonment by
libelant to the respondent ; its value, $400, should not hâve been charg-
ed to respondent.
[4] The value of the ties at place of destination was charged to re-
spondent, 93 cents for No. 1, and 83 cents for No. 2. The profit, which
we understand to mean the différence between the original cost, to-
gether with freight and Insurance, other costs of transportation, and
the selling price, was to be 15 cents on each tie. In admiralty the meas-
ure of recovery for goods lost is the price at the place of purchase, to-
gether with freight, Insurance, and other charges of transportation with-
out profit. The profit, 15 cents each, should be deducted, and the ties
charged at 78 cents for No. 1 and 68 cents for No._2.
[5] The District Judge, in the exercise of his discrétion, refused to
allow interest, and we see no sufficient ground to say that his discrétion
was abused. The Maggie J. Smith, 123 U. S. 349, 356, 8 Sup. Ct. 159,
31 L. Ed. 175 ; Pennsylvania R. R. Co. v. Naam Looze Vennoot
Schap, 261 Fed. 269, C. C. A. , Fourth Circuit, filed July 1,
1919.
The following corrected statement will show the amount for which
the decree will be entered:
BBITTON V, UNION INY. CO. 111
ce: F.>
2,335 No. 1 tles @ 78 c. each '. $1,821.30
290 No. 2 ties @ 68 c. each 197.20
$2,018.50
Less 249 tles salvaged, of the value of 78 c. each $194.22
Cost of salvage, 25 c. each 62.25
131.97
$1,886.53
Value of barge 68 400.00
$2,286.53
Salvage of barge No. 131 $ 50.00
Cost of unloadlng tles from same 312.48
C!08t reloadlng 191.14
553.62
$2,840.15
2,250 ft. Unes $ 50.00
Cash advanced for coal 81.00
131.00
Total due Ubelant from Old Rellable $2,971.15
Modilîed.
BRÏTTON V. UNION INV. CO. *
In re P. B. MANN-ANCHOR CO,
(Circuit Court of Appeals, Bighth Circuit November 5, 1919.)
No. 5289.
1. BANKKtTPTCY <@=s>161(l), 188(3), 311(5) — Lendkb secubed bt invalid wake-
HOUSE KECBIPTS KNTITLED TO EQUITABLE LIEN ; PAYMENT OP EQUITABLE LIEN
NOT PEEFEBENCE, WHEEE BASIS OF LIEN MOEB THAN FOUR M0NTH8 PBIOB TO
BANKEUPTOY.
As against the trustée In bankruptcy, who stands in no better position
than the bankrupt, one who made loans to bankrupt, secured by instru-
ments representing the grain handled by it, whlch more than four months
before the adjudication were replaeed by one receipt, covering grain in
various éleva tors in several states, that dld not comply wlth the state
laws goveming warehouse receipts, was entitled to an équitable lien;
8o that, even if the contract was unenforceable, the grain having wlth con-
sent of the parties been sold and the proceeds turned over to the credi-
tor before the bankruptcy proceedings were initlated, thus making the
pledge effective by possession, the situation vrtll not be disturbed, and
the créditer need not, as a condition to allowance of its claim for bal-
ance due, retvirn the money thus recelved.
2. Bankkuptct ®=>161(1) — Patment eelates to time of secubitt agbee-
MENT as BEGAEDS PEEFBKBNCE.
Sale of property of bankrupt on which a créditer had an équitable lien,
and payment of the proceeds to the créditer, though within four months
of bankruptcy, for préférence purposes relate back to the date of the con-
tract which they were designed to and did fulflll.
3. Bankeuptct €=»340 — Bueden of peoof as to pbefebence on trustée.
Even if, to prevent a préférence, there should be absolute identity be-
tween grain In bankrupt's elevators pledged and that of the same kind,
®=»For otber cases Ree same topio & KEY-NUMBBR in aU Key-Numbered Dlgeata & Indexes
•Certlorarl denled 251 U. S. — , 40 Sud. Ct. 346, 64 L. Ed. — .
112 262 FEDERAL KBPORTEB
quantlty, and quallty wMch was sold, wlth payment ot the proceeds to
the secured créditer, the trustée had the burden oî showing absence ol
identity.
i. Bankruptcy <g=164 — Identity of pboceeds or pledged peopebtt and
MONBT PAID PLEDGBE NOT NECES8AEY TO PEEVENT PEErERENCB.
No préférence can be predlcated on the fact that the money received
from sale of grain pledged by bankrupt was not kept physically isolated
till paid to the secured créditer, but waa deposited in bank with other
money of bankrupt, and a check for the amount Immedlately given to the
creditor,
■ Appeal from the District Court of the United States for the Dis-
trict of Minnesota; Wilbur F. Booth, Judge.
In the matter of the P. B. Mann-Anchor Company, bankrupt. Order
of the référée, holding that certain payments to the Union Investment
Company, a creditor, constituted a préférence, and that it was not
entitied to allowance of its claim till the money so paid was returned,
was reversed by the District Court, and Walter F. Britton, trustée
in bankruptcy, appeals. Affirmed.
Todd, Fosnes, Sterling & Nelson, of St. Paul, Minn., for appellant.
Lancaster & Simpson and R. G. Patton, ail of Minneapolis, Minn.,
for appellee.
Before SANBORN, CARLAND, and STONE, Circuit Judges.
STONE, Circuit Judge. Appeal from decree of District Court, on
pétition for review, reversing order of référée in bankruptcy which
declared certain payments to appellee to be préférences.
[1,2] The undisputed facts are that the bankrupt, a grain firm
owning a line of elevators, had for some time been borrowing from
appellee. Thèse loans were secured by various instruments supposed
to represent the grain handled by appellee, such as bills of lading and
receipts. More than four months before the bankruptcy adjudication
thèse receipts had been replaced by one receipt covering grain in vari-
ous elevators in several states. The présent controversy revolves
around the proceeds of grain covered by this receipt, which grain was
sold by a creditors' committee and the proceeds tumed over to appel-
lee before, but within four months of, the bankruptcy proceedings.
It is admitted that this receipt did not comply with the state laws gov-
erning warehouse receipts; therefore no reliance is placed upon it
as a warehouse receipt. Appellee's contention is that its course of
dealing in connection with its loans, made upon the faith of the receipts
replaced by this last one, coupled with the later réduction and reali-
zation upon the pledged property before the bankruptcy proceedings
began, established its right to an équitable lien on the grain covered
thereby. This position is sound, as against a trustée in bankruptcy,
who stands in no better position to avoid an équitable claim of this
character under thèse circumstances than the bankrupt itself.
The parties to this transaction, with no thought of forbidden préf-
érence, intended that the grain covered by the receipts should be a se-
curity for the debt. They sought to impound it for that purpose
through the instrument delivered. Upon the faith of this security
^=9For other cases Bee same topio & KEY-NUMBER iu aU Key-Numbered Digests & laàexem
BRITTON V. UNION INV. CO. 11 '"^
(262 F.)
loans were procured from appellee. As said by Mr. Justice Holmes, in
the case of Sexton v. Kessler, 225 U. S. 90, 96, 32 Sup. Ct. 657, 658
(56 L. Ed. 995):
"So far as the interprétation of the transaction is concerned it seems to us
tliat there Is only one fair way to deal with it The parties were business
men acting without lawyers and in good faith attemptlng to create a présent
Becurity out of specified bonds and stocks. Their conduct should be construed
as adopting whatever method consistent with the facts and with the rights
reserved is most fltted to accomplish tlie resuit. * * * So the question is
whether anything in the situation of fact or the rights reserved prevents the
intended création of a right in rem, or at ieast one that is to be preferred to
the claim of the trustée. The bankruptcy law by itself does not avoid the
transaction."
The so-called receipt is no receipt, because it fails to comply with
the requirements of the state statutes governing grain warehouse re-
ceipts, and it would form no barrier to a proper receipt covering the
same grain issued to an innocent person. But it is a part of the évi-
dence of the actual understanding and arrangement between the par-
ties. The grain was, with the consent of appellee and the bankrupt,
sold by the committee, and the resulting f unds tumed over to it by the
committee, to be applied to its debt under the above contract. In es-
sence such transactions amount to a réduction to possession of the
grain, and a realization thereon by it. This entire transaction was fuUy
consummated before the bankruptcy proceedings were initiated. Al-
though they took place within four months of bankruptcy, yet, for préf-
érence purposes, they relate back to the date of the contract which
they were designed to and did fulfill. Security Warehousing Co. v.
Hand, 206 U. S. 415, 423, 27 Sup. Ct. 720, 51 L. Ed. 1117, 11 Ann.
Cas. 789. Even if the contract were unenforceable, which we do not
décide, as contended for by appellant, because the receipt failed to
conform to the state laws governing grain warehouse receipts, yet it
was not inherently vicions, was made and carried out in good faith,
and had been fully performed before the bankruptcy proceedings began.
Equity will not disturb such a situation. The saving élément hère,
which prevents application of the state statutes invoked by appellant, is
that possession of the pledge became effective through possession of
the money for which the same was sold by consent of pledgor and
pledgee, with the knowledge that such disposition was to be made of the
money.
[3, 4] Appellant contends that the identity of the grain pledged was
not preserved nor proven. Because of the character of grain, it is
rare that receipts, pledges, or contracts with warehousemen regard-
ing it, attempt to segregate the particular grain. The needs of ail
parties are usually met by description of the warehouse, or réceptacle
therein, the kind, quantity, and quality of grain. The contract hère
was of this character. The évidence establishes that the grain sold by
the committee met the description of this pledge. There is no testi-
mony showing that it was not the identical grain, if absolute identity
be required. Nor is it material that the money received for this grain
was not kept physically isolated until paid to appellee. It was deposit-
262 r.— S
114 262 FEDERAL EBPOETEB
ed in a bank with other money, and promptly checked out to appellee,
so there is no question that the identical amount received for this
grain was in the bank and paid the check.
The judgment o£ the D'Strict Court is affirmed.
CAMP BIRD, Limited, T. HOWBBiRT, Collector of Internai Revenue.*
(Circuit Court of Appeals, Eighth Circuit November 17, 1919.)
No. 4939.
1. Intxbitai, sevenue €=93S — Bbcovebt bt oobpobation of iixeoai, excise
TÀX PAID.
On recovery of excise tax lUegalIy coUected from a corporation, the
penalty and interest exacted for dellnquency in maklng payment under
Act Aug. 5, 1909, § 38(5) held also recoverable.
2. Intkbnal bevenue (g=338 — Recoveby by oobfobation of excessive ex-
cise TAX.
A minlng corporation held entltled to recover excessive excise taxes
pald under Act Aug. 5, 1909, § 38, because of refusai of the Commlssioner
to make proper allowance for dépréciation of equipment
In Error to the District Court of the United States for the District
of C!^lorado; Jacob Trieber, Judge.
Action by Camp Bird, Limited, against Frank W. Howbert, Col-
lector of Internai Revenue, District of Colorado. Judgment for défend-
ant, and plaintiff brings error. Reversed.
See, also, 249 Fed. 27, 161 C. C. A. 87.
William Story, Jr., of Sait Lake City, Utah (William V. Hodges,
James G. Rogers, and George L. Nye, ail of Denver, Colo., on the
brief), for plaintiff in error.
John A. Gordon, Asst. U. S. Atty., of Denver, Colo. (Harry B.
Tedrow, U. S. Atty., of Boulder, Colo., on the brief), for défendant
in error.
Before CARLAND and STONE, Circuit Judges, and ELLIOTT,
District Judge.
CARL/AND, Circuit Judge. This is an action at law brought by the
Camp Bird, Limited, hereafter plaintifï, to recover of Howbert, col-
lector of internai revenue for the district of Colorado, hereafter de-
fendant, the amount of certain taxes assessed against the plaintifï under
the Excise Tax Law of 1909 (Act Aug. 5, 1909, c. 6, 36 Stat. 112), for
the years 1909, 1910, and 1911, which taxes were paid by plaintifï
under protest The trial court rendered judgment in favor of the de-
fendant, and the plaintiff sued out a writ of error. The case was before
us at a former term, and this court affirmed the judgment below. 249
Fed. 27, 161 C. C. A. 87.. The case was then removed by the plaintiff
to the Suprême Court by writ of certiorari. While the case was pend-
ing in that court, one of the Assistant Attorneys General of the United
States appeared therein and caused the judgment of affirmance by
®=3For other cases see same toplc & KEY-NUMBBE in ail Key-Numbered Dlgeats & Indeiea
•Certiorari denied 251 U. S. — , 40 Sup. Ct. 344, 64 L. Ed. — .
CAMP BIKD V. HOWBEET 115
(262 F.)
this court to be reversed on confession of error. Pursuant to said
reversai a mandate of the Suprême Court issued to this court for fur-
ther proceedings in conformity to the judgment of the Suprême Court.
The only question decided by this court at the former hearing was
that the action of the plaintiff was barred by section 3225, U. S. Rev.
Stat. (Comp. St. § 5948) ; this being also the ground upon which the
trial court denied a recovery. There exists no record as to what the
error was that the Assistant Attomey General conf essed. We conclude,
however, that as the bar of the statute was the only question decided
by this court it is in regard to that question we erred in the opinion
of the Assistant Attorney General, and we further conclude that, as
the case was remanded by the Suprême Court to this court for further
proceedings, instead of the District Court, it is our duty to proceed
and render such judgment on the merits as this court shall deem prop-
er, regardless of the bar of the statute. Lutcher & Moore Lumber
Co. V. Knight, 217 _U. S. 257, 30 Sup. Ct. 505, 54 L. Ed. 757. Before
proceeding to consider the case on the merits, we deem it proper to
say that the power to review the décisions of this court is an important
one, and ought to be left as a gênerai rule to the tribunal established
by law for that purpose. The case in the court below was tried by the
court, a jury being waived. After hearing the évidence the court made
findings of fact and conclusions of law, upon which judgment was en-
tered in favor of the défendant, for the reason that under the facts
found plaintilï's action was barred by section 3225, supra.
[1, 2] Eliminating the question as to the bar of the statute, which
we must assume upon the record was erroneously decided by this
court, although no appellate court has passed upon the question, the
assignments of error by the plaintiff are as follows: (1) The court
erred in deciding that no penalty could be recovered by the plaintiff,
as the taxes were not paid within the time required by law. (2) The
court erred in rendering judgment for the défendant, as the facts
found entitled the plaintiff to judgment for the amount of the taxes
illegally collected. In regard to the first assignment of error, we are
of the opinion that, where an illégal tax is paid, the fact that it was not
paid within the time allowed by law will not prevent the taxpayer from
recovering the penalty of 1 per cent, per month paid by him for the
nonpayment of the illégal tax, for, if the tax was illégal, it was never
due, and therefore the penalty was as much unauthorized as the tax
itself. In regard to the second assignment of error, the record shows
that the dépréciation in the value of the mine was caused by the remov-
al of ores, and that the amount of dépréciation allowed by the Com-
missioner of Internai Revenue for each year was on mine equipment.
The court further found as follows :
"That, If the plaintiff Is entitled to recover under the law, the amounts are
as follows: For the year 1909, for dépréciation of equipment, $56,907.20; dé-
préciation of value of mine, $917,697 ; total dépréciation for the year 1909,
$974,604.20. The amount allowed by the Commissloner for dépréciation to be
deducted, $40,615, leaves the net dépréciation not allowed $933,989.20, and
the tax of 1 per cent collected on that amount was $9,339.89. For the year
1910, the court flnds the dépréciation to be, on equipment, $56,907.20; of the
value of the mine, $568,129, as claimed In its retum; total dépréciation,
116 262 FEDERAL REPOKTER
5625,036.20. The amount allowed by the Commissloner to be deducted $40,615,
leaves the amount of déprédation in value for wMch it would net be liable to
taxation $584,421.20, and the 1 per cent, tax collected on that excessive as-
sessment was ?5,844.21. For the year 1911, the court flnds the depredationa
of the value of the mine were: On equipment $56,907.20; value of mine,
$617,789.00; total, $674,696.20. The amount allowed and deducted by the
Commissloner for dépréciation, $40,615, leaves the amount of déprédation not
allowed by the Commissloner to be $634,081.20, the 1 per cent, tax on which
was paid by the plalntiff amounted to $6,340.81."
It will be seen from thèse findings of fact that the court found
that there was a dépréciation in the equipment of the mine for each
of the years 1909, 1910, and 1911, amounting to $56,907, which was
$16,292.20 each year more than was allowed by the Commissioner ; his
allowance being $40,615. This would make an overassessment of $16,-
292.20 each year, which at 1 per cent, would make an illégal tax of
$162.92 per year, or $488.76 for the three years. AU the remaining
excess taxes found to be due by the trial court relate to the déprécia-
tion in the value of the mine caused by the exhaustion of ore. Since
the case was tried in the court below the cases of Von Baumbach v.
Sargent Land Co., 242 U. S. 503, 37 Sup. Ct. 201, 61 L. Ed. 460, U. S.
V. Biwabik Mining Co., 247 U. S. 116, 38 Sup. Ct. 462, 62 L. Ed. 1017,
and Goldfield Consolidated Mines Co. v. Scott, 247 U. S. 126, 38 Sup.
Ct. 465, 62 L. Ed. 1022, hâve been decided, and thèse cases hold that
in no accurate sensé can such exhaustion of the body of the ore be
deemed dépréciation. There being no other question for détermina-
tion, our opinion is that the judgment of the court below must be
reversed, and the case remanded to that court, with directions to enter
judgment upon the facts found in favor of the plaintifï for $488.76,
with interest at 8 per cent, from the time the illégal payments were
made, and also the penalty of 1 per cent, per month paid on said illégal
tax ; and it is so ordered.
HUFFMAN V. PAIGE-DETROIT MOTOR CAR CO.
PAIGE-DETEOIT MOTOR CAR CO. v. HUFFMAN.
(Circuit Court of Appeals, Eighth Circuit. December 19, 1919.)
Nos. 6330, 5332.
1. PEINCIPAI, and agent <©=33 — CONTRACT BT MOTOE CAB MANTJFACTtTEHat
GIVING EXCLUSIVE EIGHT TO SEIX IN SPECIFIED TEEBITOET TEEMINABIJ! AT
WILL.
A contract whereby manufacturer of motorcars granted plaintifC ex-
clusive right to sell cars in a si)eclfled territory, but which did not ob-
llgate plaintifC to buy or défendant to sell any speeified number of cars
at any given priée, and provided for termination if the manufacturer
should belleve plaintiff was not diligent in selling cars, eta, may be ter-
niinated by the manufacturer at will.
2. Peincipal and agent ®=>33 — Manufaotubeb of uotob cabs who tï^b-
MINATED PLAINTIFF'S AQENCY CONTRACT NOT LIABLE FOB ENTICINQ AWAY
PLAINTIFF'S SUBAGENTS.
Where the contract, giving plaintiff exclusive right to sell motor cara
in a specifled territory, was terminated by the manufacturer, lield, that
@=3For other cases see Eame toplc & KEY-NUMBEU in ail Key-Numbered DlgesU & Indexes
HUFFMAN V. PAIGE-DETEOIT MOTOB CAE CO. 117
(262 F.)
plaliitiff, who had appointed subagents, could not recover against the
manufacturer for enticing away hls subagents, where such recovery was
based on the supposed wrongful cancellation of the principal contract,
whlch, however, was terminable at the will of the manufacturer.
In Error to the District Court of the United States for the Dis-
trict of Nebraska ; Joseph W. Woodrough, Judge.
Action by William L. Huffman against the Paige-Detrolt Motor
Car Company. There was a judgment for défendant, after demurrer
was sustained to each count of the pétition, and plaintiff brings er-
ror, and défendant assigns cross-errors, based on the refusai of its
motion to quash service of summons. Affirmed.
Sidney W. Smith, of Omaha, Neb. (E. G. McGilton, of Omaha,
Neb., on the brief), for plaintiff.
Charles B. Keller, of Omaha, Neb., and Sherwin A. Hill, of Dé-
troit, Mich. (George Doane Keller and Howard H. Baldrige, both
of Omaha, Neb., Charles B. Warren, William B. Cady, and San-
ford W. Ladd, ail of Détroit, Mich., on the brief), for défendant.
Before HOOK and STONE, Circuit Judges, and AMIDON, Dis-
trict Judge.
HOOK, Circuit Judge. This was an action for damages by Huff-
man against the Paige-Detroit Motor Car Company, a corporation
of Michigan. The first count of his pétition is for a breach of a
written contract between them by its wrongful cancellation prior to
the specified date of expiration. The second count is for enticing
away plaintiff's subagents in the automobile business. The trial court
sustained a demurrer to each count for its failure to state a cause
of action, and to both for misjoinder. A judgment for défendant
followed. There was a third count in the pétition, but it is not now
in controversy.
[1] By the terms of the contract the défendant granted to the
plaintiff the exclusive right to sell Paige automobiles in Nebraska
and parts of lowa and South Dakota. Voluminous provisions defined
the basis for future dealings between the parties and their responsibil-
ities to each other and to third persons. Except for an attempt to
make their future relation purely that of vendor and purchaser, and
their transactions wholly interstate in character, the contract is much
like one of agency. This aspect of it is emphasized by the control
which défendant reserved over the activities of the plaintiff through
provisions for cancellation to which référence will presently be made.
The défendant did not obligate itself to sell, nor plaintiff to buy, any
specified quantity of automobiles, nor was a determinable quantity
fixed in a mutually binding way by the requirements of an established
business. The défendant was expressly exempted from such an ob-
ligation and from adhérence to the schedule of priées and discounts
set forth. It was free to décline shipments under the contract, and
also free to fix and change priées at will. The contract specified a
time when it expired by limitation. The fîrst count of the pétition
charged that prior to that time the défendant "without just cause
118 262 FEDBRÂL BBPORTEB
terminated and cancelled said contract." But aside from the provi-
sions above noted, indicating a lack of mutuality of obligation, the
contract expressly reserved to défendant the right of cancellation
when iri its opinion the plaintiflf was not working the territory to the
best advantage. By another clause it was provided that, if the de-
fendant "believes that the dealer [the plaintiflf] is not properly and
diligently pushing the sale of its cars, it hereby reserves the right at
its élection, and without making itself liable in any manner for any
claim or action for damages, * * * ^q cancel and terminate this
agreement. * * * " It is quite manifest that the contract merely
furnished a basis for future dealings to be observed no longer than
was mutually satisfactory. There was no hard and fast commitment
of either party, if he chose to break away. Oakland Motor Car Co.
V. Indiana Automobile Co., 121 C. C. A. 319, 201 Fed. 499; Velie
Motor Car Co. v. Kopmeier Motor Car Co., 114 C. C. A. 284, 194
Fed. 324.
[2] In the second cause of action, plaintifï avers that when the
contract with défendant was made he had a valuable selling organiza-
tion in the territory described, and that he accordingly made con-
tracts with ail his subagents to handle defendant's product; that de-
fendant canceled its contract with him without just cause, and will-
fully and maliciously induced and enticed his subagents to sever and
discontinue their relations and break their contracts with him. Fair-
ly construed this complaint seems to rest upon the supposed wrong-
fui cancellation of the principal contract between plaintiff and de-
fendant. In that view it is obvious that no cause of action is stated.
The resuit complained of ensued from an authorized lawful act and
nothing is gained by the use of the terms willfully and maliciously.
It may be observed that the record, aside from the face of the péti-
tion, indicates that the terms of thèse subcontracts were like those
of the principal contract between plaintifï and défendant; that is
to say, provisional arrangements at will. Upon a condition like that,
see Triangle Film Corporation v. Artcraft Pictures Corporation, 250
Fed. 981, 163 C. C. A. 231. But it is enough to say that no cause
of action is stated for a wrongful or malicious interférence by de-
fendant in the contract relations between other persons. The above
conclusions upon the averments of the pétition make it unnecessary
to consider whether the two causes of action were improperly joined.
By a motion to quash the service of summons, défendant raised
a question of jurisdiction, asserting that it was not doing business
in Nebraska, where the action was brought, and that the man per-
sonally served there was not its managing agent. We think that the
proofs, which need not now be recited, warranted the déniai of the
motion by the trial court.
The judgment is affirmed.
HOWEIili V. DELEWABE, L. & W. E. CX). 119
C262 F.)
HOWELL V. DELAWARE, L. & W. B. CO. THE DUNELLBN. THE
CHAPIN. THE SCOTIA.*
(Circuit Court ot Appeals, Second Circuit December 10, 1919.)
No. 48.
1. Collision iS=>70 — New York City Chaetee rule as to mooked vessels
can be xnvoked only by vessels leaving or entebing slips.
New York City Charter, § 879, providing that vessels shall not lie
moored at pier ends, exeept at their own risk, Is for the beneflt only of
vessels entering or leaving adjacent slips, and eannot be invoked in a
contest between several barges moored together at the end of a pier.
2. Collision ®=>70 — Pieb end chabter reoulation additional to otheb
EULES of navigation.
New York City Charter, § 879, regulating the mooring of vessels at pier
ends, does not render obsolète, but Is additional to, other rules of navi-
gation and maritime conduct, whether founded upon Inland Rules or
upon accepted gênerai custom.
Appeal from the District Court of the United States for the South-
ern District of New York.
I/ibel by John S. Howell against the Delaware, Lackawanna & West-
ern Railroad Company, in wrhich the barge Dunellen, her tackle, etc.
(the Central Railroad of New Jersey, claimant), the barge Chapin, her
tackle, etc. (the New York Central Railroad Company, claimant), and
the steam lighter Scotia, her engines, etc. (McAllister Bros., claimants)
were made parties under the fifty-ninth rule in admiralty. From an
adverse decree, the claimant of the barge Chapin appeals. Affirmed.
Action was originally brought against ^the Delaware, etc., Railroad Com-
pany alone; the other parties hâve been brought in under the flfty-ninth rule
(29 Sup. et xlvl).
In daylight, and weather whlch requires no considération, llbelant's scow
Lex lay fast to the outer end of Pier 33, East River. Outslde of her lay the
barge Dunellen, and outside of the latter vessel the barge Chapin. The Lex
was under charter to the Delaware, etc., Company, and it was that company
which had placed her at the pier end.
The steam lighter Scotia came out of the slip between Piers 33 and 32, and
in so doing collided with the Chapin. The blow caused ail three boats at
the pier end to break loose, and the Lex recelved the damages for which this
action was brought against the charterer alone. The charterer admltted
liabillty because of certain agreements in the charter party.
Thereupon said charterer (the Delaware, etc., Company) brought In the
Dunellen and the Chapin, alleging as faults (substantlally) : (1) That thèse
boats had moored outslde of the Lex at ail; and (2) that in so moorrag they
had negllgently protruded Into and blocked up the approaeh to and exit from
the slip out of which the Scotia desired to go. The Chapin then brought In
the Scotia, alleging faults not necessary to recite.
The trial judge held that the Injuries to the Lex were the direct resuit of
the Chapin's improperly obstrueting the egress of the Scotia from her slip,
held the Chapin primarily at fault, and exonerated the Lex, Dunellen, and
Scotia. Tlius in effect the Delaware, etc., Company succeeded in shifting its
contractual liabillty as charterer to the Chapin as a tort-feasor, although
under the decree the charterer remained secondarily responsible.
From this decree the claimant of the Chapin appealed, assignlng (in sub-
stance) for error (1) that the proxlmate cause of disaster was the faulty
navigation of the Scotia ; and (2) that the Dunellen and Lex should hâve been
found at fault for lying at the pier end in violation of section 879 of the
Charter of the City of New York.
e=5For other cases see same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes
•Certlorari denied 251 U. S. — , 40 Sup. Ct. 336, 64 L. Ed. — ,
120 262 FEDERAL EEPOETBB
Harrington, Bigham & Englar, of New York City (T. Catesby Jones
and I. A. Washbume, both of New York City, of coûnsel), for appel-
lant The Chapin.
Marsh & Wever, of New York City (Charles C. Marsh, of New York
City, of counsel), for appellee Howell.
Douglas Swift and E. W. Leavenworth, both of New York City
(J. E. Morrissey, of Syracuse, N. Y., of counsel), for appellee Dela-
ware, E. & W. R. Co.
James T. Kilbreth, of New York City, for appellee The Dunellen.
Hyland & Jabriskie, of New York City (Nelson Zabriskie, of New
York City, of counsel), for appellee The Scotia.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). Whether
the Chapin so protruded into the fairway as to proximately cause colli-
sion with the Scotia while the latter was exercising reasonable care
is matter of fact decided adversly to the Chapin by the trial judge,
and after reviewing the record we find his conclusions supported by
évidence, which it would serve no useful purpose to recite. It is, how-
ever, hère urged as matter of law that, since the Eex and Dunellen
were also moored at the pier end in violation of New York Charter
(Laws 1901, c. 466) § 879 (set forth at length in The Allemania, 231
Fed. 942, 146 C. C. A. 138), they must be as responsible as the
Chapin.
Our views of this local harbor régulation are, we think, plainly stat-
ed in The New York Central Nô. 18, 257 Fed. 405, C. C. A. ,
and The Daniel McAllister, 258 Fed. 549, C. C. A. . It was
there held, and correctly said below, that section 879 can only he in-
voked by vessels of the class therein enumerated, viz. those "entering
or leaving" a slip adjacent to the pier end at which lie the offending
craft. If, therefore, in this case the Scotia had been injured, she
would hâve made out a prima facie case against the Chapin under the
act, by showing where that barge was moored ; yet it remains possible
for vessels at the pier end to affirmatively show, either that their vio-
lation of statute neither caused nor contrihuted to disaster, or that
the "entering or leaving" vessel herself contrihuted thereto.
[1] But this case — with the Scotia exonerated — is between vessels
which were ail moored in the same illégal manner; between them-
selves none can point to the statute, and insist that the others are re-
sponsible to her by reason of the statute.
[2] The charter régulation does not, of course, take away, nor ren-
der obsolète, any other rule of navigation or maritime conduct, whether
founded on the Inland Rules or upon accepted gênerai custom as
(usually) announced in judicial décisions; it is additional thereto. The
Chapin is held solely liable hère, not because she lay with other ves-
sels at the end of a pier, but because she incumbered and obstructed
the channel in a way deemed faulty without any référence to the pier
end statute.
Decree affirmed. with costs to each appellee.
MONK V. HORN 121
(262 F.>
MONK V. HOEN.
(Olrcnlt Court of Appeals, Fifth Circuit. January 13, 1920.)
No. 3409.
Bankeuptct «3=404 (2) — Effect of denial in pbiob proceedinq of applica -
TION FOE DISCHABGE.
Under Bankruptcy Act, § 14a (Comp. St. § 9598), limiting the time for
flling application for discharge to 18 montlis from date of adjudication, a
bankrupt is not entitled, on an application filed in a second proceeding
more than 18 months after hls first adjudication, to a discharge from
debts provable in the flrst proceeding.
Appeal from the District Court of the United States for the South-
ern District of Alabama; Robert T. Ervin, Judge.
In the matter of Robert Wiley Horn, bankrupt. On appeal by
William H. Monk, Jr., from order granting discharge. Reversed.
Moses Kohn, of Mobile, Ala., for appellant.
William H. Armbrecht and J. Osmond Middleton, both of Mobile,
Ala., for appellee.
Before WALKER, Circuit Judge, and GRUBB and JACK, District
Judges.
WALKER, Circuit Judge. The appellee was adjudged bankrupt on
January 25, 1917, on a voluntary pétition filed by him in a proceeding
in which no application for a discharge was filed, and which was
closed prior to January 25, 1919, when he filed in the same court an-
other voluntary pétition, under which he was again adjudged bank-
rupt. In 1914 the appellant recovered a judgment against the bank-
rupt, which was a provable debt against the estate of the bankrupt in
each of the bankruptcy proceedings. He objected to the granting of
an application for discharge made by the bankrupt in the second pro-
ceeding, in so far as that application sought a discharge from the debt
evidenced by the judgment mentioned, and prayed that that debt be
excluded from the opération of any discharge that might be granted
under the application therefor. The court ordered a discharge, from
the opération of which the debt owing by the bankrupt to the appel-
lant was not excluded.
This court has decided that, under the provision of section 14 of
the Bankruptcy Act (Comp. St. § 9598) prescribing the time within
which an application for a discharge may be made, a bankrupt, after
the expiration of 18 months from adjudication, is not entitled, in a
second proceeding, to a discharge from debts provable in the first. In
re Bacon, 193 Eed. 34, 113 C. C. A. 358 ; Bacon v. Bufïalo Cold Storage
Co., 225 U. S. 701, 32 Sup. Ct. 836, 56 L. Ed. 1264. It appears from
the opinion rendered by the District Judge in the instant case that the
ruling just referred to was not followed, because it was considered
to be inconsistent with the ruling of the Suprême Court in the case
of Bluthenthal v. Jones, 208 U. S. _64, 28 Sup. Ct. 192, 52 L. Ed.
390. What was decided- in the last-cited case was that a debt was not
excluded from the opération of a discharge by the fact that in a former
©sjFor other cases sec same topio & KEY-NUMBEE in ail Key-Numbered Digests & Indexes
122 262 FEDBHAIi REPORTER
proceeding, on the same creditor's objection, a discliarge was refused,
where that creditor, though notified of the second proceeding and
that his same debt was scheduled therein, did not participate in any
way in that proceeding. The ground of that décision was that the
creditor lost the benefit, in the second proceeding, of the refusai of a
discharge in the first proceeding, by f ailing to plead it or bring it to
the attention of the court in the later proceeding.
It was not decided in that case that the creditor did not hâve a
valid ground of objection to the granting of the discharge applied
for in the second proceeding. It was decided that the creditor's debt
was not excluded from the opération of a discharge which was grant-
ed without objection from him. The question of the sufficiency of
an objection to an application for a discharge, because it was not made
within the time prescribed by section 14 of the Bankruptcy Act, was
not involved in that case. Nothing said in the opinion rendered in that
case indicates that the court had that question in mind. We do not
think that the décision in that case is in conflict with the above re-
ferred to décision of this court.
We are of the opinion that the ruling in the case of In re Bacon,
supra, was correct. Subdivision "a" of section 14 of the Bankruptcy
Act créâtes a limitation in favor of creditors having debts provable
against an estate in bankruptcy. Subdivision "b" of that section pre-
scribes the grounds on which an application for discharge may be
refused. There is nothing to indicate that the latter provision was in-
tended to control or supersede the former one. The former provision
fixes a period of time beyond which a creditor afïected by the bank-
ruptcy is not required to remain prepared to prove the existence of a
ground of objection to a discharge of the bankrupt. It well may be
inferred that it was contemplated that an application for a discharge
from any debt afïected by an adjudication of bankruptcy should be
made within the stated period, whether made in the first proceeding
in which such debt was provable, or in a subséquent proceeding.
The provision has the eiïect of preventing a bankrupt from with-
holding for an unreasonable length of time from creditors affected by
the adjudication of bankruptcy the opportunity of proving the exist-
ence of a ground justifying a refusai of the discharge applied for.
To give to a subséquent adjudication of bankruptcy the effect of en-
larging the time within which a discharge from debts afïected by a
former adjudication could be applied for would ainount to a destruction
of the limitation created by the statute. The conclusion is that the
court erred in overruling the appellant's motion to exclude his debt
from the opération of the discharge applied for and granted.
Because of that error, the decree is reversed.
GRANDI V. UNITED STATES 123
(262 F.)
GRANDI V. TJNITBD STATES.
(Carcult Court of Appeala, Slxth Circuit. January 6, 1920.)
No. 3278.
1. Ceiminai, LA.W <g=»1186(4)— Technicai, objection to inmctment chabgb
DOES NOT JUSTIFY BEVERSAL.
Although a count of an Indictment alleging that défendant, knowlng the
same to hâve been stolen, recelved goods from an Interstate shipment,
etc., under Act Feb. 13, 1913 (Comp. St. §§ 8603, 8604), did not speclfically
allège that the goods were stolen, défendant could not hâve been mis-
led in hls défense, and the defect is a technical one, whlch should be dis-
regarded on appeal, under Comp. St. § 1691, and Judicial Code, § 269, as
amended by Act Feb. 26, 1919.
2. Ceiminal law <g=753(2) — Motion roB dieected verdict waived bt fail-
URE to EENEW AT CLOSE OP CASE.
Where defendant's motion for dlrected verdict, made at close of gov-
ernment's case, was overruled, It was waived, where not renewed at the
close of the whole case.
3. RECEIVING stolen goods iS=3 — ReCEIVEB of stolen goods ASSUMES PEBIL
or SAME HAVINQ BEEN STOLEN FROM AN INTERSTATE SHIPMENT.
Where défendant knew the goods had been stolen, he recelved them at
péril of thelr haviag been stolen whlle In the course of an Interstate ship-
ment, in whlch case he would be llable under Act Feb. 13, 1913 (Comp.
St. il 8603, 8604).
In Error to the District Court of the United States for the West-
ern District of Tennessee; John E. McCall, Judge.
A. Grandi was convicted of knowingly receiving goods stolen from
an interstate shipment in violation of Act Feb. 13, 1913, and he brings
error. Affirmed.
Chas. M. Bryan, of Memphis, Tenn., for plaintifï in error.
Wm. D. Kyser, U. S. Atty., of Memphis, Tenn.
Before KNAPPEN and DENISON, Circuit Judges, and KIL-
LITS, District Judge.
KNAPPEN, Circuit Judge. Plaintiiï in error was convicted under
the Act of Feb. 13, 1913 {2,7 Stat. c. 50, p. 670 [Comp. St. §§ 8603,
8604]). The indictment contained three counts. The first charged the
breaking of the seal of a certain railroad freight car containing an
interstate shipment; the second, the steaHng of goods from that car;
and the third, the receipt and possession of goods knowing that they
had been stolen from the car in question, and knowing that they were
part of an interstate shipment contained in that car, which was alleged
to be under transportation in interstate commerce — the places from
which and to which the shipment was being made and the names of
the consignor and consignée being stated. The conviction was on the
third count alone.
[1] A motion to quash the third count, as not charging that the
goods were in fact so stolen, was denied. There is an absence of
such spécifie allégation. But while the count was thus technically
subject to criticism, yet, in view of the frame of the indictment taken
<g=3Por other cases see same topic & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes
124 262 FEDERAL REPORTER
as a whole, plaintiff in error could not well hâve been misled to his
préjudice. The count fairly informed the accused of the charge
against him, and sufficiently so to enable him to prépare his défense
and to protect him against further prosecution therefor. Daniels v.
United States (C. C. A. 6) 196 Fed. 459, 465, 116 C. C. A. 233;
Bettman v. United States (C. C. A. 6) 224 Fed. 819, 826, 140 C. C.
A. 265. The charge that défendant knew the goods to hâve been stol-
en naturally implies that the goods had been in fact stolen. The ver-
dict should not be reversed on account of a defect so obviously tech-
nical and unsubstantial. U. S. Comp. Stat. 1916, § 1691 ; Judicial Code,
§ 269, as amended February 26, 1919 (40 Stat. 1181, c. 48) ; West v.
United States (C. C. A. 6) 258 Fed. 413, 415, C. C. A. .
[2, 3] A motion to direct verdict, made at the close of the gov-
ernment's testimony, was overruled. If vire were to treat the right
to complain as saved (the motion was not renewed at the close of ail
the testimony, and so was waived), it would not hâve availed plaintiff
in error, for the motion was plainly without merit. There was abun-
dant évidence to sustain a finding that the goods were in fact stolen
from the interstate shipment, and that défendant had guilty knowl-
edge thereof. Indeed, if he knew the goods were stolen, he received
them at the péril of their proving to hâve been stolen while in the
course of interstate shipment, even if he did not know they were
stolen from a shipment of that kind. Kasle v. United States (C. C. A.
6) 233 Fed. 878, 882, 147 C. C. A. 552.
We see nothing in the objection that défendant and one Woods
were jointly charged with receiving and having possession of the goods,
without setting out in what way the joint receipt was accomplished.
Such joint participation was entirely possible, and it was unnecessary
to State the détails relating thereto.
We see no error in the fact that plaintifï in error was tried in the
absence of his codefendant.
The judgment is affirmed.
AMMERMAN v. UNITED STATES.*
(Circuit Court of Appeals, Elghth Circuit. December 15, 1919.)
No. 5267.
1. PEOSTiTunoN ®=»3 — Indictment under White Slave Traffic Act sut-
nCIENT.
An indictment under WTiite Slave Trafflo Act, § 2 (Comp. St. § 8813),
charRlng that the transportation was unlawfuUy and felonlously made "for
the piirpose of debauchery," held sufflclent,
2. Prostitution "Ssaé — Competenct or évidence in prosecution undeb
White Slave Traitio Act.
In a prosecution for violation of White Slave Traffic Act, § 2 (Comp. St.
§ 8813), évidence of prlor illiclt relations between défendant and the
woman transported Is compétent.
3. Chiminal law ®=5782(9) — Instruction as to suffi ciency of évidence.
Instruction in a criminal case that the jury were requlred to décide
the questions submltted "upon the strong probabilitles of the case," fol-
£=sFor other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
•Rehearing denied Mareh 30, 1920.
AMMERMAN V. UNITED STATES 125
(262 F.)
lowed by a correct statement of the rule as to exclusion of ail reasonable
doubt, held not erroneous.
4. Cbiminal law <g=3768(3) — Coercion of jury.
Statement by the court to a jury that it was the rule of the fédéral
courts that they should be kept together until tbey had agreed upon
their verdict held not errer, as tending to coercion.
In Error to the District Court of the United States for the District
of Nebraska; Thomas C. Munger, Judge.
Criminal prosecution by the United States against Day Ammerman.
Judgment of conviction, and défendant brings error. Affirmed.
Caesar A. Roberts, of Denver, Colo. (John E. Kelley, of McCook,
Neb., O. N. Hilton and Leslie M. Roberts, both of Denver, Colo., on
the brief), for plaintifï in error.
T. S. Allen, U. S. Atty., of Lincoln, Neb. (F. A. Peterson, Asst. U.
5. Atty., of Omaha, Neb., on the brief), for the United States.
Before CAR^AND and STONE. Circuit Judges, and ELLIOTT,
District Judge.
STONE, Circuit Judge. Error from conviction on one count of an
indictment charging transportation of a woman in Interstate commerce,
for immoral purposes. The errors hère urged are: (1) Insufficiency
of the indictment. (2) Insufficiency of the évidence. (3) Admission of
prior illicit relations hetween the parties. (4) Erroneous charge. (5)
Coercion of the jury.
[ 1 ] The attack upon the indictment is based on the claim that it is
lacking in any sufficient allégation of the necessary criminal intent. The
statute (White Slave Traffic Act, § 2 [Comp. St. § 8813]) condemns
such transportation when made "with the intent or purpose on the
part of such person to induce, entice or compel her to give herself
* * * up to debauchery." The indictment charges that the trans-
portation was unlawfully and feloniously made "for the purpose of
debauchery." This is sufficient.
The challenge to the sufficiency of the évidence cannot be sustained.
[2] The évidence of prior illicit relations between accused and the
woman charged to hâve been transported were compétent, as bearing
upon the élément of the intent with which she was this time transported.
[3] The portion of the charge to the jury which is attacked is :
"You are requlred In a criminal case, such as this, to décide the questions
submitted to you upon the strong probablllties of the case ; but thèse proba-
billties must be so strong as not to exclude ail doubts or ail possibility of er-
ror, but to exclude aU reasonable doubts, and when you bave attained that
degree of conviction, upon which you as prudent men v?ould unbesitatingly
act in the most Important affairs of life, you can be sure that you bave reached
that State of conviction that excludes ail reasonable doubt."
The objection is to the statement that the jury are to décide "upon
the strong probabilities of the case." That portion of the charge is
almost Verbatim identical with one approved in Dunbar v. United States,
156 U. S. 185, 199, 15 Sup. Ct. 325, 3 9 E. Ed. 390.
©=3For other cases see same topic & KBY-NUMBBR In ail Key-Numbered Dlgesta & Indexes
126 262 FEDERAL REPORTER
[4] The claim of coercion of the jury is based on a statement made
hy the court to the jury at the conclusion of the charge, as follows:
"Now, In criminal cases in thls court we follow the common-law practica
of keeping the jurors ail togetber until the jury hâve agreed; but the mar-
shal wiU endeavor to provide you a place to sleep to-night, so as not to keep
you up in the jury room.
"The Marshal: We find it a hard matter to get accommodations; stlll I
think we mlght be able to get accommodations.
"The Court : When you go to the jury room, If you agrée on a verdict thls
evening — it is now a little after 10 o'elock — ^if you want to take a ballot and
see if you can agrée within the next half hour, we wUl be ready to receive
your verdict, and that will release you ail. If you should not agrée, we will
hâve to keep you on hand, and you wUl continue to deliberate in the moming."
This does not approach coercion.
The judgment is affirmed.
EOBINS V. UNITED STATES.
(Circuit Court of Appeals, Elghth Circuit November 15, 1919.)
No. 5230.
1. PosT OFFICE <g=>35, 48(4) — Indictment roB use or uails in bcheuk to de-
FBAtrD.
The éléments of an offense under Pénal Code, S 215 (Comp. St. § 10385),
are a scheme to defraud and the placlng of a letter in a post office for
purpose of executing it; so indictment thereunder need not allège that
the scheme wals to be executed by use of the mails.
2. Criminal law ig= 1036(8) — Disceetion to consideb insueticienct or évi-
dence NOT TJBGKD BELOW.
The sufflciency of the évidence to sustaln the conviction may not be
urged in the reviewing court, where question was not raised below, unless
it in its discrétion décides to consider It.
3. CJbiminal law <S=»901 — Motion foe dieected vebdict waived.
Defendant's motion for dlrected verdict, made at close of govemment's
évidence, was waived ; he thereafter introduclng évidence.
4. Ceiminal law <©=1134(4) — Refusal of new tbial not beviewablb.
Buling of trial court on motion for new trial Is not revlewable in the
Circuit Court of Appeals.
In Error to the District Court of the United States for the Eastem
District of Arkansas ; Jacob Trieber, Judge.
Paul E. Robins was convicted of a violation of Pénal Code, § 215,
and brings error. Affirmed.
Ralph Davis, of Memphis, Tenn., for plaintifF in error.
W. H. Rector, Asst. U. S. Atty., of Little Rock, Ark. (W. H. Mar-
tin, U. S. Atty., of Hot Springs, Ark., on the brief), for the United
States.
Before CARLAND and STONE, Circuit Judges, and EL,L,IOTT,
District Judge.
CARLAND, Circuit Judge. The plaintifï in error, hereafter called
défendant, was convicted and sentenced upon the first count of an in-
^ssFor otber cases see same copie & KliT-KUMBER in aU Key-Numbered Digesta & Indexes
THE FOBDB 127
C262 P.)
dictment which charged a violation of section 215, Pénal Code (Act
Cong. March 4, 1909, c. 321, 35 Stat. 1130 [Comp. St. § 10385]). A
demurrer to this count was overruled, and this ruling is assigned as
error.
[1] Counsel for défendant has fallen into error in assuming that
section 215 of the Pénal Code is the same as the old section 5480, Unit-
ed States Rev. Stat. The cases cited in support of the contention that
the indictment must charge that the scheme to defraud was to be ex-
ecuted by opening or intending to open correspondence with some per-
son or persons through the post office establishment of the United
States, or by inciting some person to open communication with the
writer, are no longer the law in this respect. United States v. Young,
232 U. S. 155, 34 Sup. Ct. 303, 58 L. Ed. 548; United States v. Max-
ey (D. C.) 200 Ped. 997; United States v. Goldman (D. C.) 207 Fed.
1002; United States v. Young (D. C.) 215 Fed. 267. In United
States V. Young, supra, the Suprême Court said,
" • • • The éléments of an offense under section 215, P. O., are (a) a
Bcheme devised or intended to be devised to defraud, or for obtalning money or
property by means of false pretenses, and (b) for the purpose of executiug
such scheme or attemptlng to do so, the placing of any letter In any post office
of the United States to be sent • • • by the post office establishment."
[2-4] We hâve no doubt that the first count charged an offense un-
der the statute. The sufficiency of the évidence to sustain the verdict
was not raised in the trial court and may not be urged hère, unless in
our discrétion we décide so to do. We do not think that this is a case
where our discrétion ought to be exercised in favor of the défendant.
The motion for a directed verdict made at the close of the évidence
for the United States was waived by the défendant in introducing évi-
dence, and the motion was not renewed at the close of ail the évidence.
The ruling of the trial court on motion for a new trial is not review-
able hère.
Judgment affirmed.
THE FORDB.
(Circuit Court of Appeals, Second Circuit. Dtecember 10, 1919.)
No. 64.
Collision <ê=>74 — ^Pkestjmption a&ainst dkiftee not bebutted.
Evidence, If not affirmative proof of négligence of vessel, whlch, in a
harbor, dragged anchor and drifted agalnst another anehored vessel,
held not to rebut presumption agalnst It; the only v?atch, at nlght, In
threatenlng weather, belng a landsman, and no one else belng called tlll
It v?as too late to put out the second anchor to prevent damage.
Appeal from the District Court of the United States for the East-
ern District of New York.
Suit in admiralty for collision by the Neptune Line, Incorporated,
against the steamship Forde, her engines, etc.; H. Kuhnle, claimant.
Decree for libelant, and claimant appeals. Affirmed.
igssFoi other cases see same toplc & KBY-NUMBER in ail Key-Numbered DIeests & Indexes
128 262 FEDERAL REPORTER
Haight, Sandford & Smith, of New York City (Henry M. Hewîtt, of
New York City, of counsel), for appellant.
Foley & Martin, of New York City (Geo. V. A. McCloskey, and
William J. Martin, both of New York City, of counsel), for ap-
pellee.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
HOUGH, Circuit Judge. On the night of December 13-14, 1917, the
steamship Forde lay at anchor on Red Hook Flats, New York Harbor.
Libelant's barge Pittston was similarly anchored at a distance which we
find to hâve been nearly 900 feet. The wind was from northeast to
east ail the 13th, and until about 3 a. m. on the 14th, with an hourly
movement never above 39 miles, until between 2 and 3 of the 14th,
when it rose to 41 ; maximum velocities exceeding 29 miles occurred
in every hour but one after 5 p. m. on the 13th. Snow began shortly
after noon of the 13th, and fell continuously until 2 :20 a. m. of the
14th, when it turned to sleet, and so continued for about an hour.
When to this undenied description of most unpleasant weather is
added the statement of the Forde's master that he looked at his barom-
eter during the evening of the 13th and it was not "very low," we
accept the testimony for libelant which describes the night as "threat-
ening."
Certain it is that libelant's master stayed up ail night watching
events, while the Forde's officers (who were the only crew aboard
her) went early to bed, leaving as sole anchor watch a landsman (har-
bor watchman) whose duty, as described by himself, was to "keep
my eye out that nothing is molested or interfered with while the men
are sleeping." At about 3 a. m. of the 14th the wind shifted to north-
west and blew with a maximum velocity of 88 miles, so that the total
movement between 3 and 4 a. m. was Ti miles. In this hurricane the
Forde dragged her anchor, and drifted into collision with the Pittston,
inflicting the injury for which this action was brought.
Cases of this kind start with the presumption against the drifting
vessel stated in The Louisiana, 3 Wall. 164, 18 L. Ed. 85, and since
it is not claimed, in this court that the Pittston in any way contributed
to disaster, the inquiry is narrowed to the question whether the Forde
has affirmatively shown that she was the helpless victim of vis major.
That the storm was violent is admitted; that the watchman on the
steamer did as he was told, and called the officers when he thought cir-
cumstances required it, is proven ; but it is also proven by the Forde's
own testimony that in threatening weather her deck was left with no
one on it to start the second anchor, and the officers did not get on
deck and do that obviously necessary act until the vessels were, if not
in actual contact, so close that damage was inévitable.
We think such testimony, if not affirmative proof of négligence,
wholly fails to rebut the presumption against drifters ; and when there
is added thereto the fact that the Pittston, similarly situated, put out
her second anchor over an hour and a half before collision, we think
claimants hâve failed to justify their conduct. We hâve not referred to
THE MARTANNB 129
(262 P.)
évidence tending to show that the Forde's second anchor was not in
condition to be effective, and that the barometer was giving far more
waming of coming trouble than the steamship master admitted. On
thèse points the District Judge made no definite finding, and we think
the resuit below sustainable, without expressing our own opinion
thereon.
Decree affirmed, with costs.
THE MARYANNB.*
(Clrcalt Court of Appeals, Second Circuit Deoember 10, 1919.)
No. 15.
Mabitime liens ®=»70 — Deceee fob cost or befaibs aitibmed.
Decree awarding libelant a lien for amount of Its claim on a quantum
m«ruit for work done on a steamship affirmed.
Appeal from the District Court of the United States for the East-
ern District of 'New York.
Suit in admiralty by the Ramberg Iron Works against the steam-
ship Maryanne ; Maryanne Shipping Company, claimant. Decree for
libelant, and claimant appeals. Affirmed.
Bullowa & BuUowa, of New York City (H. L. Cheyney, of New
York City, of counsel), for appellant.
Foley & Martin, of New York City (G. V. A. McCIoskey and James
A. Martin, both of New York City, of counsel), for appellee.
Before WARD, ROGERS, and MÂNTON, Circuit Judges.
PER CURIAM. We agrée with the District Court that the work
was not done on the crédit of the owners of the steamer, and therefore
the libelant had a Hen under the act of June 23, 1910 (Comp. St. §§
7783-7787).
The libel was on a quantum meruit for $17,175.35, but it was admit-
ted at the trial that $6,053 of the last work done had been paid, so
that only the sum of $11,122.35 was in dispute. Of this work the
amount of $5,368 was done under a contract which provided "ail
work and material furnished to be satisfactory to your marine superin-
tendent." The balance of the claim was for extra work to which this
clause did not apply. The work called for by the contract having been
completed, the libelant could sue upon a quantum meruit, and, though
the clause as to satisfaction still govemed, it was not made, as is often
the case, a condition précèdent of payment. It enabled the claimant to
show just which part of the work and materials was not satisfactory
to its marine superintendent, but no such dissatisfaction was proved.
The évidence convinces us that the agents for the steamer knew ail
about the extra work, and approved of it. When the bill was present-
ed, the only objection they made was that their marine superintendent,
Haslam, must go over it before it was paid. He was called as a wit-
^ssFor other cases see same topio & KEY-NUMBBR In ail Key-Numbered DlgeBts & Indexe»
262 F. — 9 «Certlorari denied 251 U. S. — , 40 Sup. Ct. 345, 64 tn Ed. — .
130 262 FEDERAL REPORTER
ness before the commissioner, and did not express any dissatisfaction
with the work and materials, but only with the charges for the extra
work.
The libelant's course of business was that every night the foremen
hand into the office time sheets with the names of the men, and the
times they worked, and sheets of the material used. The foremen tes-
tified that they knew the facts and that their reports were correct.
Thèse were checked up in the office with the material that left the
shop, and summaries of the amount of time and of the material were
entered on yellow sheets which were produced. The original time and
material reports had been destroyed in accordance with the usual
course of business so that no fraudulent intent is to be inferred. The
proof is within Mayor v. Second Avenue R. R. Co., 102 N. Y. 572,
7 N. E. 905, 55 Am. St. Rep. 829. The court below found the charges
reasonable and we see no reason for differing.
The decree is affirmed.
WTSONG & MILES CO. et al. v. BANK OF NORTH, AMBBIOA,
(Circuit Court of Appeals, Fourth Circuit. November 4, 1919.)
No. 1738.
Banks and banking <ê=»270(7) — Usuet not défense ob countebclaim in
ACTION BT national BANK.
Where usurlous Interest bas been taken by a national bank, the remedy
given by Rev. St. g 5198 (Comp. St. g 9759), by an Independent action to
recover the usurlous payments is exclusive, and the claim cannot be
set up by way of défense or counterclaim in an action by the bank.
In Error to the District Court of the United States for the West-
ern District of North Carolina, at Greensboro ; James E. Boyd, Judge.
Action by the Bank of North America against the Wysong & Miles
Company and others. Judgment for plaintifï, and défendants bring
error. Affirmed.
Thomas J. Jérôme, of Greensboro, N. C. Qerome & Scales, of Greens-
boro, N. C, on the brief), for plaintiffs in error.
A. B. Kimball, of Greensboro, N. C. (King & Kimball, of Greens-
boro, N. C, on the brief), for défendant in error.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
KNAPP, Circuit Judge. In this suit by a national bank on a prom-
issory note for $9,000, dated January 4, 1918, the answer allèges, "by
way of cross-action or counterclaim," that on previous notes given for
loans by plaintifï, running through a séries of years and aggregating
a large sum, défendant has paid plaintifï usurious and illégal interest
to the amount of $6,941.48, and demands judgment against plaintifï
for double that amount. The court below on the pleadings dismissed
the "cross-action or counterclaim," and ordered judgment for plaintifï
for the fuU amount of the note, with interest from its date, and de-
^csFor otber cases see same toplc & KET-N0MBER in ail Key-Numbered DIgests & Indexes
BELL & HOWELL CO. V. BLISS 131
(262 F.)
fendant brings the case hère on writ of error. The only question \o
consider is whether the facts alleged are available to défendant in this
action.
The liabjlity of a national bank for taking usurious interest is fixed
and defined in the National Banking Act (section 5198, U. S. Revised
Statutes [Comp. St. § 9759]), as follows:
"The taking, recelving, reserving, or charging a rate of interest greater
than is allowed by the preceding section, when knowingly done, shall be
deemed a forfaiture of the entire interest which the note, bill, or other évidence
of debt carries wlth it, or wliich bas been agreed to be paid thei-eon. In case
the greater rate of interest has been paid, the person by whom it has been
paid, or his légal représentatives, may recover back, in an action in the nature
of an action of debt, twice the amount of the interrest thus paid from the
I association taking or receiving the saine: Provided such action Is commenced
within two years from the time the usurious transaction occurred."
Other than this there is no liability, for state statutes of usury are
without application. Farmers' & Mechanics' Nat. Bank v. Dearing,
91 U. S. 29, 23 L. Ed. 196. And this liability is enforceable only in a
suit against the bank to which the unlawful interest has been paid.
Barnet v. National Bank, 98 U. S. 555, 25 L. Ed. 212 ; Hazeltine v.
Bank, 183 U. S. 132, 22 Sup. Ct. 49, 46 L. Ed. 117; Schuyler Nat.
Bank V. Gadsden, 191 U. S. 451, 24 Sup. Ct. 129, 48 L. Ed. 258. In the
last-named case the Suprême Court says :
"This résulta from the prlor adjudications of this court, holding that,
vfhere usurious interest has been paid to a national bank, the remedy afforded
by section 5198 of the Revised Statutes is exclusive, and is conflned to an
independent action to recover such usurious payments."
Thèse décisions cover the instant case and conclusively réfute de-
fendant's contention. Its answer sets up no facts which are available
as a défense or counterclaim, and the court below was therefore right
in rendering judgment for plaintiff on the pleadings.
Aiiirmed.
BELL & HOWELL CO. v. BLISS et al.
(Circuit Court of Appeals, Seventh Circuit. October 7, 1919. On PeUtion for
Rehearing, December 11, 1919.)
No. 2701.
1. Patents <S=3211(3) — Invaudity of patent no défense to action on li-
CE»fSB CONTBACT.
An exclusive licensee of the right to use a patented machine, the ma-
chines to be made and suppUed by the Ucensor for stipulated payments
during the term of the contract, cannot dispute the licensor's title, and it
is no défense to an action on the contract that the patent Is invalid.
2. Appeal and ebbob i&=5ll76(2) — Couet can dismiss apfeal fbou inteb-
LOCUTOBY OBDEB.
An appellate court has power on a proper showing to direct dismissal
of a blU, on an appeal from an order grantlng a preliminary injunction.
3. Action <^=>8 — Attempt to misuse powebs or couet to delat action in
STATE COUBT.
A suit for infringement against the ovraer of another patent and it»
exclusive licensee will not be entertained by a court of equity, where the
<g=>For other cases see same toplc & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
132 262 FEDERAL RBPOBTÏIB
patent sued on was bought by the llcensee défendant, and the suit eom-
menced by hls direction and at hls expense tn the name of a dummy
complainant, who has no interest therein, for the sole purpose of de-
feating or delaying actions brought In a state court by the licensor to
recover sums due under the llcense contract. .
4. Equiït ®=»e5(l) — Maxim of clean hands.
The nile of equlty, that a complainant must come wlth clean hands, la
not a matter of défense primarily ; but the courts apply it because of
the interest of the public, and not as a favor to a défendant.
On Pétition for Rehearlng.
5. Patents <S=>286 — Joint owheib kat not bb sued by otheb paet owner
fob infbingement.
A joint owner of a patent, who has the right to use the same, canne t bo
sued for its Infringement by another part owner. •
Appeal from the District Court of the United States for the East-
ern Division of the Northern District of IlUnois.
Suit in equity by Donald M. Bliss against the Bell & Howell Com-
pan}'' and George K. Spoor. From an order granting a temporary in-
junction, défendant Bell & Howell Company appeals. Reversed, and
bill ordered dismissed.
Appellant entered into a contract wlth appellee Spoor, whereby the latter
secured the exclusive rlght to use, for a perlod of flve years, a certain ma-
chine that embodied a patent held by appellant. It was also agreed that
appellant would sell as many machines for $400 each as the licensee might
reciuire. In considération thereof Spoor obligated hlmself to pay $140,000,
in quarterly installments of $7,000 each. Spoor, who was the sole owner of
the Essanay Film Manufacturing Company, a fllm-making Company, pald the
flrst four Installments, but thereafter defaulted. An action was thereupon
eommenced, and a judgment rendered against Spoor in the Illinois state
court for $28,000. An appeal was taken therefrom and Is still pending. At
least two other actions were Instituted as varions installments became due.
While thèse actions were thus pending, appellee Bliss, the sole complainant,
brought this suit against appellant and Spoor, alleging infringement of the
so-called Schneider patent, also covering a fllm-making machine; the usual
relief being sought. Briefly stated, the theory of the Bliss suit was that the
Schneider patent was prior to and a full anticipation of the Bell & Howell
patent; that the latter patent was therefore void, and machines made there-
under by appellant and used by Spoor infringed the Schneider patent Spoor
flled a cross-bill, designated a counterelalm, against appellant, settlng forth
hls contract with appellant, assertlng that, if the patent to appellant was in-
valld, then this contract was void, and in hls prayer for relief sought an
injunetional order restraining appellant from prosecuting its actions in the
Illinois courts, also praying that the contract between hlm and appellant be
declared null and void, and demanding judgment for the $28,000 and interest
previously paid.
Appellant by its answer charged appellees wlth a conspiracy to hinder and
delay the collection of the $28,000 judgment, as well as the prosecutlon of the
other actions, and, further charged that the bill of complaint was prepared at
the instigation of Spoor; that the so-called Schneider patent was purchased
pursuant to an agreement between Spoor and Bliss to assist Spoor in defeat-
ing the collection of the amount due appellant under the aforementioned con-
tract.
After issue was joined, appellant moved to dismlss the suit because Bliss
"improperly and collusively Instituted the cause for the purpose of creating
a case cognizable in said United States District Court," and for the further
reason "that the plaintifC, Donald M. Bliss, did not come Into court with clean
^isFor «ther cases see same toplc & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes
BELL & HOWELL 00. V. BLISS 133
(262 P.)
hands, but had been guilty of Inlquity touching the matters and things charg-
ed in his bill."
Counsel for Bliss moved to strike from appellant's answer the paragraphs
eharging an unlawful conspira cy between Bliss and Spoor to procure the
tJchneider patent to hinder and delay the collection of the royalties due un-
der the license contract. Before the hearing was closed, appellant flled addi-
tional reasons in support of its motion to dismiss; it being urged that Bliss
was only a nominal party, had no interest in the subject-matter of the suit,
and that lie and one Thompson, agent of Spoor, were guilty of such "iniquity,
collusion, champerty, and maintenance" touching the matters eharged in the
bill as to require the court to deny ail relief. Both motions were referred
to a master, who heard ail the testimony and made a full report.
Upon thls report being flled, the court struck out the iwrtlons of ap-
pellant's answer complained of, denied appellant's motion to dismiss, and later
entered an order staying further action in the state court pending the appeal
from the first Judgment. Appellant on this appeal attacks, not only the In^
junctional order, but also the refusai of the court to dismiss the bill.
David K. Tone, of Chicago, 111., for appellant.
John M. Zane, of Chicago, 111., for appellee Bliss.
David Jetzinger, of Chicago, 111., for appellee Spoor.
Before BAKER, ALSCHULER, and EVANS, Circuit Judges.
EVANS, Circuit Judge (after stating the facts as above). [1] We
find no theory upon which we can sustain the order granting the in-
junction. The agreement which called for the payment of $140,000,
to recover an installment of which appellant brought this action in
the State court, was a patent license contract. The two determining
paragraphs are :
"The party of the flrst part hereby gives and grants to Ihe party of the
second part the exclusive right to use and to hâve used the said step print-
ing machine as embodied in the aforesaid letters patent and applicationa,
viz." etc.
"The party of the fécond part hereby agrées to pay to the party of the
flrst part for the exclusive right to use the step printing machines as herein
granted the aggregate surn of one hundred and forty thousand dollars ($140,-
000.00) conslsting of a yearly royalty of twonty-eight thousand dollars (Ç28,-
000.00, payable in equal quarterly Installments of geven thousand dollars
(?7,000.00)," etc.
Other provisions calling for the sale and upkeep of the machines
at a stipulated price (in no way involved in any of the state court ac-
tions) do not affect the relation of the parties as licensor and licensee.
Such being the position of the parties, Spoor cannot dispute appel-
lant's title. He is estopped by his contract. Chicago & Alton Ry. Co.
V. Pressed Steel Car Co., 243 Fed. 883, 156 C. C. A. 395 ; Siemens
Halske Elec. Co. v. Duncan Elec. Co., 142 Fed. 157, 73 C. C. A. 375.
It therefore follows that, even though Bliss were successful in this
suit in defeating appellant's patent, no benefit would inure thereby to
Spoor in any of the pending state couit actions. He still would be
liable on his contract for thèse unpaid installments. A reversai of the
injunctional order necessarily follows.
[2] Appellant, however, also asks us to dismiss the suit for the va-
rious reasons assigned. But our right to so dismiss, even though the
injunctional order be vacated, is challenged by appellee, who urges that
134 262 FEDERAL REPORTER
on appeal from an interlocutory injunctional order this court is with-
out authority to direct a dismissal.
While many cases may be found where the appellate courts refused
to consider the question of dismissal (and for good reasons in those
cases), the question of the right to dismiss upon a proper showing is
not debatable. Smith v. Vulcan Iron Works, 165 U. S. 518, 17 Sup.
Ct. 407, 41 L. Ed. 810; In re Tampa Suburb Railroad Co., 168 U. S.
583, 18 Sup. Ct. 177, 42 L. Ed. 589.
Especially are we justified in considering the motion to dismiss, on
the présent appeal, for the facts upon which dismissal is asked also
necessarily bear upon the question of the alleged abuse of judicial dis-
crétion in granting the injunctional order.
[3] Whether we should order a dismissal of the suit, therefore, dé-
pends upon the particular facts and circumstances of this case, for a
study of which we must more closely examine the findings of the master
and the testimony in support thereof. That thèse findings so made
are amply supported by tiie testimony we are fully satisfied. From
the master's report it appears :
That af ter appellant had obtained its first judgment and pending ap-
peal by Spoor, and after other actions had been instituted against him,
Spoor sent his associate, Thompson, to New York to purchase the so-
called Schneider patent, for which purpose Spoor advanced $6,500;
that such patent was acquired for the avowed object of instituting a
suit against appellant, which suit was to be used to def eat or delay ap-
pellant's actions in the state court or to force a compromise of thera ;
that Thompson, to more effectively accomplish this object, caused the
assignment of the Schneider patent to run to one Bliss, plaintiff in this
suit, who was the innocent tool selected to carry out this purpose ; that
Bliss has no real interest in the patent, and never has had any ; in f act,
he never hired an attorney to commence suit, nor paid any of the fées,
has no voice in the management of the litigation, and is indiffèrent to
the outcome, frankly stating that Thompson agreed to pay ail the ex-
penses of the litigation. In short, Bliss stated that he never knew a
suit had been commenced in his name, and was ignorant of the contents
of the bill as filed.
That this conduct is such as to justify a déniai of ail relief and a
dismissal of the bill can hardly be seriously questioned. The conclu-
sion that the présent suit is for the sole purpose of hindering and de-
laying the proceeding in the state court is most amply supported by
the testimony. Nor can the jurisdiction of the state court, upon the
facts disclosed and for the relief sought, be questioned. The présent
suit, then, bJuntly expressed, was but a means whereby Spoor, hard-
pressed in the state court, using a dummy (Bliss) to conceal his own
identity, sought to do indirectly and deceptively what he could not do
directly and openly — interfère with the orderly proceedingn of the state
court. Such action on his part is little less than contempt of that court.
Coram v. Davis (C. C.) 174 Fed. 664; Lord v. Veazie, 49 U. S. (8
How.) 251, 12 L. Ed. 1067. That this court should not lend itself to
such a purpose, or its aid to such a resuit will, of course, be at once
conceded.
BELL & HOWELL CO. V. BLISS 135
(262 F.)
[4] The complainant, entering a court of equity, must come with
clean hands. Nor is this court, as argued by counsel for appellees, lim-
ited, in applying this maxim, to a case where the iniquitous action is
one of whicii the moving party may personally complain. The rule
thus invoked need not be pleaded at ail. In f act, it is net a matter of
défense primarily. Courts apply it, not to f avor a défendant, but be-
cause of the interest of the public; courts act sponte sua. 10 R. C.
L,. 390; Memphis Keeley Institute v. Leslie E. Keeley, 155 Fed. 964,
84 C. C. A. 112, 16 1.. R. A. (N. S.) 921 ; Weeghman et al. v. Killifer
et al., 215 Fed. 289, 131 C. C. A. 558, L. R. A. 1915A, 820; Larscheid
V. Kittell, 142 Wis. 172, 125 N. W. 442, 20 Ann. Cas. 576.
It may be conceded that the naked légal title to the Schneider patent
is sufficient to support a suit thereon by Bliss, but this absence of real
interest becomes most material when it further appears that the suit is
thus instituted to conceal the identity of the real party and the real ob-
ject of the litigatiotL
Another reason in support of the conclusion hère reached appeals to
us as most persuasive. The real parties plaintiff in this suit are Spoor
and Thompson. Confessedly, Bliss only holds the title for them. Upon
the testimony before the court, we may not he able to exactly define
the précise interest of each; but it affirmatively appears that the two
together are the real owners of the Schneider patents. Placing them,
then, in their true position, as we are required to do, viz. as complain-
ants in this suit, with the appellant as défendant, we hâve the anomalous
situation of Spoor and Thompson seeking an injunction against appel-
lant for continued infringements committed by Spoor and Thompson.
If Spoor and Thompson hâve any remedy at ail, it is not in equity.
Future infringements at any time may be stopped by the complainants.
If Spoor and Thompson cease using machines, and order no more from
appellant, then no further infringement will occur. For past infringe-
ments complainants hâve their remedy at law.
Equity intervenes in patent infringement suits to prevent a multiplic-
ity of actions. Injunctions will be denied, and complainants relegated
to their actions at law, whenever the proof fails to show threatened
future infringements by the défendant. In the présent suit, Bell &
Howell infringe only when requested by Spoor and Thompson, the real
complainants. Certainly complainants cannot complain of their own
conduct, or of actions induced by their conduct.
If this conclusion results in a loss of some or ail of their rights under
the contract with appellant, then their remedy, if any they hâve, must
be based upon or arise out of tlie contract. This court will not uphold
the présent suit, because perchance some one of the parties whose in-
terest is adverse to.appellant has, or claims to hâve, an unstated cause
of action against appellant, arising out of a différent and distinct state
of facts.
The order granting the injunction is reversed, and the cause remand-
ed, with direction to dismiss tl e bill ; the dismissal, however, to be with-
out préjudice to the real parties to institute any suit or action that they
may be advised exists in their favor.
138 262 FEDERAL REPOKTBB
On Pétition for Rehearing.
In support of a pétition for rehearing, counsel for Spoor criticizes
that portion of the opinion wherein the court says :
"Another reason In support of the conclusion hère reached appeals to us
as most persuasive. The real parties plaintiff in this suit are Si)oor and
Thompson. Confessedly, Bliss only holds the title for them. Upon the testi-
mony before the court, we may not be able to exactly deflne the précise inter-
est of each; bût it afflrmatively appears that the two together are the real
owners of the Schneider patent. Placing them, then, in their true position,
as we are required to do, viz. as complalnants In this suit, with appellant as
défendant, we bave the anomalous situation of Spoor and Tliompson seeking
an injunctlon against appellant for contlnued infringements commltted by
Spoor and Thompson. If Spoor and Thompson hâve any remedy at ail, It ia
not in equity ; for their infringement at any time may be stopped by the com-
plalnants. If Spoor and Thompson cease using machines, and order no more
from appellant, then no further Infringement will occur. For past infringe-
ments complalnants hâve their remedy at law."
This statement is criticized, because Spoor and Thompson are said
to be the infringers ; it being claimed that Thompson is no party to the
infringement. This criticism of the statement of fact seems to be well
taken. While Spoor testified that Thompson worked for the Essanay
Company, owned by Spoor, and was to be paid for film development by
"the machine" at a certain rate per foot, it does not appear that "the ma-
chine" referred to was the Bell & Howell machine. From the entire
record we think it is more correct to conclude that the development
work carried on by Thompson at the Essanay plant was by a machine
other than the Bell & Howell machine. But infringement by Spoor, in-
stead of by Spoor and Thompson, does afford justification for a change
in the conclusion reached.
[5] Counsel urge that, even though the Schneider patent is owned by
Spoor and Thompson as tenants in common, Thompson may enjoin fu-
ture infringement by Spoor, citing Herring v. Gas Consumers' Ass'n (C.
C.) 9 Fed. 556, which supports his position. In that case the court says :
"Oan a part owner Infringe the common patent and eseape ail llability?
* ♦ * Se has, by virtue of the joint oivnership, a right to use the patenta-
but he has no right, more than a stranger, to infringe the same. If there is
an Infringemert, the right of recovery is In the party wronged. AU the joint
owners should ordinarUy be parties plaintiff; but, if the wrongdoer is the one
who is guilty to the damage of the other joint owner, the latter should not
be left remediless. As to such Infringement they are strangers."
The reasons thus given for the décision are not at ail persuasive. If
a tenant in common, by virtue of the joint ownership, "has a right to use
the patent," as conceded in this opinion, we are at an utter loss to un-
derstand why "he has not the right to infringe" the same. The con-
trary conclusion is supported by numerous authorsties. Among them
are several décisions by this court. Walker on Patents (3d Ed.) § 294 ;
Aspinwall Co. v. Gill (C. C.) 2,2 Fed. 697; Pusey & Jones Co. v. Miller
(C. C.) 61 Fed. 407; Blackledge & Weir v. Craig Mfg. Co., 108 Fed. 71,
47 C. C. A. 212; Drake v. Hall, 220 Fed. 905, 136 C. C. A. 471 ; Central
Brass & StampingCo. v. Stuber, 220 Fed. 909, 136 C. C. A. 475.
While this was but one of the reasons assigned in the opinion in sup-
port of the reversai of the order entered in the District Court, and the
K. LEWALD & CO. ▼. BARNBS IST
(262 F.)
reversai might well hâve rested upon the other reasons there set forth,
we embrace the opportunity of correctin^ the opinion so far as we find
it in error, and at the same time dispose of the contention in support
of the pétition for rehearing.
The pétitions for a rehearing are denied.
F. LEWALD & CO. V. BARNES.
(Carcult Court of Appeals, Seventh Circuit. October 7, 1919. Rehearing
Denied December 5, 1919.)
No. 2714.
Patents <S=328 — Poe cott buttons not iNFBiNaED.
The Bamey patent, No. 885,135, for separable cuff link buttons, heti
not infringed.
Appeal f rom the District Court of the United States for the Eastern
Division of the Northern District of Illinois.
Suit in equity by C. Clarence Barnes, trustée, against F. Lewald &
Co. Decree for complainant, and défendant appeals. Reversed.
Edward Rector and Walter H. Chamberlin, both of Chicago, 111.,
for appellant.
Laurence A. Janney, of Chicago, 111., for appellee.
Before BAKER, ALSCHULER, and EVANS, Circuit Judges.
ALSCHULER, Circuit Judge. The appeal is from a decree finding
infringement of United States patent No. 885,135, 1908, to Barney
relating to separable cuff link buttons. Infringement is the sole issue.
Figures 1, 2, and 3 of the patent are:
138 262 FEDERAL BBPOETEB
Flg. 1 shows the button in position, the inner flanges having heen
passed through the button holes of the cuflFs leaving the button faces
B, B' in position, the Connecting link flexibly holding the two button
members in relatively similar position to accommodate the inchnation
of the cuff ends m, m. In Fig. 2 link r, r is mounted revolubly in the
left button member of the figure, its révolution being effected by the
small cross-piece 1, the head a' of the free end of the link being in-
serted through a slot in the other button member, and by means of a
quarter tum of the link held by engagement with the inner side of the
slot plate, and withdrawable therefrom only by turning the link to
bring the head in alignment with the slot. A pressure spring keeps
the link from automatically turning, and the revolving of the button
members themselves (whereby the link head might become withdrawn
and the button members separated) is prevented by the stiffness of the
cuflf which holds in place between the edges of the button-holes the flat
Connecting shank between the two flanges of each button member.
Such buttons are useful in that the separate members may be insert-
ed through the buttonholes, and the cuff while on the wrist may be
readily fastened by the opposite hand, and unfastened without need of
removing one of the button members from the buttonhole, and there is
no likelihood when the cuff is not buttoned together, of the separate
parts dropping from the cuff.
Concededly the device which the patent describes is useful only in
a stiff cuff, with the stiff buttonhole edges of which, as indicated, the
device must coact in order to be effective. That this is contemplated
by the patent is further manifest from that part of the spécification
which reads:
"Of course the saine resuit (bringlng the head of the link In alignment with
the slot so that by revolving the link the head may enter or be withdrawn from
the slot) may be attained by simply turning one or the other of the button
members B B' 90°, but this action is obviously Impracticable when they are
mounted in the buttonholes of the starched cuff."
Admittedly the device of the patent could not be used for soft cuffs,
the buttonholes of which would afford no résistance to the turning of
the button members, and their conséquent f alling apart ; and when in
about 1910 soft cuffs were coming more in vogue, demand arose for a
separable link button for that use. The link of the then commercial
Barney button could not be so employed, nor was the spécial adapta-
bility of the described Barney device to the relative inclination of the
two ends of the stiff link cuff a factor in the soft cuff problem, where
there was no fixed relative inclination of the cuff ends calling for ad-
justability or flexibility as, between the two button members. There-
upon appellant brought out, and for some years has been making and
selling the alleged infringing button desîgned for soft cuffs and consist-
ing of two parts, each having an outside button head and an inner
flange, with a bail produced from the inner flange of one of the parts,
adapted to snap intq and out of a spring socket in the inner flange of
the other button part, the two parts being joined by the ordinary snap
joint thus formed, and being attached or separated by manual pres-
sure.
p. LEWALD & CO. V. BASNBS ^^^
(262 F.)
Claim 1 of the patent in suit is as follows:
"As an Improved article of manufacture a separable cuff llnk button, the
Bame comprising a pair of Independent button members each provlded with a
flxed shank terminating in a latéral flange or enlargement adapted to pass
through a buttonhole of the cuft and retain said member therein, a swinglng
coupling member or Itnk mounted on one of the button members and extending
lougitudlnally beyond its flange, and having the free end of sald link con-
structed to engage with the fellow button member for detachably securing
them together."
Appellant contends that its button is not within the purview of the
Barney conception, and that, even if claim 1 were literally readable
upon it, when construed in the hght of the prior art and the prob-
lem Barney undertook to solve, the claim cannot be held to cover ap-
pellant's device. Moreover, appellant insists that in its button there is
an entire absence of that élément in the claim set forth as "a swinçing
coupling member or link mounted in one of the button members." It
is appellee's contention that this élément of the claim is found in ap-
pellant's device in the adjustability of the parts by reason of the snap
joint not being absolutely rigid, but subject to more or less of move-
ment; that the claim itself does not require the link to swing in the
member upon which it is mounted, but that the swinging may take
place in the opposite member to which in use it is detachably secured ;
and that even if, by the terms of the claim, the link swings from the
member on which it is mounted, the rigidity of its mounting in appel-
lant' s button, and the swinging action in the opposite button member,
would be but a reversai of the opération of the parts, whereby no dif-
férent resuit is secured, and infringement would not be thereby
avoided.
Our study of the record convinces us that Barney was dealing only
with a problem of cufï buttons with détachable part, readily conform-
able to the surface of the stifHy starched link cuflf. He had to hâve such
mobility and flexibility of the two parts as would leave them in rela-
tively similar position, not controlling or influencing the shape or in-
clination of the cuflf, but conforming to the cufif surface. This is what
Barney described — ^button members which must hâve relatively similar
adjustability. Of course the old chain or link fastening between the
cufï buttons left the buttons to conform themselves to the position of
the cuflfs, and where the link was rigid to the buttons, the latter were
inclined at such angle as would conform approximately to the probable
inclination of the cufï. But Barney was trying to accomplish the same
resuit with buttons which might be readily joined or separated as indi-
cated, while the wearer has the cuffs on, and without likelihood when
separated of the parts dropping from the cuffs. It is manifest that if,
instead of the link swinging in the member in which it is mounted, it
had been rigid thereon, Barney's button would hâve been a failure for
use on stiff cuffs, in that whatever flexibility might hâve been secured
through the swinging attachment of the free end of the link to tlie
opposite side, there would be no adjustability of the member to which
the link was rigidly attached. If the link were attached rigidly at right
angles to one member, and there was mobility only with the opposite
member, it is apparent that the rigidly attached button would either
140 262 FEDERAL REPORTER
not lie flat against the cuff, or would force that end of the cuff either
forward or backward from the other end, so that the ends would not
be even.
The scope and law of the invention seem to be well indicated where,
referring to the Connecting Hnk, the spécification describes "a swinging
spring pressed rotatable central link or tongue mounted in one of said
front heads and extending longitudinally through its shank and back
head and being detachably connected in a yielding or flexible manner
with the back head of the other button member," thus indicating flex-
ibility and conformability at both ends of the link.
It seems that about 1910 Barney aiso went to work on the problem
presented by the soft cuflf, and he then brought out his types E, F, and
G, which were offered in évidence, and which some years later came
into commercial use; but it is to be noted that while in those types
he abandoned the revolubility of the Connecting link as described in
eacli of them he retained the élément of the Connecting link swinging
in the member on which it is mounted. It does not appear from the
évidence that this was necessary for the purpose of producing a but-
ton effective for soft cuffs, but whether Barney was or was not aware
of this, he still clung to the link which swung on the member on which
it was mounted, and as late as 1918 he licensed another model of,
soft cuff link button which is likewise swingingly mounted on one
member, the free end, as in appellant's button being joined to the other
member by a snap Joint. It does not appear that appellee ever con-
ceived or undertook to make a button wherein the link is rigidly held
by the member on which it is mounted.
Buttons composed of separable parts, each having two flanges for
inserting in différent garments or parts of garments, to be fastened to-
gether by the uriion of the button parts, are old. Newman (patent
227,700, 1880) shows a cuff button in two parts, each having two flang-
es, one part having a rigidly attached compressable protruding bail
to be pressed into a socket in one of the flanges of the other part. True
it was not used for so-called link cuffs, but for the ordinary cuffs with
overlapping buttonholes; and while the évidence does not show that
link cuffs were then in use, ail that would be required to adapt it for
the link cuff was to put a face on the under side. Indeed even this
was not necessary, for the faces need not be the same, being just a mat-
ter of choice. Appellant's device is far more nearly an adaptation of
Newman than of Barney. Newman's button as shown in his patent
would hâve served link cuffs, not so well as Barney's for the stiff cuffs,
but better for soft cuffs.
Buchanan (patent 12,020, 1902) and Marks (712,080, 1902) both
show what in principle is very much akin to appellant's button. They
are not stated to be cuff buttons, but they show what appear to be two
ordinary coUar buttons, the head of one constituting a bail or having
a rigidly attached bail to be inserted in a socket in the lower flange of
the other, whereby one of the parts being fastened into the lower end
of a détachable cuff, and the other into the wristband of the shirt, the
cuff is readily attachable and détachable by snapping or unsnapping;
the bail of one of the button parts into or out of the socket in thej
QETTY V. LATNE 141
(262 FJ
other. If such device were inserted in the huttonholes of soft cuffs
we would hâve the same resuit and the same possibiUties as with appel-
lant's button, the matter of shape or ornamentation of the faces net
involving invention.
We are satisfied that claim 1 of the patent in suit contemplâtes as
one of its essential éléments a link or coupling member which swings
in the buttori member on which it is mounted, and that appellant's de-
vice does not embody this élément or its équivalent, and it does not
therefore infringe.
The decree of the District Court is reversed, with direction to dis-
miss appellee's bill.
GETTY V. LATNE et aL
(Circuit Court of Appeals, Fifth Circuit January 5, 1920. Reliearlng Denied
February 18, 1920.)
No. 3384.
Patents ®=3328 — Patent for well mechanism valid, but not infeinged.
The Layne patent, No. 821,653, for well mechanism^ held valid, but not
entltled to the wide range of équivalents of a pioneer patent; also held
not mfringed.
Appeal from the District Court of the United States for the West-
ern District of lyouisiana ; George W. Jack, Judge.
Suit in equity by Mahlon E. Layne and others against Fred I. Getty.
Decree for complainants, and défendant appeals. Reversed.
R. E. Milling, of New Orléans, La., and Francis M. Phelps, of Wash-
ington, D. C, for appellant.
Paul Synnestvedt and Harvey h. Lechner, both of Philadelphia, Pa.,
Jesse R. Stone, of Houston, Tex., J. D. Wilkinson, of Shreveport, La.,
and Walter P. Armstrong, of Memphis, Tenn., for appellees.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges :
GRUBB, District Judge. This is an appeal from a decree of the
District Court for the Western District of Louisiana in favor of the
plaintiffs in the District Court, the appellees in this court, and against
the appellant in this court, who was the défendant in the District Court.
The effect of the decree was to sustain the validity of letters patent is-
sued to the appellee, Mahlon E. Layne, May 29, 1906, for a well mecha-
nism and numbered 821,653, and also to find that the défendant had
inf ringed the patent by a patented construction of his own. The same
patent has been twice heretofore passed on by this court, and its va-
lidity twice sustained. El Campo Machine Co. v. Layne, 195 Fed. 83,
115 C. C. A. 115; Van Ne?s v. Layne et al., 213 Fed. 804, 130 C. C.
A. 462. We think the défendant showed no sufficient reason for a
departure from our previous décisions sustaining the patent, and that
the District Court was correct in determining the question of its valid-
ity in favor of the plaintiffs.
(gssFoi other cases see s&me topic à KEY-NUMBER In ail Key-Numbered Digests & Indexes
142 262 FEDERAL REPORTER
The remaining question is that of infringement. The merit in
Layne's invention, protected by the patent sued on, was that it provided
a pump for deep wells, by avoiding the necessity of having a wide pit
at the top of the well, and so was capable of being used in drilled
wells, and those drilled narrowly and to a comparatively great depth.
Doing away with the wide pit at the top made it necessary that the ad-
justment and lubrication of the well mechanism be donc firom the sur-
face, instead of from the bottom of the pit. The problem that con-
f ronted L,ayne was to devise a mechanism that could be placed and kept
in position, oiled, and opéra ted frein the surface. This required ad-
justment, lubrication, and protection of the bearings and shaft, after
the well mechanism had been lowered into the drilled hole, and with-
out the necessity of the removal of it therefrom. The Crannell patent
was intended for use in a wide pit, into which descent was possible,
and so Crannell was confronted with no such problem. The limited
depth of the pit, in which the Crannell patent was to be used, made it
also unnecessary to use a jointed shaft and intermediate bearings.
Layne solved his problem by the use of a jointed shaft with inter-
mediate bearings, lubricated from the top to the bottom by gravity,
and protected from the water and sand of the well by being inclosed
in a casing, which excluded both sand and water from the bearings
and shaft. He accomplished its adjustment to vertical positions in the
well hole by suspending the shaft, pump and casing from the top of
the well, and by a .System of wedges holding the well mechanism in
position when adjusted. The suspending of the well mechanism from
the top also enabled Layne to keep the shaft in alignment through the
added stifïness given by the downward thrust of the weight of the
pump and shaft. This downward thrust also helped to effect the
closure at the lower bearing against the entrance of sand and water.
However, the spécifications of Ivayne's patent show that he relied upon
stufiîng boxes at the top and bottom of the shaft to effect the closure,
and to prevent entrance of water and sand, to the détriment of the
shaft and bearings.
The twentieth claim of the patent — that sustained in the case of Van
Ness V. Layne, supra — covered "the combination of a well casing, a
rotary pump therein, and a line shaft for the pump entirely closed off
from the water in the tvell." Validity was given this claim by defin-
ing a closed shaft to be one having the three functions of (1) aiding the
alignment of the shaft in the well casing ; (2) providing for lubrication
of the shaft and bearings ; and (3) protecting the shaft and bearings
from water and sand. The question of adjustment did not enter into
the discussion in that case. The closed shaft of the claim was restrict-
ed, as above stated, by referring it to the character of inclosed shaft
described in the spécifications of the patent. It was only by giving the
claim this restricted meaning, and limiting it to the description in the
spécifications, that the claim could be sustained. We must then look
to the spécifications to détermine the character of an inclosed shaft
covered by the Layne patent. The shaft there described was a jointed
shaft with top, intermediate, and lower bearings, means of adjustment
and fixation, means for lubrication, means for alignment in the well.
GKTTT V. 1.ATNK 1*3
C262 F.J
and means for preventing water and sand f rom reaching the shaft and
bearings. The Layne patent too nearly resembles the Crannell patent
to be called a pioneer patent, though it did accompHsh a révolution in
the well-driUing industry. Its merit was in adapting the Crannell type
of pump to a narrow and deep well hole, in a way that has been held
hy us to exhibit novelty. While the substitution of mère mechanical
équivalents for the means adopted by Layne could not avoid inf ringe-
ment of his patent, it is also true that the range of équivalents cannot
be enlarged upon the idea that his patent was a pioneer one in the pump
art. Its advance over Crannell prevented Crannell f rom being consid-
ered by us an anticipation, and was enough to show novelty, but it stops
there. The lyayne patent must rest, not upon the idea of closure, which
would not be patentable apart from the method by which it was ac-
complished, but upon the means of its accomplishment, as disclosed by
the spécifications of his patent. The means which he adopted to ac-
complish adjustment we are not hère concerned with, because the
Getty pump has no means of adjustment up and down in the well. It
is also true that the Getty pump cannot be held to infringe the means
that Layne used to keep his shaft properly aligned, since that was
accomplished by suspending the mechanism from the top of the well,
while Getty's pump mechanism receives its support by resting on the
bottom of the well.
That leaves remaining for considération the comparison of the re-
spective methods used by Layne and by Getty for lubrication and for
closure. Layne's method of lubrication was to put the oil in at the top
and to permit it to descend to each of the bearings, and remain stag-
nant within tlie shaft casing until ejected from the top after it had
become spent by air pressure through an air vent. When it was eject-
ed, it was replaced by clean oil from the top again. On the other hand,
the oil was confined at the bottom of the well by use of a packing or
stuffing box. Getty adopted a circulatory System of lubrication. By it
the oil was also introduced from the top, and descended to the lower
bearings by gravity. However at the bottom there was only a partial
obstruction to its exit, presented by a long sleeve bearing. Its passage
out from the shaft casing was automatic and continuons, so that there
was a constant and free flow of lubricant from the top of the line shaft,
throughout its length, and out through its bottom. This method was
claimed to be necessary to Getty's device, because wear on the upper
bearing required a continuons supply of fresh oil for its proper lubrica-
tion. Thèse f unctional différences between the stagnant and circulatory
Systems of lubrication prevent their being considered as merely mechan-
ical équivalents.
Layne, according to the spécifications of his patent, efïected his clo-
sure at the top and bottom of his shaft by the présence of stufifing boxes,
assisted by the effect of a downward thrust bearing and collar. In prac-
tice, La3me soon abandoned the use of packing boxes, substituting there-
for a long sleeve bearing and retaining the collar. The downward
thrust of the weight of the shaft and pump, together with the down-
ward pressure of the column of oil in the shaft casing, accomplished
his closure. While the pressure of the column of oil against the out-
144 262 FBDEBAL REFOBTEB
ward column of water is now urged by Layne as important in his means
of closure, it is true that it is not stressed, as such, in the disclosure
of his patent. Principal reliance is there placed on the use of stuffing
boxes. Getty's mechanism is f ree from any such closure devices, either
against the flow of oil outward or the flow of water inward, except
the long sleeve bearing, without either a collar or the advantage of
the downward pressure from the suspended apparatus. Getty relies
for closure upon the downward pressure of the oil column balancing
the upward pressure of the water column. His mechanism prevents
him from availing of packing boxes to effect closure, because they
would equally prevent the exit of the oil, which is a necessary feature
of his circulatory System. The same reason would prevent his using
a thrust hearing with a collar. In addition, the fact that his pump,
shaft, and casing are supported on the bottom of the well, and are not
suspended from ahove, deprives him of the downward thrust, due to
the weight of the apparatus as a means of closure.
We think Getty has accomplished closure and lubrication by means
so functionally différent from Layne's disclosure in his patent, that
they cannot be said to be mère mechanical équivalents, but rather dis-
tinct methods of attaining the same object; the object itself not be-
ing patentable. The mère fact that Getty's closure is not complète, or
not as complète and effective as that of î^ayne, is an unimportant fact.
The material différence lies in the fact that Layne's patent effects the
closure by physical obstructions, such as packing boxes and thrusts
bearings, aided incidentally only by the pressure of the oil column,
while Getty's partial closure is effected by balancing the pressure of the
column of water outside the shaft casing against the pressure of the
oil inside the casing, without the use of physical obstruction. The dif-
férence is not one without a reason, and adopted merely to avoid in-
fringement. It is made necessary by the différent method of support
and lubrication used by Getty from that disclosed in Layne's patent.
It is true that in the Van Ness Case this court stated that Van Ness
used the pressure of the oil column, and did not use packing boxes, to
effect closure. Van Ness, however, did suspend his well mechanism
from the top of the well, and did use thrust bearings and a collar to
help close the bottom of the shaft casing. The mechanism in the El
Campo Case, which was held not to infringe l,ayne's claims numher-
ed 4, 9, and 20, was one that was also supported at the bottom of the
well, instead of being suspended from the surface. Referring the
closed shaft of Layne to the description in the spécifications of his
patent, as we must do, we think the différences from Getty's mecha-
nism with respect to means of aJignment, lubrication, and closure are
so important that Getty's differing means should not be held to be
mechanical équivalents, and should not be held to infringe the closed
shaft of Layne's patent.
The decree of the District Court is therefore reversed, and the
cause remanded to that court for further proceedings in conformity
with this opinion ; and it is so ordered.
ZIDELL V. DEXÏEB 145
(262 P.)
ZIDELL V. DBXTER et al.
(Circuit Court of Appeals, Ninth Circuit. .Tanuary 5, 1920.)
No. 3389.
1. Patents <®=j28 — Absembling old éléments into single design constitdtes
invention.
The fact that tlie éléments of a design patent were old does net establisli
want of invention in assembling them.
2. Patents ©=5328 — Design patent fob childken's eompers valid.
The Zldell design patent, No. 52,720, for childien's rompers, held valid
and not infringed.
3. Patents (S==>252 — Design patent not infbinged by distinquishable vaei-
ATION or ELEMENTS.
Wliere a design invention consists only of bringing togetber old élé-
ments with slight modifications of forni, the invention is confined to
those modifications, and a person using tlie same éléments with his own
variations of form does not infiinge, if his design is reasonably distinguish-
able from the patented design.
4. Patents ®=5252 — Design patent fob children's eompebs not infbinged.
Design patent for children's rompers held not Infringed by varions gar-
ments, each of which had some, but not ail, of the éléments contained in
the patented design.
Appeal from the District Court of the United States for the South-
ern Division of the Southern District of CaUfornia; Oscar A. Trip-
pet, Judge.
Patent infringement suit by William I. Zidell against Mrs. Billie
Dexter, trading as the Billie Bumps Manufacturing Company, and
Arthur Letts, trading as the Broadway Department Store. From
that portion of the decree holding that certain garments did not in-
fringe (259 Fed. 582), plaintiff appeals. Afïîrmed.
Frederick S. Lyon and Léonard S. Lyon, both of Los Angeles, Cal.,
for appellant.
William R. Litzenberg, of Los Angeles, for appellee Broadway De-
partment Store.
Charles C. Montgomery and Victor R. McLucas, both of Los An-
geles, Cal., for appellee Dexter.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. The appellant brought suit for infringe-
ment of design patent 52,720, issued to the appellant on November 19,
1918, for "children's rompers." The court below held that the pat-
ent was valid, and that the défendant Letts had infringed by manufac-
turing and selling garments of the type described in the proceedings as
Exhibit No. 6, but had not infringed in the making and selling of cer-
tain other types of garments, known in the record as Exhibits No.
4, No. 5, and No. 8. From that portion of the decree the appellant ap-
peals.
[1] The patent was obtained without spécifications or description
other than drawings of the design, and it gives to the public no no-
tice that any particular élément or group of éléments of the design is
^:=>For other cases eee same topic & KEY-NUMBBR In ail Key-Numbered Digests & Indexes
262 F.— 10
14G 262 FEDERAL REPOKTEU
prédominant. On the face of the design tlie more promînent distin-
guishing features would appear to be (1) a square Dutch collar; (2)
the ornamentation of collar, wrist bands and knee bands; (3) a belt
with large buttons; and (4) the flaring or peg shape of the trousers.
The prior art is shown by the Verdi patent, No. 1,255,491, issued Oc-
tober 15, 1917, for a "child's garment," in which is shown a square
neck, short sleeves, flaring or peg-shaped skirts, and a belt, ail in gên-
erai resemblance to the appellant's design. Patent No. 47,447, issued
to Georgene Averill June 15, 1915, présents a combination of short
sleeves, belt, and peg-shaped trousers. Patent 51,674, issued to S. E.
Davis january 8, 1918, for "child's one-piece outer garment," exhibits
the gênerai features of the appellant's design, with the single exception
that the trousers are long and hâve not the peg shape. An advertise-
ment in a Los Angeles daily paper of May 25, 1917, displays a picture
of a one-piece child's garment called "Peggy Jeans," showing a square
neck, short sleeves, sleeve cuffs, and belt, and an advertisement in a
i,os Angeles paper of June 5, 1917, shows a garment called "Klever
Kiddie," with Dutch neck, short sleeves, with cuffs, and flaring trou-
sers, with gênerai peg effect. Other advertisements of the year 1917
display similar one-piece rompers with the Dutch neck, short sleeves,
sleeve cuffs, belts, and short trousers, the latter fuU, but not peg-
shaped.
It will thus be seen that there is nothing new in any of the features
of the appellant's design. He but brought together éléments that
were old and well known. Single pièce child's rompers with belts were
old. Square Dutch collars were old. Ornamental stitching was old.
Peg-shaped trousers were old. The fact that the éléments were old,
however, does not prove want of invention in assembling them into a
single design, and in view of the fact that the patent was granted, and
that the design was favorably accepted by the public, we are not con-
vinced that the court below was in error in sustaining the validity of
the patent.
[2-4] In a design invention, which consists only of bringing to-
gether old éléments with slight modifications of form, the invention
consists only in those modifications, and another who uses the same
éléments with his own variations of form does not infringe, if his
design is distinguishable by the ordinary observer from the patented
design. This is the conclusion deducible from the leading case of
Smith V. Whitman Saddle Co., 148 U. S. 674, 13 Sup. Ct, 768, 37 L.
Ed. 606. And in cases where, as hère, the éléments of the design are ail
old, and the design is illustrated by drawings only, it has been held
that in the absence of spécifications the patentée who combines the old
éléments must be held substantially to the design which he exhibits bv
his drawing. In Ashley v. Samuel C. Tatum, 186 Fed. 339, 108 C. C.
A. 539, it was held that in the absence of a spécification calculated to
secure to the patentée the prédominant feature of his device, with or
without ornamentation, the absence of ornamentation as shown in his
drawing must be considered an essential élément of the design, and it
is not infringed by another design which shows such surface orna-
mentation. In R. E. Dietz Co. v. Burr & Starkweather, 243 Fed. 592,
ZIDELL V. DEXÏER 147
(262 F.)
156 C. C. A. 290, the court said that when a spécification îs nied with
the drawing —
"it must be construed together wlth the clalm and drawing, as Is the estab-
lished rule in respect of other patents. The rules of interprétation are not
différent from those regulating other patents, and a design claim may (like any
other) be restricted to the spécifie form sliown.
And in Asliley v. Weeks-Numan, 220 Fed. 899, 136 C. C. A. 465, the
court said :
"The patentée having a patent with written spécifications relating to an
entirely new form of inkstand, he is entitled, not only to the exact design
shown in his drawing of the patent, but also to the protection of the court
against the making and marketing of inlistands which contain the dominant
features of the design described in the spécification."
As already shown, we hâve no means of knowing which, in the mind
of the inventor, was the prédominant feature of his design. It seems
obvious that one purchaser might be attracted by the shape of the col-
lar, another by the ornamentation stitched on the coUar, cuffs, and
knee bands, another by the belt with large buttons, and another by
the flaring effect of the trousers. The garment known as No. 6 has ail
of the features of the patented design, excepting that the ornamental
stitching is slightly différent, and the collar, instead of being made
square, is V-shaped. This the court held to be an infringement and
the ruling in that respect is not challenged by appeal. Exhibit 4 differs
from the patented design in that there is no ornamental stitching on the
Dutch collar or cuffs, and no belt with buttons, and it is distinctly
différent in the shape of the trousers, which, instead of flaring mid-
way, carry side pockets flaring at the top of the trouser legs. Exhibit
No. 5 has ail the features of the design patent, except that it is not a
single pièce garment and has no ornamental stitching, and has two front
pockets stitched upon the trouser legs. Exhibit 8 is similar to Exhibit
4, except that it has buttons upon the belt.
We do not think that the court below erred in holding that thèse
garments do not infringe. In determining the question of infringe-
ment, both the character of the design and the nature of the fabric
to which it is applied are to be taken into account. The différences
in designs, which under the patent law will avoid infringement, are
différences which will attract the attention of the ordinary observer,
giving such attention as the purchaser usualiy gives in buying articles
of the kind in question and for the purposes for which they are intend-
ed. The évidence shows that at and prior to the conception of this
design there were in use and on sale very many similar garments, with
variations in design so slight as to leave to the ordinary observer the
impression of a very gênerai resemblance, and we must assume that
to womankind, who are the purchasers in the main of this class of gar-
ment, thèse various coincident forms of garments were known, and
whether such purchasers would be deceived into taking the garments
which are alleged to infringe for a garment of the patented design
would necessarily dépend largely upon that gênerai knowledge. There
is no évidence that any purchaser has in fact been so misled.
The decree is affirmcd.
148 2C2 l^EDEItAL lïKPOETEK
A. KIMBALL CO. v. NOESTING PIN TICKET CO.
(Circuit Court of Appeals, Second Circuit. December 16, 1919.)
No. 74.
1. Patents <S=5l6 — Attkibutes of "invention" stated.
Wh.Ile patentable "Invention" Is net a term of légal art, or capable of
judicial définition, yet it is a means only, or tlie embodiment of the in-
ventive idea, and roerits the title, eveu if the want it meets is not appar-
ent until some préviens invention, Imperfectly satlsfying the more unl-
versal want, discloses the subordinate and narrower need.
X Patents <®=>328 — Fok pin ticket device valid.
The Thompson patent No. 1,252,862, for an improved pin ticket device
to be attached to textile and other articles offered for sale, held valid
against the contention that it did not disclose invention.
3. Patents ©=3l7 — When meciiakical skill beoomes inveniio.n stated.
As a mechanic is one who applies his trade by rule or rote, and only
uses what he leamed yesterday to do the work of to-day, it may become
invention, where a mechanic uses insight or foresight to couipreliend a
probiem, and uses even the learaing of yesterday to do new things in a
new way.
Appeal froni the District Court of the United States for the South-
ern District of New York.
Patent infringement suit by the A. Kimball Company against the
Noesting Pin Ticket Company. Decree for plaintif!, and défendant
appeals. Afifirmed.
Action Is upon patent 1,252,862, is.sued to J'^igene W. Thompson January 8,
1918. The subject of invention is a "pin ticket," whlch means a card or tag
intended to bear price marks or other descriptive matter, and afîlxed to arti-
cles offered for sale (usually textile), by means of a pièce of wire, so formed
as to présent a staple whose prongs pass through both card and cloth ; but the
base of said vrire staple is so formed and prolongea (at right angles to the
staple points) as to cmbrace (when bent) the conjoined edges of the pierced
cloth and card. The staple ends are then also bent over or back against the
rear face of the card.
Of the claims in suit, the sixth defines the invention in most gênerai terms,
and is as foUows :
"In a pin ticket having a plurality of round-pointed doublfr«hank pins form-
ed of a single pièce of wire, the wire between said pins engaging with the
ticket to form a support therefor, the shank of said pins passing through the
ticket, and the free ends of the wire being bent to engage with both surfaces
of the ticket to hold the pins in engagement therewith."
The seventh daim is not sufficiently différent to require quotation. The
court below found the patent valid and infringed ; défendant appeals.
Cyrus N. Anderson, of Philadelphia, Pa., and Walter K. Earle,
of New York City, for appellant.
Nathan Heard, of Boston, Mass., and Abr. A. Silberberg, of New
York City, for appellee.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). Ap-
pellant States that the only substantial question hère presented is va-
lidity; i. e. can invention be found in this "pin ticket"?
<g=For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes
A. KIMBALL CO. V. KOESTING TIN TICKET CO. Ui^
C262 F.)
We accept the statement, and shall endeavoi^ to answer the query,
without bolstering décision by dwelling on the presumption attaching
to grant of letters, or the admitted fact that défendant controls and
manufactures under another patent, over which priority was awarded
Thompson after a protracted interférence. Such proceedings assume
a belief in validity on the part of both contestants. Roth v. Harris,
168 Fed. 279, 93 C. C. A. 581.
[1] Invention, as we are instructed by the highest court, is not judi-
cially to be defmed ; i. e., it cannot be determiued as to Umit of mean-
ing. But many attributes may be marked. Thus patentable inven-
tion is a means only; it is the embodiment of the inventive idea (Cor-
rington v. Westinghouse, &c. Ce, 178 Fed. 715, 103 C. C. A. 479) ; and
even the smallest invention, if it merits the title, must meet an existing
want, yet that want, invoking invention, may never be apparent until
some previous invention, imperfectly satisfying the more universal
want, discloses the subordinate and narrower need (1 Rob. Pat. 134).
It is this thought that justifies, and indeed compels, study of the
prior art, as distinguished from anticipatory patents or uses. To
know, not only what the "more universal want" was, but how far and
by what means it had been supplied, is a process not seldom resulting
in the validation of modest inventions, and the destruction of many
of great pretense.
This indicates that "invention" is not a terni of légal art, like "com-
mon carrier" or "contingent remainder" ; nor can applicability be fixed
by Consulting dictionaries, while reports furnish, not précédents, but
only illustrations. What does connect the large word with the perhaps
small thing is évidence ; and litigations like this become studies of
facts, as varying in patent matters as in other human contests.
[2] This record shows that, trivial as the article seems (e. g.) to our-
selves, pin tickets hâve long been a widely used trade adjunct; also
that much effort has been expended to produce them cheaply in quan-
tity, yet affixable to a fabric's edge firmly and with ease, without prick-
ing the operator or injuring what is marked.
The "more universal want" has been and still is largely supplied by
the "Empire ticket," made under an expired patent (St. John, 340,-
961). The substantial différence between that ticket and Thompson's
device is that the prongs of the latter's staple are f ormed, not by cut-
ting a wire transversely ^nd making _ thereby a sharp point, but by
doubling the wire back on itself and so producing a smooth, blunt
point.
The Bayer reissue, 13,769, shows that making smooth pointed pins
by doubling a small wire on itself was known before Thompson ; no
more is claimed for it. But the tool which rapidly and cheaply makes
staple points by cutting wire may leave burrs or roughened edges,
which, though usually negligible, eut (e. g.) délicate silk.
Thus the "narrower need" is disclosed, and Thompson is confessedly
the first to supply it. Others hâve tried to ; probably Bayer did ; but
his pin could not hold its ticket firmly, and devices clutching or bind-
ing, but not piercing, the f abric, hâve been put on the market, but with-
out covering the ground.
]Ô0 262 FEDEKAL REPORTEE
Ilere, then, is a want shown to hâve long existed among intelligent
merchants, whose desires are always studied by equally intelligent man-
ufacturers, and the question recurs whether to furnish the means of
supplying that want is invention.
[3] It is, of course, urged, and naturally, that no more than a me-
chanic's skill was needed to take the final step. But a mechanic is one
who applies his trade by rule or rote, and only uses what he learned yes-
terday to do the work of to-day in the same old manner. He may do
it excellently, but if he has, not only hindsight, but insight or fore-
sight, first to comprehend the problem and use even the leaming of
yesterday to do the new thing in a new vs^ay, that mechanic has usu-
ally eamed the inventor's title.
This is what Thompson has done, if the malter be reasoned from
the premises of évidence. It is, however, an important evidential élé-
ment that the trade world to which this little device must appeal,
whether of manufacturers or buyers, evidently regards it as important.
That word is always relative, and courts and juries should learn its
meaning from the évidence, and not their own émotions.
Thus guided by the évidence, we find as matter of fact that the pat-
ent discloses invention, and in so doing we arrive at a resuit not new in
this court, and do it in substantially the same way as heretofore.
George Frost Co. v. Cohn, 119 Fed. 505, 56 C. C. A. 185; David v.
Harris, 206 Fed. 902, 124 C. C. A. 477; Barry v. Harpoon, etc., Co.,
209 Fed. 207, 126 C. C. A. 301 ; Fonseca v. Suarez, 232 Fed. 155,
146 C. C. A. 347.
The decree is affirmed, with costs.
INGLE V. LANDIS TOOL CO. et al.
(District Court, M. D. Pennsylvanla. June Term, 1919.)
No. 267a.
1. Patents <3=:5202(1) — Riqhts to paetly peei'ected invention passes bt as-
signment of all patents, etc.
Assignments, by which a concern transferred a boring maclilne, together
wlth ail patents, drawings, patterns, etc., relatlng thereto, held to convey
any rights the assignor had in an unpatented improvement made by
one of its employés.
2. Patents <S=393 — Employeb entitled to invention by employé.
Where a designer, employed to make Improvements in a boring machine,
left the résulta of his work wlth hls employer, and later returned at the
request of the employer's assignée to give ail necessary assistance in ex-
plaining the construction and opération of the machine, etc., held, that
the employé's rights to the invention passed to hls employer under thetr
contract of employment.
8. Patents <g=»203 — Assigneœ's eights not qkeater than those oï patentée.
A patentee's assignée, who was familiar with ail the transactions
which constltuted proof that the patentée had sold hls inventive powera
to his employers, has no better title to the patent than his assignor.
®=3For other cases see same toplc & KEY-Xt'MBER in ail Key-NuTnb<?re<l Digests fi Indexes
mGLE V. LANDIS TOOL CD. 151
(262 7.)
4. Bankruptcy <3=>138(2) — Riqhts to invention acquiked bt pabty claim-
INQ tTNDEB TEUSTEB'S SALE.
Where an employer became bankrupt, and Its assets and applications
for patents on a boring machine were sold to trustées for credltors, wlio
assigned them to the I. Company, whlch later sold and asslgned them to
défendant, and an employé remained in tlie employment of the employer's
successors and completed an improvement prior to the sale to défendant,
défendant acquired title to the improvement, whether it was completed
prior to bankruptcy or not
5. Patents <S=5l83 — Rights to paetlt perfected invention govebned bt
GENERAL BULES.
The sale of a banknipt's interest In a partly perfected invention upon
which patent had not Issued is governed by the gênerai principles relating
to bargains and sales, since Eev. St. § 4898 (Comp. St. § 9444), requlriug as-
slgnments of patents to be in writing, applies only where the patent bas
Issued.
6. Patents <S=»202(1) — Assignée holds légal titlb in tbust fob équitable
OWNEB.
The assignée of a patentée holds the légal title In trust for the owner
of the équitable title.
7. Patents <S=3316 — Court has powee to bequike assionment of patent in
infringement suit to equitable owneb.
Where a défendant set up its équitable title to the patent involved In
an Infringement suit, the court, having jurisdictlon of the parties and
subject-matter, may do complète equity between them by dismissing the
bill and requirlng plaintiff to assign to défendant the légal title to the
patent in suit.
In Equity. Patent infringement suit by Arthur H. Ingle against
the Landis Tool Company and the Gurney Electric Elevator Company.
Bill dismissed, and plaintiff required to assign légal title to patent to
the fiirst-named défendant.
Charles H. Howson, of Philadelphia, Pa., Clyde L. Rogers, of Bos-
ton, Mass., and James G. Sanderson, of Scranton, Pa., for plaintiff.
E. W. Bradford, of Washington, D. C, and Fred C. Hanyen, of
Scranton, Pa., for défendant.
WITMER, District Judge. In this infringement suit, the sole ques-
tion at issue is one of title or ownership of the improvements in a
boring machine, forming the basis of this controversy, and covered
by letters patent, on application of William R. Carey, No. 1,244,449.
It appears that the Ingle Machine Company was organized in 1904
Having purchased from Conrad M. Conradson the right to manufac-
ture a horizontal boring machine which he had invented, together with
assignments for patents, the company hegan the building and sale of
thèse machines. The machines were improved through the efforts of
the company, and in December, 1913, when it went into bankruptcy, it
liad pending several applications for patents on improvements, includ-
ing the application for the basic invention of Conradson. For some
time preceding, William R. Carey was in the employ of the company
as a designer on the boring machine and other tools, which the company
was manufacturing. He was working for the company, and paid as
such for his services. In the course of his employment Carey made
drawings, consisting of detailed layouts, said to be improvements on
the machine, intended to overcome certain defects due to weakness in
gearing, approximately as shown in the patent. His work in this par-
ticular v,'as about reaching completion, when bankruptcy intervened.
152 262 FEDERAL REPORTER
In January, 1914, the assets of the company were solcl by order of tîie
bankrupt court to William Gleason, Charles P. Schlegel, and L. P. Will-
sea, trustées for the creditors. The applications for patents relating
fo the boring machine were likewise assigned to thèse trustées on May
29, 1914, and in turn by them assigned to the Ingles Corporation.
Carey remained in the employ of the parties during the transfer and
completed his undertaking.
On June 4, 1914, Carey having left his dravvings in the possession
of his employer and found employment elsewhere, the Ingles Corpo-
ration sold and assigned to the Landis Tool Company, one of défend-
ants, ail of its right, title, and interest in the appHcations for lettcrs
patent pertaining to said boring machine. A final agreement and
assignment was made August 13, 1914, in which the Ingles Corpora-
tion, as the owner of the Rochester Boring Machine Company, man-
ufacturers of the Rochester boring machine, sold for $10,000 to the
Landis Tool Company ail the patents, drawings, patterns, spécial tools,
jigs, templets, part Hsts, advertising matter, and correspondence re-
lating to the manufacture and sale of said boring machine, including
the right to use the name under which said boring machines hâve been
manufactured and sold, agreeing to discontinue the manufacture of
such" machines, as long as the Landis Company chose to carry on the
business, and further specifying that, not only the items set forth should
be included in the sale and transfer, but "any others which might be
classed as belonging to the manufacture of the boring machines and
accessories thereto." That the Ingles Corporation sold and intended
to transfer to the Landis Company ail of its property interest in and
to the boring machine, as it was then constructed and in prospect of
construction, as well as the business of manufacturing and selling of
same, is not doubted. Indeed, there is no one hère speaking for the
corporation claiming to the contrary.
[1] Though the agreement between the parties is not as full and
explicit as it might be, yet it is fully established by the testimony that
the Carey improvements and drawings, being an important feature of
the machine should pass with the same in the transfer of the property.
It was not only so agreed, but, indeed, the drawings and ail that was
tangible was delivered over by the assigner to the assignée, together
with instructions how to avail itself of the alleged advantages and
benefits. The conclusion foUows that, if the corporation had title to
the improvements designed and sketched by Carey, the same were
transferred and passed over to the Landis Company.
[2] Whether Carey obtained the right to the monopoly implied in
the patent dépends upon the character of his employment and the un-
derstanding between the parties. Dowse v. Fédéral Rubber Co. (D.
C.) 254 Fed. 308. He was employed as a designer to make the draw-
ings and design certain improvements in détail relating to the con-
struction of the machine, whereby it might be made stronger and
capable of doing heavier work in a more satisfactory manner. This is
what he accomplished through the aid of others interested in the im-
provement of the machine. He was paid for what he accomplished,
and accomplished what he was paid for — to improve the machine of
INGLE V. LANDIS TOOL 00. 15îi
(262 F.)
his employer, in order that ît might hâve greater value as such, and
be more salable as such machine. Though there v/^s no writing to
the effect, yet the circumstances attending his employment, the nature
of the vi^ork he performed, as well as the subséquent conduct of Carey,
is convincing that it was not intended that he should retain any Per-
sonal interest whatever in the resuit of his efforts in the improvement
of the machine.
After bankruptcy intervened, Carey continued his efforts, remaining
until shortly before the transfer to the Landis Company. When he
changed his employment, he lef t the resuit of his undertaking with his
employers, drawings and ail. After the transfer of the machine, and
ail pertaining, was fully effected, and delivery of drawings to the
Landis Company, Carey, upon the invitation of this company, for a con-
sidération, came from Ohio, where he was then employed, to the cora-
pany's plant at Waynesboro, Pa., for the purpose of instructing those
in charge of the construction of the machine how to make use of and
avail themselves of the advantage of his improvements upon it. He
remained at the company's plant three or four days, giving every possi-
ble assistance regarding the matter of his drawings and their applica-
tion to the matter to be corrected in the machines then in course of
construction and about to be constructed. He was acquainted with the
sale and transfer that had taken place, and it could not be otherwise
than that he was aware of the full purpose of the Landis Company to
push the manufacture and sale of thèse machines, with the improve-
ments in which he now claims he then had a personal property inter-
est. Without a Word of protest, or an inkhng of a thought that he was
at ail interested, he returned home, and later fully and freely wrote
the Landis Company concerning further particulars in référence to
the matter of his visit and the use of his improvements.
The inference follows that he had no idea then of claiming an in-
terest in what he had accomplished for his former employers, and that,
in fact, the product of his labors, as he understood his relations with
them, belonged to those who paid him for the very thing accomplished.
In this particular there is no doubt that he sold in advance to his em-
ployers his inventive powers and ail that was accomplished thereby.
As was said by Mr. Justice Brewer, in Solomons v. United States, 137
U. S. 346, 11 Sup. Ct. 89, 34 L. Ed. 667:
"If one is employed to devise or perfect an instrument, or a means for ac-
complishing a prescribed resuit, he cannot, after succossfully accomplishing
tlie work for which he was employed, plead title thereto as against his em-
ployer. That which lie has been employed and paid to accomplish becomes,
when accomplished, the property of his employer. Whatever rights as an
individual he may hâve had in and to his inventive powers, and that whicb
they are able to accomi^llsh, lie has sold in advance to his employer."
[3] Surely Carey's assignée has no better title than he. Ingle, the
plaintiff assignée, vi'as'acquainted with Carey's employment, and ail that
was intended thereby to be accomplished, and ail that was in fact
achieved. He was made acquainted with the sale and transfer of the
machine and its belongings from the Ingles Corporation to the Landis
Company, as also with the intervening changes in title. He is not a
154 262 FEDEUAL REPOIlïKll
stranger to what transpired. He was interested in the initial purchase
of boring machines, as an officer of the corporation that took his name.
He pushed its development, manufacture, and sale prior to the bank-
ruptcy proceeding, and later endeavored to repurchase the same from
the Landis Company. His failure to succeed resulted in the letters
patent taken out in the name of Carey and assigned to himself . Thèse
were intended, and to some extent were used, as a wedge to accom-
pUsh his purpose. Though he may hâve other than fancied grievances,
he has no cause to complain of the conduct of the défendants and as
to them. If he otherwise possessed the semblance of claim to Carey's
invention, he would be estopped from asserting his claim to a monopoly
of the improvements claimed by Carey under his letters patent.
[4, 5] But plaintiff argues that, if the Ingles Company had other-
wise a right to the assignment of the Carey invention, when bankruptcy
overtook Carey's effort, it had not as yet assumed such a stage of de-
velopment as would impress the same with a property right, or as an
asset transférable by the bankruptcy proceedings, and therefore title
did not pass out of the Ingles Company.
Whether as an invention it was completed while Carey was in the
employ of the Ingles Company, or afterward, while continuing to de-
vote himself to his undertaking in the employ of tliose who succeeded,
by purchase, to the business of the company and the improvement of
the machine in question is not important. Surely, at some time, while
in the employ of the défendants' predecessor in title, Carey completed
his efïort, which was at ail times, and in ail of its stages, the property
of his employers, who joined in the transfer to défendant the Landis
Company. And whatever may hâve been its stage of development
when bankruptcy intervened is not material, since the property of the
bankrupt, the machine and ail its belongings, passed in the same man-
ner as any other property acquired. Ager v. Murray, 105 U. S. 128, 26
L. Ed. 942. The sale of the bankrupt's property interest in the im-
provement, if incomplète or otherwise, and the inchoate right to the
exclusive use in the invention, if complète, before patent was granted,
is governed by the gênerai principles of the law relating to bargains
and sales. Cook v. Sterling Electric Co. (C. C.) 118 Fed. 46; In re
Myers-Wolf Mfg. Co., 205 Fed. 289, 123 C. C. A. 441.
There is no provision of law that prevents the assignment of the
invention not patented. Such is regarded as other property. The
law only takes it out of the ordinary when a patent theref or is granted.
Then it isthat the statute (section 4898, R. S. U. S. [Comp. St. § 9444])
applies, and requires that the assignment, conveyance, or grant, or what-
ever interest therein, shall be in writing.
[6] Though the plaintiff, through the inventor, obtained the patent
in suit, he holds such légal title in trust for the owner of the équitable
title. Dalzell v. Mfg. Co., 149 U. S. 315, 13 Sup. Ct. 886, 37 L. Ed.
749.
[7] The défendant having set up its équitable rights in the answer
filed, and prayed for an order requiring the plaintiff to assign the title,
which he nominally holds, this court, having jurisdiction of the parties
and the subject-matter, will do fuU and complète equity between them.
HAEVET EUBEELL, IKC, V. GENERAL ELECTEIC 00. 155
(26i F.)
It foUows that the bill will be dismissed, at the cost of the plaintiff,
and in the decree presented an order on the plaintiff may be incorpo-
rated, requiring him to assign to the défendant Landis Company the
légal title to the patent in suit.
HABVEY HtrBBETX, Inc., v. GENERAL ELECTRIC CO. et al.
(District Court, S. D. New York, October 20, 1919.)
No. 265.
1. TbADE-MARKS and TBADE-NAME8 ©=67— MaKINQ UNPATENTKD PAETS INTEB-
CHANGEABLH NOT XJNLAWFTJL COMPETITION.
Complainant, a large manufacturer of eleetrical contact devices, In the
absence of protection by patent or triide-mark, held not to hâve acquired
an exclusive right in the arbitrarlly selected size and shape of the parts
of its devices, whlch precluded other manufacturers from openly adopt-
ing sueh size and shape for the puriwse of standardizing and making the
parts interchangeable with those of each other and of complainant.
2. Tkade-maeks and trade-names <S=>93 (S)— Evidence insufficient to snow
■DNKAIB COMPETinON.
Allégations of unfair compétition, by copying the physical character-
istics of complainant's devices, held not sustained by the proofs.
In Equity. Suit by Harvey Hubbell, Incorporated, against the Gen-
eral Electric Company and others. Decree for défendants.
W. Clyde Jones, of Chicago, 111., and Everett N. Curtis and Clifton
V. Edwards, both of New York City, for plaintiff.
Frederick P. Fish, Samuel Owen Edmonds, and Hubert Howson,
ail of New York City, for défendants.
MANTON, Circuit Judge. This bill in equity seeks relief for an
alleged invasion of property rights and unfair compétition in trade,
said to resuit from the manufacture and sale by some of the défend-
ants named of separahle attachment plugs and réceptacles. It is
claimed that some plugs and réceptacles, sold by some of the défend-
ants named, correspond in make and fit with devices produced by the
plaintiff.
Two causes of action are alleged in the pleadings and were urged
upon the trial:
First. That the plaintiff, by its energy, industry, and expendlture of
large sums of money throughout a period of 10 years prior to the
lîling of the bill, established and built up a System of doing business,
constituting a service to its customers, which resulted in good will
and business, and the plaintiff now claims that, thus creating a Sys-
tem of service, it bas a property right which a court of equity should
protect from the invasion of other manufacturers.
Second. That the défendants hâve copied the distinctive appear-
ances of plaintiff's goods, and hâve placed them upon the market in
such a way and by such devices as are calculated to deceive inno-
cent purchasers, and that by reason thereof they are guilty of unfair
trade.
«gssFoi other cases see same toplc & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes
156 262 FEDERAL REPORTER
[1] As to the first cause of action, the plaintiff contends that the
défendants the General Electric Company and the Bryant Electric
Company, and some selling agents named as défendants, hâve united
in a plan of action or scheme to appropriate the Hubbell System, so-
called, in violation of the plaintiff's property rights, and that the de-
fendants hâve entered the market in compétition with the plaintiff
with a séries of devices, plugs, and réceptacles, so constntcting them
as to use the arbitrary dimensions of the interfitting parts, as to in-
terfit and interchange with the plaintiff's devices, therehy interfering
with its System and property right, said to be secured to it, with the
resuit that there has been diverted from the plaintiff recurring sales
to which it is entitled as a resuit of the good will and business it has
established.
The défendants présent the issue by a déniai of the existence of such
a right as claimed, and further urge that there is no such similarity of
construction or of the method of carrying on their business as to war-
rant the claim of unfair trade. The principal controversy is over the
use by the défendant General Electric Company, and the other manu-
facturers, of parallel contact-making members of the same dimensions
and spacing as those characterizing the contact-making members pro-
duced by the plaintiff. The défendants admit that they hâve used the
same dimensions and spacing as used by the plaintiff, but contend that
this was donc in a necessity for and an honest effort to standardize thèse
devices for the benefit of the trade and public, and with no intent to
cause any unfair trade to the plaintiff. Concededly, the resuit is that
the défendants' devices are interchangeable with plaintiff's Une of de-
vices, such, at least, as employ the parallel form of contact.
The first cause of action alleged présents the question : Has the
plaintiff such a property right in a system of service which a court of
equity should protect ?
The General Electric Company produces a Une of devices known in
ihe trade as "G. E. Standard ;" the Bryan Electric Company produces
a Une known as the "Spartan ;" and, throughout the trial, comparison
as to the shape, form, and manufacture was made between plaintiff's
Une and the Unes of thèse two défendants. Plaintiff has sold to the
public millions of thèse two-part coacting devices, and its Une has
found its place in hundreds of thousands of apartment houses, office
buildings, and living quarters throughout the country. This was ac-
complished by plaintiff receiving a fair profit for its réceptacles, and,
as it says, a larger profit for caps which coact with thèse réceptacles.
Thus the plaintiff claims it has sustained great damage to its business.
The évidence in the case shows that separable plugs hâve been known
and were in use prior to 1904. The earliest example of this form was
the Weston plug, made under the Weston patent. No. 480,900, granted
August 16, 1892. It was on the market for a number of years. The
terminais on the plug base appear to be (he same as the Hubbell plug
No. 5915. The cap, to the binding screws of which the conductor is
screwed, is separable from the body, thus enabling the body to be screw-
ed into the socket or réceptacle and the circuit completed by inserting
HAEVEY HUBBELL, IXC, V. GENERAL ELECTRIC CO. 157
(2G2 p.)
the cap in the body by a straight thrust, thus avoiding twisting the con-
ductor.
Another separable plug, put on the market in 1897 and sold since in
suhstantial quantities, illustrâtes the terminal charactertistics of the
Hubbell plug No. 5915, and the sleeve contacts in the Huhbell early
plugs. This, toc, had a separable cap with coacting contacts.
The General Electric plugs were of the same construction as the
Hubbell No. 5915, except that in the latter the pin and sleeve contacts
were replaced by a flat and knif e blade contacts ; and there is sufP.cient
évidence to justify the claim of the défendant that the separable caps
and flat knife blade contacts, arranged in parallel relation and récepta-
cles and sockets adapted there for, were in common use as early as 1886.
Of this the Ft. Wayne sockets, réceptacles, and plugs were typical.
They were manufactured by the Ft. Wayne Jenney Electric Company.
It thus appears that separable parts were united by thrusting the knife
blade contacts into the locking contact springs of the réceptacle, as is
done to-day in the case of both the plaintiff's and défendants' devices,
The Ft. Wayne devices were superseded by devices having the terminal
styles of the screw ring sud bottom plate type. Then foUowed the nov-
elty plug réceptacle, where the contacts were of the pin and sleeve type.
In 1903 came the interchangeable plug réceptacles. The Bryant Elec-
tric Company brought out one having a flush surface réceptacle, as il-
lustrated in their catalogue of 1902, at pages 60, 61. This provided
for the fitting of the plugs or caps interchangeably into any of the ré-
ceptacles of the line.
In 1904 Hubbell brought out his separable or détachable caps, thus
permitting the cord to be connected to the body without twisting, and
permitting an interchange with a Hne of réceptacles; but at this time
there were already out for public use, both the pin and sleeve form and
the flat knife blade form. The blades were arranged in both tandem
relation as well as parallel relation. At this time, undoubtedly, the
favorable form was to provide for the connection to be made by thrust-
ing rather than turning. About this time there came into vogue the
more fréquent use of the electric fan, heating and cooking devices, hair
curlers and irons, as well as other devices where electricity was used.
In 1906 the Benjamin Electric Company brought out a small non-
separable swivel plug, which was customarily used. Plaintiff brought
out five différent types of contacts. Thus the différent types of contacts
became more diversified, and there was, therefore, no unit of that line
interchangeable with a similar unit of any of the complète lines. The
plaintiff bas estabhshed its line of interchangeability, so far as its caps
and sockets and réceptacles were concerned. The défendant General
Electric Company had established its own line, providing for a mechan-
ical interlocking between the maie and female contacts, having the
contact dépendent upon friction, and with the flat knife blade form,
such as is illustrated in the Ft. Wayne phig. The Bryant Electric Com-
pany brought its line of surface plug réceptacles and its Chapman ré-
ceptacle.
Hubbell adhered to the pin and sleeve form of contact, and provided
pins with necks or dépressions to effect the locking engagement with
158 262 FEDERAL REPORTER
the female contacts, and concealing its female contacts. Presumably,
the insulation of the plug body covered the ends of thèse contacts, to
guard against short circuits. Huhbell produced the knife blade con-
tacts after 1904, and then employed the blade contacts down to the
commencement of this suit. It changed its contacts from the tuming
form to the thrusting form. The plaintiff did this under the protection
of its own patents, Nos. 774,250 and 774,251, and also claimed protec-
tion under the Weston patent. No. 4S0,900. It had a license under the
latter patent. Thereaf ter the plaintiff placed upon the market a smaller
size and less costly plug designed in several types, and in 1912 it
brought out its parallel blade cap No. 5915, which is in issue in this
case. This provides parallel arrangement of blades and slots, such as
are found in the General Electric plug, "G. E. 062." The cap of Hub-
beU's No. 5915 is interchangeable with the cap of "G. E. 062" plug, and
fits into the body of the latter with serviceable contact.
In 1914 both tandem bladed caps and parallel bladed caps with ré-
ceptacles with double contacts, so as to coact with caps of either sort,
were brought out. There was then provided the f our-window construc-
tion of réceptacle, having two tandem slots and two parallel slots. This
was protected by the Burton patent, No. 1,169,613. In October, 1914,
plaintiff brought out the "double T" or "T-T" form of réceptacle. In
1916 the plaintiff brought out coacting plug caps having blades arrang-
ed at right angles. Thèse would coact with T-T slots, as would the
Hubbell tandem blade caps.
In 1915 it is estimated that 85 or 90 per cent, of the business was be-
ing done by the plaintiff, the General Electric Company, the Bryant
Electric Company, and four other concerns, who were licensees of the
General Electric Company and the Bryant Electric Company. There
were other companies in the field doing the balance of the business.
There were from 15 to 20 différent types of blades, and from 15 to 30
différent types of réceptacles. The Une of each was not interchangeable
with a competing line. The Plubbell Company was producing and dis-
posing of the larger proportion caps and réceptacles.
Then it was that the défendants claim there was public demand for
standardization. Undoubtedly, it was costly to the public to hâve non-
interchangeable plugs, caps, and réceptacles. There was a need for
standardization, as is best illustrated by the activities of the Internation-
al Electric "Light Association. The manuf acturers, including the plain-
tiff, entered into a conférence, and discussion was had as to the method
of standardization. Plaintiff rebelled against standardization, using its
type of cap and réceptacle with the dimensions as, it says, arbitrarily
selected by it for the manufacture of its line. With the plaintiff re-
fusing to standardize, the défendants selected its dimensions and meth-
od of contact, and standardized upon the plaintiff's type of blade.
Plaintiff had sold, at this time, approximately 13,000,000 réceptacles
and plug bases having tandem slots; also approximately 18,000,000
tandem blade caps adapted to coact with those réceptacles and bases,
and had sold nearly 1,250,000 réceptacles and plug bases having parallel
slots, and an equal number of parallel blade caps adapted for co-
action therewith. In this it was easily the first (in numbers) in putting
EAKVEY HUBBELL, INC., V. GENERAI, ELECTRIC 00. 159
C262 F.)
in public use a single type of plug or réceptacle. Most of the plaintifï's
tandem and parallel devices were in actual use in 1915. For this rea-
son, and because the public had so largely invested in caps and plugs
of this type, défendants say that they f elt the obligation to standardize
upon the Hubbell caps; and the défendants contend that they hâve
adopted a noninfringing construction which the public might use in-
terchangeably with plaintifï's, because they employ the same dimen-
sions and spacing of the contact.
There is no question of inf ringement of patent involved in this issue.
As a resuit, 85 per cent, of the production of the country is now inter-
changeable. The défendants' caps and plugs are plainly marked, so
that any reasonably intelligent purchaser can easily discern the type of
plug he purchases. The marks are plain and unmistakable.
Under thèse facts, I am of the opinion that plaintiff has no exclusive
right to manufacture caps and réceptacles of thèse dimensions and spac-
ing of contacts. Its competitors should hâve the right to make plugs and
réceptacles with contacts of any size and shape they désire, even if by
so doing it will permit of an interchangeability with the Hubbell Une.
If the plaintiff had popularized some unnecessary and purely nonfunc-
tional features of its productions, thèse could not be appropriated with-
out its consent. If it had secured a trade-name, such as "Hubbell's,"
it could not be appropriated, or if it was protected by valid patents it
would be entitled to immunity from infringement. Thèse are not the
rights which are hère sought to be enforced. The plaintiff asserts a
common-law property right, and on what it claims to be the best di-
mensions for the purpose in the spacing of the contacts.
In Marvel Co. v. Pearl et al, 133 Fed. 160, 66 C. C. A. 226, it was
said:
"In the absence of protection by patent, no person can monopollze or ap-
propriate to the exclusion of others éléments of mechanieal construction which
are essential to the successful practieal opération of a manufacture, or which
primarily serve to promote its efficiency for the purpose to which it Is de-
voted. Unfair compétition is not established by proof of similarity in form,
dimensions, or gênerai appearance alone. Where such similarity consists in
constructions common to or characteristic of the articles in question, and
especially where it appears to resuit from an effort to eomply with the physi-
cal requirements essential to commercial success, and not to be designed to
misrepresent the origin of such articles, the doctrine of unfair compétition
cannot be successfully invoked to abridge the freedom of trade compétition.
The enforcement of such a clalm would permit unfair appropriation, and deny
the exercise of the right of fair compétition." 133 Fed. 161, 162, 66 C. C. A.
227.
In Meccano v. John Wanamaker, New York, 250 Fed. 450, 452, 162
C. C. A. 520, 522, Judge Ward, speaking for the Circuit Court of Ap-
peals, said, where a somewhat similar claim to that now advanced by
the plaintiff was made:
"The complainant cannot obtain a monopoly for ail time of perfora ted plates
of the lengths having equidistant holes and intervening spaces which it flrst
used. Thèse are functional features of the unlts of construction, which any
one is at liberty to use. Of course, It cannot claim a monopoly of constructing
the particular models or toys which it has made, as, for example, wheelbar-
rows, bridges, crânes, Ferris wheels, trucks, etc. Assuming that the public
associâtes plates of this description with the complainant as a source, and
160 262 FEDERAL EEPOUTEB
that there Is likely to be confusion because of similarity of the outflts, it Is
a question whether it Is entitled, wittiin tlie décision of the Suprême Court
in Singer Co. t. June, 163 U. S. 169, 16 Sup. Ct 10O2, 41 L. Ed. 118, to more
protection than that outflts made by others should be advertised and sold as
the produet of the makers, under names and in packages which do not simu-
late the complainant's. This is true of the outflts which the défendant sells.
The name of the complainant's is 'Meceano,' and of those sold by the défend-
ant 'American Model Builder.' They are advertised as made by the American
Mechanical Toy Company, and sold in dlssimilar packages. So, in the nature
of things, the constructing éléments and the things constructed being the
same, the plates illustrating them and the instructions contained in the man-
uals fumished vvith the two outflts must be more or less alike. AU that
should be required of other makers is to do indépendant work."
No court has ever gone to the extent of permitting the establishment
of a monopoly of proportions or measurements, in the absence of some
patent protection. To do so would be practically to engross the par-
ticular business. Distinguishing marks may be adopted to dénote the
origin of production, or some pecuHar method of distinguishing goods,
and thus secure the benefit of good réputation which it has acquired
from such use or practice. The public hâve the right to make sep-
arable plugs, and, from the nature of the requirements, they must hâve
a resemblance in form, dimensions, and appearance. No one should
hâve the exclusive privilège of selecting measurements, even though
arbitrarily selected, and thus establish a particular spacing of the con-
tacts to the exclusion of others. To do so would be to stifle compétition.
The plaintifif hère does not rest upon the adoption of spécial char-
acteristics of any kind, but of features which pertain to the article
made and sold. Nor is this in conflict with the now well-established
rule that, if an article has a leading and striking characteristic, which
characteristic is designedly given by its maker, and advertised and
exploited, and afterward recognized, particularly by purchasers, be-
cause of such characteristic, the right to make and use the character-
istic can be protected by an action, if an imitation is perpetrated. This
rule finds its support in what is referred to in the cases as nonfunction-
al unfaif compétition. It présupposes that the appearance of the
article, like its descriptive title, has a secondary meaning, and has been
associated in the public mind with the first corner as a manufacturer
or source, and if a second corner imitâtes the article exactly, so that
the public will believe bis goods hâve come from the first and will buy,
in part at least, because of that déception, the court will enjoin the sec-
ond corner. Crescent Tool Co. v. Kilborn & Bishop Co., 247 Fed. 299,
159 C. C. A. 393. In this case it was said:
"ïhe défendant hns as rauch right to cofiy the 'nonfunctional' features of
the article as any others, so long as they bave not beeoine associated with the
plaintlff as manufacturer or source. The crltical question of fact at the out-
set always is whether the publie is moved in any degree to buy the article
because of its source and what are the features by which it dlstinguishes that
source."
The authorities relied upon hy the plaintifï are not in conflict with
Hiese views.
In International News Co. v. Associated Press, 248 U. S. 231, 39
Sup. Ct. 68, 63 L. Ed. 211, 2 A. L. R. 293, the conceded évidence
which caused the court to grant its protection indicated that the de-
HAEVET HUBBELL, INC., V. GENERAL ELECTRIC CO. 161
(262 F.)
fendant's acts amounted to fraud and bribery. The Suprême Court
stated that the complainant had a property right in the news which it
secured in the conduct of its business, and restrained the défendant
from bribing the employés of the complainant to release the news to
the défendant. There is no question of fraud, or palming off by the
défendants in this issue, nor is there any claim of déception advanced
upon this theory of the case.
In the case of Searchlight Ga*s Co. v. Prest-O-Lite Co., 215 Fed. 692,
131 C. C. A. 626, mainly relied upon by the plaintifï, the complainant
had established a System of service in tîie sale of its Prest-0-L,ite tanks
with the right of having them refilled; that is, a new tank filled and
given in exchange for the old, at the price alone of acétylène gas. The
purchase included the right to return the old tank. There the défend-
ant, with what the court found to be fraudulent intent, sold similar
tanks and merely removed the paper sticker from over the Prest-0-
Lite name, and turned the misused tank back to the plaintifï, thu!\
using the plaintiff's tanks and selling the defendant's gas. The plain'
tiff there repaired, at its expense, the tank which had been used by the
défendant, and by which method défendant secured profits. It was
a fraudulent and deceitful practice, and the court enjoined its contin-
uance. The court, by injunction, simply required the défendants to
sell their products under their own name, and did not enjoin anything
other than the fraud which was perpetrated. The défendant there was
permitted to sell, using its own Prest-O-'Lite tanks and its gas with prop-
er labels. This was far from granting immunity from compétition.
In Fonotipia Co. v. Bradley (C. C.) 171 Fed. 951, the plaintifï had
gone to great expense in preparing musical records of the voices of
great artists, and from thèse produced the commercial records which
were sold to the public. The défendant simply copied copies of the orig-
inal records and put them on the market, advertising that they were ail
duplicates of the original records made by the artists. This was a
fraud and déception, and was enjoined.
In the so-called scalper ticket cases (Nashville Ry. Co. v. McConnel!
[C. C] 82 Fed. 65; Illinois Central v. Caffrey [C. C] 128 Fed. 770;
Penn. Co. v. Bay, 150 Fed. 770) nontransf érable railway tickets were
sold. They were sold, and the transférée went before the validating
agent, had them validated, and sold the tickets. An injunction was
granted against the ticket sellers' continuation of this business method
(scalpers). Thèse cases had ail the éléments of fraud and deceit. The
conductors accepted the fraudulently resold tickets, and were deceived
in the belief that the passenger, who had a contract as an original ven-
dee, was exercising his right under his contract of carriage. Because
they were return tickets, they were sold at a reduced rate, and the
railroad company was thus cheated out of the full and regular fare.
In the trading stamp cases (Sperry & Hutchison Co. v. Mechanics'
Clothing Co. [C. C] 128 Fed. 800; vSame v. Temple [C. C] 137 Fed.
992; Same v. Louis Weber, 161 Fed. 219) there was a deliberate in-
terférence with a spécial contract made between the plaintifï and stores
which were giving the trading stamps to their customers. The de-
fendants deliberately sought to induce the merchants to break their
262 F.— 11
162 262 FEDERAL REPORTER
contract, and the court held them to be guilty of f raud, saying that by
their advertisement they deceived the public. An injunction was grant-
ed because there was unfair and f raudulent interférence with the con-
tracts and the property protected by the contracts.
The record of the case under considération discloses no palming off
of goods or attempt thereto. Nor does it indicate that by advertising
or otherwise did the plaintiff retain any property right in the caps or
réceptacles when sold. There was nothing in the nature of a mère li-
censee in the sale. It was an absolute exchange of the commodity for
the money received, and the vendee acquired absolute property rights
in the articles which he purchased, unrestricted in any way. Nor can I
find f rom the record that the caps or réceptacles were sold from their
appearance alone. Indeed, the distinguishing features are said to be
in the concealed contact slots and nicked edge blades. Thèse are recog-
nized in the trade as the main characteristics of the varions devices of
the plaintiff, and by such they are recognized and distinguished from
competing devices, and theref ore a means of identification of plaintiff's
production.
I conclude, therefore, that plaintiff bas no common-law property
right, as it claims to bave, and it cannot succeed in its position on this
branch of the case.
[2] Unfair compétition is alleged as against the défendants in copy-
ing the physical characteristics of some ten of Hubbell's devices. They
are as follows:
(1) The Hubbell hemispherical cap with knurled edge and base with
nickeled sleeve.
(2) Hemispherical brass-covered cap.
(3) Elongated cap.
(4) Cord connector.
(5) Motor plug with cylindrical cap.
(6) Brass-covered chandelier plugs.
(7) Cylindrical lamp réceptacle.
(8) Flush réceptacles witli black centers and brass plate.
(9) The use of the word "Duplex."
(10) The use of the word "Standard."
The caps and réceptacles are sold largely to jobhers and men who
are f amiliar with the trade. Each manufacturer bas plainly visible
his trade-name, so that it is easy for a purchaser to tell which he is
buying. Hubbell bas a distinctive characteristic, as pointed out, which
the trade ail know. I bave examined carefully the physical exhibits
which are involved in each of the above 10 claims, where it is said
défendants hâve copied the devices of the plaintiff. Without dealing
with each specifically hère, I am satisfied that there is no such palming
off or even copying of the physical exhibits as to présent an actionable
wrong. There is no such copying of lines. The plaintiff, in ail its
advertisements, made plain the distinguishing characteristics of its
plug. I find nothing which would warrant an interférence by a court
of equity because pi:rchasers bave been deceived or plaintiff's rights in-
fringed. Shredded Wheat Co. v. Humphrev Cornell Co., 250 Fed.
960, 163 C. C. A. 210.
For thèse reasons, a decree will be granted to the défendants.
JOST V. BOEDEN STOVE CO. 163
(262 F.)
JOST V. BORDEN STOVE CO.
(District Court, B. D. Pennsylvania. January 2, 1920.)
No. 1909.
1. Patents <S=»118 — Compuanok with statutoet eequibements necessaby.
No one has the rlght to a patent, without complying wlth ail tlie condi-
Oons set forth lu Rev. St. §§ 4S86, 4887 (Comp. St. §§ 9430, 9431).
2. Patents <S=»2S2 — Action ïob infbingement based on issuance of patent.
A patent infrlngement suit Is based, net on the fact that plalntifï may
be entitled to a patent, but on the actual Issuance of a patent to hlm.
3. Patents ©=5312(3) — Géant of patent and infeingemenï as peima facib
case.
In patent Infrlngement case, évidence of the grant of the patent and of
Infrlngement présents a prima facie case, which défendant must over-
come to prevent plalntifC securing a decree.
4. Patents ©=310(7) — Attack on validity of patent mattee of défense in
infeinoement sttits.
In patent infrlngement suits, the grounds speclfled In Rer. St. § 4920
jComp. St. § 9466), on which défendant may attack the validity of the
patent, are purely matters of défense.
6. Patents <S=»310(1) — Plaintiff mat establish only pbima facie case ob
rORESTALL DEFENSE.
In patent infrlngement suit, the plaintiff may, if he chooses, confine his
case in ehief to establishing a prima facie case, or he may forestall the
défense by presenting his whole case in chlef, but he Is not requlred to
négative possible défenses.
6. Patents ©=>310(1) — Necessity of pleadinq that inventions had not been
abandoned in infbingement suit.
In a patent infrlngement suit, a bill Is not defectlve for failure to al-
lège that the invention had not been abandoned to the publie, sluce this is
purely a matter of défense, which the défendant may raise under Rev. St.
§ 4920 (Comp. St. § 9460).
7. Patents <®=5310(9) — Determining administbateix's eight to sue fob in-
fbingement.
In a patent infrlngement suit, defendant's contention that title to the
patent was not sufflciently alleged to be in plaintiff, who was the Inven-
tor's admlnlstratrix, raises only the question of a possible variance, and
cannot be determined on a motion to dismlss the bill before proofs bave
been offered.
In Equity. Suit by Estelle C. Jost, administratrix of John Frederick
W. Jost, against the Borden Stove Company. On motion to dismiss
the bill. Denied.
Mark W. Collet, of Philadelphia, Pa., for plaintiff.
William Steell Jackson, of Philadelphia, Pa., for défendant.
DICKINSON, District Judge. Whenever two things, however es
sentially différent, corne (as is often the case) to be the same in results,
ail thought of différence is likely to be dropped, and the différences ig-
nored.
[1-3] The présent motion is based upon such suppression of the.
thought of a différence between letters patent which hâve been granted
and the right to the patent or its validity. The différence is, of course,
obvions. No one has the right to a patent without bringing himself
^=sFoi other cases see same toplc & KEY-NUMBBB In ail Key-Numbered Dlgests & Indexes
164 2C2 FEDERAL REPORTER
within ail the conditions set forth in R. S. §§ 4886 and 4887 (Comp. St.
§§ 9430, 9431). Without the patent he has no property right upon
which any one could trespass. Having that property right, he has a
cause of action against any one who infringes. In other words, his
cause of action dépends, not upon whether he is within the provisions
of the patent laws, and, in conséquence, possessed of the right to a
patent, but whether a patent has in fact been granted to him. It is
true the right he claims may be open to question, and the validity of
his patent to successful attack; yet nevertheless the real condition of
things is that without the patent he has nothing, but with it he has ail
the rights which it grants, until the invalidity of the patent appears.
Hence we bave the accepted doctrine that évidence of the grant of a
patent and of infringement présents a case which, if made out by the
évidence, the défendant must overcome, or the plaintifï is entitled to
his decree.
[4] The logic of the doctrine that the case of the plaintiff dépends
upon the patent he holds, and not upon the facts which give him the
right to the grant of a patent, is that the issue, which this feature of the
case présents, is that of patent or no patent, or, in other words, the
production of his patent is conclusive of his patent rights, which are
not open to collatéral attack.
This would necessarily be the law of the trial of patent cases, as it
would be of any other like cases, except for the fact that this law has
been changed by statute, and R. S. §' 4920 (Comp. St. § 9466), permits
the défense to attack the validity of the patent on the grounds set
forth. It is perfectly clear, however, that thèse are purely raatters of
défense.
[5] The conclusion from the above cannot be resisted that a plaintiff
(as to this branch of his case) may confine his pleadings and proofs to
the grant of a patent to him. It happens that the facts permitted to be
shown in défense are the same facts, and necessarily must be at least
some of the same facts, upon which the right of the plaintifï to his
patent dépends.
This, and the trial conditions next stated, hâve brought about what-
ever confusion of thought upon this subject exists. Trials, like ail other
combats, hâve their principles of strategy and of tactics. It is the
right of a plaintiff to confine, if he chooses, his case in chief to the
establishing, as it is called, of a prima facie case. The défendant
must then answer it, to jvhich answer the plaintiff may reply. Know-
ing, however, what the défense will be, he may deem it to be good trial
tactics to présent his whole case in chief, and undertake the proof, not
only of the issue to him of a patent, but also of the facts upon which
his right to it ultimately dépends, thus forestalling the défense. View-
ing the pleadings as the field of strategy, as the trial is of tactics, he
may plan the battle on either of the lines suggested in the same way, by
setting forth his whole case or only a prima facie case. It is apparent
that the ultimate results (if a défense is made) are the same, as the
plaintiff must appear, not only to hâve, but to hâve a légal right to hâve,
a patent. It is also apparent that the only practical différence produced
is in respect to the course of the trial. It does not foUow, however.
JOST V. BORDEN STOVE CO. 16»
C262 P.3
that because the plaintiff may thus anticipate the défense, by averring
and proving facts which it will set up, that he is bound to do so, and the
conclusion, before suggested, that he is not required to négative any or
ail possible défenses, still holds.
[6, 7] Thus the question before us seems to stand upon principle.
We hâve stated it in the abstract. In the concrète, it may be thus pre-
sented : The plaintiff has not in her bill, which is the statement of her
cause of action, averred, among other things, that this invention had
not been "abandoned to the public" ; nor has the plaintiff, who sues in
a représentative character or capacity, averred "in ipsissimis verbis that
the title to the patent was in the administratrix of the inventor, who
is the plaintiff in this action."
We hâve chosen thèse two grounds of the motion to dismiss as typi-
cal. The first raises the question of law, which we hâve discussed, and
very squarely raises it, because abandonment is one of the défenses
which R. S. § 4920, permits. We do not understand just what the other
ground is (not having access to the verbiage of the bill) ; but, giving to
this part of the motion ahy of the meanings it may hâve, the resuit rer.
mains that it goes at most to the assertion that there will be a variance.
This we cannot détermine now, having only the allegata before us, nor
until the probata appear.
It remains only to see whether the conclusion reached (that this mo-
tion be denied) is in accord with the decided cases by which we are con-
trolled. It is to be observed that many of the later cases discuss the
question of pleading presented as affected by the equity rules of 1912
(198 Fed. xix, 115 C. C. A. xix). Indced, counsel so discuss it. This
is, of course, one way of meeting it; but it does not cover the whole
ground.
One évident purpose of the equity rules was undoubtedly to simpli-
fy pleadings and curtail verbosity, but the necessity of setting forth a
cause of action still remains. The fact statements, upon which the
cause of action dépends, must still be made, although now they are
limited to the ultimate facts. Whether the bill in a patent case is re-
stricted to the statement of the grant of a patent, or expanded to in-
clude a statement of ail the facts which enter into the question of va-
lidity, does not of itself indicate compliance or noncompliance with the
requirement to make only ultimate fact statements. The real question,
in conséquence, goes back of the présent equity rules. Nor do we see
that the cases which rule that a plaintiff may set forth ail the ultimate
facts upon which his cause of action in the end dépends, without the
bill being open to the charge of the averments being surplusage, nec-
essarily rule either that he is bound to so set them forth, or that he
might not confine himself to the statement of such ultimate facts as
establish a prima facie case.
The conclusions reached we think to be in accord with the decided
cases, among which are those cited in the respective briefs of counsel.
Even thèse are too numerous to be even listed. In conséquence, we
limit ourselves to a few of them. Fichtel v. Barthel (C. C.) 173 Fed.
489; American v. Orient (C. C.) 145 Fed. 649; Pittsburgh v. Bêler
166 262 FEDERAL RBPOETEB
(D. C.) 222 Fed. 950; McCoy v. Nelson, 121 U. S. 484, 7 Sup. Ct.
1000, 30 L. Ed. 1017; Bayley v. Braunstein (D. C.) 237 Fed. 671;
Schaum v. Copley (D. C.) 243 Fed. 924.
The motion to dismiss is denied.
In re LOEN.
(District Court, W. D. Washington, N. D. December 27, 1919.)
No. 5943.
AlJENS <S=>65 ALIEN WHO SUBBENDERED DECLAItATION OV INTENTION TO EVADE
MILITABY SERVICE NOT ENTITLED TO CITIZENSHIP.
Thougti applicant, wlio had (lecUireti iutontion to becorae citizen, sur-
rendered same and made affldavit of v^illingness to return to Norway,
his native country, in support of inilitary exemption clairn, vvas inducted
Into niilitary service, and bel'ore his ciaim was disposed of the armistice
was signed, and he was discharged, held that, despite Act June 29, 1906,
g 4, as amended by Act May 9, 1918 (Comp. St. 1918, § 4352), and by Act
July 19, 1919, providing for admission to citizenship of any person of
foreign birth who served in the military or naval forces in the United
States and had been honorably discharged, applicant cannot be ad-
mitted to citizenship; his conduct shovi'ing désire to avoid burdens of
citizenship, tostead of loyalty to United States.
Naturalization Proceediiig. In the matter of the application for citi-
zenship of Knut Sigfred Loen. Application denied with préjudice.
John Speed Smith, Chief Naturalization Examiner, of Seatde,
Wash.
NETERER, District Judge. This applicant, at the time of regis-
tration for war service was 23 years old. He had declared his in-
tention to become a citizen of the United States. For the purpose of
avoidïng military service, he surrendered his déclaration of intention
to the Norwegian consul, to be forwarded to the department at Wash-
ington, D. C, and made an affidavit of his willingness to return to his
native country, in support of his exemption claim, on the ground of
being an alien. His exemption was disallowed by the local board, and
he was inducted into the army at Camp Lewis, and before his claim
could be acted upon by the departments at Washington, D. C, the ar-
mistice was signed. During the time applicant was in the service, he
declined to become a citizen, although requested to do so at Camp
Lewis. He knew that during the time he was at Camp Lewis spécial
sessions of United States court were held at Camp Lewis for the con-
venience of soldiers to become citizens, and many thousands were
naturalized.
Applicant filed his application for citizenship under Act July 19,
1919, c. 24, § 1. Section 4 of Act June 29, 1906, c. 3592, 34 Stat. 596
(Comp. St. 4352), provides that any alien may be admitted to citizen-
ship who immediately prior to his application "has resided continuous-
ly within the United States for fîve years, and within the state where
the court is held one year, and that during the time he has been "a
®=5For other cases see saine toplo & KEY-NtfMBER In ail Key-Numbered Digests & Indexes
IN EE LOEN 167
(262 F.)
man of good moral character, attached to the principles of the Constitu-
tion of the United States, and well disposed to the good order and
happiness of the same." Section 4, subd. 1, of this act, provides that
an alien shall déclare on oath before the clerk of any court authorized
to naturalize aliens, two years at least prior to his admission, that it is
bona fide his intention to become a citizen of the United States, and a
willingness to forfeit ail allegience and fidelity to foreign sovereignty.
This act was amended May 9, 1918 (40 Stat. 542, c. 69 [Comp. St.
1918, § 4352]}, by adding the seventh subdivision, by which it is pro-
vided :
"Any alien servlng In the mllitary or naval service ot the United States
(lurin^ the time this ijoimtry is engajjed in the présent war may file his pétition
for naturalizatlon without maklng the prellminary déclaration of intention,
and without proof of the required five years' résidence wlthin the United
States."
On July 19, 1919, this subdivision 7 was amended by providing that —
"Any person of foreign birth who served in the mllitary or naval forces
of the United States during the présent war, after final exainination and ae-
ceptance by the said mllitary or naval authorlties, and shall hâve been honor-
ably discharged after such * • • service, shall bave the beneflts of the
beventh subdivision of section 4 of the act of June 29, 1906, * • * as
amended, • * • and this provision shall continue for the period of one
year after ail the American troops are returned to the United States."
The applicant claims that he was honorably discharged, and that
this application is timely, and that he should be admitted. The appli-
cation is within a year, and he beats an honorable discharge.
Is the examination of the court as to the applicant's qualification
for citizenship limited to the timeliness of the application, and to the
discharge, or is the duty still impose d upon the court to détermine
wfhether the applicant comes within the other requvrements of the lavv ?
The exceptions in favor of an honorably discharged soldier appear to
be deiinitely and clearly pointed out, and limited to proof of résidence
and déclaration of intention, as far as the présent inquiry is concerned.
Ail of the requisites except résidence and déclaration of intention must
theref ore be met by the applicant, as the only limitation placed upon the
court, as far as concerns us hère, is with relation to déclaration of in-
tention and résidence. The applicant never left the training camp.
So far as appears, no further disposition was made of his claim for
exemption by the departments at Washington.
In the instant case, the applicant had declared his intention to become
a citizen, and under oath declared his willingness to renounce ail al-
legiance to foreign sovereignty. By that oath he solemnly swore it to
be his bona fide intention to transfer his citizenship and allegiance.
This implied willingness and intention to défend the flag, to support
the Constitution and laws of the United States ; and, when invitation
was extended, he declined to do so, thereby repudiating his declared
intention, and asserted under oath préférence for his native country.
He failed to meet the test. Nothing appears to indicate a change of
sentiment or feeling of regret.
Citizenship and allegiance to this country are made of sterner stuflf.
He i^ not fitted to take the oath of allegiance. Interprétation of the
oath of allegiance is more than a mère formula of words. It is the
IGS 2C2 FEDERAL REPORTER
translation of the alien applicant for citizenship from foreign language,
foreign history, foreign ideals, and foreign loyalty, into a living char-
acter of our language, of our history, of our life, of our ideals, and
loyalty to our flag. It is that intellectual, spiritual, patriotic develop-
ment of love for the United States, his adopted country, and its Consti-
tution and laws, which moves him in sincerity to dedicate his life to its
service, and conscientiously agrée to défend it against ail enemies and
the implanting in his soûl of a sincère détermination that in the hour of
danger or attack upon the Constitution or the flag, to dévote to their dé-
fense and support unlimited loyal service to the extent of his life, if re-
quired. Any person unwilling to pledge his hands, his heart, his life, to
the service and préservation of the govemment of the United States,
first and always, is unworthy to be admitted to citizenship.
The proof does not show the applicant's loyalty to our flag and
his willingness to défend it. This applicant, when the flag was as-
.saulted by a foreign foe, was unceasing in his efforts to évade mili-
tary service in a conflict forced upon this country, and did nothing
which would indicate that he was attached to the principles of the
Constitution of the United States, carrying forward liberty, equality,
justice, and humanity. It was not until ail danger was past, when
the armistice was signed, that he made up his mind to again knock at
the door of his country, and ask to be admitted to citizenship.
The application is denied with préjudice, and before he can be ad-
mitted to citizenship he will hâve to serve a probationary period which
will justify a court to conclude that he is in truth and in fact attached
to the principles of the Constitution and the laws of this country.
TAYLOR & BOUENIQTJE CO. v. NATIONAL BANK OF ASHTABULA.
(District Court, N. D. Ohio, E. D. December 27, 1919.)
No. 10201.
1. Courts <®=3372(7) — Collecting bank's liabilitt as collectob govebned
bt general law, not state decisions.
On a Question of gênerai law, as the liability of a bank accepting for col-
lection commercial paper, the fédéral courts are not bound by décisions of
the State in which the contract was made, or to be performed, but must
détermine the question of liability by référence to ail the authorlties.
2. Banks and banking ®=5l71(6) — Liability of bank collectinq commer-
cial PAPER FOR ACTS OF CORRESPONDENT.
A bank receiving commercial paper in one state for collection In another
is llable for any neglect of duty occurring in its collection, whether nrls-
ing from the default of its own officers or employés, or from that of its
correspondent, and while this obligation may be modifled by contract. a
modification will not be inferred from knowledge that the receiving bank
must, or intends in due course of business to, forward the paper to an-
other bank for collection.
i. Banks and banking •©=175(%) — Owner of commercial papeb cankot
SUE correspondent SELECTED BT BANK TO WHICH PAPEB WAS DELIVEBED
FOR COLLECTION.
Where a correspondent selected by a bank with which was deposited
commercial paper for collection is négligent, and the owncr sulïers a loss,
*=3For other cases see sama topic & KBY-NUMBBE in ail Key-Numbered Digests & Indexos
TATLOR & BOURNIQUE CO. V. NATIONAL BANK OF ASHTABULA 109
{262 F.)
the owner cannot in hls own name sue the négligent correspondent, but
his rlght of action is agalnst the bank with which he deposited tbe com-
mercial paper.
At Law. Action by the Taylor & Bournique Company against the
National Bank of Ashtabula. On demurrer. Demurrer to pétition
sustained.
H. E. Starkey, of Jefferson, Ohio, and Charles J. Ford, of Geneva,
Ohio, for plaintiflf.
Green & Gallup, of Cleveland, Ohio, and Mott G. Spaulding, of
Ashtabula, Ohio, for défendant.
WESTENHAVER, District Judge. The défendant demurs to the
plaintifï's pétition on the ground that a cause of action is not stated.
The pétition in substance allèges that on the 14th day of March, 1918,
plaintiff delivered to the Wisconsin National Bank at Milwaukee, Wis.,
for collection, four drafts, payable on demand, aggregating $12,533.45,
drawn by plaintifif on the Horton Milling Company of Ashtabula, Ohio,
payable to the order of the Wisconsin National Bank, with bills of
lading attached, for four cars of No. 3 white corn, sold by the plain-
tiff to the said Horton Milling Company ; that the Wisconsin National
Bank duly forwarded thèse drafts to the défendant at Ashtabula, Ohio,
for collection ; that the défendant carelessly and negligently held them
until about May 6, 1918, without making any demand for payment or
acceptance, and without making any report or giving any notice of its
failure to act; that as a resuit of this conduct the four cars of corn
were permitted to lie on the side tracks of the railroad carrier until the
corn had become heated and damaged, and was no longer of the grade
and quality originally sold and shipped; and that the Horton Milling
Company refused on May 6, 1918, to accept the corn or to pay the
drafts. Plaintiff seeks to recover damages based on this négligent
conduct of the défendant.
Upon this demurrer plaintiff contends that the law of Wisconsin
is to govern, and that this law is what is known as the Massachusetts
rule, applicable to the liability of a bank accepting commercial paper
for collection. On the other hand, the défendant contends that the
case is governed by the law of Ohio, which is the same as that known
as the New York rule. No statute of Wisconsin is cited or claimed to
be in force creating any spécial rule différent from the gênerai law of
commercial paper. The law of Wisconsin invoked by plaintiff re-
sults from the décisions of its Suprême Court. See Stacy v. Dane
County Bank, 12 Wis. 629; Blakeslee v. Hewett, 76 Wis. 341, 44 N.
W. 1105.
The argument before me turns chiefly on whether or not there is
any conflict in the décisions of the Surpeme Court of Wisconsin and
of Ohio, and, if so, which line of décisions shall be foUowed — the
plaintiff contending that, inasmuch as its contract was made in Wis-
consin with the Wisconsin National Bank of Milwaukee, and was to
be partly performed there, that the law of that state should control;
and the défendant contending that, inasmuch as Ohio was the place
170 262 FEDERAL REPORTER
where the contract was to be perf ormed, and the place where defend-
ant's contract, if any, was made, the Ohio law should control.
[1] In my opinion, the true question of law upon which the case
turns is not that assumed by counsel. There is, in my opinion, no
question involved of conflict in law, and therefore no inquiry need be
made as to where the contract was made, or by the law of what state or
forum it is to be controUed. The applicable raie is that stated in
Swift V. Tyson, 16 Pet. 1, 10 L. Ed. 865 ; B. & O. Railroad v. Baugh,
149 U. S._368, 13 Sup. Ct. 914, 17 L. Ed. 772. The rule thereby es-
tablished is that, when the question is one of gênerai law, and not of
purely local law, it is to be determined by référence to ail the authori-
ties, and upon due considération of the principles of gênerai jurispru-
dence applicable to the subject, and not by référence merely to those
of the state in which the cause of action arose.
Swift V. Tyson, supra, involved the question of whether or not one
who acquired negotiable paper for a pre-existing debt in due course
before maturity and without notice of any défense thereto was to be
regarded as a holder for value. The cause of action arose in New
York, by the décisions of which one taking a note for a pre-existing
debt was not regarded as a holder for value. It was held that this
was a question, not of local law, but of gênerai commercial law, and
was to be decided upon an examination of ail the authorities and due
considération of the principles underlying the gênerai commercial law
of the land. The resuit was that the United States Suprême Court
held in that case that one taking negotiable paper for a pre-existing
debt was a holder in due course. Mr. Justice Story, delivering the
opinion, says that the laws of the state, which were made by the orig-
inal Judiciary Act the rule of décision in the United States court,
mean state laws, strictly local ; that is to say, positive statutes of the
state and the construction thereof adopted by the local trihunals, and dé-
cisions relating to rights or titles to things having a permanent lo-
cality, such as the rights and titles to real estate and other matters im-
movable and intraterritorial in their nature and character.
In B. & O. Railroad v. Baugh, supra, this and ail the intervening
cases were fully reviewed, and the law reiterated to the same effect.
It was therein held that the rule of fellow servancy in négligence cases
was not a question of local law, but of gênerai jurisprudence, and that
the Ohio vice principal rule would not be followed and applied in the
United States courts, even when the in jury was sustained and the
cause of action arose in Ohio after the pronouncement by its Suprême
Court of that rule. It results that, if the United States Suprême Court
has declared a rule applicable to the présent controversy, it must con-
trol, and hence it is immaterial to inquire whether the so-called New
York or Massachusetts rule is the true rule, or which has been adopt-
ed in Ohio.
[2] Upon this proposition there can be no doubt. See Hoover v.
Wise, 91 U. S. 308, 23 L. Ed. 392; Exchange National Bank v. Third"
National Bank, 112 U. S. 276, 5 Sup. Ct. 141, 28 L. Ed. 722. Neither
of thèse cases has ever been overruled, criticized, or distinguished,
and while I do not find that the question involved has ev'er again been
TAYLOR & BOUKNIQUE CO. V, NATIONAL BANK OF ASHTABXJLA 171
(262 F.)
under considération by the Suprême Court, I do find that thèse cases
hâve ever since been uniformly followed by ail inferior fédéral courts.
The law, as established by thèse cases, is that a bank receiving com-
mercial paper in one state for collection in another state from a maker
or drawer residing there is liable for any neglect of duty occurring in
its collection, whether arising from the default of its own officers or
employés, or from that of its correspondent or its agents in another
state. This obligation, it is true, may be modified by contract; but a
modification of the bank's obligation will not be inferred from knowl-
edge that the receiving bank must, or intends, in due course of busi-
ness, to forward the same to anodier bank for collection. The sound
reasoning and policy upon which this rule rests is sufficiently stated
in Exchange National Bank v. Third National Bank, supra, and in
Reeves v. State Bank, 8 Ohio St. 465.
The contrary doctrine is that a bank receiving commercial paper and
performing thèse duties is merely obliged to exercise due care in the
sélection of compétent agents and in the transmission of such paper
with proper instructions. The resuit of this doctrine is that the re-
ceiving bank is impliedly authorized to sélect subagents, who thereby
become agents of the owner of the paper, and is not liable for the neg-
lect or default of its subagents. On the other hand, under the correct
doctrine as established by the décisions above cited, the receiving bank
contracts to make collection, and is, in effect, an independent con-
tracter, which may avail itself of such agencies as are necessary or
proper in the performance of its contract, but remains itself liable to
the owner for due performance by its agents or représentatives thus
employed, and they do not become subagents of the owner; nor is
the receiving bank exonerated from liability to the owner, no matter
what degree of care or diligence it exercises in selecting its agents.
The case of Bank of Washington v. Triplett, 1 Pet. 25, 7 L. Ed. 37,
sometimes cited as holding the contrary, is distinguished, on the ground
that the bank, upon the facts, was held to hâve contracted directly
with the holder of the bill to collect it, and that the forwarding bank
was the holder 's agent merely to transmit the bill for collection. This
is also the doctrine in Ohio. See Reeves v. State Bank, 8 Ohio St. 466.
This case has been followed once, and the law therein stated has been
approved twice in later cases. There is nothing to the contrary in
Hilsinger v. Trickett, 86 Ohio St. 286, 99 N. E. 305, Ann. Cas. 1913D,
421, as contended on behalf of plaintifif. In this case, Judge Spear,
delivering the opinion, says that it is unnecessary to consider the prop-
osition stated in Reeves v. State Bank, supra, because neither the bank
taking the paper for collection nor the bank to which it was forwarded
was shown to be guilty of any neglect of duty, and, further, no loss
to the owner had resulted from the alleged négligence.
[3] Thus far there is no difficulty. The question, however, remains
to be considered whether or not the real owner may maintain an ac-
tion against the bank or agent to which the paper was forwarded by
the bank first taking it for collection, as well as against the receiving
bank. It is undisputed that the owner may maintain an action against
the receiving bank. The apparent difficulty in plaintifï's situation has
172 2C2 FEDERAL REPORTER
impelled me to give the most careful considération to Ihis question.
As a resuit, I am of the opinion that plaintiff may maintain an action
only against the bank with which it made its contract for collection,
and not against any other bank to which the receiving bank forwarded
it, based on the latter's négligence or breach of duty, as a resuit of
which collection was not made. This conclusion is amply supported by
the following authorities: Hoover v. Wise, 91 U. S. 308, 23 L.
Ed. 392; Hyde v. First National Bank, 7 Biss. 156, 12 Fed. Cas. 1110,
No. 6970; Balcomb v. Old National Bank (C. C. A. 7) 201 Fed. 680,
120 C. C. A. 27; Montgomery County Bank v. Albany City Bank, 7
N. Y. 459; Morris v. First National Bank of Allegheny, 201 Pa.
160, 50_Atl. 1000; note of Editor, 50 Am. St. Rep. 123, 124. This
proposition is also explicitly held in Reeves v. State Bank, 8 Ohio
St. 466, 483. The dissenting opinion of Judge Sutliff conceded this
to be the correct ruie when applied to an action based on failure to
collect, due to négligence or breach of duty. See, also, I Mechem on
Agency, § 333; 1 Daniel, Negotiable Instruments, § 344; note, 52
1,. R. A. (N. S.) 663. The holding, in brief, of thèse authorities, is that
whenever the doctrine of Exchange National Bank v. Third National
Bank, supra, otherwise called the New York rule, is adopted, the
owner's right of action for failure to collect, due to négligence, is lim-
ited to the bank with which the holder made his contract for collection.
The légal principles upon which thèse décisions rest are funda-
mental. The receiving bank, being in effect an independent contracter,
has control of the means and agencies necessary and proper to per-
form its contract. The principal assumes no responsibility for the
acts or conduct of the agents selected by an independent contractor.
There is no privity of contract between the principal and the agents
of the independent contractor. If the principal sustained to them
such privity as would permit him to maintain an action against them,
then he would become in law responsible for their acts and conduct.
They might sue him for compensation, and he might be sued by
Etrangers for their acts. He would be bound by their admissions while
acting within the apparent scope of their authority. Notice to them
would be notice to him. Thèse principles are too important to be
unsettled, out of considération for the inconvenience which plaintiff
may suffer as a resuit of what must be regarded as erroneous dé-
cisions of the Suprême Court of Wisconsin.
This opinion might end hère, but, to avoid possible future misun-
derstanding, a word should be added with référence to those cases
which hold that the owner of a negotiable paper may, under some
circumstances, maintain an action against a bank to which the paper
has been sent by a receiving bank to recover money collected thereon
in an action for money had and received. In Reeves v. State Bank,
supra, this right was denied. Judge Sutliff dissented, solely on the
ground that no privity of contract was necessary to support an action
by the real owner for money had and received against one who had
no superior right to retain it. Other cases hold that, before remit-
tance to the receiving bank, the latter's agency may be revoked, and
that an action for money had and received may be maintained against
STOCKÏON V. LKDEREB 173
(262 F.)
the bank to which it is sent, if no advances hâve been made by the
latter thereon. See cases cited, note of editor, 50 Am. St. Rep. 123,
124, and note, 52 L. R. A. (N. S.) 663-665. It is unnecessary, as be-
tween this conflict, to détermine which Une of cases déclare the cor-
rect rule. It is sufificient to point out that none of them hâve any
application to an action based on négligence, as a resuit of which col-
lection was not made.
The demurrer will be sustained. An exception may be noted. Leave
to amend, if desired, will be given.
STOCKTON V. LEDERER, Internai Revenue Collecter (two cases).
(District Court, B. D. Pennsylvanla. December 2a, 1919.)
Nos. 5028, 5800.
Intbenai, eeventje <S=>7 — Accumulation for charitable purposes not sub-
ject to income tax.
Income of the e.state of a testator In the hands of trustées held not
subject to tax, under Act Sept. 8, 1916, c. 463, § 2(b) (Comp. St. § 6336b),
wliere by the ternis of the will a portion of it, so small as to be exempt
from tax, is to be used in payraent of an aunulty, and the remainder,
added to the corpus of the estate at the end of tlie annuity tenu, is to
be paid over to a charity, which, under section lia (Comp. St. § 6336k), ia
exempt from the tax.
At I^aw. Actions by Alexander D. Stockton, sole surviving trustée
under the will of Alexander J. Derbyshire, deceased, against Ephraim
Lederer, Collector of Internai Revenue. Judgments for plaintifï.
Prichard, Saul, Bayard & Evans, of Philadelphia, Pa., for plain-
tiff.
Robert J. Sterrett, Asst. U. S. Atty., and Francis Fisher Kane, U.
S. Atty., both of Philadelphia, Pa., for défendant.
DICKINSON, District Judge. As precisely the same questions of
fact and of law arise in each of the above cases, we dispose of them
in one opinion. The findings of fact and the conclusions of law ac-
companying this opinion are to be taken as found separately in each
case, respectively.
The broad question discussed in this case involves an inquiry into
the meaning of the acts of Congress taxing incomes. The particular
income is that accruing to an unsettled decedent's estate. The Une of
thought pointed out to us by counsel for the United States as we grasp
the thought and are able to foUow the Une is, roughly stated, this;
In defining the persons whose incomes are made subject to the tax
Congress created a person whose entity may be recognized through
the use of the descriptive phrase of decedent's estâtes. The thought
may be readily grasped by calling to mind one of the very numerous
situations created out of the fact that some one has died seized and
possessed of property, the possession and the légal title to which passes
to his représentatives and is held bv them for an indetinite time. Dur-
<gz:3Foi other casea Bee aaitio luDio à: K.iV -\ U.^ii- --.i m iiii Kfcy-Xuniijvi l;J IJif^t-tH it hj.iixts
174 262 FEDERAL EEPOETER
ing this time income accrues and is received. The phrase commonly
in use to describe this situation is intelligible and sufficiently expressive
in itself. It is "income of the estate," as distinguished f rom the person
or persons to whom it ultimately goes. If this income is visually
traced as issuing out of the corpus of the estate and flowing into the
hands of the légal représentatives of the testator or other décèdent,
and then being distributed in whole or in part after diminution and
division, if there be any, to the person or persons to whom it ultimately
goes, the distinction between the income of the estate and the income
of the beneficiaries under the will or other ultimate récipients is
brought to light with satisfactory clearness.
The estate with which we are concerned is that of a testator wlio
had charged his estate with certain annuities, or what were practically
the équivalent of annuities, and had given the residue to a charity.
More accurately speaking, he had bequeathed and devised his whole
estate to his executors qua trustées in trust to invest and keep invested
and to pay the annuities, and after the coming of âge of one of them
and death of the survivor of the others pay over the corpus of the es-
tate, together with the accumulated income, to the charity.
Applying the doctrine which counsel for the United States asks to
hâve applied, as above outlined, a tax has been assessed upon the in-
come as it has accrued to the trustées. In order to complète the state-
ment of facts, although the bearing of thèse features upon the ques-
tion before us is not seen, it may be added that application was made
to the court, having jurisdiction of the estate, to distribute to the resid-
uary cestui que trustent the balance of the estate after making pro-
vision for the assurance of the payment of the annuities and their re-
lease. This was upon the practical ground that the ownership of the
corpus of the estate and the excess income over and above the payment
of the annuities vested in the charity. Distribution was refused by the
court. Resort was then had to the practical expédient of the trustée
investing the funds of the estate in the form of a loan to the institution
representing the charity, upon which loan the charity paid an inter-
est sufficient to take care of the administrative charges and the pay-
ment of the annuities. The annuities hâve aîl fallen in, except one
small one.
The argument of counsel for the United States, concisely and per-
haps inadequately stated, is that, the estate being an entity or per-
son having an income within the meaning of the tax laws, this income
is taxable as such notwithstanding the fact that it ultimately goes to
the charity. The thought upon which the argument is based is sup-
ported by the statement that, notwithstanding the fact that the estate
is large and the income therefrom many times the sum required to
meet the annuities, there is no légal certainty that anything will go
to the charity. The income as income belonging to the estate is tax-
able under the provisions of the taxing statute, and is exempt only so
far as it goes to the charity. Therefore, if it does not go to the
charity, there is no ground of exemption, and as it cannot now be
determined with légal certainty that it will go to the charity, it remains
taxable.
STOCKTON V. LEDERER 175
(262 F.)
There are at least two obstacles in the way of the acceptance of this
argument as sound. One is that there are two grounds of exemption
from taxation. A part of the income is exempt because of the exemp-
tion in favor of charity. The other part is exempt because it is below
in amount the taxable lirait. The two take in the whole income, and
it is difficult to escape the conclusion that if the whole income is ex-
empt, none of it is taxable. The other obstacle is really the same
viewed from a différent standpoint. It is that this income is not the
income of the estate, but of the parties to whom it is given. The légal
représentatives of the testator are nothing more than the réservoir
and conduit pipe through which the income reaches the beneficiaries
of the testator's bounty. If that income is eut off, so that it does not
arise or is lost in the hands of the trustées, the loss is the loss of the
beneficiaries. This is nothing more than the emphatic statement that
the income which the United States is proposing to tax is their income.
Moreover, it may be stated in addition that the fact theory upon which
counsel for the United States base their argument is whoUy fanciful
and artificial. Practically speaking, there is a surplus of income
which goes to charity, so that the whole fabric of the argument is based
upon a légal figment, and to recur to tlie thought already expressed,
as no part of the income is taxable if it is the income of the benefi-
ciaries, we do not see how the fact that the charitable beneficiary may
not receive its share in any way affects the question.
We hâve dealt with the case as to its facts on the basis of the cor-
pus of the residuary estate, together with the accumulations of in-
come going under the will to the charity. Of course, if there were
hère an intestacy as to the whole or any part of the estate an entirely
différent question would arise, because the income which is claimed
to be taxable would not be within the exception to the act, We hâve
viewed the question of intestacy as a closed question for the reason that
this will has been construed by the state courts, and the finding made
thereon fixes the status of ail possible claimants. As a conséquence
we must perforée accept this finding, inasmuch as a finding by this
court that any portion of the estate, either corpus or income, passed to
distributees under the intestate laws would be the finding of something
which does not exist and which legally cannot possibly come into exist-
ence. As a further conséquence we hâve not taken up the subject of
intestacy, but accept the ruling made that the décèdent did not die in-
testate as to any part of his estate.
It may be conceded that the income from this estate is within the
gênerai taxing clause of the act of Congress because ail persons who
receive income which ultimately goes to another are required to with-
hold out of the income a sum équivalent to the normal income tax
and render a return thereof, etc. It is to be observed, however, that
the income out of which this tax sum is to be withheld is the income
of some one who is subject to the tax, and subclause (a) of clause G
(38 Stat. 172) provides that income moneys which go to charity and
other named institutions of like gênerai character are not within the
taxing clause of the act. This statement is made with respect to the
provisions of the taxing act of 1913 (Act Oct. 3, 1913, c. 16, 38 Stat.
176 202 FEDERAL KEPORTER
114) assumîng it to include the încomes from unsettled decedent's
estâtes which were included by the act of 1916 (Act Sept. 8, 1916, c.
463, 39Stat. 756).
The act of 1917 (Act Oct. 3, 1917, c. 63, 40 Stat. 329), so far as we
hâve been able to discover, does not change the situation. The lan-
guage employed in the act of 1916, which makes clear the inclusion
of incomes froni decedent's estâtes as taxable, is open to a construc-
tion which would include the income which is derived from the as-
sets of this estate, but section 11 (a) of the same Act (Comp. St. §
6336k), specifically provides that income which belongs to a char-
itable institution shall not be subject to the tax. The part of the in-
come which goes to the sole remaining annuitant is not taxable be-
cause of the provision which is in every one of the acts declaring in-
comes up to a certain amount not to be taxable under the act.
We are therefore of opinion that no part of the income from this
estate is subject to the teix, and that the plaintiff is entitled to recover
judgment for the sum set forth in the pleadings. We under stand
there is no controversy over the amount for which judgment should
be rendered, and the plaintiff may enter formai judgment for the sum
demanded in each case.
We accOmpany this opinion with findings of fact and conclusions
of law, in accordance with the requests submitted by plaintiff, as fol-
lows:
Findings of Fact.
The facts are found as requested in requests of plaintiff 1, 2, 3, 4, 5,
6, 7, 8, 9, 10, 11, 12, 13, 14, and 15.
Conclusions of Law.
We find and state conclusions of law in accordance with the requests
of the plaintiff, as follows :
Requests 16, 17, 18, and 19 are found as requested.
The conclusion with respect to request 20 is that judgment may be
entered in each of the cases before us for such sum as counsel may
agrée to be the correct sum in each case. We retain jurisdiction of the
causes to find and détermine the amounts for which judgment may be
entered, in the event that counsel fail to so agrée.
Defendant's requests for conclusions of law are answered as fol-
lows:
Requests 1, 2, 3, and 4 are denied.
Requests for findings of fact are answered as follows:
1. Finding 1 is made as requested, in the respect that the income
referred to is iricome derived from the assets of the estate of the décè-
dent pending its administration and final distribution. The income and
corpus of this estate is distributable in accordance with the will of the
testator, Alexander J. Derbyshire.
2. So far as finding 2 is of a question of fact, it is found that the law
of the distribution of this estate was declared by the Suprême Court
of the State of Pennsylvania in Biddle's Appeal, 99 Pa. 525, to be that
the corpus of the estate was not distributable in the lifetime of the
annuitants.
DETROIT, M. & T. S. L. RY. V. CIÏY OF MONROE 177
(262 F.i
3. So far as finding 3 is one of fact, it is that the law of this case
is that the trust referred to remains an active trust during the li£e of
the annuitants, in so far as that the corpus of the estate is not distrib-
utable until after the death of the last annuitant.
DETROIT, M. & T. S. L. RY. v. CITY OF MONROE et aL
(District Court, E. D. Michlgan, S. D. Deeember 22, 1919.)
No. 300.
1. COTJETS <S=5508(1) FEDERAL COUET HAS NO JUEISDICTION TO ENJOIN BUIT
IN STATE COUBT, WHEKE NOT IN AID OF ITS OWN JURISDICTION.
Under Rev. St. § 720, now Judicial Code, § 205 (Comp. St. § 1242), a
fédéral court cannot eiijoiu proseeution of a suit In a state court, wliere
not in aid of Its own jurlsdlctlon previously acquired, but to enable It
to assume jurisdlctlon of the controversy tben pouding in tlie state court,
because a fédéral question Is incidentally involved therein.
2. Courts <S=489(9) — State court has in some instances jueisdiction of
questions under interstate commerce act.
State courts are not without jurisdiction in every case involving rights
or questions under the Interstate Commerce Aet.
In Equity. Suit by the Détroit, Monroe & Toledo Short Line Rail-
way against the City of Monroe and others. On motion to dismiss bill.
Granted.
See, also, 257 Fed. 783.
Bernard F. Weadock, of Détroit, Mich., for plaintifï.
J. C. Lehr, of Monroe, Mich., for défendants.
TUTTLE, District Judge. This is a motion to dismiss the bill of
complaint herein on the grounds of alleged lack of equity appearing on
the face of the bill, and of alleged lack of jurisdiction by this court to
grant the relief prayed in the bill.
The controversy out of which this suit arose has already been before
this court recently on a bill filed by the city of Monroe, Mich., hereinaf-
ter called the City, one of the présent défendants, in one of the state
courts of Michigan, against the présent plaintiflf, hereinafter called the
Railway, to restrain the latter from an alleged violation of a certain
franchise contract between said City and said Railway, in charging
rates of fare between said City and the city of Détroit, Mich., higher
than the rates prescribed by the provisions of said franchise contract.
This previous suit was removed by the Railway, défendant therein, to
this court on the ground that the incrcase in rates complained of was
based upon and justified by an order of the Interstate Commerce Com-
mission, and that theref ore such suit was one arising under the Consti-
tution and laws of the United States and removable to the fédéral court.
Afterwards said suit was remanded by this court to the state court
from which it had been removed, for the reason that it appeared that
the bill therein was not based upon any rights arising under the féd-
éral laws, and did not so directly involve a fédéral question as to make
that suit a removable one. It was the opinion of this court that the
$=9For otlier cases see same topic & KQY-NUMBBR in ail Key-Numbered Digests & Indexes
262 F.— 12
178 262 FEDERAL REPORTER
substance and essence of that bill was the complaint that the Railway
was violating the franchise mentioned and that the allégations therein
fo the effect that the aforesaid order of the Interstate Commerce Com-
mission was void, as relating to whoUy intrastate rates, were made by
the City merely to négative an anticipated défense by the Railway, and
was only incidental to the real purpose of the suit. It was therefore
held that the suit did not arise under the Constitution or laws of the
United States, within the meaning of the statute providing for the re-
moval of such suits. City of Monroe v. Détroit, Monroe & Toledo
Short I,ine Ry., 257 Fed. 782.
After that suit had been thus remanded to the state court, the Railway
filed the présent bill in this court against the city, its mayor, and its
city attorney, seeking to restrain them from further prosecution of said
suit. In its bill herein plaintiff Railway allèges that before the removal
of the previous suit the state court had issued a temporary injunction
restraining said plaintifï from collecting the rate of fare fixed in the
order of the Interstate Commerce Commission, referred to, and requir-
ing plaintifï to collect only such rate of fare as was provided in the
franchise mentioned; that said plaintiff bas not complied with said
injunction as it is advised by counsel that such injunction is invalid
because the court by which it was issued was without jurisdiction in
the premises; that thereafter plaintiff moved the said state court to
dissolve such injunction, and dismiss the bill filed in that suit, upon the
ground, among others, that sole jurisdiction to enjoin, set aside, annul,
or suspend any order of the Interstate Commerce Commission was con-
ferred upon the United States District Court for the district in which
the carrier was a résident, which motion was denied ; that thereupon
said suit was removed to and remanded by this court as hereinbefore
stated; that subsequently the City and its officiais named as défend-
ants herein instituted proceedings in the suit in the state court to cause
this plaintiff to be punished for contempt of that court in failing to
observe its said injunction, and that an order to show cause why this
plaintiff and its officers should not be punished for such alleged con-
tempt has been issued, and hearing thereon set in said proceedings;
that the défendants herein intend by force and violence to remove
from the cars of this plaintiff the crews thereof while said cars are in
opération, and to cite said crews for contempt of that court in fail-
ing to collect and charge the rates of fare fixed by the aforesaid fran-
chise, despite the f act, as alleged by plaintiff, that said crews are now
collecting the lawful rates of fare fixed in the aforesaid order of the
Interstate Commerce Commission; that such action will resuit in
disabling plaintiff from performing its public duty as an interstate
carrier, and will cause great financial loss to it and untold inconvenience
to its patrons ; that plaintiff is forbidden by law to charge discrimina-
tory rates, and that if it should charge and collect the rates of fare fix-
ed in the franchise, rather than that fixed in said order, it would be
guilty of a discrimination in favor of said City and its inhabitants as
against the other patrons of its Une, and be subject to the pénal ties pro-
vided in the fédéral statutes, and that a compliance with said injunc-
tion would render plaintiff liable to criminal prosecution for each
DETROIT, M. & T. S. L. EY. V. CITY OP MONROE 179
(262 F.)
day that it neglected to collect the rates of fare established in said
order, and would resuit in a multiplicity of suits against it and its
officers and agents ; that said défendants hâve not applied to the proper
tribunals established to test the validity of said order, or to set it aside,
but are relying solely upon the aforesaid suit to harass and annoy plain-
tifï and prevent it from complying with the order of the Interstate
Commerce Commission; that said state court is without jurisdiction in
the premises, sole and exclusive jurisdiction therein being conferred by
the fédéral statutes on the fédéral courts, and that the prosecution of
said suit will deprive plaintiff of its property without due process of
law, in contravention of the provision of the Fourteenth Amendment
to the Constitution of the United States.
Plaintiff prays for a temporary and also a permanent injunction, re-
straining the said City and its said officiais from further prosecuting
the suit in the state court, and from taking any further steps to cite
plaintiff, its officers, agents, or crews for alleged contempt of court in
complying with the said order of the Interstate Commerce Commission,
and from attempting to enforce the terms of the aforesaid franchise
(called by the plaintiff in its bill an ordinance) relative to the rates of
fare named therein, and from causing any forfeiture of the rights of
plaintiff thereunder by reason of the increase in said rates complained
of. As already stated, défendants hâve moved the court to dismiss
this bill for want of jurisdiction and for lack of equity.
[1] Proceeding first to consider the question of jurisdiction, it is ap-
parent that the whole object of this bill is to secure an injunction re-
straining the proceedings in the state court referred to. Section 720,
United States Revised Statutes, being section 265 of the Judicial Code
(Comp. St. §' 1242), provides as follows:
"The writ of Injunrtlon sliall not be granted by any court of the United
States to stay proceedings In any court of a state, except In cases where such
injunction may be authorlzed by any law relating to proceedings in bank-
ruptcy."
This court, therefore, is asked to do exactly what Congress has ex-
pressly provided that it should not do. While it is true that the pro-
hibition of this statute does not extend to cases in which it is neces-
sary that a fédéral court should grant an injunction to protect its own
jurisdiction, previously acquired for other purposes than that of en-
joining proceedings in a state court, yet it seems clear that this is not
such a case. Before the filing of this bill this court had already divest-
ed itself of ail jurisdiction over the subject-matter of this controversy
and no proceedings of any kind were then pending hère in relation to
any of the matters involved in the présent suit. It is not, therefore,
necessary that any injunction should be issued as prayed in this bill
for the purpose of restraining interférence with the jurisdiction of
this court. This is not, of course, a case where an injunction is au-
thorized by any law relating to proceedings in bankruptcy. Nor is it
sought to restrain the enforcement of a state law alleged to be in con-
travention of the United States Constitution. The prohibition, there-
fore, of the statute is applicable. Haines v. Carpenter, 91 U. S. 254,
23 L. Ed. 345 ; Dial v. Reynolds, 96 U. S. 340, 24 L. Ed. 644 ; St.
180 2G2 FEDERAL EEPORTKR
Louis, Iron Mountain & Southern Ry. Co. v. McKnight, 244 U. S. 368,
37 Sup. Ct. 611, 61 L. Ed. 1200.
The mère fact that in the suit in the state court thus sought to be
restrained a fédéral question is incidentally involved does net authorize
a fédéral court to enjoin the prosecution of such suit, although such
fédéral question, if directiy involved, would be within the exclusive
jurisdiction of the fédéral court. Western Union Telegraph Co. v.
Louisville & Nashville R. R. Co., 218 Fed. 628, 134 C. C. A. 386 (C. C.
A. 7) ; Cari Laemmle Music Co. v. Stern, 219 Fed. 534, 135 C. C. A.
284 (C. C. A. 2).
Nor does the fear that plaintifï may be subjected to fréquent prose-
cuti ons in the suit in the state court entitle it to an injunction hère, in
the absence of a showing that tliis court bas the necessary jurisdiction
to grant équitable rehef within the gênerai powers of a court of equity
having proper jurisdiction. Fitts v. McGhee, 172 U. S. 516, 19 Sup.
Ct. 269, 43 L. Ed. 535 ; Indiana Mfg. Co. v. Koehne, 188 U. S. 681,
23 Sup. Ct. 452, 47 L. Ed. 651.
It is urgently insisted by the plaintiff that the suit in the state court
is one to enjoin, set aside, annul, or suspend an order of the Interstate
Commerce Commission, and that therefore such suit is within the ex-
clusive jurisdiction of a fédéral court. Section 208, Judicial Code
(Comp. St. § 997). This contention bas already heen, in effect, over-
ruled by this court in its opinion already cited. City of Monroe v.
Détroit, Monroe & Toledo Short Line Railway, supra.
[2] Nor are the state courts without jurisdiction in every case in-
volving rights or questions under the Interstate Commerce Act. Penn-
sylvania Railroad Co. v. Puritan Coal Mining Co., 237 U. S. 121, 35
Sup. Ct. 484, 59 L. Ed. 867; Pennsylvania Railroad Co. v. Sonman
Shaft Coal Co., 242 U. S. 120, 37 Sup. Ct. 46, 61 L. Ed. 188; Pennsyl-
vania Railroad Co. v. Stineman Coal Mining Co., 242 U. S. 298, 37
Sup. Ct. 118, 61 L. Ed. 316,
Plaintiff is not without proper remedy in the premises. It will bave
an opportunity to présent, in the state court itself, the contention that
such court lacks jurisdiction to entertain the suit pending there or to
grant the relief prayed therein, and, if necessary, that contention and
défense may, in due course, be submitted, on writ of error, to the
United States Suprême Court. Robb v. Connolly, 111 U. S. 624. 4
Sup. Ct. 544, 28 ly. Ed. 542; Fitts v. McGhee, supra; Indiana Mfg.
Co. v. Koehne, supra; Prentis v. Atlantic Coast Line Co., 211 U. S-
210, 29 Sup. Ct. 67, 53 L. Ed. 150; Dalton Adding Machine Co. v.
State Corporation Commission, 236 U. S. 699, 35 Sup. Ct. 480, 59 L.
Ed. 797.
For the reasons stated, the motion to dismiss the bill must be grant-
ed, and an order entered in conformity with the terms of this opinion.
HUNAU V. NORTHERN REGION SUPPLY CORPORATION ^^^
(262 F.)
HUNAU V. NORTHERN REGION SUPPLY CORPORATION,
(District Court, S. D. New York. January 3, 1920.)
Il Corporations <©=642(4%) — Fobeign compant subject to pbocess wheeh;
AGENT HA8 AUTHOKITT TO CONCLUDE BABGAINS GENEIÎALLT.
A foreign trading corporation, which sends an agent to New York, au-
thorized to conclude bargalns generally, is subject to local process In
personam.
2. Corporations <S=3G42(6) — Foeeign company not subject to process in
person unless doing some contintjous or permanent business.
A foreign eoiTporatlon is not subject to local process in personam In
respect of eacli single transaction vvbicli it inay autborize within the
domestic jurisdictiou, unless it does sonio '"conttnuous" or "permanent"
business within tbat jurlsdiction.
At Law. Action by Adolph Hunau against the Northern Région
Supply Corporation. On motion by défendant to quash service of
original writ in personam. Motion denied.
The défendant is a foreign corporation organized under the laws of the
"government of the Northern Région" of Russia, whatever that may be. It
is In fact a co-operative buying and selling company, whose business is to
buy American and English products, raw and made up, and to export ail
klnds of Russian produce in retum. On May 20, 1919, the plaintiff, a citizen
of New York, served one of the defendant's directors, Danichewsky, in New
York, with a summons issued ont of the state court, and attached a bauk
deposit of the défendant in a local bank. The moving papers described the
plaintiff's claim as arising upon a contract to pay tlie plaintiff for services
rendered in New York to one Konecliko, an agent of the défendant, sent hère
upon ttie company's business. The défendant, appearing speeially, removed
the suit and got the attachment vacatxsd. It tben moved, stlU appearing
speeially, to quash the service on the ground that it was doing no business
hère. The matter was referred to a master, and is now arguod upon excep-
tions to his report.
The master found the défendant to hâve done business under the foUowing
évidence:
The corporation, being organized in Septcmbcr, 1918, wrote a letter to a
New York bank in October of that year, statlng the kinds of goods it would
like to buy, and requesting assistance and proper introduction for its rep-
résentatives about to be sent, among whom was one Koneehko. He was
stated to bave no authority to buy, but to be only a "specialist" in selecting
goods. The bank was itself to give the orders of purchase, and the défendant
would wire a transfer of tlie necossary funds. To effect this arrangement the
défendant transmitted .Î47,000 to the bank.
Koneehko arrived In New York in December, 1918, and b^an at once ex-
amining goods, and setting on foot negotiations vi'ith varlous sellers. Thèse
he continued until April 15, 1919, when Danichewsky, a director, arrived, who
himself continued the business till May 20th, when the summons was served.
It was to holp Koneehko in hIs dcalings that he emiiloyed the plaintiff, ac-
cording to the latter's story.
The bank apparently at once told the défendant that the suggested arrange-
ment was not satisfactory to it, for on January 4, 1919, shortly after
Koneehko had arrived, tlie défendant in reply advised the bank that Koneehko
was authorlzed to buy goods and that his orders should be honored by them.
On Januarj' 26, 1919, the défendant asked Koneehko to postpone buying till
the director, Danichewsky, should arrive, owing to the difficulties of receiv-
Ing any goods at Murmansk durtng the winter season. This cable was not
transmitted to the bauk by either the défendant or Koneehko. Before Dani-
chewsky's arrivai, Koneehko had, however, concluded a contract wlth a local
^ssFor other cases see same toplc & KBY-NUMBER in aU Key-Numbered Digests & Indexes
182 2C2 FEDERAL REPORTER
Company by which the défendant might purehase $200,000 worth of goods,
and under that contract he had used up ail or nearly ail the deposit, .f 47,000,
in actual purchases. Another large contract of purehase had been nearly
concluded, and negotiations were opened with others. In ail thèse the plain-
tifC helped tim. Thèse contracts appear to hâve been not for spécifie pur-
chases, but apparently authorized the défendant to purehase goods as Its
agents mlght afterwards sélect. Danichewsky, on his arrivai, canceled the
exlsting contract, refused to complète that which was nearly concluded, and
repudiated the supposed contract wiUi the plaintiff.
The master thought that the défendant was "doing business" in New York
generally and contlnuously, and that in any event, in respect of those matters
out of whlch the cause of action arose, the défendant was subjeet to juris-
dletion, regardless of any gênerai business. Ile relied upon Premo Specialty
Co. V. Jersey Cream Oo., 200 Fed. 352, 118 C. C. A. 458, 43 L. B. A. (N. S.) 1015
(C. a A. 9th Cire), and Reilly v. Phil. & R. Ky. Co. (D. C.) 109 Fed. 349.
Philip A. Carroll, of New York City, for the motion.
Alphonse G. Koelble, of New York City, opposed.
LEARNED HAND, District Judge (after stating the facts as
above). [ 1 ] It appears to be still the fédéral law (People's Tobacco Co.
V. American Tobacco Co., 246 U. S. 79, 38 Sup. Ct. 233, 62 L,. Ed. 587,
Ann. Cas. 1918C, 537), despite International Harvester Co. v. Ken-
tucky, 234 U. S. 579, 34 Sup. Ct. 944, 58 l,. Ed. 1479, that the mère
solicitation of business, by agents sent into a state without authority
to conclude bargains, does not constitute "dqing business" within its
borders. Such was, of course, the ruling in Green v. C, B. & Q.
Ry. Co., 205 U. S. 530, 27 Sup. Ct. 595, 51 L. Ed. 916, and Interna-
tional Harvester v. Kentucky, supra, must be deemed to rest upon the
fact that the local agents had authority to receive negotiable paper
in payment of orders which they had not the power to close. On the
other hand, in New York, the last ruling of the Court of Appeals defi-
nitely held that a "continuons" and "permanent" business within the
state, which consisted only of soliciting orders, was "doing business."
Tauza V. Susquehanna Coal Co., 220 N. Y. 259, 115 N. E. 915. A
searching analysis of the whole subjeet would hâve been necessary if
the case at bar raised that question. The theory upon which rests the
right to sue a foreign corporation is in flux, and much may dépend in
the end upon what view becomes dominant.
In this case, however, it appears to me that the master is right un-
der any rule, because Konechko had power to buy from January 4,
1919, on a power which he exercised in one instance, and was in course
of executing in others, when Danichewsky intervened. The defend-
ant's only business was to buy and sell goods between Russia and Eng-
land and America, and when it sent a duly authorized agent, with power
to buy tliem in New York, and he began what was designed to be a
continuons business — at least so it must be assumed- — I cannot well
see what other business it could hâve donc. The cable of January 26,
1919, did indeed direct Konechko to postpone any purchases till Dan-
ichewsky arrived ; but I do not read it as curtailing his powers mean-
while, nor did Danichewsky question his intermediate purehase. It
was based upon the difficulty of receiving goods at Murmansk, due to
lack of berthing facilities, and was rather a direction of the manner
m which he should exercise those powers. It is in this aspect signifi-
OOMPANU MINERA Y COMPBADOKA, ETC. V. AMERICAN M. CO. 183
(262 F.)
cant that it was never communicated to the local bank, as the cable of
January 4, 1919, had been. I conclude that the défendant had begun a
"continuous" and "permanent" business hère. Danichewsky certainly
had fuU powers after he arrived in April, nor does it appear that, at
least until he left in May, the business of the défendant was intended
to cease. At least, the project appears to hâve remained open on May
20, 1919.
[2] T do not mean to suggest, however, that the service will stand up-
on the second ground suggested hy the learned master. I know of no
authoritative décision that a corporation submits itself to local jurisdic-
tion as to any single transaction performed in a foreign state. If so,
it would be suable upon ail local causes of action, regardless of any
other business. Such, indeed, appears to hâve been the notion in Premo
Specialty Co. v. Jersey Cream Co., 200 Fed. 352, 118 C. C. A. 458, 43
L. R. A. (N. S.) 1015, and was in 33 Harv. L. R. 10, attributed to my
décision in SmoHk v. Phil. & R. Ry. Co. (D. C.) 222 Fed. 148, though
I was, at least consciously, quite innocent of any such purpose. I do
not, however, understand this to be the law at ail. How far a corpora-
tion is immanent in every authorized act of its agents anywhere, and
what will be the eventual basis of its subjection to foreign process,
it is not necessary to consider ; but it is clear that at présent some gên-
erai activities are necessary. The last expression of the Suprême
Court (Flexner v. Farson, 248 U. S. 289, 293, 39 Sup. Ct. 97, 63 L. Ed.
250) gives little encouragement to the "realists" ; but it must be owned
that no consistent theory can at présent reconcile ail the cases, cer-
tainly not ail the opinions. At any rate, this case ought not to be the
excuse for a gênerai essay.
The motion is denied.
COMPANIA MINERA T COMPBADORA DE METALES MEXICANO, S. A.,
V. AMERICAN METAL CO., Limited, et al.
(District Court, W. D. Texas, El Paso Division. January 15, 1920.)
No. 671.
1. COUBTS ©=>359 JOINDEB OF CAUSES AND PAKTIES DE)?ENDANT, AS AFFECTINO
BIGHT TO EEMOVAL, TESTED BT LOCAL STATE LAWS.
In determining vvhether an action was properly removed from a state
court, the question whether the causes of action and parties défendant
are properly joined will be determlned according to the local state law.
2. Action (S=>50 (5) — Joindeb of causes of action pbopee.
A pétition seeking damages for an alleged breach of contract from one
défendant, and also alleglng that such défendant acted as agent of a
second défendant in making the contract, and seeking recovery agalnst
such second défendant in case It was the principal, Jmld to properly join
causes of action and parties défendant under local Texas laws.
3. REMOVAL of causes ©=5l STATUTOBT nature of BIGHT.
The right of removal from state to fédéral courts is purely statutory.
4. Removal of causes <S=348 — Sbparable contkovebst to which an alien
IS A paett not eemovable.
A separable controversy to which an allen is a party cannot be removed
from a state to fédéral court. Irrespective of whether the alien is a
plaintiff or défendant.
(gssFoT other cases see aame toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
184 2G2 FEDERAL REPORTER
5. Removai, of causes ®=29 — Suit involving alie^'s is not "suit between
citizens of different states."
Where an alien plaintif!: sued an alien défendant and a citizen de-
fendant, the suit is not one between cltizens of différent states, within
Jndicial Code, § 24 (Comp. St. § 991), conferring original jurisdiction ou
fédéral District Courts In such cases.
[Ed. Note. — For other définitions, see Words and Phrases, Controversy
between Cltizens of DiflCerent States.]
6. Courts <g=»321 — Where one oe moke parties are alieks, each plaintifp
MUST BE capable OF SUINQ EACH DEFENDANT TO GIVE FEDERAL COURT JUR-
ISDICTION.
Under Judicial Code, § 24 (Comp. St. § 991), conferring original juris-
diction on fédéral District Courts In certain suits between cltizens of a
State and foreign states, each plalntifC must be capable of suing each de-
fendant in the fédéral courts, and, if the défendant is an alien, and one of
the plaintiflfs is also an alien, a fédéral court bas no jurisdiction, al-
though other plalntiffs are citizens of the state.
7. Eemoval of CAUSES ®=>11 — Suit in which plaintiff and one of défend-
ants ARE ALIENS NOT REMOVABLE.
A fedei-al District Court has not original jurisdiction over a suit
brought by an alien plaintiff agalnst an alien défendant and a citizen
défendant, and such a suit, therefore, cannot be removed from a state
court to the fédéral court
8. Eemoval of causes <©=»82 — Pailuee of alien défendant to join in péti-
tion FOR eemoval.
In suit by an alien plaintiff agalnst an alien défendant and a citizen
défendant, the failure of the alien défendant to join in the citizen de-
fendant's pétition for removal virould necessltate remanding the case to
the state court, even if it were otherwise removable, since a citizen de-
fendant's right to remove a separable controversy does not exist in
suits involving alien parties.
Suit by the Compania Minera y Compradora de Metales Mexicano,
S. A., against the American Métal Company and the Compania de Min-
érales y Metales, S. A., was removed from a state court by the first-
named défendant. Motion to remand granted.
Jones, Jones, Hardie & Grambling, of El Paso, Tex., for plaintiff.
Turney, Burges, Culwell, Holliday & Pollard, of El Paso, Tex., for
défendant American Métal Co., Limited.
Joseph B. Cotton, of New York City, and Turney, Burges, Culwrell,
Holliday & Pollard, of El Paso, Tex., for défendant Compania de Min-
érales y Metales, S. A.
SMITH, District Judge. This case was removed hère from a state
court, and a motion to remand is now presented.
The plaintiff Compania Minera y Compradora de Metales Mexi-
cano, S. A., a corporation organized under the laws of the republic of
Mexico, brought this suit in the district court of the Forty-First ju-
dicial district of Texas, at El Paso, and upon the iîrst count of its
pétition seeks to recover of the défendant Compania de Minérales y
Metales, S. A., damages for an alleged breach of contract theretofore
made and entered into by and between them. By the second count ot
its pétition plaintiff makes the American Métal Company, Limited,
a corporation incorporated under the laws of the state of New York,
^x=9Fot other cases see same topic & KEY-NUHBER In ail Kejr-Numbered Digests & Indexes
COMPANIA MINERA Y COMPRADOEA, ETC. V. AMERICAN M. CO. 185
(262 F.)
a party défendant, and allèges that said Compania de Minérales y
Metales, S. A., in making said contract with plaintiff and in breaching
same, was acting as the duly authorized agent of said American Métal
Company, but says it makes such allégation only in event it should be
determined that Compania de Minérales y Metales, S. A., in making
said contract, was not acting for itself, but as the agent of American
Métal Company, Limited, and only in the latter event does the plaintiff
pray judgment against the last-named company.
Pétition and bond for removal were seasonably filed by the American
Métal Company, Limited, one of the défendants, but in thèse the other
défendant, Compania de Minérales y Metales, S. A., did not join.
The pétition for removal is based upon the following grounds: (1)
That this is a suit in which there is a controversy between citizens of
différent states, and that the défendants are nonresidents of the state
of Texas. (2) That there is a separable controversy herein, wholly
between the plaintiff and the petitioner for removal, which can be ful-
ly determined as between them. (3) That the matter in controversy
is between dtizens of a state and foreign states, citizens, or subjects.
[1,2] Looking to the local laws of Texas as the proper test (Cin-
cinnati, New Orléans & Texas & Pacific Ry. Co. v. Bohon, 200 Ù. S-
221, 26 Sup. Ct. 166, 50 L. Ed. 448, 4 Ann. Cas. 1152), the causes of
action set up by plaintiff and the parties défendant are properly jdined
(New State Land Co. v. Wilson et al. [Tex. Civ. App.] 150 S. W. 253).
Therefore the case with which we are hère dealing is one in which
there is only one plaintiff, an alien corporation, and only two défend-
ants, one of which is an alien corporation, and the other a citizen cor-
poration. The removal petitioner, the American Métal Compemy,
Limited, contends that this is a case of which this court bas original
jurisdiction, and therefore is removable hère under the following pro-
visions of the statutes:
"The District Courts shaJl hâve original jurisdiction as follows: « • *
Of ail suits of a civil nature, at cominon law or in equlty, * » * where
the matter in controversy exceeds, exclusive of interest and costs, the sum or
value of three thousand dollars, and * • » (b) is between citizena of
différent states, or (c) is between citizens of a state and foreign states, citi-
zens, or subjects." Section 24, Judicial Code (Act March 3, 1911, c. 231, 36
Stat. 1087 [Comp. St. § 991])
— and that provision of section 28 of the Judicial Code (Comp. St. §
1010) which reads as follows:
"Any other suit of a civil nature, at law or in equity, of which the District
Courts of the United States are given original jurisdiction by this title, and
which are now pending or which may hereafter be brought, in any state court,
may be removed Into tJie district court of the United States for the proper dis-
trict hy the défendant or défendants therein, being nonresidents of that state.
And when in any suit mentloned in this section there shall be a controversy
which is wholly between citizens of différent states, and which can be fully
determined as between them, then either one or more of the défendants actual-
ly interested in such controversy may romove said suit into the District Court
of the United States for the proper district."
[3] The right of removal is purely statutory. No case can be re-
moved from a state to the fédéral court, unless it clearly cornes within
some provision of the removal statute. Great Northern Ry. Co. v.
186 262 FKDliBAL REPOUÏER
Alexander, 246 U. S. 276, 38 Sup. Ct. 237, 62 h. Ed. 713 ; Kentucky
V. Powers, 201 U. S. 1, 26 Sup. Ct. 387, 50 h. Ed. 633, 5 Ann. Cas. 692 ;
Phœnix Ins. Co. v. Pechner 95 U. S. 183, 24 h. Ed. 427. Therefore,
in order to dispose of the motion to remand, it is necessary to deter^
mine whether or net this case comes within any of the provisions of
the statutes above quoted, and, if it does not, the motion shûuld be
granted.
[4] The contention that there is in this suit a separable controversy
between the plaintifï and the défendant petitioning for removal, which
would authorize the case to be removed to this court, cannot be sus-
tained, because, if there is a separable controversy, which I do not
décide, it is not "whoUy between citizens of différent states," as is
required by the separable controvei^sy provision of the statute. The
plaintifF, one of the parties to the controversy, being an alien, excludes
the case from that provision. A separable controversy to which an
alien is a party cannot be removed, whether the alien is a plaintifï or
défendant. Deakin v. Lea, Fed. Cas. No. 3695 ; Creagh v. Equitable
Life Assurance Society (C. C.) 88 Fed. 1 ; Merchants' Cotton Press
Co. v. Insurance Co. of North America, 151 U. S. 368, 14 Sup. Ct.
367, 38 L. Ed. 195 ; King v. Cornell, 106 U. S. 395, 1 Sup. Ct. 312,
27 L. Ed. 60; Woodrum v. Clay (C. C.) 33 Fed. 897; Insurance Co. v.
Insurance Co. (C. C.) 50 Fed. 243 ; Tracy v. Mord (C. C.) 88 Fed.
801.
[5] Now, eliminating the separable controversy question entirely,
as I must, and considering the case as a whole, it must be also held
that this is not a suit "between citizens of différent states," and hence
not within the jurisdiction of this court by virtue of that provision of
the statute.
[6, 7] This brings us to a considération of the third and last ques-
tion presented, and that is whether or not the case is removable, be-
cause falling within that provision of the statute which gîves the
United States District Courts jurisdiction of suits when the required
amount is in controversy and is "between citizens of a state and for-
eign states, citizens and subjects."
It has been held that, where a citizen of a state sues a citizen of
another state and an alien, the case is within fédéral jurisdiction, and
may be removed from a state court upon the joint pétition of both de-
fendants. Baker v. Pinkham (D. C.) 211 Fed. 728; Roberts v. Pac.
& A. Ry. & Nav. Co., 121 Fed. 785, 58 C. C. A. 61 ; Carson v. Hyatt,
118 U. S. 279, 6 Sup. Ct. 1050, 30 L. Ed. 167. Thèse décisions were
correctly based upon the obvious reason that the défendants should
be accorded the right to unité in a pétition to remove a case, where
they could hâve removed severally, if sued alone. But it has also been
held that the fédéral courts hâve no jurisdiction of a case in whicli
both the plaintiff and the défendant are aliens. Montalet v. Murray,
4 Cranch, 46, 2 L. Ed. 545 ; Mossman v. Higginson, 4 Dali. 12, 1 L.
Ed. 720; Cunard S. S. Co. v. Smith, 255 Fed. 846, C. C. A. ;
Pooley V. Luco (C. C.) 72 Fed. 561. Neither of thèse rulings is appli-
cable to the instant case. If thèse défendants had been sued separately,
one of the suits would hâve embraced an alien plaintiff and a citizen
COMPAJNLâ. MINERA Y COMPRADOEA, ETC. V. AMEKICAN M. CO. 187
(262 F.)
défendant, and the other would hâve been between an alien plaintifï
and an alien défendant. The former case, conceding the inapplicability
of the doctrine announced in the case of In re Wisner, 203 U. S. 449,
27 Sup. Ct. 150, 51 L. Ed. 264, which I do not find it necessary to dé-
cide, would be removable, and the latter would not be removable.
It is well settled that, where there are several plaintifïs and défend-
ants, each plaintiff must be capable of suing each défendant in the féd-
éral courts. Strawbridge v. Curtiss, 3 Cranch, 267, 2 L,. Ed. 435 ;
New Orléans v. Winter, 1 Wheat. 91, 4 L. Ed. 44; Coal Co. v. Blatch-
ford, 11 Wall. 172, 20 L. Ed. 179; Cuebas Y Arredondo v. Cuebas Y
Arredondo, 223 U. S. 376, 32 Sup. Ct. 277, 56 L. Ed. 476; Hooe v.
Jamieson, 166 U. S. 395, 17 Sup. Ct. 596, 41 L. Ed. 1049; Peninsular
Iron Co. V. Stone, 121 U. S. 631, 7 Sup. Ct. 1010, 30 L. Ed. 1020.
If the défendant is an alien and one of the plaintifïs is also an alien,
though the others are citizens of a state, the fédéral court has no
jurisdiction. Black's Dillon on Removal of Causes, § 84, citing Saw-
ver V. Switzerland Marine Ins. Co., 14 Blatchf. 451, Fed. Cas. No.
12408.
Tested by this rule, it is cle^r that, as the plaintifï and one of the
défendants are aliens, this court has not original jurisdiction of this
case, and same cannot be brought hère from the state court by removal
proceedings.
[8] It is also worthy of note that the alien défendant does not join
in the pétition for removal, and therefore, if this were a removable
case, it would hâve to be remanded for that reason. C, R. I. & P. Ry.
Co. v. Martin, 178 U. S. 245, 20 Sup. Ct. 854, 44 L. Ed. 1055 ; Stone v.
South Carolina, 117 U. S. 430, 6 Sup. Ct. 799, 29 L. Ed. 962; Flet-
cher V. Hamlet, 116 U. S. 408, 6 Sup. Ct. 426, 29 L. Ed. 679. To per-
mit the citizen défendant to remove this case upon his pétition alone
would be to hold that he had the right to remove under the "separable
controversy" provision of the statute — a right which, as we hâve al-
ready seen, is not accorded to défendants in suits between "a citizen
of a state and foreign states, citizens or subjects."
Counsel for the défendant petitioning for removal contends that
the alien défendant may be disregarded in considering this motion to
remand, and in support of such contention cites the case of lowa
Lillooet Gold Mining Co. v. BUss et al. (C. C.) 144 Fed. 446. I do
not consider that case in point. Bliss in that case was held to be nei-
ther a proper nor a necessary party, and was therefore misjoined. In
this case, the alien défendant, as we hâve seen, was a proper party,
against which the plaintifï sets up a cause of action properly joined
and necessary to aiïord full relief to the plaintifï.
The motion to remand is granted.
188 2C2 FEDERAL EEI'OIIÏEU
UNITED STATES v. PHILADELPHIA, B. & W. R. CO,
(District Court, B. D. Pennsylvania. Jauuary 2, 1920.)
No. 5246.
1. Internai bevenue i®=>9 — Stock dividends not subject to corporation'
excise tax.
Under the Corporation Excise Tax Act of August 5, 1909, a corporation
stockholder is not taxable on stock dividends received.
2. iNTEBNAt BEVENUE <@=»9 CORPORATION EXCISB TAX ACT INAPPLICABLE TO
EABNINGS IN PBEVIOUS TEAKS.
Under tlie Corporation Excise Tax Act of August 5, 1909, earnings
made before 1909 cannot be considered Incoine received during tliat year,
merely because the corporation tlien distributed them in dividends.
8. INTERNAL REVENUE <S=39 CORPORATION EXCISE TAX PROPEE ON DIVIDENDS
FBOM EABNINGS IN PBEVIOUS YEAR8.
Under the Corporation Excise Tax Act of August 5, 1909, a corporation
holding stock in another concern is liable on dividends declared by sucli
concern in 1910, although such dividends represented in part earnings
made before January 1, 1909.
4. INTERNAL REVENUE <S=>7, 9 — "EXCISE TAX" AND "INCOME TAX" DEFINED.
An "excise tax" is an indirect chargé for the privilège of following an
occupation or trade, or carrying on a business ; vrhile an "income tax" is
a direct tax imposed upon income, and is as directly imposed as is a tax
on land.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Excise.]
5. CONSTITUTIONAL LAW <S=>70(3) LEGISLATIVE MEASUBE OF EXCISE TAS CON-
CLUSIVE.
Though Congress, in levying an excise tax, should restrict the measure
of the tax to income derived from the occupation or business with respect
to which the tax is levied, yet the measure flxed Is conclusive on Uie
courts.
At Law. Action by the United States against the Philadelphia, Bal-
timore & Washington Railroad Company. On rule for judgment for
want of a sufficient affidavit of défense. Leave to enter a specified
judgment for plaintiff.
Robert J. Sterrett, Asst. U. S. Atty., and Francis Fisher Kane, U.
S. Atty., both of Philadelphia, Pa.
John Hampton Barnes, of Philadelphia, Pa., for défendant.
DICKINSON, District Judge. This case cornes before us with the
efïect of a case stated ; the f acts being stipulated and to be treated as
if incorporated in an affidavit of défense. The facts are as follows :
(1) The Delaware Railroad is a corporation, whose activities are
limited to what is necessary to the continuance of its corporate exist-
ence. In conséquence, vinder the doctrine of the Minehill Case, it is
not liable to the payment of an excise tax, and did not pay one.
(2) The défendant corporation is the operating company, and op-
érâtes the railroad of the Delaware Company through the part owner-
ship of the stock of the latter company and an operating arrangement
satisfactory to the two companies and their stockholdcrs.
©=»Foi otber cases see samo topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
UNITED STATES V. PHILADELPIIU, B. & W. B. CO. 189
(2G2 P.)
(3) On February 21, 1910, the Delaware Company declared, and on
February 28th of the same year paid, dividends, of which the défend-
ant corporation received a large part.
(4) The dividends received were as f oUows :
Spécial cash dlvldend of 5 per cent $ 83,223.75
Extra cash divldend of 20 per cent 332,895.00
Stock divldend of 70 per cent 1,105,132.50
Total $1,581,251.25
(5) The source of thèse cash dividends was earnings of the Dela-
ware road divided as f ollows :
Before January 1, 1909 $334,8^9.2»
Since January 1, 1909 81,229.40
$410,118.75
(6) There may be added to this statement, although not the statement
of a fact, that Act Cong. Aug. 5, 1909, c. 6, 36 Stat. 112, by section
38 subjects every corporation to the payment of a spécial excise tax,
équivalent to 1 per centum, upon "the entire net income * * * re-
ceived by it from ail sources during such year," etc.
(7) That counsel agrée that the questions presented for décision
are whether the défendant is liable for the tax upon or rather meas-
ured by
(a) The stock dlvldend of $1,165,132.50
(b) The part of the cash dividends repr&sented bv the earnings
after January 1, 1909 81,229.46
(c) The part of the same represented by eai'uings before January
1, 1909 334.889.29
[1] (a) With respect to question (a), we understand it to be admit-
ted that no tax is payable because of the stock dividend under the
rulings in Towne v. Eisner, 245 U. S. 418, 38 Sup. Ct. 158, 62 L. Ed.
372, L. R. A. 1918D, 254, and Peabody v. Eisner, 247 U. S. 349, 38
Sup. Ct. 546, 62 L. Ed. 1152. In conséquence no discussion is called
for. It may be stated, in explanation, that this cause was ripe for heaf„
ing when the later cases were pending in the Suprême Court, and the
présent case was held awaiting the rulings to be made.
[2] (b) and (c) With respect to questions (h) and (c), it may be
premised that if we were dealing with the case of a corporation which
received earnings in one year, which it made the subject of the payment
of dividends to its stockholders in another year, we would regard it as
clear upon principle and authority that such earnings were no part
of the income of the corporation during the latter year, merely be-
cause a dividend was declared in that year. If, therefore, the Dela-
ware Company were not within the doctrine of the Minehill Case,
'228 U. S. 295, 33 Sup. Ct. 420, 57 L. Ed. 842, and was subject to the
1909 tax, there could be no finding that the earnings before 1909 was
income received during that year, nor during the year 1910 merely be-
cause then distributed in dividends. Southern Pacific v. Lowe, 247 U.
S. 330, 38 Sup. Ct. 540, 62 L. Ed. 1142.
[3] It does not follow, however, that a dividend declared in 1910.
190 262 FEDERAL EEPOETER
although necessarily out of earnings received at an earlier date, would
not be part of the 1910 income of a stockholder of that company. On
the contrary, we think it clear that it would be such. The Southern
Pacific Case is not in conflict with this conclusion, although it is true it
was there held that the dividend received by the stockholder was re-
ferred back to the time the earnings came to the Central Pacific cor-
poration, because the ruling made was based upon the peculiar rela-
tions of the two companies, which were in fact such that they were
held to be one and the same, and the question was in conséquence ruled
as if it had been one of the liability of the Central Company.
If, therefore, it were a fact in this case that the Delaware road was
but another name for the défendant, or merely the hand by which the
défendant received thèse moneys before 1909, they would not be held
to be 1910 income, merely because there was a bookkeeping transfer
at that time, but would be held to be the income of the years before
1909, when the moneys in fact came to the défendant. There is, how-
ever, no such fact in this case, but, on the other hand^ the défendant is
in this case merely as a stockholder of the Delaware road.
The case of Lynch v. Hornby, 247 U. S. 339, 38 Sup. Ct. 543, 62
L. Ed. 1149, is distinguished by counsel for the défendant. Whether
properly so or not we do not stop to inquire, because, as we view it,
the real doctrine of Southern Pacific v. Lowe sustains the proposition
that dividends received by a stockholder are part of bis income during
the year in which they corne to him. Counsel for défendant seems to
read the latter case as ruling that the dividends there would not hâve
been held taxable as income of the year in which received, except for
the fact of the peculiar relations of the two companies. We read the
ruling as precisely the reverse of this, and that the dividends would
hâve been held taxable, except for this peculiar state of facts.
We confess to a feeling of being staggered by such a différence with
capable and careful counsel with whom we would at any time hes-
itate to differ, and as we hâve not otherwise been able to reconcile
the différence, we hâve sought to find it in the thought of the stock-
holder being a corporation. There is, of course, a fundamental dif-
férence between an income tax and an excise tax, both with respect to
what is taxed and the source of the power to tax.
[4] We are concerned wholly with an excise tax. Whether it is a
scientifically accurate concept of it or not, the concept of it as a charge
for the privilège of following an occupation or trade, or carrying on a
business, gives us a fairly good working idea of what it is. It is,
in conséquence, an indirect tax, and has no référence to earnings or
income, except that the sum of such earnings or income may (as any-
thing else may) be made the measure of the tax. An income tax, on
the contrary, is a direct tax imposed upon the thing called income, and
is as directly imposed as is a tax on land.
[5] If, therefore, an argument were being addressed to a legislator,
ît might be well urged that in f raming an excise tax the measure should
be limited to the yield, profits, or earnings of the occupation or busi-
ness with respect to which the tax is imposed, and the measure should
not be enlarged by the income which the taxpayer derived from other
UNITED STATES V. SMITH 19^
(262 p.)
sources wholly disconnected with the occupation or business "with re-
spect to the carrying on or doing which" he is made subject to the tax.
If, however, the legislator rejected the argument (as the exception in the
act of 1909 proves was done), and applied the larger measure, the courts
would be powerless to make the correction, even if it were assiuned to
be demanded by the justice of the case. In point of fact there would
be little merit in the argument as applied to the facts of this case, be-
cause thèse dividends are as much eamings as any other part of what
the défendant receives.
Without a further prolongation of the discussion, we are of opinion
that the excise tax imposed by the act of 1909 and measured by both
thèse cash dividends is payable by the défendant. As the amount of
the judgment to be entered is a matter of calculation, and in order that
it may hâve a definite date, no judgment is now entered, but counsel
has leave to enter the judgment indicated in this opinion to be the
proper one.
UNITED STATES y. SMITH.
(District Court, D. Indiana, at Indlanapolis. January 3, 1920.)
No. 1358.
1. POST OFFICE ®=»27 DEFENDANT, PRESENTIN» AFFIDAVITS OF OWNBBaHIP OF
NEWSPAPE^E, CANNOT UBGE THAT TUEY WEBE NOT AFFIDAVITS, IN PBOSECU-
TION FOB THEIB FALSITT.
Where défendant, pursuant to Act Aug. 24, 1912, § 2 (Comp. St. § 7313) ,
presented affidavits taken before a notary as to the ownership of a news-
paper, défendant cannot, In a prosecution for thelr falsity under Criminal
Code, § 28 (Comp. St. § 10192), urge that, because taken before a notary,
they were not affidavits within the act.
2. PosT OFFICE <S=27 — Making of affidavit containing fai.se statements
NOT ALTEEATION, FOEGEBT, OB COUNTEErEITING OF SAME.
The making of an affidavit containhig false statements, though the
same was delivered to the postal authorlties to show the ownership of a
newspaper, as required by Act Ck)ng. Aiig. 24, 1912, § 2 (Comp. St. § 7313),
does not fall within Criminal Code, § 28 (Comp. St. § 10192), denouuclng
the offense of falsely making, altering, or counterfeitlng affidavits, etc. ;
the affidavit being In fact genuine.
Delavan Smith was indicted for violation of Criminal Code, § 28,
for making a false affidavit as to the ownership of a newspaper. On
demurrer to the indictment. Demurrer sustained.
L. Ert Slack, U. S. Atty., of Indianapolis, Ind.
Ferdinand Winter and Miller, Dailey & Thompson, ail of Indian-
apolis, Ind., for défendant.
ANDERSON, District Judge. An act of Congress passed August
24, 1912 (37 Stat. 553, c. 389 [Comp. St. § 7313]), provides:
"That It shall be the duty of the editor, publisher, business manager, or
owner of every newspaper, magazine, periodical, or other publication to flle
with the Postmaster General and the postmaster at the office at which said
publication is entered, not later than the first day of Aprll and the flrst day
®=»For other cases eee same topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexe»
192 262 FEDBEAL RlirOUÏEU
of October of each year, * • • a sworn statement setting forth the namea
and post office addresses of the editor and managing éditer, publisher, business
managers, and owners. * • ♦ " Section 2.
This statute f urther provides :
"Any such publication shall be denied the privilèges of the mail If It shall
fall to comply with the provisions of this paragraph within ten days after
notice by registered letter of such failure."
Section 28 of the Criminal Code (Act March 4, 1909, c. 321, 35
Stat. 1094 [Comp. St. § 10192]) provides as follows:
"Whoever shall falsely make, alter, forge, or counterfeit, or cause or pro-
cure to be falsely made, altered, forged, or counterfeited, or willingly ald,
or assist In the false making, altering, forging, or counterfeitlng, any bond,
bid, proposai, contract, guarantee, securlty, ofEcial bond, public record, afE-
davlt, or other wrlting for the purpose of defrauding the United States; or
shall utter or publish as true, or cause to be uttered or published as true,
or hâve In his possession with the intent to utter or publish as true, any such
false, forged, altered, or counterfeited bond, bid, proposai, contract, guarantee,
seeurity, officiai bond, public record, affldavit or other wrlting for the pur-
pose of defrauding the United States, knowing tlie same to be false, forged,
altered, or counterfeited ; or shall transmit to, or présent at, or Cause or
procure to be transniitted to, or preseuted at, the office of any officer of the
United States, any such false, forged, altered, or counterfeited bond, bid,
proposai, contract, guarantee, securlty, oflicial bond, public record, affidavit,
or other wrlting, knowing the same to be false, forged, altered, or counter-
feited for the purpose of defrauding the United States, shall be flned not
more than one thousand dollars, or imprisoned not more than ten years, or
both."
On October 21, 1919, the défendant was indicted by the grand
jury for the violation of the varions clauses of this section. The in-
dictment is in 20 counts, and thèse varions counts are based upon
four affidavits, dated, respectively, October 1, 1912, April 1, 1918,
September 30, 1918, and March 31, 1919.
Thèse affidavits are not charged in any count of the indictment to
be forged or counterfeited, in the technical sensé of the term. They
are charged to be genuine as to their exécution, but false as respects
one of the material statements in them ; that is, as to the ownership
of the newspaper. Each count is based upon one of thèse affidavits,
and each of them is averred to hâve been sworn to before a notary
public.
Two objections are made to the indictment and to each count of it.
One of the objections made is that —
"A notary public is not an officer authorized by any statute of the United
States to administer an oath in référence to the matters to whlch sald atïi-
davit relates."
[1] It is earnestly contended that, this being se, the affidavit is
not an affidavit, as alleged in the indictment, and that this defect
appears upon the face of the indictment. If the défendant, as alleged
in the indictment, presented thèse affidavits to the postmaster in In-
dianapolis as affidavits, he cannot now be heard to say that they are
not affidavits.
In Ingraham v. United States, 155 U. S." 434, 15 Sup. Ct. 148, 39
L. Ed. 213, the Suprême Court had before it this question. Ingra-.
UNITED STATES V. SMITH 193
(262 F.)
ham was indicted for presenting to the Third Auditor of the Treas-
ury an affidavit in support of a fraudulent scheme against the govern-
ment, and upon his trial the objection was made that the affidavit,
which had been sworn to before a justice of the peace, was not ad-
missible in évidence without proof that the justice had been duly
commissioned and qualified as a justice of the peace. The Suprême
Court said, on page 437 of 155 U. S. (15 Sup. Ct. 149, 39 L. Ed.
213) :
"Even If Eemlngton [the justice of the peace] had not been properly com-
missioned, or had not qualifled, so as to entitle him, in law, to discharge
the functions of a justice of the peace, the paper presented by the défendant
to the Third Auditor of the Treasury for the purpose of obtainlng the pay-
ment or approval of his daim, being In the form of an affidavit, must, for ail
the purposes of this prosecution, be talien to be an affidavit If he knew
that the statement in that paper, descriljed in the indictment, was fraudulent
or flctitious, he was not the less guilty ♦ * ♦ because of the fact, if such
was the fact, that Remlngton had not been duly commissioned as a justice
of the peace, and was not, for that reason, entitled to administer the oath
certifled by him. » * * He is estopped to deny that the document or
writing so used was not what it purports to be, namely, an aiiidavlt"
The several counts of the indictment are therefore not bad upon
this ground.
[2] It is, however, insisted by the défendant that the différent
paragraphs or clauses of section 28 apply only to forged instruments,,
and not to instruments which are genuine as to exécution, but false
as to the facts contained in them. The Suprême Court has not passed
upon this section 28, so far as the researches of counsel hâve dis-
closed; but section 29 (Comp. St. § 10193), which reads as follows:
"Whoever shall falsely make, alter, forge, or eounterfeit, or cause or pro-
cure to be falsely made, altered, forged, or counterfeited, or willingly aid, or
assist in the false making, altering, forging, or counterfeiting, any deed, power
of attomey, order, certiflcate, receipt, contract, or other writing, for the pur-
pose of obtaining or receiving or of enabling any other person, either directly
or indirectly, to obtain or recelve from the United States, or any of their
officers or agents, any sum of money; or whoever shall utter or publish as
tnie, or cause to be uttered or published as true, any such false, forged,
altered, or counterfeited deed, power of attomey, order, certiflcate, receipt,
contract, or other writing, with Intent to defraud the United States, knowing
the same to be false, altered, forged, or counterfeited ; or whoever shall trans-
mit to, or présent at, or cause or procure to be transmitted to, or presented
at, any office or offleer of the Government of the United States, any deed, power
of attomey, order, certiflcate, receipt, contract, or other writing, in support
of, or in relation to, any account or ciaim, with intent to defraud the United
States, knowing the same to be false, altered, forged, or counterfeited, shall
be flned not more than one thousand dollars and imprisoned not more than
ten years"
— has been before the Suprême Court twice.
In United States v. Staats, 8 How. 41, 12 L. Ed. 979, the Su-
prême Court construed the last clause or paragraph of section 29.
The indictment in that case was based upon an affidavit, genuine in
fact, but containing what was alleged to be a false and untrue state-
ment. One of the questions before the court was whether the acts
charged in the indictment constituted an offense within the last
262 F.— 13
194 2G2 FEDERAL REPORTER
clause of this section 29. The court said, on page 46 of 8 How.
(12 L. Ed. 979) :
"The court are of opinion that the offense charged in the indictment comea
witliln the statute. The only doubt that can be ralsed Is whether the writing
transmltted or presented to the commissloner In support of the clalm for a
pension should not, within the meaning of the statute, be an instrument forged,
or counterfeited, in the tedinical sensé of the term, and not one genuine «s
to the exécution, but false as it respects the facts embodied in it.
"The instruments referred to in the flrst part of the section, the false
making or forglng of which, with the intent stated, is made an offense, proba-
bly are forged instruments in a strict technlcal sensé; and there is force,
therefore, in the argument that the subséquent clause, making the transmis-
sion or présentation of deeds or other writings to an offlcer of the government
a similar offense, had référence to the same description of instruments."
But the court held, because of the language of the last clause of
the section, "any deed, power of attorney," etc., that it embraced the
instrument counted upon in the indictment.
In United States v. Davis, 231 U. S. 183, 34 Sup. Ct. 112, 58 L.
Ed. 177, the Suprême Court again had the same question before it;
that is to say, whether the third paragraph of section 29 included
only documents which were forged or counterfeited, and therefore
excluded ail other documents, no matter how fraudulent they might
be. The court said:
"Coming to the text of the third paragraph, we think it is at once apparent
that its provisions are so comprehensive as to prevent us from holding that
they Include only documents which are forged or counterfeited, and hence
exelude ail other documents, however fraudulent they may be. The ail em-
braclng words, 'any deed, power of attorney, order, certifleate, receipt, or
other writing in support of or In relation to any account or claim with intent
to defraud the United States, knowing the same to be false, altered, forged,
or cotmterfeited,' leave room for no other conclusion. The context of the
section relnforces thIs vIew, since the contrast between the narrow scope of
the flrst two paragraphs and the enlarged grasp of the third shows the légis-
lative Intent, after fully providing In the flrst two paragraphs for forged
and counterfeited documents, instruments, etc., to reach by the provisions of
the third paragraph, any and ail fraudulent documents, whether forged or
not forged, and thus efiiclently to deter from commlttlng the wrong whieh It
was the purpose of the section to prohibit"
The court then refers to the case of United States v. Staats and
says:
"The court [in that case] fully analyzed the statute, and whlle conceding
that other clauses of the act dealt with forged instnunents in a technlcal
sensé, concluded that the case [under the third clause] was within both the
letter and the spirit of the act."
When the court in the Davis Case based its construction of the
statute upon the "narrow scope" of the first two paragraphs and the
''enlarged grasp" of the third, it, in eiïect, decided that the first two
paragraphs should hâve the narrow scope contended for; that is,
they embraced only forged or counterfeited instruments in a technlcal
sensé.
Section 28 has no such "all-embracing words" in any of its para-
graphs, such as are found and expressly relied upon by the Suprême
Court in its construction of section 29. The second and third para-
EASTEBN TRANSP. CO. V. EAST CAEOLINA LUMBEB CO. 195
(2C2 F.)
graphs of section 28 each uses the words "any such false, forged,"
etc. It therefore follows that, so far as section 28 is concerned, it
only embraces forged or counterfeited instruments in the technical
sensé, and does not include instruments wliich are genuine, but which
contain statements which are not true in fact. This construction as
to the meaning of the words "falsely make, forge or counterfeit" is
strengthened by the fact that the sections of the statute, making it a
crime to forge or counterfeit the coins or paper money of the United
States, use thèse exact words, as, for example, section 163 (Comp.
St. § 10333) :
"Whoever shall falsely make, forge, or counterfeit, or cause or procure to
be falsely made, forged, or counterfeited"
—and section 164 (Comp. St. § 10334) :
"Whoever shall falsely make, forge, or counterfeit, or cause or procure to
be falsely made, forged, or counterfeited."
It follows that no count of the indictment states an offense under
section 28, and the demurrer should be and is accordingly sustained.
EASTERN TRANSP. CO. v. EAST CAROLINA I^UMBER CO. (PHILADEL-
PHIA & READING COAL & IBON CO., Gamishee).
(District Court, E. D. Pennsylvania. January 8, 1920.)
No. 23.
1. SnippiNG <S=»39 — Obligation or shipownee undeb chaeteb paett to
rUENISH BAEQES.
The obligation of one who had agreed by a charter party to supply
barges for 18 voyages for a stipulated hire could be met only by perform-
ance, or by something which excused performance in whole or in part
2. Shipping iS=>52— Baege ownee, on default of chaeteeke, has choicb
of remedies.
Where shipper, who had chartered barges for 18 successive voyages,
failed to perform by paying the freight and demurrage as stipulated, the
owner may déclare the breach and refuse further performance, recovering
any sum already due, together with damages for breach, or disregard the
breach and elect to continue performance.
3. Shipping <g=352 — Ownee of baeges, on beeach mat sue foe beeach of
CHAETER.
Where the owner elected to continue performance, notwithstanding the
default of the charterer, who had chartered barges for 18 successive voy-
ages, such élection carries with it the rlght to demand and bring an action
tn afflrmance of the contract for each installment for freight and démar-
rage as it becomes due.
4. Shipping t@=»52 — Shipownee's élection to declaeb ob waive is final.
Where a shipper, who had chartered barges for 18 successive voyages,
defaulted in payment of freight and demurrage, the owner's élection to
déclare the breach, or to waive it, is final, except in case of a right of
an élection in successive breaches.
6. Shipping <S=»52 — Shipownee cannot declaeb beeach of chaetee afteb
HE HAD WAIVBm SAME.
Where an owner, who had chartered barges for 18 successive voyages,
did not elect to déclare the breach on the shipper's default In payment of
«ssFor other cases see same toplo & KSY-NUMBER In ail Key-Numbered Digests & Indexes
19C 202 FEDERAL EEPOUTEK
freight and demurrage, the owner, having waived Bhe default, cannot,
after hls own subséquent default, déclare a breach and recover therefor.
6. Shipping <S=351 — Request of shipper for eahlieb delivebt of vessei,
than chartes paett pbovideid no defense fob failuee to furnish ves-
sels at time peovided.
Where the owner, who agreed to fumish barges for 18 successive voy-
ages, for some time delivered them aecording to the charter party, and
then defaulted, it is no défense to defaults that the shipper asked for
barges faster than the contract schedule, and then failed to load them
and promptly pay demurrage and freight.
7. Shipping (©=351 — Inabilitt to pbocube tugs no défense to failube to
FURNISH BABGES AS PEOVIDED.
Where an owner chartered barges for 18 successive voyages, and the
charter party did not make any exceptions to the owner's inability to get
tugs, the owner's inability to get tugs will not excuse f allure to délirer
barges accordiiig to the charter party.
8. CONTEACTS <g=3316(4) TlMEl OF ELECTION TO DECLARE BEEACH ON DEFAULT
OR TO WAIVE IT.
Where one party to a contract defaults, the Innocent party has a right
of élection, which occurs at each succeeding default, but the élection cannot
be deferred until after the contract is at an end and the rights of the
parties hâve become otherwise flxed.
9. Shipping <@=>37 — Willingness to contract not équivalent to enteeino
into charter party.
A statement by an owner of barges that In effect that It was willing
to enter into a charter party embodying the contract suggested by the
shipper, but that it would not agrée until the contract was put into forni,
Is not équivalent to a contract, and cannot be made basis of an action.
In Admiralty. Libel by the Eastem Transportation Company
against the East Carolina Lumber Company, and with the Philadelphia
& Reading Coal & Iron Company as garnishee. Sur trial hearing on
Ubel, answer, and proofs. Libel dismissed, as well as cross-libél filed
by respondent.
Willard M. Harris, of Philadelphia, Pa., for libelant.
Wm. Clarke Mason, of Philadelphia, Pa., for respondents.
DICKINSON, District Judge. The propositions by which this case
is ruled are broadly stated thèse:
[1] 1. The obligation assumed by libelant under the charter party
was to supply barges for 18 voyages, and its right was to receive the
freight eamed and demurrage due when payable.
2. This obligation could be met only by performance or something
which excused performance in whole or part.
[2] 3. If the shipper failed on his part to perform, by paying freight
and demurrage as stipulated, the libelant had one of two rights : One
was to déclare the breach and refuse further performance by declaring
the contract off, recovering what was due, including damages for the
breach of the contract ; the other was to disregard the breach, elect
to continue performance notwithstanding the default, and recover,
when the contract was performed, ail to which it was entitled,
[3] 4. This latter right would car ry with it as its corollary the right
to demand and bring an action in affirmance of the contract for each
installment of freight and demurrage as it became due and payable.
^=>For other cases see same topic & KEY-NUMBKR in aU Key-Numbe^ed Dlgests & Indexe»
EASTERN TRAXSP. CO. V. EAST CAROLINA LUMBER CO, 197
(262 F.)
[4] 5. The two rights mentioned are, however, alternative riglits,
and, although either might be exercised by the libelant at its élection,
the élection, when made, was final (except that the right of élection re-
cuiTed at each succeeding breach), and the élection to keep the con-
tract in force kept alive ail the obligations of both parties thereunder.
[5] 6. The libelant, having waived defaults in the payment of
freights and elected to keep the contract in force, had no right after
its own subséquent default, and after the time of performance was
past, to déclare a breach and recover on the contract, which had not
been performed.
The parties to this action hâve, by their sins of commission and omis-
sion, or at least the confusion in their dealings with each other, creat-
ed so many difficulties with which their proctors must cope, and hâve
cast upon the trial court such an imnecessarily heavy burden of work,
that they hâve forfeited ail claims to considération, and deserve to be
left where, at the close, they found themselves to be. In the first
place, they left open to dispute whether they had made one contract or
two. In the second place, neither had, or at least neither acted upon,
any clear concept of what contract it claimed to hâve. In the third
place, although this is doubtless a conséquence of the others, each was
seeking to secure ail the rights which could possibly flow to it out of
the contractual dealings between them, without paying the slightest
attention to the obligations upon which those rights depended. Nei-
ther even seems to bave known or regarded as of any importance with
whom it had a contract.
The thread by which we may fînd our way out of the labyrinth
which the parties hâve builded is found, if there is any, in the thought
that the two lumber companies made one or more contracts, and then
sought to perform by foUowing the requirements of another contract,
which the respondent Turner had made with the garnishee. The resuit
was that each was complaining of defaults of the other, based, not
upon the charter party between them, but based upon the Turner
contract. The same explanation, in another form, is that the libelant
was looking to the first contract, and the respondent to what has been
called the second contract of July 23d.
Proctor for respondent and the cross-libelant has eut the gordian
knot of his difficulties by averring the existence of a second contract,
and taking his stand upon it. In conséquence, ail he claims dépends
upon the finding of such second contract. Proctor for libelant and the
cross-respondent has been able to find no such short and straight road
out of his difficulties. He has made it entirely clear that the libelant'
seeks to recover the f reight claimed to hâve been earned by two barges
and demurrage due to seven others.
The basis of his claim of right, or his cause of action, is, however,
by no means of like clearness. The best he has been able to do, as it is
perhaps the best which could be done, is to take his stand upon the
broad ground that the libelant had a contract which, if performed, or
which, so far as performed, gave it the right to what is claimed, and
that full performance was excused by respondent's breach, which, when
198 2(;2 ri:ni;;;AL iiîcroinT.R
declared, gave libelant the riglit, of which it availed iself, to call off
the contract and recover for what it had donc therennder.
The proposition of law involved in this statement of the position of
the libelant is in itself clear enough and is sound. The difficulty is in
applying it to the fact situation which this case présents. A statement
of the facts in anything lil<e détail would expand this opinion, already
overlong, to an impossible length. The proctor for the libelant, with
an industry and care for which he is to be commended, has grouped
some of them for us in his brief. This statement we hâve found very
helpful. Notwithstanding his efforts, however, to keep the statement
within limits, by confining it to the most salient facts, he has required
nearly 60 pages for the discussion. This gives a foretaste of what an
inquiry into ail of the matters in controversy would involve. To meet
the task as best we may, we will confine this opinion, so far as possible,
to a statement of the main facts upon which the rulings made dépend,
and discuss the evidentiary facts, along with the findings of fact,
which will be filed herewith.
We feel grateful, also, to the proctor for respondent, who has, as
before stated, rested his défense, so far as it is affirmative, and his
cross-libel whoUy, upon the existence of the second contract, which he
asks us to find.
One of the many difficulties which an adéquate discussion of the
merits of this case présents is that there are so f ew, if any, facts which
may be called undisputed. The contract, even of the parties, is in dis-
pute. It is not in dispute however, that the lumber companies exe-
cuted the charter party, which bears date July 10, 1915. Nor is its
meaning in dispute.
The libelant was to hâve ready for loading at the James City
wharves, Newbern, N. C, 18 barges, one on each of named dates,
"fhese dates covered the period from August to March, both inclusive,
and called for two barges a month, one on the Ist and the other on
the middle day of the month, except during the months of October
and November, when a third barge was to report on the 26th of each
month. Thèse arrivais were to be "on or about the date named,
weather conditions permitting." The freight was made payable on
delivery of cargo. As will appear by the findings of fact, in which
the movements of each barge are followed, the libelant had a barge to
report for loading always on time, and usually ahead of time, until
November 26, 1915. This statement includes 9 barges out of the 18.
There was a barge due on that date, and another on December Ist
following. The next barges to arrive reported December 6th and
lOth. No other barges reported until February 14, 1916, although
there were 4 barges due on the intermediate dates and one on that
date. The next contract arrivai dates were March Ist and 16th (the
latter being the closing date of the contract), but no barges reported
until March 20th and April 20th. The freight on neither of the two
last barges was paid. The libelant supplied no more barges.
It is to be observed that it supplied 9 barges in accordance with its
contract; then 2 barges, each of which was 11 days behind schedule;
then no barges for four trips; then one barge, which was 2 months
EASTEKN TKANSP. CO. V. EAST CAEOLINA LUMBEE CO. 199
(262 F.)
late, or on time, according to which date you refer it, and then two
barges, which were 20 and 36 days, or 80 and 86 days, late, according
as you refer them to the nearest or the unfilled arrivai dates. It will
be further noted that neither of the two last-named barges was sup-
plied within the contract time, and that 5 of the barges were never
supplied.
[6] The libelant, in conséquence, is confronted with thèse ques-
tions: (1) How can it recover on a contract to furnish 18 barges,
after it has refused to perfomi? (2) How could it excuse nonper-
formance by declaring a breach of the contract, when it was itself in
default, and after the time Hmit of the contract had expired?
The only answer counsel for libelant puts f orth is that the respond-
ent nagged and harassed the libelant, by asking for barges f aster than
the contract schedule, and then not loading them, and by not paying
promptly either demurrage or freight, and that libelant was hampered
in having its barges on time by its inability to get tugs to tow them.
However real its troubles and difficulties may hâve in fact been,
and they were real enough, we see in them no légal excuse for non-
performance. The first excuse is either unjustified or a dangerous
one to make. The charter party called for a schedule which, until
November 26th, was more than met. The answer of libelant to com-
plaints made during this time was ready at hand. It was more than
living up to its contract. Complaints after that date were not only
justified, but respondent might well hâve called off the contract.
The respondent has set up a second contract to furnish one addi-
tional barge per month. This second contract the libelant dénies. If
the complaints of the respondent were because of nonperformance of
this second contract (and the fact is it was in no respect performed),
the libelant recognized the existence of this contract by attempting to
perform or to excuse nonperformance.
[7] The second excuse, however well grounded in fact, and it is
very strongly supported, affords no excuse in law. The libelant con-
tracted to supply barges at stated times. Bad weather might prevent
performance, and it contracted itself out of liability in the event of
default so caused. If it was unwilling to assume the duty of towage,
or providing it, such a stipulation should hâve been inserted, or it
should hâve protected itself through a tug contract. The courts can-
not protect it against the conséquences of contracting to do more than
it was able to perform.
[8] The real situation was this: The complaints of the respond-
ent before November 26th were unjustified, except on the basis of a
second contract. There were repeated defaults in the payment of
freights. The libelant had just cause to déclare a default, but it could
not waive this default and hold to the contract, and at the same time
use thèse waived defaults as an excuse for its own subséquent defaults,
or for nonperformance of its contract.
The conclusions reached are that the libelant has shown no cause of
action, because it has admittedly not performed in fuU, nor has it
shown a right to recover for part performance, through excusing full
performance by declaring a breach because of the default of the other
200 262 FEDERAL REPORTER
party to the contract ; no breach having been declared untîl the libel-
ant was itself in def ault, and the tinie of performance by it was past.
It may be that this places the libelant in the position of being the vic-
tim of its own indulgence to the respondent. If it had declared a
breach at any time upon failure of the shipper to pay freights, it
could hâve relieved itself of ail ftirther obligations under its contract.
The respondent would then hâve been at liberty to secnre barges else-
v.'here. It had the right to hold to its contract. nnd thus keep in force
the obligation of the shipper to take the barges. The keeping of the
contract in force meant, however, the continuance of its own obliga-
tion to perform.
A contract, even after one party is in default, is either on or off, and
although the innocent party bas the right of élection, and although the
right recurs at each succeeding default, it is a right which must be
exercised during the life of the contract, and the élection cannot be
deferred nntil after the contract is at an end, and the rights of the
parties Kave become otherwise fixed.
[9] The conclusion that the libel must be dismissed makes it un-
necessary to discuss any of the other questions which arise, except
those arisi.ig under the cross-libel. This is founded upon the propo-
sition that the letter of July 23, 1915, is contractual. Our finding, as
.stated, is that it is not. Willingness of the parties to contract is not
cnough. The letter of libelant is in effect that it was willing to enter
into a charter party embodying the contract suggested by the respond-
ent, but that it would not so agrée unless and until the contract was
put in that fonn. As already twice stated, the claim of the cross-
libel is based on the second contract and falls with it. The real situa-
tion with respect to the charter party contract is that neither of thèse
parties has a claim against the other, because neither has performed.
An order may be prepared, dismissing both the libel and cross-libel,
each party to pay their own costs, and neither party to pay costs to
the other, the record costs to be paid by the one by whom incurred.
To give defintte date to the order none is now made, but either party
has leave to submit the form of one to be entered.
UNITED SVA.TBS v. APPLE et al.
(District Court, D. Kansas, Third Division. October 7, 1919.)
No. 110-N.
1. Indians <g=>27(l) — United States may maintain surr to prêtent Indians
FROM BEING UESPOIUBD OF ROYAITIES UNDER IJIASB APPBOVED BT GOVERN-
MENT BEPEE8ENTATIVES.
Where It was alleged that ignorant Quapaw Indians, who had with
authooty of the représentatives of the govemment leased oïl lands, were
being despoiled of the royalties through the fraud and machinations of
défendants, the govemment not only has the right, but also It is its duty,
to maintain siiit to protect the Indian lessors, for they were still in a
State of tutelage and wards of the United States.
^EsFor other cases see same topio & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexe*
UNITED STATES V. APPLE 201
(262 F.)
2. Indians <g=>27(6) — Bill bt United States against défendants, wno
WEEE DESPOILING InDIAN LESSKES OF ROYALTIES, HELD TO STATE A CATTSE
OF ACTION.
A bill alleging that défendants, one of wliom îield power of attorney
from Indian lessecs, still in tlie state of tuf«lago, liad eonsinred and were
defrauding the lessees of tho profits from oil leases made witli consent of
the représentatives of the govemment, hcld to state a eanse of action.
In Equity. Suit by the United States against Walter T. Apple and
others. On separate motions of several défendants to dismiss. Mo-
tions denied.
Fred Robertson, of Kansas City, Kan., J. A. Tellier, of Little Rock,
Ark., and Joseph W. Howell, of Washington, D. C, for plaintiflf.
Edward E. Sapp, S. C. Westcott, and E. B. Morgan, ail of Gaiena,
Kan., A. M. Keene, of Et. Scott, Kan., E. S. Bessey and G. W. Earn-
shaw, both of Joplin, Mo., Al F. Williams and G. W. Staton, both of
Columbus, Kan., Garland Biffle, of Baxter Springs, Kan., Fred A.
Walker, of Columbus, Kan., and P. E. Bradley, of Joplin, Mo., for de-
fendants.
POLLOCK, District Judge. The facts alleged in the pétition filed
herein, in so far as necessary to décision of separate motions of certain
défendants to dismiss, may be briefly stated as follows :
Benjamin and See-sah Quapaw, fuU-blooded, ignorant Quapaw In-
dians, through allotment and inheritance, being the owners of three
tracts of land in Ottawa county, Okl., described in the pétition, in due
f orm of law made certain mining leases covering the same, reserving as
rental certain royalties in the minerais to be produced therefrom. The
mining opérations conducted by the lessors under said mining leases
on said properties proved to be very successful, to the extent between
the 13th day of March, 1915, and the 31st day of December, 1917, the
cash royalties paid to the Indian Icssees under and by virtue of said
mining leases amounted to as much as $178,000. It is charged in the
bill said Indian lessees, being ignorant of business affairs and unleam-
ed, were induced to and did make to a Quapaw Indian relative, de-
fendant herein, Charles Goodeagle, a certain power of attorney, set
forth in the pleadings, purporting to empower him as attorney in fact
to collect the royalties of lessees arising from said mining opérations,
to deposit the same from time to time to the crédit of lessees in the
Baxter National Bank, of Baxter Springs, défendant herein, and, fur-
ther, to check out from said bank and expend said royalty moneys for
the use and benefit of the Indian lessees, however, in a certain and
definite manner stated in said power of attorney only, and none other ;
that said power of attorney, after its making, was lodged with and re-
tained by said bank for the purpose it might at ail times be fuUy in-
formed and know the contents of said instrument, and before payment
of any check drawn on said account, if the same was authorized by the
power conferred on said attorney in fact, Charles Goodeagle. There-
after said attorney in fact, and said national bank, and its officers, in
violation of the trust reposed in them by the Indian lessees, by virtue
of the terms of said power of attorney, and conspiring together and
®=aFor other cases see same topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes
202 262 FEDERAL REPORTER
with the other défendants named in the bill, and for the purpose of
wronging and defrauding said Indian lessees out of their vast sums
of royalties so accruing, and for the purpose of converting said roy-
alty moneys to the use and benefit of défendants, from time to time,
în violation of the terms of said power of attorney, and of the trust
reposed in them, the bank and the attorney in fact caused said royalty
moneys to be checked out of said bank and expcnded in the purchase
and improvement of many tracts of land purchased from the différent
défendants named in the bill, and, further, said attorney in fact, in vio-
lation of his trust, but conspiring with other défendants named herein,
seeking to wrong and defraud said Indian lessees of the property and
property rights, did make, or cause to be made, in the name of said
lessees, promissory notes and other contracts, obligating or attempting
to bind said lessees to the payment of large sums of money to certain
other défendants named in the bill, ail as particularly described and
pleaded in the many paragraphs of the voluminous pétition, as a resuit
and by reason of ail of which conspiracies and fraudulent acts on the
part of défendants, said lessees hâve been despoiled and defrauded out
of their vast property rights in more than $200,000. Wherefore the
government, acting for said Indian lessees, prays the decree of this
court canceling and annulling said fraudulent transactions and con-
tracts, that it may hâve an accounting with each and ail of the défend-
ants named hereïn so procuring any part of said royalty moneys, and,
on said accounting being taken and stated, a decree for the same may
enter in favor of plaintifï, to the use and benefit of the lessees in any
case wherein said royalty funds can be traced in property now held
by défendants, or any of them ; that the same may be decreed a trust
fund, and a lien on the property thereby purchased, said lien fore-
closed, and the property ordered sold in satisfaction of said trust lien ;
that défendant holders of said promissory notes, and other contract
obligations made by or in the name of said lessees now in the possession
of défendants, be ordered to turn same into court, and a decree en-
tered canceling and annulling the same, and for other and gênerai re-
hef.
To this pétition so charging défendants hâve appeared. Some hâve
fully answered thereto; some others bave filed separate motions to
dismiss the case. Said motions, principally, are based on the ground
the government has no interest in or right of suit to correct the wrongs
of the Indian lessees of which complaint is made in the pétition. Said
motions stand briefed, argued, and submitted for décision.
[1] In support of the motions to dismiss it is urged by défendants
the tracts of land out of which the royalty moneys arose are the ab-
solute property, in f ee simple, of their Quapaw Indian owners ; hence,
it is contended, as a necessary séquence the royalties paid from mining
opérations conducted thereon are the absolute and unconditioned prop-
erty of the Indian owners, from ail of which it is said to resuit said
Quapaw Indian owners in their own persons and right, and not the
government, must sue to correct the alleged wrongs complained of in
the pétition. On the contrary, the government contends and urges the
Indian lessees weré both in fact and law incompétent to make a valid
UNITED STATES V. APPLE 203
(262 F.)
mining lease of said properties without the approval of the accredited
représentative of the government, and, further, were not alone in-
compétent in fact and law to make said power of attorney authorizing
Charles Goodeagle to collect and expend said royalties money, when
made, but over and above ail such contentions, at ail times said Quapaw
Indian lessees were the wards of the government, and their property
and property rights were, by reason of the national policy of the gov-
ernment towards such wards, under the protccting and fostering care
which the sovereign, as the guardian of the persons and estâtes of its
wards, owes to right such wrongs as are donc them while this relation
continues to exist, which exists and will continue to exist until the
law-making power of the government shall terminate the same.
Without at this time attempting to détermine precisely what title
and right the Indian lessees hâve in the lands from which the mining
royalties accrue, or the question of the power of said Indian owners to
make mining leases on said properties without the consent and approv-
al of the représentatives of the government, or other contracts with
relation thereto, or royalties accruing from mining opérations conduct-
ed thereon, yet I am of the opinion the government may bring and
maintain this suit in its capacity as guardian or protector of the estâtes
of its Indian wards, the lessees, and, further, under the charges made
in the bill in this case, it was its duty to so do, for, although it may
in the end appear the power of attorney under which Charles Good-
eagle acted in collecting the royalties and depositing the same in bank
be held to hâve been a valid instrument of writing, yet it cannot be held
the estate of wards of the government may be despoiled and dissipated,
as charged in this bill, through fraud, collusion, and combination to
accomplish such purpose, with the knowledge and consent of the bank
and its officers in which the moneys were deposited, and the other
alleged conspirators, to their use and benefit, ail as alleged by plain-
tifif. I think this proposition is fully settled and established in the
following adjudicated cases controlling or persuasive hère:
In United States v. Rickert, 188 U. S. 432, 23 Sup. Ct. 478, 47 L.
Ed. 532, Mr. Justice Harlan, delivering the opinion of the court, says:
"Some observations may be made that are applicable to the whole case.
It is said that the state has conferred upon thèse Indians the right of suffrage
and other rights that ordinarlly belong only to citizens, and that they ought,
therefore, to share the burdens of government like other people who enjoy
such rights. Thèse are considérations to be addressed to Congress. It is
for the législative branch of the government to say vrhen thèse Indians shall
cease to be dépendent and assume the responsibîuties attaching to dtlzen-
ship."
In United States v. Noble, 237 U. S. 74, 35 Sup. Ct. 532, 59 L. Ed.
844, Mr. Justice Hughes, delivering the opinion of the coiut, says :
"The Quapaws are still under national tutelage. The government maintains
an agency, and, pursuant to the treaty of May 13, 1833 (7 Stat. 424), an annual
appropriation is made for éducation and other assistance (37 Stat 530). In
1893 the Quapaw National Councll made provisions for allotments in several-
ty, which were to be subject to the action of Congress, and in the act of
ratification of 1895 Congress imposed the restriction upon aliénation which has
been quoted. The guardianshlp of the tJnlted States continues, notwithstand-
lug the citizenshlp conferred upon the allotteea. United States v. Celestine,
2Qà 202 FKDlilîAL KEl'ORÏER
215 U. S. 278, 291 [OO Sup. Ct. 93. 54 h. Ed. 105] ; Tiger v. Western Invest-
inent Go., 221 V. S. 286, 315. 316 [.SI Sup. Ot. 578, 55 L. Ed. 738] ; Hallowell
V. United States. 221 U. S. 317, 324 [31 Sup. Ct. 587, 55 L,. Ed. 750]; United
States V. Sandoval, 231 U. S. 28, 48 [34 Sup. Ct. 1, 58 L. Ed. 107]."
In United States v. Nice, 241 U. S. 591, 36 Sup. Ct. 696, 60 L. Ed.
1192, Mr. Justice Van Devanter, delivering the opinion for the court,
says:
"It was said in United States v. Kaganui, IIS U. S. 375, 3S3 [6 Sup. Ct. 1100,
30 L. Ed. 228]: 'Thèse Indlan tribes are the wnrds of the nation. They are
communities dépendent on the United States. • * « From tlieir very
wealiness and helplessnesG, so largely due to tlie course of dealing of the
fédéral government with thcm and the treaties iii which it has bccn promised,
there arises the duty of protection, and with it the power.' What was said
In thèse cases has been repeated and applied in many others" — dting United
States V. 43 Gallons of Whlskey, »3 U. S. 188, 23 L. Ed. 846 ; Dick v. United
States, 208 U. S. 340, 28 Sup. Ct. 399, 52 U Ed. 520; United States v. Suttou,
215 U. S. 291, 30 Sup. Ot 116, 54 L. Ed. 200 ; Ex parte Webb, 225 U. S. 663,
32 Sup. Ct, 709, 56 L. Ed. 1248 ; United States v. Wright, 229 U. S. 226, 33
Sup. Ct. 630. 57 L. Ed. 1160; United States v. Sandoval, 231 U. S. 28, 34 Sup.
et. 1, 58 L. Ed. 107 ; United States v. Pélican, 232 U. S. 442, 34 Sup. Ct. 396,
58 li. Ed. 676; Perrin v. United States, 232 U. S. 478, 34 Sup. Ct 387, 58 L.
Ed. 691 ; Johnson v. Gearlds, 234 U. S. 422, 34 Sup. Ct. 794. 58 U Ed. 1383 ;
Joplin Mercantile Co. v. United States, 236 U. S. 531, 545, 35 Sup. Ct 291, 59
L. Ed. 705.
"Of course, when the Indians are prepared to exercise the privilèges and
bear the burdens of one sui juris, the tribal relation may be dlssolved and
the national guardianship brought to an end, but it rests with Congress to
détermine when and how this shall be done, and whether the émancipation
shall at flrst be complète or only partial. Cltizeuship Is not incompatible
with tribal existence or eontinued guardianship, and so may be eonferred
OTthout completely emancipating the Indians or pladng them beyond the
reach of congresslonal régulations adopted for thelr protection," — cltlng
United States v. Holiday, 3 Wall. 407, 18 L. Ed. 182; Cherokee Nation v.
Hitchcock, 187 U. S. 294, 308, 23 Sup. Ct 115, 47 L. Ed. 183; United States
V. Kickert 188 U. S. 432, 445, 23 Sup. Ct 478, 47 L. Ed. 532; United States
V. Celestine, 215 U. S. 278, 30 Sup. Ct 93, 54 L. Ed. 195 ; Tlger v. Western In-
vestment Oo., 221 U. S. 286, 311-316, 31 Sup. Ct 578, 55 L. Ed. 738 ; Hallowell
V. United States, 221 U. S. 317, 324, 31 Sup. Ct. 587, 55 L. Ed. 750; Eells v.
Itoss, 04 Fed. 417, 12 C. O. A. 205 ; Farrell v. United States, 110 Fed. 942, 49
C. O. A. 183 ; Mulligan v. United States, 120 Fed. 98, 56 C. 0. A. 50.
It follows, regardless of the fact whether the Quapaw Indian les-
sees, Benjamin and See-sah Quapaw, were or were not incompétent
to make a vahd mining lease on their lands, as that term is employed
in the act of Congress of June 7, 1897 (30 Stat. 72, c. 3), an(:, further,
regardless of the validity or invalidity of tlie power of attorney by
said' lessees made to Charles Goodeagle, yet, as the pétition allèges,
through the many conspiracies entered into between said attorney in
fact and his codefendants in violation of the trust by the lessees re-
posed in their attorney, ail with the knowledge of the défendant bank
and its officers, the lessees were despoiled and defrauded of their
property for the use and benefît of the conspirators, the government
is interested, and is under the obligation and owes the duty to its
Indian wards to bring and maintain this suit and to right the wrongs
done by calling défendants to account. Brader v. James, 246 U. S.
88, 38 Sup. Ct. 285, 62 L. Ed. 591 ; United States v. Boylan (D. C.)
256 Fed. 468.
UNITED STATES V. BLOOK 205
(202 FJ
[2] Other objections to the pétition are found stated in the motions
to dismiss, such as the misjoinder of controversies, the nonjoinder of
indispensable parties, want of equity, etc. Thèse matters, however, I
do not find urged with any insistence on the briefs and arguments of
sohcitors for the respective parties. If, as has been held, the plaintiiï
has légal capacity to niaintain this suit, sufficient facts are found set
forth in the bill to call for the interposition of a court of equity.
It follows, finding no ground to sustain the several motions to dis-
miss, they are denied. It is ordered moving parties are ruled to answer
the bill within 20 days from the date of this mémorandum.
It is 80 ordered.
UNITED STATES v. BLOCK.
(District Court, D. Indiana, at Indlanapolis. Jannary 10, 1920.)
No. 691.
1. Criminal lAw <S=3l66 — Court-martial acquittai, is bab to civil pkose-
OUTION.
Défendant registerod on tlie 5tli day of June, 1917, and thereafter
failed to answer his questionnaire and fled to eseape inilitary duty. He
was tried by a court-martial for désertion and convlcted, but tlie convic-
tion was set aside by the reviewing autliorities, and lie was ordered re-
stored to duty. Held, that this proceeding before the court-martial con-
stituted a bar to a prosecution in the District Court for failing to answer
his questionnaire.
2. Ceiminal law <g=>163 — Former jeopardy défense applicable to mis-
DEMEAS0B8.
The prineiple that a man shall not be placed in jeopardy twlce for
the sarae offense applies to misdemeanors, as well as graver crimes.
William H. Block was indicted for failure to make return on a
sélective draft questionnaire. Demurrer to plea of former acquittai
cverruled.
L. Ert Slack, U. S. Atty., of Indianapolis, Ind.
Edward Maher, of Chicago, 111., for défendant.
ANDERSON, District Judge. On November 4, 1918, the défend-
ant was indicted by the grand jury for failing and neglecting to fill
out, swear to, and return his questionnaire to Local Board No. 2 in
the city of Indianapolis. In substance, the indictment allèges that
on the 5th day of June, 1917, the défendant was a maie person between
tlie âges of 21 and 30 years; that on said 5th day of June, 1917, the
défendant was duly and legally registered under the act of Congress
entitled "An act to authorize the Président to increase temporarily
the military establishment of the United States," approved May 18,
1917, and in accordance with the régulations prescribed by the Prési-
dent under said act; that the défendant was, on the 27th day of De-
cember, 1917, under the jurisdiction of Local Board No. 2 in the city
of Indianapolis, Ind., which said local board was then and there
f ormed, constituted and operating under said act of Congress and the
Sélective Service Régulations prescribed thereunder by the Président
©csFor other cases see same topic & KBY-NXJMBBR in ail Key-Numbered Dlsests & Indexes
206 262 FEDERAL REPORTER
on November 8, 1917, and then and there had jurisdiction, by virtue
of said régulations, over ail registrants who had been registered in said
precinct; that on said 27th day of December the said local board
mailed to said défendant the questionnaire of said défendant at his
last known address, which said questionnaire the said défendant was
required to fill out, swear to, and return to said local board, in accord-
ance with said act and said régulations, on or bef ore the 5th day of
January, 1918; that on the said 27th day of December the said local
board posted in its office the proper notices prescribed in said régula-
tions, containing the order number of said défendant, notifying him
that his questionnaire had on that day been mailed to him by the said
board, and that he was required by law and by said régulations to exé-
cute and return to said board his said questionnaire within seven
days from said 27th day of December ; that the said défendant did not,
within said seven days, and did not before the 5th day of January, 1918,
fill out, swear to and return his questionnaire to said board; that on
the 5th day of January, 1918, the défendant unlawfully and willfuUy
failed, and did at ail times, from the 5th day of January, 1918, until
the day of the indictment unlawfully and willfully fail and neglect
to perform such duty and to fill out, swear to, and return his said
questionnaire to said local board.
The défendant was duly arrested and brought into court to answer
said indictment, whereupon, before his arraignment, the district attor-
ney, upon request of the Department of Justice at Washington, asked
that the défendant be turned over and delivered to the military authori-
ties of the United States at Ft. Benjamin Harrison, Ind., to be dealt
with in accordance with military law, and it was so ordered by the
court. The défendant was duly turned over to the military authori-
ties, and he now files his plea of former acquittai, setting forth the
order for his court-martial; that the court-martial met on January 15,
1919, at 10 o'clock a. m., for the trial of the défendant; that the de-
fendant was then and there arraigned upon the charge of violating the
Fifty-Eighth Article of War, with the spécification, "In that Private
William H. Block, Jr., Order No. 1742, Sériai No. 2337, unassigned,
having been duly drafted into the military service at Indianapolis,
Indiana, on March 28, 1918, did, on or about March 28, 1918, willfully
désert the service of the United States, and did remain absent in déser-
tion until he was apprehended at Roseburgh, Oregon, on or about Oc-
tober 13, 1918;" to which the défendant pleaded to the spécification,
"Not guilty;" to the charge, "Not guilty." The plea then avers that
the paragraphs of the Manual for Courts-Martial that set out the gist
of the offense were read to the court-martial by the Judge Advocate,
as follows:
"Section 130. Eegistrants falling to return their questionnaires or to
report for physical examlnation to be reported to police authority."
Then follows the procédure under this section.
"Section 131. Report to the adjutant gênerai of the state in cases of regis-
trants who fail to return their questionnaires, or who fail to report for physi-
cal examinatlon, and who cannot be located."
UNITED STATES V. BLOCK 207
(262 FJ
Then the procédure under such section is set out.
"Section 133. Adjutant gênerai to order delinquents to report; and notice
to registrant."
Then follows the procédure under such section; and
"Section 140. Persons Inducted into military service vvho fail to report for
mllitary duty, or who fail to entrain, or who absent theinselves from entrain-
ment.
"1. A registrant who, after the tiuie sot for his induction into military
service (sections 133, 159g), and with intent to évade such service;
"(a) Fails to report for military duty under induction orders, vphether
issued by the adjutant gênerai of the state (form 1014, p. 234), or by a local
board (form 1028, p. 250); or who
"(b) Fails to entrain for a mobilization camp pursuant to orders; or who
"(c) Absents himself from hls party en route to a mobilization camp, or
otherwise refuses or neglects to proceed to tlie camp as ordered
— is a déserter, and subject to punlshment by court-martial."
The plea then sets forth the évidence which was introduced against
the défendant before the court-martial, showing that he registered on
June 5, 1917, and the procédure thereafter with référence to mailing
to him his questionnaire, and his failure to answer the same, and the
posting of the notice as required by the Sélective Service Régulations,
and évidence that notice was given to the défendant to report to the
adjutant gênerai.
The plea further shows that the défendant denied that he had re-
ceived said questionnaire or such notice, and avers that he was absent
on private business and that prior to the time that he left on such pri-
vate business no such questionnaire was in existence ; that by reason of
his failure to respond to the notice of the adjutant gênerai, as therein-
before set forth, and under the Sélective Service Régulations and the
act of Congress (Comp. St. 1918, §§ 2044a-2044k), he became and was
automatically inducted into the service of the United States as a sol-
dier, as set forth in the charge and spécification thereinbefore in his
plea set out; that divers witnesses were sworn; that proceedings
were had from day to day before pni^ court-martial ; that évidence was
read, oral évidence was heard, and Sélective Service Régulations were
read ; that 28 witnesses testified orally ; that there was introduced in
évidence exhibits, Sélective Service Régulations, the registration card
of the défendant, forms 1012, 1002, 1010, 1013, 1014, 1018, and report
of police, also a blank form of questionnaire, ail as required by Sélec-
tive Service Régulations, and a report of the Médical Board; that
arguments were heard, and said court-martial found against the de-
fendant and sentenced him "to be dishonorably discharged from the
service, to forfeit ail pay and allowances due or to become due, and to
be confined at hard labor, at such place as the reviewing authority may
direct, for fifteen (15) years" ; that the matter was taken before the
reviewing authority, and the following order was made:
"The sentence Is disapproved. Private Block wiU be released from con-
finement and restored to duty."
— and that said last order remains in full force and eflfect, and cannot
be annulled or set aside in any manner by the military authorities.
208 262 FEDERAL REPORTES
The plea further allèges:
"That the ofCense of failing to file th« questionnaire was Included In the
said cbarge of 'désertion,' and that he, Iiaving been acquitted of tlie chargo,
of désertion, is thereby, as a matter of law, acquitted of tlie charge of faillnt;
to file a questionnaire, being an essential ingrédient of the charge of déser-
tion, and is a lesser offense included in the charge of désertion."
[1, 2] The plea of the défendant is based upon the theory that ho'
lias been once placed in jeopardy and acquitted of the offense charged
against him in the indictment. The Sélective Service Law provides, in
section 6, for the punishment of a registrant failing or neglecting u>
answer his questionnaire. The section, so far as it is applicable to this
case, reads as f ollows :
"* * • Or who, In any manner, shall fall or neglect fully to perform
any duty required of him in the exécution of this act, shall, if not subject
to military law, be guilty of a misdemeanor and upon conviction in the District
Court of the United States having jurisdiction thereof, be punished by im-
prisonment for not more than one year or, if subject to military law, shall be
tried by court-martial and suffer such punisliment as a court-martial may
direct."
The Suprême Court of the United States in Grafton v. United
States, 206 U. S. 333, 27 Sup. Ct. 749, 51 h. Ed. 1084, 11 Ann. Cas.
640, held that a soldier in the army, having been acquitted of the crime
of homicide, alleged to hâve been committed by him in the Philippine
Islands, by a mihtary court-martial of compétent jurisdiction proceed-
ing under authority of the United States, cannot be subsequently tried
for the same offense in a civil court exercising authority in that terri-
tory. In the course of its opinion the court said (206 U. S. on page
345, 27 Sup. Ct. 751, 51 L. Ed. 1084, 11 Ann. Cas. 640) :
"We assume as indisputable, on principle and authority. that before a
person can be said to hâve been put in jeopardy of life or limb the court in
which he was acquitted or convicted must hâve had jurisdiction to try him
for the offense charged. It is alike indisputable that if a court-martial has
jurisdiction to try an offlcer or soldier for a crime, its judgment will be ac-
corded the final! ty and conclusiveness as to the issues Involved which attend
the judgmenta of a civil court in a case of which it may legally take cog-
nizance."
Grafton having been acquitted of the crime of homicide by a court-
martial, and having thereafter been convicted in the civil courts, the
Suprême Court reversed the case and ordered that the complaint of
the United States against Grafton be dismissed, and that he be dis-
charged. This principle, that a man shall not be placed in jeopardy
twice for the same offense, applies to misdemeanors as well as to grav-
er crimes. Ex parte Lange, 85 U. S. (8 Wall.) 163, 21 L. Ed. 872.
In that part of section 6 of the Sélective Service Law above quoted,
Congress provided that whoever violated such section, "if not subject
to military law," should be guilty of a misdemeanor, and upon convic-
tion in the District Court of the United States having jurisdiction
thereof, be punished by imprisonment for not more than one year, and
provided further, in the alternative, that "if subject to military law"
he should be tried by court-martial and suffer such punishment as a
court-martial may direct, thus recognizing the légal principle that a
m EE LOONEY 20&
(262 F.)
man may not be subjected to trial or punishment twice for the same of-
fense.
This is not the case of a plea setting up the former conviction or
acquittai of the défendant in a court of another sovereignty. It is well
settled that an acquittai or conviction in a state court is not a good dé-
fense in this court ; but the rule is différent where both courts dérive
their powers from the same sovereignty. In this case the court-martial
and the District Court of the United States sitting in this district both
dérive their powers from the government of the United States.
The plea sets forth a good défense of former acquittai, and the de-
murrer should be overruled; and it is so ordered.
In re LOONEY.
(District Court, W. D. Texas, El Paso Division. January 9, 1920.)
No. 2G8.
1. Bankrtjptct iS=5225 — Représentative of "ckeditob" not an attobnby
CANNOT examine WITNESSES BEFOBE KEFEBEE.
The word "créditer," as used in General Orders in Bankruptcy No. 4
(89 Fed. iv, 32 G. G. A. vlil), does not include the agent, attomey In fact,
or proxy of a credltor, and under suoh order and No. 22 (89 Fed. x, 32
C. G. A. XXV), a credltor cannot appoint a représentative, who Is not an
attomey and counselor at law, to examine wltnesses before a référée.
[Ed. Note. — For other définitions, sce Words and Phrases, First and
Second Séries, Créditer.]
2. Bankrtjptct <S=»225 — Examination of witnebses before eeferee bt
"PARTT."
The tenu "party," as used In General Order In Bankruptcy No. 22 (89
Fed. X, 32 C. C. A. xxv), provldlng that the examination of wltnesses be-
fore the référée may be conducted by the party In person, means the ewn-
er of the claim, and seems meant to exclude agents, attomeys In fact,
and proxies.
[Ed. Note. — Fer other définitions, Bee Words and Phrases, First and
Second Séries, Party.]
In the matter of Dénia Lahrucia Looney, bankrupt. On review of
order of référée. Affirmed.
Dyer, Croom & Jones, of El Paso, Tex. (Gowan Jones, of El Paso,
Tex., of counsel), for bankrupt.
Brown & Whitaker, of Murfreesboro, Tenn. (Volney M. Brown, of
El Paso, Tex., of counsel), for T. K. Blanchard.
SMITH, District Judge. This is a certificate for the review of an
order of H. R. Gamble, one of the référées in bankruptcy of this court,
denying the right of T. E. Blanchard to examine the bankrupt at the
first meeting of bis creditors. Said Blanchard was the secretary of
the Tri-State Association of Crédit ]\Ien, and at said meeting filed the
claims of 24 creditors, in each of which he was named as attorney
in fact for the owner thereof, and in connection with each presented
as his authority to act a power of attorney as foUows :
®s>F0T otber caees see same topic & KEY-NUMBER in aU Key-Numbereil DIgests £ Indexes
262 F.— 14
210 262 FEDERAL REPORTEE
"Sald daimant hereby constitutea and appoints T. B. Blanchard, or hls sub-
etltute Indorsed hereon, its attomey in fact to join wlth other credltors and
proceed In bankmptcy agalnst the above-named debtor, under the provisions
of the act entitled 'An act to establlsh a uniforin System of bankruptey
throughout the United States,' approved July 1, 1898, and the amendments
thereto, and to exécute in the name of the nnderslgned, any usual or neces-
sary pétition or paper in that behalf, and to represent the claimant at ail
meetings of credltors hereln, wlth authorlty to vote for trustée, also ta accept
any composition proposed by said bankrupt In satisfaction of debts,
and upon ail other propositions submitted to the credltors, and to recel ve
dividends and ail notices In said cause."
Said Blanchard was not an attorney at law. The référée held that
Blanchard was not entitled to examine the bankrupt for the reasons,
first, that he was not authorized to do so by his powers of attomey;
and, second, that he was forbidden to do so by General Order No. 4
of the Suprême Court (89 Fed. iv, 32 C. C. A. viii).
I am of opinion that the ruling of the référée was correct, and
that the reasons given therefor were sound. The power of attomey
which was presented authorized the said Blanchard to exécute in the
name of the owner of the claim any usual or necessary pétition or
paper in the bankruptey proceeding, and to represent the claimant at
ail meetings of creditors, with authority to vote for trustée, and also
with authority to accept any composition proposed by the bankrupt,
and to act upon ail other propositions submitted to the creditors, and
to receive dividends and ail notices. The powers which said Blanchard
was authorized by this power of attorney to exercise in representing
the claimant at ail the meetings of creditors was limited to voting for
trustée, accepting composition, and to acting upon any other propo-
sition that might he submitted to the creditors, and to receiving divi-
dends and notices. The power of attomey did not authorize him to
examine witnesses at the meeting of creditors, or to perform any of
the duties connected with any of the proceedings of a judicial nature;
but, had it done so, I do not Âink it would hâve been valid in law.
Counsel for said Blanchard contend that he was authorized to act
in the examination of witnesses by General Order No. 4, which pro-
vides that:
"Proceedings in bankruptey may be conducted by the bankrupt in person in
hls own behalf, or by a petltioning or opposlng créditer; but a créditer wlll
only be allowed to manage before the court his indlvldual interest. Every
party may appear and conduct the proceedings by attomey, vrho shall be an
attomey or counselor authorized to practlce in the Circuit Court or Dis-
trict Court"
The argument of counsel is that, as paragraph 9 of section 1 of the
Bankruptey Act (Comp. St. § 9585) defînes a creditor to include "any
one who owns a demand or a claim provable in bankruptey, and may
include his duly authorized agent, attomey, or proxy," the word "cred-
itor" in General Order No. 4 should be so defined, and that one who
holds power of attorney from the owner of a claim is himself a cred-
itor, and by the terms of General Order No. 4 would be authorized
to conduct ail of the proceedings in bankruptey.
Considering the contéxt of this General Order, it appears to me that
the word "creditor," therein used, should be construed in its ordinary
IN RE LOONKT 211
(262 F.)
and restricted sensé, and not given the statutory définition, since the
creditor, in conducting the proceedings, is confined to his "individual
interest," and an agent, proxy, or attorney in fact has no "individual
interest." I am furtlier confirmed in this view by the fact that this
General Order f urther requires that, if a creditor be represented by an
attorney, such représentative "shall be an attorney or counselor au-
thorized to practice in the Circuit Court or District Court." There is
no possible reason why the Suprême Court should hâve prescribed this
qualification of an attorney, if it vsras the intention in the previous part
of the order to give the creditor the right to appoint any person, with-
out qualifications, to conduct the proceedings.
In General Order No. 22 the Suprême Court (89 Fed. x, 32 C. C.
A. xxv) deals more specifically with this question. It provides that:
"The examinatlon of wltnesses before tlie référée may be conducted by the
party In person or by hls counsel or attorney, and the wltnesses shall be
subjeet to examinatlon and cross-examinatlon, whlch shall be had In conforml-
ty with the mode now adopted in courts of law."
[1, 2] It will be noted that this order désignâtes the party, instead
of the creditor, as being authorized to examine the wltnesses, and says
that the party so doing shall act in person, which are words of restric-
tion, The term "party" evidently means the owner of the claim, for
it is only the owner of the claim who can be a party to the bankruptcy
proceedings, and it would seem that the intention was to exclude agents,
attomeys in fact, and proxies. "Counselor or attorney" evidently
means counselor or attorney at law. That the examination "shall be
had in conformity with the mode now adopted in courts of law" would
seem to évidence an intention to authorize only an attorney learned
and experienced in the law, and qualified to conduct the exeunination
in conformity with the rules of the courts of law when the party him-
self does not do it "in person."
I would not be understood as saying that a creditor may not be repre-
sented by proxy to a limited extent in the conduct of the bankruptcy
proceedings, but I believe such représentation should be, and is, con-
fined to those proceedings which in their nature are not judicial, m
the sensé that they do not require in their conduct expert knowledge
of court procédure and practice, such as voting at meetings of cred-
itors, selecting trustées, accepting composition, dividends, etc. This
idea is prominent in Form No. 20 (89 Fed. xxxvii, 32 C. C. A. Ixi),
"General lutter of Attorney in Fact when Creditor is Not Represented
by Attorney at Law," prescribed by the Suprême Court, when con-
sidered in connection with General Orders Nos. 4 and 22. And I
may also add, as worthy of note, that as thèse General Orders and
said Form No. 20 deal with the question as to the manner in
which creditors may be represented in the conduct of bankruptcy
proceedings and the examination of witnesses before the référée,
it can hardly be presumed that the word "creditor," as therein
used, was intended to include any qther than the owner of the prov-
able debt. The word "creditor" does not always, when used, include
"agent, attorney in fact, or proxy," as is plainly évident from para-
graph 5, General Order No. XXI (89 Fed. x, 32 C. C. A. xxiii), and
212 262 FEDEBAL EEPOETEB
doubtiess from numerous provisions of the Bankruptcy Act. By réf-
érence to paragraph 9, section 1, of the Bankruptcy Act, it will be
noted that the word "créditer" may include a duly authorized agent,
attorney, or proxy, only when consistent with the context of the pro-
visions of the act in which it is used, and, as already stated, to say that
the word "creditor," as used in General Orders Nos. 4 and 22, includes
the agent, attorney, or proxy of the creditor, would not be consistent
with the context of those General Orders. A référée is a judicial offi-
cer, and in holding the bankruptcy courts exercises judicial authority.
Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405 ; White
V. Schloerb, 178 U. S. 542, 20 Sup. Ct. 1007, 44 L. Ed. 1183; In re
Covington (D. C.) 110 Fed. 143; In re Eagles (D. C.) 99 Fed. 695;
In re McGill, 106 Fed. 57, 45 C. C. A. 218; paragraph 7, § 1, Bank-
ruptcy Act.
In ail the courts of the United States the parties may plead and
manage their own cases personally or by an attorney and counselor at
law. R. St. U. S. § 747 (Comp. St. § 1249). By clear implication this
statute excludes from the courts ail other agents, attomeys in fact. and
proxies, than attomeys and counselors at law, and it is the universal
practice to exclude them. To admit the unieamed nonprofessional in
the courts, for the purpose of conducting tlieir proceedings in the
trial of cases for others, would soon inevitably break down ail the rules
of practice which hâve becn so long in use and are so essential to the
administration of justice, and I think General Orders Nos. 4 and 22
were designed and promulgated by the Suprême Court to prevent this
very thing.
Therefore, answering the question certified by the référée for review,
I hold that said order of the référée be affirmed.
THE OATALUNA,
THE AEAGON.
(District Court, S. U. New York. Mareh 26, 1918.)
1. Shippino <S=175 — Chaktebeb bkeached contract bt rAiLtrEU to pbocube
CLEAEANCE, ETC., AFTER LOADING.
Where charter party allowed 12 lay days for loadlng and unloadlng,
and provlded for payment of demurrage In event of addltional delay, the
charterer, which falled to obtaln clearance for the vessel after it was
loaded, etc., must be deemed to hâve breached Its contract, and is llable
in personam for damages to the owner of the vessel, which, after a long
delay, unloaded the cargo at the charterer's risk.
2. Shippino <©=>152 — Freight paid in advance mat bb eecovebed baok
where cab0o is not delivered.
The American doctrine is that freight pald in advance can be recovered
back If the ship faits to deliver cargo at destination, unless there Is a
spécial stipulation that freight shall not be repaid.
3. Shipping <@=>49(5) — Cakqo unloaded foe ohabtereb's failube to obtain
CLEARANCE NOT SUBJECT TO OWNEB'S CLAIMS FOB CBABTEKEB'S BBEACH OP
contract.
Where the charterer of a vessel failed to obtain clearance, and the
owner finally unloaded the cargo, held that, while the charterer was
^ssToT other cases see same toplc t KEY-NUMBBR In ail Key-Numbered Dlgests & Indexes
THE CATALUNA 213
(262 P.)
llable In personam for breacli of the charter party, whlch flxed the tlme
for loadlng, etc., yet under the American doctrine, that freight pald In
advance may be recovered back if cargo la not delivered, the owner had
no lien on the cargo unloaded, notwithstanding charter party provided
for payment of freight in advance, for no freight In the propcr acceptance
of the terra was eamed.
In Admiralty. Libel by the Compania Trasmediterranea, as owner
of the steamship Cataluna against 6,387 barrels of petroleum and the
Société Espagnole d'Achate & d'Affrètements, together with a libel by
the Compania Trasmediterranea, as owner of the steamship Aragon,
against 7,072 barrels of petroleum and the Société Espagnole, etc. On
exceptions to libels. Exceptions overruled as to libels in personam, and
sustained as to libels in rem.
Kirlin, Woolsey & Hickox, of New York City Qohn M. Woolsey,
of New York City, of counsel), for exceptions.
Burlingham, Veeder, Masten & Fearey, of New York City (Roscoe
H. Hupper, of New York City, of counsel), opposed.
MAYER, District Judge. Exceptions hâve been filedto libels
brought by the owner of two Spanish steamships against their respec-
tive cargoes of petroleum and the charterer. The libel on behalf of
the Aragon is brought to recover (1) freight, (2) demurrage, and (3)
extra expenses, aggregating $174,864; and the libel on behalf of the
Cataluna is brought to recover (1) freight, (2) demurrage, and (3)
expenses of lighters, etc., aggregating $156,644. The charters on which
the libels are founded are in the same terms, and the libels themselves
are similar in form. It will suffice, therefore, for both cases, to re-
fer to the Cataluna libel.
[1] The Cataluna was chartered at Barcelona, Spain, to proceed
to New York and load a complète cargo of crude petroleum in barrels
to be provided by respondent, and with said cargo to proceed to cer-
tain Spanish ports. The charter party provided with regard to freight
and demurrage as f ollows :
"(4) Twelve lay days are conceded for the loadlng and unloadlng, com-
mencing to coimt thèse from the moment of the steamer's arrivai at the port,
whether the pler is ready or not, tn spite of the custom of the port, always
that the ship is ready to recelve or discharge its cargo. If the pier Indicated
by the chartererg cannot be used Immedlately, thèse days will begin to be
counted immedlately on recelving written notice that the steamer has ar-
rived in port.
"(5) For every day's delay occasioned through fault of the charterers, or
their agents, the charterers vfill hâve to pay 5,000 (five thousand) pesetas
per day, payable in Barcelona."
"(8) The charterers must pay the total svun of the freight In Barcelona on
receipt of télégraphie advice that the cargo has been loaded and the B/Vs
signed. The freight to be 60 (sixty) pesetas per barrel shlpped and further
amount of delay, should there hâve been any in New York."
It is alleged that under the charter party it was the duty of respond-
ent to furnish the Cataluna with a lawful cargo, and that respondent
was bound to secure ail such licenses and permits as should be required
in respect of the cargo, and to furnish ail such papers and documents
214 262 FEDERAL REPORTER
concerning cargo as should be necessary to enable the Cataluna to
clear and sail f rom the port of New York with her cargo.
The Cataluna arrived at the port of New York on or about August
27, 1917, was duly tendered to respondent, and in due course began
loading her cargo of 6,387 barrels of crude petroleum, which loading
was completed September 17, 1917; lay days allowed under the char-
ter parties having expired on September 12, 1917. When the loading
was completed, the Cataluna was ready to proceed on her voyage from
New York with the petroleum cargo, and libelant demanded from re-
spondent that bills of lading be presented for signature, and that re-
spondent should secure and présent such other papers and documents
as were necessary to enable the Cataluna to clear, including an export
license for the cargo. Respondent whplly failed and neglected to
présent bills of lading, and did not provide the necessary export license
and such other papers as were requisite to enable the vessel to clear, and
by reason thereof the Cataluna was prevented from proceeding on
her voyage, and was detained at New York from September 12, 1917,
to December 5, 1917. On the latter date libelant caused the cargo of
crude petroleum to be discharged from the Cataluna onto lighters,
there to be held at the risk and expense of respondent. The libel then
allèges that by reason of the foregoing matters libelant became entitled
to collect from respondent the freight provided by the charter party
to be paid and demurrage money, and fm-ther charges and expenses
for lighters, etc. The libelant asked that process in rem issue against
the 6,387 barrels of crude petroleum, and that process in personam,
with clause of foreign attachment, issue against respondent.
From the foregoing it is plain that there was a breach of the charter
party. The Cataluna was not called upon to lie idle indefinitely, and
the fact that freight and demurrage were to be paid for at Barcelona
does not transmute a breach into something else, nor prevent libelant
from recovering because by respondent's conduct libelant was pre-
vented from transporting the freight. It must be remembered that
the charter was a voyage charter, and, so far as appears from the
face of the libel, libelant was always ready to perform its agreement ;
but respondent, in failing to obtain the necessary clearance papers and
detaining the vessel for an unreasonable time, breached its contract.
I am of opinion, therefore, that the libel, so far as it sets forth an
action in personam, is good, and that the exceptions in that respect
must be overruled.
[2, 3] The libel in personam proceeds in effect, upon the theory of
damages for breach of the charter party ; but, while the libel is good
in personam, it fails in rem. The American doctrine is that freight
paid in advance can be recovered back in the event that the ship fails
to deliver the cargo at destination, tuiless there is a spécial stipulation
that the freight shall not be repaid. Nat. Steam Nav. Co., Ltd., of
Greece v. International Paper Co., 241 Fed. 861, 154 C. C. A. 563, ex-
presses the views of our Circuit Court of Appeals, and that opinion
clearly points out the différence between the law of England and our
law upon the subject of prepaid freight and référence is made to wetl
known leading cases.
NEW YORK LIFE INS. CO. V. ANDERSON 215
(262 F.)
Where freight is not prepaid, there can be no doubt that there can-
not be a maritime lien, unless the freight is earned ; that is to say, trans-
ported. Where freight is prepaid, but not transported, it seems to
me the same principle must apply, although perhaps there is no case
which clearly and directly disposes of the point. Freight imder our
law is a payment for the deUvery of goods to destination, and whether
prepaid or not is earned only by such dehvery in the absence of some
spécial arrangement to the contrary. No transportation having taken
place, and no freight having been earned, there is no foundation for
a maritime lien, and thus for an action in rem. As démarrage is ex-
tended freight, there is no action in rem for demurrage. The excep-
tions, so far as they are directed to the action in rem, are sustained.
Settle order on notice.
NEW YORK LIFE INS. CO. v. ANDERSON, Internai Revenue Collecter.
(District Court, S. D. New York. February 11, 1919.)
1. IntERNAL BEVENUE i®=>9 — ^DIVIDBNDS PAID BT IN8UEANCE COMPANY TO POU-
CT HOLDEBS OB CBEDITED ON PBEUIUIIS UUST BE EXCLUDED IN COUPUTINa
THE COMPANT'S IHCOME.
Dlvidends or surplus, which Ilfe Insurance companles are required by
Insurance Law N. Y. § 83, either to pay policy holdera lu cash or to crédit
upou premiuma due from them, must be excluded in determinlng the
income of the company for the purposes of taxation.
2. INTBBNAL EEVENÏTE <S=9 — DEPRECIATION IN MAEKET VAX.UB OF 8ECUBITIES
ROT AIXOWED AS DEDUCTION WHBBE NOT BEALIZED BY SAUE.
In Computing the Income of an Insurance company for assessment un-
der Act Aug. 5, 1909, c. 6, | 38, par. 2, whlch allowed ail losses actually sus-
tained wlthln the year and not compensated by Insurance, together wlth
reasonable allowance of déprédation of property, to be deducted, dépré-
dation of securities taken at market value during the year cannot be de-
ducted, where the déprédation was not reallzed by sale of depredated
Becurltles.
At Law. Action by the New York Life Insurance Company against
Charles W. Andersen, Internai Revenue Collecter. Verdict directed
for plaintiff.
Judgment reversed, 263 Fed. 527, C. C. A. — .
See, also, 257 Fed. 576.
James H. Mcintosh, of New York City, for plaintiflf.
Francis G. Caffey, U. S. Atty., of New York City, for défendant.
LEARNED HAND, District Judge. [1] In Conn. Mut. Ins. Co. v.
Eaton (D. C.) 218 Fed. 206, affirmed 223 Fed. 1022, 138 C. C. A. 663,
which is authoritative upon me, the resolution of the insurer under
which the dividends were paid provided that dividends were payable
upon ail policies in force at the beginning of the ensuing year. The
resolution gave the right to the dividend upon payment "or nonpay-
ment when due" of the succeeding premiums. One of the insured's
options was to receive the dividend in cash. As I understand the f acts,
therefore, the debt was absolute upon ail policies which had been kept
«=»Fof oUier euea «m same topic & KET-NUMBER In ail Ker-Numbered Digests & Indexes
216 262 FEDERAL REPORTER
in force durinjf the year in which the dividend was earned. If so, I
see no différence between that case and a policy issued under section
83 of the New York Insurance Law (Consol. Laws, c. 28). It can
make no différence that the dividend is a debt made absolute by stat-
ute instead of by contract. Therefore that case appears to me to be
on ail fours with the case at bar. In Mut. Ins. Co. v. Herold (D. C.)
198 Fed. 199, affirmed 201 Fed. 918, 120 C. C. A. 256, the tacts are not
clear, and this may not hâve been the situation.
Moreover, in principle I think there is.no distinction, even if the
debt be not absolute. Assume, if one please, that the payment of the
dividend in Conn. Mut. Ins. Co. v. Eaton, supra, was conditional upon
the insured's payment of the next succeeding premium ; even so, when
he elected to pay that premium, the dividend became an absolute debt,
payable in cash. In such cases as the insured had so elected, as he did
in ail cases there under considération, his further élection to accept,
not cash, but crédit upon his premium, discharged an absolute debt
quite as much as a similar élection under section 83 of the New York
Insurance Law. Perhaps the discharge of such a debt ought to hâve
been considered équivalent to the receipt of an equal sum of money
— i. e., as income ; but the law is fixed otherwise, and unless there be
some distinction I must f oUow it.
So it seems to me that, as respects ail policies on which the insured
hâve elected to pay the balance of their premiums during the year for
which the tax is levied, the crédit of the dividends was as much a pay-
ment where the New York law did not apply, as where it does. I
hold, therefore, both on the facts of Conn. Mut. Ins. Co. v. Eaton, su-
pra, and upon principle, that the plaintiff is right as to this item, and it
may hâve a verdict as to so much.
[2] The remaining point is as to the dépréciation of securities
taken at market value during the year. It is quite apparent that, if
this dépréciation be accepted as a déduction, and no appréciation be
added, the insurer may slowly over a séries of years crédit itself with
possibly the whole value of its securities and without any corre-
sponding offset. This is obviously an unreasonable resuit, which could
not hâve been intended. The question is whether the dépréciation
falls within the déductions covered by paragraph 2 of section 38 of the
act of 1909 (36 Stat. 112, c. 6). Of the déductions so allowed the only
one appropria te is:
"Ail losses actually sustalned wlthin the year, and not compensated by In-
surance or otherwise, Includlng a reasonable allowance for déprédation of
property If any."
This clause of the statute undoubtedly goes to a "dépréciation" which
has not yet been realized by sale of the depreciated property ; so much
one must allow. If the securities had been sold, I need not say that
the loss would not hâve been a proper item of allowance. The clause
is not intended to cover that situation. The question is whether it
should be Hmited to the loss in actual use value, due to wear and tear,
reflected in a fall in money value. It seems to me quite clear that it
should be so limited. The fluctuations in the market value of a com-
NEW YORK LIFE INS. CO. V. ANDEKSON 217
(262 F.)
mercial security, as in the case of a stock of goods, are constant from
month to month. No one regards them as a final dépréciation in value
from which the property will not recover. It may or may not ; but, if
there has been no certain détérioration in those éléments which con-
tribuce to the bénéficiai use of the property, and which prevent it from
ever commanding the same opinion of its value as before, the loss has
not, I think, been "actually sustained." When consumable goods are in
part wom out, they can never recover their earlier condition. It is
true that their value may recover, owing to the increased value of ail
their class, new and used; but the proportion between the value of
new and used goods of that kind is presumptively unchanged. The
loss has then been "actually sustained," in the sensé that it cannot be
recouped. This is what I think the language means. It refers to such
goods as by reason of their physical détérioration are permanently im-
paired in use, from which impairment there was no chance of re-
covery.
Sudi an interprétation, moreover, accords with common business un-
derstanding. A manufacturer charges his profits with the loss to his
machinery and buildings, due to wear and tear, recognizing that the
necessity of the upkeep of his capital will in the end inevitably require
some such allowance. A merchant, on the other hand does not or-
dinarily include the variations in the market values of his stock in
counting his profits. They may shortly be restored to their value, and
the time to charge his profit with them is when they are sold, and the
gain or loss finally ascertained.
Cases like Stratton's Independence v. Howbert, 231 U. S. 399, 34
Sup. Ct. 136, 58 L. Ed. 285, and those which follow it, or Doyle v.
Mitchell Bros. Co., 247 U. S. 179, 38 Sup. Ct. 467, 62 L. Ed. 1054, and
those which follow it as well, are quite différent. The question was
how the gross income was to be estimated, particularly what allowance
should be made for the original value of the raw material, which had
been worked up and sold as a finished product. Hays v. Gauley Moun-
tain Coal Co., 247 U. S. 189, 38 Sup. Ct. 470, 62 L. Ed. 1061, was a
case where securities were actually sold, and the question was also one
of gross income. It did not détermine what was to be considered the
proper déduction for dépréciation not realized by conversion into
cash. Nor do any of the cases cited in the lower courts seem to me to
be in point. While the case appears, therefore, to be one of first im-
pression, I do not hesitate to hold that the défendant is right upon this
item.
The plaintiflF will take no interest upon the first item of $694.52 in
the agreed statement. A verdict will be directed for the amount f ound
in accordance with the f oregoing.
218 262 FEDEEAL REPOHTEB
THE TAMAHA.
THE F. B. DALZELL.
THE BtLORBNCJBJ.
(District Court, B. D. New York. Deeember 5, 1919.)
1. WHABVES <©=>21 — TCO NOT négligent in BTBETCHIN(ï HAWSEB AOBOeS OPEN
SLIP.
Where a tug, under orders, drew a ressel out of a dry dock, stretched a
hawser from the veasel across an open slip to a pler, suggested to the ves-
sel's offlcer that a lantem be placed at the steamer's stem after dark, and
then left, held, that the tug was not négligent In elther stretching the Une
or in faillng to remain to watch it
2. Whabves <©=5>21 — Steameb pbimabilt and pikb amo liablb tob injtjeies
strstalned when tug ban into kawskb acbosb open slip.
Where a hawser, stretched from a vessel at a dry dock across an open
slip to a pler, caused injury to llbelant, englneer on a tug whleh endeavored
to enter the slip after dark, helA, that the steamer was primarlly responsl-
ble, but that the dry dock company, which was apparently aware of the
condition and knew that the slip was f requently used by other vessels, was
also llable<
3. Whaevks <S=»21 — Evidence insoffiCient to show injuet to libelant
when his tug ban into a hawseb.
The testlmony of an englneer on a tug that he had been knocked down
by something and injured when the tug ran against a hawser stretched
from a steamer across an open slip to a pler heli insuffldent to establlsh
that any Injuries were recelved in the manner clalmed, In vlew of fact that
persons inspeeting the engine room Immedlately after the accident found
no indications that the room had been affected by the accident, and
when the condition clalmed as injury mlght hâve resulted from dlsease.
In Admiralty. Libel by Walter A. Gully against the steamship
Tamaha; the P. B. Dalzell, James Shewan & Sons, Incorporated, and
the tug Florence, impleaded. Libel dismissed.
Harry E. Shirk, o£ Brooklyn, N. Y., for libelant.
Kirlin, Woolsey & Hickox and L. De Grove Potter, ail of New
York City, for the Tamaha.
Carter & Carter and P. S. Carter, ail of New York City, for tti.e F.
B. Dalzell.
Foley & Martin and J. A. Martin, ail of New York City, for James
Shewan & Sons, Inc.
CHATFIELD, District Judge. The libelant was an englneer upon
the tug Florence, which attempted to enter a slip adjoining the pier
used to hold the shop and offices of the Shewan Dry Dock Company
upon the evening of July 6, 1916. In so doing the tug struck a 7-inch
hawser which had been stretched from the stem of the steamer Tamaha
across the slip to the pier upon the south. No lantern had been placed
on this hawser, or at the stem of the ship, to indicate danger. The
pilothouse of the tug, its smokestack, and the steampipe leading to the
whistle were sheered off just above the roof of the main deckhouse.
The captain of the tug was in the pilothouse, but was saved from se-
rious injury by the framework of the wheel, which was cmshed down
^=»For otiier caseï aee same toplc & KET-NUMBBR in ail Key-Numbered DlgesU & Indexe*
THE TAMAHA 219
(262 P.)
over him. The libelant was thrown to the floor in his engineroom,
and testifies that he was struck upon the left side of the head, or upon
the left car, by some object which knocked him down.
Surveyors who examined the boat immediately after the accident
found absolutely nothing broken or misplaced inside of the engine-
room, except that the bell wires were pulled loose and a strip of molding
pulled out of place where thèse wires were torn eut.
The hawser in question had been placed across the slip after the
steamer had been drawn out of the dry dock in order to allow another
vessel of the same line to be put in the dry dock for immédiate re-
pairs. The Tamaha was placed at the end of the Shewan pier, but
angling across, so that her bow was held by lines to some structure in-
side of Shewan's yard. Her stern thus projected partly into the slip
in question, and the Dalzell tug stretched the hawser, at the direction
of some one either on the Shewan pier or on the ship, and with the
approval of the ship's ofScers. The captain of the tug called the at-
tention of the Tamaha's officer to the line, and indicated that a lantern
should be placed at the stern of the steamer; but his suggestion was
not accepted by this officer.
[1] The Dalzell tug left before dark, and I see no négligence in
either stretching the line or in failing to remain to watch the line, so
far as the Dalzell tug was concemed. The négligence consisted in the
maintenance of this line across an open slip in the dark without some
light to indicate its présence. Responsibility for that must rest upon
the vessel, unless that responsibility was shared or assumed by the own-
ers of the dry dock. The pétition should therefore be dismissed by
which the F. P. Dalzell was brought into the case.
[2] As between the Tamaha and the Shewan Company, the Tamaha
was primarily responsible for the conditions. The Shewan Company
was apparently aware of thèse conditions, and knew that the hawser
was blocking the adjoining slip. They also knew that this slip was
frequently used by vessels which would not know of the présence of
the hawser. The steamship, therefore, and the Shewan Company,
must be held at fault for the situation which existed and the careless-
ness which resulted in the injuries upon the Florence.
[3] But another issue in this case has been raised by the claimant
and respondent with respect to the injuries alleged by the libelant to
hâve been received on this occasion. The libelant suffered the loss of
his left leg some 35 years ago, when he was a small boy. He com-
plains of pains at times in his shoulder, which his own doctors could
trace to no injury, unless it be f rom the strain or discomfort of using a
crutch under his left arm. He complains of trouble in hearing, and an
examination by various doctors has disclosed that his hearing is some-
what impaired.
Examination in open court showed that his ability to hear was affect-
ed in great degree by his idea of what the doctors were doing in the
way of a test The libelant seemed to be attempting honestly to report
his perceptions and sensations during thèse tests; but it was appar-
ent that lâ« said he did not hear certain sounds of which he must hâve
220 262 FEDERAL REPORTEE
been in some way conscious, and which were much louder and more
easily distinguishable than the voice, which he quickly responded to, at
the same distance.
His loss of hearing is much less than he believes it to be, even if
he hâs net intentionally misled the doctors during the examinations.
The libelant has failed to fumish a prépondérance of crédible tes-
timony indicating that he received any in jury at the time, from which
the deafness has resulted, or that the deafness is the resuit of any
blow received at the time of collision with the hawser.
The captain of the vessel testifies that the libelant complained of no
injury and was around the boat within a few moments. The libelant
testifies that it was some half an hour before he was able to get eut
around the deck, and during this time he pulled most of the fire under
the boilen
The captain of the boat seems to hâve been in a better position to
estimate what was going on, as he retained command and control of
his boat and was observing the whereabouts and condition of his crew.
While the libelant may be excused for not appreciating the situation
and the length of time during which steam was escaping from the
open steam pipe outside of the engine house, while he was endeavoring
to pull his fires and to shut ofif any steam that might be escaping, nev-
ertheless his condition was not such that it is persuasive évidence of his
having received any severe blow upon the head. The hawser which
came in contact with the tug was not broken. The eardrums of the li-
belant were not ruptured, and the testimony leads the court to believe
that his impaired hearing is the resuit of some other internai trouble,
which manifested itself either after this accident, or which was first
-noticed and observed when the libelant's attention was called to what
might hâve happened from the accident, and that he thereby attribut-
ed to the accident in question effects with which it had nothing to do
as a cause.
The libel will be dismissed, but without costs.
EX PARTE CHAN WY SHEUNQ 221
(262 F.)
Ex parte CHAN WY SHBUNG.
(District Court, N. D. CaJifornia, S. D, November 20, 1919.)
No. 16672.
AxiSKS "S=>32(8) — Evidence instjfficient to sustain oedeb axcLUDiNa Chi-
NESE.
Where a Chinese appUcant's father had been admltted as a native-
born citizen, and applleant's two brothers were subsequently admltted
as sons of a natlve-bom dtlzen, held, that a déclaration, elalmed to bave
been inade by applleant's father in Canada, glvlng China as the father's
blrthplaee and an Instrument by applleant's grandfather, stating that
he arrived In the United States subséquent to the date applleant's father
had claimed to bave been bom in thls country, were Insufficient to au-
thorize the department In overtumlng Its previous décisions and exclud-
ing the appllcant.
Habeas corpus proceedings by Chan Wy Sheung. Demurrer to péti-
tion overruled, and writ issued.
Joseph P. Fallon, of San Francisco, Cal., for petitioner.
Annette Abbott Adams, U. S. Atty., and Benjamin F. Geis, Asst.
U. S. Atty., Both of San Francisco, Cal., for respondent.
RUDKIN, District Judge. The facts in this case are substantially
as follows:
Chan Young, the father of the présent applicant, was admitted to the
United States in December, 1899, as a native-born citizen, after a full
hearing before the proper department. The testimony introduced on
that hearing, consisting of the testimony of the then applicant, his
father, and at least one other witness f amiliar with the time and place
of the applleant's birth, showed without contradiction that the appli-
cant was born at 751 Sacramento street, San Francisco, state of Cali-
fornia, in the year 1875. In the year 1909 or 1910 Chan Way Bon, a
son of Chan Young, was admitted as the son of a native-born citizen,
and in 1917 Chan Way Ging, another son, was likewise admitted as
the son of a native-born citizen. It is conceded by the govemment
that the présent applicant is a brother of the two last-named Chinese,
and a son of Chan Young, who, as already stated, was formally admit-
ted to the United States as a native-born citizen 20 years ago. Chan
Young died in San Francisco in 1912, having resided continuously
in the United States from the time of his admission up to the time of
his death. The grandfather is likewise dead. The déniai of the ad-
mission in this case was based upon the fact that the father of the
applicant under the name of Chun Wan Mong on the 2d of June, 1899,
filed a statement and déclaration for registration at Victoria, British
Columbia, stating that he was born at Ding Boy, Sun Woy district,
China, and that he was then of the âge of 25 years. There was likewise
offered in évidence at the présent hearing a certified copy of an appli-
cation for a certificate of résidence, made by Chin Wong, the grand-
father of the applicant, on the lOth day of April, 1894, stating, among
other things, that the applicant arrived in the United States in May,
1876.
®:3For other cases see same toplc & KEY-NUMBBR In ail Key-Numberefl Dtgests & Indexes
222 262 FEDERAL REPORTER
Based upon thèse two certificates or statements, it îs argued by the
government that the father of the applicant was not a citizen of the
United States, and that the statement of the grandfather that he
arrived in the United States in 1876 precludes the idea that his son
was born hère in 1875. There are grave doubts in my mind whether
either of thèse statements or certificates are compétent or admissible
as against the applicant. There is aiso a grave doubt in my mind as to
whether the déclaration made at Victoria was actually made by the fa-
ther of the applicant. There is no testimony in the record tending to
identify hira as the person who made the déclaration, and while the
déclaration shows that the applicant arrived at Victoria by the steam-
ship Umatilla, there is other testimony tending to show that he in
fact arrived by the steamer Walla Walla. But, in any event, it occurs
to me that the department should be bound in this matter by its own
prior adjudications, made at a time when the witnesses who had knowl-
edge of the f acts were living, and able and compétent to testify, and that
it would be a gross injustice to exclude the applicant now, after the
death of his father and his grandfather, when it is utterly impossible to
explain or contradict the ex parte statements ofïered in évidence
against him.
As to the déclaration of the grandfather, it was not in évidence be-
fore the department, and perhaps should not be considered; but in
any event, it seems to me, entirely too much importance is attached to
the matter of dates. As showing the ease with which dates may be
confused or misstated, I need only refer to the record in this case, to
show that it is stated in the brief of counsel for the government and
the mémorandum prepared for the Secretary that the application of
the grandfather was dated April 13, 1894, whereas the certified copy
shows that it was dated April 10. Furthermore, the testimony given
by the grandfather in 1899 showed that he had been a résident of the
United States for 30 years, which would carry him back to the '60's,
and away beyond the birth of the applicant. I am fuUy aware of the
limited power of the courts in matters of this kind, and of the force
and efifect that must be given to the findings of the department ; but
I am of the opinion that the question hère presented is one of law
rather than of fact, and I cannot sanction the injustice that would re-
suit from excluding the applicant from the country at this late day
under the circumstances djsclosed by this record. The décisions of
the department, after a full hearing, should be given some efïect, and
should not be overtumed or set aside in subséquent cases upon any such
pretext or for any such reason as is hère assigned.
The demurrer is therefore overruled, and the writ of habeas cor-
pus will issue as prayed, returnable November 22, 1919, at 10 o'clock
a. m.
UNITED STATES V. BENOWITZ 223
(262 F.>
UNITED STATES 7. BENOWITZ.
(District Court, S. D. New York. October 20, 1919.)
InTXBNAX. REVENUE iS=»25— PKBSONS AtJTHOBIZBD TO ADIUNISTEB OATH TO IN-
COMX TAX BETDBN.
Under Income Tax Act Feb. 24, 1919, { 223 (Comp. St Ann. Supp. 1919,
{ 6336%kk), and the régulations made thereunder, requlrlng Income re-
turna to be made nnder oatb, such oath may be taken before any person
authorized by the local law to admlnister oaths.
Criminal prosecution by the United States against Hyman Benowitz
for perjury under Criminal Code, § 125 (Comp. St. § 10295). On
demurrer to indictment. Overruled.
Francis G. Caffey, U. S. Atty., and Benjamin P. De Witt, Asst. U.
S. Atty., both of New York City.
Abraham Levy and Mark Eisner, both of New York City, for de-
fendant.
LEARNED HAND, District Judge. It must be conceded that since
United States v. Curtis, 107 U. S. 671, 2 Sup. Ct. 501, 27 L. Ed. 534,
and United States v. Hall, 131 U. S. 50, 9 Sup. Ct. 663, 33 L. Ed. 97,
the crime charged in the first count must stand or fall solely upon
whether section 406 of the régulations under the income tax law au-
thorized commissioners of deeds to take oaths to income tax returns
(United States v. Morehead, 243 U. S. 608, 37 Sup. Ct. 458, 61 L. Ed.
926), or perhaps whether under Mr. Justice Story's dictum in United
States V. Bailey, 9 Pet. 238, 253, 257, 9 E. Ed. 113, the oath was taken
before such an officiai "in conformity with the practice and usage of
the Treasury Department."
Section 406 begins by the bare statement that ail returns must be
verified on oath, in that respect merely repealing the statute. Yet it
very clearly intended — though it must be confessed, it is very blindly
worded — to cover the whole matter, because it at once proceeds to
particulars, providing that soldiers and sailors may take oaths before
any one generally authorized to administer oaths to soldiers and sailors
and that persons abroad may go to consular offîcers. It is, of course,
absurd to suppose that the section taken as a whole meant to say that
only such officers might administer oaths. If so, no one need, or in-
deed could, verify his retum unless it were soldiers and sailors and
persons abroad. This would repeal the statute in substance; indeed,
such a régulation would be illégal.
Finally, the section concludes with a provision for the certification
of oaths taken by "a foreign notary or other officiai having no seal."
This, of course, directly implies that foreign notariés may take such
oaths, and that there are also officiais so authorized who hâve no seals
other than they. It is perfectly apparent f rom this language that those
who drafted the section must hâve supposed that the first sentence au-
thorized some officers to take oaths, for the last sentence from which
the question was taken would be without any conceivable meaning
^=9Fot other cases aee su ira tAgio ft KBT-NUHBER in ail Key-Numbered Dlgests & Indexe^
224 262 FEDERAL REPORTER
if they did not, just as the second and third sentences, while logically
possible, would be absurd and indeed invalid in law. If so, the only
question is as to what officers the draftsinen of the section must hâve
meant.
Much the most rational, and, so far as I can see, the only possible,
interprétation is that they meant to include ail such as were authorized
by the local law to take oaths in their several districts. If I do not
so interpret the language, I must suppose that the régulation which was
meant to put the statute into effect illegally defeated it by applying
it in a whimsically capricious way. I interpret the régulation, theref ore,
as intended to allow a commissioner of deeds, among other officiais to
take such an oath. It becames.unnecessary, theref ore, to consider the
efïect of Justice Story's dictum in United States v. Bailey, supra.
The second count is concededly good, if the first is.
Demurrer overruled.
HOGAN et ux. v. BUJA.
(District Court, E. D. Loulslana, New Orléans Division. January 13, 1920.)
No. 16018.
li ADMIRA.I,TT lg=>2 — UNDEB SAVING clause, INJURiED SERVANT MAT PEOCÏSED IN
ADMIEALTT, AT COMMON LAVC, OB UNDEB WORKMEN'S COMPENSATION AOT.
Under Judlclal Code, § 24, par. 3 (Comp. St. § 991), saving to suitors In
admlralty tlielr rlghts at common law and under Workmen'g Compensa-
tion Acts, a person injured by a tort cognlzable in admlralty may proceed
in admlralty, at common law, or under the provisions of a workmen'a
compensation act
2. Masteb and SERVANT <®=»401 — Pleadinq in admibaltt patment of work-
men's compensation.
Under Judlclal Code, § 24, par. 3 (Comp. St. § 991), saving to admlralty
claimants rlghts to workmen's compensation, an exception of no cause
of action to a llbel for Personal Injuries vyill not be sustained, where the
libel falls to show that a workmen's compensation award had been re-
ceived; but, if an award has been reeeived, that fact may be set up in
défense, for admlralty courts will not permit two recoverles for the same
tort.
In Admlralty. Libel by Mr. and Mrs. John Hogan, for the use
and benefit of their minor son, Alvin Joseph Coiïey, against Albert
J. Buja. Exceptions to libel overruled, and re&pondents allowed 10
days to file an answer.
Daniel Wendling, of New Orléans, La., for libelants.
Gordon Boswell, of New Orléans, La., for respondent,
FOSTER, District Judge. This is a libel in personam, brought on
behalf of a minor for personal injuries. It appears from the allé-
gations of the libel that the said minor was employed as a longshore-
man by the respondent, who is a stevedore, and the injuries occurred
on board the steamship Nondrallie, while lying in the Mississippi
river at New Orléans.
An exception of no cause of action has been filed. It is contended
on behalf of respondent that the amendment to paragraph 3, section
^=3For otber cases 8e« same toplc & KEY-NUMBER in ail Ke7-Numbered DigesU A Indexes
HOGAN V. BUJA 225
(282 F.)
24, of the Judicial Code adopted October 6, 1917 (Comp. St. § 991),
"saving * * * to claimants the rights and remédies under the
workmen's compensation law of any state," deprives the admiralty
courts of jurisdiction in any state where a workmen's compensation
law is in force and effect. It does not appear from the libel that
any settlement has been made under the compensation laws of Lou-
isiana (Act 20 of 1914 and amendments) ; but, as it is conceded
in argument, that fact may be considered in determining this ex-
ception.
As paragraph 3 of section 24, Judicial Code, was originally en-
acted, it granted admiralty and maritime jurisdiction to District
Courts of the United States, "saving to suitors in ail cases the right
of a common-law remedy where the common law is compétent to give
it," and it is well settled that the state courts had jurisdiction of a
suit not in rem to recover damages for an admiralty tort, and the
injured party might elect whether to sue at. common law or in ad-
miralty.
[1] I can see no différence with regard to the workmen's com-
pensation laws, and therefore the person injured, in a case of tort
cognizable in admiralty, may elect whether to proceed in admiralty,
at common law or under the provisions of the workmen's compensa-
tion law, where it exists.
[2] If a settlement has been made in this case in such a manner
as to exclude any further recovery, that fact may be set up in dé-
fense, as courts of admiralty administer the broadest equity, and
would not permit two recoveries for the same tort. That is a ques-
tion to be decided on the merits. If the facts set up in the answer
in this case warrant it, a trial may be had on that issue, separate
from the other questions involved in the case.
The exception will be overruled; re&pondent to hâve 10 days in
which to file an answer.
262 F.— 15
226 262 FEDERAL REPORTER
TJNITED STATES ex rel. BERGER v. UHL, Actlng CJominlssloner of
Immigration.
(District Court, S. D. New York. December 8, 1919.)
Habeas coepus <©=»54 — ^Application by alien insuffioient as to osounds
fob detention.
An application by an alien, lield in custody by the immigration author-
itles, to obtain release on habeas corpus, wlll be dismissed, wliere it did
net set forth the ground on whicb he was held by the immigration author-
ities, or the record of the déportation proceedlngs, but averred merely on
Information and bellef, witliout stating any grounds, that applicant be-
lleved he was held in custody because he arrived in 1913.
Habeas Corpus. Application by the United States, on the relation
of Fred Harold Berger, for writ of habeas corpus against Byron H.
Uhl, as Acting Commissioner of Immigration at the port of New
York. Application denied.
Chas. Recht, of New York City, for petitioner.
Francis Caflfey, U. S. Dist. Atty., of New York City, for défendant.
MAYER, District Judge. This is an application for a writ of
habeas corpus. It is impossible to ascertain from the pétition what
facts, if any, are alleged as the ground upon which it is claimed that
the détention is illégal. The petitioner allèges that —
"The cause or prêteuse of the imprlsonment or restraint of the said relator,
to the best of the knowledge and bellef of your relator, is that he arrived tn
the United States in the year 1913."
