author: WILSON, Circuit Judge.

text:
    NICHOLS v. LEACH.
    No. 2554.
    Circuit Court of Appeals, First Circuit.
    June 10, 1931.
    William T. Sabine, Jr., Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (Frederick H. Tarr, U. S. Atty., and J. Duke Smith, Sp. Asst, to the U. S. Atty., both of Boston, Mass., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for appellant.
    0. Walker Taylor, of Boston, Mass. (Everett S. White and White & White, all of Taunton, Mass., on the brief), for appel-lee.
    Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.
   WILSON, Circuit Judge.

This is an appeal from the District Court in an action originally brought by the executor to recover an overpayment of a federal estate tax on the estate of William E. Walker, late of Taunton, Mass., who died in November, 1918.

In May, 1919; the executor filed a return and paid an estate tax of $37,700.68 assessed upon his return. He later received a notice from the Commissioner of Internal Revenue’s office that an additional tax would be claimed, and in March, 1922, the Commissioner made a final decision that the total tax due from the estate was $89,735.64; whereupon the executor, having previously paid $50,000 to stop the running of interest, paid the additional amount claimed by the government, together with the interest due.

The difference between the executor and the Commissioner as to the amount of the tax due arose in the first instance over a large amount of property given by the testator within two years of his death to members of his family. The value of the gifts totalled over $400,000.

A claim for refund was filed by the executor in June, 1925, to the amount of $49,634.-70, and interest to the amount of $10,423.39, setting forth as grounds for the claim (1) that none of the gifts were made by the decedent in contemplation of death, and (2.) that a deduction should have been made of the amount of the federal estate tax.

At a conference in Washington between the Commissioner and the executor and his attorneys on November 16, 1925, at which they were advised that, by the executor filing what is denominated an Estate Tax Deposition in November, 1921, he had barred the estate from obtaining any refund on the grounds claimed, and the case was thereby closed; whereupon, on December 1,1925, the executor brought this action, and on March 16, 1926, filed the original declaration in the suit which was based on the grounds set forth in his claim filed in June, 1925. The ease was heard on this declaration in the District Court in November, 1926, and, on the ground that the Estate Tax Deposition barred the plaintiff from recovery, judgment was ordered for tbe defendant.

On appeal this judgment was reversed in December, 1927 [23 F.(2d) 275], and tbe ease sent back for further hearing.

In March, 1928, following the decision of this court reversing the judgment of the District Court, counsel for the executor requested the Commissioner to reopen the ease and sought an interview with him in Washington, at which interview the question of the refund was discussed with other members of his staff, and the Commissioner’s attention was for the first time called to the faet that no allowance had been made for the payment of the Massachusetts inheritance taxes. Counsel, however, were informed that under .a ruling by the Treasury Department, No. 2524, it was not deductible.

In July, 1928, the Commissioner, having reopened the case, ordered that a refund be made to the amount of $43,865.37, on the ground that the gifts were not in contemplation of death, but no deduction was made for the federal estate tax, which was in accordance with the holding of this court in Old Colony Trust Co. v. Malley, 19 F.(2d) 346.

In September, 1928, the plaintiff presented an amendment to his declaration in the original suit, which was allowed in the District Court, setting forth as further grounds ■of recovery that, since the original assessment, additional compensation had been paid to the executor and to his attorneys in the settlement of the estate; and the executor had also paid other miscellaneous administration expenses in addition to those deducted by the Commissioner in the original assessment; and that, in arriving at the net estate upon which the estate tax was computed, the Commissioner has refused to deduct the .amount paid by the executor to the state of Massachusetts as inheritance taxes to the .amount of $34,158.59.

To the -amended declaration the appellant filed an answer, and set up as a defense that in the claim for a refund filed in .June, 1925, the only ground set forth was that certain gifts were improperly 'included in the gross estate as being made in contemplation of death, and that no deduction was allowable for a federal estate tax; and that the original claim filed in June, 1925, did not furnish a sufficient ground for the recovery ,of any additional amounts due to any sums paid to the executor, to attorneys/, and lor administration expenses after the four-year limitation period for filing a claim for a refund, or for any amount, because of a failure to deduct the Massachusetts inheritance taxes; and that as to the above items the claim for a refund filed in June, 1925-, did not conform to section 3228, R. S., as amended by the Rev. Act of 1924, § 1012 (26 USCA § 157), and to Treasury Regulation 68, art. 99.

In May, 1929, three years after the time for filing a claim for a refund had expired under the statute, and more than three years after this action was brought, and seven months after the amendment to his declaration was allowed, in which it was not set forth that a claim for a refund on the new grounds had been filed, the exeeutor filed with the collector what he described as an “Amendment to Claim for Refund of Taxes illegally collected,” which set up a claim for overassessment of $1,000 in the original assessment, and also for a refund based on the last four grounds set forth in his amended declaration.

In July, 1929, the Commissioner issued his certificate for a refund of $1,000-, which overassessment was due to mathematical errors in computing the refund allowed in July, 1928.

In February, 1930, the ease came on for trial before the District Judge; a jury being waived in writing. Before the trial and at its close, the defendant moved to dismiss the action for lack of jurisdiction on the ground that the action was prematurely brought, which was refused.

The defendant also filed a motion at the opening of the second trial that the action be dismissed on the.ground, that the declaration failed to set up that any claim for refund on the new grounds set forth in the amended declaration had been filed with the Commissioner prior to the commencement of the action or prior to the date of the amendment to the declaration in September, 1928, and at the close of the evidence renewed the motion on the ground that the evidence showed that no claim for a refund on the new grounds was presented within four years of the payment of the tax, or prior to the bringing of the action or the date of the amendment.

After the hearing, which was based in part on an agreed statement of facts, and in part on evidence oral and documentary, the District Judge held that jurisdiction of the District Court was established, since the evidence disclosed a decision by the Commissioner denying the claim for a refund within six months of the filing of the claim and pri- or to the beginning of the action, though the Commissioner’s formal certificate of denial was not issued until January, 1926, after the action was begun on December 3, 1925.

The only real issues in the case are: (1) Whether after four years from the date of a payment of a tax a new .claim for a refund based on new grounds in the guise of an amendment to the original claim satisfies the statute; (2) whether the taxpayer can recover on a declaration whieh does not allege that a claim for a refund on the grounds relied upon in the declaration has been filed with the Commissioner before action was brought, or the amendment to the declaration setting up the new grounds was allowed; (3) whether a verbal suggestion at a conference with the Commissioner that there were other grounds for a refund not presented in the original claim is sufficient, because the Commissioner is required to determine the estate tax; and (4) whether, if the statute requiring the filing of a claim stating the facts on which the refund is claimed has been complied with, the Massachusetts inheritance tax should be deducted from the gross estate in arriving at the estate tax.

That amendments to a claim may be allowed within the four-year period, and that a Commissioner may waive the provision of the regulations, as to the form of a claim, is settled; but whether the four-year period is a period of limitation as to any new grounds not included in the original claim, which cannot be waived, is not clear. United States v. Felt & Tarrant Mfg. Co., 51 S. Ct. 376, 75 L. Ed. -, decided April 13, 1931; United States v. Swift & Co., 282 U. S. 468, 51 S. Ct. 202, 75 L. Ed. 464; Finn v. United States, 123 U. S. 227, 8 S. Ct. 82, 31 L. Ed. 128.

The cases in whieh the Supreme Court has considered this statute are Rock Island, etc., R. R. Co. v. United States, 254 U. S. 141, 41 S. Ct. 55, 65 L. Ed. 188; Maryland Casualty Co. v. United States, 251 U. S. 342, 353, 354, 40 S. Ct. 155, 64 L. Ed. 297; Kings County Savings Inst. v. Blair, 116 U. S. 200, 6 S. Ct. 353, 29 L. Ed. 657; Nichols v. United States, 7 Wall. 122, 130, 19 L. Ed. 125; Tucker v. Alexander, 275 U. S. 228, 48 S. Ct. 45, 72 L. Ed. 253; U. S. v. Felt & Tarrant Mfg. Co., supra; and United States v. Swift & Co., supra.

However, it is unnecessary to determine whether a claim for refund can be amended by inserting entirely new grounds after the four-year period of limitation has expired, as we think the District Court erred in holding that the Massachusetts succession tqx was deductible, whieh is decisive of the case, as all the other claims for refund in the amended declaration were properly disallowed.

The statutes involved are section 203 (a) (1) of the Revenue Act of 1916 (39 Stat. 778) and section 403 (a) (1) of the Revenue Act of 1918 (40 Stat. 1098).

Section 203 (a) (1) of the Revenue Act of 1916 reads as follows;

“See. 203. That for the purpose of the tax the value of the net estate shall be determined — ■
“(a) In the case of a resident, by deducting from the value of the gross estate—
“(1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise, support during the settlement of the estate of those dependent upon the decedent, and such other chm-ges against the estate, as are allowed by the laws of the jurisdiction, whether within or without the United States, under whieh the estate is being administered.” (Italics supplied.)

The ejusdem generis rule of construction, unless Congress clearly intended otherwise, requires that the phrase “and such other charges against the estate” should be construed to include only such charges as are similar in character to those whieh have been enumerated before, and are ordinarily allowed in a court of probate. Black on Interpretation of Laws, c. 5, § 63.

The Treasury Department followed the rule in its Regulation 2524, adopted September 10, 1917: “An exhaustive study of the nature of State inheritance taxes has led this office to the conclusion that amounts paid to States on account of inheritance, succession, or legacy taxes are not ‘such other charges against the estate as are allowed by the laws of the jurisdiction,’ and accordingly are not deductible in arriving at the amount of Federal estate tax. T. D. 2395 of November 19, 1916, is hereby revoked.”

Congress in the 1918 Act, § 403, also clearly indicated that it was the correct rule of construction.

