text:
    CLAUDE NEON ELECTRICAL PRODUCTS, Inc., v. BRILLIANT TUBE SIGN CO. et al.
    No. 6221.
    Circuit Court of Appeals, Ninth Circuit.
    March 23, 1931.
    Lyon & Lyon, of Los Angeles, Cal., William Bohleber, of New York City, Leonard S. Lyon and R. E. Caughey, both of Los Angeles, Cal., G. Wright Arnold, of Seattle, Wash., and Edwin J. Prindle, of New York City, for appellant.
    Caldwell & Lycette, Hugh M. Caldwell, John P. Lyeette, and Dean H. Eastman, all of Seattle, Wash., for appellees.
    Before RUDKIN and WILBUR, Circuit-Judges, and NORCROSS, District Judge.
   RUDKIN, Circuit Judge.

This was a suit for infringement of letters patent No. 1,125,476, dated January 19, 1915, covering improvements in a system of illuminating by luminescent tubes. The plaintiff is the owner and holder of the exclusive right and license to manufacture, use, and sell the patented device,-or devices, in certain western states, including the state of Washington. A later patent set forth in the complaint is not involved on the present appeal. The court below found that the patent was invalid because the alleged invention was not useful, and because the description of the invention in the specifications was not in such full, clear, concise, and exact terms as to enable any person skilled in the art or science to which it appertains, or with which it is most nearly connected, to make, construct, and use the same. From the decree of dismissal this appeal was prosecuted.

In considering the validity of the patent, we have the presumption of validity which always attaches to a grant of this kind; we have marked commercial success, especially during recent years, and we have the rule of comity which is peculiarly applicable to cases of this kind. The validity of the patent was first challenged, so far as the record discloses, in Claude Neon Lights, Inc., v. E. Machlett & Son (D. C.) 21 F.(2d) 846, where, after full consideration and painstaking investigation, the patent was sustained. In Claude Neon Lights, Inc., v. E. Machlett & Son, 27 F.(2d) 702, the decree was affirmed, after like full consideration, by the Circuit Court of Appeals for the Second Circuit; certiorari denied, 278 U. S. 634, 49 S. Ct. 32, 73 L. Ed. 551. The ruling in that case has been consistently followed in other courts and in other jurisdictions. Claude Neon Lights, Inc., v. Photion Instrument Corporation (D. C.) 32 F.(2d) 1008, affirmed (C. C. A.) 37 F.(2d) 1010; Claude Neon Lights v. Sun Ray Neon Corporation (D. C.) 33 F.(2d) 949; Claude Neon Lights, Inc., v. American Neon Light Corporation (D. C.) 35 F.(2d) 263, affirmed (C. C. A.) 39 F.(2d) 548; Claude Neon Lights v. Gardner Sign Co. (D. C.) 39 F.(2d) 487; Bellows-Claude Neon Co. v. Sun Ray Gas Corporation (D. C.) 39 F.(2d), 907. In addition to the reported cases, the validity of the patent has been sustained in other masters’ reports and unreported decisions which are found in the record. While these numerous decisions are not controlling, they are at least persuasive. As said by the Supreme Court in Mast, Foos & Co. v. Stover Mfg. Co., 177 U. S. 485, 488, 20 S. Ct. 708, 710, 44 L. Ed. 856:

“Comity persuades; but it does not command. It declares not how a case shall be decided, but how it may with propriety be decided. It recognizes the fact that the primary duty of every court is to dispose of eases according to the law and the facts; in a word, to decide them right. In doing so, the judge is bound to determine them according to his own convictions. If he be clear in those convictions, he should fol-. low them. It is only in eases where, in his own mind, there may be a doubt as to the soundness of his views that comity comes in play and suggests a uniformity of ruling to avoid confusion, until a higher court has settled the law. It demands of no one that he shall abdicate his individual judgment, but only that deference shall be paid to the judgments of other co-ordinate tribunals. Clearly it applies only to questions which have been actually decided, and which arose under the same facts.
“The obligation to follow the decisions of other courts in patent eases of course increases in proportion to the number of courts which have passed upon the question, and the concordance of opinion may have been so general as to become a controlling authority. So, too, if a prior adjudication has followed a final hearing upon pleadings and proofs, especially after a protracted litigation, greater weight should be given to it than if it were made upon a motion for a preliminary injunction. These are substantially the views embodied in a number of well-considered cases in the circuit courts and circuit courts of appeals. Macbeth v. Gillinder [C. C.] 54 F. 169 ; Electric Mfg. Co. v. Edison Electric Light Co., 61 F. 834, 18 U. S. App. 637, 10 C. C. A. 106; Edison Electric Light Co. v. Beacon Vacuum Pump & Electrical Co. [C. C.] 54 F. 678, and cases cited; Beach v. Hobbs [C. C.] 82 F. 916; Id., 92 F. 146, 34 C. C. A. 248, 63 U. S. App. 626; see, also, Newall v. Wilson, 2 De G. M. & G. 282.”

With this rule in mind, we proceed to a consideration of the reasons assigned by the court below for invalidating the patent.

After describing the invention in great detail, and by reference to a prior French patent and to an article written by the patentee and published in a French scientific journal, the specifications provide: “The slowness of the disappearance of the neon is facilitated owing to the fact already pointed out in the specification referred to that the pressure in the neon tubes may be of the nature of a mm. of mercury, that is to say, at least 10 times higher than in the nitrogen tubes, resulting in a provision of gas which is likewise more than 10 times greater.”

The court below was of opinion that a pressure of the nature of a millimeter of mercury as Specified in the patent would not permit of a variation either‘way of more than, one-half millimeter, and that the invention was not useful unless the pressure considerably exceeded 1.5 millimeters. It will readily be. conceded that the pressure is an important element of the invention and that a pressure exceeding 1.5 millimeters will greatly prolong the life of the tube. But the pressure desired or required depends on the quantity of gas and the volume of the tube. If you reduce the quantity of gas or increase the volume of the tube, the pressure will decrease, and vice versa. It follows therefore that the pressure cannot be definitely -specified, unless other conditipns, such as the quantity of gas and the volume of the tube, are likewise specified. The pressure in the neon tubes is compared with the pressure in nitrogen tubes, and is said to be at least ten times higher, and the testimony tends to show that the pressure in nitrogen tubes often exceeded one-tenth millimeter and -reached as high as one millimeter. For these reasons, it seems apparent to us that the term, of the nature of a millimeter of mercury, as specified in the American patent, or, of the order of a millimeter of mercury, as specified in the French patent, is employed to define a range of pressures, and not to fix a definite pressure applicable in all eases and under all circumstances. Such seems to be the view of other courts to which the question has been presented. Thus, in Claude Neon Lights v. E. Machlett & Son, supra, the District Court said:

“Defendant contends that the only controlling factor in the life o'f- the tube is the degree of pressure of the gas employed, and that this fact is not disclosed in the patent in suit, but, on the contrary, the disclosure of the patent in suit is inconsistent therewith.
“In my opinion defendant did not sustain this contention, because the life of the tube may be lengthened by increasing the length of the tube, thus obtaining more gas, and also because with the ordinary working pressures of between two millimeters and eight millimeters it does not make much difference on the critical value of the area of the electrode, 1.5 square decimeters per ampere.” 21 F. (2d) pages 848, 849.

In the same ease, the Circuit Court of Appeals said: “Greater volume of gas secures a greater life of the tube because it requires a longer time to absorb, and the patentee specifies the use of neon at a .pressure of ‘the nature of a millimeter of mercury/ which is said to be 10' times more than Moore used' in his tubes.” 27 F.(2d) page 704.

Or, as said* by the special master in another case: “The master finds that Claude is not restricted by tbe expression of tbe pressure of the nature of a millimeter to that particular pressure but is entitled to that range of pressure in which his combination of elements will operate efficiently. His experiments with large and small tubes show the effect of the amount of gas in the tube on life.”

Nor is the patent void for uncertainty as thus construed. As said by the court in Minerals Separation, Ltd., v. Hyde, 242 U. S. 261, 270, 37 S. Ct. 82, 86, 61 L. Ed. 286: “Equally untenable is the claim that the patent is invalid for the reason that the evidence shows that when different ores are treated preliminary tests must be made to determine the amount of oil and the extent of agitation necessary in order to obtain the best results. Such variation of treatment must be within the scope of the claims, and the certainty which the law requires in patents is not greater than is reasonable, having regard to their subject matter. The composition of ores varies infinitely, each one presenting its special problem, and it is obviously impossible to specify in a patent the precise treatment which would be most successful and economical in each case. The process is one for dealing with a large class of substances and the range of treatment within the terms of the claims, while leaving something to the skill of persons applying the invention, is clearly sufficiently definite to guide those skilled in the art of its successful application, as the evidence abundantly shows. This satisfies the law.”

We are therefore of opinion that the patent is not invalid for the reason assigned by the court below, or for any other reason.

The decisions which sustain the validity of the patent likewise sustain the charge of infringement. Claude Neon Lights, Inc., v. E. Machlett & Son, supra; Claude Neon Lights, Inc., v. Photion Instrument Corporation, supra; Claude Neon Lights, Inc., v. American Neon Light Corporation, supra.

The appellees Wallace, Cairns, Christensen, and Beem were the organizers, and are now officers, of the appellee Brilliant Tube Sign Company, and the question of their liability for damages has been discussed in the briefs. That question will be left to the determination of the court below, where other facts affecting their liability may be adduced on the accounting. In so far as the injunctive •relief is concerned, they are proper parties to the suit, and the injunction will run against them, although they will be equally bound by an injunction against the corporation of which they are officers.

A motion was interposed in this court to dismiss the appeal for the reason that it was not taken within the thirty days limited by law (28 USCA § 227). The thirty-day provision for an appeal only applies where the appeal is taken from a decree granting an injunction and ordering an accounting. Here the appeal is from a final decree of dismissal, ’ and the time for taking the appeal is fixed by the general statute.

The motion to dismiss the appeal is denied, the decree is reversed, and the cause is remanded to the court below, with instructions to grant a permanent injunction and order an accounting as prayed.


source: Caselaw Access Project

author: PHILLIPS, Circuit Judge.

license: Public Domain

text:
    WHITE v. UNITED STATES.
    No. 382.
    Circuit Court of Appeals, Tenth Circuit.
    March 17, 1931.

      Malcomm E. Rosser, of Muskogee, Okl., and C. P. Kimble, of South Muskogee, Okl., for appellant.
    Philas S. Jones, Asst. U. S. Atty., of Muskogee, Okl. (W. F. Rampendahl, U. S. Atty., of Muskogee, Okl., on the brief), for the United States.
    Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.
   PHILLIPS, Circuit Judge.