It is impossible to believe that officiais of the govemment detained
petitioner merely because he arrived in the United States in 1913. The
sources of the knowledge and belief upon which such an extraordinary
allégation is based are not stated.
The petitioner then relates some expériences beginning with his ar-
rest in California, but carefuUy avoids setting forth any fact upon
which any présent wrongful détention can be predicated. He states,
in effect, that he has been confined in various jails and immigration
stations since 1917, and discloses his wishes as foUows :
"Your petitioner feels that there is no évidence upon which to base sald
déportation, but your petitioner wlll not ralse any question as to thls, for
your petitioner feels that, if the govemment or the people of the United
States do not désire his présence hère, he is willhig to retum to his native
country, formerly Baltic Russia, but now the independent republlc of Es-
thonia and Latvia.
"Your petitioner feels, however, that he has sufCered great Injury by two
years of close confinement in various Jails and Immigration stations, In vio-
lation of promises made to petitioner that he would be immedlately deported."
The practice of applying for writs of habeas corpus upon loose
gênerai allégations, which fail to show on the face of the pétition that
a petitioner is wrongfully detained, should be discontinued. From
time to time cases may arise where déportation is imminent, and where
the person detained or his attorney may not hâve time to hâve access
to tiie records, and thus to draw a satisfactory pétition. In such in-
^=3 For other cases see same toplc & KEY-NOMBER in ail Key-Numbered Digests & Indexe»
EX PARTE YOUNQ TOY 227
(262 F.)
stances, justice may require the issuance of a writ to prevent pré-
maturé déportation from making the question moot. But such is not
this case, where so far as appears from the pétition the petitioner has
waited for two years, and is now willing to be deported, but desires
to be set at large until he is accommodated.
Petitioner or his counsel will hâve no difficulty in examlning the rec-
ords upon which his déportation is based, and, if he applies again for
a writ, he will attach to his pétition the record, or a copy thereof
(which will be furnished without expense), or, in lieu thereof, his
statements must be made on knowledge, or, if on information and be-
lief, he must set forth the grounds of his information and belief.
Application denied.
Ex parte YOUNG TOY.
(District Court, N. D. Galifomla, First Division. September 16, 1919.)
No. 16515.
Alienb <S=>32(S) — Evidence insufficient to bubtain exclusion of Chinesb.
In habeas corpus proceedlngs by a Chinese seeking admission as the
son of a résident merchant, évidence that the father was principally en-
gaged in delivering liquors and cigars sold by the flrm of which he was
a member, held not to destroy the father's mercantile status, since the
manual labor of delivering articles was a necessary part of the business.
Habeas corpus proceedings by Young Toy. Demurrer to pétition
for writ overruled, and writ issued.
George A. McGowan, of San Francisco, Cal., for petitioner.
Annette Abbott Adams, U. S. Atty., and Ben F. Geis, Asst. U. S.
Atty., both of San Francisco, Cal., for respondent.
DOOLING, District Juc^e. Petitioner, a native of China, seeks
admission into this country as the son of a résident merchant. The
relationship is conceded, but the mercantile status of the father is de-
nied. The testimony shows that the father is a member of a firm deal-
ing in liquors, but that he spends much of his time in delivering goods
to customers of the establishment. It is also claimed that the firm has
not sufficient capital, or goods to justify the number of active members
claimed. It may be said in passing that about six months before the
date of the exclusion of the présent applicant one of his brothers was
admitted into the country, and at that time the father's status as a
merchant was recognized. Establishments dealing in liquor, with pro-
hibition in sight, naturally would not want a large stock of goods
on hand, and that phase of the case was not the determining f actor in
the department's conclusion that the father was not a merchant within
the meaning of the law. The décision of the commissioner contains
the following language:
"Admittlng the alleged father's clalm that he has $500 invested In the
business, the work perfonned by hlm is that of a laborer, requlring no sklU
or tralnlng, and would not seem to brlng hlm within the définition of a 'mer-
@=»For other cases see aame toplc & KET-NUMBBR in ail Key-Numbered Digests & Indexes
228 262 FEDERAL EEPORTEK
chant' as one who Is engaged in buying and selllng merchandlse at a Sxed
place of business, and performing no manual labor other than that necessary
In the conduct ol hls business as a merchant."
Hère we hâve the real reason for the détermination that the appli-
cant's father is not a merchant as defined. But the firm of which the
father is a member has a fixed place of business and is there engaged
in buying and selling liquors and cigars. The delivery of goods sold
by a modem mercantile establishment is just as much an essential part
of the business as is the sale itself, and a member of the firm who
makes the delivery is not performing manual labor not necessary in the
conduct of his business as a merchant. It is not ail manual labor which
disqualifies, but only such manual labor as is not necessary in the con-
duct of the business as a merchant. I can see no différence between
the wrapping up of the goods in the store, and the delivery of them to
the purchaser's home. Each involves manual labor, but each is neces-
sary to conduct of the business.
The demurrer will therefore be overruled, and the writ will issue,
retumable September 20, 1919, at 10 o'clock a. m.
SANDBRSON T. BISHOP et aL
(Circuit Court, W. D. Arkansas, Itexarkana Division. January 7, 1909.)
1. Vendob and pubchaseb ®=>18(%) — Nbqotiations aftke expibation of op-
tion HELD NOT TO CBEATE CONTBACT.
Where a written option to purchase land had expired without renewal,
furtlier negotiatlons between the parties on the basis of the option oon-
tract, and aets which were condltional on completion of the sale, held not
to create a contract enforceable in equity by the vendor.
2. Specifio pebfoemance <ê=»17 — Contbact held not enfobceablk by thibd
PEESON.
A contract made by a thlrd person with one holding an option to pur-
chase land, by which he agreed to joln In the purchase and pay a stated
sum for a half interest tn the land, held not enforceable in equity by the
vendor.
In Equity. Suit by H. G. Sanderson against George W. Bishop, Jr.,
and Jacob L,. Neff. Decree for défendants.
W. H. Arnold and M. E. Sanderson, both of Texarkana, Ark., for
complainant.
L,. A. Byrne, for défendant Bishop.
Henry Moore, Jr., of Texarkana, Ark., for défendant Neff.
ROGERS, District Judge. A careful examination of the record in
this case discloses the following state of f acts :
The complainant, on January 2, 1908, gave the défendant Bishop
an option for the lands in controversy, and during that month Bishop
paid complainant $1,000 therefor. The option was in writing and re-
^=9Foi other cases see same toplc & KBT-KOMBER In ail Ker-Numbered Dlgests & Indexes
SANDERSON V BISHOP 229
(262 F.)
cited the price of the lands at $25,000 cash, on certain conditions there-
in stated. The option was to expire on March 1, 1908, and provided
that, when Bishop elected to take the land and pay $1,000, complainant
was, within 10 days thereafter, to furnish an abstract showing a good
and sufficient title, under the laws of Arkansas, and to exécute deed
therefor. It also provided that, if the purchase was made the $1,000
already paid was to go as part of the purchase price. If the title
should not tum eut to be good, the $1,000 was to be retumed to Bishop,
and if it turned out to be good, and Bishop refused to purchase the
land under the terms of the option, then Bishop was to forfeit the
$1,000 to the complainant. Meantime, however, on January 14, 1908,
the option by written contract was changed, so that the terms of pay-
ment were as follows, to wit: $8,500 cash, less the $1,000 paid that
day, and $16,500 due January 1, 1909 — and, thus modified, the op-
tion was to stand until the Ist of March, 1908. The abstract furnished
by complainant thereafter was not perfected, so as to show good title,
and on the Ist of March the option expired by its terms. After March
1, 1908, no other option terms of sale were ever offered by the com-
plainant, but Bishop and complainant's attorney and agent continued
to negotiate, dicker, and jockey with each other, in an effort to close
the deal on the terms stated in the expired option.
Meantime, and while the option was in force, Bishop had interested
his code fendant, Neff, in the option, and induced him to agrée to buy a
half interest in the lands for $17,500. That agreement was in writing,
and was dated January 31, 1908, To accomplish this he induced com-
plainant's attorney to give him a bogus option, substantially the same
as the one he already had, except the price was stated at $35,000, in-
stead of $25,000, as recited in the option of January 2, 1908, and the
bogus option was antedated, so as to make it appear that it was exe-
cuted on January 14th, the same day Bishop had paid the $1,000 on the
option. He also induced the complainant's agent for the sale of the
land to wire him the purchase price was $35,000. It is not left in doubt
by the évidence that Bishop intended to use this bogus option and
telegram to promote the sale to Neff on the basis of $35,000; whereas
he already had an option to purchase the place at $25,000. Nor is
there any doubt that complainant's attorney and agent both knew
what Bishop wanted with the bogus option and telegram. Bishop
denied having shown the bogus option to Neff until Neff had agreed
to pay $17,500, being one-half purchase price of the land, $500 of
which he paid in cash, and of the remaining $17,000 agreed to pay
$8,750 on or about March 1, 1908. Bishop admits that he promised,
before or at the time Neff paid him the $500, to show him the option
contract which contained the terms of the proposed purchase. This he
never did, but instead showed him the bogus option contract.
Neff testifies Roberts did show him the bogus contract before he
agreed to buy, and solicited him to buy on the same terms he (Bishop)
had bought from complainant. Whatever may be the truth on this
point, it is certain that Bishop had represented to Neff that the option
price was $35,000, and confirmed it by the bogus contract, in which
230 262 FEDERAL REPORTER
price was recited as $35,000. It is also true that Neff never saw the
option contract of January 2, 1908, or knew of its existence or its
ternis, until after this suit was brought. After the option expired, on
March 1, 1908, ail the negotiations had, between complainant, his
agent, and attorney, on the one side, and Bishop and his attorney, on
the other side, proceeded on the basis of the option contract of Janu-
ary 2, 1908, so far as terms of payment was concemed. As soon as
Bishop made his agreement with Neff, Bishop's attorney, Byrne, seems
to hâve practically dropped out of sight, and Bishop relied on Neff's
attorney, whose duties related solely to passing on the title. The at-
torney suggested many defects to complainant, and his agent and at-
torney endeavored to comply, and make the corrections, but never to
the satisfaction of Neff's attorney, who also represented Bishop as
to the title.
It finally came to this: That Bishop was willing to close the deal,
but Neff was not satisfied with the title. Bishop, to use his own lan-
guage, could not "swing the deal" without Neff's aid; he could not
get Neff's aid until Neff's attorney was satisfied as to the title ; com-
plainant could not satisfy Neff's attorney as to the title, and hence
Bishop would not close the deal, mainly because, presumably, he could
not raise the cash payment. Bishop's willingness to close the deal is
easily explained, because, under the arrangement into which Neff
had been inveigled if the deal went through he (Bishop) had only to
pay, in addition to the $500 he had already paid, $7,000 (and that not
due until January 1, 1909), and become half owner of a plantation
which cost $25,000, while Neff would be out $17,500 for a half own-
ership in the same plantation. Naturally Bishop could afford to take
chances on titles, which Neff could not. While the matter stood in
this shape, the parties wrangling over the title, the overflow came,
and the place was greatly damaged, and the crop lost. Immediately
ail negotiations ceased, and the suit followed.
[1,2] It is clear that Neff was never bound to complainant in any
respect, and had no contract with him ; his contract was with Bishop,
and was conditional. The conditions were never performed, and Neff
was not bound to Bishop. No cross-bill would, therefore, lie in this
case on the state of facts disclosed ; and hence the application to file
it is denied. Neff not being under any contractual obUgations to com-
plainant, as to him the original bill would not lie. Bishop having fail-
ed on account of defects in the title to close the option before it expired,
and the option never having been renewed between him and complain-
ant, none existed when the overflow came and the negotiations ceased ;
but it may be said, if the option had been in existence and complainant
had furnished an abstract showing a perfect title, so that Bishop be-
came obligated to buy the land, by the very terms of the option con-
tract of Janiiary 2, 1908 (and there never was any other), if Bishop
refused to close the option no penalty resulted, except the loss of his
$1,000 which had been paid upon the option.
Much is said and some reliance seems to be placed on the fact that
Bishop had complainant make a deed to himself and Neff, and that
complainant's brother had entered into a written contract, and had
SANDEESON V. BISHOP 231
(262 F.)
executed a note for $4,000 to pay the rent of the plantation for the
year 1908; the note being made payable to Bishop and Nefï. Those
matters are unimportant. No doubt Bishop wanted to use the rent
note and contract as an additional lever to influence Nefï to buy, and
he wanted the deed ready, so that, if Neff did buy, he could close the
deal without delay, and thereby avoid any further risk of Neff 's dis-
covering that he had been beaten out of $10,000 in the deal with Bishop ;
but thèse circumstances were ail taken conditionally, and the parties
could not hâve understood otherwise, and their actions throughout
were upon that theory. They were taken while the option was pend-
ing, and if the option f ell they f ell with it necessarily ; otherwise, Bish-
op and Neff would be getting the rent on land they did not own, and
had not even agreed to purchase. It is unprofitable to pursue that
branch of the case any further.
The principles of law governing options are stated by the Eighth
Circuit Court of Appeals in the case of James et al. v. Darby, 100
Fed. 224, 40 C. C. A. 341, and are as applicable to the case at bar as
that case.
The bill will be dismissed as to both défendants, and the attachment
discharged, at the costs of complainant
232 2G2 FEDERAL REPORTER
ADAMS EXPRESS CO. v. LANSBURGH & BRO.
(Court of Appeala of District of Columbla. Submltted November 4, 1919.
Decided January 5, 1920.)
No. 3263.
Masteb and servant <S=»305 — Helpeb moving automobiij: teuck contbaet
to instructions einoaoed in scope of employment.
A helper on defendant's automobile truck, standing near plaintifE's
place of business during the driver's temporary absence, held engagea in
the scope of his employment wben he moved the truck at a thlrd party's
request, so as to render défendant liable for the négligent knocking over
of a lamp post, whlch broke plaintifs window, although défendant had
explicitly instructed the helper not to drive the truck.
Appeal f rom the Suprême Court of the District of Columbia.
Action by Lansburgh & Brc, a corporation, to the use of the Home
Plate Glass Insurance Company, against the Adams Express Company.
Judgment for plaintifï, and défendant appeals. Affirmed.
M. W. King and 1,. Koenigsberger, both of Washington, D. C. (Eu-
gène Young and Morris Simon, both of Washington, D. C, on the
brief), for appellant.
W. H. HoUoway, of Washington, D. C, for appellee.
ROBB, Associate Justice. Appeal from a judgment in the Suprême
Court of the District for the plaintiff, appellee hère, for damages re-
salting from the breaking of a plate glass window by the négligence of
an employé of the défendant, appellant hère, in operating defendant's
automobile.
The case was tried by the court without a jury upon an agreed state-
ment of facts to the following effect: An electric automobile truck,
belonging to and in use by the défendant company in the conduct of
its express business, was standing at the curb about 120 f eet from plain-
tiff's place of business in this city. The driver of the truck had tem-
porarily left it "to make certain deliveries." Prior to leaving he had
removed the starting key and placed it under the front seat of the
truck. During the absence of the driver a third person requested the
"helper" to move the truck, that the person in question might gain en-
trance to a point opposite plaintifï's place of business, which he knew
to be the next stopping place on the route. When that place was reach-
ed, a lamp post was knocked over and against plaintifï's plate glass win-
dow, through the négligent handling of the truck. At the time of the
accident the helper was in the employ of the défendant company, and
wore a cap with "Adams Express Company" on it, "but had been ex-
pressly forbidden to drive or operate machines of said express com-
pany." Thèse instructions were given him personally, numerous signs
and notices were posted at defendant's warehouse to the same eflfect,
and the rule books fumished ail employés forbade the driving or op-
erating of machines by helpers. This helper had not previously served
on this particular route, but had served as helper with other drivers
on trucks owned and operated by the défendant company. Just what
were the duties of a helper does not appear.
<g=7FoT otber cases ses same topic & KEiV-NUMBER In ail Ker-Numbered Dlgests ft Indexes
ADAMS EXPRESS CO. V. LANSBURGH & BEO. 233
(262 F.)
The question for détermination is whether, under the admitted facts,
it may be said that the act of the helper was within the gênerai scope
of his employment. In Axman v. Washington Gaslight Co., 38 App.
D. C. 150, the décisions upon this question were quite carefully re-
viewed, and the conclusion reached that the true test in measuring the
principal's responsibility is whether the act of the agent was done in
the prosecution of the business either impliedly or expressly intrusted
to the agent by the principal. Public policy requires that the principal
be held liable for what his agent does or omits doing in conducting
the business of the principal, for the principal has voluntarily substi-
tuted for his personal management and supervision that of the agent.
It would be difiicult, if not impossible, precisely to define the meaning
of "scope of employment," for the character of the emplojrment and
the nature of the wrongful act in the given case must be considered.
It has been held that expressions équivalent to "scope of employment"
are : "Une of duty," Isaacs v. Third Ave. R. Co., 47 N. Y. 122, 7
Am. Rep. 418; "in the employer's service," Adams v. Cost, 62 Md.
264, 50 Am. Rep. 211, and Slater v. Advance Thresher Co., 97 Minn.
305, 107 N. W. 133, 5 L. R. A. (N. S.) 598; "course of service," Eph-
land v. Mo. Pac. R. Co., 137 Mo. 187, 37 S. W. 820, 38 S. W. 926,
35 L. R. A. 107, 59 Am. St. Rep. 498 ; "transaction of the employer's
business," Cobb v. Simon, 119 Wis. 597, 97 N. W. 276, 100 Am. St.
Rep. 909; "furtherance of the employer's interests," Paulton v. Keith,
23 R. I. 164, 49 Atl. 635, 54 L. R. A. 670, 91 Am. St. Rep. 624, and
Smith V. Causey, 28 Ala. 655, 65 Am. Dec. 372; "protection of em-
ployer's property," West Jersey R. Co. v. Welsh, 62 N. J. Law, 655,
42 Atl. 736, 72 Am. St. Rep. 659. And there is substantial unanimity
of opinion that the principal may be held accountable for the wrong-
ful act of the agent within the scope of his employment, although for-
bidden by the principal. Axman v. Washington Gaslight Co., 38 App.
D. C. 150; Palmer v. St. Albans, 60 Vt. 427, 13 Atl. 569, 6 Am. St.
Rep. 125 ; McCann v. Consolidated Traction Co., 59 N. J. Law, 481,
36 Atl. 888, 38 TU. R. A. 236; Consolidated Ice Mach. Co. v. Keifer,
134 m. 481, 25 N. E. 799, 10 L. R. A. 696, 23 Am. St. Rep. 688; Engel
V. Smith, 82 Mich. 1, 46 N. W. 21, 21 Am. St. Rep. 549; McClung v.
Dearbome, 134 Pa. 395, 19 Atl. 698, 8 L. R. A. 204, 19 Am. St. Rep.
708 ; Moses v. Mathews, 95 Neb. 672, 146 N. W. 920, Ann. Cas. 1915A,
698. In Duggins v. Watson, 15 Ark. 118, 60 Am. Dec. 560, the court
pertinently observed that, if disobedience of instructions by an agent
will exonerate the principal, the nde of respondeat superior, designed
for the protection of innocent third persons, virtually will be abrogated.
A helper, according to the Century Dictionary, is :
"One who helps, aids or assists; speciflcally, one who is employed as as-
sistant to another In doing some kind of work."
It results, therefore, that the helper in the présent instance was the
assistant of the driver in delivering and coUecting packages for the de-
fendant. The truck was a necessary instrument in carrying eut that
purpose, and it is a reasonable inference that, when the driver left the
truck to make a delivery, the helper was left in charge. At the moment
he was the sole représentative of the défendant, and, when he under-
234 262 FEDERAL KEPOETBR
took to drive the truck to the next stopping place, he certainly was fur-
thering the business of the principal in the particular work in which
he was engaged as helper. He represented the principal and no one
else. True, his spécifie instructions did not contemplate such an act ; but
it is equally true that the act was within the gênerai scope of his em-
ployment. Défendant attaches importance to the fact that the key
was removed by the driver and placed under the seat of the truck. It
is quite apparent, however, that this précaution was taken against
strangers, and not against the helper, who had knowledge of what had
been donc, as evidenced by his act in removing the key. Indeed, this
circumstance is not at ail helpf ul to the défendant, for, had the driver
really intended to prevent the opération of the truck by his helper, he
would hâve put the key in his pocket, instead of leaving it within easy
reach of the helper. If the policy of the défendant company be not to
permit helpers in any circumstances to drive its trucks, it should em-
ploy helpers who will obey instructions. Certainly the public ought
not to stdïer the conséquences of disobedience, where, as hère, the help-
er or assistant is acting within the gênerai scope of his employment and
in direct furtherance of the business of the principal.
The judgment is affirmed, with costs.
Affirmed.
PASSAIO NAT. BANK et al. v. OOMMBRCIAL NAT. BANK et aL
(Court of Appeals ot District of Columbla. Submitted October 13, 1»1»,
Decided November 3, 1919.)
No. 3241.
CaBTCEIXATION of INBTBtmENTS ®=»15— ADEQUATE BSMBDT AT I»AW FOB MIS-
BBFBESENTATIONS TO PUBOHASKBS OF SKCtTEITIKS.
In View of Judlclal Code, % 267 (Oomp. St. S 1244), prohiblting équitable
sults where légal remedy la adéquate, a suit In equlty to resdnd the
purchase of securities . and recover the conrfderation paid cannot be
maintained against défendants, who were not the vendors, but were al-
leged to hâve made false représentations regardlng the value of the secu-
rities, slnce a damage action at law would afford adéquate remedy for
any false représentations made by them, and they could not respond to a
decree of rescission.
Appeal from the Suprême Court of the District of Columbia.
Bill by the Passaic National Bank, the Rutherford National Bank,
the Savings Investment & Trust Company, and others against the
Commercial National Bank, Tucker K. Sands, and others. From a
decree dismissing the bill as to the named défendants, plaintiiïs ap-
peal. Affirmed.
C. F. Carusi and Hayden Johnson, both of Washington, D. C, for
appellants.
Thos. C. Bradley, W. H. Ellis, C. B. EUis, and A. H. Ferguson, ail
of Washington, D. C, for appellees,
VAN ORSDEL,, Associate Justice. Appellants, plaintiffs below,
filed a bill in equity in the Suprême Court of the District of Columbia,
©ssFor other cases see same toplo 4 KET-NUMBBR In ail Key-Numbered Dlgests & Indexes
PASSAIC NAT. BANK V. COMSIEKCIAL NAT. BANK 235
(262 F.i
seekîng a rescission of the purchase of certain securities, amounting to
$95,000 and a money decree for the amount invested therein, with in-
terest and costs. The facts, as alleged in the bill, are substantially as
f ollows :
In 1910 a firm known as F. Mertens' Sons were the owners of a
large amount of mountain lands in the state of Maryland, from which
timber had been eut. This firm conceived the idea of converting the
land into a vast orchard scheme. To this end it was subdivided into
10-acre tracts. The United States Trust Company, of Washington,
was selected as trustée to hold title to the property and to act as the
agency through which payments were to be made by purchasers of
thèse orchard tracts. Under his contract, the purchaser agreed to
pay a stated cash payment, usually 10 per cent, of the purchase price,
with notes maturing from month to month for the balance, payable to
the trust Company as trustée, and when the purchase price had been
paid in full, usually in 5 years, the purchaser was to receive a convey-
ance from the trust company for a commercial orchard. In other
words, the promoters agreed to plant the land in fruit trees, cultivate
the same, and, according to the prospectus, turn over to the pur-
chaser a bearing orchard at the time of the passing of title.
Large munbers of persons purchased thèse 10-acre tracts at priées
averaging about $2,000, in some instances paying as high as $2,500.
The deferred purchase-money notes were indorsed by the trust com-
pany without recourse, and tumed over to Mertens' Sons, who rede-
livered large numbers of them to the trust company as collatéral se-
curity for sums of money advanced to the firm from time to time.
In July, 1914, the United States Trust Company went into the hands
of a receiver, and défendant Tucker K. Sands was appointed receiver.
The défendant Continental Trust Company was then substituted as
trustée, and took over the trust from the United States Trust Com-
pany, paying $145,000, the amount of the indebtedness due from Mer-
tens' Sons, receiving the collatéral in the form of thousands of tract-
purchase deferred payment notes, took over the title to the real estate,
and proceeded to exécute the trust in substantially the same terms as it
had been carried on by the United States Trust Company. With the
receivership and the transfer of the affairs to the Continental Trust
Company, défendants Bâtes Warren and Charles W. Warden, who
had been prominently connected with the affairs of the United States
Trust Company, became ofHcers and directors of the Continental Trust
Company.
In the early part of 1916, the indebtedness of P. Mertens' Sons to the
Continental 'Trust Company was about $250,000, and it was also large-
ly indebted to the défendant Commercial National Bank. By this time
the sale of orchard tracts had aknost ceased, and Mertens' Sons had
become hopelessly insolvent. They had borrowed large simis of money
from many banks and trust companies throughout the country, largely
based upon the commercial paper which had been indorsed over to
them by the United States Trtist Company, and later by its successor
as trustée, the Continental Trust Company. In March, 1916, the
Continental Trust Company, acting through Bâtes Warren, its vice
236 262 FEDERAL REPORTER
président, the Commercial National Bank, actîng through Tucker K.
Sands, its vice président, and the firm of F. Mertens' Sons, acting
through Frederick Mertens, one of its members, conceived a plan, the
object of which was the réduction of the indebtedness of Mertens'
Sons to the two défendant banks, as well as the averting of the financial
crisis in the affairs of Mertens' Sons, which would resuit in the de-
struction of the collatéral represented by the tract purchasers' notes.
The plan conceived was to raise $1,000,000 on securities on 398 tracts
of land, worth not more than $27,400. The 398 tracts were conv^ed
to the Continental Trust Company by Frederick Mertens and John
Mitchell, Jr., who was a partner with Mertens in the apple orchard
Project. The deeds on their faces purported to convey 500 tracts.
The 102 tracts additional attempted to be conveyed were not owned
by either Frederick Mertens or John Mitchell, Jr., nor hâve they ever
had any interest in said tracts.
In carrying out this scheme, on the llth of March, 1916, the Green
Ridge Valley Orchards Company was incorporated, with a capital stock
of $500,000, divided into shares of the par value of $100 each, by Bâtes
Warren, vice président of the Continental Trust Company, Tucker K.
Sands, vice président of the Commercial National BaiJc, Frederick
Mertens, Otto G. Raymond, and Gardner L,. Boothe. At a meeting of
the incorporators held on March 16, 1916, at lOo'clock a. m., in Alex-
andria, Va., a proposition was submitted on behalf of Frederick Mer-
tens and John Mitchell, Jr., as f ollows :
"To sell to the sald company, to enable It to carry out the objects for which
It was incorporated, tlie said 500 orchard tracts for $500,000 of the fuUy pald
and nonassessable stock of this corporation and for a note of thls company
for the sum of $500,000, payable on demand."
The minutes of the meetmg f urther stated :
"Whereas, the Incorporators believe the aforementioned ofCer to be a rea-
sonable one, and the priée for sald property to be fair and reasonable ; Now,
therefore, be It resolved that the directors of thls company be, and they are
hereby, authorized to acqulre from the said Frederick Mertens and John
Mitchell, Jr., or their assigna, at a priée not in excess of that mentioned, the
aforesald 500 orchard tracta"
On the same day, at 5 :30 p. m., the directors of the Green Valley
Orchards Company held a meeting in the Commercial National Bank
Building, Washington, D. C, and accepted the proposition of Mertens
and Mitchell by a resolution which recited that each tract contained
approximately 10 acres and each tract was about one-half planted in
apple trees in good condition.
Pursuant to the prearranged plan, the Continental Trust Company
conveyed the 500 tracts of land to the Green Ridge Valley Orchards
Company, by deed in which the trust company covenanted that the
property was unincumbered. Upon 398 of the tracts conveyed, how-
ever, there existed prior mortgages and liens, and the title to the re-
maining 102 tracts was not owned by Mertens and Mitchell. None of
the property conveyed, except about 150 tracts, was under cultivation
and planted with apple trees.
PASSAIC NAT. BANK V. COIVUIEKCIAL NAT. BANK 237
C262 P.3
It is further averred that on the 17th day of March, the day fol-
lowing the meetings at Alexandria and the Commercial National Bank,
another meeting of the stockholders was held at the principal office in
Alexandria, Va., and the f ollowing resolution adopted :
"Be it resolved, that the Green Bidge Valley Orchards Company, Incorpo-
rated, shall issue in the manner provlded by law $500,000 of flrst-mortgage
coupon bonds, bearing date on the 20th day of March, 1916, to be payable
on or before flve years after date, with interest thereon at the rate of 6 per
cent per annum, payable semiannually, said bonds to be secured by mortgage
or deed of trust on ail the property of the Green Ridge Valley Orchards Com-
pany, Incorporated, said mortgage or deed of trust to be substantially in the
form submitted and read at this meeting."
Immediately following this meeting, John Mitchell, Jr., proceeded
to New York and attempted to interest plaintifïs McBee, Jones & Co.
in an effort to market the bonds. He was inf ormed by McBee, Jones
& Co. that conditions were unfavorable for the marketing of bonds of
that character, but were favorable to the marketing of short-term
notes well coUateraled. Accordingly, on April 18, 1916, the stockhold-
ers, who were, in fact, the directors, of the Green Ridge Valley Or-
chards Company, held a meeting at the office of the corporation, and
adopted the following resolution:
"Whereas, it Is deemed for the best interesta of the company that the Com-
pany issue and sell its collatéral trust notes for the aggregate principal amount
of $100,000, due in four, six, eight, and twelve months, and that said notes
1)6 secured by a pledge of $120,000, face amount, of the company's flrst mort-
gage 6 per cent, flve-year gold bonda in a form of collatéral trust agreement
to be executed between this company and the EJmpire Trust Company."
In accordanc.e with this resolution, the directors and officers of the
company were authorized to and did issue $100,000 collatéral trust
gold notes of the company, indorsed by Mertens' Sons, pledging as
collatéral security therefor $120,000 face amount of the mortgage
bonds under an agreement between the Green Ridge Company and
the Empire Trust Company.
About October 1, 1916, Mertens' Sons being financially embar-
rassed, organized a corporation known as F. Mertens' Sons Corpora-
tion, of which the président was défendant Bâtes Warren and the
treasurer was Charles W. Warden, both vice présidents of the Conti-
nental Trust Company. To this corporation Mertens' Sons undertook
to convey ail their property in trust for their creditors. Shortly there-
after an involuntary pétition for bankruptcy was filed against Mertens'
Sons, and they were adjudged bankrupt, and the deed of conveyance
to the F. Mertens' Sons Corporation was adjudged in the United States
District Court for the District of Maryland to be null and void, on the
ground that at the time of its exécution F. Mertens' Sons were insol-
vent.
On May 17, 1916, McBee, Jones & Co. telegraphed to F. Mertens'
Sons as follows:
"Hâve Continental Trust and Commercial National wlre us to-day what
they regard as safe sale value for orehard tracts securing bonds Green Ridge
Valley Orchards Co."
238 2C2 FEDERAL REPORTER
To which, on the same day, the Continental Trust Company an-
swered by telegraph as f oUows :
"Eeplying to your Inqulry respectlng value of Indlvldual orchard tracts
planted to growing apple trees on Green Eidge Valley Orchards and seeuring
tlieir flre year six per cent, bonds, we thlnk eighteen hundred to two thou-
sand dollars a conservative valuatlon. The tracts are being well cared for
and growing In value."
On the same day a letter was sent from the Commercial National
Bank, signed by Tucker K. Sands, cashier, as follows:
"Answering your inquiry as to my opinion of the sale value of orchard
tracts owned by Green Ridge Orchards Company and covered by bonds, I
should estimate that the valuation of $2,000 for each lO-acre tract would be
a fair valuatlon. I understand that prevlous sales of the tracts was at |2,500."
Upon receipt of this information, McBee, Jones & Co. sold and deliv-
ered in varions amounts to the plaintiffs in this action $95,000 of the
face value of the short time notes. Out of the proceeds of sales of
said notes, $33,750 were remitted for the account of the Continental
Trust Company, $9,000 to the Continental Trust Company for the
account of Mertens' Sons, and, at the request of Mertens' Sons, $45,000
of the unsold notes were exchanged for $45,000 worth of the bonds
of the Midland Railway Company, which bonds were forwarded to
the Continental Trust Company for the account of Mertens' Sons,
and were held by the Continental Trust Company and the Commercial
National Bank as security for loans made by them to Mertens' Sons. It
is alleged at length in the bill that the Continental Trust Company and
the Commercial National Bank knew, or were chargeable in law with
knowledge, of thèse varions transactions.
Mertens' Sons, on the 28th day of March, 1917, were adjudged bank-
rupt, and the estâtes of the firm and the individual members thereof
are being administered by a trustée in bankruptcy. It is alleged that
from the best information ohtainable the bankrupts' estâtes will pay
to the creditors a dividend of not exceeding 5 per cent, on their claims.
In June, 1917, by the voluntary action of the stockholders, officers,
and directors, the Green Ridge Valley Orchards Company was adjudged
a bankrupt, and its only asset consists of the 398 tracts of land, of a
value of $27,400, incumbered by the mortgage given to the Continental
Trust Company as trustée, to secure the issue of the $500,000 in bonds,
which are held, with the exception of the $120,000 face value on de-
posit with the Empire Trust Company, as collatéral security by creditors
of Mertens' Sons for varions obligations to them.
In the bill it is prayed :
"That the contract of sale and purchase of the gold notes In the MU men-
tloned be rescinded, for the reasons In the blU set forth, and that the plain-
tiffs, upon the retum to the défendants of the notes held by the plaintiffs,
recover of the défendants the money and securlties parted with to the de-
fendants In the proportion In which the plaintiffs respectlvely are entitled,
together with Interest and costs, and for sueh other and further relief as
may be équitable and Just."
The défendant Tucker K. Sands moved to dismiss the bill of com-
plaint on the ground, among others :
PASSAIC NAT. BANK V. COMMERCIAL NAT. BANK 239
«268 F.y
"That the blU does not state sueh a case as entitles the plalntiffs to any
relief against tàls défendant, because they bave a plain, adéquate, and com-
plète remedy at law."
The défendant Commercial National Bank also moved to dismiss
the bill on the ground that —
"Said blll of camplalnt is bad In substance, and does not contaln allégations
of fact such as would, If true, entitle tbe plalntiffs, as against this défendant,
to relief in this court."
On hearing, the motion to dismiss as to thèse défendants was sus-
tained, from which decree the case cornes hère on appeal.
The court below dismissed the bill as to défendants Sands and the
Commercial National Bank on the ground that plaintifïs, as against
thèse défendants, hâve a plain, adéquate, and complète remedy at
law. The Judicial Code of the United States (section 267 [Comp. St. §
1244]) provides that —
"Suits in equity shall not be snstained in any court of the United States in
any case where a plain, adéquate, and complète remedy may be had at law."
The case hère attempted to be made against thèse défendants is
based upon the alleged false représentations of défendant Sands in his
communication of May 17, 1916, to the brokers, McBee, Jones & Co., as
to the value of the orchard tracts. As the resuit of thèse représenta-
tions, plaintifïs were induced among other things, to exchange the $45,-
000 of railroad bonds for a portion of the notes. By the averments of
the bill, a portion of the railroad bonds was turned over to the Com-
mercial National Bank as security for an indebtedness of Mertens'
Sons to the bank. The only ground for équitable jurisdiction is found
in the prayer for rescission. It is clear that only the vendor, the Green
Ridge Company, the maker of the notes, and Mertens' Sons, the in-
dorsers, through whom they came into the hands of the brokers for
sale, could be compelled by équitable process to rescind. Défendants
Sands and the Commercial Bank are not vendors nor indorsers of the
notes.
The rule as to équitable jurisdiction in cases of this sort is clearly
stated by Judge Lurton in Hindman v. First National Bank of Louis-
ville, 112 Fed. 931, 50 C. C. A. 623, 57 L. R. A. 108, as follows:
"One who bas been induced by false représentations to buy property bas
open to him no less than three remédies. He may rescind and sue at law
for tbe considération, he may bring an équitable suit for rescission and obtain
full relief, or be may retaln what he has received and bring his action for
fraud and deceit. The flrst two klnds of relief lie, as is most évident, only
against the vendor. The thlrd wni lie against elther the vendor or any third
ïterson through whose false représentations, directly made, the plaintlff has
sustained damages."
Défendants, not being parties to the contract resulting in the sale of
the notes, clearly are not in position to respond to a decree requiring
rescission, and Mertens' Sons and the Green Ridge Valley Orchards
Company, the only persons against whom the action for rescission
would lie, are not made parties défendant. If they were before the
24:0 262 FEDERAL REPOETEK
court, and rescission could be had, défendant Commercial National
Bank, if liable, a point not hère decided, could be retained as a de-
fendant to respond to the extent of tuming over the railroad bonds
as prayed for in the bill, as one of the results to be obtained from re-
scission. It is clear that the inability of the plaintififs to obtain rescis-
sion through lack of proper parties défendant, deprives plaintiffs of
any means of requiring the bank to respond by turning over the bonds.
Hence, so far as défendants Sands and the Commercial National Bank
are concemed, the only liability left would be that growing out of the
alleged false représentations as to the value of the orchard tracts,
which, it is averred, induced plaintiffs to invest in the notes. For this
there is an adéquate remedy at law by an action sounding in tort for
damages for deceit.
The decree is afiirmed, with costs.
Afïirmed.
KANSAS CITT SOUTHERN EY. CO. V. MARTIN 241
(262 F.)
KANSAS CITT SOUTHERN RY. CO. y. MARTIN.
(Circuit Court of Appeals, Fiftli Circuit. January 6, 1920.)
No. 3450.
1. Commerce <@=27(8) — Railway employé unloadinq beidge timbers em-
ploted in "interstate commerce."
A rallroad employé, engaged, when injured, in work on the ground un-
loadlng timbers to be used by him and othors In the reconstruction or
repair of a bridge, constltutlng part of a railroad in use as an instrumen-
tality of Interstate commerce, held employed in "Interstate commerce"
within Bmployers' Liabillty Acts of April 22, 1908, and April 5, 1910
(Comp. St S§ 1010, 8657-8665).
[Ed. Note. — For other définitions, see Words and Phrases, ITlrst and
Second Séries, Interstate Commerce.]
2. Release ©=58(3) — Vaxiditt question for juet.
In an action by a servant for personal injury, where défendant pleaded
a release in bar, the issue made by a reply, alleging that plaintiff was
induced to exécute the release by fraudulent représentations of defendant's
agent, and that on leaming their falsity he retumed the check received,
held properly submitted to the jury with the other issues.
8. Masteb and servant '®=»216(5) — Risk of injurt from négligence of co-
employé of interstate carrier not assttmed.
An interstate carrler's employé, Injured by ties falling from a flat car,
caused by the négligence of a ooemployé, held not to bave assumed the
risk.
In Error to the District Court of the United States for the Eastern
District of Texas ; George W. Jack, Judge.
Action at law by M. Martin against the Kansas City Southern Rail-
way Company. Judgment for plaintifï, and défendant brings error.
Affirmed.
John J. King and W. L. Estes, both of Texarkana, Tex., for plain-
tiff in error.
J. Q. Mahafïey, of Texarkana, Tex., and S. P. Jones, of Marshall,
Tex. (Mahaffey, Keeney & Dalby, of Texarkana, Tex., on the brief),
for défendant in error.
Before WALKER, Circuit Judge, and FOSTER and GRUBB, Dis-
trict Judges.
WALKER, Circuit Judge. The défendant in error (who will be re-
ferred to as tihe plaintiff), a citizen of the state of Texas, brought this
suit under the fédéral Employers' Liability Act (35 Stat. 65 ; 36 Stat.
291 [Comp. St. §§ 1010, 8657-8665]), in the District Court for the
Eastern District of Texas against the plaintiff in error (which will
be referred to as the défendant), a Missouri corporation, having its
principal place of business in Kansas City, in that state. The question
of the court's jurisdiction of the suit, which was brought in a district
not that of the résidence of either the plaintiff or the défendant, was
duly raised; the ground on which the jurisdiction was denied being
that the plaintiff was not engaged in interstate commerce when he re-
ceived the injury complained of.
®=For other cases see same topic & KEY-NUMBER in aH Key-Numbered DIgests & Indexes
262 P.— 16
242 262 FEDERAL REPORTER
[1] The plaintiff was a member of a bridge gang employed in
maintaining and repairing bridges constituting part of Unes of railway
in use by the défendant in interstate commerce. When he was in-
jured, he, as a member of such gang, was assisting in unloading tim-
bers and cross-ties from a car at a point near a bridge on the defend-
ant's line of railway over the Calcasieu river, near Lake Charles, La. ;
the purpose being to use the timbers and ties so placed in the recon-
struction or repair of that bridge as soon as the required material
could be assembled, without causing an interruption of the use of the
bridge in interstate commerce. It is settled that the repair of bridges
or other structures constituting part of a railway in use as an instru-
mentality of interstate commerce is so closely related to such commerce
as to be in légal contemplation a part of it, that a railway employé en-
gaged in such work is to be regarded as engaged in interstate com-
merce, and that preparatory steps taken with the purpose of furthering
the actual work of repair or reconstruction constitute a part of such
commerce within the meaning of the act. Pederson v. Delaware,
Lackawanna & Western R. R. Co., 229 U. S. 146, 33 Sup. Ct. 648,
57 L. Ed. 1125, Ann. Cas. 1914C, 153; Southern Railway Co. v.
Puckett, 244 U. S. 571, 37 Sup. Ct. 703, 61 L. Ed. 1321, Ann. Cas.
1918B, 69; Louisville & Nashville R. R. Co., v. Parker, 242 U. S.
13, 37 Sup. Ct. 4, 61 L. Ed. 119; Philadelphia, Baltimore & Washing-
ton R. R. Co. V. Smith, 250 U. S. 101, 39 Sup. Ct. 396, 63 L. Ed. — .
The work in which the plaintiff was engaged when he was hurt was
not more remote from the actual making of the repairs being pre-
pared for than the work which was held to be a part of interstate
commerce in the cases of Pederson v. Delaware, Lackawanna & West-
ern R. R. Co., supra, and Philadelphia, Baltimore & Washington R. R.
Co. V. Smith, supra. We are of opinion that the doing of that work is
to be considered as a part of what was required to efifect the repair
of the bridge near which it was being donc, and that the plaintiff in
taking part in that work was engaged in interstate commerce. Un-
loading the ties at a place near enough to the bridge for them to be
conveniently available for the use to which they were destined was a
part of the task of getting the bridge repaired. That task was not
merely anticipated, but had been entered upon when plaintiff was hurt.
[2] The défendant set up in bar of the action a written release, al-
kged to hâve been executed by the plaintiff for a valuable considéra-
tion. The plaintiff replied to the effect that he was induced to exécute
the release by described fraudulent représentations made to him by the
defendant's agent, and that plaintiff, promptly after ascertaining the
falsity of such représentations, returned the check given to him when
the release was executed. The court overruled a request of the de-
fendant, made at the opening of the trial, that the issue so raised be
heard and determined, on the equity side of the court, prior to the trial
of the other issues involved ; and the court, over the defendant's ob-
jection, submitted that issue to the jury with the other issues so sub-
mitted.
There is a conflict of décisions on the question whether such an is-
sue, raised as it was in the instant case, is one at law and triable by a
KANSAS CITY SOUTHEEN RY. CO. V. MARTIN 243
(262 F.)
jury. The view prevailing in some courts is that the issue is not one
at law, unless the fraud charged touches the exécution of the question-
ed instrument, so as to be provable under a plea or replication of non
est factum. In the case of Union Pacific Railway Co. v. Harris, 158
U. S. 326, 15 Sup. Ct. 843, 39 L. Ed. 1003, such an issue was treated
as one triable by a jury in an action at law. That was a suit for Per-
sonal injuries, in which a release was pleaded as a bar to the action.
The plaintiflf replied that the release was obtained through misrep-
resentations and fraud, and that the plaintiff, while he was ill, signed
the release in ignorance of its contents. The court held that there
was no error in the instructions given in submitting those issues to the
jury, and affirmed the judgment rendered for the plaintiff. Though
fraud other than that touching the exécution of the release was set up
in the pleading attacking its validity, it was decided that there was no
error in the action of the court in submitting to the jury the issues
raised.
Upon a full considération it was decided by the Circuit Court of
Appeals for the Sixth Circuit, in the case of Wagner v. National
Ivife Ins. Co., 90 Fed. 395, 33 C. C. A. 121, Circuit Judge Taft deliver-
ing the opinion, that it is proper in a suit at law for the plaintiff to meet
a plea of release by a replication that the release was obtained by fraud,
whether the fraud touches the exécution, or consists in misrepresenta-
tion as to material facts inducing exécution. Another well-considered
case to the same effect is American Sign Co. v. Electro Lens Sign Co.
(D. C.) 211 Fed. 196. What the plaintiff does, when he makes such a
reply to a plea setting up a release, amounts to his saying that, because
of the fraudulent misrepresentations alleged, the défendant is without
right to maintain the défense based upon the release set up. A con-
tract so procured is no more binding at law than in equity. It is com-
pétent for a court of law to décide that a transaction vitiated by fraud
is not effective to confer the asserted right based upon it. Buzard v.
Houston, 119 U. S. 347, 7 Sup. Ct. 249, 30 L. Ed. 451 ; Equitable Life
Assur. Soc. V. Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. Ed. 682.
The sustaining of a replication such as the one in question does not
require the giving of any équitable remedy or the application of any
peculiarly équitable doctrine. The resuit is to sustain, on a ground
cognizable in a court of law, a déniai of the defendant's asserted right
to maintain a défense based upon an instrument which is unenforce-
able because the plaintiff was led into making it by fraudulent mis-
representations. There seems to be no necessity of resorting to a court
of equity to prevent the enforcement, by action or by défense, of an un-
sealed instrument procured by fraud. The cancellation and surrender
of such an instrument are not necessary to prevent it being availed
of by a party claiming under it. We are of opinion that reason and
authority support the conclusion that the issue raised by the reply to
the plea setting up the release was properly submitted to the jury.
It is insisted that there was no évidence to support a finding that
the release was procured by fraud. The évidence without dispute
showed that the plaintiff was seriously injured. While he was still
in the hospital undergoing treatment, he was approached by W. C.
214 262 FEDERAL REPOETEB
Rochelle, the defendant's claim agent, on the subject of a settlement of
the claim based upon the injury. There were considérable negotia-
tions ; the plaintiff demanding the payment of more than was offered,
claiming that he was permanently disabled, "that he was knocked ont,
that his bridge building was over," and Rochelle insisting that plain-
tiiï would ultimately make a complète recovery and be able to do
the same work he was doing before. While matters were in this sit-
uation the plaintiff consented to be examined by three physicians, nam-
ed and employed by Rochelle. The examinations were made; the
physicians reporting to Rochelle, not to the plaintiff. There was évi-
dence tending to prove that thereafter the plaintiff was influenced to
make the settlement evidenced by the release by statements made by
Rochelle to him to the effect that the doctors who had examined him
said that his injuries were not permanent, and that he would be able
to go to work again in a very short time.
There was évidence tending to prove that the plaintiff was perma-
nently disabled, and that at the time Rochelle made the statements
attributed to him he had received from one of the examining physicians
a written report, which not only did not show that that physician con-
sidered the injuries not permanent, but plainly indicated that he con-
sidered them very serions; there being no suggestion in that report
of the likelihood of the plaintiff's recovery. In view of the existence
of that report, the withholding of it from the plaintiff, and Rochelle's
knowledge of its contents, the statements attributed to the latter well
could be regarded as fraudaient représentations, capable of being ef-
fective in inducing the plaintiff to consent to the settlement evidenced
by the release, which he promptly repudiated upon being informed by
another physician, on the day the release was signed, that he had been
deceived as to the seriousness of his injuries. Without regard to other
évidence adduced, that which bas been referred to justified the submis-
sion to the jury of the issue raised as to the validity of the release.
[3] There is no merit in the contention that the évidence without
dispute showed that the injury to the plaintiff was due to a risk which
he assumed, and was not attributable to négligence of a coemployé.
There was évidence tending to prove that, while plaintiff was standing
near a car where he was required to be to help in unloading ties there-
from, he was struck by one or more ties, wliich fell from the car in
conséquence of another employé stepping on ties on the car after the
removal, preparatory to unloading, of the stakes or standards which
Iield them in the position in which they were placed when loaded on the
car. There was évidence to support the conclusion that the ties were
so placed that they would not hâve fallen after the removal of the
supports, if they had not been caused to do so by a man on the car
stepping on them. The plaintiff did not assume the risk due to the
négligence of a coemployé in causing the fall of the ties, where the
plaintiff was endangered thereby.
The conclusion is that the record does not show that any réversible
error was committed.
The judgment is affirmed.
THE NOETHLAND 245
(262 F.)
THE NOETHLAND. THE STIMSON. INGALLS v. BODDEN.
(Circuit Court of Appeals, Fourth Circuit. November 14, 1919.)
No. 1750.
1. Collision <S=356 — Between schooner and oveetakinq steamship, fault
of steamship.
A collision at sea on a elear nlght, between a schooner making 2% or 3
knots and an overtaking steamship, held due solely to fault of steamship,
on évidence that schooner kept her course and speed, and on seeing
steanisbip 8 or 10 miles behind showed a brlght white llght astern,
which should hâve been seen for at least 2 miles, but that she was not
seen until within half a mile, and the steamishlp then kept her course anci
speed until collision.
2. Collision ig=>56 — Défense of inévitable accident not sustained.
Breaking of the steering gear of an overtaking steamship shortly before
collision with a schooner held not to sustain the défense of inévitable ac-
cident, where it was through négligence that the steamship failed to see
the schooner in time to safely avoid collision.
Appeal from the District Court of the United States for the East-
ern District of Virginia, at Norfolk ; Edmund Waddill, Judge.
Suit for collision by W. A. Bodden, master of the schooner Stimson,
against the steamship Northland; L. C. Ingalls, master, claimant.
Decree for libelant, and claimant appeals. Affirmed.
Fo^ o]>!iii()ii liclow, SCO 257 F. 7()2.
This Is an appeal Irom ii decree of the District Court of the United States
for the Eastern District of Virginia, holding the steamship Northland solely
in fault for a collision between that vessel and the schooner Stimson, which
occurred about 13 miles southeast of Hog Island Light, ofiC the coast of Vir-
ginia, at about 4 o'clock on the morning of October 14, 1918. The schooner was
a four-masted schooner, of the gross tonnage of 693 tons, 185 feet long, ,39.5
feet beam, 13.8 feet deep, and was bound from New York to Norfolk, light.
The Northland was a steamer of the burden of 3,282 tons gross, 304.4 feet
long, 47.2 feet beam, 19.8 feet deep, and engaged in the coastwise frelght and
passenger business on the route between New York and Norfolk.
It is conceded that the weather at the time of the collision was good, the
wind being light from the southwest, the sea smooth, and the Bight being
clear and starlight. The schooner, for some time prier to the collision, had
been on a slarboard tack. heading about south by east, making from 2% to 3
knots an hour, wlth her four lower sails and four jibs set, and her régulation
running ligbts properly placed and brightly burning. An experienced master
was at tiie wheel, a sailor was on the forecastle deck of the schooner forward,
keeping an efficient lookout, and two other sailors of expérience were on the
deck of the vessel ; one of them having previously been at the wheel until he
had been sent forward by the master to assist in tacking the ship. Thèse men,
together with the regular master and mate of the schooner, hâve testifled in
the case, and the others of the crew of nine of the schooner offered for cross-
examination.
It appears that the Northland was proceeding on a course southwest, three-
quarters south, making between 16 and 17 miles an hour, and was being navi-
gated by her first offlcer In the pilot house, with a man at the wheel in the
pilot house, and a lookout on the forward deck. It appears that the navi-
gators of the schooner, some time before the collision, observed the white
light of an approaching vessel several miles distant, ofC their port quar-
ter, and when the steamer was about 2 miles away, and about eight min-
utes before the collision, her green .light was observed atill abaft on the
port beam of the schooner, whereupon a white light was shown from
the scJiooner's stem to the approaching steam vessel, this white light
©=For other cases see same topic & KBY-NUMBEB in ail Key-Numbered Dlgests £ Indexes
246 262 FEDERAL REPORTER
being the regular anchor light of the vessel, a régulation llght whose vlsl-
bllity Is proved greater than 2 miles, and which was displayed ofE the port
quarter of the schooner In such a position that the navigators of the steam-
er should hâve immedlately observed it ; that the schooner contiuued
her course and speed unehanged, and the steamer overhauled her rapidly,
seemlngly regardless entlrely of the présence of the schooner, and making no
elïort to avoid her; two or Ûiree minutes after the white light was shown, crie
of the crew of the schooner displayed an electrlc torchlight on the deck of
the schooner forward of omidships in such position also to be entlrely visi-
ble to the navigators of the approachlng steamer; notwlthstandlng the lights
thus displayed on the part of the schooner, the steamer Northland continued
on wlth her course and speed apparently unehanged, comlng into violent colli-
sion with the schooner a few minutes after this second light was displayed
from her deck, striking her on her port bow about 30 feet aft of her stem,
cutting several feet into her, and causing her most serlous damage.
The lookout of the steamer dld not testify ; the man at the wheel gave his
déposition, but stated that he did not see the schooner, nor did he know that
there was a vessel in the viclnity, until he struck ; the only wltness testif y-
ing really as to the factis of the collision from the steamer being the first
otflcer, who admlts that he did not see any of the schooner's lights until she
was about half a mile away, when he saw the white light when It was re-
ported to him by the lookout, and immedlately thereafter saw the red llght,
excusing himself from any fault for the collision by attributing it to a break-
down of Uie steering gear of the Northland.
The libel was flled in the lower court on Oetober 14, 1918, and on October
28, 1&18, the dépositions of Capt. Marshal, acting master and navigating offl-
cer of the schooner, the lookout, wheelsman, engineer, and the mate were tak-
en in Norfolk. It appears that the dépositions of the first officer, the quarter-
master, the second assistant engineer, the carpenter, and the master of the
Northland were taken in New York on February 11, 1919.
It is Insisted by appellee that thèse witnesses, at least the greater num-
ber of them, should hâve testified; but, on the other hand, it is insisted by
counsel for the appellant that most of ail the witnesses who did not testify
had retired, and therefore could not hâve known as to the facts connected with
the accident. However, none of them testifled as to the facts of the collision,
save the first ofiicer and the quartermaster. Thèse were the only witnesses
examined on behalf of the Northland out of a crew of about 50 ail told.
Several other witnesses gave their évidence by déposition and before the
court as to the construction of the steering gear of the Northland.
Henry H. Little, of Norfolk, Va. (Henry M. Hewitt, of New York
City, and Walter H. Taylor, of Norfolk, Va., on the brief), for ap-
pellant.
Floyd Hughes, of Norfolk, Va. (Hughes, Vandeventer & Eggleston,
of Norfolk, Va., on the brief), for appellee.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
PRITCHARD, Circuit Judge (after stating the facts as above).
[ 1 ] The law in regard to this case is weli established, but the facts are
controverted, and in order to reach a correct conclusion it is necessary
to ascertain, if possible, what actually occurred at the time of the
collision. It appears that four witnesses testified on behalf of the
schooner as to the material facts, while only one witness was produced
who gave affirmative testimony on behalf of the Northland as to the
main facts. It is true her quartemjaster was a witness, but he only
testified as to the accident to the steering gear. It appears that he
liad no report from the lookout, and saw no lights from the schooner.
THE NORTHLAND 247
C262 F.3
He further testified tliat he did not see the schooner nor know of
her close proximity until the collision.
MacDonald, first officer, the only witness who testified on behalf of
the Xorthland as to the main f acts, among other things, said :
"Tlie obycuration of tlie atmosphère, whatever it might hâve becn, in no
way intei-fered with my observation of that light. I should siiy that the
obsouratlon of the atmosphère would pérnïlt me to see the riding light
of a vessel, or the eolored lights of a vessel which I was approachiug,
for two miles that morniug; there was just a light vapor on the water. I
thluk I could hâve seen an anchor light about two miles, that is about ail It ia
supposed to show. I don't think there was anything in the atmosphère that
prevented me from seeing the lights of the Stimson when she was at least
two miles ofC, If those lights had been properly displayed, either a wliite or a
red light. As a matter of fact I did not see them until they were half a mile
off."
This witness admits that he did not see the schooner until she was
a half mile away. The fact that he did not see the schooner at a greater
distance than a half mile shows that the steamer was at fault in this
respect. It is true that he contradicts in many respects the witnesses
for the schooner; but in weighing his évidence it should be borne in
mind that he, above ail other witnesses, was most interested, being in
charge of the navigation of the steamship. But when we consider what
he says in connection with the évidence for the schooner we are of
the opinion that it should not prevail against the évidence of the lat-
ter; there being four witnesses introduced in the schooner's behalf.
The évidence for the schooner is corroborated, in respect to the
weather and physical facts about the collision, by Capt. Bodden and
the mate of the schooner. The failure of MacDonald to observe the
white light and the red light of the schooner until they were a half
mile distant furnishes, we think, the principal reason why the acci-
dent occurred.
The leamed judge who tried this case made a very clear and concise
finding as to the relative position of the vessels at and just before the
collision. He also states very clearly the contention of the respective
parties, as f oUows :
"The schooner's case, briefly, is that while on the starboard tack, In the
vlcinlty in question, and proceeding at about 2% knots an hour, she observed
the masthead light of the steamship some 8 to 10 miles away, bearing aft
of her port beam, and subsequently, and when more than 2 miles away, she
saw the steamshlp's green light; that at the time the schooner was pro-
vlded with a skilled and compétent crew. In charge of an experienced master,
ail at thelr proïier stations, and efiBcienUy performing their respective duties,
with her running lights properly set and brightly buming; that upon ob-
servlng the steamshlp's whlte light, and partly In the position of an over-
taken vessel, she at once caused her régulation riding light for approaching
vessels to be put eut, plaelng the same In the most conspicuous position on the
companionway of the after cabin, which was the best position In which it
could be placed, and was in fuU view of the approaching steamship, and
should hâve been seen 6 to 8 miles away ; that In addition, as the steamship
contmued to approach, the schooner caused an electric light to be waved, and
its light flashed upon her salis, to further attract the attention of the ap-
proaching steamship, and she kept her course and speed; that, notwith-
standing the plain obligation imposed upon the Northland, the burdened ves-
sel to avoid collision as well as the risk thereof, with the overtaken vessel,
the schooner, she continued to approach her at a rapld rate of speed, claimed
248 262 FEDERAL REPORTER
to be 17 miles an hour, and ran Into and collided with the Stimson, strtkin::
her about 30 feet aft of her stem on the port bow, seriously cuttlng Into and
crushlng through the schooner from her rail down below to her water Une,
causing great damage, for the recovery of whieh this libel was flled.
"The schooner furtber charges that the steamship was without a lookoiit
properly stationed ; that she was in charge of incompétent and unskillful nini-
gators; that she failed to keep out of the way of the schooner, or to shjipe lier
course so as to avoid crossing ahead of her and pass under her stern ; iliat
she failed to slacken her speed, stop, and reverse, and proeeeded at a too
rapid rate of speed; and that she, being the overtaking véssel, should not
bave collided with the schooner at ail, but hâve avoided her by a wide maririn.
"The respondent in the main, admits the circumstances of the two vesseis
approaching and coming together, as above stated, but contends: (1) Tliiit
the collision was the resuit of inévitable accident, in that, when it was too
late to avoid the conséquences thereof, the Connecting shaft of the steering
gear broke and parted, through a latent defect, causing the injury. (2) That
tlie Stimson was in command of an incompétent navigator, without a propor
lookout, and that she omitted to exhlbit her white or stern light in sufflcient
time to enable the navigators of the steamship to make proper maneuver to
avoid the collision."
It is insisted by cotmsel for the appellee that in this suit, inasmuch
as there was conflicting évidence, the decree of the lower court will
not be reversed or disturbed, unless it is clearly shown that the court
was in error. They cite in support thereof the foUowing cases: The
Richard F. Young, 246 Fed. 682, 158 C. C. A. 638; Baker- Whiteley
Coal Co. V. Neptune Navigation Co., 120 Fed. 247, 56. C. C. A. 83 ;
The Anaces, 106 Fed. 742, 45 C. C. A. 596. We think the rule as
contended for by appellee is so well established that it is useless for
us to enter into a further discussion of this phase of the question.
The évidence is conflicting, but we think, when considered as a whole,
the leamed judge who heard the case in the court below was amply
warranted in finding as he did.
[2] It is contended by counsel for the appellant that the collision
was the resuit of an inévitable accident, in that when it was too late
to avoid the conséquences thereof the Connecting shaft of the steering
gear broke and parted through a latent defect causing the injury.
This would be a good défense, if the facts of this case were such as
to bring it within the rule. In the case of The Fullerton, 211 Fed.
833, 128 C. C. A. 359, the Circuit Court of Appeals for the Ninth
Circuit, in discussing this question, said:
"The court below held that the collision was the resuit of inévitable acci-
dent. In collision cases the accident Is said to be inévitable when it is not
possible to prevent it by the exercise of due care, caution, and nautlcal sklll.
The terra Is usnally applied to collisions caused by a vis major, or by the
intervention of other vessels, or floating Ice, or a severe snowstorm, or the
disablement of the steering gear. In the Mabey and Cooper, 14 Wall. 204,
215 (20 L. Ed. 881), the court said : 'Inévitable accident, as applied to a case
of this description, must be understood to mean a collision which occurs
when both parties hâve endeavored, by every means in their power, with due
care and cauti<m, and a proper display of nautical skill, to prevent the occur-
rence of the accident, and where the proofs show that it occurred in spite of
everything that nautlcal skill, care, and précaution could do to keep the ves-
sels Irom coming together.' The Fullerton belng without fault, the question
arises whether the offlcers In charge of the Transit endeavored by every
means in their power, with due care and caution, and a proper display ot
nautical skill, to prevent the collision."
THE NOETHLAND 249
(262 F.)
The évidence as to when and how the steering gear was broken is
far from satisfactory. The schooner was the favored vessel. There-
fore it was the duty of the steamer to exercise such care as was neces-
sary to avoid a collision with her. Not having by proper lookout ob
served the schooner when at least 2 miles away, the spced the steamer
was making resulted in its coming in such close proximity to the
schooner that it was well-nigh impossible to avoid hitting her, which
places the steamer in the wrong. Therefore, if the steering gear really
broke at the time as contended by appellant, it did not présent a case
of inévitable accident. There is évidence tending to show that they
did not discover the break until after the accident, and in this connec-
tion it is significant that they displayed no signais to indicate this trouble
for more than two hours after the collision.
It also appears that the steamer approached the sailing vessel at
least twice after the collision, and made other maneuvers which would
indicate that the steering gear was not disturbed in the way and at
the time counsel for appellant contend. It is true they produced in
court what purported to be the broken rod of the steering gear; but
this only proves that the rod was broken, but throws no light upon
the question as to the time it was broken, or of the circumstances un-
der which the breakage occurred.
It further appears that the schooner was sailing on a starboard tack,
with four lower sails and four jibs set, and was making only 2% or
3 knots per hour, and that the wind was light from the southwest, and
that the night was clear, with no haze or fog, and that her lights were
properly set and burning. It also appears that the navigation of the
schooner was in charge of an experienced master, and an efficient
lookout properly stationed, who discharged their duties. There were
two other men on deck, who had assisted in tacking the ship short-
ly before the lights of the steamer were observed. The schooner's
speed was only about one-fifth of that of the approaching steamship,
and we fail to see how the schooner could hâve committed any fault
contributing to the collision. However, it appears from the record
that she discharged her obligations as to course and speed. Indeed,
there is no évidence that any fault in this respect was committed.
MacDonald, among other things, said:
"I don't thlnk there was any fault with the schooner from the time I saw
the red light, or anything she could do to avoid the collision. I attribute the
collision entirely to our failing to keep ont of the way of the schooner by rea-
son of our steering gear breaking down."
This sets at rest the question as to the conduct of the schooner. Tak-
ing it ail in ail, we think the évidence is such as to establish the fact
that those in charge of the navigation of the steamer were négligent,
and that such négligence was the cause of the collision, and for this
reason we think that the défense of the steamer of unavoidable acci-
dent, even if their contention as to when and how the steering gear
was broken be true, should not be entertained.
Therefore we are clearly of the opinion that the conclusions of the
court below were correct. Such being the case, it necessarily follows
that the decree of the District Court should be affirmed.
Affirmed.
250 262 FEDERAL REPORTEE
W. G. COYLE & 00., Inc., v. NOETH AMERICA STBAMSHIP CORPORA-
TION, Limited, et al.
THE TARMOUTH.
(Circuit Court of Appeals, Flfth Circuit. January 3, 1920.)
No. 3408.
1. Maritime uens ^=>29 — Pctbnishinq coal to fobkiqn vessel tjndeb chae-
tkb gavk bight to lien.
Llbelant, wtio fumlsUed coal In New Orléans to a forelgn steamship un-
der charter made tn New York, and new In the port, on an order glven at
the request of a business assodate of the charterer, who was absent,
but pursuant to a réquisition of the chief englneer, and whlch coal was re-
celved and recelpted for by the master, heid entltled to a lien under Act
June 23, 1910, c. 373, §§ 1-3 (Comp. St §§ 7783-7785), where It dld not ap-
pear that libelant could by the exercise of reasonable diligence hâve ascer-
talned that by the terms of the charter the charterer was to fumlsh coal.
2. Mabitiïib liens <3=30 — Fubnisheb of supplies not chaeqbd with notice
of chabtbb.
The mère fact that one fumlshlng coal to a vessel Is Informed that she
Is under charter Is not enough to charge hlm wlth notice of the terms of
the charter party.
3. Maeitime liens i&=»29 — Lien fob supplies fuenished to foeeign vessel
PUBSUANT to REQUISITION OF CHIBIB' ENGINEBB.
An order for coal dellvered to a forelgn steamship, pursuant to a réq-
uisition of the chlef engineer, an appointée of the owner, where the
coal Is recelved by the master and englneer and recelpted for by the
former, Is to be regarded as given by the ship's master wlthln Act June
23, 1910, c. 373, § 2 (Comp. St. § 7784), although a business assodate of the
Charterer co-operated lu procurlng the glvlng of the order.
4. Maritime liens ^=65 — Peesumption of authobity of mastee to peocube
SUPPLIES not oveecome bt showing made.
The statutory preaumptlon that a master has authorlty from the
owner to procure supplies or other necessarles for hls vessel, under Act
June 23, 1910, c. 373, 1 2 (Comp. St § 7784), Is not rebutted or destroyed by
showing raerely that the fumlsher was Informed that the vessel was under
charter.
Appeal from the District Court of the United States for the Eastern
District of Louisiana ; Ruf us E. Poster, Judge.
Suit in admiralty by W. G. Coyle & Co., Incorporated, against the
steamship Yarmouth; the North America Steamship Corporation,
Limited, claimant. Decree for respondent, and libelant appeals. Re-
versed.
Gustave Lemle, Selim B. Lemle, and Arthur A. Moreno, ail of New
Orléans, La. (A. A. Moreno and Lemle & Lemle, ail of New Orléans,
La., on the brief), for appellant.
Abraham Goldberg, H. Génères Dufour, and Alfred C. Kammer,
ail of New Orléans, La. (Farrar, Goldberg & Dufour, of New Orléans,
La., on the brief), for appellees.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges.
WALKER, Circuit Judge. [1] This is an appeal from a decree dis-
missing a libel against the Yarmouth, a Canadian steamship, for
«saFoT other cases see same topio & KEY-ÏJUMBBR In aU Key-Numbered DIgests & Indexes
W. G. COYLE & CO. V. NORTH AMERICA STEAMSHIP CORP. 251
(262 F.l
amounts claimed to be due for coal f urnished and towage services ren-
dered by the libelant to that ship while it was in the port of New Or-
léans in July, 1917. The ship was released on a claim interposed by
its owner, the appellee, a corporation of Nova Scotia. The libelant
(appellant hère) was engaged in the coal business in New Orléans.
Among its customers was the Cuyamel Fruit Company, which operated
a number of steamers, to which the libelant furnished coal at priées
previously agreed on. It furnished coal to the Yarmouth under the
following circumstances : Herbert S. Hiller, who was traffic manager
of the Cuyamel Fruit Company, was of good repute and was well
known to the appellant, after getting from the latter quotations of
priées of coal, ordered it to deliver to the Yarmouth 265 tons of Ala-
bama steam coal at the price quoted. The order was complied with
by delivering the coal to the Yarmouth ; its master and engineer having
knowledge of such delivery, the former giving a receipt for the coal.
A like order, given about a month bef ore, had been complied with in
the same way. On his direct examination as a witness for the libelant,
Mr. Hiller testified to the eflfect that the coal was ordered and deliv-
ered as above stated, and that he ascertained the price and gave the
order at the request of G. B. Warden, who was associated in business
with F. R. Betancourt, the charterer of the Yarmouth. The follow-
ing is a part of the report of the cross-examination of that witness :
"Q. Dld Mr. Betancourt tell you to order coal for the stearaship Yarmouth?
A. Mr. Betancourt was out of town. Mr. Warden left It entlrely with me to
order the coal for the ship.
"Q. When you ordered this coal from "W. G. Coyle & Co., were any questions
asked you as to whether or not the ship was under charterî A. I believe it
was asked who was operating the steamship. It was a new steamer hère In
town, and they asked me some information about the boat, which I told them ;
that is what information I gaye them.
"Q. What information did you give them? A. I told them that the boat
was chartered under the charter to F. R. Betancourt.
"Q, They asked no further questions? A. Well, they Just merely asked —
they asked me if thèse people had an office. I remember they asked me those
partlculars.
"Q. You say that the steamshlp Yarmouth was under charter for two
months. Do you know what months? A. I thlnk It was under charter for
two months ; that is my understanding. I had nothlng to do with the charter
of the ship, nor did I see any recorda of the ship; but I do know that they
told me the ship was under charter, and the managing owner of the ship ad-
mltted that the boat was under charter.
"Q. But what I am trylng to get you to answer is whether or not this par-
tlcular coal which you claim, to hâve ordered was ordered during the time
you know the ship to hâve been chartered to Betancourt and Warden? A. To
the best of my knowledge and belief, the boat was under charter at that tlme.
"Q. You testify that this coal was used for fuel of the steamshlp Yarmouth.
How do you know that? A, From a statement —
"Q. You do not know that of your own knowledge; you hâve no actual
knowledge of It? A. No ; I was not on the ship.
"Q. When you ordered this coal, did you order any partleular klnd of coal?
A. No ; the usual custom: is to order sufflclent coal, accordlng to the réquisi-
tion of the chlef engineer of the boat.
"Q. And you were the one that agreed as to the price of the coal? A.
Yes, sir.
"Q. Do you know how mueh was dellvered under your flrst order? A. I
kept no records of the delivery.
252 262 FEDERAL EEPORTEK
"Q. Do you know how much was delivered under the second order? A.
It was 265 tons.
"Q. Did you keep a record of that dellvery? A. No, sir.
"Q. Then how do you know itV A. I know it by tlie report from tbe eaj>-
tuin and invoices.
•'Q. But not of your own knowledge? A. Not of my own knowledge.
"Q. When was your flrst order given for tlie coal? Was it during tlie exist-
ence of this same cliarter? A. Yes, sir.
"Q. Do you renaember how much was delivered then? A. I do not remember.
I might say that, as far as the deliveries were concerned, I do not believo
that, in the opération of any boat, the man that purchases the coal knows
how much goes on the ship actually, because we never see tlie coal go in tho
.ship, and we only go by the records received from the chief englneers.
"Q. The flrst œal was bought or ordered from W. G. Coyle & Co. umlor
the same conditions and circumstauces as the second coal, was it not? A.
The same; yes, sir.
"Q. Dld you hâve anythlng else to do wlth Betaneourt, or Warden, or F.
R. Betaneourt, in ordering thèse supplies? I mean by that, dld you havo
anythlng to do wlth other officers, the payment of bills, or anything like tliat ?
A. Not a thlng."
Following the delivery of the coal and the rendition of towage serv-
ices, the Hbelant made out a bill therefor against "S. S. Yarmouth and
Owners," which it sent to Mr. Hiller. Mr. Hiller referred the collec-
ter to Betaneourt & Co., who had an office in New Orléans, as he had
done in the case of a similar bill for the coal delivered to the Yarmouth
about a month before. Betaneourt & Co. paid the first bill, but did not
pay the second one. Evidence adduced showed that at the time of the
transactions in question the Yarmouth was being operated under a
charter party made in New York on the 4th day of June, 1917, by the
owner, the appellee, to Fiacro R. Betaneourt. By that instrument the
owner hired the ship for the period of two months from the Sth.day of"
June, 1917, "with full complément of officers, seamen, engineers, and
firemen for a vessel of her tonnage." It contained the following pro-
visions :
"That the owner shall provide and pay for ail provisions, wages of eaptain,
offloers, marine Insurance, flremen and crew ; shall pay for the hull Insur-
ance of the vessel ; also for ail cabin, deck, engine room^ and other necessary
stores, and keep the steamer in a thoroughly efficient state in hull, machinery,
and equipment for and during the service.
" (2) That the charterer shall provide and pay for ail the coal, port charges,
pilotages, agencles, commissions, consular charges (exeept those pertalning to
the oaptain, officers, or crew), and ail other usual expensea, exeept those afor&-
stated ; but when the vessel puts into a port for causes for which the steamer
is responsible, then ail sueh charges shall be paid by the owner."
So far as was disclosed, at the time of the transactions in question,
the libelant was without information as to the Yarmouth and how it
was being operated, exeept as shown by the above set out part of the
testimony of the witness Hiller.
[1] So far as the claim against the ship for the price of the coal
furnished is concerned, the decree appealed from is sought to be sus-
tained on the ground that évidence adduced was such as to support a
finding that the libelant was informed that the ship was operated by a
charterer, and by the exercise of reasonable diligence could hâve ascer-
tained that, because of the terms of the charter party, the person order-
W. G. COTLE & CO. V. NORTH AMEEICA STEAMSHIP COEP. 2;>3
(262 P.)
ing the coal was without authority to bind the vesse! therefor. The
provision in the charter party requiring the charterer to provide and pay
for coal would, under the proviso contained in section 3 of the "Act
relating to liens on vessels for repairs, supplies or other necessaries"
(36 Stat. 604, c. 373 [Comp. St. § 7785]), prevent that act from having
the effect of giving a lien on the ship for coal furnished on the order
of the charterer, if the furnisher knew, or by the exercise of reasonable
diligence could hâve ascertained, the terms of the charter party. The
Kate, 164 U. S. 458, 17 Sup. Ct. 135, 41 L. Ed. 512 ; The Valencia, 165-
U. S. 264, 17 Sup. Ct. 323, 41 L. Ed. 710.
There are material différences betvifeen the facts of each of the two
cases just referred to and those of the instant case. Each of those dé-
cisions was rendered in responding to questions certified to the Suprême
Court by a Circuit Court of Appeals. In the first-cited case the fol-
lowing facts were disclosed:
"On the order of a stearmship company, whioh had an agent and office in
New York City, the libelant, which had a place of business in the same city,
furnished and delivered coaï to vessels at that place, which were operated by
the steamship company, under charters requiring the charterer to pay for
coal furnished to the vessels.
"The owners of each chartered vessel, as the libelant knew, had an agent
for the business of the vessel at New York City. The libelant knew or
could easily hâve known what vessels belonged to the steamship company
and what vessels were operated by the latter under time charters. It is true
that its agents did not examine the charter parties, nor make any inquiry as
to their provisions ; but from what they had always heard about sueh in-
struments they belleved and assumed, or took it for granted, that they con-
tained conditions requiring the charterers, at their own expense, to provide
and pay for ail coals needed by the vessel. It was under thèse ciroumstances
that the libelant furnished each vessel, operated by the steamship company,
with coal as ordered by that company, charging the company and the vessel
therefor, without making any distinction'in the mode of keeping its accounts
between the vessels owned by the steamship company and those operated by
It under time charter parties. Spécifications of lien were filed in the propcr
office against each vessel to which coal was delivered.
"None of the coal furnished to the chartered vessels was ordered by the
master of the vessel, nor were any of the hills therefor submitted to him for
approval. They were submitted only to the steamship company. Nor did the
agents of the chartered vessels know that coal was supplied by the libelant ou
the crédit of the vessel, or that any spécifications of lien were flled under the
local statute."
It was on the above-indicated state of facts that the court decided
that the furnisher of the coal was chargeable with knowledge of the
charterer's lack of authority to bind the vessel for the price of the coal
furnished. The opinion in that case contained the f ollowing :
"If the libelant In this case had furnished the coal upon the order of the
master, and without knowledge or notice that the vessel was operated under
a charter party, or if coal had been furnished upon the order of the charterer
as well as upon the crédit of the vessel, under circumstances which did not
charge libelant with knowledge of the terms of the charter party, but chai^ed
it only with knowledge of the fact that the vessel was being operated under
a charter party, a différent question would be presented."
The just-quoted statement makes it plain that that décision fumishes
no support for the proposition that, without regard to other attending
circumstances, the single fact that the furnisher of supplies to a vessel
254 262 FEDERAL RBPOETBB
is informed that it is under charter to the party on whose order the
supplies are furnished charges such fumisher with notice of the terms
of the charter party.
The Valencia, supra, also was a case of fumishing coal to a vessel at
New York, not by the order or procurement of the master but on the
order of a steamship company which had an office in that city, at which
the fumisher did business with the steamship company, and the former
could easily hâve ascertained the ownership of the vessel and the re-
lation of the steamship company to the owners. Upon the facts certi-
fied, the court concluded that the libelant by reasonable diligence could
hâve ascertained that the steamship company did not own the vessel,
but used it under a charter party providing that the charterer should
pay for ail coal needed. In each of the cases cited there was a finding
supported by facts disclosed, that the libelant, who had notice of the
fact that the party giving the order was the charterer, would hâve
learned of the terms of the charter party, if he had made use of sources
of information shown to be accessible to him. The propriety of a dé-
cision that one is cHargeable with notice of a fact actually unknown
to him is dépendent upon the circumstances under which he was put
on inquiry.
The libelant in the instant case, on an order given by a well and
favorably known officiai of a ship-operating company with which the
libelant had business relations, furnished coal to a foreign vessel at
New Orléans, that vessel being "a new steamer" there, about which no
information was imparted to the libelant, other than that it was under
charter to F. R. Betancourt, who, so far as appears, was a total
stranger to the libelant, and was not in New Orléans when the coal
was ordered and furnished. It was not disclosed that a charter party
or a copy of it was in New Orléans, or that any one then at or near
that place then knew what the terms of that instrument were. Evident-
ly Mr. Hiller did not know what were the terms of the charter party.
It was not shown that the libelant by reasonable diligence could bave
ascertained that the charter party to Betancourt provided that he
should pay for ail coal needed. One who is put on inquiry by a fact
or circumstance coming to his notice is not properly diargeable with
knowledge of another fact actually unknown to him, in the absence
of a showing that the existence of such unknown fact would hâve been
disclosed if the suggested inquiry had been made with due diligence.
In the absence of a showing that one, before acting in a situation pre-
sented, had reasonably available means of leaming of the existence of
a fact actually unknown to him, he is not to be held to hâve been bound
to know that fact, though he was put on inquiry.
[2] The mère fact that one knows or is informed that a ship is un-
der charter is not enough to charge him with notice of the terms of the
charter party. The George Dumois, 68 Fed. 926, 15 C. C. A. 675.
Tn the case just cited the claim was for coal furnished to a ship in a
foreign port on an order given by one known to be the charterer of
it. The coal was received by the master and officers of the ship, was
a necessary supply to the ship, without which the voyage could not
hâve been prosecuted, and was used by the ship in prosecuting the voy-
W. G. COTLB & 00. V. NOETH AMEBICA STEAMSHIP COKP. 255
(262 F.)
âge. That case arose and was decided before the enactment of the
above-mentioned act of June 23, 1910, relating to liens on vessels for
repairs, etc. It was held that under the law as it then existed a lien on
the ship resulted from the fumishing of supplies under the circum-
stances stated, unless it was shown that the f urnisher relied on the créd-
it of the owner or charterer, not of the ship, and that, though the fur-
nisher knew that the order for the coal was given by the charterer, he
was not bound to know the terms of the charter party, which in f act in-
cluded a provision requiring the charterer to pay for such supplies. If
there had been no change in the law, that décision would be an author-
ity supporting a ruling in the instant case that the fumishing of coal by
the libelant was under such circumstances as to hâve the efïect of creat-
ing a lien on the ship.
[3] While the évidence showed that Mr. Hiller, in giving the order
for the coal, did so at the request of a business associate of the char-
terer, it also showed that when he gave the order he was apprised of the
amount of coal needed by a réquisition of the ship's engineer, an ap-
pointée of the owner, and that the master and the engineer acquiesced
in the delivery of the coal to the ship ; the former giving a receipt for
it An order so given is to be regarded as given by the ship's master,
though a business associate of the charterer co-operated in procuring
the giving of it. The Philadelphia, 75 Fed. 684, 21 C. C. A. 501 ; Nor-
wegian Steamship Co. v. Washington, 57 Fed. 224, 6 C. C. A. 313;
In re Alaska Fishing & Development Co. (D. C.) 167 Fed. 875.
The necessity, existing under the law as it former ly was, of alleging
and proving that necessary supplies f umished on such an order as the
one shown in the instant oase were fumished on the crédit of the ves-
sel, is dispensed with by the provision of the above ref erred to act of
June 23, 1910, that designated persons, including a ship's master,
"shall be presumed to hâve authority from the owner or owners to
procure repairs, supplies, and other necessaries for the vessel." This
provision is qualified \xy the following one contained in section 3 of the
act:
"But nothlng In thls act shall be coostrued to confer a lien when the fur-
nlsher knew, or by the exercise of reasonable diligence could hâve ascertained,
that because of the terms of the charter party, agreement for the sale of the
vessel, or for any other reason, the person ordering the repairs, supplies, or
other necessaries was without authority to bind the vessel therefor."
Language used in the leist-quoted provision, "nothing in this act shall
be construed to confer a lien," etc., is some indication of the absence
of an intention to deprive a furnisher of a lien on a ship for necessary
supplies furnished to it under such circumstances that he would hâve
had a lien under the previously existing law, unaffected by any lien
statute. It is questionable whether the same meaning properly can be
attributed to the proviso that it would hâve had if, instead of the last-
quoted language, it had used some such language as the following :
"But the fumlaher shall not hâve a lien If he knew, or by the exercise of
reasonable diligoice," etc.
If the transaction now in question had occurred before the enact-
ment of the act mentioned, as it was a fumishing on the order of the
256 262 FEDERAL EEPORTEB
master of necessary supplies to a ship in a foreîgn port, there would
hâve been a lien on the ship, unless it had been shown that the supplies
were not fumished on its crédit, or that the libelant knew, or by the
exercise of reasonable diligence could hâve ascertained, that the mas-
ter was without authority to bind the vessel therefor, and the cir-
cumstance that the libelant knew that the ship was under charter would
not hâve been enough to rebut the presumption that the supplies were
obtained on its crédit, though the charterer participated in the order-
ing of them, and the charter party required the charterer to pay for
them. The George Dumois, supra. As the libelant would hâve had à
lien if the statute had not been enacted, there is some ground for say-
ing that language used in the statute stands in the way of its being giv-
en the effect of preventing a lien in the libelant's favor attaching.
But, assuming that the statute has the effect of preventing the fur-
nishing of necessary supplies to a vessel in a foreign port giving a lien
on it, if a lien would not hâve resulted if the transaction had been in
the vessel's home port, it is plain that an effect of the statute is to ei-
ther create or recognize a presumption of the validity of such an order
as the one on which the libelant furnished the coal, and that proof of
the giving of that order and of compliance with it by delivering the
coal to the ship with its master's acquiescence was prima facie suffî-
cient to entitle the libelant to the lien claimed, and put upon the claim-
ant the burden of proving that the master was without authority to
bind the vessel, and that the libelant knew, or by the exercise of reason-
able diligence could hâve known, of such lack of authority. The
Yankee, 233 Fed. 919, 147 C. C. A. 593.
[4] Nothing in the act indicates that the presumption of authority
in a vessel's master to procure necessaries for it could be rebutted or
destroyed by showing that the furnisher knew or was informed that
the vessel was under charter. To rebut or overcome the presumption
of the master's authority to bind the vessel, it must be shown that the
furnisher knew, or by the exercise of reasonable diligence could hâve
ascertaîned, that the terms of a charter party, or something else,
deprived the master of authority to bind the vessel for necessaries fur-
nished to it. The burden was on the appellee, the claimant, to prove
that the libelant knew, or by the exercise of reasonable diligence could
hâve ascertained, that the charter party required the charterer to
pay for coal needed. There was an absence of évidence tending to
prove that the libelant either knew, or from any accessible source of
information could hâve learned, that the charter party contained
a provision having that effect. There was no évidence tending to
prove that either the charter party or any one having knowledge
of its terms was within reach of the libelant. It was not shown
where the charterer was, except that he was not in New Orléans.
To say that the libelant could hâve learned of the terms of the char-
ter party by applying to the charterer's business associate, who
was instrumental in procuring the giving of the order for the coal,
would be a guess or surmise unsupported by évidence. We con-
clude that the order for the coal was given under such circumstanc-
es that it is to be treatcd as having been given by the master, and that
IN RE DEESSLEE PRODUCING CORPORATION 257
(262 F.)
no évidence adduced rebutted or destroyed the statutory presumption
that the master had authority to bind the vessel for the coal funiished
on that order. It f ollows that the libelant was entitled to a lien for the
price of the coal.
The évidence showed that the towage services in question were re-
quired in getting the coal ordered loaded on the vessel, and in effecting
a needed movement of the vessel, and that they w^ere rendered at the
request or with the acquiescence of the master. The rendition of those
services well may be regarded as necessary to enable the vessel to pro-
ceed on her voyage, or, at any rate, that they were such as facilitated
its use as an instrument of navigation. We think such services were
"necessaries," within the meaning of that word as used in the above-
mentioned act of June 30, 1910, and that they were rendered under
such circumstances as to give rise to a lien on the vessel for the price
or reasonable value thereof.
The decree appealed from is reversed, and the cause is remanded,
with instructions to enter a decree for the libelant for the amôunt
claimed in the libel and costs.
Reversed.
In re DEESSLER PRODUCING CORPORATION.
Pétition and Appeal of DALTON et al.
(Circuit Court of Appeals, Second Circuit December 10, 1919.)
No. 61.
1. Bankbuptct <S=>65 — Préférence of corporation directors fob bankextpt-
cï rathee than state court fob winding up corporation not fbaud.
A pétition, verified by the directors of a corporation, alleging Its in-
aWlity to pay its debts in full, and Its willingness to be adjudged a bank-
rupt, cannot be said to be fraudulent, because the directors prefer that
forum rather than a state court, where a stockholder has commenced
suit for dissolution, and is sufBoient to give the bankruptcy court juris-
dictlon.
2. Bankruptcy <S=>61 — Admission as act of bankruptcy eendebs solvenot
IMMATEBiTAT..
Where the act of bankruptcy is a wrltten admiission, as provlded by
Bankruptcy Act, § 3a (5) , Comp. St. § 9587, the question of solvency is Im-
nraterlal.
S. Corporations iS=»559(3) — May exercise powees after appointment ow
RECEIVEE.
Appointment of a temporary recelver for a corporation does not deprive
it of the right to exercise its corporate powers, except as to matters spécial-
ly confided to the receiver by the court.
4. Bankeuptcy ©=320(1) — Supeesbding of suit in state couet.
State court proceedings are superaeded by filing of a pétition In bank
ruptcy, to make more effective the bankruptcy proceedings.
5. Bankruptcy <S=320(1) — Proceedings by corporation stockholdeeb no7
baebed by suit for dissolution in state court.
The institution by a stockholder of a corporation of a suit for dissolu
tion in a state court does not deprive other stockholders of the right to In
stitute proceedings in bankruptcy.
^=5For other cases see same topic & KBY-NUMBBR In ail Key-Numbered Dlgesta & Indexea
262 F.— 17
258 262 fëdbral bepokteb
6. Bankrtiptcy ®=»439 — Obdee denyino motion to dismiss eeviewed bt
BEVIBIQTf.
An order of a court of bankruï>tcy, denying a motion to dismiss a péti-
tion, is reviewable by pétition to revise.
Pétition to Revise and Appeal f rom Order of the District Court of
the United States for the Southern District of New York.
In the matter of the Dressler Producing Corporation, bankrupt.
Marie Dressler Dalton and James H. Dalton pétition to revise and
appeal from an order of the District Court. Affirmed.
Whitman, Ottinger & Ransom, of New York City (Nathan Ottin-
ger, of New York City, of counsel), for appellants.
Barker, Donahue, Anderson & Wylie, of New York City (Louis J.
Wolflf, of New York City, of counsel), for bankrupt.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
M ANTON, Circuit Judge. [1] The appellants, Marie Dressler Dal-
ton, a stockholder of one-half the capital stock of the bankrupt and al-
so a créditer thereof, and her husband, créditer, on February 1, 1919,
began a proceeding in the state court for a dissolution of the bank-
rupt corporation. The ground upon which the application was based
was that there was a hopeless diversion of views of the stockholders
of equal interest and a désire to prevent waste of the corporate proi>-
erty. No allusion is made to the insolvency of the company but it was
asserted that, if the company continued with such divided ownership
of stock and management, insolvency might resuit. The pétition in
the state court was made returnable on February 24, 1919. On Feb-
ruary 19, 1919, this pétition in bankruptcy was filed. It is instituted
by the stockholders whose interests appear to be adverse to the appel-
lants. On the same day an order to show cause, returnable on Febru-
ary 21st, was issued in the proceedings, asking for a stay of the state
court proceedings. On February 26th the appellants obtained an order
to show cause, returnable March 3d, for leave to intervene and set
aside the bankruptcy proceedings. The District Judge, in the order
now under review, permitted the appellants to file an answer "raising
the issue of fraud with respect to the admission in writing of the in-
ability of the bankrupt to pay its debts and its expression of willing-
ness to be adjudicated a bankrupt." The order stays the proceedings
in the state court for dissolution, and denied the application of the ap-
pellants to dismiss the proceedings in bankruptcy.
It is not disputed but that a pétition in bankruptcy was filed with a
view to the liquidation of the afïairs of the bankrupt corporation within
the jurisdiction of the United States District Court rather than the
Suprême Court of the state. It is asserted that the corporation is
solvent, but it does appear by the schedules in bankruptcy that it owed
$22,809.97 as against cash assets of $5,865.86, and motion picture films
with an uncertain value. The assets are said to be "undeterminable."
At the time of the filing of the pétition in bankruptcy, the corporation
was not in a position or condition to continue business, and the désire
to wind up its affairs was not only necessary, but seemed to be the
©=3For other casea aee same toplc & KEY-NUMBBR in al! Key-Numbered Dlgests & Indexes
IN RE DRESSLEK PRODUCING COKPOKATION 259
(26SFJ
wish of ail the parties concerned. One faction attempted it in the state
court; the other faction with frankness of statement, says it chose the
fédéral court, because it deemed that court "better adapted to pré-
serve the rights of ail parties." We are of the opinion that it was un-
necessary to justify a choice, for the petitioners in bankruptcy hâve the
unchallengeable right to proceed by filing this pétition. The institu-
tion of the proceedings in the state court is not a bar to maintenance
of this pétition in bankruptcy. Insolvency need not be alleged or
shown to successf uUy maintain a pétition in bankruptcy, if the corpora-
tion is unable to meet its obligations as they mature and arise, and this
appears to be the fact hère. There are many allégations and déniais
of f raud on both sides, but through it ail there seems to be the com-
mon wish to liquidate the afïairs of the bankrupt.
The appellants contend that a f raud is being committed or consum-
mated by this pétition in the fédéral court, and that this is, sufficient
ground for a dismissal of the pétition. In support of this contention
we are referred to Zeitinger v. Dry Goods Co., 244 Fed. 719, 157 C.
C. A. 167. In that case a fraud was established by a decree of a state
court after a trial which lasted for four weeks. A director was ousted
by the state court for waste and mismanagement, and a receiver was
appointed to enforce the decree, and the directors were held liable for
a considérable sum of money. At the time the pétition in bankruptcy
was filed, the afïairs of the corporation had been taken from the direc-
tors by a final decree of the state court, and the losses of the corpora-
tion were decreed to be due and owing from its stockholders and assess-
ed against them. The court refused to take jurisdiction of the péti-
tion in bankruptcy, which was authorized by the same board of direc-
tors, and thus permit the instrumentality of the Bankruptcy L,aw to
further their fraudulent purposes.
In the case at bar the directors can at least be said to be holding
office as de facto officers. They, under oath, say that the corporation
is unable to pay its debts in full, and ask the protection of the bank-
ruptcy court. This is sufficient to require the bankruptcy court to take
jurisdiction. Under thèse circumstances, it cannot be said to be a
fraud to proceed in winding up the afïairs of the corporation by bank-
ruptcy proceedings, rather than through the médium of the state law
in granting a dissolution of the corporation. A choice of a forum, un-
der the circumstances disclosed by the affidavits in the record, in it-
self , is not a fraud, and would not warrant the District Judge in refus-
ing jurisdiction.
[2] Where the act of bankruptcy is a written admission, as the
statute provides (section 3a [5] Comp. St. § 9587), the question of
solvency is immaterial. Matter of Cohn, 227 Fed. 843, 142 C. C. A.
367; West Co. v. Lea, 174 U. S. 590, 19 Sup. Ct. 836, 43 L. Ed. 1098.
In re Moench & Sons Co., 130 Fed. 685, 66 C. C. A. 37, this court
held that the fact that the property of the corporation was in the pos-
session of receivers appointed in the state court did not affect the juris-
diction of the court of bankruptcy to adjudicate such corporation a
bankrupt. It was further held that an admission in writing of inability
to pay its debts, and its willing^ess to be adjudicated a bankrupt on
260 262 FEDERAL REPORTER
that ground, prevented a creditor from proving the solvency as a dé-
fense. The court said :
"It would also seem to be reasonable to hold that the power to make the
admission in writing could be exercised by the same offlcers who hâve tho
I>ower to make a gênerai assignment, and, In the absence of statuts or by-law
regulating the subject, such power résides In the dlrectors. ♦ ♦ ♦ It fe no
doubt true that by commltting either the fourth or flfth acts of bankruptcy,
when three creditors stand ready at once to take advantage of it by filiug a
pétition, the corporation achieves the object which the act forbids it to secure
by its own voluntary pétition, but Its doing so is not such a 'fraud upon the act'
as to prevent the application of the plain language of the act to the facts pre-
sented."
[3] Even where a temporary receiver is appointed for a corporation
the corporation still has the right to exercise its corporate powers, ex-
cept as to the matters specially confided to the receiver by the court.
Sigua Irbn Co. v. Brown, 171 N. Y. 488, 64 N. E. 194.
[4] It is the désire of the law that the state court proceedings be
superseded upon the filing of a pétition in bankruptcy, and this to make
more effective the bankruptcy proceedings. Cresson Coal Co. v.
Staufïer, 148 Fed. 981, 78 C. C. A. 609; Morehouse v. Giant Powder
Co., 206 Fed. 24, 124 C. C. A. 158; In re Salmon (D. C.) 143 Fed.
395.
[5] A solvant corporation, as a person, may hâve its property dis-
tributed among its creditors in the manner provided by the Bankrupt-
cy Act (Comp. St. §•§ 9585-9656)'. Hanover Nat. Bank v. Moyses, 186
U. S. 181, 22 Sup. Ct. 857, 46 L. Ed. 1113. The claim of the appel-'
lants, that at the time the directors admitted that the company was in-
solvent, and unable to meet its obligations as they matured and arose,
they were without authority to so act, and that, therefore, such a con-
sent is of no value in the bankruptcy proceedings, is w^ithout force,
and is not a reason why the motion to dismiss the pétition should be
granted. If there is a question whether a fraud has been perpetrated,
and the authority of the board of directors to sign the consent, which
was filed in the voluntary proceedings in bankruptcy, is questioned, it
is left open for trial by the order sought to be revised.
We are of the opinion that the action of the board of directors hère
was justified upon the affidavits presented, and that the District Judge
correctly disposed of the question presented in the court below. Mat-
ter of United Grocery Co. (D. C.) 239 Fed. 1016; Matter of Cohn
(D. C.) 220 Fed. 956.
[6] The petitioner seeks to hâve this cause reviewed both by a pé-
tition to revise and by an appeal. Evidently they hâve been doubtful
as to their remedy. We hâve considered the cause as coming to us
pursuant to a pétition to revise, rather than an appeal. Summary pro-
ceedings are reviewable only by a pétition to revise. In re Goldstein,
216 Fed. 887, 133 C. C. A. 91 ; Gibbons v. Goldsmith, 222 Fed. 826,
138 C. C. A. 252. Where the court of bankruptcy has erroneously
retained jurisdiction to àdjudicate the rights of an adverse claimant it-
self, the action may be reviewed by a pétition to revise. Mueller v.
Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405 ; Shea v. Lewis,
IN EE DRESSLEB PKODUCING CORPORATION 2C1
(262 F.)
206 Fed. 877, 124 C. C. A. 537; In re Gill, 190 Fed. 726, 111 C. C. A.
454; In re Vanoscope Co., 233 Fed. 54, 147 C. C. A. 123.
There is a clear distinction between "controversies arising in bank-
ruptcy proceedings" and "bankruptcy proceedings." Bankruptcy pro-
ceedings, broadly speaking, cover questions between the alleged bank-
rupt and include the matters of administration generally, such as ap-
pointments of receivers and trustées, allowance of daims, and matters
to be disposed of summarily. AU of thèse matters occur in the settle-
ment of the estate. In re Friend, 134 Fed. 778, 67 C. C. A. 500. The
determining factor or the important considération for ascertaining to
which class the particular application belongs is to détermine the ob-
ject and character of the proceedings sought to be reviewed. If it is
a controversy arising in bankruptcy proceedings, the Circuit Courts of
Appeals exercise their jurisdiction as in other cases, under section 24a
(Comp. St. § 9608). If the controversy pertains to proceedings in
bankruptcy relative to the adjudication and the subséquent steps in
bankruptcy, it is one which may be revised in matters of law upon
notice and a pétition by the aggrieved party.
The distinction was marked in Moody v. Century Savings Bank, 239
U. S. 374, 36 Sup. Ct. 111, 60 h. Ed. 336, where the court said:
"Whether the Circuit Court of Appeala rightly sustained Its jurisdiction
turns upon whetlier this is one of tliose 'controversies arising In banliruptcy
proceedings' over whlcii the Circuit Courts of Appeals are invested, by section
24a of the Bankruptcy Act, with the same appellate jurisdiction that they
possess in other cases under Judicial Code, § 128 [Comp. St § 1120], or is a
mère step in bankruptcy preceedings the appellate review of which Is regu-
lated by other provisions of the Bankruptcy Act. If it is a controversy arising
in bankruptcy proceedings, the jurisdiction of that court was properly Invok-
ed, as is also that of this court. We entertain no doubt that it Is such a con-
troversy. It has every attribute of a suit in equity for the marshallng of as-
sets, the sale of tlie iucumbered property, and the application of the proceeds
to the liens in the order and mode ultimately fixed by the deeree. True, it was
begun by the trustées and not by an adverse claimant ; but this is immaterlal,
for the mortgagees, who claimed adversely to the trustées, not only appeared in
response to notice of the trustées' pétition, but asserted their mortgage liens and
sought to hâve them enforced against the proceeds of the property conform-
ably to the contentions bofore stated. ïhis was the équivalent of an affirma-
tive inten'ention, and, when taken in connection with the trustées' pétition,
brought into the bankruptcy proceedings a controversy which was qulte apart
from the ordinary steps in such proceedings and weU within the letter and
spirit of section 24a."
Pétitions to revise bring up questions of law only ; appeals, both of
law and of fact. Elliott v. Toeppner, 187 U. S. 327, 23 Sup. Ct. 133,
47 L. Ed. 200. A pétition to revise calls up any order or judgment and
judicial action in bankruptcy proceedings; appeals, final judgments
only. Duryea Power Co. v. Sternbergh, 218 U. S. 299, 31 Sup. Ct.
25, 54 L. Ed. 1047.
If the question arises in an independent suit to détermine the claim
necessary for the settlement of the estate, or if it arise in one of the
cases specified in section 25a (Comp. St. § 9609), review may be had
by appeal ; but if the question pertains to and arises in a bankruptcy
proceeding, and does not fall within either of the cases specified in
section 25a, review may be had by pétition to revise in matter of law.
262 262 FEDERAL REPORTER
Under section 24a, a controversy arising between a trustée and a third
party in respect to property either in the possession of the trustée or
a third party, the review in the Circuit Court of Appeals is had on ap-
peal and in the same manner as any other case; but in case of such
controversy the revisory power is not available. On the review, the
judgment in independent suits to recover assets, or to détermine con-
troversies arising relative to the bankrupt estate, the remedy is by ap-
peal.
We are of the opinion that the remedy of the aggrieved party hère
was by a pétition to revise.
The détermination below is affirmed.
UNITED STATES v. VOGEI*
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 29.
AxiENS ©=568 — Power or couet to gbant amkndment of natubauzation pé-
tition.
Where an alIen In hls déclaration of Intention, and later In hls pétition
for naturallzatlon, erroneously stated the soverelgnty to whlch he owed
allegiance, whlch allegiance, as requlred by statute, he "partlcularly" re-
nounced, the court Is wlthout power on hearlng of his pétition, by an or-
der nunc pro tune, to allow ameadment of the déclaration and pétition, to
date back to the tlme of their flllng.
Appeal from the District Court of the United States for the South-
ern District of New York.
Pétition by Albert Vogel for naturalization. From an order grant-
ing naturalization, and dismissing its pétition for cancellation of certifi-
cate, the United States appeals. Reversed.
Francis G. Caffey, U. S. Atty., of New York City (Julian Hartridge,
of New York City, of counsel), for the United States.
Frank Case Hayden, of New York City, for appellee.
Before ROGERS, HÔUGH, and MANTON, Circuit Judges.
MANTON, Circuit Judge. Appellee, at the time his application for
ritizenship was filed, was a résident of the Southern district of New
York. He was bom in Benningen, Germany, in 1885. He came to
this country from France in 1906. On August 27, 1914, he subscrib-
ed and swore to a déclaration of intention to become a citizen, and
on April 23, 1917, he subscribed and filed a pétition for naturalization.
Each of thèse papers recited that he was bom in Benningen, Germany,
in 1885, and in them he made the usual oath renouncing allegiance to
any foreign sovereign, particularly the emperor of Germany. On Au-
gust 7, 1917, he subscribed and swore to an oath of allegiance, renounc-
ing his foreign allegiance, to wit, to the emperor of Germany. On
March 26, 1918, he appeared in open court before the District Judge
to complète his naturalization. The District Judge took testimony, and
€=9Foi other cases see same topic & KEY-NUMBRR In ail Key-Numbered Digests & Index»»
UNITED STATES V. VOGEL 263
(262 P.)
the appellee testified that he was a French citizen. An order was grant-
ed nunc pro tune striking out the words "William II, emperor of Ger-
many," and substituting the words "French Republic," and a decree
was entered admitting the appellee to citizenship. The govemment has
appealed from the order amending the oath of allegiance and granting
naturalization to the appellee, and asks that the certificate be canceled.
The District Judge filed an opinion in which he recognized the con-
flict of authorities of the various District Courts as to the power of a
District Judge to amend, nunc pro tune, a déclaration of intention to
become a citizen, at any time during the proceedings. He reached
this conclusion, taking the view that, because the statute requires, with
respect to both the déclaration of intention and the pétition for nat-
uralization, that the applicant renounce, not only his particular sover-
eignty, but that of every other sovereignty as well, the purpose oî
particularizing as to his own sovereignty is merely one of identification,
and that the gênerai renunciation is sufficient to include that sovereign-
ty. The court was of the opinion that the new loyalty was adequately
evidenced by the oath of allegiance as supplemented by the gênerai re-
nunciation.
The requirements to become a citizen of the United States are con
tained in section 3 of the act of June 25, 1910 (Comp. St. § 4352), as
f ollows :
"First. He shall déclare on oath before the clerk of any court authorized
by this act to naturalize aliens, or his authorized deputy, in the district in
which such alien résides, two years at least prier to his admission, and after
he has reached the âge of eighteen years, that It is bona flde liis intention to
become a citizen of the United States, and to renounce forever ail allegiance
and fidelity to any foreign prince, potentate, state, or sovereignty, and partlcu-
larly, by name, to the prince, potentate, state, or sovereignty of which the
alien may be at the time a citizen or subject. ♦ • •
"Second. Not lésa than two years nor more than seven years after he has
made such déclaration of intention he shall make and file, in duplicate, a pé-
tition in writing, slgned by the applicant in his own hand wrlting and duly
verifled, in which pétition such applicant shall state his full name, his place
of résidence (by street and number, if possible), his occupation, and, If possi-
ble, the date and place of hs birth. * • •
"The pétition shall set forth that • ♦ * It is his intention to become a
citizen of the United States and to renounce absolutely and forever ail alle-
giance and fidelity to any foreign prince, potentate, state, or sovereignty, par-
tlcularly by name to the prince, potentate, state, or sovereignty of which he at
the time of fillng of his pétition may be a citizen or subject. ♦ * *
"At the timte ôf filing his pétition there shall be filed with the clerk of the
court a certificate from the Department of Commerce and Labor, If the petl-
tioner arrives in the United States after the passage of this act, stating the
date, place, and manner of his arrivai in the United States, and the déclara-
tion of Intention of such petitloner, which certificate and déclaration shall be
attached to and made a part of said pétition.
"Third. He shall, before he is admitted to citizenship, dedare on oath In
open court that he will support the Constitution of the United States, and that
he absolutely and entirely renounces and abjures ail allegiance and fidelity to
any foreign prince, potentate, state, or sovereignty, and particularly by name
to the prince, potentate, state, or sovereignty of which he was before a citizen
or subject. • • • "
The United States District Courts bave jurisdiction to naturalize
by virtue of section 3 of the act of June 29, 1906 (34 Stat. 596 [Comp.
204 2G2 FEDERAL REPORTER
St. § 4351]). This section provides the procédure and the limitations
thereof. Section 2171 of the Revised Statutes provides that no alien
vvho is a native, citizen, or subject or the denizen of any country, state,
or sovereignty with which the United States is at war at the time of
his application, shall be then admitted to become a citizen of the Unit-
ed States. At the time of this application the United States was at
war with the German Empire.
The district judge found that appellee was the son of a parent who
was of Alsace-Lorraine at the time that territory was a part of France.
His father served in the French army in the Franco-Prussian war, and
lie returned to France afterwards to réside in Paris. He and his wife
were both French citizens. The appellee was bom in Germany while
his mother was there on a visit, after Benningen became German terri-
tory. The appellee mistalcenly renounced allegiance to Germany, when
he should hâve renounced allegiance to France. This was due to mis-
taken information given the applicant as to the proper sovereignty.
The question, therefore, is presented whether the court had the power
to admit to citizenship, in view of the erroneous renunciation in the
déclaration of intention and pétition for naturalization in the spécifica-
tion of the particular sovereignty to which allegiance had been pre-
viously owing, and to do this by granting an order nunc pro tune.
In the District Courts, there has been a division of view as to such
power in the court. The following authorities hâve held that no such
power exists in the court: In re Lewkowicz, 169 Fed. 927; In re
Stack, 200 Fed. 330; Ex parte Lange, 197 Fed. 769; In re Friedl, 202
Fed. 300. On the other hand, it has been held that such power existed
in the fédéral court. U. S. v. Viaropulos, 221 Fed. 485 ; U. S. v.
Orend, 221 Fed. 777; In re Denny, 240 Fed. 845.
In U. S. V. Ginsberg, 243 U. S. 472, 37 Sup. Ct. 422, 61 L. Ed. 853,
four questions were certified to that court which dealt with the regu-
larity of naturalizing citizens. But two of the four questions were an-
swered. The first of the questions answered was:
"Is the final hearing of a pétition for naturalization, had In open court as
required by section 9 of the act of June 29, 1906, c. 3592 [Comp. St. § 4368], If
after the pétition is first presented in open court the hearing thereof is passed
to and finally held In the chaïubers of the judge adjoining the courtroom, on a
subséquent day and at an earller hour than that to which the court has been
regularly adjournedî"
And the second :
"(4) May a certificate of citizenship be set aslde and canceled, In an Inde-
pendent suit brought under section 15 of the act of June 29, 1906, c. 3592
ÎComp. St. § 4374], on the ground that It was illegally procured, if the uncon-
tradicted évidence at the hearing of the pétition showed indisputably that
the petitioner was not qualified by résidence for citizenship, and that the court
or judge who heard the pétition and ordered the certificate mlsapplied the
law and the facts?"
The court held that a hearing in the judge's chambers .adjoining the
courtroom did not satisfy the requirements of the act and that the cer-
tificate of citizenship granted by the court could be annuUed in an in-
dependent suit by the United States. The court said:
"An alien who seeks political rights as a niember of this nation can right-
fully obtain them only upon tenns and conditions specified by Congress,
UNITED STATES V. VOGEL 265
(262 F.)
Courts are wlthout authority to sanction changes or modifications ; thelr duty
1b rlgidly to enforce the legislativi will in respect of a matter so vital to the
public welfare. • » * The whole statute indlcates a studied purpose to
prevent well-known abuses by means of publicity througliout the entire pro-
ceedings. Its plain language repels the Idea that any part of a final hearing
may take place in chambers, whether adjoining the courtroom or elsewliere.
"I\'o alien bas the slightest right to naturalization unless ail statutory le-
quirements are complied with, and every certificate of citizenshlp must be
treated as granted upon condition that the government may challenge it as
provided in section 15 and deouand its canœllation unless issued in accord-
iDice with such requirements. If procured wben prescribed qualifications
bave no existence In fact It la illegally procured ; a manifest mistake by the
judge cannot supply thèse nor render their existence nonessential."
When the act of June 29, 1906 (34 Stat. 596), was enacted "as a uni-
form rule of naturalization," Congress dictated in particularity as to
what the déclaration of intention should consist of, and required the
applicant to particularize as to the sovereignty from whence he came
and which he was renouncing. The System is statutory, and the oiily
province of the courts is to ascertain the will of Congress and exécute
it accordingly. Citizenship can only be obtained by complying with
the terms as prescribed by Congress. The act itself provides the terms
to an explicit degree when "an alien may be admitted to become a
citizen in the manner and not otherwise." Citizenship may not be ob-
tained by an alien in any other manner. Every material obligation,
as imposed by statute, constitutes a part of the manner as contemplated
by Congress in the act. The act provides that an alien shall renounce
"particularly by name to the prince, potentate, state, or sovereignty of
which he was before a citizen or subject" at the appropriate time in
each instrument. It is not within the power of courts, in our opinion,
to vary this rule and permit the applicant at a later time to recognize
his mistake and ask to change it, for to do so would be permitting the
applicant to déclare his intention of renunciation at a time other than
wlien maklng his application.
When making his déclaration and signing his pétition and filing the
same is the time he must announce his renunciation as a citizen or sub-
ject of the particular government. It was the intent of Congress to
hâve such renunciation of the particular foreign sovereignty made con-
temporaneously with the exécution and filing of each of the necessary
instruments, and the court is without power later to permit a change
to date back by granting an order nunc pro tune.
For the court to do so, we think, is reading into the statute a per-
mission which is tantamount to a trespass upon the executive domain,
nor can the court say which steps must be complied with and which
may be omitted in compliance, and which may be corrected if error
creep in. To permit such power in the court would frustrate the
whole act ; it would place the power of the court above the terms of
the act. To permit of a substantive amendment would, in but a step
further, permit naturalization to become effective without amending
an insufficient déclaration. This the courts cannot and should not do.
We think the court below was without the power to grant the order
nunc pro tune, and erred in admitting the appellee to citizens'nip.
Decree reversed.
266 262 FEDERAI. REPORTER
HAMMBESOHLAG MFG. CO., Inc., v. IMPORTEES' & TRADERS' NAT.
BANK.
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 46.
1. Banks and bankino iS=9l48(3) — Dutt of defositob to vkeitt bank statb-
IIENT.
A depositor, who sends his passbook to be wrltten up and recelves It
back with his pald checks as vouchers, Is under obligation to the bank to
examine and verlfy the passbook and vouchere, and to report to the
bank any errors dlsclosed.
2. Banks and banking <S=» 148(1) — No liabilitt fob patment op baised
CHECKB, WEEBE ALIEBATIONB NOT DISCOVEBABLE BT BEASONABLE CABE AND
DEPOSITOB I-ATE IN MAKINQ CLAIM.
A bank expressly authorized lu wrlting to pay checks to a deposltor's
bookkeeper, and wtdch so pald checks duly signed by the depositor, but
whlch, after signlng, had been raised by the bookkeeper, held not llable
for the overpayments, where the checks were entlrely written by the
bookkeeper, and the altérations were not dlscoverable by reasonable care,
and where deposltor's passbook was wrltten up and retumed wlth can-
celed cheoks each month, and no clalm was made by depositor until
more than a year after the ralslng of the checks commenced.
3. XbIAL <S=>141 — ^DlEEOTION OF VERDICT PEOPEB WHEBB EVIDENCE 18 TJNDIS-
PTJTED.
A dlrected verdict Is proper, where the évidence Is undlsputed and free
from confllct.
4. Banes and BANKING ®=»148(4) — Liabilitt tob patment of baibed oheces
AFFECTED BT LACHES OF DEPOSITOR IN NOTIFTING.
Where a deposltor's passbook was written up and retumed wlth can-
celed checks each month, wlth a notice stamped thereon requestlng its ex-
amtnation, and stating that the bank disclalmed responsibillty for any er-
ror unless notlfled withln 30 days, the bank Tveld not llable for payment of
raised checks, whlch It could not hâve dlseovered by reasonable care, and
of whlch It was not notlfled for nine months.
Manton, Circuit Judge, dissenting.
In Error to the District Court of the United States for the Southern
District of New York.
Action by the Hammerschlag Manufacturing Company, Incorporat-
ed, against the Importers' & Traders' National Bank. Judgment for
défendant, and plaintifï brings error. Affirmed.
The plaintlfC is a corporation organized and exlstlng under the laws of the
State of New Jersey and bas its principal office In the town of Garfleld, in
that State. The défendant ia organized and exlstlng under the laws of the
United States, and Is a résident and citizen of the state of New York, and has
its principal office and place of business in the Southern district of New
York. At the times hereinafter mentloned the plaintifif was a depositor In the
bank owned and conducted by défendant
The plalntifC, between August 1, 1913, and October 21, 1914, Inclusive, de-
poslted wlth défendant $659,815.40 ; and on August 1, 1913, the défendant was
indebted to plaintlfC in the sum| of $21,036.84 upon an account for money de-
poslted wlth it. Between the dates mentloned the défendant pald to the
plaintiff upon Its order the amount of $675,702.24. The plaintlfC demands In
thls action the différence between the amounts whlch défendant received and
the amounts pald out to it or on its order, to wit, the sum of $5,150. It ap-
pears that checks payable to "Bearer a/o Exchange" were presented to de-
fendant by the plamtlfC's accredlted représentative and were pald by It, which
<g=53For otlier cas*» see same toplc & KEY-NUMBER In aU Key-Numbered Dlgests & Indexes
HAMMERSCHLAG MFG. CO. V. IMPORTEES' & TBADEKS' NAT. BANK 267
(S62 F.)
had been raised by the sald aocredited représentative. It also appears thaï,
the inerease to which thèse chedis had been raised equaled the balance for
wMch the plalntiff sues.
At the conclusion of the plalntiff's case défendant moved to dismisa the
oonrplaint and for the direction of a verdict, upon the ground that plalntiff
falled to show liabûity on the part of the défendant bank, and that from
plalntiff's own évidence it appeared the défendant bank was free from any
Uabillty or fault respecting the raised checks. The motions vrere granted and
a verdict was retumed under the court's instructions in favor of défendant.
Louis S. Postier, of New York City, for plaintiff in error.
Henry W. Baird, of New York City, for défendant in error.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
ROGERS, Circuit Judge (after stating the facts as above). The
question which this case présents relates to the right of a bank which
has paid raised checks to escape liabiHty for repayment of the amounts
so paid by estabHshing the neghgence of the depositor in not examining
the passbook and vouchers returned to him by tlie bank, and in not
reporting to the bank without unreasonable delay the errors discovered
or which might hâve been discovered.
In the présent case there was no forgery of signatures. It is ad-
mitted that the signatures were ail genuine. The forgeries consisted
in raising the amounts for which the checks were originally drawn,
and the altérations were ail made by the plaintifï's confidential book-
keeper. He had exclusive charge of the préparation of the checks for
signatures, and exclusive charge of the présentation of the checks for
signatures. After the signatures were affixed, the bookkeeper would
raise the amount of the check and présent it to the bank for payment.
The altération of checks by him began in August, 1913, and in June
of that year the plaintiff had written the following letter and given
it to the bookkeeper, William H. Hooper, who presented it to the
paying teller of the bank :
"New York, June 6, 1913.
"Importers' & Traders' National Bank, Broadway and Murray Street, City —
Gentlemen : Please accept thls letter as authorlty for payment to our Mr. W.
H. Hooper of checks presented by him, drawu to the order of bearer — signature
below.
"RespectfuUy yours, [Slgned] Hammierschlag Mfg. Co.,
"J, D. Goldberg, Vice Président,
"Dla J. D. 6/K.
"[Signed] William H. Hooper."
Each one of the altered checks was altered by Hooper, presented by
him, and to him the money on ail of them was paid. The amount of
the check as originally drawn was erased by an ink eradicator prép-
aration, and as the raised amount was in the handwriting of the one
party who wrote the original check there was nothing in the appearance
of the check to challenge attention. The protectograph was not used,
with a possible exception of one or two of the checks, until after the
altération in amount was made. No book containing checks and stubs
was used. The checks were drawn on voucher forms, which were
padded, and the amounts were entered in the book as the book of orig-
inal entry.
268 262 FEDERAL REPORTER
[1] A deposîtor who sends his passbook to be written up, and re-
ceives it back with his paid checks as vouchers, is under an obligation
to the bank to examine and verify his passbook and vouchers, and re-
port to the bank the errors disclosed.
In Weisser's Administrators v. Denison, 10 N. Y. 68, 61 Am. Dec.
731 (1854), the court declared that a depositor owes the bank no
duty which requires him to examine his passbook or vouchers with a
view to the détection of forgeries. It also declared that where checks
forged by the confidential clerk of the depositor were paid by the bank,
charged to the depositor in his bank book, the book balanced and with
the forged vouchers, among others, retumed to the clerk, who exam-
ined them and reported them correct, and the principal did not dis-
cover the forgeries until months afterwards, when he immediately in-
formed the bank, the bank could not retain the amount of the forged
checks. The more récent authorities in New York, soon to be con-
sidered, lay down a quite différent doctrine.
In Leather Manufacturers' Bank v. Morgan, 117 U. S. 96, 6 Sup.
Ct. 657, 29 L. Ed. 811 (1886), the rule is laid down that the depositor
is bound personally or by an authorized agent and with due diligence
to examine the passbook and vouchers, and to report to the bank
without unreasonable delay any errors that may be discovered ; and if
he fails to do so, and the bank is misled to its préjudice, he cannot
afterwards dispute the correctness of the balance shown by the pass-
book. It is also held that, if the duty of examination is delegated by
the depositor to the clerk guilty of the forgeries, he does not so dis-
charge his duty to the bank as to relieve himself f rom loss.
In Critten v. Chemical National Bank, 171 N. Y. 219, 63 N. E. 969,
57 h. R. A. 529 (1902), the rule is laid down that a bank depositor
owes to the bank the duty of exercising reasonable care to verify re-
turned vouchers by the record kept by him of the checks he has issued,
for the purpose of detecting forgeries or altérations; and in that
case the court held a bank depositor chargeable with the knowledge of
the fraudaient altération of checks possessed by his clerk to whom he
intrusted the examination of the vouchers, and with his négligence or
failure in the vérification of the accounts, although the clerk hap-
pened to be the one who made the altérations, where the comparison
of the checks with the stubs in the check book would hâve disclosed
sùch altérations to an innocent party previously unaware of the for-
geries.
In Morgan v. United States Mortgage & Trust Co., 208 N. Y. 218,
101 N. E. 871, L. R. A. 1915D, 741, Ann. Cas. 1914D, 462 (1913), a
trusted clerk in the employ of the trustées of an estate, and who was
their immédiate agent in dealing with the bank, forged 28 checks,
aggregating a large sum, which the bank paid. Checks drawn on the
account of the estate were signed by a rubber stamp imprinting the
words "estate of David P. Morgan," and were authenticated by the
actual signature of one of the trustées. The clerk who made the de-
posits filled out the body of the checks, obtained from the bank
the passbook and vouchers and check list whenever the account was
HAMMERSCHLAa MFG. CO. V. IMPORTEES' & TRADERS' NAT. BANK 2^
(262 F.)
balanced, and employed in his forgeries the simulated signature of the
trustée Morgan. An action was brought to recover the ainount paid
by the bank on the forged checks. The court held that there could be
no recovery ; the rule being that a bank is permitted to escape liabiHty
for repayaient of amounts paid out on forged checks, if it estabhshes
that the depositor has been guilty of neghgence which contributed to
such payments and that it has been free from any neghgence. The
négligence which the bank reUed upon was the négligence of the trus-
tées in not examining their passbook and list of vouchers, and thus
discovering within a reasonable time what they were being charged
with. The depositors were in the habit of making an examination,
but the examination was incomplète and ineffective. The court de-
clared that if they had examined the check list and passbook, and
compared them with their own books, they would hâve discovered at
once the payment and débit to their account of checks which they
had not drawn, and the forgeries would hâve been uncovered. The
trustées had relied for vérification merely on a comparison of vouch-
ers, without any effort to verify them by comparison with the check
list or passbook.
In Myers v. Southwestern National Bank, 193 Pa. 1, 44 Atl. 280,
74 Am. St. Rep. 672 (1899), the court recognized the duty of the de-
positor to verify the settlements of his bank book, and held that he
could not recover from the bank the loss which he sustained by not
doing so. In that case the depositor intrusted to the confidential clerk,
who committed the forgeries, the duty of verifying the passbook, and
the court held the depositor clearly responsible for the acts and omis-
sions of his clerk in the course of the duties with which he was in-
trusted.
So in First National Bank of Birmingham v. Allen, 100 Ala. 476, 14
South. 335, 27 L. R. A. 426, 46 Am. St. Rep. 80 (1893), it is held to be
the duty of the depositor, who has his passbook written up by the
bank and receives it back with his paid checks as vouchers, to examine
the passbook and vouchers either personally or by an authorized agent,
and report to the bank without unreasonable delay any errors that may
be discovered in them. The court also held that, if the depositor has
the examination niade by an agent who happens to hâve been the one
guilty of the forgeries, the depositor will be chargeable with the knowl-
edge of the agent. And see Dana v. National Bank, 132 Mass. 156;
De Fariet v. Bank of America, 23 La. Ann. 310, 8 Am. Rep. 597.
[2] In the instant case the bank deposit book was balanced each
month. After it was balanced it was returned with the vouchers and
the check list; and on each occasion when the passbook was returned
there was stamped in red ink on it the f oUowing notice :
"The bank requests and expects that the dealers will carefuUy examine their
passbooks and vouchers each time when returned to them, and that they wlU
at once notlfy the bank of any error In the account or balances, and especial-
ly to any objection on their part, for any reason, to any voucher returned
being charged agalnst them. The bank disclaims responsibility for any error
in the accounts as rendered, unless informed of it within 30 days after tbn
retum by it of the passbook and the surrender of the vouchers."
270 262 FEDERAL REPORTER
No one in the plaintiff's company examined the retumed checks,
but the bookkeeper who forged them. This appears f rom the foUow-
ing excerpt f rom his testimony :
"Q. But, I mean, was there anybody In the business tliat went over tiieso
retumed checks? A. Myself.
"Q. That checklDg up, as It were, ot the checks retumed from the bank,
was done by y ou? A. Yes, sir.
"Q. And by no one else in the concem? A. Not in the company.
"Q. Is that correct? A. Yes, sir. * • •
"Q. So that, at the expense of répétition, I will ask you whether I am cor-
rect in understanding tiiat the sole examiination inade of the passbook and
the retumed checks during this perlod, outside of whatever the outside ac-
countant did, was made by you? A. Yes, sir."
The outside accountant, as the record shows, made a monthly ex-
amination. He checked up the vouchers retumed by the bank, and
checked them up against the bank list. Then he took the checks and
checked them up against the gênerai exhibit, which contained a record
of the number of tiie check, the date, the payée, and the amount, and
compared the amount with the entry in the gênerai exhibit. He took
the deposits as listed by the bank, and compared them with the de-
posits listed in the gênerai exhibit; and he took the balance as shown in
the gênerai exhibit and the outstanding checks that did not come
through, and found there was an agreement with the balance as shown
by the bank. Although he knew there was a daily cash receipts book,
he admitted that he did not look at it ; and he admitted that, if he had
compared it with the gênerai exhibit book, the discrepancies would
hâve been immediately disclosed. He was asked by the court whether
there would hâve been any trouble about it, and answered :
"No; it would be very plain and obvions that there was a défalcation or
embezzlement."
Inasmuch as the examination which it was the duty of the plaintiflf
to make involved, not simply the authenticity of the signatures to
checks, but the amount of the checks, as to whether they had been
raised or not, that duty could not be performed with ordinary care
by looking at the entries in a secondary book and leaving unopened
the book of original entries. Such a method of examination left the
door wide open for such forgeries as was practiced in this case, and
the négligence of the accountant is clearly attributable to the plaintiff ;
the law being that, when a duty is cast upon any person, that person
may not absolve himself of his duty by delegating the duty to some
other person to perform. In this case the duty clearly was not ade-
quately performed. When the plaintiff sent its passbook to défendant
to be balanced, it in effect demanded to be informed as to the con-
dition of its account, and, when the balanced passbook and the vouch-
ers were returned, the silence of the plaintiff respecting the retumed
vouchers and the entries in the passbook amounted to an admission on
its part as to their correctness.
The rigid responsibility imposed on banks must be maintained. It
is equally important, however, that depositors who make négligent
examinations of the accounts rendered to them by their banks should
HAMMERSCHLAG MFG. CO. V. IMPOETERS' & TRADERS' NAT. BANK 271
C262 FJ
themselves sustain the losses which resuit from their own and not the
bank's carelessness, and which would hâve been prevented if they them-
selves had exercised reasonable care. The plaintifï seeks in this case
to hold the bank responsible for the payment of checks raised by its
own employé, who was authorized by it to prépare the checks and
to obtain the money on them, and over whose conduct no reasonable
supervision was exercised.
The failure, however, of a bank depositor adequately to examine
his passbook and vouchers, and to give the bank prompt notice of any
errors he may discover, is no défense to the depositor's right to
recover the money so paid from the bank, if the bank's ofiîcers, bef ore
paying the checks, could hâve detected the forgeries, if they had
exercised reasonable care. This principle was declared by the Suprême
Court in Leather Manufacturers' Bank y. Morgan, supra, where it was
said:
"Of course, If the defendant's olBcers, before paying the altered checks,
could by proper care and skill bave detected the forgeries, then It cannot re-
celve a crédit for the amount of those checks, even if the depositor omltted
ail examination of his ac-count."
And this coutt so understood the décision and applied it in New
York Produce Exchange Bank v. Houston, 169 Fed. 785, 95 C. C. A.
251 (1909), as did the Circuit Court of Appeals in the Sixth Circuit in
First National Bank v. Fourth National Bank, 56 Fed. 967, 971, 6
C. C. A. 183 (1893). This being the law, we are brought to inquire
whether in the instant case the défendant bank, if it had exercised rea-
sonable care in examining the checks, could hâve detected the forgeries.
If in the exercise of such care it might hâve detected them, it must an-
swer to the plaintifï for its failure to do so. The proof is that the
altérations in the checks were so cleverly done that even the man
who made them could not himself detect them. The court asked
him whether it was f air to say that the altérations were so success- -
fully accomplished that he who made them was unable to détermine
them by examining the checks. The reply was, "I believe invariably
so." Then the court again asked, "You believe it [détection] could
not be made?" And the witness answered, "Yes, sir." Then followed
this:
"The Court: In other words, what you mean to say is that so far as you,
the author of this change, was conœmed, tlie change was so completely effec-
tive that even you could not see that there was a change; Is that true?
"The Wltnesa: Yes, sir."
In making the altérations the same ink was employed that was used
in writing the original amounts. At the time of the trial there were
two or three checks in which there was shown to be a différence in
the appearance of the ink. The appearance of ink changes in time,
and there is absolutely no évidence whatever as to the condition of
the ink on the checks at the time they were presented to the bank,
or that there was anything about them to put the bank upon inquiry.
In the case of one or two of the checks, it was possible that the pro-
tectograph mark had been changed. The practice was to hâve checks
signed first, then altered, and then protectographed. Asked as to the
272 2G2 FBDEKAL EBPOETEB
check upon which possibly the protectograph mark was changed, the
witness answered:
"I would e&y that the check appears to hâve been changed; but It would be
a very dilficult problem to détermine tliat it has really been changed."
And the following excerpt from the testimony of the accountant
employed by the plaintifif to make the audits is important upon this
phase of the subject :
"Q. Was there anythlng in the course of your work that directed your at-
tention as queer about any of those checksî A. No.
"Q. You thought they were ail rightî A. Oertainly."
In view of the testimony as to the appearance of the checks which
had been altered, and in view of the letter of June 6, 1913, written
by défendant to the bank, and left with the paying teller, and which
elsewhere appears, it is very évident that it is impossible to say that
there was a laçk of reasonable care in the f ailure of défendant to detect
the altérations in the checks.
This brings us to inquire whether the question of the negHgence of
the défendant in paying the checks, or of the plaintiff in examining
the passbook and vouchers, after their retum by the bank, should
hâve been submitted to the jury.
[3] It is the province of a jury to détermine facts, and of a court
to déclare the law. But a judge may direct a verdict, where there is a
failure of évidence, or where the évidence is contrary to ail reason-
able probabilities, or where it is uncontroverted ; and a directed ver-
dict is proper, when it is plain that a contrary verdict cannot be per-
mitted to stand. The rule is stated correctly in 23 Am. & Eng. Encyc.
of Law (2d Ed.) 551, where it is said that —
"When the facts are adraitted, or are undisputed, or -where the évidence is
^not conflicting, there Is no question vphich need be submitted as a question of
fact, and the court may wlthdraw the case from the jury and itself décide
ail questions which are Involved as questions of law; e. g., the question of
négligence is often a mlxed question of law and faot, but when the direct fact
or facts in issue are ascertained by undisputed évidence, and such fact or
facts are décisive of the case, a question of law is raised and the court sliould
décide it without submlttlng any question to the jury."
Again at page 558 it is said that —
"If the évidence Is free from conflict, or the facts are undisputed, or cou-
ci usively proved, so that there is no reasonable chance for drawing différent
conclusions from them, the court may and must wlthdraw the whole case from
the jury, or the partlcular fact or facts in issue as to which there is no coii-
fllct In the évidence."
Thèse propositions are established by a long line of décisions, which
are cited, and which need not be repeated hère.
The évidence in the case at bar is undisputed and free from con-
flict. Counsel for plaintifif admits this in his brief where he says :
"We feel convinced, and respectfuUy urge upon this court, that no question
of fact exists in this case with relation to complalnant's conduct In the ex-
amination of the retumed vouchers, and that fromi the uncontradicted testi-
mony It must be held that It discliarged its whole duty to the bank."
HAMMERSCHLAQ MFG. CO. V. IMPORTERS' & TRADERS' NAT. BANK 27S
(262 F.)
We agrée that no question of fact arises, either as to the plaintiff's
or the defendant's conduct. The testimony is uncontradicted aHke as
to the conduct of each. The défendant called no witnesses, and
such évidence as is in the record cornes from the plaintiff's own wit-
nesses, and they stand uncontradicted. The facts being undisputed,
there was no question of fact for the jury to détermine.
This case is in principle not unHke Morgan v. United States Mort-
gage & Trust Co., supra. It was claimed in that case that the question
of the neghgence of the bank should hâve been submitted to the jury.
But the court declared that, after an examination of ail of the évi-
dence, it was not thought that there was any which would hâve
justified the jury in deciding that the respondent was négligent; and
the court came to the same conclusion as respects the négligence of
the depositors. After calling attention to what steps tne depositors
took, and failed to take, to verify the accounts rendered by the bank,
Judge Hiscock, who wrote for the New York Court of Appeals, said :
"The only question Is whether a jury would hâve been permitted to say that
they were free from négligence, when they closed their eyes or turned them
away from thèse certain nieans of détection of their own agent's wrongdoing,
which were furnished to themi for ttiat very purpose by the bank. I do not
think it would hâve been permitted to so détermine."
And in Critton v. Chemical National Bank, supra, the Court of Ap-
peals disposed of the question of négligence as a matter of law upon
the undisputed évidence.
The plaintiff, however, notwithstanding the admission, already quot-
ed, that there is no question of fact, still strongly relies upon Leather
Manufacturers' Bank v. Morgan, supra, in which the Suprême Court
held that the question of the depositor's négligence in examining his
retumed passbook and vouchers was a question for the jury; but
that case seems to us distinguishable from the case at bar. The facts
in the instant case are undisputed and beyond controversy, while in
the Morgan Case they appear to hâve been otherwise. In the latter
case the court in its opinion speaks of the évidence as —
"tending to show — we do not say beyond controversy — that Cooper failed to
exercise that degree of care, which under ail the clrcumstances, It was hls
duty to do."
And again the opinion says:
"There was also évidence tending to prore — we do not say conclus! vely — that
the depositor gave practically no attention to the account rendered by the
bank, except to that one rendered March 2, 1881"
— which led to the discovery of the forgeries. And then the court
goes on to say that if the case had been submitted to the jury, and
they had found such négligence upon the part of the depositor as pre-
cluded him from disputing the correctness of the account rendered,
"the verdict could not hâve been set aside as wholly unsupported by
the évidence." And again it says :
"As there Is, under the évidence, falr ground for controversy as to whether
the officers of the bank exercised due ciiULiuii ueiure yuiing the altered checks,
and whether the depositor omitted, to the injury of the bank, to do what or-
262 F.— 18
274 262 FEDERAL KEPORTEK
dlnary care and prudence requlred of him, It was not proper to witMraw the
case from the jury."
Upon the undisputed évidence in the case at bar this court can
see no ground for controversy. The bank as a matter of law, upon
the undisputed facts, was not guilty of négligence, and the depositor
was.
[4] In conclusion, we corne to consider whether the plaintiff in
error was entitled to a verdict upon the three forged checks, aggre-
gating $400, paid prior to the first bank balancing. In New York it
has been held that a bank is not relieved from liability for raised
checks, which it had paid before the account was balanced, by the
f allure of the depositor subsequently to discover the altérations, un-
less thereby the bank has lost an opportunity to obtain restitution.
Critton v. Chemical National Bank, supra; Weisser's Administrators
v. Denison, supra.
It would seem sufïîcient to say that, whatever the rule may be under
other circumstances, it certainly is inapplicable to the facts under con-
sidération. The plaintifï must hâve known the rule of the bank, stamp-
ed upon its passbook each time it was balanced, in which it was stated
that—
"The bank disclaims responsibllity for any error in the accounts as ren-
dered, unless tnformed of it wlthin 30 days after the retum by it of the
passbook and the surrender of the Touchers."
In continuing to do business with the bank with knowledge of this
rule, the plaintiff consented to be bound by it, and is estopped to claim
that the bank is liable to it upon the three checks paid prior to the
first balancing of the passbook. Those checks were paid in August,
1913, and the passbook was balanced at the end of that month. Notice
of the forgeries was not given to the bank until May, 1914. Under
the circumstances of this case, it is unnecessary to inquire whether the
doctrine held in New York as to the right of the depositor to hold
the bank for payments of forged checks paid prior to the first bal-
ancing of the passbook is or is not recognized in the fédéral courts.
Judgment affirmed.
MANTON, Circuit Judge (dissenting). The défendant in error had
money of the plaintiff in error on deposit. It was subject to checking
in withdrawals. The relation existing between the bank and depositor
was that of debtor and creditor, and the bank can justify the pay-
ment on the depositor's account only on actual direction of the depos-
itor. Critton v. Chemical Bank, 171 N. Y. 218, 63 N. E. 969, 57 L.
R. A. 529. In the case under considération, payment was made without
actual direction of the depositor, because of forgeries. The bank can
only escape liability by affirmatively establishing (1) négligence of the
depositor directly relating to and facilitating the forgeries; (2) omis-
sion of the depositor to use ordinary care in the examination of re-
turn vouchers to the préjudice of the bank, thus estopping the de-
positor in making claim ; and (3) by the bank establishing that it was
guilty of no négligence in paying the forged checks. Leather Mfrs.'
Bank v. Morgan, 117 U. S. 96, 6 Sup. Ct. 657, ^9 L. Ed. 811 ; N. Y.
275
(262 F.)
Produce Exchange Bank v. Houston, 169 Fed. 785, 95 C. C. A. 251 ;
Morgan v. U. S. Mortgage & Trust Ce, 208 N. Y. 218, 101 N. E.
S71, L. R. A. 1915D, 741, Ann. Cas. 1914D, 462.
Unless the case be a plain one, whether each or any of thèse dé-
fenses has been established was a question of fact for the jury, and net
one of law for the court. When the f raudulent altération of the checks
was proved, the liabihty of the bank for the amount was made out,
and it was incumbent upon the défendant in error to establish affirma-
tively négligence on the part of the plaintifï in error to relieve it from
the conséquences of its fault or misfortune in paying on forged or-
ders. Critton v. Chemical Nat. Bank, 171 N. Y. 224, 63 N. E. 969,
57L.R.A.529.
The question of négligence cannot arise unless the depositor has, in
drawing his check, left blanks unfilled, or by some affirmative act of
négligence facilitated the commission of the fraud by those into
whose hands checks may corne. Crawford v. West Side Bank, 100 N.
Y. 50, 2 N. E. 881, 53 Am. Rep. 152. While it is true that the drawer
of a check may be liable when he draws the instrument in such an
incomplète state as to facilitate or invite fraudulent altérations, he is
not bound, under the law, to so prépare the check that nobody else
can successfully tamper with it. Belnap v. National Bank of Mass.,
100 Mass. 380, 97 Am. Dec. 105.
Reading the prevailing opinion leads me to the conclusion that the
court has decided the questions of fact which are presented by this
évidence as questions of law, rather than permitting the submission of
such questions of fact to the jury. The évidence is disputed, and the
inferences to be drawn therefrom are in dispute. Reasonable minds
might differ as to the conclusions to be drawn legitimately from such
évidence, and such are typical questions for a jury's solution. The
leading authorities, which are binding upon us, and which are con-
sidered in the prevailing opinion, illustrate the necessity for us ta
pronounce that a jury question is presented by the évidence hère.
The forgeries hère were committed by an employé of the plaintiff in
error who occupied the position of head bookkeeper and trusted execu-
tive. The forgeries in each instance consisted in the raising of the
amounts of checks drawn by the plaintiff in error to "Bearer, Account
Exchange," after the checks had been drawn and were completed and
duly signed. The checks were prepared by Hooper in his own hand-
writing, and thereafter signed by an officer of the plaintiff in error,
and were presented to the bank by Hooper. After the signature, he
committed the altérations resulting in the forgeries. The altération
of the check was made by the use of CoIIins' ink eradicator. Some of
the checks were stamped by a protectograph. In thèse instances, the
stamp of the protectograph was obliterated by restamping. This al-
tération was plain and quite visible to the naked eye. This was also
true of the change in the color of ink used.
The checks were drawn on voucher form and were numbered con-
secutively. It was not the practice of the officers of the company
to examine the books; but this was left to its bookkeepers, including
276 262 FEDERAL REPORTER
riooper. He devised a System of keeping the accounts in the books of
the plaintiff in error which covered up his forgeries and thefts. At
the end of each month the returned vouchers, with the bank's state-
ment, were checked up and reconciled by Hooper, and also by an au-
diting accountant employed by the plaintiff in error. Because of this
ingénions scheme of Hooper, they were found correct by the auditing
accountant and were net detected. In issuing the checks to "Bearer,
Account Exchange," a method was pursued by which the ofEcers of
the Company reimbursed plaintiff in error for petty cash taken as
needed in the management of the business. The plaintiff in error's
method of bookkeeping and method of checking up the accounts cap-
not be said to be antiquated, much less a négligent method. Hooper
was shrewd and élever enough to deceive his colaborers in the plaintiff
in error's employ, including the auditing accountant. But there was
sufficient indication to a prudent paying teller at a bank to put him
on notice of the altérations made by the protectograph stamp, if, in-
deed, the altération in the figures should not hâve been discovered.
This is not the case as should be disposed of by the court as a ques-
tion of law.
In Critten v. Chemical Nat. Bank, 171 N. Y. 224, 63 N. E. 971, 57
L. R. A. 529, Judge Cullen said :
"In the présent case the fraudulent altération of the checks was not merely
in the perforation of the additional figure, but in the oblitération of the written
name of the payée and the substitution therefor of the word 'Cash.' Agalnst
this latter change of the Instrument the plaintlffs could not hâve been ex-
pected to guard, and wlthout that altération it would hâve no way proflted the
crlminal to ralse the amount. Apart, however, from that considération, the
question was clearly one of fact, to be determlned largely by an inspection of
the checlis themselves."
The bank cannot be excused from its négligence upon the theory
that there was neglect by the depositor in examining the returned
vouchers. If the bank's officers, before paying the altered checks,
could, by proper care and skill, bave detected the forgeries, then it
cannot receive a crédit for the amount of those checks, even if the
depositor omitted ail examination of his account. Leather Manufac-
turers' Bank v. Morgan, 117 U. S. 96, 6 Sup. Ct. 657, 29 L. Ed. 811.
This doctrine enunciated in Leather Manu facturer s' Bank v. Morgan et
al., supra, was accepted by this court in New York Exchange Bank
V. Houston, 169 Fed. 785, 95 C. C. A. 251, and was so interpreted by
the Sixth Circuit in the First National Bank v. Fourth National Bank,
56 Fed. 967, 6 C. C. A. 183. In the New York state court, the gên-
erai rule is that a bank may pay and charge to its depositor only such
sums as are duly authorized by the latter, and, of course, a forged
check is not authority for such payment. The bank may escape lia-
bility for the repayment of amounts paid out on forged checks, by
establishing that the depositor bas been guilty of négligence which
contributed to such payment and that it bas been free from any nég-
ligence. Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 222,
101 N. E. 871, L. R. A. 1915D, 741, Ann. Cas. 1914D, 462. But as
Judge Harlan said, in Leather Mfrs.' Bank v. Morgan, supra:
277
(262 F.)
Wliere thoro is "fair ground for controversy as to whelher the officers of tïie
bank oxercised due caution before paying the altered checks, * * ♦ It
was not proper to withdraw the question from the jury."
Of course, the depositor owed a duty of some examination and
vérification of its account with the bank when the passbook and vouch-
ers were returned. In this they guarded against a continuation of sub-
séquent f orgeries and thef ts ; but such examination means the exercise
of ordinary care, either personally or by some authorized agent. The
bank cannot justly complain, after such examination, if forgeries were
not discovered by such examiner until it was too late to retrieve. Leath-
er Mfrs.' Bank v. Morgan, supra; Frank v. Chemical Nat. Bank, 84
N. Y. 209, 38 Am. Rep. 501.
When, having obtained from the bank a list of vouchers and bal-
anced passbook, which were intended to give and did give them a cor-
rect basis for comparison and vérification, the plaintifï in error, by its
agents, made an examination and reconciled the accounts, the care
with which such examination is made, and whether it was ordinary
prudent vigilance, is a question for the jury. Morgan v. U. S. Mort-
gage & Trust Co., supra. The following language was quoted with
approval in Leather Mfrs.' Bank v. Morgan, supra:
"The alleged duty, at most, only requires the depositor to use ordinary
care ; and ii thls is exercised, whether by himself or his agents, the bank
cannot justly eomplain, although the forgeries are not discovered until it i'3
too late to retrieve its position or make réclamation from the forger."
In National Bank v. Tacoma Mil! Co., 182 Fed. 1, 104 C. C. A. 441
(C. C. A. 9th Dist.), there was an examination of the bank's balance.
The deposit slips and checks upon such examination did not reveal the
forgeries. Accounts were reconciled, as in the case at bar, and there
the court approved a direction of the verdict fastening liability on the
bank, saying:
"If those statements tally with the deposit slirw made up by the depositor
and the checks drawn against the bank, and if the balances agrée one with the
other, the depositor is not obliged to look further, nor to bear in mind some
Irregularity that niay appear elsewhere in his gênerai books, although a search-
ing inquiry might lead to a discovery of the fraud. ïïie présent case is illus-
tra tive of the principle. The mlll company was unable to ascertain what had
happened, until it sent out to its customers for statements of their accounts
and called in experts to détermine the condition of its books. It was then dis-
covered that the Mandan Mercantile Company crédit was given on April 5th,
which gave a élue to the Une of inquiry, and led to a discovery of the fact that
that item did not appear in the bank deposit, as it should hâve done ; and it
was found that, if the items In the mlll company's cash account had been
checked with the deposit account, it would hâve shown that this item had not
been deposlted, although it is probable the cash had been drawn from the
bank, in this particular instance, and put in the cash drawer of the mlll com-
pany. The inquiry which the défendant would hâve had the plaintlfE pursue to
discover the fraud is collatéral to an examination of the passbook and the
record of checks drawn against the bank account, and it does not seem to us
that the plalntifE was guilty of such négligence in relation thereto as that
the question should hâve been submitted to the jury."
In both the leading authorities considered and approved by the pre-
vailing opinion (Leather Mfrs.' Bank v. Morgan, 117 U. S. 96, 6 Sup.
Ct. 657, 29 L. Ed. 811 ; Critten v. Chemical Bank, 171 N. Y. 219, 63
278 262 FEDERAL REPORTER
N. E. 969, 57 L. R. A. 529), the courts held the question o£ négligence
of the bank and depositor in.each case should be submitted to the jury.
Even though the depositor in the présent case could be said to be es-
topped because of négligent conduct or method of examination of the
returned vouchers, this does not exempt the bank from liability for
such forged checks as were paid before the depositor had an oppor-
tunity to examine the returned vouchers, and the plaintiff in error
should prevail at least as to thèse sums.
In my opinion, upon this record, we should not décide as a question
of law whether the plaintiff in error or défendant in error was nég-
ligent. Plainly they are questions of fact for the jury. The judg-
ment should be reversed.
TEANSCONTINENTAIi PETROLEUM CO. T. INTEROOBAN OIL CO.
(Circuit Ctourt of Appeals, Eighth Circuit December 12, 1919. Kehearlng
Denied Pebruary 21, 1920.)
No. 5339.
1. CONTEACTS ®=slO(4) — ^MUTUAUTT OF CONTEACT FOB SALE TO ESTENT Or BUT-
EB'S EEQTJIREMENTS.
A contract for the sale and purchase of a commodity, where the quan-
tity to be delivered or received is measured by the output or requlrementa
of an established plant or business during a limited tlme, does not lack
mutuallty.
2. contbacts 's=>10(4) — mutttalrrt of conteact foe sale of oil limited to
sellee's peoduction.
A contract, by a corporation operatlng some 20 oil wells, to sell a
stated quantity of crude oil, to be delivered during two years, held not
invalid, for lack of mutuallty, because of a provision llmitlng Its obliga-
tion to dellver to the production of its wells then owned or aftervrards
acqulred during the termt
3. Sales iS=»71 (4) — Mutxtalitt of pbovisions of contract foe sale of oil.
A provision of a contract for sale and purchase of crude oll, to be de-
livered through a stated tlme, that seller should not be bound to deliver
beyond the production of Its own wells, also limita purchaser's obligation
to receive to such production.
4. WiTNESSEs ©=287 (1) — Mat explain testimont on cboss-examination.
Where the superintendent of the export department of a large Mexican
oil Company, having wells from which the oil was piped and transported
to his headquarters at the coast, where it was stored in tanks for ship-
ment, testifled that during the term of a contract his company did not
load, deal In, or buy any oil other than from its own wells, the striking
out of his testlmony as hearsay, because of his statement on oross-es-
amlnation that he was not at the wells during the time, and the refusai to
permit him to explain that, while not stationed at the wells, he vislted
them, that he had charge of ail transportation Unes, and the men operatlng
them, and of the books and records, showing the source of the oil
handled, held error.
5. Evidence ©=5317(1) — Witnesses <g=>268(2) — Officee of coepobation may
TESTIFT as to its business; CBOSS-BXAMINATION as to SOUBCE of KNOWL-
EDGE.
That the knowledge of an ofiBcer of a large corporation as to facts con-
nected wlth its business is gained largely from others, and from recorda
in the course of the business, does not render his testimony as to such
<g=3For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes
TRANSCONTINENTAL PETROLEUM 00. V. ENTEROOEAN OIL 00. 279
(262 F.)
facts incompétent as hearsay, and while cross-examlnatlon as to hls
source of knowledge is proper, and may afifeet the welght of Ms testiraony,
that question is for the jury.
6. Evidence <®=s>158(27) — Damages fbom beeach of conteact mat be shown
BT PAEOL.
On the question of damages resulting from breach by défendant of a
contract to purchase crude oll, oral testlmony as to other sales at the
place durlng the time of default heli not incompétent, as secondary, be-
cause the sales and purchases, as between the parties thereto, may hâve
been evidenced by wrltten contracts.
7. Principal and surety <@=»6 — Liabilitt of paett fob default or assignée ;
"GUABANTY."
A défendant, whieh contracted to purchase from plaintifl a large quan-
tity of crude oil, to be delivered in future, held directly and prlmarlly
liable for breach of the contract by Its assignée, notwlthstandmg a pro-
vision of the contract that in case of assignment défendant should "remain
as simple guarantor for its fulfillment," for the term "guaranty," whlle
strlctly importing secondary liabillty, is often used in a broader sensé
to signify suretyship in gênerai.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Guaranty.]
In Error to the District Court of the United States for the District
of South Dakota; James D. Elliott, Judge.
Action at law by the Transcontinental Petroleum Company against
the Interocean Oil Company. Judgment for défendant, and plaintiff
brings error. Reversed and remanded for new trial.
Philip W. Russell, of New York City (Homer, Martens & Gold-
smith, of Pierre, S. D., and Wing & Russell, of New York City, on the
brief), for plaintiff in error.
A. K. Gardner, of Huron, S. D. (Colby & Brown, of New York
City, on the brief), for défendant in error.
Before HOOK and STONE, Circuit Judges, and AMIDON, Dis-
trict Judge.
HOOK, Circuit Judge. This was an action by the Transcontinental
Petroleum Company of the Republic of Mexico against the Interocean
Oil Company of South Dakota for breach of a written contract of sale
and purchase of crude oil produced in the Panuco oil fields, near Tam-
pico, Mexico. The plaintiff was the seller, and défendant the pur-
chaser. The breach claimed was in the failure of the latter and its
assignée to take a large part of the quantity of oil contracted for. At
the conclusion of plaintiff's évidence the trial court directed a verdict
for the défendant and judgment followed accordingly.
[1,2] At the threshold of the case is defendant's contention that the
contract is void for want of mutuality of obligation. This involves a
construction of the firist three paragraphs of the contract. By the first
paragraph plaintiff agreed to sell and deliver to défendant 1,200,000
barrels of Mexican crude petroleum oil upon terms and conditions
specified, "provided, however, that deliveries in said quantity or in any
quantity are limited to the actual production of the oil wells owned by
the vendor and the production of other wells which may be from time
<®=3For other cases see same toplc & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
280 262 FEDERAL REPORTER
to time controlled by the vendor." The second paragraph provides
for deliveries by plaintiff at the rate of not less than 50,000 barrels per
month from January 1, 1914, to December 31, 1915, in cargo lots into
defendant's vessels of stated capacities, failure of the latter to take the
speciiied quantity in any month to be made up the next. The défend-
ant was given the right to require plaintifï, by notice, to commence
the monthly deHveries before January 1, 1914. By the third paragraph
défendant agreed "to take said oil as above provided, and pay for the
same at the rate" specified.
The argument of défendant is that the proviso of the first paragraph
limiting plaintifï's undertaking to the production of wells owned or
controlled by it made it entirely optional with plaintiff to deliver any oil
at ail. There is no merit in the argument. In effect, the contract bound
the plaintiff to deliver the entire output of its wells, up to the quantities
specified. No such personal choice or option was given to withhold or
refuse deliveries of oil produced by its wells as is sometimes held to
destroy the requisite mutuality of contract obligations. The limita-
tion is a physical one, of a kind common in business affairs. When the
quantity of a commodity to be delivered or received under a contract
of sale rests in the uncontrolled will or désire of one of the parties,
mutuality is lacking. It is otherwise when the quantity is measured by
the output or requirements of an established plant or business during
a liraited time. Cold Blast Transp. Co. v. Kansas City Boit & Nut Co.,
52 C. C. A. 25, 114 Fed. IT , 57 L. R. A. 696. This latter rule is an
adjustment of légal principles to necessary and reasonable business
visages. It appears plaintiff owned and controlled about 20 oil wells
in the Panuco field, with extensive structural equipment, and thougli
the life of any parti cular well might not be forecast with certainty, it
is idie to say plaintiff did not bave an established plant, the actual
product of which it could bind itself to sell and deliver in whole or in
part during the time limited. The plaintiff could not, without violat-
ing its contract, hâve capped its wells or choked their production to es-
cape deliveries. In that respect a corrélative duty on its part would
be implied.
[3] The plaintiff contended at the trial thaf the proviso above dis-
cussed was for its sole benefit, and therefore it was not required to
prove as part of its case that it was able and willing to make the de-
liveries of oil produced by its wells. The court properly ruled other-
wise. In effect the plaintiff's contention was that its right to make de-
liveries was not limited to the product of its wells, but that defendant's
right to require deliveries was so limited. If that were the contract,
it would be unilatéral. In most of the cases cited for the contention,
the provisions held to be for the benefit of one, but not both, of the
parties, related to incidental matters, not, as hère, going to the very
root of the contract and vital to its mutuality.
Plaintiff introduced évidence tending to show the following: De-
fendant gave notice under the contract advancing the beginning of
the two-year delivery period to November, 1913. For the first five
months défendant sent vessels, and received and paid for an aggregate
,-vmount of oil less by 78,256.09 barrels than the minimum quantity it
TEANSCONTINENTAL PEÏKOLEUM CO. V. INTEEOCEAN OIL CO. 281
(262 F.)
was required to take in that time. It refused to receive or pay for
any oil thereafter. In April, 1914, it assigned the contract to one Von
Reitzenstein under a clause that it might do so "and remain as simple
guarantor for its fulfillment by its assignées." The assignée failed to
take or pay for any oil. James Dickson, a witness for plaintifï, with
23 years' expérience in the oil business in Mexico, testified that he had
been superintendent of plaintiff's export department ever since its plant
was built in 1911, and had under him in 1913 and 1914 about 200 em-
ployés, including assistant superintendents and foremen. He describ-
ed the extensive plant of the plaintifï in the Panuco oil field and at the
station where vessels were loaded. He said that during the contract
period, 1913-1915, and before and since that time, the plaintifï possess-
ed and controlled about 20 flowing oil wells in the Panuco field. Panu-
co is about 64 miles up the river from Tampico. The office of the wit-
ness was at Las Matillas, about 3 miles from Tampico. The oil flow-
ed from the wells through pipes into flow tanks, thence by pipe fines
about 2 miles into loading tanks at the river. It was then run into
barges and taken down the river to Las Matillas, where it was pumped
into storage tanks of several hundred thousand barrels capacity. He
gave the dimensions, number, and capacities of the différent instru-
mentalities and the quantifies of oil on hand available for delivery at
différent times under the contract. He testified that the plaintifï did
not load, deal in, or buy any other oil than that from its wells above
mentioned.
[4] Without going into further détails, it may be said that, except
for what will be mentioned presently, the testimony of this witness
was that the output of plaintiflf's wells, the transportation and storage
capacity of its plant, and the quantifies on hand available for deliverieS
to défendant were much in excess of the requirements of the contract.
During the cross- examina tion this occurred:
"Q. Now, you had not been up to Panuco for a number of years prior to
1914, had you? A. No, sir.
"Q. You had not been in 1912, had youî A. 1911 and 1912.
"Q. Since that time you had been down at Las Matillas? A. Yes, sir."
At the close of the cross-examination, and before the redirect ex-
amination, the court ruled that, because the witness had not been
at the oil field since 1912, his testimony as to the source of the oil
stored at Las Matillas was hearsay, and on motion of défendant it
was struck out. Plaintifï's request that it be allowed to examine the
witness further on that subject was denied. Later a request that the
witness be permitted to explain his statement that he had not been
up at Panuco since 1912 was likewise denied, as was also a formai of-
fer to show by him that he meant that he had not been employed there
since that year, but had originally constructed the pipe Unes from the
wells to the loading tanks at the river, and had been at the oil field a
number of times during the contract period down to November, 1915 ,
that no new pipe lines had been built ; that as superintendent of plain-
tiflf's export department he also had officiai charge of the conveyance
of the oil by barge from the loading tanks at Panuco to Las Matillas, of
the men engaged in that work, and of the plaintifï's books and records
282 262 FBDEBAL BEPOBTEB
concerning it. Thèse rulings of the court left the plaintifï without
proof of a vital part of its case. It had no other available witness upon
that subject.
[5] Much of what officiais of large enterprises know of their opéra-
tions is necessarily learned "in the course of business" and from as-
sociâtes Eind employés, through conférences, conversations, letters, re-
ports, records, and the like. It is upon such information that the busi-
ness is directed and carried on. Considered narrowly and technically
it might be regarded as proceeding in considérable measure from hear-
say ; but absolute, first-hand, personal knowledge is not as a rule prac-
ticable and is not required as an invariable rule of évidence. As Lord
EUenborough said, "the rules of évidence must expand according to
the exigencies of society." Pritt v. Fairclough, 3 Campbell, 306.
Cross-examination into the scope of the jurisdiction and duties of
the officiais and the sources and extent of their information may affect
the weight of their testimony, which is for the jury. If plaintifï's
président had not died, but had testified, as Mr. EHckson did, that his
Company did not "load, deal in, or buy" oil not of its own production,
there would hâve been little, if any, question as to the admissibility of
his testimony, even though it appeared that he had not been at the
wells, 60-odd miles away. And we do not think it should hâve been
ruled as a matter of law that like testimony by the superintendent of
the export department was inadmissible. He testified to the fact posi-
tively, and no légal inference or presumption arises from the title of
his office that he did not possess the requisite information. For aught
that appears, the oil coming under his jurisdiction may hâve been about
ail that was produced by his company; his duties may bave required
constant and full information as to its origin and quantity — what was
on hand from month to month, and what could be reasonably counted
on in the future from the known source or sources of supply. One in
charge of the export department of a Mexican oil company may hâve
been bound to know such things as fully and definitely as the highest
officiai. We also think that the statement of the witness, on cross-
examination, that he was not at the oil wells after 1912, might well
hâve been intended as meaning that he was not officially stationed
there. That is not an unusual form of expression in like circum-
stances. When attention was drawn to the distinction on redirect ex-
amination, the witness should hâve been allowed fully to explain. Re-
direct examinations are primarily for such purposes.
[6] As bearing upon its loss and damage, the plaintifï offered testi-
mony of other sales and purchases of oil in that neighborhood during
the period of defendant's default. The trial court excluded it as not
the best évidence, becai^se it appeared the transactions were conduct-
ed by written correspondence or according to written contracts. But
the sales, purchases, and prices were not required to be in writing.
That they were so was casual or fortuitous as to others than the par-
ties to tiiose particular transactions. Oral évidence of the prices
received and paid was not proof of the contents of writings, within the
rule on that subject. Even if the writings had been introduced, there
would still hâve been testimony that the transactions indicated were
PONTANA V. UNITED STATES 283
(262 F.)
consummated. The money might hâve passed by check or draft, but
it would hardly be contended that those instruments must be produced.
The existence of written évidence of a fact does not alvsrays exclude
paroi proof of it. Keene v. Meade, 3 Pet. 1, 7, 7 L. Ed. 581. For ex-
ample, the mère fact of title to personal property may be shown orally,
although there is a vv^riting evidencing the sale. Dixon-Pocahontas Fueî
Ce. V. Grain Co., 71 W. Va. 715, 17 S. E. 362, Ann. Cas. 1914C, 115.
[7] Finally, as to defendant's liability for the default of its as-
signée : The contract says that upon its assignment défendant should
remain as a simple guarantor. Strictly speaking the liability of a
guarantor is for the debt or obligation of a third person, is secondary
and collatéral, and its en forcement dépends upon compliance with
certain conditions. The liability of a surety is original, primary, and
direct. Hall v. Weaver (C. C.) 34 Fed. 104, 106. But the term "guar-
anty" is often used in a broader and more comprehensive sensé. It is
employed, also, to signify suretyship in gênerai. See Saint v. Wheel-
er & Wilson Mfg. Co., 95 Ala. 362, 10 South. 539, 36 Am. St. Rep. 210.
The customary incidents of a strict guaranty are lacking hère. The
principal obligation was primarily defendant's, not that of a third per-
son ; and while défendant had an unrestricted right to assign, the very
act of assignment carried with it its assurance to plaintiflf of fulfill-
ment by its assignée. Except for the assignment by the défendant,
the obligation to take and pay for the oil was its own, and under the
circumstances its guaranty should be liberally, not technically, con-
strued. We think it remained directly and severally liable for the
default of its assignée. Neither a prior action against him nor his
présence hère is essential.
The judgment is reversed, and the cause is remanded for a new trial.
FONTANA V. UNITED STATES.
(Circuit Court of Appeals, Eighth Circuit December 8, 1919.)
No. 5295.
1. Indictment and information c=>176 — Vabiance of peoof as to tikœ or
OFFENSE NOT MATEBIAL, WHERE WITHIN LIMITATION PEBIOD.
The averment In an Indictment that défendant made statements vlolat-
Ing the Bspionage Act on a speclfled day was a mère formai jurlsdlctlon-
al allégation, whlch permltted the govemment to show that such state-
ments were made at any time before the Indictment was flled wlthin the
statute of limitations and after passage of the Bsplonage Act.
2. CONSTITUTIONAL LAW <S=»265 INDICTMENT, TO CONSTITUTB DUE PKOCESS OF
LAW, MUST DISTINCTLT AND SPECIFICALLY CHARGE OFFENSE.
In order to constltute due process of law, an indictment must not only
Inform accused that there is a charge against him, but must be suffldently
distinct and spécifie to advlse him what he has to meet and to give him a
falr and reasonaWe opportunity to prépare his défense.
3. Ckiminal law iS=308 — Indictment and information <S=>55 — ^Testino on
peesumption that accusbd has no knowledge of facts chaeqbd.
A person Indlcted for a serlous offense is presumably Innocent, and the
,e=jFot other cases see same topio & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
284 262 FEDERAL REPORTER
sufflciency of an Indictment must be tested upon the presumptlon that he
is Innocent, and bas no bnowledge of the facts charged against hlm.
t. Indictment and information <S=>71 — Bequibements as to definitenkss
8TATED.
An Indictment must set forth tbe facts so dlstinctly as to advise ae-
cused of tJie charge, and give hlm a falr opportunity to prépare bis dé-
fense, so particularly that a conviction or acquittai would bar another
prosecution for tbe sam« offense, and so clearly that the court may dé-
termine whether tbe facts stated support a conviction.
t. War <S=»4 — Indictment undee Espionage Act held insufficient.
An indictment charging that ntne statements of accused uttered in a
certain town vlolated the Espionage Act, but not Identlfying the occasioi'.s
upon whicb the statements were made, héld InsufEcient, because not
specifleally advising accused of the charge he would be required to meet,
and not suffieiently deflnite to be pleaded in bar of a subséquent prosecu-
tion.
6. Criminal law iS=»29g — Bae to subséquent pbosecution dépends on ix-
dictment, and not évidence adduced on former trial.
Whether a conviction or acquittai is a bar to a subséquent prosecution
must be determlned from the Indictment and judgment at the former trial,
and the évidence on such trial cannot be considered, because not a part
of the judgment.
7. Wab <S=4 — Indictment under Espionage Act insufficient.
An indictment charging that accused made nine statements vlolating
the Espionage Act, but not specifying the circumstances under whlch,
they were made, helâ, insufficient, where, If made in a publie address
advocating the results alleged In the Indictment In the présence of mem-
bers of the military or naval forces of the United States, or of those
ellgible to become such members, or, If circulated among such men, they
might be calculated to produce such results, but if uttered in private con-
versations, or in discussion with or in the présence of loyal men of ordi-
nary intelligence, in the absence of other circumstances to indicate the
evil intents alleged, they would be susceptible to the inference that they
were made with the intents charged.
8. Indictment and information <S=>63 — Conclusions begaeding intent to
violate law not sufficient.
When language does not constltute a crime. If uttered under some cir-
cumstances, but does, if uttered under others, it Is not enough for an in-
dictment to charge that the language was used with intent to violate tho
law, since that would be a mère conclusion of the pleader.
9. Wab <©=>4 — Evidence insufficient to sustain Espionage Act conviction.
In prosecution for vlolating the Espionage Act, évidence that accused's
utterances after passage of the act constituted only a sentence or two In
a sermon and statements to persons soliciting Red Cross subscrlptlona In
accused's bouse, etc., held Insufficient to sustain a conviction.
In Error to the District Court of the United States for the District
of North Dakota; Charles F. Amidon, Judge.
J. Fontana was convicted of violating the Espionage Act, and he
brings error. Reversed and remanded, with directions to discharge
défendant.
John Knauf, of Jamestown, N. D. (B. W. Shaw, of Mandan, N. D.,
on the brief), for plaintifï in error.
M. A. Hildreth, U. S. Atty., of Fargo, N. D. (John Carmody, Asst.
U. S. Atty., of Fargo, N. D., on the brief), for the United States.
Before SANBORN, CARLAND, and STONE, Circuit Judges.
®=>For otlier cases see same toplc & KEY-NUMBEH in ail Key-Numbered Dlgests &. Indexes
FONTANA' V. UNITED STATES 285
(262 F.)
SANBORN, Circuit Judge. The défendant below was convicted of
three violations of section 3 of the Espionage Act of June 15, 1917 (40
Stat. p. 217, c. 30 [Comp. St. 1918, Comp. St. Ann. Supp. 1919, §
10212c]), and sentenced to three years in the penitentiary under an
indictment containing three counts which charged that by saying the
same words on or about December 19, 1917, he
(1) Willfully made and conveyed false reports with the intent to
interfère with the opération and success of the military and naval
forces of the United States and to promote the success of its enemies,
to the injury of the United States ;
(2) Willfully caused and attempted to cause insubordination, dis-
loyalty, and refusai of duty in the military and naval forces of the
United States, to its injury; and
(3) Willfully obstructed the recruiting and enlistment service of the
United States, to the injury thereof.
The défendant demurred to the indictment, and the demurrer was
overruled. At the close of the évidence he moved for a directed ver-
dict, on the ground that there was no substantial évidence to sustain
a verdict against him, and this motion was denied, and he made a mo-
tion in arrest of judgment, and that motion was denied. Thèse rul-
ings are assigned as error.
Counsel for the défendant instst that the indictment was insuf-
ficient, because it did not set forth the facts which the pleader claim-
ed constituted the violations charged so distinctly as to advise him of
the charges he had to meet and to give him a fair opportunity to pré-
pare his défense, nor so particularly as to enable him to avail himself
of a conviction or acquittai in défense of another prosecution for the
same ofifense.
The indictment charged that the three offenses were committed on
or about December 19, 1917, at New Salem, a town in North Dakota,
during the war between the United States and the Impérial Gernian
government, with the respective intents denounced by the statute, by
falsely stating:
(1) That Président Wilson was a man who, after securing his élec-
tion on the slogan "kept us out of war," turned squarely around and by
the use of his high office of Président whipped the members of Con-
gress into line by threats of exposure of this one and that one, and in
this way secured the authority to enter the war with Germany ;
(2) That he felt proud of tiie noble fight the Gennans were making
in the war ;
(3) That the sinking of the Lusitania was justified, and that there
was no reason whatever for the United States taking up arms against
Germany ;
(4) That he frequently prayed for the success of the armies of Ger-
many over the armies of the United States ;
(5) And stated to his congrégation and to divers persons, whose true
names are to the grand jurors unknown, false and injudicious state-
ments as aforesaid ;
(6) That he did not want to subscribe for Liberty L,oan Bonds, be-
cause it would tend to encourage the administration ;
286 262 FEDERAL REPOETEE
(7) That the Président was using the same methods of threats
to force every bank within the United States to subscribe to Liberty
Loan Bonds ;
- (8) That the purchase of Liberty Loan Bonds would give the coun-
try more money to fight Germany and thus prolong the war ;
(9) That he desired the success of the enemies of the United States.
[1] The averment in the indictment that the défendant made thèse
statements on or about December 19, 1917, was a mère formai juris-
dictional allégation, which permitted the introduction of évidence of
any of them at any time before the indictment was filed within the
statute of limitations, and there was nothing but that formai state-
ment and the allégation that the statements were made at New Salem
to indicate at what time, under what circumstances, on what occasions,
to whom, in whose présence, or by what persons the govemment would
attempt to prove that the défendant had made any of thèse statements,
nothing to indicate to him whether he was to be tried for making ail of
them at one time, on one occasion, or for making some of them at one
time to one person, and others at other times and on other occasions
to other persons.
[2, 3] The basic principle of English and American jurisprudence
is that no man shall be deprived of hfe, liberty, or property without
due process of law ; and notice of the charge or claim against him, not
only sufficient to inform him that there is a charge or claim, but so
distinct and spécifie as clearly to advise him what he has to meet, and
to give him a fair and reasonable opportunity to prépare his défense,
is an indispensable élément of that process. When one is indicted for
a serions offense, the presumption is that he is innocent thereof, and
consequently that he is ignorant of the facts on which the pleader
founds his charges, and it is a fundamental rule that the sufficiency of
an indictment must be tested on the presumption that the défendant is
innocent of it and has no knowledge of the facts charged against him
in the pleading. Miller v. United States, 133 Fed. 337, 341, 66 C. C. A.
399, 403; Naftzger v. United States, 200 Fed. 494, 502, 118 C. C. A.
598, 604.
[4-6] It is essential to the sufficiency of an indictment that it set
f orth the facts which the pleader claims constitute the alleged transgres-
sion, so distinctly as to advise the accused of the charge which he has
to meet, and to give him a fair opportunity to prépare his défense, so
particularly as to enable him to avail himself of a conviction or acquit-
tai in défense of another prosecution for the same offense, and so clear-
ly that the court may be able to détermine whether or not the facts
there stated are sufficient to support a conviction. United States v.
Britton, 107 U. S. 665, 669, 670, 2 Sup. Ct. 512, 27 L. Ed. 520; United
States V. Hess, 124 U. S. 483, 488, 8 Sup. Ct. 571, 31 L. Ed. 516; Mil-
ler V. United States, 133 Fed. 337, 341, 66 C. C. A. 399, 403; Armour
Pkg. Co. V. United States, 153 Fed. 1, 16, 17; 82 C. C. A. 135, 150,
151, 14 L. R. A. (N. S.) 400; Etheredge v. United States, 186 Fed.
434, 108 C. C. A. 356; Winters v. United States, 201 Fed. 845, 848,
120 C. C. A. 175, 178; Horn v. United States, 182 Fed. 721, 722, 105
C. C. A. 163, 167. If the pleader had set forth in this indictment any
FONTANA V. UNITED STATES 287
(262 F.}
fact or facts, such as the time, place, occasion, circumstances, persons
présent, or any other distinctive earmark whereby the défendant could
hâve found out or identified the occasion or occasions when the gov-
ernment intended to attempt to prove that the défendant uttered any
of the nine sayings charged he might hâve been able to investigate the
basis of the charges, to leam who were or were not présent on the oc-
casions referred to, hence who were possible witnesses, and to prqjare
his défense; but there is nothing of that kind in the indictment. As
it reads, he might hâve been called to meet on each of the nine charges
testimony that at any time of day or night, at any place in New Salem,
on any occasion, public or private, before the indictment was filed,
and after the Espionage Act was passed on June 15, 1917, he had ut-
tered to any one whomsoever any of the statements charged in the in-
dictment. Thèse considérations compel the conclusion that this plead-
ing signally failed to state the facts which the government claimed con-
stituted the alleged offense in this case, so distinctly as to give the de-
fendant a fair opportunity to prépare his défense to meet any of them,
and that he could not and did not hâve that notice of them required to
give him a fair trial.
Nor were the charges in this indictment so certain and spécifie that
upon conviction or acquittai thereon it or the judgment upon it con-
stitute a complète offense to a second prosecution of the défendant
for the same offense. In determining this question the évidence on
the trial may not be, and the indictment and the judgment alone can be,
considered, because the évidence does not become a part of the judg-
ment, and as the indictment states no facts from which the time, places,
or occasions on which the respective statements therein were alleged to
hâve been made can be identified, the indictment and judgment failed
to identify the charges so that another prosecution therefor would be
barred thereby. Florence v. United States, 186 Fed. 961, 962, 964,
108 C. C. A. 577, 578, 580, and cases there cited ; Winters v. United
States, 201 Fed. 845, 848, 120 C. C. A. 175, 178.
[7, 8] Moreover, there is no such clear statement in the indictment
of the facts which the government claims constituted the offenses
charged as enables a court fairly and justly to détermine that they
would sustain a conviction. If the statements charged, when consider-
ed in the light of the times and circumstances under which they were
uttered, were reasonably calculated to efïect the results averred, the
indictment was sufficient to require the court to send the case to the
jury. If, on the other hand, upon its face, in the light of the times
and circumstances it disclosed, the facts pleaded in the indictment
were not reasonably susceptible to the inference that the statements
were made by the défendant with the intent to interfère with the opéra-
tion and success of the military and naval forces of the United States,
and to promote the success of its enemies to the in jury of the United
States, or to cause or attempt to cause insubordination, disloyalty, and
refusai of duty in the military and naval forces of the United States
to its injury, or to obstruct the recruiting and enlistment service of the
United States to the injury thereof, the demurrer should hâve been
sustained. "The question in every case," said Mr. Justice Holmes in
288 262 FBDiBRAL BBPOKTEB
Schenck v. United States, 249 U. S. 47, 52, 39 Sup. Ct. 247, 248, 63
Iv. Ed. 470, "is whether the words used are used in such circumstances
and are of such a nature as to create a clear and présent danger that
ihey will bring about the substantive evils that Congress has a right to
prevent."
The statements set forth in this indictment are such that, if uttered
under some circumstances, as, for example, in a public address ad-
vocating in the présence of the members of the military or naval forces
of the United States, or of those eligible to become such members, or
if written and circulated among such men, they might be calculated to
produce the results alleged. But there is none of thèse statements that,
if uttered in private conversations or discussion with or in the présence
of loyal men of ordinary intelligence, in the absence of other circum-
stances to indicate evil intents, susceptible to any such inference. Il-
lustrations of the case of the former class are Doe v. United States,
253 Fed. 903, 166 C. C. A. 3; O'Hare v. United States, 253 Fed. 538,
165 C. C. A. 208. Illustrations of the latter class are Von Bank v.
United States, 253 Fed. 641, 165 C. C. A. 267; Wolf v. United States,
259 Fed. 388, C. C. A. . As was said by Judge Carland in the
Von Bank Case:
"The Jury • • ♦ had no right to flnd a crlminal intent, unless such la-
tent was the necessary and legitimate conséquence of the words spoken."
Whether or not the statements in the indictment were reasonably
calculated to indicate the intents stated, or to "create a clear and prés-
ent danger" of the results alleged, was conditioned by the time and cir-
cumstances in which they were said. It is an elementary rule of crim-
inal law that when language does not constitute a crime if uttered un-
der some circumstances, and does constitute a crime if uttered under
other circumstances, it is not enough to charge that it was used with
intent to violate the law. That would be a mère conclusion. The facts
must be set forth, so that the court can détermine, and not the pleader,
whether or not they constitute the crime. United Staes v. Hess, 124
U. S. 483, 8 Sup. Ct. 571, 31 L. Ed. 516; United States v. Cruikshank
et al, 92 U. S. 542, 23 L. Ed. 588; United States v. Carll, 105 U. S.
611, 26 L,. Ed. 1135; Shilter v. United States, 257 Fed. 724, 725,
C. C. A. .
Take, for example, the first charge in the indictment, that the Prési-
dent secured his élection on the slogan "kept us out of war," and by
using his high office whipped the members of Congress into line to se-
cure the authority to enter the war. If that statement was made in
a private conversation with a loyal citizen, in the présence of no other
person, his utterance of it was not susceptible to the inference that he
made it with any of the evil intents charged, or to the inference that
it was reasonably calculated to produce the results alleged. Perhaps,
however, if it had been made in a public address, in the présence of
men who were members of the military or naval forces of the United
States, such an utterance might, in view of other things said in the
same address, bave been susceptible to a différent inference. Take the
fifth statement, that he "stated to his congrégation and to divers per-
sons, whose true names are to the grand jurors unknown, false and in-
PONTANA V. UNITED STATES 289
(262 F.)
judicious statements as aforesaid." That charge is so indefinite and
ambiguous that it is clearly insufficient to warrant the introduction of
any évidence under it. No court can détermine from it whether it
means that he made the statements preceding it, or that he made other
injudicious statements to them, in the sanie way that he made the
preceding statements. The allégations in the indictment regarding the
other statements are likewise indefinite and insufficient, and for the
reasons which hâve been suggested the demurrer to the indictment
should hâve been sustained, and the défendant should hâve been dis-
charged without a trial.
[9] When, at the close of the évidence, the defendant's counsel
moved for a directed verdict, the setting of time, situation, and cir-
cumstances which the testimony had supplied had not improved the
case stated by the government in the indictment. There was confîict-
ing testimony on some of the issues, but the évidence of thèse facts
was uncontradicted. The défendant was born in Germany ; his father
was an Italian, and his mother was a German. He came to the United
States when he was 16 years of âge. In 1917 he was 45 years of âge.
He was a full citizen of the United States. He was, and for eight
years had been, the pastor of the German Evangelical Church of New
Salem in North Dakota, which had a congrégation of about 200 people,
who lived in that town and on the farms around it within five or six
miles. He had a wife and five children, the oldest of whom was 14
and the youngest of whom was 2 years old. The war was declared on
April 6, 1917. The law which he was charged with violating was
enacted June 15, 1917. Four of the members of his congrégation en-
listed in, and 34 or 36 entered, the military and naval forces of the
United States during the war. On the second Sunday after April
6, 1917, he addressed his congrégation from his pulpit in substantially
thèse words :
"We are now at war wlth the old Fatherland. Thls Is our country. We
adopted tbis country wheu we became cltizens of the United States, and we
promised and swore to the Constitution that we would stand by thls country.
Now is the tiine to prove and show it that we are williug to do our duty, and
I ask you to do your duty as a citizen of tlie United States, and to give up
everything, if it has to be, to the last man."
Every Sunday during the war he prayed in his pulpit, in the présence
of his congrégation for God to bless our country, our people, our Prési-
dent, our congrégation, and to help that they may serve to promote the
sanctification of His name and welf are of His people ; that He would
stop the war through his mercy ; that He would prevent bloodshed
and dévastation and give us an honorable peace. A witness for the
government testified that on one occasion between April 8 and May
29, 1917, he prayed for our old Fatherland, that God would give him
victory over his foes and destroy and shatter ail who wants his evil.
But this was before the Espionage Act was passed, and many witness-
es came to testify that he made no such prayer after war was declar-
ed. Another witness testified that during a few Sundays just after
April 6, 1917, he prayed for His blessing for the old Fatherland and
for the new Fatherland, that peace between them might not be broken,
262 F.— 19
290 262 FEDERAL REPORTER
that bloodshed between them might be avoided, and that those who
would break off peaceful relations be hindered in their efforts. But
this was also before the passage of the act of June 15, 1917. One wit-
ness for the government testified that, in answer to this question asked
over the téléphone regarding a sermon the défendant had delivered on
a certain day in August, 1917, to wit, "I understood you to say in your
sermon to-day that, as the Lord was with his people, the children of
Israël, and helped them to overcome their enemies, so he gave the Ger-
man people ways and means to stand off their enemies of the world,"
he answered, "Yes, I believe I did." Another government witness tes-
tified that what he said in that sermon was, "God specially blessed the
German people because they had the submarines as a means of war-
fare," but the larger number of the witnesses and the great weight of
the testimony was that he did not make thèse statements, but that at
the close of a sermon on "Temptation to Sin," on that day in August,
he said in substance:
"Gennany, la her fight against a great number of enemies, ha» a weapon
which. enabled lier to hold out until now ; but God bas glven every Christian
a weapon with whlch he can defeat ail temptation at ail tkoes, naraely,
prayer. Watch and pray that ye enter not Into temptation. The Spirit In-
deed Is wllUng, but the flesh is weak."
The substance of ail the évidence there is in this case relative to any
public statements, writings, or prayers made by the défendant has now
been recited. In it ail —
(1) There is no évidence whatever that he ever made any of the
nine statements set forth in the indictment to his congrégation or to
any one on any public occasion, and there is no such évidence in this
case.
(2) AU of the évidence recited, except that with référence to the
sermon in August, relates to expressions used prior to June 15, 1917,
for the use of which he could not be convicted if they had been
charged.
(3) Even if the expressions in the sermon on "Temptation to Sin,"
to which the govemment's witnesses testified, were used, they were
not reasonably calculated, in view of the fact that they were but a
sentence or two, in a sermon occupying some 20 or 30 minutes on
"Temptation to Sin," and were used merely for the illustration of the
argument the défendant was making, to indicate any criminal intent
or purpose, much less to sustain a finding that such intent inspired and
caused them. So it is that there was no évidence in this case of any
public advocacy or suggestion or insinuation by the défendant of any
of the evils the United States was endeavoring to prevent by the act of
June 15, 1917, or of any views tending to prove any of the evil in-
tents denounced by the law.
There was conflicting évidence on the issues whether or not the de-
fendant made to certain private persons in his own house and in other
private places some of the statements written in the indictment. This
was the setting of the first statement therein with référence to the Presi-
dent's élection and his use of his power to secure authority to conduct
the war. The cashier of a bank in New Salem went to the defendant's
FONTANA V. UNITKD STATES 291
(262 F.)
home, and in his présence and in the présence of his wife, but in the
présence of no other person, asked him on October 24, 1917, to sub-
scribe for Liberty Bonds. The défendant had a wife and five children
under 15 years of âge. His salary was $1,000 per year, out of which
he supported them. He owned $1,000 stock in a bank, and owed
over $2,000. He declined to subscribe then, although later he did so.
He and his wife testified that he told the banker that he was not able
to subscribe ; that the banker offered to loan him the money to pay for
his bonds at 6 per cent., but that he said he could not afford to pay
the interest or the principal. The banker denied thèse statements, tes-
ti-fied that nothing was said about financial matters, but that the de-
fendant said he did not want to do anything to use his influence to help
out the administration on the war, because the Président was elected
on the slogan, "He kept us out of war," and then afterwards he used
his power as Président to put us into war, by telling the members of
Congress that he would expose them to the light, jind in that way forc-
ed the country into war ; that he said that the sinking of the Lusitania
was a humane act on the part of Germany, because there were muni-
tions on board, and by sinking it a lot of lives in Germany were saved;
and that he said that he was very proud of the fight the German peo-
ple were making.
The défendant testified that ail he said about getting into the war
was that he believed the country was ready for peace, because he be-
lieved that the Président was elected on account of the slogan, "He
kept us out of war," and that it seemed to him that after he was elect-
ed he was in favor of tlie war ; that he never talked with the banker
about the Lusitania; that he never said to him that he was proud of
the fight the Germans were making ; that he never told him he would
not subscribe for Liberty Bonds because it would encourage the ad-
ministration, but that he did tell him that he would not buy any bonds
of him anyhow, because, if he had the money, he would buy the bonds
of the bank where he did his banking business. He testified further.
and this testimony was not contradicted, that what he said after hc
had declined at the commencement of the conversation to buy the
bonds was in answer to questions of the banker ; that the banker asked
if he did not think the bonds were a good investment, and he answered
that he thought they were ; that he wished he had a lot of money, he
would invest it in Liberty Bonds; that the banker asked what he
thought of the draft law, and he replied that he thought it a good law,
and that we ought to hâve had it a couple of years before the war.
The record in this case has been searched in vain for évidence that
the défendant, before the indictment was filed, ever made in public or
in private to any one the fourth, fifth, seventh, eighth, or ninth state-
ments alleged therein, and the conclusion is that there never was any
testimony in support thereof. The only évidence that the défendant
made the first, second, third, and sixth statements, or any part of them,
is the testimony of the banker which has been recited, and upon this
testimony the verdict rests. There are a great many pages of the
record which recite évidence permitted to be presented to the jury
upon the question of the defendant's intent, which relate to collatéral
292 262 PEDBKAIi REPORTER
issues, such as what the défendant said about subscribing to the Red
Cross, in view of the fact that he had read in some paper that it
would not relieve wounded and suffering enemies of the United States,
and of the fact that it had refused to accept a German nurse.
Ail this évidence upon the collatéral issues has received perusal and
méditation; but, conceding that the défendant made the statements
to which the banker testified in the privacy of his home, and conced-
ing the truth of the testimony of the witnesses for the government up-
on the varions collatéral issues, the conclusion is nevertheless irresist-
ibly forced upon our minds that, in view of the established fact that
the défendant never by public act or speech engaged in any opposition
to any of the endeavors of the government to prosecute the war, but,
promptly upon its déclaration, from his pulpit instructed his parish-
ioners to discharge their full duty to the nation therein, that by his
constant public prayers he continued this influence, that he testified
that he had never had any of the evil intents or purposes denounced by
the statute, and in view of the fact that the statements in the conversa-
tions with the banker in his home were not appropriate to accomplish
any such purposes, it is impossible to conclude that there was in this
case any substantial évidence to sustain the finding of the jury that he
willfuUy made those statements to interfère with the opération or suc-
cess of the military or naval forces of the United States, or to cause
or attempt to cause insubordination, disloyalty, or refusai of duty
therein, or to obstruct, or that he did thereby obstruct, the recruiting or
enlistment service of the United States. Those statements were not
made where they would or could naturally and reasonably hâve had
any such efïect, nor were they indicative of any, such intent, nor was
any such resuit the necessary or legitimate conséquence thereof.
Let the judgment be reversed, and let the case be remanded to the
court below, with directions to discharge the défendant.
CARLAND, Circuit Judge, concurs in the resuit, upon the ground
that the trial court erred in overruling the demurrer to the indictment,
but expresses no opinion upon the sufficiency of the évidence.
DYER V. INTERNATIONAL BANKING CORPORATION.
(Circuit Court of Appeals, Ninth Circuit. January 5, 1920. Rehearing Denied
rebruary 16, 1920.)
No. 3144.
1. BlLLS AND NOTES <®=»453 NONNEGOTIABILITT OV NOTE ACCOMPANIED BY
CONTBACT.
Under Civ. Code Cal. § 1459, malsing notes accompanied by a contract
nonnegotiable as to persons wltli knovvledge of the contract, an Indorsee
with knowledge of a contract executed at the same time aa a note holds
the note subject to ail conditions and défenses that would hâve attached,
had the note remalned in hands of the payée.
®s»Foi otber cases see same toplc & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexes
DYEB V. INTERNATIONAL BANKING CORPORATION 293
(262 P.)
2. Brixs ATiD NOTES <s=j434 — Recovery of payment on note, befobe paymbnt
DUE ACCORDINa TO COLLATERAL CONTRACT, NOT DEPENDENT ON BESCISSION
OF SUCH CONTEACT.
Where maker of note, althoush not liable thereon, under the terms cl a
contract aecompanying the not^î, uutil the payée had performed certain
work called for by the terms of the contract, paid the note, mistakenly be-
Uevlng the work had been done, to payee's assignée, who had notice of
the contract conditions, maker's right to recover such payment dld not
dépend on hia rescission, for both his original right to avoid payment for
nonperformance and his resulting right to recover payment made prier to
performance dependod on the contract's opération, and not its rescission.
3. BiLLS AND NOTES ©=3434 PaTEE's SOLVENCY IMifATERIAL IN MAKEB'S ACTION
TO EECOVEB PAYMENT FBOM INDORSEE.
In maker's action to recover payments mistakenly made on a note to an
Indorsee, who took the note with knowledge of a related contract between
maker and payée, the payee's solvency when he Indorsed the note is Im-
nuaterial, since the indorsee secured a nonnegotiable instrument, whieh
gave it no right of recourse against the payée on the maker's default, in
View of Civ. Code Cal. §§ 3108, 3116-3186, relatmg to the indorsement, pre-
seutment, and dishonor of negotiable instruments.
4. BiLLS AND NOTES <®=5434 RECOVEEINO PAYMENTS MADE WITHOUT INVESTI-
GATION.
A maker of a note may recover payments mistakenly made from an
indorsee taklng the note with knowledge of a related contract between
maker and payée, although the maker made no investigation, at the tlme
he paid the note, as to whether the payée had fulfllled his obligations un-
der the related contract.
In Error to the District Court of the United States for the Second
Division of the Northern District of CaUfornia; Oscar A. Trippet,
Judge.
Action by Edward E. Dyer against the Inliernational Banking Cor-
poration. Judgment for défendant, and plaintifï brings error. Re-
versed and remanded for a new trial.
Powell & Dow, of San Francisco, Cal., for plaintiff in error.
R. P. Henshall, of San Francisco, Cal., for défendant in error.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
HUNT, Circuit Court. Action at law by Dy«r to recover money
paid to the International Banking Corporation because of an alleged
mistake. There was a verdict and judgmert in favor of the Banking
Corporation. The facts appear to be thèse:
On April 1, 1914, Dyer, plaintiff in error, and one Green, who died
in September, 1914, made a contract whereby the Green-Dyer Com-
pany, a corporation, was to be formed to engage in the billboard busi-
ness. Green agreed to subscribe and pay for ail capital stock of $10,-
000; Dyer to buy from Green half of this stock for $30,000, payable
as follows: $10,000 upon the exécution of the agreement, $10,000
on July 1, 1914, and $10,000 on October 1, 1914. The contract con-
tained the f ollowing clause :
"No payment shall be inade by said Dyer, other than said $10,000, until the
said plants shall hâve been duly and legally transferred to tlie Green-Dyer
Company, as herelnbefore requlTcd, and until said plants shall hâve been
eompleted as provided in paragraph IX hereof."
«gssjFor other cases see same topic 6 KEY-NUMBBR in ail Key-Numbered Digests & Indexes
294 262 FEDERAL EEPOETER
By paragraph IX Green agreed to complète the plants on or before
June 1, 1914, by increasing the capacity of the billboards, se that the
linear footage thereof should be 10,000 feet. In paragraph IX there
was also this provision:
"That should the sald Green fail or refuse to complète said plants by
June 1, 1914, or withln 60 days, as provided in the last proviso, the sald
Green shall at the élection of said Dyer return forthwith to said Dyer ail
moneys reeeived by him under thls contraet together with Interest thereon at
8 per cent, per annum from April 1, 1914, until paid."
Paragraph VI of the contraet provided that if Dyer, before April
1, 1915, should become dissatisfied with the purchase arranged for,
and should désire a return of ail moneys paid by him under the con-
traet, he should notify Green to that effect, and Green promised to
pay Dyer ail moneys paid under the contraet, payments in return to
be as follows: $10,000 on April 1, 1915, $10,000 on or before July
1, 1915, and final payment of $10,000 on or before October 1, 1915;
the deferred payments of $10,000 each to be evidenced by notes, and
the whole of the $30,000 to bear interest at the rate of 8 per cent.
from April 1, 1915.
Green transferred the $10,000 note (dated April 1, 1914) to the In-
ternational Banking Corporation, défendant in error, a îew days after
exécution; the corporation then having knowledge that the plaintiff,
Dyer, was not required to pay the money represented by the note un-
less the plants should be completed to 10,000 linear feet. On July
1, 1914, Dyer paid the note held by the corporation, although at the
time of the payment the work of completing the plants to 10,000 linear
feet had not been done; Dyer, however, believing that it had been
done, and the payment being made while he was under that belief.
Thereafter Dyer learned that the necessary work had not been per-
formed, and brought this action to recover the amount he had paid
on the note.
It was in évidence that Green negotiated the note for value prior to
niaturity; that after it was discovered that Green had not performed
his contraet, as agreed, Dyer first made demand for the payment of
the money; that Green was then dead, and his estate was insolvent,
although Green may not hâve been insolvent when he discounted Dyer's
note at the bank. Dyer never rescinded the contraet, and never ten-
dered the note back to the bank, or oflfered to restore the stock he had
reeeived under the contraet, and as late as March, 1915, demanded
of Green's estate ail of the moneys paid by Dyer under the contraet
of April 1, 1914, including the $10,000 involved in this suit. It is
also in évidence that, after the nonpayment of such money on October
15, 1915, Dyer sold out ail of the stock of Green in the company for
$10,000 in collection of his demand. This right to sell was claimed
by him under the fourth paragraph of the contraet, which provided
that the entire capital stock of tlie Green-Dyer Company should be
deposited in escrow, and that Dyer should notify Green, before April
1, 1915, whether he elected to continue or withdraw from the com-
pany, and that in the event of élection to continue the stock should
be delivered by the escrow holder to the parties, 50 shares to each, and
DYEE V. INTERNATIONAL BANKING CORPORATION 295
(262 F.)
in the event of élection to withdraw the stock should remain in escrow
as security for the payments required to be made by Green to Dyer,
and, if Green should fail in payments as required, the stock should be
delivered to Dyer by the escrow holder, to be held as security.
The principal errors assigned arise upon the instructions to the
jury. Among other things, the court charged that Dyer could not
recover unless he rescinded the contract, and that when he discovered
that the work had not been donc it was his duty to offer to rescind the
contract. The court also charged that the banking corporation was
in as good a position as Green, and that, if the money had been paid
to Green, Dyer could not recover from Green on the ground of mis-
take without rescinding the contract.
The argument in behalf of Dyer is that, as the Green-Dyer contract
and the note in question were made at the same time, in the same
transaction, and between the same parties, the contract and note were
in efïect one instrument as to ail persons having knowledge that they
were concurrent and dépendent ; that the banking corporation, having
notice of the provisions of the contract, received the assignment of the
note as a nonnegotiable instrument, subject to ail conditions and dé-
fenses that would hâve attached to it, had it remained in the hands
of the original payée ; and that, as the work required by the contract
to mature the note was not done, the banking corporation had no en-
forceable claim against Dyer at the time the note was paid.
On the other hand, it is the contention of the banking corporation
that Dyer in no event can recover the money he paid under the con-
tract unless he first rescinded the contract. It is said that Dyer could
hâve rescinded when he discovered breach by Green, or could hâve
affirmed, electing to hold Green under the ternis of the contract, but,
not having elected to rescind, his right to sue Green in gênerai as-
sumpsit is gone.
The case is simplified by avoiding confusion of the rights of Dyer
as against Green with the rights of Dyer as against the banking cor-
poration. As between Dyer and Green, the contract measures their
respective rights ; whereas, any right that Dyer has against the bank
rests not upon a purely contractual relationship, but upon the prin-
ciple that, where one has paid money to another under a mistake which,
in equity and good conscience, should not hâve been paid, he may
hâve redress by an action in the nature of assumpsit. United States
V. Barlow, 132 U. S. 271, 10 Sup. Ct. 77, 33 L. Ed. 346; Steamship
Co. V. Joliffe, 69 U. S. (2 Wall.) 450, 17 L. Ed. 805 ; Page on Con-
tracts, § 789. This principle is in no way inconsistent with the rule,
relied upon by plaintiff, that the several notes and contract should
be considered together. Civ. Code Cal. § 1642 ; Goodwin v. Nickerson,
51 Cal. 166.
We are in accord with the opinion expressed in Spotton v. Dyer,
184 Pac. 23, where the main questions now presented were decided.
In the case just cited the District Court of Appeal of the First Dis-
trict of Califomia had before it the very contract now hère involved.
There Spotton, for the bank, sued Dyer upon the note payable Octo-
ber 1, 1914. Dyer set up the contract with Green, and pleaded that
-Û6 262 FEDERAL REPORTER
the work necessary to mature the note had not been donc, and that
the bank knevv of this fact. The appellate court affirmed the décision
of the trial court, and held that the making of the notes and the con-
tract were parts of one transaction ; that the notes were nonnegotia-
bie, because of the accompanying contract, of which the banking cor-
poration had knowledge when it purchased the notes. The question
of the duty of Dyer to rescind was also considered and the court
pointed out that under the contract in addition to completing the
plants and repaying Dyer, if he elected to withdraw, Green was under
obligation to do a number of other things not involved in that action,
and that if Dyer had rescinded, or if the contract had contemplated
rescission, the resuit would hâve been a nuUification of the provi-
sions of the contract whereby, in the event of the élection of Dyer to
withdraw from the venture, the stock was to remain in the hands of
the depository, and, if Green should fait to repay Dyer the money
he had advanced, the stock was to be delivered to Dyer for security.
The court said:
"To hold that Dyer was compelled to abandon hls eontractual rlghts as a
preregiuisite to hls enforoement of them would be absurd."
The Suprême Court of the state denied the motion of the bank for a
hearing, and the judgment has become final.
[1, 2] By section 1459, Civil Code of California, a note accompanied
by a contract is nonnegotiable as to ail persons having notice of the
contract. The banking corporation, having fuU knowledge of the pro-
visions of the contract, received the assignment of the note hère sued
upon as a nonnegotiable instrument, subject to ail conditions and dé-
fenses that would hâve attached, had the note remained in the hands
of the original payée. Smiley v. Watson, 23 Cal. App. 409, 138 Pac.
357 ; Metropolis v. Moonier, 169 Cal. 592, 147 Pac. 265. It theref ore
follows that, as the work called for by the terms of the contract to
mature the note was not done, the banking corporation had no en-
forceable claim against Dyer at the time the note was paid, and, this
being so, the bank has no right to the money so paid, which in good
conscience belongs to Dyer. Dyer always stood upon the contract, as
he had a right to do, and, there being no légal obligation on his part
to pay the bank the moneys hère sued for, the provisions of the
contract may yet be in force, including the agreement that Dyer was
not to pay any more money until the plant should be completed, of
which provision the bank knew when it bought the note in suit.
The error of the District Court was in assuming that, because there
was a breach of the Green-Dyer contract by Green, rescission was
essential before Dyer could maintain action against the bank. The
relevancy of the contract referred to was to show that by virtue of its
terms, ail of which were known to the bank, Dyer was not obliged
to make payment unless certain work specified in the contract was per-
formed before June 1, 1914; but the bank had no eontractual rela-
tionship with Dyer which required Dyer to rescind, nor would the
liability of the bank be affected by a rescission by Dyer.
[3] Although the évidence was that the bank had "grave doubts"
BUSHONQ V. E, E, THOMPSON BSTATE CD. 297
(262 F.)
of Green's responsibility, the question of his solvency at the time
that he sold the note to the bank is not material, because under the
record the bank had no daim against Green arising out of the pur-
chase from him of the note in question. As the case was developed,
it appeared that the bank bought a nonnegotiable instrument,
nonnegotiable in fact, and therefore there was in the indorsee no
right of recourse in the event of Dyer's f ailure to pay the note. Spot-
ton V. Dyer, supra; sections 3108, 3116-3186, Civil Code of California.
And as the bank could hâve had no recourse against Green, if Dyer
had refused to pay the note, it follows that the circumstance that
Dyer paid the note, and thereafter sought a return from the bank of
the money paid to it, did not create on the part of Green any liability
to the bank or give rise to any claim by the bank against Green. Ken-
dall v. Parker, 103 Cal. 319, 37 Pac. 401, 42 Am. St. Rep. 117; Mc-
Ewen V. Black, 44 Okl. 644, 146 Pac. 37.
[4] The fact that Dyer had the means of ascertaining that the work
l)ad not been done as required by the contract did not change the po-
sifion of the bank. He was not obliged to make an investigation in
order to maintain action. National Bank v. Miner, 167 Cal. 532, 140
Pac. 27 ; Crocker Bank v. Nevada Bank, 139 Cal. 564, 73 Pac. 456,
63 L. R. A. 245, 96 Am. St. Rep. 169; 15 Am. & Eng. Enc. of Law,
p. 1106.
The judgment is reversed, and the cause is remanded, with direc-
tions to grant a new trial.
BUSHONG V. R. R. THOMPSON ESTATE CO.
In re MULTNOMAH HOTEL 00.
(Circuit Court of Appeals, Kinth Circuit. January 5. 1920.)
No. 3373.
1. Jddgment <S=>711 — In favob op cbeiditok op purchasee of hôtel com-
TANY'S stock not adjudication TUAT PUKCHASER WAS BOUND TO PAY
ALL DEBTS OF COMPANY.
Refendant, on buying stock of a hôtel company, agreed with the seller
to dévote the purchase prlce of the stock to the payment of the hôtel
company's debts, and also to make an advance to the seller, which was
surety for the company's debts. Held, that a judgment in favor of an
existing créditer of the company against défendant, which required de-
fendant to pay such credltor's claim, was not an adjudication which
established defendant's liability to pay ail the debts of the hôtel com-
pany, which would warrant the trustée in bankruptcy of the hôtel com-
pany in recovering from défendant sums paid by the company itself In
discharge of debts.
2 Corporations <S=218 — Pubchaser of hôtel company's stock not uable
TO company's TRUSTEE IN BANKRUPTCY ON ACCOUNT OP DEBTS PAID BY
COMPANY ITSELF.
Where défendant purchased the stock of a hôtel company under an
agreement that the purchase pric-e should be devoted to discharging the
company's debts, and that défendant should make an advance to the
seller of the stock, which was surety for the hôtel company's debts, held
©=sFoi other cases see tame toplc & KEY-NUMBBU in ail Key-Numbered Dlgests & Indexe»
2d8 262 FEDERAL BJSPORTBB
that, after bankmptcy of the hôtel company, Its trustée could not recover
from défendant the amount of debts pald by the hôtel company; the
Company not belng a party to the agreement between défendant and the
seller of the stock, and the hôtel company being primarily liable for
its debts.
3. BviDENCB <@=»219(1) — FiLiisa or ciaiu bt puechaseh of hôtel stock
A0AINST KSTATE OF SELLEE NOT ADMISSION THAT PTJEOHASER VVAS BOUND TO
PAT ALL DEBTS.
Where défendant purchased ail of the stock of a hôtel company under
an agreement that the purchase price should be devoted to payment of
Its debts, and tliat it would make an advance to the seller, which was
surety on the debts of the company, held that, as any loss would ulti-
mately faU on défendant, the fact that défendant flled claim In bank-
ruptcy against the estate of the seller on accoimt of debts which it had
not pald, but which the company had partly pald and given notes there-
for, was not an admission that défendant was bound to pay such debts,
which exceeded the purchase priée of the stock.
In Error to the District Court of the United States for the District
of Oregon ; Robert S. Bean, Judge.
Action by H. F. Bushong, trustée in bankruptcy of the estate of the
Multnomah Hôtel Company, against the R. R. Thompson Estate Com-
pany to recover damages on a contract between défendant and Gevurtz
& Sons. There was a judgment for défendant, and plaintiff brings er-
ror. Affirmed.
Under an agreement between Gevurtz & Sons, a corporation In Oregon, and
the Estate Company, the Estate Company was to erect a hôtel building and
to lease the same to Gevurtz & Sons for a term of years. The Hôtel Com-
pany issued common stock of $200,000 and preferred stock of $150,000, for
which it pald by transferrlng the lease with the Estate Company, and began
business In 1912 ; ail of the stock of the company being owned and controlled
by Gevurtz & Sons, a corporation. The Hôtel Company became Involved,
and under a contract or option dated January 10, 1913, In considération of
$175,000, the Estât© Company purchased the stock of the Hôtel Company
and agreed to pay the then existing indebtedness of the Hôtel Company to
the estent of $175,000, and to advance to the Gevurtz & Sons corporation,
upon a note, a sum not to exceed $35,000 to llquidate any obligations of the
Hôtel Company In excess of 175,000. Under this agreement the Gevurtz cor-
poration guaranteed the Estate Company against ail debts and llabilltles of
the Hôtel Company above $210,000, and indemnlfled the Estate Company
against demands and liabillties of every character due by the Gevurtz cor-
poration, or to any other person or corporation, arising out of and tncurred
in the opération of the Multnomah Hôtel "from the time of Its beglnning to
the date of the delivery of possession." The contract or option further pro-
vided that the payment of $175,000 and the loan of $35,000 were only matters
of "accommodation" to Gevurtz & Sons, and were not to be "any acknowledg-
ment of any assumption by said Thompson Estate Company of any further
llability, or for the payment of any greater sum for the assets of the Mult-
nomah Hôtel Company then represented by the purchase price of the common
and preferred stock.
The Estate Company pald ail of the debts of the Hôtel Company, except
four clalms, which are the subject of this action, and the Estate Company paid
In cash a portion of each of thèse four clalms, and gave the Hôtel Company's
notes for the balances due. On May 9, 1913, Gevurtz & Sons was adjudged
bankrupt, and the Hôtel Company went into bankruptcy on January 26, 1916.
After the Gevurtz Company went into bankruptcy, the Estate Company flled
a clalm for $57,506, made up of $35,000 loaned to the Gevurtz Company and
a balance of $21,506 clalmed to be due under the agreement (heretofore re-
@=»Pof other oases see eame topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes
BUSHONG V. R. B. THOMPSON ESTATE CD. 299
(262 F.)
ferred to) of the Gevurtz Company to indemnlfy the Estate Company for
payment of additlonal debts of the Hôtel Company. The clalm flled dld not
include any part of the $175,000 imld by the Estate Company to Gevurtz
Company for the stock of the Hôtel Company, but dld Include the so-called
Weinhard clalm for $4,500, wMch aftenvards beeame the subject of litlga-
tlon, and resulted In judgment In favor of Weinhard agalnst the Estate Com-
pany.
The défense of the Estate Company Is that the debts sued on were thoae
of the Hôtel Company, which was primarlly liable for their payment; that
no considération passed from the Hôtel Company to the Gevurtz Company,
or to the Estate Company for the latter's assumptlon of any secondary lia-
bility by Gevurtz Company for those debts; that the trustée herein repré-
senta no créditer existlng at the time of the alleged promise of the Estate
Company to pay the existlng debts of the Hôtel Company, or at the time of
payment of those debts by the Hôtel Company.
The District Court directed a verdict in favor of the Estate Company, and
the trustée brought writ of error.
Teiser & Smith and Julius Silvestone, ail of Portland, Or., for plain-
tiff in error.
Bauer, Greene & McCurtain, of Portland, Or., for défendant in error.
Before GIL,BERT, ROSS, and HUNT, Circuit Judges.
HUNT, Circuit Judge (after stating the facts as above). [1,2]
Plaintiff in error takes the ground that the contract referred to was
inade for the benefit of the Hôtel Company, as well as for the benefit
of its creditors ; that the Hôtel Company is a party in privity and en-
titled to recover money paid out of its treasury, which inured to the
benefit of the Estate Company, and which should hâve been paid out
of the funds of the Estate Company, and relies principally upon the
décision of this court in Weinhard et al. v. Estate Co., 247 Fed. 951,
160 C. C. A. 376; affirming Weinhard et al. v. Estate Co. (D. C.) 242
Fed. 315. We there held that, under the contract between the Estate
Company and the Gevurtz Company, the Estate Company assumed
the entire indebtedness of the Hôtel Company and looked to the in-
demnity evidenced by the warranty obligation for reimbursement for
any liabilities in excess of the $210,000 that it might hâve to pay in
order to clear the hôtel property of the debts incurred by the Hôtel
Company. The facts of that case were that Weinhard's claim against
the Hôtel Company was upon a note executed March 6, 1912, to the
Estate Company by the Hôtel Company and the Gevurtz corporation,
and we regarded the claim as a part of the debt of the Hôtel Company
owing upon January 10, 1913, or at the time of the purchase and as-
sumption by the Estate Company, and therefore held the Estate Com-
pany liable for its payment. The rule of that case clearly controls as
to ail creditors of the Hôtel Company who were such prior to and at
the date of the agreement of assumption and to whom Gevurtz Com-
pany was liable. The question hère is whether, under the contracts,
the Estate Company is liable for the balances due upon the debts of
the Hôtel Company hère sued upon and which hâve been paid.
At the time of the purchase of the stock by the Estate Company, the
Hôtel Company owed about $244,000. The Gevurtz Company, which
sold the stock, was secondarily liable to pay thèse debts. The Estate
Company made no contract, directly, at least, with the Hôtel Company
300 262 FEDERAL EEPOETEK
or with any of the creditors of the Hôtel Company. It did agrée, how-
<!ver, with the Gevurtz corporation, to clear the Hôtel Company of the
debt which the Gevurtz corporation was then carrying. It was not held
în the Weinhard Case, supra, that the Estate Company assumed any
other or greater liahility than that which rested on the Gevurtz corpo-
ration, or that the Estate Company would be liable for a greater amount
than the Hôtel Company owed at the time of the transfer. Nor was
it decided that there was any agreement whereunder the Hôtel Com-
pany was relieved of the obligation to pay its own debts. In other
words, it has not been held that the Estate Company substituted itself
as a principal debtor so as to relieve the Hôtel Company of ail liability.
We must measure the obligation of the Estate Company solely by the
terms of the contract it made with the Gevurtz Company and what was
donc thereunder. Clearly the purpose of the contract between the Es-
tate Company and the Gevurtz corporation was to clear the Hôtel Com-
pany of debts which it owed at the time of the purchase of the stock.
The money which the Estate Company was paying for the stock was
to be applied in payment of claims against the Hôtel Company.
But the language of the contract expressly provided that the Estate
Company disclaimed the assumption or acknowledgment of any liabili-
ties of the Hôtel Company or the payment of any greater sum for the
stock than represented by the purchase price of the stock. The $35,000
advanced was "accommodation" to the Gevurtz corporation and not
an acknowledgment of any assumption of debt of the Hôtel Company.
The obligation of the Hôtel Company to pay its own debts never was
extinguished, although a créditer of the Hôtel Company on January
16, 1913, could hâve enforced payment as against the Estate Company
because of the implied assumption of payment of his claim under the
Estate Company contract with the Gevurtz corporation. Such a claim,
however, was against the Hôtel Company, yet enforceable against the
Estate Company because of the guaranty. The attitude of the Estate
Company was not unlike that of a surety to a contract.
The allégation by the trustée that the Estate Company, as owner of
the stock of the Hôtel Company, "caused" the Hôtel Company to pay
debts amounting to $14,000, which the Hotel Company owed, implies,
as we understand it, that tlie Hotel Company was obJiged to do that
which it ought not to hâve done, and that the Estate Company has be-
come responsible for a depletion of the estate of the Hotel Company to
the amoimt of $14,000. But, as it is plain that the Hotel Company owed
the money, paying it was certainly not wrongful, even though another
corporation was secondarily liable for the payment of the debts. The
fact that the Estate Company had agreed with the Gevurtz corpora-
tion to pay debts that the Hotel Company failed to pay does not make
the payment by the Hotel Company unlawful.
While the Estate Company could hâve made a gênerai enforceable
promise to pay the claims of the creditors of the Hotel Company, it
did not do so, and when it acquired ownership of the hotel it had a
right to "cause" the Hotel Company to pay $14,000 of its own debts
eut of its own earnings, provided, always, there was no fraud or un-
lawful préférence. Questions of unlawful préférence, however, arc
BUSHONG V. B. E. THOMPSON ESTATE CD. 301
(262 F.)
not material. If the Gevurtz corporation had remained owner of the
Hôtel Company stock, the Gevurtz Company would hâve had the right
to cause the Hôtel Company to pay the debts for which the Gevurtz
Company was surety, and, if there had been a failure, it would hâve
had the right to require the Estate Company to make the payment.
[3] It is said, however, that in its proof of claim in the Gevurtz
Company bankruptcy proceedings the Estate Company included the
four claims involved in this suit, and which amounted to some $14,000,
and that the Estate Company received a dividend of some 23 per cent,
on the claims out of the assets of the Gevurtz Company estate in bank-
ruptcy. Assuming that the court should hâve ruled that such proof
was admissible, it would not hâve afïected the case. The Estate Com-
pany being liable for payment of the claims on an implied assumption
of the Gevurtz corporation obligation to pay them, whether the Es-
tate Company paid the $14,000 directly or not, or whether the Hôtel
Company paid it, the loss would come finally upon the Estate Company
as owner of the stock of the Hôtel Company, and such loss would be
covered by the indemnity contract between the Gevurtz corporation and
the Estate Company. Under the'terms of the warranty the Estate
Company had a right of action against the Gevurtz corporation to re-
cover the $14,000, and therefore had a provable claim against the Ge-
vurtz Company estate in the bankruptcy court.
The primary liability of the Hôtel Company is the determining point ;
and as the Hôtel Company has paid the debts in question, the transac-
tions had between the Estate Company and the Gevurtz corporation
cannot be made the subject of complaint by the Hôtel Company. The
trustée of the estate of the Hôtel Company, bankrupt, cannot avail him-
self of the henefit of a promise made by the Estate Company to the
Gevurtz corporation, when the Hôtel Company could not hâve com-
pelled the Gevurtz corporation to pay the debts of the Hôtel Company.
Those who were benefited by the Gevurtz guaranty and the Estate
Company's assumption were those creditors of the Hôtel Company in
existence January 16, 1913, and, as ail such hâve been paid, the Hôtel
Company has no cause of action. Brower Lumber Co. v. Miller, 28
Or. 570, 43 Pac. 659, 52 Am. St. Rep. 807 ; Jefferson v. Asch, 53 Minn.
446, 55 N. W. 604, 25 L. R. A. 257, 39 Am. St. Rep. 618; Parker v.
Teffery, 26 Or. 186, 17 Pac. 712 ; Washburn v. Investment Co., 26 Or.
436, 36 Pac. 533, 38 Pac. 620.
Nor can we find any f raud upon creditors. The creditors, except the
Estate Company, of the Hôtel Company, hâve been paid, and there
seems to be no cause of action in favor of the Hôtel Company against
the Estate Company for failure to perform the contract with Gevurtz
Company, made for the benefit of the existing creditors of the Hotel
Company.
The judgment is affirmed.
302 262 FEDERAL BBFORTEB
MARKS T. HILGER.
(Circuit Court of Appeals, Nlnth Circuit. January 5, 1920.)
No. 3372.
1. Watebs and wateb coubses ®=5l42 — Appbopbiation oives appeopeia-
TOB TITU) TO USE WATKES.
The State of Montana lias assumed to itself ownership of rivers and
streains in ttie state, and has granted tlie right to appropriate waters m
accordance with statute, wbicli appropriation vests in the appropriatoi-,
witli full title to tlie use of sucli waters.
2. Watebs and wateb couesjss <S=9l43 — Appbopeiatob entitlbd to seepaoe
WATEB.
It is established in Montana tliat the prior appropriator of water is en-
titled to the use of ail water In the stream to satisfy his appropriation,
whether such waters corne from seepage or from water naturaUy flowing.
3. Watebs and wateb coubses <S=3l43, 152(3) — No excuse to appeopbiatob
TAKING excessive QUANTITY THAT EXCESS WAS EETUBNED TO SXBEAM BY
BEEPAQE.
An appropriator of water, who took a greater quantity than he was al-
lowed to talie under decree fixing priorities, cannot justify his taking on
the ground that the water was taken in the flood season, and was re-
tumed to the stream by seepage, and was really a beneflt to subséquent
appropriators, but such appropriator is guilty of contempt.
In Error to the District Court of the United States for the District
of Montana ; George M. Bourquin, Judge.
Suit by the Ames Realty Company against the Big Indian Mining
Company and others, in which water rights were fixed. On pétition
of Peter Hilger, I. W. Marks was adjudged in contempt, and con-
temnor brings error. Affirmed.
C. A. Spaulding, of Helena, Mont., for plaintiff in error.
C. W. McConnell, of Helena, Mont., for défendant in error.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
HUNT, Circuit Judge. This is a contempt proceeding, arising in the
following manner: In 1911 the District Court made a decree in the
case of Ames Realty Company, Complainant, v. Big Indian Mining
Company et al.. Défendants, decreeing certain rights in the waters of
Prickly Pear creek and its varions tributaries. I. W. Marks and Peter
Hilger, and many others, were landowners and parties défendant in
that action. Marks was decreed a right of user of 21 inches of water
from Prickly Pear creek of date April 1, 1865, also a right to 8 inches
of date April 1, 1893, and to 7 inches of date April 1, 1894, out of
Dutchman creek, a tributary to Prickly Pear. Hilger was awarded a
right to the use of 67 inches from Prickly Pear of date April 4, 1866,
and of 100 inches of date November 24, 1866. The decree also en-
joined each of the parties from in any wise interfering with any of
the water rights of any and ail other parties as fixed and decreed. In
July, 1918, Hilger by affidavit alleged that Marks had violated the de-
cree by using more water from Dutchman creek than the decree had
awarded to him, and that he had failed to comply with the provisions
^ssFoi otber cases see same topio & KEY-NUMBBB in ail Key-Numbered Digests & Indexes
MAEKS V. HILaEB 303
(262 F.)
of the decree requiring each owner to construct proper measuring
boxes in his ditches conveying water from Prickly Pear and Dutch-
man creeks. The lands of Hilger and some others were along Prickly
Pear çreek, some miles below the point where Dutchman creek flows
into Prickly Pear. Some of thèse lands were irrigated with Prickly
Pear creek water under water rights adjudged to be prior to Marks'
rights by the decree hereinbefore referred to. Marks appeared, testi-
mony was heard, and Marks was found guilty of contempt and fined
$1. He brought writ of error.
The substantial f acts as found by the District Court are thèse : The
boxes used by Marks were out of order in July, 1918, and were prac-
tically useless for accurately measuring the flow of the water; but
the évidence shows that Marks was diverting 50 inches of water from
Dutchman creek through four ditches upon his land, and that but
for such diversion the water would hâve flowed down to the use of
the Ames Realty Company and others. Marks owned a strip of about
50 acres through which Dutchman creek ran for about a mile and a
half. He turned the water from Dutchman creek into four ditches
that would carry 200 inches or more of water, and irrigated the 50
acres in grass and grain crops until the water became less in flow, when
he began to turn it ofï. Marks so used the water that sometimes by
seepage there was more water in Dutchman creek at the point of
departure from his land than at its entrance, but there was no storage
of the seepage water. The seepage or waste was nothing "out of the
usual" which was returned to the stream, although some indefinite
part of the seepage in July may hâve been from irrigation carried on
by Marks in May or June. It was found that the measurements by
Marks were very indefinite, and that under the method of his use the
saturation of the land permitted large quantities of water to go to
waste, and that such method was not proper, and did not constitute
the création of a réservoir. It was further found that the water
which Marks "borrowed" was a part of the natural flow of Dutchman
creek, and that such natural flow was not limited to the water that
was in the creek at the entrance to Marks' land, but is that quantity
which ought to be in the creek at its departure from Marks' land,
namely, the flow at tlie entrance plus the seepage from Marks' land.
[1-3] The position of Marks is that in the beginning of the season,
when there is an abundance of water, he turns such quantities upon his
lands that they become saturated, and that at a later time in the
season the waters upon thèse lands, by reason of seepage, flow back
into Dutchman creek and serve to increase the flow in Dutchman, and
to create a flow even greater in amount than the usual flow of water
in Dutchman creek above the lands of Marks, and that because of
this seepage flowing from his lands he has a right to take as mucb
water from Dutchman creek as the capacity of his ditches will allow,
even though the original decree of the court limited him to 15 inches
of waters of Dutchman creek.
We cannot uphold the argument. In Kansas v. Colorado, 206 U.
S. 46, 27 Sup. Ct. 655, 51 L. Ed. 956, it was claimed in behalf of the
State of Colorado that there was a right to the use of the waters of
304 262 FEDERAL REPORTER
the Arkansas river over Kansas, because the use of the waters of
the Arkansas river in irrigating within Colorado stored the waters, and
caused more water to flow otit by seepage below than was actually
used upon the lands in Kansas. The court, through Justice Brewer,
commented upon the difficulty of obtaining proof of the extent to
which seepage opérâtes in adding to thq flow of a stream, and said :
"Aside from this surplus water, some may be returned through overflow oi
Ihe ditches or from seepage. What either of thèse amounts may be Is not
dlsclosed. Indeed, the extent to which seepage opérâtes in adding to the flow
of a stream, or in distributing water through lands adjacent to those upon
which water is poured, is something proof of which must necessarily be al-
most Impossible. We may note the fact that a tract, bordering upon land
which has been flooded, shows by its Increasing végétation that it has received
in some way the benefit of water, and yet the amount of water passing by
seepage may never be deflnltely known. The underground movement of water
will always be a problem of uncertainty."
We need not go back to inquire into the common-Iaw rule respecting
water rights, for the reason that in Smith v. Denniff, 24 Mont. 21, 60
Pac. 398, 81 Am. St. Rep. 408, decided in 1900, it was held that by
necessary implication the state of Montana had assumed to itself
ownership sub modo of rivers and streams in the state, and had ex-
pressiy granted the right to appropriate waters of such streams, which
right, if properly exercised, in compliance with the requirements of the
statutes, vests in the appropriator full légal title to the use of such
waters by virtue of the grant made by the state as owner.
It is established in Montana that the prior appropriator of water is
entitled to the use of ail the water in the stream to satisfy his appro-
priation, whether such water come from seepage or from the water
naturally flowing in the stream. In Beaverhead Canal Co. v. Dillon
Electric Co., 34 Mont. 141, 85 Pac. 882, the court said:
"The prior appropriator of a particular quantity of water from a stream is
entitled to the use of that water, or so much thereof as naturally flows in the
stream, unimpalred and unaffected by any subséquent changes which, in the
course of nature, may hâve been wrought. To the extent of his appropriation
his supply will be measured by the waters naturally flowing in the stream and
its trlbutaries above the head of his ditch, whether those waters be furnished
by the usual rains or snows, by extraordinary rain or snow fall, or by sprlngs
or seepage which dlrectly contrlbute."
Again, under the doctrine that the prior appropriator is entitled to
the quantity of water appropriated from the stream, the prior appro-
priator is entitled to satisfy that right, and it is immaterial whether
such satisfaction is to be had out of the waters that naturally flow in
the stream and its tributaries above the head of its ditch, or come from
waters which run into the stream by rains, snows, springs, or seep-
age.
Referring again to Kansas v. Colorado, supra, the court held in
effect that an upper riparian proprietor could not maintain a défense
based upon a use to which he had appropriated the water by contend-
ing that he had given benefit to the lower proprietor. "The question,"
said the court, "will be one of légal right, narrowed to place, amount
of flow, and freedom from pollution."
MARKS V. HILGEB 305
(262 F.)
The doctrine of a right of use by appropriation îs inconsistent with
a claim of right of ownership of seepage not held in réservoir, and
which is merely incidental to usual irrigation. Nor can an upper
proprietor plead that by the use to which he had appropriated the wa-
ter he had benefited the lower proprietor, or that the lower proprietor
has received an équivalent.
In Smith V. Duff, 39 Mont. 382, 102 Pac. 984, 133 Am. St. Rep.
587, there was a contention that the respondents in that case were
entitled to the use of certain waters of Willow Swamp by reason of
water developed by the draining of the swamp from a canal; but
the court held that whether the water which saturated the swamp
came from subterranean springs or through percolation from higher
adjacent lands, or whether it was supplied from a subsurface flow,
was not apparent; yet the gênerai principle was stated to be that the
subsurface supply of a stream, whether from tributary swamps or
runs in sand and gravel, constituting the bed of the stream, is as
much a part of the stream as is the surface flow, and is governed by
the same rules.
In Spaulding v. Stone, 46 Mont. 483, 129 Pac. 327, the court held
that one who claimed upon the ground that he had developed a new
supply of water must establish by satisfactory proof the amount which
he has developed, especially when he has mingled his alleged new sup-
ply with that to which another is entitled, for he cannot justify an in-
terférence with a right which he does not question.
In Durkee Ditch Co. et al. v. Means et al. (Colo.) 164 Pac. 503, it
was held that seepage water, which was originally diverted from a
stream for irrigation and flowed into a gulch tributary to the same
stream, could not be diverted from the gulch to the préjudice of the
rights of senior appropriators on the stream. The court there held
that the waters oiE the gulch, being naturally tributary to a certain
creek, were not subject to independent appropriation and diversion,
but would be considered a part of the stream, to be permitted to re-
turn to the stream for the benefit of other appropriators in the order
of their priorities.
In Trowel Land & Irrigation Co. v. Bijou Irrigation District (Colo.)
176 Pac. 292, it was held that seepage waters from irrigation ditch-
es and réservoirs, proceeding by open ditches or by percolation, on their
return to, but not having reached, the stream which largely dépends
on such waters for supplying appropriations under a judicial decree,
are tributary to the stream, and, after being drained into it by con-
structed ditches, may not be diverted as against the rights of prior ap-
propriators. In States which recognize, at least in a modified way,
the doctrine of riparian rights, doubtless the rules are différent.
Miller & Lux v. Madera Canal & Irrigation Co., 155 Cal. 59, 99 Pac.
502, 22 Iv. R. A. (N. S.) 391. The décisions of the courts of those
States are not controlling in Montana.
Our conclusion is that the lower, but prior, appropriators are en-
titled to the uninterrupted flow of the waters of the stream and its
tributaries, and that, where seepage water may hâve found its way
262 F.— 20
306 262 FEDERAL REPORTEE
into the creek, the prior appropriators are entitled to the use of such
water, limited of course to the extent of the quantity of water judi-
cially decreed to them from the creek. Weil on Water Rights, § 337.
In the présent case it must therefore foUow that, inasmuch as the de-
cree awarded Marks only 15 inches of water from Dutchman creek,
he had no right to take from that stream 50 inches of water, and that
he cannot justify his action upon the ground that he has benefited the
lower appropriators, or has given to them the équivalent of what he
has taken.
The judgment rendered was proper, and is affirmed.
JOHNSON V. GOWGILL et aL
(Circuit Court of Appeals, Ninth Circuit. January B, 1920.)
No. 3344.
1. TeUSTS iS=262 — BUBDEN ON CESTUI TO PEOVE THAT ATTOBNETS FOE BSTATB
DIVIDED FEE WITH TEUSTEB.
In a suit by the cestui against tlie trustée and attorneys for the estate,
who it was claimed divided their fee with the trustée, the cestui has the
burden of proving an agreement between the attorneys and trustée to
share the fee.
2. Teusts <®=>231(1)— Attornet and teustkb who divided fee liabu: to
CESTUI.
It is the duty of the trustée and attorneys for the estate to be perfectly
true to the estate and cestui, and where the attorneys divided their fee
witti the trustée, etc., the cestui may recover the payaient made to the
trustée.
3. Tbusts <g=262 — Evidence insufficibnt to show attoenets divided fee
WITH TKUSTBE.
In a suit by the cestui against the trustée and attorneys for the
estate, évidence held insuffleient to show the attorneys divided their fee
with the trustée.
Appeal from the District Court of the United States for the Second
Division of the Northern District of California; Frank H. Rudkin,
Judge.
Suit by Frank Hjmsford Johnson against Lewis I. Cowgill and oth-
ers. From a decree for défendants, complainant appeals. Affirmed.
John L. McNab and Byron Coleman, both of San Francisco, Cal.,
for appellant.
Goodfellow, Eells, Moore & Orrick and Mastick & Partridge, ail of
San Francisco, Cal., and Oscar Lawler, of Los Angeles, Cal., for ap-
pellees.
Before GILBERT, MORROW, and HUNT, Circuit Judges.
HUNT, Circuit Judge. Johnson sued Cowgill and the firm of Den-
son, Cooley & Denson, attorneys, praying that the firm set forth the
nature of their claim to a certain sum of money, and that any adverse
claim they had should be declared of no validity, and for judgment
against Cowgill for $10,312.50, with interest. The complaint is found-
<g=For other cases see same toplc à KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes
JOHNSON V. COWGILb 307
(262 F.)
ed upon the allégations: That in 1910 Johnson conveyed his estate,
worth about $450,000, to his father and Cowgill, défendant herein, as
trustée, to be managed by the trustée for 5 years; that in June, 1911,
the father died, and Cowgill became and acted as sole trustée until
about November 27, 1915, at which time he reconveyed certain prop-
erty, and was relieved as trustée; that from 1911 until the close of
the trust Denson, Cooley & Denson were attorneys for the trust and for
Cowgill as trustée, and that about July 12, 1911, Johnson agreed with
Denson, Cooley & Denson that they should act in the matter of the
recovery of certain property claimed by Johnson ; that in payment for
the services rendered by the attorneys Johnson made two certain prom-
issory notes for $10,000 each, payable 6 and 12 months, respectively,
after date ; that the notes by their terms were to be paid by the trustée
out of the trust estate, and "were approved and accepted by the trustée
in writing as a charge against the trust estate; that when the attor-
ney's fee of $20,000 was fixed, it was secretly agreed between the law
firm and Cowgill that the law firm and Cowgill would divide the fee,
and that when the two notes, of $10,000 each, should be delivered, one
should be the property of Cowgill, and the other of Denson, Cooley
& Denson; that Cowgill, as trustée, about November 1, 1911, took the
notes to the law firm, and that the elder Denson indorsed one of them
on behalf of the firm and handed it to Cowgill as his share of the
$20,000; that Cowgill retained the note as his private property, and
that from May 31, 1912, to November 6, 1912, Cowgill, as trustée,
f raudulently took from the estate certain sums for interest on the $10,-
000 note retained by him; that about November 6, 1912, Cowgill paid
the law firm $10,000 from the estate f unds, and f raudulently took $10,-
000 from the estate funds for his own use in payment of the other
note, and falsely represented to plaintiff that he had paid thèse sums
as trustée to the law firm in settlement of the note; that Cowgill
fraudulently, as trustée, told plaintifï that he paid the $10,000 and cer-
tain interest to the law firm on account of the note retained by him,
whereas such amount was never paid by Cowgill to the law firm on be-
half of the trust estate ; that Cowgill never has accounted, and did con-
ceal from plaintiff the fact that the amount was appropriated to his own
private use ; that the law firm, although retained to act for Cowgill
as trustée, never told plaintiff of the transactions; and that plaintiff
never knew of the matter referred to until August 18, 1916, when he
demanded the return of the $10,312.50 from Cowgill.
Denson, Cooley & Denson admit professional employment and plead
that the notes of $10,000 each were given in payment of professional
services and are the property of the firm, and aver that the only reason
that payment in full of both notes was not made at maturity was be-
cause of the then financial condition of the trust estate. They deny ail
secret agreements and fraud and division of the notes with Cowgill,
and ask judgment against Johnson and Cowgill for $10,000 and in-
terest. Cowgill also dénies fraud or any agreement with the law firm,
whereby he was to receive any benefit in a personal way, and asks judg-
ment in favor of Denson, Cooley & Denson against plaintiff and
against himself.
308 262 FEDERAL REPORTER
The District Court found that there was no agreement between
Cowgill and the law firm, or any member of it, for any division of the
$20,000 mentioned in the complaint, or any agreement that Cowgill
should become the owner of either one of the notes given in payment
of the fee, or the proceeds thereof, and that the entire fee and both of
the notes and the proceeds thereof were always the property of the
défendants Denson, Cooley & Denson. The complaint was ordered dis-
raissed, without costs to either party.
The first important question is whether or not there was any ar-
rangement or understanding of any kind between the law firm, or
any member of it, and Cowgill, whereby Cowgill was to receive any
part of the $20,000 which Johnson agreed to pay the attorneys for pro-
fessional services rendered under the agreement between Johnson and
Denson, Cooley & Denson. If there was' any such arrangement, it
must hâve been made between Judge Denson and Cowgill, for clearly
they were the only persons who had to do with the making of it. It
is essential, therefore, that the évidence be considered.
Johnson testified that in July, 1911, he employed the law firm upon
the recommendation of Cowgill, and that after settlement of the légal
matter was made in August, 1911, neither he nor the trust had the
money to pay the lawyers ; that Cowgill said that he would arrange so
that two notes would be given, and that the two notes were then given
by Johnson and were delivered to Cowgill. It appears that one of the
notes was paid November 6, 1912, and that two payments were made
on the other note in November, 1912. Three checks were offered in
évidence — one dated November 6, 1912, for $5,000 to L. I. Cowgill,
signed by F. H. Johnson Trust, L. I. Cowgill, Trustée ; one dated No-
vember 6, 1912, in favor of L. I. Cowgill, for $17,517.50, signed by
F. H. Johnson Trust, by h. I. Cowgill, Trustée; another dated No-
vember 8, 1912, in favor of L. L Cowgill, for $10,018.31, signed by
L. I. Cowgill, Trustée. Johnson also said that the trust was closed
on November 27, 1915, and that it was not until six months afterward
that he leamed that Cowgill had received a part of the $20,000 fee ;
that when the trust was closed Cowgill turned over certain property
to him.
Mr. Berry, who had been attorney for plaintiff, Johnson, preceding
the summer of 1916, testified that in July, 1916, he called upon Judge
Denson in relation to the fee of $20,000 ; that Judge Denson told him
that the $20,000 fee received in settlement of johnson's claim against
his father's estate was not ail received by Denson, Cooley & Denson;
that Cowgill "demanded or asked" a division with him, and that Den-
son said that Cowgill was an old client, and "I was not in a position
to refuse, and we did divide it with him." Witness said he never told
Johnson what Denson said, as at the time he was not friendly with
Johnson.
Mr. G. H. Smith, counsel for Frank Johnson, testified in substance
that he first met Judge Denson on August 18, 1916, at Denson's office,
whither he went as attorney for Johnson "to demand from Cowgill
half of that $20,000 fee that Denson, Cooley & Denson had divided
with him and half of any other fées that the law firm might hâve di-
JOHNSON V. COWGILL 309
(262 F.)
vided with him." Mr. Smith says that lie opened the conversation
with that demand, and after a pause Judge Denson said that that was
"the only one" ; that Judge Denson talked for some minutes, and said
that Cowgill had brought business to the firm, and that they had not
charged Cowgill anything. Witness said that Denson said he thought
Ihe matter of the fee might corne up, and that he had kept himself
clear ; that the firm had recovered the property for Johnson, and was
entitled to the fee. Mr. Smith said :
"I asked hira If Mr. Cowgill had had anything to do with the fixing of the
fee, and he said he had. I asked him if he had agreed to divide the fee with
Mr. Cowgill at the time it was fixed, and he said 'No.' Ile said he agreed
to divide tiie fee before the notes were given, but not at the time the contract
was made."
Mr. Smith also said that Denson told him he drew the notes, and
that Mr. Cowgill brought them back to him ail signed; that Cowgill
came into his (Denson's) office and laid the notes down on his desk,
and that he took one, and indorsed it, and handed it to Cowgill, and
had never seen the notes again, and never spoke of it again. Mr.
Smith also testified that Judge Denson said that the fee had been eam-
ed, and he thought Cowgill was entitled to compensation, and that he
had given him one of the notes; that there was then some conversa-
tion with respect to the ethical and légal point of view, and that Den-
son, in answer to a question, repHed that he had a right as attorney for
the trust to divide his fee with the trustée as he had, but also said that
he had kept himself "in the clear out of this ail the time." Witness
said that Denson agreed to communicate with Cowgill; that Denson
made no claim to the money or the note which he indorsed and deliv-
ered to Cowgill ; that he told Denson that, if Cowgill did not pay the
money immediately, suit would be instituted. Mr. Smith further said
that Denson told him that he had seen Cowgill, and that if there was
any money belonging to Johnson he wanted to pay it ; that he did not
think he had any money of Johnson's, and that Cowgill had suggested
an arbitration, whereby some disinterested counsel should consider the
facts, and that, if he found that "this money" belonged to Johnson,
Cowgill would pay it, and if the money was found to belong to Cow-
gill, Cowgill would retain it ; that witness declined any suggestion
of arbitration, and told Denson that suit would be brought unless the
money was forthcoming by the 28th of August, and that as the money
was not paid at that time this présent suit was brought about August
30, 1916; that in February, 1917, Cowgill, with his counsel, Mr. Law-
1er, called upon the witness, and stated that Cowgill had obtained the
privilège of using the money from Denson until he "got ail of his mon-
ey out of the estate, and that he had now gotten ail his money out of
the estate, and they were willing to pay the money to whom it be-
longed."
S. C. Denson, referred to as Judge Denson, who died after the prés-
ent suit was filed, and who was senior member of the firm of Denson,
Cooley & Denson, in his déposition testified that Johnson consulted him
about the right to recover certain property which, under an under-
standing had with his father, Johnson claimed should come back to
310 262 FEDERAL REPORTER
him, and that in July, 1911, the arrangement already referred to con-
cerning fées was made ; that af terwards a compromise was had where-
by certain property was taken back, subject to certain liens which Cow-
gill, the trustée of Frank H. Johnson, was to take care of ; that Johnson
went to the office of the law firm, but, not having the $20,000 to pay the
firm, said he would give notes, .and the two notes were drawn up and
delivered by Johnson to him for the firm ; that the notes were in set-
tlement of the services performed by the firm, and were the property
of the firm; that there never was at any time any arrangement with
Cowgill for a division of the fee; that the subject never was discuss-
ed, and that neither of the notes had ever been given to Cowgill as
a share of the fee. Mr. Denson said that he gave the two notes to
Cowgill as président of the Merchants' National Bank with which bank
the firm had an account; that they desired to borrow $6,000, and
would give a note for that sum to the bank ; that they borrowed $6,000
upon the firm note; that later on the firm was notified that one of
the notes had been paid, and that af ter the firm note of $6,000 was paid
to the bank they still had a crédit of $4,035 ; that he did not know
what became of the other $10,000 note, but that he handed it to Cowgill
as président of the bank, and never saw it afterwards, and supposed
there would be a settlement some time ; that he knew Cowgill did not
hâve the money with which to settle the Johnson trust, and that he was
willing that Cowgill should use the $10,000 note "to help cariy him
through" ; that there was no arrangement with Cowgill, whereby Cow-
gill was to collect either of the notes and retain the proceeds for bis
own use, and no agreement as to any division of the notes or fee at
any time or place, or under any circumstances, and that there was no
division. On cross-examination Mr. Denson said that his firm was re-
tained in October, 1911, and remained attorneys for the Johnson trust
until November, 1915, that he had been attorney for Cowgill and
Cowgill's bank for many years; that he expected to be paid out of
the Johnson estate; that he had never spoken to the bank about the
$10,000 note, although he had spoken to Cowgill about it, and Cowgill
never had paid interest on the note from November, 1911, and that
when Cowgill and Johnson had their settlement, in 1916, Johnson was
obliged to give Cowgill a note and mortgage on certain property to se-
cure the balance he owed ; that he remembered the visit of Mr. Berry
to his office, and, although he might hâve told Mr. Berry that he had
not received the balance of the money, he never told him or anybody
else that there had been any division, or any request by Cowgill for
half the fee, or any demand made by Cowgill for one of the $10,000
notes. He also said that in response to questions he may hâve told
Mr. Smith, at the interview had in August, 1916, that he understood
a question would arise concerning the fee, but that he said he had
nothing to fear about it; that he had not told Mr. Smith that it had
been understood between him and Cowgill that there was to be a di-
vision of the notes ; that there was a good deal of talk between him
and Mr. Smith, and that hc told Mr. Smith that he had seen Cowgill,
and that Smith said suit would be brought, and that Cowgill suggested
a submission to arbitration, so that, if Johnson was entitled to any-
JOHNSON V. COWQUiL 311
(262 F.)
thing, he was ready to give it to him, and that the matter might be ad-
justed without litigation. Witness also said that he let the $10,000
matter drift, and carried the matter along as an asset coming to the
firm ; that he knew Cowgill was embarrassed in having to carry the
Johnson trust, and had not received the money due him ; that when he
spoke of arbitration he believed that his firm would get the money,
as he knew they were entitled to it, and that arbitration was a sug-
gestion made by Cowgill to him to avoid litigation. Witness said he
was 77 years old.
Cowgill said that he advised Johnson to employ Denson, whom he
had known for many years and whom he believed capable and reliable ;
that he introduced Johnson to Denson, and at Johnson's request was
présent when they talked about what fee should be paid to Judge Den-
son; that when the properties were finally recovered he knew notes
had been given to Judge Denson, because they were brought to him to
be "accepted" by him as trustée; that neither of the notes came into
his possession until the law firm made application for the $6,000 loan,
about February, 1912 ; that when this sum was borrowed, one of the
notes was handed to him as security for the $6,000, and the other still
remained in the possession of the law firm ; that af terwards, when the
bank of which Cowgill was président Consolidated with another bank
in June, 1912, objection was made to taking over the attomeys' note
secured by the Johnson trust, because the Johnson trust also owed the
bank, whereupon Cowgill said that he would see that the note was tak-
en up, and accordingly about May 22d he took up the note, paying the
firm $10,000 on the first note eut of his own funds; that when this
was done he told Judge Denson of the objections to the firm's obliga-
tion, and that he would take up the $6,000 note, if Denson would al-
low him to take the other $10,000 note, "so that it could not come up
against the trust, and we could not be forced to pay it at any time";
that he wanted to hold such other note until he got his own money out
of the trust, as it was hardly f air that they should get ail their money
out of the trust, when he personally had to carry the trust and could
not get his own money.
Cowgill denied positively that there was any agreement or under-
standing with the firm for a division of the $20,000, or that he had
ever made any claim to any part of such sum. He said : That on No-
vember 8th he received $20,000 and interest, which was credited on
the books to the notes. That the trust then owed him a large sum.
That he put the papers in connection with certain estate transactions
in an envelope and wrote upon it as follows: "Agreement Frank H.
Johnson; due Denson $10,000; interest 6^0 from 5/1/12." That
this writing was madè about May 1, 1912, and prior to June Ist.
On cross- examination Cowgill said that he never saw the notes until
he was called upon to approve and accept them; that the first note
was given to him as président of the bank about February 1, 1912,
and tihat he got the second note the latter part of May, 1912, when he
took up the two notes, paid the cash on the first, and took the second
with the understanding of carrying the one if he would give him the
cther to be held until he got his money out of the estate ; that he first
312 2G2 FEDERAL REPORTER
learned of the demand of Johnson for the payment of $10,000 after
Mr. Smith had interviewed Judge Denson.
A. E. Cooley, of the firm of Denson, Cooley & Denson, said: That
under date of July 7, 1911, he entered in the ledger as follows: "To
retainer and services in settlement of gênerai business in connection
with the estate of Frank S. Johnson, $20,000." That thereafter, under
date of November 1, 1911, entered as follows: "Promissory note for
services in settling claim against estate of Johnson et al., to be received
as payment when notes actually paid, $20,000." And again, on May
22, 1912, as follows: "h. I. Cowgill, $10,035." Witness said that the
notes were given to him by Judge Denson about November, 1911, and
that they remained in the firm safe until February 1, 1912 ; that he
then took the first note for $10,000 to the bank, with their own note,
and borrowed $6,000 already referred to; that Judge Denson was
mistaken when he said he had indorsed both notes, as the second note
never was indorsed by Judge Denson ; that on February 1, 1912, the
cashbook of the firm shows the loan f rom the bank and a division of the
$6,000 among the members of the firm ; that the other note remained
in the safe until Judge Denson had to do with.it in May; that he never
consented to any division of the fee, and urged Judge Denson to col-
lect it; that no statement ever was made by Judge Denson of any
agreement to give part of the fee to Cowgill ; that Judge Denson said
that Cowgill was a friend of the firm, and that it waS hard to urge him
to pay the money immediately.
H. B. Denson, also a member of the firm, said that the one note was
tumed over to the bank when the $6,000 loan was made to the firm,
and that the other note remained in the safe until the elder Denson de-
livered it to Cowgill ; that he never knew of any arrangement for di-
vision, and that his father never told him there was any such arrange-
ment ; that he frequently spoke to his father about collecting the note,
but that his father said that he could not press Cowgill, but that they
would get it as soon as affairs were straightened up.
The évidence showed entries in the cashbook of the Johnson trust,
the entries having been made by the bookkeeper under the direction of
Cowgill. Among the items are thèse :
"November 2, L. I. Cowgill, bills payable, on account of note of Denson,
Coole.y & Denson, $10,000;" sanie date, "To L. I. Cowgill, bills payable, In-
terest note Denson, Cooley & Denson, $10; November 6, bills payable, L. I.
Cowgill, second note of Denson, Cooley & Denson, $5,000; November 8, L. I.
Cowgill, bills payable, balance account of note Denson, Cooley & Denson,
$5,000 ; interest paid in fuU, $6.07."
[1-3] It is clear that the firm of Denson, Cooley & Denson made
their contract for professional services with Johnson as an individual,
and at a time before the firm became attorneys for the Johnson trust.
It is also évident that in May, 1912, Cowgill paid the first note out
of his own private funds and there is strong évidence to support the
view that, as a part considération for the payment so made by Cow-
gill, Judge Denson agreed that Cowgill could hold and use the other
$10,000 note until such time as he would be paid sums which he had
advanced to the Johnson trust. From a strict evidential standpoint it
JOHNSON V. COWGILIi 313
(262 F.)
"was therefore încumbent upon Johnson to prove that there was an
agreement between Denson and Cowgill to share the $20,000 fee to
be paid for services to be performed under the agreement with John-
son. But we hâve examined the case without adhering to close dis-
crimination as to who holds the burden of proof, for upon principle
in the dealings between Denson and Cowgill and Johnson the lawyers
and Cowgill were under the strictest obligation to be perfectly true to
Johnson and to the trust, and we readily concède that, if it were es-
tablished that Denson gave the $10,000 note to Cowgill, the plaintiff
should hâve a decree. But there is no substantial direct évidence upon
which to base a finding that Cowgill ever made any profit from the
trust estate on the notes involved in this litigation.
There is testimony that Judge Denson admitted to Mr. Smith and
Air. Berry that he had divided the fee with Cowgill. Judge Denson,
however, positively denied ever having made any admissions of such
character, and he gave an explanation of his connection with the notes
which, if crédible, is not inconsistent with rectitude and integrity. If
there had been a gift of the note to Cowgill, or if there had been any
arrangement whereby Cowgill was to receive any part of the fee,
would it not hâve been natural that he should hâve told his partners,
and not concealed the matter from them? What motive could hâve
existed for such a violation, not only of obligation to gênerai morality,
but of f air dealing to his partners, one of whom was his son ? None is
proven. Mr. Smith, evidentlv feeling a deep sensé of outrage at the
report that Cowgill and Denson had made such arrangement, and
acting under the belief that it was true, arraigned Judge Denson, and
says that Denson admitted that he had divided with Cowgill ; yet Mr.
Smith says that Judge Denson more than once stated that he had kept
himself "in the clear" or "out of the grease."
Inasmuch as even a sHght mistake or error of recollection by Mr.
Smith might alter the effect of the statements, we look to circumstances
to aid us in reaching the proper resuit; and as indicating fallibiHty
in the recollection of Mr. Smith we find that Mr. Smith said that Den-
son told him that he drew the notes and that Cowgill brought them back
to him ail signed, and that he (Denson) took one and indorsed it and
handed it to Cowgill, and had not seen the notes thereaf ter ; whereas
Cooley testified that the notes were Tsoth handed to him by Judge Den-
son about November, 1911, and were both put in the safe, and remained
there in the office of the law firm until February 1, 1912, when the $6,-
000 loan matter came up, and he himself indorsed one of the notes,
and personally delivered it to the bank, and received a crédit to the ac-
count of the firm of $6,000. As corroborative of this statement of
Cooley, there is évidence that there is an indorsement of Denson, Cool-
ey & Denson by Cooley in his handwriting, and a waiver of protest and
demand and notice on the notes. This évidence also shows that Judge
Denson erred when he said he had indorsed both the notes. But, fur-
thermore, the cash book of the firm of Denson, Cooley & Denson shows
that on February 1, 1912, the firm received $6,000 loan from the bank
and that the $6,000 was divided among the members of the firm. More
than this, Mr. Denson, the younger, says that he knew that the notes
314 262 FEDERAL REPORTER
were left in the office of the firm and put in the safe in Mr. Cooley's
room, and that they remained there for several months, or until about
February, when the $6,000 note was made, and that afterwards the
$10,000 note was delivered by the elder Denson to Cowgill.
We therefore hâve, upon the vital question, the positive déniai
of Judge Denson that he ever made the statements attributed to him
by Mr. Smith and Mr. Berry, and his affirmative statement that there
never was any agreement or understanding that Cowgill was to hâve
any part of the fee ; also the positive statement by Cowgill that no ar-
rangement of any kind for division of the fee was made by him with
Judge Denson, and that it was understood that he was only to hold the
second note until he could collect the money due him from the Johnson
trust estate. Upon this point, and confirming the testimony of Cowgill
there is the envelope in which Cowgill had put certain papers for final
settlement of the Johnson trust, upon which Cowgill had indorsed what
is in effect acknowledgment of an indebtedness to Denson, Cooley &
Denson upon the second $10,000 note. Cowgill, when the trust was
wound up, charged Johnson with the second note and with interest
thereon to maturity. It is also shown that payment of this second note
was made to Cowgill ; he having charged the trust with the payment
of both notes, and having assumed the obligation to the law firm, de-
ferring payment of the second note until he could get his money from
the trust, payment of which sum was not made until subséquent to the
institution of this suit.
There is the further évidence of Cooley and Denson that no infor-
mation was ever given to them by Judge Denson that there had been
any agreement of division with Cowgill. When we weigh this évidence,
it leads to a judgment, in accord with that of the District Court, that
there never was any agreement made with relation to a division of the
fee between Cowgill and Denson. A contrary conclusion could be
founded only upon the view that the elder Denson had willfully com-
mitted perjury in his déposition, that Cowgill had also deliberately
perjured himself, and that the two had combined in a wicked purpose
to deceive Johnson and to enrich Cowgill, the trustée of the Johnson
trust. It would also hâve to be founded upon the premise that Den-
son, a lawyer of presumably good character, had wrongfully conceal-
ed from his associâtes ail knowledge of a matter in which they were
deeply interested, morally as well as financially, and concerning which
he should hâve fully informed them.
In conclusion, after a very attentive examination of ail of the testi-
mony, our opinion is that the findings of the District Court must be
sustained, and that the dismissal of the complaint, without costs to
either party, was right.
Affirmed.
STANDARD AMERICAN DREDGMG CO. V. CITY OP OAKLAND 315
(262 F.)
STANDABX) AMERICAN DREDGING CO. v. CITY OF OAKLAND.
(Circuit Court of Appeals, Ninth Circuit January 5, 1920.)
No. 3336.
OONTEACTS <©=»231(2) — Dbedgeb kntitled undeb contract to hau compes-
SATION rOE MATBBIAL DBEDGBD BEYOND THE SPECIFIKD ABEA.
Under a contract provldlng for the dredging of a channel of specified
wldth and depth, held, that three classes of material were to be subjected
to half measurement and paid for accordingly: First, material dredged
from below specified depths, deflnltely flxed as In tlie channel; second,
material dredged from the specified area as marked by the city engineer
beyond the flxed limits of the channel ; and, thlrd, the aide slopes from
tËe specified area at the specified rates of flatness.
In Error to the District Court o£ the United States for the Second
Division of the Northern District of Cahfornia; Frank H. Rudkin,
Judge.
Action by the Standard American Dredging Company against the
City of Oakland. Judgment for défendant, and plaintifï brings error.
Affirmed.
Samuel Knight, F. Eldred Boland, and C. Irving Wright, ail of San
Francisco, Cal., for plaintifï in error.
H. L. Hagan, City Atty., and John Jewett Earle, Asst. City Atty.,
both of Oakland, Cal., for défendant in error.
Before GILBERT, MORROW, and HUNT, Circuit Judges.
HUNT, Circuit Judge. This action involves the construction of
certain clauses of a dredging contract between the Dredging Com-
pany, plaintifï in error, and the city of Oakland. The contract called
for work specified as sections A, B, and C, and the présent litigation
arises out of work done virithin what is called section C, an approach
channel in Oakland harbor. The spécifications required that the ap-
proach channel hère involved should be dredged to a depth of 25
f eet below low tide, the bottom width to be not less than 300 f eet, and
that the eut in the section (C) should be continuons from the south-
easterly end of section B. "Top widths of said section shall be such
as slopes may assume." Included in the spécifications was the follow-
ing paragraph :
"Material dredged from below the specified depths or frora beyoud the
specified areas as marked out by the city engineer, and slde slopes therefrom at
rates not flatter than one vertical to four horizontal, will be estimated at
half the actual volume of excavation and paid for accordingly: Provided,
however, that no payment will be made for material dredged from below a
depth of one foot below the specified depth, nor from a distance of more
than ten feet beyond said flattest limits of slope for sald specified areas to be
dredged. AU material must be removed down to the depths spedfled over the
whole area to be dredged."
Over 37,000 cubic yards of material were excavated on the side
slopes in the area not flatter than one vertical to four horizontal,
which was estimated at half the actual volume of excavation and paid
(gsisFor other cases see same f.oplo & KEY-NUMBBR in aU Key-Numbered Dlgests & Indexes
316
262 FEDERAL REPOHTEK
for accordingly. The Dredging Company contended that it was en-
titled to full rates, but the District Court found in favor of the de-
fendant city.
The annexed diagram, Figure 1, illustrâtes the situation, and we use
the gênerai explanation of the situation given in another, but similar,
case hereinafter cited.
FIGURE 1
In the eut a section of vertical plan of the channel îs represented.
The rectangle A B C D represents the specified area as marked out
by the city engineer, having a width of 350 feet and vertical sides of
25 feet in height. By the plan the dredging is to be performed within
this area and the material is to be removed therefrom; the side "slopes"
being such as the material naturally "assumes" in the course of op-
érations. The Unes E B, K B, L B, M B, N B, O D, P D, and F D
represent some of the side slopes from the specified area assumed by
the material in the course of the dredging opérations; B E and F D
being lines at the angle of one vertical to four horizontal, the flattest
limits for each payment as àllowed. The actual side slopes, however,
may lie without this limit, and the lines G H, H I, and I J represent
the extrême of pay work ; that is to say, an excess depth of one f oot
and an access width on each side of the channel of 10 feet beyond
the one by four slope. The line R S is drawn to indicate the actual
channel dredged, as was in places the case, beyond the horizontal and
vertical limits for which payment could be made.
No dispute arises concerning excavation performed within the area
of main channel A B C D. Certain other matters as to payments for
material are conceded, so that the question for décision narrows to
this : Is payment due for material dredged from the side slopes that
is not within the lines E B A C D F upon the basis of full measure-
ment or half measurement of the quantity removed?
In the solution of the matter we hâve been greatly aided by the
careful and analytical opinion of the District Court of Appeal of
California in Standard American Dredging Co. v. City of Oakland, 30
Cal. App. 237, 157 Pac. 833, an action involving the same question
upon the same contract and between the same parties as are now here-
in before the court; the only différence being that the suit in the
State court was brought to recover upon a différent installment claim-
ed to be due. After discussion of the features of the contract work,
the court, through Judge Chipman, said:
'•It seems to us that the natural and grammatical construction of the spéci-
fications is, as claimed by défendant, and as was held by the lower court, that
three classes of material were to be subjected to half measurement and paid
for accordingly, namely; '(1) Material dredged from below the specified
STANDARD AMERICAN DREDGING CO. V. CITY OP OAKLAND 317
(202 F.)
depth' ; that Is, depths that were definitely fixed — as in the cliannel. '(2) Ma-
terial dredged from the speeifled area as raarked out by the city engineer';
that is, beyond the flxed Unes o£ the channel. '(3) Side slopes therefrom (from
the speeifled area) at rates not flatter than one verticai to four horizontal, with
a proviso that no payment would be niade for material dredged beyond cer-
tain vertical and horizontal Unes.' That is, the phrase, 'will be estimated at
half the actual volume of excavation,' is qualifled by vrhat précèdes it and
relates to dredging 'below speeifled depths,' to dredglng 'from beyond the spee-
ifled areas,' and to 'side slopes therefrom [from the speeifled area] at rates not
flatter than one vertical to four horizontal.' And the limiting clause whicli
follows seems to confirm this view, for it expressly provides 'that no pay-
ment vpill be made for material dredged from a depth of one foot below the
speeifled depth nor from a distance of more than 10 feet beyond said flattest
limlts of slope for said speeifled areas to be dredged.' The parties understood
that side slopes were inévitable, and dredging to some extent below speeifled
depths, for the exact depth could not always be maintained, and so a limit as to
<lepth beyond which no payment would be made was provided for, and a one-
half rate was fixed for dredging on slopes not flatter than one to four, and no
payment would be made for material dredged 'from a distance of more than
10 feet beyond' this slope of one to four. We are unable to accept plalntlff's
construction, for by it there would be no material subject to half measure-
Jiient, except such as was situated beyond the area speeifled by the city en-
gineer and also beyond 'the side slopes therefrom.' Grammatically, as the spéc-
ifications are phrased and punctuated, the verb 'will be estimated' had for its
subject material 'from beyond the speeifled depths' and from beyond the
Bpecified areas, and, ns a ftjrther subject, the 'side slopes.' "
The Dredging Company argues that the meaning of the contract
and spécifications is that the words "specified area" necessarily refer
to the area theretofore specified in the spécifications, namely, the area
inckided between the bottom width of 350 feet and the top width such
as the slopes may assume. They also say that diflSculty with respect
to the words "specified areas" has arisen from the parenthetical in-
sertion of the words "as marked out by the city engineer" between
the words "specified areas" and the words "side slopes therefrom,"
and they contend that the disjunctive "or" séparâtes the phrase "ma-
terial dredged from below the specified depths" from the phrase "ma-
terial dredged from beyond the specified areas," and that the con-
junctive "and" conjoins the phrase "material dredged trom beyond
the specified areas" with the phrase "side slopes therefrom."
We cannot adopt this reasoning. The omission to include the word
"beyond" before the words "side slopes" indicates that the parties did
not in tend to provide that the material stibject to half measurement
should be only that which was removed from an area lying both beyond
the specified areas as marked out by the city engineer and beyond
the side slopes therefrom. Without attaching too much importance
to the punctuation, it is nevertheless to be observed that there are
commas after the word "engineer" and after the word "horizontal."
This would indicate that the draftsman of the contract thought it nec-
essary to sépara te the words "side slopes" from grammatical con-
nection with what immediately preceded it ; that is, "beyond the spec-
ified areas as marked out by the city engineer." The préposition
"beyond" does not govern the words "side slopes," and it is quite
clear that the items of work to be estimated at half the volume are
"material dredged from below the specified depths or from beyond
318 262 FEDEBAL REPORTER
the specified areas as marked out by the city engineer," and "side
slopes therefrom at rates not flatter than one vertical to four horizon-
tal." Two subjects of the verb "will be estimated" are apparent,
namely, "material" and "side slopes"; material being of two classes,
one "from below the specified depths" and the other "from beyond
the specified areas." If the parties had intended that material between
the specified area and the fiattest limit of slope was to be measured
at full quantity, it would not hâve been necessary, in designating what
material should be measured at half quantity, to refer to material
dredged "from beyond the specified area." The use of the conjunctive
"and" following the comma placed after the word "engineer" was
to join the two subjects of the verb "will be estimated," namely, "ma-
terial" and "side slopes."
The contention that the side slopes were part of the specified area
is not well founded, because as pointed out by the opinion of Judge
Chipman, the only lines which the city engineer could mark out were
the vertical lines of the channel.
We do not think it necessary to elaborate further than to say that,
after a careful reading of the opinion of the appellate court of the
State, we are satisfied that the construction adopted by that court is in
accord with grammatical rules and harmonizes with the évident intent
of the parties. The Suprême Court of the state refused to transfer
the cause for further hearing after the décision of the appellate court.
Under the circumstances this court will adopt the construction put
upon the contract by the appellate court, and our judgment will be
entered in a way to conform to that made by the State tribunal.
The judgment is affirmed.
In re KING. MOOBE v. BAENES. SAMB v, EMPIRE TIRE & RUBBER CO.
(Circuit Court of Appeals, Nlnth Circuit. January 5, 1920.)
No. 3293.
1. Bankeuptct <S=> 140(3) — One delivebing tires to bankbupt, to be kept
SEPARATB FEOM BANKBUPT'S STOCK, ENTITUSD TO EECLAMAIION.
Wlere, after dissolution of partnership and notice, the retiring partner
delivered to the bankrupt, who contlnued In business, automobile tires,
whleh were to be kept separate from the bankrupt's gênerai stock, and
were to be sold for the beneflt of the retiring partner, etc., held that,
under the circumstances, the retiring partner might, on bankruptcy, claim
unsold tires as against the trustée.
2. Bankeuptct <g=>140(8) — One delivering qoods to bankbupt on oonsign-
MENT for saij; entitled to eeclamation.
One deliverlng goods to bankrupt on consignment for sale held, in view
of the transactions between the parties and the fact that there was no
holding out by the consignor which would enable the consignée to com-
mit any fraud on the public, entitled to reclalm the goods on bankruptcy,
notwlthsfanding there was no express agreement that tltle should not
pass or that the goods should be returned, etc.
igsjFor other cases see same topio & KBT-NUMBER In ail Key-Numbered Digeste & Indexes
m EB KING 319
(262 F.>
Appeal from the District Court of the United States for the South-
ern Division of the Southern District of California; Benjamin F. Bled-
soe, Judge.
In the matter of George H. King, individually, doing business as the
George H. King Rubber Company and also as the George H. King
Tire Company, bankrupt. Claims of D. D. Bames and the Empire
Tire & Rubber Company, a corporation, for réclamation of tires and
accessories, were allowed, and in each case William H. Moore, Jr.,
trustée in bankruptcy, appeals. Judgment in each case afïirmed.
Bicksler, Smith & Parke, of Los Angeles, Cal., for appellant.
Jesse F. Waterman and John W. Kemp, both of Los Angeles, Cal.,
for appellees.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
ROSS, Circuit Judge. There are two appeals in this case — one by
the trustée from the judgment in favor of Barnes, who claimed by
pétition of the trustée certain automobile tires and accessories; and
the other an appeal by the tinjstee from the judgment in favor of the
Empire Tire & Rubber Company for the réclamation of certain other
tires and accessories, ail of such property being claimed by the trus-
tée to belong to the bankrupt. The two cases are brought hère and
submitted on one record.
[1] It shows that Bames and King-had been carrying on business
at 1331 South Main street, in the city of Los Angeles, as partners
under the firm name of George H. King Rubber Company — Barnes,
it seems, having put in ail the money — which partnership was dis-
solved November 14, 1916; due notice of such dissolution being pub-
lished November 27, 1916. King continued business at the same place,
and on the day of the publication of the notice of dissolution of
partnership Bames and King entered into a written agreement re-
citing that Barnes liad delivered to King "at his automobile tire store
at 1331 South Main street, in the city of Los Angeles, California, a
number of automobile tires, each suitably tagged and separately num-
bered, of différent sizes, différent makes and values, the number, val-
ue, and size of which fully appeared on" certain annexed exhibits at-
tached to and made a part of the contract, which contract provided
that King should use his best efforts to sell the tires at his place of
business, and would account to and pay to Barnes, upon request, the
price and account for each tire so sold, as specified on the exhibits, re-
taining any excess of the amount or amounts so specified as his com-
mission for selling the tires. The contract further provided that King
should keep such tires "separate and apart from other tires which he
may hâve for sale, and to keep a separate and distinct sales book,
showing the sales of ail tires belonging to" Barnes, which book, as
well as the inventory of the property, should be open to the inspection
of the latter. The contract further provided, among other things, that
Barnes guaranteed only the title to the property, and that the tires
should not, without his consent, be removed by King to any other lo-
cation for sale. The contract contained this further provision :
320 262 FEDERAL EDPORTEB
"It Is distînctly understood that the title to sald tires îs to and does remaln
in sald flrst party [Barnes] until the same are sold, and nothing herein shall be
eonstrued as a sale by flrst party to second party [King] of said tires ; no time
belng specified as to how long sald second party shall bave an opportunity of
selling sald tires, but it Is agreed that it shall be a reasonable length of time,
depending upon the success which second party shall havé in selling the same."
In both of the cases the contention of the appellant is that the appli-
cation to them of the décision of this court in the case of Miller Rub-
ber Co. et al. V. Citizens' Trust & Savings Bank, 233 Fed. 488, 147
C. C. A. 374, requires a reversai of the judgments given,by the court
below. As respects the Barnes Case, we think it clear that this is
not so. In that case, after referring to the case of Ludvigh v. Am.
Woolen Co., 231 U. S. 522, 528, 34 Sup. Ct. 161, 58 L. Ed. 345, and
the décision of this court in the case of General Electric Co. v. Brower,
221 Fed. 597, 602, 137 C. C. A. 321, 326, where it was held that, "to
constitute a sale, there must bave been in the contract a vendor and
a vendee, and a provision for a transfer of property by the vendor
to the vendee, and an obligation by the vendee to pay an agreed price
therefor, or the circumstances outside of the contract must bave been
such as to show that it was the intention of the parties to make of
the contract a fraudulent concealment of an actual sale," we said (233
Fed. at page 491, 147 C. C. A. at page 377) :
"There were In neither of those cases such fraudulent circumstances ; but
we do not think that that can be afflrmed of the présent case, for hère, not
only was the agent permitted to'mingle the consigned goods with his own
stock, but the contract expressly provided that the consignors would furnlsli
the consignée 'free of ail charge ail samples of tires and accessories and neces-
sary advertlsing matter, imprinted with the name and address of the' coe-
signee. It is difBcuIt to see how the consignors could hâve more efCectually
held the consignée out to Its customers as the real owner of the consigned
property. To pern)it them to retake from the stock of the bankrupt the re-
maining portion of the consigned goods would, in our opinion, operate as a
fraud on the credltors of the bankrupt. We flnd confirmation of this view in
the failure of the consignors to fix by the contract the priées at which tho
agent could sell the goods to Its customers, and in their failure to therein
make any provision for the remitting to the consignors of the proceeds re-
ceived by It for the goods so sold ; the agent being required by the contract
to itself pay to the consignors for the goods so sold by It priées fixed on the
Invoice, less the déductions speciSed, and in the provision that, when th(>
agent desired, 'four nionths notes drawing Interest at 5 per cent, will be
aecepted by flrst parties in settlement for ail purchases made by second party
from flrst parties ; provided, however, that the total maximum of such notes
shall not exceed twenty-flve thousand dollars (?25,000) at any one time during
the flrst year of this contract, and that such maximum after the flrst year is
to be subject to the mutual agreement of both parties, but not less tban twenty-
flve thousand dollars ($25,000), unless crédit of second party beeomes Impaired.'
For the reasons stated, we think the court below was right in conflrming the
conclusion of the spécial master that, as to the credltors of the bankrupt, the
title to the consigned goods in question should be held to hâve passed to the
consignée."
In the Barnes Case there was in the contract between the parties,
not only no holding out of King to his creditors as the owner of the
consigned property, nor anything in the method provided therein for
the handling and sale of the property tending to deceive or defraud
any one, and no évidence of anything of that sort, but, on the contr^ry.
m RE EING 321
C262 p.)
the évidence shows that the tires were separately tagged and numbered,
and kept by King in his place of business separate and apart from
other tires.
[2] In the case of the Empire Tire & Rubber Company there was
a verbal agreement between the company and King that it would keep
him supplied with a small stock of tires on "consignment for sale,"
for which he would make a settlement each month "by payment of
an amount 20 per cent, less than the list price of the tires sold, with a
further 5 per cent, off of said list price for a settlement of accounts
within 30 days," as his commission. The findings are :
"AU goods delivered to King by the Empire Company were accompanied
with a statement bearing the heading 'Consigned Account,' and listing the
goods sent. The amount of the goods so consigned was also entered In the
books of account of the Empire Company, with the date, on a slieet marked
'Consigned Account, George H. King Rubber Company.' At the end of each
month, usually on the last day or two, a représentative of the Empire Com-
pany — at most times Mr. Jarman — went to King's shop and checked over the
stock of Empire tires on hand. Eeturnlng to the oflace of the Empire Com-
pany, It was the practlce to aseertain the amount of goods sold by King slnce
the last settlement, by comparing the list of goods delivered to him since that
time. The list of goods sold during the month, ascertained in this manner,
was then billed to King on a statement marked 'Regular Account,' which listed
the goods sold and their list priées, and stated the amount for which King
should account by deducting 20 per cent, from the total of the list priées, and
stated a discount of 5 per cent, for an acc:ounting made before 30 days. The
amount for which King was required to account was entered iu the books of
the Empire Company on a sheet marlied 'Kegular Account, George H. Ktng
Rubber Company.' This account was kept separately from the account marked
'Consigned Account.'
"The bill listing the goods aold during the month and stating the amount
required to be accounted for by lOng was presented monthly, usually in per-
son by Mr. Jarman, King made his payment by check to the Empire Company
regularly each month up to the Ist of September, 1917.
"No account of sales was made by King, nor sent to the Empire Company.
Shortages in the stock of tires on hand at his shop were fllled regularly by
the Empire Company after the monthly inventory of the stock ; sueh re-
plenishraents being made without any order from King. King sometlmes sug-
gested an increase or decrease in tlie stock of certain sizes or kinds of tubes or
casings, but he never placed orders for goods.
"There is no évidence of any express agreement to the efCect that the tltle
to the goods delivered by the claimant to King should remain in the claimant ;
nor is there any évidence of any express agreement providing for the return
at any time upon any conditions of goods unsold by King or remaining In
his hands.
"As receiver, the présent trustée took, and now as trustée holds, in his pos-
session ail the Empire tires in stock at King's shop. The tires so seized and
held are the tires desci'ibed in claimant's pétition, and were ail furnished to
King under the agreement and practlce above described."
The f act that there was no express agreement that the title to the
property delivered by the Empire Company to King should remain in
the former, nor for the return by King of such portion of it as re-
mained unsold by him to the consigner, does not show, nor, indeed,
tend to show, that the transaction between the parties was anything
more than the ordinary one of the consignment of personalty for sale,
nnattended, as it was, by any positive act of the consignor that can
262 F.— 21
322 262 FEDERAL REPORTER
be properly held to hâve enabled the consignée to commit any îraud
upon the public. Ludvigh, Trustée, v. Am. Woolen Co., 231 U. S.
522, 34_Sup. Ct. 161, 58 h. Ed. 345.
The judgment in each of the cases is affxrmed.
DCWSrOVAN V. UNIVEESAL MOTOR TRTJCK CO.
(Circuit Court of Appeals, Fîrst Circuit. January 6, 1920.)
No. 1407.
1. Sales <S=>479(8) — Evidence eegakdikg plaintiff's titlic and biqht to
POSSESSION JUET QUESTION IN CONDIUONAL SELLEB'S EEPLEVIN ACTION.
In replevln, based on a conditional sale eontract, évidence regarding
defendant'3 refusai to pay installment notes when due, etc., made a jury
question as to plaintlfl's title and right to Immédiate possession.
2. Saxes <g=547Ô(8) — Instruction in conditional seixeb's eeplevin action
ON LOSS or NOTE AS EKCUSE FOB NONPBESENTMENT.
In replevln action, based on a conditional sale eontract, an instruction
that the loss of an installment note would excuse its nonpresentment, If
platntiff made that fact Imown to défendant and ofEered him security
against further demands on it, was not error, since it was more favorable
to appellant défendant than was authorized by Eev. Laws Mass. & 73, §
87, relating to necessity of presentment.
3. Sales <g=479(8) — Instruction in conditional selleb's ekplevin action
ON dutï to pat notes not peesented because lost.
In a replevin action, based on a conditional sale eontract, an instruction
that defendant's absolute refusai to perform the eontract absolved plain-
tlff from the necessity of presenting for payment notes which thereafter
fell due was unduly favorable to plaintifF.
4. APPEW.L and ebbob <S=>1064(1) — Ebboneous instbuction on necessity of
PBESBNTING NOTES NOT PEEiJUDICIAL, IN VIEW OF DEFENSE MADE.
In replevln, based on a conditional sale eontract, an instruction that de-
fendant appellant's absolute refusai to perform the eontract absolved
plaintlff from the necessity of presenting for payment notes thereafter
falling due, while unduly favorable to plaintlff, was not prejudidal,
where défendant based his refusai to pay, not on the fact that the notes
had been lost, but on the unsatisfactory character of the article sold to
him.
B. Sales <g=>479(8) — Bequested instbuction in conditional selleb's be-
PLEVIN action not SUSTAINED BY EVIDENCE.
In a replevin action, based on a conditional sale eontract, a requested
Instruction that there was no évidence that plaintlff and the payée were
identical was properly refused, where there was évidence that the payée
was a selling dcpartment of plaintlff company.
In Error to the District Court of the United States for the District
of Massachusetts; James M. Morton, Judge.
Replevin action by the Universal Motor Truck Co. against Patrick
F. Donovan. Judgment for plaintiff, and défendant brings error.
Affirmed.
James H. Kenney, of Boston, Mass., for plaintifF in error.
John H. Powers, of Boston, Mass. (Henry W. Beal, of Boston,
Mass., on the brief), for défendant in error.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit
Judges.
©3i>Foi other cases see same toplc & KEY-NUMBBR in ail Key-Numbered DIgesta & Indexe»
DONOVAN V. UNIVERSAL MOTOE TRUCK CO. 323
(262 F.)
JOHNSON, Circuit Judge. This is a writ of error from a judg-
ment recovered by the défendant in error in an action of replevin.
For conveniencfi, the parties will be designated as they were in the lower
court.
The material facts in the case are thèse: On June 11, 1913, the
défendant entered into a contract to purchase of the plaintifï two Uni-
versal motor trucks, one to be deHvered forthwith and the other in
40 days or less. At the time of placing his order he made a pay-
ment of $100, on account of the purchase price of one of the trucks,
and upon the delivery of the truck made a further payment of $600,
and gave to the, plaintifï 12 notes, nine for $266.66, and three for
$133.35 each, ail aggregating $2,800, and payable to the Universal
Motor Truck Company of New York. They were made payable at
the Fédéral Trust Company of Boston, and when the first note became
due on July 19, 1913, it was there presented and paid. The remain-
ing notes were never presented for payment to the Fédéral Trust Com-
pany, and none of them had been paid when the action was brought,
and it was claimed at the trial that they were lost early in the fall of
1914.
The agreement under which the truck was purchased contained the
following provision:
"Upon failure of undersigned to make any payment provlded for herein, at
ttie tlme same Is due and payable, you, or any person by your order, may take
possession of and reraove said motor truck, with or without leave or process.
* • • It Is agreed that title to sald motor truck shall not pass to under-
signed until the priée thereof, or any judgment for ail or part of the same,
is paid in full, and that until such payment said motor truck shall remain
the property of the Universal Motor Truck CJompany."
Each note contained a similar provision in regard to right of posses-
sion upon failure of payment and the rétention of title.
There was a jury trial, and a verdict for the plaintifï. Upon ques-
tions submitted to them the jury found specially that the notes given
by the défendant to the plaintifï had been lost ; that the défendant had
paid none of the notes in question given by him, except the one due
July 19, 1913, which was in évidence; that the défendant notified the
plaintifï's représentatives, before some of the notes became due, that
he would not pay such notes because of his dissatisfaction with the
truck.
The assignments of error are the refusai of the court to direct a
verdict for the défendant, and the refusai to instruct the jury, in sub-
stance, that, in order for the plaintiff to prevail, it was necessary to
prove that the séries of notes signed by the défendant, when due, were
presented to the Fédéral Trust Company at Boston, and there not paid ;
also that there was no évidence that the Universal Motor Truck Com-
pany of Détroit, Mich., and the Universal Motor Truck Company
of New York, are identical.
[1] Under date of August 19, 1913, James H. Kenney, acting as
attorney for the défendant, wrote the following letter to the plaintifï :
"I understand that one of his notes was due to-day, and I hâve advlsed hlm
not to pay It, because, as I understand it from his statenient, the damage
324 262 FEDERAL REPORTER
which he has sustalned, being obligea to hlre another truck to do Lis work and
tbe inabillty of the truck which he has in hls possession to do the work, gre;itly
exceeds any amount due from him to you."
There was also évidence that in April or May, 1914, there was a
conférence at the office of the defendant's attorney in Boston, at which
the défendant and his attorney were présent, and also certain repré-
sentatives of the plaintif? company ; that at this conférence either the
défendant or his attorney said :
"Mr. Donovan would not pay any more notes; that the flrst one got throngU
the bank before they knew it, aud that they had notlfied the bank not to pay
any inore of them"
— that the défendant was then told that the unpaid notes had been lost,
and at this time several notes were not yet due.
We think there was substantial évidence of the plaintiflE's title and
right to immédiate possession to be submitted to the jury, and that
there was no error in the refusai of the presiding judge to direct a ver-
dict for the défendant.
[2] The learned judge of the District Court gave the requested in-
struction in regard to the necessity of présentation of the notes at the
place of payment at their maturity, in order to entitle the plaintiff to
recover, but with the qualification that this would not apply if they
should find that the notes had been lost ; that "the loss of a note would
be an excuse for nonpresentment, but in that event it would devolve
upon the plaintiff to make that fact known to the défendant and to
offer him security against further demands upon the note ; in other
words, against having to pay that note twice." This instruction was
more favorable to the défendant than authorized by the Revised L,aws
of Massachusetts, c. 73, § 87, and the décisions of its Suprême Court
(Carley v. Vance, 17 Mass. 389 ; Ruggles v. Patten, 8 Mass. 480, 483 ;
Tucker Mfg. Co. v. Fairbanks, 98 Mass. 101 ; Farmers' National Bank
v. Venner, 192 Mass. 531, 534, 78 N. E. 540, 7 Ann. Cas. 690), and the
following décisions of the Suprême Court of the United States : Wal-
lace V. McConnell, 13 Pet. 136, 10 L. Ed. 95 ; Brabston v. Gibson,
9 How. 263, 13 h. Ed. 131 ; Cox v. National Bank, 100 U. S. 704, 25
L. Ed. 739.
Under the Massachusetts statute, and under thèse décisions, the
défendant was in default, even if the notes were not presented for pay-
ment according to their terms, unless he could prove that he had of-
fered or given directions to pay them at the time and place of pay-
ment, and had continued ready and willing to pay them.
[3j 4] The jury were further instructed that if the défendant—
"uncondltlonally and absolutely declined to go on wlth the contract for tlie
purchase of the truck, the plaintiff had the right to take him at his word and
was absolved from the necessity of presenting for payment the notes which
thereafter fell due. * * » Unless you flnd that there was such a refusai,
your verdict should be for the défendant. If you flnd that there was such a
refusai, and that afterwards Instalhnents fell due and which were not paid,
not beeause the notes were not presented, but because the défendant had made
up his mind not to go on with the contract, and had so told the plaintiff, then
there was a breach of the contract which justifled the plaintiff In retakiug the
trnck, and your verdict should be for the plaintiff."
NATIONAL SURETY CO. V. LEPLOKE COUNTY, MISS. 325
f262 P.)
The jury found specially tliat the défendant had notified the plain-
tif! that he would not pay the notes, and that he had not paid them;
and while we think this instruction, so far as it relates to the duty of
the plaintiff to présent the notes for payment, was, as already indicat-
ed, unduly favorable to the plaintiff, the défendant clearly was not in-
jured by it. He testified that he did not know the notes were lost, and
although two représentatives of the plaintiiï testified that they told him
in April or May, 1914, after several had matured, that they had been
lost, his failure to offer to pay them, or make provision for their pay-
ment, could not bave been occasioned by his knowledge of their loss.
Neither was the notice given by his attorney to the plaintifif when the
second note fell due prompted by any knowledge that that note or the
other unpaid notes had been lost and could not be surrendered ; but the
only reason assigned by him for refusai to pay the notes was that the
plaintiflf had failed to deliver the truck contracted for, and that this
failure had catised his client greater damage than the balance of thé
purchase price which had not been paid.
[5] The remaining error assigned, which we think ît necessary to
consider, is the refusai to instruct the jury —
"that there was no évidence to show that the Unlversal Motor Truck Company
of Détroit, Mich., and the Universal Motor Truck Company of New York, are
identical."
There was évidence that the Universal Motor Truck Company of
New York was a selling department of the plaintifï company, and
theref ore the notes were made payable to it ; and there was no error
in refusing to give this instruction.
The judgment of the District Court is affirmed, with costs in this
court to the défendant in error.
NATIONAL SURKTY 00. v. LEFLOEE COUNTY, MISS., et aL
(Circuit Court of Appeals, Fifth Circuit. December 16, 1919.)
No. 3416.
1. Appeal ahd ebkor <®==3323(3), 330(1) — Failure to join codefendant,
wheek judgment is joint, fatal to jubisdiction, unless theee is a
6eveeance.
Wliere judgment is joint, failure to join a codefendant in the appeal,
in the absence of severauce, is fatal to the jurisdiction of the appellate
court, and will be notieed by it, tiiough no motion to dismiss the appeal
has been made.
2. JtlDQMENT <S=j532 — JUDGMENTS UNDEE MiSISSIPPI LAWS JOINT AND SEVEBAL.
Judgments and decrees under the laws of Mississippi are joint and
several, and not merely joint.
S. APPEAL AND EBEOB iS=»336(2) OmITTED PARTIES MAT BE BBOUGHT IN BT
AiTENDMEINT.
On proper application, a writ of error or appeal may be amended by t/ie
insertion of omitted parties.
®=3For other cases see same topic & KBY-NUMBER in ail Key-Numbered Digesls 6 Indexes
326 262 FEDERAL REPOETER
4. Appeai, and ebeoe ®='S23(2) — Stjeett need not join peincipax in appeal,
wherb thkee was no joint liability.
After a surety flled its bill against a bank and county to cancel a bond
whleh. the surety had signed to enable the bank to become a county de-
pository, the county flled a cross-blU against the surety and bank, and
recovered a decree against the two ; tlie bill of the surety being dia-
missed. Held that, as the bank asserted the validity of the bond, it waa
not necessary for the surety to join the bank in its appeal, or obtain
a severance thereto ; the Judgment under the laws of the state being joint
and several, and the bank occupying a position adverse to that of the
surety.
6. Depositaeies (®=>2 — Bond of bank named as county depositoby not
cancelable becatise ofticee of bank was membee of boabd of sttpee-
vis0b3 8electino bank.
A surety on the bond of a bank, which was named as county depository,
Is not entitled to bave the bond canceled because the bank was designated
as depository by a bare quorum of the board of supervisors, one member
of whlch was Interested in the bank and voted in the sélection, for, while
the désignation was unlawful and it was an offense for the Interested
superviser to vote, the bank could not hâve received county funds with-
out the exécution of the bond.
e. Depositaeieb <3=>13 — ^Lxability of bank as countt depositoet and
8UEETT ON IT8 BOND.
TJnder Laws Miss. 1912, c. 194, § 10, provlding that the board of super-
visors may employ counsel to enforce payment and collection of funds de-
poslted under its authority and charge the fées against the depository,
and that In addition the depository shall be liable in damages for delay in
paylng over funds, and the surety of the depository shall be liable for
Buch expense and dginages, the depository Is primarlly liable for the
attomey's fées and damages, and a surety on its bond is not liable for
such sums in excess of the amount of the penalty of the bond ; so, where
the surety failed to pay the amount of liablUty when incurred, the utmost
for which the surety can be held liable for its own delay is interest from
the date the liablUty was incurred on an amount not In excess of the
penalty of the bond.
7. Depositaeies <g=52, 13 — State can impose conditions on county deposi-
TOEY.
Laws Miss. 1912, c. 194, § 10, maklng public deposltories liable in case
of default for penalties for delay and for counsel fées, and also making a
Burety on the depository's bond liable tJierefor to the extent of the penalty
of the bond, is valid, and tbe depository and surety accepted such condi-
tions when they accepted the désignation as depository and executed the
bond.
8. Depositaeies <S=>14 — No necessitt foe demand on county depositobt
WHICH had CLOSBD DOOES.
Where a bank designated as county depository, after refusing to pay
couiity warrants, closed its doors, the county need not make demand, in
order to coUect damages and attomey's fées provided by law, etc.
9. Teial ®=>105(1) — Failuke to object to évidence of value of counsel
fees admit8 authoeity to employ counsel.
On cross-bill against county depository on its bond, providlng a penalty
and counsel fées for default, failure of surety to object to introduction
of évidence of value of coimsel feea admitted authority of county to employ
counsel.
Appeal from the District Court of the United States for the North-
ern District of Mississippi; Edwin R. Holmes, Judge.
Bill by the National Surety Company against Leflore County, Miss.,
and another. From a decree dismissing its bill, and granting relief
^=»Por other cases see same toplc & KBY-NUMBER In ail Key-Numbered Digests & Indexes
NATIONAL SURETY CO. V. LEFLORE COUNTT, MISS. 327
«262 F.)
to tbe county on its cross-bill, complainant appeals. Reversed and re-
manded, with directions.
John R. Tyson, of Montgomery, Ala., for appellant.
R. C. McBee, A. F. Gardner, and E. V. Hughston, ail of Green-
wood, Miss., for appellee.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges.
GRUBB, District Judge. This is an appeal from a final decree, dis-
missing appellant's bill of complaint, which was filed to cancel a bond
executed by appellant, as surety, in favor of Leflore county, in the
State of Mississippi, a municipal corporation, appellee, and also by the
Itta Bena Banking & Trust Company, as principal, and granting to
appellee Leflore county relief on its cross-bill, which sought the en-
forcement of the bond against the appellant and its codefendant, the
Itta Bena Banking & Trust Company. The Itta Bena Banking &
Trust Company had acted as depository of the public funds of Leflore
county, under a désignation claimed by appellant to hâve been void,
because its sélection was by a bare quorum of the board of supervi-
sors, one of whom was incapacitated to act, because he was a director
and stockholder of the Itta Bena Banking & Trust Company.
[1-4] It was called to the attention of the court upon the hearing
of the appeal that the Itta Bena Banking & Trust Company had not
joined in the appeal, and that there had been no summons and sever-
ance as to it. This court bas held, in the case of The Bylands, 231
Fed. 101, 145 C. C. A. 289, that the failure of a codefendant, where
the judgment is joint, to join in the appeal, in the absence of a sum-
mons and severance, was fatal to the jurisdiction of the court, and
would be noticed by it, though no motion to dismiss the appeal had been
made, following the case of Estis v. Trabue, 128 U. S. 225, 9 Sup. Ct.
58, 32 L. Ed. 437. In that case, however, the Suprême Court stated
that the ruie would not apply if the judgment or decree was distribu-
tive, so that it could be regarded "as containing a separate judgment
against the claimants and another separate judgment against the
sureties." Judgments and decrees, under the law of Mississippi, are
joint and several, and not merely joint.
It has also been held that on proper application the writ of error
or appeal may be amended by the insertion of the omitted parties. In-
land Co. V. Toison, 136 U. S. 572, 10 Sup. Ct. 1063, 34 L. Ed. 539;
The Mary B. Curtis, 250 Fed. 9, 162 C. C. A. 181 ; The Seguranca,
250 Fed. 19, 162 C. C. A. 191. In the case of Winters v. United States,
207 U. S. 564, 28 Sup. Ct. 207, 52 L. Ed. 340, the Suprême Court,
speaking of a case in which five of the défendants, who had defaulted,
were not joined in the appeal of other défendants, who had answered
and def ended the bill, said :
"The rule whleh requires the parties to a Judgment or decree to joîn In an
appeal or wrlt of error, or be detached from the right by some proper proceed-
Ing, or by thelr renunciatlon, is flrmly establlshed. But the rule only applies
to joint judgments or decrees. In other words, when the interest of a défend-
ant is separate from that of other défendants, he may appeal wlthout them."
328 262 FEDERAL REPORTER
The Suprême Court held that the default of the défendants, who did
net join in the appeal, separated their interest from that of the de-
fendants who answered and defended the bill, and, for that reason,
excused the appdlant from joining them in the appeal. The Suprême
Court in that case said:
"Joinder in one suit dld not necessarily identify them. Besides, the de-
fendants other than appellanta defaulted. A decree pro confesso was entered
against them,, and thereafter, according to equity rule 19 [29 Sup. Ct. xxvii],
the cause was reqiùred to proceed ex parte and the matter of the bill deereed
by the court. Thomson v. Wooster, 114 U. S. 104 [5 Sup. Ct 788, 29 L. Ed. 105].
The decree was in due course made absolute, and, granting that It might hâve
been appealed from by the defaulting défendants, they would hâve been as
said in Thomson v. Wooster, absolutely barred and preduded from questlon-
ing its correctness, unless on the face of the bill it appeared manifest that
It was erroneous and improperly granted. Their rights, therefore, were en-
tjrely diflferent from those of the appellants; they were naked trespassers,
and conceded by their default the rights of the United States and the Indians,
and were In no position to resist the prayer of the blU. But the appellanta
justified by counter rights, and submitted those rights for judgment. Thero
is nothing, therefore, in common between appellants and the other défendants.
The motion to dismiss is denied, and we proceed to the merits."
In the case of Orleans-Kenner Electric Ry. Co. v. Dunbar, 218 Fed.
344, 134 C. C. A. 152, this court said, in overruling a motion to dismiss
an appeal for nonjoinder of appellants:
"The interest of the rallway company whlch was aflected by the decree
rendered was so separate and distinct from that of the other défendant that
the former is entitled to maintain an appeal in which the latter does not join
Obviously, the pecuniary or proprietary interest acquired or claimed by the
grantee of such a privilège is very différent from that of the public goveni'
mental body whlch undertook to confer the privilège. * ♦ * rpjjg béné-
ficiai proprietary interest whlch the latter has in the privilège which it claima
to hâve acquired entitles it to maintain an appeal from a judgment or decree
adversely affeeting its interest, though the officiai body which undertook to
confer the privilège, and which was also a party défendant to the cause, does
not join in the appeal. Where the respective interests of several défendants,
which are affected by a Judgment or decree against ail of them, are separate
and différent, one of them may appeal without joining the others."
In this case, the Itta Bena Banking & Trust Company answered
appellant's original bill of complaint by denying the facts stated in it,
and that appellant was entitled to the relief asked in it ; i. e., the can-
cellation of the bond. There was therefore no identity of interest
between appellant and the Itta Bena Banking & Trust Company in the
subject-matter of the decree upon the original bill. The Itta Bena
Banking & Trust Company did not answer or défend the cross-bill
of the appellee Leflore county, and was in default upon the cross-
bill. There was nothing, therefore, in common between its position
and that of appellant, even upon the decree upon the cross-bill, for it
had arrayed itself on the other side of the litigation from appellant.
It was not, therefore, necessary that it be joined in the appeal, or a
severance had as to it.
[5] The question on the merits of the appeal is whether the invalid-
ity of the proceeding through which the Itta Bena Banking & Trust
Company was selected as a depository for the funds of Leflore county
avoided the bond executed by appellant as surety, for the purpose of
NATIONAL SUBETY CO. V. LEFLORB COUNTÏ, MISS. 329
<262 F.>
securing the funds of the county deposited with the bank. It may be
conceded that the appointment was void, and that the interested super-
visor, whose vote was necessary to the désignation, was guilty of an
offense in casting his vote, according to the Constitution and laws of
the State of Mississippi. It is, nevertheless, undisputed that the de-
pository was commissioned, entered upon the discharge of its duties,
and received funds of the county under color of its office, which it
failed to account for. It was enabled to do thèse things by virtue of
the bond which the appellant, as surety, had executed with it. But for
the fîling of the bond, it could neither hâve been commissioned as de-
pository nor received the county's funds in that capacity. In view of
thèse undisputed facts, we think the appellant cannot assert, as against
the county, the invalidity of the appointment of the depository and of
fidelity bond; this not merely because the bond reclted the appoint-
ment, but because by reason of the exécution of it, and its delivery to
the county, in considération of a premium paid to the appellant, the
loss of the funds deposited was brought about. We think the weight
of reason and authorities support this conclusion. Of the many cases
so holding we cite and quote from one only. In the case of United
States V. Maurice, Fed. Cas. No. 15747, 2 Brock. 96, Chief Justice
Marshall said :
"Admitting the appointment to be Irregular, to be contrary to the law and
Its policy, wliat Is to be the conséquence of this irregularity? Does it absolve
the person appointed from the légal and moral obligation of accounting for
public money which bas been placed in his hands in conséquence of such ap-
pointment? Does it authorlze him to apply money so received to his own use?
If the policy of the law condemns such appointments, does it also condemn the
payment of money received under them ? Had this subject been brought bef ore
the Tjègislature, and the opinion be there entertalned that such appointments
were illégal, what would hâve been the probable course? The Secretary of
War mlght hâve been eensured; an attempt might hâve been authorized to
make liim ultiraately responsible for the money advaneed under the illégal
appointment; but is it crédible that the bond would be declared void? Would
this hâve been the policy of those who make the law? Let the course of
Congress in another case answer this question. It is declared to be unlawful
for any member of Congress to be concerned in any contract made on the
part of the United States, and ail such contracts are declared to be void.
What is the conséquence of violating this law, and making a contract against
its express provisions? A fine is imposed on the violator, but does he keep
tlie money received under the contract? Far from it The law directs that
the money so received shall be forthwith repaid, and, in case of refusai or
delay, 'every person so refusing or delaylng, together with his surety or
sureties, shall be forthwith prosecuted at law, for the recovery of any such
sum or sums of money advaneed as aforesaid.' If, then, this appointment be
contrary to the policy of the law, the repayment of the money under it is not,
and a suit may, I think, be sustained, to coerce such repayment on the bond
given for that purpose."
[6] We conclude that the District Court correctly entered a decree
dismissing the original bill, and in favor of the appellee on its cross-
bill in some amount. The penalty of the bond was $15,000. The stat-
ute of Mississippi (section 10, c. 194, Laws Miss. 1912) provides
that the board of supervisors is authorized to employ counsel to
enforce the payment and collection of funds deposited under its au-
thority, and to charge such counsel fées against the depository, and in
33Q 262 FEDERAL RBPOKTEB
addition thereto that the "depository shall be liable for damages at
the rate of one per cent, per month for any delay in paying over any
county funds when lawfully demanded, and the bond of any depository
shall be liable for said expenses and damages." The District Judge
awarded damages by way of delay and counsel fées in excess of the
penalty of the bond and légal interest on it, from the date the liability
was incurred, upon the theory that the penalty and counsel fées were,
by the statute, inflicted primarily upon the surety, as well as upon tht
depository. We think the statute imposes damages by way of penal-
ty for delay and counsel fées for collection primarily only upon the
depository, and not upon the surety. The defaults punished by the
statute are those of the depository alone by the very terms of the
statute, and the damages and counsel fées are imposed upon the de-
pository, and it alone.
The statute, however, makes the bond of the depository stand as
security for such damages and counsel fées, just as it does for the
moneys deposited and unaccounted for. Clearly the total liability for
the acts of the depository secured by the bond and recoverable from
the surety cannot exceed the penalty of the bond. We think, there-
fore, the District Court erred in awarding damages and counsel fées,
which, together with the moneys deposited and lost, exceeded the pen-
alty of the bond and légal interest from date of accrual of liability.
We think the proper rule to be applied would limit the entire damages
for which the surety was liable to the appellee for the defaults of his
principal to the amount of the penalty of the bond. If the surety failed
to pay the amount of the liability when it was incurred, the utmost for
which it could be held liable for its own delay, as distinguished from
that of its principal, the depository, would be interest at the legâl rate
from the date the liability was incurred (in this case May 28, 1913)
until the rendition of the decree, upon an amount not in excess of the
penalty of the bond.
[7] We think it was compétent for the Mississippi Législature to
provide that public depositories should be liable in case of default for
penalties for delay and for counsel fées. The terms of the statute in
this respect enter into the contract between the county and the deposi-
tory. The depository was free to accept or reject this added liabihty.
For a like reason it was compétent for the Législature to provide that
the depository's bond should secure the penalties and counsel fées to
the extent of the penalty of the bond. The surety accepted the added
responsibility voluntarily, by executing the bond, with knowledge of
the terms of the statute. Fidelity & Deposit Co. v. Wilkinson County,
109 Miss. 879, 69 South. 865 ; Fidelity Mutual Life Insurance Co. v.
Mettler, 185 U. S. 308, 22 Sup. Ct. 662, 46 L. Ed. 922.
[8, 9] The refusai of the depository to pay the warrants of the ap-
pellees and the closing of its bank excused a demand on the depository.
Fidelity & Deposit Co. v. Wilkinson County, 109 Miss. 879, 69 South.
865. It was therefore liable for the statutory penalty and counsel fées,
and as the counsel fées alone, in addition to the moneys deposited and
unaccounted for, exceeded the penalty of the bond, the entire penalty
of the bond was a liability of the depository secured by the bond on
8. H. KBESS & CO. V. UNDSEY 331
(262 F.)
which appellant was surety. The cross-bill averred the employment
of counsel by the county, and this averment was not put in issue or de-
nied by appellant, and required no proof to sustain it.
Evidence of the reasonableness of counsel fee was not objected to
by appellant, when offered by the appellee. It could hâve been ma-
terial only in the event the employment of counsel was authorized, and
failure of appellant to object to it constituted a tacit admission of au-
thority.
We think the decree of the District Court, as far as it related to ap-
pellant, was erroneous in amount only, and should hâve been for the
sum of $13,636.13, with interest thereon at the rate of 5% per cent.,
the stipulated ratebefore default, from March 31, 1913, until May 28,
1913, the date of default, and thereafter, and until the decree is final-
ly rendered, at the rate of 6 per cent., the légal rate in Mississippi,
and that there should be added to the amount and interest so calculat-
ed for counsel fées the sum of $1,363.87 — the différence between the
penalty of the bond and the amount of moneys deposited and unac-
counted for. No interest before final decree is to be allowed upon the
counsel fées.
The decree is reversed, and cause remanded, with directions to en-
ter a decree conformably to this opinion; and it is so ordered.
S. H. KRESS & CO. V. LINDSBT et aL
(Circuit Court of Appeals, FIfth Circuit. December 16, 1919.)
No. 3397.
1, Abatement and bevival <S=>53 — Saxes <S=>255 — No pbivitt of wareantt
BKTWEEN SELLEE OF INFECTKD SHAVINQ BRUSH AND DEPENDENTS OF PTJB-
CHASEE; no SUEVIV0E8HIP OF WAEEANTT TO PUECHASEE's DEPENDENTS.
Where, from use of sbavlng brush, purchaser became Infected with a
fatal dlsease, there was no such contractual privlty between the seller of
the brush and purchaser's wldow and chlldren, as to glve the latter a right
of action for breach of alleged warranty, nor any suiTlvorshlp to them
under any breach of warranty directly to the purchaser hlmself.
2. DEATH <©=»46 COMPLAINT AOAINST DEALEE FOE CUSTOMEB'S DEATH FBOM IN-
FECTED SHAVING BBUSH MUST SHOW NEGLIGENCE.
To recover under the Mississippi death statute (Laws Miss. 1914, c. 214)
for the death of a customer of a dealer selllng a shavlng brush containlng
anthrax germs, it must appear from the complaint that the dealer knew of
the Infection In the brush or was guilty of some négligence, and a com-
plaint whlch merely allèges breach of warranty cannot be treated as one
under the statute.
In Error to the District Court of the United States for the South-
ern District of Mississippi ; Edwin R. Holmes, Judge.
Action by Mrs. Emma McCarroll Lindsey and others against S. H.
Kress & Co., begim in state court and removed to the fédéral court.
There was a judgment for plaintiffs, and défendant brings error. Re-
versed.
<g=3For other cases see same toplo & KEY-NUMBBR In ail Key-Numbered Dlgests & Indexes
332 262 FEDERAL REPORTER
Charles Rosen, of New Orléans, La., Cari Marshall, of Bay St.
Ivouis, Miss., and S. E. Travis, of Harrisburg, Miss., for plaintiff in
errer.
V. A. Griffith and William Lyon Wallace, both of Gulfport, Miss.,
and M. M. Boatner, of New Orléans, La., for défendants in errer.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges.
ERVIN, District Judge. This was a suit instituted in the circuit
court of Eorrest county. Miss., by appellees against appellant, and re-
moved to the fédéral court for the Southern district of Mississippi.
The suit was based upon the breach of an alleged warranty con-
tained in a catalogue issued by Kress & Co., who were doing a mail
order business in New Orléans, La., which catalogue contained, among
others, the following statements:
After stating that there would be an increase in the price of the
articles shown by the catalogue over priées previously charged, the
catalogue offered what it termed "an adéquate supply of dependable
bargains." It further stated:
"Any lowerlng of guality from the Kress high standard would not be iii
keeping with our recognized policy of quallty flrst."
Again :
"This information for you. Our guaranty: We guarantee that the merchtm-
dlse shown In this catalogue Is exactly as lllustrated. We also guarantee,
when you purchase from us, that the merchandise sold you wlU represent fuU
value and a saving to you; that it wIU give you the service and satisfaction
you hâve a right to expect for the money paid. If for any reason you are
not satisfled with any article purchased from us, return it to us at our ex-
pense, and we will either exchange It, If you viish, or return your money,
together with any shipping charges you may hâve pald ;"
And on page 70 of said catalogue it states as follows :
"Notions, merchandise of merit, at low priées. In buying thèse dependable
notions from the pages," etc.
Among said notions on page 76, which is headed in large printed
words "Brushes of Value at a Very Small Cost," is found advertised
and offered a shaving brush, the same being illustrated, and under
same is printed the number "D 8732," and name "Lather Brush," and
at varions and divers places throughout said catalogue the said goods
therein are represented to be of "dependable quality," of "high qual-
ity," of "wonderful values," of "serviceable quality," of "quality stand-
ard." And:
"We make and keep customers by saving them money, giving them the besv
goods their money will buy, and protecting them with our bindlng guar-
anty of satisfaction or money retumed,"
The suit is brought by the widow and minor children of one C. H.
Lindsey, who was a résident of Mississippi. The complaint shows that
Kress' catalogue further suggested that, where several neighbors wish-
ed certain articles from Kress, they mtght save shipping costs by com-
bining their orders into one; that one Maud Dale, who was a neigh-
s. H. KRESS & CO. V. LINDSEY 333
(262 F.)
bor of C. H. Lindsey, intendlng to order certain goods, communi-
cated this intent to the wife of C. H. Lindsey ; that C. H. Lindsey had
previously informed his wife that he needed a shaving brush, and
requested her to procure one for him; that his wife communicated
this request to said Maud Dale, who, in making the order for her own
goods, included the order for the shaving brush for said C. H. Lind-
sey.
It avers that défendant selected, sold, and delivered unto said C. H.
Lindsey, contrary to the représentations, guaranties and warranties
aforesaid, a shaving brush charged with the bacilU of anthrax, and
that, when C. H. Lindsey undertook to shave himself in using said
brush, he accidently eut himself slightly with his razor, and by rea-
son of the use of the brush became inoculated with the germs of
anthrax, and died from the effects thereof. The plaintiffs conclude
with the statement that the plaintiffs, the wife and minor children of
said Lindsey, are by reason and in conséquence of the aforesaid
wrong of the said défendant bereft of the husband's and father's
care, protection, and companionship, and are left without support, ex-
cept by their own exertions. The damages claimed were $30,000.
There were no allégations of négligence on the part of Kress &
Co., or that they were informed or had reason to believe that the
brush sold and delivered by them to C. H. Lindsey was charged with
anthrax germs, nor was it alleged that Kress & Co. were the makers
of said brush, but the facts averred show that they were mère deal-
ers, who were selling commodities manufactured by other parties.
[1] The défendant filed a gênerai demurrer, under the practice
of Mississippi, to this complaint, and now urges that the court below
erred in that, while the suit is brought for breach of an alleged war-
ranty, under a sale to C. H. Lindsey, that the plaintiffs, as the widow
and children of said Lindsey, hâve no privity with the contract con-
taining said alleged warranty, and hence no right of action. We think
Ihis assignment of error is correct, as there is no survivorship to the
wife and children of Lindsey under a breach of warranty directly
to Lindsey himself.
[2] It is manifest from the allégations of the complaint, and also
from the rulings of the court below, that both plaintiffs' attorneys
and the trial court confused the right of action alleged, namely, a
breach of warranty in the sale made by Kress to C. H. Lindsey with
the right of action conferred by the "Death by Wrongful Act" stat-
ute of Mississippi. The conclusion of the complaint, which we hâve
copied, tends to show this fact, and so does the charge of the court,
which begins on page 39 of the record. On page 40 of the record
the court says to the jury:
"This Is not a suit for négligence. It is not a suit for tort. This is a suit
by the plaintiffs for the alleged breach of a warranty that is embraced in a
mail order catalogue."
The court then quotes certain statements contained in the catalogue,
and on page 46 of the record the court explains to the jury what are
the proximate and natural conséquences of an actionable default or
334 262 FEDEKAL EBPOETEK
breach of warranty. He then charges the jury that, if they should find
for the plaintiffs, they —
"may and should assess the damages at such sum as the Jury might deteriiiine
to be just, or as will amount to full Indemnity, taklng Into considération ail
the damages of every kind to the décèdent, and ail damages of every klnd to
each and every plaintiflE, and while the law can only allow compensation,
there are many éléments and things to be consldered In arriving at a final
sum. You may conslder the amount which Henderson Lindsey would probably
hâve eamed during his llfe, aceording to his llfe expectancy, and contributed
to his wife and children, or in any wlse bestowed upon them. You may In this
connection conslder his capadty and competeney for eamlng money, what he
was eamlng at the tlme of his death, and what he would probably hâve
eamed In the future, his âge and expectancy, his health, his habits of llfe
and Uving, his disposition to work and his own personal expenditures, and
in thèse connections you should also conslder the expectancy of llfe of
his wlfe and children, the plalntlfEs hère. You may conslder any loss of
comfort, companlonshlp, and soclety and protection of the husband and
father, in the Ught of ail the évidence relating to the character, habits,
and disposition of the husband and father towards his famlly, and the
relations between them and hlm at the tlme of his death and prlor thereto,
the value of his service in the superlntendence and attention to the care
of his family, and in the éducation and tralnlng of his children; but
you wUl allow nothlng by way of solatium, or for their grief or dlstress
over his slckness and death, as separated and distlngulshed from the éléments
already mentloned."
We hâve quoted enough from the court's charge to the jury to show
that the court was submitting to the jury the damages provided for
under the Mississippi "Wrongful Death Act," which is found in chap-
ter 214 of the Laws of Mississippi Législature of 1914, and which
reads, so far as the matter at issue is concerned :
"Aotions for Injuries Producinç Death. — Whenever the death of any person
shall be caused by any real wrongful or négligent act, or omission, or by such
unsafe machlnery, way or appliances as would. If death had not ensued, hâve
entitled the party Injured, or damaged thereby to malntaln an action and re-
cover damages in respect thereof, and such deceased persons shall hâve left
a widow or children or both, ♦ • ♦ the person or corporation, or both
that would hâve been liable If death had not ensued, • * * shall be llable
for damages, notwlthstandmg the death, and the fact that death was instan-
taneous shall, in no case, affect the rlght of recovery. The action for such
damages may be brought • * • by the widow, for the death of her hus-
band, * * * or in the name of the chlld for the death of a parent, • » »
or ail parties interested may join in the suit * • • In such action the
• * * parties sulng shall recover such damages as the jury may détermine
to be just, taking into considération ail the damages of every klnd to the dé-
cèdent, and ail damages of every kind to any and ail partie» interested in the
suit."
It is manifest, from the charge of the court and the verdict of the
jury in this case, that the court submitted to the jury the damages pro-
vided for by this statute, and the jury ascertained the damages as
provided for in the statute, though the action was on a breach of war-
ranty alleged to hâve been made by Kress in the sale of a shaving brush
to C. H. Lindsey. In this we think the court erred, for, the suit being
based upon a breach of warranty made to C. H. Lindsey, there was
not only no right of action in the widow and children of Lindsey, but
the damages to be allowed and recovere.d are such damages as flowed
from the breach of warranty, and not the damages 3= provided for
s. H. KRESS & CO. V. LINDSET 335
(262 F.)
by the Mississippi "Death by Wrongful Act" statute. This act would
hâve nothing to do with the measure of damages for a breach of
warranty.
There being no such wrongful act or omission as is contemplated
by this statute, and the action not being brought under the statute,
but being founded on a breach of warranty, the next question is:
What damages could hâve been recovered under the breach of war-
ranty? This dépends upon the question whether any spécial facts
and circumstances were brought to the knowledge of the parties
making and receiving the warranty, and what were the terms of the
warranty. In other words, what damage did the parties to the con-
tract, namely, Kress & Co. and C. H. Lindsey, contemplate and agrée
as the damages to flow from a breach by Kress of the alleged war-
ranty.
It will be noticed that the statement in the catalogue is under the
heading of :
"Our guaranty that the merchandlse should be exactly as illustrated. We
also guarantee, when you purchase from us, that the merchandlse sold you
will represent full value and a saving to you. It wlU give you the service and
satisfaction you hâve a right to expect for the money."
Then foUow thèse words, which are a part of the same statement :
"If for any reason you are not satlsfled wlth any article purchased from
us, retum It to us at our expense, and we will either exchange It, if you wlsh,
or retum your money, together with any shipping charges you may hâve paid."
Again the catalogue states:
"We make and kecp customers by saving them money, giving them the
best goods their money will buy, and protecting them wlth our binding guar-
anty of satisfaction or money retumed."
Now, it seems to us that the minds of thèse parties hâve met, so
far as any alleged breach of warranty is concerned, on the proposi-
tion that, if the article purchased was not satisfactory to the pur-
chaser for any reason, they hâve agreed that this article might be re-
turned, and the seller will return the purchase price and pay any ship-
ping charges which may hâve been paid by the buyer, so that any
recovery for a breach of warranty, if there was a warranty contained
in the statements made by Kress in his catalogue, was limited to this
agreement on Kress' part, and the purchaser, therefore, or his Per-
sonal représentative, could not recover more than this sum. We
therefore think the court erred in his charge as to the measure of
recovery.
It is argued, however, by appellees, that this action is really in tort,
and is based upon the breach of duty by défendant arising out of an
alleged warranty contained in the catalogue. If this were so, in our
opinion, the right of recovery and the measure of recovery would be
fixed by the Mississippi statute we hâve quoted, as the use of the
brush which is alleged to hâve inoculated C. H. Lindsey was in the
State of Mississippi, and we think it was necessary, if the action were
intended to be brought under this statute, that the complaint should
contain some allégation of knowledge or notice on the part of Kress
336 2S2 FEDERAL EBPOHTEB
& Co. that the brush contained anthrax germs, or some sufficient allé-
gation of a négligent act or omission on the part of Kress & Co.
which caused the injury to C. H. Lindsey.
Constriiing, therefore, the complaint according to this contention,
the demurrers should be sustained. We, however, construe the com-
plaint as being based upon the warranty alleged to hâve been made by
Kress to C. H. Lindsey as the purchaser of the shaving brush, and
finding, as we do, no right of action in the plaintiiïs, the case should
be reversed.
M. O. PBTimS MILLING CO. v. INTEENATIONAL STJGAR FEBD
NO. 2 CO.
(Circuit Court of Appeals, Slxth Circuit December 12, 1919.)
No. 33(M.
1. Teade-m:abk8 and tbadb-names <S=361 — Manufactubeb has bight to use
on diffebent kinds of 8ame abticle.
A manufacturer of stock food, rightfuUy using a trade-mark or symbol
on what Is known as "dry feed," carmot be so Umited as to preclude it
from uslng the same mark on "sweet feed" manufactured by it.
2. Tbade-mabks and tbadb-names ©=558 — No infeingement.
A trade-mark, consistlng of a plcture of a man on horseback, wlth the
horse in moving position, held not inf ringed by a plcture of a horse alone,
standing still.
3. EviDENCEi ©=5574 — Opinion as to bimilabitt of tbade-mabks infebioe to
OBSERVATION.
la determinlng whether two marks or designs are so similar as to be
likely to cause confusion and resuit in unfair compétition, the judgment
of the eye on comparison of the two is more satlsfactory évidence than
the opinions of witnesses.
4. Tbade-mabks and teade-naîtes ©=370(2) — ^Pictuebd designs so dissimilab
AS NOT TO SHOW UNFAIB COMPETITION.
Plctured designs, used by complalnant and défendant, respectlvely, as
trade-marks for horse feed, consistlng in one case of a horse and rider,
and in the otber of a horse, taken in connection wlth thelr dress and sur-
rounding reading matter, Jtsld so dlssimilar In appearance as to preclude
possibility of one being mistaken for the other, and to dlsprove any intent
of unfair compétition, in the absence of évidence of actual confusion in
the trade.
6. Tbade-mabks and teade-names <S=»68 — "Unfaie compétition" defined.
"Unfair compétition" consists in the use of methods, brands, or adver-
tlsing matter intended to cause, or in faet causing, confusion in the trade,
or to induce or mislead the trade into the belief that the goods of the
person or flrm marketed under such similar device are the goods of the
person or flrm which has established a trade and acquired a good will
in business in connection wlth the rlghtful use of such trade token.
[Ed. Note. — For other définitions, see Words and Phrases, EIrst and
Second Séries, Unfair Compétition.]
6. Tbade-mabks and teade-names ©=»93(3) — Ciecumstantial évidence may
biiow intent to deceive.
It Is not necessary to establlsh by direct évidence the intent to decelve,
where the circumstances are such as to lead to no other rational con-
clusion.
^=3For otUer cases see same toplc & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes
M. C. PETEES MILL CO. V. INTERNATIONAL SUG. PEED NO. 2 CO. 337
(262 F.)
Appeal from the District Court of the United States for the Western
District of Tennessee ; John E. McCall, Judge.
Suit in equity by the M. C. Peters Milling Company against the In-
ternational Sugar Feed No. 2 Company. Decree for défendant, and
complainant appeals. Affirmed.
T. Walter Fowler, of Washington, D. C, for appellant.
A. C. Paul, of Minneapolis, Minn., and Julian C. Wilson, of Mem-
phis, Tenn., for appellee.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
DONAHUE, Circuit Judge. On the 9th of March, 1916, the M. C.
Peters Milling Company, a corporation organized under the laws of
the State of Nebraska, commenced an action in the United States Dis-
trict Court in and for the Western District of Tennessee, against the
International Sugar Feed No. 2 Company, a corporation organized
under the laws of the state of Minnesota, to enjoin its alleged in-
fringement of a registered trade-mark, and also for unfair compétition.
The défendant, by its answer, dénies that it has infringed plaintiff's
trade-mark, or that it has in any vvay, manner, or form entered into
or conducted any unfair compétition. Upon the issues joined, the
District Court found for the défendant, and dismissed the bill of com-
plaint, with costs.
It appears from the évidence that the characteristic feature of plain-
tiff's trade-mark consists of two concentric circles. Within the inner-
most circle is the plcture of a horse and rider. The trade-mark of the
défendant also consists of two concentric circles, within which is anoth-
er circle with saw-tooth outline. This third circle was inserted within
the inner and outer circles about 1912 or 1913. It appears from the évi-
dence, however, that this was omitted from some of the bags through
mistake of the bag company f urnishing the same ; but as soon as this
mistake was discovered it was corrected, and no bags hâve been used
since that time without the saw-tooth circle. Thèse concentric circles
are within a rectangular field surrounded by heavy Unes, also in saw-
tooth form. Outside this border, around the rectangular field, and a
part of it, are straight lines touching the saw-tooth points. Within
the inner circle is the picture of a horse.
[1] It further appears from the évidence that, prior to registration
of plaintiff's trade-mark practically ail of its distinguishing features,
except the rider, were in gênerai use, in some form or other by the
manufacturers of horse feed. It also further appears that it is and
was a custom in gênerai use by ail manufacturers of stock feed to print
or stamp on the bags containing the same a picture of the head or
whole of the animal for which the feed is specifically intended. While
this is conceded by the appellant, the claim is made in its behalf that
the brands and trade-marks of this character were applied only to
what is known to the trade as "dry feed," and that it was the first
manufacturer to use such mark or brand in connection with the manu-
facture and sale of a mixture of grain, alfalfa, and molasses, known
to the trade as "sweet feed" ; that "dry" and "sweet feeds" are entire-
262 F.— 22
338 262 FEDBBAL REPORTES
ly différent products ; and that for this reason it is entitled to the exclu-
sive use of the concentric circles, and the picture of a horse within the
inner one, in connection with the manufacture and sale of "sweet
feeds."
This question is discussed and decided in the case of W. A. Gaines
& Company v. Rock Springs Distilling Company, 226 Ped. 531, 537,
141 C. C. A. 287, 293. That case involved the distinction between
straight whisky and blended whisky, and in tliat connection Judge
Denison, speaking for the court, said:
"Whatever the extended classifications and subclassiflcations of the Patent
Office practlce may contemplate, neither the common law nor the registra-
tion statute can intend such confusion as must resuit from recognizing the
same trade-mark as belonglng to différent people for différent kinds of the
same article."
The Suprême Court of the United States, in reviewing this case
(246 U. S. 312, 320, 38 Sup. Ct. 327, 329 [62 L. Ed. 738]), quotes this
language with approval.
It necessarily follows that, where it has been the common custom
of the manufacturers of horse feed to print or stamp the picture of a
horse on the bags containing the same, the appellant would not acquire
any prior right to the use of such picture by reason of the fact that it
was fîrst to use the same on the feed containing an additîonal ingré-
dient, for, after ail, it is still horse feed, although differing in this
respect as to its component parts.
[2] In determining whether the brand used by the défendant is an
infringement of plaintiff's trade-mark, this court is not disposed to
consider or apply any nice, technical distinctions, such as an artist's
eye would readily perceive, but rather only such marked différences as
would be readily apparent to the ordinary purchaser of horse feeds.
The doctrine is fairly stated by Mr. Nims, in his work on Unfair Com-
pétition and Trade-Marks (2d Ed.) p. 583, in this language :
"Such a slmilarlty as wlll deceive is that Hkeness which renders the average
buyer unable to distinguish the defendant's name or mark from the memory
of plaintiff's name which he carries in his mind, not such as will enable hlm
to know them apart when the two are put side by side before him."
Applying this principle to the facts in this case, it is apparent that
the defendant's trade-mark is so unlike the trade-mark of the plaintiff
that the average buyer may easily distinguish between the two. The
picture of the horse in the defendant's trade-mark is wholly unlike the
picture of the horse in the plaintiff's design. They are as unlike as it
is possible to draw two pictures of the same animal. One is the picture
of a horse in action, with his right fore foot and left hind foot lifted
from the ground; its tail falls against the bips, and the lower part
of its head is drawn in against its throat. The other is the picture of
a horse standmg firmly on its four feet, with its tail raised far from its
bips, and its head some distance from the lower part of the neck.
Aside from thèse distinguishing features of the différent types of horse
shown in thèse designs, when the plaintiff's trade-mark is taken in
connection with the rider, ail similarity ends. This feature of the de-
M. C. PETERS MILL. CO. V. INTERNATIONAL SUG. FEED NO. 2 CO. 339
(262 F.>
sign was emphasized by the plaintiff in attempting to secure regis-
tration of its trade-mark.
After registration was refused by the Patent Office, because of its
similarity to the trade-mark of Merriam & Rolph, consisting of the
Word "ARABIAN," the plaintiff then filed in the Patent Office an
argument calling attention to the "picture of the man on horseback,"
contained in its design, as the distinguishing feature thereof from the
word "Arabian," and, in that connection, used this language:
"The représentation of the maie figure on horseback, however, Is arbltrary
and fanclful, and hence cannot possibly be confused with a mère word prlnted
in plain and black letters or otherwlse."
This court is clearly of the opinion that this argument was entirely
justified by the facts. Undoubtedly it met with the favor of the of-
ficiais of the Patent Office, for, notwithstanding the former rejection,
a certificate of registration was then issued to the plaintiff. For thèse
reasons, this court has reached the conclusion that the design of the
défendant is in no way intended to be, nor is it in fact, an inf ringement
of plaintifï's trade-mark.
The question of unfair compétition is so closely allied with the
question of the infringement of a trade-mark that, in view of the
conclusion reached, it would seem unnecessary to discuss the former
at any length. As a gênerai rule, the right to recover upon either of
thèse causes of action dépends, substantially, upon the same state of
facts, excepting, of course, the statutory provisions applying to trade-
marks, and excepting, also, that in disposing of the question of unfair
compétition, a court should take into considération the dress, com-
bination of colors, and manner and method of application and use of
the respective marks in connection with the designs actually appro-
priated and protected by registration, if registration has, in fact, been
secured.
In the case of Merriam Company v. Saalfield, 198 Fed. 369, 117
C. C. A. 245, Judge Denison, referring to the analogy between thèse
two remédies, said:
"The entire substantlve law of trade-marks (excepting statutory provisions
and construction) is a branch of the broader law of unfair compétition. The
ultlmate offense always is that défendant has passed o£C his gooda as and for
those of the complalnant"
There is no évidence in this record that the design used by the de-
fendant has in fact misled or deceived any purchaser, but there is
some testimony that there is such a similarity between the designs of
défendant and plaintiflf as would tend to cause confusion in the trade
and induce the ordinary customer to believe that the goods of the
défendant were the goods of plaintifï's origin and manufacture.
[3] The opinion of the witnesses in that regard, however, must
yield to the more positive évidence afïorded by the exhibits in this
case. Mr. Justice Field has very clearly expressed this idea in the case
of Liggett Tobacco Co. v. Finzer, 128 U. S. 182, 9 Sup. Ct. 60, 32
L. Ed. 395, in this language:
"The judgment of the eye upon the two is more satisfactory than évidence
from any other source as to the ix)ssibility of parties being misled, so as to
;M0 262 FEDERAL REPORTER
tuke one tobaceo for the other ; and thls Judgment Is against any such possl-
bility."
[4] Even a casual inspection of thèse trade-marks shows such ma-
terial différences as would preclude the possibility of one being mis-
taken for the other.
The trade-mark of plaintiff is used by it in marketing^ the product
known as "Peters' Arab Horse Feed." That name is stamped on the
field within the concentric circles around the horse and rider. The
picture of the rider is undoubtedly intended to represent an Arab sol-
dier in full unif orm, with red cap, red trousers, and green cloak. The
bridle and a shawl or blanket, hanging from the saddle, are in red; a
broad girth, extending around the breast of the horse, is in red and
green. The colors used are red and green.
Upon the design of the défendant there is printed unon the space
between the outer circle and the one of ?aw-tooth formation, the
Word "Ringleader," and around the top and outside of the larger circle
is printed in semicircular form the word "International." Below thèse
concentric circles there is printed, in large letters, "International Su-
gar Feed Numher Two Co." Within the inner circle is the picture
of a riderless circus ring horse, with bridle, reins, and surcingle. The
reins are attached to the surcingle midway on the horse's sides. The
color scheme is red and green. While it is true, as contended by
counsel for appellant, that each trade-mark contains the picture of
a stylish horse, yet they are of such différent and distinctive types
that one could not possibly be mistaken for the other.
The distinguishing features of the plaintiff's trade-mark are not only
peculiarly appfopriate to the trade-name of the product marketed by
it, but are also so "arbitrary and fanciful" in character as to fully and
completely differentiate it from the mark used by défendant.
[5, 6] Unfair compétition consists in the use of methods, brands
or advertising matter intended to cause, or in fact causing confusion
in the trade, or to induce or mislead the trade into the belief that the
goods of the person or firm marketed under such similar device are
the goods of the person or firm who has established a trade and ac-
quired a good will in business in connection with the rightful use of
such trade token. While it is not necessary to establish by direct évi-
dence the intent to deceive, where the circumstances are such as to lead
to no other rational conclusion, yet in this case the distinguishing fea-
tures of the trade-marks of the plaintiff and défendant, taken in connec-
tion with their dress and color scheme, as actually used by each, are so
patent and obvious that the presumption as to the intent is to the con-
trary, and, in the absence of direct évidence showing that the defend-
ant's trade-mark has in fact created confusion and misled and deceived
customers, this presumption must obtain.
The judgment of the District Court is affirmed.
PHILLIPS CO. V. EVEEETT 341
(262 F.)
PHILLIPS CO. V. EVERETT.*
In re SPRINGFIELD REALTY CO.
(Circuit Court of Appeals, Sixth Circuit. December 12, 1919.)
No. 3338.
Corporations <S=5642(4%), 660 — Oonteact by foebign cokpoeation a Michi-
qan contract, 8dpp0rting lien by contractor.
A contract to equip a building in Micliigan with an automatlc flre
sprinkler System, raade by a foieign corporation which had not com-
plied with the laws of Micliigan to authorize It to do business or make
contracts in the state, and which executed the contract entirely through
ï^iibcontHictors, who mauufactured iind installed the System, furnishing
both materials and labor, helâ a Michigan contract, and not an Inter-
state transaction, which was void under the statute (Comp. Laws Mich.
1915, § 9063 et seq.), and would not support a mechanic's lien in favor of
the contracter, regardless of whether its contracts with the subcon-
tractors were local or Interstate transactions.
Api^eal from the District Court of the United States for the South-
ern Division of the Eastern District of Michigan; Arthur J. Tuttle,
Judge.
In the matter of the Springfield Realty Company, bankrupt; Byron
T. Everett, trustée. The PhilUps Company appeals from an order
denying its claim to mechanic's hen. Affirmed.
Thomas G. Long, of Détroit, Mich., for appellant.
