author: WOODROUGH, District Judge.

text:
    AMES v. COMMISSIONER OF INTERNAL REVENUE.
    No. 8988.
    Circuit Court of Appeals, Eighth Circuit.
    April 18, 1931.
    Charles W. Briggs, of St. Paul, Minn. (Clapp, Richardson, Elmquist, Briggs & Macartney, of St. Paul, Minn., on the brief), for petitioner.
    J. P. Jackson, Sp. Asst, to Atty. Gen. (G. A. Youngquist, Asst. Atty. Gen., Sewall Key, Sp. Asst, to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Dean P. Kimball, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for respondent.
    Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.
   WOODROUGH, District Judge.

This case is before us on petition for review of the decision of the United States Board of Tax Appeals. The Commissioner of Internal Revenue refused to allow as a deduction from the gross income of the estate of Charles W. Ames, deceased, for the year 1922, the sum of $11,837.05, which the estate claimed by reason of the fact that in that year it had turned over to certain employees of the American Law Book Company stock owned by the estate worth $11,837.05. The Board of Tax Appeals found that Charles W. Ames died testate April 3,1921, and by his will disposed of a large and complicated estate made up largely of stocks and bonds.. The bulk of the devised .property consisted of stocks of the West Publishing Company, the American Law Book Company, and the Diamond Ranch, appraised for administrative . purposes in the respective amounts of $264,000, $118,401, and $51,-445.50. Other items made up the total appraised value of $711,289.34. In 1916, certain stockholders of the American Law Book Company, including said Charles W. Ames, held 776 shares of the common and 2 shares of the preferred stock of the company under a syndicate arrangement. Onv November 2d of that year they entered into a written agreement with certain of the active managing employees of the company to the effect that such employees at the end of a term first fixed at five years, and later extended to six years, were to receive 10 per cent, of the stock of the company which was held by the syndicate, upon the condition that the company paid dividends equal to 500 per cent, of the outstanding stock of the American Law-Book Company within the six-year period. The distribution of dividends in the amount of 500 per cent, of the par value of the American Law Book Company’s outstanding stock was completed in 1922, and pursuant to the agreement 10 per cent, of the stock so held by the syndicate was delivered to the named employees in 1922 at a cost to the estate of $11,837.05.

The executor of the estate of Ames claimed deduction for this amount as a business expense under section 214 (a) of the Revenue Act of 1921 (42 Stat. 239) which in part reads as follows:

“That in computing net income there shall be allowed as deductions:

“(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered.”

Though Charles W. Ames died April 3, 1921, his executors found that they were unable to settle the estate within the time limited, two extensions of time were granted by the probate court of Ramsey county, Minn., where the estate was being administered, and final .decree in the matter of the estate was entered on or about May 1, 1925. During the period of administration the executors, in order to conserve the property, bought and sold securities in the name and on behalf of the estate, maintained an office and incurred expense in connection therewith, and employed the Northwestern Trust Company of St. Paul as their agent to take care of. all the business of the estate, keep the books of account on a cash basis, handle its securities, look after and advise with the trustees as to investments and reinvestments, collect all income, and make all disbursements for the estate.

On appeal to the Board of Tax Appeals that board sustained the decision of the Commissioner of Internal Revenue, holding that the deduction claimed was not an expense incurred in carrying on a trade or business, and said: “The surrender of the stock in question was a capital transaction designed permanently to increase the value of the stock remaining in the executor’s hands rather than an expense incidental to the production of income in the taxable year 1922.”

At the threshold of this inquiry it is necessary to consider whether or not the petitioner was engaged in a trade or business in relation to which the disbursement of the $11,837.05 worth of stock could be deemed to be an expense. . Whatever rights Mr. Ames had in the shares of stock in the law book company at the time of his death were vested thereafter in his executors. An incident to the decedent’s rights in and to the stock was the obligation he had entered into to surrender the percentage of the stock to the operating officers of the corporation if certain conditions were satisfied. All the executors had to do in relation to the law book company stock was to receive the dividends as paid, fulfill this contract obligation when it matured, and distribute the estate according to the will. There were some other properties belonging to the estate as to whieh it appears from the findings that some business was carried on, but none so far as the law book company stock was concerned. The stock was merely a part of the estate in process of liquidation, and the ordinary processes of liquidation carried on by the executor of an estate are not such activities as constitute trade or business.

Petitioner cites the decision of the Board of Tax Appeals in the case of Le Blanc v. Commissioner, 7 B. T. A. 256. In that ease' the taxpayer caused the income of his stock-holdings in a certain corporation to be paid over to his son as a means of compensating his son for services to be rendered to protect the taxpayer’s own business position and to advance the taxpayer’s interest in his business. But there was no such furthering of any trade or business by the executors in Bus-case when they simply took the stock and’ received dividends thereon and fulfilled a-contract obligation imposed on them by their decedent, and pursuant to the decedent’s contract made a surrender of the part of- the stock which decedent had contracted to surrender. Activities of such a taxpayer as an executor, if carried on for the purpose of earning profits may become sufficient to constitute the doing of business, but the execution of his trust by the executor of an estate in the ordinary way of gathering in, administering upon, and distributing the assets should not be so construed. The mere receipt of dividends and the payment of contractual debts shown in this case are but the ordinary incidents of the execution of his trust by an executor. Blair v. Wilson Syndicate Trust (C. C. A.) 39 F.(2d) 43; Crocker v. Malley, 249 U. S. 223, 39 S. Ct. 270, 63 L. Ed. 573, 2 A. L. R. 1601; United States v. Emery, 237 U. S. 28, 35 S. Ct. 499, 59 L. Ed. 825; McCoach v. Minehill Railway Co., 228 U. S. 295, 33 S. Ct. 419, 57 L. Ed. 842; Hughes v. Comm. of Internal Revenue (C. C. A.) 38 F.(2d) 755; Zonne v. Minneapolis Syndicate, 220 U. S. 187, 31 S. Ct. 361, 55 L. Ed. 428; 24 C. J. 55; O. A. Refling, Executor, v. David Burnet, Commissioner, 47 F.(2d) 859, this court.

Petitioner calls attention to the fact, not found by the Board of Tax Appeals but disclosed by the evidence before it, that the 500 per cent, dividends paid by the law book coihpany were derived largely from liquidation of the company’s great accumulation of bills receivable rather than directly from new or increased earnings of the company. The argument proceeds that the stock payment to the operating officers of the law book company ■ vas really to induce them to devote their energies to liquidating the company’s bills receivable solely as a means to produce cash income in the form of dividends rather than to increase the value of the stock in a permanent way. There was also oral evidence before the hoard that the great accumulation of receivables by the corporation and the desirability of the reduction in that account was in the minds of the parties at the time the contract was entered into and un-doubtedly figured as an inducement.

But the written contract with the operating officers did not limit them to procuring the payment of dividends through the bills receivable. The only condition of the contract with the operating officers of the company was that they were to procure the payment of the dividends by the company. They were given a great inducement to increased zeal and energy to bring about that result. The value of stock in corporations actively carrying on such a business as that of the law book company is ordinarily enhanced when large dividends are paid thereon for a number of years. The board had before it the contract and the circumstances under which the contract was made as well as the financial statements of the company covering its profits, dividends, surpluses, and receivables. Though the shrinkage shown in surpluses and receivables corroborates that the success of the officers in procuring the dividends to be paid by the company was made possible by the successful liquidation of receivables, that fact does not compel disregard of the terms of the contract, nor does it establish that such outcome was the sole purpose of the contract. In other words, the conclusion of the board that there was a purpose in the contract to permanently increase the value of the stock by making it productive of dividends is not refuted by the showing that in the working out of the contract nothing more may have been done than to convert receivables into cash and then into dividends. The specific terms of the written contract and the 'stock surrender made pursuant thereto support the opinion of the board, and its decision may not be reversed because other and different conclusions might have been drawn from the evidence before it.

The question whether the taxpayer sustained the burden of showing that the disbursement made by the operating officers of the company by the executors was a necessary or ordinary and reasonable one need not be passed on, as we are satisfied that it was not a business expense within the statute, and that there was substantial evidence to support the conclusion arrived at by the board.

The decision should be affirmed.


source: Caselaw Access Project

author: VAN VALKENBURGH, Circuit Judge.

license: Public Domain

text:
    NORRIS v. UNITED STATES. DILLAGE v. SAME.
    Nos. 9079, 9080.
    Circuit Court of Appeals, Eighth Circuit.
    April 17, 1931.
    Rehearing Denied May 28, 1931.
    Francis Murphy, of Fargo, N. D., and J. M. Hanley, of Mandan, N. D. (W. H. Shure, of Fargo, N. D., and John F. Sullivan, of Mandan, N. D., on the brief), for appellants.
    Usher L. Burdick, Asst. U. S. Atty., of Fargo, N. D. (Peter B. Garberg, U. S. Atty., of Fargo, N. D., on the brief), for the United States.
    Before VAN VALKENBURGH and BOOTH, Circuit Judges, and MUNGER, District Judge.
   VAN VALKENBURGH, Circuit Judge.