Alexander T. White brought this action against the United States to recover upon a policy of war risk insurance. Under a written stipulation filed with the clerk, trial by jury was waived and the cause tried by the court. Oral and documentary evidence was introduced, written briefs were filed and the cause was then taken under advisement. On June 13, 1930, the court rendered the following memorandum opinion:

“I find the issues of fact in favor of defendant. Set this matter for June 25, 1930, at Muskogee to enter judgment. Notify attorneys.”

On the last mentioned date, the court entered judgment for the United States, which in part recited:

“The court doth find the issues of law and of fact for the defendant, * * * and against the plaintiff, * * * and further finds that plaintiff take nothing because of his petition in this action, and that the defendant go hence without day.”

White has appealed.

Section 875, title 28 USCA (43 Stat. 936), provides:

“When an issue of fact in any civil cause in a district court is tried and determined by the court without the intervention of a jury, according to section 773 of this title, the rulings of the court in the progress of the trial of the cause, if excepted to at the time, and duly presented by a bill of exceptions, may be reviewed upon a writ of error or upon appeal; and when the finding is special the review may extend to the determination of the sufficiency of the facts found to support the judgment.”

Counsel for White did not request any special findings of fact or declarations of law, did not move for judgment upon the evidence, and did not request a declaration of law that White was entitled to judgment as a matter of law.

No error is assigned on any ruling of the court made during the progress of the trial. The sole contention made by counsel for White is that the undisputed evidence established that he became totally and permanently disabled, within the meaning of the policy, before the expiration of the period of grace following the last payment of premium. If we were free to consider the errors assigned, we should he inclined to agree with the contention of counsel for White. This makes it all the more regrettable that, under the provisions of the statute above quoted, as construed by the decisions of the national courts, we are precluded from considering the error assigned. See

Section 875, supra, was enacted in substantially its present form, March 3,1865 (13 Stat. 501), “in order to preserve to the parties submitting a cause to a trial before a court, both as to law and fact, the benefit of a review or re-examination of questions of law in the appellate court” (Flanders v. Tweed, 9 Wall. 425, 430,19 L. Ed. 678) and has been judicially construed many times. Nevertheless, there appears to exist much uncertainty at the bar both as to what questions are open for review and what procedure must be followed in order to secure such review in an appellate court.

The Fifth Circuit, in Bank of Waterproof v. Fidelity & Deposit Co., 299 F. 478; the First Circuit, in United States v. Smith, 39 F.(2d) 851; and the Eighth Circuit, in Seep v. Ferris-Haggerty Copper M. Co., 201 F. 893, recognized this uncertainty and undertook to state the settled rules governing the procedure in law eases tried before a court without a jury. In view of the record in the instant ease and in other eases recently brought before this court on appeal, it appears to be necessary to re-state such rules.

Section 773, title 28, USCA (1930), 46 Stat. 486, provides:

“Issues of fact in civil cases in any district court may be tried and determined by the court, without the intervention of a jury, whenever the parties, or their attorneys of record, agree to waive a jury by a stipulation in writing filed with the clerk or by an oral stipulation made in open court and entered in the record.”

In the absence of such a stipulation, the review of an action at law tried to the court is limited to questions arising on the process, pleadings or judgment. Commissioners of Road Improvement Dist. No. 2 v. St. Louis Southwestern Ry. Co., 257 U. S. 547, 562, 42 S. Ct. 250, 66 L. Ed. 364; Duignan v. United States, 274 U. S. 195, 198,199, 47 S. Ct. 566, 71 L. Ed. 996; Spalding v. Manasse, 131 U. S. 65, 9 S. Ct. 649, 33 L. Ed. 86; Dundee Mtg. & T. Co. v. Hughes, 124 U. S. 157, 8 S. Ct. 377, 31 L. Ed. 357; North River Ins. Co. v. Guaranty State Bank (C. C. A. 5) 30 F.(2d) 881; Municipal Excavator Co. v. Siedhoff (C. C. A.) 15 F.(2d) 10, 14; National City Bank v. Kimball Commercial & Sav. Bank (C. C. A. 8) 2 F.(2d) 461.

On an appeal from a judgment in an action at law, the questions open for review are limited by statute to errors of law. Section 879, title 28 USCA (18 Stat. 318); Federal I. C. Bank v. L’Herisson (C. C. A. 8) 33 F. (2d) 841, 843. A finding contrary to the weight of the evidence is an error of fact. Federal I. C. Bank v. L’Herisson, supra; First National Bank v. Litteer (C. C. A. 8) 10 F.(2d) 447, 448; Wear v. Imperial W. G. Co. (C. C.A.8) 224 F. 60, 63.

Section 773, title 28 USCA (46 Stat. 486), provides that the findings of the court may be either general or special, and that such findings shall have the same effect as the verdict of a jury.

In a jury waived case, in the absence of special findings, “a general finding * * * is conclusive upon all matters of faet, and prevents any inquiry into the conclusions of law embodied therein, except in so far as the rulings during the progress of the trial wer,e excepted to and duly preserved by bill of exceptions.” Fleischmann v. United States, 270 U. S. 349, 354, 46 S. Ct. 284, 287, 70 L. Ed. 624; Boardman v.Toffey, 117 U. S. 271, 6 S. Ct. 734, 29 L. Ed. 898; Martinton v. Fairbanks, 112 U. S. 670, 5 S. Ct. 321, 28 L. Ed. 862; Sierra Land & L. S. Co. v. Desert Power & M. Co. (C. C. A. 9) 229 F. 982. However, a general finding has the effect of a general verdict of a jury, and no more, and, while certain earlier decisions were apparently to the contrary (Dirst v. Morris, 14 Wall. 484, 490, 20 L. Ed. 722; Mercantile Mut. Insurance Co. v. Folsom, 18 Wall. 237, 250, 253, 21 L. Ed. 827; Cooper v. Omohundro, 19 Wall. 65, 22 L. Ed. 47; Searcy County v. Thompson (C. C. A.) 66 F. 92, 96. See also Sierra Land & L. S. Co. v. Desert Power & M. Co., supra), it is now well settled that, by motion for judgment in his favor or by an application for a declaration of law that he is entitled to judgment, • a party may raise the question of law whether he is entitled to judgment upon all the evidence, and such question, if presented by a proper bill of exceptions, will be reviewed on appeal, notwithstanding a general finding in favor of the adverse party. Maryland Casualty Co. v. Jones, 279 U. S. 792, 795, 796, 49 S. Ct. 484, 73 L. Ed. 960; City of St. Louis v. Western Union Tel. Co., 148 U. S. 92, 96, 13 S. Ct. 485, 37 L. Ed. 380; Bank of Waterproof v. Fidelity & Deposit Co. (C. C. A.) 299 F. 478, 481, 482; Griffin v. Thompson (C. C. A. 5) 10 F. (2d) 127,128; Sartoris v. Utah Const. Co. (C. G. A. 9) 21 F.(2d) 1, 2; Searey County v. Thompson (C. C. A.) dissenting opinion, 66 F. 96, 99; Barnard v. Randle (C. C. A. 8) 110 F. 906, 909; Seep v. Ferris-Haggarty Co. (C. C. A. 8) 201 F. 893; Dunsmuir v. Scott (C. C. A. 9) 217 F. 200; Sierra L. & L. S. Co. v. Desert Power & M. .Co., supra. Rulings upon such a motion or application for a declaration of law, and other rulings on questions of law made by the .court during the progress of the trial, should be presented to the appellate court by ‘a proper bill of exceptions. Federal I. C. Bank y. L’Herisson (C. C. A. 8) 33 F.(2d) 841, 843; Preston v. Prather, 137 U. S. 604, 608, 11 S. Ct. 162, 34 L. Ed. 788; Kelly-Springfield Tire Co. v. Bobo (C. C. A. 9) 4 F.(2d) 71, 74; Ana Maria Sugar Co. v. Quinones (C. C. A. 1) 251 F. 499, 504; Merriam y. Huselton (C. C. A. 8) 45 F.(2d) 983.

In a jury waived case, where the parties make and file an agreed statement of the ultimate facts, or the court makes and files special findings of the ultimate facts, the sufficiency of such facts to support the judgment presents a question of law reviewable on appeal. Wayne County v. Kennicott, 103 U. S. 554, 556, 26 L. Ed. 486; Wilson v. Merchants’ L. & T. Co., 183 U. S. 121, 127, 22 S. Ct. 55, 46 L. Ed. 113; United States Trust Co. v. New Mexico, 183 U. S. 535, 540, 22 S. Ct. 172, 46 L. Ed. 315; Tatum v. Davis (C. C. A. 8) 283 F. 948, 949; Panama R. Co. v. Beckford (C. C. A. 5) 231 F. 436, 440; Abernathy v. Oklahoma (C. C. A. 8) 31 F.(2d) 547, 548; Newlands v. Calaveras M. & M. Co. (C. C. A. 9) 28 F.(2d) 89, 90.

Such an agreed statement of facts or special findings must be of the ultimate facts, as distinguished from the evidentiary facts. Wilson v. Merchants’ Co., supra; United States Trust Co. v. New Mexico, supra; Kentucky L. & A. Ins. Co. v. Hamilton (C. C. A.) 63 F. 93; Raimond v. Terrebonne Parish, 132 U., S. 192, 194, 10 S. Ct. 57, 33 L. Ed. 309; Grayson v. Lynch, 163 U. S. 468, 472, 16 S. Ct. 1064, 41 L. Ed. 230; United States v. Sioux City Stock Yards (C. C. A. 8) 167 F. 126; United States v. Smith (C. C. A. 1) 39 F.(2d) 851, 854. An exception is not a prerequisite to a review of the question of the sufficiency of the agreed statement of facts or the specific findings to support the judgment, since such a question is presented on the record proper. Chicago, R. I. & P. Ry. Co. v. Barrett (C. C. A. 6) 190 F. 118, 123; Seeberger v. Schlesinger, 152 U. S. 581, 586, 14 S. Ct. 729, 38 L. Ed. 560; Webb v. National Bank of Republic (C. C. A. 8) 146 F. 717, 719; United States v. La Franca, 51 S. Ct. 278, 75 L. Ed.-, decided February 24,1931.