Section 403 of the Revenue Act of 191S (a) (1) (40 Stat. 1098) provided:

“That for the purpose of the tax the value of the net estate shall he determined—
“ (a) In the ease of a resident, hy deducting from the value of the gross estate—
“(1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, or from theft, when such losses axe not compensated for by insurance or otherwise, and such amounts reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes.” (Italics supplied.)

That it was not intended by Congress by the addition of the provision in italics in section 403 (a) (1) of the Act of 1918, expressly excluding succession taxes from the items deductible from the gross estate, to make any change in this respect in the act of 1916, the report of the Committee on Ways and Means in recommending the change to Congress makes clear.

The Congressional Committee reporting the Revenue Act of 1918 to the House stated in explanation: “Section 403, which takes the place of Section 203 of the original Act (1916) defining the deductions for the purpose of arriving at the net estate, inserts a provision that income taxes upon income received after the death of the decedent, and estate, succession, legacy or inheritance taxes, are not to be deducted. Obviously, income taxes should not be deducted, for the reason that they are payable from and on account of income which is not included in the gross estate. Inheritance taxes payable to states are payable in respect to the benefits derived by individual legatees and beneficiaries, and are not known until estate taxes have been ascertained. These provisions are in conformity with existing rulings in the administration of the law, which rulings the committee thinks are in accord with the statute, and are now included for the sake of clarification, as in the ease of additions made to section 402 mentioned above.” (Italics supplied.)

The nature of the Massachusetts tax has been definitely settled, see Attorney General v. Stone, 209 Mass. 186, 95 N. E. 395; Boston Safe Dep. & Tr. Co. v. Com’r of Corporations and Taxation, 267 Mass. 240, 166 N. E. 729, 730; which construction was adopted by the United States Supreme Court in Saltonstall v. Saltonstall, 276 U. S. 260, 48 S. Ct. 225, 72 L. Ed. 565, and many other Massachusetts eases, viz, that it is an excise tax on the right to receive property by will, inheritance, or gift, is assessed on the value of the legacy or gift or amount received by the legatee, distributee, or donee, and is ultimately payable by the recipient. G. L. Mass. 1921, c. 65, §§ 17-21.

The provision in the Massachusetts statutes since 1907 that it shall be paid by the executor or administrator is evidently for the convenience and security of the state in collecting the tax. In 1902 the statute expressly provided that it should be paid by the legatee or donee. It has not, we think, become a charge upon the estate within the meaning of section 203 (a) (1) of the Revenue Act of 1916 (39 Stat. 778), because, under chapter 563 of P. L. Mass. 1907, § 4, and the later acts, it is now required to be paid by the representative of the estate and then deducted from the legacy or distributive shares. See sections 9; 10, of Act of 1907.

The court in Attorney General v. Stone, supra, in speaking of the act of 1902, said at page 191 of 209 Mass., 95 N. E. 395, 397: “By the third change, a personal liability for the tax is imposed upon the respondent. But this puts no greater burden upon him. Formerly the tax would have been paid by the administrator, and the respondent would have received so much less. By the new statute, he receives the full amount bequeathed to him, and must himself pay the tax. He is required to pay into the public treasury only the additional amount which by the statute he receives directly from the trustee and indirectly from the administrator. He is not harmed by this. Moreover, he is merely subjected to the payment of an excise tax upon the privilege of receiving property bequeathed to him, and is, required to pay it only when he is allowed by our laws to have the actual enjoyment of this privilege.” (Italics supplied.)

“It is settled,” said the Massachusetts court in Boston Safe Dep. & Tr. Co. v. Com’r Corp. & Tax., supra, “that the excise thus authorized ‘is a tax upon “succession” which includes the “privileges enjoyed by the beneficiary of succeeding to the possession and enjoyment of property” * * * we are here concerned, not with, a tax on the privilege of transmission, not with an attempt to tax a donor’s estate for an absolute gift made when no tax was thought of, * * * but with a tax on the privilege of succession, which also may constitutionally be subjected to a tax by the state whether occasioned by death, Stebbins v. Riley, 268 U. S. 137, 45 S. Ct. 424, 69 L. Ed. 884, 44 A. L. R. 1454, or effected by deed, Keeney v. New York, 222 U. S. 525, 32 S. Ct. 105, 56 L. Ed. 299, 38 L. R. A. (N. S.) 1139; Chanler v. Kelsey, 205 U. S. 466, 27 S. Ct. 550, 51 L. Ed. 882; Nickel v. Cole, 256 U. S. 222, 41 S. Ct. 467, 65 L. Ed. 900. The present tax is not laid on the donor, but on the beneficiary. * * * ’ ”

“In this and earlier eases,” said the United States Supreme Court in Saltonstall v. Saltonstall, supra, at page 269 of 276 U. S., 48 S. Ct. 225, 226, “the Massachusetts court has held that the tax authorized by these statutes is a tax upon 'succession’ which includes the 'privilege enjoyed by the beneficiary of succeeding to the possession and enjoyment of property.’ See Attorney General v. Stone, 209 Mass. 186, 190, 95 N. E. 395; Minot v. Winthrop, 162 Mass. 113, 124, 38 N. E. 512, 26 L. R. A. 259; Crocker v. Shaw, 174 Mass. 266, 267, 54 N. E. 549.”

The federal statute seeks to reach only the total net estate transmitted at death; the payment by the representative of an estate of a succession tax which is eventually deducted from the legatee’s or distributee’s share does not lessen the net estate that passed at death and on which the federal estate tax is computed. In case of a will, the amount passing to the legatees, or, in ease of intestate property, the net estate actually passing at death to the distributees under the Massachusetts statutes, remains the same whether the legatees and distributees pay the tax directly or indirectly.

In New York Trust Co. v. Eisner, 256 U. S. 345, 349, 41 S. Ct. 506, 507, 65 L. Ed. 963, 16 A. L. R. 660, the Supreme Court held, following the construction of the New York statute in the Matter of Gihon, 169 N. Y. 443, 62 N. E. 561, that the New York transfer tax" should not be deducted in determining the federal estate tax, on the ground that it was not payable out of the estate. In this ease Justice Holmes, who spoke for the court, said, referring to section 203 (a) (1) of the 1916 act (39 Stat. 778): “Por if the tax attaches to the estate before distribution — if it is a tax on the right to transmit, or on the transmission at its beginning, .obviously it attaches to the whole estate except so far as the statute sets a limit. 'Charges against the estate’ as pointed out by the Court below are only charges that affect the estate as a whole, and therefore do not include taxes on the right of individual beneficiaries. This reasoning excludes not only the New York succession tax but those paid to other States, which can stand no better than that paid in New York.” (Italics supplied.)

In Keith v. Johnson, Adm’x, 271 U. S. 1, 46 S. Ct. 415, 70 L. Ed. 795, 44 A. L. R. 1432, which related to the assessment of the federal income tax and followed later decisions by the New York courts, the transfer tax of that state was held to be deductible from the estate before anything passed to the legatee, and therefore should be deducted in determining the federal income tax. Since that decision, however, the Court of Appeals of New York (Cardozo, C. J.) has held in the Matter of Oakes, 248 N. Y. 280, 162 N. E. 79, that the New York transfer tax is payable by the legatee or donee, and the federal estate tax by the residuary legatees or out of the estate. Under the rule the federal Supreme Court laid down in both the Eisner and Keith Cases, and in many others, see Saltonstall v. Sal-tonstall, supra; Stebbins v. Riley, supra, it may be assumed that it will now follow the latest decision of the New York court in the Matter of Oakes, and hold that the New York transfer tax should not be deducted. The ruling in the Keith Case did not reverse the ruling in the Eisner Case. It merely followed the last construction of the New York statute by the local courts.

However, this court in Old Colony Trust Co. v. Malley, 19 F.(2d) 346, held in principle, if not expressly, that Massachusetts succession taxes should not be deducted in arriving at the net estate of a decedent. It was determined in that case that the provision in section 403 (a) (1) of the Revenue Act of 1918 (40 Stat. 1098), that estate and succession taxes should not be deducted, was merely declaratory of the intent of Congress in section 203 (a) (1) of the act of 1916 (39 Stat. 778); that it was, as the committee of Congress stated at the0 time the change was proposed, merely “intended for the sake of clarification.”

While that case applied to federal estate taxes, this court pointed out' in its opinion the difficulty of deducting a tax before the amount could be determined, except by an al-gebraie fo-rmula. It would be just as difficult to deduct succession taxes on residuary legacies, or on distributive shares in case of an intestate estate before determining the amount of the federal estate tax, since the exact amount of the succession tax in either case cannot be computed until the federal estate tax has first been deducted and the residuum determined. The same argument against the deduction of the estate tax in determining the net estate so cogently applied in the Old Colony Trust Co. Case therefore applies with equal force to the deduction of a succession tax when it is ultimately paid by the recipient. It should not be presumed that Congress intended that a tax statute should be construed so as to render it necessary to resort to algebraic equations to determine a tax. Edwards v. Slocum (C. C. A.) 287 F. 651; also see Edwards v. Slocum, 264 U. S. 61, 44 S. Ct. 293, 68 L. Ed. 564. The result of the plaintiff’s contention is that succession taxes on residuary legacies and on the distributive shares of an intestate estate would be, in part, measured by the tax itself, which, we think, was not contemplated by the Massachusetts statute as construed by its courts.