Appellants were jointly indicted in the District Court of the United States for the District o£ North Dakota for the unlawful transportation of whisky and alcohol. One Ed Madison was also named as an aider and abettor. The trial resulted in the conviction of appellants and a mistrial as to Madison. Norris was sentenced to pay a. fine of $5,000 and to be imprisoned for a period of five years; Dillage, to two and one-half years’ imprisonment, and to pay a fine of $2,500. Comprehensively stated, the facts are these:

Sunday, March 30, 1930, at about 9 o’clock in the morning, one L. C. Quinn, engaged in the storage business at Fargo, N. D., testified that he helped to load a quantity of liquor out of his warehouse into a truck, described as a Reo truck. A man by the name of Arthur Barenson was with the truck. The circumstances concerning the loading are thus stated by this witness:

“Q. And what did you load into the truck at that time? A. Well, it was supposed to have been a load of—
“Q. Just tell physically what you put in there? A. I think it was twenty kegs, and some packages.
“Q. Do you know what was in the packages? Á. I could not swear to it.
“Q. What kind of packages? A. It was packages about that square (indicating) tied up and done up in paper.
“Q. Did it sound like liquid in the packages? A. Well, I know they was filled up; I could not swear to what they sounded like.
“Q. Well, did it sound like water or sound like cement? A. Well, it sounded like water.
“Q. And how many of those packages did you put in the truck? A. I cannot swear to just the exact amount now.
“Q. At the time that you assisted in loading this truck did you know what was in those packages? A. No, sir.
“Q. And what part did Barenson, this gentleman over here, what part did he take in loading the truck? A. Just stayed on the truck.
“Q. How long did it take you to load it? A. About twenty minutes.
“Q. About what time did the truck leave your warehouse? A. Shortly after nine.
“Q. In the morning? A. In the morning.
“Q. Did you know whether or not these packages contained tin containers ? A. They were tin containers.
“Q. About how many tins per package? A. Three in a package.
“Q. Then how many packages did you put in the truck? A. I could not swear to the exact amount but there was somewhere around thirty or forty packages.
“Q. What was the capacity of each of those tins of three? A. I imagine there was a gallon can.
“Q. That is yOur best judgment? A. Yes, sir.
“Q. And what was the capacity of the kegs? A. Ten gallon kegs.1
“Q. And how many of those did you say there were? A. Twenty if I remember correctly.
“Q. And what kind of kegs were they? A. Wood kegs.
“Q. Ten gallon wood kegs; could you tell whether or not the contents of the kegs were liquid or solid? A. They were liquid.
“Q. Did they have any odor about them? A. Not that I could swear to.
“Q. Or the cans éither? A. Not that I could swear to.
“Q. You have seen gallon cans that contained alcohol have you not? A. Yes, sir.
“Q. And were those cans that were packed three each in packages similar to the gallon cans that you know contain alcohol? A. Yes, sir.
“Mr. Murphy: No cross-examination.”

Later, in the forenoon of March 30, 1930, a Reo truck, heavily loaded was seen standing in the vicinity of Thirteenth'street and Third Avenue North in Fargo by a number of witnesses. This truck is variously described as a “Reo truck” or “Reo Speed Wagon,” with a “grain box” on it of a green or greenish color. At one time Barenson was seen by several witnesses standing a short distance from this truck. While the truck was standing there, a boy named Arthur Olson climbed upon it and took therefrom one of the gallon cans with which it was loaded. His brother Leonard Olson “sampled it,” as he says, by tasting, and- found it contained alcohol. Another witness, Gordon Baird, smelled it and pronounced it alcohol. Subsequently this can found its way into the hands of a chemist, who testified that it had an alcoholic content óf 93 per cent. Shortly after this can had been taken from the truck by Arthur Olson, three men drove up in a Buiek car, alighted, and walked over to the truck. They were identified as Barenson, Norris, and Dillage. One of the men put a satchel in the cab of the truck and then entered it himself. Barenson and Dillage returned to the Buick. The truck immediately pulled out toward the west. The hour of its departure was about 12 o’clock, noon. Dillage and Barenson in the Buick car followéd the truck at a distance of from 50 to 75 feet. About seven or eight blocks farther on, the truck was stopped by the defendant Madison, chief of police. In about ten minutes it was permitted to proceed. Two witnesses followed it and the Buick ear westward for a distance of five and one-half miles.

Edward Akason, thirteen years old, who lives on a farm eight miles west of Fargo, testified that “around noon,” on Sunday, March 30, 1930, a truck resembling a Reo, and having a green grain box on it, arrived at his home. A man came to the door of the barn, where witness and others were, called his brother out and talked to him. He says: “They went out and they shut the bam door again and I did not see the truck after that, and I noticed the granary doors were shut so I took it for granted they had the truck in the granary.” The man in question was identified as appellant Norris. -

“Q. Now what time of night did the truck leave there? A. Oh, I should judge about seven or eight o’clock.

“Q. During the day what did this man do around the farm? A. Well, he had a little bit to eat with us at dinner and then he went in the other room and read the papers for a while and then went up stairs and laid down and about dark he come down and had supper with us.”

Arthur Barenson was called as a witness by the government. We quote a portion of his testimony:

“Direct Examination
“By Mr. Thorp: Q. What is your name? A. Arthur Barenson.
“Q. Where do you live? A. Fargo.
“Q. Fargo? A. Yes, sir.
“Q. How long have you lived in Fargo? A. Close to two years.
“Q. Where were you living on the 30th day of March, 1930 ? A. At Fargo.
“Q. Do you have any business in Fargo? A. Yes, sir.
“Q. What is it? A. I was working for Lehigh Briquetting Company.
“Q. Where were you on the 30th of March, what town? A. I think I was at Fargo.
“Q. Do you know Lee Dillage? A. I refuse to answer on the grounds of incriminating myself; I have a ease pending now.
“Q. You have already pleaded guilty in the State Court to the charge of being in possession of intoxicating liquor? A. I have.
“Q. And you are now under service for that offense? A. I am in the custody of the Sheriff.
“Q. That was on account of certain liquor that was in the Fargo Storage Company’s place? A. I could not say as to that.
“Q. Well, it was on account of some liquor that you had on the 30th of March? A. I could not say as to that either.
“Q. Did you have possession of more than one bunch of liquor? A. I could not say as to that.
“Mr. Murphy: Are you now referring to the offense to which you claim he pleaded guilty?
“Mr. Thorp: Yes, sir.
“Q. What liquor did you understand that you were pleading guilty to as having had possession of? A. At the warehouse.
“Q. What warehouse? A. Fargo Transfer and Storage Company.
“Q. And that liquor consisted of alcohol and some moonshine, didn’t it? A. Yes.
“Q. And the alcohol was in tin cans? A. Yes, sir.
“Q. And the moonshine was in kegs? AYes, sir.
“Q. And it was there in that warehouse on the morning of March 30, 1930? A. I could not say.
“Q. Well, it was there the day before, wasn’t it? A. I could not say.
“Q. Were you at the warehouse where that liquor was on the morning of March 30, 1930? A. I cannot answer that.
“Q. What? A. I refuse to answer on the grounds of incriminating myself.”

The assigned errors upon which both appellants rely are:

(1) The failure of the court to. instruct the jury to return a verdict of acquittal because of the insufficiency of the evidence.
(2) The admission of Government’s Exhibit 1 and contents.
(3) Denying appellants’ motion to strike out the testimony of the witness Quinn.
(4) Admission of the testimony of witness Walter Olson as to conversations with the defendant Madison not in the presence of appellants; refusal to strike such testimony, and failure to advise the jury as to its limitations.
(5) Failure to order a mistrial because of injury to a juror during the trial.
(6) The invalidity of the Jones Law, and, in that connection, the insufficiency of the indictment.

We shall take up these specifications in their order.

1. We think there was substantial evidence to support the verdict and judgment against appellant Norris. With respect to appellant Dillage, it fails to rise sufficiently above the plane of mere suspicion to warrant affirmance as to him. We shall diseuss the remaining specifications in the light of these conclusions.

2. Government’s Exhibit 1 was the can of alcohol which Arthur Olson took from the truck while it was standing on Third avenue near Thirteenth street in Fargo on the 30th of March, 1930. Without dwelling upon the details of the transaction, we think the evidence warranted the court in admitting this exhibit for the consideration of the jury. Apart from the testimony of the chemist, by whom the contents of the can were analyzed, there was substantial direct testimony that the can contained alcohol.

3. Because of the obvious relationship of Barenson with the transaction, the connection between the loading of the truck at Quinn’s warehouse and its subsequent transportation by appellant Norris was sufficiently established to make the testimony of Quinn competent. The objection to the admission of that testimony and the motion to strike it out were properly overruled.

4. Walter Olson was a police officer who accompanied the chief, defendant Madison, at the time the truck was stopped and after-wards permitted to proceed. Over the objection of counsel for appellants, he was permitted to testify to a conversation between himself and Madison as they were returning to the city. That conversation concerned Barenson, and did not mention appellants directly nor indirectly. Upon objection to the testimony as incompetent to bind either appellant, the court said: “That would not make it incompetent as to the chief.” Mr. Murphy (for appellants) : “Possibly not as to the chief.” Finally the court said: “I assume that the answer is at the present time merely for the purpose of what Madison said. Objection overruled, and the court will later on if counsel requests caution the jury, if necessary, as to the other two defendants.” The testimony was negligible as to its effect upon appellants in any view, and was doubtless so considered by counsel for appellants, for they made no request for an instruction as invited by the court, nor did they except to the charge as given. This specification is without merit.

5. One of the jurors was struck by an automobile and injured slightly before the deliberations of the jury were concluded. His examination disclosed that the accident was not sufficiently serious to interfere with his ability properly to discharge his duty as a juror in the case. Counsel for appellants complain of the failure of the court to order a mistrial because of this accident. No motion to that effect was made by the defense. The juror was not shown to be incapacitated, and the court committed no error in permitting the deliberations of the jury to proceed to verdict.

6. The Jones Act (Act March 2,1929 [27 USO A §§ 91, 92]) is attacked as unconstitutional and void as an improper delegation of legislative power. It is further ‘urged that it is so indefinite, ambiguous, and uncertain as to be unenforceable. These questions are no longer open ones. It has been authoritatively ruled to the contrary. Ross v. United States (C. C. A. 4) 37 F.(2d) 557; McElvogue v. United States (C. C. A. 8) 40 F.(2d) 889. In both cases certiorari was denied. 281 U. S. 767, 50 S. Ct. 466, 74 L. Ed. 1175, and 282 U. S. 845, 51 S. Ct. 24, 75 L. Ed.-, October 13, 1930. See, also, Husty et al. v. United States, 282 U. S. 694, 51 S. Ct. 240, 242, 75 L. Ed.-, February 24, 1931.