Walter E. Oxtoby, of Détroit, Mich., and Stewart Hanley, of Dé-
troit, Mich., for appellee.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
DONAHUE, Circuit Judge. The PhilHps Company, a corporation
organized under the laws of the state of Wisconsin, with its principal
place of business in Chicago, 111., entered into a contract with the
Springfield Realty Company, a corporation organized under the laws
of Michigan, to equip its manufacturing plant in the city of Détroit,
Mich., with a System of automatic fire sprinklers, for which it was
to receive the sum of $31,776. Dater additional equipment was order-
ed, making in the aggregate $32,224, for which amount the Phillips
Company filed a mechanic's lien on the property equipped by it with
such sprinkler System.
The Springfield Realty Company having gone into bankruptcy, an
order was made staying proceedings for the enforcement of this lien
in the state courts of Michigan, and requiring the same to be enforced
in the bankruptcy proceedings against the fund derived from the sale
of the plant and property. In accordance with this order, a pétition
was filed by the Phillips Company in the bankruptcy proceedings, seek-
ing to bave its mechanic's lien transferred to the îund arising from the
sale of the bankrupt's property. The trustée in bankruptcy filed an an-
swer to this pétition, averring, among other things, that at the time
the Phillips Company entered into the contract with the Springfield
Realty Company, and at the time it equipped the plant of that company
with an automatic fire sprinkler system, the Phillips Company had not
<S=>For other cases see samo topie & KBY-NUMBER in ail Key-Numbered Digests & Indexes
•Certiorarl denied 251 U. S. — , 40 Sup. Ct. 344, 64 L. Ed. — .
342 262 FEDERAL REPORTEE
complied with the provisions of the laws of Michigan with référence
to foreign corporations, in that it had not procured from the secretary
of State of the state of Michigan a certificate of authority to carry on
business in that state, and that for this reason its contract with the
Realty Company was in violation of the laws of Michigan, and its
pretended mechanic's lien invalid and not enforceable in the courts
of that state. Upon this issue the référée found from the évidence
in favor of the trustée, and made an order denying the claimant's pe-
'tition and lien, and this finding of the référée was affirmed by the
court below.
The Michigan statute provides, among other things, that it shall be
unlawful for any corporation organized under the laws of any state
of the United States, except the state of Michigan, or of any foreign
country, to carry on its business in that state, until it shall hâve procur-
ed from the secretary of state a certificate of authority for that pur-
pose, and that no foreign corporation subject to this provision shall be
capable of making a valid contract in Michigan, until it shall hâve ful-
ly complied with this requirement, and at the time of making such
contract holds an unrevoked certificate to that effect from the secretary
of state.
It is contended upon the behalf of the appellant that there is no
évidence in this record tending to prove where the contract was execut-
ed ; that the presumption obtains that it was lawf ully executed in the
state of Wisconsin, in which state the appellant was authorized to
transact business, and that theref ore it was not doing business in Michi-
gan; that the installation of the automatic fire sprinkler system in
the plant of the Springfield Realty Company at Détroit, Mich., was
merely incidental to the contract ; that a large portion of the material
used in the construction of this System, either in the raw state or finish-
ed product, was shipped from other states into Michigan, and that for
this reason the entire contract involved an Interstate transaction not
within the purview of the Michigan statute; and that, even if ail of
the transaction was not interstate commerce, at least a portion there-
of was, and for that portion the Phillips Company is entitled to an
allowance of its claim as upon a quantum meruit.
It appears, from the évidence taken before the référée, that the ap-
pellant is not engaged in the manufacture of automatic sprinkler Sys-
tems, either in the state of Wisconsin or elsewhere, but, on the con-
trary, is engaged in the business of contracting for and procuring the
installation of automatic sprinkler Systems manufactured by other per-
sons and corporations. In this particular case, the appellant entered
into a contract with the General Fire Extinguisher Company of Michi-
gan, a corporation engaged in the manufacture of automatic sprinkler
Systems, for a system of wet pipe Grinnell automatic sprinklers, which
comprehended by far the larger part of appellant's entire contract.
It also entered into a contract with the Pittsburgh-Des Moines Steel
Company, of Pittsburgh, Pa., for the construction of a steel tower and
tank to be used in connection with and as a part of the sprinkler Sys-
tem to be installed by the General Fire Extinguisher Company of
Michigan. Thèse companies were required to install in the plant of the
PHILLIPS CO. V. EVEEETT 343
(262 F.)
Springfield Realty Company, at Détroit, Mich., the respective portions
of the equipment to be furnished by each in accordance with the plans
and spécifications, and subject to the inspection of the Michigan in-
spection bureau. It further appears that the Phillips Company exercis-
ed some gênerai supervision over the installation of this System, but
that the subcontractors furnished ail the material, labor, and immédiate
supervision necessary to the installation of the portion of the entire
System to be furnished by each.
The détermination of the questions presented by this record involves
no new principles, but rather the application of îhe established law to
the facts of this case. While the state has no authority to impose a
burden upon interstate commerce by taxation or otherwise, nevertheless
it has authority to provide by législation the terms and condition upon
which a foreign corporation may engage in intrastate business with-
in its territorial limits, or avail itself of the benefits of its laws and the
aid and protection of its courts in the enforcement of contracts re-
lating to such business. Baltic Mining Co. v. Massachusetts, 231 U.
S. 68-83, 34 Sup. Ct. 15, 58 L. Ed. 127.
This court has held in the case of Hayes Wheel Co. v. American
Distributing Co., 257 Fed. 881, C. C. A. , that the Michigan
statute relating to corporations of other states does not ofïend against
the fédéral Constitution, but, on the contrary, expressly provides that
the act shall not be construed "to prohibit any sale of goods or mer-
chandise which would be protected by the rights of interstate com-
merce." Comp. Laws 1915, § 9070. So that, if the installation of this
automatic sprinkler System in the plant of the Springfield Realty Com-
pany at Détroit, Mich., was an interstate commerce transaction, then
the appellant was not subject to the provision of the Michigan act,
and ought to recover in this case the f uU amount of its claim, for there
is no question hère made that it has not complied with ail the require-
ments of the mechanic's lien law of that state. Comp. Laws Mich. 1915,
§§ 14796-14830.
In view of the évidence offered on behalf of the appellant, it is clear
that the installation of this automatic sprinkler system was not mere-
ly an incident to its sale and purchase, for the appellant was not manu-
facturing sprinkler Systems, and had none of its own either to sell or
to install. Its contract with the Springfield Realty Company comprised
the whole scope of the business for which it was organized. It could
hâve donc no more in the state of Wisconsin. The fact that it employ-
ed a Michigan corporation to perform a part of this contract for it,
and that this Michigan company brought some raw materials from
other States to be used in its factory in the manufacture of its finished
product can in no wise afifect the appellant's relation to the transaction,
further than to show that it was not selling to the Springfield Realty
Company an automatic sprinkler System manufactured by itself in its
home state, or in any other state.
It is insisted that thèse subcontractors were each independent con-
tractors ; that part of the system furnished by the Pittsburgh-Des
Moines Steel Company of Pittsburgh, Pa., comes clearly within the
protection of the fédéral Constitution in référence to interstate com-
344 262 FEDERAL REPOKTEB
merce ; and that the General Fire Extinguisher Company of Michigan
is a local corporation and authorized to transact business within that
State. It might be true that a court would hold that thèse contractors
were independent contractors in an action by a third party for an in-
jury to person or property caused through the fault or négligence of
either in performing the particular part of the work covered by their
respective contracta, but that principle cannot be applied to the parties
themselves. So far as the Phillips Company is concerned they were
its subcontractors ; each performing for and on account of the Phil-
lips Company a part of its contract with the Springfield Realty Com-
pany. The relation of the Phillips Company to the Springfield Realty
Company was that of principal contractor. It was entitled to the
benefits accruing from the proper installation of this sprinkler System
by the subcontractors, and liable to the Springfield Realty Company for
any defects in that System, either in material or labor, or for any
unnecessary delay in installing the same, and therefore the claim that
thèse subcontractors occupied the relation of independent contractors,
so far as the Phillips Company and the Springfield Realty Company
are concerned, is not tenable.
It is insisted, however, that the part of this sprinkler system install-
ed by the Pittsburgh-Des Moines Steel Company of Pennsylvania was
clearly interstate commerce, and that the appellant is therefore entitled
to recover upon a quantum meruit. This proposition is equally un-
tenable. As we hâve already seen, the status of the subcontractors
cannot fix, change, or alter the status of the parties to the original con-
tract. If that were true, the Phillips Company might transfer its en-
tire business activities to the state of Michigan, and by subcontracting
with persons or corporations outside that state defy its laws providing
terms and conditions upon which nonresident corporations may do
business within the state, and at the same time avail itself of the bene-
fits of other statutes of that state and use its courts for its own pro-
tection and to enforce its rights.
For the purpose of this case it is perhaps immaterial where this con-
tract was executed. In the case of Empire Fuel Co. v. John E. Lyons,
257 Fed. 890, C. C. A. , Judge Knappen, in discussing this ques-
tion, said :
"It does not follow from the fact that the contract was made In West
Virginia that ail business done under It must be regarded as done In that
stnte" — citins in support of this proposition Lumbermen'a Ins. Co. v. Meyer,
197 U. S. 407, 414, 25 Sup. Ct. 483, 49 L. Ed. 810.
There is some évidence, however, that this contract was executed in
Michigan. It recites that the agreement is "made this 8th day of No-
vember, A. D. 1916." The first signature attached thereto is the sig-
nature of the Phillips Company; the second signature is that of the
Springfield Realty Company ; but in connection with the latter signa-
ture it further appears by the certificate of a notary public that the
président and secretary of the Springfield Company acknowledged the
signing and exécution of this contract in Wayne county, Mich., on the
9th day of November, 1916. It is true that the Phillips Company
may, and probably did, sign this paper writing at its office in Chicago,
RHEA V. NEWTON 345
(262 F.)
m.; but it was not a contract until signed by the other contracting
part}', which, from the jurât of the notary public, appears to hâve been
done in the state of Michigan on the 9th day of the same month.
This contract, however, contemplated by its terms performance by
the Phillips Company within the state of Michigan, and the évidence
relatiiig to that company's method of performance clearly shows that
no part thereof was merely incident to the main transaction, but rath-
er that the contract, in its entirety, was a business transaction, local
in its nature and indivisible in character. We hâve therefore reached
the conclusion that the finding of the référée in this particular, and the
judgment of the District Court affirming the same, are fuUy sustained
by the évidence.
It is further urged on behalf of the appellant that, by reason of the
installation of this automatic sprinkling system in the plant of the
Springfield Realty Company, it thereby enhanced the value of its prop-
erty and contributed largely to the fund arising from the sale thereof,
and that for this reason it ought to recover as upon a quantum meruit,
regardless of the validity of its contract. Undoubtedly, it did con-
tribute largely to the value of the property from which this fund was
derived ; but this action is one to enforce a mechanic's lien, and the
only question before this court at this time is the question of the
validity of that lien, either as against the property itself or as against
the fund arising from its sale.
In disposing of this question, this court has neither the right nor
the authority to ignore the laws of Michigan pertaining to this trans-
action. It is, of course, unfortunate that the appellant must lose the
cost of the material and labor that has added to the fund for distribu-
tion among the gênerai creditors of the bankrupt ; but that is not the
fault of the référée in bankruptcy or of the court. The appellant could
easily hâve protected itself from loss by complying with the laws of
Michigan relating to nonresident corporations doing business within
that state._ It _f ailed, neglected, or ref used to do this, and the courts
cannot relieve it from the conséquences of its own neglect
The judgment of the District Court is affirmed.
RHEA et al. v. NEWTON et al.
(Circuit Court of Appeals, Eighth Circuit. December 2, 1919.)
No. 5280.
CORPOKATIONS <&=3316(1) BONA FIDE C0NTBACT8 WITH OFFICER VALID.
Wliile a contract between a corporation and a director or offlcer wlll be
closely scrutinized by the courts, it will be upheld if fair and made In
good falth, and if no undue advantage was talien of the flduciary rela-
tionship between the parties.
COBPOBATIONS ©=5312(5) — PUECHASE OF PBOPEaTT OF INSOLVENT COEPOBA-
TION BT DIBECTOE DID NOT MAKE HIM TBTJSTEE.
Transactions by which stoclcholders of insolvent mlning company,
against which actions were pending, transferred their stocli under an
agreement that the property should be opei-ated for a time by creditors,
iË=jFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes
346 262 FEDERAL REPORTEB
and if the debts were so pald the stock should be returned, followed by
a reorganlzation and the élection ol new offlcers and dlrectors, who, after
It had been determlned that the property could net be profltably operated
In Its then condition, sold it In considération of payment of the company's
debts by the purchaser, held not to charge the purchaser, a dlrector of
the old Company, who had no Icnowledge of the conditions of the transfer,
wlth a trust In favor of such former stockholders.
3. COBPORATIONS <®=>289 — AcTS OF DK FACTO OFFICEES VALID.
The acts of de facto offlcers of a corporation in good falth are as valld
as respects thlrd persons as are those of de jure offlcers.
4. CoEPOKATioNS <&=9l82 — Stockholdees of insolvent coepoeation mat seli,
PEOPEETY.
When a corporation Is Insolvent, and unable to meet its obligations, or
to secure further funds wlth whlch to continue business, and credltors
are pressing their clalms, a majorlty of the stockholders bave the i)Ower,
in good falth, to make a sale of the entire corporate property to provide
for its debts.
Carland, Circuit Judge, dlssentlng.
Appeal from the District Court of the United States for the West-
ern District of Missouri; Arba S. Van Valkenburgh, Judge.
Suit in equity by Catherine K. Newton and others against Wil-
liam A. Rhea and others. Decree for complainants, and certain de-
fendants appeal. Reversed.
This Is an appeal from a decree holding that appellant Rhea and the Mont B.
Mining Company were llable as trustées to account to appellees, who were
plaintlffs below, and fixlng the amount of the recovery. Two suits were be-
gun, but later they were Consolidated and heard and declded as one case.
The plaintlfC in one suit was Catherine Newton and in the other the plaintiffs
were William H. Wbitloek and hls wife. The défendants were the same in
both suits and were the First National Bank of Carthage, Mo.; Ernest B.
Jacobs, its cashler, Wllllara A. Rhea, Mont B. Fairfield, and the Mont B.
Mining Company, a corporation.
It was alleged that plalntUï Newton was the owner of 25,000 shares, ana
that plaintlffs William H. Whitlock and wife were the owners of 24,990
shares, of the capital stock of the Ananias Mining Company, a corporation
wlth an authorized capital stock of 100,000 shares, but whlch had issued only
87,500 shares; that Rhea owned 25,000 shares, and of the remainder W. F.
Webster owned 12,500 shares, E. M. Hall owned 5, and 5 were owned by C. T.
Hall ; that the Ananias Company owned a mlnlng lease and mining ma-
cliinery, and carried on mlnlng opérations on its land in Jasper county, Mo. ;
that Rhea was a dlrector, secretary, and treasurer, and managed the mining
opérations ; that the other dlrectors were Whitlock and his wife and the two
Halls, but that the Halls were the nominees of Whitlock and Rhea, and as
dlrectors conformed to the wlshes of Rhea and Whitlock. It was alleged that
the Ananias Company became involved in debts that it was unable to meet,
and was pressed by its credltors, and that the bank, as one of the creditors,
and Jacobs, its cashler, on behalf of the creditors, proposed to the stockholders
that they should permit the mining property to be placed in the hands of a
trustée, to be held untU by its opérations it should pay its debts, or be sold by
the trustée and the debts paid, after whlch ail reœainlng money realized by
the company's opérations was to be returned to the stockholders, and that
this arrangement was to be effected by the stockholders asslgning and pladng
their stock in eserow wlth Jacobs and the bank.
The Whitlocks' bill then alleged that, pursuant to tlils proposition, they
assigned to Jacobs their 24,990 shares of stock, and that Jacobs and the bank
accepted the trust Newton's bill set out copies of letters between Jacobs as
cashier, and Newton's attorneys, alleged as defining the terms of the trust
©sjFor other cases aee same toplo & KEY-NUMBER in ail Key-Numbered Dlgesta & Indexes
EHEA V. NEWTON 347
(262 F.)
agreement between them. Thèse letters are too extended to be set forth lu
full, but a portion of the (bank's letter maklng the proposai is as follows :
"At this time It appears that an agreement can be reached among ail credi-
tors whereby they will enter into a contract to wltbliold tbe prosecution o£
their claims for a period of 90 days durlng whlch tlme they wlll place the
property in the hands of a trustée, and he will operate the same wlth an ex-
perienœd manager, and if within that tlme, as they confldently expect, the
mine can be made to pay, then there will be no reasonable doubt that eredi-
tors will receive their money, and the property can be sold at a fair valua-
tion. If this course is not adopted, bankruptcy proceedlngs will immediately
ensue, and the resuit will be that the créditera will realize but very little upon
their varions claims, for the largest value of the company lies In its lease and
the ground, which wlll immediately be forfeited by the owners of the land
as soon as work Is discontlnued ; such a course would necessarily leave the
machlnery as the only tangible asset out of whlch to pay the indebtedness.
"The eredltors do not désire to advance the money necessary to put the
mine in opération, unless they can feel assured that the stoekholders will not
interfère, or possibly stop their opérations at a time which might be vital to
the Interest of ail concemed, and It is proposed that ail stock shall be as-
signed and placed In escrow in this bank, to be held subject to an agreement,
which Is to be prepared and accepted by the stoekholders, whereby the credi-
tors, after placing the mine upon a paying basls, may bave the authorlty to
make a sale of the property in order to pay the indebtedness and save the
stoekholders something upon their investment. Mr. Whitlock and Mr. Ray,
local stoekholders of the company, and who own one-half of the capital stock,
hâve agreed to this proposition, and are willing to pool their stock as above
indicated. It is also agreed by them that they shall both resign from the
board, as well as other local parties and that a new board of directors, com-
lK)sed of the principal eredltors, shall be elected in their stead.
"1 believe I bave outlined the matter sufficiently for you to obtain a fair
idea of the situation, and I wish to urge that the stock held by the Newton
estate be deposited wlth Mr. WMtlock's and Mr. Kay's, in order to consum-
mate the plan above referred to. It Is the only chance to save anything out
of the property, elther for eredltors or stoekholders, and if this course be
not carried out and a bankruptcy court be the only resort, eredltors will
naturally be inclined to take such recourse as may be possible upon the indi-
vidual liability of stoekholders, through Irregularities in the corporation,
which appear to be numerous, as well as stock which has been unpaid for by
various shareholders."
The answer of Mrs. Newton's attorneys contained the foUowIng:
"In further reply to yours of April 26th will say that I flnd that the stock
of the Ananias Mining Company, owned by the estate of A. Newton and
Catherine E. Newton, is already on deposit wlth you under certain agree-
ment wlth Mr. Whitlock. That agreement is hereby canceled, and the stock is
placed In your hands in accordance wlth the request contained In yours of
April 26th. We désire to give you full authorlty to deposit the same in ac-
cordance wlth the wishes of the eredltors as set forth in your letter, wlth
this condition, however, that nothing must be done by vchlch the estate of Mr.
Newton or Mrs. Newton will become liable for $1 of any Indebtedness or obli-
gation whatever. Rather than do that, we would let the entire thlng go. Hop-
ing that in the end there will be somlething left for Mrs. Newton, we hâve, how-
ever, told her to forget ail about the stock, and if she recelves no retum,
well and good, and if in the end she does she is just that much better ofC."
To this letter the bank replied:
"I bave neglected earller replying to your letter of the Ist tnst. In relation
to the Ananias Mining Company stock owned by the estate of A. Newton and
Catherine Newton. I hâve filed the stock wlth your instructions attached,
and sincerely hope that better results may be reported for the future than the
past; but Mr. WhitlocK has gotten this company badly Involved, and
whether or not it can be pulled out of the hole will dépend upon various con-
ditions."
348 262 FEDERAL REPORTER
In each of the MUs It was then alleged that the bank and Jacobs, after ac-
cepting the trust, took possession of the property of the Ananias Company
and selected Rhea as the manager of the property. The Newton bill alleged
that Hhea had full knowledge of the trust. The Whitlock bill alleged that
Rhea was selected by Jacobs and the bank as manager of the property for tlie
purpose of carrying out the trust alleged In thelr bill. In each bill It was
averred that Rhea conspired with Jacobs, the bank, and wlth Mont B. Falr-
IJeld to obtain the title to the property, and In order to do so induced a crédi-
ter of the Ananias Company, holding a judgment against the Ananias Com-
pany, to levy an exécution against its property and to sell it, and tliat at
that sale Rhea caused the property to be bld in in the name of Mont B. Fair-
field, and that the sherifE thereupon executed a bill of sale for the property to
Falrfield. It was alleged that Fairfleld conveyed the property to the Mont B,
Company, but that this transfer was in breach of the trust The bills then
charged that. ail créditera of the Ananias Company had been paid out of tlie
proceeds of the trust, but that défendants still retained plalntififs' shares of
stock and the property of the Ananias Company, and had made large profits
therefrom. The prayers were for a decree declarlng a trust to exlst, as al-
leged, in the property of tlie Ananias Company, notwithstanding the form of
a sale to Fairfield, and for an accounting.
There was a déniai by Rhea of the alleged trusts, or of knowledge of them,
or of purchase of the property through conspiracy. He alleged that the ex-
écution sale was fair and conveyed the title to Mont B. Fairfleld, and that
the Ananias Company also executed a conveyance of ail its property to him ;
that the Ananias Company was in an insolvent condition, and the stockholdera
agreed to assign thelr stock to the creditors, and that the creditors should take
the corporation and Its property in full payment for their debts, with the
right either to sell the corporate property or to continue the corporate exist-
ence for their own benefit, and that the property of the corporation and the
shares of stock (except those belonging to W. F. Webster) were delivered to
the creditors pursuant to this agreement, together with the résignation of the
offlcers and directors, and that the new stockholders elected new directors,
who chose new offlcers for the corporation. He alleged that the Ananias Com-
pany, by its new offlcers, made a written agreement to sell him the property,
if he should be able to pay the clalms of the creditors ; that on the faith of
this contract he expended a large amount in Improvementa on the property
and in acquiring new mining ground adjacent to the property of the Ananias
Company, from which he procured ores and from the proceeds of their sale
was able to pay the debts of the Ananias Company. He alleged that the
Mont B. Mining Company since its organization owned and operated th&
mines, and at its own expense had made extensive improvements and obtained
new mining ground and operated mines thereon. The answer of the Mont
B. Company was similar. The decree dismissed the suit as to Jacobs, tne
bank, and Fairfleld, but held Rhea to be a trustée for plalntiffs, and ordered
him to dellver to plalntiffs certain shares of stock in the Mont B. Mining
Company, and to pay to them $183,733.76 as their share of the proflts of the
trust property. Rhea and the Mont B. Mining Company hâve appealed.
There is some dispute as to the facts, but the essential facts as shown by the
évidence are as foUows:
In 1910 the Ananias Mining Company was organlzed under the laws ot
Missouri, with an authorized capital stock of $100,000, divided into 100,000
shares. Of this stock there was issued to W. A. Rhea 25,000 shares, to W. H.
Whitlock 20,000 shares, to bis wife, Blanche W^hltlock, 4,990 shares, to E. M.
Hall 5 shares, and to 0. T. Hall 5 shares. Later there were Issued 25,000
shares to A. Newton, who aftenvards died, and thèse shares became tho
property of the plalntifC Catherine K. Newton ; 12,500 shares were also issued
to W. F. Webster; the remalning 12,500 shares were never issued. The
directors were Rhea, the two Whitlocks, and the two Halls. Whitlock was
président, and Rhea secretary. The property of the corporation consisted of
a mining lease and of a mining or concentrating plant on the leased land.
Mining opérations were conducted until In April, 1911. At that time the Com-
pany had an indebtedness of about $23,000, ineluding an overdraft to the First
RHEA V. NEWTON 349
(262 F.)
National Bank of Carthage of $4.000. The value of the property, Includlng
leasehold rights, did not exeeed $5,000. Creditors were pressing for payment,
and suits had been begun. One case was to be heard on April 22d. At a con-
férence between Wbitlock and Jacobs at the office of the attomey for the
banlî on the 21st of April means were discussed for averting the danger from
this pendlng suit, and the bank decided to and did procure an attachment of
ail the corporate property on the afternoon of the 21st. It Is at this conférence
that Whitlock claims the agreeinent was made between himself and Jacobs
relating to the disposai of his stock in trust to Jacobs. The next day judg-
men^s were entered against the Ananias Company for about $4,400 and for
the enforcement of liens securing this sura.
The next day was the 23d and on that day there was a gênerai meeting of
ftll the creditors. Mr. Wliitlock was not présent, but Rhea was. Jacobs ex-
plaiiied that the bank attachment was not for the purpose of obtalning a
préférence, but to hold the property pendùig some possible arrangement
among the creditors. The attorney for Rhea said that Rhea was ready to
turn over his stock to the creditors. An attorney for the bank said that he
was satisfied that the Whitlocks would transfer thelr shares, and Mr. Jacobs
said he would endeavor to get Mrs. Newton to transfer lier shares. The
creditors agreed to haye an expert examine the mines and report at a later
meeting. This second meeting of the creditors occurred two days afterwards,
on April 25th, at Webb City. The expert reported it to be doubtful if the
mine could be made to pay, but Mr. Rhea said he believed the ground could
be made to pay, and it was flnally decided that if the creditors would forbear
pressing their claims for 90 days, and the stockholders would turn over the
property to the creditors, asslgn thelr stock, and resign as officers and di-
rect ors, the creditors would proceed with mlning opérations, and they agreed
who should be chosen as directors. The Whitlocks resigned as directors and
officers, and their stock was turned over, assigned in blank to the bank's at-
tomey. The évidence shows this to hâve occurred on the 2oth. Halls' stock was
also assigned then, and Rhea assigned his stock an the 25 th or 2eth. On the
26th a written agreement was drawn and slgned by Whitlock for the Ananias
Company, and later signed by creditors of tlie company representlng $22,-
000 of claims, agreeing that Jacobs should act as trustée for the creditors,
and tliat they would forbear légal proceedings for 90 days on the under-
standing that Jacobs should put some one in charge of the mlning opérations
for 90 days, the proceeds to be paid to creditors. On the 26th also Jacobs
wrote the letter to Mrs. Newton's attorneys.
On May Ist, there was a meeting of those claiming to be the stockholders
of the Ananias Company. Mr. Hackney holding the Rhea and the Whitlock
certiflcates and one of the Hall certificates, and flve creditors having one
certificate of 1 share each issued that day as a distribution of the 5 shares
previously held by the other Hall, and Mr. Jacobs also acting. Five directors
were chosen for the ensuing year. Jacoljs was later elected président.
On this same day Mrs. Newton's attorney at Chicago wrote the answer to
Jacobs' letter that bas been referred to. On May 3d Rhea began work at the
mine, thinking to run It for 30 to 90 days on trial, acting as a salaried em-
ployé of the new oflicers of the corporation. On June 15th the Ananias Com-
pany, by Jacobs as président, and Rhea entered into a written agreement
authorized by the board of directors, by which the company agreed that if
Rhea, durlng the period of his management, should cause ail of the debts of
tlie company to be paid, he should thereupon become the owner of ail the cor-
porate property, and that Rhea might hâve the exclusive right to sell the
property for the unpaid portion of the corporate debts, and to hâve as a com-
mission any surplus of price received above the amount of such debts. Ja-
cobs also signed this agreement as trustée representlng ail the stock in the
company, except Webster's shares and the 5 shares issued to directors in
order to qualify them. This contract was made after Rhea had reported that
he could not profltably operate the mine longer without much new machinery
and was ready to quit, but was wlUing to continue and to put in the machinery
at his own expense, if the company would give him such a contract. The di-
rectors and creditors were unwilling to purchase the new machinery, and so
350 262 FEDERAL REPORTER
the contract was made. Rhea expended between $2,500 and $3,000 for the
new maehlnery. He operated the mine for the remainder o( the year, and
made unsucœssfnl efforts to sell the mine. In December he sold tlie ore
whlch he had held for some time because of low priées, and was able to pay
creditors a dividend of 32 per cent
Soon afterwards Rhea again reported that the mines could net pay and
that the ore faces were plnchlng out. The creditors again appointed an ex-
pert miner, who waS one of the creditors, to examine the property and re-
port, and he reported that the mine could not be operated so as to pay its
debts. The creditors then oflered Rhea a discount of 10 per cent of, thelr
claims if he would continue. Rhea assoclated Falrfield wlth hlm, and they
acquired additional land under leases, and then declded to exercise the right
of purehase of the Ananlas Company's property, given him under the option
agreement referred to. Supposlng that a judgment sale was needed In order
to clear the tltle of the property, because Webster had not asslgned hls stock,
an exécution sale on one of the judgments against the coriKtratlon was ar-
ranged, and the property was bid in on Aprll 1, 1912, by Rhea In Fairfield's
name, and the sheriff gave hls conveyanee to Falrfield. On the same day, the
Ananlas Company executed a deed to Fairfleld of the same property, and
Rhea or Fairfleld dellvered a guaranty of the payment of the remainder of
the debts of the company, which amounted to a large sum. Thèse debts were
later pald, largely from opérations in the mines on other ground and from
Rhea's prlvate funds.
A new company was organlzed, called the Mont B, Mining Company, of
which Rhea held practically ail the capital stock. To thts company the
Ananlas property was conveyed by Fairfleld, and It operated on the land
formerly occupied by the Ananlas Company, but under a new lease, on more
favorable terms, and also on a much larger tract of land adjolning. Owing to
the great Increase in the priées of zinc and lead ores, thèse opérations later
proved to be very profltable. The trial court required Rhea to account for
the profits he had made in ail of thèse opérations, on the theory that the sev-
eral mines were but an expansion of the property of the Ananias Company,
and that plaintiffs were entitled to such proportion of the shares in the Mont
B. Mining Company's stock and In Its profits as thelr shares of stock bore to
the total capital of the Ananlas Company.
Frank Hagerman and Thomas Hackney, both of Kansas City, Mo.,
for appellants.
Hiram W. Currey, of Joplin, Mo. (Hugh Dabbs, of Joplin, Mo., and
A. W. Martin, on the brief), for appellees.
Before SANBORN and CARLAND, Circuit Judges, and MUN-
GER, District Judge.
MUNGER, District Judge (after stating the facts as above). The
chief question in the case is the sufficiency of the évidence to support
the decree. The évidence introduced on behalf of the Whitlocks
tended to prove that Jacobs agreed with them that, if they would as-
sign their stock to him as trustée for the creditors, he would put a
compétent manager in charge of the mine, and endeavor to pay off the
corporate debts by the proceeds from the opération of the mine, and
then would retum the shares of stock to them. The theory of Whit-
lock's counsel is that this was as far as the agreement extended, and
that no power of sale of the mine or of the stock wîls conferred on
Jacobs or the bank, although this militâtes against the allégations of
the bill. The case has been considered upon the évidence, as if the
Whitlock bill conformed to this theory. Treating the évidence as
proving the agreement of Jacobs to hâve been as Whitlocks' counsel
now contend, and conceding, without deciding, that thereby a trust
RHEA V. NEWTON 351
(262 F.)
was created în the property of the corporation, and also in Whitlocks'
shares of stock, a question of fact arises as to what notice Rhea had
of this trust agreement, binding him, as a purchaser of the corporate
property, to account to Whitlocks.
Conceding, also, without deciding, that the correspondence between
Mrs. Newton's attorney and Jacobs created a similar trust in her
favor, a similar question of fact arises as to what notice, if any,
Rhea had of the agreement between Mrs. Newton and Jacobs, and,
if Rhea had no notice, the Mont B. Mining Company cannot be said
to hâve had notice. Rhea was held to account to plaintifïs only
because he acquired the property of the Ananias corporation, and
from that property he thereafter made profits. Its corporate ex-
istence was not continued by him after he acquired its property, and
the property acquired was transferred from him to the Mont B. Min-
ing Company.
[ 1 ] Was there anything in the relationship of Rhea to the Ananias
Company that invalidated his purchase of that company's mining
property? He was an employé of the corporation under a verbal
contract to operate the mine experimentally, with a view to discover-
ing whether it would be profitable, if operatedj His dealings for the
purchase of the mine were made with the company's président, ap-
proved by the board of directors, and ratified by the holder of more
than a majority of the issued capital stock. There is no reasonable
question of his good faith toward the company in making his purchase.
He did not in any manner represent the corporation in making the
sale. That he was making the purchase for himself was not con-
cealed, as the written contract named him as the vendee. The con-
tract is shown to hâve been fair, and to the benefit of the corporation
and of its stockholders. It provided for the payment of ail of the
debts of the corporation. There was no apparent prospect of devel-
opment of the mine of the Ananias Company so as to be profitable,
but with additional land that Rhea could acquire the property, with
its mill, would be of some advantage. It is urged that Rhea was
incapacitated to purchase the property because of his office, but this
contention cannot be sustained. In the case of Wyman v. Bowman,
127 Fed. 257, 62 C. C. A. 189, this court, by Judge Sanborn, stated
the rule as follows:
"In the flrst place, it is not true, as a gênerai rule, that the directors of a
corporation are incompétent to make contracts with themselves as individuals,
or that agreements so made may generally be avoided at the suit of creditors
or stockholders of the corporation. The only reason why a contract of thia
character may be set aslde in any case Is because directors occupy a fiduclary
relation to the corporation, and to its creditors and stockholders. This re-
lation is analogous to that of agent to principal, and trustée to cestul que
trust ; but it is not of so intimate and confidential a character as either of thèse.
Still it is such a relation of trust and confidence that courts scrutinlze with
jealous care ail transactions between directors as offlcers and as individuals,
and require them to be characterized by good faith and the conscientious dis-
charge of officiai duty. The vice against which they seek to guard them is
that the adverse interest of the individuals may overcome the duty of the
officiais, and induce agreements and transactions detrimental to the corpora-
tion, and unduly bénéficiai to the individuals. Yet in many — ^probably in
most — cases the interest of the directors and offlcers of the corporation is as
352 262 FEDERAL REPORTER
great, and It Is often greater. In the welfare and success of the company,
than in their Individual prosperity. In many cases the prosperity of the In-
dividuals is eonditloned by the suecess of the corporation they are managing.
There is no sound reason why indivlduals who are directors of a corporation
rnay not corne to its assistance in days of flnancial dlstress, may not make
their contracts to loan money to it, to receive security from It for repayment,
to aceept paymient of obligations to them, to buy property from, or sell prop-
erty to, it, or to do any other act bénéficiai to the corporation, or rautually
advantageous to both the corporation and the indivlduals. The question hère
under considération has often been discussed and determlned by the courts of
thïs country and of Bngland, and, without entering upon an exhaustive re-
vlew of the opinions, it may be safely said that thèse principles hâve become
flrmly established both by reason and by authority : Contracts and trans-
actions between indivlduals and corporations of which they are directors or
ofHcers, which are falr, which are made in good falth, whlch do not secure to
the indivlduals any undue or unjust beneflt or advantage, and in whlch the
interest of the Indivlduals and the duty of the officiais work In unison for
the welfare of the corporation, are valid and enforceable both at law and In
equity. Twin Lick 011 Co. v. Marbury, 91 U. S. 587, 590, 23 L. Ed. 328 ; Hôtel
Co. V. Wade, 97 U. S. 13, 22, 23, 24 !.. Ed. 917; Gould v. Railway Co. (C.
O.) 52 Fed. 680, 681 ; Sutton Mfg. Co. v. Hutchlnson, 63 Fed. 496, 11 C. C. A.
320 ; Holt V. Bennett, 146 Mass. 437 [16 N. E. 5] ; Smith v. Lanslng, 22 N. Y.
520, 528; Dunconib v. N. T., etc., H. Co., 88 N. Y. 1, 6, 9; Buell v. Bucking-
ham & Co., 16 lowa, 284, 291, 293 [85 Am. Dec. 516] ; Ashurst's Appeal, 60
Pa. 291, 312, 315 ; Hallam v. Indianola Hôtel Co., 56 lowa, 178, 9 N. W. 111 ;
Comblnation Trust Co. v. Weed (0. C.) 2 Fed. 24, 25-27; Gorder v. Platts-
mouth Canning Co., 36 Neb. 548, 556, 54 N. W. 830."
Later cases hâve approved the same rule. Union Trust Co. of
Maryland v. Carter (C. C.) 139 Fed. 717; Kessler & Co. v. Ensley
Co. (C. C.) 141 Fed. 130; Cowell v. M'Millin, 177 Fed. 25, 100 C. C. A.
443; Howland v. Corn, 232 Fed. 35, 146 C. C. A. 227; In re East-
man Oil Co. (D. C.) 238 Fed. 416.
[2] It is also urged that Rhea had notice of the trust relationship
between Whitlocks and Mrs. Newton and Jacobs. Rhea dénies any
knowledge of the contracts claimed by plaintififs to hâve existed.
Rhea had assigned his stock without conditions, although Jacobs'
letter to Mrs. Newton's attorney stated otherwise. Rhea mistakenly
considered that the corporate property had to be conveyed by a judi-
cial sale before he could get a clear title, because Webster had not
assigned his stock. Rhea did not see or know of the correspondence
between Jacobs and Mrs. Newton's attorneys. He did not know that
any of the stock was assigned on any condition, except that it was
for the purpose of paying the corporate debts; Without stating the
détails of évidence relied upon by the appellants and appellees, a
careful reading and considération of ail the évidence, and a compari-
son of it with the contentions made as to its légal eflfect, leaves the
conviction that Rhea was a purchaser of the corporate property in
good faith and without notice of any trusteeship by Jacobs as now
claimed by appellees, and that the Mont B. Mining Company acquired
the property from him, also in good faith and without notice of any
right therein claimed by appellees.
[3, 4] Rhea dealt with those who were at least de facto officers.
No other persons claimed to act as directors or président. The offi-
cers were recognized as such by ail who had dealings with the cor-
poration, and plaintiff's connsel conceded at the trial that the cred-
BHEA V. NEWTON 333
(2S2 P.)
itors had the right to choose a new board of directors to manage the
property. The acts of de facto officers in good faith are as valid as
respects third persons as are those of de jure officers. 3 Cook on
Corps. (7th Ed.) § 713; 2 Thomp. on Corps. (2d Ed.) §§ 1117-1120;
Augusta T. & G. R. Co. v. Kittel, 52 Fed. 63, 2 C. C. A. 615. When
a corporation is insolvent, and unable to meet its obligations, or to
secure further funds with which to continue business, and creditors
are pressing their claims, a majority of the stockholders hâve the
power, in good faith, to make a sale of the entire corporate property
in order to provide for such debts. 3 Cook on Corps. (7th Ed.) §
670; 3 Thomp. on Corps. (2d Ed.) § 2724; Hayden v. Officiai Hôtel
Red Book & Directory Co. (C. C.) 42 Fed. 875; Marks v. Merrill
Paper Co., 203 Fed. 16, 123 C. C. A. 380; Skinner v. Smith, 134 N.
Y. 240, 31 N. E. 911 ; Sewell v. East Cape May Beach Co., 50 N. J.
Eq. 717, 25 Atl. 929; PhilHps v. Providence Steam Engine Co., 21
R. I. 302, 43 Atl. 598, 45 L. R. A. 560; Rothwell v. Robinson, 44
Minn. 538, 47 N. W. 255; Bowditch v. Jackson Co., 76 N. H. 351,
82 Atl. 1014; Sawyer v. Dubuque Printing Co., 77 lowa, 242, 42 N.
W. 300; Price v. Holcomb, 89 lowa, 123, 56 N. W. 407; Traer v.
Lucas Prospecting Co., 124 lowa, 107, 99 N. W. 290; Treadwell v.
Mnfg. Co., 7 Gray (Mass.) 393, 66 Am. Dec. 490; Descombes v.
Wood, 91 Mo. 196, 4 S. W. 82, 60 Am. Rep. 239; Common Sensé
Min. & Mill. Co. V. Taylor, 247 Mo. 1, 152 S. W. 5 ; Jones on In-
solvent Corporations, § 56; Purdy's Beach on Corporations, §§ 830-
834.
Rhea purchased this property from the stockholders and board
of directors; botli they and he acting in good faith, and believing
that authority existed for the making of the conveyance, and that it
was for the best interests of the corporation and of the creditors
that the property should be sold. No other opportunity had been
found to dispose of it, and the price was fair. Rhea was justified in
believing that the other stockholders who had assigned their stock
had made such transfer on the same terms that he had, as a sur-
render of their office and a surrender of the shares of stock to the
creditors, so that they might obtain payment of their claims, either by
opération of the mines or by sale of the mining property. As noth-
ing impugns his good faith in making the purchase from the di-
rectors and holder of the majority of the stock, neither he nor the
Mont B. Mining Company can be held to be a trustée for plaintiffs.
Thèse conclusions render unnecessary a discussion of other ques-
tions presented. For the reason stated, the decree will be reversed,
with instructions to dismiss the suits.
CARLAND, Circuit Judge, dissents.
262 F.— 23
354 262 FEDERAL REPORTER
BUSINESS MBIN'S ACC. ASS'N OF AMERICA T. SOHIEFELBTJSCH.*
(Circuit Court of Appeals, Eighth Circuit. December 2, 1919.)
No. 5423.
1. INSUBANCE <SS3456 — ^Death frou blood foisonino oavsed bt "accidbntal
MEANS."
The death of an Insured from blood polsonlng from an Infected abrasion,
eaused by rubblng hls head, whlch was bald, wlth an infected towel,
héld eaused by "accidentai means," withln the terms of tlie policy, in
tbe absence of évidence that he knew of the Infected condition of the
towel when he used It.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Accidentai Means.]
2. Appbal and ebbob <S=>173(14) — New dbtense by insueee oannot be baised
FOE riEST TIME ON APPEAL.
In an action on an accident policy for death of insured from an Infec-
tion, eaused by hls own voluntary act, that he knew the probable con-
séquences of such act held matter of défense, and the question one for
the jury, whlch cannot be raised for the flrst time in the appellate court.
3. Insueance <S=>665(5) — Evidence or cause ov death as accidentai,.
Evidence held sufflclent to sustain a flndlng that the cause of death
of insured was accidentai.
In Error to the District Court of the United States for the Western
District of Oklahoma; Joseph W. Woodrough, Judge.
Action at law by Bertha Schiefelbusch against the Business Men's
Accident Association of America. Judgment for plaintifï, and de-
fendant bfings error. Affirmed.
Selon T. Gilmore, of Kansas City, Mo. (C. G. Horner, of Guthrie,
Okl, on the brief), for plaintifï in error.
A. G. C. Bierer, of Guthrie, Okl. (Frank Dale and N. E. McNeill, of
Oklahoma City, Okl., on the brief), for défendant in error.
Before CARLAND and STONE, Circuit Judges, and ELLIOTT,
District Judge.
CARLAND, Circuit Judge. This is an action by défendant in error,
hereafter called plaintiff, to recover from plaintiff in error, hereafter
called défendant, a death loss on an accident policy issued to her hus-
band, Mathis Schiefelbusch. The plaintiff recovered a verdict below,
and the défendant brings the case hère, assigning error. The policy
contained the f oUowing provisions :
"Hereby insure him against loss resulting from bodlly injuries, efCected
•dlreetly, independently, and excluslvely of ail other causes, contributing or
proximate, through external, violent, and accidentai means." " • • • For
loss of llfe, $5,000.00" "Blood polsonlng resulting dlreetly from bodlly In-
juries shall be deemed to be included in the sald term 'bodlly injuries.' "
The plaintiff stated her cause of action as foUows :
"I^at the sald Mathis Schiefelbusch belng a man that Is termed and desig-
nated as bald-headed would frequently durlng the summer time and in hot
weather in wiping and rubblng the perspiration from the top of his head
would do so with a towel, and that upon the 17th or 18th day of July, 1916,
' the exact date being unknown to sald plaintiff, the said Mathis Schiefelbusch
®=9For other cases see same toplc & KSY-NUUBSR iu ail Key-Numbered Digests & Indexes
•Rehearing denied Marcli 31, 1920.
BUSINESS MEN'S ACC. ASS'N V. SCHIEFEbBUSCH 355
C262 F.)
did violently and by external means in attemptlng to rub the perspiratlon from
the crown of bis head used a towel wMcb had been used in bis dental work,
and by rubbing over bis liead did cause a sllgbt abrasion of tbe skln and after
reeeiving sald injury and abrasion of the skin that thereafter and tliereby an
infection set in and that by reason of said infection and as a direct resuit from
the violent rubbing of said head, wliich eaused an abrasion of the skin, and as
a direct resuit blood poisoning resulted and of said injury said Mathls Schiefel-
bnsch died on or about the 24th day of July, 1916, which said death was
eaused and resulted directly from the external, violent and accidentai injury
received from the rubbing of the towel or cloth over the head of said Mathis
Schiefelbusch thereby causing a slight abrasion of the skin."
It was admitted at the trial that the deceased died from blood poi-
soning. Counsel for défendant submit two propositions for reversai.
They are as f oUows :
(a) "There eau be no recovery under a pollcy insuring against the resuit
of an Injury efCected through accidentai means, where such injury, although
totally unexpected, fortuitous, and undeslgned, and In that sensé accidentai,
Is oceasioned by voluntary act on the part of the insured, executed In an
exjjeeted and ordinary way, since such injury, though accidentai, Is not the
resuit of accidentai means."
(b) "The theory that Dr. Scbiefelbusch's death resulted from the causes
named in the pétition Is based upon a chain of presumptions or Inferenees,
and violative of the rule of law that, whenever cireumstantial évidence is
relied upon to prove a fact, the circumstances must be proved, and not them-
selves be presumed."
[1,2] The défendant introduced no testimony. The évidence on the
part of the plaintifï shows the f ollowing facts : The deceased was a
dentist, and practiced his profession at Yale, 0kl. He was bald-
headed, and perspired profusely on his head and neck duringhot weath-
er. He had a habit or practice of usîng, to the extent of a dozen
times a day or more, the towels used by him in the practice of his
profession, to wipe perspiratlon from the top of his head and neck. He
used thèse towels for this purpose when they were dirty, and had blood
and pus upon them, coming from the mouths of patients. He wiped
his hands upon thèse towels after having his hands in the mouths of
patients. The towels often had upon them hardened particles of
plaster of paris. The practice of using thèse towels was so commor.
that Dr. Bacon had talked to the deceased about it.
The history of the illness of deceased was substantially as follows :
On Wednesday, July 21, 1916, deceased complained of pain at the
back of his neck and the top of his head. There were circumscribed red
spots upon the top of the head and upon the neck. They were in-
flamed and swollen. Deceased sufïered with pain in the locality men-
tioned on Thursday and Friday. Saturday morning he had a chill,
and went to bed exhausted. He continually grew worse, became de-
lirious on Sunday afternoon, and died on Monday morning about 1 :30
o'clock. Dr. Hudson incised the red spot on the top part of the heac'
on Thursday. He found a small necrotic area underneath the skin
and no free pus. In the judgment of the doctor, deceased had been
infected by bacterial or septic infection. There WcLS médical testimon}'
that not a day passed upon which deceased could not hâve been infected
by the towels with the streptococcus germ ; that the continuai rubbing
of the head under the circumstances shown would be sufficient to carrj-
356 262 FEDERAL REPOKTEK
a germ into the body of deceased; that there was no indication that
the germ was carried into the body from any other source or manner
than by the use of the towels; that it was very probable that de-
ceased was infected by the rubbing of the towels, and that the infection
originated in the localized places upon the head.
There was no allégation in the answer that, when deceased used the
towels upon his head in the manner alleged in the complaint, he
knew they were infected and were liable to infect him. The case
below was net tried upon that theory. The trial court did not charge
the jury upon that question, nor was it requested so to do by the
défendant, and the jury did not pass upon that question. The plain-
tiff, in her effort to show that the towels were the cause of the infec-
tion and conséquent blood poisoning of tlie deceased, came near show-
ing that deceased raust hâve known of the infected condition of the
towels and that they were liable to infect him ; but, as we hâve said,
that question was not before the court. The question in ail events
was one for the jury to détermine under the évidence, and a verdict
could not hâve been directed on the ground that deceased did knovv
of the infected condition of the towels, and that they were Hable to
cause an abrasion of the skin and infect him. If the deceased knew that
the towels he used in the manner indicated would cause an abra-
sion of tlie skin, and also were infected with the streptococcus germ,
then the means of death was not accidentai, within the language of the
policy. Interstate Business Men's Ace. Ass'n v. Lewis, 257 Fed. 241,
— ce. A. — .
There is no finding, however, that deceased had the knowledge men-
tioned, and the évidence upon the subject could not be considered by
the trial or this court, except for the purpose of deciding whether
there was enough to go to the jury. The fact that deceased had this
knowledge was matter of défense. Plaintiff was not required to de-
feat her own cause of action. If the deceased used the towels with-
out knowledge that they were infected, and were liable to cause an
abrasion of the skin and also infect him, then plaintiff showed that
death was caused by accidentai means, as he could not be said to
hâve intended the use of a towel that would infect him. We cannot
say that deceased had the knowledge mentioned for two reasons : (a)
The case below was not tried on this theory; (b) the évidence upon
the subject is such that the question would hâve to be submitted to
a jury. We are therefore of the opinion that the death of deceased
was caused by accidentai means.
[3] As to the claim that the verdict of the jury is based upon a
chain of presumptions or inferences, we are satisfied that, even if this
be so, it does not invalidate the verdict, if there were facts from which
the jury had the right to draw legitimate inferences. The deceased
was a man in good health. He did rub his head with towels which
were liable to cause an abrasion of the skin and the introduction of
streptococcus germs into his body. There was nothing to indicate that
the germ which caused blood poisoning came from any other source.
There was médical testimony to the effect that it was probable that the
SINQLETON V. MOOEE *>"'
(262 F.)
infection came from the source stated. Dr. Hudson, when testifying,
said:
"Well, owing to his habits of rubbing the towel over his head In that way,
rubbing of£ the tender cells of the skin which lay In layers on the outsîde of
the skin, I would say it was very probable he got an infection through the
skin in that way."
The testimony of Dr. Hudson was supported by physical facts tes-
tified to by the plaintifï and corroborated by three other reputable phy-
sicians. We think there was sufficient évidence to sustain the verdict
of the jury. Such évidence has been held sufficient in many other
cases. Preferred Ace. Ins. Co. of New York v. Barker, 93 Fed. 158,
35 C. C. A. 250; AlcCarthy v. Travelers' Ins. Co., 15 Fed. Cas. 1254
1 Cyc. p. 292; M., K. & T. Ry. Co. v. Minor (0kl.) 181 Pac. 142
Waters-Pierce Oil Co. v. Deselms, 212 U. S. 159, 29 Sup. Ct. 270, 53
L. Ed. 453.
There was some attempt on cross-examination to show that the
blood poisoning may hâve been the resuit of a mosquito bite. There
was no évidence, however, that any mosquito ever bit the deceased.
There was testimony, also, that ref uted any claim that deceased was in-
fected by the incision made by the physicians. The jury were called
upon to décide the question presented by the évidence, and they hâve
decided it upon sufficient testimony, and their verdict is finaL
Judgment below affirmed.
SINGLETON et al. v. MOORB.
(Circuit Court of Appeals, Second Circuit. December 1, 1919.)
No. 103.
1. PaBTNEBSHIP ®=>280— EfFECT of PEOVISIONS FOK liquidation AT EXPIBA-
TION of CONTRACT PERIOD.
It is compétent to provide In partnership articles that, when the term
fixed for the duratlon of the partner.ship business has explred, the
power of liquldating the partnership business shall vest in some specified
one of the partners, and It thereupon becomes the duty of such partner,
as liquldating agent; to collect the assets, adjust the debts, etc.
2. Partnership "©=ï280 — Partner designated as liquidatino agent on
tebmination of partnership has sole control.
Where partnership articles designated one partner as liquldating agent
on terminalion of the partnership, the other partners hâve no power to
act, but ail power is conferred on tie liquldating partner.
3. Partnership ©=»280 — Nonintebference by courts with partner appoint-
ED as LIQUIDATING AGENT.
When partnership articles Intrust the charge of the property and the
windlng up of the partnership affairs to one of the partners, the courts
will not interfère with his proceedlngs, unless â pailpable breach of the
partnership articles is shown, or misconduct appears, which amounts to
fraud and endangers the property.
4. Pabtnekship <s=>282 — Liquidating partner should sell stock which
HAD ACQUIRED HIQH MARKET VALUE FROM COMPETITION BETWBEN FORMER
PARTNERS.
Where, after expiration of a partnership by Its terms, corporated stock
pledged by the partnership greatly increased in value, because the liqul-
®s=>Foi otUer cases see same toplc & KBY-NUMBER in ail Key-Numbered Disests & Index»
358 2G2 FEDERAL REPORTER
dating partner and the other partners were each seeking to obtaln con-
trol of the corporation whose stock was pledged, helcL, that it was the
duty of the liquldatlng partner to sell the stock at the period of high
priée, though such sale would be injurions to him as an individual; it
being for the beneflt of the firm.
6. Paetnership iS=282 — Liquidating paetner should sell stock which had
acquired high mabket value fbom competition between formee paet^
NEES.
Wlere partnershlp, whlch had disposed of textile products, explred, and
the partner named as liquldatlng agent and the other group of partners
each continued in the business, and desired to eontrol a textile corpora-
tion, shares of which the flrm had pledged as collatéral to secure a debt,
held that, wbere the annual meeting of the corporation was not far
distant, and thèse after demand for stock would lessen, and price would
fall, it was the duty of the liquldatlng partner ta sell saine, instead of
dividing it between the partners; hence as, if such sale would work any
Ineqtiality, It might be corrected on subséquent référence and account-
ing, the liquldatlng partner cannot complaia of an order directlng sale
of such stock.
Appeal from the District Court of the United States for the East-
ern District of New York.
Suit by Louis F. Singleton and others against Edgar B. Moore.
From an interlocutory order appointing a receiver, and directing the
sale of corporate stock which had been pledged by a partnership that
had expired according to the terms of the partnership agreement, de-
fendant appeals. Affirmed.
This cause cornes hère upon an appeal from an interlocutory order entered
on July 5, 1919, in the United States District Court for the Eastem District of
New York. The order appealed from appointed a receiver of 435 shares of
capital stock of the Camden Woolen Ooiiipany, a corporation organizeti under
the laws of the state of Maine. Thèse shares of stock belonged to the flrm ot
B. B. Moore & Co., which firm Is in liquidation, and is composed of appellant
and respondents, and the shares aforesald are held by the Lincoln National
Bank as collatéral for a loan amouuting to $32,657.57. E. B. Moore, the ap-
pellant, is the liquidator of the partnership by the terms of the articles of
copartnership. The flrm and liquidator are both solvent. No rights of credl-
tors are involved.
The order appealed from dlrected the sale of this stock by the receiver at
public auction, the repayment of the loan for which the stock is held as col-
latéral, and that the balance be held subject to the further order of the court.
The appellant obtahied a supersedeas upon flling a bond for $20,000.
AU of the firm capital of E. B. Moore & Co., or practlcally ail of It, was
contributed by appellant, who founded the flrm prior to 1904. The partner-
ship expired according to its terms on December 31, 1918. In the year 1917
the appellant's share of the flrm profits had been 55 per cent. ; the respondents
each receiving 15 per cent. In the year 1918, which was the last year of the
partnership, hls share was 40 per cent., while each of the respondents re-
ceived 20 per cent.
The respondents were former employés of the firm, who became members
of it in 1910. The appellant was always the fluandally responslble member
of the partnership, and always ûnanced it with hia own Personal crédit and
financial connections.
Fitzgerald, Stapelton & Mahon, of New York City (Luke D. Sta-
pelton, of New York City, of counsel), for appellant.
Wood, Malloy & France, of New York City (Melville J. France and
©=}For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
SINGLETON V. MOORE 259
C262 F.)
Francis X. Mahon, both of New York City, on the brief), for ap-
pellees.
Before WARD, ROGERS, and MANTON, Circuit Judges.
ROGERS, Circuit Judge (after stating the facts as above). The ap-
pellant contends that, as the partnership articles expressly provided
that upon the expiration of the partnership he should hâve the right
to liquidate the partnership affairs, the court below acted without au-
thority in taking matters eut of his hands by appointing a receiver and
directing him to obtain possession of and sell the stock, an asset of the
partnership, in the event that he, the liquidating partner, continued
to refuse to ofïer it for sale.
[1-3] It is elementary that it is compétent to provide in the part-
nership articles that, when the terni fixed for the duration of the
partnership business has expired, the power of liquidating the part-
nership business shall vest in some specified one of the partners. It
then becomes the duty of the liquidating partner to coUect the assets
and adjust debts due to the firm. It is also his duty to turn the assets
into money and then to pay and discharge the outstanding liabilities.
After thèse duties hâve been performed he is to pay over to the other
partners their proper share in the remaining surplus. 22 Am. & Eng.
Encyc. of l,aw, 218. And the désignation of a liquidating partner
takes away from the other partners authority to act and confers it
exclusively upon the liquidating partner. Hayes v. Heyer, 4 Sandf.
Ch. (N. Y.) 485 ; Montréal Bank v. Page, 98 111. 109. He is the sole
agent of the partnership for the purpose of winding up its affairs.
And when the partnership articles intrust the charge of the property
and the winding up of the partnership to one of the partners, the
court will not interfère with his proceedings unless a palpable breach
of the partnership articles is shown, or misconduct appears which
amounts to fraud or which endangers the property. Walker v. Trott,
4 Edw. Ch. (N. Y.) 38. _
The court below admitted, as indeed it would be expected to do, that
there is no question that under the partnership agreement, the appel-
lant as the liquidating partner has the légal right to dispose of the
stock in his own way, at his own time, and in his own discrétion, un-
less in doing so he thereby would work a fraud upon his former part-
ners.
[4] This being the law, we shall state more in détail the facts
which led the court below to take the action complained of on this
appeal, and shall then inquire whether the facts justify the order
which is hère under review.
Prior to the dissolution of the partnership of E. B. Moore & Co.,
which had been engaged as distributors of textiles, E. B. Moore had
inf ormed his copartners tliat he intended to continue his business after
the dissolution under the name of E. E. Moore & Co., as the agree-
ment provided that he might do. In the meanwhile the plaintiffs, who
had formed a new firm under the name of Frankenberg, Morgan &
Singleton, with offices in the same building in which E. B. Moore &
Co. had been established, it is claimed were maneuvering to be in a
300 262 FEDERAL EEPORTER
position to take over and control the profitable part of the business of
tlie partnership upon its termination. Both the plaintiffs and the de-
fendant were anxious to gain control of the Camden Woolen Company,
which operated a woolen mill at Camden, Me. The firm of È. B.
Moore & Co. handled the product of this mill, and each side desired
control of this Camden Company so as to handle the output of the
mill to the exclusion of the other at the termination of the partner-
ship. Affairs had been so managed that, wlien the new firm of Frank-
enberg, Morgan & Singleton began business, it became the exclusive
selling agents of the Camden Woolen Company. Then began a con-
test to obtain enough of the stock of the Camden Company to con-
trol the affairs of that company. The plaintiffs began to purchase
in the open market ail of the shares they were able to buy, and had
control of 214 shares, and défendant controlled 369 shares out of a
total of 1,130 shares. The annual meeting of the Camden Company
was to be held on July 16, 1919.
The activities of thèse parties in canvassing the shareholders to buy
their stock created a market value for the stock which it had never
had before, and which it is said it will not hâve again after the annual
meeting is held. The 433 shares of Camden stock were carried on the
books of E. B. Moore & Co. at about $20,000, or about $46 per share.
The last previous sale in 1917 brought $55 per share, and the ordinary
selling price was about $60 per share. Because of the active compéti-
tion for purchase of the stock in order to control the annual meeting,
the stock, if sold prior to the meeting, will bring $90 per share, and
possibly $160 a share. After the annual meeting has been held, the
évidence is that the stock will drop back to $60 per share. In other
words, it appears that, if the 433 shares which belong to the partner-
ship are sold at public auction prior to the annual meeting at even $90
per share, they will bring $38,970, and discharge the firm's "outstand-
ing liability" of $32,657.57, and leave remaining a surplus of $6,312.43 ;
whereas, a sale after the annual meeting will, as défendant admits,
bring the normal price of $60 a share, or a total of $25,980. This not
only would fail to discharge "the outstanding liability" above referred
to, but it would leave a déficit of $6,677.57, instead of a surplus of
$6,312.43. There is, moreover, a possibility, as the évidence discloses,
that tlie stock may bring as much as $43,300 in excess of its normal
value. If this block of 433 shares is not sold, the liquidating partner
can control the annual meeting, and for this reason he is opposed to a
sale, and asks that the court's order he reversed. The course he pro-
poses is in his interest as an individual. It is not in the interest of
the members of the firm.
On this State of facts the court below entered the order appointing
the receiver and directing the sale — to be made on 10 days' notice at
public auction. That order proceeds upon the theory that to withhold
the stock frora sale under the circumstances disclosed would operate
as a fraud upon the rights of the other members of the firm in liqui-
dation. It would be to prefer the personal interest of the liquidating
partner to the interest of the firm as a whole. This it seems to us he
has no right to do, and that he cannot do it without defrauding those
SINGLETON V. MOORE 361
(262 F.)
whose interests are intrusted to his keeping. His plain duty undoubt-
edly it was to sell the stock at the high price obtainable under the
peculiar conditions which existed, and his failure to perforai that duty
justified the order which the court entered.
[5] The défendant, objecting, however, to the order of sale, has
suggested that the stock should be divided and distributed in specie
among the several members of the firm, instead of heing sold. His
claim is that if a sale takes place, and he and the plaintiffs bid at
the sale, they will not go in on a fair and equal footing. He argues
that the plaintiffs can afford to outbid him at the sale, as under the
partnership agreement they will be entitled to receive back as profits
60 per cent, of whatever the stock brings over $50 a share, while de-
fendant is to receive only 40 per cent, of the profits. It is therefore
a more just and équitable method, he insists, to distribute the stock in
specie.
It would seem to be a sufficient answer that the partnership articles
specifically provide that the firm stocks shall be sold at the termination
of the partnership. Thèse articles read that —
"AU the stocks, merchandise, indebtedness owing to the firm, and other
assets of the said business shall be converted into cash, and there shall be
repaid to each of the partners the amounts of thelr capital standing to their
respective crédit on the books of the partnership, and, after payment of the
same, the remainlng assets of the flrm shall be divided among them as fol-
lows."
The partners made their own contract, and no court has any au-
thority to change it into something différent. Courts do not make
contracts.
The défendant relies on Kelley v. Shay, 206 Pa. 209, 55 Atl. 925.
In that case the court admitted that the gênerai rule was that upon the
dissolution of a partnership it is the right of each partner to hâve
the partnership property converted into money by a sale, but said that
the rule did not apply where the circumstances of the parties would
give to one an advantage in the bidding; and the court held that in
such a case, if ail the dehts were paid, the court might divide the prop-
erty in specie. It is évident that that case differs from the instant
case, in that in this case the debts are not paid, and in the former case
it does not appear that the articles of partnership expressly declared
that the firm's stock should be sold.
In Dickinson v. Dickinson, 29 Conn. 600, the bill asked for the
division of the property of the firm. The court declared:
"We had supposed thIs object could only be effected by a sale of the prop-
erty, and a conversion of it into cash, and then dividlng the cash, because as
between partners there is no other mode, where they do not agrée, of ascer-
rainlng the value of the partnership property, or of disposing of it."
And in Sigourney v. Munn, 7 Conn. 11, the court declared tha.t —
"In every case In which a court of equity interfères to wind up the concems
of a partnership, It directs the value of the stock to be ascertained in the way
in VFhich It best can be done ; i. e., by a conversion of it into money. Slacli
party may insist that the joint stock shall be sold."
362 262 FEDERAL BEPOETEK
The ruie îs correctly stated in 30 Cyc. 744, where it is laid down
as follows:
"In an action for partnershlp dissolution and accountlng, the entlre prop-
erty oi the flrm Is to be converted Into cash, unless ail the partners, by an
honest and lawful agreement, assent to a distribution of the assets in specle."
The order appointing the receiver and directing the sale of the stock
provides that any party to the action may purchase the stock, and that
any bid may be rejected by the receiver or disapproved by the court,
if inadéquate, and the court in its opinion stated that, if subséquent
proceedings showed that défendant had been inequitably caused to
create a fund, of which the plaintiffs received 60 per cent, to de-
fendant's 40, the equities might be adjusted in the subséquent account-
ing during the litigation, and the order so provides.
We f ail to discover error in the order as entered, and it is affirmed.
LONG, Mayor, et al. v. MILLER et al.
(Circuit Court of Appeala, Fifth Circuit. December 9, 1919.)
No. 3386.
COMMKBCE <S=369 — CiTT WITHOÏTT POWKB 10 QBANT EXCLUSIVE UCENSE TO INTEB-
8TATI! I1:BB7.
A vUlage ordlaance granting an exclusive license to operate a ferry
across the Mississippi river between the village and a city in another
State, and making it an offense for any other person to operate a ferry
between such places, and Act No. 111 of Acts La. 1912, and Act No. 68 of
Acts La. 1896, in so far as authorlzing such ordinance, held void, as in
violation of the commerce clause of the Constitution.
Appeal from the District Court of the United States for the Western
District of Louisiana ; George W. Jack, Judge.
Suit by George H. Miller and others and the Vicksburg & Delta Fer-
ry Company against R. Burney Long, Mayor of the Village of Delta,
La., and others. From an order granting a preliminary injunction, de-
fendants appeal. Affirmed.
The foUowing is the opinion of Jack, District Judge, in the court be-
low:
PlaintlfCs ask an injunction against défendants, mayor and aldermen of the
village of Delta, La., restralnlng them from further prosecutlon of petltioners
for a violation of an ordinance of the town of Delta, granting an exclusive
right to operate a ferry between Vicksburg and Delta Point, to the Missouri
River Transportation Company and making it an offense for any other person
to operate a ferry.
The authorlty of the town of Delta for a monetary considération to grant
such exclusive ferry privilège Is claimed under Act 111 of 1912 of the Louisi-
ana Législature, under which sald town is hicorporated, which gives it the
right "to license ferries and to regulate the same and the landing thereoî with-
in the corporate limits," and under Act 68 of 1896, which makes it unlawful
for any person not a lessee of a public ferry to transport for hlre any person
across the Mississippi river or other streams in the state wlthin a distance ol
two miles of any public ferry landing duly established under ordinance of a
municipality. Thèse acts, petltioners allège, in so far as they may be held to
^=3For otber casea see same topic & KEY-NUMBEE in aU Key-Numbered Die:ests & Indexes
LONG V. MEiLEB 3G3
(262 F.)
nuthorize such ordinance, are vlolatlve of the due process of law and the com-
merce danse of the United States Constitution.
Tlie ferry opérâtes between Vicksburg and Kings Point, in tlie state of
Mississippi, and Delta, La. It Is not a part of a tlirough System of trans-
portation, being a local ferry, although some few articles of freight for Delta
corne by rail to Vicksburg from points beyond. The pétition avers that the
number of passengers earrled average 150 a day and the freight 6 tons ; that
the Talue of the business is about $3,000 per month, and the value of the
property invested is $6,000. We think the court bas jurlsdiction.
The petitioners live In Vicksburg, Miss., and hâve leased a private wharf at
Delta, to and from which the ferry makes its regular trips. It Is v^ell settled
that transportation by ferry across a stream from one state to another con-
stitutes Interstate commerce, and as such, where Congress bas acted, Is un-
der its exclusive control. Where Congress has not acted, however, the States
iiiay exercise a measure of regulatory power not inconsistent with the fédéral
authority and not actually burdenlng or interfering with interstate commerce.
The question of the authority of a state in licensing and regulating ferries
across a navigable stream to an adjoining state has been before the Suprême
Court a number of times. The earlier décisions hâve been modlfied by the
later jurisprudence, and the extent to vphich a state may go In its regulatory
laws is now well defined.
Fanning v. Grégoire (1853) 16 How. 524, 14 L. Ed. 1043, was one of the
earllest cases. The court held that the Législature of lovfa, in granting the
plaintiff the right to establish a ferry across the Mississippi river at Dubuque,
and prohihiting the county in whlch the city is located from granting such right
to any other party, dld not thereby eut itself ofC from granting thereafter to
the City of Dubuque the right to license other ferries.
In the case of Conway v. Taylor (1861) 1 Black, 603, 17 L. Ed. 191, an ex-
clusive franchise had been granted plaintiff by the state of Kentucky to oper-
ate a ferry across the Ohio river to the state of Ohio, and the courts of Ken-
tucky restrained a competitor on the Ohio shore from operating his ferry from
the Kentucky side back to Ohio. They recognized, however, the right of the
Ohio ferry owner to carry passengers and freight from Ohio to Kentucky.
Thla judgment was approved by the United States Suprême Court.
In Wiggins Ferry Co. v. East St. Louis (1882) 107 U. S. 365, 2 Sup. Ct. 257.
27 L. Ed. 419, the ferry company had a franchise to operate across the Mis-
sissippi river between Illinois and Missouri. The suit was to recover a license
tax for the privilège of carrying on the ferry, and the Suprême Court maln-
tained that right, referring to a passage In the opinion of Chief Justice Mar-
shall in Gibbons v. Ogden, 9 Wheat. 1, 6 L. Ed. 623. In that case Chlef Jus-
tice Marshall sald :
"Internai commerce must be that whlch la wholly earrled on within the
llmits of a state, as, where the commencement, progress, and termlnation of
the voyage are wholly conflned to the terrltory of the state. This branch of
power Includes a vast range of state législation, such as turnpike roads, toll
bridges, exclusive right to run stagewagons, auction licenses, llcenses to re-
tailers, and to hawkers and peddlers, ferries over navigable rivera and lakes,
and ail exclusive rights to carry goods and passengers, by land or water. Ail
such laws must necessarlly affeet, to a great extent, the forelgn trade, and
that between the states, as well as the trade among the citizens of the same
state. But, although thèse laws do thus affeet trade and commerce with other
States, Congress cannot Interfère, as its power does not reach the régulation
of Internai trade, whlch résides exclusively In the states. ♦ • • They
[state inspection laws] form a portion of that immense mass of législation,
which embraces everythlng within the terrltory of a state, not surrendered to
the gênerai govemment, ail which can be most advantageously exercised by
the states themselves. Inspection laws, quarantlne laws, health laws of every
description, as well as laws for regulating the Internai commerce of a state,
and those which respect turnpike roads, ferries, etc., are • • • parts of
this mass."
The case of Gloucester Ferry Co. v. Pennsylvanla (1885) 114 V. S. 196, 5 Sup.
Ct. 826, 29 L. Ed. 158, first announced a contrary doctrine. In that case the
304 262 FEDERAL REPORTER
ferry company was domiclled In New Jersey and operated a ferry over the
Delaware river from Oamden to Philadelphla. The situs of its boats was In
New Jersey, but the company owned a wharf In Philadephla. The suit was
to test the validity of a tax against the corporation on the estlmated value of
Its capital stock. The court held that a tax upon receiving and landlng
passengers and frelght Is a tax upon their transportation and upon the com-
merce between the two states, and the fact that the transporatlon was by ferry
did not change the eharacter of the business. Considering the language above
quoted from Gibbons v. Ogden, the court held that Chlef Justice Marshall had
plainly referred to ferries entirely within the state, and not to ferries trans-
porting passengers and freight between the states and a foreign country.
The court held that such a ferry is a necessary means of commercial inter-
course between the states bordering on the dlvlding waters, and that it there-
fore must be conducted without the imposition of any tax or other burdens, and
the tax imposed was therefore held to be Invalid.
The doctrine of the Gloucester Case v?as again appUed in Covington & Cin-
cinnati Bridge Co. v. Kentucky, 154 U. 8. 204, 14 Sup. Ct. 1087, 38 L. Ed. 962,
Involving a law regulating the tolls to be charged on a bridge across the Ohio
river between Kentucky and Ohio- It was held that, as the bridge was over a
navigable stream, the power to regulate the tolls was in Congress, and there-
fore the State régulation was void.
Ail of thèse cases were reviewed In St. Clair v. Interstate Sand & Car Co.
(1904) 192 U. S. 454, 24 Sup. Ct. 300, 48 L. Ed. 518 ; Mr. Justice White having
been the organ of the court. The plaintiff in that case sought to recover pen-
alties of the défendant for operating without having obtained a license a
ferry across the Mississippi river from St. Clair, in the state of Illinois, to a
point opposite in the state of Missouri. It was hold that, under any vlew
which might be taken of the prior cases, they were each conclusive of the case
imder considération, because none of them imposed the power in a state to
directly eontrol Interstate commerce, and said Justice White:
"Conceding, arguendo, that the police power of a state extends to the es-
tablishment, régulation, and llcensing of ferries on a navigable stream, belng
the boundary between two states, none of the cases justifies the proposition
that such power embraces transportation by water across such a river which
does not coustitute a ferry in a strict technical sensé. In that sensé 'a ferry
is a continuation of the highway from one side of the water over which it
passes to the other, and Is for transportation of passengers or of travelers
with their teams and vehicles and such other property as they may carry or
hâve with them.' Mayor, etc., of New York v. Starin, 106 N. Y. 1, 11 [12 N.
E. 631, 632]."
The court, however, lield that the défendant was not operating a ferry with-
in the technical sensé of the tenu ; It being a link in the chain of transpor-
tation of railroad cars In Interstate commerce. It was further stated that the
power conferred upon the county was not merely to grant licenses, but to
withhold them and the aeceptance Imposed upon the licensee the duty of carry-
ing on a technical ferry business, to operate at deslgnated hours, etc. How-
ever valid such a régulation might be when applled to a ferry business in its
restricted sensé, the court held that it was not valid in the instant case, be-
cause a direct burden on Interstate commerce was made a condition précèdent
to doing business of that eharacter. The court. In concluding, adds:
"Because we hâve, arguendo, rested our conclusion In thls case upon the
assumptlon that the respective states hâve the power to regulate ferries over
navigable rivers constituting boundaries between states, we must not be under-
stood as deciding that that doctrine, which undoubtedly flnds support in the
opinions announced in Fanning v. Grégoire and Conway v. Taylor, bas not
been modifled by the rule subsequently laid down In the Gloucester Ferry Case
and the Covington Bridge Case. As this case has not reguired us to enter into
those considérations, we hâve not done so."
That this early doctrine was subsequently modifled by the rule laid down in
the Gloucester Ferry Case and the Covington Bridge Case is made clear by
the two récent cases (1914) of Port Richmond Ferry v. Hudson County, 234
U. S. 317, 34 Sup. Ct. 821, 58 L. Ed. 1330, and City of Sault Ste. Marie v. In-
LONG V. MILLER 365
C2e2 F.i
terniitioual Transit Co., 234 U. S. 333, 34 Sup. Ct. 826, 58 L. Bâ. 1337, 52 L.
K. A. (N. S.) 574, decided the same day ; Mr. Justice Hughes having been the
organ of the court in both cases.
In the former case, the board o£ freeholders of Hudson eounty, N. J., under
authority of the Législature of New Jersey, by resolution established rates to
be chargea by the ferry whieh conveyed persons from Port Richmond, N. J.,
across the Kill von Kull to Staten Island, N. Y., and lil^ewise rates which
might be charged for round trlp passage. The plaintifC contended that the
action of the board was void, for tlie reason that the transportatlon was In-
terstate and the fixing of rates therefor was a direct régulation of Interstate
commerce. The ferry, unlike the St. Clair Case, was not operated in con-
nection with a railroad, and was a ferry In the technical sensé of the term,
so the issue was clear-cut.
The court held that the transportation of persons and property from one
State to another Is none the less Interstate commerce because conducted by
a ferry, and that whatever niay be regarded as a direct burden upon inter-
state commerce as conducted by such ferries operating between statea is be-
yond authority of a state to impose. The opinion cites the Gloucester Ferry
Case and approvingly quotes : "The only interférence of the state with the
landing and recelving of passengers and freight, which is permissible, * * *
is confined to such measures as ^^■^ll prevent confusion among the veisels, and
collision between them, insure their safety and convenience, and facilltate the
discharge or receipt of their passengers and freight, which fall under the
gênerai head of port régulations."
The court further quoted : "It is true that, from the earliest period In the
history of the government, the states hâve authorized and regulated ferries, not
only over waters entirely within their limits, but over water separating them ;
and it may be conceded that in many respects the states can more advanta-
geously manage such Interstate ferries than the gênerai government, and that
the pi-ivilege of keeping a ferry, with a right to take toll for passengers and
freight, is a franchise grantaljle by the state, to be exercised within such limits
and uuder such régulations as may be required for the safety, comfort, and con-
venience of the public. Still the fact remains that such a ferry is a means,
and a necessary means, of commercial intercourse between the states border-
ing on their dividing waters, and it must therefore be conducted without the
imposition by the states of taxes or other burdens upon the commerce be-
tween them. Freedom from such impositions does not, of course, Imply ex-
emption from reasonable charges, as compensation for the carriage of persons,
in the way of tolls or fares, or from the ordinary taxation to which other prop-
erty is subjected," any more than like freedom of transportation on land im-
plies such exemption."
It was held that ferries were simply the means of transit from one shore to
another, and hâve always been regarded as instruments of local convenience,
which, for the proper protection of the public, are subject to local régulations,
and that, where the ferry is conducted over a boundary stream, each jurisdlc-
tion, with regard to the ferrlage from its shore, bas exercised this protective
power; that apart from said rules as to navigation, such ferries had not en-
gaged the attention of Congress ; that the issue involved was not one of "dis-
criminatory requlrements or burdensome exactions imposed by the state, which
may be said to interfère with the guaranteed freedom of Interstate intereourse
or with oonstitutional rights of property," but merely a simple one of reason-
able charges, and that, where there had been no fédéral action, the state
might protect the public from extortionate rates.
Under this décision, then, each state may flx the rates to be charged in
carrying passengers or property from Its shore across the boundary stream.
The court did not construe the ordinance as retiuiring the sale of round-trip
tickets, but merely as flxing the price of such tickets when sold on the New
Jersey shore, if the company should détermine to sell such round-trip tickets,
and, viewed as a limitation upon rates for round-trip tickets when sold in
New Jersey, the court held the ordinance valid.
In the Sault Ste. Marie Case, 234 TJ. S. 333, 34 Sup. Ct. 826, 58 L. Ed. 1337, 52
L. R, A. (N. S.) 574, the ordinance attacked was not merely a regulatory
366 262 FEDERAL EBPOETEE
ordlnance or one flxtng rates, but an ordinance by the clty of Sault Ste. Marie
requiring the payment of $50 for a Ucense to operate a ferry across St. Mary's
river to Canada. The court sald: "It wlll be observed that the question Is
not simply as to the power of the state to prevent extortion and to fix reason-
able ferry rates from the MIchigan shore; It is not as to the validity of a
mère police régulation goveming the manner of conducting the business In
order to secure safety and the public convenience. See Port Eichmond, etc.,
Ferry Co. v. Board of Chosen Freeholders [234 U. S.], p. 317 [34 Sup. Ct 821,
58 L. Ed. 1330], decided thls day. The ordlnance goos beyond thls. The ordi-
nance requires a municipal Ucense; and the fundamental question is whether
in the circumstanees shown the state, or the clty acting under Its authorlty,
may make its consent a condition précèdent to the prosecution of the business.
If the state, or the clty, may make its consent necessary, It may wlthhold It.
The appellee, having its domicile in Canada, is engaged in commerce between
Canada and the TJnlted States. At the wharf which it leases for the purpose on
the American shore, it receives and lands persons and property. Has the state
of MIchigan the right to make this commercial Intercourse a matter of local
prlvUege, to demand that It shall not be carried on wlthout Its permission, and
to exact as the priée of its consent — If it chooses to glve it — the payment of a
Ucense fee? This question must be answered in the négative."
In answer to the contention that, under the early décisions clted, a state, dl-
rectly or through Its munldpalitles, may establish and Ucense ferries, the
court sald: "But, since the décision In Gloucester Ferry Oo. v. Pennsylvanla,
114 U. S. 196 [5 Sup. Ct. 826, 29 L. Ed. 158], it has been dear that, whatever
authorlty the state may hâve for this purpose, it does not go so far as to en-
able the state to Interdlct one In the position of the appellee from conducting
the commerce in whIch It Is engaged, or justlfy the state In imposlng exactions
upon that commerce in the vlew that business of thls character may be car-
ried on only by virtue of its consent express or Implled."
The court, after notlng, as held In the Gloucester Case, that transportatlon
in ferryboats passing between states Is none the less Interstate commerce,
concluded: "The fundamental prlnciple Involved has been applled by thls
court in récent décisions In a great varlety of circumstanees, and It must be
taken to be firmly established that one otherwlse enjoylng full capaclty for
the purpose cannot be compelled to take out a local Ucense for the mère priv-
ilège of carrying on Interstate or forelgn commerce."
The town of Delta, under the authorlty delegated to It by the state of
Loulslana to Ucense and regulate ferries, could not hâve requlred of the plaln-
tlff the payment of a Ucense as a condition précèdent to its engaging In the
ferry business. But It went further, by an ordinance granting an exclusive
franchise to one party and penalizing ail others who mlght thereafter engage
in the opération of a ferry between Delta and Vicksburg. The ordinance must
be held vold ; and Act 111 of 1912, granting to the town of Delta the authority
to Ucense and regulate ferries, and act 68 of 1896, prohlbitlng any person not
a lessee of a public ferry to transport for hlre any person across the
Mississippi river or other stream in the state wlthin a distance of two miles of
any public ferry landlng, in so far as such acts may be construed as authorlzing
the ordinance, are répugnant to the commerce clause of the fédéral Constitu-
tion and must be held as of no efifect.
A decree wlll be entered, granting an Interlocutory Injunctlon as prayed for.
E. H. Randolph, of New Orléans, La., for appellants.
F. G. Hudson, Jr., of Monroe, La. (Heniy & Canizaro, of Vicksburg,
Miss., and Hudson, Potts, Bernstein & Sholars, of Monroe, La., on the
brîef), for appellees.
Before WALKER, Circuit Judge, and GRUBB, District Judge.
PER CURIAM. For reasons sufficiently stated in the opinion ren-
dered when the court ordered the issuance of the interlocutory injunc-
tlon prayed for, the decree appealed from is affirmed.
HETHERINGTON V. PALMER 367
(262 F.)
HETHEEINGTON v. PALMER et aL
(Circuit Court of Appeals, Blghth Circuit December 2, 1919.)
No. 5410.
MOBTOAGSS <S=>594(1) — RiOHT Oï BEDEMPTION FBOM FOBE0LOSX7KE SALE CANNOT
BE EXEBCISED BT STBANOEBi.
The right to redeem from a foreclosure sale of property Is a légal and not
an équitable right, and under Mills' Ann. St Colo. § 4248, limitlng the
rlght of rédemption to the mortgagor, hls helrs, executors, or administra-
tors, an attempted rédemption by a stranger, not shown to be actlng for
the mortgagor, held InefCective.
Appeal from the District Court of the United States for the District
of Colorado.
Suit in equity by E. G. Palmer, Public Trustée, against the Brant
Independent Mining Company. From an order allowing the Camp
Bird Mining, Leasing & Power Company to redeem from foreclosure
sale, George Hetherington, trustée, appeals. Reyersed.
J. G. Hutchison, of Kansas City, Mo. (M. J. Ostergard, of Kansas
City, Mo., and George Hetherington, of Gunnison, Colo., on the brief),
for appellant.
Dexter T. Sapp, of Gunnison, Colo., for appellee.
Before CARLAND and STONE, Circuit Judges, and ELLIOTT,
District Judge.
CARLAND, Circuit Judge. The appellant has appealed from an or-
der allowing the Camp Bird Mining, Leasing & Power Company, here-
after called Camp Bird Company, to redeem from a sale on mortgage
foreclosure. The facts are as follows:
On September 19, 1917, the District Court, in an action wherein E.
G. Palmer, public trustée for Gunnison county, Colo., was plaintiff, and
the Brant Independent Mining Company, hereafter called Mining
Company, was défendant, entered a decree of foreclosure and sale
whereby certain real estate, mining claims, mining locations, water
rights, mill site, office building and fumiture, assay office and instru-
ments, two bunkhouses, one stable and barn, wagons, horses, and
harness, mining and milling machinery, tools, and ail other property,
real and personal of the Mining Company, was ordered sold at public
auction to the highest bidder at Gunnison county, Colo., as an entirety.
May 19, 1918, the spécial master appointed to make the sale reported
to the court that he had sold the above-described property to the
appellant on May 6, 1918, for the sum of $5,012.50. On June 4, 1918,
the report of the spécial master was approved and confirmed. On Oc-
tober 15, 1918, the spécial master made a supplemental report to the
court as follows :
"To the Honorable Robert E. Lewis, Judge of Sald Court :
"I bave to report that on the 14th day of October, 1918, the Camp Bird Min-
ing, Leasing & Power Company tendered and paid to me, as spécial master in
the above-entitled case, the sum of $5,188.48 as and for rédemption by the
^s>For otber cases see same topic & KE:y-NUMB£!R la ail Key-Numbered Digests & lodexes
368 2C2 FEDERAL EEPOETEB
sald Company from the sale of the properties of the sald défendant compnny
made by me on the 6th day of May, 1918, and demanded that I, as such master,
issue to It a certiflcate of rédemption from sald sale, whlch œrtiflcate was by
me issued to sald eompany.
"Thereupon I tendered the amount so paid to me to George Hetherington,
trustée, who refused to aeeept sald tender, and hls spedflc reasons for sald
refusai are stated in extenso In an exhlblt hereto attached.
"Thereupon I requested of Dexter T. Sapp, soUeltor for the sald Camp
Bird Mining, Leasing & Power Company to wlthhold the record of sald cei--
tificate until the parties hereto could be advlsed by the court In the premlses.
"Thereupon said solicitor agreed to so wlthhold the record of sald certiflcate
until further order of the court. Sprlgg Shackleford, Spécial Master."
October 18, 1918, the Mining Company and appellant filed a péti-
tion in the District Court asking for an order restraining the Caïaip
Bird Company from recording the certificate of rédemption issued to
it, as stated in the supplemental report of the spécial master, and also
praying that the spécial master be directed and empowered to recall
and cancel said certificate, for the reason tliat the Camp Bird Company
had no right or authority to redeem from the sale made uhder the
decree of foreclosure. October 31, 1918, the pétition of the Mining
Company was denied. The only right or authority by virtue of whîch
the Camp Bird Company claimed a right to redeem was an agreement
made and entered into May 21, 1914, by and between the Mining Com-
pany, "for convenience called lessor," and T. R. L. Daughtrey & Co.,
"for convenience called lessee." In this agreement the lessor leased
to the lessee for the purpose of development and mining the f oUowing
mining claims, Paonia, Morning Glory, London, Copper Sulphide, Pro-
tection, Option No. 1, Option No. 2, Option No. 3, Option Fraction,
Contée Lode, or Winnie Fraction, and the northwest quarter of the
northeast quarter of section 21, township 50 north, range 4, and ail
improvements and equipments on above claims and the ten-stamp mill
located at Bowerman. The lease was for a period of 10 years begin-
ning August 10, 1914, The lessee was given the right- to assign the
lease to a company to be incorporated for the purpose of taking over
the lease and operating under it. The lease was assigned to the Camp
Bird Company. It contained the following, among other provisions:
"It Is expressly understood and agreed that the lessor réserves the prop-
erty and right of property in and to ail ores extracted from said premLses
during the perlod of this lease."
The agreement was an ordinary mining lease for the purpose of de-
velopment, the considération therefor being a royalty of the net profits,
There were no words of grant conveying any interest in the property
leased to the lessee. The Camp Bird Company was the owner of $44,-
100 of the bonds of the Mining Company secured by the mortgage
which was foreclosed. The total amount of the bonds issued under
the mortgage was $87,000. The Camp Bird Company was therefore
the holder of a majority of the bonds. Being such holder it delivered
the same and the coupons attached thereto to said E. G. Palmer, pub-
lic trustée for Gunnison county, and demanded that he proceed forth-
with to foreclose the mortgage. The trust deed or mortgage was
executed and deb'vered on March 1, 1909, and recorded on March
10, 1909. The appellant bid the property in at the foreclosure sale as.
HETHERINGTON V. PALMEE 309
(262 F.)
trustée for the minority bondholders and stockholders. The Camp
Bird Company was also a bidder at the foreclosure sale, but failed to
bid as much as the appellant. The order denying the Mining Com-
pany's pétition does not state the grounds upon which it was made.
We find in the record, however, a mémorandum opinion of the District
Judge which gives the reasons which influenced him in making the
order. The judge was clearly of the opinion that the Camp Bird Com-
pany as tenant was not given the right by the Colorado statute (sec-
tion 3657, Rev. Stat. Colo. 1908) to redeem from the foreclosure sale
in its own behalf, saying:
"The statute grants the rlght, and no one can exercise It who does not corne
v.'ithln its terras. Conway v. John, 14 Colo. 30, 36 [23 Pac. 170J ; Parker v.
Dacres, 130 U. S. 43 [9 Sup. Ct. 433, 32 L. Ed. 848] ; 11 Amer. Eng. Enc. Law,
232."
Mortgaged lands sold by the decree of a court of equity in Colorado
are redeemable by the mortgagor, his heirs, executors, or administra-
tors in the same manner prescribed for the rédemption ot lands swld
by virtue of exécutions issued upon judgments at common law. Sec-
tion 4248, Mills' Anno. Stat. Colo. 1912. The Camp Bird Company
could not therefore redeem from the mortgage sale. The controversy
below ought to hâve ended hère, but the trial court at the hearing, on
the suggestion of counsel for the Camp Bird Company, decided that
it would treat the rédemption as having been made by the Camp Bird
Company for the mortgagor, the Mining Company. Up to the time
the suggestion referred to was made by counsel there had been no prê-
teuse that the rédemption had been made in the interest of any one
but the Camp Bird Company. The report of the spécial master so
stated, and the certificate of rédemption was issued accordingly. The
trial court had no authority or évidence upon which to base a décision
that the rédemption of the Camp Bird Company was in the interest of
the mortgagor, even conceding that the Camp Bird Company could so
act. There was no évidence that the Mining Company ever requested
the Camp Bird Company to redeem from the sale and as the right to
redeem was a personal privilège the Mining Company could not be
compelled to exercise it. Notwithstanding the position taken by the
court, it did not incorporate the resuit of its views into its order. The
application of the Mining Company was simply denied. This left the
certificate of rédemption issued by the spécial master intact as a ré-
demption by the Camp Bird Company in its own interest.
We décline to consider the question whether the Camp Bird Com-
pany could by virtue of its lease redeem from the foreclosure sale for
the Mining Company, as there is no évidence that it ever did so. Appel-
lant further contends that, as the mortgage property consisted of real
and Personal property sold in solido, the rédemption statute does not
apply ; that the so-called lease was not a lease, but a mère license ; that
as the Camp Bird Company was only interested in a portion of the
property it could not redeem. We do not consider thèse questions, for
the reason that so far as the record shows the rédemption of the Camp
Bird Company was in its own interest, and it had no right under the
statute to do so, and the trial court had no authority to hold the re-
262 F.— 24
370 262 FEDERAL REPORÏKR
demption to he something that it was not. The right to redeera îs a
légal and not an équitable right.
The order appealed from is reversed, and the case remanded, with
directions to the trial court to enter a decree canceling the pretended
certificate of rédemption. The appellant to recover costs of this pro-
ceeding.
BRANT INDEPENDENT MIN. CO. v. PALMER.
(Circuit Court of Appeals, Elghth Circuit December 2, 1919.)
No. 5411.
OoEPOBATiONs <S=»479 — Tbustei: on fobeclosubk of mobtqaqe not entitled to
DEFICIENCT JUDGMENT.
A trustée in a corporation mortgage securlng bonds, on foreclosure oî
the mortgage, Is not entitled as sueh trustée to recover a defldency Judg-
ment for the amount found due on the bonds over and above the proceeds
of the sale, unless such right Is glven hlm by the mortgage.
Appeal from the District Court of the United States for the District
of Colorado; Robert E. Lewis, Judge.
Suit in equity by E. G. Palmer, trustée, against the Brant Independ-
ent Mining Company. From a deficiency judgment, défendant ap-
peals. Reversed.
J. G. Hutchison, of Kansas City, Mo. (M. J. Ostergard, of Kansas
City, Mo., on the brief), for appellant.
Dexter T. Sapp, of Gunnison, Okl, for appellee.
Before CARLAND and STONE, Circuit Judges, and ELUOTT,
District Judge.
CARLAND, Circuit Judge. This appeal arises out of the same
foreclosure as is mentioned in the case of George Hetherington, as
Trustée, Appellant, v. E. G. Palmer et al., Appellees, 262 Fed. 367,
C. C. A. — — , this day decided. It is from a deficiency judgment in
the sum of $108,373, against the Brant Independent Mining Company
in favor of Palmer as trustée. The judgment is the différence be-
tween the amount found due upon the bonds issued by the Mining
Company, with interest and costs, less the amount received from the
sale of the mortgage property. The decree of foreclosure found the
amount due on the bonds. The plaintiflf, Palmer, is the public trustée
of Gunnison county, Colo., by virtue of his office as county treasurer.
The public trustée of said county and the Pioneer Trust Company were
the trustées named in the deed of trust. The Trust Company refused
to act in the matter of foreclosure; hence the public trustée is the
sole plaintiflf. There was no allégation in the complaint, nor any adju-
dication, that the plaintiff had any interest in the bonds secured by the
trust deed. The complaint contained no prayer for a deficiency judg-
ment, but did contain a prayer for gênerai relief and that the amount
due upon the bonds be ascertained. On this record appellant contends
that the deficiency judgment was unauthorized. We are of the opin-
®=»For other cases see same topic & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexe»
SULLIVAN V. NITEATK PEODUCEES' S. S. CO. 371
C262 F.)
ion that the question presented is ruled adversely to the plaintiff by the
décision of this court in Mackay v. Randolph Maçon Coal Co., 178
Fed. 881, 102 C. C. A. 115. Section 271, Colo. Code, and equity rule
10 (198 Fed. xxi, 115 C. C. A. xxi), refer in our opinion to cases where
the plaintiff is the owner of the debt secured, or where, in the instru-
ment securing the debt, a right is given to him to recover the debt, as
well as to foreclose the trust deed.
Deficiency judgment reversed.
STONE, Circuit Judge. I concur in the resuit and in the opinion,
except for the final expression, "or where, in the instrument securing
the debt a right is given him to recover the debt, as well as to fore-
close the trust deed," unless Ihis expression be limited to cases
wherein the trustée occupies the légal position of a créditer of the
mortgagor as to the unpaid balance. My reasons for this view are
set forth in Rome Lane v. Equitable Trust Co. of New York, 262 Fed.
918. C. C. A. .
SULLIVAN V. NITRATE PEODUOERS' S. S. CO., Wmlted.
(Circuit Court of Appeals, Second Circuit. Deoember 10, 1919.)
No. 42,
1. Judgment <ê=»812 (2) — Decbee in rem bab to strrr in pebsonam.
A decree in rem may be successfuUy used under the plea of res judicata,
in an action in personam on the same cause of action.
2. Admibalty <S=»95 — Adjudication in action in eem fob injubt to beaman
BAK to suit in PEBSONAM.
In a suit in rem by a seaman to recover indemnity for Injury on board,
a decree of dismissal because libelant waa on an EngUsh sliip on the
high seas when injured, and under English law indemnity was not re-
coverablg, held a bar to a second suit in personam for maintenance and
cure, whïcE", although given by British statuts, mlght hâve been recovered
in the prlor suit.
S. Admibalty ig=330 — Single cause stated in suit fob injuey in sebvice.
A libel by a seaman Injured in the service to recover the expense of
maintenance and cure, and also for négligence in faillng to provide proper
médical care and attention, held to state but a single cause of action.
Appeal from the District Court of the United States for the Eastern
District of New York.
Suit by John Sullivan against the Nitrate Producers' Steamship
Company, Limited. Decree for respondent, and libelant appeals. Af-
firmed.
For opinion below, see 254 Fed. 361.
This suit is In personam against the owner of the British steamship Anglo-
Patagonian. Before this litigation, Sullivan sued the steamship In rem (in
another district), setting forth in his libel that he had "joined" the vessel "as
a horse handler In the employ of the Fédéral Export Corporation," and as
such was on board her on a voyage from Philadelphla to Bordeaux. He was
injured, as he alleged, "solely through the fault and négligence of the boat-
swain and a member of the crew of sald vessel"; he belng (as was also al-
leged) not a member of the steamshlp's crew.
<Ê=3For other cases see same topic à KBY-NUMBBR in ail Key-Numbered Digests fi Indexes
372 2G2 FEDERAL REPORTER
Damage v/as asserted In $5,000, and after the usual allégations of jurlsdlc-
tlon and prayers for process, the libel In rem ooncludes : "That thls honorable
court may be pleased to decree the paynient of your Ubelant's clalm In the
sum of flve thousand ($5,000.00) dollars, 'and that said vessel may be con-
demned and sold to pay the same, and, in the event that he should fail to provo
said vessel was unseaworthy for the reasons aforesaid, that he be awarded the
expense of hls maintenance and cure and wages to the end of the voyage for
which he signed, and such other and further reUef as to the court miay seera
Just and proper."
The answer to thia libel In rem denied that Sullivan was employed by the
Fédéral Bxport Company, and admitted that he recelved Injury while on
board as a member of the shlp's crew and after signing articles as such. It
further asserted that the accident happened on a British vessel and on the
hlgh seas, and pleaded the Merchant Shipping Acts and Workmen's Compen-
sation Act of Great Britain.
Trial was had under thèse pleadings, and libelant adjudged to hâve been a
member of tlie crew, with the status of a seaman. The court further held that.
If he did receive injury as and wlien he asserted, the occurrence was on a
British vessel, on the hlgh seas, and by reason of the négligence of a fellovv
servant As a conclusion of (British) law, therefore, it followed that Sullivan
could not maintain any action for damages through négligence, and was re-
raitted to the British Workmen's Compensation Act for relief. Final decree
was entered accordingly, whidi still stands unmodifled; ail periods for ap-
peal having expired. Thereupon the présent suit was begun, In which libel-
ant allèges that he was a member of the Anglo-Patagonian's crew, that he suf-
fered the same injuries as before complained of, and was negleoted by the
stcamship's officers; so that, beside the normal results of such a hurt as he
received, "he sufCered additional and exeruciating pain [and] * • ♦ It be-
came necessary to rcmove a portion of two of his Angers," which could havo
been saved with "proper médical care and attention." "Wherefore he demanded
(as one cause of action) "maintenance and cure," estlmated at §1,000, and (as
a second cause of action) damages of $3,000 for the neglect of his wound.
The respondents pleaded to the merits, but set up in addition the record of
the iîrst suit, after inspection of which the court below dismissed the libel.
Silas B. Axtell, of New York City (Arthur Lavenburg, of New
York City, of counsel), for appellant.
Kirlin, Woolsey & l4ickox, ofNew York City (L. De Grove Potter,
of White Plains, N. Y., of counsel), for appellee.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). [1] It
was correctly assumed in the court below that a decree in rem may
be successfully used under the plea of res adjudicata in an action in
personam. Bailey v. Sundberg, 49 Fed. 583, 1 C. C. A. 387.
[2] We then consider (1) the scope and nature of Sullivan's earlier
suit, and (2) what was decided or might hâve been decided in that ac-
tion, remembering that it is an inexorable rule of law that a judgment
is a bar to subséquent demands which either were or might hâve
been litigated in the action productive of the judgment. Watts v.
Weston, 238 Fed. 149, 151 C. C. A. 225, and cases cited.
Libelant's pleading in rem is now said to contain obvious mistakes,
amounting to something like "clérical error." The fact is, however,
that it is drawn in a common form, and is reasonably appropriate
when and if the vessel sued is American, and the law applicable that
of the United States.
_ 373
0262 F.i
By denying that libclant was a member o£ the Anglo-Patagonian's
crew, it was plainly expected to avoid The Osceola, 189 U. S. 158, 23
Sup. Ct. 483, 47 L. Ed. 760; but if Sullivan was proved to be (in con-
templation of law) a seaman, then he evidently expected to avail him-
self of The Bouker No. 2, 241 Fed. 831, 154 C. C. A. 533. Such plead-
ing was sufficient for this purpose, in the admiralty at ail events, under
The Gazelle, 128 U. S. 487, 9 Sup. Ct. 139, 32 L. Ed. 496, and the
prayer for gênerai relief as construed in Sonsmith v. The J. P. Donald-
son (C. C.)21 Fed. 671.
But it turned out on the évidence that to this in jury, received on
the high seas by a member of the crew and on a British vessel, British
law alone was applicable (The Eagle Point, 142 Fed. 453, 73 C. C. A.
569), and under that law libelant has no right to an indemnity, though
for reasons quite différent from those authoritatively stated for us in
The Osceola, supra. Further, such libelant had no right to mainte-
nance and cure (Organ v. Brodie, 10 Ex. 449), except by virtue of the
British Merchant Shipping Act, which as last enacted in 1906 contains
in section 34 a statutory direction équivalent to or identicd with the
doctrine of The Osceola, supra, on this point.
It follows that the eariier suit settled once and for ail libelant's
status, viz. that he must recover under British law or not at ail. If,
however, he had any right to recover anything under that law, we think
he was entitled in the United States to the remédies of admiralty;
wherefore his suit was well brought.
[3] In the présent case Sullivan is suing (1) for the reasonable ex-
pense of the maintenance and cure that should hâve been granted him ;
and (2) for the négligence of the steamship in failing to provide for
him "proper médical care and attention" — and thèse two items or kinds
of damage are labeled separate causes of action.
Exact définition of the phrase "cause of action" is elusive. It has
been said that the "cause of action in a suit is the act or thing done or
omitted to be done." Metropolitan, etc., Co. v. People, 106 111. App.
516, affirmed 209 111. 42, 70 N. E. 643. Long before Codes rendered
the phrase a commonplace, it was held that, even where actions were
promoted under différent writs the cause of action was the same where
the same évidence would support a recoveiy. Rice v. King, 7 Johns.
(N. Y.) 20 ; Johnson v. Smith, 8 Johns. (N. Y.) 383. An ambitious
attempt at définition is found in Secor v. Sturgis, 16 N. Y. at page
558, that:
"Tlie triie distinction between • * • rights of action which are single
and entire and those which are several and distinct is that the former imme-
diately arise out of one and the same act or contract, and the latter out of
différent acts or contracts."
Of this we incline to think that the criticism made in Oregon, etc.,
Co. v. Oregon Railway Co., 28 Fed. at page 511, is well founded, viz.
that the test suggested has "not been found satisfactory, and each
case must be decided largely on its own circumstances" ; and as much
was admitted by Earl, J., in Veeder v. Baker, 83 N. Y. 160.
But though complète and définitive statement is, we think, impossi-
ble, the above descriptions or tests require us to hold that this libelant
374 2C2 FEDERAL REPORTEE
not only might hâve asked, but did ask, for everything that he now
seeks to recover in the suit first brought by him.
In The City of Alexandria (D. C.) 17 Fed. 395, it is said that neglect
of a seaman after he had been wounded in the service of the ship "be-
comes a différent and additional cause of action against the ship," and
this may be quoted as authority holding that Sullivan's second cause
of action is something never before advanced by him against the Anglo-
Patagonian or its owner.
We doubt whether the dictum was intended to go so far; but, if
it was, the authorities cited yield no such doctrine. We hold the ques-
tion whether so-called causes of action are in truth singular or plural is
one largely dépendent on the facts of each case, and further hold that
in this instance Sullivan has shown no cause of action différent from,
additional to, or independent of his demand for maintenance and cure.
The reason for this is that, as pleaded, the only ground of complaint
that he has is that maintenance and cure were denied him, and the
absence of such cure or attempted cure is the one and only thing that
constitutes the neglect alleged as a second cause of action. It is con-
ceivable that a shipmaster or an ignorant or unqualified ship's doctor
might, while afïording maintenance, be négligent in cure ; but no such
case is pleaded or suggested. The same act — i. e., refusai of mainte-
nance and cure — cannot give rise to two causes of action. The attempt
is an endeavor to arrive at the same resuit by différent média conclu-
dendi, or grounds for asserting the right. This was condemned in
United States v. California, etc., Co., 192 U. S. 355, 24 Sup. Ct. 266,
48 L. Ed. 476.
It'may be added that, even if the présent libel did set forth a différ-
ent and hitherto unadvanced cause of action, the same is measurable
by the British law only, and for such a suit no authority is shown to
exist. Whatever right libelant has must dépend on the statutes of
Great Britain, as to which he was defînitely concluded in the earlier
action.
Decree affirmed, with costs.
UNITED STATES v. ONE FORD AUTOMOBILE AND FOURTEBN
PACKAGES OF DISTILLED SPIKITS.
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 102.
1. CUSTOMS DUTIE3 ®=»130 — InTOXICATINQ LIQUOBS <g=247 — CUSTOMS rOEFEl-
TUEE STATUTE DOES NOT APPLY TO IMPOETATIONS VIOLATINa THE PROHIBI-
TION STATUTE.
Eev. St. §1 3061, 3062 (Comp. St. §§ 5763, 5764), provlding for selzure
and forfeiture of merchandise imported In violation of the customs laws,
and also any vehide used In its importation, held not to apply to splritu-
ous liquor, brought into the United States from Canada in violation of
the prohibition of Act Aug. 10, 1917, c. 53, § 15 (Comp. St. 1918, Comp.
St Ann. Supp. 1919, § 3115% l), nor to an automobile used in such impor-
tation.
®=9For other cases see eame topic & KEY-NUMBER la ail Key-Numbered Dlgests & Indexes
UNITED STATES V. ONE PORD AUTOMOBILE, ETC. 375
(262 F.)
2. Ckiminal law <®=3l208(3) — Stattjte ceeatino new offense and pbescbib-
ING PUNISHMBNT.
Where a statute créâtes a new offense, by making that unlawful whlch
was lawful before, and prescribes the punishment for such offense, only
such punishment can be imposed.
In Error to the District Court of the United States for the Northern
District of New York.
Libel by the United States against One Ford Automobile and Four-
teen Packages of Distilled Spirits; Robert Tourville, claimant. From
the judgment dismissing the libel as to the automobile, libelant brings
error. Affirmed.
For opinion below, see 259 Fed. 894.
D. B. Lucey, U. S. Atty., of Ogdensburg, N. Y., for the United
States.
George J. Moore, of Malone, N. Y., for défendant in error.
Before WARD, ROGERS, and MANTON, Circuit Judges.
M ANTON, Circuit Judge. [1] The parties bave agreed to a state-
ment of facts of which the f ollowing are material : On the 2d of No-
vember, 1918, one Robert Tourville and others took a Ford automo-
bile, which he owned and which bas been attached in this proceeding,
and drove from the county of Franklin, in the state of New York,
into the Dominion of Canada, and there procured two quart bottles
of Impérial whisky, one quart bottle of Geneva gin, ten two-quart
bottles of White whisky, and one jug partly fuU of White whisky, and
loaded the same into this automobile, and then drove from Canada
across the international boundary line, back to the county of Franklin,
within the Northern district of New York. It is conceded that the
contents were distilled spirits, as referred to in the act of August 10,
1917 (40 Stat. 283, § 15 [Comp. St. 1918, Comp. St. Ann. Supp. 1919,
§ 31151/8/]).
Tourville was arrested by the customs authorities of this govern-
ment. The automobile and the distilled liquors were seized. Tourville
and bis companions were indicted on December 6, 1918, by the grand
jury, for a violation of this act of August 10, 1917. The act prohibits
the importation of distilled spirits. Later, on December 10, 1918,
Tourville appeared in court, pleaded guilty to the indictment, and was
fined in the sum of $50. He paid this fine. The automobile and the
liquors were relinquished by the customs authorities to the marshal
of the United States for the Northern district of New York, who took
possession imder a process of seizure pursuant to the libel filed herein.
They had no license or permit to take the whisky and gin in question
from Canada to New York state, and clearly violated section 15, chap-
ter 53, of the act of Congress of August 10, 1917. That act, however,
provides for punishment by fine or imprisoimient, or both. It does not
provide for seizure or forfeiture, either of the vehicle used in trans-
porting the prohibited liquors or of the distilled spirits smuggled into
the country. The act reads as follows :
©=3For otber cases see same topic & KEY-NUMBE!R in ail Key-Numberea Dlgests & Indexe»
376 2G2 FEDERAL REPOUTEK
'Trom and after thlrty days from the date of the approral ot this act n»
foods, fruits, food materials, or feeds shall be used In the production of dis-
tllled aplrits for beverage purposes: Provlded, that under such rules,
régulations, and bonds as tlie Président may prescribe, sucli materials
may be used in the production of distilled splrits exclusively for other than
beverage purposes, or for the fortification of pure sweet wines as defined by the
act entlUed 'An act to Increase the revenue, and for other purposes,' approved
September elghtb, nineteen hundred and stxteen. Nor shall there be imported
Into the United States any distilled splrits. » • * Any person who will-
fuUy violâtes the provisions of this section, or who shall use any foods, fruits,
food materials, or feeds in the production of malt or vinous llquors, or who shall
import any such liquors, wlthout flrst obtaining a license so to do when a li-
ceuse is required under this section, or who shall violate any rule or régulation
made under this section, shall be punished by a fine not esceedlng $5,000, or
by imprisonment for not more than two years, or both."
This libel was filed in the month of February, 1919. It allèges that
the automobile was the subject of seizure and forfeiture because it
was unlawfully used in the importation of the distilled spirits. The
libel refers to sections 3061-3082 of the Revised Statutes of the United
States (Comp. St. §§ 5763-5765, 5767-5785), and claims further sup-
port under the act of August 10, 1917.
Section 3062 of the Revised Statutes provides :
"Every such vehicle and beast, or either, together with teams or other mo-
tive povver used in conveying, drawing, or propeUing such vehicle or merchan-
dise, and ail other appurtenances, Including trunks, envelopes, opvers, and ail
means of cpncealment, and ail the équipage, trappings, and other appurtenances
of such beast, team, or vehicle, shall be subject to seizure and forfeiture. If
any person who may be drivlng or condueting, or in charge of any such car-
rlage or vehicle or beast, or any person traveling, shall willfuUy refuse to stop
and allow search and examlnation to be made as herein provided, when re-
quired so to do by any authorlzed person, he shall be punishable by a fine of
not more than one thousand dollars, nor less than fifty dollars."
The sections of the Revised Statutes (sections 3061-3082, inclusive)
are provisions of the customs law, and are applicable only to such
goods as are taxable under the law. They hâve no application, how-
ever, to the case of merchandise which cannot be entered in the custom
house at ail. By the act of August 10, 1917, it is an offense to import
distilled spirits, and the act prescribes a new and spécifie punishment
for its violation. It was a war measure. The customs law statutes
referred to do not make it a crime to bring in distilled spirits into
the United States from the Dominion of Canada, and it was not until
August 10, 1917, that such action constituted a breach of the criminal
law. This act makes no référence to any other statute, and if a for-
feiture be granted now of the automobile of the défendant in error, it
would be imposing added punishment not provided for in the statute.
Indeed, it would be a double punishment for the commission of one
offense, and this is not permissible. The customs laws referred to
hâve for their purpose and intention a prévention of smuggling mer-
chandise into the United States. It was intended to provide custom
duties to be paid for the importations. After August 10, 1917, Tour-
ville could not bring distilled liquors into the United States, irrespective
of the customs law.
The government, on finding the indictment, elected to proceed un-
UNIÏED STATES V. ONE FORD AUTOMOBILE, ETC. 377
(262 F.)
der the statute of August 10, 1917, and having done so, it cannot now
invoke the aid of the customs law, in ils endeavor to successf ully main-
tain the libel for forfeiture of the vehicle of transportation.
[2] The power to prescribe the offense carries the power to name
and define the punishment as Congress may détermine, under the
Constitution restrictions. A statute may provide for a prohibition
against an act or damage which will constitute a new crime, and maj
prescribe a punishment by penalty for the breach of such a crime, but
such punishment as prescribed by the statute only can be imposed fof
the commission of the offense. A statute may provide both a civil
remedy and a criminal punishment. McBroom v. Scottish Ce, 153 U.
S., 318. 14 Sup. Ct. 852, 38 L. Ed. 729; Barnet v. National Bank,
98 U. S. 555, 25 L. Ed. 212; Farmers, etc., Nat. Bank v. Dearing,
91 U. S. 29, 23 L. Ed. 196; People v. Stevens, 13 Wend. (N. Y.)
341.
In interpreting what is meant by the statute, vve must f oUovir strictly
its provision in regard to the punishment prescribed (1 Wharton's Crim-
inal Lawf [Uth Ed.] § 31), and, of course, the fact that a statute pro-
vides a civil remedy for an offense does not prevent the imposition
of criminal punishment. The création of a new offense, hovirever, by
statute making that unlawful which was lawful before, and prescribing
a penalty therefor, the prosecution and punishment under such act
must be in accordance with the terms of that act. U. S. v. 90 Demi-
johns, Case No. 15,887, 27 Fed. Cas. 167; Bags of Sugar, Case No.
14,324, 24 Fed. Cas. 505.
We find that, upon examination of the act of August 10, 1917, there
îs made a new offense to import distilled liquors as the défendants
named in the indictment did import them, and prescribed a punishment
by fine or imprisonment, or both. Thus the statute is complète, and it
nmkes no référence to any other statute which would give rise to a
right of action for forfeiture of the vehicle of transportation, and we
cannot add to the punishment already inflicted upon Tourville the
forfeiture of his automobile.
For the reasons hère announced, it was erroneous to sustain the
libel, in so far as the District Court granted seizure of the distilled
spirits. While the question is not presented to us by the plaintiff in
error, and the défendant in error has not taken an appeal, we announce
our view, since the United States attomey invited our considération of
this on the oral argument.
The judgment is affîrmed.
378 262 FKDKEAL KEPOETKB
KAMBBITZ et al. v. UNITED STATES.
(Circuit Court of Appeals, Second Circuit. December 17, 1919.)
No. 47.
1. Laeckny <g=>7 — Steamno peopkbty shipped oveb bàilboad in fedebal
CONTBOL.
Steallng property in course o( transportatlon on a rallroad operated
under fédéral control, In which the United States bas a spécial property
as ballee, held to constltute an offense, under Crimlnal Code, § 47 (Comp.
St § 10214), maklng it an offense to steal any valuable thlng whatever of
the property of the United States.
2. Kaileoads <g=5%, New, vol. 6A Key-No. Séries — Inteehtibence bt laecent
OF PBOPEBTT SHIPPED OTEB FEDEBAL CONTBOI.LED BAIIJtOAD.
Property of a shlpper, stolen whlle in course of transportatlon on a
rallroad operated under fédéral control, is not "property derived from or
used In connection wlth the possession, use, or opération" of the rallroad,
wlthln the meanlng of Fédéral Control Act March 21, 1918, § 11 (Comp.
St. 1918, Comp. St. Ann. Supp. 1919, § 3115%k).
3. Bailboadb <g=55%, New, vol. 6A Key-No. Séries — Intebiïbino with opeba-
TION of FEDEBAL CONTEOIXED TEANSPOETATION COMPANY.
Stealing property in course of transportatlon by an express Company
operated under fédéral control constltutes an offense imder Fédéral Con-
trol Act March 21. 1918, § 11 (Comp. St. 1918, Comp. St. Anru Supp. 1919,
§ 3115%k), as "interfering wlth and Impeding the possession, use, opéra-
tion, and control" of the express company.
In Error to the District Court of the United States for the Northern
District of New York.
Criminal prosecution by the United States against Otto Kambeitz
and John F. Tobin. Judgment of conviction, and défendants bring
error. AfErmed.
See, also, 256 Fed. 247.
Lester W. Bloch, of Albany, N. Y., for plaintifïs in error.
D. B. Lucey, U. S. Atty., of Ogdensburg, N. Y.
Before WARD, ROGERS, and MANTON, Circuit Judges.
WARD, Circuit Judge. Kambeitz and Tobin, employés on the New-
York Central Railroad, were convicted of stealing on the 20th day of
November, 1918, certain furs, clothing, and dresses shipped through
the American Railway Express Company on a train of the railroad
company running between Albany and Syracuse in the state of New
York.
The indictment contained three counts. The first charged:
" • • • Dld unlawfully and felonlously embezzle, steal, and purloin
property of the United States, to wit, one fur coat, one fur neekplece, and
two ladies" dresses, then and there being transported by the United States and
In Its possession in a certain rallroad car and then and there on the New
York Central Rallroad then and there run and operated as a part of a train
between the clty of Albany and the dty of Syracuse in sald district, * • •
the said railroad having theretofore been taken over by the United States
under and by virtue of that certain proclamation of the Président of the
United States issued on the 26th day of December, 1917, and which said
railroad was on said 20th day of November, 1918, being operated under the
control and in the possession of the United States, whereby the govemment
@=3For otber cases eee same topic & KEY-NUMBER in aU Key-Numbered Digests & Indexe*
KAMBEITZ V. UNITED STATES 379
(262 F.)
of the Unltert States had a spécial property In sald goods, so stolen, as afore-
said, and was llable and responsible to the shlppera or consignées for the
money value thereof. * * ♦"
The second charged:
" ♦ ♦ • Were engaged In rallroad and transportatlon service as em-
ployés on the New York Central Railroad, the sald rallroad then and thera
being under fédéral control and In use by the United States' both In intrastate
and Interstate commerce, havlng theretofore been taken over by the United
States, under and by virtue of that certain proclamation of the Président of
the United States issued on the 26th day of December, 1917, sald défendants
did unlawfuUy, knowingly and feloniously take and couvert to thelr own use
certain goods, to wit, one fur coat, one fur neckpiece, and two ladies' dresses,
which said goods were then and there property used in connection with the
possession, use, and opération of said railroad, in that sald goods vrere then
and there belng transported in said district on said railroad, vrhereby the
govemment of the United States had a spécial property Interest in said
goods so transported and was llable and responsible to the shippers or con-
signées for the money value thereof. • ♦ • "
The third charged:
" • * • The said défendants then and there belng engagea In rallroad
and transportatlon service and employed by the New York Central Rallroad,
which sald railroad was then and there a common carrier and was bemg used
and operated under fédéral control in the transportatlon of both intrastate
and Interstate commerce, did knowingly, willfully, unlawfuUy, and feloniously
interfère with and impede the possession, use, opération, and control of a
certain transportatlon System, to vylt, the American Railway Express Com-
pany, which said transportatlon System was theretofore taken over by the
United States under and by virtue of that certain proclamation of the Président
of the United States, issued on the 16th day of November, 1918, and which
said express company then and there was belng operated under the control
and in the possession of the United States, in that the said défendants and
each of them on the said 20th day of November, 1918, did steal, take, and
carry away from a certain express car in a certain train then and there belng
operated and runnlng between the dty of Albany and the city of Syracuse,
in said district, as a part of such transportatlon System, certain goods, t»
wit, one fur coat, one fur neckpiece, and two ladies' dresses, which sald
goods were then and there belng transported by the sald transportatlon Sys-
tem over certain of its Unes In said district, and by the United States In so
possessing, using, and operating such System. * * • "
The act of August 29, 1916 (chapter 418, Laws 1916), to take effect?
in time of war, under the heading "Ordnance Department," authorized
the Président, through the Secretary of War, to take possession and
assume control of any system of transportatlon within the boundaries
of the continental United States. December 26, 1917, the Président
by proclamation did, through the Secretary of War, take possession
and assume control of every railroad within the United States, and by
proclamation November 16, 1918, he took over ail the express com-
panies. The New York Central Railroad and the American Railway
Express Company is each a System of transportation.
The act of March 21, 1918 (chapter 25, Laws 1918 [Comp. St. 1918,
Comp. St. Ann. Sup. 1919, §§ 3115%a-31l53^p]), entided "An act to
provide for the opération of transportation Systems while under fédéral
control, for the just compensation of the owners, and for other purpos-
es," provides in section 11 (section 3115%k):
3S0 262 FEDERAL REPORTEE
" • * * Shall knowingly Interfère wlth or Impede tlie possession, use,
opération, or control of any railroad property, rallroad, or transportation
System hitherto or hereafter taken over by the Président, • • • shall be
guilty of a misdemeanor. » * » Por the taking or conversion to his own
use or the embezzlement of money or property derived from or used in connec-
tion with the possession, use, or opération of said railroads or transportation
Systems, the criminal statutes of the United States, as well as the criminal
statutes of the varions States where applicable, shall apply to ail officers,
agents and employés engagea In said railroad and transportation service,
while the same is under fédéral control, to the same extent as to persons
employed In the regular service of the United States."
The act of October 23, 1918 (chapter 194, Laws 1918 [Comp. St.
Ann. Supp. 1919, § 10199]), amended section 35 of the Criminal Code,
so as to read:
" • * * Or whoever shall take and carry away or take for hls own use,
or for the use of another, with inteut to steal or purloin, any personal prop-
erty of the United States, • * * shall be fined not more than $10,000 or
iniprisoned not more than ten years, or both. * • » '•
Section 11 of chapter 25, Laws 1918, provides that the criminal stat-
utes of the United States shall apply to ail officers, agents, and em-
ployés engaged in said railroad and transportation service w^hile the
same is under fédéral control who shall convert to their own use "prop-
erty derived from or used in connection with the possession, use, or
opération of said railroads or transportation Systems." The same sec-
tion makes it a misdemeanor for any one —
"to knowingly interfère with or impede the possession, use, opération or con-
trol of any railroad or transportation System hitherto or hereafter taken over
by the Président."
Ail this législation was a constitutional exercise of the war power
of Congress. Northern Pacific Ry. Co. v. State of North Dakota,
250 U. S. 135, 39 Sup. Ct. 502, 63 h- Ed. 897. It is not restricted to
interstate commerce.
Section 47 of the Criminal Code (chapter 321, Laws 1909 [Comp. St.
§ 10214]), provides:
"Whoever shall embezzle, steal, or purloin any money, property, record,
voucher, or valuable. thing whatever, or the moneys, goods, chattels, records,
or property of the United States, shall be fined not more than flve thousand
dollars, or imprisoned not more than flve years, or both."
[1] A majority of the court think the foregoing fédéral législa-
tion applies to goods in which the United States has a spécial property
as bailee, as well as to such as it owns absolutely. Phelps v. People, 72
N. Y. 344. Therefore the first count of the indictment is good.
[2] A majority of the court think that the goods stolen were not
property "derived from or used in connection with the possession, use
or opération" of the New York Central Railroad and that the act con-
templâtes instrumentalities of transportation rather than merchandise
carried for freight. Therefore the second count of the indictment is
bad.
[3] We ail agrée that the third count is good, because stealing goods
in the course of transportation did interfère with and impede the pos-
BEVEEIDGE V. CRAWFORD COTTON MlIiiS 381
(262 F.)
session, opération, and control of the American Railway Express Com-
pany as charged.
As the défendants were convicted on ail three counts, and fined $50,
the conviction on the first and third counts is sufficient to support the
judgment.
Judgment affirmed.
BEVBRIDGE v. CRAWFORD COTTON MILLS et al.
(Circuit Court of Appeals, Fifth Circuit January 15, 1920.)
No. 3448.
Specific peefobmance cS=114(1) — Bill instjfficient to show inadequact
of remedy at law.
Bill for spécifie performance of an alleged contract between complain-
ant and défendants for organization of a corporation, since formed by
défendants, and division of its stock and offices, held not to state a cause
of action for équitable relief; complainant's remedy, if any, being an ac-
tion for damages.
Appeal from the District Court of the United States for the North-
ern District of Georgia ; William T. Newman, Judge.
Suit in equity by George Beveridge against the Crawford Cotton
Mills and others. Decree for défendants, and complainant appeals.
Affirmed.
Edgar E. Pomeroy and Charles E. Cotterill, both of Atlanta, Ga.
(Moore & Pomeroy, of Atlanta, Ga., and W. W. Mundy, of Cedartown,
Ga., on the brief), for appellant.
Richard B. Russell, of Atlanta, Ga., for appellees.
Before WALKER, Circuit Judge, and GRUBB and JACK, Dis-
trict Judges.
JACK, District Judge. The plaintiiï in error, alleging an agreement
between himself and défendants Ingle and Corner for the formation
of a corporation to take over and operate a cotton mill owned by Ingle,
and likewise a mill on which Comer had an option, brought this suit
against the said Ingle and Comer and against the Crawford Cotton
Mills, a corporation organized by such parties pursuant to such agree-
ment, to enforce specific performance of tlie alleged contract.
Petitioner avers that he is an expert in the handling and weaving
of textile fabrics, and that he and certain other associâtes had in op-
ération at Cedartown, Ga., a dyeing and finishing plant, and likewise a
mill for the manufacture of duck; that, being désir ous of forming a
connection with other duck mills to supply material for his dyeing and
finishing plant, he entered into an agreement with défendant Ingle
to form a corporation to take over the White City Manufacturing
Company plant owned by the latter.
This agreement, it is alleged, was superseded by a new agreement,
entered into by petitioner and Ingle and défendant Comer, who held
an option on two other mills, known as the Edwards mill and the
®=5For other cases see eame topie & KEY-NUMBKR In ail Key-Numbered Dlgests & Indexes
382 262 FEDERAL REPORTER
Edwards power plant. Under this agreement the Edwards properties
were to be purchased for the sum of $135,000 by the proposed cor-
poration, and such properties, together with the White City Manu-
facturing Company plant, to be acquired from Ingle at a price of
$40,000, were to be bonded for $145,000, out of which the price of
the Edwards properties were to be paid, less $20,000 cash to be ad-
vanced by Ingle and Corner. Thirty-five thousand dollars was to be
borrowed from a selling agent to operate on. Petitioner further al-
lèges that an expert engineer was employed, and that he appraised
the three properties at $242,568.20.
This agreement, it is alleged, provided for the formation of the
corporation, to be known as the Crawford Cotton Mills, with a capital
stock of $250,000, $100,000 to be preferred stock and $150,000 com-
mon stock; that Ingle and Corner should receive preferred stock
for the $20,000 cash advanced by them, and that Ingle should receive
$40,000 of preferred stock for the White City plant and machinery
and ail merchandise and products on hand; that the common stock
should be issued, one-third to each of the parties, and they in tum
should then transfer back to the company, to be held as treasury
stock, ail but $45,000 of the common stock, each retaining $15,000
of common stock, for which each should exécute his note to the
corporation ; that Beveridge should be président, Ingle vice président,
and Corner manager, each at a salary of $10,000, out of which salaries
were to be paid their notes at the rate of $5,000 a year.
Petitioner allèges that the corporation was organized and chartered,
but that the stock was not issued as per agreement; that, on the
contrary, Ingle and Comer demanded that he pay at once $15,000 in
cash for his stock, which he refused to do, but for which amount he
offered to exécute his note, as per the original agreement; that sub-
sequently he was presented a subscription blank to be signed, subscrib-
ing for 150 shares of preferred stock, $15,000, and 500 shares of
common stock, $50,000, payment to be made on the call of the board
of directors; that, being satisfied that this was a scheme to freeze
him out, and that Ingle and Comer, constituting a majority of the
board, would at once call upon him for the fuU amount of $65,000, he
declined to sign the subscription blank, stating that he was willing
to subscribe for the stock on the conditions and terms previously
agreed upon by the parties, whereupon the stock in full was sub-
scribed by Ingle and Comer and défendant O'Neal.
Petitioner avers that the White City Manufacturing Company plant
and the Edwards properties were ail taken over by the corporation,
and bonds were issued as originally contemplated. He avers that the
corporation refused to let him hâve anything to do with its manage-
ment, and refused to pay him the salary as président agreed upon be-
tween the promoters.
Petitioner allèges that his damages "are too vague and indefinite to
be the cause of an action at law, but that they would amount to the
sum of $50,000, or other large sum." His prayer is that on final hear-
ing Comer and Ingle be required to specifically perform the contract
entered into, and that he be decreed the owner of 150 shares of the
BEVEEIDGE V. CRAWFOED COTTON MlUaS 383
i2M F.)
common stock upon exécution and payaient of his note for that
amount, and that he be declared the président of the corporation from
the date of its organization at a salary of $10,000 a year ; that Ingle
and Corner be decreed to be the owners of such stock only as may
hâve been subscribed and paid for by them, and that he hâve judg-
ment against the Crawford Cotton Mills Company for the sum of
$10,000 salary as président, and judgment against Ingle and Corner
for the sum of $50,000 damages.
In an amendment to his pétition plaintiff avers that, in accordance
with an agreement with the défendants Ingle and Corner, he had made
a trip to Philadelphia and New York, and secured the services of
a compétent selling agent, who agreed to and did thereafter advance
to the Company the sum of $35,000. The court below sustained a mo-
tion on behalf of the défendants to dismiss, holding that, even if
plaintiff had a valid contract, his remedy was not in equity for spécifie
performance, but an action in damages for its breach ; that inasmuch,
however, as plaintiff had expressly set forth in his pétition that his
damages were "too vague and indefinite to be the cause of an action
at law," an order would not be entered transferring the case to the
law docket. The court f ound that there was no equity in the pétition,
nor any ground for équitable relief set forth, and, further, that there
was a misjoinder of parties and of causes of action.
In this ruling we think the court was correct. Plaintiff, recogniz-
ing the impossibility of the relief asked, before the final decree was
signed, moved to strike out that portion of the prayer asking to be
decreed président of the corporation and awarding him judgment for
salary as such, and likewise to strike out his prayer for damages as
against Ingle and Comer. The court disallowed the amendment, be-
cause it came too late, and, further, because it did not sufficiently
change the character of the case to justify the relief prayed for in
the pétition as amended. The effect of this amendment, if allowed,
would hâve been to élimina te the prayer for a moneyed judgment, and
to restrict the équitable relief sought to a compliance with the alleged
agreement of the promoters as to the issuance and division of the
stock of the corporation.
The court had no more authority to decree the plaintiff owner of
150 shares of the common stock of the company, on his executing his
own note therefor in accordance with such alleged agreement, than it
had to déclare him président of the corporation. Whatever remedy
he had, if any, was at law for breach of contract, and by his own allé-
gations his rights at law are too vague and indefinite to sustain a
recovery.
Plaintiff had no contract whatever with the Crawford Cotton Mills,
but relies altogfether on an alleged agreement between him and the
promoters of the corporation prior to its organization. The only claim
that he could hâve against the corporation, which is a distinct légal
entity from Ingle and Comer individually, is one for services render-
ed with référence to the purchase of looms and the acquisition of a
sales agent, which, however, as the court stated, is so vaguely and
indefinitely set out as not to be entitled to considération.
The decree of the lower court will be affirmed.
384 2C2 FEDERAL REPORTEE
MOKBIS & CO. T. THURMOND.
(Circuit Court of AppealSy Mfth Oiroult. January 3, 1920. Behearlng Denled
February 28, 1920.)
No. 3425.
1. MABTEB and SEBVANT <S=228(1) — NeGUGENCE of INJiniED JCMPLOTi AS
AGENT IN CHARGE A DEFENSE.
Although an employer Is debarred by a state statute from relylng on
contributory négligence or assumptlon of rlsk in an action for injury to
an employé, be cannot be held liable where tlie négligence charged against
him was that of the employé Injured, as hls agent in charga
2. Mastee and servant <g=3289(23) — Employê's dutt of inspection question
FOE JUBT.
Where plaintlff's Intestate, a salesraan for défendant, was killed as
alleged by reason of the defective condition of an automobile fumished by
défendant for his use, évidence tending to show that deceased had fuU
charge of the machine, v?Ith instructions to hâve it repalred at defendant's
expense when and where he desired, and that he did so, held to entitle
défendant to hâve the question whether deceased was Its agent intrusted
with the duty of inspection and repair, and through whose négligence
the accident occurred, submltted to the jury.
In Error to the District Court o£ the United States for the South-
ern District of Texas; Joseph C. Hutcheson, Judge.
Action at law by Mrs. Lila Thurmond agamst Morris & Co. Judg-
ment for plaintifï, and défendant brings error. Reversed and re-
manded.
H. M. Garwood, Rodman S. Cosby, and C. R. Wharton, ail of Hous-
ton, Tex., for plaintifï in error.
Hutcheson, Bryan & Dyess, of Houston, Tex,, for défendant in er-
ror.
Before WALKER, Circuit Judge, and FOSTER and GRUBB, Dis-
trict Judges.
GRUBB, District Judge. The plaintiff in the District Court (de-
fendant in error in this court) was the widow of R. J. Thurmond, who
was kilIed, while in the employment of the défendant in the District
Court (plaintiff in error in this court) by the wrecking of an automo-
bile, which he was driving from Houston to Ellington Field. At the
time of the accident, Thurmond was a salesraan for the défendant, and
it was his duty to visit the camps in the neighborhood of Houston,
and the défendant for that purpose furnished him with the automobile,
which he was driving when he received the injury from which he died.
The plaintiff claimed that the steering gear and radius bar of the auto-
mobile were out of repair, that the défendant was responsible therefor,
and that the defective condition of the automobile caused the acci-
dent.
[ 1 ] Under the law of Texas, the défenses of contributory négligence
and assumption of risk were not available to the défendant. It could
défend only by showing that it was free from ail négligence on its
part which helped to bring about the injury. The négligence charged
^ssFoT other cases see same topic & KËY-NUMBEK in aU Key-Numbered Digests & Indexe*
MORRIS & CO. V. THURMOND 385
(262 F.)
against the défendant was that it negligeiitly failed to furnish the in-
testate a reasonably saf e automobile in which to do his work, as was its
légal duty. The évidence tended to show the existence of the two
def ects in the car already mentioned, and their continued existence
for a time long enough to hâve made it négligent on the part of the
défendant not to hâve remedied them before the accident. Whether
the accident was caused by the defects or by something else admits
of doubt. The défendant could escape liability for the intestate's
death, if due to its négligence in not correcting the defects, only by
showing that it had imposed upon the intestate die exclusive duty, foi
it, of inspecting the car, determining when it needed repairing, and,
when f ound to need repairs, of taking the car to the garage and having
the repairs made. It would also hâve to show that the defects were
discoverable and repairable defects, which could hâve been remedied,
so as to make the car safe to run. If the défendant was neghgent, but
only négligent because of the négligence of the intestate, then, while
such négligence would be imputed to it in favor of others than the in-
testate, it would not be négligence as between it and the intestate, of
which he or his légal représentative, in the event of his death, could
complain.
If intestate was placed in sole control of the car, with the duty of
determining when it was out of order, and of having it put in order
when he made the détermination, then his négligent f allure to make the
détermination, or to act upon it when made, would be not merely
contributory négligence, but would free the défendant, as to him, from
ail négligence, and so leave him, or, in the event of his death, his surviv-
ors, without a right of action for injuries so brought about. Wliile he
cannot be held to hâve assumed the risk of his fellow servant's négli-
gence, or that of his employer, it cannot be said that his own négli-
gence is that of his employer, as between them, nor is it in any sensé
the négligence of the fellow servant.
The master's duty of furnishing safe appliances is not delegable to a
fellow servant of the injured employé ; but this is far from saying
that the master cannot delegate to the injured employé the duty of
inspecting and causing to be repaired an appliance furnished to him
for his use, and which from the situation must necessarily be in his
exclusive possession and control, and that when the only négligence
charged against the employer is that of the injured employé the em-
ployer may still be liable to him for the injury. In the case of Pioneer
Mining & Manufacturing Co. v. Thomas, 133. Ala. 279, 32 South. 15,
the Suprême Court of Alabama approved the folio wing language from
the brief of appellee in that case :
"We recognlze the nile that If the Injured employé Is hlmself the agent
through whom the employer undertakes the responsibility of seelng that the
ways, Works, machinery, and plant are in proper condition he cannot com-
plain of Personal injuries sustained by him by reason of a defect in the con-
dition of such ways, works, machinery. or plant."
To the same efïect are the cases of Great Northern Railway Co. v.
Wiles, 240 U. S. 444, 36 Sup. Ct. 406, 60 h. Ed. 732 ; Owl Creek Coal
262 F.— 25
386 262 FEDERAL KEPOETEB
Co. V. Goleb, 210 Fed. 209, 127 C. C. A. 27; Crawford v. Fayetteville
Co., 212 Fed. 107, 128 C. C. A. 623.
[2] The record in this case does not disclose by undisputed testi-
mony an instance of sole control commïtted to the injured employé —
the intestate in this case — and the District Judge rightfully refused to
direct a verdict for the défendant on this theory. However, we think
a tendency of the évidence was to that effect, and that the défendant
was therefore entitled to hâve the issue submitted to the jury. The
District Judge withdrew the issue from the considération of the jury,
both by his oral charge and by his déniai of instructions requested by
défendant. The plaintiff's witness Allen testified that the local mana-
ger ôf défendant, Goedert, a couple of days before the accident, told
the intestate, when he complained that the car was not in good con-
dition, to go and hâve it fixed, and to hâve it fixed that day, if he had
time.
The defendant's witness, Goedert, testified that, when repair work
was needed on the car, the intestate had it done himself ; that he took
it to a garage of his own sélection ; that he ordered the work and af>-
proved the bills for it, which were then paid by défendant, on his ap-
proval; that, when Thurmond was employed by him, he "gave him
authority to hâve the car repaired whenever it was necessary, and left
it te his judgment to détermine as to when repairs would be neces-
sary" ; that shortly before the death of intestate he reported to witness
that the car was in bad condition, and suggested that it be sent to
another garage for repairs ; and that witness thereupon told him to take
it to whatever garage he wanted. The witnesses, Frank and James,
who were owners of garages, testified that on différent occasions the
intestate brought the car to their garj^es for repairs, gave instruc-
tions as to what was to be done to it, and approved the bills therefor.
The bills themselves — some bearing Thurmond's approval — were in-
troduced in évidence. One, dated April 20, 1918, contained an item
for the cost of one radius rod, which was one of the two parts charged
by the plaintifï to hâve been def ective The fatal accident happened on
May 29th thereafter.
We think the foregoing évidence tended to sustain the contention
of the défendant that the intestate was intrusted with the sole duty of
inspecting and having the car repaired, and that the District Court err-
ed in withdrawing that issue frora the jury, and the judgment must
be for that reason reversed, and the cause reraanded ; and it is so or-
dered.
CUYAMEL FRUIT CO. V. JOHNSON lEON WORKS 387
(262 F.>
*
CUTAMEL FRUIT CO. v. JOHNSON IBON WORKS, Limited.
(Circuit Court of Appeals, Fifth Circuit. January 6, 1920.)
No. 3410.
1. CONTBACTS ®=3213(1) CONBTBTTCTION INCI.UDIN& 8TBIKE CLAUSE AB EXCTJS-
ING DBLAY.
Adhère a proposai for repalring a vessel flxed the tlme for completlon
of the work, "barrlng labor troubles or any unforeseen cause," and tbe
letter head on whlch It was written contained a prlnted statement that
ail contracts were made subjeet to delays caused by labor troubles or un-
foreseen coutingencles, and tbe proposai was accepted without change,
except to shorten the tlme for completlon, the strike provision held to be
a term of the contract.
2. Appeal and ekboe <S=9!)7(3) — Whebe both paetieb move fob dieected
verdict findings are conci-usive.
Where both parties move for a dlrected verdict, both are concluded by
the flndlngs of fact made by the court.
3. Contracts <g=a30O(5) — Strike clause excusinq delat in pebformancb.
To preclude a party to a contract from avalllng himself of a strike
clause in case performance is delayed by a strike of his workmen, it must
be shown that it was brought about through bad faith on his part.
In Error to the District Court of the United States for the Eastern
District of Louisiana ; Rufus E. Poster, Juclge.
Action at law by the Cuyamel Fruit Company against the Johnson
Iron Worlcs, Limited. Judgment for défendant, and plaintiff brings
error. Aiîfirmed.
Solomon Wolfï, of New Orléans, La., for plaintiff in error.
Joseph W. Montgomery, of New Orléans, La., for défendant in
error.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges.
GRUBB, District Judge. This is a writ of error to a judgment of
the District Court for the Eastern District of Louisiana, in an action at
law for damages by the plaintiff in error against the défendant in
error, and in which the défendant in error filed a reconventional de-
mand. Judgment was for the défendant upon the original cause of ac-
tion, and also in its favor on the reconvention. The action and cross-
action were based upon a contract by which the défendant in error
agreed to make certain repairs on the steamship Omoa at the instance
of the plaintiff in error. The contract was evidenced by a written pro-
posai made by the défendant in error, and by the acceptance of it by
letter written by the plaintiff in error. The repairs were actually
made, but it is claimed not within the stipulated time, and the original
action sought to recover damages for the delay, and the reconvention
sought a recovery for the contract price for the work donc and ma-
terials furnished, which the plaintiff in error had declined to pay be-
cause of the delay.
[ 1 ] Dispute arose about what the contract provided as to the time
of completlon, and, as it was ïn writing, the construction of it was
^z=>F0T other cases see same toplo & KEY-NUMBER in ali Key-Numbered Dlgests & Indexe»
•Certiorarl denled 2B2 U. S. — . 40 Sup. Ct. 481, 64 L. Ed. — .
388 2G2 FEDERAL REPORTER
for the court, as a niatter of law. The disputed question was as to
whether or not a strike clause constituted a term of the contract.
The pétition of the plaintiff in error recognized the existence of the
strike clause in the contract, and the onlj' issue presented by the plead-
ings and Htigated by the parties before judgment was whether or not
the défendant in error could défend under it, having, as claimed, itself
brought on the strike. If we concède, however, that the proper con-
struction of the contract is still open for contestation, in view of the
pleadings, we think the contract was properly construed to be subject
to the strike clause. The défendant in error's letter of December
28, 1917, which contained the proposai to do the work, contained this
provision as to the time of performance :
"Work to be completed on Saturday, January 5, 1918, or sooner, if possible.
If the ship goes in dock Friday evening or Saturday moming, 7 a. m., will
corne out of dock Tuesday noon, barrlng labor troubles or any unforeseeii
cause."
The letter of the Cuyamel Fruit Company, dated December 28, 1917,
accepting the proposai contains this statement as to time of completion
of work:
"It is understood that this work wlll be compieted withln six days."
The work in fact was not completed earlier than 30 days from the
delivery of the steamship to the défendant in error. The latter dé-
fends against the delay under the strike clause, which it claims was
contained in the contract. The letter heads of the défendant in error,
upon which its letter of December 28, 1917, was written, contained a
printed stipulation to the effect that ail contracts made by it were
subject to delays caused by labor troubles and unforeseen contingen-
cies. Conceding that the words "barring labor troubles or any unfore-
seen cause," which are to be found in the body of the letter of De-
cember 28, 1917, are to be restricted to the agr cément to deliver the
steamship repaired on Tuesday noon, yet it should not hâve the force of
excluding the gênerai time of performance from the benefit of the
strike clause, which was printed at the top of the letter head and which,
therefore, was applicable to the entire agreement contained in the
letter. So the letter of December 28, 1917, may be construed, so far
as the needs of this case go, to be a proposai by the défendant in error
to complète the work by Saturday, January 25, 1918, unless delayed
by a strike. This was a period of eight days.
The plaintifï in error, in accepting the proposai, reduced the stipu-
lated time for completion to a period of six days. The défendant in
error accepted the modification, which reduced the time from eight to»
six days, by undertaking the work under it. Nothing was said in the
written acceptance of the plaintifï in error upon the subject of strikes.
In the absence of any expression by the plaintifï in error, in his letter
of acceptance, as to the nonapplication of the strike clause, his letter
of acceptance should be construed to leave that clause as it was in
the letter of proposai. As we hâve construed it, there, to apply to the
work proposed to be ;done, it should also apply to it, af ter the accept-
ance. The efïect of the acceptance was merely to reduce the time
WESSBLS V. UNITED STATES 389
C262 FJ
from 8 to 6 days, and the 6-day period of the acceptance was subject
to enlargement for the same reason as was the 8-day period of the
proposai. We think the strike clause applied to the contract.
ît is not disputed that a strike occurred that delayed the com-
pletion of the work for 30 days. The other contention of the plain-
tifï in error is that the défendant in error precipitated the strike by put-
ting in efïect a new wage scale without having given the 30 days' no-
tice that was provided for in a contract between the défendant in
error and its employés, and that for that reason it cannot défend under
it. There are disputed questions of facts shown by the record, re-
lating to the efïect of the wage scale — as to whether or not it contained
any decreases of wages, as to whether or not the défendant in error
was justified in putting it into efïect, without having given the 30
days' notice, and as to whether or not it applied to existing work in
the shop, including the repairing of the Omoa.
[2, 3] Both the plaintifï and the défendant in the court below re-
quested the District Judge to direct a verdict in its favor. The District
Judge directed a verdict for the défendant. The efïect of this was to
preclude the plaintifï in error from questioning any décision of fact in-
volved in the court's ruling, and hence from now disputing the con-
clusion of fact that the District Judge found that the défendant in
error was not in fault in a way showing bad faith in precipitating the
strike that delayed the completion of the work. This is especially the
case, in view of the principle of law that it requires a showing of bad
faith on the part of the employer to prevent him from availing himself
of a strike clause in a contract of similar kind. Hawkhurst Steamship
Co. V. Keyser (D. C.) 84 Fed. 693 ; Railway Co. v. Bowns, 58 N. Y.
574. As bad faith «s the test prescribed, we-think the plaintifï in error
must fail, both because the District Judge found that there was no
bad faith on the part of the défendant in error in bringing on the
strike; and because bis finding in that respect is conclusive as the
case cornes to us ; and also for the reason we find no évidence of bad
faith from an examination of the record. The judgment of the District
Court against the plaintiff on the original cause of action, and in favor
of défendant on its reconventional demand for the amoimt sued for,
interest, and costs, is affirmed.
WESSELS V. UNITED STATES."
(Circuit Court of Appeals, Fifth Circuit. December 15, 1919. Rehearlng
Denied January 16, 1020.)
No. 3258.
1. INDICTMENT and INFOEMATÏON <®=3.34(3) InDOKSEMKNT of STATDTE 0NDEB
WHICH IT WAS BBOUGHT IS NO PART OF INDICTMENT.
Where défendant was indicted for unlawfully and wlUfully obstnicting
the recruiting service of the United States, whieh offense is denounced by
Espionage Act, § 3 (Comp. St. 1918, § 10212c), the fact that there was
indorsed on the indictment the expression : "Charge: Obstructlng the re-
cruiting and enllstment service of the U. S. ; violation section 3 of Act of
e=3For other cases see same toplo & KEY-NUMBER In ail Key-Numbered Dlgests & Indexes
•Certiorarl denied 252 U. S. — , 40 Sup. Ct. 481, 64 L. Ed. — .
390 262 FEDERAL REPORTER
May 18, 1917" — wlU not render the indictment bad, though Act May 18,
1917 (Comp. St. 1918, §§ 2044a-2044k) , dld not denounce the offense; the
Indorsement being no part of the Indictment.
2. Indictment and information <g=»34(3) — Indictment not bad, though
EBEONEOUSLY EECITING STATUTE TTNDEB WHICH IT WAS FOUND.
An indictment charging a violation of Espionage Act, § 3 (Comp. St.
1918, § 10212c), by obstructing the recruiting and enlistment service of
the United States, Is not bad because an indorsement thereon erroneously
recited it waa found under Act May 18, 1917 (Comp. St. 1918, §§ 2044a-
2044k), vFhich act dld not include the offense, where the indictment al-
leged facts sufficlent to bring It under the proper statuta
3. Abmy and navy ®=»40 — Espionage Aot violated, though attempt to ob-
steuct enlistment not effective.
An attempt to obstruct the enlistment and recruiting service of the
United States, though unsuccessful, is a violation of Act June 15, 1917,
§ 3 (Comp. St. 1918, % 10212c), and défendant is properly punishable for
such attempt.
4. Cbiminal law <&i=>1177 — Sentence habmlbss wheee eithee count of in-
dictment IS SUPPOBTED BT EVIDENCE.
As the Espionage Act provides a maximum penalty of 20 years for
violation, and denoimces the offense of attempting to obstruct the re-
cruiting and enlistment service, a défendant sentenced to three years un-
der indictment of two counts charging obstructing of recruiting and en-
listment and attempt to cause dlsloyalty and refusai of duty, cannot
complain, if the évidence supported elther count, for the punishment
assessed was within the scope of the act.
5. Ceiminal law <S=»371(1) — Evidence of seditious uttebances admissible
to show intent in pbosecution foe obstructing enlistment.
In a prosecution for attempting to obstruct the recruiting and enlist-
ment service of the United States, etc., évidence that défendant stated
tbat the United States should not hâve gone to war wlth Germany, and
that, if he bad Président WUson, he would flll hlm so full of holes he
would be unrecognizable, Is admissible to show defendant's intent.
In Error to the District Court of the United States for the West-
ern District of Texas; Duval West, Judge.
Gerhardt Wessels was convicted of a violation of the Espionage
Act, and he brings error. Affirmed.
R. H. Ward, of Wichita Falls, Tex., for plaintiff in error.
Hugh R. Robertson, U. S. Atty., of San Antonio, Tex.
Before WALKER, Circuit Judge, and POSTER and GRUBB,
District Judges.
POSTER, District Judge. Plaintiff in error (hereafter called the
défendant) was indicted in two counts. The first count charged him
with unlawfuUy and willfuUy obstructing the recruiting and enlist-
ment service of the United States by making substantially the fol-
lowing statement to a negro named Harvey Smith :
"That the United States had no business going Into this war against Ger-
many, and that the negroes should not hâve anything to do with it, and for
him, the said Harvey Smith, to go and tell the young negroes who had been
registered, and also some of the older negroes, to meet at the bouse of a
negro by the name of Ployd Lott, and that he, the said Gerhardt Wessels,
would tell them how they could avoid being drafted into the army of the
(g=>For other cases see sapie toplc & KEY-NUMBBR In aU Key-Numbered Dlgests £ Indexes
WESSELS V. UNITED STATES 391
(262 F.)
United States; that he would explain to them that they could clalm that
thelr eyesight was bad and that they could not see the letters and figures
when tiiey were glven an eye test before the local exemption board."
The indictment allèges that said negro, acting upon défendant'?
suggestion, repeated substantially the same statement to a number of
negroes, who had heretofore registered in accordance with require-
ments of Act May 18, 1917 (Comp. St. 1918, §§ 2044a-2044k), and
six persons to whom the statement had been made were named in the
indictment.
The second count is substantially the same, except that the charge
is unlawfully and willfully attempting to cause disloyalty and refusai
of duty in the military forces of the United States. A demurrer to
the indictment was overruled. The case went to trial. A motion to
direct a verdict of acquittai was refused, and the gênerai verdict of
guilty on the whole indictment was retumed. A sentence of three
years' imprisonment was imposed.
[1, 2] Nine errors are assigned. The first assignment is to the
overruling of the demurrer. The demurrer is lengthy, but its sub-
stance is that the indictment did not charge a crime. In returning
the indictment there was indorsed on it:
"Charge : Obstructing the recrulting and enllstment service of the U. S. ;
violation section 3 of Act of May 18, 1&17."
This was undoubtedly a clérical error, as the offense that is set
out is cognizable under section 3 of the Act of June 15, 1917, known
as the Espionage Act (Comp. St. 191.8, § 10212c), and not under the
Sélective Draft Act. It is well settled that the indorsement on an
indictment is no part of the indictment. It is also well settled that,
if the prosecution be mistaken as to the particular law violated, never-
theless, if the indictment charges a crime under any law of the Unit-
ed States, it is sufficient to support the verdict.
[3, 4] The third error assigned is to the refusai of the court to
direct a verdict in defendant's favor. There was évidence tending
to show that défendant made the statement as charged; that it was
repeated to a number of witnesses; that at the time appointed he
visited the house of Floyd Lott, but, no one else appearing, no meet-
ing was held. It is also shown that défendant was a member of
the local draft board. He denied that he made the statement, or
that he visited Lott's house. The point is made that the défendant
was not guilty of obstructing the recruiting and enlistrhent service
of the United States, and did not cause disloyalty or refusai of
duty.
Conceding for the sake of argument that the évidence was not
sufficient on the first count, the second count charges that he did
"unlawfully and willfully attempt to cause disloyalty and refusai of
duty," etc. Section 3 of the Act of June 15, 1917, reads:
"Whoever • • * shall vs-lUfully cause or attempt to cause Insubordina-
tion, disloyalty, mutlny, or refusai of duty, in the military or naval forces
of the United States, or shall willfully obstruct the recrulting or enlistment
service of the United States, to the injury of the service or of the United
States, shall be punished by a fine of not more than $10,000 or imprisonment
for not more than twenty years, or both."
«l92 262 FEDERAL REPOKTER
Under the provisions of the act it was not necessary that the de-
fendant should succeed in his efforts. The mère attempt constituted
a crime. If the jury believe the évidence for the government, the
défendant was clearly guilty. As the act provides a maximum pen-
alty of 20 years, and the court imposed a sentence of only 3 years,
if either count of the indictment be supported by the proof, the sen-
tence was valid.
[5] The second error assigned is to certain évidence admitted over
objection. A witness, WilUam Cox, was on the stand, and was asked
the following question:
"I will ask you whether or not you heard the défendant, Wessels, some tinie
after reglstration day, June 5, 1&17, state substantlally that Président Wllson
had no business going Into this war wlth Germany, and that if he had hlm
he would flil hlm so full of holes you wouldn't tnow himî"
To which he answered :
"I heard him make that statement a couple of days or some time right
after reglstration day. The défendant was in hls room just prior to makiug
that statement. I heard him talklng, or reading, or somethlng. I heard hlm
maklng a fuss In there some way, and he came out on the gallery, and I
walked out there, and he made that remark."
We think this évidence was properly admitted on the question of
defendant's intent.
The fourth, fifth, sixth, seventh, eighth, and ninth assignments of
error run to portions of the judge's charge. Without repeating what
the court said, it is sufificient to say that we find no error in the
portions of the charge given.
Judgment is affirmed.
CLINCHFIBLD FUEL CO. v. HENDEESON lEON WORKS CO.
(Circuit Court of Appeals, Flfth Circuit January 13, 1920.)
No. 3444.
Collision <S=3l53 — Decbee affiemed on conflicting évidence or injtjey to
BABQE.
Decree affirmed, which found on conflicting évidence, In part taken lu
open court, that the leaking condition of a barge was not caused by oolll-
sions, but exlsted previously, and denied recovery of damages therefor.
Appeal from the District Court of the United States for the South-
ern District of Alabama ; Robert T. Ervin, Judge.
Suit in admiralty for collision by the Clinchfield Fuel Company
against the Henderson Iron Works Company. Decree for libelant,
from which it appeals. Afïirmed.
See, also, 254 Fed. 411, 165 C. C. A. 631.
Harry T. Smith and William G. Cafïey, both of Mobile, Ala., for
appellant.
T. M. Stevens and Stevens, McCorvey & McLeod, ail of Mobile,
Ala., for appellee.
Before WALKER, Circuit Judge, and GRUBB and JACK, District
Judges.
©=5For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dtgests & Indexes
CLINCHPŒLD FUEL CO. V. HENDEBSON IRON WOEKS CO, 393
(262 F.)
GRUBB, District Judge. This is an appeal from a decree of the
District Court in favor of the appellant (libelant in that court) against
the appellee (libelee in that court) for $100, for damages for injuries
to the barge of appellant, which was caused to coUide with a pier (Pier
19, Galveston) and with a steamship (the American), while being towed
by a tug of appellee, in Galveston harbor, on June 22, 1915.
The District Judge found that both collisions were caused by the
négligence of the tug, and the only question presented by this appeal
relates to the sufficiency of the award of damages. The District Judge
allowed damages for injuries done to the guard rail and fender of the
barge, but denied damages to compensate for alleged injuries to her
hull, which it was claimed caused her to leak and required her to be
overhauled and caulked. He also denied appellant damages for the
cost of a survey, claimed to hâve been made necessary by reason of the
collisions.
The sole question is one of fact, and it is whether or not the leaking
of the barge was caused or increased by either or both of the collisions.
This question was resolved against appellant by the District Judge.
Its solution dépends upon whether the record shows that the bai^e
leaked substantially more after the collisions than it had been doing
before. The libelant relied entirely upon the claim of subséquent
leakage to sustain its case. The record discloses no évidence of visible
injury to the barge below the water Une. Libelant's claim is that the
force of the collisions opened the butts and seams of the barge, and that
the immédiate leaking of the barge, after the collisions, substantiates
this contention. The whole case, therefore, dépends upon whether the
barge began to leak, or increased its leakage substantially, just after
the collisions.
The libelant offered évidence tending to show that the barge was
comparatively new; that it had just come ofï the ways, after having
been overhauled, and was tight ; that the only trip the barge had made,
after having been overhauled, was a nine-mile trip across Galveston
Bay from Texas City on the evening preceding the day of the two
collisions. The libelant also ofïered in évidence the déposition of the
niaster of the barge to the effect that he had examined the barge at 6
a. m. on the morning on which the collisions happened, and that there
was only 1 inch of water in the barge at that time, and that he had
again examined her at about 9:15 a. m., and after the happening of
both collisions, and then found 15 inches of water in her hold. The
barge remained afloat the remainder of that day and the next day, near
the place of the last collision. Part of her cargo of coal was there
unloaded into the vessel with which she had coUided, part unloaded
into another vessel, and the remainder was transferred to another
barge. The injured barge was then taken to the Houston Ship Canal,
to go on the ways, which were, however, found to be occupied. After
remaining there some time the barge was taken to Lake Charles in
September, where she was hauled up on the ways, and it was then that
her seams and butts were found to be open. No examination of her
hull had been or could hâve been made until then.
The libelee introduced the oral évidence of three witnesses — the
394 262 FEDERAL REPORTER
chief engineer of the tug, whose name was Taylor, and two of its
deck hands, named Beretietch and Burns — to the efïect that on the
morning of the collisions, and the day succeeding the evening on which
the barge had been towed from Texas City, they examined the position
of the barge in the water as she lay at Fier No. 10, Galveston, where
she had been put.up overnight, and that she then listed perceptibly,
in a way that showed that she had taken on considérable water. Burns
also testifàed that he went on the barge and looked down into her hold
and saw the water, and that there was a great deal of it. AU three
testified that Barrell, master of the barge, stated to them or in their
présence that the barge was leaking. The witnesses also testified that
the barge had encountered rough water on the preceding evening on
the way'over from Texas City to Pier No. 10, and that it was of a kind
that would tend to cause her seams and butts to open, if she was too
limber.
As tending to show that she was too limber, libelee points to the fact
that when overhauled at Lake Charles, in September, after the colli-
sions, new bulkheads were put in her at the instance of her owners for
the purpose of stifTening her. The libelee also relies upon the state-
ment of her master, Barrell, that when he examined the barge, after
the collisions, she had 15 inches of water in her hold, and that he
gauged the water entering her and found that she was t^ing on water
at the rate of an inch an hour. If no greater rate than that had obtain-
ed, even since the earlier collision, it is clear that the 15 inches of water
cannot be accounted for by the collisions, the earlier of which occurred
only 3 hours bef ore the water was gauged. To this argument libelant
answers that the seams and butts may hâve reverted to their original
positions, in the intérim between the collisions and the time of the
gauging of the water, and that this may hâve checked the entrance of
the water, and that for that reason the rate of leakage may not hâve
been constant during the whole period.
This contention, however, is a matter of theory, and not of évidence.
Other facts and inferences are relied upon by the parties in support
of their respective contentions, as to when substantial leakage com-
menced with relation to the time of the collisions. Thus the issue is
not only one of fact, but of fact depending upon conflicting oral tes-
timony, in part, of witnesses, who appeared in person before the Dis-
trict Judge, and whose demeanor and intelligence were accordingly
available to him — as they are not to us — in determining their truthful-
ness and accuracy. The District Judge found from the évidence that
the leakage was not, in fact, increased by the two collisions, but was
as great before either of them occurred as it was after both of them
occurred. In view of this affirmative finding as to the fact, he very
naturally did not permit the natural tendency of such collisions to
cause or increase leakage to control. Whatever conclusion we might
hâve reached, if the issue had been presented to us as an original prop-
osition, passing on it in the light of the District Judge's finding and the
presumption of correctness that attaches to it, we are not prepared to
disturb his conclusion that the entire leakage was due to the limber
condition of the barge, and to its journey in that condition through
UNITED STATES V. KRAMER 395
C262 F.)
rough water from Texas City to Pier No. 10, and that the leakage was
neither caused or substantially increased by the collisions.
If the leakage in its entirety existed before either collision, the
District Judge was right in not charging the cost of the survey to
appellee, since in that event it would hâve been required, though no
collisions intervened.
The decree of the District Court was correct and is
Affirmed.
UNITED STATES y. KRAMER,
(Circuit C3ourt of Appeals, Fifth Circuit. December 23, 1919.)
No. 3453.
Aliens <S=571%, New, vol. 7 Key-No. Séries — Sufficienct of évidence of
FEAUDTJLENT NATURALIZATION.
Ttiat a naturalizatlon certlficate was obtained fraudulently and not In
good faith may be estaWlshed by subséquent acts and statements of the
naturallzed citizen, showing liis disloyalty and contlnued adlierence to
tiis former soverelgn.
Appeal from the District Court of the United States for the West-
ern District of Texas ; Duval West, Judge.
Suit by the United States against Herman Kramer for cancella-
tion of naturalization certificate. Decree of dismissal, and the United
States appeals. Reversed and remanded.
Tlie United States, through the United States attomey, brought her blll
against Herman Kramer, formerly a subject of the German emperor, to can-
cel his certificate of citizensJiip issued to liim on December 30, 1912, on the
ground that It was fraudulently and unlawfully obtained.
The bill showed that Herman Kramer had been admitted to dtlzenship by
the United States District Court for the Western District of Texas, in wMch
court the bill was flled, and was then residing within the jurlsdictlon of tlie
court, and further substantially alleged that Kramer, at the tlme he was
admitted to citizenship, declared imder oath that he would obey the Constitu-
tion and laws of the United States and bear true faith and allegiance to
same ; that he then and there renouncod forever ail allegiance to any foreign
sovereign, particularly the emperor of Germany ; that the court relied on the
truth and good faith of his représentations and admitted him to citizenship;
that the said représentations were false, tn that he did not In truth and in
fact renoimce his allegiance to the emperor of Germany, but falsely de-
clared that he dld so for the purpose of obtalnlng the rights, privilèges, and
protection of American citizenship, without assuming, or Intending to as-
sume, any of the duties thereof.
Annexed to the bill was an affidavit of one A. H. Rebentish, stating that on
May 25, 1917, Kramer told him that he would do ail he could against the
United States ; that any information he could get from soldlers at the aviation
fleld he would get for him (Rebentish), same to be sent to Germany; that
when tliis war was over he would either go to Germany or Mexico to live, as
he did not care to lire in this country any longer ; that on May 31, 1917,
Kramer stated to him that he could reiK>rt to Germany that the aviation serv-
ice of the United States dld not amount to anything.
To this the défendant flled a pleadlng, which he termed an answer, but
which was more in the nature of a gênerai demurrer, and also a motion to
dlsraiss the bill. Thèse pleadings are too lengthy and diffuse to be briefly stat-
ed, aud it is unnecessary to do so, in view of what subsequenûy transpired.
igsaFor other cases see same toplc & KBY-NUMBBR In aU Key-Numbered Dlgests & Indexes
396 202 FEDERAL REPORTEE
Wlthout any action on the pleadlngs, the case went to trial, and tlie évidence
ot two wltnesses, Secret Service agents, was heard on behalf of the govern-
ment. One of thèse witnesses was the afflant, Rebentish, and the other was
one Wyndelts. The évidence of thèse witnesses showa that défendant was re-
peatedly guilty of disloyal remarks slmllar to those set out In the affldavlt
above quoted ; that he was Ijeeper of a saloon near the United States aviation
field at San Antonio; that It was his Intention to return to Germany after
the war ; that his sympathy was entirely with Germany In the war, and lie
expected her to be successful ; that he was In close accord with one Ludwig, a
soldier In the United States army, statloned at the aviation field; that the
witness Wyndelts vlslted Kramer's place on May 11, 1917, in company wlth said
Ludwig, and Ludwig made certain disloyal remaries of which Kramer seemed
to approve ; that they sang German songs ; that Ludwig would tell Kramer
what was going on at the aviation fleld, and Kramer would question hlin
about It; that on one occasion Wyndelts, Ludwig, another soldier, and Mr.
and Mrs. Kramer were in the saloon, no one else being présent, and Ludwig
said they ti-usted Kebentish, who was posing as a German spy, and they said.
"If he is a German spy, we wlU help him ail we can." There was much more
testimony to the same effect
The government also introduced in évidence the order admltOng the de-
fendant to citizenship. The govemmient then rested. The défendant intro-
duced no évidence at ail. There was nothlng to discrédit or impeach the testi-
mony of thèse wltnesses for the government. After the évidence was in, the
défendant filed an amended motion to dismiss the bill of oomplahit, by
which he waived his original motion. The amended motion was directed, not
only to the sufflciency of the blll of complalnt, but also to the corapetency and
the sufficiency of the évidence ofCered in Its support on the followlng grounds :
That the blll showed no equity, because It did not allège that at the tlme and
prior to the granting of the said certificate of citizenship défendant had any
fraudulent intent not to renounce his allegianee to the German government :
that defendant's citizenship could not be forfelted and canceled for acts donc
and words spoken by défendant subséquent to the date of the decree awarding
him citlzenslilp ; that the évidence was wholly Insuffident in equity to sustaiu
a décrie, because the disloyal statements were made long after defendant's
citizenship was granted. Thereupon the court entered an order dismissing
the bill, wlthout a wrltten opinion.
Hugh R. Robertson, U. S. Atty., of San Antonio, Tex.
Before WAI.KER, Circuit Judge, and POSTER and GRUBB, Dis-
trict Judges.
POSTER, District Judge (after stating the facts as above). In the
absence of an opinion by the District Court, we assume the judgment
rested upon the conclusion that évidence of acts of disloyalty occurring
after defendant's admission to citizenship was not sufficient to show
want of good faith and fraudulent intention at the time he was admit-
ted.
The statute, under the provisions of which défendant was admitted
to citizenship, provides that if a naturaHzed citizen retums to the
country o£ his nativity, or goes to any other f orejgn country, and takes
permanent résidence therein, within five years after his certificate of
citizenship is issued to him, it shall be prima facie évidence of lack
of intention to become a permanent citizen at the time of filing his
application for citizenship, in the absence of countervailing évidence.
Section 15, Act June 29, 1906 (Comp. St. § 4374) ; Luria v. U. S., 231
U. S. 9, 34 Sup. Ct. 10, 58 h. Ed. 101. Congress thereby clearly in-
dicated that subséquent acts of a naturalized citizen would be sufficient
UNITED STAÏES V. KEAMEE 397
C262 F.)
évidence of his fraudulent intention at the time of his admission. If
mère removal is sufficient évidence of f raud, why not subséquent acts
of disloyalty, or statements indicating his want of allegiance ? In the
nature of things it is impossible for the government to make more
than a cursory examination into the loyalty or the gênerai character
of the applicant for citizenship before admission, and the court must
of necessity rely upon the good faith and truthfulness of the apphcant
when appearing before it and taking the oath of allegiance. In a crimi-
nal case, a man's intention may be judged by his acts. A conspiracy
to defraud is usualiy proven by showing what the défendants did after
the date upon which the conspiracy is alleged to hâve been formed, and
the jury may consider such évidence in opposition to the testimony of
défendant on the question of intention, and render a verdict of gudtv
upon it. Why not the same rule in a suit to cancel a certificate of
naturalization .?
American citizenship is a priceless possession, and one who seeks
it by naturalization must do so in entire good faith, without any mental
réservation whatever, and vi^ith the complète intention of yielding his
absolute loyalty and allegiance to the country of his adoption. If he
does not, he is guilty of fraud in obtaining his certificate of citizenship.
There can be no doubt that, had the défendant in this case been
guilty of the utterances with which he is charged before his naturaliza-
tion, and that fact had been known to the court, he would not hâve been
admitted. The proof makes out a prima facie case of the disloyalty
of the défendant, and shows his continuing allegiance to the German
emperor. We think the court might well bave rested a judgment of
cancellation upon it, and it was error to dismiss the bill. U. S. v. EUis,
(C. C.) 185 Fed. 546; U. S. v. Olsson (D. C.) 196 Fed. 562; U. S. v.
Wursterbarth (D. C.) 249 Fed. 908; U. S. v. Swelgin (D. C.) 254 Fed.
884.
In view of a new trial, we deem it well to say that it is settled that
a suit to cancel a certificate of naturalization is a proceeding in equity.
Luria v. U. S., supra. In this case the bill conforma to equity rule 25
(198 Fed. XXV, 115 C. C. A. xxv), contains a plain statement of the
ultimate facts upon which the plaintiff asks relief, and is sufficient.
The affidavit annexed to the bill shows, not only the authority, but the
absolute duty, of the United States attomey to institute the proceed-
ings under the provisions of the statute.
For the error in dismissing the bill the judgment, is reversed, and the
case remanded for furtlier proceedings.
Reversed and remanded.
^98 262 FEDERAL EEPOETEH
TA-KOOT-SA et aJ. v. UNITED STATES.
f Circuit Court of Appeals, Ninth Circuit. January 5, 1920. Behearing Denied
February 9, 1920.)
No. 3387.
1. INDIANS <S=)13 — ^DeCBEB BEGABDING ALLOTMÏNTS NOT CONCLtrSIVE ON HEIBS
NOT PABTIES TO PBOCEEDINO.
A decree under Act Feb. 6, 1901 (Comp. St. §§ 4214, 4215), provldlng
that suits to détermine title of Indian allotted lands shall be defended
by the United States, etc., is not binding on Indian heirs, who were not
parties to and had no knowledge of tlie proceeding, and whose Interest
was unlmown to the district attorney defendlng the action.
2. COUBTS <S=52 — FEDERAI, COUBT HAS JUBISDICTION TO SET ASIDE PBEVIOrS
DECKEE BEOABDINO InDIAN ALLOTTED ULNDS.
Act June 25, 1910, withdrawing from fédéral courts the jurisdletion to
détermine claims to Indian allotted lands, and conferring exclusive jur-
isdletion thereover on the Seeretary of the Interlor, does not preclude a
fédéral court from setting aside a decree entered March 10, 1910, as a
cloud on the title whlch the Seeretary of Interlor had, In the meantime,
determined.
Appeal from the District Court of the United States for the Dis-
trict of Oregon ; Robert S. Bean, Judge.
Suit by the United States against Ya-koot-sa and another. Decree
for the United States, and défendants appeal. Affirmed.
In July, 1907, Ta-koot-sa and A-llp-ma, Indian women, flled thelr blll of com-
plaint In the court below against the United States, as trustée, seeking a de-
cree that they be adjudged to be the only heirs of Ta-ma-was, a deeeased Walla
Walla Indian, who was allottee No. 180, contalning 80 acres, on the Umatllla
Indian reserration, and that as such heirs they be adjudged to be the owners
of sald allotment The Wll alleged that Ta-ma-was dled July 5, 1901, leaving
surrivlng her an Infant daughter named Am-nap-um, and no other llneal de-
scendant, which sald daughter in 1903 dled wlthout Issue, and that the com-
plalnants were the only sisters of sald Ta-ma-was. The United States attor-
ney, appearing for the United States, answered, denying the allégations of the
bill. No testlmony was taken, and on March 10, 1910, a decree was entered
wlth the consent of the district attorney adjudglng the complainants in that
suit to be the only heirs at law of Ta-ma-was, and entitled to the possession of
said allotment of land.
On June 10, 1918, the United States flled its bill of complalnt, setting out the
proceedings in the suit just described, and alleglng that James Peters, an In-
dian ward of the United States, was the rightful owner of said allotment, and
that sald James Peters did not appear in those proceedings for the reason
that he had no notice thereof ; that the United States attorney had no au-
thorlty to confess sald judgment as against hlm ; that said James Peters was
the son of Pete Eahtean, who after his blrth marrled Ta-ma-was; that two
daughters were the issue of sald marrlage, the flrst of whom dled before the
blrth of the second ; that the second daughter was named Emma Eahtean ;
that Ta-ma-was dled in 1905 ; that thereafter Emma Eahtean dled, wlthout Is-
sue, leaving her father, Pete Eahtean, her sole heir, who thereafter dled,
leaving as hIs soie survlvlng heir his son, said James Peters, who Is the right-
ful owner of sald allotment. The bill made Ta-koot-sa and A-llp-ma parties
défendant, and prayed that they be requlred to set forth the nature of thelr
claim to the land, and that the decree so entered on March 10, 1910, be set
aside, and that James Peters be declared to be the owner of said Indian al-
lotment. The court below by its decree set aside the decree of March 10,
1910, holding that It was void and of no effect as to James Peters. The court
©=sFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
TA-KOOT-SA V. UNITED STATES 399
C262 F.i
dld not consider the question of heirship, holding that It was without jurls-
dictlon to pass thereon in vlew of Act June 25, 1910, 36 Stat. 855.
Soon after tlie original decree of March 10, 1910, waa entered, the Secre-
tary of the Interior, under the authorlty given hlm by the said Act June 25,
1910, heard and determined the question of the right of the respective clalm-
ants of the allotment in question, and decided that James Peters was heir to
the estate, that the former decree was not blnding upon James, because he
was not a party thereto, and awarded to htm the property, and issued a
trust patent to hlm, and subsequently a patent In fee. In 1915 the superintend-
ant of the UmatlUa Indian réservation sold the allotment under the authorlty
of and with the approval of the Secretary of the Interior, for the sum of
$8,290. Ya-koot-sa and A-lip-ma, notwithstandlng the décision of the Secre-
tary of the Interior, and the sale, contlnued to assert title to the land, and
brought suits setting up their claim thereto, for whlch reason the United
States, in the name of Peters as guardian and trustée, brought the présent
suit to eet aside and vacate the former decree as a cloud upon the title.
Prom that decree the présent appeal Is taken.
J. W. Brooks, of Walla Walla, Wash., for appellants.
Bert E. Haney, U. S. Atty., and Barnett H. Goldstein, Asst. U. S-
Atty., both of Portland, Or.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge (after stating the facts as above). [1]
The appellants contend that the decree of the court below of March
10, 1910, was a final adjudication of the title to the property in con-
troversy, and was binding upon ail persons, irrespective of whether
they appeared in that proceeding or not, and that such is the effect of
the acts of Congress of October 15, 1894 (28 Stat. 305), and February
6, 1901 (31 Stat. 760), being Comp. St. §§ 4214, 4215, authorizing
such proceedings to be brought against the United States. The appel-
lee, on the other hand, contends that James Peters, not having appear-
ed in the court in that proceeding was not bound by the decree. Un-
questionably the decree therein is not binding as to James Peters, un-
less by the provisions of Act Feb. 6, 1901, 31 Stat. 760, the United
States as party to that suit is to be held to bave represented the in-
terests of ail unknown and unnamed heirs. We do not think that such
is the meaning of the statute. It provides that ail persons who are or
claim to be entitled to an allotment —
"may commence and prosecute or défend any action, suit or proceeding In
relation to their right thereto in the proper Circuit Court of the United
States."
It is true that the act further provides that in said suit the parties
thereto shall be the claimant as plaintiff and the United States as party
défendant, and that the judgment or decree in favor of any claimant
to an allotment shall hâve the same effect when properly certified to
the Secretary of the Interior as if such allotment had been allowed and
approved by him. But it makes it the duty of the district attorney to
appear and represent "the interests of the government in the suit."
Taking the whole statute together, with its provision that any person
claiming an allotment may "défend" any action or suit in relation
thereto, and the provision making it the duty of the district attorney to
défend only "the interests of the government in the suit," we think it
400 262 FEDERAL EEPOETER
is not to be inferred that the intention of the statute was to adjudicate
in such a proceeding the interest of a claimant who was not advised of
the proceeding and whose claim was unknown to the District Attor-
ney. Such seems to hâve been the view of the courts in United States
V. Fairbanks, 171 Fed. 337, 96 C. C. A. 229, and Oakes v. United
States, 172 Fed. 305, 97 C. C. A. 139.
[2] Nor was the court below without jurisdiction to make the de-
cree which is hère appealed from. Act June 25, 1910, 36 Stat. 855,
withdrew the jurisdiction which Congress had given to the fédéral
courts to détermine claims to allotments and questions of heirship and
descent as affecting allotted lands during the trust period, and conferred
exclusive jurisdiction thereover upon the Secretary of the Interior.
Hallowell v. Gommons, 239 U. S. 506, 36 Sup. Ct. 202, 60 L. Ed. 409;
Parr v. Col fax, 197 Fed. 302, 117 C. C. A. 48. The power of the courts
to deal with those questions was thus abruptly terminated. But that
does not meet the question hère involved. The suit hère is not brought
to adjudicate the title of an heir to allotted land. It is brought solely
to set aside a former decree, which stands as a cloud upon a title which
has been finally determined by the Secretary of the Interior. The
transfer of jurisdiction to the Secretary of the Interior had not the
efïect to deprive the court below of jurisdiction to set aside its former
erroneous decree. In so doing, and in entering the decree which is
hère appealed from, the court below was not exercising jurisdiction
which had been conferred upon the Secretary of the Interior. It was
simply setting aside its own decree, which stood as a cloud upon title,
and had given rise to adverse claims on "the part of the appellants
herein, who had harassed the owner of the allotment with several suits.
We fînd it unnecessary to consider the question whether or not the de-
cree of March 10, 1910, was void, for the reason that the act of 1901
gave the courts jurisdiction only of controversies which involved
claims to allotments, and was not sufficiently broad in scope to include
claims of heirs to an allotment which had already been made. In either
view the court below had jurisdiction to déclare void its former decree.
The decree is affirmed.
PINASCO V. UNITED STATES.
(Circuit Court of Appeals, Ninth Circuit. January 5, 1920.)
No. 3379.
1. Internai, bevenue <@=s12 — Licknse bequibements not eepealed bt
Reed Amendment.
Internai revenue statiites, penallzing persons for distilllng spirituous
liquors without giving bond and notice in writing to tlie coUector, etc.,
were not repealed by the Reed Amendment of March 3, 1917 (Comp. St.
1918, |§ 8739a, 10387a-10387c) , relating to shlpments of llquor In Inter-
state commerce.
2. INTERNAL REVENUE <S=>12 — ^LlCENSE BEQUIBEMENTS 'UNArFECTED BY WaB-
TiME Prohibition Act.
A prosecution for violatlng, on January 3, 1919, the internai revenue
statutes, penalizlng distillation of spirituous Uquors without giving bond
©=3For other cases see same topio & KEY-NUMBEK in ail Key-Numbered Dlgests & Indexes
PraASCO V. UNITED STATES 401
(262 F.)
and notice to the collector, etc., was unaffected by War-Tlme Prohibition
Act Nov. 21, 1918, since that act did net take effect untll May 1, 1919.
8. Intebnal bevenue <S=»12 — License eequibement unaftected bt statb
pbohibition law.
A conviction under the fédéral statutes penalizing the distillation of
spirituous llquors without giving bond and notice to the collector, etc., is
not precluded by the fact that the violation occurred In a state which had
prohibited the manufacture of intoxicating liquors under any circum-
stances.
4. INTEENAL RHVENUE <g=>47 ELECTION BETWEEN INDIVIDUAI, PBOSECtTTION
AND rOBFEITUEE PEOCEEDINQS UNNECESSABT.
The government cannot be required to elect wliether it wlU proceed un-
der an Indictment charglng violation of the internai revenue laws in
distilling spirituous liquor without having given bond, etc., or proceed
under a pendlng suit seeking forfeiture of the dlstillery, etc., pursuant to
Eev. St. § 3257 (Comp. St. § 5993).
In Error to the District Court of the United States for the North-
ern Division of the Western District of Washington; Jeremiah Net-
erer, Judge.
Guiseppi Pinasco was convicted of distiUing Hquor contrary to the
internai revenue laws, and appeals. Affirmed.
Wilmon Tucker, George H. Rumraens, and William R. Bell, ail of
Seattle, Wash., for plaintifï in error. i
Robert C. Saunders, U. S. Atty., and Charlotte Kolmitz, Asst. U. S.
Atty., of Seattle, Wash.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. [1,2] The plaintifï in error was convict-
ed under four counts of an indictment which charged him with viola-
tion of the internai revenue laws of the United States, in that (1) on
January 3, 1919, at a place named, he unlawfuUy and feloniously car-
ried on the business of a distiller without having given bond as required
by law ; (2) that at the same time and place he was engaged in the busi-
ness of distilling without having given notice in writing to the collector
of internai revenue, as required by section 3259, Rev. Stat. (Comp. St.
§ 5995) ; (3) that at the same time and place he unlawfully made and
fermented certain mash for distillation in a dwelling house, which was
not an authorized distillery ; (4) that at the same time and place he un-
lawfully used a certain still for distilling in a dwelling house. There
was a motion to quash the indictment, one of the grounds of which
was that the statutes under which the indictments were laid had been
repealed by the act of March 3, 1917, commonly known as the Reed
Amendment. The Reed Amendment (39 Stat. 1069 [Comp. St. 1918,
§§ 8739a, 10387a-10387c]) provides that liquor in Interstate commerce
shall not be shipped into any state contrary to the laws of such state,
and does not purport to make unlawful the distillation of spirituous li-
quor. Nor does the War-Time Prohibition Act of November 21, 1918
(40 Stat. 1045, c. 212), affect the question hère involved, for that act
by its terms was not to take efïect until May 1, 1919, and the ofïenses
with which the plaintifï in error is charged occurred on January 3,
(gssFor other cases aee same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes
262 F.— 26
402 262 FEDERAL REPORTER
1919. But the prohibition law of the state of Washington became ef-
fective on January 1, 1916, and it prohibits ail manufacture and dis-
tillation of spirituous liquor within the state.
[3] It is contended that inasmuch as the purpose of the internai
revenue law is to raise revenue only, and the adoption of prohibition
by the state of Washington makes it impossible for any one in that
state to procure a license to distill intoxicating liquors, it is a légal
absurdity to say that a man may be punished criminally for failure to
secure a license or give a bond therefor, or otherwise to comply virith
the fédéral statutes. A similar contention was made and adversely
answered in License Tax Cases, S Wall. 462, 18 L. Ed. 497, where,
upon a certificate from the Circuit Court of Massachusetts certifying
that the défendant was indicted for carrying on the business of retail-
ing liquors without a license, and it appeared that the défendant was a
retail dealer as charged, and that the business was prohibited by the
laws of Massachusetts, the question presented was whether the de-
fendant could be legally convicted upon the indictment for not having
complied with the act of Congress by taking out the required license
to carry on the business. The court held that the récognition of the
power of the state to prohibit the business was consistent with an in-
tention on the part of Congress to tax such business for national pur-
poses, and that it was not necessary to regard the acts of Congress as
giving authority to carry on the prohibited business within the state
in which it was prohibited. Said the court:
"There Is nothlng hostile or contra dictory, therefore, in the acts of Congress
to the législation of the states. What the latter prohibits, the former, if the
business is found existing notwithstanding the prohibition, discourages by
taxation. The two lines of législation proceed in the same direction, and tend
to the same resuit. It would be a judicial anomaly, as stngular as Indefensi-
ble, if we should hold a violation of the laws of the state to be a justiflcation
for the violation of the laws of the Union."
[4] The plaintiff in error moved the court below that the govern-
ment be required to elect whether it would proceed under the indict-
ment or try another proceeding then pending in the same court, where-
in the govemment sought to déclare forfeited under section 3257,
Rev. St. (Comp. St. § 5993), the distillery, apparatus, distilled spirits,
and material on the premises of the plaintiff in error, and error is as-
signed to the déniai of that motion. It is sufficient to say in answer to
this that no case was made for élection of remédies. There was no
ground to require the district attorney, while proceeding to prose-
cute the plaintiff in error under the indictment, to say that he would
dismiss the forfeiture proceeding. If the government could not law-
fully pursue both proceedings, that défense was thereafter available
in bar of the forfeiture proceeding. Coffey v. United States, 116 U.
S. 436, 6 Sup. Ct. 437, 29 t. Ed. 684, is authority for the proposition
that an acquittai under an indictment under section 3257 is conclusive
in favor of the accused on a subséquent trial of a suit in rem for for-
feiture, where the existence of the same act or fact is the matter in
issue. But that is far from saying that a conviction on an indictment
under section 3257 may be availed of as a défense to a civil action
DANVILLE BEN. & BLDG. ASS'N V. HUFP 403
(262 F.)
for forfaiture based upon the same acts or transactions. That ques-
tion, however, although discussed in the briefs in the présent case,
is not properly hère for décision on a review of the ruling of the court
below upon the motion to elect. We find no error.
The judgment is affirmed.
DANVILLE BEN. & BLDG. ASS'N et al. v. HIJFF et al.
In re POETEKFIELD.
(Circuit Court of Appeals, Seventh Circuit October 7, 1919. Rehearing De-
nied December 5, 1919.)
No. 2690.
Bankextptcy <@=>260 — Obdeb foe sale of béai, estate not establisuino
validity of mechanic's lien.
An order for sale of real estate of a bankrupt free of liens, expressly
reserving the question of priority "between holders of mortgage incum-
brances * • * and the holders of meehanlcs' liens," held not to con-
clusively establish validity of a mechanlc's lien set up In an answer and
alleged to be prior to the mortgages, as against the mortgagee, which
made default ; validity of its mortgages being admitted in the pétition.
Appeal f rom the District Court of the United States for the Eastern
District of Illinois.
Suit by H. B. Boyer, trustée in bankruptcy, against the Danville Ben-
efit & Building Association, S. E. Huff, and others. Brom an order
in favor of S. E. Huff, adjudicating the priority of liens, the Danville
Benefit & Building Association and others appeal. Reversed.
The trustée In bankruptcy flled a blll of complaint setting forth his Interest
in certain real estate, acknowledgiiig the validity of two certain mortgages,
held by appellant, covering sépara te tracts of land, setting forth appeûee
HufE's two claims for meehanlcs' lien^ covering the same tracts of land, and
charging, among other things, that certain other transfers, in no way before
this court at thls time, were fraudulently made, and praying among other
things for a sale of ail real estate free and clear of ail incumbrances. Ap-
pellee Huff answered the bill, and set forth his claims for meehanlcs' liens,
and claimed priority therefor over the two mortgages of appellant. No copy of
such answer was served upon appellant, who defaulted as to the trustee's
bUl. The decree whlch followed did not détermine any issue of priority as
between appellant and appelles Huff, but especially reserved that question in
the foUowing language:
"13. It is furtber ordered, adjudged, and decreed by the court that the ques-
tion of priority of payment between the holders of mortgage Incumbrances on
the real estate above descrlbed, and the holders of raechanics' liens as against
said real estate is reserved for the further considération of the court upon
the coming in of the report of the sale of the said real estate as herelnafter
provided, excepting as to said mortgage of Trevltt-Mattis Banking Company
above mentioned, which is held to be a flrst lien upon the real estate deseribed
In said mortgage, and that such réservation is without préjudice to the rlghts
of the respective parties In interest In said mortgage Incumbrances and me-
ehanlcs' liens on such subséquent hearlng. * • ♦ "
Tlie amount realized from such sale being insufficient to pay both mortgages
and the liens in fuU, a détermination of the issue of priority was necessary.
Upon such hearing It was established that the two mortgages were executed
^=)Foï other cases see same topic & KEY-NUMBER In ail Key-Numbered Dlgests & Indexes
404 262 FEDBEAL KEPORTEB
and recorded June 20, 1916, and Noveniber 10, 1916, respectlvely, and the
contraets for fumisliing materlal for the two houses, for which Huff claimed
liens, were entered into October 1, 1915, and March 9, 1916, respectively.
Both claims for liens were flled December 9, 1916, toc late according to ap-
pellant's contention to defeat its mortgages. A decree in favor of appellee
Hufl as holder of the mecbanic's liens resulted in thls appeal.
Donald C. Dobbins, of Champaign, 111., for appellant.
Henry I. Gruon, of Urbana, 111., for appellee.
Before BAKER, ALSCHULER, and EVANS, Circuit Judges.
EVANS, Circuit Judge (after stating the facts as above). The Dis-
trict Judge in disposing of this issue of priority relied entirely upon
the earlier decree of sale, saying :
"* • • Said decree establishing the validity of said liens of S. E. Huff
necessarily implied tliat the said S. E. Huff had flled his claims for lien withiu
the tlme required by the state statute, for otherwlse said claims would noi.
hâve been valid liens as against the trustée of said bankrupt representing said
judgment creditors, and that therefore the effect of said decree Is to foredose
the question as to the validity of said méchantes' liens, and the court adhères
to its announcement to counsel at the trial of this cause, that the only ques-
tion for considération berein on distribution, as to the liens of S. B. HufC is
as to the time that said liens attached as compared to the time of the exécu-
tion and delivery of the mortgages on said tracts Nos. 1 and 3 above de-
scribed. • • *"
Ail évidence tending to show the claim for liens was insufficient or
not filed in time was excluded. Appellee offered no évidence to show
the date when the last material was delivered, while appellant's offer
to prove such date was more than four months prior to December 9,
1916, was rejected. The court also excluded appellant's testimony
tending to show both lien claims were insufficient as against valid mort-
gages, in that they failed to set forth "a sufficiently correct descrip-
tion of the lots or tracts of land to identify the same."
We thînk the District Court misconceived the scope of the réser-
vation appearing in the prior decree. The decree of sale did not dé-
termine in any way the issue of priority between mortgagee and the
lienholder. As against appellant the court could not hâve determined
this issue in appellee's favor. While appellant, upon its default, was
bound by any decree that was supported by allégations in the hill as
filed, it was not subject to a decree based upon allégations in appellee's
answer and not appearing in the bill. Had the latter party wished to
litigate this question of priority with his codefendant in that suit a
cross-bill tendering such an issue should hâve been served upon ap-
pellant.
That this was the view of the late Judge Humphrey in entering the
decree of the sale is, we think, apparent f rom the language used. The
court left open for later détermination ail of those issues of fact that
bore upon this question. In reaching this conclusion we hâve not
overlooked appellee's argument that the decree of sale recognized
the validity of the lien and that such récognition was necessarily an
adjudication that the claims were seasonably filed and that each con-
tained a sufficient description of the real estate. The Illinois statute
(Hurd's R. S. 1917, c. 82, §§ 15, 21) however, does not support the
THE ATLANTIC ^05
C262 FJ
conclusion that an adjudication of validity necessarily implies adjudi-
cation by the court that the claims were sufficient in form and were
timely filed. Had Huff failed to file his claim within four months f rom
the date of the delivery of the last article that went into the improve-
ment, his lien would hâve been lost as against the mortgagee, but it
still would hâve been good as against the bankrupt. Schmidt v.
Anderson, 253 111. 29, 97 N. E. 291.
Grant that the decree upholding the validity of the lien necessarily
involved and disposed of the question arising out of the misdescrip-
tion as well as the date of the delivery of the last article, so far as
the trustée in bankruptcy is concerned, still thèse issues were open to
appellant, not only because the court especially reserved them in' its
decree, but because the court was without authority, on the pleadings
as they existed at the time of the decree, to conclude thèse questions
against the appellant.
The decree is reverscd, with directions to take testimony upon the
issues of fact which are determinative of the issue of priority between
appellant and the appellee, Huff.
THE ATLANTIO.
EDWARDS LUMBER & MFG. CO. y. MILLER.
(Circuit Court of Appeals, Flfth Circuit. January 3, 1920.)
No. 3398.
1. TOWAGE <@=>15(1) — LACHES IN HBINQING SUIT FOB INJUBY TO TOW EXOUSBD.
Absence of a towing vessel from the district held to excase delay in
bringing suit against lier for injury to lier tow.
2. TowAGE <S=»11 (2) — Vessel liable fok injxiky to tow.
A schooner, which undertook to tow a motorboat whlch was unsea-
worthy, and by a towline Improperly attached to her steering gear, In-
Btead of at the bow, and llbelant's agent, who delivered the boat and at-
tached the Hue, both held. In fault for her injury.
Appeal from the District Court of the United States for the Eastern
District of Louisiana ; Ruf us E. Foster, Judge.
Suit in admiralty by Thomas D. Miller against the schooner Atlan-
tic; the Edwards Ëumber & Manufacturing Company, claimant.
From the decree, both parties appeal. Affirmed.
W. W. Young and Terriberry, Rice & Young, ail of New Orléans,
La., for claimant.
David Sessler and Bernard C. Shields, both of New Orléans, La.,
for libelant.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges.
GRUBB, District Judge. This is an appeal and cross-appeal from
a decree of the District Court in favor of libelant (appellee) for dam-
fesFor other cases see same topic & KEY-NUMBBR In ail Key-Numbered Digests & Indexes
406 202 B^EDERAL EEPOETER
âges for injury donc to a motorboat (the Nolco) through the négligence
of the appellant company, which towed the Nolco from New Orléans
to Biloxi. During the voyage the schooner Atlantic which had her in
tow, encountered rough water, the motorboat started to sink, and
was taken on board the schooner to prevent her from sinking, and
the injury to her was then done, and it practically destroyed her value.
The appellant makes three contentions : (1) That the claim was un-
enforceable, because of staleness ; (2) that the contract of towage was
a purely gratuitous one ; and (3) that there was no négligence on the
part of the master of the schooner which would impose liability on the
appçUant.
[1] 1. The Nolco was delivered to the appellant, to be towed to
Biloxi, on October 1, 1912. Notice of the injury done to her first
reached appellee's agent about October 10, 1912. The libel was not
filed until June 9, 1916. Soon after the injury, the appellee libeled a
companion schooner, the Pacific, belonging also to appellant, under the
impression that she was the schooner that towed the Nolco. That libel
was dismissed upon the discovery of the error. From June 9, 1913,
until February 11, 1916, the Atlantic did not come to New Orléans.
Claim was presented in writing for the damage to appellant on behalf
of appellee in December, 1912, and was finally declined by appellant
on January 11, 1913. The absence of the schooner Atlantic from the
district of the domicile of the person in charge of the motorboat for
the appellee and of the appellee himself, and of the place of the mak-
ing of the towage contract, excused the delay in filing the libel against
her, under the circumstances recited.
2. There was a conflict between the witness Shields, for libelant, and
the witness Edwards, for the libelee, as to the terms of the towage con-
tract. Shields' testimony was to the effect that the service was agreed
to be paid for on a basis thereafter to be agreed upon, and which was
to be satisfactory to him. Edwards testified that it was to be gratui-
tous. The District Judge found that the agreement was that it should
be paid for, and that it was not to be gratuitous. We see no reason
for disturbing the finding of the District Judge, in this respect.
[2] 3. We think the record abundantly sustains the conclusion of
the District Court that the master of schooner and the person who
made delivery of the motorboat to the schooner were both to blâme for
the injury done her. The master of the schooner was in fault: (1)
For undertaking to tow the motorboat when she was in an obviously
unseaworthy condition for towing ; (2) in undertaking to tow her with
a line fastened to the steering gear in the cock pit, instead of at the
bow ; and (3) in the method used in putting the boat aboard the schoon-
er, shown to hâve been a négligent one by the character of the injury,
which could hâve been caused only by rough handling. We also con-
cur in the conclusion of the District Court that the person in charge of
the motorboat was in fault (1) in that he delivered the boat to the
schooner, when she was in an unseaworthy condition for towing ; and
(2) in that he fastened the tow line to the steering wheel and delivered
her to the schooner in that way to be towed.
The District Judge found the value of the boat to hâve been $250,
GBIER V. UNITED STATES 407
(262 F.)
and further found that she was worthless af ter the occurrence. Bcing
of the opinion that appellant and appellee were both at fault, he divided
the loss equally between them, a resuit in which we concur.
It is ordered that the decree of the District Court upon both the ap-
peal, and cross-appeal be affirmed.
Affirmed.
GRIE)R V. UNITED STATES.
(Circuit Court of Appeals, Flfth Circuit. December 2, 1919.)
No. S25T.
Abmt and navy €=>40 — On chaege of applying militabt peopebtt to own
use, defendant may explain possession of pkopeaty.
A charge agalnst a défendant of applying military property to hls
own use, in violation of Criminal Code, § 36 (Comp. St § 10200), Is équiv-
alent to a charge of recelving stolen property, and défendant has the
right to explain his possession, and in dolng so to testify as to what was
said to him by the person from whom he received the property.
In Krror to the District Court of the United States for the Western
District of Texas; Duval West, Judge.
Criminal prosecution by the United States against A. D. Grier.
Judgment of conviction, and défendant brings error. Reversed.
S. Engelking, of San Antonio, Tex., for plaintiff in error.
Hugh R. Robertson, U. S. Atty., of San Antonio, Tex.
Before WALKER, Circuit Judge, and POSTER and GRUBB, Dis-
trict Judges.
POSTER, District Judge. Plaintiff in error (hereinafter referred
to as défendant) was indicted, charged with unlawfully, knowingly,
and f raudulently applying to his own use one tent, one pair of shoes,
two barrack bags, one pair of olive drab trousers, one olive drab
blouse, and one khaki suit, the property of the United States, in viola-
tion of section 36, Criminal Code (Act March 4, 1909, c. 321, 35 Stat.
1096 [Comp. St. §■ 10200]), and was convicted. In the course of the
trial the défendant took the stand in his own behalf, and in an en-
deavor to justify his lawful possession of the articles mentioned stated
that they were left in his possession by a man known as Yank. He was
then proceeding to repeat what Yank told him about the various ar-
ticles, saying:
"Yank sald the commandlng offlcer was going to burn It, was going to throw
it off the truck there at the old bridge, where they burn ail that old junk,
and he (Yank) asked the lieutenant for It He (Yank) said that the lieutenant
told him—"
The assistant United States attomey hère objected to the witness
stating what Yank had told him the lieutenant said about the stuff, on
the ground that it was hearsay. Counsel for the défense endeavored
to tell the court the purpose for which he was offering the statement,
^soFor other cases aee same toplo ft KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
408 202 FEDEKAL REPORTER
but the court declined to hear him. The court sustained the objec-
tion, proper exception was taken t-o the ruling, and the whole incor-
porated in a bill of exceptions. There was other testimony in the case
tending to show that the défendant was employed as a teamster, haul-
ing around the military camp ; that Yank worked for him, and wore
old clothes given to him by people around the camp, similar to the
clothes worn by the soldiers.
It is apparent that the ruHng of the court was error. The prosecu-
tion under the statute is identical to a case of receiving stolen goods.
It is a well-known exception to the hearsay rule that a person so charg-
ed may repeat what was said to him by the person from whom he
claims to hâve obtained the goods. The rule is clearly stated in El-
liott on Evidence, par. 3119:
"It bas been held compétent for the défense to sliow by the acaised, he be-
ing a witness in bis own behalf, when, from whom, bow, and under wbat cir-
cumstances be recelved the property, and wbat was done and sald at the
time In connection with the recelpt of it by himself; such facts being part
of the res gestje, to be submitted as évidence and weighed by the jury."
To the same effect, see Underhill on Criminal Evidence (2d Ed.)
par. 301. In justification of the possession of the articles, the défend-
ant was entitled to repeat what the person from whom he had obtained
them said to him regarding his own lawful possession. If the ar-
ticles were in fact condemned, and a lieutenant in charge of their dis-
position had given them to Yank rather than destroy them, that fact
was material to the défense.
Other errors are assigned, but in the view we take of the case it is
unnecessary to consider them.
Eor the error above referred to, the judgment of the District Court
is reversed.
HAUBTMAN & LiOEB CO., Limited, v. HOOVEN-OWBNS-TIENT-
SCHLER CO.
(Circuit Court of Appeals, Elfth Circuit January 3, 1920.)
No. 3411.
1. Appeal and erboe <S=»714(1) — Nbcessity of bill of exceptions.
Papers not forming part of the record proiwr in a law case, and not by
bill of exceptions made part of the record, are not properly before the
reviewing court on writ of error.
2, Appeai, and eerob <S=56&4(1) — Rulings on évidence not beviewablk
without bill of exceptions.
When the bill of exceptions does not set forth the évidence, the action
of the court with référence to that évidence as a whole is not presented
for review by wrlt of error from the Judgment rendered.
In Error to the District Court of the United States for the Eastern
District of Louisiana ; Rufus E. Poster, Judge.
Action at law by the Hooven-Owens-Rentschler Company against the
Haubtman & Loeb Company, Limited. Judgment for plaintifï, and
défendant brings error. Affirmed.
^nsPor otber cases see same toplc & KBY-NUMBER In ail Key-Numbered Dlgests & Indexes
HAUBTMAN & LOEB CO. V. HOOVEN-OWENS-RENTSCHI.ER 00. 409
C262 FJ
C. F. Borah, of Franklin, La., for plaintiff in error.
John P. Sullivan and David Sessler, both of New Orléans, La. (W.
C. Shepherd, of Hamilton, Ohio, on the brief), for défendant in error.
Before WALKER, Circuit Judge, and GRUBB and ERVIN, Dis-
trict Judges.
WALKER, Circuit Judge. The judgment in this case is sought
to be reversed because of the action of the court in overruling six
objections to évidence, and because of what was donc by the court
after the évidence was concluded, to which last-mentioned action no
exception was reserved. As to fiive of the objections the bill of ex-
ceptions does not show that the évidence objected to was admitted.
As to the remaining objection, the bill of exceptions does not négative
the conclusion that the objection was made after the testimony ob-
jected to was given by a responsive answer to a question calling for
it, which was not objected to, and the objection is unintelligible in the
absence of a contract to which it referred, and which is not shown by
the bill of exceptions. The transcript contains what purports to be
a report of the évidence adduced in the trial. That report is not made
a part of, and is not referred to in, the bill of exceptions, and is not
in any way authenticated by the presiding judge.
[1] Papers not forming part of the record proper in a law case,
and not by a bill of exceptions made a part of the record to be re-
viewed on a writ of error, are not properly before the reviewing court.
Leftwitch v. Lecanu, 4 Wall. 187, 18 L. Ed. 388 ; Reed v. Gardner, 17
Wall. 409, 21 L. Ed. 665. Each of the above-mentioned rulings on
objections to évidence is unavailable as a ground of reversai either be-
cause of a failure to show that the évidence objected to was admitted,
or because of a failure properly to présent the ruling for review.
[2] When the bill of exceptions does not set forth the évidence ad-
duced in a law case, the action of the court with référence to that
évidence as a whole is not presented for review by a writ of error
from the judgment rendered. Jones v. Buckell, 104 U. S. 554, 26
L. Ed. 841.
No question of law was raised by the pleadings in the case. The
record does not show that there was error in any ruling of the trial
court which is presented for review.
The judgment is affirmed.
410 262 FEDERAL REPORTER
INDIVIDUAL DKINKING CUP CO. v. PUBUO SERVIOD OTJP C».
(Circuit Court of Appeals, Second Circuit. Deeember 8, 1919.)
No. 147.
1. Appeal and ebbob ®=»1216 — Motion in appiixatk cotjet to btbike oxn
PEovraioN or judgmbnt not conforming to mandate sustained.
Where complalnant contended tliat a provision of ttie decree entered
pursuant to a mandate of the appellate court was erroneous, the proper
practlce would be for complalnant to appeal from the order denylng Its
motion to strike the provision ont of the decree ; but where complalnant
made a motion in the appellate court to strike the same pursuant to
suggestions of the trial judge, etc., the appellate court will act thereon.
2. Afpeai, and ebeob €=s>719(5) — Appellate coubt has no jubisdiotion to
detebmine uatteb not assigned as ebbob.
In an Infringement suit, where the trial judge refused to permit tes-
tlmony to be taken before the master as to a partlcular devlce, without
préjudice to an application for relief in a new suit, and plalntlff ap-
pealed from the final decree, but failed to asslgn the order as error, the
matter was not before the appellate court, and could not be determined.
3. Patents <S=>327 — Peevious judqment concltisive whkbe pabties wkbe
BEALLT THE SAME, THOUGH FOBMALLT DirraBENT.
Where parties to a previous suit for Infringement of patent were really
the same, though formally différent, the judgment in that suit la a con-
clusive adjudication.
Appeal from the District Court of the United States for the Eastem
District of New York ; Thomas I. Chatfield, Judge.
Action by the Individuel Drlnklng Cup Company agalnst the Public Service
Oup Company. After decree and appeal, complalnant applied to strike out a
certain clause from the decree oî the court below (261 Fed. 555). Insertion of
clause held error.
See, also, 226 Fed. 465; 234 Fed. 653; 237 Fed. 400.
Dunn, Goodlett, Massie & Scott, of New York City (Cllfford E. Dunn, of
New York City, of counsel), for Indivldual Drinking Oup Co.
Briesen & Schrenk, of New York Olty (Hans v. Brlesen, of New York City, of
counsel)^ for Public Service Commission.
Before WARD and EOGEES, Circuit Judges, and MAYER, District Judge.
PER CURIAM. [1 ] Th€ proper practice would be for the plaintiff
to appeal from an order to be entered by Judge Chatfield in accordance
with his opinion dated October 20, 1919, denying its motion to strike
out from the decree of June 15, 1918, entered under our mandate of
May 27, 1918, the provision as to the defendant's free dispenser, Plain-
tiff's Exhibit Push Button Bracket. As, however, he has held up the
matter, suggesting an application to this court, and both parties, in
order to avoid the delay and expense of an appeal, prefer this course
to be taken, we will state what we meant by our said mandate.
[2] Judge Chatfield by an order dated July 14, 1916, refused to per-
mit testimony to be taken before the master as to this free dispenser
without préjudice to an application for relief in a new suit. The plain-
tiiï appealed, but, not having assigned error as to this order, the sub-
ject of the free dispenser was not before us in this suit. We had,
therefore, no jurisdiction whatever to pass upon it, did not intend to do
so, or to cover it by our mandate, and the clause in question should
^=9For other cases see same topio & KEY-NUMBBR In aU Key-Numbered Dlgests & Indexée
BACKSTAT MACHINE & LEATHEB CO. V. HAMILTON 411
C262 F.i
not hâve been inserted in the decree of the court below entered there-
under.
[3,] If, as the défendant allèges, the parties to the suit of Individual
Drinking Cup Company v. Erret, in the Southern district, in which we
held the free dispenser not to be an infringement (250 Fed. 620, 162
C. C. A. 636), are, though formally différent, really the same as the
parties to the suit in the Eastem district, the question is res adjudicata
between them in any new suit the plaintifï may bring.
BACKSTAY MACHINE & LEATHEK CO. v. HAMILTON (two cases). «
(Circuit Court of Appeals, Flret Circuit. January 6, 1920.)
Nos. 1423, 1424.
1. Patents ®=>824(5) — Entiek peioe aet considebed on appeal in deteemin-
ing vamdity, eegabdless of claim in loweb couet.
Altbough appellant asslgned as error that the court below erred in hold-
ing the patent in suit anticlpated by a partlcular patent, and lower court
stated that no device, except that partlcular patent embodled plalntiffs
deviœ, nevertheless the court on appeal will conslder the entlre prlor art
as disclosed by the whole record.
2. Patents <S=328 — Invention fob riNiSHiNG welt anticipated.
Patent No. 1,226,600, claims 1, 2, 5, and 6, of May 15, 1915, for a flnlsh-
Ing welt, Tield invalld, because anticipated.
3. Patents <g=>328 — Invention fob finishing welt held invalid.
Patent No. 1,226,600, claims 3 and 4, of May 15, 1917, for a flnlshing
welt, is Invalid, because for a combinatlon of the article claimed to hâve
been invented with some other article which the inventor does not describe.
4. Patents ®=»328 — Design fob moldinq ob welt void fob lack of inven-
tion.
Patent No. 51,804, for a design for a molding or welt, held vold for lack
of Invention.
Appeals from the District Court of the United States for the District
of Massachusetts; George H. Bingham, Judge.
Two patent infringement suits by the Backstay Machine & Leather
Company against Helen Wade Hamilton. Decrees for défendant,
and plaintiff appeals. Affirmed.
William E. Dyre, of Washington, D. C. (Henry D. Williams, of New
York City, and George K. Woodworth, of Boston, Mass., on the brief),
for appellant.
W. Orison Underwood, of Boston, Mass., for appellee.
Before JOHNSON and ANDERSON, Circuit Judges, and AL-
DRICH, District Judge.
JOHNSON, Circuit Judge. Thèse were appeals from the final de-
crees of the District Court of Massachusetts in two patent cases. In
one the plaintiff alleged infringement of patent No. 1,226,600, issued
May 15, 1917, for a finishing welt, hereinafter referred to as the ar-
ticle patent; and in the other infringement of patent No. 51,804,
4=>Fof other cases see same topio & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes
•Certiorarl denleil 262 tJ. S. —, 40 Sup. Ct 485, 64 L. Ed. — .
412 2C2 FEDERAL EEPORTEK
issued February 19, 1918, to Robert C. Schemmel, for a "design for a
molding or welt," hereinafter referred to as the design patent.
There were six claims in the article patent, ail of which were in
issue. Under claims 1, 2, S, and 6 a patent was claimed for a welt
or molding constructed so that two longitudinal, parallel beads super-
imposed close together upon a base could be separated, the base be-
tween them nailed, stitched or otherwise sewed, to any article to
cover rough joints, and then the beads, because of their resiliency,
raade to assume their former positions, thus hiding the tacks, stitches
or other securing means.
In his application the patentée thus described his invention:
"My présent invention pertains to the flnishing of leather and analogous
work as used on vehicles and in other connections ; and it contemplâtes the
provision of a flnishing welt constructed and arranged with a view to being
readily nailed, stitched or otherwise attached to the article by which it Is
carried in such manner that subsequently to the nailing, stitching or other
attachment, the welt can be made to assume or assumes of itself such a state
that the attachlng means will be entirely hidden from view and the finished
appearance of the work as a whole will be enhanced."
Claim 1 of the patent is as f ollows :
"As a new article of manufacture, a welt comprlslng a body, and longitudi-
nal parallel beads superimposed on and connected with the body, the body
being constructed and arranged to permit of the beads being spread apart
and subsequently resuming their normal close-together positions, for ttie pur-
pose set (orth."
Claims 2, 5. and 6 were substantially like claim 1.
Claims 3 and 4 were for a combination of an article, without de-
scribing any particular article, and the welt described in claim 1 and
"attaching means" by which the welt could be attached to the article.
The court below found claims 1, 2, 5, and 6 void for lack of in-
vention and anticipated, and claims 3 and 4 invalid. The reason for
the finding of the court in regard to the latter claims was stated as
follows :
"It does not seem to me that the third and fourth claims are valid ; the in-
vention, if any, résides in the welt and cannot be held to extend to and in-
clude any and every article to which the welt may be attached."
The design patent was for "the omamental design for a molding or
welt as shown," the one "shown" being that described in the article
patent. This was found void for lack of invention.
The errors assigned in the suit upon the article patent are :
" (1) The court erred in holding claims 1, 2, 5, and 6 void for lack of inven-
tion over patent No. 221,801, issued November 18, 1879, to A. B. Felt.
" (2) The court erred in holding claims 3 and 4 void for the reason that the
Invention, If any, résides in the welt, and cannot be held to extend to and
inelude any and every article to which the welt may be attached."
"(5) The court erred in dismissing the bill of complaint, with costs to the
défendant."
The other errors assigned were that the court erred in finding that
the claims of the patent in suit were not infringed.
BACKSTAY iMACHINE & LEATHER CO. V. HAMILTON 413
C262 FJ
In the suit upon the design patent the en-ors assigned were :
" (1) The court erred in holding the patent in suit void for lack of Invention
over the prior art offered in évidence by the défendant."
"(4) The court erred In dismissing the bill of complaint, with costs to the
défendant"
Errors 2 and 3, not given, related to infringement.
[1] The appellee con tends that the validity of the article patent is
not open on appeal, because the appellant, in his assignment of errors,
has set out as error, not the décision, but the reason of the court,
given in his opinion, for finding that daims 1, 2, 5, and 6 are void
for lack of invention.
It is true that the learned judge sitting in the District Court states
in his opinion :
"Moldings or welts of the character hère under considération pertain to the
art of upholsterlng. Concealed tack moldings are old, and hâve been made in
varions forms; but none o( the devicea that hâve been called to my attention,
with a single exception, hâve efubodied the characterlstics of the plalntiff's
devlce. The exception to which I refer is the product of a machine upon
which a patent was granted to Alviu B. Felt, November 18, 18T9, in United
States letters patent No. 221,801."
While the appellant has alleged that the court below erred in hold-
ing that the patent in suit was anticipated by the patent to Felt, and
although it was said by that court in its opinion that no other devices
called to its attention "embodied the characterlstics of the plaintiiï's
device," we think, upon appeal, we are not confined to a considération
of the patent to Felt only, but that we should consider the prior art
as disclosed by the whole record. Electric Gaslighting Co. et al. v.
Fuller et al., 59 Fed. 1003, 8 C. C. A. 442 ; Walker on Patents (5th
Ed.) § 655; Brown v. Piper, 91 U. S. 37, 41, 23 L. Ed. 200; Slaw-
son V. Grand Street R. R. Co., 107 U. S. 649, 652, 2 Sup. Ct. 663,
27 L Ed. 576.
We find, upon ref erring to the opinion, that the court below took into
considération, in determining whether the patent in suit was antici-
pated, not only the patent to Felt, but also the f act that "concealed tack
moldings are old and hâve been made in various forms." We are en-
tirely satisfied with the conclusion reached and the reasons stated in
the opinion, which we quota:
"In that patent (the patent to Telt) it states that the cording attach-
ment for sewing machines for which he sought a patent related 'to the manu-
facture and application of corded strips to various articles or fabrics,' includ-
ing 'trlmmings for dresses, for cording seams of military trousers or the edges
of cushlons, and for other purposes.'
"The cording produced by this machine Is shown in Defendant's Exhiblt 23
and PlaintlEE's Exhiblt W. It discloses two parallel beads or cords superim-
posed upon a base and close together, only one of which is capable of belng
moved back from the other, and, on belng released, resuming or tending to ré-
sume its normal or close position to the other bead or cord. To make this
corded structure into a flnished welt it would only be necessary to tum under
and secure the edges of the base as shown in PlaintifC's Exhiblt B Introduced
lu évidence. This would involve nothing more than the use of mechanlcal
il4 262 FEDERAL EEPORTEB
sklll, and that not of a hlgh order. Although In the article produeed by the
Felt machine only one of the cords is capable of belng moved back in relation
to the ollier, and on being released of resumlng Its normal position, while in
the structure of the plaintifE's patent each cord is capable of being moved back
and agaln resuming its normal position, thls is due to the positioning of the
cords or strips. The principle by which it is accompllshed is the same in both,
and is clearly shown In the Felt construction.
"The language of Judge Sanborn in conslderlng a slmilar question in War-
ren Webster & Co. v. Dunham Co., 181 Fed. 836, 839, 104 0. 0. A. 346, 349,
seems to me applicable. He there said:
" 'Where a machine or a comblnation is dlscovered In a remote art, where It
Is iised to perform a différent funetion, and where it was not designed and
was not apparently suitable to accomplish the thing deslred, the application of
it with proper mechanical adaptation to a new use is often the resuit of the
exercise of the inventive faculty and may be protected by patent But the
thought that an existing machine or comblnation, dlscovered in the same art
or one nearly analogous to it, designed and suitable to perform a slmilar
funetion, may be used or adopted to accomplish the desideratum, is not the
product of inventive genlus, but the resuit of the application of the skill of
the mechanic to the Bubject under considération. It is only when the new use
is so recondlte and remote from that to whlch the old devlce and comblnation
has been applied, or for -which it was conceived, that its application would
not occur to the mlnd of the ordlnary mechanic skilled in the art, seeklng to
devise means to perfona the deslred funetion, with the old machine or com-
blnation before him, that its conception may rlse to the dignity of invention.' "
[2, 3] We therefore think there was no error in finding that claims
1, 2, 5, and 6 of the article patent lacked invention, because anticipated
by the patent to Felt, and by the prior art as disclosed by the record ;
nor do we find that there was any error in finding that the third and
fourth claims were invalid. Thèse claims are not for an article of
manufacture, but for the comblnation of the article which the inventor
claims to hâve invented with some other article which he does not de-
scribe, and we think the court correctly held that —
"The invention, if any, résides in the welt, and cannot he held to extend to
and include any and every article to whlch the welt may be attached."
[4] In considering the design patent the court below said:
"The question presented, so far as the validity of the design patent is con-
cemed, is whether the patentée in his article patent having conceived of a
welt having a base with superimposed parallel beads or raised portions, me-
chanically constructed to funetion in a glven manner, which may be of yari-
ous shapes, and beads of some shape being essentlal to the functioning of the
devlce, can be said to hâve exercised inventive thought of a charaeter suffl-
cient to warrant a design patent for a welt with beads or raised portions cir-
cular In cross section. It seems to me that to state the question is to answer
It; that, having devised an article of manufacture with a base having par-
allel beads which may be of any suitable shape and beads of some shape being
essentlal to constitute the article, it cannot be invention warrantlng a design
patent to conclude that they should be round in cross section rather than some
other suitable shape.
"Purthermore, the use of beads or raised portions, circular in cross section,
in connection with moldings, whether superimposed upon a base or not, is of
such long standing that I cannot on the évidence regard the use made of them
by îhe patentée in his design as disclosing Inventive thought. Tubular Blvet
& Stud Co. V. Standard Finding Co., 231 Fed. 170, 173 [145 C. C. A. 358]. The
conclusion reached renders it unnecessary to conslder whether the design
patent was an attempt at double patentlng or not."
H. D. SMITH & CO. V. PECK, STOW & WILCOX CO. 415
<262 F.J
We see no occasion for disagreeing with the finding involved in this
statement, or for adding anything to the reasoning by which it is sus-
tained.
In each case —
The decree of the District Court îs afRrmed, with costs to the ap-
pellee in this court.
H. D, SMITH & CO. V. PECK, STOW & WILCOX CO.
(Circuit Court of Appeals, Second Circuit December 10, 1919.)
No. 81.
1. Patents <g=»328 — Fob bceewdeivee vaud and infbinged.
The Ward patent, No. 737,179, for a screwdrlver, held not antlelpated
by prior patents or structures of the prlor art, and to disclose Invention ;
also held infrlnged.
2. Patents <S=35 — Commercial stjccess mat be considebed on question of
invention.
Whether a patented structure involves invention is a question of fact,
and the determining factor Is not whether the achievement was dlflBcult
or easy, but whether It bas In point of fact glven the world somethlng of
value that It dld not hâve, and upon that question great commercial suc-
cess may be consldered In its favor.
S. Patents <S=56 — Anticipation not shown by possibility or modification
OF FBIOB DEVICE TO ACCOMPLISH SIMILAB FUNCTIONS.
It is not suflSclent to constitute anticipation that the devlce relled on
mlght, by modiflcatlon, be made to accomplish the function of the patented
article; but it must be deslgned by the maker and adapted for the per-
formance of such function.
4. Patents <S=»328 — Design patent fob bobewdeivee invaxid.
The Ward design patent, No. 37,214, for a design for a screwdrlver,
held Invalid, as relating to a subject-matter not an appropriate subject for
a design patent.
Appeal f rom the District Court of the United States for the District
of Connecticut.
Suit in equity by H. D. Smith & Co. against the Peck, Stow & Wil-
cox Company. Decree for complainant, and défendant appeals. Modi-
fied and affirmed.
For opinion below, see 258 Fed. 40.
H. E. Hart, of Hartford, Conn., for appellant.
Archibald Cox, of New York City, and Henry E. Rockwell, of New
Haven, Conn., for appellee.
Before WARD, ROGERS, and MANTON, Circuit Judges.
MANTON, Circuit Judge. The appellee now owns, by assignment,
letters patent No. 737,179, granted August 25, 1903, for a screwdriver,
and design letters patent No. 37,214, of November 8, 1904, for a
design for the screwdriver. Both were issued to William S. Ward.
The mechanical patent was considered by this court in an action where-
in the présent appellee was plaintiff and the Southington Manufac-
turing Company was défendant. 247 Fed. 342, 159 C. C. A. 436. In
Ê^For other cases see same toplo & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexes
416 262 FEDERAL REPOUTEB
Ihat case, however, the plaintiff agreed, by stipulation, that the patent
was valid, and therefore did not contest its validity for want of in-
vention. The défenses offered in that litigation were noninfringe-
ment and invahdity because of anticipation. It was held there that
there was nothing in the prior art Uke the combination of this article,
to wit, the screwdriver, and the défendant failed on both of its dé-
fenses, to wit, the noninfringement and anticipation because of the
prier art.
[ 1 ] In this case, the appellant is not bound by such an admission,
and therefore the question of whether or not the patent discloses in-
vention is open to it. It bas also offered in évidence patents which
were not in the case of Smith v. Southington Mfg. Co., and which
it contends establishes anticipation because of prior date. Likewise
the défense is interposed that évidence of prior use establishes antici-
pation. There is a déniai of infringement of the patent by use of the
structure whidi the appellee says infringes its patent.
The District Judge held that, in view of the resuit in this court in
the case of Smith v. Southington Mfg. Co., supra, it was not incumbent
upon him to do more than examine such patents offered in the prior
art as were not considered by this court, and such new évidence as
amplified or added to the claim of anticipation due to prior use. In
this we think the leamed District Judge was correct. The mechanical
patent provides for a new make of screwdriver. Screwdrivers hâve
existed for a long time, but in this invention we bélieve that the in-
venter gave to the world a new and better screwdriver than it has
had, and thus has nioved the art forward. It consists of a combination
of a particular structure and a particular shape. It consists of intégral
solid drop forging beginning at the top of an oval, but having a flat
hammer face, and continuing into a flat handle web, into which scales
of an elliptical shape gradually decreasing in width are riveted, con-
tinuing into a conical tapering bolster, continuing into a round shaft,
ending up in a flat blade; the handle portion being elliptical in the
cross-section for the most part, but gradually merging with the conical
bolster by a gentle taper into a circular tool shank, thus providing a
firm grasp, while facilitating a nice control by pressure of the finger
and thumb upon the shank of the tool. There has been created for it
a very substantial and large demand. It commands a high price for
such a tool in the market. Its shape and handles provide for turning
the tool on its elliptical axis.
Two important characteristics stand out as necessary for success-
ful use by operators : (1) It should be of such a character that the
blade may be inserted in the kerf of the screw as easily and certainly
as possible; and (2) provide for the application of as much power as
possible to turn it. Hand power is applied, and the hand grip must
be attained by the shape upon which the hand rests and obtains control
of the tool, and is brought to bear in the turning opération. The com-
bination must bave such structural strength as to meet increased strains
occasioned by the increased control and turning power. The structure
provided by this intégral solid drop forging provides for wooden hand
scales so shaped as to provide the foregoing characteristic. The shape
H. D, SMITH & CO. V. PECK, STOW & WILCOX UO. 417
C262 F.>
can be seen plainly by the eye and felt by the hand. In the lower
part of the handle, the elliptical cross-section merges with an abrupt
break into a circular cross-section, and the two then decrease in diam-
eter until there is a comparatively small circular cross-section and
then continuing down becomes still smaller and then flattens eut as
a blade.
[2] Whether the structure involves invention is a question of fact,
and the determining factor is not whether the achievement is difficult
or easy, but whether it has, in point of fact, given the world something
of real value, that it did not hâve — a benefit conferred upon mankind.
O'Rourke Engineering Const. Co. v. McMullen et al, 160 Fed. 933, 88
C. C. A. 115.
This court, upon the appeal in the other litigation, considered it very
useful, and pointed out that a considérable demand had arisen for it.
The record hère shows that 4,700,000 of thèse screwdrivers hâve been
sold at a price of at least 10 per cent, higher than the next highest
priced screwdriver. This willingness of the purchasing public to pay
is a practical démonstration of its substantial value. The appellant's
conduct in copying the structure and shape of the appellee's structure
is a strong indication that it, too, appréciâtes the value of this advance
in the art. We conclude that the combination constitutes invention,
and that the patent is valid.
We shall consider the various patents in this record which were
not considered in the case of Smith & Co. v. Southington Mfg. Co.,
247 Fed. 342, 159 C. C. A. 436. In that case, the défendant introduced
the same three table knife patents, No. 78,328, issued May 26, 1868,
to Moses Rubel, No. 86,252, issued January 26, 1869, to Moses Rubel,
and No. 172,874, issued February 1, 1876, to James D. Frary; the
screwdriver patent, No. 267,709, issued November 21, 1892, to Philip
Nadig; three wrench patents, No. 553,059, issued January 14, 1896, to
Robert C. Ellrich, No. 666,029, issued January 15, 1901, to Amos
Sheppard, and design No. 34,136, issued February 26, 1901, to William
S. Ward ; and ail were held not to anticipate the .patent in suit. We
adhère to the conclusion there announced. In addition to the foregoing
patents, this appellant has ofïered and introduced three other patents,
one to Franz Lehman, No. 96,928, issued November 16, 1869, for a
horseshoer's hoof parer, one to Munson, No. 104,056, issued June 7,
1870, relating to rubber-coated carriage trimmings, and one to Conk-
lin. No. 128,020, issued June 18, 1872, for an ice pick and méat maul.
The ice pick is made of a single pièce of cast métal, with handle scales
attached. The carriage trimmings tool consists of a pièce of métal
covered with rubber, and the hoof parer of a curved pièce of métal with
a curved knife fastened to one end, and two pièces of hom riveted
to either side. They hâve neither the structure nor the shape
of the patent in suit. It is plain that none of thèse prior patents
could provide for the patented screwdriver without modification of
the things shown in the patent.
[3] It is not sufficient to constitute anticipation that the device re-
lied upon might, by modification, be made to accomplish the function
perf ormed by the patent in question. It must be designed by the maker
202 F.— 27
418 262 FEDERAL REPORTER
and adapted for the performance of such function. Toplifï v. Toplifï
& Ce, 145 U. S. 156, 12 Sup. Ct. 825, 36 L. Ed. 658. The prior wrench
patents to Ellrich (No. 553,059) and Sheppard (No. 666,029) do not
show or suggest any part of the shape of the patented screwdriver,
except only at one end of the six mentioned parts. They do not dis-
close or suggest either the butt at one end or any of the shape below
the handle portion, where the elliptical cross-section gradually merges
into a round cross-section, nor the continued contracted diameter
through the conical bolster into the circular tool shank. They lack half
the combination of the article, because, if a blade is formed on the
end of one of thèse wrenches, the device still lacks the shape, and they
cannot be declared an anticipation. We shall consider the design pat-
ent to Ward later.
The tools made pursuant to the prior patents were not screwdrivers,
and do not suggest the idea in their construction of being at ail adapted
to a tool utility by tuming on its longitudinal axis. To adapt thèse old
devices to this new function would require modification or changes,
and therefore they do not anticipate. Hobbs v. Beach, 180 U. S. 383,
21 Sup. Ct. 409, 45 L. Ed. 586; Barry v. Harpoon Castor Mfg. Co., 209
Fed. 207, 126 C. C. A. 301.
The improvised tools used by employés of both in their f actory and
at their homes were simply wrench bars and were not anticipations.
They had not become established facts, accessible to the public, in
contributing definitely to the advance of the art. They had not taken
their place as part of the known established art, to which the public
may at any time resort. Ajax Métal Co. v. Brady Brass Co. (C. C.)
155 Fed. 409. Thèse tools do not suggest or show the merging of
the elliptical cross-section into the circular cross-section, or the portion
of the tool below that. To prove anticipation by an unpatented device,
if attempted by oral testimony, the existence and use must be proven
by clear, satisfactory proof and beyond a reasonable doubt. The
Barbed Wire Patents, 143 U. S. 275, 12 Sup. Ct. 443, 36 L. Ed. 154.
We find nothing in the prior use of the various tools, which hâve been
oflfered in évidence and been considered, which warrants our conclud-
ing, beyond a reasonable doubt, that the appellee's patented structure
has been anticipated by such use.
The proof of infringement is ample. The appellant's screwdriver is
so near in structure and shape to the appellee's screwdriver that we
are convinced of its infringement.
[4] The appellee has sued upon both patents in this action. This
it may properly do. Eclipse Mach. Co. v. Harley-Davidson Motor Co.
(D. C.) 244 Fed. 463. To successfully establish the validity of the
design patent, and to entitle the inventor to protection, he must establish
a resuit obtained, which indicates, not only that the design is new, but
that it is beautiful and attractive. It must involve something more
than mère mechanical skill. There must be invention of design. The
District Judge concluded that the screwdriver is beautiful and attrac-
tive, and he says, even omamental. We cannot, however, agrée that
the appellee's structure, made pursuant to this patent, has such a
pleasing effect imparted to the eye as to create beauty or attractiveness.
IMPERIAL MACHINE & FOUNDRY CORP. V. Q. S. BLAKESLEE & CO. 419
(2C2 F.)
or to make it ornamental. It provides for a new utility. Design pat-
ents refer to appearance. Their object is to encourage vvorks of art
and décorations which appeal to the sesthetic émotions — to the beauti-
ful. We do not think tliat the device constructed by the appellee has
a subject-matter for sucli beauty and attractiveness as is contemplated
by the statutes, which permit the Patent Office to grant design patents,
and conclude that the learned District Judge erroneously sustained
this patent.
We therefore modify the decree by affirming the resuit reached
by the District Judge as to the letters patent, No. 737,179, granted
August 25, 1903, and reverse the decree as to design letters patent.
No. 37,214.
The decree below is thus modified and affirmed.
IMPERIAL MACHINE & FOUNDBY COEPORATION y. Q. S. BI/AKESLEB
& CO.
(Circuit Court of Appeals, Second Circuit December 10, 1919.)
No. 119.
1. Patents <g=>328 — Patent tob veqktablb pbeuno machine not antioi-
PATED.
The Roblnson patent, No. 809,582, for a vegetable peeling machine, held
not antldpated, and to cover a ploneer Invention; also tnfrlnged by a
machine operatlng on the same prlnclple, although the abradlng surface of
the rotary disk la of différent materlal.
2. Patents "©=297 (2) — Peeliminaby injunction aoainst iNrsiNGEMKNT pboP"
EB WHEBE case IS CLBAB.
While an application for prellmlnary Injunction In a suit for infrlnge-
ment Is addressed to the discrétion of the court, where the valldlty of
the patent has been sustained by many prior adjudications and Infringe-
ment Is clear, Its refusai would be error.
Appeal from the District Court of the United States for the South-
ern District of Nevir York.
Suit by the Impérial Machine & Foundry Corporation against G. S.
Blakeslee & Co. From an order granting a preliminary injimction,
défendant appeals. Affirmed.
A. H, Adams and J. L. Jackson, both of Chicago, 111., and J. J.
Kennedy, of New York City, for appellant.
A. Alexander Thomas, of New York City, for appellee.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
MANTON, Circuit Judge. The appellee sued for an infringement
of claims 1, 2, 3, and 4 of the Robinson patent, No. 809,582, for im-
provements on machines for peeling vegetables. A preliminary injunc-
tion was granted and the appellant appeals.
The patent has been held valid and infringed in previous litigations.
Impérial Machine Co. v. Jacobus (D. C.) 212 Fed. 958 (Judge Lacombe
granted a preliminary injunction) ; Impérial Machine Co. v. Streetei
<Ë=3For other cases see same topic & KBY-NUMBER in ail Kly-Numbered Dlgests & Indexe»
■120 2C2 FEDERAL REPORTER
& Co. (D. C.) 214 Fed. 985 (Judge Hazel) ; Impérial Machine Co. v.
Smith & McNell (Judge Hough), filed February, 1914; Impérial Ma-
chine Co. V. Reinhold Mfg. Co. (Judge Tuttle), filed July, 1919 ; Im-
périal Machine Co. v. American Fruit Machinery Co. (D. C.) 212 Fed.
959, note (Judge McPherson) ; Impérial Machine Co. v. Whyte (Judge
Learned Hand), filed December, 1918; Impérial Machine Co. v. Rees
et al. (D. C.) 261 Fed. 612 (Judge Mayer), filed November, 1919.
[1] However, since the validity of this patent is presented to this
court for the first time, we hâve examined the patent and are of the
opinion that it is valid. It discloses a practical machine for peeling
vegetables in a deep mass. Indeed, we think it is a pioneer patent.
The claims in suit are as follows:
"1. In a device of the class described, an lmi)ening and abrading raember
oomprising a rotary disk composed of a horizontal flat striated portion and a
raised portion extending from near the clrcumference Inward and having two
aides sloplng down to the flat striated portion of sald disk, substantlally as
described.
"2. In a device of the class described, an impelling and abrading member
comprislng a rotary disk composed of a number of horizontal flat striated por-
tions separated by raised portions at intervais extending from near the oir-
cumference inward, substantlally as described.
"3. In a device of the class described, an impelling and abrading member
comprislng a rotary disk composed of a horizontal flat striated portion and a
rounded raised portion rlslng gradually from near the center toward the clr-
cumference, substantlally as described.
"4. In a device of the class described, an Impelling and abrading member
comprislng a rotary disk composed of a horizontal flat striated portion, and a
rounded raised portion bounded by two approximately radial edges extending
from near the circumferenee inward and having a striated surface, sub-
stantlally as described."
The machine of this patent consists of a cylinder, at the bottom of
which is mounted a rotary disk having an abrading surface providing
for one or more rounded humps or raised portions which slope down
from the circumferenee of the disk toward the main portion thereof.
The function or purpose of the mounted or sloping humps is to pro-
duce agitation or circulation of the mass of vegetables whereby ail of
the vegetables are brought into contact with the abrading disk. If it
were not for the sloping humps or raised portions, the vegetables in
contact with the disk would be ground away and would not hâve any
means of agitation and circulation of the mass. The spécifications
point this out. They point out that, where the flat disk is used alone,
there is a tendency to set up a rotary motion of the mass, wherein each
individual soon settles down to a substantlally fixed position in the
moving mass. This would resuit in a wear on certain parts of each
vegetable and retard the suflSciçnt action on other parts. This hump-
shaped portion, with its abrading surface, forces the mass forward;
and this, together with the movement of the disk, faster than the mass
is treated, make the raised parts act to tum over the vegetables next to
the bottom, so as to bring différent portions of each separate individual
of the mass into contact with the différent abrading surfaces. It is
in this it may be said to be a pioneer invention.
IMPERIAL MACHINE & FOUNDEY COUP. V. G. S. BLAKESLEE & CO. 421
(26a i\)
The inventor, in an affidavit, points this out and déposes that for
more than 13 years the Robinson construction has been successful,
and that until this construction there was no successful vegetable peel-
ing machine on the market ; and he déclares that no machine is suc-
cessful without an abrading disk having raised portions. The appel-
lant so constructs its machine as to hâve a disk with humps or raised
portions with an abrading surface.
A controversy is presented as to what is meant by a striated disk
within the meaning of the claims. The appellee's disk has a carborun-
dum surface, and the appellant's disk an abrading surface of cernent
or concrète. This is said to be such a différence in construction as to
négative the claim that the appellant infringes. The spécification of
the patent states that the abrading surface may be made of a variety of
material such as cast iron, glass, earthenware, and the inventor says
that he "is not limited to any spécifie arrangement of the striations, and
that a variety of methods of striation will be within the spirit of this
invention."
In order to obtain efficient rubbing points or ridges, there is no need
for any geometrical or symmetrical arrangement, nor is it needed to
successfuUy do the work of peeling. It is plain that exactly the same
purpose is accomplished in precisely the same way, if the points or
ridges be set irregularly. This is true in the disk of both the appellee
and appellant. A surface of carborundum or concrète is a striated sur-
face.
Funk & Wagnalls' New Standard Dictionary defines the noun "stria"
— curved, crooked, and intermittant gouges, of irregular depth and
width and rough définition, of a certain rock surface, sometimes due
to abrasions by icebergs. It would therefore seem that the appellant's
abrading service cornes within the appellee's claims. The appellant's
disk, with its abrading surface, has a pair of rounded humps or rais-
ed portions so arranged as to be diametrically opposite and sloping
downward from the circumference of the disk to the flat abrading sur-
face.
We are of the opinion that the appellant's rotary disk has an im-
pelling and abrading member in a vegetable peeling machine, which
member is composed of a fiât horizontal raised portion, and a raised
portion extending from near the circumference inward and havmg two
sides sloping down to the flat striated portion of the disk, thus coming
within the reading of claim 1.
The appellant's disk is composed of a number of horizontally flat
striated portions, separated by raised portions at intervais extending
from the circumference inward. The appellant's disk, as thus striated,
cornes within the phrase of claim 2. The appellant's has an impeUing
and abrading disk composed of the horizontally flat striated or abrad-
ing portion, and has a rounded raised portion rising gradually from
near the center toward the circumference, and is the kind of construc-
tion referred to in claim three. Appellant's disk has a rounded raised
portion, bounded by two approximately radial edges extending from
near the circumference inward and having a striated surface, thus
coming within the description of claim 4.
422 202 FEDERAL KEPOKTBB
The défense that "striated" does not mean a concrète abrading sur-
face is not well founded. This disk, as constructed, has an abrading,
impelling, and turning function. It permits of dealing successfully
witli a deep mass of vegetables. In otlaer machines, but shallow layers
could be deah with. The resuit obtained hère does not grind or braise
the vegetables, but confines its action to removing the thin outer layer
of skin, and leaves the surface of the vegetable comparatively smooth,
instead of pitted or hacked. Such advantages bave not before been
found in machines of this type, and this invention marks an advance
in the art. In other words, the feature of the invention hère is in the
abrading surface having rounded humps or raised portions to produce
the necessary agitation and circulation of the vegetables, without
which a machine of this character has been found not practical.
Such a resuit having been obtained, we are of the opinion that the
inventer is entitled to a reasonable range of équivalents, and it would
be well within such range to coat the disk with carborundum. When
such a coating is accomplished, striations are formed, although the
Unes are broken and irregular. The variety of methods and striations
would permit of such construction. National Hollow Brake-Beam Co.
V. Interchangeable Brake-Beam Co., 106 Fed. 693, 45 C. C. A, 544;
Cimiotti Unhairing Co. v. American Unhairing Co., 115 Fed. 498, 53
C. C. A. 230; Hinman v. Visible Milker Co., 239 Fed. 896, 153 C. C.
A. 24.
Nor do we find in the prior art any patent which anticipâtes the
patent in suit.
In the Buist & Schmidt patent, No. 551,526, the patentées dépend
upon upright wings or partitions for agitation of the mass ; but it is
not the same kind of agitation produced by the humps of the patent
in suit. The corrugations and abutting wings, and the other hard
points in the inside of the machine, are intended to scrape the skin off
the vegetables. There is no kind of agitation which causes the vege-
tables to circulate to change position, and thus afford différent sides to
the paring or abrasive surface.
In the Jaeger patent No. 524,420, the inventor dépends upon spring
rasps fastened to radial boards and arranged in concentric circles. It
may be that the inventor's disk of rasps would impart a rolling or
turning movement to the vegetables ; but there is nothing to cause the
necessary circulation of the mass. The rolling or turning of the vege-
tables is not enough; there must be circulation of the vegetables, and
this, 80 that, as each layer is peeled, the next layer is brought against
the disk and the performance continued, until finally the entire mass
has circulated from top to bottom. The construction of the patent in
suit accomplishes this, but the Jaeger patent does not do so.
For the same reason the French patent to Harff, No. 234,435, can-
not be said to anticipate the patent in suit.
In the patent to Kiepenheuer, No. 74,399, there is disclosed no
abrading disk but a contrivance of knives. A knife arrangement of
this kind is expressly disclaimed in the patent in suit. It may be that
it would simply eut and hack the vegetables to pièces, as claimed by
the appellee. It has never been in successful opération.
BALTZLET V. SPENQLER LOOMIS MFG. CO. 4;23
(262 p.)
We think, further, that this German patent to Kiepenheuer was in-
tended to peel but a single layer of vegetables, as distinguished from
the deep mass of vegetables. The knife blades shown in Fig. 12 in the
patent are arranged and shaped differently from the sloping humps of
both the appellee's and appellant's structure. The blocks extend in a
circumferential direction along the edge of the disk, and slope down-
wardly toward and along the periphery of the disk, forming a cir-
cumferential pocket between the central and highest point of the blocks
and the stationary wall. The "humps of the disk of the appellee and
appellant extend radially in with, and slope from, the circumference
toward the center; the two sides also sloping toward the main por-
tion of the disk. We do not think that this patent anticipated the
patent in suit.
It is very significant that the appellant has copied the appellee's disk,
rather than make use of the patents referred to, and which are said
to constitute the art prior to the date of the patent in suit. If the ap-
pellant thinks that any of the devices or improvements or combinations
are protected by any of thèse patents of the prior art, they may still
use them, notwithstanding this patent, so that the enforcement and re-
straint of the injunction granted herein cannot injure them. On the
other hand, the failure to enforce the injunction would deprive appellee
of the benefits secured to it by this patent. Minn. Ry. Co. v. Barnett &
Record Co., 257 Fed. 302, C. C. A. .
[2] Since the validity of the patent was sustained by many prior
adjudications, it was proper for the District Judge to grant the prelimi-
nary injunction. Edison Electric Light Co. v. Beacon Vacuum etc.,
Co. (C. C.) 54 Fed. 678. And while it is true that the application for a
preliminary injunction was addressed to the discrétion of the court,
still the patent was frequently sustained, and there was undoubted
authority, since the infringement appeared clear. To refuse to exer-
cise that discrétion to the détriment of the patentée would hâve been
error. Searchlight Horn Co. v. Sherman Clay & Co., 214 Fed. 99, 130
C." C. A. 575 ; Weber Electric Co. v. Cutler-Hammer Mfg. Co., 256
Fed. 31, — C. C. A. — .
We think the order below was properly granted, and it will be af-
firmed.
BALTZLEY et al. v. SPENGLER LOOMIS MFG. CO. et al.
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 66,
1. Patents ®=>328 — Papbb binding clip not anticipated.
The Baltzley patent, No. 1,139,627 for a paper binding clip, daims 3, 7,
12, and 14, heid unanticipated, valid, and infringed.
2. Patents <©=»160 — File weappbb évidence only on QttESTioN of bstoppel
THBOUOn bejected claim.
In considering tbe validity or scope of a patent the only purpose for
which the file wrapper can be examlned is to ascertain whether estoppel
has arisen through rejected clalms.
^=jFoi other cases see same toplc & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes
424 262 FEDERAL REPORTER
3. Patents <&=>289 — Lâches baeeing becoveby of peofits or iNFBiNGEireNT
MATTEB OF INEQUITY.
Lâches which will prevent the recovery of profits from an Infringer Is
not a mère matter of tlme, but Is a question of the inequlty of enforcing
the claîm.
Appeal from the District Court of the United States for the South-
ern District of New York.
Suit by Louis E. Bahzley, as trustée, and the Cushman & Denison
Manufacturing Company, against the Spengler Loomis Manufacturing
Company and the Automatic Pencil Sharpener Company. Decrce for
défendants, and complainants appeal. Reversed.
Action is upon claims 3, 7, 12, and 14 of patent 1,139,627, May 18, 1915, to L.
E. Baltzley for a "paper blnding clip." This generically means a mechanlcal
device, which, usually by sprlng action, eontroUed by flnger strength, serves
to temporarlly Ijeep together without teai-îng or plercing, papers and leaflets of
the sort that accumulate in every place wbere clérical labor is performed.
There hâve been many of them and the demand is large, if they are cheap
enough.
The clips of both parties hereto belong to a deflnite subclass of such desk
eonveniences, whereln the gripping and holding power Is obtained by forming
or bending one snmll rectangular sheet of résilient métal, so that two opposite
sides or edges thereof are set dosely paraUel to each other, perhaps touchlng.
When thus formed, the bent sheet is a sprlng against which the gripping parallel
edges ean be opened to let in whatever Is to be held fast, and when the opening
power is released the edges close together again, against whatever has been
Inserted. Both thèse clips also, belong to a still smaller, but not vmknown,
class, in which the sheet of résilient métal is bent and set into a form of tri-
angnlar cross-section; both therefore, must hâve some means — preferably
affixed to the métal, which is both clip and spring — enabllng the user to open
or separate the parallel gripping edges.
Baltzley fumishes sueh means by folding back and outwardly both hls grip-
ping edges and so cutting away the tubular roUs thus formed as to leave jaws,
into which are inserted the outwardly tumed extremities of a hairpin spring
of Steel wire. When each spring, thus journaled, is tumed back against that
side of the trlangular body which provided its jaws, the ends of the steel
springs pro.1ectlng beyond that side of the trlangular clip which is the base
(assumîng the clip edge to be the apex) are levers, which, when pressed toward
each other by thumb and finger pressure, enable the user to open the clip.
When the papere are inserted, hand pressure Is released, the grip closes, and
the springs are turned forward to lie flat against the papers, or by compres-
sion of the "hairpin" can be removed, and the leaflets (e. g.) be treated like a
bound book.
Of the claims in suit the third is mtost gênerai and the fourteenth of the
greatest particularity. They are as follows :
"3. A binder clip for loose papers, comprising a section of sheet métal hav-
ing converging sides, each side provided with spaced handle receiving and
retaining means located thereon, and a spring handle for each side having
oppositely disposed ends journaled in said means."
"14. A binder clip comprising a section of sheet métal having converging
sides, each side provided wlth two spaced intégral handle receiving means ex-
tending outwardly therefromi, the handle reœivlng means of each side spaced
apart, and résilient handle for each side having oppositely disposed ends tend-
ing to spread a greater distance apart than said spaced handle receiving
means and journaled in said spaced means whereby said spaced handle receiv-
ing means confine said ends under spring stress and prevent free swinging
movement of the handle."
The défendants' clip has the sarae trlangular body as plaintlCEs', opérâtes on
the same mechanlcal principle, but difCers, In that the hairpin spring, Instoad
of having its ends journaled into roUs formed on the clip edges, has said ends
®:=>For other cases see same toptc & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexe»
BALTZLET V. SPENGLER LOOMIS MPG. CO. 425
(262 F.)
Inserted into what are called "retaining straps, intf^ral" wlth the sldes of
the triangle; i. e.. into straps made by appropriately slltting and punohing
outwardly portions of métal situated approximately In the mlddle of each
side, adjacent to the apex of said triangular body.
Baltzley's application was flled in 1910. For défendants' devlce patent
application was flled in 1913, and patent issued sbortly after the date of
plaintiffs' (Spengl&r 1,150,073, dated August 17, 1915). The court below decreed
that plaintiffs' claims were invalid but. If deemed valid, were not infringeu,
and therefore dismissed the bill. Plaintiffs appealed.
Hans V. Briesen, of New York City (Fred A. Klein, of New York
City, of counsel), for appellants.
D. A. Usina, of New York City, and Wilkinson & Huxley, of Chi-
cago, 111. (Hervey S. Knight, of Chicago, 111., of counsel), for appellees.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
HOUGH, Circuit Jtidge (after stating the facts as above). [1] In
addition to the mechanical concept above set forth, the patentée had a
secondary idea described in the spécification and covered by claims not
in suit. If the spring handies are moved on their journaled ends, with
nothing but friction retarding motion, they may become loose like the
bail of a bucket similarly journaled (see Weber, 550, 429).
To prevent this, Baltzley so inclined the edges of his tubular roUs
touching the spring handies as to produce a camming effect, which
(cammed surface co-operating with spring handle) produced a snap
action, forcing said spring handle into the final forward or backward
]>osition, as might be desired. This suhsidiary advantage does not af-
fect this case, which, as its fîrst query, asks whether the invention,
without the camming adjunct, présents patentable novelty.
The patent of Dudley (622,610) is the nearest and best référence. It
shows a clip of bent résilient métal, elliptical in cross-section, and dis-
tended by applying to each clip edge a tool of métal, which by a "tongue
and groove" arrangement seizes an edge, and when laid back, like Baltz-
ley's handies, fumishes the necessary leverage. Thèse tools were re-
movable, and were to be used for any ntunber of clips ; yet, if the user
desired, they might be turned forward, much like Baltzley's handies,
and left flat against the papers in the clip.
The merest examination of this device shows it to be cumbersome,
expensive, and diiïicult, if not dangerous, in opération. Yet it was a
machine of sorts, and when it functioned at ail it did so for the same
mechanical reason as does that of the patent in suit. This patentee's
contribution to the art, consisted in devising a new, simple, and con-
venient method, not strictly of opération or function, but of co-opera-
tion. There could hardly be a better example of the truth of the re-
ma'-k of Ivacombe, J., in Miehle, etc., Co. v. Whitlock, etc., Co., 223
Fed. 650, 139C. C. A. 204:
"Patentable novelty is sometimes found in dlscovering what Is the dlfflculty
with an existing structure and what change in its éléments will correct tht>
dlfficulty even though the means for introducing that élément Into the combi-
nation are old and their adaptation to the new purpose Involves no patentable
novelty."
426 262 FEDERAL EEPOEIBB
So hère, whatever Baltzley's intellectual processes really were, he
might well hâve considérée Dudley, and by substituting for Dudley's
clumsy and separate tools a spring wire handle, joumaled externally
to the clip sides, produced (as he did) an admittedly inexpensive, use-
ful, and salable article, simply by correcting the "dimculty with the ex-
isting structure" ; i. e., Dudley's, which never had (on this record) any
field of practical utility. We hâve no doubt that patentable invention
is disclosed by the foregoing.
There being no différence, mechanical or structural, between défend-
ants' article and that of the claims in suit, other than the positioning
of the Steel spring handles, infringement would seem plain. Hère the
trial court fell into error in considering the subsidiary caraming ad-
junct as Baltzley's single contribution to the art. This is a mistake.
The invention advanced in this suit was made without any référence
to a cam.
[2] The argument for noninfringement is sought to be strengthened
by référence to the contents of the file wrapper. On this point our
view was restated in Spalding v. Wanamaker, 256 Fed. 533, — C. C.
A. , viz. that the only purpose for which the file wrapper can be
examined is to ascertain whether estoppel has arisen through rejected
claims. See, also, Walker on Patents (5th Ed.) § 187a. The reason
why that may be important is because the doctrine of estoppel holds
"the utterer to the truth of his speech." Babbitt v. Read, 236 Fed. 45,
149 C. C. A. 252.
Having from this viewpoint examined the file wrapper, we are of
opinion that the patentee's disclosure stated f ully and at first facts suf-
ficient upon which to ground the claims in suit, and such claims or their
équivalents he never receded from. Many claims, first propounded,
were obviously too broad ; but Baltzley never "accepted limitations im-
posed by the rejection of broader claims" and affecting the claims in
suit. The residuum is ample for the purposes of this case. See Good-
win, etc. Co. v. Eastman, etc., Co. (D. C.) 207 Fed. 357, affirmed 213
Fed. 231, 129 C. C. A. 575.
This camming effect, however, must be considered from another an-
gle. The device of défendants' patent further attempts to differ in its
mechanics from that of the patent in suit, in that its cam is transferred
from the edge of the tubidar jaw to the spring handle; but the triv-
iality of any cam is proven by the style of défendants' commercial ar-
ticle shown as an exhibit in this court, which works well, does every-
thing indicated by the claims in suit, and has no cam at ail. Friction
is enough for practical purposes.
[3] Finally, it is urged that plaintiflFs' lâches should forbid the rem-
edy of accounting. On this subject there is no évidence; but a com-
parison of dates shows that défendants (who were infringing before
Baltzley's patent issued) were not sued until something less thanthree
years after such issuance. It is not profitable to mention décisions
wherein this or that lapse of time has been held sufficient to justify this
défense ; for "lâches is not a mère matter of time, like limitation, but
is a question of the inequity of enforcing the claim." Hubbard v. Man-
hattan Trust Co., 87 Fed. 59, 30 C. C. A. 528 and cases cited. It is
HOMER BROOKE GLASS CO. V. HARTFORD-FAIRMONT CO. 427
<262 P.l
now argued that défendants exercised great care to avoid infringing,
and should therefore hâve been promptly sued for their own advise-
ment. We think that, in the sensé of careful studying under prof es-
sional advice, and after personal warning from plaintiffs, just how
near to plain copying their intended imitation might go, they were very
careful. Their patent shows it ; and we are quite unable to see how, if
Baltzley had issued when Spengler was considered by the Office,^
Spengler could hâve failed of rejection "on Baltzley of record."
Under such circumstances, there is no inequity in regarding this in-
f ringement as persistence in wrongdoing, when the light was unusually
strong.
'Decree reversed, with costs, and case remanded, with directions to
grant plaintiffs the relief prayed for in their bill.
HOMEE BROOKE GLASS CO. et al. v. HARTFORD-FAIRMONT CO.
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No, 67.
1. Patents <S=»328 — ^Machine tob cuttinq molten qlass vaud and not in-
FBINQED.
The Brooke patent. No. 723,983, for apparatus for cuttlng molten glass,
construed aa vaUd only for a mechanlcal device, held not Infrlnged.
2. Patents <S=»178 — ^Limitation or eange or equivai^ents bt lanquagb or
CLAIUS.
Whether the Invention of a patent la large or small, prlmary or trivial,
■when a clalm Is olear and distinct, the patentée cannot go beyond the
words thereof for the purpose of establishing Infrlngement, and the range
of équivalents Is measured by what Is both descrlbed and clalmed.
Appeal from the District Court of the United States for the District
of Connecticut.
Suit by the Homer Brooke Glass Company and the Owens Bottle
Machine Company against the Hartford-Fairmont Company. Decree
for défendant, and complainants appeal. Affirmed.
For opinion below, see 255 Fed. 901.
Action Is upon clatms 3, 4, and 5 of patent 723,983, Issued March 31, 1903, to
Homer Brooke, and duly conveyed to the flrst-named plalntlfC. The daims in
suit (together with Nos. 1 and 6) hâve been recently sustalned in an opinion
whlch renders référence to the prlor art and detalled description of the sub-
ject-matter unneeessary. Sohran^ etc., Co. v, Homer Brooke, etc., Co., 249
Fed. 228, 161 C. C. A. 264.
The typlcal and most gênerai of the clalms now sued on Is No. 3, whlch is
as foUows : "An automatlc device for cuttlng or separatlng a flowlng stream.
of molten materlal Into unformed molten masses, the same comprlslng a
cuttlng knlfe and means for moving the same, and means for dlscharging the
eald molten miasses Into suitable réceptacles."
Claim 4 differs from clalm 3 only In speclfylng that the separated masses
shall be of "predetermined quantity," and clalm 5 only by speclfylng a plurallty
of réceptacles and means for Intermlttently moving them Into position. Wheth-
er, If défendant Infrlnged the thlrd clalm, it would also infringe Nos. 4 and 5,
i Spengler was allowed January 16, 1915, but dld not Issue for seven months,
because fées were not pald until July. Baltzley was allowed Aprll 17, 1915, and
fées were pald two days later.
428 262 FEDERAL REPORTER
need not be decided, for It Is clear that, If there Is no Infringement of clalm 3,
there Is none of the other two.
The trial court held the clalms valid on the authority of the case dted above,
held that defendant's alleged Infrlnglng System was différent f rom that of the
patent in suit, in that It was founded on a différent conception of the way to
automatically handle glass, had been worked out by a différent method of
autoniiatlc molten glass delivery, and Involved apparatus difCerent In construc-
tion. The bill was therefore dismlssed for nonlnfringement, and plaintiff ap-
pealed.
Charles Neave, Frederick P. Fish, and "William G. McKnight, ail
of Boston, Mass., for appellants.
Thomas Ewing, John P. Bartlett, and Vernon M. Dorsey, ail of
New York City, for appellee.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). [1]
The Schrtim Case, supra, holds the claims in suit valid for a mechani-
cal device, and dénies that what Brooke patented is in truth a method.
We agrée with this, and plaintifïs must theref ore prove that the alleged
infringing machine, not only produces the same results as does the
device of Brooke, but that its opération, when in use, is substantially
the same. Davis v. Perry, 120 Fed. 945, 57 C. C. A. 231.
It is not suggested that défendant has copied the varions mechani-
cal components of the device disclosed in plaintiff's spécification, and
the record is commendably free of expert évidence relating to any ma-
chine. Hardinge, etc., Co. v. Abbe, etc., Co., 195 Fed. 936, 940, US C.
C. A. 624. The reason is that in this case plaintifïs are only intere.sted
in showing that Brooke conceived and disclosed in his patent (in the
words of a brief) —
"the entirely original and novel Idea [of operating], upon molten glass flowlng
C'ontinuously from the fumace and dropping in a stream — ^body or eoluinn —
through the air, by severing or cutting that flowing stream, at a point below
the outiet and dlstributlng the cut-off portions into molds."
Brooke admittedly disclosed only one means of embodying or utiliz-
ing this conception, and defendant's means are very différent in me-
chanical arrangement; but it is urged that Brooke was entitled (as
he States in his spécification) —
"to broadly cover ail means for cutting or separatlng a stream of flowing
molten material Into unformed molten masses and discharging the cut-off
portions."
Exactly what défendant does is a matter as to which much évidence
has been given ; but whatever difficulty exists in answering that ques-
tion does not dépend upon difficulty in discovering what the défendant
would like to do or is trying to do, but from the fact that what is
actually happening with molten glass at the edge of a spout, at a tem-
pérature of about 2,000 Fahrenheit is not easy to see with the human
eye, and (judging from exhibits) quite impossible to perpetuate by
photography.
What the défendant tries to do — ^by the calculated agitation of a
paddle in a mass of molten glass resting in a container whose crest
HOMEB BKOOKE GLASS CO. V. HARTFOBD-FAIRMONT CO. i29
<263 F.)
or dam is uniformly higher than the glass level — is to propel over
said crest and into a spout (which is itself slightly above said level)
precalculated portions of molten glass, to the end that such portions
or "gobs" of glass shall separately and individually be distributed to
the molds awaiting them.
If defendant's machine could do this with accuracy, and push over
the crest, into the spout, and so on to the mold, separate definite
weights or volumes of melted glass, with not one of them connected
with or touching another, the machine would arrive at perfection in
its class. But it cannot do this ; when several agitations of the paddle
start the melted glass to surging, each forward paddle motion shoves
glass over the crest, and each backward movement of the paddle re-
tracts the glass body. Thus in actual opération there may be 30
surges a minute produced by the paddle, and 30 "gobs" per minute will
drop f rom the spout ; but they are connected by a thinner band, string,
or line of glass, because the viscosity of the substance will not permit
it to drop from any spout like a shot or marble. The visible resuit of
the allegedly infringing apparatus is to produce from the end of
the container spout, not a rope of molten glass, but (again to quote
from argument) a "string of sausages" of the same material. Each
sausage is a "gob," and destined for one mold; and the size — i. e.,
length and weight — of each can be and is measurably predetermined
by the amplitude of the paddle motion.
Brooke by knives severs at predetermined intervais his continuously
flowing stream of molten glass, and so produces "gobs"; there is
absolutely no preformation until the knife cuts. In defendant's ma-
chine, knives eut the "sausage strings" ; but "gobs" are pref ormed by
the calculated movement of the paddle before the knife cuts. It is true
that what defendant's machine discharges by surges suffers solution of
continuity only by and through the knife, and the same is true of
Brooke's stream; but by ail the évidence the two streams look no
more alike than a stream of sausages looks like a stream of sausage
méat. The contest of fact in this case may be said to rage only over
the size or thickness of the string that connects the sausages. It
seems plain that this contest is immaterial, if there is really no more
than a string connection, between masses visibly formed, and formed
for use, before severance; and we agrée with the court below that
such is the case.
The essence of Brooke's concept or idea is that (as disclosed) he
always has a "stream of flowing molten material" existing and moving
by gravity alone; the contention hère is that defendant's "string of
sausages" is such "flowing stream." The fact that the stream said
to infringe relies on gravity only after the material has been by the
paddle shoved or lifted, paddleful by paddleful (so to speak), over the
container's crest, makes no difïerence, because (as is argued), once
over, gravity takes hold, and the stream is that of Brooke "substan-
tially as describ' d."
The argumeii'-, for infringement may be thus summarized: (1)
Brooke's is a picneer patent, and (2) therefore entitled to a "favorable
construction commensurate with the advance which he made." (3)
430 262 FEDERAL REPORTER
Defendant's machine is made to work on a continuous supply of molten
glass, which is eut with a kiiife, and (4) this is arriving at the same.
resuit by "analogous means" — which is enough to constitute infringe-
ment of a pioneer patent.
The argument avoids the question suggested by Brooke's spécifica-
tion, viz. : Is a patentée ever entitled "to cover broadly ail means"
for doing a désirable thing, when he discloses but one means and sug-
gests no substitute? Perhaps, in the light of this évidence, the ques-
tion is whether, if Brooke was the first to use a severed stream of
glass for fiUing molds, anybody else can so use such a stream, irre-
spective of means.
But we take the argument as made, and of course accept the descrip-
tion of a pioneer invention furnished by Brown, J., in Westinghouse
V. Boyden, etc., Co., 170 U. S. 537, 18 Sup. Ct. 707, 42 L. Ed. 1136.
It is as near a définition as we are likely to get. Auto Piano Co. v.
Amphion Co., 186 Fed. 163, 108 C. C. A. 291.
Of such an invention we hâve said that, when it "inaugurâtes a
new industry," courts should be "zealous so to construe the claims as
to give validity to what is a meritorious invention." Auto Vacuum,
etc., Co. V. Sexton Co., 239 Fed. 900, 153 C. C. A. 26. It is also true
that, under restrictions not necessary to dwell upon, a patentée is en-
titled to the benefit of properties or functions inhérent in his invention
whether fuUy comprehended by him at the date of disclosure or not.
Electric, etc., Co. v. Gould, etc., Co., 158 Fed. 610, 85 C. C. A. 432;
Van Epps v. United, etc., Co., 143 Fed. 869, 75 C. C. A. 77.
Whether Mr. Brooke's invention is of such a primary nature as to
merit the application of the word "pioneer" we shall assume, but not
décide; for whatever the proper ad j active applicable to this patent, the
légal rule of construction is the same. Outlook, etc., Co. v. General,
etc., Co., 239 Fed. 878, 153 C. C. A. 5, et seq. It is always necessary,
even after granting the widest range of équivalents, to find as a matter
of fact that what the défendant has done is the invention of the plain-
tiiï "substantially as described." The range of décision, the limits im-
posed by law on the triers of the facts, are indicated by the word "sub-
stantially" ; an inf ringer may easily substantially imitate a big thing —
i. e., a deeply rooted and wide-spreading inventive thought ; whereas,
without "Chinese copying," imitation of a little thing is oftentimes
difficult.
[2] But, whether the invention is large or small, primary or trivial,
it remains true that, when a claim is clear and distinct, the patentée
cannot go beyond the words thereof for the purpose of establishing
inf ringement ; the spécification may be referred to for the purpose of
limiting, but not of expanding, a claim, and the range of équivalents is
measured by what is described and claimed. Westinghouse, etc., Co.
v. New York, etc., Co., 119 Fed. 874, 56 C. C. A. 404; Universal, etc.,
Co. V. Sonn, 154 Fed. 665, 83 C. C. A. 422; Loraine, etc., Co. v. Gen-
eral, etc., Co., 202 Fed. 215, 120 C. C. A. 615; Fowler, etc., Co. v.
McCrum, etc., Co., 215 Fed. 905, 132 C. C. A. 143.
Applying thèse rules, we are of opinion that defendant's apparatus
does not présent a flowing stream of molten material, whether we con-
UNION TOOL CO. V. UNITED STATES 431
4262 F.J
sider that phrase standing alone, or ask whether it is the stream con-
ceived by Brooke, or suggested by bis patent. If the phrase be inter-
preted verbally, the word "stream" by universal définition conveys
the idea of unif orm and unbroken succession in movement ; and "flow-
ing," which indicates movement, as if in a current or stream, only
emphasizes the thought. The idea of continuity, uniformity, and in-
deed of steadiness, is inhérent in the phrase.
Much criticism of the lower court has been made, in that it declared
the words to mean a steady discharge; yet by définition a "steady
motion" means in respect of a fluid that the velocity at each point
remains "constant in magnitude and direction." We think the word
was well appHed.
But if the meaning of the phrase be referred, not directly f rom the
claim to lexicographers, but to the disclosure as illuminated by the
évidence, it is clear that what Mr. Brooke desired to get away from,
and did most ingeniously avoid, was the formation of "gobs" before
their severance from the gênerai molten mass. He did that by choi>-
ping up whatever fluid came by gravity out of an orifice in the con-
tainer. Out of such orifice he could only get, and only wished to get,
a run of material as from a spigot. Such a stream he had in mind, and
he had no other; nor would any other suit what he wanted to do.
The relation between defendant's and plaintifï's supplies of material
is that both are continuous and both are of glass; and that is not
enough.
The decree below is affirmed, with costs.
TJNION TOOL CO. et al. v. UNITED STATES et aL
(Circuit Court of Appeals, Ninth Circuit. January 5, 1920.)
No. 3393,
1. Patents ®=>326(4) — Fine fob violatins injunction eestbictbd to com-
plainant's costs.
A fine for vlolatlng an injunction in a patent Infrlngement suit, where
the violation was commltted In good faith, sliould be llmlted to an amount
sufficlent to cover complalnant's costs, and should not include an amount
imposed for punitive purposes.
2. Patents <S=>326(4) — Amount of fine fob violatino injunction subtainbd
BT EVIDENCE.
AffidavltB showing that complalnant had been to heavy expense in
coUecting proofs of the violation of an injunction by défendants in a
patent infrlngement case, but not closely ealculatlng the exact amount of
such expansés, held to sustain a flnding that $2,600 was a reasonable por-
tion of the expenses incurred by complalnant.
3. Patents <&=326(4) — Punishment fob violatino injunction, without
seevice of contempt pbooeedings, invalid.
A contempt order, that the président of a corporation whIch had violated
a patent infrlngement injunction should be commltted to jail untll the
corporation pald a fine Imposed on it, heUd erroneous, where it did not
appear that the order to show cause in the contempt proceedlng was ever
served on the président, or that he had appeared therein.
®=»For other cases see sama toplc & KEY-NUMBBR In ail Key-Numbered Digests & Indexes
432 262 FEDERAL REPORTER
In Error to the District Court of the United States for the Southern
Division of the Southern District of California ; Benjamin F. Bledsoe,
Judge.
Contempt proceeding by the United States and Elihu C. Wilson
iigainst the Union Tool Company and Edward Double. From a judg-
ment of conviction, défendants bring error. Affirmed, as modified.
Thla Is a wrlt of error brought by tbe Union Tool Company and Edward
Double, its président, to review a judgment of conviction for contempt of
(lourt in the matter of an injunction issued by the District Court, imposing a
fine npon the Union Tool Company and, in the' event of a fallure to pay the
fine within 20 days, adjudglng that Double, the président of the Union Tool
Company, be committed to jall untll the fine Is paid.
The court, after findlng that the Union Tool Company had Infringed upon
claims 9 ând 19 of letters patent No. 827,595, by maUing and selling under-
reamers llke the Wilson Exhibits, defendant's reamer type D, and Complain-
ant's Exhlbit, reamer types E and F, enjolned défendant and its oflBcers and
servants from making or selling any underreamera embodying the construction
or interrelation or formation of parts of elther "Complainant's Exhlbit, im-
proved double reamer and cutters," or Complainant's Exhlbit, defendant's
reamer type D, or Exhlbit type E, or Exhlbit type P, and from making or
selling any parts or éléments calculated or intended to be combined or used as
a part or feature of aûy underreamer in Infrlngement of claims 9 and 19 of the
patent referred tj.
Wilsou, défendant in error hère, as complalnant, sued the Union Tool Com-
pany, alleging infringement of Wilson patent, No. 827,595, for underreamers,
and praylng for Injunction and aceountlng. Interlocutory decree was entered,
and thereafter this court affirmed the interlocutory decree. The hlstory of
the case is in Union Tool Oo. v. Wilson, 249 Fed. 736, 161 C. C. A. 646. In-
junction wrlt was served, and thereafter, upon a showing by affidavits, the
Union Tool Company and its officers were cited to show cause why it and
they should not be punished for contempt in failing ta comply with the in-
junction. After hearing, the court found that the Union Tool Company, in
défiance of the injunction issued, had manufactured, offered for sale, and
sold two types of underreamers, neither of which was substantially or even
colorably différent from the respective devices described In the injunction or-
der of the court, the manufacture, sale, and use of which underreamers were
inhibited.
Frederick S. Lyon and A. V. Andrews, both of Los Angeles, Cal.,
for plaintiffs in error.
G. Benton Wilson, of Los Angeles, Cal., for défendants in error.
Before GILBERT, ROSS, and HUNT, Circuit Judges,
HUNT, Circuit Judge (after stating the facts as above), The es-
sential question before the District Court was whether the so-called
"pocket" or so-called "U" type of underreamer was within the in-
hibition of the injunction. The District Court evidently made a very
careful examination into the construction of the devices, and con-
cluded as a fact that there was no différence between the types made
and sold and those which could not be. The question whether there
was an infringement is not directly in issue in this proceeding, and
we take the fact to be that the "pocket" type and the "U" type are
the same as those referred to in the injunction order of the court.
Walker on Patents, § 696.
The plaintifïs in error hâve argued that the injunction order was
not violated, because in the construction of the devices involved in
UNION TOOL 00. V. UNITED STATES 483
(262 F.)
this proceeding there was a return to a former construction covered
by patent No. 748,054, which had been issued to the Union Tool
Company, and tliat there had been a mère addition of some small tri-
angular fillets of métal to the body of the infringing and enjoined de-
vice ; but it was held by the District Court that the présence or élim-
ination of thèse insignificant pièces of métal did not change the struc-
ture at ail, and had no effect whatever upon the operative capacity of
the device, or the extent or functioning of the device, and that their
présence or absence could be disregarded.
It is also said that there was no invasion of the right of Wilson
because of the entire shearing away of a certain latéral web structure
on each side of the pocket or recess of the sides of a part of the
device. The District Court rejected this contention, and said that it
was the shearing away of only so much of it, as had been indicated, as
sufficed to provide new and différent and lower in-thrust bearings,
which gave the strength and stamina to the machine that it required
to do the work, and in order to compete with the device of Wilson,
and in order to enable the défendant to stay in the market.
[ 1 ] It is said that there was no finding that the violation of the in-
junction was willful or intentional. The court at once purged coun-
sel for the Union Tool Company of contempt, but expressed the opin-
ion that the devices examined were infringements of an obvious and
flagrant character, and that there had been a "sedulous désire and dis-
position" on the part of the Union Tool Company to do what could
be donc, and yet take advantage of the things that Wilson had pat-
ented. The court was also of opinion that the président and gênerai
manager of the corporation was knowingly a party to the violation of
the injunction, but the decree adjudged the corporation alone guilty.
The court, however, after commenting upon the several features of
the case, said:
"And I am saylng ail of this with the réservation, mentally and actually
indulged in by me, that thèse parties are not acting in bad faith. If I thought
they were acting in bad faith, and if I thought that this Injunotion had been
willfuUy violated, there would be a substantial jail sentence meted ont to
each individual at ail responsible for such violation, Irrespective of his place,
station, or relation to the sub.i'ect-matter of the lltigatlon. However, in splte
of some very persuasive features, I am going to assume that the défendant
bas not done that which has been done wlUfully. There has been, however, a
violation of this injunction In at least two materlal and substantial respects."
This opinion was followed by the decree wherein the court adjudged
the corporation défendant guilty, in that it had, since the issuance and
service of the injunction and — •
"contrary to and in défiance of thè commands thereof, manufactured and put
out, offered for sale, and sold, a so-called pocket type of underreamer which
is not substantially or even colorably différent from the device particularly
Identified and described in said injunction, and whose manufacture, sale, or
use is inhibited therein."
The corporation, "in virtue of such contempt so committed," was
ordered to pay to the clerk of the court $5,000, out of which said sum
and amount, when so paid to the clerk, and the costs having been othe-r-
wise met and paid in full, the clerk was authorized to pay over to
2G2 F.— 28
434 262 FEDERAL REPORTEE
E. C. Wilson $2,500 "as a reasonabJe portion of the expansés incurred
by the complainant" in the proceedings. Our construction of the de-
cree is that there was an acquittai of the défendant of having acted in
bad faith and of having willfuUy violated the injunction order, and
by proceeding to a decree based upon the assumption that the acts of
the défendant corporation had not been done willfully, we think the
corporation was exonerated of willful and contumacious disregard of
the injunction. Bessette v. Conkey, 194 U. S. 324, 24 Sup. Ct. 665,
48 h. Ed. 997.
We are therefore of the opinion that the clearly punitive portion of
the decree must be reversed. But in so far as the decree imposed a
fine, and directed that the sum imposed should be paid to the com-
plainant to cover his costs, the decree must be sustained.
[2] To sustain the order for such payment, which was an adjudi-
cation in civil contempt, the court had before it a number of affidavits
showing that the complainant had been to heavy expense in collecting
proofs of the violation of the injunction by the défendants, and while
the exact amount of such expansés does not seem to hâve been closely
calculated, the sum of $2,500 was found to be a reasonable portion of
the expenses incurred by the complainant in the "instant proceedings,"
and the order made accordingly should stand. Board of Trade of
Chicago V. Tucker, 221 Fed. 305, 137 C. C. A. 255 ; Kreplik v. Couch
Patents Co., 190 Fed. 565, 111 C. C. A. 381; Christiansen Engineer-
ing Co. V. Westinghouse Air Brake Co., 135 Fed. 774, 68 C. C. A. 476.
[3] It is urged that the court erred in decreeing that, in the event
the fine of $5,000 was not paid into court within 20 days from a cer-
tain date, the président of the Union Tool Company, Double, should
stand committed to jail, and be confined therein until the money was
paid. It does not appear that the order to show cause in the contempt
matter was ever served upon Edward Double, or that he was ever made
a party défendant to the contempt proceeding, or that he ever appeared
therein. The court expressed the opinion that he was knowingly a
party to the violation of the injunction order, but under the circum-
stances we are not satisfied that the court had the power to direct that
in the event of a failure on the part of the corporation to pay the
$2,500 to the complainant that the président should stand committed
to jail until the sum was paid.
The decree will therefore be modified, by striking therefrom the or-
der that in the event of a failure to pay the fine into court the prési-
dent of the corporation, Edward Double, should stand committed to
jail, and be confined therein until the fine be paid; and in so far as
the decree directed that $2,500 be paid. to the clerk of the court as a
punishment of the corporation the order is reversed.
As modified to conf orm to thèse views, the decree is affirmed.
GEOEQE D. MAYO MACHINE CO. V. HEMPHILL MFQ. CO. 4»J5
(282 F.)
GEORGE D. MAYO MACHINE CO. y. HEMPHILL MFG. CO.
(Circuit Court of Appeals, First Circuit December 16, 1919.)
No. 1378.
Patents <S=i328 — Fob kniiting machine invalid fob want or invention.
Tlie Mayo patent, No. 726,178, claims 23, 24, 38, 41, 43, 48, 49 and
130, for knittlng machine Improvements, held void for lack of invention.
Appeal f rom the District Court of the United States for the District
of Rhode Island; Arthur L,. Brown, Judge.
Inf ringement suit by the George D. Mayo Machine Company against
the Hemphill Manufacturing Company. From a decree for défendant
(247 Fed. 536), plaintiff appeals. Affirmed.
Hubert Howson, of New York City (Frederick P. Fish, of Boston,
Mass., and Howson & Howson, of New York City, on the brief), for
appellant.
Joseph C. Fraley, of Philadelphia, Fa. (James H. Thurston, of
Providence, R. L, on the brief), for appellee.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit
Judges.
BINGHAM, Circuit Judge. This is an appeal from a decree of
the District Court for Rhode Island in an equity suit charging in-
fringement of letters patent No. 726,178, issued to George D. Mayo,
April 21, 1903, for an improvement in knitting machines and now own-
ed by the plaintiff.
The défenses are noninvention, anticipation, noninfringement, and
lâches.
There are eight claims in issue. Two of them. Nos. 23 and 24,
relate to certain parts of knitting machines known as "sinkers and
their guides," and the remainder. Nos. 38, 41, 43, 48, 49, and 130,
to what is termed the "transfer means." In the court below the bill
was dismissed ; ail the claims being held invalid for want of patentable
novelty. It was also held as to claims 38, 41, 43, 48, 49, and 130, that
they should be limited to the précise construction shown and, when so
limited, were not infringed.
The first two claims are as f ollows :
"23. In a knitting machine a sinlcer cyllnder having radlally arranged
sinker guideways and a holddown portion above the same, combined with
sinkers arranged in said guideways and having portions overlying said hold-
down portion.
"24. In a knitting machine, the combination, with sinkers eaeh having a
plurality of arms, of a sinker cylinder therefor provided with guideways open
at both euds for both the arms of said sinkers."
From the language used in the first claim, read in connection with
the "comparative chart of sinkers and supports" shown on page 187
of the record, it is évident that the éléments there called for are as
^:=3For otlier cases see same toplc & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes
436 262 FEDEEAL EBPOETEB
follows: (1) Sinkers with two arms, an upper and a lower; (2) a
sinker cylinder ; (3) radially arranged sinker guideways in the sinker
cylinder for the lower arms of the sinkers ; and (4) a holddown portion
of the sinker cylinder above the guideways for the lower arms.
In No. 24 the éléments are: (1) Sinkers, each having at least two
arms ; axià (2) a sinker cylinder provided with guideways for both arms
of the sinkers, the guideways being open at both ends. The latter
claim does net call for guideways for the upper arms of the sinkers
separate and distinct from the guideways for the lower arms, and in
every respect reads upon the device shown in patent No. 542,311,
granted to Randall in 1895. In the Randall device each sinker has
two aims. The sinker cylinder located at the top of the needle cylin-
der is provided with guideways for both arms of the sinkers, and the
guideways are open at both ends. The combination of this claim
being fully disclosed in the prior art, we regard it as lacking in patent-
able novelty and invalid.
Claim 23 does not specify that both arms of the sinkers should be
provided with guideways in the sinker cylinder and open at both ends,
as does claim 24. The only guideways called for in this claim are for
the lower arms of the sinkers, and thèse guideways are not required to
be open at both ends. In the prior art devices shown in the patents
granted to Eck in 1894, No. 523,111, and to Burleigh in 1895, No.
537,802, both of which are substantially alike, ail of the éléments
called for in this claim are disclosed, with the single exception of the
guideways for the lower arms of the sinkers. They do, however, dis-
close guideways in the sinker cylinder for the upper arms of the
sinkers, so that ail the plaintifif's patentée can claim to hâve done
differing from thèse prior art patents is to hâve provided guideways in
the cylinder for the lower arms of the sinkers. Therefore the question
is, inasmuch as thèse prior art patents disclose guideways for the upper
arms of the sinkers in the sinker cylinder, was it invention to extend
or elongate the lower arms and provide for them slots or guideways in
the sinker cylinder ? This is so plainly a matter of mechanical détail
that we are constrained to agrée with the District Court that the claim
présents no patentable conception.
In the knitting of men's stockings or half hose, the ribbed tops are
ordinarily knït on a separate machine and then transferred to the
needles of a stocking machine for completion. To effect the transfer
it is necessary to bring ail of the needles of the stocking machine to a
common level. Claims 38, 41, 43, 48, 49, and 130 relate to means
for leveling the needles preparatory to transferring the ribbed top to
them. Claim 28 is typical of this set of claims and reads as follows :
"38. A knitting machine provided with a double-actlng stitch-formlng cam
and means to withdraw it bodily from operative engagement with the
needles."
The éléments embodied in this daim are (1) a double-acting stitch
or depressing cam, and (2) means to withdraw it bodily from operative
engagement with the needles.
GEORGE D. JMAYO MACHINE CO. V. HEMPHILL MFG. CO. 4.37
(262 F.)
The double-acting stitch or depressing cam is brought into action in
the round and round knitting of the body of the stocking and in the
reciprocating knitting of the heel and toe of the stocking. In round
and round knitting it opérâtes as a single depressing cam. In recipro-
cating knitting its double-acting feature is brought into play. It is
then double-acting, in that it depresses the butts of the needles as they
are being moved forward and back in the locality of the cam.
When the machine is stopped preparatory to transfer, the cam de-
presses the butts of the needles with which it is in contact and inter-
fères with their being raised, so that the knitting ends of ail the needles
may be leveled to receive the ribbed top. To remove this obstruction
the patentée provides means for withdrawing the cam bodily and radi-
ally from engagement with the needle butts.
A double-acting stitch or depressing cam for round and round knit-
ting and for reciprocating knitting was old. O'Neil, No. 387,251
(1888). Means for removing an obstructing cam bodily and radially
to enable the needles to be leveled -were also old. This is shown in
the patent to Gordon, No. 438,686. But the cam employed by Gor-
don was a double-acting elevating cam, instead of a double-acting
depressing cam. The patent to Hemphill, No. 629,503, July 25,
1898, also discloses means for radially removing an obstructing cam
preparatory to transfer. The cam used in the device of that patent,
however, and which obstructs the leveling of the needles, is a single-
acting depressing cam. The question, therefore, is whether, in view of
the disclosures of the prier art, it involved invention for Mayo to hâve
conceived the idea of removing bodily a double-acting depressing cam
from engagement with the needles ; the prior art having shown how a
double-acting elevating cam and a single-acting depressing cam could
be removed bodily to permit the leveling of the needles.
In the plaintifï's machine the normal position of the knitting ends of
the needles is above the arms of the sinkers, and, in order to knit, a
machine so constructed has to be supplied with a depressing cam which
will draw down the needles for the first stroke opération. Conse-
quently Mayo adopted a double-acting depressing cam, which would
depress the needles when the machine was doing round and round
knitting, and also when it was doing reciprocating knitting. In the
Gordon patent, which antedates Mayo, the normal position of the knit-
ting ends of the needles was below the ends of the sinkers, and to
enable the machine to knit it was necessary to provide it with an
elevating cam, which would thrust the needles up for the first stroke
opération. He therefore provided a double-acting elevating cam for
the first stroke in round and round knitting and in reciprocating knit-
ting. Gordon's elevating cam was in the way, and had to be removed
to permit the needles to be leveled. To do this he provided means ^
which would withdraw the cam bodily and radially from the cam
cylinder. Mayo's depressing cam was in the way in his machine and
had to be removed to permit the needles to be leveled, so he provided
means for withdrawing it bodily and radially, which difïer, so far as
inventive thought is concerned, in no way from that of Gordon. The
438 262 FEDERAL EEPOHTEB
problem of removal was the same. In each case it was necessary to
remove the obstructing cam to level the needles, because it was in the
way, and, in each case, it was necessary to adopt an elevating or
depressing cam because of the gênerai construction of the respective
machines.
In Hemphill, 1899, two single depressing cams were employed, one
of which was an obstruction and had to be removed to permit the
leveling of the needles. In both Hemphill and Gordon the obstruct-
ing cam was removed radially and bodily. In view of Gordon's and
HemphiU's disclosures of means for the radial and bodily withdrawal
of a double-acting elevating cam and a single-acting depressing cam
from operative engagement with the needles, we do not think it in-
volved invention for Mayo to make use of like means for the radial
and bodily withdrawal of a double-acting depressing cam.
The decree of the District Court is affirmed, with costs to the ap-
pellee.
OHUBOHWARD INTERNATIONAL STEEL (X). v. BETHLEHEÎM STEEL
00. (CABNEGIB STEEL 00., Intervener).
(District Oovu-t, E. D. Pennsylvania. December 24, 1919.)
No. 1491.
1. Patents <e=9222 — ^Damages fob infbingement rot eecovebabij; whebb
ABTicu: not mabeed.
Rev. St. S 4900 (Comp. St. § 9446), providlng that patentées and ail
persons maklng or vending any patented article, who fall to mark It
as therein required, may not recover damages in a suit for Infrlngement,
except on proof of notice to défendant and subséquent infrlngement, ap-
plles to ail patentées, and Is not llmlted to those who make or vend the
patented article.
2. Patents ®=>222 — ^Profits feom infeingement must be acoounted fob,
although aeticle was not uabeed.
Rev. St § 4900 (Comp. St § 9446), providlng that patentées, who fall
to mark the patented article as therein required, shall not re<»ver dam-
ages in a suit for infrlngement, except on proof of notice to défendant
and subséquent infrlngement, does not relieve an Infringer wlthout noâce
from accountlng for profits In equlty.
In Equity. Suit by the Churchward International Steel Company
against the Bethlehem Steel Company, with intervention by the Carne-
gie Steel Company. On settlement of decree.
See, also, 260 Fed. 962.
Charles H. Duell, Frédéric P. Warfield, and HoUand S. Duell, ail
of New York City, for plaintiflE.
Fraley & Paul, of Phïladelphia, Pa., and Charles Neave and Clarence
D. Kerr, both of New York City, for défendant.
R. V. Lindabury, of Newark, N. J., Henry P. Brown, of Philadel-
phia, Pa., and D, Anthony Usina, of New York City, for intervener.
DICKINSON, District Judge. The motion now before the court
relates wholly to the form of decree, which is appropriate, following
^sjFor oUier cases see same toplc & KEY-NUMBER in aU Key-Numbered DIgeats & Indexes
CHUECHWAED INTERNATIONAL S. CO. V. BETHLEHEM S. CO. 439
(262 F.)
findings which were made by the court as expressed in the opinion
handed down.
The question involved in the framing of this decree is whether it
should be confined to the awarding of an injunction, with costs and
nominal damages, or whether there should be also an accounting for
profits. The position of the défendant is that R. S. § 4900 (Comp. St.
§ 9446), applies to plaintifï, and dénies profits as well as damages.
The position of the plaintifï is that R. S. § 4900, does not apply, be-
cause this plaintifï has not made and vended the patented article and
further that, if the section does apply, it dénies such damages as could
be recovered at law, but does not deny profits for which an account-
ing is allowed in equity.
Thèse siiggested questions are not as simple, nor open to as easy
answer, as at first sight they would seem to be. The first inquiry is
whether thèse questions hâve been already authoritatively settled.
Counsel for défendant relies upon the ruling made by Judge Mayer
in Gibson v. American, reported (on appeal) in 234 Fed. 633, 148 C. C.
A. 399. This ruling was based upon that of Judge Dallas in National
V. Belcher (C. C.) 68 Fed. 665, and on appeal in 71 Fed. 876, 18 C. C.
A. 375, and upon Lorain v. Switch Co., 184 Fed. 301, 106 C. C. A. 443.
As thèse cases were before the Circuit Court of Appeals for this cir-
cuit, if the statement that they rule the présent questions can be accept-
ed, the questions are no longer open ones.
In the Belcher Case, however, there were several patents before
Judge Dallas, the validity of some of which he had upheld ; others he
had held to be void. The assigmnent of error related only to this lat-
ter ruling. The decree in this respect was reversed. The ruling which
he had also made, that R. S. § 4900, denied the right to profits, as well
as damages, was not before the Court of Appeals, and was not men-
tioned.
The Lorain Case was several times before the court. It is first re-
ported in 124 Fed. 548. There is nothing to indicate that any point
was made of R. S. § 4900. The case appears again in 153 Fed. 205,
on exceptions to the report of the master, who had allowed both dam-
ages and profits, notwithstanding R. S. §' 4900. The only point made,
however, was with respect to the fact of notice, and the case was sent
back to the master to find this fact.
The only direct référence to the questions before us is the isolated,
unconnected statement, based upon Lowell v. Hogg (C. C.) 70 Fed.
787, that the déniai of the right to damages in R. S. § 4900, includes
profits. The plaintifï by his bill had averred compliance with R. S. §
4900. When the case was back before the master he shifted his
ground by saying that his averment of notice was wrong, but that
R. S. § 4900, did not apply because he had never made or vended.
The master supported this view, and again allowed both damages and
profits. Exceptions were sustained, and neither damages nor profits
allowed. The Court of Appeals in 184 Fed. 301, 106 C. C. A. 443,
affirmfid this decree, but placed the affirmance solely on the ground
that the plaintifï was held to the issue of notice which he had raised,
440 262 FEDERAL REPORTEB
and were careful to say that what the plaintiff mîght otherwise hâve
lecovered either by way of "damages or profits" was not decided.
This certainly means that the question of whether R. S. § 4900, ap-
plied was still open, and carries Ûie further implication that its mean-
ing was also an open question. This conclusion is supported by the
disposition made of later cases. In RoUman v. Universal (D. C.)' 207
Fed. 97 (upon which défendant relies), the questions now raised were
met and ruled. The ruling was made without the previous ruling of
Judge Dallas or the Lorain Case having been called to the attention of
ihe court. No appeal was taken in the Rollman Case.
In the subséquent case of Sharpless v. Lawrence, 213 Fed. 423, 130
C. C. A. 59, however, the court had made a decree awarding damages,
but saying nothing of profits. This decree was, on appeal, affirmed.
When the case went back, the question arose of whether the use of the
word "damages" limited the right of recovery to the meaning of dam-
ages as a légal term, and hence to compensation for injuries sustained
or whether it was used as a generic word, implying the money award to
which plaintiff was entitled in equity, and hence might include profits
as well as damages.
The ruling of Judge Dallas, in the Belcher Case, was then relied on
as authority for the proposition that damages included profits. . As
Judge Dallas had so ruled, and although this ruling had not been re-
viewed by the Court of Appeals, as it had not been reversed, the court
felt bound to follow it, notwithstanding the ruhng in the Rollman Case.
This was because the Rollman Case would hâve been otherwise ruled
if the Belcher Case had been cited. The plaintiff was accordingly al-
lowed profits. This decree was reversed on the spécifie ground that
the word "damages" was a légal term, having attached to it the mean-
ing of compensation for injuries sustained, and could not be expanded
into a generic word, covering everything for which a plaintiff might
recover in equity.
It is true that R. S. § 4900, was not before the court, but inasmuch
as the court held that the word "damages," when used in a decree,
was limited to its meaning of the recovery allowed in actions at law,
and did not include the profits which might be allowed in equity a for-
tiori it has that meaning as used in R. S. § 4900. This is because R.
S. §§ 4900, 4919, and 4921 (Comp. St. §§ 9446, 9464, 9467), ail relate
to the same gênerai subject. R. S. § 4919, recognizes the damages
which may be recovered in actions at law, and allows them, and statu-
tory damages, also; R. S. § 4921, recognizes the différence in the basis
and measure of recovery allowed in equity, thus permitting profits to
be recovered, and allows this, and also allows, in addition, the damages
which could be recovered at law ; and R. S. § 4900, dénies to patentées,
who hâve not given notice the right to recover damages, but does not
deny to them Ôie right to profits.
The inference we are prompted to draw is that the word "damages"
in R'. S; § 4900, means damages, and does not mean or include profits.
It follows, as a conséquence, that we are bound to accept the ruling
in the Rollman Case and reject that in the Belcher Case.
Sharpless v. Lawrence, as we view it, ends ail discussion of the
CHURCHWABU INTERNATIONAL, S. CO. V. BETHLEHEM S. CO. 441
(262 F.)
main question; but as the very capable counsel for défendant deems
the question to hâve been ruled otherwise by the Suprême Court, and
as Judge Mayer has f ollowed tlie cases which do rule otherwise, we will
consider the question as still an open one, at the expense of drawing
eut this opinion to undue length. It is to be kept in mind that Judge
Mayer accepted and followed the ruling of Judge Dallas, without hav-
ing the Rollman or Sharpless Case before him.
[1] The first question of the application of R. S. § 4900, may be
disposed of by the statement that the statute applies to ail patentées
who hâve not given notice. This is clear from a review of the légis-
lation. This provision began with Act Aug. 29, 1842, c. 263, 5 Stat.
543, which required ail patentées who made and vended to mark the
patented articles, and carried a fine penalty for not so doing. This was
followed by Act March 2, 1861, c. 88, 12 Stat. 246, which contained
the same requirement, and denied the right to damages unless notice
was given. It is to be observed that both thèse acts were limited to
patentées who made and vended. Then came Act July 8, 1870, c. 230,
16 Stat. 198, which extended the provision to ail patentées, and to per-
sons who made and vended. and the same phraseology is found in R-
S. § 4900, as we now hâve it.
There are a number of cases which rule that the statute does not ap-
ply to process patents, because there is no patented article made or
vended ; but thèse cases will be found to hâve been so ruled before the
act of 1870, or to hâve been ruled on the authority of thèse prior
cases, without the change in the statute having been noted.
[2] Upon the main question we hâve a number of cases so large
that even the listing of them is impracticable. We dismiss many
to which we hâve been referred, with the comment, often made and
as often disregarded, that judicial expressions must always be read
in the light of the fact situation to which they refer. Globe v. Segal
(D. C.) 239 Fed. 322, is an illustration. Obviously the quotation given
us has no référence to the présent question, but is merely a state-
ment of the position of counsel that equity has no jurisdiction, when
nothing is involved except the recovery of damages.
We can deal only with a few of the cited cases. Tilghman v. Proc-
tor, 125 U. S. 136, 8 Sup. Ct. 894, 31 L. Ed. 664, has no direct bearing.
It was a proceeding in equity, in which both damages and profits were
allowed. R. S. §' 4900, was not involved, as no question of notice was
raiscd. The case is usually cited as authority for the distinction be-
tween the basis and measure of recovery in actions at law and in pro-
ceedings in equity.
The case of Coupe v. Royer, 155 U. S. 580, 15 Sup. Ct. 199, 39 L.
Ed. 263, is of value because it reviews the whole question of damages
and profits, making clear the distinction between them, and that dam-
ages only could be recovered at law while an accounting for profits
might be allowed in equity. The case was, however, one at law, so
that the question of whether damages included profits (as we now hâve
it) did not nor could arise. The question of whether R. S. § 4900, ap-
plied was then (January 7, 1895) expressly stated to be still an open
one, and was not decided.
4^2 262 FED£BAL BEPOBTER
Another oft-cited case is that of Rubber Co. v. Goodyear, 76 U. S-
(9 Wall.) 788, 19 L. Ed. 566. It was a proceeding m equity. The ac-
counting period is not definitely disclosed, but it was before the acts
which allowed damages in addition to profits, and when what is now
R. S. § 4900, was limited to patentées who made and vended. There
was no avéraient of compliance with what is now R. S. § 4900, in the
bill, no référence to it in the answer, no évidence bearing upon it, and
no point made of it as a déniai of the right to a decree for damages
or profits. The court allowed an accounting for profits, and referred
the case to a master. The master reported, and the court allowed
profits. On appeal, the Suprême Court held that the défendant could
not raise the question. R. S. § 4900 (or its then équivalent), was in
conséquence not in the case. What its efïect, if in, was not decided.
Another case is Dunlap v. Schofield, 152 U. S. 244, 14 Sup.Ct. 576,
38 L. Ed. 426, also in equity. The prayer was for an injunction, and
the spécial damages allowed by Act Feb. 4, 1887, c. 105 (Comp. St. §§
9476, 9477). There was not only no claim for profits, but a waiver
of them. There was neither averment nor proof of a compliance with
R. S. § 4900. The court below awarded the spécial damages. This
was reversed wholly on the ground of a failure to aver and prove com-
pliance with R. S. §' 4900. The distinction between damages and
profits did not arise, nor could arise, because spécial damages only were
claimed.
It is clear that the RoUman Case is not in conflict with any of thèse
rulings, nor with any other ruiing of the Suprême Court to which we
hâve been referred. They serve to give emphasis to the distinction
drawn in the Sharpless Case between damages and profits.
There are, it is true, man}' cases in other dii^tricts which support the
defendant's position ; but we are constrained to foUow the cases in
this circuit as binding upon us, or, if not décisive of the question, then
to follow the Rollman Case as one supported by reason and authority.
If the question be considered with the mind uninfluenced by the rul-
ings made, we may start with the propositions before stated that in
actions at law damages only, in the sensé of compensation for in-
juries sustained, can be recovered, and that in proceedings in equity
an accounting for profits may be awarded. Corollary propositions are
that damages may be recovered, although the inf ringer may hâve made
no profits, but that no damages can be recovered, unless suffered, al-
though the infringer may hâve made large profits, and that no profits
can be allowed, unless made, although much damage may hâve flowed
from the infringement.
From the standpoint of the législation on the subject, infringement
means a trespass upon the property rights of the patentée. In consé-
quence, it is a tort, for which the tort-feasor should respond in dam-
ages, whether he has himself gained or not. If he has profited by his
use of the property of the patentée, he should account for what does
not belong to him as a trustée ex maleficio. I^aws, however, hâve their
policies, as well as their principles of justice. The policy of the patent
îaws is to encourage invention and thus "promote the progress of
science and the useful arts." Such Iaws may, however, become an in-
BEITMAN V. STEATEB 443
(262 F.)
tolerable nuisance, if made traps for the innocent and unwary. No-
tice of patent rights should, because of this, be given. Damage im-
plies hurt, and the one who is huit iinows it, and knows when, and
usually how and by whom he is hurt. He may therefore well be re-
quired to give notice, and because otherwise an innocent user may be
punished and be put to a loss. An infringer, however, may be making
profits without the patentée knowing of it, because he is not otherwise
damaged. The fact that an infringer is an innocent infringer without
notice is a reason for relieving him f rom the payment of damages when
he bas made no profits. It is no reason for permitting him to retain
profits which belong to another. The fact that he is innocent does not
give him title to the property of another. Damages may be well denied,
but profits allowed.
The history of this législation may be of some help. If it is traced, it
will be found the distinction between damages and profits and recover-
ies at law and in equity has been at ail times recognized. Sometimes
the right of recovery has been enlarged by giving damages, both actual
and statutory, with profits in addition in both actions at law and in
proceedings in equity ; sometimes they hâve been separated, and dam-
ages only allowed at law, and both in equity.
R. S. § 4919, as we now hâve it, goes back to the original Patent Law
of April 10, 1790 (1 Stat. 109, c. 7), which gave actual damages and for-
faiture of the infringing article. Skipping the intermediate législa-
tion down to July 4, 1836 (5 Stat. 117, c. 357), that act gave actual and
trebled damages. Then came Act July 8, 1870, c. 230, 16 Stat. 198,
which allowed in any action or proceeding damages, actual and statu-
tory, in addition to profits. This was followed by the revision of De-
cember 1, 1873, which gave us the separate sections, as we now hâve
them, except for the amendment of March 3, 1897 (29 Stat. 692, c.
391). The genesis of R. S. § 4921, is included in the above, and that
of R. S. § 4900, has already been given.
We restate the conclusions reached.
1. R. S. § 4900, applies to ail patentées, and is not limited to those
who make and vend patented articles.
2. This section relieves infringers without notice from payment of'
damages, but not from accounting for profits.
A decree to this efïect is filed herewith.
BEITMAN V. STBATEB.
Plstrlct Court, N. D. OUo, E. D. July 31, 1917.)
iNo. 377.
Patents <g=>328 — Fob wind shield ci^eaneb valid and infeingkd.
The Beitman patent, No. 993,816, for a wind shleld cleaner, llmlted to
the précise structure described and clalmed, Jield not antlclpated, and, while
for a combination o( old éléments, to disclose Invention, in vIew of Its su-
perior utility, slmpUcIty of opération, and Its commercial adoption and buo-
cess ; also held infringed.
®=3For otber cases see same toplc & KEIY-NUMBER in ali Key-Numbered Dlgests & Indexes
444 2G2 FEDERAL REPORTEB
In Equity. Suit by Albert B. Beitman against J. Edward Strater.
Decree for complainant.
Hull, Smith, Brock & West, of Cleveland, Ohio, for plaintiff.
Squire, Sanders & Dempsey, of Cleveland, Ohio, and Charles H.
Wilson, of New York City, for défendant.
WESTENHAVER, District Judge. Complainant, Albert B. Beit-
man, in his bill allèges that he is the owner of letters patent No. 993,-
816, dated May 30, 19II, and charges infringement thereof by the
défendant. The answer dénies infringement, and avers that the
construction described in complainant's patent has been described and
patented in certain letters patent of the United States, a list of
which is given in the answer, and also avers that, prior to the com-
plainant's alleged invention and discovery, said invention was known
to and used by certain persons, whose names and addresses are given,
among them one Charles J. Heineman, to whom later letters patent were
issued. The case has been fully heard on the bill, answer, and proof s.
Complainant's invention relates to an improvement in a wiper or
çleaner for window panes or transparent screens, employed as wind
shields on automobiles or other vehicles. It is called in the patent "a
wind shield cleaner." Its purpose is to clean the outer or front side of
automobile wind shields or street car windows of accumulating mist,
rain, snow, or frost, and thereby afïord the driver free observation
while the automobile or street car is in opération. The cleaning device
is an adaptation of the old squeegee principle of cleaning Windows.
The cleaning of the wind shield is accomplished by means of an elastic
strip of rubber so adjusted as to be held and compressed against the
wind shield front, which is operated by an arm or handle, connected
therewith, and extending to the driver's side, thus permitting opération
by the driver while the automobile is in use.
The combination of éléments making up the invention consists of a
depending arm or holder on the outside, to which is attached the
rubber cleaning strip; a shaft attached thereto, and extending at right
angles transversely across the top of the wind shield ; a depending arm
extending downwardly from this shaft on the inside, adapted to be
used as a handle ; a supporting bracket adapted to be mounted on the
top edge of the wind shield, and adjusted thereto in any desired posi-
tion, by means of which the shaft, the outside wiper arm, and the
inside handle arm are supported, carried, and operated.
The construction is exceedingly simple and economical. It may be
put on and taken off quickly, and without marring the wind shield.
The shaft and both depending arms are made up of the same pièce
of métal. The supporting bracket is made in two pièces, adapted to
go over the upper edge of the wind shield, and to be clamped thereto
in the desired position by means of a boit and nut. The boit passes
through the upper edges of the two-piece bracket ; the shaft also passes
through the upper edge of the bracket. The inside depending arm is
equipped with a wooden or rubber wheel or button at the lower end.
This wheel, by means of a spring action of the two depending arms, is
BEITMAN V. SÏBATER 445
(262 F.)
compressed against the wind shield, thereby procuring a frictional
engagement of the elastic rubber strip with the front side of the
wind shield. This wheel revolves as on an axle against the inside of
the wind shield, and serves as a carrier for the inside handle arm.
When adjusted and in position, the bracket is clamped rigidly to the
wind shield frame, and the handle and cleaner are operated back and
f orth, describing an arc of a circle, thus cleaning the wind shield on the
outside.
The foregoing describes the simple form of construction commer-
cially developed and sold by complainant. The spécifications and
drawings of his patent show a more complex device. The inside de-
pending arm is also provided with a set screw in addition to the wheel,
and an additional arm fitting against the wind shield, whereby the handle
arm may be rigidly locked to the other meniber. The supporting brack-
et is equipped with a thumbscrew whereby the bracket may be f asten-
ed, but not clamped rigidly to the wind shield frame. With thèse
additional features, and with the handle arm thus locked, the cleaner
was designed and adapted to operate back and forth longitudinally
with the wind shield.
As already stated, however, the device as commercially developed
and sold éliminâtes thèse features, and embodies only the simple élé-
ments and method of construction and of opération already described.
The device thus developed and sold is, however, described in the spéc-
ifications, and also, it is contended, is included within claims 1 and
6 hère relied on, of complainant's patent.
Defendant's construction differs only slightly from complainant's.
The shaft extending transversely across the top of the wind shield,
and Connecting the two depending arms, is somewhat shortened, and
is bent or curved; whereas, complainant's extends at right angles
straight across the top of the wind shield. The handle or inside de-
pending arm of defendant's construction is not equipped with a wheel
or button, but has an elastic rubber strip constructed and operated on
the same principle as the outside rubber strip, being thereby designed
to clean both sides of the wind shield at the same time. The construc-
tion of the rubber strip is exactly like complainant's. The supporting
bracket is made in one pièce, instead of two pièces, and is designed
to be attached by its own spring action to the wind shield frame.
The depending arms are bent or offset at an angle about 2 inches from
the shaft, thus permitting the depending arms to lie more closely to
the frame when not in opération.
If complainant's patent is valid, defendant's construction undoubted-
ly inf ringes ; in fact, défendant, upon the hearing, did not seriously
contend to the contrary, and I shall not, therefore, discuss further, in
this opinion, the question of infringement. Complainant relies on
claims 1 and 6 ; they are as follows :
1. A wind shield cleaner comprising a shaft arranged to extend transversely
of an edge of a window pane or transparent screen; a suitably supported
bracket bearing the shaft and adjustable longitudinally of the same edge;
and a wlper holder having a wlper whleh Is arrangea to make contact with
and extend over the outer side of the pane or screen, sald wiper holder being
446 262 FEDBEAL EEPORTEB
conneciled to the shaft, so as to swing the wiper over the sald side of the pane
or screen during an oscillation of the shaft
6. The combinatlon, with an uprlght wlndow pane or transparent screen
formlng a wind shleld, of a shaft arranged above and transversely of the
top edge of the pane or screen, whlch shaft terminâtes at the outer side of
the pane or screen in a depending arm whlch Is spaced from the pane or
screen, said shaft termlnatlng at the inner side of the pane or screen in a
downwardly projecting lever, whlch la spaced from the pane or screen and
arranged substantially parallel with the aforesald arms; a sultaWy sup-
ported braclîet bearing the shaft, and a wlper arranged between the foresaid
arm and the outer side of the pane or screen and extending longltudlnally
of and connected to the sald arm.
Thèse daims, jt will be noted, embody no more than the simple con-
struction described above, and developed and sold commercially ; cer-
tainly they do not cover more, although it is contended that they cover
less. In my opinion, thèse two claims adequately cover complainant's
construction, and fumish, when considered with the drawings and
accompanying description, sufficient détail and information to enable
a skilled mechanic to construct and reproduce the patented article.
Defendant's main contention is that, in view of the prior art as
disclosed in letters patent of the United States, complainant's patent
is invalid for want of novelty or invention. In support of this con-
tention he has pleaded and offered in évidence the following patents :
B. L. Cohn, No. 694,615, dated March 4, 1902; Mary Anderson, No.
743,801, dated November 10, 1903 ; T. J. Short, No. 856,428, dated
June 11, 1907; F. Ames, No. 866,996, dated September 24, 1907;
O. Caesar, No. 887,585, dated May 12, 1908; C. E. Prickett, No.
942,743, dated December 7, 1909; T. J. Rochford, No. 944,245, dated
December 21, 1909; C. A. Kelloff, No. 956,770, dated May 3, 1910;
C. J. Heineman, No. 1,112,793, dated October 6, 1914. Some others
were pleaded, but were not introduced in évidence, and are not re-
lied on.
Of thèse letters patent, défendant asserts that the Cohn patent em-
bodies every élément of claims 1 and 6, and is a complète anticipation.
I do not agrée with this contention. Cohn's patent is for a window
washing device, and is not designed or intended to remove snow, f rost,
or mist from a wind shield or a street car window. A small-sized
model of it was constructed by defendant's expert, and introduced in
évidence. The device is constructed so as to be clamped to the window
sill or frame. The supporting member is offset from this clamp and
carries two substantially parallel arms, extending upward therefrom,
one on each side of the sash, thus embracing the glass. Thèse arms
are provided with rubbers at the ends, and thèse rubbers are, by the
spring action of the carrying arms, compressed against the window
frame. The operator, standing inside the room, may by shifting the
window pane up and down, and moving the arms back and f orth, wash
both sides of the window. In order to reach the edges and corners
of the window pane, the arms carrying the rubber are constructed so
tliat the operator may lengthen the same, thereby extending the rub-
bers into the corners and angles.
This device is novel and discloses invention, but, in my opinion, is
obviously lacking in utility. It is a clumsy, impractical device, which
BEITMAN V. STEATEE 447
(262 F.)
the évidence does not show ever went into practical use, and an exam-
ination o£ the model convinces me that it disclosed nothing to Beitman
or any other person desiring to construct a wind shield or street car
window cleaner, designed to remove mist, snow, or frost while the
car is in opération.
Some others of the patents, however, are more nearly in point, par-
ticularly the Rochford, Ames, Anderson, Short, and Heineman pat-
ents. Éach of thèse requires considération.
The Rochford patent is described as being adapted for use in
cleaning automobile wind shields, street car Windows, and the Uke. It
has a downward depending arm on the outside, equipped with a rubber
strip operating on the squeegee principle. It has a handle connected
with the outside arm and extending transversely over the top of the
wind shield, and downwardly on the driver's side, by means of which
it is operated. It has a carriage attached to the outside of the top
frame, on which the cleaner rides back and forth as on a track. The
cleaner arm is permanently riveted through outwardly extending ears.
In opération, the downward depending arm is moved back and forth
longitudinally on the front of the wind shield. Frictional engagement
or compression of the rubber strip against the wind shield is obtained by
means of a spring, and not by the spring action of the two depending
arms. Apparently, without modifications, the carriage could be at-
tached only to a wooden or flat frame, and, when once attached, be-
comes a permanent fixture, not easily removed.
The Ames patent has a wiper bar constructed preferably of a split
tube, in which is secured the wiper, which is preferably composed of
a rulDber tube. This wiper bar is f astened to the inside handle through
a lower corner of the wind shield, or its frame, by means of a journal
and a bearing. The inside handle is not an arm, and the compression
is not obtained by spring action of the arm. The driver, by tuming the
handle, moves the wiper bar over the outside of the pane, thereby
cleaning the same.
The Anderson patent is similar in construction to the Ames device.
The outside cleaning bar is connected with the inside handle through
the upper corner of the sash or frame. The wiper bar is preferably
made in two sections. The compression or frictional engagement of
the cleaner is obtained by means of spring action, not provided by the
arms, but by the method of construction whereby the rubber is held in
yielding contact against the glass with suflScient pressure to clean
the same.
The Short patent has two similar amis, one on each side of the pane.
It was designed exclusively for cleaning street car Windows. Its method
of construction and attachment would not seem to admit of its use on
wind shields. The arms are both equipped with elastic rubber strips,
and are bolted fîrmly to the frame or sides. The inside is equipped
with a knob, and the two together serve as a handle whereby the clean-
er arm may be moved back and forth over the window pane.
The Heineman patent is also relied on as a part of the prior art.
It was applied for December 21, 1910, but the letters patent were
not issued until October 6, 1914. The application for the Beitman pat-
448 2G2 FEDERAL RKPOETER
ent was filed January 6, 1911, and the patent was issued May 30,
1911. It appears, therefore, that Heineman made his application first,
while Beitman first obtained bis patent. In my opinion, this patent is
not a part of the prior art, because for prior art purposes a patent
speaks only from the date of its issue. It is, however, in my opinion,
relevant on the issue that Beitman was not the first inventor, but that
the invention was known to and used by Heineman at an earlier date.
Nothing else appearing, except the respective appHcation dates, the
one earlier in time will control, if the invention embodied in the earlier
application is the same as that covered bythe second application and
earUer patent. The law in this respect is, I believe, correctly stated in
Sundh Electric Co. v. Interborough Rapid Transit Co., 198 Fed. 94, 117
C. C. A. 280. I shall therefore consider the Heineman patent, not as
a part of the prior art, but as bearing only on the issue of whether
or not Beitman's invention was known to and used by Heineman at
a date prior to its invention by Beitman.
The Heineman construction has a similar depending arm on the
outside, also equipped with an elastic rubber squeegee strip. This
arm extends transversely over the top of the wind shield, and down-
wardly on the inside, and is provided on the inside with a spring stud
adapted to press against and ride upon the surface of the glass, thus
holding the rubber strip firmly in wiping contact against the front sur-
face as the guide arm is moved back and forth in the act of cleaning.
The compression is obtained by means of this spring stud, and not by
the spring action of the depending arms. Thèse arms are not support-
ed by an adjustable two-piece bracket, but are attached to a guiding
clamp adapted to ride upon the wind shield frame. This clamp, while
designed to be permanently affîxed to the wind shield, is not, neverthe-
less, rigidly clamped thereto. It is called a "guiding clamp," and is
intended to ride back and forth on the wind shield frame. In opéra-
tion the wiper arm and handle do not oscillate, describing an arc of
a circle, but move back and forth with the guiding clamp. The guiding
clamp, when once attached, becomes a permanent fixture. It is not
equipped with a simple boit and nut, so that it may be put on and
taken oiï readily. Thèse are the essential différences between the
Heineman and Beitman constructions.
If the foregoing patents do not anticipate, or if the exact Beitman
invention is not embodied in the Heineman patent, then none of the
other patents can be said to anticipate, for none of them so nearly
approximate the éléments of the Beitman patent. I shall not, therefore,
ref er f urther to the other patents in évidence.
From the foregoing review it is évident that this case is of that
class known as "border line" cases. Whether or not invention is
présent is a question respecting which différent minds may well corne
to différent conclusions. Assuming, as is required by the settled rule,
that Beitman, in making his invention, had before him ail thèse prior
art patents, it is obvious that his patent must be limited to the exact
construction therein described and claimed. The question îs whether
the simple combination of old éléments thus made embodies patentable
invention. AU of thèse éléments are old, and while the question of
BEITMAN V. STRATER *49
(262 P.)
what in the combination involves invention, as distinguished from mère ■
mechanical skill, is not free from doubt, I am of opinion, after care-
ful reflection and a balancing of ail the considérations, that actual
invention is présent in his patent, and that his invention is not antici-
pated. I shall briefly summarize the main considérations bringing my
mind to this conclusion.
It appears from the évidence that Beitman in fact actually invented
the construction embodied in this patent. When he conceived the
idea of developing a wind shield cleaner to overcome the difficulties
in driving, due to an accumulation of rain, mist, snow, and ice, he made
inquiries first of ail houses selling automobile supphes and acces-
sories, and was informed that there was no cleaning device on the
raarket. He thereupon proceeded to develop his wind shield cleaner,
and, as soon as he had developed it, made his application for a patent.
In the first year thereafter, namely, 1911, the sales vfere small (only
about 100) ; but they hâve since steadily increased, and during the
last preceding year the sales, the évidence shows, hâve been from
40,000 to 50,000. This acceptance and practical use, it is well settled
law, is, in doubtful cases, entitled to great weight. It does not appear
that any of the wipers or cleaners embodied in the anticipating patents
were successful commercially, or went into gênerai use. The mère
fact of their failure is a circumstance indicating that Beitman was
successful in overcoming defects which made them failures, and that
his success was the resuit of invention, and not mère mechanical skill
in construction or adaptation, or in advertising and selling methods.
The défendant has closely imitated complainant's construction; in
fact, he has modeled his device after complainant's, endeavoring to
improve slightly thereon. It is not différent in. any substantial respect,
except that he has duplicated on the inside the outside depending arm.
The two arms, however, are alike in construction and function. It
was equally open to défendant to adopt a construction like that of
Rochford, Ames, Anderson, Short or Heineman, or that of any of
the other anticipating patents. He has paid to Beitman's patent the
tribute of imitation, and he has furthermore made application for a
patent on this slightly changed imitation. It ill becomes him in this
situation to deny utility or invention in the device which he has so
closely imitated.
In what respect, then, does Beitman's device differ from the earlier
patents, and why has his device succeeded when others hâve failed?
In my opinion, the answer is to be found in"its simplicity, economy of
construction, facility of adjustment, and ease of opération. His ad-
vance in this respect is so marked and différent as, in my opinion, to
amount to invention. He realized that a wind shield cleaner, to be
successful and win public favor, must be cheap, simple, and economi-
cal; that it must be so constructed that it could be put on and taken
off as desired ; tliat it should not be attached to the glass or f rame, so
as to mar or injure the glass or f rame ; that any device which, either in
attaching or operating, marred or injured the glass or frame, or made
it a permanent fixture, or involved expense in constructing, attaching,
or removing, would not meet the requirements of automobile owners.
262 F.— 29
450 262 PEDBEAL REPORTER
Ail of the other patents f ailed in some one or another of thèse respects.
AU of them, except Heineman's, require a marring of the frame or
glass, and even Heineman's is designed to be permanently attached,
and it is évident that its method of opération would, in a short time,
by rubbing, mar the supporting frame. Beitman overcame ail thèse
objections by a combination of simple éléments. His act in this respect
rises to the dignity of invention.
The principles of law are well settled; the difficulty is in applying
them to the facts of the case. I shall not, therefore, cite or comment
on the many cases cited by the différent counsel, ail of which, how-
ever, hâve been given careful considération by me. I will, however,
as illustrating and emphasizing the reasons which hâve brought me
to this conclusion, cite a few pertinent extracts from unquestioned
authority.
In TopHff V. Topliff, 145 U. S. 156, 164, 12 Sup. Ct. 825, 828 (36
L. Ed. 658), Mr. Justice Brown said :
"While the question of patentable novelty In this devlce la by no means
free from doubt, we are IncUned, in view of the extensive use to which thèse
spriugs hâve been put by manufacturera of wagons, to résolve that doubt In
favor of the patentées, and sustain the patent."
In Heekin v. Baker, 138 Fed. 63, 70 C. C. A. 559 (8 C. C. A.), the
court said:
"None of its erements was new, and it did not produee a new resuit; but
we think the record clearly discloses that the combination, although of old
éléments, was new, and that It accompUshed an old resuit in a more facile,
economieal, and efficient way. This gave it patentable novelty. • » • The
merits of the device consist in the simpliclty and cheapness of its construc-
tion, the ease of its opération. * • * But If the questions of novelty and
merit were otherwise left In doubt by the évidence, they would hâve to be
resolved in favor of the patent, because of the Immédiate and gênerai use
Into which the devlce is shown to hâve gone when It was put upon the mar-
ket."
Complainant's device and its acceptance by the public meets thèse
standards of patentable novelty. It may also be said of this device, as
was said in Faultless Rubber Co. v. Star Rubber Co., 202 Fed. 927, at
page 930, 121 C. C. A. 285, at page 288 (6 C. C. A.) :
"This resuit, as a new and useful resuit, seems probable enough on in-
spection of the patent and the earlier patents, and observation of samples,
as far as they were submittcd to us, conflrms this idea. In any event, the
Qtility of the new combination is probable enough, evidenced, as It is, by
extensive public adoption, so that the défendant who has copied cannot be
heard to deny such utility."
It may also be said of the situation now before me, as was said
by Judge Baker in Railroad Supply Co. v. Hart Steel Co., 222 Fed.
261,274, 138 C. C. A. 23, 36:
"They [courts] should consider the patentee's equltles In his business which
has developed under the presumptive validity of the patent, should glve heed
to the place achieved by the patented article In the fleld of the practical art
slnce the date of the patent, and should therefore décline to sustain the dé-
fense of noninventlon and to strike down the patent and the business bullt
upon it unless that défense has been established beyond a reasonable doubt."
EX PARTE LUM YOU ^51
(262 F.)
Upon the whole case I am of opinion that the situation hère is con-
trolled by the Barbed Wire Patent, 143 U. S. 275, 12 Sup. Ct. 443,
450, 36 L. Ed. 154, Webster Loom Co. v. Higgins, 105 U. S. 580,
26 L. Ed. 1177, Diamond Rubber Co. v. Consolidated Tire Co., 220
U. S. 428, 31 Sup. Ct. 444, 55 L. Ed. 527, and similar cases, and
not by Atlantic Works v. Brady, 107 U. S. 192, 2 Sup. Ct. 225, 27 L.
Ed. 438, Railroad Supply Co. v. Elyria Iron & Steel Co., 213 Fed.
789, 130 C. C. A. 447, Id., 244 U. S. 285, 37 Sup. Ct. 502, 61 L. Ed.
1136, decided May 21, 1917, and similar cases.
A decree will be entered, sustaining the validity of claims 1 and 6
of complainant's patent, granting an injunction, and directing an ac-
counting to be had, if complainant so desires.
Eîx parte LUM YOU.
(District Court, N. D. CaUfomia, First Division. September 16, 1919.)
No. 16617.
AuENs ®=»32(8) — Evidence iNSumciENT to authorize exclusion of Chi-
NESE.
In habeas corpus proceedings by a CWnese, who had been previously
adinltted aa a son of a native-born citizen, but was exeluded upon hls
return, after a three-year visit in Ctiina, because of discrepancies in his
testimony and that of hls alleged father regarding conditions in China,
but not relating to the question of relationship, which was the only issue
In dispute, held, that such discrepancies were Insufficlent to sustaln the
Department's order of exclusion.
Habeas corpus proceedings by Lum You. Démarrer to pétition
overruled, and writ issued.
Joseph P. Fallon, of San Francisco, Cal., for petitioner.
Annette Abbott Adams, U. S. Atty., and Ben F. Geis, Asst. U. S.
Atty., both of San Francisco, Cal., for respondent.
DOOLING, District Judge. The record shows that petitioner wa*
admitted to this country in January, 1910, as the sonof a native-born
citizen of this country. He was then about 12 years old. In 1916 he
returned to China without a preinvestigation of his status, because
the serious illness of his mother in China, whom he desired to see,
did not afford him time for such preinvestigation. Returning in
March, 1919, he was denied admission because of certain discrepancies
between his testimony and that of his alleged father, and because of
other discrepancies in the testimony of the father, given at différent
times, in regard to the conditions in the home village. None of thèse
latter seem to bear at ail upon the question of relationship, which is
the only question in dispute.
The rights of one whose status as an American citizen has alreadj
been determined, who has lived a number of years in this country
without question, should be, it seems to me, more stable than to be over-
turned by the évidence in the présent case ; much of it having nothing
@=9For otber cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Inûexvt
452 262 FEDERAL REPORTEB
at ail to do with the question at issue. I do not mean that a first, or
second, or third adjudication of status by the Department is final, or
that it may not later be set aside ; but I do mean that there should be
some substantial reason for so doing. To my mind such does not ap-
pear in the présent case.
The demurrer will therefore be overruled, and the writ will issue
as prayed for, returnable September 20, 1919, at 10 o'clock a. m.
THE HUTTONWOOD.
(District Court, E. D. New York. November 26, 1919.)
Salvaoe ®=531 — Compensation awabded fob seevices to bukning steamek.
Salvage awards made to différent tugs for services to a steamsliip, wliich
took fire in a told loaded witli drums of benzol wbile lying at a pier,
rendered in connection wlth flre department boats in pumping on tlie
fire and tovving tlie vesscl on tlie flats where slie was sunk ; the awards
being made on the basis of one-half the salved value of vessel and cargo
and allowing that seven-eighths of the work was done by the flre boata
In Admiralty. In the matter of salvage claims against the steam-
ship Huttonwood. Decree for libelants.
Burlingham, Veeder, Masten & Fearey, of New York City, for li-
belants Dalzell and Old Dominion S. S. Ce.
Ward D. Williams, of New York City (Robinson Leech, of New
York City, of counsel), for libelant Merritt & Chapman Derrick &
Wrecking Co.
Carter & Carter, of New York City, for libelant Gowanus Towing
Co., Inc.
Foley & Martin, of New York City, for libelants Lee and Pétrie.
Kirlin, Woolsey & Hickox, of New York City, for claimant.
CHATFIELD, District Judge. The Huttonwood is a steel vessel
342 feet in length. On August 6, 1918, she was substantially loaded
with a cargo which had been placed on board the vessel while lying
at the north side of the pier at Thirty-First street, East River. On
the afternoon of that day, with a light wind blowing from the gênerai
direction of southeast, and while the captain was absent from the ves-
sel, an explosion occurred in the No. 1 hatch, which a gang of steve-
dores had filled to within six feet of the coaming. The cargo in this
hatch, aside from a small quantity of wire, consisted of drums of
benzol. In the No. 2 hatch and in the cross-bunker hatch, varions
cargo, mostly noninflammable, was stored, while in the two after
hatches, lumber and metallic ware of différent kinds made up the car-
go, except for some 100 or 150 drums of benzol in the No. 4 hatch.
The vessel had a naval gun and carried about 75 rounds of ammunition
undemeath the poop deck.
The first alarm of fire was the explosion in the No. 1 hatch, and at
that time or shortly thereafter a number of the stevedores were injur-
ed. There was no fire under the boilers of the ship, except that sup-
®=>For otber cases see same toplc & KEY-NUMBER In ail Key-Numbered Digests & ludexes
THE HUTÏONWOOD 453
(262 F.)
plying the donkey engine, and the crew of the engine rçom immediate-
ly started to rig up the pump Connecting with the donkey engine, so as
to get a stream of water on the fire. Several minutes were consumed
in this work, and in the meantime a tug, the WilHam Rowland, which
was lying at the adjoining pier, reached the side of the vessel, foUowed
shortly thereafter by the Henry D. McCord. Neither of thèse boats
was allowed to put a hose on board the vessel, but both of them re-
ceived an intimation from some one on the vessel that it was advisable
to take the boat out of the slip. They made a start to free the Unes and
move the boat aw^ay from the pier, the Rowland actually drawing the
stem of the boat out a few feet from the pier, when they were dis-
missed by the officers of the vessel and told that their services were not
only unnecessary, but that they would not be tolerated.
The captain of the vessel appears to hâve arrived about this time,
and his conclusion was that outside help from boats was unnecessary.
The firedepartment, both in the forra of land companies and a fire
boat, reached the vessel shortly before the captain of the ship. They
immediately went to work rescuing the longshoremen from the hold
and getting streams on the fire in the No. 1 hold. In the meantime
the Baxter, a médium sized tug of fair power, came alongside the port
bow, and either with the consent of those then on deck, or without mo-
lestation, began to play a hose into the No. 1 hatch.
Upon the arrivai of the fire boat the Baxter's hose was left in the
hatch, and gradually the flame and smoke seemed to be afifected by the
water, so that the officers of the vessel were thinking that the fire could
be gotten under control, when what has been referred to as the second
explosion started a large amount of flame and smoke through the
hatchway, driving the firemen back, throwing loose objects into the air,
and making it apparent that the inflammable materials in the No. 1
hatch, which would explode only if confined when burning, demanded
more help and threatened greater destruction.
At about this time the fire chief in charge telephoned for more help.
His request, which was later repeated, resulted in the dispatch of other
fire boats, with a deputy chief, who reached the fire in a launch, and
finally the chief of the department himself, who came just as the fire
was finally brought under control. It evidently was the opinion of the
officers of the fire department, as soon as the extent of the fire was
seen, that the boat must be removed from the slip. Two reasons hâve
been stated for this : (1) That the fire threatened to endanger the pier
and the surrounding water front ; (2) that if the fire proved stubbom,
and the vessel had to be scuttled, she should not be sunk in the slip,
where not only would she obstruct navigation, cause additional trouble
in being raised, and be less easily filled with water to the sinking point,
but also where her proximity to the piers rendered it extremely prob-
able that, if the piers should get on fire, the vessel could not be either
removed or sunk, and would become a total loss. Orders were there-
f ore given to the Baxter, the tug hanging onto the bow, to call for help.