Whether the findings shall be special or general rests in the discretion of the trial court and its refusal to make special findings is not reviewable on appeal. Modoc County Bank v. Ringling (C. C. A. 9) 7 F. (2d) 535, 536; Bank of Waterproof v. Fidelity & Deposit Co. (C. C. A. 5) 299 F. 478, 480; Compania Trans. de Petroleo v. Mexi can Gulf Oil Co. (C. C. A. 2) 292 F. 846, 848; United States v. Smith (C. C. A. 1) 39 F. (2d) 851, 853; Denver L. S. Comm. Co. v. Lee (C. C. A. 8) 18 F.(2d) 11, 16; Southern Surety Co. v. United States (C. C. A. 8) 23 F.(2d) 55, 59; Merriam v. Huselton (C. C. A. 8) 45 F.(2d) 983.

To have preserved the error here assigned, counsel for White should have moved the eourt for judgment at the close of the evidence, or should have requested the court to make a special declaration of law that White was entitled to judgment, on the ground that the evidence would sustain no other conclusion.

Since we are precluded from considering the errors assigned, the judgment appealed from is affirmed.

       Fleischmann Const. Co. v. United States, 270 U. S. 349, 355, 356, 46 S. Ct. 284, 70 L. Ed. 624; Wilson v. Merchants’ Loan & Trust Co., 183 U. S. 121, 126-129, 22 S. Ct. 55, 46 L. Ed. 113; Vicksburg, S. & P. Ry. Co. v. Anderson-Tully Co., 256 U. S. 408, 415, 41 S. Ct. 524, 65 L. Ed. 1020; City of St. Louis v. Western Union Tel. Co., 166 U. S. 388, 390, 393, 17 S. Ct. 608, 41 L. Ed. 1044; Lehnen v. Dickson, 148 U. S. 71, 72-74, 13 S. Ct. 481, 37 L. Ed. 373; Norris v. Jackson, 9 Wall. 125, 128, 129, 19 L. Ed. 608; Federal I. C. Bank v. L’Herisson (C. C. A. 8) 33 F.(2d) 841, 843, 844; Akre v. Liberty Bank (C. C. A. 8) 24 F.(2d) 816, 818; Henry H. Cross Co. v. Texhoma Oil & Refining Co. (C. C. A. 8) 32 F.(2d) 442, 445; First National Bank of Ardmore v. Litteer (C. C. A. 8) 10 F.(2d) 447, 448; Lahman v. Burnes Nat. Bank (C. C. A. 8) 20 F.(2d) 897-899 ; Pennok Oil Co. v. Roxana Petroleum Co. (C. C. A. 8) 289 F. 416, 418, 419; Arkansas Anthracite Coal & L. Co. v. Stokes (C. C. A. 8) 277 F. 625, 627; United States v. A., T. & S. F. Ry. Co. (C. C. A. 8) 270 F. 1, 3; Wear v. Imperial W. G. Co. (C. C. A. 8) 224 F. 60, 63, 64; Tieman v. Chicago L. Ins. Co. (C. C. A. 8) 214 F. 238, 241, 242; Maryland Casualty Co. v. Jones (C. C. A. 9) 35 F. (2d) 791, 792; United States v. Smith (C. C. A.) 39 F.(2d) 851, 853, 854; Bank of Waterproof v. Fidelity & Deposit Co. (C. C. A. 5) 299 F. 478, 480-482; Merriam v. Huselton (C. C. A. 8) 45 F.(2d) 983.


text:
    GAWF et al. v. UNITED STATES.
    No. 387.
    Circuit Court of Appeals, Tenth Circuit.
    March 17, 1931.
    W. R. Banker, of Muskogee, Okl. (Benj. E. Cook, of Ponca City, Okl., on the brief), for appellants.
    Philas S. Jones, Asst. U. S. Atty., of Muskogee, Okl. (W. P. Rampendahl, U. S. Atty., of Muskogee, Okl., on the brief), for the United States.
    Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.
   PHILLIPS, Circuit Judge.

Nora B. Gawf, and J. H. Gawf individually and as administrator of the estate of David Láveme Gawf, brought this action against the United-States to recover upon a policy of war risk insurance. Under a written stipulation filed with the elerk, trial by jury was waived and the cause tried by the court. Oral and documentary evidence .were introduced and the cause was taken under advisement. On June 13, 1930, the court rendered the following memorandum opinion:

“I find the issues of fact for the defendant. Judgment will be entered at Muskogee on June 25, 1930. Notify attorneys.”

On the last mentioned date, the court entered judgment for the United States, which judgment in part recited:

“The court doth find the issues of law and of fact in favor of the defendant, * * * and against the plaintiffs, * * * and further finds that plaintiffs take nothing because of their petition in this action, and that the defendant go hence without day.”

This is an appeal therefrom.

Section 875, Title 28 USCA (43 Stat. 936), provides:

“When an issue of fact in any civil cause in a district court is tried and determined by the court without the intervention of a jury, according to section 773 of this title, the rulings of the court in the progress of the trial of the cause, if excepted to at the time, and duly presented by a bill of exceptions, may be reviewed upon a writ of error or upon appeal; and when the finding is special the review may extend to the determination of the sufficiency of the. facts found to support the judgment.”

Counsel for appellants did not request any special findings of fact or declarations of law, did not move for judgment upon the evidence, and did not request a declaration of law that appellants were entitled to judgment as a matter of law.

No error is assigned on any ruling of the court made during the progress of the trial. The sole contention made by counsel for appellants is that the undisputed evidence established that David Láveme Gawf, the insured, became totally and permanently disabled, within the meaning of the policy, before the expiration of the period of grace following the last payment of premium.

In a jury waived case, in the absence of special findings, a general finding is conclusive upon all matters of fact, and prevents any inquiry into the conclusions of law embodied therein, except in so far as the rulings during the progress of the trial were excepted to and duly preserved by a bill of exceptions. See White v. United States (C. C. A.) 48 F.(2d) 178, where the authorities are reviewed and the rules governing procedure in law cases tried before the court without a jury are fully stated.

It follows that we are precluded from reviewing the errors assigned.

The judgment is affirmed.


author: STONE, Circuit Judge.

text:
    COMMERCIAL STATION POST OFFICE, Inc., et al. v. UNITED STATES.
    No. 8916.
    Circuit Court of Appeals, Eighth Circuit.
    March 13, 1931.
    Henry C. Carlson, of Minneapolis, Minn. (Fowler, Carlson, Furber & Johnson, of Minneapolis, Minn., and Harry Weiss, of St. Paul, Minn., on the brief), for appellants.
    John M. Rees, Sp. Asst. to U. S. Atty., of St. Paul, Minn. (Lewis L. Drill, U. S. Atty., of St. Paul, Minn., on the brief), for the United States.
    Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.
   STONE, Circuit Judge.

This is an appeal from an order according possession to the United States, during a condemnation of the property, of a tract of land and building thereon in St. Paul, Minn.

Appellants are owners and mortgage trustees of a tract of land and building in St. Paul, Minn., which has been leased to and occupied by the United States as a commercial station post office since November 6, 1921. By the Act of March 4,1929 (45 Stat. 1661), the Secretary of the Treasury was authorized to acquire this property with the provision that “not more than $480,000.00” should he paid therefor. Negotiations for purchase failing, condemnation proceedings were instituted in accordance with the statutes of Minnesota. Such statutes provide for the filing of a petition, a finding by the -court that the condemnation should take plaee, the appointment of commissioners to assess the damages, with the right of appeal from.the award of the commissioners to the court where there is a jury trial de novo as to amount of damages. The petition here sought condemnation of the property, and also prayed immediate possession. The court adjudicated the condemnation with a denial, “without prejudice,” of the prayer for possession, and appointed the commissioners, who filed a damage award of $317,562. An appeal to the trial court was taken by appellants from that award. Erom the briefs of both parties, if appears that there has been a judgment on verdict entered in that appeal for $334,416, and that there is now pending an appeal to this court from that judgment. After the award by the commissioners was filed, appellee filed a motion for immediate possession, which was contested by appellants. Erom an order according possession on the motion, this appeal is taken. Appellants present here three matters: Lack of authority for the order; lack of necessity for the order ; improvidence of the order.

I. Lack of Authority.

While the argument upon- this point is directed to three matters, the gist of all of them is that “the faith of the Government is not pledged to pay compensation- for such possession.”

It is urged that the condemnation pethtion expressly reserves the right in the Secretary of the Treasury to abandon the proceedings at any stage, and that the limitation of amount in the act leaves a like discretion in Congress if the ultimate award for the property should exceed the $480,000- fixed by the act as a maximum. It may be conceded that such rights to abandon exist, but neither affects the right to condemn nor the right to do .anything which can properly he done in such a condemnation proceeding. Hanson Lumber Co. v. U. S., 261 U. S. 581, 586, 43 S. Ct. 442, 67 L. Ed. 809; U. S. v. Gettysburg Elec. Ry. Co., 160 U. S. 668, 683, 16 S. Ct. 427, 40 L. Ed. 576; Shoemaker v. U. S., 147 U. S. 282, 302, 13 S. Ct. 361, 37 L. Ed. 170.

It is urged that there must be express statutory authority to take possession pending condemnation proceedings, and, without such, the taking of possession is a trespass. Also it is claimed that the statutes do not authorize any officer of the government to take’ possession of to pay compensation therefor or to pay any amount in the event the ultimate award exceeds $480,000. These contentions present really two matters which áre whether any officer of the government is empowered to take possession for the government and whether provision has been made to pay for the possession.

The Act of May 25, 1926 (44 Stat. 630, § 1 [40, USCA § 341]) .expressly authorizes the Secretary of the Treasury to acquire by “purchase, condemnation, or otherwise” sites for “post offices.” The Act of March 4, 192§ (45 Stat. 1661) was an amendment to the 1926 act, and specifically authorizes the Secretary •to acquire this particular property. 'There could not be more direct and unequivocal conferring of authority upon the Secretary to .acquire this property by condemnation. Being empowered to acquire, for the government, the entire right, title, and interest to this property, he is, of course, authorized to take over, for the government, the possession thereof without limitation as to when possession might be taken. Where, as here; the condemnation contemplates acquiring the entire title, the matter of possession is merely incidental to the main purpose, and is included, therein. We have ho doubt that the Secretary is amply - -designated as the official to conduct this condemnation proceeding and, as part thereof, to take possession of the property whenever he may properly do so.