This indictment is attacked as insufficient because it does not state whether the accused are charged with “casual” or “slight” violation of the law, or whether they are charged with “habitual sales,” or with “attempts to commercialize violations of the law.” This criticism is met in the cases cited above. In Husty et al. v. United States, supra, the Supreme Court said:

“As the act added no new criminal offense to those enumerated and defined in the National Prohibition Act, it added nothing to the material allegations required to be set out in indictments for those offenses. The proviso is only a guide to the discretion of the court in imposing the increased sentences for those offenses for which an increased penalty is authorized by the act” — citing Ross v. United States and McElvogue v. United States, supra.

Finally, it is urged that the court abused this discretion in the sentence imposed. It is submitted that the record does not justify an increase of sentence over that provided for transportation in the National Prohibition Act (27 USCA § 46). As suggested in the Husty Case, the District Court may have had before it facts other than those appearing of record which it was entitled to. consider in imposing sentence under the Jones Act.” North Dakota is situated on the Canadian border. It is a matter of common knowledge that much of the illicit supply of intoxicating liquor which finds its way into sections of the United States is smuggled from Canada. The offense here charged involved transportation on a large scale. The record furnishes support for the conclusion that appellant Norris was operating along the line of an established route or “underground railway” in furtherance of this unlawful importation. At all events, we cannot say that the District Cburt exceeded its powers in the premises. It results that the judgment in case No. 9079 is affirmed; that in No. 9080 is reversed, and the case is remanded for a new trial.


author: PER CURIAM.

text:
    ZURICH GENERAL ACCIDENT & LIABILITY INS. CO., Limited, v. THOMPSON.
    No. 6286.
    Circuit Court of Appeals, Ninth Circuit.
    May 8, 1931.
    Rehearing Denied June 15, 1931.
    J. Hampton Hoge, of San Praneiseo, Cal. (A. Dal Thomson, of San Francisco, Cal., of counsel), for appellant.
    Norman S. Menifee, of Redwood City, Cal., and Clifton Hildebrand, of San Francisco, Cal. (Thomas F. MeCue, of San Francisco, Cal., of counsel)., for appellee.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
    The following opinion, prepared by RUD-KIN, Circuit Judge, is adopted as the opinion of the court by WILBUR and SAWTELLE, Circuit Judges:
   PER CURIAM.

This was an action on a policy of automobile insurance to recover the amount of a judgment for damages theretofore recovered by the plaintiff in an action for personal injuries against the person driving'the automobile covered by the policy. The omnibus coverage indorsement extended the policy to apply to any person or persons riding-in or legally operating the automobile. The person so operating the automobile was a son of the assured. Under the heading of special conditions, it was stated in the policy that the automobile was principally used in the city or town of Los Altos and in the vicinity of said city or town. This provision was later amended by indorsement so as to show that the address of the assured was Mill Valley, Cal., and that the automobile was maintained, garaged, and principally used in the city or town of Mill Valley. Upon the trial of the action, the jury returned a verdict in favor of the plaintiff, and from the judgment on the verdict the defendant has appealed.

The principal specifications of error are, that the court erred in refusing to direct a verdict in favor of the appellant at the close of all the testimony, for the reason that the uncontradieted testimony showed a breach of the warranty contained in the policy, to the effect that the automobile was maintained, garaged, and principally used in the town or city of Mill Valley, and that the court erred in striking certain testimony tending to prove that the person driving the automobile at the time the appellee received her injuries was intoxicated and for that reason was not legally operating the automobile.

There was testimony tending to prove that the assured was a nurse by occupation, and made her home a part of the time with her son in Mill Valley and a part of the time with her daughter, having no home of her own; that at or about the time the policy in suit was taken out she went to Los Altos to nurse her daughter, who was suffering from tuberculosis, and while there learned to drive the car; that about March, 1928, when the indorsement changing the place of garaging and principal place of use from Los Altos to Mill Valley was made, she went to the latter place to reside with her son; that she never drove the, car in San Francisco herself; that, for about six months pri- or to the accident which gave rise to the present controversy, the car was used by her son and daughter; that the principal use of the car was by her son in driving between San Francisco and Redwood City and Los Altos; that the ear was kept in Mill Valley over week-ends and during the remainder of the time was generally garaged some place in San Francisco. There was no testimony tending to prove the extent to which the automobile was used by either the son or daughter, except as above set forth. The appellant offered testimony tending to prove that the insurance rate on automobiles garaged and principally used in San Francisco was considerably higher than the rate on automobiles garaged and'principally used in Mill Valley.

On the foregoing facts, the court instructed the jury, in effect, that, if they found that the policy contained a special condition that the automobile would be maintained, garaged, and principally used in Mill Valley, and that thereafter the automobile was, for a considerable period of time prior to the accident, maintained, garaged, and principally used in San Francisco, without notice to the insurer and without a request for an amendment of the special condition changing the place of maintaining, garaging, and principal use to San Francisco, and that such change or amendment would call for a larger premium, the failure of the assured to comply with the special condition avoided the policy, and their verdict should be for the defendant. The court below thus treated this condition of the policy as a warranty, and, without expressing any opinion on the question, we will treat it in the same nlanner.

There was no exception to the charge as thus given, but counsel earnestly insist that under the undisputed facts the verdict should have been for the appellant, and that the court should have so directed the jury. With this contention we are unable to agree. The meaning of the term “principally” is somewhat uncertain and indefinite at best, and this is especially true where it relates to the movements or place of use of the modern automobile. This was fully recognized by the parties to the contract of insurance, because the policy expressly authorized the use of the automobile at any place within the limits of the United States and the Dominion of Canada. The policy in this respect must therefore be liberally construed. The assured made her home at Mill Valley with her son a portion of the time, and the son resided there continuously. If the son had driven the automobile to his home in Mill Valley every night, making the same use of it during the day, we apprehend there would be little contention that there was a breach of the warranty; and the fact that he returned to his .home the greater part of the'time by some other means, leaving the automobile on this side of the bay, should not he permitted to change the result.

Nor do we see any merit in the contention that the intoxication of the driver was a defense to the action. The term “legally operating the automobile” means operating it by right or by lawful authority, rather than operating it in accordance with law. It is a well-recognized fact that nearly all automobile accidents result from infractions of traffic regulations of some kind, and to limit indemnity to unavoidable accidents for which the assured is in no wise responsible would reduce it to a mere shadow. As said by the court in Messersmith v. American Fidelity Co., 232 N. Y. 161, 133 N. E. 432, 19 A. L. R. 876: “To restrict insurance to cases where liability is incurred without fault of the insured would reduce indemnity to a shadow. Neither in the statute nor in its application' as shaped by long-continued practice is there the token of an intention that indemnity shall be withheld from owners operating their own .cars, and limited to those whose ears are run by servants. Liability of the owner, who is also the operator, can never be incurred without fault that is personal. Indeed, the statute has so covered the field that it can seldom, if ever, be incurred without fault that is also crime. It is a misdemeanor * • * to drive without adequate brakes and horns and lamps * * *; to fail in stated situations to stop on signal * * *; to violate the rules of the road by not keeping to the right * * *; to drive in a careless and imprudent manner or at a dangerous or prohibited rate of speed. * * *”

See, also, Fireman’s Fund Ins. Co. v. Haley, 129 Miss. 525, 92 So. 635, 23 A. L. R. 1470; Pawlicki v. Hollenbeck, 250 Mich. 38, 229 N. W. 626; Odden v. Union Indemnity Co., 156 Wash. 10, 286 P. 59; Kautz v. Zurich General. Accident & Liability Ins. Co. (Cal. App.) 293 P. 133. The case last cited grew out of the same accident here in question and was covered by the same policy of insurance.

Furthermore, the policy contained an express provision that it should not cover in respect to any automobile while driven or manipulated by any person under the age fixed by law, or under 16 years of age in any event, or while driven or, manipulated in any race or speed contest; and, if it were intended to except drunken drivers as well, the policy should have so stated, not leaving the question of liability to depend on some such ambiguous expression as legally operating the automobile.

On the argument before this court, counsel for appellant frankly conceded that mere violations of traffic regulations, such -as driving on the wrong side of the highway, or at an unlawful rate of speed, would not avoid the policy or constitute a defense, but argued that driving while intoxicated is a felony and a different rule should apply. We fail to appreciate the force of this distinction. The defense was based upon the claim that the automobile was not being legally operated at the time of the accident, and, if the term “legally” has the broad significance claimed for it, it would preclude a recovery under the policy for every accident resulting, directly or indirectly, from an infraction of the law, whether felony or misdemeanor.

In the course of the argument before the jury, counsel for appellant stated, in effect, that the appellant was a large and responsible corporation. Counsel for the appellee thereupon replied that there was no evidence in the record to that effect; that in fact the standing of the appellant was not good, judging from the large number of eases piling up against it in court. This latter statement was assigned as misconduct and the appellant moved the court to declare a mistrial. The court denied the motion, but informed the jury that the statement of counsel for the appellee was serious misconduct, that it should not have been made, and admonished them to disregard it. Both statements were outside of the record and 'should not have been made, but the statement of counsel for appellee was provoked in a measure by the improper statement of counsel for appellant. We have no doubt that the admonition of the court was sufficient to remove any prejudice that might otherwise have resulted from the statement complained of.

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


author: WILBUR, Circuit Judge.

text:
    REPUBLIC OF CHINA v. MERCHANTS’ FIRE ASSUR. CORPORATION OF NEW YORK.
    No. 6287.
    Circuit Court of Appeals, Ninth Circuit.
    May 8, 1931.

      See, also, 30 F.(2d) 278.
    W. Y. Char and H. D. Rodger, both of Shanghai, China, and Eustace Cullinan and Thomas W. Hickey, both of San Francisco, Cal., for appellant.
    Fleming, Franklin & Allman, of Shanghai, China (George F. Richardson, of Shanghai, China, of counsel), for appellee.
    Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
   WILBUR, Circuit Judge.