But before this call was given by the Baxter, other boats had been at-
tracted by the fiâmes and the sound of the second explosion.
The tug Dalzell, also a tug of fair power and médium size, came
454 262 FEDERAL REPORTER
to the assistance of the vessel and contributed particularly in under-
taking the movement of the ship away from the pier and towing her
eut as the hawsers were loosened. The tug Hesperus and the tug Lee,
also beats of fair power and médium size, ofïered their assistance,
which was not received with eagerness by the officers of the vessel,
but was welcomed by the firemen and was apparently effective in con-
ducting the opération of towing the vessel from the slip. The Hes-
perus took up her position under the port quarter, passing a Une up to
the deck of the Huttonwood. The Lee took her position alongside the
Dalzell and joined in towing with the Dalzell's hawser. In the mean-
time another tug, the Victory, of about the same capacity as the Dal-
zell, Hesperus and Lee, had taken a position on the port bow of the
vessel, where she remained, assisting in the throwing of water into
the No. 1 hatch, but having nothing to do with the towing of the ves-
sel.
The additional fire boats, as they came to the scène, put out Unes
to the vessel, and some of them apparently used their own power to
maintain their position alongside of the vessel, but none of them took
part in the towing. As the vessel was pulled out into the stream, the
direction of the wind and the necessity of rounding the water front
on the opposite side of the Gowanus Canal compelled the tugs to swing
the stem of the Huttonwood further toward the south. As she ap-
proached the flats on the opposite side of the Red Hook channel, thèse
tugs continued holding the stern of the vessel in such position that the
smoke and flames would go over the side.
In the meantime the vessel was going down at the head from the
amount of water which had been pumped into the forward hatches.
After the vessel left the slip, the Merritt & Chapman boat Champion,
a powerful vessel with large capacity pumps and a derrick for the lift-
ing of cargo, was attracted as she was proceeding up New York Bay,
went in and ran alongside of the steamer, and undertook, at the di-
rection of the captain, to remove the cargo of ammunition, which the
captain of the Hesperus had been unable to take ofï. The Champion
also assisted in bringing some of the firemen to their boats, and then
took her position alongside of the steamer, where she, according to
the testimony of her officers, continued to pump water on the flames
until the boat stttled on the bottom, and then stood by during the night,
at the direction of an officer of the Merritt & Chapman Company.
The boat Chapman Brothers brought this officer of the Merritt &
Chapman Company from New York at about the time that the deputy
chief of the fire department came down in his launch. This boat, the
Chapman Brothers, reported to the captain of the Huttonwood, who,
upon learning that she came from the Merritt & Chapman Company,
allowed her to take a position alongside the fire boats and do ail that
she could in putting out the fire. She is a boat with very large pumps,
and probably compared with the fire boats in the amount of assist-
ance which she rendered in flooding the ship.
With the help of ail thèse boats, the Huttonwood was moved toward
the Red Hook flats ; it being the évident purpose of every one to sink
her in water enough to drown the fire, but at the same time where
THE HUTTONWOOD 455
C262 F.i
the bottom would be soft enough to avoid danger to the Huttonwood,
and where the depth of water would not be so great that the cargo
could not be saved and the boat raised. As the beat approached the
neighborhood of the flats, and apparently while being held at approxi-
mately the position in which the various ones in authority expected
her to be sunk. her bow took bottom. This fixed the location where
the boat was compelled to sink, and the only change thereaf ter would
be to keep her from swinging. The amount of swing was regulated
by the direction of the wind, with the resuit that, when the Huttonwood
fànally sank, her bow was in 40 feet of water and her stem in 15 feet
of water, and it is argued by the Huttonwood that the berth in which
she rested was sufficiently uneven to cause some damage to the hull
through the résultant strain.
It is apparent, however, that as the boat fiUed with water at the bow,
but was afloat at the stem, no damage could hâve resulted from the
projection of the stern over the crest of the bank. The No. 3 and No.
4 hatches did not leak, except as water worked through into the No. 3
hatch from pressure upon the bulkhead separating it from the for-
ward hatches. The Merritt & Chapman people were able to keep
the stern of the Huttonwood dry until the cargo was taken ofï. The
forward holds were finally pumped out by the Merritt & Chapman
people, the cargo was taken out, and the vessel raised.
It has been stipulated that the net resuit was salvage of property,
including boat and cargo, aggregating $420,000. This amount has
not been definitely divided, but it is apparent that the cost of repairs
to the vessel was large. Such benzol as was not consumed was re-
moved in the steel drums and was not injured, presumably, but, aside
from the contents of the No. 1 hatch, constituted but a small part of
the cargo. The balance of the cargo would receive more damage from
water than could be inflicted on thèse steel drums.
It also appears from the testimony that, as the boat went down,
flaraes and explosive material or burning material was f orced up from
below decks, and that burning benzol was scattered around over a con-
sidérable area. Ail the boats in the neighborhood pulled away from
the vessel to avoid this buming material, and put out the fire upon the
water before going to work upon the sunken hull. Some of the tugs
followed along the hull, putting out burning cargo wrappings and vari-
ous articles of equipment, by which the fiâmes were being carried
over that part of the boat which was not submerged. Thèse last serv-
ices, however, were of little conséquence, except in so far as they
extended the time before the boats left the wreck.
The first proposition presented by thèse facts is that, if the boat
and its cargo had been totally destroyed, there would be no valuation
upon which to base a claim for salvage services. As compared with
total destruction, therefore, the sum of $420,000 at least remained for
the benefit of the claimants. The évidence, as has been stated, leads
to the conclusion that the removal of the ship from its berth contribut-
ed largely to prevent total destruction. The benzol and the other in-
flammable cargo would hâve substantially wiped out any salvage of
cargo and probably made valueless the hull of the boat, if the nre had
456 262 FEDERAL BEPORTEK
not been checked in any way, and if the boat had bumed until she
sank from the effects of the fire upon her interior. The testimony thus
indicates that, if the boat had not been removed from her berth, the
fire would hâve spread, and that total destruction of the cargo, and in
ail likelihood of the boat, would hâve accompanied any extensive fire
upon the pier.
But in opposition to this we must take into account the testimony
which indicates that the fire, subject to explosions from time to time,
could hâve been confined to the No. 1 hatch, if the boat had not been
in a situation where danger to surrounding property was feared. The
testimony shows that the appréhension of the firemen that ail of the
holds contained material similar to that in hatch No. 1 was unfounded.
It was extremely désirable that the fire be stopped before it reached
hatch No. 4, or the ammunition at the stern, but the danger from the
fire to cargo in the holds aft of the No. 1 hatch was a very différent
proposition from the fire which the deputy chief of the department an-
ticipât ed that he would hâve to fight.
The next proposition that is to be taken into account is that the
boat was not landed in the mud in the form in which the salvors in-
rended. As bas been said, the bow took the ground, so that the boat
could not be drawn upon the shoal entirely away from the channel,
and yet the vessels were compelled to sink it where there was suffi-
cient water to drown the fire. VVhile the damage to the steamer from
lying upon the uneven bottom was presumably small in comparison with
the other damage, it militâtes against the amount of success in the res-
cue as planned by the tugs.
Another proposition that must be taken into account is that most of
the boats involved in the opération were in comparatively little dan-
ger for the greater part of the time. The explosions were around the
bow. It was only when the vessel sank that the zone of danger spread,
and the Baxter, the Chapman Brothers, and the fire boats were the only
tugs which tenaciously and steadily operated close to the No. 1 hatch.
Subséquent events proved that the No. 1 hatch was the only likely
place from which danger to the tugs could hâve happened, even though
it was reasonable to expect that danger at ail points around the boat.
The next proposition that I wish to consider is that the creditable
work of the lire department and of the tugs in removing the boat from
the neighborhood of the pier and from the slip, if the vessel was to be
sunk, cannot be recognized in this action, in the sensé of rewarding any
saving of surrounding property. The salvage must be limited to the
saving of the boat and its cargo alone. The tugs which were not ac-
cepted by the ofiicers of the steamer, as rescuers or helpers in the
work of rescue, are still entitled to compensation in accordance with
the ordinary rules of salvage, inasmuch as the situation justified, not
only their offers, but the work which they did, and upon the testimony
( find that the ofiicers of the Huttonwood should not hâve resisted
ihose entering into the undertaking. The évidence does not verify
the opinion of thèse ofiicers that the boat should bave been left in her
berth, when the Rowland and the McCord attempted first to tow her
out. Nor does the testimony justify the action of the ofiicers of the
THE HUTTONWOOD 457
£263 F.J
steamer in assuming that the boat could be towed out casually, by one
or two tugs, as an ordinary towing opération. On this account both
the Rowland and the McCord should be recognized as salvors, in that
they undertook what was an offer and actual rendering of assistance at
a time when part of the loss which ultimately occurred could hâve been
prevented, if their efforts had not been frustrated by the action of
the officers of the steamer.
The amount of salvage which the Rowland and McCord can be al-
lowed cannot be based upon the amount of property saved directly by
what they did; but their position is similar to that of a vessel stand-
ing by to render needed assistance, when f urther danger is anticipated,
and where the vessels actually engaged in the direct work of salvage
are sufficient to produce the resuit, if the danger does not increase.
The next proposition that I wish to consider is based upon the prés-
ence and actions of the fire department and its boats. Taking the
value of $420,000 as property actually saved, and figuring that from
the standpoint of total loss an award of approximately one-third or
one-half of the value saved might not be extravagant, tt is necessary
to apportion the value of the services of the fire department and its
equipment in considering what should be awarded to tlie assisting
tugs. Crédit is always allowed to the fire department, but its services
are not customarily estimated in dollars and cents; but in this case
it is necessary to divide the whole adventure, as we are dealing with
but one part, which bas to do with the outside tugs.
I am of the opinion that from three-fourths to seven-eighths of the
value of the services rendered should be credited to the fire depart-
ment and its officers, and, assuming that one-half of the total amount
salvaged should be the hasis of computation, then I should consider that,
remembering the noninflammable character of the greater part of the
cargo which was in immedate danger, the f act that much of the inflam-
mable material causing the explosions at the bow was actually consum-
ed, and that the danger was growing less as the water, poured into the
boat, rose in the No. 1 hatch, and considering that the sinking of the
vessel upon the flats was not of itself necessary beyond the drowning
of the forward hatches, and also considering that the placing of the
vessel was attended with some miscalculation, due to the effect of the
wind, tide, and grounding, I should assume that one-eighth of the 50
per cent., which would represent a maximum, would fairly represent
the efforts of the vessels involved.
Now, taking up the proportionate shares, I should attribute to the
Baxter the greatest crédit and the most valuable services, from the
sandpoint of a rescuing vessel. She not only went most directly to
the point of danger, but she rendered service through her mate and
other officers of a high order of courage. The Chapman Brothers also,
like the fire boats, was as close to the fire as she could be placed, and
her services and her powerful pumps undoubtedly were of great value,
and make her worth more than could be represented by the mère pump-
ing of water while lying alongside of a vessel. The Champion ren-
dered sensible and accurate service as requested, and was a powerful
enough boat to be of much use, if viewed from her capacity to pump
458 262 FEDERAL REPORTER
water. I take it that it is of little conséquence whether she actually
did pump, or whether her pumping was small. As between the three
boats, I should hâve been inclined to compensate the Baxter as much
or more than the other two.
Counsel for the various libelants hâve placed the aggregate value of
their services in such proportion that the total of their estimâtes would
exceed the lump amount which they figure as the salvage prayed for.
The libelants Chapman Brothers, Champion, and Baxter request an
allowance in the proportions of four parts for the Chapman Brothers,
three parts for the Champion, and two parts for the Baxter, out of
what may be allowed for thèse three boats. I f eel that the allowance to
the Baxter should be at least as large as that to the Champion, and I
will yield my original opinion that the Baxter was actually the most
meritorious of the three, by giving the Baxter the greatest award in
the endeavor of its services, but giving to the Chapman Brothers the
greatest monetary compensation.
I consider that the Dalzell, although working at the end of a haw-
ser, rendered services substantially as valuable in most respects as the
services actually rendered by the Baxter. But the original entry of the
fiaxte»- into the situation, and the fact that the Dalzell did perform her
services at a considérable length f rom the buming vessel, will establish
the différence between the awards to the Baxter and the Dalzell. The
services of the Hesperus and the Lee are substantially alike in character
and in amount, and are considerably less in quantity than those of the
Baxter and the Dalzell.
The services of the Rowland and the McCord can be estimated only
from the standpoint of a reward for their endeavor. We must also
take into account the présence of the Victory and the fact that her
services represent as large a share as that of the Dalzell or of the Bax-
ter in most of the éléments to be taken into account. In fact, the Vic-
tory, from its position near the fire, would require that that vessel be
taken largely into account, if it were one of the libelants in the case.
I therefore will apportion this one-eighth part with which I am start-
ing, and which amounts to substantially $26,000, so as to take off a sub-
stantial portion for the Victory.
It also appears that other tugs were in the neighborhood of the
steamer when she was aground on the flats, and that some other tugs
were in the slip apparently assisting or looking after the lighters from
which the cargo was being placed on the steamer. Some compensation
from the standpoint of total available rescuing power must be taken
into account, in the présence of thèse tugs, and added to that which
is apportioned as representing the présence of the Victory in reducing
the amount to be divided.
I shall allow to the Chapman Brothers $4,000, to the Champion and
the Baxter $3,700 apiece, to the Dalzell $3,200, to the Hesperus and
Lee $1,750 apiece, and to the Rowland and McCord ^500 apiece, and
decrees may be entered accordingly.
XraiTED STATES V. UNITED STATES BROKERAQE & TKADING CO. 4:59
(262 F.)
UNITED STATES T. UNITED STATES BKOKERAGE & TRADING CO.
et al.
(District Court, S. D. New York. December 24, 1919.)
1. CONSPIEACX <S=533 — RlQHT OF UNITED STATES TO SEIX ASTEAY FBEIQHT IM-
MATEBIAL.
In a prosecutlon for consplracy to defraud the United States by re-
talning more than proper share of proceeds from selling astrny rallroad
frelght, it Is Immaterlal whether the govemment had the rlght to sell the
freight, slnce It was at least a bailee of the goods, and entltled to
possession of the proœeds as against défendants.
2. EMBEZZLEMENT <®=3lO — RIQHT of GOVEBNMENT to BELL ASTBAT BAILEOAD
FBEIGHT IMMATEBIAL.
In a prosecution for embezzling the proceeds of astray rallroad frelght,
It Is Immaterlal ' whether the govemment had the rlght to sell such
frelght, since It was at least a bailee of the goods, and entltled to posses-
sion of the proceeds as against défendants.
3. EMBEZZLEMENT <g==>8, 9 — DABCENT iS=»8 OWNEKSHIP OF VICTIM CANNOT BE
QUESTIONED.
While embezzlement dlfCers from larceny, In that it does not dépend
on a violation of possession, yet an accused, receiving possession from
another as a flduciary, wlll not be heard to question the ownership of
the goods by hls immédiate victim.
4. EMBEZZLEMENT <S=>11(1) RlQHT TO DKDUCT PAET AS COMMISSION DOES NOT
PBECLTJDE PBOSECUTION.
The fact that accused had the rlght to deduet a portion of certain sums
as a commission does not preclude a prosecution for embezzlement upon
his converting the entire fund, or a greater portion thereof than he was
entltled to, and it Is immaterlal whether accused had separated hls com-
mission before embezzling the balance.
5. EMBEZZLEMENT <S=>16 BaILEE TO SELL ON COMMISSIONS WITHIN FEDERAL
EMBEZZLEMENT STATUTE.
An auctioneer or bailee to sell on commissions la wlthin the fédéral
embezzlement statute.
6. CONSPIKACY (S=>43(10) INDICTMENT CHAEGING VIOLATION OF DlBECTOE GEN-
ERAL' S OEDEB BY "DELIVERY" OF GOODS BUFFICIENT.
An Indlctment that défendants conspired to violate an order of the
Director General requirlng rallroads to sell certain unelalmed freight at
public auction to the highest bidder, by dellvering certain frelght under a
cornipt agreement and not at public auction, etc., is insufHcient, slnce the
word "dellvery" need not import a final disposition, and is consistent wlth
an agreement to sell at public auction and thereafter embezzle the pro-
ceeds.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Dellvery.]
Criminal prosecution by the United States against the United States
Brokerage & Trading Company and others. On demurrers to the in-
dictments. Demurrers overruled to ail counts of ail indictments, ex-
cept one count of one indictment, and sustained as to that count.
The case cornes up upon demurrers to three indictments, whlch, as they con-
cem dealings wlth three différent rallroads, are referred to aa the Central
Vermont, the Long Island, and the Jersey Central Indictments.
The Central Vermont indictment is In seven counts against only the flrst
three défendants, of whlch the flrst allèges that the Central Vermont Rallroad
was under the control of the Director General ; that the United States had a
property intere-st In certain freight in its possession, whlch it had become
@:=}Foi oUier cases see same toplc & KEY-NUMBEK in ail Key-Numbered Digests & Indexes
460 262 FEDERAL REPORTEE
"practlcally Impossible to dellver to the consignées thereof," belng known as
"astray freight" ; that the Dlrector General, through his agents, delivered to
the défendants "for sale on commission" quantities ot "astray freight," which
they caused to be sold under an agreement with the Dlrector General, by
which they were entitled to retain the expenses of cartage and delivery and
10 per cent, commission ; that the balance of the money was the property oC
the United States ; that the défendants conspired to defraud the United
States of the money realized from the sale of such freight by maklng frauda-
ient returns of the money recelved by them from such sales, and by retaining
a large part of the money recelved above their expenses and agreed commis-
sion. The second eount allèges that the Dlrector General delivered 72 bag.s
of bark, which was astray freight, to the défendants, under the cireumstances
.set forth in the first count, and that the défendants, ont of the balance due
from the sale of such bark, converted the sum of $83.85. Thls count was
under the embezzlement section of the Orimlnal Code. The third, fourth, fifth,
sixth, and seventh counts are simllar to the second, laying separate Instances
of embezzlement.
The Long Island Eailway Indictment is against the first three défendants
and contains seven counts. It is precisely simllar to the Central Vermont
Indictment, except that It lays différent Instances of embezzlement In the six
last counts.
The Central Rallroad of New Jersey Indictment is against ail flve do-
fendants and contains nine counts. The flrst count allèges : That the Dlrector
General was in control of the Jersey Central Rallroad, and came Into posses-
sion of certain freight which It had become impossible to dellver to the con-
signées, and which was known as "astray freight." That the two last de-
fendants were clerks in the freight clalm agcnt's office of the road; that
ail five défendants conspired to defraud the TJnited States as follows : The
clerk, Lowrie, would dellver to the three first-named défendants astray
freight, the three first-named défendants should sell such freight, and ail flve
should unlawfully appropriate a large part of the moneys recelved, which
were the property of the United States. That they should remit smaller
sums, representing them as full payment for the sales of such freight, and
that the two clerks should receive such sums as full payment. The second
count allèges a conspiracy to embezzle money of the United States by the
same acts as laid in the flrst count. The third count lays a conspiracy to com-
mit an offense against the United States ; that is, to vlolate the provisions of
General Order 34a of the Dlrector General. Thls order, so far as materlal, is
as follows: "Carriers subject to fédéral control shall sell at public auction
to the highest bidder without advertisement carload and less than carload
nonperi'Shable freight, which has been refused or Is unclairaed at destination
by consignées after the same has been on hand sixty days." The défendants
agreed to vlolate thls order by having the two clerks "dellver by a priva te,
secret, and corrupt agreement and not at public auction and sale" to the
other three défendants, freight of the klnd described in the order. The
fourth, flfth, sixth, seventh, eighth, and ninth counts are for embezzlement
and are simllar to the counts In the other Indictments.
Benjamin P. De Witt, of New York City, for the United States.
Mooney, Fitts & Rowe, of New York City, for défendant Dumont.
Isaac Levy, of New York, for other défendants.
LEARNED HAND, District Judge (after stating the facts as
above). [1] The counts for conspiracy to defraud the United States
are clearly good from any aspect. It is no concern of the défendants
whether or not the United States had the right to sell "astray freight."
It was at the least a bailee of that freight, and, though the sale were
wrongful, it was entitled to the possession of the proceeds. To ap-
propriate those proceeds was either to impede the United States in its
duty of discharging its liability to the consignées, if the sale was il-
UNITED STATES V. UNITED STATES BROKEEAQE & TRADING CO. 461
(262 F.)
légal (Haas v. Henkel, 216 U. S. 462, 479, 480, 30 Sup. Ct. 249, 54 L.
Ed. 569, 17 Ann. Cas. 1112; U. S. v. Plyler, 222 U. S. 15, 32 Sup.
Ct. 6, 56 L. Ed. 70), or, if the United States had the right to sell the
goods then it was a direct misappropriation of funds of the United
States, because upon that hypothesis the proceeds could be truly de-
scribed as a part of the operating profits of the railway ; i. e., as "rail-
way operating income," under section 1 of the Fédéral Control L,aw
(Comp. St. 1918. § 311534a).
[2, 3] The embezzlement counts are also in my judgment good, and,
if so, the count in the Jersey Central indictment for conspiracy to
commit embezzlement as well. Two objections are raised to thèse:
First, that it appeared that the property was not that of the United
States ; and, second, that the fîrst three défendants could not commit
embezzlement because they were part owners of the fund.
The first objection I answer as I hâve answered the objection to the
"defrauding" counts. While embezzlement differs from larceny pre-
cisely in this, that it does not dépend upon a violation of possession,
nevertheless a person lawfully in possession may transfer that pos-
session to another as a fiduciary, and the latter, having received pos-
session in that way and betrayed the trust, will not be heard to ques-
tion the ownership of the immédiate victim. Rex v. Beacall, 1 Car. &
P. 310, 454; Campbell v. State, 35 Ohio St. 70 (the statute reading,
however, in that case "anything of value which shall come into his
hands by virtue of his employment" [Act May 5, 1877 (74 Ohio L,aws,
p. 249) § 11]) ; Waterman v. State, 116 Ind. 51, 18 N. E. 63 (the pros-
ecutor was a consignée) ; Meacham v. Florida, 45 Fia. 71, 33 South. 983,
llOAm. St. Rep.ôl.
The second point dépends upon the meaning to be attached to the
word "embezzle," in the Criminal Code. As there was no such com-
mon-law crime, and as the statutes of embezzlement are various, a
question arises as to just what éléments enter into the crime. It has
been very common to define embezzlement as the conversion of "the
property of another," and under that définition niany courts hâve ex-
cluded property owned in part by the défendant. McElroy v. Peopie,
202 111. 473, 66 N. E. 1058; Peopie v. Ehle, 273 111. 424, 112 N. E.
970 ; State v. Kent, 22 Minn. 41, 21 Am. Rep. 764 ; Van Etten v. State,
24 Neb. 734, 40 N. W. 289, 1 L. R. A. 669 ; Com. v. Libbey, U Metc.
(Mass.) 64, 45 Am. Dec. 185 (semble) ; State v. Kusnick, 45 Ohio St.
535, 540, 541, 15 N. E. 481, 4 Am. St. Rep. 564.
In cases where the défendant has the right to retain as commission
part of a sum of money courts hâve at times therefore been at some
pains (Campbell v. State, 35 Ohio St. 70, 74), to inquire just where
the title to the whole fund lay at the moment of conversion, and wheth-
er the défendant had any property interest in it at that time. Yet,. on
the whole it is the weight of the later authorities, and as I think much
the better, that this inquiry is not necessary, but that the right to deduct
a part of a sum of money due the prosecutor is irrelevant to the ques-
tion whether the défendant has committed embezzlement in converting
the whole. State v. Maines, 26 Wash. 160, 66 Pac. 431 ; Com. v.
Fisher, 113 Ky. 491, 68 S. W. 855; Com. v. Jacobs, 126 Ky. 536, 104
462 262 FBDEBAL REPORTEE
S. W. 345, 13 L. R. A. (N. S.) 511, 15 Ann. Cas. 1226 (overruling Stone
V. Com., 104 Ky. 220, 46 S. W. 721, 84 Am. St. Rep. 452, and re-estab-
lishing the original rule in Clark v. Com., 97 Ky. 76, 29 S. W. 973) ;
People V. Civille, 44 Hun, 497; Territory v. Meyer, 3 Ariz. 199, 24
Pac. 183 ; Branderstein v. Way, 17 Wash. 293, 303, 49 Pac. 511 ; Wal-
lis V. State, 54 Ark. 611, 620, 16 S. W. 821; People v. Hanaw, 107
Mich. Z17, 341, 65 N. W. 231.
Com. V. Smith, 129 Mass. 104, 110, is probably not in point, and
stands upon the fact that défendant was bound tO' turn over the whole
sum without déduction. Apparently his pay was merely calculated by
commission. Reg. v. Tite, 8 Cox, C. C. 458, probably must be under-
stood in the same way. But in Hartley's Case, Ryan & R. 139, I un-
derstand the facts to be that the défendant was entitled to retain his
commissions, and perhaps in Carr's Case, Ryan & R. 198, as well,
though that is uncertain.
[4] The proper rule, where the défendant has an undivided inter-
est in a cliattel, which he couverts, I need not consider until it arises.
In the case at bar the défendants are alleged to hâve embezzled, not
the chattels, but their proceeds, of which at most they were entitled to
keep only a part. In such cases I think it is of no conséquence what-
ever whether or not they had separated out their commission before
they embezzled the balance. Having the right to retain so much as
was their due of thèse absolutely interchangeable units, it appears to
me absurd to say that they did not couvert the balance. I am not sure
that the allégations of the indictment do not meet the necessity, if
there were one, of showing that the conversion was after séparation
of the fund; but I lay no stress whatever upon that. It is enough
that the défendants converted a fund made up of équivalent units, a
part of which they were not entitled to retain.
[5] Finally, the question arises whether a bailee to sell on commis-
sions is within the statute. In Moore v. U. S., 160 U. S. 268, 275, 16
Sup. Ct. 294, 40 L. Ed. 422, the Suprême Court said that an indictment
dgainst an assistant postmaster, properly laid, would hâve been suflfi-
cient. He is scarcely a "clerk or servant." In the same case (160 U-
S. 269, 272, 16 Sup. Ct. 294, 40 L. Ed. 422) the court said that it ap-
plied generally to ail cases of persons intrusted with money by virtue
of any fiduciary relation. I hâve no doubt that an auctioneer is within
the statute. Therefore thèse counts are good.
[6] There remains only the third count of the Jersey Central in-
dictment. I think this insufficient, regardless of the validity of Or-
der 34a, or of the question whether it is a crime to violate it. If the
count should be read as meaning that the clerks finally disposed of the
chattels themselves by delivering them to the other défendants for
their own, certainly it would lay a violation of the order, since the car-
rier would not then be selling them at public auction. Ail the other
counts show that this was not the fact, but that the delivery was in
compliance with the order and under an agreement by which the three
first défendants were to sell the chattels and remit. Indeed, the very
embezzlement présupposes that the order has been complied with, and
not violated, since it implies a delivery to the défendants as fiduciaries.
IN RE KROEGER BROS. CO. *63
(262 F.)
The facts as they appear elsewhere in the indictment, therefore, con-
tradict the only meaning which the allégations of this count can bear,
which would state a violation of the order, because it is not such a
violation to sell goods at public auction on behalf of the carrier, and
to embezzle a part of the proceeds. The order goes no further than
to lay down for the carrier one way as against ail others of disposing
of the chattels, which way was followed.
Strictly, of course, as the count cannot stand through aider, the
demurrer may not either, and if the allégations are adéquate, I ought
not to read to their préjudice the other counts. Yet I own to an un-
willingness, unless it be necessary to make a décision upon a putative
situation which is obviously untrue, merely because there is no spécial
demurrer for répugnance between the counts. Moreover, I think it
may be quite honestly said that the count taken alone is insufficient, if I
hâve correctly limited the scope of the order. The phrase, "deliver un-
der a private, secret, and corrupt agreement, and not at private auction
and sale," means nothing. "Delivery," standing alone, does not im-
port a final disposition qua the carrier, and is consistent with an agree-
ment to sell at public auction, though the delivery were not itself at
public auction. The corrupt agreement may well hâve been to em-
bezzle a part of the proceeds after an auction sale as fiduciary for the
carrier. I hold, therefore, that the pleading is bad, if designed to lay
the only facts which could constitute a violation of the order.
Therefore, in any aspect of the case, the question is altogether irrel-
evant whether the United States had the right to sell f reight which re-
mained unclaimed. It is irrelevant to the former counts, becauss the
défendants are not in any position to question the title of the United
States. It is irrelevant on this count, because the order was not vio-
lated. As the issue should under no circumstances be imported into
any phase of the three indictments or of the trial, I décline to con-
sider the questions of law discussed by the défendants touching it.
Demurrers overruled to ail counts of ail indictments, but the third
count of the Jersey Central indictment. Demurrer to that count sus-
tained.
In re KROEGEH BROS. CO.
(District Court, E. D. Wisoonsin. Febniary 2, 1920.)
Bankbuptcy <S=3319 — Judgment fob damages bendeeed afteb banketjptoy
not peovable.
A judgment for damages against a banlirupt In a state court, actually
rendered after banliruptcy, but by direction of an appellate court, wliich
reversed a judgment in banlîrupt's favor, entered nunc pro tune as of the
date of the reversed judgment, which was before banlcruptcy, held not
a fixed liability at the time of bankruptcy, provable under Bankruptcy
Act, § 63a(l), Comp. St f 9647.
In Bankruptcy. In the matter of Kroeger Bros. Company, bank-
rupt. On review of order of référée disallowing claim of Lizzie
Glatz. AfHrmed.
— ' . % .
<g;=>For other cases ses samo toplc 6 KEY-NTJMBBR la ail Key-Numbered Dlgesta & Indexes
464 262 FEDERAL REPOKTBB
The petitioner, Glatz, brought suit In the state circuit court to reeover dan;-
ages accrulng to her upon the death of her husband through alleged négli-
gence of the défendant (the présent bankrupt) on a collision of Its dellverj'
automobile with a motor vehlele operated by him. In July, 1918, the trial of
that action resulted In a spécial verdict In her favor ; but the judge set aside
one of the matters of fa et found by the jury, and thereupon entered judgirient
agalnst her. An appeal to the Suprême Court was promptly taken and pend-
ing, when In October, 1918, thèse bankruptcy proceedings were Instituted. In
Mareh, 1919, the state Suprême Court reversed the judgment (168 Wls. 635,
170 N. W. 934) and dlrected the circuit court to enter judgment In favor of
the plaintiff (petitioner) and agalnst the défendant (bankrupt) nunc pro tuno
as of July, 1918 — the date when the original judgment adverse to petitioner
had been entered. This was done by the trial court, whereupon petitioner
tiled a claim upon the judgment herein. The référée havlng dlsallowed and
stricken It aâ not provable, this review is taken.
Joseph H. Marshutz, of Milwaukee, Wis., for trustée.
Lenicheck, Boesel & Wickhem, of Milwaukee, Wis., for claimant.
GEIGER, District Judge (after stating the facts as above). Under
the provision of the Bankruptcy Act (section 63 [Comp. St. § 9647])
governing the case before us, a claim to be provable must hâve the
dual ingrédients (1) a fixed liability, as evidenced by a judgment or an
instrument in writing (2) at the time of ûling the pétition in bankruptcy.
It will he conceded that the bankruptcy court is bound absolutely to
ascertain the facts and apply the statute açcording to its very ternis ;
that it is powerless and without discrétion, upon considérations of
justice or otherwise, to antedate a liabihty or to give it a fixed character
as of any time other than that prescribed in the statute. So, in the prés-
ent case, if the judgment presented as the basis of the daim had been
rendered in the ordinary course, after fiHng the pétition, but upon a
verdict rendered before, the court would be powerless to treat the judg-
ment as élective on or prior to the date of filing the pétition in bank-
ruptcy. It is agreed, however, that at the time when the bankruptcy
pétition was filed, there was not only no judgment in favor of the
petitioner herein, but in truth against her; and if the Suprême Court
of Wisconsin had not directed a nunc pro tune entry of the judgment,
I believe there would be no question that the bankruptcy court would
be powerless to give tlie judgment effect as of July, 1918. Now, if the
bankruptcy court is so limited, it cannot be that any other court has
greater power or any discrétion in respect of the ingrédients of a
provable claim and the manner of evidencing them. Indeed, if such
power or discrétion were recognized, no good reason can be urged
for denying to private parties the analogous power or right of moving
back, by agreement, the effective date of an "instrument in writing" —
the other évidence or test of "fixed liability."
I agrée with the view expressed by the référée and in his disposition
of the claim. The order is affirmed.
LTONS V. EMPIRE FUEL CO. A65
(262 F.)
LYONS V. EMPIRE FUEL CO.
(drcnlt Oonrt of Appeals, Sixth Circuit. January 6, 1920.)
No. 3340.
1. JPDOMENT <S=5744 RlGHTS T7NDER CONTBACT CONCLUSIVE WHEN DETEBMINED.
Where, In an action at law for breach of a written contract, in which
the rlght to recover depended upon the construction of the contract, as
to whlch the parties differed, défendant asked no équitable relief, as
permitted by Judicial Code, g 274b (Comp. St. | 1251b), but, tlie court
having held the contract amblguous on its face, the question of its con-
struction was fuUy heard on oral évidence of the facts and clrcumBtances
Burrounding Its exécution, and submitteû to the jury, who foiuid for plain-
tifif, défendant cannot thereafter malntain a suit in equlty to enjoin en-
forcement of the judgment and for reformation of the contract.
2. Judgment (©=720 — Adjudication conclusive as to fact in issue.
A fact disttnctiy put in issue and dlrectly determined by a court of com-
pétent jurisdiction as a ground of recovery cannot be disputed in a subsé-
quent suit between the same parties, even if the second suit is for a dif-
férent cause of action.
3. Appeai. and ebbor (g=3l71(3) — Construction op pleadings below must
BB ADHERED to on APPEAL.
Where the question of the construction of a contract is directly put In
Issue by the court, and subraitte<J to and decided by the jury on oral évi-
dence introduced by both parties, without objection, as to the intention of
the parties, it is too late to urge that the pleadings did not ralse the
issue.
Appeal from the District Court of the United States for the South-
ern District of Ohio ; John E. Sater, Judge.
Suit in equity by the Empire Fuel Company against John E. Lyons.
From an order granting a preHminary injunction, défendant appeals.
Reversed, with direction to dismiss bill.
See, also, 257 Fed. 890, — C. C. A. — .
Murray Seasongood, of Cincinnati, Ohio, for appellant.
Arthur S. Dayton, of Phillipi, W. Va., and M. G. Sperry, of Clarks-
burg, W. Va., for appellee.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
KNAPPEN, Circuit Judge. Bill in equity to restrain the enforce-
ment of a judgment at law. The case is this :
Lyons sued the Fuel Company on the law side of the court below to
recover damages for an alleged breach of a contract whereby Lyons
was to transport, for the Fuel Company, coal by river barge from
Hugheston, W. Va., to Pomeroy, Ohio, and there load the same into
cars. The claimed right of action was based on plaintiff's contention
that the contract required the Fuel Company absolutely to furnish
for shipment 350 tons of coal per day during the one-year contract
term. The Fuel Company contended that the contract bound it to
furnish plaintiiï coal for transportation only when cars could not be
had for rail shipment. The trial court thought the contract ambigu-
ous in this respect, and so submitted its construction to the jury, whose
verdict necessarily involved a finding in favor of plaintiff's construc-
Ê=»For other cases see same toplo &■ KBY-NUMBEK in ail Key-Numbered Dlgesta & Indexes
262 F.— 30
466 262 FEDERAL REPORTER
tion. This court affirmed the judgment, holding the contract ambigu-
ous, and the question of construction ttius properly submitted to the
jury. 257 Fed. 890, C. C. A. , where a history of the case and
of the case and of tiie contentions of the parties will be found.
Thereupon the Fuel Company filed its bill, on the equity side of the
court below, to restrain the enforcement of the judgment at law and
for a reformation of the contract according to its own construction
thereof, upon the ground that when the contract was made the tninds
of the parties f ully met in an agreement which accorded with the Fuel
Company's stated construction of the written contract, but that
"through the mutual mistake of the parties, and by reason of the over-
sight and error of the attorney acting as scrivener to reduce, said oral
contract to writing," there were omitted therefrom définitions and
statements limiting the subject-matter to such coal only as the Fuel
Company could not get cars to transport, viz. what is called in the
record "surplus coal." The bill makes part thereof the record of the
proceedings in the court below on the trial of the law case, as appear-
ing in the transcript presented in this court on review of that case,
together with the opinion of this court on that review. Upon the fil-
ing of this bill the court below granted an injunction restraining en-
forcement of the judgment at law during the pendency of the equity
suit. This appeal is from that order.
[1] We think the injunction was improperly granted, for the rea-
son that it plainly appears by the bill that the proposition of fact as-
serted thereby as necessary basis for relief was, by the judgment in
the suit at law, conclusively determined against the Fuel Company's
contention. Lyons' suit for damages was planted upon the proposition
that the contract required the Fuel Company absolutely to furnish for
transportation at least 350 tons of coal per day. The suit was based
upon the written contract alleged in the pétition to so provide, and
the writing itself, which was made part of the pétition, expressed
Lyons' agreement to "furnish sufficient barges * * * in which to
load not less than 350 tons of coal per day, and * * * to transport
ail such coal to Pomeroy, Ohio, * * * and to load such coal into
such cars as may be f umished at" that place.
The Fuel Company thus had explicit notice, through the pétition,
of Lyons' construction of the contract, and was thereby given the
right and opportunity, under section 274b of the Judicial Code (Act
March 3, 1915, 38 Stat. 956 [Comp. St. § 1251b]), to interpose and
hâve heard the défense that the writing did not express the actual
agreement, and to ask affirmative relief by way of its reformation.
That (as the company contends) the case for équitable reformation
would necessarily be tried as a case in equity (Union Pacific R. R. Co.
v. Syas [C. C. A. 8] 246 Fed. 561, 566, 158 C. C. A. 531 ; Keatley v.
Trust Co. [C. C. A. 2] 249 Fed. 296, 161 C. C. A. 304; PhiUppine
Sugar Co. v. Philippine Islands, 247 U. S. 385, 388, 389, 38 Sup. Ct.
513, 62 L. Ed. 1177, arising under the Philippine Code of Civil Pro-
cédure) is not, in the view we take of the case, important hère ; and
we think it equally unimportant that, as held in Railroad Co. v. Syas,
supra, the case for équitable relief should be disposed of before pro-
LYONS V. EMPIEE FUEL CO. ^^"^
C2«2 F.)
ceeding in the action at law. In any event, the action at law would
be stayed pending the hearing on prayer to reform. Prudential Co.
V. Miller (C. C. A. 6) 257 Fed. 418, 421, C. C. A. . The point
is that by the action at law opportunity was given the Fuel Company
to try out then and there the case for reformation, and, to ail intents
and purposes, in the same case, although perhaps without a common-
law jury, as to the plea for reformation. The Fuel Company did not
talte the benefit of this statute, but contented itself with a plea deny-
ing every allégation in the pétition except its West Virginia incorpora-
tion. Had it pleaded mutual mistake, and asked reformation, it clear-
ly could not again raise the question. Werlein v. New Orléans, 177
U. S. 390, 399, 20 Sup. Ct. 682, 44 L. Ed. 817. And there is respecta-
ble authority that the resuit would be the same if the existing right
was not availed of.
Two décisions of the Circuit Court of Appeals for the Second Cir-
cuit illustrate this proposition : In Whitcomb v. Shultz, 223 Fed. 268,
273, 274, 138 C. C. A. 510, the right to resort to equity to cancel a con-
, tract alleged to hâve been obtained by fraud, after judgment at law
awarding recovery thereon, was sustained for the reason that the con-
tract was under seal and so could not hâve been attacked by défense at
law; while in Du Pont v. Gardiner, 238 Fed. 755, 757, 758, 151 C. C.
A. 605, the right to so resort to equity was denied for the reason that
the contract there in question was not under seal, and thus the défense
of fraud in its obtaining was open in the suit at law. In the latter case
it was said that the resuit reached was the same as it would hâve been
had the act of March 3, 1915, hère in question, been in force.
In Knox County v. Harshman, 133 U. S. 152, 154, 10 Sup. Ct.
257, 258 (33 L. Ed. 586), it was said, by way of stating the converse
rule, that —
"A court of equity does not Interfère with judgments at law, unless the comr
plalnant bas an équitable défense of whleh be could not avail himself at law,
or had a good défense at law which he was prevented from availlng himself of
by fraud or accident, unmixed with négligence of himself or bis agents."
In the instant case the Fuel Company had an équitable défense of
which it could avail itself in the suit at law, even if èie proceedings for
affirmative relief were équitable in form. More or less analogy is to
be found in décisions under gênerai equity rule No. 30 (201 Fed. v,
118 C. C. A. v), which permits a défendant in a suit in equity, without
cross-bill, to "set out any set-oflf or counterclaim against the plaintifif
which might be the subject of an independent suit in equity against
him." In Caflisch v. Humble, 251 Fed. 1, 163 C. C. A. 251, we held
that the defendant's claim for damages for breach of a contract of
purchasc and sale of lumber, on account of which plaintifï was seek-
ing to establish an équitable lien, was a counterclaim arising out of the
transaction which was the subject-matter of the suit, and one which
the défendant was obliged to set up or waive ; and in Knupp v. Bell
(C. C. A. 4) 243 Fed. 157, 156 C. C. A. 23, where in a suit to rescind
a contract for the purchase of land judgment for défendants for the
amoxmt of the purchase-money notes (on déniai of relief to plaintifï)
468 262 FEDERAL KEPOETEK
was affirmed as on a counterclaim, doubt was expressed whether de-
fendants would not hâve waived such recovery had it not been set up
in the answer.^
In Howard v. Leete, 257 Fed. 918, 925, C. C. A. , we found
it unnecessary to décide whether the défense there presented would
hâve been waived by f ailing to présent it ; so hère we find it unneces-
sary to détermine whether or not the Fuel Company lost its rîght to
be heard upon the now asserted claim for reformation through failure
to claim such relief by plea in the suit at law, for we thiiik it clear
that the proposition of fact hère raised by the Fuel Company, and im-
peratively necessary to its relief, was distinctly put in issue on the
trial of the suit at law, and was tliere directly determined against the
company's contention.
Lyons' testimony tended to show that the parties intended by the
contract that he was to hâve absolutely 350 tons of coal per day. After
introducing the writing, he testified that bef ore it was drafted he had
a talk with the Fuel Company's manager about it ; that the only différ-
ence between them was the price per ton for transportation ; that
on the day the contract was written the manager agreed to Lyons'
terms of $1 per ton ; that Lyons was then taken to a lawyer's office,
where a contract was drafted; that the first draft failed to specify
"the amotmt of coal I was to boat, and * * * that they were to
furnish billing. and * * * that they were to be responsible for
my boats for a reasonable time until I came after them"; that he
told them "he would not sign a contract like that, that he had to know
what he was going to do and how many tons he was to get per day, so
he would know how much work he had for his boats and barges" ;
that at that time he stated that he had understood f rom the manager that
"the car supply was 32 per cent.," and that the latter said "that was
about right" ; that the lawyer "took the original draft, and interlined
it and changed it, so it specified 350 tons and the billing, and also that
he would be responsible for the safe-keeping of the barges." He
further testified that the préparation of the second draft was hurried
to enable the witness to catch a train. On cross-examination he denied
having admitted to another party that under his contract he "was
only to get surplus coal from the mine."
The Fuel Company's testimony was addressed even more specifically
to the proposition that the oral contract which the writing was intended
to cover applied only to surplus coal, and that the writing was intended,
and was understood by ail concerned, to state such agreement. The
attomey who drafted it testified that he dictated it from information
furnished him by Lyons and the Fuel Company's manager and mine
superintendent, and "upon a statement of facts furnished by ail of
them" ; that when the final draft was brought in, and just before it
was signed, Lyons said, "Now, you hâve not agreed to give me any
1 Cases such as Northern Assurance Co. v. Grand View Bldg. AsrfH, 2f>3 U.
S. 106, 27 Sup. et. 27, 51 L. Ed. 109; I.umber Underwrlters v. Rife, 237 U.
S. 605. 35 Sup. et. 717, 59 L. Ed. 1140, and Prudential Casualty Oo. v. Miller,
supra, are not helpful on the question of adjudication, for the contracta in-
volved In those cases were not on their face ambiguoua.
LTONS V. EMPIRE FUEL CO. 469
C262 F.)
spécifie amount of coal whatever"; that the attorney then stated his
understanding to be that "the basis of this contract is to provide for
the loading of coal at such times as coal cars cannot be procured from
the railroad ; that the only coal that Mr. Lyons is entitled to is the
coal which is actually run over the Coal Company's river tipple, and
as no coal is ever run over the * * * river tipple while there are
railroad cars to be filled, it would be impossible to provide in the con-
tract for specifying any certain amount of coal to be delivered on
any day or at any time ; the purpose of it is to provide some means to
keep this mine in opération when the railroad cars cannot be procured" ;
that thereupon the Fuel Company's mine superintendent and manager
each made some explanations on their own behalf, and that Lyons
then signed the contract.
The company's mine superintendent, as well as its manager, corrob-
orated the attorney in ail important particulars, including Lyons' ob-
jection that the contract did not "provide any certain tonnage," the
superintendent saying that he replied, "Absolutely none; * * *
we could not afford to give you any tonnage at the river whenever
we get the railroad cars placed;" and tliat the manager explained
that he "could not afford to ship coal by barge when cars were avail-
able." The superintendent testified expressly "that Mr. Lyons under-
stood it and signed the contract." The manager stated that at the
conversation previous to the day the writing was drafted he told Lyons
that he "wanted him [Lyons] to transport their coal — such tons as we
could not hâve railroad cars to load" ; also that "ail the terms of the
contract were agreed upon at this meeting." After stating what oc-
curred when the contract was signed, including the statement above
narrated, he added, "It was plainly understood by ail parties at
that time." Another witness for the défendant testified that Lyons
told him of the existence of his contract, saying :
"Whenever they hâve got cars at the mine, why I can't get the coal ; but
after that, when they hâve no cars there, then they will load the coal in my
boats.''
The Fuel Company's testimony was thus plainly addressed directly
to the proposition that, when the contract was written, the minds
of the parties had fully met in an agreement which accorded with the
company's présent construction of the writing, and that the latter was
intended to express that agreement. This necessarily implied that, if
the contract was to be held ambiguous, it could only be because of
mutual mistake of the parties, and through error or oversight of the
person charged with the duty of writing it, in not clearly stating the
alleged spécifie limitation to surplus coal. The charge to the jury made
this issue plain. The court said :
"The parties differ wldely as to whether the défendant was obliged under
the contract to fumish the plaintlff with the 350 tons of coal per day, or only
the surplus that remalned after shipments were made by rail. The plalntifC
clalms that the défendant was bound to supply his barges with 350 tons per
day for each avallable working day of the year. The défendant dénies that,
and says it was obliged to fumish him for carrlage only such coal as It dld
not ship by raU."
470 262 FEDERAL UEPOETER
After stating the conflicting testimony respecting the occurrences
at the attorney's office, the court said :
"It Is for you jurors to say what occurred there, and If you cannot reconclle
that évidence, tlien It wlll be for you to say whom you belleve — whether you
«ocept the statements of Lyons or of the other three parties."
And again:
"If you flnd from the évidence that at and before the slgnlng of the contract
It was tnterpreted to mean and was understood to mean that Lyons was to
transport only the excess of coal over and above what was shipped by rail,
and that he signed the contract with that understanding, he is bound by that
interprétation, and he cannot say, if you so flnd, that he was entitled to a spe-
dflc amount of coal per day."
And yet again, after discussing the testimony bearing upon the gên-
erai issue, including the reasonableness of the differing constructions
of the parties :
"What would reasonably prudent men, situated as the plalntlfif and as the
defendant'a représentatives were, naturally hâve done under the clrcumstances
which surrounded themi and of whlch they had knowledge at the time the con-
tract was exeeuted?"
The jury was asked:
"Dld the plalntiff hâve a contract for a spécifie amount of 350 tons of coal
a day, or was it sitnply for what remahied and went over that river tlpple
after the car supply had l>een exhausted, after as mueh as the cars would
take, and did thèse parties or not put a construction on that contract after it
was executedî If they dld (referrlng evidently to the later construction), they
are bound by it; at least, it is a matter entitled to great considération.
When you hâve deoided what the contract is, you will then hâve to say:
Did the défendant breaki Itî"
From this it seems equally plain that there was submitted the ques-
tion, What was the contract on which the minds of the parties met?
and that the verdict necessarily involved a finding that Lyons' con-
struction of what the parties orally agreed (and what they intended)
was right, and that the company's construction of what that oral
contract was (and what the parties intended) was wrong. Indeed,
the présent bill expressly charges that Lyons could hâve obtained no
judgment whatever in the suit at law, had the written contract "em-
bodied the true intent and agreement of the parties at the time of its
exécution, as hereinbefore set out."
[2] It is fimdamental that a fact distinctly put in issue, and di-
rectly determined by a court of compétent jurisdiction, as a ground of
recovery, cannot be disputed in a subséquent suit between the same
parties, even if the second suit is for a différent cause of action. So.
Pacific R. R. Co. v. United States, 168 U. S. 1, 48-55, 18 Sup. Ct. 18,
42 L. Ed. 355. This principle, in our opinion, controls this case.
The ultimate points of controversy in the two cases are the same, and
there is thus "identity in the thing sued for," We find nothing to the
contrary in Lyon v. Perin, 125 U. S. 698, 700, 8 Sup. Ct. 1024, 31
L. Ed. 839. That case called for no définition of "identity." The
principal question was whether the dismissal of the bill for lack of
prosecution worked a final adjudication against the relief claimed un-
LTONS V. EMPIKE FUEL CO. 471
C262 F.i
der the bill. The discussion of the authorities contained in the opinion
in So. Pacific R. R. Co. v. United States, supra, plainly establishes
the identity of the point in controversy in the respective suits.
It is not enough to say that the interprétation in the suit at law of
the written contract was "merely secondary and collatéral to the main
issue," which was whether Lyons could recover damages. This, in-
deed, is the issue to which the reformation hère proposed is ultimately
directed. So the détermination in the suit at law that the actual con-
tract was as Lyons claimed it to be was made necessary to recovery.
We see no force in the ai-gument that in the suit at law the validity
of the contract as written was not attacked, while by the bill in equity
its validity is assailed, "so far as it fails to express the true meeting
of the minds of the parties," and that —
"The jury merely found what the contract as written meant. In the equity
case the court would find what the parties meant in fact."
This, to our minds, is but to "stick in the bark," for identity of is-
sue is not obscured by the fact that in the suit at law it was decided by
a jury, because the writing was held ambiguous, while a court of equity
is now asked to décide it because the writing is asserted to be unam-
biguously wrong. In each case the intention would be found by a con-
sidération of both the writing and the oral testimony.
Were the Fuel Company's bill to be sustained, the resuit would be
merely an appeal from the verdict of the jury to the opinion of the
judge. As said in So. Pacific R. R. Co. v. United States, supra (168
U. S. 49, 18 Sup. Ct. 27, 42 L. Ed. 355) : The gênerai rule (as to the
conclusiveness of judgments in subséquent suits between the same
parties, even where the suit is for a différent cause of action) —
"Is demanded by the very object for which civil courts hâve been established,
which is to secure the peace and repose of society by the settlement of matters
capable of judlcial détermination. Its enforcement is essentlal to the main-
tenance of social order ; for the ald of judicial tribunals would not be invoked
for the vlndication of rights of person and property, If, as between parties
and their privies, conclusiveness did not attend the judgments of such tribunals
In respect of ail matters properly put in issue and actually detennined by
them."
[3] We see no merit in the contention that the point in controversy
was not raised by pleading or upon the record. That it appears upon
the record has been sufficiently shown.' In view of the state of the
pleadings already referred to, and (a subject later referred to) the
introduction without objection, of oral testimony concerning the in-
tention of the parties, it is too late to urge that the pleadings did not
raise the issue. In any event, the trial court put the question directly
in issue, and this court has finally determined that the action was right,
It is thus not vitally material whether or not the Fuel Company volun-
tarily submitted that issue. But we are the better content with the
2 Indeed, the Fuel Company's brlef in this court on revlew of the judgment
In the suit at law expressly states that at the trial Lyons "based his suit en-
tirely upon his theory of the construction of the contract, to wit, that it
required [the Fuel Company] to fumisb to [Lyons] in bia bargeis the eum of
350 tons of coal per day."
472 262 FEDERAL RBPOKTEK
conclusion that the company has had its day in court because of the
way in which the crucial question was treated by it on the trial of the
suit at lavv. It made no objection whatever to Lyons' testimony,
whose manifest object was to show the intention of the parties in
making the contract. The objection to the introduction of the written
contract (no ground being stated) had no tendency to suggest objection
to paroi testimony of the actual agreement; and it was already clear
from Lyons' pétition how he construed the contract.
The Fuel Company produced four witnesses, and went into the
subject fully. The first two of its requests to charge were addressed
to a construction by the jury of the contract. The third was on the
theory that the contract was clear and unambiguous.' Lyons asked
instruction that the contract unambiguously meant what he claims was
intended, and asked for the jury's interprétation only in case the con-
tract was held ambiguous. To the charge as given the Fuel Company
took no effective exception, stating, on the contrary, that it would file
a mère formai exception to it, in so far as it fails to include ail of
the material éléments in the charges requested by the Fuel Company,
"if there is any such failure," coupled with the statement that counsel
was not certain that every material part of the charges requested
was not embodied, and that if, on opportunity to examine the charge,
he found that ail were included, even that exception would be with-
drawn. This attitude was persisted in, in the face of suggestion that
it was ineffective. The natural construction of the company's attitude
is that it believed, from the nature of the court's charge, and from the
nature of the testimony, and the number of its own witnesses, that
the jury would find with it, and that it was not unwilling to hâve the
issue so submitted.
We may assume, for the purposes of this opinion, that had the ques-
tion of intention not been submitted to the jury, or had such submis-
sion not been sustained on review, or had the Fuel Company been re-
fused opportunity by plea to ask reformation when Lyons' testimony
of intention came in, a mère mistake of law in construing the writing
as unambiguous (as was probably the reason the plea took the form it
did) would not hâve precluded the Fuel Company from asking refor-
mation in equity. It is enough to say that no such situation is presented.
A party cannot be permitted to speculate upon the chance of suc-
cess, in substantial effect acquiesce in the submission of an issue to
the jury, and then urge that, as it did not invite that issue, it was not
bound thereby.
The order of the District Court is accordingly reversed; and in-
asmuch as the question involved is one of law, determining the vtl-
timate rights of the parties, and is fully presented by the record, the
court below is directed to enter decree dismissing the bill of complaint.
Harriman v. Northern Securities Ce, 197 U. S. 244, 287, 25 Sup. Ct.
493, 49 L. Ed. 739.
» The point was saved by exception to the refusai to glve the Fuel Com-
pany's requested charges "exœpt as the same are glven In the gênerai charge,"
and there had been motion to direct verdict at the close of the testimony, no
statement of reason therefor appearing tn the record.
PUEPURA V. UNITED STATES 4T3
(262 F.)
PURPURA V. UNITED STATES.
(Circuit Court of Appeals, Fourth Circuit November 13, 1919.)
No. 1740.
Cbiminal Liaw <®=r>519(3) — Confession made while undeb détention inad-
missible.
Where défendant, diarged with stealinipr a package from the post office,
where he was employed, was taken in charge by flve inspectors and held
24 hours, without being permitted to communicate with friends or pro-
cure counsel, being cotnpeîled to sieep in the rooin with one of thera, and
being told that they belleved hlm guilty and had évidence whlch made It
look bad for him, a confession, written by the inspectors, but signed by
him at the end of that tlme, helA not voluntary, and not admissible
against hlm.
In Error to the District Court of the United States for the Eastern
District of Virginia, at Norfolk; Edmund Waddill, Jr., Judge.
Criminal prosecution by the United States against Santo S. Pur-
pura. Judgment of conviction, and défendant brings error. Re-
versed.
Tlie plalntifC in error, who wlll be referred to as défendant (such being the
position lie occupied in the court below), was iudicted In the United States
District Court for the Eastern District of Virginia upon the charge that, while
In the postal sen'lce of the United States as a clerk In the Norfolk iJost office,
he did uniawfuUy and feloniously steal a certain package addressed to Sea-
board National Bank, 'Norfolk, Va., which package had corne Into hls posses-
sion by virtue of hls employment, said package containing the sum of $3,500.
He was placed on trial, and upon hls pleading not guilty, after a hearing be-
fore a jury, he was found guilty and sentenced to a term of flve years In the
peniteutiary. The case cornes hère on wiit of error for revlew.
Statement of Facts.
The facts may be epitomized as foUows:
It appears that the défendant entered the Post Office Department as a sub-
Btitute clerk in the year 1914, and remained so employed at a constantly in-
creaslng salary until the year 1918, when he was employed In the registry divi-
sion of said office, and he so remained with the department until he was dis-
missed from the service of the govemment on the 17th day of January, 1919.
The charge against the défendant grows out of the alleged loss of a regis-
tered package containing $3,500 in bills, which was sent from the United States
post office at Rocky Mount, N. C, addressed to Seaboard National Bank, Nor-
folk, Va. This package left the Rocky Mount post office on June 19, 1918,
and was recelved at the Norfolk post office on June 20, 1918, about 11:10 a. m.
of that day.
Witness R. J. Whitehead testlfled that he last saw this package in the Nor-
folk office at 4:15 p. m. on June 20th, and that he then placed a notice of the
receipt of the same in the post office lock box of the Seaboard National Bank ;
that he went ofif duty and left the post office at 4:15 p. m. of that day, and in
hls testimony he gives the names of the employés having access to the pack-
age, who were on duty at that time, but states that Purpura was not then ou
duty. This witness is corroborated by C. M. Wolfe. This latter witness was
chief clerk In the registry division oif the Norfolk office, and states that the
package was last seen at 4:15 p. m. on June 20th. He also gives the names of
the employés who were on duty at that time, the défendant not being one of
them. He further states that from 5:30 a. m. to 9:30 a. m. on June 21st, the
foUowlng employés were on duty, wltli access to such package, If the same was
there, namely: Wolfe, Swift, Purpura, Whitehead, and Clément
^=3For other cases aee same topic & KEY-NUMBBR in ail Key-Numbered Digesta & Indexes
474 262 FEDERAL REPORTER
M. B. Edson, an employé In the registry division of the Norfalk ofBce, teg-
tlfylng on behalf of the govemment, states that he was on duty from 1 p. m.
to 10:30 p. m. on June 20th, and that it was hls duty, when so employed, to
see that the registered pacliages were put in the office safe ; that he did net
count or check thèse packages, and that he could only tell that ail packages
had been placed in the safe by not flndlng any remalning eut; and that he does
not recall the package in question at ail. AU of the above wltnesses testifled
on behalf of the govemment, and their testlmony was the only direct évidence
offered by the government as to what actually became of the package on June
20th. This is substantially ail the évidence offered by the govemment as to
the physical handling of the package.
However, another investigation was Instituted about October 18th, by G. G.
Himmelwright, James B. Robertson, John S. Lemen, W. Chambers, and W. D.
Kahn. Thèse were well-trained inspectors of long expérience. On the moming
of the 18th, Just as the défendant was entering the post office building in
Norfolk, Inspecter Kahn, one of the flve named, requested Purpura to ac-
company hlm to the office of Inspecter Himmelwright about 11 o'clock Frlday
mornlng, October 18th, and was detained contlnuously in the présence of thèse
inspectors untll the foUowing day at or about the same time. Mr. Himmel-
wright, testifying for the government, says:
"Q. So for 24 hours he was In charge of post office Inspectors? A. I do not
know the number of hours, but approximately, yes. I would say from between
11 and 12 o'clock on the mornlng of the 18th until about the same time the
next day. Q. And spent the night with them? A. Yes ; wlth Post Office In-
specter Kahn, I think." Inspecter Robertson, testifying on behalf of the
govemment, states: "I recoUect that distinctly, some time during the after-
noon, the boy remarked that he had not had anything to eat ; I think he said
he had not had his breakfast."
It appears that. In the course of the Interview between the inspectors and the
défendant on the 18th of October, he made a wrltten statement denylng the
knowledge of the package, but after making this statement he was not per-
mitted to return home ; the reason assigned by the inspectors belng that they
desired to interview Mr. Casper and hls daughter, whose names had been
mentloned in the affidavlt the défendant had made before the Inspectors on
the 18th, and that they did not désire him to départ untll they could be In-
terviewed. On the early mornlng of the 19th of October, whlle the défendant
was dressing in the room with Inspecter Kahn, whlch room they had both
occupied at the Neddo Hôtel, the subject of the package was again brought up
by Mr. Kahn, who testifled as foUows: "In the room, before I left, while we
were dressing, I said to Purpura: 'Miss Casper has contradicted every state-
ment practically whlch you hâve made in your affldavit to-day, and which
puts you in a pretty bad light. While you hâve denied any glft to her, she
has stated to us that you had bought her a ring, a plush dress, suit, and
trunk, and varions articles of clothing.* "
This conversation took place before breakfast on the mornlng of the 19th,
and the same witness proceeds to testify as follows to the subséquent occur-
rences: "Q. You had her wrltten statement denylng the statements Purpura
had made to you? A. Yes, sir. That was about ail that was said; that it
looks pretty bad ; and when we got him in the room we sat possibly 15 min-
utes, not much more than that. Robertson, Himmelwright, and he aod I
were there. He asked me to step outside. I stepped ont of the door, and a
little to the slde of the door, and we talked. He flrst said, 'Can I withdraw
that statement I made yesterdayî" I said, 'No ; you cannot withdraw it, but
you can make any additlonal statement you wish to make.' That was the
affidavlt he had made before Lemen and Robertson on tlie ISth. I told him
that I was eonvinced that he had stolen this package, and about this way, and
he said, 'Yes ; I know I did it; I hâte like the devil to admit It.' "
The défendant and the witness then retumed to Mr. Hlmmelwright's office,
and the statement which was relied upon by the government was then wrltten
eut by Inspecter Chambers, with varions suggestions from Inspecter Kahn.
Inspecter Kahn, In testifying, said: "He showed no objection whatever to
wrlting the statement. He resented nothing that we did." Thus it appears
PUEPUEA V. UNITED STATES ^75
C262 F.)
that the govemment's case rests upon a statement, not written by the de-
fendant, but by Inspecter Obambers, containlng suggestions of Inspecter Kahn,
slgned by the défendant, after belng detalned 24 hours surrounded at ail times
by one or the other of the inspectors, who were well tralned, and was told
that it looked very bad for him. He was ^ven to understand by one of the
inspectors that he believed he had stolen the package, and the inspecter wlth
whom he had to remaln during the night had In his pocket a warrant for the
defendant's arrest at a convenlent tlme. It is inslsted that after an expérience
of this kind that It was but natural that the young man should succumb to
the importunity of thèse officiais.
The défendant hlmself went on the stand, and went fuUy Into the détails
and circumstences under which the paper, relied on by the govemment, was
slgned by him. It Is insisted that in many respects the defendant's testlmony
is corroborated by that of the govemment's witnesses. For instance, he states
the circumstances under which he went to Mr. Himmelwright's office, the
length of time that he remained there, his physlcal condition owing to lack of
food and rest, and the fact that he was required to spend the nlght in a room
wlth Inspecter Kahn, a perfect stranger to him. It is further insisted that he
was given no rest during this period, and that the inspectors relentlessly pur-
sued thelr investigation, and that he endeavored to communicate with his
f riends for the purpose of employing counsel ; that his spendlng the night at
the Neddo Hôtel was against his protest ; that during this tlme thèse inspec-
tors, and especially Inspecter Kahn, with whom he spent the night, were
continuously telling him that It was best for him to confess to taklng the
package; that they were confident he had taken It, and that they would be
much more lenient with him in the event that he admitted taking the same.
J. L. Broudy and Tazewell Taylor, both of Norfolk, Va., for plain-
tiff in error.
Hiram M. Smith, U. S. Atty., of Richmond, Va., for the United
States.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
PRITCHARD, Circuit Judge. It is insisted by the first assign-
ment of error that the court erred in permitting the introduction of
the alleged confession. The introduction of this paper was objected
to by counsel for défendant, upon the ground that the same was ob-
tained by promises, threats, and coercion, and that it was not vol-
untary. This assignment présents squarely the question as to wheth-
er the alleged confession was compétent, in view of the objections
urged against the introduction of the same.
It is well settled that, to render a confession admissible, it must
clearly appear that it was free and voluntary, and that the witness
was not influenced by threats, violence, or by any implied or direct
promises — in other words, it should clearly appear that the confes-
sion was not due to any improper influence by those seeking to obtain
the same. That portion of the Fifth Amendment of the Constitu-
tion, which provides that "no person * * * shall be compelled in
any criminal case to be a witness against himself," is a safeguard
thrown around one who is called upon to answer a criminal charge.
When one iS arràigned on a criminal charge, the law présumes that
he is innocent until the contrary is shown by évidence sufficient to
convince the jury beyond a reasonable doubt as to his guilt. There-
fore it is highly important in a case like the one at bar that this right
should be preserved, and that only confessions should be admitted
476 262 FEDERAL KEPOETEB
where ît clearly appears that it was the free act of the défendant,
without any inducement, threat or other influence.
In 2 Hawkins, Pleas of the Crown (8th Ed.) p. 595, § 34, there
is an admirable statement of the law upon this subject, which is as
f ollows :
"And as the human mind under the pressure of calamity is easily seduced,
and liable. In the alarm of danger, to acknowledge indiscrimina tely a false-
hood or a truth, as différent agitations may prevall, a confession, wheiher made
upon an officiai examinatlon or In discourse wlth private persons, which Is
obtained from a défendant either by the flattery of hope, or by the impressions
of fear, however sllghtly the émotions may be Implanted, is not admissible
évidence; for the law wlll not suffer a prlsoner to be made the deluded in-
strument of hls own conviction."
The foUowing from 3 Russell on Crimes (6th Ed.) 478, we think
is a clear statement of the record:
"But a confession, in order to be admissible, must be free and voluntary ;
that is, must not be extracted by any sort of threats or violence, nor obtained
by any direct or implied promises, however sllght, nor by the exertlon of any
improper Influence. * • * A confession can never be received in évidence
where the prlsoner bas been influenced by any threat or promise; for the
law cannot measure the force of the influence used, or décide upon Its efCect
upon the mlnd of the prlsoner, and therefore excludes the déclaration if any
degree of influence bas been exerted."
The case of Bram v. United States, 168 U. S. 532, 18 Sup. Ct.
183, 42 %. Ed. 568, is very much in point — indeed, we think it is
practically on ail fours with the case at bar. There it appears that the
défendant, who was the first officer of the ship of which the de-
ceased was the captain, was charged with the murder of the captain
on the high seas. The alleged confession was supposed to hâve been
made to a détective at a time when the défendant was under arrest.
The détective testified that no threats were made or any inducements
held out to him. On this point the witness was interrogated by the
court, and testified as f ollows:
"Q. You say there was no inducement to hlm in the way of promise or ex-
pectatlon of advantageî A. Not any, your honor.
"Q. Held out? A. Not any, your honor.
"Q. Nor anything sald, In the way of suggestion to hlm that be might suffer
If be dld not — that it might be worse for hlm? A. No, sir; not any.
"Q. So far as you were concemed, it was entlrely voluntary? A. Volun-
tary, indeed.
"Q. No influence on your part exerted to persuade hlm one way or the
other? A. None whatever, sir ; none whatever."
Thereafter the witness on cross-examination answered the ioh
lowing question, "What did you say to him, and he to you ? " to which
the witness answered as f ollows:
"When Mr. Bram came into my office, I sald to hlm: 'Bram, we are trylng
to unravel this horrible mystery.' I sald: 'Yonr position is rather an awk-
ward one. I bave had Brown in this office, and he made a statement that he
saw you do the murder.' He sald: 'He could not hâve seen me; where was
he?' I said: 'He states he was at the wheel.' 'Well,' he sald, 'he could not
see me from there.' I said: 'Now, look hère, Bram; I am satlsfied that you
killed the captain from ail I bave beard from Mr. Brown. But,' I said, 'some
of us hère think you could not bave done ail that crime alone. If you had an
accomplice, you should say so, and not hâve the blâme of this horrible crime
PURPURA V. UNITED STATES 477
(2G2F.)
on your own shoulders.' He sald: 'Well, I tlilnk, and many others on board
the shlp think, that Brown is the murderer; but I don't know anything about
it.' He was rather sliort In hls replies.
"Q. Anything further said by either of youî A. No; there was nothlng
further said on that occasion."
In that case the Suprême Court said:
" 'The law cannot measure the force of the influence used or dedde upon
Its effiect upon the mind of the prlsoner, and theref ore excludes the déclaration
if any degree of influence has been exerted.' In the case before us we flnd
that an influence was exerted, and as any doubt as to whether the confession
was voluntary must be determined in favor of the accused, we cannot escape
the conclusion that error was comraitted by the trial court in admittlng the
confession under the circumstances disclosed by the record."
In the case of Sorenson et al. v. United States, 143 Fed. 820-824,
74 C. C. A. 468, 472, the court said:
"The confessions iu the case before thls court were made to an inspector
whlle the défendants were prlsoners under his control. He stated to oue of
them that he had an absolntely good case against hlm, and to both that the
thing for them to do was to plead gullty aud to throw themselves on the mercy
of the court, and the matter would probably be overlooked in the state court.
Tried by the décision of the Suprême Court In Bram's Case, either of thèse
statements was 'legally sufficlent to engender in the mind of the accused hope
or fear in respect of the crime charged,' and each of them rendered the sub-
séquent confession Involuntary and inadJnissible in évidence."
In this instance, as we hâve stated, the testimony shows that de-
fendant for a period of almost 24 hours, excluding the time he was
asleep, was continuously plied with questions by thèse five inspectors
and ail manner of questions propounded to him about the circum-
stances under which the package in question was lost. It further ap-
pears that he was given no rest during this period, except when
asleep; that he endeavored to communicate with friends for the pur-
pose of employing counsel, and that he spent the night at the hôtel
under protest.
Under the circumstances, according to the testimony of the in-
spectors, we think this alleged confession is clearly inadmissible. This
is true, independent of the testimony of the défendant; but in many
respects, as we hâve said, the defendant's testimony is corroborated
by that of the inspectors. In view of what we hâve said, the court
below was in error in admitting this alleged confession, and there-
fore the judgment of the lower court should be reversed.
Reversed.
478 262 FEDEBAL EEPOKTËB
MAYNARP et al. v. TJN[TF:D THACKER COAL CO.
(CJircult Court of Appeals, rourth Circuit. October 7, 1919.)'
No. 172a
Dkeds <S=>124(1) — TiTUE iH fee simple conveted on patment of pbicb.
A deed executed pursoiant to a plan of grantor to divide his lands
among his sons, conveying certain land to a son in considération of his
payment of stated sums to his sisters, for whlch a lien was reserved, "to
hâve and to hold the same durlng his natural life, and then to descend to
the heirs of lils body," with the right, however, to sell to either of his
Brothers or sisters, the grantor and wife then grantlng and reUnqulshing
to grantee "ail their right, title, and Interest in the foregoing named lands,
to hâve and to hold the same forever, upon the fulflUment of the contract,
and payment of the sums stipulated," held, on payment of the considéra-
tion named, to vest grantee with tltle in fee simple.
Woods, Circuit Judge, dlssentlng.
Appeal from the District Court of the United States for the South-
ern District of West Virginia, at Huntirigton; Benjamin F. Keller,
Judge.
Suit in equity by William Maynard and others against the United
Thacker Coal Company. Decree for défendant, and complainants ap-
peal. Affirmed.
Certiorari denied 40 Sup. Ct. 119.
Ed. Noonchester, of WilHamson, W. Va., for appellants.
Malcolm Jackson, of Charleston, W. Va. (Edward C. Eyon, of New
York City, Cary N. Davis, of Huntington, W. Va., Buford C. Tynes,
of Huntington, W. Va., Brown, Jackson & Knight, of Charleston, W.
Va., and Campbell, Brown & Davis, of Huntington, W. Va., on the
brief), for appellee.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
PRITCHARD, Circuit Judge. This is a suit instituted in the Dis-
trict Court of the United States for the Southern District of West
Virginia, by the plaintifïs against the défendant, who seek to quiet
their title to certain lands hereinafter referred to. The facts in this
case may be epitomized as f ollows :
In the year 1870 Richard Maynard, his wife, Charlotte, uniting, in
furtherance of a sch^me for partitioning his landed estate among his
numerous sons, conveyed to his son John B. Maynard the tract of
land in the bill of complaint set out and described, by a deed, the con-
struction of which is the subject of controversy in this suit. The ap-
pellants' contention is that the said deed vested the said John B. May-
nard with a life estate only in the tract of land therein described. The
appellee's contention is that the said deed vested the said John B.
Maynard with a fee simple absolute title in said tract of land; the
minerais and incidental rights and privilèges pertaining to which passed
by mesne conveyances unto, and are now claimed in fee simple abso-
lute by, the appellee.
€=9For ctber casea see same toplc & KBY-NUMBER In ail Key-Numbered DIgests & Indexes
MAYNARD V. UNITED THACKEE COAL CO. 479
(262 F.)
The deed upon which appellee relies is in the f oUowing language :
"Thls deed made this the 30th day of September, 1870, between Richard
Maynor and Oharlotty Maynor his wife of the first part and John B. Maynor
of the second part both of the county of Logan and state of West Vlrghnla
wltnesseth that the parties of the flrst part hath thls day bargalned and sold
and by thèse présents doth grant bargaln and sell unto the party of the second
for and in considération of the siim of fifty dollars to be pald to Parlée Stepp
wife of Aaron Stepp by the flrst day of June 1871 and twenty flve dollars to
be paid by the first day of June 1871 to Sarah Ann Stepp wife of Hlram Stepp
ail the foUowing named lands to wlt lying and being in the county of Logan
& State of West Virginia on Llcb creek a tributary of the Tug fork of Sandy
river and bounded as followa to wlt — [hère follows description] To hâve and
to hold the same during his natural llfe and then to descend to the heirs of
his body but the party of the flrst part grants to the party of the second part
the right to sell the foregoing lands to either of his brothers or sisters the
parties of the flrst part hereby reserves a Une upon the lands for purchase
money stipulated the said Richard Maynor & wife Charlotta Maynor hereby
grants and relinquishes to the said John B. Maynor ail their right, tltle and
Interest in the foregoing named lands to liave and to hold the same forever
ui)on the fulfiUment of the contract & payment of the sums stipulated. Given
under our hands and seals day and date mentioned."
The appellants, in their bill of complaint, pleaded ail the f acts per-
taining to the aforesaid scheme of division of the landed estate of the
said Richard Maynard among his chiidren, filing therewith numerous
exhibits, constituting both their own and the chain of title of the
appellee. Thereupon the appellee moved to dismiss the appellants'
bill of complaint, and the said motion was sustained by the court.
Whereupon appellants filed a pétition for a rehearing, to which were
appended as exhibits numerous deeds from the said Richard Maynard
and Charlotte, his wife, to their other sons, ail made as a part of the
gênerai scheme of the said Richard Maynard for dividing his landed
estate among his sons as aforesaid. The court having overruled ap-
pellants' pétition for a rehearing, they now prosecute this appeal.
In order that we may properly interpret the provisions of the deed
in question, we must, if possible, ascertain the intention of the grantor
at the time the deed was executed. Therefore it is necessary to con-
sider the situation, the circumstances surrounding the transaction, and
the purpose of the grantor; in other words, the situation which con-
fronted the grantor and his wife (who, no doubt, were well advanced
in years), and what it was they wished to accomplish when they exe-
cuted this deed, as well as the deeds to the other six sons. Why were
the peculiar and somewhat inconsistent terms of this deed employed?
There must hâve been some substantial reason prompting the grantor
to draft the deed in the manner he did.
It appears that prior to the year 1870 Richard Maynard was the
owner in fee simple absolute of a large contiguous body of land, ag-
gregating about 1,100 acres, situated on L,ick creek, a tributary of the
Tug fork of Sandy river, then known as Logan county, W. Va. It
f urther appears that he was the f ather of ten chiidren, seven of whom
were sons and three daughters, the daughters being Harriett Maynard,
Sarah Ann Stepp (wife of Hiram Stepp), and Parlée Stepp (wife of
Aaron Stepp).
480 262 FEDERAL EBPOETEB
The facts and circumstances clearly shôw that the father for some
reason was of opinion that it would be best to convey the real estate to
the sons, and it further appears that it was his désire to provide for
his daughters ; hence the requirement that his sons pay to each of his
daughters such amounts as would in the aggregate be équivalent in
value to the share of land they would hâve received, had the land been
apportioned equally aniong ail the sons and daughters. That this was
the grantor's purpose in partitioning his lands is evidenced by the
fact that he undertook to retain liens on the various tracts until the
sons should pay to the three daughters the respective amounts there-
in provided.
It must be admitted that the deed was inartificially drawn and is
somewhat contradictory in its terms; but, while this is true, the pro-
visions are such as to warrant us in assuming that it was his inten-
tion not only to convey the land to his sons, but at the same time secure
such amounts as were to be paid to the daughters. Instead of convey-
ing the land outright to his sons and then requiring them in tum to
exécute to him deeds of trust on the lands in question to secure the
payment of the notes to his daughters, he undertook in a simple way
to charge the same with a lien for the several amounts which he ex-
acted of them to be paid as a condition précèdent to investing them
with the fee simple title to this property.
After restricting the right of aliénation, except as to the brothers
and sisters, the grantor then undertook to reserve a lien upon the lands,
as we hâve said, for the purchase money stipulated to be paid to the
daughters, which is as follows :
"* ♦ * The sald Elchard Maynor and wife Oharlotta Maynor hereby
grants and relinqulshes to the said John B. Maynor ail thelr right tltle and
Interest In the foregoing named lands to hâve and to hold the same forever
upon the fulflllment of the contract & payment of the sums stipulated."
The next question is as to whether the grantees complied with the
stipulation which required that they should pay to the daughters the
respective sums fixed by the grantor. The learned judge who tried this
case in the court below, in ref erring to this phase of the case, said :
"It Is oonceded that the purchase price mentioned in the deed has been
fully paid."
Therefore there has been a literal fulfillment of the requirements
of the grantor as a condition précèdent to the grantees becoming in-
vested with fee simple titles for thèse lands. It would be contrary to
ail rules of construction to ignore the concluding clause of the deed,
wherein the grantors relinquished to the grantee ail their right, title,
and interest in thèse lands, which provides that the grantee shall hold
the same forever. The learned judge, in construing this deed, among
other things, said :
"After a careful study of the context of this deed, It seeras clear to me that
Eichard Maynard, desirlng to divide his property among his children, in-
tended to convey to John B. Maynard the property herein Involved In fee,
upon the compliance by him with the terms and conditions therein set eut In
other words, a life estate only (and that subject to the lien retained) vcas to
vest in the grantee lu the event of his fallure to fulflll the conditions therein
MAYNABD V. UNITED THACKER COAL CO. '481
(262 F.)
Imposed, vlz. the payment of the considération mentioned to the grantee's
slsters, whieh evidently constituted, or was to constltute, a portion of thelr
division of the property ; and upon the payment of the considération set ont,
a fee simple estate should vest. In determlning the intention of the grantor,
courts look not only at the words used, but to the situation, and drcumstancea
of the parties as well. The modem rule governing construction leans toward
the intention of the maker, overridlng mère form and technical words, and
now it may be said that the intention must govem and rule the construction
in deed as well as in wills. Moreover, under the rules governing the construc-
tion of deeds, where the context is susceptible of two constructions, that
which is more unfavorable to the grantor is accepted, and restrictions con-
tained in such instruments are construed most strongly agalnst the maker
fWilliams v. South Penn 011 Ck).] 52 W. Va. 181 [43 S. B. 214, 60 L. R. A. 795],
[Deer Creek Lumber Co. et al. v. Sheets et al.] 75 W. Va. 21 [83 S. E. 81]. In
the case of Railway Company v. Honaker, 66 W. Va. 149 [66 S. B. 104, 27 h.
R. A. (N. S.) 388], the court held that when a deed contains a restramt upon
aliénation, but is an attempted grant in fee, that conditions or restrictions
absolutely restralning aliénation when répugnant to the estate created, are
void as against public policy."
The deed contains provisions in the habendum clause which, upon a
casual considération, might cause one to think that it was the inten-
tion of the grantor to provide only for a life estate and then by descent
to limit it to the first taker. Such would be true, were it not for the
fact that later on in the deed is to be found a provision which clearly
shows that, upon compliance on the part of the grantee with certain
stipulations contained therein, he would immediately become invested
with a f ee-simple title to the premises in question.
In the case of Mauzy et al. v. Mauzy et al., 79 Va. 537, wherein
the principle involved in this controversy was passed upon, the court,
among other things, said :
"At common law, in case of repugnancy between the premises and the
habendum in deeds to natural persons, the latter gave way to the former; but
as in this case the deed conveys the fee only by virtue of the statute (Code
Î873, c. 112, § 8), which provides that when real estate is conveyed the entire
Jpterest of the grantor shall be construed to be conveyed, unless a contrary
intention appears by the conveyance, the whole deed must be looked to. In
order to ascertain and glve effect to the Intention of tJie parties. • * •
Looking, then, to the whole deed and the surroundlng circumstanees, vre
thlnk the conveyance was to Mrs. Mauzy, absolutely and exclusively. * ♦ •
The considération flowed from her alone, and, her husband belng insolvent, tlie
burden of malntalning the famlly was cast upon her. The language of the
habendum of the deed already quoted merely indicates the motive for the
conveyance to her, which was to provide a home and a means of support for
herself and children, free from the control of her husband, and secure from
the clalms of hls creditors."
The following cases are in point: Higgins v. Round Bottom Coal
Co., 63 W. Va. 218, 59 S. E. 1064; Morgan v. Morgan, 60 W. Va.
327, 55 S. E. 389, 9 Ann. Cas. 943 ; Culpeper National Bank v. Wrenn,
115 Va. 55, 78 S. E. 620; Uhl v. Railroad Co., 51 W. Va. 106, 41 S.
E. 340; Williams v. South Penn Oil Co., 52 W. Va. 181, 43 S. E. 214,
60 E. R. A. 795 ; Weekley v. Weekley, 75 W. Va. 281, 83 S. E. 1005.
To hold that only a life estate was intended to be granted would
be to ignore the plain provisions of the deed and the facts and circum-
stanees surrounding its exécution ; in other words, to do this, we would
262 F.— 31
482 262 FEDERAL REPORTER
be compelled to ignore the plain rules of construction applying to suits
like the one at bar.
We hâve read and carefuUy considered the cases relied upon by ap-
pellants, but are of opinion that they do not apply to the suit at bar.
Therefore we are impelled to the conclusion that the rulings of the
court below are highly proper, and that the decree should be
Affirmed.
WOODS, Circuit Judge (dissenting). United Thacker Coal Com-
pany claims the minerais in the land in dispute under successive con-
veyances from John B. Maynard, deceased. The plaintiffs, alleging
that John B. Maynard had only a life estate, with remainder at his
death to them as the heirs of his body, ask that the claim of the
défendant be declared a cloud upon their title. The issue dépends up-
on the meaning of a conveyance from Richard Maynard to John B.
Maynard. The District Court and a majority of this court hold, on a
motion to dismiss the bill, that upon payment by him of the purchase
money mentioned in the deed John B. Maynard took a fee simple
absolute, and that therefore the défendant has good title to the minerais.
I cannot resist the conclusion that under the deed he took only a life
estate, with remainder to the heirs of his body, and that the plaintiffs,
heirs of his body, are entitled to the relief of removal of defendant's
claim as a cloud on their title. Omitting the description of the land
the deed was as f oUows :
"Thls deed made tMs the 30th day of September 1870 between Richard
Maynor and Charlotty Maynor his wlfe of the flrst part and John B. Maynor
of the second part hoth of the county of Logan and state of West "Virginia
wltnesseth that the parties of the flrst part hath this day bargalned and sold
and by thèse présents doth grant bargaln and sell unto the party of the sec-
ond for and In considération of the sum of fifty dollars to be paid to Parlée
Stepp wlfe of Aaron Stepp by the flrst day of June 1871 and twenty-flve dol-
lars to be paid by the flrst day of June 1871 to Sarah Ann Stepp wlfe of Hiram
Stepp ail the foUowlng named lands to wit • • * To hâve and to hold
the same during his natural life and then to descend to the heirs of his body
but the party of the flrst part grants to the party of the second part the right
to sell the foregoing lands to elther of his brothers or sisters the parties of
the flrst part hereby reserves a lien upon the lands for purchase money stlp-
ulated. The sald Richard Maynor & wlfe Oharlotta Maynor hereby grants
and relinqulshes to the said John B. Maynor ail their rlght title and interest
In the foregoing named lands to hâve and to hold the same forever upon the
fulfiUment of the contract & payment of the sums stipulated."
This was one of five deeds similar in language by which Richard
Maynard divided a large body of land among his sons, providing that
they should pay as considération the sums mentioned therein to their
sisters. Virginia and West Virginia abolished the rule in Shelley's
Case by this statute:
"Where any estate, real or Personal, Is glven by deed or wlU to any person
for his life, and after his death to his heirs, or to the heirs of his body, the
conveyance shall be construed to vest an estate for life only In such person,
and a remainder in fee simple In his heirs or the heirs of his body." Code Va.
1860, c. 116 : Code W. Va. § 3749.
As was conceded at the argument, if we leave out of view the last
sentence, the deed clearly meant: (1) That John B. Maynard should
MAYNARD V. UNITED THACKEB COAL CO. 483
(262 F.)
have a lif e estate only ; (2) that at his death the heirs of his body should
hâve the remainder in fee simple; (3) that John B. could convey the
entire fee in the land to any of his brothers or sisters, but to them
only; (4) that the life estate of John B. and the remainder in the
heirs of his body, and the title in any brother or sister to whom John
B. might convey, should be subject to the lien for the purchase money
in favor of the grantor for the benefit of his daughters ; (5) that the
remainder to the heirs of the body of John B. could be defeated only
by his conveyance to brothers or sisters, or by sale under the lien iot
the purchase money ; (6) that upon payment of the lien by John B. or
the remaindermen the interest of John B. would still be only a life es-
tate, coupled with the right to convey to his brothers or sisters the
fee. Thus the life estate of John B. and the interest of the heirs of
his body was explicitly fixed by language too plain for doubt, without
the least implication of an intention that the remaindermen should take
only in case John B. should fail to pay the purchase money. As an
incident of this interest of the remaindermen, they as well as John B.
had the right to pay the purchase money and discharge the lien. But
obviously John B. could not defeat the interest of the remaindermen
by paying the purchase money, any more than they could defeat his
life estate by paying it. The only effect of the payment of either would
have been the right of contribution.
It is said, however, that this carefuUy and clearly expressed scheme
of the grantor, and the interests and rights so clearly and carefully
conferred on the remaindermen, the grantor immediately turned upon
and destroyed by the last sentence of the deed — that by this last sen-
tence he eut out the remainder he had just put in. The contention is
that the express grant to John B. of a life estate was enlarged to a fee
simple, and the express grant of the remainder to the heirs of his
body defeated, because in the closing sentence of the deed the grantors
say they —
"grants and relinqulshes to the sald John B. Maynor ail thelr right title and
interest in the foregoing lands to have and to hold the same forever upon the
fulfillment of the eontract and payment of the sum stipulated."
There is the strongest presumption against the intention of the
grantor to destroy the remainder so explicitly created. The grantor
gave a life estate to John B., subject to the payment of the purchase
money ; he could not have intended in the next sentence of the same
instrument to give him a fee simple, subject to the payment of the
purchase money. The only natural construction is that the grantor
in the preceding clause of the deed, relating to the estate and interest to
be conferred, fixed the quality and quantity of the estate that should
pass to John B. and the heirs of his body, and the lien upon it. Hav-
ing said plainly ail that could be said on that subject to make his in-
tention perefectly clear, his mind leaves it and adverts to the complète
relinquishment of his own interest on payment of the purchase money,
and he then leaves out répétition of the limitation of John B.'s in-
terest to his own life.
This conclusion is strongly supported by the deeds of the same date
of Richard Maynard to four other sons, filed with the pétition for
484 262 FEDERAL REPORTEE
rehearing in the District Court. The deeds show on theîr face an
intention to treat ail the sons alike, and to convey a life estate to each,
with remainder to the heirs of his body. The language is slightly
varied, doubtiess because the draftsman, after writing the first deed,
relied on his memory for the language. For example, this language
is used in the deed to his son, Allen Maynard :
"To hâve and to hold the same his natural life then to descend to the
heirs of hia body. But the parties of the first part hereby grant unto the
parties of the second part the privilège of selling the same to any of his
brothers or sisters & making a good and lawful tltle to the lands named in
the foregoing the party of the first part reserves a vendors lien on the said
lands for the payment of the amount named above and for the support stip-
ulated the parties of the first part hereby relinquishes to thfe parties of the
second part ail their right title and Interest in the said lands to hâve and to
hold the same forever upon the condition above named and stipulated."
It would hardly be contended for a moment that "the condition above
named and stipulated" referred only to the payment of the purchase
money, and that under this deed Allen could hâve defeated the inter-
est of the remaindermen by paying ofï the lien. Any différence in the
construction of the several deeds must rest on shadowy verbal dis-
tinctions applied to deeds drawn by a plain untutored man.
Reducing the matter to its simplest form, in the first clause and the
last the grantor used gênerai words of grant to each son, without paus-
ing to express the limitation for his life and then to the heirs of his
body, for the reason that in the intervening clauses he had so clearly
set out the limitation of the son's interest to his life and to the heirs
of his body after his death, subject to the lien for the purchase money,
that it could not be misunderstood.
This conclusion is entirely consistent with the canons of construction
and the principles of law. The common-sense rule that in deeds as well
as wills the intention of the parties, ascertained by considération of the
whole instrument and the surroundings, must be given effect, is no-
where more distinctly stated and consistently maintained than in the
Suprême Court of West Virginia. In Uhl v. Ohio R. R. Co., 51 W.
Va. 106, 41 S. E. 340, and Weekley v. Weekley, 75 W. Va. 281, 83
S. E. 1005, the rule was stated and applied to deeds very similar in
expression to that before us. I am unable to find anything in the
cases cited by defendant's counsel supporting the contention that John
B. Maynard took more than a life estate. The rules relied on in the
opinion of the District Court and the majority of this court, that
unless a contrary intention appears a deed should be construed to
convey the entire estate, and that a deed is to be construed most strong-
ly against the grantor, hâve no application, for there is no dispute that
under any construction the grantor parted with his entire estate, sub-
ject to the lien for the purchase money.
BALTIMORE D. D. & S. BUILD. CO. V. NEW YORK & P. R. S. S. CO. 485
(262 F.)
BAI/riMOEB DRY DOCKS & SHIP BUILDING CK). T. NEW YORK & P.
B. S. S. CO. et al.
THE ISABBIiA.
(Cireult Court of Appeals, Fourth Circuit Kovember 6, 1919.)
No. 1748.
Whabves <©=»16 — Réservation OB' feee use ïob "vessels eelonginq to
United States."
Under a conveyance from the United States of a site for a dry dock,
wlthout other considération than "tlie right to the use forever of said
dry dock at any tlme for the prompt examination and repair of vessela
beionging to the United States free from charge for docking," a privately
owned vessel, requisitioned by the government for war purposes, taken
over under a "bare boat" charter, and manned and operated by the Navy
Department as an army transport, held, while in such use, to "belong"
to the United States, and entltled to free docking.
Appeal from the District Court of the United States for the District
of Maryland, at Baltimore ; John C. Rose, Judge.
Suit in admiralty by the Baltimore Dry Docks & Shipbuilding Com-
pany against the Steamship Isabela, the New York & Porto Rico
Steamship Company, claimant, and the United States, intervener.
From the decree (258 Fed. 934), libelant appeals. Affirmed.
Certiorari denied 251 U. S. , 40 Sup. Ct. 178, 64 L. Ed. .
This was a suit in admiralty, instituted in the District Court of the United
States for the District of Maryland for libel of the steamship Isabela. The
appellant, libelant below, is a corporation owning a dry docking and ship-
building plant in the city of Baltimore, Md., consisting, among other prop-
erty and structures, of two docks known as "Simpson Dry Docks," one of
which is sltuated on property conveyed by the United States through tlie Sec-
retary of War, under authority of an act of Congress approved June 19,
1878 (20 Stat 167), entitled "An act granting a site for a dry dock in the city
of Baltimore upon certain conditions." The otlier, which is the larger dock,
is sltuated on propei'ty acquired from priva te owners. The conditions under
which the ground for the flrst-mentloned dry dock was conveyed to the
predecessor in title of appellant are set out in a deed from the Secretaxy of
War, dated March 26, 1879, and are as follows:
"The considération of this conveyance and the condition upon which same
Is being made being that the sald Baltimore Dry Dock Company of Balti-
more City is required to construct upon the land hereby conveyed within two
years from the date of this conveyance an efficient Simpson improved dry
dock 450 feet in length, and to accord to the United State» the right to the
use forever of the said dry dock at any time for the prompt examination, and
repair of vessels belonging to the United States, free from charge for
docking * • • ."
This dock will be called for convenience the Ft. McHenry dock, and the
larger dock of the appellant company, referred to, will be' spoken of as the
cross-street dock. Among other things, it appears: That the steamsiilp
Isabela, a vessel of 3,068 tons gross reglster, pursuant to the authority and
directions embodied in the executive order of July 11, 1917, was requisitioned
by the Président, actlng tlirough the United States Shipping Board, for na-
tional uses and puriwses. That after said réquisition, the New York & Porto
Rico Steamship Company, her ehartered owners, executed the govemment's
standard form of réquisition charter. Said steamship was first taken over
on the time basis, the terms thereof being contained under the form entitled
e=5For other cases see same toplc & KBY-NUMBER in aU Key-Numbered Digests & Indexes
486 262 FEDERAL EBPOKTBH
"tlme form" on pages 2, 3, and 4 of said réquisition charter, but that on Aprll
9, 1918, pursuant to tlie ternis of tlie réquisition, the steamship was taken
over on the bare boat basis, the tenns of whlcli are deflned under tàe tltle
"bare boat" on pages 5 and 6 of said réquisition cliarter. That on February
4, 1918, the said steamship was asslgned for service of the War Department,
and thereafter used as an army transport, and that on and after Aprll 9,
1918, untll the tlme of her redelivery to the chartered owners, she was em-
ployed In such service, and during said period, was manned by the United
States through its Navy Department, with the officers and enUsted personnel
of the navy, and said steamship, at the tlme of the rendering of the services
mentioned in the libel, was In such service and so manned.
In the month of January, 1919, it appears that the appellant company re-
ceived a letter from the Coast Inspector of the Naval Overseas ïrausptutatlou
Service, In whlch that offlcer states that he had deducted from bills rendered
by the appellant company to the Naval Overseas Transportation Service for
dry dock on three steamers, namely, the Soestdijk, the Norlina, and the
Corozal, amounting to $3,960.85, on the ground that the dry dock located on
the appellant's lower plant, which Is the Ft. McHenry dock, could at any tlme
be used for the prompt examination and repalr of vessels belonging to the
United States, free from charge for docking, and on the theory that the
said vessels were "vessels belonging to the United States."
The appellant company at once protested against the déduction on the
ground that thèse vessels did not belong to the United States, and the ques-
tion was thereupon referred by the Naval Overseas Transportation Service
to the Navy Department, and an opinion of the Solicitor of the Navy De-
partment, dated January 21, 1919, was received in reply, the material parts
of which opinion are: "That where vessels are under charter upon a bare
boat basis for the sole use and beneflt of the United States, either by the
Shipping Board or any other department of the government, the équitable
title therein Is tn the United States, the government havlng a spécial llmited
ownership in the vessels, and therefore such chartered vessels hâve the same
free use of the lower dock of tbls company as other vessels of the United
States."
In pursuance of this opinion, the said vessels beJng vessels under a bare
boat charter to the Shipping Board, the Cost Inspector of the Navy refused
to reinstate the charges. The earlier part of the Solidtor's opinion was oon-
cemed with the contention that vessels owned by the United States Shipping
Board Emergency Fleet Corporation (although the learned Solicitor faUs
to distinguish between the Shipping Board and the neet Corporation, but
evidently means the latter) could not be said to belong to the United States,
and he proves to hls own satisfaction that, as the United States owns 100
per cent, stock of said corporation, the United States bas the sole use and
beneflt of said vessels, and they are, equltably at least, and under the pro-
visions of the act of 1878, "vessels belonging to the United States." The
appellant company In Its letter of February 5, 1919, did not insist at the
time on any exception It mîght hâve taken to the opinion on thIs point, but
distlnctly ralsed the further point that vessels under charter to the govern-
ment, either through the Shipping Board or any other govemmental agency,
are not "vessels belonging to Ûie United States," and are not entltled to free
dockage.
The appellant company then reqnested that It be informed by the district
superviser of the Naval Overseas Transportation Service whenever an order
was received to dry-dock a vessel, whether the vessel was a chartered vessel
or one owned by the government The district superviser, Oapt. Abele, accord-
Ingly on February 5, 1919, wrote to the appellant as follows: "Subject: Dry-
docking U. S. S. Isabela. I hâve to Inform you that the Isabela Is a govern-
ment owned vessel under the ruling of the Solicitor of the Navy Department,
dated 21st January, 1919. Tltle of ownership of this vessel resta with the
Porto Rlean Steamship Company" (sicî).
On receipt of this information the arvpellant on February 6, 1919, wrote a
lengthy communication to Capt. Abele, in which they say, among other
things: "We hereby refuse the free use of our dock for this privately owned
BALTmOBE D. D. & S. BUILD. 00. V. NEW YORK & P. K. S. S. UO. 487
(262 F.)
vessel and otlier privately owned vessels. We wlsh to emphasize that we are
now wllling, as we hâve always been, to carry out fully the use of the dock
for vessels belonging to the United States. If the Navy Department désires
thls vessel docked, and orders us to do so, we shall, under protest, furnlsh
the neeessary fadllties to dock the vessel, and for this service we daim the
usual docklng charges. If thèse charges are not pald by the Navy Depart-
ment, we shall hold the ship and the owners of the ship responslble, and shall
notify the owners to this effect" The letter contains, in addition, a measured
protest against the threat on the part of he Navy Department therein re-
ferred to, to "commandeer" the dry dock, and undertook to suggest methods
by which the controversy be determined promptly by the United States courts.
On February 7, 1919, Capt. Abele replied as follows: "The Baltimore Diy
Docks & Shlpbullding Company, Baltimore, Maryland — Gentlemen: Subject:
Dry-doeking of U. S. S. Isabela. Référence: Tour letter February 6th,
relative docking of U. S. S. Isabela. It is hereby directed that the U. S. S.
Isabela be docked in the lower dry dock of your company. This is to be con-
sidered an order for dry-docking In accordance with référence. Tours very
truly, C. A. Abele, Captaln, U. S. N."
Prior to recelpt of the above order from Capt. Abele, the appellant Com-
pany had written on February 6, 1919, to the New York & Porto Eico Steam-
ship Company, New York City, inclosing a copy of their letter of the Bame
date to Capt. Abele heretofore quoted. The day foUowing receipt of order,
to wit, February 8, 1919, they admitted the vessel to the dry dock, where she
remained flve days, incurring the dry-docking charge of 12 cents a ton for
the flrst day and 10 cents each for the remaining four days, amounting alto-
gether to $1,592.76. The bill for thèse charges was disapproved by the Cost
Inspecter of the United States Navy, as shown in his letter of February 13,
1919. The vessel was placed in drj' dock by the govemment for the purpose
of having her bottom scraped and being othervvise put in order for redelivery
to her owner, the New York & Porto Rico Steamship Company, which re-
delivery took place on February 14, 1919, and the same day, she being then
In the possession of private parties, the vessel was attached by the United
States marshal on the order of the libelant, the appellant in this case.
The court below entered a decree dismissing the Ubel, from which decree
libelant appealed to this court
George Weems Williams, of Baltimore, Md. (Marbury, Gosnell &
Williams, of Baltimore, Md., on the brief), for appellant.
George Forbes, of Baltimore, Md. (Ray Rood Allen, Fred A. Whit-
ney, and Burlingham, Veeder, Masten & Fearey, ail of New York City,
on the brief), for appellee New York & Porto Rico S. S. Co.
Samuel K. Dennis, U. S. Atty., of Baltimore, Md., for the United
States.
Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.
PRITCHARD, Circuit Judge (after stating the facts as above). The
questions involved in this controversy are within a narrow compass ;
the main question being the proper interprétation to be given to the
words "belonging to the United States." In order to correctly inter-
pret the meaning of thèse words in the connection in which they are
used, it becomes important to consider the circumstances which induc-
ed the govemment to make the grant it did. It must be admitted that,
when this land was granted by the govemment for the purpose of dry-
docking, the government's only compensation therefor consisted in the
use of the dry dock, f ree of charge ; and it is but f air to assume that
it was the purpose of the représentatives of the govemment to at
488 262 FEDERAL EBPORTEE
least secure the free use of thèse dry docks for ail ships being operated
under its exclusive control.
As we hâve already stated, the Isabela was requisitioned by the
government, assigned for the service of the War Department, and
used as an army transport until her redelivery to her chartered own-
ers. Its movements were controlled by the United States, through its
Navy Department, under the supervision of its officers. Thus it will
be seen that for the period in question, the Isabela was as much under
the control and subject to the orders of the government as if it were
actually owned by the government. Thèse circumstances are material,
and should be considered in ascertaining the correct interprétation to
be given to the words "belonging to the United States."
The words "owned by" mean an absolute and unqualified title. The
use of the words "belonging to" does not import that the whole title
to the property or the thing is meant, because it frequently occurs in
ordinary transactions that things may "belong to" one who has less
than an unqualified and absolute title. Numerous instances in the
ordinary transactions of life may be cited where this is true; for in-
stance, where collatéral is owned by the debtor and belongs to the
creditor until the debt is paid. Also, premises occupied by the mort-
gagor until default ; there the légal title is in the mortgagee, but the
land "belongs to" the debtor until default. Bouvier's Law Dictionary
contains the following définition of the word "belongs" :
"To appertain to; to be the property of. Property belonging to a person
has two gênerai meanlngs: (1) Ownership ; (2) the absolute right ot uaer.
A road may be sald wlth perfect propriety to belong to a man who has the
right to use it as of rlght, although the soil does not belong to him."
In the case of People v. Chicago Theological Seminary, 174 111. at
page 182, 51 N. E. at page 199, the court said:
"We think this position Is based upon a too limited meaning of the words
'belonging or appertainlng' as hère used. Of course, if the language of sec-
tion flve had been that the property, of whatever kind or description, owned
by the Seminary shall be forever free from ail taxation, etc., or if, as counsel
seem to assume, the words 'belonging or appertainlng' hère neeessarily
ineant ownership of the property, then there would be force in this argument
of counsel. It is undoubtedly true that the word 'belonging' may mean own-
ership and very often does. But that is not its only meaning. • » » ••
Counsel seem to hâve been unable to discover any admiralty cases in
this country analogous to the one at bar. However, the courts of
Kngland hâve passed upon this point frequently. In the case of The
Master, Wardens and Assistants of the Trinity Church v. Clark, 4
Maule & Selwyn's (1815-16) King's Bench Reports, 288, the court,
speaking through Lord Ellenborough, said :
"Where défendant chartered his ship to the Commlssioners of the trans-
port service on behalf of the crown, to be employed as a transport, and the
ship in the course of such employment made several voyages from Deptford
io forelgn ports and back, held that the terms of the charter party, coupled
jvdth the nature of the service, a temporary ownership passed to the crown,
so that défendant during the tlme of such service, was not to be considered
as owner within the charters granted to the Trinity House, which impose
lighthouse duties, and for buoyage and the beaconage, on the masters and
owners of shlijs."
DOREANCB V. BAEBEE & CO. *89
(262 F.)
After an elaborate discussion of the facts, the court, in concludii^
Its judgments, said:
"The only question Is, who Is to be considered aa owner of the vessâ
wlthin the charters vmder whlch the plaintiffs clalm» durlng the tlme she
was in the service of the crown under this charter-iwrty. We are of the
opinion that from the terms of the contract, and from the nature of the
service to be performed, the crown Is to be so considered, and that a non-
suit must be entered."
The following English cases are also very much in point: The
Sarpen, [1916] Probate E>ivision, Law Reports, 306; The Carrie,
[1917] L. R. Probate Division, 224; Admiralty Commissioners v. Page
and others, [1918] 2 Law Reports, King's Bench Div. 299; The Hop-
per No. 66, décision of Bargrave Deane, J., [1907] P. 34, and of Court
of Appeals, 524; The Matti, [1918] Law Reports, Probate Divi-
sion, .
Therefore we are of the opinion that the court below was correct
when it said:
"The vvord 'belonging' is not a technioal one; its meaning dépends to a
large extent upon the circumstances under whlch It is used. In conunon
speech and understandlng, something may well 'belong* to one, although he
has less than an absolute and unqualifled ownership of It."
In view of what we hâve said, we do not deem it necessary to enter
into a discussion of the other points involved, feeling, as we do, that
the decree of the court below was proper, and should be affirmed.
Affirmed.
DORRANCB et al. v. BAEBER & CO., Ina
(Circuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 65.
1. SniPPiNQ <S=>108 — Meaning attached to wobds in contbact of oabriaob
AT Tlins THET WERE WBITTEN CONTKOLLING ; "iCERCANTELE CONTBAOT."
A contract between a shipper and carrier for the carrlage of a stated
quantity of cotton on one of the carrières shlps held a "mercantile con-
tract," to be construed in accordance with the meaning attached to the
words at the tlme they were written.
2. SnippiNG <S=5l08 — WOEDs "Januaey shipment from Galveston" a wae-
KANTY.
In a contract for carrlage by respondent from New YorK on one of its
ships of a quantity of cotton, "January shipment from Galveston," the
words quoted held to be a warranty, and respondent held not requlred
to accept cotton not shipi)ed In January from Galveston.
3. CON TRACTS <S=294 "SUBSTANTIAL PERFORMANCE."
"Substantial performance" means not doing the exact thing promlsed,
but doing something else that is just as good, or good enough for both
obliger and obligée.
[Ed. Note. — For other définitions, see Words and Phrases, ïïrat and
Second Séries, Substantial Performance.]
Appeal from the District Court of the United States for the South-
ern District of New York.
^=>For otber cases see same toplc & KBY-NUMBER in ail Key-Mumbered Dlgesta A Ind«zm
490 262 FEDERAL REPORTER
Suit by John M. Dorrance and others, trading as Dorrance & Ce.,
against Barber & Ce, Incorporated. Decree for respondent, and libel-
ants appeal. AfErmed.
Respondent corporation owns and opérâtes a line of freight steamers. A
contract was made by it wlth Ubelant, expressed In a broker's note, of whlch
the followlng is the materlal portion :
"Engaged for account of Messrs. Dorrance & Co. (shipper).
"Destination — Vladivostock ; Steamer — Barber Line. With Barber & Co.,
Agents. 1,000 baies compressed cotton at $2.25 net per 100 Ibs. freight pre-
paid, January shlpment from Galveston."
This agreement was made January 5, 1916, and it Is admltted that the last
phrase quoted from the broker's note means that the cotton to be carried by
the Barber Line was to be shipped from Galveston, Tex., in the month of
January.
The reason for the clause as proved is that it enabled the carrier to book
freight ooming from Galveston wlth a reasonable expectation of its delivery
in Kew York in net over two weeks from shlpment in Galveston, so that thls
consignaient could reasonably be expected to get out of New York durlng the
first half of February.
It Is further admltted that respondent was not bound to carry by any par-
tieular vessel. On February 9th it did "déclare" the "Bolton Castle" ; i. e., no-
tifled libelants to dellver their cotton. Accordingly on February 12th Dorrance
sent a lighter wlth approximately the contract quantity of cotton on board to
Barber's pier, and the lighterman dellvered to respondent's agent the usual
papers evidencing tltle and rlght to ship, but Barber & Co. never physlcally
received or recelpted for the cotton; that, accordlng to custom as proved,
would hâve occurred when the goods were elther on board or on respondent's
pier. Meanwhlle the Bolton Castle was loadlng other cargo, of a kind that
would naturally be stowed below the cotton, and the cotton-laden lighter lay
near by. On February 16th a fire broke out wMch greatly injured respondent's
pier and the steamship, but completely destroyed the cotton on the lighter.
T5ie Bolton Castle required repairs, whlch prevented her use for about
three months; at the expiration of that time she started for Vladivostock.
On or about February 20th Dorrance tendered to Barber other cotton in at-
tempted fulflUment of the contract stated, but It was not "January shlpment
from Galveston"; cotton so shipped belng impossible to obtain. Thereupon
Barber refused to receive the same, on the sole ground that it had not been
shipped as per contract. Dorrance, who had sold that quantity of cotton to
arrive in Siberia, thereupon shipped at a much higher rate by other carriers,
and brought this suit to recover as damages for breach of contract the excess
paid. The District Court dismissed the libel.
Harrington, Bigham & Englar, of New York City (Oscar R. Hous-
ton, of New York City, and Geo. S. Brengle, of San Juan, P. R., of
counsel), for appellants.
Hunt, Hill & Betts, of New York City (Geo. Whitefield Betts, Jr.,
and Robert McLeod Jackson, both of New York City, of counsel),
for appellee.
Before WARD, ROGERS and HOUGH, Circuit Judges.
HOUGH, Circuit Judge (af ter stating the facts as above). [1] The
agreement herein involved is accurately described as a contract for
freight, if not strictly a contract of affreightment, and for présent
purposes there is no différence between the phrases. The contest be-
fore us is shortly, but sufficiently, stated by inquiring whether such a
contract is a "mercantile contract," as those words hâve been used in
a long line of décisions of controUing authority.
DORRANCE V. BARBES & CO. ^^^
(262 F.)
Charter parties are mercantile contracts (Lowber v. Bangs, 2 Wall
728, 17 L. Ed. 768), and so are contracts for the sale of chattels
(Norrington v. Wright, 115 U. S. 188, 6 Sup. Ct. 12, 29 L. Ed. 366).
If Dorrance, instead of hiring room in a large ship for 1,000 bales_ of
cotton, had chartered a small one to carry the same, the transaction
would hâve been absolutely governed by the cases cited. We perceive
no différence in principle between hiring a whole ship for the carriage
of freight, and engaging room for a little freight in the same ship;
both acts are the natural fruit of the same activities, normally pursued
by men of the same environment and éducation, for the same purposes.
Every reason assigned by Swayne, J., in the Lowber Case for putting
charters in the class of mercantile contracts, and construing such con-
tracts in the manner there authoritatively done, applies with equal
force hère, and we unhesitatingly hold this a mercantile contract.
Such contracts are to be construed according to the intention of the
parties, but that intention, when it cornes to labeling or defining any
particular stipulation as a warranty, or a condition précèdent, or a rep-
résentation, or an independent covenant, must be discovered from
the instrument itself. This ruie may at times involve plain men using
hard words in some difficulty, but it insures that plain men using plain
words will hâve their language enf orced according to the meaning
attaching to the words at the time they were written. The construction
is to be irrespective of after-occurring events (Davison v. Von Lingen,
113 U. S. 40, 5 Sup. Ct. 346, 28 L. Ed. 885), and if the parties by plain
words make that fundamentally important, which courts and juries
subsequently deem immaterial and would like to disregard, it is not for
them to substitute the wisdom of their hindsight for what they may
regard as the folly of the parties (National Surety Co. v. Long, 125
Fed. 887, 60 C. C. A. 623, and cases cited).
[2] It is not denied nor doubted that, when thèse parties wrote
"January shipment from Galveston," they meant that what Barber was
to carry was cotton that had started on its journey in January. It
is shown by évidence that the reason for this stipulation was to en-
able Barber to rely on arrivais in New York. We think the fact im-
material, if the phrase is both compréhensible without explanatory
évidence, and to be regarded as a condition précèdent or a warranty.
That it is such condition or warranty we feel assured, because it may
be regarded either as a stipulation in respect of time which is of the
essence in contracts mercantile (Connell, etc., Co. v. Diederichsen & Co.,
213 Fed. 737, 130 C. C. A. 251, and cases cited), or as a descriptive
statement intended to be a substantive part of the contract, which is
a warranty (Behn v. Burness, 3 B. & S. 751). The truth of this last
interprétation is tested by asking whether, if no fire had occurred
(the normal expectation), Dorrance would hâve dared to tender to
Barber cotton that did not leave Galveston in January ? That he would
not is, we think, admitted, and is obvions at ail events.
Argument for appellant, as to construction of contract, really disre-
gards the rule of Davison v. Von Lingen, supra, and relies on after-
occurring accidents to control construction. The Bolton Castle did not
and could not sail as contemplated, and long before her delayed de-
492 262 FEDERAL REPORTEE
parture other cotton was tendered; and, to quote from a wîtness,
'cotton is cotton," and this new tender would weigh as mudi and
pay as much as if it had come from Galveston in January, instead o£
from some other equally celebrated cotton center. The judgment, and
especially the words of Lord Blackbum in Bowes v. Shand, 2 App.
Cas. 455, disposes of a similar argument, if rice be substituted for cot-
ton.
The sum of the matter is that libelant warranted to respondent cot-
ton of a particular description, that the description is in terms of time
is accidentai, and when (though without fault on his part) Dorrance
failed to deliver the warranted article, he f ailed to fulfiU the contract
he had made.
The doctrines of substantial performance and waiver hâve no appli-
cation to this case. Waiver is always a voluntary act or the necessary
légal resuit thereof, and is mainly a question of intention. Frankfurt-
Bamett Co. v. Prym, Co., 237 Fed. 21, 150 C. C. A. 223, L. R. A.
1918A, 602, and cases cited. Nothing but the fire is suggested as evi-
dencing a waiver by Barber, and that certainly was neither intentional
nor voluntary.
[3] Substantial performance, as that phrase is correctly used, means
not doing the exact thing promised, but doing something else that is
just as good, or good enough for both obligor and obligée ; and courts
and juries say what is good enough or just as good. The object (or
one important purpose) of warranties and précèdent conditions is to
prevent (e. g.) our doing any such thing in this case.
Decree affirmed, with costs.
AMERICAN MBECANTILB CORPORATION v. SPIBLBERG.
(Circuit Court of Appeals, Second Circuit December 2, 1919.)
No. 11.
1. Bbokebs <©=960 — Whkbe deal faibed withotjt fattlt or pbincipai, thebe
IS NO EIGHT TO COMMISSIONS UNDEE CONTRACT CAIXING FOB PAYMENT FBOH
FINAL PAYMENT BT PUECHABEB.
Under a contract by défendant to pay plalntlff as broker a commission
on the sale of a shlp, if hls ofCer was accepted "and the deal consummated,
• ♦ * when the fuU purchase prlce is pald to me, from the final pay-
ment," défendant helA not liable for commission where, although a con-
tract of sale was entered Into, through no fault of défendant it could not
be carried out, and was afterward canceled by the parties.
2. Appbal and ebbob <g=>997(3) — Findinos on motions by both pabties fob
DIBECTED VEEDI0T C0NCLTJSIVE.
In an action at law, where at the end of the trial both i»artles move for
a dlrected verdict, both are concluded by the flndings of the court on ail
Issues of fact.
Ward, Circuit Judge, dlssentlng.
In Error to the District Court of the United States for the Southern
District of New York.
» ' — iiii-'~ m— — ■, „ -i-.i.. .i...... .11 I .1. ■ ,. i
^=;9For otber casea see same topic & KEÎY-NUMBER lu ail Key-Numbered Digests & Indexes
AMERICAN MERCANTILE CORPORATION V. SPIELBERQ 493
(262 F.)
Action by the American Mercantile Corporation against Harold
Spielberg. Judgment far défendant, and plaintifï brings error. Af-
firmed.
The American Mercantile Corporation Is a corporation organized under the
laws of the state of Delaware. The défendant, Spielberg, is a citizen of the
State of New York, reslding in the Southern district of that state.
The défendant was the owner of an undivided half interest in the American
steamship Fordonlan, subject to said vessel being security to the Equitable
Trust Company for a loan amountlng to approximately $310,000 ; the owner of
the other half Interest being A. W. Duckett & Co., Incorporated, which Com-
pany was in the hands of a recelver apiwinted by the United States District
Court in the Southern District of New York. The defendant's half Interest In
the Fordonlan had been secured by obtalnlng the loan above mentioned from
the Equitable Trust Company, which was made upon the note of A. W. Duckett
& Co., Incorporated, Indorsed personally by A. W. Duckett and by défendant,
and secured by a bill of sale of the vessel to Arthur A. MUler, nomlnee of the
Equitable Trust Company. The loan became due December 27, 1917, at which
time notice of its nonpayment was given to défendant by the Equitable Trust
Company ; and on January 7th notice was sent to défendant that if the note
was not paid on or before January 10, 1918, légal proeeedlngs would be brought
against him immedlately for its collection. Thèse facts become Important in
explalning why it was that the contract of sale, subsequently referred to,
could Eot be consummated.
The complaint allèges that on January 8, 1918, the défendant, who repre-
sented hîmself to hâve in charge for sale as owner or otherwise the steamship
Fordonian, requested plalntiff, as broker, to produce a purchaser for said
property for the sum of $540,000 and the défendant agreed to pay to the plaln-
tiff for services as a broker in said transaction 5 per cent, of the said pur-
chase priée or the sum of $27,000.
It appears that on January 8, 1918, the défendant wrote to the plaintlfC as
follows:
"I am informed that you hâve some people who are interested, or may be-
come interested, in the purchase of the steamship Fordonian, in which I hâve
an undivided half interest, and the sale of the entire boat I am in a position to
control. I am willing to sell that boat for the sum of flve hundred and forty
thousand dollars ($540,000), in cash, free and clear from ail liens, mortgages,
or incumbrances of any kind or description whatsoever.
"Said boat is to be delivered subjeet to a bare boat form charter between
the présent owners of the boat and the United States govemment. The boat is
3,800 tons dead weight, paying at the rate of $15,770 a month. I will dellver
that boat, rated A-1, British corporation, will deliver a certlflcate of seaworthi-
ness, and in the shape and condition, as required by the United States gov-
emment, bare boat form charter.
"If you accept my offer, I will ask you to deposlt 10 per cent at the Metro-
politan Trust Company of the City of New York, and will undertake to de-
liver title within oue week from to-day. This option is good untll 5 p. m.
January 8, 1918."
On the same day the plaintiff communicated defendant's offer to the Metro-
politan Trust Company. The latter company on the same day addressed a
letter to the défendant, in which it said :
"We hereby beg to accept your offer, subject to the vérification by an in-
spection of the représentations regarding the boat made in your offer, and
your additional représentations made over the téléphone to our représentative
this afternoon, vlz. the vessel's guaranteed fuel capacity to be not less than
203 tons of fuel oil, consumption of fuel not to exceed 4 tons of fuel oll per 24
hours based on a speed of 9 to 10 knots In fair weather ; also, subject to the
compllance on the part of the présent owners of ail terms and conditions of
the bare boat form charter, which we understand you are now about to enter
into for this vessel with the United States government or their agents ; and
it la understood that said vessel is to be delivered to us, subjeet to this charter,
494 202 FEDERAL REPORTER
fully compUed with, by the présent owners, and subject to the approval of the
United States to this sale.
"We are Informed by you that the vessel Is now lying at Bordeaux, France,
vrhere she Is avallable for our Inspection. If this is correct, we will cable at
once and arrange for immédiate inspection at that port, to be completed and
confirmed by cable advlces to us ■wlthin six days from this date. If sald in-
spection conflrms the représentations you hâve made to us as outlined In your
ofEer and herelnabove, you are to deliver title of the boat to us wlthin 24 houra
thereafter, upon payment to you or your order of the purchase price, $540,000.
"The 10 per cent deposit referred to in your offer, to wlt, $54,000, has been
made and is now held by us in escrow, subject to the terms of this agreement,
to be pald to you upon the completlon of the purchase under the terms hereln
above stated."
On the same day défendant wrote to the plaintifif a letter which read as
foUows :
"Gentlemen : If my offer given this day to your corporation, is accepted by 5
o'clock this aftemoon, and the deal consummated, I agrée to pay you 5 per
cent, commission, the amount to be paid over to you when the full amount of
the purchase price is paid over to me, from the final payment"
It is alleged that the plaintIfC procured a responsible purchaser, the Metro-
politan Trust Company of the City of New York, whlch was aeting for the
Cosmopolitan Shipping Company, and that sald purchaser was ready and
wlUlng and anxious to purchase the boat in accordance with terms agreed
upon, yet the défendant failed to earry ont the conditions he had agreed to
perform, and voluntarily released by an Instrument lu wrltlng the Metropoli-
tan Trust Company from its obligation to purchase. It is also alleged that
the release of the Metropolitan Trust Company from its agreement was due
solely to the Inability or fallure of défendant to perform the agreements upon
hls part to be performed, and not to any fault or defect upon the part of the
purchaser so obtalned by the plaintiff. The complalnt stated that the plalntiff
was entitled by reason of the facts aforesaid to recover from défendant his
commission In the sum of $25,000, and he demanded judgment In that amount,
with Interest thereon from January 18, 1918.
The défendant represented and agreed that the vessel was at Bordeaux,
France, and was there avallable for Inspection, and that he would deliver the
vessel, free and clear of ail liens, subject to a bare boat form charter to the
United States government, and in the shape and conditions as requlred by the
United States government bare boat form charter, and would deliver a certifi-
cate of seaworthiness. After this agreement was made it was ascertained that
the boat was not at Bordeaux, and during the slx-day period above mentloned
the vessel was not avallable for inspection. Thereafter the Metropolitan
Trust Company was ready to accept the boat and carry out the conditions of
the contract, waivlng the inspection, upon satisfactory assurance that the boat
was In the shape and condition as requlred by the United States government
bare boat form charter, and ui>on delivery of certlflcate of seaworthiness;
but it is alleged that défendant refused to carry out the terms and conditions
he had agreed to perform.
The purchaser wanted the vessel, and negotiatlons were continued between
défendant and the proposed purchaser, until late in the aftemoon of Janu-
ary 17th, when, upon the refusai of défendant to extend the tlme to permit In-
spection or to acoept any substltute therefor, défendant and the purchaser can-
celed the agreement of sale and purchase without the plaIntifE's consent The
circumstance which prevented the extension of tlme asked for was that the
note glven to the Equitable Trust Company, already referred to, and for
which that company held a blU of sale of the vessel, was past due, and notice
had been given by that company that If the note was not paid by January 10,
1918, légal proceedlngs would be taben Immèdlately for its collection. The
défendant could not give any extension of tlme to the would-be purchaser, in-
asmuch as the Equitable Trust Company refused to give défendant any exten-
sion of tlme In connection with the payment to It of his note, although the
défendant and the would-be purchaser united in applylng for it, so that an
Inspection of the boat mlght be had, whlch inspection had been made Impossl-
AMEEICAN MERCANTILE CORPORATION V. SPIELBEEQ 495
(262 FJ
ble, according to the terms of the original agreement, by the fact that tlie
boat was not at Bordeaux, aa ail the parties concerued had believed at the tlme
the original agreement waa mada
William Dewey Loucks, of New York City (Dorman T. Connet, of
New York City, on the brief), for plaintiff in error.
Hunt, Hill & Betts, of New York City (George C. Sprague, of New
"ï'ork City, of counsel), for défendant in error.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
ROGERS, Circuit Judge (after stating the facts as above). [1]
The gênerai rule is well established that, if by the contract of em-
ployment a broker is simply to find a customer who is able, ready, and
willing to enter into a transaction with the principal on the terms pre-
scribed by him, the broker is entitled to compensation on performing
that service, whether or not the principal complètes the transaction.
Kock V. Emmerling, 22 How. 69, 16 L. Ed. 292 ; Handley v. Shaffer,
177 Ala, 636, 651, 59 South. 286; Blakeslee v. Peabody, 180 Mich.
408, 147 N. W. 570; Beougher v. Clark, 81 Kan. 250, 106 Pac. 39, 27
L. R. A. (N. S.) 198; 9 C. J. 591. That proposition seems to be rec-
ognized by ail the courts. It certainly is not questioned in this court.
In many cases, however, the right of a broker to his commission dé-
pends on the final consummation of the transaction which he was em-
ployed to negotiate.
This court had the matter under considération in Hammond v.
Crawf ord, 66 Fed. 425, 14 C. C. A. 109. A paper signed by the broker
stated that his understanding was that, in case he effected a sale or deal
of certain mines, he was to hâve a certain compensation. The broker's
intervention did not resuit either in a completed sale or in an en-
forceable agreement for sale. This court held that the broker was not
entitled to his commission.
In Holton v. Job Iron & Steel Co., 204 Fed. 947, 123 C. C. A. 269,
the défendant agreed to pay to plaintiff a specified commission "if this
deal is put through." The Circuit Court of Appeals in the Sixth Cir-
cuit held that the term "put through" meant to cariy or conduct to a
successful termination, and that, the plaintiff's engagement being, not
merely to obtain a party able and willing to enter into a given con-
tract, but to bring the transaction about, and not having done so, he
was not entitled to recover.
In Haie v. Kumler, 85 Fed. 161, 29 C. C. A. 67, the same court de-
nied in a like case the right of the broker to his commissions. In that
case the court held that where a broker was to become entitled to com-
missions only upon bringing about a completed agreement between
his principal and a third party, he could not recover upon proof of a
preliminary and tentative agreement upon certain éléments of the pro-
posed agreement which were afterwards abandoned by the principal
and without fault. "The condition," said Judge Lurton, "upon which
Kumler is entitled to recover compensation bas not been fulfiUed,
and, as he has not been prevented from its performance by the wrong-
ful conduct of Haie, the latter is entitled to rely upon the nonperform-
ance of the condition."
496 262 FEDERAI, EBPORTER
The instant case is not distinguishable in principle from the cases
j'ust above cited. In the présent case the agreement between plaintiflE
and défendant reads as follows :
"If my ofCer given thls date to your corporation Is accepted by 5 o'clock thla
aftemoon, and the deal consummated, I agrée to pay you 5 per cent com-
mission, the amount to be paid over to you when the full amount of the p«i>
Chase priée Is paid over to me, from the final payment"
There can be no doubt as to the meaning of this agreement. It is
clear and unequivocal. "Consummate," according to the Century Dic-
tionary, means:
"To finish by completlng what was intended; perfeot; brlng or carry to
the utmost point or degree ; carry or bring to completion ; complète ; achieve."
The agreement contemplated the actual sale of the vessel and the
payment of the purchase money to the défendant as a condition pré-
cèdent to the right of the plaintiff to any commissions; and as the
broker's services did not efïect either a completed sale or an enforce-
able agreement for sale, he is not entitled to the commission ofïered
him in the letter of January 8th, already quoted.
If it appeared that consummation of the agreement was prevented
by the wrongful conduct of the principal we should be obliged to hold
that the broker was entitled to his commissions. Counsel for the plain-
tif! in his brief and argument in this court bas laid great stress upon
an agreement which the défendant made on January 16, 1918, with
other parties for the sale of the vessel for $550,000 or $10,000 more
than the price which défendant offered to sell the boat for in his let-
ter of January 8, 1918. The agreement of January 16th mentions the
agreement of January 8th, and states that the second agreement is only
to become effective in case the first agreement is not carried out. We
hâve given this second agreement full considération in ail of its as-
pects and bave examined carefuUy the circumstances under which it
was made, and we fully agrée that no blâme attaches to the défendant
for entering into it. The situation as it existed at the time it was
made, and which we do not need to go into at length, fully justified
its making.
The défendant acted in entire good faith throughout the whole of
the negotiations, and the testimony not only shows beyond doubt that
this was the case, but it shows, also, that the officers of the Cosmopoli-
tan Shipping Company believed that there was entire good faith. The
testimony of the vice président of that company disposes of the mat-
ter, as the f ollowing excerpt shows :
"Q. Now, Mr. Munez, did Mr. Splelberg, at any time, throw any obstacle In
your way of consummating the sale of this shlpî A. Not as far as I could see ;
no.
"Q. Did he, so far as you know, do everything that he could to bave t(ie
sale consummated} A. As far as I know be did; yes."
The attorney for the purchaser who prepared the letter of January
8th and gave advice throughout the negotiations, and who did not in
any way represent the défendant, gave the f ollowing testimony :
AMEEIOAN MEKCANTILE COBPOKATION V. SPIELBERG 497
(262 F.)
"Q, And dld he [the défendant], so far as you know, do everything In his
power to bring about the consummation oî the sale of tiiis sbipî A. That was
my impression, sir,"
[2] However, even if we did not agrée with the findings of the
court below on this question of the defendant's good faith, we should
nevertheless be concluded by those findings. The plaintiff and de-
fendant both moved for the direction of a verdict at the end of the
trial, and so both parties are concluded by the findings on ail issues of
fact; this being neither an admiralty nor an equity suit. Beuttell v.
Magone, 157 U. S. 154, 15 Sup. Ct. 566, 39 L. Ed. 654; United States
V. Two Baskets, 205 Fed. 37, 123 C. C. A. 310.
Judgment affirmed.
WARD, Circuit Judge (dissenting). In this case the plaintiff, as
broker, not only produced a purchaser ready, willing, and able to buy
the steamer Fordonian for $540,000, but a contract by correspondance
was entered into by him with the défendant January 8, 1918, express-
ing ail the terms of sale, and the purchaser deposited $54,000 of the
purchase money in escrow.
The défendant owned only one-half the steamer, but was under
contract to purchase the other half. The second letter of January 8th,
quoted in the opinion of the court, was accepted in writing by the
défendant. One of its terms was the defendant's statement that the
steamer was at Bordeaux, where the purchaser could hâve her in-
spected for the purpose of confirming the defendant's représentations
in respect to her within 6 days thereafter. Within 24 hours there-
after, if the inspection confirmed the représentations, the défendant
covenanted to deliver a bill of sale, and the purchaser covenanted to
pay the purchase price. In a commercial contract like this, the repré-
sentation that the steamer was at Bordeaux was a warranty. See ouf
décision in Dorrance v. Barber, 262 Fed. 489, C. C. A. . In
point of fact, the steamer was not at Bordeaux, and could not be in-
spected within six days, and because of this breach of warranty the
purchaser could hâve withdrawn from the contract. Being, however,
very anxious to carry it out, the purchaser offered to extend the time
for inspection. The défendant could not do so, because he had, for
want of funds, failed to complète his purchase of the other half of the
steamer. It will thus be seen that, while the défendant had no con-
tract which he could enforce, his purchaser had an enforceable con-
tract for damages against him. The sale was not consummated be-
cause of the defendant's default. The fact that the parties to it sub-
sequently exchanged mutual releases, and that the défendant was not
guilty of bad faith, cannot affect in any way the plaintiff's right to its
commission under its indépendant contract with the défendant. If
the purchaser, instead of releasing, had sued the défendant for breach
of contract, and had recovered judgment, the contract could not be
said to hâve been consummated, and the défendant would not hâve
received the final payment out of which the commission was to corne;
but I think no one would deny the plaintiff's right to his commission.
I think the court should hâve directed a verdict for the plaintiff.
262 F.— 32
498 262 FEDERAL KEPOETEE
INTERNATIONAL HARVESTER CO. OF AMERICA r. LANGERMANN.
(Circuit Court ot Appeals, Eighth Circuit Deoember 24, 1919.)
No. 5198,
1. PBINCIPAI, and agent <S=al04(2) — ImPIJED AUTHOEITT OF AGENT TO WABBANT
SAFETY OF MACHINE.
Where the manufacturer of a corn shredder had compHed wlth ail ro-
quirements of a state statute as to safety appliances and wamlng notices,
as certifled by a state inspector, who Inspected the machine, a sales agent
held without implled authority to give an additional oral warranty as to
its safety of opération.
2. Négligence <S=366(2) — Contbibtjtobt négligence in handlinq machine.
The aet of plaintiff in reaching his hand into a spaœ three Inches wlde
between the feed rolls and snapping roUs of a corn shredder while in mo-
tion, where it was oaught and was injured, held so obviously dangerous as
to oonstltute contributory négligence.
3. Teial <S=>174 — Motion fob dibected veedict sufficient.
Motion for direction of verdict "because it does not appear that Mr. C,
the sales agent in this case, had any authority to mjake a warranty or con-
tract or représentation appearlng in the évidence," heli sufflclent.
In Error to the District Court of the United States for the District
of Minnesota ; Wilbur F. Booth, Judge.
Action by Alphonse Langermann against the International Harvester
Company of America. Judgment for plaintiff, and défendant brings
error. Reversed.
Guy Chase, of St. Paul, Minn., and George W. Morgan, of Duluth,
Minn. (Davis, Severance & Olds and P. J. McLaughlin, ail of St. Paul,
Minn., on the brief), for plaintiff in error.
Stan D. Donnelly, of St. Paul, Minn. (Stan J. Donnelly, of St. Paul,
Minn., on the brief), for défendant in error.
Before HOOK, Circuit Judge, and AMIDON, District Judge.
AMIDON, District Judge. Langermann brought this action against
the International Harvester Company to recover damages for personal
injuries. The trial resulted in a verdict and judgment in his favor,
and the Harvester Company brings error.
[1] The case arose out of the following facts: Plaintiff and his
brother purchased a corn husker and shredder of the défendant. The
sales agent through whom it was sold had some negotiations with them
about a secondhand machine. He pointed out that that machine was
made upon an old model ; that it did not comply with the requirements
of the statute of Minnesota, and urged plaintiff and his brother to
buy a new machine. His représentations as to the safety features of
the new machine are an important point in the case. It is claimed
that he stated orally substantially as f ollows :
"This new machine, we guarantee it perfecUy safe, so that you cannot come
to any harm or ariy Injuries by this new machine, because the law stands back
of It ; you cannot come to any harm. You buy this new machine, and we wiU
send up an expert wlth the machine to set it up, to help unload It and set it
®=sFor otber caseï see same toplc & KEY-NUMBER in aU Key-Numbered Dlgests & Indexes
INTERNATIONAL HABVESTER CO. V. LANGERMANN 499
C262 F.)
up, and to put It together for you, show you how to operate it, show you ail
dangeroas parts about the machine. Boys, that Is worth a wliole lot, to be
safe and know you are working around a machine that is safe, that you need
net corne to any injuries or harm."
Plaintiflf claims he bought the machine on thèse oral warranties, and
that he was injured because it failed to measure up to them in its safety
features.
[2] The accident happened in this way: The corn husker clogged.
Plaintiff, while it was in motion, climbed up onto the feed apron,
reached over into the space, about three inclies wide, between the
feed rolls and the snapping rolls. He first pulled out a handful of
the clogged comstalks. He then undertook to spread out the rest
of them, so that the snapping rolls would engage them and pull them
through the machine. His hand was drawn into the snapping rolls
and seriously injured.
Plaintiff claims that the machine failed to measure up to the war-
ranties in thèse particulars : First, the opening was not protected by
any guard; second, that there was no warning against putting the
hands into the machine at this point ; third, there were numerous spé-
cifie wamings of that kind at other points of danger on the machine.
He had been running the shredder only a few hours when the acci-
dent happened. The expert who brought it out to his place explained
it, but did not give spécifie warning in regard to the particular point
or danger. Because plaintiff's engine was out of repair, they were
unable to start up the shredder, and run it, and give the advice along
with the dangers in the actual operating of the machine. Plaintiff,
however, signed a written exonération excusing the expert from giv-
ing him such instructions, because the engine was not working; so
that is not a feature of defendant's liability.
The case présents thèse questions: First, Had a mère sales agent
implied authority to make oral warranties as to the safety of the ma-
chine? Second. A state inspecter had inspected the machine, and
given his certificate that the machine had ail the safety appliances and
warnings required by the state statute. Could an agent impose liabili-
ties upon the défendant by spécial warranties that were broader than
the law and the judgment of the inspecter ? Third. Was the machine
in fact defective, in that it failed to contain any safety appliance or
warning such as plaintiff relies on? Fourth. Was not the plaintiff
clearly guilty of contributory négligence?
The corn husker and shredder was made in conformity with the
state law and was marked with the warnings which the public author-
ities charged with the administration of the law required to be placed
upon it. So there was no f ailure on the part of défendant to f ully com-
ply with the state law and the requirements of the officers of the
state charged with its administration. Second. It was not practical
to put any guard or covering to protect an operative against injury
when he was attempting to do what the plaintiff tried to do while
the machine was in motion. It was an act so manifestly reckless and
dangerous that it could not be anticipated that any reasonable man
would attempt to do it. Accidents had happened so frequently in re-
500 262 FEDERAL EEPOETEK
gard to corn shredders, by the hands of the feeder being drawn înto
the first or feed cylinder, that the statute of Minnesota was passed to
compel makers and sellers of such machines to build them in such a
way as to safeguard against that danger and to warn purchasers. This
statute was never intended to warn purchasers against the dangers
of such an act as the plaintiflf was attempting to do, because, as we
hâve said, it was such a foolhardy act that no lawmaker or manufac-
turer could anticipate that an operator of a machine would undertake
to do it while the machine was in motion. So, in our judgment, the
sales agent of défendant had no implied authority to impose liabiUty
upon it in respect to such an act. Third. We think the plaintifï was
guilty of reckless negHgence.
For thèse reasons the case ought not to hâve been submitted to
the jury.
[3] There is one other point of practice. There was a motion for
a directed verdict at the conclusion of the évidence. As to the con-
tributory négligence of plaintiff, the motion is entirely satisfactory and
clear. As to the authority of the sales agent, the language of the
motion is:
"And because It does not appear that Mr. Corcoran, the sales agent In thls
case, had any authority to make a warranty or contract or représentation
appearing In the évidence."
The motion was denied, and an exception saved. We think it was
sufficient.
The judgment is reversed, with directions to grant a new trial.
In re HUGHES.
Appeal of DOCTOR et al.
(Circuit Court of Appeals, Second Circuit Deoember 10, 1919.)
No. 59.
1. Ba-NKBuptct <S=>22 — Administrative procédure not governed bt EQtrmr
BULES.
The equity raies of the Suprême Court are not rules of court, affecting
administrative work of bankruptcy.
2. Bankruptcy (S=>415 (2) — Formai, exceptions to mastee's report ow appli-
cation FOR DI8CHABGE NOT BEQUIRED.
The matter of grantlng discharges Is by the Bankruptcy Act commltted
to the judge of the District Court, the flndlngs of a commlasioner or
master, to whom an application is referred, being advlsory only, and
compliance with formai equity rules in flllng exceptions to hls report Is
not required.
3. Bankeuptot <S=»408(3) — Omission of worthless assets not oboitnd fob
kefusing discharge.
Omission from a bankrupt's schedules of coriwrate stock havlng no
possible value heild not a conoealment of assets whlch defeats the rlght to
discharge.
€=3For otber cases ses same toplc & KEY-NUMBER in ail Key-Numbered Dlsests £ Indexe*
IN EE HUGHES 501
(262 F.)
4. Banketjptcy ®=»408(3) — Concealment must bk or eeal assets to defeat
DISCHAEGE.
Omission from bankrupt's schedules, altlxough with Intent to conceal, of
a rlght in property wMch. baukrupt supposed he owned, but in fact dld
HOt, is not a concealment of assets wliicli defeats the riglit to discharge.
Appeal from the District Court of the United States for the East-
ern District of New York.
In the matter of EHzabeth L. Hughes, bankrupt. From an order
granting a discharge, Augusta Doctor and another appeal. Afïîrmed.
See, also, 257 Fed. 986.
Certain creditors (appellants bere) objected to bankrupt's discharge on vari-
ons grounds of which two only need be mentioned: (1) She coneealed, by
omitting from her sworn schedules, certain shares of stock in an Incorporated
Company; (2) she similarly coneealed an interest in property created by a
transfer by her still living father to a trustée, and of such a nature as to be
"real estate," as those words are deflned by statute in the state of New York.
Thèse objections were referred for considération to a "spécial commlssioner,"
who recommended déniai of discharge. Bankrupt, within 60 days of report
filed, moved for an order setting it aslde and granting discharge, and shortly
after expiration of the 60-day period filed exceptions, in apparently Intended
com'pliance with equity rule 66 (198 Fed. xxxvii, 115 C. 0. A. xxxvii).
The District Judge disapproved the report and granted diseharge; tliis
appeal followed, and tt is assigned for error, not only that the objections
were overruled, but that the court failed to confirm the report as matter of
course, for lack of timely exceptions thereto.
Mark G. Holstein, of New York City, for appellants.
I^ee & Wadsworth, of New York City (Joseph Day Lee, of New
York City, of counsel), for bankrupt.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
HOUGH, Circuit Judge. [1,2] The administration of bankruptcy
is so largely a matter of business that any and every formality in the
court of first instance, additional to those prescribed by statute, is to
be avoided as far as possible. The matter of discharges is hy the act
a duty laid on the judge holding the District Court, and commission-
ers or masters are merely his advisory assistants. We approve of the
décision in International Harvester Co. v. Carlson, 217 Fed. 736, 133
C. C. A. 430, and hold that the equity rules of the Suprême Court
are not rules of court affecting the administrative work of bankruptcy.
This case was fairly and with fair expédition presented to the District
Judge, and that was enough.
[3] The corporate stock omitted from the schedules was not only
worthless, but it utterly lost whatever value it ever possessed by and
through the actions of thèse objecting creditors, when long before
bankruptcy they "sold out" the issuing corporation, by foreclosing a
mortgage on its property. Our décision in Re McCrea, 161 Fed. 246,
88 C. C. A. 282, 20 E. R. A. (N. S.) 246, is applicable, and overrules
the creditors' first objection.
[4] The so-called realty also omitted from schedules has a long
history that may be best stated in légal efïect rather than in détail.
®=3For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes
502 262 FEDERAL REPORTEE
When Mrs. Hughes verified her schedules, she had long before con-
veyed this interest to her husband. We assume (but do not find) that
such conveyance was a mère cover, and that the husband was but a
trustée for the bankrupt. We may also assume, without finding, that
Mrs. Hughes' intent in making the transfer was to hinder, delay, or
defraud her creditors. Thèse assumptions are rather violent on this
record, but they are certainly ail the creditors could ask.
Contemporaneous with this discharge proceeding, however, was a
suit in the courts of New York, to détermine what, if any, right or
interest Mrs. Hughes ever had in said real estate, and before discharge
granted the New York Court of Appeals decided that she never had
any interest at ail ; her conveyance to her husband was a nullity, be-
cause there was not, and never had been, an)d:hing whereon it could
operate. Doctor v. Hughes, 225 N. Y. 305, 122 N. E. 221.
It foUows that this bankrupt concealed nothing, because there was
nothing to conceal; yet when she swore to her schedules she thought
the property value existed. She had (we may assume) "intent" as
fuUy as if her intended act could either help her or harm her creditors.
She had the émotion of concealment, but ail about nothing.
It is a mistake, and a widespread one, to regard a discharge in bank-
ruptcy as a reward of virtue, or its déniai as a punishment for gênerai
moral turpitude. Discharge is a légal right attaching to the status of
bankrupt, which right the statute requires the court to recognize, unless
it be affirmatively shown that the applicant has donc one or more of
the acts enumerated specifically or by référence in section 14 of the
statute (Comp. St. § 9598). The mental opération of thinking property
is owned, and desiring to conceal it, when in fact no such property ex-
ists, does not fall within any of the prohibitions of that section, which,
when speaking of concealed or transferred property, always means
something that is or ought to be (in common parlance) "assets of the
estate." Cf. In re Dauchy, 130 Fed. 532, 65 C. C. A. 78. There was
no error in overruling this objection.
Order affirmed, with costs.
GIIiL T. UNITED STATES.
(Circuit Court of Appeals, Second Circuit December 10, 1919.)
No. 43.
CONTEMPT <®=66(2) — REVIEW OF OKDEB OF OOMMITMENT.
An order of a District Court commltting a witness to jail for contempt
for refusai to answer questions before a grand Jury is final, and revlew-
able on writ of error taken wltliln six months; but an order denylng a
motion to vacate such order is interlocutory, and not subject to review
by writ of error.
In Error to the District Court of the United States for the Southeni
District of New York.
John Gill brings error to review an order of the District Court deny-
ing a motion to vacate an order of commitment for contempt. Dis-
missed.
®:9For other cases see same toplc & KEY-NUMBER In ail Key-Numbered Digests & Indexes
QILL V. UNITED STATES 503
(262 F.)
Santiago P. Cahill, of New York City (S. P. Cahill, of New York
City, of counsel), for plaintifï in error.
Francis G. Cafifey, U. S. Atty., of New York City, and George
Winship Taylor, Asst. U. S. Atty., of Baltimore, Md.
Bef ore ROGERS, HOUGH, and MANTON, Circuit Judges.
ROGERS, Circuit Judge. The défendant was committed on July
3, 1918, for contempt of court. On that day he was before a grand
jury in the Southern district of New York and declined to answer
certain questions which were put to him. He claimed no privilège,
but merely refused to answer. He was taken before District Judge
Augustus N. Hand, who directed him to be again taken before the
grand jury and instructed him to answer the questions. He was ac-
cordingly again taken before the grand jury, and he again declined to
answer. The grand jury thereupon presented the facts to the court,
and the court, finding that he willfuUy and contumaciously refused to
answer and was without any légal excuse therefor, entered an order
committing him to the custody of the United States marshal, to be de-
tained in Ludlow Street Jail until he should signify a willingness to
answer the questions or otherwise purge himself of the contempt.
That the order committing for contempt was a final order cannot be
questioned. Whether an order committing one for contempt is final,
or whether it is interlocutory, dépends upon its character. If the
order is remédiai, it is merely interlocutory, and reviewable only upon
an appeal from the final decree. If, however, the order is punitive, it
is a final judgment, criminal in its nature, and reviewable upon a
writ of error without awaiting the final decree. And the order is
deemed punitive when its purpose is to vindicate the authority of the
court by punishing the act of disobedience as a public wrong. In re
Merchants' Stock & Grain Co., 223 U. S. 639, 32 Sup. Ct. 339, 56
L. Ed. 584. And it cannot be questioned that the conduct complained
of, being against the dignity and authority of the court and in a crim-
inal proceeding, is a criminal contempt. The Suprême Court holds
that judgments in criminal contempt proceedings are reviewable only
by writ of error (Grant v. United States, 227 U. S. 74, 33 Sup. Ct.
190, 57 L. Ed. 423), and that judgments in civil contempt proceedings
are reviewable by appeal only (In re Merchants' Stock & Grain Co.,
supra).
The order in question, being a final order, might hâve been reviewed
in this court by writ of error, if the writ had been sued out within
six months after the entry of the order. 26 Stat. 829, §11 (Comp.
St. § 1647). Instead of suing out a writ of error within the six
months, nothing was donc until seven months elapsed, when défendant
petitioned the court to enter an order declaring the original order of
commitment null and void, on the ground, among others, that it did
not recite at length the questions which were put to défendant before
the grand jury, and which he refused to answer, so as to show the exact
grounds of his alleged contempt. For this reason défendant asked
that he be discharged from custody. The court thereupon amended
its record nunc pro tune, and denied the motion to vacate the original
504 262 FEDERAL KBPOETEB
order and to discharge the défendant from custody. Thereupon a
writ of error was sued out, bringing hère, not the original order, but
the décision of the District Court denying the motion to vacate that
order.
Judicial Code, § 128 (Comp. St. § 1120) gives appellate jurisdiction
only when décisions of the District Courts are final ; and the only final
décision in this matter was the original order of commitment. The
décision of the court denying the motion to vacate is one which may
be renewed at any time, and is not final. Therefore it is not subject
to review upon writ of error.
While the défendant, if advised by his counsel that his détention in
custody is illégal, may hâve the original proceedings reviewed, he may
— not now by writ of error; still by means of a writ of habeas
corpus — hâve the legality of his détention inquired into, and procure
his release in case it appears that he is illegally in custody.
In Ex parte William F. Hudgings, 249 U. S. 378, 39 Sup. Ct. 337,
63 L. Ed. 656, the Suprême Court of the United States upon a péti-
tion for habeas corpus ordered the petitioner, who was held in custody
under a commitment for contempt, discharged on the ground that the
District Court had exceeded its jurisdiction and proceeded in vio-
lation of due process of law. In that case relief was obtained by resort
to the original jurisdiction of the court. We do not mean to intimate
any opinion, however, whether the circumstances in this case are of
such an exceptional character as would be likely to induce that court
to exercise its original jurisdiction as ït did in the Hudgings Case, or
whether the circumstances indicate any illegality in what the District
Court has done.
The writ of error is dismissed.
A. SCHRADEB'S SON, Inc., v. DILL MFG. CO.
(Circuit Court of Appeals, Slxth Circuit. January 6, 1920.)
No. 3315.
1. Patents <S=>328 — Clampino device fob pneumatic tires void foe iaok
of invention.
The Schweinert & Kraft patent. No. 783,469, for damplng device for
pneumatic tires, held void for lack of Invention, in view of the prier art.
2. Patents <®=»328 — Dust cap fob tiee valves void fob lack of invention.
The Burke patent. No. 1,253,573, for dust cap for tire valves, held void
for lack of Invention, In view of the prior art.
Appeal from the District Court of the United States for the North-
ern District of Ohio ; D. C. Westenhaver, Judge.
Suit by A. Schrader's Son, Incorporated, against the Dill Manufac-
turing Company. Decree for défendant, and complainant appeals. Af-
firmed.
Arthur C. Fraser, of New York City, for appellant.
Arthur J. Hudson, of Cleveland, Ohio, for appellee.
Before KNAPPEN, DENISON. and DONAHUE, Circuit Judges.
^EsFoi otber cases aee sama topio & KBY-NUMBBB In ail Key-Numbered Dlgests & Indexe»
A. SCHEADEE'S son, INC., V. DILL MFG. CO. 505
C262 F.i
PER CURIAM. Suit for infringement of claim 3 o£ United States
patent No. 783,469, February 28, 1905, to Schweinert & Kraft, for
clamping device for pneumatic tires (the spécifie feature being a pro-
tective casing or cap for stay boit extension, applicable also to tire
valve stem casings), and claims 1 and 2 of United States patent No.
1,253,573, January 15, 1918, to Burke, for dust cap for valves (such
as tire valve stems).
On hearing upon pleadings and proofs, the District Court found
both patents invalid — that to Schweinert & Kraft for lack of invention,
in view of the prior art ; that to Burke for two reasons : First, tliat
Burke was not the real inventor of the device of the patent; and,
second, that the claims in suit did not involve invention in view of the
prior art.
We not only are satisfied that the claims of the respective patents
5n suit are invahd for lack of invention over the prior art, but are
content to affirm the decree of the District Court upon the gênerai Une
and reasoning of the opinion of Judge Westenhaver, who presided
below, except that as to the proposition that Burke was not the real
inventor of the subject-matter of the patent issued to him we find it
unnecessary to express an opinion. We print below Judge Westen-
haver's opinion, omitting therefrom the part relating to the above-
excepted proposition. In our opinion the case as to each of the claims
in suit falls within the principle of cases such as Railroad Supply Co.
V. Elyria Iron Co„ 244 U. S. 285, 293, 37 Sup. Ct. 502, 61 L. Ed. 1136;
Package Mach. Co. v. Johnson Automatic Sealer Co. (C. C. A. 6) 246
Fed. 598, 601, 158 C. C. A. 568; Huebner-Toledo Brew. Co. v. Mat-
thews Gravity Carrier Co. (C. C. A. 6) 253 Fed. 435, 447, 165 C. C.
A. 177.
The decree of the District Court is affirmed.
ï!ie following is the opinion of Westenhaver, District Judge:
Couiplainant's bill charges infringement by défendant of two United States
letters patent. No. 783,469, issued Februarj' 28, 1905, to M. C. Schweinert and
H. P. Kraft, and No. 1,253,573, issued .Tanuary 15, 1918, to Wilbur B. Burke.
No issne is made as to complainant's title thereto. The défenses are Invalidity
in view of the prior art, for lack of invention, and for lack of novelty ; and,
also, as to the second patent, invalidity because Burke was not the sole origi-
nal inventor of the device covered by his patent application. Defendant'a an-
swer also sets up a counterclaim, charging complainant with Infringing United
States letters patent No. I,0&l,ie4, issued April 21, 1914, to S. E. Nold. No
issue is made as to defendant's ownershlp thereof, but the défense thereto is
that Nold's patent is, in view of the prior art, invalid for lack of invention and
lack of novelty, and noninfringement,
Schweinert & Kraft Patent No. 783,469.
[1] The alleged invention of this patent relates to clamping devices foi
pneumatic tires for automobiles or other heavy vehicles. Claim 3 thereof is
the only one in issue. It is as foUows:
"3. In a clamping device, the combination of a nut proper having an elon-
gated extension secured thereto, said extension being formed of sheet métal
and having an internai diameter greater than that of said nut, whereby said
extension Is adapted to form a protecting casing for a boit."
The patent application was filed June 3, 1904. In the early days of the
automobile industry, and before the development of tlie clineher tire, automo-
bile tires were held to the rim by clamping devices disposed at intervais
506 262 FKDEEAL BBPOBTBB
around the rlm. A part of thèse devlces conslsted of bolts fastened at one
end of the tire casing, passlng tlirough the rlm, and clamped thereto on the
tnslde of the rlm wlth a nut. They were usually six or eight in number, and
werô called "stay" bolts. At présent, and for many years past, exceptiag on
raclng cars, the boit and nut hâve decreased In number to one whlch la
fastened wlth a spreader plate or bridge, and other devlces, to the Inner tube
of the tire, passes through the rlm and Is clamped on the inslde wlth a nut
This boit Is serew-threaded, and carrle» the valve by means of whlch the tire
is Inflated, and Is now more commonly known as a valve stem. The dampLng
nut performs wlth respect to the stay boit and to this valve stem the same
function. The dlfficultles of adjusttng a tire to the rlm requlre a stay boit
or valve stem of considérable length, so that It can be engaged by the clamplng
nut and the latter used as a sort of handle to pull down the retainlng plate
to Its clamplng position. In its final position a considérable part of the stay
boit or valve stem projects inwardly beyond the rlm, and it is very désirable
that the part thus exposed sbould be proteeted from dust or Injury to the
threads.
Complalnant's contention Is that, prlor to thls Invention, combined stay bolts
and caps and combined valve nuts and dust caps were made exclusively of a
single pièce of métal; that the method commonly employed in making com-
bined nuts and caps was to eut the same from a hexagonal rod ; that, owlng
to the desired length of the combined nut and cap, this, it is contended, caused
a great waste of métal; and that, Inasmuch as the métal then commonly used
was brass, thls waste resulted In a substantial loss. A further contention la
that the bore of the nut must either be screw-threaded Its fuU length, which
is a disadvantage, or that it must be enlarged with an expandlng tool beyond
the screw-threaded section of the nut proper. This is sald to be an expensive
opération. The invention was designed to overcome thèse disadvantages, and
is sald to accomplish that purpose.
Complainant and its witnesses unduly exaggerate, It seems to me, the prob-
lems involved. Threaded bolts and nuts as clamplng devlces are simple and old
In the art. They are designed for use in many situations, and are common to
ail arts In whlch threaded bolts and screw-threaded nuts need to be used as
clamplng devlces. There is nothing unusual or out of the ordlnary tn the use
of a boit and nut as a devlce to clamp a tire to a rlm. No Invention, It seems
to me, can be predicated upon the adaptation of nuts and bolts to this use.
The Invention, if any is présent, in clalm 3, Is sald to réside and must be found
In the comblnation of a nut proper having an elongated extension seeured
thereto, and the formation of this extension from sheet meta! with an internai
diameter greater than that of the nut. Such, In brief, is complalnant's con-
tention.
Complalnant's witnesses, Kraft and Volckhausen, in their testimony state
that, prior to complainant's invention, screw-threaded bolts wlth nuts were
in common use for holding pneumatic tires to automobile vehlcles. The nuta
were in varions forms, Including solid nuts, wing nuts, and a nut wlth a sleeve
or cap made Integrally from one pièce of métal, as has already been stated.
More pertinent to thls issue, their testhnony shows that nuts in comblnation
with a sépara te cap or sleeve, fitting over the exposed end of the boit or valve
stem are also commonly used. Thls cap or sleeve, formed separately from
the nut, was drawn from sheet métal, with the lower end screw-threaded on
its interior slde to the same diameter as that of the nut Complainant's Ex-
hibit No. 22 shows varions forms of separate sleeves or dust caps thus used.
The earliest form Is that numbered 835, whlch had been used and was belng
used at and before the date of thls alleged invention.
In vlew of this art, the inventor's problem was merely to unité thls sleeve
or dust cap to the nut proper. Claim 3 does not prescrlbe any method for
makùig thls union. The problem mardfestly could be solved by removlng
the tnterior screw threads of dust cap No. 835 and Connecting It wlth the nut
by any efficient medianical method. Unless Invention Is présent In eoncelving
the Idea of unitlng thèse two, then clalm 3 Is Invalld, otherwlse It is not.
Before answerlng thls question, the art of record should be brlefly stated.
United States letters patent No. 621,971, Issued March 28, 1899, to Charles G.
A. SCHRADEB'S son, INC., V. DILL MFG. CO. 507
C262 F.)
Page, discloses a combined nut and cap used as a means of clamplng a tire to
a rim. The drawings show the cap, as dlstinguished from the nut, having a
diameter greater thaii the diameter of the nut proper. The spécifications say
that, in order to conceal the stem — that is, the screw-threaded end of the boit
or valve on the inside of the rim — a cap may be arranged over the exposed end
thereof, preferably formed with or seeured to the nut. This is the précise
Idea embodled in claim 3. It distincUy says that the cap may be formed sep-
arately and seeured to the nut, which Is the main élément of claim 3. Tho
exact method of securing the cap to the nut disclosed in United States letters
patent No. 787,578, issued April 18, 1905, to Frank Lambert, on an application
flled June 21, 1902, is that used by complalnant In manufacturing under its
patent its later commercial device. A circular groove is provided in the top
of the nut adapted to receive the lower rim of the cap, and, when the cap is
Inserted therein, the métal of the nut is compressed around the cap, so as to
hold it permanently to the nut This is complainant's exact way of construct-
tng its commercial device.
AU the problems with which it Is contended Schweinert & Kraft were cou-
fronted and succeeded in solving are fuUy set up and disclosed in Lambert'a
spécifications. Lambert points ont the desirability of protecting the end of
the boit projectlng through the nut from injury by corrosion or otherwise;
that the cost of production may be cheapened by making the nut of métal, such
as brass or steel, and the cap of another métal; that the common cap nut, if
made in one pièce, Is very difficult to thread the full length, or to enlarge with
an expanding tool beyond the screw-threaded section of thé nut proper. This
is complainant's contention on the basis of wbich invention is clalmed to be
présent. Lambert's cap nut, it Is true, was designed primarily for use in con-
nection with water meters, but the spécifications and teachings of his patent
are not so limlted. The cap also, as the drawings show, is spherical and cir-
cular, and not elongated ; but Lambert points ont therein that his invention is
easily available for use with caps of other shapes. The elongation or extension
of lambert's cap would be a mère change of form, shape, or proportion, and
was clearly withln his contemplation and within the teachings of his patent.
Other prior art patents are cited, which I deem it unnecessary to review.
Answering the exact question presented of whether or not, in vlew of the art
shown, claim 3 Involves invention, I am clearly of the opinion that it does not.
Screw-threaded bolts and nuts performing the same function and used in the
same connection were old clamping devices commonly used for holding tires to
rims. Sleeves or caps drawn from sheet .métal and used in connection there-
with, but not seeured thereto, were also admittedly old. The only problem
was seairing the elongated extension or dust cap to the nut proper. Claim
3 does not disclose or claim any meehanical means of accomplishing this use.
Many means of so doing, It seems to me, would suggest themselves naturally
to any skilled mechanic Furthermore, the Idea of combining a nut and cap
and a means for so doing are fuUy disclosed in the Page and Lambert patents.
The only modification requlred of Lambert's patent was to elongate the cap
and draw the same of sheet métal in order to meet precisely the letter of the
language of claim 3. The length of the dust cap or of this elongated extension
is not an aet of invention, but Is determined by the length of the screw-thread-
ed stay boit or valve stem ; In point of fact, Volckhausen, complainant's wlt-
ness, testlfles that it was determined by taking the longest boit and the thtn-
nest rim, and making the cap of sufliclent length to inclose the projectlng end.
No Invention Is involved in substituting one material for another. This Is
a matter of Judgment only In selectlng suitable materials. No invention is
involved in changing the slz^ degree, or proportion of an article or device.
Walker on Patents (5th Ed.) §§ 31, 41, and 41a. Securing together by com-
mon meehanical method an exlstlng nut and an existing cap, which thereafter
performed together In precisely the same way the same function prevlously
performed by both separately, Is not Invention. The lead pencil case of Reck-
endorfer v. Faber, 92 TJ. S. 357, 23 L. Ed. 719, Is almost an exact parallel.
More inventive faculty waa requlred to combine the Indla rubber eraser to
the lead pendl in that case than was requlred to omit from the dust cap of
the prior art the Interlor screw threads at the lower end and secure this cap
508 262 FEDERAL REPORTER
to the nut by mechanlcal means, and thls is ail the advance tbat clalm 8 covers
over the pre-exlsting art.
My conclusiou is that clalm 3 of the Schweinert & Kraft patent, No. 783,46&,
la Invalid for lack of invention, and for lack of novelty.
Burke Patent No. 1,253,573.
[2] Tlie invention of this patent la said by the inventor to be one for a dust
cap for valves. Olalms 1 and 2 only are in issue ; no contention being mada
that claims 3 and 4 are infringed by défendant'» device. Claim 1 is as follows:
"1. A dust cap for tire valves or the like, comprising a cap portion having a
polygonal foot i)ortion wltli an internai shoulder above it, and having means
for Connecting it to a threaded valve casing or the like, said means comprising
a polygonal bushing of différent métal from the cap portion entering and lying
within and substantially inclosed by the foot portion, and said foot portion
belng permanently connected to the bushing by over-lying parts of the foot
portion; the article constituting a unitary structure, whereby when the cap
is rotated the bushing is forced to rotate with it."
Claim 2 is precisely the same, except that it omits the feature or élément that
the nut or bushing inclosed in the cap portion is made of différent métal from
that of the cap. Olalms 3 and 4 differ from claims 1 and 2 only in that tha
bushing or nut is formed of a plurality of parts, the exact détails of vrhich
need not be stated. The défenses are: (1) That Burke vras not the sole and
original Inventor. (2) That, in view of the prior art, this patent is invalid for
lack of invention and lack of novelty.
(1) Claims 1 and 2, in view of the prior art already stated, and as clearly
appears from an examtnation of the file wrapper history of this patent, were
allowed only because of the supposedly novel method of constructlng the dust
cap by formlng a footing with an internai shoulder above the bushing and se-
curing the bushing therein by crimping the lower edges of the cap over the
bushing. Complainant claims for this cap that its polygonal form above the
foot portion is a distinct advantage, permitting the grasping thereof by hand
or wrench for the purpose of securing it home. This feature, it will be noted,
Is not an élément of claims 1 and 2, and, in view of the many forms of dust
cap previously made and sold, Introduced in évidence as Exhibit No. 22, it
could not well be claimed as novel, nor that Invention can be predicated on
the mère form or shape of the dust cap. Furthermore, Burke himself, the
évidence shows, had made and sold more than two years prior thereto an un-
patentable dust cap of which the part above the nut was of this shape or
form. * * *
(2) I am of opinion also that claims 1 and 2 are Invalid in view of the prior
art of cttmblning nuts and dust caps, which, except as it relates to crimping the
edges of the footing over the inclosed nut or bushing, bas already been suffl-
ciently reviewed. United States letters patent No. 692,812, issued to A. G. An-
dersen, showa a cap with an enlarged foot portion, polygonal in form and with
an internai shoulder formed above it. It is compressed against the nut so that
the cap and nut constitute a unitary structure whereby, when the cap is ro-
tated, the bushing is forced to rotate with it. It does not, however, show the
lower edges of the footing crimped around the bushing or nut. Anderson's
cap nut, it is true, Is dome-shaped instead of elongated, but Andersen points
ont that the shape of this cap may be varied as desired, and used for many
purposes, and that the hole in the top thereof may. If desired, be omitted. The
art already reviewed shows many elongated spécimens of dust caps other
than Burke's. The prior art, comblned with Anderson's, leavea nothing of
claims 1 and 2, except the crimping over of the lower edges of the footing.
This expédient of crimping or pressing the métal of the footing around the
nut or bushing to hold it In place is a very old one In the prier art. It is
shown In the following TJnlted States letters patent: Matthews, No. 212,962;
Tweed, No. 319,644; Andrews, No. 376,502; Palmer, No. 796,671; and Abel,
No. 949,108. Furthermore, on this hearing, a polygonal nut with an enlarged
footing having a shoulder above the nut and the edges of the footing crimped
around it to hold it In place jvas clearly proved to hâve been designed and
used in large quantltles by the Bronson-Walton Company. See testimony of
wltnesses Bronson, DeLloyd, and Phillips. Wltnesses Thatcher and Phillips,
A. SCHRADEE'S son, me, V. DILL MFG. CO. 509
(262 P.)
both Bkllled mechanlcs of long expérience iu the art of métal dravving ana
Btamplng, testify that It Is an old and well-known expédient to insert a nut
withln a tube and crimp the métal around the nut to hold it iB place.
The only remaining supposedly new élément of claim 1 is that of making
the bushing of différent métal from the cap. No élément of Invention la in-
volved in substituting one métal for another, but only a question of judgment
in the selecting of materials, and even thls expédient is shown to be old In
the patent art
I/ambert's patent, No. 787,578, speciflcally discloses the conception of using
one métal for the' cap and another for the nut Ryle patent. No. 400,414, shows
a brass bushing in an iron cap. Complainant's counsel urge that, inasmuch as
his cap was in the water hydrant art, it is so remote from the art under con-
sidération as not to deprive Burke's use of the idea of patentable novelty.
This contention was strenuously urged in the Patent Office, when the Ryle
patent was cited against the Burke application, and was there held unsound,
and that no feature of patentable novelty eould be based on the use of a bush-
ing of différent métal. See paper 22, Burke patent file wrapper. An appeal
was taken from this décision of the Examiners in Chief to the Commissioner,
who affirmed the ruling on the authority of In re Morgan, 179 O. G. 292, quot-
Ing thereîrom as applicable the ruling foUowing: "Certain devices are common
to the art as a whole because they are adapted for use in many situations."
Burke acquiesced in this ruling, and aceepted the patent thus modifled, and
Is now bound thereby.
In view of this holding, the good or bad falth of défendant in making a dust
cap which may be an imitation of Burke's is immaterial. It is, liowever,
worthy of note that in February, 1915, nearly one year after Burke is said to
bave created his invention, he adjusted with défendant a controversy respeet-
Ing the manufacture by it of dust caps, at which time the only contention was
that his design patent. No. 44,082, was being infringed. He seemed then to
be whoUy unconsàous that he had made any other invention, or was entitled
to any other patent His application, filed Mardi 26, 1915, seems to hâve been
made in his behalf by the complainant as an assignée.
In conclusion it may be noted that arguments other than those herein dis-
cussed hâve been urged upon me. They hâve ail been fuUy considered, but
none of them call for a différent conclusion or require spécifie comment. Com;-
mercial success Is urged in support of the validity of each of thèse patents.
It is true ail bave been sold in substantial, if not in large, quantities. The
question of validity being doubtful, this évidence might be of weight if it ap-
I)eared that this commercial success was due to the new éléments of the in-
vention; but I am convinced that such sales as were made were the resuit of
other considérations than the alleged Invention. Business methods and 11-
cense agreements hâve played a large part; but, more important still, the
growth and development of the automobile industry, ereating a wide demand,
is the chief contributing factor. As to ail three patents, they are examples
of patents devoid of invention, for the reasons stated by Mr. Justice Bradley
In Atlantic Works v. Brady, 107 D. S. 192, 2 Sup. Ot. 225, 27 L. Ed. 438, re-
cently approved and reaffirmed by Mr. Justice Clarke in Élyria Iron & Steel
Oo. V. RaUway Supply Co., 242 U. S. 609, 37 Sup. Ot. 16, 61 L. Ed. 525, as
foUows:
"The process of development In manufactures créâtes a constant demand
for new appliances, which the skill of ordinary head workmen and engineers
1b generally adéquate to devise, and which, indeed, are the natural and proper
outgrowth of such development. Bach step forward prépares the way for the
next, and each Is usually taken by spontaneous trials and attempts in a hun-
dred différent places. To grant to a single party a monoxwly of every sllghl
advance made, except where the exercise of invention, somewhat above ordi-
nary mechanical or engineering skill, is distinctly shown, is unjust In principle
and injurions in Its conséquences.
"The design of the patent laws is to reward those who make some substan-
tial discovery or invention, which adds to our knowledge and makes a step
In advance in the useful arts. Such inventors are worthy of ail favor. It was
never the object of those laws to grant a monopoly for every trifling deviee,
510 262 FEDERAL REPORTER
every shadow of a shade of an idea, whlch would naturally and spontaneoualy
oœur to any skilled mechanic or operator In the ordlaary progrese of manu-
factures. Such an indlscrlminate création of exclusive privilèges tends rather
to obstruct than to stlmulate invention. It créâtes a class of si>eculative
schemers who make It thelr business to watch the advancdng wave of Improve-
ment, and gather Its foam in the form of patented monopolles, whlch enable
them to lay a heavy tax upon the industry of the country, wlthout contributing
anythmg to the real advancement of the arts. It embarrasses the honest pur-
sult of business wlth fears and appréhensions of concealed liens and unknown
llabilities to lawsults and vexations accountings for profits ili good falth."
A decree wUl be entered, dismlsslng complalnant's bill, and also denying
défendant any relief on its counterelalm. A proper proportion of the costs
due to the introduction of defendant's counterelalm wlU be paid by it The
clerk will aseertaln that proportion. Ail the remalnlng costs will be paid by
complamant.
TOLEDO PLATE & WINDOW GI/ASS CO. v. KAWNEEE MFG. CO.
(Circuit Court of Appeals, Slxth Circuit January 6, 1920.)
No. 8805.
1. Patents <ê=5306, 307 — Bond mat be bequired or plaintiff in geantinq
PBELIMINAEY INJUNCHON OK FROil DEFENDANT IN EEIFUSINa IT.
In patent infrlngement cases, the trial court may require a bond, either
from plaintifC as a condition of granting a prelimlnary Injunction, or
from défendant in lieu of such injunction.
2. Patents <S=3306 — Bond mat be eequiebd of défendant fob stipulated
DAMAGES on KEFUSAL OF INJUNCTION.
In patent infringement cases, the trial court may, in view of the diffi-
culty frequently found In provlng actual damages, require défendant to
stipulate the amount of futm-e damages, and give a bond to cover that
amount, as a condition of refuslng a prelimlnary injunction.
8. Patents <S=»306 — Bond qiven to avoid injunction covees stipulated
pkospective damages only.
In a patent infringement case, a bond given by défendant to cover stip-
ulated damages, so as to avoid an injunction, was prospective only, and
dld not cover damages suffered from Infringements prior to the date of
the order.
4. Patents <®=>306 — Bond feom dépendant to covbie stipulated damages fob
pbioe infeingement cannot be eequieed on eefusal of injunction.
In patent infringement cases, the trial court cannot, as a condition of
refuslng a prelimlnary injunction, require défendant to fumlsh a bond
to pay stipulated damages for Infringements occurrlng prier to the order,
nor does the fact that défendant was glven the choice between an Injunc-
tion and such a bond render the bond voluntary.
5. Patents <©=>306 — Riqht to oomplain or bond fob stipulated damaqeb
not waived.
Defendant's appeal from and the affirmance of an Interlocutory decree
In a patent Infringement case, which requlred défendant to account and
for issuance of an injunction, dld not walve defendant's right to contest on
the final hearlng an order requlring It to glve bond coverlng stipulated
damages, slnce the validlty of that order was not dedded on the appeal
from the interlocutory decree.
6. Patents <S=806— Obdee bequibing bond covebino stipulated dauages
not acquiesced in.
In a patent infringement case, a stipulation extending defendant's tlme
for puttlng in testlmony and continuing for a slmilar perlod an order
requlring défendant to glve a bond to cover stipulated damages was not
an aequiescence In a later Interprétation of the order which construed it
to cover Infringements occurrlng before the order was made.
_^ — <
^=sFoi other cases see same topic & KEY-NUMBKR in ail Key-Numbered Dlgests & Indexai
TOLEDO PLATE & WINDOW GLASS 00. V. KAWNEEE MFG. CD. 511
(262 F.)
7. Patents <S=»319(1) — ^Damages foe infringement mat exceed defendant's
PEOFITS.
In a patent Infrlngement suit, plalntifPs damages may exceed defend-
ant's profits, where plaintiff was a manufacturer of the article Installed
by défendant, and might Itself hâve made the sales wMch défendant made,
had the latter not bought from a rival manufacturer.
8. Patents ©=3306 — Stipulated dauaqes inapplicable wheeb iNrMNQEiŒNT
ONLY PABTLT SUStAINED,
Where défendant gave a bond to pay certain stlpulated monthly damr
âges in a patent infrlngement case, in which plàintlfC claimed that two
kinds of construction Infringed, and it was later determined that only on©
of such constructions did infringe, held, that the stlpulated damages
could not be recovered, since the stlpulated sum was fixed on the theory
that both kinds of construction Infringed.
Appeal from the District Court of the United States for the East-
em District of Michigan; Arthur J. Tuttle, Judge.
Patent infringement suit by the Kawneer Manufacturing Company
against the Toledo Plate & Window Glass Company. From a decree
for plaintiff, défendant appeals. Appellee's motion to strike certain
matter from the record denied, decree reversed in part, and remanded,
with directions.
See, also, 240 Fed. 737.
Wilber Owen, of Toledo, Ohio, and Livingston Gifford, of New
York City, for appellant.
Wallace R. Lane, of Chicago, 111., for appellee.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
KNAPPEN, Circuit Judge. This is an appeal from the final decree
of the District Court on the accounting ordered by its interlocutory
decree (which was affirmed by this court, 237 Fed. 364, 150 C. C. A.
378), adjudging infringement of patent No. 852,450 to Plym, for store
front construction.
On May 25, 1914, the day the answer to the bill of complaint was
filed, the District Court, on plaintiff's motion for preliminary injunc-
tion, required défendant Glass Company to give a bond for the pay-
ment to the plaintiff Kawneer Company, in the event of decree for in-
fringement, of $500 per month as liquidated damages from that date
until the District Court's décision on final hearing, but without préj-
udice to the recovery of damages and profits in excess of that amount.
The bond was given two days later to avoid injunction, which was or-
dered to issue in default of bond.
It appeared on the former review in this court that before suit was
begun défendant was making two types of bracket, known respectively
as the "scant" and the "full." The infringement found by the Dis-
trict Court was limited to the scant bracket; that is to say, brackets
too short to come into contact with the outer web of the gutter, and so
permitting gutter resiliency (which was an élément of each of the claims
in suit), and thus effecting infringement. Défendant claims that since
the order in question it has used only "full" brackets; that is, of such
®=iFoT other caaes Be« same toplc & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
512 262 FEDERAL REPORTER
length as to come into actual or substantial contact with titie gutter,
thus making it nonresilient, and so noninfringing. At the original
hearing below on the merits, défendant asked the court to déter-
mine, by its interlocutory decree, whether the full bracket construc-
tion infringed. The request was refused, on the ground thaï such
construction was not within the issues, and this court approved that
refusai. 237 Fed. 369, 150 C. C. A. 378.
The final decree on accounting, now before us, awarded to plaintifï,
first, $246.26 for profits made by défendant upon sales by it prior
to May 25, 1914 (the date of the injonction order) ; and, second,
$6,966.67 (plus interest since the date of the master's report), as liq-
uidated damages at the rate of $500 per month from May 25, 1914, to
the date of the décision below on the merits, viz. July 23, 1915. There
was no finding of infringement since the date of the injunction order
referred to, or of any actual damages for prior infringement. The
award of profits for prior infringement was based upon defendant's
report of sales and profits, and is not subject to criticism. The real
issue arises over defendant's contention that the decree for liquidated
damages is wholly unauthorized and unsustainable.
[1, 2] Défendant assails, not only the construction of the bond as
applicable to prior infringement, but the authority of the court below
to require the bond. A trial court bas undoubted power to require a
bond, either from a plaintifï as condition of granting a preliminary
injunction, or from a défendant in lieu of such injunction; and in
view of the difficulty frequently found in proving actual damage, the
requirement tliat the damages be stipulated is, u/ider proper cir-
cumstances, permissible. In Commercial Co. v. Acme Co. (C. C.) 188
Fed. 89, Judge Denison required from plaintifï a bond for stipulated
damages, where it was fairly évident that the injunction would re-
suit in closing down an existing business, and that the ordinary bond
would furnish inadéquate protection to défendant. The order was
approved by this court. 192 Fed. 321, 112 C. C. A. 573. In Grand
Rapids V. Warren Bros. Co., 196 Fed. 892, 116 C. C. A. 454, we
approved an order denying an injunction on condition that défendant
give bond for liquidated damages, and providing, in the alternative,
that if such bond were not given the injunction should issue, on the
giving of a similar bond by plaintiff. And in Coca-Cola Co. v. Nash-
ville Syrup Co. (D. C.) 200 Fed. 153, Judge Sanford required the plain-
tifï to give a bond for liquidated damages, where the wrongful allow-
ance of injunction bade fair to cause a damage to défendant wholly or
largely incapable of proof. In each of thèse cases it satisfactorily ap-
peared that the trial judge had carefully considered the situation, and
had made the order in question in the full exercise of judicial dis-
crétion, and upon due considération of the éléments involved.
[3, 4] In the instant case the order requiring the bond opens with
this récital:
"This cause belng brought on for hearing on motion for preliminary Injunc-
tion, the court not having time to hear the motion on its merits, orders that
défendant wltbm two days aie a bond"
TOLEDO PLATE & WINDOW GLASS CO. V. KAWNEEE MFG. C». 513
(262 F.)
— with the condition we hâve already stated. Except as involved in
the récital already quoted, and in the fact that the bond was required,
there is nothing in the order itself or in the record to show that inquiry
and considération were had of what would be a proper liquidation of
damages in view of the existing situation, or of the apparent necessity
for injunction. Whether in view of such récital, and in the absence of
further évidence on the subject, we should présume, in the absence of
contrary showing, that judicial discrétion, after inquiry and due con-
sidération, was exercised, we find it unnecessary to détermine ; for, in
our opinion, the order is not îairly susceptible of construction as re-
quiring payment of stipulated damages for infringements prior to its
making, and, if so construed, would be invalid.
The bond plainly looked only to the future. The provision for pay-
ment by the month could bear no reasonable relation to past infringe-
ments, for the simple reason that damages suffered for prior infringe-
ment were complète at the date of the order in question, and could
not be made greater by the lapse of time ; and if (as there is no rea-
son to think) the stipulated damages were intended as mère compen-
sation for delay in making payment on account of damages for prior
infringement, aie requirement would be clearly invalid as having no
relation to actual compensation or actual damages, and thus a mère
penalty. Gay v. Camp (C. C. A. 4) 65 Fed. 794, 799, 13 C. C. A. 137;
Feilows v. National Can Co. (C. C. A. 6) 257 Fed. 970, 972, C.
C. A. . It is no answer to say that défendant cannot be heard to
complain of the order because of its insistence that an injunction would
cause it irréparable damage, and that it was given its clioice between
such injunction and giving a bond. Thèse facts alone conferred no au-
thority to require a bond stipulating damages for past infringements,
to be computed by so unreasonable a measure as the mère lapse of time
before decree should be made on the merits. Such a bond would
be none the less given under compulsion.
[5] We see no force in the suggestion that the right to complain
of the order has been waived by the fact that tlie appeal from the in-
terlocutory decree carried an assignment of error addressed to the or-
der requiring the bond, and to the refusai tO set it aside, as requested
by défendant following the announcement of the décision below find-
ing infringement only by the scant bracket construction. Apart from
the fact that the bond cannot be construed to cover past infringements
— it is enough to say the decree of this court was confined to aiifirm-
ance of the interlocutory decree that défendant account and for in-
junction. There was no occasion to consider the other question, and
it was not donc.
[6] Nor are we impressed by the suggestion that défendant acqui-
esced in the order requiring the bond by its stipulations extending the
time for putting in its testimony, and in connection therewith con-
senting to the continuance of the order of May 25, 1914. Défendant
was not bound to anticipate that an attempt would be made to construe
the bond as relating to infringement before the injunction order was
made.
262 F.— 33
514 262 FEDERAL REPORTER
[71 It results that the decree for accounting must be reversed and
set aside, so far as it relates to recovery of stipulated damages for in-
f ringement prior to the date of the order. The decree will accordingly
be remanded to the district court, with directions, however, to grant
plaintifï, if it shall so ask, an accounting upon the basis of actual
damages. In this connection, we deem it proper to say that plaintifï's
damages are not necessarily no greater than defendant's profits, inas-
much as plaintifï is itself a manufacturer of the kind of construction
installed by défendant, and might itself hâve made the sales which
défendant made had the latter not bought from a rival manufacturer.
[8] As proof of inf ringement by the scant bracket construction since
the injunction order may présent a question of liability under the
bond theref or, we are constrained to say that as this record stands such
sales would not, in our opinion, be subject to stipulated damages. It
appears from the record now hère that when the bond was given plain-
tifï was insistirig that both the scant and fuU bracket construction were
infringements, and défendant was denying that either construction in-
fringed. The natural inference would be that the stipulated dam-
ages were intended to cover liability for both kinds of inf ringement. If
so, it would be inéquitable to allow recovery, on account of infringe-
ment by one kind of construction, of damages stipulated on a theory
that both structures were the subject of suit, and thus of possible lia-
bility for damages on account of both.
Appellee's motion to strike from the record the narrative statement
contained therein, or, in the alternative, certain specified matter, is
denied.
Appellant will recover its costs of this court. The question of
costs of the accounting already had below is addressed to Ùie District
Court.
tlNITBD STATES v. MORRIS et al.
(District Court, D. Colorado. December 16, 1918.)
No. 6833.
1. CouKTs <S=>480(1) — Fedeeal couet has no jueisdiction or action against
orriCEB or state coxiet.
A fédéral court Is without power to entertaln a suit agalnst a sheriff,
to requlre him to disregard the orders of a state court as to exécution of
Its proceas, havlng no relation to any matter pendlng in the fédéral court.
2. Courts <S=>478 — Money coluected on pbocesb fbom stateî court passes
out or its custodx when paid ovxb.
Money collected on process from a state court, wlien paid over to ttio
plalntiff, passes out of the jurisdlctlon of the court, and a fédéral court
may entertain a suit to requlre such plalntlfC to hold the money subject to
the rlghts of an intenrener In the state suit, whose daim to an interest in
the fund has not yet been flnally adjudlcated.
^=»For otber cases see same topic & KBT-NUMBBR in ail Key-Numbered Digesta & Indexes
UNITED STATES V. MOKKIS 515
C262 F.)
8. Uniïed States <S=»67(S) — Government not entitled to shaee in inteeesï
on penalty of bond of contbactoe for public work.
The rlght of the United States to share pro rata in a judgment recovered
by laborers and materialmen on the bond of a contracter for public work,
given under Act Aug. 13, 1894 (Comp. St. § 6923, note), where the judg-
ment is for the amount of the penalty of the bond, with Interest on thelr
claims, does not extend to such interest
In Equity. Suit by the United States against Ernest Morris and
others. On motions to dismiss and to strike. Sustained in part.
Harry B. Tedrow, U. S. Dist. Atty., of Boulder, Colo., and Frank
Hall, Asst. Atty. Gen., for the United States.
S. S. Sherman and E. M. Sherman, both of Montrose, Colo., for de-
fendant Sherman.
Ernest Morris, of Denver, Colo., pro se.
James A. Marsh and Norton Montgomery, both of Denver, Colo.,
for défendant Bailey.
Bartels & Blood, of Denver, Colo., for défendants McPhee & Mc-
Ginnity.
Catlin & Blake, of Montrose, Colo., for défendant McClelland.
LEWIS, District Judge. A proper understanding of the purpose
of the bill may be more readily obtained by a statement of the ma-
terial facts involved in the controversy. In 1904 the Taylor-Moore
Construction Company, a corporation, made a contract with the plain-
tif? to construct to completion the Gutmison Tunnel, which was to be
a part of the plaintifif's Uncompahgre Valley irrigation project, in
Montrose county. On the making of the contract the plaintifï took
from the Construction Company a bond, conditioned in accordance
with the terms of the Act of August 13, 1894 (28 Stat. 278). The
bond, however, was executed in seven like parts to accommodate the
sureties, and the sureties obligated themselves, respectively, in différent
amounts. The Taylor-Moore Company were not able to exécute theii
contract, and tumed the work over to the plaintiff a few months after
they begun. The plaintifï thereupon completed the construction, and
charged the cost to the contractor, as it had a right imder the contract
to do. In 1905 suit was brought on the bond against some of the sure-
ties, in the State court in Montrose County, by a number of persons
and corporations, who had furnished labor and material to the Taylor-
Moore Construction Company, who had not been paid. They recov-
ered judgment. The case was appealed by the bondsmen to the State
Suprême Court, and is found in McPhee v. U. S., 174 Pac. 808. Prior
to the trial of the case the plaintiff, having completed the work, in-
tervened in that case, and it, too asked judgment on the bond for the
amount that it had expended in completing the tunnel, over and above
the contract price with Taylor-Moore. The trial court denied that re-
lief to the plaintiff, and it also appeared as one of the appellants in the
Suprême Court. That court reversed the action of the trial court in
denying judgment in favor of the plaintiff as intervenor. When the
€=3Foi otlier CBses see Bama toplo & KBT-NUMBE!R In aU Key-Numbered Dlsests & Indexn»
516 202 FEDERAL EBPOBTBB
case went back on mandate the plaintiffs proceeded to take out exécu-
tions on their judgments, and considérable sums were collected on the
writs. Thereupon this plaintifï again appeared in the State court and
asked that court for an order directing the holding of those funds in
the registry of that court until it could obtain its judgment, asserting
that ail sums realized, and that thereafter might be realized, on the
bond, was a trust fund in which it would be entitled to share. The
motion was denied, and the officer who had executed the writs thereto-
fore issued and realized sums thereon, was directed to turn the money
over to the attomeys of the plaintififs who had recovered the judg-
ments, and to likewise turn over to them any further sums that might
be realized. Thereupon the plaintifï filed this bill against the attor-
neys who had received the moneys, their clients, ail other judgment
creditors in the State court, and against the sheriff and his deputies.
The bill sets up the foregoing facts, and gives in détail the amount of
each judgment and by whom recovered, and it asks, among other
things, "that said défendants and each of them may be required to ac-
count and pay to the United States of America its proportionate part
of the funds derived from said exécutions," and "that the plaintiff may
bave such other and further relief as to the court may seem équitable."
Motions to dismiss, and motions to strike parts of the complaint, bave
been filed by some of the défendants.
The motion of S. S. Sherman, E. M. Sherman, and Henry W. Catlin
to strike a part of paragraph 7 of the bill is sustained.
The motion of défendant Morris to strike a part of the bill is over-
ruled.
[1] The motion of Dewey C. Bailey, sheriiï, and P. S. Boyer, his
deputy, to dismiss as to them is sustained. The motion of thèse two
ofîficers is sustained because any attempt on the part of this court to
control their actions as officers of the State court, or to give them any
directions as to their duties as such, would be unwarranted interfér-
ence with the State court and the exécution of its process.
[2] The chief argument in support of the other motions to dismiss
the entire bill bas been based upon the contention that to maintain it
and give the relief above noted would be to interfère with the State
court and the exécution of its judgments. An examination of the au-
thorities cited in the briefs on both sides leads to the conclusion that
this contention is not sound. Having ordered that the bill be dismissed
as against the ofïicers of the State court, there bas been taken out of
the bill any claim for a basis on which that contention could rest. The
judgment creditors are now as free as they heretofore hâve been to
take any steps they wish in the collection of those judgments. The re-
lief which the bill seeks as against them is to restrain them from dis-
posing of the money so collected, or distributing it among the other
judgment creditors, until the plaintifï can be heard on its claim that
ail moneys recovered on the bond must be treated in equity as a trust
fund, and distributed pro rata among ail judgment creditors, including
the plaintifï, when it shall hâve obtained its judgment. As soon as
writs issue on those judgments heretofore obtained, and the money
UNITED STATES V. MORRIS 517
realized has been tumed over to any of the plaintiffs, or their counsel,
the jurisdiction of the State court over that fund has been exhausted,
and its powers are then at an end.
[3] But the amount recovered in the State court against the sure-
ties who were there sued was in each instance far in excess of the
amount that each surety bound himself for in the bond. To illustrate :
T. B. Townsend bound' himself for only $10,000.00, whereas the judg-
ment entered against him on July 7, 1914, was for $17,050.00. The
excess was by way of interest from the time of the breach, which was
approved by the Suprême Court, and that court cites a case from
Maine in which the added interest is characterized as "damages for
detaining the damages which they (sureties) bound themselves to pay
at a prior date." A very large part of the amount thus far coUected is
composed not only of that interest but also of interest that has accrued
on those judgments from the time they were rendered up to the time
payment was made under the exécutions. This is not the time for a
final détermination of the question as to whether the pénal sum named
in the bond should be treated as a trust fund and pro-rated between
the plaintifif and material-men and laborers upon the works. Some au-
thority so holding has been cited by plaintiff's counsel, and none direct-
ly to the contrary by défendants. Circuit Judge Putnam so held in
Surety Co. v. Cément Co. (C. C.) 96 Fed. 25, and entered a decree in
accordance with that holding in U. S. v. Surety Co. (C. C.) 126 Fed.
814, which decree was affirmed by the Court of Appeals, 135 Fed. 78»
67 C. C. A. 552, and there is strong intimation from the Suprême Court
in support. Fidelity & Guaranty Co. v. Struthers Wells Co., 209 U.
S. 306, 28 Sup. Ct. 537, 52 L. Ed. 804. But I do not think that the
principle announced by Judge Putnam can be carried to the extent of
including the interest collected by the judgment creditors as a part
of the trust fund, if it should finally be decided that there must be an
équitable pro-rating.
The motions of the several défendants to dismiss the bill will be
overruled, and the défendants, and each of them, will be enjoined from
distributing, or (|!||ierwise disposing, of any and ail amounts heretofore
realized, and hereÉf ter to be realized, on their exécutions, or otherwise
received from their judgment debtors, except interest collected by them
on said judgments. The injunction will extend only to the principal
of the amount received from the respective sureties.
A motion was submitted on behalf of the plaintiff to require the de-
fendants who hâve any of said funds in hands to deposit the same in
the registry of this court until the amount of plaintiff's damage can
be ascertained in the State court, so that it would be on hand when
the question of prorating was finally settled, if a decree to that effect
shall be obtained. But there is no allégation in the bill that the défend-
ant or défendants who now hold the funds is or are insolvent, or that
there is any other cause to suspect that the fund will not be forthcoming
if the plaintiff is successful in this suit. The présent order will there-
fore go no further than above noted, but the plaintiff may at any time
hereafter ask for such further orders in respect thereto as it may be
advised to be necessary in its interest, after the answers corne in.
518 202 FEDERAL UEPOETEE
The défendant Morris also filed a motion to show cause why coun-
sel for complainant should not be punished for contempt on account
of certain language objected to in the bill. That motion is likewise
overruled.
The défendants may hâve time and until January 6th next to answer.
UNITED STATES v. WOOLLET et al.
(District Court, D. Oregon. January 5, 1920.)
No. 6499.
1. PuBUC LAND8 ®=9l20 — Evidence stjiticientto cancel homesthIad patents.
Evidence regardlng the circumstances under whlch an unde assisted
three nièces to make homestead entries, paying the entry fées, erectlng
cablns, in whieh they lived not to exceed two months, and then purchasing
the land from them upon final proofs belng made, etc., Jield to estabUsh
fraudulent entry and proof, authorlzlng cancellatloa of patents.
2. Public landb ^=5»120— Evidence eequired to cancel homestead patents
rOB FBAUD.
In sults to set aside homestead patents for deceit and fraud, the govem-
ment has the burden of establishing the deceit and fraud by clear and
convincing proof.
8. Public lands <S=>120 — Evidence insufficient to establish fbaud in
secubing h05,testead patent.
Evidence tendlng to show that a homestead patentée had llved almost
continuously upon his homestead, except when worklng for his brother-
in-law, who purchased the claim from hlm some four months after issuance
of final receipt, etc., held not to establish fraud or deceit authorizing
cancellatlon of the patent, although varions witnesses testlfled that the
patentée had seldom been seen on the homestead.
4. Public lands ig=ï>120 — Evidence insufticient to show pubchasee with-
OUT KNOWLEDGE OF PATENTEE'B FKAXJD.
Evidence regarding the circumstances under whlch an uncle assisted
three nièces In securing homesteads, whlch he purchased from them upon
final proof belng made, held insufiSeient to establish that he was an Inno-
cent purchaser for value, wlthout notice of thelr failure to comply wlth
the homestead requlrenients.
6. Limitation of actions i©= 100(10) — Right of action to cancel homestead
patent foe feaud accrues on discoveet of fbaud.
Where the government flrst leamed of fraud practlced in securing
homestead entries through a spécial agent's report dated July 28, 1908,
and recelved in General I«nd Office August 31, 1908, a suit to cancel the
patents, instituted August 22, 1914, was not barred by the six-year statute
of limitations.
6. Limitation of actions ®=3l04(l) — Statuts does not eun untii, discovbby
OF CONCEALED FEAUD.
A fraud concealed, or commltted In sudi a way as to conceal Itself,
wUl toU the limitation statute until discovery of the fraud.
In Equity. Suit by United States against Nancy C. Woolley, Eva
E. Woolley, Anna L. Traylor, George C. Woolley, and Stephen Har-
rer. Homestead patents issued to the first three named défendants
set aside, and patent to George C. Woolley confirmed in the last-
named défendant.
®=»Foi other cases eee same topic & KEY-NUMBER In ail Key-Numbered Dlsests & Indexes
UNITED STATES V. WOOLLEY 519
C262 F.)
Lester W. Humphreys, U. S. Atty., of Portland, Or., Elton Wat-
kins, Asst. U. S. Atty., of Portland, Or., for the United States.
Errett Hicks, of Canyon City, Or., and Davis & Farrell, of Port-
land, Or., for défendants.
WOLVERTON, District Judge. This is a suit by the govemment
to set aside certain patents issued to the WooUeys covering lands
which they acquired through commuted homestead entries. The suit
is predicated upon fraud which it is alleged the patentées practiced
in procuring their patents. Harrer purchased from the Woolleys,
and, it is claimed, with knowledge of and participation in the fraud.
The proofs in the land office show that the Woolleys ail made ap-
plication for their respective homestead entries on August 15, 1900;
that Nancy C. established actual résidence upon her homestead on
July 2, 1901, Eva E. July 23, 1901, and Anna L. (now Mrs. Traylor)
July 25, 1901, and that George C. commenced living on his land May
6, 1900, first lived in a tent, and when his house was built established
résidence thereon November lOth of that year. George C. filed his
commutation affidavit November 1, 1901, and received his final cer-
tificate November 6th of that year. His patent was issued to him
August 12, 1902. He conveyed to Harrer March 13, 1902. The
other three Woolleys applied for commutation September 5, 1902,
and received their final certificates September 13, 1902. Each of
them conveyed to Harrer September 30, 1902. Their patents were
issued to them January 28, 1904.
The record herein further shows that George C. Woolley is a
brother-in-law of the défendant Stephen J. Harrer, having marri ed
Harrer's sister, and that the other défendants Woolley are the daugh-
ters of George C, being nièces of Harrer. Harrer assisted ail the
parties in locating their lands for making application for homestead,
and, as it respects the Woolley daughters, he constructed their houses
for them, such as were constructed, upon their respective homesteads,
went with them to the land office, and paid their filing fées for
them. George C. Woolley was présent at the same time, and made
his filing; but it does not appear that Harrer paid the filing fee for
him. when the daughters made their final proofs and commutation,
Harrer again accompanied them to the land office, and paid for each
of them the commutation price of $200. The final proof witnesses
are the same in ail the cases.
The fraud imputed to the défendants Woolley by the bill of com-
plaint is in effect that the testimony and proofs submitted by them
for procuring their patents were attended with deceit and misrepre-
sentation, and were false and fraudulent, in that none of them es-
tablished actual or any résidence upon their respective claims, nor
maintained résidence thereon, but elsewhere, that the houses con-
structed upon such claims were not at any time abodes fit for habita-
tion, nor did the entryman ever live in them ; that none of them act-
ed in good faith in filing upon and making proof of their respective
homesteads, and that each of them well knew at the time that the
proofs so made were false and fraudulent, .and in fact were so made
520 262 FEDERAL REPORTER
for the purpose of deceiving the officers of the land department ; and
that such officers relied thereon and were deceived, and were thus
induced to issue the patents in question.
[1] A brief narrative as to what was done respecting thèse claims
will suffice for an understanding of the situation, so as to fix re-
sponsibihty or not, as the case may be, for fraud practiced by the
rêverai homestead claimants.
Woolley, who was a laborer, his wife, and three daughters were
residing at Drain early in 1900. Grant Harrer, a brother of Stephen,
visited them there, and when he returned to Grant county, in which
the land in dispute is situated, Woolley went with him. L,ater, in
March or April, 1900, probably the later date, Mrs. Woolley and the
three daughters also went to Grant county, and were met at Heppner
by Stephen Harrer, who took them out to his place in that county,
which was near the lands in dispute, perhaps four or five miles dis-
tant. The family stayed with Stephen Harrer until he rebuilt a
house belonging to him. Thereupon they rented the house f rom him,
and thereafter lived there separate and apart from Stephen. As is
shown by the proofs, the daughters, as well as the father, made set-
tlement upon their respective homesteads August 20, 190O. The
houses were not built for the daughters, however, until in January,
1901, and they did not, as they say in their proofs, establish actual
résidence until in July, 1901. The father and tlie daughters, as we
hâve seen, ail located at the same time, and ail went to the land office
together to make their filings; Stephen Harrer accompanying them.
Their houses or cabins were constructed of logs, and those of the
daughters were built for them by Harrer; some of them without
Windows, and ail without doors, except openings to admit of ingress
and egress; possibly one of them was provided with a hinged door
to close the opening. None of them had floors, except as the soil
was used for the purpose. Thèse houses are described by some of the
witnesses as sheep cabins, such as are used in that country to provide
shelter for sheep, and it is claimed by the govemment that they were
in reality cabins or sheds extemporized for temporary habitation for
the purpose of simulating résidence for the requisite period to obtain
patent.
The mother and the daughters returned to Drain in August or
early September of 1901. They intended to go back to Grant county
that f ail, but did not do so. They remained in Drain until the spring
of 1902, and the daughters thought that by being away so long they
had lost their homesteads. Their uncle Stephen came to Drain, and
persuaded them that they had not forfeited their homesteads, and
the daughters returned with him to Grant county in March, 1902,
where Eva and Nancy remained until after they made final proof
September 5th. Anna stayed until June, 1902, when she went back
to Drain, and there remained until August. She then returned to
Grant county, and lived there until after she made final proof. AU
of the daughters later in the month of September left Grant county
again for Drain. Their uncle Stephen accompanied them to Hepp-
ner, where he purchased their claims, paying them $200 each. The
UNITED STATES V. WOOLLET 521
(262 F.)
deeds were executed September 30, 1902, and were filed for record
in Grant county July 20, 1903.
[2, 3] The daughters made some attempt to live upon the land.
They took with them a meager supply of fumiture, but none of them
occupied their supposed habitat alone. They stayed together, first
awhile at one cabin and then at another, thus rotating from cabin to
cabin. But, even with this nomadic way of occupation, it is not
probable that they resided in their cabins or upon their homesteads
more than a month ail told, certainly not more than two months at
the outside, and it is quite apparent that their final proofs as to actual
résidence were largely simulated, and not real. While they intended
no fraud upon the government, and undoubtedly believed they were
actually within the law, yet what they did operated as a fraud upon
the law, and they cannot be permitted to hold their homesteads against
the claim of the government for the cancellation of their patents.
McGoldrick Lumber Co. v. Kinsolving et al, 221 Fed. 819, 137 C.
C. A. 377.
The claim of Woolley stands in a différent light. He was not call-
ed as a witness at the trial. His final proofs, however, show that his
wife would not live with him upon the land, but that he lived prac-
tically continuously on his homestead up to the time he made such
proofs; that he was away for short periods only. The testimony on
the trial shows that he worked for Stephen Harrer while away from
his cabin. There has been no testimony adequately to dispute this.
Se ver al witnesses hâve testified for the government that they were
frequently in the vicinity of thèse homesteads, including WooUey's,
and that they never saw any one occupying the cabins. To this gên-
erai statement there is perhaps one exception: One of the witness-
es, as I remember, did see Woolley or some one at one time at one
of the cabins. This testimony is far from satisfactory or convincing.
It must be remembered that this is a suit to set aside patents for
alleged deceit and fraud, and this puts upon the government the
burden of establishing the deceit and fraud by clear and convincing
proof ; otherwise the solemn act of the government in issuing the
patents must stand. The proposition is so elementary as to need the
citation of no authorities to support it. In this respect there is no
distinction between causes instituted in a strictly private capacity and
suits by the government to annul conveyances of title on account of
alleged fraud and déception. The sale to Harrer of Woolley's claim,
although only a little over four months after the issuance of the final
receipt, appears to hâve been regular, and the filing of the deed for
record was less than a month thereafter, and it has not been adequate-
ly shown that Woolley and Harrer, or either of them, hâve been
guilty of any concealed fraud respecting this claim.
[4] The défendant Harrer's further défense is that he purchased
thèse homesteads from the patentées in good faith and for valuable
considération, without knowledge of any fraud perpetrated by them
in the acquirement of their patents. This can hardly be claimed by
him as it respects the daughters, because from his own testimony he
was quite as familiar with their transactions as they were themselves,
522 262 FEDBRÂL BEPOBTER
and was personally cognizant of practically ail they did, from the
time of making their entries to the time of presenting their final
proofs, including what they did in the way of living upon their home-
steads, ail of which is preclusive of his plea of an innocent purchaser
for value.
As it pertains to the George C. Woolley daim, while it may be that
Harrer did advance the money at the time that Woolley made his final
proof to enable him to pay the price of his commutation, it appears
that Woolley was probably indebted to Harrer for advances made to
enable him to provide for his family and for other purposes. It is
not otherwise shown that Harrer bore the same intimate relation
toward Woolley as he did toward the daughters. In reality, the
daughters and WooUey's wife were in large measure objects of char-
ity with Harrer, and what he did with référence to their homesteads
was to relieve them in part from dire necessities thrust upon them.
[5, 6] The next question presented relates to the statute of lim-
itations. The patents were issued, as we hâve seen, the one to George
C. Woolley August 12, 1902, and those to the daughters January
28, 1904. The first information that the government had of any
fraud practiced with référence to thèse homesteads was through An-
drew Kennedy, a spécial agent of the General Land Office, by a
report bearing date July 28, 1908. This report was received in the
General Land Office August 31, 1908. This suit was instituted Au-
gust 22, 1914, and has since been pending in court. This was in time
by a few days to save the running of the statute of limitations of six
years against the government after the discovery of the fraud. A
fraud concealed, or committed in such a way as to conceal itself,
will toU the statute, and it will not begin to run until after the dis-
covery of such fraud. Exploration Co. v. United States, 247 U. S.
435, 38 Sup. Ct. 571, 62 L. Ed. 1200._ The facts hère f ail within the
principle, and the statute did not begin to run until August 31, 1908.
The decree of the court will be that the patents issued to Anna L.,
Eva E., and Nancy C. Woolley will be set aside and held for naught,
but that, as to the George C. Woolley patent, the title will be con-
firmed in Stephen Harrer, and that neither party to the suit shaU re-
cover costs.
In re STANDARD SHIPYARD 00.
(District Court, D. Maine. January 8, 1920.)
No. 396.
1. BXWKBUPTOT «=5»61 — ^APMISSION OF INSOLVENOT NOT ACT OV BANKBtJPTOT.
A letter wrltten by the derk of a corporation Ijy authority of ita ûiiecr
tara, statlng Its InabUity to pay its debts in full and that the only course
open to nonattachlng creditors waa to bring Involuntary proceedlngs in
bankruptcy, In wldch case the company would admit Insolvency and its
wUlingness to be adjudioated bankrupt, held not such an unquallfled admis-
sion as to constitute an act of bankruptcy, under Bankruptcy Act, § 3a
(6), Comp. St § 9587.
^s»For other cases see eame toplc & KBT-NUMBBR In ail Key-Numbered Dlgests & Indexes
IN RE STANDARD SHIPYARD CO. 523
(262 F.i
2. Bankbuptct ©=963 — Ratification by cobporation or unauthokizkd act
OF BANKEUPTCY INEFFECTUAL.
Under Ilev. St. Me. c 51, § GO, provlding tliat no corporation shall part
with any of its property or corporate rights essentlal to the conduct of the
corporate business, otherwise than in the ordinary and usual course of
its business, except wlth tlie consent of Its stockholders at a meet-
ing the call for which shall give notice of the proposed action, a business
corporation Is without power to commit the act of bankruptey specifled in
Bankruptcy Act, § 3a (5), Comp. St. § 9587, except by a vote of the stock-
holders at a meeting duly caUed for the purpose, and ratification of such
an act of the dlrectors by the stockholders after filing of a pétition against
the corporation cannot relate back, so as to eut offl the rights of objecting
creditors.
In Bankruptcy. In the matter of pétition in involuntary bankruptcy
against the Standard Shipyard Company. Pétition dismissed.
Cari M. P. Larrabee, of Wiscasset, Me., for petitioning creditors.
Irving E. Vemon, of Portland, Me., for alleged bankrupt.
Williamson, Burleigh & McLean, of Augusta, Me., for answering
creditor.
Clément F. Robinson, of Portland, Me., for an intervener.
HALE, District Judge. This case comes before the court on the
question of adjudication. It is alleged by the petitioning creditors that
the Standard Shipyard Company committed an act of bankruptcy on
the 6th day of June, A. D. 1919, by a letter to its creditors admitting
in writing its inability to pay its debts, and its willingness to be ad-
judged a bankrupt on this ground.
Hâve the petitioning creditors alleged sufficient facts to bring them
within the fifth act of bankruptcy? They contend that they hava in-
troduced such évidence, first, by proof of acts committed prior to the
filing of the pétition in bankruptcy ; and, second, by proof of acts com-
mitted after such filing.
[ 1 ] 1. A letter has been oiïered in évidence, written by Mr. Vernon,
the clerk of the corporation, as f ollows :
"June 6, 1919.
"Cari Larrabee — Dear Brother Larrabee: Replylng to your Inquiry over
the phone of this moming, as I understand the situation the Standard SMi>-
yard Company owes some $17,000 or more direct Uabllities, besldes some con-
tingent ciaims under power contract and lease.
"The Company has not sufficient funds with which to satisfy their creditors,
and the value of the property in the sMpyard at Wiscasset is not suffldent to
satisfy the creditors In full. The only course open to the nonattaching cred-
itors is to bring Involuntary proeeedlngs In bankruptcy, and the company will
admit its Insolvency, and its willingness to be adjudged bankrupt on that
ground.
"Very truly yours."
The record of a resolution passed at a meeting of the directors of
the corporation, held on September 4, 1919, is offered as authority for
the above letter. That resolution confirms the
"instructions givrai to the clerk of the corporation to admit the inability of
the corporation to i>ay its debts, and its willingness to be adjudged a bank-
rupt on that ground."
^ssFor other cases sec same toplc & KBT-NXTMBER in ail Key-Numbered Digests A Indexes
524 262 FEDERAL REPORTER
The resolution then proceeds to admit its liability to pay îts debts
and its willingness to be adjudged bankrupt, and authorizes the clerk
to file answer or answers —
"in any court wherein there is now pending, or may be pendlng, any pétition
praylng that sairl corporation be adjudged bankrupt."
There is further évidence tending to show the authority of the
clerk to write the above letter, and to take ail the action which he took
for the corporation in the premises. I assume, for the purposes of
the case, that the clerk had such authority, although this is denied by
the objecting creditors. It is not contended that the clerk, at the time
he wrote the letter, had such authority by a vote of the stockholders
themselves.
In the Baker-Ricketson Case (in the Massachusetts District, 1899),
97 Ked. 489, the directors—
"voted, tliat B. B. Eicketson be authorized in behalf of the Baker-Ricketson
Company to appear on behalf of said Company in tlie United States court in
Boston in ttie event of an Involuntary pétition In bankruptcy beînj,' iîlod
against said company, and on behalf of the Company to admit in wrlting its
inability to pay its debts, and its willingness to be adjudged a bankrupt on
that ground."
It was held that such vote was not in itself a written admission, but
merely authorized one of the ofîîcers of the company to make the ad-
mission, if a pétition in bankruptcy should be filed ; that it was, there-
fore, not such an unqualified admission as is required by the statute,
to prove the commission of the fifth act of bankruptcy.
Collier says:
"Where an offlcer of a corporation was deputlzed to exécute such a writing
(as an admission in bankruptcy) provided a pétition should be flled against
it, it is not an act of bankruptcy." Collier on Bankruptcy (llth Ed.) p. 127.
In the case before me, the letter itself advises that the only course
open to creditors is to bring involuntary proceedings in bankruptcy,
and that, if such proceedings are brought, the company will admit its
insolvency, and its willingness to be adjudged bankrupt on that ground.
It seems clear to me that this letter is not such an unqualified admis-
sion as is required by law to prove the commission of the fifth act of
bankruptcy.
[2] 2. Are the acts in évidence after the filing of the pétition in
bankruptcy Sufficient to prove the commission of the fifth act of bank-
ruptcy ?
On November 6, 1919, some time after the filing of the pétition in
bankruptcy, the stockholders of the Standard Shipyard Company held
a meeting and voted to ratify the action of the board of directors taken
at their meeting of September 4, 1919, and at other meetings —
"with refereiice to authorizlng the clerk of the corporation to admit the in-
solvency of the corporation in the matter of the Involuntary pétition in bank-
mptcgr now pendlng against the company, and wlth référence to the admission
on the part of the directors, and the corporation, of its inability to pay its
debts in full, and its willingness to be adjudged bankrupt on that ground, and
its willingness to surrender its property for the beneflt of its creditors, and
with référence to authorizing the clerk, as attomey for the corporation, to file
answer or answers," ©te
IN EE STANDARD SHIPTAED CO. 525
C262FJ
Further votes were passed, as follows :
"Resolved, tliat the stocklioiaers hereby ratify and conflrm the Instructions
beretofore given by the directors to the clerk to admit the inability of the cor-
poration to pay its debts and its willingness to be adjudged a bankrupt on
that ground, and hereby admit that said bank-inabUity to pay and willingness
to be adjudged a bankrupt on that ground has contlnued at ail tlmes since
January 28, 1919, to this date.'.'
"Eesolved, that the stockholders hereby admit the iuability of this corpora-
tion to pay its debts and its willingness to be adjudged a bankrupt on that
ground, and authorize the clork, as the attorney for the coiporation, to file
answer or answers in any court or courts wherein Is now pending, or may
be pending, any pétition praying that the corporation be adjudged bankrupt"
"Kesolved, that Uie corporation hereby appoints the clerk as its attorney'
to act for it in the United States District Court for the Southern Division of
Maine, in the matter of the involuntary pétition of bankruptcy heretofora
brought and now pending therein against the corporation, and, as such attor-
ney, does authorize him to file ail necessary papers, and take ail necessary
steps for expedltiug in every way possible the said bankruptcy proceedings
to the end that the property of the corporation may, through the bankruptcy
courts, be made available pro rata for the creditors of the corporation, and
the otiicers nnd directors of the corporation are hereby empowered and di-
rected to exécute ail necessary instruments, documents, pleas, motions and
agreements to and to take ail action necessary for securing the purposes of
thèse resolutions."
On examination of thèse votes, and f rom ail the testimony, it is évi-
dent that the intention of the stockholders was to ratify whatever action
had been taken by the directors and by the clerk under the votes of the
directors. The lelter of the clerk, already referred to, is the only ex-
pression of the action of the directors in thç premises. That was ail,
then, that there was for the stockholders to ratify. I hâve already held
that such letter is not such an unqualified admission as is required to
prove the commission of the fifth act of bankruptcy. It is clear that
the ratification by the stockholders does not add anything to this letter,
or make it an "unqualified admission." This ratification on the part
of the stockholders, then, cannot constitute the letter of June 6th such
an admission as is called for by the statute ; and it follows that no com-
pétent testimony has been brought before me to prove the commission
of the fifth act of bankruptcy.
In considering the power of directors in the premises, and the effect
of a ratifying vote by the stockholders, passed after the filing of the pé-
tition, it is my duty to refer to the décisions of the fédéral courts, es-
pecially in this circuit. In the Bâtes Machine Co. Case (January, 1899)
91 Fed. 625, Judge Lowell held that, under the laws of Massachusetts,
in a case where the directors of a corporation, exceeding their stat-
utory authority, made a written admission of its insolvency and its
willingness to be adjudged a bankrupt on that ground, and thereupon a
pétition in bankruptcy against it was filed by certain creditors; but
where certain other creditors objected to the adjudication thereon, a
subséquent vote of the stockholders, ratifying the action of the direc-
tors, will not relate back, so as to eut ofif the rights of objecting cred-
itors. In that case, unlike the case at bar, the directors had made an
unqualified admission of the inability of the corporation to pay its
ciebts, and of its willingness to he adjudged bankrupt on that ground.
In his opinion, Judge Lowell points eut that the directors of a busi-
526 262 FEDERAL REPORTER
ness or manufacturing corporation hâve no authority to make such ad-
mission; that, if they had such power, they would be able to make a
complète transfer of ail the property of the corporation, in violation
of the statute of Massachusetts, which provides :
That "no conveyance or mortgage of Its real estate, or lease thereof for
more than one year, shall be made, unless autborized by a vote of the stock-
holders at a meeting called for the purpose." PAb. St Mass. 1882, c. 106, § 23.
He shows that directors cannot dérive such power from a by-law,
which gives them authority to do the ordinary business of the corpo-
ration ; for it can be no part of the ordinary business of a corporation,
orgemized for business or manufacturing purposes, to go into bank-
ruptcy. In re Quartz Gold Mining Co. (District Court of Oregon) 157
Fed. 243, affirmed in 158 Fed. 1022, 85 C. C. A. 547, under the name
of Van Emon et al. v. Veal ; Burbank Co. Case (D. C.) 168 Fed. 719
(opinion by Judge Aldrich).
In the case at bar the question whether the directors of a Maine cor-
poration hâve power to admit its willingness to be adjudged a bank-
rupt dépends somewhat upon our state statutes. Section 60 of chap-
ter SI of the Revised Statutes of Maine provides;
"No corporation shall sell, lease, consolidate or in any manner part with Its
franchises, or its entire property, or any of its property, corporate rights or
privilèges essential to the conduct of its corporate business and purposes,
otherwise than in the ordinary and usual course of its business, except with
the consent of its stockholders at an annual or spécial meeting, the call for
which shall give notice of the proposed sale, lease or consolidation."
This prohibition is positive. It forbids a corporation to part with
any of its franchises, or anything essential to the conduct of its cor-
porate business, "otherwise than in the ordinary and usual course of
its business."
It cannot be said that it is a part of the usual course of business of
a manufacturing corporation to go into bankruptcy. It is clear that
it would be no part of the duty of a board of directors, under the
foregoing statute, to put a corporation into bankruptcy by admitting
its inability to pay its debts and its willingness to he adjudged a bauk-
rupt. In RoUins v. Clay, 33 Me. 132, our Maine court held that:
"The directors of a corporation are authorized, by virtue of their office, to
transact its ordinary and customary business, unless the charter and by-laws
otherwise détermine. But they are net authorized, without some spécial au-
thority, to make sale of that portion of its estate or property essentially
necessary to be retalned to eoable it to transact its customary business."
Although corporation law has deepened and broadened since 1851,
I do not find that the rule relating to a Maine corporation, then an-
nounced by Chief Justice Shepley, in speaking for the court, has been
substantially changed.
I cannot extend the scope of corporate power beyond the limit im-
posed by owr Maine statutes. I am of the opinion that a business cor-
poration has no power to commit the fifth act of banlcruptcy, except
by vote of its stockholders, and that such act can be authorized only
by such vote at a meeting duly called for the purpose ; that the ratifi-
cation of such action of directors of a corporation, by vote of the
IN EE BEINN 527
(262 F.)
stockhoîders, after the filing of the pétition in bankruptcy, cannot re-
late back, so as to eut off the rights of the objecting creditors.
The petitioning creditors présent many reasons to induce the court
to proceed, in a libéral spirit, to view their rights, urging that it is un-
conscionable that a single attaching créditer shall be allowed to absorb
an estate against the interests of many gênerai creditors. If it were
merely a question of allowing a lame pétition to be made whole, or if
it were in the power of the court to say that, under ail the circum-
stances, the corporation ought to be in bankruptcy, and that, theref ore,
a pétition having been filed, the court might proceed upon vague and
gênerai grounds to order adjudication, in disregard of vital objections
inhering in the case, then there would be great force in the petitioners'
suggestions and in their citation of law. But I do not find that cases
referred to by their counsel assist me in determining the précise ques-
tions now before me. In re Yaryan Naval Stores Co., 214 Fed. 563,
131 C. C. A. 15 ; In re Vêler, 249 Fed. 633, 161 C. C. A. 543; Brink-
ley V. Smithwick (D. C.) 126 Fed. 686.
It is insisted, also, by the learned counsel for the petitioning credi-
tors that the reasoning of the Bâtes Machine Co. Case should not be
applied, since the act of 1910 (Act June 25, 1910, c. 412, 36 Stat. 838),
which permits voluntary corporate bankruptcy, and that this suggestion
is emphasized by the query of Judge ÎLowell in the latter paragraphs of
his opinion. I agrée with counsel that, since the passage of the act of
1910, courts hâve adopted, so far as possible, a libéral policy with réf-
érence to this subject. But no policy, however libéral, permits me to
find in the proof s before me, any compétent évidence that the respond-
ent committed the fifth act of bankruptcy, before the filing of the péti-
tion.
The resuit is that I am forced to order that the pétition for adjudi-
cation he dismissed. A decree consistent with this opinion may be pre-
sented.
In re BRINN et aL
In re MASON et al.
(District Court, N. D. Georgia. December 17, 1919.)
1. Bankkttptot ®=>9(2), 214 — Act cbeatino bankbtjptcy coubt stjpbesebes
statb insolvency i^ws.
As the Bankruptcy Act (Comp. St §§ 9585-9656) was passed under a
spécifie grant of power In the fédéral Constitution, It is a part of the
suprême law of the land, and the bankruptcy courts established for its
administration are necessarily paramount ; the act superseding ail state
insolvency laws, and the power of state courts to enforoe liens invalldated
by the act endlng with bankruptcy.
2. Bankbuptcy ®=>214 — Conoubbent jtjbisdiction of state and bankbuptot
couets to enfoece liens not invalidated by act.
Notwithstandlng the paramount character of the Bankruptcy Act (Comp.
St. §§ 9585-9656), the state courts remain courts of concurrent jurlsdie-
tion for the enforcement of liens not invalldated by the act, and In cases
In which proceedings for their enforcement are Instltuted in the state
^=9For other cases see same toplc & KET-KUMBEÎR In ail Key-Numbered Dlgests & Indexes
528 262 FEDERAL REPORTER
courts prlor to bankruptcy, tbe rules of comlty between state and fédéral
courts as courts of concurrent Jurtsdlction remain In full force.
3. BANKEurTcy ®=»200(4) — Enfobchment of jtjdoment eecoveeed moke than
FOUB MONTHS BBFORE WILL NOT BE ENJOINED.
Enforcement by exécution of a judgment recovered agalnst the bankrupt
more than four montlis before bankruptcy wlU not be enjolned, even
though there be an excess of value in the property souglit to be levied
on over the amount of the exécution.
4. Execution <&=»134 — Levt on land by entet on peocess with notice.
A levy on land in Georgia consists, not in seizure, but in an entry on
tbe process describing the realty seized, with notice to the owner or person
In possession.
5. Execution <S=>140 — Bntbt of ij:vt on téléphone switchboaeds void fob
uncebtain descbiption; "bealtt."
As easements for téléphone iines constitute "realty," under Civ. Code
Ga. 1910, § 3617, a sheriff's entry of levy of exécution, describing the
property as switchboards and ail wires, Unes, etc., is void for uncertainty
of deseiiptlon, in so far as it relates to the easements or interests in lands.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Real Property.]
6. Execution <Sx=»129 — Mode of levy on pebsonalty.
Under Civ. Code Ga. 1910, § 6057, a levy in case of personalty consists
in an actual or construotive seizure, and the offlcer must do eome act for
which be could be successfuUy prosecuted as a trespasser, were it not
for the protection afiforded him by the writ.
7. Execution <g=»140 — Récital of levy on téléphone switchboaeds not a
SUFFICIENT SEIZUEB OF PERSONAL PEOPEETT.
The sheriff's entry of levy of exécution, describing the property, which
was used for a téléphone System, as switchboards, etc., is not a sufiicient
seizure, under Civ. Code Ga. 1910, § 6057, to amount to a valid levy on
personalty.
8. Bankkuptcy <S=116 — ^Appointment of beceiveb and denial of pétition
of siiebiff, who had levied on pabt of the pbopeety, fob deliveet of
saiie, held peoper.
Where the sheriff's levy of exécution on judgments rendered against the
bankrupts more than four months before bankruptcy was insufficient, and
the sheriff was attempting to sell property other than that subject to a
purchase-money lien in favor of one of the judgment creditors, held that,
as the property subject to the lien was not identiiied, it was pror>er for the
bankruptcy court to refuse an order for delivery of any property to the
sheriff, and instead to aUow a receiver appointed to retaiu possession of
ail the property, which as a whole constltuted a téléphone System.
In Bankruptcy. In the matter of the bankruptcy of Mrs. S. E. Brinn
and Mrs. S. L. Wheless, doing business as the City Téléphone Com-
pany, a firm. Pétition by W. C. Mason and others to review an order
of the référée directing a receiver appointed not to deliver property
of the bankrupts to the sheriff, etc. Affirmed.
J. H. & Emmett A. Skelton, of Hartwell, Ga., and Erwin, Erwin &
Nix, of Athens, Ga., for the sheriff and Mason.
Wolver M. Smith, of Athens, Ga., for J. H. Nottis.
Alex C. Johnson, of Athens, Ga., for petitioners.
SIBLEY, District Judge. J. A. Norris, Mrs. Rhetta Norris, and C.
J. Wheless petitioned for bankruptcy adjudication against Mrs. S. E.
Brinn and Mrs. S. L. Wheless on March 31, 1919, and concurrently
^:»Far otber cases see same toplc & KBY-NUMBER lu ail Key-Numbered Digests £ Indexes •
m EE BEINN 529
(262 FJ
sought an injunction against a levy and sale of certain téléphone prop-
erty by J. W. Wansley, sherifF of Franklin county, under judgments
in favor of W. C. Mason and W. B. Richardson, averring the judg-
ments to hâve been obtained within four months, and the lien of them
to be void under the Banltruptcy L,aw; also that the property was
worth more than the judgments, and asking a receiver for the estâtes
of the bankrupts.
This pétition was referred to the référée, and was answered by the
sheriff and the plaintiffs in fi. fa. — they averring that Mason's judg-
ment was for the purchase money of the property levied upon; tliat
its lien was in enforcement of a rétention of title thereto, and dated
from said rétention of title; that the judgment itself had been ren-
dered more than four months prior to the bankruptcy ; and that Rich-
ardson's judgment had likewise been rendered more than four months.
■It was claimed that the levy by the sheriff antedated the bankruptcy,
and that possession should remain with the sheriff to exécute his levy,
and a prayer to this effect was made.
Upon the hearing, the référée, having appointed a temporary receiv-
er, who had gone into possession of ail the property of the bankrupts,
including that claimed to hâve been levied on, refused an injunction
against the sheriff of the state court, but directed his receiver to re-
tain possession of the property. The latter ruling of the référée is now
under review, at the instance of the sheriff and plaintiffs in fi. fa.
Their answer is not sworn to ; the proceedings in the state court do not
appear in the record, nor any of the documents relied upon to show
the lien of Mason. The only évidence touches the existence of a sur-
plus value above the fi. fas. in the sheriff's hands, and whether or not
the sheriff had actually seized the property claimed to hâve been levied
on, to reduce it to his possession, prior to the bankruptcy.
[1,2] While the décision must rest upon narrow grounds, it will be
profitable to state some of the broader principles upon which counsel
hâve differed. The Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat.
544 [Comp. St. §§ 9585-9656]), passed by Congress under a spécifie
grant of power in the Constitution, is, by the Constitution, a part of
the suprême law of the land. The courts of bankruptcy, established for
its administration, are necessarily paramount in authority. This is
recognized by section 265 of the Judicial Code (Act March 3, 1911, c.
231, 36 Stat. 1162 [Comp. St. § 1242]), which prohihits fédéral courts
from enjoining state courts, "except in cases where such injunction may
be authorized by any law relating to proceedings in bankruptcy." The
state insolvency laws are suspended by the Bankruptcy Law, and the
power of the state courts to enforce liens which are invalidated by that
law ends with the bankruptcy of the défendant. But the state courts
remain courts of concurrent jurisdiction for the enforcement of liens
not so invalidated, and in cases in which proceedings for their enforce-
ment are instituted in the state courts prior to bankruptcy, the rules
of comity between state and fédéral courts of concurrent jurisdiction
remain of fuU force. This is established by an unbroken line of dé-
cisions of the Suprême Court of the United States (Peck y. Jenness, 7
How. 625, 12 L. Ed. 841 ; Eyster v. Gaff, 91 U. S. 521, 23 L,. Ed. 403 ;
262 F.— 84
530 262 FEDERAL REPORTEE
In re Watts, 190 U. S. 1, 23 Sup. Ct. 718, 47 L,. Ed. 933 ; Farmers
Trust Co. V. Lake Street Co., 177 U. S. 51, 20 Sup. Ct. 564, 44 L.
Ed. 667; Metcalf v. Barker, 187 U. S. 165, 23 Sup. Ct. 67, 47 1.. Ed.
122; Pickens v. Roy, 187 U. S. 177, 23 Sup. Ct. 78, 47 L. Ed. 128;
Hébert v. Crawford, 228 U. S. 204, 33 Sup. Ct. 484, 57 h. Ed. 800),
and by the Circuit Court of Appeals for the Fifth Circuit (Wilcox v.
Sheriff, 105 Fed. 910, 45 C. C. A. 117; Carling v. Seymour Co., 113
Fed. 483, 51 C. C. A. 1; White v. Thompson, 119 Fed. 868, 56 C. C.
A. 398; Sample v. Beasley, 158 Fed. 607, 85 C. C. A. 429; Roger v.
Levert, 237 Fed. 737, 150 C. C. A. 491). See, also, the well-considered
décision of the District Court for the Southern District of Georgia, ini
Broach v. Mullis, 228 Fed. 551. In such cases the bankruptcy court
will not ordinarily interfère by injunction, whether before or after ac-
tual levy, though in exceptional cases, such, for instance, as might au-
thorize the interférence of a court of equity where bankruptcy had ■
not occurredj the bankruptcy court may properly intervene.
[3] 1. The référée properly refused an injunction, if for no better
reason than because the ground on which it was sought, to wit, that the
judgments in question had been rendered within four months prior to
the pétition in bankruptcy, was not in f act true. The conclusion reach-
ed by him that there was an excess of value in the property sought to
be levied upon over the amount of the fi. fas. in the sherifï's hands
would not, by itself, justify an interférence by injunction. While this
ruling of the référée is not excepted to, it being merely advisory to
the court, it is afErmed.
[4-8] 2. The direction to the receiver appointed by the référée to
retain possession of the property, which is excepted to as being vir-
tually équivalent to an injunction against sale by the sheriiif, was also
proper. The téléphone system appears to hâve been a going concern.
Had the sheriflf levied upon it in its entirety, he could not hâve operated
it, nor authorized its opération. A receiver alone could properly main-
tain its value by keeping it going, but it is not clear that the sherifï
levied upon it in its entirety. On the contrary, the ref eree's conclusion
that he had actually levied on nothing seems to be justified. A levy
upon land in Georgia consists, not in seizure, but in an entry upon the
process describing the realty seized, with notice to the owner or per-
son in possession. Isam v. Hooks, 46 Ga. 309 ; Keaton v. Farkas, 136
Ga. 189, 70 S. E. 1110, subheadnote 6.
Evidently f rom the exhibits in the sherifï's unswom answer, as well
as the necessities of the case, the téléphone property included easements
over the streets of the towns involved and the land between the towns,
with which the pôles and téléphone wires were connected. Thèse con-
stitute realty in Georgia. Code of 1910, § 3617. The sheriflf's entry
of levy contains no sufficient description of any such realty, it being in
the f ollowing words :
"One swltebboard located in Lavonla, Ga. ; also one swltchboard located In
Canon, Ga.; also one swltchboard located at Oamesvllle, Ga.; and ail wires,
lines, instruments, equlpments of every kind."
For want of sufficient description this levy was void for vincertainty
so far as it relates to land. Bird v. Burgsteiner, 100 Ga. 486, 28 S.
E. 219; Walden v. Walden, 128 Ga. 126, 57 S. E. 323.
m KE BKINN 531
1262 FJ
In the case of personalty, a levy in Georgia consists in an actual or
constrnctive seizure. Code of Georgia 1910, § 6057; Ayers v. State,
3Ga. App. 305, 59S. E. 924:
"The mere déclaration of an ofEcer of an intent to seize Personal property
does noi constitute a levy. The officer must do some act for wMcli he could
be suceessfully prosecuted as a trespasser, if it were not for the protection
afEorded him by the wrlt" Dean v. State, 9 Ga. App. 303, 71 S. E. 597.
The référée correctly found that the sherifif had seized no personal
property within the meaning of this rule, and consequently that no valid
levy existed with référence thereto. A comparison, moreover, of the
property seized by the sheriff with the description of that sold by
Mason, given in his bond for title, indicated that the sherifï was at-
tempting to sell other property than that described in the bond. If the
sheriff, under the rules of comity, ought not to be interfered with in
the enforcement of the lien against the spécifie property sold, suppos-
ing the state court proceedings to amount to such an enforcement, still
the other property would not be within the rule (Carling v. Seymour
lyumber Go., 113 Fed. 483, 51 C. G. A. 1), and the évidence in this case
does not serve to distinguish the property. For lack of sufficient show-
ing as to the nature of the proceedings the sheriff was seeking to en-
force, for want of sufficient proof of any valid levy by him, and for
want of identification of the property as to which he claims a spécifie
lien existed, the référée correctly refused the prayer of the sheriff
that any property be turned over to him.
Whether the sheriff should be permitted now to identify any prop-
erty to foreclose the lien on which the proceedings in the state court
were directed, and to levy upon and sell the same, is not for décision.
It would seem, however, considering the nature of the property, the
fact that there would be few buyers for it, and they difficult to se-
cure, and that a sheriff's sale, when begun, must be consummated to
the highest then bidder, that there is likely to be a sacrifice of the prop-
erty at a sheriff's sale, and especially if it must be dismembered to sep-
arate it into parts which the sheriff may and may not sell. It would
be for the best interests of ail concemed that the bankrupt court sell
it as an entirety; the rights of those interested in the state court pro-
ceeding being f uUy and equitably guarded in the matter of expenses and
costs.
Upon the question now for décision, the judgment of the référée is
in ail respects affirmed.
532 262 FEDERAL EBPOETBB
UNITED STATES ex rel. GRAU v. UHL, Actlng Commissloner of Immigra-
tion.
(District Court, S. D. New York. Deeember 8, 1919.)
1. Habeas corpus <©=>54 — ^Vagtje allégations against officials who oe-
DEBED PBTITIONEK'S DEPORTATION NOT CONSIDEIRED.
Allégations in an application for wrlt of liabeas corpus by an alien
seaman arrested, and held by the Immigration authoritles for déporta-
tion, setting ont in an illuslve, vague manner that lie had been informed
that he was to be deported on the ground that he was likely to beeome a
public charge, but that there was no évidence on whlch to base such
flnding, and that in reallty he was to be deported because he was a mem-
ber of the Industrial Workers of the World, and that varions officiais of
the Department of Labor had stated he was too clever to afford actual
grounds for déportation, are too vague to bo considered by the courts.
2. Habeas corpus ®=>53 — Application mitst siiow cause for allowancœ.
Under Kev. St. §§ 754, 755 (Comp. St. §§ 1282, 1283), relatlng to habeas
corpus, writ of habuas corpus will not be issued as a matter of course,
but it must prelirainarily appear that there was cause for its allowance,
and if the application shows there Is no ground for allowance such applica-
tion must be denied.
3. Habeas corpus <S=>4 — Courts cannot interfère in déportation pbo-
CEEDINGS UNTIL ALIEN HAS APPEALED TO SeCBETABY OP LiABOR.
Where a question of fact is involved, the courts will not interfère in
behalf of the alien ordered to be deported, who had not appealed from
the décision of the immigration aUthorltles to the Secretary of Labor,
as authorized by Act Feb. 5, 1917, § 17 (Comp. St. 1918, i 4289i4ii.)
Habeas Corpus. Application by the United States, on the relation
of José Grau, for writ of habeas corpus to be directed to Byron H.
Uhl, as Acting Commissioner of Immigration at the Port of New-
York. Application denied.
Chas. Recht, of New York City, for relator.
David V. Cahih, of New York City, for the United States.
MAYER, District Judge. The pétition allèges that after certain
proceedings, this court (per Knox, D. J.) held that relator, being a
seaman, "was entitled to the benefit of provisions of section 34 of
Act Feb. 5, 1917, c. 29, 39 Stat. 896 (Comp. St. 1918, § 4289iAs) name-
ly, to be brought before a board of spécial inquiry for examination
as to his qualifications for admission to the United States." The pé-
tition then continues:
"Subsequently, and on the 20th day of November, 1919, relator was brought
before a board of spécial inquiry for hearing as to his right to enter the
United States. That for more than two hours said board questioned relator
as to his political and industrial views, laying spécial stress on his member-
ship and affiliation in the Industrial Workers of the World. At the conclu-
sion of said hearing relator was informed that he was to be excluded on the
ground that he was likely to becorae a public charge.
"There is absolutely no évidence on which to base said finding, Inasmuch as
relator has never had any difficulty in procurlng employment, and has always
been able to earn sufflcient money to maintain hlmself comfortably. That the
conduet of the Department of Immigration and of the members of said board
before whom said hearing was held was in manifest abuse of the discrétion
©ï»Foi oOier cases see samo toplo & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes |
UNITED STATES V. UHL 533
(262 FJ
of said board, and the ruling of sald board to the effect tbat allen was llkely
to beeome a public charge was in abuse of thelr discrétion and in violation of
the constitutional and statutory rights of the relator.
"That the relator was originally arrested on the 26th day of May, 1919,
on certain false and malicious information which the govemment has not
been able to prove, and which it has repudiated. That your petitioner is a
seaman by profession and wishes to continue to pursue his calling. That
your petitioner is informed that It will be a long time before the immigration
authorities will be able to effect his déportation, and that therefore your
petitioner sues out this writ to obtain relief from the unlawful restraint which
is now being imposed upon hiin, and so that he inay obtain employment.
Should the Immigration Department be able to effect your relator's déporta-
tion speedily, your petitioner will be willlng to drop ail proceedings under
this writ. Petitioner feels, however, in view of his continued confinement
slnce May, 1919, under charges which the immigration authorities afterwards
dlsmissed, that he has suffered grcat injustice and irréparable Injury, and
that his continued confinement is merely a persécution on the part of said
authorities. Your petitioner therefore feels that there is no évidence on which
a charge that relator is likely to beeome a public charge can possibly be
based, and that the ends of justice will be met by the grantlug of this writ.
"Your petitioner prays for this writ on the further ground that an appeal to
the Department of Labor would be futile, in view of the continued persécution
of said relator, and in view of the fact that petitioner is informed and be-
lieves that the records of the latest hearing before the board of spécial in-
quiry hâve been submitted to the authorities in Wasliington, that aU the
facts in regard to this case hâve been before the officiais of the Department
of Labor several times, and that petitioner has been infomied and believes
that the statement has been made by various of the officiais that they con-
slder the petitioner a dangerous man and although there is no évidence upon
which they seem to be able to effect his déportation, that he should neverthe-
less be deported. Furthermore, that upon information and belief petitioner
has been informed that various officiais of the Department of Labor hâve
made statements to the eft'ect that your petitioner is really too élever to 1>e
able to afford them some ground upon which to exclude him, and that they
nevertheless felt, in splte of the lack of évidence, that they would be doing
the proper thing by deporting him. Your petitioner respectfully says that
there is no basis for such statements, and that they are made merely to
carry to a victorious conclusion the original efforts made to déport déponent."
[1] The foregoing extract is set forth in full in order to point out
the loose allégations as to unnamed officiais of the Department of La-
bor and the reprehensible nature of the pétition in setting forth that
an appeal to an administrative department charged by law with per-
forming certain duties "would be futile." If the allégations set forth
in the pétition are true or hâve any basis of fact, then the petitioner
must State what he knows on knowledge or what he has been informed
and believes and must set forth the grounds and sources of his infor-
mation and belief. In calling attention to the character of this pétition,
it may be observed that the court is of opinion that hereafter counsel
will be held responsible for submitting pétitions containing loose gên-
erai allégations as to the conduct of unnamed officiais. If officiais hâve
acted unlawfully or wrongfully, they should be named, and the good
repute of any department of government or of any officiais should not
be indefinitely and vaguely assailed. The attorney for a petitioner must
be willing that names, facts, and incidents shall be set forth in order
to enable the particular officiais concemed to answer any allégations.
Pétitions such as this should not be countenanced nor sponsored by
members of the bar.
534 262 FEDERAL REPORTEE
[2, 3] The impression seems to hâve become current that the court
must allow a writ of habeas corpus as matter of course, no matter
what the pétition may set forth or fail to set forth. The writ is one
of the great safeguards of the liberty of the individual ; but, in order
to prevent its abuse, it must preliminarily appear that there is cause
for its allowance. Thus it is provided in sections 754 and 755 of the
United States Revised Statutes (Comp. St. §§ 1282, 1283) as follows :
"Application for writ of habeas corpus shall be made to the court, or
justice, or judge authorized to Issue the sarae, by eomplalnt in writing, slgned
by the person for whose relief It is intended, setting forth the facts con-
ceming the détention of the party restralned, in whose custody he Is detained,
and by virtue of what claim or authority, If known. The facts set forth in
the eomplalnt shall be verlfled by the oath of the person making the ap-
plication."
"The court, or justice, or Judge to whom such application is made shall
forthwith award a writ of habeas corpus, unless it appears from the pétition
itself that the party is not entitled thereto. The writ shall be directed to the
person in whose custody the party Is detained."
Briefly stated, what this pétition cornes down to is that a board of
spécial inquiry has found, as a f act, that relator is likely to become a
public charge. This conclusion relator is entitled to attack. But the
procédure preliminary to such attack is clear.
Section 17 of the Act of February 5, 1917 (Comp. St. 1918, §
4289i4ii), provides as follows :
"Boards of spécial inquiry shall be appointed • • • for the prompt
détermination of ail cases of immigrants detained at such ports under the
provisions of the law. • • • Such boards shall hâve authority to déter-
mine whether an alien who has been duly held shall be allowed to land or
shall be deported. * • • guch boards shall keep a complète permanent
record of their proceedtngs and of ail such testimony as may be produced
before them ; and the décisions of any two members of the board shall pre-
vall, but either the alien or any dissenting member of the said board may
appeal through the commissioner of immigration at the port of arrivai and
the Commissioner General of Immigration to the Secretary of Labor, and the
taking of such appeal shall operate to stay any action in regard to the final
disposai of any alien whose case is so appealed until the reeeipt by the com-
missioner of immigration at the port of arrivai of such décision which shall
be rendered solely upon the évidence adduced before the board of spécial in-
quiry. In every case where an alien is excluded from admission Into the
United States, under any law or treaty now existing or hereafter made, the
décision of a board of spécial inquiry adverse to the admission of such alien
shall be final, unless reversed on appeal to the Secretary of Labor. * ♦ •"
In United States v. Tuck, 194 U. S. 161, at pages 167 et seq., 24
Sup. Ct. 621, at page 622 et seq. (48 L. Ed. 917), the court discussing
the Chinese Exclusion Act, stated :
"But if the act Is valld, even if ineffectuai on this single point, then It points
out a mode of procédure which must be foUowed before there can be a resort
to the courts. In order to act at ail the executive ofiScer must décide upon
the question of citizenshlp. If hls Jurisdiction Is subject to being upset, still
It is necessary that he should proceed if he décides that It exista. An appeal
is provided by the statute. The flrst mode of attacking his décision is by
taking that appeal. If the appeal fails it then is tlme enough to consider
whether upon a pétition showlng reasonable cause there ought to be a further
trial upon habeas corpus.
"We perfectly appreciate, whlle we neither countenance nor discountenance,
the argument drawn from the aUeged want of jurisdiction. But whlle tbe
IN EK ST. JOSEPH-CmCAQO S. S. CO. 535
C262 F.)
conséquence of that argument If sound Is that both executive oflacers and
Secretary of Commerce and Labor are acting without authorlty, It is one
of the neeessities of the administration of justice that even fundamental
questions should be determlned in an orderly way. If the allégations of a
pétition for habeas corpus setting up want of jurlsdlction, whether of an
executive ofBcer or of an ordinary court, are true, the petitloner theoretlcally
is entitled to hls liberty at once. Yet a summary interruption of the regular
order of proceedings, by means of the wrlt, is not always a matter of right.
A familiar illustration is that of a person imprisoned upon criminal process
by a State court under a State law alleged to be unconstitutional. If the
law is unconstitutional the prisoner is wrougfully held. Yet except under
exceptional cireumstances the courts of the L'nited States do not interfère
by habeas px)rpus. The prisoner must in the flrst place take hls case to the
highest court of the state to which be can go, and after that he generally
Is left to the remedy by writ of error if he wishes to brllig the case hère.
Minnesota v. Brundage, 180 U. S. 499 [21 Sup. Ct. 4.55, 45 L. Ed. 639] ; Baker
V. Grice, 169 U. S. 284 [18 Sup. Ct. 323, 42 L. Ed. 748]. • * •
"Considérations slmilar to those which we hâve suggested lead to a fur-
ther conclusion. Whatever may be the ultimate rights of a person seeking to
enter the country and alleging that he is a citizen, it is within the power of
Oongress to provide at least for a prellminary investigation by an inspecter,
and for a détention of the person until he bas establlshed hls citizenshlp in
some reasonable way. If the person satisfies the inspecter, he is allowed to
enter the country without further trial. Now, when thèse Chinese, havlng
that opportunity, saw fit to refuse it, we think an addltional reason was
glven for not allowing a habeas corpus at that stage. The détention during
the time necessary for investigation waa not unlawful, even if ail of thèse
parties were citizens of the United States and were not attemptlng to upset
the inspection machinery by a transparent device. Wong Wing v. United
States, 163 U. S. 228, 235 [16 Sup. Ct. 977, 41 L. Ed. 140]. They were offered
a way to prove their alleged dtizenshlp and to be set at large, which would
be suflîcient for most people who had a case and which would relieve the
courts. If they saw fit to refuse that way, they properly were held down
strictly to their technical rights."
Where, therefore, a question of fact is involved, the statutory remé-
dies and app^s must first be exhausted before this court will enter-
tain an application for a writ of habeas corpus.
As the pétition shows on its face that petitioner has not taken his
appeal to the Secretary of Labor, as provided by section 17, the ap-
plication is denied.
In r© ST. JOSEPH-CHICAGO S. S. CO.
THE EASTIyAND.
(District Court, N. D. Illinois, B. D. December 23, 1919.)
No. 32231.
1. SALVAOO €=»14 — LlFB BALYOBS WHO DID NOTHINO TO AID VKS8EX OAWNOT
SHABE IS SAL.TAGE AWABD TO ONE WHO BAISED TESSEL.
Where a vessel loaded with excursionists overturned In a narrow river
and sank, llfe salvors, who performed their main services at the tlme of
the accident, are not, under Act Aug. 1, 1912, § 3 (Oomp. St. § 7992) , known
as the Salvage Act, entitled to share In the sums paid a wrecking Com-
pany for raising and refloatlng the vessel ; the work of the latter company
belng performed a considérable tlme after ail services by the life salvors
had been rendered, and the statute contemplatlng a dlvlded service where
asjFor other cases aee same toplc & KŒT-NUMBBR In ail Key-Numbered Dlgests & Indexes
536 262 FEDERAL REPORTER
both Uves and property were simultaneously imperiled and both are resK
cued about the same tlme.
2. Salvagœ <g=»40 — Last salvob has pbefbrence ovek former salvoks.
It is a well-recognized rule of maritime law that the last salvor Is
entitled to préférence over former salvors.
S. Salvage iS=>40 — Salvob of vessel has pbiobitt oveb claims op life
SALVOBS.
A vessel loaded wlth exeursionists capsized and sanlr, many persons
being lost. Thereafter, under contract wlth the owners, It was righted
and refloated ; such services being performed a considérable time after
the accident, aud after life salvors had ceased to render any services.
Held that, notwithstanding Act Aug. 1, 1912, § 3 (Comp. St. § 7992), re-
lating to claims of salvors, the salvor of the vessel, having performed its
services last, takes priority over claims of llfe salvors.
4. Salvage ®=>40 — Salvob of geab of vessel has peioritt over life
SALVOBS.
One who salvaged gear and other property of vessel, which had cap-
sized and simk wlth great loss of llfe, which gear and property was sold
wlth the vessel, which was also salvaged and sold, has priority to the
extent of his service over the claims of life salvors, who rendered their
services at the time of the accident; the salvage of the vessel and gear
occurrlng thereafter.
5. Salvage <@=>45%, New, Vol. 9A Key-No. Séries — NECESsriY of pbesenï-
ING CLAIMS FOB LIFE SALVAGE WITHIN TWO YEAES.
Under Salvage Act, § 4 (Comp. St § 7993) , provldlng that suit for ré-
munération for rendering assistance or salvage services cannot be main-
tainable, if brought later than two years from the date when .such assist-
ance, etc., shall hâve been rendered, life salvors cannot recover compen-
sation for services rendered out of the fund resulting from the sale of
the vessel, which, after having capsized, was righted and refloated, where
they did not présent their claims within two years after the time of
rendering services, for the section créâtes a new right, and unless the
claim is presented within the time flxed the right Is lost.
6. Salvage <S=>50 — Judgment in favoe of salvob against bepeesentatives
of those l08ino life not concltjsive against claims of life salvobs.
A jndgment entered on a décision of the Circuit Court of Appeals,
sustaining as a preferred lien the claim of the salvor of a vessel as against
the claims of Personal représentatives of those who lost their lives in the
accident, is not a conclusive adjudication against the claims of life
salvors, who saved life at the time of the accident
In Admiralty. In the matter of the pétition of the St. Joseph-Chi-
cago Steamship Company, owner of the steamer Eastland, for Umi-
tation of liability. On exceptions of the Great Lakes Towing Com-
pany to the amended claims of life salvors. Exceptions in part sus-
tained, and in part overruled.
Goulder, White & Garry, of Cleveland, Ohio, and Wilkerson, Cas-
sels, Potter & Gilbert, of Chicago, 111., for Great Lakes Towing Co.
Edward Maher and Justus Chancellor, both of Chicago, 111. (Charles
S. Thomton, of Chicago, 111., of counsel), for life salvors.
CARPENTER, District Judge. The steamer Eastland, heavily la-
den with excusionists, sank at its dock in the Chicago river on July
24, 1915. The loss of life was appalling. Through the magnificent
and heroic efiforts of the life salvors, intervening in this pétition, the
^:s>Voi other cases see same toplc & KBY-NUMBER in ail Key-Numbered Digeste & Indexe»
IN EE ST. JOSEPH-CHICAGO S. S. CO. 537
(262 F.)
lives of many men, women, and children were saved. The Eastland
was fast to the dock at the tirae of the disaster, and for lack of proper
ballasting tumed over on her side, settled, and sank in 20 feet of
water on the bottom of the Chicago river. As she lay on her side, a
considérable part of the steamer was above the surface of the water,
and she constituted an obstruction to the free navigation of the Chi-
cago river; indeed, a menace to safe navigation.
It became the duty of the owners, under the law, promptly to raise
and remove her. To this end, on July 27, 1915, the owner of the ves-
sel entered into a contract with the Great Lakes Towing Company
"to raise and deliver said steamer, righted and pumped out, to a dock
in the vicinity where she lay sunk, for the sum of $34,500, no cure
no pay." Under this contract the towing company began the work
of raising the steamer on August 4, 1915, completed the work, and
turned the steamer over to her owners on August 16, 1915.
On August 17, 1915, limitation proceedings were begun in this court
by the owners of the steamer. The steamer was conveyed to a trustée
appointed by the court, and on August 27, 1915, a monition issued,
returnable the following December, requiring ail persons having claims
against the steamer Eastland, or her owners, arising out of the dis-
aster of July 24, 1915, to file such claims on the return day of the mo-
nition. On September 1, 1915, the Great Lakes Towing Company
filed its pétition in this court setting up its contract for raising the
steamer, the performance of the contract, and praying that it be paid
$34,500, the price agreed upon. On December 15, 1915, the trustée
of the court sold the vessel at public auction for $46,000, and that
sum was paid into the registry of the court.
Many claims were filed in this proceeding by administrators of es-
tâtes of people who lost their lives when the vessel capsized, and by
other persons who suffered personal injuries or lost property at the
same time. On behalf of thèse claimants objection was made to the
payment of the claim of the Great Lakes Towing Company, and the
District Court, on November 3, 1916, entered an order denying the
payment of the claim of the Great Lakes Towing Company as a pre-
ferred lien claimant. On July 23, 1918, the Circuit Court of Appeals
handed down an opinion, reversing the order of the District Court and
remanding the cause, with directions to allow the towing company's
claim, stating in the opinion :
"Slnce it aflirmatively appears that appellant's claim Is the only one of
the preferred class, there Is no reason for delaying payment."
On November 25, 1918, and March 24, 1919, applications for writs
of certiorari in the Suprême Court of the United States to review
the action of the Circuit Court of Appeals were denied. On March
29, 1919, the présent claimants, the salvors of human life, so called,
made an application to the District Court for leave to file an interven-
ing pétition in this proceeding, claiming a fair share of the rémunéra-
tion allowed to the towing company for its service in raising and right-
ing the steamer. On April 24, 1919, leave was given to the life salvors
to file their claims.
538 262 FBDEEAL EBPORTBR
On May 5, 1919, the District Court denied a motion of the Great
Lakes Towing Company for a decree and immédiate payment, on the
ground that the mandate of the Court of Appeals merely directed it to
allow the claim for raising the boat, together with interest and costs,
but did not direct its allowance as a preferred claim against the life
salvors. Exceptions were filed by the towing company to the amended
intervening pétitions of the life salvors, and the question presented
hère is whether the life salvors, performing their services on July 24,
25, and 26, 1915, may participate in the contract salvage allowance
made to the Great Lakes Towing Company for raising the Eastland
between August 4 and August 16, 1915, under the contract of July 27,
1915.
[1] The amended claims admit that ail of the services rendered by
the life salvors were performed on or before July 27, 1915. They
make their claims under section 3 of the act of August 1, 1912 (37
Stat. 242), known as the Salvage Act (U. S. Comp. Stat. §§ 7990-
7994 [9 Fed. Stat. Ann. (2d Ed.) 121]):
"Chapter 268. An act to harmonlze the national law of salvage with the
provisions of the International convention for the unification of certain
ruies with respect to assistance and salvage at sea, and for other purposes.
"Be It enacted by the Senate and House of Représentatives of the United
States of America In Congress assembled, that the rlght of rémunération for
assistance or salvage services shall not be affected by common ownership of
the vessels renderlng and receivlng euch assistance or salvage services.
"Sec. 2. That the master or person in charge of a vessel shall, so far as
he can do so without serions danger to his own vessel, crew, or passengers,
render assistance to every person who l3 found at sea In danger of belng
lest ; and If he f ails to do so, he shall, upon conviction, be Ilable to a penalty
of not exceeding one thousand dollars or imprlsonment for a term not exceed-
Ing two years, or both.
"Sec. 3. That salvors of human Ufe, who bave taken part la the services
rendered on the occasion of the accident glvlng rlse to salvage, are entltled
to a falr share of the rémunération awarded to the salvors of the vessel, her
cargo, and accessorles.
"Sec. 4. That a suit for the recovery of rémunération for renderlng assist-
ance or salvage services shall not be maintalnable if brought later than two
years from the date when such assistance or salvage was rendered, nnless
the court In which the suit Is brought shall be satisfled that durlng such
perlod there had not been any reasonable opportunlty of arrestlng the assisted
or salved vessel withln the Jurisdletlon of the court or wlthin the territorial
waters of the country in which the libelant résides or bas his principal place
of business.
"Sec. 5. That nothing in thls act shall be construed as applylng to shlps
of war or to govemment ships appropriated excluslvely to a public service.
"Sec. 6. That this act shall take efCect and be in force on and after July
flrst, nineteen hundred and twelve."
The life salvors claim that they "are entitled to a fair share of the
rémunération awarded to the salvors of the vessel, her cargo, and ac-
cessories," and that therefore the claim of the Great Lakes Towing
Company ought not to be paid in full to their préjudice. The ex-
ceptions of the towing company are as follows:
"I. Sald amended claim of Sherwood S. Mattocks for himself and others,
and the other llke claims, do not state a cause of action.
"II. It appears on the face of sald clalma as amended that the alleged serv-
ices were rendered entlrely dlsassodated from, Independent of, and were prior
IN RE ST. JOSEPH-CHICAGO S. S. CO. 539
C282P.)
In time to the services of the Great Lakes Towing Company, and were In no
manner connectée with or related to the services rendered by sald Great
Lakes Towing Cîonipany.
"III. It appears on the face of said daims as amended that any such serv-
ices alleged ia sald amended clalma were of an entirely différent character to,
were prier in time to, and constltuted no part of the services of the Great
Lakes Towing Company, under its contract set forth in its pétition in tUs
cause and referred to in the llbel and pétition of the St. Joseph-Chicago
Steamship Company, and likewlse heretofore passed upon and adjudicated by
the Circuit Court of Appeals in this cause, which sald services of Great Lakes
Towing Company are also referred to In said amended life salvors' claims.
"IV. It appears from sald amended claims that the services of said life
salvors, and ail and each of them, were performed more than two years prior
to the making or filing of any such claim, and no sufficient excuse or reason,
under the statute, for said delay is given.
"V. The matters set up in said amended claims In behalf of said Itfe salvors
are foreelosed and made res adjudicata by the décision and decree of the
Circuit Court of Appeals In this cause.
"VI. There is no substantial or material différence in the amended claims
now filed from the original life salvors' claims filed by said Sherwood S.
Mattoeks and others, to which exceptions made by Great Lakes Towing Com-
pany hâve recently been sustained, so ail matters and things set forth in
thèse claims are res adjudicata by décision and order of this court
"VII. There is palpable and manifest misstatement of fact in the amended
claims as filed, of which this court will take notice from the flles on record
in this case, and from gênerai knowledge of such matters, to wit: In the
original claims of said Sherwood S. Mattoeks and others, as life salvors, it
was alleged on oath that the life salvors' services were performed on the
day the said steamer Eastland tipped over and sank, to wit, on July 24, 1915,
and this court will take judlcial knowledge of the fact that any services ren-
dered in the saving of human life connected with the sinking of the steamer
Eastland would hâve to be rendered wlthin a few minutes, or at most within
a few hours, of the time sald steamer tipped over and sank.
"VIII. There is an effort in the amended claims to ask for an award in
favor of said claimants on account of the salvage of property, as to which the
claimants hâve no standing in this court, both by reasoù of the decree and
opinion of the Court of Appeals, and also by reason of former orders of this
court."
First. It is admitted that the life salvors hâve no claim against the
steamer, or the towing company, or the fund, save under the statute
heretofore quoted. The Eastland, immediately after the catastrophe,
while lying on her side on the bottom o fi, the Chicago river, was in no
further danger of destruction by the éléments; that is to say, where
she sank she was in a position to be raised without danger to the
salvors. No effort was made at the time of the accident to save or
protect the boat. When the services of the life salvors were rendered,
the steamer had already safely settled in the mud at the bottom of
the river in about 20 feet of water. The efforts of the life salvors were
directed solely to saving from drowning the passengers and crew of
the steamer. There was nothing to distract those salvors from their
humane purpose. The statute, I think, presupposed possibly a divid-
ed interest, and probably a sordid interest, in the average salvor. It
imposed penalties of fine or imprisonment, or both, upon the master or
person in charge of a vessel who failed, so far as he could do so with-
out serious danger to his own vessel, crew, or passengers, to render
assistance to any person who was found at sea in danger of being
ItfSt It also aimed to stimulate, or excite, at least as much effort
540 262 FEDERAL REPORTEE
to save human life as ordinarily would be spent in saving vessel or
cargo. The statute, however, présupposée! an emergency where both
lives and goods were at hazard, and aimed to encourage the saving of
life. It is a sad reflection to contemplate this law. However, we may
not inquire into the wisdom of Congress in its passage. Suffice it to say,
the circumstances of this case do not bring it within the law. Thèse
life salvors were put to no choice between passengers and crew and
cargo. They had no chance to hesitate in determining whether it
was more profitable to save the ship, or the men, women, and children
on board. What they did was inspired by the spirit which since
Christendom bas been the foundation of the great brotherhood of
mankind. Their work was done, and well donc. Their reward they
hâve ; it never can be taken f rom them, and it is measured by a stand-
ard greater than money. They would not hâve done less for great
promises.
At the time the life salvors were performing their heroic deeds, no
effort was made to save the steamer or its appurtenances. There was
no time for that. The steamer could not hâve been saved, because she
was then practically lost. AU of the efforts of the life salvors would
not hâve saved her. The purpose of the statute being to engage the
interest of the life salvors at least equally between human lives and
property, it can hâve no effect in a case where there was no association
of effort or co-operation between those saving lives and those savmg
ship or cargo. The lives were saved before the contract was made to
raise the boat ; certainly before work was begun under that contract.
After ail the lives possible were saved, the steamer was still lying at
the bottom of the river a worthless wreck, an obstruction, a menace
to navigation, which had to be removed. The boat at the bottom of the
river was of no value, and a reading of the statute hère involved shows
clearly that it was intended to apply only to cases which might be
termed "pure salvage"; that is, cases where the service was rendered
voluntarily at the time of risk, and not under contract after the emer-
gency had passed. The service hère rendered was a wrecking service
in the nature of a salvage service, but not in any sensé "salvage," as
understood in the statute. The Elfrida, 172 U. S. 186, 19 Sup. Ct.
146, 43 Iv. Ed. 413; The Annle,_6 Aspinall (N. S.) 117.
The statute in question was intended only to apply to cases where
the vessel and cargo, together with her crew, including also passen-
gers, were exposed to a common danger threatening their destruction
and loss ; to cases where service is rendered by a volunteer adventurer,
and such service is successful in saving lives and property, consisting
either of the cargo, the vessel, or both. The services rendered in the
saving of lives were to be considered when rémunération for salvage
was awarded, so that they might participate in and be given a part
of any sum paid for saving the vessel or other property. In such
a case, the life salvor, by virtue of his service rendered at the time
that the property was saved, became a cosalvor, with a right to re-
cover compensation for a service, when, under the gênerai maritime
law, he would get nothing. It was for the purpose of enabling such a
salvor to recover for his services that the statute was passed. It was
IN EE ST. JOSEPH-CHICAGO S. S. CO. 541
C262 F.)
not intended that, as between différent sets of salvors, the life salvor
was to participate in awards which might be made for services ren-
dered months, and even years, after the life-saving service had been
performed.
The salvage service in saving Ufe, to be compensated for under tliis
statute, must hâve been performed substantially at the time and while
both lives and property w^ere in distress and danger of loss; not, of
course, at the same instant of time, but during the period of péril. The
Hfe salvors, therefore, are not entitled, under the statute, to any part
of the contract price aw^arded to the towing company for raising and
righting the Eastland.
[2, 3] Second. The claim and lien of the towing company, being for
services last in point of time, is paramount and preferred over ail
others, including those of the life salvors. The life salvors rendered
their services on the day of the disaster and the two days following,
and we may assume that those services were f ully accomplished some
days before any attempt was made to raise the steamer. We hâve,
then, this situation: Ail of tlie lives saved that could be, and the
steamer lying on the bottoni of the Chicago river, an obstruction to
navigation, and of no value to any one as she lay there. The towing
company entered into its contract to raise the boat on July 27 , 1915 ;
began work on August 4, 1915 ; completed the contract and turned the
ship over to the owners on August lèth of that same year. The serv-
ices, therefore, of the towing company were subséquent in point of
time to those of the life salvors. There was no connection between the
services of the towing company and those of the life salvors. The life
salvors had no claim for their services against anybody at the time
they were rendered. The towing company was engaged in the wrecking
business on the Great Lakes, and was under no obligation, légal or mor-
al, to raise the steamer ; and if it had not done the work successfully
under its contract there would hâve been no property to sell, and no
fund, or at least a very small one, for distribution. Nothing that the
life salvors did contributed to the success of the subséquent service
rendered by the towing company.
It is a well-known rule of the maritime law of the United States
that the last salvor is entitled to préférence over the first or former
salvors. The two services, namely, life-saving service and wrecking
service, were rendered at différent times, and were not allied in any
way. The flrst service in no way helped the second service, or pre-
served any of the property that was finally salved by the towing com-
pany. As priority, in point of logic, dépends upon the rank of benefits
conferred, so, therefore, must the towing company's claim be preferred
to the claims of the life salvors. As the Court of Appeals said in this
case (Great Lakes Towing Co. v. St. Joseph-Chicago Steamship Co.,
253 Fed. 638, 165 C. C. A. 264) :
"But, after ail, It Is unnecessary that appellant's service be deflned as sal-
yage. Maritime liens arlse from many kinds of acts and services, and priority
Is determined by rank of benefits conferred. The .Tohn G. Stevens, 170 XJ. S.
113, 18 Sup. et. 544, 42 L. Ï3d. 969. Appellees' liens, If any they hâve, at-
tached to the Eastland as she lay on the bottom of the river at the end of
542 262 FEDERAL EEPOETEB
her voyage. Api>ellees, as well as the owner, were beneflted by appellant's
service, and thelr daims are therefore subordlnate."
See, also, Hughes on Admiralty, p. 331 ; Kennedy on the Law of
Civil Salvage, p. 8; The Veritas, 9 Aspinall (N. S.) 237.
The life salvors' claims, like the death and accident claims, under
considération in Great Lakes Towing Co. v. St. Joseph-Chicago Steam-
ship Co., supra, attached to the Eastland as she lay on the bottom of
the river. As she thus lay, she was subject to claims of various kinds,
and among those who were entitled to a fair share of the rémunération
awarded to the salvors of the vessel were the life salvors. But the
Eastland, lying at the bottom of the river, could not pay. To make
her valuable she had to be raised, ptimped out, and righted. To secure
that value, the contract with the Great Lakes Towing Company was
made; and if the well-recognized principle of maritime law, which
the courts hâve announced, that priority among various claimants de-
paids upon the order in which the services are rendered, were not the
law, no one could hâve been secured to raise the Eastland. Men were
employed, materials were purchased, time and effort were spent, in
order to raise that boat, and it cannot be that the company which did
that work at its convenience, under contract, and safely delivered the
boat at the dock for the benefit of ail concerned, is not entitled to its
outlay and fair compensation for its services — in this case, the con-
tract price. If this work had not been done, there would hâve been
nothing available for claimants of any class. Clearly section 3 of the
Salvage Act does not afïect the priority of claims as settled in the Mari-
time Law. The life salvors were entitled only "to a fair share of the
rémunération awarded to salvors" of the same rank, and not as to sal-
vors whose claims were entitled to priority.
[4] Suggestion is made that some part of the fund derived from
the sale of the Eastland should be withheld from contributing to the
claim of the Great Lakes Towing Company because one Capt. Walter
Scott saved some $8,000 worth of property, which was sold as a part
of the vessel, and for which he was allowed $500 as salvage. It ap-
pears that, beginning with August 4th, and up to August 16th, long af t-
er the accident, Capt. Scott picked up in the Chicago river various parts
of the equipment of the Eastland. That equipment was returned to the
boat, and when the boat was sold was disposed of with it. At the most
Capt. Scott and the towing company were cosalvors; the one raising
the wreck, and the other saving certain goods, which got loose and
floated down the river. It cannot for a moment be argued that they
were cosalvors with those who saved human lives. Inasmuch as the
boat and its apparel were sold together, there is no way of determining
what the part of the property saved by Capt. Scott was sold for, and
what the property saved by the towing company brought. The District
Court awarded Scott what it thought was reasonable for the service
he performed for the benefit of the steamer Eastland, and this sum
was paid to him out of the proceeds of the sale. No objection was
made by any one interested; no application was made to sell sep-
arately the property saved by Capt. Scott. The services rendered were
treated as services for the benefit of the whole steamer, which in-
IN RE ST. JOSEPH-CHICAGO S. S. CD. 543
(262 F.)
cluded the huU and ail the différent parts of the ship, boats, tackle, ap-
parel, and furniture.
Capt. Scott had a lien not only upon what he actually saved, but
upon the whole vessel, which included what he saved. The towing
Company rendered its service in saving the Eastland, and that included
everything that belonged to her and had always been a part of her.
The life salvors hâve no more claim against the property saved by
Scott than they hâve against the property saved by the towing com-
pany.
[5] Third. It is provided by section 4 of the act, upon which the
life salvors base their claim :
"That a suit for the recovery of rémunération for renderlng assistance or sal-
vage services shall not be malntainable If brought later than two years from
the date when such assistance or salvage was rendered."
Under this statute the time for filing claims against the Eastland
expired on July 25, 1917. The steamer practically came into the
custody of the court on the 16th day of August, 1915, and after the
sale in December, 1915, the proceeds were placed in the registry of
this court, where they still remain. The towing company filed its
claim on September 1, 1915. The monition advised the world of the
pendency of proceedings. The life salvors, or at least most of them,
resided in Chicago, and had ample opportunity to file their claims at
any time, and were given every right to do so. They took no part in
the trial of the case of the towing company to recover its claim in the
District Court. They took no part in the hearing of the case in the
Circuit Court of Appeals, and they were heard of for the first time,
80 far as this court is concemed, on March 29, 1919, more than three
years after their services were rendered, and more than three years
after the towing company had filed its claim, and more than two years
after the hearing of the towing company's case in this court. They
are theref ore not within the two years provided by the statute.
The act of Congress under which thèse life salvors proceed created
a new cause of action. "A statute which in itself créâtes a new lia-
bility, gives an action to enforce it unknown to the common law, and
fixes the time within which that action may be commenced, is not a
statute of limitations. It is a statute of création, and the commence-
ment of the action within the time it fixes is an indispensable con-
dition of the liability and of the action which it permits. Such a stat-
ute is an ofïer of an action on condition that it be commenced within
the specified time. If the ofïer is not accepted in the only way in which
it can be accepted, by a commencement of tlie action within the speci-
fied time, the action and the right of action no longer exist, and the
défendant is exempt from liability." Partee v. St. Louis & S. F. R.
Co., 204 Fed. 970, 123 C. C. A. 292, 51 L. R. A. (N. S.) 721, and
cases cited.
It is, however, now contended that inasmuch as no claim is made
against the steamer or her proceeds directly, but only against the
amount awarded to the towing company, that the two-year limitation in
the statute does not apply imtil after the award to the towing company
had been established, and it is argued that until the décision of the
544 262 PEDBEAL RBPOETEB
Court of Appeals on July 23, 1918, the right of the towing company to
recover for its services had not been determined, and that therefore
the life salvors had until July 23, 1920, to file their daims for a
fair share of the rémunération awarded to the towing company.
The language of the statute is plain, and not in any degree ambigu-
ous or doubtful. On the day their services were rendered the life
salvors had some sort of claim, présent, contingent, inchoate, or other-
wise, and they were bound, under the law, to présent that claim to
this court where the limitation proceedings were pending. They hâve
not brought themselves within the exception noted in section 4, and
no expîanation is made of the reason why they were late in asking
for relief. Indeed, I am of the opinion that, inasmuch as the funda-
mental law required the daims to be filed within a certain time, no ex-
pîanation would excuse the delay. The court is powerless, under the
language of the act, to grant an extension of time beyond the two years,
except as provided by the statute, and this case does not come within
that exception.
This argument of the life salvors is very seductive for the moment,
but an analysis of the statute must demonstrate that it is unsound. It
is conceded it was the purpose of Congress to grant some compensation
to the salvors of human life. It cannot for a moment be supposed that
it was put in the power of the salvors of the vessel or the cargo to
defeat the claim of the life salvors. Those saving the vessel or the
cargo might make a private settlement with the owner with référence
to salvage. Clearly that ought not to defeat any claim of those who
saved lives. A reasonable construction of the statute would permit
the salvors of human life, in the absence of the salvors of the vessel
and the cargo, to appear in the District Court having jurisdiction over
the vessel or its proceeds, stating in their pétition that salvage services
were rendered the vessel and the cargo on the occasion of the accident,
and ask that the owners or claimants of the vessel be required to pay to
them a fair share of the rémunération which was earned, or ought to
be paid to the salvors of the vessel and the cargo. The vessel and cargo
salvors could be made respondents, and cited into court to show cause
why, as cosalvors, those saving human lives should not participate
in the total rémunération for services rendered. Indeed, such a
pétition fîled would prevent private settlement by the owner and the
vessel salvors, or would permit it at the owner's risk of making fair
compensation to the life salvors in addition to the private settlement.
In any event, the statute created a new liability, gave a new cause of
action, and it cannot be presumed that it was intended that the liability
or right of action should be dépendent upon the conduct of others.
Of course, if there were no other salvage services rendered than the
saving of human lives, no remvineration could be recovered under the
statute; but, granting that in the emergency on the occasion of the
accident services were rendered which resulted in the saving of the
vessel or cargo, the salvors of human life, acting during Ûit same
péril, were entitled to compensation, to rémunération, at least to some
extent, and their right to claim it in this court is clear. This being my
construction of the statute, it follows necessarily that under section
J. W. EINGEOSE CO. V. W. & J. SLOANE 545
(262 F.)
4 the claimants hère hâve f ailed to comply with the conditions prescrib-
ed by Congress under which they were permitted to be compensated
for their services.
[8] Those exceptions to the libel which amount to a gênerai demur-
rer to the daim of the life salvors, and the exceptions raising the point
that the claims were not filed in time, are sustained. The exceptions
jnvolving res adjudicata are overruled.
J. w. RINGROSE CO. v. W. & J. SLOANB.
plstrlct Court, E. D. Pennsylvanla. December 22, 1919.)
No. 5672.
1. EVIDENCK <S=»71 KECEIPT or rjETTEE EVIDENCKD BT MAILING.
The mailing to a défendant of a properly addressed and stamped en-
velope contalning a letter, and the production of the letter by défendant
at the trial, are both évidence of its recelpt.
2. Evidence ©=5378 (3) — Lettee of corporation admissible withoitt peooe of
authoeity of signee.
In an action on a contract alleged to hâve been made by correspondence,
a letter purportlng to be slgned by défendant corporation, and to accept
the ternis proposed In a letter recelved from plalntlff and In évidence, held
admissible as prima facie that of défendant, vs'ithout proof that the per-
son signlng It had authority to mabe the contract.
S. Sales <g=>94 — Contract révocable at will détermines eights phiob to
REVOCATION,
A contract to buy or sell goods at a prlce, although revocable at wlll,
détermines the rlghts of the parties respecting the transactions executed
thereunder before revocation.
4. Principal and agent ©=341 — Instruction submitting kind of contract
MADE MISLEADING, WHEBE JURY WA8 QIVEN NO MEASUEE OF DAMAGES THERE-
FOB.
Where, In an action on a sales contract, court instructed that if jury
found a commission contract damages would be a stated amonnt, and If
they found a protection contract to simply flnd for défendant, it was mls-
leading to submit the question whether contract was a référence contract
— that Is, to refer buyers to plalntlff — which would carry a différent meas-
ure of damages.
At Law. Action by the J. W. Ringrose Company against W. & J.
Sloane, a corporation. On motion by défendant for a new trial.
Granted.
Paxton Deeter and Murdock Kendrick, both of Philadelphia, Pa.,
for plaintifï.
Selden Bacon, of New^ York City, and F. B. Bracken, of Philadel-
phia, Pa., for défendant.
DICKINSON, District Judge. The findings of any tribunal in any
cause are facilitated by the détermination (1) of what the questions
are upon which the décision of the cause tums, and (2) the proper an-
swers to be made to thèse questions. This fîrst step is always of im-
portance, and usually is a long step toward the final conclusion reached.
A third help is not to hâve thèse questions too numerous. The fable
®=sFor other cases aee aame toplo & KBY-NUMBER In ail Key-Numbered Dlgests & Indexe*
262 P.— 35
546 262 PEDEEAL REPORTER
of the fagots does not apply to défenses in litigated cases. Many dé-
fenses, no matter how bundled, are often of less strength than one,
and very many are sometimes weaker than none.
The real différence thèse parties hâve is over the arrangement made
between them. The plaintiff asserts that it was a contract to pay him
a 10 per cent, commission on ail sales made of a certain fabric. The
défendant asserts it was an agreement to sell to the plaintiff at a certain
price, and not to sell to others at less than a 10 per cent, advance on
this price. The former is known to this record as a commission con-
tract ; the latter, as a protection contract.
The real question involved is what was the contract; a subsidiary
question of law is whether the contract is to be f ound by the jury from
ail the évidence, or found by the court to be embraced in the part
of the évidence which is in writing and construed as a written contract.
A number of défenses were advanced by the défendant at the trial,
and are now reurged in support of the présent motion. In déférence
to the insistence and urgency of counsel, we will take up a number of
them for considération seriatim.
(1) No oral contract was made on behalf of the défendant by the
salesman, Gardner, as averred by plaintiff.
(2) If such a contract was made, the salesman, Gardner, by whom
it was made, had no authority to bind the défendant.
This défense, as the first, has no présent value, for the reason that
it dépends upon what the contract was. If it was as asserted by the
plaintiff, the trial judge ruled that it was unauthorized ; if it was as
asserted by the défendant, the jury was instructed that the contract
had not been breached ; and, f urther, the contract asserted was not a
contract made by Gardner, but one suggested and outlined by him, and
submitted to the défendant itself, who then made the contract, or,
if the expression be preferred, ratified it.
(3) The défendant itself made no contract.
The real meaning of this is that there was no évidence from which
a contract could be found, and will be so considered.
[ 1 ] (4) There was no évidence that défendant received the letter of
March 13, 1918, setting forth the contract.
The maihng of a properly addressed and stamped envelope, contain-
ing the letter, is in itself évidence of its receipt by the défendant. Whit-
more v. Ins. Co., 148 Pa. 405, 23 Atl. 1131, 33 Am. St. Rep. 838.
The production of the letter by défendant at the trial on call is also
évidence of its receipt.
[2] (5) There was no évidence that the reply letter of March 14,
1918, accepting the contract set forth in the letter of March 13, 1919,
was the letter of défendant, or written by its authority.
For this proposition the case of Penna. Taximeter Co. v. Cressy, 191
Fed. 337, 112 C. C. A. 81, is cited. Under the broad facts of that case
it might well be relied upon as ruling the instant case, because there
was there, as hère, a letter mailed to the défendant and answered. It
is to be observed, however, that for some reason the cause of action
there was not based, as it is hère, upon the contract of the défendant
appearing (inter alla) by letters to and from the défendant, but upon a
J, W. EINGEOSE CO. V. W. & J. SLOANE 547
C252 P.)
contract made by one George W. Close, by which the défendant was
averred to be bound upon the double ground (1) that Close had been
held out by the défendant to be its agent with authority to make the
contract, and (2) the défendant by its "course of dealing subséquent
to the date" of the contract by which it had accepted and acted upon
it "had efïectually ratified and affirmed" it.
The trial judge submitted thèse two questions to the jury, who
found for plaintifï. The Court of Appeals (as was then the practice)
entered judgment for défendant n. o. v., holding that there was no
évidence of any "course of dealing" from which either précèdent au-
thority to make the contract or subséquent ratification of it could be
found. Judge Gray was careful to point out that the ruling was made
whoUy upon the point of the absence of évidence of any "course of
dealing," as it was an admitted fact in the case that there was no
other basis of support for the judgment.
In the instant case, it is to be observed that the cause of action is
not put upon the ground of précèdent authority in Gardner to make the
contract, or of ratification in any real sensé by the défendant. On the
contrary, the cause of action is based upon a contract made by the
défendant itself. Gardner's connection with it was merely to fix its
scope and terms. It was then submitted to the défendant, and be-
came defendant's contract, because défendant made it such. It was a
ratification of Gardner's act only in the sensé that the défendant made
a contract, the terms of which had been talked over and approved by
Gardner before it was submitted to the défendant. It did not become
a contract because Gardner had first made it, and the défendant had
af terwards sanctioned it by accepting it and benefiting by it, but it be-
came a contract, as has been said, wholly because défendant made it.
The question is not whether there was any évidence of the ratification
of an unauthorized contract, but whether there was any évidence that
the défendant had made the contract. There was no évidence to war-
rant the finding of a contract, unless the letters of March 13 and
March 14, 1918, were properly admitted in évidence.
We hâve already ruled the letter of March 13th to be evidential.
Is the letter of March 14th ? The question is brought down to this :
Plaintifï, having ofïered in évidence the letter of March 13th, follows
it with the ofifer of the reply letter of March 14th, which purports to
bear the signature of the défendant. No proof of signature was re-
quired, but the letter was objected to on the ground that the défendant,
being a corporation, could sign a letter only by the hand of some natural
person, and that the authority of the person who signed the letter to
make a contract should be shown before the letter (although the letter
of the défendant) could go in évidence.
The question presented will be determined upon the assumption
that the only évidence upon the question of authority to receive and
answer letters was that the organization of the defendant's office for
business was by the appointment of a mail clerk, who received ail let-
ters and distributed them to différent persons in the ofïîce to be an-
swered, and that this letter had been referred to and answered by (as
the letter itself showed) the same Mr. Gardner, with whom the plain-
548 262 FEDERAL REPORTER
tiff had conferred before the letters were written. We adhère to the
view before expressed that the letters were properly admitted in évi-
dence as prima facie letters received and answered by défendant. Roe
V. Insurance Co., 149 Pa. 94, 23 Atl. 718, 34 Am. St. Rep. 595.
The question subsequently lost ail trial value, for the reason that
the défendant proved by the witness Gardner that the défendant made,
in the usual course of its business, what he terms "protection contracts,"
and his authority to make contracts of this character, so that the real
question became, not one of whether the défendant had made the con-
tract, or of Gardner's authority, but what the contract, which was made,
was.
(.6) The contract, if made, was nudum pactum.
This is mère assertion. The considération was that the plaintifï
should create a market for the fabric and buy it of the défendant at
a price.
(7) There was no mutuality of obligation.
This is the same point in another form.
(8) The contract was so vague and indefinite in its terms as to be
unenforceable.
This dépends altogether upon what the contract was. The point has,
however, a bearing which will be later discussed.
(9) The contract was void, because against public policy.
This point was so presented as to suggest danger that it would
arouse only préjudice. The illegality of the contract turned wholly
upon what it was. The point presented asked the trial judge to charge
that it was illégal, because it was a conspiracy to raise the price of the
fabric to the government. The contract expressly excluded transac-
tions in which the government was concerned. The point in consé-
quence had no application, because, if the government was concerned,
there was no contract, and whether lawful or not was of no moment.
(10) There was no évidence to establish the contract set up.
This is involved in the points already discussed.
[3] (11) The contract was revocable at will, and because of this no
contract at ail.
So far as this point is not involved in that of indefiniteness, it dé-
pends upon whether the contract is executory or executed. So far as
executory by its very terms neither party could be compelled to con-
tinue it. Aji agreement to buy or sell at a price, however, although
revocable at will, will détermine the rights of the parties respecting
any transaction within the contract which the parties hâve had before
revocation.
(12) The letter of May 4, 1918, was a revocation of the contract.
No point was made of this at the trial, and it does not support a mo-
tion for a new trial. It remains in the case for whatever it may be
worth.
(13) No breach of contract was shown.
This, also, dépends altogether upon what the contract was. If the
contract was as construed by défendant, the jury was instructed there
was no breach, and directed to find for défendant. If the contract was
as construed by plaintifï, the breach was manifest.
J. W. RINGROSE CO. V. "W. &. J. SLOANE 549
(262 F.)
[4] (14) The numerous complaints of error in the exclusion or ad-
mission of évidence need not now be considered, nor the question of
whether the contract was for the court or the jury to find and con-
strue. Ail thèse questions remain in the case.
There was in the case and défense but one question, which, if there
was any jury question, it was worth while to submit to the jury, and
that was the question of what the contract was — whether it was a
contract to ref er ail purchasers to plaintifï, so that it might make the
sales, otherwise to allow plaintifï Sy^ cents per yard on sales made by
défendant, or whether it was a contract not to sell at less than a Su-
cent advance on the price to plaintiff. If the contract was the fîrst,
the measure of damage was the 5^/4 cents. If the contract was the sec-
ond, there was no breach. The charge so left the cause with the jury.
At the close of the charge the trial judge was asked to submit to the
jury to find whether the contract was one to simply refer purchasers
to the plaintiff. This was done, but for the moment the efïect of
this instruction was overlooked. The eiïect was this : The jury had
been charged in efïect that, if they found for the plaintifï, the damages
should be assessed at 5i/4 cents per yard; if they found a protection
contract, the verdict should be simply for the défendant. They were
not instructed upon the measure of damages, because there was no need
of a measure. When, however, they were charged they might find
a référence contract, tlie natural inference was Qiat the measure of
damages was still 5i/4 cents per yard. This inference was an error,
and, although the error in the charge was an inadvertence, it was none
the less error. If the jury found a commission contract, the measure
of damages given them was correct. If they found a référence con-
tract, that measure was clearly wrong. The présent difficulty is that we
do not know which contract they found. The attention of counsel was
called to this, and the suggestion made that the jury be reinstructed ;
but counsel for plaintiff thought the instruction was sufficiently clear.
We bave examined the charge, and do not find it so. For this reason,
the case must be retried. This is to be regretted, because it is a dis-
tastef ul duty to interfère with a verdict fairly won.
The same thing must be said as to the answer to the plaintifï's fifth
point. This point was misread. It was read at the time as referring
to the distinction between a contract made by an agent without author-
ity, and the same contract subsequently submitted to and made by the
principal. A re-reading, however, discloses the point to be broader, or
at least difïerent from this. It means that if, after an unauthorized
contract is made, the parties subsequently accept it by acting upon it,
this ratifies and confirnis it. The proposition is true enough, but it
was error to submit it to the jury, because there was no évidence in
the case of such ratification.
The case of the plaintifï, if it has any, as presented, rests upon the
proposition that a contract negotiated by the agent was submitted to
and accepted by the défendant itself. If the évidence of a contract is
wholly in writing, so that a contract may be found from the writings
alone, it is to be construed and its meaning found by the court; if
facts are to be found before the contract can be known, it necessarily
550 2G2 FEDERAL REPORTER
must g<^ to the jury. This question is still in the case, but there was
no évidence upon which defendant's point 5 could be based. The
point, and unfortunately the answer, also, ignores the distinction be-
tween a contract negotiated by an unauthorized person and submitted
to and made by the principal, who thus makes it his contract, and an
agreement made with the same unauthorized person, which the prin-
cipal afterwards, by his course of dealing and acts, is held to hâve
adopted as his own, and thereby ratified it through having accepted
the benefits of it. Each proposition is sound, but the respective prin-
ciples upon which each is based are wholly différent, and the évidence
supporting each is likewise différent.
The letters of March 13th and 14th, having been admitted as
the letters of défendant, were évidence that the défendant made the
contract; there was no évidence that the défendant, with knowledge
that Gardner had assumed authority to make the contract, had acted
upon it by performance or accepting performance, so as to be estopped
from denying it.
The Tule for a new trial is made absolute.
EVANS, District Judge, v. GOEB, Deputy and Actlng Collector of
Internai Revenue.
(District Court, W. D. Kentueky. December 23, 1919.)
No. 557.
INTEBNAI, EEVENITE <©==? — PROVISION FOE INCOMB TAX ON SAIJV.EIE8 OP FEDEBAL
JUDGES NOT UNCONSTITUTIONAL.
The provision of Income Tax Act, § 213,i which, in requiring salaries
generally to be included in gross income returns, spécifies, among others,
salaries of fédéral judges, held not in violation of Const. art. 3, § 1, which
provides that the compensation of judges of the Suprême and inferior
courts "shall not be diminished durlng their continuance in office."
At Law. Action by Walter Evans, United States District Judge
for the Western District of Kentueky, against J. Roger Gore, Dep-
uty and Acting Collector of Internai Revenue. On demurrer to péti-
tion. Demurrer sustained.
Walter Evans, of Louisville, Ky., pro se (Frank P. Straus, Howard
B. Lee, Helm Bruce, William Marshall Bullitt, and Edmund F. Trabue,
ail of Louisville, Ky., of counsel), for plaintiff.
W. V. Gregory, U. S. Atty., and S. M. Russell, Asst. U. S. Atty.,
both of Louisville, Ky., for défendant.
PECK, District Judge (for the Southern District of Ohio, sitting
by désignation in the Western District of Kentueky, for the purposes
of the above-entitled cause). Heard upon demurrer to the pétition.
From the pétition demurred to the following facts appear: The
plaintiff is, and was before the passage of the Income Tax Law of
1919 (Acts Feb. 24, 1919, c. 18, 40 Stat. 1057), a judge of a District
Court of the United States. In March, 1919, as required by the terms
of that act, he made his income tax retum, including therein, under
<fcs>For other cases «ee same toplc & KEÎY-NUMBEÎR In ail Key-Numbered Olgests & Indexes
» Comp. St. Ann. Supp. 1919, § i
EVANS V. GORE 851
(262 F.)
protest, his judicial salary for the preceding year. He thereafter paid
the deputy collecter his income tax thereon, under protest, with no-
tice of his intention to sue to recover it. He subsequently made the
necessary application and appeal to the Commissioner of Internai
Revenue for ref under thereof , which were overruled and ref used, and
accordingly he now sues the deputy collector for the return of the
tax.
No question is made as to the regularity of the steps taken prelim-
inary to bringing the suit, and the case turns wholly on the merits.
The sole question is whether section 213 of the act of February 24,
1919 (40 Stat. 1065), in so far as it requires the compensation re-
ceived by judges of the Suprême and inferior courts of the United
States to be included within the gross income returned, is contrary
to article 3, section 1, of the Constitution of the United States. That
section is as follows:
"The judicial Power of the United States, shall be vested in one Suprême
Court, and in such inferior Courts as the Congress may from time to time
ordaln and establlsh. The Judges, both of the Suprême and inferior Courts,
shall hold their Offices during good behavior, and shall, at stated Times, re-
(•eive for their Services, a Compensation, whlch shall not be diminished
during their Continuance in Office."
The définition contained in section 213 of the act states that the
term "gross income" —
"includes gains, profits, and income derived from salaries, wages, or compen-
sation for Personal service (including in the case of the Président of the
United States, the judges of the Suprême and inferior courts of the United
States, and ail other officers and employés, whether eleeted or appointed, of
the United States, Alaska, Hawaii, or any political subdivision thereof, or
the District of Columbia, the compensation received as such), of whatever
kind and in whatever form paid, or from professions, vocations, trades, busi-
nesses, commerce, or sales, or dealings in property, whether real or Personal,
growing out of the ownership or use of or interest In such property, also
from Interest, rent, dividends, securlties, or the transaction of any business
carried on for gain or profit, or gains or profits and income derived from
any source whatever."
The gross income so required to be returned is subject to certain
exemptions and déductions, and the net income thus arrived at is
taxed on a graduated scale.
Section 1 of article 3, above quoted, was not affected by the Six-
teenth Amendment, declaring that:
"The Congress shall hâve power to lay and coUect taxes on incomes, from
whatever source derived, without apportlonment among the several states, ana
without regard to any census or enumeration"
— ^because this amendment has been determined not to extend the pow-
er of taxation of incomes to subjects previously exempt, but onîy to
remove the necessity for apportionment with référence to income
taxes. Peck v. Lowe, 247 U. S. 165, 172, 38 Sup. Ct. 432, 62 L.
Ed. 1049; Brushaber v. Union Pacific R. R., 240 U. S. 1, 36 Sup.
Ct. 236, 60 L. Ed. 493, !.. R. A. 1917D, 414, Ann. Cas. 1917B, 713 ;
Stanton v. Baltic Mining Co., 240 U. S. 103, 36 Sup. Ct. 278, 60 E.
Ed. 546. Not only is the presumption in favor of the validity of the
act, but the question must be free from reasonable doubt to justify
552 262 FEDERAL REPORTER
holding to the contrary, Nicol v. Ames, 173 U. S. 509, 19 Sup. Ct.
522, 43 L. Ed. 786.
The constitutional provision referred to (section 1 of article 3)
does not exempt the judges from taxation, generally speaking. They
are subject to tlie taxing power equally with other citizens. Indeed,
their salaries, in so far as used to defray their living expenses, or
otherwise consumed by them, hâve been laid under indirect taxation
by duties, imposts, and excises since the beginning of the govern-
ment, and if the revenue now exacted by income tax had been raised
by the familiar indirect means, the judicial salary would hâve been,
without question, subject thereto in its expenditure, as in the past.
Therefore a tax is not invalid merely because it may operate indirect-
ly or incidentally to require repayment to the government of some
part of the money paid out as judicial salary.
Since the judge is, as others, subject to taxation, it may be stated
that he owes the government his fair share of the burden which the
United States is obliged to impose upon its citizens for its support.
On the other hand, the government owes to him an undiminished
compensation. But thèse are two independent accounts; neither may
be justly said to impair the other.
If a tax were directly laid upon judicial salary, as such, and "be-
cause of its source or in a discriminative way" (Peck v. Lowe, 247
U. S. 172, 38 Sup. Ct. 432, 62 L. Ed. 1049), it might, perhaps, fairly
be claimed to be a diminution of compensation. But a tax laid
•upon incomes generally, including judicial salary, without discrimina-
tion, at a uniform rate, seems to be nothing other than the requiring
ôf the judge his fair share of the burden aforesaid, raeasured by his
income. His salary is not thereby diminished; his income is mere-
ly used as the fairest measure of his tax. The tax is, in efïect, im-
posed upon the citizen in proportion to income.
It is said that Congress is bound by no gênerai rule of equality
in the laying of the income tax, that it may classify persons for
taxation at pleasure, and that the judges may be put in a class by
themselves or in an unfavored class and their salaries taxed, to the
destruction of that judicial independence the Constitution unques-
tionably sought to protect. Federalist, No. 79; 2 Story, Const. §
1628 et seq. ; 1 Kent, Com. 293. But there seems to be an inhér-
ent, fundemiental distinction between equal participation in the gên-
erai burden of a uniform income tax, and subjection to a discrim-
inative salary tax. The one appears not to be directed against sal-
aries, as such, but to fall only incidentally thereon, and therefore not
to be a diminution thereof within the constitutional phrase. The oth-
er, merely seeking by classification to reclaim part of that paid out in
compensation, might, without injustice, be regarded as a diminution
of tlie salary under the guise of taxation. For the purpose of de-
ciding upon its validity, a tax should be regarded in its actual and
practical, rather than in its theoretical, results. Nicol v. Ames (su-
pra) 173 U. S. at page 516, 19 Sup. Ct. 522, 43 L. Ed. 786.
There appears to be no adjudication of this point by any court of
the United States. It was, however, the subject of a letter from
EVANS V. GOBE 553
(262 P.)
Chief Justice Taney to Hon. Salmon P. Chase, Secretary of the
Treasury, condemning as invalid a similar tax. 157 U. S. 701.
That a gênerai income tax would fall upon judicial salaries was
likewise assigned by Mr. Justice Field as an additional reason for
the unconstitutionality of the income tax of 1894, in a separate con-
curring opinion, in the case of Pollock v. Farmers' Loan & Trust Co.,
157 U. S. 429, 604, 15 Sup. Ct. 673, 39 L. Ed. 759; but the point
was not touched by the opinion of the court, and the unconstitution-
ahty of that act was placed thereby upon entirely différent grounds.
There is aiso an opinion by Attomey General Hoar, addressed to
Hon. George S. Boutwell, Secretary of the Treasury, October 23,
1869 (13 Op. Attys. Gen. 161), upon the constitutionality of the act
of 1867, taxing salaries of ail civil officers of the United States, and
concluding that no income tax may be lawfully assessed and collect-
ed upon the salaries of the Président or any of the judges who were
in office at the time the statute imposing the tax was passed.
A similar conclusion was reached by the Attorney General of North
Carolina, in a letter to Hon. David M. Furches, Chief Justice for that
State, dated December 16, 1902. In re Taxation of Salaries of Judges,
131 N. C. 693, 42 S. E. 970.
The présent Attorney General of the United States has, upon fuU
coiisideration, concluded in favor of the validity of the tax. Opin-
ion of Mr. Attorney General A. Mitchell Palmer to the Secretary
of the Treasury, May 6, 1919, 31 Op. Atty. Gen. 475.
It cannot be denied that the foregoing opinions, although not bring-
ing the point under the rule of stare decisis, are entitled to great
weight.
In Commonwealth ex rel. v. Mann, 5 Watts & S. 403, the Su-
prême Court of Pennsylvania determined that an act which assessed
upon the salaries of judges a tax of 2 per cent, which the state
treasurer, by the provisions of the law, was directed to retain, was
contrary to a provision of the state Constitution forbidding diminu-
tion of judicial compensation. The terms of the act are to be found
on page 415. The tax was not gênerai, but was specifically directed
against the salaries of offices held in Pennsylvania, and the court,
at page 417, uses this significant language:
'Taxation is an incident of sovereign power, which acknowledges no limita
except the discrétion of tliose who use It, unless It be those objects of taxation
wljich for wise reasons hâve been withdrawn from thèse gênerai powers. The
property of a judge, his income, whether derlved from thls or any other
source, we admit is a proper subjeet of taxation. His securlty wlU then con-
sist in being placed on the same footing with other cltlzens, and an abuse of
theiîi by any will be speedily corrected. Of this the relator does not complain ;
but he does complain that he, with others, Is selected as a spécial object of
taxation, contrary to the charter which he has solenmly swom to support."
Thus, clearly, this décision was placed upon the discriminative
feature of the tax, and the opinion specifically affirms the validity of
a tax such as that now under considération.
In Commissioners v. Chapman, 2 Rawle, IZ, the Suprême Court
of the same state had previously held that a tax levied upon the de-
fendant for his office as Président Judge of a judicial district of
554 262 FEDERAL EEPOBTBB
Pennsylvania, by the laws for raising county rates and levies, was
not unconstitutional, and the court say (page 77):
"The object of the Législature was to apportlon the public burden accord-
ing to the ratio of property, and to produce in détail a resuit approaching as
near as possible to that of an income tax — a measure of assessment more
equable in the abstract than any other that could be proposed. • • »
The Législature could not constitutionally retrench a part of a judge's salary
under the pretext of assessing a tax on it ; but, for the bona flde purpose of
contribution, a reasonable portion of It, Uke any other part of his property,
may be applied to the public exigencies."
There is nothing irreconcilable in thèse two décisions. The one,
condemning a spécial tax on salaries, admits the propriety of a gên-
erai tax on incomes, including the judicial salary; the other upholds
the latter form of taxation. The distinction between thèse two cases
would seem to define clearly the boundary line between diminution
of salary by S'pecial taxation and the taxing of incomes generally, in-
cluding such salaries.
In State v. Nygaard, 159 Wis. 396, 150 N. W. 513, Ann. Cas.
1917A, 1065, as against a similar constitutional provision, the stat-
ute levying an income tax by uniform rule, which fell upon the sal-
aries of judges as upon others, was upheld; but the case was put
principally upon an amendment of the Constitution of that state
adopted in 1908, authorizing generally the laying of income taxes,
from which the court could find no reason for excepting judicial
salaries.
In New Orléans v. Lea, 14 La. Ann. 197, an attempted tax by the
city of New Orléans upon the salary of a Justice of the Suprême
Court of that state, was held void, as contravening a similar con-
stitutional provision. The décision was based upon McCuUoch v.
Maryland, 4 Wheat. 316, 4 L. Ed. 579; but the décision there ob-
viously turns upon a différent principle, to wit, the power of the state
to tax an instrumentality of the govemment of the United States,
and it is worth noticing that the décision went no further than was
necessary to protect from taxation the sovereign powers of the Unit-
ed States, and was specifically restricted so as not to extend to a
tax paid by the real property of the bank in common with other real
property within the state, nor to a tax imposed on the interest which
the citizens of Maryland might hold in the institution, in common
with other property of the same description throughout the state.
Dobbins v. Commissioners, 16 Pet. 435, 10 L. Ed. 1022, and Col-
lector V. Day, 11 Wall. 113, 20 L. Ed. 122, proceed upon the same
principle, or its converse, the immunity of the instrumentalities of
the state government from fédéral taxation, and cannot be said to be
a guide in the solution of the question presented in this case.
That income may be taxable, although derived from sources in
themselves exempt from taxation, is demonstrated by the décisions
in Peck V. Lowe, supra, holding that income derived from the ex-
port trade is taxable, and U. S. Glue Co. v. Oak Creek, 247 U. S.
321, 38 Sup. et. 499, 62 L. Ed. 1135, Ann. Cas. 1918E, 748, holding
that a state inay lay a gênerai income tax including corporate profits
derived from interstate commerce. In the latter case (247 U. S. at
ATLANTIC STEEL CO. V. B. O. CAMPBELL COAL CO. 555
(262 F.)
page 328, 38 Sup. Ct. SOI, 62 L. Ed. 1135, Ann. Cas. 1918E. 748)
the court say:
"The correct Une of distinction Is so well illustrated In two cases declded at
tte présent term that we hardly need go further. In Crew, Levick Co. v.
Pennsylvanla, 245 U. S. 292, 38 Sup. Ct. 126, 62 L. Ed. 295, we beld that a
State tax upon the business of selling goods in foreign commerce, measured
by a certain percentage of the gross transactions in such commerce, was by its
necessary efifect a tax upon the commerce, and at the same time a duty upon
exports, contrary to sections 8 and 10 of article 1 of the Constitution, since It
operated to lay a direct burden upon every transaction by withholdlng for the
use of the state a part of every dollar receîved. On the other hand, in Peck
& Co. V. Lowe, ante [247 U. S. 165, 38 Sup. Ct. 432, 62 L. Ed. 1049], we held
that the Ineome Tax Act of October 3, 1913, c. 16, § 2, 38 Stat. 166, 172, when
earried into effect by imposing an assessment upon the entlre net ineome of a
corporation, approximately three-fourths of whlch was derlved from the ex-
port of goods to foreign countrles, dld not amount to laylng a tax or duty on
articles exported withln the meanlng of article 1, § 9, cl. 5, of the Constitution.
The distinction between a direct and an indirect burden by way of tax or
duty was developed, and it was shown that an ineome tax laid gcnerally on
net incomes, not on ineome from exportation beeause of Its source or in the
way of discrimination, but just as it was laid on other Ineome, and affecting
only the net receipts from exportation after ail expenses were pald and losses
adjusted and the récipient of the ineome was free to use It as he chose, was
only an indirect burden."
It seems, therefore, that the tax which the plaintiff now sues to
recover is at most but an indirect or incidental burden upon judicial
compensation, resulting from a uniform and gênerai ineome tax, and
is therefore not a diminution of such compensation within the mean-
ing of the Constitution.
ïhe demurrer to the pétition must accordingly be sustained.
ATLANTIC STEEL 00. v. B. O. CAMI'BBLL COAL CO.
(District Court, N. D. Georgla. December 4, 1919.)
No. 393.
Sales iS=>85(2), 411— Pbovision of contbact cbeating conditions sttbse-
QUENT.
A provision of a contract for sale and porchase of coal, vrtth equal
monthly deliverles, that if the mines were unable to operate, or their
output was curtalled, by causes beyond seller's control, it should not be
liable for resulting failure to deliver, held to croate conditions subse-
auent, whlch, under Civ. Code Ga. 1910, §§ 4223, 4224, were mattera of dé-
fense, to be set up by défendant, rather than antlclpated by plamtlffs
pleading. In an action by the purehaser for failure of deliverles.
Sales <S=>62, 172 — Conteact fob sale of goal a beveeable, and not
entieb, contbact.
A contract for sale and purchase of 12,000 tons of coal per year for
three years, 1,000 tons to be delivered each month and pald for the suc-
ceeding month, and further provldlng that, if the mines were unable to
operate, or their output was curtalled, from causes beyond seller's control
it should not be liable for failure to make shlpments "during such neri-
ods," held severable as to each month's deliverles ; and under Clv Code
Ga. 1910, § 4228, Inablllty of seller to make deliverles during the time its
mmes were m control of the fédéral Fuel Administration AeW to disdiaree
It from Its obligation to make such deliverles, but not from Its obligation
«=For other cas» see same toplc & KBT-NUMBBR In ail Key-Numbered Dlgests « Indexe»"
556 262 FEDERAL REPORTEE
to continue monthly deliverles after such control ceased, to the end of the
contract tenu.
3. SaUS <S=»71(1) — CONSTEUCTION OF CONTEACT FOB SALE OF COAL AS BKQUIBINQ
INCBEASED SHIPHENTS.
A contract for sale of coal, to be delivered In equal monthly Install-
ments, which recited that purchaser had another contract for Its re-
quirements of coal above the quantity eovered by the présent contract,
and providing that seller should increase or decrease Its shipment on
request to conform to the proportionate increase or decrease of shipmenta
by the other contracter, constiTied, and held not to require seller to in-
crease shipmeuts because of decreased shipments by the other contracter,
but to mean that, should purchaser's requirements prove greater or less
thpn estimated, shipments by both contractors should be iacreased or
decreased proportionately.
At Law. Action by the Atlantic Steel Company against the R. O.
Campbell Coal Company. On demurrers to pétition and amended
pétition. Sustained in part.
Chas. T. & L. C. Hopkins, of Atlanta, Ga., for plaintiff.
Robert C. & Phil. H. Alston, of Atlanta, Ga., for défendant.
SIBLEY, District Judge. This is a suit for damages for the breach
of a contract dated June 1, 1916, the material portion of which follows :
"In considération of the price hereinafter agreed upon, subject to the
ternis and conditions hereof, the party of the first part agrées to seU, and the
party of the second part agrées to buy, f. o. b. mines, 12,000 tons per annum
of coal, for gas and reheatlng purposes, shipments to be made at the rate of
1,000 tons per month, or one car per day. The coal is to be what Is known
as the party of the first part's 'Westburn Gas Coal,' and mlned at Westburn,
Kentucky. * • • The price for the same shall be $1.35 per ton. * * , *
"If the mines from which this coal Is to be shipped are unable to operate
by reason of mining troubles, or on account of other causes beyond their
immédiate control, the flrst party shall not be liable for failure to maUe ship-
ments during such period ; and if for the same reason the output of such mines
Is curtailed, shipments may be dlstributed pro rata on their existing orders
and contracts during such periods.
"If the party of the second part is unable to operate Its plant by reason of
strikes or other causes beyond its Immédiate control, It shall not be liable
for failure to reçoive shipments during such period ; and if for the same reason
the opération of the plajit of the party of the second part is curtailed, it shall
receive only such shipments as are necessary for its opération.
"Mine weights shall govern ail settlements, and payments for ail coal
shipped shall be made by the flfteenth (15th) of the month Immediately fol-
lowing the month of shipment, and ail past-due accounts shall bear interest
from maturity until paid.
"The party of the second part has a contract with Southern Coal & Coke
Company for Its requirements of coal, of approximately 50,000 tons per annum,
In excess of the 12,000 tons per annum purchased from the said party of the
flrst part, and the said party of the flrst part hereby agrées to Increase or
decrease its shipments of coal to conform to the proportionate Increase or
decrease in shipments to be made by the Southern Coal & Coke Company,
upon request of the party of the second part, said increase, however, not te
be In excess of twenty (20%) per cent."
Pertinent to the last paragraph, this letter is exhibited :
"January 31, 1917.
"The K. O. Campbell Coal Company, Atlanta, Georgia — Gentlemen: Wlth
référence to our contract with you of June 1, 1916, covering the delivery of
^s>For otber cases se« same toplc & KEY-NUMBER in ail Key-Numbered Digests & Indexes
ATLANTIC STEEL CO. V. R. O. CAMPBELL COAL CO. 557
(268 F.)
coal to US, beg to say that under this contract we were entltled to the flxed
delivery of 1,000 tous of coal per mouth. • • *
"Uuder the contract, we are entitled to Increase the 1,000 tons per mouth
to the extent of 20 per cent., and our business is in sueh condition as that it
will be neeessary for us to obtain the beneflt of thls increase; and you will
please consider this communication as being a formai demand, under the
contract and covering the future, not only for the delivery of 1,000 tons per
mouth, but the additional 20 per cent."
Generally stated, the pétition avers a partial failure to deliver the
coal contracted for each month from June 1, 1916, to August, 1917, a
total failure from August, 1917, to December 15, 1918, and a partial
failure from that date to the termination of the contract; that each
month plaintiff purchased the déficit in the open market at stated loss-
es, for which, excluding the period from August 1, 1917, to December
15, 1918, damages in the aggregate sum of $23,698.93 are sought. Dur-
ing the last-named period the original pétition states :
"The fédéral Fuel Administration took possession of the coal mines and their
output. * * • Petitioner was forced to purchase its entire supply of coal
neeessary to the opération of its plant from companies other than the défend-
ant. It received no shipments from the défendant company betvveen the two
dates mentioned. This suit does not Include any failure upon defendant's
part to deliver the stlpulated coal during this period."
By amendment it is alleged :
"During the tlme the fédéral Fuel Administration controUed the output
of said mines, the défendant received from the government $3.10 per ton for
the coal which the défendant had contracted to sell plaintiff at $1.35 per ton,
and which represented a légal obligation on the part of défendant to deliver
said coal to the plaintifC at the prior priée stipulated for in the contract.
* « * Tije profit represented by the différence between the price which
plaintiiî was to pay, of $1.35 per ton, and the price received by the défendant,
$3.10 per ton, was a profit received by the défendant for and in behalf of the
plaintiff, and représenta a sum which belongs to, and is the property of, the
plaintiff, and for which it is entitled to recover In thls cause" an aggregate
sum of $21,788.
With référence to the subj'ect-matter of the letter quoted above, the
amendment further allèges:
"At the time that Exhibit B to the original pétition was written, and sub-
sequently thereto, and during the continuance of the contrac-t between the
plaintiff and the Southern Coal & Coke Company, the latter company deliv-
ered less than 75 per cent, of the contractual 50,000 tons per annum. This
failure to deliver upon the part of the Southern Coal & Coke Company gave
plaintiff the right to exercise its option under Its contract with the défend-
ant, and increase the shipments from 1,000 tons per month to 1,200 tons per
month."
Damages are claimed for the failure to deliver the increase. The
amendment also allèges that the shipments from December 15, 1918, to
June 1, 1919, were made under the terms of the v/ritten contract,
covered by its provisions, accepted by the plaintiff as a partial com-
pliance, and paid for by the plaintiflf under the contract.
Demurrers to the pétition and amendment raise questions which will
now be disposed of.
558 262 FEDERAL EEPOKTEE
[ 1 ] First. The défendant contends that its obligation to deliver was
conditional, and that the pétition is déficient in not alleging that the
conditions named in the contract occurred; that is, that défendant
operated its mine and that its production was not curtailed, or, if cur-
tailed, that the plaintiff did not receive its pro rata of coal shipped.
The contract was made and to be performed in Georgia, and is gov-
emed by Georgia law. The liability to deliver is doubtless conditional,
and if the conditions are précèdent their occurrence must be averred
and proved by the plaintiff, in order to show a right to recover. If
subséquent, their occurrence is a matter of défense, to be set up by the
défendant. Code Georgia 1910, §§ 4223, 4224. Section 3717, dealing
with similar conditions, déclares:
"The law inclines to construe conditions to be subséquent rather than
précèdent, and to be remediable by damages rather than by forfeiture."
It is plain that the purpose of thèse parties was to make a présent
contract for the delivery of 12,000 tons of coal per year, at the rate
of 1,000 tons per month, for three years. The Hability to deliver was
not to arise on the occurrence of some event, but existed and was to
continue unless and until certain possible things should happen. If
thèse things did occur, they were conditions subséquent, and are to be
set up by the défendant. This is true, except as to the condition re-
lating to the right to demand an increase above 1,000 tons per month.
The increase was to be demandable only upon the occurrence of the
matters stated in the last paragraph of the contract. This condition
was précèdent, and it devolves upon the plaintifï to sufficiently aver
the occurrence of the condition.
[2] Second. The pétition and amendment affirmatively disclose that
during the period from August, 1917, to December 15, 1918, the mine,
or the output thereof, from which alone the contract coal was to be
shipped, was taken over and controlled by the fédéral Fuel Administra-
tion. The plaintiff contends that this contract was entire, for 36,000
tons of coal, to be delivered in three years, and that if the delivery was
interrupted in any manner it did not operate to defeat their right final-
ly to hâve the coal contracted for, or damages for its nondelivery.
The défendant contends that the contract was divisible, and that each
month's shipment and payment therefor was independent of the other
months, and that the efïect of the législation of Congress and the
action of the Président thereunder, and of the fédéral Fuel Adminis-
tration, with regard to this mine, prevented delivery during the ex-
istence of the fédéral control, and excused delivery, not only for that
period, but for the remainder of the contract. Code Georgia 1910, §
4228, déclares:
"A contract may be either entire or severable. In the former, the whole
contract stands or falls together. In the latter, the fallure of a distinct part
does not void the remainder. The charaeter of the contract in such case is
determined by the intention of the parties."
And see 9 Cyc. 648.
That the considération is severable, as well as the articles to be de-
livered, is a strong circumstance to support the severable charaeter
ATLANTIC STEEL CO. V. E. O. CAMPBELL COAL 00. 559
(262 F.)
of the promise. This contract was intended by the parties to be sev-
erable as to each month's deliveries. The plaintiff so déclares in the
letter of January 31, 1917. Each month's delivery was to be paid
for after the end of the month, and the plaintifï, in dealing with the
matter, acted each month in buying in coal to supply the deficiency
and in charging the loss to the défendant. The condition as to the dis-
charge of either party on the nonoperation of its mine or plant, or
for other cause beyond its control, provided, not that delivery or ac-
ceptance should be delayed, but that the failure should be excused.
They evidently intended that there should be no accumulation of ob-
ligation from month to month, but that each month's business should
stand for itself. Moreover, time, as is usual in mercantile contracts,
was for the same reason evidently of the essence of this contract.
Neither party desired its business to become involved and embarrassed
by a postponement of the obligations assumed tmder this agreement.
Waterman v. Banks, 144 U. S. 394, 12 Sup. Ct. 646, 36 L. Ed. 479;
Cheney v. Libby, 134 U. S. 68, 10 Sup. Ct. 498, 33 L. Ed. 818; Beard-
en Mercantile Co. v. Madison Oil Co., 128 Ga. 695, 58 S. E. 200,
The act of Congress of August 10, 1917 (40 Stat. 279, c. 53 [Comp.
St. 1918, §§ 3115>^e to 3115y8r]), provided in section 12 (Comp. St.
1918, § 3115%jj) that the Président might take over for use and
opération by the goverrunent, any mine and operate the same, return-
ing if to the owners when he should détermine it no longer essential
for the national security, and paying a reasonable compensation for
the use thereof, with power to regulate the opération, the disposition of
the products, and the employment and compensation of employés. In
section 25 (Comp. St. 1918, § 3115^q) a similar power was given the
Président to fix the price of coal and to require the producers of coal,
or those in any spécial area, to sell their product only to the United
States through an agency to be designated by the Président, which
might regulate the resale of such coal, the methods of production,
shipment, distribution, and apportionment thereof; the act making it
unlawful for the producer thereafter to make shipments of his product
on his own account, and requiring shipment to be made only on the
authority of the agency designated by the Président, the price to be
fixed by the Fédéral Trade Commission.
Under the allégations of the pétition and amendment it is uncertain
whether the defendant's mine was operated by the government, or its
output simply taken over and controlled by it ; but in either event the
régulation of production and distribution was wholly in the hands of the
government agency, and in neither case could the défendant lawfully
make shipments upon its own orders taken prior to such control.
Was the eflfect of this action of the government simply to postpone
performance of the contract, or to discharge the contractor in part or
in whole? It is true that impossibility of performance arising after
the making of the contract, which might hâve been f oreseen and guard-
ed against by a stipulation of the contract, is ordinarily no défense to
an absolute obligation. Jacksonville Railway v. Hooper, 160 U. S.
515, 16 Sup. Ct. 379, 40 L. Ed. 515; Chicago, Milwaukee & St. Paul
560 262 FEDERAL REPORTER
Ry. V. Hoyt, 149 U. S. 1, 13 Sup. Ct. 179, 37 L. Ed. 625. The rule
is thus stated by Mr. Justice Swayne, in Dermott v. Jones, 2 Wall.
atpage7, 17L. Ed. 762:
"It Is a well-settled rule of law that, If a party by hls contract cbarge him-
self wlth an obligation possible to be performed, he must make it good, unlesa
its performance is rendered impossible by the act of God, the law, or the
other party. tJnforeseen difflculties, liowever great, will not excuse him."
In this case, however, it was the law that subsequently rendered per-
formance impossible.
"To the gênerai rule that a party to a contract is not discharged by sub-
séquent impossibility of performance, there is an exception where the per-
formance becomes impossible by law, either by reason of, flrst, a change
in the law; or, second, of some action by or under the authority of the govern-
ment. In such case, the promlsor is discharged. * • * In like manner,
any prohibitory action taken by the public authorities wUl discharge the
promise." 9 Oyc. 630.
That the défendant in this case, when called upon to surrender the
use and control of its property to the public need, should thereby be-
come liable to damages for failure to perform a civil obligation, is un-
thinkable. That its performance should be only temporarily excused
would be less harsh, and, if time were not of the essence of the con-
tract, it might be thought that no hardship would resuit in a mère
postponement. To apply the rule of postponement, however, to the
many contracts that were indefinitely arrested by government action,
both in coal mines and manufacturing establishments, during the war,
would perhaps resuit in an accumulation of obligations to make deliv-
eries or to receive and payfor goods that would be ruinous to the per-
sons involved. It would seem to be a much more practical rule to es-
tablish that, when the performance became due, whether time was
strictly of the essence or not, if performance could not be made be-
cause of government action then forbidding, the duration of which
obstacle was indefinite and unascertainable, the obligation was thereby
canceled and the contract discharged, and that the parties should
each be at liberty and under the duty to save themselves as best they
might by other contracts and arrangements. This, in principle, seems to
be settled by the rulings as to embargoes on ships releasing their own-
ers from their contracts to carry, in the cases of Allanwilde Transport
Corporation v. Vacuum Oil Co., 248 U. S. Z77, 39 Sup. Ct. 147, 63
L. Ed. 312, and Standard Varnish Works v. Steamship Bris, 248 U.
S. 392, 39 Sup. Ct. 150, 63 L. Ed. 321. And see L. & N. R. R. Co. v.
Mottley, 219 U. S. 467, 31 Sup. Ct. 265, 55 L. Ed. 297, 34 L. R. A.
(N. S.) 671.
The same conclusion may fairly be reached by a considération of
the contract that thèse parties actually made. While the occurrence
of the exact conditions that did arise was, of course, not anticipated
by them, still the contract provided :
"If the mines from which this coal Is to be shipped are unable to operate
by reason of mining troubles, or on account of other causes beyond their
immédiate control, the flrst party is not to be liable for failure to make ship-
ments during wiid period."
ATLANTIC STKEL 00. V. B. G, CAMPBELL COAL CO. 561
(262 F.)
While in a certain sensé the mines did operate, they did not operate
under the control of the défendant, nor was it able to avail itself of
their opération in the discharge of its contracts. It may fairly be said
that within the meaning of thèse parties, on account of causes beyond
defendant's control, it could not operate its mine for the purpose of
meeting the shipments due during the period of fédéral control, and
that the stipulation that it should not be liable for the failure to make
shipments is to be applied. In either view the défendant ought not to
be liable for defaults during such period.
The iheory of the amendment, however, is not to sue for failure to
deliver under the ordinary rule of damages, but to assert a quasi équita-
ble right to sue as for money had and received, or for an accounting for
profits actually made by the défendant on account of deliveries to the
government of this coal, instead of delivering it to the plaintiff. At
first thought there seems to be, waiving any question of the appropri
ateness of joining such an action in the présent suit, considérable jus-
tice in the idea; but it could not be practically applied and followed
to its conséquences. The plaintiff by this contract got title to no spé-
cifie property, so as to own its proceeds. It got only an executory
promise that so much coal should be produced and delivered to it, for
which it gave only its executory promise to pay. Since the régulation
of the production of the coal fell under the government agency, in-
cluding the right to fix wages and hours of labor, the coal was pro-
duced under very différent conditions from those that would hâve
existed aside from government control, and it is not certain but that
coal which might hâve been produced prior to such control at a profit
at $1.35 per ton may actually hâve been produced at no greater profit
at $3.10 per ton under such control. The effort to do justice by caus-
ing an accounting to be made of the actual profits received would
hâve to go deeper than the mère comparison of the contract price with
the price paid by the government.
Nor would it be good policy to hamper, during a time of war, re-
sponse to the demands of the government on thèse mines with a liabil-
ity over to others under pre-existent contracts. A similar scrutiny
would hâve to be applied to the plaintiff, also, whose plant, the pétition
discloses, was a steel plant, which continued in opération during the.
war, doubtless under the same governmental control. Its products
were sold, no doubt, at a price fixed by the government under the
same law, based upon a profit with coal at $3.10 per ton, which it al-
lèges it had to purchase during this period. Having been allowed, in
this way, an expense item of $3.10 for coal, it ought not to be allowed
to make an additional profit of the différence between that price and
its old contract price. Tt will be readily seen that to follow an ad-
justment of the sort suggested in the amendment throughout the
devions course that it might take in passing on a profit or loss under
war conditions, to others affected by it, would be a wholly impractical
job for the courts. The simplest and best rule, and the one most con-
sonant with good policy, is that suggested first above, that the action
of the government, in so far as it directly interfered with and prevented
262 F.— 36
562 262 FBDBBAL BBPOBTBB
the fulfillment of contracts, should be considered as a final discharge
from their obligation.
Third. The défendant, however, contends that the efïect of the
govemment control was to annul the contract entirely, and to render
it inoperative for the period succeeding govemment control until its
expiration. This effect was attributed to it by neither party, for,
under the averments in the pétition, the défendant thereafter delivered
coal in pursuance of the contract, which the plaintifï received and paid
for at the contract price. The contract says :
"The flrst party Is not to be liable for failure to make shipments durlng
sucli period."
That both regarded the contract as of force afterwards is évident,
nor does any good reason occur why it should not be treated as of
force. It may be that costs of production had increased, and that
the delivery was at a loss to the défendant ; but it might equally hâve
happened that the reverse should hâve occurred. The compulsion
which prevented delivery during govemment control thereafter ceased
to exist, and nothing having intervened to render the contract in its
remaining provisions illégal, or even impossible of performance, there
can be no good reason why each party should not be held to perform
thereunder. No question has arisen as to time necessary af ter cessation
of govemment control to prépare to résume deliveries. For such fail-
ures in thèse latter months as may be proved against the défendant
it should be held liable in damages.
[3] Fourth. There remains to consider whether the plaintifï is jus-
tified in its claim to increased damages by reason of the failure of the
défendant to increase its deliveries to 1,200 tons per month after the
request of January 31, 1917. The pétition fails to show a liability in
this regard. A close reading of the language of the agreement dis-
closes that the contract with Southern Coal & Coke Company was for
plaintiff's requirements of coal, estimated at 50,000 tons per annum,
in excess of 12,000 tons purchased of défendant, and that what the
parties intended was that, if plaintiflf's requirements proved more or
less than 62,000 tons per year, so that Southern Coal & Coke Company
had to increase or decrease its shipments, défendant might be called on
to share with Southern Coal & Coke Company such increase or de-
crease in the ratio of 12,000 to 50,000; the increase, however, not to
exceed 20 per cent. This construction gives literal effect to the words
used, is intelligible and reasonable, but under it no liability appears in
the pleadings, because the Southern Coal & Coke Company did not in-
crease, but decreased, its shipments.
Plaintifï, however, contends the agreement means the reverse ; that
if the Southern Coal & Coke Company decreased its shipments below
50,000 tons per annum, the défendant was bound to increase its ship-
ments to make good the deficiency. That the Southern Coal & Coke
Company should at any time and for any period, for any reason, or
for no reason, by simply refusing to deliver coal, impose on the de-
fendant the duty of delivering it, no matter what the market price,
- could hardly hâve been intended by intelligent business men. More-
EX PABTE DILLON 563
(262 F.)
over, what would the word "proportionate" then mean? While increase
or decrease may be proportioned to each other, it is difficult to under-
stand how an increase can be proportioned to a decrease, and if the
contract means what the plaintiff contends, could plaintiff on January
31, 1917, "covering the future," demand an increase of 20 per cent,
of défendant before the default of Southern Coal & Coke Company
occurred ?
Yet, further, the request made upon défendant by plaintif? would not
seem to be a reasonable compliance with the contract stipulation, for
it utterly fails to indicate to the défendant that the circumstances had
arisen on which the request would be justified. The ground of the re-
quest stated is simply:
"Our business is in such condition as that it will be necessary for us to
obtain tbe beneflt of this Increase."
A request based merely upon this ground might justly be disre-
garded by the défendant. A case for recovery upon this item is not
shown.
Fifth. Spécial demurrers complain that certain paragraphs of the
pétition aver mère conclusions of the pleader, or irrelevant f acts. Some
of the paragraphs do appear liable to this criticism in part; but the
conclusions are harmless, and the irrelevant facts blended with other
facts, that either aid in the construction of the contract or go to show
the breach thereof. No sufficient reason appears for striking entirely
any paragraph of the pétition demurred to for this cause.
Let judgments upon the demurrers be taken accordingly.
Ex parte DILLON.
(District Court, N. D. Oalifornia, First Division. January 27, 1920.)
No. 16763.
1. CONSTITTJTTONAI, I,AW (©=22 — AmENDMENT TO FEnEBAL CONSTITUTION TAEE8
EFFEOT ON RATIFICATION BT BEQUISITE NXTMBEE OF STATES.
An amendment to the Constitution of the United States takes effect and
beeomes a part of the Constitution on its ratification by the requialte num-
ber of States, and not from the date of Its promulgation by the Secretary of
State, under Rev. St. § 205 (Comp. St. § 303).
2. CONSTITUTIONAL LAW <©=3lO — RATIFICATION OF AMENDMENT TO BE BT MODE
PBESCEIBED BT CONSTITUTION.
The provision of article 5 of the fédéral Constitution that, when that
miethod is proposed by Congress, ratification of a proposed amendment
shall be by the lieglslatures of the several states, In case of such proposai,
excludes ail other modes of ratification, and a state Is without power to
prescribe a dlfEerent method, as by popular vote.
3. CONSTITUTIONAL LAW <S=>10 — BlGHTEENTH AMENDMENT HELD VAIJD.
The Blghteenth Amendment to the Constitution held constltatlonally
adopted and valid.
Pétition of J. J. Dillon for writ of habeas corpus. Denied.
^=3Far otlier cases see «une topic £ KBY-NUMBEîR in ail Key-Numbered Digests & Indexes
564 2G2 FEDERAL REPORTER
Théodore A. Bell, of San Francisco, Cal., for petîtîoner.
Annette Abbott Adams, U. S. Atty., and É. M. Léonard, Aist. U. S.
Atty., both of San Francisco, Cal., for the United States.
RUDKIN, District Judge. Article 5 of the Constitution of the Unit-
ed States provides as f ollows ;
"ïhe Congress, whenever tvvo-tlilrds of both houses shall deem It necessary,
shall propose amendments to this Constitution, or, on the application of the
I>egislatures of two-thirds of the several states, shall call a convention for
proposing am;endmonts, whleh, in either case, sliall be valid to ail intents and
purposes, as part of this Constitution, wlien ratified by the Législatures of
three-fourths of the several states, or by conventions in tbree-fourths thereof,
as the one or the other mode of ratification may be proposed by the Congress :
Provided that no amendment which may be made prior to the year one thou-
sand eight hundred and eight shall in auy manner alïect the flrst and fourth
clauses in the ninth-seetion of the first article, and that no state, without its
consent, shall be deprived of its euual suffrage in the Senate."