Whether he could properly do so at the time he did depends upon the ’determination of - the offer matter .argued; ’ namely, whether adequate, provision, has.feen made to pay for such possession. It is settled that the government may take possession in advance of passing of title or of abandonment of the condemnation proceeding (Hanson Lumber Co. v. U. S., 261 U. S. 581, 587, 43 S. Ct. 442, 67 L. Ed. 809), and that, while payment must be made for tbe use of the property during such advance possession (Seaboard Air Line Ry. v. U. S., 261 U. S. 299, 305, 43 S. Ct. 354, 67 L. Ed. 664; U. S. v. Rogers, 255 U. S. 163, 169, 41 S. Ct. 281, 65 L. Ed. 566), yet it need not make such payment at the time of taking possession (Seaboard Air Line Case, supra, page 306 of 261 U. S., 43 S. Ct. 354; Cherokee Nation v. Kansas Ry. Co., 135 U. S. 641, 659, 10 S. Ct. 965, 34 L. Ed. 295), but that the owner is sufficiently protected if adequate provision for payment for possession be made at the time of taking possession (Joslin Co. v. Providence, 262 U. S. 668, 677, 43 S. Ct. 684, 67 L. Ed. 1167; Hanson Lumber Co. v. U. S., 261 U. S. 581, 587, 43 S. Ct. 442, 67 L. Ed. 809).

Therefore, the substantial question here is whether adequate provision has been made to secure to appellants payment for this advance possession. Two contingencies may arise — the government may pay the ultimate award (whether less or greater than $480,-000) and take the property or it may abandon the condemnation proceeding before or after final .award. If it ultimately takes the property, payment for this advance possession must be included therein. Such payment will take the form of interest from the time possession was taken until the payment of the award. Brown v. U. S., 263 U. S. 78, 79, 44 S. Ct. 92, 68 L. Ed. 171; Seaboard Air Line Ry. Co. v. U. S., 261 U. S. 299, 306. 43 S. Ct. 354, 67 L. Ed. 664. Also see U. S. v. North Amer. T. & T. Co., 253 U. S. 330, 337, 40 S. Ct. 518, 64 L. Ed. 935.

What will occur if the' condemnation is abandoned by the government? It is sufficient if the government has assumed the duty of payment for such possession “by the pledge, either expressly or by necessary implication, of the public good faith to that end” (Crozier v. Krupp, 224 U. S. 290, 306, 32 S. Ct. 488, 492, 56 L. Ed. 771) “and there is adequate provision for enforcing the pledge” (Joslin Co. v. Providence, 262 U. S. 668, 677, 43 S. Ct. 684, 688, 67 L. Ed. 1167). Has such pledge and provision for payment been here made? When the government duly authorizes the taking of private property for public use, it impliedly agrees to pay therefor. Bothwell v. U. S., 254 U. S. 231, 232, 41 S. Ct. 74, 65 L. Ed. 238; U. S. v. North Amer. T. & T. Co., 253 U. S. 330, 333, 335, 40 S. Ct. 518, 64 L. Ed. 935; U. S. v. Cress, 243 U. S. 316, 329, 37 S. Ct. 380, 61 L. Ed. 746; U. S. v. Lynah, 188 U. S. 445, 465, 472, 474, 23 S. Ct. 349, 47 L. Ed. 539; Hill v. U. S., 149 U. S. 593, 599, 13 S. Ct. 1011, 37 L. Ed. 862; U. S. v. Great Falls Mfg. Co., 112 U. S. 645, 656, 5 S. Ct. 306, 28 L. Ed. 846. Also, where the government takes without condemnation proceedings, the promise to pay is implied. Campbell v. U. S., 266 U. S. 368, 370, 45 S. Ct. 115, 69 L. Ed. 328. Also see Bothwell v. U. S., 254 U. S. 231, 41 S. Ct. 74, 65 L. Ed. 238. This rule is concisely expressed in U. S. v. Lynah, 188 U. S. 445, 465, 23 S. Ct. 349, 355, 47 L. Ed. 539 (italics ours) as follows: “The government may take real estate for a postoffice, a courthouse, a fortification, or a highway. 's * * But can this be done without an obligation to pay for the value of that which is so taken and appropriated? Whenever in the exercise of its governmental rights it takes property the ownership of which it concedes to be in an individual, it impliedly promises to pay therefor. Such is the import of the cases cited as well as of many others.” The rule is equally applicable where condemnation proceedings are abandoned — see U. S. v. Great Palls Mfg. Co., 112 U. S. 645, 5 S. Ct. 306, 28 L. Ed. 846 (a ease where the taking was authorized by act, condemnation proceedings abandoned, and thereafter the property taken by the government), where the court (page 658 of 112 U. S., 5 S. Ct. 306, 312) says: “Having abandoned the proceedings of condemnation, the proper officers of the government, in conformity with the acts of congress, constructed the dam. “ * * In such a ease, it is difficult to perceive why .the legal obligation of the. United States to pay for what was thus taken pursuant to an act of congress, is not quite as strong as it would have been had formal proceedings for condemnation been resorted to for that purpose.” Such obligation to pay has been upheld even where there was no specific appropriation therefor on the theory that it could not be presumed that the United States would not meet its just obligations. Great Falls Mfg. Co. v. U. S., 124 U. S. 581, 599, 8 S. Ct. 631, 31 L. Ed. 527. These citations must be taken' as announcing the rule that, if the government authorizes the taking of private property, it impliedly agrees to pay the value of whatever is taken in pursuance of such authority. Here the government has authorized the taking of the entire title and,use of this property; in a proper proceeding to effectuate that purpose, it has taken possession and use of the property. Under the above authorities, it is obligated to pay for what it has taken no matter what may be the final outcome of the condemnation proceedings. Nor can it be doubted that adequate provision has been made to satisfy that obligation. It has authorized $480,000 to be paid for the entire title and use. Every dollar of that sum is back of the obligation to pay for whatever is taken in pursuance of such authorized purpose, and this possession was so taken.

Our conclusion is that there was entire authority.in the court to make this order.

II. Propriety of Order.

Aside from the matter of authority to make the order, appellants argue the propriety of the order. This they do under two headings entitled “There was no necessity for placing the government in possession” and “The order for possession was improvidently made.” Both of these may be treated together. The argument as to the first is that “the' Secretary of the Treasury is forbidden to expend any moneys for building operations” until the Attorney General had rendered an opinion “that title was in the United States” (which could not be done pending the condemnation proceedings) and the government was already in possession, for all purposes, under the lease. The argument as to the second is that there is grave doubt whether “the ultimate award will not exceed the $480,000.00 appropriation and that as a consequence title cannot ultimately pass under any present act of Congress and there is therefore no assurance that compensation for any purpose will ever be paid to these landowners,” which, coupled with the lack of necessity for the order, made it improvident. As to the danger of ño payment for the occupancy under the order if the ultimate award should exceed $480,000 and the proceeding be abandoned by the Secretary of the Treasury, we have above removed the cause for such apprehensions. As to the necessity for the order — the court was not ruled by the necessity but by the advisability of the order. Such determination is within the wise discretion of the trial court (20 C. J. 970 and citations), and should not be overturned, unless clearly exercised improperly.

The statutes of Minnesota provide that interest on an award shall begin with the filing thereof by the commissioners (section 6552, Mason’s Minn. St. 1927), and the Supreme Court of the state has distinctly decided that the “taking” is of that date. City of Minneapolis v. Wilkin, 30 Minn. 145, 146, 147, 148, 15 N. W. 668; Whitacre v. St. P. & S. C. R. Co., 24 Minn. 311, 312; Warren v. First Div., St. Paul & P. R. Co., 21 Minn. 424, 425, 427; U. S. v. Sargent, 162 F. 81, 84, this court. With the “taking” as of the date the award was filed by the commissioners, with interest on the ultimate award allowable from that date, and with the payment for such occupancy secured by ample appropriation by Congress, the court might well conclude that possession should be given as under an order in the condemnation proceeding. This view might well he further enforced by the amount of the award which was far below the maximum appropriation and the attendant natural presumption that the property would ultimately be taken under the proceeding. Another consideration which might well affect the discretion of the court is that this record shows that the commissioners placed the value of this property at $317,562; yet this lease was for a long-time annual rental of $120,000, or an annual rental of more than 37% per cent, of the value found by disinterested commissioners.' Such an outrageous ■ rental suggests a powerful incentive to appellants to delay, in every possible manner, the ultimate determination of the condemnation proceeding in order to prolong the receipt of such a rental. The situation shown by the above recitals, not only fails to show that the trial court exercised his discretion improperly, but strongly shows the wisdom of the order.

The order should be, and is, affirmed.


author: FOSTER, Circuit Judge.

text:
    A. HARRIS & CO. v. LUCAS, Commissioner of Internal Revenue.
    No. 5940.
    Circuit Court of Appeals, Fifth Circuit.
    March 30, 1931.
    BRYAN, Circuit Judge, dissenting.
    Murphy W. Townsend, of Dallas, Tex., for petitioner.
    G. A. Youngquist, Asst. Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Allin H. Pierce, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., A. H. Conner, Sp. Asst. Atty. Gen., J. Louis Monarch and Norman D. Keller, Sp. Assts. Atty. Gen. (J. K. Polk, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., on the brief), for respondent.
    Before BRYAN and POSTER, Circuit Judges, and HUTCHESON, District Judge.
   FOSTER, Circuit Judge.

In this case there is no dispute as to the material facts. It appears that petitioner is a Texas corporation operating a department store in Dallas, Tex., selling at retail dry goods, dresses, shoes, and other articles usually handled by a retail store of that class. In 1916, in order to avoid bankruptcy, it eiféeted a compromise with its creditors, other than the banks, whereby 50 cents on the dollar was accepted by them in full settlement of claims aggregating over $130,000. In making its returns for 1916, petitioner accounted for the balance of the obligations relinquished by its creditors, $65,699.70, as profits, and paid taxes accordingly. As a result of the compromise, the credit of petitioner was practically destroyed, it could not borrow money, and it was forced to buy largely for cash. In order to induce its customers to pay cash, it adopted the plan of giving certificates, exchangeable for tickets to moving picture theaters, as premiums. This cost petitioner over $10,000 in 1917, over $15,000 in 1918, over $27,000 in 1919, and over $41,000 in 1920. These expenditures were allowed to be deducted as expenses in making returns for those years. Notwithstanding the unusual expedient of giving motion picture tickets as premiums, petitioner soon realized that it could not continue to do business profitably unless its credit was restored. It was advised by its bankers that it could not hope to re-establish its credit until it paid its former creditors an amount equal to the debts relinquished by them in 1916. Petitioner agreed to pay these amounts, and voluntarily paid $31,196.10 in 1920, $15,481.37 in 1921, and $15,241.17 in 1922. The first payment resulted in immediate and complete restoration of petitioner’s eredit, favorable ratings, theretofore denied, were given by the commercial agencies, and petitioner was again able to borrow money from banks. Thereafter the giving of moving picture certificates was discontinued.