This is an appeal from an order of the United States Court for China refusing to vacate the entry of the satisfaction of a money judgment against appellee and in favor of the republic of China. It appears from the affidavits and records used upon the motion and incorporated in the transcript that the judgment and satisfaction were the result of a compromise arrangement entered into between the appellee and the attorney at law and attorney in fact of the plaintiff in the action upon an obligation of the appellee growing out of a loss sustained upon a fire insurance policy issued by it to the Chinese government telephone administration, Wuchang, upon its telephone building at Wuchang, China, which was destroyed by fire on the 22d day of February, 1926, while the policy was still in force. The amount of the loss had been ascertained in accordance with the terms of the policy to be $66,238.12, Mexican silver dollars. In pursuance of the stipulation for a settlement of the claim, the above-mentioned judgment was entered, and, upon payment being made in accordance with the terms of this stipulation, the satisfaction of judgment was entered. The suit was brought in pursuance of authority thereto by the civil officers purporting to represent the Chinese government at Peking who were co-operating with the military forces under General Chang Tso Ling which had captured the city of Peking and driven out the officers of the Provisional government of the republic of China. t In making the settlement and consenting to the judgment and in making- a payment thereof, the appellee dealt with the same attorneys at law and in fact who had brought the suit. After these transactions were completed and the judgment satisfied, the government of the United States, in July, 1928, recognized as the rightful government of China the Nationalist government of China, with headquarters at Nanking, whose military forces had been operating under General Chang Kai Shek. Upon the theory that such recognition related back to the beginning of the Nationalist government, it is contended that the courts must act upon the theory that, at the time this action was brought, and when judgment was rendered and the time of its satisfaction, the present recognized government of China was the only authority authorized to bring and maintain the action, and that the judgment in this action in favor of the republic of China, while actually procured by agents of the Peking government, is nevertheless the property of the Nationalist government, because such government is now recognized as the rightful government of China, and such recognition is binding' upon the judicial department of our government. It is therefore contended that the recognized government has a right to the judgment and to claim here that the payment thereof was to persons who were not authorized to represent the republic of China, and that such payment therefor should be ignored and the satisfaction of the judgment vacated.

It should be observed at the outset that this contention is in conflict with the axiom that he who takes benefit must bear the corresponding burden. In this case the benefit which the appellant seeks to appropriate is the judgment in favor of the republic of China. The corresponding burden is the agreement under which the judgment was procured, and this agreement not only provided for the entry of the judgment, but for its satisfaction in the manner and by the payments authorized thereby. This is in accord with the opinion of the trial judge, who stated his views in his opinion given in connection with his ruling upon the motion as follows:

“The satisfaction of the judgment, for the consideration so specified, was therefore an essential and very important factor in the contract by which the compromise and settlement was to be effected, and but for the agreement to give such satisfaction of judgment no such judgment would ever have been entered.
“To permit the movant, under such circumstances, to reject the satisfaction and compromise of the judgment, which were the very conditions upon which the judgment was procured and entered, and at the same time to take over the judgment as the beneficial owner thereof and have execution thereon for the full amount of the judgment, would in my opinion do violence to the most elementary principles of equity and justice. Such a course of procedure would result in compelling the defendant to pay the judgment a second time, and in an amount of money very much in excess of the consideration for which the judgment had already been compromised and settled.”

This consideration alone we think would require us to affirm, the aetion of the trial court in refusing to set aside the satisfaction of the judgment. In view of the somewhat complicated situation presented by the record, we will state some additional facts and consider their applicability to the question involved on this appeal.

At the time of the procurement of the policy on the Telephone Exchange Building in Wuchang, the government telephone administration using the building and procuring the fire insurance policy was the duly recognized Provisional government having its capital at Peking. Thereafter the military forces operating under Chang Kai Shek of the Nationalist government captured the cities of Wuchang and Hangkow, China, across the Yangtse river from Wuchang. The fire which caused the loss sued upon occurred before the capture of Wuchang by the forces of the Nationalist government and during the continuance of the Provisional government recognized by the United States government. The Nationalist government took possession of the Telephone Exchange building, and thereafter operated the exchange. It secured possession of tbe policy involved in this aetion, and after the adjustment of the loss brought a suit (No. 3004) upon the policy against the appellee in the name of the republic of China in the United States Court for China at Shanghai, which plaee was also occupied by the military forces of the Nationalist government. Shortly thereafter, this aetion (No. 3025), instituted by the authorities at Peking, was brought in the name of the republic of China against the appellee upon the same policy and loss. With these two actions pending before the United States Court for China against the appellee upon the same insurance policy and for the same loss, the jurisdiction of the court was invoked by appropriate motions to have determined which of the two governments or sets of officials was entitled to sue upon the claim of the republic of China, neither government having been expressly recognized by the government of the United States, and the government which had been recognized (the Provisional government at Peking) having been entirely dissipated and dispersed by the military forces operating under Chang Tso Ling. The trial court, recognizing the principle that it lies with the executive and legislative departments of the government to determine whieh government of China it should recognize, came to the conclusion that the United States government had sufficiently recognized the Peking government to justify that government in prosecuting the aetion. This decision was based upon a telegram from the American minister at Peking. The court thereafter sustained the authority of the attorneys at law and in fact who were prosecuting this aetion (by the Peking government), No. 3025, and in aetion No. 3004 decided against the authority of those who were prosecuting that action in behalf of the republic of China upon authorization from the Nationalist government. The Nationalist government appealed to this eourt. In the meantime the government of the United States recognized the Nationalist government, and, basing our judgment upon that ground, this court reversed the judgment of dismissal in case No. 3004. Republic of China v. Merchants’ Fire Assur. Corp., 30 F.(2d) 278.

In the meantime, the trial court had proceeded to judgment in this action, No. 3025, as hereinbefore stated. When case No. 3004 was remanded for further proceedings by the trial court, the appellant insurance company, defendant in that action, set up the judgment in No. 3025 as a bar to the action. The court rendered judgment in favor of the defendant (appellee herein) sustaining its claim that the judgment in No. 3004 was res judicata. Appellant, in effect, claims that this judgment in action. No. 3004 was erroneous. In. the absence of an appeal, the judgment is binding, even if erroneous. After the rendition of the judgment in case No. 3004, appellant took the position in action No. 3025 hereinbefore stated, namely, that- as the recognized government of China it was entitled to collect the judgment in favor of the republic of China rendered in ease No-. 3025. The settlement between the parties claiming to- represent the republic of China in this ease, No. 3025, and the appellee insuran.ee company, provided that the judgment, when rendered, should be satisfied by a payment to the Equitable Eastern Banking Corporation of $43,-029.20, Mexican, and the assignment to' said bank of a claim of the appellant against the Russo-Asiatio Bank at Hankow for $25,993.-99, Mexican. The sum of these two amounts represents the total loss due to the fire, with interest thereon. This money was to be paid, and the assignment of the claim against the Russo-Asiatio Bank was to be made, to the Chinese Electric Company, Limited, the attorney in fact of the Chinese (Peking) government. In the event this court, upon the pending appeal from the judgment of dismissal in ease No. 3004, reversed that judgment, it was agreed that the money so paid and the assignment should be deposited with the Equitable Eastern Bank Corporation at Shanghai, China, to be held to await the event of the trial of ease No. 3004, and, in ease the judgment was rendered against the appellant in that action, the money and assignment were to be returned to the appellee insurance company, to be applied to the satisfaction of any judgment rendered in action No. 3004. It was also agreed that the counsel for the Chinese government (Peking government) should have the right to defend against the action of the Nationalist government (in ease No. 3004) and take an appeal to this court in-the event of an adverse judgment. No ex-press agreement is made with reference to the disposition of this deposit in the event that the judgment in No. 3004 was adverse to the Nationalist government, as it was.

There seems to be no serious question but that the money paid into the banking company upon this settlement and the assignment is available to the appellant, the recognized government of China. The principal complaint made here is that the appellee insurance company gained an advantage in the settlement because of the transfer of a claim against an. insolvent bank in lieu of the corresponding obligation to pay money. It is claimed that the agreement for the satisfaction of the judgment was a collusive one, brought about by the desire on the part of the insurance company to realize upon this claim of doubtful value. This contention, however, is based upon the erroneous theory that the judgment in case No. 3025 belongs to the appellant, and that the appellant is not bound by the acts of the agents who procured that judgment, even though it ratifies their act to the extent of appropriating the fruits of their action in the form of a judgment. This contention we think conflicts with the fundamental principles of agency which is thus stated in 21 Ruling Case Law, 923, 924, § 102:

“If a principal elects to ratify any portion of an unauthorized transaction of his agent he must ratify the whole of it. He cannot avail himelf of such acts as are beneficial to him, and repudiate such as are detrimental, Whether the ratification be expresed or implied. If, for example, an agent obtains possession of the property of another by making a stipulation or condition which he is not authorized to make, the principal must either return the property, or remain subject to the condition upon which it was parted with by the former owner. Similarly, keeping part of the goods left for a person with an unauthorized agent, who assumed to accept them in discharge of a contract which the other party had the option to discharge either in goods or in money, ratifies the act of the agent in accepting the goods, and prevents the rejection of other portions of the goods. And on the same principle the payee of a renewal note cannot, after knowledge of all the facts, ratify the act of his agent in obtaining such note by suing thereon, and at the same time repudiate as unauthorized the act of his agent in executing contemporaneously therewith an agreement detrimental to him, which contemporaneous agreement was the inducing cause of the execution of the renewal note. (21 R. C. L. 923, 924, § 102 of Principal and Agent.)”

In view óf the action of the appellant in abandoning the suit No. 3004 brought by it and in moving to appropriate the fruits of the action brought by the Peking government, we find it unnecessary to discuss or further consider the perplexing problems growing out of the civil war in China and the conflicting claims of the various civil and military organizations claiming to represent all or .a part of China. If the appellant had adhered to its position taken originally on appeal in its case No. 3004, some of these questions pressed up* on us for consideration would have required determination, but, for the reasons stated, it is unnecessary to enter into these perplexing questions.

Order affirmed.

SAWTELLE, Circuit Judge, concurs.


author: MUNGER, District Judge.

text:
    GUARANTY TRUST CO. OF NEW YORK v. DANIEL.
    No. 9088.
    Circuit Court of Appeals, Eighth Circuit.
    May 4, 1931.
    William C. Dorsey, of Omaha, Neb. (H. Malcolm Baldrige, of Omaha, Neb., on the brief), for appellant.
    Winthrop B. Lane, of Omaha, Neb. (Hal-leek F. Rose, Arthur R. Wells, and Paul L. Martin, all of Omaha, Neb., on the brief), for appellee.
    Before YAN YALKENBURGH and BOOTH, Circuit Judges, and MUNGER, District Judge.
   MUNGER, District Judge.