Section 205 of the Revised Statutes (Comp. St. § 303) provides :
"Wlienever ofBcIal notice is received at the Departrnient of State that any
amendment proposed to the Constitution of the United States has been adopted,
uccording to the provisions of the Constitution, the Secretary of State shall
forthwith cause the amendment to be published in the newspapers authorized
to promulgate the laws, with hls certifieate, specifying the states by which the
same may hâve been adopted, and that the same has become valid, to ail
intonts and purposes, as a part of the Constitution of the "United States."
On the 19th day of December, 1917, Congress proposed the Eight-
eenth Amendment to the Constitution of the United States. Section
1 of the amendment prohibits the manufacture, sale, or transportation
of intoxicating liquors within, the importation thereof into, or the ex-
portation thereof from, the United States and ail territory subject to
the jurisdiction thereof, for beverage purposes, after one year from
date of ratification. Section 3 provides that the article shall be inop-
erative unless ratified as an amendment to the Constitution by the
Législatures of the several states as provided in the Constitution with-
in seven years from the date of the sulmiission to the states by Con-
gress. On the 29th day of January, 1919, the Department of State
promulgated the amendment as required by section 205 of the Revised
Statutes, certifying the names of the states by which the same had been
ratified, 36 in number. Among the states thus certified were Washing-
ton and Ohio. The last section of the National Prohibition Act of
October 28, 1919, c. ^85, provides that certain provisions of the act
shall take effect and be in force from and after the date when the
Eighteenth Amendment to the Constitution of the United States goes
into effect.
The petitioner is now in custody charged with a violation of one of
those provisions of the last-mentioned act, which did not take effect,
as already stated, until the same date as the Eighteenth Amendment.
The crime is alleged to hâve been committed on the 17th day of Jan-
uary of the présent year. The petitioner claims that his restraint is
illégal, first, because the Eighteenth Amendment, and consequently the
provision of the National Prohibition Act, were not in force or efïect
on that date; and, second, because the Eighteenth Amendment itself
EX PARTE DILLOK 566
(262 P.J
is null and void. The claiin that the Eighteenth Amendment and the
act of Congress were not in force and effect on the 17th day 6f Jan-
uary of this year is based on two grounds : First, because, as already
stated, the Department of State did not promulgate the amendment
until the 29th of January, 1918, or less than one year ago; and, sec-
ond, because the states of Ohio and Washington had not in fact rati-
fied the amendment as certified by the Department of State.
[1 ] The claim that the amendment was not ratified until the Depart-
ment of State caused the publication and made the certificate pre-
scribed by section 205 of the Revised Statutes is not in my opinion well
founded. What was meant by publishing the amendment in the news-
papers authorized to promulgate the laws can only be ascertained hy
referring back to the preceding section. The preceding section pro-
vides that the Secretary of State shall cause every law, order, reso-
lution, and vote to be published in at least three of the public news-
papers printed within the United States, and shall also cause one
printed copy to be delivered to each Senator and Représentative of the
United States, and two printed copies, duly authenticated, to be sent
to the executive authority of each state. Ihe promulgation of a con-
stitutional amendment under section 205 is no more essential to its
validity than is the promulgation of an act of Congress under the pre-
ceding section, and the former is no more the beginning of the amend-
ment than the latter is the beginning of the law ; for, notwithstanding
the requirement for promulgation, it is universally recognized that an
act of Congress takes effect and is in force from the date of its passage
and approval, and a constitutional amendment is likewise in fuU force
and effect from and after its ratification by the requisite number of
States. In other words, the promulgation by the Department of State
only affords prima facie évidence of ratification, and the promulgation,
when made, relates back to the last necessary vote hy a state Législa-
ture. Congress might perhaps provide that the Department of State
should ascertain and détermine the fact of ratification, and that an
amendment should not take effect until due promulgation of that dé-
termination by proclamation or otherwise; but Congress has not so
provided.
[2] The second objection urged would seem easy of solution, were
it not for the conflicting décisions in the state courts. Thus, in State
v. Howell (Wash.) 181 Pac. 920, it was held that the resolution ratify-
ing the Eighteenth Amendment was subject to the référendum provi-
sions of the Constitution of the state, and that the resolution, therefore,
did not become final until after the expiration of the time allowed for
filing a référendum pétition, and, in case such a pétition was filed, not
until the final vote of the people thereon. No sufficient pétition was
filed, however, and no further action was taken. In the state of Ohio
a similar ruling was made in Hawke v. Smith, 126 N. E. 400, decided
September 30, 1919; but in that state a référendum pétition was filed,
and the resolution ratifying the amendment was voted down by the
people at the next gênerai élection. In so far as thèse décisions con-
strue the Constitution of the respective states, they are, of course, bind-
ing upon this court ; but in so far as they construe the Fif th Amend-
566 262 FEDERAL REPORTEE
ment to the Constitution of the United States a fédéral question is in-
volved, and the décisions are not controlling hère. I regret my inabil-
ity to follow the décisions of the highest court in those states, for in
my opinion the correct rule is announced by the Suprême Judicial Court
of Maine, in Re Opinion of the Justices, 107 Atl. 673. The court
there said:
"As there are two methods of proposai, so there are two methods of ratifi-
cation. Whether an amendment is proposed by joint resolution or by a na-
tional constitutional convention, It must be ratifled In one of two ways :
First, by the Iiegislatares of three-fourths of the several states; or, second,
by constitutional conventions held in three-fourths thereof, and Congress is
given the power to prescrlbe which roiode of ratification shall be foUowed.
"Hitherto Congress bas prescrlbed only the former raethod, and ail amend-
ments heretofore adopted bave been ratifled solely by the approving action of
the Législature In three-fourths of the states. That Is the mode of ratifica-
tion prescribed by Congress in case of the amendment now under considération,
and it was in pursuance of that prescrlbed mode that thls ratlfying résolve
was passed by the Législature of Maine. Hère, again, the state Législature in
ratlfying the antendment, as Congress In proposlng it, is not, strlctly speaking,
actlng in the discharge of législative dutles and functlons as a law-niaking body,
but Is actlng In behalf of and as représentative of the people as a rattfylng
body, under the power expressly conferred upon It by article 5. The people,
through thelr Constitution, might hâve clothed the Senate alone, or the House
alone, or the Govemor's CouncU, or the Governor, with the power of ratifica-
tion, or mlght bave reserved that power to themselves to be exerclsed by
popular vote. But they dld not. They retained no power of ratification In
themselves, but conferred It completely upon the two houses of the Législa-
ture; that Is, the législative assembly."
The requirement of the Fifth Amendment that proposed amend-
ments shall be ratifled by the Législatures of three-fourths of the
states or by conventions in three-fourths thereof, as one or the
other mode of ratification may be proposed by Congress, would
seem to me to preclude ratification by direct vote of the people ; and
the intention of the framers of the Constitution that amendments
should be ratified by the représentatives of the people, either in Légis-
lature or in Convention, and not by the people themselves seems man-
ifest. Had the resolution in this case provided that the amendment
should be ratified by the people of the several states by direct vote,
such provision would be clearly in dérogation of the Constitution and
void, and what Congress could not do it is needless to say the several
states cannot do, hecause full power over the matter is conferred upon
the former and denied to the latter. No more in my opinion can the
people of a state to-day ratify an amendment to the Constitution of the
United States by direct vote than could they elect a United States Sen-
ator by direct vote prior to the récent amendment.
The term Législature does not necessarily mean or imply the same
thing at ail times or in ail parts of the Constitution. Thus, when the
Législature of a state is referred to simply as the lawmaking body,
the term may well be construed to emhrace the entire lawmaking
machinery of the state including a vote of the people where authorized
by the local Constitution, as in Davis v. Ohio, 241 U. S. 565, 36 Sup.
Ct. 708, 60^ L. Ed. 1172. But where the Législature is designated as a
merc agencjr to discharge some duty of a nonlegislative character, such
as the élection of a United States Senator, or the ratification of a pro-
EX PARTE DILLON 567
C362 F.J
posed amendaient to the Constitution, the législative body alone in
its représentative capacity may act, just as a sheriflf who is designated
to discharge some unofRcial duty, such as jury commissioner, must act
in person, and may net act by deputy. State v. Payne, 6 Wash. 563,
34 Pac. 317. For thèse reasons I am of opinion that the Eighteenth
Amendment and the statute charged to hâve been violated were both
in full force and effect on the 17th day of January of this year.
[3] The claim that the Eighteenth Amendment itself is unconstitu-
tional and void is based upon two grounds : First, because the amend-
ment is in dérogation of the Constitution, and not an amendment at
ail; and, second, because Congress was without power or authority
to suhmit a conditional amendment, or an amendment limiting the
time within which it must be ratified. The length of this opinion and
the limited time at my disposai forbid an extended discussion of thèse
objections, if, indeed, such a discussion be called for by this court.
After receiving the approval of two-thirds of the membership of both
houses of Congress and after ratification by the Législatures of more
than three-fourths of the states, the defects in a constitutional amend-
ment must be plain indeed before a court of inferior jurisdiction will
be justified in declaring it nuU and void. No such case is presented
hère. Piriefly stated the contention of the petitioner is this :
An amendment "Implles such an addition or change within the Unes of the
original Instrument as will effect an improvement, or better carry eut the
purpose for whlch it was framed." Livermore v. Waite, 102 Cal. 118, 36 Pac.
426, 25 L. B. A. 312.
And from this it is argued that inasmuch as the original Constitu-
tion was silent on the question of the manufacture and sale of intoxi-
cating liquors there is nothing to be amended or to amend by and there-
fore the amendment itself is void. The term "amend," as defined by
Webster, means:
"To change or alter, as a law, biU, motion, or constitutional provision, by
the will of a législative body, or by comi)etent authority; as to amend a
charter."
That the amendment in question changes the original Constitution
does not admit of question, and while it does not change any provision
relating to this particular matter it does change the instrument as a
whole. The Constitution is a niere grant of power to the fédéral gov-
emment by the several states and any amendment which adds to or in
any manner changes the powers thus granted comes within the légal and
even within the technical définition of that term. The Thirteenth
Amendment, abolishing and prohibiting slavery within the states, has
been recognized as a part of the Constitution for upwards of half a
century. The amendment in question does no more, only the prohibi-
tion extends to a différent subject-matter. It seems to me therefore
that the objections are without substantial merit. Again it is urged
that the Constitution does not authorize the submission of conditional
amendments. This is no doubt true, but it is equally true that the Con-
stitution dœs not forbid them. The framers of the Constitution could
not f oresee the form or character of amendments which might become
necessary in the future and wisely left ail such questions in the hands
568 262 FEDERAL REPORTER
of those who might be charged with officiai duty when the necessity for
the change and the character of the change to be made became ap-
parent.
For thèse reasons I am of opinion that the amendment in form and
substance was entirely within competency of Congress and the several
States to propose and ratify and that both the amendment and the Na-
tional Prohibition Act were in f ull force and effect on the day in ques-
tion.
The pétition is accordingly denied.
ANZOLOTTl V. MeADOO, Dlrector General of Eailroada.
(District Court, S. D. New York. December 19, 1919.)
1. Masteb asd sebvant <&=5203(1), 227(1) — Assumption op risk distinguish-
ed fbom contkibutory negligence.
The distinction between contributory négligence and assumption of risk
dépends on vvhether the servant bas made a careless cholee between safe
and unsafe ways of dlscharglng his dutles, or whether he has failed to
take some précaution outside of the discharge of those duties.
2. Masteb and servant <S=213(1) — Risks assumtsd by seirvant.
A longshoreman, wheeling bags of flour from a car down an Inclined
plank and through a short gangway between plled bags on the side of a
pier, and along a central fainvay used by trucks, who, gaining speed
with his heavy load golng down the plank, on turning into the fairway
struck a truck and was injured, heli not chargeable with assumption of
the risk.
At Lawr. Action by Pasquale Anzolotti against William G. McAdoo
Director General of Railroads (Lehigh Valley Railroad Company).
On motion to set aside a verdict for the plaintifï in an action to re-
cover damages under the Employers' Liability Act (Comp. St. §§ 8657-
8665). Denied.
The plaintifif was a longshoreman employed by the Lehlgh Valley Railroad
Company at a pier in the East River, New York. On the day in question he
was engaged in carrying four bags of flour on a hand truck from a car on a
car float alongside one of the piers In the river to the deek of the pier.
Planks about 18 feet long ran from the floor of the car to the deck of the pier,
the différence In level between the two belng about 3 feet. Bags of flour were
piled upon the pier about 9 or 10 feet hlgh, making a gangway from the side
of the pier towards the center, through which the plank ran. Through the
middle of the pier and at right angles with thls gangway ran a passage or
fairway, in which trucks and carts went to and fro, taking freight on and off
the pier, and this fairway the gangway connected with the edge of the pier.
The flour, piled as It was, made a wall on either side of the gangway, so ihat
no part of the fairway, except where the two met, could be seen from the
edge of the pier or the floor of the car.
On the day in question the plaintlff took four bags of flour, weighing, to-
gether with the truck, some 700 pounds, and started down the plank through
the gangway, meaning to turn to the left Into the fairway and pile the flour
further down. Owing to the weight of the load and the slope of the plank,
he was obliged to take the plank upon the run, and, as the edge of the plank
was only 4 feet from the turn Into the fairway, he was on the run at the tum
as well. In so doing he came into collision with a truck slowly moving up
the fairway, and not visible to hlm at the thne he started from the car.
^s^FoT other cages see same toplc & KET-NTJHBER In ail Key-Numbered DUests & lodezes
ANZOLOTTI V. m'aDOO 569
(262 F.)
TJpon the trial the case was left to the jury upon the question of the de-
fendant's négligence in faJling to provide tlie plaintifP with a safe place to
work, and upon tlie plaintiff's contributory négligence in taldng so large a
load as to cause him to run, and in failing to ascertain before taking the
load whether anything was eoming up the falrway. The défendant asbed
for a dismlssal of the complaint on the ground that the plaintiff had assumed
the l'isk and that the question of assumption of risk should be left to the
jury, both of which requests were refused. The exceptions taken to thls
refu!^al are the basls of this motion.
William FI. Wack, of New York City, for plaintiff.
Clifton P. Williamson, of New York City, for défendant.
LEARNED HAND, District Judge (after stating the facts as
above). My refusai to dismiss the complaint because of the plaintiff's
assumption of risk, or at any rate to leave that question to the jury,
can, of course, be supported only upon the theory that the évidence
presented no question of the assumption of risk, but only a question
of contributory négligence. If I am wrong in that, obviously the ver-
dict should not stand. The Employers' L,iability Act, in establishing a
distinction between thèse two défenses, makes it necessary more care-
fully to discriminate between them than was the case before, for con-
tributory négligence is no longer a défense, but only goes in mitiga-
tion, while assumption of risk remains, as before, a bar. It raust be
confessed, however, that the line of distinction is not whoUy clear in
the hooks.
Both défenses présuppose that the in jury has in fact arisen through
some fault of the master; that is, some act, or some inaction, where
action is required, which would ordinarily resuit in injury to the serv-
ant. Both présuppose also that the servant could hâve avoided the re-
suit, had he chosen sufficiently to regard his own safety, and that,
therefore, he has joined in causing the injury, at least to this extent,
that he voluntarily places himself in a position where to his knowledge
he is exposed to the results of the master's fault. The différences can
best be understood by considering the divergent approaches to the gên-
erai question of the servant's part in the eventual injury, which each
notion involves. The idea of an assumption of risk started in the
servant's supposed acceptance of the dangers, when he took the job
with knowledge of them. He remained exposed to them, whether
he was careful or careless in his own work. Thomas v. Quartermaine,
L. R. 18 Q. B. D. 685 ; Schlemmer v. Buffalo, etc., Ry., 205 U. S. 1, 11,
12, 20, 27 Sup. Ct. 407,51 L. Ed. 681. It makes no différence whether
or not one imputes to him an agreement, as is sometimes done. Narra-
more v. Cleveland, etc., Ry., 96 Fed. 298, 301, 37 C. C. A. 499, 48 L.
R. A. 68 ; St. Louis Cordage Co. v. Miller, 126 Fed. 495, 502, 61 C.
C. A. 477, 63 L. R. A. 551. The idea of contributory négligence, on the
other hand, started with those cases where the servant, having the
choice of safe and unsafe ways of discharging his duties, chooses
wrong ; the choice being imposed upon him through the master's fault.
Schlemmer v. Buffalo, etc., Ry., 220 U. S. 590, 596, 31 Sup. Ct.
561, 55 Iv. Ed. 596; Erie R. R. v. Purucker, 244 U. S. 320, 324,
570 262 FEDERAL REPORTER
325, 37 Sup. Ct. 629, 61 L. Ed. 1166; Maloney v. Cunard S. S. Co.,
217 N. Y. 278, 283, 111 N. E. 835.
Now thèse two approaches themselves converge. The Suprême
Court has expressly declined to commit îtself upon whether a servant
who continues in the présence of imminent danger assumes a risk, or
negligently contributes to his injuries. Seaboard Air Line v. Horton,
239 U. S. 595, 601, 36 Sup. Ct. 180, 60 L. Ed. 458. In face of this
reserve it must be owned that it is hazardous to take sides, nor is it
necessary in the case at bar, for I may concède for argument that in
such cases the servant assumes the risk.
[ 1 ] Further, I may assume that in order to establish an assumption
of risk the servant need not be faced with a choice between throwing
up the work or losing ail right of recovery. If a remedy for the
danger is at hand, and he fails to use it, his inaction may be évidence
of assumption. Seaboard Air Line v. Horton, 233 U. S. 492, 34 Sup.
Ct. 635, 58 L. Ed. 1062, L. R. A. 1915C, 1, Ann. Cas. 1915B, 475 ; Id.,
239 U. S. 595, 36 Sup. Ct. 180, 60 L. Ed. 458. Yet, if the doctrine of
contributory négligence is to remain at ail, I think we must interpret
language liïce that of Mr. Justice Day in Schlemmer v. Buffalo, etc.,
Ry., 220 U. S. 590, 596, 31 Sup. Ct. 561, 55 L. Ed. 596, as meaning
that the précautions which the servant omits when he contributes neg-
ligently to the injury are choices required of him only in the discharge
of the duties imposed upon him, and not précautions which call upon
him to do something outside. At any rate, without attempting any
exhaustive définition, it appears to me quite safe to say that when the
injury arises from a failure to choose correctly between two ways of
discharging those duties, one of which is safe and the other hazardous,
the servant has not assumed the risk, but has negligently contributed
to the injury. This may not be the final line between the notions;
but, if not, I believe it safely excludes ail cases of assumption of risk,
unless that idea is to absorb the other altogether.
Jacobs v. Southern R. R., 241 U. S. 229, 36 Sup. Ct. 588, 60 E- Ed.
970, may be thought to look the other way, since the servant might
hâve waited till the locomotive stopped. As the crew was only shifting
cars, this would hardly seem to hâve involved an abandonment of the
work. I own I should hâve supposed it a case of contributory négli-
gence, and possibly the décision ought to stand against the distinction
I hâve attempted. However, it is to be observed that the court did
not discuss the présent question at ail, but assumed that the important
point was whether section 4 of the Employers' Liability Àct (Comp. St.
§ 8660) covered more than omissions by the master of statutory re-
quirements. I cannot agrée that the case stands for a décision that
the servant assumes the risk when he sélects a dangerous way of dis-
charging his duties, instead of a safe way, which is open.
[2] Coming now to the case at bar, it seems to me quite plain that
the défendant did not prove a case which called for the submission to
the jury of the plaintifFs assumption of any risk. It did not appear
that the plaintiflE had no way in the discharge of his duties to avoid
turning the corner on a run. Several possibilities suggest themselves ;
for example, it would hâve been perfectly possible for the plaintifï to
BRIGHAM V. JOHN F. SCHMADEKE, INC, 571
C262 7.)
let the feet of the truck slide on the plank for the earlier part of the
décline, thus acting as a partial brake. By so doing he could hâve
diminished the momentum at the turn. Nor does it appear that, if
the plaintifï had explained the facts and asked that he be allowed to
take three bags, he would hâve been refused. Nor does it appear
that the planks had no skids, such as are in common use, whichthe
plaintiff could hâve used as a brake upon his wheel.
Now the défense is a bar, and must be proved as well as pleaded.
If, as I think, it arises only when the servant has discharged the duties
imposed upon him with proper heed, that must be shown. The de-
fendant must show that the dangers arise either from any continued
discharge of the work at ail, or from an omission to do something
which was not a part of the discharge of his duties.
Finally, if the test be one of degree, as is suggested in Schlemmer v.
Buffalo, etc., Ry., 205 U. S. 1, 12, 27 Sup. Ct. 407, 51 L. Ed. 681, it is
clear that the immédiate cause of the plaintiff's injury was not any
pre-existing defect in the appliances or conditions, but because he had
no warning of the cart coming in the fairway. His failure to inform
himself whether there was one or not, being the immédiate cause of
his injury, was in this view contributory négligence. While I prefer to
regard that failure in the other light, it appears to me that the de-
fendant is in the dilemma of accepting one interprétation or the other.
Certainly the statute has left some scope for the doctrine of contrib-
utory négligence.
The motion is denied.
BRIGHAM et aL v. JOHN F. SCHMADEKE, Inc., et aL
(District Court, E. D. New York. November 14, 1919.)
1. WhARVES <Ê=520(1) OwNEa NOT UABLE FOB INJUET TO UOOBED VB8SEI.
FBOM COLLISION.
Owner of property on Gowanus Canal, which maintained a berth for
boats on its front, which was known to users of the canal, held not liable
for injury to a barge moored there from collision with a passing boat,
although the barge, where It lay, was necessarily an obstruction to navi-
gation.
2. Collision i®=»71(2) — ^Passino boat liable for injuet to moobed vessel.
One moving a boat up Gowanus Canal, with knowledge cl other boats
berthed on the slde of the canal, held responslble for injury by collision
to a barge so moored.
In Admiralty. Suit by Henry R. Brigham and William H. Brigham,
trading as Brigham Bros., against John F. Schmadeke, Incorporated,
with John Morton's Sons Company impleaded. Decree for libelants
against John F. Schmadeke, Incorporated, and dismissed as against
Morton's Sons Company.
Harrington, Bigham & Englar, of New York City, for libelants.
Hyland & Zabriskie, of New York City, for John F. Schmadeke,
Inc.
George W. Titcomb, of Brooklyn, N. Y., for John Morton's Sons Co.
^saFor other cases see same toplc & KEY-NUMBER In ail Key-Numbered Dlgests & Indexer
572 262 FEDERAL EEPORTEK
CHATFIELD, District Judge. The accident occurred on the 19th
of August, 1918, and ail the important occurrences were before dark.
The brick barge Brigham came up the Gowanus Canal with the flood
tide, and with the acquiescence of the Morton Company took the
lower of the three berths in front of their property, being moored
in -such a position that the stern of the Brigham cleared the CarroU
Street abutment by some 50 feet. The angle of the CarroU street draw
is such that a boat coming straight through the draw up the canal
would corne in contact with a boat lying in the berth in which the
Brigham was placed, unless pulled away by a tug or by lines.
According to the testimony, the tide was flood between 6 and 7
p. m. After the tide turned, the current continued to run up the
canal, because the city pump, used to flush the canal, was working and
creating a strong draft. The captain of the Brigham had left his boat
apparently moored in a proper way to avoid in jury as the tide went
down. There is a distinct slope, both to the side of the prism of the
canal and in from the abutment of the bridge at this corner, which
is used only for receiving the stream of a small street sewer or drain,
^hown in the picture as emptying from CarroU street.
The Brigham, when breasted out, projected so that no boat could
pass up through the draw. Shortly after the Brigham's arrivai, the
Gowanus Towing Company took through a coal barge to the Schma-
dcke yard. According to the testimony of several of the witnesses,
Cnis barge actually came in contact with the Brigham; but the pas-
sage was possible at that time because at high tide the Brigham was
still in close to the bulkhead.
Immediately after this boat had gone through, the captain of the
iirigham ate his supper and then breasted his boat off. In the mean-
time the Joséphine, which had been brought to the southerly side of
the CarroU street draw, attempted the passage. It appears that the
Joséphine had been left at this southerly side of the draw by the tug
bringing her there, either because the day's work of the tug was over,
or because the tug captain did not wish to make an attempt to put the
boat through. He apparently arrived at this point at just 5 o'clock, and
testifies that he told the captain of the Joséphine and the foreman of
the Schmadeke Company that he could not put the boat through under
the conditions at that state of the tide. If he gave this warning, it
merely added to the responsibility of those undertaking to move the
boats, and in no way brings the Gowanus Towing Company into the
situation.
Owing to the demand for coal, the Schmadeke Company undertook
to do by hand what the Gowanus Towing Company had not undertaken
to do, and drew the Joséphine by lines throught the draw. According
to the custom in the Gowanus Canal, the brick boat, which was then
breasted ofif from the bulkhead, was to be moved in order to aUow the
Joséphine to pass through. There seems to be no rule of law or pri-
vate right which prohibits the moving of a boat under such circum-
stances. Conditions in the canal require that the captain in charge
of the boat, or the owner providing the berth, anticipate and provide
for craft when in their charge, in order to meet the responsibility
BRIGHAM V. JOHN F. SCHMADEKE, INC. 573
C262 F.)
which is presented if use of the canal requires the moving of the boats.
In this situation the Schmadeke men provided that two of their num-
ber should go on the Brigham, so as to take out the forward and
aft props, which had been used by the captain to breast the boat away
from the bulkhead. Thèse men apparently did remove both of the
props, or, at any rate, the stern prop. The forward prop was removed,
or was not in place, and the Brigham was free. She was then drawn
in toward the bulkhead, when the Joséphine (passing through the
draw with the current of the pump dragging her toward the side where
the Brigham was lying) failed to clear the Brigham, striking her
about a foot from the starboard after corner, and then jamming in
that position. At this point the captain of the Joséphine, who had been
absent when the Schmadeke men started to take the boat through,
came back to his boat and immediately endeavored to warp her out,
by lines which he led to the other side of the canal. Failing in the
attempt to draw her back, he carried the line forward, had the men
man the capstan, and then drew the Joséphine into the clear water of
the canal by pulling her forward in contact with the side of the Brig-
ham. The apparent resuit of the original collision, and this squeezing
of the Brigham as the Joséphine passed through, forced the Brigham
toward the shore and grounded her so fîrmly that the man who, accord-
ing to the respondent's testimony, was left on the Brigham to breast
her out again, was unable to move her. He evidently reported this to
his foreman, and about an hour later the foreman, with the gang of
men, having acted about as speedily as he could under the circum-
stances, found that she was hard aground, and in a position where she
remained for several days, until unloaded.
There is some évidence that the parties discussed the advisability
of and responsibility for an attempt to pump out the Brigham immedi-
ately. There is nothing to indicate that she could hâve been floated
by such pumping, or that her condition was made worse by her being
allowed to lie there until unloaded. I think, therefore, that collatéral
dispute was immaterial.
[ 1 ] As I see the situation, the berth maintained by the Morton Com-
pany is a disagreeable f eature of navigation in the canal ; but it is not
a nuisance, such that the mère existence of that kind of a berth will
render them liable for ail damage. The condition, size, and arrange-
ment of the channel in the Gowanus Canal is such that responsibility
for accident cannot be placed on those who permanently maintain a
location or yard which is more or less of an obstruction to navigation,
where that obstruction is obvious and notorious, and actually expected
by those using the canal. The Morton Company could not be charged
with blocking the draw under conditions shown in this case, unless
they deliberately and knowingly created some new condition, which
would mislead and cause likehhood of injury to those using the canal
in a proper way, from the standpoint of their previous knowledge.
[2] So that the question in this case comes down to whether the
Schmadeke Company, using the canal in the condition in which they
knew it was, and meeting the circumstances which they would expect
under those conditions of the tide, are responsible for what happened
574 262 FEDERAL EEPOETBH
to the Brigham through acts of their employés which are équivalent
to négligence. The Schmadeke Company undertook to conduct the
navigation of the Joséphine by hand, and their need of the coal was
such that they did this rather than to w^ait for the next day, or to
put responsibility on the towing company, by getting them to bring the
boat up at night. Under such circumstances they must assume re-
sponsibility for the manner in which the work was conducted. That
responsibility would include choice of methods for taking the boat
through the drawbridge, and would include the détermination of how
far the Brigham could be safely moved out of the way, or could
be transferred in order to clear the draw. The testimony shows that
there was a cernent boat of much less beam immediately ahead of the
Brigham, and if, under the circumstances, it was necessary to shift
thèse boats, the responsibility would rest upon the persons undertaking
the maneuver, namely, the Schmadeke Company, and not the captain of
the Brigham.
As I see the issue, the pétition against the Morton Company must be
dismissed, and the libelant is entitled to a decree against the Schma-
deke Company.
In re SULLIVAN.
(District Court, N. D. New York. January 12, 1920.)
Bankruptcy (@=)421(1) r— Nonsupport bond to becuee patments bt husband
CBEATED PBOVABLE AND DI8CHAEQEABLE DEBT.
A bond executed by banknipt, securing the making of semlmonthly pay-
ments by a brother for 10 years for the support of the brother's wife,
held to croate a debt provable and diachargeable in the bankruptcy pro-
ceedlng; Bankruptcy Act, § 17(2), Comp. St. § 9601, not applying.
In Bankruptcy. In the matter of Peter Sullivan, hankrupt. On mo-
tion to vacate stay of suit against bankrupt. Denied.
P. H. Fitzgerald, of Utica, N. Y., for petitioner.
D. H. O'Brien, of Port Leyden, N. Y., for bankrupt.
CHATFIElvD, District Judge. The bankrupt executed a bond in
the pénal sum of $100 as security for the payment by the bankrupt's
brother of the sum of $10 every two weeks for 10 years to his wife,
who had caused his arrest for nonsupport. But one payment was made
thereon, and the wife then brought suit against her husband, as prin-
cipal, and the bankrupt, as surety, upon this bond, upon September
23, 1919. The bankrupt filed his pétition, reciting this hond of $100
as his only debt upon the 16th of October, 1919, and has obtained
from the référée in bankruptcy in this district a stay pending further
order of this court. The présent application is to vacate this stay.
The parties raised no issue as to the gênerai facts of the case. The
bankrupt allèges, upon the présent motion, tliat his brother has allowed
his wife to obtain a divorce and they are in collusion in allowing the
wife to coUect the amount of this bond from her brother-in-law. The
wife, on the other hand, daims that the bond is not dischargeable, in-
€=sFor otber cases see same topic & KEY-NUMBER in ail Key-Numbered DIgests & Indexes
IN EE SULLIVAN 575
(262 p.)
asmuch as the débt was incurred for the support of a wife and child,
and that the discharge of such obligations in bankruptcy proceedings
is against public policy îind cannot be allowed, unless plainly included
within the scope of the bankruptcy statute. This latter claim is based
upon a well-known proposition and must be divided into two parts.
In the first place, a doctrine of law which is contrary to public policy
cannot be upheld ; but, if this doctrine of law, through changed con-
ditions, becomes enacted into statute, the statute cannot be held void
if the legislating body bas power to détermine what the law shall be
without référence to matters of public policy, or to establish by the
enactment of this législation what shall be the policy in that particular
regard.
The Bankraptcy I,aw (Comp. St., §§ 9585-9656) is a statute of this
sort. Congress had the power to legislate so as to relieve a dehtor f rom
an obligation that might bave been required of him under the public
policy of the state. But where public policy requires certain obliga-
tions, and a statute is passed to relieve from or limit those obhgations,
the statute should be construed strictly. The limitation should not be
extended beyond the clear statement of the statute. In the case at bar
the language of the statute is as f ollows :
Section 17: "A discharge in bankruptcy stLall release a bankrupt from ail
of hls provable debts except sucli as * * * (2) are llabilltles * • *
for maintenance or support of wife or child. * * • " Cîomp. St. § 9601.
Subdivision (2) was added by the amendment of 1903, after the dé-
cisions of In re Hubbard (D. C.) 98 Fed. 710, and Dunbar v. Dunbar,
190 U. S. 345, 23 Sup. Ct. 757, 47 h. Ed. 1084. This evidendy refers
to the bankrupt's wife or child, and such debts are now not discharge-
able, whether provable or not. But in the case at bar the form of tiie
bond and the f act that it was given as security to a private party shows
that the debt is not for breach of public duty, but for f allure to meet a
contract of guaranty.
It must be held that section 17 of this statute is not broad enough in
language to expressly include in the exceptions a debt such as that now
under considération, if no other part of the statute prohibits that re-
suit. Debts due the United States or due a municipality hâve priority.
Taxes are not dischargeable. An obligation upon a bail bond to pro-
duce a défendant in court would, if reduced to judgment or treated as
a liquidated debt, be dischargeable in bankruptcy ; but the United
States or the state would bave priority in distribution in so far as
the assets might be available therefor. Public poUcy merely requires
that the sovereign shall be protected, it does not provide or require
that debts to the public, except taxes, shall be nondischargeable. It
is for this reason that taxes are made liens upon property.
Under thèse circumstances it would seem that a penalty provided
for in a bond to secure a private individual must be treated as a debt,
when the condition of the bond has been met so that the obligation is
payable. Unless the bond is so worded as to give the sovereign priority,
it is of no higher rank than an obligation to pay an annuity or any
other item which is necessary for the support of an individual. In
the case at bar the support of the wife and child may hâve been re-
576 262 FEDERAL KBPORTER
quired so as to protect the public, but the public could not collect
upon this bond, or sue theref or, except in the namé of the mother (the
plaintiff in the action), to whom the bond ran. The possibility that
the mother or child might become a public charge would be a suf-
ficient motive for excepting such debt from the bankruptcy statute, if
that motive so appealed to Congress ; but the présent bankruptcy stat-
ute does not in terms so provide, and a debt of this sort raust be held
provable, and therefore dischargeable.
The motion to vacate the stay will be denied, pending application for
a discharge and détermination thereon, or the expiration of the period
to apply for such discharge.
YALE & TOWNE MFG. CO. v. TRAVIS, State Comptroller of New îorli. *
(District Court, S. D. New York. August 6, 1919.)
No. E16-153.
1. CoNSTrruTioîJAL Law cS=3207(4) — Taxation <S=s>545 — Denial of Pbivileg-
ES AND ImMUNITIES — IXCOME TAX NONBESIDENTS.
Where a state has power to impose an Income tax upon both reaident
and nonresident employés, a provision requiring employers of nonresi-
dents to withhold their tax Is merely a régulation respecting collection,
and does not render a statute uneonstitutional as denying to nonresidents
the privilèges and imraunitles of citizens.
2. CONSTITUTIONAL LAW <g=»206(l) — TAXATION ©=>193 — Validity oï State
Statute — Income Tax Law — Immunities of Citizens of United States.
The amendment of the New York Tax Law by Act May 14, 1919 (Laws
1919, c. 627) adding article 16 relating to tax of incomes, in its provisions
imposlng taxes upon nonresidents who are citizens of other states without
givlng thern the benefit of the exemptions glven to résidents of the state,
held uneonstitutional and vold as abridging the privilèges and immuni-
ties of citizens of the United States.
In Equity. Suit by the Yale & Towne Manufacturing Company
against Eugène M. Travis, Comptroller of the State of New York.
{3n motion to dismiss bill. Denied.
Decree affirmed 251 U. S. , 40 Sup. Ct. 228, 64 L. Ed. .
The complatnant, a Connectlcut corporation, bas ita plant and principal
business place at Stamford, Conn. It is authorized to do business In thisi
state, vchere it maintains au otBce, owns property, and employs nuraerous resi-
<lents of other states, to wlt, of New Jersey and Connectlcut, who are occupled
In whole or In part In the complainant's business withln this state. A num-
ber of complainant's employés, who are nonresidents of New York, perform
substantially ail of their services at the New York office, and thelr salaries are
paid at stipulated times in the clty of New York from funds of the complain-
ant withln the state. Still other employés slmilarly situated hâve their sala-
ries pald to tùem by checks sent by mail from the home offlce to such employés
In New York. Stlll other nonresident employés are occupied In services
which are rendered partly in Connectlcut and partly in New York, some spend-
ing relatively llttle time in Connectlcut and vice versa, the amount of tlme
spent in each place depending upon circumstances. The complainant also em-
ploys certain nonresidents as traveling salesmen, who spend their time In New
York and in traveling through other states.
The number of employés occupied as above set forth, whose salaries are In
excess of $1,000 per annum, exceed 50 in number, and thelr total salarier
are in excess of $200,000.
^=9Foi otber cases see same toplc & KEY-NUMBER In ail Key-Numbered DIgesta & Indexes
•Decree afflrmed 251 U. S. — , <0 Sup. Ct. 228, S4 L. Ed. — .
YALE & TOWNE MFG. CO. V. TEAVIS 5'^^
(262 F.)
TTpon May 14, 1919, wliat Is known as "cbapter 627 of the Laws of 1919,"
aria entltled "An act to amend the tax law, In relation to imposing taxes upon
and with respect to Incomes," became a law of this state.
Section 351 of the act pro vides:
"A tax is hereby Imposed upon every résident of the state, which tax shall
be levied, collected and paid annually upon and wlth respect to hin entire net
liK'omo as herein deflned at rates as foUows:" 1 per cent, on amounts not
exceeding $10,000, 2 per cent, upon amounts in excess of $10,000 and not in
excess of $50,000, and 3 per cent, on amounts in excess of $50,000.
The section continues: "A like tax Is hereby imposed and shall be levied,
collected and paid annually, at the rates specifled in this section, upon and
with respect to the entire net Ineome as herein defined, except as herelnafter
provided, from ail property owned and from every business, trade, profession
or occupation carried on in this state by natural persons not résidents of the
state." The tax shall first be levied and paid with respect to the calendar
year 1919.
From hère on the act proceeds to specify its provisions in much détail. "In
gênerai," says Mr. Povcell in his very récent work. Taxation of Corporations
and Tersonal Ineome, "it may be said that the New York law has copied tne
Fédéral Ineome Tax Act, substituting 'taxpayer other than a résident' for
'nonresident alien' and 'January 1, 1919' for 'March 1, 1913.' The remédiai pro-
cédure and method of collection in the New York Corporation Tax Law,
arts. 9 and 9a, are substituted for the fédéral procédure."
Nonresidents are not entitled to the Personal exemption provided for rési-
dents, to wit, $1,000 for unmarried persons and $2,000 for married persons
and $200 for each dépendent.
Résidents are likewise entltled to certain déductions in Computing net
ineome, but nonresidents are allowed such proportion of déduction as the
ineome arising from sources within the state bears to the total ineome. Th«
method of apportlonment and allocation of claimed déductions is to be deter
mined by the state comptroller.
The act créâtes "withholding agents," and the complainant would be one
under the définition of the term, and such agents are required "to deduct and
withhold 2% from ail salaries, wages, commissions, annuities, émoluments,
and other flxed and determinable annual or periodical gains, profits and in-
comes of which he shall hâve control, reeeipt, custody, disposai or payment, if
the amount paid or received in any year equals or exeeeds $1,000, unless thero
shall be flled with the withholding agent before the time to retum any pay-
ment a certificate * * * to the effect that the person entltled to such
salary," etc., is a résident, and setting forth his résidence in the state.
The complainant allèges the existence between it and its employés of term
contracts, and is so positioned generally as to corne within the terms of this
act, and would, it says, be put to considérable expense In withholding a per.
centage of the salaries of its employés. The défendant as comptroller is al-
leged to threaten to enforce the penalties of the statute against the complainant
unless it compiles with the terms of the statute. The jurisdlctional allégation»
of the bill being sumcient, the complainant asks for équitable relief against
the threatened action of the comptroller upon the grounds :
(1) That the statute is illégal and unconstltutionaj, in that it is contrary to
and in violation of article 1, § 8, of the Constitution by interfering with and
directly hindering commerce;
(2) That it impairs .the obligation of contracts between the complainant and
its employés;
(3) That it Is contrary to section 2 of article 4 of the Constitution, in that it
deprives the citizens of the states of Conneeticut and of New Jersey of the
privilèges and immunities enjoyed by citissens of the state of New York.
(4) That it contravenes the Fourteenth Amendment of the fédéral Consti-
tution, in that it abrldges the privilèges and immunities of citizens of the
United States residlng in, and citizens of, Conneeticut and New Jersey and
States other than New York, and that the complainant and Its employés are
deprived of their property without due process of law, and that they are de-
nied the equal protection of the laws.
262 F.— 37
578 282 FEDBRAL BBFOBTEB
Louis H. Porter and Archibald Cox, both of New York City (F.
CarroU Taylor, of Stamford, Conn., on the brief), for complainant.
James S. Y. Ivins, Deputy Atty. Gen., of the State of New York,
for défendant.
KNOX, District Judge (after stating the facts as above). By reason
of the décision which I hâve determined should be made in this case,
it will be unnecessary to enter upon a discussion of the enactment in
its entirety. That a state possesses practically unlimited powers of tax-
ation within the realm of its jurisdiction save as circumscribed by
constitutional limitations is elementary, and income taxes are no excep-
tion.
The outstanding question, it seems to me, in this litigation is wheth-
er the act as drawn transgresses upon the equal privilèges and im-
munity provisions of the fédéral Constitution, If it does, I need pro-
ceed no further.
So far as decided cases upon this précise question go, there appear
to be none.
It is true the question was raised in the Income Tax Cases of Wis-
consin, 148 Wis. 456, 134 N. W. 673, 135 N. W. 164, wherein Chief
Justice Winslow said:
"It Is argued that the provisions whlch deny to nonresidents the exemptions
whlch are allowed to résidents • • • vlolate section 2 of article 4 of the
fédéral Constitution, which provides that 'the citlzens of each state shall be
entitled to ail privilèges and Immunitles of citlzens In the several states.'
* • * We regard it as a question involved in considérable doubt, and one
not necessary to be passed upon now."
The case of Shaffer v. Howard (D. C.) 250 Fed. 873, by reason of
its facts, is but of little help in this instance, and it is necessary to
consider more or less original sources, and resort is had to the case
of Corfield v. Coryell, 4 Wash. C. C. 381, Fed. Cas. No._3,230.
The accuracy of the language, and the authority of this case, so far
as I know, hâve not been questioned, and Justice Washington there
said that he had no hésitation in confining the expression that "the
citizens of each state shall be entitled to ail privilèges and immunities
of citizens in the several states" to those privilèges and immunities
which were in their nature fundamental, which belong of right to citi-
zens of ail free governments and which hâve at ail times been enjoyed
by the citizens of the several states which compose the Union from
the time of their becoming free, independent, and sovereign. Among
thèse fundamental rights, said Justice Washington, were "the right
of a citizen of one state to pass through or to réside in any other state,
for the purposes of trade, agriculture, professionai pursuits, or other-
wise ; to claim the benefit of the writ of habeas corpus ; * * * to
take, hold, and dispose of property, either real or personal, and an
exemption from higher taxes or impositions than are paid by the other
citizens of the state."
Thereafter, in Paul v. Virginia, 8 Wall. 168, at page 180 (19 L. Ed.
357), the Suprême Court said:
"It was undoubtedly the object of the [constitutional] clause In question to
place the citizens of each state upon the same footing with citlzens of other
TALE & TOWNE MFQ. CO. V. TBAVIS 579
(262 P.)
States, so far as the advantages resultlng from cltizenship In those states are
coneerned. It relieves them from the disabilities o£ alienage In other states ;
it inhibits discriminatlng le^lation against them by other states; it give?^
them the right o£ free ingress Into other states, and egress from them; it
insures to them in other states the same freedom possessed by the citizens of
those states In the acquisition and enjoyment of property and in the pursuit of
happiness; and it secures to them in other states the equal protection of
their laws. It has been justly said that no provision in the Constitution bas
tended so strongly to constitute the citizens of the United States one people as
this."
Again, in Ward v. Maryland, 12 Wall. 418, 20 L,. Ed. 449, the court,
in specifying some of the rights included within the words "privilèges
and immunities," said one of them was that a citizen of one state
should be "* * * exempt from any higher taxes or excises than
are imposed by the state upon its own citizens." See, also, Cooley,
Const. Limitations, 16. Subsequently in the Slaughterhouse Cases, 16
Wall. 36, 211,. Ed. 394, it was said that the purpose of the Fourteenth
Amendment " * * * was to déclare to the several states that
whatever those rights, as you grant or establish them to your own
citizens, or as you limit or qualify, or impose restrictions on their ex-
ercise, the same, neither more nor less, shall be the measure of the
rights of citizens of other states within your jurisdiction." Certainly,
the force of this pronouncement was not qualified by the vigor of th«
dissents in thèse cases; and also in Barbier v. Connolly, 113 U. S.
27, 5 Sup. Ct. 357, 28 L. Ed. 923, in a discussion of the Fourteentb
Amendment somewhat similar language was used.
Then there may be found the cases of Blake v. McClung, 176 U. S
59, 20 Sup. Ct. 307, 44 L. Ed. 371, followed by Sully v. American Na-
tional Bank, 178 U. S. 289, 20 Sup. Ct. 935, 44 L. Ed. 1072, whereir
it was held that nonresident unsecured creditors stood upon the same
footing with résident unsecured creditors, a statute of Tennessee to
the contrary notwithstanding.
It need not be argued that the rights of a corporation created by one
state within the borders of another state are not altogether similar
to the rights of a natural person so circumstanced (Paul v. Virginia,
supra) ; but, even so, it was decided in Southern Railway v. Greene,
216 U. S. 400, 30 Sup. Ct. 287, 54 L. Ed. 536, 17 Ann. Cas. 1247,
that to tax a foreign corporation under the circumstances there présent
by a différent and more onerous rule than was used in taxing domestic
corporations for the same privilège constituted a déniai of the equal
protection of the law.
In Wiley v. Parmer, 14 Ala. 627, it was held that the statute of that
state, taxing the slaves of a nonresident at double the amount at
which those of a résident were taxed, was imconstitutional.
In Bliss's Pétition, 63 N. H. 135, it was held that a state cannot re-
fuse a peddier's license to a citizen of another state, asked for upon the
same terms that it grants licenses to its own citizens. Among othei
things the court said:
"The equallty of privilèges and Immunities guaranteed by the fédéral Con-
stitution * • * to the citizens of each state exempts them from any •
higher taxes than the state imposes uipon her own citizens."
580 262 FEDERAL REPORTER
Other cases to the same gênerai eflFect are State v. Lancaster, 63
N. H. 267; McGuire v. Parker, 32 La. Ann. 832; Oliver v. Washing-
ton Mills, 11 Allen (Mass.) 280; Town of Farmington v. Downing,
€7 N. H. 441, 30 Atl. 345.
In Sprague v. Fletcher, 69 Vt. 69, 17 Atl. 239, 37 L. R. A. 840, it
was declared that an act of Vermont which denied to nonresidents of
the State rights which are allowed to résidents under the same circum-
stances, in respect to déductions from taxable personal property
by reason of debts owed by the taxpayers, conflicts with article 4,
§ 2, of the fédéral Constitution, which secures to citizens of each state
"ail the privilèges and immunities in the several states."
Tested by the standard of the principles set forth in the foregoing
cases does the f ailure to accord to nonresidents of the state the exemp-
tions and immunities provided for to résidents make this law, or part
of it, invalid?
It becomes necessary to détermine what persons are meant by the
term "nonresidents." The comptroller of the state has used this
language in ref erring to the term :
"A person Is a nonresident within the meaning of the act, If he recelves tax-
able income from property owned or from a business, trade, profession or oc-
cupation carrled on in the state, but is not a résident thereof."
What I hâve to say will be confined to such nonresidents who are
citizens of states other than New York.
The question is of importance to the state of New York, and is
likewise of importance to the thousands of persons, résidents, and citi-
zens of adjoining states, who daily come into this state and hère con-
tribute to its welfare and prosperity.
It may be well to inquire what is the nature of the discrimination
which it is alleged nonresidents will be subjected to under the opéra-
tion of the law. The following illustration will serve to answer the
inquiry :
Two persons are employed in this state by the plaintiff. Their work
is in ail respects similar, and each receives a salary of $2,000 per an-
num. Assume that each employé is married, one living with his wife
in New York, the other living with his wife in Connecticut. Under the
law as it is written the résident of New York would be exempt from
taxation, but the résident of Connecticut would be subject to a tax
of $20.
[1] Section 366 provides that "every withholding agent shall de-
duct and withhold two per centum from ail salaries," etc., of non-
residents. The tax imposed by section 351 is at the rate of one
per cent, on net incomes up to $10,000. This is obviously an error
in the act, and under the régulations withholding agents are required
to withhold but 1 per cent. Without commenting upon the authority
of the régulation so imposed, this discrepancy may be passed. The
withholding of any sum from the salaries of nonresidents is objected
to, inasmuch as there is no withholding from résidents. Assuming the
power to lay a tax upon nonresidents based upon personal service, this
feature of the act I am inclined to think is not necessarily fatal to its
validity. It is the law, I think, that not only must the final purpose of
YALE & TOWNE MPG. CO. V. TEAVIS 581
4262 F.i
the law be considered, but the means of its administration — the ways
it may be def eated. St. John v. New York, 201 U. S. 633, 26 Sup. Ct.
554, 50 L. Ed. 896, 5 Ann. Cas. 909. As to this feature of administra-
tion, I believe that some classification between résidents and nonresi-
dents may with propriety be made. District of Columbia v. Brooke,
214 U. S. 138, 29 Sup. Ct. 560, 53 L. Ed. 941; Field v. Barber As-
phalt Co., 194 U. S. 618, 24 Sup. Ct. 784, 48 L. Ed. 1142. Référence
may also be had to Bell's Gap Railroad Co. v. Pennsylvania, 134 U.
S. 232, 10 Sup. Ct. 533, 33 L. Ed. 892, wherein the court held that the
déduction of a tax by a vvithholding agent is merely a matter of con-
venience, adopted as a secure method of collecting the tax, and as such
is not objectionable.
As to the inconvenience resulting to the nonresident by reason
of the payment by the withholding agent of the gross amount so with-
held, and the trouble and expense of the taxpayer in recovering any
excess over the tax finally determined upon, I need not now comment.
[2] Paragraph 5 of section 360 provides that a résident may de-
duct losses incurred in any transaction entered into for profit, though
not connected with the trade or business, "but in the case of a tax-
payer other than a résident of the state only as to such transaction
within the state." The resuit of this is that two employés of com-
plainant, each receiving a salary of $5,000 a year, may together enter
into a business venture in another state ; if the venture within a year
results in a loss of say $5,000 to each, the résident of New York may
deduct his loss and pay no tax, but the nonresident of New York
is subject to the tax. Also under paragraph 6 a résident may deduct
his losses from fires, but unless the property of a nonresident injured
by fire is within this state he can make no déduction.
Theoretically, the first of the two last-mentioned discriminations
may be justifiable upon the ground that as to a résident of New York
the state is entitled to tax upon his gains and profits from sources
without the state, whereas as to a nonresident the tax may be recovered
only as to net income from property, businesses, and occupations with-
in the state of New York. The fact, however, remains that it is the
Personal knowledge of us ail that the only appréciable source of incom''
of thousands of nonresidents subject to this tax lies within the confines
of this state, and that as a matter of practical opération of the statute
the effect will be simply to deny to a nonresident, no matter what
his misfortune, any exemptions. That there are in thèse provisions
of the law a number of problems as to the character and place of
income sought to be taxed well worthy of serious considération is
undeniable ; but, in the aggregate, I am of opinion that as now f ramed
the statute cannot operate without depriving citizens of other states
of privilèges and immunities which are open to citizens and résidents
of New York.
The difhculty hère bas arisen, it would appear, by the Législature
having assumed that a citizen of the United States residing in a state
other than New York sustains to the taxing power of that state the
same relationship that a nonresident alien sustains to the fédéral tax-
ing power. There is, however, a distinction. Generally speaking, the
582 262 FEDERAL REPORTER
United States government, as suggested by Mr. Powell in his book
Taxation oî Corporations and Personal Incomes, may prescribe terms
under which aliens may do business hère, or prevent them from doing
business hère altogether. By the Fourteenth Amendment it is declar-
ed that —
"Ail persons born or naturallzed In the United States, and suMect to the
Jurisdiction thereof, are cltizens of the United States and of the state wherein
they réside," and "no state shall make or enforee any law which sball abridge
fhe privilèges or immunlties of citlzens of the United States."
It is this provision of the Constitution along with the second section
of article 4 and the Interstate commerce section of our fundamental
law that hâve been largely responsible for the community of interest,
the unanimity of purpose, the united effort, and the magnificent ac-
complishments of our people. If now, under one pretense or another
the States are to erect économie and taxation barriers along their
boundaries, it is but a question of time when the citizens of the various
States will for ail practical purposes be burdened with the disabilities
of alienage, and this would be intolérable.
For thèse reasons, I am constrained to hold that the provisions of
chapter 627 of the laws of the state of New York for the year 1919
are, in so far as they attempt to assess, lay, and collect a tax upon
citizens of the United States who are not résidents of the state of
New York, and who are citizens of other states, without according
them the privilèges and immunities afïorded by said act to citizens
of the United States who are citizens of the state of New York and
résident therein, are unconstitutional and void. Nothing herein,
however, is meant to be decided as to the validity of the statute so
far as it relates to résidents of the state of New York.
Neither that question nor the question as to the power of the state
to lay a tax upon nonresident citizens of another state based upon their
earnings in this state for personal service rendered need, in view of the
basis of my décision, now be considered.
The motion will be denied.
GBIESBDIECK BROS. BBEWERY CO. v. MOORB, Internai Revenne
CoUector, et aL
(District Court, E. D. Missouri, E. D. November 21, 1919.)
No. 5207.
1. CONSTITUTIONAL lAW ®=»45 — QUESTION OF CONSTITUTIONAIJTT OF AOTS
OF CONGBESS IS FOE THE COTJBTS.
Where the constitutionality of an act of Congress la ehallenged, the
question for détermination la one for the courts, and the jurisdiction of
the court to détermine the same cannot be successfully attacked.
2. iNJUNCTioN <S=»85(2) — Courts hâve jurisdiction to enjoin pubuo orn-
CKB FEOM ENFOEOINQ UNCONSTITUTIONAL ACTS.
Courts hâve Jurisdiction to enjoin public offlcers from enforcing uncon-
stitutional acts, for such offlcers, In enforcing such acts, become mère
unofflcial intermeddlers, and are not entitled to protection as officers.
^=3Foi other cases see same topic & KEY-NUMBER la ail Key-Numbered Digeste & Indexes
GBIESEDIECK BROS. BBEWERY CO. V. MOORE 583
(262 F.)
3. INTOXICATINQ LiQUOES <S=>6 — RE8EEVED POWEKS OF STATES TO BEOTTLATE.
In tlme of peaee, and In the absence of the EIghteenth Amendment, thé
etates hare exclusive power to regulate the manufacture and sale of In-
toxicating Uquors; sucli power falling wlthln the police power reserved
to the States.
4. iNJUNCiTOiT (@=>85(2) — Bnjoining enfoecement or National Peohibition
AcT befoue peohibitoet amendment became effective.
In View of the faet that the EIghteenth Amendment provided a period
of one year after ratification before it should go into efCect, and that
active hostilitles had ceased and the armed forces had been demobiliaed
at the time Congress passed the National Prohibition Act, which con-
tained provision to carry Into effect the previously enacted War-Tlme
Prohibition Act, îield, the EIghteenth Amendment not yet having become
eflEective, that enforcement of those provisions of National Prohibition
Act designed to carry into effect the War-Tlme Prohibition Act, and
which prohibited the sale of 2.75 per cent béer, manufacture of which
was allowed by previous acts, will, in view of the injury, be temporarlly
enjoined pending détermination of the constltutionality of such act.
In Equity. Suit by the Griesedieck Brothers Brewery Company
against George H. Moore, CoUector of Internai Revenue, and another,
Consolidated with suits by other brewery companies against the same
défendants. On motion of défendants to dismiss for want of j'uris-
diction and equity, and on application of plaintiffs for temporary in-
junction. Injunction pendente lite granted.
Edward C. Crow, John T. Fitzsimmons, Charles A. Houts, Edgar R.
Rombauer and W. K. Koemer, ail of St. Louis, Mo., for plaintiff.
Walter L. Hensley, U. S. Atty., and Benj. L. White, Asst. U. S.
Atty., both of St. Louis, Mo., for défendants.
POLLOCK, District Judge. The above entitled and numbered suit
arose out of the consolidation, for the purpose of hearing and dé-
cision, of five like suits, brought, respectively, by the Independent
Breweries Company, St. Louis Brewing Association, Griesedieck Bros.
Brewery Company, Schorr-Kolk-Schneider Brewing Company, and
Louis Obert Brewing Company, against défendants, the coUector of
internai revenue for the First district of the state of Missouri, and
the United States attorney for the Eastern district of the state of
Missouri, to restrain and enjoin said défendants from enforcing or
attempting to enforce against complainants certain provisions of an
act of Congress entitled the National Prohibition Act, approved October
28, 1919 (chapter 85). The spécifie ground on which such injunctive
relief is demanded is the alleged want of constitutional power in Con-
gress to enact said législation; therefore the act, in so far as chal-
lenged by complainants, afïords défendants no warrant of law to do
the injurious acts by them threatened to be done unto complainants in
their persons and property rights, as set forth in the bills of complaint.
To the several complaints so filed défendants hâve appeared, and
interpose separate motions to dismiss for want of jurisdiction in the
court to entertain them, and, further, for want of equity. The several
complainants hâve applied for a temporary injunction to protect the
status of the parties until the constitutional validity of the act may
@=9Foi otber cases see same toplc & KEIT-NUMBER la ail Key-Numbered Dlgests & Indexes
584 262 FEDERAL REPORTER
be finally determined and decreed. On said motions and applications
the Consolidated cause stands argued and submitted for décision on the
pleadings, motions, and proofs in the form of affidavits fîled by the
complainants.
From the pleadings and proofs certain facts are deducible beyond
ail controversy. Complainants, each and ail, were on the day said
act by its terms became effective engaged in Ijrewing, manufacturing,
selling, and distributing within the jurisdiction of this court certain
beverages containing not to exceed 2% per cent, alcohol, in pursuance
of and in strict conformity with the provisions of the acts of Con-
gress of August 10, 1917 (40 Stat. c. 53), and of November 21, 1918
(40 Stat. c. 212), and ail other acts of the Congress, and in strict com-
pliance with and conformity to ail the laws of the state of Missouri,
and under permission or license received from the lavi^fully constituted
authorities of the state of Missouri. In the conduct of said lawful
business under the laws of the state complainants engaged many work-
tnen, employés, and laborers at vast expense, employed vast amounts
of capital invested in buildings, machinery, materials, and products
specially devoted to the conduct and carrying on of said business, and
for tlie purpose of obtaining the permission of and a license from the
state of Missouri to engage in and conduct said business. Complain-
ants for years had been, and were at the time said act became opera-
tive according to its terms, compelled to and did pay to the state large
amounts of money by way of revenues collected and used by the
state. Such beverages so being manufactured by the complainants are
not in truth and fact intoxicating liquors or drinks, as the word "in-
toxicating" is defined or employed in its common acceptation among
men, or as defined or employed in scientific language or treatise on
the subject. That the enforcement by défendants against complainants
and their properties, plants, and apparatus so employed of the provi-
sions of said act of October 28, 1919, in so far as applicable to the
pcriod of one year after ratification of the Eighteenth Amendment
to the national Constitution by the states, will operate to confiscate the
property of complainants, will deprive complainants of the use, benefiti
and value of the same without just compensation and without due
process of law, etc. Therefore complainants pray injunctive relief
against the threatened acts of irréparable injury, loss, and damage pro-
vided for in said portion of the act.
[1, 2] Corning, now, first to a considération of the separate motions
of défendants filed against the complainants to dismiss the same for
want of jurisdiction, it may be said :
It is perfectiy obvious this court has jurisdiction to hear and dé-
termine the question raised as to the constitutional validity of the
provisions of the act of Congress challenged, for such issue is a ju-
dicial, and not a législative, question, and on the décision of this one
issue dépend ail others in this case; for, if the act in so far as chal-
lenged be within the constitutional power of the Congress to enact
into law, the complainants, and ail others, including the défendants,
must obey and enforce its terms. On the contrary, if the provisions
of the act challenged by complainants are found and decreed as a mat-
GEIBSBDIECK BROS. BBEWEBT CO. V. MOORE 585
(262 F.)
ter of law to lie without and beyond the constitutional power of the
Congress to enact into law, then the act is not a law. It has no oflSce
to perform, has no binding force or effect upon any citizen of the
republic, and défendants in enforcing it, or in attempting or threaten-
ing to enforce its provision against complainants or their property and
property rights, to their irréparable loss, injury, and damage, are not
officers of the law, acting within the scope of their lawful authority,
but are, when so engaged, mère private individuals, volunteers, and
intermeddlers, whose injurions acts ought to and in justice should
be restrained. To such extent and end go ail the authorities on the
subject. Osborn v. United States Bank, 9 Wheat. 737, 6 L. Ed. 204;
Dobbins V. Los Angeles, 195 U. S. 223, 25 Sup. Ct. 18, 49 L. Ed.
169; Ex parte Young, 209 U. S. 123, 28 Sup. Ct. 441, 52 L. Ed.
714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764; Wes. Un. Tel. Co. v.
Andrews, 216 U. S. 165. 30 Sup. Ct. 286, 54 L. Ed. 430; Herndon
V. Chi., Rock Island & Pac. Ry., 218 U. S. 135, 30 Sup. Ct. 633, 54
L. Ed. 970; Philadelphia Co. v. Stimson, 223 U. S. 605, 32 Sup. Ct.
340, 56 L. Ed. 570; Truax v. Raich, 239 U. S. 33, 36 Sup. Ct. 7, 60
L. Ed. 131, L. R. A. 1916D, 545, Ann. Cas. 1917B, 283; Wilson v.
New, 243 U. S. 332, 37 Sup. Ct. 298, 61 L. Ed. 755, L. R. A. 1917E,
938, Ann. Cas. 1918A, 1024; Hammer v. Dagenhart, 247 U. S. 251,
38 Sup. Ct. 529, 62 L. Ed. 1101, Ann. Cas. 1918E, 724; Jacob Hofï-
man J3rewing Co. v. McElligott, 259 Fed. 525, C. C, A. ;
Scatena et al. v. Caffey and Edwards (Southern District of New York,
August 20, 1919) 260 Fed. 756.
The court has jurisdiction to consider and détermine the constitu-
tional vaudity of the act in question. If valid the court must so dé-
clare, and being valid the law must be obeyed. If void for want of
constitutional power, the courts to which that question is lawfully
submitted must so déclare ; and, if such resuit be decreed, neither the
government, the défendants herein nor any right-minded citizen will
désire its enforcement, and the courts to which this question is law-
fully suljmitted can neither décline nor escape décision of the ques-
tion raised.
[3] Is the act of October 28th, in so far as by complainants chal-
lenged in this controversy, constitutional and valid? The act on its
face is divided into two distinct parts: First, one having relation
to the continued enforcement of what is known as the War-Time Pro-
hibition Act of November 21, 1918, as changed, modified, and amend-
ed, until the conclusion of the treaty of peace between this country
and the German allies, or at least until that time is reached at which
the Président by his proclamation shall déclare the war at an end.
The other part of the act deals with the enforcement of national pro-
hibition after the prohibitory amendment to the Constitution shall
by its terms become operative. With this second part of the act
this controversy does not concern itself, but does involve alone the
first part or provision of the act.
That the right of complainants to manufacture, barter, sell, dis-
pose of, or use the beverages by them produced, whether in their
nature intoxicating or nonintoxicating, within the territorial limits
262 FEDERAL REPORTER
of the State of Missouri, in time of peace, in the absence of the Eight-
eenth Amendment to the national Constitution, can be prohibited or
regulated alone by the exercise of the sovereign police power of the
State, none can well deny. As under the national Constitution, form-
ed by the union and consent of the several states in existence when
it was formed, and to which the subsequently admitted states hâve
irrevocably bound themselves by the act of admission, ail police power
is expressly reserved to be exercised by the sovereign states in such
manner and form as they may lawfully ordain and prescribe by law,
it is too clear for argument no power or pretended power of Congress
in the enactment of the act in question can or may be traced to any
such source. If permissible, at this late date, to cite authorities in
support of this position, the f oUowing may be noted : Kidd v. Pear-
son, 128 U. S. 1, 9 Sup. Ct. 6, 32 L. Ed. 346; Vance v. Vander-
cook, 170 U, S. 438, 18 Sup. Ct. 674, 42 L. Ed. 1100; Keller v.
United States, 213 U. S. 128, 29 Sup. Ct. 470, 53 %. Ed. 737, 16
Ann. Cas. 1066; Hammer v. Dagenhart, 247 U. S. 251, 38 Sup. Ct.
529, 62 L. Ed. 1101, Ann. Cas. 1918E, 724.
Indeed, the state of Missouri, in the lawful exercise of its undoubt-
ed reserve police power, has ordained complainants in this case may
do, and has legalized complainants in the doing of, the précise acts
which Congress by its act in controversy condemns and makes crim-
inal. As ail législative power conferred upon or which may be exer-
cised by the Congress was first vested in the sovereign states, and was
by the states through the médium of the national Constitution dele-
gated to the national Congress, then, if, as in this instance, the Con-
gress assumes in the enactment of any law to invade the realra of the
sovereign police power of the states expressly reserved by the creators
of the nation to the sovereign states, of necessity, it must and does
follow, he who would contend for the constitutional validity of such
enactment must point out some spécifie provision of the national Con-
stitution which in express terms, or by necessary implication, justifies
and authorizes the Congress in making such invasion, or the act so
donc must fail of constitutional power.
[4] In the instant case défendants justify the invasion of the reserve
police power of the states by Congress in the passage of the act in
question by pointing to the war powers of the government as found
expressed in article 1, section 8, of the national Constitution. In op-
position to this contention complainants reply: (1) That in fact the
war between this country and the German allies had actually terminated
before the date the act was passed over the veto of the executive;
that the executive has so declared in his officiai capacity. Hence the
power of the Congress to proceed under its war powers granted in the
national Constitution had ceased to exist. (2) Because during the peri-
od of warfare between this country and the German allies the Eight-
eenth Amendment to the national Constitution was by the Congress
proposed to and ratified by the states and had become a part and
parcel of our national Constitution at the date of the passage of the
act in question, by reason of which assent the right of the Congress
to exercise control over the subject of intoxicating beverages concur-
QEIESEDIECK BROS. BREWERY CO. V. MOORB 587
(262 F.)
rently with the states was in express ternis deferred until one year
after ratification of said amendment by the states. Hence said amend-
ment by necessary implication excluded Congress from the passage
of the act in question, so far as it relates to the provisions of the
act hère challenged.
Thèse contentions of the respective parties to the suit bring the
controUing question for décision before the court in this form: On
the one hand, in support of the constitutional validity of the act, we
hâve référence to the war pov/ers of the government and such légis-
lative authority thereunder as the Congress was warranted in exer-
cising at the date of the act. In opposition to this, we hâve: (1)
Prier to the date of the passage of the act ail police power employed
in times of peace to prohibit, regulate, or control the manufacture,
sale, transportation, or use of intoxicating beverages under the national
Constitution expressly reserved to be exercised by the several states.
(2) The Eighteenth Amendment to the national Constitution, proposed
by the Congress and ratified by the states during a period of actual
war f are, places the exercise of the police power employed to prohibit,
regulate, or control the manufacture, barter, sale, and use of intoxi-
cating beverages under the concurrent control of the sovereign nation
and the sovereign states, to be thereafter exercised, however, only
on the part of the nation at the expiration of one year from the date
said amendment was ratified by the states. In this condition of our
organic law the Congress acted in the passage of the law in question.
Does such condition of the organic law authorize the act done?
Complainants contend the states created this nation because they
could not continue to endure as a single state or nation without a cen-
tral power authorized to employ in certain matters and contingencies
powers above and beyond that possessed by the state or any other
power. That the states made for the nation they so created a written
Constitution. This Constitution was made to contain the provisions
and conditions on which it might thereafter be modified or amended.
That under this provision, and in pursuance thereof, the Eighteenth
Amendment to the national Constitution became a part of the or-
ganic law. That the national Constitution is a written instrument.
Its true intent and construction must be gained by considering ail
within its four corners as a completed whole. As no provision may be
excluded therefrom, so, provisions apparently conflicting, if any be
found therein, must be reconciled and harmonized in construction.
That the war powers therein granted to the nation were irrevocably
delegated for the express purpose of empowering the nation, inde-
pendent of ail other source of power, to préserve and perpetuate its
national existence in times of national péril arising from or out of
war. That the war powers of the nation as employed in the Constitu-
tion are emergency powers. When the emergency arises, the péril
comes, then sui sponte the war powers of the nation spring into use
to be exercised by the Congress. When such emergency ceases to
exist, and the péril to the nation ends, the war power of the nation
relapse into disuse. Whether the exigency calling for the exercise of
the power has arisen is a question of f act for the détermination of the
588 262 FEDERAL REPORTER
courts, and is not concluded by the fact the Congress has exercised
the power. Ex parte Milligan, 4 Wall. 2, 18 L. Ed. 281 ; Mitchell v.
Hamony, 13 How. 115, 14 Ir. Ed. 75; Perrin v. United States, 232
U. S. 478, 34 Sup. Ct. 378, 58 L. Ed. 691 ; Willoughby, Constitutional
Law, vol. 2, p. 125.1 ; MiUigan v. Hovey, 3 Biss. 13, Fed. Cas. No.
9,605; In re Egan, 5 Blatchf. 319, Fed. Cas. No. 4,303; Johnson v.
Jones, 44 111. 142, 92 Am. Dec. 159; Griffin v. Wilcox, 21 Ind, 370;
Nance & Mays v. Brown, 71 W. Va. 519, 77 S. E. 243, 45 L. R. A.
(N. S.) 996, Ann. Cas. 1914C, 1; United States v. Hicks (D. C.)
256 Fed. 707; Montoya v. United States, 180 U. S. 261, 21 Sup. Ct.
358, 45 L. Ed. 521 ; Jacob Hoffman Brewing Co. v. McElligott, 259
Fed. 321, C. C. A. .
If this argument made by complainants in the end prevails it is
entirely clear there was not, as shown by the proofs in this case, and
as determined by those governmental and historical acts of which the
court will take judicial notice, any such emergency existing on Oc-
tober 28, 1919, as to authorize the Congi-ess in resorting to the war
powers of the nation as enibodied in the Constitution to invade the
reserve police powers of the state in the passage of the act in question
so far as challenged in this suit, and, further, that the prohibition f ound
in the act against the manufacture, barter, sale or use of beverages by
complainants containing not to exceed 2% per cent, of alcohol bears
no just or substantial relation to either the conduct of any war then
in fact prevailing between this country and any other nation of this
eafth, or on the process of disbanding any troops theretofore engaged
in the prosecution of any such war. However this question of grave
doubt may ultimately be determined, there is another aspect of this
case, which, in my mind, gives rise to serions concern. The national
Constitution considered as a whole, inclusive of the récent Eighteenth
Amendment thereto, takes away from the several states the theretofore
exclusive exercise of the police power in dealing with the subject of the
manufacture, sale, transportation, and use of intoxicating beverages,
and places the right to exercise such power under the concurrent
control of the nation and the several states, only, however, after the
expiration of a period of one year from the date said amendment
was ratified by the states. This one-year period had not as yet expired
at the date the act in question was passed by the Congress. The
act in question, so far as it relates to a time prior to the expiration of
said one-year period does not prétend to concur with the législation of
the state of Missouri on the subject-matter thereof, but, on the con-
trary, as has been seen and stated, is in direct conflict with the lawful
législation of the state now in force, enacted under its reserve police
power.
This amendment was made to the Constitution at a time when the
war in fact was raging in Europe. Theretofore the Congress had, in
the exercise of the war powers of the government, passed the acts
of August 10, 1917, and of November 21, 1918, which said acts were
în full force at the date the Eighteenth Amendment was by the Con-
giess proposed to the states. This proposai, as made and accepted by
the states, provides such powers of législation as are therein conf erred
GEIESEDEECK BROS. BREWERT CO. Y. MOORE 589
(262 p.)
on the Congress shall be withheld for the period of one year from the
date of ratification by tlie states. Yet the Congress, in the passage
of the act in question, in so far as hère challenged, attempts by a re-
exercise of the war powers of the government within the one-year
restricted period to accompHsh that purpose which the Eighteenth
Amendment at the time expressly withheld from national control.
In other words, the act challenged cornes to this : By a re-exercise of
an implied power under one provision of the national Constitution,
the Congress attempts the doing of those acts withheld from its ju-
risdiction or control by the express provisions of another provision of
the Constitution. True, if it is possible to conceive, think, or believe
sucli exercise of the war powers of the nation arose out of any emer-
gency of the government at war, or bears any just or substantial re-
lation to any exigency of the nation in the conduct or conclusion of
war, ail right-minded men will most cheerfully and willingly yield
obédience thereto without question, "for the safety of the nation is
the suprême law." But if, as expressed by the Chief Executive in bis
message vetoing the act, the war was then at an end, demobilization of
our forces completed, and no emergency of government calling for
its enactment, containing powers by the national Constitution still
reserved to be exercised by the states under their police powers, then
the necessity of the Congress to resort to the war powers having ceased,
the power to so do had ceased, and may not be pointed to in support
of the act, and the courts of the country, when their jurisdiction is law-
fuUy invoked, should and must so déclare.
Bcyond ail cavil the purpose sought to be subserved in postponing
the exercise of the power conferred on Congress by the Eighteenth
Amendment for the period of one year therein found was to protect
the property and property rights of citizens similarly situated with
complainants, located in states whose then laws permitted the manu-
facture, sale, and use of beverages such as are produced by complain-
ants from spoliation or confiscation under législative enactment by
the Congress, such as is contained in that portion of the act of October
28, 1919, herein sought to be enjoined, to the end that during said
period of one year the owners might change, convert, and dévote said
properties to other lawful and bénéficiai uses consistent with the exer-
cise of the power so conferred upon the Congress at the end of the
period. From the very fact the amendment so provides, it must be
thought those states, such as the state of Missouri, in which such
properties were lawfully owned, employed, and enjoyed at the date
the amendment was ratified, would not, through their législative bodies,
hâve ratified the same, in the absence of the one-year provision found
in the amendment ; or, had it been thought by the législative bodies of
such states, during said one-year period, and on October 28, 1919, the
Congress would bave enacted the drastic provisions found in that
part of the act hère challenged, unless impelled thereto by positive,
pressing exigencies of war itself .
Without declaring or attempting to déclare the act to be either con-
stitutional or unconstitutional, but having in view the grave doubts
590 262 FEDBEAL EBPOKTBB
expressed as to its constitutional valîdity, so far as challenged in this
suit; in view of the fact the injunctive relief sought in this case is
the very life of the bill itself ; in view of the fact the présent enf orce-
ment of the drastic provisions therein found will work irréparable
loss and damage to complainants ; in view of the conclusive showing,
made in this case, the beverages being manufactured by complainants
are in no just or true sensé intoxicating or baneful in their efïects;
and in view of the further fact no in jury or damage can corne to the
défendants by the making of an interlocutory order preserving the
status of the parties pendente lite, it follows — the motions to dismiss
for want of jurisdiction and equity must be denied, and are denied.
The application for an injunction pendente lite, and until a détermina-
tion of the constitutional validity of the act so far as herein chal-
lenged is decreed on fuU hearing, is granted, on such terms as to
bonds and forms of order as may be agreed upon by the parties or here-
after determined by the court
It is so ordered.
NIRDLINGER V. STEVENS 591
C2e2F.)
NIRDLIN6ER v. STEVENS.
(District Court, D. New Jersey. December 26, 1919.)
1. JUDOMENT ®=»570(5) — ^DlSMISSAL FOB FAILTJBI! TO PBOVK TIILE, NOT BES JtT-
DXCATA
In a suit under 4 Comp. St. N. J. 1910, p. 5399, "to compel the détermi-
nation of clàlms to real estate," in which. the court Is required by the
statute to flnally adjudge whether défendant bas any interest in the prop-
erty, and to flx and settle the rlgbts of the parties, a decree simply dis-
missing the bill, on the ground that plainUfC had failed to establlsh his
tltle, as pleaded, held not an adjudication which barred a second suit, in
whlch plaintlff sets up a différent title.
2. CorBTS <g=371 (2) — FEDERAL COURTS MAY ENFOECE REMEDIES aiVEN BY STATE
8TATTJTES.
A fédéral court of equlty may entertaln a suit to quiet tltle under a
State statute, brought by one in peaceable possession, who is without adé-
quate remedy at law.
3. Navigable watees <©=336(3), 44(3) — Botjndart op state lands below
high-watek mark shiits as high-wateb line changes.
The boundary between land owned by the state below high-water llne
on navigable water and the land of a shore owner is ambulatory, shifttng
from time to time as the high-water llne advances or recèdes, due to
érosion, relietlon, or accretion; and a grantee of the state acquires no
greater right, and cannot daim tltle to land formed by accretion.
4. Navigable watebb ®=»44(4) — Division of accretion between bipaeian
OWNEBS.
Where océan shore lands withln a dty were conveyed with référence to
a survey and plat, their lines running parallel with the streets, accre-
tions along their front held properly divisible between their owners by ex-
tending the boundary Unes between them' to the then high-water Une.
In Equity. Suit by Samuel F. Nirdlinger against Henry E. Stevens,
Jr. Decree for complainant.
George A. Bourgoose, of Atlantic City, N. J., and Robert H. Mc-
Carter, of Newark, N. J., for plaintifï.
Wilson & Carr, of Camden, N. J., for défendant.
HAIGHT, Circuit Judge. This suit is primarily instituted under
an act of the New Jersey Législature, entitled "An act to compel the
détermination of claims to real estate in certain cases, and to quiet
the title to the same." 4 N. J. Comp. St. p. 5399. The bill also con-
tains allégations which, it is claimed, bring the suit within the gênerai
quia timet jurisdiction of a court of equity, irrespective of the statute.
Accordingly it prays for a decree removing a cloud upon the title of
the plaintiff to the land in question, alleged to hâve been created by a
certain riparian grant made by the riparian commissioners of the state
of New Jersey, for a decree establishing that the défendant has no
estate or interest in the land, and for a decree fixing and settling the
rights of the parties therein.
Some time prior to the institution of this suit the présent plaintifï
and a corporation known as the Dewey Land Company, being at that
time tenants in common of the land in question, brought a suit in
the Court of Chancery of New Jersey under the same statute against
the same défendant, and therein sought the same relief in respect to
<Ê=aFor other cases see same toplo & KEY-NUMBER In ail Key-NumDered Digests & Indexes
i592 262 FEDERAL HEPORTER
substantially the same property as is sought in the présent suit, ex-
cept that the prayer for relief in the bill in the former suit did not,
as does the bill in the présent suit, specifically pray for the removal
of the before-mentioned alleged cloud upon the title. The former suit
was duly prosecuted, and resulted in a decree dismissing the bill. Upon
appeal, the Court of Errors and Appeals of New Jersey affirmed the
decree of the Court of Chancery. The plaintifï subsequently and prior
to the institution of the présent suit acquired the interest of the Dewey
Land Company.
[1] 1. Naturally the first question which îs raised is whether the
decree in the former suit is res adjudicata of the issues in the prés-
ent suit and a bar to the prosecution thereof . In solving that question,
the decree actually made and the grounds upon which the same was
rested by the respective New Jersey courts must be considered, in
connection with the statute under which the bill was filed. This stat-
ute was originally passed in 1870 (P. L. 1870, p. 20), and, as is set forth
in the title, its purpose is not only to quiet titles, but —
"to corapel the détermination of claims to real estate lu certain cases," viz.
those where one Is "in peaceaWe possession of lands * * * clalmlng to
own the same and hls title thereto or to any part thereof is denled or disputed,
or any other person claims or is clalmed to own the same or any part there-
of, or any Interest thereln, or to hold any lien or encumbrance thereon, and
no suit shall be pending to enforce or test the validity of such title, claim or
incumbrance." Section 1, 4 Comp. Stat
As îs pointed out by Vice Chancellor Stevenson in Fittichauer v.
Metropolitan Fireproofing Co., 70 N. J. Eq. 429, 430, 61 Atl. 746, it
takes care of —
"those cases of hardship, where the défendant out of possession makes a
clalmi, while the complalnant in possession bas no means of compelling the
défendant, either at law or in equity, to submit hls clalm for détermination,
and thus hâve it either established as valid or finally declared vold. The
great object of the statute is not to afford the complainant a new means of
asserting and establishlng hls title, but to afCord the complainant a means
of compelling the défendant to either abandon or establish hls title or bave it
decreed invalid."
As is indicated in the last-quoted remarks, the act provides for those
cases where the défendant may disclaim ail interest in the land, but
provides that, if he shall answer, claiming any interest therein, he shall
in his answer specify and set forth the same, as well as the manner in
which, and the source through which, it is claimed to be derived. Thèse
provisions hâve been construed by the courts of New Jersey to consti-
tute an answering défendant the real actor in the suit — the plaintiff —
so that he must not only set forth in his answer, but must maintain by
proofs, any adverse title or claim which he asserts; and the actual
complainant in the suit is under no obligation to exhibit his own title
until after the défendant has shown his, being required in the first
instance to merely establish the jurisdictional facts, viz. that he is in
peaceable possession, claiming to own the lands, and that no suit is
pending in which the defendant's claim, whatever it may be, can be
tested. Fittichauer v. Metropolitan Fireproofing Co., supra; Océan.
View Land Co. v. Loudonslager, 78 N. J. Eq. 571, 80 Atl. 471.
NIBDLINGEE V. SÏEVENS 593
(262 P.)
In furtherance of the object of the statute, as expressed in its title,
it is provided that, when a défendant bas answered, setting up his
claim, except in cases where eitber party bas applied for the fram-
ing of an issue at law and a trial tbereof by a jury (with which feature
of the statute we are not concerned in tbis case) —
"the Court of Oliancery shall proceed to Inqulre into and détermine such
claims, Interest and estate, according to the course and praetlce of that court,
and shall * • • finally settle and adjudge whether the défendant has any
estate, Interest or rlght In, or enoumbrance upon, sald lands, or any part there-
of, and what such interest, estate, rlght or encuinbrance Is, and In or upon
what part of sald lands the same exlsts." Section 5.
It is further provided in section 6 that —
"the final détermination and decree In such suit shall flx and settle the rlghts
of the parties in said lands, and the same shall be bindlng and concluslve on
ail parties to the suit."
The statute, therefore, specifically directs that the final decree in
the cause shall (1) finally adjudge whether the défendant has any in-
terest in the property and if so, exactly what it is; and (2) fix and
settle the rights of the parties. No other decree is provided for in
the statute; nor, except in cases where the complainant has failed
to establish the jurisdictional facts of peaceable possession, etc., or
something kindred thereto, would any other kind of decree seem to
be permissible. In the latter class of cases there must necessarily be,
as in practice there has been, I think, a decree simply dismissing the
bill. See Steelman v. Blackman, 72 N. J. Eq. 330, 65 Atl. 715, and
Oberon Land Co. v. Dunn, 60 N. J. Eq. 280, 47 Atl. 60.
It is thus apparent that in a décision on the merits the ascertain-
ment and settlement of the defendant's interest is the primary and
absolutely essential requirement of the statute. The decree of the
Court of Chancery of New Jersey in the suit which is set up as a bar to
this suit was simply that the complainant's bill be dismissed. No at-
tempt was made to adjudicate the defendant's interest, or to settle the
rights of the parties in the land. That decree was merely afRrmed by
the Court of Errors and Appeals. It was in no respect ordered to be
modified or changed. The decree of the Court of Chancery (as ap-
pears from the unreported mémorandum filed by the Chancellor) was
based on the conclusion that, as the défendant asserted a claim based
on a riparian grant of the state, made through the riparian commis-
sioners, and as the validity of the grant could not be attacked collat-
erally, but only by a direct proceeding instituted for that purpose by
or in the name of the Attorney General, the bill, which was held in
eflfect to be such a collatéral attack, could not be maintained. The
Court of Errors and Appeals disagreed with the ground upon which
the Chancellor had dismissed the bill, and held that the complainants
might maintain their bill "if they bave made out their title." Dewey
Land Co. v. Stevens, 83 N. J. Eq. 314, 316, 90 Atl. 1040. The Chan-
cellor's decree of dismissal, however, was affirmed, on the ground that
the deeds, upon which the complainants relied to establish their title,
262 F.— 38
594 202 FEDERAL RErORTER
conferred, in fact, no title upon them; Mr. Justice Swayze remarking
at the conclusion of his opinion:
"We thlnk the complainants fail to establlsh the tltle set up In the amended
bill. The decree of dismlssal must therefore be affirmed."
What, therefore, has the New Jersey decree specifically established
and settled? Nothing, it seems to me, but that the complainants in
that suit had not established f acts sufficient to warrant the relief prayed
for in their bill and authorized, by the statute, to be given. It es-
tablished nothing more, for instance, than it would hâve established,
had the complainants' bill been dismissed because they had failed to
establish that they were in peaceable possession of the locus in quo,
as in Steelman v. Blackman, supra, or, as in Oberon Land Co. v. Dunn,
supra, because the parties had by their own act made it impossible for
the court to carry out the direction of the statute and by decree fix and
settle the rights of the parties in the lands.
But it is urged on bdialf of the défendant that, although the decree
did not in form do so, it has actually settled that the defendant's title
is superior to that asserted in that suit by the complainants. This
contention is based on the proposition that because under the statute,
as hereinbef ore construed, it was incumbent upon the défendant in the
first instance to assert and prove his title before the complainants were
called upon to reveal theirs, the Court of Errors and Appeals must
hâve found that defendant's prima facie title, which rested upon the
state's riparian grant, was superior to that asserted by the complain-
ants; otherwise, the court would not hâve affirmed a dismissal of the
bill. But this is a non sequitur. It may be that that décision has es-
tablished a new jurisdictional requirement, viz. that the plaintifï must
establish some kind of title to the land in controversy before the de-
fendant is required to set forth and establish his claim, and, in the
event of his failure so to do, the court is not at liberty to entertain
a bill filed under the statute in question.
On the other hand, its action in merely affirming a dismissal of the
bill may hâve been due to the fact that, upon examining the record,
it found that the deeds relied upon by the complainants conferred no
title upon them, and, consequently, it adopted a practical and conveni-
ent way of disposing of the case, thus rendering it unnecessary for it
to détermine whether or not the défendant had any interest in the
lands, and hence it advisedly merely dismissed the bill ; the complain-
ants being treated rather as interlopers, without a shadow of title.
That in a suit instituted under the statute in question, if the decree
fixing and settling the rights of the parties in the disputed premises
is appealed from and is reversed, the Court of Errors and Appeals
must direct what decree is to be entered, is recognized by that court in
Blackford v. Conover, 40 N. J. Eq. 205, 218, 1 Atl. 16, 7 Atl. 354.
If, therefore, the Court of Errors and Appeals in the New Jersey
suit had intended to fix the rights of the parties in the land in ques-
tion, it would hâve remitted the record to tiie Court of Chancery, with
a direction to enter such a decree as would hâve fixed those rights as
it adjudged them. I would be loath indeed to hold that a décision in
NIRDLINGER V. STEVBNS 595
C262 F.)
a former case îs res adjudicata upon a mère spéculation as to what
another court may hâve meant to décide, especially when its actiial
decree or judgment is not in harmony therewith. Nor, in my judg-
ment, is there anything in the opinion o£ the court, which was writ-
ten by Mr. Justice Swayze (a "concurring" opinion having also been
written by Judge White), which would justify such a conclusion as
défendant contends for.
In approaching the discussion of this point, it seems advisable to
refer briefly to some of the facts. The locus in quo, which for ail
practical purposes is the same in this case as it was in the New Jersey
case, is situate in Atlantic City, N. J., and borders on the Atlantic
Océan. It probably can best be described, and other matters, which it
becomes necessary to hereafter discuss, can best be understood, I
think, by référence to the following diagram, which is made for con-
venience of référence to conf orm as nearly as possible to that in Judge
White's opinion in the Dewey Land Company Case. It is not drawn
to scale:
AT-^AM XIC
596 262 FEDERAL EBPOETER
The locus in quo is the triangular pièce of property lying east of
New Hampshire avenue and indicated by the shaded lines. In 1852
the entire tract shown on the diagram was fast land, and was owned
by one Robert B. Leeds. In 1856, and apparently after some of the
land had been encroached upon by the océan, he conveyed it to John
McClees, describing it as bounding on "the edge of Absecon Inlet."
In 1897 McClees conveyed it to the Atlantic City Beach Front Im-
provement Company, by a description bounding it on the "high-water
mark of Absecon Inlet and the Atlantic Océan." At that time, as
appears on the diagram, the land in question was under water; the
océan in the intervening years having moved inward many feet.
Whether the land had been lost by érosion or avulsion, I do not at this
point attempt to décide. The predecessors in title of both the défendant
and the plaintiff acquired their respective titles to the fast land from
the Atlantic City Beach Front Improvement Company. In 1900 the
immédiate predecessor in title of the défendant, WiUiam H. Bartlett,
who owned tlie shore front lot inarked B on the diagram, procured a ri-
parian grant from the state for the land, then under water, included
within the dotted lines shown on the diagram. In 1899 and 1900, re-
spectively, the then upland part of the lot marked D on the diagram was
acquired by the plaintifif's predecessors in title from the Atlantic City
Beach Front Improvement Company. Since that time, the shore front
by reason of accretions has moved much further oceanward, and is now
located approximately as shown on the diagram. It is thus apparent
that the triangular pièce of the lot marked D — the locus in quo — is
now fast land, and is within the bounds of the riparian grant to Bart-
lett.
In 1910 the Dewey Land Company and the présent plaintiff, who
then were tenants in common of lot D, as before stated, filed the
before-mentioned bill in the Court of Chancery of New Jersey against
the présent défendant to hâve the latter's interest in the locus in quo
determined and settled. In the original bill in that case the complain-
ants claimed title to the locus in quo by reason of accretions. Subse-
quently, however, they amended their bill, eliminated ail claim based on
accretions, and rested their title upon quitclaim deeds taken in 1911 from
John McClees and in 1912 from the heirs of Robert B. Leeds, respec-
tively. This was apparently donc under a mistaken notion of the
effect of a décision rendered by the Court of Errors and Appeals of
New Jersey in Océan City Ass'n v. Shriver, 64 N. J. Law, 550, 46 Atl.
690, 51 L. R. A. 425. In the deed from the Leeds heirs, the property
was described as running to the high-water mark as it existed in 1852,
and in the McClees deed as running to the high-water mark as it
existed on April 15, 1853.
It is important that the title asserted by the complainants in the
New Jersey suit be borne in mind in ascertaining what the Court of
Appeals in New Jersey decided in that suit. As will be seen by reading
the opinion of Mr. Justice Swayze (83 N. J. Eq. 316, 90 Atl. 1040)
and the opinion of Judge White (83 N. J. Eq. 656, 91 Atl. 934), it was
held that neither of thèse deeds conferred any title upon the complain-
ants to the locus in quo, for the reasons which are very clearîy set
NIRDLINGER V. STEVKNS 59T
(282 F.)
forth in Mr. Justice Swayze's opinion. It is entirely clear, both from
Justice Swayze's opinion and from Judge White's opinion, that the
New Jersey court did not attempt to détermine what rights, if any,
any of the parties to that suit had acquired in the land in question by
reason of accretions, and Judge White distinctly says that the question
as to what rights the défendant had acquired in the locus in quo by
virtue of the riparian grant was not before the court. What better
assurance could there be that the court did not attempt to décide that
question? It is true that Justice Swayze said (83 N. J. Eq. 317, 90
Atl. 1042) :
"If the land was formerly fast land, and the title was lost by érosion, It
became the property of the state, not merely as long as it remained under
water, but, if the state made a riparian grant, absolutely. Stevens v. Pater-
son & Newark Railroad Co., 34 N. J. Law, 532 [3 Ain. Rep. 269]. Whatever
right the former owners might hâve as against private persons upon the
océan recediug was of no avail against the state's riparian grant; the title
lost by érosion was then lost forever, unless it was regained by accretion, and
the right of accretion was the compensation of the former owner for his
loss ; each grantee had the same right."
It was thèse remarks which called forth the opinion of Judge White.
I do not think that they give any warrant for the conclusion that
Justice Swayze meant to say thàt the riparian grant deprived the own-
er of lot D of such land within the bounds of the riparian grant as
might thereafter be formed by accretions, if, in other respects, he
would be entitled thereto. It is true that he made a broad statement
when he said that "it became the property of the state, not merely as
long as it remained under water, but, if the state made a riparian grant,
absolutely" ; but that statement must be read in the light of what he
had just been discussing and what he said afterwards. He had just
been discussing, not the effect of the riparian grant, but of the title,
if any, acquired by the complainants through the deeds which they
had received from John McClees and the Leeds heirs. I think that
his remarks had référence to the dévolution, as respects thèse grantors,
of the title to the property embraced within the original Leeds and
McClees deeds, when it or a part of it became covered with water, and
later when it became uncovered by reason of accretions. In the suc-
ceeding sentence. Justice Swayze said:
"The title lost by érosion was then lost forever, imless it was regained by
accretion."
If this means anything, it is a clear limitation upon the broader
statement theretofore made. The case of Stevens v. Paterson & New-
ark Railroad Co., cited by Mr. Justice Swayze, simply held that the
state of New Jersey is the absolute owner of the land under ail navi-
gable waters, below the ordinary high-water line, within its limits,
and can grant such land to any one without making compensation to the
owner of the shore, with the possible exception of the right to "alluvium
and dereliction," pointed out in Judge White's opinion in Dewey Land
Co. Case. This case did not hold, and in f act the question was not in-
volved, that in making a riparian grant of land under water the state
could confer a title upon its grantee which would deprive the owner of
the ripa of his right to such accretions as might form in front of
598 262 FEDERAL REPOETER
his land, within the bounds of the grant, before the grantee might hâve
filled in or otherwise reclaimed the land thus granted to him. As
pointed out in Judge White's opinion, the statute of New Jersey,
under which the grant in this case was made, provides :
"That before an Independent grantee from the State may flU the land under
water In front of the land of a riparlan owner who bas failed to take out a
etate grant after notice, such Independent grantee niust extingulsh sueh ri-
parlan owner's rlght to acoretions by paying to hlm the value thereof, to be
flxed by the riparlan commlssioners, subject to an appeal to the Suprême Court
and to a tiial by jury." Dewey Land Co. v. Stevens, supra, 83 N. J. Eq. 659, 91
Atl. 935.
Accordingly, it is not to be presumed that Justice Swayze, by the
bef ore-mentioned broad statement which he made, considering the cir-
cumstances under which he made it, the subséquent apparent Umitation,
and what was actually decided in Stevens v. Paterson & Newark Rail-
road Co., intended to lay down as an absolute rule that a riparian
grant from the state divested the owner of the ripa, when a différent
person from such grantee, of his right to land formed by accretions
before such grantee had reclaimed the land under water thus granted.
This will be more manif est, I think, in the light of the gênerai rules,
which will hereafter be discussed, regarding the relative rights of the
owner of shore front property and tfie state and the latter's grantee.
Reverting now to the question of the effect of the New Jersey de-
cree and décision on this suit, as before shown, the détermination of
whether the défendant has any interest, and, if so, what it is, is the
primary and absolutely essential requirement of the statute. A decree
or décision which either expressly or impliedly falls short of that re-
quirement necessarily does not dispose of the case on the merits. It
is, of course, elementary that, for a judgment in one suit to be a bar
to the prosecution of another suit between the same parties or their
privies, the point in controversy must be determined on its merits,
and if the first suit be dismissed for want of jurisdiction, or disposed
of on any ground which did not go to the merits of the action, the
judgment rendered will prove no bar to the prosecution of anothei' suit.
Hughes V. United States, 4 Wall. 232, 18 L. Ed. 303.
Nor is the practical effect of the decree to bar the présent action,
because of the rule that a judgment on the merits is res adjudicata,
not only as to any matter which was offered to sustain or defeat the
claim in controversy, but as to any other matter which might have been
offered for that purpose ; in other words, I do not think that the f act
that the plaintïff in this suit did not assert, with his co-complainant in
the New Jersey suit, the title upon which he now relies to defeat the
title set up by the défendant, precludes him from now asserting it.
That rule has no more appUcation to this case than it would have to a
judgment of involuntary nonsuit rendered in an action at law, which
is based upon the failure of the plaintiff to establish facts entitling
him under the law to relief. Such a judgment, of course, does not
preclude the plaintiff from supplying in a subséquent action facts
which he might have supplied in the first action, and which would
have made out a case entitling him to relief, if not sufEciently answered
by the défendant. Manhattan Life Insurance Co. v. Broughton, 109
KIEDLINGER V. STEVENS 599
(262 F.)
U. s. 121, 3 Sup. Ct. 99, 27 L. Ed. 878; Beckett v. Stone, 60 N. J.
Law, 23, 36 Atl. 880; 23 Cyc. 1136 and cases there cited.
I accordingly conclude that the New Jersey decree is not res ad-
judicata of the questions in this case. If a contrary conclusion were
reached, there would be presented a situation where, although the
title or interest of the défendant had never been settled, neither party
would ever be able to procure a decree under the statute, setting at
rest the title to the land. Indeed, the practical effect would be to
confîrm the def endant's claim of title to land of which the complainant
was and is in peaceable possession, not because it had ever been so de-
creed by any court, but because in a previous suit the complainant had
f ailed to establish his title. Such a resuit should, of course, be avoided,
if possible.
This conclusion has made it unnecessary for me to consider whether
the fact that the bill in the présent suit seeks, quite independently
of the statute, to remove a cloud upon the title, or whether the fact
that the premises in question in this suit do not include a part which
was in question in the former suit, viz. the part beyond Âe présent
high-water Une, has any efïect on the question under discussion. As
no claim is made in the présent suit on account of the deeds upon which
the plaintifï and his co-complainant relied in the New Jersey suit, the
eflfect of that décision as respects any question which might hâve arisen
in this case, because of thèse deeds, need not be considered.
[2] 2. It is conceded that the plaintifï is in peaceable possession
of the land in question, claiming to own the same, and that no suit
is pending to test the validity of the title or claim asserted by the de-
fendant; consequently the jurisdictional facts required by the statute
are présent. It is also apparent that the plaintifï is without any adé-
quate remedy at law. As he is in peaceable possession of the land, he
cannot institute an action in ejectment, and no suit is pending at law
wherein the validity of his title and the claim of the défendant can be
tested. Under thèse circumstances, it is entirely clear that not only
has this court jurisdiction to entertain the bill in this suit and thus
administer the New Jersey statute, but that it is its clear duty to
do so. Holland v. Challen, 110 U. S. 15, 3 Sup. Ct. 495, 28 L. Ed.
52; Reynolds v. Crawfordsville Bank, 112 U. S. 405, 5 Sup. Ct.
213, 28 L. Ed. 733; Chapman v. Brewer, 114 U. S. 158, 5 Sup. Ct.
799, 29 L. Ed. 83; Wehrman v. Conklin, 155 U. S. 314, 15 Sup. Ct.
129, 39 L. Ed. 167. In ail of thèse cases, statutes in no material re-
spect différent f rom the New Jersey statute were administered in the
fédéral courts. In the last-cited case, it was held that such a state
statute could not be administered by a fédéral court, where the plain-
tifï had an adéquate remedy at law.
[3] 3. I am now brought to a considération of the case on its merits.
Both the plaintifï and the défendant claim to own the locus in quo.
The defendant's claim is based both upon the riparian grant from the
State and upon accretions to the f ast land, of which his predecessor in
title was the owner at the time of the riparian grant, and of which
the défendant is now the owner. The plaintifï's claim o£ title is like-
wise based upon accretions to the upland, of which he and his prede-
ÔOO 262 FEDERAL REPORTER
cessors in title from time to time hâve been the owners. He also
makes claim under the doctrine pertaining to avulsion. The first
question on this phase of the case is whether the riparian grant to the
defendant's predecessor in title, in and by itself, has conferred any
title on the défendant to the locus in quo, in view of the fact that
it is now fast land, and was not reclaimed by the state's grantee bef ore
the accretions had formed it. The solution of that question nécessi-
tâtes the ascertainment of the relative rights of the owner of shore
front property and the state and the latter's grantee. For ail pur-
poses necessary to be considered in this case (there are some différ-
ences), the rights of the state of New Jersey to lands under navigable
waters are the same as those which before the révolution were vested
in the Crown of England ; the title to the soil beyond the ordinary high-
water line being formerly vested in the crown, and since the révolution
in the state. Bell v. Gough, 23 N. J. Law, 624, 633 ; Stevens v. Pat-
erson & Newarlc Railroad Co., supra; Paul v. Haselton, y? N. J.
Law, 106; Hoboken v. Pennsylvania Railroad, 124 U. S. 656, 8 Sup.
Ct 643, 31 L. Ed. 543. It was the rule of the common law, as it is
the rule in New Jersey and elsewhere, so far as I know, that as the
high-water line shifts from time to time, due to érosion, accretion, or
reliction, the crown's or state's inland boundary and the outward bound-
ary of the riparian proprietors respectively, shift, so that both are
ambulatory, and dépend from time to time upon the location of the
high-water line. The King v. Yarborough, 3 Barn. & Cress. 91 ; In
re HuU & Selby Railway, 5 M. & W. 328, 131 English Reports (Full
Reprint) 139; Camden & Atlantic Land Co. v. Lippincott, 45 N. J.
Law, 405 ; Océan City Assoc. v. Shriver, 64 N. J. Law, 553, 554,
46 Atl. 690, 51 L. R. A. 425 ; New Orieans v. United States, 10 Pet.
706, 716, 9 L. Ed. 373; County of St. Clair v. Lovingston, 23 Wall.
46, 23 L. Ed. 59 ; Gould on Waters, § 165, and cases there cited.
On principle, it would seem to necessarily follow that the state's
grantee can acquire no greater rights than the state itself had. If,
therefore, the state's inland boundary is ambulatory, and it has no
title to lands formed by accretions, its grantee can hâve none, and niust
merely acquire a like boundary. The authorities so hold. I am not
now speaking of the right of a grantee under the New Jersey statute
to fill in and reclaim land under water conveyed to him by the state's
riparian commissioners, upon compensating the owner of the upland,
because that right rests on, as I take it, an entirely différent principle,
viz. that of eminent domain. The leading case on this point is Scratton
V. Brown, decided by the Court of King's Bench in 1825 and reported
in 4 Barn. & Cress. 488. One of the questions in that case was whether
a conveyance of certain property, lying between the high and low
water marks, acquired originally by the grantor from the crown, con-
veyed that which from time to time, as the sea encroached upon or
receded from the beach, lay between the high and low water marks,
or only that which at the time that the deed was made was bounded
by the then high and low water marks. It was held that, as the high
and low water marks shifted, the property conveyed by the deed also
shifted. In the course of his opinion, Judge Bayley said (page 498) :
NIRDLINGER V. STEVENS 601
C262 F.)
"The question hère Is whether there may be a certain quantity of land
sliiftlng in situation and vesting in the same persons at différent times?
That must be the case of land frontlng the sea or a river, where, from time
to tlme, the sea or river encroaches or retires. If the sea leaves a parcel of
land, the pièce left belongs to the person to vehom the shore there belongs. The
land between high and low water marks orlginally belonged to the crown,
and can only vest in a subject as the grantee of the crown. The crowin iy a
grant of the seashore tvould convev, not that which at the time of the grant is
hetiveen the high and low water rrvarhs, iut that which from time to tiAne
êhall he hetween thèse two termini. Where the grantee has a freeholû, in that
which the crown grants, his freehold shifts as the sea, recèdes or encroaches,
Then what was the objeet of the parties to the deed of 1773? To grant the
land within certain limita. Those to the east and west were ascertained, but
those on the north and south were to be ascertained by the high and lovsr water
marks. I think that those words must be construed with référence to the
rule of the common law upon the subject of accretion, and that, as the high
and low water marks shift, the property conveyed by the deed also shifts."
The above rule and the authority of Scratton v. Brown is approved
by the Court of Appeals of New York in Trustées, etc., of East
Hampton v. Kirk, 84 N. Y. 215, 38 Am. Rep. 505, as it is also by
the Circuit Court for the Southern District of New York in De
Lancey v. Welbrock, 113 Fed. 103, in whjch latter case it was applied
in construing a riparian grant of land under water originally made
by the British crown and subsequently sold by the state of New York
for failure to pay the rents provided for in the grant. The same
principle is recognized by the United States Suprême Court in County
of St. Clair v. Lovingston, supra. It will be noted that at the be-
ginning of the opinion in that case, 23 Wall. 62 (29 L, Ed. 59) Mr.
Justice Swayne said:
"We shall assume, for the purposes of thls opinion, that ail the title whlch
could be passed by Congress and the state was and is vested in the plaintiff In
error."
Scratton v. Brown is cited with approval by the New Jersey courts
in Camden & Atlantic Land Co. v. Lippincott, supra, and Océan City
Land Co. v. Shriver, supra, although the précise point now under dis-
cussion does not seem to hâve been involved in either of thèse cases.
Indeed, I think that this rule is recognized by Justice Swayze in the
Dewey Land Co. Case, because, as bef ore noted, he said :
"Title lost by érosion was then lost forever, unless it was regalned by ac-
cretion."
It is expressly adopted by Judge White in his opinion. Conse-
quently, I hâve no hésitation in reaching the conclusion that if the
plaintiff, by virtue of owning lot D, is otherwise entitled to the land
formed by accretions within the locus in quo, the riparian grant in
question conferred no title thereto on the défendant.
[4] The next inquiry, then, is whether the complainant or the de-
fendant, by reason of being respectively riparian proprietors of the
upland, is entitled to tlie accretions which hâve formed the locus in
quo. On this point the décisive question is how the lines of their
respective properties, so far as including accretions is concerned, should
run — whether they should foUow exactly or approximately the lines
of the riparian grant, or whether they should foUow lines parallel to
New Hampshire avenue.
602 262 FEDERAL REPORTER
This question is by no means free froin difficulty. The division of
lands formed by accretions among coterminous riparian proprietors,
and of lands between high and low water marks when the title there-
to is not vested in the state, as in Massachusetts, has always been a
perplexing question and the subject of considérable discussion in the
courts. While I hâve examined a great many authorities, it would, I
think, serve no useful purpose, but would unduly and unnecessarily
burden this opinion, to attempt to review them. It is impossible, and
the courts hâve heretofore so recognized, to f ormulate a gênerai con-
crète rule by which ail cases can be govemed, because of the many
varying conditions which each case présents. The fundamental prin-
ciple, however, which underlies ail the cases is that the division should
be équitable and fair according to the conditions of each particular
case. In ascertaining what is équitable in any given case, except pos-
sibly in some of that class where the actual or presumed agreement of
the parties or their predecessors in title has been considered as the dé-
cisive factor (see, for instance, Adams v. Boston Wharf Co., 10 Gray
[Mass.] 521, 530), the courts hâve been primarily govemed by the gên-
erai rule announced by Chief Justice Shaw in Deerfield v. Arms, 17
Pick. (Mass.) 41, 45, 28 Am. Dec. 276, as follows :
"Two objecta are to be kept in vlew, In making such an équitable distribu-
tion ; one Is, that the parties shall hâve an equal share In proportion to thelr
lands, of the area of the newly formed land, regardlng It as land useful for
the purposes of cultivatlon or otherwise, In which the value wlU be In propor-
tion to the quantlty ; the other is, to seeure to each an access to the vs^ater, and
an equal share of the river Une in proportion to his share on the original Une
of the water, regardlng such water Une In many situations as prlnclpally
useful for forming landlng places, docks, quays, and other accommodations,
wlth a vlew to the benefits of navigation, and as such constituting an important
ingrédient in the value of the land."
That case was specifically approved by the United States Suprême
Court in Johnston v. Jones, 1 Black, 200, 222, 17 L. Ed. 117. While
in Delaware, Lackawanna & Western Railroad ads. Hannon, Zl N. J.
Law, 276, there was not directly involved the question of the division
of alluvion between coterminous riparian proprietors, yet the question
which was before the court was for ail practical purposes the same.
The case was decided in accordance with the same principle; Chief
Justice Beasley thus expressing it, viz. :
"It is not probable that any précise formula, applicable to every case, can be
devised. The principle to work by is, that when practicable, each owner is to
hâve his full shore front ; when this is not practicable, he is to hâve his ratable
part of such front. I do not see how the rule can be further specialized."
In the application of thèse gênerai principles to particular cases
various concrète ruies hâve been adopted. In some cases it was f ound
that inequalities would resuit if the side lines separating the upland
holdings of the various riparian proprietors were extended over the
newly formed land, because of the contour of the new shore front, or
because of the direction in which the side lines approached the old
shore front, and for other reasons; while in other cases it was held
that the extension of side lines would divide the new shore front and
the newly formed land equitably between the adjoining owners. In
still other cases, where the old shore front was in a cove, another
NIKDLINGER V. STEVENS 603
C262F.)
method of division was adopted; and in some cases the lines havè
been run perpendicular to the old shore front, etc. A collection of
the cases will be found in the foot note of 21 L. R. A. 776, and 25 L.
R. A. (N. S.) 257. See, also, Gould on Waters, §§ 162, 163.
But there is still another rule (hereinbefore referred to as a pos-
sible exception to the gênerai rule), which rests upon and gives effect
to the actual or presumed agreement (which may be found from ac-
quiescence or conduct) of the owners (either the présent owners or
some of their predecessors in title) of the upland as to the boundary
lines of lands between high and low water marks, to which they, re-
spectively, are or may become entitled as owners or otherwise. It
was upon that ground that the décision of the Court of Chancery of
New Jersey in Stockham v. Browning, 18 N. J. Eq. 390, was based.
The facts in that case in several important respects are so nearly analo-
gous to the facts in the case at bar as to make the case an important
authority. The last-nientioned rule bas been most frequently applied
by the Suprême Court of Massachusetts in the division of the flats
(the shore between high and low water mark) which, under an an-
cient colony ordinance, belong to the riparian proprietors. Valentine
V. Piper, 22 Pick. (Mass.) 85, 33 Am. Dec. 715 ; Piper v. Richardson,
9 Metc. (Mass.) 155; Drake v. Curtis, reported in a foot note to
Curtis v. Francis, 9 Cush. (Mass.) 446; Adams v. Boston Wharf
Co., 10 Gray (Mass.) 521 ; Attorney General v. Boston Wharf Co.,
12 Gray (Mass.) 553; Gerrish v. Gary, 120 Mass. 135. See, also,
cases cited in Gould on Waters, §§ 162 and 164. It needs no argu-
ment to demonstrate that this rule is as applicable to the division of
lands formed by accretions as it is to the division of "flats," as in the
Massachusetts cases, or the division of the shore front for wharfage
purposes, as in the New Jersey case.
It is now necessary to consider some additional facts in light of
thèse gênerai rules. As before noted, ail of the lands of the plaintiff
and the défendant, as well as ail land in that vicinity, was originally
fast land. In the years intervening between 1852 and 1870, the océan
had encroached to such an extent that ail of the lands of the plaintiff
and défendant, and considerably more to the north and west and ail
to the east were under water. The high-water mark at the last-
mentioned year was, on a curving line, at approximately the intersec-
tion of Pacific and Vermont avenues. Thereafter the land which had
been washed away began to reform. In 1852 ail of the property in
the vicinity of the locus in quo and for a considérable distance to
the west was surveyed, and a map made thereof. Between 1852 and
1854 a Street system was laid out on this map and an agreement en-
tered into between the varions property owners adopting that street
System and dedicating the streets shown thereon to the public. On
this map, New Hampshire avenue is shown as extending in a straight
line and at right angles to Pacific avenue to the low-water mark of the
Atlantic Océan, f urther in distance than it actually extends at the prés-
ent time.
As before stated, John McClees in 1856 had acquired title to a con-
sidérable part of the property in the vicinity of the locus in quo, in-
604 262 FEDERAL RBPOETBB
cluding ail of the property owned by the respective parties to this
suit. In 1858 he conveyed a plot lôO'xlOO', lying approximately mid-
way between Pacific and Oriental avenues, to one Wooton. In this
deed the property was described as lying on the south side of New
Hampshire avenue, 150 feet from the corner of Pacific avenue, and the
varions courses were run in accordance with thèse two avenues. In
1897 McClees conveyed to the Atlantic City Beach Front Improvement
Company a part of the land which he had acquired from Leeds, ex-
cepting the lot which he had theretofore conveyed to Wooton, by a
deed wherein the first course was stated to begin on the southerly side
of Pacific avenue, 175 feet east of Vermont avenue, and extending in
an easterly direction along Pacific avenue to the land of the Camden
& Atlantic Land Company, thence to the edge of Absecon Inlet, thence
along the high-water mark thereof and of the Atlantic Océan to a
point 175 feet east of Vermont avenue, and thence north, parallel with
Vermont avenue, a certain number of feet to the place of beginning.
The Atlantic City Beach Front Improvement Company in tum convey-
ed a parcel of the then upland to a predecessor in title of the défend-
ant by référence to New Hampshire, Oriental, Atlantic, and Pacific
avenues, and made New Hampshire avenue the easterly boundary of
the property. That grantee, as well as defendant's immédiate predeces-
sors in title, conveyed by like référence to the street System, and by
the same easterly boundary. The Atlantic City Beach Front Improve-
ment Company also conveyed to plaintiff's predecessors in title by réf-
érence to the same street System, and made New Hampshire avenue
the westerly boundary of the property so conveyed, as did likewise
each of the plaintiff's subséquent predecessors in title.
New Hampshire avenue is an improved street. Manifestly there is
hère a clear récognition by the common grantor of the parties to this
suit, as well as by McClees, of New Hampshire avenue, as laid down
on the original map, as a boundary line between at least two portions
of the upland; and in this connection it must be borne in mind that
the land conveyed by the Atlantic City Beach Front Improvement
Company to the predecessors in title of the plaintiff and défendant,
respectively, was alluvial land, some of which had been formed by
accretions before the company acquired title from McClees, and
some of it afterwards. It seems to me that the case thus falls clearly
within the principle of the rule last above mentioned. There are dif-
férences, I freely admit, between the facts of the cases heretofore cited
to support the rule, and the facts of the case at bar, but none which
distinguish them in principle.
Not only do I think that tlie owners of ail of this land, as it existed in
1854, in dedicating New Hampshire avenue as a public street, across
the same, to and at right angles to the océan, divided the land into two
parts and thus fixed the natural side Unes of accretion gains for thèse
parts, as suggested in Judge White's opinion in the Dewey Land Co.
Case, but the subséquent owners, down to and including the plaintiff
and défendant, hâve, by the récognition of New Hampshire avenue as
a boundary line, so divided the upland, which in fact had been formed
by accretions, as to make it inéquitable to adopt any other division
NIEDLINQER V. STEVENS 605
C262F.)
lines for accretion gains. Indeed, to do otherwise would be to fail
to give eflfect to what may be clearly presumed, from the conduct and
conveyances of their predecessors in title, was their understanding
and intention. In addition, since 1900, there hâve been recorded some
400 deeds and 200 or 300 mortgages affecting the property in the vi-
cinity of the locus in quo. In ail of thèse, the properties hâve been
described by lines running at right angles to and parallel wlth the
Street system, both as respects that vi^hich was upland at the time the
défendant received his riparian grant, as well as that which has since
been f ormed by accretions.
Moreover, the newly formed land in the vicinity of the locus in quo,
has, to a very great extent, been built upon, and large sums of money
invested therein. The plaintiff has been assessed and has paid taxes,
as well as assessments for improvements, on the locus in quo. It is
manifest,_therefore, that if it should be held that the respective ri-
parian prbprietors are entitled to accretions in accordance, or approxi-
mately in accordance, with the lines of their riparian grants (there
were riparian grants made at about the same time as the defendant's,
both to the west of his land and to the east of the plaintiff's land), a
very great confusion in titles would resuit, and the door be thrown
open, in the straightening out of lines, to the making of exorbitant de-
mands on the part of those who would thus be held to own parts of
land which has been improved on the assumption that the various ri-
parian proprietors were entitled to accretions on lines parallel and at
right angles respectively to the street system. On the other hand, if it
be held that accretions should be awarded in accordance with such
Street system, thèse difficulties will ail be avoided, and a stability given
to titles in that vicinity.
I appreciate, of course, that such a holding will resuit in certain
persons holding riparian grants for land under water when they do
not own the upland immediately in front thereof. What effect that
may hâve upon the vahdity of such riparian grants under the New
Jersey statutes it is not necessary to détermine in this case. Under the
rule heretofore adopted, as new l'and forms hereafter, it is clear the
inland boundary of the riparian grant will move oceanward, and thus
no practical difficulty will be experienced, at least until some attempt
has been made by holders of riparian grants to reclaim the land under
water, in ascertaining who is the owner of the land formed by accre-
tions from time to time. It seems entirely clear, therefore, that the
land formed by accretions since the riparian grant, or preferably since
the Atlantic City Beach Front Improvement Company made its first
conveyance to one of defendant's predecessors in title, should be di-
vided in accordance with the street System. If such a course is
adopted, and the plaintiff decreed to be entitled to the accretions form-
ed between the easterly line of New Hampshire avenue and a line be-
ginning the same number of feet east of New Hampshire avenue as
the easterly boundary line of his original upland (as it was when At-
lantic City Beach Front Improvement Company conveyed it) is distant
therefrom, and running parallel to New Hampshire avenue, and if
the defendcint is decreed to be entitled to the accretions formed be-
606 2G2 FEDERAL REPORTER
tween like lines on the westerly side of New Hampshire avenue, it is
apparent that each will get approximately an equal share of the newly
formed land in proportion to their upland, so far as frontage on the
océan is concemed, each will secure access to the water, and each will
hâve approximately an equal share of the new high-water line of the
océan in proportion to his share of the original line.
Such a division will therefore be fair and équitable under ail of
the circumstances, and thus, in addition, will comply with the before-
mentioned fundamental rules. Whether the riparian proprietors who
own lands east of the plaintifï's lands should hâve the accretions di-
vided among them on lines parallel with New Hampshire avenue, or
on lines parallel with Pacific and Oriental avenues, it is not necessary
to décide. I merely make this observation because of one of the points
made in the brief of counsel for the défendant. It is true that Judge
White, in the opinion which he delivered in the Dewey Land Co. Case,
seems ot hâve expressed an inclination to accept for the division of
accretion gains the lines adopted by the riparian commissioners in
making riparian grants, provided that in any given case it was not
shown that such a division would be unfair. But he also indicated, as
before stated, that a différent conclusion might be reached if it should
be found that by the dedicating of New Hampshire avenue, etc., it
was inéquitable for the state, in making its grant, to hâve disregarded
the lines so fixed. Whether or not the act of the state in disregarding
the lines of the streets was inéquitable, it is clear, for the reasons here-
tofore given, that it would be inéquitable or at variance with the pre-
sumed intention or understanding of the predecessors in title of the
respective parties to divide the accretions in accordance with the lines
of the riparian grant.
Upon the whole, therefore, I will hold that the plaintiff is entitled
to ail lands formed by accretions between the easterly line of New
Hampshire avenue and a line drawn parallel thereto and distant easter-
ly therefrom the same number of feet as the easterly botmdary line
of his original upland (as it was when the Atlantic City Beach Front
Improvement Company conveyed it) is distant from the easterly line
of New Hampshire avenue. This necessarily results in finding that
the défendant has no title by reason of accretions to any part of the
locus in quo. As I hâve heretofore found that he has no title thereto
by reason of the state's riparian grant, and as his only claim of title
is based on the riparian grant and his right to accretions, it foUows
that he has no right, title, or interest in the locus in quo.
This conclusion renders it unnecessary for me to consider whether
the doctrine pertaining to lands lost by evulsion and subsequently re-
gained is applicable to this case, or whether the principle of Banks v.
Ogden, 2 Wall. 57, 17 L. Ed. 818, is pertinent.
The plaintiff is entitled to a decree to the above effect, with costs.
TUCKERMAN V. MEARNS 607
(262 F.i
TUCKERMAN v. MEARNS et aL
(Court of Appeals of District of Columbla. Submitted October 9, 1919.
Dedded December 1, 1919.)
No. 3240.
1. BBOKESa <S=96 — Stockbbokeb cubtoueb'b aqbwt iw Bimwo stock.
Ab to stock purcbases, a broker Is the cnstomer's agent, and U bonnd to
foUow hls directions or décline the agency.
3. BbOKEBS <g=»26 — CtrSTOMEB HAS TITLE to stock BOXTOHT rOB OTJSTOMEB.
A broker, advanclng money and purchaslng stock for a customer, be-
comes the customer's créditer, and If he retalns possession of the stock as
securlty for hls advancements, he Is a pledgee of the stock, or If the
stock Is fuUy pald for, and he retalns possession snbject to the customer's
order, he Is merely a ballee, but in any case the title la In the customer.
8. Beokebs <S=>38(2) — Customeb's remedt aqainbt bbokebs at law pbb-
cltjdbs kquitt suit.
A customer eannot proceed In equlty against the former members of a
■ bankrupt brokerage ooncem, whlch had purchased stock for plalntlff,
upon the theory that the brokerage flrm was a trustée holding the légal
title for the customer's beneflt, wlthout évidence Indlcatlng an latent to
create a trust ; hls remedy belng at law.
4. Banks and bankino <S=ï>153 — "Spécial deposit" defined.
A "spécial deposit" ImpUes the custody of property wlthout the uu-
thorlty In the custodlan to use It, and the right of the owner to recelve
back the Identlcal thlng deposlted.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Spécial Deposit.]
8. Beokebs ®=23 — Holding customer's stock not a spécial deposit.
Stock purchased by a broker for a customer does not constitute a
si)eclal deposit in the broker's hands, sinee the broker might discharge
hls obligation by dellvering other stock of equal kind and dénomination.
6. Pabtneeship ig=>239(5) — ^Liability oe eetieing membebs not dischabged
BY DEALINGS WITH NEW FIBM.
The retlrement of défendants from a stock brokerage flrm between the
time the firm became unable to meet Its obligations to plalntlfC customer
and the date the flrm became bankrupt does not absolve them from
liabillty, although plalntlff contlnued to do business with the firm, and
to receive dividends on the stock ta question after défendants' retlrement ;
such acts not amounting to acquiesceuce by plalntlff in défendants'
withdrawal and the acceptance of the responsibillty of the new flrm for
the obligation.
7. CouBTs <@=5444(2) — Statute supebioe to bule of Supbeme Couet of Dis-
TEICT OF COLUMBIA.
Judlclal Code, § 274a (Comp. St. § 1251a), relatlng to procédure in cases
not brought on the proper side of the court, is superior to any rule incon-
sistent therewith formulated under Code of Law, § 85, authorizing the
District of Columbla Suprême Court to make equlty rules, etc.
& CouBTs i®=>444(2) — Beteoaotive opekation of eules of Distbict of Colum-
BiA Supbemb Couet.
Rule 76 of the District of Columbla Suprême Court, relatlng to trans-
ferring cases brought on the wrong side of the court, is inapplicable to a
case la whlch the decree was rendered prior to its adoption.
0. Couetb <Ê=a352 — Statutes belatinq to tbansfeb between equitt and
LAW SIDES APPLICABLE TO BILL FILED BEF0EE ITS ENACTMENT.
Judidal Code, § 274a (Comp. St § 1251a), relatlng to the procédure In
cases brought on the wrong side of the court, is applicable to a case In
4s»For other casos see same toplc & KEJY-NTJMBSR In ail Key-Numbered Dlgeots & Indexes
608 262 FEDERAL REPORTEE
whlch the blll was flled before, and the decree entered after, Its enact-
ment.
10. COTTRTS <S=»352 — ^TkANSFEEBING CAtrSE TO LAW SIDE INSTEAD OF DISMISSING.
Under Judldal Code, § 274a (Comp. St. § 1251a), relating to amend-
ments In actions brought on the wrong slde of the court, etc., a customer'a
action against brokers, erroneously brought in equity, should not be dis-
mlssed, but the pleadings recast, and the cause transferred to the law
slde of the court
Appeal from the Suprême Court of the District of Columbia.
Suit by Wolcott Tuckerman against William A. Mearns, Charles
P. Williams, Rudolph Kauffman, and others. From a decree dismiss-
ing the bill, plaintifï appeals. Reversed and remanded.
C. C. Tucker, C. A. Keigwin, and Allen MacCullen, ail of Washing-
ton, D. C, for appellant.
F. J. Hogan and W. H. Donovan, both of Washington, D. C, for
appellees.
VAN ORSDEIv, Associate Justice. Appellant, plaintifï below,
brought a suit in equity in the Suprême Court of the District of Co-
lumbia to recover the value of certain stock purchased for him by de-
fendant firm of Lewis Johnson & Co.
Lewis Johnson & Co. were a copartnership, conductîng a banking
and stock brokerage business in the city of Washington from 1858 un-
til November, 1914, when it went into bankruptcy. At the time of the
transaction hère involved, the partners constituting the firm were de-
fendants Mearns and Williams and one John W. Henry. Plaintifï
was a customer of the bank, and on March 28, 1912, had on deposit
therein the sum of $21,890.40, together with certain securities bought
on his account and held for him. On that date he directed the firm to
purchase for him 200 shares of the capital stock of the Amalgamated
Copper Company. The stock was purchased through Post & Flagg,
brokers, the firm's New York correspondent, at $80 per share. On the
same day, Johnson & Co. notified plaintifï of the purchase, and on the
following day debited plaintifif's account with $16,000, the purchase
price, plus $25 commission.
No demand for delivery of the stock was ever made by plaintifï.
The record évidence, on which there is no dispute, disclosed that from
the date of the purchase until the failure of the firm, about 2 years and
8 months, the stock was carried on the books of the firm to the crédit
of plaintifï, and periodical statements were furnished plaintifï, showing
the crédit to his account of successive quarterly dividends accruing np-
on tlie stock. It also appears that Johnson & Co. never had actual pos-
session of the stock, but that it was held by Post & Flagg to the crédit
of Johnson & Co. Until May 31, 1912, or about 2 months after the
purchase, Johnson & Co. had to its crédit with Post & Flagg 200
shares of the Amalgamated Copper Company's stock, but after that
date it was short at least 400 shares, and so continued tmtil the date
of the bankruptcy.
Plaintifï, in his bill, averred at length the circumstances of the pur-
chase of the stock and the leaving of the stock with Johnson & Co.
^=}FoT other cases «ee same topic & KET-NUMBER In ail Ker-Numbered Dlgest» * ladezM
TUCKERMAN V. MEAENS 609
(262 P.)
■upon spécial deposit subject to plaintiff's order. It was sought by the
prayers to discover the whereabouts of the stock and what had become
of it, and to secure its surrender to plaintiff, if possession could be
had; otherwise, a personal judgment for its value.
At the conclusion of the hearing, the trial court dismissed the bill
with the following statement:
"In this case no accounting Is sought and under the proofs the facts show
a simple ballment. While the blll prayed for a discovery, the answers of the
défendant revealed no facts other than those whlch were withln the knowl-
edge of the eomplainant. I am of the opinion that the remedy at law is plain,
adéquate, and complète, and that the hill should be dismissed -without préju-
dice to an action at law."
[1,2] From the decree dismissing the bill, plaintiff appealed. At
the inception we are confronted by the peculiar relation which exists
between a stockbroker and his customer. It is the customer who pur-
chases the stock. He merely procures the broker as his représentative
to buy it on his account. The broker is but the agent of the customer,
bound to f ollow his directions or décline the agency. Galigher v. Jones,
129 U. S. 193, 9 Sup. Ct. 335, 32 L. Ed. 658. Being a mère agent for
the purchase of the stock, the title to the stock", both légal and équitable,
is in the customer. Richardson v. Shaw, 209 U. S. 365, 377, 28 Sup.
Ct. 512, 52 L. Ed. 835, 14 Ann. Cas. 981. If the broker advances mon-
ey in making the purchase, he becomes the créditer of the customer,
and if he retains possession of the certificates of stock as security for
money advanced, he is a pledgee of it; or, if the stock is fully paid
for, as in the présent case, and he retains possession of it subject to
the order of the customer, he is merely a bailee of it. The law is brief-
ly, but clearly, summarized in Jones on Pledges, § 496, as f ollows :
"The broker acts in a threefold relation: First, in purchaslng the stock he
is an agent ; then in advancing money for the purchase he becomes a creditor ;
and, finally, in holding the stock to secure the advance made, he becomes a
pledgee of it. It does not matter that the actual possession of the stock was
never In the customer. The form of delivery of the stock to the customer,
and a redellvery by him to the broker, would hâve constituted a strict formai
pledge. But this delivery and redellvery would leave the parties in precisely
the same situation they are in when, waivlng this formallty, the broker re-
tains the certificates as security for advances."
[3] Whatever may be the distinction between a case where the cer
tificates of stock are held by the broker as security for money advanc-
ed and the présent case, where the broker purchased the stock and
charged the full purchase price to the account of the customer, it can-
not affect the underlying principle common to both — that the title is
in the customer. Equity, therefore, cannot be invoked on the untenable
ground that the broker is a trustée in whom is vested the légal title.
While it is true that there is a limited trust relation in every case of
bailment, there is nothing hère in the conduct of the parties from
which an intention to create a trust may be assumed. Blackstone de-
fines a bailment as :
"A delivery of goods In trust, upon a contract, express or ImpUed, that tlic
trust shaU be falthfully executed on the part of the bailee." 2 Bl. Comm. 451.
262 F.— 39
610 262 FEDERAL EEPOKTEB
In a case of simple bailment, like the présent, divested of any facts
or circumstances f rom which it may even be inferred that the parties
intended to create a trust, where the obligation does not arise f rom con-
fidential relations, and no such fiduciary relations exist between the
parties as to require the intervention of equity, the remedy is at law.
In Young v. Mercantile Trust Co. (C. C.) 140 Fed. 61, the court, con-
sidering a situation strikingly analogous to that hère presented, con-
cluded as f oUows :
"Tte next point Is whether the relations between the contendlng parties
were of a fiduciary character. Assumlng the relations of bailor and ballee
to hâve existed, the question naturally arlses whether a fiduciary responsl-
blllty was Imposed thereby. That the transactions of principal and agent,
bailor and ballee, and pledgor and pledgee are not cognizable In equity, la
clear, unless accompanled by facts and circumstances from which It may be
presumed that the intendment of the parties was to create a trust, or where
the obligations Imposed arose out of confidentlal relations."
[4] Nor does counsel for plaintiff improve his jurisdictional dilem-
ma by calling this a spécial deposit. A spécial deposit implies the cus-
tody of property without authority in the custodian to use it, and the
right of the owner to receive back the identical thing deposited.
"In the case of a spécial deposit, the bank assumes merely the charge or
custody of property, without authority to use it, and the depositor is en-
tltled to receive back. the identical money or thing deposited. In such case,
the right of property remains in the depositor, and if the deposit is of money,
the bank may not mingle it with its own funds. The relation created is that
of bailor and ballee, and not that of debtor and creditor," 3 R. 0. L. 522.
[5] But this was not a spécial deposit of spécifie shares of stock.
In brokerage transactions, the broker may mjjce good on demand of
the customer by delivering stock of equal kind and dénomination as
that originally purchased. The character of the property involved
permits the substitution. As was said in Richardson v. Shaw, supra,
209 U. S. 378, 28 Sup. Ct. 516, 52 L. Ed. 835, 14 Ann. Cas. 981 :
"It Is objected to this vlew of the relation of customer and broker that
the broker was not obllged to retum the very stocks pledged, but mlght sub-
Btitute other certlflcates for those received by him, and that this Is Incon-
sistent with ownershlp on the part of the customer, and shows a proprletary
Interest of the broker In the shares; but this contention loses slght of the
fact that the oertlficate of shares of stock is not the property Itself — It Is but
the évidence of property In the shares. The certiflcate, as the term Implies,
but certifies the ownershlp of the property and rights In the corporation repre-
sented by the number of shares named. A certificate of the same number of
Bhares, although printed upon différent paper and bearing a différent num-
ber, représenta precisely the same kind and value of property as does another
certificate for a like number of shares of stock In the same corporation. It
Is a misconception of the nature of the certiflcate to say that a retum of a
différent certificate, or the right to substituts one certificate for another, is a
material change in the property right held by the broker for the customer."
[6] It is urged by counsel for appellees that défendants Meams and
Williams are released from liability by reason of their retirement from
the firm of Lewis Johnson & Co. between the date when, according to
its books, the firm was short in Amalgamated Copper Company's stock,
and therefore unable to meet plaintiflf's demand for delivery of his
stock had such demand been made, and the date when the firm went in-
TUCKERMAN V. MEARNS 611
C262 F.J
to bankruptcy. It appears that, after thèse défendants withdrew from
the firm and gave notice of their withdrawal, plaintiff continued to do
business with the firm and to receive dividends on the stock in question.
This, it is insisted, amounted to an acquiescence by plaintiff in défend-
ants' withdrawal, and the acceptance of the responsibility of the new
firm for this obligation. With this contention we cannot agrée. The
situation hère presented is not différent from that presented in the ré-
cent case in this court of Meams v. Chatard, 47 App. D. C. 257, which
involved a conversion of stock by the same firm involved in the présent
case. In that case a wrongful hypothecation of the stock had been
committed while Mearns was a member of the firm. This was correct-
ed by rédemption of the stock before Meams withdrew from the firm.
Another conversion of the stock occurred after Mearns' withdrawal,
and it was contended that his liability for the original conversion was
purged by the rédemption of the stock while he was yet a member of
the firm. On this point the court said:
"To this we cannot assent. The liability whlch he assumed as a member of
the old firm when the stock was flrst placed with it continued until the stock
was accounted for to its owners, or he was released therefrom. Blew v.
Wyatt, 5 Car. & P. 897; Daniel v. Cross, 3 Ves. Jr. 277; Bernard v. Torrance
(Md.) 5 GiU & J. 383 ; Easton v. Wostenholm, 137 Fed. 524, 70 O. C. A. 108 ;
Neal V. M. E. Smith & Oo., 116 Fed. 20, 54 C. C. A. 226. It was not accounted
for, and we hâve found he was not released ; therefore he was liable for it,
either as of the date of the flrst or the second hypothecation. Api>ellee could
bave selected one or the other."
[7-10] It is urged by counsel for plaintiff that, assuming the court
was correct in holding that there was a complète and adéquate remedy
at law, it was error to dismiss the bill. The proper order, it is con-
tended, should hâve been to transfer the case for trial from the equity
to the law side of the court. It was held in Curriden v. Middleton,
232 U. S. 633, 636, 34 Sup. Ct. 458, 58 L,. Ed. 765, that equity rule 22
of the Suprême Court of the United States (198 Fed. xxiv, 115 C. C.
A. xxiv) has no application to the courts of the District of Columbia.
The ruling is based upon section 85 of the District Code, which, de-
fining the jurisdiction of the equity court, provides:
"The practlce In sald court shall be accordlng to the establlshed course of
equity and procédure and the rules establlshed by the said Suprême Court of
the District not inconsistent with law."
This brings us to the considération of section 274a of the fédéral
Judicial Code (38 Stat. 956 [Comp. St. § 1251a]), which is as fol-
lows :
"That in case any of sald courts shall flnd that a suit at law should hâve
been brought in equity or a suit in equity should hâve been brought at law,
the court shall order any amendments to the pléadlngs whlch may be necessary
to conform them to the proper practlce. Any party to the suit shall hâve the
right, at any stage of the cause, to amend his pléadlngs so as to obviate the
objection that his suit was not brought on the right slde of the court. The
cause shall proceed and be determlned upon such amended pléadlngs. Ail
testimony taken before such àmendment, il preserved, shall stand as testt-
mony in the cause with llke effect as If the pléadlngs had been originally il
the amended form."
612 262 FEDERAL REPORTEE
This statute was enacted as an amendment to the Judicial Code,
and appended to and made a part of chapter 1 1 thereof , which relates
to the jurisdiction common to the courts of the United States general-
ly, including the courts of the District of Columbia. It must be held,
therefore, that the provisions of 274a are superior to any rule inconsis-
tent therewith formulated under authority of section 85 of the Code.
Rule 76 of the Suprême Court of the District of Columbia, adopted
April 25, 1919, is as follows :
"I( at any tlme It appear that a suit coinmenced In equlty should hâve been
brought as an action on the law side of the court, or that a suit at law should
hâve been brought in equity, it shall be transferred to the law or equlty slde
of the court, as the case may be, and be there proceeded with, with only such
altération in the pleadings as shall be essential."
This rule is in conformity with section 274a, supra. The statute
seems to more particularly define the course of procédure in the Dis-
trict Courts of the United States where the same judge simultaneously
holds both an equity and a law court. The rule, however, merely con-
forms the procédure defined in the statute to the custom of the Su-
prême Court of the District of Columbia in holding the equity and law
courts in separate divisions and presided over by différent judges.
We come now to the procédure which should hâve been adopted in
the court below. It will be observed that, under the statute :
"Any party to the suit shall hâve the rlght, at any stage of the cause, to
amend his pleadings so as to obviate the objection that his suit was not
brought on the rlght side of the court."
This, in effect, forbids the dismissal of a bill in equity on the ground
of an adéquate remedy at law, or the sustaining of a demurrer at law
on the ground that the remedy is in equity. When either of thèse con-
ditions arise, it is the duty of the trial judge, either upon motion of
counsel or upon hte own motion, to order a recasting of the pleadings
and the transfer of the cause to the proper side of the court. In Col-
lins V. Bradley Co. (D. C.) 227 Fed. 199, 201, the court, considering
the broadening efïect of section 274a upon equity rule 22 of the Su-
prême Court of the United States, said :
"The equity rule and the statute hâve swept away entlrely any and ail
technical objection whatsoever. While the Constitution préserves the rlght
to a jury trial in every action at law, the practlce as to ralsing the objection
Is revolutlonized. Defendant's motion to dlsmlss may be taken as a motion
to transfer the case to the law side. If the remedy at law is adéquate."
We are in accord with this practical construction of the intent of
Congress to establish a simple, speedy, and inexpensive means of ac-
cording justice, and at the same time closing the door against the bar
of the statute of limitations which, under the former practice, fre-
quently furnished an available avenue of escape for the party justly
liable, thereby resulting in a miscarriage of justice.
Rule 76 had not been adopted when the decree in this case was en-
tered, and therefore is not applicable hère. Section 274a was enacted
after the original bill was filed, but it was in force when the decree
hère appealed from was entered, and applies directly to this action.
Collins V. Bradley Co., supra. The court, therefore, erred in dis-
NATIONAL SAVINGS & TRUST CO. V. EYAN 613
C262 FJ
missing the bill. The order should hâve been to recast the pleadings
and transfer the cause to the law side of the court.
The decree is reversed, with the costs of this appeal to be equally di-
vided between the appellant and appellees, and the cause is remanded
for further proceedings not inconsistent with this opinion.
Reversed and remanded.
NATIONAL SAVINGS <& TRUST CO. v. KYAN et al.
(Court of Appeals of District of Columbia. Submitted October 14, 1919.
Decided December 1, 1919.)
No. 3257.
1. Appeal and EsaoB c=5254 — Exception unnecessaet to sulinos which
HEED MOT BE INCOEPOEATED IN BlIX OF EXCEPTIONS.
The action of tlie trial court in sustainlng a demurrer to, and striking
out, defendant's pleas, may be reviewed without an exception, for an ex-
ception is unnecessary, save to rullngs whlch must be brought Into the
record by a bill of exceptions.
2. Teustb <S=3316(1) — Testamentaby trustées entitled to coufknbation
ON teansfeb fbom ïhemsblves as exectjtobs.
Where executors settled thelr accounts as such, and were ordered to
transfer the fimds to themselves as trustées, they are entitled to further
commissions as trustées.
8. Tbusts <g=359(2) — Prooeeding bt remaindermen against testamentaby
TRUSTEES MUST BE BEOUGHT IN EQUITY.
A proceedlng by remaindermen to require a trustée to turn over certain
property to them must be brought in equlty, If the trust is still ooen
and the trustee's commissions and some outstanding claims against the
estate are undetermined.
A. Appeal and kbrob iS==>917(l) — On appeal fbom euling on dsuttbber to
PLEAS, TIIEIB TBUTH ASSUMED.
On appeal from trial court's action in sustainlng a demurrer to, and
striking out, defendant's pleas, It wiU be assumed that the statements In
such pleas are true.
5. Plïading ®=3264 — Pleas not abandoned by filinq amesded plba.
Defendant's action in offering an amended plea dld not waive or consti-
tute an abandonment of hls previous pleas, where the amended plea was
not offered as a substltute for them.
6. EXECUTOBS AND ADMINISTBATOBS <SÎ=3291 EVIDENCE INSUFPICIENT TO SHOW
ABSENT OE EXECUTORS TO VESTING ESTATE IN BENEFICIARIES.
The fact that the cestuis que trustent unlted with an exécuter In prose-
cutlng a daim does not, as a matter of law, establish the exeeutor's assent
to vestlng of title In them, but, at most, raises a question of fact
7. Limitation of actions <S=>155(6) — Tolled by testamentaby trustee's
PAYMBNTS to EEMAINDKEMEN.
A testamentary trustee's payments to plalntifC remaindermen after the
life tenant's death tolled the three-year perlod of limitations prescribed
by Code of Law, § 1265, for bringing suit against the trustee's exécuter.
8. Teusts <S='287 — ^Tbust does not vest in New York courts on trusteei's
dkath, whebe his only unfinisiied dutt was to account.
Code dv, Proc. N. Y. 1910, § 2818, providing that a surviving trustee's
death vests an unexecuted trust In the New York courts, etc., is inap-
plicable, where the deceased trustée had nothing further to do, except to
account, and an action in such a case may be brought against the trus-
tee's executor.
^=sjFor other cases oee same topic & KEY-NUMBBR In aU Key-Numbered Dlgests & Indexes
614 202 FJ2DEUAL KEl'ORTER
Appeal from the Suprême Court of tlie District of Columbia.
Action by Joseph M. Ryan and Christine C. Sartor, as exécuter and
executrix of the estate of Théodore A. Sartor, deceased, against the
National Savings & Trust Company, as exécuter of the estate of
Charles J. Marc, deceased. Judgment for plaintifïs, and défendant
appeals. Reversed, with directions.
James Gillin, of New York City, for appellant.
R. C. Thompson and J. E. Laskey, both of Washington, D. C, for
appellees.
SMYTH, Chief Justice. The appellees, Joseph M. Ryan and Chris-
tine C. Sartor, in their capacity as executors of the estate of Théodore
A. Sartor, deceased, brought action against the appellant, National
Savings & Trust Company, as exécuter of the estate of Charles J.
Marc, deceased. The case was tried to a jury, and from a verdict
and judgment against it the Savings & Trust Company appeals.
Joseph F. Sartor died in 1897, leaving a will in which he named
his mother-in-Iaw, Henrietta M. Rouviere, and Charles J. Marc as
executors and trustées of his estate, giving to them "full power and
authority to sell, convey, mortgage or lease any or ail of the prop-
erty" of his estate, and "to collect the rents and profits arising there-
from and to invest, reinvest and keep the same invested for the uses
and purposes * * * set forth" in the will. He also directed that
they pay to his mother-in-law during her life the income and profits
arising eut of the estate, and that at her death the surviving trustée
should pay four legacies, aggregating $20,000, to certain persons and
institutions, and then said :
"I hereby give, devise and bequeatb ail the rest, resldue and remainder of
my estate, af ter the aforesald bequests hâve been paid, and the aforesaid trust
fulfllled to my brother Théodore A. Sartor, Ms heirs and asslgns forever."
Mrs. Rouviere and Marc qualified as executors. Théodore A. Sar-
tor, the beneficiary under the clause just quoted, died in May, 1903,
leaving a will which was duly admitted to probate. In it he named
Christine C. Sartor, his wife, and Joseph M. Ryan, the appellees, as
executors, and said in the second clause:
"I give and bequeath unto my beloved wife Christine Cellna Sartor and to
my son Joseph Eene Sartor the whole of the proceeds of my brother's (Joseph
F. Sartor) estate vrhatever that may amount to, of which I am resldnary
legatee. Also ail the rest, resldue and remainder of my real and Personal prop-
erty, wheresoever sltuated of which I am possessed, to be by them divided
share and share allke, but In the case of my son his stoare Is to be Invested and
given hlm on attalning the âge of twenty-flve (25) years."
The named executors qualified in August, 1903. Mrs. Rouviere
died in 1907, leaving Marc as surviving trustée of the estate of Joseph
F. Sartor. He died July 5, 1911, wiSiout accounting to the remain-
dermen for the trust fund. The National Savings & Trust Company
was designated as sole exécuter of his estate, and in due time quali-
fied as such.
Some time afterwards Ryan, as executor, Sartor, as exécuter and
lega+ee, and Joseph René Sartor, as legatee of Théodore A. Sartor,
NATIONAL SAVINGS & TRUST CO. V. EYAN C15
(262 F.i
joined in a claim against the estate of Marc for the amount of money
which they asserted was due to them under the provisions of the wills
of Joseph F. Sartor and Théodore A. Sartor, respectively, which we
hâve quoted. The claim was rejected, and this action f ollowed.
On the pétition of Charles J. Marc, his account as acting executor
of the will of Joseph F. Sartor (Mrs. Rouviere having neglected to
act) was judicially settled and allowed, and it was found that he had
in his hands on July 28, 1899, the sum of $59,311.99, out of which he
was directed to make certain disbursements, which, when donc, left
a balance of $58,255.44. The decree further provided that Marc
should turn over to himself and Mrs. Rouviere, as testamentary trus-
tées under the will of Joseph F. Sartor, that amount, to be dealt with
as provided in the will of Joseph F. Sartor. The appellees gave Marc
crédit for having paid the four spécifie legacies designated in the
will, and for certain other payments, which brought the amount claim-
ed down to $24,841.35. This sum, they say, should hâve been paid by
Marc to Théodore A. Sartor, his heirs or assigns, under the will of
Joseph F.; that, Théodore having predeceased the life tenant, Mrs.
Rouviere, they, as executors of his will, were entitled to receive it,
and hence their claim against the estate of Marc.
It is urged by the appellant in varying forms that a court of
law has no jurisdiction of the case, because, as asserted, an accounting
is necessary to fix the amount due from Marc, and where this is
true an action at law by cestuis que trustent against the testamentary
trustée to recover the trust property cannot be maintained. Appel-
lant filed certain pleas, which were rejected. In one way or another
it set up in thèse pleas that commission was due to Mrs. Rouviere
and to Marc as trustées, but that the amount was never determined;
that Marc had invested the trust funds, as he was authorized to do
under the will, in bonds and mortgages on real estate located in dif-
férent counties of the state of New York; that in 1902 or 1903 he
became a résident of this District, and continued therein until his
death in 191 1 ; that he, in the usual course of business, and in the
exercise of due and proper care, employed one Gray, a reputable
member of the New York bar, to collect from time to time, as they
became due, the amounts invested; that Gray did not account to
Marc for ail the collections which he had made; that he is now
asserting a claim of $15,000 for attorney's fées for services ren-
dered to the estate; and that Marc had disbursed ail the money of
the estate which came into his hands, excepting that which Gray
had received and failed to turn over. A demurrer was sustained to
five of the pleas, and two were stricken out. No exception was taken
to the action of the court. Appellant ofïered no proof.
[1] Notwithstanding the fact that no exception was taken to the
décision of the court just mentioned, we think it is properly hère for
review. An exception is not necessary, save to a ruling which must be
brought into the record by a bill of exceptions. Nalle v. Oyster, 230
U. S. 165, 176, 33 Sup. Ct. 1043, 57 L. Ed. 1439. The ruling before
us does not fall within that category.
[2] The writer doubts that the appellees or those whom they rep-
016 202 FEDERAL REPORTER
resent stand in the attitude of cestuis que trustent. They are seek-
ing to enforce the right of remaindermen under tlie will of Théodore
A. Sartor. This, it seems, is a légal right. Bergland v. Owen, 48 App.
D. C. 26, 34. But none the less, before the amount which Marc's
estate is responsible for can be determined, the questions raised by the
pleas must be passed upon. Where executors settle their accounts
as such, and are ordered to pay the funds in their hands to themselves
as trustées, the fund to be managed by them, they are "entitled to
further commissions as trustées." In re Willets, 112 N. Y. 289, 296,
19 N. E. 690, 693 ; Robertson v. De Brulatour, 188 N. Y. 301, 80 N. E.
938; Olcott y. Baldwin, 190 N. Y. 99, 82 N. E. 748. Whether the
allégations with respect to Gray are sufficient to exonerate Marc or
his estate from responsibility for the fund intrusted to him is a
matter upon which we express no opinion. It is, however, with the
other questions raised by the pleas, a proper subject for investiga-
tion in the light of équitable principles, which must be applied in a
court of equity.
[3, 4] Where no ascertainment of the amount due, either by com-
putation, adjustment, or uncontradicted évidence, has been made, "the
only remedy for the cestui que trust is by a bill in equity. An action
at law does not lie in his favor against the trustée while the trust is
open." Davis v. Coburn, 128 Mass. 377, 382. Perry on Trusts and
Trustées (6th Ed.) § 843, says :
"XTnless some légal debt has been ereated between the parties, or some en-
gagement, the noiiperfomiance of which may be the subject of damages at
law, a court of equity is the only tribunal to which he [the cestui que trust]
can bave recourse for redress."
In Edwards v. Bâtes, 7 Man. & G. 590, an action for money had
and received by a cestui que trust against a trustée, Tindall, Chief
Justice, speaking for the court, denied the right of the plaintiff to
maintain the action, because the amount of certain costs and charges
which the trustée claimed should be paid out of the fund had not
been determined, and said that he (plaintiff) "ought to hâve filed a
bill in equity for an account." "If the trust is still open, the accounts
of the trustée unsettled, and the amount going to the particular bene-
ficiary unknown, resort must be had to a court of equity. It is the
peculiar province of that court to supervise the exécution of trusts,
the distribution of trust property and the conduct of trustées in man-
aging trust estâtes. With ail interested persons before it, its decrees
protect ail interests and enforce ail rights." Husted v. Thomson, 158
N. Y. 328, 335, 53 N. E. 20, 21. Other authorities bearing on the
same subject are Brown v. Fletcher, 235 U. S. 589, 35 Sup. Ct. 154,
59 E. Ed. 374; Mitchell v. Penny, 66 W. Va. 660, 662, 66 S. E.
1003, 26 L. R. A. (N. S.) 788, 135 Am. St. Rep. 1046; Nelson v.
Howard, 5 Md. 327: Herrick v. Snow, 94 Me. 310, 47 Atl. 540;
Deering v. Pierce, 149 App. Div. 10, 133 N. Y. Supp. 582, 39 Cyc.
469.
Nothing in conflict with thèse holdings has been brought to our at-
tention. McEaughlin v. Swann, 18 How. 217, 15 E. Ed. 357, is a case
much relied upon by appellees, but it is not in point. There the lower,
NATIONAL SAVINQS & TEtJST CO. V. ETAN 617
(262 F.)
court charged the jury that, since there was no évidence that "any
specified sum ascertained hy the accounts of the trustées, or by judicial
décision," was due to tTie plaintiffs, the law court was without jurisdic-
tion. The Suprême Court disapproved this, saying that the "trust was
for the payment of specified debts, which should be presented to the
trustées before a fixed day. The payments made, and the sums receiv-
ed in exécution of the trust, were liquidated sums, ascertained with en-
tire précision. The trust was completely executed, and the balance
remaining in the hands of the trustées was a sum certain. Under
thèse circumstances, an action at law for money had and received
could be sustained. * * * " But the balance due f rom Marc or
his estate had not been "ascertained with entire précision"; it is not
"a sum certain." This distinguishes the case from the one before us.
Neither does Palmer v. Fleming, 1 App. D. C. 528, aid the appellees.
It holds that a mère allégation of an équitable ground for relief, with-
out setting forth the facts, is not sufficient to divest the law court of its
right to décide the case. We hâve much more in the présent case
than a mère allégation of an équitable ground for relief, if the state-
ments in the pleas are true, and we must assume that they are for our
présent purpose. Ail the other cases cited by appellees proceed upon
the assumption that the trust was closed. Where this is so, an action
at law will undoubtedly lie; but the trust we are considering is not
closed. It is still open for the purpose of settling the things set up
in the pleas. Where this is so, we find no authority for holding that
an action at law may be prosecuted. We think the pleas show that the
case is one for équitable cognizance, and that the leamed court below
erred in putting them aside.
[5] The appellant did not abandon thèse pleas by filing the amended
seventh plea, because it was not offered as a substitute for them. If
it had been, there would be force to the contention of the appellees
that they had been abandoned. "The plaintiff, by filing an amended
déclaration in lieu of his original déclaration, must be treated as hav-
ing waived ail objection to the court's action upon the demurrer to it,
and to bave been content to stand upon his amended déclaration."
Birckhead v. Railroad, 95 Va. 648, 649, 29 S. E. 678. But, as we havc
just seen, nothing of that kind was donc hère.
Howard v. Railway Co., 11 App. D. C. 300, and Clearwater v.
Meredith, 1 Wall. 25, 17 L. Ed. 604, do not help the argument of
the appellees. In the first case the question was as to whether or
not the défendant had waived his objection to the jurisdiction of
the court over his person by moving to set the ruling of the court
aside, which was done upon condition that he should plead the gên-
erai issue. He accepted the condition, and this, says the court, "worked
an abandonment of the pleas attacking the jurisdiction and the
validity of the service of the writ. * * * " 'The Clearwater Case,
like Birckhead v. Railroad, supra, was one in which a plea was sub-
stituted for the rejected one. The court held that by the substitu-
tion the party waived his objection to the action of the court in reject-
ing the first plea.
618 262 FEDERAL REPORTER
This disposes of the appeal. There are, however, other matters dis-
cussed in the briefs, which will undoubtedly arise upon a new trial,
if there should be one, if not ruled upon now, and therefore we décide
them.
[6] It is asserted that the appellees hâve no title to Théodore A.
Sartor's interest under the will of Joseph F. Sartor, and, in consé-
quence, hâve no right to maintain this action. This rests upon the
theory that the bequest, which the appellees are seeking to recover,
is a spécifie legacy ; that it was the duty of the executors to assent to
the vesting of title thereto in the beneficiaries as soon as they had
ascertained that the remaining personal property of the testator was
sufficient to pay his debts ; that this assent may be express or implied,
and that there is a presumption that it arose immediately after the
expiration of the time fixed by law for the administration of the
estate; and that as ten years, lacking one month, hâve elapsed since
the granting of letters testamentary to the appellees, the presumption
is conclusive that they gave their assent. It is further urged that the
évidence establishes that the appellees expressly assented to the vest-
ing of the title in the cestuis que trustent.
The assent claimed has not been established. During the entire
period referred to the appellees were actively urging their rights, as
executors, to the fund. They commenced a suit in New York imme-
diately after the death of Henrietta M. Rouviere to recover the fund
from Marc. Their right to receive the fund was acknowledged by
Marc by his making payments to them from time to time, running
down to June, 1910. Thèse payments were made by Gray as attorney
for Marc. His authority is denied in argument by the appellant ; but
it was admitted at the trial that he was Marc's attorney. This ad-
mission, it is said, was the resuit of inadvertence ; but the record
does not show that to be the fact. Within a year after Marc's
death appellees filed a claim against his estate for the amount as-
serted to be due, and upon that having been rejected they instituted
this suit. While the cestuis que trustent united with the executors in
the claim, this falls far short of estabHshing that the latter had as-
sented to the vesting of title in them. They ail joined, no doubt, as
a matter of précaution. The most that may be said for their action in
this connection is that it constitutes, with the other facts disclosed, a
question of fact for the tribunal charged with the finding of facts.
It certainly did not establish the assent so clearly as to require the
court to rule as a matter of law that the assent was given.
.With regard to the évidence adduced by the appellees to show the
value of the estate of Joseph F. Sartor at the time of the death of the
life tenant, we think it was quite sufficient, especially in view of the
fact that it was not contradicted.
[7] There is no merit in the argument that this action is barred by
the statute of limitations. Mrs. Rouviere, the life tenant, died in 1907.
Appellees' cause of action arose then. Marc, as we hâve seen, made
pajrments from time to time after her death, the last on June 17,
1910. This tolled the running of the statute. Marc died July 5,
1911, and letters testamentary were issued upon his estate September
NATIONAL SAVINGS & TRUST CO. V. EYAN G19
(■i62 F.)
29, 1911, 2 months and 24 days thereafter. Under section 1266 of tlie
Code, the time between the death of the deceased and the granting of
letters testamentary is not to be counted in determining whetlier or
not the statute of limitations has run. This suit was brought July
10, 1913. When we eliminate the 2 months and 24 days, we find that
the interval between the last payment and the date on which suit was
instituted is less than 3 years, the period of the statute of limitations.
Code, § 1265.
Section 348 of the Code says that, if a creditor of an estate shall
not within 9 months after his claim has been rejected by the executor
or administrator commence suit for recovery, it shall be barred. In
this case the executors filed their claim on September 26, 1912; it
was rejected October 19, same year, and this action was commenced
July 10, 1912, some 9 days less than the period limited.
[8] We do not think that section 2818 of the Code of Civil Pro-
cédure of the State of New York applies to this case. It provides in
substance that upon the death of a last surviving trustée the trust
estate does not descend to his personal représentative; but if the
trust be unexecuted, in the absence of contrary directions on the
part of the person creating the same, it vests in the Suprême Court of
the State of New York, and is to be executed by some person appoint-
ed by the court. From this it is urged that the trust fund did not come
to the appellant as executor of the estate of Marc, and hence the ap-
pellant cannot be held liable for Marc's failure to account. To give it
the construction urged would be unreasonable. Why appoint a trustée
to bring suit against Marc's estate for the benefit of the remainder-
men, when they, or those who represent them, are qualified to en-
force their own rights ? That statute deals only with cases where
there is something besides merely accounting for tiie estate to be done
by the trustée. Hère the only duty remaining to be perf ormed by Marc
at the time of his death was the turning over to the remaindermen of
the amount of money for which he was responsible as trustée. That
was a duty which he should hâve discharged many years before, but
which remained unexecuted at his death. The theory of the appellees
is that, since he was derelict in that respect, his estate is liable, and
hence that an action will lie against his personal représentative. In
this we think they are right.
The judgment must be reversed, at the cost of the appellees, and
the case remanded, with directions to the court to transfer it to the
equity side of the court, there to be prosecuted as a suit in equity, after
the pleadings hâve been properly recast. Section 274a, Judicial Code
(38 Stat. L. 956, c. 90 [Comp. St. § 1251a]); District of Columbia v.
Washington Terminal Co., 47 App. D. C. 570, 576; Tuckerman v.
Mearns, 49 App. D. C. , 262 Fed. 607, this day decided.
Reversed, with directions.
820 262 FBDBBAL BSFOBTEB
CONKLING V. NEW YORK LIFE INS. & TRUST CO. et al.
(Coui-t of Appeala of District of Columbla. Subraitted October 8, 1919.
Decided Deeember 1, 1919.)
No. 3230.
1. Equitt <g=>81 — Lâches no bab wheee uhsuccessfui, negotiations inteb-
VENED.
A blU to lmpres3 a trust on property Iniproved by plaintlfC's mother
with plaintiff's funds was seasonably brought some tbree years after tho
mother's death, where the intervening period had been occupied with un-
successful negotlatlons for a settlement and filing a clalm against the
mother's estate in New York State.
2. Evidence <S=>186(2) — ^Testimont as to lost lettees admissible.
In suit to Impress a trust on property which plaintlfE's deceased mother
had improved with plaintiff'g money, a wltness may testify concerning lost
letters from the mother to plaintIfC, which the wltness had read, and
from which he had made extracts.
3. Trusts <S=>81(4) — Resultinq fkom investment by mothek or son's money
IN LAND.
Evidence that plaintiff's mother had removed his bonds from a safe de-
posit box to which they had joint access to another box used by her alone,
and that the proceeds were used in remodeliug real estate which she
apparently had expected to deed to her son, etc., held to establish plain-
tiff's right to hâve a trust declared on the improved real estate to the ex-
tent that the proceeds of his bonds went iuto the property.
Smyth, Chief Justice, dissenting.
Appeal from the Suprême Court of the District of Columbla.
Suit by David Paul Burleigh Conkling, against the New York Life
Insurance & Trust Company, exécuter and trustée under the will of
Sarah B. Conkling, deceased. Délia Mason Caldwell, Sarah B. C. Mol-
1er, and others. From a decree dismissing the bill, plaintiff appeals.
Reversed and remanded.
Wm. G. Johnson, of Washington, D. C, for appellant.
B. S. Minor and ly. Randolph Mason, both of Washington, D. C.
(Hugh B. Rowland and Colley W. Bell, both of Washington, D. C, of
counsel), for appellees.
ROBB, Associate Justice. Appeal from a decree in the Suprême
Court of the District dismissing appellant's bill for discovery, the déc-
laration of a resulting trust, and the conveyance to appellant of the
trust estate, and for gênerai relief.
Mrs. Sarah B. ConkHng, the mother of appellant and a résident of
the city of New York, died February 22, 1904, leaving a will under
which the appellee New York L,ife Insurance and Trust Company was
named executor and trustée. Appellant and the other appellees are the
beneficiaries of the trust estate created by the will. Appellant is
a sculptor, and the youngest of three children, having been born in
1871. In 1885 he was given five bonds, of the aggregate value of
$50,000. Shortly after his graduation from collège, and when he was
23 years of âge, appellant went abroad, and continued to réside abroad
for more than 10 years.
^=9For other caseB see same topic & KEÎY-NUMBSR in ail Key-Numbered Dtgests & Indexea
CONKLING V. NEW YORK LIPE IKS. & TRUST CO. 621
C262F.)
From May 8, 1900, to February 21, 1904, a safe deposit box was
rented by appellant and his mother at the Fifth Avenue Bank in New-
York, either to hâve access thereto. On several occasions the mother
was seen at the vault of that bank, and this was the only box she had
there ; but she did hâve a safe deposit box in the Lincoln Trust & Safe
Deposit Company in New York, to which appellant did not hâve ac-
cess. Upon an occasion when appellant was in this country, about 2
3'ears prior to his mother's death, he went to his deposit box, above
mentioned, and there then were in that box nine Union Pacific, six
Chesapeake & Ohio, and three Richmond & Banville bonds. After the
mother's death no bonds were found in the deposit box at the Fifth
Avenue Bank, but in the mother's box at the Lincoln Trust & Safe
Deposit Company were found Richmond & Banville, Union Pacific,
and Chesapeake & Ohio bonds, together with a slip of paper on which
was written, in appellant's handwriting, the f ollowing :
"3 bonds Richmond & DanvlUe 6%.
"9 bonds Union Pacific 4%.
"6 bonds Clies. & Ohio 4%.
"D. B. P. C."
— and underneath were the words, in the mother's handwriting, "Cut
coupons, S. B. C."— the letters "S. B. C." being the initiais of the
mother's name.
There had been some correspondence between appellant and his
mother with référence to the remodeling of two small houses belong-
ing to the mother and located on New Hampshire avenue, N. W., in
the District of Columbia. Not long after the death of the mother,
appellant exhlbited to John M. Dickinson, Esq., of New York, who
was an intimate friend of the family, some letters from his mother.
Mr. Dickinson, who was very familiar with the mother's handwriting,
read the letters for the purpose of formulating an afïïdavit for appel-
lant, to be used in New York in prosecuting there appellant's claim
to the 18 bonds heretofore mentioned. Mr. Dickinson "took extracts
from the letters at that time and copied them in his own handwriting."
The originals then were handed to appellant and subsequently lost.
Mr. Dickinson testified that the first extract read as f oUows :
"I was not offended, as you thought, from your inquiry about the Wash-
ington hoiise, but only felt that you should trust your mother. The honse and
land will be worth more than §20,000, if you ever wanted to sell, as Washington
property is always going up. I hâve spoken to Octave (a sister) and per-
haps to Ijlzzie about our plans, but I do not want the matter dlscussed. The
less sald the sooner mended. I will send you 4% interest, so that you will
not lose anything there."
The second extract reads:
"Do try to practice economy. Two thousand more and the twenty will be
completed."
The third extract is as f ollows :
"I hâve been thinlclng over our talk about your bonds. I thlnk It would be
very foollsh for you to hâve thera In Paris, and it will not be long now be-
fore the house Is flnished and in your name anyway. They are as safe at the
Lincoln as in your box, and much more convenient for me. If you insist, I
will send them; but please do what I say."
622 262 FBDBRAL BEPORTBB
The remodeling of the house was going on when thèse letters were
received, and was completed about the time of the mother's death, at
a cost of about $20,000.
Mr. Benjamin R. Bechtel, an artist living in London, deposed that
he was intimately acquainted with appellant, having lived in the same
studio building with him for several years. Déponent had known ap-
pellant's mother for 6 or 7 years prior to her death. In May or June
of 1902 he met her on the landing stage at Liverpool, as she was
disembarking from the steamship Oceanic, and accompanied her to
Calais. She referred to the house which she owned in Washington,
D. C, and said she intended remodeling it, and was in hopes that her
son Paul, the appellant, would occupy the house when he returned to
live in America; that Paul had handed over to her $20,000 in bonds,
"which she was going to use in the proposed improvements and altér-
ations of the house, and she considered it was a better investment
for him than the way in which the money was placed at the time."
This statement was made voluntarily, and not in response to any in-
quiry by déponent.
Appellant in his testimony stated that after the death of his mother
he found in his deposit box at the Fifth Avenue Bank a 12-page letter
in the handwriting of his mother, on the envelope of which, also in
her handwriting, were the words, "To my son Paul, to be opened after
my death." Fearing that he might lose this letter, he made a careful
copy of it, which he took to Europe and showed to his sisters. The
original he placed in the envelope containing the other letters of his
mother, and this letter with its contents subsequently was lost. The
copy which he showed his sisters was attached to their déposition in
this case. Over objection, the copy was read in évidence. In the let-
ter, after discussing her children, their prospects, and the provision
she had made for them, the mother wrote:
"You hâve the Washington house and your Income from the trust [created
by her wlU] and with your own efforts should be able to live nlcely. The pa-
per about the house Is in naçy desk, but If you want It done more legally I wlU
see to It with you when we meet agaln. Anyway, it is sure to be ail right."
The sisters, who first examined the desk above referred to, admitted
having destroyed certain of its contents. At the time of their testimony
they were quite certain that nothing was destroyed, other than some
letters from them to their mother. Mr. Dickinson, however, who
talked with one of them not long after the occurrence, testified that
they were not then clear as to just what had been destroyed by them.
At ail events, the paper was not found araong the mother's effects.
[1] Immediately upon the death of his mother, appellant returned
to this country, and, failing to fînd his bonds or the paper referred
to in his mother's letter, proceeded to take steps looking to the adjust-
ment of the matter. He first filed a claim against the estate of his
mother in New York, for the retum of the bonds or their value.
This claim he subsequently withdrew, because he was advised that
under the laws of the state of New York he could neither testify con-
ceming the matter nor introduce in his behalf the letters he had
received from his mother. Negotiations were had with his sisters.
CONKLING V. NEW YORK LIFE INS. & TKUST CO. 623
(262 1'.)
but, no settlement resulting, this bill was filed in November of 1907.
That it was seascaiably filed there can be no doubt In Southern Pac.
Co. V. Bogert et al, 250 U. S. 483, 39 Sup. Ct. 533, 63 L. Ed. 1099,
decided by the Suprême Court on June 9, 1919, more than 22 years
had elapsed "since the wrong complained of was committed." The
court said:
"It Is essentlal that there be also acquiescence in the alleged wrong or lacU
of diligence in seeking a remedy. Hère plalntifls, or others representing
them, protested as soon as the terras of the reorganlzation agreements were
announced ; and ever since they hâve with rare pertinadty and undaunted
by failure persisted in the diligent pursuit of a remedy as the schedule of
the earlier litigation referred to In the margin demonstrates. • ♦ • Nor
does failure, long contlnued, to dlscover the approprlate remedy, though well
known, establish lâches, where there has been due diligence, and, as the lower
courts hâve hère found, the défendant was not prejudlced by the delay."
In the présent case, appellant immediately asserted his rights and
consistently and persistently sought their récognition.
Appellant in his déposition, which was received in évidence by the
court, had testified in considérable détail as to conversations that had
tal<en place between his mother and himself concerning the remodeling
of the house in question, and it was conceded by his counsel at the
hearing below that much of this testimony was inadmissible under the
statute of frauds. It is contended, however, that when such a dépo-
sition is offered it is within the power of the court to receive it with
the same efïect as though the party had been called to testify by the
court, as provided in section 1064 of the Code. This question was
before us in Ockstadt v. Bowles, 34 App. D. C. 58, but was not deter-
mined. Nor do we deem its détermination necessary hère, owing to
the view we take of the case, although appellant's déposition was regu-
larly taken and he was fully and carefully cross-examined by counsel
for appellees; in other words, the resuit was exactly the same as
though he had been called to testify by the court.
[2] It was not error for the court to permit Mr. EHckinson to
testify concerning ths letters from Mrs. Conkling to appellant, which
witness had read, and from which he had made extracts. He was
familiar with the handwriting of Mrs. Conkling, and it is apparent
from the testimony that the extracts are not garbled. Indeed, they
speak for themselves. But, as we do not détermine the power of the
trial court to consider ail of appellant's déposition, we must eliminate
from considération hère the letter which he found in his deposit box
after his mother's death, for the contents of that letter are established
by no other testimony. In so ruling, however, we do not wish to be
understood as casting any reflection upon the appellant, for the copy of
the letter produced by him bears indubitable évidence of authenticity.
[3] The évidence before us, then, amounts to this: Appellant un-
questionably had 18 bonds in a safe deposit box in the Fifth Avenue
Bank, to which his mother had access. It is apparent from her letters
to him that she eut the coupons from those bonds from time to time
and sent him the interest. It is further apparent, from the mother's
letters and from the unimpeached testimony of Mr. Bechtel, that as
the resuit of an understanding with her son she transf erred those bonds
624 262 FEDERAL REPORTER
from appellant's deposit box to her own deposit box in another bank,
and, in effect, subsequently converted them by investing the amount of
their value in the remodeling of the house in question. Just what the
arrangement was is difficult to détermine, but it is certain that neither
of the parties imderstood the transaction as a gift to the mother.
That the mother understood she was investing the proceeds of thèse
bonds for her son, and expected to account to him therefor, is too
plain to admit of question. It is quite probable that the mother in-
tended and the son understood that, after the repairs on the house
were completed with his money, the house would be deeded to him;
but, this not having been accomplished before the mother's death, we
think that under the évidence equity will be met by giving appellant
the relief he first sought, namely, by foUowing this fund into the prop-
erty and impressing thereon a trust in his favor. He therefore will
receive back the value of his bonds, with interest from the date of
the final payment on the house.
The decree is reversed, with costs, and the cause remanded, with
directions to enter a decree in conformity with this opinion.
Reversed and remanded.
SMYTH, Chief Justice (dissenting). The theory of the majority is
that the mother, pursuant to an agreement, "difficult to détermine," in-
vested the proceeds of certain bonds belonging to the son in the
remodeling of the house in question, and that she expected to account
to him therefor ; and on this theory a trust is impressed upon the house
in favor of the son. I might say at the outset that this is utterly out of
harmony with the son's testimony, for he does not claim anywhere
that the bonds belonging to him were converted into cash by the
mother and the proceeds invested in the house. On the contrary, he
says they were foxmd in his mother's safe deposit box after her death.
Some space is given to a letter written by the mother to the son, and
which was found in her safe deposit box after her death ; but, as it is
held that this letter is incompétent under the Code (section 1064), I
put it aside as of no conséquence.
When the son, at the âge of 23, left collège in 1885, his parents gave
him $50,000 in government bonds. According to the records of the
United States Treasury, thèse bonds were held by the son until April,
1900, at which time they were assigned by him in person, and were
afterwards received at the Treasury Department in Washington, "some
for transfer and some for rédemption for account of varions persons."
Subséquent to this he acquired, he said, nine Union Pacific, six Ches-
apeake & Ohio, and three Richmond & Banville Bonds, but the "larger
share of my [his] holdings was in Reading" bonds. He was unable to
give the number of the bonds, or any other description which would
distinguish them from other bonds issued by the same companies.
When he last saw them before his mother's death, they were, he said,
in his safe deposit box. He later contradicts this, as we shall see in a
moment, by saying that they were in his mother's box before her
death; that is, at the time he wrote the mémorandum referred to by
my Associates. When he next saw the box, which was a month after
CONKLINQ V. NEW YORK LTPE INS. & TRUST CO. 625
(262 F.)
his mother's death, they "were not ail there." The missing bonds
were the Union Pacific, Chesapeake & Ohio, and the Richmond &
Banville. He saw Union Pacific, Chesapeake & Ohio, and Richmond
& Danville bonds in his mother's box, but whether she then owned
bonds of that description, which she had not derived from him, he
could not tell. Over objection, he testified that the mémorandum
just mentioned, in which the Richmond & Danville, Union Pacific,
and Chesapeake & Ohio bonds are noted, was "partially in my hand-
writing and partially in my mother's" ; that the words "eut coupons"
and letters "S. B. C." were in her handwriting, and ail the rest was
in his, and added :
"I went to the Lincoln Safe Deposit Company wlth my mother one day and
helplng her with some papers there, and I told her that I thought thèse bonds
which she had of mine on account of this houge ought to be kept separately
from the rest, and I wrote that mémorandum and stuck It in an elastic. Those
bonds were together — I mean, separate from the rest of the bonds and papers
and varions accounts that she had in her box."
He thus testified to a transaction between him and the deceased, and
this, of course, was incompétent.
Nor is it shown by proper testimony that he found the mémorandum
among his mother's papers. With respect to that he said at the trial
that the appellee trust company "had taken possession of ail her pa-
pers and the contents of the box," and that he asked them "if they
would look through the papers and see if there was anything among
them which referred in any way to me" [him] ; that they went through
them, found the mémorandum, and delivered it to him. But whether
it was located in what had been the "contents of the box" or among
the other papers he does not say. True, he averred in an ex parte affi-
davit, which was put in évidence over the defendant's objection, that
he found the mémorandum in his mother's box; but such testimony
was inadmissible, and, besides, was in conflict with what he said at
the trial, as we hâve just shown. The mémorandum, then, must be
disregarded, for the reason that it was not properly authenticated.
We now come to consider the extracts taken by Dickinson from
letters written by the mother to the son. The dates of thèse letters are
not given by him; so we do not know when they were written. The
extracts are copied in the majority opinion, and need not be set out
hère in extenso. A summary will suffice. In one letter the mother
wrote that she was not ofïended, as he thought, by his inquiry about
the Washington house, but only felt that he should trust her, and
then observed that "the house will be worth more than $20,000, if
you [he] ever wanted to sell, as Washington property is always go-
ing up," and concluded by saying, "I will send you 4fo interest, so
that you will not lose anything there." In the second extract she ad-
monishes him to practice economy, and said that $2,000 more, and
the $20,000 would be completed. In the third and last extract she
says that she had been thinking over their talk about the bonds ; that
in her judgment it would be very foolish to hâve them sent to Paris;
that "it will not be long now before the house is finished and in your
name, anyway" ; and concludes thus :
262 F.— 40
626 262 FEDERAL BEPOBTER
"They [meanlug the bOEds] are as safe at the Uncoln as In your box, and
muoh more convenlent for me. If you insist, I will send them; but pleas»
do what I eay."
There is nothing in thèse extracts, I submit, which warrants the
conclusion that the mother had converted bonds of the son into cash
and had invested the proceeds in the house. Further comment could
not make this plainer.
With respect to Bechtel's testimony, he said on cross-examination
that the statement made to him by Mrs. ConkHng concerning the
house in Washington was that —
"The amount of payment made on aceount of the house was $20,000, and the
character of the payment was United States govemment bonds, and the pay-
ment was made in 1901 or 1902 ; I do not know whlch."
This is clearly a mistake. She could not hâve made such a state-
ment, because at that time her son did not hâve any government bonds
to give her, and the record clearly demonstrates that he never gave
her any government bonds for that purpose or any other. The Treas-
ury's statement, referred to above, shows that the govemment bonds
held by him were disposed of in 1900. Besides, the son does not say
that he gave his mother any government bonds, or that he ever ad-
vanced her any money. His contention is, as we hâve heretofore ob-
served, that she took his railroad bonds, which were found in her box
after her death. In view of this, Bechtel's testimony must be rejected
as unreliable.
This leaves the theory adopted by the majority as entirely without
support in the évidence. Especially is this true when we consider
that, in a case like the one before us, where the contract relied upon
rests partly in paroi and partly in disconnected excerpts from let-
ters written by the deceased, the proof "must be clear, definite and
conclusive. * * * " Purcell v. Miner, 4 Wall. 513, 517, 18 L. Ed.
435. See, also, Barbour v. Barbour, 51 N. J. Eq. 271, 29 Atl. 148;
Schuey v. Schaefïer, 130 Pa. 16, 18 Atl. 544; Krauth v. Thiele, 45 N.
J. Eq. 407, 18 Atl. 351.
In addition, on the theory of the son, as expressed in his bill and
testimony, the mother was the légal and équitable owner of the bonds.
He claims that in pursuance of his agreement with her she took the
bonds to reimburse herself for money previously expended upon the
house, and that she, in turn, was to convey the house to him, but failed
to do so — in other words, breached her contract to convey. In thèse
circumstances she was in no sensé a trustée of the bonds for him.
She owned them absolutely. On what principle, then, can it be held
that equity has the power to impress a lien on the house. It is familiar
law that, before this can be donc, two things must concur : (a) That
she was a trustée of the bonds ; and (b) that in some way they or their
proceeds were invested in the house. In Macy v. Roedenbeck, 227
Fed. 346, 353, 142 C. C. A. 42, 49 (L. R. A. 1916C, 12), it was said:
"That only so long as the trust property can be traced and followed Into other
property Into whlch It has been converted does It remaln subject to the trust"
See Illinois Trust & Savings Bank v. First National Bank (C. C.)
15 Fed. 858; Spokane County v. First National Bank of Spokane
WOODWAKD & LOTHEOP V. UNION TRUST CO. 627
(262 F.)
et al., 68 Fed. 979, 16 C. C. A. 81 ; Zenor v. McFarlin, 238 Fed. 721,
151 C. C. A. 571 ; In re See, 209 Fed. 172. 126 C. C. A. 120; City of
Lincoln v. Morrison, 64 Neb. 822, 90 N. W. 905, 57 L. R. A. 885 ;
Bradley v. Chesebrough, 111 lowa, 126, 82 N. W. 472; Hopkins et
al. V. Burr et al., 24 Colo. 502, 52 Pac. 670, 65 Am. St. Rep. 238;
Reeves v. Pierce, 64 Kan. 502, 67 Pac. 1108.
This is the gênerai rule, to which I find no exception. He neither
established a trust in the bonds nor traced them into the property,
but demonstrated the contrary by his own testimony. He may hâve a
claim at law against the estate for the value of the bonds, but he has
no standing in a court of equity.
For thèse reasons, I think the decree of the lower court should be
affirmed, and hence I dissent.
WOODWARD & LOTHEOP, Inc., v. UNION TRUST CO. OF ROCHESTER,
N. T., et al.
UNION TRUST CO. OF ROCHESTER, N. T., et aL V. WOODWARD &
LOTHROP, Inc.
(Court of Appeals of District of Columbla. Submitted December 1, 1919.
Declded Jonuary 5, 1920.)
Nos. 3260, 3261.
1. Mechanics' liens <S=»225 — Owneb paying monet into couet befobe suit
peoteoted.
Under Code of Law 1901, §§ 1239, 1246, 1254, 1255, provlding that an
owner may pay money demanded In méchante' s lien suit Into court and
be relleved from further liability, a payaient Into court by an owner
after a subcontractor had flled a lieu, but before suit had been started,
and later applled by the court to pay such subcontraetor's lien, constltutes
a substantial compllance with the statute, and the owner is not llable to
pay such sum a second tlme to the contractor's assignée.
2. Mechanics' liens <S=>268 — Owneb nebd not notify contbaotoe's as-
signées or subconteactob's suit.
An owner need not notlfy a contractor's assignées that a subcontractor
had instltuted a mechanlc's lien suit against it.
3. INTEEEST ®=1 NOT BECOVEEABLE WHEBE CEEDITOB PEEVENT8 PATMENT.
OrdlnarUy, Interest is not recoverable where payment is prevented by
the credltor.
4. Mechanics' liens ig=5l61(4) — Owneb not eequieed to pat inteeest on
BALANCE DUE C0NTEACT0R.
Where the aœount an owner owed a contracter was rendered uncer-
tain by the owner's daim that a substantial allowance should be made for
Inferior work and mechanlc's lien proceedlngs instituted by subcontractors,
held, that interest on the balance due from the owner to the contracter
was properly dlsallowed.
Smyth, Chlef Justice, dlssentlng.
Appeals from the Suprême Court of the District of Columbîa.
Mechanlc's lien proceedlngs by the Garden City Plating & Manufac-
turing Company against Woodward & Lothrop, Incorporated, in which
the Union Trust Company and the Central Bank, both of Rochester,
N. Y., intervened. From a decree sustaining exceptions to a spécial
^EsFor other cases see same toplc & KBY-NUMBER in aU Key-Numbered Dlgests & Indexée
628 262 FEDERAL EBPOKTEE
master's report, Woodward & Lothrop, Incorporated, appeal; and
from a decree overruling exceptions to the master's report, the inter-
veners appeal. Reversed on first-named appeal, and affirmed on the
second appeal.
B. W. Parker, of Washington, D. C, for Woodward & I^othrop, In-
corporated.
W. G. Johnson, of Washington, D. C, for Union Trust Co. of
Rochester, N. Y., and another.
ROBB, Associate Justice. Thèse appeals involve a decree in the
Suprême Court of the District sustaining certain exceptions and over-
ruling other exceptions to the report of a spécial master in a case grow-
ing out of a suit to enforce mechanics' liens.
In June of 1913 Woodward & Lothrop contracted with F. T. Nesbitt
Company, of New York, for the érection of a store building at Eleventh
and F. Streets, Northwest, in this city, and at about the same time
contracted with the John Hofman Company, of Rochester, N. Y., for
the furnishing and installation, for $31,000, of the store fixtures in the
new building and in parts of the adjoining old building. This installa-
tion was completed in December following.
During the month of September, 1913, and while the contract of
the Hofman Company was being executed, that company borrowed
sums of money from the Central Bank of Rochester aggregating more
than $16,000, for which it gave its promissory notes and executed as-
signments of money due and to become due from Woodward & Lo-
ihrop; the balance due under thèse assignments when the work was
completed being $9,280. During the same month the Hofman Com-
pany borrowed from the Union Trust Company of Rochester $5,000
under the same conditions, and there was a balance due under that as-
signment to this bank of $2,170 at the completion of the contract.
Shortly after the exécution of the above assignments the Hofman
Company became financially embarrassed, and on Novemher 8, 1913,
the company notified its creditors that a pétition for voluntary disso-
lution had been filed in New York, and that G. Albert Taylor had been
appointed temporary receiver. On December 26th following the com-
pany was adjudged a bankrupt, and Mr. Taylor subsequently was ap-
pointed trustée. On November 11, 1913, the Union Trust Company
notified Woodward & l,othrop of its assignment from the Hofman
Company, and on November 14th following wrote Woodward & Lo-
throp that it might disregard the former notice, and might make settle-
ment "direct with the receiver, G. Albert Taylor." The Central Bank
first notified Woodward & Lothrop of its assignment from Hofman &
Co. on January 13, 1914. On the same day the Union Trust Company
wrote Woodward & Lothrop, requesting direct payment to the bank
under its assignment.
Among the subcontractors of the Hofman Company was the Pitts-
burgh Plate Glass Company, ai}d on the 27th of December, 1913, it filed
in the court below its notice of lien in the sum of $3,286.53. On the
30th of December following an order was passed in the court below,
authorizing Woodward & Lothrop to pay into the registry of the court
WOODWABD & LOTHROP V. UNION TRUST CO. 629
(262 F.)
"the sum of $3,286.53 the amount of the claim of the lienor in thèse
proceedings, together with the sum of $200 to cover interest and costs" ;
the order fui-ther reciting that "upon the payment of said moneys in-
to the court in accordance with the terms of section 1254 of the Code,
the property shall be released, and the money so paid shall be subject
to the final decree of the court." On January 21, 1914, pursuant to
the provisions of the Code, the Pittsbiirgh Company filed its bill of
complaint in the court below to enforce the hen theretofore asserted.
Service was made on the Hofman Company hy publication and by notice
to their last known place of résidence in Rochester. Woodward &
Lothrop made answer, stating, among other things, that it was with-
out knowledge of the terms of the contract alleged to hâve been enter-
ed into between the Hofman Company and the Pittsburgh Plate Glass
Company, claimed that certain adjustments would be necessary, owing
to defective work by the Hofman Company, and directed attention to
the deposit it had made and to the bankruptcy of the Hofman Com-
pany. On February 4, 1915, about a year after the filing of its bill,
the court entered a decree confirming the lien of the plaintiflf, the Pitts-
burgh Plate Glass Company, in the amount claimed, and directing that
amount to be paid plaintiff or its attomey of record from the sum de-
posited in court, which payment thereupon was made.
Numerous other subcontractors of the Hofman Company filed notice
of Hens during December of 1913 and January of 1914, and on April
20, 1914, the Garden City Plating & Manufacturing Company, one of
thèse Henors, filed a bill for the enforcement of its lien against Wood-
ward & Lothrop and the Hofman Company, and also naming the other
lienors, including the Pittsburgh Plate Glass Company, as défendants.
In that bill were detailed the proceedings culminating in the decree in
f avor of the Pittsburgh Plate Glass Company.
On October 26, 1915, a decree pro confesso was taken against the
Hofman Company, and on November lOth following this decree was
set aside on motion of counsel for the Hofman Company. On the
same day the Hofman Company and the two banks, by leave of court,
filed intervening pétitions in the suit of the Garden City Company, one
of the banks claiming $9,280 and the other $2,170 under the assign-
ments already mentioned. Leave to file a similar pétition also was
sought and obtained by the trustée in bankruptcy of the Hofman Com-
pany, but no pétition was filed.
While the record does not definitely disclose who then represented
the banks, it is fair to assume that the counsel who obtained the setting
aside of the pro confesso decree, and thereby laid the foundation for
the filing of the intervening pétitions by the banks also represented
them. This inference is supported by the fact that since that time he
has represented the banks. The intervening pétitions of the two banks
are silent as to the averments in the main pétition concerning the suit
of the Pittsburgh Plate Glass Company; the allégation being merely
that the claims of the interveners are paramount to those of the plain-
tiflf or of any of the défendants. The cause was referred to a spécial
master, to report findings of fact and conclusions of law.
At the first session before the spécial master on November 15, 1915.
630 262 FEDERAL REPOETBR
which it will be observed was subséquent to the filing of tfae interven-
ing pétitions, it was stipulated between counsel for Woodward & Lo-
throp and counsel for the lienors that the balance due f rom Woodward
& Lothrop to the Hofman Company was $6,013.60, and that no claim
would be made against Woodward & L,othrop for any sum in excess
of the amount admitted to be due. Hearings were had before the spécial
master, and on September 30, 1918, his report was filed. The master
found that the furnishings supplied under the Hofman contract by the
various subcontractors, asserting their claims in the proceedings, were
not affixed to the realty, and hence were net fixtures within the meaning
of the mechanic's lien statute. He further found that the loans of the
two banks were made in good faith and that the assignments were not
affected by the bankruptcy proceeding; "that the pajment into court
in the mechanic's lien case of the Pittsburgh Plate Glass Company to
discharge an alleged lien, which would hâve been a cloud upon the title
of the said Woodward & Lothrop, Incorporated, having been paid by
order of the court to the alleged lienor, Woodward & LrOthrop, Incorpo-
rated, are not bound to pay the money over again." The master fur-
ther observed that "the assignées cannot complain of this resuit, because
their failure to give notice of their assignments to Woodward & Lo-
throp would be sufficient to protect the latter in making any lawf ul pay-
ment out of the fund." The master accordingly found the amount due
f rom Woodward & Lothrop to be the amount stipulated on November
15, 1915. The record does not disclose that any claim was made for
interest.
To this report the bank filed exceptions, claiming that Woodward &
Lothrop was not entitled to crédit for the money paid into court in the
Pittsburgh Plate Glass Company's suit, and that interest should hâve
been allowed on the balance due f rom Woodward &, Lothrop on Decem-
ber 30, 1913. The first of thèse exceptions was sustained, and the sec-
ond overruled. Accordingly, Woodward & Lothrop appealed from the
first, and the banks appealed from the second, ruling.
[1 ] We first will consider the appeal of Woodward & Lothrop. Un-
der the provisions of section 1239 of the Code a subcontractor is entitled
to a mechanic's lien, and that lien is declared by section 1245 to be su-
perior "to ail judgments, mortgages, deeds of trusts, liens, and incum-
brances which attach upon the building or ground affected by said lien
subsequently to the commencement of the work upon the building," etc.
This lien must be enforced by a bill in equity. Section 1246. Under
section 1254, when such a suit has been filed, the owner of the build-
ing affected "may be allowed to pay into court the amount claimed by
the lienor, and such additional amount, to cover interest and costs, as
the court may direct," or he may file a written undertaking, with sure-
ties to be approved by the court af ter notice to the défendant. "On the
payment of said money into court, or the approval of such undertaking,
the property shall be released from such lien, and any money so paid
in shall be subject to the final decree of the court." Section 1255 pro-
vides that a similar undertaking may be offered before any suit is
brought. The contention of counsel for the appellee banks is that the
payment into court by Woodward & Lothrop, having been made be-
WOODWARD & LOTHROP V. UNION TRUST CO. 63i
(282 F.)
fore the suit of the Pittsburgh Plate Glass Company was filed, was un-
authorized by statute.
The évident purpose of sections 1254 and 1255 is to enable the owner,
against whose building or fixtures a lien has been asserted, to be relieved
of the embarrassment of the lien through the payment into court of a
sum equal to the amount of the lien with interest and costs, or the filing
of an undertaking to cover that amount. Where admittedly an amount
is due the principal contractor, and the lien is asserted by a subcontrac-
tor, there is no contest between the owner and the subcontractor ; the
issue being restricted to the contractor and subcontractor. If the own-
er does not take advantage of thèse provisions of the Code for the re-
lease of the lien, the statute imposes upon him no duty to notify the
contractor of the pendency of the subcontractor's suit. In the présent
case, had Woodward & Lothrop failed to take advantage of the provi-
sions of either of thèse sections of the Code, the resuit would hâve been
exactly the same, for, after the Pittsburgh Company had obtained a
final decree confirming its lien, Woodward & Lothrop would hâve beei*
fully protected in satisfying that decree.
How, then, were the banks prejudiced in any way by what actually
was done? The Pittsburgh Company had asserted its lien, the court
authorized the payment into its registry of the amount claimed, and
when the suit was filed that amount was in court, where it was treated
as a deposit under the statute, and from that time on exactly the same
procédure was followed as though the filing of the suit had preceded
the deposit. In substance and eiïect there was a compliance with the
terms of the statute. To hold otherwise would be to prefer form to
substance, and impose upon the owner a duty not contemplated by the
statute. It will be observed that no notice is required under section
1254, where a money payment is made by the owner ; the theory evi-
dently being that cash speaks for itself , and that no one possibly could
be prejudiced by the substitution of cash for the obligation of the owner
to pay the amount due under its contract. It was for this reason that
section 1255 makes no mention of a cash payment. The object of the
filing of an undertaking is to release the property from the lien and
to satisfy the final decree. When the suit of the Pittsburgh Company
was instituted, therefore, the court had a right to treat the payment of
Woodward & I^othrop as a payment made on account of that suit.
There the responsibility of Woodward & Lothrop ended, for money
thus paid into court no longer is under the control of the owner, but of
the court.
[2] Counsel for the banks contend that Woodward & Lothrop
should bave notified them of the suit of the Pittsburgh Plate Glass
Company. It is significant, this being a proceeding in equity, that in
their intervening pétition the banks did not allège their lack of knowl-
edge in this connection. Moreover, on December 12, 1913, the re-
ceiver of the Hofman Company, in a letter to Woodward & Lothrop,
armounced his purpose to come to Washington on a day certain to
"straighten eut the tangle." To do this he was to interview "the at-
torneys acting for Hofman creditors." On January 14, 1914, after
the receiver had been appointed trustée in bankruptcy, he notified
632 262 FBDBRAL BBPORTKB
Woodward & Lothrop that, inasmuch as the banks "were the chief
parties at interest," he would turn the facts in his possession over to
them. It is inconceivable, in the circumstances, that thèse banks should
hâve made no inquiry during the year intervening hetween the filing of
the suit of the Pittsburgh Company and the decree under which its
hen was confirmed and payment made out of the registry of the court
in satisfaction of the decree. Such quiescence is net customary with
banks. But, however that may be, Woodward & Lothrop owed them
no duty in the premises. The suit was of record, and their remedy, if
any, must hâve been obtained therein.
Counsel assert that it should hâve been ruled in this proceeding that
the asserted lien of the Pittsburgh Plate Glass Company was without
foundation. That question was not hefore the court, having been
finally adjudicated in another proceeding.
[3, 4] We now will consider the appeal of the two banks from the
action of the court in disallowing interest. It is a gênerai rule that in-
terest is not recoverable where payment is prevented by the act of the
creditor. Thompson v. Boston & Maine R. R., 58 N. H. 524; Le
Branthwait v. Halsey, 9 N. J. l,aw, 4; Bowman v. Wilson (C. C.) 12
Fed. 864. In the présent case it is insisted that Woodward & Lothrop
might hâve paid the money into court by filing an intervening pétition.
It is apparent from the foregoing récital of the facts that the situation
was decidedly complicated. Woodward & Lothrop claimed a very sub-
stantial allowance on account of poor work, and this allowance ulti-
mately was made. That Woodward & Lothrop were endeavoring to
avoid unnecessary delay and expense apparently was recognized by
counsel for the lienors when, in November of 1915, they entered into
a stipulation to the effect that no interest would be demanded. The
banks then had intervened, and at no time prior to the filing of the
report of the spécial master did they raise any question as to interest.
Woodward & Lothrop were innocent parties, and they hâve been com-
pelled to incur a very considérable expense in protecting their interests.
They at ail times were ready to pay the amount they really owed, and
the delay was through no fault of theirs. We think the court below
was right in disallowing the claim to interest.
The decree in No. 3260 is reversed, with costs, and the cause remand-
ed for a decree in conformity with this opinion. The decree in No.
3261 is affirmed, with costs.
No. 3260 reversed.
No. 3261 affirmed.
Mr. Chief Justice SMYTH is of the view that payment into court
by an owner, being a statutory right, must be in strict conformity with
the statute, and he therefore dissents from the opinion and decree of
the court in appeal No. 3260. In appeal No. 3261, he is of the view
that Woodward & Lothrop, having had the use of the balance due,
should pay interest, and he therefore dissents from the opinion and
decree of the court in that cause.
MBABNS V. SULLIVAN 633
(262 F.)
MBARNS V. SULLIVAN (two cases).
(Court of Appeals of District of Columbla. Submltted December 2, 1919.
Deolded January 5, 1920.)
Nos. 3275, 3276.
1. Appeal and erbok "©=>71(4) — Receiveks <S=:358 — Partt without notice op
obdee appoinïing mat petition for revocation, and appeai, from de-
nial of petition.
A party, without notice or opiwrtunity to answer a pétition seeklng
appolntment of receivers, may pétition for revocation of the appoint-
ment, and, under Code of Law D. C. 1901, § 226, appeal from a déniai of
hls pétition.
2. Appeal and eeeoe <s=>71(4) — Interlocutoet obdeb in beceiveeship peo-
CEEDINGS NOT APPEALABLE.
T^'here an order appolnting receivers dlrected appellant to turn orer
certain money to them, a subséquent order In the recelvershlp proceed-
Ings, reiterating the direction that appellant pay the money to the re-
ceivers, is not appealable, under Code of Law D. 0. 1901, § 226, allowlng
appeals from Interlocutory orders In whlch "the possession of property is
changed or afCected."
3. Contempt i®=66(2) — Ordeb in eeceivebship pboceedings not appealable.
A contempt order in recelvership proceedings, punlshing appellant for
hls refusai to turn over certain funds to the receiver, pursufint to other
orders of the court, Is not appealable, under Code of Law D. C. 1901, §
226, mailing certain Interlocutory orders appealable.
Appeal from the Suprême Court of the District of Columbia.
Two proceedings by George E. Sullivan, receiver, agalnst William
A. Mearns. From adverse orders, Mearns appeals. Appeals dis-
missed.
C. H. Merillat and Henry E. Davis, both of Washington, D. C, for
appellant.
Geo. E. Sullivan, of Washington, D. C, pro se.
VAN ORSDEL, Associate Justice. A suit in equity was brought
in the Suprême Court of the District of Columbia by one Morril B.
Spaulding against the International Sales Corporation, William A.
Mearns, its président, and other officers and stockholders of the cor-
poration. In the course of the proceedings receivers were appointed,
to take over certain money of the corporation alleged to be in the pos-
session of appellant, Mearns, and hold it pending the equity litigation.
Thèse appeals are from orders made in proceedings instituted hy ap-
pellee Sullivan, surviving receiver, to compel Mearns to comply with
the order appointing the receivers. After a séries of proceedings un-
der the receivership, in which Mearns responded by answers to rules
to show cause and otherwise, the court made the order appealed from
in No. 3275, requiring him to pay over to the receiver, out of the
money found by the order appointing the receivers to belong to the
corporation, the sum of $3,878.30.
[1] It is unnecessary to consider the validity of the order under
which the receivers were appointed, since the case tums upon a ques-
tion of jurisdiction. Section 7 of the Act of Congress of February 9,
^s^jFor other cases see same topio & KBY-NUMBBR in aU Key-Numbered Dlgests & Indexes
634 262 FBDBBAL REPORTER
1893 (27 Stat. 434; Code D. C. § 226), conferring jurisdîction upoi>
this court, among other things, provides :
"Appeals shall also be allowed to sald Court of Appeala from ail Interlocu-
tory orders of the Suprême Court of the District of Columbia, or by any jus-
tice thereof, wliereby the possession of property Is changed or affected, such
as orders for the appolntmient of recelvere, granttag Injunctlons, dissolvlng
writs of attachment, and the llke; and also from any other interlooutory
order, la the discrétion of the said court of appeals, whenever It is made to
appear to said court upon pétition that It will be In the Interest of Justice to
allow such appeaL"
This appeal is net from the order appointing the receivers, but from
an order made in the course of the receivership proceedings. While
it is true that appellant, Mearns, had no notice of or opportunity to an-
swer the pétition asking for the appointment of receivers, and there-
fore no opportunity to appeal directly from that order, his proper
course, if he objected, was to hâve filed a pétition seeking its revoca-
tion, and, if the court had denied the pétition, he could then hâve ap-
pealed from that order.
But that is not what was donc. Mearns, instead of making timely
objection, defended in the receivership proceeding, until the order com-
plained of was entered. The order in which "the possession of prop-
erty is changed or affected" is not the order appealed from, but the
original order for the appointment of receivers. That order directed
the receivers —
"to take over and hold pendente lite, or until the further order of the court,
that part or portion claimed by the plaintiff, as averred in the bill of com-
plaint herein, ail the profits heretofore and hereafter derived from the certain
contracts referred to in said bill."
[2] The order hère appealed from is merely a supplemental order
directing Mearns to turn over a certain spécifie amount of the money
found by the court in the original order to belong to the corporation,
and which, in the order of appointment, the receivers were directed to
take over and hold pending the equity litigation. It is, in effect, in so
far as it goes, a répétition of the original order. It is not, therefore,
a final order, or such an interlocutory order as is contemplated by the
statute conferring gênerai appellate jurisdiction upon this court.
[3] The appeal in No. 3276 is from an order adjudging Mearns in
contempt of court by reason of his f ailure and refusai to comply with
the order appealed from in No. 3275. This order is to enforce com-
pliance with the order requiring him to turn over the money. It is
the exercise merely of an inhérent jurisdictional prérogative employed
by courts as a last resort to compel obédience to their orders. Such
an order is not final. The extent of its duration dépends upon the
powers of résistance displayed by the contemnor, with whom its dis-
charge is wholly lodged. The discharge of the former order will dis-
charge the latter. They are both interlocutory in the course of the
receivership proceedings.
For the reasons stated, the court is without jurisdiction in either
case, and the appeals are dismissed.
Dismissed.
APPLICATION OF STEPHBNS-ADAMSON MPQ. CO. 635
(262 F.)
In re MAOLIN-ZIMMER-McGILL TOBACCO CO., Inc.
(Court of Appealfl of District of Columbla. Submltted November 10, 1919.
Declded January 5, 1920.)
No. 1241.
T&ADE-MÂBKS AND TEADE-NAMKS <g=43 — BEOISTEATION OÏ ENOLIBH NAMK PBB-
CLUDES SPANISH EQUIVALENT.
"El Gallo," whicb Is Spanish for "The Rooster," cannot be registered as
a trade-mark, where the words "Dur Booster" and a picture of a rooater
had been previously registered for the same goods by another concern.
Appeal from the Commissioner of Patents.
Application by the Maclin-Zimmer-McGill Tobacco Company, In-
corporated, to register a trade-mark. From a décision refusing regis-
tration, the applicant appeals. Affirmed.
Henry M. Wise, of New York City, for appellant.
T. A. Hostetler, of Washington, D. C., for appellee.
ROBB, Associate Justice. Appeal from a Patent Office décision
refusing registration to the words "El Gallo," as a trade-mark for
tobacco.
"El Gallo" is the Spanish for "The Rooster," and it appears that
"Our Rooster" and a picture of a rooster hâve been registered as a
trade-mark for tobacco by another concern. In Nestlé & A. S. C. Milk
Co. V. Walter Baker & Co., 37 App. D. C. 148, 152, we ruled that
"Milkmaid" and a pictorial représentation of a milkmaid meant the
same to the public, and that the "right to employ one necessarily in-
cludes the right to employ both." It matters net that appellant has em-
ployed the Spanish language, instead of English. In re Bradford Dye-
ing Ass'n, 46 App. D. C. 512.
The décision was right, and is affirmed.
Affirmed.
Application of STEPHENS-ADAMSON MFG. CO.
(Conrt of Appeals of District of Columbla, Submltted November 13, 1919.
Declded January 5, 1920.)
No. 1259.
1. TBADE-MABK8 AND TBADE-NAMES <S=»44 APPUOATION MAT BE AMENDED BY
STBIKINO OUT WORD.
A trade-mark application to register the words "Unit Carrier" for roUer
brackets for belt conveyers may be amended by striklng out the word
"carrier."
2. Teade-mabks and tbade-names <g=>3(4) — "Unit" as teade-mabk foe eoll-
EB BBACKETS foe BELT CONVETEBS NOT DESCEIPTIVE.
The word "Unit," as a trade-mark for roller brackets for belt conveyers,
Is entitled to registration against the objection that It Is descriptive.
Appeal from a Décision by the Commissioner of Patents.
Application by the Stephens-Adamson Manufacturing Company to
register a trade-mark. From a décision by the Commissioner of Pat-
ents, denying the application, the applicant appeals. Rêver sed.
<g=>For other cases see same topio & KEY-NUMBER In ail Key-Numbered Dlgesta & Indexes
63€ 262 FBDBRAL REPORTER
I/. K. Gillson and C. B. Gillson, both of Chicago, 111., for appellant.
T. A. Hostetler, of Washington, D. C, for appellee.
SMYTH, Chief Justice. [1] The Stephens-Adamson Manufactur-
ing Company applied to hâve the words "Unit Carrier" registered as
a trade-mark for roller brackets for belt conveyers ; but the application
was denied, on the ground that the words were descriptive. While
the application was pending a motion for leave to strike out of the
mark the word "Carrier" was overruled by the Commissioner of Pat-
ents. According to the décisions of this court (In re Beckwith, 48
App. D. C. 1 10, and authorities there ref erred to), this was error.
[2] Considering the mark as embracing merely the word "Unit,"
the question as to whether or not it is descriptive is a close one. We
hâve sustained the word "Cream" as a valid trade-mark for baking
powder over the objection that it was descriptive. And the folio wing
words hâve been upheld: "Holeproof," as applied to hosiery (Hole-
proof Hosiery Co. v. Wallach Bros., 172 Fed. 859, 97 C. C. A. 263) ;
"Cream," as applied to rolled oats (Albers Bros. Milling Co. v, Acme
Mills Co. [C. C] 171 Fed. 989); "Anti-Washboard," as applied to
soap (O'Rourke v. Central City Soap Co. [C. C] 26 Fed. 576); and
many others, equally suggestive, referred to in the last case, where
the opinion is by Judge Brown, afterwards Mr. Justice Brown of the
Suprême Court of the United States. He said of the words "Anti-
Washboard" that they were not objectionable, "although the natural
inference from them is that by the use of the soap the necessity of
rubbing cloths is obviated." Continuing he ruled :
"We Incline to the opinion that they are rather suggestive than descriptive,
and that they may be properly claimed as a trade-mark."
It may be said that a mark to be suggestive must contain some
élément of descriptiveness ; but if this be true, it seems from the
foregoing décisions that this does not render it obnoxious to the law.
The word "Unit" is not descriptive, therefore, because it may suggest
to the mind that the carrier, consisting of three rollers, moves as one.
Standing alone, it does not necessarily indicate "a plurality of similars."
It refers as well to a single person or thing. Standard Dictionary,
1913. In electricity we speak of a unit current — one in which a unit
quantity of electricity flows in unit time.
We think, therefore, that the applicant company, upon eliminating
the word "Carrier," is entitled to hâve the word "Unit" registered as
a trade-mark for the goods mentioned in its application.
The décision of the Commissioner is reversed.
Reversed.
TUENBE V. HENNINQ 637
(262 F.)
TURNER V. HENNING.
(Court of Appeals of District of Columbla. Submltted December 2, 1919.
Declded January 5, 1920.)
No. 3271.
1. CONTEACTS ®=s295(l) — CONTEACTOB INTENTIONALLT DEPATTLTING CANNOT
INVOKE DOCTRINE OF SUBSTANTIAL PERFORMANCE.
In a mechanlc's lien proceeding, plaintiff contractor, who intentionally '
failed to observe portions of the building spécifications and repeatedly
refused to remedy the defects, Is net entltled to the benefit of the équitable
doctrine of substantial performance.
2. Damages ©=123 — Ownee may deduct entiee cost of compltino wiTir
SPECIFICATIONS.
Where contractor intentionally falls to observe a portion of the build-
ing spécifications, the owner may deduct the entire cost of making the
building conform to spécifications, and is not required to deduct merely
the dlfCerence between value of the work as done and its value if it had
been performed pursuant to the spécifications.
Appeal from the Suprême Court of the District of Columbia.
Mechanic's lien proceeding by Watkins L. Turner against Samuel
Cari Henning. Decree for plaintiff, and he appeals. Affirmed.
H. W. Wheatley, of Washington, D. C, for appellant.
Edmund Brady, of Washington, D. C, for appellee.
SM YTH, Chief Justice. [ 1 ] Turner instituted a suit against Hen-
ning to foreclose a mechanic's lien for $940, a balance said to be due on
a contract with Henning for the construction' of a dwelling house for
the latter. From a decree deducting several items from his daim,
and awarding him only $59, less the costs, Turner appeals.
The contract followed a form usually employed by building con-
tractors. It provides that the sum agreed upon "shall be paid by the
owner to the contractor* in current funds, and only upon certificates of
the architect."
Appellant alleged in his bill that he had completed the building in
"strict and fuU accordance" with the contract, except in certain minor
particulars consented to by the owner, and that "the architect arbi-
trarily, unreasonably, and without just cause declined to give a certifi-
cate." The owner in response denied that the contract had been per-
formed according to its terms, and asserted that in many respects, de-
tailed by him, the contractor failed and refused to do what was required
of him, and prayed that the bill be dismissed.
The court deducted from the sum claimed by the appellant the cost
of reconstructing the parts which it found were not in accordance with
the contract. The testimony of the architect, supported by that of
several other compétent witnesses, satisfies us that the contractor in-
tentionally failed in the respects mentioned in the decree. This is
illustrated by the f oUowing instances : The spécifications called for a
concrète floor in the cellar, consisting of a one-inch topping with a
three-inch base, making four inches in ail. But the floor laid did not
€=3For other cases see same toplc & KEY-NUMBBR in ail Key-Numbered Digests & Indexes
638 262 FŒDURAIi BBFOBTBB
have an inch topping and measured only from 1^ to ly^ inches in
total thickness. Upon little pressure a pick punctured the surface.
If the floor was constructed as the contract required, the pick "could
not have made any more than just a slight impression, and sparks
would have responded from the pick," said an architect of more than
thirty years' expérience. "The porch" of the building, testified the
architect in charge, "was to be finished with a master builders' prépara-
tion for a red top, but when it was finished it lacked the coloring.
It was mottled and a duU red, not the kind he expected. * * *
There was a great deal of the black color on the west side under the
covered portion. * * * and when completed it gave the appear-
ance that lamp black or something else had been worked into it. It was
very much disfigured." Appellant repeatedly refused to remedy thèse
and the other defects.
Under this state of the proof he is not entitled to the benefit of
the équitable doctrine of substantial performance. That doctrine —
"is intended for the protection and relief of those who have faitMully and
honestly endeavored to perform their contracts in ail materlal and substan-
tial particulars, so that their right to compensation may not be forfelted by
reason of mère technical, inadvertent, or unimportant omissions -or defects.
It is incumbent on hlm who invokes ils protection to présent a case In which
there bas been no willful omission or departure from the terms of his con-
tract" Gillespie, etc., v. Wilson, 123 Pa. 19, 16 Atl. 36.
[21 Appellant urges that, if the work was defective, the owner
should have been allowed only the différence between the value of
it as donc and the value of it if performed in accordance with the con-
tract. Is this Sound? The owner did not want a cellar floor, nor a
porch such as we have described, and he should not be required to
pay for them, but this is what would resuit if appellant's theory as
to the measure of damages is followed. Appellant did not do the
things for which appellee agreed to pay him, and he should not be
permitted to thrust upon the latter things not substantially the same,
but much inferior, even though he is willing to let him have them at
a reduced price.
In our judgment the correct rule of damages in a case like the one
before us is anneunced in Morgan v. Gamble, 230 Pa. 165, 79 Atl.
410, and Long v. Owen, 21 Idaho, 243, 121 Pac. 99, Ann. Cas. 1913D,
465. in the Morgan Case it is said that the contract provided :
"That Aome antl-rust palnt should be used for the tin painting, but in direct
violation of this provision of the agreement the plalntlfif used Prlneess' metal-
lic palnt. He does not assign any reason for a change In the palnt, but ofCered.
and was permitted, to show on the trial that the palnt he used was as good
as that provided In the agreement. The défendants had a right to Insist upon
the substantial performance of thèse express stipulations of the contract, and
the plaintiff was not relieved from this duty by reason of the fact * * •
that the paint used by the plalntlfif was of the same or a better quality than
that provided In the agreement"
Further on, speaking of the action of the contractor in substituting
an iron for a strong lead water pipe, the court said :
"Unless we hold that the contractor had the right to thus change the spécifie
stipulation in the agreement, and use his own Judgment Instead of that of
T0BNER V, HENNma 639
(262 F.)
the défendants as to the pipe to be laid, we must requlre Mm to pay to the de-
fendants, not the différence between the Iron and lead pipes, but the cost of
laying a lead pipe as provlded In the agreement. This is the proper measure of
damages."
The Long Case involved the construction of a sidewalk, which was
defective in some particulars, and also failed to meet the requirements
of a city ordinance. The court said in reversing a judgment for the
contractor :
"If upon a new trial the respondent [contracter] has not yet repalred or re-
oonstructed the walk so as to meet the substantial requirements of the ordi-
nance, there should be deducted from the contract prlce a sufflclent sum to
place the walk in condition that it will substantially comply wlth the spécifica-
tions prescribed by the city authoritles."
We think it proper, however, to add that in our judgment the cost
should always be the équivalent of the prevailing market value of the
things omitted.
At the bar it was argued that if the owner had removed the de-
fective parts and replaced them according to the contract, he might be
entitled to deduct the cost of the replacement; but, because he did
not do so, but is keeping thèse parts and using them, he should pay
their value. We cannot accède to this. Appellee, after appellant had
refused to perform his contract, had his élection either to use those
parts or take them up and throw them away. Neither course would
resuit in £my benefit to the appellant; therefore, he could not be in-
jured by appellee's taking the one course rather than the other. If
the latter could return to the appellant the defective things, the rule
might be otherwise (Mack v. Sloteman [C. C] 21 Fed. 109 ; Watson v.
Bigelow Co., 77 Conn. 124, 58 Atl. 741), but obviously he could not
do so. To remove them would be to destroy them.
To enjoy the house for which appellee had paid nearly $8,000, he
was compelled to use, more or less, the defective parts. This did not
work an acceptance of them, since they were negligible as compared
with the whole, and he had repeatedly said to the appellant that he
would not accept them. Equity will not penalize him, in the circum-
stances, by compelling him to pay for that which he does not want.
Nothing we hâve said is in conflict with Mercantile Trust Co. v.
Hensey, 27 App. D. C. 210. That was an action by the owner for
damages because, as claimed, the contractor had not completed the
buildings as required by his contract. The owner accepted the build-
ings and sued for the différence between their value as they were and
their value if constructed as agreed. Of course, the measure of dam-
ages was the différence between the two values. This must be so in an
action of that character. Moulton v. McOwen, 103 Mass. 587 ; White
V. Brockway, 40 Mich. 209, cited by appellant. But it is otherwise
where, as hère, the plaintiff bottoms his suit on the assumption that
he had fuUy performed his contract. Unless he establishes that, or
at least a substantial performance, he must fait.
The law of damages, strictly speaking, has no relation to the issue.
Appellant relied upon fuU performance. In this he failed. The rule
adopted by the trial court substituted what the things omitted would
640 262 FBDBBAL REPORTES
cost for the things themselves, and deducted the amount from the
sum to which the appellant would otherwise be entitled under his
contract. This is in accord with the décisions referred to, as well as
with Sound reason.
The lower court was right, and its decree is affirmed, with costs.
Affirmed,
PAUIi F. BEICH CO. v. KELLOGG TOASTED CORN FLAKES CD.
{Court of Appeals of District of Columbla. Submitted November 14, 1919.
Deelded January 5, 1920.)
No. 1265.
Tkade-maeks and tbade-names <g=343 — "Golden Cbumbles," used on candy,
NOT INVALIDATED BT PBIOB USE OF "KRUMBLES" ON CEBEAM.
The trade-mark "Golden Crmnbles," used on candy since 1915, was
not invalldated by the opposing party's use of the word "Krumbles" for
oereal breakfast foods since 1912, and on candy slnce 1916, since the es-
sential charaeteristica of breakfast foods and candy are différent, and
there was no proof that cereal breakfast food manufacturera usually en-
gagea in producing candy.
Appeal from a Décision by the Commissioner of Patents.
Proceeding in the Patent Office by the Kellogg Toasted Corn Flakes
Company to cancel a trade-mark of the Paul F. Beich Company.
From a décision sustaining the pétition, défendant appeals. Reversed.
Jas. L. Steuart and S. R. Perry, both of New York City, for appel-
lant.
W. H. C. Clarke, of New York City, for appellee.
ROBB, Associate Justice. Appeal from a Patent Office décision sus-
taining appellee's pétition for the cancellation of appellant's trade-
mark "Golden Crumbles," which it had used on candy since February
of 1915.
It appears that the words "Golden Crumbles" were suggested by the
color of the candy and its tendency easily to crumble. A very con-
sidérable business soon was established. Appellee, in 1912, adopted
the word "Krumbles" as a trade-mark for a cereal breakfast food.
In April of 1916, more than a year subséquent to appellant's adoption
of its mark, appellee commenced using its mark on a confection. It
contends that this was a legitimate and natural expansion of its busi-
ness. We do not think so. Quaker Oats Co. v. Mother's Macaroni
Co., 41 App. D. C. 254. The acting Examiner of Interférences perti-
nently observed that there is no "proof to the effect that manufacturers
of cereal breakfast foods are in the habit of engaging in the produc-
tion of candy." Moreover, the gênerai and essential characteristics of
breakfast foods and candy are différent, and we are of opinion that
the use of a mark by a dealer in one leaves its use open to a manu-
facturer of the other.
The décision is reversed.
Reversed.
KBNNICOTT V. CAPS Wl
(262 V.)
KENNICOTT v. CAPS.
(Cîourt of Appeals of District of Columbla. Submltted Norember 10, 1919.
Decided January 5, 1920.)
No. 1242.
Patents ©=113 (7) — Concubeent décisions of Patent Office tbib-onals
will not be disiuebed.
The concurrent décisions of the three Patent OflSce tribimals, in inter-
férence proceedings, that one of the parties had failed to show diligence
in seeking to amend, and in awarding priority, will not be disturbed, where
supported by compétent évidence.
Appeal from a Décision by the Assistant Commissioner of Patents.
Interférence proceeding in the Patent Office between Cass L. Ken-
nicott and John E. Caps. From a décision awarding priority to Caps,
Kennicott appeals. Affirmed.
Frances M. Phelps, of Washington, D. C, and Frank A. Howard,
of Chicago, 111. (Dyrenforth, Lee, Chritton & Wiles, of Chicago, III,
on the brief), for appellant.
Joseph H. Milans and Calvin T. Milans, both of Washington, D.
C, and Rudolph W. Lotz, of Chicago, 111., for appellee.
SMYTH, Chief Justice. The Assistant Commissioner of Patents
awarded priority of invention to Caps in an interférence between his
application and that of Kennicott, and the latter appeals. Improve-
ments in an apparatus for softening water constitute the subject of
the invention. There is only one count of the interférence. It reads :
1. In a water-softening apparatus a reagent druin, means for passing water
to be softened through the reagent in said drum, a water meter for measuring
the water flowing through the said drum, a valve for shutting off the How of
water through the drum, and means opérable by said meter for actuating the
said valve.
Caps alleged conception in January, 1915, and disclosure in February
following. He filed his application in June, 1916. Kennicott in his
original preliminary statement claimed that he had conceived the in-
vention and reduced it to practice in December, 1915. His application
was filed in March following. He is, therefore, the senior party.
After Caps' testimony had been completed, and Kennicott knew the
dates claimed by him, he sought leave to amend his statement by al-
leging conception in February, 1914, nearly two years before the date
first claimed, and about a year anterior to Caps.
The three tribunals of the Office concurred in denying leave to
amend, on the ground that he had failed to show diligence in discover-
ing the assumed error in his first statement. They also concurred in
holding, on the question of fact presented, that Caps was the first to
conceive, and, being diligent thereafter, and up to the time of the fil-
ing of his application, was entitled to priority. It is a well-settled rule
of décision in this court that where the tribunals of the Office concur
with respect to the proper solution of a question of fact we will not
^=:3For other cases see saine topio & KEY-NUMBER In ail Key-Numbered Dlgesta & Indexes
262 F.-^l
Sé2 262 FBDBBAL RBFOBTEB
disturb their action, if there is any compétent évidence to sustain it
Greenawalt v. Dwight, 49 App. D. C. — , 258 Fed. 982, and cases
there cited. We think the évidence hère amply satisfies the rule,
and therefore we affirm the décision of the Assistant Commissioner
of Patents.
Affirmed.
HOPKINS V. KIEGGBR.
(Court of Appeals of District of Oolumbla. Submltted November 12, 1919.
Decided January 5, 1920.)
No. 1256.
Patents <S=>112(4) — Conctjeeent décisions of Patent Office tkibttnals con-
clusive, unless cijeablt wbong.
The concurrent décisions of the three Patent OflBce tribunals in award-
Ing priority In an interférence proceedlng will not be reversed, unless mani-
festly wrong.
Appeal from a Décision by the Commissioner of Patents.
Interférence proceeding in the Patent Office betv/een Arthur T.
Hopkins and Constantin Riegger. From a décision awarding priority
to Riegger on ail coimts except one, Hopkins appeals. Affi,rmed.
Chas. S. Jones, Clarence O. McKay, and W. Lee Helms, ail of New
York City, for appellant.
C. L. Sturtevant, of Washington, D. C, and Oscar W. Jefïery, of
New York City, for appellee.
SMYTH, Chief Justice. This is an interférence involving nine
counts, which cover a subject-matter that relates to a tank bail or rub-
ber float valve for the outlet in toilet flush tanks. The Commissioner of
Patents awarded priority to Riegger on ail the counts except No. 9,
which was given to Hopkins, and the latter appeals.
Counts 1 and 4 illustrate the character of the invention. They are
as f ollows :
1. A tank bail fonned with a seat engaging portion of flexible rubber, an
upper portion of flexible rubber, and a reinforcement formed of rubber com-
iwsltion vulcanlzed to the upper portion for preventlng the collapslng thereof,
eald reinforcement belng formied with an annular enlargement opposite the
juncture of the seat engaging portion and the upper portion.
4. A float bail valve formed with a flexible seat portion, an upper portion, a
separate stiffenlng member arrangea interiorly of sald upper portion to pre-
vent the coUapsing thereof, and also to prevent the collapslng of the upper edge
of the seat portion, and a reinfordng member arrangea at the juncture of the
■upi)er portion and the lower portion, said relnforclng member overlapping
sald stflïenlng member for provldtng a substantlally rlgid joint.
The thing about which the controversy centers, as we hâve just stat-
ed, is a bail, the lower part of which is made of soft white rubber, and
the top of like material reinf orced on the inside with a hard black rub-
ber core cemented and vulcanized to it. In order that the joint be-
tween the two parts may not separate easily, the upper part is carried
^ssFor other cases see same toplc & KBT-NUMBEÎR in ail Key-Numbered Dlgeets & Indexes
IN EE SMITH 643
(262 F.)
down to and across the edge of the lower part, while a reinforcing
strip embraces the lower edge of the shell and is vulcanized to the up-
per and lower portions of the bail.
Both parties claim the inventive idea, each asserting that the other
derived it from him. There is évidence tending to support the cause
of each, but it is not necessary for us to go into an analysis of it. The
three tribunals of the Patent Office decided in favor of Riegger.
Where they concur, the question being one of fact, as hère, we will
not review the Commissioner's décision, unless it be manifestly wrong
(Greenawalt v. Dwight, 49 App. D. C. , 258 Fed. 982, and cases
cited), and we cannot say that it is in the case before us.
For this reason the décision of the Commissioner must be affirmed.
Affirmed.
In re SMITH.
(Oonrt of Appeala of District of Columbia. Subraitted November 13, 1910,
Decided January 5, 1920.)
No. 1258.
1. Patents <S=5>26(1) — Combination of mechanical équivalents is hot iir-
VKNTION.
A combination of appUcant's previously patented aéroplane with hy-
droplane features known to the prior art is not patentable, since assembling
the mechanical équivalents of features old in the art lato a single struc-
ture does not constitute invention.
i. Patents ©=113(2) — Décision dentinq amendment afteb taking appeal
NOT beviewabub:.
The action of the Commissioner of Patents in denying a pétition for
rehearlng, seeklng permission to substitute new claims for those denled,
and which was flled after an appeal had been taken from the rejection of
the original claims, is not reviewable, since the case had passed beyond
the Commissioner's jurisdlction when the rehearing pétition was present-
ed, and no proper final judgment on the patentability of the substitute
claims was presented for review.
3. Patents <S=>113(2) — Final décisions bexîaedino patentability necessary
rOE KEVIEW.
An appeal lies only from a final décision of the Commissioner on the
issue of patentability.
Appeal from a Décision of the Commissioner of Patents.
Patent application proceeding by Rexford M. Smith. From a dé-
cision denying the application, the applicant appeals. Affirmed.
E. S. Clarkson, of Washington, D. C. (C. C. Hines, of Washington,
D. C, of cotmsel), for appellant.
T. A. Hostetler, of Washington, D. C, for appellee.
VAN ORSDEL, Associate Justice. This appeal is from a décision
of the Commissioner of Patents denying the application of appellant
for a patent on improvements in hydroaeroplane construction.
The application is in 41 claims, ail of which were considered by the
tribunals of the Patent Office, and refused, in the light of the prior
4=sFor other cases née same topic & KEY-NUMBER In ait Key-Numbered Dlgesta £ Indexe*
644 262 FEDERAL BEPORTEB
art. On appeal to this court, appellant has abandoned ail but 10 of
the claims.
[1] It appears that on November 24, 1914, applicant was granted
a patent on the présent disclosure, with claims limited to the aéroplane
features. Whatever aéroplane features are contained in the présent
application could hâve been claimed in that patent. It was therefore
held not to constitute invention to substitute his patented aéroplane
in hydroplanes of the prior art. To review in détail appellant's claims,
or the relation of the prior art to his disclosure, would amount merely
to a restatement of that which is clearly set forth in the opinions of
the respective tribunals of the Patent Office. The combination hère
sought to be patented, while not disclosed in a single structure of
the prior art, is so completely shown in différent prior inventions as to
admit easily of mechanical simulation. Such an assembling of me-
chanical équivalents of features old in the art into a single structure
does not constitute invention.
[2,3] After the présent appeal had been perfected, applicant filed
with the Commissioner of Patents a pétition for a rehearing, asking
permission to withdraw the entire 41 claims appealed and présent in
lieu thereof 6 claims. The Commissioner denied the rehearing, and
applicant seeks a hearing upon the substituted claims in this court. It
is clear that the claims cannot be hère considered, since an appeal only
lies from a final décision of the Commissioner on the issue of patenta-
bility. The claims were not presented to the Commissioner until the
case had passed beyond his jurisdiction, and no case was before him
in which the claims could be heard or to which a judgment thereon
could attach. It foUows, therefore, that no proper judgment on the
patentability of thèse substituted claims is before this court for re-
view.
The décision of the Commissioner of Patents is affirmed, and the
clerk is directed to certify thèse proceedings as by law required.
Affirmed.
CNGIiB T. MAKCEESTER & SPOONEB 646
(262 F.)
BNGLE V. MANCHESTER & SPOONBR.
SAME V. MANCHESTER (two cases).
(Court of Appeals of District of Columbla. Submltted November 14, 1919.
Decided January 5, 1920.)
Nos. 1262-1264.
Patents iS=>91(4) — Evidence sustains senior partt in inteefebence pko-
ceedings.
In patent Interférence proceedings over an electrlc battery, évidence re-
garding the junior party's acquiescence in statements that the senior party
was the Inventer, etc., held to establish, contrary to the Assistant Com-
missioner's décision, that the senior party was entltled to prlority.
Appeal from a Décision by the Assistant Commissioner of Patents.
Patent interférence proceeding between George S. Engle! and Man-
chester & Spooner, and two similar proceedings between George S.
Engle and Arthur P. Manchester. From a décision awarding prioiity
to the junior parties, George S. Engle appeals. Reversed.
Vernon E. Hodges, of Washington, D. C., for appellant.
A. S. Steuart and Melville Church, both of Washington, D. €., for
appellees.
SMYTH, Chief Justice. This is an appeal from a décision of the
Patent Office awarding priority in three interférence proceedings — to
Manchester and Spooner in No. 1262, and to Manchester alone in Nos.
1263 and 1264. Engle is the senior party, having filed some two months
before the others. The subject-matter of each interférence is so close-
ly related to that of the others that the three bave been submitted on
the same record, and they shall he disposed of as one case.
The invention concems an electric battery, and the claims of the is-
sue are illustrated by the f oUowing :
No. 1262.
I. An électrode for batteries eomposed of oupric oxide (CuO) and cuprous
oxide (CU2O).
5. An électrode for batteries formed of cuprlc oxide and cuprous oxide in
the form of scales of appréciable size bonded together and compressed Into a
dense hard mass.
II. The process of producing a coppcr oxide electrlc battery élément con-
slsting In forming flakes of blaok or cuprlc oxide of eopper carrylng therewlth
portions of unoxidized eopper and treating the said flakes to eliminate any
imctuous matter therefrom, thoroughly mlxlug the flakes carrying the por-
tions of unoxidized eopper with a binder and pressing the mass thus pro-
duced into a deslred shape so that the Wack or cuprlc oxide of eopper and por-
tions of the metallic eopper wlU be rcgularly distributed throughout the body
of the pressed mass, then subjectlng the compressed mass to the action of beat
until the compressed mass is oured and the binder reduced to a minlmized
residuum, then placing the compressed mass carrying the minlmized residuum
of the binder in the oven and subjeotmg the said mass to a high degree of beat
to flrst bum out the binder residuum and next to change the metallic eopper
wlthin the body of the mass of cuprous oxide removing the mass now eom-
posed of cuprlc and cuprous oxldes of eopper from the baking oven and again
compressing the sn;.ic whlle red with heat, and finally allowlng the plate to
cool in the air.
<g=>For other cases see same topic & KBY-NUMBBR In aU Kcy-Numbered Dlgests & Indexe»
646 262 FEDERAL REPORTER
No. 1263.
1. A gelatinoTis alkallne eleotrolyte for prlmary batteries formed of an al-
kallne hydroxlde of approxlmately 28° gravlty Baume with whlch vegetable
stareh Is combined at a température of approximately 180° F. and in quantlty
substantially less than that required to gelatinize an equal quantlty of water.
No. 1264.
1. The herein deserlbed process of making an alkallne gelatlnous electrolyte,
consistlng In thoroughly mlxing a caustic alkallne solution comprlsing about
one part of stareh to nlnety parts of the solution and thoroughly stirring the
two components, subjeeting the mixture of alkallne solution and stareh to a
degree of heat less than that required to boil the mixture to avold the libéra-
tion of the constituents of stareh that would hâve a tendency to harden the
electrolyte, and allowing the mixture to cool to a pourlng conslstency.
Appellant was successful before the Examiner of Interférences and
the Board of Examiners, but failed before the Assistant Commission-
er. Originality is the crux of the dispute, and the question for décision
is one of fact Manchester and Spooner, being junior parties, must
overcome the claim made by Engle, or they cannot succeed. AU the
parties worked together in the same house upon the invention. Man-
chester and Spooner assert that they were partners with Engle ; that
he was merely a promoter and légal adviser, but supplied none of the
inventive ideas, while Engle says that Manchester and Spooner were
employés of his; that he furnished the funds necessary to carry on
the work, and also the ideas embodied in the invention.
The testimony is a tangled web of contradictions; none the less
there are certain things in it which stand out prominently and point to
the right direction for the investigator. One of the witnesses called
by Manchester and Spooner refers to the battery throughout his tes-
timony as Engle's and speaks of Spooner as Engle's workman, though
he later tried to change his testimony on the latter point. Spooner,
without dissent, witnessed a contract, after it had been read to him, in
which Engle was represented as the inventor, and both Manchester and
Spooner knew that Engle was going to file an application for a patent
on the invention, but neither objected. Indeed, Engle was distinctly
asked in the présence and hearing of Manchester at the time his appli-
cation for a patent was being prepared as to whether he (Engle) was
the sole inventor, or a joint inventor with Manchester, and he answered
that he was the sole inventor. Manchester did not deny it, but ac-
quiesced in the answer by his silence. Perhaps this conduct on the
part of Manchester and Spooner may be explainable in harmony with
their claim of inventorship. They attempt to show that it is by say-
ing that they were misled by Engle, who, they assert, gave them to
understand that he was the proper one to make the application, and
that he would, after having obtained a patent, recognize their interests
in it. This may be correct, but it is difficult to accept it, for it means
that they, knowing they were the inventors and that Engle was not,
made no protest against his pretensions. They would hâve to be far
less intelligent than the record shows them to be before we could be-
lieve that they did not understand that a person who is not an inventor
cannot, under the statute, obtain a patent. Thèse things, in connec-
tion with others in the record, tend to establish with much force that
BRAUN V. WIEGAND 647
(262 P.)
Manchester and Spooner hâve not sustained the burden of proof im-
posed upon them by the law. With great care the Examiner of Inter-
férences and the Board of Examiners hâve analyzed the testimony in
their respective opinions. We are entirely satisfied with their rea-
soning, and therefore the décision of the Assistant Commissioner must
be reversed, and priority of the subject-matter involved in the three
interférences awarded to Engle.
Reversed.
BRAUN V. WIEGAND.
(Court ot Appeala of District of Columbla. Submltted November 18, 1919.
Declded January 5, 1920.)
No. 1271.
1. Patents <S=>91(4) — Jttniob pabty mxjst establish peiobitt betond eea-
sonable doubt.
In patent Interférence cases, where a patent bas Issued to the senfor
party before the junior party files hls application, the junior party must
establlsh that he Is the Inventer beyond reasonable doubt.
2. Patents <S=91(4) — Pbioritt of senioe pabtt, except as to onk ci^aim,
sustained bt evidence.
Evidence In a patent Interférence proceeding, Involvlng an Improved
electrical system for wlrlng In heating déviées, regardlng the activitles
of the rival parties, vrho had worked for the same concern, that the
junior party delayed filing hls application until nine months after the
senior party's patent Issued, and for two years after he clalmed to hâve
made a disclosure of the devlee, etc., held to establish that the senior
party was entltled to priority, except as to one clalm.
Appeal from a Décision by the Assistant Commissioner of Patents.
Patent interférence proceeding between Edwin L. Wiegand and
William A. Braun. From a décision of the Assistant Commissioner
of Patents, avirarding priority to the senior party, Braun appeals.
Affirmed, as modified.
Harry Frease, of Canton, Ohio, and L. C. Wheeler, of Milwaukee,
Wis., for appellant.
John B. HuU and Harold E. Smith, both of Cleveland, Ohio, for
appellee.
SMYTH, Chief Justice. Braun appeals from a décision of the As-
sistant Commissioner of Patents awarding priority to Wiegand in an
interférence concerning the invention of an apparatus for embedding
an electric résistance wire in the insulating portion of heating devices,
such as the electric sadiron. There are 14 counts, illustrated suffi-
ciently by counts 1, 5, 6, and 9 :
l. In an apparatus of the character descrlbed, the comblnatlon of a base
support, a supportlng device for a conductor, means for movlng sald devlee
tovi^ard and from the base, and means adapted to remove the conductor from
Its supportlng device and apply It to the base.
5. As a means for applytng a conductor to a sultable base, the comblnatlon
of a plurallty of pins whereto the conductor Is applled, and means co-operat-
ing with the conductor to remove the same from the pins.
©soFoi other cases ses same toplo & KBY-NUMBER in aU Key-Numtered Digests & Indexes
648 262 FEDERAL REPORTER
6. As a means for applying a conductor to a suitable base, the combtnatlon
of a support for a conductor, and means co-operating wlth the conductor to
remove the same from the support.
9. In an apparatus of the character descrlbed, the combinatlon of a base
support, a base plate having a plurality of pins projecting therefrom on the
ends of which the conductor Is wound, a strlpping plate mounted on the pins
and inteijposed between the conductor and the base plate, means for raoving
eaid base plate toward the base support, and means for movlng the stripping
plate relatively to the base plate to remove tlie conductor from the projecting
ends of the pins.
[ 1 ] Both parties claim the invention and rely upon the same réduc-
tion to practice, which was accomplished in the shops of their em-
ployer, the Dover Manufacturing Company, Dover, Ohio. The prob-
lem to be solved, therefore, is one of originality. Wiegand was granted
a patent for the invention March 30, 1915, on an appHcatidn filed
January 9, 1914. Braun did not apply for a patent until January 19,
1916. In order, therefore, that Braun may succeed, he must establish
beyond a reasonable doubt that he is the inventor. Sharer v. McHenry,
19 App. D. C. 158; Dashiell v. Tasker, 21 App. D. C. 64; Sendelbach
v. Gillette, 22 App. D. C. 168; Schmidt v. Clark, 32 App. D. C. 291.
[2] Braun is an electrical engineer, and entered the employ of the
Dover Manufacturing Company in April, 1911, and, for aught that ap-
pears, is still there. His first work for that company was to design a
sadiron embodying an automatic control, for which he had previously
secured a patent. This proved so unsatisfactory that the officers of
the company became convinced that the iron would hâve to be improv-
ed or its manufacture discontinued.
Wiegand, a young man, became an employé of the same company in
June, 1911. He had taken a course in electrical engineering, and, with
his brother, had equipped a shop at his home, where he made various
sjlectrical devices, such as motors, batteries, etc. In January, 1912,
he was assigned to the work of assembling and testing the irons which
the company was manufacturing. After awhile he became foreman of
the electric flatiron department, and was regarded as an expert in that
line.
Braun assigned his application to his employer. Nearly ail his
witnesses are officers of that company, while Wiegand dépends on
the testimony of himself , his brothers, and a friend. The évidence is
very conflicting ; nearly every material statement made by the one side
is denied by the other. We must, therefore, test its accuracy by the
circumstances surrounding the parties, as well as by things which were
donc or omitted to be donc by them, and about which there is no con-
troversy.
An important considération in this connection is the fact that the
sadirons which the company was manufacturing were totally unsatis-
factory, and consequently that it was very anxious to discover an iron
which would meet the requirements of the trade. Keeping this in
mind, we find that Braun's preliminary statement asserts conception in
October, 1911, and disclosure about January 15, 1912. Haug, the gên-
erai superintendant of the company, testified that in the early part of
December, 1911, after the président of the company had strongly ex-
BBAOTî V, WEEGAND 649
(262 F.)
pressed to Braun his dissatisfaction with the latter's first invention,
Braun came into the office where Haug was, made sketches, and ex-
plained in détail the complète machine of the issue. Yet that machine
was not constructed until the latter part of 1912. It appears, also,
that before the device disclosed by Braun, according to Haug, was de-
veloped, Braun spent several months working on a less satisfactory
form, but finally returned to the forra first conceived. If Haug's
recollection as to the time of the disclosure be correct, why the delay
in preparing the structure for the market ? Especially pertinent is this
inquiry in view of the earnest désire of the company to discover an
acceptable device. The trade was waiting for it ; the company had it,
according to Haug, and yet neglected to construct it and put it on sale.
It is claimed on behalf of Braun that there are a number of witnesses
who testified that he commenced work upon the machine of the issue
in January, 1912; but we do not think their testimony supports the
daim. It relates to what is known as the groove type of winding
form, which was operated by hand for a little while, and not to the
pin type of winding form, which is the invention in controversy.
Wiegand gave much attention to expérimental work. Besides the
patent in controversy, he had obtained two other patents. It is ad-
mitted that he made the working drawings for the machine of the
issue, lie claims that they were made at his home, while Braun in-
sists that they were made at the factory, under the latter's directions.
Wiegand is supported by the testimony of his brother, who says that
the drawings were made at his home at night. Another brother testi-
fies that in January, 1912, Wiegand told him that he had a .nachine
figured out which "would bring this wire down, put it in the bottom
ail at once, something in this style," and illustrated it by bringing his
right hand down into his left hand. Wiegand filed his application in
January, 1914, and left the company in the summer of that year. This
shows that Wiegand had a conception of the invention of the issue
before Braun, unless the latter has established beyond a reasonable
doubt that he conceived it in 1911 and disclosed it in January, 1912.
But he has not done so.
In addition to this it must not be overlooked, because it is in our
judgment of much importance, that Braun did not apply for a patent
until nine months after Wiegand's patent had issued, and not until
over three years after the invention patented by Wiegand was to a
large extent in commercial use. Braun knew that Wiegand had applied
for a patent and that he had received one ; nevertheless he, though he
had been seeking eamestly the device of the issue, made no objection
whatever at the time. Not only that, but he permitted more than two
years to elapse between the date on which he claims to hâve made a
disclosure of the device, and the time of his application for a patent
thereon, thus allowing the bar of public use to run against any right
that he might otherwise hâve to a patent. This in itself constitutes
strong évidence against him. Sendelbach v. Gillette, 22 App. D. C.
168, 180. AU thèse things, when considered, convince us that, as to
ail the claims, except No. 6, Braun has not established beyond a rea-
sonable doubt that he is entitled to them.
6tK)l 262 FEDBBÀL BESPOBTEB
But with respect to daim 6 we think that he has clearly proven by
the required quantum of évidence that the device on which it reads was
made and used in Tanuary, 1912, prior to the date of conception claim-
ed by Wiegand. There is no limit in it to the pin type of winding f orm,
nor is there any limitation to an organized machine for supporting the
f orm and bringing it down to the base whereon the plastic material is
supported. It calls particularly for a means of applying a conductor
to a suitable base, including or comprising a support for the conductor,
which may be the grooved winding form of Braun's Exhibit 13, and
means co-operating with the conductor to remove the same from the
support which in Braun's Exhibit 13 may be the movable spider with
which the form is provided, and therefore we think that Braun is en-
titled to this claim.
The décision of the Assistant Commissioner of Patents is affirmed,
with respect to ail the claims excepting claim 6, and as to it priority of
invention is awarded to Braun.
Modifîed.
SCHBUEELE v. CONNEB.
(CJourt of Âppeals of District of Columbla. Submitted November 17, 1919.
Dedded January 5, 1920.)
No. 1269.
Patents ®=981 — Evidence bhowino beissue patentée entitled to fmoeitt.
Evidence that the person to whom a reissue patent for poUshing blfocal
lenses had been Issued was using a slmilar mechanism before the date of
conception claimed for the opposing party, and the failure of such oppos-
Ing party to testlfy in behalf of the concem ownlng hls application, etc.,
held to show, contrary to the Assistant CJommissioner's décision, that the
reissue patentée was entitled to priority.
Appeal from a Décision of the First Assistant Commissioner of Pat-
ents.
Interférence proceedings in the Patent Office between Theophilus D.
Conner and Marie E. Scheuerle, administratrix of the estate of Henry
A. Scheuerle, deceased. From a décision awarding priority to Conner,
Marie E. Scheuerle appeals. Reversed.
A. E. Pajge, of Philadelphia, Pa., for appellant.
V. H. Lockwood, of Indianapohs, Ind., for appellee.
SMYTH, Chief Justice. From a décision of the First Assistant Com-
missioner of Patents, awarding priority to Conner, in an interférence,
Scheuerle appeals. The invention relates to mechanism for polishing or
abrading the major areas of bifocal lenses. A reissue patent emerged
to Henry A. Scheuerle July 27, 1915, on an application filed June 8,
1915. He afterwards died, and the interest of his estate in the pat-
ent is represented by his widow, Marie E. Scheuerle, as administra-
trix.
Conner's application was filed May 25, 1912. There are four counts
in the issue, of which count 3 is typical. It reads :
(Ss»For other cases see same toplc & KEY-NUMBKR In ail Key-Numbered Dlgests & Indexes
SCHEUEELE V. CONNER 651
(262 F.)
3. The combinatlon with an annular rotary lap having a central recess, ot a
rotary holder for the surface to be abraded, means arranged to relatively
rotate said lap and holder, and means maintaining the axes of said lap and
holder in such angular relation that said recess spans the axis of said holder,
in eccentric relation therewith, with said axes intersecting at a center of curva-
ture of said surface, whereby said lap is prevented from abrading the axial
région of said surface while it is caused to abrade an annular région of said
surface concentric wlth the axis of said surface, but eccentric with the axis
of said lap.
The case turns upon a question of fact. At the very outset we are
confronted by thèse significant things: Conner refused to sign the
preliminary statement made on his behalf ; it was signed by one Rau,
président of the Onepiece Bifocal Lens Company, which owns Con-
ner's application. Conner — who was in Indianapolis when testimony
was being taken there in this proceeding, a fact well known to the
Lens Company — was not called as a witness in its behalf. It had
the right to force his attendance, but it did not see fit to exercise it.
This warrants the inference that he, in the judgment of counsel for
the Company, would not support the claims made in his name.
The earliest date of conception claimed for Conner in the first pre-
liminary statement filed on his behalf is about February 1, 1911, but
in an amended statement the date is moved back to August 1, 1910.
The witness Wall, an officer of Wall & Ochs, manufacturers of
lenses, testified that in 1906 Scheuerle was employed by his establish-
ment, and at that time "had knowledge of the manufacture of bifocal
lenses." Brown, another witness, says that in the spring or stmimer of
1909 Scheuerle made an abrading tool for use in the préparation of
bifocal lenses, and Henry A. Scheuerle, a practical optician, nephew
of Scheuerle, the patentée, testified that his uncle was manufactur-
ing bifocal lenses in 1909 at his résidence with a mechanism the same
as Exhibit K; that "he had several customers, his own patients that
he ref racted, that he supplied with thèse lenses." Margath, who seems
to be an intelligent witness, supports him with respect to the use, by
the elder Scheuerle, of a mechanism like Exhibât K. In short, a care-
ful study of the record satisfies us that, to borrow the language of the
examiner of interférences :
"It positive! y appears that as early as 1909 Scheuerle had made the abrading
tool as illustrated in his reissue patent Involved in this Interférence, and
that during the Christmas holidays of the same year he had disclosed his
method to others, and by February, 1910, had operated his tool and holder In
the manner set forth In this issue, and had tn 1911 actually sold lenses made
thereby."
We do not think the part of the record sent up by the office in re-
sponse to our writ of certiorari, issued at the instance of the party
Conner, was necessary, and therefore the costs of it are taxed against
Conner; this being in accordance with the terms of the order for the
writ.
The décision of the First Assistant Commissioner is set aside, and
priority of invention of the subject-matter in issue is awarded to
Scheuerle.
Reversed.
652 262 FEDERAL REPORTBB
EEICHBL V. DOKSET.
(Ckmrt of Appeals of District of Coluntbla. Submltted November 14, 1919.
Decided January 5, 1920.)
No. 1261.
1. Patents <S=>90(5) — Ostaininq hoo choléra pbodtjct without testing not
a eeductios to practice.
Merely obtalnlng an improved hog choiera produet, with.out testing It by
immunlzlng a hog, does not constltute a réduction to practlce.
2. Patents <S=»90(4, 5) — Failuhe to appbeoiatb patentabilitt no excuse tob
not beducing to practice ob appltino fob patent.
Failure to appreclate the patentabillty of an Invention does not ex-
cuse elther failure to reduce it to practlce or maklng tlmely application
for letters patent.
3. Patents ®=591(4) — Due diligence not shown in eeducing to peactice.
Evidence that a party to patent Interférence proceedlngs dld not test
and reduce to practlce hls improved hog choiera préparation untll a year
af ter he had obtained the produet held to show, contrary to the Assistant
Conunlssioner's flndlng, that he had not proceeded with due diligence.
Appeal from a Décision by the Assistant Commissioner of Patents.
Interférence proceeding in the Patent Office between John Reichel
and Marion Dorset. From a décision for Dorset, Reichel appeals.
Reversed.
L,. H. Campbell, of New York City, for appellant.
C. W. Boyle and A. J. Decker, both of Washington, D. C, for ap-
pellee.
VAN ORSDEL, Associate Justice. The issue in this interférence
is in four counts, of which counts 1 and 3 are illustrative :
"1, The process of elimlnating, from hog choiera 'antltoxta,' the sérum al-
bumins, cellular débris flbrin, or Uvlng or dead genns by précipitation with
Chemical précipitants other than those formlng insoluble hydroxides and fil-
tration and preservlng only the active substances whereby the hog choiera
immune bodles and the globullns are obtained, having the characteristlcs of
Increaslng the résistance of the hog against infection from hog choiera virus
or the cause of hog choiera, and adapted to be used elther alone or in con-
nection with hog choiera virus or the cause of hog choiera to prevent the
disease known as hog choiera in healthy hogs or to cure hogs slck of hog
choiera."
"3. As a new substance hog choiera globulin, consistiug only of the hog
choiera immune bodies and the globullns obtained from hog choiera defibri-
nated blood antitoxin, having the active substance in concentrated and stérile
fonn."
The invention relates to a process for refining antitoxin for hog
choiera and the produce therehy obtained.
The respective dates f ound by the tribunals below are f ully sustained
by the record. Appellant, Reichel, conceived the invention October
15, 1913, and constructively reduced it to practice by filing his appli-
cation April 3, 1914. Dorset conceived the invention in the latter
^fsslfot oUier cases see same toplc & KET-NUMBBR in ail Key-Numbered Dlgests £ Indexes
REICHEL V. DOESET 053
C262 FJ
part of 1912, obtained a product in May, 1913, which was tested and
reduced to practice May 16, 1914. The réduction to practice consist-
ed in Dorset sending some of the defibrinated blood antitoxin to Dr.
Schroeder at the experiment station at Bethesda, Md., where it was
tested by immunizing a hog, and was found to be potent in preventing
choiera. Dorset filed his application for patent August 5, 1915.
[1] We are of the opinion that the mère obtaining of the product
by Dorset in May, 1913, without a test of its potency by immunizing
a hog, does not amount to a réduction to practice. The invention is
an important step in a difficult art, and therefore nothing short of
a successful test could meet the légal requirements of a réduction to
practice.
[2, 3J The diligence of appellee at the time appellant entered the
field is the sole question in the case. The Examiner of Interférences
held that Dorset was lacking in diligence, and awarded priority to
Reichel. lie was reversed by the Board of Examiners in Chief and
the Assistant Commissioner. Dorset's excuse for his inactivity from
May, 1913, to May, 1914, is pressing ofEcial duties. He was chief of
the Biochemic Division of the Bureau of Animal Industry of the De-
partment of Agriculture. In March, 1913, Congress passed an act
requiring the Agricultural Department to inspect ail plants producing
hog choiera sérum and other veterinary biological products. Ail the
field work in connection with this inspection was assigned to Dorset,
and he claims that, inasmuch as he was working under orders as a
govemment officiai, he was not at liberty to lay aside his assigned work
and dévote his time to testing his invention.
The validity of this sort of excuse dépends entirely upon the facts
and circumstances of the instant case. If he had perf ected the product,
as he claims, it would seem that, without any material loss of time or
interférence with his officiai duties, he could hâve done in May, 1913,
what he did in May, 1914 — send some of the perfected defibrinated
blood antitoxin to Dr. Schroeder, at Bethesda, Md., and hâve it tested.
But the record discloses circumstances which, we think, point more
accurately to the real cause of appellee's delay. He did not think the
l)rocess patentable until Reichel visited his office in May, 1915, and
told him that a patent had been allowed on his application. Dorset
then caused a protest to be filed against the issuance of the patent,
and shortly thereafter filed his application. This resulted in a with-
drawal of Reichel's case from issue and the déclaration of this inter-
férence.
Failure to appreciate the patentability of an invention is no excuse,
either for failure to reduce it to practice or to make timely applica-
tion for letters patent. Dorset allowed one year to elapse between his
alleged perfecting of the product and its réduction to practice, during
which time Reichel conceived the invention and constructively reduced
it to practice by filing his application in the Patent Office. Another
year of inactivity on Dorset's part elapsed, until he discovered the al-
lowance of the patent to his rival, when, spurred to activity, he en-
lered his protest and filed his application. While the delay in filing,
654 262 FEDEEAL REPORTER
had he been diligent in reducing to practice, would not hâve barred
his right to priority, it is a circumstance strongly indicating that lack
of appréciation of the patentability of the invention was the real cause
of his inactivity, when the law required diligence.
The invention in issue was a development of the w^ork in wrhich
Dorset was officially engaged. The govemment was deeply interested
in a discovery which would eflfectually aid it in its war upon a destruc-
tive disease; hence, considering the relation of Dorset to the public
service, the delay of one year in sending the product to Dr. Schroeder
for test is totally inexcusable.
The décision of the Commissioner of Patents is reversed, and the
clerk is directed to certify thèse proceedings as by law required.
Reversed.
LEB et al. v. VEBBLAND.
(Court of Appeals of District of Columbla. Submltted November 11, 1919.
Dedded January 5, 1920.)
No. 1252.
1. Patents <S=»106(1) — Peioeitt mat bb awabded on thb becobd to skniob
applioant.
In patent Interférence cases, the Commissioner, In proper cases, may
award priority on the record to the senior appllcant.
2. Patents <S=»106(3) — ^Aitbidavit ovbecomes pbima facie showing or senior
APPLICANT.
In patent interférence proceedings involvlng wlreless receivlng Systems,
an affidavit by the junior appllcant, stating that the apparatus disclosed
In the earller application was tnoperative. If tested In light of the develop-
ment of the art at the time the application was flled, etc., held to overcome
the prima fade record showing of the senior party.
Appeal from the Patent Office.
Interférence proceeding in the Patent Office between Frederick K.
IVreeland and John W. Lee and John L. Hogan, Jr. From a décision
awarding priority to Vreeland, the junior parties appeal. Reversed
and remanded.
F. W. Winter, of Pittsburgh, Pa., for appellants.
F. L. Dyer, of New York City, and Melville Church, of Washing-
ton, D. C, for appellee.
ROBB, Associate Justice. Appeal from a décision of the Commis-
sioner of Patents in an interférence proceeding awarding priority of
invention to the party Vreeland upon the record ; neither party having
taken testimony.
The application of Lee and Hogan was filed on November 16, 1912,
and ripened into a patent (No. 1,141,717) on June 1, 1916. Vree-
land's application in interférence was filed October 27, 1915, or nearly
five months after the grant of the Lee and Hogan application, as a
division of an earlier application filed January 2, 1907, upon which a
^issFor other cases see same topic & KEY-NUMBER In ail Key-Numbered Dlgests & Indexes
LEE V. VEEELAND 655
(262 F.)
patent was issued September 1, 1917. In the divisîonal application,
Vreeland copied Verbatim daims from the Lee and Hogan patent.
The contention of Lee and Hogan is that the apparatus disclosed by
Vreeland in his early application is inoperative, and that thàr motion
for leave to take testimony to that effect should hâve been allowed;
in other words, that, in the circumstances of the case, Vreeland was
rtot entitled to an award of priority on the record.
The invention relates to an improvement in wireless receiving Sys-
tems, and particularly for receiving persistent and continuons waves.
It is conceded that this is a highly technical subject-matter, in which
very slight changes and modifications may be of great importance, and
it clearly appears that there has been a very decided advance in the
art since the filing of "Vreeland's original application. Moreover, it
should be observed, that, the claims having originated with Lee and
Hogan, they must be given an interprétation in harmony with that
patent.
Under the view we hâve taken of the case, we do not deem it neces-
sary to do more than set forth the substance of the affidavit which
Lee and Hogan filed to overcome the effect of Vreeland's original
filing date. In that affidavit it is stated that an apparatus like that
shown in Vreeland's early application had been constructed by the
affiant and had been found to be inoperative, that the Vreeland bat-
tery is short circuited around the detector, and that if there were as-
sumed such values of the éléments of the circuit as prevailed in actual
practice, and hence were known to those familiar with the art, the
device would not be operative. Vreeland, both in the Patent Office
and in the argument at bar, did not seriously contend that his early
device as shown was operative for practical purposes, but he did
contend that it could hâve been made so by a skilled mechanic. The
Examiner of Interférences ruled that the affidavit of Lee and Hogan
stopped short of showing that, by assuming values other than those
commonly used, the Vreeland structure would not operate. The Ex-
aminers in Chief were of the view that —
"The accuracy of the conclusions of nelther party, based on the conditions
assumed by hlm, oan be assailed. The question is a practical one, dependtng
largely upon how far in an actual system we may départ from the theoretlcal
value of a zéro résistance in the résonant circuit -without seriously interfering
with the opération of the System," etc.
The Commissioner, while expressing some doubt as to certain of
the conclusions reached by the lower tribunals, accepted those conclu-
sions.
[1, 2] The authority of the Commissioner to award priority on
the record to the senior applicant in a proper case is settled. Ewing
V. Fowler Car Co., 244 U. S. 1, 37 Sup. Ct. 494, 61 L. Ed. 955. In
that case the applicant last to file had copied the claims of the earlier
applicant, and failed to "intimate the existence of any circumstances
which would overcome the priority of invention as determined by the
différence in times of the conception of the contending applicants.
* * * There was not only the précèdent conception," said the
656 262 FEDERAL KBPOHTER
court, "but there was its expression in claims ; and that ît was practical,
a usefiil gift to the world, petitioner concèdes by adopting the claims.
There were, therefore, ail of the éléments of a completed invention —
one perf ected before the filing of petitioner's application."
The présent invention, as we hâve stated, relates to an obscure and
highly technical art. The claims of the later applicant were copied by
Vreeland, and the later applicant has filed an affidavit to the effect that
the apparatus disclosed in the early application, if tested in the light of
the development of the art at the time that application was filed — that
is, in 1907, instead of 1916, the date of the affidavit — is inoperative.
The affidavit further allèges that certain changes in the apparatus
amounting to invention are essential to operativeness. We are of the
view that, in the circumstances of the case, the affidavit overcame the
prima f acie showing of the senior party.
The décision is therefore reversed, and the case remanded for a
trial on the merits.
Reversed and remanded.
COMMERCIAL SECURITY CO. V. HOLCOMBE 657
C202 F.)
COMMERCIAL SECURITY CO. v. HOLCOMBE.
In re E. E. FOREES PIANO CO.
(Circuit Court of Appeals, Fifth arcuit. January 7, 1920.)
No. 3-129.
1. Bankrtxptct <@=»210 — Cotjet has jubisdiction to adjudicate lien claim.
An order of a référée, requiring a holder of notes and accounts receiv-
able of a bankrupt to tum the sarae over to the trustée for collection,
transferrlng the claim of the holder to a lien to the pror-eeds, and ex-
pressly reserving the right to afterwards pass on the validlty of the elaim,
the holder being présent by attorney and assenting, held to give the
bankruptcy court jurisdiction over the claimant to adjudicate its claim.
2. Sales <S=j6 — Contbact construed as pledge and not ptirchase of papek.
Transactions by which bankrupt, a dealer in musical instruments,
transferred paper taken from its customers to claimant under a oon-
tract in accordance with which claimant advauced 70 per cent, of its face
and agreed to pay 20 per cent, more on collection, where bankrupt was
required to pay Interest on such sums, to mi»t payments on the paper when
due, and coUected and kept the proceeds of actual payments by the makers,
with the privilège of subsUtuting other acceptable paper, or of taking
up any pai>er by payment, held not sales of the paper, but a pledging as col-
latéral for loans.
5. UsuRT <S=»57 — Repledging collatéral foe pledgee's use not erokeeage
transaction, WAERANTINO charge of USUBIOUS HATE.
That a pledgee of collaterial repledges the same to secure money bor-
rowed by itself and used in carrying on its business does not make it tne
agent of the pledgor in such transaction, nor justify the taking of usurious
Interest
4. Ubury <g=372 — Pledge of notes in continuous dealing undee conteact
FOE loans not separate transactions.
Where a large number of notes were pledged from time to tlme to secure
loans under a contract for continuous dealing, which gave pledgor tho
right to take up or replace any note separately, the transaction was not
for that reason a separate one as to each note, but a single continuous
transaction of lending, and was not closed as to a note when It was taken
up or replaced by another, so as to eut ofC the défense of usury.
6. TJStJBT <&=îl00(l) ONLT final SETTLEMENT IS BAB to DEFENSE.
Under a contract for loans on pledged notes, by which pledgee ad-
vanced 70 per cent, of the aggregate face value of notes pledged and
agreed to pay 20 per cent, additional on payment, with right in the
pledgor to pay and take, up any single note, where on such payment of a
note no part of the retained 20 per cent, was paid, the transaction was
open to the défense of usui"y until final settlement.
Appeal from the District Court of the United States for the Nortli-
em District of Alabama; William I. Grubb, Judge.
In the matter of the E. E. Forbes Piano Company, bankrupt ; J. H.
Holcombe, trustée. From an order of the District Court, the Com-
mercial Security Company appeals. Affirmed.
Fomey Johnston and W. R. C. Cocke, both of Birmingham, Ala., for
appellant.
Borden Burr, Claude D. Ritter, and D. K. McKamy, ail of Birming-
ham, Ala., for appellee.
Before WALKER, Circuit Judge, and POSTER and EVANS, Dis-
trict Judges.
£S9For other oaees see same topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexe»
262 F.— 42
658 262 FEDERAL REFOETEB
WALKER, Circuit Judge. This is an appeal from a decree confirm-
,ing an order made by the référée in bankruptcy which adjudged that
the appellant, Commercial Security Company, an Illinois corporation,
restore and pay back to the appellee, the trustée in bankruptcy of E.
E. Forbes Piano Company, the sum of $12,893.41, which amount had
been paid to the appellant pursuant to an order which provided that
the court reserved the right, for the purpose of a correct, proper, and
légal administration of the estate in bankruptcy, to order the restora-
tion in part or in whole of sums so paid ; that the appellant surrender
and deliver to the trustée in bankruptcy designated assets and papers
foimd to belong to the bankrupt estate; and that the appellant pay
the costs of the proceeding, instituted by the trustée in bankruptcy, in
which the order in question was made. The order followed findings
to the effect that transactions by which the appellant had acquired
from the bankrupt, which had been engaged in the business of leasing
and selling pianos and organs, notes and other obligations made to
the latter by its customers, were in the nature of pledges or hypotheca-
tions to secure the amounts of loans made by the appellant to the
bankrupt at usurious rates of interest, and that payments made to the
appellant prior to the bankruptcy amounted to $4,062.71 in excess of
the amounts lent by it to the bankrupt with légal interest thereon.
[1] In behalf of the appellant it is contended that the court had not
acquired jurisdiction of the appellant for the purpose of making such
an order as the one appealed from. The appellant was présent by its
attorneys of record at the first meeting of the bankrupt's creditors.
At that meeting, with the consent of ail parties présent, the référée
made an order which contained the f ollowing provisions :
"(3) The sald trustée Is authorlzed, empowered, and dlrected to prooeed to
coUect ail accounts, notes, claims, and demanda recelvable, and to incur t&e
reasonaWe expenses thereof, and wherever any person, flrm, or corporation
has, or claims to hâve, any lien or claim upon any snch accounts, notes,
olalms, or demands receivable, the lien or clalm of such person, flrm, or cor-
X)oration shall be transferred as of this day, and in precisely the same plight
and condition as such lien or claim now stands, to the money or other thing oC
value whleh raay so be coUected by the trustée, and if anythlng but money be
so collected and resold or converted, then to such and subsequently recelved
proceeda ; but as to each such collection or substltute or the proceeds thereof,
ail such expenses, including an équitable apportionment of the gênerai oosts
and expenses of the administration and of tMs proceeding, the part represented
by such lien or claim shall bear its own burden or part and the exeess or
balance remaining of each such part upon which lien or claim is or may be
asserted shall be sub.ieoted to the satisfaction of such clalm or demand after
the legality thereof shall be finally determlned by this court; but that any
person, flrm, or corporation, including the trustée, who or which may consider
hlmself or itself aggrieved, shall hâve the right of review, appeal, or benefit of
any or ail appellate proceedings which otherwlse are now authorlzed by
law.
"The Intent and purpose of the foregoing and of the nest sueceedlng
paragraph Is to authorize and empower the trustée to coUect and liquldate au
of the assets and estate of the bankmpt, or in which the bankrupt or this
estate has any claim, tltle, or right, légal or équitable, and to impose upon
that portion of each collection upon which any other person, flrm, or cor-
poration has, or claims to bave, any lien, claim, or demand a proportionate
share of the expenses of making such collection, Including the necessary gên-
erai costs and expenses of administration under this proceeding in bank-
COMMERCUL SECURITT CO. V. EOLCOMBE 659
(262 F.)
ruptcy, but wlthout prejudlclng and without adjudicatlng at the présent tlme
tlie legality or valldity or the extent of any such olaim or demand ol any such
person, flrm, or corporation, but as to each item of balance or excess over
the claim or demand of each and every such person, flrm, or corporation, re-
gpectively, shall stand in precisely the same plight and condition as such claim
or demand now stands in référence to the property or thing from whlch tha
excess or balance may be derived. The trustée shall from time to time make
application for instructions and orders for distribution, including thèse bal-
ances upon which there may be liens or claimis, or of or concerning which he has
any information, whether obtained before bankruptcy or afterwards, that any
person, firm, or corporation has, or claims to hâve, any lien, daim. Or de-
mand, of the hearing of which applications the person, flrm, or corjwration
shall be given ample notice by the court ; and any such person, flrm, or cor-
poration may at any time itseït njake such application, and no matter what
the form of application, whether by pétition, motion, or otherwise, the mailing
of such application shall, for the punjose of the hearing and of the disposition
thereof, be oonstrued and considered as if having been made by the trustée as
the actor in procuring the action of the court with référence thereto.
"(4) Commercial Security Company, Hamilton Investment Company, and
Empire Security Company, each of Chicago, 111., and J. H. Shale trustée of New
York City, each claim to be the holder of certain papers or security originally
delivered to them, respeotively, by the bankrupt in the conduct of its business,
each of which securities held by them, respectively, purports to cover, or car-
ry title to, certain musical instruments described in each such paper and
each of which consents, with the same provisions, limitations, and burdens
expressed in numbered paragraph next supra, that the said trustée proœed to
coUect from the obligors under said papers, using his best judgment in maklng
such collections In money or any other thing of value from such obligors.
"Nothing herein in this paragraph, or in thls order anywhere contained,
shall be construed as a gênerai appearance by said Commercial Security Com-
pany, Hamilton Investment Company, Empire Security Company, J. H. Shale,
trustée, Bank of Cody, Smith & Bames, Bush & Gerts, and French & Sons, the
appearance of whoni is limited expressly to the making of this order and
the terms and provisions hereof.
"(5) The trustée wlll keep a separate account of ail collections, whether of
money or other thing of value, and of ail substitutes for such other things of
value. In each instance where any lien or claim is made, or which has come to
his attention before or after bankruptcy and the proceeds of such collections
shall be distributed as herein provided, and as may be hereafter ordered by
thls court in this proceeding."
Following the making of the agreement evidenced by the order
just quoted from, the appellant delivered to the trustée sundry notes
for pianos and organs and piano and organ leases and mortgages given
to the bankrupt and acquired from it by the appellant, and thereafter
for more than a year continued to deliver to the trustée for collection
ail such paper called for by the trustée, and the trustée proceeded to
make collections on those papers and on other claims in favor of the
bankrupt. After the trustée had in this way realized a considérable
sum of money, and before any décision by the court on the question of
the legality of appellant's claim to notes, etc., acquired by it from the
bankrupt had been made, the court, on the pétition of the appellant and
others, made the above-mentioned order, under vi^hich the trustée paid
to the appellant the amount which the decree appealed from ordered
the latter to restore and pay back. By the terms of the order in pur-
suance of v^^hich the appellant delivered to the trustée notes, etc., made
to the bankrupt by its customers, the appearance of the appellant in
the bankruptcy proceeding was limited "to the making of this order and
660 262 FEDERAL REFOETEB
the terms and provisions hereof." Included in the "terms and pro-
visions" ref erred to were an authorization to the trustée to coUect ail
accounts, notes, etc., payable to the bankrupt to which the appellant
asserted any claim, and a consent that the question of the legality of
the appellant's claim to those notes, etc., or collections thereon, be
determined by the court making the order consented to. It does not
seem to us to be fairly open to question that the appellant submitted
itself to the jurisdiction of the court, so far as concems the enforce-
ment of its agreement to deliver to the trustée notes, etc., made to the
bankrupt and held by the appellant, and the détermination of the le-
gality of appellant's claim to or against assets administered or agreed
to be administered by the trustée in bankruptcy. The decree appealed
f roni did not embrace any matter as to which the appellant had not con-
sented to the court's exercise of jurisdiction. Plainly the court's juris-
diction so assented to was not exhausted by a payment made to the
appellant under the above-mentioned order, containing a réservation
to the court of the right to require a repayment to the trustée of the
sum so condjtionally disbursed.
[2] During several years, commencing in 1910, the appellant had
dealings with the bankrupt, with the resuit that the former acquired
many so-called "piano contracts" made to the latter by its customers
for the whole or deferred parts of the price of pianos or organs sold
or leased. Those dealings were, except as stated below, in pursuance
of the terms of three substantially similar written contracts entered into
successively between the appellant and the bankrupt — the first one on
August 16, 1910, for the period of one year from its date; the sec-
ond one on August 16, 1911, for a like period; and the third one on
August 16, 1912, which provided that it should remain in force until
terminated by two months' written notice — such termination not to
affect or impair any obligation given under the contract then in force.
Those contracts did not obligate the appellant to acquire paper offered
by the bankrupt, but stated the terms on which appellant would acquire
such offered paper as was acceptable to it. By the terms of the con-
tracts mentioned the transactions provided for were called "sales";
the price stated being 90 per cent, of the face value of the paper ac-
cepted, 70 per cent, of such face value being payable in cash, and 20
per cent, thereof to be retained by the appellant until the assigned
paper was paid off, the appellant having the right to apply any money
in its possession belonging to the bankrupt to the payment of install-
ments due on assigned paper in def ault, the bankrupt agreeing promptly
to repurchase at par of the uncollected part of paper in default, or
to substitute therefor other like acceptable paper of equal value and
to pay in cash for such portions as shall then be in default. The
bankrupt was to pay ail expenses of making collections on paper as-
signed, and guaranteed the payment of such paper. It was stated in
the contracts disclosing the basis of dealings between the parties that
they were made upon représentations in writing concerning the fînan-
cial responsibility of the bankrupt.
While those contracts provided that the subjects of them were to be
contracts drawing interest at the rate of 6 per cent, per annum, the
COMMERCIAL SECCRITT CO. V. HOLCOMBE 661
(262 F.)
provision as to the rate of interest called for by assigned paper was
îgnored ; the practice followed being that the appellant accepted paper
offered without regard to the rate of interest it bore, some of it bear-
ing no interest at ail, and most of it bearing interest at the rate of 8
per cent, per annum. The course of dealing was as foUows: From
time to time the bankrupt made ofïerings of a number of "piano con-
tracts," listed and serially numbered on forms provided by the appel-
lant. Upon acceptance of the papers so offered the appellant would
pay 70 per cent, of the amount unpaid thereon, by a deposit in a Chi-
cago bank to the crédit of the bankrupt, and would set aside an addi-
tional 20 per cent, in what was termed a reserve fund. Every month
the appellant sent to the bankrupt a bill for interest on the "entire linc
carried" at the rate of 6 per cent, per annum, deducting interest at
the same rate on the amount in the 20 per cent, reserve fund. The
bankrupt would pay the interest called for by the bill, without regard
to what it had collected from its customers on the paper assigned.
Twice a month the bankrupt would remit to the appellant the amount
due on paper transferred. If the amount due each month was not paid
by the makers of the papers, the bankrupt had to pay such amounts
out of its gênerai funds. Moneys collected by the bankrupt from its
customers was deposited in bank to its own crédit, and, with the knowl-
edge and consent of the appellant, was treated as belonging to the
former. Whenever a transferred paper was in default, the bankrupt
substituted other like paper or paid in cash the amount in default. The
appellant had no dealings with the makers of the transferred paper,
not even notifying thcm of its transfer, and never attempted to collect
from them the amount due on such paper in default.
That the transactions in question were not sales, but were loans se-
cured by the transferred paper as collatéral, is persuasively indicated
by a number of attending circumstances, among them the following:
That the bankrupt had the right to reacquire the paper by paying the
amount it called for, with interest thereon, the aggregate being an
amount in excess of that paid, or in any event to be paid, by the ap-
pellant ; that the bankrupt was to, and did, pay ail expenses of making
collections on the paper, and was treated as the owner of it, except
in so far as was required to give the transfer the effect of enabling the
appellant to hold it until the amount it called for, with interest there-
on, was paid to the appellant ; that the bankrupt paid 6 per cent, per an-
num interest on the amounts owing on the paper, whether it bore in-
terest or not; and that as to most of the transferred paper, namely,
that part of it which bofe interest at a rate in excess of 6 per cent, per
annum, the bankrupt was recognized, after the transfers were made, to
be the owner of part of the amount owing on such paper, the right to
retain as its own property, f ree of any claim in favor of the appellant,
so much of the interest collected as was in excess of 6 per cent, being
admitted.
The nature of a transaction is deterniined, not by the name given to
it by the parties, but by its opération and efïect. That a transfer of
paper evidencing indebtedness payable after the date of the transfer,
and which does not include any interest, is not a sale, is quite obvious,
662 2G2 FEDERAL UEPOETER
when the transférer is required to pay to the transférée interest on
the amount owing on such paper before anything is payable by maker,
and the transférer bas the right to reacquire the paper by paying to
the transférée the sum it calls for with interest thereon. That such
transactions as those under considération are loans has been decided in
several récent cases, among them the foUowing: In re Grand Union
Co., 219 Fed. 353, 135 C. C. A. 237, certiorari denied Hamilton In-
vestment Co. v. Emst, 238 U. S. 626, 35 Sup. Ct. 664, 59 L. Ed. 1495 ;
Home Bond Co. v. McChesney, 239 U. S. 568, 36 Sup. Ct. 170, 60
L. Ed. 444; National Trust & Crédit Co. v. F. H. Orcutt & Son Co.,
259 Fed. 830, C. C. A. . The contract which was the basis of
the dealings between the parties in the first-cited case, a copy of which
is set out in the report of that case, is identical in its terms with the
above-mentioned contracts between the appellant and the bankrupt.
[3] In behalf of the appellant it is contended that the évidence as
to the disposition made of the transferred paper by the appellant dis-
closes a material différence between the facts of the instant case and
those of the cases above cited. That évidence showed that the appel-
lant, by using the transferred paper as security for bonds issued by
it, acquired the money required to enable it to carry on the business
of purchasing and marketing such paper as that offered by the bank-
rupt. It is urged that, though the différence between the appellant's
possible outlay and what it was to realize from the transferred paper
amounts to more than légal interest, the appellant was entitled to con-
tract for the payment of such différence, because it included compen-
sation in the way of brokerage for the service rendered in marketing
the paper. In pledging the transferred paper to secure its own obliga-
tions the appellant acted for itself, not as a selling or borrowing agent
of the bankrupt. It acquired and held that paper in its own right,
whether as owner or as pledgee. As to that paper the relation of prin-
cipal and agent did not exist between the bankrupt and the appellant.
The latter's exaction of more than légal interest is no more justifiable
than would be a banker's réservation of more than the allowable dis-
count on the ground that he had to rediscount paper so acquired to be
enabled to carry on the business of discounting. One cannot charge
another for a service he renders to himself. There can be no broker-
age, where there is no broker or agency. Home Bond Co. v. McChes-
ney, supra.
[4] It is contended that each transfer of a pièce of "piano paper"
was a separate transaction, and that as to such of those transactions
as were settled by payment of the amount called for by the paper, or
by substituting other paper in lieu thereof, they were so closed as not
thereafter to be open for the purpose of the élimination of the usuri-
ous charges which figured in them. It is true that a separate account
was kept as to each paper transferred, which showed what was paid on
that particular paper (ail payments being on specified paper), when it
was in default, and when it was redelivered to the bankrupt upon pay-
ment in fuU, or upon default and other paper being delivered in lieu
of it. From the fact that an accoimt is kept as to each pièce of paper
pledged as collatéral, so as to disclose the occurrence of any default
COMMERCIAL SECURITY CO. V. HOLCOMBE 063
(262 F.)
in the payment of the debt evidenced by that paper, and to indicate
■ivhen the substitution of other collatéral is désirable, it does not fol-
low that that paper is unrelated to other paper similarly pledged, or
that the pledging of it was a transaction separate and independent of
the pledging of other like paper, either at the same time or in the course
of continuing dealings consisting of advancements made on such se-
curity as it is offered from time to time. The dealings between the
parties were such as to afford ground for treating them as constituting
one continuous transaction of lending or advancing money secured
by successive pledges of assigned paper; there being substitutions of
collatéral from time to time, part of the amount payable by the ap-
pellant for or on any paper accepted being retained by it with the
right of applying what was so retained on debts evidenced by other
like paper. Dorothy v. Commonwealth Ce, 278 111. 629, 116 N. E.
143, L. R. A. 1917E, 1110.
[5] Whether the dealings are so regarded or not, or whether the
acquisition of each pièce of paper or the acceptance of each oflfering
of a number of such paper s together is considered to hâve been a
separate transaction, a material feature of each of the transactions
was the réservation by the appellant of 20 per cent, of the amount
owing at the time on the paper ofïered and accepted. Such a transac-
tion could not properly be regarded as settled and closed so long as the
reserved 20 per cent, is not paid or applied pursuant to requirements
of the contract. Until that is done an obligation imposed on the ap-
pellant by the transaction remains undischarged. The practice of re-
delivering transf erred paper when paid off, without paying or applying
the reserved part of the amount it called for, indicates an absence of
intention to close the transaction by which that paper was acquired,
and was hardly consistent with the existence of an understanding that
that transaction was separate from and independent of other similar
ones. To support the claim made in behalf of the appellant that many
of the transactions had been finally settled and closed, with the resuit
that they could not be reopened because of usury, it was incumbent on
it to show that the amount it reserved when the paper was acquired
by it had been paid or accounted for. There was no évidence nega-
tiving the conclusion that the amounts so reserved by the appellant
remained in its hands without having been applied in pursuance of
the contract. In the absence of such évidence it may be presumed that
the transactions remained open so far as concems the payment or appli-
cation of the amounts retained or reserved by the appellant.
The transactions remaining open and unsettled as to a material fea-
ture of them, they were open for the purpose of eliminating usurious
charges involved in them, and of ascertaining whether the secured
debt or debts, with légal interest thereon, had been paid, with the re-
sult of extinguishing appellant's right to the pledged collatéral. The
évidence was such as to justify the finding that the appellant had been
paid the amounts owing to it, including légal interest, before its re-
ceipt of the amount ordered to be repaid. As the decree appealed from
did not require the payment by the appellant of the amount found to
hâve been that of the overpayment to it prior to the bankruptcy, there
664 262 FEDERAL KEPORÏER
is no occasion to inquire as to the propriety of the amount of that
finding.
What has been said disposes of the grounds of complaint against the
decree appealed from which seem to us to call for discussion or com-
ment. The conclusion is that on no ground urged is that decree sub-
ject to be reversed.
It is affirmed.
BAIN V. DNITBD STATES. *
(Circuit Court of Appeals, Sixth Circuit. January 6, 1920.)
No. S301.
1. Ceiminal law <@=>935(1) — Gbanting new tbial fob insufficienct or
EVIDENCE IN DISCRETION OF COTJET.
In a crlminal case, It Is not a trial court's légal duty to grant a new
trial, when he Is not hlmself satlsfled that the évidence establlshes guilt
beyond a reasonable doubt; but be may deny a new trial, unless con-
vinced tbat reasonable men could not hâve considered the évidence to
hâve establlshed accused's guilt beyond a reasonable doubt.
2. WlTNESSES <g=298 DEMANDINa ACCUSED'S PRODUCTION OF PAPERS RF--
QUIKES DEFENDANT TO TESTIFY AGAINST HIMSELF.
In a prosecution for defrauding a national bank, a demand tliat accusod
produce certain checks and drafts which the bank should hâve returned
to him held erroneous, because équivalent to an attempt to eompel aecused
to testify against himself.
3. Ckiminal law i®=5ll6S(l) — Demand that accused produce évidence
AGAINST HIMSELF NOT REVERSIBLE ERBOB.
In a prosecution for defrauding a national bank, the error In deinand-
Ing that accused produee certain checks and drafts for use against him
does not require reversai, where the court directed the jury to disregard
the demand, secondary évidence establlshed many of the checks and drafts
involved, and défendant later offered in évidence ail the checks aud
drafts in his possession.
4. Bankbuptcy <S=>242(2) — Cross-examination on testimony undee Bank-
ruptcy act.
Under Bankruptcy Act, § 7, cl. 9 (Comp. St. § 9591), providing for an
examination of the bankrupt, which shall not be offered in évidence
against him in a criminal proceeding, ete, an accused, on trial for de-
frauding a national bank, is not eubject to be cross-examdned regarding
his testimony on his bankruptcy examination.
6. Criminal law ig=»1043(l) — Objection to admitting déposition insuffi-
CIENT.
In a prosecution for defrauding a national bank, objection that a dép-
osition of accused in the bankruptcy court was not the best évidence, and
the final objection that It was incompétent, do not save for revlew tlie
point that Bankruptcy Act, § 7, cl. 9 (Comp. St. § 9591), precluded such
testimony from being used against the bankrupt, since the gênerai objec-
tion that the déposition was incompétent must hâve been supposed to
relate back to the objection that It was not the best évidence.
6. Bankeuptct "©=9242(2) — Necessity of objecting to bankruptcy déposi-
tion.
Bankruptcy Act, § 7, cl. 9 (Comp. St. f 9591), providing that a bank-
rupt's testimony shall not be offered in évidence against him In criminal
proeeedings, does not obviate the necessity of objecting to such testimony
when offered.
^ssFor other cases see same topic & KBY-NUMBBR in aU Key-Numbered Dlgesta & Indexe»
•Certlorarl denied ZSl U. S. — , <0 Sup. Ct. 3%, 64 L. Ed. — .
BAIN V. UNITED STATES 665
(262 F.)
7. Ceiminal law <S=>11SC(4)— Ekror in admitting acctjsed's déposition
against him not prejudicial.
In a prosecution for defrauding a national bank, the erroneous ad-
mission ot acaised's déposition, taken under Bankruptcy Act, § 7, cl. 9
(Comp. St. § 9591), does not requlro reversai, where accused did not den.v
anything Important developed in tlie déposition, as Judicial Code, § 269
(OÔmp. St. § 1246), as araended by Act Feb. 26, 1919, requires judgmcnr
to be given without regard to technieal errors not affecting substantial
rights.
In Error to the District Court of the United States for the Middle
District of Tennessee ; Edward T. Sanf ord, Judge.
Arthur Bain was convicted of defrauding a national bank, and he
bring-s error. Affirmed.
Bain was a business man who, for a séries of years, had deallngs with a
neighboring national bank. When the bank failed, its cashier and manager
claimed that he had paid over large sums to Bain, by honoring checks and
drafts which were not covered by any funds on deposit, and by paying cash-
ier's checks and certificates of deposit which had been issued to Bain without
considération. The cashier and Bain were indicted for conducting thèse trans-
actions with Intent to injure and defraud the national bank. The cashier
seems to bave pleaded guilty. Bain was convicted, and brlngs this writ of
error. The assignments of error ail pertain to the admission of évidence, and
ail, exeept two, were abandoned on the argument in this court. Thèse two,
and one alleged error, not assigned, constitute the matters for décision.
A. M. Tillman, and J. C. McCall, both of Nashville, Tenn., for
plaintiff in error.
Lee Douglas, U. S. Atty., of Nashville, Tenn.
Before KNAPPEN, DENISON, and WARRINGTON, Circuit
Judges.
DENISON, Circuit Judge (after stating the facts as above). 1.
One of the grounds of a motion for new trial, overruled by the trial
judge, was that the verdict was not supported by the évidence. As
to this, the trial judge said:
"The verdict is susrained by material évidence, and Is not manifesUy
against the weight of the évidence, so as to require or warrant Its being set
aside."
While it is not claimed that we could or should review the dis-
crétion of the trial judge in passing upon the motion for new trial,
it is urged that he misconceived his légal duty, and thus committed
réversible error. This ground of error is not assigned; but, if there
was error in this respect, which was plain and clear, we should be
inclincd to notice it under rule 11 (202 Fed. viii, 118 C. C. A. viii),
and accordingly we hâve considered this complaint.
[1] Counsel's proposition is that, if the trial judge is not him-
self satisfied that the évidence shows defendant's guilt beyond a rea-
sonable doubt, it is his légal duty to set aside the conviction and give
a new trial; that what the judge said in this case indicated his own
belief that the évidence was not of this compelling character; and
that there was no room for the exercise of his discrétion, since, by
^=3Foi otier cases see same topio & KKY-NUMBBR in ail Key-Numbered Dlgests & Indexes
666 262 FEDERAL KEPOETER
his conclusion, he had removed the foundation therefor. We think
this position tmtenable, and that there was no error, even if it should
be assumed that the personal opinion of the trial judge was as is thus
supposed. It is, of course, within the discrétion of a trial judge to
grant a new trial, if he thinks that, in a civil case, the jury disre-
garded the prépondérance of évidence, or that, in a criminal case, the
évidence lacks that degree of persuasiveness without which there
should be no conviction; but we do not understand that his impera-
tive légal duty in this respect, apart and distinct from his discre-
tionary rights and duties, is différent from that of an appellate court,
nor that he must set aside a verdict merely because he thinks it is
not the right one under the évidence ; and it f oUows that it cannot be
said to be his légal duty to set aside a conviction, unless he is con-
vinced that no reasonable man can think the évidence sufficient be-
yond a reasonable doubt — in other words, unless he concludes that
the verdict was not supported by any substantial évidence, in the
sensé in which that phrase must be used in connection with the
necessity of proof beyond a reasonable doubt. See Kelly v. U. S.
(C. C. A. 6) 258 Fed. 392, and cases cited on pages 406, 407,
C. C. A. — .
The gênerai principle may be illustrated by the familiar case where
the trial judge sets aside a verdict in a civil case because it is against
the weight of the evdence, and, upon another trial before the same
judge and upon the same évidence, another jury renders the same
verdict. Undoubtedly, he may, as he often does, consider this his-
tory as a sufficient reason for disregarding his still persisting indi-
vidual opinion about the évidence, and for refusing another trial;
and this practice demonstrates that the opinion of the judge upon
that subject does not, as matter of law, constrain him to grant a new
trial accordingly. There is nothing in this record to show that the
trial judge had found the évidence so insufficient as to deprive him
of his ordinary discretionary power.
[2, 3] 2. Many of the transactions involved, during the long pe-
riod of time covered, depended upon Bain's checks and drafts which,
in due course of business, would hâve been returned by the bank to
him. The prosecution was prepared to give secondary évidence re-
garding their contents, and undertook to lay the basis therefor by
demanding that Bain produce the originals of thèse as well as of
his unpaid checks and drafts. It is sufficient to say that the manner
of the demand and the proceedings had in connection therewith clear-
ly constitute error, in that they amounted to an attempt to compel
the respondent to testify against himself, within the définition fixed
by this court in McKnight v. U. S., 115 Fed. 972, 54 C. C. A. 358.
It ought to be said that not until after the proceedings had reached
this stage was the attention of the court called to the particular ob-
jection, nor — apparently — did it occur to defendant's counsel. When
the objection was made and had been considered, the court said to
the jury:
"Under the constitutlonal rlght of défendant, that notice [to produce orlghial
checks and drafts] should not hâve been given, and the court was tn error
BAIN V. UNITED STATES 667
(262 FJ
In maklng the suggestion and permitting the notice t» be given In your prés-
ence, and that action Is withdrawn. That notice goes for nothing. You ara
not to draw any iuference as to whether the défendant bas or bas not tbese
Touchers in bis possession. There is no inference to be drawn against hlm, If
it appears that be does not produce them later In the trial. The govemment
proceeds to prore its case and [the défendant was not requlred to make the
production] and no inference whatever Is to be drawn from bis fallure to do
80. You understand that Expunge that matter from your minds as though
you had not heard it."
We do not find that any exception was saved to the earlier ac-
tion of the court in permitting the demand, nor to any supposed in-
sufficiency of the effort thus made by the court to cure the error;
and yet we do not dépend solely upon that ground for concluding,
as we do, that there was no réversible error. Plainly, the trial court
did everything possible to neutralize the false step which had been
made. The argument of counsel is that the injury was past remedy,
since it was impossible for the jury to expunge fi'om their minds the
things which they had seen and heard. See comment to that effect
in Gillespie v. State, 5 0kl. Cr. 546, 115 Pac. 620, Ann. Cas. 1912D,
259, 35 L. R. A. (N. S.) 1171. Every such case must dépend upon
its own circumstances as to whether the net resuit is réversible er-
ror; and we therefore look further into the record. The case is
one where ample secondary évidence was at hand to prove many of
thèse checks and drafts, and some évidence as to ail of them, and
there are no suggestions that this secondary évidence was attacked
or questioned. The inference that many of thèse originals had come
into Bain's possession, and that he could or would produce them or
account for their absence, if he questioned anything shown by the
bank books, would be so natural in the minds of ail men that we
doubt whether it could be regarded as either created or strengthened
in the minds of this juiy by the demand which was made.
Later in the trial, and as a part of his défense. Bain produced ail
that he had of thèse same checks and drafts, and offered them in
évidence; and while, under many circumstances, such a production
and offering could not be called voluntary, after what had occurred,
yet we hâve no substantial doubt that he would hâve produced and
ofïered them just the same, if the objectionable demand had never
been made. Further, it cannot be said that the évidence covered by
the demand was "highly incriminatory." Having this view of the
practical situation, we cannot think that Bain was, in the end, sub-
stantially prejudiced by the erroneous view which the court tem-
porarily and briefly held and expressed. For instances where it was
thought that such an error might be sufficiently cured, see Wilson
V. U. S., 149 U. S. 60, 67, 68, 13 Sup. Ct. 765, 13 U Ed. 650, and
Dunlop v. U. S., 165 U. S. 486, 489, 17 Sup. Ct. 375, 41 L. Ed. 799,
and People v. Gibson. 218 N. Y. 70, 112 N. E. 730, Ann. Cas. 1918B,
509.
3. At some time prior to the trial. Bain had gone into bankruptcy
and had submitted to an examination, pursuant to section 7 (9) of the
Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 548 [Comp. St. §
9591]). His déposition had been written out and signed by him and
668 262 FEDERAL REPORTER
deposited with the clerk of the bankruptcy court. The original dépo-
sition was not available, but, upon the trial of this indictment, the
district attorney had a copy of the déposition, certified by the clerk
of the bankruptcy court, and oflfered it in évidence. Eventually, the
entire déposition was received in évidence and filed; but no por-
tions of it were read to the jury, excepting those portions which were
read to Bain on cross-examination when he was testifying as a wit-
ness in his own behalf, and the reading of each portion to him was
accompanied by the question whether he did not so testify upon his
bankruptcy examination. In each case he said he did. In each of
thèse instances, no objection was made to this use of a portion of the
déposition; but it is fairly to be inferred that it had been the in-
tention of ail parties to save such questions as they desired to save
upon this subject while the admission of the entire déposition was
being considered, and we therefore overlook the absence of any
spécifie objection at the later times, when alone the use of thèse por-
tions could hâve been prejudicial.
[4] The substantial objection now urged is that the same para-
graph of the Bankruptcy Act which authorizes this examination (sec-
tion 7, cl. 9) concludes:
"But no testimony given by him shall be ofCered In évidence against him
in any criminal proceeding."
Obviously, the use permitted of this déposition was erroneous, and
we hâve only to décide whether objection was properly saved for our
considération, and whether there was substantial préjudice.
[5] It is plain that the thought that the statute itself forbade this
use of the déposition never occurred, either to counsel or the court,
until motion for new trial was made. At first, it was specifically
objected that the certified copy was not the best évidence. Eventual-
ly, this was withdrawn, and it was agreed that the copy should be
considered as if it were the original. Still the objection was made
that it was not the best évidence, but that the testimony should be
proved by some one who heard it given. In one form or another,
this claim was insisted upon at several différent times, and though,
upon the final conclusion of the court to admit the déposition, it was
objected to as "incompétent," there was still no suggestion as to
why it was incompétent, except for the reason which had already
been given.
Such a record, showing that the objection was rightly overruled
so far as concerns the only reason then urged in its support, does
not call upon us to reverse a judgment because counsel hâve later
discovered another and a better reason. It may well be said, as it
has been (Johnson v. U. S., 163 Fed. 30, 31, 89 C. C. A. 508, 18 L.
R. A. [N. S.] 1194), that where an objection in gênerai words must
hâve been understood by counsel and by court to be for a particular
reason, because that reason was well known and no other was sug-
gested, the objection will be considered sufficiently definite to base
error upon; but that is not this case. Hère the objection that the
testimony was incompétent had been based upon a spécial reason
strenuously urged, and ail the circumstances contradict any infer
DUCKTOWN SULPHUR, COPPER & IRON 00. V. GALLOWAT 6C9
(262 F.)
ence that either court or counsel could hâve supposed it to rest upon
the objection now urged. See Davis v. U. S. (C. C. A. 6), 107 Fed.
753, 757, 46 C. C. A. 619.
[6, 7] Objection by défendant was necessary. True, the statute
says the déposition "shall not be offered" ; but we cannot construe
this language as obviating the right to use by consent, nor the infer-
ence that consent is to be implied from lack of objection. Burrell
V. Montana, 194 U. S. 572, 577, 24 Sup. Ct. 787, 48 L. Ed. 1122.
If we should hesitate to consider this alone an arbitrarily sufficient
reason for refusing to disturb a conviction, we would again look into
the record to discover how much Bain was hurt by the use of this
déposition. It is difficult to find any substantial injury. It does not
seem that, as a witness on this trial, he questions or dénies anything
important that developed in the déposition, or that there was really,
in the end, any dispute of fact which was materially affected by any-
thing read to the jury out of the déposition. Such inconsistencies
as there were are too trifling to justify thinking that the jury gave
any force to them.
A reasonable probability (to say the least) that this error need not
he thought prejudicial under the practice formerly prevailing in the
fédéral appellate courts becomes a certainty in view of section 269
of the Judicial Code (Act March 3, 1911, c. 231, 36 Stat. 1163 [Comp.
St. § 1246]), as amended February 26, 1919, c. 48, 40 Stat. 1181.^ It is
now provided that judgment shall be given upon a writ of error
"without regard to technical errors, defects or exceptions which do
not affect the substantial rights of the party." Under this section,
it must at least be true that there cannot be, from the mère exist-
ence of error, any effective presumption of préjudice, when the ap-
pellate court is able to say from the record that it is not reasonable
to infer that the substantial rights of the plaintiff in error hâve been
injuriously afïected. West v. U. S. (C. C. A. 6), 258 Fed. 413, 415,
— C. C. A. .
The judgment of the court below must be affirmed.
DUCKTOWN SULPHUR, COPPER & IRON CO. y. GALLOWAT et al.
(Circuit Court of Appeals, Slxth Circuit January 6, 1920.)
No. 3308.
1. Masteb and servant <S=95% — Statutoet mine foeeman deemed sebvant
of mine ownee.
Under Acts 1915 Tenn. e. 169, providlng that a mine foreman must be
employed in every mine, that he must hâve proper qualiflcatlona, and be
certlfied by the proper state board, that he shall perform enumerated du-
tiea to keep the mine safe for workmen, and be criminally liable for breach
thereof, and declaring in section 19 that the foreman shall be deemed the
agent or représentative of the owner or operator, and in view of the
change from the similar Acts Tenn. 1903, c. 23f , which provided for a mine
foreman, and in section 20 declared that he should not be subject to the
control of the owner, held that the foreman must be deemed the employé
Qs^For otber cases see same toplc & JCEY-NUMBER io ail Key-Numbered Digests & Indexes
> Comp. St. Ann. Supp. 1919, § 1246.
670 262 FEDERAL REPOETER
of the ownor or operator so the doctrine of respondeat superior applies
In case of a miner injured by reason of the foreman's négligence, notwith-
standlng that the owner must make hls sélection from a restricted ohoice.
2. MaBTEH and SBEVANT <ê=>&5^ PEOVISION for assistant D0E3 NOT PKEVENT
STATUTOET MINE FOEEMAN FEOM BEINQ DEiEUCED SEEVANT OF OPEBAT0E.
The provisions in Acts Tenn. 1915, c. 169, that the àutlea of the mine
foreman shall in his absence be performed by an assistant whom he shall
sélect, etc., do not prevent the foreman himself from belng considered a
servant of the owner or operator, so that a miner injured by reason of
the foreman's négligence may recover from the owner or operator, imder
the doctrine of respondeat superior.
3. MaSTEE and SEEVANT <S=>95''^ — STATUTOEY MINB FOEEMAN 18 EMPLOYÉ NOT-
WITHSTANDING STATUTOEY DUTIB8.
The provision of Acts Tenn. 1915, c. 169, that the statutory mine foreman
shall dévote ail his time to hls statutory duties held not to prevent hinj
from belng considered an employé of the owner or operator, hence a
miner injured through the foreman's négligent faUure to make the mine
safe, etc., may recover against the owner or operator under the doctrine
of respondeat superior.
4. CoNSTiTUTioNAL LAW <S=>275(2) — Mabtbe and sbuvant <S=11 — Requiee-
MENT THAT MINE OWNEB ENGAGE STATUTOEY FOBEMAN WHO 18 DEEMED AN
AGENT W0BK8 NO DEPBIVATION OF PBOPEETY WITHOUT DUE PBOCESS OF LAW.
Though Acts Tenn. 1915, c. 169, requirlng the employment of a mine
foreman in every mine to perform statutory duties to keep the mine safe
for miners, makes the foreman the agent of the owner or operator, so
that the owner or operator is llable under the doctrine of respondeat su-
perior to a miner injured through the foreman's négligence, such act is
not invalld as deprivlng the owner or operator of hls property without
due process either in violation of U. S. Const. Amend. 14, or the state
constitution.
In Error to the District Court of the United States for the Eastern
District of Tennessee ; Edward T. Sanford, Judge.
Action by Luther and Ed. Galloway, administrators, against the
Duclstown Sulphur, Copper & Iron Company. There was judgment
for plaintiffs, and défendant brings error. Affirmed.
W. B. Miller, of Chattanooga, Tenn., for plaintiff in error.
James B. Cox, of Johnson City, Tenn., for défendant in error.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
DENISON, Circuit Judge. While engaged as a miner in the Duck-
town Company's copper mine, Galloway was killed by the fall of ma-
terial from the roof. His administrators brought this action in the
court below, and recovered a judgment, against which the company
prosecutes this writ of error.
The négligence upon which the right of action depended was that of
the defendant's mine foreman, who is said to hâve been careless in
the duty of inspection. The chief question preserved and brought to
this court is whether the mine foreman should be regarded as the
agent of the défendant, so as to bring into action the respondeat su-
perior rule; and this, in tum, dépends upon whether the Tennessee
statute is rightly to be considered as consistent with such theory of
agency, and whether, when so considered, it is in conflict with either
the due process clause of the Fourteenth Amendment to the fédéral
@=:>For other cases ses same topic & KEIT-NUMBER in ail Key-Numbered Digests & Indexes
DUCKTOWN SULPIIUR, COPPER & IRON CO. V. GALLOWAY 671
C2Ô2 P.J
Constitution, or the "law of the land" clause of the Tennessee Consti-
tution (article 1, § 8). There is no occasion to consider the Tennessee
Constitution separately, since the clause thereof which is invoked and
the due process clause of the Fourteenth Amendment are, for the pur-
poses of this case, substantially équivalent.
[1] The statute in question is chapter 169, § 19, of the Tennessee
Acts of 1915. It provides that a mine foreman must be employed in
every mine ; that he must hâve certain qualifications and must be "cer-
tified" by the proper state board ; that he shall perform certain duties
to keep the mine safe for the workmen; and that he shall be crim-
inally liable for the breach of any of thèse duties. He is, undoubtedly,
in certain respects, placed above and beyond the orders or direction of
the mine owner; and the final question is whether the status of agent
for the state in the exercise of its police powers, thus created for him
by the statute, is so inconsistent with the status of agent for the mine
owner in operating the mine as to defeat any inference of the latter
agency, or, if agency must be assumed, as to make the taking of the mine
owner's property to answer for the default of the foreman a violation of
the constitutional provision.
The Tennessee act vi^as first passed in 1903 (Laws 1903, c. 237), and
was in substantially its présent form, with the exceptions hereinafter
noted. Section 20 of the act of 1903 contained the provision :
"That said mine foreman shall not be suTjject to the control of the operator
or owner in the discharge of the duties required of said foreman by this act."
This act came before the Suprême Court of Tennessee, in Coal Co.
v. Priddy, 117 Tenn. 168, 96 S. W. 610. It was held that the mine
foreman was not the agent or représentative of the owner in the per-
formance of the duties required by the act, although he was employed
by and subject to discharge by the owner, and although he was per-
forming for the owner duties which, by gênerai law, rested upon the
owner. In reaching this conclusion, some force was put — we cannot
be sure just how much — upon that part of section 20 above quoted;
but the case was grounded chiefly on the rule announced by the Su-
prême Court in Homer Ramsdell Co. v. La Compagnie, 182 U. S. 406,
21 Sup. Ct. 831, 45 Iv. Ed. 1155, and stated by Sherman & Redfield on
Négligence (volume 1, p. 231, quoted by the Tennessee court) in this
form:
"Where a gênerai manager of a department is appointed In obédience to a
statute mailing such appointment compulsory and maklng such manager ex-
pressly responsible and independent of his employer's control, such employer
is not liable for anything more than due care In selecting him."
The Priddy Case may well involve only the meaning of the 1903
statute ; it does not toudi the constitutional question now urged.' Up-
on the subject of interprétation, however, we will be obliged to reach
the same conclusion, unless, as to this f eature, there is good reason for
distinguishing the 1915 statute from that of 1903.
1 Unless by Implication from the statement "under such a etatute there la
no ground ou which to place the llabillty of the owner, etc."
672 2G2 Ï'BDERAL REPORTER
In the act of 1915 (section 19), the above-quoted words are omitted,
and, in place thereof , we find :
"Sald mine foreman is expressly declared to be the agent or représentative
of the operator or owner of the mine In the discharge of the dutles required of
said mine foreman by this act."
We thus hâve hère old matter stricken out and new matter inserted.
From the omission alone, we could not draw any satisfactory inference
as to change in intent. It was plain enough, looking at other parts of
the old statute, that, in the discharge of the duties required of the
foreman by the act, he was not subject to the control of the owner; to
make the déclaration in so many words did not clearly add anything
of substance ; and to strike out this déclaration did not subtract much.
The same cannot be said of the new matter inserted. If we consider
this insertion alone, the intent of the Législature could not be more
clearly expressed to create, or to affirm the existence of, the master and
servant relationship with its ordinary incidents. In view of the con-
struction which had been given to the earlier act hy the Tennessee
court and the plain words of the later act, we must infer that the Lég-
islature, in the earlier act, observed the inconsistency between some
of its provisions and the theory of agency by the foreman, and, to em-
phasize this inconsistency, inserted the express statement that the
foreman was not subject to the owner's control, and that, in the later
act, it observed an ambiguity as to whether this agency existed, and
endeavored to solve that ambiguity by an express statement of intent.
That intent, of course, should be given effect, uniess to do so would
be inoonsistent with the gênerai purpose and resuit of the act as evi-
denced by other provisions.
The other provisions especially relied upon to overrule the expressly
stated intent are four: (1) That the owner must sélect the foreman
from a small class, membership in which is confined to those approved
by the controlling state authority ; (2) that in the statutory matters the
judgment of the foreman, and not of the owner, controls; (3) that,
in the absence of the foreman, his place is taken by an assistant se-
lected by him without any approval from the owner; (4) that the
foreman is required to give his entire time to his statutory duties.
The first two may be considered together. Much reliance is placed
upon the Homer Ramsdell Case, supra, the resuit in which was thought,
by the Seventh Circuit Court of Appeals, to dépend upon compulsion
to sélect a particular person as distinguished from compulsion to sélect
out of a class. Fulton v. Wilmington Co., 133 Fed. 193, 197, 66 C.
C. A. 247, 68 L. R. A. 168. A careful study leads us to doubt whether
the resuit stands on that distinction. From the opinion in the case,
with the quoted certificate, and from the opinion at the District Court
trial (63 Fed. 848), it appears that the New York statutes compelled
an incoming boat to take a pilot, and had the color of directing ac-
ceptance of the first pilot who offered; that, upon the outgoing trip
of the same boat, the master was compelled to take the same, or prac-
tically the same, pilot who brought him in, uniess the master protested,
in which case the pilot commissioners would sélect another for him.
Construing this statute, the New York courts had held (Gillespie v.
DUCKTOWN SULPHUB, COPPER & IKON CO. V. GALLOWAY 673
(262 P.)
Zittlosen, 60 N. Y. 449, 451; and, of course, the fédéral courts in-
tended to accept this construction, 182 U. S. 411, 21 Sup. Ct. 831, 45
L,. Ed. 1155) that upon the inbound trip the master was under no ob-
ligation to accept the first pilot, but might sélect any licensed pilot whom
he wanted, and whom he could get out of the whole class. The stat-
utes, therefore, must be taken as providing that, when coming in, the
master must take one of the class, but, when going out, he must take
a previously chosen individual. The controversy regarding the liabil-
ity of the boat for the neghgence of the pilot arose out of the out-
bound trip, and therefore might hâve been decided as being a case where
there was no right of sélection; however, the Circuit Court of Ap-
peals certified, and the Suprême Court considered, the matter as if
there were no différence between the situation coming in and going
out.
The question certified to the Suprême Court reached and covered
the case of a boat coming in, where the right to sélect among the class
existed; and both because the Suprême Court decided the whole ques-
tion certified, and because it cites with approval (on page 416 of 182
U. S., on page 835 of 21 Sup. Ct. [45 L. Ed. 11551) the extract from
Story, where his conclusion is based on the absolute duty of the master
to take some pilot, instead of piloting the boat himself, and without
regard to the right of class sélection, we do not think the opinion can
he distinguished from the présent case merely upon the ground that the
mine owner may sélect from the whole class of certified foremen, and
need not take the first applicant.
However, there is ample diflference between the Homer Ramsdell
Case and this, both in the fact that the statutes there did not attempt
to create the master and servant relationship, and in the fact that the
position of a pilot on a ship is very différent from that of a foreman
in a mine. By long-settled rules, the pilot supersedes the master in
the entire matter of management, while this mine foreman supersedes
the owner, at most, as to only one phase of the owner's rights and duties.
The argument that the owner cannot be liable because he neither
sélects nor controls the foreman is not entirely persuasive. We find the
ordinary field or basis for the relation of master and servant in full
existence. The duty of reasonable inspection, in order to keep the
premises fairly safe, is universally accepted as the master's duty, and
one to whom that duty is delegated continues to be his représentative
for whose acts of négligence he must respond. The owner makes his
choice, when he employs the mine foreman — a restricted choice, it is
true, but nevertheless a substantial right; and he may discharge his
foreman at any time, when dissatisfied, unless he has contracted not to
do so. In the présence of this suitabie background, we are not con-
vinced that the statute took away the control from the master so wholly
and completely as to leave not enough of substance to support the re-
spondeat superior rule.
Doubtless, if the owner thinks the place is safe and the foreman
thinks it is not, it will be the latter's statutory duty to disregard the
owner's instruction to do nothing about it — though, even then, the owner
could measurably constrain the foreman's action by threat of discharge ;
262 F.~^3
674 262 FEDERAL REPORTER
but this is only one aspect of the situation. If the foreman thought
the place was safe and the master thought it was not, we think it would
be, as between them, the clear duty of the foreman to obey the master's
instructions to make it saf er. Neither does it appear that either the re-
striction to a class or the exaltation of the foreman's judgment as to
safety is particularly important. Any man compétent to be foreman
ought to be, and probably is, given a certificate ; and, in ail the par-
ticulars involved, the owner would usually yield to the judgment of his
skilled foreman, with or without any statute.
[2] The claim, which dépends upon the possible substitution of an
assistant, without the consent of the owner, is not without force ; but
neither by itself nor in connection with the other provisions is it suffi-
cient to override the expressly stated intent. The bringing in of an
assistant in such a way as to throw liability on the owner is an incident
which may or may not occur, and whether such an assistant foreman
would be within the législative déclaration of agency is a question that
does not arise in this case. The possibility that there may be instances
of insuperable obstacle to carrying out the declared theory of the stat-
ute does not forbid the application of that theory where the obstacle
does not exist.
[3] The remaining provision relied upon is that the foreman is re-
quired to give ail his time to his statutory duties, and that, since he
would hâve no time remaining for the performance of duties directed
by the master, it must be assumed that he is subject to no such duties ;
and since the owner may not control the foreman in his statutory duties,
it is said that the owner has no power to control at ail. This contention
is of the Scime class ; it has force, but not controUing force, as against
the deliberate désignation of the foreman as the owner's agent.
[4] Passing from the question of construction, we come, now, to
that of constitutional powers ; and, for that purpose of this décision,
we assume that, in spite of the statutory attempt to make the foreman
the agent of the owner, there might be such an utter lack of basis for
this attempt that to recognize and enforce it would be to deny to the
owner due process. We find that the Suprême Court, in Wilmington
V. Fulton, 205 U. S. 60, 27 Sup. Ct. 412, 51 L. Ed. 708, has gone far
towards covering this subject. In that case, a similar statute was in-
volved ; the Illinois court had construed it as intending to create the
relationship with its attendant liabiUties; that construction, the Su-
prême Court, of course, f ollowed ; and, upon the basis thus f ormed,
it afHrmed the constitutional power of the state to do what had been
done. We do not find any satisfactory reason for thinking that the
power did not exist hère, if it did in that case. The distinctions which
exist are those which we already discussed and which go rather more
to the question of intent than to that of power, though they do hâve
some bearing upon the latter aspect. It is probably true that the Ten-
nessee law goes further than the Illinois law did in putting the fore-
man's statutory duties beyond the owner's control, and the Suprême
Court put some rehance upon the state policy as declared by the state
court — a background not présent hère — ^but the principle affirmed, on
page 74 of 205 U. S., on page 417 of 27 Sup. Ct (51 I.. Ed. 708), is
UNITED STATES V. RIDGELY 675
(262 F.)
ample to cover this case. The refusai to accept the rule of the state
courts of Pennsylvania and West Virginia (205 U. S. 72, 27 Sup. Ct.
416, 51 L. Ed. 708; and see Farmer v. Keamy, 115 La. 722, 39 South.
967, 3 Iv. R. A. [N. S.] 1105), and the adoption of the contrary Illinois
view, are made to dépend, we think, not on the varying degrees of
control remaining in the owner, but rather on the idea that this class
of duty belongs to the master, that he cannot delegate it, and that he
cannot claim exemption merely because he is somewhat constrained in
his choice of a foreman, and because the state has closely defined some
of the duties and given its aid in compelling their performance.
The other errors alleged afFord no basis for reversai, either because
they are sufficiently covered by what has been said, or because they
do not rest upon any exception properly taken below.
The judgment is affirmed.
UNITED STATES v. RIDGELY et al.
(Circuit Court of Appeals, Biglith Circuit January 6, 1920.)
No. 5334.
Public lands ^=53 — Approval op Commissioneb eequisite to acquisi-
tion OF EIGHTS IN INDEMNITY LANDS.
A State, which was owner of scliool land Included wlthln a national
forest reserve, by selectlng and making application for lieu land In com-
pliance with the Btatutes and régulations, acquires no estate, légal or
équitable, in the land selected, as agalnst the United States, prior to
approval of its application by the Commissioner of tlie General Land
Office, and pending such approval it la subject to withdrawal from sélec-
tion as minerai land.
Appeal from the EHstrict Court of the United States for the District
of Wyoming; Jolin A. Riner, Judge.
Suit in equity by the United States against H. S. Ridgely and othets
Decree for défendants, and the United States appeals. Reversed.
Henry F. May, Sp. Asst. Atty. Gen. (Charles L. Rigdon, U. S. Atty.
of Cheyenne, Wyo., on the brief), for the United States.
John W. L,acey, of Cheyenne, Wyo. (D. A. Preston, of Cheyenne,
Wyo., William L. Walls, Atty. Gen., of Wyoming, and Herbert V.
Lacey and Hilliard S. Ridgely, both of Cheyenne, Wyo., on the brief),
for appellees.
Edwin A. Meserve, Shirley C. Ward, and Jefferson Chandler, ail of
Los Angeles, Cal., amici curise.
Before HOOK and STONE, Circuit Judges, and AMIDON, Dis-
trict Judge.
AMIDON, District Judge. The state of Wyoming was admitted
by act of Congress on July 10, 1890 (26 Stat. 224), which granted to it
sections 16 and 36 for educational purposes, with certain indemnity
lands in place thereof in case they had been otherwise disposed of ;
the indemnity lands to be selected with the approval of the Secretary
of the Interior. Under this grant the state acquired a perfect title to
®=s>For ather cases see same toplc & KBY-NUMBBR in ail Key-Numbered Digests & Indexe*
676 2G2 FEDERAL REPORTER
a certain section 36. On February 22, 1897, the Big Horn National
Forest Reserve, created by proclamation of the Président (29 Stat.
909), included within its outer boundaries the section referred to, at a
time when title thereto had vested absolutely in the state.
On April 4, 1912, the state filed in the proper local land office its ap-
plication under the provisions of the act of Congress of July 10, 1890
(26 Stat. 222), and sections 2275 and 2276 of the Revised Statutes, and
the acts amendatory thereof (Comp. St. §§ 4860, 4861), for the tract
of land involved in the présent suit as indemnity for a part of said
section 36. The state did everything necessary to show a perfect title
to the land relinquished and perfect relinquishment thereof to the
government, and everything that was required either by statute or
régulation of the Land Department to sélect the land hère involved as
indemnity for the land so relinquished. Among other things in the
showing was an affidavit that the land applied for contained no known
deposits of minerai or petroleum, and it was stipulated at the hearing
that at the time the application was filed the land "had been classified
by the government in no way as minerai lands." The filing of the ap-
plication was allowed by the local land office, publication ordered, the
receipt of the publication fee accepted, and ail the papers submitted
by the state were sent to the Commissioner of the General Land Office
on April 30, 1912, with proper certificate of the local officiais, showing
that the records in their office disclosed no adverse claims to the land
selected.
On May 6, 1914, the Président, under the terms of the act of
June 25, 1910 (36 Stat. 847 [Comp. St. §§ 4523-4525]), withdrew as oil
land the tract so applied for by the state.
On April 29, 1915, the Commissioner of the General Land Office
caused notice to be given to the state advising it that, inasmuch as
the tract applied for had been withdrawn as oil land, certification of
the sélection, if made, would. contain a réservation of the petroleum
deposits under the act of July 17, 1914 (38 Stat. 510 [Comp. St. §
4640c]), unless the state within 30 days filed an application for classi-
fication of said land as nonmineral, together with a showing, in which
event the state would be allowed a hearing to show that the tract was
not valuable for petroleum.
On May 24 of the following year, 1916, the state made what purport-
ed to be a lease of the property to défendant Ridgely, for the purpose
of drilling for oil thereon, which lease was thereafter by mesne con-
veyance assigned to défendant Midwest Refining Company.
Byletter dated the day following the date of the lease, to wit, May
25, 1916, the state replied tb the notice given under instructions of
the Commissioner last above referred to, declining to accept a surface
patent, so called, and, instead of asking for a hearing as to the charac-
ter of the land, claimed that an équitable title had vested in it by vir-
tue of its compliance with the laws and régulations in its application
for sélection of April 4, 1912.
Thereafter, on August 17, 1916, the Commissioner of the General
i.and Office held the sélection for cancellation, on the grounds that
the land had been withdrawn as oil lands and had been shown to be
UNITED STATES V. EIDGBLY 677
C262 F.)
such. An appeal was taken by the state to the Secretary of the In-
terior, and the décision of the Commissioner was affirmed on Octo-
ber 25, 1916, and this décision was made final by the Secretary of the
Interior on February 26, 1917, on pétition for rehearing.
Going back, now, to developments on the land, in the year 1916
drilling for oil was undertaken by the défendant Midwest Refining
Company, and carried on to discovery and subséquent production.
But no discovery was made or drilling commenced until after May
24, 1916, the date of the lease to Ridgely, and nearly a year after
the letter of July 29, 1915, from the Commissioner to the state of
Wyoming, notifying it that, if the sélection were allowed, it would
contain a réservation of the petroleum deposits. Since that time
production has been carried on by défendant Midwest Refining Com-
pany, and is now being carried on by it from a number of wells making
a large production. This suit was brought by the United States to
enjoin the continuing trespass involved in such drilling and opération
and exhaustion of the oil content of the land, to quiet title in the gov-
ernment, and to cancel the varions instruments relied on by défendants,
as supporting their claim of an équitable title thereto, and for an ac-
counting. The state intervened in the action. It and the other de-
fendants filed separate answers. Evidence was adduced, showing the
facts substantially as above recited. The trial court dismissed the biil
upon the merits, and the présent appeal seeks a review of that déci-
sion.
It is stated in the briefs, and was referred to in the oral arguments,
that it is the purpose of ail parties in this case to présent squarely the
question whether or not the state can obtain title to lieu lands by fil-
ing its application for sélection and complying with ail the require-
ments of the statutes, rules, and régulations on its part to be complied
with, although its sélection never was approved, but prior to action
thereon by the Commissioner of the General Land Office and while
the application for the selected land was pending before him, the land
applied for was shown to be oil land, and withdrawn as such, and upon
those grounds the sélection was rejected.
We think that it has been clearly determined by the Suprême Court
that the state, down to the time of the approval of the application by
the Commissioner of the General Land Office, acquires no estate, légal
or équitable, in the lands applied for as against the government. The
only right which it acquires by its application and the proceedings in
the local land office is to be protected against any subséquent right in
the tract being acquired by private parties in case the government dé-
cides to dispose of the lands as agricultural lands.
This in our judgment is placed beyond controversy by the décision
of the Suprême Court in Wisconsin Railroad Co. v. Price County, 133
U. S. 496, 511, 512, 10 Sup. Ct. 341, 33 L. Ed. 687, and more particu-
larly by the décision in Cosmos Co. v. Gray Eagle Oil Co., 190 U. S.
301, 23 Sup. Ct._692, 24 Sup. Ct. 860. 47 L. Ed. 1064. The latter case
is directly in point. There are minor circumstances in which it dif-
fers from the présent case, but none of thèse constitutes a substantial
ground of distinction.
678 262 FEDEEAL HKPOETEE
In brief, the Cosmos Case holds that the local ofEcîals are not vest-
ed with any jurisdiction to pass tipon any of the questions, either
of law or fact, involved in the application. Their power is confined to
accepting the state's papers, making the proper notation upon their
records to protect the application against subséquent rights of private
parties, and then transmitting the papers, with a certificate showing the
tract to be free from adverse claims so far as disclosed by the records
in their office, to the Commissioner of the General Land Office. That
officer is clothed with jurisdiction, not only to pass upon the paper
showing made by the state, but to make any investigation which he
sees fit to détermine whether the lands are nonmineral, so as to come
within the statutes controlling the application. Until he approves of
the application, there is, as Mr. Justice Field said in the Price County
Case, 133 U. S. 511, 10 Sup. Ct. 341, 33 L. Ed. 687, no sélection.
In other words, the favorable action of the Commissioner is an
élément of the sélection, and until that is obtained the state acquires
no title, légal or équitable, to the land. In exercising his jurisdiction,
the Commissioner is not reviewing the action of the local land of-
ficiais. His jurisdiction is original and primary. While the case
is pending before him, the transaction is simply an application to
exchange. The government is as free in that transaction as the state.
The case of Daniels v. Wagner, 237 U. S. 547, 35 Sup. Ct. 740, 59
L. Ed. 1102, L. R. A. 1916A, 1116, Ann. Cas. 1917A, 40, does not im-
pair the authority of the Cosmos Case, but expressly approves it as
to the power of the Commissioner to détermine the minerai character
of the land applied for. Ail the Daniels Case décides is this : That the
applicant for lieu lands, by presenting his application to the local land
office, acquires the right as against private individimls whose rights in
the property arise subsequently, to be protected against such subsé-
quent private rights, and that the Commissioner of the General Land
Office in the name of discrétion cannot, while holding the lands sub-
ject to disposai as agricultural, timber, or désert lands, give the land
to a private party whose rights arose after the application to sélect
the indemnity lands was made to the local land office. The Daniels
Case has nothing to do with the right of the goveriunent to décide any
question of fact involved in the application to sélect the land as indem-
nity. It simply holds that a private individual, whose rights arise
subséquent to the entry of the application in the local land office, can-
not be given priority over such applicant. The Suprême Court in
the case cited simply holds the Commissioner, in exercising his juris-
diction to dispose of the lands as between private parties, must give
eflfect to the gênerai doctrine of priorities.
In the argument and briefs there is a great array of authorities hold-
ing that it is the "known" minerai quality of lands at the time a right
to them is acquired which controls in suits to cancel patents, and that
the discovery of the minerai character of the land subséquent to the in-
ception of the right does not give the government the right to cancel a
patent. The différence between those cases and the présent is plain.
This is not a suit to cancel a patent or an équitable title. The suit
simply involves the question of the right of the government, through
UNITED STATES V. EIDGELT 679
(202 F.)
the Commissioner of the General Land Office, to détermine whether
the lands are of a character subjecting them to plaintiff's claim. Un-
til that question is decided, as we hâve already stated, the applicant,
as against the govemment, acquires no title in the property, légal or
eqiiitable. This is not only established by authority, but is justifîed
by expérience. The right to sélect indemnity lands in lieu of agricul-
tural lands lost, which empowers the selector to range over a whole
State in search of lieu lands, has been the agency by means of which
great frauds hâve been perpetrated upon the government. What is
"known" about lands some years prior to the time when that knowledge
becomes determinative of a right is a difficult field of inquiry. The
showing at the time of the filing in the local land office is made wholly
by the applicant. It is a paper showing. So far as the government is
concerned, it is an ex parte proceeding. The selector is entitled to
agricultural lands, and not to minerai lands. The Commissioner of the
General Land Office, in the exercise of his jurisdiction to détermine
whether the lands applied for are such as the applicant is entitled to
under the law, may not only make such inquiry through agents as he
sees fit, but, if needbe, he may make such exploration as is necessary
to détermine the question upon which he is asked to pass. This is the
only way in which the government can be protected against grave
frauds in the administration of the public land laws. The power and
duty of the Commissioner to détermine whether the land is minerai
is not dépendent on whether some private party has filed a contest.
His iurisdiction to protect the United States is certainly as obligatory
as to protect the private rights of contestants.
The decree of the District Court is reversed, with directions to the
trial court to enter a decree in favor of the plaintifï in accordance with
the prayer of the bill, and proceed with the cause.
680 262 FEDERAL REPORTER
SIMONS V. CROMWELL et al.
(Circalt Court of Appeals, Second Circuit December 19, 1919.)
No. 57.
Wiixs @=s>68 — Making of conteaot question fob jubt.
Evidence in support of an allégation that a décèdent, in considération
of services rendered and to be rendered to her by plalntiff, and which
were afterward rendered, promised to bequeatli to plaintiffi a stated sum
by her will, held sufflcient to require submission of the issue to the jury.
Eogers, Circuit Judge, dissenting.
In Error to the District Court of the United States for the South-
ern District of New^ York.
Action at law by Annie S. Simons against William Nelson Crom-
well and another, executors. Judgment for défendants, and plaintiff
brings error. Reversed.
Roger Poster, of New York City, for plaintiff in error.
Sullivan & Cromwell and Clarke M. Rosecrantz, ail of New York
Çity (P. L. Miller, of New York City, and Hiram C. Todd, of Sarato-
ga Springs, N. Y., of counsel), for défendant in error Cromwell.
Edgar T. Brackett, of Saratoga Springs, N. Y., for défendant in
error Cramer.
Before WARD, ROGERS, and MANTON, Circuit Judges.
WARD, Circuit Judge. This is a writ of error to a judgment for
the défendants, executors of the estate of Frank Leslie, deceased, di-
rected by the court. The complaint demanded judgment in the sura
of $40,000 upon three separate causes of action as foUows:
First. A promise made by the décèdent, Mrs. Leslie, to the plaintiff
in 1902, that in considération of personal services theretofore and to be
tliei-eafter rendered by her, to bequeath her a legacy of $50,000;
whereas, Mrs. Leslie bequeathed her a legacy of only $10,000.
Second. A promise, in considération of the services aforesaid, to
pay to the plaintiff the reasonable value of the said services, which
was the sum of $50,000, no part of which the décèdent has paid, ex-
cept by a legacy of $10,000.
Third. A promise, in considération of the services aforesaid, to
bequeath the plaintiff a sum equal to the reasonable value thereof,
which was $50,000; whereas, the décèdent left the plaintiff only a
legacy of $10,000.
The answers of the défendants contained déniais, and also pleaded
to the second cause of action the New York statute of limitations of
six years.
Mrs. Leslie sustained a paralytic stroke in 1902, and was thereafter,
down to the time of her death at the âge of 77, in 1914, a semi-invalid.
Evidence as to her wealth and as to her relatives was proper, and it
appeared therefrom that she was a rich woman, with no direct de-
scendants, and that the plaintiff is her first cousin. Our conclusion
makes it unnecessary to state in détail the particulars of Mrs. Leslie's
(ÊsaFor other cases see same topio & KEY-NUMBER in ail Key-Numbered Dlgests & Indezea
SrUONS V. CEOMWEIiL 681
<2S2 F.)
disabilities and of the plaintiff's services. Suffice ît to say that for
the 12 years in question the plaintiff spent one or two months each year
with Mrs. Leslie, and did render her services made necessary by her
âge and condition of health.
Taking up, first, the second cause of action, it will be seen that with-
in 6 years of the decedent's death the plaintiff could in the aggregate
hâve rendered services covering a period in ail of not over one year.
We agrée with the trial judge that $10,000 was as much as any jury
could award as the reasonable value of such services. Any verdict
rendered for the plaintiff on this cause of action would hâve been set
aside by the trial judge, and therefore it was within his power to
direct a verdict in favor of the défendants on it.
The testimony in support of the third cause of action was that of
the plaintiff's son, as f ollows :
"I had a conversation with Mrs. Lefslie about what she intended to do for
my motlier after lier death in the year lî)04 at Charleston. I saw that Mrs.
Simons was running down in health, and I thought I would take her eut to
the theater. I wanted to invite her to the theater. So, on a drive in a car^
rlage with Mrs. Leslie — we nsed to relieve her from that duty at tlmes — I
invited her, and she said she didn't want to go. I knew she wouldn't go, be-
cause she always went to bed at 9 o'clock. I asked her, dld she objeet to Mrs.
Simons going, and she said she did. I said, 'I think she ought to hâve a little
récréation,' and she said to me, 'Kobert, your mother is going to be well paid
for what she is doing for me, and I don't wish her to go,' so I dropped the con-
versation further.
"Q. Did she say how your mother was going to be paidî A. I Inferred from
her previous statement —
"Mr. Roseerantz: No; no.
"A. Not at that time.