Petitioner sought to deduct the amounts of its said payments to its creditors as expenses of doing business, but they were disallowed by the Commissioner and additional taxes were assessed. On appeal to- the Board of Tax Appeals, the ruling of the Commissioner was affirmed on the ground that the payments did not constitute expenses at all, but were an investment of capital. 16 B. T. A. 705.

The Revenue Acts of 1918 and 1921, 40 Stat. 1077 and 42 Stat. 254 (and other acts), section 234, provide that in computing the income of a corporation there shall be allowed as deductible “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. * * * ”

It is evident that the words “ordinary” and “necessary” in the statute are not used conjunctively, and are not to be construed as requiring that an expense of a business to be deductible must be both ordinary and necessary in a narrow, technical sense. On the contrary, it is clear that Congress intended the statute to be broadly construed to facilitate business generally, so that any necessary expense, not actually a capital investment, incurred in good faith in a particular business, is to be considered an ordinary expense of that business. This in effect is the construction given the statute by the Treasury Department and the courts.

While the Treasury Department has held as a general rule that only expenditures commonly recognized as operating expenses are deductible, the rule has been applied with great liberality, and practically any reasonable- expenditure that has benefited the business has been allowed to- be deducted as an expense. For instance, taxpayers have been allowed to deduct a bonus paid for the delivery of a steamship at a date earlier than that contracted for; an amount paid to secure-the 'cancellation of a prior lease- in order to secure immediate possession of property purchased from a tenant in possession; an amount expended on trading, stamps to promote business; amounts spent by traveling salesmen for treating and entertaining prospective customers; and various other unusual expenses. See Holmes Federal Taxes (1923 Ed.) pp. 716-726, and rulings cited.

The Board of Tax Appeals has been equally liberal, and has allowed deductions for tickets to entertainments purchased from customers to promote good will (McQuade’s Appeal, 4 B. T. A. 837); the cost of operating a yacht used for the purpose of inducing prospective customers to visit the owner’s plant (Dickinson v. Commissioner, 8 B. T. A. 722); an amount expended for physical training by an actor (Hutchison v. Commissioner, 13 B. T. A. 1187); amounts paid by a brokerage firm for the purpose of securing evidence with which to suppress bucket shops (Pierce v. Commissioner, 18 B. T. A. 447); an amount contributed towards repairing and enlarging a church attended by the taxpayer’s employees (Poinsett Mills’ Appeal, 1 B. T. A. 6); a contribution to assist in the erection and equipment of a school building attended by the children of the-! taxpayer’s employees (Holt Granite Mills Co’s. Appeal, 1 B. T. A. 1246); sums paid into a trust fund for pensioning employees (Hibbard, Spencer, Bartlett & Co. v. Commissioner, 5 B. T. A. 464); a contribution by a manufacturing company to a chamber of commerce to, be used for advertising a city (Hirsch-Weis Mfg. Co. v. Commissioner, 14 B. T. A. 796); a sum paid to a partner to bring about an early dissolution of the partnership (Aitkin v. Commissioner, 12 B. T. A. 692); an amount of $37,000 paid by a jockey club to retire a note which it was under no obligation to pay, payment being compelled by the city under threat of revoking the jockey club’s permit to conduct racing (Louisiana Jockey Club, Inc. v. Commissioner, 13 B. T. A. 752).

In American Rolling Mill Co. v. Commissioner of Internal Revenue (C. C. A.) 41 F. (2d) 314, it appeared that the company agreed to contribute $360,000' to a fund to be distributed among different civic activities of Middletown, Ohio, such as the American Legion, Boy Scouts, Community Building, Y. M. C. A., etc. The company was allowed to deduct these as ordinary and necessary expenses, on the theory that it tended to promote the welfare work of the company, which employed about one-half the wage earners of Middletown, and tended to prevent strikes and other dissatisfaction.

In Lucas, Commissioner, v. Ox Fibre Brush Co., 281 U. S. 115, 50 S. Ct. 273, 74 L. Ed. 733, the company in 1920’ paid its president and treasurer $24,000 each as extra compensation for services performed in prior years. The Supreme Court held that the payments were deductible in the year 1920.

Of course, each case depends for decision upon its own facts, and it would be impossible to formulate a uniform rule to govern all cases. Generally speaking, business men should be free to exercise their ingenuity in devising methods of increasing business. This redounds to the benefit of the government by creating more taxable income. Considering the above-stated examples, it would seem clear by analogy that petitioner was entitled to deduct the amounts paid to its former creditors. It was under no legal obligation to make the payments, and they were made entirely to promote the business by restoring its credit with the wholesalers from whom it purchased goods.

It is argued, however, on behalf of the respondent, that the expenditures were in the nature of the purchase of good will, the benefit of which would accrue over a period of years, and that good will is a capital asset. Good‘will is an asset that adds to the value of a going business and may pass to a purchaser, even though the seller be otherwise insolvent, to remain until destroyed by the purchaser’s own conduct. Good will consists largely of a reputation for competence, honesty, and fair dealing, but its value is in attracting customers and not in securing credit. The establishment of credit to purchase does not at all guarantee that it will continue over a period of years. A man’s credit may be firmly established to-day and entirely destroyed to-morrow because of his changed financial condition or because of the discovery of traits of character destructive of confidence. That the proprietor of an established business has good credit with' those from whom he buys adds nothing to the value of the business to one intending to purchase it. After the sale, the credit to be extended to the business will depend entirely upon the net worth and the reputation of the purchaser, the then proprietor.

It would be entirely equitable to allow petitioner to deduct these payments in arriving at net income for the taxable years in which they were made, as it had already paid taxes on the same amounts as profits in the year in which the compromise was made. However, it is not necessary to rely upon equitable principles in deciding the ease. It is perfectly plain that the payments did not constitute capital investment. On the contrary, the business was deprived, of cash assets, and nothing was added to its saleable value. The payments may he classed as advertising expenditures as they secured credit not only from those to whom made but from the trade in general. They might be classed as bonuses paid to secure credit, the same as paying an indorser on a note for his signature, a custom at one time in vogue. But no matter how classed, it is certain that they were necessary to preserve and continue the business. Under the circumstances, the payments were reasonable, and they should be held to be deductible in the year in which paid.

The petition is allowed. The judgment of the Board of Tax Appeals is reversed, and the ease is remanded for further proceedings not inconsistent with this opinion.

Reversed and remanded.

BRYAN, Circuit Judge, dissents.


author: SAWTELLE, Circuit Judge.

text:
    McLEOD v. NAGLE, Commissioner of Immigration.
    No. 6311.
    Circuit Court of Appeals, Ninth Circuit.
    March 30, 1931.

      John F. O’Sullivan, of Fresno, Cal., for appellant.
    Geo. J. Hatfield, U. S. Atty., and Francis J. Perry, Asst. U. S. Atty., both of San Francisco, Cal., for appellee.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
   SAWTELLE, Circuit Judge.

Appellant is a British alien who entered the United States from Canada during April, 1924. Prior to such entry he was convicted in Vancouver, British Columbia, on January 25, 1924, of breaking and entering, and of stealing a quantity of jewelry of the value of over $10. On April 15, 1930, deportation proceedings were instituted against him under section 19 of the Immigration Act of February 5, 1917 (8 USCA § 155), and thereafter appellant was ordered deported on the ground that he had “been convicted of or admits the commission of a felony or other crime or misdemeanor involving moral turpitude, to-wit: breaking and entering, prior to entry into the United States.” The facts are not in dispute, but appellant contends that the order of deportation is void under said act because proceedings were not instituted within five years after the alien’s entry into the United States.

The cases of Lauria v. United States (C. C. A.) 271 F. 261, certiorari denied, 257 U. S. 635, 42 S. Ct. 48, 66 L. Ed. 408, and Weedin v. Tayokichi Tamada (C. C. A.) 4 F.(2d) 455, 456, stand four square with this case, and the Circuit Court of Appeals for the Second Circuit and this court have held therein that an alien who “has been convicted of or admits the commission of a felony or other crime or misdemeanor involving moral turpitude” is subject to deportation at any time. In the construction of statutes it is the duty of the court to ascertain the clear intention of the Legislature. In that regard, we find nothing in the instant ease to differentiate it from the cases cited and to invoke a different interpretation of the statute in question.

Appellant contends, however, that, aecording to the strict rules of grammatical construction, a different interpretation of the intent of the Legislature must necessarily follow. He holds that said section' 19 is divided into two' main parts, those eases coming under the heading “within five years.after entry,” and those eases coming under the heading “within three years after entry”; that there are certain exceptions especially noted; and that, in the absence of any particular specification of time, the beginning phrase “at any time within five years after entry” modifies every succeeding clause until the clearly antithetical phrase “at any time within three years” is reached. Appellant admitted in his oral argument, that, if the two cases cited above were upheld, there would be nothing in the appeal, and we find that the above cases follow very carefully the commonly accepted grammatical rules.

The Oxford Dictionary, after defining a semicolon, says that it is used for “marking off a series of sentences or clauses of coordinate value.” Vqlume VIII, part II, p. 440. According to this statement of usage, every clause separated by a semicolon in the section under consideration is co-ordinate with eaeh of the others, and therefore must each be read separately with the verb “shall * * * be taken into custody and deported.” Under this construction the beginning phrase, “at any time within five years,” cannot he carried over to each of the succeeding clauses; each of the latter must be modified only by the time limit specifically stated therein, and, if no time limit is expressed, then the section must be interpreted to mean “at any time after the entry of the alien into the United States.”

Again, Crowell’s Dictionary of English Grammar (Thomas Crowell, 1928) says, at page 527: “The semicolon is used to separate independent clauses that are not joined by a conjunction as ‘He cried; I laughed’; to separate co-ordinate clauses of unusual length and those that contain commas, whether or not the clauses are joined by conjunctions;- to separate conditional clauses joined by conjunctive adverbs.” The clauses of the instant section are each as independent as the clauses of the example given, because of the fact that, although-the predicate is expressed only once for the sake of brevity, it is elliptical to each of the sections set off by semicolons.

Again, Ward’s “Sentence and Theme” (Scott, Foresman & Co., 1923), at page 331, says the semicolon “shows that two sentences, each of which should stand alone, have been combined into one sentence”; and continues, “A semicolon is used to‘show that what follows is grammatically independent, though closely related in thought.” (Italics our own.)