The P'eters Trust Company of Omaha, Neb., hereafter called bankrupt, was adjudged insolvent in a proceeding in the state court on November 25, 1929. On November 27, 1929, a petition was filed in the United States Court at Omaha by some of its creditors asking that it be declared a bankrupt, and on December 10, 1929, an adjudication of bankruptcy and order of reference were made on this petition and Herbert S. Daniel was appointed as receiver. The receiver was afterwards chosen as trustee of the bankrupt. In April, 1930, appellant, the Guaranty Trust Company of New York, filed before the referee at Omaha, Neb., a petition for reclamation of .certain negotiable bonds. In its petition the Guaranty Trust Company alleged that the Guaranty Company of New York had shipped these bonds to the bankrupt on November 20, 21, and 23, 1929, pursuant to an order of the bankrupt and that they were received by the bankrupt on November 23 and November 25, 1929. It alleged that the bankrupt knew of its insolvency when it ordered the bonds, and did not intend to pay for them, that they were fraudulently obtained, and that no valid title to them passed to the bankrupt. It was further alleged that the Guaranty Company had assigned to the Guaranty Trust Company the accounts against the bankrupt for the bonds, that the Guaranty Trust Company was the owner of the bonds, and the prayer was for an order by the referee directing the trustee to deliver the bonds to the petitioner, and for such other relief as might be just and proper. The trustee answered this petition for reclamation, asserting that the sale of the bonds to the bankrupt had been made in the usual course of business, and denied a fraudulent purchase. In addition to these defensive averments, the trustee alleged that the Guaranty Trust Company had in its possession $31,224.60 which belonged to the •bankrupt estate, which had been accumulated by the receiver and trustee of the bankrupt after the adjudication, and asked for an order directing the Guaranty Trust Company to pay this amount to the trustee. At a hearing before the referee the Guaranty Trust Company moved that this portion of the answef by the trustee should be stricken out, because it pertained to an issue, separate from the one presented by the petition for reclamation, and was an issue not within the jurisdiction of the referee. The referee overruled this motion, and thereafter the Guaranty Trust Company announced that it was entering a dismissal of its reclamation proceedings and participated no further in the hearing before the referee. The hearing continued before the referee and testimony was received from a number of witnesses, and at the conclusion the referee entered an order, which, in part, was as follows:

“And the court further finds that the Guaranty Trust Company has in its hands the sum of $23,724.60 in cash, belonging to Herbert S. Daniel, trustee of the above named bankrupt; that said sum was accumulated by Herbert S. Daniel, as receiver,subsequent to February 12th, 1930, said moneys having been collected by said Guaranty Trust Company for and on behalf of said bankrupt estate from the Prudential Insurance Company of America on mortgages made by the bankrupt and sold to the Prudential" Insurance Company of America, and that said Guaranty Trust Company has not made herein any claim to the said fund of $23,724.60, and has no claim to the said fund, or to any part thereof, and is merely holding the said sum of $23,724.60 as custodian and agent of Herbert S. Daniel, as trustee of the above named bankrupt, and that said sum should be delivered forthwith to said trustee.
“And the court further finds generally that the allegations in the answer of Herbert S. Daniel, trustee, are true. * * *
“And it is further ordered that the Guaranty Trust Company of New York, the applicant herein, be, and it is hereby ordered and directed to forthwith pay over to Herbert S. Daniel, as trustee of the above bankrupt estate, the sum of $23,724.60, of moneys in the hands of said Guaranty Trust Company of New York, belonging to Herbert S. Daniel, trustee of said bankrupt estate, with interest thereon at the rate of 7 per cent per annum from this date.”

The Guaranty Trust Company filed with the referee a petition for review of this order, and this petition for review was submitted to the court upon the record and the proceedings before the referee. The court affirmed the order, except as to the allowance of interest. The Guaranty Trust Company has appealed from this decision. Its assignments of error allege, in various forms of expression, that the referee was without jurisdiction to make the order complained of, after appellant had dismissed its petition for reclamation. It also alleged that appellant was in possession of the moneys in controversy, and that it was outside of the territorial jurisdiction of the bankruptcy court. A further claim was made that appellant was an adverse claimant of the money. No complaint was made of the facts found by the referee. Under these findings, there is no basis for any claim that the appellant was an adverse claimant, both because no such claim was asserted, and because the referee found that the money in question was the bankrupt’s and had been received after the bankruptcy proceedings had begun.

There remains the question whether the referee and the court below had the power to order this money to be turned over to the referee. Appellant does not question the authority of a bankruptcy court, through ancillary proceedings in the territorial jurisdiction of appellant’s residence, to order the delivery of the bankrupt’s assets, but appellant as-serfs that it was not subject to the order of the referee in this case, although it had filed a petition in reclamation before him. The courts of bankruptcy may act in the exercise of their jurisdiction in their territorial limits, hut there may be ancillary bankruptcy proceedings in other districts, in aid of the bankruptcy court exercising primary jurisdiction. Bankruptcy Act, § 2 (20), 11 USCA § 11 (20); Babbitt v. Dutcher, 216 U. S. 102, 30 S. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969; In re Elkus, 216 U. S. 115, 30 S. Ct. 377, 54 L. Ed. 407; Lazarus v. Prentice, 234 U. S. 263, 34 S. Ct. 851, 58 L. Ed. 1305. An order by the referee directing appellant, as a resident of New York, to surrender to the trustee property which it held there, would be beyond the ordinary powers of the referee. Staunton v. Wooden (C. C. A.) 179 F. 61.

Appellee claims that the referee had jurisdiction to make the order complained of, because a bankruptcy ease is a proceeding in equity, and when the appellant filed its petition for reclamation it became subject to Equity Rule 30 (28 USCA § 723), which provides that the answer, in an equity case, “must state in short and simple form any counterclaim arising out of the transaction * * * and may, without cross-bill, set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim, so set up, shall have the same effect as a cross-suit, so as to enable the court to pronounce a final decree in the same suit on both the original and the cross-claims.”

It may be conceded that the trustee might have brought an independent suit in equity to recover the amount of money which he alleged the appellant had, belonging to the bankrupt estate. Whitney v. Wenman, 198 U. S. 539, 25 S. Ct. 778, 49 L. Ed. 1157. What was the power of the referee to hear and determine such an issue, if the allegations of the answer should be treated under Equity Rule No. 30, as the statement of a counterclaim? In Weidhorn v. Levy, 253 U. S. 268, 40 S. Ct. 534, 536, 64 L. Ed. 898, the court considered the authority of a referee to entertain a suit against a third person seeking to set aside an alleged fraudulent conveyance and to recover for the estate the goods conveyed. After referring to the provisions in the Bankruptcy Act and in the General Orders in Bankruptcy, conferring power upon the referee, the court decided that such a suit was not a “proceeding” in bankruptcy, within the meaning of that term as found in General Order XII rfl), 11 USCA § 53. The court said: “We-find nothing in the provisions of the Bankruptcy Act that makes it necessary or reasonable to extend the authority and jurisdiction of the referee beyond the ordinary administrative proceedings in bankruptcy and such controversial matters as arise therein and are in effect a part thereof, or to extend the authority of the referee under the general reference so as to include jurisdiction over an independent and plenary suit such as the one under consideration. The provisions of the act, as well as the title of his office, indicate that the referee is to exercise powers not equal to or co-ordinate, with those of the court or judge, but subordinate thereto; and he becomes ‘the court’ only by virtue of the order of reference. In the General Orders the word ‘proceedings’ occurs frequently, but never in a sense to inelude a plenary suit. On the other hand, ‘proceedings in equity’ and ‘proceedings at law’ are specially dealt with in General Order XXXVII [11 USCA § 53].” See also Remington on Bankruptcy §§ 648, 2188, 2194.

We think the reasoning in this case applies also to any plenary suit brought before the referee by the trustee to recover a sum of money alleged to belong to the bankrupt, but the petition of appellant for reclamation, and the portion of the trustee’s answer which asked for affirmative relief were, in fact, petitions by the parties asking the referee to exercise his summary jurisdiction in proceedings in bankruptcy. The two proceedings were quite distinct. Appellant sought to recover certain bonds to which it claimed title. The trustee sought an order that appellant should pay over money of the bankrupt estate received by appellant, after bankruptcy. The proceedings would not have been more unrelated to each other, if the trustee had sought an order on appellant for the delivery of books and papers such as was asked in Babbitt v. Dutcher, 216 U. S. 102, 30 S. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969, or an order for the examination of witnesses such as was asked in Re Elkus, 216 U. S. 115, 30 S. Ct. 377, 54 L. Ed. 407. We have been cited to no authority for the proposition that a creditor or other petitioner asking specific relief against a bankrupt’s estate, as provided by the Bankruptcy Act, thereby becomes subject to summary orders by the referee in matters entirely disconnected from the subject-matter of such claim or petition, and no such authority is believed to exist.

Under the circumstances we. think that the appellant’s objections to the jurisdiction should have been sustained, and the order of the court affirming the order of the referee will be reversed.


text:
    STRATON et al., Special Com’rs, v. NEW et al.
    No. 2847.
    Circuit Court of Appeals, Fourth Circuit.
    May 1, 1931.
    Randolph Bias, of Williamson, W. Va., for appellant.
    Arthur F. Kingdon, of Bluefield, W. Va. (E. A. Hansbarger, of Williamson, W. Va., on the brief), for appellees.
    Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.
   PER CURIAM.