"Q. What did she state at any other tlrae? A. She said some short whlle
befoie that, on one of thèse drives, 'I don't know why your motlier worrles
so about the future, as I hâve provided for her."
This is not the language of contract, but of pure intention or expec-
tation, quite insufficieiit tp prove an agreement to bequeath to the plain-
tiff a sum equal to the reasonable value of the services rendered or to
be rendered by her.
The first cause of action is the only one requiring serious consid-
ération. To recover, the plaintiff must establish a promise made to
her by the décèdent that, in considération of services rendered and to
be rendered, the décèdent would leave her a legacy of $50,000. Under
section 829 of the Code of Civil Procédure the plaintiff was an in-
compétent witness on this subject. Still such a promise could be es-
tablished by circumstantial testimony. The testimony on which the
plaintiff relies is that of her husband, as f ollows:
" ♦ ♦ • March, 1902. Mrs. Leslie did not get up until very late, about
9 o'clock in the morning, and I had gone to my business. Saturday aftemoon
I went into the room with her, and I said, 'Cousin Florence, my wife tells me
that you are going to leave her $50,000 in your will, and I wlsh to thank you
for it.' Her reply was, 'Robert, I am due Annie that money for what she
has done In many services rendered to me in my présent condition, and I
Intend to call ou her in the future.'
"Q. Do you recollect anythlng more about that conversation? A. That is
the conversation. Then . tliere was no more conversation after that Mrs.
I^eslie was a woman that, whenever you said anything to her, that eettled it
• • •
682 262 FEDERAL REPORTER
"Q. You must use the language as near as you recoUect that you used to
yonr wifeî A. I sald, 'I went to thank Cousin Florence for that $50,000 she
proposed to leave to you, and she repUed to me, 'Robert, I am due Annie
thls, because she lias been kind to me, and has uursed me in my récent illness,
and 1 propose to call on her in tbe future.' "
This testimony, if believed, was évidence that the décèdent had ad-
mitted a conversation with the plaintiff as to her services rendered and
to be rendered, and as to the compensation to be paid for them in the
decedent's will. A jury might find it to be, not language of expecta-
tion or intention, but of agreement. The détails necessary to establish
a contract appear specifically ; the considération, the amount, and man-
ner of compensation are ail stated. The décèdent, perhaps in not tech-
nical language, but substantially stated to the witness the considération,
viz. that there was "due" by her to Annie the sum of $50,000 for
services rendered in the past and for which she was going to call in
the future. Thèse services had been and were subsequently rendered
by the plaintiff. We think the case should hâve gone to the jury
upon the first cause of action. The testimony in support of it was
quite différent from that of the plaintiff's son in support of the
third cause of action. No doubt it would be proper to instruct the
jury as to the care and scrutiny with which they shouH weigh the
testimony, in view of ail the circumstances of the case, but in our
opinion the question was for them. McKeon v. Van Slyck, 223 N. Y.
392, 119 N. E. 851.
The judgment is reversed.
ROGERS, Circuit Judge, dissents.
In re H. L. HBBBBBT & CO.
Appeal of NATIONAL SUREOTY CO.
(Carcuit Court of Appeals, Second Circuit. December 10, 1919.)
No. 54.
1. Indemnitt <g=>l — Construction of conteact to assume and pat debis
OF another; "contract to pat."
Agreement by a corporation, which acquired the business of an Indivld-
ual, to assume and pay ail obligations of the seller "contracted in said
business, now due or to become due," held a contract to pay the debts,
and not one to Indeumlfy the seller.
2. Limitation of actions ®=>46(12), 105(2) — ^Acoeual op ri&ht of action on
fbomise to pay debt of anotheb ; bffeot of litigation by original
debtob contesting the debt.
Where a corporation contracted to assume and pay the debts of an-
other, and such other owed a debt then due, elther he or hls créditer had
an immédiate right of action, against which limitation ran from that
time, notwithstandlng the fact that he was then contesttng the claim In
the courts.
3. Indemnitt <ê=>1 — ^Debtos mat sue on contract assumino his debts.
A debtor, whose debts another bas assumed and agreed to pay, may sue
on the contract for the amount of a debt due, alihough he has not paid it.
4. Limitation of actions @=s>43 — Accbual of bight of action, eathee than
damages, otaets running of statute.
The amount or kind of damages recoverable on breach is Immaterlal ;
it is the existence of a right of action that starts the statute of limitations.
®=3For oUier cases see same toplc & KEY-NUMBER In ail Key-Numbered Digests & Indexe»
IN EE H. L. HEEBERT & CO. 683
(262 F.)
Appeal f rom the District Court of the United States for the South-
ern District of New York.
In the matter of H. L,. Herbert & Co., a corporation, bankrupt.
From an order expunging its claim, the National Surety Company ap-
peals. AfSrmed.
Appeal from an order expunging the daim, as eredltor, of National Surety
Company, entered In the District Court for the Southern District of New
York. The facts, as stated in the proof of clalm of the appellant, are that on
and prior to April 30, 1902, one Henry L. Herbert, belng engagea in the busi-
ness of buying and selling coal, "entered into a contract wlth" one Thedford,
which contract said Herbert falled to fulfiU, "to the damage of Thedford In
the sum of $10,542.38, which sum was due and payable to said Thedford on
February 1, 1903." Herbert failed or refused to pay. Thedford brought Buit
in the courts of New York, and after numerous trials and appeals Thedford
received a judgment, which was finally aflinned in the New York Court of
Appeals in 1914. 210 N. Y. 606, 104 N. E. 1142.
The surety company had at Herbert's Individual request and agalnst collat-
éral deposited with it by hlm, executed the undertaking on appeal in thla
suit, and when Thedford finally prevailed, and on March 13, 1914, it paid
Thedford his judgment. It then reaUzed upon the securities deposited with it
by Herbert, but therefrom failed to obtain repayment in fuU, so that the surety
Company remained a créditer of Herbert to the extent of some $9,000.
While the action of Thedford v. Herbert was proceeding, and on or about
Alay 31. 1907, this bankrupt corporation (H. L. Herbert & Co.) was fbrmed.
On the date last mentioned the directors of this new company passed a reso-
lution reciting that, the corporation "haying organlaed with the purpose of
acquiring" Herbert's individual business, it was therefore resolved that said
corporation "assume and pay ail obligations of Henry L. Herbert contracted
in said business, now due or to become due." That Herbert's individual
iiability to Thedford was contracted or Incurred "In said business" is ad-
mltted.
There is no évidence that the bankrupt ever managed, conducted, or took
any part In the litigation between Thedford and Herbert On September 27,
1916, the pétition in bankruptcy herein was filed, whereupon the surety com-
I)any filed its proof of clalm for the said balance of about $9,000. Motion by
the trustée to expunge the same was granted, on the ground that it was barred
by the statute of limitations. This appeal was then taken.
William R. Page, of New York City, for appellant.
Frank M. Patterson, of New York City, for trustée in bankruptcy.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). [1]
There can be no différence between the assumption of a mortgage, when
the party assuming receives grant of the mortgaged lands, and the
assumption of business debts, when such a party receives or takes
over the business. The law of New York on this subject is sum-
marized in Willard v. Wood, 135 U. S. 309, 10 Sup. Ct. 831, 34 h.
Ed. 210. See, also, Schley v. Fryer, 100 N. Y. 71, 2 N. E. 280, and
Goodyear, etc., Co. v. Dancel, 119 Fed. 692, 56 C. C. A. 300.
This bankrupt, therefore, became personally liable to Thedford in
1907, and the relation of the Herbert Company and Herbert the man
to Thedford became that of principal and surety (Union Co. v. Han-
ford, 143 U. S. 187, 12 Sup. Ct. 437, 36 L. Ed. 118) as soon as Thed-
ford knew of the agreement. As he never called on the corporation
to pay, so far as this record shows never learned of the assumption, and
684 262 FEDERAL REPORTER
has received payment in full, no effort can be made by appeUant to
claim throiigh Thedford. It foUows that, to recover at ail, appellant
must stand in Herbert's shoes, for there was never any contract directly
between surety company and bankrupt.
Therefore the crucial inquirj'^ Js to classify or define the nature of
the contract between Herbert and the Herbert Company, embodied in
the resolution above recited. It is either an agreement to pay, or an
agreement to indemnify; i. e. to save Herbert harmless. See Mills v.
Dow, 133 U. S. 423, 10 Sup. Ct. 413, 33 L. Ed. 717, where the con-
tract was both, and the différence is emphasized.
In contracts of indemnity the obligée cannot recover until he has
been actually damnified, and then only to the extent of injury at the
time suit brought ; but, where the agreement is to pay, a recovery may
be had as soon as breach of contract exists, and the measure of dam-
ages is the full amount agreed to be paid. Wicker v. Hoppock, 6
Wall. 99, 18 L. Ed. 752. lïi our opinion, the contract at bar was plain-
ly to pay ; it says so, and does not by words or inf erence promise to
save Herbert harmless, which is the substance of an indemnity agree-
ment.
[2, 3] But, when one promises to pay, the right of action on that
promise is complète and perfect the moment the debt to which the
promise relates becomes due and remained unpaid. Hume v. Hendrick-
son, 79 N. Y. at page 127. Applying tliat doctrine hère, Thedford could
hâve sued the bankrupt on this contract for his benefit as soon as it
was made, or Herbert could hâve sued, assigning for breach that the
corporation had not paid Thedford, whose debt was long before "'due
and payable." That he had not paid Thedford would be no défense,
if as matter of fact he owed the money. Rector, etc., v. Higgins, 48
N. Y. 532, as expained in Maloney v. Nelson, 144 N. Y. 182, 39 N.
E. 82.
[4] The amount or kind of damages recoverable on breach is imma-
terial ; it is the existence of a right of action that "starts the statute"
of limitations. Aachen, etc., Co. v. Morton, 156 Fed. 657, 84 C. C. A.
366, 15 L,. R. A. (N. S.) 156, 13 Ann. Cas. 692; Goelet v. Ward Co.,
242 Fed. 65, 155 C. C. A. 9. Indeed, an agreement to pay a debt due
at date of promise may be said to be broken the moment it is made.
It foUows that the statute of limitations barred any suit of Herbert's
against the bankrupt in six years — i. e., in 1913 — and the court below
was right in expunging the surety company's claim on that ground.
That Herbert chose to prolong litigation with Thedford confuses the
issue, but is immaterial; the only resuit of suit was to prove that
Herbert had owed the money since 1903, which is now admitted.
Order affirmed, with costs.
BERKSHIRE HILLS PAPER CO. V. BYKON WESTON 00. 685
«262 F.)
BBRKSHIEE HILLS PAPER CO. v. BYRON WESTON CO.
(Circuit Court of Appeals, First Circuit. February 7, 1917.)
No. 1247.
Patents ®=»328 — Pbocess of gbooving papeb not infringed.
The Ramage & Sliaw patent, No. 958,174, for paper and process of
grooving same, which covera a method of making tinged ledger leaves,
by grooving thé paper after the samie is dry, and before It Is sized and
calendered, held not infringed by a process which opérâtes upon tbe wet
pulp.
Appeal from the District Court of the United States for the District
of Massachusetts ; Dodge, Judge.
Suit in equity by the Berkshire Hills Paper Company against the
Byron Weston Company. Decree for défendant, and complainant ap-
peals. Affirmed.
Fred R. Shaw, of Adams, Mass., Edward S. Duvall, Jn, of Washing-
ton, D. C, and Henry L. Harrington, of Adams, Mass., for appellant.
W. K. Richardson, of Boston, Mass. (C. L. Sturtevant, of Wash-
ington, D. C, on the brief), for appellee.
Before BINGHAM, Circuit Judge, and ALDRICH and BROWN,
District Judges.
BINGHAM, Circuit Judge. The pl^intiff, the Berkshire Hills
Paper Company, is the owner of the United States letters patent No.
958,174, issued May 17, 1910, to Ramage & Shaw, for "paper and
process of grooving same," and complains that the défendant, the
Byron Weston Company, bas infringed claims 4, 5, and 9 of the patent
in its manufacture of hinged ledger leaves. Claim 5 is the broad claim
of the patent, and is the only one to which spécial référence need be
made. It reads as f ollows :
"The herein described method of making hinged ledger leaves, whlch con-
slsts in formlng a paper sheet from pulp, in producing a reladvely thin section
therein to forni the hinge, then sizing the thinned sheet, and flnally calen-
derlng."
The spécification states that "the invention consists essentially in
the process of forming grooves or flexible portions in the web or sheet
of paper while the same is being made and before it has been sized and
calendered, so that such flexible portions will possess the same dura-
bility as the rest of the sheet," that "the grooving opération is per-
formed during the manufacture of the paper after the same is dry, and
preferably in web form," and that "the manner in which the paper
is grooved" is as f ollows :
"The web of paper as it nears the 'drier' end of the paper-making machine,
eommonly known as the 'Fourdrinier* type, and after It has passed around the
last drier roll, is passed over an adjustable platen over whlch cutter wheels
are rotated at a high rate of speed, in a direction opposite to the travel of
the web. The cutter wheels and platen are both adjustable to eut any number
or depth of grooves in the paper, and the paper, after it passes under the
cutters, goes to the sizing boxes, and then it is calendered In the proper man-
^=3For otber cases see same toplc & KBY-NUMBER in aU Key-Numbered Digests & Indexes
68i8 262 FEDERAL REPORTER
n«r ana eut Into the proper sized sheets. Thus It wlll be seen that the dry
and unflnished paper is grooved, afterward animal sIzed, then calendered and
flnished."
The défendant makes hinged ledger leaves under a reissue patent,
No. 13,730, granted to Phillip Weston, May 12, 1914. In defining the
defendant's method of making hinged ledger leaves, the court below
said:
"To produce its relatlvely thln htnged section in the completed sheet, the
défendant opérâtes at what Is called the 'wet' end of the Fourdrlnler machine,
upon the wet pulp web, spread upon the wlre apron, and at a point near the
discharge end of said apron. The pulp bas at that stage lost some of the water
contained in it when first spread upon the wlre apron, and during its travel
thereon its fibres hâve become so distributed and interwoven that they are
ready to become felted together when compressed and dried. But the process
of drying it can hardly be said to hâve begun, while the process of pressing it
bas not begun at ail. Both processes are indispensable to the production of a
paper sheet, and they require for their completion more machinery and more
space in the machine than bas been employed in getting the pulp web to the
point at which the defendant's relatively thinned section is formed in it.
"It is there formed by removlng some of the wet pulp constituting the web
along deflned Unes. Such removal 1b effected by suction from the upper side
of the web, during or just before its passage over suction boxes operating
upon its under side, which begin the process of extracting the water contained
in it Thus thinned along the deflned Unes desired in ita upper surface, the
web passes over more suction boxes ; then undemeath the dandy roll, which
forms the water-mark in it ; then between two couch rolls, which compress It
to a State in which it can leave the wire apron; then to the successive felt
aprons and press rolls, which further compact it and squeeze out its con-
tained water, deUvering it, in the stage at which it is usually flrst called pa-
per, to the drier rolls, and from them, its dampness removed, to the calendar
rolls, which finish its surface."
In its opinion the court below found and ruled: (1) That claims
4 and 9 were not infringed by the defendant's process, "even if the
défendant could properly be said to form its relatively thin sections by
operating upon a paper sheet," as, by thèse claims, the patentées hâve
expressly limited themselves to "grinding or cutting a paper sheet as
their means for f orming relatively thin sections" ; that "the wet pulp
upon which the défendant opérâtes could not be grotmd or eut, any
more than the paper sheet upon which the patentées operate could be
thinned by suction" ; and (2) that daim 5 is not infringed by defend-
ant's process (a) because that claim, by its terms and by the proceedings
in the Patent Office, is limited to a removal of the iîber after a paper
sheet bas been formed from the pulp, and that a paper sheet bas not
been formed at the point wfiere the pulp web is thinned in the de-
fendant's process ; and (b) because the prior art f orbids a construction
of the daim "which would cover the production of a paper sheet hav-
ing thin hinged sections in it obtained by any removal of a part of the
stock during or simultaneously with the course of manufacture, at
cmy stage prior to sizing."
Having carefully considered the proofs and arguments of counsel
with référence to thèse questions, we think the decree of the court
beiow should be afKrmed, and for the reasons above stated.
The decree of the District Court is affirmed, with costs to the ap-
pellee.
MICKLE V. HBNRICH3 687
(262 F.)
MICKLE V. HENRICHS, Warden of Nevada State Prison, et aL
(District Court, D. Nevada. May 25, 1918.)
No. A-59.
Cbiuinal i-aw <S=>1213 — Vasectomt is cruel and unusual fdnishment.
Rev. Laws Nev. | 6293, authorizing trial court to compel certain crim-
inals to submlt to an opération known as vasectomy, whlch destroys tlie
power of procréation, but may be performed in a painJess manner, and
is otherwlse harmless, violâtes Const Nev. art 1, § 6, prohibitlng cruel or
unusual punishments.
In Equity. Suit by Pearley C. Mickle against Rufus B. Henrichs,
as Warden, and Donald TVEaclean, as Physician of the Nevada State
Prison. Decree restraining défendants from performing a proposed
opération.
Woodbum & Bartlett, of Reno, Nev., for plaintiff.
Geo. B. Thatcher, Atty. Gen., and E. T. Patricia, Asst. Atty. Gen.,
of State of Nevada, for défendants.
FARRINGTON, District Judge. Mickle, having pleaded guilty to
the charge of râpe, was sentenced to be imprisoned in the Nevada
State Penitentiary for an indeterminate period of not less than 5
years. It was also ordered as a part of ttie judgment that an opéra-
tion be performed on his person sufficient to de.prive him of the power
of procréation. This suit is brought against the warden and the
physician of the Nevada State Prison to procure a decree of this
court restraining them from carrying the order of the court into
effect. Ail questions as to jurisdiction hâve been expressly waived.
The opération directed is known as vasectomy, ahd is authorized by
section 6293 of the Revised Laws of Nevada, which reads as fol-
lows:
"Whenever any person shall be adjudged guilty of carnal abuse of a female
person under the âge of ten years, or of râpe, or shall be adjudged to be an
habituai crimlnal, the court may, in addition to sueh other punishment or
confinement as may be imposed, direct an opération to be performed upon
such person, for the prévention of procréation: Provlded, the opération eo
directed to be performed shall not consist of castration."
Plaintifï claims that the statute violâtes section 6 of article 1 of
the Constitution of Nevada, "in that the punishment therein permit-
ted and authorized is cruel and unusual." The section referred to is
as foUows:
"Excessive bail shall not be requlred, nor excessive fines Imposed, nor shall
cruel or unusual punishments be inflicted."
Under this provision, if the punishment is either cruel or unusual,
it is prohibited. It was agreed by counsel that the opération could
be performed in such manner as to be painless, and such was the
effect of the testimony. The opération, under a local anœsthetic, oc-
cupies but a few minutes. The person operated on may at once
®=>For other cases see same toplc & KBY-NUMBER in ail Key-Numbered Digests & Indexes
688 262 FEDERAL EBPOBTER
thereafter résume his ordinary avocation and physical activities, with-
out serious discomfort. The power to beget offspring is taken away,
without impairing the désire and capacity for sexual enjoyment.
It appears from the record that Mickle is an epileptic. That fact
was accorded considérable weight by the court in pronouncing judg-
ment. Possibly in the exercise of its police power, it may be law-
f ul for the Législature to adopt reasonable measures, adéquate and
sufficient to prevent dégénérâtes and persons afflicted with trans-
mittable mental defects, physical disease, or criminal tendencies from
begetting children; but législation of that character must operate
alike on ail unfortunates of the same class, and the classifiation must
operate reasonably with relation to the end sought to be accomplished.
The courts of New Jersey recently refused to uphold a state stat-
ùte providing for the sterilization of certain feeble-minded, epileptic,
and criminal defectives confined in pénal and charitable institutions
of that state. Much stress was laid on the fact that an epileptic con-
fined in a pénal institution is less likely to transmit his infirmity to
children than an epileptic who is not so confined. It was pointed out
by the court that the statute créâtes two classes, viz. those who are,
and those who are not, unfortunate enough to be inmates of such
institutions, and it applies its remedy to the former class only; that
the classifiation has no relation whatever to the eradication of epilep-
sy; it is purely arbitrary and artificial, and dénies to those least
able to protect themselves, equal protection of the law. Smith v. Bd.
of Exmrs. of Feeble-Minded, 85 N. J. Law, 46, 88 Atl. 963.
If the purpose of the Nevada statute be to prevent the transmis-
sion of criminal tendencies, it must be noted that it does not apply
to ail convicted oflfenders, not even to ail who are habituai criminals,
or to ail persons adjudged guilty of râpe or carnal abuse of female
children, but only to such habituai criminals and persons guilty of
râpe as the court, in the exercise of a discrétion, which is in no wise
directed by the statute, may designate.
It is a notorious fact that many judges do not regard mutilation
as a wise or lawful method of punishment. It is only those of the
contrary opinion who will prescribe vasectomy as a part of'the .pun-
ishment for this offense. Again, it is doubtful whether our pénal
institutions contain more than a small minority of those undesirables
who are inclined to lawlessness and crime. It is easy to imagine that
a brute guilty of râpe, or who has a tendency to commit such a crime,
might regard it rather an advantage than otherwise to be sterilized.
As a préventive of this crime vasectomy is without efïect. Once
f ree, the convict who has been so punished is still physically capable
of committing the oflFense.
Thèse considérations, however, are beside the issue. There is no
attempt by défendants to support the judgment on the ground that
vasectomy is calculated to promote gênerai welfare. It is conceded
that cruel or unusual punishments are prohibited, regardless of any
and ail théories of race culture. Whether the opération performed
as punishment is violative of the constitutional injunction against.
cruel or unusual punishment is the question.
MICKLE V. HENBICHS 689
C262 FJ
This provision in slightly varying form is to be found in the féd-
éral Constitution, and in ail but three o£ the state Constitutions. In
Washington (article 1, § 14) the inhibition is against "cruel punish-
ment" ; in the fédéral Constitution (article 8) it is against "cruel and
unusual punishment" ; in Nevada it is against "cruel or unusual pun-
ishment"; and in Massachusetts (part 1, art. 26) it is directed ex-
pressly to the judiciary:
"No magistrat© or court of law shall • • • inflict cruel or unusual
punishment"
The fédéral courts hâve never att<impted a précise définition of
either "cruel" or "unusual," as used in the Constitution. The pro-
hibition first appeared in the English Bill of Rights of 1688, and was
there directed to modes of punishment which to the modem mind
seem barbarous and inhuman, such as the pillory, the thumbscrew, the
rack, disemboweling the living victim, drawing, quartering, burning,
and boiling.
The décisions are not altogether harmonious. Some hold that, as
used in the earlier Constitutions, including that of the United States,
the restriction applies only to those ancient punishments which seem
so shocking in this more enlightened âge. Whitten v. State, 47 Ga.
297, 301.
Judge Story intimâtes that such limitations on the power to punish
are unnecessary, because resort to atrocious punishment is hardly
possible by the government of a f ree people. In support of this view
attention is called to the fact that even bef ore the Revolutionary War
the modes of punishment mentioned had been practically discarded,
not only in the colonies, but in England; and as originally drafted
and adopted, the fédéral Constitution contained no such restriction.
It was only in response to a strong popular demand that it became
a part of the organic law of the nation as the Eighth Amendment.
It is unreasonable to believe that it was adopted solely as a shield
against obsolète abuses.
In other and more récent cases there are strong expressions to the
efiEect that imprisonment, though not in itself cruel or unusual, may
become so if the term of confinement is grossly disproportionate
to the offense. McDonald v. Commonwealth, 173 Mass. 322, 53
N. E. 874, 7Z Am. St. Rep. 293 ; Weems v. United States, 217 U. S.
349, 30 Sup. Ct. 544, 54 L. Ed. 793, 19 Ann. Cas. 705. In the latter
case the Suprême Court of the United States seems to hâve commit-
ted itself to the more humane and libéral doctrine that the Eighth
Amendment is a régulation of sufficient vitality and adaptability to
restrain cruel innovations in the way of punishment.
The Nevada Constitution was not adopted until 1864, a compara-
tively récent date. Neither then nor at any other time within the
history of this state, prior to the date of the act in question, had
mutilation of the person been a recognized mode of punishment. It
is to be noted that the Nevada Constitution forbids punishments ei-
ther "cruel or unusual." The terms are used disjunctively, and if
accorded their usual significance it is évident the purpose was to
forbid newly devised as well as cruel punishments.
262 F.— 44
690 262 FEDERAL EBPOETEB
In Cooley on Constitutional Limitations (6th Ed.) p. 402, it is said
that—
"Those degradlng punisbments whlch In any state had become obsolète be-
fore its existing Constitution was adopted, we think, may well be held forbld-
den by It as cruel and unusual. We may wdl doubt the right to establlsJi the
whlpplng post and the pillory in states where they were neyer recognized as
instruments of punlslunent, or In states whose Constitutions, revised sdnce
public opinion had banished them, hâve forbidden cruel and unusual punish-
ment. In such states the public sentiment muait be regarded as having con-
demned them as 'cruel,' and any punlshment whlch, if ever employed at ail,
has become altogether obsolète, must certainly be looked upon as 'unusual.' "
In Hobbs v. State, 133 Ind. 404, 408, 32 N. E. 1019, 1020, 18 L. R.
A. 774, 777, the court says that "unusual," as used in the Constitu-
tion, means a class of punishments which never existed in the state,
or that class which public sentiment must be regarded as having con-
demned. It may be said, as questioning the accuracy of this défini-
tion, that the courts hâve repeatedly upheld statutes authorizing elec-
trocution, but in those cases death was the punishment ; electrocution
was merely the means adopted to reach that end as swiftly and as
painlessly as possible. Storti v. Commonwealth, 178 Mass. 549, 60
N. E. 210, 52 L. R. A. 530.
In State v. Feilen, 70 Wash. 65, 126 Pac. 75, 41 L. R. A. (N. S.)
418, Ann. Cas. 1914B, 512, the Suprême Court of Washington came
to the conclusion that a statute authorizing vasectomy was not un-
constitutional. This décision was rendered under a Constitution
which prohibited cruel punishment only. In this it difîers from the
Nevada Constitution, which prohibits cruel or unusual punishment.
I am not inclined to adopt the view that the two provisions mean
substantially the same thing.
' The same question came up in the case of Davis v. Berry (D. C.)
216 Fed. 413. There Judges Smith, Pollock, and Smith McPherson
had under considération an lowa statute directing the opération of
vasectomy to be performed upon convicts in the state prison who had
been twice convicted of a felony, After going into the history of
similar punishments, the court says:
"When Blackstone wrote hls Commentaries, he did not mention castration
as one of the cruel punishments, quite likely for the reason that, with the ad-
vanee of civilization, the opération was looked upon as too cruel, and was no
longer performed. But each opération is to destroy the power of procréation.
It is, of course, to follow the man during the balance of his llfe. The physical
sufCering may not be so great, but that is not the only test of cruel punishment ;
the humiliation, the dégradation, the mental suffering are always présent and
known by ail the public, and will foUow him wheresoever he may go. This
belongs to the Dark Ages. * • • Our conclusion is that the Infliction of
this penalty is in violation of the Constitution, which provides that cruel and
unusual punishment shall not be infllcted."
Vasectomy in itself is not cruel; it is no more cruel than brand-
ing, the amputation of a finger, the slitting of a tongue, or the cut-
ting off of an ear; but, when resorted to as punishment, it is ig-
nominious and degrading, and in that sensé is cruel. Certainly it
would be unusual in Nevada. It may well be that it came in the
minds of the men gathered in the constitutional convention of this
AMERICAN SURETT CO. V. AMEEICAN MILLS CO. 691
C262 FJ
State that there could be unwise punishment without the infliction
of physical pain; that legislators, under the stress of unusual con-
ditions and peculiarly atrocious crime, might hastily adopt strange
methods of repression, unknown to our criminal practice and harm-
ful to the State.
Reformation of the criminal is a wise and humane purpose of pun-
ishment, to be disregarded only when the death penalty is inflicted.
It needs no argument to establish the proposition that degrading and
humiliating punishment is not conducive to the resumption of upright
and self-respecting life. When the penalty is paid, when the offender
is free to résume his place in society, he should not be handicapped
by the consciousness that he bears on his person, and will carry to
his grave, a mutilation which, as punishment, is a brand of infamy.
True, râpe is an infamous crime; the punishment should be severe;
but even for such an offender the way to an upright life, if life is
spared, should not be imnecessarily obstructed. It will not do to
argue that, inasmuch as the death penalty may be inflicted for this
crime, vasectomy, or any other similar mutilation of the body, cannot
be regarded as cruel, because the greater includes the less. The fact
that the extrême penalty is not exacted is évidence that the criminal
is considered worthy to live, and to attempt reformation. For him,
and for society, a fair opportunity to retrieve his fall is quite as im-
portant as the eugenic possibilities of vasectomy.
A decree will be entered in favor of the plaintiff, restraining the
warden and the physician of the Nevada State Prison from perform-
ing the proposed opération of vasectomy on the person of the plaintiff.
AMERICAN StlRETY CO. OF NEW YORK v. AMERICAN MILLS CO.
(District Court, S. D. New York. January 15, 1920.)
No. 16-36.
1. Peikcipal and surety ig=>57 — Sttbety bond pboctjbed bt fraud.
A transaction between défendant mlll conipany and a debtor corpora-
tion, apparent! y insolvent, by wliich the debtor contracted to deliver a
quanti ty of bags to défendant for payment falsely recited as recelved, and
procured complainant surety company to guarantee dellvery, whereby,
if the bond was enforced défendant would obtain payment of Its debt,
held. fraudulent as to the surety company, and the bond subject to can-
cellation at its suit.
2. Equity <S=»53(1) — Objection to juBismcnoN because or adéquate eem-
EDY AT LAW MAY BE WAIVED.
Where the subject-matter of a suit Is withln the cognizance of a fédér-
al court of equity, the rlght to object to the jurisdiction on the ground
of adéquate remedy at law may be waived.
3. Equity <©=53(1) — Objection to jurisdiction waived by counteeciaim.
In a suit for cancellation of a surety bond on the ground that it waa
obtained by fraud, an objection in the answer to the jurisdiction in
equity on the ground that complainant had an adéquat© remedy at law
held waived by a counterclaim asking recovery on the bond.
®=»For other cases see same topio & KEY-NUMBBR In ail Key-Numbered Dlgests & Indexée
692 262 FEDERAL REPOETEB
In Equity. Suit by the American Surety Company of New York
against the American Mills Company. Decree for complainant.
Henry C. Willcox, of New York City (Henry C. Willcox and Allan
C. Rowe, both of New York City, of coiinsel), for plaintiff.
Henry Uttal, of New York City (Hamilton Moses, of Chicago, 111.,
and Herbert J. Haas, of Atlanta, Ga., of counsel), for défendant.
ROSE, District Judge. [1] The plaintiff seeks the cancellation of
a bond given to the défendant by the Hartenfeld Bag Company as
principal, and itself as surety, and an injunction against suits thereon.
The three corporations concerned are of New York, Georgia, and Illi-
nois, respectively, and will be herein severally called the "surety," the
"Mills," and the "Bag Company."
For seven years, ending in 19.18, the former had bought second-
hand bags from the latter, sometimes to the amount of $100,000 an-
nually. Frequently, if not usually, payment had preceded delivery.
In August, 1918, the Bag Company was behind in its shipments, and
some of the bags which it had fumished had been undergrade. At
that time the Bag Company was indebted to the Mills in the amount of
about $12,000. Nevertheless, when near the end of August the Mills
bought more bags, the Bag Company persuaded it to give, for their
purchase price, its notes, aggregating something over $9,000. The Bag
Company had been in the habit of selling its accounts to the Commer-
cial Crédit Company of Baltimore. Notwithstanding that the notes
of the Mills had fully paid for the last purchases, the Bag Company
sold its bill for them to the Crédit Company, and a few days later dis-
counted the promissoi"y notes of the Mills with a Chicago banker. In
this way it obtained double payment for bags which it had certainly
never shipped, and which it had probably at that time not even bought.
On the 24th of September, through a telegram from the Crédit
Company telling the Mills that it had bought the Bag Company's ac-
count against it, and stating that a formai notice to that effect had
been mailed, the Mills got wind of at least part of what had hap-
pened. In due course, the letter of the Crédit Company came to hand.
It asiced to be promptly informed if the Mills claimed any payment,
crédits, notes, etc., against tlie account. The Mills, surprised, as it
must hâve been, left the communications of the Crédit Company un-
answered, but within less than an hour after the receipt of the tele-
gram busied itself in another direction.
The président of the Mills wired the président of the Bag Company
that he would arrive at the La Salle Hôtel in Chicago on the next
evening, September 25th, and to meet him there without fail. The
Bag Company's officiai was not on hand that night, but the next day
the président of the mills did see him, and for the next" three. day s
they were in more or less constant touch with each other, and then
if not before, the président of the Mills leamed that bis company's
notes had been discounted. It was explained to him that what had
happened had been due to the mistake of a "bonehead clerk."
It is admitted that the président of the Bag Company said it was
AilERICAN SURETY CO. V. AMERICAN MILLS CO. 693
(262 FJ
short of money. There is more or less dispute as to the détails of
what passed between the two men. It is asserted that the président
of the Mills asked for money or for security, real estate or other, while
he says he did not. He admits that he came to Chicago to get his ac-
count settled. What was actually done speaks for itself.
During the war, it not infrequently happened that sellers of goods
were forced to ask for advance payments, and some, if not ail, of the
Surety Companies, got into the habit of guaranteeing deliveries to
buyers. On one or two occasions, the surety had done so much for
die Bag Company. As a resuit of whatever passed between the offi-
ciais of the Mills and of the Bag Company, the latter, on the 27th, en-
tered into a formai contract to sell the Mills $22,100 worth more of
bags, and acknowledged the receipt of that sum of money. The con-
tract provided that deliveries under it should be guaranteed by a
surety bond.
The président of the Mills admits that, when he came to Chicago,
he had no intention of buying bags, and it is further admitted that,
prior to the receipt of the surety bond, he wired the Mills nothing was
yet accompHshed, but to hold any reply to the Crédit Company.
The Bag, Company took the contract to the surety, and on the 28th
obtained from it the bond now in controversy, by which the surety
guaranteed the deliveries. This bond was at once turned over to the
président of the Mills, and on the same day he started back to Atlanta.
The statement in the contract that the $22,100 had been paid was un-
true. The président of the Mills, on his return to Atlanta, conferred
with its counsel, and on October Ist had the Mills draw its check for
$22,100 to the order of the Bag Company. The check was certified,
and then with it and his légal adviser he returned to Chicago on the
3d of October.
After having agreed with the président of the Bag Company that the
latter was indebted to the Mills in the sum of $21,087.20, the latter
drew its check for that amount. They then went to the bank of the
Bag Company. The $22,100 certified check of the Mills was deposited
lo the crédit of the Bag Company, and the latter's check for $21,087.-
20 was certified and handed to the président of the Mills. The différ-
ence between the face of the two checks was $1,012.80. It so happen-
ed that the only bags received by the Mills under the contract of Sep-
tember 27th were of the value of $1,050. It follows that, if the bond
had never been obtained or is now unenforceablè, the Mills will be
$37.20 better off for what took place between September 27 and Oc-
tober 3, 1918, and that, if the bond be held good, it will hâve profited
to the amount of $21,087.20.
The président of the Mills admits that he understood, when he
made the so-called contract of September 27th, that the Bag Company
would pay his company ail that it then owed it out of the price that
the Mills agreed to pay for the bags of the new contract. A furtlier
analysis of the facts is unnecessary. The making of the contract was
obviously a mère means of inducing the surety to guarantee the exist-
ing debt of the Bag Company. The surety would never bave executed
the bond, had it been told the facts, and it is certain that both the
694 262 FEDERAL REPORTER
président of the Bag Company and the président of the Mills knew that
it would not.
[2] The fraudulent character of the whole transaction is too ob-
vious for further comment. The bond should be canceled if this court
has in this case jurisdiction so to decree. The Mills says it has none.
Phcenix Mutual l,ife Insurance Co. v. Bailey, 13 Wall. 616, 20 L,. Ed.
501, and many cases since, hold that, as one who is sued at law, upon a
bond or policy, the exécution of which by him was procured, as he
asserts, by f raud, may there défend on that ground, he has an adéquate
remedy at law, and has no claim to the interposition of equity. If the
Mills had stood on its objection to the jurisdiction of equity, the Une
of authorities referred to would hâve been conclusive. It is, however,
equally well settled that when, as hère, the subject-matter is within the
cognizance of a court of equity, the right of a défendant to object on
the ground that there is a légal remedy may be waived. McGowan v.
Parish, 237 U. S. 295, 35 Sup. Ct. 543, 59 L. Ed. 955. It is waived
when the défendant by cross-bill under the old practice, or by counter-
claim under the new, asks for affirmative relief. Original Consolidat-
ed Mining Co. v. Abbott (C. C.) 167 Fed. 681 ; 1 Street's Fédéral
Equity Practice, § 92. A similar principle was applied in Texas &
Pacific Railway Co. v. Eastin, 214 U. S. 153, 29 Sup. Ct. 564, 53 L. Ed.
946.
[3] In this case, the Mills, while in its answer asserting that the
plaintiff had an adéquate remedy at law, went on to set up its coun-
terclaim on the bond, and prayed for a decree against the surety for
$21,050, being the penalty of the bond, less $1,050, the value of the
bags received by the Mills under the guaranteed contract. It said it
did not thereby waive its objection to the jurisdiction of equity. In
its présent view, what it did was not voluntaty on its part, but was re-
quired by the new equity rules. If it had not made a counterclaim, it
says it would hâve imperiled its right subsequently to recover upon the
bond anywhere. Is that so?
If the Mills had rested upon its contention that the chancellor was
without jurisdiction, one of three things would hâve followed : This
court might hâve agreed with it. If so, nothing which took place in
a forum into which it was taken against its will, and from which, upon
its demand, it was dismissed for want of jurisdiction, could hâve in-
juriously afïected it? right in any other tribunal. The court might
hâve retained jurisdiction, and decided that the surety had not made
out a case for cancellation. The judicial décision that the bond was
good could not possibly hâve hurt the Mills in a subséquent prosecu-
tion of its suit at law, instituted before the bill in equity was filed. The
third possibility was that the court might hold that the bond was in-
valid and should be canceled. Then, of course, the controversy would
be finally decided against the Mills; but that resuit would not hâve
depended in whole or in part upon whether it had made or had re-
f rained from making a counterclaim.
It follows that the Mills had no reason for asking affirmative re-
lief, except the hope of getting a decree against the surety for the
amount due on the bond. Under such circumstances, to make a coun-
KELLY V. EOBINSON 695
(262 F.)
tcrclaim is to accept the jurisdiction of the court of equity. It be-
comes, therefore, unnecessary to décide whether, in a case in which
there are other reasons for setting up a counterclaim, good faith does
not require that a défendant, who wishes to stand to the end upon his
objection to the equity jurisdiction, should not move to dismiss be-
fore answering, as the rules permit him to do, or, if he includes both
his motion to dismiss and his counterclaim in his answer, whether he
is not bound to make it plain that he does so only because his right to
recover in another forum upon his counterclaim may not be prejudiced
by his silence.
The Mills did neither of thèse things. At the hearing it ofïered
évidence in support of its prayer for an affirmative decree against the
surety. No attempt to withdraw the counterclaim was made until
after the court had emphatically expressed an opinion upon the merits.
Its waiver of objection to the jurisdiction was complète. It is argued
that this court may not enjoin a prosecution of state court suits. That
is doubtless true, but is not hère important. The Mills oflfered the
bond in controversy in évidence. It is still in the custody of this
court. A decree canceling it is within the jurisdiction of this tribu-
nal, and, when passed, will make the invalidity of the bond res adjudi-
cata as between the parties to this suit.
Upon reasonable notice, a draft decree in accordance with the con-
clusions herein reached may be submitted.
KELLY V. ROBINSON et aL
(District Court, B. D. Missouri. January 31, 1920.)
No. 5031.
1. Removai. of cattses <S=>49(1) — Joint oe seveieal liabilitt of défendants
deteeminabix bt local law.
In determlnlng whether there Is a separable controversy, wMch en-
titles one défendant to remove a cause, the question of joint or several
llability of défendants Is determinable by the local law.
2. Principal and agent ®=>159(2) — ^Agent not liable to thibd fessons foe
nonfeasancb.
An agent Is not personally liable to a thlrd person for nonfeasance,
or a mère omission of duty ta the course of his employment
3. Removal of CAUSES <S=>4Î)(3) — Action against employée and supebin-
TENDENT NOT SEPABABLE CONTROVEESY.
The pétition in an action for death of a miner, against the employer
coriwration and its superintendent and foreman, alleglng négligent faU-
ure to fumish décèdent a safe place to work, bjy an allégation that In-
dividual défendants were authorized and required to make and keep such
place safe, held not to state a cause of action against them, and the cause
held removable by the corporation défendant.
At Law. Action by Nellie Kelly against Robert H. Robinson, La-
fayette J. Johnson, and the Fédéral Lead Company. On motion to re-
mand to state court. Denied.
Safford & Marsalek, of St. Louis, Mo., for plaintifif.
Holland, Rutledge & Lashky, of St. Louis, Mo., for défendants-
®:=>ror other cases see same toplc & KEY-NUMBER in ail Key-Numbered Digests & Indexes
C96 262 FEDERAL REPORTER
PARIS, District Judge. Plaintîff's motion to remand is tottorae<]
upon the fact that défendants Robinson and Johnson are citizens of
the State of Missouri, of which state the plaintiff is likewise a citi-
zen, and that there is lacking, therefore, that diversity of citizenship
whereby jurisdiction of the case is conferred on this court. Défend-
ant Fédéral "Lead Company insists that the controversy is a separahle
one, and that the existence of a diversity of citizenship as between plain-
tiff and the corporate défendant (against whom alone, it is urged, a
cause of action is stated in the pétition) confers jurisdiction upon this
court.
The question mooted must be resolved by resort to the allégations
of the pétition. Plaintiff sued in a state court for the alleged négligent
killing of her husband, who came to his death, as it is averred, by
reason of certain négligent omissions of duty owed by défendants to
plaintiff's décèdent. This négligence is set out in the pétition thus :
"That ♦ • • défendants herein. In the opération of saîd mine, negli-
gently employed and provldod an Insuffieient nuniber of miners to Snspect
and keep safe the roof, or what Is commonly known as the 'baek,' of sald
mine, negligently caused and permitted loose, drummy roof or 'back' to be and
remain In said mine, in shaft No. 4, stope C 345, above the point where
Kobert N. Kelly received'the injuries herein alleged, and negllgently caused
and permitted Robert N. Kelly, in performlng his dutles to défendant Féd-
éral Lead Company, to be and remain in said mine, nnder said loose, drummy
roof or 'back,' and défendants by sald négligence directly and proximately
caused the premlses at and near the point where Robert N. Kelly recelved
said injuries, when and for a long time before sald injuries were reeeived, to
be and remain an unsafe and dangerous place to work, and défendants, by
said négligence, on the day and year and in the county and state last afore-
sald, directly and proximately caused and permitted the ground and rock
of sald roof or 'back' In said mine in which défendants were then engaged
in mlning lead, a yaluable minerai, to fall upon and strike and Injure and
thereby kill said Robert N. Kelly, who was then In the employ of défendant
Fédéral I^ead Company, and actlng within the scope of said employment."
The pétition avers that défendants Robinson and Johnson, at the
time plaintiff's décèdent came to his death, were respectively superin-
tendent of défendant Fédéral Lead Company's mines and one of the
mine captains thereof, and as such, it is further averred, they were —
"atithorieed and requireé to provide a atifflcient nwniber of compétent miners
to inspect and keep safe the roof, or what is commonly called the 'back' of
said mine." (Italics are mine.)
As bearing upon the good faith of plaintiff in joining the individaul
défendants, affidavits were filed both asserting and denying the finan-
cial responsibility of the latter to respond in damages to plaintiff. But
in the last analysis the financial capacity of tlie individual défendants
is of negligible value in determining the question now before the court.
For obviously, if there is in fact a joint liahility against both the cor-
porate and individual défendants, the motive of the plaintiff in pro-
ceeding to enforce such liability brecomes practically immaterial. Chi-
cago, etc., Railway Co. v. Schwyhart, 227 U. S. 184, 33 Sup. Ct. 250,
57 Iv. Ed. 473. For if the individual défendants owed any duty to the
plaintiff's décèdent, which they negllgently perf ormed, they are prop-
erly joined, and this motion ought to be sustained, and the case le-
manded to the state court, whence it came.
KEIjLT V. EOBINSON 697
(262 P.)
[ 1 ] Stated in its ultimate terms, the duty alleged to hâve been neg-
lected by défendants was that of fumishing plaintiff's décèdent a safe
place to work. It needs neither exposition, argument, nor citation up-
on the proposition that primarily it was the duty of the corporate
défendant, and not that of the individual défendants, to provide for
plaintiff's décèdent such safe place to work. If such place was unsafe,
or if it became unsafe, and was allowed to so remain by reason of the
nonfeasance of the individual défendants, as contradistinguished from
their misfeasance, such défendants would not he liable to the plaintiff.
Whether the duty alleged to hâve been neglected by the individual
défendants was so neglected by misfeasance, or mère nonfeasance, is
then the décisive question raised by the motion to remand. This ques-
tion is to be resolved by a référence of the fact of liability vel non to
the décisions of the state court of last resort, and not to the décisions
of the fédéral courts. Chesapeake & O. R. R. Co. v. Cockrell, 232
U. S. 146, 34 Sup. Ct. 278, 58 h. Ed. 544 ; Chicago, etc., Rv. Co. v.
Dowell, 229 U. S. 102, 33 Sup. Ct. 684, 57 L. Ed. 1090._
[2] The ground of négligence upon which recovery is sought against
ail the défendants is, I repeat, the alleged failure of défendants to fur-
nish to plaintiff's décèdent a safe place to work. But this duty under
the law was not owed to décèdent by the individual défendants, who
were merely the agents of the corporate défendant. This duty was
owed to décèdent by the défendant Fédéral Lead Company alone, and
if this corporate défendant failed in discharging its duty, it alone can
be sued. Whether in case of dereliction the individual défendants, as
servants and agents of the corporate défendant, might or might not
be liaMe to the latter, if the latter by the default of the former be
mulcted in damages, I need not pause to inquire. Ordinarily, the lia-
bility of a servant or agent of the master or principal for a tort aris-
ing in the master's business is to be tested upon the question whether
the injury accrued from négligence of the servant or agent sounding
in misfeasance or nonfeasance. Steinhauser v. Spraul, 127 Mo. 541, 28
vS. W. 620, 30 S. W. 102, 27 L. R. A. 441 ; Harriman v. Stowe, 57
Mo. 93. An agent is liable to him who is injured by a tort or wrong
done by such agent in the scope of his employment, if such injury is
the resuit of the misfeasance or the positive wrong of the agent, as
contradistinguished from mère nonfeasance or omission of duty.
Tersely expressed the rule is that:
"An agent is pèi-sonally liable to thlrd parties for doing sometliing which
he ought not to hâve done ; but he is not liable for not doing something which
he onght to hâve done." Elwell's Evans on Agency, 438.
The îearned observations of Mr. Story in his valuable work on the
Law of Agency (Story on Agency [9th Ed.] § 308) seem most accu-
rately to set forth the law on àiis question. Upon this précise point Mr.
Story said this:
"We «ime, in the next place, to the considération of the Uability of agents
to third persons, in regard to torts or wrongs done by tliem tn the course of
their agency. * • * And hère the distinction ordinarily taken is between
acts of misfeasance or positive wx-ongs and nonfeasances or inere omissions
of duty by private agents. * * • 'phe mast«r is alwaya liable to third
persons for the misfeasancea and négligences and omissions of duty of hia
;,698 262 FEDERAL REPOETEK
cervant, în ail cases wlthln the scope of hls employment So the principal,
lu like maniier, is llable to thlrd persons for the llke misfeasances, négligences,
and omissions of duty of his agent, leavlng him to his remedy over against
the agent in ail cases, whera the tort Is of such a nature as that he is en-
tltled to compensation. • « • The agent is also personally llable to thlrd
persons for hls own misfeasances and positive wrongs. But he Is not • • •
llable to thlrd persons for hla own nonfeasances or omissions of duty, in the
course of hls employment. Hls llablllty, in thèse latter cases, is solely to his
principal."
The above excerpt was quoted with approval by Judge Sherwood in
the case of Steinhauser v. Spraul, supra, which case is the latest utter-
ance of the Suprême Court of Missouri which I hâve been abje to find
upon this subject. Substantially, however, what was said by Judge
Sherwood in the Steinhauser Case only reiterated what had theretofore
been said by the Suprême Court of Missouri in an early case. Harri-
man v. Stowe, 57 Mo. 93.
Applying to the allégations of plaintiff's pétition the test of mis-
feasance or nonfeasance connoted by the rule above quoted, it seems
plain that défendants Robinson and Johnson were, as to plaintiff's dé-
cèdent, guilty of a mère omission of duty. Thèse défendants were au-
thorized and required to employ a sufficient number of compétent
miners to inspect and keep safe the rooî of the mine. Having thus
pleaded the incumbent duties resting upon the individual défendants
plaintiff thereupon avers that the défendants (which of course includes
the individual défendants) "negligently employed and provided an in-
sufficient number of miners to inspect the roof of said mine," so that
the place where décèdent was compelled to work became and remained
"an unsafe and dangerous place to work" and by this négligence it
is averred décèdent came to his death.
[3] In the light of thèse averments in the pétition it is, I think, too
plain for argument that the charge hère against the individual défend-
ants is merely a charge of a failure, or omission to perforai an incum-
bent duty ; that is, a charge of nonfeasance of duty and not misfeas-
ance or wrong performance of such duty. If this view of the fact be
correct, then there is no liability in favor of the plaintiff as against the
individual défendants. Therefore the case presented is one of a sep-
arable controversy, and since, as between plaintiff and the corporate
défendant against which a cause of action is pleaded in the pétition, di-
versity of citizenship exists, this court has jurisdiction.
It f ollows that the motion to remand ought to be overruled. I,et this
be done.
HOWARD V. MECHANICS' BANK 699
(262 F.)
HOWARD V. MECHANICS' BANK et al.
(District Court, E. D. New Tork. January 6, 1920.)
1. PLEDGES <g=s>31(4) — LiABILITT OF PLEDGEE TOR CONVEHSION.
A bank, holding certain new automobiles in pledge as securlty for a
loan, whleh, on bankruptcy of the debtor, nomlnally sold them for lésa
than their value to a dlrector, who resold them slngly through an agent
at a profit, whlch was tumed over to the bank, held accountable to the
trustée in bankruptcy for the différence between Its debt and the amount
actually recelved, wlth Interest
2. PI.EDGES «©=925— Lien of pledgee limitèd to proceeds of wrongpul sau;.
A pledgee of property of bankrupts, whlch ostenslbly sold It for the
amount of its debt, but afterwards recelved from the purchaser the profit
on resalea, held to hâve walved any rlght to a lien for expenses ineurred
for storage before its sale.
3. Bankhuptct <@=>188(1) — Bffect of WRONQFxri, sale bt pledgee of bank-
RUPT.
A pledgee, whlch wrongfully sold the pledged property, held estopped
to claim a lien for a greater amount than it recelved on an accounting to
the trustée In bankruptcy of pledgors for the value of the property.
4. Bankeuptoy <S=»154 — Right of bank to apply funds on unsecubed in-
debtedness.
A bank, whlch as pledgee wrongfully sold property of bankrupts at
prlvate sale for the amount of its lien, but afterwards recelved the proflt
from resales by the purchaser, which it held as its own, held estopped,
on an accounting to the trustée, to apply such sum on unsecured Indebted-
ness of bankrupts.
In Equity. Suit by William Howard, Jr., trustée in bankruptcy of
Senior Bros., against the Mechanics' Bank and the Brooklyn Trust
Company and Walter S. Ward, executors of N. Willard Curtis, de-
ceased. Decree for complainant.
Horace W. Palmer, of New York City (Charles A. Taussig, of New
York City, of counsel), for plaintifif.
Gray & Tomlin, for défendant Mechanics' Bank.
Bruce R. Duncan, of Brooklyn, N. Y., for défendant executors.
CHATFIELD, District Judge. The plaintifif seeks to set aside a
conveyance from the défendant bank to the décèdent, Curtis, and for
an accounting for the market value of some eight automobiles, which
it allèges both the bank and the décèdent converted, and for the value
of which they should be held as trustées. Five of thèse automobiles
are what is known as "Light Sixes," and three as "Twin Sixes," ail of
the model of 1916, made by the Pathfinder Company, and sent to
Brooklyn upon the orders of Senior Bros., the bankrupts herein.
The Mechanics' Bank of Brooklyn had previously advanced certain
money upon the strength of warehouse receipts for ten cars, and had
possession of them as security. Two of thèse cars were sold three
days before bankruptcy. The remaining eight were sold by the bank
to N. Willard Curtis, one of the directors, and then sold to customers,
who were told, by men who knew of the bank's transaction, that the
<g=3For other cases see same toplc & KBY-NUMBER in aU Key-Numbered Dlgests & Indexes
700 262 FEDERAL REPORTEE
cars could be bought cheap, and to apply to one of the bankrupts, acting
as salesman at the bank's request. The proceeds were turned over to
the bank. Out of thèse proceeds the banl< repaid themselves the
amount due upon the Curtis note, with interest, and thus met the
amount of the so-called purchase by Mr. Curtis. The balance was ap-
plied on other indebtedness of Dr. Frank S. Senior, father of the
bankrupts. The record actually shows that Mr. Roy Senior, one of
the bankrupts, was told by the représentatives of the bank that each
car could be sold for any price over the amount which they owed to the
bank on each car, and that, if he obtained more, the bank would apply
it for the benefit of his father's account. Since the beginning of the
action, Mr. Curtis has died, and his executors hâve been brought in to
défend the action in his place.
It appears that thèse cars were sold at a time when the Pathfinder
Company had no regular repair station or sales office in Brooklyn.
One was opened in New York before ail of the cars were disposed of ,
but by parties entirely independent of the Seniors. The Pathfinder
Company had placed upon the market in the meantime a 1917 model,
which did not difïer greatly in structure, but contained some changes
of appearance, and the testimony has gone at length into the obtainable
price for cars of the sort involved herein under the circumstances
existing during the time through which Mr. Roy Senior made sales
of thèse cars. It appears that the buyers of thèse cars knew that they
were getting them at reduced rates. None of the cars were sold from
any place recognized as a show room or agency. Each buyer had in-
formation that they were being disposed of under such cii'cumstances
as would indicate a forced sale of some kind. Each buyer endeavored
to get his car as cheap as he could do so, while Mr. Senior apparently
endeavored to get as much as the buyer would give.
It was in no case the ordinary commercial transaction of hunting
out buyers, who were to be interested in the cars and talked into mak-
ing the purchase on such terms as the agent was ready to give in mak-
ing sales. Nor were any of them such sales as would be made where
a customer came into an agency and was looking for a car at the lowest
price for which the agency would dispose of cars. Each sale in the
présent case was on a eut rate or forced sale basis, and the value of
the cars under those circumstances was what could hâve been obtained
in that kind of a market, rather than the amounts which represented
the usual sales price of the cars, or the amounts which might hâve been
obtained if the business of selling the Pathfinder automobiles had been
going on in the usual course.
[1] On the évidence it is apparent that Mr. Senior procured fairly
good priées for the cars. His willingness to let the cars go at any
price which would cover the claims of the bank was evidently restrain-
ed by the knowledge that the bank would give his father the benefit
of any surplus up to the amount of his father's indebtedness, and the
testimony does not indicate that he slaughtered prices, or let the cars
go for less than any one else could bave obtained under similar cir-
cumstances. It will therefore be found that the amount at issue in this
case, representing the value of the cars, for which an accounting should
HOWARD V. MECHANICS' BANK 701
(262 F.)
be had, does not exceed the sum which was actually turned over from
the purchase of thèse cars to the bank.
The plaintiff allèges that Mr. Curtis and the bank acted with knowl-
edge of ail the circumstances preceding the time when Mr. Curtis
nominally bought thèse cars from the bank. At that time the bank
had the right to hold thèse particular cars and to proceed in a statu-
tory way or according to law to convert the property pledged into mon-
ey, to pay its debt, and to account for the balance, or to dispose of the
property by auction, on giving proper notice, and to apply the pro-
ceeds to the liquidation of its debt, accounting for the surplus, if
any. The plan adopted by the bank, of selling to some one burden-
ed with knowledge of the facts, for an amount admittedly less than
the value of the property, and then to receive the benefit of the full
amount realized, was a violation of the duty which the bank owed
as a trustée, even when acting upon its légal rights in selling the prop-
erty to liquidate its debt.
Both the bank and Mr. Curtis held this trust relationship to the
bankrupts' creditors, and are liable to account for the différence be-
tween the amount due on the notes, with interest to the date of sale to
Mr. Curtis, and the total amount actually received. The plaintiff is
entitled to receive interest upon this balance from the time of its pay-
ment to the bank until the entry of judgment.
[2] An item of $454.96 is sought to be charged by the bank for the
amount of storage accrued against thèse cars when they were taken
possession of by the bank, shortly after bankruptcy. When the bank
made ostensible sale to Mr. Curtis, it did not include in the purchase
price this charge for storage. It is impossible to tell how the bank ex-
pected to reimburse itself therefor, or whether it anticipated proving
this amount merely as a gênerai creditor of the bankrupts. But it is
évident that the bank expected to receive, through Mr. Curtis, addi-
tional moneys upon the sales of thèse cars. They waived any claim
of lien or right to apply moneys in their hands to the payment of ex-
penses, by holding out to the world what appeared to be a flat sale
for the face value of their debt. To allow the bank to profit by its own
wrongdoing, and to thereafter deduct charges as to which the lien
had been waived, would not be équitable under the circumstances, and
for thèse charges upon the automobiles the bank should be allowed
nothing but a gênerai claim against the bankrupt estate.
[3] If any interest was due thereafter upon the amount which Mr.
Curtis was supposed to hâve paid, it would be a charge against his
estate, and his estate cannot come in and insist that the executors be
relieved by an admission of primary responsibility on the part of the
bank, and at the same time ask that the bank be allowed to enforce a
claim for interest, not against them, but against an innocent third par-
ty. If the bank considered the notes paid by the sale to Mr. Curtis,
except in so far as they may hâve had a balance at that time which was
provable as a gênerai claim against the bankrupt, it cannot now be
heard to transf er this balance into a secured claim.
[4] The bank also raises the contention that it has the right to
apply any amount which came into its hands from the sale of thèse
702 262 FEDERAL EBPOETEE
eight automobiles to the payment of other indebtedness owing by the
bankrupts to the bank, and for whicli the bank pref erentially took pos-
session of certain other automobiles, which were sold and the pro-
ceeds kept by the bank, which bas been ordered to pay back the sums
involved, leaving it to its proof of gênerai debt for that amount.
The proposition urged by the bank would be true in the ordinary
sensé. Its right to set off funds in its hands against any indebtedness
owing by the bankrupt to it is unrestricted, except in so far as the
funds sought to be so used are definitely held as trust funds for a cer-
tain purpose, or as the property of another party. But in the présent
case the bank attempted to dispose of its property to Mr. Curtis, with-
out crediting to the bankrupt anything at ail out of the sum which
might corne into its hands as surplus, and bas therefore estopped itself
from applying that surplus as a set-off on the amount due to the bank
from the bankrupts. It holds the balance which it received from Mr.
Curtis in trust to liquidate the claim against his estate, and if the bank
applies thèse funds, or any part of them, to the payment of its own
debts, which it may still bave the right to do under the bankruptcy law,
then judgment for the amount which the bank fails to tum over must
be rendered against the estate of Mr. Curtis, which is also jointly
liable.
The plaintifï may hâve a decree for the amount received by the bank
over and above its indebtedness upon the notes given, with the eight
cars in question as security, together with interest to the date of the
sale to Mr. Curtis, in so far as that interest bas not been paid. The
plaintifï may bave interest upon the amount so received from the date
of payment of the varions sums to the bank, and judgment should run
against both the bank and the estate of Mr. Curtis, but with the pro-
vision that the debt shall be paid primarily by the bank, and that re-
course shall be had against the estate oiÉ Mr. Curtis only in such
amount as the bank may fail to pay.
Ex parte GIVINS.
(District Court, N. D. Georgia. February 2, 1920.)
1. AEMT and NAVÏ <®=543 — COMMAKDEB OF PERMANENT CAMP HAD POWER TO
CONVENE GENERAL COUET-MAETIAL.
Under ElghtU Article of War (Comp. St. § 2308a), authorlzlng the com-
manding officer of a district or body of troops to appoint a gênerai court-
martial when empowered by the Président, a gênerai court-martial called
by the commander of a permanent camp, as authorized by General Order
No. 56 of the War Department, issued June 13, 1918, by direction of the
Président, held lawfully convened.
2. ABMT and NAVY <S=»47 — KeCOBD or COrKT-MABTIAI. NEED NOT SHOW ALL
FACTS ESSENTIAL TO IT9 EXISTENCE.
The record in a case tried by a court-martial need not show ail the
facts necessary to constitute it a lawful court.
8. AEMY and NAVT ®=»47 — JUDOMENT of COUET-MAB/riAL NOT EKVIEWABLE ON
HABEAS CORPUS.
A civil court In a habeas corpus proceeding cannot review the judg-
ment of a court-martial for error.
®33For other cases see same toplo & KEY-NUMBER In ail Key-Numbered Dlgests & Indeies
EX PARTE GIVINS 703
(262 FJ
4. Aemt and navt <S=547 — Peoof or jubisdiction or court-mabttai, ovkb dé-
fendant SUFFICIENT.
That a défendant was appolnted, accepted his commission, and served
as an ofGcer In tbe army Is suffleient proof that he was subject to mill-
tary law.
6. Abmt and navt <g=347 — Cottetb-mabtiai, had jueisdiction of tbial for
MtTBDEB AFTEB ARMISTICE ; "TIME OF PEACE."
The provision of article 92, Articles of War (Comp. St § 2308a), that
no person shall be tried by oourt-martlal for murder commltted wlthln
the geographleal limita of the States of the Union In tlme of peace, held
not applicable to any tlme betvreen the déclaration of war with Ger-
many and the ofiBclal conclusion of peace, although the place of war was
not wlthln the United States.
6. Abmt and navt <©=>48 — ^Désignation of place of impbisonment peesumed
LAWFUL.
Where the judgmient of a court-martial, on conviction of a défendant
for manslaughter, dlrected the kind and duratlon of his imprlsonment as
authorlzed by article 93, Articles of War (Comp. St. § 2308a), the place of
confinement may be later deslgnated by the War Department, and such
désignation on the commltment papers will be presumed to hâve been
lawfuUy made.
7. Armt and navt <S=>43 — ^Meaning or "disteiot" in Eighth Abticle of
Wae.
The term "district," as used In Eighth Article of War (Comp. St. §
2308a), providlng that, when empowered by the Président, the command-
Ing officer of any district may appoint gênerai courts-martial, has no
tecbnical military meaning, but inoludes the terrltory occupied by a per-
manent milltary camp.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, District.]
Pétition by William J. Givins for writ of habeas corpus. Denied.
John S. Strahom, of Annapolis, Md., for petitioner.
Hooper Alexander, U. S. Atty., and John W. Henley, Asst. U. S.
Atty., both of Atlanta, Ga., and Francis E. McGovern, Judge Advocate,
of Milwaukee, Wis., for the United States.
SIBLEY, District Judge. The retum to the writ showed the appli-
cant held in the United States penitentiary, Atlanta, Ga., since May
2, 1919, under sentence by a court-martial. The exhibited record shows
the arraignment and trial of Capt. William J. Givins, Infantry, United
States Army, on October 30, 1918, before a gênerai court-martial con-
vened at Camp Sevier, S. C, under Spécial Order No. 172, Head-
quarters, Camp Sevier, S. C, on a violation of the Ninety-Second
Article of War (Comp. St. § 2308a), and spécifications, in effect, of
murdering a private on September 28, 1918, by premeditated shooting.
There is a plea of "not guilty," and a finding of not guilty of the
charge made, but guilty of violation of the Ninety-Third Article of
War, with spécifications amounting to manslaughter. The sentence is :
"To be dismlssed the service and to be conflned at hard labor at such place
as the revlewing authority may direct for 10 years."
The sentence having been approved by the convening authority, and
the record of the trial forwarded for the action of the Président, under
the Forty-Eighth Article of War, the f oUowing order is made théreon :
®=jFoT other cases see same topic & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexes
704 262 FEDERAL EEPOETBE
"In the foregolng case of Captaln William J. Glvins, Infantry, the sentence
Is conflrined, and wlU be carried Into exécution. Woodrow Wilson. The
Whlte House, 14th Aprll, 1919."
The contentions of the applicant are :
(1) The court-martial was not légal, because convened by a camp
commander, who could only call a spécial court-martial.
(2) The record of the trial does not show accused was an officer as al-
leged, nor in any manner amenable to trial by court-martial.
(3) The court-martial had no authority to try him for murder, be-
cause : (a) There was a time of péace in the United States when the
crime was committed; and (b) the pleadings do not négative a time
of peace.
(4) The sentence as promulgated did not include confinement in the
United States penitentiary at Atlanta, or any other place.
[1] 1. The commander of a camp may, as such and on his own mo-
tion, call a spécial court-martial under the Ninth Article of War ; but
a spécial court-martial may not try a captain. Article 13. There is,
however, in évidence General Order No. 56, promulgated by the Secre-
tary of War under date of June 13, 1918, which so far as material is as
f ollows :
"By direction of the Président, the commandlng officer of each of the fol-
ïowlng camps is empowered, under the Eighth Article of War, to appoint gên-
erai courts-martial whenever necessary" : Namlng, among 33 camps, "Camp
Sevier, Greenvllle, South Carolina."
Besides the inhérent power of the commander-in-chief to direct the
convening of courts-martial (Swaim v. United States, 165 U. S. 553,
17 Sup. Ct. 448, 41 L. Ed. 823), article 8 déclares that gênerai courts-
martial may be appointed "when empowered by the Président," by
"the commanding officer of any district or of any force or body of
troops."
[7] The term "district" has no technical military meaning, but in-
cludes the territory occupied by a permanent military camp, such as
Camp Sevier. Moreover, the troops at the camp are ordinarily under
the command of its commanding officer, so that the Président might
authorize such officer to convene gênerai courts-martial, both as the
commander of a district and of a body of troops.
[2] 2. The record is not defective in failing to refer to General
Order 56 as authority for Spécial Order 172, by which the court was
constituted. While courts-martial are spécial courts of hmited juris-
diction, and hâve no presumptions to aid them (Runkle v. United
States, 122 U. S. 543, 555, 7 Sup. Ct. 1141, 30 U. Ed. 1167; McClaugh-
ry v. Deming, 186 U. S. 49, 63, 22 Sup. Ct. 786, 46 L. Ed. 1049), still
it is not requisite for an inferior court to spread upon the record of
each case which it tries the full pedigree of its powers. Its record
need not justify its existence genefally, but should show the right to
try the particular case. Otherwise, this record must hâve shown, not
only the spécial order appointing its members and General Order 56,
but also that the persons making thèse orders were really the com-
manding officer bf Camp Sevier and the duly elected Président of the
United States. Obviously such things need not be made of record,
EX PARTE QIVINS 705
C262 F.J
because they are to be judicially recognized. So a gênerai order of
the War Department is an army régulation, and is the law of the army,
and will surely be judicially noticed by military courts, without either
allégation or proof, and indeed by the civil courts as well. Jenkins
V. Collard, 145 U. S. 547, 560, 12 Sup. Ct. 868, 36 L. Ed. 812; Caha
V. United States, 152 U. S. 211, 221, 14 Sup. Ct. 513, 38 L. Ed. 415;
Gratiot v. United States, 4 How. 80, 117, 11 L. Ed. 884.
[3] 3. If by the second contention is meant that the évidence pro-
duced to the court-martial did not sufïïciently show that applicant
was a captain in the infantry of the United States Army, it must be
replied that this court, on habeas corpus, is not a court of errors for
the court-martial. The inquiry hère is not whether that court decided
rightly, but whether it could rightly décide at ail. Johnson v. Sayre,
158 U. S. 109, 15 Sup. Ct. 773, 39 L. Ed. 914; Swaim v. United States,
165 U. S. 553, 561, 17 Sup. Ct. 448, 41 L. Ed. 823; Dynes v. Hoover,
20 How. 65, 15 L. Ed. 838; McClaughry v. Deming, 186 U. S. 49, 69,
22 Sup. Ct. 786, 46 L. Ed. 1049. Of course the applicant may hère
contend that he was not in fact a person subject to military law, and
was not triable by court-martial, although that court might hâve ad-
judged otherwise, for that dénies the jurisdiction in fact of the court,
and its record cannot establish its jurisdiction, if indeed it had no au-
thority to make a record.
[4] The évidence introduced hère, however, shows that Givins, hav-
ing served for several months as first lieutenant, was commissioned as
a captain September 9, 1918, and accepted his commission September
25, 1918. The only reply made is that there is no proof he took the
oath of allegiance at any time, which is said to be the touchstone of
soldierhood. In re Grimley, 137 U. S. 147, 156, 11 Sup. Ct. 54, 34
L. Ed. 636. The oath may hâve been taken long since, and, being oral,
may not be capable of convenient proof; but accepting a captain's
commission, carrying the privilèges and pay of that office, is amply
sufficient proof that the petitioner was subject to military law. Article
of War 2 (a).
[ 5 ] 4. Capt. Givins was arraigned for murder under article 92, and
convicted of manslaughter, punishable under article 93. Under
article 92 he could not be tried by a court-martial for murder "com-
mitted within the geographical limits of the states of the Union
* * * in time of peace." It is said that at no time was there other
than peace in the United States, and especially so after the armi.=tice
was signed with Germany, prior to the promulgation of the sentence
in this case. If the right of a court-martial to try a military person
under article 92 was intended to exist only in a place of war and in
case the civil courts were closed, it would hâve been easy to say so ;
but a time of war is made the test, and it must be held that for military
persons, at least, such a time continued from the date of the déclaration
of war by Congress until some formai proclamation of peace by an
authority compétent to proclaim it. The rapid movement of soldiers,
causing the scattering of witnesses before the civil courts could act,
as well as the necessity of firm discipline and full control over an army
when on a war footing, are prime causes for the substitution of courts-
262 F.— 45
706 262 FEDERAL REPORTER
martial for civil courts in time of war. Thèse causes existed at Camp
Sevier, though the state of active opérations viras far removed.
If in exceptional cases a time of peace may come before officiai
récognition of it, and before a demobilization of the armies, this is not
such a case. And again it must be held that the failure of the court-
martial's record to aver the crime to hâve been committed in a time
of war is not fatal. On objection duly made it should hâve been
alleged, and doubtless would hâve been; but, if the fact indeed ex-
isted, the failure of the record to state it is an irregularity in the rec-
ord, and not a real want of jurisdiction in the court. If the jurisdiction
really existed, in meeting a collatéral attack it may be shown, either by
the récitals of the record (which are neither conclusive nor exclusive
évidence either way) or by aliunde proof. Galpin v. Page, 18 Wall.
350, 21 L. Ed. 959. The point is of the less practical merit because
the petitioner was not convicted under article 92, but under article 93,
as to which a time of war or peace is immaterial. Under familiar
rules, he went on trial, not only for a charge of murder, but also for
every lesser crime included in the offense alleged. He was not tried
for murder alone, but for manslaughter and assault also, and was
lawf ully convicted of manslaughter. Dynes v. Hoover, 20 How. 65, 79,
15 L. Ed. 838.
[6] 5. Article 93 authorized punishment "as the court-martial may
direct." The court could properly prescribe the kind and duration of
the punishment, as it did; but the place of its exécution is under
législative control. Ex parte Karstendick, 93 U. S. 396, 400, 23 L.
Ed. 889; Weed v. People, 31 N. Y. 465. The time and place of exé-
cution are no part of the judicial sentence. Schwab v. Berggren, 143
U. S. 442, 451, 12 Sup. Ct. 525, 36 L. Ed. 218; In re Cross, 146 U. S.
271, 13 Sup. Ct. 109, 36 L. Ed. 969; Ex parte Waterman (D. C.) 33
Fed. 29; O'Brien v. Barr, 83 lowa, 51, 49 N. W. 68. They may,
under various circumstances, be added or altered after the adjourn-
ment of the term of court. Re Bonner, 151 U. S. 242, 14 Sup. Ct. 323,
38 L. Ed. 149; State v. Kitchens, 2 Hill (S. C.) 612, 27 Am. Dec. 410;
Ex parte Nixon, 2 S. C. 4; Bland v. State, 2 Ind. 608; State v.
Cardwell, 95 N. C. 643 ; Kingen v. Kelley, 3 Wyo. 566, 28 Pac. 36,
15 L. R. A. 177; In re Bell, 56 Miss. 282; Mills v. Commonwealth, 13
Pa. 631. Else, the specified penitentiary being discontinued or de-
stroyed, a discharge on habeas corpus would resuit. Other embarrass-
ments would exist in the case of an army in the field. Capt. Givins has
been lawfully sentenced to confinement at hard labor for 10 years,
and should not be discharged until he has lawfully served it, or been
pardoned or paroled.
Under Article of War 42 and under section 2 of the act of March 4,
1915 (38 Stat. 1084 [Comp. St. § 2458a]), he may lawfully be con-
fined on this sentence in cmy penitentiary directly or indirectly under
the control of the United States. Further, in promulgating this sen-
tence, after confirmation by the Président, the Acting Adjutant Gen-
eral, in his order accompanying the court-martial record, which was
sent with the prisoner as a commitment, states that the United States
penitentiary at Atlanta, Ga., had been designated as the place of con-
m RE BRINSON 707
C2G2 FJ
finement. Tt appears from the évidence that a recommendatîon of this
place by the Secretary of War had accompanied the proce^dings when
submitted to the Président for his confirmation, and there is proof that
the désignation of the place of confinement in this way, separately from
the confirmation proper of the sentence, is the uniform practice of the
War Department.
It is argued that it should be assumed that the Président had orally
directed this place of confinement in accordance with the sentence of
the court, and not that the Ad jutant General had donc so. United
States V. Page, 137 U. S. 673, 11 Sup. Ct. 219, 34 L. Ed. 828; United
States V. Fletcher, 148 U. S. 84, 89, 13 Sup. Ct. 552, 37 L. Ed. 378;
Wolsey V. Chapman, 101 U. S. 755, 770, 25 L. Ed. 915. And see, as to
presumption of regularity as to the place designated for imprisonment.
Ex parte Wilson, 114 U. S. 417, 421, 5 Sup. Ct. 935, 29 L. Ed. 89. A
contrary view could only resuit in the petitioner's being held until the
place could be designated. In re Bonner, 151 U. S. 242, 14 Sup. Ct.
323, 38 L. Ed. 149. He would then lose crédit for the time he has here-
tofore been improperly confined. If there is any objection to his prés-
ent place of confinement, it can doubtless be changed on such showing
as could be made to the Président in making now an original désig-
nation.
The view will be adopted that the confinement has been and is law-
ful, and the writ of habeas corpus will be discharged, and the peti-
tioner remanded to custody.
In re BRINSON.
(District Court, S. D. Mississippi, Jackson Division. December 16, 1919.)
No. 1407.
BANKBUtTCT <S=>143(12) TBUSTEE AOQUIEES no INTKREST in SUBEENDEB VALtJR
OF EXEMPT INSURANCE POLICT ; "PBOCEBDS."
Under Hemlngway's Code Miss. §§ 1813, 1814, exempting from debts of
the insured the proceeds of a life policy to a certain amount, whethei
payable to his estate or to others, and whlch, as construed by the Suprême
Court of the state, includes as "proceeds" of a policy its surrender value,
the trustée of a bankrupt In that state takes no interest in a policy held
by hlm, under Banknipcy Act, §§ 6a, 70a (Comp. St. §§ 9590, 9654).
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Proceeds.]
In Bankruptcy. In the matter of A. C. Brinson, bankrupt. On pe.-
tition to revise order of référée. Reversed.
Magee & Gibson, of Monticello, Miss., for bankrupt.
HOLMES, District Judge. This is a pétition for revision of an or-
der of the référée holding that the trustée in bankruptcy is entitled to
the cash surrender value of an insurance policy on the life of the bank-
rupt, and requiring the bankrupt to pay to the trustée the amount of
such cash surrender value before being entitled to claim said policy
as exempt.
(Ê=3For other cases see sama topio & KEY-NtJMBBR in ail Key-Numbered Dlgesta & Indexes
708 262 FEDERAL REPORTEE
Among the assets listed in the bankruptcy schedule was a life insur-
ance policy for $1,000, payable to the wife of tlie bankrupt as benefi-
ciary, but with the right reserved to the insured to change the bene-
ficiary by written notice to the company. The cash surrender value of
the policy upon the filing of his pétition and on the date of adjudication
was $249. This amount, as well as the policy itself, is claimed as
exempt by the bankrupt.
When iae filed his pétition the bankrupt also claimed as exempt cer-
tain real estate and $250 in cash out of $996.58 which he had on hand.
The claim for land exemption was denied, and the one for $250 in cash
allowed by the référée, and no appeal was taken from his order in ei-
ther instance.
But the trustée demanded payment of the sum of $249, which was
the cash surrender value of the insurance policy, and the référée en-
tered an order requiring payment thereof by the bankrupt within 30
days, and providing that, should the bankrupt fail, within said time, to
comply with the terms of said order, then the trustée was directed to
take the necessary steps to obtain from the insurance company the said
sum, either as cash surrender value or loan value, for the benefit of the
creditors of the estate. Ten days were allowed in the order in which
the bankrupt might appeal therefrom, which appeal was duly taken.
The bankrupt claims that the cash surrender value of the policy is
exempt under the Mississippi law. The référée after quoting section
70a of the Bankruptcy Law (Act July 1, 1898, c. 541, 30 Stat. 565
[Comp. St. § 9654]), says in his certificate:
"I think the creditors are entltled to the cash surrender value of the policy.
The Suprême Court of the United States, in the case pf Cohen v. Samuels,
245 U. S. SO, 38 Sup. Ct. 36, 62 L. Ed. 143, decided in 1917 the exact question
hère presented, which is, of course, décisive of the instant case. There the poli-
cy was payable to the wife of the bankrupt as beneflciary, but the right was
reserved to the bankrupt to change the policy at will. The court held that,
under section 70a of the Bankruptcy Act, the creditors were entitled to the
avafts of the policy."
Section 6a of the Bankruptcy Act is as follows:
"Sec. 6. (a) This act shall not affect the allowance to bankrupts of the ex-
emptions which are prescribed by the state laws in force at the time of the
riling of the pétition in the state wherein they hâve had their domicile for
the six months or the greater portion thereof immediately preceding the
flling of the pétition." Act July 1, 1898, c. 541, 30 Stat. 548, § 6 (Comp. St.
S 9590).
The claim of the trustée to the cash surrender value of this policy
dépends entirely upon section 70a of the Bankruptcy Law, which pro-
vides that the trustée of the estate of a bankrupt, upon his appointment
and qualification, shall be vested by opération of law with the title of
the bankrupt, as of the date he was adjudged a bankrupt, to ail of
his property of designated kinds, "except in so far as it is to property
which is exempt."
There is a proviso to subdivision 5 of section 70a which says that,
when any bankrupt shall hâve any insurance policy which has a cash
surrender value payable to himself, his estate, or personal représenta-
tives, he may, within 30 days after the cash surrender value has been
m RE BBINSON 709
(262 FJ
ascertained, pay or secure to the trustée the sum so ascertained, and
continue to hold and own such policy free from the claims of creditors
participating in the distribution of his estate, but that if he fails to do
this the policy shall pass to the trustée as assets.
It is obvious that sections 6a- and 70a first préserve to the hankrupt
the title to ail property exempt to him by law, and in addition that the
proviso to 70a gives the bankrupt the right to secure to himself any non-
exempt insurance policy free from claims of creditors by paying to the
trustée vvithin a stipulated time the cash surrender value. The trustée
takes no title to any life insurance policy wliich is exempt under the
law of the state; but, if the policy is not so exempt, the trustée takes a
qualified title, defeasible by the bankrupt upon payment of the cash
surrender value of the policy.
I do not think the case of Cohen v. Samuels, 245 U. S. 50, 38 Sup. Ct.
36, 62 L. Ed. 143, is décisive of the question hère, because there the
policy was not claimed as exempt under the state law. There, as hère,
the policy was upon the life of the bankrupt, payable to another as
beneficiary, but with the absolute right in the insured bankrupt to
change the beneficiary without the latter's consent, and there, as hère,
the policy had a cash surrender value, which the company was willing
to pay to the bankrupt. But there, as hère, the policy was not directly
in words payable to the bankrupt, and therefore literally did not fall
within the terms of the proviso that, when any bankrupt shall hâve
"any insurance policy which has a cash surrender value payable to
himself, his estate, or personal représentatives," he may continue to
hold and own the same by paying to the trustée the cash surrender
value thereof. The court held that under subdivision 3 of section 70a
the trustée was vested with ail powers which the bankrupt might hâve
exercised for his own benefît, and that, although the policy was not
payable to the bankrupt, it could hâve been so payable at his own will
and by his simple déclaration. The efifect of this décision is simply that,
where the bankrupt has reserved to himself in an insurance policy the
absolute power to change the beneficiary at his own will, the policy
passes to the trustée, subject to the conditions of the proviso in section
70a, in the same way and just as if it were payable in words to "him-
self, his estate, or personal représentatives." But the décision does not
hold that the trustée gets title to a policy, regardless of how payable,
which is exempt by the state law, for the exemption in such a policy
is expressly recognized by sections 6a and 70a of the Bankruptcy Act.
In Holden v. Stratton, 198 U. S. 202, 25 Sup. Ct. 656, 49 L. Ed. 1018,
the court held that policies of insurance which are exempt under the
law of the state of the bankrupt are exempt under section 6 of the
Bankruptcy Act of 1898, even though they are endowment policies,
payable to the insured during his Hfetime, and hâve cash surrender
values, and held, further, that the provisions of section 70a of the act
do not apply to policies which are exempt under the state law. The
court said:
"As section 70a deals only with property whieh, not belng exempt, passes
to the trustée, the mission of the proviso was, In the Intcrest of the perpétu-
ation of policies of life insurance, to provide a rule by which, vphere such
policies passed to the trustée because they vi'ere not exempt, if they had a
710 262 FEDERAL REPORTER
Burrender value, thelr future opération could be preserved by vesting
the bankrupt wlth the privilège of paylng such surrender value, v^hereby
the policy would be withdrawn out of the category of an asset of the es-
tate ; that is to say, the purpose of the proviso was to conf er a beneflt upon
the Insured bankrupt by limitlng the character of the Interest in a nonexempt
llfe Insurance policy whlch should pass to the trustée, and not to cause
such a policy when exempt to become an asset of the estate."
The Mississippi exemption statutes with référence to life insurance
policies are found in sections 1813, 1814, of Hemingway's Code, as
follows :
"1813. (2140.) Amount of Life Insurance Policy— How Payable. — The
proceeds of a life insurance policy, to an amount not exceedmg ten thousand
dollars upon any one life, shall Inure to the party or parties named as the
beneflciarles thereof, free from ail liability for the debts of the person whose
life was insured, even though such person paid the premiums thereon.
"1814. (2141.) Amount of Life Insurance PoUcy — Payable to Executor. —
The proceeds of a life insurance policy uot exceeding five thousand (¥5,000.-
00) dollars payable to the executor, or admlnistrator, of the insured, shall
inure to the heirs or legalees, freed from ail liability for the debts of the
décèdent, except premiums paid on the policy by any one other than the in-
sured for debts due for expenses of last illness and for burlal; but if the
llfe of the deceased be Insured for the beneflt of his heirs or legatees at the
tlme of his death othervpise, and they shall coUect the same, the sum coUected
shall be deducted from the five thousand (55,000.00) dollars and the excess
of the latter only shall be exempt."
Laws 1908, c 175, hi effect February 20, 1908.
In Dreyfus v. Barton, 98 Miss. 758, 54 South. 254, the Suprême
Court of Mississippi held that the cash surrender value was "proceeds"
of a life insurance policy, and exempt under thèse statutes. The court
said:
"This statute exempts the vrhole proceeds, or any part of It, whether the
value accrues during the life or after the death of the insured. The cash
surrender value of the policy Is just as much 'proceeds' of the policy, within
the meaning of the statute, as vcould be the full amount after the death of
the insured. In other words, when the person insured dies, the proceeds of
the policy are exempt ; whlle he lives, if the policy acquires a cash surrender
value, this cash surrender value is 'proceeds' within the meaning of the
statute, and exempt so long as the value in either case does not exceed three
[now five] thousand dollars. Any other construction of the statute would im-
pair. If it did not destroy In some cases, the object of the statute."
This case was cited, quoted, and followed in King v. Miles, 108 Miss.
732', 67 South. 182.
The fact that the insured reserved the absolute right to change the
beneficiary did not destroy the exempt character of the proceeds of
the policy, although the exercise of this right might change the statute
under which the exemption would fall as a matter of law. If the bene-
ficiary were changed from the wife to some other "party or parties
named as beneficiaries," the proceeds would still be exempt under sec-
tion 1813 ; if changed "to the executor or administra tor of the insured,"
the exemption would corne under section 1814. See, aiso, Allen v. Cen-
tral Wisconsin Trust Co., 143 Wis. 381, 127 N. W. 1003, 139 Am. St.
Rep. 1107; Chandler v. Traub, 159 Ala. 519, 49 South. 240; Young v.
Thomason (D. C.) 179 Ala. 454, 60 South. 272 ; In re Morse (D. C.)
206 Fed. 350; In re Carlon (D. C.) 189 Fed. 815; In re Orear, 189
NORTHERN lOWA GAS & E. CO. V. INC. TOWN OF LUVERNB 711
C262 FJ
Fed. 888, 111 C. C. A. 150; In re Booss (D. C.) 154 Fed. 494; In re
Johnson (D. C.) 176 Fed. 591 ; Steele et al. v. Buel et al, 104 Fed.
968, 44 C. C. A. 287; In re Pfaffinger (D. C.) 164 Fed. 526; In re
Young (D. C.) 208 Fed. 373.
It follows, in my judgment, that the order of the référée should be
reversed, and an order entered setting aside this policy, together with
the cash surrender value thereof , to the bankrupt as exempt property
under the Mississippi law.
NORTHERN lOWA GAS & ELECTRIC OO. v. INCOEPORATBD TOWN
OF LUVERNE, lOWA.
(District Court, N. D. lowa, O. D. January 28, 1920.)
No. 28.
CONTBACTS <S=3lO(l) — CONTEACT TO FUBNISH EUECTBICITT VOID FOE LACK OF
MUTCALITY.
A eontract by which an electric comipany agreed to fumlsh a town for
a term of years ail the electriclty and current ttiat should be deslred, to be
paid for by meter measurement, but by which the town assumed no obliga-
tion to purchase any deflnlte qimntity of current, held void for laek of
mutuality.
In Equity. Suit by Northern lowa Gas & Electric Company against
Incorporated Town of Luverne, lowa. On motion to strike out an-
swer. Sustained.
See, also, 257 Fed. 818.
Price & Bumquist, of Ft. Dodge, lowa, for plaintiff.
Grimm, Wheeler, Élliott & Jay, of Cedar Rapids, lowa, for défend-
ant.
REED, District Judge. This proceeding is a continuation of the
proceedings upon the application of the plaintiff for a temporary in-
junction, decided on May 26, 1919, reported in 257 Fed. at page 818, to
which référence is now made for a statement of the case and the ques-
tions involved, without repeating them hère.
After the décision upon such application, the défendant on June 17,
1919, filed an answer to the pétition setting forth at length various al-
leged défenses to the pétition, ail of which were set forth in substance
upon the hearing of the application for the temporary injunction, to
which the plaintiff, for the purpose of testing the sufficiency of the
various allégations of the answer as a défense to its pétition, moved to
strike out or dismiss the allégations of said answer under the présent
equity rules Nos. 29, 33 (198 Fed. xxvi, xxvii, 115 C. C. A. xxvi,
xxvii), and perhaps others of such rules, and in effect asked for a re-
hearing and readjudication of such application.
The preliminary injunction was granted after a fuU hearing of
both parties upon the merits, and upon the ground that the eontract
between the parties relied upon on such hearing, and now relied upon
in this application, is void for lack of mutuality, and affords no ground
for relief to the défendant. The eontract or agreement between the
<gS3For oUier cases see same toplc & KBT-NUMBER In ail Key-Numbered Digests & Indexes
712 202 FEDERAL REPORTEE
parties is set forth in full in the plaintifï's pétition, to which référence
should be made for the entire agreement, for such bearing as it may
hâve, one clause of which, omitted from the opinion in 257 Fed. 818,
reads as f oUows :
"Should the Company, their successors or asslgns, fall or refuse to fumish
such electrlcity then stipulated damages in the smn of ten dollars per day
shall be pald by it to the town for each day thereof during which it shall
fall or refuse to furnlsh such electrlcity. But In the case of the happening of
an unavoidable casualty or contingency not due to the négligence of the Com-
pany, or against which the company cannot with reasonable diligence provide,
then such stipulated damages shall not obtaln for a period of thirty-six houra
after the happening thereof and a sulficient number of hours in addition to
ail for the repalr of the matter ; and in case the service shall be interrupted
by reason of flre or tornado or wind, then such damages shall not be collectible
until a reasonable length of time shall hâve been allowed the company to
repay the damages."
The answer as thus assailed by the plaintiff repeats and réitér-
âtes the same défenses urged to defeat the preliminary injunction,
without alleging any new or other grounds of défense than those urged
upon the original hearing, unless it may enlarge some of the alléga-
tions originally urged against the granting of the temporary injunction.
The Court of Appeals may, if it shall be so advised, overrule its
former décision, upon which the preliminary injunction was granted ;
but until it shall do so this court feels that it is bound by the former
décision of that court. The plaintiflf's motion to strike out defendant's
said answer will be sustained upon the ground that it allèges no dé-
fense to the plaintiff's cause of action, and the order granting the
temporary injunction will be reaffirmed, and a decree may be pre-
pared accordingly, to which the défendant is given an exception.
Ordered accordingly.
INCORPORATED TOWN OF liAURENS, 10 WA, v. NORTHERN 10 WA
6AS & ELECTRIC CO. et al.
(District Court, N. D. lowa, O. D. January 28, 1920.)
No. 24.
i. Injunction «S^SOCl) — Resteaininq beeach of contract is nkgativb
SPŒCIFIC KNFOBCEMENT.
A mandatory injunction to restrain breadi of a contract Is a négative
speeiflc enforcement of that contract, and the gênerai rule Is that the
granting of such relief by a court of equity Is govemed by the rules,
principles, and practices which lirait the granting of relief by writ of
Injunction.
2. Specific performance <g=»8 — Granting of relief discketionart.
Spécifie enforcement of a contract by a court of equity Is not a matter
of abeolute rlght, but rests in the sound discrétion of the chancellor, dé-
pendent upon the drcumstances of each partlcular case.
3. Specific performance 0=573 — Contracts rekjuieinq continuous Personal
labor ou skill not enforcbable.
A court of equity will not decree si>eeiflc performance of a contract,
which requires performance of contimious dutles Involvlng exercise <rf
Personal labor, sklU, and cultlvated judgment.
(@=53For other cases see same topic & KBY-NUMBER In aU Key-Numbered Digests & Indexe*
INC. TOWN OF IjATTRENS V. NOETHERN lOWA GAS « E. 00. 713
(262 F.)
4. Specific peefoemance (S=>32(1) — Contracts lacking mutualitt not bn-
rORCEABI^.
A court of equlty wlll not decree specific performance of a contract
lacking in mutuallty of obligation.
In Equity. Suit by the Incorporated Town of Laurens, lowa,
against the Northern lowa Gas & Electric Company and another. On
motions by défendant to dissolve temporary injunction and to dismiss.
Motions granted.
F. C. Gilchrist, of Laurens, lowa, for plaintiff.
Priée & Burnquist, of Et. Dodge, lowa, for défendants.
REED, District Judge. This suit is by the incorporated town of
Laurens, a municipal corporation of lowa, against the Northern lowa
Gas & Electric Company (and another party not material in this action)
upon a contract between the parties substantially like that in the case
of the Northern lowa Gas & Electric Company against the town of Lu-
veme, another municipal corporation of lowa (No. 28, Equity, decided
by this court May 26, 1919, and reported in 257 Eed. at page 818).
It was brought originally in the district court of lowa in and for
Pocahontas county, on November 25, 1918, against the défendant com-
pany, a West Virginia corporation, having a place of bvisiness at
Humboldt, this state, for producing electricity for lighting, heating,
manufacturing, and other purposes, and transmitting it to the plaintiflf
and to other towns in Northern lowa, to restrain the défendant from
disconnecting its transmission line from the Une of the plaintiff, where-
by it receives electricity from the défendant company, for lighting,
heating, and other purposes, which said contract provides, among
other things, as follows:
"The défendant (which Is called the Company) agrées to sell and furnlsh
to the plaintiff, Ineorixirated town of Laurens, a municipal corporation of
lowa, during a period of ten years from and after the Ist day of November,
1912, ail electricity and eurrent that shall be desired by tJie town or its patrons
along its transmission line (whetlier withln or without the town) for lighting
puriK)ses, or for other lawful uses, at a stipulated priée. At th.e close of
said len-year period the town may at its option renew this contract for an-
other like period of ten years, and this may be donc by the town at its option
on the expiration of each recurring tcn-year period thereafter until the year
1952. • » »"
There is no other provision of the contract specifying the amoimt of
electricity that the plaintiff town agrées to purchase from the défend-
ant company during the term of said contract, and it is the contention
of the défendant that the plaintiff is under no obligation to purchase or
take from the défendant company any electricity or power during the
period of said contract, or any renewal thereof, and that it is there-
fore lacking in mutuality and void.
The original pétition as filed in the state court asks that the de-
fendant be enjoined and restrained from violating any of the terms and
provisions of the contract, which is attached to the pétition, also from
ceasing to fumish electricity and power as called for under the terms
®=5For other cases see same toric & KEY-NUMBER In ail Key-Numbered Dlgests & Indeie»
71i 262 FEDERAL RBPOETBB
oîthc contract, and that the défendant may by a mandatory writ of
injunction be required to fumish power and electricity as stipulated
in said contract, and to continue to perform ail of the conditions
thereof ; that upon final hearing said temporary writ of injunction be
made permanent ; that plaintiff hâve and recover f rom the défendant
such damages as the plaintifï town may at that time be able to establish,
and for such other, further, and différent relief as may be agreeable
to equity and for the recovery of costs. The temporary writ of in-
junction was granted by the state court as prayed.
The défendant removed the cause from the state court to this court
upon the ground of diversity of citizenship and the record has been
filed herein. An amendment to the pétition was then filed by the plain-
tiff in this court after its removal hère. Upon the removal of the case
the défendant herein filed a motion under the présent equity rules to
test the sufficiency of plaintifl''s pétition as amended, to dissolve the
temporary injunction issued against it by the state court, and dismiss
the pétition at plaintiff's costs, upon the following grounds : That it ap-
pears upon the face of the pétition that said contract, which is at-
tached thereto, is void for want of mutuality, in that there is no ob-
ligation upon the part of the town to continue taking electricity from
the défendant company for any purpose or in any quantity under or
by virtue of said contract. Wherefore the défendant prays that the
pétition as amended be dismissed, that the temporary writ of in-
junction be dissolved, and that it recover its costs of the suit.
[1] The mandatory injunction, as prayed by plaintiff in its pétition
and granted by the state court against the défendant, is but a négative
order or decree for the spécifie performance of the contract set out in
plaintiff's pétition. The gênerai ruie is that the power and duty of a
court of equity to grant such relief is governed by the same rules, prin-
ciples, and practices which limit its powers and duties to grant relief
by a writ of injunction. 3 Pomeroy's Eq. Jur. §§ 1340, 1343.
[2] The spécifie performance of a contract by a court of equity is
not a matter of absolute right, but rests in the sound discrétion of the
chancelier, dépendent upon the circumstances of each particular case.
Hennessey v. Woolworth, 128 U. S. 438, 9 Sup. Ct. 109, 32 L. Ed. 500;
Willard v. Tayloe, 8 Wall. 557, 19 h- Ed. 501 ; Marble Co. v. Ripley,
10 Wall. 339, 19 h. Ed. 955 ; Shubert v. Woodward, 167 Fed. 47, 52,
92 C. C. A. 509, and cases cited; Hess v. Bowen, 241 Fed. 659, 154
C. C. A. 417, affirming (D. C.) 237 Fed. 510; Zundelowitz v. Webster,
96 lowa, 587, 65 N. W. 835, and cases cited. In Willard v. Tayloe, 8
Wall. 557, 19 L. Ed. 501, Mr. Justice Field, speaking for the Suprême
Court of the United States, said (8 Wall, at page 565, 19 h. Ed. 501) :
"This form of relief Is not a matter of absolute rlght to elther party; It
is a matter restlng In the discrétion of the court, to be exerclsed upon a con-
sidération of ail the circumstances of each particular case. The Jurlsdlction,
said Lord Brekine, 'is not compulsory upon the court, but the subject of dis-
crétion. The question is not what the court must do, but what it may do
under the circumstances, elther exerdslng the Jurladlctlon by grantlng the
spedflc performance, or abstalntng from it* • • • The rule of equity la
cari7lng agreements Into spécifie i)erfornianoe Is weU known, and the court is
not obllged to decree every agreement entered into, though for valuable con-
sidération, in strlctness of law, it dependiiig upon tie circumstances."
CHICAGO & N. W. ET. CO. V. B. C. TECKTONIUS MPG CO. 715
<262 F.)
In Zundelowitz v. Webster, 96 lowa, 587, 65 N. W. 835, the Su-
prême Court of lowa says (96 lowa, at page 590, 65 N. W. at page
836):
"No rnle of law la better settled than 'that spécifie exécution of a coutract,
lu equlty, is not a matter of absolute rlght, but It Is a remedy the right to
whlch rests alone In the sound discrétion of the chancelier, a discrétion con-
troUed by establlshed principles of equltj' in vlew of ail the facts and cir-
cumstances attendlng the case presented.' [Citing cases.] Spécifie perfonm-
ance will not be decreed when It would not be équitable, • * » and the
party wlll often be remitted to his légal remedy."
And see Shubert v. Woodward, 167 Fed. 47, 52, 53, 92 C. C. A. 509.
[3] And especially will a court of equity not decree the enforce-
ment of a contract, which requires the performance of continuons du-
ties involving the exercise of personal labor, skill, and cultivated judg-
ment. Marble Co. v. Ripley, 10 Wall. 339, 19 L. Ed. 955, and other
cases above cited, including Port Clinton R. R. Co. v. Cleveland & To-
ledo R. R. Co., 13 Ohio St. 544.
[4] By the terms of this contract the plaintiflf town reserves the
option to renew it without the consent of the défendant at the end of
every ten-year period until the year 1952. In view of this f act and that
the contract is lacking in mutuality, I am constrained to deny the in-
junctive relief granted by the state court to the plaintiff town, dissolve
the temporary injunction, and dismiss the pétition, at plaintifï's costs.
It is ordered accordingly.
CHICAGO & N. W. RY. CO. v. E. C. TECKTONIUS MFG. CO.
(District Court, E. D. Wlsconsin. February 2, 1920.)
Cabbiees ®=>196 — Shippeb can assert coonteeclaim fob dahaoes to snir-
MENT IN ACTION FOB FREIGHT.
In an action by a rallroad company for frelght charges, défendant held
entitled to counterclalm for damages for goods lost on other shlpments.
At Law. Action by the Chicago & Northwestern Railway Company
against the E. C. Tecktonius Manufacturing Company. On demurrer
to counterclaim. Overruled.
Plaintiff sues to recover tariff charges, accruing to it and Connecting
carriers on certain freight transported for défendant. The latter, by
coimterclaim, seeks to recover damages for loss of freight intrusted
on other occasions to plaintiff for transportation. Plaintiff demurs
to the counterclaim as not pleadable in this action.
R. N. Van Doren, of Milwaukee, Wis., for plaintiff.
Bottum, Bottum, Hudnall & L,echer, of Milwaukee, Wis., for de-
fendant.
GEIGER, District Judge. Concededly the parties could, by inde-
pendent actions, assert their grievances; and ordinarily whichever
sued first thereby fumished to the other the occasion to assert his
<g=»For other cases see same toplo & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
716 2C2 FEDERAL REPORTEB
or its by counterclaim. It is urged that the counterclaim by the shtp-
per should not be allowed, because thereby he may defer, and there-
fore, if successful, may defeat, the discharge of the carrier's obligation
under the law to collect tariffs in money without abatement in any
form, or, as is further suggested, he thereby may décline to pay an
admitted obligation in order to set off an unliquidated claim, thus ac-
complishing through légal proceedings a thing forbidden to be donc
by agreement in any event; that the practice of permitting set-offs
would open the door to coUusive compromise, with the intent to évade
tariff obligations, etc. The parties cite Railway Co. v. Hoopes (D. C.)
233 Fed. 135, Railway Co. v. Stein (D. C.) 233 Fed. 716, and Johnson
V. Railway Co..(D. C.) 239 Fed. 590, in support of the demurrer, and
Wells Fargo Co. v. Cuneo (D. C.) 241 Fed. 729, contra.
Of course, as indicated, if, in an action by the carrier for the
charges, a shipper cannot counterclaim for a cause of action ordinarily
pleadable as such, then, as a corollary, in an action by the shipper, the
carrier should not be permitted to counterclaim on a cause of action
for tariff charges. This must be so, if, as a basis of the proposition,
there be the asserted necessity of eliminating ail opportunity to col-
îude or compromise, or to set off liabilities in contravention of the
duty to collect tariffs in money. Now, when the matter is thus viewed,
we appreciate that there is no ground for differentiating one suit
brought by either party, wherein the other counterclaims, f rom distinct
and separate suits by each against the other; the one furnishing, the
other excluding, inherently, occasion for or possibility of compromis-
ing, colluding, or in f act setting off. Indeed, when- we consider liti-
gation as a cover or device for accomplishing any one of thèse objects,
the latter means might prove far more effective. Therefore, if the
prohibited object may be accomplished as well in the latter as in former
situation, its possibility is not relevant as a basis for the conclusion
that in the one, and not the other, the procédural right must be denied.
Plainly there is no ground for treating suits by one wherein the
other counterclaims as presumptively collusive; and the mère cir-
cumstance that it may resuit procedurally in setting off the amount
due or awarded to the other, thus leaving a balance to be compulsorily
satisfied, will not, in my judgment, prima facie or otherwise (unless
actual fraud or collusion be proved), violate the principle announced
in Louisville, etc., Ry. Co. v. Mottley, 219 U. S. 467, 31 Sup. Ct.
265, 55 L. Ed. 297, 34 h. R. A. (N. S.) 671.
An order may be entered overruling the demurrer to the counter-
claim, with leave within 20 days to reply.
&
m EE SMITH 717
(262 P.)
In re SMITH.
(Court of Appeals of District of Columbia. Submltted November 17, 1919.
Dedded January 5, 1920.)
No. 1270.
1. Patents ©=»74 — Anticipation by peiob patent reqaedless of intent.
A clalm cannot be allowed to an applicant for a patent for a construc-
tion disclosed in a prier patent, whicli would Inherently accomplisb ap-
plicant's purpose, whether intentionally or not
2. Patents (S=>2ô — Invention not shown bt aggbeqation of old devices.
Merely bringlng old devices into juxtaposition, and there allowing
eacb to work ont its own effect, witliaut the production of sometbing
novel, is not invention.
Appeal from a Décision of the Commissioner of Patents.
In the matter of the appHcation of William A. Smith for patent for
motor. On appeal by applicant from décision of Commissioner of Pat-
ents. Affirmed.
B. G. Foster, of Washington, D. C, for appellant.
T. A. Hostetler, of Washington, D. C, for appellee.
SMYTH, Chief Justice. Smith appeals from a décision of the Com-
missioner of Patents rejecting his application for a patent for an
improvement in motors, on the ground that he was anticipated by two
patents, one to Joy August 4, 1868, and one to Wakfer October 20,
1914. There are five claims, of which 1 and 4 are examples :
1. In a motor of tbe cbaracter set forth, tbe combination wltb a cylinder
inember liaving a head charaber and opposite neck chambere extending tbere-
from, of a piston In the cylinder meniber, comprislng a head operating in the
head chamber and opposltely extending necks operating in tbe said neck
cbambers, sald piston beliig réversible to permit either neck to operate in
eitber neck chamber, means for supplying motive fluld altemately to opposite
sides of the piston head, and means for permitting a portion of such motive
fluld supplied to one slde of tbe head to pass into one of tbe neck chambera
behind the neck therein.
4. In a motor of the obaraeter set forth, the combination witb a cylinder
member bavlng a head chamber and opposite neck cbambers extending there-
from, of a piston In the cylinder member comprlsing a head operating in tbe
head chamber, necks operating in the opposite neck cbambers, said piston belng
réversible to permit either neck to operate in either neck chamber, and means
for supplying motive fluid alternately to opposite sides of the piston head, said
means belng controlled by the piston necks.
[1] Claims 1 and 2 read directly on Wakfer. While the passage
16 and 17 in his patent might not suggest the use of a like passage
for the purpose outlined by Smith, it would necessarily give the same
resuit. An inspection makes this apparent at once. As the Exam-
iners in Chief said, a claim cannot be allowed to Smith, the appel-
lant, for a construction disclosed by Wakfer "which would inherently
accomplish applicant's purpose," whether intentionally or not.
[2] With respect to claims 3, 4, and 5, the Joy patent, particularly
@=»For other casea eee same toplo & KEY-NUMBBR in aU Key-Numbered Digesta & Indexes
718 262 FEDERAL REPORTEE
Figure 8, anticipâtes them. Certain changes, it is true, would be requir-
ed to make the one conform to the other, but this would not call for
invention, for ail the factors revealed by the claims are old in the
art.
"Merely brlnging old devlces Into juxtaposition, and there allowlng each to
work out Its own effeot wlthout the production of somethlng novel, Is not
Invention." Halles v. Van Wlormer, 20 Wall. 353, 368 (22 L. Ed. 241).
We think the décision of the Commissioner should be affirmed.
AfErmed.
Application of SCHNEIDER,
(Court of Appeals of District of Cîolumbla. Submitted November 12, 1919.
Decided January 5, 1920.)
No. 1255.
1. Patents <S=>138(1) — Reissub with bboadened claims babeed bt lace of
diligence.
The reissue of a patent wIth broadened claims, 2 years and 8 months
after the original issue, held barred by lack of diligence, where the appli-
cant's only excuse was that he had failed to discover the insufflciency of
the original claims until shortly before flling his application for a reissue.
2. Patents <S=» 138(1) — Abandonment pbesumed whebe diligencb not shown
in seekino eeissue.
Where a patentée, seektag a reissue with broadened claims 2 years
and 8 months after the original issue, falls to establish his diligence, It
is presiumed that he abandoncd the new matter to the public.
Appeal f rom the Patent Office.
Application by Franklin Schneider for the reissuance of a patent.
From a décision denying the application, the applicant appeals. Af-
firmed.
H. B. Fay, of Cleveland, Ohio, for appellant.
T. A. Hostetler, of Washington, D. C, for appellee.
SMYTH, Chief Justice. This is an appeal from a décision of the
Commissioner of Patents, refusing a reissue on the ground that the
appellant was not diligent in making his application. Two years and
eight months elapsed between the issue of the original patent and the
filing of his application. The only reason assigned by him for the
delay is:
"That he had no occasion to review his patent from the date of its issue
until the présent time, and that the Insufficiencies in his original spécification
and claims only came to his attention through others, namely, Mr. Burton W.
Sweet, who was employed by him, and his attomeys, Messrs. Fay, Oberlin &
Fay, within the i>ast few weeks, and that he did not delay after he had knowl-
edge of the Insufficiency of his original patent."
It is conceded by him that the claims which he now seeks to hâve
allowed are broader thîm those of the original patent This is impor-
tant.
©=>For otber cases ses same toplc & KEY-NUMBER in ail Key-Numbered Digests & Indexes
APPLICATION OP SCHNEIDER 719
(262 F.)
[1] While the applicant says he had no occasion to review his pat-
ent f rom the date of its issue until the présent time, we think prudence
would hâve suggested that he examine his claims when the patent was
granted, or soon thereafter, certainly within two years after he had
received it, to détermine whether or not they were commensurate with
his invention. If the claims were intricate, something he could not un-
derstand, it was his duty to call for the aid of an expert. A reasonably
careful man would hâve pursued such a course. In Ives v. Sargent,
119 U. S. 652, 662, 7 Sup. Ct. 436, 441 (30 L. Ed. 544), the court, in
rejecting the excuse for delay proffered by an applicant for a reissue,
said that —
"He assumed, wlthout examlnation, that the speclflcation and claims of his
[original] patent were Just what he had desired and intended they should be,
and rested quietly In Ignorance of the error and of his rights for nearly 3
years, and then did not diseover them imtll after others had discovered that
he had lest the rlght to repair his error by his neglect to assert it within a
reasonable time."
This, in effect, is what was donc by the applicant in the case be-
fore us. The period of his inaction was 2 years and 8 months —
"nearly 3 years." During that time he made no examination of his
claims and spécifications, but assumed, as did the applicant in the
Ives Case, that they were just what he had desired.
The court said in Wollensak v. Reiher, 115 U. S. 96, 99, 5 Sup.
Ct. 1137, 1139 (29 L. Ed. 350) :
"If, at the date of the issue of the original patent, the patentée had been
conscious of the nature and estent of his invention, an inspection of the patent,
when Issued, and an examination of its terms, made with that reasonable de-
gree of care whlch is habituai to and expeeted of men, in the management of
their own Interests, in the ordinary affairs of life, would hâve immediately in-
formed hlm that the patent had failed fuUy to cover the area of his invention ;
and this must be deemed co be notice to him of the fact, for the law Imputes
knowledge when opportunity and interest, combtned with reasonable care,
would necessarily impart it."
In the light of this reasoning it cannot be said that Schneider was
diligent. Nor will it do for the applicant to say that the fault was
that of his solicitors in drawing the original claims. They were his
agents, and he is bound by their acts. In the Ives Case the applicant
sought to shift the responsibility to his solicitors; but the court re-
fused to permit him to do so, saying, in effect, that, even if they were
négligent, he had not shown sufficient reason why he had not discovered
it before.
[2] There being no justifiable cause for applicant's failure to apply
for the reissue until more than 2 years had elapsed, the law présumes
that he abandoned —
"the new matter to the public to the same extent that a failure by the In-
venter to apply for a patent within 2 years from the public use or sale of his
invention Is regarded by the statute as conclusive évidence of an abandon-
ment of the patent to the public." Topliff v. ToplifE, 145 TJ. S. 156, ITl, 12
Sup. Ct 825, 831 (36 L. Ed. 658.)
720 262 FEDERAL KEPORTEE
And it is said in In re Starkey, 21 App. D. C. 519, 525, that—
"We must now regard tlie law as well setUed by the Suprême Court of ths
United States that, after the lapse of 2 years after the issue of a pateiut, a
reissue which seeks to enlarge the clalms of the original patent will not be
granted, or, if granted, will be held invalid, unless spedal circumstances are
shown to excuse the delay."
As we hâve already shown, those circumstances hâve not been made
to appear in this case. It is said that there can be no action without
knowledge, and that Schneider did not hâve knowledge that his orig-
inal claims were not as broad as they should be; but there may be
négligence in not acquiring knowledge, and it was in this respect that
Schneider failed. Applicant asserts that the lapse of 2 years applies
only to the prima f acie presumption of intervening rights ; but this is
not correct. It is, as we hâve just observed, also évidence of abandon-
ment. There being no showing of diligence, the décision of the Com-
missioner is affirmed.
Affirmed.
ELT BEAL ESTATE & INVESTMENT CO. V. WATTS 721
(262 F.)
ELX REAL ESTATE & INVESTMENT CO. v. WATTS et al.*
(Circuit Court of Appeals, Nlntli Circuit. February 2, 1920.)
No. 3332.
1. PtTBLIC LAND8 <S=>223(6) RECOGNITION BY TRBATY OF MBXICAN QUANT.
The owner of a Mexican grant, perfected before tlie cession by the
Gadsden Treaty, was permitted, but not required, by Act July 22, 1854,
to assert bis claim and liave the land resorved thereunder and tbe fact
that he did not do so in no way affects his title, whîcli by tbe treaty the
United States bound itself to recognize and protect.
2. Public lands <S=220 — Personb concltjded bt judgmknt of Cottbt or Pei-
VATE Land Claijis.
A judgnik?nt of the Court of Private Land Olattns, created by Act
March 3, 1891, in a suit by the United States, sustaining the validity of a
Mexican grant within the terrltory ceded by the Gadsden Treaty as hav-
Ing been perfected prior to the cession, is eondusive, not only as against
the United States, out as against any grantee of the United States.
Appeal from the District Court of the United States for the District
of Arizona; William H. Sawtelle, Judge.
Suit in equity by Cornélius C. Watts and Dabney C. T. Davis, Jr.,
against the Ely Real Estate & Investment Company. From a decree
for complainants (254 Fed. 862), défendant appeals. Reversed.
Selim M. Franklin, of Tucson, Ariz., for appellant.
Kingan & Campbell, of Tucson, Ariz., for appellees.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. In June, 1860, Congress passed an act
(12 Stat. 71, c. 167), granting to the heirs of Luis Maria Cabeza de
Baca the right to sélect lands in the public domain in lieu of the Las
Vegas grant, which they claimed to own. The act provided that the
heirs of Baca might sélect "an equal quantity of vacant land, not
minerai," in the territory of New Mexico, to be located by them in
square bodies not exceeding five in number. In 1863 the Baca heirs
made sélection of the tract now known as "Baca Float No. 3." In
1864 the Commissioner of the General Land Office approved the sé-
lection and ordered a survey, and in 1906 the tract was surveyed.
In December, 1914, the field notes of the survey were approved by the
Secretary of the Interior. Within the boundaries of Baca Float No.
3 is a tract of land known as the "Sonoita Grant," granted in 1824
by the Mexican govemment to Léon Herreros. The appellees, the
owners of Baca Float No. 3, brought suit in the court below against
the appellant, the owner of the Sonoita Grant, to quiet title to the
whole of Baca Float No. 3. Upon the final hearing decree was en-
tered in favor of the appellees, as prayed for in their bill of complaim,
and it was adjudged that the appellant be barred from asserting any
right, title, or interest in the land included within the boundaries of
Baca Float No. 3.
[1] The Gadsden Treaty with Mexico of December 30, 1853 (10
Stat. 1031), under which the United States acquired that portion of
Arizona in which the land hère in controversy lies, declared in article
©3»For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexe»
262 F. — 46 «Rehearlng denied Aprll 5, 1920.
722 262 FEDERAL REPORTER
5 that ail the provisions of the eighth and ninth articles of the Treaty
o£ Guadalupe Hidalgo (9 Stat. 929, 930) should apply to the ceded
îand. Those articles provide that the property of Mexicans within
the terri tory ceded "shall enjoy with respect to it guaranties equally
ample as if the same belonged to citizens of the United States," and
"shall be maintained and protected in the free enjoyment of their
liberty and property," etc. It is not disputed that at the time of the
treaty the Iand in the Sonoita Grant was private property, and that
the grant was a perfected grant, whereby the absolute title to the Iand
had passed out of the republic of Mexico and into Herreros, the
grantee.
The court below dealt with the claim of the appellant as dépendent,
not only upon the terms of the treaty, but also upon the provisions of
the Act of July 22, 1854, 10 Stat. 308, and held that inasmuch as
no steps were taken by the appellant's predecessors in interest to se-
cure under that act the réservation of the Iand from entry and sale,
Congress had the right to regard the Sonoita Grant éis forfeited, and
to dispose of the Iand as it saw fit, and that it did so dispose of it
by the grant to the Baca heirs of June 21, 1860, which grant, in the
opinion of the court, efïected a repeal pro tanto of the réservation of
the act of 1854. This position is tenable only on the assumption that
în order to protect the Sonoita Grant it was necessary for the owner
to assert his claim thereto under the Act of July 22, 1854, and thereby
effect a réservation of the granted Iand from disposition or sale by the
United States. The Act of July 22, 1854, made it theduty of the Sur-
veyor General of New Mexico to ascertain the origin, nature, char-
acter, and extent of ail claims to lands under the laws, usages, and
customs of Spain and Mexico, and for that purpose it gave him power
to issue notices, summon witnesses, administer oaths, etc., and re-
quired him to make a full report of ail such claims as originated be-
fore the cession of the territory to the United States by the Treaty
of Guadalupe Hidalgo, denoting the varions grades of title, with his
décision as to the validity or invalidity of each, and provided that on
présentation of his report to Congress ail lands covered by such claims
should be reserved from sale or other disposai by the govemment.
There is in the act no expression of the intention of Congress that
a Mexican grant to Iand in the ceded territory should be impaired or
affected by the failure of the Surveyor General to investigate the
same or report thereon, or the failure of the claimant to présent the
same for investigation. In that respect the act differs materially from
the Act of March 3, 1851, 9 Stat. 631, for the settlement of private Iand
claims in the state of California, which provided that ail claimants of
Iand under a Spanish or Mexican grant should présent the same to
commissioners to be appointed, and declared that —
"AU lands the claims to which shall not hâve been presented to the said
commissioners wlthln two years after the date of this act shall be deemed,
held, and consldered as part of the public domain of the United States."
Section 13.
That act provided a spécial tribunal to settle aU questions of title
and location. There were afforded three, and at one time four, op-
ELT EEAL ESTATE & INVESTMENT CO. V. WATTS 723
C262 FJ
portunities for a hearing: First, before the Board of Land Com-
missioners, then successive appeals to the District, Circuit, and Su-
prême Courts of the United States, in ail of which, except the last, the
parties were entitled to introduce further évidence. The act of 1854
imposed no obligation upon the claimants of Mexican grants to présent
the same for investigation and adjudication, as did the act of 1851,
nor did it create a commission to adjudicate the validity of such claims,
as did the act of 1851, and we cannot think that under the act of 1854
the failure of the Surveyor General to investigate or report the claim
of a Mexican grant worked a forf eiture of such a claim or rendered the
land subject to disposai by the United States. No reported case so
holds. On the contrary, the Suprême Court has in several décisions,
either in terms or by implication, held that under the Gadsden Treaty
the owner of a perfect grant from the Mexican government is en-
titled to protection, irrespective of any provision of the Act of July
22, 1854. In Ely's Adm'r, v. United States, 171 U. S. 220, 239, 18
Sup. Ct. 840, 848 (43 L. Ed. 142), the court said :
"This government promlsed to Invlolably respect the property of Mexicans.
That means the property as it then was, and does not imply any addition to
it. The cession did not Increase rights. Ttiat whleh was beyond challenge
before reraained so after."
And, speaking of the Sonoita Grant (171 U. S. 234, 18 Sup. Ct.
846, 43 L. Ed. 142), the court said :
"Thèse considérations lead us to the conclusion that this grant was one
which, at the tlme of the cession in 18.'53, was recognlzed by the government of
Mexico as valid, and therefore one which it was the duty of this government
to respect and enforee."
In Ainsa v. New Mexico & Arizona Railroad, 175 U. S. 76, 20 Sup.
Ct. 28, 44 L. Ed. 78, the court, after adverting to grants of land in
prior cessions of territory to the United States, said :
"Even grants which were complète at the time of the cession may be requir-
ed by Congress to hâve their genulneness and their extent established by pro-
ceedings in a particular manner before they can be held to be valid. But, where
no such proceedings are expressly required by Congress, the récognition of
grants of this class in the treaty itself is sufflclent to glve them full effect.
• * * The effect of thèse provisions of the act of 1891 is that aU prier acts
of Congress providing for the assertion, whether in a judidal tribunal or be-
fore a surveyor gênerai and Congress, of either complète or incomplète Mexi-
can grants, are repealed, except as to claims prevlously acted upon and decided
by Congress or under its authority; that ail incomplète claims against the
United States, comlng within the provisions of the act, miust be presented to
the Court of Private Land Claims ; that any one clalming land under a Mexi-
can grant, which was complète and perfect at the time of the cession of
sovereignty, 'shall hâve the right (but shall not be bound) to apply to said
court,' as In cases of incomplète grants. • • • The resuit is that the
United States, by the act of 1891, hâve prescribed and defined the only
method by which grants incomplète before the cession can be completed and
made binding upon the United States, but hâve neither made It obligatory upon
the owner of a title complète and perfect before the cession to resort to this
method, nor declared that his title shall not be valid if he does not do so. A
grant of land In New Mexico, which was complète and perfect before the ces-
sion of New Mexico to the United States, is in the same position as was a like
grant In Louisiana or In Florida, and is not In the position of one under tha
724 262 FEDERAL REPORTER
peculiar acts of Congress In relation to Oalifornia, and may be assertcd, aa
agalnst any adverse private claimant, in the oi"dinary courts of justice."
In Richardson v. Ainsa, 218 U. S. 289, 31 Sup. Ct. 23, 54 L. Ed.
1044, the court held that under the Gadsden Treaty the good faith
of the United States was pledged to respect Mexican titles, and that
one whose title was absolutely perfected prior to the treaty was not
bound to présent his title to the Court of Private Land Claims for
confirmation under the Act of March 3, 1891. In that case, which was
a suit to quiet title brought in 1887, the appellee tlierein claimed under
the Sonoita Grant, and the appellant claimed through patents issued by
the United States in 1879 and 1880 under the Homestead I^aws (12
Stat. 392, c. 75). The court held that the patents were void, for the
reason that the lands conveyed thereby, whether reserved or not by the
Acts of July 22, 1854, c. 103, § 8, 10 Stat. 308, and July 15, 1870, c.
292, 16 Stat. 304, were not public lands, but private property, "which
the government was bound by the express terms of the Gadsden
Treaty of December 30, 1853, to respect." Referring to sections 6
and 8 of the Act of March 3, 1891, the court said :
"After providing in section 6 for incomplète titles, the act goes on in sec-
tion 8 to deal with complète oncs. Holders of claims under sucli titles, it
says, 'shall hâve the right (but shall not be bound) to apply to said court' for
a confirmation of their title. Of course this means that the title is recognized
as good without the proceeding in court."
We are iinable to distinguish the Richardson Case in principle from
the case at bar. If it was unnecessary for the protection of the
Sonoita Grant that proceedings should be taken to reserve it against
homestead settlement and patents, it was unnecessary that such pro-
ceedings be taken to protect it against the grant to the Baca heirs. If
the United States could not grant the Sonoita land to homestead set-
tiers, it could not grant it to the Baca heirs. We think it was error,
therefore, to hold that the right of the claimant of the Sonoita Grant
was lost by the f ailure to secure a réservation of the same prior to the
grant to the Baca heirs, and that it was error to adjudge the title to
be in the appellees.
[2] We are of the opinion, moreover, that the appellees are estopped
by judgment to assert title as against the appellant. The appellant,
in its answer to the bill of cofn plaint, alleged that on October 19,
1892, the United States filed in the United States Court of Private
Land Claims under the Act of March 3, 1891, its pétition against the
predecessors in interest of the appellant to obtain a decree that the
claim of the défendants therein to title be adjudged invalid and void,
and that upon the issues therein the défendants claiming under the
grant to Léon Plerreros, a final judgment and decree was entered on
August 6, 1902, in favor of the predecessors in interest of the ap-
pellant and against the United States, adjudging that the Sonoita Grant
constituted a valid title from the Mexican government, which was
complète and perfect at the date of the acquisition of the territory by
the United States, and that said decree has not in any respect been
vacated or modified. The court bdow held that the decree was not
ELY REAL ESTATE & INVESTMENT CO. V. WATTS 725
(262 F.)
res adjudicata between the parties hereto, and did not estop the
appellees to litigate the question of title hère involved. The Act of
March 3, 1891, 26 Stat. 851, 857, provides that the decree in a pro-
ceeding to confirm title in the Court of Private Land Claims shall not
affect any conflicting private interests, rights, or claims held adversely
to any such claim or title, and that no confirmation of claims or
titles under the act shall hâve any effcct other or further than as
a release of ail claim of title by the United States, and that no private
right of any person as between himself and other claimants or per-
sons in respect of any such lands shall be in any manner affected
thereby. A similar provision is found in section 15 of the Act of
March 3, 1851, 9 Stat. 631. In Beard v. Pedery, 3 Wall. 478, 492, 18
L. Ed. 88, concerning the effect of proceedings under the latter act,
the court said :
"As against the government tliis record, so long as it remains unvacated, Is
conclusive. And It is equally conclusive asainst parties claiming under the
government t>y title subséquent * * * The term 'third i)ersons,' as there
used, does not embrace ail persons other than the TJnlted States and the
claimants, but only those who hold suporior titles, such as will enable them
to resist successfully any action of the government in dlsposing of the prop-
erty."
In Dominguez de Guyer v. Banning, 167 U. S. 723, 741, 17 Sup. Ct.
937, 943 (42 L. Ed. 340) the court reaffirmed the conclusiveness of
the record as against "parties claiming under the government by title
subséquent." In Jones v. St. Louis Land Ce, 232 U. S. 355, 34 Sup.
Ct. 419, 58 L. Ed. 636, the court cited Beard v. Federy and said :
"It may be said of such direct confirmation by act of Congress, as has been
said of confinnation through spécial tribunals creat:cd by Congress, that It con-
stitutes a déclaration of the validity of the clain» under tho Mexican lavvs
and that the claim is ontitled to récognition and protection by the stipulations
of the treaty."
In Interstate Land Co. v. Maxwell Land Co., 139 U. S. 569, 580, 11
Sup. Ct. 656, 660 (35 L. Ed. 278), the court, speaking of the efïect
of proceedings to confirm title under the Act of March 3, 1851, and
the patents from the United States issued in pursuance thereof, ob-
served :
"The coiitirraation and patenting of the gi-ant • • * operated to dl-
vest the United States of ail their rights to the land embrac'eù in the grant
wliich this country acqulred from Mexico by the Treaty of Guadalnpe Hidal-
go ; and the pnly way that that grant can be defeated now is to show that the
lands embraced in it had been prevlously granted by the Mexican govern-
mient to some other i)erson."
In Teschemacher v. Thompson, 18 Cal. 11, 26, 79 Am. Dec. 151,
the Suprême Court of California, in an opinion by Chief Justice Field,
after referring to the solemn record of the government of its action
and judgment with respect to the title of a claimant existing at the
date of the cession, said that the government itself —
"cannot quc-stion its verity, nor can parties claiming through the government
by title subséquent. * * * But as the reoord of the government of the
existence and validity of tlie grant it establishes the title of the patentées
from the date of the grant."
T26 262 FEDERAL REPORTEE
Again the court said:
"The 'thlrd persons' against whose Interest the action of the govemment
îind patent are not conclusive under the flfteenth section of the Act of March
3, 1851, are those whose tlUe accrued before the duty of the government and
Its rlghts under the treaty attached."
In Carpentier v. Montgomery, 13 Wall. 480, 495 (20 L. Ed. 698), the
court said that the fifteenth section of the act —
"was intended to save the rights of thlrd persons, not parties to the proceed-
ing, who might hâve Spanish or Mexlcan elaims independent of or superior to
that presented by the clalraant, or the équitable rights of other parties having
rightful daims under the title conflrmed."
It has been held in numerous décisions that the patent issued upon
a confirmed Mexican grant is to be regarded in two aspects: First,
it is a quitclaim deed from the United States, which takes effect by
relation at the time when proceedings were instituted by the filing of
the pétition with the commission or court created to adjudicate the
claim ; second, it is a record of the government, showing its judgment
with respect to the title of the patentée at the date of the cession.
Leese v. Clark, 20 Cal. 388; Beard v. Federy, 3 Wall. 478, 18 L. Ed.
88; Bissell v. Henshaw, 1 Sawy. 553, 565, Fed. Cas. No. 1,447, af-
firmed in Henshaw v. Bissell, 18 Wall. 255, 21 L. Ed. 835. In Los
Angeles Milling Co. v. Los Angeles, 217 U. S. 217, 227, 30 Sup. Ct.
452, 456 (54 L. Ed. 736), it was said that the action of the tribunals
established to pass upon the validity of such grants is —
"an admission that the rightful ownership had never been in the United States,
but had passed at the time of the cession to the clalmant, or to those under
whom he clalmed."
The reasons for thèse rulings are aptly expressed by Chief Justice
Field in Leese v. Clark, 20 Cal. 388, 423 :
"As agalnst the government, thls record, so long as it remalns unvacated, Is
conclusive; as agalnst the government it Imports absolute verlty; and it Is
equaUy conclusive agalnst parties dalming under the government by title
acquired subséquent to the time at which the obligation of the government
attached ; otherwlse, the power of the government to enforce the stipulations
of the treaty, and the obligation Imposed by the law of nations, would be
limited and dépendent, and not, as they are, sovereign and suprême. And it Is
in thls effect of the patent as a record of the government that ita security and
protection chiefly lie. If parties asserting interests in lands acquired since the
acquisition of the country, could deny and ««itrovert thls record and compel the
patentée in every suit for the reeovery of hls land to establlsh the validity
of the grant, hls right to a confinnation of his claim thereunder, and the
correotness of the action of the officei-s of the government in the survey and
location of the grant, the patent, instead of being an instrument of quiet and
security to the possessor, would become a source of perpétuai and rulnous
litigatlon."
The decree is reversed, and the cause is remanded to the court be-
low, with instructions to enter a decree in favor of the appellant, quiet-
ing its title to the land described in the patent which issued to it from
the United States of date October 29, 1906, in pursuance of the de-
cree of the Court of Frivate Land Claims hereinbefore mentioned.
SWEET V. ALL PACKAGE GEOCEET STORES CO. 727
t262 F.)
SWEET V. AJLIi PACKAGE GROCEKT STORES CX).
(Circuit Court of Appeals, Second Circuit. December 12, 1919.)
No. 63.
CoBPORATioNS <S=:»688 — Claim or statk for ucense tax on pbopbett oï
FOREIGN COBPOEATION PMOE LIEN.
Clalm of the state of New Yorlc for Ucense tax Imposed on a forelgn
corporation doing business In the state under Tax Law, § 181, as amend-
ed by Lavvs N. T. 1917, c. 490, Aeîd entitled to prlority of payment over
gênerai credltors from assets of the corporation in the hands of re-
celvers of a fédéral court In New York, although the state had not, by
levy, acqulred a lien on the property prior to the receiversliip.
Hough, Circuit Judge, dlssentlng.
Appeal from the District Court of the United States for the South-
ern District of New York.
Suit in equity by WiUiam L,. Sweet, Jr., against the Ail Package
Grocery Stores Company. From a decree denying priority to its claim
for license taxes, the State of New York appeals. Reversed.
Charles D. Newton, Atty. Gen. (Robert P. Beyer, of New York City,
of counsel), for the People of the State of New York.
Gilbert & Gilbert, of New York City (A. S. Gilbert and Francis Gil-
bert, both of New York City, of counsel), for appellee.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
WARD, Circuit Judge. The state of New York has presented in
this equity receivership claims against the Ail Package Grocery Stores
Company, a corporation of the state of New Jersey, as follows :
"For Ucense fee or tax stated against AU Package Grocery Stores Company,
a New Jersey corporation, the predecessor of défendant, for the prlvUege of
exerdsing its corporate franchises and carrylng on business wlthln the state
of New York t>ased on the amount of capital stock employed in New York
state, $977.86.
"For license fee or tax heretofore stated against the défendant for the
privilège of exerdsing Its corporate franchise and carrylng on bustuess with-
In the state of New York, $22,517.86."
Section 181 of the Tax Law (Consol. Laws, c. 60) of the state of
New York was amended hy chapter 490, Laws 1917, entitled "An
act to amend the tax law in relation to the license tax on f oreign cor-
porations," the material provisions being :
"Sec. 181. License Tax on Foreign Corporations. — Every forelgn corpora-
tion, except banking coriwrations, fire, marine, casualty and llfe Insurance
companles, co-operatlve fratemal Insurance companles, and building and loan
associations, doIng business In this state, shall pay to the state treasurer, for
the use of the state, a license fee of oae-eighth of one per centmn for the
privilège of exerdsmg Its corporate franchises or carrylng on Its business ta
such corporate or organlzed cai>adty in this state, to be computed upon the
basls of the capital stock employed by it wlthtn this state, durlng the flrst
year of carrylng on its business in this state ; whleh flrst payment shall not
be less than trai dollars. • • * The amount of capital upon which such
license fées shall be pald shaU be fixed by the state tax commission, wblch
shaU hâve the same authority to examine the books and records in this state
of such forelgn corporations, and the employés thereof as It has In the case of
(g=For other cases see same topic & KBY-NUMBBR In aU Key-Numbered Digests & Indexes
728 262 FEDERAL REPORTE K
domestlc corporations and the comptroller shall hâve the sarae power to
Issue hls warrant for the collection of such license fées, as he now has with,
regard to domestic corporations."
The remedy which the comptroller had to collect taxes from do-
mestic corporations was provided by section 201, the relevant part of
which is as follows:
"Sec. 201. • • * The comptroller uiay issue a warrant under his liand
and ofiieial seal, dlrected to the sheriff of any county of the state, command-
ing him to levy upon and sell the real and Personal property of the pcrson,
partnership, company, association or corporation against which such account
is stated, found wlthin hls county for the payment of the amount thereof wth
interest thereon and costs of executing the warrant, and to retum such war
rant to the comptroller and pay to the state treasurer the money collected by
virtue thereof, by a time to be thereiu specified, not less than sixty days from
the date of the warrant. Such warrant shall be a lien upon and shall bind
the real and Personal property of the person, partnership, company, associa-
tion or corporation against which it Is issued, from the time an actual levy
shall be made by virtue thereof."
It is contended that this license f ee is not a tax, but a conventional
agreement between the state and foreign corporations, wherehy they
contract to pay a fee in considération of the privilège of doing business
in the state. But we think it quite clear that the license fee is a tcix.
It is provided for in the state Tax L,aw, described as a license tax in
the titie of the amending act, called a license tax in the description
of section 181 and is fixed by the state tax commission.
The Court of Appeals of Nev\^ York in Wise v. Wise Co., 153 N. Y.
507, 47 N. E. 788, referring, among other cases, to two earlier dé-
cisions of In re Columbian Ins. Co. (N. Y.) 3 Abb. Dec. 239, and
Central Trust Co. v. N. Y. C. & N. R. R. Co., 110 N. Y. 250, 18 N. E.
92, 1 E. R. A. 260, said:
"The contention of the leamed counsel for the receiver of taxes rests upon
a somewhat novel proposition. It Is that from the most ancient times the
courts of England hâve recognized the right of the sovrreign, representing
the state, to priority of payment over ail other claims, though they may bave
been secured by spécifie liens; that the people of this state hâve sueceeded
to ail the prérogatives of the Brltish crown as parts of the common law
sultable and applicable to our condition. • • ♦ Tiie gênerai doctrines
contained in thèse cases would seem, upon a superficial view, to go far in
support of the contention upon which this appeal Is based, although it should
be observed that a very important fact présent in this case was absent in
the cases clted, and that was the existence of a spécifie lien at law upon the
Personal property acquired by a levy under valid légal process in the hands
of the sheriff.
"On a doser examlnation, however. It wîil be found that they do not sustain
the broad principle contended for. They undoubtedly go far enough to sustain
the principle that, when a fund is in the hands of the court or the trustée of
an insolvent person or corporation, a claim due to the govemment upon a debt
or for taxes Is entltled to a préférence in certain cases, or under certain
clrcumstances. * * • In this country the right of the govemment to be
preferred In the distribution of such a fund exists, under the authorities, In
two cases: (1) Where the préférence Is expressly glven by statute, as wa»
the case in U. S. v. State Bank of North CaroUna, supra, 6 Pet. 29, 34 [8 L.
Ed. 308]. (2) Where, before the fund has come to the hands of the receiver
or trustée, a warrant or some other légal process has been issued for the col-
lection of the tax or debt, and the fund has come to his hands Impressed with
a lien in favor of the govemment in conséquence of the proceedings for col-
SWEET V. ALL PACKAGE GBOCERY STOEES CO. 729
(262 P.)
lection. as was tlic case In the Oolumbian Ins. Co. Eeceivershlp [N. T.], 3
Abb. Dec. 239."
In Robinson v. Mutual Reserve Co. (C. C.) 175 Fed. 624, aiifîrmed
189 Fed. 347, 111 C. C. A. 79, we held that the state was not entitled
to any préférence over gênerai creditors on its claim for taxes when
the statutory liendid not arise until after receivers had been ap-
pointed and no warrant or other légal process for collection had been
issued before their appointment. This was in strict accordance with
the test laid down in Wise v. Wise, supra, as to the state's right of
préférence. In Central Trust Co. v. Third Avenue R. R. Co., 186
Fed. 293, 110 C. C. A. 1, though a lien was given for taxes which came
into effect before the appointment of the receivers, we construed the
statute as not giving the lien any préférence over prior debts specifi-
cally secured by lien. Subsequently the Appellate Division of the First
Department in Matter of Carnegie Trust Co., 151 App. Div. 606, 136
N. Y. Supp. 466, affirmed 206 N. Y. 390, 99 N. E. 1096, 46 *L. R. A.
(N. S.) 260, decided that the sta^e as sovereign is entitled to priority
of payment for taxes and any other debts, whether such priority is
given by statute or not, over unsecured creditors, just as the crown was
at common law.
In this case the District Judge held that this priority as confirmed
by the highest court of New York was a matter of procédure only.
We think it was a matter of substantive right, being a part of the com-
mon law adopted by the state Constitution of 1777 as the law of the
state of New York. Following this décision, therefore, we now hold
that the state's claim for license tax, though not given a lien by stat-
ute (except f rom the time of the actual levy of a warrant for collection
issued by the comptroller), is entitled to priority of payment over gên-
erai creditors.
It is further contended that the prérogative of the state of New
York does not exist as against a corporation of the state of New
Jersey, with which the state of New York is not in the relation sov-
ereign. But the state is a sovereign as to ail persons and things within
its own boundaries and as to the property of the défendant corpora-
tion in the hands of the receivers hère the prérogative clearly exists.
Decree reversed.
HOUGH, Circuit Judge (dissenting). The majority décision does
not enforce a spécifie lien securing either a tax or any other demand ;
it does recognize a right in the state of New York to préférence and
priority in the payment of debts over other creditors, by virtue of
its sovereignty.
Sovereignty over what? Certainly not over the insolvent corpora-
tion, which is of another state, and not over this court (as I suppose),
but over the corporate property, because it is physically situated in
New York. In other words, when, as hère, the state has no lien affect-
ing its debtor's res, its sovereignty is brought forward to operate in rem.
The doctrine, when not imposed by a modem statute, is a trifle ar-
chaic, yet perhaps well enough in a court of New York, which is sub-
ject in personam (so to speak) to the same sovereignty. But, so far
730 262 FEDERAL REPORTER
as New York is concerned, the property of the Ail Package Company
might just as well be in the custody of a court of California, or of Can-
ada, as where it is.
Goods in custodia the District Court of the United States cannot be
reached by any process of the state in which that court is sitting ; le-
gally they are as remote as if in foreign parts, and the physical situa-
tion could only affect légal rights, if the légal custodian were bound by
foreign law — in this instance, the law of New York. In matters such
as this, it is not so hound by either comity, statute, or constitutional
obligation. The majority judgment can ordy rest on a belief that the
court is affected by the sovereignty aforesaid.
This I deny, and therefore dissent.
In re GOTTUEB.
Appeal of EOXFORD KNITTINQ C50.
(CSrcuIt Court of Appeals, Second Circuit. December 10, 1919.)
No. 69.
1. Bankeuptcy <g=»460 — Necessabt pabties to appeal feom oedek con-
riEiUNG composition.
To an appeal from an order conflrming a composition by a credltor,
who objected on grounds wliicli go to bankrupt's rlglit to a dlscharge,
other credltors are not necesaary parties.
2. Bankbuptct <@=3455 — Appeal lies fbom obdeb coNFiauiNO composition.
An order conflrming composition is appealable.
3. Bankbuptoy <©=»414(1) — Bueden of peoof on objection to disohaeqe.
A credltor, objecting to dlscbarge, starts out with. the burden of prov-
Ing by a fair prépondérance of évidence the facts alleged, and which,
unexplained, warrant an inference of the requisite intent; but, when
such proof is made, the burden is cast on hankrupt to explain and dis-
prove such intent
4. Bankbupxot <S=384 — Etidknoe showing no eight to dischabqe
THBOUQH composition.
Evidence held sufflcient to show that bankrupt made a false oath to
his schedule, and failed to keep books with intent to conceal his finan-
oial condition, which debarred him of the right to make a composition
which would effect his discharge.
Appeal from the District Court of the United States for the Eastern
District of New York,
In the matter of Lewis Gottlieb, bankrupt. From an order conflrm-
ing a composition, the Roxford Knitting Company appeals. Reversed.
Gottlieb was a merchant tn a suburban town on Long Island. In the spring
of 1918 he made a statement in writing to Roxford Company, "for the purpose
of obtaining crédit and induclng [it] to sell [him] merchandise," as the docu-
ment signed by Gottlieb déclares. This statement siteclfled (as of January 1,
1918):
Total assets of $21,582.39
Of which merchandise on hand "at actual cost" accounted for. . 19,532.39
His only debts are given as —
On open accounts for merchandise, due or past due. ....... $5,628.00
And due a bank 4,000.00
Total $9,628.00
His sales for 1917 are stated as $33,763.32
^ssFor other cases see same toptc * KEY-NUMBER in ail Key-Numbered Dlgeats & Indexes
IN RE GOTTLIEB 731
(202 F.)
Roxford Company, after receipt of thls statement, sold goods to GottUeb,
for whlch he has not paid.
Bankrupt testified that he personally took stock on January 1, 1918, and
the $19,532.39 represented "actual cost priées." As to sales his évidence ia
that he had no books that would show "the gross amount of [hls] sales," and
fnrther that he kept no books enabling anybody to "flnd ont [his] financial
conditicm." How under such a systemi he knew the amount of his 1917 salea
\vlth the accuracy of his financial statement remains unexplained. He dld
estimate his average sales for January, 1918, and, if that estimate is correct,
he must hâve sold daily about twice as much, every day, Includlng Sundays
and holidays, of the year 1917, to reach $33,763.32.
On Augnst 23, 1918 Gottlieb vrent into voluntary bankruptcy, and his
sehednles shov?:
Stock $22,532.39
With other assets (open accounts, maehinery, etc.) amounting
to 1,213.23
Total $23,745.62
His liabilities (ail imsecured elaims) are $22,187.62
As to his stock at faUure, lie swore: "I mercly guessed at it, but I thought
it was woith It, at that time ; but at actrial cost it would hâve amounted to a
great deal more." The increased Indel)tedness in August as compared to
January he ascribed to "buying merchandlse" from "différent people," and
who those people were appearcd (as he said) in one of the books surrendered
to Ms trustée. There is no testimony contradicting this, and we assume that
the schedule statement of debt has been found substantially correct.
On or about December 24, 1918, Gottlieb oflfered his creditors a comi)osition
at 33% per cent, of their daims. Roxford Company filed objections, alleging
that the bankrupt had (1) falled to keep books with intent to conceal, etc. ;
(2) obtained property upon a materially false statement; and (3) made a
false oath when he stated his merchandlse in his schedules.
A commissioner heard évidence, and reported as to the flrst objection that
there was a faUure to keep books, but such faiiure "was not due to any de-
liberate intent to conceal financial condition," although concealment was "the
obvious resuit of the System of bookkeeplng" adopted. The other objections
he overruled : the District Court adopted the report, and approved the com-
position.
From the order aecordingly entered, the objecting creditor appealed, and In
this court certain of the other creditors and the trustée appearêd and moved
to dismiss the appeal, on the ground that neither they nor any other creditor
had been cited to appear herein.
Archibald Palmer, of New York City, for moving creditors, etc.
Walter S. flilbom, of New York City, for objecting creditor appd-
lant.
Frederick H. Sanborn, of New York City, for bankrupt.
Before WARD, ROGERS and HOUGH, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). [1]
The motion to dismiss is based on Field v. Wolf, 120 Fed. 815, 57
C. C. A. 326. The appeal record in that case shows an objection filed
to a composition, alleging that it was not for the "best interests of the
creditors," because (in substance) the bankrupts were well able to pay
more than the ofïered amount, which fact they had concealed, or tried
to, by a System of bookkeeping obnoxious to the statute.^ The évidence
1 The spécification goes into much greater détail ; but the above illustrâtes
the pleader's theory, vlz. that acts by the bankrupt that would bar a dis-
chai^e, were reasons why the composition was not for the best interests of
creditors. He dld not assert that a-cts barring discharge ar© per se préventive
oC composition.
732 262 PEDEKAIy REPORTER
in that record îs principally (but not wholly) devoted to showîng that
the bankrupts had or controlled far more property than they had of-
fered to use in composition.
If the case cited holds no more than that, when the sole or principal
ground of appeal is that the District Judge should hâve disapproved
the composition because it was not large enough, the décision relates to
something we are not now concerned with, and as to which we ex-
press no opinion. Whether a composition is in the interest of credi-
tors, or was accepted ont of sympathy and merely with a view to bene-
fit the debtor, is a point not infrequently mooted under the British
statute (e. g. Ex parte Hudson, 22 Ch. Div. 773), but hitherto not con-
sidered with us.
If, however, the Field décision be thought to lay down a gênerai
rule that consenting creditors, or a représentative fraction of them,
are necessary parties respondent in proceedings like the présent, we
are compelled to disagree. The ruling as so understood is opposed to
our décision in Re Bay State Milling Co., 223 Fed. 778, 139 C. C. A.
598 (subsequently heard on the merits as Re Soloway, 234 Fed. 67,
148 C. C. A. 83). It is also at variance with the considered judgment
of the Sixth Circuit in United States ex rel. Adler v. Hammond, 104
Fed. 862, 44 C. C. A. 229.
[2] We adhère to the doctrine that a confirmed composition, because
it results in discharge, is the subject of appeal, as is a discharge. Fur-
ther than that this case does not require a ruling. See In re McVoy
Hardware Co., 200 Fed. 949, 119 C. C. A. 337; In re Brookstone, etc..
Ce, 239 Fed. 697, 152 C. C. A. 531 ; In re Graham & Sons, 252 Fed.
93, 164 C. C. A. 205.
The motion to dismiss is denied.
The évidence before us first compels belief in one important fact ;
it is baldly impossible that Gottlieb's financial statement, his schedules
in bankruptcy and his testimony before the Commissioner can ail be
true. Using (for brevity's sake) approximate figures only, he says he
had at the beginning of 1918, by actual count and at cost price, goods
worth $19,000. His merchandise debts amounted to no more than
$5,000, and his bank borrowings to $4,000. Thirty-three weeks later
he had, by his swom schedules, goods worth at least $22,000, and which
had cost more than that, while he owed $22,000 for merchandise.
If he had sold no goods and paid for none during the year 1918, he
bought on crédit in that year $17,000 worth of merchandise; a figure
by the bankrupt's own statement much too small. On the same hy-
pothesis, of neither paying nor selling, but always buying on crédit,
he should hâve had at least $36,000 worth of goods on the day of
bankruptcy. Of course, he admits some selling, but makes no effort
worthy the name to show where the sale price went to. It does appear
that in 1918 he paid ofï his bank indebtedness, and drew and expended
for clerk hire and family expenses what he estimâtes at $104 a week
or say $3,500. The only additional business expense mentioned is the
rent of his store, which he ceased to pay (to his father-in-law) in
April ; its amount does not appear. If in 1918 he sold only at the rate
he testified to for January, he would hâve taken in nearly $10,000 be-
IN RE GOTTLIEB 733
(262 F.)
fore bankruptcy; but, if he sold at the rate he gave for 1917, he
would hâve similarly received over $21,000. Yet on the day of bank-
ruptcy his cash as per schedules amounted to just $3.
The computations suggested by thèse figures, every one of them
based on a statement of Gottlieb, are numerous and obvious, and eacb
leads to palpable falsity under some one of the points above stated. It
makes small différence for the purposes of this case whether such
falsity is ultimately allocated to one heading or the other.
[3] In matters of discharge every objecting creditor starts out with
the burden of proving that which he allèges. In re Miller, 212 Fed.
920, 129 C. C. A. 440. But when a set of facts is shovk^n which unex-
plained would lead a reasonable man to believe the allégations of the
objecter, the bankrupt niust explain, and a déficit in assets far less
than that demonstrably existing hère has been held sufficient for that
purpose in this court. In re Loeb, 232 Fed. 601, 146 C. C. A. 559 : In
re Schultz, 250 Fed. 103, 162 C. C. A. 275. Nor is any creditor called
upon to prove the substance of his objection beyond a reasonable
doubt; a fair prépondérance is enough. In re Garrity, 247 Fed. 311,
159 C. C. A. 404.
When such condemning facts are shown, the bankrupt's usual effort
is in confession and avoidance ; he admits the facts and seeks to avoid
by ignorance, and thereby show lack of intent ; for the objecting cred-
itor has the burden, not only of showing facts in the ordinary sensé of
the Word, but intent also. In re Garrison, 149 Fed. 178, 79 C. C.
A. 126.
But intent, being pre-eminently a fact or phenomenon that (barring
confession) can never be proved otherwise than by inference, the
same facts — i. e. acts and documents — which cast the burden of ex-
planation or évidence upon the bankrupt also cast on him the burden
of disproving the intent of doing those things which are the inévitable
and natural conséquences of said acts and documents. This is well
considered by Sanbom, J., in McKibbon v. Haskell, 198 Fed. 639, 117
C. C. A. 343, and was, we think, plainly indicated in our décision in
Re Weston, 206 Fed. 281, 124 C. C. A. 345.
In this évidence, there is no confession in the sensé that untruth is
admitted; the court is asked to believe what the very statement dis-
proves. The inference from such an attitude, leads to belief in inten-
tional falsity. Nor is there any avoidance. Gottlieb had been in busi-
ness 15 years, and said he was unable personally to keep proper books;
but he was under no such obligation, and never tried; his clerk kept
whatever was wanted. That, after so much expérience, he could not
indicate the results desired from his (unproduced) clerk's bookkeeping,
is not even asserted. Indeed, his défense consists in saying (substan-
tially), in response to his counsel's leading question, that he did not
intend to deceive anybody. Illiteracy or ignorance of English, the
usual avenues of palliation, are not even suggested.
[4] Assuming, what cannot be complained of by appellee, that his
financial statement of January, 1918, is true, we hold that his oath to
the schedules was an oath to a falsity, and further that he failed to
keep books with intent to conceal his financial condition.
On thèse grounds, the order appealed from is reversed, with costs.
734 262 FEDERAL EEPOETEB
In re OLINER et al.
(Circuit Court of Appeals, Second Circuit December 10, 1919.)
No. 49.
1. BankBiUptct <g=s407(5) — Falbe statement which will peecludb dis-
charge; "OBTAIN PBOPBRTY ON CEEDIT."
The obtaining by bankrupta of a license to do business as private bank-
ers, by means of a written statement made to the comptroller of the state
of New York, as required by statute, was not tbe obtaining of "property,"
withln Eankruptcy Act, § 14b (3), Comp. St. § 9598, nor made to one fromi
whom property was obtaiaed on crédit, and, althougb the statement was
materlally false It is not ground for déniai of dLscharge.
2. Bankrttptct <S=407(5) — False statements baeking discharge.
The provision of Bankraptcy Act, 1 14b (3), Comp. St. § 9598, authorlzlng
refusai of diseharge to a bankrupt who has "obtained property on crédit
from any person upon a materially false statement in writing made to such
person for the purpose of obtaining such property on crédit," especially In
View of its législative history, is not to be extended by construction.
3. Bankruptct ®=5407(3) — Fraudulent concealment which will bab dis-
CHABiGE.
The deposit by bankrupts of money In bank in their own name cannot
be coiisidered a transfer or eoncealment to hinder, delay, or defraud credi-
tors, which will bar discharge under Bankruptcy Act, § 14b (4), Comp.
St. § 9598.
4. Bankruptct <®=408(%) — Offenses which bar dischabgs umited to acts
MADE OFFENSES BY BaNKBUPTCY ACT.
Bankruptcy Act, § 14b (1), U. S. Comp. St. § 9598, which bars discharge
if bankrupt has "committed an offense punishable by Imprisonment as
herem provided," is Umited to acts made offenses by Bankruptcy Act.
Appeal from the District Court of the United States for the South-
ern District of New York.
In the matter of vSaul Oliner and Isidor Oliner, trading as Oliner
Bros., bankrupts. On appeal from order refusing discharge. Re-
versed.
Robert P. Levis, of New York City, for appellants.
Samuel Hoffman, of New York City, for respondent.
Before WARD, ROGERS, and MANTON, Circuit Judges.
ROGERS, Circuit Judge. This appeal brings before the court the
right of the bankrupts to their discharge. The court below, confirming
the report of the spécial master, has denied to the bankrupts individ-
ually and as copartners a discharge.
The bankrupts were engaged in the business of private banking in
the city of New York. It is alleged that they filed a false statement
with the comptroller of the state of New York, in order that that
officiai might permit them to continue in the private banking business
and to accept and receive deposits for saf e-keeping as well as for trans-
mission.
It may be observed that obtaining property on crédit on a materially
false statement in writing made to a person for the purpose of obtain-
ing crédit from him was not made a ground for barring discharge in
<g:3For other cases see same toplo & KBY-NUMBER In ail Key-Numbered Digests & Indexes
m EE OLINEE "^35
C262 PJ
any Bankruptcy Act of the United States until the présent act was
amended so to provide in 1903. Act Fed. S, 1903, c. 487, 32 Stat. 797.
The amendment then made was not only novel in the bankruptcy légis-
lation of this country, but no such provision, it has been said, was to
be found in the bankruptcy législation of England.
The Bankruptcy Act, in making provision for the bankrupt's dis-
charge, directs that the judge shall discharge the applicant after ail the
parties in interest hâve been fully heard and he has investigated the
merits, unless the applicant has donc certain enumerated things.
[1] It has been claimed that the bankrupts now before fiie court
hâve donc certain things which bar their discharge. Two objections to
their discharge are made. The first spécification of objection to be
considered reads as f oUows :
"That heretofore, and on the 18th of December, 1913, the bankrupts herein
made a Btaterrxent In writing, whloh they submltted to the comptroUer of
the State of New York as of the 13th of December, 1913, In which statement
they claimed that they had stocks and bonds of the value of $159,347.00, and
that they liad loans and bllls receivable, not secured by collatéral, amountlag
to $75,296.62. It is alleged that the said statement dellvered by the bank-
rupts to the comptroUer of the state of New York was dellvered for the pur-
pose of showing their true flnandal condition to the comptroUer of the state
of New York, ta order that he mlght permit the said bankrupts to continue in
the private banklng business and to accept and reçoive deposits for safe-keeiv
ing as well as for transmission."
And the spécial master in his findings says :
"As to the false statement, the statement filed with the state comptroUer
enumerated certain equities in mortgages and varions notes, aggregating up-
wards of $14,000, as good and coUectible, and the ofïicers of the receiver testify
that, in liquidating the affairs of the bank, they hâve been able to coUect only
about $1,400 of those notes, and further this same witness testifles that the
bankrupts' liabilities exeeeded their assets over $100,000, and in the light of
this testimony. In my opinion, the spécification as to false statements has been
sustained."
He adds:
"The amount of divldends payable to gênerai credltors herein Is so Insignifl-
cant In amount that it seems impossible that the bankrupts could hâve made
thèse finanàal statements to the state but a few weeks before bankruptcy, not
knowing that they were Inflated and much above the real value of the se-
curities to which they referred. In my opinion, the spécifications hâve been
sustained, and the bankrupts should be denled their discharge."
Laws of the State of New York 1910, vol. 1, p. 614, c. 348, provide
that no individual or partnership shall engage directiy or indirectly in
the business of receiving deposits of money for safe-keeping or for the
purpose of transmission to another, or for any other purpose in cities of
the first class, without having first obtained from the comptroUer a
license to engage in such business. In order to obtain such license, the
applicant is obliged to file with the comptroUer a written statement,
which has to be verified, and which, among other things, shows the
amount of the assets and liabilities of the applicant. If the applicant
compiles in ail respects with the requirements of the law, and his state-
ment is approved, the comptroUer issues a license authorizing the
licensee to carry on the business at the place described in the license
736 262 FEDERAL REPORTER
certificate, and upon the receipt of the certificate the licensee "shall
cause such license certificate to be posted and at ail times conspicuously
displayed in the place of business for which it is issued, so that ail per-
sons visiting such place may readily see the same." Licenses so issued
are revocable by the comptroller at ail times for cause shown. Any
person or partnership carrying on the specified business without a li-
cense is guilty of a misdemeanor.
And the Banking Law of New York makes it the duty of individual
bankers to make a report to the state superintendent of banks, which
report must be verified under oath to the effect that it is true and cor-
rect in ail respects, to the best of the knowledge and bclief of the per-
sons verifying it. Birdseye, Cumming & Gilhert's Consolidated Laws,
vol. 7, § 21. It also provides that a failure to make the report within
a specified time, or to include therein the information required, should
subject the dehnquent to a forfeiture of $100 for every day that such
report is delayed or withheld. And it goes on to say:
"If any * * ♦ Individual banker sball fail to make two successive re-
ports, * * ♦ such individual banker shall forfeit his privilèges as such
banker." Birdseye, Cumming & Gilbert's Consolidated Laws, vol. 1, p. 320, i
22.
Counsel for the opposing creditors ref er to the above provisions, and
ask whether the bankrupts did not, by reason of their license, obtain
money and crédit, and whether they did not hold and keep their li-
cense by regularly filing the quarterly reports which the Banking Act
requires. The record fails to disclose what quarterly reports were
filed with the superintendent of banking. The objection is confined to
a certain spécifie report filed, not with the superintendent of banking,
but with the state comptroller. But, however that may be, what is
about to be said as to the statement filed with the state comptroller
applies equally to a statement filed with the state superintendent of
banking.
The Bankruptcy Act in section 14, subd. (b), Comp. St. § 9598, dé-
clares that the judge shall discharge the bankrupt unless he has
" * * * (3) obtained property on crédit from any person upon a
materially false statement in writing made to such person for the pur-
pose of obtaining such property on crédit." If the statement made to
the superintendent of banks cornes within the provision quoted, the
discharge must be denied.
Is the statement filed with the state comptroller within the terms of
section 14, subd. (b), cl. 3, above set forth? That provision was con-
sidered in Firestone v. Harvey, 174 Fed. 574, 98 C. C. A. 420. The
Circuit Court of Appeals for the Sixth Circuit, speaking through Judge
Lurton, af ter quoting the language of subdivision 3 of section 14b, said :
"This ground for denying a discharge was evidently leveled partlcularly at
the practice of making false statements of one's ânancial condition by a buyer
or borrower, for the purpose of ohiainUig from the person to tahom such false.
statement i» made, in writing, the articles or money desired 'on crédit.' The
false statement In writing which is enough to deny a discharge Implies a
statement knowingly false, oi- made recklessly, without an honest bellef in
Its tnith, and with a purpose to mislead or deceive, and thereby obtain from
the person to whom It is made property upon crédit."
IN BE OLINER 737
C262 F.)
It was held in In re Tanner (D. C.) 192 Fed. 572, that the obtain-
ing of a surety or indemnity bond by a bankrupt by means of a ma-
terially false statement is not the obtaining of "property" on crédit,
within the meaning of the provision of the clause under considér-
ation.
[2] The provision was also considered by this court in In re Zof-
fer, 211 Fed. 936, 128 C. C. A. 434. We held in that case, in an opin-
ion written by Judge "Lacombe, and concurred in by Judges Coxe and
Ward, that a false statement in writing, made by the bankrupt to the
agent of a commercial agency, merely that the agency might fix a crédit
rating in its books, and not requested by any customer, is not ground
for déniai of a discharge. The court in its opinion quoted from the
report of the judiciary committee of the Senate concerning the meas-
ure in which it was said :
"Any tendency to make the bankrupt act unduly harsh Is to be avolded.
It is a sufflcient ground of opposition to discharge that the bankrupt has ob-
tained property from a creditor by a materlally false statement In writing,
where that statement was speoifically asked for by the creditor or by the
creditor's représentative. General statements to mercantile agencies, not
specifically asked for by prospective creditors, ought not to be ground of op-
position to discharge; it makes the provision too harsh, în the estimation of
your committee."
We are unable to distinguish this case in principle from In r^
Zoffer. Neither the state comptroUer nor the superintendent of banks.
like the mercantile agency, obtained the report at the request of anj*
depositor or prospective depositor. Neither of those officiais was the
représentative of a creditor from whom any money or property was
obtained.
The ohtaining of a license from the comptroller of the state of New
York, or from the state superintendent of banking, is not the obtain-
ing of "property" within the meaning of the clause under considéra-
tion. If it be said that moneys deposited with bankers thus licensed
are obtained from depositors, on the faith of the statement filed either
with the comptroller or the superintendent of banking, the answer is :
(1) That there is no évidence that a single depositor ever knew or
heard of the statement, or relied upon it.
(2) That under the Bankruptcy Act the statement must be made to
the person — in this case the depositors — from whom the crédit was
obtained.
[3] The spécifications of objection also set forth:
"That the bankrupts, whlle tnsolvent and knowing that they were Insolvent,
accepted and received from numierous persons moneys for safe-keeping and
transmission, which they well knew that they could not repay or return with-
out intent to defraud persons who so gave to them moneys for safe-keeping,
transmission, or for any other purpose."
And the spécial master in his findings says:
"As to the receiving o£ money for transmission to forelgn coimtries, the
testimony shows that thèse moneys had been intermingled with the gênerai
asseta of the estate, and at the time of the fUing of the Involuntary pétition
there was some money on hand in the banks, and especlally the Clinton Bank,
ïhere were some notes due the Clinton Bank from the bankrupts, and conse-
262 F.— 47
738 262 FEDERAL EEPOBTEE
quently tjfte Clinton Bank charged those notes against the balance, whlch near-
ly completely consumed the fund. Thls is no défense to the spécification. The
money was not avallable for the uses for whlch It was deposited wlth the
bank, and in wty opinion the spedflcatlon has been sustalned."
If the above spécification of objection cornes within any of the
clauses in section 14b, it is within clause 4 which is as f ollows :
" (4) At any tlme subséquent to the flrst day o£ the four months tmmediately
preœding the flllng of the pétition transferred, remioved, destroyed, or con-
cealed, or permitted to be removed, destroyed, or concealed any of hls property
wlth the Intent to hlnder, delay, or defraud hls credltors."
We may concède that the bankrupts received moneys for transmis-
sion to Europe, which were never transmitted. The bankrupts state
that the sum so received was $5,167.50. Their explanation is that the
hreaking out of the war in Europe prevented the transmission. The
master has found as a f act that thèse f unds were not kept separate and
apart f rom the other business assets. They were deposited in the Clin-
ton Bank, and when the bankrupts failed that bank applied the funds
on deposit to discharge the indebtedness due from the bankrupts to the
bank. The deposit of thèse moneys in a bank in the name of the bank-
rupts certainly cannot be within clause 4 above cited, even though the
funds went into their gênerai account.
[4] Counsel for the opposing creditors in their brief call attention
to the provision found in chapter 348 of the I^aws of 1910 of the
State of New York which reads as f ollows :
"29. O. • • • AU moneysi received for transmission to a foreign
country by any lieensee shall be forwarded to the person to whom the saitfe Is
dlrected to be transmitted within five days after the receipt thereof, and
every person who shall fail to so forward the same within the tlme specifled,
shaU be gullty of a mlsdemeanor."
The inference seems to be that, because of the foregoing law of the
state of New York, the défendants are suhject to section 14, subd. (b),
cl. 1, which prevents a discharge if the bankrupt "has (1) committed
an offense punishable by imprisonment as herein provided." But sure-
ly it is quite unnecessary for us to say that, while the failure to trans-
mit funds so received may be pimishable as a misdemeanor under the
laws of the state of New York, it is not made an offense punishable
by imprisonment under any provision which can be found in the Bank-
ruptcy Act. For that reason the failure to transmit is not within
clause 1.
The order is reversed, with direction to grant the discharge.
GEISBNBEEGEE & FBIEDLBR V. ROBERT YORK & 00. 739
<262 P.)
GBISENBERGEB & FRIEDLER et al. v. EOBBRT YORK & 00. et aL
(arcuit Court of Appeals, Fltth Circuit. December 20, 1919.)
No. 3364.
1. OoEPOEATions <5=»309(5) — Payment of corporation mortgaqk debt by
CEEDITOR, WHO IS DIBECTOR, ENTITLES HIM TO SUBROGATION.
A creditor, who was also a dlrector, wlio paldi a note of a corporation
secured by mortgage on land in Louislana, held subi'Ogated to the ntort-
gage lien, under Civ. Code La. art. 2161, providing for sucli subrogation as
of riglit, althougb he took an unsecured note for the amount.
2. Corporations <®=>309(5) — Mortgage to dikectors valid.
A mortgage given by a cori)oration to seeure a loan made to It by two
dlrectors, as authorized by unanimous vote of the direetors présent at an
annual meeting, held not Invalld because such. two direetors voted for the
resolution and their présence was necessary to constitute a quorum, where
the direetors présent owned ail the stock except one share, and it ap-
peared that the transaction was fair and in good falth, and that the money
was needed and used to pay other debts of the corporation.
3. Corporations <g=>309(5) — Asstjmption of mortgage in corporation
SUCCEEDING MOBTGAGOE VALID.
A mortgage on property of a corporation, made to two of Its direetors,
even though voidable by the corporation, held. valid as against a corpora-
tion succeeding to its assets, which assumed it by unanimous vote of Its
direetors, who were also sole stockholders.
Appeal from the District Court of the United States for the West-
ern District of Louisiana; George W. Jack, Judge.
Suit in equity by Robert York & Co. and others against the Stand-
ard Hardwood Company and others. From the decree, Geisenberger
& Friedler and others appeal. Affirmed.
The following is the opinion of Jack, District Judge :
On pétition of plalntiffs, recelvers were appointed for défendant company.
Xhereaf ter plalntiffs took a rule on the recelvers to show cause why the mill
and lands of the conïpany should not be sold to satisfy certain mortgage notes
held by the plaintifEs. The défendant company is the successor of the Bre-
vard & Woods Stave Company, which purchased a large tract of land in Con-
cordia parish, La., from the Farmer-Wren Land Company, for the price of
$170,000, of which amount a part was pald by exchange of lands In Missis-
sippi, $10,000 in cash, and for the balance four vendor's lien and mortgage
notes were given, for $24,212.50 each. Plalntiffs allège themselves to be the
owners of the three last maturlng of thèse notes by purchase from the Farm-
er-Wren Land Company, and In addition they allège themselves the holders
and owners of five notes of défendant company, for $20,000 each, aggregat-
ing $100,000 secured by a second mortgage on the lands.
Défendant recelvers, In answer, admit that the plalntifE owns the two last
maturlng notes given the Farmer-Wren Land Conrpany for $24,212.50 each,
but they allège that the other note of thls séries was not purchased by plaln-
tiffs but was paid by them, and that plalntiffs merely hâve an unsecured
claim against the défendant ifor the amount of sald note. The recelvers while'
making no déniai of the fact that the Yorks loaned the company $100,000
and more, denied the validity and legallty of the $100,000 mortgage executed
to seeure this Indebtedness, on the ground that at the meeting of the board
of direetors, which authorized the mortgage, only four of the flve members
were présent, including the two Yorks, who were interested parties, and
therefore they clahn could nelther vote on the resolution nor be counted to
make a quorum.
<g=)For other cases see same toplc & KEY-NUMBBR in ail Key-Numbered Digesta & Indexes
740 262 FEDERAL REPORTER
It appears that the Brevard & Woods Stave Company was a Tennossoe
coiTporatlon, wlth a capital stock of $25,000, doing business in Mississippi. In
1907 Brevard, the président, sought to obtain a loan from J. B. & Robert
York of St. Louis, wlxo were engaged tn buying and selllng luraber. To in-
duce them to make the loan the stockholders of the compaiiy sold them one-
half of the outstanding stock. For part of tlils stock they pald par value,
and for the remainder $1.25 on the dollar. Later the Torks obtained one-
fourth more of the stock, thus glvlng them a three-fourths Interest In July,
1914, a large tract of land In Ooncordia parlsh, La., was purchased and a
hardwood mlU thereon erected.
In December, 1915, on request of the stockholders, the board of directors
passed a resolution changing the name of the company to the Standard Hard-
wood Company and increased the capital stock to $100,000. This change in the
charter, however, It seems, was never legally perfected, and in January, 1918,
after the appointment of the receivers the old board of directors rpsciiidod
the action. On .Tanuary 11, 1916, at the annual meeting of the board of di-
rectors, the $100,000 mortgage was authorlzed. There were présent at this
meeting the two Yorks, L. E. Brevard, Gates, who was an errtployé of the
Yorks, and Mrs. Brevard, wife of L. E. Brevard. Thèse flve constltuted the
entire board, and likewise were the sole stockholders ; the latter two holding
each only one share of stock. At this meeting, Robert York offered a res-
olution authorizing the président to give a second mortgage on the lands to
J. B. & Robert York (a commercial partnership) to secure them for moneys
advanced and to be advanced before the Ist of February, 1916. The resolu-
tion was seconded by J. B. Y'ork and unanimously adopted. On January 15,
1916, Brevard, as président, executed to the order of Robert York five notes,
each for $20.000, payable in one, two, three, four, and flve years, and on May
15th executed the mortgage, and a few days thereafter delivered the notes
to J. B. and Robert York.
The Company did not prosper. Larger capital was necessary to conduct its
business. The Yorks conceived the idea of organizing a new company, witli
a larger capital stock, and transferring to it the assets of the Stave Com-
pany. Accordlngly the Yorks and Brevard procured tlie organizatlon of a
Itelaware corporation under the name of the Standard Hardwood Company.
The three men named In the charter apparently acted merely as a matter
of accommodation. They subscribed for only 10 shares of .stock, for wiiicb.
they pald nothing, and which they later transferred to the two Yorks and
Brevard, who beeame the sole stockholders and the flrst board of directors
of the new company.
To the Standard Hardwood Company was sold and transferred the Loui-
siana property of the Brevard & Woods Stave Company. Their only other
property at the time was some land in Mississippi worth about $3,000, whlcli
was mortgaged to the mother of Brevard for a debt of about that amount.
The considération of the sale was the assumption by the Hardwood Com-
pany of the balance due on the mortgage Indebtedness of the Farmer-Wren
Land Company, aggregating $72,637.50, the assumption of $100,000 of second
mortgage notes given Robert York, tlie assumption of ail aecounts due by the
Stave Company as of October 2, 1916, Incurred by opérations in Louislana,
and the Issuance to the stockholders of the Brevard & Woods Stave Conïpa.ny
of $25,000 of the stock of the Standard Hardwood Company; this being in
efCect an exchange of stock of the two corporations dollar for dollar. By
another resolution the offlcers were directed to issue and sell to any future
subscribers stock up to the full amount authorlzed by the charter, $100,000,
but no stock, was sold.
The Standard Hardwood Company took charge of the properties about
the middle of October, 1916, and pald ail bills of the Stave Company, which
had been rendered by creditors. Practieally ail lumber thereafter manufac-
tured was sold to the Yorks. The mill continued to lose money. Brevard In
December, 1916, made a trip away to try to flnd a purchaser for the property,
but was unsuceessful, and a few months thereafter the mill ceased opération.
The Yorks resigned and transferred thelr stock to J. B. Coyle, trustée. Coyle
was the bookkeeper of the Hardwood Company. On the resolution of J. B.
GEISENBERGER & FRIEDLEB V. ROBERT YORK & CO. 741
C363 F.)
York, as président, February 20, 1917, Brevard was elected to succeed hlm,
and on March lOth Coyle was elected a director. At the same meeting a res-
olution was passed providing that the company take steps to Imiilediately
dispose of the assets and llquidate the business.
The Tarmer-Wren Company's Notes.
The Yorks claim to hâve purehased the three last maturing of the Farm-
er-Wren notes each l'or 821,212.50, and as to the last two there Is no dispute;
but it is contended by the receivers that the first of thèse three notes, due
January 15, 1917, was not purehased by the Yorks, but was actually paid by
them, the receivers claiming that Robert York had taken the company's
note for $25,000 to cover the amount of the Famier-Wren note, with interest,
and had tlien paid the latter. Thus they claim the Yorks were the holders of
the company's unsecured note, aud uot the Farmer-Wren mortgage note; In
other words, that the Farmer-Wren mortgage note bas been estingulshed by
novaUon.
It appears that In December, 1916, in anticipation of the maturlty of the
Farmer-Wren mortgage note, Brevard executed the company's note for $25,-
000 to the order of J. B. & IJobert York, which he delivered to Robert York,
who was then at the mill. Brevard testifles that it was his understanding
that the Yorks vifould aceept this note for the loan of the necessary money
to pay ofE the mortgage note and that the latter would thus be paid. Robert
York dénies that there was any agreement that the Yorks would lend the
money, but states that, it having been apparent that the Hardwood Company
would not be able to pay the note when due, he had told Brevard It mlght be
advisable for him to take the company's note to Memphis wlth hlm, to see
what ;ould be doue relative to financing payment of the mortgage note due
the foUowing month, and that ho was thon acting in his capacity as vice
président of the lîardwood Company ; that aecordingly the note was made
out, and he took it to Menrphis, and left it wlth the bookkeeper of J. B. &
Robert York, with the foUowing mémorandum attaehed: "Hold unless we
pay B. & W. note to B'armer-Wren Co. J. B. & R. Y."
The bookkeeper, he states. was instructed not to place the note to the créd-
it of the Hardwood Company until further advised, unless the Yorks borrow-
ed the money In their own name to pay the note. He testifles that he cancel-
ed by perforation the Hardwood Company's signature on the note about the
middle of February, 1917. The note, however, was not returned to the com-
pany's office at Ashridge, La., until aftor the appointment of a recelver. The
mémorandum attaehed to the note was an instr\iction to York's bookkeeper,
and was in effect to hold the note, making no entry In the books, unless York
paid the Farmer-Wren note. York's testimony is that he obtained a few
months' extension of the note, and then bought the note from the Farmfer-
Wren Company, and iu this he is corroborated by Farmer. The note itself
Is indorsed in blank, and not marked "Paid" or "Canceled." No entry was
made, either in the Hardwood Company's books or the books of J. B. and
Robert York, of the .$25,000 note. Whatever may hâve been the original in-
tention of York as to the payment of the Farmer-Wren note, the welght of
the évidence sustains his contention that he did not pay it, but purehased It.
[1] As a matter of fact, however, even had York paid the note and had It
canceled, his position would not bave been materially al'fected, for In that
event he would bave been subrogated to the rights of the Farmer-Wren
Company under article 2161 of the Civil Code, whicih reads : "Subrogation
takes place of right: 1. For the bonefit of hlm who, being hlmself a creditor,
pays another creditor, ^^'hose claim is préférable to his by reason of his
privilèges or mortgages." See. also. Walnisley v. Thens, 107 I^n. 41Q, 31 Soiith.
869; Zelgler v. His Creditors, 49 La. Ann. 145, 21 South. 666.
The $100,000 Second Mortgage.
[2] That a corpor.Ttlou may borrovv money froin ,'uid grant a mortgaga to
one or more of Its dlrectors, where the interested dlrectors deal absolutely
fairly wlth the corporation and no advantage is taken, is well settled by both
the fédéral and state jurisprudence, While such contracts will be closely
742 262 FEDERAL REPORTEE
ecrutinlzed by the courts, they will be sustalned where they are In the In-
terest of tbe company and are fair and équitable. The doctrine is well and
sucelnctly stated in Thompson's Commentarles on Corporations, | 4068, qnot-
ed and approved in the case of Villere v. New Orléans Pure Milk Co., 122 La.
717, 48 South. 162 : "The strict rule that dlrectors cannot enter into contracts
with the corporation does not seem practicable. It would operate to dis-
able those who hâve already embarked their funds in a corporate enterprise,
and glyen to It their Personal attention, from assisting It ta time of dlfflculty,
except at the rlsk of doing so without security. A corporation might be In a
sorry plight, Indeed, If one who had already embarked his funds in It, and
who, from the fact of his belng one of its managers, Is best acquainted with
Its needs and difîiculties, should not be able to inake a présent advance of
money to help It out of those difflcultles."
In Thompson on Corporations (2d Ed.) vol. 2, par. 1227, it Is sald: "The
American courts, with some exceptions already noted, take perhaps the more
practieal view that contracts entered into by directors with themselves as
Individuals are not per se void, but are merely voidable at the option of the
corporation or of the stockholders, provlded the disafflrmance Is exercised
wlthin a reasonable time, ail the cixcumstances of the case considered." See
large number of authorlties cited, state and fédéral.
And agaln, In paragraph 1256, Thompson says: "The rule granting relief
to the corporation and stockholders where a director makes a contract with
himself, or where he secures some advantage or profit, Is not to be used to
the Injury of the director, where such contract is free from actual fraud.
The rule was adopted for the purpose of securing justice, and not to work
Injustice. In attemptlng to prevent a wrong, It is not the Intention of the
law to substitute one wrong for another. Hence, certain limitations hâve
been placed Upon the opération of the rule, intended to guard agalnst evll
conséquences as Inéquitable as those It was deslgned to prevent."
In the case of Sanford Tool Co. v. Howe, Brown & Co., 157 TJ. S. 312, 15
Sup. Ot 621, 39 li. Ed. 713, the court upheld a mortgage given by the dl-
rectors to themselves to secure thera for indorsements made and to be made
on the com'pany's paper, holding that, although a corporation at the time of
such mortgage might not then be possessed of assets at cash priées sufBcIent
to cover Its Indebtedness, If It were in fact a going concem and expeeted to
continue business, the mortgage would be upheld.
It is contended, however, by eounsel for the recelvers, that, while a mort-
gage may be glven to a director to secure a loan, It must be flrst authorized
by a vote of the board of dlrectors at which a quorum was présent exclusive
of interested directors, and a majorlty of such voted for the resolution.
They take the position tliat in the case at bar, only four of the flve dlrectors
having been présent, Includlng the two Yorks, that the action of the board
was absolutely void. Thls contention leads to the conclusion that, while one
member of the board of directors might come to the corporatlon's relief by
making It a loan and taklng as security a mortgage, the entire board could
not joln In such a loan, because in that event there would be no dlsinterested
directors whatever, much less a quorum, to authorlze the contract.
Thls contention I do not think sound. Whether the loan be made by one
or ail of the dlrectors, and the mortgage given to one or ail of them, it Is
subject to the sanïe rule. It Is not absolutely void, but voidable, and will be
closely scrutinized by the court, and if there be any fraud or advantage tak-
en, or If It be not to the Interest of the corporation, the courts will not en-
force it. In the Sanford Tool Co. Case, Just clted, the mortgage was made in
favor of ail flve of the Individuals composing the board of directors, who
as directors authorized the mortgage to themselves.
In the case of Leavenworth County v. Railroad Co., 134 U. S. 688, 10 Sup,
et 708, 33 li. Ed. 1064, which was a suit to annul a mortgage, or deed of
trust, from the Southwestern Co. to the Rock Island Co., the court sald: "I
am unable to see anything In the fact that some of the same men were found
to be trustées In thls deed and dlrectors In the Rock Island Company, and
that directors in the Southwestern Company were also directors in the Rock
Island Company, which should block the course of justice, paralyze the power
GEISENBERGEE & FRIEDLEE V. ROBERT YORK & CD. "43
C262 F.)
of the court, and deprive the créditer corporation of ail remedy for the en-
forcement of its lien." The court then proceeded to hold that the corpora-
tion and Its dlrectors had the right to enter Into contracta between them-
selvcs, and the question was not : Could they do thèse things ; but hâve the
relations of the parties — trust relations, if, indeed, such existed — been abused
to the serious in jury of the company?
And so In my opinion. In the case at bar, the question Is not whether the
corporation could enter into the contract with the Yorks, even though It were
necessary for thera to partlcipate in the dlrectors' meeting in order to hâve
a quorum, but whether the trust relations of the Yorks to the corporation
were abused to the injury of the corporation, or Its credltors. It Is not dls-
puted that the Stave Company recelved the $100,000 and more from the
Yorks. At the time the mortgage v^as authorlzed Brevard testlfles $89,000 of
the amount had already been advanced and $11,000 more was put up wlth
whlch was paid off other creditors. Brevard's mother, It appears, had a
clalm for $3,000, whlch was taken care of by a mortgage on other property.
AU other credltors not secured by mortgage were paid the accounts rendered,
though there may hâve been due some of the mercantile creditors small
amounts for the current month. Thus there was left only the Indebtedness
due the Farmer-Wren Land Company, the Yorks, and Mrs. Brevard. This
mortgage on the property was granted while the company was a going con-
cern, and over a year and a half prlor to the api)licatlon for the recelvershlp.
Clearly, had the $100,000 been loaned by a third party, no objection what-
ever could hâve been made to giving him a mortgage, and, the transaction
belng free from fraud, or unfair advantage, there is no good reason why thèse
dlrectors, who came to the aid of the coiTporatlon, should not be glven the
l)enefit of thelr mortgage. That there was not a quorum of disinterested dl-
rectors at the meeting authorizing the mortgage was due to the fact of the
absence of Mrs. Brevard, wife of the président of the Company, who held only
one share of stock, which she did not pay for, and whlch was plaoed in
her name merely as a matter of convenlence to make her ellgible as a dlrector.
It would, no doubt, hâve been the better course to bave had her présent, In
whlch event It would not hâve been necessary for the Yorks to hâve partici-
pated In the meeting; but as the contract was not unfair, but, on the con-
trary, for the beneflt of the corporation, enabllng It to settle ail of Its indebt-
edness on open accounts and continue Its business, the mère fact that the
Yorks voted for the resolution would not be suffident cause to annul the
niortgage.
[3] The Standard Hardwood Company, as I hâve before stated, was but a
reorganlzatlon of the original Stave Company. Its sole stoekholders and dl-
rectors were the two Yorks and Brevard. The three, both at a stoekholders'
meeting and at a dlrectors' meeting, authorized tlie assumption of this $100,-
000 mortgage as a part of the considération for the transfer of the Stave
Company to the Hardwood Company of the Louisiana lands. Thus the orig-
inal action of the board of dlrectors of the Stave Company, which was void-
able, was ratifled by the unanimous vote of ail of the dlrectors and the stoek-
holders of the reorganized company. True it is that the majority of the dl-
rectors of the reorganized corporation were still Interested ; but they, wlth
Brevard, constltuted the sole dlrectors and the sole stoekholders, and cer-
talnly by their unanimous vote the former action of the dlrectors mlght be
ratifled.
In Thompson on Corporations, vol. 2, par. 1257, it Is said : "The contracta
made by dlrectors wlth themselves, are in some cases sald to be vold ; but
this Word is used In the sensé of voldable. The correct prinolple Is that, unless
such transactions and contracts fall wlthln the prohibition of the statute, or
of a rule of the conrmon law, It Is voldable elther at the élection of the cor-
poration acthig through Its dlrectors, or at the élection of stoekholders." See
Hoyle V. Plattsburg R. R. Co., 54 N. Y. 314, 13 Am. Dec. 595; BueU y. Buck-
ingham, 16 lowa, 284, 85 Am. Dec. 516 ; Chouteau v. Allen, 70 Mo. 290 ; Nye
V. Storer, 168 Mass. 53, 46 N. B. 402.
Acts of a minorlty of the dlrectors, while vold, may be ratifled by the di-
rect and express action of a duly assembled quorum. In re Portuguese Con-
744 262 FEDERAL REPORTER
solidated Mining Co., 45 Ch. Dlv. 16; Ashlcy Wlre Co. v. 111. Steel Co., IM
III. 149, 45 N. E. 410, 56 Am. St. Rep. 187. The évidence falls to disclose any
unfalr advantage taken by the Yorks of thelr position in the Company. They
continued to advance nioney to the corporation untll it owed them about
$89,000 on open account, and tliey then took the mortgage to cover this and
about $11,000 more, whlch they advanccd to pay off the other credltors. Had
the corporation then gone ont of business, no one would hâve lost anythlng.
The mortgage, then, at the tlme ît v^as given, was not prejudidal elther to the
Company or to its credltors, but the company continued in business, and there-
after lost more money. It iffay be that the Yorks, after taklng the mortgage
on ail of the company's business, about equal, wlth the prior mortgage, to ita
full value, should not hâve permitted the company to continue business at
the risk of future credltors, when they themselves had been made secure.
But that la a matter for the Législature and not for the courts. Better busi-
ness judgment mlght hâve prompted a liquidation of the company's afEalrs at
the tlme of the mortgage; but the évidence does not disclose that the cor-
poration was in siieh a straitened financlal condition as would make iC
évident to its directors that its continued opération necessarlly meant fur-
ther loss.
For the reasons stated, I am of the opinion that the three first mortgage
notes, of $24,212.50 each, and the flve second rawrtgage notes, for $20,000 eaeh,
held by J. B. and Robert York, are valld obligations of the corporation, and
that the property mortgaged should be sold by spécial master to pay the
debts of the company, and by préférence such mortgage indebtedness ; plaln-
tifEs at such sale to hâve the right, in event they bid In the property, to pay
90 per cent, of thelr bid In mortgage notes held by them, the remainder to be
pald In cash. Fées of attorneys vcill be fixed latcr.
A decree in accordance wlth the vievrs herein expressed wlU be prepared
and entered.
L. T. Kennedy, of Natchez, Miss., for appellants.
John C. Theus, of Monroe, La., for appellees.
Before WALKER, Circuit Judge, and FOSTER and GRUBB, Dis-
trict Judges.
PER CURIAM. We concur in the conclusions reached by the
court below in this case, and in the reasons in support thereof stated
in the opinion rendered by the District Judge. This being so, discus-
sion by us of the questions presented is deemed to be unnecessary and
superiluous.
The decree is afBrmed.
BEiNTALL v. UNITED STATES.
(Circuit Court of Appeals, Elghth Circuit December 16, 1919.)
No. 5297.
1. CBIMINAL UlW (@=24 — Necessabt intent implied feom act.
Wbere an act, to be criminal, must be knowingly and willfully done,
not only a Jmowledge of the act is implied, but a détermination, witii a
bad intent, to do it.
2. Omminal law <S=»24 — Intent peesume» feom natubal besult of act
is rebuttable.
The presumptlon of wrongful Intent of a défendant, based upon the
natural resuit of his words or acts, is not conduslve, but rebuttable, and
this rebutting évidence may take the form of testlmony by défendant that
he Intended no such results.
<g=>For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
BENTALL V. UNITED STATES 745
(262 P.)
S. Crimi;s:al law ®=3772(5) — Inrtrtjctiotî as to iîstent ekronkous.
An instruction in a criminal case, which stated without qualiflcation
tliat a man could not say that he dld not intend to do a certain thing,
■when such tliing was the natural result of his act, Iteld erroneous wtiere
a spécifie intent was essential to the crime chargea, and défendant testi-
fied that he did not hâve such Intent
Carland, Circuit Judge, dissenting.
In Error to the District Court of the United States for the District
of Minnesota; Page Morris, Judge.
Criminal prosecution by the United States against Jacob O. Benlall.
Judgment of conviction, and défendant brings error. Reversed.
Seymour Stedman, of Chicago, 111. (Thomas E. Latimer, of Minne-
apolis, Minn., on the brief), for plaintiff in error.
Alfred Jaques, U. S. Atty., of Duluth, Minn.
Before SANBORN, CARLAND, and STONE, Circuit Judges.
STONE, Circuit Judge. Conviction on two of three counts for
violation of section 3 of the Espionage Act of June 15, 1917 (40 Stat.
219, c. 30), through utterances in a public speech.
While the indictment was challenged in the brief, counsel for plain-
tiff in error, in the oral argument, conceded its sufficiency. The in-
dictment alleged the utterance of the objectionable words in the prés-
ence of two apprenticed seamen, Mersen and Ford. It is contended
that the évidence failed to show the présence at the meeting of thèse
two nien. This claim is not well founded.
The charge is attacked for several alleged errors. The first is that
the court, in the opening portions of the charge, made prejudicial
statements. This portion of the charge is :
"I coiife.'îs — I nmy alinost say that I proudly eonfess — that at a time lilSe
thi,s I hâve inten.çe feelings. It is natural with one whose aneestor has given
his life on the battlefields of the RevoKition that at a time like this he should
feel iutensely, and on that account I liave tried throughout this trial not to
.«how or Kive any indication of what niy opinion is as to the facts prove<l by
this évidence."
This expression was unnecessary, and approached the objectionable.
However, it was followed by a clear caution that the jury were the
exclusive triers of the facts, and there were no other statements in
the charge which accentuated the part just quoted. It is also urged
that the charge was erroneous upon the matter of intent. The portion
designated is:
"A mail cannot say he did not intend to do a certain thlng, when the natural
conséquence of his act is bound to he so and so."
[1, 2] The bearing of this upon the évidence is that the défendant
not only denied making the statements alleged in the indictment, but
he specifically denied that he ever, and particularly upon the date
charged, intended to obstruct the recruiting or enlistment service, or
to attempt to cause insubordination, disloyalty, mutiny, and refusai
of duty in the military or naval forces. In other words, he denied
©=3For other cases see same topic & KBY-NtJMBBR in ail Key-Numbercd Dlgests & Indexes
746 262 FEDERAL REPORTEE
the criminal intent necessary to the crimes charged. This intent was
a most material élément, which must be found by the jury. The case
of the govermnent upon this point rested mainly, if not entirely,
upon the words themselves, coupled with their utterance to a large
crowd of people of various âges, some proven to be within the draft
and enlistment âges. In its essence this proof rested upon the words
themselves and their natural and probable eflfect upon such auditors.
It is true that, when one knowingly does an act (including the utterance
of words), the presumption arises that he intended the results which
would naturally follow. Reynolds v. United States, 98 U. S. 145,
167, 25 L. Ed. 244. But where the act must, as hère, be "knowingly
and willfully" done to be criminal, not only a knowledge of the act
is implied, "but a détermination with a bad intent to do it." Felton v.
United States, 96 U. S. 699, 702, 24 L. Ed. 875 ; Hicks v. United
States, 150 U. S. 442, 449, 14 Sup. Ct. 144, 37 L. Ed. 1137. And the
presumption of wrongfui intent, based upon the natural resuit of the
words or acts, while constituting strong évidence of the présence of
such intent, is not conclusive, but rebuttable. Hicks v. United States,
supra, 150 U. S. 447, 449, 14 Sup. Ct. 144, 37 L. Ed. 1137. This rebut-
ting évidence may take the form of testimony by the défendant that he
intended no such resuit. Hicks v. United States, supra, 150 U. S.
449, 14 Sup. Ct. 144, 37 L. Ed. 1137; Oakes v. State, 98 Miss. 80,
54 South. 79, 33 L. R. A. (N. S.) 207; State v. Marfaudille, 48 Wash.
117, 92 Pac. 939, 14 L. R. A. (N. S.) 346, 15 Ann. Cas. 584; Ker-
rains v. People, 60 N. Y. 221, 228, 19 Am. Rep. 158; Gréer v. State,
53 Ind. 420; White v. State, 53 Ind. 595; People v. Farrell, 31 Cal.
576, 582; State v. Harrington, 12 Nev. 125, 135; 8 R. C. L. p. 181;
16 C. J. 81, §§ 48, 49; 1 Wharton's Crim. Evid. (lOth Ed.) § 431;
1 Wigmore on Evid. § 581.
[3] Such évidence was introduced by défendant. The above lan-
guage of the charge minimized, if it did not entirely eliminate, that
évidence. This part of the charge was emphatic and clear, and in its
entirety is:
"A man's Intention In doing or saylng a thing must be ascertained from
what he does or says. A man cannot say he dld not intend to do a certain
thing, when the natural conséquence of his act is bound to be so and so. He
cannot then coine In and say that he never Intended to do that A man ought
to be and must be Judged by the natural conséquences of hIs acts, the natural
and necessary conséquences of his acts. If this use of the words naturally
and necessarlly produces that effect, then y ou mnst judge of the Intention ot
the man by the words themselves."
It would be an absurdity to say that a party has the right to intro-
duce évidence upon a vital élément of fact, but that the court might
thereafter tell the jury they must disregard such évidence when it
has been introduced. Nor can this portion of the charge be fairly
construed as a mère comment upon the évidence, which might be
saved by a cautionary statement that the jury are not bound by the
judge's opinion of such facts. Even the careful and able United
States attomey who tried this case did not hâve the temerity to sug-
gest such a view, and it would require a fertile imagination to see
the jury taking such a view of thèse positive, unequivocal statements
BENTALL V. UNITED STATES 747
(262 F.)
by the court. It is true that the language was immediately used in
connection with count 2, upon which there was acquittai, but the
three counts were for acts similar in gênerai character, ail involving
an intent based upon the motive of interfering with the government
in the création and maintenance of its military forces in war time;
ail were based on différent expressions in one public address, and
as to intent each covered by identical testimony on the part of défend-
ant. It is net likely, if even it be possible, that the jury would segre-
gate in their minds this gênerai language and apply it only to the
offense charged in count 2. Nor is the defect cured by other parts of
the charge, some of which accurately, and others of which more
nearly, stated the law in this regard. This definite, positive state-
raent made to the jury, when it returned for reinstruction, must hâve
impressed and influenced the jury.
Other assigned errors need no notice, as for this error the judgment
must be and is reversed.
CARIvAND, Circuit Judge (dissenting). I feel obliged to dissent
from the opinion of the majority in this case. The défendant was
allowed to testify as to his purpose and intention in using the lan-
guage he did in a public speech. The record présents an aggravated
violation of the statute. For the purpose of determining the guilt or
innocence of the défendant, the trial court's comment upon the weight
to be given to his testimony in regard to his intent was absolutely
true. No court or jury ever gives any weight to the testimony of a
défendant in regard to his intent in the circumstances mentioned by
the court in its charge, and any finding of a court or jury based upon
such évidence would make a criminal trial a farce. The judge, as
has been said by high authority, was not occupying the position of a
moderator at a town meeting, but was charged with the duty of taking
care that the outcome of the trial should be just. The trial judge had
the right to give the jury his opinion of the weight to be given to
testimony in the case, provided he left the facts to the jury to décide.
This he did in the following language:
"I wish to caution you in the outset, gentlemen of the Jury, before I pro-
ceed to explain the indictment and give you the law goveming this case, and
to say to you, as a part of the law goveming this case, that you are the ex-
clusive judges of the facts which hâve been proved by the testimony. That
Is not for me; that is your exclusive province. You are to consider this tes-
timony, and to say upon your oaths and consciences what facts the testimony
shows, and then you are to say by your verdict whether thèse facts compel,
under tlie rule, a conviction of this défendant.
"You are not to be influenced, or in any way govemed, by anything which I
may hâve said, or by any act or expression of my own, during this trial, in
the détermination of thèse facts. As I hâve already said, you are the ex-
clusive judgea on that subject"
The authorities cited in the majority opinion simply décide that,
where a spécifie intent is one of the ingrédients of a crime, the person
charged with such crime may testify as to his intention. This the
défendant in the case at bar was allowed to do. If a person is charged
with having made an assault with intent to kill, or to do great bodily
748 262 FEDERAL REPORTER
harm, and the évidence shows that the person charged held in his hands
a loaded shotgun, and at a distance of five paces took deliberate aim
and discharged the gun at another person, the universal judgment of
ail reasonable men would be to the effect that his testimony that he
did net intend to kill or to do great bodily harm was worthless, and
any considération given to the same would be a wrong committed
against the administration of justice. To reverse the judgment in
this case, because the trial judge stated an obvious truth, would
be a greater error than any committed by the trial court.
The judgment should be affirmed.
KEYES V. ANDERSON.
(Circuit C!ourt of Appeals, Eighth Circuit. December 16, 1919.)
No. 5335.
1. INDEMNITY i®=58 CONTRACT TO INDEMNIFiT BANK AGAINST LOSS FEOM UN-
COr.LECTIBI.E ASSETS COVERKD FOKGED OB PAID NOTES.
A contract executed by dlrectors and stockholders of a national bank,
<m a statement by the examiner that he regarded notes receivable shown
on its books as of doubtful value and intended to report it Insolvent, by
whlch they bound themselves to Indemnify the bank "against any losa
whatever whlch sald bank may hereafter sustaln by reason of its In-
ablllty to realize upon or coUect la the fuU amount or value of the
assets of said bank as shown by its boolis of aceount as of this date."
held to eover notes so shown on the books, wbich were forged or which
had been pald.
2. INDEMNITY ig^S CONSIDERATION FOR CONTRACT TO INDEMNIFT BANK.
Contract by dlrectors and stockholders of a national bank to indem-
nify it against loss from uncoUectible assets, made to prevent closing of
the bank by the ComptroUer for insolvency, held based on sufficient con-
sidération.
3. Indemnitt <@=»3 — Delivekt to Comptrollee of contract to indemnift
bank sufficient.
Dellvery to the Oomptroller of a contract by dlrectors and stockholders
to indemnify a national bank against loss fromi uncoUectible assets, made
to prevent (dosing of the btmk for insolvency, held sufficient.
In Error to the District Court of the United States for the District of
Minnesota ; Wilbur F. Booth, Judge. ,
Action at law by Paul C. Keyes, receiver of the First National Bank
of Clarkfield, Minn., against Peter Anderson. From the judgment,
plaintiff brings error. Reversed.
J. N. Johnson, of Canby, Minn., for plaintiff in error.
C. A. Fosnes, of Montevideo, Minn. (Ole Hartwick, of Granité
Falls, Minn., on the brief), for défendant in error.
Before CARI.AND and STONE. Circuit Judges, and YOUMANS,
District Judge.
STONE, Circuit Judge. This is an action by the receiver of a na-
tional bank upon a contract for $66,579.95. The charge of the court
'or other cases see same toplc fi KBY-NUMBBR in ail Key-Numbered Digeata & ladeiea
KEYES V. ANDERSON 'i'-t^
<2G2 F.l
limited recovery to $770.14. From a recovery for such amount the
receiver brings his writ of error.
[1] The entire sutn asked in the pétition was represented by notes
held by the bank. Of thèse notes $770.14 were unpaid notes; the
balance were notes which had been paid or forged by the cashier.
The court eliminated recovery for the paid and forged notes, upon the
theory that they were not included in the terms of the contract in
suit. The one proposition hère presented is whether such notes were
within the contract, which is as foUows :
"Bond.
"Whereas, the First National Banlc of Clarl^fleld, Minn., a corporation
created and existing under the laws of the United States, is in financial diffi-
culty through négligence on the part of the management in not urging col-
lection on matiuing paper, and the bank examiner, acting as agent of the Comp-
troîler of the Curreney. has notified the undersigiied directors and stock-
holdera of said bank that the assets are of such nonliquid cliaraeter that it
may be unable to meet Its obligations as they mature ; and
"Whereas, the undersigiied directors and stockholders of said bank are
Interested in protecting said bank and its depositors against loss in consé-
quence of the doubtful character and value of its assets, and to prevent the
insolvency of the bank :
"Now, know ail men by thèse présents that we, the undersigned directors
and stockholders of said First National Bank of Clarkfleld, Minn., in consid-
ération of the premises and of the sum of one dollar (ifl.OO) to each of us paid
by the said bank, the receipt w-hereof is hereby acknowledged, do hereby,
jointly and severaJly, covenant and agrée to and with said bank that we shall
and will indemnify and save said bank harmless against any loss whatever
which said bank may hereafter sustain by reason of its Inabillty to realize
upon or coUect in the full araount or value of the assets of said bank as
shown by its books of account as of this date; and we further, jointly and
severally, agrée that we will, at any time hereafter, at the request of the
cashier of said bank, or upon the demand of the Comptroller of the Curreney,
purchase from said bank any assets now owued or held by said bank which
the said Comptroller of the Curreney, or his agent, the national bank ex-
aminer, appuinted to examine sjùd bank, may designate as of doubtful value,
and to pay to said bank therefore in cash the value or amount at which the
said assets are now carried upon the books of the said bank.
"In wituess whereof, we hâve hereunto set our hands and seals this 19th
day of June, A. D. 1917. George J. Piersol. [Seal.l
"Peter Anderson. [Seal.]
"Witness: O. A. Carlson, N. B. Examiner."
Anderson contends that the forged and paid notes cannot be re-
garded as assets within the meaning of the contract, and that, even
if this be not true, yet, as the contract indemnified only against such
loss as the bank might sufïer after the contract, there was no loss,
since that paper was worth as much af terwards as it was at the time
the contract was made.
The argument on the first contention is that the word "assets"
does not include worthless paper, as it has no value, and therefore can-
not be an asset. The case cannot turn upon such a view, but it must
be determined by what the parties at the time of the contract meant
that word should cover. An examination of the circumstances sur-
rounding the making of the contract and of the object and purpose of
the contract reveals the following:
750 262 FEDERAL REPORTER
The bank examiner had just made an examination of the bank,
which convinced him that it was in such condition that he could
net pass its solvency. This condition was brought about in his opin-
ion by the doubtful value of a large portion of the notes held by it.
Thèse notes showed on the books of the bank at their face value as
assets, and if in fact worth approximately what those books showed as
their value, the bank was solvent. The examiner made known to three
of the directors and officers, including Anderson, how he regarded
thèse notes, and also his intention of reporting the bank as insolvent,
unless such assets were fortified by a bond or contract guaranteeing
their worth to be as represented on the books. It was for the sole pur-
pose of establishing such a value for those notes that this contract was
made. If it had not been made, and thèse assets so fortified, he would
hâve reported the bank as insolvent, and Anderson understood that
situation thoroughly at the time he signed the contract. Therefore
what ail of the parties intended to do through this contract was to
place Anderson and his cosigner, Piersol, back of the value of those
notes as shown on the bank books. The contract sufficiently expresses
that intention by binding Anderson to "indemnify and save said bank
harmless against any loss whatever which said bank may hereafter sus-
tain by reason of its inability to realize upon or collect in the full
amount or value of the assets of said bcUik as shown by its books of
account as of this date" (italics ours).
Much emphasis is laid on the claim that Anderson did not know at
the time the contract was made that any of thèse notes had been paid
or forged, and were therefore worthless, and therefore that ail he in-
tended to guarantee was the payment of overdue notes. It is highly
probable that he thought that was ail that he was doing ; but what the
examiner insisted upon, what the contract was designed by ail parties
to do, and what it did do, was to assure the bank of assets to the value
of the notes as represented upon its books. Under thèse circumstances
it makes no différence whether or not Anderson knew the true charac-
ter of the notes.
The second contention is clearly not justified. The entire situation,
as above outlined, shows that what the parties intended was to re-
move the doubt and objection of the examiner by putting the crédit of
Anderson and Piersol back of the value of the notes as shown on the
books. The examiner was not uneasy lest that value decrease, but he
was critical whether it could be realized in cash. It was to meet that
criticism that the contract was made.
[2] While not involved in this writ by the receiver, yet both parties
hâve argued the sufficiency of the considération for the contract. The
permission to continue business and not to be reported as insolvent
was a sufficient considération.
[3] Andertson questioned below that any proper delivery of the con-
tract had been made. because the bond had not been delivered to
the bank. That point was not discussed hère orally, though men-
tioned in the brief of counsel for Anderson. We are convinced that
the delivery was sufficient. The contract was taken by the examiner
in the name of the bank and for the protection of its depositors, credi-
THE RATHLIN HKAD 751
(262 F.)
tors, and stockholders. The original was forwarded to the ComptroUer
at Washington, and the two copies retained by the examiner. It is
the business of the ComptroUer's office, of which the examiner was a
part, to make such examinations and to take such steps, within the
îaw, as seem necessary to protect national banks, and those who deal
with them. This contract was taken in pursuance of that power, and it
was unnecessary that the contract be delivered to the bank.
The judgment is reversed, and the case remanded for proceedings
not inconsistent with this opinion.
THE RATHLIN HEAD. *
SANDREN et al. v. ULSTER S. S. 00., Limited.
(Circuit Court of Appeals, Fifth Circuit January 20, 1920.)
No. 3413.
Seamen <@=>24 — Amount of waqes demandable at inteemediate poets;
"one-halp part of the wages which he shall have then eaened."
Under Seamen's Act March 4, 1915, § 4 (Comp. St. § 8322), whlch glves a
seaman the right to demand and receive at intermedlate ports "one-half
part of the wages whlch he shall liave then eamed," the amount to
whlch he is entitled la one-half hls gross eamlngs during the voyage to
that tlme, less aR prior payments.
Appeal^ from the District Court of the United States for the East-
ern EHstrict of Louisiana ; Ruf us E. Foster, Judge.
Suit in admiralty by Karl Sandren and others against the steamship
Rathlin Head; the Ulster Steamship Company, L,imited, claimant.
Decree for claimant, and libelants appeal. Affirmed.
W. J. Waguespack and Herbert W. Waguespack, both of New Or-
léans, La., for appellants.
Terriberry, Rice & Young, of New Orléans, La., for appellee.
Before WALKER, Circuit Judge, and GRUBB and JACK, Dis-
trict Judges.
GRUBB, District Judge. The appeal présents a single question
involving the construction of section 4 of the Seamen's Act. Act
March 4, 1915, 38 Stat. 1165 (Comp. St. § 8322). The applicable part
of that section is as f ollows :
"Bvery seaman on a vessel of the United States shall be entitled to receive
on demand from the master of the vessel to which he belongs one-half of tha
part of the wages whlch he shall hâve tlien earned at every port where such
vessel, after the voyage has been commenced, shaU load or deliver cargo before
the voyage Is ended."
The question presented is as to the proper method of Computing the
amount payable to seamen, at intermedlate ports under this section,
in cases in which previous payments or advances hâve been made.
Appellants contend that from the total wages eamed from the com-
mencement of the voyage to the date of demand there should fîrst be
«gssFor other cases see same topic & KKY-NUMBER in aU Key-Numbered Dlgests & Indexée
•Certlorart dented 251 U. S. — , 40 Sup. Ct. 394, 64 L. Ed. — .
752 262 FEDERAL UEPORTER
deducted ail advances and payments ; one-half of the reniainder being
the amount payable. The appellee contends, and the District Judge
held, that the total wages should first be divided in two, and from
the quotient should be deducted ail advances and previous payments ;
the remainder, if any, being the amount demandable by the seaman.
There has been diversity of opinion among the District Courts as
to which method is the proper one. The cases of The Ixion, 237
Fed. 142, and In re Ivertsen, 237 Fed. 498, hold in line with the con-
tention of appellants. The cases of The Jacob N. Haskell, 235 Fed.
914, The London, 238 Fed. 645, The Delagoa, 244 Fed. 835, The
Meteor, 241 Fed. 735, and The Thor, 248 Fed. 942, support the con-
tention of the appellee. The case of The London, 238 Fed. 645, was
affirmed by the Circuit Court of Appeals for the Third Circuit in an
opinion reported in 241 Fed. 863, 154 C. C. A. 565, and a certiorari
to the decree of the Circuit Court of Appeals was denied by the Su-
prême Court, 245 U. S. 652, 38 Sup. Ct. 11, 62 h. Ed. 532. In the
case of Sandberg v. McDonald, Claimant of the Talus, 248 U. S. 185,
39 Sup. Ct. 84, 63 h. Ed. 200, the Suprême Court impliedly recog-
nized the correctness of the method adopted by the District Judge in
this case. The statement of facts contained in the opinion of the Su-
prême Court in that case recites that —
"The master then paid to them [the demanding seamen] a sum whlch, with
the cash paid them and the priée of the articles purchased as stated above,
together with the advances made in Lilyerpool, equàled or exceeded the one-half
of the wages then earned by each of them from the commencement of his serv-
ice for the ship."
While the adequacy of the payment was questioned in that case on
a différent ground— -i. e., the alleged invalidity of advances made to
the seamen in Liverpool — the payments would hâve been insufficient
(granting the présent contention of appellants to be correct), even after
the allowance of the Liverpool advances, and the Suprême Court, by
its afiirmance of the decree dismissing the libel, in view of the lan-
guage quoted, in effect approved the method of Computing the half
wages demandable under the statute, which was adopted in that case
in the court below, and which was that adopted in the District Court
in this case.
The "one-half part of the wages which he shall hâve then earned"
is literally one-half of the wages earned by the seaman to the date of
demand, without déductions. The language of the act places emphasis
upon wages earned, and not upon amounts due when demand is made.
The statute does not concem itself with what is due as upon a partial
or final settlement, but requires the payment of an amount propor-
tioned upon eamings rather than upon balances due. While the stat-
ute does not expressly say that wages theretofore paid shall be taken
into considération in the computation, the absurdity of a contrary con-
struction is enough to warrant the implication that they are to be con-
sidered. If the ascertainment, reqtiired by the act, was of the amount
owing on a settlement, the ordinary method of computation would be
to first deduct from gross earnings previous payments and allow one-
half of the residue. But the statute says "one-half |>art of the wages
which he shall hâve then earned." His gross earnings or total wages
THE RATHLIN HEAD 753
C262 F.i
must therefore be divided in two, in order to arrive at "one-half part
of the wages wîiich he shall hâve then earned," which is what the
statute read literally accords him the right to demand. The implied
condition to the demand is that he shall net hâve already received the
whole or any part of the wages demanded. Otherwise, a double pay-
ment would resuit, and the act will net be construed so as to produce
such an inéquitable resuit. The imphed condition makes it necessary
to deduct from the half eamings, when so ascertained, ail préviens
payments. The remainder is what the seaman is entitled to demand.
The évident aim of Congress was to provide that the seaman should
be entitled, pending the termination of the voyage, to demand and re-
ceive at intermediate ports of loading or unloading, with five-day in-
tervais, a sum equal to one-haJf of his then eamings, when there was
added to it ail previous payments, and that the master should retain
until the termination of the voyage the remaining half of the sea-
man's wages as an assurance against désertion.
It is urged by appellants that référence to the earlier laws, of which
section 4 of the présent Seamen's Act was merely amendatory, is per-
suasive of their contention. Section 4530 of the Revised Statutes and
section 5 of the act of December 21, 1898 (30 Stat. 756), both use
the word "due," instead of the word "earned." It is contended that
the purpose of the substitution was merely to avoid the effect of sea-
men's articles, which postponed the maturing of wages until the ter-
mination of the voyage, and that it should not be given a wider mean-
ing; i. e., that of making a change in the method of computation
from that which obtained under the earlier laws and which was un-
favorable to the seamen, since the Seamen's Act of March 4, 1915, was
enacted in the interest of the seaman rather than that of the ship-
owner. We are referred to no cases construing the earlier laws as
contended for, or citing any such practice as obtaining under them
and hâve found none. The District Judge in the opinion in the case
of In re Ivertsen, supra, assumed without citation of authority that
the method that prevailed under the earlier laws was that which is
hère contended for by appellants. Conceding, without deciding, that
the sole purpose of Congress in changing the word "due" to the word
"earned" was that stated, still, unless the method of computation con-
tended for by the appellants is shown to hâve been the prévalent one
under the earlier laws, the argument advanced fails, for in that event
no change in language in the amended law was needed to give it the
construction given it in the court below.
Our conclusion is that the weight of authority and of reason is per-
suasive that Congress intended to provide by section 4 of the Seamen's
Act of 1915, that the half of a seaman's wages should remain in the
hands of the master until the voyage was ended, as a security against
his leaving the ship, and that the seaman should be entitled to receive
only a sum, which at the time demanded would represent one-half of
his then earned wages, when there was added to it the total of ail pre-
vious advances and payments.
The decree of the District Court dismissing the libel is therefore
affirmed.
262 F.— 48
754 262 FEDERAL REPORTEE
FIBST NAT. BANK OF EVANSTON, WTO., v. BANK OF
WAYNESBORO et al.
(Carcuit Court of Appeals, Eighth Circuit. December 8, 1919.)
No. 5274.
1. Sales <S=»47S(1) — Vœndob undeb conditional saxe has title supebiobto
THAT OF BONA FIdE PUECHABEE.
The gênerai rule that a vendee under a contract retaining title to Per-
sonal property cannot, as against the vendor, convey good title even to a
purchaser without notice, Is in force in Utah.
2. FlXTUEES <g=>20~VENDOE*S BIGHTS UNDEB CONDITIONAL SALE CONTEACT
SUPEEIOE TO THOSE OF MOETGAGEE.
In Utah, the rlghts of a vendor retaining title to machinery for manu-
facturing ice untll the purchase price is paid are superior to those of a
person holding a mortgage on the premises in which such machinery was
installed by the vendee.
3. CoUBTS iS=5366(14) — State eulb of décision govebns in conditional sale
CONTRACT.
Whether the rights of a conditional sale vendor are superior to those
of a person holding a mortgage on the premises in which the vendee In-
staUed the purchased article will be determined according to the lave of
the state in wliich the case arises.
Appeal from the District Court of the United States for the District
of Utah.
Suit by Raymond H. Ryan against the James Coal & Ice Company,
the First National Bank of Evanston, Wyo., the Bank of Waynesboro,
T. D. Ryan, and others. From that portion of a decree adjudging the
Bank of Waynesboro and T. D. Ryan entitled to certain funds in the
hands of the receiver, the First National Bank of Evanston, Wyo., ap-
peals. Affirmed.
S. T. Corn, of Ogden, Utah, for appellant.
J. D. Skeen, of Ogden, Utah, for appellees.
Before SANBORN, Circuit Judge, and MUNGER and YOU-
MANS, District Judges.
YOUMANS, District Judge. The James Coal & Ice Company,
bought machinery for an ice plant from Frick & Co. under an agree-
ment that the title to the machinery should remain in Frick & Co. until
the purchase price was fully paid. Appellees succeeded to the rights
of Frick & Co. under that contract. The machinery was installed in a
building especially constructed for the purpose, and was placed on a
heavy concrète foundation and bolted thereto. It could be removed
by unscrewing the nuts on the bolts. The James Coal & Ice Company
afterwards contracted other debts, which it secured by mortgage on the
ice plant as real estate. Among the debts thus secured was a note to
appellant for $3,000. The note was executed April 22, 1913, and was
a renewal note. The mortgage was executed April 30, 1913. There is
a balance of $1,700 still due, and that balance is represented by a re-
newal note. The plant was sold at receiver's sale, and the proceeds
arising therefrom are now in court for distribution. The question hère
(g=5For other cases see same topic & KEY-NUMBBR lu ail Key-Numbered Digests & Indexes
FIRST NAT. BANK V. BANK OP WAYNESBORO 755
f262 F.)
is whether appellant, as a purchaser without notice, has a claim under
the mortgage superior to the claim of appellees under the contract re-
taining title. The court below held that the note secured by the mort-
gage was not entitled to priority.
In the case of Bierce v. Hutchins, 205 U. S. 340, 347, 27 Sup. Ct.
524, 525 (51 L. Ed. 828), the Suprême Court said:
"There remains the question whether the sale was conditional. Such sales
sometimes are regulated by statute, and put more or less on the footing of
mortgages. With the development of its eftects there has been some reaction
against the Benthamite doctrine of absolute freedom of contract. But courts
are not Législatures, and are not at liberty to invent and apply spécifie régula-
tions according to their notions of convenience. In the absence of a statute,
their only duty is to discover the meaning of the contract and to enforce it,
without a leaning in either direction, wlien, as in the présent case, the parties
stood on an equal footing and were free to do what they chose. The contract
says in terms that it is conditional, and that the goods are to remain the
property of the seller until payment of the note given for the price. This
stipulation was perfectly lawful."
In the case of Holt v. Henley, 232 U. S. 637, 640, 34 Sup. Ct. 459,
460 (58 Iv. Ed. 767), the Suprême Court said :
"We turn now to the claim of the mortgagees. This is based upon the clause
extending the mortgage to plant that may be acquired and placed upon the
premises while the mortgage is In force, coupled with the subséquent attach-
ment of the System to the freehold. But the foundation upon which ail tiieir
rights dépend is the Virginia statute giving priority to purchasers for value
without notice over Holt's unrecorded réservation of title; and as the mort-
gage deed was executed before the sprinkler System was put in, and the mort-
gagees made no advance on the faith of It, they were not ptirchasers for value
as against Holt. York Manufacturing Co. v. Oassell, 201 U. S. 344, 351, 352
[26 Sup. Ct 481, 50 L. Ed. 782]. There are no spécial facts to give them a
better position in that regard. But, that belng so, what reason can be given
for not respectlng Holt's title as against them? The System was attached to
the freehold, but it could be removed without any serious harm, for which
complaint could be made against Holt, other than the loss of the System itself.
Removal would not affeet the integrity of the structure on which the mort-
gagees advanced. To hold that the mère fact of annexing the System to the
freehold overrode the agreement that it should remain personalty and still be-
long to Holt would be to give a mystlc importance to attachment by bolts and
screws. For, as we hâve said, the mortgagees hâve no equity, and do not
bring themselves within the statutory provision. We believe the better rule
in a case like this, and the one consistent with the Virginia décisions so far
as they hâve gone, is tliat 'the mortgagees take just such an interest in the
property as the mortgagor acquired ; no more, no less.' "
In the case of Détroit Steel Co. v. Sistersville Brewing Co., 233 U. S-
712, 716, 34 Sup. Ct. 753 (58 L. Ed. 1166), the Suprême Court said:
"In Holt V. Henley, 232 U. S. 637 [34 Sup. Ot. 459, 58 L. Ed. 767], the court
had to consider a similar question of priority in view of a Virginia statute
like that of West Virginia upon which the petitioner relies, and, although in
that case the conditional sale had not been recorded, it was held that the
vendor was to be preferred. The main question now before us is whether
this case is to be decided differently on the ground that the tanks were 'an
essential indispensable part of the completed structure contemplated by the
mortgage,' a question left open in the former décision. 232 U. S. 641 [34
Sup. Ct. 459, 58 II. Ed. 767]. The tanks were essential to the working of the
brewery, and after they were installed the opening into the recess in which
they stood was bricked up. It may be assumed that they became part of the
realty as between mortgagor and mortgagee; but that is immaterial in equity,
756 262 FEDERAL EErORTER
however it may hâve been at the old common law. The question Is not wheth-
er they were attached to the soll, but, we repeat, whether the fact that they
were necessary to the working of the brewery gives a préférence to the mort-
gagee. We see no sutRcient ground for that resuit. ïhls class of need to
use property belonging to another is not yet recognized by the law as a suffi-
cient ground for authority to appropi-iute it. If the owner of the tanks bad
lent them, it ■would be an extraordinary proposition that it lest title whcn
they were bricked in. That it contemplated the ultimate passing of title upon
an event that did not happen makes its case no worse, except so far as by
statute recording is made necessary to save Its rights. The common law knows
no objection to what commonly is called a conditlonal sale."
[1-3] Thèse three cases from the Suprême Court of the United
States give full force to the gênerai rule that a vendee under a contract
retaining title to personal property cannot convey good title thereto,
even to a purchaser without notice as against the vendor. This is the
rule in Utah, and this case must be determined by the laws of that
State. Hirsch v. Steele, 10 Utah, 18, 36 Pac. 49; lyippincott v. Rich,
19 Utah, 140, 56 Pac. 806; Walker v. Machine Co., 41 Utah, 255, 126
Pac. 308; Stores Co. v. Moon, 49 Utah, 262, 162 Pac. 622. The ma-
chinery could hâve been removed. In that respect the case is similar
to the case of Holt v. Henley and the case of Détroit Steel Co. v. Sis-
lersville Brewing Co.
The case of Triumph Electric Co. v. Patterson, 211 Fed. 244, 127
C. C. A. 612, was determined by the law of the state of Arkansas. The
question there was whether the machinery involved was an irremovable
fixture as defined by the décisions of that state. It was there held that
under those décisions the machinery was an irremovable fixture. The
case of In re Sunflower State Refining Co., 195 Fed. 187, 115 C. C. A.
139, was decided under the law of Kansas, which requires a conditional
sale contract to be recorded.
There is no statute of Utah, nor décisions of its court of last re-
sort, changing the gênerai rule touching the point involved in this
case. It follows that the décision of the lower court must be affirmed.
MURPHY V. BANK OF WAYNESBORO et al.
SULLIVAN V. SAME.
(Circuit Court of Appeals, Eighth Circuit. December 8, 1919. Rehearing
Denied March ]5, 1920.)
. Nos. 5221, 5273.
Appeals from the District Court of the United States for the District of
Utah ; Tillman D. Johnson, Judge.
Suit by Raymond H. Ryan against the James Coal & Ice Company, Harry
L. Sullivan, as administra ter, the Bank of Waynesboro, Charles S. Murphy
and others. From those portions of a decree adjudging certain funds in the
hands of a recelver should be paid to the Bank of Waynesboro and T. D.
Ryan, Charles S. Murphy and Harry L. Sullivan, as administrator, appeal.
AfiSrmed.
Joseph Chez, of Ogden, Utah (David L. Stine, of Ogden, Utah, on the briefi
for appellant Murphy.
S. T. Corn, of Ogden, Utah, for appellant Sullivan.
J. D. Skeen, of Ogden, Utah (D. A. Skeen, of Sait Lake City, Utah, on the
briefs), for appellees.
EDWARD HINES LUMBER CO. V. AMERICAN CAR & FOUXDRY CO. «ai
(262 F.)
Before SANBOKN, Circuit Judge, and JIUXGT'^R and YOUMANS, District
Judges.
MDXGER, District Judge. Theso appeals are couipauions to the case of
Pirst N*atlonal Bank of Evanston v. Bank of Waynesboro, 262 Fed. 754,
C. C. A. - — , just decided, and seeli a reversai of portions of tlie same decTee.
After the James Coal & Ice Company had installed the ice-maliing machinery,
which it had received under tlie titlc-retaining contract, it executed a note
for borrowed money and secured it by a mortgage, and Murphy is the owner
of the note and mortgage and seeUs to hâve a decree that his lien extended to
the iee-maklng machinery, and that it was superior to the seller's claim under
his contract.
Sullivan seeks the same relief, and as a basls therefor asserts that he has
an interest in a mortgage executed by the James Coal & Ice Company after
the ice-making machinery had been iiistalled. The decree of the lower court
denied to appeUants the relief sought by tliem. What has been said in the case
of First National Bank of Evanston v. Bank of Waynesboro necessarily déter-
mines thèse appeals and requires an alflrmance of the decree.
Affirraed.
EDWARD HINES LUMBER CO. v. AMERICAN CAR & FOUNDRY CO.
(Circuit Court of Appeals, Seventh Circuit. May 15, 1919. Reheariiig
Denied September 24, 1919.)
No. 2004.
Whaeves <S=9— Holding over aiter tkkm not renkwai. ob extension or
LEASE.
The holding over by a lessee of docks after the expiration of the writ-
ten lea.se and the continued payment of rent, thus creating a tenancy
from year to year, is not a reuewal or extension of the lease, whlch con-
tained no provision therefor; hence provision of lease that tenant would
pay cost of rebuilding docks ou extension or rene\\al of lease haa no
application.
In Error to the District Court of the United States for the Eastern
Division of the Northern District of IlUnois.
Action at law by the Edward Hines Lumber Company against the
American Car & Foundry Company. Judgment for défendant, and
plaintiff brings error. Affirmed.
Certiorari denied 250 U. S. , 40 Sup. Ct. 179, 64 L. Ed. .
Charles T. Farson, of Chicago, 111., for plaintiff in error.
William D. McKenzie, of Chicago, 111., for défendant in error.
Before BAKER and EVANS, Circuit Judges, and ENGUSH, Dis-
trict Judge.
ENGEISH, District Judge. Plaintiff in error undertakes to collect
from défendant in error cost of rebuilding certain docks. Suit is based
upon a lease, which provided, first, plaintiff in error should become
legally obligated to rebuild docks; and, second, the lease might be
renewed or extended.
The déclaration filed by plaintiff' in error contained a full statement
of the lease. The language of the clauses of the lease in question,
neccssary for the considération of this case, are as f ollows :
<g=ï}For other cases see same topic & KEY-NTJMBER in ail Key-Numbered Digests & Indexes
758 262 FEDERAL REPORTER
"It Is further understood and agreed that the party of the flrst part
[plalntlff lu error] Is not to make any repairs to said docks durlng the con-
tinuance of this lease, and that If the party of the second part desires said
docks improved or repalred that such repairs or improvements sh^U be
made at its own expense.
"If the first party shall become legally obllgated to rebulld the docks than
by action other than through the request of the second party, the first party
Bhall bear the cost, but if thereafter this lease should be renewed or pxtended
to second party for any further period, then second party will at the time of
such renewal, repay to flrst party the entire cost of rebuilding said docks, to-
gether with interest thereon," etc.
The déclaration further allèges that at the expiration of the lease
no other or further lease or express agreement of any kind was entered
into by and between the parties, but that défendant in error remained
in possession of the premises and thereby a tenancy from year to year
was created whereby the written indenture of lease was renewed or
extended to the défendant in error for a further period.
A demurrer was interposed to the déclaration, which raised two
questions, the first of which relates to the construction to be given
to an ordinance of the city of Chicago, which we need not consider.
The second question is : Did the holding over by the défendant in
error operate to "renew or extend the lease"? The lower court an-
swered this question in the négative and entered an order sustaining
the demurrer and dismissing the suit, which action of the court is
brought hère for review.
Liability of the défendant in error dépends upon a renewal or ex-
tension of the lease. The lease covered a period of five years, termi-
nating on the 30th day of April, 1912. At the expiration of said period
no. further lease or express agreement of any kind whatever was en-
tered into between the parties. There was no provision in the lease
for its renewal or extension, but défendant in error remained in pos-
session, paying rent for the time it held over, and thereby, it is claimed,
created a tenancy from year to year, and such tenancy from year to
year is the basis for the contention by plaintifï in error that said lease
was renewed or extended.
The défendant in error, as tenant of plaintifï in error, held over
after the expiration of the term of the lease, and plaintifï in error ac-
quiesced in such holding over, by accepting rent therefor. Such hold-
ing over constituted a tenancy from year to year. This tenancy from
year to year was neither a renewal nor extension of the old lease, but
was a new lease for each year for such holding over, similar in its
provisions and covetiants, except as to the term of years, to that
of the old lease, so far as they were applicable to the new relation.
This new relation springs out of a duty implied by law, rather than
out of the contract. The renewal of the old lease implied the exécu-
tion of a lease for the same term ; and the extension of the old lease
implied the continuation of same upon same conditions and covenants
and for the same term. A tenancy from year to year, there fore, could
not be either a renewal or extension of the old lease. Weber v.
Powers, 213 111. 370, 72 N. E. 1070, 68 L. R. A. 610; 1 Wood on
Landlord and Tenant, § 13 ; Kennedy v. City of New York, 196 N.
MONTOYA V. UNITED STATES 759
(262 P.)
Y. 19, 89 N. E. 360, 25 L. R. A. (N. S.) 847; Herter v. Mullen, 159
N. Y. 28, 53 N. E. 700, 44 L. R. A. 703, 70 Am. St. Rep. 517 ; U. M.
Realty & Impr. Co. v. Roth, 193 N. Y. 570-576, 86 N. E. 544; Tif-
fany on Landlord and Tenant, pp. 1472-1519; A. & E. Encyc. Law,
vol. 18, p. 197; Hately v. Myers, 96 111. App. 217, 226.
Iviability was conditioned, not upon the continued possession of the
premises, but upon the renewal or extension of the written lease. A
tenancy from year to year is neither a renewal nor extension of the
prior lease.
The judgment is afïirmed.
MONTOYA et al. v. UNITED STATES.
(Circuit Court of Appeals, Bighth Circuit December 16, 1919.)
No. 5202.
1. Co^'BPIEACY ®=43(5) — Ovebt act need not be alleged.
An indlctment under Orlminal Code, § 19 (Comp. St. § 10183), for con-
spiracy to injure, oppress, threaten, and Intlmldate a citizen In the free
exercise of a right secured to him by the laws of the United States, is
not required to allège an overt act.
2. INDICTMENT and INFOBMATION <S=»110(3) — STATUTOBT LAKatTAOE surFi-
CIENT.
An indlctment which foUows the language of the statute Is sufflcient In
substance, and is not subject to attack, after verdict and judgment, on
the ground that It is not sufflciently spécifie.
In Error to the District Court of the United States for the District
of New Mexico ; Colin Neblett, Judge.
Criminal prosecution by the United States against C. C. Montoya
and Anastacio Sereseres. Judgment of conviction, and défendants
bring error. Affirmed.
A. B. Renehan, of Santa Fé, N. M. (M. C. Spicer, of Socorro, N.
M., and Cari H. Gilbert, of Santa Fé, N. M., on the brief), for plaintiflfs
in error.
Henry G. Coors, Jr., Asst. U. S. Atty., of Albuquerque, N. M.
(Summers Burkhart, U. S. Atty., of Albuquerque, N. M., on the brief),
for the United States.
Before CARLAND and STONE, Circuit Judges, and ELLIOTT,
District Judge.
STONE, Circuit Judge. Error by C. C. Montoya and Anastacio
Sereseres from conviction for conspiracy to injure, oppress, threaten,
and intimidate Rosetta M. Reed in the free exercise and enjoyment of
his rights to make effectuai a homestead entry.
The errors relied upon are insufKciency of the indictment, and in-
sufficiency of the évidence. The indictment was under section 19 of
the Criminal Code (Comp. St. § 10183). The portion of the statute hère
of moment is:
<Ê:=>For other cases see same toplc & KEY-NUMBBR in ail Key-Nuuibered Dlgests & Indexe»
760 2C2 FEDERAL REPORTER
"If two or more persons conspire to injure, oppress, threaten, or Intimidât»
any citizen in tJie free exercise or enjoyment of any rlght or privilège secured
to him by the Constitution or laws of the United States," tbey sliall be pun-
Islied.
The indictment outlines the homestead entry of certain described
public lands by Reed, and that he was residing thereon for the purpose
of complying with .the laws respecting homestead entries, and securing
a patent therefor, and that upon a certain date défendants and two oth-
ers conspired "to injure, oppress, threaten, and intimidate" Reed in the
free exercise and enjoyment of his right to réside upon, cultivate, and
improve the land, and mature his title to it as a homestead. The ac-
cused challenges the sufficiency of this indictment on thèse grounds:
"(a) It does not aver an overt act.
"(b) It does not go iuto particulars of the crime.
"(c) It does not define the oppression, intimidation, Injury, or threat vvhich
is pretended to hâve been exerted, and does not descend into particulars iu
thèse respects or any of them.
"(d) There was no spécification of the navinner in which tlie homestead
entryman was to be oppressed, or injured, or intimidated, or threatened, in
the right to make a homestead entry (which in fact had already been made) ,
or in the. right to réside, cultivate, and improve, or in the right to mature title,
or to what end or purpose, if at ail, whether to prevent the fulflllment of his
dutles as a homesteader, or to drive him away from. the laud, by ill treatment
or unneighborllness, or by active interférence with his potssessoi'y rlghts."
[1,2] The statute does not require an overt act as an élément of the
crime. The conspiracy alone complètes the crime. The other spéci-
fications may be generalized as objections that the indictment is not
sufficiently spécifie. There was no attack upon this indictment bef ore
trial, and it is to be deemed sufficient, unless it is defective in sub-
stance, rhuibar v. United States, 156 U. S. 185, 191, 15 Sup. Ct. 325,
30 Iv. Ed. 390. The indictment closely follows the wording of the
statute, and is therefore sufficient as to its substance, and is not sub-
ject to the attack made upon it after verdict and judgment. Smith v.
U. S., 157 Fed. 721, 725, 85 C. C. A. 353.
A careful reading and study of the entire évidence is convincing of
its sufficiency to sustain the verdict.
The judgment is afErmed.
NAKANO V. UNITED STATES TS-l
t262 F.)
NAKANO V. UNITED STATES. *
(Circuit Court of Appeals, Nintli Circuit. February 2, 1920.)
No. 33.37.
1. Wae <S=>4 — Evidence of disokderoly chabacter of house admibsibu:.
In a prosecution for keeping a liouse of 111 famé within five miles of a
military post, In violation of Aet May 18, 1917, § 13 (Comp. St. 1918, Comp.
St. Ann. Supp. 1919, § 2019b), and order of Secretary of War pursuanC
thereto, évidence of soUciting by a woman on the premlses, who lived
there held admissible.
2. Wae ®=»4 — Evidence op disorderlt chabacteb of hotjse admissible.
In a prosecution for lieeplng a bouse of 111 famé witbin five miles of a
military post, testlmony of an employé of the board of bealth that women
foimd in the place were infected with venereal diseases held admissible.
8. Cbiminai law <S=>1032(3) — Objection to indictment necessaby to secube
REVIEVy.
After golng to trial vvitliout objection, a défendant cannot raise the
objection in the apr)ellate court tliat the indictment was not signed by
tbe district attorney.
In Error to the District Court of the United States for the First Di-
vision of the Northern District of California; Edward E. Cushman,
Judge.
Criminal prosecution by the United States against S. Nakano. Judg-
ment of conviction, and défendant brings error. AfSrmed.
Marshall B. Woodworth, of San Francisco, Cal., for plaintiff in er-
ror.
Annette Abbott Adams, U. S. Atty., and Ben F. Geis, Asst. U. S.
Atty., both of San Francisco, Cal.
Before GILBERT, MORROW, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. The plaintifï in error was convicted un-
der an indictment which charged him with keeping a house of ill famé
within five miles of a military post, in violation of section 13 of the
Act of May 18, 1917 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, §
2019b), and the order of the Secretary of War made in pursuance
thereof.
[1] Error is assigned to the refusai of the court below to strike
from the évidence the testimony of a policeman, who testified that on
the premises of the plaintifï in error he arrested a certain woman
who he said was a prostitute ; that she was soliciting prostitution and
Hving on the premises ; that she was standing in the doorway of the
hôtel of plaintifï in error "and there was a white inan came along
Stockton Street ; she nodded to him and said, 'Come on in.' " Motion
was made to strike out the last stateraent, on the ground that it was
hearsay, and not made in the présence of the défendant. The évidence
was clearly admissible for the purpose of showing that prostitution
was being practiced on the premises. State v. Toombs, 79 lowa, 741,
45 N. W. 300; Beard v. State, 71 Md. 275, 17 AU. 1044, 4 L. R. A.
675, 17 Am. St. Rep. 536; State v. Littman, 86 N. J. Law, 453, 92
Atl. 580; People v. Clafify, 95 Mise. Rep. 400, 160 N. Y. Supp. 760.
^:=>For ottier cases see same lopic & KEY-NUMBER in ail Key-Numbered Digesta & Indexes
«Reheaiiac denled Aprll 6, 1920.
762 262 FEDERAL REPORTER
[2] It is contended that it was error to permit an employé of the
board of health, whose duty it was to examine women arrested on
immorality charges, with a view to isola te them and cure them if in-
f ected, to testify that he examined three of the women who were found
on the premises of the plaintiff in error, and ascertained that they were
ail infected with venereal diseases. No authorities are cited for or
against the admissibility of such testimony. We are not convinced
that it was réversible error to admit it. The character of the women
on the premises in question was proper to be considered in connection
with the charge, and we think it was not beyond the proper range of
proof to show, for the value which it might hâve, that the women
had acquired the maladies common to prostitution. The charge of
the court below is not before us. We may assume that the jury were
properly instructed as to the probative value of such évidence.
[3] We find no merit in the suggestion that the indictment is fatally
defective for failure of the district attomey to attach his signature
thereto. No statute makes such a signature essential. The indict-
ment was properly indorsed "A true bill" by the foreman, and was
presented and filed in open court, and the plaintiff in error went to
trial without directing objection to any formai defect. The objection
was not raised in the court below, nor is it found in the assignments
of error. It cornes too late. United States v. McAvoy, 4 Blatchf . 418,
Fed. Cas. No. 15,654; Frisbie v. United States, 157 U. S. 160, 15 Sup.
Ct. 586, 39 h. Ed. 657.
The judgment is affirmed.
LIM CHAN V. WHITE, Commissloner of Immlgratloa*
(Circuit Court of Appeals, Ninth Circuit. February 2, 1920.)
No. 3377.
1. Habsas cokpus ®=>113(5%) — Waivee by immigrant of bight to boabd op
special inquiet by failube to claim it.
An alien denied admission by ttie United States oannot ralse tlie ques-
tion of bis rlglit to a board of spécial inquiry on appeal from a judgment
In habeas corpus proceedlngs, wbere the rigbt was not claimed before tlie
iiunilgration oiHcers nor in the court below.
2. Habeab cokpus ®=>92(1) — Court need not weiqh évidence befobe im-
migkation ofïtoials.
In habeas corpus proceedlngs by an excluded alien, the court la not re-
qulred to weigh the évidence before the immigration offlclate, further than
to détermine whether there was substantial évidence to sustain their
décision.
Appeal from the District Court of the United States for the First
Division of the Northern District of California ; Maurice T. Dooling,
Judge.
Habeas corpus by Lim Chan against Edward White, Commissloner
of Immigration for the port of San Francisco. From a judgment
denying the writ, petitioner appeals. Affirmed.
<s=>For other cases see same toplc & KBY-NUMBER in ail Key-Numbered Dlgest-s & îndexea
•Rehearlng denied Aprll 5, 192ft,
Llil CHAN V. WHITE 763
(262 FJ
Geo. A. McGowan and Heim Goldman, both of San Francisco, Cal,
for appellant.
Annette Abbott Adams, U. S. Atty., and Ben F. Geis, Asst. U. S.
Atty., both of San Francisco, Cal., for appellee.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. The appellant made application to enter
the United States as the minor son of a résident Chinese merchant
lawfully domiciled therein. He was denied the right to enter for fail-
ure of proof of the alleged relationship. On appeal the Secretary of
Labor afiàrmed the décision. The appellant petitioned the court below
for habeas corpus, alleging that the hearing before the immigration
officiais was unfair. The writ was denied.
[1] On appeal to this court the appellant présents two points:
First, that he was entitled of right to hâve the question of his ad-
missibility determined by a board of spécial inquiry; and, second,
that the évidence of his right to land was of such a positive and con-
clusive character that to disregard it was abuse of discrétion on the
part of the officiais. To sustain the first point we are referred to
the décisions of this court in Quan Hing Sun v. White, 254 Fed. 402,
165 C. C. A. 622, and Jeong Quey How v. White, 258 Fed. 618,
C. C. A. , holding that Chinese persons claiming to be citi-
zens of the United States are entitled to bave the question of their
right to enter determined by a board of spécial inquiry. In the prés-
ent case there is no contention that the appellant is a citizen of the
United States. No claim for a hearing before a board of spécial in-
quiry was made at any time in the proceedings before the immigration
officiais, nor was the right to it asserted in the pétition for the writ,
nor is its déniai presented in the assignments of error. It is presented
for the first time in a brief filed in this court. It cannot avail the ap-
pellant hère. Passing by the question whether an alien may demand a
board of spécial inquiry, the objection that the appellant was denied
it is made too late. Jeung Bock Hong v. White, 258 Fed. 23,
C. C. A. .
[2] Nor do we find that the testimony concerning the right of the
appellant to enter the United States was of such a character as to
establish conclusively that right or to indicate that there was such
abuse of discrétion in ordering the exclusion of the appellant as to
justify review of the décision by habeas corpus. We discover many
discrepancies between the testimony of the appellant and that of Lim
Kee, who was alleged to be his father, discrepancies which may rea-
sonably hâve caused the immigration officiais to reject the claim
that the asserted relationship existed. On pétition for habeas corpus
on the ground that the hearing was unfair, the court below was not
required to weigh the testimony, or to go further into its investiga-
tion than to ascertain whether there was substantial évidence to sup-
port the décision. Low Wah Suey v. Backus, 225 U. S. 460, 32 Sup.
764 262 FEDERAL REPORTEE
Ct. 754, 56 L. Ed. 1165; Whitfield v. Ranges, 222 Fed. 745, 138 C.
C. A. 199; Katz v. Commissioner of Immigration, 245 Fed. 316, 157
C. C. A. 508.
The judgment is affirmed.
GUGGOLZ V. TJNIÏED STATES.
(Clroult Court of Appeals, Ninth Circuit. February 20, 1920.)
No. 3333.
Wab <S='4 — Indictment tjnder EanoNAGE Act must allège tiiat la»îguagb
WA8 SPOKEN IN PKESENCE OF SOME PEKSON.
An Indictnient for uttering profane, scurrilous, and abusive langage
about the form of government, the Constitution, and array and navy of
tlie United States held not to state an offense under Esplonage Act June
15, 1917, tlt. 1, § 3, prier to its araendment by Act May 16, 1918, § 1
(Comp. St. 1918, Oomp. St Ann. Supp. 1919, § 10212c), in the absence of
avernient that tie language waa uttered in the présence of any person
who mlglit be Influenced thereby.
In Errer to the District Court of the United States for the
Northern Division of the Northern District of California; William
C. Van Fleet, Judge.
Criminal prosecution by the United States against John C. Guggolz.
Judgment of conviction, and défendant brings error. Reversed.
A. M. Seymour, J. M. Inman, and Downey & Downey, ail of Sacra-
mento. Cal., for plaintifï in error.
Annette Abbott Adams, U. S. Atty., of San Francisco, Cal, and
Charles W. Thomas, Jr., Asst. U. S. Atty., of Sacramento, Cal.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. The plaintifï in error was found guilty
under an indictment which charged that on or about the llth of May,
1918, in violation of section 3, title 1, of the Act of Congress of June
15, 1917, as amended May 16, 1918 (Comp. St. 1918, Comp. St. Ann.
Supp. 1919, § 10212c), he did at a place named and while the United
States was at war with the German government, unlavvfully, willfully,
knowingly, and feloniously utter disloyal, profane, scurrilous, and
abusive language about the form of government of the United States,
the Constitution of the United States, and the military and naval
forces of the United States, which said language was intended by him
to bring the form of government of the United States, the Constitution
of the United States, and the military and naval forces of the United
States into contempt, scom, contumely, and disrepute, and did by
word support and favor the cause of the Impérial German govenunent,
with which the United States is and was at the time at war, and
opposed the cause of the United States in the said war. Then followed
the words which the plaintifï in error was alleged to hâve uttered, and
the charge that they were uttered with the intent to bring the form
^=>For other cases see same toplc & KEY-NUMEER in ail Key-Numbered Digests & luaexes
NOBTHERN IDAHO & MONTAXA P. CO. V. A. L. JORDAN L. CO. 70")
C2C2 F.)
fif government of the United States, the Constitution of the United
States, and the military and naval forces of the United States into con-
tempt, scorn, contumely, and disrepute, and to favor the cause of the
Impérial German government, and to oppose the cause of the United
States in said war. Upon the trial is was developed, and the district
attorney admitted, that the words so charged were uttered by the de-
fendant in April, 1918, and consequently before the amendment of
May 16, 1918.
The principal question in the case is whether the indictment charges
facts upon which a conviction may be sustained under the terms of the
original act of June 15, 1917. That act provides (section 3) :
"Whoever, when the United States is at war, sliall willfully make or convey
false reports or false statements witti intent to interfère with the opération or
snccess of the miilitarj' of naval forces of the TJnlted States or to promote
the suecess of its enemies, and whoever, when the United States is at war,
shall willfully cause or attempt to cause insubordination, disloyalty, mutlny,
or refusai of duty, in the military or naval forces of the United States, or
shall willfully obstruct the recruiting or enlistment service of the United
Statee, to the Injury of the service of the United States, shall be punished,"
etc.
The indictment fails to state a case under the first clause of the
act, for it contains no information that the reports were made or
conveyed to any person, or from which it may be seen that the state-
ments were made or conveyed with the intention to interfère with the
opération or suecess of the military and naval forces of the United
States. It likewise falls short of charging the causing, or attempting
to cause, insubordination, disloyalty, etc., in the military or naval
forces, or obstructing the recruiting or enlistment service, for it fails
to show that the statements were made within the hearing of any
person, or that they could hâve reached those who were in the miU-
tary service or who contemplated enlistment therein. In thèse re-
spects the case is similar to Shilter v. United States, 257 Ped. 724,
ce. A. — .
The judgment is reversed, and the cause is remanded, with in-
structions to discharge the plaintiff in error.
NORTHERN IDAHO & MONTANA POWER CO. v. A. t.. JORDAN
LUMBER CO.*
(Circuit Court of Appeals, Ninth Circuit. February 2, 1920.)
No. 3382.
1. Appeal and brror ©=5717 — In action teied bt the court, its opinion
CANNOT BE RE80RTED TO, TO SUPPLY FINDINGS NOT MADE.
On error to review a judgment in an action at law tried by the court by
stipulation, where no spécial flndings were requested or made, the opinion
of the court cannot be resorted to for such flndings.
2. Appeai, AND EREOa <S=»544(1), 846(5)— Re VIEW in action tbied by court.
Judgment in an action tried by the court by stipulation cannot be
reviewed, If the complaint States a cause of action, in the absence of
spécial flndings or bill of exceptions presenting rallngs made during the
trial.
«=)For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
•Rehearlng denied April 5, 1920.
766 262 FEDERAL RKPORTEB
In Error to the District Court of the United States for the District
of Montana; George M. Bourquin, Judge.
Action at law by the A. L. Jordan Liimber Company against the
Northern Idaho & Montana Power Company. Judgment for plain-
tiff, and défendant brings error. Affirmed.
B. S. Grosscup, of Tacoma, Wash., Sidney M. Logan and Logan
& Child, ail of Kalispell, Mont., and Grosscup & Morrow, of Tacoma,
Wash., for plaintiiï in error.
Henry C. Smith, of Helena, Mont, and T.. H. MacDonald and
J. E. Erickson, both of Kalispell, Mont., for défendant in error.
Before GIEBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge. The plaintifï in error seeks to reverse
the judgment of the court below, rendered against it in a law action,
in which a jury was waived and the cause was tried before the court.
The plaintiff in error states in its brief that, while the writ challenges
certain findings of the court for the reason that they are not supported
by the évidence, it is mainly based on the assignment that on the
facts found by the court, supplemented by the vindisputed évidence, the
judgment should hâve been for the défendant.
[1] On the trial no exceptions were taken to any ruling of the
court, and no request was made for spécial findings, or for a finding in
favor of the défendant in the action. The plaintifï in error refers to
the opinion of the court below as containing spécial findings of
fact, but the opinion cannot be resorted to for that purpose. Dickin-
son V. Planters' Bank, 16 Wall. 257, 21 L. Ed. 278; British Queen
Min. Co. V. Baker Silver Min. Co., 139 U. S. 222, 11 Sup. Ct. 523,
35 L. Ed. 147;. Saltonstall v. Birtwell, 150 U. S. 417, 14 Sup. Ct.
169, 37 L. Ed. 1128; York v. Washburn, 129 Fed. 564, 64 C. C. A.
132; Hayden V. Ogden Savings Bank, 158 Fed. 91, 85 C. C. A. 558;
United States v. Sioux City Stock Yards Co., 167 Fed. 127, 92 C. C.
A. 518; Gibson v. Luther, 196 Fed. 203, 116 C. C. A. 35.
[2] In the absence of a spécial finding, the judgment must be af-
firmed, unless the complaint fails to state a cause of action, or the
bill of exceptions présents some erroneous ruling of the court in the
progress of the trial. Norris v. Jackson, 9 Wall. 125, 19 L. Ed. 608.
There being in the présent case no ruling of the trial court, and no
spécial finding of fact, but only a gênerai finding, the latter must be
accepted as conclusive, and this court can go no further than to
affirm the judgment. Lehnen v. Dickson, 148 U. S. 71, 13 Sup. Ct.
481, 37 L. Ed. 373; Dunsmuir v. Scott, 217 Fed. 200, 133 C. C. A.
194; Pennsylvania Casualty Co. v. Whiteway, 210 Fed. 782, 127
C. C. A. 332.
The judgment is affirmed.
BUEGESS V. STANDARD OIL CO. 767
(262 P.)
BURGESS V. STANDARD OIL CO.
(Circuit Court of Appeals, Seventh Circuit. January 6, 1920.)
No. 2697.
Masteb and seevant <S=>302(1) — Masteb not liable fob aots or seevant not
IH OOUBSE OF DUTÏ.
An employer held not chargeable wlth liability for acts or omissions
of an employé sent to deliver a can of oU at a building in assistitig an
employé of the building at his request to operate an elevator on wbleli
the can was to be placed for carriage ; such service having no relation
to the dutles of his employment.
In Error to the District Court of the United States for the Eastern
Division of the Northern District of IlHnois.
Action at law by Anna Burgess against the Standard Oil Company.
Judgment for défendant, and plaintifï brings error. Affirmed.
David S. Eisendrath, of Chicago, 111., for plaintiff in error.
John A. Bloomingston, of Chicago, 111., for défendant in error.
Before BAKER, EVANS, and PAGE, Circuit Judges.
PAGE, Circuit Judge. Plaintiff sued to recover damages for Per-
sonal injuries, and prosecutes this writ of error because the trial court
instructed the jury to retum a verdict for the défendant.
Packages for the County Building, in Chicago, are taken in on an
elevator, which, when not in use, is in the basement imder métal
doors, that are in and form a part of the sidewalk on Randolph sticet.
lit is claimed that def endant's teamster, arriving at the County Building
with a can of oil, went into the basement to find some one to receive it.
The chief engineer of the County Building sent him to McGlynn, a
county employé. McGlynn asked the teamster to go up and give
three raps on the métal doors, and said that he (McGlynn) would
bring the elevator up and take Ùie oil in. Ajfter hearihg the teamster,
as McGlynn supposed, stamp three times with his foot on the iron
shutters, McGlynn immediately started the elevator upward, and that
raised the métal doors, thereby injuring plaintiff, who was just walking
over the doors.
The sole reason why the master is responsible for the wrongs of his
servant is because he is doing the master's business. It is not necessary
to cite authorities to show that, when he is doing a thing for some-
body else, the master is not Hable. Standard Oil Co. v. Anderson, 212
U. S. 215, 221, 29 Sup. Ct. 252, 53 L. Ed. 480. The utmost that De
Lude had to do for the défendant, in connection with the elevator, was
to place the can of oil upon its platform af ter it arrived at the sidewalk
level. The charge hère is that he undertook, on behalf of the de-
fendant, that the défendant would protect the public against the op-
ération of the elevator by the county's employé. This was not within
the line of his duty, and the défendant is not liable.
The cases cited by plaintiff are nearly ail coal hole cases, and differ
essentially from the case hère. In those cases the instrumentalities
Ê=>For other cases see eame toplc & KBY-NUMBER in ail Key-Numbered Dlgests & Indexe»
768 2G2 FEDERAL REPORTEE
used were necessary in the performance of the work undertaken and
their use and opération were necessarily wholly within the control of
the défendants.
If the injury was in fact caused by the neghgence of the teamster in
the manner charged, it was the personal neghgence of the teamster,
and not chargeable to the défendant.
The judgment of the District Court is afi&rmed.
UNITED STATES v. LONG BRAJSTOH DISTILLING 00. et aL
(Circuit Court of Appeals, Fifth Circuit. January 28, 1920.)
No. 3396.
APPEAL AND EBROB <@=123 CaSE NOT EEVIEWABLE WHEBE RECORD FAILS TO
SHOW JUDGMENT.
A case in whlch the record shows the verdict of a jury, but no judgment
thereon, is not reviewable on writ of error.
In Error to the District Court of the United States for the Southern
District of Florida; Rhydon M. Call, Judge.
Action at law by the United States against the Long Branch Dis-
tilHng Company and others. From the judgment, the United States
brings error. Dismissed.
H. S. PhilHps, U. S. Atty., of Tampa, Fia. (Fred Botts, Asst. U. S.
Atty., of Jacksonville, Fia., of counsel), for the United States.
N. P. Bryan and L. R. Milton, both of Jacksonville, Fia., for défend-
ants in error.
Before WALKER, Circuit Judge, and GRUBB and CLAYTON,
District Judges.
PER CURIAM. The record in this case does not show a judgment
which this court is given jurisdiction to review. It shows that a ver-
dict was rendered in favor of the défendants in error, who in the trial
court were défendants in an action at law, but does not show that
there was judgment on that verdict.
Because of the failure of the record to disclose a judgment subject
to be reviewed, the writ of error is dismissed.
®=sFor other cases see same toplc & KEY-NUMBQR in ail Key-Numbered Dlgests & Indexes
E. H. PREEMAN ELECTRIC 00. V. WEBER ELECTRIC CO. "09
(262 P.>
E. H. FREEMAN ELECTRIC CO. v. WEBER ELECTRIC CO. *
WEBER ELECTRIC CO. v. E. H. FREEMAN ELECTRIC CO.
(Circuit Court of Appeals, Third Circuit. August 13, 1919. Reliearing Denled
December 13, 1919.)
Nos. 2440, 2441.
Patents <®=»328 — Validitt and infringement — Electbic lamp socket.
Tlie Weber patent, No. 743,206, for an incandescent electrlc lamp socket,
claims 2 and 3, held vold for laclc of patentable novelty. Olaims 1 and 4,
as limlted by thelr laiiguage, the proceedlngs in the Patent Office, and
the prier art, held not infringed.
Appeal from the District Court of the United States for the District
of New Jersey ; J. Warren Davis, Judge.
Suit in equity by the Weber Electric Company against the E. H.
Frecman Electric Company. From tlie decree, both parties appeal.
Affirmed in part, and reversed in part.
For opinion helow, see 253 Fed. 657.
Frank C. Curtis, of Troy, N. Y., for plaintiff.
Robert H. Farkinson, of Chicago, 111., Livingston GiflFord, of New
York City, and David P. Wolhaupter, of Washington, D. C, for de-
fendant.
Before BUFFINGTON and WOOLLEY, Circuit Judges, and
MORRIS, District Judge.
MORRIS, District Judge. Weber Electric Company, the plaintiff..
filed its bill in equity against E. H. Freeman Electric Company, charg-
ing infringement of United States letters patent No. 743,206, for im-
provements in incandescent electric lamp sockets, granted to August
Weber, Sr., November 3, 1903, and by him assigned to the plaintiff.
The claims in issue were 1 to 4, inclusive. From a decree adjudging
claims 1 and 4 valid and infringed, and claims 2 and 3 invalid, both
parties appealed.
The incandescent electric lamp socket, to which Weber's patent
relates, is a sheet métal case consisting of a sleeve and a cap telescop-
ically fitting over the end of the sleeve. The case thus ïormed incloses
an insulating base with which the Une wires entering through a central
aperture in the cap are connected, and upon which is ciffixed a screw
socket for receiving the screw-threaded shank of an incandescent lamp.
The patent deals principally with interlocking means between the
sleeve and cap, and with means to prevent rotative movement between
sleeve and base when a lamp is being inserted in or removed from the
screw socket affixed to the base. The claims in issue are set out at
length, and plaintiff's structure described, in the opinion of the court
below. 253 Fed. 657.
The plaintiff contends that claims I, 2, 3, and 4 are infringed by
.defendant's keyless socket, and claims 1 and 4 by defendant's key
socket, and, as cross-appellant hère, allèges that the court erred in
©SjFor other cases see same topie & KEY-NUMBER in ail Key-Numbered DIgesta & Indexes
262 F. 19 «Certlorarl granted 262 tJ. S. — , 40 Sup. Ct. 48^, 64 L. Ed. — .
770 262 FEDERAL REPORTER
adjudging daims 2 and 3 invalid, instead of valid and infringed. Ea'~h
of thèse daims was held valid and infringed in a suit brought in the
Southern district of New York by this plaintiff against National Gas
& Electric Fixture Co. (D. C.) 204 Fed. 79, affirmed 212 Fed. 948,
950, C. C. A. . Thé défendant contends, howéver, that in
view of the évidence as to the prior art presented in this, but not in
the former, case, both claims 2 and 3 are invalid for want of patent-
able novelty. This new évidence consists, among other things, of
British patent to the Edison & Swan Electric Light Co., Ltd., No.
6781 of 1895, British patent to Gover, No. 11,714 of 1897, and United
States patent No. 575,322 to Benjamin, dated January 19, 1897. Each
of thèse patents, as does Weber's, pertains to electric lamp sockets.
The Edison & Swan patent states :
"The base A is grooved along each side, and the casing G which holds it
bas its two opposite sldes indented as shown at R, so that the base A. and
the parts flxed in it are made to oecupy the proper position relatlvely to the
bayonet catch slot K by whlch the lamp base is held in the socket."
The Gover patent expressly provides :
"The two sldes of the socket are indented so as to form internai protubér-
ances p engaging in the gi'ooves i of the Insulator to prevent It from
tuming."
In thèse two patents the lamp is mounted directly upon the sleeve
Iby means of bayonet slots instead of upon the base by means of the
lamp support or screw socket as in Wel^er's; but in the Benjamin
patent the lamp is mounted upon the base by means of a screw socket,
the base being inclosed in a case or shell of two parts screwed to-
gether. Benjamin describes his means of preventing rotation between
the case and base thus :
"Upon the interior of the shell or casing a two lugs or projections eseî are
provided, which engage correspondlng recesses ctoffl» in the base a to prevent
rotation of the base relatlvely to the casing."
To prevent unscrewing the sleeve and cap when screwing the lamp
into or unscrewing it from the screw socket of the base Benjamin
placed his projections within the cap instead of within the sleeve.
Each of thèse three patents antedates the Weber invention. The
means to prevent relative rotative movement between case and base
called for by Weber's claims 2 and 3 consists of a "peripheral recess"
in the base and "a sheet métal sleeve having a portion of its wall
introverted to oecupy said base recess." Thèse claims deal only with
means to prevent rotative movement between base and socket, and
do not, as do claims 1 and 4, include means to automatically interlock
with a snap action when the case members are telescopically joined,
thereafter to remain interlocked until released by manually compress-
ing the sleeve. The device described in each of the prior art pat-
ents accomplishes the same purpose by substantially the same means
operating in substantially the same way as does the introverted portion
of the case wall called for by Weber's claims 2 and 3; and this is
true whether or not the claims be restricted to the spécifie device he
describes. Consequently thèse claims lack novelty and fall within the
E. H. PREEMAN ELECTRIC CO. V. WEBEE ELECTRIC CO. 771
C262 F.i
références to the prior art. We are therefore of the opinion that
daims 2 and 3 of the Weber patent cannot be sustained, and that the
court below did not err in so holding.
The défendant appellant by its assignments of error allèges that the
court below erred in finding claims 1 and 4 valid and inf ringed. Thèse
claims were in issue and sustained in Weber Electric Ce. v. Na-
tional Gas & Electric Fixture Co. (D. C.) 204 Fed. 79, affirmed 212
Fed. 948, 950, C. C. A. ; Weber Electric Co. v. Wirt Mfg.
Co. (D. C.) 226 Fed. 481 ; and Weber Electric Co. v. Cutler-Hammer
Mfg. Co. (unreported) ; affirmed 256 Fed. 31, C. C. A. . Claim
4 was in issue and sustained in Weber Electric Co. v. Union Electric
Co. (D. C.) 226 Fed. 482. In view of thèse décisions, and hecause
we think the plaintiff has failed to show that the défendant has used
the particular devices to which the plaintiff can be considered en-
titled under thèse claims, assuming them to be valid, our discussion
will be confined to the question of infringement.
Claims 1 and 4 call for "a cap adapted to telescopically receive the
slotted end of said sleeve," to which claim 1 adds :
"Said members having Interengaging parts adapted to automatically inter-
lock icith a snap action lohen telescopically appUed to each other."
And claim 4, after describing the interengaging parts, provides :
"Whereby said members are adapted to automaticaJly imierloek toith a snap
action when telescopically applied to each other."
That the italicized words are words limiting and restricting the
claims to such interengaging parts as will automatically interlock with
a snap action when telescopically applied to each other is clear. Paper
Bag Patent Case, 210 U. S. 405, 410, 28 Sup. Ct. 748, 52 L. Ed. 1122;
The Corn Planter Patent, 23 Wall. 181, 218, 219, 23 L. Ed. 161 ; Dey
Time Register Co. v. W. H. Bundy Recording Co. (C. C.) 169 Fed.
807, affirmed 178 Fed. 812, 102 C. C. A. 260 ; Long v. Pope Manufg.
Co,, 75 Fed. 835, 839, 21 C. C. A. 533. But the meaning of thèse
words of limitation, and particularly of the words "when telescopical-
ly applied," remains to be ascertained. For this purpose resort may
be had to the state of the prior art, the file wrapper and contents of
the Weber patent in suit, Weber's patent No. 916,812, where the iden-
tical words are again used by him, and to the dictionaries.
The incandescent electric lamp socket in most gênerai use before
and at the time of Weber's invention was made in two parts, one
sleeved over the other and united by a bayonet joint. To form this
joint one member had an open end slot, longitudinal for part of its
length and transverse the remainder. The other member was pro-
vided with a stud which entered and passed down the longitudinal
part of the slot as the members were pushed together; then hy a
rotary mpvement of one member upon the other the stud entered the
transverse part of the slot and locked the two parts, so as to prevent
séparation by a longitudinal movement. The members were held
against reverse latéral motion by friction, or by the tightening of a.
screw forming the stud in one or more of the bayonet joints.
The chief object of Weber's invention was to provide an automatic
772 262 FEDERAL REPORTER
and positive locking connection between the sîeeve and cap of the
socket. His original application contained eight claims, but, as dvs-
closed by the file wrapper and contents, certain claims were rejected
hy the patent oifice on patent to Oetting, No. 642,825, or to Kenney,
No. 712,686. The Oetting device, as appears by the spécification, was
intended to do away with the bayonet joint as a locking means. It
substituted therefor spring tongues formed within and as part of the
sleeve, and bent flanges or lips on the spring tongues adapted to en-
gage openings or slits in the flange of the cap. The lock so formed
was positive in that it required deliberate effort to release it. The
parts vi^ere adapted to interlock by simply slipping or pushing one
within the other as contrasted to the bayonet joint locking movement,
but the lock was not automatic, for manual dépression of the spring
tongues was necessary to permit the flange of the cap to pass over
the protruding lips. In Kenney's device the opening in the sleeve con-
sisted of bayonet slots, and bayonet slots with a bridge crossing the
transverse portion of the slot at its intersection with the vertical por-
tion, the bridged hayonet slots being designated in the patent as open-
end slots and adjacent pockets with a bridge between them.
Radial inwardly projecting studs on the cap were designed to travel
vertically in and to the lower end of the open-end slots or gâtes, thence
laterally across the bridge and into the adjacent pockets, while addi-
tional radial projections on the cap were traveling in the vertical and
transverse portion of the bayonet unbridged slots, and entering recesses
within the periphery of the socket base to lock it in position. The
radial projection entering the bridge bayonet slot was beveled on each
side to permit its passing over the bridge by a latéral or rotary move-
ment in locking and unlocking. Kenney's lock would not operate by
the longitudinal assembling of the case members ; it required a rotary
movement; it was not positive, for it could become unlocked without
a deliberate effort to accomplish that purpose, but it was automatic in
that it could be locked without separate manipulation of the inter-
engaging parts.
After the above-mentioned rejection of claims, the patentée amended
his application and filed with the amendments remarks which indicate
not only his understanding of the manner in which his device diflfered
from those of Oetting and Kenney, but also his understanding of a
"telescopic movement." Concerning his own device he says :
"The parts are permltted to be applied to each other by simply Insertlng one
within the other, without manually compresslng the inner member," etc.
As to the Oetting construction he states :
"The parts cannot be locked together by simple telescopic movement; It
belng necessary to manually depress thé catches," etc.
He thus distinguishes from Oetting, not in the direction o^ the lock-
ing movement or in the positiveness of the lock, but in the automatic
feature only. In so doing he treats the direction of locking movement
as identical and describes it synonymously as "simply inserting one
within the other" and as a "simple telescopic movement." Touching
the Kenney socket Weber says :
E. H. PBEEJIAN ELECTRIC CO. V. WEBER ELECTRIC 00. 773
(202 F.)
"Kenney's device Is adapted to unlock by simply rotating one member upon
another in the same manner that the parts are locked together, no maniial
compression of the inner member being necessary."
Comparing this description with tlie Weber structure, we find that
hoth looks are automatic ; Weber's is positive ; Kenney's is not.
Weber's locks by "simply inserting one [member] within the other" ;
Kenney's by "simply rotating one member upon the other." The dis-
tinguishing features are the positiveness of the lock and the direction
of locking movement. As "simply rotating one member upon another"
is not "simply inserting one [member] within the other," it is not the
movement described in Weber's remarks as "telescopic." It thus
appears that "telescopic movement" is used by the patentée, not to de-
scribe a bayonet joint locking movement, but a movement in antithesis
thereto. This is confirmed by the patentee's use of the w^ords "when
telescopically applied" in his subséquent patent, No. 916,812, which
covered a device so constructed as to prevent relative rotary motion
of the cap and sleeve both during and after their telescopic application.
And we think thèse words apt and appropriate to define the straight
longitudinal movement as distinguished from the bayonet joint move-
ment, for such is their ordinary and usual acceptation.
Hawkins' Mechanical Dictionary, under "Telescopic Pipe Joint"
says :
"The telescopic joint permits longitudinal extension and contraction."
The word "télescope" is defined by the Standard Dictionary thus :
"To drive togetlior, so that one slides into another, like the sections of a spy-
glass or small télescope ; to crush by driving together Into or upon ; to move
like the sliding portions of a spyglass in closing."
Lexicographers hâve so uniformly defined this word that the mean-
ing given by one may be accepted as imparting the thought of ail.
The verbs in this définition convey the idea of a longitudinal force
impelling a direct onward or forward movement in contradistinction
to latéral force and rotary motion.
But, even assuming that the words "when telescopically applied"
are susceptible of a construction sufficiently broad to include the bay-
onet joint locking movement, the remarks, filed in the Patent Office
by the patentée or on his behalf, distinguishing the Weber locking
movement from that of Kenney, discîose that either Weber always
intended and understood that thèse words should bear their usual
meaning, and thus exclude the Kenney movement, or under stress of
the Patent Office rejection he elected to so restrict their meaning. In
either event the resuit is the same, namely, that having thus limited his
claims to exclude the bayonet joint movement of Kenney, he is not
now entitled, through the aid of the doctrine of équivalents or other-
wise, to a construction that would embrace it.
The direction of the Weber locking movement lias been heretofore
considered by the courts, not, it is true, in cases in which the mem-
bers of the socket alleged to he an inf ringement were adapted to inter-
lock by a bayonet joint movement only, for such device appeared in
the history of the Weber litigation for the first time in the court be-
774 262 FEDERAL HEPORTER
low, but in cases in which the locking parts were adapted to interengage
when applied to each other by a single, straight, longitudinal move-
ment. In those cases the courts, construing the claims there in issue,
and differentiating the Weber device from those of Kenney and Oet-
ting, hâve held that the Weber locking movernent is a straight longi-
tudinal motion along the axial line of the two members of the socket,
and that this constituted a feature distinguishing it from the Kenney
device. In the Union Electric Co. Case, Judge Rellstab, referring to
the Weber device, said :
"From thls récital It will appear that In assembllng the members nothing
beyond telescopically applied pressure was necessary to elïect interlocklng."
And as to the Kenney device he said :
"No interlocklng of the Kenney members could be effeeted automatlcally by
telescopic pressure. A rotary movernent of the members against each other
was absolutely necessary to put the radial projections and the intermediate
lugs into position to effect a locking engagement."
Judge Ray, in the National Gas & Electric Fixture Co. Case, re-
ferred to the interlocklng of the two members of the Weher socket as
taking place "as the two are pushed together." Judge Hand, in the
Cutler-Hammer Mfg. Co. Case, said:
"I think it is established by the décisions of Judge Ray, Judge Rellatab,
and the Circuit Court of Appeals, that the Kenney socket is locked by a rota-
tive movernent whereas the Weber socket is locked by a direct longitudinal
thrust. * * • Judge Ray * * • said as to the Bray patent, No. 170,-
703, that the partial rotation required for disengagement was a distinguishing
mark from the mode of opération of the Weber patent."
The Circuit Court of Appeals, in affirming Judge Hand, said :
"The vital point is that Weber's way is to engage by a straight
thrust. * * *"
While the dominant feature of Weber's inventive idea may be the
interlocklng without handling or manipulating the catches as in Oet-
ting, and the positiveness of the lock which requîtes manual compres-
sion of the slotted sleeve to unbolt it, as contended by the plaintiff,
yet the protection afforded by the patent is no broader than its claims ;
and in view of the foregoing considérations we are of the opinion
that the words "adapted to automatically interlock with a snap action
when telescopically applied to each other," found in claims 1 and 4,
limit those claims to such means or members as will so interlock when
applied to each other by a straight longitudinal motion along the axial
line of the two members of the socket.
As defendant's key and keyless sockets, charged to infringe claims
1 and 4, both lock with the bayonet joint movement and their locking
means are not adapted to interlock when the members or means are
telescopically applied to each other, we think the charge of infringe-
ment cannot be sustained.
The decree of the District Court is accordingly affirmed as to claims
2 and 3, and reversed on the issue of infringement as to claims 1 and
4, with directions to dismiss the bill, with costs to the défendant in
this court and the court below.
UNITED STATES V. CLEVELAND, C; C. & ST. h. RY. CO. 775
C262 FJ
UNITED STATES v. OLEVELAND, C, C. & ST. h. RY. CO. (two cases).
(District Court, N. D. Ohio, E. D. January 30, 1920.)
Nos. 9934, 10088.
1. Cabbiebs <©=»37 — Local caebiee not liable undeb Twentt-Eight Hour
LAW rOE TBANSP0BTINO CATTLE TO YAEDS FOE UNLOADING FOE WATEE, FO</D,
AND BEST.
The receipt of live stock Dy a raili'oad company, whose Une connected
with one over whlch the stock was being shipped, but fcJrmed no part of
the through. route, and the transporting of sucb stock wlth due diligence
to a reasonably convenlent stockyard for unloadmg for feed, water, and
rest, Tield not a violation of the Twenty-Eight Hour Law (Comp. St. §
8651), although the stock was conflned longer than the time limlted.
2. CABRiEats ®=337 — LdABiLinr of locai, cabeieb undeb Twenit-Eight Hour
Law.
Where an Interstate carrier of live stock has contracted with the owner
of stockyards, near, but not on, its llne, to unload, feed, water, and rest
the stock in transit, a Connecting carrier, which transports the stock from
Buch Uirough Une to the yards is not responsible for delay in unloadlng
by the stockyards company, whlch In such case is agent of the through
carrier.
At Law. Action by the United States against the Cleveland, Cincin-
nati, Chicago & St. Louis Railway Company. Two cases. On de-
murrers to answers. Overruled.
E. S. Wertz, U. S. Atty., of Cleveland, Ohio.
Cook, McGowan, Foote, Bushnell & Lamh, of Cleveland, Ohio, for
défendant.
WESTENHAVER, District Judge. Thèse cases arose under the
twenty-eight hour stock law act of June 29, 190$ (U. S. Comp. Stat.
1916, § 8651). Défendant has filed an answer to the first, fourth, and
fifth causes of action in case No. 9934, and to the first and second
causes of action in case No. 10088, and to thèse answers plaintiff has
demurred generally.
Ail the answers set up the same défense in precisely the same lan-
guage, varying only in describing the shipment and in one respect,
presently to be noted, in the answer to the fourth and fîfth causes of
action in case No. 9934. AU the shipments were made in Interstate
commerce from an originating point on the Unes of the New York
Central Railroad Company to the destination point, soraewhere east
of Cleveland, Ohio, in which routing and carriage the defendant's
road formed no part. The answers, after admitting the shipments as
alleged and that the cattle were confined in ail cases for a continuous
period in excess of 36 hours without being unloaded for rest, feed, and
water, sets up a défense which can best be stated by quoting it :
"Further answering, défendant says that said cattle shipment origlnated
on the Unes of the New York Central Kailroad Company, and was to be tran»-
ported entirely over the Unes of said railroad company to the city of New-
York, in the state of New York ; that In the course of transportation of said
cattle from Chicago, Illinois, to the city of New York, New York, over the Unes
of said railroad company, it became necessary for said railroad company to
i@=Por other cases see same toplo & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexe»
776 2G2 FEDERAL REPORTER
unload sald stock at Cleveland, Olilo, for the purpose of resting, feeding, and
waterlng the same, In compliance with the laws of the United States govern-
Ing the transportation of such stock; that said New York Central Railroad
Company, not havlng any stockyards of its own, or on the Une of its railroad,
at Cleveland, Ohlo, bas contracted and arranged with the Cleveland Union
Stoekyards Company at Cleveland, Ohlo, for the performance by It of such
service, sald Cleveland Union Stoekyards Company being located on the Une
of the railroad of this défendant ; that for the purpose of reachlng the yards
of said Stoekyards Company this défendant permitted sald New York Central
Railroad Company to transport sald cars of cattle to said stoekyards. over the
Une of railroad of this défendant, from the point of connection between its
railroad and that of said New York Central Railroad Company, défendant re-
ceiving for such service a swltehlng charge In the sum of two dollars and flf ty
cents ($2.50) ; that said switching charge formed no part of the through rate
charged for the transportation of said stock, and defendant's road, over whlch
said service was performed, formed no part of the through route for the
transportation of said stock from point of origin to destination thereof, and
défendant was not a Connecting carrier of said stock ; that said stock was
transported to said stoekyards over defendant's tracks in the ordinary and
usual time required for such service, and was delivered to said stockyai-ds
company at its said stoekyards in sufficient time for sald stock to be un-
loaded before the expiration of the period of thirty-six hours allowed by
law for the continuous confinement of such stock without food, rest, or
water; that any confinement of said stock beyond said period of thirty-six
hours was due solely to the failure of saiil New York Central Railroad Com-
pany and of said Cleveland Union Stoekyards Company, their agents and serv-
ants, to unload said stock within said statutory period; that the service
provided and fumished by said Cleveland Union Stoekyards Company in the
unloading, feeding, watering, and resting of sald stock was performed en-
tirely for the beneflt of said New York Central Railroad Company, and un-
der contract or arrangement made directly between sald Stoekyards Company
and sald New York Central Railroad Company, this défendant not being a
party to sald contract; that it has not vlolated any of the provisions of the
acts of Congress relating to transportation of such cattle and especially the
act of Congress of June 29, 19CK5, referred to in the pétition, and tliat it is
not liable to tlie United States for any penalty under any of said acts of
Congress."
The answers in case No. 10088 are precisely in thèse ternis, and the
answer in case No. 9934 to the fourth and fifth causes of action differ
only in that, instead of alleging that the défendant permitted the New
York Central Railroad Company to transport with its own crews said
cars of cattle over defendant's line of raiiway to the Union Stoek-
yards in Cleveland, Ohio, allège that such transportation was made
by the défendant.
[1] I am of opinion that the facts stated in thèse several answers
constitute a good défense, and that the demurrer thereto should be
overruled. In exact principle, if not upon the exact facts, the question
hère involved is ruled by the f ollowing cases : United States v. Stoek-
yards Terminal Raiiway Co. (8 C. C. A.) 178 Fed. 19, 101 C. C. A.
147; Northern Pacific Terminal Co. v. United States (9 C. C. A.) 184
Fed. 603, 106 C. C. A. 583; Merchants' Bridge Terminal Raiiway
Co. V. United States (7 C. C. A.) 209 Fed. 600, 126 C. C. A. 422;
United States v. Union Pacific Railroad Co. (8 C. C. A.) 213 Fed.
332, 130 C. C. A. 34. Ali thèse cases hâve heen cited with approval in
the récent case of United States v. Chicago, Milwaukee & St. Paul Raii-
way Co. (8 C. C. A.) 250 Fed. 442, 162 C. C. A. 512. In this last case
it is held that receipt by a Connecting carrier of a stock shipment for
UNITED STATES V. CLEVELAND, C, C. & ST. L. RY. CO. ' ' '
t262 FJ
transportation, and not merely to be iinloaded for feed, water, and
rest, is a violation of this act, if done knowingly and willfully, but
that this holding in no vvise conflicts with the other cases cited, in
which it is held that siich receipt and transportation, if perf ormed with
due promptness, for the purpose of being unloaded for feed, water, and
rest, is not ïin offense. It is further said that the distinction between
the two Hnes of conduct and the reason therefor is well drawn in
United States v. Lehigh Valley Railroad Co. (C. C.) 184 Fed. 971
(Holt, District Judge), affirmed without report (3 C. C. A.) 187 Fed.
1006, 109 C. C. A. 211.
Thèse cases, it seems to me, settle the law that a terminal carrier,
or any other carrier, may receive stock to be carried with due diligence
to any reasonably convenient stockyard, for the purpose of being un-
loaded as required by law, without committing an offense; and this
is true, even though the lines thus used. may be part of a Connecting
line, which it is necessary to use in performing the original contract
of Interstate carriage.
[2] In the instant case, défendant as to three shipments merely per-
mitted a section of its track to be used, and in two cases merely switch-
ed the shipment over its line from the New York Central Railroad
Company's line to the Union Stockyards, with which the New York
Central had a contract to feed, water, and rest cattle in compliance
with this law. The défendant, as well as the Stockyards Company, was
an agency availed of by the New York Central Railroad Company
to comply with the law. Its lines did not form any part of the line
of road over which the catde were to be conveyed from one state to
another. If the failure of the Stockyards Company to perform the
labor of unloading the stock with due promptness is a matter of im-
portance, this failure must be imputed, not to the défendant, but to the
New York Central, whose agency it was, and on which the duty rests
to comply with the law.
Two cases only are cited by plaintifï's counsel in support of its de-
murrer, namely, United States v. St. Joseph Stockyard Co. (D. C.)
181 Fed. 625, and United States v. Northern Pacific Terminal Co. (C.
C.) 186 Fed. 947. Both are décisions by District Judges, and are in
contlict with the Circuit Court of Appeals décisions already cited. The
first named was overruled by the Circuit Court of Appeals (187 Fed.
104, 110 C. C. A. 432), and the second was upon tthe third and fourth
propositions, the only ones in point, overruled in 209 Fed. 600, 126 C.
C. A. 422.
The demurrers will be overruled. Exceptions may be noted.
778 262 FEDERAL KBPORTEE
In re HUDSON.
(District Court, S. D. Alabama. January 30, 1920.)
No. 2023.
Bankeuptcy <S=40T(5) — Borbowing money bt moetgaginq peopebtï' not
owned not obtaininq monet on false weitten statement, babbino'
disceabge.
The giving by a bankrupt of a mortgage on property whieh he did not
own, to secure a note for money borrowed, held not an obtaining of the
money upon a materially false statement in writlng, wliicli bar8 discliarge,
under Bankruptey Act, § 14b(3), Comp. St. § 9598; the debt being one
whieb, under section 17a (2), Comp., St. § 9601, ia not released by a dis-
cbarge.
In Bankruptey. In the matter of Riehard B. Hudson, bankrupt.
On motion to strike objection to discharge. Motion granted.
Lyons, Chamberlain & Courtney, of Mobile, Ala., for movant.
Wm. B. Inge and Roy R. Cox, both of Mobile, for respondent.
ERVIN, District Judge. This is a motion to strike the contest of
the bankrupt's application for discharge on the ground that the ob-
jection to the discharge is not one of those enumerated in the Bank-
ruptey Act of July 1, 1898 (30 Stat. 544, c. 541). The objection is
based upon subdivision b (3) of section 14 (Comp. St. § 9598), which
reads as f ollows :
"The judge shall * • * discharge the applicant unless he has * ♦ •
obtained money or property on crédit upon a materially false statement In
writing, made by him to any i)erson or his représentative for the purpose of
obtaining crédit from sueh person."
The facts set up to support this contest are that the bankrupt, in
order to secure a loan of money from the contesting creditor, evidenced
by bankrupt's notes given at the time, gave such creditor a written
mortgage upon a described automobile, and that the bankrupt owned
no such automobile. An analysis of thèse facts will show that techni-
cally they do literally come within the provisions of subsection 3.
The money was obtained and notes were given evidencing the loan, so
that there was a crédit then granted by the lender to the borrower,
and the written statement contained a materially false statement, in
that the borrower did not then own the automobile as stated in tlie
writing, and the loan was made on the faith of such représentation.
The question, however, is whether this was such an obtaining of
money on crédit as was contemplated by Congress when this provision
was written. Counsel hâve been unable to find any case in which
the State of facts set up herein has been discussed in this connection,
nor hâve I, in the brief examination I hâve made, been able to find
any such case; so I must consider the words as contained in the two
sections herein referred to, and give to each the meaning which the
import of the language suggests to me that Congress intended they
should hâve.
<gc=>For other cases see same topic & KBY-NUMBKR In ail Key-Numbered Digests & Indexes
IN RE HUDSON 779
C262 F.)
The Bankruptcy Act was primarily written to cover ordinary mer-
cantile dealings; so the words used in the act are to be given the
construction and meaning ordinarily understood in mercantile dealings,
and not the strict technical construction which they may be suscepti-
ble of. A loan upon given security is not ordinarily contemplated
when merchants speak of obtaining money, goods, or property on
crédit. The fact that Congress used thèse words to dénote the ordi-
nary crédit dealings between merchant and customer is indicated by
the construction placed upon this subdivision by ail the text-writers,
such as Collier, Brandenburg, and Remington.
In discussing this provision, they ail treat it as a provision intended
by Congress to deny a discharge where the money or goods were se-
cured on some représentation by the borrower, such as the statements
ordinarily given to the mercantile agencies — a statement of facts made
as a basis of crédit between a customer and a merchant. None of
thèse writers, so far as I hâve been able to ascertain, hâve considered
that the provision written in subdivision 3 goes further than this and
covers a spécial loan secured by collatéral pledged or mortgage given
at the time, which loan may hâve been obtained upon a false représen-
tation of fact.
The fact that thèse writers hâve ail so construed this provision, and
hâve not conceived that it went far enough to include money or
property obtained by false pretenses or false représentations, is per-
suasive évidence that the language used by Congress was not intended
to include such a state of facts, and is supported by the further fact
that Congress wrote into the Bankruptcy Act, in section 17, the fol-
lowing : ■
"A discharge In bankruptcy shall release a bankrupt from ail of hls provable
debta, except such as * ♦ ♦ (2) are liabllities for obtaining property by
false pretenses or false représentations, or for wlllful and malicious injuries
to the person or property of another, or for alimony due or to become due, or
for inaiiitenauce or support of ^vife or child, or for séduction of an unmarried
female, or for breach of promise of marriage accompanied by séduction, or
for crimlnal conversation."
It will be observed that the statement of facts in this case brings
the parties directly under the first paragraph of subsection 2 of section
17, in that it was a liability or debt created by obtaining money by
false pretenses or false représentations, and hence the debt or lia-
bility so created would not be released by the discharge, even if granted.
Congress would scarcely hâve provided that a debt or liability created
by a given state of facts should be a ground for objecting to a dis-
charge, and at the same time hâve excepted the debt so created from
the discharge when granted. It is manifest that thèse two provisions,
if so construed, would be inconsistent, because, if an obligation so
created was excepted from the discharge when granted, it could hard-
ly be a ground for objecting to the granting of the discharge, which
would not cancel or release such debt or liability.
Again, it is hardly conceivable that Congress would hâve grouped a
number of classes of obligations or debts and excepted them from re-
lease by the discharge, and yet hâve provided that a debt or obligation
780 202 FEDERAL REPOKTKU
so created in the manner specified by one of thèse classes only should
be a bar to the release, and not hâve given the same effect to the debt
created by the other enumerated classes. For instance, to construe
it as contended by the objecting créditer, \ve would hâve a debt or
obligation created by buying property under false pretenses or false
représentations, which vi^ould be a bar to any discharge ; but, if the
debt or obligation was created through willful or malicious injuries to
the person or property of another, it would be merely excepted from
the opération of the discharge when granted, but would be no ground
for objection to the granting of any discharge whatever. I cannot
conceive that Congress intended to draw such distinctions between the
two classes of debts enumerated.
I am satisfied that what Congress intended to do was to except from
the effect of the discharge one class of debts or obligations created by
obtaining property under false pretenses or false représentations, as
thèse words are used in the various statutes of the varions states,
making this state of facts a crime, and that the words used in
subsection 3 of section 14 were intended to be limited to such deal-
ings between merchants or individuals, where a written statement of
facts was made by the borrower as a basis of crédit, as ordinarily un-
derstood in mercantile dealings, and that the language they hâve used,
where given its ordinary meaning, does just what Congress intended.
I therefore hold that, where the facts set up bring the parties under
the provisions of subdivision 2 of section 17, the debt or obligation is
not released by the discharge, and hence such facts présent no ground
for objecting to the granting of a discharge.
A decree will therefore be entered, granting the motion to strike the
objections.
THE M. J. EUDOLPH.
(District Court, E. D. New York. .Tanuary 5, 1920.)
OoLusiON ©=>102 — Mutual failuke to kebp proper lookout.
Collision between a small tug crossing East River, but which, on near-
ing the Brooklyn slde, had turned upstream and was moving nearly paral-
lel wlth the plers, and an overtaking steam lighter, passlng up, held due
to faults of both vessels in failing to keep proper lookont.
In Admiralty. Suit for collision by Thomas F. Timmins and others,
doing business as the Croton Water Company, owner of the tug Roach,
against the steam lighter M. J. Rudolph. Decree for libelants for half
damages.
Foley & Martin, of New York City, for libelants.
Park & Mattison, of New York City, for claimant.
CHATFIELD, District Judge. On July 29, 1918, at a little after
five in the afternoon, a small tug, called the Roach, and belonging to
the libelant, left Pier 7 on the Manhattan side of the East River, to
go to a water hydrant at the end of a short pier located on the Brook-
©c»For othcr cases see same toplc & KBY-NUMBBR In ail Key-Nunibered Digeste & Indexe»
THE M. J. RTJDOLPH 781
(262 P.)
lyn side of the East River, near where the Penn Annex Ferry slip
formeriy was located, and iramediately north of the large Pier 4
at the foot of Fulton street, Brooklyn. The tide was running strong
ebb, and the Roach, in order to avoid a tow coming down the river,
headed across, so as to reach the protection of the Brooklj'n shore,
instead of going up along the Ncyv York shore until she could run
straight across the river. The Roach passed on the New York side
of a suction dredge located several hundred feet from the Brooklyn
piers, and then took her course so as to run directly up the river
toward the Brooklyn side of the span of the Brooklyn Bridge. She
thus expected to reach a point where she could turn into the dock
above Pier 4, as soon as she could observe the conditions at that pier,
and yet bef ore she would be struck by the strong rush of the tide under
the Brooklyn Bridge.
Just behind her, passing up the Brooklyn side of the East River,
was the deck lighter Rudolph, which has its pilot house located aft
of its derrick mast and back of the cargo space upon the main deck.
The captain of the Rudolph was in his pilot house while the deckhand
and others working upon the boat were at varions points principally
near the stern of the boat on the starboard side. The captain of the
Rudolph saw the Roach when the Roach was some 200 or 300 feet
away from the end of Pier 4, and when she was pursuing a course
slightly Crossing that of the Rudolph, but in gênerai heading up the
East River. The deckhand of the Rudolph observed the Roach at
about the same time as she was seen by the captain of the Rudolph, but
gave no alarm, as the captain was cognizant of the Roach at the time
Apparently the captain of the Rudolph diverted his attention whiU'
the mast of the Rudolph obstructed the Roach from view, and while
he was looking out of his starboard pilot house window at the Brooklyn
shore, or at the men upon the starboard side of his own lighter, and
the next any of the men on the Rudolph knew the Roach was almost
across the bow of the Rudolph, and so near that, although the en-
gines of the Rudolph were reversed, she struck the Roach, which was
carried a little distance up the river, and rolled over, so that her
captain and his engineer were forced to jump overboard and swim
to the upper corner of Pier 4.
Ail of the parties locate the collision at 150 feet out from the face of
Pier 4 and approximately near the middle of the pier. Evidently the
Rudolph must hâve carried the Roach upstream a sufficient distance,
so that the men swimming from the Roach could reach the upper side
of that pier.
Tlie tcstimony does not show definitely whether they would be
carried down by the ebb tide, or may hâve been carried up somewhat by
the eddy formed between the Brooklyn Bridge and Pier 4; but this is
not of great importance in the case. The Roach was short its deck-
hand, who had not shown up that day for work, and it was therefore
without a lookout. The captain of the Roach and the engineer on that
boat were entirely oblivious of the présence of the Rudolph, which
evidently was proceeding at twice the speed of the Roach, and thus
was overtaking her, up to the moment of coUision.
782 262 FEDERAL REPORTER
It is évident from the testimony that the captain of the Rudolph,
as well as the lookout of the Rudolph, were négligent in failing to ap-
preciate the approach of the Roach to the Brooklyn shore, and to
realize that they were overtaking and passing a boat which was get-
ting into dangerous proximity, even though it was proceeding, ac-
cording to their assumption, on a course parallel to their own up
through the Brooklyn Bridge. The configuration of the Brooklyn
shore and the narrowness of the space under the Brooklyn Bridge
made the courses of the Rudolph and the Roach converging, and the
burden was upon the Rudolph, in overhauling the Roach, to pass her
in safety. A whistle signal, or care on the part of the lookout, would
hâve averted the collision.
But evidently the captain of the Roach has placed himself in a dilem-
ma from which he cannot extricate himself. In order to avoid the
conclusion that he was on a crossing course, and that he was ap-
proaching Pier 4 with the Rudolph on his starboard hand, and that he
was at fault for failing to blow a two-whistle signal, he has insisted
and strenuously explained that he was running parallel with the
Brooklyn shore, and therefore was not on a course converging with
that of the Rudolph.
An examination of the chart makes it plain that, if he were on a
parallel course with that of the Rudolph, he would hâve been in no
position to make the slip above Pier 4, as he explains that he was
doing. He was running without lookout, in the absence of a deck-
hand. He kept no lookout himself, except to observe the boats appar-
ently that were coming down through the Brooklyn Bridge. He al-
lowed the Rudolph to get so close that the strong ebb tide, as it came
through the Brooklyn Bridge, swept him in and directly across the
bow of the Rudolph, without giving waming to that vessel of any
need of space in which to exécute the maneuver.
The Roach was a small boat, used as a water boat, and her captain
estimâtes that, with an ability to make a speed of but 3 or 4 knots an
hour, he could successfuUy buck the tide in the East River, which he
estimâtes runs 15 knots an hour.
The collision in question is one which could hâve been easily avoid-
ed by careful observation and lookout on the part of either vessel.
Both vessels were actually at fault, and they are fortunate in that the
damage was not greater, and that the men who were f orced overboard
escaped without injury. Both should bear responsibility, and the libel-
ant may hâve a decree for one-half of his damages.
THE AUSABLB Î83
C262 P.J
THE AUSABLE.
(District Court, E. D. New York. November 21, 1919.)
SALVAGE ®=5l3 — AXLOWED rOB TOWING VESSEL DEIFTING IN POBT.
Two tugs, wMch in response to dlstress signala rendered service in
movlng a partially loaded steamer, which had dragged her anchor, and
drlfted over the anchor ehain of another vessel, and was in danger of
fouling her propeller, held, entitled to salvage compensation.
In Admiralty. Suit by Leta D. Potter against the steamer Ausable.
Decree for libelant.
Foley & Martin and J. A. Martin, ail of New York City, for libelant.
Barry, Wainwright, Thacher & Symmers and John C. Prizer, ail of
New York City, for claimant.
CHATFIELD, District Judge. The facts seem to be that the Ausa-
ble was in a position where conditions had to improve or where con-
sidérable danger might hâve resulted. The Ausable was loaded heavily
below decks. She was taking on a deck cargo from at least four
barges alongside, and had been dragging her anchor, under the influ-
ence of the flood tide and the southeast wind. She reached a position
where she was dangerously close to the Kenny, which was at anchor,
but which apparently had insufficient crew on board even to drop back
out of the way.
This occurrence happened on the 24th day of July, 1919, so that no
likelihood of storm enters into the case. It was broad daylight until
after the Ausable had been finally brought to an anchorage ; the wind,
if anything, had died down during the afternoon, and the Ausable
was not moved until nearly high water. Her drifting had been check-
ed or stopped by putting out a starboard anchor and then hauling in
on the port anchor chain, so as to take up at least the amount which
it had been lengthened during the previous night, and so as to bring
the boat into a position where she would swing evenly with the tide
from both anchors. Âccording to the witness Bousak, she brought up
on thèse anchors in such a position that her stern actually moved over
the anchor chain of the Kenny back and forth, without fouling that
anchor chain. Subsequently the Ausable must hâve settled back to
some extent, for ail of the other witnesses, including the captain of
the Ausable, testified that the anchor chain of the Kenny led down
forward of the rudder post and rudder of the Ausable, and, if the
drifting of the Ausable had been stopped, there must hâve been some-
thing in the conditions of wind and tide which allowed the Kenny and
the Ausable to move toward and away from each other, as well as for
the Ausable to swing back and forth.
It seems more likely, from ail the testimony, that during the after-
noon the Ausable in some way worked into a position where she was
actually against the chain of the Kenny, and in such a situation that
the captain of the Ausable was justified in his assimiption that she had
better be moved from that position before the tide changed, and that
©saFoT other cases see same toplo & KBY-NUMBBR In ail Key-Numbered Digests & Indexes
784 262 FEDERAL RHPOKTBB
it was dangerous to turn over his own propeller, for fear that this
anchor chain was actually afoul the propeller and was wound around
it. It appears that the Ausable blew what were to be interpreted as
distress signais, or signais for assistance. At first the captain intended
his calls for the tug which had been handling the lighters, which had
left for South Brooklyn shortly after noon, and which did not i-e-
tum until after the Ausable was finally at anchor. It appears that the
captain of the Ausable blew thèse whistles and was looking for as-
sistance for at least an hour and a half, and that he was finally an-
swéred by the Juno, a moderate sized tug ordinarily employed in bring-
ing vessels in from outside the Hook. The captain of the Juno took
charge of the Ausable at the request of the first officer in comraand
of thé Ausable, reached the conclusion that it was unwise to move the
Ausable without further assistance, and called in the Emma J. Ken-
nedy by an additional whistle that was équivalent to a distress whistle
or call for assistance.
The Kennedy came from Staten Island, and with the Juno at-
tempted to draw the Ausable away from proximity to the Kenny.
This was accomplished by taking a hawser from the Ausable to the
Kennedy. There is a dispute as to whether the Juno assisted in starting
the Ausable away from the side of the Kenny, because some of the
witnesses on the Ausable did not see any indications of working of the
engines of the Juno. Under the circumstances, it makes very little
différence, because the présence of the Juno made it possible to carry
out the maneuver without risk, and, if the Juno used her own power,
it would entitle her to little more compensation than if she had merely
towed alongside in readiness. In any event, the engines of the Ausable
were started as soon as the distance away from the Kenny was such
that it was certain that the propeller was not fouled in the Kenny 's
chain, and after that the Ausable proceeded to what was thought a
proper anchorage; but on testing this, and particularly upon the re-
quest of the first officer of the Ausable, the boat was moved further,
which took a few moments of time, but does not enter into the
question of salvage.
The whole opération indicates that if the Ausable had been left alone
she might hâve swung clear when the tide changed, as apparently the
danger was diminishing, instead of increasing, if the propeller did not
get fouled in the anchor chain. But during the time that the Ausable
was calling for assistance the situation was such that she certainly
needed assistance, and the solicitation of a removal from danger was
not that of obtaining a tow, but was evidently a seeking for help.
The danger which she was in would be estimated more by the possible
delay in undertaking her voyage, the difficulty of making any repairs
to the loaded vessel, if her cargo had to be lightened so that her stern
could be raised in order to get at the propeller, and the incident ex-
penses of making any repairs at ail, rather than the possibility of loss
either of the boat or of her cargo. In fact, the danger from the
standpoint of the value of the boat and of her cargo does not enter
into the value of the services rendered. The situation is not
one in which a percentage of either the value of the boat or her cargo
THE WEEGELAND 785
C262 F.)
could be taken as a basis for compensation, nor should the mère
value of the towing services rendered in taking the boat to an anchor-
age be the basis for compensation.
The Kennedy was a joint party in the undertaking, but, of course,
did nothing except tow the boat. The Juno and her captain under-
took the opération, assuming entire responsibility, which later was
shared with the captain of the Kennedy; and yet, after the engines
of the Ausable began to work, the services actually rendered for the
next half hour were merely those of the ordinary towboat, whose
captain was acting as pilot upon the steamer.
I think that makes it apparent that the award should not be judged
from the standpoint of the towing service, nor from the standpoint
of possible loss of the ship or her cargo. Taking into account the
damages which the first officer of the Ausable had a fair reason to
apprehend, and which he was endeavoring to avoid at the time that he
sought to get his boat away from the Kenny, an award of $750 to the
Juno and $250 to the Kennedy would be proportionate, and you may
hâve a decree for that amount.
THE WERGEI/AND.
(District Court, W. D. Washington, N. D. September 20, 1919.)
No. 4095.
SHIPPING Ig=5l49 — CHAKTEREB mat RECOVEH rBEaoHT EABNED IN VIOLATION
or CHAETEB.
Where a sehooner, under cliarter to carry a cargo of lumber wlileh
provided, "No goods to be laden on board otherwise than from ctiarterers,"
after encountering a storroi In wliicbsbe was oompelled to jettison part
of the cargo, returned to port of loading for repairs, where charterer
tendered cargo to replace that lost, whleh, was refused, but the vessel
reiplaced it with other lumber at a hlgher freight rate, charterer held
entitled to recover the excess freight so earned.
In Admiralty. Suit by Comyn Mackall & Co. against the motor
sehooner Wergeland; A. O. Anderson & Co., claimants. Decree for
libelant.
Wm. H. Gorham, of Seattle, Wash., for libelant.
Grosscup & Morrow, of Tacoma, Wash., for respondent and claim-
ants.
NETERER, District Judge. The sehooner, under a charter party,
loaded a full cargo of lumber for libelant at Port Blakely, Wash.,
and sailed for Sydney, New South Wales, on March 13, 1918. On the
I5th of March, when about 100 miles west of Cape Flattery, the
sehooner encountered a storm and lost two masts, and approximately
200,000 feet b. m. of her deck cargo was jettisoned, and the sehoon-
er was compelled to seek a port of refuge, which proved to be the
loading port, at which place a large part of the remaining cargo
had to be discharged by reason of the damage sustained by the
^=s>Por other casea see same toplc & KEY-NUMBER in ail Key-Numbered Digests à Indexes
262 F.— 50
786 262 FEDERAL EEPOBTER
vessel. Upon the schooner being repaired, the original cargo was
again loaded, with the exception of 5,502 feet b. m., which was bro-
ken and destroyed in discharging and reloading. The charterer ten-
dered sufficient cargo to replace the lost cargo at charter rate, but
the owners refused to accept, except at an increased rate of freight,
which was declined. The owners then shipped on their own accounf
164,152 feet b. m. of lumber.
The libelant seeks to recover the profit earned on the replacement
cargo at the rate of $20.43 per thousand feet b. m. ; this being the ad-
vance in freight rate at the time of shipment above the charter rate.
The charter party contained this provision : "No goods to be laden on
board otherwise than from charterers." The libelant contends that
it had a right to replace the lost cargo at the charter rate, and further
contends that the owner is guilty of a breach of charter party be-
cause of the provision stated, and is liable in damages to the market
rate of freight as the market stood when the vessel sailed the second
time, in excess of the charter rate. The owner contends that the empty
space caused by the excepted péril belonged to the vessel, and not to
the charterer.
The charterer having shipped a full cargo, including deckload, and
the schooner having sailed on her voyage, and through périls of the
sea lost a part of her deck load, the owners, by reason of the excep-
tions in the charter, were relieved from any liability for nondelivery
of that part of the cargo so lost, and the charterers free from any
liability for freight thereon. When the schooner sailed, both parties
had complied with their respective obligations under the charter party,
in delivering and accepting a full cargo ; but, through the exigencies
of a storm at sea, the vessel was again at the loading port with space
for approximately 200,000 feet b. m.
It would appear that, while the policy of the law favors the full
use and employment of vessels as a public good, in the absence of any
prohibitory clauses in the charter party (1 Parsons, Ship. & Adm. 294),
the parties are held, however, to ail reasonable stipulations not incon-
sistent with the charter party, or such policy, where there is no in-
tent or purpose to nullify the policy of the law. Such intent is ab-
sent in this case, as shown by the tender of cargo.
The libelant in this case had a right to insist upon the terms of the
charter party, and not permit itself to be placed in a position where its
cargo might be placed in compétition with the cargo of the owner at
the port of discharge, and that may hâve had an important bearing
upon the venture of the libelant, and, as stated by the court in The
Port Adélaïde, 62 Fed. 486, 10 C. C. A. 505 :
"Under such a contract the master had no right, without the permission
of the libelant, express pr implled, to use the vessel upon any part of the
voyage for carrying cargo for thlïd persons. Having done so, however, and
earned freight thereby, the libelant, if he saw fit to adopt the master's act,
became entltled, upon the plainest prindples of law, to the freight earned."
In the absence of stipulation, there would be no further duty upon
charterers to tender replacement cargo, or on the owners to accept
such tender. The space left vacant by the lost cargo would be at the
UNITED STATES V. EAINE-ANDREWS LUMBEK CO, 787
C262 FJ
disposai of the owners, provided that the voyage was not tnereby de-
layed. Weir et al. v. Girvin et al., 8 Aspinall, Maritime Cases, 471 ;
same, on appeal, 9 Aspinall, Maritime Cases, 79.
The damage stipulated, in the event recovery was awarded, is $3,-
353.62, in which amount, together with interest, a decree may be en-
tered.
UNITED STATES v. EAINE-ANDHEWS LUMBER CO.
(District Court, N. D. West Virginia. January 3, 1920.)
No. 19.
1. Courts "©=3347 — Answer to bill constrxjed to set up fraud and mistake,
so that evidence of communications and neq0tiati0n8 phior to exe-
cution of contract was admissible.
Answer to bill by tlie United States to enjoln défendant, who had con-
tracted In wrlting to sell eut-over land for a forest reserve, from removing
tlmber. In whichi défendant set up tliat it was understood the riglit to
remove vIrgin timber was reserved, held sufflcient to raise the issue of
fraud and mistake under the new equity rules, and so paroi évidence of
the communications prior to the exécution of the agreement was ad-
missible.
2. Evidence cS==428 — Parol admissibix wiiere contbact thkouqh feaud
or mistake does not show real agreement.
Where a wrltten contract, through fraud or mlstalie, does not express
the intention of the parties, paroi évidence Is admissible to show the real
agreement.
8. United States <©=»5 — Polict of government not to wrono citizens.
It is the policy of the United States never linowingly to do wrong and
injustice to any of its citizens.
4. WOODS AND FORESTS <©=58 CONTRACT NOT BESEEVING LANDOWNEE'S EIOHT
TO REMOVE VIRGIN TIMBER EESULT OF MISTAKE.
In a suit by the United States to enjoln a landowner, who sold a large
quantity of cut-over lands for a forest reserve, from removing about 100
acres of virgin timber, held that, under the évidence, the f allure of the
consummated contract and deed to reserve to the landowner the rlght
of removal was the resuit of mistalje, due to représentations of the offi-
ciais of the forestry department, so évidence of communications between
the parties prior to the contract, etc., was admissible.
6. Evidence <S=> 441(1) — Parol évidence admissible to show sepaeatk and
independent c0ntemp0rane0us contract.
In a suit by the United States to enjoin défendant, who had contraeted
to sell cut-over lands for a forest reserve, held, that there was an Inde-
pendent contemporaneous contract, whereby défendant was to be entitled
to eut a small amount of vlrgln timber still on the lands to be sold, so
évidence of communications between the parties prior to the contract was
admissible.
6. Woods and forests <S=58 — ^Vendob of cut-ovkb lands havinq eight to
EEMOVE virgin TIMBER FBOM FOREST RESERVE.
Where the government's forester, who handled the negotlations for
cut-over lands for a forest reserve, decllned to agrée to defendant's réser-
vation, for two years, of tlie right to remove the virgin timber on about
100 acres of a large tract, which was agreed to be sold, but stated that
the matter should be handled by permits for a reasonable time after the
government acqulred title, defendant's failure to remove the timber
wlthin two years after the contract was made dld not deprive It of its
igSjPoi other cases see same toplc & KBY- NUMBER in ail Key-Numbered DIgests & Indexes
788 262 FEDERAL REFOETER
rlght of removal thereafter, the government not having acqulred title ft>r
Bome time, and the permits not having been issued, for the agreement by
the forester was an independent contemporaneous contract
In Equity. Suit by the United States against the Raine- Andrews
Lumber Company. On final hearing of appHcation for injunction.
Temporary restraining order dissolved, and bill dismissed.
On the lOtli day of October, 1919, the United States presented its bill against
the défendant, wherein it charges that on or about the day of ,
1919, it instituted against it in this court proceedings to condemn 5,614.9'2
acres of land under the Weeks Iforestry Act, and that such proceedings are
pending and undetermined ; that the United States purchased this tract mider
conti-act with défendant dated October 5, 1915 (a mistake — should be October
5, 1914), a copy of which contract is exhibited ; that under this agreement it
purchased the land in fee, subject to réservation of coal and mining rights
and easement for nine years for a railroad to be maintalued by défendant to
remove the tiinber froin other laiids owned by it; that plalntifC has caused
the lines and corners to be marked as set out on plat flled ; that "slnce the
order of the said court appointing viewers" the défendant company, at points
set forth in the bill as identilled by the plat, has gone on said tract of land
and eut at least 200,000 feet of valuable timber, and is threatening to eut at
least a million and a half of other timber wiûiin a radius of not to excced
a mile and a half from the point whcre it is now cutting, which timber it ia
converting to its own use, against the plaintifC's rights. Further allégations
as to such cutting, the alleged willful and unlawful character thereof, and
the necessity for Injunction are made. The prayer of the bill is for immédiate
Injunction and decree for threefold damages in value for ail timber so
removed.
The day after the filing of this bill, without notice to défendant, a temporary
restraining order for ten days was granted, notice was required to be given,
and the motion for temporary injunction was set down for hearing at Wlieel-
ing on October 21st following. On that date the défendant appeared and by
agreement of parties the restraining order was continued in force until Novem-
oer 13th, at Philippi. By subséquent agreement it was continued, from tlm»
to time, until December 8, 1919, at Martlnsburg, when and where the évidence
was taken and full hearing of the cause had, and the court took time to con-
sider of its judgment in regard thereto.
In the meantime, however, on Noveonber 15th, the défendant flled its answer.
In which it admits the allégations of the bill that condemnation proceedings
bave been instituted and are pending; that the contract under date of Oc-
tober 5, 1914, was executed ; that since viewers in the condemnation proceed-
ings were appointed it has eut 241,070 feet, and removed to its mill 128,305
feet, of timber from the land. It asserts its right for such action, and for
the right to further eut and remove some million and a half other timber
therefrom, for substantially the reasons that it was never eontemplated by
the parties that the uncut-over timber on the land should be sold by it, but
only the surface of the land was so sold, and by independent agreement such
timber and the right to eut and remove it was to be reserved to it
Upon the hearing, the évidence was almost wholly documentary in charac-
ter, the material parts of which are herein set forth, and from which the
rights of parties must be determined. On August 12, 1913, the Forest Service
of the Department of Agriculture procured from the défendant a proposai to
sell to the United States 32 parcels of land (24 in Randolph and 8 in Tucker
countles, this state) aggregating about 13,200 acres.
This proposai, made upon the govemment's prlnted blank form, set forth:
"When timber is eut ofC, we will remove ail the buildings, inachtnery, etc.,
which right we reserve in the proposai, except, if sale is made, we will let
any three houses that you may sélect remain on the ground. We will reserve
ail timber for a period of ten years, with privilège of extension if we are com-
pelled to shut down for strikes, lires, or something beyond our control." Also
this: "If the timber rights on whole acres are reserved for 10 years and the
UNITED STATES V. RAINE-ANDEEWS LUMBER CO. 789
C262 F.)
minerai rights are reserved on whole acres, we will sell for $4 per acre." And
thls: "Said land is free and clear from incumbrances, excepting about 400
acree, title to which is now pending in the Suprême Court."
On AugTist 22, 1913, the department's Forest Examiner in charge wrote a
letter to défendant, in wliicli, after aclcnowledging receipt of tliis proposai to
sell, he says:
"It is the policy of the National Forest Réservation Commission not to ac-
cept lands on which the timber canuot be removed within two or three years,
except at a yei*y low price, on account of tlie fact that purchase by the gov-
emment relieves the owners of taxes, cost of protection, and a large share of
the carrylng cost of the investmcnt. Therefore I think It imliltely that your
offer ean receive favorable considération unless you would be willing to con-
sider a lower price than $4 per acre. The minerai réservation would be Bat-
Isfactory, but It would be necessarj- to fix definitely the minimum diameter
limits to whicli you will eut."
To this letter défendant, under date of August 25th, after acknowledging
Its receipt, replied:
"Would advise that the costs you refer to would only be a small item. lu
this State timber and land are assessed sépara tely and v»e are assessed $2 an
acre for eut over lands. You hâve timber in this section which you are pro-
tecting, and this additional amount should not add materially to the cost of
protection, especially with our co-operation."
Ou September 12th foUowing the Forest Examiner wrote to the government'.s
local supervisor at Elkins a letter in which he says:
"Tlie two objectionable features of the proposai of the Raine-Andrews Lum-
ber Company were that, while they had 7,000 acres of cut-over land and only
5,000 acres of meicbantable forest yet reraaiuing, they desired a cuttlng perlod
of ten years, with the privilège of further extension in case they were com-
pelled to shut down. A ten-year perlod is too long for a tract of 5,000 acres.
1 believe that a thousand acres a year should be about the minimum allowance.
Moreover, it was évident, from the wording of the proposai, in which it was
Ktated that 'the timber rights are reserved on the whole number of acres,' that
the Company expected to reçut the 7,000 acres of cut-over land. Thls would
mean that the government might cari-y this 7,000 acres for a period of nine
years, and that the vendors durîng the tenth year would bave the right to
eut ail the merchantable timber on this area at that time. If thls land could
be ofCered, releasing the 7,000 acres of cut-over land immediately, and cuttiug
the 5,000 acres to a diameter of at least 12 inches for oak and poplar (if it
is hardwood land) , the proposai would merit considération at the price of $4
at which it is offered. I hoiîe you can take the tract up with the owners
again on tliis basis, and see if it is possible to obtain a modifled proposai."
On September 25th foUowing the local examiner or supervisor replied to
this letter as foUows:
"I bave had an opportunity on September 23d to talk over with Mr. T. W.
Raine, of tlie Raine-Andrews Lumber Company, their ofEer of 13,200 acres of
laud, 8,200 of which bas already been eut over and the remainder, 5,000 acres,
is still in virgin forest. The company does not wish to reçut the 7,000 from
which the merchantable timber bas been removed, and in case of sale to the
government this aoreage, together with 1,200 acres of bumed brush land could
be delivered at once. I dare say the wording of the proposai was a little mls-
leading, when 'the timber rights are reserved on tlie whole number of acres.'
Mr. Raine meant that the timber rights were reserved on the whole number
of acres (5,000) still to be eut over.
"As far as shortening the period of eut, they cannot do it with Uie mill ot
the capacity now in opération. The mill bas a capacity of about 15,000,000
board feet per year. The company bas just flnisbed the eut on a 1,000-aere
tract which yielded 35,000,000 feet, and it took nearly 2% years to complète
thls eut. From this you can see that, to remove tho timber from at least
1,000 acres per year, the company would require a mill of double the capacity
of the one now in opération. The timtter on the 5,000 acres will average about
25,000 to 30,000 board feet per acre. For the amount of material to be re-
moved a ten-year llmit is quite reasonable.
790 262 FEDERAL KEPORTBB
"I took up the question of a dlameter limlt, but the company could not be
eotpeeted to adhère to a dlameter on the 5,000 acres, whlch Is composed of
spruce, hemlock, birch, maple, beech, basswood, ash, cherry, and cucumber,
Timber, averaging 25,000 board feet per acre in the spruce and hemlock type,
is usually ail large trees that can be eut, excepting an occasional beeeh and
some small spruce, and thèse are eut to a 4-lnch limit.
"I accompanied Mr. O. D. Oushing in making a preliminary examinatlon of
tibe tract. We did not hâve an opportunity to examine the best of the cut-over
lands, nor the heaviest stands and best soil In the virgin portion of the tract.
Mr. Oushing plaeed a value of $4 per acre on the land from just vvhat he had
seen. Portions within this 13,200 acres could be sold readily for $10 per acre.
"At my request Mr. Raine wiU make out another proposai, stating clearly
Just v?hat réservations he will make and Ineludlng their share in co-operation
wlth the government In fire patrol."
On October 8th following the inspecter in charge at Washington wrote to
the local one at Elkins as follows:
"Your letter of September 25th is reeelved. In order that we may better
consider the proposai in this case when it is resubmitted, please let us know
the condition of the land that bas already been eut over. We cannot give
much weight to the forest flre protection in which this company wlU co-oper-
ate, since this will be largely for their own beneflt in the protection of their
own timber. I do not belleve, however, that the proposai will be considered
at a price of $4, unless the company is wllling either to reserve occasional
seed trees of ash, cherry, and basswood, which are the most valuable species
of the hardwood land, or to agrée to eut those species to some dlameter limit
where this is possible. What proportion of this land would you say was oc^
cupied by spruce and hemlock, and what proportion by hardwoods? The
soil of the spruce type is generally extremely gravelly, rocky, or sandy, and
has invariably been given a much lower value than the hardwood lands. In
the White Mountains the usual value for the spruce type has been about $1
an acre. If the company could be indueed to reduce their offer to $3 an acre,
there would be a much greater probability of Its belng favorably considered."
To this the local examiner on October 17 th replied :
"The hardwood lands of this company, consistiug of approximately 6,000
acres hâve already been eut over. The company is now operating in the spruce
and hemlock type, which contains a small projjortion of birch, beech, maple,
cucumber, ash, cherry, and basswood, along wlth the heavy stand of spruce
and hemlock. This type will average upwards of 30,000 board feet per acre.
In the hardwood portion of the tract Ares hâve occurred nearly every sprlng
and fall, and there are about 2,000 acres burned over. On the whole, the
hardwooia lands are in good condition, and are restocking rapidly to a young
growth. Several boundarles of the hardwood land hâve been sold from the
original tract, after belng eut over, at the rate of $10 per acre, to be used for
agrieultural purposes. Local ownera of adjacent lands place a value of more
than $4 per acre on the entire tract after the timber is removed. The mixture
of hardwoods in the spruce and hemlock type increases the soil value, and
in this tract it is worth double in value of the soil in the pure spruce stands.
I believe $2 per acre is the lowest value plaeed on any lands in Randolph
county, although some lands deserve a much lower value.
"Mr. Raine has not resubmitted the proposai. It is hardly probable that
the company could be Indueed to offer their lands at $3 per acre."
And agaln on November lOth he wrote:
"The Raine-Andrews Lumber Company hâve resubmitted their proposai for
the sale of their lands to the government. In this proposai they hâve In-
cluded only the lands that hâve been eut over, amountlng to 6,482 acres, and
reserve the timber rights on 100 acres for two years. The land is offered at
a rate of $4 per acre, which Is a reasonable price for this class of land. I
expect that other portions of their holdings in this section may be acquired
as fast as they are eut over. The proposai, with a map showlng the lands
offered is inclosed."
The second proposai inclosed with map reduced the negotiations to the cut-
over lands aggregating 6,482 acres, and Is llkewise made upon the govem-
UNITED STATES V. KAINE-ANDKEWS LUMBEE CO. 791
(262 F.)
ment's form therefor. It is dated November 5, 1913. It describes the lands
by référence to the survey map and contains the followlng;
"At the red letter 'A' Inclosed by dotted Unes is a tract of 400 acres in dis-
pute, case pending in the Suprême Court of this state. At black letter 'B' are
about lOO acres of uucut timber that we want to reserve for two years; also
a right of way along the Glady Fork, from Evenwood to Gladwln, wUl be
reserved until we finish cutting our timber in thls section, whlch will be about
eight years."
It also contains the followlng:
"If the timber rights on 100 acres are reserved for two years, and the min-
erai rights are reserved on 6,482 acres, will sell for $4 per acre."
On November 12, 1913, the Forest Inspecter in charge at Washington there-
upon wrote the défendant as follows:
"Your proposai of November 5th, in which you offer 6,482 acres of land
largely eut over, situated in Randolph county, W. Va., to the governmeiit
under the Weeks Law at $4 an acre, is received.
"An examlnation will be made of this land at the earliest convenlence of
Mr. W. A. Hopson, Elklns, W. Va., the représentative of the Forest Service
on the Monongahela area, and you will be advised whether the tract can be
reeommended for purchase to the National Forest Réservation Commission at
$4 an acre."
On the same date he wrote the local examiner at Elkins as follows:
"The ofiEer of the Ralne-Andrews Lumber Company of thelr 6,482-acre tract
at .'^4 an acre seems to be at a reasonable price. The map which they submlt,
however, shows that their rallroad runs about 18 miles through the very céH-
ter of this tract For this reason I imagine that the problem of flre protection
would be very difflcult to handle in connection with its administration. If
the rallroad la incorporated, it will hâve to conform to the state laws in re-
gard to equipment of locomotives and In clearing up the right of way to re-
duce the danger from forest fires. If it is not incorporated, I think it will be
désirable to hâve some understanding with them in regard to what measures
they will take in order to reduce the danger from flre along the rallroad. This
point I believe should be taken up with Mr. Wm. L. Hall, when he makes hls
trip to the Monongahela area to see if it is iwssible to reaeh some understand-
ing vrtth the lumber company in regard to what préventive measures they
will assume."
Correspondence, not necessary to quote hère, between the local examiner and
the défendant, Indicates that the formeras examlnation and report to the de-
partment requlred something llke seven months' time. On June 17, 1914, the
examiner in charge at Washington sent to the local one both a telegram and
letter. The letter contains the followlng:
"I Wired you to take an option on this 6,400 acres contained In the last pro-
posai of the Ralne-Andrews Lumber Company at $4 an acre, and to let us
hâve a summary of the report showing the valuation of the tract and the map
as soon as possible. The complète report can be sent in later. It is désirable,
however, that we get a summary of it, in order to be able to décide several
days before the Commission meets upon the desirability of brlnging the tract
before the Commission. If we can secure the complète report by June 20th,
this will give us several days for copying it for the meeting.
"While It was understood, in submitting their proposai, that the minerais
would be reserved, if you can do so, we would like for you to limlt the period
of minerai réservation to 20 years, with the understanding that, in case com-
mercial deposits are not located for development within that ttme, the min-
erai rights shall lapse. Thls, however, is not necessary, but It Is désirable."
The local examiner replied on June ISth as follows:
"Your telegram of June 17th is received. Mr. T. W. Raine, of the Ralne-
Andrews Lumber Co., is now In Pennsylvanla, and will pass through Elkins
on Saturday on his way to Evenwood. Mr. Presyz, hls manager, has con-
flrmed the option at $4 per acre. The map and report will be forwarded on
June 19th."
On June 20, 1914, he wrote a letter to T. W. Raine, and sent copy thereof
to the Assistant Forester at Washington, in which he says:
792 2G2 FEDERAL REPORTER
"I am înclosing an option prepared in diiplicate lo cover tîie G.OOO acres of
land in Randolph and Tueker counties, West Virginia, l)eloiiging to the Baine-
Andrews Lumber Company, at tlie priée of $4 per acre, witti tbe minerais re-
served to the vendor for a period of 20 years. Please liave tlie proper ofScers
of tiie Company exécute the original copy of the option before a notary publie
in the présence of witnesses and retum it in the inclosed envelope. Tlie du-
plicate copy is for the files of the eompany.
"In returning the option, will you please seud a certifled copy of the min-
utes of the meeting of the direetors of the eompany, showing the authority of
the offieers to sign the option, or a copy of the by-laws of the eompany cover-
ing this point."
On June 22, 1914, Raine, in a letter to the local examiner at Elkins, set
forth a list of the différent klnds of timber and amounts, in 1,000 feet board
measure, eut from the lands offered for sale to the govemment, sliowlng an
aggregate of 76,775,000 feet so eut. This statement concludes thus:
"There is still 800,000 feet on thèse lands of saw timber which would make
about 77% million feet."
T. W. Balne answered the local examtner's letter of the 20th on the 23d, as
foUows:
"I bave sent option to Mr. Andrews, onr président, to sign, and wlll send It
to you as soon as it returns. There Is no réservation in it for riglit of way
for the railroad. This will hâve to be reserved, and revert to the govemment
after we are through hère."
On June 24, 1914, Assistant Forester Hall vn-ote T. W. Haine as foilows:
*'Tlie National Forest Réservation Commission at its meeting to-day ap-
proved for purchase under the WeeUs Law the C,00O acres of land bolonging
to the Raine-Andrews Lumber Company, in Randolph and Tiicker counties,
West Vii^nla, at $4 an acre. The govemment desires to purchase this land,
and a purchase agreement vi^ill therefore be prepared and sent you for signa-
ture within a few days."
And on July 7th he wrote him:
"We hâve not received the option covering the 6,000 acres of land of the
Ralne-Andrews Lumber Company whlch you wired us on june 23d was on
the way. We are awaiting this option in order to prépare the purchase agree-
ment for the tract and wlll be glad to hâve you submit it as soon as possible.
"In the proposai which is dated Novemt>er 5, 1913, you mention your désire
to reserve for two years the timber on lOO acres, together with a railroad
right of way for the time whlch would be required to remove your timber in
that section. I hâve been informed since that you are cutting the timber on
the 100 acres, and if this is so you will probably hâve completed its removal
before the title to the tract can pass to the govemment in whlch case there
is no need to mention a réservation of the timber.
"As to the right of way, I should be glad to know whether It would be sat-
isfactory to you to retain your railroad right of way under a form of a free
annual permit granted by the govemment. In this way it would not be nec-
essary for you to retain an easement for It, and I am sure the rétention of
the right of way under annual permit would be quite as satisfactory to your-
selves."
And on July 8th:
"The option given the Secretary of Agriculture on the 6,000 acres of land,
more or less, belonglng to the Raine-Andrews Lumber Company in Randolph
and Tueker counties, West Virginia, is received.
"I am incloslng a voucher to cover payment for the option. Please sign the
voucher at the point indlcated and retum it In the inclosed envelope, and a
check will be sent you."
T. W. Raine, on July llth, wrote the Assistant Forester as foilows:
"Beplylng to yours of 7th in regard to purchase of 6,000 acres of Raine-
Andrews lands, forwarded to me hère. Tou no doubt hâve the option by this
tlme, as I sent it to Mr. Hopson at Elkins the 6th. The delay was caused by
havlng to send it to New Bethlehem, Pa., to hâve our président sign It, and
bave seal attached. As to the timber, will remove ail of it the coming winter.
As to the right of way for railroad, an annual permit from the govemment
UNITED STATES V. RAINE-ANDREWS LUMBER CO. 793
(262 F.)
would be satisfactory, If it was arrangea to be given every year until our tim-
ber is exhausted, \yhi(ii, at full capacity, will take seven years. Another year
will be required to ship out the timber, and take up the rails."
And on July 16th the Assistant Forester wrote Raine:
"Your letter of July llth from Avonia, Pa., is received. We shall draw up
the contract for your land without référence to the réservation of the timber
or the railroad, and when title passes to the land a permit will be Issued to
you, covering the right of way, whlcli permit can be renewed from year to
year until the right of way is no longer needed by your company or its sue-
cessors. Inasmueh as the timber will ail be removed before title is likely to
pass to the government, no mention will be made in the agreement concerntng;
the timber réservation."
And on the same day he sent to the Solicitor for the Department of Agricul-
ture the following mémorandum:
'"J'he National Forest Réservation Commission at Its meeting on June 24th
approved for purchase a tract of 0,000 acres of land, more or less, in Raudolph
and Tucker counties, West Virginia, belonging to the Raine-Andrews Lumber
Company, at the priée of .$4 per acre, with the minerais reserved. Please
prépare an agreement to cover the purchase of this land. The option held by
the government is inclosed for your information. Maps showing the twunda-
ries of the tracts are also inclosed herewith.
"In preparing the agreement, please omit référence to the right of way and
the réservation of the timber on 100 acres citcd in the option, as thèse matters
will be handled under permits. In connection with the réservation of the
minerais, the agreement should provide for a bond in the sum of $3,000. A
copy of the by-laws of the Raine-Andrews Lumbe;.- Company, showing the
authority of the offlcers to sign the agreement, is also inclosed."
And on August 8th he wrote the défendant company as follows:
"Référence is made to my letter of June 24, 1914. I am inclosing for exé-
cution the agreement in quadruplicate to cover the purchase of the 6,000
acres of land in Tucker and Randolph counties, West ^'irginia, belonging to
the Raine-Andrews Lumber Company, at the priée of $4 per acre.
"l'Iease hâve the proi>er officers of the company sign ail four copies of the
agreement before a notary public, having thelr signatures witnessed, and re-
turn them in tlie inclosed envelope. One copy of the agreement will be sent
you for the information of the vendor, after it bas been approved by the Sec-
retary of Agriculture.
"In retuming the agreements, please inelose a certified copy of the resolu-
tion of the board of directors, giving the officers of the company authority to
exécute it, or a certified copy of the by-laws of the c-ompany covering this
point."
On August 24th T. W. Raine replied as follows:
"On my retum home today I found your letter of the 8th inst., with agree-
ment inclosed to be executed by our comi>any to cover the purchase of the
6,000 acres of land in Tucker and Randolph Co. This agreement is ail right,
with the exceptions of article 1. In our réservation meutioued, you hava
omitted the re-servation for railroad right of way to stand until we finlshed
cutting our other timber lands. I received a letter from you stating that this
could be arrangea by yearly permits. This would be satisfactory, but some
mention sliould be made of it in tliis article 1.