Thus the authorities, we think, sustain the government’s contention that the inheritance or succession taxes of Massachusetts should not be deducted. Since the federal courts follow the state courts in the interpretation of state laws, it is futile to try to harmonize the results of the decisions of the Supreme Court or of the several Circuit Courts of Appeals, where the opinions are based on local statutes as interpreted by local courts. Stebbins v. Riley, 268 U. S. 137, 146, 45 S. Ct. 424, 69 L. Ed. 884, 44 A. L. R. 1454; New York Trust Co. v. Eisner, 256 U. S. 345, 41 S. Ct. 506, 65 L. Ed. 963, 16 A. L. R. 660; Keith v. Johnson, Adm’x, 271 U. S. 1, 46 S. Ct. 415, 70 L. Ed. 795, 44 A. L. R. 1432.

Therefore, if we follow the construction of the Massachusetts statutes by the Massachusetts courts and the principles laid down by this court in Old Colony Trust Co. v. Malley, supra, and may apply the language of Justice Holmes in New York Trust Co. v. Eisner, quoted above, it must be held that the Massachusetts succession taxes are not deductible in this case.

The judgment of the District Court is reversed, with costs.


source: Caselaw Access Project

author: NETERER, District Judge.

license: Public Domain

text:
    JUDITH BASIN LAND CO. v. FERGUS COUNTY, MONT., et al.
    No. 6391.
    Circuit Court of Appeals, Ninth Circuit.
    June 8, 1931.

      Ralph J. Anderson, of Lewistown, Mont., and William Ryan, of Madison, Wis., for appellants.
    C. E. Baker, of Lewistown, Mont., and Gunn, Rasch, Hall & Gunn, of Helena, Mont., for appellees.
    Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.
   NETERER, District Judge.

The plaintiff, a Wisconsin corporation, licensed to do business in the state of Montana, and owner of certain lands in Fergus county, Mont., and mortgagee of certain other lands therein, brought this aetion to restrain Fergus county, its officers, etc., from applying for and securing tax deeds to lands owned by it and upon which it held mortgages ; the land having been sold to the county for delinquent general taxes and special assessments of the Judith Basin irrigation district after the plaintiff had tendered and offered to pay all delinquent general taxes due to the state, county, and school districts, including interest and penalties. Plaintiff claims that the irrigation district assessments are illegal and void for irregularity and want of power in the officers of the district to levy taxes and issue the irrigation district bonds, and also 'contends that certain validating statutes of the state of Montana (post), as construed by the Supreme Court of Montana, declaring said irrigation district bonds to be valid, operated to deprive plaintiff of its property without due process of law in violation of the Fourteenth Amendment to the Constitution. From an order dismissing the complaint, this appeal is prosecuted.

The appellees claim that appellant is estopped by acquiescence and laches and that, in any event, the validating statutes are conclusive as to validity. The power to tax within constitutional limitations is inherent in the state (Kelly v. Allen, 49 F.(2d) 876, decided by this court May 18, 1931); and this includes special taxes for public benefit. The legality of the irrigation district is not challenged. The proceeds of the bonds were devoted to the publie purpose designated. The plaintiff had notice of the confirmation hearing provided by statute; of the progress of the work of development, and full opportunity, if illegal, to prevent its accomplishment. Inasmuch as it was silent for more than nine years and failed to speak when it should have spoken, the arm of the chancellor may justly be reluctant to move. It is not sufficient for appellant to say that it stood by and did not pay the tax after the issuance of the bonds and expenditure of the proceeds for public benefit accruing to it in common with others. It was its duty to act and not wait until the final step to divest title after all benefits had been received. Penn Mutual Life Ins. Co. v. Austin, 168 U. S. 685, 18 S. Ct. 223, 42 L. Ed. 626; Shepard v. Barron, 194 U. S. 553, 24 S. Ct. 737, 48 L. Ed. 1115; Hays v. Port of Seattle, 251 U. S. 233, 40 S. Ct. 125, 64 L. Ed. 243; Rodgers v. Thomas (C. C. A.) 193 F. 952; Tomich v. Union Trust Co. (C. C. A.) 31 F.(2d) 515; Page v. Oneida Irr. Dist., 26 Idaho, 108, 141 P. 238.

The court is of opinion that the validating statutes of the state are conclusive. The Legislature of a state may ratify any act that it could have authorized. Charlotte Harbor & N. R. Co. v. Welles, 260 U. S. 8, 43 S. Ct. 3, 67 L. Ed. 100. And it is not enough to say that the bonds were invalid because issued at a place not authorized, or in the absence of a proper petition. The purpose of the statutes was to validate invalid bonds. Read v. Plattsmouth, 107 U. S. 568, 2 S. Ct. 208, 27 L. Ed. 414. The bonds were issued for a proper municipal purpose, and the proceeds were properly applied to the purpose. Irregularity in issuance and excess of, or departure from, statutory authority by administrative or executive officers, are matters within the province of the Legislature to remedy. The Legislature is the source of power, the fountain head of authority. As said by the Supreme Court in Otoe County v. Baldwin, 111 U. S. 1, 4 S. Ct. 265, 273, 28 L. Ed. 331: «The doctrine is well settled in this court that the legislature of a state, unless restrained by its organic law, has the right to authorize a municipal corporation to issue bonds in aid of a railroad, and to levy a tax to pay the bonds and the interest on them, with or without a popular vote, and to cure, by a retrospective act, irregularities in the exercise of the power conferred.”

In the instant ease there is no state constitutional limitation withholding legislative power of any of the acts complained of. The Legislature could, in the first instance, have authorized the issuance of the bonds without a petition of the landowners and the sale thereof at the price obtained, or established the office of the district at the place where located, or elsewhere outside of the district. Baltes v. Farmers’ Irr. Dist., 60 Neb. 310, 83 N. W. 83.

In Peery v. City of Los Angeles, 187 Cal. 753, 203 P. 992, 19 A. L. R. 1044, a constitutional provision limited the legislative power with relation to the sale of the bonds at not less than a fixed amount. And the same relation obtains in Wallace v. Ball, 205 Ala. 623, 88 So. 442.

Nor is a state statute validating municipal bonds inhibited by the Federal Constitution. Rogers v. Burlington, 70 U. S. (3 Wall.) 654, 663, 18 L. Ed. 79; Thompson v. Perrine, 103 U. S. 806, 26 L. Ed. 612. See, also, Gray on Limitations of Taxing Power and Public Indebtedness, p. 620.

Section 72 of chapter 153, Laws of Montana 1921, provides: “And where districts have heretofore been organized, or bonds authorized, issued or sold or any proceedings have been undertaken on the theory that under the laws as they then existed, assessments might, be assessed, levied or collected, such organization, authorization, issuance or sale of bonds and any and all such proceedings are hereby validated, cured and confirmed.”

Section 2 of chapter 54, Laws of Montana 1923, provides: “All districts heretofore established by order of the court and having a de facto ’existence of at least one year, * * * and all acts and proceedings of any such district and of its board of commissioners leading up to the authorization, issuance or sale of bonds or the proposed issuance or sale of bonds, are hereby legalized, ratified, confirmed and declared valid to all intents and, purposes, and all sueh bonds whether sold heretofore or hereafter are hereby legalized and declared to be valid and legal obligations of and against the irrigation district so issuing and selling the same.”

These are the validating statutes which have been attacked. A more specific and all-inclusive ratification can scarcely be conceived.

In State v. Board of Com’rs of Fergus County, 86 Mont. 595, 285 P. 932, 935, the court said: “Among other irregularities in the issuance of the bonds, and one on which the respondents principally rely is that the* judgment of the court authorizing and con- ■ firming the bonds to be; issued, and the assessment or tax for their payment with interest, was never entered in the minutes of the court It is also urged that the place of meetings of the irrigation commissioners was not held within the confines of the district, although it was within the county, and thai, the bonds were in fact sold for less than ninety per cent, of their par value. These are all objections capable of being cured by validating enactments.”

Courts of the United States take judicial notice of the laws of any state, whether depending on state statutes or judicial decisions. Lamar v. Micou, 114 U. S. 218, 5 S. Ct. 857, 29 L. Ed. 94. See, also, Atlantic Fruit Co. v. Red Cross Line (C. C. A.) 5 F.(2d) 218. Federal courts for many years have expressed concurrence in the general current of opinion upon state statutes in the state court.

The further contention of appellant, that the validation laws as construed by the state Supreme Court in Cosman v. Chestnut Valley Irr. Dist., 74 Mont. 111, 238 P. 879, 40 A. L. R. 1344, are violative of the Fourteenth Amendment, is without merit. There the court said (page 117 of 74 Mont., 238 P. 879, 881): “An irrigation district is in the nature of a special improvement district, and, of course, has no authority to levy general taxes, its power in that regard being limited to what is known as special assessments. A special assessment is in the nature of a tax upon property levied according to benefits conferred on the property. * * * The justification and authority for levying special assessments is derived. from the benefits which the expenditure of the tax’ or assessment confers on the owners of the lands in the special assessment district, and a tax out of all proportion to the benefits conferred could not be sustained.”

And this was affirmed by the same court in State v. Board of Com’rs of Cascade County, 296 P. 1, 14.

While taxes are assessed for the common good, special assessments are for benefits to land equal to the assessment in a district common to all. The value of the land in the irrigation district and the bond issue and assessment and benefits must be considered as of the time when authorized and made. Appellant may not speculate upon public benefits; and, having stood by and taken advantage thereof for ten years and permitted assessments and taxes to become delinquent, because of accumulated taxes, assessments, and interest upon the bonded indebtedness, it cannot claim that “now” the assessments are out of proportion to the value of its land. The assessment must be itself illegal when made. The scheme of assessment and the equalities which are provided are the determining factors. In Fallbrook Irr. Dist. v. Bradley, 164 U. S. 112, 176, 17 S. Ct. 56, 70, 41 L. Ed. 369, the Supreme Court said: “It is one of those matters of detail in arriving at the proper and fair amount and proportion of the tax that is to be levied on the land with regard to the benefits it has received, which is open to the discretion of the state legislature, and with which this court ought to have nothing to do. The way of arriving at the amount may be in some instances inequitable and unequal, but that is far from rising to the level of a constitutional problem, and far from a case of taking property without due process of law.’?