This is an appeal from an order entered in the bankruptcy proceedings of the Fall Branch Coal Company enjoining commissioners, appointed by a West Virginia state court, from proceeding with the sale of certain property of the bankrupt as ordered by the decree of that court. The petitioners in the court below, upon whose plea the injunction was granted, were the trustees in bankruptcy of the coal company, the First National Bank of Bluefield, and one Edwin Mann; the last two being holders of mortgages or deeds of trust upon the coal company’s property. The petition set forth that the commissioners were advertising for sale only the property of bankrupt situate in West Virginia; that it would be advantageous to all parties to have this property sold in connection with property of bankrupt situate in Kentucky; that the bankruptcy court had exclusive jurisdiction to make the sale; and that Mr. Bias, one of the commissioners, had consented to its jurisdiction by proving claims at the first meeting of creditors, participating in the election of a trustee, and otherwise taking part in the bankruptcy proceedings. The commissioners, in their answer, denied the right of the District Court to enjoin the proceedings in the state court, and, from the order awarding the injunction, appealed.

The facts with regard to the suit in the state court are as follows: One Paul Z. Alley, on April 11, 1927, obtained a judgment against the coal company in the circuit court of Mingo county, W. Va., which was duly docketed on May 5,1927, in the county clerk’s office, and thereupon became a lien upon its real estate situate in that comity. On February 20, 1928, he filed in that court against the coal company a judgment creditors’ suit, making parties thereto all creditors having liens upon its real estate, including the First National Bank of Bluefield and Edwin Mann, and asked that the liens and assets be marshaled and that the real estate of the coal company in Mingo county be sold and the proceeds thereof he distributed among the lien claimants in accordance with their respective rights. The cause was duly matured, and at the April term, 1928, was referred to a commissioner in chancery to report the real estate owned by the coal company and the liens thereon. At the July term, 1928, the commissioner made his report, and thereupon three commissioners were appointed to make sale of the property. On August 4, 1928, sixteen months after the rendition of one of Alley’s judgments and five and one-half 'months after the filing of the creditors’ bill, the coal company filed its voluntary petition in bankruptcy; and on October 11th following, while the commissioners of the state court were proceeding to carry out its order of sale, the trustee in bankruptcy with the First National Bank of Bluefield and Edwin Mann filed the petition to enjoin them from proceeding further.

Upon a disagreement of the judges of this court the following question was certified to the Supreme Court, viz.: “Where creditors have obtained and docketed judgments constituting liens on the real estate of defendant, and have instituted a creditors’ suit in a state court to marshal and enforce the liens and sell the real estate subject thereto, does the bankruptcy of defendant occurring more than four months after the institution of the creditors’ suit oust the state court of jurisdiction, or vest in the court of bankruptcy power to enjoin further proceedings in the state court ?”

The Supreme Court has answered this question in the negative. Straton et al. v. New, Jr., et al., 51 S. Ct. 465, 75 L. Ed.-.

The argument that the state eourt lost its jurisdiction because one of its commissioners, as attorney for creditors of the bankrupt, including the lien creditors who had instituted the suit in the state court, filed claims in their •behalf and participated in the first meeting of creditors, is without merit. The bankrupt estate owned property other than that involved in the litigation in the state court. A creditor had the right to file his claim against the estate notwithstanding he was interested in the state,court litigation, and certainly the filing of such claim did not operate to deprive the state court of jurisdiction or to a consent that the bankruptcy court should enjoin proceedings therein. Pickens v. Roy, 187 U. S. 177, 180, 23 S. Ct. 78, 47 L. Ed. 128; Pickens v. Dent (C. C. A. 4th) 106 F. 653, 657.

For the reasons stated, there was error in granting the injunction restraining the commissioners of the state court from proceeding with the sale in accordance with its decree, and the order granting the injunction is accordingly reversed.

Reversed.

Note. — Judge WADDILL, who sat in the hearing of this case, died before the ease was decided and did'not participate in the decision.


author: WALKER, Circuit Judge.

text:
    SCHICK v. CITY OF NEW ORLEANS et al.
    No. 5884.
    Circuit Court of Appeals, Fifth Circuit.
    May 16, 1931.
    Rehearing Denied June 17, 1931.

      Claude L. Johnson, of New Orleans, La. (Claude L. Johnson and James F. Pierson, both of New Orleans, La., on the brief), for appellant.
    Michel Provosty, City Atty., and Henry B. Curtis, Asst. City Atty., both of New Orleans, La., for appellees.
    Before BRYAN, FOSTER, and WALKER, Circuit Judges.
   WALKER, Circuit Judge.

The appellant, who is a citizen of the United States, domiciled in the city of New Orleans, and engaged in that city in the business of transferring and storing household goods, office furnishings and effects, and other light commodities, filed his bill in equity praying that an injunction be issued restraining the enforcement against himself of provisions of an ordinance of that city, adopted March 6, 1928, which, omitting its title, reads as follows:

“Section 1. Be it ordained by theo Commission Council of the City of New Orleans, that it is hereby made the duty of all persons, firms or corporations owning or operating within the City limits of New Orleans, any dray, moving van, furniture car, transfer wagon, express wagon, or any other vehicle who shall haul or move, or cause to be hauled or moved, household goods or personal effects other than baggage of any person in the City of New Orleans, which person is changing the place of his or her abode, to make report thereof to the Chief Police, which report shall .be made within one day thereafter on a blank form which is hereinafter described.
“Section 2. Be it further ordained, that it shall be unlawful for any person, firm or corporation causing the removal of any property herein described, to give the owner or operator of any vehicle employed to haul such property, a fictitious name, or refuse to give the correct name of the owner or party in possession of such property, so as to wilfully deceive such operator as to same.
“Section 3. Be it further' ordained, That the form or blank to be filled in by the person in Section 1 herein, shall be as follows:
------ Moved from......Moved to...... (Signed) ...... (Owner of Vehicle) Date Moved......Date filed with Chief of Police
“Section 4. Be it further ordained, that it shall be the duty of the Chief of Police to keep in a well bound book, open for inspection at the Police Station, all such certificates or blanks alphabetically indexed, as required by Section 3 hereof, provided the entire expense and cost of executing and carrying out the provisions of this Section shall be free of • cost to the City of New Orleans, except the expense of furnishing said book, blank or certificate.
“Section 5. Be it further ordained, that any person, firm or corporation violating the provisions of Sections one and two of this ordinance shall, upon conviction thereof before any Court of competent jurisdiction, be fined not more than $25.00 and imprisoned not more than ten days, or both, at the discretion of the Court.”

Provisions of that ordinance were challenged on the grounds that they violate rights secured to the appellant by the Thirteenth and Fourteenth Amendments of the Constitution of the United States, by imposing the additional involuntary labor upon appellant of obtaining information required to make prescribed reports and of making such reports under penalty of fine, and imprisonment for failing to do so, and by arbitrarily depriving him of his property without due process of law; by arbitrarily and wrongfully depriving him of the equal protection of the law, and by abridging and infringing his right and privilege of managing and controlling his private business for his own benefit and use in a. way not inconsistent with law and good morals. Upon the submission of the cause for final decree on the bill and answer, and upon a stipulation as to facts, which showed, in addition to above stated facts, that that ordinance imposed upon appellant and others engaged in similar business duties and obligations to do prescribed things and in so doing to incur expenses which were not required prior to the adoption of that ordinance, the court rendered a decree denying the prayer of appellant’s bill and dismissing the cause.

The ordinance in question requires nothing of the appellant except that, when he shall haul or move, or cause to be hauled or moved, household goods or personal effects other than baggage of any person in the city of New Orleans, which person is changing the place of his or her abode, he make report thereof to the chief of police within a prescribed time and on a prescribed form or blank furnished at the expense of the city of New Orleans, to be filled in by one making such report. The appellant has no standing to complain of that ordinance in so far as it made provision as to any one other than himself doing or omitting to do anything, as appellant could not be affected by the enforcement of such provision of the ordinance.

The “police power” includes the power to adopt regulations designed and reasonably adapted to promote the general prosperity by safeguarding contract or property rights, or to protect the public generally, or a class or classes of citizens, from fraud or criminal misconduct. Chicago B. & Q. Railway Co. v. Illinois ex rel. Drainage Com’rs, 200 U. S. 561, 592, 26 S. Ct. 341, 50 L. Ed. 596, 4 Ann. Cas. 1175; Adams v. Tanner, 244 U. S. 590, 596, 37 S. Ct. 662, 61 L. Ed. 1336, L. R. A. 1917F, 1163, Ann. Cas. 1917D, 973; Marrs v. City of Oxford (D. C.) 24 F.(2d) 541, 547. That the city of New Orleans is vested with police power was decided by the Supreme Court of Louisiana in a ease in which the validity of the ordinance now in question was adjudged. City of New Orleans v. Schick, 167 La. 674, 120 So. 47. Persons having business relations with residents of a large city, or having liens upon or other property interest in household goods or personal effects other than baggage in the possession or custody of such residents, may be prejudicially affected by the clandestine moving of such household goods or personal effects when such a resident is changing his or her abode. Such a report as the ordinance in question provides for may be a means of preventing the successful concealment of household goods or personal effects stolen or fraudulently obtained or intended to be fraudulently concealed. It is for the branch of the government which is vested with the police power to determine whether such a regulation as that provided for by the ordinance in question should or should not be adopted as a means of preventing or aiding in the detection of crime, or for the protection of contract or property rights of a class or classes of citizens; that regulation being such a one as reasonably may be considered to be appropriate to promote the accomplishment of the purposes mentioned. Standard Oil Co. v. Marysville, 279 U. S. 582, 49 S. Ct. 430, 73 L. Ed. 856. The business of moving household goods or personal effects is subject to reasonable regulations under the police power. Lawson v. Connolly, 175 Mich. 375, 141 N. W. 623, 45 L. R. A. (N. S.) 1152; Wagner v. St. Louis, 284 Mo. 410, 224 S. W. 413, 12 A. L. R. 495.

We conclude that the court did not err in sustaining the ordinance in question against the attack made by appellant’s bill.

The decree is affirmed.


author: ANDERSON, Circuit Judge.

text:
    KEELER et al. v. FRED T. LEY & CO., Inc.
    No. 2544.
    Circuit Court of Appeals, First Circuit.
    May 16, 1931.
    Lothrop Withington, of Boston, Mass. (Edward C. Park and Withington, Cross, Proctor & Park, all of Boston, Mass., on the brief), for appellants.
    Herbert Parker, of Boston, Mass. (Charles G. Gardner and William V. Baldwin, both of Springfield, Mass., on the brief), for appellee.
    Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.
   ANDERSON, Circuit Judge.