From the point of view of strict grammatical construction, therefore, it is evident that, since the semicolon has been used to set off the various subdivisions of the section, the initial phrase, “within five years after entry,” cannot be presumed to carry over into the subsequent clauses that are separated from the initial clause by a semicolon. The initial phrase,' “within five years after entry,” is set off by a comma, a weaker punctuation mark than the semicolon. The function of that comma is to set off the phrase from the rest of the clause in which it appears, and not from the rest of the entire section. The semicolon effectually isolates the opening clause and its dependent phrase from the other and subsequent clauses. These clauses have only one grammatical construction in common; they are joint subjects of the common predicate with which the entire section is brought to a close.

There is only one remaining basis for the contention of appellant on grammatical grounds that the opening phrase, “within five years after entry,” is applicable to the classification under which he falls. That basis would be the closely related field of rhetoric, but it is neither the province nor the desire of this court to set itself up as an academy of letters to rule on questions of style. It may be admitted that the language of many statutes might be improved upon, but, so long as that language follows certain well-established rules of grammar, it is not our duty to judge it by its nicety of phraseology.

The argument that aliens who admit having committed a crime before entry into the United States are under the class of those “excluded by law” and. therefore must be considered subject to deportation only within five years after entry into the United States does not appeal to us. “It must be conceded that the appellee is a member of one of the classes excluded by law. * * * But it must likewise be conceded that he also belongs to the special class for which no time limit is fixed, and under a familiar rule of statutory construction the special provision will control over the general one.” Weedin v. Tayokichi Yamada, supra. Here Congress has expressly excepted aliens convicted of crime prior to their entry into the United States from the general classification of those who are excluded by law. The language is clear, and so to construe it gives each clause of section 19 its due importance; to construe it so that a five-year limitation would be attached to the clause in question would render void a definite statement of the will of Congress.

Finally, the third proviso near the end of the section seems conclusive that there is no time limit save as specially noted. This proviso reads as follows: “The provisions of this section, with the exceptions herein-before noted, shall be applicable to the classes of aliens therein mentioned irrespective of the time of their entry into the United States.” 8 USCA § 155.

This proviso seems clearly to indicate, in words as unambiguous as Congress could have used, that, in each subdivision of Section 19 in which no time limit is specifically provided, no time limit is intended.

The judgment of the lower court is affirmed.


author: SIBLEY, Circuit Judge.

text:
    SOUTHERN TRANSP. CO. v. ASHFORD.
    No. 6071.
    Circuit Court of Appeals, Fifth Circuit.
    April 1, 1931.

      D. A. Frank, of Dallas, Tex., John B. Files, of Shreveport, La., and W. P. Bondies, of Dallas, Tex. (D. A. Frank, of Dallas, Tex., and John B. Files, of Shreveport, La., on the brief), for appellant.
    Geo. T. McSween, of Shreveport, La., for appellee.
    Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.
   SIBLEY, Circuit Judge.

The Southern Transportation Company appeals from a judgment for $4,000' obtained by Elmore Ashford, for personal injuries sustained by him in a collision of the automobile in which he was riding as a guest, with a truck of appellant.

Glover, a witness for appellee, was confronted with an affidavit which he admitted signing, and which was somewhat at variance with his testimony. He was allowed to testify in explanation that he had, at the request of an agent of appellant, signed it, but did not swear to it, in order to get the truck driver out of jail, and under promise that the paper should not come up in court. The objection was that the witness was estopped by his affidavit. A party to a civil suit may sometimes be estopped from changing his claims or his contentions because of his pleadings, his solemn admissions, a previous judgment, or statements or conduct by which others have been misled. But a witness as such, if allowed to testify at all, is never cut off from, but is always under the duty of, telling the full truth as he really knows it.- A previous contrary statement whether under oath or not is no estoppel, but is admissible in impeachment of the present testimony of the witness. He may state the circumstances under which it was made, or may explain what he meant by it, or may deny that it was made at all. The very purpose of the rule requiring the impeaching writing to be called to the attention of-the witness before it can be introduced as an impeachment is to give the opportunity to deny or explain it, or exculpate himself if he can. The Charles Morgan, 115 U. S. 77, 5 S.Ct. 1172, 29 L. Ed. 316. The jury are then to determine under all the circumstances the real force of the impeachment, and the credit to be given the present testimony of the witness.

The numerous assignments of error touching instructions to the jury given or refused cannot be considered because the record fails to show that any exception was taken to them at the time. A main function of an exception is to call the attention of the court pointedly to the error which it is thought has been committed, that he may have opportunity to reconsider it and correct it, and avoid miscarriage of justice or a new trial. United States v. U. S. Fidelity Co., 236 U. S. 512, 529, 35 S. Ct. 298, 59 L. Ed. 696. Exception timely taken to a. charge or refusal to charge is indispensable to a review on appeal. Lindsay v. Burgess, 156 U. S. 208, 15 S. Ct. 208, 39 L. Ed. 399. State statutes and practices to the contrary make no difference. St. Clair v. United States, 154 U. S. 134, 14 S. Ct. 1002, 38 L. Ed. 936.

The complaint that the verdict was excessive was for the trial court alone on motion for a new trial. Refusal of the new trial is not ground for reversal on appeal. Lincoln v. Power, 151 U. S. 436, 14 S. Ct. 387, 38 L. Ed. 224; Waters-Pierce Co. v. Deselms, 212 U. S. 160, 29 S. Ct. 270, 53 L. Ed. 453.

Affirmed.


text:
    THE CARLTON.  UNITED STATES SHIPPING BOARD et al. v. GLASGOW SHIPOWNERS’ CO., Limited, et al. THE GIBRALTAR.
    No. 5918.
    Circuit Court of Appeals, Fifth Circuit.
    April 1, 1931.
    Fred Cubberly, U. S. Atty., and Geo. E. Hoffman, Asst. U. S. Atty., both of Pensacola, Fla., and Edouard F. Henriques, Sp. Asst. in Admiralty to U. S. Atty., and William I. Connelly, Atty. United States Shipping Board, both of New Orleans, La., for appellants.
    Robert S. Erskine, of New York City, and Philip D. Beall, of Pensacola, Fla. (Kirlin, Campbell, Hickox, Keating & MeGrann and Henry P. Elliott, all of New York City, on the brief), for appellees.
    Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

      Rehearing denied May 23. 1931.

   FOSTER, Circuit Judge.

This is a ease of collision, presented by a libel on behalf of appellant and by a cross-libel on behalf of appellee. The collision occurred between the steamships Carlton and Gibraltar in the harbor of Pensacola, Fla., on April 20, 1928. The District Court held the Carlton solely at fault.

There is very little conflict in the evidence except as to immaterial matters. The accuracy of the log book of the Gibraltar is challenged, and there are the usual differences in the testimony of the witnesses in estimating distances and fixing the time of certain occurrences in the chain of events leading up to the collision. The differences in time result largely from the inaccuracy of a clock on the Carlton. When this is taken into consideration, there is no material difference between the witnesses on this point.

The record supports the following conclusions as to the material facts: Both the Carlton and the Gibraltar were at anchor in the harbor of Pensacola overnight on April 19. The Carlton is of approximately 5,100 gross tons and the Gibraltar is of approximately 4,3001 gross tons. Both were partly loaded and intended to dock the next morning. They were anchored about three-fourths of a mile off the Palafox street wharf and a little to the west of the wharf. The Gibraltar was destined to the east side of the Commendeneia street wharf, in the slip between that wharf and the Tarragona street wharf, which is next to it on the east. The Carlton was destined to the east side of the Tarragona street wharf. The Carlton was at anchor to the west of the Gibraltar, about three ship lengths away from her, approximately 1,200 feet, and practically abreast of her. The Palafox street wharf is some 500 or 600 feet west of the Commendencia street wharf. These docks extend out from the north shore of the bay in a direction.a few points east of south. The tide was about flood stage, and running in about a northwest direction, so that the ships swinging at anchor were headed away from the shore and out into the bay. About 6 o'clock in the morning each vessel was boarded by a harbor pilot, officially designated as a deputy harbor master. These pilots each knew to what dock the other ship was going. The Gibraltar raised her anchor and got under way about 6:19 o’clock and proceeded at half speed with her helm hard astarboard to swing in an are to the left and straighten up to enter the slip between the Commendencia and Tarragona street wharves. When she had straightened' up her helm was eased off and put amidships, and she proceeded on her way, dropping to slow speed at about 6:22. The Carlton got under way at about 6:21 or 6:22, some two or three minutes after the Gibraltar, and proceeded at full speed with her helm hard astarboard. This brought her up on the port side of the Gibraltar, which she was overtaking. She blew a signal of two blasts of her whistle, indicating her intention to pass to port. Her pilot testified that he intended to cross the bow of the Gibraltar, by direction of the Carlton’s master. The Gibraltar answered with two blasts, and then, almost immediately, seeing the imminence of a collision, reversed her engines full speed astern and blew three blasts of her whistle, to indicate her propellor had been reversed, her helm remaining amidships. The Carlton was approaching the Gibraltar on the latter’s port side at an angle variously estimated by the witnesses but probably about 45 degrees. She, too, saw the imminence of the collision, reversed her engines full speed astern, dropped first her port anchor to swing her about and then dropped her starboard anchor. Her speed was considerably cheeked, but nevertheless the collision occurred, the stem of the Carlton striking the Gibraltar about 15 feet aft of her center on the port side. The Carlton’s stem was bent to port and the Gibraltar suffered some damages. The collision occurred a little to the west of the Commendeneia wharf and about 1,000 to 1,200 yards out from it.