No claim of unequal assessment is made. There is no claim that the special assessment when made was not equal in amount and benefit received.

Affirmed.


author: PER CURIAM.

text:
    Charles G. WELCH and Ed. R. Estberg, Trustees, and Western Farm Land Company, a Corporation, Appellants, v. FERGUS COUNTY, a Political Subdivision of the State of MONTANA, Board of County Commissioners of Fergus County, Montana, and A. W. Stoddard, R. W. Blake and Andrew Green, Members of said Board, Delia C. Marshall, as County Clerk of Fergus County, Montana, and E. O. Hedrick, as County Treasurer of Fergus County, Montana, Appellees.
    No. 6392.
    Circuit Court of Appeals, Ninth Circuit.
    June 8, 1931.
    Ralph J. Anderson, of Lewistown, Mont., and William Ryan, of Madison, Wis., for appellants.
    C. E. Baker, of Lewistown, Mont., and Gunn, Raseh, Hall & Gunn, of Helena, Mont., for appellees.
    Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.
   PER CURIAM.

Affirmed on authority of Judith Basin Land Company v. Fergus County, etc. (C. C. A.) 50 F.(2d) 792, just decided.


author: SPARKS, Circuit Judge. ALSCHULER, Circuit Judge

text:
    BLOCKBURGER v. UNITED STATES.
    No. 4389.
    Circuit Court of Appeals, Seventh Circuit.
    June 11, 1931.

      ALSOHULER, Circuit Judge, dissenting.
    Harold J. Bandy, of Granite City, 111., for appellant.
    Walter M. Provine, U. S. Atty., and Marks Alexander, Asst. U. S. Atty., both of Springfield, 111.
    Before ALSCHULER, EVANS, .and SPARKS, Circuit Judges. •
   SPARKS, Circuit Judge.

Appellant was charged by indictment with having violated what is commonly known as the Harrison Narcotic Act of 1914, as amended, and also what is commonly known as the Nareotic Drugs Import and Export Act of 1909, as amended. The indictment was in five counts. The first count alleged a sale to Ella Rush on May 27, 1929, of two grains of morphine hydrochloride not in or from an original stamped package. The second count alleged a sale to the same party, on May 28,1929, of ten grains of the same drug not in or from an original stamped package. The third count alleged a sale to the same party, on May 29, 1929, of eight grains'of-the same drug not in or from an original stamped package. The fourth count charges appellant with having knowingly received, bought, sold, and facilitated the transportation, concealment, and sale, on May 31,192-9, of twenty grains of the same drug, which had been fraudulently imported into the United States. The fifth count alleges a sale to Ella Rush, on May 291, 1929; of ten grains of the same drug, which sale was not in pursuance of a written order of Ella Rush upon a blank form issued for that purpose by the Commissioner of Internal Revenue.

The first, second, and third counts were based upon section 703, 44 Stat. 96 (26 US; CA §§ 211, 691-695-, 704); the fourth count was based on the Act of 1909, § 2, 35 Stat. 614, as amended in 1914, 1922, and 1924 ,(21 USCA §§ 172-177). The fifth count was based on section 2, 38 Stat. 786 (26 USCA § 696). The jury returned a verdict of guilty as to counts 2, 3, and 5, and not guilty as to counts 1 and 4. The court assessed a punishment on each of the second, third, and fifth counts of five years’ imprisonment and a fine of $2,000, the terms of imprisonment to run consecutively.

It is appellant’s contention that the sentence imposed is excessive, unreasonable, and for a longer period of imprisonment and a greater fine than the maximum fixed by law; \ that the facts proved under counts 2, 3, and 5, establish, if anything, but one offense, and that he cannot legally be held guilty of separate offenses; that the maximum punishment for any single violation of the statute in controversy is a fine of $2,000 and imprisonment for five years.

Section 703, 44 Stat. 96 (26 USCA § 692), provides that it shall be unlawful for any person to sell opium or coca leaves, or any compound, manufacture, salt, derivative, or preparation thereof, except in the original stamped package or from the original stamped package. Counts 1 and 2 are drawn under this section. They charge two separate sales, on different days but to the same party, and the evidence supports the charges. There is nothing in the statute to indicate that Congress intended that such a state of facts should be considered as a continuing offense, or that such an offender should suffer but one penalty, or that the aggregate penalties should not exceed the maximum penalty provided for a separate offense. The offenses charged and proved are as separate and distinct as if appellant had sold the drug to different parties on the dates mentioned.

The sale referred to in the third count is the same sale upon which the fifth count is based, but the circumstances under which the sale was made were such as to render the sale illegal for two different reasons, as set forth in and as violative of two separate statutes. In other words, in making one sale appellant violated two separate sections of the law, one of which required the sale to be made in or from the original stamped package, upon which section count three is based, and another section which required the sale to be made in pursuance of a written order of the purchaser upon a blank form issued for that purpose by the Commissioner of Internal Revenue, upon which section the fifth count is based. It cannot be said that the evidence necessary to establish the truth of either of the two counts in controversy would establish the other count, for indeed the opposite is true.

The test of identity of offenses is whether the same evidence is required to sustain them; if not, then the fact that both charges relate to and grow out of one transaction does not make a single offense where two are defined by statute. Morgan v. Devine, 237 U. S. 632, 35 S. Ct. 712, 59 L. Ed. 1153.

That distinct violations of law growing out of the same transaction constitute distinct offenses is fully supported by Burton v. United States, 202 U. S. 344, 26 S. Ct. 688, 50 L. Ed. 1057, 6 Ann. Cas. 362; Gavieres v. United States, 220 U. S. 338, 31 S. Ct. 421, 55 L. Ed. 489; Ebeling v. Morgan, 237 U. S. 625, 35 S. Ct. 710, 59 L. Ed. 1151; Braden v. United States (C. C. A.) 270 F. 441; and Roark v. United States (C. C. A.) 17 F.(2d) 570, 51 A. L. R. 870. “There is nothing in the Constitution which prevents Congress from punishing separately each step leading to the consummation of a transaction which it has power to prohibit and punishing also the completed transaction.” Albrecht v. United States, 273 U. S. 1, 47 S. Ct. 250, 254, 71 L. Ed. 505.

In this case the court imposed upon appellant separate punishments (a) for sale of morphine which was not in the original stamped package or from the original stamped package, (b) for selling on another day morphine not in the original stamped package, and (c) for selling morphine without a written order from the purchaser and without using a form for such order issued by the Commissioner of Internal Revenue.

O'ur attention has been called to the ease of Ballerini v. Aderholt (C. C. A.) 44 F.(2d) 352, 353, wherein appellant was charged in one count of the indictment with having sold a narcotic without being registered and without having paid the special tax provided by law; and in the second count with having made the sale without requiring from the purchaser a written order. Upon his plea of guilty the District Court sentenced him on both counts and ordered that the sentences run consecutively. The Circuit Court of Appeals of the Fifth Circuit reversed the District Court and held that there was but one offense, and in so doing it used the following language: “At last it was the sale, and not the failure to register, pay the tax, or secure the written order, that constituted the offense.” This we cannot accept as a proper' construction of the statute, nor of the Supreme Court decisions, supra. Neither the sale, the failure to register, pay the tax, or secure the written order, in and of itself constitutes a crime; but the sale in conjunction with either the failure to register, pay the tax, or secure the written order does constitute a separate crime as we interpret the statute, and as we think the Supreme Court has interpreted it.

Whether the sentence imposed is unduly severe we are not in position to say accurately. Circumstances not disclosed by the record may justify it, and we cannot disturb the judgment on this account. United States v. Daugherty, 269 U. S. 360, 46 S. Ct. 156, 70 L. Ed. 309.

In instructing the jury upon the competency and credibility of appellant as a witness, the court said: “There was a rule at one time that one who had been convicted of a felony was an incompetent witness. That is not the rule now, but he is a competent witness and the jury has a right to take the fact of a former conviction into consideration in determining the degree of credibility they will accord to Mm as a witness, and, if you believe Mm, to act upon his testimony.”

Appellant insists that the court erred in instructing the jury as to what was formerly the law. There was no prejudicial error in this, and if there had been the court cured it by withdrawing that part of the instruction from the jury.

Appellant contends that the court erred in permitting the District Attorney, in cross-examination, to ask witness George Bloekburger if he had not signed a bond of William Bapple, who is under indictment in this court, charged with violating the Harrison Narcotic Law; and that the court further erred in permitting the district attorney, in cross-examination, to ask appellant if he did not know and associate with William Bapple, with one Walker, and with one Hemiitrett, known as Lion Tamer. The court did not abuse its discretion in permitting these questions to be asked and answered, as affecting the credibility of such witnesses.

The question put to George Bloekburger was proper for another reason. He had testified that his business was that of real estate broker, and the cross-examination showed that a part of his business was that of going on bonds in criminal eases — not only for Bapple, but for other people. In this respect it related to Ms direct testimony and was proper.

Appellant further contends that reversible error was committed by the district attorney in his argument to the jury to the effect that most narcotic addicts are pickpockets. This statement was immediately withdrawn by the district attorney, and the court admonished the jury that no one was on trial for being a pickpocket. If there was any error in tMs remark it was cured.

The district attorney further stated to the jury that “I am an officer of the Government and the Court is an officer of the Government, and we know Ella Rush.” Appellant insists that this was error. While the remark was unnecessary, we fail to understand how it could have prejudiced appellant, and the court instructed the jury to disregard it.

We find no error in the record, and the judgment is affirmed.

ALSCHULER, Circuit Judge

(dissenting).