"As soon as this is arrangea by you, I will hâve the agreement properly exe-
cuted and forwaixied to you at once."
And on September 24th the Assistant Forester replied:
"Your letter of August 24th is received. The Raine-Andrews tract was ap-
proved by the National E'orest Réservation Commission without réservations
except as to the minerais. However, tbe Secretary of Agriculture bas been
granted some latitude in matters of détail such as this, and If you will add at
the end of paragraph 1 in ail copies of the agreement a réservation covering
the easement for the railroad right of way along Glady fork I will recommend
that the Secretai-y of Agriculture approve the agreement. I suggest the fol-
lowing wording:
•794 262 FEDERAL REPORTER
"Also reserving to the vendor, Its successors and assigns, for a perlod of
eight years from the date of this instrument, an easement for the rlght of way
of the logglng rallroad throngh the property along Glady Fork."
This is substantially the correspondence between the parties preceding the
contract of sale, whlch bears date October 5, 1914. This agreement, a true
copy of which is flled wlth defendant's answer, it will be noted, was prepared
by the govemment's soliciter, and does not contaln any réservation of the
timber uncut. It providea that the vendor company should fumish abstract
of title, a safe conveyance of the property, wlth right to the govermnent to
instltute eondemnatlon proceedtngs, if not satisfled as to sueh title. Subsé-
quent correspondence may be properly added as follows:
October 7, 1914, the Actlng Assistant Forester sent to the Department Sollo-
itor the followlng mémorandum:
"I am retuming herewlth for the approval of the Secretary of Agriculture
the agreement, in quadruplicate, covering the purchase of the 6,000 acres of
land, more or less, in Randolph and Tucker countles, West Virginia, belong-
ing to the Ralne-Andrews Lumber Company. The agreement bas been signed
by the vendors. The addition to page 2 of the agreement, regarding the ease-
ment for the rallroad right of way, is acceptable to the Forest Service, if
stated in the proper form."
On same date he wrote to F. L. Andrews as follows:
"The agreement to cover the purchase of the 6,000 acres of land la Randolph
and Tucker counties, West Virginia, belonging to the Ralne-Andrews Lumber
Company, has been received. The addition to page 2 of the agreement, re-
garding the easement of the rallroad right of way, Is acceptable to the Forest
Service. A copy of the agreement will be sent you for the information of the
Company, after it has been approved by the Secretary of Agriculture."
And on October 16, 1914, to T. W. Raine this:
"I am Incloslng by registered mail an executed copy of the agreement cover-
ing the purchase of 6,000 acres of land in Randolph and Tucker counties, West
Virginia, from the Ralne-Andrews Lumber Company, under the provisions of
the Weeks Law. This copy of the agreement is to be retained for the infor-
mation of the vendor."
On January 27, 1915, the local Forest Examiner in charge made to the dé-
partaient this report:
"Report on Trespass.
"Monongahela Trespass Blklns, W. Va.,
"Timber January 27, 1915.
"The Raine-Andrews Lumber Co.
"1. The Raine-Andrews Lumber Company, of Evenwood, W. Va., lumber op-
erators. Réputation good. Financial standing good. The company is respon-
sible for the trespass.
"2. (a) (1) The trespass began on October 28, 1914. It termlnated December
23, 1914. The trespass was continuons. Dates were determlned from the
company and from J. E. HlUeary, the contractor, euttlng and skldding the
timber. (2) The trespass occurred on lands under contract for purchase from
the Raine-Andrews Lumber Co. The trespass area covers about 30 acres and
lies south of Woodford run on the west side of Glady fork, nearly adjacent to
the Glady and Alpena railroad, and about six miles north of Evenwood. (See
map submitted wlth this report.) (3) Trespass occurred by resumlng opéra-
tions through a previous logging contract that J. E. HiUeary made wlth the
company three years ago, to log the timber lylng to the west of Glady foi^
and south of Woodford run.
"Under this contract, Mr. HlUeary has removed ail of the timber called for
in the contract excepting approxlm^ately 175,000 board feet, of hardwoods.
During the summer of 1914, after this tract was approved for purchase, which
waa June 30, 1914, Mr. T. W. Raine, treasurer and gênerai manager of the
Ralne-Andrews Lumber Company, spoke to Mr. HUleary about picking up the
legs he had skldded from the tract, but were not in reach of the company's
log loader, and asked him to clean up the job. Mr. Raine did not mean that
he should continue cutting any more timber, but that ail the logs and a few
cords of bark should be placed doser to the rallroad. At the tlme that the
UNITED STATES V. RAINE-ANDEEWS LUMBEB CO. 795
(262 P.)
trespasa began Mr. Raine was attending to business in Pennsylvania, and the
men left in charge approved tlie further cutting of timber by Mr. Hilleary.
On bis retum from Pennsylvania, Mr. Raine called at this office, on December
21st and acknowledged that the timber eut by Hilleary was not tnduded wlth-
In the 100 acres of timber asked to be reserved in the proposai submitted
November 5, 1913. In the sale contract, there is no mention made of the rés-
ervation of this timber, for it was understood that the timber on the 100
acres would be removed before the final title was passed.
"The amount of timber eut in trespasa is as foUows:
Ash 2,000
Cherry 1,000
Maple 84,000
Ohestnut 10.000
Birch, beeeh and others 3.3,585
Total 130,585
"The timber was of good quality and estima ted to be worth $3.50 per thou-
sand on the stump, and at the railroad $9.50 per thousand, for the contracter
received $6 per thousand for cutting and skldding. The logs were the only ma-
terial removed. The logs hâve ail been removed to Evenwood and sawed in
the mill. The men engaged in removing the timber were John E. Hilleary, Al-
pena, W. Va., EYench Stalnaker, Rich Mountain, W. Va. ; Luther Kems, Wy-
mer, W. Va.; Ike Smith, Wymer, W. Va.; Brancon Summerfleld, Bowden,
W. Va.
"S. Trespass was not connected with any autliorized use of the National
Forests. The company formerly owned thèse lands, but overlooked reserving
the timber on this portion, when the lands were offered for sale to the govem-
ment. The facts in this case show that the trespass was comraltted unlnten-
tionally on the part of the contracter. The area upon whlch the trespass oc-
curred was examined by Forest Guard Joseph Schmidlen, Aljiena, W. Va., on
December 4, 9, 26, 1914.
"5. (a) (1) The trespass should be settled on an innocent basis, for the
reason that the contracter, J. E. Hilleary, was not notified that he should not
continue cutting on his former contract ; also Mr. Raine had not Instrueted
bis assistants In the exact location of the timber he wished to reserve. Mr.
Raine stated that he did not know that Hilleary was cutting timber until his
return from Pennsylvania. In settlement for the tl)nber and tie trespasses
(see report on tie trespass), Mr. Raine offers to exchange about 35 acres of
timber, uncut, lying to the north of lot 14, and to the west of a boundary
of land owned by Nathaniel Carr, and on lands under contract for sale to
the govemment (See map.) This 35 acres of timber is part of the 100 acres
of timber Mr. Raine reserved in the proposai of November 5, 1913. The other
portion of the 100 acres of timber is at the head of Ash lick and Five lick
runs and Is now belng removed. The 35 acres of timber offered in exchange
contains, according to Mr. Raine, 200,000 board feet of hardwoods, consisting
of red oak, basswood, chestnut, and others, and Is worth about $5 per thousand
on the stump. In order to détermine the amount and value of this timber,
it will be necessary to make an estimate of the same. The timber trespass
amoimts to $407.05, with the timber valued at $3.50 per thousand on the stump,
while the tie trespass amounts to $100.56, with the ties valued at 12 cents
per tie, making a total of $507.61 required in settlement of the two trespasses.
It is recommended that the exchange of timber on the 35 acres of uncut timber
be accepted, provided the stand is found sufScient in quantity and value to
make up for the timber and ties removed In trespass. By accepting this
timber in exchange the company will be relieved of the reserved timber and
will bave no further cause to eut timber in the future on lands sold to the
govemment. The company should be allowed six months In whlch to lop
the top«) and larger limbs.
"W. A. Hopson, Forest Examiner In Charge."
On March 25, 1915, the Assistant Forester wrote défendant as foUows:
"Référence is made to the interview of December 21st of Mr. T. W. Raine,
of the Ralne-Andrews l-umber Company, with Mr. W. A. Hopson, the repres«n-
796 262 FEDERAL REPORTER
tatlve of the ÎV>rest Service, representing two timber trespasses by the Ralne-
Andrews Lurober Cîompany on land now under purchase contract wlth the
United States, the contract having been signed by the Secretary of Agriculture,
Oetober 10, 1914.
"Mr. Hopson's reports on thèse trespasses show that they took place be-
tween June 30, 1914, and Deœmber 23, 1914, and involved cutting at a point
east of Crlady fork and abont three-fourths of a mile south of Gladwln and
on the west slope of Middle Mountain, of 838 tles, having a stumpage value
of $100.56, and the cutting at a point south of Woodford run of 130,585 feet
B. M. of hardwood timber, having a total value of .$407.05, giving an aggregate
value of the timber eut in both trespasses of $507.01.
"Mr. Hopson has recommended that there be accepted in seulement of the
amount involved in thèse trespasses certain timber resei^ed by the Raine-
Andrews Lumber Company in their sale to the government amounting to
100,384 feet B. M. This timber is situated on an area of about 50 acres iu
lots 22 and 23, Bandolph eounty, neiar the Myleus lands, and Is loeated ap-
proximately as shown on the inclosed plot within the dotted Unes and marked
rirgin timber. Since thèse trespasses were coinmitted through Inadvertence,
it would seem an équitable metliod of settlement if this timber were trans-
ferred by the Raine-Andrews Lumber Company to tlie government conformably
to Mr. Hopson's recommendation. Please inform me if this method of adjust-
ment will suit the company."
To which on April 13th following T. W. Raine replied:
"Replying to yours of March 25th ui regard to Mr. Hopson's report of tres-
Ijasses and Mr. Raine's proposition of leaving standing timber: In lieu of
this trespass, beg to say that we do not conslder there has been any trespass,
excepting as to the 838 ties, being a stumpage basis of 12 cents, and would
enter our protest to this stumpage as being excessive. If you will refer to
your letter of January 7, 1914, to our Mr. Raine, which we intei-pret as mean-
ing that we are privileged to eut 100 acres of timber on thèse lands, to be
taken off during the winter of 1914-1915. Unless there had been an exact
location of this 100 acres, we do not consider that there is any trespass, un-
less we had eut In excess of 100 acres; but in order to appease Mr. Hopson
our Mr. Raine proposed to leave standing the vlrgin timber as indlcated on
the plat Inclosed with your letter of March 25th, which accordingly we hereby
conflrm, and this matter of adjustment will suit us."
For reasons not diselosed, resort was not made to a direct eonveyance by
the défendant to the United States for the land, but condemnatlon proeeed-
ings were instituted In 1919, and are now pending as set forth la the bill.
S. W. Walker, U. S. Atty., and H. H. Byrer and C. W. Campbell,
Asst. U. S. Attys., ail of Martinsburg, W. Va., and J. P. Wenchal, Asst.
Sol. Department of Agriculture, of Baltimore, Md., for the United
States.
W. E. Baker, of Elkins, W. Va., for défendant.
DAYTON, District Judge (after stating the facts as above). [1]
There are several propositions proven in this cause beyond ail doubt
or controversy. Among others : (a) That the government did not
originally hâve any intent or purpose to buy the uncut virgin timber
on this large tract of land ; (b) that it did not, at any time, indicate any
purpose to claim it prior to the agreement entered into Oetober 5,
1914; (c) that this agreement was wholly prepared by its govern-
ment solicitor under instructions from the forestry division having the
preliminary negotiations in charge; (d) that this lumber company
had no purpose or design of selling the timber on the uncut-over land,
estimated to be worth to it, by reason of the merchantable timber stand-
UNITED STATES V. RAINE-ANDREWS LUMBER CO. 797
(262 FJ
ing thereon, $45 per acre, to the government at the very modest price
of $4 per acre.
Since procuring this agreement to sell, the government has, however,
upon somewhat technical grounds, claimed, and by this proceeding is
now seeking to secure, this timber, which it did not in fact purchase.
Its position substantially is that the agreement is not ambiguous in its
terms; that they are ample to include and constitute a complète sale
of this uncut timber as part of the land sold, and, in the words of Jus-
tice Clifford in Walden v. Skinner, 101 U. S. 577, at page 584, 25 L.
Ed. 963 :
"When an agreement is reduced to wiiting by the act and consent of tlie
parties, the intent and meaning of the same raust be sought in tlie instrument
which they hâve chosen as the repository and évidence of their purpose, and
not in extiinsic facts and allégations."
Under this rule of law^ the counsel for the government has filed
exceptions to the answer of the défendant, so far as it attempts to dé-
fend, relying upon negotiations and communications had prior to the
exécution of the agreement by the parties. I announced at the trial my
purpose to overrule thèse exceptions, and now confirm such purpose
for two reasons: First, because I am constrained to think that the
allégations of this answer, under the simplified pleading provided for
by the new equity rules (198 Fed. xix, 115 C. C. A. xix), were suffi-
cient to raise the issue of fraud and especially mistake in the exécution
of the contract; and, second, were also sufficient to base the plea
that a separate, independent, and contemporaneous contract had been
made between the parties touching this uncut timber.
[2] The power and duty of equity courts to relieve for reasons of
fraud and mistake are very generally recognized, and citation of au-
thorities in support theref or would ordinarily be unnecessary ; but in-
asmuch as the courts hâve varied as to the strictness of the rules gov-
erning as to what mistakes will be relievable — some holding they must
be mutual on the part of both parties to the agreement — I quote the
rules so clearly and satisfactorily set forth by Justice Clifford in Wal-
den V. Skinner, supra, which are binding on fédéral courts:
"Courts of equity afford relief in case of mistake of facts, and allow paroi
évidence to vary and reform written contracts and instruments, when the
defeet or error arises from accident or misconception, as properly forming an
exception to the gênerai rule which excludes paroi testimony offered to
vary or contradict written Instruments. Where the mistake Is admitted
by the other party, relief, as ail agrée, will be granted, and if it be fully proved
by other évidence, Judge Story says, the reasons for granting relief seem to
be equally satisfactory. 1 Story, Eq. Jur. § 156.
"Décisions of undoubted authority hold that where an Instrument is drawu
and executed that professes or is Intended to carry into exécution an agree-
ment, which is In writing or by paroi, previously made between the parties,
but which by mistake of the draftsman, either as to fact or law, does not
fulfill or which violâtes the manifest Intention of the parties to the agree-
ment, equity will correct the mistake, so as to produce a conformity of the
Instrument to the agreement; the reason of the rule belng that the exécution
of agreements falrly and legally made Is one of the peculiar- branches of
equity jurisdictlon, and if the instrument intended to exécute the agreement
be from any cause insufficient for that purpose, the agreement reniains as
rauch unexecuted as if the party had refused altogethor to comply with hl3
798 262 FEDERAL REPORTER
engagement, and a court of equity will, In the exercise of Its acknowledged
jurisdlction, afford relief In the one case as well as in the other, by compelllng
the delinquent party to perform hls undertaking according to the terms of It
and the manifest intention of the parties. Hunt v. Rousmanlere'a Adm'rs, 1
Pet. 1, 13 [7 L. Ed. 27] ; Same v. Same, 8 Wheat. 174, 211 [5 L. Ed. 589].
"Even a judgment, when confessed, if the agreement was made under a
clear mlstake, wlU be set aside, if application be made, and the mlstake shown,
while the judgment is withln the power of the court. Such an agreement, even
when made a rule of court, will not be enforced, if made under a mlstake, if
seasonable application be made to set It aside, and, if the judgment be no
longer In the power of the court, relief, says Mr. Chief Justice Marshall, may
be obtained in a court of chancery. The Hlram, 1 Wheat. 440, 444 [4 I.. Ed.
131].
"Equitable rules of the kind are applicable to sealed Instruments as well as
to ordlnary written agreements; the rule being that if by mlstake a deed be
drawn plainly différent from the agreement of the parties, a court of equity
wlU grant relief by considering the deed as if It had conformed to the anté-
cédent agreement. So if a deed be ambiguously expressed In such a nianner
that It Is diffiicult to give It a construction, the agreement may be referred to
as an aid in expounding such an ambiguity ; but if the deed is so expressed
that a reasonable construction may be given to it, and when so given it does
not plainly appear to be at variance with the agreement, then the latter is not
to be regarded In the construction of the former. Hogan y. Insurance Ce, 1
Wash. [0. C] 419, 422 [Ped. Cas. No. 6,582].
"Rules of décision in sults for spécifie performance are necessarily affected
by considérations pecullar to the nature of the right sought to be enforced and
the remedy employed to accomplish the object. Where no question of fraud
or mlstake Is Involved, the rule witb respect to the admission of paroi évidence
to vary a written contract is the same in courts of equity as in those of com-
mun law, the rule in both being that, when an agreement is reduced to writing
by the act and consent of the parties, the intent and meaning of the same must
be sought In the instrument which they hâve chosen as the reposltory and
évidence of thelr purpose, and not In extrinsle facts and allégations. Proof
of fraud or mlstake, however, may be admitted in equity to show that the
terms of the instrument employed in the préparation of the same were varied
or made différent by addition or subtraction from what they were Intended
and believed to be when the same was executed.
"Evidence of fraud or mlstake is seldom found In the Instrument Itself,
from which it foUows that unless paroi évidence may be admitted for that pur-
pose the aggrieved party would hâve as little hope of redress in a court of
equity as in a court of law. Even at law, ail that pertains to the exécution
of a written instrument or to the proof that tlie Instrument was adopted or
ratlfled by the parties as thelr act or contract, is necessarily left to extrinsle
évidence, and witnesses may consequently be called for the purpose of Im-
peaching the exécution of a deed or other writing under seal, and showlng
that its sealing or delivery was procured by frandulently substituting one
instrument for another, or by any other spedes of fraud by which the com-
plalning party was misled and Indueed to put hls name to that which was sub-
stantlally différent from the actual agreement. Thoroughgood's Case, 4
Coke, 4.
"When the deed or other written Instrument is duly executed and dellvered,
the courts of law hold that it contains the true agreement of the parties, and
that the writing fumlshes better évidence of the sensé of the parties than any
that can be supplied by paroi; but courts of equity, says Chancelier Kent,
hâve a broader jurisdlction and will open the written contract to let In an
equity arlslng from facts perfectly distinct from the sensé and construction
of the instrument itself. Pursuant to that rule, he held it to be establlshed
that relief can be had agalnst any deed or contract in writing founded on
mlstake or fraud, and that mistake may be shown by paroi proof and the re-
lief granted to the Injured party whether he sets up the mlstake afliirmatlvely
by bill or as a défense. Gillesple v. Moon, 2 Johns. (N. Y.) Oh. 585, 596 [7
Am. Dec. 559]."
UNITED STATES V. EAINE-ANDEEWS LUMBER CO. 79Î)
(262 F.)
[3-5] In its verified answer (the bill was verified and by it answer
under oath was not waived) the défendant says ;
"Respondent further states that It would never hâve sipied said contract of
sale at $4 per acre in fee wlthout havlng thereln a spécifie reserration o" Its
right to eut and remove ail merchantable timber from said tract, whlch sald
tlmber alone was worth at least $45 per acre, but for the letter of July 16,
1914, from Wm. L. Hall, Assistant Forester for the United States Department
of Agriculture, hereinbefore set out, wherein he states: "We shall draw up
the contract for your land without référence to the réservation of the timber.
* * * Inasmuch as the tltriber will ail he removed hefore title is Ukely to
pass to the govemment, no mention voill lie made in the agreement conceminç
the tim'ber réservation" But relying tmplicitly upon said letter protecting
its timber rights, it caused said contract to be executed on October, 5, 1914.
"Respondent further states that, although said contract was executed on
October 5, 1914, more than five years ago, the title thereto has never been ap-
proved or said land taken up by the plalntlff, by reason of which it has suf-
fered the loss of more than 30 per cent, interest upon the purchase price, been
compelled to pay taxes thereon for five years, and if it should be denied the
right to remove the balance of the merchantable timber therefrom, it would
suffer a great injustice, and much pecuniary loss, as the merchantable timber
remaining uncut thereon is worth at least $5 per thousand feet on an average,
as alleged in paragraph No. 9 of plaintlff's biU."
I am constrained to believe this statement to be strictly true. Its
very statement of substantially undisputed fact as to the value of the
timber involved is impressive, and it would be hard to conceive why
such value would be surrendered by a company managed by men of
business sensé and capacity. In the first proposai to sell the full acre-
age of 13,200 acres owned by it, the company proposed to reserve the
timber with a 10-year limit to eut and remove it. This was objected
to by the govemment forester, who, assuming that 7,000 acres of the
whole had been eut over, expressed his belief "that 1,000 acres a year
should be about the minimum allowance" for cutting a remainder of
5,000 acres uncut. The capacity of defendant's mill was not equal to
this, and the resuit was that, at the local examiner's request, Mr.
Raine, for the défendant, undertook to submit a second proposai, and
upon notice to this effect the government's forester at Washington
wrote its local agent:
"I do not believe, however, that the proposai will be considered at a priée
of $4, unless the company is willing to reserve occasional seed trees of ash,
cherry, and basswood"
— meaning, manifestly, refrain from cutting such. And he added:
"If the company could be Induced to reduce their offer to $3 per acre, there
would be a much greater probability of its being favorably considered."
In reply the local examiner stated the hardwood lands (that would
supply seed trees of ash and cherry) had already been eut over, and
that "several boundaries from the original tract, after being eut over,
had been sold for agricultural purposes at the rate of $10 per acre."
The second proposai confined the negotiation to the cut-over land sub-
stantially, but set out that timber on 100 acres thereof uncut was to
be reserved for two years, and agreeing:
"If timber rights on 100 acres are reserved for two years, and the minerai
rights are reserved in 6,482 acres, will sell for $4 per acre."
800 262 FBDEEAL EEPOUTEB
It will be thus seen that the company had gone in this paper to the
limit — offered to limit the uncut area to a total area of 100 acres with-
in the limits of the 6,482-acre boundary — and that this proposition
had come to the final word, so far as the company was concerned, as
regards the sale of the uncut timber; and it was so regarded by the
government officiais in charge of the negotiations, for we hear nothing
f urther, during the seven months .taken by them to make examination
of the land, in regard to any further réductions in the timber rés-
ervations, and when the assistant forester had prepared the three
months option dated June 27, 1914, he inserted in it the réservation for
two years of the uncut timber on 100 acres. Had the forester seen
fit to prépare the final agreement of sale in accord with this option
which he himself prepared, or had prepared, and had inserted in it
the option clause in regard to this timber réservation, there is no doubt
the ruling of the Suprême Court of Appeals of this state in the cases
of Null V. EUiott, 52 W. Va. 229, 43 S. E. 173, Adkins v. Huff, 58
W. Va. 645, 52 S. E. 773, 3 !.. R. A. (N. S.) 649, 6 Ann. Cas. 246,
Electro Co. v. Montgomery, 70 W. Va. 754, 74 S. E. 994, and Deer
Creek Lumber Co. v. Sheets, 75 W. Va. 21, 83 S. E. 81, cited and so
confidently relied on by counsel for the government, would hâve been
décisive. The agreement to sell in that event would hâve restricted
the removal of the timber to a spécifie and limited period of two years
from the date of the agreement.
Several very vital déductions are to be drawn from thèse cases —
among others : (a) That in order to f orf eit the right of the owner to
his timber the contract must fix a spécifie period of time within which
the timber must be eut and removed, and this period of time must hâve
elapsed. This for the reason that "such a provision as this in timber
contracts is held to be a condition of the sale, and not a covenant to
remove, and that the purchaser only takes such of the timber as
he may eut and remove in the specified time; otherwise it remains
the property of the landowner as part of the land." Null v. EUiott,
supra. It is very clear from thèse cases that where, in the contract,
no specified period of time for removal is set forth, this rule is wholly
inapplicable. In such case there is a severance, whereby the seller re-
mains the owner of the timber, and the buyer becomes owner of the
land surface, as so commonly illustrated in this state, where coal is
sold from under the land and the surface is retained.
Incidentally it may be noted that this Null Case was really decided
indépendant of ail thèse considérations, on the ground that equity had
no jurisdiction ; the plaintiff Null havbg, if any at ail, a complète
remedy at law. That ruling, if applied hère, would dismiss and end
the government's case. I do not apply it, however, and make no point
as to it other than to mention it, for that, as I construe the subséquent
case of Pardee v. Lumber Co., 70 W. Va. 68, 73 S. E. 82, 43 E. R. A.
(N. S.) 262, it overrules this ruling in the Null Case, and I think right-
ly so. A second déduction from the Null and other cases, relied on as
above set forth, is (b) that the right of equity to reform or rescind thèse
timber contracts for fraud or mistake is fully recognized; and (c) in
the Adkins-Hufï Case, 58 W. Va. at page 649, 52 S. E. 773, 3 L. K. A.
UNITED STATES V. RAINE-ANDREWS LUMBER CO. 801
(252 F.)
(N. S.) 649, 6 Ann. Cas. 246, citing and approving Johnson v. Moore,
28 Mich. 3, the right of equity to uphold and enforce an indépendant
simultaneous contract as to the timber reserved is also fully recognized.
But the forester did not see fit to include in the final agreement to
sell the option's clause in regard to the timber resei-vation, but in-
stead wrote the défendant, under date of July 7th, ten days after the
option had been prepared (dated June 27th) :
"In the proposai which is dated November 5, 1913, you mention your désira
to reserve for two years the timber on 100 acres, together with a railroad right
of way for the tlme which would be required to remove your timber in that
section. I hâve been informed since that you are cutting the timber on the
100 acres, and if this is so you will probably hâve completed its removal be-
fore the title to the tract can pass to the government, in which case there Is
no need to mention a réservation of the timber."
This was a clear récognition of the defendant's right to the timber
and its right to remove it, with no definite fixed date to do so. But
this was not ail ; on July 18th he wrote défendant :
"We shall draw up the contract for your land without référence to the rés-
ervation of the timber or the railroad, and wben title passes to the land a
permit can be renewed from year to year until the right of way is no longer
needed by your company or its successors. Inasmuch as the timber will ail
be removed before title is lilsely to pass to the govemment, no mention will
be made in the agreement concerning the timber réservation."
Hère was a clear récognition of the right of the défendant to eut and
remove the timber until title should pass to the government, and an im-
plied promise, if not so eut by that time, permit would be granted it
to do so afterwards, as in the case of the use of the railroad across
the land. And this implied promise is made certain by the fact that,
on the very same day he wrote this letter to the défendant, he sent a
mémorandum of directions to the department's solicitor as to how the
final agreement was to be drawn, in which he says:
"Please prépare an agreement to eover the purchase of this land. The
option held by the government is inclosed for your information. Maps show-
Ing the boundaries of the tracts are also inclosed herewith. In prepariug the
agreement, please omit référence to the right of way and the réservation of
the timber on 100 acres cited In the option, as thèse matters will be handled
under permits."
When it is borne in mind that ail thèse writings, the two proposais,
the option, and the final agreement to sell, were prepared under the
direction of the government's officers, and that the consummation of
the purchase was only to pass when title deed was declared to be
satisfactory to the government's Attorney General, it seems to me their
terms should be construed more liberally in favor of the grantor de-
fendant — in short, constitute an exception to the gênerai rule to the
contrary. And this is strengthened by the very gênerai and very prop-
er understanding that the government will never knowingly do wrong
and injustice to any of its citizens. For reasons not disclosed, the At-
torney General has never approved of the government's taking title
direct from the défendant. For near five years or more it has de-
layed securing title by condemnation proceedings, only having institut-
ed such proceedings a few months ago. During ail this time — to be
262 F.— 51
802 262 FEDERAL EEPORTEK
accurate, since June 27, 1914, the date of its option — defendant's large
tract of land has been tied up in a degree of uncertainty as to whether
it would be talcen by the government or not. It has been deprived of
ail right to sell and convey to others. It has lost the use in the way of
interest on the very moderate price at which it agreed to sell, some-
thing over $8,500, and now is confronted with a demand that its pur-
chase price be abated, or it be required to pay the government damages
for the cutting of something over 240,000 feet of lumber at threefold
its value, or over $3,600, which it believed, and had good reason to be-
lieve, it owned and had right to eut, and also be deprived of the value
of at least 800,000 feet more of timber, worth $4,000, which it believes
and insists it never sold, and the government agreed it should hâve
the right to eut and remove.
I cannot reconcile myself to hold that the contentions of the govern-
ment to this end would be in accord with equity and good conscience.
On the contrary, I am constrained to reach the conclusion that the de-
fendant by the final contract never intended to sell this timber on 100
acres of the uncut-over land ; that its exécution of this contract, so
carrying on its face and by its terms such conveyance, was donc by
it by mistake at least, being directly led to do so by the représentations
of the government officiai agents having the negotiations in charge;
that thèse représentations in fact, taken together, as disclosed by the
documentary évidence in the cause, fuUy constituted an independent,
separate, and contemporaneous contract whereby the défendant was to
hâve the right to this timber on 100 acres uncut over, and the right to
eut and remove the same any time before the government took over
the légal title, and a reasonable time thereafter by its permit. This
conclusion is not shaken by the argument of counsel that, because the
défendant in its option agreed to limit the time of removal to two years,
and by the fact that Raine wrote they were going to eut the timber the
foUowing winter, that forfeiture of its right to such timber has there-
by accrued in the govemment's favor.
[6] It could be argued very plausibly that the two-year limit clause
in the option should relate to the two years foUowing either the date
of the option, the date of the final agreement, or the date when the gov-
ernment should finally take légal title to the land. But such argu-
ment becomes wholly de trop, because this clause of the option was not
accepted by the govemment's f orester ; but, on the contrary, he con-
stituted the limit, by his separate, independent, and contemporaneous
contract, to be until the title to the land shall hâve passed to the gov-
ernment, and a reasonable time thereafter by permit, if necessary.
The bill admits that title has not yet passed to the government, but
sets f orth that condemnation proceedings to secure the same are pend-
ing.
It follows that the temporary restraining order must be dissolved,
and the bill dismissed.
KENNEDY V. CAEOLINA PUBLIC SERVICE 00. 803
£262 F.i
KENNEDY et al. v. CAROLINA PUBLIC SERVICE CO.
(District Court, N. D. Georgia, January 31, 1920.)
1. CoEPOBATiONS (S=>67 — Decbeasinc} outstanding stock vamd when not in-
VOLVING AMENDMENT OF CHARTER.
Tlie provisions of Delaware Corporation Law, § 26, prescribing tlie pro-
cédure for amendmient of tlie charter of a corporation "by Inereasing or
decreasing its authorized capital stock," or changing tbe préférence given
to any one or more classes of preferred stock, helà not applicable to tbe
action of stockholders in decreasing the amount of common and preferred
stock oiitstanding, withln the charter Itmits, and which involved no amend-
ment of tbe charter.
2. Corporations (S^CT— Method or beducinq capital stock statkd.
Delaware Corporation Law, § 28, providlng that any corporation or-
ganized thereunder may by two-thirds vote of stockholders reduce its
stock by retiring or reduclng any class of stock, by purchase or requiring
holders to accept a less number of shares in exchange, held to prescilbe
such metbods of réduction in tbe alternative, llmited by tbe nature of the
stock to be reduced, and not to permit the corporation to adopt either
naetbod, regardless of tbe reason or justice of tbe action.
3. Corporations <S=367 — Method of reducing preferred stock controlled
BY provisions of certificate.
Under Delaware Corporation Law, § 28, providlng that any corporation
organized thereunder may reduce any class of its stock by vote of two-
thirds of its stockholders, by requiring holders to accept a less number ot
shares in exchange, or by retireraent of a stated number of shares, a sol-
vent corporation having both common and preferred stock, the former the
greater in amount, held not authorized by vote of two-thirds of aU stock-
holders, voting together, to requlre preferred stockholders to sur-
render their shares and accept a less number, when tbeir eertiflcates pro-
vlded for tbeir retirement by purchase at a stated premium.
4. Corporations <®:=5l56 — Earnings applied to arrearage of cumulative
DIVIDENDS ONLT ÂFTEB CURRENT DIVIDEND IS PAID.
Where dividends were in arrears on cumulative preferred stock, net dlvl-
dends earned in a current period held equltably applicable first to payment
of the divjdend for that period, leaving arrearages payable only from any
surplus.
In Equity. Suit by Henry B. Kennedy and others against the Caro-
lina Public Service Company. Decree for complainants.
Charles T. & L. C. Hopkins, of Atlanta, Ga., for plaintiflfs.
Evins & Moore, of Atlanta, Ga., for défendant.
SIBLEY, District Judge. The Carolina Public Service Company
was organized under the Corporation Law of Delaware in 1912, the
certificate of incorporation authorizing a capital stock of $1,000,000
common stock and $1,000,000 preferred stock, and fixing as the mini-
mum capital on which business might be donc $2,500 of common stock.
In point of fact, $500,000 in value of preferred stock and $750,000
of common stock was issued.
On August 20, 1918, dividends on the preferred stock, which were
6 per cent, cumulative dividends, being in arrears for nearly five years,
a meeting of the stockholders was held, pursuant to call of the direc-
tors, at which more than two-thirds of the preferred stock and two-
^=3For other cases see same toplc & KBY-NUMBBR in ail Key-Numbered Dlgests & Index»
804 262 FEDERAL REPORTER
thirds of the common stock, voting separately, adopted a résolution
which in substance released the obligation for dividends up to January
1, 1919, reduced the preferred stock from 5,000 shares to 3,000 shares
and the common stock from 7,500 shares to 6,000 shares.
Certain holders of preferred stock dissented from this action and
brought this bill to annul it. Pending the litigation the directors are
averred to hâve declared a dividend of 3 per cent, as eamings for the
six months from January 1, 1919, to July 1, 1919, on the preferred
stock. A supplemental bill was filed by the petitioners, claiming judg-
ment for 30 per cent, on their original stock as the total accumulated
unpaid dividends on it.
Exceptions to the master's report are novir to be decided and a de-
cree to be entered involving the f ollowing propositions :
[1] 1. The meeting of stockholders did not conform to the procé-
dure prescribed by section 26 of the Delaware Corporation Law (Rev.
Code Del. 1915, § 1940). The action taken was invalid if that section
is applicable. The section déclares the procédure by which any cor-
poration, created under this act or otherwise, should amend the cor-
poration's charter — among other changes, "by increasing or decreasing
its auihorised capital stock." It is f urther provided :
"If any such proposed amendment would alter or change the préférence
given to any one or more classes of preferred stock authorized by the certifl-
cate of Incorporation, or would Increase or decrease the armount of autharitcil
stock of such class or classes of preferred stock, or would Increase or decrease
the par value thereof, then the holders of the stock of each class of prefer-
red stock so affected by the amendment shall be entitled to vote as a class
upon such amendment whether by the terms of the certificate of incorpora-
tion such class be entitled to vote or not"
Evidently it is only when the authorized capital as fixed by the cer-
tificate of incorporation is to be changed that an amendment of this
certificate is necessary. No such change was proposed in this case.
The authorized capital fixed by the certificate was within the limits
$1,000,000 to $2,500 for the common stock and $1,000,000 to nothing
for the preferred stock. Within thèse limits any amount of either
stock could be issued that the directors saw fit, and the action taken
by the stockholders' meeting did not go outside thèse limits. In point
of fact the call for the meeting stated, not that the authorized capital
was to be changed, but that the stock "issued and outstanding" was
to be reduced. Not only was no amendment of the charter necessary,
but no amendment was contemplated, and in my opinion whether sec-
tion 26 was foHowed as to procédure or not is entirely immaterial.
[2,3] 2. Section 28 (Rev. Code Del. 1915, § 1942) provides:
"Any corporation organixecl under this chapter may reduce its capital stock
at any time by a vote of, or by the written consent Of, stockholders repre-
senting two-thlrds of its capital stock, and after notice of the proposed de-
crease has been mailed to the address of each stockholder at least twenty
days before the meeting is held for that purpose."
This provision evidently applies to a change in the capital actually
employed and represented by certificates of stock actually outstanding,
within the limits authorized by the charter. The procédure hère pre-
KENNEDY V. CAROLINA PUBLIC SERVICE CO. 805
(262 F.)
scribed appears to be appropriate for the purpose undertaken at the
stockholders' meeting and to hâve been substantially carried out. The
questions made are : (a) Is this section appropriate to a case of pre-
ferred stock, where no mention of réduction is made in the company's
certificate of incorporation or its certificates of preferred stock? and
(b) if it be applicable, does it authorize what was done in this case?
As to the first point, although section 13 (Rev. Code Del. 1915, §
1927) déclares, "Unless its original or amended charter or certificate of
incorporation shall so provide, no corporation shall create preferred
stock," yet since this certificate did provide for preferred stock, ail the
provisions relating thereto in the Corporation Law become a part of
this charter, especially section 28, which in terms states "any corpora-
tion organized under this chapter," might exercise the powers it con-
fers. I should hâve thought, in view of the fact that no separate vote
for each class of stock to be afifected is provided hère as in section 26,
that this section would ref er only to réductions of common stock ; but
this provision occurs:
"A decrease of capital stock Issued may be effected by retlrlng or reduc-
Jng any class of the stock, or by drawliig the necessary number of shares by
lot for retlrement, or by the surrender by every sbareholder of hls shares,
and the issue to hlin In lieu thereof of a decreased number of shares, or by the
purchase at not above par of certain shares for retlrement, or by retiring
shares owned by the corporation or by reducing the par value of shares."
Since any class of stock may be thus affected, preferred stock may
be. We are then met with the remarkable situation in which, with-
out qualification, a single meeting of ail the stockholders of every
class may, by a two-thirds majority, destroy any class, if, as contended
by this corporation, any method of dealing with the stock may be
adopted that is above stated. For instance, if four-fifths of the stock
be common stock and one-fifth preferred stock, that meeting, by a two-
thirds vote might reduce the preferred stock to one-half or one-fourth
its previous par value, with conséquent decrease of dividends, by simply
exchanging the old certificates for new. Unless the corporation hap-
pened to be entirely unable to pay its preferred stock on dissolution,
such action would amount to a gift by the meeting from the property
belonging to the preferred stockholders to the common stockholders,
and a gift until dissolution of a corresponding interest in the earnings
of the corporation. As regards the common stockholders, the preferred
stockholder is really an incumbrancer on the assets of the corporation,
and so remarkable a power could hardly hâve been intended to be
given a stockholders' meeting.
The law must be construed, not only by what has happened in this
case, but what might happen in other cases. While it is true that,
this charter and thèse certificates of stock having been made since the
law and under its provisions, no question of impairment of contract
thereby could arise, nor would it be a case in which, without due pro-
cess of law, one is deprived of his property, yet the law, charter, and
certificate should at least be construed together as one contract, and
a meaning given to them, if possible, that is not so unreasonable as that
contended for in this case. This I think may be effected by holding that
806 262 FEDERAL REPOETEB
the statute intended, if such a class of stock as preferred stock was
to be retired, that it should be donc under the provisions stated in the
stock, if any. In this case those provisions are that the stock should
be paid for at 105, together with ail accrued unpaid dividends. If,
instead of retiring it, this class was to be reduced, similar considéra-
tions of reason and justice would require that the réduction be like-
wise paid for. It may be that there would be a power of retiring or
reducing such stock, otherwise than as provided in the certificate, if,
in point of fact, the stock was not fairly worth so much, under the
provision, "by purchase at not above par of certain shares for re-
tirement." Purchase hère, however, would seem to imply a consent on
the part of the seljer, as well as a willingness to buy on the part of the
corporation, manifested through its stockholders' meeting.
I zxn clear that the action taken in this meeting of reducing the stock
of each preferred stockholder by two-fifths, with the corporation still
a going concern and able to earn profits, as was immediately after-
wards demonstrated, with no considération given them by the corpo-
ration therefor, cannot be upheld as reasonably intended by the entire
contract, evidenced by the certificate of stock, the certificate of incor-
poration, and this statute. It is conceded that the accrued dividends
could not be so given away by the action of the meeting. There is
nothing, in principle, to distinguish the efi:ort of the meeting to cancel
the dividends from their effort to cancel two-fifths of the stock. It
appears in this record that the greater number of the preferred stock-
holders were also common stockholders, and this fact may hâve had
a large influence in procuring the action that was taken; a loss in
the preferred stock being offset by an advantage in the common stock.
The statute, therefore, in permitting thèse several ways of retiring or
reducing stock, must be talcen to offer them as alternatives, limited
by the nature of the stock to be retired or reduced, and not to be ap-
plied indifferently, at the will of the corporation, to any sort of stock,
regardless of the reason and justice of the action. It is to be noted
that the common stock was reduced only one-fifth, while the preferred
stock was reduced two-fifths, so that not even relative proportions were
observed in the réduction. It :s not apparent, however, to me that,
had tlie réduction been in the same ratio, there would be any change
in the case.
3. The petitioners, having in no wise consented, and not appearing to
hâve estopped themselves in any way, are entitled to be recognized by
the corporation, both as respects their rights to dividends and their
holdings of stock, just as though the August 20, 1918, meeting had
never occurred, and a decree enjoining treatment otherwise will be en-
tered.
[4] 4. As respects claim made that ail unpaid accumulated divi-
dends should be adjudged against the corporation by reason of the
3 per cent, dividend declared from profits between January 1, 1919,
and July 1, 1919, the pleadings do not justify that resuit. While it
appears that the déclaration of a 3 per cent, dividend on a reduced
preferred capitalization of $300,000 must mean that $9,000 has been
declared as eamings during 1919, it does not follow that the petitioners
STAPPORD V. BALTIMORE & O. R. CO. 807
(262 F.)
are entitled, merely on this account, to hâve the entire arrearages of
dividends adjudged them out of this fund, It tnay be, since the action
of the meeting of August 20, 1918, was a unit, both as to dividends and
with référence to the réduction of the stock, and since the proxies
signed therefor was an agreement to both propositions conjoined, they
may be binding in no respect, since the object sought has proven
at least partly abortive, and tlie action of the meeting may be suh-
ject to be rescinded and the agreement contained in the proxies to
be canceled, under ail the circumstances, so that each stockholder will
be remitted to his original status. Such would appear to be a more
just conclusion of the matter than that a few stockholders, by opposing
the action of the large majority, should get, not only what they would
hâve gotten, had the majority not so acted, but very much more be-
side, contrary to the expectation of that majority in taking the action
that they did. It does not certainly appear that any issue was pre-
sented or joined as to who or how many were entitled to dividends
under the old stock, together with the plaintiffs. It is now too late,
by amendment, to join such an issue and thresh it out, especially in
view of the uncertainties above pointed out as to the real rights of ail
the stockholders in view of this décision of the court.
Again, this dividend was declared from earnings since January 1,
1919, and, if they were truly such, it would appear to be more équitable
that ail preferred stockholders entitled to dividends during the period
that the earnings were made should participate in the distribution of
thèse earnings, rather than that the earnings should be appropriated to
accumulated dividends on some of the stock in former years. The
provision for accumulation of dividends would apparently work most
equitably by declaring from each year's earnings the 6 per cent, due
for that year, and then only carrying any surplus to previous yeara
in which dividends had not been paid. It is true that ail such arrear-
ages must be paid before the common stock is paid anything, but not
necessarily true that the accumulated dividends should be paid, wheth-
er due to few or many, before the current dividends should be met
from the current profits.
Leave will be given in the decree to enter judgment for 3 per cent,
dividend declared since January 1, 1919, or, at the option of petitioners,
they may withdraw ail issues concerning dividends and make them the
subject of a full and adéquate separate proceeding.
STAFFORD v. BAI/TIMORE & O. R. CO.
CDlstrlct Court, N. D. West Virginia. November 21, 1919.)
No. 890.
Mastbb and servant <S=»88(1) — Secubino emplotment by feaud defeats hb-
coveby foe injxjet.
In an action by a brakeman for Personal Injury, a plea alleging that
plalntlff, being over the âge prescrlbed, and also unable to pass the phys-
Ical examlnatlon required by defendant's rulea, procured another, who
<E=55For other cases see same toplc & KEY-NUMBBR In ail Key-Numbered Digests & Indexe»
808 262 FEDERAL RErORTER
was compétent to make application ancl tako the pxaminatlon, and by
means of the certlficate so obtained fraudulently secured tUe position,
held good on motion to strike.
At Ivaw. Action by Thomas J. Stafford against the Baltimore &
Ohio Railroad Company. On motion to stiike out defendant's spécial
plea No. 1. Denied, and case dismissed on motion of plaintiff.
Reese Blizzard, C. M. Hanna, and R. E. Bills, ail of Parkersburg,
W. Va., for plaintiff.
B. M. AmbJer and J. W. Vandervort, both of Parkersburg, W. Va.,
for défendant.
DAYTON, District Judge. This plea présents siich an extraordi-
nary statement of facts as to render the légal questions involved in
the motion to strike it out extremely perplexing. It, in brief, says:
The défendant company had certain established rules goveming em-
ployment by it of men in the capacity of brakemen. They had to be
within a certain âge. They had to appear before its médical examiner
and undergo a physical examination, which would show them to be of
such physique and in such condition of health as to fit them, in the
judgment of such examiner and the employing officers of the com-
pany, to properly perf orm the important and dangerdus duties of brake-
men in its service. No one could secure this service without coming
within the rules laid down for such physical examination. That plain-
tiff, knowing thèse rules, bieing over the required âge and physically
unable to pass the required médical examination, secured one Reardon,
a man within the required âge and physically fit, to assume his (Staf-
ford's) name and be examined, and under Stafford's name to secure
such certificate or report froni the médical examiner and enahled Staf-
ford, upon securing it f rom Reardon and presenting it to the company's
employing oificer, to secure the employment of hrakeman, in which
employment, so fraudulently obtained, he was injured.
In this suit, brought by hira, the question immediately arises: (a)
What relation became established by reason of Stafford's fraud on
the one part and the railroad's acceptance of his service on the other ?
Is Stafford to be considered, under the circumstances, a servant of the
company, or as a licensee or a trespasser? In a note to Bist v. Lon-
don & Southwestern Ry. Co., 8 Ann. Cas. 1, more than 250 cases frora
Erigland, Canada, Ihiited States Fédéral, and 35 states are cited in
support of the gênerai rule:
"Tliat a servant accepting employment wlth knowledge of the master's
niles or régulations is under obligations to conform fully to such rules or
régulations so long as they are really maintained in force, and that by a
failure or refusai to observe such rules or régulations he takes upon himself
the risk of the conséquences of his disobedience, and is, as a matter of law,
guilty of négligence vi'hlch defeats his rlght to hold the rtraster liable for an
Injury to tvhich such négligence contributes as a pi'oximate cause."
I hâve not undertaken to examine ail of thèse cases, but hâve ex-
amined a large number of them. In a veiy récent case, decided May
19, 1919, No. 241, October Term, 1918, Donatto Fillippon, Petitioner, v.
Albion Vein Slate Ce, 250 U. S. 76, 39 Sup. Ct. 435, 63 L. Ed. 853, on
STATFOED V. BALTIMORE & O. R. CO. 809
(262 F.)
writ of certiorari to the United States Circuit Court of Appeals for thc
Third Circuit, a négligence case against an employer by its employé for
injury sustained, the Suprême Court says "the case was governed by the
law of Pennsylvam'a, where the injury was received and the trial took
place," under Rev. Stat. § 721 (Barnes' Fed. Code, § 1282 [Comp. St. §
1538]), and cites Pennsylvania décisions as controlling.
I find no case in which the Suprême Court of Appeals of West Vir-
ginia has established the rule of law to govern the exact question in
point hère. I do find that in the récent case of Blagg v. Baltimore &
Ohio R. Co. (W. Va.) 98 S. E. 526, the Suprême Court of Appeals of
this State, in determining the status of one, not an employé, who used
a walkway over its tracks accustomed to be used by its employés, and
was killed by a passing locomotive, to be that of a mère licensee, en-
titled to no higher duty on the part of the company than due to a
trespasser, cites favorably the case of Norfolk & Western Ry. Co. v.
Bondurant, 107 Va. 515, 59 S. E. 1091, 15 L. R. A. (N. S.) 443, 122
Am. St. Rep. 867. In this Virginia case it was held that a minor, who,
by misrepresenting his âge, obtained employment from a railroad Com-
pany as student fireman, is entitled only to the degree of care due
to trespassers, or at most bare licensees, although his infancy in no
way contributed to his injury. The court there held the all-controUing
question to be what the relation of the injured party was to the rail-
road, and such relation, having been shown to hâve been established
by reason of the injured party's fraudulent représentations, was held
void so far as his right to claim damages as an employé.
Much the same question arose in Kirkham v. Wheeler-Osgood Co.,
39 Wash. 415, 81 Pac. 869, 4 Ann. Cas. 532. In that case recovery
was upheld in a case where a boy under 14 had contracted to work in
a sash factory, contrary to the law of the state forbidding such employ-
ment ; he having represented himself to be 14 when he was in f act but
12 years of âge. The court justified the recovery solely on the ground
that the plaintiflf was an infant at the time he contracted to work;
"that infants are liable for torts — that is, for pure torts, such as in-
juries to person or property. On the other hand, by the great weight
of authority, infants are not liable for torts connected with or growing
out of contracts and the doctrine of estoppel in pais does not apply to
them." The strong impression arises from an examination of this dé-
cision that it designs to hold that, while the infant, making the contract
of employment, by reason of his infancy is not estopped, a man of ma-
ture âge would be by reason of his fraud or misrepresentations in se-
curing the contract of employment. In McDermott v. lowa Falls &
S. C. Ry. Co. (lowa) 47 N. W. 1037, the Suprême Court of lowa
takes a différent view of the matter when it says :
"An Instruction dlrected the jury, In effect, that if the défendant was mia-
led by the deceased as to his âge, and Induced to believe he was not a mlnor,
the fact should be considered by the jury, and, if deceased's âge led to the
Injury, plaintlff cannot recovpr. The Instruction is right If no injury result-
ed from the déception practiced upon défendant, it cannot complain."
This ruling is in direct conflict with the Virginia Bondurant Case
and the other cases cited therein, in that it makes the cause of injury
810 262 FEDERAL REPORTEE
and not the status of the injured person the fundamental and crucial
test, and to a degree is in conflict with the principle, as also is the
Kirkham (Washington) Case, laid down by our state Suprême Court of
Appeals in Williamson v. Jones, 43 W. Va. 562, 27 S. E. 411, 38 1,. R.
A. 694, 64 Am. St. Rep. 891, where it was held :
"An Infant of years of discrétion, by Intentional fraudulent conduct, wlU
be barred, under the doctrine of estoppel in pais, from asserting lier tltle to
eltber real or personal property against one misled thereby."
The Court of Appeals of New York, in Hart v. N. Y. Cent. & H. R,
R. Co., 205 N. Y. 317, 98 N. E. 493, takes the extrême opposite view
when it says :
"Notwithstandlng that the deceased, by hls mlsrepresentation, evaded the
rule of the défendant forblddlng the employment of minors, he was actually
In Its service, and therefore was entitled to the protection of an employé
accorded by the law."
Further considération of this question of a minor's misrepresenta-
tion of his âge will be found in notes to Braasch v. Michigan Stove Co.,
20 L. R. A. (N. S.) 500, and Lupher v. Atchison, T. & S. F. R. Co., 25
L. R. A. (N. S.) 707.
Another line of cases establishes, with less confusion and conflict, the
principle that one who voluntarily assumes to act as servant for an-
other cannot recover for personal injuries as if he were in fact such
servant, and one who, having no interest in the work, voluntarily as-
sists the servant of another, cannot recover from the master for an
injury caused by the négligence of such servant, because he cannot
impose a higher duty on the master than a hired servant could impose.
See 26 Cyc. 1287; "Langan v. Tyler, 114 Fed. 716, 51 C. C. A. 503 (2d
Circuit); Everhart v. Railroad Co., 78 Ind. 292, 41 Am. Rep. 567;
Church V. Railroad Co., 16 L. R. A. 861 ; and others cited by counsel
for défendant in their brief .
A very interesting case is that of Rhodes v. Railroad Co., 84 Ga.
320, 10 S. E. 922, 20 Am. St. Rep. 362, which makes a minor's right
to recover as a volunteer dépendent upon his capacity to protect him-
self with the presumption arising that if under 10 years of âge he did
not hâve such capacity, and if over 14 he does hâve it. The case fur-
ther holds that —
"To constltute a servant, there must be some contract, or some act on the
part of the master, which recognlzes the person as a servant"
This principle, if upheld, may be important in the solution of the
question hère, for that it may be shown under the plea hère that a con-
tract was made in fact with Reardon, who took the examination, met
the company's rules and requirements, and who by reason thereof
alone was contracted with to enter into the condition of servant with
the company ; that, on the other hand, no contract of employment was
in fact consummated with Stafïord, but he in fact was a volunteer of
fuU âge and mental capacity to contract, but not physically qualified to
be accepted and contracted with. In such view, a numher of questions,
such as consent to the substitution, for example, might arise on trial
MANNEES V. PAMOUS PIATEES-LaSKY COEPOBATION 811
(262 F.)
that could not be determined in advance on this motion to reject th.e
plea.
But, when it is ail said, the conclusion is inévitable that ail the au-
thorities that I can find are more or less irrelevant ; that the question
is one of first impression, that of a man over (not under) âge, and
charged to be physically incompétent under the rules of the company,
securing by the fraudulent personation of another a service of danger
and responsibility, and, notwithstanding his fraud and deceit, seeking
to hold the defrauded company responsible for an injury sustained by
him in a place where he had no légal or other right to be. Had he not
committed the fraud on the company, he would not hâve been injured.
The force of the reasoning in the Virginia and other cases cited by it,
to the effect that he can secure no benefàt hy reason of his fraud, grows
stronger against his claim than in the case of a minor, for whose pro-
tection the law specially provides.
The force of the moral side of the question bears strongly, too, in
the same direction. Railroad brakemen fill very responsible place in
railroad opération. Not only the corporation, but the public also, are
vitally interested in his physical and other ability to protect both lives
and property from destruction. Without further discussion, it seems
to me clear, v^rhatever principle may be applied, that it cannot be hère
relied on to the extent of rejecting this plea ofïhand, and forbidding
the matters set up in it, if proven, from becoming pertinent to the is-
sues to be detennined on the trial.
The motion to reject the pka will be overruled.
Note. — At the January term, 1920, of court, foUowing the filing of
this opinion, on motion of the plaintiff, and at his costs, this case was
dismissed.
MANNERS v. FAMOUS PLAÏERS-LASKY CORPORATION.
(District C!ourt, S. D. New York. December 11, 1919.)
1. Cebtiobàbi ^=47 — Pendenct not stat of stjit bt defeated pabtt involv-
ing conteact in suit.
Fendency of certlorarl proceedtng in the Suprême Ck)urt to review a
decree construing a contract heïd not to act as a stay In suit, by party de-
feated below against a third i)erson, based on his construction of the
contract
2. CoPYBiQHTS <®=>4S — ^IjIcense contract constrtjed; "Altérations, élimi-
nations, OR additions."
A provision of a contract granting exclusive llcense to produce a play,
which includes also motion plcture rights, that no "altérations, élimina-
tions, or additions" shall be made without the author's consent, held to
apply to motion plcture productions, and while altérations made necessary
by the différent method of production may be made without the author's
consent, such as constltute a substantial déviation from the locus of the
play, or the order and séquence of the development of the plot, may not
In Equity. Suit by J. Hartley Manners against the Famous Play-
ers-Lasky Corporation. Decree for complainant.
®=»For «tlier cases see same toplo & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexe
812 262 FEDBKAL REPORTER
David Gerber, of New York City, for plaintiff.
Nathan Burkan and Elek J. Ludvigh, both of New York City, for
défendant.
MAYER, District Judge. This is a suit to restrain the production
and release of the motion picture "Peg o' My Heart" and the mak-
ing of additions thereto and altérations thereof. On January 19, 1912,
plaintiff entered into a contract with one Morosco, which was modified
in certain particulars by a supplemental agreement dated July 20, 1914.
A litigation arose between the parties as to whether Morosco had ac-
quired the motion picture rights, and, in a suit brought by plaintiff
against Morosco, the court dismissed plaintiff 's bill, holding that Man-
ners had conveyed thèse rights to Morosco. The détails of this contro-
versy will be found in Manners v. Morosco (D. C.) 254 Fed. 737, af-
firmed 258 Fed. 557, C. C. A. . Thereafter the Suprême Court
allowed a writ of certiorari (250 U. S. , 39 Sup. Ct. 494, 64 L. Ed.
■ — -), and the cause is now on the calendar of the Suprême Court await-
ing a hearing, a rnotion to advance having been opposed by Morosco
and having been denied by the Suprême Court,
Under paragraph "Eleventh" of the supplemental agreement, su-
pra, it was provided:
"Eleventh. — Said Morosco Is hereby exprcssly authorized to lease, sublet,
cssign, transfer, or sell, to any pereon or pei-sons, flrm, or corporation what-
«oever, any of bis rights acqiiired under said original agreement or thts
supplemental agreement; it belng expressly understood and agreed that no
sueh leasing, subletting, assignment, transfer, or sale shall in any way release
or discharge said Moro,?co from bis Personal liabillty to pay to said J. Hart-
ley Manners the royalties in amounta, manner, and at the time, as specifled in
said original agreement and in this supplemental agi'eement."
On December 14, 1918 (a day after the decree dismissing the bill
against Manners was filed), Morosco granted to this défendant —
"the exclusive rigbt to reproduce" Peg o' My Heart "in the form of motion
pictures or of a photoplay, and to publicly represent and cause to be repre-
sented such reproduction In the United States and Canada."
In view of Manners v. Morosco, supra, défendant, so far as appears
from this record, is entitled to reproduce the play in motion pictures.
[1] The pendency of the certiorari proceedings between Manners
and Morosco does not in any manner act as a stay in this suit between
Manners and this défendant. The suggestion that the court, as mat-
ter of respect and courtesy, should wait until the Suprême Court shall
hâve decided Manners v. Morosco, is not pertinent.
The production of a motion picture by thèse défendants will not
render moot the question pending in the Suprême Court ; for if the
Suprême Court should reverse, Manners will hâve his appropriate
remédies against Morosco, and could make this défendant (if the pic-
ture were produced) respond to an appropriate accounting.
[2] There is thus left for détermination the question arising out of
paragraph "Seventh" of the agreement between Manners and Morosco,
which reads as f ollows :
MANNEES V. FAMOUS PLAYERS-LASKY CORPORATION 813
C202 F.)
"No altérations, elnninations, or additions to be made in the play without
the approval of the autlior."
This paragraph is not only a part of the original agreement, but,
under the terms of the snpplemental agreement, with other paragraphs,
it was "in ail respects ratifiée!, confirmed, and approved." It ca,nnot
be held, therefore, that this paragraph Seventh refers only to the spo-
ken play, but, on the contrary, it applies as well to a motion picture re-
production of the spoken play.
At the outset it is necessary to détermine the proper construction
of this paragraph. It is obvious that a spoken play cannot be literal-
ly reproduced on the screen. The screen must convey by pantomimic
action and legends, or concise statements, whether by way of narra-
tive or dialogue, the subject-matter and action of the play. Therefore
an altération, élimination, or addition, which is faithfuUy consistent
with the plan and séquence of the play, cannot be held to be an altéra-
tion, élimination, or addition prohibited under the seventh paragraph
without the consent of the author. On the other hand, the author
and playwright, by virtue of the contract expressed in the seventh
paragraph, is entitled to the exercise of the veto by that paragraph
secured, in respect of any part of the motion picture which constitutes,
within the intent of the parties, an altération, élimination, or addition.
To illustrate: The scène in Westminster Abbey, described in
Arnold Bennett's "Buried Alive," might very well be a part of a mo-
tion picture, although eliminated in the spoken play known as "The
Great Adventure." Klein v. Beach (D. C.) 232 Fed. at page 246. Any
person, seeing the picture, would realize that such a portrayal of West-
minster Abbey would probably not be practicable in the spoken play,
and yet the Westminster Abbey scène raight very well be not con-
strued as an addition or altération, because of the référence to it in
the dialogue of the play.
In the case at bar the scène of the play is confined to the Chichester
house at Scarborough, England. The plot and incidents of the play
are so familiar to the Htigants and counsel that, in the interest of brev-
ity, it is unnecessary to set them forth in this opinion. Early in the
play the fact of the death of Kingsworth, the uncle of the heroine, is
made known, and the soliciter also describes the provisions of Kings-
worth's will. In the motion picture an imaginary scène is displayed,
in which Kingsworth is making his will, and in which Jerry (Sir Gerald
Adair), the hero of the play, and the solicitor are présent. One of the
valuable features of the play is the mystery surrounding Jerry's iden-
tity, and the fact that he is one of the executors of the Kingsworth
will. This feature of surprise is eliminated from the motion picture,
whereas in the play it is well concealed, and the fact that Jerry is an
executor does not become known until almost the end of the play.
The question before the court is not whether this order or séquence
in the motion picture is as good or better than the order or séquence
of the play. The point is that it is such an altération as, under the
seventh paragraph, could not be made without the consent of the au-
thor. In the motion picture there would be no doubt in the mind of
814 262 FEDHEAL EEPOETBE
the audience from the start as to who Jerry is, and there is very lîttle
doubt, if any, as to what will happen. One of the most important fac-
tors in any play is the suspense. To attain this method and resuit suc-
cessfully involves one of the problems of play writing, and not infre-
quently a play fails because the audience leams too early what the end
will be, and what part or relation each actor bears to the ultimate
climax or dénouement. This élément of surprise has been admirably
done in the spoken play by plaintiff, and no doubt was one of the rea-
sons contributing to the remarkable success of the play. A différent
situation might hâve been presented, if the play opened in the manner
devised by the plaintiff, and if, in the course of the dialogue between
the solicitor and the Chichesters, the screen had interpolated a scène
showing the making of the will, but eliminating Adair therefrom to
such extent, at least, as would not disclose his identity.
In the motion picture the so-called English-Irish controversy is em-
phasized quite out of proportion to the références in the spoken play.
In the play, Peg's références to her father are incidental to a portray-
al of her own character and her dévotion to her father. The play
has no political purpose or significance. In the last analysis, it is a
charming, clean love story, with a whimsical, wholesome young girl
as the heroine, and a manly, aristocratie young Englishman as the hero.
Indeed, plaintiff opens his play book with the quotation:
"Oh, there's nothlng half so sweet In life
As Love's young dream."
One of the contrasts developed in the play is that of a young girl
whose father was of Irish birth, and whose mother was English, and
who had lived part of her life in America, suddenly coming to the sur-
roundings of an English home. This contrast is the means of intro-
ducing some of the comedy of the play, and, naturally, some of its
dramatic interest. In the play the girl comes from America. In the
motion picture she comes from Ireland. This departure is adopted
probably in order to give opportunity for the picture to display varions
scènes in Ireland. Some of thèse scènes are very attractive, especial-
ly the peasant scènes, and would, no doubt, be pleasing to the specta-
tor; but most of them are foreign to the thème of the play, and are
in no way needed to illustrate the action of the play. Certain pictures
are introduced which do not appear in the play and delay the action of
the story. One of thèse is the scène of Peg with her tutor, and the
unnecessary introduction of a scène from Antony and Cleopatra.
It is impractical to analyze the motion picture, scène by scène, and
compare it with the spoken play. The writer of the scénario evidently
had in mind the kind of présentation which pleases the audience of a
motion picture play, and to that end departed from the sequential ex-
péditions course of the spoken play. To illustrate that it is not neces-
sary to foUow the play literally, I may observe that I should not re-
gard the ballroom scène in the picture as in violation of paragraph
seventh. This scène, which forras a pleasant picture, does not de-
tract from the thème or continuity of the story, and, if anything, might
be regarded as a helpful illustration.
HEATH V. PORT OF PARA 815
(262 F.)
But the point is that, in view of the fact that the parties contracted
as set forth in the seventh paragraph, there cannot be a substantial
déviation from the locus of the play or the order and séquence of the
development of the plot. If thèse substantial features are retained,
then such pictures as may be necessary to explain the action of the play,
and as may be necessary in substitution for dialogue, may be entirely
proper, and not in violation of the seventh paragraph. The case is
probably sui generis, for doubtless in most contracts the producer will
insist upon a reasonably free hand, if he intends to reproduce the play
in motion pictures.
For the reason, therefore, that the provisions of paragraph Seventh
hâve not been adhered to, plaintiff is entitled to a decree restraining the
production of the motion picture in question.
Submit decree on three days' notice.
HEATH v. POET OF PARA et aL
(District Court, S. D. New York. January 29, 1920.)
CoBPOBATioNS <&i»474 — Pledgees of bonds held "bondholdebs" and enti-
tled TO vote AT A MEETING OF SAME.
Under the terms of a deed of trust securing an issue of corporation
bonds, pledgees of bonds pledged by the corporation to seeure Its own
debts held '"bondholders," and entitled to vote at a meeting of bond-
holders held pursuant to provisions of the deed of trust to détermine fu-
ture action.
In Equity. Suit by George B. Heath against the Port of Para, the
National Trust Company, Limited, as trustée, and the Empire Trust
Company, as trustée. On application of the Empire Trust Company,
trustée, for instructions.
This is an application by Empire Trust Company, as trustée, as to the course
to be pursued at the meeting of the holders of bonds issued under the deed
of trust of vphlch Empire Trust Company is trustée, in respect of the accept-
ance of votes by or on behalf of bonds issued under said deed of trust pledged
by défendant Port of Para, and for other and approprlate relief.
The Empire Trust Company Is the trustée under what Is known as the
second division deed of trust, dated March 1, 1909, and made by défendant
Port of Para to seeure an issue of £5,000,000 of 5 per cent. 60-year bonds,
herelnafter referred to as second division bonds. Bonds of the par value of
£4,996,000 hâve been certtfled by the trustée and issued by Port of Para. Of
thèse there hâve been £3,736,089 par value issued to the public and £1,259,911
issued as security for loans to the f oUowing named companles or corporations :
Bank of Seotland £312,000
Madeira-Mamoré Railvray Company 156,000
Para Construction Company, Limitftd 156,000
Société Générale and Banque de l'Union Parisienne, jolnily... 635,911
£1,259,911
In due course and In accordance with the provisions of the deed of trust, a
meeting of the holders of the second division bonds ia about to be held, and
at such meeting varions resolutions will be submltted, whlch, to be efifectlvely
passed, vrill requlre certain majoritles of said holders of bonds. The meeting
in question Is expected to deal vrith Important matters Involvlng the future of
(gsjFot other cases see same tople &. KBY-NUMBBR In aU Key-Numbered Dlgesta & Indexes
816 202 FEDERAL REPORTER
the Port of Para, as well as the flnaneial arrangements and relations ot sald
corporation with Ita credltors, whether bondholders or otherwlse.
The défendant Port of Para takes the position that It désires that the
holders of the pledged bonds shall vote sald bonds, if such course is proper,
and calls attention to the fact that, If the bonds were reduced to possession,
the resuit would Involve considérable loss to défendant Port of Para. Tha
French bank credltors who hold the bonds, In order to asslst the reorganiza-
tlon or readjustment of the flnaneial affalrs of défendant Port of Para, pre-
fer to continue the présent status, if they hâve the right to vote on the
pledged bonds at the meeting above referred to. Some changes apparently hâve
taken place In respect of the holdings of the Bank of Scotland, but a décision
Ih regard to the status of tliese creditor banks whlch hâve appeared vvill gov-
em ail stmllarly situated.
Masten & Nichols, of New York City, for plaintiff.
Olin, Clark & Phelps, of New York City (W. G. Murphy, Jr., of
New York City, of counsel), for défendant Empire Trust Co.
Sullivan & Cromwell, of New York City (William Nelson Cromwell
and Philip L,. Miller, both of New York City, of counsel), for respond-
ents Banque de l'Union Parisienne and Société Générale pour Fa-
voriser la Developement du Commerce et de l'Industrie en France,
appearing specially, and for défendant Port of Para.
David T. Davis, of New York City, for défendant Màdeira-Mamoré
Ry. Co.
George W. Schurman, of New York City, for National Trust Co.,
appearing, but not participating.
MAYER, District Judge (after stating the facts as above). The
meeting which is about to be held will be conducted according to what
js known as "the second schedule," attached to and a part of the deed
of trust. This is a form of procédure familiar in English deeds of
trust, whereby a meeting of bondholders is held and such meeting
conducted generally in accordance with procédure outlined in the deed
of trust.
The deed of trust securing thèse second division bonds defines the
expressions "the bonds" and "the bondholders" as f ollows :
" 'The bonds' means the bonds of the company of each and every séries
issued hereunder and for the time belng outstandlng and entltled to the bene-
flt of the securlty hereby created. 'The coupons' means the Interest coupons
attachpd to the bonds.
"'The bondholders* means the bearers for the time belng of the bonds, or
the reglstered holders for the tlme belng if the bonds be reglstered under the
provisions of thèse présents."
It is undisputed that Port of Para had the right to raise money hy
way of pledging its bonds, as well as by way of selling them. Worth
v. Marshall Field & Co., 240 Fed. 395, 397, 153 C. C. A. 321 ; Wil-
liam Firth Co. v. South Carolina I^oan & Trust Co., 122 Fed. 569,
573, 59 C. C. A. 73. The deed of trust specifically contemplâtes such '
use of its bonds. Paragraph 32 provides as f ollows :
"32. Should the company pledge any bonds secured hereunder or other-
wlse deliver or deposit any bonds so as to entitle the company to redeem
or get back the same and should the company redeem or get back the bonds
so pledged or otherwise dellvered or deposited then the company may rrom
tlme to tlme reissue the same or any of them or surrender to the trustée for
HEATH V. PORT OP PARA 817
(262 F.)
oaneellatton the sald bonds or any of them and the trustée shall cancel the
same and shall certlfy and deliver to the company or its order an amount of
bonds secured hereunder equal to those canceled and the last-mentioned bonds
or the bonds so reissued shall be secured hereby equally with ail other bonds
i'ssued or to be issued hereunder and without préférence or priority one over
another and the holders thereof from tiime to tinte shall be hondholders
hereunder and shall be entitled to ail the rlghts securlty and advantages
given hereby."
It is to be noted that there is a spécifie provision that bonds re-
deemed from pledge may be "reissued." This shows that bonds is-
sued by way of pledge are lawfully issued and outstanding bonds of
the company. The provision that bonds so reissued shall be secured
equally with ail other bonds issued or to be issued, and that the
holders thereof shall he bondholders, was clearly inserted (the mort-
gage being largely in the English fomi) in order to avoid the resuit of
the décision in In re Perth Electric Tramways, Ltd., [1906] 2 Ch.
216, in which it was held that debentures which hâve been issued by
way of pledge to secure a debt of the issuing company cannot be re-
issued after having been redeemed from the pledge.
The deed of trust nowhere makes any distinction whatever be-
tween pledgees of the bonds from the company and purchasers of
bonds from the company. From the intent to be gathered from the
whole structure of the instrument, and applying familiar rules of con-
struction, it seems plain that in such circumstances as are hère dis-
closed, a pledgee from the company of its own bonds was intended to
be a bondholder within the meaning of the word "bondholder" as de-
fined in the deed of trust. If the contrary had been the intention,
the word "owner" or some other apt word could hâve been used.
Under the provisions of the deed of trust as appropriately construed,
there is no reason why there should not be accorded to the holder of
a cori^orate bond, who, as hère, holds such bond "by way of pledge
from the issuing corporation for the corporation's own debt" every
right of a bondholder consistent with the right of the corporation to
redeem. Both purchasers and pledgees of bonds from the corporation
are creditors secured by the security of the bonds, and where voting
rights are given to the bonds, and thereby it is intended to confer on
the bondholders the power to deal with the security by majority vote,
pledgees of this character of pledge are equally interested with pur-
chasers in having a voice in dealing with the security in question.
It is plain that the corporation in such circumstances would not
hâve the power to vote, and it may fairly be assumed that it was in-
tended that the voting power should réside somewhere, and there is
no reason why this voting power should not be possessed by a pledgee,
where the pledge is of the character hereinabove described.
It is unnecessary, for purposes of décision in this case, to déter-
mine what the rights of a pledgee would be who holds a collatéral
pledge in the ordinary course of business under some familiar form
of collatéral note, nor is it necessary to détermine the rights of a
pledgee of corporation stock pledged by a corporation to secure its
own debt. Yet, while the précise question hère under considération
has perhaps not been the subject-matter of judicial décision, the view
262 F.— 52
818 2t!2 FEDERAL REPORTER
hère expressed seems to be supported, to some extent, at least, either
directly or inferentially, by Vail v. Hamilton, 85 N. Y. 453, and Bur-
gess V. Seligman,, 107 U. S. 20, 2 Sup. Ct. 10, 27 L. Ed. 359. In
Brewster v. Hartley, 37 Cal. 15, 99 Am. Dec. 237, the case went off,
among other grounds, on the point that the company had no right to
pledge its stock. In Thomas v. International Silver Co., 72 N. J. Eq.
224, 73 Atl. 833, the case arose under a New Jersey statute (P. L,. 1896,
p. 277, § 38) which prohibited corporations f rom voting their stock di-
rectly or indirectly, in certain circumstances.
It must be remembered that a pledgee of bonds of a corporation
pledged by the corporation to secure its own debt is not a trustée. In
voting on such bonds the owner thereof is not voting directly or in-
directly for the corporation. When he votes on such bonds, he is
voting like any other creditor in his individual interest and to protect
his individual debt.
As the character of thg meeting of bondholders to be held in pur-
suance of the provisions of the deed of trust is, among other things,
to give the bondholding crédite rs of the corporation fuU opportunity
to détermine by appropriate vote what their future financial relations
with the corporation shall be, it is well within the intent of the deed
of trust and its whole procédural plan that the holders of bonds
pledged as thèse were, should hâve every opportunity to vote in the
same manner as the outright owners of bonds hâve their rights.
Such a course, in my opinion, safeguards the rights of ail con-
cemed, does no injustice to the other bondholders, and prevents an
unnecessary and perhaps heavy loss to the corporation which would
occur if the pledgees, in order to assert their rights, were compelled to
reduce the bonds to possession.
In view of the foregoing conclusions, the trustée îs instructed to
accept the vote of the owners of thèse pledged bonds at the meeting
to be held. In order, however, to avoid any question which might re-
suit, if thèse votes were not separately counted or tallied, the trustée
is instructed to keep a record of the votes cast by the owners of the
pledged bonds referred to.
An order will be filed in accordance herewith.
THE PRANKMEEE 819
(262 P.)
THE FRANKMERB.
(District Court, E. D. Virginia. February 12, 1920.)
No. 2034.
Shipping <g=551, 58(1) — Effect on chaeteb or requisitioninq fou wab pub-
poses.
The requisitloning and taking over by the British government early
in the war of a British ship, then under a three-year time charter con-
taining tlie usual restralnt of princes claiise, held to terminate the
charter, and. the charterer held not entitled to damages for breaoh of
charter, nor to recover the excess of hire received by the owner from the
British government over the charter rate.
In Admiralty. Suit by the Gans Steamship Line against the steam-
ship Frankmere and the Palace Shipping Company, Limited, as claim-
ant. Decree for respondents.
Haight, Sandford & Smith, Edward Sandford, and Warton Poor, ail
of New York City, and Hughes, Little & Seawell, of Norfolk, Va., for
libelant.
Kirlin, Woolsey & Hickox and John M. Woolsey, ail of New York
City, and Hughes, Vandeventer & Eggleston, of Norfolk, Va., for re-
spondents.
Frédéric R. Coudert and Howard Thayer Kingsbury, both of New
York City, for British Embassy, as amici curise.
WADDILL, District Judge. The libel in this case was filed to
recover damages for alleged breach of a charter party entered into
between the Palace Steamship Company, Limited, owner of the British
steamship Frankmere, and the libelant, under the following circum-
stances :
On the 28th day of October, 1913, in the city of New York, the
Palace Steamship Company chartered under the ordinary time charter,
for a period of 3 years from the delivery of the steamer, at the
rate of £1,600 per month, less 2y2 per cent, address commis-
sions, making the net amount payable by the charterers for its use the
sum of il, 560 per month. The steamship was delivered on the 30th
of November, 1913, and the charter party provided that the charterers
should hâve an option of 45 days more or 45 days less than the 3-
year period in order to round up voyages. The flat 3-year period ex-
pired November 30, 1916, and under the overlap of the original char-
ter party the charterers would hâve had the right, under their option,
to keep the vessel 45 days longer, as above mentioned. The ship en-
tered at once in the transatlantic trade on November 30, 1913, and so
continued from that date until the 4th day of May, 1915, when she
was requisitioned by the British admiralty. On the 7th day of May,
1915, upon coming out of dry dock at Genoa, over the protest of the
libelant, duly made to the respondent, the ship was formally taken
possession of by the British government, and thenceforth continuously
<S=3For other cases see same toplo & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes
820 262 FEDERAL REPORTER
used by it in the then pending war, for a period subséquent to the
expiration of the life of the charter.
The Hbelant claims, in eiïect, that the ship was taken possession of
by the govemment, with the assent of the owner, and over the li-
belant's protest, and that as a resuit heavy damages were sustained
by the hbelant, the charter hire of vessels having immensely increased
after the charter party was entered into, and that for the 20 months
and 6 days that it was deprived of the use of the ship, it would hâve
received a charter rate of £6,397 per month, and was accordingly
damaged to the extent of £4,797 per month, or £96,896 sterling, or
its équivalent in United States money of $465,110, at least, and for the
recovery of which this Hbel was filed. Libelant moreover urges in
argument that during the remainder of the charter period, after the
réquisition by the govemment, the respondent operated the ship un-
der the réquisition for the benefit of the libelant, subject to the payment
of the regular charter hire, which libelant tendered to the respondent ;
its claim being that the différence between said amount and that paid
by the govemment belonged to the charterer, and was the least amount
for which a recovery should be had.
The charter party in question contained the usual "restraint of
princes" clause, as foUows:
"20. The act of God, the king's enemies, épidémies, pirates, ice, blockade of
rivers, robbers by land or sea, restraint of Princes, rulers or people, périls of
tlie sea, collisions, strandings, patent defects in the hull, boUers, machlnery or
appurtenances, lo.ss or damage froin machlnery, boilers, or steam, or from ex-
plosions, beat or lire on board, In the hulk of the craft, or shore, jettison, bar-
ratry, any act, neglect or default whatsoever of pilots, master or crew in the
management or navigation of the ship, and ail and every danger and accident
of the sea, rivers and canals or navigation of vs'hatever nature or kind are
excepted throughout this charter."
The question presented turns upon (a) whether or not the ship was
commandeered, as contemplated by this provision of the charter party ;
and (b) what effect such commandeering had upon the contractual re-
lation of the parties.
Considering the first proposition, the suggestion is made that the
vessel was taken by the British govemment with the consent, if not
the connivance, of the owners ; that the commandeering was not
legally made, and that the ship could not hâve been lawfully taken at
Genoa, outside of the dominion of the British govemment, and within
the 3-mile limit of the Italian coast. Neither of thèse positions appear
to the court to be well taken. In the first place, while doubtless, hav-
ing regard to the hazardous exigencies of the existing war period, the
owners may hâve been willing that their ship should be commandeered,
still the testimony does not warrant the inference that anything im-
proper was donc in this respect on their part, further than arose from
their surrendering the vessel when demanded by the constituted au-
thorities. At the time, its résistance, either from a business, sensible,
or a patriotic standpoint, could not hâve been thought of for a moment.
The taking of the vessel by the govemment, under the facts and
f ircumstances of this case, seenis to hâve been in ail respects lawful
THE PRANKMERE 821
, <2S2 F.)
and complète, without any bad faith on tlie part of the owner, and
the same occurred at a time when there was every indication that the
commandeering was for the period at least covered by the Ufe of the
charter, and which the resuit proved. As to the talting of the vessel
at Genoa, while technically the government might not hâve been able
to enforce its decrees and orders as long as the ship remained in
harbor there, still she could never hâve left there, without, upon
reaching the high seas, being immediately seized and taken. Had
this course been pursued, the charterer's interest would not hâve been
promoted, and the owners, in every probability, would hâve received
nothing whatever from the use of the ship.
Considering the efïect of the commandeering upon the rights of the
parties under the charter, in the light of the excepting vis major clause
therein, and whether there was a frustration of the contract, it may be
said that the same is not f ree from doubt, and that much contrariety
of opinion exists in the authorities on the subject. Two récent déci-
sions in cases of breach of charters party, arising during the récent
war and under circumstances substantially as hère, one by Judge
Learned Hand, of the Soutliern district of New York, in the case of
Earn Line S. S. Co. v. Sutherland S. S. Co., Ltd., 254 Fed. 126, and
the other by Judge Rose, of the Maryland district, in The Isle of
MuU, 257 Fed. 798, hâve been recently rendered. The courts are di-
rectly at variance; Judge Rose holding that the charterer is entitled
to the advanced hire during the life of the charter, and Judge Learned
Hand talcing the contrary view.
To thèse two opinions, as well as to the authorities therein cited,
spécial référence is made, as containing great learning and throwing
much light upon the question. Judge Rose, in an exceedingly vigorous
and able opinion, strongly adhères to the view that pending the life of
the contract, any advance in rates arising from the taking of the
ship, should belong to the charterer, as distinguished from the owner.
The equity of this position caimot well be gainsaid, certainly in many
cases. Having relation, however, to the status of the parties, the
court cannot accept this view. Their rights should be determined in
the light of their relation under the contract, having regard as well to
what might hâve taken place thereunder, assuming the view contend-
ed for to be correct, as to what actually occurred. The respondent
was the owner of the vessel ; the libelant had no right to or interest
in her, save as arose under the terms of the contract. Anything that
lawfully put an end to the contract terminated the libelant's rights
thereunder, and such an event was, in terms, contemplated and pro-
vided for in the contract. Each party, in entering into it, was anxious
to hâve just such a vis major clause as this one contained, looking
to possibilities or eventualities which might arise thereafter.
The wisdom, if not the necessity, of such a clause ail recognize, and
was strikingly illustrated hère. Before half of the term of the con-
tract had expired, the most frightful war theretofore known had broken
out, in which much of the world was engaged, and especially the
country of the shipowner, its very existence being seriously imperiled,
822 262 FEDERAL REPORTEE
and the restraint of princes clause, providing for the termination and
annulment of the contract in such contingency, became acutely of the
essence of the contract. The state of the war at that time, and the
condition of the country and of the world, made it manifest to both
parties that the commandeering would continue long past the life of
the contract. This it actually did, and the contract was thereby frus-
trated when the government took possession of the ship, and the rights
of the charterer were absolutely ended and terminated, and those of
the owner, subject, however, to the paramount power of the govern-
ment to use the ship, without consulting the désire of the owner, re-
vived, as though the charter had never been entered into. It so hap-
pens that the government did pay a much higher réquisition rate than
the ovk^ner was to receive under the charter party, but that was a mère
coincidence. It might just as readily hâve been less, or indeed nothing
at ail; and, as seen, the owner was dispossessed of his property with-
out his consent, or consultation with him as to its worth or value, and
it should not, because it happened to be more than was actually re-
ceived from the charterer, be required to give the excess to one whose
interest therein, or contractual relations therewith, had been terminated.
No one would say, had the government paid less hire than the owner
had been receiving, that the charterer could hâve been held for the
différence. Nor can it be successfully claimed that, if the comman-
deering had not continued during the life of the contract, the charterer
could either hâve been required to complète the contract for the unex-
pired term or pay the owner the hire therein provided for. The char-
terer's rights in the res existed only by virtue of the charter party.
One whose rights hâve been terminated, as hère, cannot be heard to
complain of any inequity or injustice that arises. The happening of
the very thing that occurred was anticipated in the making of the
contract. In this instance, charter rates had increased ; but had they
decreased, and the government had chosen to seize the vessel, as it
did hère, the charterer would hâve been the only person that could
hâve protected itself from the disastrous conséquences of such a situ-
ation, as it might hâve gone upon the market and hired tonnage at a
much cheaper rate; whereas the owners would hâve been entirely
at the mercy of the government, in what it chose to pay.
No gênerai discussion or citation of authorities will be entered upon,
save to refer to the décisions of Judges Hand and Rose, supra, and
to the cases cited by them; the court's opinion being, under the cir-
cumstances hère, that the charter party was frustrated, and the
rights of the libelant thereunder terminated.
The court's conclusion is that the libelant is not entitled to recover in
this case, whether its claim be treated as for damages generally for
breach of the contract, or specifically for the excess paid by the govern-
ment to the owner, over and above the sum the respondent would hâve
received from the libelant, and accordingly the libel should be dis-
missed.
SIMSON V. KLIPSTEIN 823
C262 F.)
SIMSON et al. v. KLIPSTEIN.
Plstrtct Court, D. New Jersey. January 30, 1920.)
1. PAETNEESHIP <S=320 — ^WHETHEB association IS TBUST de PARTNEBSHIP DK-
PEND8 ON INSTRUMENT CBEATINQ IT.
Whetlier an association Is a trust or partnershlp dépends on whether
the Instrument creatlng it vests the power to control Its management.
Where sucU power is in trustées it is a trust, but where vested In the
shareholders it Is a partnershlp, wlthout regard to whetlier or not
they hâve ever exercised such power.
2. Partnership ®=»20 — Association hbld paetnebship.
An association formied under articles providing that the légal and
équitable title to ail property should be in two trustées, wlth power to
carry on business, make contracts, and buy and sell property, but that the
bénéficiai interest should be in certlficate holders, who were glven power to
amend or change the articles, held, a partnei-ship.
3. Partnership <s=5l98 — Right to sue bt agent.
Where the articles of an association constitutlng a partnership named
two trustées, in whom was vested the légal and équitable title to ail
property, wlth gênerai power to buy and sell, such trustées held agents of
the partners, who were certiflcate holders, and entitled under the law of
New Jersey to malntain a suit in their own name on behalf of the asso-
ciation relating to its property.
4. Courts <S=>3H — Citizenship confeeking jubisdiction on fedeeai. coubt.
Jurisdictlon of a fédéral court on the ground of diverse citizenship dé-
pends on the Personal citizenship of the parties to the record, and not
on the citizenship of the persons whom they represent.
At Law. Action by Leslie N. Simson and George W. Hunter,
trustées, against Ernest C. Klipstein. On motion to dismiss for want
of jurisdiction. Denied.
McCarter & English, of Newark, N. J., for plaintiflfs.
Frederick Seymour, of New York City, and Borden D. Whiting, of
Newark, N. J., for défendant.
DAVIS, District Judge. Défendant in the above-stated cause mov-
ed to dismiss the same on the ground that this court is without juris-
diction because one of the necessary parties plaintif? and the défendant
are both citizens of the state of New Jersey. The défendant further
asks permission to take testimony to establish the citizenship of the
said necessary party and for an order adding the name of said party
plaintifï to the complaint.
[1] On March 15, 1916, the plaintiffs, Simson and Hunter, by an
instrument purporting to be a déclaration of trust, called "Articles
of Association of Midvale Chemical Works," established a proposed
trust and constituted themselves trustées thereof. Their plan con-
templated that, as trustées of the Midvale Chemical Works, the name
of the proposed trust, persons would give to them money, in retum
for which they would issue certificates entitling the holders thereof
to share in the profits resulting from their management of the enter-
prise upon which they were to embark with said money. The certifi-
^ssFor otber casea see sam« topic & KET-NUMBER in ail Key-Numbered DIgesU & Indexée
824 202 FEDERAL REPORTER
cate holders were the bénéficiai owners of the money contributed by
them, in that they were to share in the profits earned and in the final
distribution of the assets of the association, in accordance with the
terms of the articles of association. According to said terms, however,
the légal and équitable title to the property is vested in the said trus-
tées.
The trustées purchased at EHzabeth, N. J., some considérable real
estate and established and operated a factory thereon, wherein aniline
oil, etc., was manufactured. On May 31, 1917, the "Midvale Chemical
Works, by George W. Hunter, Leslie N. Simson, trustées," entered in-
to an agreement with the défendant for the sale to him of said real
estate and factory for the sum of $150,000, and also for the personal
property, including the raw materials on hand, an inventory of which,
the plaintiffs allège, showed it to be worth about $45,000 in addition.
The défendant entered into possession of the property, but it develop-
ed tliat the said trustées could not give a clear title to the real estate
and the défendant refused to accept a deed for the same. During the
time title to said real estate was being determined by litigation in the
Court of Chancery of New Jersey, the défendant continued in posses-
sion of the property and operated the factory. For his alleged failure
to pay for the personal property and raw materials, for his refusai to
remove from the premises at the termination of the litigation in ac-
cordance with the terms of an agreement entered into while litigation
was going on, and for damages alleged to hâve been done to the said
property while in possession of defenaant, plaintiffs brought this action
against him to recover the sum of $141,870.78. The défendant is be-
fore this court on motions as aforesaid.
Whether or not an association is a trust or partnership dépends up-
on the instrument creating it. Real estate trusts, such as this claims
to be, hâve arisen principally in Massachusetts and Missouri. Upon a
careful examination of the articles of association of the Midvale
Chemical Works and of the cases bearing upon this question, I am of
the opinion that the Midvale Chemical Works is a partnership. The
test is the power of control of the management of the association. If
the certificate holders hâve the power of control, the association is a
partnership; if they bave not, and the power of control is in the trus-
tées, it is a trust. "The distinction," said Judge Morton, in the case
of In re Associated Trust (D. C.) 222 Fed. 1012, "between the two
turns upon the provisions of the trust agreement or déclaration. In
cases where by the déclaration of trust, the shareholders are given sub-
stantial control of the management of the trust property, the trust is
held to be a partnership; in cases where shareholders hâve no guch
control, the trust is held, for the purposes of taxation, to be of the
same sort as the usual testamentary trust, and not to be a partnership."
Hoadley v. County Commissioners, 105 Mass. 519; Whitman v. Por-
ter, 107 Mass. 522; Gleason v. McKay, 134 Mass. 419; Phillips v.
Blatchford, 137 Mass. 510; Ricker v. American Loan & Trust Co.,
140 Mass. 346, 5 N. E. 284; Mayo v. Moritz, 151 Mass. 481, 24 N.
E. 1083; Williams v. Boston, 208 Mass. 497, 94 N. E. 808; WiUiams
SIMSON V. KLIPSTEIN 825
(262 P.)
V. Milton, 215 Mass. 1, 102 N. E. 355. In the last case cited, Judge
Loring, in distinguishing the cases, said the différence —
"lies in the fact that in tlie former cases the certlflcate holders are associated
tx)gether by the terms of the 'ti-ust' and are the principals whose instructions
are to be obeyed by their agent, who for their convenlence holds the légal ti-
tle to their property. The property Is their property. They are the masters.
AVhile in Mayo v. Moritz, on the other hand, there Is no association between
the certlflcate holdere. The property is the property of the trustées, and the
trustées are the masters. Ail that the certlflcate holders in Mayo v. Moritz
had was a right to hâve the property managed by the trustées for their
beneflt. They had no right to manage it themselves, nor to instniot the
trustées how to manage it for them. Aa was said by O. Allen, J., in Mayo
V. Moiltz, 151 Mass. 481, 484 [24 N. E. 1083]: 'The scrip holders are ces-
tuis ffae trust, and are entitled to their share of the avails of the property
when the sanve is sold,' and that Is ail to which they were entitled. In Mayo v.
Moritz the scrip holders had a common interest in the trust fuad In the same
sensé that the members of a class of life tenants and the members of a class of
remaindermen (aniong whom the income of a trust tund and the corpus are
to be distributed respectlvely) hâve a common interest. But in Mayo v.
Moritz there was no association among the certlflcate holders just as there
is no association, although a common interest auiong the life tenants or the
remaindermen in an ordinai-y trust."
It was held in New Jersey that the mère sharing in profits would
make persons partners as to third parties, even though there was
no intention to become partners. Sheridan v. Medara, 10 N. J. Eq.
469, 64 Am. Dec. 464 ; Voorhees v. Jones, 29 N. J. Law, 270. Later
this rule seems to hâve been modified, so that profit sharers mnst hâve
the power of control, in order to constitute them partners. Wild v.
Davenport, 48 N. J. Law, 129, 7 Atl. 295, 57 Am. Rep. 552. It is
not necessary that the power of control should be actually exercised
for partnership to exist. It is sufficient if the power is given, though
never exercised. In re Associated Trust (D. C.) 222 Fed. 1012, supra.
This would follow as a necessary corollary from the statement that
whether or not a partnership exists, rather than a trust, dépends up-
on the terms of the créative instrument, the trust déclaration, for it
could not be determined from the examination of such instrument
whether or not the power given by it had been exercised.
[2] Power of control in the case at bar is given to the certificate
holders in the articles of association. By articles X and XI a meeting
may be called at any time, and the certificate holders may amend any
and ail of the articles of the association, except in three particulars, not
essential to the substantial control of the association or the manage-
ment of the property thereof . In article II, it is provided that :
"The trustées shall hâve the power to contract and carry on in the name of
and for the association any business which could be lawfully conducted or
carried on by an individual, and, in the conduct of such business, may use
and invest any funds of the association and shall hâve full gênerai iK>wer and
authorlty to l)uy, sell, pledge, mortgage, grant, convey and exchauge property
of every description, real, Personal or uiixed," etc.
Suppose at one of their meetings provided for in article XI, the
certificate holders should pass a resolution amending article II, line 1,
by striking out the word "trustées" and substituting in lieu thereof
826 262 FEDERAL EEPOUTEK
the words "certificate holders," the trustées would be practically strip-
ped of their control and opération of the enterprise.
In article XXI, it is provided that :
"The trust hère ereated shall termlnate at the expiration of 21 years after
the death of the last survivor of the above named trustées," etc.
If in one of their said meetings the certificate holders should pass
a resolution amending the said article, so that the trust should ter-
minate forthwith, the trustées would be powerless and the trust would
corne to an end. The trustées hâve no vote in such matters, nor hâve
they, so far as the facts before me disclose, any capital of their own in
the enterprise to protect. It is évident that the power of control of
the management is in the certificate holders, and may at any time be
exercised by them, notwithstanding any opposition the trustées might
ofl?er. The certificate holders are associated together by the terms
of the créative instrument. The association is therefore a partnership,
and not a trust.
[3] Does it thereupon follow, as contended by the défendant, that
the names of the certificate holders should be added as parties plaintiff,
one of whom, it is alleged, is a citizen of New Jersey, which fact ousts
this court of jurisdiction? It should be noted that the association is
a partnership, the certificate holders themselves being the partners,
and not, as défendant seemed to think, partners with the trustées,
who are not certificate holders. There is, therefore, no trust hère, and
strictly speaking no trustée. The so-called trustées represent the
certificate holders. The certificate holders are principals, and the
trustées, the plaintififs, are their mère "managing agents." By what-
ever name, however, they are designated, there can be no doubt that
they hâve full authority to represent the certificate holders and bind
them in ail transactions touching tlie property. It will be recalled that
by article II the "trustées" "hâve full gênerai power and authority
to buy, sell, pledge, mortgage, grant, convey, and exchange property
of every description, * * * and do ail things necessary to the
conduct of the business which they may undertake." It is further
provided in article IV that:
"The trustées shall be deemed the absolute owners of ail the property of
the association and both the légal and équitable tltle to ail such property shall
be vested absolutely In them."
The défendant in ail his dealing with the plaintiffs, has regarded
and accepted them as accredited authoritative agents of the certificate
holders, with full power to deal as they pleased with the property con-
tributed by said certificate holders. That the présent plaintiffs are the
proper parties plaintiff in a suit in equity in New Jersey touching said
property was decided in the case of Simson et al. v. IClipstein, 88 N. J.
Eq. 229, 102 Atl. 242. The parties plaintiff and défendant were the
same in that case as in the instant case and the same questions which
are raised hère as to proper parties were raised there, and decided
against the défendant. In view of the powers conferred upon the so-
called trustées or "managing agents" by the articles of the association.
SIMSON V. KLIPSTEIN 827
C262 FJ
the récognition by the défendant of their full and unquestioned au-
thority of the association, and the décision of the Court of Chancery
of New Jersey holding that the plaintifïs are the proper parties plain-
tiff in a suit touching said property, I am of the opinion that Simson
and Hunter are proper parties plaintiff, and hâve full power and au-
thority to represent the certificate holders in this proceeding.
[4] It is settled that the jurisdiction of fédéral courts dépends
upon the personal citizenship of the parties to the record, and not up-
on the citizenship of the parties whom they represent. Memphis St.
Ry. Co. V. Bobo, 232 Fed. 708, 710, 146 C. C. A. 634. To put it in
another way, représentatives may stand upon their own citizenship
in fédéral courts, irrespective of the citizenship of the persons whom
they represent — such as executors, administrators, guardians, trus-
tées, receivers, etc. The evil which the la\y, prohibiting the création
of fédéral jurisdiction by assignments, intended to obviate, was the
voluntary création of fédéral jurisdiction by simulated assignments
made for that sole purpose. But assignments or conveyances by
opération of law creating légal représentatives are neither within the
mischief nor reason of the law. New Orléans v. Gaines, Administra-
tor, 138 U. S. 595, 606, 11 Sup. Ct. 428, 34 L. Ed. 1102; Mexican
Central R. R. Co. v. Eckman, 187 U. S. 429, 434, 23 Sup. Ct. 211, 47
L. Ed. 245. The plaintiff s are "managing agents," having the légal
and équitable title to the property in question, and are proper parties
to the record, and so come within the above exception.
It appears f rom the complaint that Simson is a citizen of New York,
and Hunter of Missouri, while the défendant is a citizen of New
Jersey. This cause of action, therefore, being a controversy exceed-
ing, exclusive of interest and costs, the sum or value of $3,000, is
properly in this court, and the motions of the défendant are denied.
The défendant may hâve 20 days, after the entry of order, within
which to answer.
828 262 FEDERAL REPORTER
In re WEIJîON.
(District CSourt, N. D. lowa, Cedar Kapids Division. .Tanuary 14, 1920. Sup-
plemental Order, February 2, 1920.)
No. 943.
1. Bankbttptct ^=410 — Time fok filing application fob dischabge.
Under Bankruptcy Act, § 14a (Comp. St. § 9598), a court of banltruptoy
is wlthout jurisdlctlon to grant a dlscharge on an application therefor
filed more than 18 months after adjudication, unless sucti time is ex-
tended because of banknipt being in the miiitary service, under Act Mareb
8, 1918, § 205 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3078i4e).
Supplemental Order.
2. Bankeuptcy <@=3410 — Time for filing application fob dischaeqe; ef-
FECT of SOLDIEKS' RELIEF AcT.
Tbat bankrupt's attorney entered the mllltary service and tumed over
tbe case to another attorney, wbo neglected to file application for discharge
imtil more than 18 months after adjudication, heia not to vest the court
with jurisdlction to entertain it by virtue of Soldiers' and Sailors' Civil
Relief Act March 8, 1918, e. 20, § 205 (Comp. St. 1918, Comp. St. Ann.
Supp. 1919, S 30T8i4e).
In Bankruptcy. In the matter of Patrick Weldon, bankrupt. On
application for leave to file pétition for discharge. Referred.
J. M. Dower, of Marengo, lowa, for bankrupt.
REED, District Judge. The application by the bankrupt for leave
to file a pétition for discharge recites :
"That the banknipt was adjudicated a banlaiipt In thlg court on the 14tb
day of March, 1918 ; that within the last month he presented to the référée in
bankruptcy an application for discharge, but the référée refused to file the
Rame, because it was not presented within 12 months after the adjudication."
[ 1 ] This application is signed and sworn to by the attorney for the
bankrupt on the 25th day of September, 1919, and is indorsed, "Filed
September 27, 1919, by J. C. Stoddard." The original pétition is signed
by the bankrupt on August 21, 1919, and appears to hâve been veri-
fied by him before a notary public on that date. When it was filed
with the clerk, if at ail, does not appear, but appears to hâve been filed
with the référée on the 7th day of October, 1919. If filed on the
25th or 27th day of September, 1919, both of thèse dates would be
more than 18 months after March 14, 1918, the date of the adjudica-
tion. Twelve months after the adjudication would expire on March
14, 1919, and 6 months after that date would be September 14, 1919,
and the earliest date the pétition seems to hâve been presented to or
filed with the deputy clerk, if at ail, was September 25 or 27, 1919,
which is more than 18 months after the adjudication.
Section 14a of the Bankruptcy Act reads in this way:
"Any person may, after the expiration of one inonth and within the next
twelve months subséquent to being adjudged a bankrupt, file an application for
a discharge in the court of bankruptcy in which the proceedings are pending ;
©isFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes
IN RE WELDON 8^9
(2C2 F.)
If It shall be made to appear to the judge tliat tlie bankrupt was unavoldably
prevented from filing it wlthln such time, it may be flled within but not after
the expiration of the next six months." (Comp. St. § 9598.)
When must the bankrupt file his pétition for a discharge to be en-
titled to the benefît of the Bankruptcy Act? This question was an-
swered in Re Walters (D. C.) 209 Fed. 133, as follows :
"After the expiration of one month and wltliin the next 12 months" after the
adjudication, and if prevented for unavoidable reasons from so doing within
sald 12 months, then within the next 6 months thereafter, thus makiug the 12
months period begln, "not from the date of the adjudication, but from the
expiration of one month thereafter."
If this is correct, then the bankrupt for unavoidable reasons may file
his application within 1 month after the expiration of 18 montlis from
the date of the adjudication, or within 19 months thereafter. In that
case the adjudication was on September 18, 1912, the application for
discharge was fîled on October 6, 1913, more than 1 year after the ad-
judication, but within 1 month thereafter. There was a^howing of un-
avoidable delay in filing the pétition, but without determining whether
or not that showing was sufïicient the court allowed the application to
stand and set the same for hearing, thus allowing the pétition for dis-
charge to be fîled after the expiration of 12 months from the date of
the adjudication without a showing of unavoidable reasons for not fil-
ing it within the 12 months. The décision holds, correctly as we think,
that the application may be filed as of right only after the expiration of
one month, and within the next 12 months subséquent to the adju-
dication, but holds that such 12 months period dates not from the
adjudication, but from the expiration of 1 month thereafter. That
the 12 months period dates' from the adjudication is clear, I think,
from the language of the act, which reads :
"If it shall be made to appear to the judge that the banlîrupt was unavoid-
ably prevented from filing" the pétition "within such time [obviously the
twelve months period], then It may be filed within, but not after the expiration
of, the next 6 months" — meanlng obviously within 18 months after the adjudi-
cation, and not one month.
In Re Fahy, 116 Fed. 239, Judge Shiras, of this district, held that
after the expiration of 18 months from the date of the adjudication
the court is without jurisdiction to entertain a pétition for the bank-
rupt's discharge. This view is followed in Re Wagner, 139 Fed. 87,
by Judge Hawley in the district of Nevada, wherein he cites In re
Wolfï (D. C.) 100 Fed. 430; In re Knauer (D. C.) 133 Fed. 805; In
re Anderson (D. C.) 134 Fed. 319; In re Lewin (D. C.) 135 Fed. 252 ;
Kuntz V. Young, 131 Fed. 719, 65 C. C. A. 477. See, also, In re Daly
(D. C.) 205 Fed. 1002, and In re Daly (D. C.) 224 Fed. 263, ail of which
hold to the same view. Kuntz v. Young, above, was decided by the
Court of Appeals of this circuit.
The application for leave to file pétition for discharge recites :
"Tour petitioner, Patrick Weldon, respectfully states that he was adjudl-
cated a bankrupt in this court on the 14th day of March, 1918 ; that within
the last DKinth he presented to the référée application for Ms discharge, but
830 262 FEDERAL KEI'ORTER
that sald référée refused to file the same, for the reason that the same was not
presented withln tlie 12 months period; that one James P. Gaffney, ot Wll-
Uamsburg, lowa, was appllcaat's original attomey in sûJd bankruptcy pro-
ceedings, and that he afterwards entered the milltary service, and upon hia
entering into the service he gave Attomey J. M. Dower gênerai instructions to
look after said proceedings in behalf of said bankrupt; that the statutory
period for flllng said pétition for discharge was overlooked by petitloner and
Attomey Dower, and that the failure to flie sald pétition withln the statutory
time is due to that, and to no ulterior reason ; and that petitloner would hâve
filed the application withln the statutory tlcae, had his attention been called
to it, and that his failure to flle the same Is due to the fact that Attomey Dow-
er dld not call his attention to said time limlt. Wherefore petitloner respect-
fully asks that an order be granted, directlng the référée to flle sald pétition,
and for such other orders as may be proper In the premises. [Slgned] Patrick
Weldon, Appllcant, by J. M. Dower, His Attomey."
This is signed and swom to by J. M. Dower on the 25th day of Sep-
tember, 1919, before a notary public.
This may be an attempt to allège that the bankrupt was in the mili-
tary service of the United States during the 12 months period for fil-
ing a pétition for discharge; but the allégation is so indéfini te that
it is uncertain whether it allèges that the bankrupt or his attorney was
in the military service, and the reason for the failure to file the applica-
tion within the time required by the Bankruptcy Act.
By the act of Congress approved March 8, 1918, known as the Sol-
diers' and Sailors' Civil Relief Act (chapter 20, § 100 et seq. 40 Stat.
pp. 440, 449 [Comp. St. 1918, Comp. St. Ann. St. Supp. 1919, §
307814a et seq.]), it is provided that in any court of the United States,
or of any state or territory therein, in which is brought or pending any
suit against a person in the military service of the United States as
specified in said act, to establish a civil liability or to recover a judg-
ment or order of any kind against such person in the military service
of the United States, may in the discrétion of the court, either upon its
own motion, or upon the application of such person, or in his behalf,
be temporarily suspended or otherwise stayed or disposed of during
the pendency of the présent war or until such time as it may détermine.
In his certificate in this case the référée states that on the 24th day
of November, 1919, the time fixed for the appearance of creditors to
object to the application for leave to file said pétition, came on for
hearing, and there was no appearance against the same; and it fur-
ther appearing from the application asking leave to file the pétition
that the reasons or cause of delay in filing the same within the time
fixed by the bankruptcy laws was owing largely to the absence of the
bankrupt or his attorney serving in the United States army; and
it appearing that none of the creditors having availed themselves or
himself of the right to appear and object to the allowance of the pé-
tition for discharge, the référée finds that the reason for failure to file
the pétition for discharge is sufiîcient, and that the nonappearance of
the creditors to object to the discharge places them in default. He
therefore recômmends that the bankrupt be allowed to file the pétition
for discharge, notwithstanding the expiration of the time within which
it is required to be filed under the Bankruptcy Act, and recômmends
that the pétition for discharge be allowed and the discharge granted.
IN RE WELDON 831
(262 F.J
The référée does not set out the testimony, îf any was taken by
him, and reports his conclusion only. There is nothing, theref ore, upon
which the conclusion can be reviewed or set aside. The référence to
the référée could rightly be only to take the testimony and find the f acts
as a spécial master, for the judge only can détermine whether or not the
bankrupt is entitled to a discharge ; and inasmuch as under the terms
of the Soldiers' and Sailors' Civil Relief Act the court may suspend or
delay the final order in the matter, the order will be that the applica-
tion for leave to file the pétition for discharge be suspended or stayed,
and the matter referred back to the référée to permit the bankrupt
to show, if he can do so by compétent testimony, that he was unavoid-
ably delayed from filing his pétition for discharge within the 12 months
period after the adjudication because of being in the military service
of the United States within the 12 months period after the adjudica-
tion in bankruptcy, and the matter suspended until such question can
be determined, and the application for discharge thus delayed beyond
the 12 and 18 months period; and it is accordingly so ordered.
Supplemental Order.
[2] As ordered in the mémorandum filed in this proceeding on Jan-
uary 14, 1920, the matter was referred hack to the référée, as spécial
master, to hear the application of the bankrupt for leave to file a péti-
tion for discharge after the expiration of more than 18 months from
the date of the adjudication in bankruptcy. The référée, as spécial
master, has taken the évidence in support of the bankrupt's application
for leave to file the pétition for discharge, has found the facts and
reported the same, with his conclusion that leave shall be granted the
bankrupt to file the application, and that a hearing should be had upon
the bankrupt's pétition for discharge.
The facts as found by the spécial master are: That the bankrupt
did not file the pétition for discharge until more than 18 months after
the adjudication in bankruptcy, and without showing any grounds there-
for other than that he did not know that the pétition for discharge was
required by the Bankruptcy Act to be filed within one year after the
adjudication, and not later than 18 months thereafter, without showing
that he was unavoidabily prevenled from filing the pétition within 12
months, and not later than 18 months after the adjudication. The ad-
judication in bankruptcy, as shown by the bankrupt's pétition for dis-
charge, was on March 14, 1918. Some time in July, 1918, the bank-
rupt's original attomey in the proceedings enlisted or was drafted in
the military service of the United States, and then turned over the mat-
ter pertaining to said bankruptcy to Mr. J. M. Dower, another attomey,
for further attention to the matter, who the proofs show had forgotten,
or for some other reason overlooked, the fact that a pétition for dis-
charge must be filed in the bankruptcy court within 12 months after
the adjudication, and not later than 18 months thereafter. It is need-
less to say that the fact that the bankrupt did not know that the pétition
for discharge must be filed within the 12 months, and not later than 18
months after the adjudication, is no ground for permitting the pétition
832 262 FEDERAL REPOBTEK
for discharge to be filed more than 18 months after the adjudication,
and the court is without jurisdiction to entertain such pétition after
the expiration o£ 18 months after the adjudication. In re Fahy (D.
C.) UôFed. 239.
The facts as found by the spécial master show without any dispute
that the bankrupt was never in the military service of the United
States; that it was his original attorney who entered that service, and
the bankruptcy proceedings were turned over hy him to Mr. Dower,
who presented to the court the application of the bankrupt for leave to
file such pétition more than 18 months after the adjudication. If the
bankrupt himself had entered the military service of the United States
during the 12 months period after his adjudication, or after 18 months
even, there might be some reason for saying that the act of Congress
approved March 8, 1918, known as the "Soldiers' and Sailors' Civil Re-
lief Act," might be ground for relieving the bankrupt from his failure
to file the application within the statutory time ; but, without determin-
ing whether or not it would be ground for so relieving him, his failure
to file the pétition for more than 18 months after the adjudication is con-
clusive against his right to a discharge in this proceeding. It follows
that the application for leave to file the pétition for discharge must be
denied, and the discharge also denied.
It is ordered accordingly.
UNITED STATES V. WELLS 833
(262 F.)
UNITED STATES v. WELLS et al.
(District Court, W. D. Washington, N. D. July 31, 1917.)
No. 3671.
1. CONSPIBACY <g=>43(6) InDICTMENT eUFFICIENT.
An indictment under Criminal Code, § 37 (Comp. St. § 10201), charging
conspiracy to violate section 211 (Comp. St. § 10381), by sending througU
the maUs Indécent matter of a character tendlng to incite murder antj
assassination, held sufficient, witliout settlng out the matter.
Z Conspiracy <S=43(11) — Indictment chabging foecible résistance of con-
SCEIPTION SUïTICIENT.
An indictment charging conspiracy to oppose by force the authority of
the United States and to resist such authority by mutiny and armed force,
by circulating after déclaration of war wlth Germany printed matter set
out, advising forclble résistance to conscription, held to charge an offense,
although at the time the Sélective Draft Act (Comp. St 1918, Comp. St.
Ann. Supp. 1919, §§ 2044a-2(M41i) had not been enacted, but was pendlng
In Congress.
Criminal prosecution by the United States against Hulet M. Wells,
Sam Sadler, R. E. Rice, and Aaron Foslerman. On demurrer to in-
dictment. Overruled.
Clay Allen, U. S. Atty., and Ben L. Moore, Asst. U. S. Atty., both
of Seattle, Wash.
Vanderveer & Cummings and Mark M. L,itchman, ail of Seattle,
Wash., for défendants.
NETERER, District Judge. The défendants are charged with con-
spiracy in five counts. Count 1 charges a conspiracy under section 37
of the Pénal Code to violate section 211 of the Pénal Code (Comp. St.
§§ 10201, 10381), and charges that they printed, prepared for distri-
bution, etc., a certain circular, set out in hœc verba in the indictment,
which, with some omitted portions, is as f ollows :
"No Conscription!
"No Involuntary Servitude I
"No Slavery!
" 'Neither slavery nor involuntary servitude • * * shall exlst vrlthln
the United States.'
"The above is a part of the Constitution of the United States. The Prési-
dent and Congress has no authority to set it aside. * * * For the Prési-
dent and Congress to do so is to usurp the powers of autoorats, and if unre-
slsted means the abandonment of democracy and the destruction of the Ke-
public. » * • Walte up! Stand by us now, for when we hâve beoome an
army vce wlU hâve ceased to thinlî and vi'e will shoot you if told to shoot you !
Just so it Is expected that we will shoot and kill our brothers in other lands.
♦ * • Resist! Refuse! • * ♦ Better be impiisoned than to renounce
your freedom of conscience. • ♦ * Tell them that we are refusing to regla-
ter or to be conscripted, and to stand by ns llke raen. ♦ ♦ * If we are to
flght autocraey, the place to begln is where we first encounter it. * * •
If we must fight and die, It Is better to do it upon soil that is dear to us.
* * * Better mutiny, défiance and death of brave men wlth the llght of
$=s>For otber cases see same topic & KEiY-NUMBBR in ail Key-Numbered Digests & Indexes
262 F.— 53
834 262 FEDERAL REPORTER
Oie moming upon our brows, than the Ignominy of slaves and death wlth the
mark of Gain and our hands spattered wlth the blood of those we hâve no
reaswi to hâte • • • "
— ^it being the object of such conspiracy by force and violence to pre-
vent the enforcement of any law of the United States relative to en-
listment and mobilization of the army of the United States. The con-
spiracy is alleged to hâve been entefed into on or about the Ist day
of May, 1917. Count 2 charges a conspiracy to violate section 211 by
mailing indécent matter of a character to incite murder and assassi-
nation. Count 3 charges a conspiracy to oppose by force the authority
of the United States. Count 4 charges a conspiracy to resist by mutiny,
bloodshed, and armed force any enforcement of the laws of the United
States. Count 5 charges a conspiracy to prevent, hinder, and delay
the enforcement of the Sélective Service Law by force, etc.
Demurrer is filed to each count in the indictment, on the ground
that—
"Baoh and ail of them do not recite facts suflacient to constitute an offense
agalnst the United States."
[ 1 ] It is urged by the défendants that the government should set out
in count 2 what letters, pamphlets, etc., were referred to, and in what
respect they were indécent in character, intended ta incite murder and
assassination, and in what manner and for what purpose it was pro-
posed to accomplish the object of the conspiracy.
The gist of the offense is the conspiracy, and the object of the con-
spiracy is to violate section 211, which makes pénal the posting of any
matter therein prohibited. This court, in U. S. v. Dabi, 225 Fed. 909,
held that an indictment need not set out the particular Chinese aliens
who were sought to be imported, in an indictment charging a conspir-
acy to violate that section of the Immigration L,aw, but it was suiifi-
cient to refer to Chinese aliens generally as are not entitled to come
into the United States. The Circuit Court of Appeals affîrmed this
conclusion in 234 Fed. 618, 148 C. C. A. 384. In that case the dé-
fendants attention was called to a particular class of aliens in that the
indictment was definite and spécifie. In this indictment count 2 charges
that the printed matter was of a character to incite murder and as-
sassination. This differentiates the matter f rom other matters included
in the section, and brings it specifically within the amendment of March
4, 1911, which provides that the —
"term 'indécent,' within the intendment of this section, shall include matter
of a character to incite arson, murder or assassination."
This désignation of the character of the documents is, I think, suffi-
cient, and it is not necessary that the matter be set out in the indict-
ment. Williamson v. United States, 207 U. S. 425, 28 Sup. Ct. 163,
52 L. Ed. 278.
[2] The remaining counts may be discussed together. On April 6,
1917, 40 Stat. 1, the Congress passed the following:
"Resolved by the Senate and House of Kepresentatives of the United
States of America In Congress assembled, that the state of war between the
UNITED STATES V. WELLS 835
(262 F.)
United States and the Impérial German government whlch has thus been
thrust upon the United States is hereby formally declared ; and tliat the Prési-
dent be, and lie is hereby, authorized and dlrected to employ the entlre naval
and military forces of the United States and the resources of the govern-
ment to carry on war agalnst the Impérial German government ; and to biing
the confllet to a suceessful termlnation ail of the resources of the country
are hereby pledged by the Congress of the United States."
Prior to the adoption of tlie Sélective Service Act on the 18th day
of May, 1917 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, §§ 2044a-
2044k), the law did provide for a militia of the United States, which
was classijfied by the National Défense Act of June 3, 1916, section 57
of which provides:
"The militia of the United States shall consist of ail able-bodled maie ciUzens
of the United States and ail other able-bodled maies who hâve or who shall
hâve declared thelr intention to become citizens of the United States, who
shall be more than 18 years of âge and, except as herelnafter provided, not
more than forty-flve years of âge, and said militia shall be divided tnto three
classes, the national guard, the naval militia, and the unorganized militia."
Comp. St. § 304.
And it is made the duty of the Président, whenever the United
States is in danger of invasion from any foreign nation, to call forth
such numher of the militia as may be deemed necessary by Act Jan.
21, 1903, 32 Stat. 776, as amended May 27, 1908 (35 Stat. 400 [U. S.
Compiled Stat. Ann. 1916, vol. 4, p. 4296]). The Président was directed
by Congress to employ the "entire naval and military forces to carry
on war against the Impérial German government." I think, there-
fore, that it is immaterial whether the Sélective Service Act had been
passed or not at the time, except as to count 5, if the tendency of the
matter was to resist or oppose by force the authority of the United
States. Section 6 of the Pénal Code (Comp. St. § 10170) provides that:
"If two or more persons • * • subject to the jurisdiction of the United
States * * • oppose by force the authority thereof, or by force * ♦ *
hinder or delay the exécution of any law of the United States ♦ • • "
— they shall be punished. Persons are not denied the right of pétition,
nor the privilège of criticism, or to say or do anything not in itself
unlawful, to prevent the passage of a law, or secure the repeal of
one already passed. But after a law is passed it is every man's duty to
conform his acts in accordance with the provisions of the law, and he
may not, for the purpose of creating sentiment against the wisdom of
the law, do anything with intent to procure the violation of the law, in
his advocacy of its unwisdom, or for the purpose of repeal. It must be
apparent that persons may not advise others to "resist," "refuse," or
to "mutiny, défiance, and death," especially after the adoption of the
"war status" resolution by the Congress Âpril 6, 1917, and prior to
the Sélective Service Act of May 18, 1917. There is a wide différ-
ence between bona fide criticism or pétition, and instigation of others
to résistance by force, as charged.
Count 5 charges a conspiracy to violate the Sélective Service Act
passed May 18, 1917, and sets forth overt acts, some of which were
perfonned prior to the adoption of the act. The défendants contend
836 262 FEDERAL REPORTER
that it is impossible to conspire to violate a law prior to its passage, and
that the doing of an overt act after the passage of the law would net
carry with it the conspiracy entered into prior to the passage of the
act. I think this position is reasonable and logical. U. S. v. Crafton
et al., Fed. Cas. No. 14,881. However reprehensible an act charged
may be, it may not be carried forward and made to offend against a
law subsequently passed. But the objection is obviated by the alléga-
tion in this cotint that :
"After said law had been duly enacted, oontlnued In their sald conspiracy to
prevent, hinder, and delay by force the exécution of the law of the United
States, In that it was their purpose then and there to resist, and by niutiny,
armed résistance, and by bloodshed to oppose the authority of the United
States in the exécution of said mentioned act. * * • "
The demurrer is overruled.
UNITED STATES v. FULD STORE CO.
(District Court, D. Montana. January 21, 1920.)
No. 3509.
Game <s=54 — Migkatoet Bird Teeaty Act not betkoactive.
Migratory Bird Treaty Act July 3, 1918, § 2 (Oomp. St. Ann. Supp. 1919,
§ 8837b), providing that it shall be unlawful to possess, offer for sale, or
sell any migratory bird included in the termis of the treaty between the
United States and Great Britain of August 16, 1916, "or any part, nest,
or egg of any such bird," held not to apply to plumage of such birds law-
fuUy acquired before its enactment.
Information by the United States against the Fuld Store Company.
Dismissed.
E. C. Day, U. S. Atty., and W. W. Patterson, Asst. U. S. Atty.,
both of Helena, Mont.
BOURQUIN, District Judge. The information (and exhibits of
it a part) charges (1) that before the Migratory Bird Treaty x\ct of
July 3, 1918 (40 Stat. 755 [Comp. St. Ann. Supp. 1919, §§ 8837a-
8837J]), défendant owned and possessed aigrettes of héron plumage,
and continued to own and possess them months thereafter; and (2)
that months after said act défendant ofïered said aigrettes for sale.
Défendant, without counsel and by one of its officers, answered the
charge is true, and that it would "leave it to the court." A plea of
guilty was tentatively entered. It is believed, however, that the in-
formation sets out no offense. Accordingly the plea is ordered with-
drawn, and, as though demurred to, the information is dismissed.
The treaty (39 Stat. 1702) includes hérons as migratory nongame
birds, déclares for a continuous close season in their behalf, and pro-
vides for législation to exécute its purposes. The act provides "that
unless and except as permitted by régulations" by it authorized to be
^rmFor other cases see same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes
UNITED STATES V. FULD STORE CO. 837
(262 F.)
made by the Secretary of Agriculture, "it shall be unlawful to hunt,
* * * kill, possess, offer for sale, sell, offer to purchase, purchase,
* * * at any time or in any mariner, any migratory bird included"
in the treaty, "or any part, nest, or egg of any such bird." It also
provides for seizure and confiscation of the things so denounced.
There is no régulation purporting to apply to plumage antedating the
act, and it is very doubtful if there can be.
Pretermitting whether plumage manufactured into aigrettes is "any
part" of a bird within the intent of the act, or by merger and transfor-
mation into a new article has lost its identity as plumage or part of
a bird, the act appears prospective, to protect birds in the future, to
make killing them in the future a crime, and incidentally to make
possession or offer of sale of any part of the birds unlawfuUy killed
(that is, killed in the future) also a crime. To kill is made unlaw^ful,
and to possess or sell the fruits of such unlawful killing alone is also
made unlawful. This is the most reasonable construction of the act,
in view of associated words and the circumstances, and perhaps the
only construction which will sanction the act's validity. Before the
act, hérons were lawfully killed and their plumage lawfuUy possessed
and sold. Much of this plumage had been converted into aigrettes,
artistic, beautiful, useful, and ornamental — harmless and valuable.
They had entered into the domain of commerce, and the stock of pri-
vate property, and were possessed by many persons. An intent on the
part of Congress to virtually outlaw and destroy such property ought
not to be assumed, unless very clear and the only reasonable construc-
tion of the act; for it is very doubtful if Congress has any such
power.
In harmless, useful, and valuable property there is a vested right of
possession, use, enjoyment, and sale — a liberty of action, of which
owners cannot be arbitrarily deprived without compensation. The
"due process" clause of the Constitution well may forbid. See Eberle
V. Mich., 232 U. S. 706, 34 Sup. Ct. 330, 58 L. Ed. 803; U. S. v.
Tin Fuey, 241 U. S. 401, 36 Sup. Ct. 658, 60 L. Ed. 1061, Ann. Cas.
1917D, 854; Barbour v. State, 249 U. S. 454, 39 Sup. Ct. 316, 63
L. Ed. 704, Apr: 14, 1919; Hamilton v. Distilleries & Warehouse
Ce, 251 U. S. 146, 40 Sup. Ct. 106, 64 L. Fxl. • — , Dec. 15, 1919;
Ruppert's Case, 251 U. S. 264, 40 Sup. Ct. 141, 64 L. Ed. , Jgn.
5, 1920. And it would be at least interesting to learn that the de-
partment's agents are embarked on a campaign to seize thèse ornaments
from women's bats and hair, and how they propose to accomplish it.
Furthermore, such construction, denouncing as a crime possession
and sale of this theretofore lawful private property, would expose
the act to serious question as an ex post facto law within constitu-
tional inhibition. Taking immédiate effect, it would instanter convert
many law-abiding citizens into criminals, change the law to their
great disadvantage, and not for any act of theirs subséquent to the
law, so far as possession goes, but only because they theretofore had
acted and thereafter remained inactive. Ail this can be avoided by con-
struction that the act relates only to birds and parts of birds killed
838 262 FEDERAL REPORTER
subséquent to the act, a permissible and more reasonable construction,
and in principle always to be preferred to avoid grave doubts of the
validity of the law otherwise.
True, treaties and laws to exécute them may sometimes extend
beyord congressional power, but, even as are acts and enactments of
the war-making and ail other powers, treaties and executory laws
are subject to constitutional limitations. Doe v. Braden, 16 How. 657,
14 L. Ed. 1090. And the treaty is silent upon birds and parts of
birds theretofore and lawfully killed anv'l possessed. It does not re-
quire that they be regulated, and so, créâtes in Congress no power
to deal with them. See U. S. v. Jin Fuey, supra. That in game laws
it is generally provided that it is unlawful to possess game in the
close season, though lawfully acquired in the open season, is not
analogous. There the game is acquired subject to a known condition
that to retain possession into the close season is unlawful. Note, too,
such laws hâve not been construed to include possession of stufïed
game, mounted heads, ornaments, and the like.
That some incidental advantage in administration of the law would
accrue from a construction that it applies to birds and parts of birds
killed before its date avails nothing, in the face of the language of
the act, of the settled principles of construction, and of the strong and
controJling reasons otherwise.
UNITED STATES V. PEDARRE 839
(262 F.)
UNITED STATES ex reL LAMBERT et al. v. PBDARRB.
(District Court, E. D. Louisiana, New Orléans Division. January 26, 1920.)
No. 15972.
1. CoTTETS <S=3284 — Action on fedebal couet judgment not necessabilt a
FEDERAL QUESTION.
That an action is based on a judgment of a fédéral court does not ot
itself raise a fédéral question, which glves jurlsdictlon to another féd-
éral court
2. CotTETS <S=264(1) — Fedeeax court vvithout ancillakt jukibdiction op
LAW action on judgment OF FEDERAL COUET.
A fédéral court is without ancillary jurisdiction of an action at law
on a jud?ment of a court of anotlier district against the surety on the bond
of a contractor given under Act Feb. 24, 1905 (Comp. St. § 6923), and in
favor of a subcontractor, where tlie real parties are citizens of the same
State and the amount involved is less than $3,000.
At Law. Action by the United States, on the relation of John M.
Lambert and others, against Henry R. Pedarre. Dismissed.
Hall, Monroe & Lemann and Walter J. Suthon, Jr., ail o£ New Or-
léans, La., for plaintiffs.
Edward Dinkelspiel and John C. Davey, both of New Orléans, La.,
for défendant.
POSTER, District Judge. This is a suit by citizens of Louisiana
against another citizen of Louisiana to recover $1,415.07 on a judgment
rendered by the United States District Court for the Southern Dis-
trict of Mississippi in proceedings entitled United States ex tel., etc.,
V. O. E. Gibson, No. 6737 on the docket of that court. The défense
is that the judgment has been paid. The jury was waived in writing
and the matter submitted to the court.
The material f acts are thèse : Gibson ohtained a contract f rom the
United States to build a levée in the Southern district of Mississippi.
Pedarre was one of the joint and several sureties on the bond given to
the United States under the provisions of Act Cong. Feb. 24, 1905, c.
778 (Comp. St. § 6923), with the usual provision for the security of
furnishers of labor and materials on the work. The plaintiffs in this
case, doing business as a partnership under the name of Lambert Bros.,
contracted with Gibson for the hire of certain teams. They exacted
of him a bond for their own security, separate and distinct from the
bond signed by Pedarre, and on this bond the National Surety Com-
pany was surety. Gihson defaulted in his payments to certain furnish-
ers of material, including Lambert Bros. A suit was brought in the
Southern district of Mississippi on the original bond. Lambert Bros,
intervened in that suit and obtained judgment against the sureties fof
the amount due them on their subcontract, $1 ,457.70. Previously they
had filed suit in the civil district court for the parish of Orléans, La.,
against the National Surety Company, and obtained a final judgment
prior to their intervention. This judgment the National Surety Cora-
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840 202 FEDERAL REPORTER
pany subsequently paid, and obtained a subrogation from Lambert
Bros, to ail their rights against tlie sureties on the original bond. The
instant suit is brought in the name of Lambert Bros,, but for the ben-
efit of the National Surety Company, without that company being named
in the pleadings.
As the parties are ail citizens of Louisiana, and the amount involved
does not exceed $3,000, the question of jurisdiction obtrudes itself at
the outset, as this is a question that the court must consider and dé-
cide whether it is raised by the parties or not. Judicial Code, § 37
(Comp. St. § 1019) ; Rosenbaum v. Bauer, 120 U. S. 459, 7 Sup. Ct.
633, 30 L. Ed. 743.
[1] It is contended by plaintiffs that the United States is presumed
to be the real plaintifï in this suit, and therefore this court has juris-
diction, regardless of diversity of citizenship or amount involved. Un-
tloubtedly in the original suit in the Southern district of Mississippi tlie
United States is to be considered the real party plaintifï, but this is
on the theory that the govemment is interested in seeing that ail par-
ties furnishing labor or materials necessary for the completion of the
work be paid. The United States has no such interest in the instant
case, which is purely a controversy between sureties. It is settled that
the mère fact that a suit is based on a judgment of the United States
court does not of itself raise a fédéral question (Metcalf v. Watertown,
128 U. S. 586, 9 Sup. Ct. 173, 32 L. Ed. 543), and furthermore there
is not sufficient amount involved in this case to give the court juris-
diction. If it be considered that the suit is one under the act of 1905,
then it could only be brought in the district where the contract was
performed, the Southern district of Mississippi, and that court has
ample jurisdiction to bring the parties before it and enforce its judg-
ment in some appropriate way. U. S. v. Congress Construction Co.,
222 U. S. 199, 32 Sup. Ct. 44, 56 L. Ed. 163.
[2] The question then remains as to whether this court has ancillary
jurisdiction to enforce the judgment of the District Court for the
Southern District of Mississippi. I do not thinlc it was the intention
of Congress to require the laborer or materialman, obtaining a judg-
ment against the surety on a bond given under the act of 1905, to go
elsewhere to enforce the judgment. There are cases holding that courts
of the United States hâve ancillary jurisdiction in equity and bank-
ruptcy in aid of another fédéral court; but the instant suit is at law,
and has ail the éléments of an original proceeding. If it is necessary
to sue upon the judgment obtained under the provisions of the act of
1905 at the domicile of- the sureties, it seems to me that jurisdiction
would he govemed by the statute limiting the gênerai jurisdiction of the
District Courts.
■ As there is neither diversity of citizenship nor sufficient amount in-
volved to give this court jurisdiction, the case must be dismissed.
THAVKLERS' INS. CO. V. PBINCB LIKE 841
(262 F.)
TRAVELERS' INS. CO. et al. v. PRINCE LINE, Limited, et aL
(District Court, S. D. New York. January 5, 1920.)
Admikaltt <s=>1 — State cannot ceeate mabitime cause of action bt WobiK-
men's Compensation Act peovidino fok assiqnment of kights of in-
jubed employé.
An assignment under Workmen's Compensation Act N. Y. (Consol. Laws,
a 67) § 29, of a daiin agalnst a third person for death or injury of a
workman on payment of compensation under tlie act by an insurer, held
not to confer on tlie assignée a right of action under the maritiine law.
At Law. Action by the Travelers' Insurance Company and the As-
sociated Operating Company against the Prince Line, L,imited, and
the Asiatic Steamship Company. On demurrer to complaint. Demur-
rer sustained.
Amos H. Stephens, of New York City (William L. O'Brion, of New
York City, of counsel), for plaintifïs.
Kirlin, Woolsey & Hickox, of New York City (Cletus Keating and
V. S. Jones, both of New York City, of counsel), for défendants.
MAYER, District Judge. The amended complaint, to which the de-
murrer is interposed, allèges that one Patterson, a stevedore employed
by the plaintiff Associated Operating Company, was killed on October
22, 1914, by the négligence of the défendants while working on the
steamship Chinese Prince, then lying in navigable waters ; that the de-
pendents of Patterson filed an élection to take compensation under
the New York state Compensation Law (Consol Laws, c. 67), and that
the plaintiff Travelers' Insurance Company, the insurer of Associated
Operating Company, pursuant to the provisions of the state Compen-
sation Law, paid compensation to dependents of Patterson and receiv-
ed from the dependents an assignment of their cause of action. A
copy of the assignment is attached to the complaint and states that it
is in pursuance of the New York state Compensation Law.
The theory of plaintiffs is that the action does not seek to enforce a
liability created by the Workmen's Compensation Act to pay compen-
sation without regard to fault, but the liability is predicated on the
violation by défendants of an obligation imposed by the gênerai mari-
time law, to wit, to hâve the ship and its appliances in safe condition
when turned over to the stevedores to load.
In this connection, the plaintifïs contend that section 29 of the Work-
men's Compensation Law referred to in the complaint, which is the
section under which the assignment to the plaintiffs was executed,
created a cause of action of which plaintiffs may avail. At the time
when the cause of action accrued, arising out of Patterson's death, the
state of New York was without power to legislate regarding maritime
contracts. Southern Pacific Co. v. Jensen, 244 U. S. 205, 37 Sup Ct.
524, 61 L. Ed. 1086, L. R. A. 1918C, 451, Ann. Cas. 1917E, 900.
The only possible theory upon which plaintiffs could recover would
®=3Fox other cases see same topic & KBY-NUMBER in ail Key-Numbered Dlgest» & Indexes
, ° ^ 262 FEDERAL EEPOETEB
be if the state statute created an assignable cause of action irrespective
of and unrelated to the Workmen's Compensation Act. A mère read-
ing of the statute demonstrates that its whole machinery was con-
nected with the carrying out of the Workmen's Compensation Act and
that the assignment was in relation thereto. When, therefore, plain-
tiffs were out of court because of the Jensen Case, their position was
not helped by the assignment executed under and by virtue of section
29 of the Workmen's Compensation Act. That section reads as fol-
lows:
"Sec. 29. If an enïployé entitled to compensation under thls chapter be In-
Jured or killed by the négligence or wrong of auother not In the same em-
ploy, such Injured employé, or In case of death, hls dependents, shall, before
any suit or any award under this chapter, elect whether to take compensa-
tion under this chapter or to pursue his remedy against such other. Such
élections shall be evidenced in such manner as the commission may [by] rule
or régulation prescribe. If such injured employé, or in case of death, hls
dependents, elect to take compensation under this chapter, the awarding of
compensation shall operate as an assignment of the cause of action against
such other to the State for the benefit of the state Insurance fund, if com-
pensation be payable therefrom, and otherwise to the person, association, cor-
poration, or Insurance carrier liable for the payment of such compensation,
and if he elect to proceed against such other, the state Insurance fund, per-
son, association, corporation, or Insurance carrier as the case may be, shall
contribute only the deflciency, if any, between the amount of the recovery
against such other person actually collected, and the compensation provided
or estimated by the chapter for such case. Such a cause of action asslgned
to the state may be prosecuted or compromised by the commission. A com-
promise of any such cause of action by the employé or his dependents at an
amount less than the compensation provided for by this chapter shall be
made only with the written approval of the commission, if tiie deflciency of
compensation would be payable from the state Insurance fund, and other-
wise with the written approval of the person, association, coriwration, or In-
surance carrier liable to pay the same. Wherever an employé is klUed by
the négligence or wrong of another not in the same enïploy and the depend-
ents of such employé entitled to compensation under the chapter are minors,
such élection to take compensation and the assignment of the cause of ac-
tion against such other and such notice of élection to pursue a remedy
against such other shall be made by such minor or shall be made on behalf
of such minor by a parent of such mlnor, or by his or her duly appolnted
guardian, as the commission may détermine by rule in each case."
The argument of learned counsel for plaintiffs is ingenious, but not
convincing, and it seems to me entirely plain that the demurrer must be
sustained, and as a conséquence that the complaint must be dismissed.
PBESTON V. DUBHAM 8^3
(262 F.)
PRBSTON V. DUEHAM et aL
(District Court, N. D. Georgia. January 21, 1920.)
CouETS <S=»328(2) — ^Amount involved in stjit on judqment is amount ot
JUDQMENT.
The amount Involved in a suit on a judgment, for the purpose of deter-
mining fédéral jurlsdiction, Is the amount of the judgment, and not the
amount of the original debt upon vphlch it was reudered.
In Equity. Suit by C. M. Preston, trustée, against C. F. Durham,
D. M. Elrod, and the Fidelity Mutual Life Insuréince Company. On
motion to dismiss. Denied.
G. E. Maddox, of Rome, Ga., and J. Hodge McLean, of Ciiattanooga,
Tenn., for plaintiff.
W. CarroU Latimer and Smith, Hammond & Smith, ail of Atlanta,
Ga., for défendants.
NEWMAN, District Judge. This is a suit on a judgment obtained
in Hamilton county, Tenn., which is for the sum of $3,286.75. A mo-
tion is made now to dismiss the suit, upon the ground that the juris-
dictional amotmt is not involved. The contention is that we must take
the original debt as it stood prior to its being merged into a judg-
ment in the state court of Hamilton county, Tenn., as a criterion for
determining whether jurisdiction exists.
The suit, of course, must be for over $3,000, exclusive of interest
and costs, and that amount is involved hère, if vft allow the amount of
the judgment, and do not go behind that to find the character and
amount of tlie original debt. I do not care to go into an extensive
discussion of this subject, as contained in the argument of counsel
before the court, and in the full briefs of counsel for the parties re-
spectively. The law on this subject appears to be correctly laid down
in 20 Am. & Eng. Enc. of Law (2d Ed.) p. 599, as f ollows :
"Where a cause of action has been prosecuted or redueed to judgment, the
cause of action is swallowed up and merged in the judgment, which is a
higher and superior sort of security. The effect of the merger is that the nat-
ter v?hlch gave rise to the litigation can never again be the basls of an ac-
tion" — citlng a large number of authorities from varlous state and fédéral
courts.
I think this authority establishes a gênerai rule on this subject, which
should control hère in determining the amount involved, so as to dé-
termine the jurisdiction of the court. Clearly the suit is on the judg-
ment itself, and the judgment is for more than $3,000, exclusive of
interest and costs, as it now stands. Whether or not, in some cases
where a judgment is sued on, it may be necessary to go behind the
judgment for the purpose of ascertaining the character or kind of
debt originally involved, as indicated in some of the cases we hâve
seen, is unnecessary to be passed upon or determined now, as that is
CraFor other cases aee same topic & KBY-NUMBER in ail Key-Numbered Dlgests & iDdexea
844 262 FEDERAL REPORTER
not involved hère. The sole question hère is the amount, and not the
character, of the debt.
What any judgment obtained hère in this suit on the Tennessee judg-
ment will cover, it is unnecessary now to décide. Whether or not
the prayer of the plaintiff that he "be decreed a lien on the property
described in said bond for titles, and that" he "be entitled to hâve
said lien foreclosed, and the property described in said contract and
bond for titles be held subject to the payment of the amount so to be
decreed in his favor," is meritorious and can prevail, is not now to be
determined, but is for hearing on the merits.
The motion to dismiss the bill, on the ground that the necessary ju-
risdictional amount is not involved, is overruled and denied.
SHAMROCK TOWING CO. v. MANUFACTUREES' & MERCHANTS'
LIGHTERAGE CO. et al.
(District Court, E. D. New York. February 9, 1918.)
Admibalty <S=32 — Suitob has eiqht to elkct district of striT wheke .titris-
DICTION IS CONCURBENT.
As between districts haviog concurrent jurisdiction, it is not an abuse
of process for a sultor in admiralty to sélect the one in which lie can
obtain security, and whether the districts are distant from each otlier or
adjoining is iinmaterial.
In Admiralty. Action in personam, with clause of foreign attach-
ment, by the Shamrock Towing Company against the Manufacturers' &
Merchants' Lighterage Company and the Hax Trading Company. On
motion to dismiss libel. Denied.
Alexander & Ash, of New York City, for libelant.
Foley & Martin, of New York City, for respondents.
CHATFIELD, District Judge. The purpose of choosing this dis-
trict was to obtain security. While concurrent jurisdiction exists be-
tween the districts, this does not give the right to obtain security in
the district where personal service could be had. The possibility of
levying upon the vessel does not give the right so to do. Hence it is
not abuse of process to go into an adjoining district any more than it
would be to go to a more remote district.
Motion denied.
fc ' I I I .11 — ■ -.. III... .,... . I I..- — i-.i. I —.1 — .. j
^r3>For other cases see same topic & KEY-NTJMBER In ail Key-Numbered Dïgests & Indexes
SAUNDERS V. LUCKKNBACH CO. ^^5
(262 F.)
SAUNDERS V. LUCKENBACH CO., Inc.
(District Court, S. D. of New York. Febraary 3, 1919.)
No. 65-99.
1. KEAMEN <®=2 RIGHT OP INJURED SBAMEN TO CARB AND MAINTENA^fCK.
A steamstiip in the transatlantic merchant sei-vioe during the war dld
not cease to be a merchantman, nor Its erew marchant seamen, with the
right to maintenance and care in case of injury, because the vessel car-
ried an amiament of two guns, manned by a naval crew, for protection
against Bubmarines.
2. Seamen €=^11 — Injueed seamas's bigot to oaue and maintenance.
Decree afflrmed, holding that the fact that a seaman recelvefl flfty per
cent, additional wagos as a "war risk bonus" did not deprive hira of the
right to itialntenanee and care for a reasonable tlrne after termination of
the voyage, while being treated for an injury received during a submarine
attack on the vessel.
In Admiralty. Suit by Drew B. Saunders against the Luckenbach
Company, Incorporated. Decree for libelant.
Decree affirmed 262 Fed. 849, C. C. A. .
vSilas B. Axtell, of New York City, for libelant.
Peter S. Carter, of New York City, for respondent.
HOUGH, Circuit Judge. The material facts seem to be as follows :
Libelant became first assistant engineer on an American steamship
owned by respondent. The vessel was engaged in the merchant serv-
ice ; her crew, including libelant, was shipped in the usual manner be-
fore the commissioner, and so far as the contract between the parties
hereto (and therefore between libelant and his ship) is concerned, as
expressed by writings in évidence, there was nothing about it out of
the common, except the rate of wage.
As to this, it was agreed on the face of the articles that, in addition
to wages, libelant and his mates were to receive a "war risk bonus
of 50 per cent." of their wages, and also that both wages and bonus
should, in the event of loss of the vessel, continue to be paid until the
crews had again reached the United States, provided that such return
was not delayed beyond two calendar months.
[ 1 ] On the voyage to France the vessel was attacked by a German
submarine, but the steamship was armed with two guns, manned (a fact
of which judicial notice is taken) by a naval gun crew. A running
fight ensued, lasting for several hours, and terminated only by the
arrivai on the scène of the U. S. S. Nicholson, whereupon the attack-
ing German vessel submerged and disappeared. It does not appear that
the arming of the steamship was otherwise than voluntary on the part
of her owners. My inference from the évidence is that quite prop-
erly and lawfully, but for the sake of gain, the ship reverted to the
habits of merchantmen historically known as existing well into the
last century; i. e., the habit of going armed in order to resist at-
tempted capture by anything but superior force.
<^r7>For other cases see same toplc & K£iY-NUMBER in ail Key-Numbered Digeets & Indexes
846 262 FEDERAL REPORTER
One may assume that the owners were entirely ignorant tliat in
arming their vessel they were reverting to the custom of years ago,
but I think it must follow from this fact that the steamship did not
cease to be a merchantman, and her crew did not cease to be merchant
seamen, because she carried an armament of two guns and a detach-
ment of naval gunners.
The libelant was on duty in the engine room during this engagement.
A shell from the submarine struck some portion of the superstructure,
or possibly the machinery, and pièces of métal (whether shell frag-
ments, shrapnel, or pièces of the ship's structure is not of importance)
descended into the engine room and struck libelant.
From the évidence it is plain that he received a slight wound in the
foot and another in the calf of one leg. He says that a rib or two were
broken, and pièces of shrapnel struck him in the back. He undoubted-
ly shows évidence at présent of having had at least one rib broken at
some time, and he has two small discolorations on his back not far
from his spine. The testimony leaves me in great doubt as to whether
thèse présent discolorations hâve any relation to the attack by the
submarine, or whether he did hâve any rib broken at that time. My
doubt on the latter point is that it is not possible that he should hâve
done as much work as he did for days after the fight if his rib or
ribs had been actually fractured.
I find the fact to be that neither Saunders nor his fellow officers
considered at the time that he was much hurt. The surgeon of the
Nicholson came aboard, attended to his foot, looked him over, and left
him evidently as fit to keep a "throttle watch," which seems to be
an engine room term for sitting down in the engine room and giving
orders without moving about. His vessel went to Havre, and he was
seen by a French shore doctor, who seems to hâve been satisfied with
the way he was getting on. She then went to a Welsh port and coaled,
thence to Queenstown, and so on back to New York, where the crew
was paid ofï. During ail this period Saunders continued to do partial
duty, but was not looked upon as well by his mates. He made no
complaint on arrivai at New York, did not ask to go to the hospital,
but repaired to a lodging house in this city, where he says he has kept
a room, présent or absent, for the last two years, and employed a
doctor of his own. He did no work for four months, and since that
time has been little at sea, but has, he says, with difficulty performed
mostly harbor jobs, and not even that continuously. He says he is
much better than when he left respondent's ship, but his appearance,
method of speech, and gênerai demeanor is entirely consonant with
the médical testimony from both sides of this case that he still is in
an excited and nerve-shaken condition. I find no difficulty in agreeing
with one of the testifying physicians that in common parlance the man
is hysterical.
The testimony of the chief engineer is that "he appeared to be an
A-1 man in every way" before the attack of the submarine. I find that
he did not receive during said attack any wound or lacération of tis-
sue that in the least accounts either for his présent condition or for his
SAUNDERS V. LUCKENBACH CO. 847
(262 FJ
history during the year and a quarter that has elapsed since the sub-
marine attack. Under a good physical exterior, beneath the physique
of a vigorous man of middle âge, I hâve no doubt that this libelant
concealed a nervous System or a vital connection between nerve and
brain of an inferior character, and that the excitement and shock
of battle, plus slight physical injuries, bave used him up in a way that
a better organized man would never expérience.
But just as some men hâve bones that break more easily than others,
or bave skulls so thin that tliey may be killed by a blovir that would not
hurt most of us, so there are men whose Systems are such that they
receive injury through the brain and nervous System in ways that are
mysterious. I think this libelant is such an unfortunate. But he
worked no déception; he was guilty of no vi^rongdoing himself. He
appeared to be perf ectly fit to go to sea ; however annoying (to use
a somewhat frivolous word in such a connection) it may be to hâve
on board a vessel in wartime a man who is so easily hurt as Saunders,
I do not think that he is thereby put outside the pale of that measure
of protection which every ship owes to the seamen on board of it for
ail hurt, injury, or disaster not caused by their own willful wrong-
doing.
In my opinion everything was donc for Saunders that could hâve
been donc. Surgery could not help bis détective nervous System. He
was not and is not sufïering from what is commonly called (by lay-
men) "shell shock" ; yet he has sufïered and is suffering from tlie re-
sults of the explosion of a shell, and he was therefore entitled to a
reasonable period of care and maintenance after the voyage on which
he was hurt terminated.
[2] I think this is the resuit of our local cases on this point, es-
pecially The Bouker No.- 2, 241 Fed. 831, 154 C. C. A. 533, and cases
cited, unless one or ail of the following matters change the law : First,
he was injured in a fight; second, he and ail the other members of
the crew were covered by war risk insurance under the récent statute ;
and, third, he was getting from respondent 50 per cent, additional
to a high wage as a "war risk," and he was injured by reason of the
war risk that he was thus paid for taking. So far as the governmental
insurance was concerned, the policy did not cover the kind of injury
that Saunders received, and I fail to see how a man can be said to bie
affected as to a given risk by insurance as to another and entirely
différent risk. Therefore I think there is nothing in this défense.
The other two défenses are really the same, and présent the point
that the dangers of crossing the océan were perf ectly well known
in October, 1917 ; that Saunders knew them, and took his chances for
pay, and therefore he ought not to ask anything from his shipowners,
because he took no hurt, except one of which he had assumed the
risk.
With considérable doubt, and quite conscious that I may be
infiuenced by very deep-rooted views of the extent and nature of
sea périls, and a firm belief that the union between crew and ship
ought always to be maintained with loyalty on both sides, and should
848 262 FEDERAL EEPORTER
extend on the one hand to the care of the ship as "long as two planks
hang together," and on the other hand to the care of the seamen in
every way naturally arising out of their dangerous and honorable
employment, I am of opinion that Saunders and his mates engaged to
assist the owners of the steamship in an adventure full of péril, and
yet it was ail sea péril; war had only increased the dangers of the
seas, not changed their kind. Even to-day almost every deep-sea bill
of lading contains the exception against pirates, robbers, enemies,
and capture; they are among the oldest périls of the merchantmen.
To be sure, the seamen received high wages ; but the shipowners, on
the other hand, received high freights. The nature of the engagement
between ship and crew remained the same. Only the probabilities of
hurt were increased, but neithér by express contract nor by any pro-
vision of law is the duty of care and maintenance taken away from
the ship. Indeed, I think it would require express statutory provision
to relieve a ship of this obligation.
I am not aware of any authority on this point, but to me it follows
logically, as well as humanely, from the accepted and well-established
doctrine. Thus I think libelant is entitled to a decree. What he need-
ed was rest; possibly with better advice he would hâve gotten along
very much f aster; but he felt himself sufHciently rested and recuper-
ated to go to work in four months. From his own statement, I think
the very moderate cost of his living was not to exceed $80 a month.
The évidence as to his doctor's bill and médicament charges is very
vague. I find it impossible to accept the estimate of $100 for what
libelant calls "medicine." On the whole, I think that for doctors and
medicines $50 is as much as the testimony will warrant. The cost of
maintenance is much higher than when libelant in The Bouker No. 2
fell ill; of this cognizance is taken. The évidence only affords an
opportunity to estimate. My estimate is that $300 would be a fair
price for a four months' rest.
For that ainount and costs libelant may hâve decree.
DOREMUS V. UNITED STATES 84&
(202 F.)
SAUNDEHS V. LTJCKENBACH 00., In&
(Carcult Court of Appeals, Second Circuit. December 10, 1919.)
No. 56.
Appeal from the District Court of the United States for the South-
ern District of New York.
Suit in admiralty by Drew B. Saunders a^ainst the Luckenbach
Company, Incorporated. Decree for hbelant (262 Fed.. 845), and re-
spondent appeals. Affirmed.
Carter & Carter, of New York City (Peter S. Carter, of New York
City, of counsel), for appellant.
S. B. Axtell, of New York City (A. Lavenburg, of New York
City, of counsel), for appellee.
Before WARD, ROGERS, and MANTON, Circuit Judges.
PER CURIAM. Decree affirmed.
DOREMUS V. UNITED STATES.»
(Circuit Court of Appeals, Flfth Circuit. February 17, 1920.)
No. 3412.
1. Poisons <g=j4 — Knowinglt selling narcotics on prescription issued to
GRATIFT APPETITE VIOLATION OF LAW WHICH PHYSICIAN AIDS AND ABETS.
Notwitbstanding Harrison Narcotic Act, § 2 (Comp. St. g 62871i), excep-
tion (b), excepting sales of the prohlbited di-ugs on the written prescrip-
tion of a registered physlclan, a sale by a druggist, who knows that the
prescription was issued to gratify the holder's appetite, and not to cure
disease or alleviate sufferlng, violâtes the law, and the physician Issulng
the prescription, knowing it is to be filled by a di-ugglst having such
knowledge, aids and abets the violation.
2. Poisons <g=2 — Négligent failuke to inquire not sufficient to eendeb
DRUGGIST GUILTT FOR FILLING PRESCRIPTION Vk'RONGFULLY ISSUED.
Knowledge by a druggist that a prescription under the Harrison Nar-
cotic Law was issued to gratify the holder's appetite, and not to cure
disease or alleviate suffering, is essential to guUt, and négligent failure
to inquire will not take the place of knowledge.
3. Ckiminal law <S=>1059(2) — Exceptions to charge held not to raise
point belied on.
On a trial for aiding and abetting violation of the Harrison Narcotic
Law, exceptions to the charge on the ground that there was no évidence of
the facts hyjwthesized by the court in its instruction respecting knowl-
edge, and that knowledge was Immaterial when the sale was made on the
prescription of a registered physician, did not raise the point, presented
on appeal, that the charge authorized conviction, though the druggist
had no actual knowledge, if he negligently failed to make inquiry.
4. Cbiuinal law <®=11]1(1) — Record is controlling as to request fob in-
struction ajid failure to excbpt to modified instruction.
Where the record shows that a charge as moditled was given at de-
fendant's req\iest, and that no exception was reserved to the giving of
the modified charge, the court is coutroUed thereby.
^csFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Digeste & Indexe»
262 F. — 54 «Certiorari denied 252 V. S. — , 40 Sup. Ct. «3, M L. Ed. — .
830 262 FEDERAL EEPOETER
6. OiMiNAii ulw <S=3ll72(6) — ^Instruction allowino conviction without
PEOOF or ACTTJAL KNOWLEDGE WAB HABMLES3, WHEBB ACTUAL KNOWLEDGE
CONCLUSIVELT APPKARED.
On a trial for abetting a violation of the Harrison Narootlc Law by a
druggist, an instruction erroneously authorizing a conviction, though tlie
druggist had no actual linowledge that a prescription was wrongfnlly
issued, was not ground for reversai, where reasonable men could hâve
drawn but the one Inference that the druggist had such actual knowledga
8. Ceiminal law <®=1172(1) — Conviction sustained wheee ekrob in ciiaegb
was habmless as to certain counts and sentence justified on such
COTTNTS.
Where défendant was charged with abetting violations of the Harrison
Narcotic Law by différent drugglsts, and an error in the charge was
harmless as to certain of the counts, and the sentence would hâve been
Bustalned by a single transaction, the judgment will not be reversed,
though with respect to another count the error was not harmless.
In Error to the District Court of the United States for the Western
District of Texas; Duval West, Judge.
C.T. Doremus was convicted of offenses, and he brings error. Af-
firmed.
C. A. Davies and Haltom & Haltom, ail of San Antonio, Tex., for
plaintiff in error.
Hu^ R. Robertson, U. S. Atty., of San Antonio, Tex.
Before WALKER, Circuit Judge, and GRUBB and JACK, Dis-
trict Judges.
GRUBB, District Judge. The plaintiff in error was convicted in
the District Court of the United States for the Western District of
Texas, for alleged violations of the Harrison Narcotic Law (Act
Cong. Dec. 17, 1914 [Comp. St. §§ 6287g-6287q]), under an indictment
containing 12 counts. Conviction was had under the first ten counts.
The plaintiff in error was a physicîan and duly registered as such with
the collector of internai revenue and had paid the tax. He was
charged with having unlawfully and willfuUy aided and àbetted cer-
tain named druggists in making illégal sales of morphine and cocaine,
by giving the persons to whom the sales were alleged to hâve been
made prescriptions, which were by them presented to the druggists
and fiUed by the druggists. The filling of the prescriptions was al-
leged to constitute the illégal sales, which the plaintiff in error was
charged with having aided and abetted. The persons to whom the
prescriptions were issued were at liberty to hâve them fîlled by any
druggist selected by them.
There was no preconcert between the physician and druggists charg-
ed. It was charged that the plaintiff in error contemplated that his
prescriptions would be filled by druggists who knew that they were
issued to gratify thè appetite of addicts for the drugs, and not for the
alleviation of suffering or the cure of disease. The illegality in the
sale îs charged to hâve consisted in the fact that the sale was made
neither to one who had or was entitled to hâve an order blank, nor was
it made upon the prescription of a physician within the meaning of
<S=3Fot other caaes see same topic & KEY-NUMBER In ail Key-Numbered Dlgesta & Indexes
DOREMUS V. UNITED STATES 851
(262 F.)
exception (b) of section 2 of the Harrison Act. That exception is
as follows:
"To the sale, dispenslng or distribution of tbe aforesaid durgs by a dealer
to a consumer under and In pursuanee of a written prescription issued by
a physiclan ♦ • • reglstered under tbls act."
[ t ] The indictment is questioned upon the idea that it alleged that
the drugs were fumished by the druggists upon written prescriptions
of the plaintiff in error, a registered physician, who had paid the tax,
and hence that they were within the terms of the exception, and that,
as no crime was committed by the druggist, no aiding and abetting
could be charged against the physician. The indictment also charged
in effect that the prescriptions were issued by the physician with the
purpose of gratifying the appetite of the addict, and with no intent to
cure disease or alleviate suffering, and that this was known to the
druggist when he filled the prescription. The question is presented
whether a prescription issued under such circumstances is covered by
the exception. This question has been determined by the Suprême
Court in the case of Webb v. United States, 249 U. S. 96-99, 39 Sup.
Ct. 217, 63 L,. Ed. 497. The Suprême Court answered the following
question, which was certified to it, in the négative:
"If a practlcing and reglstered physician Issues an order for morphine to
an habituai user thereof, the order not belng issued by him in the course of
professlonal treatment In the attempted cure of the habit, but belng issued
for the purpose of providing the user with morphine sufficient to keep him
comfortable by maintaining his customary use, is such order a physician's
prescription under exception (b) of section 2."
The Suprême Court said:
"As to question 3 [the one just set out] — to call such an order for the use
of morphine a physician's prescription would be so plainly a perversion of
meaning that no discussion of the subject Is required. That question should
be answered In the négative."
If a prescription issued under such circumstances is not a prescrip-
tion protected by exception (b) of section 2 of the act, then the druggist
who fills it, knowing the purpose and circumstances under which it
was issued, makes a sale in violation of the law ; i. e., one not on an
order blank, and not in pursuanee of a prescription. The physician
who issues the prescription for the purpose mentioned, knowing it is
to be filled by a druggist who knows of its illegality, aids and abets the
druggist in violating section 2 of the act by the making of an illégal
sale. The cases of United States v. Doremus, 249 U. S. 86, 39 Sup.
Ct. 214, 63 L. Ed. 493, and Webb v. United States, 249 U. S. 96, 39
Sup. Ct. 217, 63 L. Ed. 497, sustain the indictment.
The motion of the plaintifï in error for a directed verdict was prop-
erly denied, for the reasons given for sustaining the indictment.
[2, 3] Plaintiff in error also complained of the court's oral charge
and of the action of the court in modifying a requested instruction
of the plaintiff in error. Thèse two complaints présent a single ques-
tion. The court charged the jury that if the druggists who filled the
prescriptions —
852 262 FEDERAL RErORTER
"either had knowledge of the facts mentloned or had such InfonnaHon,
galned from facts and circumstances surrounding the transaction as that Ifc
would be their duty, under the circumstances and situated as they were,
to exercise a reasonable degree of précaution such as a reasonably prudent
person, desirous of obeying the law, would adopt under liUe or simiiar cir-
cumstances surrounding them, If those circumstances were such as to put a
reasonably prudent person upon notice and inquiry as to whether the sale
was lawful or unlawful, then It was the duty of the sald PfeifCers, sellers, to
hâve foUowed up such inquiry, and if you belleve that if such inquiry had
been made and if followed up would hâve brought knowledge of tlie unlaw-
ful purpose home to the Pfeiffers, sellers, then you would be authorized to
infer the knowledge of the unlawful purpose on their part."
The charge appHed the same rule to Prochnow and Luckenbach,
who were the other druggists. The quoted portion of the court's
charge placed too severe a duty on the druggists and wrongly defined
imputed knowledge. The druggists were under no affirmative duty
to make inquiry. Knowledge was essential to guilt on their part.
It might be shown by direct proof or inferred from circumstances.
But, if it was established in neither way, guilt would not exist. A nég-
ligent failure to inquire would not take the place of knowledge. The
question remains whether the error in the court's charge is a réversible
one. We think it is not. In the first place, the grounds of exception
did not présent to the District Judge the infirmity that is now insisted
upon. Those grounds are (1) that there was no évidence before the
court which tended to show that the Pfeiffers, or either of them,
were prudent or imprudent, and the jury were not informed as to
what surroundings and circumstances there would hâve to be to make
it the duty of the said Pfeiffers, or either of them, to exercise a reason-
able degree of précaution in ascertaining whether the prescription had
been issued for a lawful or unlawful purpose; and (2) because ex-
ception (b) section 2 of the Act of December 17, 1914, only requires
that the druggist or dealer in dispensing said drugs do so in pursuance
of a written prescription issued by a physician registered under the
act, and no other knowledge upon the part of the druggist is required
by law. The two grounds are entirely différent from the ground now
relied upon. The first implies that the District Judge's définition of
knowledge or what legally constitutes it was correct, but that there
was no évidence to support the définition. The District Judge's at-
tention was not called by the exception to the infirmity in his définition
of knowledge. The second ground of the exception we hâve already
held to be unwarranted, under a proper construction of exception (b).
[4, 5] The plaintiff in error requested a written instruction, which
omitted ail référence to knowledge. The District Judge supplied the
omission by inserting in it a référence to knowledge as defined in
his gênerai charge. The plaintiff in error objected and protested to
the modification of the written instruction, but the record shows that
the charge as modified was given at the request of the plaintiff in
error, and that no exception was ^served by him to the giving of the
modified charge. Whatever the fact in this respect may hâve been, we
are controlled by the record. The plaintiff in error also requested a
written instruction defining knowledge properly, which the court de-
clined to give. No exception, however, was reserved to the refusai
DOREMUS V. UNIÏED STATES 853
(252 F.)
to give this requested charge. We hâve less hesitancy in reaching the
conclusion that the question was not properly preserved, because we
are impressed that the errer in the court's charge caused the plain-
tiff in error no substantial in jury, and should not avail to reverse the
judgment under the terms of the Act of Congress approved February
26, 1919 (40 Statutes at Large, 1181 [Comp. St. Ann. Supp. 1919, §
1246]), which amend section 269a of the Judicial Code.
The plaintiff in error introduced no proof . The inquiry as to wheth-
er the druggists knew the character of the prescriptions issued by the
plaintiff in error and which were filled by them, depended upon the
proper inference to be drawn from circumstances established by un-
disputed testimony. If it was one upon which the minds of rea-
sonable men could not differ, an infirmity in the court's définition of
knowledge could not hâve been harmful to plaintiff in error. We
think from the facts proven reasonable men could hâve drawn but the
one inference, viz., that the druggists, Prochnow and Luckenbach,
must hâve known when they filled plaintiff in error's prescription that
they were not given to treat disease or to alleviate suffering, but to
gratify the appetites of the persons to whom they were given. We
are led to this conclusion as to Prochnow and Luckenbach from the
undisputed facts that the plaintiff in error issued prescriptions only
for narcotics ; that many of the alleged patients were described in
his prescriptions as addicts, and had the physical appearance of such :
that the prescriptions were issued to the same persons repeatedly and
over long periods of time and without diminution in the quantity pre-
scribed, indicating that no cure by réduction was intended by the plain-
tiff in error. It is inconceivable that a pharmacist would be ignorant
of the character of the prescriptions in view of the course of busi-
ness established by the évidence. The druggists concerned conducied
their business in person.
[6] With référence to the Pfeiffers reasonable minds might bave
reached différent conclusions as to their knowledge or want of knowl-
edge of the character and purpose of the prescriptions. The trans-
actions in which they participated were f ewer and less conclusive. The
plaintiff in error was convicted because of transactions through the
Pfeiffers, Luckenbach, and Prochnow. He was sentenced to prison
for two years, without fine. One transaction would bave sustained
the sentence. If he was rightfully convicted because of the prescrip-
tions filled by Luckenbach and Prochnow, or either, the sentence
must be sustained, though it were not defensible if it was required
to be based on transactions with the Pfeiffers. We think the judg-
ment of conviction under the counts which related to prescriptions
filled by Prochnow and the Luckenbachs should be sustained, notwith-
standing an error in the charge of the court in defining the term,
knowledge.
As the conviction on those counts warrants the sentence imposed by
the District Court the judgment of the District Court is affirmed.
854 262 FEDERAL EEPORTEK
MARINE NAT. BANK et al. v. SWI6ART.
(CJlrcult Court of Appeals, SixOi Circuit. February 3, 1920.)
No. 3343.
X. Bankbuptct ©=»440 — Appeal and kot ebrob peopeb in eeview or obdeb
DENYING ADJUDICATION WITHOTJT JUHT TEIAX..
Under Bankruptcy Act, § 25a (Comp. St. § 9609), authorizlng an appeal
as in equity from an order denying an adjudication, an appeal, and not
a ■writ of error, is the proper remedy, thougli a jury was demanded, wliere
the demand was wlthdrawn and a tiearing had without a jury.
2. BANKBUPTCr <S=467 — BotH LAW and FACTS EBVIEWABLE ON APPEAL ÏBOM
OBDEB DENYING ADJUDICATION.
On appeal from an order denying an adjudication in bankruptcy on a
hearing by the court after wittidrawal of a deuiand for a jury, the whole
case is open for revlew on both the law and the facts.
5. Bankeuptoy <S=»467 — Finding that pkopeety was not tbansfeebed with
INTENT TO DEFKAUD CBEDITOBS MUST BE ACCEPTED UNLESS EVIDENCE PEEPON-
DERATES AGAINST IT.
On appeal from an order denying an adjudication in bankruptcy, a
flnding that a transfer of property to corporations organized by the al-
leged bankrupt was not with intent to hlnder, delay, or defraud credltors,
must be accepted, unless the évidence decidedly preponderates against it
4. Bankeuptcy <S=»91(2) — Evidence held to show that tbansfeb was not to
defeaud cbeditobs.
Evidence held to support flndlngs that the président of an insolvent
Jewelry corporation, who transferred fann lands to corporations organ-
ized by hlm, had reason to believe, from negotiations with credltors, that
he would not be held on his contingent liabUity as guarantor of the
oompany's debts, and did not intend to Mnder, delay, or defraud his
credltors.
6. Bankeuptcy ®=»396(5) — ^Homestead interest does not pass to teustee.
A homestead interest in lands in Ohio, though mortgaged, does not
pass to the owncr's trustée in bankruptcy.
6. Bankeuptcy ®=»143(8) — Wife's doweb interest does not pass to tbustek.
A wife's dower Interest in lands in Ohio, though mortgaged, dœs not
pass to the husband's trustée in bankruptcy.
7. Bankeuptcy <g=»57 — Tbansfees of exempt interebts will not support
charge of fbaud necbssaby to act of bankeuptcy.
Oredltors of an alleged bankrupt could not complaln of the transfer or
a homestead Interest of the alleged bankrupt and a dower Interest of his
vrtfe to corporations organized by him, and the fraudulent intent neces-
sary to render such transfer an act of bankruptcy could not be predicated
thereon.
8. Fraudulent conveyances <S=541 — ^Transfer to coeporation organized et
debtob not necessaeily fbaud.
A transfer of property by a debtor to a corporation organized by him
is not a fraud merely because an Incorporation is employed.
9. Fraudulent conveyances i3=>64(1) — Ultimate question is one or faot as
TO ACTUAL INTENT.
While, in determlning whether a transfer of property was with intent
to defraud credltors, the court should consider the nature and neoessary
resuit of the transfer, the ultimate question is one of fact as to the actual
intent.
Appeal from the District Court of the United States for the West-
ern Division of the Northern District of Ohio; John M. Killits, Judge.
£=sFor otber cases see same toplc & KEY-NUMBER in ail Key-Numbered Qlgests & Indexes
MARINE NAT. BANK V. SWIGART 855
(2S2 F.)
Proceeding by the Marine National Bank and others to hâve John
Swigart adjudicated a bankrupt. From an order denying an adjudi-
cation, petitioners appeal. Affirmed.
Harry C. Cotter, of Toledo, Ohio, for appellants.
E. J. Marshall and R. R. Taylor, both of Toledo, Ohio, for appellee.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
KNAPPEN, Circuit Judge. Appeal from an order refusing to ad-
judge appellee a bankrupt. After asking a jury trial, appellee waived
that right in open court, and hearing was had without a jury.
[1, 2] The question whether appeal or error is the proper rernedy
is more or less important as affecting the scope of our review, notwith-
standing section 4 of chapter 448 of the Act of September 6, 1916 (39
Stat. p. 727 [Comp. St. § 1649a]), forbids dismissal of appeal or writ
of error merely because the other remedy should hâve heen taken.
In our opinion appeal is the proper remedy. The statute (B. A. §
25a [Comp. St. § 9609]) expressly gives a right of appeal "as in
equity" from an order denying an adjudication of bankruptcy. It is
only when a jury is had that vi^rit of error is needed to enable review
of rulings upon the trial. Eoveland on Bankruptcy (4th Ed.) pp. 1439
and 1441 ; Elliott v. Toeppner, 187 U. S. 327, 23 Sup. Ct. 133, 47
L. Ed. 200. The fact that appellee, after having demanded a jury,
withdrew his demand, does not alter the case. The necessity for writ
of error relates only to an actual, not a potential, trial by jury. Up-
on this appeal the whole case is open for review, on both law and facts.
Elliott V. Toeppner, supra ; Merchants' Bank v. Cole (C. C. A. 6) 149
Fed. 708, 79 C. C. A. 414. The limitation upon the scope of review
recognized in Edwards v. La Dow, 230 Fed. 378, 383, 144 C. C. A.
520, as applicable to that suit at law, where waiver of jury was not
in writing, has no application to the hearing of this pétition for ad-
judication in bankruptcy, on which a jury is not required, unless spe-
cially claimed.
Tuming to the merits: Appellee was the principal stockholder in
and the président of the John Swigart Company, a wholesale jewelry
and optical firm at Toledo. On June 27, 1918, the company, being
heavily in debt and embarrassed, transferred its stock and assets to
one Hickok, as common-law trustée, so called. A committee of cred-
itors was thereupon organized. Appellee had personally indorsed or
guaranteed notes aggregating more than $150,000 for money bor-
rowed from banks by the Jewelry Company, of which about $99,000
remained unpaid after July 1, 1918. The books of the Jewelry Com-
pany showed charges against him in upwards of $22,000, which were
valid and impaid, and he had some other debts. The small stock-
holders in the Jewelry Company (some of whom were also creditors
as well as employés) seem to hâve been dissatisfied with the trustee's
conduct of the business, and to désire a slower liquidation, in the hope
of saving something for their stock. There seem to hâve been threats
of interférence with existing conditions, by injunction or bankruptcy.
In thèse circumstances, the creditors' committee agreed with appellee
and the small stockholders upon a compromise method of liquidating
856 262 FEDERAL REPORTER
the affalrs of the Jewelry Company, embracing appellee's retirement
from participation in the business and the continuance therewith of
the then force of salesmen and employés, a slower liquidation and the
cutting doM^n of overhead expenses, and the appointment of four addi-
tional trustées to assist Mr. Hickok, with full authority to liquidate
the business and sell the property on such terms as the majority of
the trustées should détermine. This course it was hoped would realize
for creditors a maximum of 70 per cent, of their claims ; the amount
so realized, whether 70 per cent, or less, "to he regarded as a settle-
ment and compromise figure, in full discharge of ail claims and de-
mands which creditors hâve against the company or against John
Swigart personally." Should the 70 per cent, figures be reached, the
trustées were to convey back to the company the remaining property
"as considération for the services of the employés" referred to.
On July 27, 1918, the creditors' committee, by letter, informed cred-
itors of the situation, including the proposed method of liquidation;
and in submitting the plan for ai>proval or disapproval by creditors in
practical effect announced the committee's approval of the plan and
idvised its acceptance, stating that appellee's property was so badly
incumbered that "any equities there may be are doubtful and hard to
reach," that the proposed plan would produce more than bankruptcy
(stated to be the only alternative), and the committee's conclusion that
appellee's indorsements were "substantially worthless." On July 31st,
the J. S. Farming Company was incorporated under the Michigan
statutes (hy appellee, his wife, and one Marguerite Jamieson) with a
capital stock of $10,000, represented by 100 shares of $100 each ; and
appellee and his wife conveyed to that company on the last-named
date three parcels of farming land in Michigan, aggregating 478 acres,
each parcel subject to a mortgage or mortgages which in ail aggregated
$57,600 of principal (of which $40,000 was a second mortgage on ail
three parcels, securing appellee's guaranty of a debt of the Jewelry
Company), besides upwards of $1,500 accrued interest and taxes, to-
gether with farming tools, machinery, and equipment, wagons, ve-
hicles, and nine horses, upon the farms and belonging to appellee. Mrs.
Swigart also conveyed to the Farming Company 43 head of cattle,
then upon the land and claimed to be owned by her. In full payment
for thèse conveyances the Farming Company issued to appellee 35
shares of the capital stock, to Mrs. Swigart 60 shares, and to Mar-
guerite Jamieson 5 shares; the latter presumably for qualifying pur-
poses.
On the same 31st of July the J. S. Realty Company was organized
under the Ohio statutes by appellee, his wife, Marguerite Jamieson,
and two others; also with a capital stock of $10,000, consisting of
100 shares, of the par value of $100 each ; and on August 3, 1918,
appellee and his wife conveyed to the Realty Company a large num-
ber of parcels of real estate in Lucas county, Ohio (two parcels being
in Toledo), each of thèse parcels being incumbered by a mortgage or
mortgages aggregating $42,800 of principal. In ail the Ohio property
Mrs. Swigart had a dower interest, and in one of the Toledo parcels
aK>ellee had a homestead interest. In payment for thèse conveyances-
MARINE NAT. BANK V. SWIGART 857
C262 P.)
the Realty Company issued to appellee 33 sliares of its capital stock,
to Mrs. Swigart 60 shares, to Mai'guerite Jamieson 5 shares, and to
each of the other incorporators one share each, thèse 7 shares being
issued presumably for qualifying purposes. In each of thèse two new
corporations Mr. and Mrs. Swigart were elected to the two principal
offices. The property so conveyed by appellee to the Farming Com-
pany and to the Realty Company was aJl that appellee then had. A
small minority of the Jewelry Company's creditors accepted the pro-
posed settlement.^ On August 14th pétition in bankruptcy was filed
against the Jewelry Company, and thereafter it was adjudicated bank-
rupt.- On August 17th appellee and his wife transferred to Messrs.
Marshall & Fraser (the counsel under whose supervision the Realty
and Farming Companies were formed) ail the shares of the capital
stock of both the Farming Company and the Realty Company received
by them respectively. This transfer was made as security for the
payment of the transférées' "reasonable charges and disbursements
* * * for services in connection with the affairs of" appellee and
the Jewelry Company. On September 14, 1918, pétition was filed in
the court below for adjudication of appellee as a bankrupt, the sole
act of bankruptcy alleged being the conveyances to the Farming Com-
pany and the Realty Company before referred to, and the receipt in re-
tum therefor of the issued capital stock in those corporations, with al-
leged intent thereby to hinder, delay, and defraud appellee's creditors.
[3] On the hearing of this pétition appellee's insolvency and the
statutory amount of debts were conceded for the purposes of the issue ;
and there being the statutory number of petitioning creditors, the only
ultimate question left for décision was whether appellee, in convey-
ing the Michigan farm property and the Toledo and other Ohio real
estate to the respective corporations, upon the sole considération of a
portion of the capital stock of those corporations received therefor, in-
tended to hinder, delay, or defraud his creditors. Lansing Boiler, etc.,
Works v. Ryerson (C. C. A. 6) 128 Fed. 701, 703, 63 C. C. A. 253,
253. The District Judge, after careful considération of the testimony,
as indicated by his written opinion, reached the conclusion that such
intention was not proved, but that in fact "the proof tends to prepon-
derate on the other side." The testimony having been taken in open
court, we must accept this conclusion of fact unless the évidence de-
cidedly preponderates against it. Carey v. Donohue (C. C. A. 6) 209
Fed. 328, 333, 126 C. C. A. 254. And if this conclusion of fact is
accepted the order refusing adjudication must be affirmed.
Apart from the conclusion that previous to the issue of the commit-
tee's letter of July 27, 1918, careful examination had been made into
the affairs of both appellee and the Jewelry Company, at a largely at-
1 Appellee's attomey testifled, without dispute, that favorable responses
were received from 25 or 30 creditors of ail classes, who assigned their clalms,
and that "the retums came in a very satisfactory manner, and except for the
Interférence of Mr. Hickok and his détermination to force Immédiate sale the
plan of July 27tli could and would hâve been carried through."
2 The trustée In bankniptcy di.'sposed of ail the Jewelry Company's assets
In bulk. It is stipulated that that estate will pay creditors approximately 70
cents on the dollar.
858 262 FEDERAL REPOETER
tended meeting of that company's bank creditors and by the creditors'
committee which was appointed by that meeting, the substantial con-
clusions reached hy the trial judge, so far as seem presently material,
are : (a) That when the transfers of the equities were made appellee
"had every reason to believe he would not be held upon his contingent
liahility and was justified in assuming that the creditors would release
him personally"; (b) that appellee's explanation that the conveyances
of the Michigan and Ohio real estate to the new corporations were
made "to conserve the spéculative equities in those properties and
to make possible the continuance of the dairy business on the Michi-
gan farm" did not appear to be fanciful; and that there appeared
nothing reprehensible in appellee's "attempt to save for himself, if
possible, through the corporate combination of the tag ends of his
properties, what, because of the exigency due to bankruptcy adminis-
tration, was not salvable for his creditors" ; (c) Ihat the "transaction
was done openly after a discussion of the purpose with Swigart's cred-
itors" ; (d) that there was no satisfactory évidence of the value of
Mrs. Swigart's property conveyed to the new corporations, viz. her
herd of dairy stock and her dower interest in tlie Ohio properties, and
that it was thus impossible to say that there was "such a disproportion
between the interests in the corporations reserved by Swigart and
those given to his wife as to itself be a badge of fraud."
Weighing thèse conclusions by the light of the trial court's oppor-
tunity to judge of the credibility of witnesses, we cannot say that the
évidence decidedly preponderates against them in material respects.
If the testimony of both appellee and his attorney is to be fully cred-
ited, the conclusions seem justified. The question of the intent of the
conveyances must at the last be referred to appellee's good or bad
faith. On this subject the District Judge said:
"Mr. Swigart was on the stand and he exhibited then a state of mind with
référence to his afEairs as they stood in July and Angust of last year whlch
compels the conclusion that he was actlng at ail times in the best of faith
with his creditors, and we flnd no justifloation in the facts before us for the
bdief that be was moved at the time by a fraudulent purpose, or even by
the despairing debtor's last effort to thwart the lawful exercise of the right
of his creditors to immediately proeeed against his properties."
This déclaration of appellee's apparent credibility is entitled to
much considération.
[4] Referring to conclusion (a): Appellee's attorney testified that
he had an understanding with the représentatives of the creditors that
the latter would accept 70 cents on the dollar and release appellee,
and that at the conférences with the creditors' committee three mem-
bers named, who represented and assumed to speak for ail merchan-
dise creditors, repeatedly assured him that the signing of the form
of consent by the creditors was a mère matter of form and that such
signatures would be fumished "whenever the matter was nearing
completion," although it was of course understood that "the matter
would hâve to be submitted to creditors" ; and appellee testified that
"everybody had agreed to accept 70 per cent., and there was no mis-
understanding about that." No member of the creditors' committee
MARINE NAT. BANK V. SWIGAET 859
(262 F.)
was produced on the trial, and there was no oral testïmony disputing
that of appellee and his attorney.»
As to conclusion (b) : The actual value of the equities in real estate
transferred to the new corporations is not highly important, except as
it bears upon the question of good or bad f aith. The hurden of show-
ing this value, as an élément of alleged bad faith, would seem to be
on the petitioning creditors. There was no testimony from either side
of the actual value of the lands, except by a witness for petitioning
creditors, who (we think naturally) failed to impress the court as
having "much qualification." But there was direct testimony on the
part of appellee and his attomey, which, if believed, would justify a
conclusion that the value of the equities was regarded as small and
spéculative, and practically valueless to creditors through bankruptcy
or other hostile proceeding, although it was regarded as sufficiently
promising to justify an attempt to préserve it from such dissipation,
and it appears by express testimony that by purchasing more cattle,
through the aid of chattel mortgage, and by careful opération the
value and income of the equities has been subistantially bettered. We
do not construe appellee's testimony that in his statement of assets
and liabilities he included "the amount available from the farm at
$32,000" as attributing to it that value above ail encumbrances. The
statement seems more naturally to mean that he thought the farm not
worth enough to pay more than $32,000 of the $40,000 second mort-
gage (covering ail three parcels of the Michigan lands) given to se-
cure appellee's guaranty of one of the debts due to creditors. Nor
do we think that the language of appellee's attomey cited by appel-
lant's counsel necessarily means that creditors and their rights did not
enter into the transaction.
[5-7] While there are considérations tending to discrédit conclu-
sion (c), there was oral testimony by appellee's attorney which, if be-
lieved, would justify the conclusion; and this oral évidence was evi-
dently believed.
Conclusion (d) is amply sustained by the record. Mrs. Swigart's
ownership of the cattle must be treated as established, and it is un-
questioned that the herd had substantial value. Neither appellee's
» The letter ot the small stockholders to créditons of Augnst 12 (subséquent
to the conveyances in question) sfated that appellee had tumed over ail his
Jewelry Company stock to a trustée for other stoekholders. While the can-
cellation of Swigart's débit account on the books oj the Jewelry Company is
not mehtioned in the letters to creditors (or In express terma in the testimony)
as a feature of the proposed setUement, the natural presuinption would be
that it was Intended — from the considérations: (a) That Swigart's $40,00Q
second mortgage (nearly double the book charges) secured the Jewelry Com-
pany's debt alone, apd the Company would thus owe him for whatever was
paid thereon ; (b) Swigart's undisputed testimony that the ofCered TO per cent,
was to cover "my liabUity to any of said creditors under and by vlrtue of in-
dorsement or otberwise" ; (c) the statements in the Commlttee's letter to
creditors already referred to; (d) the statements In the stoekholders' letter
that Swigart has "nothlng worth going af ter" ; and (e) the improbability that
Swigart would tum his stock in the Jewelry Company over to the smaller
stoekholders and still remain Uable to the Company for the book charges
agalnst hlm.
860 262 FEDERAL REPORTER
homestead interest in the Toledo property nor Mrs. Swigart's dower
interests in the Ohio lands, although mortgaged, passed to the trustée
in bankruptcy. In re Hays (C. C. A. 6) 181 Fed. 674, 678, 104 C. C.
A. 656; In re National Grocer Co. (C. C. A. 6) 181 Fed. 33, 104 C.
C. A. 47, 30 L. R. A. (N. S.) 982; In re Baker (C. C. A. 6) 182 Fed.
392, 104 C. C. A. 602. Creditors cannot complain of the transfer of
thcse interests to the new corporations, nor can fraudulent intent be
predicated upon such transfers. It cannot, from this record, be stated
with any degree of confidence that the shares of corporate stock trans-
ferred to Mrs. Swigart were of greater value than the three classes
of interests just referred to, or that appellee received stock of less
value than his equities in the property transferred (as existing at the
time), excluding therefrom the three classes of items mentioned."
[8, 9] If, when the transfers were made to the Farm and Realty
Companies, respectively, appellee actually and in good faith believed
that his release from contingent liability on the debts of the Jewelry
Company was as good as given — that its giving was a mère matter of
form — it is not a far cry (as the case is presented hère) to a conclu-
sion of lack of bad faith in organizing the new corporations and mak-
ing the transfers complained of. The situation would be in principle
more or less analogous to that declared in Merchants' Bank v. Cole,
supra, 149 Fed. 708, 79 C. C. A. 414, where a conveyance was held
not intended to hinder, delay, or defraud creditors where the grantor,
although in fact heavily indebted contingently, supposed such liability
had been extinguished. It is true that a court of equity will look
through the fiction of a corporation formed for the purpose of ac-
complishing a fraud under the disguise of the fiction. First Nat.
Bank v. Trebein, 59 Ohio St. 316, 52 N. E. 834; Stark Elec. Co. v.
McGinty Contracting Co. (C. C. A. 6) 238 Fed. 657, 663, 151 C. C. A.
507. But fraud is not committed merely because an incorporation is
employed. The Trebein Case (cited by appellants) is readily distin-
guîshable in its facts from the instant case, in that in the Trebein Case
the contingent liability was known to exist at the time the conveyance
under considération was made. It is also true that in deterralning
the question of intent a court should take into considération the nat-
ural and necessary resuit of the transfer. Bean v. Standard Co. (C. C.
A. 6) 131 Fed. 215, 65 C. C. A. 201. But the ultimate question is still
always one of fact, viz. actual intent, and "that intent must be es-
tablished by proof, fraud must be shown, and the good faith of the
transaction must be successfuUy impeached." Merchants' Bank v.
Cole, supra, 149 Fed. at page 711, 79 C. C. A. 417; Coder v. Arts, 213
U. S. 223, 242-244, 29 Sup. Ct. 436, 53 L. Ed. 772, 16 Ann. Cas. 1008 ;
Lansing, etc., Works v. Ryerson, supra, 128 Fed. at page 703, 63 C.
C. A. 253; Johnson, etc., Co. v. Bardsley (C. C. A. 8) 237 Fed.
763-767, 150 C. C. A. 517.
Taking into considération the entire record, and giving due weight
to the absence of testimony material to the issue and as to which pe-
titioning creditors had the burden of proof, as well as the conclusions
adopted by the trial judge after seeing and hearing the witnesses, we
SHEAREB V. FARMEES' LIFE INS. CO. SGI
(202 F.)
cannot say that the évidence decidedly preponderates against the ulti-
mate conclusion reached below.
The order denying adjudication of bankruptcy is accordingly af-
firmed.
SHEAREK V. FARMERS* LIFE INS. CO.
WIBLE V. SAME.
(Circuit Court of Appeals, Eightli Circ-ult. December 2, 1919.)
Nos. 5372, 5373.
1. CONTRACTS <S=>264 EQUITT GEANTS KESCISSION AS RESTOBATION TO INJtrKEt>
PABTT, BUT REQUIRES HIM TO DO EQUIÏT.
Equlty grants rescission of a contrnct obtained by fraud as a means
of restoring the parties to thelr original situation, but will not permit It
to be made a means of Injustice, and will requlre the defrauded party to
do equlty to the other.
2. Insurance ®=>33 — Buyer of stock of corporation whose value it had
destroyed must pat actual value to obtain bescission.
Wliere an Insurance eompany vras indiiced by fraud to purchase stock
of another eompany, and had destroyed the value of the stock by trans-
ferring the assets and business of the latter eompany to H:self, equlty, on
grantlng resciasion, will require the buyer to pay the actual value of the
stock at the tlme of Its purchase.
3. Appeal and erboe <@=>931(1) — Presumption is that findings and conclu-
sions OF TBIAL COURT ARE CORRECT.
The presumption is that the findings and conclusions of the trial court
vcere rlght, and they will not be disturbed on appeal, unless the record
shows a material mistake of fact or serions error of law.
4. Insurance <S=333 — Wheee agents of insubance compant butins stock of
anotheb knew of facts afi-ecting its value, buter cannot claim mis-
eepresentation.
Where the agents of an Insurance eompany, who purchased stock of
another eompany, knew of a report by an Insurance oommlssioner discount-
Ing the value of certain securities owned by the latter eompany, the buying
eompany had sufficient notice to put it on inqulry, and cannot rely on mis-
representatlons as to the value of those assets.
K. Insurance <g=»33 — Proof of material misrepkesentation of value of as-
sets OF insubance COMPANY HELD TO WARRANT BESCISSION OF STOCK PUB-
CHA8K.
Where the évidence showed that an Insurance eompany, whose stock
plaintlff purchased, listed among its assets many notes and mortgages
given to It wlthout valuable considération to enable It to deposlt wlth the
Insurance department the required amount of securities, and that the se-
curlty of some of them was Insufiicient, of whlch faets the purchaser had
no notice, there was sufficient évidence of Intentional mlsrepresentatlon
to sustain a decree of rescission.
e. OOBPOBATIONS <S=>487(1) — EQUITY WILL DECREE BESCISSION OF ULTRA VIRES
CONTEACT ONLT IF CORPORATION DOES EQUITT.
A corporation which has made an ultra vires oontract can obtaln a
rescission thereof in equlty only on condition of doing equlty to the
other party, which nécessitâtes restoration of considération.
7. Appeal and ebeoe <S=3l054(l) — Erboneous admission of évidence not
FATAL. IF THERE IS SUFFICIENT COMPETENT EVIDENCE TO SUPPOET DECEEE.
The erroneous admission of évidence in an e<iuitable suit for a rescis-
sion of a contract does not invalidate the decree, if there was sufficient
©ssFor other cases see same toplc & KBY-NUMBER in ail Key-Numbered Digests & Indexes
862 262 FEDERAL REPORTER
conpetent and relevant évidence to sustain the charge of material mis-
representatlons Inducing the contract.
8. Insubance (©=533 — Estoppel of instjbance compant to eescind purchase
OF STOCK.
An Insurance company, vchich purchased stock of another company and
transferred the business and assets of the latter company to itself, is not
estopped to resclnd Its contract for the purchase of the stock for fraud,
where the évidence did not show that It had knowledge of the fraud be-
fore it transferred the assets and business to itself.
9. Insurance <S=5>33 — Eight to shaee in bemaining assets held not to es-
TABLISH EQTJITT OF EESCISSION ON SUBRENDEE OF STOCK.
Where an Insurance company had purchased stock In another, Induced
by fraud, and had transferred to itself the assets and business of the
latter, except the assets deposited with the state Insurance department,
the rlght to partlclpate in the deposited assets does not render équitable
a rescission on reconveyance of the stock, since the value of the stock
represented by the other assets of the company and Its outstanding busi-
ness caunot bê restored.
10. COEPOEATIONS (®=^537 INSUFTICIENCY of assets of INSURANCE COMPANY TO
EQUAL PAR VALUE OF STOCK DOKS NOT ESTABLISH INBOLVENCY.
An insurance company, whose assets exceeded its liabilities, and whlch
was able to pay those debts as tliey matured, is not insolvent, though tûe
excess of its assets over its liabilities was less than the par value of its
outstanding stock.
Appeals from the District Court of the United States for the West-
ern District of Missouri; Joseph W. Woodrough, Judge.
Separate suits by the Farmers' Life Insurance Company against
W. F. Shearer and against John Wible. Decrees for complainant, and
défendants appeal. Reversed, with instructions to render modified
decrees for complainant.
J. Herbert Smith and William G. Holt, both of Kansas City, Mo.
(James K. Cubbison and Amos Townsend, both of Kansas City, Mo.,
on the brief), for appellants.
W. F. Zumbrunn, of Kansas City, Mo. (H. A. Hicks, of Denver,
Colo., on the brief), for appellee.
Before SANBORN, Circuit Judge, and MUNGER and YOU-
MANS, District Judges.
SANBORN, Circuit Judge. Thèse are appeals from decrees of
rescission of contracts between the appellants and the appellee, by
means of which the appellee, the Farmers' Life Insurance Company,
secured and retains ail the assets of the Anchor Life Insurance Com-
pany, in which the appellants Shearer and Wible, were the controlling
stockholders when the contracts were made. A brief statement of the
situation of the parties when the contracts were made and at this time
since the decrees, and a history of their transactions, is necessary to
an understanding of the questions at issue.
In September, 1914, the Anchor Life Insurance Company, a corpora-
tion of the State of Kansas, was conducting its insurance business in
Kansas City. It had issued its policies to the amount of about $1,600,-
000, and the annual premiums payable thereon were about $49,000.
Under the statutes of Kansas this company was required to maintain
<®=3For other cases see same toplo & KEY-NUMBER In ail Key-Numbered Dlgests & Indexe»
SHEABER V. FARMERS' LIPE INS. CO. 863
(282 F.)
a deposit of securities with the officers of that state to the amount of
$100,000, the par value of its 1,000 shares of capital stock, in order to
secure permission to conduct its business in that state, and to the
amount of about $25,000 more to maintain a légal reserve to secure
the payment of its policies. Its insurance had so increased that it
was difficult for it to maintain the required deposits, and Mr. Jones, an
examiner for the insurance department of Kansas, after examining the
securities of the company, had filed a report in the insurance depart-
ment to the efïect that there should be deducted from the value of its
assets, which were $160,814.06, as shown by its report of December
31, 1913, $30,000 on account of two mortgages, aggregating $30,000,
made by one Wade, $9,000 on account of eight mortgages, for $1,250
each, and $29,500, the value stated in that report of $41,000, face
value, of the bonds of the Williamsville, Greenville & St. Louis Rail-
way Company, making in ail a déduction of $68,500, leaving the value
of the company's assets $92,314.06, and showing an impairment of its
capital to the extent of $34,554.94, according to the report of Jones.
Shortly after the filing of this report, the superintendant of insurance
notified the company that it must deposit securities sufficient to re-
move this impairment, or he would be compelled to apply for a receiver
of its property at the end of 30 days.
In September, 1914, the Farmers' Life Insurance Company, a cor-
poration of the state of Colorado, was conducting a life insurance
business at Denver in that state. Its capital stock was $1,000,000,
divided into shares of the par value of $3 each. The aggregate amount
of the insurance it had written was about $850,000, or about one-half
of that which had been written by the Anchor Company. The évi-
dence tends to show that it is necessary for a life insurance company
to hâve about $5,000,000 of insurance to enable it to maintain its re-
quired deposits, pay its expansés, and conduct a profitable business
from its income; and, as the addition to insurance which a company
has itself written of insurance already written by other companies
does not materially increase its overhead expenses, and increases its
insurance much faster than to solicit and to write it, the Farmers' In-
surance Company was endeavoring to buy such insurance of other
companies, by purchasing them or their property and reinsuring their
risks. Mr. Royce was the superintendent of its agents. He had been
bank examiner of the state of Kansas, was well acquainted with Mr.
Lewis, the superintendent of insurance of Kansas, had secured the
admission of the Farmers' Company into that state, and was well quali-
fied to examine, ascertain, and state the value of the assets of insur-
ance companies. He, Mr. Temple, the secretary or attorney of the
Farmers' Company, and Mr. O'Shaughnessy, one of its agents, went
from Denver to Kansas City in September, 1914, to secure the in-
surance and other property of the Anchor Company for the Farmers'
Company. Before they went, some of them had seen a copy of the
report of the Anchor Company of December 31, 1913, euid before
any contract was made by them, or the Farmers' Company, some of
them had notice of the contents of Mr. Jones' report, of the worthless-
ness of the Wade mortgages, for $30,C)00, and of the railroad bonds.
864 262 FEDERAL REPORTER
for $41,000, par value, and o£ the fact that notice had been given to
the Anchor Company that an application for a receiver of its property
would be made shortly, unless it speedily deposited securities to re-
move the reported impairment of its capital. They endeavored to ac-
quire the Insurance and assets of the Anchor Company, by arranging
an exchange of the stock of the Farmers' Company for that of the An-
chor Company at the rate of 15 shares of the former for one share ot
the latter. Mr. WilHam F. Shearer owned 135 shares and was the
président of the Anchor Company. Mr. John A. Wible owned 351
shares of that company's stock and was its secretary. They controlled
the insurance, the property, and the business of the Anchor Company.
The agents of the Farmers' Company conferred and negotiated with
them from some time in September until November 16, 1914, to
obtain their stock for the Farmers' Company and their assistance
in getting the other stock of the Anchor Company for it, to the end
that that company might hâve the Anchor Company and ail its in-
surance, income, and assets. The resuit of thèse negotiations was
that between November 13 and November 17, 1914, the Farmers'
Company made contracts with Shearer to pay him for his 135 shares
of Anchor stock $27,000, $13,500 in 1,350 shares of the stock of the
Farmers' Company and $13,500 in notes which that company had re-
ceived for the sale of its stock ; that the Farmers' Company did and
would pledge 1,350 shares of its stock and the 135 shares of stock of
the Anchor Company bought by it of Shearer as collatéral security for
the payment of the stock notes ; and that the stock and the stock notes
secured thereby should be and they were delivered to Townsend and
Smith in trust to secure the performance of thèse agreements. The
Farmers' Company at the same time made agreements with Mr. Wible
to pay him for his 351 shares of Anchor stock $62,500, $5,000 in cash,
$17,500 in three mortgage' notes, for $3,500, $6,000, and $8,000, re-
spectively, which notes were secured on Wible's property and were
owned by the Anchor Company, and $40,000 in stock notes owned by
the Farmers' Company and made by the purchasers of its stock; that
the Farmers' Company would and did pledge 4,000 shares of its stock
and the 351 shares of the stock of the Anchor Company bought by it of
Wible as collatéral security for the payment of the $40,000 of stock
notes ; and that the stock so pledged and the notes so secured should be
and they were delivered to Townsend and Smith in trust to secure the
performance of thèse contracts. The stock pledged by thèse contracts,
the notes secured thereby, and their proceeds were prior to the decrees
placed in the custody of the court below and constitute a part of the
subject of this litigation. Thèse contracts gave the Farmers' Company
imrestricted control and possession of the insurance and other assets
of the Anchor Company.
At the time thèse contracts were made the Farmers' Company hired
Shearer and paid him $2,500 to assist it in exchanging its stock with
other holders of Anchor stock at the rate of 15 for 1, in getting Ihe
Anchor Company insurance over to the Farmers' Company, and induc-
ing the Anchor Company's policy holders to reinsure in the Farmers'
Company, and in acquiring ail the other assets of the Anchor Company.
SHEARER V. PARMEES' LIFE INS. CO. 86S
(262 P.)
Ali this was practically accomplished by the early part of January,
1915. The Farmers' Company acquired, including the stock of Shearer
and Wible, more than 95 per cent, of ail the stock of the Anchor Com-
pany, by the use of this stock caused the substitution of its agents,
Royce, O'Shaughnessy, and others for Wible, Shearer, and the other
officers and directors of the Anchor Company, and made a contract
of reinsurance of the Anchor Company 's policy holders which the
great majority of them accepted, while those that did not accept
generally abandoned their policies, so that ail the value of the prop-
erty of the Anchor Company was secured and appropriated to its
own use by the Farmers' Company.
On January 15, 1915, after ail this had been done, the Farmers'
Company gave notice to Shearer and Wible that, on account of their
misrepresentations of the value of the assets of the Anchor Company
during the negotiations for the contracts, it elected to rescind its con-
tracts with them and offered to retum the shares of Anchor stock it
had secured from them and other stockholders, to abrogate its contract
of reinsurance of the Anchor Company's policy holders made on De-
cember 11, 1914, and to retum everything of value it had received, up-
on the return to it of the considération it paid therefor. In March,
1915, it brought thèse suits, one against Shearer and the other against
Wible, for rescission of the contracts on the grounds: (1) That 50
shares of Shearer's 135 shares were an overissue ; (2) that Shearer
and Wible represented the value of the assets of the Anchor Company
to be much greater than it actually was, especially the value of some
of its mortgage securities, and of the $41,000, face value, reported
worth $29,500, of the bonds of the Williamsville Railway Company,
and that the contracts were beyond the powers of the Farmers' Com-
pany. It prayed that ail the contracts be avoided, and that the défend-
ants Shearer and Wible and the trustées be decreed to deliver and pay
over to it ail they had received under the contracts, except the 135
shares of Anchor stock delivered to it by Shearer and the 351 shares
delivered to it by Wible, and that they hâve such other orders and
decrees as might seem meet.
The défendants answered. In their answers they denied the equities
of the complaints, alleged that the Farmers' Company had investigated
and had notice of the character and value of the assets of the Anchor
Company before it made its contracts, alleged that the Farmers' Com-
pany had failed to perform them, that it had failed to return any of the
property it received under them, that it was unable to retum the prop
erty of value which it had received thereunder, and prayed for spécifie
and gênerai affirmative équitable relief.
The court below rendered decrees in favor of the Farmers' Com-
pany. At the time of the entry of the decree in the suit against Shear-
er, there were in the custody of the court in his case stock notes un-
paid of the face value of $3,375, $10,367.37, the proceeds of such
notes paid, 1,350 shares of stock of the Farmers' Company, and 135
shares of stock of the Anchor Company. The court adjudged that this
cash, thèse notes, and the 1,350 shares of the stock of the Farmers'
Company be delivered to the Farmers' Company, that the défendant
262 F.— 55
866 262 FEDERAL REPORTEE
Shearer pay the costs of the suit and hâve nothing but the 135 shares
of stock of the Anchor Company, from which the complainant had ex-
tracted and appropriated to itself everything of value. At the time of
the entry of the decree against Wible, there were in the custody of the
court in that case stock notes unpaid of the face value of $17,872.50
and $24,483.42 in cash, the 4,000 shares of stock of the Farmers' Com-
pany, and the 351 shares of stock of the Anchor Company. The court
decreed that thèse notes and this cash and the 4,000 shares of stock of
the Farmers' Company be delivered to it, that Wible reassign to it the
$8,000 note and mortgage which had been assigned to him pursuant to
the provisions of the contracts between him and the Farmers' Com-
pany, that the Farmers' Company recover $5,975 from him, that if he
should fail to make such reassignment, or to pay the $5,975, the 351
shares of stock of the Anchor Company should be sold, and its pro-
ceeds should be appUed to pay the judgment against Wible and the
costs of the suit, and that exécution issue against him to enforce the
decree. It is from thèse decrees that Shearer and Wible hâve ap-
pealed.
[ 1 ] The basic reason for the rescission of a contract by a court of
equity is that, vs^here it has been obtained by fraud, deceit, or other
unlawful act of one of the parties, their restoration as near as may be
to their respective situations before the contract was made generally
gives the most équitable relief to the injured party at the expense of
the least loss to the perpetrator of the wrong. The grant of such
reHef is and always ought to be conditioned by the application to its
terms and to the measure of its extent of the équitable principles that
he who seeks equity must do equity, that a court of chancery may and
it should condition its grant of relief to the complainant whenever pos-
sible with the préservation and enforcement of the equities of the
défendant, that it may, in a case in which the rules and principles of
equity demand it, condition the grant of relief sought from it by the
complainant with the enforcement of a claim or equity held by a de-
fendant, which the défendant could not enforce in any other way,
Farmers' Loan & Trust Co. v. Denver L. & G. Co., 126 Fed. 46, 51,
60 C. C. A. 588, 593 ; Bûmes et al. v. Burnes et al., 137 Fed. 781, 791,
70 C. C. A. 357, 367; and that a court of equity may and should so
mold its decrees as to do equity and avoid inequity, Jones v. Missouri-
Edison Electric Co., 144 Fed. 765, 766, 717, 77?,, 779, 781, 75 C. C. A.
631, 632, 643, 644, 645, 647; Central Improvement Co. v. Cambria
Steel Co., 201 Fed. 811, 812, 824, 827, 120 C. C. A. 121, 122,
134, 135, 136, 137; Union Central Life Ins. Co. v. Drake, 214 Fed.
536, 538, 548, 131 C. C. A. 82, 84, 94; United States v. Debell, 227
Fed. 775, 779, 142 C. C. A. 299, 303.
[2] The facts disclosed by the pleadings and the decrees, that the
Farmers' Company and the appellants made the contracts rescinded
on the agreed basis that the property of the Anchor Company was
worth $184,731, and the stock of the appellants therein $89,700, the
fact that it is not claimed that the property or stock of the Anchor
Company was worthless, or that the Farmers' Company received no
substantial value or benefit therefrom, but the complainant only urges
SHBAEER V. FARMEES' LIFE INS. CO. 867
C262 F.)
that they were worth much less than the agreed estimate ; and the
fact that Shearer and Wible will come out ôf thèse transactions under
the decrees below, when executed, without anything of value, while
the Farmers' Company will hâve retained ail it had before the contractf.
were made, and will hâve added thereto and retained ail the value that
the Anchor Company and the appellants as its stockholders had, with-
out paying or being required to pay anything therefor — ^have brought
thèse principles of equity jurisprudence forcibly to mind, hâve suggest-
ed the questions : What was the real value of the property of the An-
chor Company and of the stock of Shearer and Wible when the
contracts were made? May not decrees be lawfully made which
will relieve the Farmers' Company of their contracts to pay more than
the value of the appellants' stock, and yet avoid depriving the appellants
of ail its value? and hâve induced a patient examination of the évi-
dence in an endeavor to find a fair value of the property of the Anchor
Company and of the stock of the appellants at the time the contracts
were made.
There is testimony scattered through the more than 600 closely print-
ed pages of the records of the trials of thèse cases relating to the
value of about 60 separate securities claimed to hâve been the property
of the Anchor Company at some time. The évidence relative to each
one of thèse securities has been extracted, coUected together, consid-
ered, and a conclusion has been deduced theref rom as to the ownership
of that security by the Anchor Company and as to the value of it on
November 15, 1914. The first contracts were made November 14,
1914, and the second contracts on November 16, 1914. As to some
of thèse securities the proof on thèse questions is not clear or con-
clusive, but an appeal in equity invokes a trial of the case de novo, and
the Suprême Court has admonished that, although the proof in a suit
in equity be uncertain and its effect doubtful, it is still the duty of a
court of equity to décide the issues presented on the évidence furnish-
ed to it, in accordance with the best judgment it can form thereon.
This has been done as to each of thèse securities. Time and space
will not permit the review or statement of the détails of the évidence
regarding them. Suffice it to say that the Williamsville Railway bonds,
reported at $29,500, and the Wade mortgages, reported at $30,000,
according to the report of December 31, 1913, and the so-called dona-
tion notes and mortgages, for which the Anchor Company gave no
valuable considération, but which it deposited with the state officers to
comply with their requirements, hâve been found worthless on No-
vember 15, 1914. The three mortgage notes — for $3,500, secured
on Wible's property at 1832 Washington street, Kansas City, Mo.;
for $6,000, secured on his property at Twenty-Fifth and Washington
streets, Kansas City, Mo.; for $8,000, secured on his property at
1221 Garfield avenue, Kansas City, Mo. — which Wible and the Famn-
ers' Company agreed that he should take in part payment of the $62,-
500 it agreed to pay himfor his Anchor stock, hâve in view of that
fact, and of the other évidence regarding them, been found to hâve
been worth on November 15, 1914, respectively, $4,285, $6,270, and $8,-
000 aggregating $18,555.83, and this amount has been deducted from
868 262 FEDERAL REPORTER
the determined value of his 351 shares of stock on that date în ascer-
taining the amount which he ought in equity to receive in addition to
thèse mortgage notes and their securities.
The resuit of the considération in the way which has been described
of ail the évidence regarding each of the mortgages, securities, and
bonds claimed to hâve been owned by the Anchor Company on Novem-
ber 15, 1914, is that those owned by it on that date were worth $85,-
716.25, that its written Insurance was worth $19,000, that it owned cash
items in addition to the above amounting to $4,000, that the real value
of its property was $108,716.25, that the value of the 135 shares of its
stock owned by Shearer was $14,676.69, and that the value of the 351
shares thereof owned by Wible was $38,159.40.
There is testimony tending to show that the Farmers' Company paid
Wible $5,000 in cash in part payment for his stock, and that he paid to
the trustées holding the securities $2,000 thereof. The différence, $3,-
000, and the value on November 15, 1914, of the three mortgage notes
Wible was to take in part payment for his stock, $18,555.83, hâve been
deducted from the value of that stock, $38,159.40, and the conclusion
is that the balance, $16,603.57, and the three mortgage notes and their
securities, were on November 15, 1914, equal to the real value of
Wible's stock in the Anchor Company on that day. In view of thèse
fîndings and conclusions, the effect of the decree in Shearer's case will
be to restore to the Farmers' Company the 1,350 shares of its stock, the
stock notes, and the proceeds thereof, and to settle and confirm in it
the title to ^'"/looo of ail the assets of the Anchor Company, which was
worth $14,676.14 on November 15, 1914, without the receipt by him of
anything of value therefor, for his 135 shares of Anchor stock were
rendered worthless by the transfer of ail the property of that company
to the Farmers' Company before suit was brought against him; and
the efïect of the exécution of the decree in Wible's case will be to re-
store to the Farmers' Company the 4,000 shares of its stock, the stock
notes delivered to the trustées, and the proceeds thereof, to deprive
Wible of the entire value of his stock, which was $38,159.40 on No-
vember 15, 1914, and to vest the title of the property it represented ir-
revocably in the Farmers' Company, without his receipt of any substan-
tial considération therefor.
Thèse decrees cannot be sustained. They conilict with the princi-
ples of equity jurisprudence, that he who seeks equity should do
equity, and that a court of equity should so mold its decree, if possible,
as to avoid inequity as well as to do equity. Thèse decrees unneces-
sarily inflict upon Shearer and Wible an injustice and inequity not less
flagrant than that from which they relieve the Farmers' Company.
What, then, ought a court of equity to do ? It ought as nearly as pos-
sible to do equity. Its province is not the infliction of punishment. It
is to hold the scales even, and to grant to ail alike their just dues. To
such a court the Farmers' Company has elected to appeal for relief,
and not to a court of law for its damages, as it might hâve done; and
such a court ought to render such decrees as will justly adjudge and
settle ail the equities of each of the parties to this litigation.
The decrees below should be reversed. A decree should be render-
SHEARER V. FARMERS' LIFE INS. CO. 869
(262 F.J
ed in Shearer's case to the effect : (1) That the contracts between him
and the Farmers' Company be set aside ; that the proceeds of its stock
notes be paid over to it ; that its unpaid stock notes and its 1,350 shares
of stock pledged to secure their payment, and the 135 shares of the
stock of the Anchor Company, which are worthless, be conveyed and
delivered to it ; that ail this be decreed and donc on condition, but not
otherwise, and on no other condition, that within 60 days, or such
other short time as shall be allowed by the District Court, after the
entrv of the decree, the Farmers' Company pay to Shearer $14,676.14,
the value of his stock on November 15, 1914, and interest thereon at
6 per cent, per annum from that date to the date of such payment;
that in case such payment is made within the time prescribed the
Farmers' Company hâve the relief which it is above declared entitled
to, on the condition there stated, and recover of Shearer the cost of
îts suit. (2) That in case the Farmers' Company fails to make such
payment within the time fixed in the decree, ail the proceeds of the
stock notes in his case be forthwith paid over to Shearer, in part pay-
ment of the $14,676.14 and interest to the time of payment; that the
1,350 shares of the stock of the Farmers' Company pledged to secure
the payment of the stock notes in his case be sold under the direction
of the court ; that the proceeds of such sale be applied, first, to the pay-
ment of the costs of the suit, and, second, to the payment of the un-
paid remainder of the $14,676.14 and interest; that the surplus, if
any, of such proceeds of the sale after such payments are made, be
paid over to the Farmers' Company ; and that, in case there still re-
mains a part of the $14,676.14 and interest unpaid, Shearer recover the
amount of such deficiency of the Farmers' Company and hâve exécu-
tion to collect it.
In Wible's case the agreement was that he should take, in part pay-
ment of the $62,500 agreed to be paid for his stock, $5,000 in cash and
at their face value three mortgage notes, for $3,500, $6,000, and $8,000,
respectively, owned by the Anchor Company and secured by mortgages
on three différent tracts, respectively, of Wible's real estate. The note
for $3,500, which was secured on his prcperty at 1832 Washington
Street, Kansas City, Mo., and was worth $4,285, on November 15, 1914,
was delivered to Wible on November 16, 1914. The mortgage was
foreclosed, the mortgaged property was bid in at the foreclosure sale
by Shearer for Wible, the time for rédemption expired without any
rédemption, the trustée who made the sale duly conveyed the property
to Shearer, but the Farmers' Company by claim and notice to Shearer
prevented him from conveying it to Wible, and he has never made
such a conveyance. The Farmers' Company refused to deliver to
Wible the mortgage note for $6,000, secured on his property at Twen-
ty-Fifth and Washington streets, Kansas City, Mo., which was worth
$6,270.83 on November 15, 1914. The Farmers' Company delivered to
Wible the mortgage note for $8,000, secured on his property at 1221
Garfield avenue, Kansas City, Mo., which was worth $8,000 on Novem-
ber 15, 1914. The Farmers' Company paid Wible $5,000 in cash on
November 16, 1914, and Wible paid $2,000 to the receiver in his case.
870 262 FEDERAL REPORTEU
sr' that the Farmers' Company is entitled to crédit for $3,0CX), on ac-
count of thèse cash transactions.
A decree should be rendered in Wible's case to the efïect that the
contracts between him and the Farmers' Company be set aside ; that
the proceeds of the stock notes in his case be paid over to it ; that its
unpaid stock notes, and its 4,000 shares of stock pledged to secure
the payment of the stock notes in Wible's case, be conveyed and deUv-
ered back to it ; that the title to the property at 1832 Washington street,
Kansas City, Mo., acquired from the foreclosure of the mortgage
for $3,500 be conveyed to and vested in the Farmers' Company ; that
the title to the mortgage note for $8,000 to any amounts collected from
it and any rights pertaining to or derived from the ownership thereof
be conveyed to and vested in the Partners' Company and that the 351
shares of Anchor stock be surrendered and delivered to it; that ail
thèse things be decreed and donc on condition, but not otherwise, and
on no other condition, that within 60 days, or such other short time
as may be fixed by the District Court, the Farmers' Company pay to
Wible $35,159.40, v^rhich wras the value of his stock, $38,159.40, less
the $3,000 cash crédit specified above, and interest on said $35,159.40
at 6 per cent, per annum from November 15, 1914, to the day of such
payment ; that in case such payment is made within the time prescrib-
ed the Farmers' Company hâve the relief it is above declared to be
entitled to on the condition there stated, and that it recover the costs
of this suit ; that in case the Farmers' Company f ails to make such pay-
ment within the time fixed by the decree : (a) Then that the right and
title to and the possession of the $8,000 mortgage note, the mortgage
or trust deed securing its payment, and ail the proceeds and proper-
ty derived and derivable theref rom be decreed to be quieted in Wible ;
(b) that the Farmers' Company cause the $6,000 mortgage note, the
mortgage or trust deed securing it, and ail the proceeds and property
derived or derivable therefrom, to be conveyed to and vested in Wible,
and that the title thereto be quieted in him ; (c) that the Farmers' Com-
pany convey, assign, and release to Wible ail its right and claim to the
mortgage note for $3,500, the mortgage or trust deed securing the pay-
ment thereof, and ail the proceeds and property derived or derivable
therefrom, that it cause Shearer to convey to Wible the property mort-
gaged or conveyed by the trust deed to secure that note, and that the
title to that property and to the note and mortgage relating thereto be
quieted in Wible; (d) that in case the provisions of paragraph (a)
above are performed and become effectuai within 120 days after the
entry of the decree, or such other short time as may be fixed by the
District Court as to the $8,000 mortgage note, the security therefor,
and the proceeds and the property derived and derivable therefrom,
then thesum of $8,000 shall be deducted from the $35,159.40 above
mentioned as of the date of November 15, 1914; that in case the pro-
visions of paragraph (b) above are performed and become effectuai
within 120 days after the entry of the decree, or such other short time
as may be fixed by the District Court, as to the $6,000 mortgage note,
the security therefor, and the proceeds and property derived and de-
rivable therefrom, then $6,270.83 more shall be deducted from that
SHEAREE V. PARMERS' LIFE INS. CO. 871
(262 P.J
$35,159.40 as of November 15, 1914, and in case the provisions of
paragraph (c) above are performed and become eflfectual within 120
days after the entry of the decree, or such other short time as may
be fixed by the District Court, as to the $3,500 mortgage note, the
security therefor, and the property derived and derivable therefrom,
and especially as to the title of the property derived from the fore-
closure of the trust deed securing that note, which title is now in
Shearer, then $4,285 more shall be deducted from the $35,159.40 as
of the date of November 15, 1914; that ail the proceeds derived from
the stock notes in Wible's case, or such part thereof as may be re-
quired to pay in full the costs of this suit and the $35,159.40 and
interest thereon at 6 per cent, per annum from November 15, 1914, to
the time of payment, or, in case any réduction or réductions therefrom
are made pursuant to the last preceding paragraphs relating to such
réductions, then to pay the remainder of said $35,159.40 after such
réductions are made, and the interest on such remainder from No-
vember 15, 1914, to the day of its payment, be paid over to Wible
and applied, first, to the payment of the costs of the suit, and, second,
to the payment of $35,159.40 and interest, or, in case such réduc-
tions are made, to the payment of the unpaid remainder thereof and
the interest thereon; that, after such payment has been made, the
unpaid stock notes, the 4,000 shares of stock of the Farmers' Company,
and the 351 shares of the stock of the Anchor Company be sold un-
der the direction of the court, and the proceeds thereof be applied
to the payment of the unpaid remainder of the $35,159.40 and the
interest thereon, and the remainder of such proceeds, if any, be paid
to the Farmers' Company; that in case the $35,159.40 and interest, or
any part thereof, still remains unpaid, then that Wible recover the
amount of such balance unpaid of the Farmers' Company and hâve
exécution against that company to collect it.
What has been said regarding the decrees that should be rendered in
thèse cases is not intended to, nor does it, limit the power or discrétion
of the court below to vary the decrees and orders to be rendered after
the filing of this opinion, from those indicated above, so far as such
variations relate to the times, forms, and terms to be used in attaining
the indicated resuit. It has been said to disclose the resuit desired and
the gênerai character of the decrees by which it is thought that re-
suit may be reached in accordance with the rules and principles of
equity jurisprudence.
[3] The view of the chief contentions of counsel for the respective
parties which has led to the conclusions which hâve been stated is this :
The record contains no finding of facts and no opinion of the court
below, so that there is nothing but the decrees it rendered to indicate
its findings of fact or its conclusions of law. The légal presumption is
that its findings and conclusions were right, and they ought not to be
disturbed by an appellate court, unless the record proves that the
District Court made a material mistake of fact or committed a serious
error of law. The évidence fails to satisfy that there was an over issue
of 601/^ shares of the stock of tha Anchor Company, and that this
60y2 shares was a part of Shearer' s 135 shares, as alleged by the
K72 262 FEDERAL EEPORTER
Farmers' Company, the decree is not appropriate to such a fànding, and
the conclusion is that the District Court did not so find, and tiiat it
ought not to hâve so found.
J4] The decrees convince that the court below found that Shearer
and Wible by their acts and words made material false représentations
to O'Shaughnessy, Royce, and Temple, or to one or more of them,
during the negotiations for the purchase from Shearer and Wible of
the property and stock of the Anchor Company, as to the value of the
mortgage notes of the Anchor Company and the securities for the
payment thereof , and that thèse misrepresentations induced the Farm-
ers' Company to make the contracts challenged. A careful reading,
analysis, and study of the évidence has failed to convince that there
was any mistake in this finding of fact. On the other hand, the évi-
dence establishes the facts that O'Shaughnessy, Royce, and Temple
were the agents of the Farmers' Company throughout the negotiations
for and the making of the contracts, that the notice to and knowledge
of each of them of the financial condition pî the Anchor Company
and of its securities was under the law notice to and the knowledge
of the Farmers' Company, that they or one or more of them and that
Company had such notice before the contracts were made of the Jones
report and of the worthlessness of the bonds of the Williamsville
Railway Company, and of the Wade mortgages, as would hâve led a
person of ordinary prudence in their situation to fuU knowledge there-
of ; that notwithstanding this notice, and their knowledge of the im-
pairment of the capital of the Anchor Company and the receivership
that threatened it, thèse agents and the Farmers' Company urged
Shearer and Wible with importunity to make the contracts, which the
latter never solicited.
[5] But neither the Farmers' Company nor its agents had adé-
quate notice of the fact that there were many thousands of dollars of
notes and mortgages among those which Shearer and Wible by their
acts and words during the negotiations held out as good security of the
Anchor Company, so far as they knew, which they knew had been
given to the Anchor "Company without any valuable considération re-
ceived by the makers, and merely to enable that company to deposit
them with the insurance department of Kansas, and thereby make a
showing of an amount of security owned by it sufficient to meet the
requirements of the laws of that state. Nor did the Farmers' Com-
pany hâve adéquate notice of the insufficiency of the security of some
of the mortgage notes so held out. There was theref ore sufficient évi-
dence of intentional misrepresentation of the character and value of
some of the mortgage securities to hâve sustained decrees of rescission
of the contracts, if Shearer and Wible could hâve been substantially
restored to their respective financial situations before the contracts
were made.
[6] Counsel for the Farmers' Company insist that the contracts
were ultra vires of the Farmers' Company, and seek their rescission
on that ground. Conceding, but neither admitting nor deciding, that
the contracts were beyond the powers of that company, it certainly
has the power to ask, and is now asking, this court for the same
SHEARER V. FARMERS' UFE INS. 00. 873
(262 F.)
équitable relief it prays on account of the misrepresentations. The
right to this relief in equity on account of its lack of power to make
the contracts is conditioned, however, by the same duty on its part to
do, and on the part of the court to require it to do, equity as is its
right to relief on the ground of false représentations. It is therefore
unnecessary to discuss or décide the question whether or not the
contracts were beyond its powers. It is not irrelevant to note, how-
ever, that, if they were, the Farmers' Company is not without fault.
The primary duty rested upon it to know its powers, and not to
exceed them, and its taking of ail the value of the stock of Shearer
and Wible in the Anchor Company without the lawful power to do
so, and its persistent attempt to hold it by decrees in equity because
it had no such power, does not appeal to the conscience of a chan-
celier with compelling force.
[7] Counsel for Shearer and Wible complain of the admission in
évidence of the report of the Anchor Company of December 31, 1913.
Conceding that its admission was erroneous, and that there was much
other évidence erroneously admitted, an examination of the record
nevertheless discloses the fact that there was sufficient compétent
and relevant évidence in this case to sustain the charge of the ma-
terial inducing misrepresentations to which référence has been made,
and the findings and conclusions of this court in this regard rest
upon the latter évidence.
[8] Counsel for Shearer and Wible argue that the Farmers' Com-
pany should be denied any relief because it was guilty of lâches, be-
cause it waived its right to rescind, and because it is estopped from
rescinding. Thèse défenses are of the same nature, and rest in reality
upon the single ground of estoppel. The facts invoked to sustain this
estoppel are that the contracts were made between November 13 and
November 16, 1914; that about November 16, 1914, Shearer's 135
shares and Wible's 351 shares in the Anchor Company were surren-
dered to the Farmers' Company, transferred on the books of the An-
chor Company and certificates issued to O'Shaughnessy and Royce,
the, agents of the Farmers' Company, who thereafter held and voted
them for that company; that Shearer and Wible resigned, and
O'Shaughnessy and Royce were elected président and secretary of the
Anchor Company ; that the latter's board of directors passed under the
exclusive control of the Farmers' Company, as did the possession and
management of ail its property and business; that on December 11,
1914, it made a sale of its Insurance policies, premiums due and to
become due thereon, and of ail its securities then held by the superin-
tendent of insurance or the state treasurer of Kansas for the légal
reserve only upon its policies of insurance and such of its additional
assets as should be necessary to make up the full légal reserves upon
ail said policies, except the mortgage securities made by E. J. Lutz;
that the Farmers' Company assumed and agreed to reinsure ail its
policies ; that the Anchor Company's board of directors adopted a
resolution to the effect that the best interests of the stockholders of
the Anchor Company required that it be dissolved, that it discontinue
its business, and that its président and secretary should make applica-
874 262 FEDERAL REPORTER
tion to the superiiiitendent of insurance for permission so to do; that
at the annual meeting of its stockholders, which commenced on Jan-
uary 5, 1915, and was adjoumed to February 4, 1915, resolutions
were unanimously passed, for which the stock formerly owned by
Shearer and Wible was voted by its holders, the agents of the Farmers'
Company, to the eflfect that the contract of sale and reinsurance of
December 11, 1914, be ratified and approved, that the company should
liquidate its afïairs, that its board of directors should take such action
as should be necessary so to do, and that it should apply to the super-
intendent of insurance for a delivery to it of the securities held by
him over and above the légal reserve; and that the Farmers' Company
first gave notice of its intention to rescind the contracts with Shearer
and Wible on January 15, 1915, and commenced its suits on March
29, 1915. Thèse facts, it must be admitted, strongly show the dispo-
sition on the part of the Farmers' Company to hold, and use for its
own benefît, ail the property of the Anchor Company, and establish
a persuasive equity in the latter's favor. But the évidence in the rec-
ord fails to prove when the Farmers' Company first received notice
of the false représentations of Shearer and Wible relative to the do-
nation notes and mortgages, and relative to the inadequacy of some
of the other securities, and a careful review of the entire évidence has
failed to convince that the Farmers' Company was barred from ail
relief in a court of equity by either lâches, waiver, or estoppel.
[9] Counsel for the Farmers' Company contend that the decrees
below may and ought to be sustained, notwithstanding its inability to
restore ail the property it received under the contract. While con-
ceding that the gênerai rule is that the rescission of contracts in equity
should not be adjudged, unless the parties may be substantially restor-
ed to their financial situations before the contracts were made, either
by the return of the property itself or a substantial équivalent therefor,
they assert that this has been or will be done under the decrees below.
They write in their brief that the return to Shearer and Wible of the
stock they held in the Anchor Company would restore to them ail of
their share of the securities of that company deposited with the treas-
urer of Kansas to obtain and secure its license to do an insurance
business in that state. Counsel for Shearer and Wible, on the other
hand, write in their brief that the Farmers' Company took over ail
the property of the Anchor Company of every kind and nature, ap-
propriated it àll to its use and benefit, retains it, and that it completely
put the Anchor Company out of business.
No évidence is cited in the brief for the Farmers' Company to the
efïect that the securities deposited by the Anchor Company to secure
or retain its license were at the time of the hearing below, or that their
proceeds were, or are now, or ever will be, available for distribution to
Shearer and Wible as stockholders of the Anchor Company if the
contracts are rescinded by the decrees of the court, and the stock
which they formerly owned in that company is reconveyed and de-
livered to them. On the other hand, there is conclusive évidence that
as long ago as February 4, 1915, the Farmers' Company, which then
owned more than 90 per cent, of the stock of the Anchor Company,
SHEARER V. FARMERS' LIPE INS. CO. 875
C262 F.i
caused the latter stockholders to adopt the resolution directing its
board of directors to discontinue its business, to take down its de-
posited securities so far as it could do so, and to liquidate its affairs,
that its business was discontinued, that its offices were closed, and its
movable property taken to the offices of the Farmers' Company in
. Denver. A careful considération of the évidence and the lack of évi-
dence on this subject in the record compels the finding that the Farm-
ers' Company has by the use of the Anchor Company and its stock
appropriated to itself ail the securities of the Anchor Company and
the exclusive benefit thereof, whether they were deposited with the
treasurer or superintendent of the state of Kansas, and that neither
they nor their proceeds are or would be available for distribution to
Shearer and Wible, if the contracts were avoided and the stock they
formerly owned in the Anchor Company were reconveyed and deliv-
ered to them, and that this stock is worthless. Moreover, if those
securities not requisite for the reserve were available or are available
for restoration, still the great value of that stock would yet be lost
to Shearer and Wible. The Anchor Company's Insurance business
cannot be restored, its policies, premiums, stockholders, are irrevocably
beyond reach, its business is gone, and it cannot be regained.
[10] Counsel for the Farmers' Company assert, and opposing coun-
sel deny, that Shearer and Wible and the Anchor Company were in-
solvent when the contracts were made and thereafter. There is no
proof in thèse cases that either of them is, or ever was, insolvent.
A corporation is not insolvent when the value of its property is far
greater than the amount of its liabilities, and it is able to pay its debts
when they mature, although the excess of the value of its property
above its liabilities may be much less than the par value of its stock;
and the finding hère is that Shearer, Wible, and the Anchor Company
were solvent.
There is no logical escape from the conclusion that neither the
Farmers' Company nor the court can do equity in either of thèse
cases by the restoration to Shearer and Wible of the stock in the
Anchor Company which they owned, because the value of that stock
when thèse contracts were made was $52,836.09, and its value now is
nothing. That value then was the value of the share of the value of
the property of the Anchor Company represented by that stock. AU
the property of the Anchor Company has been taken and appropriated
to itself by the Farmers' Company, and it cannot restore it. It
cannot bring back to that company its business, its policies, its stock-
holders, its contracts of Insurance, its premiums payable therefor, its
agents ; and the only way in which a court can grant just and équitable
decrees for the Farmers' Company in thèse cases is on the condition
that it requires that company to do justice to Shearer and Wible.
Let the decrees in thèse cases be reversed, and let decrees be ren-
dered therein in accordance with the views expressed in this opinion.
876 262 FEDERAL REPORTEE
In re ROSBNFBLD.
(Circuit Court of Appeals, Second Circuit. November 12, 1919.)
No. 14.
1. Bankbttptcy <@=414(3) — Evidence on opposition to DiscHABaE showinq
OUISSION OF LIABILITY FBOM FINANCIAL SÏATEMENT WAS UNINTENTIONAI,.
Where a bankrupt, who was illiterate, directed hls booklieeper to make
up a financial statement, and tlie bookkeeper omitted a llability wtiicli did
not appear in the books, held that, though tlie statement was fumished
one who extended crédit, évidence was insufficient to show that the bank-
rupt intentionally and willfully obtained crédit on a statement which he
knew was false, and hence discharge should not be denled.
2. Bankruptct <ê==>404(1) — Steict constbuction of act in favob or dis-
charge.
The Bankruptcy Act is very libéral toward a bankrupt as to discharge,
and, the purpose of the act being to release honest debtors from the bur-
den of thelr debt, the act, In so far as it relates to discharge, should be
given a strict construction in favor of the bankrupt.
3. Bankruptcy ®=>407(5) — False statement must be intentional to war-
rant DENIAI, OF DISCIIARGE ; "fALSE."
Under Bankruptcy Act, § 14b, subd. 3 (Comp. St. § 9598), provlding that
the bankrupt shall be discharged, unless he bas obtained money or prop-
erty on crédit upon a materlally false statement in writing, the word
"false" means more than untrue, and Implies a purpose to deceive, and so,
to prevent a discharge, the statement must be intentionally false.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, False.]
Hough, Circuit Judge, dissenting.
Appeal from the District Court of the United States for the South-
ern District of New York.
In the matter of Isaae Rosenfeld, bankrupt. Gross, Engel & Co.
filed objections and spécifications in opposition to the application for
discharge. From an order granting the discharge, they appeaL Af-
firmed.
Rosenthal & Heermance, of New York City, for appellants.
H. Howard Babcock, of New York City, for appellee.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
ROGERS, Circuit Judge. The question presented involves the right
of the bankrupt to his discharge. The bankrupt, at the time of the fil-
ing of the pétition against him, was in business as a manufacturing
retail furrier, which amounts to little more than a workman. This
work he carried on in the city of New York. He was born in Russia,
and came into this country 11 years ago, and when he was 20 years
of âge". He does not read English, and never attended school in the
United States. After working for a firm of furriers for 6 years, he
entered a partnership, and in 1913 started in business for himself . On
January 10, 1915, he made a gênerai assignment, and on March 11,
1915, a pétition in bankruptcy was filed against him. The schedules
which he fiiled showed 28 creditors and the claims of unsecured credi-
tors aggregated $3,500.
@=97ot otber cases see Eame toplc & KET-NUMBER in ail Key-Numbered Dlgests & Indezes
IN RE BOSENPELD 877
(262 P.)
[1] On the return day of the bankrupt's application for discharge,
the firm of Gross, Engel & Co. filed objections and spécifications in op-
position to the application. No other creditors made any objection to
his discharge. The claim of Gross, Engel & Co. amounts to $761.45,
and the objection alleged is that crédit was obtained upon a materially
false statement in writing made by the bankrupt on or about February
20, 1914, to the Fur Merchants' Crédit Association, of which Gross,
Engel & Co. was a member. It is said that he then made a financial
statement in which he understated his liabilities and overstated his
assets. A failure to keep proper books of account, and concealment
and mutilation of such books with intent to conceal his financial con-
dition was also included in the spécification of objections, but this last
charge was abandoned. The question whether the bankrupt is entitled
to a discharge dépends on whether or not the financial statement, above
mentioned, was materially and intentionally false, and whether or not
he obtained property from the spécification creditors on crédit induced
by the statement.
The false statement upon which the objection to the discharge is
based is the omission of an unpaid debt arising from a loan made to
the bankrupt in 1913 by one Fabricant. The matter was referred to a
spécial commissioner for examination and report. Testimony was
taken at some considérable length. The commissioner in a very care-
ful report, "made after considérable reflection," reached the conclusion
that the omission of the Fabricant loan from the statement was not
deliberate or intentional upon the part of the bankrupt, and that at the
time it was made the bookkeeper did not know of the existence of the
omitted loan. He also stated that it was not established to his satis-
faction that, in view of the dealings of the parties and the relations
existing between the bankrupt and the spécification creditors, the crédit
extended by Gross, Engel & Co. to the bankrupt was induced by the
statement above mentioned. This conclusion was reached by the com-
missioner, notwithstanding the testimony of Engel, who was in charge
of the crédits of his firm's customers, and who had testified that he
relied upon the bankrupt's statement.
The bankrupt testified that he instructed his bookkeeper to prépare a
financial statement, "just according to what the books show, what I
owe, and what people owe me, just right" ; that after the statement was
pfepared he did not read it, because he did not know how to read;
that the statement was prepared by his bookkeeper ; that he asked the
bookkeeper whether it was ail right, and was assured it was ; and that
he trusted the bookkeeper and signed it. He was asked if he had any
intention of leaving out the statement as to his debt to Fabricant, and
he replied that he had not.
The bookkeeper testified that he made out the statement, and then
showed it to Rosenf eld and asked him to sign it ; that Rosenf eld said,
"Do you know it is ail right?" and that he (the bookkeeper) replied,
"It is ail right," and he never questioned his honesty. Again the book-
keeper said:
"When I brought this paper or other papers to hlm, he didn't know any-
thing about the figures. He would say, if this is ail right, Brookman, and I
878 262 FEDERAL REPORTER
sald, Tes; that îs ail right.' If I drew a check or anythlng, he never
doubted me ; he had that confidence in me to let me make the figures out."
A careful examination of the testimony has led the majority of this
court, as it did the District Judge, and the spécial commissioner, to the
conclusion that while the statement was untrue which the bankrupt
made, and which the objecting créditer says he relied upon, neverthe-
less the omission from the statement of any mention of the debt due
to Fabricant was not due to any intention to deceive. The bookkeeper,
who made up the statement, knew nothing about the Fabricant debt.
The transaction took place before he took charge of the books, and
there was nothing on the books concerning it ; and the bankrupt sup-
posed the item was on the books, and told the bookkeeper to make up
the statement from the books. Several months after the statement was
signed the bookkeeper swears to a conversation he had with the bank-
rupt about the Fabricant debt: "I said," he testified, "you owe $2,-
000;" and he said, "I do;" and I said, "I didn't see it in the books;
it ought to be in the books ;" and he said, "Wasn't it there when you
came;" and I said, "No, it wasn't there when I came;" later on he
said, "It is carelessness ; when you came in hère on thèse premises I
had no bookkeeper ;" and he said, "With my own money I started to
do business before I opened any books; I may hâve explained it to
you to jp>ut it down ; I am not denying I owe the man anything ; so I
believe I put it down." And the bankrupt, when on the stand, was ask-
ed whether he had any intention of giving a false statement, and he
answered : "No ; it wasn't necessary for me ; I had ail the crédit I
wanted."
[2, 3] Any person who has been adjudged a bankrupt is entitled to
apply for his discharge ; and Bankruptcy Act, July 1, 1898, c. 541, §
14b, 30 Stat. 550 (Comp. St. § 9598), provides that the judge shall dis-
charge the applicant unless he has —
" • • * 3. Obtained money or property on crédit upon a materially
false statement in writing, made by him to any person or his représentative
for the purpose of obtaining crédit from such person."
When an application for the discharge is presented it may be op-
posed by a party in interest. In this case it is opposed by one from
whom it is claimed that the bankrupt obtained property upon a material-
ly false statement. That the party opposing is in this case "a party
in interest" is of course conceded. The Bankruptcy Act is very Hberal
towards the bankrupt as to his discharge; and the act in so far as it
relates to his discharge is to be given a strict construction in favor of
ihe bankrupt. The purpose of the act is to release honest debtors from
the burden of their debts.
The question then arises as to what is meant by a false statement.
Does the word "false" mean simply untrue, or does it mean willfully
and intentionally untrue ? The answer is that the word as used in this
connection means designedly untrue. Bouvier's Law Dictionary says
of the word "false" :
"Applied to the intentional act of a responsible being, it implies a purpose to
deceive."
IN EE BOSENFELD 879-
(262 F.)
Black's Law Dictionary, referring to the word "false," says that —
"In law, this word means soniething more than untrue ; it means some-
thing deslgnedly untrue and deceitful, and implies an intention to perpetrate
some treachery or fraud."
Webster's New International Dictionary defines "false représenta-
tion" as "an untrue représentation willfully made to deceive another to
his damage."
In Gilpin v. Merchants' National Bank, 165 Fed. 607, 91 C. C. A.
445, 20 L. R. A. (N. S.) 1023 (1908), the Circuit Court of Appeals
for the Third Circuit overruled the décision of the District Judge in
which he held that the word "false" in the section of the Bankruptcy
Act now under considération meant no more than "not true." The
opinion of the Circuit Court of Appeals was written by Judge Gray,
who said:
"The bankrupt, who bas made to a créditer, for the purpose of obtaining
crédit, a false statement — that is, one intentionally and knowingly untrue —
Is unworthy of the privilège of a discharge under the act, and the court wlU
act upon information brought to it of such an act by any party in interest."
In Sallies v, Johnson, 85 Conn. 17, 82, 81 Atl. 974, 976 (Ann. Cas.
1913A, 386), it is said:
" 'False' may mean untrue, or it may mean deslgnedly untrue, implylng an
Intention to deceive. Wlien applied to the représentations of one inducing an
act to another's injury it implies a purpose to deceive."
And see Wood v. State, 48 Ga. 192, 297, 15 Am. Rep. 664; State
V. Smith, 63 Vt. 201, 210, 22 Atl. 604; Williams v. Territory, 13 Ariz.
27, 108 Pac. 243, 27 L. R. A. (N. S.) 1032; United States v. Twenty
Boxes of Cheese (D. C.) 163 Fed. 369, 371 ; Remington on Bankruptcy
(2d Ed.) vol. 3, § 2560.
In view of the conclusion, the majority of the court has reached that
the omission from the financial statement made in December, 1915, of
the Fabricant loan made in January, 1913, was due to the bankrupt's
inability to read the statement prepared for him by his bookkeeper,
and not to any intention to deceive, the order granting the discharge is
affirmed.
HOUGH, Circuit Judge (dissenting). The law suggested by this
record requires little comment. Falsity of statement, barring dis-
charge, must be intentional untruth, as we hâve already held. In re
Kerner, 250 Fed. 993, 163 C. C. A. 243.
The facts are rather interesting, for the bankrupt reveals himself
as that not unknown commercial danger — an extremely intelligent man
of no éducation, who perfectly knows how to deceive, and pleads his
illiteracy as an excuse when found out. His présent success is re-
grettable, and I dissent.
880 262 FEDKRAL REPORTER
AMMON & PBRSON v. NAEEAGANSETT DAIKY CO., Umlted.
NARRAGANSETT DAIRY CO., Limited, v. AMMON & PEESON.
(Circuit Court of Appeals, First Circuit. November 18, 1919.)
Nos. 1404, 1405.
1. TBADE-MAÎEKS and TEADE-NAMES <®=331 EXTENT OF KIGHTS ACQUIRED.
Ttie adoption of a trade-mark does not, at common law, project the rjght
of protection in advance of tlie extension of tlie trade, or operate as a
claim of territorial rights over areas Into wliich it may thereafter be
deemed désirable to extend the trade.
2. Tbade-marks and teade-names <g=»31 — Users in différent tereitobt
EACH ENTITLED TO PROTECTION.
Wliere two users of tlie same or a similar trade-mark occupy essen-
tially différent territory, each is entitled to its exclusive use in its own
territory as against the other, regardless of whlch was the earlier user.
3. Tbade-maeks and tbade-names <S=»35 — Sale of tanoible peopeety doe*
not cabby trade-mark.
Sale by a collector of the plant, product, and materlal of an oleomar-
garine manufacturer, forfelted under Act Aug. 2, 1886, § 17 (Comp. St. §
6229), does not carry the business, good will, or trade-mark.
4. Tbade-marks and teade-names <@=53S — Abandonment; adoption bt
ANOTHEE.
That one of two users of the same trade-mark had the rlght to its use
In its own territory does not entitle a third party, on the abandonment of
its business by such user, to adopt Its trade-mark as against the other
user, which is extending Its trade into such territory.
5. Tbade-marks and teade-names iS=s>98 — Infeingement; becovery of
PROFITS.
To entitle the owner of a trade-mark to recover profits from an In-
frlnger, It has the burden to prove that défendant has made profits at-
tributable In whole or in part to its use of the trade-mark.
Appeals from the District Court of the United States for the Dis-
trict of Rhode Island; Arthur L. Brown, Judge.
Suit in equity by Ammon & Person, a corporation, against the
Narragansett Dairy Company, Limited. From the decree, both par-
ties appeal. Affirmed.
For opinions below, see 252 Fed. 276 ; 254 Fed. 208.
George J. Hesselman, of New York City (Eliot G. Parkhurst and
Edwards & Angell, ail of Providence, R. I., and Pennie, Davis, Marvin
& Edmonds, of New York City, on the hrief), for Ammon & Person.
Alexander Churchill, of Providence, R. I. (Wilson, Churchill &
Curtis, of Providence, R. I., on the brief), for Narragansett Dairy
Co., Limited.
Before BINGPIAM, JOHNSON, and ANDERSON, Circuit
Judges.
ANDERSON, Circuit Judge. This is a trade-mark infringement
case. The plaintifï is a wholesale dealer in oleomargarine, organized
as a corporation under the laws of New Jersey, with headquarters at
Jersey City. It and its predecessors in title hâve used since 1891 the
trade-mark "Queen of the West" on oleomargarine sold by them. In
\=>¥ot otlier cases Bee same topic & K£:y-NUMBER in ail Key-Numbered Dieests & Indexer
AMMON & PEBSON V. NAEEAGANSEÏT DAIEY CO. 881
(262 F.)
this name the word "Queen" is obviously the dominant part, as the
court below held.
[1] The défendant is a Rhode Island corporation, organized in Au-
gust, 1915. It manufactures and sells oleomargarine at Providence, R.
I. The Narragansett Dairy Company (not the défendant) applied the
trade-name "Queen" to oleomargarine manufactured and sold by
it at Providence during the period 1909 to August, 1915. On August
31, 1915, the oleomargarine and other tangible assets of the old
Narragansett Company were seized by the collector of internai rev-
enue, under a warrant of distraint for nonpayment of taxes, and sold.
This property was bought in by one Matthews, and transferred on
the same date to the défendant Company, which at once began
and has continued the manufacture of oleomargarine at the same place,
selling it under the trade-mark "Queen." While the plaintifif has reg-
istered "Queen" as its trade-marlc, -we agrée with the court below
that the case must be determined on common-law principles, and that
no rights now in question hâve been acquired out of registration.
The earlier Narragansett Company adopted the use of the word
"Queen" in good faith and with no intent to infringe upon any rights
of the plaintiff. Both the plaintiff and the old company sold their
goods as their own to their own customers. There is no évidence of
any confusion of goods or of any unfair compétition.
It thus appears that up to September, 1915, two concerns were
carrying on the same gênerai line of business, partly in the same
territory, each operating under trade-marks likely at some time to
confuse the purchasing public, but each in fact reaching its own
customers, and without any real confusion in the trade.
The District Court held that "the plaintiff's right to an injunction
is not free from doubt, but seems justified in order to prevent confu-
sion likely to arise in the natural expansion of trade. * * * The
plaintiff's equity rests upon its showing a prior use of the trade-mark
'Queen of the West' and of the trade-name 'Queen.' "
The court below also held that it was "unnecessary to détermine
whether the défendant has succeeded to the rights, if any, of the
earlier Narragansett Company." An injunction was granted, but the
plaintiff's prayer for an acrt)unting for profits and damages was de-
nied. Both parties appealed.
The décision of the District Court was made on December 12, 1918.
On December 9, 1918, the Suprême Court had decided the case of
United Drug Co. v. Rectanus Co., 248 U. S. 90, 39 Sup. Ct. 48, 63
L. Ed. 141, with a most illuminating opinion by Mr. Justice Pitney.
This case was not cited by the District Court, and would not, in the
natural course of events, be in print or otherwise available for its
guidance.
The legally significant facts in the Rectanus Case are, we think, sub-
stantially on ail fours with the case at bar. In that case, it appeared
that as early as 1877 Mrs. Régis, at Haverhill, Mass., had adopted the
word "Rex" as a trade-mark for certain medicines prepared by her.
Thèse medicines were thereafter sold by her and her successor in title,
the United Drug Company, under this trade-mark in Massachusetts
262 F.— 56
882 262 FEDERAL REPORTEE
and neighboring states. In 1883, Rectanus, a druggist of Louisville,
Ky., applied the same name "Rex" to certain medicines prepared and
sold by him in Louisville, and later in other parts of Kentucky. In
the course of the expansion of the trade of the United Drug Company,
the two concerns, using the same trade-name for competing products,
came into collision in Kentucky. The plaintif! claimed an exclusive
right on the ground of prior use. The District Court sustained the
plaintifif's contention. 206 Fed. 570. The Court of Appeals reversed
the District Court and ordered the bill dismisesd. 226 Fed. 545, 141
C. C. A. 301. The decree of the appellate court was afBrmed by the
Suprême Court. The principles held controlling in that case are thus
stated, 248 U. S. 96, 39 Sup. Ct. 50, 63 L. Ed. 141 :
"The entire argument for the petltioner is summed up In the contention
that whenever the first user o£ a trade-mark bas been reasonably diligent In
extendlng the territory of hls trade, and as a resuit of such extension has In
good falth corne Into compétition with a later user of the same mark, who In
equal good faltb has extended his trade locally before invasion of his field
by the flrst user, so that finally it comes to pass that the rival traders are
offering compétitive merchandlse in a common market under the same trade-
mark, the later user should be enjoîned at the suit of the prlor adopter, even
though the latter be the last to enter the compétitive fleld and the former
hâve already established a trade there. • • •
"The asserted doctrine is based upon the fundamental error of supposing
that a trade-mark right is a right In gross or at large, like a statutory copy-
right or a patent for an invention, to elther of which, in truth, It has little
or no analogy. Canal Co. v. Clark, 13 Wall. 311, 322 [20 L. Ed. 581] ; McLean
V. Fleming, 96 U. S. 245, 254 [24 L. Ed. 828]. There Is no such thing as prop-
erty in a trade-mark except as a right appurtenant to an established business
or trade In connection with which the mark is employed. The law of trade-
marks is but a part of the broader law of unfair compétition ; the right to
a particular mark grows out of its use, not its mère adoption ; its functlon
Is simply to designate the goods as the product of a particular trader and to
protect bis. good will against the sale of another's product as his; and It Is
not the subject of property except in connection with an existlng business.
Hanover Milling Oo. v. Metcalf, 240 U. S. 403, 412-414 [36 Sup. a. 35T, 60
1j. Ed. 718].
"The owner of a trade-mark may not, like the proprietor of a patented In-
vention, make a négative and merely prohibitive use of it as a monopoly. See
United States v. Bell Téléphone Co., 167 TJ. S. 224, 250 [17 Sup. Ct. 809, 42
II. Ed. 144] ; Bernent v. National Harrow Co., 186 U. S. 70, 90 [22 Sup. Ct. 747,
46 li. Ed. 1058] ; Paper Bag Patent Case, 210 TJ. S. 405, 424 [28 Sup. Ct. 748, 52
L. Ed. 1122].
"In truth, a trade-mark confers no monopoly whatever in a proper sensé,
but is merely a convenient means for facilitating the protection of one's good
Will la trade by placing a distingulshing mark or symbol — a commercial signa-
ture — upon the merchandlse or the package in which it is sold.
"It results that the adoption of a trade-mark does not, at least In the ab-
sence of some valld législation enacted for the purpose, project the right
of protection in advance of the extension of the trade, or operate as a claim
of territorial rights over areas into which it thereafter may be deemed désir-
able to extend the trade."
[2] We think thèse principles are applicable and must control the
respective rights of the plaintiff and of the earlier Narragansett Dairy
Company. While it is true that both thèse concerns were operating to
some degree in the same territory, and that their markets were not,
in the territorial sensé, "remote," yet on this record we must find
that neither concern had to any substantial degree invaded the other
AMMON & PERSON V. NAERAGANSETT DAIRY CO 883
(262 F.)
concern's commercial or market territory. As already pointed out,
the markets — the customers — of the two concerns were essentially
separate. The plaintiiï had net occupied the oleomargarine market in
the territory in which the earlier Narragansett Dairy Company was,
in good faith and without knowledge of the plaintiff's trade-mark,
manufacturing and selling its product under the trade-name "Queen."
It follows, we think, that if the case at bar were to be determined on
the basis of the status obtaining between the plaintiff and the earlier
Narragansett Dairy Company, the bill would hâve to be dismissed.
In other words, in order to prevail, the plaintiff must now show that
it has greater rights against this défendant than it had against the
earlier Narragansett Company. It was not entitled, we think, to
prevent the earlier company from continuing the use of the name
"Queen" in its own commercial territory.
[3] This conclusion makes it necessary to consider and détermine
what the court below held it unnecessary to détermine, to wit:
"Whether the défendant has succeeded to the rights, if any, of the
earlier Narragansett Company." If the défendant has so succeeded,
we think, under the Rectanus Case, supra, the bill should be dismissed.
But on considération of the record we think it clear that the défendant
has not succeeded to the rights of the earlier Narragansett Company
to use the trade-mark "Queen"; and, so holding, we reach the same
resuit reached by the court below. The salient facts bearing on this
point may be briefly outlined.
The statute under which the collector of internai revenue proceeded
against the défendant contains no mention of trade-marks, good will,
going concern value, or any other sort of intangible property. It pro-
vides that the delinquent taxpayer "shall forfeit the factory and man-
ufacturing apparatus used by him, and ail oleomargarine and ail raw
material for the production of oleomargarine found in the factory and
on the factory premises, and shall be fined," etc. Act Aug. 2, 1886,
c. 840, § 17, 24 Stat. 212 (Comp. St. § 6229). As this is a pénal
statute, it cannot be extended by construction. No attempt was made
by the collector to sell any trade-mark, good will, or other intangible
assets. The schedule of property sold by the collector to Matthews
and transferred by Matthews to the new corporation contains no
mention of trade-mark, good will, or other intangible property. The
old corporation has not been dissolved. It is, so far as this record
shows, still legally alive. The sale of its tangible property simply
killed its business; and it abandoned thereafter ail attempts to
préserve its good will, including any right in its trade-marks previous-
ly used. The case is in thèse respects like the Jaysee Corset Co. Case
(D. C.) 201 Fed. 179, where, subséquent to the sale of the chattels
of a bankrupt, the trustée in bankruptcy attempted to sell the good
will and trade-marks of the bankrupt's former business. Judge
Hough said :
"In due course of tlme the trustée sold the goods and chattels of the bank-
rupt, but made no attempt to sell the good will of the bankrupt's business,
nor the trade-mark ; nor did he sell the business as a going concern. The effect
of thèse proceedings by the trustée was to kill the good will and destroy the
884 262 FEDERAL REPORTER
trade-mark ; for It is admltted that tWs partlcular kînd of trade-mark can-
not pass, except In conjunction with the good will of a business. What bas
become of the bankrupt's business? It stopped by bankruptcy, was kllled by
the trustee's sale, and the présent Intended action on the part of the trustée
is an attempt to galvanize it Into life agaln, something which cannot be done."
This pungent statement is really nothing but an assertion of the
same doctrine laid down by Mr. Justice Pitney in United Drug Co. v.
Rectanus, 248 U. S. 97, 39 Sup. Ct. 50, 63 L. Ed. 141 :
"There is no such thlng as property In a trade-mark, exeept as a right ap-
purtenant to an established business or trade in connection with which the
mark is employed."
Where the business goes, the trade-mark goes, whether in Hfe or
to death.
[4] Indeed, defendant's counsel make no serious attempt to show
that the défendant is the légal successor of the earlier Narragansett
Dairy Company, or that it in any way derived any légal title to the
trade-mark "Queen" by reason of its purchase of the earlier com-
pany's tangible assets and assumption of the contracts outstanding
at the time of the sale by the collector of internai revenue. Counsel
base their clalm rather on the ground that the plaintiff's failure to
enforce as against the earlier company an exclusive right to this
trade-mark permitted the défendant or any other newcomer to use the
infringing name. This is not the sound view. The plaintiff, as the
original adopter of the trade-mark "Queen," or in which "Queen"
was the dominant word, would hâve been entitled to enjoin any other
later infringing user of that word, had it not been for the equal equity
accruing to the earlier Narragansett Company out of its adoption, in
good faith, of essentially the same name, and continued use thereof
in a market essentially separate from that of the plaintiff. The failure
of the plaintiff prior to 1909 to occupy exclusively the field subse-
quently occupied in part by the earlier Narragansett Company did not,
when tliat earlier company abandoned its business, open the door to
the défendant or to any other volunteer to use the plaintiff's trade-
mark, or any colorable imitation thereof, at least in a territory then
in part occupied by the plaintiff and a field in which its business was
expanding.
We reach, therefore, the same conclusion as to the plaintiff's right
to an injunction reached by the court below; but, guided by the déci-
sion of the Suprême Court in the Rectanus Case, on différent grounds.
[5] So far as damages and profits are concerned, we agrée, also,
with the District Court that the burden is upon the plaintiff to prove
that the défendant has made profits attributable, in whole or in part,
to its trade-mark. Westinghouse Mfg. Co. v. Wagner Mfg. Co., 225
U. S. 604, 622, 32 Sup. Ct. 691, 56 L. Ed. 1222, 41 L. R. A. (N. S.)
653; Ludington Novelty Co. v. Léonard, 127 Fed. 155, 62 C. C. A.
269; Keystone Type Foundry v. Portland Pub. Co. (C. C.) 180
Fed. 301. This burden was not sustained.
It is true that the plaintiff promptly notified the défendant in Sep-
tember, 1915, that its use of the word "Queen" was an infringement
upon the plaintiff's rights, and that the défendant thereafter wrong-
SEEEACH V. UNITED STATES 885
(2«2 F.>
f.ully persisted in this infringing use. But, as the court below found,
there was no évidence that any mistake was ever made by purchasers,
and there was affirmative évidence that no mistake was made to the
knowledge of the defendant's officiais. Moreover, the goods of the
two concerns were to some degree distinguished by cartons, labels, and
other markings, notwith standing the common use of the word "Queen"
as a trade-mark. The findings of the court below, that "the évidence
fails to show that the défendant has adopted the word 'Queen' with
any intention of deceiving the public, or of appropriating the plain-
tiff's good will or trade réputation," and "that the word 'Queen' was
used by the défendant apparently in good faith and in reliance upon its
former use by the earlier company which had used it since 1909," were
plainly warranted by the évidence and dispose of any doubt otherwise
possibly arising as to the plaintiflf's right to an accounting for dam-
ages and profits.
The decree of the District Court is affirmed, and neither party re-
covers costs of appeal.
SEEBACH V. UNITED STATES.
(Circuit Court of Appeals, Eighth Circuit. Noveraber 15, 1919.)
No. 5360.
1. CONSTITUTIONAL LAW «©=390 — RiGHT OF FKEE SPEECH NOT A BIQHT TO HAMPER
WAE.
The ooiiRtltiitional guaranty of right of freedom of speech does not
warrant one In exercisiug sucli right in timo of war in such a manner as
to destroy the nation or hamper military opérations.
2. ARMT AND NAVY ©=40 VIOLATION OF ESPIONAGB ACT.
Stateraents made by accused during tlie World War attacking the
draft, and siiggesting to registrants that others were going to refuse to go
to war, together with the application of insulting epithets to one who
had enlisted for military service, amount to violations of Espionage
Act, § 3 (Comp. St. 1918, § 10212c), being attempts to cause insubordina-
tion, disloyalty, and refusai of duty in the military forces.
3. Criminal law <S=3ll59(2, 3, 4) — Considération oii- évidence on appeal.
On writ of error to review a conviction, the appellate court will not
weigh couflicting évidence or détermine credibility of witnesses, and win
uphold the verdict, if supported by substantial évidence.
4. Cbtminai, law <g=3ll59(2) — Impeachment ob verdict by reoommendation
TO I.ENIENCY.
That the .1ury, which conviçted accused of violating Espionage Act, § 3
(Comp. St. 1918, § 10212c), recommended leniency, will not eatablish on
appeal that there was no substantial évidence to support the conviction.
5. Witnesses <S=3,337(fJ) — Impeachment as to otiiek orraNSES.
In a prosecution for violating Espionage Act, § 3 (Comp. St. 1918, S
10212c), where défendant denied having made statements siniilar to thosè
set fortli in the indietment, évidence of such statements was admissible as
impeaching évidence.
6. Crimi.nal law <3::3371(1) — Evidence of otuer offenses as showing intekt.
In a prosecution under Espionage Act, § 3 (Comp. St. 1918, § 10212c)i
where it was eontended that accused made statements with intent to cause
insubordination and refusai of duty in the military forces, évidence of
similar statements was admissible In chief on the question of intent.
e=jFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indexe
886 262 FBDEEAL REPORTEE
* Ckiminal iaw <S=»684 — Admission on eebuttal of évidence also admissi-
ble IN CHIEF.
Wliere evdence was admissible in chief as well as in rebuttal, the fact
that it was admitted in rebuttal is not réversible error.
8. ABMY and NAVY ©=>40 — CAUSING INSUBOEDINATION AMONG DEAFT BEOI3-
TRANTS ; "MILITAEY FORCES."
Those who had registered under the Draft Act of May 18, 1917, are
part Of the "mllitary forces" of the United States, withln Espionage Act, S
3 (Comp. St. 1918, § 10212c), denouncing the offense of attempt to cause
insubordination and refusai of duty in the military forces.
[Ed. Note. — For other définitions, see Words and Phrases, Military
Forces.]
9. Abmy and NAVY ©=540 — Attempt to cause insubobdination.
A charge in a prosecutlon for attempting to cause insubordination, etc.,
of the military forces in violation of Espionage Act, § 3 (Comp. St. 1918,
§ 10212c), which used the term "intent to cause insubordination," etc., as
the équivalent of willfulness, Is not objectionable.
10. Cbiminal law ■®=3304(2), 814(2) — Judicial notice.
In a prosecution for violation of Espionage Act, § 3 (Comp. St. 1918, §
10212c), the court may take judicial notice that the United States was at
war durlng the times covered by the indictment, and may so charge the
jury.
11. Cbiminal law <S=>767 — Instbuctions as to application of law to facts.
Where the évidence upon any issue is clear and uncontradicted, pre-
senting a question of law, the court may, without usurping the functions
of the jury, instruct them as to the principles applicable to the case made
by such évidence, and this rule applies especially to facts judicially
noticed.
In Error to the District Court of the United States for the District
of Minnesota; Wilbur F. Booth, Judge.
John C. Seebach was convicted of violating the Espionage Act of
Jtine 15, 1917, and he brings error. Affirmed.
H. V. Mercer, of Minneapolis, Minn. (W. N. Carroll, of Minneapo-
lis, Minn., and Arthur E. Arntson, of Red Wing, Minn., on the brief ),
for plaintiff in error.
Alfred Jaques, U. S. Atty., of Duluth, Minn.
Before HOOK and CARLAND, Circuit Judges, and YOUMANS,
District Judge.
HOOK, Circuit Judge. Seebach was convicted of willful attempts
to cause insubordination, disloyalty, and refusai of duty in the mihtary
forces of the United States when the United States was at war, con-
trary to section 3, tit. 1, of the Espionage Act of June 15, 1917 (40
Stat. 217, c. 30 [Comp. St. 1918, § 10212c] ). The three counts of the
indictment, under each of which there was a conviction, severally
charged that the attempts were made by statements, counsel, and ad-
vice to three young men who had theretofore registered under the
Draft Act of May 18, 1917 (40 Stat. 76, c. 15), as follows:
To Harry Oison — "I do not thiuk that the draft is right, to take the young
men from this country and send them to another country, to protect the land
of England and France. Just think of sendlng the young men of this country
to protect another country. They will go down to the bottom of the sea
2O,0O0 at a tlme. I would rather see my son Cari shot than go to war against
(g=3For other cases see same topic & KBY-NUMBER in ail Key-Numbered Dlgests &, Indexes
SEEBACH V. UNITED STATES 887
(262 F.)
GermaBy. How did y ou come out in the draft? Are y ou golng, if you are
called?"
To Alf G. Nelson — "Do you know that a lot of the boys (meaning soldler
boys) are going to refuse to go to France? The government cannot compel
them to go."
ïo Henry D. Reltman, summarized from a conversation — "Are you the
Reltman lioy that enllsted? What did you do that for? Don't you know you
are a danm fool to do that? Don't you know Germany Is going to win thia
war? Germany has enough resources and men to win the war. (Keltman:
"Why, if you are so strong for Germany, why don't you move over there?")
No ; no ; that Is not it. I am for America. I hope every American citizen
who has bought Russian bonds will lose every cent he invested."
[1, 2] The right of free speech in time of war and the tendency of
words spoken or written to affect injuriously the military préparations
and opérations of the government hâve been so often considered by the
courts that an extended discussion of the sufficiency of the présent in-
dictment is unnecessary. Time, place, and circumstance hâve every-
where much to do with the quality of human conduct, and this is true
of the exercise of rights under the Constitution. The Constitution con-
tains no invitation to destroy the fundamental structure of the govern-
ment, to frustrate its duly ordered opérations, or to lend aid to the
public enemies. When the nation is at war, its very existence is in the
scales, and the freedom of action and speech of the individual is quali-
fîed accordingly. If this were not so, each one might détermine for
himself the validity or force of public statutes for the gênerai safety ;
there could even be no such crime as treason. The tendency of the
language above quoted, when addressed to men in the military service
during the time mentioned, to cause insubordination, disloyalty, and
refusai of duty, is obvions. An indictment which states that the lan-
guage was uttered in willful attempt to cause that resuit charges an
offense against the statu te.
[3, 4] Much of the argument of counsel is addressed to the évi-
dence. The question at the trial o£ a criminal case is whether the
guilt of the accused has been shown beyond a reasonable doubt. Up-
on conviction and appeal it is whether the verdict below was supported
by substantial évidence. Humes v. United States, 170 U. S. 210, 18
Sup. Ct. 602, 42 L. Ed. 1011. The appellate court does not weigh con-
(licting testimony or the credibility of witnesses. The verdict hère
clearly stands this test. The recommendation of leniency by the jury
is argued as impairing the effect of the évidence against the accused.
But, if we could consider it, such a recommendation would seem to
proceed upon the assumption of guilt, not of innocence. We cannot
know what other considérations induced it, nor say that the discrétion
of the trial court invoked by the recommendation was not duly exer-
cised.
[5-7] Evidence that the accused made statements to other persons
similar to those set forth in the indictment was received in rebuttal,
after he had denied them. It was proper for impeachment. Further-
more the évidence would hâve been admissible in chief to show intent.
Exchange Bank v. Moss, 79 C. C. A. 278, 149 Fed. 340. Being rele-
vant for that purpose, admission in rebuttal instead of in chief was not
888 262 FEDERAL REPORTER
réversible error. Goldsby v. United States, 160 U. S. 70, 16 Sup. Ct.
216, 40 L. Ed. 343.
[8-11] It appeared without dispute or contradiction at the trial that
the three young men named in the indictment had registered in accord-
ance with the Draft Act of May 18, 1917. The trial proceeded upon
that assumption, and the court in charging the jury said that they were
therefore in the military forces of the United States, within the mean-
ing of section 3 of the Espionage Act. An exception was taken to this
conclusion, but it was correct. See Debs v. United States (March 10,
1919) 249 U. S. 211, 39 Sup. Ct. 252, 63 L. Ed. 566. Though the
above was the only exception taken, counsel extends the argument to
other parts of the charge. Passing the failure to direct the attention
of the trial court to them, we see no merit in the criticisms. The court
correctly defined the term "willfully" as used in the Espionage Act.
Elsewhere in the charge it used intent to cause insubordination, etc.,
as équivalent to willfulness. This was right. Chicago, B. & Q. R. Co.
V. United States, 114 C. C. A. 334,_ 194 Fed. 349. It is difficult to see
how the attempt was not willful, if the resuit was intended and the
nieans employed reasonably calculated to attain it.
Complaint is made that the court took judicial notice that the United
States was at war during the times covered by the indictment. So far
as judicial notice is concerned, see United States v. Hamburg- Ameri-
can Co., 239 U. S. 467, 36 Sup. Ct. 212, 60 L. Ed. 387 ; Louisville
Bridge Co. v. United States, 242 U. S. 409, 37 Sup. Ct. 158, 61 L. Ed.
395 ; Oetjen v. Central Leather Co., 246 U. S. 297, 38 Sup. Ct. 309,
62 L. Ed. 726. Judicial notice having been properly taken of a fact
not embracing the entire issue made by the plea of not guilty, it was
not necessary to submit it to the décision of the jury. In effect it be-
came a matter of law for the court to instruct them.
"It has long been the settled doctrine of this court that the évidence before
the jury, if clear and uncontradicted upon any issue made by the parties, pre-
sented a question of law, in respect of which the court could, without usurp-
ing the tunctions of the jury, instruct them as to the prlnclples applicable to
the case made by such évidence." Bosen v. United States, 161 U. S. 29, 16
Sup. Ct. 434, 480, 40 L. Ed. 606.
This especially applies to facts judicially noticed. Nothing more in
the case requires attention.
The sentence is affirmed.
UNITED STEEL CO. V. CASET 8*9
C262 F.^
UNITED STEEL CO. v. CASEY et al.
(Circuit Court of Appeals, Slxth Circuit. February 13, 1920.)
No. 3302.
L CONTEACTS ■®=>232(4) — PEO VISION AS TO EXTBAS DID NOT PEOHIBIT OBAL
MODIFICATION.
A provision, in a contract for excavating, grading, back-fiUlng, and con-
creting, that no extras would be allowed without an understanding and
written order, did not prohibit the making of an oral contract ebanging
the compensation to be paid for tbe work and materlal covered by the
written contract, but was a fact to be considered by tbe jury, wlth évi-
dence tendlng to establish the oral contract.
2. Evidence <3=>596(3) — Oral modification of contbact may be established
bt simpi.e preponderance.
An oral modification of a written contract may be established by a pré-
pondérance of the évidence, and need not be established by clear and con-
vincing proofs.
3. CoNTKACTS <@=»237(2) — Modification of contract suppobted bt considér-
ation, WIIEBE DEFENDANT HAD DELAYED AND EMBABRASSED PLAINTIFF IN
ITS PERFORMANCE.
Where défendant made changes In the location of the work, and failed
to fumish plana for part of the work of excavating, etc., and underesti-
mated the amount of excavation, thus delayiug plaintiff In the perform-
ance of the contract, and necessltating the doing of a large part of tlie
work in the winter season, there was sufflcient considération for an oral
contract to pay plaintifC the reasonable value of Uie work, instead of the
unit priées fixed by the written contract for the work, even though plain-
tiff did not specifically waive daims for damages from such delays.
4. CoNTRACTs <S=237(2) — Modification as to peice foe work supported by
CONSIDERATION, WHEEE CHABACTEE OF WORK WAS MISREPEESENTED THOUGH
IN GOOD FAITH.
Where, in the negotiations for a contract for excavation, etc., défend-
ant raisrepresented the character of the soil to be excavated, though the
représentations were made in good faith, there was a sufficient considéra-
tion for an oral contract fixing a différent priée for that part of the work
than that prescribed in the written contract covering the work.
In Error to the District Court of the United States for the Eastern
Division of the Northern District of Ohio; D. C. Westenhaver,
Judge.
Action by John F. Casey and anotlier, doing business as the John
F. Casey Company against the United Steel Company. Judgment for
plaintiffs, and défendant brings error. Affîrmed.
H. H. McKeehan, of Cleveland, Ohio, and John H. Fimple, of
Canton, Ohio, for plaintiff in error.
Paul J. Bickel and W. C. Boyle, both of Cleveland, Ohio, for de-
fendants in error.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
DONAHUE, Circuit Judge. On the 4th day of September, 1915,
the United Steel Company entered into a contract in w^riting with the
John F. Casey Company, by the terms of which the latter company
agreed to do certain excavating, grading, back-filling, and concreting
at fixed and defînite priées per cubic yard. This contract was signed
(gssFor other cases see same toplc & KBY-NUMBEIR lu ail Ker-Numbered Dlgesta & Indexes
890 262 FEDERAL REPORTER
on the part of the United Steel Company by S. R. Smythe, engineer,
and on the part of the Casey Company by John F. Casey.
The Casey Company completed this contract September 23, 1916,
and later commenced an action against the Steel Company to recover
$1 12,295.99 for and on account of wOrk and labor perf ormed and ma-
terial furnished. It is admitted that, based upon the unit priées named
in the writ'ten contract, there was then a balance due the Casey Com-
pany from the Steel Company of approximately $12,000. The Steel
Company denied that the Casey Company was entitled to recover this
balance, by reason of the f act that it had failed to complète the work
at the time specified in the contract; but there is now no longer a
serions dispute in référence to this amount.
The real question in dispute is the claim of the Casey Company
that on or about the 22d day of November, 1915, the Steel Company
agreed with it that the unit priées named in the written contract should
not be the measure of compensation for the work then or thereafter
to be donc, but, on the contrary, that the Steel Company would
pay the Casey Company, for the work performed and material fur-
nished, the fair and reasonable value thereof.
The Casey Company daims that the fair and reasonable value of the
material furnished and the work done by it exceeds by about $100,000
the amount that would be due it, if calculated upon the unit price fiixed
in the contract. The Steel Company in its answer denied that any
oral agreement had been made changing the prices per unit fixed in
the written contract, and in its cross-petition asks damages for $500,-
000 for failure to complète the work without delay and in the quickest
possible time, as provided in the contract. The jury returned a ver-
dict against the Steel Company for the sum of $68,831.56, including the
amount of $12,261.73, upon which verdict a judgment was rendered
accordingly. This proceeding in error is prosecuted to reverse that
judgment.
It is contended on the part of the plaintiflf in error that there was no
considération for the alleged oral promise of the Steel Company to
pay the Casey Company a fair and reasonable amount for material
to be furnished, that the court erred in charging the jury that a pré-
pondérance of the évidence would be sufficient to warrant the finding
that the written contract was orally modified, and that the verdict
of the jury finding in favor of the plaintiff upon that issue is not
sustained by clear and convincing proofs.
[1] Whether the oral contract was made as pleaded in the pétition,
by the terms of which the Steel Company agreed to pay the Casey
Company the fair and reasonable value of the work done and material
furnished by it, instead of the unit price named in the written contract,
is purely a question of fact for the jury. The correctness of this
verdict in this particular involves the weight of the évidence, which
this court will not consider, except in connection with the degree of
proof required to establish such oral contract, the terms of which
differ materially in a very important particular from the terms of the
written one. The provision in the contract that "no extras will be con-
sidered or allowed in connection with this contract, without first hav-
UNITED STEEL CO. V. CASEY 891
C262 F.J
ing an understanding and written order between John F. Casey Com-
pany and the United Steel Company," does not in terms prohibit the
making of an oral contract changing the compensation to be paid for
the work and material actually covered by the written contract, but it
does emphasize the fact'that at the time this contract was executed
it was the purpose and intention of the parties that the rights and lia-
bilities of each should be measured and determined by its terms, at
least as to the extent of the work to be donc and the quantity of
material to be furnished. While this provision applied only to extra
material and labor not specified or included in the contract, never-
theless it was a fact to be considered by the jury in connection with the
évidence tending to establish an oral contract, but in no wise control-
ling the détermination of that issue.
[2] The plaintiff avers a new and distinct contract as to price, not in
writing, made some months after the original written contract was
made; nevertheless we know of no rule of law or évidence that re-
quires an oral contract, or an oral modification of a written contract,
to be established by clear and convincing proofs. On the contrary,
the authorities seem to be unanimous that such contracts may be
established by a prépondérance of the évidence. Jones, Stranathan &
Co. V. Greaves, 26 Ohio St. 2, 20 Am. Rep. 752 ; Lyon v. Fleahmann,
34 Ohio St. 151-155; Shaul v. Norman, 34 Ohio St. 157; Bell v.
McGinness, 40 Ohio St. 204, 48 Am. Rep. 673 ; Achenbach v. Stod-
dard, 253 Pa. 338, 98 Atl. 604; Piatt's Administrator v. U. S.. 89
U. S. (22 Wall.) 496, 506, 22 L. Ed. 858.
The case of Ashley v. Henahan, 56 Ohio St. 559, 47 N. E. 573, in-
volved a claim by the contractor for extra work donc and material
furnished in défiance of the express provision of the written contract
that he would.make no such claim except upon a written order from
the architect. The other cases cited by counsel for plaintiff in error
involve like questions, except the case of Hasler v. West India
Steamship Co., 212 Fed. 862, 129 C. C. A. 382, in which case there was
no claim made that a new oral contract, changing or modifying the
terms of a written contract, had been made; but, on the contrary,
the plaintiff claimed that the terms of the contract as written had
been orally waived by agents of the other contracting party, and this
without any considération whatever paid or agreed to be paid by
the party in default.
We are, therefore, of the opinion that the trial court did not err
in its charge to the jury touching the degree of proof required to es-
tablish an oral modification of the terms of a written contract.
[3] The more important question, perhaps, is the claim that there
is no considération for the oral agreement. There is évidence in this
record that prior to the time it is claimed this oral contract was made,
cmd after the Casey Company had started to put its machinery in place,
it was notified by telegram from Mr. Smythe, representing the Steel
Company, that it had changed the location of the steel plant three
hundred feet further east than as first located, and commanding him
to stop ail work at once in connection with érection of equipment and
cable work; that this change of location necessitated the making of
892 262 FEDERAL REPORTEE
a new fill, during ail of which time the Casey Company was compelled
to suspend opérations; that after the Casey Company had relaid its
tracks it was informed by the Steel Company that the' change in
location was 316'/io feet, instead of 300 feet, and again the track
had to be removed and placed still further east. The actual cost of
thèse changes were paid by the Steel Company, but the Casey Com-
pany was delayed at least three weeks thereby.
There is also évidence in this record that the Steel Company failed
and neglected to furnish plans for a material part of the work to be
done ; that the failure to do this, not only hindered and embarrassed
the contractor in doing his work, but also increased the cost of opéra-
tion; that thèse delays caused by the Steel Company prevented the
Casey Company f rom completing their contract in the fall of the year,
when the weather was more favorable for that character of work.
There is also évidence to the effect that Mr. Smythe, representing the
Steel Company, had represented to Mr. Casey that the concrète would
be about 15,000 cubic yards, and the excavation from 120,000 to 130,-
000 cubic yards, while the actual amount of excavation was 217,921
cubic yards and of concrète 24,366 cubic yards, an increase of nearly
double the quantity estimated by the Steel Company's engineer; that
under ordinary circumstances this, perhaps, would bave been to the
advantage of the Casey Company, but, because of the fact that it was
compelled to do a large part of this work in the winter season, it nat-
urally and necessarily resulted to its disadvantage ; that, in fixing the
price per unit for this character of work and material, the time of the
year in which the work is to be performed is an important consid-
ération ; that a lower price would be charged for excavation and con-
crète work in the summer and fall than would be charged for like
work in the winter months.
If the jury believed this évidence to be true, then the consent of
the contractor to go on with the work in the winter months, although
but for the fault of the owner he might hâve completed his contract in
good weather, and his waiver of damages for the delays occasioned
by the owner were sufficient considération to sustain the oral contract.
King V. Railway Co., 61 Minn. 482, 63 N. W. 1105; Tobey v. Price,
75 111. 645 ; AUamon v. Mayor of Albany, 43 Barb. (N. Y.) 33 ; Stub-
bings Co. V. World's Columbian Exposition Co., 110 111. App. 211.
This case must be distinguished from the case of Lingenfelder v.
Wainwright Brewing Co., 103 Mo. 578, 15 S. W. 844, and other cases
in line with that décision. In that case Lingenfelder, at the time the
oral contract was made to pay him 5 per cent, on the refrigerator
plant as the condition of his complying with his contract relating to
other matters, had no claim for damages whatever against the own-
er, nor was there any reasonable excuse for his refusai to perform
the work covered by that contract according to its terms. The
court, in the considération of that case, said:
"He took advantage of Wainwright's necessltles, and ertorted the promise"
■without "even the fllmsy pretext that Wainwright had violated any of tbe
conditions of the contract on Ms part,"
UKITED STEEL CO. V. CASE Y 893
C262 F.)
In thîs case there is substantial évidence that the Steel Company
had so delayed, hindered, and embarrassed the Casey Company in
the performance of its contract that it would at least bave had a bona
fide daim for damages, regardless of the amount that it might bave
recovered in a suit based upon such claim.
It is not important, except as a fact for the considération of the
Jury, that Mr. Casey, representing the Casey Company, did not, at
the time it is claimed this oral contract was made, specifically waive
ail claims for damages as a considération for this oral contract. Par-
ties to a contract are presumed to understand and appreciate ail the
facts and circumstances within their knowledge in relation to the sub-
ject-matter then under considération. If the Casey Company, after
making this contract, had brought action for damages occasioned by
the delays incident to change of location and failure of the Steel
Company to furnish plans, it would hâve been met with the answer
that any claims for damages it may hâve had were waived and com-
pensated by the provisions of the new contract, regardless of whether
it had, in terms, waived such damages.
[4] It also appears from the évidence that the character of the
soil was in a large part wholly différent from what the parties un-
derstood it to be at the time the contract was made. There is évidence
in this record that Mr. Smythe, representing the Steel Company,
pointed out to Mr. Casey the character of the soil to be excavated ;
that he called attention to an excavation, about 16 feet deep, 30 feet
wide, and 50 feet long, near the location of the work covered by the
contract, which excavation had been made by the Steel Company fer
an additional open-hearth fumace at plant A. This excavation was
in sand and gravel. Mr. Smythe also called Mr. Casey's attention
to the bed and banks of the creek as representing the condition of the
soil to be encountered, and this was also of gravelly sand.
The fact that thèse représentations were made in good faith and in
the honest belief that the character of the soil to be excavated under
the terms of this contract was similar to the soil shown to the con-
tractor is not important, if thèse représentations were made to Mr.
Casey for the purpose of inducing him to believe them to be true, and
the Casey Company had a right to rely, and did rely, upon the truth
of thèse représentations. If the jury found thèse facts in favor of the
plaintiff, it would constitute a sufficient considération for the oral
contract fixing a différent price per unit for that particular part of
the work. On the other hand, in the absence of such représentations,
a contract is not invalid, nor is the obligor therein discharged from
its terms, because it turns out to be difficult or burdensome to per-
form. Cottrell v. Smokeless Fuel Co., 148 Fed. 594, 78 C. C. A. 366,
9 L. R. A. (N. S.) 1187; U. S. v. Gleason, 175 U. S. 588, 20 Sup.
Ct. 228, 44 L. Ed. 284; Simpson v. U. S., 172 U. S. 372, 19 Sup.
Ct. 222, 43 L. Ed. 482 ; Ry. Power & Light Co. v. City of Columbus,
Ohio, 249 U. S. 399, 39 Sup. Ct. 349, 63 L. Ed. 669.
However, where a contract must be performed under burdensome
conditions not anticipated, and not within the contemplation of the
parties at the time the contract was made, and the promisee measures
894 262 FEDERAL REPORTER
up to the right standard of honesty and fair dealing, and agrées, in
view of the changed conditions, to pay what is then reasonable, just,
and fair, such new contract is not without considération within the
meaning of that term, either in law or in equity. Cooke v. Murphy,
70 111. 96; Galveston v. Railroad Co., 46 Tex. 435, 440; King v.
L. & N. Ry. Co., 131 Ky. 46, 114 S. W. 308; Hart v. Lauman, 29
Barb. (N. Y.) 410; Meech v. Bufifalo, 29 N. Y. 198.
The judgment of the District Court is affirmed.
GOOCH V. BUFORD et al.
(Circuit Court of Appeals, Sixth Circuit. February 13, 1920.)
No. 3328.
1. Appeal and ebrob <S=5>1099(11) — Question decided on formée weit of ee-
EOE no LONGEE OPEN.
Where It was decided on a former writ of error that a verdict and
judgment for défendant on the first count. In an action for Personal' in-
juries, did not dispose of the second count based on breach of contract,
that question was no longer open.
2. Judgment ®=>ia4 — Hecovert on count foe breach of contract not
BARRED BT VERDICT AND JUDGMENT ON COUNT FOR NEGLIGENCE.
Where plalntifC, sulng a hospital for personal injuries, alleged négli-
gence in one count and in another count breach of a contract to fumish
her spécial and extraordinary care, nursing, and watching, because of her
mental condition and suicidai tendencies, a verdict and judgment for de-
fendant on the first count dld not dispose of the second count, as the right
to recover would not dépend on the same facts.
3. HospiTALS <S=8 — Question for jury in action for injuries to patient.
In an action against a hospital for personal injuries alleged to hâve re-
sulted from breach of a contract made w^ith plalntiffi's husband to fumish
her a spécial nurse and spécial care, because of her mental condition and
suicidai tendendes, évidence as to the makhig of the contract and its
breach held to make a question for the jury.
4. HOSPITALS <S=8 WhETHER PLAINTIFF WOULD HAVE BEEN INJURED IF SPE-
CIAL NURSE HAD REMAINED IN CHARGE WAS QUESTION FOB JURY.
In an action for personal injuries alleged to bave resulted from a
hospital's breach of contract to fumish a patient a spécial nurse and spé-
cial care, whether the injury would hâve happened if the spécial nurse
had remained in charge was a conclusion to be drawn from the other
facts in the case, and was a question for the jury,
5. Principal and agent <S=5l57 — Physician could not on behalf of both
PARTIES REVOKB CONTRACT MADE FOR PATIENT WITH FIEM OF WHICH HE WAS
A MEMBEE.
Where one member of a partnership conducting a hospital was also the
attendlng physician of a patient, In whose behalf her husband contracted
for a spécial nurse and spécial care, such physician could not, as a repré-
sentative of both parties, revoke the contract without the knowledge or
consent of any one other than himself, so as to relleve proprietors of
liability for Injuries to patient from breach of contract.
6. CosTRACTS <S=>187(1) — Plaintiff entitled to damages fob breach of con-
tract MADE BY HER HUSBAND WITH HOSPITAL FOB HER BENEFIT.
Where plalntiff's husband contracted with a hospital to fumish plain-
tiff a spécial nurse and spécial care, plaintiff was the direct beneficiary
of the contract and entitled to recover damages for any personal injuries
sustained by reason of its breach.
^ssFor other caees ses eame topic & KBY-NUMBER In ail Key-Numbered Dlgests & Indexes
GOOCH V. BUFORD 895
(262 F.)
In Error to the District Court of the United States for the Western
District of Tennessee; John E. McCall, Judge.
Action by Mary Dockery Gooch, by next friand, W. D. Gooph,
against G. G. Buford and another, doing business as the Presbyterian
Home Hospital. Judgment on a directed verdict for défendants, and
plaintiff brings error. Reversed and remanded.
John E. Bell, of Memphis, Tenn., for plaintiff in error.
John W. Farley, of Memphis, Tenn., for défendants in error.
Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.
DONAHUE, Circuit Judge. The amended déclaration contained
two counts — one to recover damages for personal injuries to plaintiff
caused by the négligence of the défendants ; the other to recover dam-
ages for the same injuries caused by défendants' breach of contract.
The défendants' answer denied négligence on their part, averred con-
tributory négligence on the part of the plaintiff, and for a third défense
pleaded the statute of limitation. For answer to the second count, the
défendants denied the making of a contract as in the déclaration al-
leged.
Upon the trial of the issues so joined the court instructed the jury
to return a verdict for the défendants on the first count of plaintiff's
amended déclaration, which was done accordingly. Upon the second
count of the déclaration the jury disagreed and were discharged. Fi-
nal disposition of the second count was reserved for further orders
of the court. Later, upon motion of the défendants, the court entered
final judgment, dismissing plaintiff's pétition with costs. This judg-
ment was reversed by this court on the 6th day of March, 1917, for
the reason that the issues upon the second count had not been adjudi-
cated when the motion to dismiss was considered and sustained.
Gooch V. Presbyterian Home Hospital, 239 Fed. 828, 152 C. C. A. 614.
The cause was then remanded to the District Court, with directions to
award the plaintiff a new trial upon the second count in the amended
déclaration in accordance with this judgment of reversai.
The cause then came on for trial in the District Court on the second
count, and at the close of ail the évidence the court peremptorily in-
structed the jury to return a verdict in favor of the défendants, and
final judgment was entered upon this verdict. This proceeding in er-
ror is prosecuted to reverse that judgment.
[1,2] The larger portion of the brief for défendants in error is
devoted to a discussion of the effect of the verdict and judgment on
the first count in the déclaration. It is insisted that there is but one
injury, and but one cause of action, and that a verdict and judgment
upon either count disposes of the whole case. That is the same
question that was presented to this court and decided adversely to
défendants' contention in the first error proceedings, and therefore is
no longer an open question in this case. However, it might be well in
passing to say that, while each count in the déclaration sought to
recover damages for the same injuries, aside from the fact that one
is based on tort, the other on breach of contract, the right to recover
would not dépend upon the same facts. Upon the first count it would
896 262 FEDERAL REPORTER
be necessary for the plaintiff to establish by a prépondérance of the
évidence that défendants had failed, neglected, or refused to give to
this patient the usual, ordinary, and reasonable care and attention giv-
en by hospitals of this character to patients in like mental and physical
condition.
Upon the second count the question of usual, ordinary, and reason-
able care and attention would not be involved, but it would be neces-
sarv for the plaintiff to establish by a prépondérance of the évidence
that a contract was made with the défendants, as averred in the second
count, by the terms of which this patient was to receive spécial and
extraordinary care, nursing, and watching, which her husband, in view
of his knowledge of her mental condition and suicidai tendencies,
deemed to be necessary, and which extraordinary service the défend-
ants agreed to fumish, and for which the husband agreed to pay, in
addition to the hospital fee for usual and ordinary care and attention.
The fact that upon the trial of the first count in the déclaration the
plaintiff failed to establish by évidence that défendants were guilty
of neglect in failing to provide this patient with ordinary and usual
care and attention could not in any way affect or détermine the issue
as to whether they had given her such spécial care and attention as re-
quired by the terms of this contract, if such contract were in fact made.
The issues presented by the second count and the answer thereto,
as distinguished f rom the first count, are : First. Was there a con-
tract made, the terms of which were substantially as averred in the
second count of the déclaration ? Second. Was there a breach of this
contract on the part of the défendants? Third. Did this breach of
contract resuit in injury to the plaintiff? If there was évidence offered
by the plaintiff tending to establish thèse mater ial averments, then
the cause should hâve been submitted to the jury upon prooer instruc-
tions by the court, and it was error to direct a verdict for the défend-
ants.
[3] W. D. Gooch and Alfred Dockery testified on behalf of the
plaintiff that her husband. Prof. Gooch, had made a contract with Dr.
Buford, one of the partners and representing the partnership operat-
ing the Presbyterian Home Hospital, by the terms of which the de-
fendants were to furnish plaintiff a spécial nurse, for which Prof.
Gooch agreed to pay the sum of $15 per week in aadition to the ordi-
nary hospital fee of $20 per week for room, board, and ordinary care
and attention, furnished to patients in like mental and physical condi-
tion ; that at the time this contract was made he paid to Dr. Buford
$50 on account; that by the terms of this contract this spécial nurse
was to give her entire time and attention to the care of plaintiff ; that,
whenever this spécial nurse was required to leave the patient, one of
the floor nurses would be called to take her place ; that no extra charge
would be made for the service of the floor nurse while relieving the
spécial nurse, this service being included in the room rental.
They also testified that Prof. Gooch told Eh". Buford- at that time
that he had authorized Alfred Dockery, brother of the plaintiff, to act
as his agent; that Mr. Dockery lived in the city, and that whenever
Dr. Buford wanted to confer with him in référence to her case he could
be reached by téléphone. Mr. Dockery also testified that threc days
GOOCH V. BUFORD 897
(262 F.)
prior to the injury he had called to see his sister, Mrs. Gooch; that
when leaving the hospital Dr. Buford called him into his office and told
him that the plaintiff was worrying over the expense of the spécial
nurse, and wanted to know if he did net think it best to discharge her ;
that Mr. Dockery then said to Dr. Buford that he thought the nurse
was very necessary to be with the plaintiff at ail times, and he would
not agrée to her discharge ; that, if the nurse was to be dismissed, Dr.
Buford would hâve to take the matter up with Prof. Gooch ; that he
(Mr. Dockery) would not agrée to her discharge.
Mrs. Earl Smith, formerly Miss Jennie Roberts, testified that she
was assigned by the hospital as spécial nurse for the plaintiff ; that in
obédience to the orders given her Mrs. Gooch was never allowed to
be out of her sight during the time she was so employed, except when
she was relieved by another nurse. She further testified that she was
dismissed from this case by Dr. Buford between 8 and 9 o'clock on
the morning of the day the plaintiff was injured ; that the plaintiff was
injured shortly after the lunch hour; that after she was dismissed
from this case she went on gênerai duty as a floor nurse; that on the
day plaintiff was injured she carried the lunch tray into her room,
then went for her own lunch, but that she did not ask any one to
watch her that day, because she was not her patient any longer, but
"just walked into her room and set the lunch down and walked out, the
same as she would in any other patient's room."
Dr. Buford does not deny that as représentative of the partnership
operating this hospital he entered into a contract with Prof. Gooch,
by the terms of which the hospital was to furnish a spécial nurse to
the plaintiff ; but he does deny that anything was said about having a
nurse constantly in attendance. He further testified that it is the duty
of a spécial nurse to stay with the patient in her charge; "that no
other nurse is permitted to go there unless it is for a spécial accommo-
dation or something, and this spécial nurse gives her entire time and
attention to this patient." He admits that he discharged this spécial
nurse on the same day the injury occurred to the plaintiff. It further
appears, from the évidence of Prof. Gooch, Mr. Dockery, and Dr.
Buford, that at the time this contract for a spécial nurse was made Dr.
Buford was employed as physician to treat the plaintiff professional-
ly ; that there was a discussion between Prof. Gooch and Dr. Buford
as to whether more than one spécial nurse would be required to care
for the plaintiff in her mental condition ; that Dr. Buford had advised
that one spécial nurse would be sufficient; that Prof. Gooch insisted
upon seeing the spécial nurse to be assigned to the case before deciding
whether more than one would be necessary. In this connection Dr.
Buford was asked by his counsel:
"Was that your professional opinion as the physician In charge, after you
had seen and examined and conversed with this lady — as the physician —
not as manager of the hospital at ail, but as the physician in charge of the
patient, acting as the physician, and contrary to your Interests as part
owner of the hospital, that she should hâve only one si>ecial nurse?"
Answer: "Only one spécial nurse; yes. There was no necesslty for
more."
262 F.— 57
898 262 FEDERAL REPORTER
It is clear, however, from the testimony of thèse three witnesses,
that up to this time Dr. Buford had not seen, examined, or conversed
with Mrs. Gooch, as assumed by counsel when this question was asked,
and theref ore he could not hâve been exercising his prof essional knowl-
edge as to her need. Nor does he make any such daim in his testi-
mony relative to the making of this contract. On the contrary, he tes-
tified that Prof. Gooch had asked in the beginning of the conversation
to let the éxpenses be as small as possible, and that "he was looking to
Prof. Gooch's interest, as separate from the hospital, as much as he
would any other man's interest." It would therefore appear that in
giving this advice to Prof. Gooch he was not acting in any professional
capacity, but was acting for the hospital, and endeavoring upon its
part to treat Prof. Gooch fairly, the same as he would treat any other
man, regardless of professional employment.
Dr. Buford denied that he had any -conversation with Mr. Dockery
with référence to the discharge of this nurse. There is also a conflict
in the évidence as to the terms of the contract, touching the extent and
character of the services to be rendered by a spécial nurse, and also as
to the exact time when she ended her connection with this case. This
conflict in the évidence cannot afiEect the constitutional right of plaintifif
to hâve thèse issues submitted to a jury for its détermination.
It is also contended, even if the spécial nurse did end her connection
with this case in the forenoon of that day, that nevertheless the plain-
tifif was receiving the same care and attention at the time the injury oc-
curred that she would hâve received, had the spécial nurse continued
in charge, and that, in any event, the same resuit would hâve f oUowed.
[4] There is not, and in the very nature of the case there could not
be, any évidence ofifered as to what would or would not hâve hap-
pened, had the spécial nurse remained in charge. That is a conclu-
sion that must be drawn from the other f acts proven in the case, and
it is also a question for the jury to détermine.
[5] It is further contended that Dr. Buford, as physician to Mrs.
Gooch, was authorized to rescind this contract for a spécial nurse that
he, as one of the partners and managing agent of the partnership, had
made with her husband for her safety. In answer to this it is sufficient
to say that Dr. Buford could not occupy a dual relation to this con-
tract, nor could he represent both parties thereto, either in the making
or revocation of the same. Prof. Gooch knew the mental condition of
his wife and her suicidai tendency far better than any other person
présent at the time the contract was made. Having made this contract,
he had the right to rely upon the faithful performance of its terms by
the other contracting party.
Whether Dr. Buford, as the physician of Mrs. Gooch, might hâve
rescinded or revoked this contract without the knowledge or consent
of Prof. Gooch, were he in no wise connected with the hospital and
acting solely and on behalf of his patient, is a question that does not
arise in this case; neither is it a question of tiie good faith of Dr.
Buford, but rather a question of his légal right and authority to act
as the représentative of both contracting parties. His employment
as her physician could not and did not change his légal relation to the
principal he represented in making this contract, to wit, the partner-
PATTERSON V. DIAZ 899
(262 F.)
ship, of which he was not only a member, but also in active charge and
management of its affairs. Nor did it authorize him, as her physician,
to agrée with himself, as managing agent of that partnership, that the
contract entered into between Prof. Gooch and the hospital should
be revoked or canceled without the knowledge or consent of either par-
ty thereto, except in so far as he assumed the authority to represent
both.
[6] Thèse propositions are too elementary to require further dis-
cussion. Dr. Buford not only purported to represent the hospital, but
actualfy did represent it in making this contract. He cannot now be
heard to say that in revoking and rescinding the same contract he not
only represented the hospital, but also represented Prof. Gooch, or
his patient, Mrs. Gooch, who was and is the direct beneficiary of this
contract, and entitled to recover any damages she may hâve sustained
by reason of its breach.
The judgment of the District Court is reversed, and the cause re-
manded for new trial and further proceedings açcording to law.
PATTEESON v. DIAZ et aL
(Circuit Court o£ Appeals, Fifth Circuit Tebruary 9, 1920.)
No. 3382.
AD\flERSE POSSESSION ®=>48 ACTUAL POSSESSION NOT INTEBBUPTED BT EECOBD-
ING DEED BY ADVEKSE CLAIMANT.
Clv. Code Canal Zone. art. 2526, provldlng that "the acqulsltlve pi-escrlp-
tion of real property ♦ * • does not obtalu against a recorded title,
excppt by vlitue of another reoorded title," does not glve the mère re-
eordlng of a deed by one claimant the effect of Interruptlng or rendering
inefCective the actual possession of an adverse claimant, who holds under
a prevlously recorded title.
Appeal from the District Court of the United States for the Canal
Zone ; William H. Jackson, Judge.
Suit in equity by Domingo Diaz and others against Guillermo Pat-
terson. Decree for complainants, and défendant appeals. Reversed.
Edwin T. Merrick and Ralph Schwarz, both of New Orléans, La.
(Merrick, Gensler & Schwarz, of New Orléans, L,a., on the brief), for
appel lant.
Harmodio Arias, of Panama, R. O. P., and Irvin R. Saal, of New
Orléans, "La. (Milling, Godchaux, Saal & Milling, of New Orléans, La.,
on the brief), for appellees.
Before WALKER, Circuit Judge, and GRUBB and CLAYTON,
District Judges.
WALKER, Circuit Judge. The appellees (hereinafter referred to as
the plaintiffs), claiming to be the owners of an estate known as Lo
de Caceres, brought this suit in November, 1917, against the appellant
(hereinafter referred to as the défendant), who, it was averred, claim-
®=3For otber cases ses same topic & KSIY-KUMBBR in ail Key-Numbered DIgests & Indexes
900 262 FEDERAL REPORTEE
ed to be the owner of the estate of Mata Redonda, which adjoins tlie
first-mentioned estate on the west, and that he had an interest in and
to a portion of described land in the Canal Zone which the plaintiffs'
pétition alleged was part of the 1/3 de Caceres estate. The pétition
prayed that the adverse claim asserted by the défendant be determined
by the decree of the court, and that it be declared and adjudged that
the plaintiffs are the owners of said described lands and are entitled
to the possession thereof, and that the défendant has no estate or in-
terest therein. There was a decree in favor of the plaintiffs, granting
the relief prayed. The appeal is from that decree.
The claim asserted by the pétition of the plaintiffs was hased upon
a chain of conveyances beginning with a grant by the Spanish crown
in 1736 of the estate of Lo de Caceres. The pétition did not assert
the claim that the plaintiffs had acquired title by possession under claim
of ownership. The défendant claimed under a chain of conveyances
ending with one made to himself in 1891, and recorded in that year,
and he also claimed the land in dispute by prescription or adverse pos-
session. Several conveyances successively made to the defendant's
predecessors in title, commencing with one made in 1859, described
land included in that which was decreed to belong to the plaintiffs, and
there was évidence tending to prove that for more than 30 years prior
to the bringing of the suit land which was adjudged to the plaintiffs
was continuously and adversely in the possession of the défendant and
those under whom he claimed. There was no évidence to support a
finding as to who was in possession of the land in dispute prior to
1869.
The opinion rendered by the trial judge shows that the decree in
favor of the plaintiffs resulted from the conclusion that, under the
following provision of the Civil Code of the Canal Zone, the recording
in 1895 of the conveyances under which the plaintiffs' predecessor in
title claimed had the effect, though neither such claimant nor any one
claiming through him got possession of the land in dispute, of prevent-
ing the acquisition by the défendant of the ownership of such land by
the continuance thereafter of the possession commenced by a predeces-
sor of the défendant, to which the latter succeeded when the deed to
him was made and recorded in 1891, and from which he was not
ousted :
"Art. 2526. The aequisltlve prescription of real property or of real rights
constituted therein does not obtaln against a recorded title, except by vlrtue of
another recorded title, nor shall It begin to run but from the date of the
record of the second."
That opinion, after making a statement of the contentions of the
parties and expressing the conclusion from évidence adduced that the
description contained in conveyances under which the plaintiffs claimed
embraced tlie land in dispute, and after referring to the above-quoted
provision of the Civil Code, concluded as f ollows :
"There does not seem to be any doubt whatever that the défendant had ac-
quired by 1869 by prescription a portion of the lands purchased in 1832 by
tho plaintiffs' predecessors in Interest. But the question to dedde is whctlier
the tlOe so acquired continues to the présent tlma We find that the last
record efîected by or on behalf of tlie défendant with référence to the
PAÏTERSON V. DIAZ 901
(.262 FJ
lands in dispute took place in 1891. AXter that date nelther the said de-
fendant nor any one on hls behalf lias made any Inscription on tlie public
land registry tliat would afifect tlie recorded possession of the lands claim-
ed. On the other hand, we flnd that the plaintiffs by their predeces-
tiors in title reasserted thelr recorded possession of 1832, which they had
loat by prescription, by means of the registration of the public sale of the es-
tnte of Ix) de Caceres that took place in 1895. In thls public sale the old
Une of Mocambo to the Mata Redonda is again restated. Hence the conflict
between the two estâtes reappears from the said year of 1895. Furthermore,
aftc!- that year, several sales of undivided interests in the estate of Lo de
Oaceres took place, and hence the correspondlng Inscriptions were affected, ail
of which show that public and open assertions of ownershlp, in the manner
provided by law, were made by said plaintiffs or their predecessors in interest,
in opposition to any and ail clalms of ownership of the défendant,
"The court, therefore, flnds that, applylng section 2526 above quoted, pre-
scription began to run in 1895 as agalnst the recorded possession of the défend-
ant ; that the défendant has not interrupted that prescription, inasmuch as
he has no recorded title subsecjuent to 1891 ; and that, as more than ten years
hâve elaijsed since 1895, the plaintiffs hâve reacquired the lands In dispute.
The plaintiffs are therefore entitled to a decree in accordance with the above
flndings."
In view of the above-mentioned condition of the évidence adduced,
the quoted part of the court's opinion plainly indicates that the case
was disposed of on the theory that, assuming, without determining
from the évidence adduced, that the défendant and those through
whom he claimed had continuous and uninterrupted possession under
claim of ownership for the length of tinie required to confer title by
prescription, that possession v/as ineiïective in his behalf from the
date of the recording of a deed describing the land, made by an ad-
verse claimant to a third person, though neither the grantee in such
deed nor any one through whom he claimed, or who claimed under him,
acquired possession of any of the land described therein, and though
the conveyances under which the défendant claimed were first re-
corded.
In behalf of the défendant it is contended that the court was in er-
ror in failing to apply the provision of section 40 of the Code of Civil
Procédure of the Canal Zone, under which title to land is acquired
by ten years' uninterrupted adverse possession under claim of owner-
ship. The Code of which that provision is a part went into force on
May 1, 1907. Section Zl of that Code, that being the first section of
the chapter containing section 40, provides that:
"Thls chapter shall not apply * * • to cases wherein the right of ac-tion
has already accrued."
As the right of action asserted in the instant case accrued before
that Code went into force, section 40 of that Code is not applicable to
this case. It is the previously existing law which is applicable.
The above-quoted provision of the Civil Code, which the court's
opinion shows was relied on to support the conclusion reached, is to
be interpreted in the light of other provisions of that Code, among them
the following:
"Art. 2512. Prescription is a manner of acquiring the things of another, or
of extinguishing another's actions or rights, by reason of having possessed
the things and said actions and rights not having been exercised during a cer-
tain lapse of time, and with the attendance of the other légal requisites.
902 202 FEDERAL REPORTER
"An action or rlght prescrlbes when It Is extinguished by prescription."
"Art. 2521. If a thlng shall hâve been possessed suceesslvely and without
Interruption, by two or more persons, the time of thé prevlous possessor may
or may not be added to the tlme of the successor, according to tbe provisions
of article 778.
"The possession begun by a deceased person continues in tbe vacant Inherlt-
ance, whicli shall be understood to possess In the name of the heir."
"Art 778. Whether one sueceeds under a unlversal or singular tltle, the
possession of the successor beglns at the time thereof, unless he shall désire to
add that of his predecessor to hls own; but in such case he appropriâtes
It together wlth its qxialltles and vices.
"One's own possession may be added in the same terms to that of an unin-
terrupted séries of predecessors."
"Art. 2527. Acquisitlve prescription Is ordlnary and extraordinary.
"Art 2528. To acqulre the ordlnary prescription, a regular unlnterrupted
possession, during such time as the laws require, shall be necessary.
"Art. 2529. The time necessary for ordlnary prescription is three yeara for
movables, and ten years for real property. * • • "
"Art 2531. The ownership of thlngs In commerce, vehich shall not hâve
been acquired by ordlnary prescription, may be acqulred by extraordinary
prescription, under the f ollowing rules :
"1. For the extraordinary prescription no tltle whatsoever is necessary.
"2. Good faith Is presumed therein of rlght notwlthstandlng the absence of
a tltle aoquisitive of ownership.
"3. But the existence of a tltle of mère possession, shall cause bad faith
to be presumed and shall not produce the prescription, unless the foUowlng
two circumstances be présent :
"1. Tliat he who daims to be the owner cannot prove that during the past
thirty years hls ownership shall hâve been acknowledged expressly or im-
plledly by the person pleading tl^e proscription.
"2. That he who pleads the prescription shall prove that he bas had posses-
sion without violence, concealment, or Interruption for the same period oî
time.
"Art 2532. The lapse of tlme necessary to acqulre by thls kind of pre-
scription ig thirty years against any jjerson, and Is not suspended in favor of
those enumerated In article 2530."
"Art. 789. In order that registered possession may cease, it is necessar.v
that the recoi-d be canceled, either by the will of the parties or by a new
record In which the registered possessor transfers his rlght to another, or by
judiclal decree.
"As long as the record subsists, he who obtalns the thing whlch Is the
subject-matter of the record, does not aoqulre the possession thereof nor does
he put an end to the existing possession."
The langiiage used in article 2526 does not indicate a purpose to give
to the recording of a conveyance by and to parties who are strangers
to the possession of the thing conveyed or purported to be conveyed
the effect of preventing the acquisition of ownership by prescription
by one remaining in possession under a previously recorded title. It
does not purport to give to the mère recording of a deed to such an
adverse claimant the efïect of interrupting or rendering ineffecti^e the
actual possession of a stranger to such deed who holds under a" pre-
viously recorded title. It does not make the effectiveness of an ac-
tually unlnterrupted adverse possession dépendent upon a re-recording
of the title of the possessor which had already been recorded when an
adverse claimant had recorded the instrument or instruments under
which the latter daims. It does no more than require one record of
the title under which the possessor daims to make his possession ef-
fective against a recorded title in favor of another. The provision
PATTERSON V. DIAZ 903
C262 F.J
cannot be given the effect of requiring a possessor to hâve a tîtle re-
corded to enable him to acquire ownership by extraoïdinary prescrij>-
tion. To do so would be in the teeth of the f ollowing provision of the
above set out article 2531 :
"For the extraordinary prescription no tltle wliatsoever Is necessary."
In view of the just-quoted explicit provision, it is to be inferred that
the provision of article 2526 was intended to hâve référence only to
the acquisition of ownership by ordinary prescription, and not to such
acquisition by extraordinary prescription, by means of vvhich a pos-
sessor having no title whatsoever may acquire ownership of the thing
possessed for the required time. Furthemiore, the deeds under which
the défendant possessed and claimed land in dispute having already
been recorded when the instruments under which the plaintiffs claim-
ed were recorded, to give to the recording of the last-mentioned in-
struments, in the absence of a claimant thereunder acquiring posses-
sion, the eflfect of terminating the defendant's previously registered
possession, is inconsistent with the provision of article 789, above set
out. That provision stands in the way of a registered possession beir^
terminated by the mère recording of a deed, not made by the possessor,
to one who does not acquire possession. Possession being essential
to the acquisition of ownership hy prescription (article 2512, supra),
there is no basis in law for the conclusion that the mère lapse of time
from the date of the record of a deed by and to parties out of posses-
sion can havc the effect of conferring ownership by prescription on
the grantee in such deed.
It appears from the record that the decree appealed from was based
upon the conclusion that the plaintiffs had acquired by prescription the
ownership of the land sued for, without that land having been possessed
by them or by any one through whom they claimed, and though their
pétition did not assert the claim that they were by prescription entitled
to that land. The court erred in so concluding.
What bas been said indicates the grounds which are deemed to sup-
port the conclusion reached that the case was disposed of on a theory
inconsistent with the law applicable to the facts disclosed by the plead-
ings and the évidence adduced. There was conflicting oral testimony
as to the possession of the land in dispute. There was such évidence
tending to prove that the défendant and those to whose rights he
succeeded were, for more than 30 years immediately preceding the
bringing of the suit, continuously and uninterruptedly in possession
under claims of ownership of land which the decree appealed from^
adjudged to the plaintiffs. If that évidence was such as to require a
finding in accordance with it, a resuit would he that tlie défendant was
entitled by prescription to disputed land so possessed. There was no
finding for or against what that évidence tended to prove. Such évi-
dence, and that in conflict with it, can be weighed l3y the trial court
better than by this court. A good deal of the oral testimony, as it is
disclosed by the record before us, is unintelligible, because nothing in
the record, including the maps which hâve been made a part of it, en-
ables us to détermine the location of places and objects mentioned by
witnesses. The proper détermination of issues of facts presented calls
904 262 FEDERAL REPOETEK
for the weighing of oral testimony by the tribunal before which that
testimony was given. The record discloses that, in conséquence of
a misconception of what is the law applicable to the case, this was not
done in the trial now under review.
For the reasons indicated, the conclusion is that this court, without
undertaldng to pass on the conflicting évidence, should reverse the
decree and remand the cause for further proceedings not inconsistent
with this opinion ; and it is so ordered.
Reversed.
GINACA et al. v. PETERSON (two cases.) (Nos. 3391, 3392.)
(Circuit Court of Appeals, Nlnth Circuit. Februaiy 2, 1920. Rehearing
Denied Aprll 5, 1920.)
1. QUIETING TITUB <S=>44(4) QUITCLAIM DEED SUFFICIENT PRniA FACIE TO SUP-
PORT SUIT.
A quitclalm deed from one In possession, accompanled by delivery of
actual possession, Is prima facie évidence of tltle, and will support a suit
to quiet title.
2. QUIETING TITLE ®=>10(2) — IT IS UNNECESSAET TO QO BACS OV COMMON
POUUCE OF TITLE.
Where défendant In a suit to quiet tltle claims through a tax deed
based on a sale for taxes levied while complainant's grantor was owner,
such. grantor is the common source of tltle, and it is unnecessary for either
party to go back of sucb source in the proof.
8. Taxation <S=>788(7) — ^U'ax deed not évidence or begulaeitt or noticb
TO EEDEEM.
A tax deed Is not évidence of giving of the notice required by Pol. Code
Cal. § 3785, to be given to the owner or occupant of the land 30 days be-
fore expiration of time for rédemption, or before application for the deed,
and without such notice the deed is invalid.
■i. Corporations ®=s>616 — Convbtance of peopeutt by sole stockholdee
AFTEE FOBFEITXJRE OF CHAETEB VALID.
On a forfeiture of the charter of a corporation under the laws of Cali-
fornia, the président, who was also sole stockholder and trustée, Tield
authorized to convey its property, and in the asbence of creditors his
conveyance eannot be coUaterally attacked.
5. Mines and minebals iS=>12 — ^Alien may pboteot riqhts in unpatbnted
CLAIMS.
An alien may own unpatented minlng claims and protect his rights
therein in adverse proceedings in the Land Department or in the courts,
althongh not qualifled to obtatn a patent by suit under Rev. St. § 2326
(Comp. St. § 4623).
Appeals from the District Court of the United States for the Nor-
thern Division of the Southern District of California; Benjamin F.
liledsoe, Judge.
Suits in equity by Ellen Justina Peterson against Gladys Ginaca and
Louis A. Ginaca, executrix and executor of the will of Henry G.
Ginaca, deceased, and No. 9 Gold Mining Company. Decre.es for
complainant, and défendants appeal. Affirmed.
<g=}For otber cases see same topic & KEY-NUMBER in aU Key-Numbered Oigests & Indexes
GINACA V. PETERSON 905
(262 F.)
A. H. Ricketts and Peter F. Ehinne, both of San Francisco, Cal.,
Louis W. Bennett, of Oakland, Cal., and R. L. McWilliams, of San
Francisco, Cal., for appellants.
T. John Butler, Sullivan & Sullivan, and Théodore J. Roche, ail of
San Francisco, Cal., and J. C. Thomas, of Oakland, Cal., for appellee.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
HUNT, Circuit Judge. Thèse are appeals from decrees quieting
title of appellee, Ellen Peterson, to certain mining lands in California,
and enjoining appellants from trespassing or interfering with ap-
pellee's possession. Défendants denied ail material allégations of the
bill, and alleged owrnership and actual, open, peaceable, and exclusive
possession. The défendants No. 9 Gold Mining Company and Henry
G. Ginaca, who died pending thèse suits, also set up proceedings in the
United States Land Office in the matter of their respective applica-
tions for patent from the United States for certain tracts. Nos. 6 and
10. Tract No. 6 is called the Eurêka mine ; tract No. 10, the No. 9
mine, or the Baltimore mine.
It appears that in 1896 Moses L. Rodgers sold many mining claims,
including the property involved, to S. W. Parker, for a considération
partly paid in cash and partly by mortgage back upon the property in
the sum of $48,000. At the time of the transfer by Rodgers he was
in possession, and delivered possession to Parker, who remained in
possession until October 4, 1896, when he conveyed the lands to the
Hornitos Gold Mining Company, a California corporation. By con-
veyance datcd J^uary 8, 1913, between the tax collector of the coun-
ty of Mariposa, state of California, and the state, the record title of
the property, which was sold for nonpayment of taxes for the year
1897, was described as the value of the interest created by mortgage by
Parker to the Hornitos Gold Mining Company, and the record title
is described also in another conveyance between the tax collector and
the state of California dated January 6, 1915. The mortgage of $48,-
000 is also referred to in the indenture. In March, 1905, the Hornitos
Gold Mining Company, by proclamation of the Governor of California,
forfeited its charter, and on March 10, 1915, Parker, who was the sole
stockholder and trustée of the corporation, conveyed the property in-
volved to C. H. Perry, who took possession, and on March 10, 1915,
by deed conveyed to Ellen Peterson, appellee herein.
The two tracts. Nos. 6 and 10, called the Eurêka mine and the No. 9
mine, or Baltimore mine, were in the possession of and conveyed by
the predecessors in interest of Ellen Peterson, as already set forth, and
Parker, on September 19, 1896, located the Eurêka mine by marking
mnunds of rock and posting notices and running a shaft or tunnel 200
f eet deep. There was a shaft, rock in place, and a large out-cropping.
Parker also erected stamps, engines, and put improvements upon the
raine. The No. 9 or Baltimore mine (called tract 10), in the possession
of and conveyed by Rodgers to Parker, as already indicated, was used
as a center from which the other mines, except the Eurêka, were work-
ed. The Eurêka was away from the other properties. Improvements
were made upon the No. 9 as far back as 1896. After acquiring the
î^OG 2C2 FEDERAL EEPOETER
properties, Ellen Peterson was frequently upon them, directed assess-
ment work thereon, and in February, 1915, under her direction, work
of the value of $300 was performed on the Eurêka. In 1914 the as-
sessment work was done on the No. 9, but in 1915 the performance of
such work thereon was prevented by the appellants. In the latter part
of 1916, the appellee, by reason of disturbances, was prevented from
working on the Eureica. In April, 1915, two of Ellen Peterson's em-
ployés were arrested at the instance of the alleged grantors of the ap-
pellants, and were charged with being unlawfully upon the properties.
It also appears that in April, 1917, while thèse suits were pending,
Henry G. Ginaca, since deceased, applied for patent for the Eurêka
mine under the name of the Joséphine mine, and that an adverse claim
was fîled by Ellen Peterson in the Land Office in June, 1917. Applica-
tion for patent for the No. 9 Gold Mining Company was also made, and
an adverse claim was filed in the Land Office by Ellen Peterson.
The appellants lay claim to ail property involved, except the No. 9
mine and the Eurêka mine, upon the basis of tax deeds from the tax
coUector of Mariposa county. Cal. One deed is from D. E. Bert-
ken, datéd September 11, 1913, to G. D. Turner, purporting to convey
a certain pièce of property containing 108 acres ; another deed from
the same tax collector, dated November 6, 1915, to Rosendo Busano,
purporting to convey 25 acres; another deed, dated March 15, 1915,
to Clarence W. Lake. The deed dated September 11, 1913, to Turner,
purports to convey the property described therein for nonpayment of
taxes for 1905, while the deed to Busano purports to convey certain
property for nonpayment of taxes for the fiscal year 1896. In neither
of thèse deeds is it recited that any notice of the sale was given to the
owner of the land, and there is no évidence in the record that any
such notice was given. In the deed to Lake the tax collector purports
to convey certain of the lands described in the complaint filed in this ac-
tion, but not ail of such lands.
With respect to the mining locations, the title which appellants as-
sert is wholly dépendent upon the claim that the locations are superior
to the title established by Ellen Peterson. The argument of the ap-
pellants is that a quitclaim deed is not of itself sufficient to constitute
prima f acie évidence of title ; that a suit to quiet title cannot be main-
tained unless the complainant's title by occupancy has ripened into a
title by prescription, or, if based upon color of title, by the payment of
taxes; that a tax deed, whether valid or not, does not create a com-
mon source of title; that where the défendants make application for
patent to the mining claim the complainant in a suit pending prior to
such apphcation should, by supplemental pleading, base the existing
suit upon rights granted by section 2326, Revised Statutes of the Unit-
ed States (Comp. St. § 4623), and hâve the controversy determined ac-
cordingly; that the title to the Joséphine location being in fieri, and
no supplemental pleading having been filed by the complainant, the
court was without authority to détermine that the title to that claim
vested in the complainant.
The appellee contends that the tax deed of March 15, 1915, is void,
and that the Eurêka and No. 9 mines are properly claimed by appel-
GINACA V. PETERSON 907
C262 F.)
lee by virtue of prior location and the doing of annual assessment work
and by virtue of the color of title in Ellen Peterson under the deeds
to her from her grantors and more than five years' undisturbed posses-
sion of the mines immediately prior to the fiHng of thèse suits.
[1] First considering the tracts, other than the unpatented min-
ing claims, tracts Nos. 6 and 10, we find that appellee Peterson and her
grantors were in continuons and exclusive possession for more than
20 years. It therefore devolved upon the appellants to overthrow her
title by showing that the tax title deed of March 15, 1915, to Lake
was superior. A quitclaim deed from one in possession, accompanied
by a delivery of actual possession, is prima facie évidence of title, and
is proof thereof until such title is shown to be invalid or inferior by
the one who assails it. See cases hereinafter cited.
But, if we assume that the tax deeds under which appellants claim
were valid, they establish a common source of title. Appellants rely
upon the tax deed of March 15, 1915; that is, the tax deed to L,ake.
But from September, 1896, when Rodgers, who was then in possession,
conveyed to Parker, Parker held title until October, 1896, when title
was conveyed to the Hornitos Gold Mining Company. Title remain-
ed in the Hornitos Gold Mining Company until after the forfeiture of
the charter of that corporation, when title became vested in the trus-
tées for the stockholders.
Examination of the assessment roll, the advertisement of the de-
linquent list, the certificate of sale to the state, the published notice of
sale of the tax coUector, and other papers which had to do with the
proceedings which culminated in the exécution of the tax deed of
March 15, 1915, discloses that the assessment was of a mortgage given
by S. Webber Parker during the time that the title to the land was in
Parker, and that the record title to the land at the time of the assess-
men thereof was in the Hornitos Gold Mining Company.
[2] Taxes are a lien upon the lands, and in the enforcement of
statutory proceedings to enforce such a lien there must be an owner-
ship of the property against whicH the lien is established. Toler v.
Edwards, 249 Mo. 152, 155 S. W. 26. It would follow that, inasmuch
as the title asserted by the appellants and that asserted by the appellee
are from a common source, it is not necessary for either party to go
back of that common source in their proof. McGorray v. Robinson,
135 Cal. 312, 67 Pac. 279. In Phillips v. Menotti, 167 Cal. 328, 139
Pac. 796, the court said that, where both parties claim title from a com-
mon source, it is sufficient to show conveyance of title from that source,
without further establishing that the grantor himself had title. In
Bond V. Aickly, 168 Cal. 161, 141 Pac. 1188, in an action to quiet title,
the court said:
"As between parties, neltber of whom can connect himself wlth the légal
title, the one who proves prior possession in himself or those through whom
he claims, makes out a sufficient showing of ownership. 15 Cyc. 30. 'Occu-
pancy for any period confers title sufficient against ail eicept the state and
those who hâve title by prescription, accession, transfer, wlll, or succession.'
Civil Code, § 1006. It has always been the law in this state, as well as else-
where, that possession Is prima facle évidence of ownershlpu"
908 262 FEDERAL EEPORTKR
The court cited many earlier California décisions and contînued:
"Aceordingly, In the absence of. anything to show a better or prior title,
Aiekly's possession, taken in 1892, established Ws ownerslup of the premises
at that time. His quitclaim deed to Annie Bond transferred to her whatever
title he tlien had, * * * and Annie's subséquent deed vested the title In
plaintiff. When this point was reaclied, the plaintlfC had establislied a perfect
prima faeie case, whicli could be overcome only by establishing a superior
title In the défendant."
The same doctrine is announced in Redmond v. McLean, 32 Cal.
App. 729, 164 Pac. 15.
[3] The Lake deed of March 15, 1915, from the tax collector, re-
cites that levy was made for taxes for 1897 due to the state, but fails
to show that the Hornitos Company had any notice of the tax sale or
of any proceedings leading up thereto, and the testimony heard upon
the trial was to the effect that no notice of the tax sale, or any of the
proceedings upon which the sale was based, was ever given to the
Hornitos Gold Mining Company. There is a récital that notice was
mailed "to the party to whom the land was last assessed," etc., to wit,
"M. L. Rodgers," etc. The assessment roll which was introduced in
évidence shows upon its face that the Hornitos Gold Mining Company
was the owner of the land when the assessment was made, and there
is nothing in the deed from the tax collector to Lake, dated March
15, 1915, showing that any notice of any kind was ever given to the
Hornitos Gold Mining Company.
Section 3785 of the PoHtical Code of California, in force when the
sale to the state was made, provided that the purchaser of property sold
for delinquent taxes, or his assignée, must 30 days previous to the ex-
piration of the time for rédemption, or 30 days before he applies for
a deed, serve upon the owner of the property purchased, or upon the
person occupying the property, if the property is occupied, a written
notice stating that said property, or a portion thereof, has been sold
for delinquent taxes, giving the date of the sale, the amount of prop-
erty sold, the amount for which it was sold, the amount then due, and
the time when the right of rédemption will expire, or when the pur-
chaser will apply for a deed. The tax sale under which appellants
herein claim was had March 15, 1915, or 5 days after the Hornitos
Gold Mining Company conveyed the land to one C. H. Perry ; but the
statute was not complied with by notice to the Hornitos Gold Mining
Company at least 30 days before that sale.
In Chapman v. Jocelyn, 187 Pac. 962, decided May 31, 1919, the
Suprême Court of California reviews the earlier décisions, and, after
holding that the production of a tax deed in évidence establishes a
prima f acie title, said :
" 'But several years subséquent to tbe foregoing lej^islation, a statute was
cnacted provlding tliat the pui'chaser of property sold for délinquant taxes,
or bis assignée, must, 30 days previous to the expiration of the time for re-
dejuptlon, or 30 days before he applies for a deed, serve a notice upon the
owner. * ♦ * The service of this notice is not one of those matters es-
tablished prima (acie by the deed under section 37S6, supra; but It is in-
sisted under section 37S7, supra, the deed ipso facto is made conelusive évi-
dence of such service. * * * As already suggested, this enactment of tha
^législature requlrlng notice to be served, etc., is of much more récent date
GINACA V. PETERSON 909
C262 FJ
than section 3787 of the Political Code, and it Is very apparent, upon an in-
spection of tliis provision, tlint tlie Législature never intended that It should
corne within the purview of that section. It certainly should not be held by
this court to be embraced within the rules of évidence there provided, tn the
absence of nn express déclaration to that efl'ect, for the section is sovere and
rigid in its opération.' * * * It is évident that the Leglslatui'e intended
each notice to contaln the same stateraent of the amount due * * * at the
date of the sale. * * • The point that the notice fails to conform to the
law, in that it contains a statement, in eftect, that the whole tract will be Bold
to the purchaser who is willing to pay the amount due, etc.. Is well taken,
for the reason that no compétition is invlted. As said in section 80 of Black
on Tax Titles, page 103: 'The notice must also follow the statut© in statlng
whether the whole tract will be sold, or an undivided Interest in it, or a des-
ignated portion of it, or as much of it as may be found uecessary. If the
collector gives notice of a sale vyhich in this respect will exceed his authority,
it is void.' The statement in the notice that sale would be to the bidder who
will pay the amount due on the bond, together with the cost of the publica-
tion of this notice, is also an incorrect statement of the tenus of the sale as
required by law."
Hère appellants failed to submit any évidence that any notice of
sale was given, or that the notice of sale which may hâve been given
was such as complied with the requirements of tiie statute. They
therefore failed to show any title under the tax deeds upon which
they rely, or under the deeds from the tax collector to Ttirner and
Busano, to which référence has hereinbefore been made. See, also,
Davis V. Peck, 165 Cal. 353, 132 Pac. 438; Strauss v. Canty, 169
Cal. 101, 145 Pac. 1012; Johnson v. Taylor, 150 Cal. 201, 88 Pac.
903, 10 Iv. R. A. (N. S.) 818, 119 Am. St. Rep. 181 ; Krotzer v. Doug-
las, 163 Cal. 49, 124 Pac. 722. Another grave defect apparent is
that the assessment for a large part of the property involved was
made against M. L. Rogers, notwithstanding the fact that the as-
sessment roll showed that the lands described had been conveyed by
deed from S. Webber Parker who gave the mortgage for $48,000, to
the Hornitos Gold Mining Company. The assessor does not appear
to hâve had authority to assess the lands against M. L,. Rogers.
Again, on the face of the tax roll Rodgers' name appears as M. L.
Rogers, and in subséquent documents it was spelled Rodgers and Rog-
ers. There is no évidence to show that notice of the proceedings re-
quired to be given by the statute was given to Rogers or Rodgers.
Plenderson v. De Turk, 164 Cal. 296, 128 Pac. 747.
It is urged that an action to quiet title cannot be maintained, unless
the title of the plaintif? by occupancy has ripened into a title by pre-
scription, or, if based upon color of title, by the payment of taxes.