In the circumstances above disclosed, it is clear that the Carlton was at fault. Considering that she was anchored to the west of the Gibraltar, was destined for a berth to the east of that vessel, and that she left her anchorage three minutes after the Gibraltar, it would have been a usual and proper maneuver for her to swing in a wide arc and go completely around the course of the Gibraltar, to come up in a position where she could run into her dock. Instead of doing that she swung in a smaller are and proceeded at greater speed than the Gibraltar, which in itself was an error, and came up on the Gibraltar’s port side. After doing so, there is no doubt that she intended to forge ahead and cross the Gibraltar’s bow in order to get to her own berth. There was not room for that maneuver, and it was too dangerous to be attempted. She was also wrong under any interpretation of the navigation rules. The Pilot Rules for Inland Waters of the Atlantic- and Pacific Coasts and the Gulf of Mexico, which govern navigation of vessels in the harbors on those coasts, required the Carlton to keep out of the way of the Gibraltar as the Carlton was the overtaking vessel and had the Gibraltar on her starboard side. And she should not have attempted to cross the latter’s bow, but should have gone around her stern.-. See rule 8, and articles 19, 22, and 23 of rule 9. Of course, when the collision became imminent, the Carlton did all that was possible to avoid it, but it was then too late. If the Carlton had slackened her speed soon enough and crossed astern of the Gibraltar, as she could very easily have done, there would have been no collision. ""By her careless and faulty maneuver, she put both vessels in a position of danger. The Gibraltar was not guilty of any fault contributing to the collision. She was in her proper course. That she was slightly to the west of her slip could be accounted for by the tide, but at that she was in position to enter her berth. At any rate, she was not in the Carlton’s proper course; that lay east of her. If the Gibraltar was guilty of any error, it was in answering the passing signal of the Carlton, but it is possible that, if she at that moment had blown the danger signal, stopped and reversed her engines, ' and dropped her anchors, the collision would nevertheless have occurred. We conclude that the Carlton was solely responsible for the collision.

The record presents no reversible error.

Affirmed.


text:
    UNION TRUST Co. OF CLEVELAND, OHIO, et al. v. WOODROW MFG. CO. et al.

    No. 9005.
    Circuit Court of Appeals, Eighth Circuit.
    March 16, 1931.

      Casper Schenk, of Des Moines, Iowa (Charles S. Bradshaw and Rex H. Fowler, both of Des Moines, Iowa, on the brief), for appellants.
    Robert J. Bannister, of Des Moines, Iowa (H. H. Stipp, E. D. Perry, and Vincent Starzinger, all of Des Moines, Iowa, on the brief), for appellees.
    Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.

      Rehearing denied May 12, 1931.

   STONE, Circuit Judge.

This is an action by a mortgagee for waste of the mortgaged property. From a judgment on a directed verdict in favor of defendants, plaintiffs bring this appeal.

At the time this mortgage was executed, the Woodrow Manufacturing Company (mortgagor therein) was manufacturing washing machines in a plant, equipped therefor, located at Newton, Iowa. Thereafter this entire property was sold. The purchasers organized a new corporation, and removed all, or practically all, of the movable machinery and equipment to Pella, Iowa, where it was installed and used to manufacture gashing machines. Thereafter there were foreclosure sales under this mortgage and under a prior mortgage upon part of the same property. These sales were of the dismantled real estate in Newton and of the machinery and equipment as severed therefrom. The proceeds of such sales left a deficiency on the prior mortgage indebtedness of something over $14,000; $5,342.68 was realized from property not covered by the prior mortgage for application in payment on this mortgage. This .action is for a balance of $35,000 due on this mortgage indebtedness, and is based upon the waste caused by the above removal of machinery and equipment from the plant at Newton. The theory upon which the trial court directed a verdict was that the evidence failed to show that these plaintiffs were damaged by this removal, since it did not show the value of the equipped plant at Newton would exceed the sale prices of the real estate and severed machinery and equipment by more than the .amount necessary to meet the deficiency on the prior mortgage indebtedness.

The questions presented here have to do with such sufficiency of the evidence and with rulings on evidence.

The matter of the sufficiency of the evidence requires construction of the mortgage to ascertain what it covered and examination of the evidence as to values.

This mortgage was to secure an indebtedness of $37,000; was expressly subject to a prior mortgage (for $40,000); and contained provisions here pertinent as follows;

It covered described real estate in Newton, Iowa, “together with all buildings and improvements situated thereon, and all machinery, line shafts, belting, factory equipment, fixtures, tools, furniture and appurtenances thereto belonging or hereafter situated in and contained in said buildings and used by the first party in connection with its manufacturing business conducted on said premises; provided, however, that the second party shall have the right to remove and dispose of any part of said personal property which shall become obsolete or unfit for further use. * * *
“Said first party shall not suffer waste, shall pay all prior encumbrances, the interest thereon when due, and all taxes and assessments upon said property before delinquent ; also all personal taxes, shall keep the buildings and equipment thereon insured to the satisfaction of said seeond party for at least Seventy-seven Thousand Dollars ($77,-000.00), assigning and delivering all policies and renewal receipts to the holder of prior encumbrances if demanded. * * *
“A failure to comply with any of the agreements hereof shall cause the whole debt at once to become due and collectible, at the option of second party without notice, and said seeond party or assigns shall be entitled to have a receiver, appointed to take immediate possession of said real estate, buildings, equipment, fixtures and personal property, stock and merchandise therein, and operate said plant and manufacturing business, and to have the net profits thereof applied on said indebtedness or on any prior encumbrances, if seeond party so elects, until the same shall have been fully paid. Said taking possession shall in no way retard collection or foreclosure.”

The above terms in the mortgage are clear that it covered the real estate and designated buildings with all machinery and equipment as a plant or unit, and was not merely a mortgage upon the separate parcels or pieces. The expression that the mortgagor had' “the right to remove and dispose of any part of said personal property which shall become obsolete or unfit for further use” (italics ours) is clear proof that none of such personal property was to be removed except because of obsolescence or unfitness.. If there were need of further proof of the expressed intention of the parties, it is found in the provision for a receivership. This provision contemplated that the plant (as a going operable factory) .and all “stock and merchandise therein” shall be taken over and operated as such. We have no doubt that this mortgage covered the property as a unitary operable plant and that the removal of machinery and equipment was the commission of waste forbidden by the mortgage and for which appellees are liable.

Even though such liability existed, if no damage thereby was shown, the appellants could not recover, because this is an action for damages through such waste. The trial court determined no such showing of damage was made because, the eourt thought, there was no showing that the damage from the above removal would exceed the deficiency on the prior mortgage, and therefore nothing would be left for appellants under this mortgage. We are unable to agree that there was no evidence which would justify a' verdict for a larger amount.

The measure of damages here is the difference in value of the equipped plant before it was dismantled and the value of the parts thereafter. Chicago, B. & Q. R. Co. v. Gelvin, 238 F. 14, 18, L. R. A. 1917G, 983, this eourt. There was evidence as to value before dismantling as follows. One witness plaeed it at from $100,000 to $110,000; Two prospectuses issued by Woodrow Washing Machine Company (appellee) and the individual appellees state: “The Company now has invested in buildings and ground at Newton [this property], approximately $177,000,” .and contains a certified balance sheet showing the depreciated value of the property at Newton to be $200,167.37 (excluding the value of a truck and of patents). As to the value of the parts after removal, there was evidence that the land and buildings were worth from $25,000 to $35,000; that, at foreclosure, the real estate sold for $26,039.86 and the machinery and personalty for $7,400 — a total of $33,439.86.. A comparison of this evidence as to value before removal, with the evidence as to value afterward, shows a margin of more than enough to pay the deficiency on the prior mortgage as well as the entire claim of appellants. This was sufficient evidence of damage beyond the deficiency of the prior mortgage to justify submission to the jury.

As the case must be retried, there are several matters which have been presented to us and which should be determined. The first of these has to do with a motion of appellants to strike two parts of appellees’ answer. The court sustained the motion in part, and struck out one of the parts of the answer aimed at by the motion. The court denied the motion as to the other part, and such denial is here complained of. The portion of the answer involved in this part of the motion is contained in “Division III” thereof. The general import of this “division” of the answer is that the foreclosure of the prior mortgage had divested the lien of this mortgage, and that the foreclosure of this mortgage (on the severed parts) had resulted in the appellants receiving the full value of their mortgage lien. The concluding paragraph (preceding the prayer) is as follows:

“That by said proceedings, the full value of said property, both real and personal, has been realized and devoted to the satisfaction of the mortgages thereon-in the order of their priority. That the said real property brought as much as it would have if occupied by a defunct and failed manufacturing corporation in Newton, Iowa, and that the said personal property brought more, in behalf of the said liens for which it was sold, in its operating condition and in use in an actively going manufacturing concern in Pella, Iowa, than if it had been left idle in disuse at Newton, Iowa, and that the plaintiffs are and have been in no manner damaged or injured by the removal of said personal property consisting of machinery and equipment as described in plaintiff’s petition from Newton to Pella, Iowa.”

The motion sought to strike the above-quoted paragraph and also the expression “thereby the plaintiff received the full value of their lien” having reference to previous allegations that through foreclosure of this mortgage there had been full realization of value.

The eourt properly ruled in denying the motion to strike out the above expression “thereby the plaintiff received the full value of their lien.” It is a question of fact whether the foreclosure sale resulted in full realization of the value of the lien. The lien was upon the plant as an equipped unit. The value of such unit was the security provided by this mortgage. The entire plant, as severed portions, was sold under the foreclosure of this mortgage — there being separate sales of the real estate .at Newton and of the machinery which had been removed therefrom and placed in another plant at Pella. If these severed parts were as valuable as they had been when united into an equipped plant .at Newton, there would be no loss of value of the mortgaged security through the separation and removal, and, therefore, no damage therefrom. Appellees were entitled to present and try this issue, which was that the removal had not lessened the value of the entire security provided by this mortgage. This was an issue of fact.

The situation as to the other portion of the answer (the paragraph above quoted) is different. Into that paragraph is injected a new consideration, which is that the proceeds from the foreclosure of this mortgage were as much or more than the value of the equipped plant at Newton would have been “if occupied by a defunct and failed manufacturing corporation in Newton” and if the machinery, etc., “had been left idle in disuse at Newton.” This injected the consideration of an idle, unused plant at Newton occupied by “a defunct and failed” corporation as an important element in determining the damages arising from the waste of dismantling that plant of its equipment. There is no allegation anywhere in the answer that there was the situation of such an idle plant ever existing. Nor, if it is a legal excuse for so doing (upon which we make no intimation), was it alleged that preservation of the value of such mortgage security had a part in the motive impelling the dismantling of this plant. On the contrary, “Division II” of the answer alleges that the purchaser of the property “determined that it could more profitably and to better advantage for itself and its stockholders, operate its business at Pella, Iow.a, and pursuant to said determination, obtained a factory site and building at Pella, Iowa, and removed thereto the said property, including said machinery, equipment and supplies,” and that it had a right so to do. In this state of the pleadings, there was no place for the issue thus sought to be made by this paragraph of the answer, and it should have been stricken therefrom.