The imposition under three counts of one indictment of an aggregate penalty of fifteen years’ imprisonment and $6,000 fine, where the maximum penalty for the crime denounced by the statute is five years’ imprisonment and $2,000 fine, suggests careful search of the record to see whether such triple maximum is sustainable.

In United States v. Daugherty, 269 U. S. 360, 46 S. Ct. 156, 70 L. Ed. 309, where, as here, there was imposed a penalty of five years’ imprisonment under each of three counts charging violation of the Anti-Narcotic Act, it was held that the Court of Appeals was right in denying the contention that the indictment charged but a single crime. Erom the opinion of the Court of Appeals therein [2 F.(2d) 691] it appears that the first count charged a sale January 4, 1923, to Elmer; the second, January 10 to Entriken; and the third, January 17 to Ellison. The Supreme Court held unsound the contention that each sale proceeded from the same criminal intent and was therefore but a single crime, “because criminal intent is not an element of the crime, and because each count charges a different sale to a different person and on a different day, and if the sales were made as charged they constituted three separate offenses.”

But here, accepting at par the evidence for the government, it seems to me hut a single crime appears. Witness Ella Rush, herself an addict, was the keystone of the government’s case. She had been regularly employed by a federal narcotic agent as a decoy to ferret out persons faho were unlawfully selling narcotics. She reported for duty at Springfield and sought out a woman named Walker (a eodefendant), representing that she wished to buy morphine. On the night of May 27, 1929, Walker brought appellant to Rush, who, after various pretenses concerning herself, gave appellant $2, requesting him to get her some morphine. He went out and returning a little later brought her the morphine. At the same time she gave him $8 more, requesting him to bring her more of the drug. In a few hours he again returned with about ten grains more; and a little later the same day she gave him $10 for more morphine, which he brought her the day following. ' She asked him for more, but he evidently had become suspicious and did not bring it, whereupon he was arrested. She also paid Walker $10 for introducing her to appellant, all the funds being supplied by the narcotic agent.

The situation here is decidedly different from that in the Daugherty Case, where the sales were to different persons, and separated by intervals of several days. Here the transactions were between the same parties, and in pursuance of the same definite purpose and plan of the narcotic agent to have this person detected and taken in the act of violating the law. The transactions between appellant and Rush, which are alone the foundation of the charge, show a sort of “continuous performance,” Rush supplying him with the government’s money, and employing each delivery of the drug as an immediate leverage for inducing him to procure more of' the same. There was substantially no interval of time between the receiving of one and the advancing of the money for the next installment.

I do not question the propriety, in proper eases such as this, of resorting to such means for detecting and punishing crime; but if in the detecting process the government sees fit to make an installment affair of it, I do not think the government is in position to say that each installment of such a general operation constitutes a separate crime. The agent conducted the affair with an unbroken continuity, with the motive and plan of adducing proof that this man could and would and did unlawfully procure and sell and deliver narcotic drugs. It was essentially more a buying than a selling transaction. The government procured it to be done. The sectional nature of the transaction was a device of the agent, not of appellant, who would no doubt have been quite as willing to sell the entire quantity at once instead of on the federal agent’s “installment plan.”

Upon the count which involved the $2 sale appellant was acquitted by the jury. Of the three counts on which he was convicted, counts 3 and 5 involved the very same transaction; count 3 charging that the morphine sold was not in nor from the original stamped package, and count 5 that the sale was not made in pursuance of a written order of Ella Rush and upon a form issued in blank for that purpose by the Commissioner of Internal Revenue. The incriminating acts of appellant under each of these counts are precisely the same — the same sale of the same drug, and all pursuant to the same scheme of having appellant caught in the act of selling the drug which appellee’s agent was to buy.

That the “bootlegging” of narcotics is a most reprehensible and dastardly business should have no bearing on whether a single unlawful sale may be twice punished — once because the purchaser supplied no written order, and again because there was no stamp on the package.

I do not think the penalty section of the statute contemplates such double punishment for the same transaction. Section 705, title 26, U. S. C. (26 USCA § 705), provides: “Any person who violates or fails to comply with any of the requirements of sections 211 and 691 to 707 of this title shall, on conviction, be fined not more than $2,000 or be imprisoned not more than five years, or both, in the discretion of the court.” It seems to me this wording implies that any act whereby any one or more of the requirements of the enumerated sections is violated shall subject the offender to the singular penalty which the quoted section specifies. Appellant’s one act of selling ten grains of morphine subjected him to the prescribed penalty if in the sale he violated or failed to comply with “any of the requirements” — whether one or more. The unlawful sale is the essential thing, not the particular reason or reasons because of which the sale is unlawful. If the seller in making it complies with all the statutory requirements he commits no crime; if he fails to comply with all or any of these requirements a crime is committed, for which the penalty fixed in section 705 may be imposed; but to my mind not a cumulative series of such penalties, each predicated on a different one of the quite numerous requirements of the specified sections.

The quoted sentence, from Albrecht v. United States, 273 U. S. 1, 47 S. Ct. 250, 71 L. Ed. 505, is not in my judgment applicable to these facts. There the court held that possessing and selling intoxicating liquors are separate offenses each separately punishable, or, if considered separate steps of a single offense, may be separately penalized without constitutional transgression. There the defendant possessed and he sold, and it was reasoned he might have done either without having done the other. Here he only sold — a criminal act only if any one or more of the, statutory requisites for a lawful sale were absent.

The Fifth Circuit Court of Appeals recently considered the identical question in Ballerini v. Aderholt, Warden, 44 F.(2d) 352, reaching the conclusion that two penalties may not be predicated on a single sale of narcotics. The court overruled its prior decision to the contrary (by the same judge and the same judges sitting) announced in Vamvas v. United States (C. C. A.) 13 F.(2d) 347. It is to be hoped that this conflict in decisions of the United States Courts of Appeals for the Fifth and Seventh Circuits may be authoritatively resolved.

I believe that this one “continuous performance,” initiated and enacted under the “personal direction” of the government narcotic agent, and financed by the government, represents but a single infraction of the law by appellant, and should have been so treated in sentencing him. But I think that in any event the infliction of consecutive and cumulative penalties under each of counts three and five was unwarranted and erroneous.


author: HUTCHESON, Circuit Judge.

text:
    BUSCH et ux. v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5899.
    Circuit Court of Appeals, Fifth Circuit.
    June 5, 1931.
    W. E. Walsh, of Miami, Fla., for petitioners.
    G-. A. Youngquist, Asst. Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and De Witt M. Evans, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., and J. Louis Monarch, Sp. Asst, to Atty. Gen., for respondent.
    Before BRYAN, SIBLEY, and HUTCH-ESON, Circuit Judges.
   HUTCHESON, Circuit Judge.

This petition to review the decision of the Board of Tax Appeals assigns two errors:

(1) That the Board erred in denying to Clarence M. Busch the right to deduct as a bad debt in 1923 $29,000 advanced by him, in that year personally to himself as trustee, and by him as trustee used to pay taxes due by a trust estate of which he and his wife, the other petitioner, were part owners.

(2) That the fiduciary return made by him as trustee showing that the trust estate sustained net losses in its fiscal year ending March 31,1922, of $14,353.55, of $6,002.02 in its fiscal year ending March 31, 1923, and of $93,535.69 in its fiscal year ending March 31, 1924, the Board erred in denying to each of the petitioners the right to deduct in his return for the calendar years ending respectively December 31,1922,1923, and 1924, the net loss of the trust estate proportional to his beneficial share therein.

The record as to the claimed deduction of $29,000 shows that in 1923, after Busch gave his check personally to himself as trustee, and by his cheek as trustee paid the taxes of the trust estate, he made claim in his 1923 return for a deduction of that amount as a bad debt ascertained in that year to be worthless. This claim was disallowed by the Commissioner. In 1924 the estate sold some bonds, and Busch, as trustee, repaid himself personally the $29,000 advanced, and, after the receipt of it, undertook to show it in income in 1924, the year in which it was recovered. The Commissioner refused to sanction this disposition of the item, treating it neither as deductible as a bad debt in 1923 nor returnable as income in 1924. The Board took the same view, and disallowed the deduction claimed.

It is perfectly plain that the action of the Commissioner and of the Board in disallowing the claim that the advance created a worthless debt should be approved. Not only is this finding supported by the evidence, but no other finding could reasonably have been made. It is now contended by petitioner that, if the disposition which he has all along contended for, that the amount should be allowed him as a bad debt, cannot be made, he should have the right to deduct at least the proportion of the $29,000 which represents the proportion of taxes chargeable to his interest in the trust.

It seems perfectly plain that petitioners can have no allowance on account of this sum or any part of it on the theory now advanced, that it was a payment by him of his taxes and deductible as such. Such shifting by the taxpayer from foot to foot as the exigencies of the situation seem to demand, now claiming a deduction upon one theory before the Commissioner and the Board, and upon another theory here, is of doubtful propriety, when there is evidence in the record to support the change, unless there is a clear showing of mistake of fact. When, as here, not only the claim of the petitioner, as maintained throughout as to the facts, but the evidence itself, establishes that petitioner did not pay the taxes on his own account, but advanced them to the trust, treating the matter as a loan to the trust both at the time of the advance to it and at the time of its payment back to him, petitioner certainly cannot now claim that he did what he did not do.