This was an action for deceit in inducing the plaintiffs to enter into contracts. At the close of the plaintiffs’ evidence the court ordered a verdict for' the defendant. Under such circumstances, the plaintiffs were entitled to have their evidence considered in its aspect most favorable to them. Gray v. Davis, etc. (C. C. A.) 294 F. 57; Union Pacific R. R. v. Huxoll, 245 U. S. 535, 539, 38 S. Ct. 187, 62 L. Ed. 455; Myers v. Pittsburgh Coal Co., 233 U. S. 184, 34 S. Ct. 559, 58 L. Ed. 906.

There was evidence tending to show facts as follows: In the fall of 1927 the plaintiffs owned the vacant Keeler Hotel site, in Al'bany, N. Y. The business of the defendant had been, for a generation, the construction of public works and buildings, and the management of buildings owned by controlled subsidiary corporations. Its treasurer, principal stockholder, and chief executive was Pred T. Ley. It was an expert both in building and in the management of such properties.

In November, 1927, the plaintiffs negotiated with Ley for the sale of this vacant land at an agreed price of $1,010,000 upon the understanding that the defendant was to construct an office building thereon substantially like another building built by defendant in New York City. Ley had an estimate made of the cost of such a building, and told plaintiffs that the structural cost thereof would be not less than $850,000; that the Ley Company would continue to operate the completed building through its subsidiary, and would look to the common stock of such subsidiary for its profit; that the Ley Company would have an investment of $150,000 to $200,000 above a contemplated first mortgage of $850,000 on the completed property.

Accordingly, the plaintiffs deeded their land to the defendant’s ■ subsidiary — the Broadway-Maiden Lane Corporation — which executed a first mortgage for $850,000 to the Pirst Trust Company of Albany, and a second mortgage for $870,000 to the plaintiffs. Prom the proceeds of the'first mortgage, the plaintiffs were paid $140,000, and the building was erected by the defendant,-at an actual cost of about $500,000. The defendant got as profit the balance of the proceeds of the first mortgage. The Broadway-Maiden Lane 'Company shortly defaulted on the interest on both mortgages as well as on the taxes. The plaintiffs were therefore constrained to pay the interest on the first mortgage and the taxes, and to foreclose their second mortgage.

Ley’s representations that the building-' would cost not less than $850,009 and that his company would continue in the management thereof until it was on an income-produeing basis were knowingly false.

Ley himself, called as a witness by the plaintiffs, testified specifically that, when the contract was made, he did not intend to cause his company to expend $850,000 on the contemplated building; that he fully expected to obtain a profit out of the proceeds of the first mortgage to be placed on the building; that “it was not his expectation or intention that there would not be any profit to the Ley Company out of the proceeds of the first mortgage. It is a fact that they obtained a profit from the proceeds of the first mortgage. It was not his expectation and intention * f ’ that his company would necessarily manage the business, either through direct ownership or through a subsidiary, until it was upon an income-producing basis.”

These false representations were substantially repeated in January, 1928, in defendant’s application to the Trust Company for the first mortgage of $850,000. There was abundant evidence that these false representations by Ley were believed and relied upon by the plaintiffs and induced them to deed their land to the defendant’s subsidiary and to make a contract with the defendant for the erection of*a building thereon, under financial arrangements above outlined.

Neither into the deed nor into this contract were inserted the representations made by Ley as to the cost of the building and its continued operation by defendant through its subsidiary. The defendant contends, and the court below apparently ruled, that all the rights and obligations of the parties were strictly limited by and to the terms of the ' contract itself. This was error. The correct rule was stated by the same learned District Judge in overruling the demurrer when he said: “The defendant demurred to the declaration, and stated as ground for demurrer that the statement of facts in the declaration showed that after the alleged misrepresentation had been made a contract was entered into which contained the entire agreement between the parties, and the parol evidence rule would not allow the plaintiffs to prove anything in variance with the contract. In. my opinion this argument is unsound. * * * The parol evidence rule has no application, as this is not a suit on a contract but is an action of tort for deceit in fraudulently inducing the plaintiffs to enter into a contract.”

It was no more necessary to set forth the inducing representations in the building contract than it was in the deed of the land. A party fraudulently induced to execute a deed is not remediless because the inducements thereto are not contained in the deed itself. Adams v. Gillig, 199 N. Y. 314, 319, 322, 92 N. E. 670, 32 L. R. A. (N. S.) 127, 20 Ann. Cas. 910; Ritzwoller v. Lurie, 225 N. Y. 464, 467, 122 N. E. 634.

The case is to be governed by the law of New York. James-Dickinson Co. v. Harry, 273 U. S. 119, 125, 47 S. Ct. 308, 71 L. Ed. 569; Huntington v. Attrill, 146 U. S. 657, 13 S. Ct. 224, 36 L. Ed. 1123.

The New York rule is well stated in Arnold, v. National Aniline & Chemical Co. (C. C. A.) 20 F.(2d) 364, 369, 56 A. L. R. 4. We have no occasion to determine whether the law of Massachusetts is in any way different.

It is well settled that fraud may consist in asserting a belief or an opinion, when such belief or opinion is not entertained and the assertion is made in bad faith, with a design to mislead and deceive. See Milliken-Tomlinson Co. v. Am. Sug. Ref. Co. (C. C. A.) 9 F.(2d) 809, 815, and eases cited. Shackett v. Bickford, 74 N. H. 57, 59, 60, 65 A. 252, 7 L. R. A. (N. S.) 646, 124 Am. St. Rep. 933;. Adams v. Gillig, supra.

In Vulcan Metals Co., Inc., v. Simmons Mfg. Co., 248 F. 853, 856, Judge Learned Hand, speaking for the Circuit Court of Appeals for the Second Circuit, said:

“An opinion is a fact, and it may be a very relevant fact; the expression of an opinion is the assertion of a belief, and any rule which condones the expression of a consciously false opinion condones a consciously false statement of fact. When the parties are so situated that the buyer may reasonably rely upon the expression of the seller’s opinion, it is no excuse to give a false one. Bigler v. Flickinger, 55 Pa. 279. And so it makes much difference whether the parties stand ‘on an equality.’ For example, we should treat very differently the expressed opinion of a chemist to a layman about the properties of a composition from the same opinion between chemist and chemist, when the buyer had full opportunity to examine.”

In Seven Cases v. United States, 239 U. S. 510, 517, 36 S. Ct. 190, 193, 60 L. Ed. 411, L. R. A. 1916D, 164, the court said:

“It is said that the owner has the right to give his views regarding the effect of his drugs. But state of mind'is itself a fact, and may be a material fact, and false and fraudulent representations may be made about it; and persons who make or deal in substances or compositions alleged to be curative are in a position to have superior knowledge, and may be held to good faith in their statements.”

See, also, authorities cited in 239 U. S. page 518, 36 S. Ct. 190, 193. Cf. Gordon v. Butler, 105 U. S. 553, 558, 26 L. Ed. 1166; 3 Williston on Contracts, No. 1494; Kerr on Fraud and Mistake (5th Ed.) p. 51; Simar v. Canaday, 53 N. Y. 298, 306, 13 Am. Rep. 523; People v. Peckens, 153 N. Y. 576, 591, 47 N. E. 883; Edgington v. Fitzmaurice, L. R. 29 Ch. Div. 459.

The plaintiffs’ evidence would warrant a finding of fraud. It tended to show that Ley not only intentionally misrepresented the actual estimate of the' cost of the contemplated building; but also falsely stated his intention of staying with the project until the completed building was a financial success; and the defendant apparently derived from its fraud an immediate profit of nearly $200,-000. Cf. Aaron’s Reefs v. Twiss, L. R. (1896) A. C. 273, 285.

The ruling that the plaintiffs were barred by their contract was error.

The judgment of the District Court is reversed, with costs, and the case is remanded to that court for further proceedings notv inconsistent with this opinion.


author: WILSON, Circuit Judge.

text:
    KEENE v. KELLEY (two cases).
    Nos. 2542, 2543.
    Circuit Court of Appeals, First Circuit.
    May 16, 1931.

      S. Leo Solomont, of Boston, Mass. (Everts, Aldridge & Solomont, of Boston, Mass., on the brief), for appellant.
    Stuart Maemillan, of Boston, Mass., and Philip G. Willard, of Cambridge, Mass. (Barker, Davison & Shattuck, of Boston, Mass., on the brief), for appellee.
    Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.
   WILSON, Circuit Judge.

These actions originally brought as cross-actions grew out of a building contract. The judgment below in both cases was against the appellant. In September, 1922, Kelley, a resident of Massachusetts, entered into a contract with Keene, a resident of New York, to construct for him a summer residence and garage in East Dennis in Massachusetts for the sum of $27,842. In the declaration in the action of Kelley v. Keene, there are two counts — one declaring on the contract and claiming to recover the further sum of $2,-068.78 for extra labor and materials furnished, with credits amounting to $21,158, leaving a balance due of $8,442.78; a second count of quantum meruit, under which he claimed the same amount as the value of the services and materials furnished by him, viz. $29,550.78, with the same credits and the ■ same balance due, viz. $8,442.78.

The cross action of Keene v. Kelley is based on an alleged breach of the contract and consequent damages.

Owing to the numerous items involved and claims and counterclaims, the actions were first referred to an auditor to determine the respective issues.

After protracted hearings in which the claims and counterclaims of both parties were presented with great detail, the auditor reported that there was due Kelley in his action the sum of $3,499.64, with interest from the date of the writ. The auditor also, for some reason not made clear, found for Keene in his action against Kelley in the amount of $1.

The entire ease was then tried before a jury; the auditor’s report being offered as. prima facie evidence. The jury, however, upon the evidence presented before it, found that Kelley was entitled to .recover the sum of $5,000 with interest, and awarded judg-> ment for the defendant in the action of Keene v. Kelley.