Appellants cite section 1(X)6, California Civil Code, which contained the
gênerai provision that occupancy for any period confers a title suffi-
cient against ail except the state, and those who hâve title by prescrip-
tion, with the proviso added in 1915 to the effect that title conferred
by such occupancy shall not be a sufficient interest in real property to
enable the occupant or his privies to maintain an action to quiet title
under the provisions of section 738 of the Code of Civil Procédure of
California, unless such occupancy shall hâve ripened into title by pre-
scription. EHscussion of this statute is irrelevant, because appellee
makes no claim of title by adverse possession, but predicates her right
910 262 FEDERAL REPORTER
upon the statutes of California (sections 318, 319, 320 and 321, of the
Code of Civil Procédure), which refer to actions for the recovery of
real property or the possession thereof.
[4] It is said that a stockholder of a corporation which has forfeit-
ed its charter cannot as a corporation convey real property of the cor-
poration, and that one not shown to be a director in office at the time
of the forfeiture of the charter of the corporation cannot properly exé-
cute a deed as président and trustée. The évidence, however, shows
that at the time of the exécution of the deed of March 10, 1915, S. W.
Parker was the président of the Hornitos Gold Mining Company and
owner of ail of the capital stock of the corporation. We believe that
he had cmiple power to do with the property of thé corporation and
to make conveyance of property, and that it is not in the power of any
one to complain of any disposition made by Parker of the property, ex-
cept, of course, creditors existing at the time of the disposition. Have-
meyer v. Superior Court, 84 Cal. 327, 24 Pac. 121, 10 h. R. A. 627,
18 Am. St. Rep. 192; Civil Code Cal. § 400; Reed & Co. v. Harshalf,
12 Cal. App. 697, 108 Pac. 719; Relley v. Campbell, 134 Cal. 175, 66
Pac. 220; Deming v. Maas, 18 Cal. App. 330, 123 Pac. 204.
[5] Passing next to the unpatented mining claims : It is urged that
an adverse claimant must be a citizen of the United States, or must
hâve declared her intention to become a citizen of the United States.
That is the rule, doubtless, where the adverse claimant endeavors to
prosecute an adverse suit against one who applies for a patent under
the mining laws of the United States, and wherein sudi adverse claim-
ant seeks to obtain title to the mining claim for himself or herself. On
the other hand, an alien is not prevented f rom owning unpatented min-
ing claims, and an alien so owning may protect his property rights in
the mining claims in adverse proceedings bef ore the Land Department
of the United States or in the courts, although he may not acquire
title from the United States through such proceedings. Âltoona Q. M.
Co. V. Intégral Q. M. Co., 114 Cal. 100, 45 Pac. 1047.
It is urged that, where the défendants apply for patent, the plaintiff
in a suit pending prior to such application should, by supplemental pro-
ceedings, base the existing suit upon the rights granted by section 2326
of the Revised Statutes, and hâve the controversy determined accord-
ingly. This may be accepted as correct where the adverse claimant is
lawfully qualified to receive a patent from the United States, and, as
akeady indicated, where she seeks such patent in the adverse suit.
But the proposition is not pertinent to the case before us, for hère the
adverse claimant is not qualified to receive patent from the United
States, and has not sought such patent in thèse suits, but only en-
deavors to protect her property from being unlawfuUy taken from her,
and from having a cloud put upon the title by the unlawful acts of the
appellants.
It is said that, the Joséphine location being in fieri and the plaintiff
having filed no supplemental pleading, there was no authority in the
District Court to détermine that the title to the mining claims vested
in the plaintifFs. Bat the title involved in this controversy is not in fieri.
There never has been a détermination that the title to the fee in the
TJOSEVIG V. DONOHOE 911
C262 FJ
mining claims involved was in the appellee, but merely that as against
thèse appellants appellee has the valid and légal title to the mining
claims involved. It is therefore of no concern to the United States,
other than to be advised to whom the mines are awarded by the court,
to the end that the gênerai govemment may net issue patent to a party
not entitled to the same. Hâd the United States issued patent to appel-
lants, then Ellen Peterson, by supplemental pleading, could obtain a de-
cree that the appellants were holding such title in trust for her.
It is apparent that the mining claims were located as required by
law, and that appellee or her grantors were in possession for over five
years, and did the necessary assessment work upon the claims until
1916, when appellants interfered with her and in eflfect ousted her from
possession.
We find no error in the decree of the District Court.
Affirmed.
TJOSEVIG et al. v. DONOHOE et al. *
(Circuit Court of Appeals, Nlnth Circuit. February 2, 1920.)
No. 3360.
1. Tbusts ig=5l7, 18(3), 101 — Tkttst aeises fbom contract to convet Pbop-
BRTY IN CONSIDERAllON OF SEBVICES, NOT WITHIN STATTJTE OF I-RAUDS.
Wliere, on performance by complainants of sei'vices under a wrltten
contract witli défendants, complainants became entitled to conveyance
of an Interest In mining claims, légal title to which was In défendants,
from that time défendants held complainants' interest in trust, and such
trust relation cannot be attributed to a subséquent oral agreement to
defer the conveyance, so as to bring it within the statute of frauds.
2. Deeds <s=:>6 — Agbeembnt xo convet pbopertt not converted into con-
VBTANCE.
A contract provlding that, on performance by complainants, défendants
should convey to them an Interest in certain property, held not converted
from an agreement to convey into a conveyance by a further provision
that, if défendants should be unable or refuse to convey, It should be
treated as conveyance.
3. Mines and minebals <S=>54(2) — Construction of quitclaim as to peop-
ebtt conveyed.
Where the grantors in a quitclaim deed to miniug property represented
that they were sole owners, and they in fact held the légal title of record,
which they purported to convey, they cannot claira, as against the owner
of an équitable interest who afflrms the sale, that their deed dld not
convey such interest.
•t. Appeal and ebbor i@=3878(1) — Appellee not entitled to modification
OF DECEEB.
A complainant, who does not appeal from a decree awarding hlm affirma-
tive relief, cannot review it as to the déniai of a portion of the relief
sought.
Appeal from the District Court of the United States for the First
Division of the District of Alaska; Robert W. Jennings, Judge.
Suit in eqûity by T. J. Donohoe and Edmund Smith against Chris-
tian Tjosevig and others. Decree for complainants, and défendants
appeal. Affirmed.
See, also, 255 Fed. 5, 166 C. C. A. 333.
Ê=3For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes
•Certiorarl denied 251 U. S. — , 40 Sup. Ct. 396, 64 L. Ed. — .
912 262 FEDERAL REPORTER
The appellees, In a snlt which they brought agalnst the api)ellaiits, the
Tjosevjg Copper Company and other parties défendant, alleged that the appel-
lees and appellants entered Into a contract by vvhldi tiie appellees, as attor-
neys at law, wers to represent the appellants in litigation conceming their
interests In certain deslgnated miniug clalms. In considération of which the
appellants were to deed to the appellees an undivlded 1^ one-hundredths In-
terest of the total Interests remalning to the appellants after the conclusion
of such litigation; that It was agreed in the contract that said speclfled un-
divlded Interest in and to each of the clalms should be conveyed luimediately
after the settlement of the litigation by good and sufflcient quitclalm or min-
ing deed, and that In case the appellants were unable or refused to exécute
said deed the contract should be understood to be "a conveyance, and the sald
parties of the flrst part hereby give and grant unto the said parties of the
second part, their heirs, exocutors, admlnistrators, and assigns, the said un-
divlded TYz one-hundredths in and to said above-descrlbed Iode mining clalms,
to hâve and to hold the same unto the sald parties of the second part, their
heirs, execntors, admlnistrators, and assigna, forever." The complaint alleged
that the appellees performed sald contract on their part, resmlting In a decreo
on Aprll 6, 1911, the effect of whlcîi was set forth, but that the appellants
Ignored their rights and sold the clalms for a large amount of money and
stock, under some kind of an arrangement with the défendant corrwrations
under which some of the money has bcen paid, and the remainder of money
and stock bas been placed In escrow, and they prayed that they be adjudged
to be owners of their percentage In the money and stock for vrhlch the said
clalms had been sold, and prayed for an accountlng.
The appellants filed their joint answer, admltted the contract, and alleged
the sale to hâve been for |117,000 in cash and 125,000 shares of stock, but al-
leged that the sale was a quitclalm of their Intex-ests only, and no more, in
some of the clalms mentloned in the decree of 1911, and of certain otlier
clalms net so mentloned. The answer admltted that at tlie thne when the
same was flled, March 3, 1917, the $117,000 had been paid to the Flrst Bank
of Cordova as trustée, and alleged that whatever interest the appellees ever
hfld had become forfelted to the api'ellants for nonperformauce oi' their
proportion of the assessment work under and by virtue of regular proceedings
which were set forth.
The appellees replled, denylng that the appellant's deed was only a quit-
clalm of their rlght, tltlc, and Interest, and alleged that the othor clalms
embraced in the conveyance were of no value. Concernlng the alleged for-
feiture, they alleged that there was a paroi contract by which the api>ellants
were to do the assessment work for the appellees in considération of the latter
looklng after the légal end and endeavorlng to etfect a sale, wliich contract
appellants performed, and they denied that the forfeiture proceedings were
légal.
The appellees thereafter flled tlieir auiended and supplcmental complaint,
in which, in addition to the principal allégations of the original complaint,
they alleged that the priée to be recelved by the appellants for the clalms
was $121,000 in cash and 125,000 shares of stock, and that tlie cash had beeu
paid to the Flrst Bank of Cordova as agent and trustée of the appellants.
To the amended and supplemental complaint Christian and Eli Tjosevig
flled their joint answer, setting up, as before, the défense of forfeiture of the
appellees' rights and of tJie quitclaini only of the appellants' rights, and al-
leglng that the sale was made in considération of the conveyance of claims
and interest in addition to those mentloned lu the contract, to which addltional
clalms and interests ttie appellees had no rlght or title, and that thèse addi-
tioual clalms and interests were of great value, and that there was no way of
deterralning or asoertalning, in case the court should flnd that the appellees
were entitled to any part of the money recelved by the appellants, what their
proportion or share should be, and alleglng further that »/4 8 of the sum recelv-
ed was the sole property of the appellant Halvorsen, and that for that interest,
so belonging to him exclu.slvely, he was to receive $20,000. And the answer
pleaded estoppel agalnst the appellees on the ground, as alleged, that they had
failed to assert any claim to the miniug clalms, and refused to accept a deed
TJOSEVIG V. DONOHOE 913
C262 p.)
or conveyanoe thereof, and refnsed to assist In developing the clalms, and
tïiat tliey knew in April, 1916, that negotiations were pending foi- the sale of
the claims, but failed and neglected to assert any rlght or Interest in tbe
same, until after the claims had been sold.
The appellees replied, setting up the paroi contraot as to the i)erfomianee
of asseesment work, denied that the deed çiven hy the appellants was a quit-
claim of only thelr right, title, and interest, denied that »/is interest of the
purchase money belonged to Halvorsen.
The app<4Iant Halvorsen filed his separate answer, alleging that subséquent
to the decree of April 6, 1911, he purchased from Holman, Bkemo, and Hazlet
certain interests wliich were in no way involved in that liligation, and that
he, Joining in the conveyance to the Copper Company, sold to the company
those interests for $20,000, ?3,000 of wbich had been paid to hlm ; the re-
maining $17,000 being the balance of the purchase priée then held by tho
First Bank of Oordova under the Injunction of the court
Tlie appellees replied alleging that Christian Tjosevig was, at the tinie of
the exécution of the contract, the owner of the said interests which later were
so transferred to Halvorsen, and that Halvorsen paid no considération there-
for, but held the saine as trustée for Christian Tjosevig.
The court bolow, upon the évidence, made findings of fact, the substance
of whieh is as foUows: That the contrac-t between the appellees and the appel-
lants was as allesed in the complaiiit; that the appellees i^erfornied the serv-
ices which they had agreed to perfonn, and thereby l)ecame owners of and
entitled to a deed from tlie appellants to an undivided 7% per cent of thu
interest of the appellants In said claims; that on the reqTiest of the appel-
lants Christian Tjosevig and Eli Tjosevig the appellees agreed not to demand
a deed, but that those appellants should hold the légal title to the appellees'
interest in trust for them; that said appellants agreed that they would annu-
ally, until the sale of the mining claims was raade, do and perform ail the
assessment work required by law for the proportionate sharo and interest of
the appellees, in considération of which the appellees agreed that they would
use their best efforts in endeavoring to secure a purchaser for the said prop-
erty, and when called upon would draw the necessary papers, contracts, and
flgreements in conner><inn therewith, and would counsel and advlse the said
Tjosevigs In ail matters coiiiipctpcl with thoir interest, and that pending the
sale of the said property the said Tjosevlgs slhould continue to hold the légal
title to the appellees' interest In trust for them ; that the said appellants,
although they agreed to do the assessment work, neglected to do the annual
assesstnent work, or make the improvements annually required by law, on or
for the benefit of said mining claims during the years 1911 to 1915, inclusive,
and no money was due from the appellees for assessment work, as said ap-
X)ellants well knew when they published the forfeiture notice and attempted
to forfeit the appellees' Interest
The court found that the sale was made in June, 1916, of ail the interest of
the appellants, as well as the interests of the appellees, for $117,000 in cash
and 125,000 shares of capital stock of the Copper Company ; that the appel-
lant Halvorsen joined in said deed for the purpose of conveylng the légal
title to 8/48 interest in certain claims ownned by Christian Tjosevig, the record
title of which had been plaoed In Halvorsen, and which he held as trustée
for Christian ; that possession was dellvered to the Copper Company of ail
said mining claims, and the Copper Company went into the possession of each
and every part thereof, and that said appellants wholly Ignored the rights of
the appellees, and refused to account or pay them any part or portion of the
purchase price ; that in ail said transactions and during ail the time thereof
Cliristian Tjosevig acted as attomey In fact and as agent for Mi Tjosevig
and Andrew Halvorsen ; that the appellees hâve at ail times acquiesced In
the sale of said property, by clalming their full and proper interest in the con-
sidération; that the said appellants ^ere the holders of the légal title In the
mining claims as trustées for the appellees, and did not act In good faith when
they attempted to forfeit the interests of the appellees ; and the court made
findings to tlie effect tliat ail of said forfeiture proceedings were void, and
found that the appellant Christian Tjosevig, with the knowledge and consent
262 F— 58
yi4 262 FEDERAL EBPORTBR
of the other api)ellants, wlllfully and Intenttonally mingled the trust property
wlth th« nontrust prc^erty in such a way as to niake it impossible to ascertain
the relative value of each, or to ascertain whetber the trust pr<^erty, by
being combined with the nontrust property, has not conferred a greater benefit
on the nontrust property t±ian the combinatlon has conferred upon the trust
property.
As conclusions of law the court found that the appellants sold and con-
veyed the appellees' interest nnder and by vlrtue of the deed to the Copper
Compeiny, and that the appellees are entitled to a decree against the appellants
for 7% per cent, of the $117,000, with Interest on tlie same from December 1,
1916, at 8 per cent, per annum, and to 7% per cent, of the 125,000 sharea of
the stock of the Copper Company. From tliat decree the appeal Is taken.
John Rustgard, of Juneau, Alaska, for appellants.
Hellenthal & Hellenthal, of Juneau, Alaska, Lyons & Orton, of Seat-
tle, Wash., 'Donohoe & Dimond, of Valdez, Alaska, and Smith, Chester
& Brown, of Seattle, Wash., for appellees.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
GILBERT, Circuit Judge (after stating the facts as above). [1] It
is contended that a trust relationship between the appellees and the
appellants was neither pleaded nor proved, and the statute of f rauds
is invoked. The statute of f rauds is complied with in the fact that the
appellants held the appellees' interest in trust under a contract which
was in writing and was signed by the appellants, and which created the
trust. It provided that the appellees, after the conclusion of the liti-
gation, should receive from the appellants a deed of a specified un-
divided interest in the mining claims. It was compétent, either by a
paroi agreement or by inaction, to postpone the conveyance. There
is no déniai that it was in fact postponed, and there is no contention
that an interest in the property was ever conveyed to the appellees
after the date of the contract. The complaint plaînly shows that a
trust was pleaded. The appellees, after setting forth in their amended
complaint the terms of the contract and their performance thereof,
alleged that from the date of the original decree, which was obtained
by them under that contract, until the sale to the Copper Company, the
appellants held the interests of the appellees in trust for them.
The appellants urge as against the existence of a trust that the parties
to the contract of 191 1 treated that instrument as conveying title to
the appellees, and they point to the fact that in the interval between
the final decree of April 6, 1911, and the sale to the Copper Company
the appellees signed, together with the appellants, certain options that
were given on the mining properties. There is nothing in that fact
to show that the appellants did not hold the property in trust. It in-
dicates only that the owners of the équitable interest and the owners
of the légal title were working in harmony and had agreed upon terms
of sale. It has no further probative value. Nor does the fact that
after the forfeiture proceedings the appellants claimed the properties
adversely to the appellees négative the existence of a trust. Nor does
the fact that the appellees finally became convinced that the appellants
were intending to "beat them out of their interest" in the property tend ■
to prove that there was no trust. And the same may be said of any
TJOSEVIG V. DONOHOE ^15
(262 F.)
alleged admissions of the appellees that it was incumbent upon them
to contribute to the assessment work.
The appellants are in error in asserting that the court below found
that the appellants were trustées of an express trust created orally.
What the court found was that on the request of the appellants the
appellees agreed not to demand a dt>ed and agreed that the appellants
should hold the légal tîtle to their interest in trust for them. That is
not a finding that an express trust was created by paroi. It is a fînd-
ing that the date of the conveyance was by agreement of the parties
deferred, and that in the meantime the trust which had been created
by the contract continued in force.
[2] The appellants contend that, notwithstanding the deed to the
Copper Company, the appellees still hold whatever interest they had
in the mining claims, that the contract itself operated as a transfer of
title to tlie appellees, and that they hâve not been injured by the deed
to the Copper Company. We are unable to assent to this view. While
the contract contains words of présent grant, it also clearly shows that
it was the intention of the parties that at the close of the contemplated
litigation a deed should be executed to the appellees. Says the con-
tract :
"The said 7% one-hundredths undlvlded Interest In and to each sald claim
shall be conveyed immediately after tlie settlement of the said Utlgatlon as
aforesald by a good and sufBclent quitclaim or mlnlng deed, and in case the
said parties of the first part are unable to or refuse to exécute sald deed as
above, then and In that case this instrument shall be understood to be and
it is hereby agreed to be a conveyance."
It is not shown that the appellants were unable to convey, or that
they refused to convey, and the contingency, therefore, on which the
contract was to stand for a deed, never arose. Instead of executing
the deed at the close of the litigation, as the contract required, the ap-
pellants agreed, as the court below found, to retain the title to the in-
terest of the appellees in order the better to negotiate a sale of the min-
ing claims.
The appellants point to the allégation of the original complaint which
charges that they failed and neglected to convey to the appellees their
interest in the claims. That, however, is far f rom saying that the ap-
pellants refused to convey. The case was tried on the amended com-
plaint. If the original complaint had contained an allégation that the
appellants refused to convey, the appellees were not precluded from
otherwise alleging the facts in an amended complaint. In Williams v.
Paine, 169 U. S. 55, 76, 18 Sup. Ct. 279, 287 (42 L,. Ed. 658) the court
said:
"We agrée generally that, although there are words of conveyance in prœ-
senti in a contract for the piu-chase and sal« of lands, stlU, if from the whole
instrument it Is manifest that further conveyances were contemplated by the
parties, it will be considered an agreeanent to convey and not a conveyance.
The whole question is one of intention, to be gathered from the instrument
itself."
To the same eiïect is Chavez v. Bergère, 231 U. S. 482, 34 Sup.
Ct. 144, 58 L. Ed. 325.
916 262 FEDERAL REPORTER
[3] The appellants contend, further, that it is immaterial whether
the appellees' interest was légal or équitable ; that whatevcr interest in
the premises they ever had they still hâve, for the reason that the deed
to the Copper Company was a quitclaim deed and transferred only the
interest of the grantors. The record leaves no room to doubt that in
conveying the mining claims to the Copper Company the grantors in-
tended to grant, and the Copper Company and its agent understood
that they were to receive, an absolute transfer of ail interests in the
claims. The évidence is that Christian Tjosevig, for himself and the
other appellants, represented that the appellees' interest had been ad-
vertised out, and there was no f ear of any question regarding the title ;
that the grantee had expected to receive a warranty deed, but that a
quitclaim deed was accepted only for the reason that patents had not
yet issued to the mining claims ; that Christian Tjosevig repeatedly stat-
ed that it was the intention to convey a clear title to the whole property,
and that after the appellees brought their suit he stated to the officers
of the purchaser that the appellees' claims were fictitious ; that it was
never his intention to convey anything but a clear title.
In an option for a deed given on April 6, 1916, by the appellants to
Rowe for the sale of the mining claims, the grantors gave the right to
purchase "ail their right, title, and interest in [which said interest in-
cludes the whole] those certain mining claims or Iodes," etc. That op-
tion was forfeited, and on June 6, 1916, when the claims were sold
to the Copper Company, a contract was entered into between the gran-
tors in the deed and the Copper Company, one purpose of which was to
make provision for the terms of payment of the purchase price. It
was agreed in that contract that the Copper Company should hâve the
right to enter upon said mining claims "for the purpose of mining, de-
veloping, and equipping the same, and operating the same as a going
mine or mines, and to sell or dispose of any of the ores so mined or
milled." The contract and the deed are parts of one transaction and
are to be construed together. The contract shows that the Copper
Company was given the unrestricted right to enter upon said mining
claims and to mine and dispose of ail the ores thereof, on the as-
sumption that the appellants and Nils Tjosevig were the owners of
said claims and were possessed of the right to mine and sell ail the ores
therein.
It is the gênerai rule that the grantee in a quitclaim deed takes only
the interest of his grantor in the premises. Lindblom v. Rocks, 146
Fed. 660, 71 C. C. A. 86. In 18 C. J. 314, it is said :
"But the fact that a deed purports to convey the grantor's interest is noc
conclusive of an intention to convey only that interest. The intention, to
be gathered from the whole instrument, must prevail."
In Wise v. Watts, 239 Fed. 207, 152 C. C. A. 195, in giving effect
to a conveyance which was in the form of a quitclaim deed, this court
held that the paramount object in the construction of a deed is to give
eflfect to the intention of the parties, which is to be gathered from
a considération of the entire instrument, read in the light of the facts
and circumstances under which it was executed. The deed made to
the Copper Company had greater efficacy than a mère quitclaim. By
TJOSEVIG V. DONOHOE 917
(262 F.)
its terms it conveyed "ail the estale, right, title, interest, property, pos-
session, claim, and demand whatever, as well in law as in equity, of the
grantors." The grantors held at that time the légal title to ail inter-
ests in the daims as they appeared of record; the appellees' contract
not having been recorded. Taking the language of the deed, together
with the coïncident contract between the parties, and the facts and cir-
cumstances surrounding the transaction, we entertain no doubt that
the deed was, and was intended to be, a conveyance of ail interests in
the claims. Trudeau v. Fischer, 96 Neb. 275, 147 N. W. 698; Gar-
rett V. Christopher, 74 Tex. 453, 12 S. W. 67, 15 Am. St. Rep. 850;
Holland, Adm'r v. Rogers, 33 Ark. 251 ; Plummer v. Gould, 92 Mich.
1, 52 N. W. 146, 31 Am. St. Rep. 567; Dennison v. Ely, 1 Barb. (N.
Y.) 610.
It is contended that the Copper Company had, through Rowe, its
agent, actual notice of the interest of the appellees before making the
purchase ; that Rowe had seen the record at Chitina showing that the
interests of the appellees had been forfeited for nonperformance of
assessment work, and must hâve also seen that the notice showed on
its face that it was absolutely defective. It does not follow from this
that Rowe discovered any defect in the forfeiture proceedings. The
appellants' counsel in the court below had discovered no such defect.
They set forth in the answer that the appellants had acquired the ap-
pellees' interest by forfeiture, and, although they hâve abandoned that
contention in this court, they stoutly maintained it in the court below.
Rowe testified that Christian Tjosevig told him that he had "advertised
ever;vbody out." Said the witness :
"Ile asked me at that time If I Iiad not found the statement to be tnie tbat
they had been advertised out. I adiiiitted I had checked up hls statemenrs
at tlK; office of tho mining recorder at Chitina on my first trip to Alaska, and
had found thein correct aecordoig to the records of that office. There never
was any (jiieslion in my mind but that Christian Tjosevig was transferring
ail the right, title, and interest in the property to tke corporation. He said
many times that everj'thtng was cleaued up."
The appellants advert to the fact that at the time when the appel-
lees began the présent suit a considérable proportion of the purchase
money had not been paid, and they argue that the Copper Company
was not a purchaser in good faith. It would make no différence in this
case, if the Copper Company had notice of ail the antécédent facts in
relation to the appellees' claim of interest and had not paid the pur-
chase price at the time when this suit was begun. The controlling fact
is that the appellants, together with Nils Tjosevig, made a conveyance
of ail interests in the property to the Copper Company. The appellees
had the right to regard the conveyance as a thing accomplished, and to
acquiesce in it, and to require the appellants to account to them for
their proportion of the purchase money then paid or agreed to be paid.
It is not important to inquire what remedy, if any, the appellees might
hâve had as against the Copper Company.
Of the assignment of error directed to the finding that the légal title
to '/«s interest in several claims, which stood at the time of the con-
veyance to the Copper Company in the name of Ilalvorsen, was held
918 262 FEDERAL REPORTBB
by him as trustée for Christian Tjosevig, it is sufficient to say that Hal-
vorsen joined in the conveyance with the other grantors, and thereby
transferred whatever interest he had in the claims. The record is
convincing that he had no right to that */*8 interest. But, if there is
due him any proportion of the proceeds which his coappellants receiv-
ed, his demand is against them and not against the appellees. Halvor-
sen joined with the other appellants in petitioning the court to release
to them ail of the purchase money held in trust, excepting $17,000,
which was deemed more than sufficient to meet the appellees' demand.
The court below went as far as equity permitted in expressing its pur-
pose to direct that any portion of the fund in excess of the amount
awarded to the appellees, with interest and costs, should be tumed over
to Halvorsen.
[4] The appellees ask us to modify the judgment, and they point
to the fact that in the opinion of the court below it was said that they
were entitled to 7y^ per cent, of the $3,000, which the appellants re-
ceived on the forfeiture of the contract to Rowe; the court having
omitted in the decree to add that amount to the judgment. The ap-
pellees, not having appealed from the decree awarding them affirma-
tive relief, cannot review the déniai of a portion of the relief which
they sought. Sanborn-Cutting Co. v. Paine, 244 Fed. 672, 682, 157
C. C. A. 120; Ivasswell Land & Lumber Co. v. Lee Wilson & Co., 236
Fed. 322, 149 C. C. A. 454.
The decree is affirmed.
LANB V. EQUITABLE THUST CO. OF NEW YORK. *
(Circuit Court of Appeals, Elghth Circuit. November 24, 1919.)
No. 5381.
1. RAILBOADS ®=>191 — MORTGAGE TBT7STEE ENTITLED TO DEFICIENCT DECKEE.
The trustée lu a rallroad trust deed lielS, entitled to a deflclency decree
tmder equity rule 10 (198 Fed. xxi, 115 O. C. A. xxl), where the proceeds of
the mortgaged property eold under foredosure decree were Insufflclent to
pay the mortgage debt, and the trust deed expressly authorlzed the trustée
to collect any deflclency tn its own name.
2. MoBTaAGES <S=»559(5) — Suppuementaet deceee fob deficienct, wheee de-
FICIENCT LIABILITT ADJTJDQED IN PEINCIPAL DECEEE NOT APPEALED FBOM.
Where a foreclosure decree, ordering sale of mortgaged property, pro-
vided that In case of deflclency the amount should be reported by the
master, and complainant, trustée in the mortgage, should be entitled to
Judgment therefor, from which decree no appeal was taken, a defidency
decree subsequently entered pursuant thereto fteld not subject to attack by
an imsecured creditor of mortgagor.
8. MOBTGAQES <S=>55Î>(5) — SUPFIOIENCY OF PLEADING TO SUPPORT DEFICIENClf
DECBEE.
A prayer for gênerai relief in a blU for foreclosure of a mortgage ftetd
broad enough to authorlze a deflclency Judgment.
4. OoEPOEATioNS <g=>642(7) — Suit bt roEEiau coepoeation not "doinq busi-
ness IN STATE."
Brlnglng suit by a foreign corporation as trustée to forecloee a mortgage
on real estate situated in the state of suit does not constltute "dolng
business" in that state.
©ssFor other cases see same toplc & KEY-NUMBBR In ail Key-Numbered Dlgests & Indexes
•Certiorarl denled 251 U. S. — , 40 Sup. Ct. 344, 64 L. Ed. — .
LANE V. EQUITABLE TRUST CO. OP NEW YORK 91^
C262 F.)
6. CoTTETs i@=>343 — Pabties on roBEci.osxJBa in fedebal coubt not conteoixbd
BY BTATE STATlTrE.
Rev. St. Mo. 1909, § 2859, requirtng forelgn trustées bringing suit to
foreclose a trust deed on property In that state to joln a résident trustée
as plaintiff, cannot control suits brought In a- fédéral court.
6. Kailroads <S=»196 — Reobganization bt oontbibtjting stockholdees and
bondholdebs puechasing at fobeclosube saul! doeb not constitute pat-
ment op bonds.
That under a plan of reorganlzation stockholders and bondholders of
the old rallroad corporation, wlio contrlbuted casb for the purchase of its
property at foreclosure sale, were to receive stock and bonds of the new
Company, does not raise any presumption tbat the property was wortb
more than the prlce It sold for, or that the bonds secured were to be con-
sldered paid In fulL
Stone, Circuit Judge, dissentlng.
Appeal from the District Court of the United States for the East-
em District of Missouri ; Walter H. Sanborn, Judge.
Suit by the Equitable Trast Company of New York against the Wa-
bash Railroad Company and James B. Forgan. From a deficiency
decree, Rome Lane appeals. Affirmed.
Wells H. Blodgett and Clifford B. Allen, both of St. Louis, Mo., for
appellant.
Théodore Rassieur, of St. Louis, Mo. (George Welwood Murray
and Lawrence Gréer, both of New York City, of counsel, and Murray,
Prentice & Howland and Pierce & Gréer, ail of New York City, and
Jourdan, Rassieur & Pierce, of St. Louis, Mo., on the brief), for ap-
pellee^
Daniel N. Kirby, of St. Louis, Mo. (Nagel & Kirby, of St. Louis,
Mo., on the brief), for Wabash Ry. Co., by leave of Court.
Before STONE, Circuit Judge, and MUNGER and YOUMANS,
District Judges.
YOUMANS, District Judge. On January 30, 1914, a decree of
foreclosure upon a deed of trust was entered in the case of Equitable
Trust Company of New York v. Wabash R. R. Co. and James B.
Forgan. The property of the railroad company covered by the deed
of trust was ordered sold, and sale of the property was accordingly
made. The amount realized from the sale was not sufïîcient to pay
the indebtedness secured by Ihe deed of trust. On March 8, 1918,
the Equitable Trust Company filed a motion under equity rule 10 (198
Fed. xxi, 115 C. C. A. xxi) for a deficiency judgment against the rail-
road company. The appellant, an imsecured creditor of the railroad
company, on behalf of himself and other unsecured creditors, resisted
the motion.
The pleading filed by appellant is summarized in the brief filed by
his counsel, as f ollows :
"(a) That It was true, as alleged In sald pétition, that the amount realized
from the sale of said mortgaged property was not sufflelent to pay the amount
due as principal and Interest of said bonds.
"(b) That the mattera set forth and alleged In th© foreclosure blU of the
©ssFor other cases see same toplc & KBY-NDMBBR In ail Key-Numbered Digtjsta & Indexe»
920 2G2 FEDERAL KEPOETEE
Equitable Trust Company were not sufflclent to eutltle sald trust Company to a
I)ersonal judgment agalnst sald Wabasli Rallroad Company for any deflciency.
"(c) That sald foreolosure decree was entered January 30, 1914, and that a
sale thereunder was had July 22, 1915; that at the Instance of sald trust
Company the recelvers under sald foredosure blll were dlscharged on the 18th
day of September, 1916, and that by the consent and procurement of sald trust
Company ail the unmortgaged property and assets of the Wabash Rallroad
Company were taken over and transferred by sald receivers to the new Wabash
Eallway Company, and that no steps were taken by sald Equitable Trust Com-
pany to procure a deflciency judgment untll after proceedlngs had been tn-
stltuted by gênerai oredltors for an accountlng and recovery of the trust funds
wrongfuUy dlverted as aforesald at the Instance of sald trust company, and
that sald trust comjmny was in equlty now estopped from havlng and recover-
Ing a deflciency judgment for any sum whatever.
"(d) That under the plan of the bondholders and stockholders of sald
Wabash Rallroad Company for the foreclosure of sald mortgage and a sale
of the mortgnged property under a foreclosure decree, and the purchase there-
of by a commlttee representlng sald stockholders and bondholders (as shown
by the record, folio 289), ail olalms and demands of the holders of sald bonds
and of said Equitable Trust Company as trustée agalnst sald Wabash Com;-
pany on account of sald bonds were fuUy satlsfled and dlscharged."
The issue presented by the motion and answer was submitted upon
the f ollowing stipulation :
"It Is hereby stlpulated and agreed between the parties hereto as foUows :
"(1) That the paper hereto attached, marked 'Exhlbit A,' and entitled 'Wa-
bash Rallroad Company, Plan and Agreement of Reorganizatlon,' dated April
28, 1915, is a true and correct copy of said plan and agreement of reorganiza-
tlon, and is made a part of the record In thls proceeding with the same force
and effect as the original copy of said plan and agreement of reorganizatlon.
"(2) That the paper hereto attached, marked 'Exhlbit B,' and entitled 'The
Wabash Rallroad Company Joint Reorganizatlon Commlttee,' dated January
26, 1916, is a true and correct copy of the final report of said joint reorganiza-
tlon commlttee, made to the board of dlrectors of the Wabash Railway Com-
pany, and is made a part of the record in thls cause with the same force and
effect as the original copy of sald final report.
"(3) That the paper hereto attached and marked 'Exhlbit C and entitled
'Method 5' is a correct computation, made by Thomas J. Tobin, of interest on
the prtneipal of the first refunding and extensions mortgage twnds, and on
the aecumulated Interest as provlded In paragraph 10 of the foreclosure decree
by the method as stated upon sald exhlbit Said exhlbit Is hereby made a
part of the record in thls cause.
"(4) It Is agreed that the court may refer to and use in thls proceeding
bound volumes I and II of the prlnted record of the varions proceedlngs in
the Wabash receivership cases, entitled 'Record of Wabash R. R. Co. Re-
ceivership.'
"It Is further agreed that ail or any part of the orders, pétitions, decrees, or
other documents set forth in sald prlnted volumes, and referred to in this
proceeding by either party hereto by approi)rlate références, may be consldered
and used by either party making référence to the same as a part of the record
in thls cause."
[1 ] I. The first ground urged by counsel for appellant is that equity
rule 10 does not authorize the entry of a deflciency judgment in favor
of a trustée to whom the défendant is not indebted. In support of this
contention reliance is placed upon the case of Mackay v. Randolph-
Macon Coal Co., 178 Fed. 881, 102 C. C. A. 115, decided by this court.
In that case a deficiency judgment had been taken by a trustée tor
bondholders under a deed of trust. The défendant corporation had
been adjudged a bankrupt, and the remainder of its estate was being
LANE V. EQUITABLE TRUST CO. OP NEW TOEK 921
(262 P.)
admitiistered in the bankruptcy court in the Eastern district of Mis-
souri. With the Intention of having the trustée in bankruptcy bring
suit in the state of New York against the stockholders of the bankrupt
for unpaid subscriptions to stock, the trustée for the bondholders pre-
sented bis deficiency judgment for allowance in bankruptcy. In the
statement of facts Judge Amidon, speaking for the court, said :
'The only claim proven In bankruptcy Is the deficiency decree, and the
trustée in bankruptcy would, of course, hâve no higher right than the holder
of that claim. Boing apprehensivc that the trustée under the mortgage mijçht
not be a 'creditor' of the corporation who would be entitled to raaintain the
suit against stockholders for their unpaid subscriptions, holders of the Iwnds
secured by the mortgage roade due proof of the saine before the référée, and
asked that they be allowed as clalms against the estate. The référée, bcing of
the opinion that the bonds had been merged in the deficiency judgment, disal-
lowed the daims, and his ruling was afflrmed on appeal to the District Court.
The bondholders seek a review of that action by the présent appeal."
The only question before the court was whether each separate bond
was merged in the deficiency judgment, so as to prevent a separate al-
lowance in bankruptcy on the bond. On that point the court said (178
Fed. 884, 102 C. C. A. 118):
"It Is manife.st that the appeal turns mainly upon the question whether the
cause of action arising out of the bonds was merged In the deficiency deci-ee.
Both merger and res adjiidieata lie in the same field. They are not, however,
identical. A point may heoome res adjudicata as to one cause of action in a
suit upon an entirely indepeudent cause of action between the same parties, if
It has been there directly Utigated. Merger, on the contrary, cannot resuit
unless the causes of action in the two sults are identical."
The court said also :
"As between the parties to the foreclosure suit, the deficiency decree Is, ol
course, conclusive of evsry fact nocessary to support the decree. It forecloses
tnquiry as to whether the court had authority to enter a deficiency judgment.
Hateher v. Hendrie, etc., Supply Co., 133 Fed. 267, 272, 6S C. C. A. 19. But the
suit against the stockholders is not between the parties to the foreclosure
action. It is pending in the state of New York. By the décisions of the hlghest
court of that state it is doubtful whether a judgment against a corporation
is more than prima fade évidence of the creditor's deljt in a suit against
stockholders. Cook on Corporations, |§ 209 and 224. If that should be the
holding of the court in the action of the trustée in bankruptcy against tlie
stockholders of thls corporation, the défense would be open to them that the
trustée under the mortgage had no right whatever except to enforce the aecu-
rity, and was in no sensé a creditor of the corporation. The peculiar language
of the covenaut in the mortgage, to say the least, glves color to such a défense.
"The principle of merger has its foundation mainly in the maxim : 'Nemo
débet bis vexari pro una et eadem causa.' That maxim has no application to
tho facts of thls case. No one could possibly be vexed by costs or litlgatlon
through the allowance of the bondholders' clalms. No costs could accrue, and
it was not necessary to summon any person to the hearing of the clalms. An-
other reason that has gulded courts in barring a second action for the same
cause Is that the Judgment already entered afEords to the plaintifC ail the Ju-
dldal aid that could be obtained from a second judgment. In the présent case
there is good reason for saying that the allowance of the bondholders' claims
would furnish the trustée In bankruptcy a much better basis than the defi-
ciency decree for his suit against the stockholders. The clalms could hâve been
allowed without the posslbllity of injury to others. The référée had full
power, both by his order and his subséquent control over the administration
of the estate, to safeguard ail interests from any préjudice from the allow-
ance of both clalms.
922 262 FEDERAL REPORTER
"The whole case Is therefore reduced slmply to tUs: Should the court of
bankruptey liave alded thèse creditors by removlng one of the apprehended
dangers from their pathway, vvhen it could hâve done so wlthout the slightest
cost or prejudicse to any oneî The reason of the rule which it thought deprived
It of the power to grant the ald was wantlng In thls case, and we thlnk the
nile itself, even if otherwise applicable, shoiild not hâve been enforeed."
It was not held in that case that the deficiency judgment was invalid.
It was held that the doctrine of merger did not apply. It is true that
language was used in that opinion which went beyond the point in-
volved in the case, as stated in the opinion, but "the language of the
opinion cannot be separated from the facts of the case." Coca-Cola
Co. V. Moore, 256 Fed. 640, 643, C. C. A. .
The case of In re A. J. Ellis, Inc. (D. C.) 242 Fed. 156, is also cited
by counsel for appellant as sustaining their contention. That case
arose in the state of New Jersey. The question involved was the right
of the trustée for bondholders in a deed of trust to prove a deficiency
judgment against a bankrupt corporation. The référée in bankruptey
refused to îdlow the claim. Upon pétition for review the District Court
said:
"In New Jersey, a separate suit at law upon the bond is necessary to seeure
Judgment for deficiency in the foreclosure of mortgages."
The cotirt then quoted the sections of the statute of New Jersey
making that requirement. The court then in its opinion proceeds to
say:
"The cause of action arislng out of the bonds in thls case waB not merged In
the deficiency decree. The trustée could not prosecute a separate action at law
upon the bonds in order to seeure a deficiency Judgment ; nelther can it prove
this deficiency claim, which, however, need not be redueed to judgment in or-
der to be proved. In re McAualand (D. C.) 235 Fed. 173. There is some au-
thority in apparent conflict witli the conclusion herein reached (Grant v.
Winona, etc., S. W. R. R. Co., 85 Mian. 422, 89 N. W. 60; Laing v. Queen
City Ry. Co. [Tex. Oiv. App.] 49 S. W. 136) , yet the décisions in those cases are
explalned in part, at least, by the provisions contained in the mortgage and the
provisions of the statute in those jurisdictions. A deficiency decree In those
jurisdictions may be entered In the foreclosure proceedings."
The court distinguished the practice in New Jersey from the prac-
tice in other states.
Counsel for appellant in their brief say that the above case was
affirmed by the Court of Appeals of the Third Circuit in 252 Fed. 483,
164 C. C. A. 399. While that is true, a careful reading of the opinion
of the court disdoses that the question of the allowance of the defi-
ciency judgment was not considered. With référence to the facts in
that case the court said :
"The undisputed facts are as follows : In June, 1910, the bankrupt, A. J.
Ellis, Incorporated, executed 200 bonds, eaoh for Ç500, to the New Jersey
Title Guarantee & Trust Company as trustée for the future holders. The
bonda were 10-year 6 per cent obligations, interest and principal payable at
the trustee's office In Jersey City, and were secured by a mortgage on real and
Personal property. If certain specifled defaults should oceur, the trustée was
bound to foreclose if two-thlrds of the bonds should so request Default dld
occur, the request was made, and in May, 1915, the company flled a fore-
closure bill in the state chancery. At thls tlme the bankruptey proceedlng
was in progress — the adjudication had been entered in March — and Me-
LANE V. EQUITABLE TRUST CO. OF NEW TOEK 923
C282 F.)
Bumey, the trustée In bankruptcy, was made one of the défendants In the blll
by i)erniission of the District Court. There was no défense, and In October au
the mortgaged property was sold for $50,000. As the decree had been for
more than $86,000, wlth Interest, and, as certain costs and fées had also ac-
crued, the resuit was that the sale left nearly $38,000 of the mortgage debt un-
paid. A deed for tie property was made In Deeember, 1915, and a month later
the trust company on behalf of the bondholders filed a clalm In bankruptcy for
the deficiency. McBumey objected, and in October the référée dlsallowed the
clalm; his dlsallowance being afBrmed by the District Cîourt on Aprll 27,
1917. 242 Fed. 156. From thls order the flrst appeal now before us was taken
by the trust company.
"The clalm was rejected on the ground that It should hâve been made by the
bondholders themselves and in thelr own names, and accordtngly on April
30 a pétition to amend the claim was flled by William J. Sloane and Babette
Mohler, who held ail the outstanding bonds, except eight; thèse being unrepre-
sented in the proceetlings, bolh below and in thls court. The petitioners aver-
red Inter alla that after the foreclasure sale a deflelency of $230.04 exlsted on
each bond, and that they had requested and Instructed the trust company to
act as their agent to prove thelr clalm against tiie bankrupt estate for such
deficiency, that the company had proved on behalf of ail the bondholders, and
that the petitioners had ratifled and did ratlfy whatever the company had
done as thelr agent, praylng leave to amend the proof so as to malie It a direct
clalm by William J. Sloane and Mrs. Mohler upon the bonds held by them re-
speotively. The District Court allowed the amendment, and the second appeal
Is from thls order."
It is thus seen that two appeals were taken, one on the refusai to
allow the deficiency judgnient, and the other on the question of allow-
ing two bondholders, who held ail outstanding bonds except eight, to
amend the proof theretofore made hy the trustée in the deed of trust,
so as to make it a direct claim by the two bondholders on the bonds
held by them respectively. On thèse two points the Court of Appeals
said :
"We need not consider the question ralsed by the flrst appeal. The only
bondholders on this record are the two just named, and if they were properly
allowed to adopt the tnist company's clalm already on file the company's
appeal becomes académie. We thlnk Judge Davis was rlght in allowing tbe
amendment. The claim set forth ail the facts wlth particularlty, and express-
ly stated that the company was actlng for the bondholders. Every one knew
the facts and was aware that the company did not own the bonda and eould not
beneflt by the balance stlll due on the mortgage debt Whether tt had a formai
légal rlght to use Its own name while ooUecting the money for the bondholders
was a matter of dispute; If it had, the bondholders did not need to file indlvld-
ual claims, and we see no reason why they mlght not safely walt untU that
question should be flnally deeided. In re Standard Co. (D. O.) 186 Fed. 586.
Instead of waitlng, however, the bondholders assumed that the comi)any mlght
be wrong, and (pendlng the final décision) took steps to amend the clalm, thua
acqulring the second string for thelr bow. Save ta the dlsputed point, the
company's proof was complète; the objection made to it was wholly based on
a rule of procédure, and had no support in the merits, for the balance was
undoubtedly due to the bondholders, and the company had authorlty to make
the clalm as agent The only mlstake (if mlstake it were) consisted in falllng
to set forth posltlvely that the real credltors were themselves asserting thelr
conceded right, and that the company was merely an agent"
The significant sentence in the foregoing quotation is the follow-
ing:
"Save in the dlsputed point, tlie company's proof was complète; the ob-
jection made to it was whoUy based on a rule of procédure, and had no sup-
924 262 FEDERAL REPORTER
port in the merits, for the balance was undoubtedly due to the bondliolders,
and the company had authorlty to make the claiin as agent"
In the case at bar the taking of a deficiency judgment was expressly
authorized and provided for in section 13, article 5, of the deed of
trust, which section reads as f ollows :
"In case default shall be made In the payraent of any Interest on any bond
hereby secured, or in case default shall be made In the payment of tue
principal of any such bond when the aame shall become payable, whether at
the maturity of said bonds, or by déclaration as authorized by thia indeuture,
or by a sale of the mortgaged premises as herelnbefore provided, then, upon
demand of the trust company, the rallroad company agrées and covenants
that It wlll imy to the trust company, for the beneflt of the holders of the
bonds and couiwns hereby secured then outstanding, the whole amount which
shall then be due and payable on ail such bonds and coupons for principal or
interest, or both, as the case may be, wlth interest upon Oie overdue principal
and installments of interest ; and, in case the rallroad company shall fail to
pay the same forthwith upon such demand, the trust company, in Its own name
and as trustée of an express trust, shall be entitled to recover judgment for
the whole amount so due and unpaid. The trust company shall be entitled to
recover judgment as aforesald before or after or during the pendency of any
proceeding for the enforcement of the lien of thls indenture upon the mortgag-
ed premises, and the riglit of the trust company to recover such judgment shall
not be afCected by any entry or sale hereunder, or by the exercise of any other
right, power, or remedy for the enforcement of the provisions of this inden-
ture, or by the foreclosure of the lien thereof ; and in case of a sale of the
mortgaged premises and of the application of the proceeds of sale to the pay-
ment of tlie mortgage debt, the trust company. In its own name and as trustée
of an express trust, shall be entitled to receive and to enforce payment of any
and ail deficlencies or amoimts then remaining due and unpaid upon any aud
ail of the bonds issued hereunder and then outstanding, for the beneflt of the
holders thereof, and shaU be entitled to recover judgment for any portion of
the mortgaged debt remaining unpaid, wlth interest. No recovery of any
judgment by the trust company and no levy of any exécution under any such
judgment upon property subject to the lien of this Indenture, or upon any other
property, shall In any manner, or to any extent, affect or Impair the lien of the
trust company upon the mortgaged property, or any part thereof, or any
rights, powers, or remédies of the trust company hereunder, or any rights, pow-
ers, or remédies of the holders of the bonds hereby secured, but such lien,
rights, powers, and remédies shall continue unaffected and unlmpaired as be-
fore. Any moneys thus recovered or coUected by the trust company unaer
this article, less the cost and expenses of collection and the reasonable com-
pensation of the trust company, shall be applied by it towards payment to the
holders of such bonds and coupons of the amounts due and unpaid upon such
bonds and coupons respectively, such payment in every instance to be made
ratably and without any préférence or priorlty upon présentation of the re-
spective bonds and coupons and tndorsement of such payment thereon, if partly
paid, or upon cancellation thereof, if paid in fuU."
[2] Appellant is not a bondholder. His interest is adverse to the
interest of the bondholders. In the Randolph-Macon and EUis Cases
bondholders were asserting their right to maintain in their own names
suits upon the bonds, instead of maintaining thèse suits in the names
of their agents, the trustées in the deeds of trust. The attitude of
appellant is not comparable with the attitude of the bondholders in
those cases. Hère appellant seeks to defeat the claims of the bond-
holders. He is not endeavoring to aid them in maintaining those claims.
Article 21 of the decree of foreclosure is as foUows:
liANE V. EQUITABLE TRUST CO. OP NEW YOKK 925
C262 PJ
"Deflciency Judgment.
"It Is fiirther ordered, adjudged, and decreed tliat, In case the proceeds of
suoh sale shall not be suffident after the making of the other payments in
article XVIII of thls decree directed to be made, to pay in full the whole
amount of the principal of sald first refunding and extensions mortgage bonds,
together wlth overdue interest tliereon, and ail other sums found by tlils
decree to be due and owing, including recel vers' certificates, then the said
spécial master shall report to the court the ainount of sueli deflciency, and,
upon confirmation of said report, the complainant, as trustée under said tlrst
refunding and extensions mortgage, shall be entitled to hâve judgment agalnst
tiie défendant the Wabash Eallroad Company for the amount of the deflciency,
and shall hâve exécution therefor, pursuant to the rules and practice of this
court."
It thus appears that a deflciency judgment was expressly provided
for in the deed of trust, that in the decree the spécial master was
expressly directed to report the amount of the deflciency, if there
should be one, and that the trustée should be entitled to hâve judgment
for the amount of such deflciency. We think that raie 10 authorized a
deflciency judgment in this case.
Moreover, the flnal decree of foreclosure was entered on January
30, 1914, and no appeal was taken therefrom. That decree declared
the trustée was entitled to a judgment for the amount of the de-
flciency, if the proceeds of the sale should not be sufficient to pay the
amount found due upon the bonds. The court had jurisdiction to en-
ter this decree of foreclosure, whether this issue was decided wrong
or right. It was not open to attack by the appellant, an unsecured
creditor, at the time he made his objection. The amount of the defl-
ciency was left for future détermination, but the right of the trustée to
recover it had been finally adjudicated.
[3] IL The next point urged by appellant is that the prayer of the
original bill was not hroad enough to warrant the rendering of the de-
flciency judgment. Assuming, without deciding or conceding, that
appellant can raise that question, we are of opinion that there is no
merit in this contention. The prayer of the bill was for gênerai re-
lief, and we think that such a prayer is sufficient to authorize the ren-
dition of a deflciency judgment. Seatde, L. S. & E. Ry. Co. v. Union
Trust Co.. 79 Fed. 179, 188, 24 C. C. A. 512; Shepherd v. Pepper, 133
U. S. 626, 10 Sup. Ct. 438, 33 L. Ed. 706; Northwestern Mutual Life
Insurance Co. v. Keith, 77 Fed. 374, 23 C. C. A. 196; Ramsden v.
Keene, 198 Fed. 807, 117 C. C. A. 449; Kansas City Southern Ry.
Co. V. Guardian Trust Co., 240 U. S. 166, 178, 36 Sup. Ct. 334, 60 L.
Ed. 579.
[4] III. The next point urged by counsel for appellant is that ap-
pellee, being a trust company organized under the laws of New York,
could not bring and maintain a suit to foreclose a deed of trust on
real estate in the state of Missouri. The suit for foreclosure did not
constitute doing business in the state of Missouri. Frick Co. v. Mar-
shall, 86 Mo. App. 463; Missouri Coal & Mining Co. v. Ladd, 160
Mo. 435, 61 S. W. 191 ; Meddis v. Kenney, 176 Mo. 200, 75 S. W. 633,
98 Am. St. Rep. 496; Broadway Bond Street Co. v. Fidelity Printing
Ce, 182 Mo. App. 309, 170 S. W. 394.
926 262 FEDERAL REPORTER
[5] IV. The next point urged by appellant is that section 2859 of
the Revised Statutes of Missouri of 1909 provides that a f oreign cor-
poration or individual trustée cannot foreclose a deed of trust covering
property in that state without joining a résident trustée as a party
plaintiflf. That requirement of the statute of Missouri cannot control
the bringing of a suit in a United States court in that state by a f or-
eign corporation. Barron v. Burnside, 121 U. S. 186, 7 Sup. Ct. 931,
30 L. Ed. 915; Butler Bros. Shoe Co. v. United States Rubber Co.,
156 Fed. 1, 84 C. C. A. 167; Dunlop v. Mercer, 156 Fed. 545, 86 C.
C. A. 435.
"It may not be doubted that the judiclal power of the TJnlted States, as
created by the Constitution and provlded for by Congress, pursuant to its con-
stitutional authorlty, Is a power wholly Independent of state action, and
whlch therefore the several states may not by any exertlon of authorlty in
any form, dlrectly or Indirectly, destroy, abrldge, limit, or render Inefflcacdous.
The doctrine is so elementary as to requlre no citation of authorlty to sustaln
it. Indeed, it stands out so plainly as one of the essentlal and fundamental
conceptions upon whlch our constitutional system rests, and the Unes wlilch
define it are so broad and so obvious, that, unlike some of the other powers
delegated by the Constitution, where the Unes of distinction are less elearly de-
fined, the attempts to transgress or forget them hâve been so infrequent as to
call for few cases for their statement and application." Harrison v. St.
Louis & San Francisco K. R., 232 U. S. 318, 328, 34 Sup. Ct 333, 335 (58 L.
Ed. 621, L. R. A. 1915F, 1187).
[6] V. The next contention of counsel for appellant is that, under
the plan of reorganization which preceded the sale under the foreclo-
sure decree and by the adoption of such plan, the bonds were paid in
fuU. The only évidence in the record on that point is the plan itself.
It does not provide that the acceptance of the plan by the stocldiolders
and bondholders of the railroad company shall constitute f ull payment
of the bonds.
The plan provided for the raising of $27,720,000 in cash for the pur-
pose of paying certain liabilities enumerated in the plan, amounting
to that sum. The provision in the plan is as f ollows :
"The foregolng cash requlrements are to be met, as herelnafter provlded, by
payments of $30 per share by the preferred and common stookholders of the
présent company (amount outstanding $92,400,000), whlch payments, so far as
not made by the stockholders, are to be made by the holders of flrst refundlng
and extensions mortgage bonds, and are further to be underwrltten by a
Byndicate $27,720,000."
Provision for unsecured creditors was made in the plan as fol-
lows:
"Unsecured creditors of the "Wabash Railroad Company wlll be entltled un-
der the plan to receive. In settlement and discharge of their clalms duly pre-
sented and esïkWished, 25 per cent thereof in convertible preferred stock B,
at par, and 75 per œnt. In common stock, at par, of the new company."
Terms and conditions were set out in the plan by which holders
of gênerai unsecured indebtedness against the railroad company might
participate in the pian, if they desired to do so.
It cannot be said, because the stockholder in the old corporation thus
acquired stock in the new, that a conclusive presumption, or any pre-
sumption at ail, arises that the property was worth more than the price
LANE V. EQUITABLE TEUST CO. OF NEW YORK 927
(262 P.)
it soW for at foreclosure sale and more than the mortgage debt. In
the opinion in Kansas City Southern Ry. Co. v. Guardian Trust Co.,
240 U. S. 178, 36 Sup. Ct. 337 (60 L. Ed. 579), référence is made to
the fact "that reorganization plans often would fail if the old stock-
holders could not be induced to come in and contribute some fresh
money," and the court further says, in that opinion, "that the necessity
of such arrangementsi should lead courts to avoid artificial scruples."
The record in this case contains no testimony that would sustain
the charge of fraud to hinder and delay the unsecured creditors.
There is no testimony in the record to show that the property which
passed under the foreclosure decree was worth more than the price
it sold for. Appellant relies upon the plan of reorganization alone to
sustain his contention. In our opinion that is not sufficient.
The décision of the lower court should be affirmed; and it is so
ordered.
STONE, Circuit Judge (dissenting). I am unable to agrée with the
resuit reached by the majority of the court, because I think the trus-
tée in this deed of trust had no authority or right to procure a defi-
ciency decree. As to this contention, the position of appellee is that the
terms of the mortgage created an. express trust, investing the trustée
with the spécifie power and duty of recovering such a deficiency de-
cree for the benefit of ail of the bondholders. To this appellant op-
poses the suggestions that the contract cannot enlarge the equity
powers and jurisdiction of the District Court; that such powers, re-
specting mortgage deficiency decrees, exist only by virtue of equity rule
10; that equity rule 10 expressly limits such decrees to amounts
"found due to the plaintiff," and that such language means amounts
owing to plaintiflf as a creditor of défendant.
The language of the mortgage intended is found in section 13,
article 5, quoted in the majority opinion. The provision shows a
clear intention and attempt to invest the trust company with full pow-
er to obtain a deficiency decree for ail the bondholders ; but it is évi-
dent that the jurisdiction of courts cannot be afifected by contracts
between private parties. It is true, however, that contracts may cre-
ate légal relations between parties which place them within a juris-
diction which would not otherwise apply, and if the quoted portion of
the deed of trust makes the trust company the trustée of the bonds for
the bondholders, then it is a creditor of the mortgagor, and fully ca-
pable of enforcing payment, either through a deficiency decree or a
separate suit. Therefore the questions hère are : What is the juris-
diction of United States courts relating to deficiency decrees? and has
the above provision of the deed of trust placed the trust company
within that jurisdiction?
Prior to the adoption of old equity rule 92, now rule 10, there was
no jurisdiction to enter a deficiency decree in a foreclosure suit. Noon-
nan v. Lee, 67 U. S. (2 Black) 499, 509, 17 L. Ed. 278; Orchard v.
Hughes, 68 U. S. (1 Wall.) 73, 11, 17 L. Ed. 560. The existence and
extent of such jurisdiction, therefore, dépends upon the construction
to be given that rule, which is as f oUows :
928 262 FEDERAL EEPORTBB
"In sults for the foreclosure of mortgages, or the enforcement of other Mens,
a decree may be rendered for any balance that may be found due to the
plalntiff over and above the proceeds of the sale or sales, and exécution may
Issue for the collection of the saœe, as Is provided Ja rule 8 when the decree
is solely for the payaient of money."
This rule was adopted as a resiilt of the two above décisions, and
closely followed the latter, appearing in the same volume of the re-
ports (page vii). Both of those cases were instances where the foreclos-
ing mortgagee owned the entire debt secured by the mortgage. The
language of that rule requires that the plaintiiï, hère the trustée, must
be the one to whom the liability represented hy the deficiency decree
is "due." This court has decided that such a trustée, not owning the
bonds, is not the one to whom such amount is due. Mackay v. Coal
Co., 178 Fed. 881, 102 C. C. A. 115; also see In re Ellis (D. C.) 242
Fed. 156. I think that décision controlling and correct, for the rea-
sons given therein. But in addition to what is there said there are
the following considérations, which seem to me worthy of attention:
It must be assumed that in the carefully prepared rules of the Su-
prême Court every word was intended to hâve an effective mean-
ing. The purpose of this rule was to permit recovery of deficiencies
in foreclosure suits, and thus obviate the necessity of a separate ac-
tion for that purpose. The court had in mind that the ordinary par-
ties to such a foreclosure action would be the mortgagee or trustée and
the mortgagor, and it had no intention of permitting persons, not par-
ties to that suit, to obtain relief or to be bound by what was donc
therein. It therefore distinctly specified that deficiency decrees should
go only for "any balance" found "due to the plaintiff." If this is
not the proper construction of the rule, then the court meant nothing
by the words "to the plaintiff," because those words can be eliminat-
ed and still leave a right to recover "for any balance that may be
fotmd due." The rule cannot be thus emasculated. Appellee recog-
nizes that the balance must be due to "the plaintiff," and seeks to in-
terpret the deed of trust as creating the trust company a trustée of
this balance.
The mère statement in the deed of trust that the trustée is made
"trustée of an express trust" does not create a trust, unless the re-
lation so established contains éléments essential to a trust. Was
such a relation created by the language above quoted in the major-
ity opinion from the deed of trust?
"A trust Is where there are rights, tltles, and Interests in property distinct
from the légal ownership." Seyniour v. Freer, 8 Wall. 202, 213 (19 L. Ed.
306) ; also see 39 Oye. 18, and citations.
"A trustée Is not an agent. An agent représenta and acts for hls principal,
who may be either a natural or artiflcial person. A trustée may be deflned
generally as a person in whom some esta te, Interest, or power In or aflectlng
property is vested for the benefit of another." Taylor v. Davis, 110 U. S. 330,
334, 4 Sup. et. 147, 150 (28 L. Ed. 163).
A trustée is "the person who takes and holds the légal tîtle to the
trust property for the benefit of another." 39 Cyc. 19, also page 76,
and numerous citations. It is thus évident that a trust cannot ex-
ist unless there are présent three éléments : A res, or subject to which
BULQER V. BBNSON 929
(262 P.)
the trust attaches ; a trustée, who holds the légal title for the benefît
of another; and a cestui que trust, for whose benefit the légal title
is held. Does this claimed trust possess thèse éléments? I think not.
What was the res, and what title was transferred to the alleged trus-
tée? Clearly the property covered by the deed of trust was not the
res, because this section of the mortgage applies only after that prop-
erty has been exhausted and an unpaid residue left. No title to the
bonds or to the unpaid residue is transferred to the trustée ; that title
in the bondholders is left complète and undisturbed. The attempted
grant was solely and only that of a power to receive payment or to
enforce payment. That this is true is emphasized by the provision that
no sucli recovery by the trustée "shall in any manner, or to any ex-
tent, aflfect or impair * * * ^ny rights, powers, or remédies of
the holders of the bonds hereby secured, but such lien, rights, powers,
and remédies shall continue unaffected and unimpaired as before."
Again, there is no imperative obligation upon the trust company to
seek enforcement beyond the realization upon the mortgaged prop-
erty.
"The distinction between a power and a trust is marked and obvious.
Powers, as Cbief Justice Wilrnot observed, are never Imperative; they leave
the act to be done at the will of the party to whom they are given. Trusts are
always Imperative, and are obllgatory upon the conscience of the party in-
trusted." Stanley v. C!olt, 5 Wall. 119, 168 (18 L. Ed. 502). Also see 39 Cyc.
22, and citations.
Ail that was hère granted was a power or permission to bring a
suit for the benefit of the bondholders. This makes nothing "due"
the trustée in any proper légal sensé of the word as used in rule 10.
BULGER, Supervising Steamboat Inspecter, et al. v. BENSON.
(Circuit Court of Appeals, Ninth Circuit. Febniary 2, 1920.)
No. 3304.
1. PiLOTs <S=3l7 — Inspectoks mat impose penalty, but cannot suspend
LICENSE.
Where the only charge made In the complalnt of a local board of In-
spectors against a licensed pilot, on whlch a hearing was held, under
Bev. St. § 4450 (Comp. St. § 8212), was a disregard of article 16 of the
Pilot Rules (Act June 7, 1897 [Comp. St. § 7889]), the only penalty whlch
may be Imposed, on an adverse flndlng, is the fine of $50, expressly pre-
scribed by secrion 3 of the act (Comp. St. § 7907), and the board is without
power to suspend his llcense In addition.
2. Ikjunction ®=374 — Enforcement or iLijioAr, obdeb suspending pilot's
LICENSE MAY BE ENJOINED.
A fédéral court held to hâve Jurisdiction to enjoin enforcement of an
order of a local board of steamboat Inspectors and of a supervlsing in-
spector, suspending the license of a pilot, where in maklng such order
they exceeded their powers.
Appeal from the 'District Court of the United States for the North-
ern Division of the Western District of Washington ; Jeremiah Neter-
er, Judge.
©=aFor other cases see same topic & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes
262 P.— 59
930 262 FEDERAL REPOHTEB
Suit by George E. Benson against John K. Bulger, Supervising In-
spector, Steamlx)at Inspection Service, Department of Commerce of
the United States, and others, as Local Inspectors. Decree for com-
plainant, and défendants appeal. Affirmed.
For opinion below, see 251 Fed. 757.
Tlie appellee, Benson, a master and pllot of steam vessels, appeared wlth
counsel before tlie appellants, Deerlng and Craft, local Inspectera of the TJnited
States Steamboat Inspection Service at Seattle, to answer the foUowlng letter:
"Sir: Yon, as a licensed offl«er of steam vessels, are hereby chargea with
Inattention to your duties and violation of section No. 4442, R. S. U. S., in
connection with the navigation of the steamer Tolo, of whlch you were master
and pllot, and In charge of the navigation of said vessel when she coUided
with the steamer Magic on October 5, 1917, disregarding the provisions of
article 16 of the Pllot Bules for Certain Inland Waters of the Atlantic and
Pacific Coasts and of the Coast of the Gulf of Mexico, as foUows: 'Bvery
vessel shall, in a fog, mist, falltng snow, or heavy ralnstorm, go at a moderate
speed, having careful regard to the exlstlng clrcumstances and conditions.
• • * A steam vessel hearing, apparently forward of her beam, the fog
signal of a vessel, the position of whlch is not ascertalned, shall, so far as
the clrcumstances of the case admit, stop her engines, and then navigate wlth
caution imtil danger of collision is over.' "
Benson pleaded "not gullty," and after a hearing the local Inspectors found
that the charges preferred were sustained and ordered:
"Pursuant to the authority of this board, by section 4450, E. S. U. S., the
lieense of George B. Benson, master and pilot, * • * is hereby suspended
for a perlod of six months from date of surrender of his lieense to this office,
whlch surrender Mr. Benson has becn directed to make at once."
Thereafter the Treasury Department, through the Collector of Customs,
notifled the appellee that a fine of $50 was imposed uiK)n him pursuant to
article 31 oî the Pilot Rules. Benson appealed from the order of the local
inspectors to the sui)ervising inspecter, but the latter refused to entertain
the appeal unless Benson surrendered his lieense pending the appeal. Benson
then prayed for injunctlon against the enforcement of the order of the local
inspectors, and against the imposition of any penalty other than a fine of
$50 for violation of article 16 of the Pilot Rules, and commanding appellants
to recognize the appellee as a duly licensed master and pilot and to reiustate
him in the fuU enjoyment of liis lieense. After a hearing on the merits the
District Court denied a motion to dismisa the bUl, and made a decree niillify-
ing the order of the local inspectors suspending the lieense issued to Benson,
and enjotned the supervising iuspector and the local inspectors from imposlng
any fine or penalty upon Benson, other than a $50 fine for violation of article
16 of the Pilot Rules. The Inspectors appealed.
Section 4442 of the Revlsed Statutes (Comp. St. § 8204), Régulation of Steam
Vessels, authorizes the inspectors to grant a lieense to pilot a vessel and
provides: "But such lieense shall be suspended or revoked upon satisfactory
évidence of the négligence, imskillfulness, Inattention to the duties of his
station, or intempérance, or the willful violation of any provision of this
title." Section 4450 (section 8212) after providing for the investigation of
the conduct of an oflicer acting under the authority of a lieense, authorizes
examination of an alleged dellnquent and provides that, if the board "shall
be satisfled that such licensed offlcer Is incompétent, or has been gullty of
misbehavlor, négligence, or unskillfulness, or has endangered Ufe, or wUl-
fuUy violated any provision of this title, they shall immediately suspend or
revoke his lieense."
Robert C. Saunders, U. S. Atty., of Seattle, Wash., and Frederick
R. Conway, Asst. U. S. Atty., of Tacoma, Wash., for appellants.
Fred H. Peterson and Philip D. MacBride, both of Seattle, Wash.,
for appellee.
Before GILBERT, MORROW, and HUNT, Circuit Judges.
BULGEB V. BENSON &31
(262 F.)
HUNT, Circuit Judge (after stating the facts as above). [1] The
questions presented are whether the court had jurisdiction to grant re-
Uef and whether the complaint charged more than the offense of dis-
regarding the provisions of Article 16 of the Pilot Rules.
Article 16, already quoted, of the Pilot Rules, is part of section 1,
chapter 4, of the Act of June 7, 1897, 30 Stat. 99 (U. S. Comp. Stat.
§ 7889). Section 3 of the same chapter and same act (30 Stat. 102 [§
7907] ) provides that every pilot who neglects or refuses to observe the
the provisions of the act referred to shall be liable to a penalty of $50.
Under section 4405 of the Revised Statutes, as amended by Act Feb.
8, 1907, 34 Stat. 881 (U. S. Comp. Stat. §; 8159), the supervising in-
specter and the supervising inspecter gênerai, as a board, shall estab-
lish, with the approval of the Secretary of Commerce and Labor, ail
necessary régulations with respect to the steamboat inspection service
and such régulations shall hâve the force of law. Under a prescribed
form (801a) of the General Rules and Régulations of the Board of
Supervising Inspectors, Edition of November 21, 1916, page 144, it is
provided that —
'TTpon the revocation or suspension of the Ucense of any such oflîcer, master,
or pUot, said Ucense shall be surrendered to the local insi)ectors orderlng
such suspension or revocation."
Under the rules of practice for the government of supervising and
local inspectors of steam vessels, in trials of such ofhcers, the inspecter
shall fumish the "accused" with a copy of the charges, "setting forth
specifically their character and the section of the statutes or the rules
of the board that hâve been violated," and an appeal is provided for
to the supervising inspecter, who, in turn, is required to proceed to
investigate the case under the same rules prescribed for the trial of the
accused by the local board.
The contention of the appellants is that the local inspectors had
jurisdiction to make the order of suspension, unless the provisions of
the statutes already referred to with respect to such suspension are to
be censtrued as pénal rather than remédiai. An opinion by the Attomey
General (24 Op. Atty. Gen. 136) is cited as holding that, for the crimes
and misdemeanors which are defined in the steamboat inspection law,
a regular course of procédure through the criminal courts is provided,
but that, where a question arises with respect to the revocation of the
licenses of pilets and engineers, section 4450, heretefere quoted, is
remédiai, and net pénal, and that the revocation of a Ucense, as pro-
vided for in that statute, may be viewed —
"not in the llght of a punishment for an offense committed, but rather as a
remedy placed In the hands of the board of Inspectors to Insure greater eflB-
ciency in the steamboat inspection service, and to guard agaiust obstruction
or injury to commerce. • • • "
We agrée with the District Court that the charge of inattention to
duties and violation of section 4442 in connection with the navigation
of the steamer Tolo dees not "specifically" set forth the character of
the charges against the pilot. The statute evidently centemplated
some statement of facts upon which the alleged inattention to the duties
932 262 FEDERAL REPORTER
of his Station was predicated, and we think that more than the gênerai
language shotild hâve been set forth.
There was a spécifie charge however, that the pilot had disregarded
the provisions of article 16 of the Pilot Rules as quoted, and the
learned judge was correct in ruling that the spécifie allégation should
control, and that the gênerai référence to section 4442 was surplusage.
To the spécifie charge the accused made answer, and after investigation
was found guilty. The question whether or not the statute or rule
is strictly pénal is not of controUing importance, further than to say
that it is pénal in its nature, and should receive a strict construction.
The only charge being that the accused violated article 16 of the Pilot
Rules, the inspectors were only authorized to impose the penalty pro-
vided for by article 31, section 7180, Bames' Fédéral Code (Comp. St.
§§ 7905-7909). Under this rule every pilot who neglects or refuses
to observe the provisions of the act shall be liable to a penalty of $50,
and for ail damages sustained by any passenger to his person or to
his baggage by such neglect, provided that nothing in the rule shall
relieve any vessel, owner, or corporation from any liability incurred by
reason of such neglect or refusai. As no suspension of license is pro-
vided for in case of a violation of article 16, the inspectors exceeded
their authority in ordering a suspension of the license of the appellee
and in directing a surrender of his license.
[2] Our opinion is that the District Court had jurisdiction to en-
join against the doing of iUegal acts by the inspectors and supervising
inspector, and that the decree of the court whereby the order suspend-
ing the license issued to appellee was held nuU and void, and restrain-
ing the inspectors from imposing any penalty other than a $50 fine
for having violated article 16 of the Pilot Rules, is correct
Affirmed.
BENEDIOTO, Treasurer of Porto Rico, v. COMPANIA DE LOS TERROCAR-
RILES DE PUERTO RICO.
(Circuit Court of Appeals, First Circuit February 4, 1920.)
No. 1420.
Taxation <S=>611(4) — Suit to enjoin collection oï taxes kot maiktain-
able fob want of pbopeb parties.
A rallroad company, whose franchise and property were exempted from
taxation, wliich contracted wlth another company to operate its road and
pay for new extensions and equipment held not entitled to maintain a
suit to enjoin collection of taxes levled against property so acqulred, on
the ground that it is the owner and the property Wlthln its tax exemption,
to whlch suit the operatlhg company Is not a party.
Appeal from the District Court of the United States for the Dis-
trict of Porto Rico ; Peter J. Hamilton, Judge.
Suit W the Compania de los Perrocarriles de Puerto Rico against
José E. Benedicto, Treasurer of Porto Rico. Decree for complainant,
and défendant appeals. Reversed and remanded, with directions to
dismiss bill.
• <gz=5For other cases see same topio & KBY-NUMBER In ail Key-Numbered Dlgests & Indexes
BENEDICTO V. COJIPANIA DE LOS PERROCARRnjES DE P. B. 9^^^
C2C2 F.)
Charles Marvin, of Washington, D. C. (Dana T. Gallup, of Wash-
ington, D. C, on the brief), for appellant.
Francis H. Dexter, of San Juan, P. R., for appellee.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
AN'DERSON, Circuit Jurl^-e. The plaintifï (appellee) is the owner
of a franchise for the construction and opération of a railroad System
in Porto Rico, one of the provisions of which is an exemption froni
taxation on its railroad property for 25 years, ending in 1927. When,
in 1902, this exemption was ■ grarted, the railroad System was but
partially built and equipped. Under a contract in 1902 the opération
of the System was turned over to the American Railroad Company of
Porto Rico — the plaintifï, however, to furnish the capital requisite for
completing, equipping, and extending the System. This operating con-
tract was so modified in 1906 as thereafter to place the burden of
f urnishing new capital upon the American Company ; it being secured
therefor upon the equipment and rolling stock purchased and other
facilities created out of the funds so advanced, in some fashion not
very clearly defined, either in the contracts or in the évidence. The
American Company is not entitled to exemption from taxation on any
railroad property owned by it. The exemption right has not been as-
signed, and it is not now claimed to be assignable. Nor is it claimed
that the operating contracts amount to a lease. See opinion of Attor-
ney General Wickersham dated December 1, 1910, 28 Op. Attys. Gen.,
491, where the relations of the two companies and the exemption from
taxation are discussed in détail. So far as applicable to this case, we
accord with the conclusions there reached by the learned Attomey Gen-
eral. Morgan v. Louisiana, 93 U. S. 217, 23 1. Ed. 860; Railroad
Co. V. Commissioner, 103 U. S. 1, 26 L. Ed. 359; Chesapeake & Ohio
Railway Co. v. Miller, 114 U. S. 176, 5 Sup. Ct. 813, 29 L,. Ed. 121 ;
Pickard v. Railroad Ce, 130 U. S. 637, 9 Sup. Ct. 640, 32 h. Ed. 1051.
Since 1906 the American Company has actually furnished and used
for equipment and new construction much more than $1,000,000 of
new capital. Cars used upon the system bear the name of the Ameri-
can Company. Part of the rolling stock is testified to be "security,"
in exactly what légal form does not appear. Part of its advances seem
to be secured by mortgage upon certain property.
For the tax year 1917-18 the défendant, as treasurer of Porto Rico,
assessed the American Company (not the plaintifï) for taxes on the
basis of $1,000,000 property owned by it and used in this railroad
System. On this basis of $1,000,000 there was levied for the first
half of the fiscal year a tax amounting to $6,636.50. This was paid
by the American Company under protest. Suit to recover said amount
was then brought by the American Company in the insular court, dis-
missed on demurrer, and the American Company failed to perfect and
prosecute its right of appeal. There is nothing to indicate that the
American Company has not a plain, adéquate, and complète remedy at
law for any illégal taxes assessed upon it ; but its rights and duties as
a taxpayer are not now before the court. For the second half of the
same tax year a tax of $7,019.12 was levied by the défendant on the
934 262 FEDEEAL REPORTER
same basis of $1,000,000 taxable property. Then this suit was brought
by the plaintiff, the owner of the franchise, seeking an injunction
against the collection of this tax. The gist of the plaintifï's claim is
that the défendant has assessed the plaintifï's property as being the
property of the American Company, thus clouding its title to certain
realty (a pier assessed for $40,000), and subjecting it, as alleged to a
multiplicity of suits to défend its personalty, besides impairing the
obligation of the exemption contract.
The contentions of ûie plaintiff were in part sustained by the court
below, which found that the pier, assessed at $40,000, and the rolling
stock, assessed at $500,000, belong to the plaintiff, and as such were
entitled to exemption from taxation. Thereupon a final decree was
entered, enjoining the défendant, as treasurer of Porto Rico, his suc-
cessors in office, and ail employés and agents of the Treasury Depart-
ment —
"from levylng and coUectlng taxes of any kind or character for Insular or mu-
nicipal purposes under the autttorlty of the Iieglslature of Porto Rico upon
any or ail real property, rolling stock, and ail other property used by tne
American BaUroad Company of Porto Rico and necessary for the opération
of the railroad Unes of the Companla de los Ferrocarrlles de Puerto Rico under
a certain operating agreement made and entered between the said companies
on the 22d day of March, 1902, as modlfled by the agreement of November 15,
1906.
"This Injunction shall be In force until the 24th day of January, 1927, when
the exemption to plaintiff conipauy herelnbefore referred to expires by opéra-
tion of law."
From this decree an appeal was taken to this court. There are 38
assignments of error, with which we are not called upon to deal in
détail. It is enough now to say that they raise, broadly, objections
fatal, in our view, to the maintenance of the action.
In effect, the plaintiff, by this suit, seeks to induce the court to dé-
termine important and difficult questions of title and property rights
as between it and the American Company, and also as to the rights and
duties of the American Company as a taxpayer on its investment of
more than $1,000,000 in the railroad System of Porto Rico. It is too
plain for argument that the court has no jurisdiction to deal with either
class of questions, unless and until the American Company is before
the court. Property derived from the capital fumished by the Ameri-
can Company for this railroad enterprise cannot be adjudicated to be
the plaintiff's property, and thus covered by its tax exemption, without
at the same time detemiining it to be the plaintiff's as against rights
which may be asserted by the American Company. On this record we
cannot legally détermine the facts upon which the plaintiff grounds its
claim for relief in equity.
It may be well to add that this opinion is not to be taken as an
intimation that, apart from the fatal defect as to proper parties, we
accord with the court below in its déductions from the évidence or in
its rulings of law. But on this record we should be dealing with
purely moot questions if we discussed and determined tlie questions of
fact and law with which the court below tmdertook to deal. It is
enough now to hold that the plaintiff has not made out a case within
the doctrine of Greene v. Louis & Intérurban Co., 244 U. S. 499, 507,
BBILL V. JEWETT 935
(262 F.)
37 Sup. Ct. 673, 61 L. Ed. 1280, Ann. Cas. 1917E, 88; Truax v. Raich,
239 U. S. 33, 37, 36 Sup. Ct. 7, 60 h. Ed. 131, L. R. A. i916D, 545,
Ann. Cas. 1917B, 283 ; Phila. Co. v. Stimson, 223 U. S. 605, 621, 32
Sup. Ct. 340, 56 L. Ed. 570; Ex parte Young, 209 U. S. 123, 150, 155.
28 Sup. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas.
764; Benedicto v. Porto Rican Tobacco Co., 256 Fed. 422, 167 C. C.
A. 550; I/x>ney v. Crâne Co., 245 U. S. 178, 38 Sup. Ct. 85, 62 L,.
Ed. 230. Nor does the case fall within the principal approved by the
Suprême Court in Pollock v. Farmers' Trust Co., 157 U. S. 429, 553,
15 Sup. Ct. 673, 39 L. Ed. 759.
The decree of the District Court is reversed, and the case is remanded
to that court, with directions to dismiss the bill, and the appellant re-
covers his costs of appeal.
BRILL V. JEWETT et al.
(Olroult Court of Appeals, Fifth Circuit February 10, 1920.)
No. 3473.
1. CONTRACTB <g=»182(l) OBLIGATION IS PKESUMED JOINT UNLESS DIFFEEENT
INTENTION 18 DISCLOSED.
The presumptlon of law is tliat, wlieii two or more In writing incur an
obligation, the undertaklng Is joint, and not several, unless the languag©
used discloses a différent intention.
2. BiLLS AND NOTES <S=>120— JOINT NOTE NOT BENDEEED SEVEBAL BY AQEEEMENT
SEVEEALLT TO PAY ATTORNEY'S FEES.
Tbe presutnption that a note slgned by two persons and joint in form
was joint, and not several, was not rebutted by the récitals that the m&k-
ers and Indorsers severally agreed to pay reasonable attomey's fées. If
the note was placed In the hands of an attomey for collection.
3. ABATEMENT and BEVIVAL ©=50 — StATOTE HELD to ABROGATE COIOION-LAW
EUtœ AS TO EFFECT OF DEATU OF JOINT OBLIGOB.
Gen. St. Fia. 1906, § 1375, provlding that ail actions for personal In-
juries, thereln specifled, die wlth the person, and that ail other actions
maj' be malntalned in the name of the représentative of the deceased,
provides for the survlval of ail actions, other than those enumerated, on
the death of either obligor or obligée, and abrogates the common-law raie
that the death of one joint obligor discharges his représentative and
leaves the survlving obligor alone liable.
4. Abatement and bevival <g=»50 — Statute as to stjevivai, should be lib-
EEALLY C0NSTEUED.
Gen. St. Fia. 1906, § 1375, as to the survlval of actions, should be llber-
ally construed to efCectuate Ita remédiai purpose.
In Error to the District Court of the United States for the Southern
District of Florida; Rhydon M. Call, Judge.
Action by Louis Brill against Mary B. Jewett and another as exécu-
trices of Florence E. Inman, deceased. Judgment for défendants on
demurrer, and plaintiff brings error. Reversed.
K. I. McKay and R. W. Withers, both of Tampa, Fia., for plaintiiï
in error.
William Hunter, of Tampa, Fia., for défendants in error.
®=aFor other cases eee same toplc & KEY-NOMBBR In ail Key-Numbered Dlgests & Indexe»
936 262 FEDERAL REPORTER
Before WAI^KER, Circuit Judge, and GRUBB and JACK, District
Judges.
WALKER, Circuit Judge. This was an action by the plaintiff in
errer, suing as indorsee, against the défendants in error, the personal
représentatives of Florence E. Inman, deceased, on an instrument of
which the following is a copy:
"$15,000.00. Tampa, Fia., April 3, 1911.
"On deniand after date we promise to pay to the order of the Swann &
Holtsinger Company, fifteen thousand dollars with Interest after maturlty at
the rate of eight per œnt per annunm until paid, for value received, nego-
tiable and payable at any bank in Tampa, Florlda, and If not paid at maturlty,
thls note may be placed In the hands of an attomey at law for collection, and,
in that event, It Is agreed and promlsed by the makers and indorsers, severally,
to pay an addltional sum of reasonable attorney's fées, having deposited with
the sald payée as collatéral securlty for the payment of this note, and any
note given tn extension or renewal thereof.
"Eugène Holtsinger. [Seal.l
"Florence B. Inman. [Seal.]"
It was disclosed by the déclaration as it was amended that Eugène
Holtsinger died intestate after the decease of the other maker of the
note, Florence E. Inman. The défendants by demurrer suggested that
the right of action on the joint note sued on survived only against Eu-
gène Holtsinger or his estate. The demurrer to that eÉect was sus-
tained.
The demurrer was based upon the proposition that under the common
law, which, except as it has been modified, is in force in Florida, if
one of two joint obligors dies the debt is extinguished against his repré-
sentative, and the surviving obliger is alone chargeable. Pickersgill v.
Lahens, 15 Wall. 140, 21 h. Ed. 119.
[1,2] In behalf of the plaintifif in error it is contended that the note
sued on imposed a several obligation on each of the makers of it. The
presumption of law is that when two or more in writing incur an obli-
gation the undertaking is joint, and not several, unless the language used
discloses a différent intention. Atlanta & St. A. B. Ry. Co. v. Thomas,
60 Fia. 412, 53 South. 510; 13 Corpus Juris, 577. The language of
the instrument in question is not such as to rebut that presumption, so
far as the obligations imposed on the makers are concerned. The only
words of severance found in the instrument are those in the part of it
imposing an obligation to pay an attorney's f ee in the event of the note
not being paid at maturity and being placed in the hands of an attor-
ney at law for collection. The severance so efifected seems to hâve been
intended to be between the makers on the one hand and the indorsers
on the otlier hand. The language used in that part of the instrument
does not indicate a purpose to make the obligation it imposes on the
makers a several one of each of them. The conclusion is that if the
above-stated common-law rule still is in force in Florida the note is
not enforceable against the personal représentatives of that one of the
two joint obligors who died first.
[3] The following statute of Florida is invoked in behalf of the
plaintiff in error to support the conclusion that the right of action
BEILL V. JEWETT 937
C262 F.)
agaînst the maker who died first was enforceable agaînst her personal
représentatives :
"Ail actions for personal in.iuties shall die with tlie person, to wit: Assault
and battery, slandor, false Imprisonment, and malicious prosecution ; ail
othor actions shall and niay be maintained in the name of the representatiros
of the deceased." General Statntes of Florida, § 1375.
Under the familiar rule of construction which is expressed in the
maxim, 'Tîxpressio unius est exclusio alterius," we think that the first
clause of the quoted statute is to be regarded as an enumeration of the
actions which die with the person, and as impliedly including a state-
ment to the effect that actions other than those enumerated do not die
with the person. The last clause of the section is not inconsistent with
the just-stated conclusion. It makes ail actions other than those enu-
merated maintainable in the name of the représentatives of the deceas-
ed. The language used puts it beyond question that, in the event of the
death of one who had a right of action other than those enumerated,
the party liable surviving, such right of action is made enforceable
agaînst the latter by the personal représentative of the former. This is
acîmitted by the counsel for the défendants in errer.
To sustain the contention made in their behalf would resuit in giving
to the statute the effect of creating the anomaly of a class of actions
which survive in favor of the personal représentatives of deceased
beneficiaries, but die with the persons of those who incurred liabilities.
Valentine v. Norton, 30 Me. 194.. The statute plainly provides for the
survival of ail actions other than those enumerated. There is no indi-
cation of an intention to make any action survive after the decease of
one party and not survive after the decease of the other. The use of
the words "shall and may be maintained" is what is relied on to give
the provision the effect of making "ail other actions" survive only in
favor of the personal représentatives of the beneficiaries thereof. In
attribiiting such a meaning to the language used It is assumed, and we
think improperly, that an action may not as well be said to be maintain-
ed against one as in his favor.
[4 I But the language of such a statute is to be liberally construed, to
effcctuate the remédiai purpose it évidences. The intention in provid-
ing for the survival of ail actions except the enumerated ones was to
prevent their enforceability being destroyed by the death of a party.
As to such actions there was an abrogation of the common-law rules
as to the effect of the death of a party. We think that the language
of the statute, giving it the meaning and effect which it must be sup-
posed was intended, requires the conclusion that it prevents the death of
one of the joint makers of the note sued on from having the effect of
making the obligation imposed by it enforceable only against the other
then surviving maker.
The averments of the déclaration do not show that there has been
any appointment of a personal représentative of Eugène Holtsinger,
one of the deceased makers of the note sued on. They do not show that
there is in existence any one subject to be sued on it, except the de-
fendants in error, the personal représentatives of one of the deceased
makers. As the asserted right of action survived against the parties
938 262 FEDERAL REPOKTEE
sued, and ît not appearing that there is any one else subject to be sued,
the déclaration was not subject to tlie demurrer interposed. The court
erred in sustaining that demurrer.
Because of that error the judgment is reversed.
CITT OF HAMMOND, IND., et al. v. OAX.UMET COAt, & SUPPLT CO.
(Circuit Court of Appeals, Seventh Circuit January 6, 1920.)
No. 2T18.
1. CouBTs <S=>489(2) — Fedeeai couet mat entebtaik injunction sttit
WHERE VALIDITY OF STATE STATUTE 18 INVOLVED.
Where enforcement of an alleged unconstitutional municipal ordinance
would subject complainant to successive fines aggregating a large amount,
it Is not requlred to resort flrst to the state courts, but may maintaln a
suit for Injunction In a fédéral court.
2. Municipal cokpoeations <S=121 — Applicant foe pbbmit undeb oedinance
not estopped to deny validitt.
That complainant applled for a building permit under a clty ordinance
held not to estop It to attack the valldlty of the ordinance on refusai ot
Its application.
3. Municipal coepoeations <©=»625 — Uîîeeasonable oedinance invalid.
An ordinance prescribing conditions for grantlng a permit for the use
of property for a wood, coal, or lumber yard held invalid as unreasonaWe.
Appeal from the District Court of the United States for the District
of Indiana.
Suit in equity by the Calumet Coal & Supply Company against the
City of Hammond, Ind., and members of its Board of Public Works.
From an order granting preliminary injunction, défendants appeaL Af-
firmed.
W. J. Whinery, of Hammond, Ind., for appellants.
Charles W. Moores, of Indianapohs, Ind., for appellee.
Before BAKER, EVANS, and PAGE, Circuit Judges.
PAGE, Circuit Judge. This suit was started by appellee, hereinafter
known as Company, against appellants, the city of Hammond, herein-
after known as City, and its board of public works, to enjoin the City
from enforcing against the Company the following ordinance, passed
by the City:
"Section 3. Any person, flrm or corporation hereafter desiring to locate,
bulld, erect and maintaln, or establish and maintaln a coal, lumber or wood
yard upon any block or square In sald clty, shall file wlth the board of public
Works his or ItB pétition for a permit, which shaU properly describe the par-
cel of ground upon which It Is proposed to locate sueh coal, lumber or wood
yard, and the same shall be slgned by a majorlty of the property owners
owning property upon both sldes of the street between the two nearest Inter-
secting streets of sald proposed location, of such coal, lumber or wood yard.
Thereupon sald board of public works shall cause forthwith written notice to
be given by letter addressed and mailed to each of the property owners owning
property as aforesaid, stating in such notice that at a tlme and place thereln
named, the sald board wlU consider the pétition for a permit to erect or es-
®s»Por other cases see same toplc & KHIY-NUMBBR in ail Key-Numbered Digests & Indexes
CITY OP HAMMOND, IND. V. CALUMET COAL & STJPPLT CO. 939
(262 P.)
tablish suoh coal, lumber or wood yard; and if the board of public works,
after hearing, be satisfied that the pétition is properly signed by a majori^
of the property owners as aforesaid, tlien in that event a permit shall be
granted by said board of public works to such applicant to erect or estabUsh.
such coal, lumber or wood yard; and thereupon the city controller shall be
authorized to issue a permit to erect and malntain or establish and maintaln
such coal, lumber or wood yard.
"Section 4. Any person, flrm or corporation who shall violate any of the
provisions of thls ordinance shall be flned in any sum not less than twenty-
five dollars ($25.00), nor more than three hundred dollars ($300.00), and every
day that such ordinance Is vlolated shall constitute a separate ofCense.
"Section 5. And be it further ordained and provlded that any coal, lumber
or wood yard erected or established in violation of thls ordinance shall be
deemed a nuisance and may be abated as suoh ; and It is hereby made the dutyi
of the building inspecter of the city of Hammond to abate the same as a
nuisance by proper steps taken."
The Company, desiring to establish a coal yard upon lot B of Eder's
addition to Hammond, on January 8, 1919, filed a pétition signed by
the Company and Giles T. Warner, trustée, as owner of said lot, with
the board of public works, asking for a permit. Property owners re-
siding on Détroit street filed objections. A public hearing was had
and other objections were filed. On Fehruary 5, 1919, the pétition was
denied. The pétition was amended, and again denied. On Febniary
18th the Company commenced a suit in the Lake county circuit court
of Indiana to enjoin the City. The City there filed an answer similar
to its answer hère. That suit was dismissed and this suit was com-
menced on February 25, 1919, in the District Court of the United
States for the District of Indiana.
The bill is based upon the claim that the ordinance is in contraven-
tion of the Fourteenth Amendment of the Constitution of the United
States. The prayer is that the ordinance shall be adjudged invalid and
that the City and its agents shall be restrained f rom in any way enforc-
ing said ordinance.
On February 28th the City filed its answer, insisting upon the va-
lidity and the enforcement of the ordinance. On March 7th Judge
Anderson granted a temporary restraining order, and the City appealed
for the purpose of having the restraining order dissolved.
[1] It is argued that the fédéral court should not entertain ju-
risdiction but that the Company should be left to work out its rights
in the state courts of Indiana, with the ultimate right to come into
the fédéral courts if it shall be f ound that a fédéral question is involved.
Not counting the time spent by the Company in its endeavors to
get a permit prior to the commencement of this suit, 255 days hâve
elapsed to this date. If the Company had established its yard, it would,
if the ordinance is valid, be liable to a minimum penalty of not less
than $6,000 and a maximum penalty of $36,000 up to this date, exclu-
sive of losses in improvements and to business, if interrupted.
Even under the rule in Cavanaugh v. Looney, 248 U. S. 453, 39 Sup.
et. 142, 63 L. Ed. 354, decided by the United States Suprême Court
on January 13, 1919, cited by the City, the Company has a right to
hâve its case heard hère, and it would be inéquitable and unjust and
serve no good purpose to send it to the state courts.
[2] It is argued that, because the Company asked for a permit
940 262 FEDERAL REPORTER
under the ordinance, it thereby waived any right to challenge the va-
lidity of the ordinance.
If the ordinance is invalid, it is clear that the board of pubHc works
had no power to act. The principal authority cited in support of
City's contention that the Company is estopped is Phillips v. Kankakee
Réclamation Co., 178 Ind. 31, 98 N. E. 804, Ann. Cas. 1915C, 56. It
will not be necessary to do more than quote the rule stated in that case
to show that it has no application whatever to the facts hère.
"One who receives a beneflt under an unconstltutlonal law Is estopped froin
denying its constitutionallty."
"One who stands by and without objection sees bis property beneflted by a
public improvement is estopped to deny tlie legality of the proceedings under
which the Improvement was made."
No stretch of the imagination can picture any benefit received or
that could be received by the Company. The whole act was in déro-
gation of its rights.
[3] The City insists that the ordinance is valid. We are of
opinion that the city of Hammond had authority to enact législation of
ihe gênerai character attempted in the ordinance in question, but tliat
the ordinance is invalid because it does not represent a reasonable ex-
ercise of power.
It is doubtf ul if the Company's property cornes within any fair défi-
nition of a "block or square." It is certain that, except as the end of
Hink Street, or the end of Détroit street, whichever it may he, touches
30 feet of the north side of the west end of the property, and except
that there is a thirty foot street, or alley, which would be an extension
of Hink street, between the property in question and the property east
of it, there is no street touching the property, between two intersect-
ing streets. There is no one disclosed by the record who had the
right, under the terms of the ordinance, to either consent to or oppose
a permit. The property owners on Détroit street did not come within
the tenus of the ordinance.
The only authority the board of public works had was to give notice
to the property owners coming within the terms of the ordinance, and
"if it, after hearing, be satisfied that the pétition is properly signed by
a majority of the property owners" described, then to grant a per-
mit. The ordinance gives to the majority property owners (might be
one or more) who happen to own property on a street situated as
specified in the ordinance, the power for any reason, or no reason, ar-
bitrarily, to prevent any property owner f rom using his property for a
coal, lumber or wood yard, no matter where or how it is situated. It
also, in effect, gives the same men the power to brand any such prop-
erty as a nuisance, which may be abated if its owner dares to use it
as a coal, lumber or wood yard. Such an ordinance is unreasonable
and invalid. Eubank v. Richmond, 226 U. S. 137, 33 Siip. Ct. 76, 57
L. Ed. 156, 42 L. R. A. (N. S.) 1123, Ann. Cas. 1914B, 192; Cusack
Co. V. City of Chicago, 242 U. S. 531, Z7 Sup. Ct. 190, 61 h. Ed. 472,
E. R. A. 1918A, 136, Ann. Cas. 1917C, 594.
The action of the District Court in granting the temporary restrain-
ing order is affirmed.
WEICHEN V. UNITED STATES 9*1
(262 P.)
WEICHEN V. UNITED STATES.
(Circuit Court of Appeals, Seventh Circuit. January 6, 1920.)
No. 2724.
L Cbiminal law <®=>1038(2), 1050(1)— Instiîdction in frosecution foe uo-
INQ BUSINESS AS KETAIL LIQUOK DEALER WITIIOUÏ PAYMENT CE TAX NOT EE-
VEESIBLE ERBOB.
Instruction, in a prosecution for carrying on business as retail liquor
dealer witliout paynient o£ spécial tax, that proof o£ a single sale might
warrant conviction, held not réversible error under tbe évidence, where
no exceptions were taken, nor furtber instructions re(iu;;sted.
2. Courts <S=66(2) — Teem of fedeeal court peopebly adjoubned, though
oedeb for adj0uenment was not dieeoted to maeshal ob clkek.
Under Judicial Code, § 12 (Comp. St. § 979), providing that, if a judge
Is unable to attend at any time during a tenn, court niay be adjourned
by the marshal or clerk by virtue of a written order "directed" to him oy
tbe judge, court will be held to bave been properly adjourned, where
recorded entry by judge recites adjournment, but is not directed to any
oliicer, since the offlcers must take notice of the order, and it will be pre-
sumed that they performed their duty.
3. ClUMINAL LAW <®=3322— OfFICEES PRESUMED to HAVE PEEFORMKD TIIEIB DU-
TIKS.
Public officers are presumed to hâve performed their duties.
In Error to the District Court of the United States for the Eastern
District of Illinois.
Criminal prosecution by the United States against August Weichen.
Judgment of conviction, and défendant brings error. Affirmed.
Charles A. Karch, of East St. Louis, 111., for plaintiflf in error.
J. G. Burnside, of Vandalia, 111., and McCawley Baird, of Olney,
IlL, for the United States.
Before BAKER, EVANS, and PAGE, Circuit Judges.
BAKER, Circuit Judge. Plaintiflf in error was convicted under an
indictment in two counts ; the first charging him with carrying on the
business of a retail dealer in spirituous liquors without hâving paid
the spécial tax, and the second count setting forth a similar illégal
business in malt liquors.
[1] 1. Complaint is made of the following portions of the charge
to the jury:
"The law expressly prohiblts or states that any one who makes a sale of
either one or both of malt or distilled spirits is a retail liquor dealer ; one
sale, or a dozen sales, the number is not important, so there is a sale of ei-
ther one or both."
"Tou are trying him for having retailed liquor In the manner and form
as charged in the indictment, and if In the conduct of his business of run-
ning a gambling house he charged his patrons money for the privilège of
participatlng in the game, and if as part of the fumishings they recelved for
the money they pald they also recelved whisky, then the défendant Is guUty
under the first count ; and if for the same considération or any portion
of it they recelved béer from the défendant, then the défendant is guilty
under the second count. If his patrons recelved both béer and whisky as
a portion of the considération for an extra charge of the money, or as gen-
<gS5>For other cases see same toplc & KBY-NUMBBR In aU Key-Numbered Digests & Indexes
942 262 FEDEEAI, REPORTER
eral fumlshlngs of the game or entertainment lu whlch they partidpated,
then he Is guilty under both connts."
No exception was taken to any portion of the court's instructions
to the jury; nor was any request made for additional and more par-
ticular instructions. Weichen's insistence is that the court was undcr
the duty of explaining to the jury that the offense charged consisted,
not in making a particular sale to a particular person at a particular
time, but in carrying on the business of retailing spirituous or malt
liquors. In Ledbetter v. United States, 170 U. S. 606, 610, 18 Sup.
Ct. 774, 775 (42 L. Ed. 1162), the court said:
"Whlle It has been sometimes held that proof of selling to one person was,
at least, prima faole évidence of crlmlnallty, the real offense consists in
carrying on such business, and if only a single sale were proven it mlght
be a good défense to show that such sale was exceptlonal, acddental, or
made under such cireumstances as to indicate that it was not the business
of the vendor."
Under this ruling the single sale may make out a prima f acie case ;
and if the défendant should make the défense that the sale was excep-
tional, accidentai, or made under such cireumstances as to indicate
that it was not the business of the vendor the défendant should re-
quest the court to charge the jury on the lines of such défense. Un-
der the cireumstances of this case, in which the évidence on behalf
of the prosecution showed many sales of both spirituous and malt
liquors, and in which the défendant failed to challenge the attention
of the trial judge either by exceptions or requests for additional in-
structions, we cannot hold that any réversible error appears.
2. At the conclusion of ail of the évidence Weichen moved for a
directed verdict in his favor. Upon an examination of the évidence,
which it would be profitless to détail, we find that there was no error
in denying this motion.'
[2] 3. In his brief, without having laid any basis in the trial court
by objection or in this court by assignment of error, Weichen con-
tends that the trial court was without jurisdiction to proceed with the
trial at the time when it was had. In the record before us the first
entry is as follows:
"Be It remembered that heretofore, to wlt: On the 24th day of Oetober,
A. D. 1918, the foUowing proceedings were had in sald court and entered of
record, to wlt:
"Thursday, Oetober 24, A. D. 1918.
"Court met pursuant to adjoumment.
"Présent: Honorable George W. English, Judge.
"It is ordered by the court that the regular November tenu, of the Dis-
trict Court of the United States for the Eastem District of Illinois, as des-
ignated by law to be held at Bast St. Louis, Illinois, on the first Monday of
November, 1918, be, and the same Is hereby adjourned from the first Mon-
day of November, 1918, to Monday, December 2, 1918, at 9 :00 a. m."
And then follows, under date of December 2, 1918, the record of the
trial.
[3] Weichen's point is that the adjoumment of the regular No-
vember term until the second day of December was not in accordance
with section 12 of the Judicial Code (Comp. St. § 979), which provides :
THE HATTIE THOMAS 943
«62 F.)
"If the judge of any District Court Is unable to attend at the commence-
ment of any regiilar, adjourned, or spécial term, or any tlme durlng such.
term, the court may be adjourned by the marshal, or clerk, by virtue of a
written order directed to him by the judge, to the next regular term, or to
any earlier day, as the order may direct."
While the order of October 24th is not in terms directed to either
the marshal or the clerk, those officiais were required to take cogni-
zance of it and will be presumed to hâve performed their duty until
the contrary appears. Presumably on the first Monday of Novem-
ber the marshal or the clerk advised ail persons who assembled to
attend court at the November term that the beginning of the term
was adjourned to December 2d. See Stockslager v. United States,
116 Fed. 590, 54 C. C. A. 46.
The judgment is affirmed.
THE HATTIE THOMAS.
THE ETTA McELROY.
(Circuit Court of Appeals, Second Circuit. January 14, 1920.)
Nos. 116, 117.
1. MàBITIMB LIENS <®=»40 — NOT LOST BY EENDKKING BILLS AND EELTINO ON AC-
COUNT STATED.
Where repairs were made on vessels at the request of the owner, so as
to CTeate a maritime lien under Act June 23, 1910 (Comp. St. §§ 7783-
7787), the maritime liens were not lost by rendering bUls to the owner,
nor by relying on the rétention of such bUls wlthout objection as accounts
stated.
2. Mabitime liens <S=>&4^ — Existence of lien admitted bt failube to dent
In a suit in admiralty to enforce maritime liens, the answer admitted,
by failure to deny, that the Ubelant had a maritime lien.
3. Mabitime liens <S=»65 — Amount or lien may be established by account
stated.
A contraot for repairs to vessels t>eing of a maritime nature, the amount
of the Uen could be established in a court of admiralty by an account stated.
Appeals f rom the District Court of the United States for the East-
em District of New York.
Separate libels in admiralty by Verdon & Co. against the steam lighter
Hattie Thomas, her engines, etc., and against the steam lighter Etta
McElroy, her engines, etc. ; the Rogers Russell Marine Transporta-
tion Company being the claimant in each case. Decreé for libelant in
each case, and claimant appeals. Affirmed.
Thomas P. McKenna, of New York City (Bernard C. McKeima, of
New York City, of counsel), for appellant.
Alexander & Ash, of New York City (Mark Ash, of New York
City, of counsel), for appellee.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
MANTON, Circuit Judge. Thèse appeals were argued together and
will be treated in one opinion. The appellee in the court below ob-
^=»Foi other cases see same toplo & KBY-NUMBBR In ail Key-Numbered Dlgesta & Indexes
944 262 FEDERAL EEPOETEE
tained a decree against the Hattie Thomas for $1,780.84, and against
the Etta McElroy for $3,322.90. The Hbel, as to its material alléga-
tions, excepting as to the amount claimed for the work done, is sub-
stantially the same in each case. The allégations are as f ollows :
"Second. Upon information and bellef, tliat at varions times between July,
• * • at West Bow Brighton, New York, the libelant herein, which at said
times was and now Is a New York corporation, at the instance and re<îuest
of the owner of said vessel, or its agent, performed work, labor, and services,
and furnished materlals, In and about the necessary repalr of sald vessel, at
the price and of the value in the aggregate of ♦ * *, no part of which sum,
although demanded, has been pnld.
"Thlrd. Upon information and bellef, that on or about * * • libelant
forwarded and transmltted to the owner of said vessel an aoeount current, or
bill of items, of the said wcrk done and materlals furnished, amounting in
the aggregate to said sum of * * *, which aceount current, or bill o£
items, was retahied wlthout objection and thereupon became an aceount stated.
"Fourth. Pursuant to the provisions of an act of Congress relatlng to liens
on vessels for repairs, supplies, and other necessariea, passed June' 23, 1910,
libelant's clalm aforesaid became and stlll is a maritime lien upon said vessel.
"Fifth. AU and singular the premises are true and within the admiralty and
maritime jurisdiction of this court."
The issues raised were referred to a master, and he made the
above awards, which were confirmed by the District Judge. That re-
pairs were made upon each of the vessels at the request of the owner
of the vessels is not disputed. After the repairs were completed, the
appellee forwarded to the shipowner a bill of items for the repairs.
As thus rendered, no objection was made at the time.
[1] The contention of the appellant is that liability has been fixed
in the court below against the vessels in thèse actions upon the theory
that the appellee's cause of action was upon an aceount stated. It is
claimed that invoking this form of relief, through the légal theory
of an aceount stated, created a novation of the liability, and that ad-
miralty has not jurisdiction. It is further contended that allégation
third of the libel, being an attempt by the appellee to allège an ac-
eount stated, is not a sufficient allégation to sustain a libel for an ac-
eount stated. The suit is in rem and a maritime lien for the repairs is
claimed.
We think the appellant is in error in thèse contentions. We think
that the appellee did not lose its maritime lien, which arose upon the
completion of the repairs, because it thereafter rendered bills to the
owner; nor did it by alleging in the libel that the bills were retained
without objection and therefore became an aceount stated. When the
repairs were made upon the vessels, under the act of Congress of
June 23, 1910 (Ann. Comp. Stat. 1916, §§ 7783-7787), the daim be-
came and was a maritime lien upon the vessels, and was such at the
time of the filing of the libel.
It will be observed that paragraph second of the lihel sets forth a
sufficient allégation to establish the maritime lien and the right to
maintain the action in rem. The appellee in each action rested its case
upon proof that the order for repairs was not disputed, and that the
amount of the repairs and the price or value thereof was sent to the
owners in the form of an itemized statement, and that such bills were
kept, and not returned or objected to. The appellant's witness ad-
THE HATTIE THOMAS 945
f262 F.)
mitted the receipt of the bills as proven by the appellee. The appel-
lant's superintendent testified to a conversation he had with one Rogers,
président of the corporation which owned the vessels, in which he
made no objection, but stated he had considérable money outstanding
and expected to pay the bill, and that he would make a substantial
payment and arrange for the payment of the remainder. The item-
ized statement of the materials f urnished and the work performed was
very lengthy, and would involve very considérable proof, if it was
necessary to prove each item separately.
[2] In Morse Dry Dock & Repair Co. v. Munson S. S. Une (D. C.)
155 Fed. 150, affirmed by this courtin 158 Fed. 1021, 85_C. C. A. 666,
there was an action for repairs in similar form. The suit was in per-
sonam. The libel alleged that the respondent engaged the libelant to
repair four steamers, that the work was finished, and that there was
a balance due. The itemized bills for the work and materials against
each vessel were delivered by the libelant to the respondent ; the re-
spondent admitted the correctness of the bills and promised to pay
the account. The libel was drafted in very much the same language
as is this. The court assumed jurisdiction in admiralty, and sustained
the libel, and rendered a verdict, which -was afifirmed in this court,
where it was said :
"We think the Distriot Judge was correct In holding that the action was
upon an account stated"
— and affirmed upon the District Judge's opinion. Indeed, the an-
swer admits, by failure to deny, that the appellee has a maritime lien.
Dunham v. Cudlipp, 94 N. Y. 129.
The acceptance of a note of a third perscn for a pre-existing debt
does not constitute payment, in the absence of an express agreement
to that eflfect. Atlas S. S. Co. v. Colombian Land Co., 102 Fed. 358,
42 C. C. A. 398. And the acceptance of the note of a third person,
and taken for debt of a vessel, does not discharge the maritime lien.
The James T. Easton (D. C.) 49 Fed. 656. Where a debt was for
material and supplies furnished to a vessel, and therefore cognizable
in admiralty, it does not deprive a creditor of the right to sue in
admiralty by taking a bond and mortgage, unless it appears that such
was the express intention of the parties. Robins Dry Dock & Repair
Co. v. Chesbrough, 216 Fed. 121, 132 C. C. A. 365. And so a mari-
time contract is not changed into a nonmaritime contract because of
an account stated. Morse Dry Dock & Repair Co. v. Munson Steam-
ship Line, 158 Fed. 1021, 85 C. C. A. 666.
[3] We conclude that the principle of thèse cases is applicable to
the case at bar, where the admiralty jurisdiction is invoked in an
action in rem. The nature of the contract being maritime, it was per-
missible to establish the amount of the lien in a court of admiralty
by the method of an account stated. To do so is a mère matter of
évidence.
The decrees are affirmed, with interest and costs.
2t52 F.— 60
946 262 FEDERAL REPORTER
In re 9,889 BAGS OF MALT.
KBNKE V. HOWARD.
(OlrcBlt Court of Appeala, First Circuit. November 19, 1919.)
No. 1422.
Shippino iS=>154 — Ijen fob freight waived by unloadinq and storinq in
NAME or CONSIGNEE.
Owner of a barge held to hâve lost his right to a lien for freight on a
cargo whlch was unloaded at a wharf, and received and stored in the
name of the consignée, wlthout any agreement or understanding or knowl-
edge on the part of the wharf owner that a lien was claimed.
Appeal from the District Court of the United States for the District
of Massachusetts; Clarence Haie, Judge.
Suit in admiralty by Thomas J. Howard against 9,889 Bags of Malt ;
George T. Renke, claimant. Decree for libelant, and claimant appeals.
Reversed.
Pitt F. Drew, of Boston, Mass., for appellant.
Richard H. Wiswall, of Boston, Mass. (Hill, Barlow & Homans, of
Boston, Mass., on the brief), for appellee.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
ANDERSON, Circuit Judge. This case grew out of a libel against
a cargo of malt to enforce an alleged lien in favor of the owner of the
barge George S. Repplier for freight and demurrage accruing in con-
nection with the transportation of the malt from Hoboken, N. J., to
Boston.
The court below found that the libelant had performed his contract
of carriage; that his maritime lien therefor had not been lost; and
entered a decree for the libelant.
While several questions are raised on the record, the only one we
find it necessary to consider and détermine is whether the libelant
retained his lien against the cargo. We think he did not, and that the
libel must consequently be dismissed.
On July 12, 1917, Renke, the claimant and owner, had about 500
tons of- malt on cars in Hoboken, which he had contracted to sell to
one Logi in France. This he desired to hâve speedily transport ed to
Mystic Wharf, Boston, in order to connect with the Moorish Prince,
due to sail about 10 days later. Because of war conditions, he could
obtain no assurance from the railroad company of transportation in
season to connect with this steamer. Accordingly, he engaged one
Elder, who was engaged in the lighterage business, to procure water
transportation. Elder went to the firm of Gilmartin & Trundy, ship
brokers, and through them contracted with the libelant, the owner of
the barge, for the transportation of the malt. Howard was to furnish
both barge and power; that it, towage for the trip. The malt was
shipped in the name of W. H. Story & Co., cpmmission merchants,
who were financing Renke in the transaction.
®=3For other cases see sanie toplc & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
IN EE 9,889 BAGS OP MALT 947
f262 F.)
There is some conflict of évidence as to the degree of speed, or
diligence in transportation, for which Howard contracted, and also as
to whether he performed his contract. But our conclusion that the
libelant lost his lien makes it unnecessary for us to consider and déter-
mine any questions arising concerning the contract or its performance.
The action is in rem to enforce a lien ; if there was no lien, the action
fails.
The barge George S. Repplier was loaded on July 15. It, with
three other barges, was taken in tow, and started on July 17. De-
layed by fog, and because of the other barges, the cargo of malt finally
reached Mystic Wharf on July 28, 8 days after the Moorish Prince
had sailed, and 16 days after the claimant had made his contract with
Elder. The barge was in charge of Capt. Gafïney. Renke seems to
bave been unknown to ail the parties, except Elder, until he appeared
in the case as claimant in October. The France & Canada Steamship
Company was in control of this wharf, and one Akerley in charge
thereof . The barge stayed at the wharf, loaded, for 6 days. Exactly
what occurred during thèse 6 days the record does not show. After
6 days some one gave instructions that the malt should be unloaded on
the wharf. Gafïney testified that he did not know why the cargo
was not unloaded bef ore ; that he had nothing to do with unloading,
and said nothing to the représentatives of the France & Canada Steam-
ship Company about this freight. In fact, the malt was taken out of
the barge, apparently by Akerley's directions, and put in storage in a
warehouse belonging to the Boston & Maine Railroad. Subsequently
the railroad company and the steamship company both sought to main-
tain liens for their respective claims, originating in unloading and in
storing the malt. Thèse claims appear to hâve been paid by Renke's
financial agent; the intervening pétitions of the steamship company
and the railroad company were accordingly dismissed. We find no évi-
dence that, when this malt was discharged from the barge, Howard
or any one in his behalf in any way, by word or act, indicated any pur-
pose of claiming any lien thereon for freight and demurrage. Akerley
testified to the efïect that neither the captain nor the owner of the
barge, or any one representing either of them, made any claim of a
lien ; that he had the malt put on the pier, so that it could go on some
later ship ; and then caused it to be stored in the name of Logi. After
the cargo was discharged, controversies arose between the parties,
both as to the time taken for the voyage and as to an alleged shortage
in the malt delivery. Howard, who had been 25 years in this Une of
business, and must be presumed to be familiar with maritime liens, on
August 8 threatened to "attach" the malt if his claim was not promptly
paid. This threat to attach is, in our view, inconsistent with his even
supposing that he had retained such constructive possession of the malt
as to permit his maritime lien to survive. On August 15 he repeated
his demand for payment of the freight and demurrage, but without
asserting any claim to a maritime lien.
We do not think the évidence sustains the finding of the court below
that "the malt was received by the France & Canada Steamship Com-
pany as a deposit for the benefit of both parties." The steamship
948 262 FEDERAL REPORTER
Company seems to us to hâve taken possession of the malt because
there was no one else to take possession of it, and without any notice,
express or implied, f rom Howard or from any one in his behalf, of any
claim of a continuing lien. The case does not, we think, fall within
the principle laid down in Bags of Linseed, 66 U. S. (1 Black) 108, 114
(17 %. Ed. 35), cited by the court below. In that case, the court, by
Chief Justice Taney, said :
"It Is true that such a dellvery, without any condition or qualification an-
nexed, wouid be a waiver of the lien, because, as we hâve already sald, the lien
is but an incident to the possession, with the right to retain. But in
cases of the iJind above mentioned it ia fre<iuently, perhaps more usually, un-
derstood between the parties that transferring the goods from the ship to the
warehouse shall not be regarded as a waiver of the lien, and that the ship-
owner reserves the right to proceed in rem to enforce it, if the freight is not
paid. And If it appears by the évidence that such an understanding did exist
between the parties, before or at the time the cargo was placed in the hands of
the consignée, or if such an understanding is plainly to be inferred from the
established local usage of the port, a court of admiralty will regard the trans-
action as a deposit of the goods, for the time, in the warehouse, and not as an
absolute delivery, and, on that ground, will consider the shlpowner as still con-
structively in possession, so far as to préserve his lien and his remedy in rem."
The évidence in this case utterlj'^ fails to show that "such an under-
standing did exist between the parties." This case has been frequently
cited, and the doctrine enunciated in the above quotation consistently
followed. None of the libelant's cases cited justify his claim, on the
facts of this case.
The decree of the District Court is reversed, and the case is remand-
ed to that court, with directions to dismiss the libel, with costs ; and
the appellant recovers his costs of appeal.
ROBERTSON v. UNITED STATES.
(Circuit Court of Appeals, Eighth Circuit December 17, 1919.)
No. 5382.
1. Intoxicating liqtjors ®=>210 — Indictment chahgino tbanbpoetation
WmiIN CAMP zone STATES AN OITENSE.
An information charging the transportation of intoxicating llquor with-
in five miles of a military camp helà to state an offense under the régu-
lations made by the Président expressly authorized by Sélective Draft
Act, § 12 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 2019a).
2. Intoxicating liquors '®=5210 — iNroBMATioN for teanspoetino liqtjob
WITHIN CAMP ZONE NOT DEFECTIVE.
An information for transporting liquor within a military camp zone. In
violation of régulations made by the Président, Is not détective for fail-
Ing to allège that défendant Is not punishable under the Articles of War.
3. Indictment and iNroRMATioN <s=53 — Violation of prohibition régula-
tions MAY BE PEOSECUTED BY INFORMATION.
The offense of selllng or transporting llquor within a military camp
zone, in violation of régulations made by the Président, may be prosecuted
by Information.
<g=>For other cases see same toplo &. KEY-NUMBBR In ail Key-Numbered Dlgests & Indexes
EOBERTSON V. UNITED STATES 949
(262 F.)
4. Cbijiinai. law ©=31206(3) — Statute allowing sentence at hard labor
NOT applicable TO STATUTE STJBSEQUENTLT ENACTED.
The provision of Oriminal Code, § 338 (Oomp. St. § 10512), that the
omission of tlie words "hard labor" from provisions of "this act" pro-
seribing pimisliment shall not deprive the court of power to impose hard
labor in any case where such power then existcd, hel<l not to apply to a
pénal statute subsequently enacted.
5. Intoxicating liquobs ®=3 — Président mat peouibit transpoktation op
liquok within camp zones.
The provision of the presidential régulations prohibiting "transporta-
tion" of liquor within the military camp zones prescribed thereln helâ
within the authority given by Sélective Draft Act, % 12 (Coni{). St. 191S,
Comp. St. Ann. Supp. 1919; § 2019a).
In Error to the District Court of the United States for the District
of New Mexico.
Criminal i)rosecution by the United States against Clara Robertson.
Judgment oî conviction, and défendant brings error. Affirmed.
J. E. Grigsby, of Albuquerque, N. M. (W. C. Heacock, of Albu-
querque, N. M., on the brief), for platntifï in error.
J. O. Seth, Asst. U. S. Atty., of Santa Fé, N. M. (Summers Burk-
hart, U. S. Atty., of Albuquerque, N. M., on the brief), for the United
States.
Before C ARMAND and STONE, Circuit Judges, and ELLIO'n\
District Judge.
STONE, Circuit Judge. [1] Error from conviction for violation
of presidential régulations of June 27, 1918, promulgated under sec-
tion 12 of the Draft Act (40 Stat. 82 [Comp. St. 1918, Comp. St. Ann.
Supp. 1919, § 2019a]), prohibiting the transportation of intoxicants
within a five-mile zone surrounding a military encampment. There are
no properly preserved exceptions presenting any of the questions hère
argued. However, as the sentence involves imprisonment we hâve
examined tlie points presented. The first contention is that no of-
fense is stated in the information in violation of section 12. Tliat
section is :
"Sec. 12. That the Président of the United States, as Commander-in-Chief of
the Army, is authorized to malte such régulations governlng the prohibition of
alcoholio liquors m or near military camps and to the officers and enlisted
meu of the Army as he may from time to tinie deem necessary or advisable:
Provided, that no person, coi-poration, partnershlp, or association shall sell,
supply, or hâve in his or ifcs possession any intoxicatmg or spirltuous liquors
at any military station, cantonment, camp, fort, post, offlcers' or enlisted men's
club, which is being used at the time for military purposes under this act, l>ut
the Secretary of War may niiake régulations permltting the sale and use of
Intoxicating liquors for médicinal purijoses. It shall be unlavrful to sell
any intoxicating liquor including béer, aie, or wine, to any officer or mem-
ber of the military forces while In uniform, except as hereln provided. Any
person, corporation, partnershlp, or association vlolatlng the provisions of
this section or the régulations mjade thereunder shall, unless otherwlse
punishable under the Articles of War, be deeraed guilty of a mlsdemeanor
and be punished by a fine of not more than $1,000 or Imprisonment for not
rroro than twelve months, or both."
<@=>For other cases see same topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes
950 262 FEDKEAL REPORTES
It is true that this section does not designate the "transportation"
of liquor as an offense, but it does provide for régulations to be
promulgated by the Président, and section 1 o£ the régulations pro-
mulgated June 27, 1918, specifically prohihits that any liquor be
"transported to any place within any such zone."
[2] It is next claimed that the information was vitally defective in
not alleging that the offense hère charged was not punishable under
the Articles of War. Such exception in the statute was no part of
the définition of the offense, and was a matter of défense, rather than
one necessary to be alleged in the information. United States v.
Cook, 17 Wall. 168, 21 L,. Ed. 538; United States v. Scott (D. C.) 248
Fed. 361.
[3, 4] The next proposition is that the accused could be proceeded
against only by indictment. The argument advanced is that, although
the statute did not provide for imprisonment beyond one year, and
made no provision for jail sentence to be at "hard labor," and al-
though the sentence was for less than a year, and no requirement
therein of hard labor, yet that the sentence might hâve required such
hard labor, and therefore might hâve been an "infamous punishment."
No hard labor requirement could hâve been attached to this sentence,
because the maximum imprisonment permitted was one year, and
hard labor was not expressly permitted by the statute. Ex parte Kars-
tendick, 93 U. S. 396, 23 L. Ed. 889; In re Mills, 135 U. S. 263, 10
Sup. Ct. 762, 34 L. Ed. 107. The reliance placed by the counsel of
accused upon the provision in section 338 of the Criminal Code (Act
March 4, 1909, 35 Stat. p. 1088 [Comp. St. § 10512]), that the omis-
sion of the words "hard labor" from the provisions of the Criminal
Code should not deprive the court of the power to impose such, is not
well founded. That provision referred to that statute alone, and bas
no application to this one, subsequently enacted.
[5] The final contention is that the Président had no authority to
prohibit the "transportation" of liquor within the camp zone, but, if
he had such authority, the information was fatally defective, in fail-
ing to State that such régulations had been made. The statute gave
the Président power to make régulations "governing the prohibition of
alcohoUc liquors in or near military camps," and prescribed the pun-
ishment for violation of such régulations. Congress, having declared
the purpose of the régulations and the punishment for violation of
them, could and did leave the définition of those régulations to the
Executive. The régulation prohibiting the transportation of liquor
within certain reasonable limits "near" the camps was well within
the authority granted. Such a régulation has the effect of law, and
it was not necessary to plead its existence in the information. The
information properly covered this phase of the accusation, by alleg-
ing facts which would bring the acts charged within the régulations.
The judgment is affirmed.
HANRAHAN V. PACIFIC TEANSPOET CO. 951
C262 F.)
HANRAHAN T. PACIFIC TRANSPORT CO., Limited.
(Circuit Court of Appeals, Second Circuit November 12, 1919.)
No. 44.
1. Adiiiraltt <®=2— Mabitimb bights not changed bt choice of common-
law remedy.
Tliat a seaman injured on board sues at law for the injury does not
change the fact that bis rights are govemed by the maritime law.
2. Seamen <S=59 — Ship not unseawortht, bo as to give eight to damages
rOB INJUBT.
A ship held not unseaworthy, because of the temporary absencei of a
handrail while she was lying alongside a wharf discharging cargo, so as
to entitle a seaman injured thereby to recover damages.
In Error to the District Court of the United States for the Southern
District of New York.
Action at law by William F. Hanrahan against the Pacific Transport
Company, Limited. Judgment for défendant, and plaintiflf brings er-
ror. Affirmed.
Certiorari denied 251 U. S. , 40 Sup. Ct. 345, 64 L. Ed. .
The Pacific Company is the owner of a steamship, and Hanrahan was a
member of her crew. The vessel belng in port, and fast to a pler, Hanrahan
returned at night from shore leave, and while walking on the upper deck,
and toward. his quarters, fell overboard, suffering Personal injuries, for
whlch he brought this common-law action. We assume for the purposes of
this case that the reason why he was injured was that by the négligence of
the ship's offlcers a certain handrail was not In place. This rail consisted of
wire rope passing through stanchions, which were insertable in sockets built
Into the deck. It was erected to take the place of a bulwark.
From ail the évidence the jury might hâve found thaC Hanrahan's in-
juries were caused or eontributed to by the absence of the handrail. He
asked to go to the jury on the theory that the vessel was unseaworthy by
reason of the failure of those in charge of her to maintaln the handrail in
place. This motion having been denied, and verdict directed as above, he
took this writ
Silas B. Axtell, of New York City (Arthur Lavenburg, of New York
City, of counsel), for plaintiflf in error.
ÏCirlin, Woolsey & Hickox, of New York City (Robert S. Erskine,
of New York City, and L,. De Grove Potter, of White Plains, N. Y.,
of counsel), for défendant in error.
Before WARD, HOUGH, and MANTON, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). If de-
fendant, as master, had been constructing a house, instead of operat-
ing a ship, and plaintiflf (the servant) had fallen from a defective
scaflfold, instead of from an unguarded deck, the resulting injury
would hâve conferred both a common-law right and a common-law
remedy, and such right would (or might) hâve resulted from breach
of a contract recognized, if not created, by the common law.
At the time of this accident, however, plaintiflf's relation to défend-
ant resulted from a maritime contract, viz. his hiring as a seaman.
®=>For oth^r cases see same toplc & KET-NUMBER In aU Key-Nutnbered Dlgests & Indexes
952 262 FEDERAL REPORTER
The scope and effect of such contract is defined and regulated solely
by the gênerai maritime law, which is a différent System of juris-
prudence from the common law, and neither subordinated to nor con-
trolled thereby. Cf. Southern Pacific Co. v. Jensen, 244 U. S. 205,
37 Sup. Ct. 524, 61 L. Ed. 1086, L. R. A. 1918C, 451, Ann. Cas. 1917E,
900.
[1] Assuming that the master of this ship negligently omitted to
place the handrail, and that there is a causal connection between such
négligence and plaintiff's injuries, he is entitled, not to "indemnity"
for the conséquences of that négligence, but to "maintenance and
cure"— i. e., "care." The Osceola, 189 U. S. 158, 23 Sup. Ct. 483,
47 L. Ed. 760; The Bouker No. 2, 241 Fed. 831, 154 C. C. A. 533.
This is the resuit of the maritime law, and that this action was brought
on the common-law side of the court below makes no différence.
Plaintiff chose a common-law remedy, but the.choice neither changed
the maritime rights of the parties, nor created a new right. Chelentis
V. luckenbach, etc., Co., 247 U. S. 372, 38 Sup. Ct. 501, 62 L. Ed. 1171.
[2] But since by the law maritime a seaman is entitled to "indem-
nity" (which may be taken as équivalent to "damages") for injuries
received through the "unseaworthiness of the .ship" (The Osceola,
supra, 189 U. S. at page 175, 23 Sup. Ct. 483, 47 E. Ed. 760), it is
now urged that section 20, Seaman's Act March 4, 1915, c. 153, 38
Stat. 1185 (Comp. St. § 8337a), requires a holding that it was at
least for the jury to say whether this ship was not unseaworthy, as
a resuit of the négligent absence of handrails; for such négligence
being that of an ofïicer, who cannot (under section 20) be regarded as
plaintiff's fellow servant, the ca.se is the same as if défendant owner
had personally made the deck unsafe for plaintiff's lawful purposes.
The argument fails both on authority and reason, for (1) it is op-
posed to the ground of décision in Chelentis v. Luckenbach, etc., Co.,
supra; and (2) it involves a misuse of the word "seaworthiness."
(1) Chelentis claimed to hâve been injured by obeying a négligent
order; this plaintiff allèges injury because an order was negligently
omitted. If (as held) section 20 had no application to Chelentis, it
bas none hère, because it is still immaterial "whether the master and
seaman are fellow servants or not"; maintenance and care remain
the fuU limit of the controUing maritime law.
(2) Every allégation of fact made by plaintiff bas been assumed,
yet we hold that no jury could on such facts déclare the ship unsea-
worthy.
Seaworthiness is a relative term; a vessel may hâve that quality
in port, and yet be wholly unfit for rough water (McLanahan v. Uni-
versal, etc., Co., 1 Pet. 170, 7 L. Ed. 98) ; and to say that this ship
was unseaworthy because she had no handrail up, while lying along-
side a wharf discharging cargo, is merely untrue.
The contention confounds seaworthiness and safety, if not sea-
worthiness and comfort; and the facts presented require only réf-
érence to Hedley v. Pinkney, [1894] App. Cas. 222, and Oison v.
Navigation Co., 104 Fed. 574, 44 C. C. A. 51.
Presenting this point before a jury somewhat beclouds the final
THE ESROM ^^^
(252 P.)
issue, which is whether section 20 has changed or sought to change
the gênerai maritime law. That it does not was decided in the Che-
lentis Case.
Judgment affirmed, with costs.
THE ESROM.
(Circuit Court of Appeals, Second Circuit January 14, 1920.)
No. T6.
Shippino <S=5l32(3) — Bubden on bhippee to pbovk alleged unkeasonable
DELAr IN SAILINa.
In a suit by a shipper for damages for delay in salling of the vessel
after exécution of tiie bill of lading, tlie burden of proviug that the delay
waa umeasonable under the circumstances, and for how long, held to rest
on llbelant.
Appeal from the District Court of the United States for the East-
em District of New York.
Suit in admiralty by Charles E. Michael and another, copartners as
Charles E. Michael & Sons, against the steamship Esrom; Actiesels-
kabet Dampkibet Island, claimant. Decree for libelants and claimant
appeals. Reversed.
Burlington, Veeder, Masten & Fearey, of New York City (R. H.
Hupper and Goulding K. Wight, both of New York City, of counsel),
for appellant.
Bullowa & Bullowa, of New York City (H. L. Cheyney, of New
York City, of counsel), for appellees.
Before WARD, HOUGH, and MANTON, Circuit Judges.
WARD, Circuit Judge. July 6, 1915, the libelants made a freight
contract with the Interocean Transportation Company for the ship-
ment of 1,957 baies of tohacco from New York to Copenhagen in
July ; no vessel being named. July 30 the Transportation Company
chartered the steamer Esrom to be loaded by it for Copenhagen. Ar-
ticle 1 of the charter provided that the Esrom was to load at New
York:
"A full and complète cargo of wheat and/or malze and/or other lawful mer-
chandlse, and being so loaded shall forthwith proceed as ordered upon slgnlng
blUs of lading to Gothenburg and Copenhagen."
Article 13 of the charter provided:
"The eaptain shall sign bllis of lading or master's receipts as and when
presented, wlthout préjudice or référence to this charter party, and any
différence between the amount of freight by the bills of lading and this char-
ter party, to be settled at port of loadlng before salling, as customary."
The foregoing provisions regulate the rights of the charterers and
owners inter se.
(gzaFor other caees see samo topic & KEY-NUMBER In ail Key-Numbered DIgesta & Indexe»
954 262 FEDBEAL REPORTER
July 31 the libelants delivered the tobacco to the steamer and paid
the Transportation Company the freight in advance against the com-
pany's printed form of bill of lading which concludes as foUows:
"In witness whereof the master or agent of the steamship hath afflrmed to
three bills of lading ail of this ténor and date, one of which belng accompUshed,
the others to stand void. Interocean Transportation Co.,
"By
"W. Habel, Master."
Ail of the above was the printed form, except the words "three"
and "W. Habel, Master."
The Interocean Transportation Company did net sign the bill of
lading, but the master did. He testified that he signed it as master by
virtue of article 13 of the charter party, and that the owners subse-
quently forbade him to sign any more bills of lading without first
getting authority from them.
The bill of lading, making no référence whatever to the charter par-
ty, constituted the contract between the libelants and the charterers,
for performance of which, after exécution by the master and shipment
of the tobacco, the steamship also became bound.
September 17 the Transportation Company became bankrupt, with-
out having paid the freight due under the charter party, and thereupon
the owners were obliged to discharge some of the cargo at the demand
of shippers, to negotiate some freight settlement with other ^hippers,
who wished their shipments to go forward, and who had paid freight
to the Transportation Company without getting bills of lading signed
by the master, and to complète the loading. Thèse things necessi-
tated delay, and the resuit was that she did not sail until October 9.
The trial judge held that the steamship was bound for the perform-
ance of the bill of lading, and as he directed a decree for the libelants
we must infer that he thought she was also bound to sail within a
reasonable time and had not done so. But neither he nor the com-
missioner determined what was a reasonable time under ail the circum-
stances or discussed it in any way. Indeed, the commissioner al-
lowed interest on the value of the tobacco for three months, although
the steamship sailed nine weeks after the goods went aboard, at which
date the relation between the libelants and the steamship began. The
burden of proving that the sailing was unreasonable under the cir-
cumstances of the case, and for how long, lay upon the libelants, and
they hâve not sustained it.
The decree is reversed.
IN RE POTTIER & STYMUS CO. 955
(268 F.>
In re POTTIER & STYMUS CO.
Pétition of WHITTLESEY.
(Circuit Court of Appeals, Second Circuit November 12, 1919.)
No. 10.
Bankettptct iS=)140(%), 154 — Ceeditoe's eight of set-oit against uen os
his goods fob bepaies by bankeupt.
Where fumiture owned by a creditor was at tlie time of bankruptcy In
possession of bankrupt for repairs, which tiad been partlally complétée!,
such creditor held entitled to reclaim the furniture on payment of ttie
amount then due for worl£ done thereon, and to set o£E against sucli
amount the amount of liis admitted claim.
Pétition to Revise Order of the District Court of the United States
for the Southern District of New York.
In the matter of Pottier & Stymus Company, bankrupt. On pétition
of Charles W. Whittlesey to revise order of District Court. Order
reversed.
At the date of flUng pétition one Whittlesey was a creditor of the bankrupt
in $718.48, and tlie bankrupt had possession of divers articles of furniture In-
trusted to It by Whittlesey for repalr and Improvement. This work was In-
complète when bankruptcy supervened ; It was, however, shown below by
compétent évidence that the value of the work done and materials fumished
before pétition filed was $991.78. A recelver took charge of the bankrupt's
affaire, who refused to surrender the property In question to Whittlesey, and
also refused to complète the work thereupon unless Whittlesey paid him in fuU
for ail labor and material, whether fumished before or after bankruptcy.
Thereupon a written agreement was made between the recelver and Whit-
tlesey whereby the latter agreed so to pay; but It was provlded that by so
doing Whittlesey dld "not in àny way waive any of his rights to claim from
the recelver or bankrupt [estate] the return of the moneys 'so paid" to the es-
tent of Whittlesey's admitted claim and alleged set-ofE, vlz. $718.48. The Dis-
trict Court refused to allow the set-oft, and Whittlesey flled this pétition.
Walsh & Young, of New York City (John Patrick Walsh, of New
York City, of counsel), for petitioner.
Zalkin & Cohen, of New York City, for receiver.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
HOUGH, Circuit Judge (after stating the facts as above). It may
be admitted (though the facts shown are meager) that the bankrupt
had the possessory lien of an artisan for the work and materials ex-
pended on Whittlesey's furniture. But such lien grew in amount
from day to day and could at any time be adjusted or measured in
money, and as well on the day of filing pétition as any other. It
is also true that the receiver or other officer representing the bank-
rupt estate was not bound to complète the Whittlesey job; it was
like any other contract made by a bankrupt. Howard v. Magazine,
etc., Co., 147 App. Div. 335, 131 N. Y. Supp. 916. If Whittlesey's
work had been completed by the receiver, without any réservation
of right or claim by Whittlesey, a diflferent situation might hâve
arisen ; as the case stands, we need not consider that question.
®=aFor other cases eee Bame toplo & KEY-NUMBER in aU Key-Numbered Dlgests & Indexes
956 262 FEDKEAL REPORTEE
Admittedly Whittlesey has no right to set off the bankrupt's debt
against a demand by the receiver for work done by himself ; the debts
or crédits are not mutual within the meaning of section 68 of the Bank-
ruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 565 [Comp. St. § 9652]).
But what Whittlesey insisted on below, and now urges, is that what he
owed Pottier & Stymus for their work and material should be ascer-
tained as of the date of pétition filed, and he be allowed to set ofï his
admitted debt against that amount. That this position is right, we do
not doubt. The possessory Hen of an artisan stands upon no higher
ground than the statutory mechanic's lien, and that set-off is allowable
in foreclosure of such liens is settled. Valett v. Baker, 129 App. Div.
514, 114 N. Y. Supp. 214, and cases cited. Nor is it necessary to the
exercise of set-oflf that the demand should be matured or presently due
at date of bankruptcy. We so held in respect of the creditors' claim,
and there is no différence between that and a claim by the bankrupt.
In re Semmer Glass Co., 135 Fed. 77 , 67 C. C. A. 551, appeal dismiss-
ed as Conboy v. First National Bank, 203 U. S. 141, 27 Sup. Ct. 50, 51
h. Ed. 128.
It is further urged, in support of the resuit below, that petitioner
is estopped from now claiming to exercise the right of set-off because
he made a new contract with the receiver. This is a mère matter, of
construing the agreement ; in our opinion the réservation of Whittle-
sey's rights was complète. The position originally taken by the receiv-
er was that to grant the set-off created a préférence. It is quite true
that set-off does work a sort of préférence ; but, while the Bankrupt
Act itself créâtes préférences, it does not create, but recognizes, set-
offs (Studley v. Boylston Bank, 229 U. S. at 528, 33 Sup. Ct. 806, 57
L,. Ed. 1313); indeed, a set-off may be described as a sort of lawful
préférence.
At the most the bankrupts were bailees of Whittlesey's furniture,
and the receiver or trustée acquired no title whatever to the same. In
re Wright-Dana, etc., Co., 211 Fe* 908, 128 C. C. A. 286. His only
right thereto arose from a lien capable of ascertainment or valuation.
The receiver, therefore, erred in not surrendering the property on de-
mand, and payment of any balance due after allowing the set-off de-
manded.
The order appealed from is reversed, and the matter remanded for
further proceedings not inconsistent with this opinion. If the re-
ceiver or trustée desires to combat the évidence offered by the petition-
er as to the value of the work done by Pottier & Stymus before bank-
ruptcy, he may at his own costs and charges take a référence for that
purpose ; but against whatever may turn out to be the value of such
work, labor, and material Whittlesey is entitled to set off his admitted
demand, $718.48. He is also granted the costs of this court.
HENKIN V. FOUSEK 957
C262 P.)
STEPHENS V. UNITED STATES.
(Circuit Court of Appeals, Klnth Circuit. February 9, 1920.)
No. 3349.
Il, JICTMENT AND INFORMATION ®::^88^»-SUFFICrENT AVERMENT OF INTENT.
An indictment charglng that an act was done knowingly, willfuUy, un-
lawfuUy, and feloniously sullicàently charges crimiaal intent.
Criminal prosecution by the United States against E. A. Stephens.
On motion for rehearing. Denied.
For former opinion, see 261 Fed. 590, C. C. A. .
PER CURIAM. Plaintiff in error urges that the indictment "does
not allège any intent whatsoever." It is true that it does not use the
word "intent," but the allégation that défendant knowingly, willfully,
unlawfully, and feloniously did attempt to cause and create insubordi-
nation and disloyalty in the military and naval forces, by doing the
things charged, sufficiently charged that the attempt was done with
willful and unlawful purpose. Bise v. United States, 144 Fed. 374, 74
C. C. A. ], 7 Ann. Cas. 165; People v. Butler, 1 Idaho, 231; State
V. Rechnitz, 20 Mont. 488, 52 Pac. 264 ; State v. Clark, 32 Nev. 145,
104 Pac. 593, Ann. Cas. 1912C, 754; Atkinson v. State, 34 Tex. Cr. R.
424, 30 S. W. 1064 ; State v. Hagar, 50 W. Va. 370, 40 S. E. 393 ;
Eunch V. State, 58 Fia. 9, 50 South. 534, 138 Am. St. Rep. 91 ; State
V. Daly, 41 Or. 515, 70 Pac. 706; State v. Hughes, 31 Nev. 270, 102
Pac. 562 ; People v. Willett, 102 N. Y. 251, 6 N. E. 301.
Motion denied.
HENKIN V. FOUSEK.
(Circuit Court of Appeals, Elghth Circuit. January 9, 1920.)
No. 6164.
Bankruptct €=»461 — Allowanoe of appeai, by bankrupt in foema pau-
PEEIS.
I>eave granted to a bankrupt to prosecnte an appeai In forma pauperis
from an order adjudglng hlm in eontempt for failure to comply with an
order requirlng hlm to pay over money to hls trustée.
Appeai from the District Court of the United States for the District
of South Dakota.
In the matter of Eouis Henkin, bankrupt ; Charles B. Fousek, trus-
tée. On motion by bankrupt to prosecute appeai in forma pauperis.
Granted.
Before SANBORN and STONE, Circuit Judges, and MUNGER,
District Judge.
STONE, Circuit Judge. This is a motion to prosecute an appeai in
forma pauperis. Because of the unusual situation in this case, it is
advisable to state the views of the court upon this motion, in order that
®=»Por other casea see same toplc & KEY-NUMBER in ail ICey-Numbered DIgests & Indexes
958 262 FEDERAL REPORTER
the disposition now made may hâve no bearing upon the merits of the
appeal wnen later presented to this court. This appeal is from an or-
der adjudging appellant guilty of contempt in not obeying an order to
pay over to the trustée in banicruptcy of his estate $6,000, which the
court found belonged to that estate, and which appellant had secret-
ed and refused to so pay over. The finding of the trial court is that
appellant —
"now does hâve In Ms possession, or under his control, the sald sum of money
so concealed" by him as aforesaid, and that he willfuUy and intentlonally se-
crètes, holds, and detains the same from the sald trustée in bankruptcy, and
his said credltors, in contempt of this court. ♦ • ♦ "
Among other assignments of error are several which challenge the
sufficiency of the évidence in the contempt proceedings. As showing
that appellant had, at the time he was ordered to pay over the above
sum, that money, or that he has since that time been physically able
to comply with such order. Thèse contentions will apparently be
strongly urged upon the hearing of the merits in this appeal. We think
that we should not upon this motion prejudge or aflfect thèse impor-
tant features of the appeal. However, it is necessary to carefully guard
against an injustice to appellant in the direction of a déniai of a hear-
ing in this court on his appeal. Confronted by this situation, and guid-
ed by a solicitude to préserve appellant's right to a hearing in this
court on the merits of his appeal, we hâve concluded to grant his mo-
tion to prosecute that appeal in forma pauperis, with the clear state-
ment that such is donc out of abundant caution for his rights, and
with no intention of affecting in any wise the merits of that appeal.
It is so ordered.
CONCRETE APPLIANCES CO. étal. v. MEINKEN et al.
(Circuit Court of Appeals, Sixth Circuit. January 6, 1920. On Pétition for
Eehearing, March 2, 1920.)
No. 3241.
1. Patents ®=»61 — Validitt affected bt pbioe application toe anothkr
PATENT.
A patent, applled for after fillng of application for, but before issue of,
another patent in the same art, should, as to anticipation and the présence
of Invention, be judged upon the basis of which the earller application is
a part, though it was not a part of tlie prior art, in the sensé in which
that phrase is used with référence only to publication.
2. Patents ©=328 — For distbibutinq wet conceete invalid for want of
invention.
The Smith iwitent, No. 948,746, for an apparatus for distributlng wet
concrète, as llmlted by the prior Callahan patent, No. 948,719, held not
to show invention.
3. Patents <S=>328 — Combination device foe distbibutinq wet concrets;
VALID AND not ANTICIPATED.
The Callahan patent, No. 948,719, for an apparatus for distributlng
wet concrète, consistlng of an elevating tower and devlces for spread-
Ing same over structure, though a combination, held to show invention,
and not to hâve been anticipated.
^ ' ' ' '■' " - I i.i , '■ I .1.1 i
(g=>For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgesta & Indexes
CONCRETE APPLIANCES CO. V. MEINKEN 959
C262 F.i
4. Patents ®=>27(2) — Double use.
Api>aratus for elevating and distributlng wet concrète held not a mère
double use of earller apparatus for loading coal.
5. Patents <S=>26(2) — New besult.
The élévation and gravi ty distribution of wet concrète to and around
the successive floors of a building being construeted, and ail In a seml-
automatic vcay, is a new resuit In a patentable sensé.
6. Patents <S=25 — Aggregation.
Apparatus designed for what is in a fair sensé a unltary work does not
become an aggregation merely because It involves successive steps under
manual control.
On Pétition for Rehearing.
7. Patents <g=328 — Patent eoe device fob elevatino and disteibutino
CONCRETE CONSTBUED.
The Oallahan patent, No. 948,719, for an apparatus for elevating and
distributlng wet concrète to the floors of buildings under construction, one
of the features of whleh is a horizontally movable boom adjustably con-
nected with the tower and adapted to be arrangea at varions positions In
the height thereof, held not limited to horizontal adjustability of the boom,
nor to a tower built section by section as the building progresses.
Appeal from the District Court of the United States for the West-
ern Division of the Southern District of Ohio ; Howard C. HoUister,
Judge.
Suit by the Concrète Appliances Company and another against Diet-
rich Meinken and others. From a decree for défendants, plaintifïs
appeal. Reversed and remanded, with directions.
Suit upon patents niimberod 948,719, issaed February 8, 1910, to L. Callahan,
and 948,746, Issued February 8, 1910, to A. L. Smith. This case involvea
the tower apparatus now in common use for elevating and distributlng wet
("mush") concrète upon the successive floors of hlgh buildings, construeted
In whole or in part from that material. The apparatus, as now used, involves
two steps: First, elevating the material to a réservoir or hoppcr bin tempo-
rarily fixed at the desired élévation In the tower; and, second, distributlng It
from that élévation, by gravity, through a conduit revolving at the point of
connection with the hopper bin and havlng at least one swiveled elbow joint,
whereby any desired point upon the selected horizontal plane can be reached
for the gravity discharge of the material.
Callahan and Smith each showed, in his drawing, the complète apparatus ;
but Callahan made no claim to the feature of the double swiveled discharge
pipe. Callahan's application was filed January 21, 1909; Smith's on Feb-
ruary 23d of the same year. The Patent Office notified Callahan that his
application seemed to conflict with another, and suggested to him some of the
elaims which Smith had made. Oallahan adopted thèse claims, whereby an
interférence was declared. The substance of the Issue is shown by count 1,
which is given In the margin.i Upon thls issue, Callahan conceded priority ;
Judgment was rendered upon the concession; Callahan canceled thèse addl-
tional claims ; and both patents issued. Both patents, by assignments, llcenses,
etc., became the property of the Concrète Appliances Company and Insley,
and this suit was brought by them la the court below based upon alleged
infringement of both patents. The above-qùoted count 1 of the interférence
became claim 1 of the Smith patent, and Is typical of those sued upon.
1 "In a device for distributlng concrète, means for elevating tlie concrète
to a point above the work to be performed; a hopper adapted to reeelve
the concrète so elevated; a primary distributlng pipe revolubly mounted be-
neath the hopper; and a secondary distributlng pipe revolubly mounted be-
neath the mouth of the flrst named pipe, substantially as descrlbed."
960 262 FEDERAL REPORTER
Clalm 5 of tte Callahan patent Is hère quoted.» and may be accepted as a
statement of hls invention sai* to be Infrlnged. Claims 1, 2, and 13 are also
declared upon.
Arthur M. Hood, of Indianapolis, Ind., for appellants.
F. E. Dennett, of Milwaukee, Wis., for appellees.
Before WARRINGTON, KNAPPEN, and DENISON, Circuit
Judges.
DENISON, Circuit Judge (after stating the facts as above). [1, 2]
It goes without saying that the Smith patent can get no advantage
merely because it has been owned and commercially exploited along
with the Callahan patent. Upon this record, Smith cannot claim to be
the inventer of anything shown by Callahan's application, except as
the latter is modified by the later concession of priority. The Callahan
patent is not a part of the prior art, in the sensé in which that phrase
is used with référence only to publications, but the Smith patent,
both as to anticipation and as to the présence of invention, must be
judged upon the basis of which the earlier Callahan application is
a part. Lemley v. Dobson-Evans Co., 243 Fed. 391, 156 C. C. A.
171. It must therefore be assumed, as against Smith, that the ad-
vance of his claim 1 consisted merely in taking the concrète elevat-
ing and distributing apparatys of Callahan and substituting for Cal-
lahan's simple discharging conduit, revolving only at the point of at-
tachment to the receiving hopper, the compound discharging conduit
consisting of two or more sections revolubly connected with each
other.* We are not convinced that this advance involved any in-
vention. Such a double swiveled conduit was a well-known ex-
pédient for the gravity conveying of any material which it was de-
sired to discharge at selected points in a lower horizontal plane.
It is obvious — at least when it is pointed out to us — that, with an
inclined conduit revolving at its upper end, the lower end could be
made to reach any desired point on the lower plane, either by changing
the angle of inclination and modifying the length of the conduit, as by
telescoping a section, or by adding a supplementary conduit revolubly
connected with the lower end of the primary one. Neither form had
been in use for concrète (before Callahan), but both forms were old
for other purposes. The double swiveled form had been most highly
developed in grain elevators, for distributing the grain from the ele-
vated receiving bin to the several openings on the floor below, which
indicated spouts leading to still lower storage bin s.
If the matter were to be considered in the broadest sensé, there
a "Clalm 5. An apparatus for the purpose deseribed, comprising a tower, a
conduit extending laterally therefrom, a sultably supported horlzontally mov-
able boom carrying the conduit, said boom being adjustably connected with
the tower and adapted to be arranged at various points in the helght thereof,
means for ralsing plastic material to the point desired in the helght of the
conduit [tower], and means for receiving plastic material from the raislng
means and conducting the same to the conduit; the said receiving and coa-
ductlng means being adjustable in the direction of the helght of the tower."
» We speak thus of Callahan's form, because of the necessary efCect of the
flllng dates, the concession, and the form of the issued claims.
CONCRETE APPLIANCES CO. V. MEINKEN 961
(262 F.)
might be such distinctions between éleva ting and distributing grain and
elevating and distributing concrète that transferring a device from
one art to the other and making the necessary adaptation would in-
volve invention. That need net be decided; but hère Smith be^ns
at the point where the élévation of the concrète is finished. He has
then merely the question of gravity distribution. He finds that con-
crète has been distributed and grain has been distributed by a single
unitary chute, swinging and turning at its upper end, and that grain
has also been distributed by the double swiveled chute, thereby in-
creasing the ability to sélect exactly the desired point for discharge.
In the words which were used in Crown Co. v. Sterling Co., 217 Fed.
381, 133 C. C. A. 297, Callahan had already "bridged over whatever
gap there was" between the art of concrète building and the art of
gravity distribution, and the "door of opportunity was open" to ail
who wished to use in the former art an expédient well known in the
latter. It seems to us quite clear that there is no invention in adding
to the device of Callahan the well-known additional swiveled joint in
the discharge conduit. It follows that those claims of the Smith
patent sued upon are invalid, and the decree of the court below, which
dismissed the bill as to this patent, must so far be affirmed.
[3] At the time thèse patentées appeared on the field concrète had
already corne into extensive use as a building material in connection
with metallic reinforcements, and it had been found that it was suit-
able for buildings of ail shapes and of many stories in height. When
mixed of the proper consistency, it was called "mush" concrète,
and to handle this material and deliver it efficiently at the place of
use in a large building opération was a considérable problem. Vari-
ous methods had been employed, but the one most approved consisted
in raising it by elevator to the floor or level where it was to be used
and there dumping it into wheelbarrows, by which it was conveyed
to the varions desired points of use upon that level. It occurred to
Callahan that he could construct a tower, or skeleton elevator shaft,
which should originally extend, or which, by successive additions,
should be made to extend, well above the highest story of the pro-
posed building; that he could attach to this tower, and make vertical-
ly adjustable thereon, a receiving bin or hopper carrying a down-
wardly inclined and revolubly connected discharge chute, which could
be swung about to reach varions points on the next lower level to
that where the receiving bin was fixed ; that this receiving bin and
its discharging apparatus could be temporarily fixed, as the building
advanced, at positions on the tower suitably elevated above each suc-
cessive story; that the mush concrète could be elevated inside the
tower to thèse varions fixed positions and there dumped into the re-
ceiving bin; and that, in this way the mush concrète could be deliv-
ered in an approximately automatic way throughout the successive
floors or levels of a building, no matter how high. Upon this record,
this gênerai thought was whoUy novel. It has proved to be of great
commercial value. It is common knowledge that, mostly within the
period since the patent issued, reinforced concrète has largely super-
seded ail other materials in the érection of large structures, and the
262 F.— 61
96â 262 FEDERAL REPORTER
record shows that 80 or 90 per cent, of ail the important construction
work of this class in the country employs this Callahan method, and
that ail of the larger manufacturera of machinery and apparatus for
this gênerai purpose hâve taken licenses under the patent. It is not
too much to say that the invention has played a large part in revolu-
tionizing the building industry, and that it is not common for a pat-
ent in litigation to find itself supported by such a large measure of
commercial merit and public acquiescence.
It is not contended that the patent is anticipated, in the strict sensé
of that term, but the defendant's position, approved by the court be-
low, is that Callahan only put together old and f amiliar éléments, and
that his advance did not involve invention over what had gone be-
fore. To détermine this question, we must know, first, the charac-
ter of the relations between what was old and this new arrangement;
and, second, whether his claims are properly characterized by référ-
ence to his real advance. To elevate material to a fixed and invari-
able height, and to distribute it therefrom by gravity, through a
swinging, revolving chute, to différent discharge spots upon a lovver
level, was common. As we hâve said, in considering the Smith pat-
ent, this was familiar in the class of grain elevators. The typical
so-called grain elevator, or storage house, was a permanent structure,
and grain was carried by varïous types of elevating apparajtus to the
permanent top floor or level. From the bottom of the bin there sit-
uated depended a swinging chute, which could be moved about so as
to discharge, upon the floor below, into any storage bin opening from
that level. Thesé grain elevators, like others of similar type shown
by the record, entirely lack the only substantial novelty claimed for
Callahan. They did not hâve a temporary receiving bin or hopper
with a connected discharge chute vertically adjustable in an elevator
tower, adapted to distribute the material upon successive levels. If
invention lies in this thought and its practical application, the grain
elevators are not important.
Next we are cited to several examples of unloading apparatus for
vessels, of which the English patent to Baillie, No. 10,380 of 1888,
is as relevant as any. In this device, which was for transferring coal
from a barge to the ship alongside, there was a receiving bin or hop-
per located in an elevated framework or staging on the barge, and
from which a depending chute carried the material away by gravity
to the proper bunker in the ship. The coal contents of the barge
were raised to this point by an endless chain of buckets over an in-
clined mast or support pivoted to the vertical frame at its upper end.
Evidently, as the contents of the hold of the vessel became lowered,
this mast must be extended further down, or further to one side, and
this could be done either by an extension of the lower end or by low-
ering the upper pivoted point. The patent shows both methods of
adjustment. The bin and pivot could be lowered upon this support-
ing stage a short distance — not more than the height of the bin. The
point of final delivery was not changed. Such vertical adjustability
as there was in the bin was incidental to raising and lowering the
whole "tower" to accommodate it to the point where élévation be-
CONCRETE APPLIANCES CO. V. MEINKEN 963
(262 F.)
gan. We do not find hère any substantial disclosure of the real novel-
ty of Callahan's invention, as above stated.
This leaves for considération only the patent to Theiss et al., No.
866,166, of September 17, 1907. It is not to be doubted that this is
suggestive of the idea and the apparatus of Callahan; whether it is
more than a mère suggestion is the question. Theiss' apparatus, like
Baillie's, was intended for unloading coal from a barge and loading
it into the hold of a ship. It consisted essentially of a tower-shaped
structure permanently erected upon the deck of a barge or scow. It
was intended to reach a distance substantially higher than the coal-
receiving hatchways of the particular ship which might be selected
to be served; there was never occasion to make it any higher. This
tower carried an elevator car or skip which was loaded with coal when
it was at the bottom of the tower, and then was elevated as far as
necessary to be dumped into a receiving bin, which bin was capable
of vertical adjustment on the tower. This receiving bin in tum
dumped into a chute, which, at its lower end, discharged through the
hatchway of the vessel to be loaded. This chute was not revolubly
connected with the bin or tower. It could not be moved laterally.
It was carried, by the tower, in ways or guides which gave the chute
its inclination and permitted it to slide therein longitudinally. There
was a permitted adjustment of the guide by which the angle of in-
clination could be changed, but this was donc by releasing and read- .
justing and refastening the guideways, and could not be donc as a
part of the opération of the device while in use.
The adjustment and fixing of the chute, in order to discharge into
a desired hatchway, was a complicated matter. First, the carrying
scow must be so positioned and fastened with référence to the ship
that the tower was exactly opposite the hatchway. Second, the re
ceiving bin and the chute must be adjusted vertically in the tower at
such a position that the chute, in its carrying guides, would be point-
ed at the hatchway. Third, the chute must be slid downward and
outward, in the direction at which it was pointed, until its lower end
entered the hatchway. If, then, it was next desired to reach another
hatchway on the same transverse Une, the vertical adjustment of the
bin and the chute carrier, and the aiming of the chute at the new
hatchway and its longitudinal extension into contact therewith, must
be repeated. If it were desired to reach hatchways further forward
or aft, the scow and its entire apparatus must be released and floated
alongside the ship to its new position. In the broadest sensé, this
patent shows a plan of elevating material to an adjustable vertical
height, and from there distributing it by gravity to selected positions
upon a lower level; but it shows this idea in a very rudimentary
form. It would be practically useless, for the purposes now involved.
In détails of construction and of claim reading, there is ample
differentiation. Claim 5 of Callahan, above quoted, will not read on
Theiss. A comparison of the Theiss apparatus with this claim shows :
(a) That the Theiss apparatus is not "for the purpose described,"
in any restricted sensé of that phrase, (b) That Theiss has a rela-
tively short supporting framework, rather than a relatively high and
964 262 FEDERAL REPORTER
distinctive tower. (c) That, while Theiss has "a conduit," it does
not "extend laterally therefrom," excepting in the most gênerai sensé,
(d) That Theiss has no "suitably supported horizontally movable
boom carrying the conduit," nor anything which approximates such
a boom, (e) That, since he has no boom at ail, of course he has no
boom "adjustably connected witb the tower and adapted to be arranged
at the varions points of the height thereof'; but it must be said that
Theiss' conduit itself has this vertically adjustaWe connection with the
tower. (f) The remaining éléments of the claim are literally met well
enough by Theiss, save for the distinction as to their use with plastic
material.
[4] The question presented by Theiss seems not to be one merely of
double use, because the structural différences are too great; but, if
the physical resemblance were much doser, the défense of double use
would be far from satisfactory. See Ansonia Co. v. Electrical Co.,
144 U. S. 11, 18, 12 Sup. Ct. 601, 36 L. Ed. 327; Potts v. Creager,
155 U. S. 597, 606-608, 15 Sup. Ct. 194, 39 L. Ed. 275; Hobbs v.
Beach, 180 U. S. 383, 390, 21 Sup. Ct. 409, 45 L. Ed. 586; Gold v.
Newton (C. C. A. 2) 254 Fed. 824, 827, 166 C. C. A. 270. Certainly,
the art of loading coal into a ship for fuel is not the same art as that
of distributing wet concrète to a building structure ; nor is the analogj^
very close. It is not at ail certain, even if probable, that an ex-
perienced building engineer, considering methods of handling wet
concrète for a skyscraper, would call to mind a coal-handling apparà-
tus on a harbor scow. On the other hand, it impresses us as a bold
and original thought that this material could be handled in this way.
Distributing mush concrète through gravity chutes by one apparatus
throughout the whole course of building obviously involved difficul-
ties ; it had never been handled by gravity chutes at ail, excepting un-
der simple conditions where thèse difficulties did not exist, and then,
perhaps, had been done only on paper. On one side was the danger
that it would adhère to the cliutes and set and choke up the pipes,
at least at the valves and gâtes ; on the other side, the risk that the
éléments would disintegrate, and the water and the cément and the
broken stone fall in separate strata.
Callahan's conception, that this material could be thus treated so as
to deliver it from the ground ail about the successive several floors
of a high building and with practically no manual labor, except that
involved in the story by story adjustment of the apparatus, involved,
we think, inventive thought of a high order, when accompanied as
it was by the devising of suitable apparatus to carry out the thought,
which apparatus substantially differed from anything which had
ever been constructed for any purpose, although every élément
was old. It is true, in a sensé, that the Callahan device is produced
upon the basis of Theiss' structure by substituting for the longi-
tudinally sliding and extensible delivery chute of Theiss, the revolubly
mounted chute of the grain elevators; but this is not the whole
truth. Callahan built up his tower to a height never thought of by
Theiss, and which Theiss could not hâve accomplished witihout cap-
sizing his barge; and Callahan supplied a chute- supporting boom
CONCRETE APPLIANCES CO. V. MEINKEN 965
(262 F.)
attached to the receiving hopper and vertically adjustable with it, a
feature which the grain elevators did not hâve and could not hâve
used. He thereby laid the basis for adapting the structure to use
fairly distinct from that of either a coal elevator or a grain elevator.
As upon every such question, there is no authoritative décision
which compels one or the other conclusion. The doubtful inference
is rather one of fact; but we sélect and refer to a few instances
where invention has been found — by the Suprême Court or by this
court — and the facts of which may well be thought to présent no
stronger inferences in its favor than do those of the instant case:
Loom Co. v. Higgins, 105 U. S. 581, 590, 26 L. Ed. 1177; Hobbs
v.Beach, 180 U. S. 383, 393, 21 Sup. Ct. 409, 45 L. Ed. 586; Ex-
panded Métal Co. v. Bradford, 214 U. S. 366, 381, 29 Sup. Ct. 652, 53
L. Ed. 1034; National Co. v. Aiken, 163 Fed. 254, 259, 91 C. C. A. 114;
Warren v. Owosso, 166 Fed. 309, 92 C. C. A. 227; Morgan Co. v.
Alliance Co., 176 Fed. 100, 109, 100 C. C. A. 30; Ferro-Concrete
Co. v. Concrète Co., 206 Fed. 666, 124 C. C. A. 466; International
Co. V. Sievert, 213 Fed. 225, 129 C. C. A. 569.
[5] The test of the présence of invention in a new assembly of old
éléments is sometimes said to be whether a new resuit is accom-
plished. This is often not a helpful rule, because its application in-
volves définition of the phrase "new resuit," and this opens the orig-
inal difiiculty. Within a narrow définition, every new combination
of old éléments gets a new resuit; but this is not the sensé in which
the phrase is rightly used as indicative of invention. The récent opin-
ion of this court in Huebner Co. v. Matthews Co., 253 Fed. 435, 165
C. C. A. 177, illustrâtes this situation. The ultimate practical resuit
at which the patentée and his predecessors aimed was to carry pack-
ages by gravity upon a runway from one place to another. The pat-
entée was the first to accomplish this with such a degree of efficiency
as to make the device commercially popular; but the same resuit, ex-
cept in efficiency degree, had several times been reached before, and
by apparatus so similar as to be superficially indistinguishable. The
patentée had simply added the well-known and common mechanical
refinements and expédients already used by others, even in the same
art — e. g., he used roller bearings, instead of ordinary journal hoxes —
and we declined to regard this as a new resuit. We hâve no inten-
tion to départ from that line of our récent décisions * of which this
one is typical; such refinements are not inventions. On the other
hand, we recall no instance of combinations of old éléments which
has been held to produce "a new resuit" in a patentable sensé and
which better deserves that commendation than does Callahan's. The
quasi automatic élévation and distribution of wet concrète under the
varying conditions of progressive building and by a single apparatus
was an entire novelty. No one had tried to do it ; apparently, no one
had thought of it ; it was usef ul in a very high degree ; and when we
* Berger Co. v. Trussîed Co., 257 Fed. 741, C. O. A. — - ; Edwards v.
Dayton Co., 257 Fwl. 980, C. C. A. ; Van Dorn Co. v. Mathis Oo., 260
Fed. 400, C. C. A. .
966 262 FEDERAL REPORTER
find a new resuit in this complète and extrême sensé accomplished by
a confessedly new combination — though of known means — we think
both the purpose of the patent law and the rightful application of
the décisions thereunder require that it should be awarded the merit
of invention.
[6] We hâve stated our conclusion that the device of the patent is
not an aggregation in the sensé that it represents such a mère assem-
bling of old éléments as might hâve been made by the exercise of only
ordinary skill. It is at least equally clear that the device is not an ag-
gregation in the more technical sensé of the word, but is rather a true
combination. It is true that the use of the apparatus involves suc-
cessive steps, and is at each of its stages under direct or indirect
manual control; but in a fair sensé the entire opération of elevating
and distributing the concrète is a unitary thing. From the time it
starts on its joumey from the ground to the time it is deposited in the
forms, its progress might well be automatic. There is clear dis-
tinction between this performance and that of the associated washing
and wringing machines, discussed by the Suprême Court in Grinnell
Co. V. Johnson Co., 247 U. S. 426, 38 Sup. Ct. 547, 62 L. Ed. 1196.
In the latter case, both the judgment and the hand of the operator
were involved, in submitting to the second opération the material
which had finished the first; the juxtaposition of the two machines
was a mère matter of convenience. In the présent case, the operator
can, at the most, only interfère to prevent the otherwise normal com-
pletion or second part of what is intended to be the unitary work;
and even then his interférence will only temporarily stay the normal
action. We collected and commented on the décisions of the Su-
prême Court and other courts on this subject in Gas Co. v. United
Co., 228 Fed. 684, 143 C. C. A. 206. Callahan's patent should not be
condemned as an aggregation.
We do not overlook the fact that some, and perhaps a considérable
portion, of the practical and commercial success has been due to the
use of the feature covered by the Smith patent; but this does not
detract from the patentable and inventive merit of Callahan's idea.
An oscillating or swinging chute, even without Smith's secondary
swivel, would make the primary distribution of the concrète through-
out the floor or level, leaving the secondary and more accurate dis-
tribution to be accomplished by further means. We hâve held that
the particular means adopted by Smith did not involve invention, and
we can hardly say that much of the crédit due to public use should
be taken away from Callahan, because he had not himself adopted an
improvement and refinement which, however important to commer-
cial success, was within the grasp of the men ordinarily skilled in
the art.
We hâve considered claim S. Claims 1, 2, and 13, also in suit,
use more gênerai terms and are superficially somewhat broader; but
we think, in connection with the spécification, they necessarily intend
that the means for receiving the concrète from the raising means and
taking it to the conduit are vertically adjustable in the tower. This
may fairly be implied from the requirement that the material is to be
CONCRETE APPLIANCES CO. V. MEINKEN 907
C262 FJ
laised to a "suitable point" in the tower. It is then seen that ail
thèse claims involve what we hâve thought Callahan's meritorious in-
vention, resting upon the successive story by story opération of the
device. With this interprétation, they are not very différent from.
claim 5, but should be treated as other expressions of the same thought
in terms nominally of somewhat broader equivalency. Thèse claims,
also, should be considered valid.
Infringement is not denied.
The decree below, as entered, must be set aside, and the record
remanded for a new decree, modified in accordance with this opinion.
On Pétition for Rehearing.
[7] The application for rehearing brings to our attention a matter
not mentioned in the opinion. We selected claim 5 as the one most
suitable for study, because it expressly incorporated those features in
which we thought patentable novelty was to be found. One of thèse
features was the horizontally movable boom carrying the conduit,
and "being adjustabily connected with the tower and adapted to be
arranged at various positions in the height thereof." We assumed
that this referred to a vertical adjustment of the boom in the tower.
The assumption is now challenged, because it is said that the ad-
justable connection between the boom and the tower was that mechan-
ism which provided for a horizontal adjustment of the upper end
of the boom on a horizontal track (which défendant has not used),
and that the provision for vertical change of the boom in the tower
is not adjustahility, but rather refers to a disassembling of the parts in
one location and reassembling them in another. It is true that the
speciiication refers to a horizontal adjustahility, but we do not think
that it is this capacity to which claim 5 refers — at any rate, this in-
ference is not clear enough to justify limiting the claim to a com-
paratively unimportant détail. Such an inf erence is contradicted, both
by the fact that this horizontal adjustahility of the boom on the tower
is made the spécial characteristic of a group of claims not in suit, and
by the fact that the thought is stated in the claim in immédiate con-
nection with the référence to "various points in the height" of the
tower, and after one référence has been made to the horizontal motion
of the boom and the référence to that function apparently finished,
while the draftsman tumed to the thought of vertical change. It is
true, also, that in the form of the invention shown in the drawings, and
specifically described, the vertical change was to be made by taking
out bolts, removing the horizontal platform, raising it, and bolting it
again to a new position, and that this is not adjustahility in the most
précise définition. However, it is well within the sensé in which the
word is very often used, and we must define it as the patentée intended.
For thèse reasons we adhère to the interprétation of the claim in this
respect which the opinion assumed.
It is also true enough that Callahan specifically contemplated build-
ing his tower up section by section, as the building progressed ; but this
was a matter of préférence. His drawing shows the completed tower.
9G8 262 FEDERAL REPORTEH
permitting opération anywhere along its height, and observation of his
plan of érection does not change our conception of the real disclosure.
In other respects, further review of the case leaves our stated con-
clusions unchanged, and the application for rehearing will be disallowed.
SCOTT & WILLIA3IS v. HEMPHIU^ MFG. CO.
(Circuit Court of Appeals, First Circuit. February 18, 1920.)
No. 1379.
Patents <g=3.328 — Fob improvement in knitting machine hœld invalid, and
NOT INFRINGED, IF VALID.
Claims 20-;32, iuoluslve, of the Wardwell patent, No. 649,021, for im-
provements in knitting machines, held invalid for want of invention, and
not infringed, if valld, and claim 36 invalid for anticipation.
Appeal from the District Court of the United States for the District
of Rhode Island ; Arthur L. Brown, Judge.
Suit by Scott & Williams, Incorporated, against the Hemphill Manu-
facturing Company. From a decree dismissing the bill (247 Fed. 540),
plaintiff appeals. Affirmed.
Hubert Howson, of New York City, and Frederick P. Fish, of Bos-
ton, Mass. (Howson & Howson, of New York City, on the brief), for
appellant.
Frederick L,. Emery, of Boston, Mass. (James H. Thurston, of Provi-
dence, R. L, on the brief), for appellee.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
BINGHAM, Circuit Judge. This is an appeal from a decree of the
District Court for Rhode Island in an equity suit charging inf ringement
of letters patent No. 649,021, issued to C. J. A. Wardwell May 8, 1900,
for improvements in knitting machines, and now owned by the plaintiff.
The défenses are anticipation, noninvention, noninfringement, and
lâches.
There are five claims in issue. They ail relate to certain mechanisrti
in knitting machines, whereby the variations in the knitting of a stock-
ing are automatically produced, and more particularly to alleged im-
provements in old mechanism for producing thèse variations auto-
matically; they do not provide automatic action for effecting thèse
changes for the first time.
Claim 29, which is typical of claims 29 to 32, inclusive, is as f ollows :
"29. A knitting machine organlzed so as to knit in eircular and reclprocat-
Ing courses and to produce stocklngs having seamless heels and toes, said
machine having, In comblnatlon, a time shaft which moves from time to tlme
and by Intervening mechanism controls the variations in the knitting, said
time shaft belng given from tlme to tlme an intermittent step by step motion
and a movement through a greater extent than that of its usual steps, and
automatlo means controlled by a pattem mechanism for movlng said time
shaft, substantlally as set forth."
ignsFor other cases see same topic & KBY-NUMBBR In ail Key-Numbered Digesta & Indexes
SCOTT & WILLIAMS V. HEMPHILL MPO. CO. ^^^
(262 F.)
In the court below the bill was dismissed. It was there pointed out
that claims 29 to 32 embodied an old mechanical motion as their spécial
feature, and it was held (1) that if Wardwell was the first to use this
old mechanical motion in machines for the aiitomatic knitting of stock-
ings, its introduction did not involve invention, but related to a mechan-
ical détail of construction ; and (2) if its introduction involved inven-
tion and rendered the claims valid, they must be limited to the structure
disclosed ; that, thus limited, the comparison upon the question of in-
f ringement would be, not of movements produced, but of means where-
by the plaintifï and défendant in their respective machines produced the
movements; and that, when so compared, the défendant did not in-
fringe thèse claims.
Claim 36 reads as foUows:
"36. A knitting macliine havlng, In comblnation, a time sbaft; a ratcliet
loose on said shaft; a chain wlieel movaWe witU said ratcliet; a pattern
Chain engaging said chain wheel ; a ratcliet wlieel fast to the time shaft ; a
pawl engaging said loose ratchet wheel to impart a step by step movement to
said pattern chain ; a pawl engaging said fast ratchet to give a step by step
movement to the Urne shaft; a lifter engaging said fast ratchet pawl to
normally hold it out of co-operation with said fast ratchet, and adapted to
drop when a variation in the pattern chain co-operates Iherewith, thereby per-
mitting said pawl to engage its fast ratchet wheel, substantially as set forth."
This claim omits the long movement of claims 29 to 32. In the opin-
ion of the court below it is pointed out that the spécial feature of the
combihation of this claim is "a lifter engaging said fast ratchet pawl
to normally hold it out of co-operation with said fast ratchet, and
adapted to drop when a variation in the pattern chain co-operates there-
with, thereby permitting said pawl to engage its fast ratchet wheel,"
and, after showing that the prior art discloses machines embodying
means to perform the same function and in substantially the same way,
it was held that this claim also related rather tb a détail in machine
building than to any novel and inventive idea peculiar to knitting ma-
chines, and that, if the claim could be sustained as valid, it was only by
limiting it to the particular construction shown, and, so limited, was
not infringed.
After giving careful considération to the arguments and briefs of
counsel and having made an extended examination of the statè of the
art as presented by the record, we are of the opinion that the court
below was right in dismissing the bill, so far as concems claims 29 to
32, and for the reasons stated in its opinion.
As to claim 36, we think it is anticipated by letters patent No. 508,-
965, granted to McMichael & Wildman, November 21, 1893. Eveiy
élément embodied in this claim is disclosed in the McMichael & Wild-
man patent. It is true that the lifter in the latter machine is made
intégral with the fast ratchet pawl, while Wardwell's lifter is construct-
ed as a separate part ; but the claim is such that a lifter of either con-
struction answers its requirements. If a lifter intégral with the pawl
would not answer the requirements of claim 29, that is unimportant, for
claim 36 does not contain the long movement embodied in claim 29.
970 262 FEDERAL REPORTER
Regarding daim 36 as invalid, because of anticipation, we think the bill
was properly dismissed as to this claim also.
The decree of the EHstrict Court is affirmed, with cûsts to the appellee.
DE YRY OORPOEATION v. ACME MOTION PICTURE PEOJECTOB OO.
(Circuit Court of Appeals, Seventù Clroult January 6, 1920.)
No. 2715.
Patents iS=>32S — Foe moving pictube machine void foe lack of invention.
The Locliwood patent, No. 929,678, for an improvement lu apparatus
for exhibitlng moving pietures, consistlng of a rotary fan for ventilating
tlie moving plcture cabinet wben In use, to prevent aie fllm from belug
subjected to excessive beat, held void for lack of novelty and invention.
Appeal from the District Court of the United States for the East-
ern Division of the Northern District of Illinois.
Suit by the De Vry Corporation against the Acme Motion Picture
Projector Company. Decree for défendant, and complainant appeals.
Affirmed.
Fred Gerlach, of Chicago, III., for appellant.
Luther Johns, of Chicago, 111., for appellee.
Before BAKER, EVANS, and PAGE, Circuit Judges.
BAKER, Circuit Judge. This is an appeal from a decree dismiss-
ing for want of equity the appellant's bill for alleged infringement of
patent No. 929,678, issued on August 3, 1909, to Lockwood for im-
provements in apparatus for exhibiting moving pietures. The decree
followed a ruling sustaining appellee's motion to dismiss, which was
in the nature of a gênerai demurrer.
Claims 14, 15, and 16 were the only ones counted on in the bill. As
thèse claims are ail of the same efifect so far as determining the cor-
rectness of the ruling on demurrer is concemed, only one of them is
subjoined.
"16. In an apparatus for exMbiting moving pietures, the comblnation with
a cabinet having a picture fllm therein, of a light and a light condenser therein,
an Inciosing caslng for said lamp and condenser, and a rotary fan for with-
dravcing the heated air from said casing and discharging it wlthout said
cabinet."
In his spécification the applicant acknowledged that the motion pic-
ture cabinet, with its necessary projecting means, was old in the art.
Ile noted that the pietures are printed on a highly inflammable film of
celluloïd. "To guard -against the possibility of igniting the inflam-
mable film," he said, "I hâve provided a ventilating apparatus by means
of which the air heated by the lamp and in the projector is withdrawn
and discharged from the cabinet. As shown, Âis comprises a rotary
fan driven by the motor and which is connected to the casing sur-
rounding the lamp and containing the light condenser ; and the fan is
<g3»For other cases see same toplc & KBY-NUMBER in aU Key-Numbered Digests & Indexes
DE VEY CORP. V. ACME MOTION PIGTUEE PROJECTOR CD. 971
(262 F.)
connectée! with a conduit for discharging the hot air eut of the cabinet.
Thus the température within the chamber is prevented from rising to
the danger point."
In Lange v. McGuin, 177 Fed. 219, 101 C. C. A. 389, we spoke of
the demurrer in equity pleading in this way:
"It Is not the province of a demurrer to speak of matters beyond the bill.
Of course, every blU is written against the background of common knowledge ;
and In that view a demurrer raay be said to invite the chancellor to take ju-
diclal notice of the background. But if a bill, in and by its own averments,
States a prima facie case, that case cannot properly be overthrown by the
chancellor merely on the ground that he judicially knows of facts that would
support an answer. Hls judicial knowledge miust go farther, and be so broad
and all-embracing that he can properly hold that no facts exlst that would
tend to controvert the supposed answer and support a replication and the blU.
This is so because, if such facts exist, tJie complaùiant Is entitled to a hear-
ing whei-e he can présent and argue the facts, and such a heartng cannot be
had on demurrer to the bill."
Under that rule v^^e upheld bills against demurrers in Westrumite
Co. V. Commissioners, 174 Fed. 144, 98 C. C. A. 178, and Krell Piano
Co. V. Storey & Clark Ce, 207 Fed. 946, 125 C. C. A. 394, Wright v.
Wisconsin Ume & Cernent Co., 239 Fed. 534, 152 C. C. A. 412, and
sustained demurrers to bills in Chas. Boldt Co. v. Turner Bros. Co.,
199 Fed. 139, 117 C. C. A. 621, and Bronk v. Chas. H. Scott Co., 211
Fed. 338, 128 C. C. A. 17.
In the présent case the claims in suit and the spécification explana-
tory thereof make it clear that Ivockwood contributed nothing to the
strict art of projecting moving pictures, and that his improvement con-
sisted in ventilating by means of a rotary fan the moving picture cabinet
in order to prevent the inflammable film from being suhjected to exces-
sive heat. If invention may be predicated upon that act, then any one
could obtain a monopoly of the use of a ventilating fan in every cab-
inet or box or room into which he put a dififerent apparatus, or in which
existed a différent condition on account of which he desired ventila-
tion for a différent purpose. Jones v. Cyphers, 126 Fed. 753, 62 C. C.
A. 21 ; Baker v. Duncombe Mfg. Co., 146 Fed. 744, 77 C. C. A. 234;
Voightmann v. Perkinson, 138 Fed. 56, 70 C. C. A. 482; National
Regulator Co. v. Powers Regulator Ce, 160 Fed. 460, 87 C. C. A.
444; Alexander v. De Moulin Bros. & Co., 199 Fed. 145, 117 C. C. A.
627.
The decree is affirmed.
972 262 FEDERAL REPORTER
BURGBSS BATTEBT CO. v. NOVO MFG. CO., InC.
(Circuit Court of Appeals, Second Circuit. November 20, 1919.)
No. 31.
Patents <S=s>328 — For electmo hand lamp void fob lack of invention.
The Burgess patent, No. 1,084,926, for un electric hand lamp, claim 4,
held vold for lack of Invention, In view of the prior art.
Appeal from the District Court of the United States for the South'
ern I^strict of New York.
Suit in equity by the Burgess Battery Company against the Novo
Manufacturing Company, Incorporated. Decree for complainant, and
défendant appeals. Reversed.
Action Is upon a single elaim (No. 4) of the Burgess patent. No. 1,084,926,
for an electric hand lamp or flashlight. The claim in suit Is as foUows :
"In a tubular hand lamp, the combination of an insulating casing, batteries
therein, a lamp at one end of said casing, a closure for the other end of said
casing, said closure carryiug a spring for establishing connection with said
batteries, a reflector for said lamp, a contact device near the center of said
casing, conduetors leading from said contact device to said reflector and to
said spring, respectively, a lens for said lamp and a lens support envelopiny
saM reflector and its conduotor and însulated therefrom to prevent accidentai
lîghting of the lamp through accidentai connection of those parts with other
parts of the device."
The trial court sustained the patent Défendants appealed.
Drury W. Cooper and William F. Nickel, both of New York City,
for appellant.
Pennie, Davis, Marvin & Edmonds, of New York City (Arba B.
Marvin and W. B. Morton, both of New York City, of counsel), for
appellee.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
HOUGH, Circuit Judge (after stating the f acts as above). Invention
is asserted in respect of the above claim because the patentée overcame
accidentai short-circuiting in lamps having a tubular fiber casing, but
with métal ends. The spécification dwells on the point thus:
"Tliere Is no exposed part [of the lamp] which can be accidentally con-
nected to any other part to cause inadvertent ' lightiug of the lamp. This
la an Important feature, for It has often bappened with other lamps of this
gênerai type that when placed in a box or bag witli tools, or thrown into a
wire mail basiiet, the lamp would light up with its thumb contactor open,
and thus might completely wear out its batteries to no useful purpose."^
The disclosed means for accomplishing this désirable resuit consist
(in the language of the above claim) of "a lens support enveloping said
reflector and its conductor and insulated therefrom," so that if by ac-
cident a continuous strip of conducting métal touches both the metallic
ends of the fibrous and non-conducting lamp case, the circuit would still
be incomplète.
But lamps with casings wholly of conducting métal were old, and
such lamps (as was said below in another case on the same patent) were
"in a wire basket ail the time," yet by this same device of insulating
^ssFor other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexe»
JAY V. WEINBERQ 9'73
C262 F.)
the rcilector and its conductor wastage was prevented. Lobel, British,
9,050 of 1911. The embodiment of the daim in suit is substantially
the lamp of Patterson, 807,860, plus the insulation of Lobel, supra.
Appellee urges that a new conibination of the oldest éléments pro-
ductive of a new resuit is patentable invention. It may be invention,
but that question of fact cannot be resolved in favor of such a patentée,
without considering other matters equally pertinent to solution.
The question hère important is whether it required anything more
than the skill of a mechanic electrician to use for the prévention of ac-
cidentai short-circuiting in a fiber-cased lamp, the well-known insula-
tion of a metal-cased lamp. We hold that it did not as matter of fact.
Approved methods of reasoning on such a matter are well illustrated
in Herzog v. Chas. Keller & Co., 234 Fcd, 8.S, 148 C. C. A. 101, and
.^lian Co. v. Wanamaker, 234 Fed. 90, 148 C. C. A. 106. This pat-
ent contains claims not in suit, covering the feature of a focusing re-
fîector, as to which we, of course, can express no opinion.
We therefore confine décision to finding no invention in the claim
in suit, and direct that the decree appealed f rom be reversed, with costs,
and the case remitted, with directions to dismiss the bill, with costs in
the court below.
JAY et al. v. WEINBKRG et al.*
(Circuit Court of Appeals, Seventh Circuit. April 29, 1919. Rehearing Denied
December 5, 1919.)
No. 2646.
1. Patents ©=3328 — Infbingement; vacuum suotion devicb.
The Higginson & Arundel patent, No. 1,067,814, and the Jay patents, No.
1.132,273 and No. 1,134,457, for vacuum suction devices for raising gaso-
line in an automobile from a main tank below the level of the carburetor
to a secondary tank, held limited to the spécifie means shown, and, as so
construed, not infringed.
2. Patents >S=>174 — IjImitation of improvement patents.
Where the gênerai art has been dcveloped by pioneers, there Is room
for an adapter to hâve only a spécifie patent for his particular form of
adaptation, and he is not privlleged to exclude others from gleacing in
the same open field.
Appeal from the District Court of the United States for the Eastern
Division of the Northern District of Illinois.
Suit in equity by Wehb Jay and the Stewart-Warner Speedometer
Corporation against Frederick Weinberg and the Auto Parts Com-
pany. Decree for défendants, and complainants appeal. Affirmed.
For opinion below, see 250 Fed. 469.
Charles Burton, of Edwardsville, 111., and George L,. Wilkinson, of
Chicago, 111., for appellants.
R. A. Parker, for appellees.
Before BAKER, Circuit Judge, and LANDIS and ENGEISH, Dis-
trict Judges.
<8=sFor other cases see same topio & KEY-NUMBER in ail Key-Numbered Digests & Indexea
•Certiorari denied 251 U. S. — , 10 Sup. Ct. 396, 64 L. Kd. — .
974 262 FEDERAL REPORTER
BAKER, Circuit Judge. This is an appeal from a final decree dis-
missing appellants' bill for infringement of the Higginson and Arun-
del patent. No. 1,067,814, and the Jay patents, Nos. 1,132,273 and
1,134,457, for vacuum suction means of raising gasoline in an automo-
bile from a main tank below the level of the carburetor into a sec-
ondary tank from which gasoline flows to the carburetor by gravity.
[1] The trial court found that in the water-elevating art the prin-
ciple of opération whereby a fluid is lifted by vacuum suction and
discharged by gravity, and the gênerai combinations of mechanical
means for attaining the resuit, were old and well known long before
appellants' patentées began their labors; that appellants' patentées,
starting from this common ground, had made certain spécifie improve-
ments which they were entitled to hâve protected; that the appellees,
operating under Weinberg's patent No. 1,229,360, had started from
the same common ground and had made certain spécifie improve-
ments; and that appellees' improvements do not overlap any of ap-
pellants'.
Considération of the record, briefs, and oral argument, has led
us to approve the findings of the trial court and the reasons therefor
as expressed at length in Jay v. Weinberg (D. C.) 250 Fed. 469.
The exigencies of the case hâve caused appellants to contend that —
"The water-elevating art is too remote from the Internai combustion engine
art to warrant imputlng knowledge of expédients in the former to persons en-
gagea In the latter art."
No problem of the internai combustion engine is présent. To the
gravity- fed carburetor it is immaterial where the feed tank gets its
supply. So appellants' insistence is that the art of elevating water
from a lower to a higher réservoir is not analogous to the art of
elevating gasoline from a lower to a higher réservoir. We agrée
that the arts are not analogous ; they are identical.
[2] Where the gênerai art has been developed by the pioneers,
there is room for an adapter to hâve only a spécifie patent for his
particular form of adaptation, and he is not privileged to exclude
others from gleaning in the same open field. Loew Supply Co. v.
Fred Miller Brewing Co., 138 Fed. 886, 71 C. C. A. 266.
The decree is affirmed.
DUPEE V. DENISON 975
C262 F.)
DUPRE V. DENISON et al.
(District Court, N. D. New York. Febniary 23, 1920.)
IWJTTNCTION <©=»174 CONTINUANCE OF TEMPORABT INJUNCTION IN SUIT OVEK
OWNEBSHIP OF PATENT DENIED.
A temporary Injunction restralntng an assignée ot a patent from dis-
posing of rigtts thereunder or Issulng liœnses wlU net be contlnued on
the unsupported afBdavlt of plalntiff that he was induœd to sign the as-
slgnment by misrepresentations that It was a power of attomey, where
lie concèdes that he read the Instrument and the misrepresentations are
denied by counter affidavits.
In Equity. Suit by William H. Dupre against Howard P. Denison
and another. On motion to continue a temporary injunction. Motion
denied.
Motion to continue an injunction restraining the défendants from
disposing of rights under or granting licenses to use a certain patent
originally granted to William H. Dupre, letters patent No. 927,337,
dated July 6, 1909, for "lubricating means."
James F. Hubbell, of Utica, N. Y. (Charles B. Mason, of Utica,
N. Y., of counsel), for complainant.
Eugène A. Thompson, of Syracuse, N. Y. (Le Roy B. Williams, of
Syracuse, N. Y., of counsel), for défendants.
RAY, District Judge. On the complaint and the affidavit of the
plaintiff an order was made by me on or about December 22, 1919,
temporarily enjoining the défendants from incumbering by licenses
or otherwise the title to the patent mentioned in the moving papers,
and which was originally issued to the plaintiff in this action, who
résides at Vicksburg, state of Mississippi. Such order required the
défendants to show cause December 31, 1919, why such injunction
order should not be continued during the pendency of this action and
until it is finally determined. The défendants hâve filed certain affi-
davits, which deny substantially ail the material allégations of the
moving papers.
The plaintiff contends that the défendant Denison came to his place
of business in the city of Vicksburg, state of Mississippi, on the 7th
of November, 1919, and in substance represented that he desired and
would be willing to become the agent of the plaintiff for the purpose of
selling rights to use the patent above ref erred to, and that said Denison
finally induced him to sign a paper which the plaintiiï supposed was
a power of attomey giving Denison the right to sell rights under said
patent as agent for the plaintiff, and that, believing he was signing such
a power of attorney, he executed and acknowledged the instrument
which tumed out to be an assignment to the Bowen Products Corpo-
ration, of the City of Syracuse, N. Y., of the said letters patent and
of ail rights thereunder. The paper executed by Dupre on the 7th of
November, 1919, was acknowledged before John Howard, a notary
public of the county of Warren, city of Vicksburg, state of Mississippi,
and the acknowledgment bears the seal of said Howard. This assign-
®=jFor otlier cases see same topic & KBY-NUMBBR In ail Key-Numbered Dlgests & Indexes
976 2G2 FEDERAL REPORTER
ment was recorded m the United States Patent Office November 15,
1919.
The défendants contend that Mr. Denison went to Mr. Dupre at the
time the assignment was executed for the purpose of purchasing the
patent; that there was no misrepresentation, and no statement by
Mr. Denison to the effect that he desired to become or would become
the agent of Dupre in disposing of rights under such patent; that
Dupre shqwed a perfect willingness to dispose of his rights in the
said patent ; and that Mr. Denison, in behalf of the Bowen Products
Corporation, which he represented, purc.hased the said patent for the
sum of $500 and paid the considération at the time. Dupre concèdes
that he read the instrument which he 3igned on the day in question.
There is no pretense he was in any way prevented f rom reading it, or
ascertaining fully the contents of such instrument. Mr. Howard, who
took the acknowledgment of Mr. Dupre to the assignment of the
patent November 7, 1919, does not make any affidavit on the subject.
No one makes affidavit to the effect that Mr. Denison represented to
Dupre that the instrument signed by Dupre was other than it pur-
ported to be; that is, an assignment of the patent and of ail rights
thereunder. I do not think the complaint and sustaining affidavits,
the allégations of which are supported by the affidavits of Dupre
alone, an interested party, are sufficient to overcome the déniais of
Mr. Denison, or to justify an injunction as prayed for.
There will be an order denying the motion.
LOCKPORT GLASS CO. v. H. L. DIXOK CO.
(District Court, W. D. Pennsylvanla. February 27, 1919.)
No. 2104.
Rkmoval of causes ®=3l4 — Cause cannot be eemovkd into district in
ANOTHER STATE.
Judicial Code, § 29 (Comp. St. § 1011), which alone prescribes procé-
dure for removal of causes, œade removable by section 28 (Comp. St. §
1010) "into the district court for the proper district," by providlng that
the pétition shall be "for the removal of such suit Into the District Court
to be held in the district where such suit is pending," expresses the
législative meaning of the term "proper district," as used in section
28, and tliere is no authority for removal of a cause from a state court
Into a fédéral court of a district in a différent state.
At Law. Action by the Lockport Glass Company against the H. L.
Dixon Company. On motion to remand to state court. Granted.
George C. Lewis, of Lockport, N. Y. (Patterson, Crawford, Miller &
Arensherg, of Pittsburgh, Pa., of counsel), for plaintifï.
Reed, Smith, Shaw & Beal, of Pittsburgh, Pa., and Locke, Bab-
cock, Spratt & Hallister, of Bufïalo, N. Y., for défendant.
ORR, District Judge. This case cornes before the court upon a mo-
tion to remand. The plaintifï is a corporation of the state of New
^ssjFor otber cases see same tople & KEY-NUMBER In aU Key-Numbered Digests & Indexe»
LOCKPORT GLASS CO. V. H. L. DIXON 00. 977
(262 F.)
Jersey. The défendant is a corporation of the state of Pennsylvania.
The suit was brought in the Suprême Court of the state of New York,
and upon the apphcation of the défendant to that court the cause was
removed to this court.
Plaintiff's motion to remand must prevail. While this court would
hâve had jurisdiction, had the action been brought originally in this
court, yet, inasmuch as the action was brought in the Suprême Court of
the state of New York, this court has no jurisdiction by virtue of the
proceedings whereby the case was removed hère. The Judicial Code
(Act March 3, 1911, c. 231, 36 Stat. 1087) provides in chapter 3 for the
removal of causes from the state courts to fédéral tribunals. The
Code provides, not only for classes of cases wherein removal may be
efïected, but also provides the process for effecting removals. In sec-
tion 28 (Comp. St. § 1010) the classes of cases (with some exceptions
found in other provisions of the statutes) are set forth. In section 29
(Comp. St. § 1011) the process which must be followed is declared.
In defining the classes, the statute provides that suits within such
classes "may be removed by the défendant or défendants therein to the
District Court of the United States for the proper district."
The words "proper district" hâve given rise to a diversity of opin-
ion. Some cases hâve held that they niean any district of the United
States in which the action could hâve been brought originally, and that
therefore a removal from a state court to a District Court situate in
another state can be had, because the suit could hâve been brought in
the latter. The unreasonableness of such a construction must appear
in the light of the application of such construction to extrême cases.
Suppose a citizen of New Jersey has been aggrieved by a citizen of
California, and immediately thereafter brings his action of tort in the
state court of New York, where the offense was committed, and par-
ties and witnesses are there to be conveniently found. The défendant,
under such a construction of the words "proper district," would be
entitled to hâve the cause removed to the District Court of the United
States for the Southern District of California, if he were a citizen of
Los Angeles. Again, if proceedings were instituted by a citizen of
New Jersey in a state court of Pennsylvania, and immediately there
was an attachment of personal property, the défendant and owner of
the property, if he were a citizen of the Southern district of California,
might remove the action to that district. Such cases, however, can-
not arise if there is kept in mind the fact that the words "proper dis-
trict" are only in the provisions of the statute which détermine the
classes of cases which may be removed.
When an examination of section 29 of the Judicial Code is made, we
find the procédure for the removal of causes set forth in détail, and
such procédure must be followed in every case of every class for the
removal of which section 28 has prof ided, and those requirements show
what is meant in the statute by the words "proper district." The péti-
tion must be presented by the défendant to the state court in the suit
therein pending, within a time limited by the law governing such court
for filing an answer or plea, and such pétition must be, in the language
of the act, "for the removal of such suit into the District Court to
262 F.— 62
978 262 FEDERAL REPORTEE
be held in the district where such suit is pending." In that language
is found the expression of the législative mind that the "proper dis-
trict" of section 28 is the district in which such suit is pending. A suit
pending in the state court of New York, or a suit pending in the state
court of Pennsylvania, cannot be held to be pending in the Southern
district of CaUfornia. The présent action was pending in the state
of New York at the time the pétition for removal was filed. In no way
can it be deemed to hâve been pending in the Western district of
Pennsylvania.
The distinction has not always been maintained, in the décisions upon
the sections of the Judicial Code just referred to, between what may
be the "proper district" in which the plaintifï might hâve brought his
action and the "proper district" for the removal of the action already
brought. This is apparent when we consider that Congress has never
repealed the Conformity Statute (section 914 of the Revised Statutes
[Comp. St. § 1537]), requiring practice, pleadings, forms, and modes
of proceeding in civil causes, other than equity and admiralty causes,
to conform, as near as may be, to the practice, pleadings, forms, and
mode of proceeding existing at the time in like causes in courts of
record of the state within which such Circuit or District Courts are
held.
It is not difficult to conceive of the existence in différent states of
a différent practice, of différent forms of pleading, and différent modes
of proceeding. If a suit should be removed from one state to a Dis-
trict court of a district in another state, the practice, pleadings, forms,
and modes of procédure adopted by the plaintiff before removal might
not be in conformity with those of the state in which the District Court
to which the removal is had performed its judicial functions. Again,
referring to the procédure for removal as found only in section 29
aforesaid, we find that the certified copy of the record shall be entered
in the District Court within 30 days, and "the parties so removing the
said cause shall, within thirty days thereafter, plead, answer, or demur
to the déclaration or complaint in said cause, and the cause shall then
proceed in the same manner as if it had been originally commenced in
the said District Court."
It would not be of spécial value to review ail the authorities bearing
upon the question now before the court. A very valuable opinion upon
the subject of removal of causes is that of Judge Rellstab, of the Dis-
trict Court of New Jersey, in Ostrom v. Edison, 244 Fed. 228. In that
opinion the majority of the cases are considered, and proper consid-
ération given to the meaning of the words "proper district." As is well
emphasized in that opinion, the real question is the détermination of
législative intent.
Section 53 of the Judicial Code^, (Comp. St. § 1035), contained in
chapter 4, under the heading "District Courts — Miscellaneous Provi-
sions," is helpful in ascertaining the législative intent with respect to
removals. The last part of that section is as foUows :
"In ail cases of the removal of suits from the courts of a state to the Dis-
trict Court of the United States such removal shall be to the United States
District Court in the division in which the county is sltuated from which the
LOCKPOBT GLASS CO. V. H. L. DIXON CO. 979
<262 P.)
removal îs made ; and the tlme wlthln whlch the removal shall be perfected,
m 80 faï as it refers to or Is regulated by the terms oî United States courts,
shall be deemed to refer to the tenus of the United States District Court in
such division."
Section 53, in which that langnage is found, relates to districts con-
taining more than one division, but may be helpful in arriving at the
solution of the question in this case, although there is but one division
in this district. In the report of the spécial joint committee on revision
and codification of the laws of the United States upon the Senate bill to
codify, revise, and amend the laws relating to the judiciary, which
resulted in the passage of the Judicial Code, it is pointed out by the
committee that section 53 is intended to embrace a great many acts
creating or changing judicial districts or divisions thereof, anj those
acts are severally set forth in connection with the respective states.
Examining those acts we find that there was an act passed August
8, 1888 (25 Stat. 388, c. 789), entitled "An act to subdivide the V/estern
judicial district of Louisiana." Section 7 of that act providea;
"That causes removed from any court of the state of Louisiana 1 ito the
Circuit Court of the United States within said Western district shall be re-
moved to the Circuit Court in the division In whlch such state court Is held."
The same language is found in "An act to subdivide the Eastern ju-
dicial district of Louisiana," etc., passed August 13, 1888. 25 Stat.
438, c. 869. Again, in an act passed April 26, 1890 (26 Stat. 72, c.
167), entitled "An act providing the terms and places of holding the
courts of the United States in the district of Minnesota, and for other
purposes," there is found this provision :
"That causes removed from any court In the state of Minnesota Into the
Circuit Court shall be removed to the Circuit Court in the division In whlch
sald state court is held."
It is significant that Congress, while enacting many statutes contain-
ing provisions relating to removal of causes from one court to another
in the same state, neglected to provide expressly for such removal to
the courts in other states. Such législation was about the time and after
Act Aug. 13, 1888, c. 866, 25 Stat. 433, entitled :
"An act to correct the enrollment of an act approved March thlrd, eighteen
hundred and eighty-seven, entitled 'An act to amend sections one, two, three
and ten of an act to détermine the jurlsdiotion of the Circuit Courts of the
United States, and to regulate the removal of causes from the state courts,
and for other purposes, approved March third, eighteen hundred and seventy-
flve.' "
The act last mentioned was the act before the Suprême Court in Ex
parte Wisner, 203 U. S. 449, 27 Sup. Ct. 150, 51 L. Ed. 264, from
which case appears to hâve sprung the diversity of opinion with respect
to the construction of sections 28 and 29 of the Judicial Code.
There does not seem to be suflScient grounds for assuming that Con-
gress impliedly extended the judicial power of the United States to
permit of a removal of an action in a state court, by the défendant, into
a fédéral court of a district in a différent state, Until there is some
express enactment by Congress, a case so removed should be remanded.
Therefore the motion to remand in this case must be granted.
262 FEDERAL EBPOETBB
CLEVELAND OLIFFS IKON CO. v. VILLAGE OF KINNBT et al. "
(District Court, D. Minnesota, Fifth Division. August 20, 1919.)
1. COUKTS ®=>280 — DiSÏEICT COUET MUSÏ 8EARCH EKCOBD FOE JUEISDIOTIONAL
TACTS.
United States District Court, being a court of limited jurisdlctlon, muât
search the record in each case to ascertain whether tlie jurisdictional
facts exist.
2. CouBTS <g=»322(5) — Amendment to allège divebsity of citizenship m al-
LOWED AS OF COUESE AT ANY STAGE.
Under the express provisions of Judicial Code, § 274c (Oomp. St. § 1251c),
an amendment to allège tlie diversity of citizenship necessary to give the
court jurisdiction may be allowed as of couree at any stage of the pro-
ceedings, if such diversity in fact exists.
3. CouETs <S=5329 — Bill to enjoin élection foe annexatton to village
HELD NOT to show JTJRISDICTIONAL AMOTJNT IN CONTKOVERSY BY INCBEASB
OF TAXATION.
A bill to enjoin an élection to annex territory to a village, which al-
leged the ownershlp by cotnplainant of land within the territory af-
fected, but did not allège that the amount of taxation would be thereby
Increased, does not establish the jurisdictional amount in controversy,
though it does allège that the assessed valuation of plaintifC's land ex-
oeeded that amount.
4. Courts <@=>329 — Bill to enjoin élection fob annexation to village as
HELD NOT to SHOW JL'BISDICTIONAL AMOUNT IN CONTBOVERSY.
A bill to enjoin an élection to annex territory containing land of com-
plainant to a village, because such annexation would infringe plaln-
tiff's right to hâve his taxes assessed and levied by the township, in-
stead of the village, authorities, but not showing the value of such rignt,
does not establish the jurisdictional amount in controversy.
5. CouETs <S=»262(2) — Existence of eemedy at law enfoeceablb only in
STATE COUKT DOES NOT DENY EQUITABLE POWER OF FEDEEAL COUET.
The fact that plaintiff, who by reason of diversity of citizenship Is en-
titled to sue in the fédéral court, has a plain, speedy, and adéquate reme-
dy at law enforceable only in the state courts, does not deprive It of the
right to sue In equity In the fédéral court.
6. CouETS 'S=262(2) — Douetful remedy at law does not négative jueisdic-
TION.
The fact that plalntUC has a remedy at law by quo warranto does not
deprive him of right to sue in equity, where it Is doubtful whether the
State quo warranto proceedings can be enforced in the fédéral court.
7. Equity ®=»17 — Protection of propeety eight extends to every right of
a pecuniaby nature.
The jurisdietion of equity, unless enlarged by express statute, is limited
to protection of rights of property, but such rights of property include any
civil right of a pecuniary nature.
S. Equity <ê=x>15 — Right to be goveened and taxed by township eathee
THAN village 18 "POLITICAL BIGHT" NOT ENFORCEABLE IN EQUITY.
The right of an owner of property to continue to hâve his land assess-
ed and taxes levied thereon, and the money spent by township authorities,
Instead of by village authorities, is a political, not a property, right, which
cannot be enforced by equity ; political rights conslsting In the power to
particlpate directly or Indtrectly In the management of the govemment.
[Ed. Note. — For other définitions, see Words and Phrases, First and
Second Séries, Political Right]
9. iNJUNCnON <S=>SO — WiLL not issue AGAINST holding of an ELECTION.
Though, under Laws MInn. 1909, c. 113, as construed by the state Su-
prême Court, the question whether property In territory sought to be
«gcsFor other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgeata & Indexe»
CliEVELAND CLIPFS IBON CO. V. VILLAGE Oî" KINNBT 981
(26SF.)
annexed to a village Is such as may properly be subjocted to village govem-
ment Is open to inquiry in quo warrante proceedings, equity cannot pasa
on that question, which Is the question to be determined by tlie electora,
in a suit to restrain the holding of the élection, and will not enjoin an
élection on that question.
10. Municipal coepoeations <©=>33(9) — Statb court's eight to eeview élec-
tion ANNEXING TEBRITOHY BT QUO WAREANTO DOES NOT MAKE EIQHT OF PAE-
TIES A PBOPERTT RIGHT.
Laws Mlnn. 1909, c. 113, glving the State courts power to revlew by
quo warranto the validity of an élection for the annexation of territory to
a village, does not change the politlcal rigbt of proporty owners in that
territory to remain undcr township govemment into a property rlght,
which may be enforced In eqnlty.
In Equity. Suit by the Cleveland Cliffs Iron Company against the
Village of Kinney and others to enjoin the holding of an élection. On
final hearing. Preliminary injunction set aside, and hill dismissed.
Washburn, Bailey & Mitchell, of Duluth, Minn., for plaintifï.
Whipple & Randall, of Duluth, Minn., and Luke F. Bums, of Vir-
ginia, Mirm., for défendants Village of Kinney, John Schultz, and John
Setala.
Charles E. Adams and Whipple & Randall, ail of Duluth, Minn., for
défendant county auditor.
BOOTH, District Judge. This is a suit in equity by the Cleveland
Clifïs Iron Company against the village of Kinney and others, to en-
join the défendants from holding an élection for the purpose of annex-
ing to the village of Kinney the lands described in the complaint, and
from calling an élection at any time during the pendency of the action
to vote upon said question of annexation, or from taking any action
in référence to such élection. The bail v^^as filed June 12, 1918. A
preliminary injunction was issued on the 15th day of June, 1918. Sub-
sequently the county auditor was made a party défendant. The case
has been brought on for final hearing upon the bill, amended and sup-
plemental bill, answers to said original and supplemental bills, and tes-
timony taken. The following facts appear:
The village of Kinney is a village in St. Louis county, Minn., includ-
ing within its limits, at the commencement of this suit, approximately
1,200 acres of land, and with a population of approximately 1,000 per-
sons. The assessed value of the land within the limits of the village
of Kimiey for the year 1917 was approximately $846,985. The taxes
levied and assessed for said year by said village were approximately
$15,500. The village is located within the town of Great Scott. The
total valuation in said town at the commencement of the suit was ap-
proximately $2,105,000.
Plaintilï is the owner through leases of the following lands lying
within the town of Great Scott, but outside the limits of the village of
Kimtey as existing at the commencement of this suit, to wit: The
north one-half of the southwest quarter and the southeast quarter of
the southwest quarter of section 12, and the north one-half of the
northwest quarter and the southeast quarter of the northwest quarter
of section 13, ail in township 58 north, range 19 west. The assessed
<@=Por other cases aee sam« topic à KEY-NUMBER In ail Key-Numbered Digests & Indexes
982 262 FEDERAL BEPOETER
valuation of said property at the commencement of the suit was ap-
proximately $300,000; at the time of the trial approximately $400,000.
At the commencement of the suit there was but one résident upon the
lands owned by the plaintiff, but the plaintiff was at that time planning
to open mines upon its property, and about to bring a considérable num-
ber of men upon said lands for the purpose of opening and operating
the mine. At the time of the trial, the mine had been opened, and the
population on the plaintiff's land was approximately 257.
On the 4th day of June, 1918, there was presented to the village
council of the village of Kinney a pétition, signed by 6 persons, pray-
ing that the village council call an annexation élection for the purpose
of determining whether certain territory described in the pétition should
be annexed to the village of Kinney, including plaintiff's lands, and
comprising in ail some 1,560 acres, having approximately 108 résidents.
lUpon the présentation of said pétition, the village council passed a res-
olution calling an élection for the 17th of June, 1918, and appointed
the défendants John Schultz and John Setala inspectors and judges of
élection, and as a third inspector and judge Alvin Goodspeed, Sr.
The statutory steps preliminary to the holding of the élection were
duly taken. On the 15th of June, 1918, a preliminary injunction was
issued after hearing, and was served upon the village of Kinney and
two of the Personal défendants, to wit, John Schultz and Alvin Good-
speed, Jr. By inadvertence, one of the personal défendants was al-
leged in the complaint to be an inspector of the élection, when in fact
he was not, so that service of the writ of injunction was in fact made
on one only of the three inspectors of the élection. On the 17th of
June, 1918, the élection was held. Two of the appointed inspectors
being absent, the third one who was présent swore in two other inspec-
tors in accordance with the provisions of the statute. On the 18th of
June, the village recorder of the village made his certificate and at-
tached thereto certain papers, required by the statute to be filed with
the county auditor in case of such élection, and forwarded same to the
county auditor. Each and »11 of the inspectors of the élection and the
village recorder had full knowledge and notice of the preliminary in-
junction.
Thereafter, and on or about the 3d of September, 1918, the village
council of Kinney passed a resolution making its annual levy of taxes
in the sum of $40,000 for gênerai purposes and returned the same to
the county auditor. The taxes as finally spread upon the tax books by
the county auditor for said village of Kinney for said year amounted
to $31,614.22.
The supplemental bill sets eut facts as to matters occurring subsé-
quent to the issuance of the preliminary injunction, and prays for addi-
tional relief, viz. that the attempted annexation be declared invalid, that
the élection proceedings be set aside, and the land attempted to be in-
cluded by said annexation be declared not a part of the village of Kin-
ney, and that the county auditor be enjoined from spreading any taxes
levied by the village of Kinney against the lands attempt^ to be an-
nexed.
By timely motions, and also in their answers, the défendants hâve
contested the jurisdiction of the cotu-t: First, that this court as a fed-
CLEVELAND CLIFFS IRON CO. V. VILLAGE OF KINNEY 983
C2S2 F.)
eral court has no jurisdiction of the case; second, that the subject-mat-
ter in suit is not one of which an equily court in gênerai has jurisdiction.
[1 ] The United States District Court, being a court of Hmited juris-
diction, it is the duty of the court to search the record in each case to
ascertain whether the jurisdictional facts exist. N. Y. Life Ins. Co. v.
Johnson, 255 Fed. 958, 167 C. C. A. 250. Although upon the face of
the plaintiiï's pleadings the claim is made that the statute under which
the élection was proposed to be held is unconstitutional and void, as be-
ing in contravention both as to the Constitution of the United States and
of the State of Minnesota, such contention was expressly disclaimed up-
on the final hearing.
[2] The jurisdiction of this court as a fédéral court is sought to be
sustained on the ground of diversity of citizenship. This was not al-
leged in the original hill ; but an amendment was allowed, and, although
the sufîiciency of this amendment is attacked, yet, as it appears from
the record that the diversity of citizenship does in fact exist, an amend-
ment which would be sufficient in form would be allowed as of course
at any stage of the proceedings. Judicial Code, § 274c (Comp. St.
§ 1251c).
[3] But the amount involved necessary to give the court jurisdiction
is not alleged either in the original bill or in the supplemental bill. The
assessed valuation of plaintiff's land is alleged and proven, but this
amount, of course, is not the amount involved in the suit. The loss
of the land is not involved nor is any damage to the land alleged or
claimed. However, questions relating to the taxation of the land are
involved, and the original bill contains this allégation:
"That the annexation o£ sald lands of this plaintiff would be of absolutely
no benefit to this plaintiff, or to said lands ; on the contrary, it would simply
dlvert fuûds raised by taxation upon certain property to the village treasurer,
to be largely squandered in useless expenditures, the annual taxes at the prés-
ent village rate on said property being upwards of $5,000 yearly."
It is not alleged, however, what the current taxes paid by the plain-
tif? on its said lands in the town of Great Scott were under the con-
ditions existing at the time of filing the bill, nor is it alleged what the
taxes levied by the town of Great Scott on said lands would be if
the proposed annexation was not carried out. It may be noted in
this coimection that, if the village of Kinney and the town of Great
Scott each should levy taxes upon plaintiff's land up to the légal lim-
it under the existing statutes of Minnesota, the différence between
the two amounts thus levied would not be sufficient to meet the ju-
risdictional requirement of this court. Further than this, upon the
trial, one of the plaintiff's witnesses, manager of said plaintiff Com-
pany, testified that the company made no claim that the taxes would
be higher on plaintiff's lands after annexation than before, and did
not base opposition to the annexation on the ground of increased tax-
ation, but did claim that the taxes levied should be expended by the
township authorities of the town of Great Scott, rather than be ex-
pended by the village authorities of Kinney, for the benefit of that
village.
[4] Such being the state of the record, the jurisdictional amount,
so far as increased taxes are concerned, is neithei- alleged, claimed.
984 262 FEDERAL REPORTER
nor shown to exist. Two rights are, however, claimed by the plain-
tiff to be threatened or injured by the annexation :
1. The right to hâve the taxes paid by plaintifï company levied and
adrainistered by the authorities of the town of Great Scott rather than
hy the authorities of the village of Kinney.
2. The right to hâve plaintiff's lands remain subject to township
govemment, instead of being subjected to village government.
But no value is alleged or proven as to either of thèse rights nor
is the amount of threatened damage either alleged or proven. Per-
haps, in the nature of the case, this was not possible; but, if so, it
simply shows the impossibihty of estabhshing one of the necessary
jurisdictional facts. My conclusion is, therefore, that the prerequisite
jurisdictional amount is not shown to exist and that the bill must
be for that reason dismissed. See Vance v. Vandercook Co., 170
U. S. 468, 18 Sup. Ct. 645, 42 L. Ed. 1111; U. S. Express Co. v.
Poe, Auditor, et al. (C. C.) 61 Fed. 475 ; Risiey v. City of Utica et
al. (C. C.) 168 Fed. 737; Maryland Casualty Co. v. Price et al., 231
Fed. 397, 145 C. C. A. 391, Ann. Cas. 1917B, 50; Fuerst Bros. & Co.
V. Polasky et al., 249 Fed. 447, 162 C. C. A. 13 ; N. Y. Life Ins. Co.
V. Johnson, 255 Fed. 958, 167 C. C. A. 250.
It is also urged by défendants that this court, as a court of equity,
bas no junsdiction on account of the nature of the suit.
[5] 1. It is contended that plaintifï has a plain, adéquate, and com-
plète remedy at law, namely, by quo warrante. In my judgment this
contention cannot be sustained. Where by reason of diverse citizen-
ship plaintiffs are entitled to sue in the fédéral court, the remedy at
law to négative équitable jurisdiction must be a remedy at law in the
fédéral court. Arrowsmith v. Gleason, 129 U. S. 86, 9 Sup. Ct. 237,
32 L. Ed. 630; Smyth v. Ames, 169 U. S. 466, 516, 18 Sup. Ct. 418,
42 L. Ed. 819; Smith v. Reeves, 178 U. S. 436, 20 Sup. Ct. 919, 44
Iv. Ed. 1140; Singer Sewing Mch. Co. v. Benedict, Treas., etc., 229
U. S. 481, 33 Sup. Ct. 942, 57 L. Ed. 1288; Johnson, Treas., v. Wells
Fargo & Co., 239 U. S. 234, 243, 36 Sup. Ct. 62, 60 L. Ed. 243 ; Union
Pac. R. R. Co. V. Board of County Com'rs, 247 U. S. 282, 38 Sup.
Ct. 510, 62 L. Ed. 1110.
[6] It is probable that the remedy of quo warranto in the fédéral
court is limited to cases specifically authorized by statute. See Foster's
Fédéral Practice, § 468; In re Yancey (C. C.) 28 Fed. 445, 451. If
the remedy at law is doubtful merely, équitable jurisdiction is prop-
erlv exercised. Davis v. Wakelee, 156 U. S. 680, 16 Sup. Ct. 1200, 41
L."Ed. 310; Union Pac. R. R. Co. v. Board of County Com'rs, 247
U. S. 282, 38 Sup. Ct. 510, 62 L. Ed. 1110.
[7] 2. It is further contended by défendants that the court has no
jurisdiction, beçause the subject-matter of the suit is not of équitable
cognizance. It is claimed that the acts sought to be enjoined are po-
litical acts, and that the rights sought to be asserted by plaintiff are
political rights. In the case of In re Sawyer, 124 U. S. 200, 8 Sup.
Ct. 482, 31 L. Ed. 402, the court, in speaking of the jurisdiction of a
court of equity, said :
"The office and jurisdiction of a court of equity, unless enlarged by express,
«tetute, are limited to the proteotlon of rights of property."
CliBVELAND CLIPPS IBON CO. V. VILLAGE OP KINNBT 985
(262 F.)
This jurisdiction, however, to protect rights of property, includes
any civil right of a pecuniary nature. International News Service v.
Associated Press, 248 U. S. 215, 236, 39 Sup. Ct. 68, 63 L. Ed. 211,
2 A. L. R. 293. And equity may even restrain prosecution under un-
constitutional enactments if necessary to protect property rights. Da-
vis & Farnum Co. v. Los Angeles, 189 U. S. 207, 23 Sup. Ct. 498, 47
L. Ed. 778; Dobbins v. Los Angeles, 195 U. S. 223, 241, 25 Sup. Ct.
18, 49 L. Ed. 169; Ex parte Young, 209 U. S. 123, 155, 161, 28 Sup.
Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764;
Philadelphia Co. v. Stimson, 223 U. S. 605, 607, 620, 32 Sup. Ct. 340,
56 L. Ed. 570.
[8] As has been shown above, the right to prevent a threatened il-
légal increase of taxes is not in this case, but the two rights claimed by
the plaintiff are: (1) The right to hâve the taxes paid by plaintiff
Company levied and administered by the authorities of the town of
Great Scott, rather than by the authorities of the village of Kinney;
(2) the right to hâve plaintiff's lands remain subject to township gov-
ernment, instead of being subjected to village government. Whether
such rights actually exist, and are possessed by plaintiff, and, if so,
whether they are property rights, may both well be doubted.
That the Législature may change the boundaries of the political sub-
divisions of the State is elementary. In Kelly v. Pittsburg, 104 U. S.
78, 26 L. Ed. 658, the court said :
"What portion o( a state shall be withln the limlts of a city, and be gov-
erned by Its authorities and its lawa, has always been considered to be a prop-
er subject of législation. How thielJly or how sparsely the territory withln a
city must be settled is one of the matters wlthin législative discrétion.
Whether territory should be govemed for local purposes by a county, a city,
or a township organization is one of the most usual and ordinary subjects of
state législation."
In the case of Hunter v. Pittsburg, 207 U. S. 161, 28 Sup. Ct. 40,
52 L. Ed. 151, the court said:
"Municipal corporations are political subdivisions of the state, created as
oonvenient agencies for exercising such of the govemmental powers of the
state as may be intrusted to them. » • • The number and nature and
duration of the powers conferred upon thèse corporations and the territory
over whi(■^ they shall be exercised rests in the absolute discrétion of the
state. • * ♦ The state, therefore, at its pleasure, may modify or withdraw
ail such powers, may tal^e wlthout compensation such property, hold It itself,
or vest It In other agencies, expand or contract the territorial area, unité the
whole or a part of it wlth another munieipality, repeal the charter, and de-
Btroy the corporation. Ail this may be done, conditlonally or unconditionally,
with or without the consent of the cltizens, or even against thelr protest. In
ail thèse respects the state is suprême, and its législative body, conforming
Its acts to the state Constitution, may do as It will, unrestrained by any pro-
vision of the Constitution of the United States. Although the inhabitants and
property owners may by such changes suffer inconvenience, and thelr prop-
erty may be lessened In value by the burden of Increased taxation, or for any
other reason, they hâve no right by contract or otherwise in the unaltered or
continued existence of the corporation or its powers, and there is nothtng in
the fédéral Constitution which protects them from thèse injurious consé-
quences. The power is in the state, and those who legislate for the state are
alone responsible for any unjust or oppressive exercise of it."
986 262 FBDBBAL BBPORTER
See, also, Mt. Pleasant v. Beckwith, 100 U. S. 514, 529, 25 L. Ed.
699; McQuillin on Mun. Corporations, § 265 ; State v. Village of Gil-
bert, 127 Minn. 452, 459, 149 N. W. 951, and cases cited; Dillon, Mun.
Corporations. § 1394.
But it is claimed by plaintifif that thèse cases hâve référence to acts
done and changes made by the Législature directly; whereas, in the
case at bar, the action is taken by the local authorities under gênerai
law, and that there is a distinction between the two classes of cases,
and that in the latter dass of cases courts of equity will interfère,
even to the extent of enjoining an élection whenever necessary to pro-
tect property rights. The cases of Wilton v. Pierce County, 61 Wash.
386, 112 Pac. 386, Maçon v. Hughes, 110 Ga. 795, 36 S. E. 247, "Lay-
ton V. Mayor, 50 L,a. Ann. 121, 23 South. 99, and other cases are cited
by plaintiff as tending to support such contention. I do not think
thèse cases proceed upon the distinction claimed by plaintiff, but they
do hold that a court of equity has jurisdiction under certain circum-
stances to enjoin the holding of an élection. In my judgment, however,
thèse cases are opposed to the greater weight of authority, and this is
recognized in the Georgia case.
[9] It is the gênerai rule that courts of equity hâve no jurisdiction
in political matters, and that, in the absence of spécial statutory au-
thority, courts of equity hâve no power to enjoin the holding of an élec-
tion; and this is true, wrhether the élection relates to the filling of
public office or to other matters, such as changes in boundaries or
political subdivisions and other kindred matters. State of Ga. v. Stan-
ton, 6 Wall. 50, 18 L. Ed. 721 ; Holmes v. Oldham, 12 Fed. Cas. 421,
No. 6,643; Green v. Mills, 69 Fed. 852, 16 C. C. A. 516, 30 L. R. A.
90; Anthony v. Burrow (C. C.) 129 Fed. 783 ; Taylor v. Kercheval (C.
C.) 82 Fed. 497, 500; Angélus v. Sullivan, 246 Fed. 54, 64, 158 C. C.
A. 280; Bonifaci v. Thompson (D. C.) 252 Fed. 878, 879; People v.
City of Galesburg, 48 111. 486; Dickey v. Reed, 78 111. 261 ; Walton v.
Develing, 61 111. 201 ; Fletcher v. Tuttle, 151 111. 41, 37 N. E. 683, 25
L. R. A. 143, 42 Am. St. Rep. 220; Harris v. Schryock, 82 111. 119;
People v. Barrett, 203 111. 99, 67 N. E. 742, 96 Am. St. Rep. 296; People
V. McWeeney, 259 111. 161, 102 N. E. 233, Ann. Cas. 1916B, 34; Mor-
gan V. County Court, 53 W. Va. 372, 44 S. E. 182 ; Smith v. McCarthy,
56 Pa. 359; Spelling on Inj. § 630; Joyce on Inj. §§ 1386-1390; Dug-
gan V. Emporia, 84 Kan. 429, 114 Pac. 235, Ann. Cas. 1912A, 719;
City Council of McAlester v. Milwee, 31 Okl. 620, 122 Pac. 173, 40 L.
R. A. (N. S.) 576 ; McCrary on Elections, § 386 ; Pomeroy's Eq. Rem.
vol. 1, § 331.
[10] It is true that the Suprême Court of the state of Minnesota, in
State v. Gilbert, has held that the lands sought to be annexed under
chapter 113, Laws of 1909 (the statute hère involved), must be so con-
ditioned as properly to be subjected to village government, and that
this question is open to inquiry by the courts in quo warrante proceed-
ings. This holding does not, in my judgment, establish that the right
jnquired into in the quo warrante proceedings is a property right, nor
does it give countenance to the idea that a court of equity has jurisdic-
CLEVELAND CLIFPS IRON CO. V. VILLAGE OF KINNET 987
(262 F.)
tion to enjoin the holding of such an élection. It rather indicates that,
when the Législature acts through its subordinate agency the village
council, the acts of such council, though quasi political in their nature
and affecting political rights, are nevertheless subject to inquiry by the
courts in quo warrante proceedings, for the purpose of ascertaining
whether the acts of the council hâve been in conformity with the stat-
utory requirements. That property rights may be aflfected by the re-
suit of the quo warranto proceedings is doubtless true ; but the f unda-
mental basis of the proceeding is to ascertain the legality of the quasi
political acts of the local authorities, including the constitutionality of
the statute under which they act.
The définition of "political rights," given by Bouvier and quoted with
approval by the court in People v. Barrett, supra, is as f ollows :
"Political rights consist in the power to particlpate, dlrectly or indirectly,
in the establishment or management of government"
It is suggested that the plaintiff, being a corporation, cannot, strictly
speaking, be possessed of political rights as such. This is probably
true, but the conclusion sought to be drawn that the rights claimed by
plaintiff in the case at bar must therefore be property rights is not a
necessary conclusion. With perhaps equal justification the conclusion
might be drawn that no such rights as plaintiff claims in the case at
bar exist at ail in behalf of a corporation.
But whether the alleged rights of plaintiff, which are sought to be
protected, are property rights or quasi political rights, it is certain
that the relief demanded is a drastic interférence with political rights.
This is not ail. It is demanded that the court, in advance of the élec-
tion, détermine the very question which the voters are entitled to dé-
cide, namely, whether the territory in question sought to be annexed
is so conditioned as to be properly subject to village government. That
this question, under the Minnesota statutes and décisions, is a question
of fact for the voters to décide, see State v. Village of Dover, 113
Minn. 452, 130 N. W. 74, 539; State v. Village of Gilbert, supra.
It is true that this décision of the voters on that question may be in-
quired into by the courts by way of review in quo warranto proceed-
ings; but this review after the élection is quite a différent matter
from restraining the holding of the élection imtil the court has it-
self first passed its judgment upon the very question which the élec-
tion is to décide.
Ail of the cases cited by plaintiff in which injunctions were granted
against the holding of élections were based on the fact that there was
some matter outside the élection itself into which the court might prop-
erly inquire and the détermination of which might necessitate the for-
bidding of the élection. In the case at bar, the court is asked to déter-
mine, first, the very question involved in the élection, and then, if the
décision is adverse, to forbid the voters to pass upon that question, al-
though the législature has said they may pass upon it. No case has
been pointed out holding that a court of equity has such power, and
I am constrained to hold that it has no such jurisdiction.
988 262 FBDBRAL SBFORTBB
Inasmuch as what has been said disposes of the case, ît is unneces-
sary to consider the question whether the lands of plaintiflf sought to
be annexed to the village of Kinney were so conditioned as to be prop-
erly subject to village govemment, nor the further question as to the
effect of the violation of the preliminary injunction by the défendants.
Since this court has at no time had jurisdiction, the preliminary injunc-
tion must be set aside, and the original bill and amended and supple-
mental bill dismissed, with costs to the défendants; and it is so or-
dered. A decree may be prepared accordingly.
It is with great diffidence that I bave reached thèse conclusions, be-
cause the question of jurisdiction has already been passed upon favor-
ably by my associate in issuing the preliminary injunction; and it is
only at his express request, and after I had once refused to reopen
the question of jurisdiction, that I hâve consented to consider and pass
upon the matter. While the conclusions are not free from doubt, they
are the only ones that I bave been able conscientiously to adopt, after
a careful considération of the record, aided by the well-prepared brief s
of able counsel. Much fuller discussion has doubtless been given to
the question of jurisdiction upon the final hearing than was practicable
at the hearing for a preliminary injunction.
It is also with great reluctance that I bave reached the resuit stated,
because it precludes doing more than expressing the deepest disapprov-
al of the course of action taken by the défendants and others, who
either by active or tacit participation hâve supported them in disobey-
ing the preliminary injunction. Such conduct was in my judgment
gravely unbecoming and unwarranted.
BOEDER LINE TEANSP. CO. V. CANADIAN PAO. ET. 00. 989
(262 F.)
BOKDER LINE TRANSP. CO. v. CANADIAN PAC. RY. CO.
THE WAKENA. THE NITINAT.
(District Court, W. D. Washington, N. D. Aprll 8, 1919.)
No. 4071.
1, Collision <S=579 — Caused bt mutual faults of vessels meeting.
Evidence held to show that the motor vessel Wakena and the tug
Nltlnat, meeting at sea wcre both in fault for a collision ; the Nitinat
for answering the signal of the Wakena and then faillng to navigate ae-
cordlngly, and the Wakena for not reverslng when her first signal was
unanswered.
2. Collision <S=5ll — Vesselb in same vtatebs bound bt same bules.
Ail vessels navlgating In the same waters are ^ound by the same rules.
In Admiralty. Suit for collision by the Border L,ine Transportation
Company, owner of the motor vessel Wakena, against the Canadian
Pacific Raihvay Company, owner of the tug Nitinat. Decree dividing
damages.
Huffer & Hayden, of Seattle, for libelant.
Bogie, Merritt & Bogie, of Seattle, for respondent.
NETERER, District Judge. On March 1, 1918, at a point approx-
imately 2,000 yards southerly on a straight line drawn f rom Turn Point,
Stuart Island, to Kellett Bluff, Henry Island, and approximately 100
yards west, the motor vessel Wakena and steam tug Nitinat came into
collision. The dividing line between inland waters and the open sea
is a straight line from Kellett Blufï to Turn Point. Coast Pilot, U. S.
page 239.
The Wakena is a twin screw motor ship of 316 net registered tons,
flat bottom, 7% feet draft, and was proceeding light in ballast at a
speed of 6^ knots per hour from Vancouver to Victoria, B. C. The
Nitinat is an iron steam tug of 14 feet 6 inches draft, with a speed of
7 knots an hour, having in tow a barge between 290 and 300 feet long,
loaded with 15 full cars; the towline from the Nitinat was approxi-
mately 900 feet long ; the tide was at flood, which increased the tug's
speed to 8 knots an hour. The Nitinat was on a voyage from Esqui-
malt to Vancouver, B. C. The Wakena was proceeding in a direction
south by east, and the Nitinat N. W. by N.
[ 1 ] The évidence is conclusive that both vessels acted upon the as-
sumption that they were navigating upon inland waters. The navlgat-
ing officers of both vessels are in error as to the relative location of
the vessels when first observed. The following diagram portrays the
waters in which the vessels were navigating, and the courses and lo-
cation of the vessels as indicated by the first officer of the Wakena :
<$=3For other cases see same toplc & KEY-NUMBBR in ail Key-Numbered Dtgests & Indexta
990
262 FEDERAL REFOBTEB
1. Indlcates Wakena's course, Mouatt Point to Tum Point
2. Location of Wakena when ttie Nitinat and the Adélaïde wer» flrst ob-
served.
3. Nitinat, when flrst obeerred by Wakena's flrst olflcer.
4. Wakena's course after readiing a point 300 yards off Tum Polat.
5. Course Nitinat appeared to be taklng.
6. Point of collision.
7. Where Adélaïde was at tlme of passing Wakena.
8. Adélaïde when flrst slghted by Wakena.
BOBDEE UNE TBANSP. CO. V. OANADtàN PAC. BY. 00. 991
(262 F.)
The following diagram portrays the relative situation of the vessels
as given by the first officer of the Wakena iounediately prior to the
collision :
1. Bearlng of boats at tlme of Wakena's firat wblstle, belng about oue-fourtb
of a mile or moie apart.
2. Second whlstle, about 200 ^rda doser.
8. Four whlstles of the Mitlnat
4. (Collision of boata
992
262 FEDERAL REPORTER
The foUowing diagram portrays the relative position of the vessels
as given by A. B. Robson, Ûie ofEcer on watch of the Nitinat :
Nitlnat 1. Course of Nitinat, northerly.
Wakena 1. Position of Wakena on hearlng Wakena's one blast Of whistle.
Nitinat 2. When answering Wakena's flrst blast
Nitinat 3 — Wakena 3. Position of boats Just before collision.
The distance between the vessels at the time of answering the Wa-
kena's one blast of the whistle is one-fourth of a mile, as given hy Mr.
Robson.
The testimony of the first officer of the Nitinat that hc was one-
fourth of a mile to the starboard of the Wakena places the vessels in
a relation to each other where a collision would be impossible, and the
maneuvering of the vessels as indicated by the diagram made by this
witness (Robson) emphasizes such fact. The statement of the first
officer of the Wakena that the Nitinat was far to his port side, as in-
dicated by the diagram, is greatly exaggerated.
The testimony establishes that thèse vessels, when first approaching,
were green to green. This relation of the vessels appears to be sus-
tained by the testimony of the first officer of tlae Adelaide, who, after
having passed the Nitinat and its tow, and the Wakena nearly half a
mile to starboard, looking hack, saw the vessels in such relation that a
PEARCE V. LEDEEER 993
(262 P.)
collision was inévitable, which would indicate, considering the loca-
tion of the Adelaide, that the Nitinat was on the Wakena's port.
[2] Much emphasis is placed by respondent upon the fact that the
collision occurred in the open sea and without the jurisdiction of the
Inland Rules of the Road. Ail vessels running upon the same waters
should be bound by the same rules. The Delaware, 161 U. S. 459, 16
Sup. Ct. 516, 40 L,. Ed. 771. However, in this case, both parties were
proceeding upon the theory that they were navigating inland waters.
The first officer of the Nitinat in answer to the question, "When you
answered her one blast with one blast, what did you do?" replied, "T
ported the helm ; that is, I directed my course to starboard."
The circumstances considered, and the facts upon which there is no
dispute, or are established, indicate that, when one blast was given by
the Wakena and answered by the Nitinat, if the Nitinat had properly
maneuvered as indicated by the signal, the collision would not hâve
occurred ; or, if that was impossible of exécution, then the Nitinat is
at fault in acquiescing in a maneuver which it was dangerous or im-
possible to exécute. I think the Wakena was at fault in not reversing
its engine when it received no response to its first blast and saw that
a collision was inévitable.
I think both vessels are at fault, and the damages should be divided.
PBAECB y. LEDEREH, Internai Revenue Collecter.
(District Court, E. D. Pennsylvania. November 28, 1919.)
No. 5848.
1. PowEBS iS=536(2) — Law goveening exercise or powee of appointment.
Under the law of Pennsylvania tlie question of the effective exercise of
a power of appointment is determined by the domicile of the donor of
the power, not of the donee.
2. WiLLS (®=3682(2) INTEREST OF BENEFICIABY UNDEE SPENDTIIRIFT TRUST.
Where property has been bequeathed or devised to a trustée on a spend-
thrift trust, the beueficiary has nothing until and except as he receives,
and ail of the property until actually received by him remains the estate
of the flrst testator, although the beneflciary may be the donee of a
power of appointment, and may exercise it.
3. WiLLS <S=3692, 693(1) — Bxekcise of power of appointment tjndeb spend-
THRIFT TRUST.
Where the beneflciary of a spendthrlft trust by his will exercises a
power of appointment of which be is donee, under the law of Pennsylvania
his appointée takes, not under his will but under the will of the donor.
4. Internal revenue ©=38 — Trust estate not subject to inheritanoe tax.
The principal of a spendthrlft trust fund, bequeathed by will by the
beneflciary of the trust under a power of appointment given hIm, al-
though Included with his other estate, and thereby made subject to gên-
erai administration by his executor and to his debts, held under the law
of Pennsylvania not subject to inheritance tax as part of his estate, under
Act Sept. 8, 1916, § 202 (Comp. St. § 6336y2C).
At L,aw. Action by John W. Pearce, executor of Alfred Pearce, de-
ceased, against Ephraim Lederer, Collector of Internai Revenue foi
the First District of Pennsylvania. Judgment for plaintifï.
^=»For other cases see same topic & KEY-NUMBER in ail Key-Numbered Dlgests & Indeiaj
262 F.— 63
994 262 FEDERAL REPORTER
Arthur U. Bannard, of Philadelphia, Pa., for plaintiff.
Robert J. Sterrett, Asst. U. S. Atty., and Francis Fisher Kane, U.
S. Atty., both of Philadelphia, Pa., for défendant.
DICKINSON, District Judge. Plaintifï sues in assumpsit to recover
the sum of $1,590.61, with interest from November 16, 1918 (less
$10.32), claimed as an unlawfuUy exacted inheritance tax on the estate
of which the plaintiff is the executor. On August 30, 1918, the plain-
tifï was notified of the assessment of an additional tax of $1,557.33,
aggregating, with the 10 per cent, per annum penalty imposed to
November 16, 1918, the above sum of $1,590.61.
The theory of liability upon which the assessment was made, and up-
on which the lawfulness of the tax is now asserted, is that Élizabeth
Pearce, the mother of the plaintiff, by her will created a spendthrift
trust for the benefit of her children, of whom the plaintiff's décèdent
was one, under which the children were given the income from this
trust fund for life, with power of testamentary disposition. Plaintiff's
décèdent died seized and possessed of an estate of his own, besides
being donee of the foregoing power. The plaintiff was acting in''a
dual capacity. He is trustée under the mother's estate, and as such
has in his hands the trust fund to which référence has been made, and
he is also the executor of his brother, who was one of the life benefi-
ciaries of this trust estate and donee of the testamentary power above
mentioned. The will of the plaintiff's décèdent recited the power, and
declared it to be his intention by will to exercise that power, and to
include the fund to which that power appUed in the disposition which
he made of his estate.
Inasmuch as it is the settled law of Pennsylvania that property thus
held in trust passes, when title does pass, through and by the will of
the donor of the power, and as part of the estate of such donor, and
not as part of the estate of the donee, it follows, as a conséquence, that
in strictness the plaintiff was called upon to account for the property
in his hands as trustée of his mother's estate so far as affects this trust
fund, and as the executor of his brother's estate so far as affects the
remaining estate and property in his hands. In the accounting and
distribution which he made as such executor, however, there was
brought in and included that portion of the principal or capital sum
which was in his hands as trustée of his mother's will, which was dis-
posed of through and by the exercise of the power of appointment
which had been given to his brother by the mother's will.
The plaintiff, claiming that only the property in his hands as execu-
tor was liable to payment of a tax, made his return and paid the tax
on this basis. The United States, claiming that the share of the trust
fund disposed of as above stated should be also included in arriving at
the sum subject to the payment of the tax, brought this part of the trust
fund into the sum upon which the tax should be levied. The theory
upon which the payment of the tax now sought to be recovered was
levied is that this trust fund was subject to the tax. The theory of
the case of the plaintiff is that this trust fund should not be included in
the tax assessment.
PEARCE V. LEDERER 995
(262 FO
This présents the question to be decided. It is brought up on motion
for a judgment notwithstanding the affidavit of défense. The rule is
taken on the assumption that technically the United States is not a
party to the présent cause, but that the action is one against the col-
lecter as an individual. Counsel for défendant acquiesces in this view.
There is no dispute between the parties, other than the controversy
over the broad question above suggested, and ail other fîndings are
concededly to be made in favor of the plaintifî. We mention this,
because counsel for the plaintiff has brought into his brief a discussion
of his right to judgment now in his favor, if his position on this main
question is upheld. In the brief submitted on behalf of the défendant,
which we now hâve before us, every other question than this main
question is admittedly out of the case, and because of this has not been
considered.
In order to meet the question above outlined, it may be premised
that the death of the donor of the power was before the act of Congress
imposing the tax (Act Cong. Sept. 8, 1916, c. 463, 39 Stat. 756), and
the death of the donee was after that date. The text of the act of
Congress is, so far as it bears upon the controversy before us, that the
tax is imposed "upon^the transfer of the net estate of every décèdent
dying after the passage of this act." Section 201 (Comp. St. §
6336V2b). The sum which in any given case represents the tax thus
imposed is to be found by estimating the value of the estate of the
décèdent "to the extent of the interest therein of the décèdent at the
time of his death, which after his death, is subject to the payment of
the charges against his estate and the expenses of its administration,
and is subject to distribution as part of his estate." Section 202 (sec-
tion 6336Vèc). In providing for the déductions to be made from this
gross valuation, in order to détermine the net estate subject to the tax,
there is included, after an enumeration of spécifie déductions, "such
other charges against the estate as are allowed by the laws of the jur-
isdiction, * * * under which the estate is being administered."
Section 203 (section 6336y2d).
We hâve also been referred by counsel for défendant to the act of
assembly of Pennsylvania of June 4, 1879 (P. L,. 88), and to the Act of
Congress of February 24, 1919 (40 Stat. 1057, c. 18). We do not quite
see the bearing of either of thèse statutes upon the décision of the ques-
tion before us. It is not asserted by the plaintiff that Congress could
not hâve subjected property (for it is property in a very substantial
sensé) in the form of a right or power of appointment to the payment
of the tax. The proposition set up is that Congress did not subject this
property to the tax, inasmuch as the act of 1919 was not passed until
after the death of this décèdent. It is, of course, not claimed that
this act subjects this estate to the payment of the tax. As a déclaration,
and in this sensé an indication of législative intent, the implication is
rather in plaintiff's favor than against it, because the déclaration of
Congress is that we did not tax property of this kind by the act of 1916,
but we do now tax it by the act of 1919.
The sole bearing which the act of assembly of Pennsylvania of 1879
has upon the subject of the exercise of a power is to déclare what in
996 262 FEDERAL REPORTER
Pennsylvania shall be deemed an effective exercise of that power.
The law, as it was before it was changed by the législative enactment,
was that the power could be exercised only through and by a clear-cut
référence to the power and a clear déclaration of the donee to exercise
it, and it could be exercised only in strict accordance with the mode
and manner of its exercise laid down by the donor. The real change
made by législation was that a gênerai devise, which before the statute
would not hâve been a good exercise of the power, should thereafter
be deemed to be a lawful and effective exercise, unless a contrary inten-
tion appeared by the will. In other words, there is a complète boule-
versement of the principles of law involv.ed. Before the enactment of
the législation of this kind, the instrument asserted to be an exercise
of the power must, among other things, disclose a clear intention to
exercise. After that législation, it was assumed to hâve been exercised
unless the contrary intention was disclosed.
The gênerai proposition involved is admitted to be one which sup-
ports the claim of the plaintiff. The thought is advanced, however,
that a testator, who subsequently dies seized and possessed of an estate
of his own, and who was also the donee of a power of appointment,
might by his will so blend the estate which was his individual property
with the other estate over which he had the power of appointment as
to subject both of them to liability for the payment of the inheritance
tax. Before taking up the considération or discussing the cases cited
in support of this proposition, it is well to hâve a firm grasp of the
principles of law which should be in mind in order to enable us to
apprehend the rulings made and the reasoning which controls thèse
rulings.
[1] We start off with the principle, well established in Pennsylvania
and in a number, if not ail, of the other states, that the question of the
proper, the lawful, and in this sensé the effective, exercise of a power
of appointment, is determined by the law of the domicile, not of the
donee, but of the donor, of the power. It follows that if, to instance a
concrète case, a power of appointment was given under and by the
will of a testator, who was domiciled at the time of his death in Dela-
ware, to a donee, who exercises that power of appointment by a will
made in Pennsylvania and who there died, the question of the effective
exercise of the power would be determined, not by the law of Penn-
sylvania, but by the law of Delaware, and if the will which was made
was not a good exercise of the power under the laws of Delaware, the
appointée would not take, notwithstanding the fact that the exercise
would hâve been good under the laws of Pennsylvania. Bingham's
Appeal, 64 Pa. 345 ; Aubert's Appeal, 109 Pa. 447, 1 Atl. 336.
[2] Another proposition is that, where property, as hère, has been
bequeathed or devised to a trustée who holds under a spendthrift
trust, the beneficiary has nothing until and except as he receives, and
ail of the property until actually received by the beneficiary remains
the estate of the first testator, notwithstanding the fact that the bene-
ficiary may be the donee of a power of appointment by will and may
exercise it.
PEARCE V. LEDERER 997
(262 P.)
[3] Still another proposition is that the appointée, who takes, takes,
when he takes, not under the will of the donee of the power, but un-
der the will of the donor. When the power of appointment is gênerai,
the donee may exercise that power in f avor of his creditors, or in favor
of those who hâve a claim growing out of the administration of his
estate, as he may exercise it in favor of any one or in any way he pleas-
es ; but the piroposition holds good that the appointée, whoever he is,
takes under the will of the donor, and if he is the creditor of the donee,
and has been made the appointée because he was such creditor, he
nevertheless takes qua appointée, and not qua creditor. In other words,
the appointée takes as a beneficiary, and not as a creditor, precisely as
the creditors of a son would take to whom a father had bequeathed
legacies measured by the claim of debt which they had against the
son. Burt v. Herron's Ex'rs, 66 Pa. 400.
[4] The argument is made which, on its face, has at least plausi-
bility, if not force, that as section 202 of the taxing act (Comp. St. §
6336y2c) directs that ail property which, after the death of the décèdent
whose estate is subject to the tax, "is subject to the payment of
the charges against his estate and the expenses of its administration
and is subject to distribution as part of his estate," shall be subject-
ed to the inheritance tax, and as this testator has subjected this prop-
erty to the payment of his debts and to the administrative expenses
of his estate, he has thereby brought it within the taxing act.
It is to be observed, however, that there are three conditions in this
clause, which are put, not in the disjunctive, but in the conjunctive.
It is not estâtes which are subjected to the payment of debts or estâtes
which are subjected to administrative expenses or estâtes which are
distributable as part of the estate of the décèdent whose estate is tax-
ed, but it is an interest or property which responds to ail of thèse condi-
tions which is to be valued and included within the taxable property.
It is doubtless well not to lay much stress upon this mère verbiage of
the act of Congress, because it is well recognized that conjunctive and
disjunctive prépositions are very laxly and loosely used by legislators,
as well as other people, and because of this the courts hâve exercised
a wide latitude in the construction of législative enactments, and
the word "and" is often construed to mean "or." It is to be further ob-
served that the words of the taxing act which describe the property
to be taxed describe it as property which is "subject to" the payment
of his debts, not property which by his will he charges with the pay-
ment of his debts, and it is only by seizing upon the expression "after
his death" that the property now in question could be said to be sub-
ject to the payment of debts.
We are not inclined, however, to lay stress upon the distinction hère
suggested, because this act of Congress may be construed to mean any
property upon which creditors, qua creditors, hâve a claim, no matter
how their claims arise. The proposition upon which we do lay stress,
however, and upon which we place reliance as a proper ground upon
which the question before us should be ruled, is the distinction bef ore
noted, that creditors who take through and by the exercise of a power
of appointment take, not because they are creditors, but because they
are appointées, and take, not under the will of the donee, but under
998 262 FEDERAL REPORTER
the will of the donor. It is true that they hâve been made appointées
because they were creditors, but they emphatically are not creditors
because they are appointées.
It is admitted that the question before us is to be determined in ac-
cordance with the law of Pennsylvania. In conséquence, counsel for
the défendant hâve cited the Pennsylvania cases upon which they rely.
We pass without comment cases ruled in other jurisdictions, because
it is conceded that the doctrines there laid down hâve been rejected in
Pennsylvania.
The first case cited is that of Commonwealth v. Duffield, 12 Pa.
277. The opinion in that case was delivered by Chief Justice Gibson,
who by gênerai accord has been given a premier position among the
lawyers of Pennsylvania. The ground of the ruling in that case is
made perfectly clear, and it is that the property which passes by virtue
of a power of appointment not merely is not, but cannot possibly be or
become, the property of the donee or form part of his estate.
Commonwealth v. WilHams' Executors, 13 Pa. 29, admittedly lays
down the same proposition, which is involved in the other proposi-
tion that the appointée takes, not under the will of the donee, but under
the will of the donor. The critical stage in the argument made on be-
half of the défendant in its progress to its conclusion is reached just
hère. The propositions above stated are admitted to be sound, but it
is averred "that the donee may, in the absence of contrary instructions
by the donor, do voluntarily what the English courts of equity compel
him to do." Let us see if this is true, or possibly can be true. The
EngHsh courts subjected the property to the payment of debts be-
cause it was the law of England that the donee of a gênerai power of
appointment was ipso facto given such an estate in the gift of the
donor as to subject it to ail the liabilities to which his own estate was
subject. The courts reasoned themselves to this conclusion by foUow-
îng the line of thought that, inasmuch as the donee had the power to
give the property to his creditors if he chose, and as they were of the
opinion that he should do so, it foUowed that thèse courts looked upon
it as if that thing had been done. This, it is to be noted, is the very
line of thought which Judge Gibson combats, and the doctrine deduced
îs the very doctrine which is repudiated in Pennsylvania.
Huddy's Estate, 236 Pa. 276, 84 Atl. 909, is relied upon, not for
what it décides, but for what the opinion expresses was not being de-
cided. The will of the donee in that case did not direct the payment of
debts, and we are asked to draw the inference that, because the court
made the distinction which it did make between wills which contained a
direction for the payment of debts and those which did not, ergo if
there had been in the Huddy estate the direction to pay debts the con-
clusion reached would hâve been the opposite of the conclusion which
was reached. We think this inference would be justified. We are ask-
ed, however, to draw the further inference that, because creditors
would hâve been awarded their just claims in the Huddy estate if the
will had so directed, it is the law of Pennsylvania that the estate of the
donor is liable for the debts of the donee. Let us see if this second in-
ference is justified.
PEARCE V. LEDEREB 999
(262 F.)
The proceeding there, it is to be noted, was one of distribution.
Emma Huddy was the donor. The gift was of a sum of money to her
executors in trust to pay the income to her granddaughter for life,
with a gênerai power of appointment in the granddaughter. The
granddaughter married, and by her will gave a number of pecuniary
legacies, and the residue of her estate she directed to be divided into
two equal portions, one of which she gave to her brothers and sisters,
and the other of which she gave to her husband as long as he should
remain single ; this share being subject to a trust in f avor of her sis-
ters upon the death or marriage of her husband. The husband elected
to take against the will. It is to be observed that the husband would
take whatever he took under the intestate laws, and therefore would
share in nothing except the estate of his deceased wife. It is further
observed that the adjudication made was in the estate of Emma Huddy,
not of Helen Moore. The auditing judge gave the whole fund to the
sisters and brother and to the sisters, one-half to each of thèse two
classes. There was no claim upon the part of any one that the fund
should be awarded to the executors of the donee, but the court in banc
of its own motion so awarded it. An appeal was taken from this de-
cree.
The argument on behalf of the appellant laid down the gênerai prop-
osition that under the law of Pennsylvania appointées took under the
will of the donor, not the will of the donee, and distinguished the cases
which had been ruled by the orphans' courts of Philadelphia upon the
ground that in every one of thèse cases the payment of debts had been
directed. It was further pointed out that the courts of the other coun-
ties in the state, or at least some of them, had refused to follow the
Philadelphia rule. The decree from which the appeal was taken was
made upon the proposition that the creditors of the donee had claims
against her estate, and as she had blended her own property with that
over which she had the power of appointment, the latter fund should
go to her executors. The decree was reversed upon the two proposi-
tions — one that there was no occasion to apply the act of 1879, inas-
m.uch as the donee had a sufficient estate to pay ail the legacies she
had bequeathed without calling upon the trust fund, and therefore
there was no justification to assume that she intended to exercise the
power given to her ; and the other that the trust fund was not part of
the estate of the donee, but whoUy that of the donor. The efïect of
a blending was expressly not ruled, for the reason that in the opinion
of the court that question was not before them.
Browne's Appeal, 244 Pa. 248, 90 Atl. 566, which was cited in the
adjudication in the estate of the donor hère, has no bearing upon the
question before us, as the question there was whether or not the one
exercising the power of appointment possessed that power.
This leaves only the Philadelphia orphans' court cases to be consid-
ered. Some expressions hâve crept into the reports of the Philadelphia
cases which, if casually read, seem to give some measure of support
to the defendant's argument. It is thèse expressions which provoked
the dissenting comments from the courts of some of the other counties
in the state. The appearance of support given to the argument on be-
1000 262 FEDERAL EEPOETEB
half of the défendant in the instant case is really due to the conclusion
reached in some of thèse cases, which was that the estate of the donor
over which the donee had the power of appointment was distributable
to the creditors of the donee. This, however, has absolutely no signifi-
cance, because it will be found that there is nothing in any of thèse
cases inconsistent with the récognition and apphcation of the principle
above formulated.
The doctrine or principle is (as before stated) that the whole sub-
ject-matter of the power belongs to the estate of the donor, and is no
part (nor can the donee, by any act of his own, make it part) of the es-
tate of the donee. If the donee is given a gênerai power of appoint-
ment, he may of course exercise that power in favor of his creditors,
as he may exercise it in favor of any one else. If he exercises it in
the form of a direction to his executors to pay his debts, the creditors
take, but (as already several times stated) they take, not qua creditors,
but qua appointées. It is perfectly true, as Judge Lamorelle remarks,
that in the process of getting to the creditors of the donee what has
been given to them it is practically convenient to give the fund to the
executors of the donee, and that the distribution should be made to
the créditer appointées as if they took as creditors. In conséquence of
this, what is donc takes on the appearance of a finding that the power
of appointment fund is subject to the payment of the debts of the donee.
It will be observed, however, that the proposition is wholly an "as
if" proposition, and that the direction of the donee to his executor to
pay his debts out of the appointment fund is really the making of the
executor the appointée of the donee to the amount of such debts and
trustée for the creditors, and thus receiving the fund as such appointée,
he distributes it to those who are the creditors just as if they were
getting their money as creditors. It still remains wholly true that they
get what they get, not because they are creditors, but because they are
appointées, although it is also true that they hâve been made appointées
because they were creditors.
If the Philadelphia orphans' court cases and the cases ruled by the
orphans' courts of other counties are read with this distinction in
mind, it will be seen that in every case what was ruled was entirely con-
sistent with the principles laid down by Chief Justice Gibson and the
other justices of the Suprême Court. The real purpose of invoking the
"blending" of the estâtes is to enable the courts to détermine whether
the donee by his will intended to make his creditors appointées of the
appointment fund, or whether he intended them to be paid out of his
individual estate. Stokes' Estate, 3 Pa. Co. Ct. R. 193 ; Horner's Es-
tate, 4 Pa. Co. Ct. R. 189; Fell's Estate, 14 Pa. Dist. R. 327; Huey's
Estate, 17 Pa. Dist. R. 1030; Pearce's Estate (not reported); Kensel's
Estate, 21 Montg. Co. Law Rep'r (Pa.) 37; Brewer's Estate, 33 Pittsb.
L. J. (Pa.) 161.
Much may be said in favor of the proposition, as one founded upon
Sound légal principles, that one who is given the usufruct of property,
together with the power of disposition, is the owner of that property,
and should not be permitted to hold it as against his creditors. We do
not see that anything is gained by dragging in the supposed equity of
UNITED STATES V. SISCHO 1001
C262 F.J
creditors, nor resorting to any principle of equity, as distinguished
from the law. Indeed, the equity of creditors is by no means clear.
They hâve their légal rights, and thèse spring from the policy of law
that the property of every man is subject to the payment of his debts,
and that, whenever a man has every interest in property which full
ownership could give him, he is the owner, with ail the conséquences of
ownership. Such is the law in some jurisdictions, but it is not the
law of Pennsylvania. The Pennsylvania doctrine is that the donor
held his property clëar of ail claims of the creditors of any one else,
and if he chose to create what is in effect a spendthrift trust in fa-
vor of his donee, the property so given is not subject to the claims of
creditors of the donee. The only way of overthrowing this doctrine
is by establishing a policy of the law which may be expressed in the
Paradox that property cannot be given to any one without property be-
ing given to him.
In order that the judgment entered in this case may hâve a definite
date, no judgment is now entered, but plaintiff is given leave to enter
judgment ; the court being of opinion that the rule for judgment should
be made absolute.
UNITED STATES v. SISCHO.
(District Court, W. D. Washington, N. D. November 22, 1919.)
No. 4038.
1. Statoïes <©=5l94 — Rule of cokstbuction of ejusdem geneeis.
The rule of construction known as "ejusdem generis" Is that gênerai
and spécifie words, which are capable of analogous meaning, being asso-
clated together, take color from each other, so that the gênerai words are
restricted to a sensé analogous to the less gênerai (eiting Words and
Phrases, Ejusdem Generis.)
2. Words and phrases — "Exports and impoets."
The words "exports and imports," used in the fédéral Constitution,
apply only to property.
3. Words and phrases — "Exports and impobïs."
The words "exports and liuports" cannot apply to a dead human body.
4. CUSTOMS DUTIES <©=130 FoBFEITUEE ON IMPORTATION OF PBOHIBITED QOODS.
ProUibited goods are ipso facto forfeited by the fact of importation.
5. CuSTOMS DUTIES <^=>129 — COLLECTION OF PENALTY FOB UNLAWFUL INTRO-
DUCTION OF SMOKING OPIUM; "MERCHANDISE."
In an action under Act June 22, 1874, § 15 (Comp. St. § 5803), to coUect
a penalty imposed by the Customs Department under Rev. St. § 2809
(Comp. St § 5506), against one who unlawfully brought into the United
States smoking opium, held, in view of Comp. St. §§ 8800, 8801, forbid-
dlng the importation of smoking opium, as well as sections 6287a and
6287b, and Act June 22, 1874, § 4 (Comp. St. § 5798), deflning smuggllng,
smoking opium is not "merchandise," within Rev. St. § 2766 (Comp. St
§ 5462), defining merchandise as including goods, wares, and chattels of
every description capable of being imported, for It Is an outlaw drug,
hence the penalty described by section 2809 Is inapplicable.
[Ed. Note.— For other définitions, see Words and Phrases, First and
Second Séries, Merchandise.]
«=Foi other cases see same toplc & KEY-NUMBER In ail Key-Numbered Dlgeats & Indexée
1002 262 FEDERAL REPORTER
6. CtrsTOMS DUTiES <S=»129 — Collection of penaltt for unlawful importa-
tion OF SMOKING OPIUM.
As smoking opium Is a prohiblted thing, and could hâve no market
value in the United States, défendant, who smuggled Into the United
States smoking opium from Brltish Columbia, where Its sale was also
forbldden, cannot be required to pay the penalty prescribed by Rev. St.
§ 2809 (Comp. St. § 5506), against the master of vessels who brlng in mer-
chandise without manifesting the same, etc., for the penalty is under
the section based on the value of the merchandise so brought in.
7. Statutes <3=»163 — Implied repeal of genebal statuts bï spécial statute.
The enactment of a spécial statute repeals and takes the subject out
of a gênerai statute, whlch otherwise mlght include the partlcular sub-
ject-matter dealt with in the spécial statute.
8. Statuties ®=3l83 — Intebpeetation aocobding to intent.
Interprétation of a statute should be not according to the letter of the
statute, but according to the intent as gathered from ail parts of the law.
9. Statutes <ê=183 — Construction according to intent.
The letter of a statute should not be followed, if It will produce an
absurd resuit, or if a more reasonable meaning présents Itself.
10. Statutes iS=>22S — Office of pboviso.
The usual office of a proviso in a statute Is to except somethlng which
otherwise would fall within its scope.
11. Statutes iS=>239 — Construction with BEarEBENCE to common law.
Statutes are construed with référence to the common law; so, in con-
struing statutes in dérogation of common law, there should be no greater
departure than the statute expresidy déclares.
12. CusTOMS DUTIES ®=9l29 — Penalties for importation of smoking opium.
Comp. St § 8801f, declaring that whenever opium, cocaine, or any
préparations or derlvatives thereof, shall be found on any vessel at any
port of the United States, which is not shown on the vessel's manifest as
required, such vessel shall be liable for the penalty and forfeiture pre-
scribed by Rev. St. & 2809 (Comp. St. § 5506), does not Include smoking
opium, for It cannot be consldered a préparation or derlvative of opium,
as the Importation of smoking opium is forbldden, and in view of the
penalties prescribed for the smuggling of smoking opimn into the United
States.
At Law. Action by the United States against Wesley L. Sischo.
Judgment for défendant.
Robert C. Saunders, U. S. Atty., and Miss Charlotte Kolmitz, Asst.
U. S. Atty., both of Seattle, Wash.
Daniel Landon, of Seattle, Wash., for défendant.
CUSHMAN, District Judge. The défendant, Wesley L. Sischo,
was tried for a violation of Act Feb. 9, 1909, as amended January
17, 1914 (section 8801, Comp. St.), convicted, sentenced, and is now
serving a term of years in the penitentiary for smuggling opium pre-
pared for smoking from British Columbia into the United States.
The opium and the boat in which it was smuggled hâve been forfeit-
ed. The Customs Department under section 2809, R. S. (section 5506,
Comp. St.), imposed a penalty of $6,400 upon the défendant, and this
suit was begun under section 15 of Act June 22, 1874 (section 5803,
Comp. St.), upon the report of the collector, and a writ of attachment
issued against a Marmon automobile, the property of this défendant,
to satisfy the said penalty.
^ïsjFor other cases see same topic & KBY-NUMBBR in aU Key-Numbered Digests & Indexes
UNITED STATES V. SISCHO 1003
(262 F.)
The complaint or libel of the government describes the importation
as "certain merchandise denied importation into the United States, to
wit, one hundred (100) five-tael tins of opium, prepared for smoking
purposes, the same not being on any manifest or included or described
in the manifest," and allèges that the value of such merchandise was
$6,400. The answer of the défendant dénies the allégations of the li-
bel, and specifically dénies that the so-called merchandise was worth
the sum of $6,400, or any sum whatever.
A trial bas been had, upon which the government produced testi-
mony regarding the value, in this country, of morphine, and showed
that the opium brought in by Sischo could be converted into morphine.
There was no évidence as to the cost of such conversion. Other testi-
mony was introduced as to what price was paid in British Columbda
for such opium. The laws of British Columbia, as our own, prohibit
any importation or traffic in such opium. Further testimony was giv-
en regarding the price paid for opium in China, Mexico, and Macao,
a Portuguese colony near China.
Section 2809, R. S. (2 Fed. St. Ann. 647; section 5506, Comp. St.),
provides :
"If any merchandise is brought into the United States in any vessel what-
ever from any forelgn port without having such a manifest on board, or which
shall not be included or described in the manifest, or shall not agrée there-
with, the master shall be liable to a penalty equal to the value of such mer-
chandise not included in such manifest; and ail such merchandise not included
in the manifest belonging or consigned to the master, mate, offlcers, or crew
of such vessel, shall be forfeited."
This section is contained in the Customs Revenue Act of March
2, 1799 (1 Stat. 646, c. 22, § 24).
"The Word 'merchandise,' as used In this title, may Include goods, wares,
and chattels of every description capable of being imported." Section 2766,
R. S. section 5462, Comp. St.)
Section 15 of the act of June 22, 1874 (an act entitled "An act to
amend the customs revenue laws and to repeal moieties"), provides:
"That it shall be the duty of any ofBcer or person employed in the customs
revenue service of the United States, upon détection of any violation of the
customs laws, forthwith to make complaint thereof to the collecter of the
district, whose duty it shall be promptly to report the same to the district
attorney of the district in which such frauds shall be committed. Immedi-
ately upon the receipt of such complaint, tf, in his judgment, it can be sus-
tained, it shall be tlie duty of such district attorney to cause Investigation
Into the facts to be made before a United States commissioner having juris-
diction thereof, and to initiate proper proceedlngs to recover the fines and
penalties in the premlses, and to prosecute the same with the utmost diligence
to final judgment." 18 Stat. 189 (section 5803, Comp. St.).
The statutes further provide :
"After the first day of April, nlneteen hundred and nine, It shall be unlawful
to Import into the United States opium in any form or any préparation or
derivative thereof: Provided, that opium and préparations and derivatives
thereof, other than smoking opium or opium prepared for smoking, may be
hnported for médicinal purposes only, under régulations which the Secretary
of tlie Treasury is hereby authorlzed to prescribe, and when so imported shall
be subject to the dutles which are now or may hereaf ter be imposed by law."
Section 8800, Comp. St.
1004 262 FEDERAL REPORTER
"If any person shall fraudulently or knowingly Import or brîng Into tho
United States, or asslst In so doing, any opium or any préparation or deriva-
tlve thereof contrary to law, or shall reeeive, conceal, buy, sell, or in any
manner facilitate the transportation, concealment, or sale of such opium or
préparation or derivative thereof after Importation, knowlng the same to
hâve been imported contrary to law, such opium or préparation or derivative
thereof shall be forfeited and shall be destroyed, and the offender shall be
fined In any sum not exœeding $5,000 nor less than $50 or by iraprisonment
for any time not exceeding tw^o years, or both. Whenever, on trial for a vio-
lation of thls section, the défendant is shown to hâve, or to hâve had, posses-
sion of such opium or préparation or derivative thereof, such possession shall
be deemed sufficient évidence to authorize conviction unless the défendant shall
explain the possession to the satisfaction of the jury." Section 8801, Comp.
St
"Whenever opium or cocaïne or any préparations or derivatives thereof shall
be found upon any vessel arrivlng at any port of the United States which Is
not shown upon the vessel's manifest, as Is provided by sections twenty-eight
hundred and six and twenty-elght hundred and seven of the Revlsed Statutes,
such vessel shall be liable for the penalty and forfeiture prescribed In section
twenty-eight hundred and nine of the Eevised Statutes." Section 8801f,
Comp. St.
A tax of $300 per pound is levied upon opium manufactured in
the United States for smoking purposes, and a minimum bond o£
$100,000 is required of the manufacturer (sections 6287a and 6287b,
Comp. St.) ; but ail opium prepared for smolcing is denied importation
(sections 8800 and 8801, Comp. St.).
Section 4 of the act of June 22, 1874 (section 5798, Comp. St.),
defines smuggling as —
•4 « * * ipjjg jjçj.^ .^çJ^J) iiitent to defraud, of brlnging Into the United
States, or, with like intent, attemptlng to bring into the United States, duti-
able articles wlthout passiiig the same, or the package containing the same,
through the custom house, or submltting them to the officers of the revenue
for examinatlon."
[1-5] To justify a judgment for the penalty for which suit is
brought, three things are necessary :
(1) That section 2809, R. S., was intended to cover prohibited articles —
things denied admission to the United States — as well as legitimate articles
of commerce brought into the United States in an unautUorized manner ; that
is, not manifested as required by law.
(2) That imported opium prepared for smoking purposes falls wlthin the
description of "goods, wares or merchandise," as the same are used in cus-
toms duty laws and section 2809, R. S.
(3) That such opiums Is an article of merchandise of value and that the
value has been shown.
The décisions as to the rule of construction of provisions for for-
feiture and penalties are not in accord. Certain courts hâve held that
they are highly pénal; others hold them remédiai in character; but,
even by the latter class, as well as the former, the case must be brought,
not only within the letter, but the spirit, of the statut e. 12 Cyc. 1166,
B, and 1167.
If the présent case is not fairly within the provisions of section 2809,
R. S., no cause arises for stretching that statute to cover it as an
overlooked need. It is not casus omissus, for section 3082, R. S. (sec-
tion 5785, Comp. St.), the gênerai smuggling statute, and section 8801
UNITED STATES V. SISCHO 1005
(262 F.)
(Comp. St.), the opium smuggling statute, being the statute under
which the défendant was convicted, make provision, not only for im-
prisonment and fine, but forfeiture as well.
Customs laws pertain to that part of commerce that bas to do with
property, its exchanges and movements. "Customs duties" is the name
given to taxes on the importation and exportation of commodities
(Webster's Dictionary) ; the tarifï or tax assessed upon merchaiidise
imported from, or exported to, a foreign country (Standard Diction-
ary).
What is condemned by section 2809, R. S., is nonmanifested mer-
chandise. Webster defines "merchandise" as "whatever is usually
bought or sold in trade or market or by a merchant." "Commodity"
is defined as an article of trade ; a movable article of value ; something
that is bought and sold. Standard Dictionary. "Merchandise" is any-
thing customarily bought and sold for profit. Standard Dictionary.
For "capable" Webster gives as synonyms : "Susceptible; compétent;
qualified; fitting; possessing légal power or capacity." The word
"chattels" is derived from the Norman French; its meaning being
goods of every kind, every species of property movable, which is less
than freehold. Bouvier (3d Ed.) vol. 1, p. 471.
If "capable of being imported" referred to, and was limited to,
physically capable, Congress would hâve contented itself with saying
Personal chattels, for it would be ridiculous to think that Congress
would bave thought it necessary to exclude the impossible — the impor-
tation of chattels real. Opium lawfully brought into the United States
is merchandise ; but it does not, necessarily, f ollow that smoking
opium, denied admission to the United States, is merchandise, consid-
ered either generally or as the word is used in section 2809, R. S.
The rule of construction, "noscitur a sociis," is particularly appli-
cable and frequently resorted to in interpreting custom statutes.
"Merchandise, goods, wares and chattels" are not used in an all-
comprehensive sensé, so as to include ail movable things. Thèse words
as used in this statute, do not include ships themselves. 12 Cyc.
1132 (11) ; The Conqueror, 166 U. S. 110, 17 Sup. Ct. 510, 41 U Ed.
937.
The words "chattels capable of being imported," being used 'vith the
words "goods and wares," under the rule "noscitur a sociis," would
limit their meaning to articles the subject of commercial transactions
— lawfully the subject of such transactions. Ail laws regulating the
payment of duties are, for practical application to commercial opéra-
tions, to be considered in a commercial sensé.
Merchandise may include every article of trafific, foreign and do-
mestic, which is properly embraced in a commercial transaction; but
it would not include imported slaves, although they were merchandise
in a foreign state. Groves v. Slaughter, 40 U. S. (15 Pet.) 449, at
pages 506 and 507, 10 L. Ed. 800.
The rule of construction of ejusdem generis is that gênerai and spé-
cifie words, which are capable of analogous meaning, being associated
together, take color from each other, so that the gênerai words are
restricted to a sensé analogous to the less gênerai. 3 Words and
1006 262 FEDERAL BBPOETEE
Phrases, 2328; U. S. v. Baumgartner (D. C.) 259 Fed. 722, at page
725. So the words "merchandise and chattels," in thèse two statutes,
take color from the words "goods and wares," and show that the things
contemplated are such as are capable o£ entering into the commerce of
the United States — things that can legally be bought and sold.
Section 5299, Conip. St., providing for the seizure and forfeiture of
obscène books and articles, does net describe nor recognize them as
"merchandise, goods or wares," but refers to such objects throughout
as "articles," painstakingly designating them as such not less than sev-
en times in this section. In Criminal Code, § 245 (Act March 4, 1909,
c. 321, 35 Stat. 1138 [Comp. St. §■ 10415]), providing a punishment for
the importation and transportation of obscène books and indécent
things, they are not described as "merchandise," nor recognized as
such, nor as "chattels," but are properly and accurately described as
that which they legally are, "articles, matters, and things."
The words "exports and imports," as used in the Constitution, refer
only to property. 12 Cyc. p. 1108, B, 5.
"The words 'inspection laws,' 'imports,' and 'exports,' as used in clause 2,
§ 10, art. 1, of the Constitution, hâve exclusive référence to property.
"This is apparent from the language of clause 1, § 9, o^ the same article,
where, In regard to the admission of persons of the African race, the word
'migration' is applied to free persona, and 'Importation' to slaves."
People V. Compagnie Gen. Transatlantique, 107 U. S. 59, 2 Sup. Ct 87, 27
li. Ed. 383.
The words 'exports' and 'imports' cannot apply to a dead human
body. In re Wong Yung Quy, 2 Fed. 624, 6 Sawy. 442. In the im-
portation of smoking opium, under the laws as at présent existing,
there cannot properly be said to exist an intent to defraud the Unit-
ed States. There is no question of revenue, or loss of anything of
value, involved. If the illégal importation of such opium — ^being ab-
solutely prohibited — can be called the working of f raud upon the Unit-
ed States, then the commission of any crime can properly be so desig-
nated.
Section 15 of the act of June 22, 1874, the section under which this
suit is brought, provides :
"That It shall be the duty of any officer or person employed In the customa
revenue service of the United States, upon détection of any violation of the
customs laws, forthwlth to make complaint thereof to the collector of the
district, whose duty it shall be promptly to report the same to the district
attorncy of the district in which such frauds shall be committed. Immediate-
ly upon the receipt of such complaint, if, in hls judgment, it can be sustained,
it shall be the duty of such district attomey to cause investigation into the
facts to be made before a United States commissioner havlng jurisdiction
thereof, and to initiale proper proceedings to recover the fines and penalties
in the premises, and to prosecute the same with the utmost diligence to final
judgment." Section 5803, Comp. St (The italics are those of the court.)
Section 16 of the same act provided :
"That In ail actions, suits, and proceedings In any court of the United States
now pending or hereafter commenced or prosecuted to enforce or déclare the
forfeiture of any goods, wares, or merchandise, or to recover the value there-
of, or any other sum alleged to be forfeited by reason of any violation of the
provisions of the customs-revenue laws, or any of such provisions, in which
action, suit, or proceeding an issue or issues of fact shall hâve been joined.
UNITED STATES V. SISCHO 1007
C262 F.)
It shall be the duty of the court, on the trial thereof, to submlt tx> the jury,
as a distinct and separate proposition, whether the alleged acts were done
wltli an actual Intention to defraud the United States, and to require upon
such proposition a spécial finding by such jury ; or, if such issues be tried by
the court without a jury, it shall be the duty of the court to pass upon and
décide such proposition as a distinct and separate finding of f act ; and in such
cases, unless intent to defraud shall be so found, no fine, penalty, or lorfel-
ture shall be Imposed." 18 Stat. 189.
Although section 16, directing the procédure, has been repealed, its
provision requiring that the court, or jury, make a spécial finding as
to whether there was actual fraud, the court, being called upon to con-
strue section 15, should still look to section 16 to détermine in what
sejise the word "frauds" is used in section 15. Section 15 contem-
plâtes that a violation of the letter of the statute may occur, without
any intent to defraud the United States.
Prohibited goods are ipso facto forfeited by the fact of importation.
12 Cyc. 1171 ; McLane v. U. S., 31 U. S. (6 Pet.) 404, 8 L. Ed. 443 ;
Anonymous, Fed. Cas. No. 470 (the importation in this case being pic-
tures of a nature to corrupt the public morals) ; U. S. v. Jordan, Fed.
Cas. No. 15,498.
It is not necessary to include goods not dutiable in a manifest. The
S. Oteri, (>7 Fed. 14i5, 14 C. C. A. 344. This has been expressly recog-
nized by Congress in section 7810, Comp. St., which provides:
"Bvery yacht, except those of fifteen gross tons or under, vlsitlng a forelgn
country under the provisions of sections forty-two hundred and fourteen, forty-
two hundred and flfteen, and forty-two hundred and seventeen of the Eevised
Statutes shall, on her retum to the United States, make due entry at the
custom house of the port at whlch, on such retum, she shall arrive: Pro-
vided, that nothing in this act shall be so construed as to exempt the master
or person in charge of a yacht or vessel arriving from a foreign port or place
wlth dutiable articles on board from reporting to the customs oflîcer of the
United States at the port or place at which sald yacht or vessel shall arrive,
and deliver in to said offlcer a manifest of ail dutiable articles brought from
a foreign country in such yachts or vessels."
Where, in violation of the Nonintercourse Law of the War of 1812,
certain merchandise had been brought to the United States from Great
Britain, it was said :
"In point of law, no duties, as such, can legally accrue upon the Importa-
tlon of prohibited goods. » • * •• McLane v. U. S., 31 U. S. (6 Pet.) 404,
at page 427 (8 L. Ed. 443).
In a very récent case in the Northern district of New York, Judge
Ray has decided :
"The provision of Act Aug. 10, 191T, % 15 (Comp. St. 1918. % SllSi^ï),
making it a criminal offense to Import distilled splrits, punishable by fine or
Imprisonment or both, is not a custom.s law, but a prohibition law, enacted
under the police power of Congress, and whlle the seizure and forfelture as
contraband of spirits so imported, tbough not specflcally provlded for, Is
essentlal to the effective enforcement of the law, the court cannot Impose as
an additional punishment the forfelture of the vehicle used, under another
statute" (a customs statute). U. S. v. 1 Ford Automobile and 14 Packages of
Distilled Splrits (D. G.) 259 Fed. 894.
Attorney General Knox, in an opinion rendered the collecter of ais-
toms at Port Townsend (29 Op. Attys. Gen. 603), holds that opium
1008 262 FEDERAL REPORTES
prepared for smoking purposes is a nuisance per se, and quotes Freund
on Police Power and Hipolite Egg Co. v. U. S., 220 U. S. 45, at pages
57 and 58, 31 Sup. Ct. 364, 55 L. Ed. 364, to the effect that smoking
opium is fitted by nature to harm the community ; that it is a menace
belonging to the class of things that carry their own identification as
contraband of law, which are outlaws of commerce ; that, under Act
Feb. 9, 1909, c. 100, 35 Stat. 614 (Comp. St. §§ 8800, 8801), opium
prepared for smoking purposes is legally no longer classed with com-
mercial imports, but is a prohibited thing, to be summarily condemned
and destroyed — in efïect, that it is not within the customs laws.
The Attorney General, in his récent opinion, referred to by Judge
Ray, approves of and construes the opinion of Attorney General Knox
as to the effect "that a violation of the law prohibiting the importation
of smoking opium is not a violation of the customs laws." Section
2809, R. S., and section 15 of the act of June 22, 1874, under which the
présent suit is brought, are customs laws.
Property is a thing which is the subject of ownership. N. W. Mu-
tual Life Ins. Co. v. Lewis County, 28 Mont. 484, 491, 72 Pac. 982, 98
Am. St. Rep. 572. Things capable of no use for lawful purposes are
not property. Stanley-Thompson Liquor Co. v. People (Colo.) 168
Pac. 750. There is no right of property in Confederate notes. Mur-
phy V. Denman, 18 La. Ann. 55. Opium prepared for smoking pur-
poses is contraband. It is an outlaw, both under the laws of the Unit-
ed States and British Columbia.
The only reason that there was any question in Northern Commer-
cial Co. V. Brenneman, 259 Fed. 514, C. C. A. , as to the right
of forfeiture, was that interstate commerce was involved, and that
there were purposes, other than for a beverage, for which alcoholic
liquors could legally be used in Alaska. If such liquor had been con-
traband, and not legally usable for any purpose, section 23 of the act
(Comp. St. 1918, § 3643m) considered by the court in that décision — pro-
viding that no property right shall exist jn the alcoholic liquor — would
be unnecessary. This provision of the law was evidently the resuit of
abundant caution, and is the récognition of an existing rule of law, rath-
er than the promulgation of a new one. Such alcohoHc liquor could not
be held a nuisance per se, for, under the statute, it could be intended
for a lawful purpose. It became a nuisance because it was kept and
intended for an unlawful purpose, for beverage purposes. Being of
that character, something more was required than a mère inspection of
the thing.
It is not so with opium prepared for smoking purposes. It is true
that the use of opium prepared for smoking purposes is not prohibited
directly, but its use is effectively prohibited by the punishing of one
who receives it, and by its possession being made évidence of guilt.
Opium prepared for smoking is not a deodand, customarily an inno-
cent thing, that has become the instrument of doing a particular \yrong.
Such opium is, itself, a wicked thing, dangerous from the beginning
and at ail times to human welfare.
Property is the right a man has in a thing held, and openly used, or
the thing itself, in which a man has, and can hâve a right the law will
UNITED STATES V. SISCHO 1009
(262 F.)
protect — a thing in which it will protect the right of possession, not
a forbidden thing he cannot even receive, and the bare possession of
which is enough to send him to jail. Such a thing is not property.
In a proceeding for forfeiture of opium prepared for smoking pur-
poses, the only issue upon which a claimant would be heard would be
whether or not the article was opium prepared for smoking purposes.
If it was, it would stand forfeited, and no daim of right in it would
avail. Therefore the necessities, if any, for a forfeiture proceeding,
do not recognize an article as property.
It is well understood that the tax of $300 per pound on smoking
opium of domestic manufacture is one of the means adopted to stamp
out traffic in it, and is not intended as a récognition of even the domes-
tic article as property. For smuggling opium there is a penalty provid-
ed of a fine not to exceed $5,000, or imprisonment of not to exceed two
years. Section 8801, Comp. St. For a violation of the statute regulat-
ing domestic manufacture, there is a penalty of not less than $10,000,
or imprisonment for not less than five years. Section 6287e, Comp. St.
The purpose to prohibit the domestic manufacture is clearly shown
by the enormous tax levied and other burdens placed upon such busi-
ness. Such a law was probably enacted to prevent the escape of an
accused, in whose possession smoking opium was found, for the law
against its importation provides two presumptions :
(1) That opium found in the United States is of foreign growth and manu-
facture.
(2) That the défendant, being shown to be in its possession, may be con-
Yicted, uniess he satisfactorily expia ifts tliat possession.
Thèse presumptions are rebuttable. There is left an oppor-
tunity for a défendant found in such possession to contend that the
smoking opium is of domestic manufacture ; but, under the law
authorizing its domestic manufacture, the restrictions and punish-
ments being heavier than those for smuggling smoking opium of for-
eign manufacture, and possession of the domestic article affording a
like presumption of guilt sufficient to sustain conviction, this act re-
moves the temptation to attempt to évade punishment for smuggling
by setting up the claim that the smoking opium is of domestic manu-
facture.
"It is well settled that things which are capable of no use for lawful pur-
IX)ses — and It is established that thèse instruments are of that class — are not
the subject of property. They cannot be recovered in replevin, nor will dam-
ages be given for their loss or injury. They are, as some courts hâve said,
'outlaws.' " Stanley-Thompson Liquor Co. y. People (Colo.) 168 Pac. 750.
In Frost v. People, 193 111. 635, 61 N. E. 1054, it was held :
"Cr. Code, div. 8, providing that gamlng apparatus may be seized and de-
stroyed under the direction of the judge, justice, or court, is not uneonstitu-
tlonal because depriving persons of property without due process of law,
such apparatus not being the lawful subject of property which the law pro-
tects."
In Mullen v. Mosely, 13 Idaho, 457, 90 Pac. 986, 12 L. R. A. (N.
S.) 394 (121 Am. St. Rep. 277, 13 Ann. Cas. 450), the court said :
262 F.— 64
1010 262 FEDERAL REPORTER
"A 'slot machine,' Incapable of use for any purpose exeept In violation of
the pénal prorisions of the antl-gambling law, is not property within the
meaning and protection of section 13, art. 1, of the state Constitution, which
provides that 'no person shall * ♦ • be deprlved of life, liberty, or prop-
erty without due process of law.' "
Miller V. C. & N. W. R. Co., 153 Wis. 431, 141 N. W. 263. 45 L. R.
A. (N. S.) 334, Ann. Cas. 1914D, 632, held that, the use of a gambling
device being prohibited by statute, there can be no recovery on account
of its injury. In Board of Police Commissioners v. Wagner, 93 Md.
182, 48 Atl. 455, 52 h. R. A. 775, 86 Am. St. Rep. 423, it was held that
replevin would not lie for the recovery of an outlawed article, a gam-
bling device. State v. Soucie's Hôtel, 95 Me. 518, 50 Atl. 709, held that
a gambling device is noxious per se, and distinguishable from intoxi-
cating liquors, which will be destroyed only when intended for an un-
lawful use or purpose. See, also, State v. Four Jugs of Intoxicating
Iviquor, 58 Vt. 140, 2 Atl. 586, and State v. Robbins, 124 Ind. 308, 24
N. E. 978, 8 L. R. A. 438.
[G] Thare is another question remaining that, other questions aside,
would hâve to be determined in any event. To justify the imposition
of a penalty under section 2809, R. S., the court must be able to
measure the penalty in the case by the value of the imported thing.
This value must be determined by a statutory rule or a common-law
rule.
As smoking opium is a prohibited thing, it is not a thing of value.
It is not an asset. It is a liability. Its value is minus. It is worth
less than nothing. It can only do iharm. In legitimate articles of com-
merce, the court may inquire at what price they are freely sold in the
open market in the ordinary course; but it is inconceivable that the
court will be guided by, and seek to ascertain, the ruling quotation for
smoking opium as fixed by the furtive exchanges therein efïected by
criminals in the haunts of vice.
If it were a thing of value, the govemment would not destroy it.
By condemning it to destruction, the govemment says that there is
more harm than good in it ; that the harm in it offsets the good, if any,
and leaves a residuum of harm. The govemment does not destroy it
as a house in the path of a fire may be destroyed — a good thing made
harmful by particular circumstances. It is not destroyed as the skins
of fur seals were once destroyed, to protect a monopoly given by the
govemment. Opium prepared for smoking is destroyed because harm
is of its essence — ^because it is malum in se.
Judge Dundy, of Nebraska, in an unreported décision rendered 30
or more years ago, held that, under the statute punishing a post of-
fice employé for embezzling a letter containing an article of value
(section 5467, R. S. [section 10365, Comp. St.]), a prosecution could
not be had for the embezzlement of a letter containing a Louisana
lottery ticket, because the ticket was not a thing of value ; its carrying
being prohibited by the postal laws. This rule is amply supported by
the cases collected in 25 Cyc. 1653, V, A, 2.
This being true in the case of a lottery ticket, which, under a pro-
hibition law, one court at least has held not to be malum in se (Com-
UNITED STATES V. SISCHO 1011
C2S2 F.J
monwealth v. Lottery Tickets, 5 Cush. [Mass.] 369), it follows a
fortiori that imported opium prepared for smoking purposes, being
malum in se, can hâve no value at common law. Goods, wares, and
merchandise are things of value, requiring and justifying expense to
bring them to those who need them. Smokmg opium is a thing that
requires expense to keep it from its victims, and to prevent the inno-
cent being exposed to the dangers that lurk in it.
There is no statute of the United States as to values and the method
of determining them that is applicable. The only ones that can bear
any analogy to the question are in the customs revenue laws. There
hâve been many of thèse laws, and many sections are still in effect.
They are too numerous to quote. An outline of the growth and trend
of thèse laws is given in 12 Cyc. pp. 1141, 1142, and 1143. Running
through ail of them, in words or substance, are provisions that value
shall be determined as the actual market value, or wholesale price, at
the time of exportation to the United States in the principal markets
of the country from which exported ; that such actual market value is
the price at which the merchandise is freely offered for sale to ail
purchasers in such markets, the price which the manufacturer or own-
er would hâve received for such merchandise, sold in the ordinary
course of trade in the usual wholesale quantities.
The value in the country from which exported is the one looked to
in ail of thèse statutes. Sales of merchandise in British Columbia are
the sole standard of value of exports from that country. Hence no
considération can be given to the testimony offered regarding values
in China and other foreign countries than British Columbia. The
sales shown in the latter country were ail illicit sales. There can be
no market value of an article which cannot be freely ofïered for sale ;
so the statutory rule, provided by the customs revenue laws, does not
apply. There was no évidence of the cost of production in British
Columbia, or, indeed, any that smoking opium is manufactured therein.
It will not be presumed that smoking opium is freely ofïered for sale
in British Columbia, because of the law prohibiting trafïîc in it. There
is neither a légal rule provided by which to détermine the value, if
any, of such opium, nor any évidence sufficient to find a value for it.
[7-12] There still remains to be considered the effect, if any, of sec-
tion 8801f upon section 2908, R. S. In section 8801f, in speaking of
opium, its préparations and derivatives, did Congress intend to in-
clude smoking opium? On account of manifest uncertainties and am-
biguities, arising under this statute and section 2809, R. S., which it
adopts by référence, construction must be resorted to. Section 2809,
R. S., measures the penalty by the value of the merchandise not mani-
fested. This rule is perfectly proper in the case of opium subject to
importation ; but is it applicable, and did Congress intend it to be ap-
plied, in forbidden importations of smoking opium not manifested?
Section 8801 f directly provides for a penalty and forfeiture to be
imposed against the vessel, and, the présent case being one to recover
a penalty from the master, under section 2809, R. S., the construction
of section 8801f should not be undertaken by the court further than is
necessary. This section recites that —
1012 262 FEDERAL REPORTEE
"Sueh vessel shall be liable for the penalty and forfeiture described In
section 2809, R. S. • * * "
The only forfeiture stated in section 2809, R. S., is the forfeiture
of the merchandise belon^ing to the master, mate, officers, or crew of
the vessel. Was it intended by the foregoing to forfeit the interest
the vessel had on account of freight in the opium omitted from the
manifest, or was it intended to subject the vessel to forfeiture, general-
ly, under sections 5792 and 5766, Comp. St.? It could not hâve been
intended that the vessel should be liable for a penalty in addition to its
own forfeiture.
Generally, merchandise consigned to others than the master, mate,
officers, or crew, and omitted from the manifest, is not subject to for-
feiture under section 2809, R. S. This shows that it was intended by
section 8801f to effect a forfeiture in the case of opium not applicable
to other merchandise. By the former section forfeiture was not pro-
vided for gênerai merchandise (the property of those not connected
with the ship) for the default of the master in failing to manifest;
but by section 8801 f, in the matter of opium, such forfeiture was pro-
vided.
The penalty and forfeiture pronounced are fixed quantities. There-
fore is it likely that Congress would impose the same penalty for the
failure to manifest a lawful import as it would a prohibited one, if
the manifesting of the latter were contemplated — particularly in view
of the severity of the punishment provided for the willful importation
of smoking opium by other sections of the law ? Does not the require-
ment that opium be manifested, under a penalty if omitted, imply the
law's protection of some one in case of compliance with such require-
ment? No such protection could be provided in the case of the im-
portation of smoking opium. Therefore it is unreasonable to présume
it was intended to be covered by section 8801 f.
If no room were left for the opération of the penalty and forfeiture
provided for in section 8801f, supra, except in case of the failure to
manifest smoking opium, it could be forcibly contended that a penalty
equal to the value of such opium accrued against the vessel, and the
court would hâve to treat it as a thing of value, and search for a
measure of value. But such is not the case, for, under section 8800,
Comp. St., opiumi and préparations and derivatives thereof , other than
smoking opium, or opium prepared for smoking, may be imported for
médicinal purposes.
"Préparations and derivatives," thèse words being associated, take
color from one another, and, to one of average understanding, "prépa-
rations and derivatives of opium" would not suggest smoking opium.
Smoking opium may be prepared from a préparation of opium, or
even from the residue of smoking opium, yen shee. Section 6287a,
Comp. St. So smoking opium cannot always be accurately described
as a préparation of opium, as that expression is ordinarily understood.
Congress, in using the expression "préparations and derivatives"
of opium, was using an expression familiar in sections other than those
of this act. Section 5291, Schedule A, par. 47, and section 6287g,
Comp. St. That section 8801 f, in using the words "préparations and
UNITED STATES V. SISCHO 1013
<262 F.J
derivatives thereof," contemplâtes drugs as properly used in medicine,
is shown by including cocaine :
"Opium or cocaine or préparations or derivatives thereof."
Cocaine, its préparations and derivatives, are not mentioned in either
section 8800 or 8801, or in any of the other sections of the act of
January 17, 1914 (38 Stat. 275, c. 9 [Comp. St. §§ 8800-8801 f]), relat-
ing to imports into the United States. But it is included with opium,
its préparations and derivatives, in section 5291, par. 47, and section
6287, subsection (g), supra, both of which latter include, as associated
dangers, hedged abuut with restrictions, opium and cocaine, prépara-
tions and derivatives thereof.
Ail of thèse sections are limited to those drugs of which opium and
cocaine form the base, and to those alone, further showing that sec-
tion 8801 f should be construed for its proper understanding rather
with thèse two sections, than alone with sections 8800 and 8801, nei-
ther of which mentions cocaine. Any opium, préparations and deriva-
tives thereof, for médicinal purposes, excepting smoking opium, can
be imported under régulations prescribed by the Secretary of the
Treasury. Section 8800, Comp. St. Opium, cocaine, salts, prépara-
tions and derivatives thereof, except smoking opium, can be exported
to countries regulating their entry, under such régulations. Section
8801d, Comp. St.
Having, in the two sections giving the right to import and export
opium, its préparations and derivatives (8800 and 8801d), pointed out
that the right in neither case extended to smoking opium, may not an
intent be shown thereby, in using, in section 8801 f, the expression "its
préparations and derivatives," not to include smoking opium, provid-
ing, as it does, a new penalty for failure to comply with an existing
régulation, as to the manner of importing merchandisable opium? In
sections 8800 and 8801 d, in defining what opium can be imported and
exported, exactness was necessary ; but section 8801 f, regulating the
procédure and imposing penalties for an irregularity in bringing within
the United States something which a right had been given to import,
the same exactness in this particular was not requisite. That which
can be lawf ully imported had already been definitely stated.
Under the famlilar rule that the enactment of a spécial statute re-
peals, or takes the subject out of, a gênerai statute, wîiich might other-
wise include the particular, the limiting of the penalty and forfeiture
to the vessel by this latter section would, in any event, indicate an in-
tention on the part of Congress to leave the smuggler to be punished,
alone, by fine, imprisonment, and forfeiture of the opium, as provided
in section 8801, and the master not at ail, unless criminally liable.
The maximum fine, $5,000, to which the willful importer is subject, is
sufficient in the vast majority of cases to render superfluous a penalty.
There is nothing in the customs revenue laws to indicate, in requir-
ing the making and delivering to government officers by consignée and
ships's officers of manifests, entries, déclarations, bills of lading, and
invoices of merchandise, any intention or purpose, other than to se-
cure and facilitate the détermination of the amounts and payments of
1014 262 FEDERAL REPORTER
the duties accruing upon imports. The danger arising from the lawful
importation of opium, its derivatives and préparations, for médicinal
purposes, except smoking opium, was deemed sufficient to warrant the
régulation thereof by the Secretary of the Treasury, not applicable to
other merchandise. Thèse régulations are authorized by section 8800.
It is fair to présume that the same considération actuated Congress in
providing a penalty (section 8801 f) in case of failure to properly mani-
fest opium entitled to importation, which is not provided for in case
of any other merchandise, except that of the master, mate, officers, or
crew of the vessel. The vessel, if a common carrier, is not, in case of
other merchandise, liable, unless the owner or master is a consenting
party, or privy thereto; the only remedy being an action against the
master. 29 Op. Attys. Gen. 364 ; section 5766, Comp. St.
Interprétations should be, not according to the letter of the statute,
but the intent should be gathered from ail parts of the law. The letter
should not be followed, if a resuit which is absurd follows, or if a more
reasonable meaning présents itself. U. S. v. Hogg, 112 Fed. 909, 50
C. C. A. 608; Interstate Drainage & Investment Co. v. Board of
Com'rs, 158 Fed. 270, 85 C. C. A. 532; In re Matthews (D. C.) 109
Fed. 603. It is true that one of the surest means in fixing and de-
termining the scope of a statute is the insertion of an exception or
proviso ; but, like other canons of construction, its force may be over-
come by other évidence of intention. The déniai of smoking opium to
importation and exportation (sections 8800 and 8801d) is in the nature
of an exception. But this rule would be invoked with better grâce
for the interprétation of those particular sections than of 8801 f, a
statute concerning other matters, the manifesting of imports for duty
purposes. The fîrst of thèse statutes defines what opium can be and
cannot be imported. The latter provides one of the régulations for the
importation of that which can be imported. There was, therefore, need
for the exception in the former, in order to remove ail doubt ; not so
in the latter.
The rule of interprétation by considering the exception is used to
détermine those things which do fall within the wider scope of the
statute, as indicated by those things which hâve been excepted from its
efïect. But this rule cannot be invoked for that purpose hère, at least
with the same force, because the only thing excepted is smoking opium,
and nothing else is claimed to fall within the statute, similar in nature
to smoking opium, by reason of the latitude given the statute by such
exception.
"The • • • usual ofBce of a proviso Is to except somethlng out of a
statute whieh would otherwlse be In it." Deltcli v. Staub, 115 Fed. 309, at
page 310, 53 C. C. A. 137, at page 138.
"Ordlnarily, tlie office of a proviso In a statute Is to modlfy or restrain
the enacting clause." U. S. v. Kansas City So. Ky. Co. CD. C.) 189 Fed. 471,
at page 472.
"• • • It is no doubt the gênerai rule that a proviso to a particular sec-
tion dœs not apply to other sections, and that it is to be construed with
référence to the Immediately preceding parts of the clause to which It Is
attached. But such rule Is not controlling, especially in such composite
structures as tarife and appropriation acts. In U. S. v. Babbit, 1 Black, 55,
17 L. Ed. 94, it was held that the particular proviso then under considération
UNITED STATES V. SISCHO 1015
(252 F.)
was 'not limited in its efEect to the section where it is found, but that It was
affirmed by Congress as an Independent proposition,' applylng alike to ail offl-
cers of 'Ûiis class,' Includlng offieers not mentioned In the section which
contained the proviso. The true rule seems to be that, 'while the position of
a proviso in a statute has a great and sometimes a controlllng influence upon
the extent of Its application, yet the inference from Its position cannot over-
rule its plain gênerai intent' Lewis' Sutherland Statutory Construction (2d
Ed.) § 352, and authoriUes cited." U. S. v. R. F. Downing & Co., 146 Fed.
56, at page 59, 76 O. C. A. 376, at page 379.
Applying the rule announced in this case, the express exception of
smoking opium in section 8800 becomes, by impUcation, a part of sec-
tion SSOlf. Statutes are construed with référence to the common law.
In construing statutes in dérogation of the common law, there should
be no f urther or greater departure than the statute expressly déclares.
A statute, the effect of which is to recognize rights of property or
value in an outlawed thing, a nuisance per se, a thing malum in se, is
certainly in dérogation of the common law. Before it can be given
such effect, it must clearly so déclare. This section SSOlf does not do.
If such a radical departure from established principles was con-
templated as to undertake to give the qualities of property and value
to an outlawed thing, respect for the uniform administration of the
law would doubtless hâve suggested to the enacting Congress that
such purpose be clearly and unequivocally expressed. This it has not
done ; hence I conclude it did not so intend. If such departure was
intended, it would not relate back to give to section 2809, R. S., a différ-
ent effect, in so far as the imposition of the penalty therein provided
against the master was concerned, whatever might be its effect regard-
ing the liability of the vessel.
It is not intended by anything said herein to hold that section SSOlf
does not provide for a forfeiture of a vessel on account of failure to
manifest smoking opium, but the provision for a penalty equal to the
value must be limited to cases where the subject of importation is
merchandisable opium.
Judgment for the défendant.
1016 262 FEDERAL EEPOKTEB
MEMORANDUM DECISIONS
AMERICAN EY. EXPRESS CO. v. STATE OF MARYLAND, for Use of
SMITH et al. (Circuit Court of Appeals, Fourth Circuit October 7, 1919.)
No. 1718. In Error to the District Court of the United States for the District
of Maryland at Baltimore. William S. Thomas, of Baltimore, Md., and H. S.
Marx, of New York City, for plalntiffl in error. Isaac Lobe Straus, of Balti-
more, Md., for défendants in error.
PER CURIAM. Cause dismlssed on motion of plaintlff in error.
BAKBR-WHITBLEY COAL CO. v. WILSON. THE BRITANNIA. THE
M. MITCHELL DAVIS. THE HBLENUS. (Circuit Court of Appeals, Fourth
Circuit. May 5, 1919.) No. 1668. Appeal from the District Court of the
United States for the District of Maryland, at Baltimore. For opinion below,
see 251 Fed. 391. See, also, 262 Fed. 1022, C. C. A. — . Harry N. Abe^r-
crombie, of Baltimore, Md., and Albert T. Gould, of Boston, Mass., for appel-
lants. George Forbes, of Baltimore, Md., for appellee.
PER CURIAM. Cause dismlssed under rule 20 (233 Fed. xili, 146 C. C. A.
xiii), in accordance wlth agreement of coimsel.
BARRA V. MILLS, Immigration Inspecter. (Circuit Court of Appeals,
Eighth Circuit. September 8, 1919.) No. 5486. Appeal from the District
Court of the United States for the District of New Mexico. Isaac Barth and
T. J. Mabry, both of Albuquerque, N. M., for appellant. S. Burlîhart, U. S
Atty., of Albuquerque, N. M., and J. O. Seth, Asst. U. S. Atty., of Santa Fé, N.
M., for appellee.
PER CURIAM. Cause docketed and appeal dismissed, without costs to
either party in this court, on motion of appellee, under rule 16 (188 Fed. xi, 109
C, C. A. xi) , Motion of appellant for leave to file and docket record denied.
BLAND V. REEVES. (Circuit Court of Appeals, Eighth Circuit. October
20, 1919.) No. 5375. Appeal from tlie District Court of the United States, for
the Western District of Missouri. James A. Reed and J. G. L. Harvey, Ijoth
of Kansas City, Mo., and H. M. Harvey, of Oolumbia, Mo., for appellant. O.
O. Madison, of Kansas City, Mo., and W. H. Hallett, of Nevada, Mo., for
appellee.
PER CURIAM. Temporary tajunctlon vacated, and cause dismissed by the
court, without costs to either party In this court.
BLUMLIEN V. UNITED STATES. (Circuit Court of Appeals, Eighth Cir-
cuit. September 2, 1919.) No. 5191. In Error to the District Court of the
United States for the District of New Mexico. T. J. Mabry, Isaac Barth, and
ri. B. Jamison, ail of Albuquerque, N. M., for plaintifC in error. S. Burkhart,
U. S. Atty., of Albuquerque, N. M.
PER CURIAM. Wrlt of error dismissed, without costs to either party In
this court, on motion of plaintifC in error.
CHICAGO, R. I. & P. RY. CO. v. O'DELL et al. (Circuit Court of Appeals.
Eighth Circuit October 25, 1919.) No. 5419. In Error to the District Court
of the United States for the Eastem District of Oklahoma. O. O. Blake, R.
J. Roberts, and J. E. Du Mars, ail of El Reno, Okl., for plaintifif in error. W.
MEMORANDUM DECISIONS 1017
(262 P.)
L. Chapman and Joe M. Adams, both of Shawnee, 0kl., for défendants In
errer.
PBR CURIAM. Writ of error dismissed with préjudice, at costs of plaln-
tlÊE in error, per stipulation of parties.
COSDEN V. BERRINGIîR. (Circuit Court of Appeals, EIghth Circuit.
October 20, 1919.) No. 5482. In Error to the District Court of tlie United
States for the District of Wyoïning. Alfred R. Lowey and J. M. Hodgson, both
of Casper, Wyo., for plaintiff in error. R. L. Donley, of Cody, Wyo., ana
William E. Mullen, of Cheyenne, Wlyo., for défendant in error.
PER CURIAM. Writ of error dismissed, at costs of plaintiff in error, per
stipulation of parties.
OROOKETT V. UNITED STATES. (Circuit Court of Appeals, Sixth Cir-
cuit. January 6, 1920.) No. 3377. In Error to the District Court of the
United States for the vVcstem District of Tennessee; John E. McCall, Judge.
Abe Cohn and Wm. R. Harrison, both of Memphis, Tenn., for plaintiff tn er-
ror. Wm. D. Kyser, U. S. Atty., of Memphis, Tenn.
PBR CURIAM. Order of disinissal entered.
CUDAHY PACKING CO. v. FRET & SON, Inc. (Circuit Court of Appeals,
Fourth Circuit. July 16, 1919.) No. 1571. In Error to the District Court of
the United States for the District of Maryland at Baltimore. See, also, 261
Fed. 65, C. C. A. . Gilbert H. Montague, of New York City (Charles
W. Dunn, of New York City, amieus curiae), for plaintiff in error. Charles
Markell and Horace T. Smith, both of Baltimore, Md. (Henry S. Mitchell,
of Washington, D. C, amlcus curiœ, Department of Justice), for défendant In
error.
PER CURIAM. Judgraent of District Court reversed. Order allowing writ
of error to Suprême Court filed October 13, 1919.
DOWNS et al. v. UNITED STATES. (Circuit Court of Appeals, Fourth
Circuit. April 8, 1919.) No. 1693. In Error to the District Court of the
United States for the Northern District of West Virginia, at Elkins. Martin
Brown, of Moundsville, W. Va., for plaintiffs in error. Harry H. Byrer, Asst.
U. S. Atty., and Stuart W. Walker, U. S. Atty., both of Martinsburg, W. Va.
PER CURIAM. Writ of error dismissed on motion of défendant in error.
EAST ST. LOUIS CONNECTING RY. CO. v. ROBERTS. (Circuit Court
of Appeals, EIghth Circuit. July 15, 1919.) No. 5292. In Error to the District
Court of the United States for the Eastern District of Missouri. W. M. Hezel
and J. L. Howell, both of St. Louis, Mo., for plaintiff in error. Sldney Thome
Able and Charles P. Noell, both of St. Louis, Mo., for défendant in error.
PER CURIAM. Writ of error dismissed, at costs of plaintiff in error, per
stipulation of parties, etc.
FOSTER V. UNITED STATES. (Circuit Court of Appeals, Flfth Circuit.
January 16, 1920.) No. 3380. In Error to the District Court of the United
States for the Southern District of Georgia ; Beverly D. Evans, Judge. J. H.
Foster was convicted of an offense, and he brings error. Affirmed. John R.
Cooper, of Maçon, Ga., for plaintiff in error. John W. Bennett, U. S. Atty., ot
Waycross, Ga. Before WALKER, Orcuit Judge, and GRUBB and JACK,
District Judges.
PER CURIAM. The judgment in the above numbered and entitled cause
Is affirmed.
1018 262 FEDERAL EEPORTER
GREGORY, Dlst. Atty., et al., v. BBRNHEIM DISTIIXING CO. (Circuit
Court of Appeals, SLxth Circuit. March 2, 1920.) No. 3363. Appeal f rom the
District Court of the United States for the Western District of Kentucky;
Walter Evans, Judge. W. V. Gregory, U. S. Atty., of Louisville, Ky., for ap-
pellants. Selligman & Selligman, of Douisville, Ky., for appellee.
PER CTJRIAM. Order dismlssing appeal entered.
GREGORY, Dlst. Atty., et al., v. BROWN-FORMAN CO. (Circuit Court
of Appeals, Sixtli Circuit. March 2, 1920.) No. 3357. Appeal from the Dis-
trict Court of the United States for the Western District of Kentucky ; Walter
Evans, Judge. W. V. Gregory, U. S. Atty., of Louisville, Ky., for appeUants.
Levy Mayer, of Chicago, 111., and Wm. Marshall Bullitt, of Louisville, Ky., for
appellee.
PER CURIAM. Order dismlssing appeal entered.
GUENTHER v. DENNIS-SIMMONS LUMBBR CO. et al. (Circuit Court
of Appeals, Fourth Circuit. October 7, 1919.) No. 1716. Appeal from the Dis-
trict Court of the United States for the Eastem District of North Carolina, at
Washington ; Henry G. Connor, Judge. Suit in equlty by Emil Guenther against
Dennis-Simmons Lumber Company and others. Decree for défendants and
complainant appeals. Aflarmed on opinion of District Court 246 Fed. 521.
A. D. MacLean, of Washington, N. C. (Small, MacLean, Bragaw & Rodman,
of Washington, N. C, on the brlef), for aijpeilant. H. S. Ward, of Washington,
N. C. (Ward & Grimes, of Washington, N. C, and H. W. Stubbs and Wheeler
Martin, both of WllUamston, N. C, on the brief), for appellees. Before
PRITCHARD, KNAPP, and WOODS, Circuit Judges.
PRITCHARD, Circuit Judge. The plaintiff In the court below brlngs tnis
appeal hère from the final decree of the Judge of the District Court for the
Bastern District oï North Carolina, wherein It is decreed that the plaintiff is
not the owner of certain lands referrcd to thereln and that the défendant,
Dennls-Slramons Lumber Company, is the owner in fee of such lands. The
leamed judge who trled this suit prepared an exhaustive and oomprehen-
sive opinion, in which he entered Into an elaborate discussion of the dif-
férent questions involved, reaching the conclusion that the défendant ac-
quired title to the premises by adverse, open, notorious, and continued pos-
session of the same, and that the plaintiff Is also barred by lâches. A careful
examinatlon of the whole évidence leads us to the conclusion that the decree of
the court below is eminently proper. We feel that to wrlte an opinion in this
case, in vlew of our conclusion, would of necesslty be more or less répétition of
what the lower court has already so well said about the questions Involved
In this controversy, therefore we content ourselvea by adopting the opinion
of the court below as reported in Guenther v. Dennis-Simmons Lumber Co.
(D. C.) 246 Fed. 521, as the opinion of this court. Afflrmed.
HENDRIX V. PORNEY. (Circuit Court of Appeals, Eighth Circuit. Sep-
tember 1, 1919.) No. 5309. In Error to the District Court of the United States
for the Eastem District of Arkansas. Morris M. Cohn, Powell Clayton, and
Louis M. Cohn, ail of Llttle Rock, Ark., for plaintiff in error. Charles T.
Coleman, of Llttle Rock, Ark., for défendant in error.
PER CURLAM. Writ of error dismlssed, wlth costs, per stipulation of
parties.
THE HOWEIiL. McCOLE v. CHELSEA LIGHTBRAGE CO. (Circuit
Court of Appeals, Second Circuit. December 31, 1919.) No. 133. Appeal from
the District Court of the United States for the Southern District of New York.
Suit in admlralty by Michael McCole against the lighter Howell ; the Chelsea
Lighterage Company, Incorporated, claimant. Decree for respondent, and
MEMORANDUM DECISIONS 1019
(262 F.)
Ilbelant appeals. Question certified to Suprême Court For opinion below, see
257 Fpd. 578. Before WARD, BOGERS, and HOUGH, Circuit Judges.
To the Honorable the Justices of the Suprême Court ot tlie United States:
The libelant, a longslioreinan, wliile engaged in unloading bags of colïee from
the lighter Howell in New Tork Harbor, was struck on the head by a boit
falling out of a shackle on the end of the boom of the lighter's derrick. He
filed this llbel In the District Court of the United States for the Southern Dis-
trict of New Tork to recover damages on the ground that the lighter's equip-
ment or appllances had been negligently allowed to become and to remain in
dangerous condition. The owuers of the lighter had taken out insurance under
the Workmen's Compensation Law (chapter 41, Laws N. Y. 1914, which aooi-
ished ail other remédies ; the libelant being engaged in an employment covered
by group 10 of section 2, art. 1, of the act, as amended by chapter 249, Laws
1918. The District Judge dismissed the libel, on the ground that the amend-
ment to sections 24 and 256 of U. S. Judlcial Code, reserving "to claimants
the rights and remédies under the Workmen's Compensation Law of any state,"
restricted the libelant to bis remedy under the New York Workmen's Com-
pensation Law. An appeal bas been duly taken by the libelant from this
decree, and this court desires the Instructions of the Suprême Court for the
proper décision of the following question of law:
Is the remedy provlded by the New York Woi'kmen'a Compensation Law
exclusive, or bas the libelant the option either of proceeding under It or of
proceeding in admiralty, either agalnst the lighter in rem, or agalnst ber
owners in personamî
H. G. WARD,
HENRY WADE ROGBRS,
CHARLES M. HOUGH.
United States Circuit Court of Appeals for the Second Circuit
United States of America, Second Judicial Circuit — ss. :
I, William Parkin, clerk of the United States Circuit Court of Appeals for
the Second Circuit, do hereby certify that the foregoing certiflcate and state-
ment of facts in the case of Michael McCole v. Lighter Howell, was duly filed
and entered of record in my office by order of said court, and, as directed by
said court, the said certiflcate Is by me forwarded to the Suprême Court of
the United States for Its action thereon. In witness whereof, I hâve hereunto
subscribed my name, and affixed the seal of said court, at the city of New
York, this 31st day of December, 1919. Wm. Parkin, Clerk of the United
States Circuit Court of Appeals for the Second Circuit. [Seal.]
JONG HONG V. UNITED STATES. (Circuit Court of Appeals, Sixth Cir-
cuit. October 11, 1919.) No. 3260. Appeal from the Dlsti-ict Court of the
United States for the Northern District of Ohio; D. C. Westenhaver, Judge.
John A. Cline, of Cleveland, Ohio, for appellant E. S. Wertz, U. S. Atty., of
Cleveland, Ohio.
PER CURIAM. Order of dlsmissal entered.
LANGLBY v. UNITED STATES. (Circuit Court of Appeals, Sixth Circuit
June 30, 1919.) No. 3276. In Error to the District Court of the United
States for the Western District of Tennessee; John B. McCall, Judge. Abe
Cohn, of Memphis, Tenu., for plaintiff In error. Wm. D. Kyser, U. S. Atty.,
of Memphis, Tenn.
PEB CURIAM. Order of dlsmissal entered.
LOUIS VILLE & JEFFBRSON VILLE BRIDGE 00. t. UNITED STATES.
(Circuit Court of Appeals, Slxth Circuit. June 30, 1919.) No. 3016. In Error to
the District Court of the United States for the Western District of Kentucky ;
Walter Evans, Judge. For opinion below, see 236 Fed. 1001. Alex P. Humph-
1020 262 FEDERAL REPORTEK
rey and Bdw. P. Humphrey, both of Loulsville, Ky., for plaint! ff \n error.
Perry B. MUler, U. S. Atty., of Louisvllle, Ky., and Philip J. Doherty, Sp. Asst.
U. S. Atty., of Washington, D. C.
PER CURIAM. Judgment affinned.
MEELINI V. PARTOH, Immigration Inspector. (Circuit Court of Appeals,
Elçhth Circuit. September 8, 1919.) No. 5485. Appeal from the District Court
of the United Statea for the District of New Mexico. Isaac Barth and T. J.
Mabry, both of Albuquerque, N. M., for appellant. S. Burkhart, U. S. Atty.,
of Albuquerque, N. M., and J. O. Seth, Asst U. S. Atty., of Santa Fé, N. M., for
appel] ee.
PER CURIAM. Cause doclseted, and appeal dlsmîssed, wlthout costs to elther
party in thls court, on motion of appellee, under rule 16 (188 Fed. xl. 109
C. 0. A. xi). Motion of appellant for leave to file and docket record denied.
Pétition of NATIONAL DISCOUNT CO. In re HITT LUMBER & BOX CO.
(Circuit Court of Appeals, Slxth Circuit October 11, 1919.) No. 3309. Pé-
tition to Révise an Order of the District Court of the United States for the
Southern Division of the Eastem District of Tennessee; Edward T. Sanford,
Judge. White, Johnson, Cannon & NefC, of Cleveiand, Ohlo, and Williams
& Lancaster, of Chattanooga, Tenn., for petltioner. Frank Spurlock, D. L.
Grayson, and J. M. Trlmble, ail of Chattanooga, Tenn., for trustée. Lusk &
Thompson, of Chattanooga, ïeun., for petltioning creditors.
PER CURIAM. Order of dlsmissal entered.
NEW YORK CENT. R. CO. v. KOVACS. (Circuit Court of Appeals, Sixth
Circuit. November 5, 1919.) No. 3314. In Error to the District Court of the
United States for the Northern District of Ohlo; D. C. Westenhaver, Judge.
S. H. West, of Cleveiand, Ohlo, for plaintlfC In error. Anderson & Lamb and
J. J. Tetlovf, ail of Youngstown, Ohio, for défendant tn error.
PER CURIAM. Order of dlsmissal entered.
OMAHA NAT. BANK v. COOTS et al. (Circuit Court of Appeals, Slxth
Circuit. December 5, 1919.) No. 3303. In Error to the District Court of the
United States for the Eastem District of Mlchlgan ; Arthur J. Tuttle, Judge.
George E. Brand, of Détroit, Mich., for plaintlfC in error. Charles F. Del-
bridge, of Détroit, Mich., for défendants In error.
PER CURIAM. Order of dlsmissal entered.
POWERS y. UNITED STATES. (Circuit Court of Appeals, Sixth Circuit.
January 6, 1920.) No. 337G. In Error to the District Court of the United
States for the Western District of Tennessee; John E. McCall, Judge. Abe
Cohn, of Memphls, Tenn., for plalntiff in error. Wm. D. Kyser, U. S. Atty., or
Memphls, Tenn.
PER CURIAM. Order of dlsmissal entered.
PEICE BOOKER MFG. CO. v. HAAEMANN PICKLING CO. (Circuit Court
of Appeals, Eighth Circuit. September 1, 1919.) No. 5243. In Error to the
District Court of the United States for the District of Colorado. Sewall Myer,
of Houston, Tex., and 6. Dexter Blount, J. Howard Dana, and Harry S. Sil-
versteln, ail .of Denver, Colo., for plaintlfC In error. Carie Whltehead and
Albert L. Vogl, both of Denver, Colo., for défendant in error.
PER CURIAM. Wrlt of error dismissed; with costs, per stipulation of
parties.
MEMORANDUM DECISIONS 1021
(262 P.)
RATON WATERWORKS CO. v. CITY OF RATON, COLFAX OOUNTY,
NEW MEXICO. (Circuit Court of Appeals, Bighth Circuit. September 1,
1939.) No. 4941. Appeal from the District Court of the United States for the
District of New Mexico. Jesse G. Northcutt, of Denver, Colo., Henry W. Coil,
of Riverside, Cal., E. P. Davies, of Santa Fe, N. M., and L. Laflin Kellogg, of
New Torli City, for appellant. James H. Pershing and John H. Fry, botli of
Denver, Colo., Howard L. Bickley, of Raton, N. M., and A. T. Rogers, Jr., of
Las Vegas, N. M., for appellee.
PER OURIAM. Mandate of Suprême Court of the tlnited States (249 U. S.
552, 39 Sup. et 384, 63 L. Ed. 768), ordered filed and recorded, and appeal
dismissed with costs, etc.
ST. LOUIS SOUTHWESTERN RT. CO. OF TEXAS v. CONSOLIDATED
FUEL CO. (Circuit Court of Appeals, Eighth Circuit September 1, 1919.)
No. 5352. In Error to the District Court of the United States for the Eastern
District of Oklahoma. B. B. Perkins, of Dallas, Tex., ClifCord L. Jackson, of
Muskogee, Okl., and Daniel Upthegrove, of St. Louis, Mo., for plaintiff in error.
Edward R. Jones and Ephraim H. Foster, both of Muskogee, Okl., for défend-
ant in error.
PER CURIAM. Writ of error dismissed, with costs, pursuant to opinion in
No. 5351, between same parties. 260 Fed. 638, C. C. A. .
THE ST. PAUL. Appeal of HUDSON NAV. CO. (Circuit Court of Appeals,
Second Circuit November 12, 1919.) No. 111. Appeal from the District Court
of the United States for the Southern District of New York. Llbel by J. Aron
& Co., Incorporated, against the steamship St. Paul, her englues, etc. From an
order refuslng confirmation of the marshal's sale, and ordering a resale of
the vessel, the Hudson Navigation Company, purchaser, appeals. Appeal dis-
missed.
Certiorari denied 251 U. S. , 40 Sup. Ot. 344, 64 L. Ed. . Barber,
Watson & Gibboney, of New York City (S. G. Gibboney, of New York City, of
counsel), for appellant. Klrlin, Woolsey & Hlckox and George H. Mitchell, ail
of New York City (C. R. Hlckox and G. H. Mitchell, both of New York City,
of counsel), for libelant Before WARD, HOUGH, and MANTON, Circuit
Judges.
PER OURIAM. This appeal Is dismissed, under Butterfield t. Usher, 91
U. S. 246, 23 L. Ed. 318.
SMITH V. STEPHENS. (Circuit Court of Appeals, Eighth Circuit. May
12, 1919.) No. 5264. Appeal from the District Court of the United States for
the Western District of Missouri. Bennett H. Young, for appellant. J. P.
McBaioe and Boyle G. Clark, both of Columbla, Mo., for appellee.
PER CURIAM. Appeal dismissed, at costs of appellant per stipulation of
parties.
THAYER V. FARMBRS* ELEVATOR CO. OF MIRANDA, S. D. (Circuit
Court of Appeals, Eighth Circuit May 6, 1919.) No. 198. Pétition to Révise
Order of the District Court of the United States for the District of Minnesota.
George E. Young, of Minneapolis, Minn., for petitioner. Perry F. Loucks, of
WatertowB, S. D., and E. P. Allen and Clark R. Fletcher, both of Minneapolis,
Minn., for respondent.
PER CURIAM. Pétition to revise dismissed by the court for want of pros-
ecutlon, without costs to either party in this court
1022 262 FEDERAL REPORTER
THATER V. RAMONA FARMERS WAREHODSB CO. (Circuit Court of
Appeals, Bighth Circuit. May 6, 1919.) No. 199. Pétition to Revise Order of
the District Court of the United States for the District of Minnesota. George
E. Young, of Minneapolia, Minn., for petitioner. Perry F. Louclîs, of Water-
town, S. D., and E. P. Allen and Clark R. Fletcher, both of Minneapolis, Minn.,
for respondent.
PER OTJRIAM. Pétition to revise dismissed by the court for want of prose-
cution, wlthout costs to either party In this court
THOMPSON V. UNITED STATES. (Circuit Court of Appeals, Elghth Cir-
cuit. May 12, 1919.) No. 5271. In Error to the District Court of the United
States for the Northern District of lowa. James E. Williams, of Mason City,
lowa, for plaintiff in error. F. A. O'Connor, U. S. Atty., of Dubuque, lowa.
PER CURIAM. Writ of error dismissed, without costs to either party in
this court, on motion of plaintifC in error.
UNITED STATES ex rel. ORMSBY v. PECK, District Judge. (Circuit
Court of Appeals, Sixth Circuit. February 13, 1920.) No. 3384. In Error to
the District Court of the United States for the Southern District of Ohio.
George F. Ormsby, of Cincinnati, Ohlo, for petitioner.
PER CURIAM. Order denying pétition for writ of mandamus entered.
WARE et al. v. COX. (Circuit Court of Appeals, ESghth Circuit. May 6,
1919.) No. 5413. In Error to the District Court of the United States for the
Westerq District of Arkansas. Robert A. Rowe, of Greenwood, Ark., for plain-
tlfCs in error. Chester Holland, of Greenwood, Ark., for défendant in error.
PER CURIAM. Cause docketed, and writ of error dismissed, at the costs
of the plaintifts in error, on motion of défendant in error.
WEBB et al. v. UNITED STATES. (Circuit Court of Appeals, Fifth Circuit.
January 16, 1920.) No. 3394. In Error to the District Court of the United
States for the Southern District of Georgia ; Wm. Wallace Lambdln, Judge.
Oriminal prosecution by the United States against Early Webb and others.
Judgment of conviction, and défendants bring error. Affinned. John R. Coop-
er, of Maçon, Ga., for plaintlffs in error. John W. Bennett, U. S. Atty., of
Waycross, Ga. Before WALKER, Circuit Judge, and GRUBB and JACK,
District Judges.
PER CURIAM. The judgment in the above numl)ered and entitled cause
is affirmed.
WESTERN INDBMNITX CO. v. UNITED STATES. (Circuit Court of Ap-
peals, Elghth Circuit. May 12, 1919.) No. 5256. In Error to the District
Court of the United States for the Eastern District of Oklahoma. L. J.
Roach, of Muskogee, Okl., for plaintiff in error. W. P. McGlnnis, U. S. Atty.,
of Muskogee, Okl., and J. C. Wllhoit, Sp. Asst U. S. Atty., of Okemah, Okl.
PER CURIAM. Writ of error dismissed, per stipulation of parties.
WILSON V. BAKBRr-WHITELEY COAL CO. THE HBLENUS. THE
BRITANNIA. THE M. MITCHEIiL DAVIS. (Circuit Court of Appeals,
Fourth Circuit May 5, 1919.) No. 1687. Appeal from the District Court of
the United States for the District of Maryland, at Baltimore. For opinion
below, see 251 Fed. 391. See, also, 262 Fed. 1016, C. C. A. . George
MEMORANDUM DECISIONS 1023
(262 F.)
Forbes, of Baltimore, Md., for appellant. Harry N. Abercromble, of Baltimore,
Md., for appeUee.
PER OURIAM. Cause dlsmlssed, under rule 20 (233 Fed. xlU, 146 O. O. A.
xlii), In accordance with agreement of counsel.
SCANNELL v. BBTHKE. (Court of Appeala of District of Columbla. Sub-
mltted January 14, 1920. Dedded February 2, 1920.) No. 1277. Appeal from
Décision of Commissioner of Patents. Interférence proceedings In the Patent
Office between John P. Scannell and John P. Bethke. From a décision for the
first-named party, Bethke appeals. Affirmed. C. E. Riordan and Wm. S.
Hodges, both of Washington, D. C, for appellant. A. L. Morsell, of Mil-
waukee, Wls., and C. D. Davis, of Washington, D. 0., for appellee.
PER CURIAM. This Is an interférence proceeding, whlch solely tums upon
issues of fact. After a careful review of the testimony and the concurrtng dé-
cisions of the trlbunals of the Patent Office, we are convinced that no error
was committed. The testimony is fully and fairly revlewed In the dedsion of
the Commissioner, and a further review hère would serve no good purpose.
The décision of the Commissioner of Patents is affirmed, and the clerki is di-
rected to certify thèse proceedings as requlred by law.
End of Cases in Vol. 262
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