The second point, in our opinion, presents no greater difficulty. Assuming that a trust estate is here involved, we believe that petitioners’ insistence for the same treatment as would be accorded members of a partnership springs from their having given too great attention to the legal and factual resemblances between partnerships and the kind of trusts which this is, and too little to the fundamental statutory differences between the two. With petitioners’ point that no trust estate was created because,the trustee named was one of the beneficiaries we cannot at all agree. No principle inherent in the nature of trusts supports such- a conclusion, for a trust is an entity entirely separate from its beneficiaries, Merchants’ L. & T. v. Smietanka, 255 U. S. 509, 41 S. Ct. 386, 65 L. Ed. 751, 15 A. L. R. 1305; nor does Willey v. W. J. Hoggson Corp., 90 Fla. 343, 106 So. 408, 411, do more than hold, as so many courts have done, that persons engaged in partnership relations and conducting a partnership business may not avoid the personal liability of partners through the device of calling themselves beneficial owners in a trust. It is equally plain, however, that the existence or nonexistence of personal liability does not determine, for the purpose of Federal taxation, the classification of the taxpayer, Burk-Waggoner Oil Ass’n v. Hopkins, 269 U. S. 110, 46 S. Ct. 48, 70 L. Ed. 183, but that is determined by the facts of each case, Lucas v. Extension Oil Co. (C. C. A.) 47 F.(2d) 65.

The Board in its opinion, 17 B. T. A. 592, has set fully out the material terms of the instrument creating the trust and the circumstances under which it was executed. These will not be restated here. It is sufficient to say that, a corporation in which petitioners and others were interested, having held property, having been by its incorporators dissolved, and its assets distributed in kind to its stockholder joint owners, these joint owners deeded the property to Clarence M. Busch, as trustee, with power to manage, collect, dispose of by sale, exchange, or otherwise, all of the property as quickly as practicable, and distribute to the persons interested such moneys as might be derived from its operation. The instrument effecting this arrangement declared its purpose to be to create a trust estate. Its terms were competent to effect that purpose, and we think there is no doubt that within the meaning of the taxing statute neither a partnership nor an association, but a mere trust estate, has resulted. Blair v. Wilson Syndicate Trust (C. C. A.) 39 F.(2d) 43; Lucas v. Extension Oil Company (C. C. A.) 47 F.(2d) 65.

A trust estate not regularly carrying on the operation of any trade, or business, but merely one for liquidation and distribution, and therefore one to which section 204 (c) of the Revenue Act of 1921 (42 Stat. 231), the overemphasis upon which has perhaps contributed more than any other thing to the confusion with which this essentially simple case has been invested in its approach and treatment, has no application. Refling, Executor, v. Commissioner, 17 B. T. A. 327; Refling v. Burnet (C. C. A.) 47 F.(2d) 859; Besides, petitioners are not claiming the right to carry over the net losses of one year into subsequent years as provided in the statutes; they are merely claiming the right to deduct in the calendar year, as a loss of their own, losses of the trust estate for the fiscal year.

It is true that this is the character of trust covered by subdivision 4 of section 219 (a) , 42 Stat. 246, in which the income is to be distributed to the beneficiaries periodically, and as to which the fiduciary makes merely an informative return, which includes “a statement of the income of the estate or trust, which pursuant to the instrument or order governing the distribution, is distributable to each beneficiary whether or not distributed before the close of the taxable year for which the return is made.” . It is also true that in this character of trust, though the tax is imposed upon the net income of the estate or trust, the tax is not paid by the fiduciary, but by the beneficiary, who must include his proportional part of the net income of the trust in his return. Section 219 (a) subd. 4, and (b) , Revenue Act of 1921, 42 Stat. 246.

It is also true that the regulations under which returns are made by partners do provide in article 332 that net losses by partnership operations will be “divisible by the partners in the same proportion as the net income would have been divisible,” and may be shown by them as deductions.

It is further true that the regulations, article 345, as to estates and trusts, after providing how the beneficiary shall make the return, concludes: “The regulations governing partnerships are generally applicable to such an estate or trust. See articles 331-335,” and, were it not for the difference in the statutory provisions as to trusts and partnerships, making the one a taxpayer, the other not, it would be difficult to avoid the conclusion that beneficiaries in such trust as this and the members of a partnership should be treated, in the matter of the return of net losses of the partnership and of the trust, in the same way. The statutes, however, forbid such treatment. Section 218 (a) of the Act having to do with partnerships provides: “Individuals carrying on business in partnership shall be liable for income tax only in their individual capacity,” while section 219 (a), as to estates and trusts, provides “that the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust,” and (b) “the fiduciary shall be responsible for making the return of income for the estate or trust for which he acts” (c) “in eases * * * except paragraph (4) thereof the tax shall be imposed upon the net income of the estate or trust and shall be paid by the fiduciary,” while (d) provides “in cases under paragraph (4) * * * the tax shall not be paid by the fiduciary, but there shall be included in computing the net income of each beneficiary that part of the income of the estate or trust for its taxable year which, pursuant to the instrument or order governing the distribution, is distributable to such beneficiary, whether distributed or not.” The provisions under the one section declaring a partnership not taxable, and under the other a trust estate taxable, permit no other disposition of this ease than that made by the Commissioner and the Board. It was plainly provided by the statutes that, for the purpose of accounting and determination of its income, a trust is a separate taxpaying entity, and it is perfectly clear that the beneficiary of a trust may not claim as his own a loss which the estate has sustained. This has been the uniform practice of the Commissioner, and the uniform holding of the Board of Tax Appeals. Stern v. Commissioner, 14 B. T. A. 444; O. Ben Haley v. Commissioner, 6 B. T. A. 782; Appeal of George M. Studebaker et al., 2 B. T. A. 1020, and we think it not only accords with the meaning and intent of the statutes, but that the statutes permit no other disposition.

Sinee it is our view that the looses of the estate cannot in any case be deducted by petitioners as their own losses, it is unnecessary to consider or determine the point made against the petitioners that, if in any case such losses might be deductible, petitioners must fail here, because they are'seeking to deduct in their calendar year the losses of the trust incurred in a different period, the trust’s fiscal year.

The petition for review will be denied. ’ The judgment of the Board is affirmed.


author: FOSTER, Circuit Judge.

text:
    GENERAL MOTORS ACCEPTANCE CORPORATION v. AMERICAN INS. CO.
    No. 6070.
    Circuit Court of Appeals, Fifth Circuit.
    June 22, 1931.
    Rehearing Denied August 5, 1931.

      R. W. Shackleford and N. B. K. Pettin-gill, both of Tampa, Fla., for appellant.
    T. A. Hammond, of Atlanta, Ga., and Alston Cockrell, of Jacksonville, Fla. (Smith, Hammond, Smith & Bloodworth, of Atlanta, Ga., and Cockrell & Cockrell, of Jacksonville, Fla., on the brief), for appellee.
    Before FOSTER, SIBLEY, and HUT-CHESON, Circuit Judges.
   FOSTER, Circuit Judge.

The General Motors Acceptance Corporation brought suit against the American Insurance Company to recover some $14,000 ón a dealer’s open fire policy covering a number of automobiles, issued to J. N. Ackley and assigned to it after the loss. The case was tried to a jury, and at the close of the evidence for plaintiff a verdict was directed for defendant. Various errors assigned will be referred to in the course of the opinion.

We will not stop to review the errors assigned to rulings on the pleadings. After settlement of the pleadings the issues presented were these. Plaintiff (appellant), in substance, alleged the amount of the loss and annexed a list of the cars destroyed, giving details as to value, make, condition, serial numbers, etc. It further alleged that notice of the fire had been promptly given and proofs of loss had been furnished to defendant within sixty days after the fire, as required by the policy. Plaintiff also pleaded waiver and estoppel as to the furnishing of proofs of loss, based on allegations that the insured had furnished proofs of loss, intended to be a compliance with the terms of the policy; that the defendant had retained them without objection; and that an adjuster representing the defendant, after making full investigation of the fire, within the time allowed by the policy for furnishing proofs of loss, had advised the insured that the defendant had all the knowledge necessary to determine its liability and no further proofs of loss were necessary.

Defendant denied that there was any loss; denied that proper proofs of loss as required by the policy had been furnished at all; denied the authority of the adjuster to bind it by waiver or estoppel; and relied upon the usual clause of the policy to the effect that , no waiver of any provision of the policy would be valid unless written in or attached to the policy.

At the trial complete destruction of the automobiles covered by the policy and their value was shown without dispute, and also that prompt notice of the fire had been given to the local agent of the defendant and he in turn had notified his principal. Plaintiff then endeavored to show the making and delivery of proofs of loss and the following proceedings occurred.

Ackley, the insured, was permitted to testify that about two weeks after the fire he prepared a document, assisted by Schuyler, an engineer and adjuster, and his secretary, Mrs. Newland, and that it was mailed to defendant. He also testified that he usually kept copies of letters and had made diligent search for a copy of this letter but was unable to find it. He then attempted to testify that the document was intended to be and was believed by him to be a proof of loss complying with the policy. An objection that the document was the best evidence was sustained. Counsel for defendant were then asked to produce the proofs of loss and stated they did not have them in court and had never seen any such document. The court denied the motion to produce. Counsel for plaintiff then offered to prove by the witness on the stand (Ackley) that within two or three weeks after the fire he made a list of cars with other data; that it was signed and executed by him; that it was mailed in a letter duly sealed and stamped, addressed to the defendant; and that it was intended to be and was in the best judgment of the insured a compliance with the terms of the policy as to proof of loss. An objection to this offer was sustained. Thereafter, Mrs. Newland was permitted to testify that she assisted in the preparation of a proof of loss in connection with Ackley and Schuyler; that it was taken from the records and compared with the list of cars; that it was written out on the typewriter by herself and sworn to by Ackley before a notary; that she inclosed it in the letter which she stamped and mailed herself to the American Insurance Company, at Newark, N. J. On motion of defendant her testimony to the effect that the document was a proof of loss and sworn to was stricken out.

Errors are assigned to the various adverse rulings of the court above noted, except as to the denial of the motion to require defendant to produce the proofs of loss. The defendant presents certain objections to the consideration of these assignments.