In both actions there were numerous assignments of error by the appellant, based on admission of evidence and failure to give requested instructions, and in the ease of Kelley v. Keene an alleged error in giving1 eertain instructions and in denying a motion" to direct a verdict for the defendant.

The chief issues were over the questions of whether the plaintiff Kelley had in goodf faith carried out his contract, and whether" Kelley was responsible for caving in of the cellar wall. It was conceded by the plaintiff Kelley that he did not entirely complete the1 contract in all particulars in accordance with’" its terms and could not recover under the first-count, but his contention was that in good faith he substantially completed it and was entitled to recover for the actual benefits eon-| ferred upon the defendant Keene to the amount of the fair value of the work and-material he did furnish, under the rule -in: Massachusetts laid down in Hayward v. Leonard, 7 Pick. (Mass.) 181, 19 Am. Dec. 268,, and since followed in that commonwealth, i Norwood v. Lathrop, 178 Mass. 208, 59 N. E. 650; Handy v. Bliss, 204 Mass. 513, 90 N. E. 864, 134 Am. St. Rep. 673, the question of. good faith being one of fact for the jury,. Leverone v. Arancio, 179 Mass. 439, 61 N. E. 45. The defendant Keene claimed poor workmanship, a faulty construction of the cellar wall, and many other minor failures-in completing the contract,“to complete which he claimed he was obliged to expend a large amount of money.

There was much testimony pro and eon on the several contentions of the parties. The jury must have found under the instructions of the court that Kelley could not recover on the contract, but, having in good faith substantially completed his contract, he was, under the second count, entitled to recover the sum of $5,000 and interest. Having so found, as the presiding judge properly instructed the jury, they found for the defendant in the action of Keene v. Kelley.

It would serve no purpose to discuss the evidence in support of the several contentions of the parties. It is sufficient to say that the motion to direct a verdict for the defendant in the action of Kelley v. Keene was properly denied. There was testimony in support of the claims of Kelley which, if believed, was sufficient to warrant a verdict in his favor to the amount awarded.

'As to the assignments of error based on the admission of testimony, we do not from an examination of the record find any prejudicial error was committed; and, as to the failure to give the several instructions requested by the defendant Keene, we find that they were either covered in another form in the judge’s charge, or were in some particular not proper instructions in view of the Issues and testimony.

The error assigned as to the instruction by the presiding judge to the jury, that the finding of the’ auditor for $1 damages for the plaintiff in the case of Keene v. Kelley was wrong, is without merit. The court explained to the jury that if, under his instructions, they found for Kelley, it would dispose of all the issues between the parties, and in that event they should find for the defendant.

Nor was there error in the judge’s instruction that Keene was not entitled to charge Kelley for expert advice in relation to restoring the cellar wall after it caved in. At least it does not appear that there was prejudicial error here, inasmuch as the jury from their verdict may have found that the trouble with the cellar walls was not due to the failure of Kelley to comply with the specifications of the contract, but to conditions found in the soil; and the appellant admitted that the contract did not require the additional re-enforcement and waterproofing of the cellar walls and floor that was finally done under the advice of the experts.

These eases involving much detail have been fully heard. Both auditor and jury found that Kelley was entitled to recover, though in different amounts.

The judgments of the District Court are affirmed, with costs.


author: NETERER, District Judge.

text:
    KELLY, County Assessor, et al. v. ALLEN.
    No. 6270.
    Circuit Court of Appeals, Ninth Circuit.
    May 18, 1931.
    Rehearing Denied June 15, 1931.

      H. H. Baker, Co. Atty., of Yuma, Ariz., K. Berry Peterson, Atty. Gen., Charles L. Strouss and Riney Salmon, Asst. Attys. Gen., for appellants.
    George B. Webster, of Los Angeles, Cal., for appellee.
    Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.
   NETERER, District Judge.

Appellee, as complainant, obtained a decree enjoining “the defendant Riley, his agents and employees,” from collecting, coercing, or compelling payment of taxes levied and assessed upon school lands of the state held by the appellee under a contract of purchase, and enjoining other defendants from assessing or levying taxes on-the said land, and defendant Babbitt from making or asserting any forfeiture or termination of the right to purchase the land, prior to issuance of patent by the state, for default in payment of taxes assessed against and levied upon the said land. Defendants, except Riley, appeal.

Defendants moved to dismiss the bill of complaint for want of equity, which motion was overruled, and exception noted. Defendant filed answer, and decree followed, with like exception. The assignments of error allege, first, that the court erred in not dismissing the complaint for want of equity, and the second and third are, in substance, the same, - in entering decree in favor of plaintiff.

The appellee moves to dismiss the appeal, first, because the decree runs against all the defendants jointly, but Riley, the tax collector of Yuma county, does not join in the appeal, .and, second, on the ground that the assignments of error present no “specific question involved.” The motion to dismiss will be denied. The decree is against the defendants as county officers, each of who-m performs a link in the ultimate act enjoined. Representative of one link may not, by declining to join in appeal, defeat review of the decree. In- any event, Riley executed the appeal bond, filed appearance, and waived time for filing brief and other proceedings, and asks judgment on the merits. Hill v. Western Electric Co. (C. C. A.) 214 F. 243. The complaint, motion, and order overruling the motion to dismiss for want of equity appear in the record, and no hill of exceptions is necessary to save the point for appellate consideration. Mitsui v. St. Paul Fire & Marine Insurance Co. (C. C. A.) 202 F. 26, certiorari denied 231 U. S. 749, 34 S. Ct. 321, 58 L. Ed. 465. The complaint alleges official acts, making assessments, and laws of Arizona, 1929, p. 234, and threat to declare forfeiture thereunder.

The power of the state to tax is unlimited (Austin v. Aldermen of Boston, 7 Wall. [74 U. S.] 694, 19 L. Ed. 224); it is the essential of political existence, and the essence of the prosperity of the state (Nicol v. Ames, 173 U. S. 509, 515, 19 S. Ct. 522, 43 L. Ed. 786). See, also, Best Foods v. Welch (D. C.) 34 F.(2d) 682. The land in issue, with other land, was transferred to the state of Arizona for certain purposes. 36 Stat. 557. The land in issue was sold to the appellee for 5 per cent, cash, balance in thirty-eight annual payments, 5 per - cent, interest, payable annually. . Upon payment of six months’ inter, est- in advance,, and principal,' a pateiñt inay be obtained from the state. Laws of Arizona, 1915, 2nd Sp. Sess., e. 5, § 59. The Constitution of Arizona (section 2, art. 9) does not exempt state lands sold under purchase contract from taxation. Chapter 5, § 70, Laws of 1915 (section 2999, Revised Code Arizona), provides that all school lands shall be subject to taxation the same as other lands, and the taxes collected in like manner.' In 1929 (Laws of Arizona, p. 234) this section (section 2999) was amended by providing that, if the tax is mot paid “when the next annual deferred" payment on the land becomes due, it shall constitute a forfeiture of the land to the stated as for failure to make payments when due.”

The state is not holding this land as an instrumentality of the United States, but in its own right, in trust, however, for the schools of the state (King County v. Seattle School Dist., 263 U. S. 361, 44 S. Ct. 127, 68 L. Ed. 339), and may tax the purchaser upon the entire value and enforce collection against the interest of the purchaser. (New Brunswick v. United States, 276 U. S. 547, 48 S. Ct. 371, 72 L. Ed. 693).

It is not contended that the tax was not legally assessed and levied, if the right to assess obtains. The purchaser had opportunity to appear before the equalization board and protest excessive valuation (section 3090, Revised Code Arizona), so requirements of due process are fully met. McMillen v. Anderson, 95 U. S. 37, 41, 24 L. Ed. 335; Hagar v. Reclamation Dist. No. 108, 111 U. S. 701, 4 S. Ct. 663, 28 L. Ed. 569; Pittsburgh, etc., Ry. v. Board of Pub. Works, 172 U. S. 32, 19 S. Ct. 90, 43 L. Ed. 354.

The constitutional provision and the laws of the state having relation to the sale of school lands and taxation became a part of the contract of sale as if set out therein (Walker v. Whitehead, 16 Wall. [83 U. S.] 314, 21 L. Ed. 357), and, by express provision of the contract, the purchaser agreed to pay all taxes assessed against and levied upon the land. The" omission of reference to the general laws for collection of taxes on “other lands,” by the amendment of 1929, supra, is immaterial, since procedure is provided for this special class of land. Expressio unius est exclusio alterius has application. The act of the state (Laws of 1929, supra) is remedial. There is a distinction between the obligation of a contract and statutory remedy for its enforces ment. Waggoner v. Flack, 188 U. S. 595, 23 S. Ct. 345, 47. L. Ed. 609. And the procedure of enforcement or collection by forfeiture applies to all purchasers of school land (Kentucky Union Co. v. Kentucky, 219 U. S. 140, 31 S. Ct. 171, 55 L. Ed. 137); and the collection may be varied to suit the necessities of the particular class (Tappan v. Merchants’ Nat. Bank, 19 Wall. [86 U. S.] 490, 505, 22 L. Ed. 189), and in no way infringes any right of the appellee.

There is no analogy between the title to land resting in the state of Arizona and title to land resting in the United States. As has been seen, the land was conveyed to the state by the United States, the state Constitution does not exempt land sold on contract, and the laws of the state provide for its taxation.

Walker v. Whitehead, 16 Wall. 314, 21 L. Ed. 357; Little Rock & Ft. S. R. R. v. Worthen, 120 U. S. 101, 7 S. Ct. 469, 30 L. Ed. 588; Barnitz v. Beverly, 163 U. S. 118, 16 S. Ct. 1042, 41 L. Ed. 93; Ex parte Young, 209 U. S. 123, 28 S. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764; Columbia Ry. v. South Carolina, 261 U. S. 236, 43 S. Ct. 306, 67 L. Ed. 629; Frick v. Commonwealth, 268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A. L. R. 316, and other eases cited, are beside the issue here. No new condition or burden is injected into the contract. No injury to purchaser can obtain. To analyze, distinguish, or apply the numerous eases cited by the appellee would unduly extend this opinion and would serve no useful purpose.

Reversed.