While we are not judging the pleadings by the evidence introduced, yet as this case is to be retried, as the evidence is here so that we can see from it what the pleader had in mind, as an endeavor may be made to amend the answer to admit the same character of evidence, and as we think it proper to anticipate and prevent any possible error of that character which might result in prolonging this litigation and, possibly, a further appeal here, we will notice this matter. The evidence in question is to the effect that the mortgagor had become financially involved, and, without financial aid, would have been compelled to suspend operation of the plant at Newton. This evidence is met by the undisputed evidence that the citizens of Newton had agreed to raise $125,000 to keep the plant operating at Newton. Also the evidence is clear that there was no cessation of operation at Newton until just before the equipment was removed to Pella. However, we are not now determining matters of evidence but merely stating sufficient of the evidence tp give an idea of its trend. As to the pleadings, the question is whether impending insolvency which would result in shutting down this plant can have any legal connection with the right to dismember the plant or with the measure or amount of damages, if any, resulting to the security of the mortgage from such dismemberment. We think there is no such connection. This mortgage created a status .as to this property which could not, without consent of the mortgagee, be altered or changed by the mortgagor or those acting under it. While the misfortunes of the mortgagor may affect the value of the security, yet the mortgagor (or those claiming under it) cannot, in an attempt to remedy its condition, injuriously affect the security and deal with it in a manner forbidden by the mortgage. Therefore the circumstance that the mortgagor might have been compelled to close the plant, but never did so, has no connection with the right to remove the equipment nor the measure nor amount of any damages caused by such removal. Another consideration bearing on this matter is the above quotation from this mortgage relating to operation by a receiver. Under that provision of the mortgage, the mortgagee had the right to continue operation by a receiver as soon as a default on the mortgage occurred.

A related matter covered in the evidence (though not in the pleadings) is that this plant at Newton was used to manufacture washing machines under patents owned by the mortgagor. These patents were sold by the mortgagor to other of the appellees who caused this factory to be dismantled. Also there is evidence that some of the machinery in this plant was suitable only for manufacturing washing machines in accordance with the patents. Appellees contend that the mortgagor had the right to sell these patents, and, having done so, there was no further right in it or the mortgagee to continue such manufacture. If any right of title or use of such patents passed under this» mortgage, it is clear that such would be unaffected by any subsequent transfer of the patents by the mortgagor without consent of the mortgagee. When this mortgage was executed on this plant, so used and so equipped, when it provides that the property covered is the land, buildings, and all machinery, etc., located therein, “and used by the first party [mortgagor] in connection with its manufacturing business conducted on said premises,” when it provides that the mortgagee may (through a receiver) take over and operate this “plant and manufacturing business” until its debt is paid from the net proceeds of such operation, and when it appears that such operation would be effectually prevented without the right to do so under the existing patents, we have no doubt that the mortgage passed to the mortgagee the right to operate under those patents at that plant for the above purpose and term. Any sale of the patents by the mortgagor was subject to that right. This being true, the sale of the patents by the mortgagor has no bearing upon the measure or amount of damages, if any, arising from the dismantling of this plant.

There remain several matters relating to the admission of evidence. The first of these is a contract offered by appellants and excluded. In order to understand the import of this contract, it is necessary to briefly state its place in the history of these transactions. The purchasers of this property at Newton were certain of these appellees who lived and had business interests in Pella. On June 23, 1926, they made two contracts with the mortgagor and the stockholders thereof. One of these contracts related to purchase of certain treasury and outstanding stock of the mortgagor, giving corporate control of that company. The other related to the removal of the “business and plant” to Pella. The purposes of the contract now under consideration were to cancel the above contract for sale of stock, to confirm the contract of removal of the plant and business, and to operate as a sales contract of the property of the mortgager. It recites the earlier contracts, the purpose to incorporate the Woodrow Washing Machine Company (an appellee here) to take over the business. It describes the property sold (including that covered by this mortgage). It states that:

“(3) The parties of the second part agree to pay to the parties of the first part and the parties of the first part agree to receive from the parties of the second part, in full of the purchase price of the property and each item thereof above described, a sum of money to be arrived at as follows:
“The real estate and personal property, plant, machinery, rights and equipment to be valued as follows: * * *
“(d) The real estate above described, plant, machinery and equipment including each of the items upon the balance sheet of the Woodrow Manufacturing Company dated December 31, 1925, under the head ‘Fixed Assets’, to-wit: land, paving, building, heating plant, lighting equipment, machinery and equipment, patterns and jigs, furniture and fixtures, and trucks, shall be taken at the depreciated value shown on said balance sheet of December 31,1925, to-wit: $216,764.97 to which shall be added the actual cost of betterments and additions during the year 1926. and from which shall be deducted the usual and customary depreciation for the year 1926. * * °
“4. In case of any disagreement arising between the parties as to the inventories to' be taken, or the valuation or count therein or the depreciation to be taken off, as provided in paragraph 3 hereof, the same shall be decided by arbitration by three persons, one selected by the first parties, one by the second parties, and one by the two thus selected and their decision shall be binding upon the parties hereto.”

It then provides for payment by certain' deductions, assumptions of obligations of the' mortgagor, and issuance of common stock in the corporation to be formed to the stockholders of the mortgagor. It provides for assignment of the contract to the new corporation and release of these purchasers when the new corporation assumes the obligations under this contract.

The purpose of appellants in offering this contract was to secure the statement in paragraph (d), above quoted, of the value of this “plant, machinery and- equipment” covered by the mortgage. This was sought on the theory that it was a statement against inter-, est or an admission by appellees. Every one of these appellees was a party to, that contract except the new company (Woodrow Washing Machirie Company), and it was organized by some of these appellees with the purpose of taking over this contract, and did so by a contract of assignment thereof. This statement of value was one of the important statements of fact upon which the contract was based, and was the major element of value covered by the conveyance. It was •made upon August 3, 1926, and related to a value shown by the mortgagor’s balance sheet for December 31, 1925. It included little property not covered by this mortgage. It covered a character of property not so susceptible of change or depreciation or displacement that it could not be properly connected by evidence with the value as of the date of dismantling (early in July, 1927). In fact, it would of itself be some, though weaker, evidence of value in July, 1927, without such connecting evidence. We think it was error to exclude this contract and the assignment thereof to the Woodrow Washing Machine Company.

Another piece of evidence offered and excluded was .a later contract (April 21, 1927). This contract was between the same parties as the other contract and also the new company (Woodrow Washington Machine Company) and three of the above parties as trustees. This contract was intended to modify the former contract; to dispose of the real estate at Newton and to “remove said plant” to Pella in order to “complete the sale of stock” of the new company; .and to extend the time of performance to July 1, 1927. It provided (in paragraph 1) that the mortgagor should retain the real estate at Newton, but the new company would remove “all of the machinery, fixtures, equipment .and all * * * property * * * except only the ground and buildings thereon, and there shall be credited upon the amount of the purchase price to be paid by the Woodrow Washing Machine Company to the Woodrow Manufacturing Company on account of the retention of said grounds, buildings and appurtenances thereunto belonging, the sum of One Hundred Thousand Dollars ($100,000.00).”

Also the mortgagor was given a five-year option to purchase common stock in the new company “equal to the equity in the real estate retained by the Woodrow Manufacturing Company [the mortgagor] referred to in Paragraph (1) hereof.” Also it provided:

“It is further agreed that in view of the fact that the Woodrow Washing Machine Company may have to pay a certain amount of the mortgage given to R. W. Shelter of South Euclid, Ohio, existing against' the building and real estate above referred to and creating a lien thereon for the sum of Thirty-seven Thousand Dollars ($37,000.00), and in order to obtain the right to move the machinery and equipment in said building and to have the same released from said mortgage, that .any amount which the second parties may have to pay to obtain the release of said machinery and equipment from said mortgage, not to exceed, however, the sum of Twelve Thousand Dollars ($12,000.00) shall be credited upon the purchase price of the property described in said contract of August 3, 1926.”

We think this contract was admissible as an admission against interest by the appellees for the purpose for which it was offered which was to show value.

Two prospectuses of the new company were offered by appellants in connection with examination of their witnesses and in connection with cross-examination of appellees’ witnesses. In its ruling (at the end of the ease) upon the admissibility of this evidence the court said:

“If this case were going to the jury under the instructions of the court and the jury had to decide these vital questions involved, I should not permit that evidence to be admitted, but in view of the ruling of the court in order that if I should possibly be wrong you will have the benefit of it I am admitting it.”

These prospectuses were issued by the new company for stock sale purposes. The record fails to show definitely when these were put out. However, the earlier one was in circulation in February, 1927, and it seems probable that both were issued within a few months before the dismantling of the Newton plant. The new company was organized to take over this property and to remove the movables to Pella. All of the individual appellees were participants in, or actively interested in, the organization of this company, and were certainly familiar with its affairs. The mortgagor was an active party to the contracts which were parts of this general plan, and its governing stockholders were participants in, or interested in, the organization and the success of the new company. Hence all of these appellees would be bound by statements in these prospectuses as to the value of the Newton property. Each of the prospectuses contained such statements, and the purpose of the offer w.as to' get such statements before the. jury.- We think they were competent as admissions against interest. We need jiot determine whether the exclusion as being improper cross-examination was correct, because they were offered directly in connection with appellants’ witnesses.

Another matter urged by appellants is that they were improperly limited in cross-examination of the witness Caldwell. This witness was placed on the stand by appellees as an expert on values. He was asked a hypothetical question as to whether the removal of the machinery and fixtures would decrease the fair reasonable value of this building and machinery where the operating company had sold the patents under which it was operating and had become financially unable to continue operation without additional financing. He answered that there would be no decrease of value therefrom. The question excluded on cross-examination was:

“Would it make a difference in your opinion if it appeared that the local community had raised $125,000.00 which would be sufficient to keep the factory in operation?”

The question was excluded on an objection that it was “an assumption of counsel.” While the ground of the objection may not have been well taken, yet the hypothetical question was (under our holding above as to the materiality of the sale of the patents and the financial condition of the mortgagor) improper, and, on retrial, would not again occur, .and therefore the basis of the question ■on cross-examination would disappear. It is, however, not out of place to say that, in view of this opinion, we do not now see how evidence as to this community fund is pertinent to any issue which will be presented at the retrial. The well-known inducement and purposes for raising such character of fund are so removed from the question of value of the property that no light is thrown on such value by this kind of evidence.

Another matter of disputed evidence related to the expense of removing the equipment from Newton to Pella. This expense has nothing to do with the issues of this ease. The removal was, admittedly, without the consent of this mortgagee, and we hold it was in violation of the mortgage. It is not material to the recovery for this waste that the appellees were put to expense to commit it.

The judgment should be and is reversed, and the cause remanded for a new trial.