Defendant contends that the only way that plaintiff could have secured the proofs of loss, alleged to be in the possession of defendant, would have been by rule, returnable before the trial, under the provisions of Revised Statutes, § 724 (28 USCA § 636). The suggestion seems to be implied that, not having followed that method to secure the best evidence, plaintiff was precluded from offering secondary evidence. It is doubtful that the section has any application to the case. Carpenter v. Winn, 221 U. S. 533, 31 S. Ct. 683, 55 L. Ed. 842. But the method provided by that section is not exclusive. It is usually'sufficient to call for the production of a relevant document, admittedly in the possession of the other side, at any time during the trial, if the notice is reasonable. Where the possession of the document is denied, the question of notice becomes immaterial and secondary evidence is admissible. The contention is without merit.

It is also contended by defendant that the offer to prove by a witness on the stand the mailing of a letter to defendant and its contents was not a proper way to raise the question of the admissibility of such evidence; that questions should have been asked the witness, objections made, and exceptions noted to the exclusion of the answers. It is further contended that no exception was noted to the exclusion of part of Mrs. Newland’s testimony.

Of course, it is the usual and proper practice to interrogate a witness, to object to the question, stating the grounds of objection, and to except to an adverse ruling. This is generally necessary to in fairness advise the court and to permit a correction of what otherwise might be error. However, in this case it would have been useless to further interrogate the witness Ackley and would have needlessly wasted the time of the court. The question could not have been more squarely presented. On this point it appears from the record that an exception was noted to the ruling of the court. With regard to the exclusion of part of Mrs. Newland’s testimony it appears from the record that objection was made thereto by plaintiff. When a witness has testified fully, the noting of an objection to the ruling of the court striking out part of the testimony is equivalent to an exception. Mere technicalities not affecting the substantial rights of the parties have no place in federal practice. The record is sufficient upon which to predicate error to the rulings of the court on these two questions.

It appears from the evidence above quoted that there was undisputed evidence before the eourt that a letter had been mailed to the defendant, properly stamped and addressed. This created a presumption of fact that it had been received, sufficient to go to the jury although the receipt of the letter was denied. Rosenthal v. Walker, 111 U. S. 185, 4 S. Ct. 382, 28 L. Ed. 395. Having made a prima facie showing as to the dispatch and receipt of the letter, it is an elementary rule of evidence that plaintiff was then entitled to prove the contents of the letter by secondary evidence consisting of the best evidence within its power to produce. A satisfactory showing was made that a copy could not be found. Therefore, parol evidence was admissible. Dunbar v. U. S., 156 U. S. 185, 15 S. Ct. 325, 39 L. Ed. 390. No particular form of proof of loss is required. A substantial compliance with the provision of the policy is all that is necessary. If the proof tendered gives sufficient information to enable the insurer to determine its liability and it is sworn to, it is usually sufficient. O’Brien v. North River Ins. Co. (C. C. A.) 212 F. 102, L. R. A. 1917C, 722; Globe & Rutgers Ins. Co. v. Prairie Oil & Gas Co. (C. C. A.) 248 F. 452; Liverpool & London & Globe Ins. Co. v. Dillon (C. C. A.) 16 F.(2d) 774. It well might be that the document mailed was sufficient. If not, that fact could readily have been determined on cross-examination. It was error to exclude the evidence tendered to show that proofs of loss had .been furnished.

In support of the pleas of waiver and estoppel, Ackley testified, in substance, that Bowers presented himself as an adjuster representing the American Insurance Company; that at Bowers’ request he executed a non-waiver agreement; that Bowers, Schuyler, and himself went over the records taken from the files of his firm; that they went to the place where the garage was burned and rechecked the numbers of the ears from their records; that Bowers said the cheeking was O. K. except one car, the number of which did not correspond with the certificate of insurance; that Bowers said the ears were badly burned and destroyed; that Bowers checked over and made a list of all the cars burned and the amount of insurance covered by the certificates; that he asked Bowers if there was anything else he wanted; that Bowers told him that he had all that was necessary, and that he then told Bowers that if there was anything else to let him know and he would be glad to furnish it; that this was after the proofs of loss had been mailed. It is not disputed that Bowers was the adjuster of the loss representing the defendant. He took the stand to testify as to his employment and did not deny the conversation between himself and Ackley as outlined above.

It is settled that a clause in a policy of insurance requiring any waiver of its provisions to be in writing, indorsed on or attached to the policy, does not apply to waivers claimed from circumstances arising after the loss. Daniel v. Fireman’s Fund Ins. Co. (C. C. A.) 46 F.(2d) 784; Concordia Ins. Co. v. School District, 282 U. S. 545, 51 S. Ct. 275, 75 L. Ed. 528.

The weight of authority is to the effect that an adjuster authorized to investigate and adjust a loss has authority to waive proofs of loss. Cooley’s Briefs on Insurance (2d Ed.) vol. 5, p. 3987; Twin City Fire Ins. Co. v. Stockmen’s Nat. Bank (C. C. A.) 261 F. 470; Firemen’s Ins. Co. v. Brooks (C. C. A.) 32 F.(2d) 451, 65 A. L. R. 909. It is also the rule that, in certain cases, depending on the facts, the retention of proofs of. loss without objection may amount to a waiver and estoppel. Hartford Fire Ins. Co. v. Empire Coal Mining Co. (C. C. A.) 30 F.(2d) 794. Regardless of the rulings on evidence, the questions of waiver and estoppel were clearly for the jury. It was error not to submit them.

The errors indicated above are substantial and prejudicial. It is unnecessary to consider other assignments of error.

Reversed and remanded.


text:
    LUCAS, Commissioner of Internal Revenue, v. BAUCUM.
    No. 6048.
    Circuit Court of Appeals, Fifth Circuit.
    June 22, 1931.
    G. A. Youngquist, Asst. Atty. Gen., Se-wall Key, Sp. Asst, to the Atty. Gen., C. M. Charest, Gen. Counsel Bureau of Internal Revenue and E. Riley Campbell, Sp. Asst. Bureau Internal Revenue, both of Washington, D. C., and A. H. Conner, Sp. Asst, to the Atty. Gen., for petitioner.
    Ralph W. Baucum, of Shreveport, La. (Craig, Bolin & Magee, of Mansfield, La., on the brief), for respondent.
    Before BRYAN, SIBLEY, and HUTCH-ESON, Circuit Judges.
   HUTCHESON, Circuit Judge.

Petitioner comes here complaining of the finding and order of the Board of Tax Appeals that money, to wit, $43,000 paid to respondent’s husband as the purchase price of a 3/32 mineral interest which respondent owned in land located in the Haynesville oil field in Louisiana, was community property, respondent insisting that the mineral interest was though incorporeal an interest in the land owned by respondent as her separate property, and that the cash received in lieu of it was therefore likewise so. The facts are undisputed. They are set out fully in the board’s findings of fact 17 B. T. A. 1312. Summarized and briefly stated, they are:

Respondent and her husband were married in Louisiana in 1900 and have lived together there as husband and wife since that date, during all of which time the husband has acted as the manager of the community of acquests and gains which has during all of that time existed between him and his wife. In 1906, respondent inherited from her father a tract of farm land in Louisiana. In 1921, oil was discovered near the farm and respondent, with the aid and assistance of her husband, leased the entire property to oil companies, reserving a 1/8 or 4/32 mineral interest.

Thereafter, in the same year, respondent ■executed instruments in the form of deeds, wherein she granted subject to the oil lease, not interests in the royalty reserved in the lease, but mineral rights. In addition to the $43,000 from the sales of mineral interests, respondent received in 1922 royalty checks from the oil companies on account of the 1/32 interest still owned by respondent.

Details aside, the facts found by the board are sufficient to support the conclusion that the property in question was under the full management of the husband, both during the time that he farmed it in person and by tenants, and during the time that he busied himself with negotiating leases on it, making sales of the mineral interests and collecting and handling the proceeds. Respondent and her husband filed separate income tax returns for 1922. Respondent reported as her own income, not only the $43,-000 received from the sale of the 3/32 mineral interest, but that received as royalty from the 1/32 interest not conveyed by her. Respondent was allowed for depletion purposes against the sums returned as royalty more than the amount received, and she and her husband testified that they did not claim the $43,000 as community because they understood they would have a depletion allowance more than sufficient to absorb it. When this was denied them, they set up the claim which before the board and here is the subject of this controversy, that the sums received from the sale of mineral interests were not her separate, but were community, property, and that they should be returned one-half each by her and her husband.

The board found that the deeds had operated as sales of property, that the profits from them were taxable as capital gains, section 202, Revenue Act of 1921 (42 Stat. 229); Appeal of Anna Taylor, 3 B. T. A. 1201, but that the proceeds of the sale were fruits of the wife’s paraphernal property under the administration of her husband, and hence community property, and it sustained the claim of respondent that she and her husband might each return one-half thereof.

The courts of Louisiana have not, as we are advised, ruled upon the precise point here involved, the status as between the separate and the community estates of the proceeds of the sale by the wife of mineral interests in her separate land, nor have the courts of the state discussed the character, whether separate or community, of receipts from oil from such property, whether these receipts are from royalties, from bonuses, or from the sale of the mineral interests itself. The courts of Texas, in which state the fuga-cious theory of oil is not accepted, and leases are regarded as substantial sales of minerals in place and not as in Louisiana, mere grants of the right to extract the oil and take it when extracted, have held that oil royalties from land, the separate property of either spouse, remains separate property. Stephens v. Stephens (Tex. Civ. App.) 292 S. W. 290, 291; Ferguson v. Commissioner (C. C. A.) 45 F.(2d) 573.

Petitioner insists that though the legal nature of mineral interests and the legal effect of leases, sales, or reservations of such interests are differently stated in Louisiana than in Texas, the substantial, the practical result upon the disposition of the real interest involved, the right to the minerals, of leases, sales, and reservations of such interests are in both states substantially the same. Logan v. State Gravel Co., 158 La. 105, 103 So. 526; Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313. He declares that whether a mineral right be denominated as in Texas, a corporeal right in the minerals, or as in Louisiana, a right to extract such minerals from the soil, “an incorporeal right — a real right or servitude” (Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313, 314), it is in each state a thing owned, a species of immovable real property, in one state property in oil, in the other property in a servitude, a real right, a right to enter the land and take the oil, in each just as definitely real, immovable property as the land itself. That in each state, in Louisiana as in Texas, this ownership, whether you call it title in the oil, or the right to take it when conveyed, is “separate and distinct from the land and does not follow the ownership of the land.” Wilkins v. Nelson, 155 La. 807, 99 So. 607, 609, and he who has the right in Louisiana, has “a standing in court to vindicate and protect” it even to the extent of a decree “quieting it in its possession of all of the oil, gas, and other mineral rights in and to the property in question.” Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313, 314.

Respondent, conceding that the courts of Louisiana have not directly determined the matter at issue here, insists that the state of the law in Louisiana upon the character and quality of an oil interest in the light of the jurisprudence of Louisiana upon community and separate property makes it clear that both royalties received from oil wells and the proceeds of their sale are fruits of the land, and fall into the community.

Assuming, but not deciding, that if the question here were as to the status of royalties reserved in oil leases, that is, returns to respondent as rents paid her for the right to take the minerals from her land, or even as to the status of the proceeds from the sale in bullí at an estimated figure of the royalties to be received, that the law in Louisiana might be different from that in Texas. It is perfectly clear, we think, that the facts presented here defeat respondent’s claim. Here the respondent owning as her separate property the lands and minerals, first through the medium of a lease conveyed to the extent of 7/8 the real incorporeal right to extract the minerals from the land, Logan v. State Gravel Co., 158 La. 105, 103 So. 526, 527; Wilkins v. Nelson, 155 La. 807, 99 So. 607; Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313, 314, reserving in herself, in separate and distinct ownership, 1/8 of the minerals in and under .the land (Bodcaw v. Cox, supra). Thereafter, she parted this time, not by lease, but by sale having however the same effect, (Logan v. State Gravel Co., 158 La. 105, 103 So. 526) with 3/32 of her mineral rights, vesting the purchaser with the incorporeal right, the real right or servitude, not as she had theretofore herself owned it, as a part of and appurtenant to the land, but separate and distinct from the land. Wilkins v. Nelson, 155 La. 807, 99 So. 607. Thus, in effect, by two separate conveyances she sold to various purchasers, not an interest in royalties, but 31/32 of her mineral rights in the land. Leydig v. Comm. (C. C. A.) 43 F.(2d) 494; Bellport v. Harrison, 123 Kan. 310, 255 P. 52.

Certainly it would not be contended by respondent that if she had sold the land without reservation of the minerals she had thereby converted her separate property into community; nor had she sold her land reserving her minerals, or her minerals reserving her land, would it be contended by her that either of these transactions would have converted the proceeds from separate to community. It cannot be any more contended that because the minerals were disposed of by fractional sales such a result would come about.

Whatever then may be the law, which we do not at all undertake to decide, as to the status, whether separate or community property, of royalties which respondent received from her lease, or as to the status of the proceeds if respondent, instead of selling her mineral interests had merely sold the right to receive the royalties to accrue under the lease, we think it perfectly plain that upon no reasonable theory can a sale, as here, by the wife of a part of her mineral interests operate to convert separate into community property, and that the ruling of the board has the effect of a spoliation of the wife’s property'in favor of the community, upon facts which do not at all sustain it.

The petition for review is granted; the judgment of the board is reversed.


author: THOMPSON, Circuit Judge.

text:
    ATLES et al. v. UNITED STATES.
    No. 4538.
    Circuit Court of Appeals, Third Circuit.
    June 25, 1931.
    Rehearing Denied July 31, 1931.

      Walter Winne and Winne & Banta, all of Hackensack, N. J., for appellants.
    Phillip Forman, U. S. Atty., of Trenton, N. J., and Horace C. Jeffers, Asst. U. S. Atty., of Morristown, N. J.
    Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges.
   THOMPSON, Circuit Judge.

This is an appeal from a decree of the District Court for the District of New Jersey against Louis Atles and John Gilmore enjoining a nuisance, as defined in section 21 of title 2, under the provisions of section 22 of title 2, of the National Prohibition Act (27 USCA §§ 33, 34).

The decree declared a café room at 25 South New York avenue in Atlantic City "a common nuisance. It enjoined the defendants in accordance with the terms of section 22 and ordered the padlocking of the premises for one year.

The bill charged that Gilmore was the person in charge of the saloon or business, that Louis Atles was the proprietor of the Atlas Hotel or place of business, that Gilmore was employed by Louis Atles, and that Louis Atles and Jennie Atles were the owners of the real estate. Louis Atles and Jennie Atles in their answer denied the allegations against them. A decree pro confesso was entered against Gilmore in default of an answer. Prior to hearing on the merits, a motion to suppress evidence seized upon the premises was denied.

Upon hearing, there was evidence that two prohibition agents entered the premises in the afternoon; that the place was fitted as a restaurant with a bar; that Gilmore was behind the bar; that one of the agents ordered whisky, which was refused; that both agents ordered beer, which was served over the bar by Gilmore and was consumed by the agents. The agents testified that they were familiar with the taste and appearance of beer of unlawful alcoholic content and that they knew from taste and sight, based on personal experience, that the beer served contained more than one-half of one per cent, of alcohol by volume. After drinking the beer, they told the bartender that they were prohibition agents and arrested him. They took samples of the beer which was on tap behind the bar. The chemist’s analysis showed that the samples contained about 4% per cent, of alcohol by volume.

The agents asked Gilmore who was the proprietor; whereupon Atles entered, and, in his presence, Gilmore stated that Atles was the proprietor and was his employer.

The first contention of the appellants is that the testimony of the prohibition agents, from taste and sight alone of the beer, was not competent evidence of its unlawful alcoholic content to sustain the fact of unlawful possession and. sale, and, therefore, the evidence, consisting of the beer seized, should have been suppressed. That identification of the unlawful content of intoxicating liquor by taste, sight, and smell is admissible, has been held by this court in a number of cases. See Singer v. United States (C. C. A.) 278 F. 415. Schliefer v. United States (C. C. A.) 288 F. 368. Stoecko v. United States (C. C. A.) 1 F.(2d) 612.

It is true that, where the issue is whether beer is of unlawful aleoholie content, a court should be more careful in admitting opinion evidence than where distilled or vinous liquors are the subject of inquiry. But we agree with Judge Evans in the case of Lewinsohn v. United States (C. C. A.) 278 F. 421, that, with a proper showing of qualification to form a judgment, there is no reason why a witness, qualified by experience, should not give his- opinion that the beverage sold and drunk was or was not beer containing an unlawful percentage of alcohol.

With the evidence of their senses of sight, smell, and taste and their conclusions before the trial judge, we perceive no reason why the seizure was not lawful and why the beer seized, which undoubtedly contained a high percentage of alcohol, should not be admitted in evidence.

The seizure being justified, it was evidence to show unlawful possession and to show the alcoholic content of the beer sold to the agents. That evidence, together with the fact shown that the premises were equipped as a barroom, is amply sufficient to support the finding that the premises were maintained as a common nuisance. Farrell v. United States (C. C. A.) 21 F.(2d) 318. Singer v. United States, supra.

It is argued on behalf of the appellant, however, that because, in the bill of complaint, if is alleged that Louis Atles and Jennie Atles are the owners of the real estate and that allegation is denied in the answer, and neither Louis Atles nor Jennie Atles were shown by the evidence to be the owners of the premises, the bill should be dismissed for want of proper parties defendant. The allegations as to these defendants in the bill are “that defendant Louis Atles is the proprietor of the said ‘Atlas Hotel’ or place of business; that defendant John Gilmore is employed by said Louis Atles in said premises; and that Louis Atles and Jennie Atles are the owners of said real estate.”

Prohibition agent Andrichak testified: “After drinking our beer, we identified ourselves to the man behind the bar and asked him where the proprietor was; and a kind . of a stout man came out and at that time Mr. Gilmore said that was the proprietor. The man gave his name as Mr. Atles. In the presence of Mr. Atles, Mr. Gilmore admitted, stated, that Mr. Atles was the proprietor and employed him.”

And Agent Kopezynski testified: “After we arrested John Gilmore, we asked John Gilmore who the owner was, and at that time a man came in and identified himself as Louis Atles, and he admitted ownership.”

That testimony, which was admitted without objection concerning Atles, who was there on the premises, was sufficient for the finding that he was. at least the proprietor of the place of business and that he was the employer of Gilmore, the bartender. While, therefore, it is not proved that he was an owner of the premises, the evidence is sufficient at least to show that he was in possession as an occupant.

Section 22 of title 2 of the act, because of the provision that the court may, in its ■ discretion, permit the premises to be occupied or used if the owner, lessee, tenant, or occupant thereof shall give bond, conditioned that intoxicating liquor will not thereafter be manufactured, sold, bartered, kept, etc., has been construed as meaning that the action in equity must be brought against one or more of the persons so described. United States v. McCrory et al. (C. C. A.) 26 F.(2d) 189. Denapolis et al. v. United States (C. C. A.) 3 F.(2d) 722. The use of the disjunctive “or” entirely supports that construction.

It is not necessary, therefore, that the owner of the fee be a party if any person of the classes named is made defendant. There was, therefore, in our judgment sufficient evidence to sustain the decree as against Louis Atles. As the decree did not run against Jennie Atles and there was no evidence to establish any interest in the premises .in her, it is held that she has no standing upon appeal and, as to her, the appeal, is dismissed..

The decree is affirmed.